Mellon Reports Third Quarter Continuing EPS Increase of 15% to $.53

PITTSBURGH, Oct. 18 /PRNewswire-FirstCall/ -- Mellon Financial Corporation today reported income from continuing operations of $220 million, or 53 cents per share, in the third quarter of 2006. This compares to income from continuing operations of $195 million, or 46 cents per share, in the third quarter of 2005, and $230 million, or 56 cents per share, in the second quarter of 2006. Earnings per share from continuing operations in the third quarter of 2006 increased 15% compared to the third quarter of 2005. During the quarter, Mellon announced an agreement to sell its insurance premium financing business and applied discontinued operations accounting to this business. Accordingly, the income statements for all periods in this release have been restated.

"Mellon has momentum. Growth in revenue and earnings is strong with impressive underlying growth in assets under management and assets under custody or administration. It is a testament to the quality of our people and strength of the global markets," said Robert P. Kelly, Mellon chairman, president and chief executive officer.

Net income, including discontinued operations, totaled $222 million, or 54 cents per share, in the third quarter of 2006, compared with $194 million, or 47 cents per share, in the third quarter of 2005, and $232 million, or 56 cents per share, in the second quarter of 2006.

Third Quarter Highlights of Continuing Operations (comparisons are with the third quarter of 2005, unless noted otherwise).

- Total noninterest revenue increased $137 million, or 13%, and represented 91% of total revenue. - Assets under management increased 20% to a record level of $918 billion at Sept. 30, 2006. The acquisition of Walter Scott & Partners on Oct. 2, 2006 will add over $28 billion to assets under management in the fourth quarter. Assets under custody or administration increased 16% to a record level of $4.380 trillion at Sept. 30, 2006. Assets under management increased 6% (unannualized), and assets under custody or administration increased 4% (unannualized) compared to June 30, 2006. - Investment management fee revenue increased 20% to $574 million, a record quarterly level, and increased 7% sequentially. The increases reflect strong net inflows, improved equity markets and higher performance fees. - Institutional trust and custody fee revenue, including securities lending revenue, increased 18% to $233 million. The increase reflects the benefit of net new business and higher earnings from the ABN AMRO Mellon and CIBC Mellon joint ventures. - Net interest revenue (FTE) totaled $121 million, an increase of $7 million, or 6% compared to both the third quarter of 2005 and second quarter of 2006. Net interest revenue excludes the results of our insurance premium financing business which have been reclassified to discontinued operations. The increase in net interest revenue reflects a higher level of customer deposits, particularly in our corporate cash management business, including certain customer activity that is only expected to remain through October 2006. - Financing related/equity investment fee revenue totaled $34 million, a decline of $15 million compared to the third quarter of 2005 and $12 million compared to the second quarter of 2006. The decline reflects a lower level of venture capital gains in the third quarter of 2006 as well as lower lease residual gains. - Total revenue amounted to $1.290 billion (non-FTE), an increase of 13%, or $145 million. Total revenue was relatively unchanged compared with the second quarter of 2006. - Total operating expense in the third quarter of 2006 was $966 million, an increase of 12%. Operating expense was relatively unchanged compared with the second quarter of 2006. The higher level of operating expense versus the third quarter of 2005 was due principally to: higher staff expense of $67 million, which included a higher level of incentives ($36 million) associated primarily with growth in pre-tax profits in our asset management and asset servicing businesses; annual merit increases ($8 million); higher pension and severance expense ($7 million); and a higher level of distribution and servicing expenses ($22 million). The remaining increase was principally in support of new business. The expense increase was partially offset by lower net occupancy expense. - Positive operating leverage resulted in a 1% increase in the pre-tax margin (FTE) to 26% for the third quarter of 2006. - The tax rate was 32.2% for the third quarter of 2006 compared to 28.5% for the third quarter of 2005 and 29.5% for the second quarter of 2006. It is currently anticipated that the tax rate for the fourth quarter of 2006 will be approximately 32.5%. - Return on common shareholders' equity was 20.2% for the third quarter of 2006. - The tangible shareholders' equity ratio was 5.35% at Sept. 30, 2006 compared to 4.99% at June 30, 2006, reflecting earnings retention and a reduction in the level of unrealized losses in the securities held for sale portfolio, partially offset by a higher period-end balance sheet. - We repurchased 1.3 million shares of common stock during the third quarter, and issued 1.7 million shares, primarily for employee benefit plan purposes. Subsequent to the end of the third quarter, we issued 2.8 million shares in connection with the acquisition of Walter Scott & Partners.

Also, Mellon declared its quarterly common stock dividend of 22 cents per share. This cash dividend is payable on Wednesday, Nov. 15, 2006, to shareholders of record at the close of business on Tuesday, Oct. 31, 2006.

During the quarter, we announced an agreement to sell our insurance premium financing business to Branch Banking and Trust Company (BB&T) and applied discontinued operations accounting to this business. Accordingly, the income statements for all periods in this release have been restated. The restatement resulted in a reduction to previously reported levels of net interest revenue and the net interest margin; a slight reduction in financing- related fee revenue; a reduction in operating expenses; and a slight change in continuing earnings per share for certain periods. Restated quarterly results from the first quarter of 2004 are provided in the Financial Trends and are available via http://www.mellon.com/investorrelations/financialreports/financialtrends.

Throughout this earnings release, certain measures, which are noted, exclude certain items. We believe these measures are useful to the investment community in analyzing the financial results and trends of ongoing operations. We believe they facilitate comparisons with prior periods and reflect the principal basis on which our management monitors financial performance. See page 11 for a reconciliation of Reported Amounts presented in accordance with Generally Accepted Accounting Principles (GAAP) to Adjusted non-GAAP Amounts, which exclude these items. We believe Reported Amounts for the third quarter of 2006, without any adjustments, are comparable with the third quarter of 2005 and have made no adjustments to third quarter 2006 or third quarter 2005 Reported Amounts for the purpose of our internal assessment of quarterly financial performance.

Mellon Financial Corporation is a global financial services company. Headquartered in Pittsburgh, Mellon is one of the world's leading providers of financial services for institutions, corporations and high net worth individuals, providing asset management, private wealth management, asset servicing and payment solutions and investor services. Mellon has approximately $5.3 trillion in assets under management, administration or custody, including $918 billion under management. News and other information about Mellon is available at http://www.mellon.com/.

Conference Call and Supplemental Data

Robert P. Kelly, chairman, president and chief executive officer; Steven G. Elliott, senior vice chairman; and Michael A. Bryson, chief financial officer, along with other members of executive management, will host a conference call and simultaneous live audio webcast at 8 a.m. EDT on Wednesday, Oct. 18, 2006. This conference call and audio webcast will include forward-looking information and may include other material information. Persons wishing to access the conference call and audio webcast may do so by dialing (888) 466-9857 (U.S.) and (847) 619-6150 (international), or by logging on to http://www.mellon.com/. The earnings release together with the quarterly earnings summary will be available at http://www.mellon.com/ beginning at approximately 6:30 a.m. EDT on Oct. 18. Replays of the conference call and audio webcast will be available beginning Oct. 18 at approximately 5 p.m. EDT until Wednesday, Nov. 1, 2006 at 5 p.m. EST by dialing (888) 895-5637 (U.S.) or (630) 652-3017 (international). The archived version of the conference call and audio webcast will also be available at http://www.mellon.com/ for the same time period.

Note: Access to the Quarterly Earnings Summary including supplemental financial trends is available via http://www.mellon.com/investorrelations/financialreports/financialtrends. The Quarterly Earnings Summary and supplemental financial trends have been updated through Sept. 30, 2006 and include data that previously had been included in the earnings release.

This earnings release contains statements relating to future results of Mellon Financial Corporation that are considered "forward-looking statements." 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, future financial goals, the expected tax provisioning rate for the fourth quarter of 2006, customer deposits in the corporate cash management business, expected immaterial gain from the sale of a business and intentions with respect to junior subordinated debentures and expected reduced funding costs. These forward-looking statements and other forward-looking statements contained in other public disclosures of the Corporation, which make reference to the cautionary factors contained in this earnings release, are based on assumptions that involve risks and uncertainties and that are subject to change based on various important factors (some of which are beyond the Corporation's control). Actual results may differ materially from those expressed or implied as a result of these risks and uncertainties, including, but not limited to, changes in political and economic conditions; equity, fixed-income and foreign exchange market fluctuations; geographic sources of income and levels of tax-free income, as well as other risks and uncertainties detailed elsewhere in this earnings release and in the Corporation's Annual Report on Form 10-K for the year ended Dec. 31, 2005 and in subsequent reports filed by the Corporation with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. All statements in this earnings release speak only as of Oct. 18, 2006, and the Corporation undertakes no obligation to update any statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events.

FINANCIAL HIGHLIGHTS Mellon Financial Corporation (dollar amounts in millions, except per share amounts and unless otherwise Quarter ended Nine months ended noted; common shares Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30, in thousands) 2006 2006 2005 2006 2005 Continuing Operations: Noninterest revenue $1,173 $1,175 $1,036 $3,484 $3,176 Net interest revenue 117 110 109 344 341 Total revenue (GAAP) $1,290 $1,285 $1,145 $3,828 $3,517 Non-GAAP adjusted (a) $1,290 $1,285 $1,145 $3,828 $3,320 Return on equity 20.2% 22.0% 18.8% 20.6% 22.8% Fee and other revenue as a percentage of total revenue (FTE) (GAAP) 91% 91% 90% 91% 90% Non-GAAP adjusted (a) 91% 91% 90% 91% 89% Pre-tax operating margin (FTE) (GAAP) 26% 26% 25% 25% 30% Non-GAAP adjusted (a) 26% 26% 25% 26% 27% Net interest margin (FTE) (b) 1.61% 1.67% 1.76% 1.71% 1.90% Selected average balances: Interest-earning assets (c) $29,885 $28,205 $26,462 $28,401 $25,699 Total assets (c) $41,671 $39,364 $37,959 $39,589 $37,120 Interest-bearing deposits $19,917 $15,722 $16,155 $16,995 $15,791 Noninterest-bearing deposits $7,988 $8,362 $7,411 $8,207 $7,182 Shareholders' equity (c) $4,458 $4,351 $4,142 $4,360 $4,154 Average common shares and equivalents outstanding: Basic 407,210 408,154 414,606 408,298 416,373 Diluted 411,996 412,986 417,911 413,068 419,811 Period-end data Assets under management (in billions) $918 $870 $766 Net inflows (for the quarter) (in billions) $32 $17 $15 Assets under custody or administration (in billions) $4,380 $4,213 $3,777 Employees 16,700 16,700 16,700 Total shareholders' equity to assets ratio (d) 10.54% 10.55% 10.79% Tangible shareholders' equity to assets ratio (d) 5.35% 4.99% 5.08% Tier I capital ratio (d) 12.2%(e) 10.85% 10.52% Total (Tier I plus Tier II) capital ratio (d) 18.6%(e) 16.77% 16.35% Leverage capital ratio (d) 9.1%(e) 8.34% 8.21% Book value per common share $10.91 $10.31 $10.00 Tangible book value per common share $5.24 $4.59 $4.42 Dividends per share $.22 $.22 $.20 Dividend yield 2.3% 2.6% 2.5% Closing common stock price per share $39.10 $34.43 $31.97 Market capitalization $16,104 $14,166 $13,367 (a) These amounts are detailed on a supplemental table on page 11. (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 adjustments for fair value required by SFAS No. 115. (d) Includes discontinued operations. (e) Preliminary. The higher ratios reflect the issuance of 200 million pounds Sterling denominated Tier I qualifying trust-preferred securities. See page 10 for a further discussion.

Note: Throughout this earnings release, all information is reported on a continuing operations basis unless otherwise noted, and all calculations are based on unrounded numbers. Returns are annualized. Certain amounts are presented on a fully taxable equivalent (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.

CONDENSED CONSOLIDATED INCOME STATEMENT Mellon Financial Corporation Quarter ended Nine months ended (in millions, except Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30, per share amounts) 2006 2006 2005 2006 2005 Noninterest revenue Investment management $574 $537 $479 $1,635 $1,351 Distribution and service 107 108 82 313 227 Institutional trust and custody 233 244 197 701 564 Payment solutions & investor services 119 124 122 364 398 Foreign exchange trading 52 69 52 179 156 Financing-related/equity investment 34 46 49 131 341 Other 51 47 54 158 138 Total fee and other revenue 1,170 1,175 1,035 3,481 3,175 Gains on sales of securities 3 - 1 3 1 Total noninterest revenue 1,173 1,175 1,036 3,484 3,176 Net interest revenue Interest revenue 394 343 283 1,055 797 Interest expense 277 233 174 711 456 Net interest revenue 117 110 109 344 341 Provision for credit losses (1) (3) 12 (3) 13 Net interest revenue after provision for credit losses 118 113 97 347 328 Operating expense Staff: Compensation 280 270 255 819 748 Incentives 162 148 126 481 348 Employee benefits 73 71 67 220 194 Total staff 515 489 448 1,520 1,290 Non-staff: Professional, legal and other purchased services 131 126 113 372 322 Distribution and servicing 122 126 100 363 271 Net occupancy 51 58 60 168 175 Equipment 42 44 44 130 128 Business development 25 28 23 78 67 Communications 19 23 20 65 63 Amortization of intangible assets 7 7 7 21 20 Other 54 62 46 168 134 Total non-staff 451 474 413 1,365 1,180 Total operating expense 966 963 861 2,885 2,470 Income Income from continuing operations before income taxes 325 325 272 946 1,034 Provision for income taxes 105 95 77 296 331 Income from continuing operations 220 230 195 650 703 Discontinued operations: Income (loss) from operations after-tax 1 - 1 2 (99) Net gain (loss) on disposals after-tax 1 2 (2) 9 (30) Income (loss) from discontinued operations, net of tax expense (benefit) of $1, $2, $-,$(1) and $5 2 2 (1) 11 (129) Net income $222 $232 $194 $661 $574 Earnings per share Basic: Income from continuing operations $.54 $.56 $.47 $1.59 $1.69 Net income $.55 $.56 $.47 $1.62 $1.38 Diluted: Income from continuing operations $.53 $.56 $.46 $1.57 $1.67 Net income $.54 $.56 $.47 $1.60 $1.37 CONDENSED CONSOLIDATED BALANCE SHEET Mellon Financial Corporation Sept. 30, Dec. 31, Sept. 30, (dollar amounts in millions) 2006 2005 2005 Assets Cash and due from banks $2,670 $2,373 $2,770 Money market investments 5,415 3,085 2,521 Trading account securities 491 269 286 Securities available for sale 18,469 17,245 16,821 Investment securities (approximate fair value of $149, $170, and $179) 147 167 175 Loans 5,971 6,573 7,558 Reserve for loan losses (55) (63) (80) Net loans 5,916 6,510 7,478 Premises and equipment 699 656 627 Goodwill 2,201 2,166 2,178 Other intangibles 137 148 154 Assets of discontinued operations 907 - - Other assets 5,614 6,059 5,733 Total assets $42,666 $38,678 $38,743 Liabilities Deposits $28,976 $26,074 $25,155 Short-term borrowings 1,246 845 1,675 Other liabilities 2,902 2,852 2,989 Notes and debentures (with original maturities over one year) 3,621 3,663 3,695 Junior subordinated debentures 1,395 1,042 1,047 Liabilities of discontinued operations 31 - - Total liabilities 38,171 34,476 34,561 Shareholders' equity Common stock - $.50 par value Authorized - 800,000,000 shares, Issued - 588,661,920 shares 294 294 294 Additional paid-in capital 1,970 1,953 1,946 Retained earnings 7,217 6,842 6,715 Accumulated unrealized loss, net of tax (44) (84) (57) Treasury stock of 176,799,701; 173,183,019; and 170,537,262 shares, at cost (4,942) (4,803) (4,716) Total shareholders' equity 4,495 4,202 4,182 Total liabilities and shareholders' equity $42,666 $38,678 $38,743 Business Sectors

Our lines of business are combined into five business sectors: Mellon Asset Management; Private Wealth Management; Asset Servicing; Payment Solutions & Investor Services (PS&IS); and Other.

Quarterly data (dollar amounts in Private millions, presented Mellon Asset Management Wealth Management on an FTE basis) 3Q06 2Q06 3Q05 3Q06 2Q06 3Q05 Total revenue $596 $550 $487 $177 $177 $168 Operating expense 411 396 358 106 105 96 Income from continuing operations before taxes (FTE) $185 $154 $129 $71 $72 $72 Average assets $2,507 $2,353 $1,986 $10,544 $10,395 $10,062 Average common equity $997 $997 $966 $553 $553 $571 Average economic capital (a) $1,396 $1,396 $1,442 $737 $737 $786 Return on common equity (annualized) 50% 42% 37% 34% 35% 34% Pre-tax operating margin 31% 28% 27% 40% 41% 43% Quarterly data Payment Solutions & (dollar amounts in millions, Asset Servicing Investor Services presented on an FTE basis) 3Q06 2Q06 3Q05 3Q06 2Q06 3Q05 Total revenue $320 $348 $271 $175 $174 $161 Operating expense 257 261 217 130 133 127 Income from continuing operations before taxes (FTE) $63 $87 $54 $45 $41 $34 Average assets $10,159 $9,248 $9,048 $9,910 $7,129 $6,992 Average common equity $551 $551 $482 $266 $266 $315 Average economic capital (a) $683 $683 $607 $330 $330 $390 Return on common equity (annualized) 31% 42% 30% 46% 41% 30% Pre-tax operating margin 20% 25% 20% 26% 23% 21% Quarterly data (dollar amounts in millions, Other Total Consolidated presented on an FTE basis) 3Q06 2Q06 3Q05 3Q06 2Q06 3Q05 Total revenue $35 $49 $71 $1,303 $1,298 $1,158 Credit quality expense (1) (3) 12 (1) (3) 12 Operating expense 62 68 63 966 963 861 Income (loss) from continuing operations before taxes (FTE) $(26) $(16) $(4) $338 $338 $285 Average assets (b) $7,442 $9,173 $8,957 $41,447 $39,104 $37,907 Average common equity $1,945 $1,815 $1,775 $4,312 $4,182 $4,109 Average economic capital (a) $2,238 $2,051 $1,916 $5,384 $5,197 $5,141 Return on common equity (annualized) N/M N/M N/M 20% 22% 19% Pre-tax operating margin N/M N/M N/M 26% 26% 25% (a) Defined as the sum of average common equity and average Tier I preferred equity. (b) Consolidated average assets include average assets of discontinued operations of $885 million for the third quarter of 2006, $806 million for the second quarter of 2006 and $862 million for the third quarter of 2005. N/M - Not meaningful. For the nine months ended Sept. 30, Mellon Asset Private Wealth (dollar amounts in millions, Management Management presented on an FTE basis) 2006 2005 2006 2005 Total revenue $1,696 $1,361 $526 $503 Operating expense 1,197 1,017 314 279 Income from continuing operations before taxes (FTE) $499 $344 $212 $224 Average assets $2,282 $1,976 $10,407 $9,654 Average common equity $997 $966 $553 $571 Average economic capital (a) $1,396 $1,442 $737 $786 Return on common equity (annualized) 45% 31% 34% 34% Pre-tax operating margin 29% 25% 40% 45% For the nine months ended Sept. 30, Payment Solutions & (dollar amounts in millions, Asset Servicing Investor Services presented on an FTE basis) 2006 2005 2006 2005 Total revenue $981 $776 $516 $521 Operating expense 763 605 392 395 Income from continuing operations before taxes (FTE) $218 $171 $124 $126 Average assets $9,268 $8,462 $8,131 $7,331 Average common equity $551 $482 $266 $315 Average economic capital (a) $683 $607 $330 $390 Return on common equity (annualized) 36% 31% 42% 35% Pre-tax operating margin 22% 22% 24% 24% For the nine months ended Sept. 30, (dollar amounts in millions, Other Total Consolidated presented on an FTE basis) 2006 2005 2006 2005 Total revenue $148 $401 $3,867 $3,562 Credit quality expense (3) 13 (3) 13 Operating expense 219 174 2,885 2,470 Income (loss) from continuing operations before taxes (FTE) $(68) $214 $985 $1,079 Average assets (b) $8,441 $8,694 $39,370 $37,075 Average common equity $1,851 $1,790 $4,218 $4,124 Average economic capital (a) $2,108 $1,935 $5,254 $5,160 Return on common equity (annualized) N/M N/M 21% 23% Pre-tax operating margin N/M N/M 25% 30% (a) Defined as the sum of average common equity and average Tier I preferred equity. (b) Consolidated average assets include average assets of discontinued operations of $841 million for the first nine months of 2006 and $958 million for the first nine months of 2005. N/M - Not meaningful.

Mellon Asset Management, a multi-boutique asset manager, offers a broad range of investment products primarily to institutional investors as well as individual mutual fund investors. Private Wealth Management provides investment management, wealth management and comprehensive financial management services to the high net worth market. Asset Servicing provides institutional trust and custody and related services such as securities lending, investment management backoffice outsourcing, performance measurement, benefits disbursements, transition management, fund administration, Web-based investment management software and foreign exchange and derivative products to corporate and public retirement funds, foundations and endowments and global financial institutions. PS&IS provides working capital solutions and shareholder services to corporations, institutions and government agencies. The Other sector includes corporate lending; the results of Mellon Ventures, our venture capital group; business exits activity; Corporate Treasury activities and certain corporate revenues and expenses.

Nonperforming Assets

Nonperforming assets totaled $4 million at Sept. 30, 2006, down from $14 million at June 30, 2006 and $37 million at Sept. 30, 2005. The decreases compared with June 30, 2006 and Sept. 30, 2005 were due to the removal from nonaccrual status of a regional airline lease receivable. This $10 million receivable was collected in full in October 2006. The decrease compared with Sept. 30, 2005 also resulted from credit losses and additional principal payments.

Provision and Reserve for Credit Exposure

The provision for credit losses totaled negative $1 million in 3Q06, compared with positive $12 million in 3Q05 and negative $3 million in 2Q06. The reserve for loan losses was $55 million at Sept. 30, 2006, reflecting $3 million transferred to assets of discontinued operations. This reserve totaled $58 million at June 30, 2006 and $80 million at Sept. 30, 2005. The reserve for unfunded commitments was $80 million at Sept. 30, 2006, $81 million at June 30, 2006 and $77 million at Sept. 30, 2005.

Discontinued Operations

In August 2006, we announced a definitive agreement to sell our insurance premium financing company, AFCO Credit Corporation, and its Canadian affiliate, CAFO Inc., to Branch Banking and Trust Company. It was determined that this business no longer fits our strategy of focusing on growth in asset management and securities servicing globally. The sale is expected to close in the first quarter of 2007 and is expected to result in an immaterial gain.

In the third quarter of 2006, we applied discontinued operations accounting to this business. Accordingly, the income statements for all periods have been restated. The restatement resulted in a reduction to previously reported levels of net interest revenue and the net interest margin; a slight reduction in financing-related fee revenue; a reduction in operating expenses; and a slight change in continuing earnings per share for certain periods. Restated quarterly results from the first quarter of 2004 are provided in the Financial Trends. In the third quarter of 2006, a $1 million after-tax net gain on disposals was recorded resulting from residual activity of prior-periods divestitures.

Junior Subordinated Debentures

Based on current interest rate expectations, we intend to redeem our Series A and Series B junior subordinated debentures, each issued for a face value of $515 million, on or after the optional call dates of Dec. 1, 2006 and Jan. 15, 2007, respectively. The securities are redeemable at 103.86% and 103.9975% of the liquidation amounts during the 12-month periods beginning on the call dates. We expect to replace these securities with a combination of Tier I qualifying capital securities and senior debt securities that would reduce our funding costs beginning in 2007. Assuming the Series A debentures are redeemed in December, there would be a pre-tax charge to income of $23 million in the fourth quarter of 2006 for the redemption premium and write-off of unamortized issuance costs. Assuming the Series B debentures are redeemed in the first quarter of 2007, there would be a pre-tax charge to income of $23 million in the first quarter of 2007 for the redemption premium and write-off of unamortized issuance costs. In the third quarter of 2006, we issued junior subordinated debentures associated with 200 million pounds Sterling denominated Tier I qualifying trust-preferred securities, as part of the funding for the fourth quarter 2006 acquisition of Walter Scott & Partners.

Supplemental Information - Reconciliation of Reported GAAP Amounts to Adjusted Non-GAAP Amounts

Reported Amounts are presented in accordance with GAAP. We believe that this supplemental adjusted non-GAAP information is useful to the investment community in analyzing the financial results and trends of ongoing operations. We believe it facilitates comparisons with prior periods and reflects the principal basis on which our management monitors financial performance. See the table below for a reconciliation of the first nine months of 2006 and 2005 Reported Amounts presented in accordance with GAAP to Adjusted non-GAAP Amounts, which exclude the items described in the table below. We believe Reported Amounts for the third quarter of 2006, without any adjustments, are comparable with the third quarter of 2005, and have made no adjustments to third quarter 2006 or third quarter 2005 Reported Amounts for the purpose of our internal assessment of quarterly financial performance.

Supplemental information (dollar amounts in millions) Nine months ended Sept. 30, 2006 Sept. 30, 2005 Adjusted Adjusted Adjusted Amounts Reported Amounts Reported Amounts (non- Amounts (non- Amounts (non- GAAP) (GAAP) Adjustments GAAP) (GAAP) Adjustments GAAP) % Change Noninterest revenue: Fee and other revenue $3,481 $- $3,481 $3,175 $(197)(a) $2,978 Gains on sales of securities 3 - 3 1 - 1 Total noninterest revenue 3,484 - 3,484 3,176 (197) 2,979 17% Net interest revenue 344 - 344 341 - 341 Total revenue 3,828 - 3,828 3,517 (197) 3,320 15% Provision for credit losses (3) - (3) 13 - 13 Operating expense: Staff: Compensation 819 (2)(b) 817 748 - 748 Incentives 481 (16)(b) 465 348 - 348 Employee benefits 220 (1)(b) 219 194 - 194 Total staff 1,520 (19) 1,501 1,290 - 1,290 Net occupancy 168 - 168 175 (2)(c) 173 Other 1,197 - 1,197 1,005 (13)(d) 992 Total operating expense 2,885 (19) 2,866 2,470 (15) 2,455 17% Income from continuing operations before taxes $946 $19 $965 $1,034 $(182) $852 13% Memo - Fully taxable equivalent basis: Total noninterest revenue $3,511 $- $3,511 $3,207 $(197) $3,010 17% Net interest revenue 356 - 356 355 - 355 -% Total revenue $3,867 $- $3,867 $3,562 $(197) $3,365 15% Income from continuing operations before taxes $985 $19 $1,004 $1,079 $(182) $897 12% Pre-tax operating margin (e) 25% 26% 30% 27% Fee and other revenue as a percentage of total revenue 91% 91% 90% 89% Staff expense as a percentage of total revenue 39% 39% 36% 38% (a) Reflects the gain from the sale of our remaining investment in Shinsei Bank, recorded in the first quarter of 2005. (b) Reflects the charges recorded in connection with payments, awards and benefits for Mellon's former chairman and chief executive officer, pursuant to his employment contract, recorded in the first quarter of 2006. (c) Reflects an additional charge associated with the move to the new Mellon Financial Centre in London, recorded in the first quarter of 2005. (d) Includes a $10 million charge associated with the early extinguishment of debt and a $3 million additional writedown of a business previously identified as held for sale, recorded in the first quarter of 2005. (e) Income from continuing operations before taxes as a percentage of total revenue.