The Bank of New York Mellon Corporation 10Q 2023 Q3 Quarterly report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended September 30, 2023

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 001-35651

THE BANK OF NEW YORK MELLON CORPORATION

(Exact name of registrant as specified in its charter)


Delaware			13-2614959
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

240 Greenwich Street

New York, New York 10286

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code – (212) 495-1784

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	BK	New York Stock Exchange
6.244% Fixed-to-Floating Rate Normal Preferred Capital Securities of Mellon Capital IV	BK/P	New York Stock Exchange
(fully and unconditionally guaranteed by The Bank of New York Mellon Corporation)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of Sept. 30, 2023, 769,073,278 shares of the registrant’s common stock, $0.01 par value per share, were outstanding.

THE BANK OF NEW YORK MELLON CORPORATION

Third Quarter 2023 Form 10-Q

Table of Contents


			Page
Consolidated Financial Highlights (unaudited)			2

Part I – Financial Information
Items 2. and 3. Management’s Discussion and Analysis of Financial Condition and Results of Operations; Quantitative and Qualitative Disclosures about Market Risk:
General			4
Overview			4
Key third quarter 2023 events			4
Highlights of third quarter 2023 results			4
Fee and other revenue			6
Net interest revenue			9
Noninterest expense			12
Income taxes			12
Review of business segments			13
Critical accounting estimates			21
Consolidated balance sheet review			22
Liquidity and dividends			31
Capital			36
Trading activities and risk management			39
Asset/liability management			41
Supplemental information – Explanation of GAAP and Non-GAAP financial measures			43
Recent accounting and regulatory developments			47
Website information			49

Item 1. Financial Statements:
Consolidated Income Statement (unaudited)			50
Consolidated Comprehensive Income Statement (unaudited)			52
Consolidated Balance Sheet (unaudited)			53
Consolidated Statement of Cash Flows (unaudited)			54
Consolidated Statement of Changes in Equity (unaudited)			55


			Page
Notes to Consolidated Financial Statements:
Note 1—Basis of presentation			58
Note 2—New accounting guidance			58
Note 3—Acquisitions and dispositions			59
Note 4—Securities			59
Note 5—Loans and asset quality			64

Note 6—Goodwill and intangible assets			71
Note 7—Other assets			73
Note 8—Contract revenue			74
Note 9—Net interest revenue			76
Note 10—Employee benefit plans			77
Note 11—Income taxes			77
Note 12—Variable interest entities			77
Note 13—Preferred stock			78
Note 14—Other comprehensive income (loss)			79
Note 15—Fair value measurement			80
Note 16—Fair value option			85
Note 17—Derivative instruments			85
Note 18—Commitments and contingent liabilities			92
Note 19—Business segments			98
Note 20—Supplemental information to the Consolidated Statement of Cash Flows			101

Item 4. Controls and Procedures			102
Forward-looking Statements			103

Part II – Other Information
Item 1. Legal Proceedings.			105

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.			105
Item 5. Other Information.			105
Item 6. Exhibits.			105

Index to Exhibits			106
Signature			108

The Bank of New York Mellon Corporation (and its subsidiaries)

Consolidated Financial Highlights (unaudited)


	Quarter ended									Year-to-date
(dollars in millions, except per share amounts and unless otherwise noted)	Sept. 30, 2023			June 30, 2023			Sept. 30, 2022			Sept. 30, 2023			Sept. 30, 2022
Results applicable to common shareholders of The Bank of New York Mellon Corporation:
Net income	$	956		$	1,031		$	319		$	2,892		$	1,853
Basic earnings per share	$	1.23		$	1.31		$	0.39		$	3.66		$	2.29
Diluted earnings per share	$	1.22		$	1.30		$	0.39		$	3.65		$	2.28

Fee and other revenue	$	3,358		$	3,354		$	3,353		$	9,947		$	10,011
Net interest revenue	1,016			1,100			926			3,244			2,448
Total revenue	$	4,374		$	4,454		$	4,279		$	13,191		$	12,459

Return on common equity (annualized)	10.5		%	11.6		%	3.5		%	10.8		%	6.8		%
Return on tangible common equity (annualized) – Non-GAAP (a)	20.5		%	22.6		%	7.5		%	21.1		%	14.0		%

Fee revenue as a percentage of total revenue	74		%	73		%	76		%	73		%	78		%

Non-U.S. revenue as a percentage of total revenue	36		%	37		%	35		%	36		%	35		%

Pre-tax operating margin	29		%	30		%	15		%	29		%	21		%

Net interest margin	1.18		%	1.20		%	1.05		%	1.23		%	0.89		%
Net interest margin on a fully taxable equivalent (“FTE”) basis – Non-GAAP (b)	1.18		%	1.20		%	1.05		%	1.23		%	0.90		%

Assets under custody and/or administration (“AUC/A”) at period end (in trillions) (c)	$	45.7		$	46.9		$	42.2		$	45.7		$	42.2
Assets under management (“AUM”) at period end (in billions) (d)	$	1,821		$	1,906		$	1,776		$	1,821		$	1,776

Average common shares and equivalents outstanding (in thousands):
Basic	777,813			787,718			811,304			789,609			810,703
Diluted	781,781			790,725			814,516			793,364			814,214

Selected average balances:
Interest-earning assets	$	339,044		$	362,049		$	352,062		$	349,789		$	365,279
Total assets	$	397,492		$	421,174		$	415,670		$	408,685		$	431,074
Interest-bearing deposits	$	209,641		$	215,057		$	203,659		$	209,624		$	215,271
Noninterest-bearing deposits	$	52,467		$	62,152		$	84,804		$	61,438		$	88,952
Long-term debt	$	31,161		$	31,970		$	28,449		$	31,129		$	26,754
Preferred stock	$	4,838		$	4,838		$	4,838		$	4,838		$	4,838
Total The Bank of New York Mellon Corporation common shareholders’ equity	$	35,983		$	35,769		$	35,942		$	35,787		$	36,483

Other information at period end:
Cash dividends per common share	$	0.42		$	0.37		$	0.37		$	1.16		$	1.05
Common dividend payout ratio	35		%	29		%	95		%	32		%	46		%
Common dividend yield (annualized)	3.9		%	3.3		%	3.8		%	3.6		%	3.6		%
Closing stock price per common share	$	42.65		$	44.52		$	38.52		$	42.65		$	38.52
Market capitalization	$	32,801		$	34,671		$	31,135		$	32,801		$	31,135
Book value per common share	$	46.98		$	46.35		$	43.18		$	46.98		$	43.18
Tangible book value per common share – Non-GAAP (a)	$	24.66		$	24.17		$	21.55		$	24.66		$	21.55
Full-time employees	53,600			53,200			51,100			53,600			51,100
Common shares outstanding (in thousands)	769,073			778,782			808,280			769,073			808,280

2 BNY Mellon

Consolidated Financial Highlights (unaudited) (continued)


Regulatory capital and other ratios	Sept. 30, 2023		June 30, 2023		Dec. 31, 2022
Average liquidity coverage ratio (“LCR”)	121	%	120	%	118	%
Average net stable funding ratio (“NSFR”)	136	%	136	%	N/A		(e)

Regulatory capital ratios: (f)
Advanced Approaches:
Common Equity Tier 1 (“CET1”) ratio	11.4	%	11.1	%	11.2	%
Tier 1 capital ratio	14.4		14.0		14.1
Total capital ratio	15.2		14.8		14.9
Standardized Approach:
CET1 ratio	11.9	%	11.8	%	11.3	%
Tier 1 capital ratio	15.1		15.0		14.4
Total capital ratio	16.1		16.0		15.3

Tier 1 leverage ratio	6.1	%	5.7	%	5.8	%
Supplementary leverage ratio (“SLR”)	7.2		7.0		6.8

BNY Mellon shareholders’ equity to total assets ratio	10.1	%	9.5	%	10.0	%
BNY Mellon common shareholders’ equity to total assets ratio	8.9		8.4		8.8

(a) Return on tangible common equity and tangible book value per common share, Non-GAAP measures, exclude goodwill and intangible assets, net of deferred tax liabilities. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 43 for the reconciliation of Non-GAAP measures.

(b) See “Net interest revenue” on page 9 for a reconciliation of this Non-GAAP measure.

(c) Consists of AUC/A primarily from the Asset Servicing line of business and, to a lesser extent, the Clearance and Collateral Management, Issuer Services, Pershing and Wealth Management lines of business. Includes the AUC/A of CIBC Mellon Global Securities Services Company (“CIBC Mellon”), a joint venture with the Canadian Imperial Bank of Commerce, of $1.5 trillion at Sept. 30, 2023, $1.6 trillion at June 30, 2023 and $1.4 trillion at Sept. 30, 2022.

(d) Excludes assets managed outside of the Investment and Wealth Management business segment.

(e) The reporting requirement for the average NSFR became effective in the second quarter of 2023. For additional information on our NSFR, see “Liquidity and dividends” beginning on page 31.

(f) For our CET1, Tier 1 capital and Total capital ratios, our effective capital ratios under U.S. capital rules are the lower of the ratios as calculated under the Standardized and Advanced Approaches. For additional information on our capital ratios, see “Capital” beginning on page 36.

N/A – Not applicable.

BNY Mellon 3


Part I – Financial Information


Items 2. and 3. Management’s Discussion and Analysis of Financial Condition and Results of Operations; Quantitative and Qualitative Disclosures about Market Risk

General

In this Quarterly Report on Form 10-Q, references to “our,” “we,” “us,” “BNY Mellon,” the “Company” and similar terms refer to The Bank of New York Mellon Corporation and its consolidated subsidiaries. The term “Parent” refers to The Bank of New York Mellon Corporation but not its subsidiaries.

Certain business terms used in this report are defined in the Glossary included in our Annual Report on Form 10-K for the year ended Dec. 31, 2022 (the “2022 Annual Report”).

The following should be read in conjunction with the Consolidated Financial Statements included in this report. Investors should also read the section titled “Forward-looking Statements.”

Overview

Established in 1784, BNY Mellon is America’s oldest bank and the first company listed on the New York Stock Exchange (NYSE: BK). Today, BNY Mellon powers capital markets around the world through comprehensive solutions that help clients manage and service their financial assets throughout the investment life cycle. BNY Mellon has been named among Fortune’s World’s Most Admired Companies and Fast Company’s Best Workplaces for Innovators. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation.

BNY Mellon has three business segments, Securities Services, Market and Wealth Services and Investment and Wealth Management, which offer a comprehensive set of capabilities and deep expertise across the investment life cycle, enabling the Company to provide solutions to buy-side and sell-side market participants, as well as leading institutional and wealth management clients globally.

The diagram below presents our three business segments and lines of business, with the remaining operations in the Other segment.

The Bank of New York Mellon Corporation

Securities
Services

Market and Wealth Services

Investment and Wealth Management

Asset
Servicing

Pershing

Investment
Management

Issuer
Services

Treasury
Services

Wealth
Management

Clearance and Collateral Management

Key third quarter 2023 events

Increase in cash dividend on common stock

In July, our Board of Directors approved a 14% increase in the quarterly cash dividend on our common stock, from $0.37 to $0.42 per share.

Highlights of third quarter 2023 results

Net income applicable to common shareholders was $956 million, or $1.22 per diluted common share, in the third quarter of 2023, including the impact of notable items. Notable items in the third quarter of 2023 include severance expense and litigation reserves. Excluding notable items, net income applicable to common shareholders was $992 million (Non-GAAP), or $1.27 (Non-GAAP) per diluted common share, in the third quarter of 2023. Net income applicable to common shareholders was $319 million, or $0.39 per diluted common share, in the third quarter of 2022, including the impact of notable items. Notable items in the third quarter of 2022 include goodwill impairment in the Investment Management reporting unit, a disposal gain (reflected in investment and other revenue), severance expense and litigation reserves. Excluding notable items, net income applicable to common shareholders was $983

4 BNY Mellon

million (Non-GAAP), or $1.21 (Non-GAAP) per diluted common share, in the third quarter of 2022.

The highlights below are based on the third quarter of 2023 compared with the third quarter of 2022, unless otherwise noted.

•Total revenue of $4.4 billion increased 2%, primarily reflecting:

•Fee revenue was flat, primarily reflecting higher market values, net new business and the favorable impact of a weaker U.S. dollar, partially offset by the impact of the Alcentra divestiture, the mix of cumulative AUM flows and lower foreign exchange volatility and volumes. (See “Fee and other revenue” beginning on page 6.)

•Net interest revenue increased 10%, primarily reflecting higher interest rates, partially offset by changes in balance sheet size and mix. (See “Net interest revenue” on page 9.)

•Provision for credit losses was $3 million, compared with a benefit of $30 million. (See “Consolidated balance sheet review – Allowance for credit losses” beginning on page 29.)

•Noninterest expense decreased 16%, primarily related to the third quarter 2022 goodwill impairment associated with the Investment Management reporting unit. Excluding notable items, noninterest expense increased 3% (Non-GAAP), primarily reflecting higher investments and revenue-related expenses, and the unfavorable impact of a weaker U.S. dollar, as well as the impact of inflation, partially offset by the favorable impact of efficiency savings and the impact of the Alcentra divestiture. (See “Noninterest expense” on page 12.)

•Effective tax rate of 18.8%. (See “Income taxes” on page 12.)

•Return on common equity (“ROE”) was 10.5% for the third quarter of 2023.

•Return on tangible common equity (“ROTCE”) was 20.5% (Non-GAAP) for the third quarter of 2023.

See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 43 for a reconciliation of these Non-GAAP measures.

Metrics

•AUC/A of $45.7 trillion increased 8%, primarily reflecting higher market values, client inflows, the favorable impact of a weaker U.S. dollar and net new business.

•AUM of $1.8 trillion increased 3%, primarily reflecting the favorable impact of a weaker U.S. dollar and higher market values, partially offset by the divestiture of Alcentra.

Capital and liquidity

•Our CET1 ratio calculated under the Advanced Approaches was 11.4% at Sept. 30, 2023 and 11.1% at June 30, 2023. The increase primarily reflects capital generated through earnings and lower risk-weighted assets (“RWAs”), partially offset by capital deployed through common stock repurchases and dividends. (See “Capital” beginning on page 36.)

•Tier 1 leverage was 6.1% at Sept. 30, 2023 and 5.7% at June 30, 2023. The increase primarily reflects lower average assets. (See “Capital” beginning on page 36.)

•Returned $783 million to common shareholders, including $450 million of common share repurchases.

Highlights of our principal business segments

Securities Services

•Total revenue increased 1%.

•Income before income taxes decreased 7%.

•Pre-tax operating margin of 23%.

Market and Wealth Services

•Total revenue increased 6%.

•Income before income taxes was flat.

•Pre-tax operating margin of 44%.

Investment and Wealth Management

•Total revenue decreased 4%.

•Income before income taxes increased to $164 million from $(497) million.

•Pre-tax operating margin of 20%; adjusted pre-tax operating margin – Non-GAAP of 22%.

See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures”

BNY Mellon 5

beginning on page 43 for a reconciliation of the Non-GAAP measure. See “Review of business segments” and Note 19 of the Notes to Consolidated Financial Statements f

or additional information on our business segments.

Fee and other revenue


Fee and other revenue																				YTD23
(dollars in millions, unless otherwise noted)										3Q23 vs.										vs.
	3Q23			2Q23			3Q22			2Q23		3Q22		YTD23			YTD22			YTD22
Investment services fees	$	2,230		$	2,252		$	2,157		(1)	%	3	%	$	6,601		$	6,356		4	%
Investment management and performance fees (a)	777			762			800			2		(3)		2,315			2,516			(8)
Foreign exchange revenue	154			158			203			(3)		(24)		488			632			(23)
Financing-related fees	45			50			43			(10)		5		147			132			11
Distribution and servicing fees	39			35			33			11		18		107			97			10
Total fee revenue	3,245			3,257			3,236			—		—		9,658			9,733			(1)
Investment and other revenue	113			97			117			N/M		N/M		289			278			N/M
Total fee and other revenue	$	3,358		$	3,354		$	3,353		—	%	—	%	$	9,947		$	10,011		(1)	%

Fee revenue as a percentage of total revenue	74		%	73		%	76		%					73		%	78		%

AUC/A at period end (in trillions) (b)	$	45.7		$	46.9		$	42.2		(3)	%	8	%	$	45.7		$	42.2		8	%
AUM at period end (in billions) (c)	$	1,821		$	1,906		$	1,776		(4)	%	3	%	$	1,821		$	1,776		3	%

(a) Excludes seed capital gains (losses) related to consolidated investment management funds.

(b) Consists of AUC/A primarily from the Asset Servicing line of business and, to a lesser extent, the Clearance and Collateral Management, Issuer Services, Pershing and Wealth Management lines of business. Includes the AUC/A of CIBC Mellon of $1.5 trillion at Sept. 30, 2023, $1.6 trillion at June 30, 2023 and $1.4 trillion at Sept. 30, 2022.

N/M – Not meaningful.

Fee revenue was flat compared with the third quarter of 2022 and the second quarter of 2023. Compared with the third quarter of 2022, higher investment services fees were offset by lower foreign exchange revenue and investment management and performance fees. Compared with the second quarter of 2023, lower investment services fees were offset by higher investment management and performance fees.

Investment and other revenue decreased $4 million compared with the third quarter of 2022 and increased $16 million compared with the second quarter of 2023. The decrease compared with the third quarter of 2022 primarily reflects a disposal gain recorded in the third quarter of 2022, a strategic equity investment loss and net securities losses, partially offset by debt extinguishment gains, higher other trading revenue and improved seed capital results. The increase compared with the second quarter of 2023 primarily reflects debt extinguishment gains and higher other trading revenue, partially offset by strategic equity investment losses and net securities losses.

Investment services fees

Investment services fees increased 3% compared with the third quarter of 2022 and decreased 1% compared with the second quarter of 2023. The increase compared with the third quarter of 2022 primarily reflects higher market values, higher clearance volumes and collateral management balances and higher fees on sweep balances, partially offset by lost business in Pershing. The decrease compared with the second quarter of 2023 primarily reflects lower Depositary Receipts revenue, partially offset by higher fees on sweep balances and higher clearance volumes and collateral management balances.

AUC/A totaled $45.7 trillion at Sept. 30, 2023, an increase of 8% compared with Sept. 30, 2022, primarily reflecting higher market values, client inflows, the favorable impact of a weaker U.S. dollar and net new business. AUC/A consisted of 34% equity securities and 66% fixed income securities at Sept. 30, 2023, and 33% equity securities and 67% fixed income securities at Sept. 30, 2022.

See “Securities Services business segment” and “Market and Wealth Services business segment” in “Review of business segments” for additional details.

6 BNY Mellon

Investment management and performance fees

Investment management and performance fees decreased 3% compared with the third quarter of 2022 and increased 2% compared with the second quarter of 2023. The decrease compared with the third quarter of 2022 primarily reflects the impact of the Alcentra divestiture and the mix of cumulative AUM flows, partially offset by higher market values and performance fees. The increase compared with the second quarter of 2023 primarily reflects the timing of performance fees. Performance fees were $30 million in the third quarter of 2023 and $10 million in the third quarter of 2022 and second quarter of 2023. On a constant currency basis (Non-GAAP), investment management and performance fees decreased 5% compared with the third quarter of 2022. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 43 for the reconciliation of Non-GAAP measures.

AUM was $1.8 trillion at Sept. 30, 2023, an increase of 3% compared with Sept. 30, 2022, primarily reflecting the favorable impact of a weaker U.S. dollar and higher market values, partially offset by the divestiture of Alcentra.

See “Investment and Wealth Management business segment” in “Review of business segments” for additional details regarding the drivers of investment management and performance fees, AUM and AUM flows.

Foreign exchange revenue

Foreign exchange revenue is primarily driven by the volume of client transactions and the spread realized on these transactions, both of which are impacted by market volatility, the impact of foreign currency hedging activities and foreign currency remeasurement gain (loss). Foreign exchange revenue decreased 24% compared with the third quarter of 2022 and 3% compared with the second quarter of 2023. The decrease compared with the third quarter of 2022 primarily reflects lower volatility and volumes. Foreign exchange revenue is primarily reported in the Securities Services business segment and, to a lesser extent, in the Market and Wealth Services and Investment and Wealth Management business segments and the Other segment.

Financing-related fees

Financing-related fees, which are primarily reported in the Market and Wealth Services and Securities Services business segments, include capital market fees, loan commitment fees and credit-related fees. Financing-related fees increased 5% compared with the third quarter of 2022 and decreased 10% compared with the second quarter of 2023. The increase compared with the third quarter of 2022 primarily reflects higher fees on standby letters of credit and commitments, partially offset by lower underwriting fees. The decrease compared with the second quarter of 2023 primarily reflects lower underwriting fees.

Investment and other revenue

Investment and other revenue includes income or loss from consolidated investment management funds, seed capital gains or losses, other trading revenue or loss, renewable energy investments losses, income from corporate and bank-owned life insurance contracts, other investment gains or losses, gains or losses from disposals, expense reimbursements from our CIBC Mellon joint venture, other income or loss and net securities gains or losses. The income or loss from consolidated investment management funds should be considered together with the net income or loss attributable to noncontrolling interests, which reflects the portion of the consolidated funds for which we do not have an economic interest and is reflected below net income as a separate line item on the consolidated income statement. Other trading revenue or loss primarily includes the impact of market-risk hedging activity related to our seed capital investments in investment management funds, non-foreign currency derivative and fixed income trading, and other hedging activity. Investments in renewable energy generate losses in investment and other revenue that are more than offset by benefits and credits recorded to the provision for income taxes. Other investment gains or losses includes fair value changes of non-readily marketable strategic equity, private equity and other investments. Expense reimbursements from our CIBC Mellon joint venture relate to expenses incurred by BNY Mellon on behalf of the CIBC Mellon joint venture. Other income includes various miscellaneous revenues.

BNY Mellon 7

The following table provides the components of investment and other revenue.


Investment and other revenue
(in millions)	3Q23		2Q23		3Q22		YTD23		YTD22
(Loss) income from consolidated investment management funds	$	(11)	$	10	$	(7)	$	4	$	(51)
Seed capital (losses) gains (a)	(4)		7		(11)		11		(43)
Other trading revenue	86		53		65		184		115
Renewable energy investments (losses)	(45)		(45)		(44)		(122)		(132)
Corporate/bank-owned life insurance	29		23		32		79		93
Other investments (losses) gains (b)	(9)		10		13		(8)		152
Disposal gains (losses)	2		(1)		37		—		37
Expense reimbursements from joint venture	29		31		27		89		80
Other income	55		9		4		72		22
Net securities (losses) gains	(19)		—		1		(20)		5
Total investment and other revenue	$	113	$	97	$	117	$	289	$	278

(a) Includes gains (losses) on investments in BNY Mellon funds which hedge deferred incentive awards.

(b) Includes strategic equity, private equity and other investments.

The decrease in total investment and other revenue compared with the third quarter of 2022 primarily reflects a disposal gain recorded in the third quarter of 2022, a strategic equity investment loss and net securities losses, partially offset by debt extinguishment gains, higher other trading revenue and improved seed capital results. The increase compared with the second quarter of 2023 primarily reflects debt extinguishment gains and higher other trading revenue, partially offset by strategic equity investment losses and net securities losses.

Year-to-date 2023 compared with year-to-date 2022

Fee revenue decreased 1% compared with the first nine months of 2022, primarily reflecting lower investment management and performance fees and foreign exchange revenue, partially offset by higher investment services fees. The 8% decrease in investment management and performance fees primarily reflects the impact of the Alcentra divestiture, the mix of cumulative AUM flows and

lower market values, partially offset by the abatement of money market fee waivers and higher performance

fees. The 23% decrease in foreign exchange revenue primarily reflects lower volatility and volumes. The 4% increase in investment services fees primarily reflects the abatement of money market fee waivers, the accelerated amortization of deferred costs for depositary receipts services related to Russia recorded in the first quarter of 2022, higher clearance volumes and collateral management balances, net new business in Asset Servicing and higher fees on sweep balances, partially offset by lower client activity, and lost business in Pershing.

Investment and other revenue increased $11 million compared with the first nine months of 2022, primarily reflecting higher other trading revenue, improved seed capital results and debt extinguishment gains, partially offset by strategic equity investment gains recorded in the first nine months of 2022, a disposal gain recorded in the third quarter of 2022 and net securities losses.

8 BNY Mellon

Net interest revenue


Net interest revenue																				YTD23
										3Q23 vs.										vs.
(dollars in millions)	3Q23			2Q23			3Q22			2Q23		3Q22		YTD23			YTD22			YTD22
Net interest revenue	$	1,016		$	1,100		$	926		(8)%		10%		$	3,244		$	2,448		33%
Add: Tax equivalent adjustment	—			1			3			N/M		N/M		1			9			N/M
Net interest revenue (FTE) – Non-GAAP (a)	$	1,016		$	1,101		$	929		(8)%		9%		$	3,245		$	2,457		32%

Average interest-earning assets	$	339,044		$	362,049		$	352,062		(6)%		(4)%		$	349,789		$	365,279		(4)%

Net interest margin	1.18		%	1.20		%	1.05		%	(2)	bps	13	bps	1.23		%	0.89		%	34	bps
Net interest margin (FTE) – Non-GAAP (a)	1.18		%	1.20		%	1.05		%	(2)	bps	13	bps	1.23		%	0.90		%	33	bps

(a) Net interest revenue (FTE) – Non-GAAP and net interest margin (FTE) – Non-GAAP include the tax equivalent adjustments on tax-exempt income, which allows for comparisons 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.

N/M – Not meaningful.

bps – basis points.

Net interest revenue increased 10% compared with the third quarter of 2022 and decreased 8% compared with the second quarter of 2023. The increase compared with the third quarter of 2022 primarily reflects higher interest rates, partially offset by changes in balance sheet size and mix. The decrease compared with the second quarter of 2023 primarily reflects changes in balance sheet size and mix, partially offset by higher interest rates.

Net interest margin increased 13 basis points compared with the third quarter of 2022 and decreased 2 basis points compared with the second quarter of 2023. The changes compared with the third quarter of 2022 and the second quarter of 2023 primarily reflect the factors mentioned above.

Average interest-earning assets decreased 4% compared with the third quarter of 2022 and decreased 6% compared with the second quarter of 2023. The decrease compared with the third quarter of 2022 primarily reflects lower securities and loan balances and interest-bearing deposits with banks. The decrease was partially offset by higher interest-bearing deposits with the Federal Reserve and other central banks. The decrease compared with the

second quarter of 2023 primarily reflects lower interest-bearing deposits with the Federal Reserve and other central banks, securities and interest-bearing deposits with banks.

Average non-U.S. dollar deposits comprised approximately 25% of our average total deposits in the third quarter of 2023. Approximately 45% of the average non-U.S. dollar deposits in the third quarter of 2023 were euro-denominated.

Year-to-date 2023 compared with year-to-date 2022

Net interest revenue increased 33% compared with the first nine months of 2022, primarily driven by higher interest rates, partially offset by lower deposit balances. The increase in the net interest margin primarily reflects the factors mentioned above.

Average interest-earning assets decreased 4% compared with the first nine months of 2022, primarily reflecting lower securities and loan balances and interest-bearing deposits with banks. The decrease was partially offset by larger interest-bearing deposits with the Federal Reserve and other central banks.

BNY Mellon 9


Average balances and interest rates	Quarter ended
	Sept. 30, 2023						June 30, 2023						Sept. 30, 2022
(dollars in millions; average rates annualized)	Average balance		Interest		Average rates		Average balance		Interest		Average rates			Average balance		Interest		Average rates
Assets
Interest-earning assets:
Interest-bearing deposits with the Federal Reserve and other central banks	$	98,767	$	1,153	4.57	%	$	114,578	$	1,241	4.29	%		$	91,836	$	288	1.23	%
Interest-bearing deposits with banks	12,287		125		4.04		13,919		128		3.68			16,298		67		1.62
Federal funds sold and securities purchased under resale agreements (a)	26,915		2,066		30.47		26,989		1,776		26.38			22,971		321		5.55
Loans	63,962		1,029		6.39		63,459		957		6.05			68,082		581		3.39
Securities:
U.S. government obligations	32,224		250		3.08		34,147		247		2.90			40,829		179		1.75
U.S. government agency obligations	59,481		426		2.87		61,565		428		2.78			62,819		300		1.91
State and political subdivisions (b)	13		1		4.42		13		—		4.45			1,982		12		2.39
Other securities (b)	39,861		393		3.93		40,976		367		3.59			42,642		204		1.90
Total investment securities (b)	131,579		1,070		3.24		136,701		1,042		3.05			148,272		695		1.87
Trading securities (b)	5,534		76		5.49		6,403		81		5.02			4,603		35		3.06
Total securities (b)	137,113		1,146		3.33		143,104		1,123		3.14			152,875		730		1.91
Total interest-earning assets (b)	$	339,044	$	5,519	6.45	%	$	362,049	$	5,225	5.77	%		$	352,062	$	1,987	2.24	%
Noninterest-earning assets	58,448						59,125							63,608
Total assets	$	397,492					$	421,174						$	415,670

Liabilities and equity
Interest-bearing liabilities:
Interest-bearing deposits	$	209,641	$	1,911	3.62	%	$	215,057	$	1,739	3.24	%		$	203,659	$	488	0.95	%
Federal funds purchased and securities sold under repurchase agreements (a)	21,512		1,956		36.07		26,282		1,729		26.39			12,297		250		8.05
Trading liabilities	3,959		48		4.80		3,893		43		4.46			3,550		23		2.52
Other borrowed funds	540		6		4.47		2,702		32		4.60			504		1		1.15
Commercial paper	7		—		4.13		5		—		5.11			5		—		2.34
Payables to customers and broker-dealers	13,515		147		4.30		14,801		143		3.85			18,030		48		1.07
Long-term debt	31,161		435		5.52		31,970		438		5.45			28,449		248		3.43
Total interest-bearing liabilities	$	280,335	$	4,503	6.37	%	$	294,710	$	4,124	5.61	%		$	266,494	$	1,058	1.57	%
Total noninterest-bearing deposits	52,467						62,152							84,804
Other noninterest-bearing liabilities	23,790						23,625							23,547
Total liabilities	356,592						380,487							374,845
Total The Bank of New York Mellon Corporation shareholders’ equity	40,821						40,607							40,780
Noncontrolling interests	79						80							45
Total liabilities and equity	$	397,492					$	421,174						$	415,670
Net interest revenue (FTE) – Non-GAAP (b)(c)			$	1,016					$	1,101						$	929
Net interest margin (FTE) – Non-GAAP (b)(c)					1.18	%					1.20	%						1.05	%
Less: Tax equivalent adjustment			—						1							3
Net interest revenue – GAAP			$	1,016					$	1,100						$	926
Net interest margin – GAAP					1.18	%					1.20	%						1.05	%

(a) Includes the average impact of offsetting under enforceable netting agreements of approximately $126 billion for the third quarter of 2023, $113 billion for the second quarter of 2023 and $35 billion for the third quarter of 2022. On a Non-GAAP basis, excluding the impact of offsetting, the yield on federal funds sold and securities purchased under resale agreements would have been 5.36% for the third quarter of 2023, 5.10% for the second quarter of 2023 and 2.21% for the third quarter of 2022. On a Non-GAAP basis, excluding the impact of offsetting, the rate on federal funds purchased and securities sold under repurchase agreements would have been 5.26% for the third quarter of 2023, 4.99% for the second quarter of 2023 and 2.11% for the third quarter of 2022. We believe providing the rates excluding the impact of netting is useful to investors as it is more reflective of the actual rates earned and paid.

(b) Average rates were calculated on an FTE basis, at tax rates of approximately 21%.

10 BNY Mellon


Average balances and interest rates	Year-to-date
	Sept. 30, 2023						Sept. 30, 2022
(dollars in millions; average rates annualized)	Average balance		Interest		Average rates		Average balance		Interest		Average rates
Assets
Interest-earning assets:
Interest-bearing deposits with the Federal Reserve and other central banks	$	102,762	$	3,247	4.17	%	$	98,310	$	389	0.52	%
Interest-bearing deposits with banks	14,129		393		3.72		17,189		114		0.88
Federal funds sold and securities purchased under resale agreements (a)	26,187		4,833		24.68		24,715		474		2.56
Loans	63,563		2,852		6.00		67,980		1,211		2.38
Securities:
U.S. government obligations	35,050		776		2.95		40,988		363		1.19
U.S. government agency obligations	61,098		1,259		2.75		64,922		803		1.65
State and political subdivisions (b)	16		1		5.71		2,126		36		2.22
Other securities (b)	41,080		1,098		3.57		43,929		461		1.40
Total investment securities (b)	137,244		3,134		3.05		151,965		1,663		1.46
Trading securities (b)	5,904		227		5.15		5,120		79		2.07
Total securities (b)	143,148		3,361		3.13		157,085		1,742		1.48
Total interest-earning assets (b)	$	349,789	$	14,686	5.59	%	$	365,279	$	3,930	1.44	%
Noninterest-earning assets	58,896						65,795
Total assets	$	408,685					$	431,074

Liabilities and equity
Interest-bearing liabilities:
Interest-bearing deposits	$	209,624	$	5,016	3.20	%	$	215,271	$	541	0.34	%
Federal funds purchased and securities sold under repurchase agreements (a)	22,048		4,577		27.75		12,589		339		3.60
Trading liabilities	3,629		121		4.47		3,385		37		1.46
Other borrowed funds	1,317		41		4.08		467		6		1.85
Commercial paper	4		—		4.55		5		—		1.41
Payables to customers and broker-dealers	15,077		418		3.70		17,099		57		0.45
Long-term debt	31,129		1,268		5.39		26,754		493		2.44
Total interest-bearing liabilities	$	282,828	$	11,441	5.40	%	$	275,570	$	1,473	0.71	%
Total noninterest-bearing deposits	61,438						88,952
Other noninterest-bearing liabilities	23,734						25,097
Total liabilities	368,000						389,619
Total The Bank of New York Mellon Corporation shareholders’ equity	40,625						41,321
Noncontrolling interests	60						134
Total liabilities and equity	$	408,685					$	431,074
Net interest revenue (FTE) – Non-GAAP (b)(c)			$	3,245					$	2,457
Net interest margin (FTE) – Non-GAAP (b)(c)					1.23	%					0.90	%
Less: Tax equivalent adjustment			1						9
Net interest revenue – GAAP			$	3,244					$	2,448
Net interest margin – GAAP					1.23	%					0.89	%

(a) Includes the average impact of offsetting under enforceable netting agreements of approximately $101 billion for the first nine months of 2023 and $40 billion for the first nine months of 2022. On a Non-GAAP basis, excluding the impact of offsetting, the yield on federal funds sold and securities purchased under resale agreements would have been 5.10% for the first nine months of 2023 and 0.98% for the first nine months of 2022. On a Non-GAAP basis, excluding the impact of offsetting, the rate on federal funds purchased and securities sold under repurchase agreements would have been 4.99% for the first nine months of 2023 and 0.86% for the first nine months of 2022. We believe providing the rates excluding the impact of netting is useful to investors as it is more reflective of the actual rates earned and paid.

(b) Average rates were calculated on an FTE basis, at tax rates of approximately 21%.

BNY Mellon 11

Noninterest expense


Noninterest expense															YTD23
							3Q23 vs.								vs.
(dollars in millions)	3Q23		2Q23		3Q22		2Q23		3Q22		YTD23		YTD22		YTD22
Staff	$	1,755	$	1,718	$	1,673	2	%	5	%	$	5,264	$	4,998	5	%
Software and equipment	452		450		421		—		7		1,331		1,225		9
Professional, legal and other purchased services	368		378		363		(3)		1		1,121		1,112		1
Net occupancy	140		121		124		16		13		380		371		2
Sub-custodian and clearing	121		119		124		2		(2)		358		373		(4)
Distribution and servicing	87		93		88		(6)		(1)		265		257		3
Business development	36		47		34		(23)		6		122		107		14
Bank assessment charges	37		41		35		(10)		6		118		107		10
Goodwill impairment	—		—		680		N/M		N/M		—		680		N/M
Amortization of intangible assets	15		14		17		7		(12)		43		51		(16)
Other	78		130		120		(40)		(35)		298		516		(42)
Total noninterest expense	$	3,089	$	3,111	$	3,679	(1)	%	(16)	%	$	9,300	$	9,797	(5)	%

Full-time employees at period end	53,600		53,200		51,100		1	%	5	%	53,600		51,100		5	%

Total noninterest expense decreased 16% primarily related to the third quarter 2022 goodwill impairment associated with the Investment Management reporting unit. Excluding notable items, noninterest expense increased 3% (Non-GAAP) primarily reflecting higher investments and revenue-related expenses, and the unfavorable impact of a weaker U.S. dollar, as well as the impact of inflation, partially offset by the favorable impact of efficiency savings and the impact of the Alcentra divestiture. The investments, net of savings, are primarily included in staff, software and equipment, and professional, legal and other purchased services expenses. Total noninterest expense decreased 1% compared with the second quarter of 2023, primarily reflecting the favorable impact of efficiency savings and lower litigation reserves, partially offset by higher investments, severance and revenue-related expenses.

Year-to-date 2023 compared with year-to-date 2022

Noninterest expense decreased 5% primarily related to the third quarter 2022 goodwill impairment associated with the Investment Management reporting unit. Excluding notable items, noninterest expense increased 2% (Non-GAAP) compared with the first nine months of 2022, primarily reflecting higher

investments and revenue-related expenses, as well as the impact of inflation, partially offset by the favorable impact of efficiency savings, the impact of the Alcentra divestiture and the favorable impact of a stronger U.S. dollar.

See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 43 for the reconciliation of this Non-GAAP measure.

Income taxes

BNY Mellon recorded an income tax provision of $241 million (18.8% effective tax rate) in the third quarter of 2023. We recorded an income tax provision of $242 million in the third quarter of 2022. The effective tax rate was 38.4% in the third quarter of 2022, or 19.5% (Non-GAAP) excluding notable items, primarily goodwill impairment. We recorded an income tax provision of $270 million (20.2% effective tax rate) in the second quarter of 2023. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 43 for the reconciliation of this Non-GAAP measure. For additional information, see Note 11 of the Notes to Consolidated Financial Statements.

12 BNY Mellon

Review of business segments

We have an internal information system that produces performance data along product and service lines for our three principal business segments: Securities Services, Market and Wealth Services and Investment and Wealth Management, and the Other segment.

Business segment accounting principles

Our business segment data has been determined on an internal management basis of accounting, rather than the generally accepted accounting principles (“GAAP”) used for consolidated financial reporting. These measurement principles are designed so that reported results of the businesses will track their economic performance.

For information on the accounting principles of our business segments, see Note 19 of the Notes to Consolidated Financial Statements. For information on the primary products and services in each line of business, the primary types of revenue by line of business and how our business segments are presented and analyzed, see Note 24 of the Notes to Consolidated Financial Statements in our 2022 Annual Report.

Business segment results are subject to reclassification when organizational changes are made, or for refinements in revenue and expense allocation methodologies. Refinements are typically reflected on a prospective basis. There were no reclassification or organizational changes in the third quarter of 2023.

The results of our business segments may be influenced by client and other activities that vary by quarter. In the first quarter, staff expense typically increases, reflecting the vesting of long-term stock awards for retirement-eligible employees. In the second quarter, staff expense typically increases, reflecting the annual employee merit increase. In the

third quarter, volume-related fees may decline due to reduced client activity. In the fourth quarter, we typically incur higher business development and marketing expenses. In our Investment and Wealth Management business segment, performance fees are typically higher in the fourth and first quarters, as those quarters represent the end of the measurement period for many of the performance fee-eligible relationships.

The results of our business segments may also be impacted by the translation of financial results denominated in foreign currencies to the U.S. dollar. We are primarily impacted by activities denominated in the British pound and the euro. On a consolidated basis and in our Securities Services and Market and Wealth Services business segments, we typically have more foreign currency-denominated expenses than revenues. However, our Investment and Wealth Management business segment typically has more foreign currency-denominated revenues than expenses. Overall, currency fluctuations impact the year-over-year growth rate in the Investment and Wealth Management business segment more than the Securities Services and Market and Wealth Services business segments. However, currency fluctuations, in isolation, are not expected to significantly impact net income on a consolidated basis.

Fee revenue in the Investment and Wealth Management business segment, and, to a lesser extent, the Securities Services and Market and Wealth Services business segments, is impacted by global market fluctuations. At Sept. 30, 2023, we estimated that a 5% change in global equity markets, spread evenly throughout the year, would impact fee revenue by less than 1% and diluted earnings per common share by $0.04 to $0.07.

See Note 19 of the Notes to Consolidated Financial Statements for the consolidating schedules, which show the contribution of our business segments to our overall profitability.

BNY Mellon 13

Securities Services business segment


																										YTD23
(dollars in millions, unless otherwise noted)																3Q23 vs.										vs.
	3Q23			2Q23			1Q23			4Q22			3Q22			2Q23		3Q22		YTD23			YTD22			YTD22
Revenue:
Investment services fees:
Asset Servicing	$	984		$	991		$	948		$	971		$	953		(1)	%	3	%	$	2,923		$	2,947		(1)	%
Issuer Services	281			319			236			271			288			(12)		(2)		836			738			13
Total investment services fees	1,265			1,310			1,184			1,242			1,241			(3)		2		3,759			3,685			2
Foreign exchange revenue	107			124			139			149			132			(14)		(19)		370			435			(15)
Other fees (a)	52			54			55			55			52			(4)		—		161			147			10
Total fee revenue	1,424			1,488			1,378			1,446			1,425			(4)		—		4,290			4,267			1
Investment and other revenue	65			84			72			70			111			N/M		N/M		221			221			N/M
Total fee and other revenue	1,489			1,572			1,450			1,516			1,536			(5)		(3)		4,511			4,488			1
Net interest revenue	600			668			666			656			538			(10)		12		1,934			1,372			41
Total revenue	2,089			2,240			2,116			2,172			2,074			(7)		1		6,445			5,860			10
Provision for credit losses	19			16			—			11			(6)			N/M		N/M		35			(3)			N/M
Noninterest expense (excluding amortization of intangible assets)	1,577			1,575			1,548			1,568			1,549			—		2		4,700			4,698			—
Amortization of intangible assets	8			7			8			8			8			14		—		23			25			(8)
Total noninterest expense	1,585			1,582			1,556			1,576			1,557			—		2		4,723			4,723			—
Income before income taxes	$	485		$	642		$	560		$	585		$	523		(24)	%	(7)	%	$	1,687		$	1,140		48	%

Pre-tax operating margin	23		%	29		%	26		%	27		%	25		%					26		%	19		%

Securities lending revenue (b)	$	46		$	47		$	48		$	50		$	48		(2)	%	(4)	%	$	141		$	132		7	%

Total revenue by line of business:
Asset Servicing	$	1,593		$	1,706		$	1,664		$	1,681		$	1,596		(7)	%	—	%	$	4,963		$	4,642		7	%
Issuer Services	496			534			452			491			478			(7)		4		1,482			1,218			22
Total revenue by line of business	$	2,089		$	2,240		$	2,116		$	2,172		$	2,074		(7)	%	1	%	$	6,445		$	5,860		10	%

Selected average balances:
Average loans	$	11,236		$	11,283		$	10,939		$	11,850		$	11,573		—	%	(3)	%	$	11,154		$	11,042		1	%
Average deposits	$	162,509		$	172,863		$	167,209		$	176,541		$	176,328		(6)	%	(8)	%	$	167,510		$	186,500		(10)	%

Selected metrics:
AUC/A at period end (in trillions) (c)	$	32.3		$	33.2		$	32.6		$	31.4		$	30.0		(3)	%	8	%
Market value of securities on loan at period end (in billions) (d)	$	406		$	415		$	441		$	449		$	435		(2)	%	(7)	%

(a) Other fees primarily include financing-related fees.

(b) Included in investment services fees reported in the Asset Servicing line of business.

(c) Consists of AUC/A primarily from the Asset Servicing line of business and, to a lesser extent, the Issuer Services line of business. Includes the AUC/A of CIBC Mellon of $1.5 trillion at Sept. 30, 2023, $1.6 trillion at June 30, 2023, $1.5 trillion at March 31, 2023 and Dec. 31, 2022 and $1.4 trillion at Sept. 30, 2022.

(d) Represents the total amount of securities on loan in our agency securities lending program. Excludes securities for which BNY Mellon acts as agent on behalf of CIBC Mellon clients, which totaled $63 billion at Sept. 30, 2023, $66 billion at June 30, 2023, $69 billion at March 31, 2023, $68 billion at Dec. 31, 2022 and $75 billion at Sept. 30, 2022.

N/M – Not meaningful.

Business segment description

The Securities Services business segment consists of two distinct lines of business, Asset Servicing and Issuer Services, which provide business solutions across the transaction life cycle to our global asset owner and asset manager clients. We are one of the leading global investment services providers with $32.3 trillion of AUC/A at Sept. 30, 2023. For

information on the drivers of the Securities Services fee revenue, see Note 10 of the Notes to Consolidated Financial Statements in our 2022 Annual Report.

The Asset Servicing business provides a comprehensive suite of solutions. We are one of the largest global custody and front-to-back outsourcing partners. We offer services for the safekeeping of assets in capital markets globally, as well as fund

14 BNY Mellon

accounting services, exchange-traded funds servicing, transfer agency, trust and depository, front-to-back capabilities as well as data and analytics solutions for our clients. We deliver foreign exchange, and securities lending and financing solutions, on both an agency and principal basis. Our agency securities lending program is one of the largest lenders of U.S. and non-U.S. securities, servicing a lendable asset pool of approximately $4.5 trillion in 34 separate markets. Our market-leading liquidity services portal enables cash investments for institutional clients and includes fund research and analytics.

The Issuer Services business includes Corporate Trust and Depositary Receipts. Our Corporate Trust business delivers a full range of issuer and related investor services, including trustee, paying agency, fiduciary, escrow and other financial services. We are a leading provider to the debt capital markets, providing customized and market-driven solutions to investors, bondholders and lenders. Our Depositary Receipts business drives global investing by providing servicing and value-added solutions that enable, facilitate and enhance cross-border trading, clearing, settlement and ownership. We are one of the largest providers of depositary receipts services in the world, partnering with leading companies from more than 50 countries.

Review of financial results

AUC/A of $32.3 trillion increased 8% compared with Sept. 30, 2022, primarily reflecting higher market values and the favorable impact of a weaker U.S. dollar.

Total revenue of $2.1 billion increased 1% compared with the third quarter of 2022 and decreased 7% compared with the second quarter of 2023. The drivers of total revenue by line of business are indicated below.

Asset Servicing revenue of $1.6 billion was flat compared with the third quarter of 2022 and decreased 7% compared with the second quarter of 2023. The comparison with the third quarter of 2022 primarily reflects a third quarter 2022 disposal gain, lower foreign exchange revenue and a strategic equity investment loss, partially offset by higher net interest revenue and market values and net new business. The decrease compared with the second quarter of 2023 primarily reflects lower net

interest revenue, lower foreign exchange revenue and a strategic equity investment loss.

Issuer Services revenue of $496 million increased 4% compared with the third quarter of 2022 and decreased 7% compared with the second quarter of 2023. The increase compared with the third quarter of 2022 primarily reflects higher net interest revenue. The decrease compared with the second quarter of 2023 primarily reflects lower Depositary Receipts revenue.

Market and regulatory trends are driving investable assets toward lower fee asset management products at reduced margins for our clients. These dynamics are also negatively impacting our investment services fees. However, at the same time, these trends are providing additional outsourcing opportunities as clients and other market participants seek to comply with regulations and reduce their operating costs.

Noninterest expense of $1.6 billion increased 2% compared with the third quarter of 2022 and was flat compared with the second quarter of 2023. The increase compared with the third quarter of 2022 primarily reflects higher investments and the impact of inflation, partially offset by the favorable impact of efficiency savings.

Year-to-date 2023 compared with year-to-date 2022

Total revenue of $6.4 billion increased 10% compared with the first nine months of 2022. Asset Servicing revenue of $5.0 billion increased 7%, primarily reflecting higher net interest revenue, net new business and the abatement of money market fee waivers, partially offset by lower foreign exchange revenue and client activity, and a third quarter 2022 disposal gain. Issuer Services revenue of $1.5 billion increased 22%, primarily reflecting higher net interest revenue, the accelerated amortization of deferred costs for depositary receipts services related to Russia recorded in the first quarter of 2022 and the abatement of money market fee waivers.

Noninterest expense of $4.7 billion was unchanged compared with the first nine months of 2022, primarily reflecting the favorable impact of efficiency savings and lower litigation reserves, partially offset by higher investments as well as the impact of inflation.

BNY Mellon 15

Market and Wealth Services business segment


																										YTD23
(dollars in millions, unless otherwise noted)																3Q23 vs.										vs.
	3Q23			2Q23			1Q23			4Q22			3Q22			2Q23		3Q22		YTD23			YTD22			YTD22
Revenue:
Investment services fees:
Pershing	$	506		$	496		$	499		$	502		$	494		2	%	2	%	$	1,501		$	1,406		7	%
Treasury Services	172			172			168			170			173			—		(1)		512			519			(1)
Clearance and Collateral Management	277			265			260			249			239			5		16		802			722			11
Total investment services fees	955			933			927			921			906			2		5		2,815			2,647			6
Foreign exchange revenue	21			21			18			20			20			—		5		60			68			(12)
Other fees (a)	51			55			54			47			49			(7)		4		160			129			24
Total fee revenue	1,027			1,009			999			988			975			2		5		3,035			2,844			7
Investment and other revenue	16			16			15			15			14			N/M		N/M		47			25			N/M
Total fee and other revenue	1,043			1,025			1,014			1,003			989			2		5		3,082			2,869			7
Net interest revenue	402			420			453			396			378			(4)		6		1,275			1,014			26
Total revenue	1,445			1,445			1,467			1,399			1,367			—		6		4,357			3,883			12
Provision for credit losses	6			7			—			6			(1)			N/M		N/M		13			1			N/M
Noninterest expense (excluding amortization of intangible assets)	806			779			768			783			735			3		10		2,353			2,141			10
Amortization of intangible assets	2			2			1			2			2			—		—		5			6			(17)
Total noninterest expense	808			781			769			785			737			3		10		2,358			2,147			10
Income before income taxes	$	631		$	657		$	698		$	608		$	631		(4)	%	—	%	$	1,986		$	1,735		14	%

Pre-tax operating margin	44		%	46		%	48		%	43		%	46		%					46		%	45		%

Total revenue by line of business:
Pershing	$	699		$	686		$	693		$	673		$	658		2	%	6	%	$	2,078		$	1,864		11	%
Treasury Services	389			402			412			382			390			(3)		—		1,203			1,101			9
Clearance and Collateral Management	357			357			362			344			319			—		12		1,076			918			17
Total revenue by line of business	$	1,445		$	1,445		$	1,467		$	1,399		$	1,367		—	%	6	%	$	4,357		$	3,883		12	%

Selected average balances:
Average loans	$	37,496		$	36,432		$	36,854		$	39,843		$	40,882		3	%	(8)	%	$	36,930		$	41,791		(12)	%
Average deposits	$	84,000		$	85,407		$	86,040		$	86,083		$	90,612		(2)	%	(7)	%	$	85,141		$	93,658		(9)	%

Selected metrics:
AUC/A at period end (in trillions) (b)	$	13.1		$	13.4		$	13.7		$	12.7		$	12.0		(2)	%	9	%

Pershing:
AUC/A at period end (in trillions)	$	2.4		$	2.4		$	2.4		$	2.3		$	2.1		—	%	14	%
Net new assets (U.S. platform) (in billions) (c)	$	23		$	(34)		$	37		$	42		$	45		N/M		N/M
Average active clearing accounts (in thousands)	7,979			7,946			7,849			7,603			7,466			—	%	7	%

Treasury Services:
Average daily U.S. dollar payment volumes	233,620			233,931			236,322			246,189			234,468			—	%	—	%

Clearance and Collateral Management:
Average tri-party collateral management balances (in billions)	$	5,706		$	6,044		$	5,626		$	5,451		$	5,457		(6)	%	5	%

(a) Other fees primarily include financing-related fees.

(b) Consists of AUC/A from the Clearance and Collateral Management and Pershing lines of business.

(c) Net new assets represents net flows of assets (e.g., net cash deposits and net securities transfers, including dividends and interest) in customer accounts in Pershing LLC, a U.S. broker-dealer.

N/M – Not meaningful.

Business segment description

The Market and Wealth Services business segment consists of three distinct lines of business, Pershing,

Treasury Services and Clearance and Collateral Management, which provide business services and technology solutions to entities including financial institutions, corporations, foundations and

16 BNY Mellon

endowments, public funds and government agencies. For information on the drivers of the Market and Wealth Services fee revenue, see Note 10 of the Notes to Consolidated Financial Statements in our 2022 Annual Report.

Pershing provides execution, clearing, custody, business and technology solutions, delivering operational support to broker-dealers, wealth managers and registered investment advisors (“RIAs”) globally.

Our Treasury Services business is a leading provider of global payments, liquidity management and trade finance services for financial institutions, corporations and the public sector.

Our Clearance and Collateral Management business clears and settles equity and fixed income transactions globally and serves as custodian for tri-party repo collateral worldwide. We are the primary provider of U.S. government securities clearance and a provider of non-U.S. government securities clearance. Our collateral services include collateral management, administration and segregation. We offer innovative solutions and industry expertise, which help financial institutions and institutional investors with their financing, risk and balance sheet challenges. We are a leading provider of tri-party collateral management services with an average of $5.7 trillion serviced globally, including approximately $4.6 trillion of the U.S. tri-party repo market at Sept. 30, 2023.

Review of financial results

AUC/A of $13.1 trillion increased 9% compared with Sept. 30, 2022, primarily reflecting net client inflows and higher market values.

Total revenue of $1.4 billion increased 6% compared with the third quarter of 2022 and was unchanged compared with the second quarter of 2023. The drivers of total revenue by line of business are indicated below.

Pershing revenue of $699 million increased 6% compared with the third quarter of 2022 and 2% compared with the second quarter of 2023. The increase compared with the third quarter of 2022 primarily reflects higher net interest revenue and higher fees on sweep balances, partially offset by lost

business. The increase compared with the second quarter of 2023 primarily reflects higher fees on sweep balances.

Treasury Services revenue of $389 million was flat compared with the third quarter of 2022 and decreased 3% compared with the second quarter of 2023. The decrease compared with the second quarter of 2023 primarily reflects lower net interest revenue.

Clearance and Collateral Management revenue of $357 million increased 12% compared with the third quarter of 2022 and was unchanged compared with the second quarter of 2023. The increase compared with the third quarter of 2022 primarily reflects higher clearance volumes and collateral management balances. Compared with the second quarter of 2023, higher clearance volumes and collateral management balances were offset by lower net interest revenue.

Noninterest expense of $808 million increased 10% compared with the third quarter of 2022 and 3% compared with the second quarter of 2023. The increases primarily reflect higher investments and revenue-related expenses, as well as the impact of inflation, partially offset by the favorable impact of efficiency savings.

Year-to-date 2023 compared with year-to-date 2022

Total revenue of $4.4 billion increased 12% compared with the first nine months of 2022. Pershing revenue of $2.1 billion increased 11%, primarily reflecting the abatement of money market fee waivers, higher net interest revenue and higher fees on sweep balances, partially offset by lower client activity and lost business. Treasury Services revenue of $1.2 billion increased 9%, primarily reflecting higher net interest revenue. Clearance and Collateral Management revenue of $1.1 billion increased 17%, primarily reflecting higher net interest revenue, U.S. collateral management balances and U.S. government clearance volumes.

Noninterest expense of $2.4 billion increased 10% compared with the first nine months of 2022, primarily reflecting higher investments and revenue-related expenses, as well as the impact of inflation, partially offset by the favorable impact of efficiency savings.

BNY Mellon 17

Investment and Wealth Management business segment


																												YTD23
																	3Q23 vs.											vs.
(dollars in millions)	3Q23			2Q23			1Q23			4Q22			3Q22				2Q23		3Q22		YTD23			YTD22				YTD22
Revenue:
Investment management fees	$	746		$	750		$	752		$	754		$	788			(1)	%	(5)	%	$	2,248		$	2,461			(9)	%
Performance fees	30			10			22			26			10				N/M		N/M		62			49				27
Investment management and performance fees (a)	776			760			774			780			798				2		(3)		2,310			2,510				(8)
Distribution and servicing fees	62			58			55			54			55				7		13		175			138				27
Other fees (b)	(50)			(56)			(53)			(58)			(45)				N/M		N/M		(159)			(75)				N/M
Total fee revenue	788			762			776			776			808				3		(2)		2,326			2,573				(10)
Investment and other revenue (c)	1			12			6			(3)			(3)				N/M		N/M		19			(24)				N/M
Total fee and other revenue (c)	789			774			782			773			805				2		(2)		2,345			2,549				(8)
Net interest revenue	38			39			45			52			57				(3)		(33)		122			176				(31)
Total revenue	827			813			827			825			862				2		(4)		2,467			2,725				(9)
Provision for credit losses	(9)			7			—			1			3				N/M		N/M		(2)			—				N/M
Noninterest expense (excluding goodwill impairment and amortization of intangible assets)	667			672			729			693			669				(1)		—		2,068			2,102				(2)
Goodwill impairment	—			—			—			—			680				N/M		N/M		—			680				N/M
Amortization of intangible assets	5			5			5			6			7				—		(29)		15			20				(25)
Total noninterest expense	672			677			734			699			1,356				(1)		(50)		2,083			2,802				(26)
Income (loss) before income taxes	$	164		$	129		$	93		$	125		$	(497)			27	%	N/M		$	386		$	(77)			N/M

Pre-tax operating margin	20		%	16		%	11		%	15		%	(57)		%						16		%	(3)		%
Adjusted pre-tax operating margin – Non-GAAP (d)	22		%	18		%	13		%	17		%	(64)		%	(e)					18		%	(3)		%	(e)

Total revenue by line of business:
Investment Management	$	557		$	546		$	557		$	550		$	579			2	%	(4)	%	$	1,660		$	1,840			(10)	%
Wealth Management	270			267			270			275			283				1		(5)		807			885				(9)
Total revenue by line of business	$	827		$	813		$	827		$	825		$	862			2	%	(4)	%	$	2,467		$	2,725			(9)	%

Average balances:
Average loans	$	13,519		$	13,995		$	13,960		$	14,404		$	14,482			(3)	%	(7)	%	$	13,823		$	13,937			(1)	%
Average deposits	$	13,578		$	15,410		$	16,144		$	16,416		$	17,225			(12)	%	(21)	%	$	15,035		$	20,157			(25)	%

(a) On a constant currency basis, investment management and performance fees decreased 5% (Non-GAAP) compared with the third quarter of 2022. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 43 for the reconciliation of this Non-GAAP measure.

(b) Other fees primarily include investment services fees.

(c) Investment and other revenue and total fee and other revenue are net of income (loss) attributable to noncontrolling interests related to consolidated investment management funds.

(d) Net of distribution and servicing expense. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 43 for the reconciliation of this Non-GAAP measure.

(e) Excluding notable items and net of distribution and servicing expense, the adjusted pre-tax operating margin was 24% (Non-GAAP) in the third quarter of 2022 and the first nine months of 2022. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 43 for the reconciliation of this Non-GAAP measure.

N/M – Not meaningful.

18 BNY Mellon


AUM trends											3Q23 vs.
(dollars in billions)	3Q23		2Q23		1Q23		4Q22		3Q22		2Q23		3Q22
AUM by product type: (a)
Equity	$	133	$	145	$	142	$	135	$	125	(8)	%	6	%
Fixed income	190		203		207		198		205		(6)		(7)
Index	425		440		408		395		366		(3)		16
Liability-driven investments	534		579		604		570		546		(8)		(2)
Multi-asset and alternative investments	156		162		161		153		181		(4)		(14)
Cash	383		377		386		385		353		2		8
Total AUM	$	1,821	$	1,906	$	1,908	$	1,836	$	1,776	(4)	%	3	%

Changes in AUM: (a)
Beginning balance of AUM	$	1,906	$	1,908	$	1,836	$	1,776	$	1,937
Net inflows (outflows):
Long-term strategies:
Equity	(3)		(3)		(4)		(5)		(5)
Fixed income	(7)		(4)		4		(12)		(3)
Liability-driven investments	1		(3)		10		19		30
Multi-asset and alternative investments	(4)		(1)		(3)		(4)		2
Total long-term active strategies (outflows) inflows	(13)		(11)		7		(2)		24
Index	(2)		2		(2)		(4)		(1)
Total long-term strategies (outflows) inflows	(15)		(9)		5		(6)		23
Short-term strategies:
Cash	7		(9)		—		27		(2)
Total net (outflows) inflows	(8)		(18)		5		21		21
Net market impact	(50)		(3)		52		18		(118)
Net currency impact	(27)		19		15		53		(64)
Divestiture	—		—		—		(32)		—
Ending balance of AUM	$	1,821	$	1,906	$	1,908	$	1,836	$	1,776	(4)	%	3	%

Wealth Management client assets (b)	$	292	$	286	$	279	$	269	$	256	2	%	14	%

(a) Excludes assets managed outside of the Investment and Wealth Management business segment.

(b) Includes AUM and AUC/A in the Wealth Management line of business.

Business segment description

Our Investment and Wealth Management business segment consists of two distinct lines of business: Investment Management and Wealth Management. Our investment firms deliver a highly diversified portfolio of investment strategies independently, and through our global distribution network, to institutional and retail clients globally. BNY Mellon Wealth Management provides investment management, custody, wealth and estate planning, private banking services, investment servicing and information management. See pages 19 and 20 of our 2022 Annual Report for additional information on our Investment and Wealth Management business segment.

Review of financial results

AUM increased 3% compared with Sept. 30, 2022, primarily reflecting the favorable impact of a weaker

U.S. dollar and higher market values, partially offset by the divestiture of Alcentra.

Net long-term strategy outflows were $15 billion in the third quarter of 2023, driven by fixed income, multi-asset and alternative investments and equity investments. Short-term strategy inflows were $7 billion in the third quarter of 2023. Market and regulatory trends have resulted in increased demand for lower fee asset management products and for performance-based fees.

Total revenue of $827 million decreased 4% compared with the third quarter of 2022 and increased 2% compared with the second quarter of 2023. The drivers of total revenue by line of business are indicated below.

Investment Management revenue of $557 million decreased 4% compared with the third quarter of 2022 and increased 2% compared with the second quarter of 2023. The decrease compared with the

BNY Mellon 19

third quarter of 2022 primarily reflects the impact of the Alcentra divestiture and the mix of cumulative AUM flows, partially offset by higher performance fees and market values, and the favorable impact of a weaker U.S. dollar. The increase compared with the second quarter of 2023 primarily reflects the timing of performance fees.

Wealth Management revenue of $270 million decreased 5% compared with the third quarter of 2022 and increased 1% compared with the second quarter of 2023. The decrease compared with the third quarter of 2022 primarily reflects lower net interest revenue and changes in product mix, partially offset by higher market values. The increase compared with the second quarter of 2023 primarily reflects higher market values.

Revenue generated in the Investment and Wealth Management business segment included 33% from non-U.S. sources in the third quarter of 2023, compared with 33% in the third quarter of 2022 and 30% in the second quarter of 2023.

Noninterest expense of $672 million decreased 50% compared with the third quarter of 2022 and 1% compared with the second quarter of 2023. The decrease compared with the third quarter of 2022

primarily reflects the third quarter 2022 goodwill impairment in the Investment Management reporting unit and the impact of the Alcentra divestiture, partially offset by higher investments and the unfavorable impact of a weaker U.S. dollar.

Year-to-date 2023 compared with year-to-date 2022

Total revenue of $2.5 billion decreased 9% compared with the first nine months of 2022. Investment Management revenue of $1.7 billion decreased 10%, primarily reflecting the impact of the Alcentra divestiture, the mix of cumulative AUM flows and lower market values, partially offset by the abatement of money market fee waivers and improved seed capital results. Wealth Management revenue of $807 million decreased 9%, primarily reflecting lower net interest revenue and changes in product mix.

Noninterest expense of $2.1 billion decreased 26% compared with the first nine months of 2022, primarily reflecting the third quarter 2022 goodwill impairment in the Investment Management reporting unit, the impact of the Alcentra divestiture and the favorable impact of efficiency savings, partially offset by higher revenue-related expenses and higher investments, as well as the impact of inflation.

Other segment



(in millions)	3Q23		2Q23		1Q23		4Q22		3Q22		YTD23		YTD22
Fee revenue	$	6	$	(2)	$	3	$	12	$	28	$	7	$	49
Investment and other revenue	28		(16)		(14)		(442)		(5)		(2)		69
Total fee and other revenue	34		(18)		(11)		(430)		23		5		118
Net interest expense	(24)		(27)		(36)		(48)		(47)		(87)		(114)
Total revenue	10		(45)		(47)		(478)		(24)		(82)		4
Provision for credit losses	(13)		(25)		27		2		(26)		(11)		21
Noninterest expense	24		71		41		153		29		136		125
(Loss) before income taxes	$	(1)	$	(91)	$	(115)	$	(633)	$	(27)	$	(207)	$	(142)

Average loans and leases	$	1,711	$	1,749	$	1,508	$	1,267	$	1,145	$	1,656	$	1,210

See page 21 of our 2022 Annual Report for additional information on the Other segment.

Review of financial results

Total revenue includes corporate treasury and other investment activity, including hedging activity, which has an offsetting impact between fee and other revenue and net interest expense.

Total revenue increased $34 million compared with the third quarter of 2022 and $55 million compared with the second quarter of 2023. The increase compared with the third quarter of 2022 primarily reflects debt extinguishment gains, partially offset by net securities losses.

The provision for credit losses was a benefit of $13 million in the third quarter of 2023, primarily

20 BNY Mellon

reflecting a reduction in reserves related to financial institutions.

Noninterest expense decreased $5 million compared with the third quarter of 2022 and $47 million compared with the second quarter of 2023. The decrease compared with the second quarter of 2023 primarily reflects lower litigation reserves.

Year-to-date 2023 compared with year-to-date 2022

Loss before income taxes increased $65 million compared with the first nine months of 2022. Total fee and other revenue decreased $113 million, primarily reflecting lower strategic equity investment gains and net securities losses, partially offset by debt extinguishment gains.

Noninterest expense increased $11 million compared with the first nine months of 2022, primarily reflecting higher staff expense.

Critical accounting estimates

Our significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements in our 2022 Annual Report. Our critical accounting estimates are those related to the allowance for credit losses, goodwill and other intangibles and litigation and regulatory contingencies, as referenced below.


Critical accounting estimates			Reference
Allowance for credit losses			2022 Annual Report, pages 23-25, and “Allowance for credit losses.”
Goodwill and other intangibles			2022 Annual Report, pages 25-27. Also see below.
Litigation and regulatory contingencies			“Legal proceedings” in Note 18 of the Notes to Consolidated Financial Statements.

Goodwill and other intangibles

BNY Mellon’s business segments include six reporting units for which goodwill impairment testing is performed on an annual basis. An interim test is performed when events or circumstances occur that may indicate that it is more likely than not that the fair value of any reporting unit may be less than its carrying value.

In the third quarter of 2023, due to the results of the second quarter 2023 interim goodwill impairment test and macroeconomic conditions, we performed an interim goodwill impairment test of the Investment Management reporting unit, which had $6.0 billion of allocated goodwill. The fair value of the Investment Management reporting unit exceeded its carrying value by approximately 2%. We determined the fair value of the Investment Management reporting unit using an income approach based on management’s projections as of Sept. 30, 2023. The discount rate applied to these cash flows was 10.5%.

As of Sept. 30, 2023, if the discount rate applied to the estimated cash flows was increased or decreased by 25 basis points, the fair value of the Investment Management reporting unit would decrease or increase by 4%, respectively. Similarly, if the long-term growth rate was increased or decreased by 10 basis points, the fair value of the Investment Management reporting unit would increase or decrease by approximately 1%, respectively.

Determining the fair value of a reporting unit is subject to uncertainty as it is reliant on estimates of cash flows that extend far into the future, and, by their nature, are difficult to estimate over such an extended time frame. In the future, changes in the assumptions or the discount rate could produce a material non-cash goodwill impairment.

BNY Mellon 21

Consolidated balance sheet review

One of our key risk management objectives is to maintain a balance sheet that remains strong throughout market cycles to meet the expectations of our major stakeholders, including our shareholders, clients, creditors and regulators.

We also seek to undertake overall liquidity risk, including intraday liquidity risk, that stays within our risk appetite. The objective of our balance sheet management strategy is to maintain a balance sheet that is characterized by strong liquidity and asset quality, ready access to external funding sources at competitive rates and a strong capital structure that supports our risk-taking activities and is adequate to absorb potential losses. In managing the balance sheet, appropriate consideration is given to balancing the competing needs of maintaining sufficient levels of liquidity and complying with applicable regulations and supervisory expectations while optimizing profitability.

At Sept. 30, 2023, total assets were $405 billion, compared with $406 billion at Dec. 31, 2022. The decrease in total assets was primarily driven by lower securities and interest-bearing deposits with banks, partially offset by higher interest-bearing deposits with the Federal Reserve and other central banks. Deposits totaled $277 billion at Sept. 30, 2023, compared with $279 billion at Dec. 31, 2022. The decrease reflects lower noninterest-bearing (principally in U.S. offices) and interest-bearing deposits in non-U.S. offices, partially offset by higher interest-bearing deposits in U.S. offices. Total interest-bearing deposits as a percentage of total interest-earning assets were 63% at Sept. 30, 2023 and 58% at Dec. 31, 2022.

At Sept. 30, 2023, available funds totaled $152 billion and included cash and due from banks,

interest-bearing deposits with the Federal Reserve and other central banks, interest-bearing deposits with

banks and federal funds sold and securities purchased under resale agreements. This compares with available funds of $138 billion at Dec. 31, 2022. Total available funds as a percentage of total assets was 37% at Sept. 30, 2023 and 34% at Dec. 31, 2022. For additional information on our available funds, see “Liquidity and dividends.”

Securities were $128 billion, or 32% of total assets, at Sept. 30, 2023, compared with $143 billion, or 35% of total assets, at Dec. 31, 2022. The decrease primarily reflects lower U.S. Treasury securities and agency residential mortgage-backed securities (“RMBS”), partially offset by higher U.S. government agencies and collateralized loan obligations (“CLOs”). For additional information on our securities portfolio, see “Securities” and Note 4 of the Notes to Consolidated Financial Statements.

Loans were $66.3 billion, or 16% of total assets, at Sept. 30, 2023, compared with $66.1 billion, or 16% of total assets, at Dec. 31, 2022. The increase was driven by higher loans to financial institutions and other residential mortgages, partially offset by lower overdrafts. For additional information on our loan portfolio, see “Loans” and Note 5 of the Notes to Consolidated Financial Statements.

Long-term debt totaled $29 billion at Sept. 30, 2023 and $30 billion at Dec. 31, 2022. Maturities and repurchases, and a decrease in the fair value of hedged long-term debt were partially offset by issuances. For additional information on long-term debt, see “Liquidity and dividends.”

The Bank of New York Mellon Corporation total shareholders’ equity totaled $41 billion at Sept. 30, 2023 and Dec. 31, 2022. For additional information, see “Capital.”

22 BNY Mellon

Country risk exposure

The following table presents BNY Mellon’s top 10 exposures by country (excluding the U.S.) as of Sept. 30, 2023, as well as certain countries with higher risk profiles. The exposure is presented on an internal risk management basis and has not been reduced by the allowance for credit losses. We monitor our exposure to these and other countries as part of our internal country risk management process.

The country risk exposure below reflects the Company’s risk to an immediate default of the counterparty or obligor based on the country of residence of the entity which incurs the liability. If there is credit risk mitigation, the country of residence of the entity providing the risk mitigation is the country of risk. The country of risk for securities is generally based on the domicile of the issuer of the security.


Country risk exposure at Sept. 30, 2023	Interest-bearing deposits											Total exposure
(in billions)	Central banks		Banks			Lending (a)		Securities (b)		Other (c)
Top 10 country exposure:
Germany	$	17.0	$	0.7		$	0.9	$	3.9	$	0.3	$	22.8
United Kingdom (“UK”)	10.7		0.7			1.7		2.9		2.3		18.3
Japan	8.2		1.0			—		0.4		0.3		9.9
Belgium	7.8		0.9			0.1		0.7		—		9.5
Canada	—		1.8			0.4		3.9		1.3		7.4
Australia	—		2.0			0.3		0.7		0.5		3.5
South Korea	0.1		—			2.2		0.2		0.5		3.0
Luxembourg	0.1		0.1			1.5		—		1.2		2.9
France	—		—			0.2		1.8		0.7		2.7
Ireland	0.1		0.1			0.4		—		1.6		2.2
Total Top 10 country exposure	$	44.0	$	7.3		$	7.7	$	14.5	$	8.7	$	82.2	(d)

Select country exposure:
Brazil	$	—	$	—		$	0.9	$	0.1	$	0.3	$	1.3
Russia	—		0.4		(e)	—		—		—		0.4

(a) Lending includes loans, acceptances, issued letters of credit, net of participations, and lending-related commitments.

(b) Securities include both the available-for-sale and held-to-maturity portfolios.

(c) Other exposures include over-the-counter (“OTC”) derivative and securities financing transactions, net of collateral.

(d) The top 10 country exposures comprise approximately 70% of our total non-U.S. exposure.

(e) Represents cash balances with exposure to Russia.

Events in recent years have resulted in increased focus on Brazil. The country risk exposure to Brazil is primarily short-term trade finance loans extended to large financial institutions. We also have operations in Brazil providing investment services and investment management services.

The war in Ukraine has increased our focus on Russia. The country risk exposure to Russia consists of cash balances related to our securities services businesses and may increase in the future to the extent cash is received for the benefit of our clients that is subject to distribution restrictions. BNY Mellon has ceased new banking business in Russia

and suspended investment management purchases of Russian securities. At Sept. 30, 2023, less than 0.1% of our AUC/A and less than 0.01% of our AUM consisted of Russian securities. We will continue to work with multinational clients that depend on our custody and recordkeeping services to manage their exposures.

We are monitoring our exposure to Israel as part of our internal country risk management process. At Sept. 30, 2023, our total exposure to Israel was $187 million and primarily consisted of investment grade short-term interest-bearing deposits and OTC derivatives maturing within six months.

BNY Mellon 23

Securities

In the discussion of our securities portfolio, we have included certain credit ratings information because the information can indicate the degree of credit risk to which we are exposed. Significant changes in ratings classifications could indicate increased credit risk for us and could be accompanied by an increase in the allowance for credit losses and/or a reduction in the fair value of our securities portfolio.

The following table shows the distribution of our total securities portfolio.


Securities portfolio	June 30, 2023			3Q23 change in unrealized gain (loss)		Sept. 30, 2023					Fair value as a % of amortized cost (a)		Unrealized gain (loss)			% Floating rate (b)		Ratings (c)
																						BBB+/ BBB-		BB+ and lower
(dollars in millions)	Fair value					Amortized cost (a)		Fair value										AAA/ AA-		A+/ A-						Not rated
Agency RMBS	$	38,052		$	(961)	$	41,341	$	35,850		87	%	$	(5,491)		18	%	100	%	—	%	—	%	—	%		—	%
U.S. Treasury	33,818			18		32,689		31,439			96		(1,250)			59		100		—		—		—			—
Agency commercial mortgage-backed securities (“MBS”)	11,441			(64)		11,739		10,927			93		(812)			45		100		—		—		—			—
Sovereign debt/sovereign guaranteed (d)	10,662			75		10,648		10,168			95		(480)			28		90		5		4		1			—
Supranational	8,742			24		8,498		8,239			97		(259)			65		100		—		—		—			—
CLOs	6,765			48		6,948		6,908			99		(40)			100		100		—		—		—			—
U.S. government agencies	6,745			(66)		7,213		6,630			92		(583)			43		100		—		—		—			—
Foreign covered bonds (e)	6,133			22		6,364		6,137			96		(227)			59		100		—		—		—			—
Non-agency commercial MBS	3,031			(6)		3,315		3,012			91		(303)			55		100		—		—		—			—
Foreign government agencies/local governments (f)	2,380			29		2,334		2,243			96		(91)			40		92		8		—		—			—
Non-agency RMBS	1,895			(27)		1,953		1,763			90		(190)			47		85		3		—		6			6
Other asset-backed securities (“ABS”)	1,043			6		1,026		922			90		(104)			14		100		—		—		—			—
State and political subdivisions	11			(1)		12		10			85		(2)			—		—		—		3		—			97

Other	1			—		1		1			100		—			—		—		—		—		—			100
Total securities	$	130,719	(g)	$	(903)	$	134,081	$	124,249	(g)	93	%	$	(9,832)	(g)(h)	44	%	99	%	1	%	—	%	—	%		—	%

(a) Amortized cost reflects historical impairments and is net of the allowance for credit losses.

(b) Includes the impact of hedges.

(d) Primarily consists of exposure to Germany, France, UK, Canada, Singapore and Belgium.

(e) Primarily consists of exposure to Canada, UK, Australia, Germany and Norway.

(f) Primarily consists of exposure to Canada, Norway, the Netherlands, Sweden and Finland.

(g) Includes net unrealized gains on derivatives hedging securities available-for-sale (including terminated hedges) of $2,406 million at June 30, 2023 and $2,820 million at Sept. 30, 2023.

(h) At Sept. 30, 2023, includes pre-tax net unrealized losses of $3,036 million related to available-for-sale securities, net of hedges, and $6,796 million related to held-to-maturity securities. The after-tax unrealized losses, net of hedges, related to available-for-sale securities is $2,293 million and the after-tax equivalent related to held-to-maturity securities is $5,182 million.

The fair value of our securities portfolio, including related hedges, was $124.2 billion at Sept. 30, 2023, compared with $139.3 billion at Dec. 31, 2022. The decrease primarily reflects lower U.S. Treasury securities and agency RMBS, partially offset by higher U.S. government agencies and CLOs.

At Sept. 30, 2023, the securities portfolio had a net unrealized loss, including the impact of related hedges, of $9.8 billion, compared with $9.4 billion at Dec. 31, 2022. The increase in the unrealized loss, including the impact of related hedges, primarily reflects the impact of higher interest rates, partially offset by securities moving closer to maturity.

The fair value of the available-for-sale securities totaled $80.0 billion at Sept. 30, 2023, net of hedges, or 64% of the securities portfolio, net of hedges. The fair value of the held-to-maturity securities totaled $44.2 billion at Sept. 30, 2023, or 36% of the securities portfolio, net of hedges.

The unrealized loss (after-tax) on our available-for-sale securities portfolio, net of hedges, included in accumulated other comprehensive income was $2.3 billion at Sept. 30, 2023, compared with $2.4 billion at Dec. 31, 2022. Net unrealized loss, including the impact of hedges, decreased as securities moved closer to maturity, partially offset by the impact of higher interest rates.

24 BNY Mellon

At Sept. 30, 2023, 99% of the securities in our portfolio were rated AAA/AA-, unchanged compared with Dec. 31, 2022.

See Note 4 of the Notes to Consolidated Financial Statements for the pre-tax net securities gains (losses) by security type. See Note 15 of the Notes to Consolidated Financial Statements for securities by level in the fair value hierarchy.

The following table presents the amortizable purchase premium (net of discount) and net amortization related to the securities portfolio.


Amortizable purchase premium (net of discount) and net amortization of securities (a)
(in millions)	3Q23		2Q23		3Q22

Amortizable purchase premium, net of discount	$	973	$	1,028	$	1,386

Net amortization	$	45	$	42	$	82

(a) Amortization of purchase premium decreases net interest revenue while accretion of discount increases net interest revenue. Both were recorded on a level yield basis.

Loans


Total exposure – consolidated	Sept. 30, 2023						Dec. 31, 2022
(in billions)	Loans		Unfunded commitments		Total exposure		Loans		Unfunded commitments		Total exposure
Financial institutions	$	10.4	$	31.8	$	42.2	$	9.7	$	31.7	$	41.4
Commercial	1.9		11.4		13.3		1.7		11.7		13.4
Wealth management loans	9.4		0.6		10.0		10.3		0.6		10.9
Wealth management mortgages	9.2		0.2		9.4		9.0		0.2		9.2
Commercial real estate	6.7		3.4		10.1		6.2		3.9		10.1
Lease financings	0.6		—		0.6		0.7		—		0.7
Other residential mortgages	1.0		—		1.0		0.4		—		0.4
Overdrafts	3.6		—		3.6		4.8		—		4.8
Capital call financing	3.5		3.2		6.7		3.4		3.5		6.9
Other	2.8		—		2.8		3.0		—		3.0
Margin loans	17.2		—		17.2		16.9		—		16.9
Total	$	66.3	$	50.6	$	116.9	$	66.1	$	51.6	$	117.7

At Sept. 30, 2023, our total lending-related exposure of $116.9 billion decreased 1% compared with Dec. 31, 2022, primarily reflecting lower overdrafts and exposure in the wealth management loan portfolio, partially offset by higher exposure in the financial institutions and other residential mortgage portfolios.

Our financial institutions and commercial portfolios comprise our largest concentrated risk. These portfolios comprised 47% of our total exposure at Sept. 30, 2023 and Dec. 31, 2022. Additionally, most of our overdrafts relate to financial institutions.

BNY Mellon 25

Financial institutions

The financial institutions portfolio is shown below.


Financial institutions portfolio exposure (dollars in billions)	Sept. 30, 2023										Dec. 31, 2022
	Loans		Unfunded commitments		Total exposure		% Inv. grade		% due <1 yr.		Loans		Unfunded commitments		Total exposure
Securities industry	$	1.7	$	17.2	$	18.9	95	%	99	%	$	1.6	$	17.5	$	19.1
Asset managers	1.5		8.0		9.5		97		81		1.6		7.6		9.2
Banks	6.8		1.5		8.3		85		97		6.1		1.5		7.6
Insurance	0.1		3.9		4.0		100		12		0.1		3.8		3.9
Government	—		0.2		0.2		100		42		—		0.2		0.2
Other	0.3		1.0		1.3		97		30		0.3		1.1		1.4
Total	$	10.4	$	31.8	$	42.2	94	%	84	%	$	9.7	$	31.7	$	41.4

The financial institutions portfolio exposure was $42.2 billion at Sept. 30, 2023, an increase of 2% compared with Dec. 31, 2022, primarily reflecting higher exposure in the banks portfolio.

Financial institution exposures are high quality, with 94% of the exposures meeting the investment grade equivalent criteria of our internal credit rating classification at Sept. 30, 2023. Each customer is assigned an internal credit rating, which is mapped to an equivalent external rating agency grade based upon a number of dimensions, which are continually evaluated and may change over time. For ratings of non-U.S. counterparties, our internal credit rating is generally capped at a rating equivalent to the sovereign rating of the country where the counterparty resides, regardless of the internal credit rating assigned to the counterparty or the underlying collateral.

The exposure to financial institutions is generally short term, with 84% of the exposures expiring within one year. At Sept. 30, 2023, 55% of the exposure to financial institutions had an expiration within 90 days, compared with 17% at Dec. 31, 2022.

In addition, 64% of the financial institutions exposure is secured. For example, securities industry clients

and asset managers often borrow against marketable securities held in custody.

At Sept. 30, 2023, the secured intraday credit provided to dealers in connection with their tri-party repo activity totaled $16.1 billion and was included in the securities industry portfolio. Dealers secure the outstanding intraday credit with high-quality liquid collateral having a market value in excess of the amount of the outstanding credit. Secured intraday credit facilities represent approximately 38% of the exposure in the financial institutions portfolio and are reviewed and reapproved annually.

The asset managers portfolio exposure is high quality, with 97% of the exposures meeting our investment grade equivalent ratings criteria as of Sept. 30, 2023. These exposures are generally short-term liquidity facilities, with the majority to regulated mutual funds.

Our banks portfolio exposure primarily relates to global trade finance. These exposures are short term in nature, with 97% due in less than one year. The investment grade percentage of our banks portfolio exposure was 85% at Sept. 30, 2023, compared with 86% at Dec. 31, 2022. Our non-investment grade exposures are primarily trade finance loans in Brazil.

26 BNY Mellon

Commercial

The commercial portfolio is presented below.


Commercial portfolio exposure	Sept. 30, 2023										Dec. 31, 2022
(dollars in billions)	Loans		Unfunded commitments		Total exposure		% Inv. grade		% due <1 yr.		Loans		Unfunded commitments		Total exposure
Services and other	$	1.1	$	3.4	$	4.5	98	%	34	%	$	0.8	$	3.2	$	4.0
Manufacturing	0.5		3.6		4.1		96		15		0.5		4.1		4.6
Energy and utilities	0.3		3.7		4.0		91		5		0.3		3.7		4.0
Media and telecom	—		0.7		0.7		87		—		0.1		0.7		0.8
Total	$	1.9	$	11.4	$	13.3	95	%	18	%	$	1.7	$	11.7	$	13.4

The commercial portfolio exposure was $13.3 billion at Sept. 30, 2023, a decrease of 1% from Dec. 31, 2022, primarily reflecting lower exposure in the manufacturing and media and telecom portfolios, partially offset by higher exposure in the services and other portfolio.

Our credit strategy is to focus on investment grade clients that are active users of our non-credit services. The following table summarizes the percentage of the financial institutions and commercial portfolio exposures that are investment grade.


Percentage of the portfolios that are investment grade
	Quarter ended
	Sept. 30, 2023		June 30, 2023		March 31, 2023		Dec. 31, 2022		Sept. 30, 2022
Financial institutions	94	%	94	%	95	%	95	%	96	%
Commercial	95	%	95	%	95	%	95	%	95	%

Wealth management loans

Our wealth management loan exposure was $10.0 billion at Sept. 30, 2023, compared with $10.9 billion

at Dec. 31, 2022. Wealth management loans primarily consist of loans to high-net-worth individuals, a majority of which are secured by the customers’ investment management accounts or custody accounts.

Wealth management mortgages

Our wealth management mortgage exposure was $9.4 billion at Sept. 30, 2023, compared with $9.2 billion at Dec. 31, 2022. Wealth management mortgages primarily consist of loans to high-net-worth individuals, which are secured by residential property. Wealth management mortgages are primarily interest-only, adjustable-rate mortgages with a weighted-average loan-to-value ratio of 61% at origination. At Sept. 30, 2023, less than 1% of the mortgages were past due.

At Sept. 30, 2023, the wealth management mortgage portfolio consisted of the following geographic concentrations: California – 21%; New York – 14%; Florida – 11%; Massachusetts – 8%; and other – 46%.

BNY Mellon 27

Commercial real estate

The composition of the commercial real estate portfolio by asset class, including percentage secured, is presented below.


Composition of commercial real estate portfolio by asset class	Sept. 30, 2023				Dec. 31, 2022
	Total exposure		Percentage secured (a)		Total exposure		Percentage secured (a)
(in billions)

Residential	$	4.2	86	%	$	4.1	85	%
Office	2.6		74		2.8		75
Retail	0.8		65		0.9		58
Mixed use	0.8		30		0.8		33
Hotels	0.6		40		0.6		42
Healthcare	0.5		58		0.4		49
Other	0.6		71		0.5		66
Total commercial real estate	$	10.1	72	%	$	10.1	71	%

(a) Represents the percentage of exposure secured by real estate in each asset class.

Our commercial real estate exposure totaled $10.1 billion at Sept. 30, 2023 and Dec. 31, 2022. Our income-producing commercial real estate facilities are focused on experienced owners and are structured with moderate leverage based on existing cash flows. Our commercial real estate lending activities also include construction and renovation facilities. Our client base consists of experienced developers and long-term holders of real estate assets. Loans are approved on the basis of existing or projected cash flows and supported by appraisals and knowledge of local market conditions. Development loans are structured with moderate leverage and, in many instances, involve some level of recourse to the developer.

At Sept. 30, 2023, the unsecured portfolio consisted of real estate investment trusts (“REITs”) and real estate operating companies, which are both primarily investment grade.

At Sept. 30, 2023, our commercial real estate portfolio consisted of the following concentrations: New York metro – 36%; REITs and real estate operating companies – 28%; and other – 36%.

Lease financings

The lease financings portfolio exposure totaled $633 million at Sept. 30, 2023 and $657 million at Dec. 31, 2022. At Sept. 30, 2023, 100% of leasing exposure was investment grade, or investment grade equivalent, and consisted of exposures backed by well-diversified assets, primarily real estate and

large-ticket transportation equipment. The largest components of our lease residual value exposure relate to freight-related rail cars and aircraft. Assets are both domestic and foreign-based, with primary concentrations in Germany and the U.S.

Other residential mortgages

The other residential mortgages portfolio primarily consists of 1-4 family residential mortgage loans and totaled $1.0 billion at Sept. 30, 2023 and $345 million at Dec. 31, 2022. Included in this portfolio at Sept. 30, 2023 was $750 million of fixed-rate jumbo mortgage loans, purchased primarily in the first quarter of 2023, with a weighted-average loan-to-value ratio of 73% at origination.

Overdrafts

Overdrafts primarily relate to custody and securities clearance clients and are generally repaid within two business days.

Capital call financing

Capital call financing includes loans to private equity funds that are secured by the fund investors’ capital commitments and the funds’ rights to call capital.

Other loans

Other loans primarily include loans to consumers that are fully collateralized with equities, mutual funds and fixed-income securities.

28 BNY Mellon

Margin loans

Margin loan exposure of $17.2 billion at Sept. 30, 2023 and $16.9 billion at Dec. 31, 2022 was collateralized with marketable securities. Borrowers

are required to maintain a daily collateral margin in excess of 100% of the value of the loan. Margin loans included $6 billion at Sept. 30, 2023 and Dec. 31, 2022 related to a term loan program that offers fully collateralized loans to broker-dealers.

Allowance for credit losses

Our credit strategy is to focus on investment grade clients who are active users of our non-credit services. Our primary exposure to the credit risk of a customer consists of funded loans, unfunded contractual commitments to lend, standby letters of credit and overdrafts associated with our custody and securities clearance businesses.

The following table details changes in our allowance for credit losses.


Allowance for credit losses activity	Sept. 30, 2023			June 30, 2023			Dec. 31, 2022			Sept. 30, 2022
(dollars in millions)



Beginning balance of allowance for credit losses	$	323		$	320		$	280		$	310

Provision for credit losses	3			5			20			(30)
Net (charge-offs) recoveries:
Loans:
Other residential mortgages	—			(1)			1			1




Other financial instruments	(1)			(1)			(9)			(1)
Net (charge-offs) recoveries	(1)			(2)			(8)			—
Ending balance of allowance for credit losses	$	325		$	323		$	292		$	280

Allowance for loan losses	$	211		$	191		$	176		$	164
Allowance for lending-related commitments	85			91			78			72
Allowance for other financial instruments (a)	29			41			38			44
Total allowance for credit losses	$	325		$	323		$	292		$	280

Total loans, at period end	$	66,290		$	64,469		$	66,063		$	69,829




Allowance for loan losses as a percentage of total loans	0.32		%	0.30		%	0.27		%	0.23		%
Allowance for loan losses and lending-related commitments as a percentage of total loans	0.45		%	0.44		%	0.38		%	0.34		%

(a) Includes allowance for credit losses on federal funds sold and securities purchased under resale agreements, available-for-sale securities, held-to-maturity securities, accounts receivable, cash and due from banks and interest-bearing deposits with banks.

The provision for credit losses was $3 million in the third quarter of 2023, compared with a benefit of $30 million in the third quarter of 2022.

The allowance for loan losses and the allowance for lending-related commitments represent

management’s estimate of lifetime expected losses in our credit portfolio. This evaluation process is subject to numerous estimates and judgments. To the extent actual results differ from forecasts or management’s judgment, the allowance for credit losses may be greater or less than future charge-offs.

BNY Mellon 29

Based on an evaluation of the allowance for credit losses as discussed in “Critical accounting estimates” in our 2022 Annual Report, we have allocated our allowance for loans and lending-related commitments as presented below.


Allocation of allowance for loan losses and lending-related commitments (a)	Sept. 30, 2023				June 30, 2023				Dec. 31, 2022					Sept. 30, 2022
(dollars in millions)	$		%		$		%			$		%			$		%
Commercial real estate	$	222	75	%	$	199	71	%		$	184	72	%		$	176	74	%
Commercial	32		10		21		7			18		7			17		7
Financial institutions	22		7		32		11			24		9			20		8
Wealth management mortgages	9		3		15		5			12		5			9		4
Other residential mortgages	6		2		9		3			8		3			8		3
Capital call financing	3		1		4		1			6		2			4		2
Lease financings	1		1		1		1			1		1			1		1
Wealth management loans	1		1		1		1			1		1			1		1

Total	$	296	100	%	$	282	100	%		$	254	100	%		$	236	100	%

(a) The allowance allocated to margin loans, overdrafts and other loans was insignificant at Sept. 30, 2023, June 30, 2023, Dec. 31, 2022 and Sept. 30, 2022.

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

Our allowance for credit losses is sensitive to a number of inputs, most notably the credit ratings assigned to each borrower, as well as macroeconomic forecast assumptions that are incorporated into our estimate of credit losses through the expected life of the loan portfolio. Thus, as the macroeconomic environment and related forecasts change, the allowance for credit losses may change materially. The following sensitivity analyses do not represent management’s expectations of the deterioration of our portfolios or the economic environment, but are provided as hypothetical scenarios to assess the sensitivity of the allowance for credit losses to changes in key inputs. If commercial real estate property values were increased 10% and all other credits were rated one grade better, the quantitative allowance would have decreased by $47 million, and if commercial real estate property values were decreased 10% and all other credits were rated one grade worse, the quantitative allowance would have increased by $83 million. Our multi-scenario-based macroeconomic forecast used in determining the Sept. 30, 2023 allowance for credit losses consisted of three scenarios. The baseline scenario reflects slightly negative GDP growth through the fourth quarter of 2023 before moderating, slightly rising unemployment and declining commercial real estate prices through the end of 2024. The upside scenario reflects faster GDP growth, slightly declining unemployment and higher commercial real estate prices compared with the baseline. The downside

scenario contemplates negative GDP growth through the second quarter of 2024 with subsequent stabilization, as well as rapidly increasing unemployment through 2024 and sharply lower commercial real estate prices than the baseline. In the third quarter of 2023, we placed the most weight on our downside scenario, followed by the baseline scenario, with the remaining weighting placed on the upside scenario. From a sensitivity perspective, at Sept. 30, 2023, if we had applied 100% weighting to the downside scenario, the allowance for credit losses would have been approximately $83 million higher.

Nonperforming assets

The table below presents our nonperforming assets.


Nonperforming assets	Sept. 30, 2023			Dec. 31, 2022
(dollars in millions)
Nonperforming loans:
Other residential mortgages	$	24		$	31

Wealth management mortgages	22			22
Commercial real estate	—			54



Total nonperforming loans	46			107
Other assets owned	2			2
Total nonperforming assets	$	48		$	109
Nonperforming assets ratio	0.07		%	0.16		%
Allowance for loan losses/nonperforming loans	458.7			164.5
Allowance for loan losses/nonperforming assets	439.6			161.5
Allowance for loan losses and lending-related commitments/nonperforming loans	643.5			237.4
Allowance for loan losses and lending-related commitments/nonperforming assets	616.7			233.0

30 BNY Mellon

Nonperforming assets were $48 million at Sept. 30, 2023, a decrease of $61 million, compared with $109 million at Dec. 31, 2022. The decrease reflects lower nonperforming commercial real estate loans.

Deposits

Total deposits were $277.5 billion at Sept. 30, 2023, a decrease of 1%, compared with $279.0 billion at Dec. 31, 2022. The decrease reflects lower noninterest-bearing (principally in U.S. offices) and interest-bearing deposits in non-U.S. offices, partially offset by higher interest-bearing deposits in U.S. offices.

Noninterest-bearing deposits were $60.6 billion at Sept. 30, 2023, compared with $78.0 billion at Dec. 31, 2022. Interest-bearing deposits were primarily demand deposits and totaled $216.9 billion at Sept. 30, 2023, compared with $201.0 billion at Dec. 31, 2022.

Short-term borrowings

We fund ourselves primarily through deposits and, to a lesser extent, other short-term borrowings and long-term debt. Short-term borrowings consist of federal funds purchased and securities sold under repurchase agreements, payables to customers and broker-dealers, commercial paper and other borrowed funds. Certain short-term borrowings, for example, securities sold under repurchase agreements, require the delivery of securities as collateral.

Federal funds purchased and securities sold under repurchase agreements include repurchase agreement activity with the Fixed Income Clearing Corporation (“FICC”), where we record interest expense on a gross basis, but the ending and average balances reflect the impact of offsetting under enforceable netting agreements. This activity primarily relates to government securities collateralized resale and repurchase agreements executed with clients that are novated to and settle with the FICC.

Payables to customers and broker-dealers represent funds awaiting reinvestment and short sale proceeds payable on demand. Payables to customers and broker-dealers are driven by customer trading activity and market volatility.

The Bank of New York Mellon may issue commercial paper that matures within 397 days from

the date of issue and is not redeemable prior to maturity or subject to voluntary prepayment.

Other borrowed funds primarily include borrowings from the Federal Home Loan Bank, overdrafts of sub-custodian account balances in our Securities Services businesses, finance lease liabilities and borrowings under lines of credit by our Pershing subsidiaries. Overdrafts typically relate to timing differences for settlements.

Liquidity and dividends

BNY Mellon defines liquidity as the ability of the Parent and its subsidiaries to access funding or convert assets to cash quickly and efficiently, or to roll over or issue new debt, especially during periods of market stress, at a reasonable cost, and in order to meet its short-term (up to one year) obligations. Funding liquidity risk is the risk that BNY Mellon cannot meet its cash and collateral obligations at a reasonable cost for both expected and unexpected cash flow and collateral needs without adversely affecting daily operations or our financial condition. Funding liquidity risk can arise from funding mismatches, market constraints from the inability to convert assets into cash, the inability to hold or raise cash, low overnight deposits, deposit run-off or contingent liquidity events.

Changes in economic conditions or exposure to credit, market, operational, legal and reputational risks also can affect BNY Mellon’s liquidity risk profile and are considered in our liquidity risk framework. For additional information, see “Risk Management – Liquidity Risk” in our 2022 Annual Report.

The Parent’s policy is to have access to sufficient unencumbered cash and cash equivalents at each quarter-end to cover maturities and other forecasted debt redemptions, net interest payments and net tax payments for the following 18-month period, and to provide sufficient collateral to satisfy transactions subject to Section 23A of the Federal Reserve Act. As of Sept. 30, 2023, the Parent was in compliance with this policy.

We monitor and control liquidity exposures and funding needs within and across significant legal entities, branches, currencies and business lines, taking into account, among other factors, any applicable restrictions on the transfer of liquidity among entities.

BNY Mellon 31

BNY Mellon also manages potential intraday liquidity risks. We monitor and manage intraday liquidity against existing and expected intraday liquid resources (such as cash balances, remaining intraday credit capacity, intraday contingency funding and available collateral) to enable BNY Mellon to meet its intraday obligations under normal and reasonably severe stressed conditions.

We define available funds for internal liquidity management purposes as cash and due from banks, interest-bearing deposits with the Federal Reserve and other central banks, interest-bearing deposits with banks and federal funds sold and securities purchased under resale agreements.

The following table presents our total available funds at period end and on an average basis.


Available funds	Sept. 30, 2023			Dec. 31, 2022			Average
(dollars in millions)							3Q23			2Q23			3Q22			YTD23			YTD22
Cash and due from banks	$	4,904		$	5,030		$	5,183		$	5,295		$	5,089		$	5,390		$	5,585
Interest-bearing deposits with the Federal Reserve and other central banks	107,419			91,655			98,767			114,578			91,836			102,762			98,310
Interest-bearing deposits with banks	12,999			17,169			12,287			13,919			16,298			14,129			17,189
Federal funds sold and securities purchased under resale agreements	26,299			24,298			26,915			26,989			22,971			26,187			24,715
Total available funds	$	151,621		$	138,152		$	143,152		$	160,781		$	136,194		$	148,468		$	145,799
Total available funds as a percentage of total assets	37		%	34		%	36		%	38		%	33		%	36		%	34		%

Total available funds were $151.6 billion at Sept. 30, 2023, compared with $138.2 billion at Dec. 31, 2022. The increase was primarily due to higher interest-bearing deposits with the Federal Reserve and other central banks, partially offset by lower interest-bearing deposits with banks.

Average non-core sources of funds, such as federal funds purchased and securities sold under repurchase agreements, trading liabilities, other borrowed funds and commercial paper, were $27.0 billion for the first nine months of 2023, compared with $16.4 billion for the first nine months of 2022. The increase primarily reflects federal funds purchased and securities sold under repurchase agreements and other borrowed funds.

Average interest-bearing foreign deposits, primarily from our European-based businesses included in the Securities Services and Market and Wealth Services segments, were $88.9 billion for the first nine months of 2023, compared with $103.0 billion for the first nine months of 2022. Average interest-bearing domestic deposits were $120.8 billion for the first nine months of 2023, compared with $112.3 billion for the first nine months of 2022. The changes primarily reflect client activity.

Average payables to customers and broker-dealers were $15.1 billion for the first nine months of 2023 and $17.1 billion for the first nine months of 2022. Payables to customers and broker-dealers are driven by customer trading activity and market volatility.

Average long-term debt was $31.1 billion for the first nine months of 2023 and $26.8 billion for the first nine months of 2022.

Average noninterest-bearing deposits decreased to $61.4 billion for the first nine months of 2023 from $89.0 billion for the first nine months of 2022, primarily reflecting client activity.

A significant reduction of client activity in our Securities Services and Market and Wealth Services business segments would reduce our access to deposits. See “Asset/liability management” for additional factors that could impact our deposit balances.

Sources of liquidity

The Parent’s major sources of liquidity are access to the debt and equity markets, dividends from its subsidiaries, and cash on hand and cash otherwise made available in business-as-usual circumstances to the Parent through a committed credit facility with our intermediate holding company (“IHC”).

32 BNY Mellon

Our ability to access the capital markets on favorable terms, or at all, is partially dependent on our credit ratings, which are as follows:

Credit ratings at Sept. 30, 2023

Moody’s

S&P

Fitch

DBRS

Parent:

Long-term senior debt

(a)

AA-

Subordinated debt

(a)

A-

AA (low)

Preferred stock

Baa1

(a)

BBB

BBB+

Outlook – Parent

(a)

Stable

The Bank of New York Mellon:

Long-term senior debt

Aa2

(a)

AA-

AA (high)

Subordinated debt

(a)

Long-term deposits

Aa1

AA-

AA+

AA (high)

Short-term deposits

A-1+

F1+

R-1 (high)

Commercial paper

A-1+

F1+

R-1 (high)

BNY Mellon, N.A.:

Long-term senior debt

Aa2

(a)(b)

AA-

(b)

AA (high)

Long-term deposits

Aa1

AA-

AA+

AA (high)

Short-term deposits

A-1+

F1+

R-1 (high)

Outlook – Banks

(a)

Stable

(a) Ratings under review.

(b) Represents senior debt issuer default rating.

NR – Not rated.

During the third quarter of 2023, Moody’s Investor Service (“Moody’s”) placed the long-term issuer ratings, debt ratings, counterparty risk ratings and counterparty risk assessments of the Parent and our rated subsidiaries on review for downgrade. Moody’s also affirmed all Prime-1 short-term ratings of the Parent and rated subsidiaries as well as the long-term deposit ratings for The Bank of New York Mellon and BNY Mellon, N.A.

Long-term debt totaled $29.2 billion at Sept. 30, 2023 and $30.5 billion at Dec. 31, 2022. Maturities and repurchases totaling $5.5 billion and a decrease in the fair value of hedged long-term debt were partially offset by issuances of $4.5 billion. Long-term debt of $600 million will mature in the remainder of 2023.

In October, the Parent issued $900 million of fixed to floating rate senior notes maturing in 2029. The annual fixed interest rate is 6.317% from issuance to, but excluding, Oct. 25, 2028, and then an annual interest rate of the compounded secured overnight financing rate (“SOFR”) plus 159.8 basis points. The Parent also issued $1.1 billion of fixed to floating rate senior notes maturing in 2034. The annual fixed interest rate is 6.474% from issuance to, but excluding, Oct. 25, 2033, and then an annual interest

rate of the compounded SOFR plus 184.5 basis points.

The Bank of New York Mellon may issue notes and certificates of deposit (“CDs”). At Sept. 30, 2023 and Dec. 31, 2022, $1.3 billion and $780 million, respectively, of notes were outstanding. At Sept. 30, 2023 and Dec. 31, 2022, $387 million and $122 million, respectively, of CDs were outstanding.

The Bank of New York Mellon also issues commercial paper that matures within 397 days from the date of issue and is not redeemable prior to maturity or subject to voluntary prepayment. There was no commercial paper outstanding at Sept. 30, 2023 and Dec. 31, 2022. The average commercial paper outstanding was $4 million for the first nine months of 2023 and $5 million for the first nine months of 2022.

Subsequent to Sept. 30, 2023, our U.S. bank subsidiaries could declare dividends to the Parent of approximately $2.2 billion, without the need for a regulatory waiver. In addition, at Sept. 30, 2023, nonbank subsidiaries of the Parent had liquid assets of approximately $4.4 billion. Restrictions on our ability to obtain funds from our subsidiaries are discussed in more detail in “Supervision and

BNY Mellon 33

Regulation – Capital Planning and Stress Testing – Payment of Dividends, Stock Repurchases and Other Capital Distributions” and in Note 19 of the Notes to Consolidated Financial Statements, both in our 2022 Annual Report.

Pershing LLC has one uncommitted line of credit in place for funding purposes that is guaranteed by the Parent for $300 million. Average borrowings under this line were less than $1 million in the third quarter of 2023. Pershing Limited, an indirect UK-based subsidiary of BNY Mellon, has two separate uncommitted lines of credit amounting to $256 million in aggregate. Average borrowings under these lines were $15 million in the third quarter of 2023.

The double leverage ratio is the ratio of our equity investment in subsidiaries divided by our consolidated Parent company equity, which includes our noncumulative perpetual preferred stock. In short, the double leverage ratio measures the extent to which equity in subsidiaries is financed by Parent company debt. As the double leverage ratio increases, this can reflect greater demands on a company’s cash flows in order to service interest payments and debt maturities. BNY Mellon’s double leverage ratio is managed in a range considering the high level of unencumbered available liquid assets held in its principal subsidiaries (such as central bank deposit placements and government securities), the Company’s cash generating fee-based business model, with fee revenue representing 74% of total revenue in the third quarter of 2023, and the dividend capacity of our banking subsidiaries. Our double leverage ratio was 118.7% at Sept. 30, 2023 and 120.5% at Dec. 31, 2022, and within the range targeted by management.

Uses of funds

The Parent’s major uses of funds are repurchases of common stock, payment of dividends, principal and interest payments on its borrowings, acquisitions and additional investments in its subsidiaries.

In August 2023, a quarterly dividend of $0.42 per common share was paid to common shareholders. Our common stock dividend payout ratio was 35% for the third quarter of 2023.

In the third quarter of 2023, we repurchased 10.0 million common shares at an average price of $45.03 per common share, for a total cost of $450 million.

Liquidity coverage ratio (“LCR”)

U.S. regulators have established an LCR that requires certain banking organizations, including BNY Mellon, to maintain a minimum amount of unencumbered high-quality liquid assets (“HQLA”) sufficient to withstand the net cash outflow under a hypothetical standardized acute liquidity stress scenario for a 30-day time horizon.

The following table presents BNY Mellon’s consolidated HQLA, and the average HQLA and average LCR.


Consolidated HQLA and LCR	Sept. 30, 2023			June 30, 2023
(dollars in billions)
Cash (a)	$	107		$	118
Securities (b)	70			93
Total consolidated HQLA (c)	$	177		$	211

Total consolidated HQLA – average (c)	$	180		$	198
Average consolidated LCR	121		%	120		%

(a) Primarily includes cash on deposit with central banks.

(b) Primarily includes securities of U.S. government-sponsored enterprises, the U.S. Treasury, sovereigns and U.S. agencies.

(c) Consolidated HQLA presented before adjustments. After haircuts and the impact of trapped liquidity, consolidated HQLA totaled $140 billion at Sept. 30, 2023 and $151 billion at June 30, 2023, and averaged $129 billion for the third quarter of 2023 and $141 billion for the second quarter of 2023.

BNY Mellon and each of our affected domestic bank subsidiaries were compliant with the U.S. LCR requirements of at least 100% throughout the third quarter of 2023.

Net stable funding ratio (“NSFR”)

The NSFR is a liquidity requirement applicable to large U.S. banking organizations, including BNY Mellon. The NSFR is expressed as a ratio of the available stable funding to the required stable funding amount over a one-year horizon. Our average consolidated NSFR was 136% for the third quarter of 2023 and 136% for the second quarter of 2023.

BNY Mellon and each of our affected domestic bank subsidiaries were compliant with the NSFR requirement of at least 100% throughout the third quarter of 2023.

34 BNY Mellon

Statement of cash flows

The following summarizes the activity reflected on the consolidated statement of cash flows. While this information may be helpful to highlight certain macro trends and business strategies, the cash flow analysis may not be as relevant when analyzing changes in our net earnings and net assets. We believe that in addition to the traditional cash flow analysis, the discussion related to liquidity and dividends and asset/liability management herein may provide more useful context in evaluating our liquidity position and related activity.

Net cash provided by operating activities was $8.0 billion in the nine months ended Sept. 30, 2023, compared with $12.1 billion in the nine months ended Sept. 30, 2022. In the nine months ended Sept. 30, 2023, cash flows provided by operations primarily resulted from earnings and changes in accruals and other, net. In the nine months ended Sept. 30, 2022, cash flows provided by operations primarily resulted from changes in trading assets and liabilities and earnings.

Net cash used for investing activities was $4.5 billion in the nine months ended Sept. 30, 2023, compared with $5.3 billion in the nine months ended Sept. 30, 2022. In the nine months ended Sept. 30, 2023, net

cash used for investing activities primarily resulted from changes in interest-bearing deposits with the Federal Reserve and other central banks and changes in federal funds sold and securities purchased under resale agreements, partially offset by changes in

investment securities. In the nine months ended Sept. 30, 2022, net cash used for investing activities primarily resulted from changes in interest-bearing deposits with the Federal Reserve and other central banks, partially offset by changes in federal funds sold and securities purchased under resale agreements.

Net cash used for financing activities was $7.3 billion in the nine months ended Sept. 30, 2023, compared with $7.5 billion in the nine months ended Sept. 30, 2022. In the nine months ended Sept. 30, 2023, net cash used for financing activities primarily resulted from changes in payables to customers and broker-dealers and repayments, redemptions and repurchases of long-term debt, partially offset by the net proceeds from the issuance of long-term debt. In the nine months ended Sept. 30, 2022, net cash used for financing activities primarily resulted from changes in deposits, repayments of long-term debt and changes in payables to customers and broker-dealers, partially offset by proceeds from the issuance of long-term debt.

BNY Mellon 35

Capital


Capital data	Sept. 30, 2023			June 30, 2023			Dec. 31, 2022
(dollars in millions, except per share amounts; common shares in thousands)



BNY Mellon shareholders’ equity to total assets ratio	10.1		%	9.5		%	10.0		%
BNY Mellon common shareholders’ equity to total assets ratio	8.9		%	8.4		%	8.8		%
Total BNY Mellon shareholders’ equity	$	40,966		$	40,933		$	40,734
Total BNY Mellon common shareholders’ equity	$	36,128		$	36,095		$	35,896
BNY Mellon tangible common shareholders’ equity – Non-GAAP (a)	$	18,964		$	18,821		$	18,686
Book value per common share	$	46.98		$	46.35		$	44.40
Tangible book value per common share – Non-GAAP (a)	$	24.66		$	24.17		$	23.11
Closing stock price per common share	$	42.65		$	44.52		$	45.52
Market capitalization	$	32,801		$	34,671		$	36,800
Common shares outstanding	769,073			778,782			808,445



Cash dividends per common share	$	0.42		$	0.37		$	0.37
Common dividend payout ratio	35		%	29		%	60		%
Common dividend yield (annualized)	3.9		%	3.3		%	3.2		%

(a) See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 43 for a reconciliation of GAAP to Non-GAAP measures.

The Bank of New York Mellon Corporation total shareholders’ equity increased to $41.0 billion at Sept. 30, 2023 from $40.7 billion at Dec. 31, 2022. The increase primarily reflects earnings, partially offset by common stock repurchase activity and dividends.

In the first nine months of 2023, we repurchased 45.8 million common shares at an average price of $47.06 per common share for a total of $2.2 billion.

In January 2023, we announced a share repurchase program approved by our Board of Directors providing for the repurchase of up to $5.0 billion of common shares beginning Jan. 1, 2023. This new share repurchase plan replaced all previously authorized share repurchase plans.

In July 2023, our Board of Directors approved a 14% increase in the quarterly cash dividend on common stock, from $0.34 to $0.42 per share. The increased quarterly cash dividend was paid on Aug. 10, 2023.

Capital adequacy

Regulators establish certain levels of capital for bank holding companies (“BHCs”) and banks, including BNY Mellon and our bank subsidiaries, in accordance with established quantitative measurements. For the Parent to maintain its status as a financial holding company, our U.S. bank subsidiaries and BNY Mellon must, among other things, qualify as “well capitalized.” As of Sept. 30, 2023 and Dec. 31, 2022, BNY Mellon and our U.S. bank subsidiaries were “well capitalized.” Failure to satisfy regulatory standards, including “well capitalized” status or capital adequacy rules more generally, could result in limitations on our activities and adversely affect our financial condition. See the discussion of these matters in “Supervision and Regulation – Regulated Entities of BNY Mellon and Ancillary Regulatory Requirements” and “Risk Factors – Capital and Liquidity Risk – Failure to satisfy regulatory standards, including “well capitalized” and “well managed” status or capital adequacy and liquidity rules more generally, could result in limitations on our activities and adversely affect our business and financial condition,” both of which are in our 2022 Annual Report.

The U.S. banking agencies’ capital rules are based on the framework adopted by the Basel Committee on Banking Supervision, as amended from time to time. For additional information on these capital requirements, see “Supervision and Regulation” in our 2022 Annual Report.

36 BNY Mellon

The table below presents our consolidated and largest bank subsidiary regulatory capital ratios.


Consolidated and largest bank subsidiary regulatory capital ratios	Sept. 30, 2023								June 30, 2023		Dec. 31, 2022
	Well capitalized			Minimum required			Capital ratios		Capital ratios		Capital ratios
						(a)
Consolidated regulatory capital ratios: (b)
Advanced Approaches:
CET1 ratio	N/A		(c)	8.5	%		11.4	%	11.1	%	11.2	%
Tier 1 capital ratio	6	%		10			14.4		14.0		14.1
Total capital ratio	10			12			15.2		14.8		14.9
Standardized Approach:
CET1 ratio	N/A		(c)	8.5	%		11.9	%	11.8	%	11.3	%
Tier 1 capital ratio	6	%		10			15.1		15.0		14.4
Total capital ratio	10			12			16.1		16.0		15.3
Tier 1 leverage ratio	N/A		(c)	4			6.1		5.7		5.8
SLR (d)	N/A		(c)	5			7.2		7.0		6.8

The Bank of New York Mellon regulatory capital ratios: (b)
Advanced Approaches:
CET1 ratio	6.5	%		7	%		15.8	%	15.6	%	15.6	%
Tier 1 capital ratio	8			8.5			15.8		15.6		15.6
Total capital ratio	10			10.5			15.9		15.7		15.7
Tier 1 leverage ratio	5			4			6.6		6.2		6.2
SLR (d)	6			3			8.3		8.2		7.7

(a) Minimum requirements for Sept. 30, 2023 include minimum thresholds plus currently applicable buffers. The U.S. global systemically important banks (“G-SIB”) surcharge is 1.5%. The countercyclical capital buffer is currently set to 0%. The stress capital buffer (“SCB”) requirement is 2.5%, equal to the regulatory minimum for Standardized Approach capital ratios.

(b) For our CET1, Tier 1 capital and Total capital ratios, our effective capital ratios under U.S. capital rules are the lower of the ratios as calculated under the Standardized and Advanced Approaches. The Tier 1 leverage ratio is based on Tier 1 capital and quarterly average total assets.

(d) The SLR is based on Tier 1 capital and total leverage exposure, which includes certain off-balance sheet exposures.

N/A – Not applicable.

Our CET1 ratio under the Advanced Approaches was 11.4% at Sept. 30, 2023 and 11.2% at Dec. 31, 2022. The increase was primarily driven by capital generated through earnings and lower RWAs, partially offset by capital deployed through common stock repurchases and dividends.

The Tier 1 leverage ratio was 6.1% at Sept. 30, 2023 and 5.8% at Dec. 31, 2022. The increase primarily reflects lower average assets.

Risk-based capital ratios vary depending on the size of the balance sheet at period end and the levels and types of investments in assets, and leverage ratios vary based on the average size of the balance sheet over the quarter. The balance sheet size fluctuates from period to period based on levels of customer and market activity. In general, when servicing clients are more actively trading securities, deposit balances and the balance sheet as a whole are higher. In addition, when markets experience significant

volatility or stress, our balance sheet size may increase considerably as client deposit levels increase.

Our capital ratios are necessarily subject to, among other things, anticipated compliance with all necessary enhancements to model calibration, approval by regulators of certain models used as part of RWA calculations, other refinements, further implementation guidance from regulators, market practices and standards and any changes BNY Mellon may make to its businesses. As a consequence of these factors, our capital ratios may materially change, and may be volatile over time and from period to period.

Under the Advanced Approaches, our operational loss risk model is informed by external losses, including fines and penalties levied against institutions in the financial services industry, particularly those that relate to businesses in which we operate, and as a result, external losses have impacted and could in the

BNY Mellon 37

future impact the amount of capital that we are required to hold.

The following table presents our capital components and RWAs.


Capital components and risk-weighted assets
	Sept. 30, 2023		June 30, 2023		Dec. 31, 2022
(in millions)
CET1:
Common shareholders’ equity	$	36,128	$	36,095	$	35,896
Adjustments for:
Goodwill and intangible assets (a)	(17,164)		(17,274)		(17,210)
Net pension fund assets	(353)		(350)		(317)
Embedded goodwill	(273)		(278)		(279)
Deferred tax assets	(63)		(58)		(56)
Other	(11)		(8)		(2)
Total CET1	18,264		18,127		18,032
Other Tier 1 capital:
Preferred stock	4,838		4,838		4,838
Other	(9)		(8)		(14)
Total Tier 1 capital	$	23,093	$	22,957	$	22,856
Tier 2 capital:
Subordinated debt	$	1,248	$	1,248	$	1,248
Allowance for credit losses	325		323		291
Other	(6)		(6)		(11)
Total Tier 2 capital – Standardized Approach	1,567		1,565		1,528
Excess of expected credit losses	78		61		50
Less: Allowance for credit losses	325		323		291
Total Tier 2 capital – Advanced Approaches	$	1,320	$	1,303	$	1,287
Total capital:
Standardized Approach	$	24,660	$	24,522	$	24,384
Advanced Approaches	$	24,413	$	24,260	$	24,143

Risk-weighted assets:
Standardized Approach	$	153,363	$	153,359	$	159,096
Advanced Approaches:
Credit Risk	$	86,836	$	89,894	$	90,243
Market Risk	3,072		2,629		2,979
Operational Risk	70,550		71,013		68,450
Total Advanced Approaches	$	160,458	$	163,536	$	161,672

Average assets for Tier 1 leverage ratio	$	379,630	$	403,206	$	396,643
Total leverage exposure for SLR	$	318,865	$	326,215	$	336,049

(a) Reduced by deferred tax liabilities associated with intangible assets and tax-deductible goodwill.

The table below presents the factors that impacted CET1 capital.


CET1 generation	3Q23
(in millions)
CET1 – Beginning of period	$	18,127
Net income applicable to common shareholders of The Bank of New York Mellon Corporation	956
Goodwill and intangible assets, net of related deferred tax liabilities	110
Gross CET1 generated	1,066
Capital deployed:
Common stock repurchases	(450)
Common stock dividends (a)	(333)
Total capital deployed	(783)
Other comprehensive gain (loss):
Unrealized (loss) on assets available-for-sale	(15)
Foreign currency translation	(185)

Defined benefit plans	(3)

Total other comprehensive (loss)	(203)
Additional paid-in capital (b)	67
Other additions (deductions):
Net pension fund assets	(3)
Embedded goodwill	5
Deferred tax assets	(5)
Other	(7)
Total other (deductions)	(10)
Net CET1 generated	137
CET1 – End of period	$	18,264

(a) Includes dividend equivalents on share-based awards.

(b) Primarily related to stock awards and stock issued for employee benefit plans.

The following table shows the impact on the consolidated capital ratios at Sept. 30, 2023 of a $100 million increase or decrease in common equity, or a $1 billion increase or decrease in RWAs, quarterly average assets or total leverage exposure.


Sensitivity of consolidated capital ratios at Sept. 30, 2023
	Increase or decrease of
(in basis points)	$100 million in common equity		$1 billion in RWA, quarterly average assets or total leverage exposure
CET1:
Standardized Approach	7	bps	8	bps
Advanced Approaches	6		7

Tier 1 capital:
Standardized Approach	7		10
Advanced Approaches	6		9

Total capital:
Standardized Approach	7		11
Advanced Approaches	6		10

Tier 1 leverage	3		2

SLR	3		2

38 BNY Mellon

Stress capital buffer

In July 2023, the Federal Reserve announced that BNY Mellon’s SCB requirement would remain at 2.5%, equal to the regulatory floor, for the period from Oct. 1, 2023 through Sept. 30, 2024. The SCB replaced the static 2.5% capital conservation buffer for Standardized Approach capital ratios for CCAR BHCs. The SCB does not apply to bank subsidiaries, which remain subject to the static 2.5% capital conservation buffer. See “Supervision and Regulation” in our 2022 Annual Report for additional information.

The SCB final rule generally eliminates the requirement for prior approval of common stock repurchases in excess of the distributions in a firm’s capital plan, provided that such distributions are consistent with applicable capital requirements and buffers, including the SCB.

Total Loss-Absorbing Capacity (“TLAC”)

The following summarizes the minimum requirements for BNY Mellon’s external TLAC and external long-term debt (“LTD”) ratios, plus currently applicable buffers.


	As a % of RWAs (a)	As a % of total leverage exposure
Eligible external TLAC ratios	Regulatory minimum of 18% plus a buffer (b) equal to the sum of 2.5%, the method 1 G-SIB surcharge (currently 1%), and the countercyclical capital buffer, if any	Regulatory minimum of 7.5% plus a buffer (c) equal to 2%
Eligible external LTD ratios	Regulatory minimum of 6% plus the greater of the method 1 or method 2 G-SIB surcharge (currently 1.5%)	4.5%

(a) RWA is the greater of Standardized Approach and Advanced Approaches.

(b) Buffer to be met using only CET1.

External TLAC consists of the Parent’s Tier 1 capital and eligible unsecured LTD issued by it that has a remaining term to maturity of at least one year and satisfies certain other conditions. Eligible LTD consists of the unpaid principal balance of eligible unsecured debt securities, subject to haircuts for amounts due to be paid within two years, that satisfy certain other conditions. Debt issued prior to Dec.

31, 2016 has been permanently grandfathered to the extent these instruments otherwise would be ineligible only due to containing impermissible acceleration rights or being governed by foreign law.

The following table presents our external TLAC and external LTD ratios.


TLAC and LTD ratios	Sept. 30, 2023
	Minimum required		Minimum ratios with buffers
					Ratios
Eligible external TLAC:
As a percentage of RWA	18.0	%	21.5	%	30.6	%
As a percentage of total leverage exposure	7.5	%	9.5	%	15.4	%

Eligible external LTD:
As a percentage of RWA	7.5	%	N/A		14.6	%
As a percentage of total leverage exposure	4.5	%	N/A		7.3	%

N/A – Not applicable.

If BNY Mellon maintains risk-based ratio or leverage TLAC measures above the minimum required level, but with a risk-based ratio or leverage below the minimum level with buffers, we will face constraints on dividends, equity repurchases and discretionary executive compensation based on the amount of the shortfall and eligible retained income.

Trading activities and risk management

Our trading activities are focused on acting as a market-maker for our customers, facilitating customer trades and risk-mitigating hedging in compliance with the Volcker Rule. The risk from market-making activities for customers is managed by our traders and limited in total exposure through a system of position limits, value-at-risk (“VaR”) methodology and other market sensitivity measures. VaR is the potential loss in value due to adverse market movements over a defined time horizon with a specified confidence level. The calculation of our VaR used by management and presented below assumes a one-day holding period, utilizes a 99% confidence level and incorporates non-linear product characteristics. VaR facilitates comparisons across portfolios of different risk characteristics. VaR also captures the diversification of aggregated risk at the firm-wide level.

BNY Mellon 39

VaR represents a key risk management measure, and it is important to note the inherent limitations to VaR, which include:

•VaR does not estimate potential losses over longer time horizons where moves may be extreme;

•VaR does not take into account the potential variability of market liquidity; and

•Previous moves in market risk factors may not produce accurate predictions of all future market moves.

See Note 17 of the Notes to Consolidated Financial Statements for additional information on the VaR methodology.

The following tables indicate the calculated VaR amounts for the trading portfolio for the designated periods using the historical simulation VaR model.


VaR (a)	3Q23						Sept. 30, 2023
(in millions)	Average		Minimum		Maximum
Interest rate	$	2.6	$	1.9	$	4.6	$	2.4
Foreign exchange	2.5		2.0		3.2		2.1
Equity	0.1		—		0.3		0.2
Credit	1.2		0.9		1.7		1.3
Diversification	(4.3)		N/M		N/M		(4.1)
Overall portfolio	2.1		1.3		3.2		1.9


VaR (a)	2Q23						June 30, 2023
(in millions)	Average		Minimum		Maximum
Interest rate	$	3.1	$	2.0	$	5.1	$	2.6
Foreign exchange	3.0		2.0		4.5		2.3
Equity	0.1		—		0.3		0.1
Credit	1.4		1.0		2.0		1.3
Diversification	(4.6)		N/M		N/M		(4.0)
Overall portfolio	3.0		1.8		4.9		2.3


VaR (a)	3Q22						Sept. 30, 2022
(in millions)	Average		Minimum		Maximum
Interest rate	$	4.1	$	2.6	$	7.5	$	3.3
Foreign exchange	3.9		2.7		7.1		4.7
Equity	0.2		0.1		0.5		0.2
Credit	1.9		1.0		4.4		3.9
Diversification	(5.6)		N/M		N/M		(7.1)
Overall portfolio	4.5		2.5		7.7		5.0


VaR (a)	YTD23
(in millions)	Average		Minimum		Maximum
Interest rate	$	3.2	$	1.9	$	7.6
Foreign exchange	3.0		2.0		5.7
Equity	0.1		—		0.3
Credit	1.4		0.7		3.5
Diversification	(4.7)		N/M		N/M
Overall portfolio	3.0		1.3		8.9


VaR (a)	YTD22
(in millions)	Average		Minimum		Maximum
Interest rate	$	4.4	$	1.6	$	9.3
Foreign exchange	3.6		2.2		10.2
Equity	0.3		—		0.9
Credit	1.9		1.0		4.4
Diversification	(4.8)		N/M		N/M
Overall portfolio	5.4		2.5		11.4

(a) VaR exposure does not include the impact of the Company’s consolidated investment management funds and seed capital investments.

N/M – Because the minimum and maximum may occur on different days for different risk components, it is not meaningful to compute a minimum and maximum portfolio diversification effect.

The interest rate component of VaR represents instruments whose values are predominantly driven by interest rate levels. These instruments include, but are not limited to, U.S. Treasury securities, swaps, swaptions, forward rate agreements, exchange-traded futures and options, and other interest rate derivative products.

The foreign exchange component of VaR represents instruments whose values predominantly vary with the level or volatility of currency exchange rates or interest rates. These instruments include, but are not limited to, currency balances, spot and forward transactions, currency options and other currency derivative products.

The equity component of VaR consists of instruments that represent an ownership interest in the form of domestic and foreign common stock or other equity-linked instruments. These instruments include, but are not limited to, common stock, exchange-traded funds, preferred stock, listed equity options (puts and calls), OTC equity options, equity total return swaps, equity index futures and other equity derivative products.

The credit component of VaR represents instruments whose values are predominantly driven by credit spread levels, i.e., idiosyncratic default risk. These instruments include, but are not limited to, single issuer credit default swaps, and securities with exposures from corporate and municipal credit spreads.

The diversification component of VaR is the risk reduction benefit that occurs when combining portfolios and offsetting positions, and from the correlated behavior of risk factor movements.

40 BNY Mellon

During the third quarter of 2023, interest rate risk generated 41% of average gross VaR, foreign exchange risk generated 39% of average gross VaR, equity risk generated 1% of average gross VaR and credit risk generated 19% of average gross VaR. During the third quarter of 2023, our daily trading loss did not exceed our calculated VaR amount of the overall portfolio.

The following table of total daily trading revenue or loss illustrates the number of trading days in which our trading revenue or loss fell within particular ranges during the past five quarters.


Distribution of trading revenue (loss) (a)
	Quarter ended
(dollars in millions)	Sept. 30, 2023	June 30, 2023	March 31, 2023	Dec. 31, 2022	Sept. 30, 2022

Revenue range:	Number of days
Less than $(2.5)	—	—	—	2	—
$(2.5) – $0	5	2	1	4	3
$0 – $2.5	14	15	20	13	10
$2.5 – $5.0	24	37	26	24	32
More than $5.0	20	9	15	20	19

(a) Trading revenue (loss) includes realized and unrealized gains and losses primarily related to spot and forward foreign exchange transactions, derivatives and securities trades for our customers and excludes any associated commissions, underwriting fees and net interest revenue.

Trading assets include debt and equity instruments and derivative assets, primarily foreign exchange and interest rate contracts, not designated as hedging instruments. Trading assets were $10.7 billion at Sept. 30, 2023 and $9.9 billion at Dec. 31, 2022.

Trading liabilities include debt and equity instruments and derivative liabilities, primarily foreign exchange and interest rate contracts, not designated as hedging instruments. Trading liabilities were $7.4 billion at Sept. 30, 2023 and $5.4 billion at Dec. 31, 2022.

Under our fair value methodology for derivative contracts, an initial “risk-neutral” valuation is performed on each position assuming time discounting based on a AA credit curve. In addition, we consider credit risk in arriving at the fair value of our derivatives.

We reflect external credit ratings as well as observable credit default swap spreads for both ourselves and our counterparties when measuring the fair value of our derivative positions. Accordingly, the valuation of our derivative positions is sensitive to

the current changes in our own credit spreads, as well as those of our counterparties.

At Sept. 30, 2023, our OTC derivative assets, including those in hedging relationships, of $2.7 billion included a credit valuation adjustment (“CVA”) deduction of $12 million. Our OTC derivative liabilities, including those in hedging relationships, of $3.2 billion included a debit valuation adjustment (“DVA”) of $8 million related to our own credit spread. Net of hedges, the CVA decreased by less than $1 million and the DVA increased by less than $1 million in the third quarter of 2023, which increased investment and other revenue – other trading revenue by less than $1 million. The net impact decreased investment and other revenue – other trading revenue by less than $1 million in the second quarter of 2023 and increased investment and other revenue – other trading revenue by $3 million in the third quarter of 2022.

The table below summarizes our exposure, net of collateral related to our derivative counterparties, as determined on an internal risk management basis. Significant changes in counterparty credit ratings could alter the level of credit risk faced by BNY Mellon.


Foreign exchange and other trading counterparty risk-rating profile

	Sept. 30, 2023				Dec. 31, 2022
(dollars in millions)	Exposure, net of collateral		Percentage of exposure, net of collateral		Exposure, net of collateral		Percentage of exposure, net of collateral

Investment grade	$	2,056	96	%	$	2,553	98	%
Non-investment grade	82		4	%	63		2	%
Total	$	2,138	100	%	$	2,616	100	%

Asset/liability management

Our diversified business activities include processing securities, accepting deposits, investing in securities, lending, raising money as needed to fund assets and other transactions. The market risks from these activities include interest rate risk and foreign exchange risk. Our primary market risk is exposure to movements in U.S. dollar interest rates and certain foreign currency interest rates. We actively manage interest rate sensitivity and use earnings simulation and discounted cash flow models to identify interest rate exposures.

BNY Mellon 41

An earnings simulation model is the primary tool used to assess changes in pre-tax net interest revenue between a baseline scenario and hypothetical interest rate scenarios. Interest rate sensitivity is quantified by calculating the change in pre-tax net interest revenue between the scenarios over a 12-month measurement period.

The baseline scenario incorporates the market’s forward rate expectations and management’s assumptions regarding client deposit rates, credit spreads, changes in the prepayment behavior of loans and securities and the impact of derivative financial instruments used for interest rate risk management purposes as of each respective quarter-end. These assumptions have been developed through a combination of historical analysis and future expected pricing behavior and are inherently uncertain. Actual results may differ materially from projected results due to timing, magnitude and frequency of interest rate changes, and changes in market conditions and management’s strategies, among other factors. Client deposit levels and mix are key assumptions impacting net interest revenue in the baseline as well as the hypothetical interest rate scenarios. The earnings simulation model assumes static deposit levels and mix, and it also assumes that no management actions will be taken to mitigate the effects of interest rate changes. Typically, the baseline scenario uses the average deposit balances of the quarter.

In the table below, we use the earnings simulation model to assess the impact of various hypothetical interest rate scenarios compared to the baseline scenario. In each of the scenarios, all currencies’ interest rates are instantaneously shifted higher or lower at the start of the forecast. Long-term interest rates are defined as all tenors equal to or greater than three years and short-term interest rates are defined as all tenors equal to or less than three months. Interim term points are interpolated where applicable. The impact of interest rate shifts may not be linear. The results of this earnings simulation should therefore not be extrapolated for more severe interest rate scenarios than those presented in the table below.

The following table shows net interest revenue sensitivity for BNY Mellon.


Estimated changes in net interest revenue (in millions)	Sept. 30, 2023		June 30, 2023		Sept. 30, 2022
Up 100 bps rate shock vs. baseline	$	166	$	324	$	267
Long-term up 100 bps, short-term unchanged	13		7		(17)
Short-term up 100 bps, long-term unchanged	153		317		283
Long-term down 100 bps, short-term unchanged (a)	(14)		(13)		14
Short-term down 100 bps, long-term unchanged	(214)		(346)		(408)
Down 100 bps rate shock vs. baseline	(228)		(358)		(394)

(a) Prior periods have been updated to reflect the impact of a 100 basis point decrease in long-term rates while short-term rates were unchanged.

At Sept. 30, 2023, the impact of a 100 bps upward shift in rates on net interest revenue decreased compared with June 30, 2023. The primary driver is lower deposit balances in the most recent quarter, which reduce the benefit of rising interest rates.

While the net interest revenue sensitivity scenario calculations assume static deposit balances to facilitate consistent period-over-period comparisons, net interest revenue is impacted by changes in deposit balances. Noninterest-bearing deposits are particularly sensitive to changes in short-term rates.

To illustrate the net interest revenue sensitivity to deposit run-off, we estimate that a $5 billion instantaneous reduction/increase in U.S. dollar-denominated noninterest-bearing deposits would reduce/increase the net interest revenue sensitivity results in the up 100 basis point scenario in the table above by approximately $320 million. The impact would be smaller if the run-off was assumed to be a mixture of interest-bearing and noninterest-bearing deposits.

Additionally, during periods of low short-term interest rates, money market mutual fund fees and other similar fees are typically waived to protect investors from negative returns. See “Fee and other revenue” in our 2022 Annual Report for additional details on money market fee waivers.

For a discussion of factors impacting the growth or contraction of deposits, see “Risk Factors – Capital and Liquidity Risk – Our business, financial condition and results of operations could be adversely affected if we do not effectively manage our liquidity” in our 2022 Annual Report.

42 BNY Mellon

Supplemental information – Explanation of GAAP and Non-GAAP financial measures

BNY Mellon has included in this Form 10-Q certain Non-GAAP financial measures on a tangible basis as a supplement to GAAP information, which exclude goodwill and intangible assets, net of deferred tax liabilities. We believe that the return on tangible common equity – Non-GAAP is additional useful information for investors because it presents a measure of those assets that can generate income, and the tangible book value per common share – Non-GAAP is additional useful information because it presents the level of tangible assets in relation to shares of common stock outstanding.

BNY Mellon has presented revenue measures excluding notable items, including disposal gains. Expense measures, excluding notable items, including goodwill impairment, severance expense and litigation reserves, are also presented. Litigation reserves represent accruals for loss contingencies that are both probable and reasonably estimable, but exclude standard business-related legal fees. Total revenue, noninterest expense, net income applicable to common shareholders of The Bank of New York Mellon Corporation, diluted earnings per share and the effective tax rate, excluding the notable items

mentioned above, are also provided. These measures are provided to permit investors to view financial measures on a basis consistent with how management views the business.

The presentation of the growth rates of investment management and performance fees on a constant currency basis permits investors to assess the significance of changes in foreign currency exchange rates. Growth rates on a constant currency basis were determined by applying the current period foreign currency exchange rates to the prior period revenue. We believe that this presentation, as a supplement to GAAP information, gives investors a clearer picture of the related revenue results without the variability caused by fluctuations in foreign currency exchange rates.

BNY Mellon has also included the adjusted pre-tax operating margin – Non-GAAP, which is the pre-tax operating margin for the Investment and Wealth Management business segment, net of distribution and servicing expense that was passed to third parties who distribute or service our managed funds. We believe that this measure is useful when evaluating the performance of the Investment and Wealth Management business segment relative to industry competitors.

The following table presents the reconciliation of the return on common equity and tangible common equity.


Return on common equity and tangible common equity reconciliation	3Q23			2Q23			3Q22			YTD23			YTD22
(dollars in millions)
Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP	$	956		$	1,031		$	319		$	2,892		$	1,853
Add: Amortization of intangible assets	15			14			17			43			51
Less: Tax impact of amortization of intangible assets	3			4			4			10			12
Adjusted net income applicable to common shareholders of The Bank of New York Mellon Corporation, excluding amortization of intangible assets – Non-GAAP	$	968		$	1,041		$	332		$	2,925		$	1,892



Average common shareholders’ equity	$	35,983		$	35,769		$	35,942		$	35,787		$	36,483
Less: Average goodwill	16,237			16,219			17,189			16,206			17,341
Average intangible assets	2,875			2,888			2,922			2,887			2,950
Add: Deferred tax liability – tax deductible goodwill	1,197			1,193			1,175			1,197			1,175
Deferred tax liability – intangible assets	657			660			660			657			660
Average tangible common shareholders’ equity – Non-GAAP	$	18,725		$	18,515		$	17,666		$	18,548		$	18,027

Return on common equity (annualized) – GAAP	10.5		%	11.6		%	3.5		%	10.8		%	6.8		%

Return on tangible common equity (annualized) – Non-GAAP	20.5		%	22.6		%	7.5		%	21.1		%	14.0		%

BNY Mellon 43

The following table presents the reconciliation of book value and tangible book value per common share.


Book value and tangible book value per common share reconciliation	Sept. 30, 2023		June 30, 2023		Dec. 31, 2022		Sept. 30, 2022
(dollars in millions, except per share amounts and unless otherwise noted)
BNY Mellon shareholders’ equity at period end – GAAP	$	40,966	$	40,933	$	40,734	$	39,737
Less: Preferred stock	4,838		4,838		4,838		4,838
BNY Mellon common shareholders’ equity at period end – GAAP	36,128		36,095		35,896		34,899
Less: Goodwill	16,159		16,246		16,150		16,412
Intangible assets	2,859		2,881		2,901		2,902
Add: Deferred tax liability – tax deductible goodwill	1,197		1,193		1,181		1,175
Deferred tax liability – intangible assets	657		660		660		660
BNY Mellon tangible common shareholders’ equity at period end – Non-GAAP	$	18,964	$	18,821	$	18,686	$	17,420

Period-end common shares outstanding (in thousands)	769,073		778,782		808,445		808,280

Book value per common share – GAAP	$	46.98	$	46.35	$	44.40	$	43.18
Tangible book value per common share – Non-GAAP	$	24.66	$	24.17	$	23.11	$	21.55

The following table presents the reconciliation of growth in total revenue, noninterest expense, net income applicable to common shareholders and diluted earnings per common share.


Reconciliation of Non-GAAP measures, excluding notable items												YTD23
						3Q23 vs.						vs.
(dollars in millions, except per share amounts)	3Q23		3Q22			3Q22		YTD23		YTD22		YTD22
Total revenue – GAAP	$	4,374	$	4,279		2	%
Less: Disposal gain (reflected in investment and other revenue)	2		37
Adjusted total revenue – Non-GAAP	$	4,372	$	4,242		3	%

Noninterest expense – GAAP	$	3,089	$	3,679		(16)	%	$	9,300	$	9,797	(5)	%
Less: Severance	41		32					67		32
Litigation reserves	5		2					46		105
Goodwill impairment	—		680					—		680
Adjusted noninterest expense – Non-GAAP	$	3,043	$	2,965		3	%	$	9,187	$	8,980	2	%





Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP	$	956	$	319		200	%
Less: Disposal gain (reflected in investment and other revenue)	—		28
Less: Severance	(32)		(25)
Litigation reserves	(4)		(2)
Goodwill impairment	—		(665)
Adjusted net income applicable to common shareholders of The Bank of New York Mellon Corporation – Non-GAAP	$	992	$	983		1	%


Diluted earnings per common share	$	1.22	$	0.39		213	%
Less: Disposal gain (loss) (reflected in investment and other revenue)	—		0.03
Less: Severance	(0.04)		(0.03)
Litigation reserves	(0.01)		—
Goodwill impairment	—		(0.82)
Total diluted earnings per share common share impact of notable items	(0.05)		(0.81)		(a)
Adjusted diluted earnings per common share – Non-GAAP	$	1.27	$	1.21		5	%

(a) Does not foot due to rounding.

44 BNY Mellon

The following table presents the reconciliation of the effective tax rate.


Effective tax rate reconciliation
(dollars in millions)	3Q22
Provision for income taxes – GAAP	$	242
Less: Disposal gain (reflected in investment and other revenue)	9
Less: Severance	(7)
Litigation reserves	—
Goodwill impairment	(15)
Adjusted provision for income taxes – Non-GAAP	$	255

Income before taxes – GAAP	$	630
Less: Disposal gain (reflected in investment and other revenue)	37
Less: Severance	(32)
Litigation reserves	(2)
Goodwill impairment	(680)
Adjusted income before taxes – Non-GAAP	$	1,307

Effective tax rate – GAAP	38.4		%
Adjusted effective tax rate – Non-GAAP	19.5		%

The following table presents the impact of changes in foreign currency exchange rates on our consolidated investment management and performance fees.


Constant currency reconciliation – Consolidated					3Q23 vs.
(dollars in millions)	3Q23		3Q22		3Q22
Investment management and performance fees – GAAP	$	777	$	800	(3)	%
Impact of changes in foreign currency exchange rates	—		15
Adjusted investment management and performance fees – Non-GAAP	$	777	$	815	(5)	%

The following table presents the impact of changes in foreign currency exchange rates on investment management and performance fees reported in the Investment and Wealth Management business segment.


Constant currency reconciliation – Investment and Wealth Management business segment					3Q23 vs.
(dollars in millions)	3Q23		3Q22		3Q22
Investment management and performance fees – GAAP	$	776	$	798	(3)	%
Impact of changes in foreign currency exchange rates	—		15
Adjusted investment management and performance fees – Non-GAAP	$	776	$	813	(5)	%

BNY Mellon 45

The following tables present the reconciliations of noninterest expense, income before income taxes and the pre-tax operating margin for the Investment and Wealth Management business segment.


Reconciliation of Non-GAAP measures – Investment and Wealth Management business segment
						3Q23 vs.
(dollars in millions)	3Q23		3Q22			3Q22		YTD22
Noninterest expense – GAAP	$	672	$	1,356				$	2,802
Less: Severance	5		(1)					(1)
Goodwill impairment	—		680					680
Adjusted noninterest expense – Non-GAAP	$	667	$	677				$	2,123

Income (loss) before income taxes – GAAP	$	164	$	(497)		N/M		$	(77)
Less: Severance	(5)		1					1
Goodwill impairment	—		(680)					(680)
Adjusted income before income taxes – Non-GAAP	$	169	$	182		(7)	%	$	602

Total revenue – GAAP			$	862				$	2,725
Less: Distribution and servicing expense			88					258
Adjusted total revenue, net of distribution and servicing expense – Non-GAAP			$	774				$	2,467

Pre-tax operating margin – GAAP (a)			(57)		%			(3)		%
Adjusted pre-tax operating margin, net of distribution and servicing expense – Non-GAAP (a)			(64)		%			(3)		%
Adjusted pre-tax operating margin, net of distribution and servicing expense and excluding notable items – Non-GAAP (a)			24		%			24		%

(a) Income before income taxes divided by total revenue.


Pre-tax operating margin reconciliation – Investment and Wealth Management business segment
(dollars in millions)	3Q23			2Q23			1Q23			4Q22			YTD23
Income before income taxes – GAAP	$	164		$	129		$	93		$	125		$	386

Total revenue – GAAP	$	827		$	813		$	827		$	825		$	2,467
Less: Distribution and servicing expense	87			93			86			87			266
Adjusted total revenue, net of distribution and servicing expense – Non-GAAP	$	740		$	720		$	741		$	738		$	2,201

Pre-tax operating margin – GAAP (a)	20		%	16		%	11		%	15		%	16		%
Adjusted pre-tax operating margin, net of distribution and servicing expense – Non-GAAP (a)	22		%	18		%	13		%	17		%	18		%

(a) Income before income taxes divided by total revenue.

46 BNY Mellon

Recent accounting and regulatory developments

Recent accounting developments

The following accounting guidance issued by the Financial Accounting Standards Board (“FASB”) has not yet been adopted as of Sept. 30, 2023.

Accounting Standards Update (“ASU”) 2023-02, Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method

In March 2023, the FASB issued ASU 2023-02, Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method, which permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the income tax credits and other income tax benefits received, and recognizes the net amortization and income tax credits and other income tax benefits in the income statement as a component of the provision for income taxes.

This ASU is effective Jan. 1, 2024 with early adoption permitted. BNY Mellon is currently evaluating this guidance with respect to our investments in renewable energy projects, which historically have not been eligible to apply the proportional amortization method. These investments currently generate losses in investment and other revenue that are more than offset by benefits and credits recorded to the provision for income taxes. The impact of adopting this new guidance for our renewable energy investments that meet the eligibility criteria would be an increase in investment and other revenue and an increase in the provision for income taxes on the consolidated income statement.

Recent regulatory and other developments

For a summary of additional regulatory matters relevant to our operations, see “Recent regulatory developments” in our Form 10-Q for the quarters ended March 31, 2023 and June 30, 2023, and “Supervision and Regulation” in our 2022 Annual

Report. The following discussion summarizes certain regulatory, legislative and other developments that may affect BNY Mellon.

Federal Deposit Insurance Corporation (“FDIC”) Special Assessment

On May 11, 2023, the FDIC proposed a rule to impose a special assessment on insured depository institutions (“IDIs”) to recover losses to the Deposit Insurance Fund (“DIF”) associated with the closures of Silicon Valley Bank and Signature Bank. Under the proposal, the FDIC would collect from each IDI a special assessment at an annual rate of approximately 12.5 basis points of the IDI’s estimated uninsured deposits (excluding the first $5 billion of estimated uninsured deposits), as of Dec. 31, 2022. For an IDI that is part of a holding company containing multiple IDIs, the $5 billion deduction would be apportioned based on the IDI’s estimated uninsured deposits as a percentage of total estimated uninsured deposits held by all IDI affiliates in the consolidated banking organization. The special assessment would be collected during an initial special assessment period of eight quarters, with the first quarterly assessment period beginning on Jan. 1, 2024, subject to potential extension and a potential one-time final special assessment for any shortfall to the DIF. If the assessment is finalized as proposed, we estimate a noninterest expense of approximately $470 million to be recorded in the quarter in which the rule is finalized, which would significantly affect the results of operations for that quarter.

U.S. Regulatory Capital Requirements

On July 27, 2023, the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation proposed substantial revisions to the capital requirements applicable to large banking organizations and to banking organizations with significant trading activity, including BNY Mellon. The proposed revisions would implement international capital standards issued by the Basel Committee on Banking Supervision in December 2017 to finalize the Basel III reforms, as well as the Basel Committee’s revised standard for market risk capital requirements finalized in February 2019. In addition, on July 27, 2023, the Federal Reserve proposed amendments to its rule regarding risk-based capital surcharges for GSIBs, including BNY Mellon. The period to submit comments on the proposals has been extended to Jan.

BNY Mellon 47

16, 2024. We continue to assess the potential impact of the proposals.

European Central Bank (“ECB”) remuneration on minimum reserves

On July 27, 2023, the Governing Council of the ECB established 0% as the remuneration of minimum reserves credit institutions are required to hold with their Eurosystem national central bank on average over a maintenance period. The change became effective as of the beginning of the reserve maintenance period starting Sept. 20, 2023.

FDIC Long-Term Debt and Clean Holding Company Requirements

On Aug. 29, 2023, the Federal Reserve proposed amendments to its total loss-absorbing capacity (“TLAC”) rule applicable to G-SIBs, including BNY Mellon. Among other requirements, the proposal would (i) require a $400,000 minimum denomination for newly issued long-term debt of G-SIBs used to satisfy TLAC and long-term debt requirements and (ii) subject to notice and comment procedures, require a G-SIB to maintain an amount of eligible TLAC or long-term debt instruments greater or less than generally required under the rule. The proposal would also exempt certain agreements from the scope of the TLAC rule’s clean holding company prohibitions with respect to qualified financial contracts with third parties. Comments on the proposed rule are due by Nov. 30, 2023. We are evaluating the potential impact of the proposed rule.

FDIC Resolution Planning for Large Banks

On Aug. 29, 2023, the FDIC proposed revisions to the resolution plan rule applicable to covered IDIs. The proposed amendment would expand certain IDI resolution plan content requirements, adjust the frequency of resolution plan submissions from a 3-year cycle to a 2-year cycle, and require supplemental submissions of information in the interim period between filing years. Comments on the proposed rule are due by Nov. 30, 2023. We are evaluating the potential impact of the proposed rule.

SEC Naming Convention Rules for Funds

On Sept. 20, 2023, the SEC adopted amendments expanding the scope of terms that the SEC considers materially deceptive and misleading in a fund’s name

without a corresponding policy and related controls to invest at least 80% of the fund’s net asset value (plus certain borrowings) in the manner suggested by the fund’s name (“80% Policy”), including names that reference “growth” or “value,” or a name indicating that investment decisions incorporate any environmental, social and governance factors. The amendments will become effective 60 days after publication in the Federal Register and fund groups will have either 24 months or 30 months to come into compliance, depending upon their net asset size.

SEC Money Market Fund Reforms

On July 12, 2023, the SEC adopted amendments to rules that govern money market funds. The amendments became effective Oct. 2, 2023, with tiered compliance dates. The amendments include, among other things: (i) a mandatory liquidity fee for institutional prime and institutional tax-exempt money market funds, which will apply when a fund experiences daily net redemptions that exceed 5% of net assets (effective Oct. 2, 2023); (ii) maintenance of a fund board’s ability to impose liquidity fees (not to exceed 2% of the value of the shares redeemed) on a discretionary basis for non-government money market funds (effective April 2, 2024), (iii) substantially increasing the required minimum levels of daily and weekly liquid assets for all money market funds from 10% and 30%, to 25% and 50%, respectively (effective April 2, 2024), and (iv) removal of a money market fund’s ability to impose temporary “gates” to suspend redemptions in order to prevent dilution and remove the link between a money market fund’s liquidity level and its imposition of liquidity fees (effective Oct. 2, 2023).

California Climate Disclosure Laws

On Oct. 7, 2023, California enacted three climate-related bills imposing extensive new climate-related disclosure obligations applicable to companies doing business in California. The Climate Corporate Data Accountability Act (SB 253) requires covered companies with total annual revenues of $1 billion or more to disclose annually their Scope 1 (owned and controlled sources) and Scope 2 (from energy purchased and used) greenhouse gas emissions beginning in 2026, and Scope 3 (up and down value chain) greenhouse gas emissions beginning in 2027. The Climate-Related Financial Risk Act (SB 261) requires covered companies with total annual revenues of $500 million or more to publish biennial

48 BNY Mellon

reports disclosing climate-related financial risks and the measures adopted to mitigate the disclosed risks by Jan. 1, 2026. The Voluntary Carbon Market Disclosures Act (AB 1305), effective Jan. 1, 2024, requires companies making certain claims, including regarding carbon neutrality or reduction of greenhouse gas emissions, and companies purchasing carbon offsets in addition to making such claims, to disclose information on the determination of accuracy of the claim, interim progress measures, third-party verification and, if applicable, information on the carbon offsets purchased and emissions data. The laws may be modified by future legislation. We are assessing the potential impact of the climate disclosure laws.

Federal Reserve Novel Activities Supervisory Program

On Aug. 8, 2023, the Federal Reserve issued a Supervision and Regulation Letter (SR 23-7) announcing the establishment of its Novel Activities Supervision Program (“NAS Program”) to complement its existing supervision and oversight of supervised banking organizations, including BNY Mellon. The NAS Program will encompass risk-based monitoring and examination and focus on novel activities related to crypto-assets, distributed ledger technology, and complex, technology-driven partnerships with nonbank providers of banking products and services to customers. We are evaluating the potential impact of the NAS Program.

Website information

Our website is www.bnymellon.com. We currently make available the following information under the Investor Relations portion of our website. With respect to filings with the Securities and Exchange Commission (“SEC”), we post such information as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the SEC.

•All of our SEC filings, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to these reports, as well as proxy statements and SEC Forms 3, 4 and 5;

•Our earnings materials and selected management conference calls and presentations;

•Other regulatory disclosures, including: Pillar 3 Disclosures (and Market Risk Disclosure contained therein); Liquidity Coverage Ratio Disclosures; Net Stable Funding Ratio Disclosures; Federal Financial Institutions Examination Council – Consolidated Reports of Condition and Income for a Bank With Domestic and Foreign Offices; Consolidated Financial Statements for Bank Holding Companies; and the Dodd-Frank Act Stress Test Results for BNY Mellon and The Bank of New York Mellon; and

•Our Corporate Governance Guidelines, Amended and Restated By-Laws, Directors’ Code of Conduct and the Charters of the Audit, Finance, Corporate Governance, Nominating and Social Responsibility, Human Resources and Compensation, Risk and Technology Committees of our Board of Directors.

We may use our website, our X (formerly known as Twitter) account (@BNYMellon) and other social media channels as additional means of disclosing information to the public. The information disclosed through those channels may be considered to be material. The contents of our website or social media channels referenced herein are not incorporated by reference into this Quarterly Report on Form 10-Q.

BNY Mellon 49


Item 1. Financial Statements
The Bank of New York Mellon Corporation (and its subsidiaries)

Consolidated Income Statement (unaudited)


	Quarter ended						Year-to-date
	Sept. 30, 2023		June 30, 2023		Sept. 30, 2022		Sept. 30, 2023		Sept. 30, 2022
(in millions)
Fee and other revenue
Investment services fees	$	2,230	$	2,252	$	2,157	$	6,601	$	6,356
Investment management and performance fees	777		762		800		2,315		2,516
Foreign exchange revenue	154		158		203		488		632
Financing-related fees	45		50		43		147		132
Distribution and servicing fees	39		35		33		107		97
Total fee revenue	3,245		3,257		3,236		9,658		9,733
Investment and other revenue	113		97		117		289		278
Total fee and other revenue	3,358		3,354		3,353		9,947		10,011
Net interest revenue
Interest revenue	5,519		5,224		1,984		14,685		3,921
Interest expense	4,503		4,124		1,058		11,441		1,473
Net interest revenue	1,016		1,100		926		3,244		2,448
Total revenue	4,374		4,454		4,279		13,191		12,459
Provision for credit losses	3		5		(30)		35		19
Noninterest expense
Staff	1,755		1,718		1,673		5,264		4,998
Software and equipment	452		450		421		1,331		1,225
Professional, legal and other purchased services	368		378		363		1,121		1,112
Net occupancy	140		121		124		380		371
Sub-custodian and clearing	121		119		124		358		373
Distribution and servicing	87		93		88		265		257
Business development	36		47		34		122		107
Bank assessment charges	37		41		35		118		107
Goodwill impairment	—		—		680		—		680
Amortization of intangible assets	15		14		17		43		51
Other	78		130		120		298		516
Total noninterest expense	3,089		3,111		3,679		9,300		9,797
Income
Income before income taxes	1,282		1,338		630		3,856		2,643
Provision for income taxes	241		270		242		771		626
Net income	1,041		1,068		388		3,085		2,017
Net (income) loss attributable to noncontrolling interests related to consolidated investment management funds	(3)		(1)		—		(4)		13
Net income applicable to shareholders of The Bank of New York Mellon Corporation	1,038		1,067		388		3,081		2,030
Preferred stock dividends	(82)		(36)		(69)		(189)		(177)
Net income applicable to common shareholders of The Bank of New York Mellon Corporation	$	956	$	1,031	$	319	$	2,892	$	1,853

50 BNY Mellon


The Bank of New York Mellon Corporation (and its subsidiaries)

Consolidated Income Statement (unaudited) (continued)


Net income applicable to common shareholders of The Bank of New York Mellon Corporation used for the earnings per share calculation	Quarter ended						Year-to-date
	Sept. 30, 2023		June 30, 2023		Sept. 30, 2022		Sept. 30, 2023		Sept. 30, 2022
(in millions)	Sept. 30, 2023		June 30, 2023		Sept. 30, 2022		Sept. 30, 2023		Sept. 30, 2022
Net income applicable to common shareholders of The Bank of New York Mellon Corporation	$	956	$	1,031	$	319	$	2,892	$	1,853
Less: Earnings allocated to participating securities	—		—		—		—		—
Net income applicable to common shareholders of The Bank of New York Mellon Corporation after required adjustment for the calculation of basic and diluted earnings per common share	$	956	$	1,031	$	319	$	2,892	$	1,853


Average common shares and equivalents outstanding of The Bank of New York Mellon Corporation	Quarter ended			Year-to-date
	Sept. 30, 2023	June 30, 2023	Sept. 30, 2022	Sept. 30, 2023	Sept. 30, 2022
(in thousands)
Basic	777,813	787,718	811,304	789,609	810,703
Common stock equivalents	4,058	3,097	3,311	3,848	3,713
Less: Participating securities	(90)	(90)	(99)	(93)	(202)
Diluted	781,781	790,725	814,516	793,364	814,214

Anti-dilutive securities (a)	1,305	7,059	3,306	5,559	3,294

(a) Represents stock options, restricted stock, restricted stock units and participating securities outstanding but not included in the computation of diluted average common shares because their effect would be anti-dilutive.


Earnings per share applicable to common shareholders of The Bank of New York Mellon Corporation	Quarter ended						Year-to-date
	Sept. 30, 2023		June 30, 2023		Sept. 30, 2022		Sept. 30, 2023		Sept. 30, 2022
(in dollars)	Sept. 30, 2023		June 30, 2023		Sept. 30, 2022		Sept. 30, 2023		Sept. 30, 2022
Basic	$	1.23	$	1.31	$	0.39	$	3.66	$	2.29
Diluted	$	1.22	$	1.30	$	0.39	$	3.65	$	2.28

See accompanying unaudited Notes to Consolidated Financial Statements.

BNY Mellon 51


The Bank of New York Mellon Corporation (and its subsidiaries)

Consolidated Comprehensive Income Statement (unaudited)


	Quarter ended						Year-to-date
	Sept. 30, 2023		June 30, 2023		Sept. 30, 2022		Sept. 30, 2023		Sept. 30, 2022
(in millions)
Net income	$	1,041	$	1,068	$	388	$	3,085	$	2,017
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(185)		97		(442)		15		(1,150)
Unrealized gain (loss) on assets available-for-sale:
Unrealized (loss) gain arising during the period	(29)		(157)		(908)		131		(3,321)
Reclassification adjustment	14		—		(1)		15		(4)
Total unrealized (loss) gain on assets available-for-sale	(15)		(157)		(909)		146		(3,325)
Defined benefit plans:



Amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost	(3)		(2)		13		(8)		44
Total defined benefit plans	(3)		(2)		13		(8)		44
Net unrealized gain (loss) on cash flow hedges	—		3		(1)		8		(8)
Total other comprehensive (loss) income, net of tax (a)	(203)		(59)		(1,339)		161		(4,439)
Total comprehensive income (loss)	838		1,009		(951)		3,246		(2,422)
Net (income) loss attributable to noncontrolling interests	(3)		(1)		—		(4)		13
Other comprehensive loss attributable to noncontrolling interests	—		—		19		—		25
Comprehensive income (loss) applicable to shareholders of The Bank of New York Mellon Corporation	$	835	$	1,008	$	(932)	$	3,242	$	(2,384)

(a) Other comprehensive income (loss) attributable to The Bank of New York Mellon Corporation shareholders was $(203) million for the quarter ended Sept. 30, 2023, $(59) million for the quarter ended June 30, 2023, $(1,320) million for the quarter ended Sept. 30, 2022, $161 million for the nine months ended Sept. 30, 2023 and $(4,414) million for the nine months ended Sept. 30, 2022.

See accompanying unaudited Notes to Consolidated Financial Statements.

52 BNY Mellon


The Bank of New York Mellon Corporation (and its subsidiaries)

Consolidated Balance Sheet (unaudited)


	Sept. 30, 2023		Dec. 31, 2022
(dollars in millions, except per share amounts)
Assets
Cash and due from banks, net of allowance for credit losses of $23 and $29	$	4,904	$	5,030
Interest-bearing deposits with the Federal Reserve and other central banks	107,419		91,655
Interest-bearing deposits with banks, net of allowance for credit losses of $2 and $4 (includes restricted of $3,084 and $6,499)	12,999		17,169
Federal funds sold and securities purchased under resale agreements	26,299		24,298
Securities:
Held-to-maturity, at amortized cost, net of allowance for credit losses of $1 and less than $1 (fair value of $44,211 and $49,992)	51,007		56,194
Available-for-sale, at fair value (amortized cost of $83,074 and $92,484, net of allowance for credit losses of less than $1 and $1)	77,218		86,622
Total securities	128,225		142,816
Trading assets	10,699		9,908
Loans	66,290		66,063
Allowance for credit losses	(211)		(176)
Net loans	66,079		65,887
Premises and equipment	3,234		3,256
Accrued interest receivable	1,141		858
Goodwill	16,159		16,150
Intangible assets	2,859		2,901
Other assets, net of allowance for credit losses on accounts receivable of $3 and $4 (includes $1,561 and $971, at fair value)	25,231		25,855
Total assets	$	405,248	$	405,783
Liabilities
Deposits:
Noninterest-bearing (principally U.S. offices)	$	60,571	$	78,017
Interest-bearing deposits in U.S. offices	132,245		108,362
Interest-bearing deposits in non-U.S. offices	84,651		92,591
Total deposits	277,467		278,970
Federal funds purchased and securities sold under repurchase agreements	14,771		12,335
Trading liabilities	7,358		5,385
Payables to customers and broker-dealers	17,441		23,435

Other borrowed funds	728		397
Accrued taxes and other expenses	5,389		5,410
Other liabilities (including allowance for credit losses on lending-related commitments of $85 and $78, also includes $23 and $221, at fair value)	11,758		8,543
Long-term debt	29,205		30,458
Total liabilities	364,117		364,933
Temporary equity
Redeemable noncontrolling interests	109		109
Permanent equity
Preferred stock – par value $0.01 per share; authorized 100,000,000 shares; issued 48,826 and 48,826 shares	4,838		4,838
Common stock – par value $0.01 per share; authorized 3,500,000,000 shares; issued 1,402,122,865 and 1,395,725,198 shares	14		14
Additional paid-in capital	28,793		28,508
Retained earnings	39,822		37,864
Accumulated other comprehensive loss, net of tax	(5,805)		(5,966)
Less: Treasury stock of 633,049,587 and 587,280,598 common shares, at cost	(26,696)		(24,524)
Total The Bank of New York Mellon Corporation shareholders’ equity	40,966		40,734
Nonredeemable noncontrolling interests of consolidated investment management funds	56		7
Total permanent equity	41,022		40,741
Total liabilities, temporary equity and permanent equity	$	405,248	$	405,783

See accompanying unaudited Notes to Consolidated Financial Statements.

BNY Mellon 53


The Bank of New York Mellon Corporation (and its subsidiaries)

Consolidated Statement of Cash Flows (unaudited)


	Nine months ended Sept. 30,
(in millions)	2023		2022
Operating activities
Net income	$	3,085	$	2,017
Net (income) loss attributable to noncontrolling interests	(4)		13
Net income applicable to shareholders of The Bank of New York Mellon Corporation	3,081		2,030
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Provision for credit losses	35		19
Pension plan contributions	(4)		(2)
Depreciation and amortization	1,122		1,255
Goodwill impairment	—		680
Deferred tax (benefit) expense	(42)		255
Net securities losses (gains)	20		(5)
Change in trading assets and liabilities	1,015		6,945
Change in accruals and other, net	2,753		967
Net cash provided by operating activities	7,980		12,144
Investing activities
Change in interest-bearing deposits with banks	453		2,937
Change in interest-bearing deposits with the Federal Reserve and other central banks	(16,667)		(12,186)
Purchases of securities held-to-maturity	(273)		(2,144)
Paydowns of securities held-to-maturity	3,540		5,851
Maturities of securities held-to-maturity	1,715		1,423
Purchases of securities available-for-sale	(15,779)		(26,007)
Sales of securities available-for-sale	9,449		11,303
Paydowns of securities available-for-sale	2,794		4,205
Maturities of securities available-for-sale	12,988		8,392
Net change in loans	(243)		(2,517)

Change in federal funds sold and securities purchased under resale agreements	(2,002)		6,109
Net change in seed capital investments	18		24
Purchases of premises and equipment/capitalized software	(951)		(989)
Proceeds from the sale of premises and equipment	—		45

Disposition, net of cash	—		51
Other, net	494		(1,747)
Net cash (used for) investing activities	(4,464)		(5,250)
Financing activities
Change in deposits	81		(8,202)
Change in federal funds purchased and securities sold under repurchase agreements	2,538		(129)
Change in payables to customers and broker-dealers	(5,983)		(1,108)
Change in other borrowed funds	342		(347)

Net proceeds from the issuance of long-term debt	4,493		6,684
Repayments, redemptions and repurchases of long-term debt	(5,466)		(3,250)
Proceeds from the exercise of stock options	—		9
Issuance of common stock	12		10

Treasury stock acquired	(2,154)		(122)

Common cash dividends paid	(934)		(860)
Preferred cash dividends paid	(189)		(177)

Other, net	—		(12)
Net cash (used for) financing activities	(7,260)		(7,504)
Effect of exchange rate changes on cash	203		327
Change in cash and due from banks and restricted cash
Change in cash and due from banks and restricted cash	(3,541)		(283)
Cash and due from banks and restricted cash at beginning of period	11,529		9,883
Cash and due from banks and restricted cash at end of period	$	7,988	$	9,600
Cash and due from banks and restricted cash
Cash and due from banks at end of period (unrestricted cash)	$	4,904	$	4,707
Restricted cash at end of period	3,084		4,893
Cash and due from banks and restricted cash at end of period	$	7,988	$	9,600
Supplemental disclosures
Interest paid	$	11,196	$	1,355
Income taxes paid	653		319
Income taxes refunded	13		7

See accompanying unaudited Notes to Consolidated Financial Statements.

54 BNY Mellon


The Bank of New York Mellon Corporation (and its subsidiaries)

Consolidated Statement of Changes in Equity (unaudited)


	The Bank of New York Mellon Corporation shareholders												Nonredeemable noncontrolling interests of consolidated investment management funds		Total permanent equity			Redeemable non- controlling interests/ temporary equity
(in millions, except per share amount)	Preferred stock		Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive (loss), net of tax		Treasury stock
Balance at June 30, 2023	$	4,838	$	14	$	28,726	$	39,199	$	(5,602)	$	(26,242)	$	65	$	40,998	(a)	$	104


Shares issued to shareholders of noncontrolling interests	—		—		—		—		—		—		—		—			10

Other net changes in noncontrolling interests	—		—		1		—		—		—		(12)		(11)			(2)
Net income	—		—		—		1,038		—		—		3		1,041			—
Other comprehensive (loss)	—		—		—		—		(203)		—		—		(203)			—
Dividends:
Common stock at $0.42 per share (b)	—		—		—		(333)		—		—		—		(333)			—
Preferred stock	—		—		—		(82)		—		—		—		(82)			—
Repurchase of common stock	—		—		—		—		—		(450)		—		(450)			—
Common stock issued under employee benefit plans	—		—		5		—		—		—		—		5			—


Stock-based compensation	—		—		61		—		—		—		—		61			—
Excise tax on share repurchases	—		—		—		—		—		(4)		—		(4)			—
Other	—		—		—		—		—		—		—		—			(3)
Balance at Sept. 30, 2023	$	4,838	$	14	$	28,793	$	39,822	$	(5,805)	$	(26,696)	$	56	$	41,022	(a)	$	109

(a) Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $36,095 million at June 30, 2023 and $36,128 million at Sept. 30, 2023.

(b) Includes dividend equivalents on share-based awards.


	The Bank of New York Mellon Corporation shareholders												Nonredeemable noncontrolling interests of consolidated investment management funds		Total permanent equity			Redeemable non- controlling interests/ temporary equity
(in millions, except per share amount)	Preferred stock		Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive (loss), net of tax		Treasury stock
Balance at March 31, 2023	$	4,838	$	14	$	28,650	$	38,465	$	(5,543)	$	(25,790)	$	72	$	40,706	(a)	$	96


Shares issued to shareholders of noncontrolling interests	—		—		—		—		—		—		—		—			7

Other net changes in noncontrolling interests	—		—		2		—		—		—		(8)		(6)			(1)
Net income	—		—		—		1,067		—		—		1		1,068			—
Other comprehensive (loss)	—		—		—		—		(59)		—		—		(59)			—
Dividends:
Common stock at $0.37 per share (b)	—		—		—		(297)		—		—		—		(297)			—
Preferred stock	—		—		—		(36)		—		—		—		(36)			—
Repurchase of common stock	—		—		—		—		—		(448)		—		(448)			—

Common stock issued under employee benefit plans	—		—		5		—		—		—		—		5			—



Stock-based compensation	—		—		69		—		—		—		—		69			—

Excise tax of share repurchases	—		—		—		—		—		(4)		—		(4)			—
Other	—		—		—		—		—		—		—		—			2
Balance at June 30, 2023	$	4,838	$	14	$	28,726	$	39,199	$	(5,602)	$	(26,242)	$	65	$	40,998	(a)	$	104

(a) Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $35,796 million at March 31, 2023 and $36,095 million at June 30, 2023.

(b) Includes dividend equivalents on share-based awards.

BNY Mellon 55


The Bank of New York Mellon Corporation (and its subsidiaries)

Consolidated Statement of Changes in Equity (unaudited) (continued)


	The Bank of New York Mellon Corporation shareholders												Nonredeemable noncontrolling interests of consolidated investment management funds		Total permanent equity			Redeemable non- controlling interests/ temporary equity
(in millions, except per share amount)	Preferred stock		Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive (loss), net of tax		Treasury stock
Balance at June 30, 2022	$	4,838	$	14	$	28,316	$	37,644	$	(5,307)	$	(24,521)	$	7	$	40,991	(a)	$	154


Shares issued to shareholders of noncontrolling interests	—		—		—		—		—		—		—		—			17
Redemption of subsidiary shares from noncontrolling interests	—		—		—		—		—		—		—		—			(1)
Other net changes in noncontrolling interests	—		—		2		—		—		—		—		2			1
Net income	—		—		—		388		—		—		—		388			—
Other comprehensive (loss)	—		—		—		—		(1,320)		—		—		(1,320)			(19)
Dividends:
Common stock at $0.37 per share (b)	—		—		—		(303)		—		—		—		(303)			—
Preferred stock	—		—		—		(69)		—		—		—		(69)			—
Repurchase of common stock	—		—		—		—		—		(1)		—		(1)			—

Common stock issued under employee benefit plans	—		—		5		—		—		—		—		5			—



Stock awards and options exercised	—		—		51		—		—		—		—		51			—


Balance at Sept. 30, 2022	$	4,838	$	14	$	28,374	$	37,660	$	(6,627)	$	(24,522)	$	7	$	39,744	(a)	$	152

(a) Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $36,146 million at June 30, 2022 and $34,899 million at Sept. 30, 2022.

(b) Includes dividend equivalents on share-based awards.




	The Bank of New York Mellon Corporation shareholders												Nonredeemable noncontrolling interests of consolidated investment management funds		Total permanent equity			Redeemable non- controlling interests/ temporary equity
(in millions, except per share amount)	Preferred stock		Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive (loss) income, net of tax		Treasury stock
Balance at Dec. 31, 2022	$	4,838	$	14	$	28,508	$	37,864	$	(5,966)	$	(24,524)	$	7	$	40,741	(a)	$	109


Shares issued to shareholders of noncontrolling interests	—		—		—		—		—		—		—		—			27
Redemption of subsidiary shares from noncontrolling interests	—		—		—		—		—		—		—		—			(34)
Other net changes in noncontrolling interests	—		—		(5)		—		—		—		45		40			6
Net income	—		—		—		3,081		—		—		4		3,085			—
Other comprehensive income	—		—		—		—		161		—		—		161			—
Dividends:
Common stock at $1.16 per share (b)	—		—		—		(934)		—		—		—		(934)			—
Preferred stock	—		—		—		(189)		—		—		—		(189)			—
Repurchase of common stock	—		—		—		—		—		(2,154)		—		(2,154)			—

Common stock issued under employee benefit plans	—		—		15		—		—		—		—		15			—


Stock-based compensation	—		—		275		—		—		—		—		275			—
Excise tax on share repurchases	—		—		—		—		—		(18)		—		(18)			—
Other	—		—		—		—		—		—		—		—			1
Balance at Sept. 30, 2023	$	4,838	$	14	$	28,793	$	39,822	$	(5,805)	$	(26,696)	$	56	$	41,022	(a)	$	109

(a) Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $35,896 million at Dec. 31, 2022 and $36,128 million at Sept. 30, 2023.

(b) Includes dividend equivalents on share-based awards.

56 BNY Mellon


The Bank of New York Mellon Corporation (and its subsidiaries)

Consolidated Statement of Changes in Equity (unaudited) (continued)




	The Bank of New York Mellon Corporation shareholders												Nonredeemable noncontrolling interests of consolidated investment management funds		Total permanent equity			Redeemable non- controlling interests/ temporary equity
(in millions, except per share amount)	Preferred stock		Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive (loss), net of tax		Treasury stock
Balance at Dec. 31, 2021	$	4,838	$	14	$	28,128	$	36,667	$	(2,213)	$	(24,400)	$	196	$	43,230	(a)	$	161



Shares issued to shareholders of noncontrolling interests	—		—		—		—		—		—		—		—			26
Redemption of subsidiary shares from noncontrolling interests	—		—		—		—		—		—		—		—			(15)
Other net changes in noncontrolling interests	—		—		(3)		—		—		—		(176)		(179)			5
Net income (loss)	—		—		—		2,030		—		—		(13)		2,017			—
Other comprehensive (loss)	—		—		—		—		(4,414)		—		—		(4,414)			(25)
Dividends:
Common stock at $1.05 per share (b)	—		—		—		(860)		—		—		—		(860)			—
Preferred stock	—		—		—		(177)		—		—		—		(177)			—
Repurchase of common stock	—		—		—		—		—		(122)		—		(122)			—

Common stock issued under employee benefit plans	—		—		15		—		—		—		—		15			—

Stock awards and options exercised	—		—		234		—		—		—		—		234			—
Balance at Sept. 30, 2022	$	4,838	$	14	$	28,374	$	37,660	$	(6,627)	$	(24,522)	$	7	$	39,744	(a)	$	152

(a) Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $38,196 million at Dec. 31, 2021 and $34,899 million at Sept. 30, 2022.

(b) Includes dividend equivalents on share-based awards.

See accompanying unaudited Notes to Consolidated Financial Statements.

BNY Mellon 57


Notes to Consolidated Financial Statements

Note 1–Basis of presentation

Basis of presentation

The accounting and financial reporting policies of BNY Mellon, a global financial services company, conform to U.S. generally accepted accounting principles (“GAAP”) and prevailing industry practices. For information on our significant accounting and reporting policies, see Note 1 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended Dec. 31, 2022 (the “2022 Annual Report”).

The accompanying consolidated financial statements are unaudited. In the opinion of management, all adjustments necessary, consisting of normal recurring adjustments, for a fair presentation of financial position, results of operations and cash flows for the periods presented have been made. These financial statements should be read in conjunction with our Consolidated Financial Statements included in our 2022 Annual Report. Certain additional immaterial reclassifications have been made to prior periods to place them on a basis comparable with the current period presentation.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates based upon assumptions about future economic and market conditions which affect reported amounts and related disclosures in our financial statements. Although our current estimates contemplate current conditions and how we expect them to change in the future, it is reasonably possible that actual conditions could be worse than anticipated in those estimates, which could materially affect our results of operations and financial condition.

Note 2–New accounting guidance

The following accounting guidance was adopted in the first quarter of 2023.

Accounting Standards Update (“ASU”) 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging – Portfolio Layer Method

In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging – Portfolio Layer Method, which provides guidance that expands the ability to hedge interest rate risk by permitting the use of multiple hedged layers of a single closed portfolio of assets and will (1) Allow multiple layer hedging within the same closed portfolio, (2) Expand the scope of the portfolio layer method to include non-prepayable assets, (3) Expand the eligible hedging instruments to be utilized in a single-layer hedge, and (4) Permit held-to-maturity debt securities to be transferred to available-for-sale at the date of adoption, provided such transferred securities are designated in a portfolio layer method hedge within 30 days of the adoption date.

The standard also provides further guidance and disclosure requirements with respect to hedge basis adjustments related to portfolio layer method hedges.

We adopted this guidance as of Jan. 1, 2023. The Company did not choose to make the one-time election to reclassify securities classified as held-to-maturity to available-for-sale as of Jan. 1, 2023 and can choose to prospectively apply portfolio layer method hedging.

ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures

In March 2022, the FASB issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which provides post-implementation guidance related to the adoption of ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, which was effective Jan. 1, 2020. This ASU amends the guidance related to two issues: Troubled Debt Restructurings (“TDRs”) and disclosure requirements for the credit profile of the loan portfolio. This ASU eliminates the accounting guidance for TDRs by creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. An entity must apply the loan refinancing and restructuring guidance to determine whether a

58 BNY Mellon


Notes to Consolidated Financial Statements (continued)

modification results in a new loan or a continuation of an existing loan.

This ASU also requires that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments – Credit Losses – Measured at Amortized Cost.

We adopted the revised guidance related to loan modifications on Jan. 1, 2023. The impact was immaterial. The updated disclosures are included in Note 5.

Note 3–Acquisitions and dispositions

We sometimes structure our acquisitions and divestitures with both an initial payment or receipt and later contingent payments or receipts tied to post-closing revenue or income growth. Contingent payments totaled $5 million in the first nine months of 2023. There were no contingent receipts in the first nine months of 2023. At Sept. 30, 2023, we are potentially obligated to pay additional consideration which, using reasonable assumptions and estimates, could range from $25 million to $40 million over the next two years. At Sept. 30, 2023, we could potentially receive additional consideration which, using reasonable assumptions and estimates, could be up to $390 million over the next five years.

See Note 3 of the Notes to Consolidated Financial Statements in our 2022 Annual Report for information related to the 2022 transactions.

Note 4–Securities

The following tables present the amortized cost, the gross unrealized gains and losses and the fair value of securities at Sept. 30, 2023 and Dec. 31, 2022.


Securities at Sept. 30, 2023			Gross unrealized				Fair value
	Amortized cost
(in millions)			Gains		Losses
Available-for-sale:
U.S. Treasury	$	23,212	$	67	$	2,381	$	20,898
Agency residential mortgage-backed securities (“RMBS”)	10,581		93		687		9,987
Sovereign debt/sovereign guaranteed	9,192		2		504		8,690
Supranational	7,988		1		421		7,568
Agency commercial mortgage-backed securities (“MBS”)	8,233		69		770		7,532
Foreign covered bonds	6,364		3		257		6,110
Collateralized loan obligations (“CLOs”)	5,965		4		34		5,935
Non-agency commercial MBS	3,315		1		399		2,917
U.S. government agencies	3,014		43		295		2,762
Foreign government agencies/local governments	2,256		—		97		2,159
Non-agency RMBS	1,927		31		221		1,737
Other asset-backed securities (“ABS”)	1,026		—		104		922


Other debt securities	1		—		—		1
Total securities available-for-sale (a)(b)	$	83,074	$	314	$	6,170	$	77,218
Held-to-maturity:
Agency RMBS	$	30,760	$	1	$	4,898	$	25,863
U.S. Treasury	9,477		—		835		8,642
U.S. government agencies	4,199		—		543		3,656
Agency commercial MBS	3,506		—		407		3,099
Sovereign debt/sovereign guaranteed	1,456		—		73		1,383
CLOs	983		—		10		973

Supranational	510		—		24		486
Foreign government agencies	78		—		5		73
Non-agency RMBS	26		1		1		26
State and political subdivisions	12		—		2		10
Total securities held-to-maturity	$	51,007	$	2	$	6,798	$	44,211
Total securities	$	134,081	$	316	$	12,968	$	121,429

(a) The amortized cost of available-for-sale is net of the allowance for credit losses of less than $1 million. The allowance for credit loss relates to non-agency RMBS.

(b) Includes gross unrealized gains of $272 million and gross unrealized losses of $153 million recorded in accumulated other comprehensive income related to securities that were transferred from available-for-sale to held-to-maturity. The unrealized gains primarily relate to agency RMBS, agency commercial MBS and U.S. Treasury securities. The unrealized losses primarily relate to agency RMBS and U.S. Treasury securities. The unrealized gains and losses will be amortized into net interest revenue over the contractual lives of the securities.

BNY Mellon 59


Notes to Consolidated Financial Statements (continued)


Securities at Dec. 31, 2022			Gross unrealized
	Amortized cost						Fair value
(in millions)			Gains		Losses
Available-for-sale:
U.S. Treasury	$	32,103	$	93	$	2,663	$	29,533
Sovereign debt/sovereign guaranteed	10,906		5		547		10,364
Agency RMBS	9,388		113		544		8,957
Agency commercial MBS	8,656		89		685		8,060
Supranational	8,129		4		399		7,734
Foreign covered bonds	6,041		3		286		5,758
CLOs	5,446		1		104		5,343
Non-agency commercial MBS	3,334		—		357		2,977
U.S. government agencies	2,465		52		223		2,294
Foreign government agencies/local governments	2,363		1		123		2,241
Non-agency RMBS	2,197		43		211		2,029
Other ABS	1,443		—		124		1,319
State and political subdivisions	12		—		—		12

Other debt securities	1		—		—		1
Total securities available-for-sale (a)(b)	$	92,484	$	404	$	6,266	$	86,622
Held-to-maturity:
Agency RMBS	$	34,188	$	1	$	4,229	$	29,960
U.S. Treasury	10,863		—		895		9,968
U.S. government agencies	4,206		—		534		3,672
Agency commercial MBS	4,014		—		411		3,603
Sovereign debt/sovereign guaranteed	1,388		—		76		1,312
CLOs	983		—		26		957
Supranational	443		—		25		418
Foreign government agencies	66		—		6		60
Non-agency RMBS	30		2		1		31
State and political subdivisions	13		—		2		11
Total securities held-to-maturity	$	56,194	$	3	$	6,205	$	49,992
Total securities	$	148,678	$	407	$	12,471	$	136,614

(a) The amortized cost of available-for-sale securities is net of the allowance for credit losses of $1 million. The allowance for credit loss primarily relates to non-agency RMBS.

(b) Includes gross unrealized gains of $347 million and gross unrealized losses of $179 million recorded in accumulated other comprehensive income related to securities that were transferred from available-for-sale to held-to-maturity. The unrealized gains primarily relate to agency RMBS, U.S. Treasury securities and agency commercial MBS. The unrealized losses primarily relate to agency RMBS and U.S. Treasury securities. The unrealized gains and losses will be amortized into net interest revenue over the contractual lives of the securities.

The following table presents the realized gains and losses, on a gross basis.


Net securities gains (losses)
(in millions)	3Q23		2Q23		3Q22		YTD23		YTD22
Realized gross gains	$	1	$	4	$	9	$	19	$	89
Realized gross losses	(20)		(4)		(8)		(39)		(84)
Total net securities (losses) gains	$	(19)	$	—	$	1	$	(20)	$	5

The following table presents pre-tax net securities gains (losses) by type.


Net securities gains (losses)
(in millions)	3Q23		2Q23		3Q22		YTD23		YTD22
Non-agency RMBS	$	—	$	—	$	—	$	2	$	49
U.S. Treasury	(19)		—		—		(27)		12
State and political subdivisions	—		—		—		—		(13)
Corporate bonds	—		—		—		—		(51)
Other	—		—		1		5		8
Total net securities (losses) gains	$	(19)	$	—	$	1	$	(20)	$	5

Allowance for credit losses – Securities

The allowance for credit losses related to securities was $1 million at Sept. 30, 2023 and $1 million at Dec. 31, 2022, and relates to state and political subdivision and non-agency RMBS securities.

Credit quality indicators – Securities

At Sept. 30, 2023, the gross unrealized losses on the securities portfolio were primarily attributable to an increase in interest rates from the date of purchase, and for certain securities that were transferred from available-for-sale to held-to-maturity, an increase in interest rates through the date they were transferred. Specifically, $153 million of the unrealized losses at Sept. 30, 2023 and $179 million at Dec. 31, 2022 reflected in the tables below relate to certain securities that were previously transferred from available-for-sale to held-to-maturity. The unrealized losses will be amortized into net interest revenue over the contractual lives of the securities. The transfer created a new cost basis for the securities. As a result, if these securities have experienced unrealized losses since the date of transfer, the corresponding unrealized losses would be reflected in the held-to-maturity securities portfolio in the following tables. We do not intend to sell these securities, and it is not more likely than not that we will have to sell these securities.

60 BNY Mellon


Notes to Consolidated Financial Statements (continued)

The following tables show the aggregate fair value of available-for-sale securities with a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 months or more without an allowance for credit losses.


Available-for-sale securities in an unrealized loss position without an allowance for credit losses at Sept. 30, 2023	Less than 12 months				12 months or more				Total
	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
(in millions)
U.S. Treasury	$	749	$	64	$	20,149	$	2,317	$	20,898	$	2,381
Agency RMBS	2,975		108		6,848		579		9,823		687
Sovereign debt/sovereign guaranteed	1,686		27		5,988		477		7,674		504
Agency commercial MBS	474		23		6,925		747		7,399		770
Supranational	2,555		58		4,499		363		7,054		421
Foreign covered bonds	1,449		18		3,606		239		5,055		257
CLOs	459		1		4,233		33		4,692		34
Non-agency commercial MBS	139		1		2,632		398		2,771		399
U.S. government agencies	837		25		1,685		270		2,522		295
Foreign government agencies/local governments	587		10		1,512		87		2,099		97

Non-agency RMBS	53		2		1,288		219		1,341		221
Other ABS	—		—		858		104		858		104


Total securities available-for-sale (a)	$	11,963	$	337	$	60,223	$	5,833	$	72,186	$	6,170

(a) Includes $153 million of gross unrealized losses for 12 months or more recorded in accumulated other comprehensive income related to securities that were transferred from available-for-sale to held-to-maturity. There were no gross unrealized losses for less than 12 months. The unrealized losses are primarily related to agency RMBS and U.S. Treasury securities and will be amortized into net interest revenue over the contractual lives of the securities.


Available-for-sale securities in an unrealized loss position without an allowance for credit losses at Dec. 31, 2022	Less than 12 months				12 months or more				Total
	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
(in millions)
U.S. Treasury	$	14,058	$	824	$	15,236	$	1,839	$	29,294	$	2,663
Agency RMBS	7,929		376		789		168		8,718		544
Agency commercial MBS	6,088		389		1,878		296		7,966		685
Sovereign debt/sovereign guaranteed	4,176		184		3,788		363		7,964		547
Supranational	3,451		109		2,571		290		6,022		399
CLOs	4,806		94		403		10		5,209		104
Foreign covered bonds	2,830		83		1,977		203		4,807		286
Non-agency commercial MBS	1,914		201		932		156		2,846		357
Foreign government agencies/local governments	1,148		43		1,013		80		2,161		123
U.S. government agencies	1,710		186		208		37		1,918		223
Non-agency RMBS	588		16		1,148		193		1,736		209
Other ABS	333		18		876		106		1,209		124

State and political subdivisions	—		—		12		—		12		—

Total securities available-for-sale (a)	$	49,031	$	2,523	$	30,831	$	3,741	$	79,862	$	6,264

(a) Includes $120 million of gross unrealized losses for less than 12 months and $59 million of gross unrealized losses for 12 months or more recorded in accumulated other comprehensive income related to securities that were transferred from available-for-sale to held-to-maturity. The unrealized losses are primarily related to agency RMBS and U.S. Treasury securities and will be amortized into net interest revenue over the contractual lives of the securities.

BNY Mellon 61


Notes to Consolidated Financial Statements (continued)

The following tables show the credit quality of the held-to-maturity securities. We have included certain credit ratings information because the information can indicate the degree of credit risk to which we are exposed. Significant changes in ratings classifications could indicate increased credit risk for us and could be accompanied by an increase in the allowance for credit losses and/or a reduction in the fair value of our securities portfolio.


Held-to-maturity securities portfolio at Sept. 30, 2023					Ratings (a)
			Net unrealized gain (loss)								BB+ and lower
(dollars in millions)	Amortized cost				AAA/ AA-		A+/ A-		BBB+/ BBB-				Not rated
Agency RMBS	$	30,760	$	(4,897)	100	%	—	%	—	%	—	%		—	%
U.S. Treasury	9,477		(835)		100		—		—		—			—
U.S. government agencies	4,199		(543)		100		—		—		—			—
Agency commercial MBS	3,506		(407)		100		—		—		—			—
Sovereign debt/sovereign guaranteed (b)	1,456		(73)		100		—		—		—			—
CLOs	983		(10)		100		—		—		—			—
Supranational	510		(24)		100		—		—		—			—
Foreign government agencies	78		(5)		100		—		—		—			—
Non-agency RMBS	26		—		27		52		2		17			2
State and political subdivisions	12		(2)		—		—		3		—			97
Total held-to-maturity securities	$	51,007	$	(6,796)	100	%	—	%	—	%	—	%		—	%

(a) Represents ratings by Standard & Poor’s (“S&P”) or the equivalent.

(b) Primarily consists of exposure to Germany, France, UK and the Netherlands.


Held-to-maturity securities portfolio at Dec. 31, 2022					Ratings (a)
			Net unrealized gain (loss)								BB+ and lower
(dollars in millions)	Amortized cost				AAA/ AA-		A+/ A-		BBB+/ BBB-				Not rated
Agency RMBS	$	34,188	$	(4,228)	100	%	—	%	—	%	—	%		—	%
U.S. Treasury	10,863		(895)		100		—		—		—			—
U.S. government agencies	4,206		(534)		100		—		—		—			—
Agency commercial MBS	4,014		(411)		100		—		—		—			—
Sovereign debt/sovereign guaranteed (b)	1,388		(76)		100		—		—		—			—
CLOs	983		(26)		100		—		—		—			—
Supranational	443		(25)		100		—		—		—			—
Foreign government agencies	66		(6)		100		—		—		—			—
Non-agency RMBS	30		1		22		58		2		17			1
State and political subdivisions	13		(2)		2		2		3		—			93


Total held-to-maturity securities	$	56,194	$	(6,202)	100	%	—	%	—	%	—	%		—	%

(a) Represents ratings by S&P or the equivalent.

(b) Primarily consists of exposure to Germany, UK and France.

62 BNY Mellon


Notes to Consolidated Financial Statements (continued)

Maturity distribution

The following table shows the maturity distribution by carrying amount and yield (on a tax equivalent basis) of our securities portfolio.


Maturity distribution and yields on securities at Sept. 30, 2023
	Within 1 year				1-5 years				5-10 years				After 10 years				Total
(dollars in millions)	Amount		Yield (a)		Amount		Yield (a)		Amount		Yield (a)		Amount		Yield (a)		Amount		Yield (a)
Available-for-sale:
U.S. Treasury	$	5,957	0.87	%	$	12,059	1.15	%	$	1,055	1.35	%	$	1,827	2.92	%	$	20,898	1.27	%
Sovereign debt/sovereign guaranteed	2,850		2.29		4,934		1.95		841		1.31		65		3.55		8,690		2.00
Supranational	530		1.33		5,438		2.88		1,570		3.28		30		3.42		7,568		2.86
Foreign covered bonds	748		1.47		4,969		3.50		393		1.05		—		—		6,110		3.08
Foreign government agencies/local governments	348		2.12		1,682		2.63		129		3.68		—		—		2,159		2.61
U.S. government agencies	20		2.98		1,605		3.37		1,033		2.90		104		2.73		2,762		3.15


Other debt securities	—		—		—		—		—		—		1		4.85		1		4.85
Mortgage-backed securities:
Agency RMBS																	9,987		4.94
Non-agency RMBS																	1,737		4.50
Agency commercial MBS																	7,532		3.03
Non-agency commercial MBS																	2,917		3.56
CLOs																	5,935		6.83
Other ABS																	922		2.21
Total securities available-for-sale	$	10,453	1.37	%	$	30,687	2.13	%	$	5,021	2.26	%	$	2,027	2.93	%	$	77,218	2.97	%
Held-to-maturity:
U.S. Treasury	$	1,307	1.99	%	$	7,256	1.21	%	$	914	1.24	%	$	—	—	%	$	9,477	1.32	%
U.S. government agencies	294		1.32		2,629		1.48		1,063		1.48		213		1.99		4,199		1.49
Sovereign debt/sovereign guaranteed	573		1.17		810		0.99		73		0.59		—		—		1,456		1.04
Supranational	—		—		510		1.42		—		—		—		—		510		1.42
Foreign government agencies	—		—		78		1.16		—		—		—		—		78		1.16
State and political subdivisions	—		—		—		—		12		4.75		—		—		12		4.75
Mortgage-backed securities:
Agency RMBS																	30,760		2.32
Non-agency RMBS																	26		2.75
Agency commercial MBS																	3,506		2.40
CLOs																	983		6.73
Total securities held-to-maturity	$	2,174	1.69	%	$	11,283	1.27	%	$	2,062	1.36	%	$	213	1.99	%	$	51,007	2.11	%
Total securities	$	12,627	1.42	%	$	41,970	1.91	%	$	7,083	2.02	%	$	2,240	2.86	%	$	128,225	2.64	%

(a) Yields are based upon the amortized cost of securities and consider the contractual coupon, amortization of premiums and accretion of discounts, excluding the effect of related hedging derivatives.

Pledged assets

At Sept. 30, 2023, BNY Mellon had pledged assets of $127 billion, including $95 billion pledged as collateral for potential borrowings at the Federal Reserve Discount Window and $9 billion pledged as collateral for borrowing at the Federal Home Loan Bank. The components of the assets pledged at Sept. 30, 2023 included $109 billion of securities, $13 billion of loans, $4 billion of trading assets and $1 billion of interest-bearing deposits with banks.

If there has been no borrowing at the Federal Reserve Discount Window, the Federal Reserve generally allows banks to freely move assets in and out of their pledged assets account to sell or repledge the assets

for other purposes. BNY Mellon regularly moves assets in and out of its pledged assets account at the Federal Reserve as there have been no borrowings.

At Dec. 31, 2022, BNY Mellon had pledged assets of $138 billion, including $106 billion pledged as collateral for potential borrowing at the Federal Reserve Discount Window and $8 billion pledged as collateral for borrowing at the Federal Home Loan Bank. The components of the assets pledged at Dec. 31, 2022 included $121 billion of securities, $12 billion of loans, $4 billion of trading assets and $1 billion of interest-bearing deposits with banks.

At Sept. 30, 2023 and Dec. 31, 2022, pledged assets included $23 billion and $24 billion, respectively, for

BNY Mellon 63


Notes to Consolidated Financial Statements (continued)

which the recipients were permitted to sell or repledge the assets delivered.

We also obtain securities as collateral, including receipts under resale agreements, securities borrowed, derivative contracts and custody agreements, on terms which permit us to sell or repledge the securities to others. At Sept. 30, 2023 and Dec. 31, 2022, the market value of the securities received that can be sold or repledged was $191 billion and $115 billion, respectively. We routinely sell or repledge these securities through delivery to third parties. As of Sept. 30, 2023 and Dec. 31, 2022, the market value of securities collateral sold or repledged was $163 billion and $78 billion, respectively.

Restricted cash and securities

Cash and securities may be segregated under federal and other regulations or requirements. At Sept. 30, 2023 and Dec. 31, 2022, cash segregated under federal and other regulations or requirements was $3 billion and $7 billion, respectively. Restricted cash is primarily included in interest-bearing deposits with banks on the consolidated balance sheet. Securities segregated under federal and other regulations or requirements were $3 billion at Sept. 30, 2023 and $3 billion at Dec. 31, 2022. Restricted securities were sourced from securities purchased under resale agreements and are included in federal funds sold and securities purchased under resale agreements on the consolidated balance sheet.

Note 5–Loans and asset quality

Loans

The table below provides the details of our loan portfolio.


Loans	Sept. 30, 2023		Dec. 31, 2022
(in millions)
Commercial	$	1,944	$	1,732
Commercial real estate	6,730		6,226
Financial institutions	10,441		9,684
Lease financings	633		657
Wealth management loans	9,415		10,302
Wealth management mortgages	9,130		8,966
Other residential mortgages	972		345
Capital call financing	3,410		3,438
Other	2,804		2,941
Overdrafts	3,628		4,839
Margin loans	17,183		16,933
Total loans (a)	$	66,290	$	66,063

(a) Net of unearned income of $270 million at Sept. 30, 2023 and $225 million at Dec. 31, 2022 primarily related to lease financings.

We disclose information related to our loans and asset quality by the class of the financing receivable in the following tables.

64 BNY Mellon


Notes to Consolidated Financial Statements (continued)

Allowance for credit losses

Activity in the allowance for credit losses on loans and lending-related commitments is presented below. This does not include activity in the allowance for credit losses related to other financial instruments, including cash and due from banks, interest-bearing deposits with banks, federal funds sold and securities purchased under resale agreements, available-for-sale securities, held-to-maturity securities and accounts receivable.


Allowance for credit losses activity for the quarter ended Sept. 30, 2023									Wealth management loans		Wealth management mortgages		Other residential mortgages		Capital call financing
(in millions)	Commercial		Commercial real estate		Financial institutions		Lease financings										Total
Beginning balance	$	21	$	199	$	32	$	1	$	1	$	15	$	9	$	4	$	282
Charge-offs	—		—		—		—		—		—		—		—		—
Recoveries	—		—		—		—		—		—		—		—		—
Net (charge-offs) recoveries	—		—		—		—		—		—		—		—		—
Provision (a)	11		23		(10)		—		—		(6)		(3)		(1)		14
Ending balance	$	32	$	222	$	22	$	1	$	1	$	9	$	6	$	3	$	296
Allowance for:
Loan losses	$	17	$	166	$	10	$	1	$	1	$	8	$	6	$	2	$	211
Lending-related commitments	15		56		12		—		—		1		—		1		85
Individually evaluated for impairment:
Loan balance (b)	$	—	$	102	$	—	$	—	$	—	$	14	$	1	$	—	$	117
Allowance for loan losses	—		2		—		—		—		—		—		—		2

(a) Does not include the provision for credit losses benefit related to other financial instruments of $11 million for the quarter ended Sept. 30, 2023.

(b) Includes collateral-dependent loans of $117 million with $198 million of collateral at fair value.


Allowance for credit losses activity for the quarter ended June 30, 2023									Wealth management loans		Wealth management mortgages		Other residential mortgages		Capital call financing
(in millions)	Commercial		Commercial real estate		Financial institutions		Lease financings										Total
Beginning balance	$	21	$	177	$	24	$	1	$	1	$	14	$	9	$	6	$	253
Charge-offs	—		—		—		—		—		—		(3)		—		(3)
Recoveries	—		—		—		—		—		—		2		—		2
Net (charge-offs)	—		—		—		—		—		—		(1)		—		(1)
Provision (a)	—		22		8		—		—		1		1		(2)		30
Ending balance	$	21	$	199	$	32	$	1	$	1	$	15	$	9	$	4	$	282
Allowance for:
Loan losses	$	4	$	143	$	17	$	1	$	1	$	14	$	9	$	2	$	191
Lending-related commitments	17		56		15		—		—		1		—		2		91
Individually evaluated for impairment:
Loan balance (b)	$	—	$	101	$	—	$	—	$	—	$	11	$	1	$	—	$	113
Allowance for loan losses	—		3		—		—		—		—		—		—		3

(a) Does not include the provision for credit losses benefit related to other financial instruments of $25 million for the quarter ended June 30, 2023.

(b) Includes collateral-dependent loans of $113 million with $167 million of collateral at fair value.

BNY Mellon 65


Notes to Consolidated Financial Statements (continued)


Allowance for credit losses activity for the quarter ended Sept. 30, 2022									Wealth management loans		Wealth management mortgages		Other residential mortgages		Capital call financing		Total
(in millions)	Commercial		Commercial real estate		Financial institutions		Lease financings
Beginning balance	$	16	$	184	$	21	$	1	$	1	$	7	$	7	$	6	$	243
Charge-offs	—		—		—		—		—		—		—		—		—
Recoveries	—		—		—		—		—		—		1		—		1
Net recoveries	—		—		—		—		—		—		1		—		1
Provision (a)	1		(8)		(1)		—		—		2		—		(2)		(8)
Ending balance	$	17	$	176	$	20	$	1	$	1	$	9	$	8	$	4	$	236
Allowance for:
Loan losses	$	4	$	130	$	9	$	1	$	1	$	8	$	8	$	3	$	164
Lending-related commitments	13		46		11		—		—		1		—		1		72
Individually evaluated for impairment:
Loan balance (b)	$	—	$	75	$	—	$	—	$	—	$	14	$	1	$	—	$	90
Allowance for loan losses	—		1		—		—		—		—		—		—		1

(a) Does not include the provision for credit losses benefit related to other financial instruments of $22 million for the quarter ended Sept. 30, 2022.

(b) Includes collateral-dependent loans of $90 million with $135 million of collateral at fair value.


Allowance for credit losses activity for the nine months ended Sept. 30, 2023													Other residential mortgages		Capital call financing		Total
(in millions)	Commercial		Commercial real estate		Financial institutions		Lease financings		Wealth management loans		Wealth management mortgages
Beginning balance	$	18	$	184	$	24	$	1	$	1	$	12	$	8	$	6	$	254
Charge-offs	—		—		—		—		—		—		(3)		—		(3)
Recoveries	1		—		—		—		—		—		2		—		3
Net recoveries (charge-offs)	1		—		—		—		—		—		(1)		—		—
Provision (a)	13		38		(2)		—		—		(3)		(1)		(3)		42
Ending balance	$	32	$	222	$	22	$	1	$	1	$	9	$	6	$	3	$	296

(a) Does not include provision for credit losses benefit related to other financial instruments of $7 million for the nine months ended Sept. 30, 2023.


Allowance for credit losses activity for the nine months ended Sept. 30, 2022													Other residential mortgages		Capital call financing		Total
(in millions)	Commercial		Commercial real estate		Financial institutions		Lease financings		Wealth management loans		Wealth management mortgages
Beginning balance	$	12	$	199	$	13	$	1	$	1	$	6	$	7	$	2	$	241
Charge-offs	—		—		—		—		—		—		—		—		—
Recoveries	—		—		—		—		—		—		3		—		3
Net recoveries	—		—		—		—		—		—		3		—		3
Provision (a)	5		(23)		7		—		—		3		(2)		2		(8)
Ending balance	$	17	$	176	$	20	$	1	$	1	$	9	$	8	$	4	$	236

(a) Does not include provision for credit losses related to other financial instruments of $27 million for the nine months ended Sept. 30, 2022.

Nonperforming assets

The table below presents our nonperforming assets.


Nonperforming assets	Sept. 30, 2023						Dec. 31, 2022
	Recorded investment						Recorded investment
	With an allowance		Without an allowance				With an allowance		Without an allowance
(in millions)					Total						Total
Nonperforming loans:

Other residential mortgages	$	23	$	1	$	24	$	30	$	1	$	31
Wealth management mortgages	7		15		22		8		14		22
Commercial real estate	—		—		—		—		54		54

Total nonperforming loans	30		16		46		38		69		107
Other assets owned	—		2		2		—		2		2
Total nonperforming assets	$	30	$	18	$	48	$	38	$	71	$	109

66 BNY Mellon


Notes to Consolidated Financial Statements (continued)

Past due loans

The table below presents our past due loans.


Past due loans and still accruing interest	Sept. 30, 2023								Dec. 31, 2022
	Days past due						Total past due		Days past due						Total past due
(in millions)	30-59		60-89		≥90				30-59		60-89		≥90
Wealth management loans	$	40	$	1	$	—	$	41	$	43	$	1	$	—	$	44
Commercial real estate	9		4		—		13		11		—		—		11
Other residential mortgages	6		2		—		8		5		—		—		5
Wealth management mortgages	1		2		—		3		54		1		—		55




Total past due loans	$	56	$	9	$	—	$	65	$	113	$	2	$	—	$	115

Loan modifications

Modified loans are evaluated to determine whether a modification or restructuring with a borrower experiencing financial difficulty results in principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, or a term extension. The modification could result in a new loan or a continuation of the existing loan.

In the third quarter of 2023, we modified one other residential mortgage loan, with an aggregate recorded investment of less than $1 million, by providing payment modifications.

In the second quarter of 2023, we modified one commercial real estate exposure, with a recorded investment of $59 million and an unfunded lending commitment of $15 million, by extending the maturity date. We also modified two other residential mortgage loans, with an aggregate recorded investment of less than $1 million, by extending the maturity dates and reducing the interest rates.

We modified one commercial real estate loan in the first quarter of 2023, with a recorded investment of $12 million, by extending the maturity date.

Loans modified prior to 2023 are considered to be TDRs if the debtor is experiencing financial difficulties and the creditor grants a concession to the debtor that would not otherwise be considered. A TDR may include a transfer of real estate or other assets from the debtor to the creditor, or a modification of the term of the loan. Not all modified loans are considered TDRs.

We modified eight loans in the first nine months of 2022 with an aggregate recorded investment of $13 million. The modifications of the other residential and commercial real estate loans in the first nine months of 2022 consisted of reducing the stated interest rates and, in certain cases, forbearance of default and extending the maturity dates.

BNY Mellon 67


Notes to Consolidated Financial Statements (continued)

Credit quality indicators

Our credit strategy is to focus on investment-grade clients that are active users of our non-credit services. Each customer is assigned an internal credit rating, which is mapped to an external rating agency grade equivalent, if possible, based upon a number of dimensions, which are continually evaluated and may change over time. The tables below provide information about the credit profile of the loan portfolio by the period of origination.


Credit profile of the loan portfolio													Sept. 30, 2023
													Revolving loans
	Originated, at amortized cost												Amortized cost		Converted to term loans – Amortized cost				Accrued interest receivable
(in millions)	YTD23		2022		2021		2020		2019		Prior to 2019						Total (a)
Commercial:
Investment grade	$	128	$	121	$	69	$	—	$	—	$	45	$	1,440	$	—	$	1,803
Non-investment grade	56		18		—		—		—		—		67		—		141
Total commercial	184		139		69		—		—		45		1,507		—		1,944		$	2
Commercial real estate:
Investment grade	1,538		882		585		153		307		894		187		22		4,568
Non-investment grade	1,098		634		154		43		30		142		61		—		2,162
Total commercial real estate	2,636		1,516		739		196		337		1,036		248		22		6,730		29
Financial institutions:
Investment grade	579		86		58		—		—		10		7,390		—		8,123
Non-investment grade	4		10		—		—		—		—		2,304		—		2,318
Total financial institutions	583		96		58		—		—		10		9,694		—		10,441		103
Wealth management loans:
Investment grade	36		32		61		22		8		164		8,949		100		9,372
Non-investment grade	—		2		—		—		—		—		41		—		43
Total wealth management loans	36		34		61		22		8		164		8,990		100		9,415		69
Wealth management mortgages	692		1,709		1,931		873		742		3,163		20		—		9,130		21
Lease financings	167		—		—		42		8		416		—		—		633		—
Other residential mortgages (b)	1		547		196		5		—		223		—		—		972		3
Capital call financing	—		—		—		—		—		—		3,410		—		3,410		14
Other loans	—		—		—		—		—		—		2,804		—		2,804		6
Margin loans	6,452		—		—		—		—		—		10,731		—		17,183		36
Total loans	$	10,751	$	4,041	$	3,054	$	1,138	$	1,095	$	5,057	$	37,404	$	122	$	62,662	$	283

(a) Excludes overdrafts of $3,628 million. Overdrafts occur on a daily basis primarily in the custody and securities clearance business and are generally repaid within two business days.

(b) The gross write-offs related to other residential mortgage loans were $3 million in the third quarter of 2023.

68 BNY Mellon


Notes to Consolidated Financial Statements (continued)


Credit profile of the loan portfolio													Dec. 31, 2022
													Revolving loans
	Originated, at amortized cost												Amortized cost		Converted to term loans – Amortized cost				Accrued interest receivable
(in millions)	2022		2021		2020		2019		2018		Prior to 2018						Total (a)
Commercial:
Investment grade	$	379	$	148	$	—	$	—	$	43	$	45	$	963	$	—	$	1,578
Non-investment grade	78		6		—		—		—		—		70		—		154
Total commercial	457		154		—		—		43		45		1,033		—		1,732		$	2
Commercial real estate:
Investment grade	1,265		973		407		739		204		904		183		—		4,675
Non-investment grade	431		511		145		323		93		6		20		22		1,551
Total commercial real estate	1,696		1,484		552		1,062		297		910		203		22		6,226		25
Financial institutions:
Investment grade	126		389		—		—		—		25		7,216		—		7,756
Non-investment grade	20		—		—		—		—		—		1,896		12		1,928
Total financial institutions	146		389		—		—		—		25		9,112		12		9,684		78
Wealth management loans:
Investment grade	45		57		22		45		—		217		9,887		—		10,273
Non-investment grade	—		—		—		—		—		—		29		—		29
Total wealth management loans	45		57		22		45		—		217		9,916		—		10,302		49
Wealth management mortgages	1,775		1,976		918		775		485		3,012		25		—		8,966		20
Lease financings	17		—		49		11		7		573		—		—		657		—
Other residential mortgages	27		70		—		—		—		248		—		—		345		1
Capital call financing	—		—		—		—		—		—		3,438		—		3,438		17
Other loans	—		—		—		—		—		—		2,941		—		2,941		6
Margin loans	5,984		—		—		—		—		—		10,949		—		16,933		33
Total loans	$	10,147	$	4,130	$	1,541	$	1,893	$	832	$	5,030	$	37,617	$	34	$	61,224	$	231

(a) Excludes overdrafts of $4,839 million. Overdrafts occur on a daily basis primarily in the custody and securities clearance business and are generally repaid within two business days.

Commercial loans

The commercial loan portfolio is divided into investment grade and non-investment grade categories based on the assigned internal credit ratings, which are generally consistent with those of the public rating agencies. Customers with ratings consistent with BBB- (S&P)/Baa3 (Moody’s) or better are considered to be investment grade. Those clients with ratings lower than this threshold are considered to be non-investment grade.

Commercial real estate

Our income-producing commercial real estate facilities are focused on experienced owners and are structured with moderate leverage based on existing cash flows. Our commercial real estate lending activities also include construction and renovation facilities.

Financial institutions

Financial institution exposures are high quality, with 94% of the exposures meeting the investment grade

equivalent criteria of our internal credit rating classification at Sept. 30, 2023. In addition, 64% of the financial institutions exposure is secured. For example, securities industry clients and asset managers often borrow against marketable securities held in custody. The exposure to financial institutions is generally short term, with 84% expiring within one year.

Wealth management loans

Wealth management loans are not typically rated by external rating agencies. A majority of the wealth management loans are secured by the customers’ investment management accounts or custody accounts. Eligible assets pledged for these loans are typically investment grade fixed-income securities, equities and/or mutual funds. Internal ratings for this portion of the wealth management loan portfolio, therefore, would equate to investment grade external ratings. Wealth management loans are provided to select customers based on the pledge of other types of assets. For the loans collateralized by other assets, the credit quality of the obligor is carefully analyzed,

BNY Mellon 69


Notes to Consolidated Financial Statements (continued)

but we do not consider this portion of our wealth management loan portfolio to be investment grade.

Wealth management mortgages

Credit quality indicators for wealth management mortgages are not correlated to external ratings. Wealth management mortgages are typically loans to high-net-worth individuals, which are secured primarily by residential property. These loans are primarily interest-only, adjustable-rate mortgages with a weighted-average loan-to-value ratio of 61% at origination. Delinquency rate is a key indicator of credit quality in our wealth management portfolio. At Sept. 30, 2023, less than 1% of the mortgages were past due.

Lease financings

At Sept. 30, 2023, the lease financings portfolio consisted of exposures backed by well-diversified assets, primarily real estate and large-ticket transportation equipment. The largest components of our lease residual value exposure relate to freight-related rail cars and aircraft. Assets are both domestic and foreign-based, with primary concentrations in Germany and the U.S.

Other residential mortgages

The other residential mortgages portfolio primarily consists of 1-4 family residential mortgage loans and totaled $1.0 billion at Sept. 30, 2023 and $345 million at Dec. 31, 2022. Included in this portfolio at Sept. 30, 2023 were $750 million of fixed-rate jumbo mortgage loans, purchased primarily in the first

quarter of 2023, with a weighted-average loan-to-value ratio of 73% at origination. These loans are not typically correlated to external ratings.

Capital call financing

Capital call financing includes loans to private equity funds that are secured by the fund investors’ capital commitments and the funds’ right to call capital.

Other loans

Other loans primarily include loans to consumers that are fully collateralized with equities, mutual funds and fixed-income securities.

Margin loans

We had $17.2 billion of secured margin loans at Sept. 30, 2023, compared with $16.9 billion at Dec. 31, 2022. Margin loans are collateralized with marketable securities, and borrowers are required to maintain a daily collateral margin in excess of 100% of the value of the loan. We have rarely suffered a loss on these types of loans.

Overdrafts

Overdrafts primarily relate to custody and securities clearance clients and totaled $3.6 billion at Sept. 30, 2023 and $4.8 billion at Dec. 31, 2022. Overdrafts occur on a daily basis and are generally repaid within two business days.

Reverse repurchase agreements

Reverse repurchase agreements at Sept. 30, 2023 and Dec. 31, 2022 were fully secured with high-quality collateral. As a result, there was no allowance for credit losses related to these assets at Sept. 30, 2023 and Dec. 31, 2022.

70 BNY Mellon


Notes to Consolidated Financial Statements (continued)

Note 6–Goodwill and intangible assets

Goodwill

The tables below provide a breakdown of goodwill by business segment.


Goodwill by business segment (in millions)	Securities Services		Market and Wealth Services		Investment and Wealth Management		Consolidated
Balance at Dec. 31, 2022
Goodwill	$	6,973	$	1,424	$	8,433	$	16,830
Accumulated impairment losses	—		—		(680)		(680)
Net goodwill	$	6,973	$	1,424	$	7,753	$	16,150


Foreign currency translation	(7)		1		15		9
Balance at Sept. 30, 2023
Goodwill	$	6,966	$	1,425	$	8,448	$	16,839
Accumulated impairment losses	—		—		(680)		(680)
Net goodwill	$	6,966	$	1,425	$	7,768	$	16,159


Goodwill by business segment (in millions)	Securities Services		Market and Wealth Services		Investment and Wealth Management		Consolidated
Balance at Dec. 31, 2021	$	7,062	$	1,435	$	9,015	$	17,512
Impairment loss	—		—		(680)		(680)
Dispositions	(13)		—		—		(13)
Foreign currency translation	(142)		(18)		(247)		(407)

Balance at Sept. 30, 2022
Goodwill	$	6,907	$	1,417	$	8,768	$	17,092
Accumulated impairment losses	—		—		(680)		(680)
Net goodwill	$	6,907	$	1,417	$	8,088	$	16,412

Goodwill impairment testing

The goodwill impairment test is performed at least annually at the reporting unit level. An interim test is performed when events or circumstances occur that may indicate that it is more likely than not that the fair value of any reporting unit may be less than its carrying value.

BNY Mellon 71


Notes to Consolidated Financial Statements (continued)

Intangible assets

The tables below provide a breakdown of intangible assets by business segment.


Intangible assets – net carrying amount by business segment (in millions)	Securities Services		Market and Wealth Services		Investment and Wealth Management		Other		Consolidated
Balance at Dec. 31, 2022	$	193	$	384	$	1,475	$	849	$	2,901

Amortization	(23)		(5)		(15)		—		(43)
Foreign currency translation	—		—		1		—		1
Balance at Sept. 30, 2023	$	170	$	379	$	1,461	$	849	$	2,859


Intangible assets – net carrying amount by business segment (in millions)	Securities Services		Market and Wealth Services		Investment and Wealth Management		Other		Consolidated
Balance at Dec. 31, 2021	$	230	$	392	$	1,520	$	849	$	2,991

Amortization	(25)		(6)		(20)		—		(51)
Foreign currency translation	(8)		—		(30)		—		(38)
Balance at Sept. 30, 2022	$	197	$	386	$	1,470	$	849	$	2,902

The table below provides a breakdown of intangible assets by type.


Intangible assets	Sept. 30, 2023							Dec. 31, 2022
(dollars in millions)	Gross carrying amount		Accumulated amortization		Net carrying amount		Remaining weighted- average amortization period	Gross carrying amount		Accumulated amortization		Net carrying amount
Subject to amortization: (a)
Customer contracts – Securities Services	$	727	$	(558)	$	169	10 years	$	731	$	(539)	$	192
Customer contracts – Market and Wealth Services	280		(271)		9		3 years	280		(267)		13
Customer relationships – Investment and Wealth Management	553		(475)		78		8 years	553		(461)		92
Other	41		(11)		30		13 years	41		(9)		32
Total subject to amortization	$	1,601	$	(1,315)	$	286	10 years	$	1,605	$	(1,276)	$	329
Not subject to amortization: (b)
Tradename	$	1,290	N/A		$	1,290	N/A	$	1,290	N/A		$	1,290
Customer relationships	1,283		N/A		1,283		N/A	1,282		N/A		1,282
Total not subject to amortization	$	2,573	N/A		$	2,573	N/A	$	2,572	N/A		$	2,572
Total intangible assets	$	4,174	$	(1,315)	$	2,859	N/A	$	4,177	$	(1,276)	$	2,901

(a) Excludes fully amortized intangible assets.

(b) Intangible assets not subject to amortization have an indefinite life.

N/A – Not applicable.

Estimated annual amortization expense for current intangibles for the next five years is as follows:


For the year ended Dec. 31,	Estimated amortization expense (in millions)
2023		$	57
2024		49
2025		43
2026		34
2027		28

Intangible asset impairment testing

Intangible assets not subject to amortization are tested for impairment annually or more often if events or circumstances indicate they may be impaired.

72 BNY Mellon


Notes to Consolidated Financial Statements (continued)

Note 7–Other assets

The following table provides the components of other assets presented on the consolidated balance sheet.


Other assets	Sept. 30, 2023		Dec. 31, 2022
(in millions)
Corporate/bank-owned life insurance	$	5,449	$	5,417
Accounts receivable	5,054		4,924
Software	2,385		2,260
Fails to deliver	2,163		2,569
Prepaid pension assets	1,943		1,651
Qualified affordable housing project investments	1,225		1,298
Cash collateral receivable on derivative transactions	881		1,014
Equity method investments	873		803
Prepaid expense	809		764
Renewable energy investments	711		871
Other equity investments (a)	694		695
Fair value of hedging derivatives	589		319
Assets of consolidated investment management funds	541		209
Federal Reserve Bank stock	485		478
Income taxes receivable	475		481
Seed capital (b)	191		218
Other (c)	763		1,884
Total other assets	$	25,231	$	25,855

(a) Includes strategic equity, private equity and other investments.

(b) Includes investments in BNY Mellon funds that hedge deferred incentive awards.

(c) At Sept. 30, 2023 and Dec. 31, 2022, other assets include $7 million and $6 million, respectively, of Federal Home Loan Bank stock, at cost.

Non-readily marketable equity securities

Non-readily marketable equity securities do not have readily determinable fair values. These investments are valued using a measurement alternative where the investments are carried at cost, less any impairment, and plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. The observable price changes are recorded in investment and other revenue on the consolidated income statement. Our non-readily marketable equity securities totaled $420 million at Sept. 30, 2023 and $445 million at Dec. 31, 2022, and are included in other equity investments in the table above.

The following table presents the adjustments on the non-readily marketable equity securities.


Adjustments on non-readily marketable equity securities											Life-to-date
(in millions)	3Q23		2Q23		3Q22		YTD23		YTD22		Life-to-date
Upward adjustments	$	—	$	5	$	3	$	5	$	125	$	288
Downward adjustments	(21)		(1)		—		(40)		(7)		(52)
Net adjustments	$	(21)	$	4	$	3	$	(35)	$	118	$	236

Qualified affordable housing project investments

We invest in affordable housing projects primarily to satisfy the Company’s requirements under the Community Reinvestment Act. Our total investment in qualified affordable housing projects totaled $1.2 billion at Sept. 30, 2023 and $1.3 billion at Dec. 31, 2022. Commitments to fund future investments in qualified affordable housing projects totaled $589 million at Sept. 30, 2023 and $614 million at Dec. 31, 2022 and are recorded in other liabilities on the consolidated balance sheet. A summary of the commitments to fund future investments is as follows: remainder of 2023 – $175 million; 2024 – $137 million; 2025 – $183 million; 2026 – $24 million; 2027 – $28 million; and 2028 and thereafter – $42 million.

Tax credits and other tax benefits recognized were $45 million in the third quarter of 2023, $45 million in the second quarter of 2023, $38 million in the third quarter of 2022, $135 million in the first nine months of 2023 and $114 million in the first nine months of 2022.

Amortization expense included in the provision for income taxes was $38 million in the third quarter of 2023, $38 million in the second quarter of 2023, $32 million in the third quarter of 2022, $114 million in the first nine months of 2023 and $97 million in the first nine months of 2022.

Investments valued using net asset value (“NAV”) per share

In our Investment and Wealth Management business segment, we make seed capital investments in certain funds we manage. We also hold private equity investments, primarily small business investment companies (“SBICs”), which are compliant with the Volcker Rule, and certain other corporate

BNY Mellon 73


Notes to Consolidated Financial Statements (continued)

investments. Seed capital, private equity and other corporate investments are included in other assets on the consolidated balance sheet. The fair value of

certain of these investments was estimated using the NAV per share for our ownership interest in the funds.

The table below presents information on our investments valued using NAV.


Investments valued using NAV	Sept. 30, 2023					Dec. 31, 2022
(in millions)	Fair value		Unfunded commitments			Fair value		Unfunded commitments
Seed capital (a) (b)	$	3		$	—	$	3		$	—
Private equity investments (c)	144			47		130			53
Other	7			—		5			—
Total	$	154		$	47	$	138		$	53

(a) Seed capital investments at Sept. 30, 2023 are generally redeemable on request. Distributions are received as the underlying investments in the funds, which have redemption notice periods of seven days, are liquidated.

(b) Includes investments in funds that relate to deferred compensation arrangements with employees.

(c) Private equity investments primarily include Volcker Rule-compliant investments in SBICs that invest in various sectors of the economy. Private equity investments do not have redemption rights. Distributions from such investments will be received as the underlying investments in the private equity investments, which have a life of 10 years, are liquidated.

Note 8–Contract revenue

Fee and other revenue in the Securities Services, Market and Wealth Services and Investment and Wealth Management business segments is primarily variable, based on levels of assets under custody and/or administration, assets under management and the level of client-driven transactions, as specified in the fee schedules. See Note 10 of the Notes to Consolidated Financial Statements in our 2022 Annual Report for information on the nature of our services and revenue recognition. See Note 24 of the Notes to Consolidated Financial Statements in our 2022 Annual Report for additional information on our principal business segments — Securities Services,

Market and Wealth Services and Investment and Wealth Management — and the primary services provided.

Disaggregation of contract revenue

Contract revenue is included in fee and other revenue on the consolidated income statement. The following tables present fee and other revenue related to contracts with customers, disaggregated by type of fee revenue, for each business segment. Business segment data has been determined on an internal management basis of accounting, rather than GAAP, which is used for consolidated financial reporting.


Disaggregation of contract revenue by business segment
	Quarter ended
	Sept. 30, 2023										Sept. 30, 2022
(in millions)	Securities Services		Market and Wealth Services		Investment and Wealth Management		Other		Total			Securities Services		Market and Wealth Services		Investment and Wealth Management		Other		Total
Fee and other revenue – contract revenue:
Investment services fees	$	1,259	$	952	$	27	$	(19)	$	2,219		$	1,233	$	903	$	26	$	(16)	$	2,146
Investment management and performance fees	—		4		774		(2)		776			—		5		800		(3)		802
Financing-related fees	7		2		—		—		9			7		3		—		1		11
Distribution and servicing fees	2		(25)		62		—		39			1		(23)		55		—		33
Investment and other revenue	58		52		(81)		—		29			56		49		(76)		(1)		28
Total fee and other revenue – contract revenue	1,326		985		782		(21)		3,072			1,297		937		805		(19)		3,020
Fee and other revenue – not in scope of Accounting Standards Codification (“ASC”) 606 (a)(b)	163		58		7		55		283			239		52		—		42		333
Total fee and other revenue	$	1,489	$	1,043	$	789	$	34	$	3,355		$	1,536	$	989	$	805	$	23	$	3,353

(a) Primarily includes investment services fees, foreign exchange revenue, financing-related fees and investment and other revenue, all of which are accounted for using other accounting guidance.

(b) The Investment and Wealth Management business segment is net of income (loss) attributable to noncontrolling interests related to consolidated investment management funds of $3 million in the third quarter of 2023 and $— million in the third quarter of 2022.

74 BNY Mellon


Notes to Consolidated Financial Statements (continued)


Disaggregation of contract revenue by business segment	Quarter ended
	June 30, 2023
(in millions)	Securities Services		Market and Wealth Services		Investment and Wealth Management		Other		Total
Fee and other revenue – contract revenue:
Investment services fees	$	1,299	$	932	$	23	$	(14)	$	2,240
Investment management and performance fees	—		5		760		(4)		761
Financing-related fees	10		4		—		1		15
Distribution and servicing fees	1		(23)		58		(1)		35
Investment and other revenue	60		50		(79)		—		31
Total fee and other revenue – contract revenue	1,370		968		762		(18)		3,082
Fee and other revenue – not in scope of ASC 606 (a)(b)	202		57		12		—		271
Total fee and other revenue	$	1,572	$	1,025	$	774	$	(18)	$	3,353

(a) Primarily includes investment services fees, foreign exchange revenue, financing-related fees and investment and other revenue, all of which are accounted for using other accounting guidance.


Disaggregation of contract revenue by business segment
	Year-to-date
	Sept. 30, 2023										Sept. 30, 2022
(in millions)	Securities Services		Market and Wealth Services		Investment and Wealth Management		Other		Total		Securities Services		Market and Wealth Services		Investment and Wealth Management		Other		Total
Fee and other revenue – contract revenue:
Investment services fees	$	3,734	$	2,809	$	74	$	(48)	$	6,569	$	3,657	$	2,647	$	75	$	(50)	$	6,329
Investment management and performance fees	—		14		2,315		(9)		2,320		—		17		2,509		(11)		2,515
Financing-related fees	30		11		—		1		42		21		21		—		1		43
Distribution and servicing fees	3		(71)		175		—		107		3		(44)		138		—		97
Investment and other revenue	178		152		(240)		1		91		157		96		(169)		(1)		83
Total fee and other revenue – contract revenue	3,945		2,915		2,324		(55)		9,129		3,838		2,737		2,553		(61)		9,067
Fee and other revenue – not in scope of ASC 606 (a)(b)	566		167		21		60		814		650		132		(4)		179		957
Total fee and other revenue	$	4,511	$	3,082	$	2,345	$	5	$	9,943	$	4,488	$	2,869	$	2,549	$	118	$	10,024

(a) Primarily includes investment services fees, foreign exchange revenue, financing-related fees and investment and other revenue, all of which are accounted for using other accounting guidance.

(b) The Investment and Wealth Management business segment is net of income (loss) income attributable to noncontrolling interests related to consolidated investment management funds of $4 million in the first nine months of 2023 and $(13) million in the first nine months of 2022.

Contract balances

Our clients are billed based on fee schedules that are agreed upon in each customer contract. Receivables from customers were $2.6 billion at Sept. 30, 2023 and Dec. 31, 2022.

Contract assets represent accrued revenues that have not yet been billed to customers due to certain contractual terms other than the passage of time and were $49 million at Sept. 30, 2023 and $48 million at Dec. 31, 2022. Accrued revenues recorded as contract assets are usually billed on an annual basis.

Both receivables from customers and contract assets are included in other assets on the consolidated balance sheet.

Contract liabilities represent payments received in advance of providing services under certain contracts and were $205 million at Sept. 30, 2023 and $164 million at Dec. 31, 2022. Contract liabilities are included in other liabilities on the consolidated balance sheet. Revenue recognized in the first nine months of 2023 relating to contract liabilities as of Dec. 31, 2022 was $104 million. Revenue recognized in the third quarter of 2023 relating to contract liabilities as of June 30, 2023 was $77 million.

BNY Mellon 75


Notes to Consolidated Financial Statements (continued)

Changes in contract assets and liabilities primarily relate to either party’s performance under the contracts.

Contract costs

Incremental costs for obtaining contracts that are deemed recoverable are capitalized as contract costs. Such costs result from the payment of sales incentives, primarily in the Wealth Management business, and totaled $51 million at Sept. 30, 2023 and $58 million at Dec. 31, 2022. Capitalized sales incentives are amortized based on the transfer of goods or services to which the assets relate. The amortization of capitalized sales incentives, which is included in staff expense on the consolidated income statement, totaled $4 million in the third quarter of 2023, $5 million in the third quarter of 2022, $4 million in the second quarter of 2023, $12 million in the first nine months of 2023 and $14 million in the first nine months of 2022.

Costs to fulfill a contract are capitalized when they relate directly to an existing contract or a specific

anticipated contract, generate or enhance resources that will be used to fulfill performance obligations, and are recoverable. Such costs generally represent set-up costs, which include any direct cost incurred at the inception of a contract which enables the fulfillment of the performance obligation, and totaled $88 million at Sept. 30, 2023 and $77 million at Dec. 31, 2022. These capitalized costs are amortized on a straight-line basis over the expected contract period.

Unsatisfied performance obligations

We do not have any unsatisfied performance obligations other than those that are subject to a practical expedient election under ASC 606, Revenue From Contracts With Customers. The practical expedient election applies to (i) contracts with an original expected length of one year or less, and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

Note 9–Net interest revenue

The following table provides the components of net interest revenue presented on the consolidated income statement.


Net interest revenue	Quarter ended						Year-to-date
(in millions)	Sept. 30, 2023		June 30, 2023		Sept. 30, 2022		Sept. 30, 2023		Sept. 30, 2022
Interest revenue
Deposits with the Federal Reserve and other central banks	$	1,153	$	1,241	$	288	$	3,247	$	389
Deposits with banks	125		128		67		393		114
Federal funds sold and securities purchased under resale agreements	2,066		1,776		321		4,833		474
Loans	1,029		957		581		2,852		1,211
Securities:
Taxable	1,069		1,042		683		3,133		1,626
Exempt from federal income taxes	1		—		9		1		29
Total securities	1,070		1,042		692		3,134		1,655
Trading securities	76		80		35		226		78
Total interest revenue	5,519		5,224		1,984		14,685		3,921
Interest expense
Deposits	1,911		1,739		488		5,016		541
Federal funds purchased and securities sold under repurchase agreements	1,956		1,729		250		4,577		339
Trading liabilities	48		43		23		121		37
Other borrowed funds	6		32		1		41		6

Customer payables	147		143		48		418		57
Long-term debt	435		438		248		1,268		493
Total interest expense	4,503		4,124		1,058		11,441		1,473
Net interest revenue	1,016		1,100		926		3,244		2,448
Provision for credit losses	3		5		(30)		35		19
Net interest revenue after provision for credit losses	$	1,013	$	1,095	$	956	$	3,209	$	2,429

76 BNY Mellon


Notes to Consolidated Financial Statements (continued)

Note 10–Employee benefit plans

The components of net periodic benefit (credit) cost are presented below. The service cost component is reflected in staff expense, whereas the remaining components are reflected in other expense.


Net periodic benefit (credit) cost	Quarter ended
	Sept. 30, 2023						June 30, 2023						Sept. 30, 2022
(in millions)	Domestic pension benefits		Foreign pension benefits		Health care benefits		Domestic pension benefits		Foreign pension benefits		Health care benefits		Domestic pension benefits		Foreign pension benefits		Health care benefits
Service cost	$	—	$	3	$	—	$	—	$	2	$	—	$	—	$	3	$	—
Interest cost	47		9		1		47		9		2		35		6		1
Expected return on assets	(95)		(23)		(2)		(95)		(22)		(3)		(78)		(8)		(2)
Other	2		(4)		(3)		3		(4)		(3)		17		1		(1)
Net periodic benefit (credit) cost	$	(46)	$	(15)	$	(4)	$	(45)	$	(15)	$	(4)	$	(26)	$	2	$	(2)


Net periodic benefit (credit) cost	Year-to-date
	Sept. 30, 2023						Sept. 30, 2022
(in millions)	Domestic pension benefits		Foreign pension benefits		Health care benefits		Domestic pension benefits		Foreign pension benefits		Health care benefits
Service cost	$	—	$	8	$	—	$	—	$	9	$	—
Interest cost	142		26		4		105		21		3
Expected return on assets	(285)		(67)		(7)		(234)		(27)		(5)
Other	7		(11)		(9)		51		3		(3)
Net periodic benefit (credit) cost	$	(136)	$	(44)	$	(12)	$	(78)	$	6	$	(5)

Note 11–Income taxes

BNY Mellon recorded an income tax provision of $241 million (18.8% effective tax rate) in the third quarter of 2023. The income tax provision was $242 million (38.4% effective tax rate) in the third quarter of 2022, which includes approximately 19% impact due to the goodwill impairment. The income tax provision was $270 million (20.2% effective tax rate) in the second quarter of 2023.

Our total tax reserves as of Sept. 30, 2023 were $109 million, compared with $106 million at Dec. 31, 2022. If these tax reserves were unnecessary, $109 million would affect the effective tax rate in future periods. We recognize accrued interest and penalties, if applicable, related to income taxes in income tax expense. Included in the balance sheet at Sept. 30, 2023 is accrued interest, where applicable, of $36 million. The additional tax expense related to interest for the nine months ended Sept. 30, 2023 was $3 million, compared with $3 million for the nine months ended Sept. 30, 2022.

It is reasonably possible the total reserve for uncertain tax positions could decrease within the next 12 months by approximately $9 million as a result of

adjustments related to tax years that are still subject to examination.

Our federal income tax returns are closed to examination through 2016. Our New York State and New York City income tax returns are closed to examination through 2014. Our UK income tax returns are closed to examination through 2020.

Note 12–Variable interest entities

We have variable interests in variable interest entities (“VIEs”), which include investments in retail, institutional and alternative investment funds.

We earn management fees from these funds, as well as performance fees in certain funds, and may also provide start-up capital for new funds. The funds are primarily financed by our customers’ investments in the funds’ equity or debt.

Additionally, we invest in qualified affordable housing and renewable energy projects, which are designed to generate a return primarily through the realization of tax credits. The projects, which are structured as limited partnerships and limited liability companies, are also VIEs, but are not consolidated.

BNY Mellon 77


Notes to Consolidated Financial Statements (continued)

The following table presents the incremental assets and liabilities included on the consolidated balance sheet as of Sept. 30, 2023 and Dec. 31, 2022. The net assets of any consolidated VIE are solely available to settle the liabilities of the VIE and to settle any investors’ ownership liquidation requests, including any seed capital we invested in the VIE.


Consolidated investment management funds
	Sept. 30, 2023		Dec. 31, 2022
(in millions)

Trading assets	$	529		$	203
Other assets	12			6
Total assets (a)	$	541		$	209

Other liabilities	$	7		$	1
Total liabilities (b)	$	7		$	1
Nonredeemable noncontrolling interests (c)	$	56		$	7

(a) Includes voting model entities (“VMEs”) with assets of $113 million at Sept. 30, 2023 and $86 million at Dec. 31, 2022.

(b) Includes VMEs with liabilities of $1 million at Sept. 30, 2023 and $1 million at Dec. 31, 2022.

(c) Includes VMEs with nonredeemable noncontrolling interests of $16 million at Sept. 30, 2023 and $7 million at Dec. 31, 2022.

We have not provided financial or other support that was not otherwise contractually required to be provided to our VIEs. Additionally, creditors of any consolidated VIEs do not have any recourse to the general credit of BNY Mellon.

Non-consolidated VIEs

As of Sept. 30, 2023 and Dec. 31, 2022, assets and liabilities related to the VIEs where we are not the primary beneficiary were included in other assets and other liabilities on the consolidated balance sheet and primarily related to accounting for our investments in qualified affordable housing and renewable energy projects.

The maximum loss exposure indicated in the following table relates solely to our investments in, and unfunded commitments to, the VIEs.


Non-consolidated VIEs	Sept. 30, 2023		Dec. 31, 2022
(in millions)
Other assets	$	2,005	$	2,235
Other liabilities	589		614
Maximum loss exposure	2,595		2,850

Note 13–Preferred stock

The Parent has 100 million authorized shares of preferred stock with a par value of $0.01 per share. The following table summarizes the Parent’s preferred stock issued and outstanding at Sept. 30, 2023 and Dec. 31, 2022.


Preferred stock summary (a)		Total shares issued and outstanding		Carrying value (b)
				(in millions)
		Sept. 30, 2023	Dec. 31, 2022	Sept. 30, 2023		Dec. 31, 2022
	Per annum dividend rate (c)
Series A	Greater of (i) SOFR plus 0.565% and (ii) 4.000%	5,001	5,001	$	500	$	500
Series D	SOFR plus 2.46%	5,000	5,000	494		494
Series F	4.625% to but excluding Sept. 20, 2026, then SOFR plus 3.131%	10,000	10,000	990		990
Series G	4.700% to but excluding Sept. 20, 2025, then a floating rate equal to the five-year treasury rate plus 4.358%	10,000	10,000	990		990
Series H	3.700% to but excluding March 20, 2026, then a floating rate equal to the five-year treasury rate plus 3.352%	5,825	5,825	577		577
Series I	3.750% to but excluding Dec. 20, 2026, then a floating rate equal to the five-year treasury rate plus 2.630%	13,000	13,000	1,287		1,287
Total		48,826	48,826	$	4,838	$	4,838

(a) All outstanding preferred stock is noncumulative perpetual preferred stock with a liquidation preference of $100,000 per share.

(b) The carrying value of the Series D, Series F, Series G, Series H and Series I preferred stock is recorded net of issuance costs.

(c) References to SOFR are to a floating rate equal to the three-month CME Term SOFR (plus a spread adjustment of 0.26161% per annum).

78 BNY Mellon


Notes to Consolidated Financial Statements (continued)

The table below presents the Parent’s preferred dividends.


Preferred dividends
(dollars in millions, except per share amounts)	Depositary shares per share		3Q23				2Q23				3Q22				YTD23				YTD22
			Per share		Total dividend		Per share		Total dividend		Per share		Total dividend		Per share		Total dividend		Per share		Total dividend
Series A	100	(a)	$	1,552.50	$	8	$	1,412.60	$	7	$	1,011.11	$	5	$	4,292.82	$	22	$	3,044.44	$	15
Series D	100		2,036.78		10		2,250.00		11		—		—		4,286.78		21		2,250.00		11

Series F	100		2,312.50		23		—		—		2,312.50		23		4,625.00		46		4,625.00		46
Series G	100		2,350.00		23		—		—		2,350.00		23		4,700.00		47		4,700.00		47
Series H	100		925.00		6		925.00		6		925.00		6		2,775.00		17		2,775.00		17
Series I	100		937.50		12		937.50		12		937.50		12		2,812.50		36		3,145.83		41
Total					$	82			$	36			$	69			$	189			$	177

(a) Represents Normal Preferred Capital Securities.

All of the outstanding shares of the Series A preferred stock are owned by Mellon Capital IV, a 100% owned finance subsidiary of the Parent, which will pass through any dividend on the Series A preferred stock to the holders of its Normal Preferred Capital Securities. The Parent’s obligations under the trust and other agreements relating to Mellon Capital IV have the effect of providing a full and unconditional

guarantee, on a subordinated basis, of payments due on the Normal Preferred Capital Securities. No other subsidiary of the Parent guarantees the securities of Mellon Capital IV.

For additional information on our preferred stock, see Note 15 of the Notes to Consolidated Financial Statements in our 2022 Annual Report.

Note 14–Other comprehensive income (loss)


Components of other comprehensive income (loss)	Quarter ended
	Sept. 30, 2023						June 30, 2023						Sept. 30, 2022
(in millions)	Pre-tax amount		Tax (expense) benefit		After-tax amount		Pre-tax amount		Tax (expense) benefit		After-tax amount		Pre-tax amount		Tax (expense) benefit		After-tax amount
Foreign currency translation:
Foreign currency translation adjustments arising during the period (a)	$	(106)	$	(79)	$	(185)	$	61	$	36	$	97	$	(292)	$	(150)	$	(442)
Total foreign currency translation	(106)		(79)		(185)		61		36		97		(292)		(150)		(442)
Unrealized gain (loss) on assets available-for-sale:
Unrealized (loss) arising during period	(38)		9		(29)		(202)		45		(157)		(1,205)		297		(908)
Reclassification adjustment (b)	19		(5)		14		—		—		—		(1)		—		(1)
Net unrealized (loss) on assets available-for-sale	(19)		4		(15)		(202)		45		(157)		(1,206)		297		(909)
Defined benefit plans:


Amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost (b)	(5)		2		(3)		(4)		2		(2)		17		(4)		13
Total defined benefit plans	(5)		2		(3)		(4)		2		(2)		17		(4)		13
Unrealized gain (loss) on cash flow hedges:
Unrealized hedge (loss) gain arising during period	(1)		1		—		3		(1)		2		(5)		1		(4)
Reclassification of net loss to net income:
FX contracts – investment and other revenue	2		(1)		1		1		—		1		1		—		1
Foreign exchange (“FX”) contracts – staff expense	(2)		1		(1)		—		—		—		3		(1)		2

Total reclassifications to net income	—		—		—		1		—		1		4		(1)		3
Net unrealized (loss) gain on cash flow hedges	(1)		1		—		4		(1)		3		(1)		—		(1)
Total other comprehensive (loss) income	$	(131)	$	(72)	$	(203)	$	(141)	$	82	$	(59)	$	(1,482)	$	143	$	(1,339)

(a) Includes the impact of hedges of net investments in foreign subsidiaries. See Note 17 for additional information.

(b) The reclassification adjustment related to the unrealized gain (loss) on assets available-for-sale is recorded as net securities gains (losses), which is included in investment and other revenue on the consolidated income statement. The amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost is recorded as other expense on the consolidated income statement.

BNY Mellon 79


Notes to Consolidated Financial Statements (continued)


Components of other comprehensive income (loss)	Year-to-date
	Sept. 30, 2023						Sept. 30, 2022
(in millions)	Pre-tax amount		Tax (expense) benefit		After-tax amount		Pre-tax amount		Tax (expense) benefit		After-tax amount
Foreign currency translation:
Foreign currency translation adjustments arising during the period (a)	$	32	$	(17)	$	15	$	(848)	$	(302)	$	(1,150)
Total foreign currency translation	32		(17)		15		(848)		(302)		(1,150)
Unrealized gain (loss) on assets available-for-sale:
Unrealized gain (loss) arising during period	179		(48)		131		(4,393)		1,072		(3,321)
Reclassification adjustment (b)	20		(5)		15		(5)		1		(4)
Net unrealized gain (loss) on assets available-for-sale	199		(53)		146		(4,398)		1,073		(3,325)
Defined benefit plans:

Amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost (b)	(13)		5		(8)		51		(7)		44
Total defined benefit plans	(13)		5		(8)		51		(7)		44
Unrealized gain (loss) on cash flow hedges:
Unrealized hedge gain (loss) arising during period	6		(1)		5		(16)		4		(12)
Reclassification of net loss to net income:

FX contracts – staff expense	1		—		1		4		(1)		3
FX contracts – investment and other revenue	3		(1)		2		1		—		1

Total reclassifications to net income	4		(1)		3		5		(1)		4
Net unrealized gain (loss) on cash flow hedges	10		(2)		8		(11)		3		(8)
Total other comprehensive income (loss)	$	228	$	(67)	$	161	$	(5,206)	$	767	$	(4,439)

(a) Includes the impact of hedges of net investments in foreign subsidiaries. See Note 17 for additional information.

(b) The reclassification adjustment related to the unrealized gain (loss) on assets available-for-sale is recorded as net securities gains, which is included in investment and other revenue on the consolidated income statement. The amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost is recorded as other expense on the consolidated income statement.

Note 15–Fair value measurement

Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. A three-level hierarchy for fair value measurements is utilized based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. BNY Mellon’s own creditworthiness is considered when valuing liabilities. See Note 20 of the Notes to Consolidated Financial Statements in our 2022 Annual Report for

information on how we determine fair value and the fair value hierarchy.

The following tables present the financial instruments carried at fair value at Sept. 30, 2023 and Dec. 31, 2022, by caption on the consolidated balance sheet and by the three-level valuation hierarchy. We have included credit ratings information in certain of the tables because the information indicates the degree of credit risk to which we are exposed, and significant changes in ratings classifications could result in increased risk for us.

80 BNY Mellon


Notes to Consolidated Financial Statements (continued)


Assets and liabilities measured at fair value on a recurring basis at Sept. 30, 2023												Total carrying value
(dollars in millions)	Level 1			Level 2			Level 3			Netting (a)

Available-for-sale securities:
U.S. Treasury	$	20,898		$	—		$	—		$	—	$	20,898
Agency RMBS	—			9,987			—			—		9,987
Sovereign debt/sovereign guaranteed	2,583			6,107			—			—		8,690
Supranational	—			7,568			—			—		7,568
Agency commercial MBS	—			7,532			—			—		7,532
Foreign covered bonds	—			6,110			—			—		6,110
CLOs	—			5,935			—			—		5,935
Non-agency commercial MBS	—			2,917			—			—		2,917
U.S. government agencies	—			2,762			—			—		2,762
Foreign government agencies/local governments	—			2,159			—			—		2,159
Non-agency RMBS	—			1,737			—			—		1,737
Other ABS	—			922			—			—		922


Other debt securities	—			1			—			—		1
Total available-for-sale securities	23,481			53,737			—			—		77,218
Trading assets:
Debt instruments	2,068			2,048			—			—		4,116
Equity instruments	4,431			—			—			—		4,431
Derivative assets not designated as hedging:
Interest rate	11			1,041			—			(1,052)		—
Foreign exchange	—			7,813			—			(5,734)		2,079
Equity and other contracts	9			126			—			(62)		73
Total derivative assets not designated as hedging	20			8,980			—			(6,848)		2,152
Total trading assets	6,519			11,028			—			(6,848)		10,699
Other assets:
Derivative assets designated as hedging:
Interest rate	—			369			—			—		369
Foreign exchange	—			220			—			—		220
Total derivative assets designated as hedging	—			589			—			—		589
Other assets (b)	469			349			—			—		818
Total other assets	469			938			—			—		1,407
Assets measured at NAV (b)												154
Total assets	$	30,469		$	65,703		$	—		$	(6,848)	$	89,478
Percentage of total assets prior to netting	32		%	68		%	—		%




Liabilities
Trading liabilities:
Debt instruments	$	4,069		$	19		$	—		$	—	$	4,088
Equity instruments	49			—			—			—		49
Derivative liabilities not designated as hedging:
Interest rate	3			1,483			—			(501)		985
Foreign exchange	2			7,701			—			(5,472)		2,231
Equity and other contracts	—			15			—			(10)		5
Total derivative liabilities not designated as hedging	5			9,199			—			(5,983)		3,221
Total trading liabilities	4,123			9,218			—			(5,983)		7,358
Other liabilities:
Derivative liabilities designated as hedging:

Foreign exchange	—			16			—			—		16
Total derivative liabilities designated as hedging	—			16			—			—		16
Other liabilities	—			7			—			—		7
Total other liabilities	—			23			—			—		23
Total liabilities	$	4,123		$	9,241		$	—		$	(5,983)	$	7,381
Percentage of total liabilities prior to netting	31		%	69		%	—		%

(a) ASC 815, Derivatives and Hedging, permits the netting of derivative receivables and derivative payables under legally enforceable master netting agreements and permits the netting of cash collateral. Netting is applicable to derivatives not designated as hedging instruments included in trading assets or trading liabilities and derivatives designated as hedging instruments included in other assets or other liabilities. Netting is allocated to the derivative products based on the net fair value of each product.

(b) Includes seed capital, private equity investments and other assets.

BNY Mellon 81


Notes to Consolidated Financial Statements (continued)


Assets and liabilities measured at fair value on a recurring basis at Dec. 31, 2022												Total carrying value
(dollars in millions)	Level 1			Level 2			Level 3			Netting (a)
Assets
Available-for-sale securities:
U.S. Treasury	$	29,533		$	—		$	—		$	—	$	29,533
Sovereign debt/sovereign guaranteed	4,237			6,127			—			—		10,364
Agency RMBS	—			8,957			—			—		8,957
Agency commercial MBS	—			8,060			—			—		8,060
Supranational	—			7,734			—			—		7,734
Foreign covered bonds	—			5,758			—			—		5,758
CLOs	—			5,343			—			—		5,343
Non-agency commercial MBS	—			2,977			—			—		2,977
U.S. government agencies	—			2,294			—			—		2,294
Foreign government agencies/local governments	—			2,241			—			—		2,241
Non-agency RMBS	—			2,029			—			—		2,029
Other ABS	—			1,319			—			—		1,319
State and political subdivisions	—			12			—			—		12

Other debt securities	—			1			—			—		1
Total available-for-sale securities	33,770			52,852			—			—		86,622
Trading assets:
Debt instruments	1,590			1,901			—			—		3,491
Equity instruments	3,791			—			—			—		3,791
Derivative assets not designated as hedging:
Interest rate	10			1,287			—			(986)		311
Foreign exchange	—			9,433			—			(7,215)		2,218
Equity and other contracts	4			98			—			(5)		97
Total derivative assets not designated as hedging	14			10,818			—			(8,206)		2,626
Total trading assets	5,395			12,719			—			(8,206)		9,908
Other assets:
Derivative assets designated as hedging:
Interest rate	—			205			—			—		205
Foreign exchange	—			114			—			—		114
Total derivative assets designated as hedging	—			319			—			—		319
Other assets (b)	294			220			—			—		514
Total other assets	294			539			—			—		833
Assets measured at NAV (b)												138
Total assets	$	39,459		$	66,110		$	—		$	(8,206)	$	97,501
Percentage of total assets prior to netting	37		%	63		%	—		%




Liabilities
Trading liabilities:
Debt instruments	$	2,373		$	101		$	—		$	—	$	2,474
Equity instruments	97			—			—			—		97
Derivative liabilities not designated as hedging:
Interest rate	6			1,578			—			(798)		786
Foreign exchange	—			9,456			—			(7,444)		2,012
Equity and other contracts	—			17			—			(1)		16
Total derivative liabilities not designated as hedging	6			11,051			—			(8,243)		2,814
Total trading liabilities	2,476			11,152			—			(8,243)		5,385
Other liabilities:
Derivative liabilities designated as hedging:

Foreign exchange	—			220			—			—		220
Total derivative liabilities designated as hedging	—			220			—			—		220
Other liabilities	—			1			—			—		1
Total other liabilities	—			221			—			—		221
Total liabilities	$	2,476		$	11,373		$	—		$	(8,243)	$	5,606
Percentage of total liabilities prior to netting	18		%	82		%	—		%

(b) Includes seed capital, private equity investments and other assets.

82 BNY Mellon


Notes to Consolidated Financial Statements (continued)


Details of certain available-for-sale securities measured at fair value on a recurring basis	Sept. 30, 2023												Dec. 31, 2022
	Total carrying value (b)			Ratings (a)											Total carrying value (b)			Ratings (a)
			AAA/ AA-	A+/ A-		BBB+/ BBB-		BB+ and lower				Not rated				AAA/ AA-		A+/ A-	BBB+/ BBB-		BB+ and lower				Not rated
(dollars in millions)
Non-agency RMBS, originated in:
2008-2023	$	1,479		100	%	—	%	—	%	—	%		—	%		$	1,728		100	%	—	%	—	%	—	%	—	%



2007 and earlier	258			4		14		1		41			40			301			5		13		1		45		36
Total non-agency RMBS	$	1,737		86	%	2	%	—	%	6	%		6	%		$	2,029		86	%	2	%	—	%	7	%	5	%
Non-agency commercial MBS originated in:
2009-2023	$	2,917		100	%	—	%	—	%	—	%		—	%		$	2,977		100	%	—	%	—	%	—	%	—	%
Foreign covered bonds:
Canada	$	2,476		100	%	—	%	—	%	—	%		—	%		$	2,384		100	%	—	%	—	%	—	%	—	%
UK	1,045			100		—		—		—			—			1,215			100		—		—		—		—
Australia	703			100		—		—		—			—			696			100		—		—		—		—
Germany	580			100		—		—		—			—			542			100		—		—		—		—
Norway	266			100		—		—		—			—			377			100		—		—		—		—
Other	1,040			100		—		—		—			—			544			100		—		—		—		—
Total foreign covered bonds	$	6,110		100	%	—	%	—	%	—	%		—	%		$	5,758		100	%	—	%	—	%	—	%	—	%
Sovereign debt/sovereign guaranteed:
Germany	$	2,778		100	%	—	%	—	%	—	%		—	%		$	3,103		100	%	—	%	—	%	—	%	—	%
France	1,445			100		—		—		—			—			1,665			100		—		—		—		—
UK	1,232			100		—		—		—			—			2,225			100		—		—		—		—
Canada	608			100		—		—		—			—			702			100		—		—		—		—
Singapore	562			100		—		—		—			—			797			100		—		—		—		—
Japan	341			—		100		—		—			—			475			—		100		—		—		—
Spain	287			—		28		72		—			—			214			—		40		60		—		—
Hong Kong	254			100		—		—		—			—			273			100		—		—		—		—
Italy	211			—		—		100		—			—			390			—		—		100		—		—
Austria	197			100		—		—		—			—			177			100		—		—		—		—
Other (c)	775			80		5		—		15			—			343			55		9		—		36		—
Total sovereign debt/sovereign guaranteed	$	8,690		89	%	5	%	5	%	1	%		—	%		$	10,364		88	%	6	%	5	%	1	%	—	%
Foreign government agencies/local governments:
Canada	$	746		85	%	15	%	—	%	—	%		—	%		$	652		83	%	17	%	—	%	—	%	—	%
Norway	430			100		—		—		—			—			427			100		—		—		—		—
Netherlands	296			100		—		—		—			—			363			100		—		—		—		—
Sweden	212			100		—		—		—			—			260			100		—		—		—		—
France	18			100		—		—		—			—			240			100		—		—		—		—

Other	457			86		14		—		—			—			299			100		—		—		—		—
Total foreign government agencies/local governments	$	2,159		92	%	8	%	—	%	—	%		—	%		$	2,241		95	%	5	%	—	%	—	%	—	%

(a) Represents ratings by S&P or the equivalent.

(b) At Sept. 30, 2023 and Dec. 31, 2022, sovereign debt/sovereign guaranteed securities were included in Level 1 and Level 2 in the valuation hierarchy. All other assets in the table are Level 2 assets in the valuation hierarchy.

(c) Includes non-investment grade sovereign debt/sovereign guaranteed securities related to Brazil of $118 million at Sept. 30, 2023 and $123 million at Dec. 31, 2022.

BNY Mellon 83


Notes to Consolidated Financial Statements (continued)

Assets and liabilities measured at fair value on a nonrecurring basis

Under certain circumstances, we make adjustments to the fair value of our assets, liabilities and unfunded lending-related commitments, although they are not measured at fair value on an ongoing basis. The following table presents the carrying value as of Sept. 30, 2023 and Dec. 31, 2022 of financial instruments for which nonrecurring adjustments to fair value have been recorded during 2023 and/or 2022 and all non-readily marketable equity securities carried at cost with upward or downward adjustments by balance sheet caption and level in the fair value hierarchy.


Assets measured at fair value on a nonrecurring basis	Sept. 30, 2023								Dec. 31, 2022
							Total carrying value									Total carrying value
(in millions)	Level 1		Level 2		Level 3					Level 1		Level 2		Level 3
Loans (a)	$	—	$	29	$	—	$	29		$	—	$	33	$	—	$	33
Other assets (b)	—		421		—		421			—		448		—		448
Total assets at fair value on a nonrecurring basis	$	—	$	450	$	—	$	450		$	—	$	481	$	—	$	481

(a) The fair value of these loans was unchanged in the in the third quarter of 2023 and the fourth quarter of 2022, based on the fair value of the underlying collateral, as required by guidance in ASC 326, Financial Instruments – Credit Losses, with an offset to the allowance for credit losses.

(b) Includes non-readily marketable equity securities carried at cost with upward or downward adjustments and other assets received in satisfaction of debt.

Estimated fair value of financial instruments

The following tables present the estimated fair value and the carrying amount of financial instruments not carried at fair value on the consolidated balance sheet at Sept. 30, 2023 and Dec. 31, 2022, by caption on the consolidated balance sheet and by the valuation hierarchy.


Summary of financial instruments	Sept. 30, 2023
(in millions)	Level 1		Level 2		Level 3		Total estimated fair value		Carrying amount
Assets:
Interest-bearing deposits with the Federal Reserve and other central banks	$	—	$	107,419	$	—	$	107,419	$	107,419
Interest-bearing deposits with banks	—		12,995		—		12,995		12,999
Federal funds sold and securities purchased under resale agreements	—		26,299		—		26,299		26,299
Securities held-to-maturity	9,617		34,594		—		44,211		51,007
Loans (a)	—		64,309		—		64,309		65,446
Other financial assets	4,904		2,086		—		6,990		6,990
Total	$	14,521	$	247,702	$	—	$	262,223	$	270,160
Liabilities:
Noninterest-bearing deposits	$	—	$	60,571	$	—	$	60,571	$	60,571
Interest-bearing deposits	—		212,309		—		212,309		216,896
Federal funds purchased and securities sold under repurchase agreements	—		14,771		—		14,771		14,771
Payables to customers and broker-dealers	—		17,441		—		17,441		17,441

Borrowings	—		1,487		—		1,487		1,487
Long-term debt	—		27,306		—		27,306		29,205
Total	$	—	$	333,885	$	—	$	333,885	$	340,371

(a) Does not include the leasing portfolio.

84 BNY Mellon


Notes to Consolidated Financial Statements (continued)


Summary of financial instruments	Dec. 31, 2022
(in millions)	Level 1		Level 2		Level 3		Total estimated fair value		Carrying amount
Assets:
Interest-bearing deposits with the Federal Reserve and other central banks	$	—	$	91,655	$	—	$	91,655	$	91,655
Interest-bearing deposits with banks	—		17,167		—		17,167		17,169
Federal funds sold and securities purchased under resale agreements	—		24,298		—		24,298		24,298
Securities held-to-maturity	10,948		39,044		—		49,992		56,194
Loans (a)	—		64,668		—		64,668		65,230
Other financial assets	5,030		1,817		—		6,847		6,847
Total	$	15,978	$	238,649	$	—	$	254,627	$	261,393
Liabilities:
Noninterest-bearing deposits	$	—	$	78,017	$	—	$	78,017	$	78,017
Interest-bearing deposits	—		196,258		—		196,258		200,953
Federal funds purchased and securities sold under repurchase agreements	—		12,335		—		12,335		12,335
Payables to customers and broker-dealers	—		23,435		—		23,435		23,435
Borrowings	—		911		—		911		911
Long-term debt	—		28,977		—		28,977		30,458
Total	$	—	$	339,933	$	—	$	339,933	$	346,109

(a) Does not include the leasing portfolio.

Note 16–Fair value option

We elected fair value as an alternative measurement for selected financial assets and liabilities that are not otherwise required to be measured at fair value, including the assets and liabilities of consolidated investment management funds and subordinated notes associated with certain equity investments.

The following table presents the assets and liabilities of consolidated investment management funds, at fair value.


Assets and liabilities of consolidated investment management funds, at fair value
	Sept. 30, 2023		Dec. 31, 2022
(in millions)
Assets of consolidated investment management funds:
Trading assets	$	529	$	203
Other assets	12		6
Total assets of consolidated investment management funds	$	541	$	209
Liabilities of consolidated investment management funds:

Other liabilities	$	7	$	1
Total liabilities of consolidated investment management funds	$	7	$	1

The assets and liabilities of the consolidated investment management funds are included in other assets and other liabilities on the consolidated balance sheet. We value the assets and liabilities of consolidated investment management funds using quoted prices for identical assets or liabilities in

active markets or observable inputs such as quoted prices for similar assets or liabilities. Quoted prices for either identical or similar assets or liabilities in inactive markets may also be used. Accordingly, fair value best reflects the interests BNY Mellon holds in the economic performance of the consolidated investment management funds. Changes in the fair value of the assets and liabilities are recorded as income (loss) from consolidated investment management funds, which is included in investment and other revenue on the consolidated income statement.

We elected the fair value option on subordinated notes associated with certain equity investments. The fair value of these subordinated notes was $8 million at Sept. 30, 2023 and $10 million at Dec. 31, 2022. The subordinated notes were valued using observable market inputs and included in Level 2 of the valuation hierarchy.

Note 17–Derivative instruments

We use derivatives to manage exposure to market risk, including interest rate risk, equity price risk and foreign currency risk, as well as credit risk. Our trading activities are focused on acting as a market-maker for our customers and facilitating customer trades in compliance with the Volcker Rule.

The notional amounts for derivative financial instruments express the dollar volume of the transactions; however, credit risk is much smaller.

BNY Mellon 85


Notes to Consolidated Financial Statements (continued)

We perform credit reviews and enter into netting agreements and collateral arrangements to minimize the credit risk of derivative financial instruments. We enter into offsetting positions to reduce exposure to foreign currency, interest rate and equity price risk.

Use of derivative financial instruments involves reliance on counterparties. Failure of a counterparty to honor its obligation under a derivative contract is a risk we assume whenever we engage in a derivative contract. There were no counterparty default losses recorded in the third quarter of 2023.

Hedging derivatives

We utilize interest rate swap agreements to manage our exposure to interest rate fluctuations. We enter into fair value hedges as an interest rate risk management strategy to reduce fair value variability by converting certain fixed rate interest payments associated with available-for-sale securities and long-term debt to floating interest rates. We also utilize interest rate swaps and forward exchange contracts as cash flow hedges to manage our exposure to interest rate and foreign exchange rate changes.

The available-for-sale securities hedged consist of U.S. Treasury, agency and non-agency commercial MBS, sovereign debt/sovereign guaranteed and foreign covered bonds. At Sept. 30, 2023, $31.4 billion par value of available-for-sale securities were hedged with interest rate swaps designated as fair value hedges that had notional values of $31.4 billion.

The fixed rate long-term debt instruments hedged generally have original maturities of five to 30 years. In fair value hedging relationships, fixed rate debt is hedged with “receive fixed rate, pay variable rate” swaps. At Sept. 30, 2023, $22.7 billion par value of debt was hedged with interest rate swaps designated as fair value hedges that had notional values of $22.7 billion.

In addition, we utilize forward foreign exchange contracts as hedges to mitigate foreign exchange

exposures. We use forward foreign exchange contracts as cash flow hedges to convert certain forecasted non-U.S. dollar revenue and expenses into U.S. dollars. We use forward foreign exchange contracts with maturities of 18 months or less as cash flow hedges to hedge our foreign exchange exposure to currencies such as the Indian rupee, Polish zloty, Hong Kong dollar, Singapore dollar, British pound and euro used in revenue and expense transactions for entities that have the U.S. dollar as their functional currency. As of Sept. 30, 2023, the hedged forecasted foreign currency transactions and designated forward foreign exchange contract hedges were $639 million (notional), with a net pre-tax gain of $4 million recorded in accumulated other comprehensive income (“OCI”). This gain will be reclassified to earnings over the next 12 months.

In 2022, we utilized forward foreign exchange contracts as fair value hedges of the foreign exchange risk associated with available-for-sale securities. At Sept. 30, 2023, there were no remaining foreign exchange contracts. Forward points are designated as an excluded component and amortized into earnings over the hedge period.

Forward foreign exchange contracts are also used to hedge the value of our net investments in foreign subsidiaries. These forward foreign exchange contracts have maturities of less than one year. The derivatives employed are designated as hedges of changes in value of our foreign investments due to exchange rates. The change in fair market value of these forward foreign exchange contracts is reported within foreign currency translation adjustments in shareholders’ equity, net of tax. At Sept. 30, 2023, forward foreign exchange contracts with notional amounts totaling $9.4 billion were designated as net investment hedges.

From time to time, we also designate non-derivative financial instruments as hedges of our net investments in foreign subsidiaries. At Sept. 30, 2023, there were no non-derivative financial instruments hedging our net investments in foreign subsidiaries.

86 BNY Mellon


Notes to Consolidated Financial Statements (continued)

The following table presents the pre-tax gains (losses) related to our fair value and cash flow hedging activities recognized in the consolidated income statement.


Income statement impact of fair value and cash flow hedges
(in millions)	Location of gains (losses)	3Q23		2Q23		3Q22		YTD23		YTD22
Interest rate fair value hedges of available-for-sale securities
Derivative	Interest revenue	$	439	$	388	$	1,294	$	392	$	3,644
Hedged item	Interest revenue	(438)		(389)		(1,292)		(393)		(3,630)
Interest rate fair value hedges of long-term debt
Derivative	Interest expense	(281)		(277)		(540)		(279)		(1,573)
Hedged item	Interest expense	281		278		539		280		1,570
Foreign exchange fair value hedges of available-for-sale securities
Derivative (a)	Foreign exchange revenue	—		—		(2)		—		(4)
Hedged item	Foreign exchange revenue	—		—		2		—		5


Cash flow hedges of forecasted FX exposures


Gain (loss) reclassified from OCI into income	Staff expense	2		—		(3)		(1)		(4)
(Loss) reclassified from OCI into income	Investment and other revenue	(2)		(1)		(1)		(3)		(1)
Gain (loss) recognized in the consolidated income statement due to fair value and cash flow hedging relationships		$	1	$	(1)	$	(3)	$	(4)	$	7

(a) There was no amortization associated with the excluded component in the third quarter of 2023, second quarter of 2023 and first nine months of 2023. Includes gains of less than $1 million in the third quarter of 2022 and $1 million in the first nine months of 2022 associated with the amortization of the excluded component.

The following table presents the impact of hedging derivatives used in net investment hedging relationships.


Impact of derivative instruments used in net investment hedging relationships
(in millions)
Derivatives in net investment hedging relationships	Gain or (loss) recognized in accumulated OCI on derivatives										Location of gain or (loss) reclassified from accumulated OCI into income	Gain or (loss) reclassified from accumulated OCI into income
Derivatives in net investment hedging relationships	3Q23		2Q23		3Q22		YTD23		YTD22			3Q23		2Q23		3Q22		YTD23		YTD22
FX contracts	$	333	$	(152)	$	631	$	70	$	1,279	Net interest revenue	$	—	$	—	$	—	$	—	$	—

The following table presents information on the hedged items in fair value hedging relationships.


Hedged items in fair value hedging relationships	Carrying amount of hedged asset or liability				Hedge accounting basis adjustment increase (decrease) (a)


(in millions)	Sept. 30, 2023		Dec. 31, 2022		Sept. 30, 2023		Dec. 31, 2022
Available-for-sale securities (b)	$	31,303	$	31,370	$	(2,820)	$	(2,678)
Long-term debt	$	21,236	$	23,510	$	(1,497)	$	(1,232)

(a) Includes a $464 million decrease and less than $1 million increase of basis adjustment on discontinued hedges associated with available-for-sale securities at Sept. 30, 2023 and Dec. 31, 2022, respectively, and $49 million and $48 million of basis adjustment decreases on discontinued hedges associated with long-term debt at Sept. 30, 2023 and Dec. 31, 2022, respectively.

(b) Carrying amount represents the amortized cost.

BNY Mellon 87


Notes to Consolidated Financial Statements (continued)

The following table summarizes the notional amount and carrying values of our total derivative portfolio.


Impact of derivative instruments on the balance sheet	Notional value				Asset derivatives fair value				Liability derivatives fair value
	Sept. 30, 2023		Dec. 31, 2022		Sept. 30, 2023		Dec. 31, 2022		Sept. 30, 2023		Dec. 31, 2022
(in millions)
Derivatives designated as hedging instruments: (a)(b)
Interest rate contracts	$	54,076	$	56,142	$	369	$	205	$	—	$	—
Foreign exchange contracts	10,058		10,096		220		114		16		220
Total derivatives designated as hedging instruments					$	589	$	319	$	16	$	220
Derivatives not designated as hedging instruments: (b)(c)
Interest rate contracts	$	160,712	$	190,917	$	1,052	$	1,297	$	1,486	$	1,584
Foreign exchange contracts	895,679		880,948		7,813		9,433		7,703		9,456
Equity contracts	3,801		2,993		135		102		10		13
Credit contracts	220		200		—		—		5		4
Total derivatives not designated as hedging instruments					$	9,000	$	10,832	$	9,204	$	11,057
Total derivatives fair value (d)					$	9,589	$	11,151	$	9,220	$	11,277
Effect of master netting agreements (e)					(6,848)		(8,206)		(5,983)		(8,243)
Fair value after effect of master netting agreements					$	2,741	$	2,945	$	3,237	$	3,034

(a) The fair value of asset derivatives and liability derivatives designated as hedging instruments is recorded as other assets and other liabilities, respectively, on the consolidated balance sheet.

(b) For derivative transactions settled at clearing organizations, cash collateral exchanged is deemed a settlement of the derivative each day. The settlement reduces the gross fair value of derivative assets and liabilities and results in a corresponding decrease in the effect of master netting agreements, with no impact to the consolidated balance sheet.

(c) The fair value of asset derivatives and liability derivatives not designated as hedging instruments is recorded as trading assets and trading liabilities, respectively, on the consolidated balance sheet.

(d) Fair values are on a gross basis, before consideration of master netting agreements, as required by ASC 815, Derivatives and Hedging.

(e) Effect of master netting agreements includes cash collateral received and paid of $1,909 million and $1,044 million, respectively, at Sept. 30, 2023, and $1,786 million and $1,823 million, respectively, at Dec. 31, 2022.

Trading activities (including trading derivatives)

Our trading activities are focused on acting as a market-maker for our customers, facilitating customer trades and risk-mitigating economic hedging in compliance with the Volcker Rule. The change in the fair value of the derivatives utilized in our trading activities is recorded in foreign exchange revenue and investment and other revenue on the consolidated income statement.

The following table presents our foreign exchange revenue and other trading revenue.


Foreign exchange revenue and other trading revenue
(in millions)	3Q23		2Q23		3Q22		YTD23		YTD22
Foreign exchange revenue	$	154	$	158	$	203	$	488	$	632
Other trading revenue	86		53		65		184		115

Foreign exchange revenue includes income from purchasing and selling foreign currencies, currency forwards, futures and options as well as foreign currency remeasurement. Other trading revenue reflects results from trading in cash instruments, including fixed income and equity securities, and

trading and economic hedging activity with non-foreign exchange derivatives.

We also use derivative financial instruments as risk-mitigating economic hedges, which are not formally designated as accounting hedges. This includes hedging the foreign currency, interest rate or market risks inherent in some of our balance sheet exposures, such as seed capital investments and deposits, as well as certain investment management fee revenue streams. We also use total return swaps to economically hedge obligations arising from the Company’s deferred compensation plan whereby the participants defer compensation and earn a return linked to the performance of investments they select. The gains or losses on these total return swaps are recorded in staff expense on the consolidated income statement and were losses of $11 million in the third quarter of 2023 and $11 million in the third quarter of 2022, gains of $8 million in the second quarter of 2023 and $4 million in the first nine months of 2023 and a loss of $54 million in the first nine months of 2022.

We manage trading risk through a system of position limits, a value-at-risk (“VaR”) methodology based on historical simulation and other market sensitivity

88 BNY Mellon


Notes to Consolidated Financial Statements (continued)

measures. Risk is monitored and reported to senior management by a separate unit, independent from trading, on a daily basis. Based on certain assumptions, the VaR methodology is designed to capture the potential overnight pre-tax dollar loss from adverse changes in fair values of all trading positions. The calculation assumes a one-day holding period, utilizes a 99% confidence level and incorporates non-linear product characteristics. The VaR model is one of several statistical models used to develop economic capital results, which are allocated to lines of business for computing risk-adjusted performance.

VaR methodology does not evaluate risk attributable to extraordinary financial, economic or other occurrences. As a result, the risk assessment process includes a number of stress scenarios based upon the risk factors in the portfolio and management’s assessment of market conditions. Additional stress scenarios based upon historical market events are also performed. Stress tests may incorporate the impact of reduced market liquidity and the breakdown of historically observed correlations and extreme scenarios. VaR and other statistical measures, stress testing and sensitivity analysis are incorporated into other risk management materials.

Counterparty credit risk and collateral

We assess the credit risk of our counterparties through regular examination of their financial statements, confidential communication with the management of those counterparties and regular monitoring of publicly available credit rating information. This and other information is used to develop proprietary credit rating metrics used to assess credit quality.

Collateral requirements are determined after a comprehensive review of the credit quality of each counterparty. Collateral is generally held or pledged in the form of cash and/or highly liquid government securities. Collateral requirements are monitored and adjusted daily.

Additional disclosures concerning derivative financial instruments are provided in Note 15.

Disclosure of contingent features in over-the-counter (“OTC”) derivative instruments

Certain OTC derivative contracts and/or collateral agreements contain credit risk-contingent features

triggered upon a rating downgrade in which the counterparty has the right to request additional collateral or the right to terminate the contracts in a net liability position.

The following table shows the aggregate fair value of OTC derivative contracts in net liability positions that contained credit risk-contingent features and the value of collateral that has been posted.


	Sept. 30, 2023		Dec. 31, 2022
(in millions)
Aggregate fair value of OTC derivatives in net liability positions (a)	$	1,479	$	3,069
Collateral posted	$	1,519	$	3,484

(a) Before consideration of cash collateral.

The aggregate fair value of OTC derivative contracts containing credit risk-contingent features can fluctuate from quarter to quarter due to changes in market conditions, composition of counterparty trades, new business or changes to the contingent features.

The Bank of New York Mellon, our largest banking subsidiary, enters into the substantial majority of our OTC derivative contracts and/or collateral agreements. As such, the contingent features may be triggered if The Bank of New York Mellon’s long-term issuer rating were downgraded.

The following table shows the fair value of contracts falling under early termination provisions that were in net liability positions for three key ratings triggers.


Potential close-out exposures (fair value) (a)
	Sept. 30, 2023		Dec. 31, 2022
(in millions)
If The Bank of New York Mellon’s rating changed to: (b)
A3/A-	$	60	$	20
Baa2/BBB	$	814	$	545
Ba1/BB+	$	1,714	$	1,803

(a) The amounts represent potential total close-out values if The Bank of New York Mellon’s long-term issuer rating were to immediately drop to the indicated levels, and do not reflect collateral posted.

(b) Represents ratings by Moody’s/S&P.

If The Bank of New York Mellon’s debt rating had fallen below investment grade on Sept. 30, 2023 and Dec. 31, 2022, existing collateral arrangements would have required us to post additional collateral of $378 million and $214 million, respectively.

BNY Mellon 89


Notes to Consolidated Financial Statements (continued)

Offsetting assets and liabilities

The following tables present derivative and financial instruments and their related offsets. There were no derivative instruments or financial instruments subject to a legally enforceable netting agreement for which we are not currently netting.


Offsetting of derivative assets and financial assets at Sept. 30, 2023
	Gross assets recognized		Gross amounts offset in the balance sheet			Net assets recognized in the balance sheet		Gross amounts not offset in the balance sheet
(in millions)					(a)			Financial instruments		Cash collateral received		Net amount
Derivatives subject to netting arrangements:
Interest rate contracts	$	1,297	$	1,052		$	245	$	56	$	—	$	189
Foreign exchange contracts	7,361		5,734			1,627		46		—		1,581
Equity and other contracts	126		62			64		1		—		63
Total derivatives subject to netting arrangements	8,784		6,848			1,936		103		—		1,833
Total derivatives not subject to netting arrangements	805		—			805		—		—		805
Total derivatives	9,589		6,848			2,741		103		—		2,638
Reverse repurchase agreements	151,944		134,691		(b)	17,253		17,204		—		49
Securities borrowing	9,046		—			9,046		8,649		—		397
Total	$	170,579	$	141,539		$	29,040	$	25,956	$	—	$	3,084

(a) Includes the effect of netting agreements and net cash collateral received. The offset related to the OTC derivatives was allocated to the various types of derivatives based on the net positions.

(b) Offsetting of reverse repurchase agreements relates to our involvement in the Fixed Income Clearing Corporation (“FICC”), where we settle government securities transactions on a net basis for payment and delivery through the Fedwire system.


Offsetting of derivative assets and financial assets at Dec. 31, 2022
	Gross assets recognized		Gross amounts offset in the balance sheet			Net assets recognized in the balance sheet		Gross amounts not offset in the balance sheet
(in millions)					(a)			Financial instruments		Cash collateral received		Net amount
Derivatives subject to netting arrangements:
Interest rate contracts	$	1,208	$	986		$	222	$	33	$	—	$	189
Foreign exchange contracts	8,920		7,215			1,705		314		—		1,391
Equity and other contracts	95		5			90		—		—		90
Total derivatives subject to netting arrangements	10,223		8,206			2,017		347		—		1,670
Total derivatives not subject to netting arrangements	928		—			928		—		—		928
Total derivatives	11,151		8,206			2,945		347		—		2,598
Reverse repurchase agreements	75,614		60,322		(b)	15,292		15,182		—		110
Securities borrowing	9,006		—			9,006		8,531		—		475
Total	$	95,771	$	68,528		$	27,243	$	24,060	$	—	$	3,183

(a) Includes the effect of netting agreements and net cash collateral received. The offset related to the OTC derivatives was allocated to the various types of derivatives based on the net positions.

(b) Offsetting of reverse repurchase agreements relates to our involvement in the FICC, where we settle government securities transactions on a net basis for payment and delivery through the Fedwire system.

90 BNY Mellon


Notes to Consolidated Financial Statements (continued)


Offsetting of derivative liabilities and financial liabilities at Sept. 30, 2023						Net liabilities recognized in the balance sheet
	Gross liabilities recognized		Gross amounts offset in the balance sheet					Gross amounts not offset in the balance sheet
(in millions)					(a)			Financial instruments		Cash collateral pledged		Net amount
Derivatives subject to netting arrangements:
Interest rate contracts	$	1,073	$	501		$	572	$	71	$	—	$	501
Foreign exchange contracts	6,992		5,472			1,520		280		—		1,240
Equity and other contracts	10		10			—		—		—		—
Total derivatives subject to netting arrangements	8,075		5,983			2,092		351		—		1,741
Total derivatives not subject to netting arrangements	1,145		—			1,145		—		—		1,145
Total derivatives	9,220		5,983			3,237		351		—		2,886
Repurchase agreements	147,027		134,691		(b)	12,336		12,278		58		—
Securities lending	2,435		—			2,435		2,344		—		91
Total	$	158,682	$	140,674		$	18,008	$	14,973	$	58	$	2,977

(a) Includes the effect of netting agreements and net cash collateral paid. The offset related to the OTC derivatives was allocated to the various types of derivatives based on the net positions.

(b) Offsetting of repurchase agreements relates to our involvement in the FICC, where we settle government securities transactions on a net basis for payment and delivery through the Fedwire system.


Offsetting of derivative liabilities and financial liabilities at Dec. 31, 2022						Net liabilities recognized in the balance sheet
	Gross liabilities recognized		Gross amounts offset in the balance sheet					Gross amounts not offset in the balance sheet
(in millions)					(a)			Financial instruments		Cash collateral pledged		Net amount
Derivatives subject to netting arrangements:
Interest rate contracts	$	1,306	$	798		$	508	$	67	$	—	$	441
Foreign exchange contracts	9,261		7,444			1,817		51		—		1,766
Equity and other contracts	15		1			14		—		—		14
Total derivatives subject to netting arrangements	10,582		8,243			2,339		118		—		2,221
Total derivatives not subject to netting arrangements	695		—			695		—		—		695
Total derivatives	11,277		8,243			3,034		118		—		2,916
Repurchase agreements	70,830		60,322		(b)	10,508		10,476		31		1
Securities lending	1,827		—			1,827		1,754		—		73
Total	$	83,934	$	68,565		$	15,369	$	12,348	$	31	$	2,990

(a) Includes the effect of netting agreements and net cash collateral paid. The offset related to the OTC derivatives was allocated to the various types of derivatives based on the net positions.

(b) Offsetting of repurchase agreements relates to our involvement in the FICC, where we settle government securities transactions on a net basis for payment and delivery through the Fedwire system.

BNY Mellon 91


Notes to Consolidated Financial Statements (continued)

Secured borrowings

The following table presents the contract value of repurchase agreements and securities lending transactions accounted for as secured borrowings by the type of collateral provided to counterparties.


Repurchase agreements and securities lending transactions accounted for as secured borrowings
	Sept. 30, 2023										Dec. 31, 2022
	Remaining contractual maturity								Total		Remaining contractual maturity								Total
(in millions)	Overnight and continuous		Up to 30 days		30-90 days		Over 90 days				Overnight and continuous		Up to 30 days		30-90 days		Over 90 days
Repurchase agreements:
U.S. Treasury	$	115,930	$	743	$	1,044	$	627	$	118,344	$	62,401	$	7	$	827	$	553	$	63,788
Agency RMBS	21,846		508		371		25		22,750		1,460		493		—		—		1,953
Corporate bonds	91		122		1,039		628		1,880		99		88		782		306		1,275
Sovereign debt/sovereign guaranteed	1,445		—		—		—		1,445		1,008		—		—		—		1,008
State and political subdivisions	48		37		431		272		788		38		49		443		159		689
U.S. government agencies	164		7		47		7		225		161		—		—		—		161
Other debt securities	2		129		90		14		235		13		102		92		7		214
Equity securities	—		5		1,353		2		1,360		—		61		1,681		—		1,742
Total	$	139,526	$	1,551	$	4,375	$	1,575	$	147,027	$	65,180	$	800	$	3,825	$	1,025	$	70,830
Securities lending:
Agency RMBS	$	98	$	—	$	—	$	—	$	98	$	110	$	—	$	—	$	—	$	110
Other debt securities	40		—		—		—		40		66		—		—		—		66
Equity securities	2,297		—		—		—		2,297		1,651		—		—		—		1,651
Total	$	2,435	$	—	$	—	$	—	$	2,435	$	1,827	$	—	$	—	$	—	$	1,827
Total secured borrowings	$	141,961	$	1,551	$	4,375	$	1,575	$	149,462	$	67,007	$	800	$	3,825	$	1,025	$	72,657

BNY Mellon’s repurchase agreements and securities lending transactions primarily encounter risk associated with liquidity. We are required to pledge collateral based on predetermined terms within the agreements. If we were to experience a decline in the fair value of the collateral pledged for these transactions, we could be required to provide additional collateral to the counterparty, therefore decreasing the amount of assets available for other liquidity needs that may arise. BNY Mellon also offers tri-party collateral agency services in the tri-party repo market where we are exposed to credit risk. In order to mitigate this risk, we require dealers to fully secure intraday credit.

Note 18–Commitments and contingent liabilities

Off-balance sheet arrangements

In the normal course of business, various commitments and contingent liabilities are outstanding that are not reflected in the accompanying consolidated balance sheets.

Our significant trading and off-balance sheet risks are securities, foreign currency and interest rate risk management products, commercial lending commitments, letters of credit and securities lending indemnifications. We assume these risks to reduce interest rate and foreign currency risks, to provide customers with the ability to meet credit and liquidity needs and to hedge foreign currency and interest rate risks. These items involve, to varying degrees, credit, foreign currency and interest rate risks not recognized on the balance sheet. Our off-balance sheet risks are managed and monitored in manners similar to those used for on-balance sheet risks.

92 BNY Mellon


Notes to Consolidated Financial Statements (continued)

The following table presents a summary of our off-balance sheet credit risks.


Off-balance sheet credit risks	Sept. 30, 2023		Dec. 31, 2022
(in millions)
Lending commitments	$	48,624	$	49,750
Standby letters of credit (“SBLC”) (a)	1,974		1,918
Commercial letters of credit	51		19
Securities lending indemnifications (b)(c)	452,620		491,043

(a)Net of participations totaling $184 million at Sept. 30, 2023 and $175 million at Dec. 31, 2022.

(b)Excludes the indemnification for securities for which BNY Mellon acts as an agent on behalf of CIBC Mellon clients, which totaled $60 billion at Sept. 30, 2023 and $64 billion at Dec. 31, 2022.

(c)Includes cash collateral, invested in indemnified repurchase agreements, held by us as securities lending agent of $48 billion at Sept. 30, 2023 and $43 billion at Dec. 31, 2022.

The total potential loss on undrawn lending commitments, standby and commercial letters of credit and securities lending indemnifications is equal to the total notional amount if drawn upon, which does not consider the value of any collateral.

Since many of the lending commitments are expected to expire without being drawn upon, the total amount does not necessarily represent future cash requirements. A summary of lending commitment maturities is as follows: $28.8 billion in less than one year, $19.5 billion in one to five years and $337 million over five years.

SBLCs principally support obligations of corporate clients and were collateralized with cash and securities of $145 million at Sept. 30, 2023 and $144 million at Dec. 31, 2022. At Sept. 30, 2023, $1.3 billion of the SBLCs will expire within one year, $634 million in one to five years and $8 million over five years.

We must recognize, at the inception of an SBLC and foreign and other guarantees, a liability for the fair value of the obligation undertaken in issuing the guarantee. The fair value of the liability, which was recorded with a corresponding asset in other assets, was estimated as the present value of contractual customer fees. The estimated liability for losses related to SBLCs and foreign and other guarantees, if any, is included in the allowance for lending-related commitments.

Payment/performance risk of SBLCs is monitored using both historical performance and internal ratings criteria. BNY Mellon’s historical experience is that SBLCs typically expire without being funded. SBLCs below investment grade are monitored closely for payment/performance risk. The table below shows SBLCs by investment grade:


Standby letters of credit	Sept. 30, 2023		Dec. 31, 2022

Investment grade	74	%	75	%
Non-investment grade	26	%	25	%

A commercial letter of credit is normally a short-term instrument used to finance a commercial contract for the shipment of goods from a seller to a buyer. Although the commercial letter of credit is contingent upon the satisfaction of specified conditions, it represents a credit exposure if the buyer defaults on the underlying transaction. As a result, the total contractual amounts do not necessarily represent future cash requirements. Commercial letters of credit totaled $51 million at Sept. 30, 2023 and $19 million at Dec. 31, 2022.

We expect many of the lending commitments and letters of credit to expire without the need to advance any cash. The revenue associated with guarantees frequently depends on the credit rating of the obligor and the structure of the transaction, including collateral, if any. The allowance for lending-related commitments was $85 million at Sept. 30, 2023 and $78 million at Dec. 31, 2022.

A securities lending transaction is a fully collateralized transaction in which the owner of a security agrees to lend the security (typically through an agent, in our case, The Bank of New York Mellon) to a borrower, usually a broker-dealer or bank, on an open, overnight or term basis, under the terms of a prearranged contract.

We typically lend securities with indemnification against borrower default. We generally require the borrower to provide collateral with a minimum value of 102% of the fair value of the securities borrowed, which is monitored on a daily basis, thus reducing credit risk. Market risk can also arise in securities lending transactions. These risks are controlled through policies limiting the level of risk that can be undertaken. Securities lending transactions are generally entered into only with highly rated counterparties. Securities lending indemnifications

BNY Mellon 93


Notes to Consolidated Financial Statements (continued)

were secured by collateral of $476 billion at Sept. 30, 2023 and $515 billion at Dec. 31, 2022.

CIBC Mellon, a joint venture between BNY Mellon and the Canadian Imperial Bank of Commerce (“CIBC”), engages in securities lending activities. CIBC Mellon, BNY Mellon and CIBC jointly and severally indemnify securities lenders against specific types of borrower default. At Sept. 30, 2023 and Dec. 31, 2022, $60 billion and $64 billion, respectively, of borrowings at CIBC Mellon, for which BNY Mellon acts as agent on behalf of CIBC Mellon clients, were secured by collateral of $63 billion and $68 billion, respectively. If, upon a default, a borrower’s collateral was not sufficient to cover its related obligations, certain losses related to the indemnification could be covered by the indemnitors.

Unsettled repurchase and reverse repurchase agreements

In the normal course of business, we enter into repurchase agreements and reverse repurchase agreements that settle at a future date. In repurchase agreements, BNY Mellon receives cash from and provides securities as collateral to a counterparty at settlement. In reverse repurchase agreements, BNY Mellon advances cash to and receives securities as collateral from the counterparty at settlement. These transactions are recorded on the consolidated balance sheet on the settlement date. At Sept. 30, 2023, we had no unsettled repurchase agreements and $65.9 billion of unsettled reverse repurchase agreements. At Dec. 31, 2022, we had $4.0 billion of unsettled repurchase agreements and $11.3 billion of unsettled reverse repurchase agreements.

Industry concentrations

We have significant industry concentrations related to credit exposure at Sept. 30, 2023. The tables below present our credit exposure in the financial institutions and commercial portfolios.


Financial institutions portfolio exposure (in billions)	Sept. 30, 2023
	Loans		Unfunded commitments		Total exposure
Securities industry	$	1.7	$	17.2	$	18.9
Asset managers	1.5		8.0		9.5
Banks	6.8		1.5		8.3
Insurance	0.1		3.9		4.0
Government	—		0.2		0.2
Other	0.3		1.0		1.3
Total	$	10.4	$	31.8	$	42.2


Commercial portfolio exposure (in billions)	Sept. 30, 2023
	Loans		Unfunded commitments		Total exposure
Services and other	$	1.1	$	3.4	$	4.5
Manufacturing	0.5		3.6		4.1
Energy and utilities	0.3		3.7		4.0
Media and telecom	—		0.7		0.7
Total	$	1.9	$	11.4	$	13.3

Major concentrations in securities lending are primarily to broker-dealers and are generally collateralized with cash and/or securities.

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	7th grade Avg

The Bank of New York Mellon Corporation (BK) 10-Q2023 Q3 Quarterly report

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