Bank of New York Mellon Corp - Quarter Report: 2023 March (Form 10-Q)

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 March 31, 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 March 31, 2023, 789,133,812 shares of the registrant’s common stock, $0.01 par value per share, were outstanding.

THE BANK OF NEW YORK MELLON CORPORATION

First 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 first quarter 2023 events			4
Highlights of first quarter 202 3 results			4
Fee and other revenue			6
Net interest revenue			9
Noninterest expense			11
Income taxes			11
Review of business segments			12
Critical accounting estimates			19
Consolidated balance sheet review			20
Liquidity and dividends			29
Capital			33
Trading activities and risk management			37
Asset/liability management			39
Supplemental information – E xplanation of GAAP and Non-GAAP financial measures			41
Recent accounting and regulatory developments			43

Website information			45

Item 1. Financial Statements:
Consolidated Income Statement (unaudited)			46
Consolidated Comprehensive Income Statement (unaudited)			48
Consolidated Balance Sheet (unaudited)			49
Consolidated Statement of Cash Flows (unaudited)			50
Consolidated Statement of Changes in Equity (unaudited)			51


			Page
Notes to Consolidated Financial Statements:
Note 1—Basis of presentation			53
Note 2—New accounting guidance			53
Note 3—Acquisitions and dispositions			54
Note 4—Securities			54
Note 5—Loans and asset quality			59

Note 6—Goodwill and intangible assets			65
Note 7—Other assets			66
Note 8—Contract revenue			68
Note 9—Net interest revenue			70
Note 10—Employee benefit plans			70
Note 11—Income taxes			70
Note 12—Variable interest entities			71
Note 13—Preferred stock			72
Note 14—Other comprehensive income (loss)			73
Note 15—Fair value measurement			73
Note 16—Fair value option			78
Note 17—Derivative instruments			78
Note 18—Commitments and contingent liabilities			85
Note 19—Business segments			91
Note 20—Supplemental information to the Consolidated Statement of Cash Flows			93

Item 4. Controls and Procedures			94
Forward-looking Statements			95

Part II – Other Information
Item 1. Legal Proceedings.			97

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.			97
Item 6. Exhibits.			97

Index to Exhibits			98
Signature			100

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

Consolidated Financial Highlights (unaudited)


	Quarter ended
(dollars in millions, except per share amounts and unless otherwise noted)	March 31, 2023			Dec. 31, 2022			March 31, 2022
Results applicable to common shareholders of The Bank of New York Mellon Corporation:
Net income	$	905		$	509		$	699
Basic earnings per share	$	1.13		$	0.63		$	0.86
Diluted earnings per share	$	1.12		$	0.62		$	0.86

Fee and other revenue	$	3,235		$	2,862		$	3,228
Net interest revenue	1,128			1,056			698
Total revenue	$	4,363		$	3,918		$	3,926

Return on common equity (annualized)	10.3		%	5.7		%	7.6		%
Return on tangible common equity (annualized) – Non-GAAP (a)	20.2		%	11.5		%	15.4		%

Fee revenue as a percentage of total revenue	72		%	82		%	80		%

Non-U.S. revenue as a percentage of total revenue	35		%	39		%	35		%

Pre-tax operating margin	28		%	17		%	23		%

Net interest margin	1.29		%	1.19		%	0.75		%
Net interest margin on a fully taxable equivalent (“FTE”) basis – Non-GAAP (b)	1.29		%	1.19		%	0.76		%

Assets under custody and/or administration (“AUC/A”) at period end (in trillions) (c)	$	46.6		$	44.3		$	45.5
Assets under management (“AUM”) at period end (in billions) (d)	$	1,908		$	1,836		$	2,266

Average common shares and equivalents outstanding (in thousands):
Basic	803,340			811,669			809,469
Diluted	807,718			815,846			813,986

Selected average balances:
Interest-earning assets	$	348,378		$	352,987		$	373,186
Total assets	$	407,501		$	414,519		$	440,202
Interest-bearing deposits	$	204,114		$	207,875		$	223,243
Noninterest-bearing deposits	$	69,886		$	75,862		$	90,179
Long-term debt	$	30,246		$	29,508		$	25,588
Preferred stock	$	4,838		$	4,838		$	4,838
Total The Bank of New York Mellon Corporation common shareholders’ equity	$	35,604		$	35,259		$	37,363

Other information at period end:
Cash dividends per common share	$	0.37		$	0.37		$	0.34
Common dividend payout ratio	34		%	60		%	40		%
Common dividend yield (annualized)	3.3		%	3.2		%	2.8		%
Closing stock price per common share	$	45.44		$	45.52		$	49.63
Market capitalization	$	35,858		$	36,800		$	40,091
Book value per common share	$	45.36		$	44.40		$	45.76
Tangible book value per common share – Non-GAAP (a)	$	23.52		$	23.11		$	22.76
Full-time employees	51,600			51,700			49,600
Common shares outstanding (in thousands)	789,134			808,445			807,798

2 BNY Mellon

Consolidated Financial Highlights (unaudited) (continued)


Regulatory capital and other ratios	March 31, 2023		Dec. 31, 2022
Average liquidity coverage ratio (“LCR”)	118	%	118	%

Regulatory capital ratios: (e)
Advanced Approaches:
Common Equity Tier 1 (“CET1”) ratio	11.0	%	11.2	%
Tier 1 capital ratio	13.9		14.1
Total capital ratio	14.7		14.9
Standardized Approach:
CET1 ratio	11.4	%	11.3	%
Tier 1 capital ratio	14.4		14.4
Total capital ratio	15.4		15.3

Tier 1 leverage ratio	5.8	%	5.8	%
Supplementary leverage ratio (“SLR”)	6.9		6.8

BNY Mellon shareholders’ equity to total assets ratio	9.6	%	10.0	%
BNY Mellon common shareholders’ equity to total assets ratio	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 41 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 March 31, 2023 and Dec. 31, 2022 and $1.7 trillion at March 31, 2022.

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

(e) 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 33.

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 first quarter 2023 events

Leadership succession

Dermot McDonogh joined BNY Mellon on Nov. 1, 2022, and, effective Feb. 1, 2023, succeeded Emily Portney as the Chief Financial Officer (“CFO”). Ms. Portney served as the CFO since July 19, 2020, and has assumed a new position leading the Company’s Asset Servicing business.

Highlights of first quarter 2023 results

Net income applicable to common shareholders was $905 million, or $1.12 per diluted common share, in the first quarter of 2023, compared with $699 million, or $0.86 per diluted common share, in the first quarter of 2022.

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

•Total revenue of $4.4 billion increased 11%, primarily reflecting:

•Fee revenue was flat, primarily reflecting the abatement of money market fee waivers and the $88 million reduction primarily due to accelerated amortization of deferred costs for

4 BNY Mellon

depositary receipts services related to Russia recorded in the first quarter of 2022, offset by lower market values, the unfavorable impact of a stronger U.S. dollar and the impact of the Alcentra divestiture. (See “Fee and other revenue” beginning on page 6.)

•Net interest revenue increased 62%, primarily reflecting higher interest rates on interest-earning assets, partially offset by higher funding expense. (See “Net interest revenue” on page 9.)

•Provision for credit losses was $27 million, reflecting changes in the macroeconomic forecast. (See “Consolidated balance sheet review – Allowance for credit losses” beginning on page 27.)

•Noninterest expense increased 3%, primarily reflecting higher investments and revenue-related expenses, as well as the impact of inflation, partially offset by the favorable impact of efficiency savings, a stronger U.S. dollar and the impact of the Alcentra divestiture. (See “Noninterest expense” on page 11.)

•Effective tax rate of 21.0%. (See “Income taxes” on page 11.)

•Return on common equity (“ROE”) was 10.3% for the first quarter of 2023.

•Return on tangible common equity (“ROTCE”) was 20.2% (Non-GAAP) for the first quarter of 2023.

See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 41 for a reconciliation of the Non-GAAP measure.

Metrics

•AUC/A of $46.6 trillion increased 2%, primarily reflecting client inflows and net new business, partially offset by lower market values and the unfavorable impact of a stronger U.S. dollar.

•AUM of $1.9 trillion decreased 16%, primarily reflecting lower market values, the unfavorable impact of a stronger U.S. dollar and the divestiture of Alcentra, partially offset by net inflows.

Capital and liquidity

•Our CET1 ratio calculated under the Advanced Approaches was 11.0% at March 31, 2023 and

11.2% at Dec. 31, 2022. The decrease primarily reflects capital deployed through common stock repurchases and common dividends and higher risk-weighted assets (“RWAs”), partially offset by capital generated through earnings and unrealized gains in the first quarter on securities available-for-sale. (See “Capital” beginning on page 33.)

•Tier 1 leverage was 5.8% at March 31, 2023 and Dec. 31, 2022 as a slight decrease in capital was offset by a decrease in average assets. (See “Capital” beginning on page 33.)

•Returned $1.6 billion to common shareholders, including $1.3 billion of common share repurchases.

Highlights of our principal business segments

Securities Services

•Total revenue increased 19% and was impacted by the accelerated amortization of deferred costs for depositary receipts services related to Russia recorded in the first quarter of 2022.

•Income before income taxes increased 100% and was impacted by the first quarter 2022 adjustment to revenue related to Russia.

•Pre-tax operating margin of 26%.

Market and Wealth Services

•Total revenue increased 22%.

•Income before income taxes increased 41%.

•Pre-tax operating margin of 48%.

Investment and Wealth Management

•Total revenue decreased 14%.

•Income before income taxes decreased 56%.

•Pre-tax operating margin of 11%; adjusted pre-tax operating margin – Non-GAAP of 13%.

See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 41 for a reconciliation of the Non-GAAP measure. See “Review of business segments” and Note 19 of the Notes to Consolidated Financial Statements for additional information on our business segments.

BNY Mellon 5

Fee and other revenue


Fee and other revenue
(dollars in millions, unless otherwise noted)										1Q23 vs.
	1Q23			4Q22			1Q22			4Q22		1Q22
Investment services fees	$	2,119		$	2,173		$	1,993		(2)	%	6	%
Investment management and performance fees (a)	776			783			883			(1)		(12)
Foreign exchange revenue	176			190			207			(7)		(15)
Financing-related fees	52			43			45			21		16
Distribution and servicing fees	33			33			30			—		10
Total fee revenue	3,156			3,222			3,158			(2)		—
Investment and other revenue	79			(360)			70			N/M		N/M
Total fee and other revenue	$	3,235		$	2,862		$	3,228		13	%	—	%

Fee revenue as a percentage of total revenue	72		%	82		%	80		%

AUC/A at period end (in trillions) (b)	$	46.6		$	44.3		$	45.5		5	%	2	%
AUM at period end (in billions) (c)	$	1,908		$	1,836		$	2,266		4	%	(16)	%

(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 March 31, 2023 and Dec. 31, 2022 and $1.7 trillion at March 31, 2022.

N/M – Not meaningful.

Fee revenue was flat compared with the first quarter of 2022 and decreased 2% compared with the fourth quarter of 2022. Compared with the first quarter of 2022, higher investment services fees were offset by lower investment management and performance fees and foreign exchange revenue. The decrease compared with the fourth quarter of 2022 primarily reflects lower investment services fees and foreign exchange revenue.

Investment and other revenue increased $9 million compared with the first quarter of 2022 and $439 million compared with the fourth quarter of 2022. The increase compared with the first quarter of 2022 primarily reflects higher other trading revenue and improved seed capital results, partially offset by strategic equity investment gains recorded in the first quarter of 2022. The increase compared with the fourth quarter of 2022 primarily reflects the net loss of $449 million related to repositioning the securities portfolio in the fourth quarter of 2022.

Investment services fees

Investment services fees increased 6% compared with the first quarter of 2022 and decreased 2% compared with the fourth quarter of 2022. The increase compared with the first quarter of 2022 primarily reflects the abatement of money market fee waivers and the accelerated amortization of deferred costs for depositary receipts services related to Russia recorded

in the first quarter of 2022, partially offset by lower market values. The decrease compared with the fourth quarter of 2022 primarily reflects lower Depositary Receipts revenue and client activity, partially offset by higher market values.

AUC/A totaled $46.6 trillion at March 31, 2023, an increase of 2% compared with March 31, 2022, primarily reflecting client inflows and net new business, partially offset by lower market values and the unfavorable impact of a stronger U.S. dollar. AUC/A consisted of 33% equity securities and 67% fixed income securities at March 31, 2023, and 36% equity securities and 64% fixed income securities at March 31, 2022.

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

Investment management and performance fees

Investment management and performance fees decreased 12% compared with the first quarter of 2022 and 1% compared with the fourth quarter of 2022. The decrease compared with the first quarter of 2022 primarily reflects lower market values, the mix of cumulative net inflows, the impact of the Alcentra divestiture and the unfavorable impact of a stronger U.S. dollar, partially offset by the abatement of money market fee waivers. The decrease

6 BNY Mellon

compared with the fourth quarter of 2022 primarily reflects the impact of the Alcentra divestiture and lower performance fees, partially offset by higher market values. Performance fees were $22 million in the first quarter of 2023, $34 million in the first quarter of 2022 and $26 million in the fourth quarter of 2022. On a constant currency basis (Non-GAAP), investment management and performance fees decreased 9% compared with the first quarter of 2022. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 41 for the reconciliation of Non-GAAP measures.

AUM was $1.9 trillion at March 31, 2023, a decrease of 16% compared with March 31, 2022, primarily reflecting lower market values, the unfavorable impact of a stronger U.S. dollar and the divestiture of Alcentra, partially offset by net inflows.

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 15% compared with the first quarter of 2022 and 7% compared with the fourth quarter of 2022. The decrease compared with the first quarter of 2022 primarily reflects lower volumes, partially offset by higher volatility. The decrease compared with the fourth quarter of 2022 primarily reflects lower volatility. 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 16% compared with the first quarter of 2022 and 21% compared with the fourth quarter of 2022. The increase compared with the first quarter of 2022 primarily reflects higher loan commitment fees. The increase compared with the fourth quarter of 2022 primarily reflects higher capital markets fees, including 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)	1Q23		4Q22			1Q22
Income (loss) from consolidated investment management funds	$	5	$	9		$	(20)
Seed capital gains (losses) (a)	8		6			(8)
Other trading revenue	45		34			5
Renewable energy investments (losses)	(32)		(32)			(44)
Corporate/bank-owned life insurance	27		35			33
Other investments (losses) gains (b)	(9)		7			61
Disposal (losses)	(1)		(11)			—
Expense reimbursements from joint venture	29		28			27
Other income	8		12			12
Net securities (losses) gains	(1)		(448)		(c)	4
Total investment and other revenue	$	79	$	(360)		$	70

(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 increase in total investment and other revenue compared with the first quarter of 2022 primarily reflects higher other trading revenue and improved seed capital results, partially offset by strategic equity investment gains recorded in the first quarter of 2022. The increase compared with the fourth quarter of 2022 primarily reflects the net loss from repositioning the securities portfolio recorded in the fourth quarter of 2022.

8 BNY Mellon

Net interest revenue


Net interest revenue
										1Q23 vs.
(dollars in millions)	1Q23			4Q22			1Q22			4Q22		1Q22
Net interest revenue	$	1,128		$	1,056		$	698		7	%	62	%
Add: Tax equivalent adjustment	—			2			3			N/M		N/M
Net interest revenue (FTE) – Non-GAAP (a)	$	1,128		$	1,058		$	701		7	%	61	%

Average interest-earning assets	$	348,378		$	352,987		$	373,186		(1)%		(7)%

Net interest margin	1.29		%	1.19		%	0.75		%	10	bps	54	bps
Net interest margin (FTE) – Non-GAAP (a)	1.29		%	1.19		%	0.76		%	10	bps	53	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 62% compared with the first quarter of 2022 and 7% compared with the fourth quarter of 2022. The increases compared with both the first quarter of 2022 and fourth quarter of 2022 primarily reflect higher interest rates on interest-earning assets, partially offset by higher funding expense.

Net interest margin increased 54 basis points compared with the first quarter of 2022 and 10 basis points compared with the fourth quarter of 2022. The changes compared with the first quarter of 2022 and the fourth quarter of 2022 primarily reflect the factors mentioned above.

Average interest-earning assets decreased 7% compared with the first quarter of 2022 and 1% compared with the fourth quarter of 2022. The decrease compared with the first quarter of 2022 primarily reflects lower securities, interest-bearing deposits with the Federal Reserve and other central banks and loan balances. The decrease compared with the fourth quarter of 2022 primarily reflects lower loan balances.

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

BNY Mellon 9


Average balances and interest rates	Quarter ended
	March 31, 2023						Dec. 31, 2022						March 31, 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	$	94,899	$	853	3.59	%	$	94,868	$	630	2.60	%		$	100,303	$	2	0.01	%
Interest-bearing deposits with banks	16,225		140		3.51		15,750		107		2.70			17,181		14		0.33
Federal funds sold and securities purchased under resale agreements (a)	24,631		991		16.32		25,657		726		11.22			27,006		37		0.56
Loans	63,261		866		5.54		67,364		788		4.65			66,810		260		1.57
Securities:
U.S. government obligations	38,852		279		2.89		39,382		244		2.46			40,868		74		0.74
U.S. government agency obligations	62,280		405		2.60		61,426		354		2.30			67,055		245		1.46
State and political subdivisions (b)	23		—		7.07		1,178		7		2.77			2,337		13		2.16
Other securities (b)	42,429		338		3.21		41,732		279		2.66			45,541		115		1.02
Total investment securities (b)	143,584		1,022		2.86		143,718		884		2.45			155,801		447		1.15
Trading securities (b)	5,778		70		4.97		5,630		64		4.51			6,085		21		1.43
Total securities (b)	149,362		1,092		2.94		149,348		948		2.53			161,886		468		1.16
Total interest-earning assets (b)	$	348,378	$	3,942	4.56	%	$	352,987	$	3,199	3.59	%		$	373,186	$	781	0.84	%
Noninterest-earning assets	59,123						61,532							67,016
Total assets	$	407,501					$	414,519						$	440,202

Liabilities and equity
Interest-bearing liabilities:
Interest-bearing deposits	$	204,114	$	1,366	2.71	%	$	207,875	$	1,046	2.00	%		$	223,243	$	(37)	(0.07)	%
Federal funds purchased and securities sold under repurchase agreements (a)	18,316		892		19.75		13,985		595		16.88			12,864		12		0.36
Trading liabilities	3,025		30		4.05		3,572		31		3.45			3,372		4		0.53
Other borrowed funds	711		3		1.75		619		3		1.69			458		3		2.36
Commercial paper	—		—		—		6		—		3.87			4		—		0.09
Payables to customers and broker-dealers	16,954		128		3.08		17,147		99		2.27			16,661		—		0.01
Long-term debt	30,246		395		5.22		29,508		367		4.90			25,588		98		1.53
Total interest-bearing liabilities	$	273,366	$	2,814	4.17	%	$	272,712	$	2,141	3.11	%		$	282,190	$	80	0.11	%
Total noninterest-bearing deposits	69,886						75,862							90,179
Other noninterest-bearing liabilities	23,789						25,810							25,419
Total liabilities	367,041						374,384							397,788
Total The Bank of New York Mellon Corporation shareholders’ equity	40,442						40,097							42,201
Noncontrolling interests	18						38							213
Total liabilities and equity	$	407,501					$	414,519						$	440,202
Net interest revenue (FTE) – Non-GAAP (b)(c)			$	1,128					$	1,058						$	701
Net interest margin (FTE) – Non-GAAP (b)(c)					1.29	%					1.19	%						0.76	%
Less: Tax equivalent adjustment			—						2							3
Net interest revenue – GAAP			$	1,128					$	1,056						$	698
Net interest margin – GAAP					1.29	%					1.19	%						0.75	%

(a) Includes the average impact of offsetting under enforceable netting agreements of approximately $62 billion for the first quarter of 2023, $51 billion for the fourth quarter of 2022 and $53 billion for the first 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 4.62% for the first quarter of 2023, 3.76% for the fourth quarter of 2022 and 0.19% for the first 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 4.49% for the first quarter of 2023, 3.63% for the fourth quarter of 2022 and 0.07% for the first 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

Noninterest expense


Noninterest expense
							1Q23 vs.
(dollars in millions)	1Q23		4Q22		1Q22		4Q22		1Q22
Staff	$	1,791	$	1,802	$	1,702	(1)	%	5	%
Software and equipment	429		432		399		(1)		8
Professional, legal and other purchased services	375		415		370		(10)		1
Net occupancy	119		143		122		(17)		(2)
Sub-custodian and clearing	118		112		118		5		—
Distribution and servicing	85		86		79		(1)		8
Bank assessment charges	40		19		35		111		14
Business development	39		45		30		(13)		30

Amortization of intangible assets	14		16		17		(13)		(18)
Other	90		143		134		(37)		(33)
Total noninterest expense	$	3,100	$	3,213	$	3,006	(4)	%	3	%

Full-time employees at period end	51,600		51,700		49,600		—	%	4	%

Total noninterest expense increased 3% compared with the first quarter of 2022 and decreased 4% compared with the fourth quarter of 2022. The increase compared with the first quarter of 2022 primarily reflects higher investments and revenue-related expenses, as well as the impact of inflation, partially offset by the favorable impact of efficiency savings, a stronger U.S. dollar 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. The decrease compared with the fourth quarter of 2022 primarily reflects lower severance and litigation expenses, partially offset by higher staff expense primarily driven by the annual vesting of stock-based awards to retirement-eligible employees.

Income taxes

BNY Mellon recorded an income tax provision of $260 million (21.0% effective tax rate) in the first quarter of 2023. The income tax provision was $153 million (16.7% effective tax rate) in the first quarter of 2022 and $142 million (20.7% effective tax rate) in the fourth quarter of 2022. For additional information, see Note 11 of the Notes to Consolidated Financial Statements.

BNY Mellon 11

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 first 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 March 31, 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.

12 BNY Mellon

Securities Services business segment



(dollars in millions, unless otherwise noted)																1Q23 vs.
	1Q23			4Q22			3Q22			2Q22			1Q22			4Q22		1Q22
Revenue:
Investment services fees:
Asset Servicing	$	948		$	971		$	953		$	995		$	999		(2)	%	(5)	%
Issuer Services	236			271			288			309			141			(13)		67
Total investment services fees	1,184			1,242			1,241			1,304			1,140			(5)		4
Foreign exchange revenue	139			149			132			155			148			(7)		(6)
Other fees (a)	55			55			52			54			41			—		34
Total fee revenue	1,378			1,446			1,425			1,513			1,329			(5)		4
Investment and other revenue	72			70			111			36			74			N/M		N/M
Total fee and other revenue	1,450			1,516			1,536			1,549			1,403			(4)		3
Net interest revenue	666			656			538			457			377			2		77
Total revenue	2,116			2,172			2,074			2,006			1,780			(3)		19
Provision for credit losses	—			11			(6)			13			(10)			N/M		N/M
Noninterest expense (excluding amortization of intangible assets)	1,548			1,568			1,549			1,647			1,502			(1)		3
Amortization of intangible assets	8			8			8			9			8			—		—
Total noninterest expense	1,556			1,576			1,557			1,656			1,510			(1)		3
Income before income taxes	$	560		$	585		$	523		$	337		$	280		(4)	%	100	%

Pre-tax operating margin	26		%	27		%	25		%	17		%	16		%

Securities lending revenue (b)	$	48		$	50		$	48		$	45		$	39		(4)	%	23	%

Total revenue by line of business:
Asset Servicing	$	1,664		$	1,681		$	1,596		$	1,534		$	1,512		(1)	%	10	%
Issuer Services	452			491			478			472			268			(8)		69
Total revenue by line of business	$	2,116		$	2,172		$	2,074		$	2,006		$	1,780		(3)	%	19	%

Selected average balances:
Average loans	$	10,939		$	11,850		$	11,573		$	11,386		$	10,150		(8)	%	8	%
Average deposits	$	167,209		$	176,541		$	176,328		$	191,191		$	192,156		(5)	%	(13)	%

Selected metrics:
AUC/A at period end (in trillions) (c)	$	32.6		$	31.4		$	30.0		$	31.0		$	33.7		4	%	(3)	%
Market value of securities on loan at period end (in billions) (d)	$	441		$	449		$	435		$	441		$	449		(2)	%	(2)	%

(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 March 31, 2023 and Dec. 31, 2022, $1.4 trillion at Sept. 30, 2022, $1.5 trillion at June 30, 2022 and $1.7 trillion at March 31, 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 $69 billion at March 31, 2023, $68 billion at Dec. 31, 2022, $75 billion at Sept. 30, 2022, $70 billion at June 30, 2022 and $78 billion at March 31, 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 $32.6 trillion of AUC/A at March 31, 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 accounting services, exchange-traded funds servicing, transfer agency, trust and depository, front-to-back capabilities and 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-

BNY Mellon 13

U.S. securities, servicing a lendable asset pool of approximately $4.6 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 $32.6 trillion decreased 3% compared with March 31, 2022, primarily reflecting lower market values and the unfavorable impact of a stronger U.S. dollar, partially offset by client inflows and net new business.

Total revenue of $2.1 billion increased 19% compared with the first quarter of 2022 and decreased 3% compared with the fourth quarter of 2022. The drivers of total revenue by line of business are indicated below.

Asset Servicing revenue of $1.7 billion increased 10% compared with the first quarter of 2022 and decreased 1% compared with the fourth quarter of 2022. The increase compared with the first quarter of 2022 primarily reflects higher net interest

revenue and the abatement of money market fee waivers, partially offset by lower market values, the unfavorable impact of a stronger U.S. dollar and lower foreign exchange revenue. The decrease compared with the fourth quarter of 2022 primarily reflects lower foreign exchange revenue and client activity, partially offset by higher net interest revenue and market values.

Issuer Services revenue of $452 million increased 69% compared with the first quarter of 2022 and decreased 8% compared with the fourth quarter of 2022. The increase compared with the first quarter of 2022 primarily reflects the accelerated amortization of deferred costs for depositary receipts services related to Russia recorded in the first quarter of 2022, higher net interest revenue and the abatement of money market fee waivers. The decrease compared with the fourth quarter of 2022 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 3% compared with the first quarter of 2022 and decreased 1% compared with the fourth quarter of 2022. The increase compared with the first quarter of 2022 primarily reflects higher investments, as well as the impact of inflation, partially offset by the favorable impact of efficiency savings and a stronger U.S. dollar. The decrease compared with the fourth quarter of 2022 primarily reflects lower severance expense and litigation reserves.

14 BNY Mellon

Market and Wealth Services business segment



(dollars in millions, unless otherwise noted)																1Q23 vs.
	1Q23			4Q22			3Q22			2Q22			1Q22			4Q22		1Q22
Revenue:
Investment services fees:
Pershing	$	499		$	502		$	494		$	479		$	433		(1)	%	15	%
Treasury Services	168			170			173			176			170			(1)		(1)
Clearance and Collateral Management	260			249			239			240			243			4		7
Total investment services fees	927			921			906			895			846			1		10
Foreign exchange revenue	18			20			20			22			26			(10)		(31)
Other fees (a)	54			47			49			46			34			15		59
Total fee revenue	999			988			975			963			906			1		10
Investment and other revenue	15			15			14			11			—			N/M		N/M
Total fee and other revenue	1,014			1,003			989			974			906			1		12
Net interest revenue	453			396			378			340			296			14		53
Total revenue	1,467			1,399			1,367			1,314			1,202			5		22
Provision for credit losses	—			6			(1)			4			(2)			N/M		N/M
Noninterest expense (excluding amortization of intangible assets)	768			783			735			700			706			(2)		9
Amortization of intangible assets	1			2			2			2			2			(50)		(50)
Total noninterest expense	769			785			737			702			708			(2)		9
Income before income taxes	$	698		$	608		$	631		$	608		$	496		15	%	41	%

Pre-tax operating margin	48		%	43		%	46		%	46		%	41		%

Total revenue by line of business:
Pershing	$	693		$	673		$	658		$	636		$	570		3	%	22	%
Treasury Services	412			382			390			373			338			8		22
Clearance and Collateral Management	362			344			319			305			294			5		23
Total revenue by line of business	$	1,467		$	1,399		$	1,367		$	1,314		$	1,202		5	%	22	%

Selected average balances:
Average loans	$	36,854		$	39,843		$	40,882		$	42,391		$	42,113		(8)	%	(12)	%
Average deposits	$	86,040		$	86,083		$	90,612		$	94,716		$	95,704		—	%	(10)	%

Selected metrics:
AUC/A at period end (in trillions) (b)	$	13.7		$	12.7		$	12.0		$	11.8		$	11.6		8	%	18	%

Pershing:
AUC/A at period end (in trillions)	$	2.4		$	2.3		$	2.1		$	2.2		$	2.5		4	%	(4)	%
Net new assets (U.S. platform) (in billions) (c)	$	37		$	42		$	45		$	16		$	18		N/M		N/M
Average active clearing accounts (in thousands)	7,849			7,603			7,466			7,432			7,432			3	%	6	%

Treasury Services:
Average daily U.S. dollar payment volumes	236,322			246,189			234,468			237,763			240,403			(4)	%	(2)	%

Clearance and Collateral Management:
Average tri-party collateral management balances (in billions)	$	5,626		$	5,451		$	5,457		$	5,207		$	5,026		3	%	12	%

(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.

BNY Mellon 15

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 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 $5.6 trillion serviced globally, including approximately $4.6 trillion of the U.S. tri-party repo market at March 31, 2023.

Review of financial results

AUC/A of $13.7 trillion increased 18% compared with March 31, 2022, primarily reflecting net client

inflows, partially offset by lower market values and the impact of the stronger U.S. dollar.

Total revenue of $1.5 billion increased 22% compared with the first quarter of 2022 and 5% compared with the fourth quarter of 2022. The drivers of total revenue by line of business are indicated below.

Pershing revenue of $693 million increased 22% compared with the first quarter of 2022 and 3% compared with the fourth quarter of 2022. The increase compared with the first quarter of 2022 primarily reflects the abatement of money market fee waivers and higher net interest revenue, partially offset by lower client activity. The increase compared with the fourth quarter of 2022 primarily reflects higher net interest revenue.

Treasury Services revenue of $412 million increased 22% compared with the first quarter of 2022 and 8% compared with the fourth quarter of 2022. The increase compared with the first quarter of 2022 primarily reflects higher net interest revenue and the abatement of money market fee waivers. The increase compared with the fourth quarter of 2022 primarily reflects higher net interest revenue.

Clearance and Collateral Management revenue of $362 million increased 23% compared with the first quarter of 2022 and 5% compared with the fourth quarter of 2022. The increases compared with the first quarter of 2022 and the fourth quarter of 2022 primarily reflect higher net interest revenue and U.S. government clearance volumes.

Noninterest expense of $769 million increased 9% compared with the first quarter of 2022 and decreased 2% compared with the fourth quarter of 2022. The increase compared with the first quarter of 2022 primarily reflects higher investments and higher revenue-related expense, as well as the impact of inflation, partially offset by the favorable impact of efficiency savings and a stronger U.S. dollar.

16 BNY Mellon

Investment and Wealth Management business segment



																	1Q23 vs.
(dollars in millions)	1Q23			4Q22			3Q22				2Q22			1Q22			4Q22		1Q22
Revenue:
Investment management fees	$	752		$	754		$	788			$	825		$	848		—	%	(11)	%
Performance fees	22			26			10				5			34			N/M		(35)
Investment management and performance fees (a)	774			780			798				830			882			(1)		(12)
Distribution and servicing fees	55			54			55				51			32			2		72
Other fees (b)	(53)			(58)			(45)				(31)			1			N/M		N/M
Total fee revenue	776			776			808				850			915			—		(15)
Investment and other revenue (c)	6			(3)			(3)				(13)			(8)			N/M		N/M
Total fee and other revenue (c)	782			773			805				837			907			1		(14)
Net interest revenue	45			52			57				62			57			(13)		(21)
Total revenue	827			825			862				899			964			—		(14)
Provision for credit losses	—			1			3				—			(3)			N/M		N/M
Noninterest expense (excluding goodwill impairment and amortization of intangible assets)	729			693			669				685			748			5		(3)
Goodwill impairment	—			—			680				—			—			N/M		N/M
Amortization of intangible assets	5			6			7				6			7			(17)		(29)
Total noninterest expense	734			699			1,356				691			755			5		(3)
Income (loss) before income taxes	$	93		$	125		$	(497)			$	208		$	212		(26)	%	(56)	%

Pre-tax operating margin	11		%	15		%	(57)		%		23		%	22		%
Adjusted pre-tax operating margin – Non-GAAP (d)	13		%	17		%	(64)		%	(e)	26		%	24		%

Total revenue by line of business:
Investment Management	$	557		$	550		$	579			$	603		$	658		1	%	(15)	%
Wealth Management	270			275			283				296			306			(2)		(12)
Total revenue by line of business	$	827		$	825		$	862			$	899		$	964		—	%	(14)	%

Average balances:
Average loans	$	13,960		$	14,404		$	14,482			$	14,087		$	13,228		(3)	%	6	%
Average deposits	$	16,144		$	16,416		$	17,225			$	20,802		$	22,501		(2)	%	(28)	%

(a) On a constant currency basis, investment management and performance fees decreased 9% (Non-GAAP) compared with the first quarter of 2022. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 41 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 41 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. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 41 for the reconciliation of this Non-GAAP measure.

N/M – Not meaningful.

BNY Mellon 17


AUM trends											1Q23 vs.
(dollars in billions)	1Q23		4Q22		3Q22		2Q22		1Q22		4Q22		1Q22
AUM by product type: (a)
Equity	$	142	$	135	$	125	$	139	$	168	5	%	(15)	%
Fixed income	207		198		205		226		248		5		(17)
Index	408		395		366		387		440		3		(7)
Liability-driven investments	604		570		546		641		812		6		(26)
Multi-asset and alternative investments	161		153		181		188		215		5		(25)
Cash	386		385		353		356		383		—		1
Total AUM	$	1,908	$	1,836	$	1,776	$	1,937	$	2,266	4	%	(16)	%

Changes in AUM: (a)
Beginning balance of AUM	$	1,836	$	1,776	$	1,937	$	2,266	$	2,434
Net inflows (outflows):
Long-term strategies:
Equity	(4)		(5)		(5)		(4)		(4)
Fixed income	4		(12)		(3)		(1)		(5)
Liability-driven investments	10		19		30		12		17
Multi-asset and alternative investments	(3)		(4)		2		(5)		(4)
Total long-term active strategies inflows (outflows)	7		(2)		24		2		4
Index	(2)		(4)		(1)		12		(5)
Total long-term strategies inflows (outflows)	5		(6)		23		14		(1)
Short-term strategies:
Cash	—		27		(2)		(26)		(11)
Total net inflows (outflows)	5		21		21		(12)		(12)
Net market impact	52		18		(118)		(241)		(130)
Net currency impact	15		53		(64)		(76)		(26)
Divestiture	—		(32)		—		—		—
Ending balance of AUM	$	1,908	$	1,836	$	1,776	$	1,937	$	2,266	4	%	(16)	%

Wealth Management client assets (b)	$	279	$	269	$	256	$	264	$	305	4	%	(9)	%

(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 decreased 16% compared with March 31, 2022, primarily reflecting lower market values, the

unfavorable impact of a stronger U.S. dollar and the divestiture of Alcentra, partially offset by net inflows.

Net long-term strategy inflows were $5 billion in the first quarter of 2023, driven by inflows of liability-driven investments and fixed income, partially offset by outflows of equity and multi-asset and alternative investments. 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 14% compared with the first quarter of 2022 and was flat compared with the fourth quarter of 2022. The drivers of total revenue by line of business are indicated below.

Investment Management revenue of $557 million decreased 15% compared with the first quarter of 2022 and increased 1% compared with the fourth quarter of 2022. The decrease compared with the

18 BNY Mellon

first quarter of 2022 primarily reflects the impact of the Alcentra divestiture, the mix of cumulative net inflows, lower market values and the unfavorable impact of a stronger U.S. dollar, partially offset by the abatement of money market fee waivers. The increase compared with the fourth quarter of 2022 primarily reflects higher market values.

Wealth Management revenue of $270 million decreased 12% compared with the first quarter of 2022 and 2% compared with the fourth quarter of 2022. The decrease compared with the first quarter of 2022 primarily reflects lower market values and changes in product mix.

Revenue generated in the Investment and Wealth Management business segment included 31% from

non-U.S. sources in the first quarter of 2023, compared with 39% in the first quarter of 2022 and 34% in the fourth quarter of 2022.

Noninterest expense of $734 million decreased 3% compared with the first quarter of 2022 and increased 5% compared with the fourth quarter of 2022. The decrease compared with the first quarter of 2022 primarily reflects the impact of the Alcentra divestiture and the favorable impact of a stronger U.S. dollar, partially offset by higher revenue-related expenses. The increase compared with the fourth quarter of 2022 primarily reflects higher staff expense driven by the annual vesting of stock-based awards to retirement-eligible employees.

Other segment



(in millions)	1Q23		4Q22		3Q22		2Q22		1Q22
Fee revenue	$	3	$	12	$	28	$	13	$	8
Investment and other revenue	(14)		(442)		(5)		62		12
Total fee and other revenue	(11)		(430)		23		75		20
Net interest expense	(36)		(48)		(47)		(35)		(32)
Total revenue	(47)		(478)		(24)		40		(12)
Provision for credit losses	27		2		(26)		30		17
Noninterest expense	41		153		29		63		33
(Loss) before income taxes	$	(115)	$	(633)	$	(27)	$	(53)	$	(62)

Average loans and leases	$	1,508	$	1,267	$	1,145	$	1,172	$	1,319

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 decreased $35 million compared with the first quarter of 2022 and increased $431 million compared with the fourth quarter of 2022. The increase compared with the fourth quarter of 2022 primarily reflects the $449 million net loss from repositioning the securities portfolio in the fourth quarter of 2022.

The provision for credit losses was $27 million in the first quarter of 2023, reflecting changes in the macroeconomic forecast.

Noninterest expense increased $8 million compared with the first quarter of 2022 and decreased $112 million compared with the fourth quarter of 2022. The decrease compared with the fourth quarter of 2022 primarily reflects lower severance 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.

BNY Mellon 19


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 first quarter of 2023, due to the results of the fourth quarter 2022 interim 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 1%. We determined the fair value of the Investment Management reporting unit using an income approach based on management’s projections as of March 31, 2023. The discount rate applied to these cash flows was 10.5%.

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.

As of March 31, 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.

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 March 31, 2023, total assets were $425 billion, compared with $406 billion at Dec. 31, 2022. The increase in total assets was primarily driven by higher interest-bearing deposits with the Federal Reserve and other central banks, partially offset by lower securities and loans. Deposits totaled $281 billion at March 31, 2023, compared with $279 billion at Dec. 31, 2022. The increase reflects higher interest-bearing deposits in U.S. offices, partially offset by lower non-interest bearing (principally in U.S. offices) and interest-bearing deposits in non-U.S. offices. Total interest-bearing deposits as a percentage of total interest-earning assets was 58% at March 31, 2023 and Dec. 31, 2022.

At March 31, 2023, available funds totaled $165 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 39% at March 31, 2023 and 34% at Dec. 31, 2022. For additional information on our available funds, see “Liquidity and dividends.”

Securities were $139 billion, or 33% of total assets, at March 31, 2023, compared with $143 billion, or 35% of total assets, at Dec. 31, 2022. The decrease

20 BNY Mellon

primarily reflects lower U.S. Treasury securities, partially offset by unrealized pre-tax gains in the first quarter and higher U.S. government agencies and collateralized loan obligation (“CLOs”) securities. For additional information on our securities portfolio, see “Securities” and Note 4 of the Notes to Consolidated Financial Statements.

Loans were $62 billion, or 15% of total assets, at March 31, 2023, compared with $66 billion, or 16% of total assets, at Dec. 31, 2022. The decrease was driven by lower overdrafts, margin loans and loans in the financial institutions portfolio, partially offset by higher other residential mortgages. For additional information on our loan portfolio, see “Loans” and Note 5 of the Notes to Consolidated Financial Statements.

Long-term debt totaled $30 billion at March 31, 2023 and Dec. 31, 2022. Issuances and an increase in the fair value of hedged long-term debt were offset by maturities. 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 March 31, 2023 and Dec. 31, 2022. For additional information, see “Capital.”

Country risk exposure

The following table presents BNY Mellon’s top 10 exposures by country (excluding the U.S.) as of March 31, 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 March 31, 2023	Interest-bearing deposits											Total exposure
(in billions)	Central banks		Banks			Lending (a)		Securities (b)		Other (c)
Top 10 country exposure:
Germany	$	21.9	$	0.5		$	0.7	$	4.1	$	0.3	$	27.5
United Kingdom (“UK”)	11.2		0.5			1.3		4.2		2.1		19.3
Belgium	8.4		0.9			0.1		0.1		0.1		9.6
Japan	6.1		0.8			0.1		0.5		0.1		7.6
Canada	—		2.2			0.1		4.0		1.3		7.6
South Korea	0.1		—			2.3		0.1		0.3		2.8
Australia	—		1.4			0.1		0.7		0.6		2.8
France	—		—			0.1		2.3		0.4		2.8
Singapore	—		0.5			0.1		1.1		1.0		2.7
Cayman Islands	—		—			1.2		—		1.1		2.3
Total Top 10 country exposure	$	47.7	$	6.8		$	6.1	$	17.1	$	7.3	$	85.0	(d)

Select country exposure:
Brazil	$	—	$	—		$	0.8	$	0.1	$	0.2	$	1.1
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.

BNY Mellon 21

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 March 31, 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.

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	Dec. 31, 2022			1Q23 change in unrealized gain (loss)		March 31, 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	$	38,916		$	488	$	43,691	$	39,519		90	%	$	(4,172)		16	%	100	%	—	%	—	%	—	%		—	%
U.S. Treasury	41,503			306		36,662		35,505			97		(1,157)			49		100		—		—		—			—
Agency commercial mortgage-backed securities (“MBS”)	11,864			101		12,529		11,824			94		(705)			42		100		—		—		—			—
Sovereign debt/sovereign guaranteed (d)	11,756			59		12,262		11,783			96		(479)			24		90		5		4		1			—
Supranational	8,298			34		8,835		8,595			97		(240)			62		100		—		—		—			—
CLOs	6,300			13		6,780		6,664			98		(116)			100		100		—		—		—			—
U.S. government agencies	6,115			62		7,149		6,655			93		(494)			41		100		—		—		—			—
Foreign covered bonds (e)	5,776			22		6,234		5,991			96		(243)			56		100		—		—		—			—
Non-agency commercial MBS	3,054			(9)		3,358		3,069			91		(289)			54		100		—		—		—			—
Foreign government agencies (f)	2,307			16		2,521		2,415			96		(106)			33		94		6		—		—			—
Non-agency RMBS	2,060			7		2,146		1,986			93		(160)			49		86		3		—		6			5
Other asset-backed securities (“ABS”)	1,319			17		1,252		1,145			91		(107)			14		100		—		—		—			—
State and political subdivisions	23			—		13		11			88		(2)			—		1		2		3		—			94

Other	1			—		1		1			100		—			—		—		—		—		—			100
Total securities	$	139,292	(g)	$	1,116	$	143,433	$	135,163	(g)	94	%	$	(8,270)	(g)(h)	39	%	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, UK, France, Canada, Singapore and Italy.

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

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

(g) Includes net unrealized gains on derivatives hedging securities available-for-sale (including terminated hedges) of $2,678 million at Dec. 31, 2022 and $1,979 million at March 31, 2023.

(h) At March 31, 2023, includes net unrealized losses of $2,776 million related to available-for-sale securities, net of hedges, and $5,494 million related to held-to-maturity securities. The after-tax unrealized losses, net of hedges, related to available-for-sale securities is $2,094 million and the after-tax equivalent related to held-to-maturity securities is $4,189 million.

The fair value of our securities portfolio, including related hedges, was $135.2 billion at March 31, 2023, compared with $139.3 billion at Dec. 31, 2022. The decrease primarily reflects lower U.S. Treasury securities, partially offset by unrealized pre-tax gains in the first quarter and higher U.S. government agencies and CLO securities. At March 31, 2023, the

securities portfolio had a net unrealized loss, including the impact of related hedges, of $8.3 billion, compared with a net unrealized loss, including the impact of related hedges, of $9.4 billion at Dec. 31, 2022. The decrease in the net unrealized loss, including the impact of hedges, was primarily driven by lower market interest rates.

22 BNY Mellon

The fair value of the available-for-sale securities totaled $86.1 billion at March 31, 2023, net of hedges, or 64% of the securities portfolio, net of hedges. The fair value of the held-to-maturity securities totaled $49.1 billion at March 31, 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 $2.1 billion at March 31, 2023, compared with $2.4 billion at Dec. 31, 2022. The decrease in the unrealized loss, net of tax, was primarily driven by lower market interest rates.

At March 31, 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)	1Q23		4Q22		1Q22

Amortizable purchase premium, net of discount	$	1,096	$	1,109	$	1,699

Net amortization	$	42	$	61	$	121

(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	March 31, 2023						Dec. 31, 2022
(in billions)	Loans		Unfunded commitments		Total exposure		Loans		Unfunded commitments		Total exposure
Financial institutions	$	9.3	$	31.4	$	40.7	$	9.7	$	31.7	$	41.4
Commercial	1.8		11.6		13.4		1.7		11.7		13.4
Wealth management loans	10.0		0.6		10.6		10.3		0.6		10.9
Wealth management mortgages	9.0		0.3		9.3		9.0		0.2		9.2
Commercial real estate	6.3		3.8		10.1		6.2		3.9		10.1
Lease financings	0.7		—		0.7		0.7		—		0.7
Other residential mortgages	1.0		—		1.0		0.4		—		0.4
Overdrafts	2.4		—		2.4		4.8		—		4.8
Capital call financing	3.3		3.5		6.8		3.4		3.5		6.9
Other	2.8		—		2.8		3.0		—		3.0
Margin loans	15.7		—		15.7		16.9		—		16.9
Total	$	62.3	$	51.2	$	113.5	$	66.1	$	51.6	$	117.7

At March 31, 2023, our total lending-related exposure of $113.5 billion decreased 4% compared with Dec. 31, 2022, primarily reflecting lower overdrafts, margin loans and exposure in the financial institutions portfolio, partially offset by higher other residential mortgage loans.

Our financial institutions and commercial portfolios comprise our largest concentrated risk. These portfolios comprised 48% of our total exposure at March 31, 2023 and 47% at Dec. 31, 2022. Additionally, most of our overdrafts relate to financial institutions.

BNY Mellon 23

Financial institutions

The financial institutions portfolio is shown below.


Financial institutions portfolio exposure (dollars in billions)	March 31, 2023										Dec. 31, 2022
	Loans		Unfunded commitments		Total exposure		% Inv. grade		% due <1 yr.		Loans		Unfunded commitments		Total exposure
Securities industry	$	1.3	$	17.2	$	18.5	96	%	98	%	$	1.6	$	17.5	$	19.1
Asset managers	1.5		7.8		9.3		99		84		1.6		7.6		9.2
Banks	6.0		1.4		7.4		86		98		6.1		1.5		7.6
Insurance	0.1		3.8		3.9		100		9		0.1		3.8		3.9
Government	—		0.2		0.2		100		42		—		0.2		0.2
Other	0.4		1.0		1.4		98		54		0.3		1.1		1.4
Total	$	9.3	$	31.4	$	40.7	95	%	84	%	$	9.7	$	31.7	$	41.4

The financial institutions portfolio exposure was $40.7 billion at March 31, 2023, a decrease of 2% compared with Dec. 31, 2022, primarily reflecting lower exposure in the securities industry portfolio.

Financial institution exposures are high quality, with 95% of the exposures meeting the investment grade equivalent criteria of our internal credit rating classification at March 31, 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 March 31, 2023, 19% 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 March 31, 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 40% of the exposure in the financial institutions portfolio and are reviewed and reapproved annually.

The asset managers portfolio exposure is high quality, with 99% of the exposures meeting our investment grade equivalent ratings criteria as of March 31, 2023. These exposures are generally short-term liquidity facilities, with the majority to regulated mutual funds.

Our banks portfolio exposure primarily relates to our global trade finance. These exposures are short term in nature, with 98% due in less than one year. The investment grade percentage of our banks portfolio exposure was 86% at March 31, 2023 and Dec. 31, 2022. Our non-investment grade exposures are primarily trade finance loans in Brazil.

24 BNY Mellon

Commercial

The commercial portfolio is presented below.


Commercial portfolio exposure	March 31, 2023										Dec. 31, 2022
(dollars in billions)	Loans		Unfunded commitments		Total exposure		% Inv. grade		% due <1 yr.		Loans		Unfunded commitments		Total exposure
Manufacturing	$	0.6	$	4.0	$	4.6	96	%	24	%	$	0.5	$	4.1	$	4.6
Services and other	0.9		3.2		4.1		97		37		0.8		3.2		4.0
Energy and utilities	0.2		3.7		3.9		94		3		0.3		3.7		4.0
Media and telecom	0.1		0.7		0.8		88		—		0.1		0.7		0.8
Total	$	1.8	$	11.6	$	13.4	95	%	20	%	$	1.7	$	11.7	$	13.4

The commercial portfolio exposure was $13.4 billion at March 31, 2023, unchanged from Dec. 31, 2022, primarily reflecting higher exposure in the services and other portfolio offset by lower exposure in the energy and utilities 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
	March 31, 2023		Dec. 31, 2022		Sept. 30, 2022		June 30, 2022		March 31, 2022
Financial institutions	95	%	95	%	96	%	96	%	97	%
Commercial	95	%	95	%	95	%	95	%	94	%

Wealth management loans

Our wealth management loan exposure was $10.6 billion at March 31, 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 $9.3 billion at March 31, 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 March 31, 2023, less than 1% of the mortgages were past due.

At March 31, 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 25

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	March 31, 2023				Dec. 31, 2022
	Total exposure		Percentage secured (a)		Total exposure		Percentage secured (a)
(in billions)

Residential	$	4.2	86	%	$	4.1	85	%
Office	2.7		75		2.8		75
Retail	0.9		59		0.9		58
Mixed use	0.8		33		0.8		33
Hotels	0.6		42		0.6		42
Healthcare	0.4		49		0.4		49
Other	0.5		67		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 March 31, 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 March 31, 2023, the unsecured portfolio consisted of real estate investment trusts (“REITs”) and real estate operating companies, which are both primarily investment grade.

At March 31, 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 $640 million at March 31, 2023 and $657 million at Dec. 31, 2022. At March 31, 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 March 31, 2023 and $345 million at Dec. 31, 2022. Included in this portfolio at March 31, 2023 was $784 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.

26 BNY Mellon

Margin loans

Margin loan exposure of $15.7 billion at March 31, 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 March 31, 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	March 31, 2023			Dec. 31, 2022			March 31, 2022
(dollars in millions)



Beginning balance of allowance for credit losses	$	292		$	280		$	260

Provision for credit losses	27			20			2
Net recoveries (charge-offs):
Loans:
Commercial	1			—			—
Other residential mortgages	—			1			1



Other financial instruments	—			(9)			—
Net recoveries (charge-offs)	1			(8)			1
Ending balance of allowance for credit losses	$	320		$	292		$	263

Allowance for loan losses	$	170		$	176		$	171
Allowance for lending-related commitments	83			78			53
Allowance for financial instruments (a)	67			38			39
Total allowance for credit losses	$	320		$	292		$	263

Total loans, at period end	$	62,323		$	66,063		$	68,052




Allowance for loan losses as a percentage of total loans	0.27		%	0.27		%	0.25		%
Allowance for loan losses and lending-related commitments as a percentage of total loans	0.41		%	0.38		%	0.33		%

(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 $27 million in the first quarter of 2023, reflecting changes in the macroeconomic forecast.

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.

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.

BNY Mellon 27


Allocation of allowance for loan losses and lending-related commitments (a)	March 31, 2023				Dec. 31, 2022				March 31, 2022
(dollars in millions)	$		%		$		%			$		%
Commercial real estate	$	177	70	%	$	184	72	%		$	176	78	%
Financial institutions	24		9		24		9			15		7
Commercial	21		8		18		7			12		5
Wealth management mortgages	14		5		12		5			9		4
Other residential mortgages	9		4		8		3			7		3
Capital call financing	6		2		6		2			3		1
Lease financings	1		1		1		1			1		1
Wealth management loans	1		1		1		1			1		1

Total	$	253	100	%	$	254	100	%		$	224	100	%

(a) The allowance allocated to margin loans and overdrafts was insignificant at March 31, 2023, Dec. 31, 2022 and March 31, 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 $39 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 $78 million. Our multi-scenario-based macroeconomic forecast used in determining the March 31, 2023 allowance for credit losses consisted of three scenarios. The baseline scenario reflects slow GDP growth through the fourth quarter of 2023 before moderating, slightly rising unemployment and moderating growth in commercial real estate prices through the end of 2023. 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 fourth quarter of 2023 with subsequent stabilization as well as increasing unemployment through mid-2024 and lower commercial real estate prices

than the baseline. In the first 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 March 31, 2023, if we had applied 100% weighting to the downside scenario, the allowance for credit losses would have been approximately $67 million higher.

Nonperforming assets

The table below presents our nonperforming assets.


Nonperforming assets	March 31, 2023			Dec. 31, 2022
(dollars in millions)
Nonperforming loans:
Commercial real estate	$	54		$	54
Other residential mortgages	30			31

Wealth management mortgages	19			22



Total nonperforming loans	103			107
Other assets owned	2			2
Total nonperforming assets	$	105		$	109
Nonperforming assets ratio	0.17		%	0.16		%
Allowance for loan losses/nonperforming loans	165.0			164.5
Allowance for loan losses/nonperforming assets	161.9			161.5
Allowance for loan losses and lending-related commitments/nonperforming loans	245.6			237.4
Allowance for loan losses and lending-related commitments/nonperforming assets	241.0			233.0

Deposits

Total deposits were $281.3 billion at March 31, 2023, an increase of 1%, compared with $279.0 billion at Dec. 31, 2022. The increase reflects higher interest-bearing deposits in U.S. offices, partially offset by lower noninterest-bearing (principally in U.S. offices) and interest-bearing deposits in non-U.S. offices.

28 BNY Mellon

Noninterest-bearing deposits were $70.3 billion at March 31, 2023, compared with $78.0 billion at Dec. 31, 2022. Interest-bearing deposits were primarily demand deposits and totaled $211.0 billion at March 31, 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 March 31, 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 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.

BNY Mellon 29

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


Available funds	March 31, 2023			Dec. 31, 2022			Average
(dollars in millions)							1Q23			4Q22			1Q22
Cash and due from banks	$	5,564		$	5,030		$	5,697		$	5,413		$	6,040
Interest-bearing deposits with the Federal Reserve and other central banks	117,042			91,655			94,899			94,868			100,303
Interest-bearing deposits with banks	15,114			17,169			16,225			15,750			17,181
Federal funds sold and securities purchased under resale agreements	26,894			24,298			24,631			25,657			27,006
Total available funds	$	164,614		$	138,152		$	141,452		$	141,688		$	150,530
Total available funds as a percentage of total assets	39		%	34		%	35		%	34		%	34		%

Total available funds were $164.6 billion at March 31, 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, federal funds sold and securities purchased under resale agreements and cash and due from 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 $22.1 billion for the first three months of 2023, compared with $16.7 billion for the first three months of 2022. The increase primarily reflects higher federal funds purchased and securities sold under repurchase agreements and other borrowed funds, partially offset by lower trading liabilities.

Average interest-bearing foreign deposits, primarily from our European-based businesses included in the Securities Services and Market and Wealth Services segments, were $91.3 billion for the first three months of 2023, compared with $107.0 billion for the first three months of 2022. Average interest-bearing domestic deposits were $112.8 billion for the first three months of 2023, compared with $116.3 billion for the first three months of 2022. The decreases primarily reflect client activity.

Average payables to customers and broker-dealers were $17.0 billion for the first three months of 2023

and $16.7 billion for the first three months of 2022. Payables to customers and broker-dealers are driven by customer trading activity and market volatility.

Average long-term debt was $30.2 billion for the first three months of 2023 and $25.6 billion for the first three months of 2022.

Average noninterest-bearing deposits decreased to $69.9 billion for the first three months of 2023 from $90.2 billion for the first three 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”).

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

30 BNY Mellon

Credit ratings at March 31, 2023

Moody’s

S&P

Fitch

DBRS

Parent:

Long-term senior debt

AA-

Subordinated debt

A-

AA (low)

Preferred stock

Baa1

BBB

BBB+

Outlook – Parent

Stable

The Bank of New York Mellon:

Long-term senior debt

Aa2

AA-

AA (high)

Subordinated debt

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)

AA-

(a)

AA (high)

Long-term deposits

Aa1

AA-

AA+

AA (high)

Short-term deposits

A-1+

F1+

R-1 (high)

Outlook – Banks

Stable

(a) Represents senior debt issuer default rating.

NR – Not rated.

Long-term debt totaled $30.5 billion at March 31, 2023 and Dec. 31, 2022. Issuances of $1.5 billion and an increase in the fair value of hedged long-term debt were offset by maturities of $1.8 billion. Long-term debt of $3.5 billion will mature in the remainder of 2023.

In April 2023, the Parent issued $1.5 billion of fixed-to-floating rate senior notes maturing in 2027. The annual fixed interest rate is 4.947% from issuance to, but excluding, April 26, 2026, and then an annual interest rate of the compounded secured overnight financing rate (“SOFR”) plus 102.6 basis points. The Parent also issued $1.0 billion of fixed-to-floating rate senior notes maturing in 2034. The annual fixed interest rate is 4.967% from issuance to, but excluding, April 26, 2033, and then an annual interest rate of the compounded SOFR plus 160.6 basis points.

The Bank of New York Mellon may issue notes and certificates of deposit (“CDs”). At March 31, 2023 and Dec. 31, 2022, $780 million of notes were outstanding. At March 31, 2023, $697 million of CDs were outstanding. There were $122 million of CDs outstanding at Dec. 31, 2022.

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 March 31,

2023 and Dec. 31, 2022. There was no average commercial paper outstanding for the first three months of 2023. Average commercial paper outstanding was $4 million for the first three months of 2022.

Subsequent to March 31, 2023, our U.S. bank subsidiaries could declare dividends to the Parent of approximately $1.5 billion, without the need for a regulatory waiver. In addition, at March 31, 2023, non-bank subsidiaries of the Parent had liquid assets of approximately $4.5 billion. Restrictions on our ability to obtain funds from our subsidiaries are discussed in more detail in “Supervision and 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 uncommitted lines of credit in place for liquidity purposes that are guaranteed by the Parent. Pershing LLC has two separate uncommitted lines of credit amounting to $350 million in aggregate. There were no average borrowings under these lines in the first quarter of 2023. Pershing Limited, an indirect UK-based subsidiary of BNY Mellon, has two separate uncommitted lines of credit amounting to $259 million in aggregate. Average borrowings under these lines were $2 million in the first quarter of 2023.

BNY Mellon 31

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 72% of total revenue in the first quarter of 2023, and the dividend capacity of our banking subsidiaries. Our double leverage ratio was 119.9% at March 31, 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 February 2023, a quarterly dividend of $0.37 per common share was paid to common shareholders. Our common stock dividend payout ratio was 34% for the first quarter of 2023.

In the first quarter of 2023, we repurchased 25.1 million common shares at an average price of $49.94 per common share, for a total cost of $1.3 billion.

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 at March 31, 2023, and the average HQLA and average LCR for the first quarter of 2023.


Consolidated HQLA and LCR	March 31, 2023
(dollars in billions)
Cash (a)	$	117
Securities (b)	87
Total consolidated HQLA (c)	$	204

Total consolidated HQLA – average (c)	$	195
Average LCR	118		%

(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 March 31, 2023 and averaged $135 billion for the first 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 first quarter of 2023.

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 $1.8 billion in the three months ended March 31, 2023, compared with $3.4 billion in the three months ended March 31, 2022. In the three months ended March 31, 2023, cash flows provided by operations primarily resulted from changes in trading assets and liabilities and earnings, partially offset by changes in accruals. In the three months ended March 31, 2022, cash flows provided by operations primarily resulted from changes in trading assets and liabilities and earnings.

Net cash used for investing activities was $17.8 billion in the three months ended March 31, 2023, compared with $33.9 billion in the three months ended March 31, 2022. In the three months ended March 31, 2023, net cash used for investing activities primarily resulted from changes in interest-bearing deposits with the Federal Reserve and other central

32 BNY Mellon

banks, partially offset by net changes in securities and loans. In the three months ended March 31, 2022, 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 interest-bearing deposits with banks, partially offset by changes in federal funds sold and securities purchased under resale agreements.

Net cash provided by financing activities was $14.4 billion in the three months ended March 31, 2023,

compared with $30.1 billion in the three months ended March 31, 2022. In the three months ended March 31, 2023, net cash provided by financing activities primarily resulted from changes in federal funds purchased and securities sold under repurchase agreements. In the three months ended March 31, 2022, net cash provided by financing activities primarily resulted from changes in deposits, changes in payables to customers and broker-dealers and changes in federal funds purchased and securities sold under repurchase agreements.

Capital


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



BNY Mellon shareholders’ equity to total assets ratio	9.6		%	10.0		%
BNY Mellon common shareholders’ equity to total assets ratio	8.4		%	8.8		%
Total BNY Mellon shareholders’ equity	$	40,634		$	40,734
Total BNY Mellon common shareholders’ equity	$	35,796		$	35,896
BNY Mellon tangible common shareholders’ equity – Non-GAAP (a)	$	18,561		$	18,686
Book value per common share	$	45.36		$	44.40
Tangible book value per common share – Non-GAAP (a)	$	23.52		$	23.11
Closing stock price per common share	$	45.44		$	45.52
Market capitalization	$	35,858		$	36,800
Common shares outstanding	789,134			808,445



Cash dividends per common share	$	0.37		$	0.37
Common dividend payout ratio	34		%	60		%
Common dividend yield (annualized)	3.3		%	3.2		%

(a) See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 41 for a reconciliation of GAAP to Non-GAAP measures.

The Bank of New York Mellon Corporation total shareholders’ equity decreased to $40.6 billion at March 31, 2023 from $40.7 billion at Dec. 31, 2022. The decrease primarily reflects common stock repurchases and common dividends, partially offset by earnings and unrealized gains in the first quarter on securities available-for-sale.

In the first three months of 2023, we repurchased 25.1 million common shares at an average price of $49.94 per common share for a total of $1.3 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.

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 March 31, 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

BNY Mellon 33

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.

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


Consolidated and largest bank subsidiary regulatory capital ratios	March 31, 2023								Dec. 31, 2022
	Well capitalized			Minimum required			Capital ratios		Capital ratios
						(a)
Consolidated regulatory capital ratios: (b)
Advanced Approaches:
CET1 ratio	N/A		(c)	8.5	%		11.0	%	11.2	%
Tier 1 capital ratio	6	%		10			13.9		14.1
Total capital ratio	10			12			14.7		14.9
Standardized Approach:
CET1 ratio	N/A		(c)	8.5	%		11.4	%	11.3	%
Tier 1 capital ratio	6	%		10			14.4		14.4
Total capital ratio	10			12			15.4		15.3
Tier 1 leverage ratio	N/A		(c)	4			5.8		5.8
SLR (d)	N/A		(c)	5			6.9		6.8

The Bank of New York Mellon regulatory capital ratios: (b)
Advanced Approaches:
CET1 ratio	6.5	%		7	%		15.4	%	15.6	%
Tier 1 capital ratio	8			8.5			15.4		15.6
Total capital ratio	10			10.5			15.5		15.7
Tier 1 leverage ratio	5			4			6.3		6.2
SLR (d)	6			3			7.8		7.7

(a) Minimum requirements for March 31, 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.

34 BNY Mellon

Our CET1 ratio under the Advanced Approaches was 11.0% at March 31, 2023 and 11.2% at Dec. 31, 2022. The decrease was primarily driven by capital deployed through common stock repurchases and common dividends and higher RWAs, partially offset by capital generated through earnings and unrealized gains in the first quarter on securities available-for-sale.

The Tier 1 leverage ratio was 5.8% at March 31, 2023 and Dec. 31, 2022, as a slight decrease in capital was offset by a decrease in 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 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
	March 31, 2023		Dec. 31, 2022
(in millions)
CET1:
Common shareholders’ equity	$	35,796	$	35,896
Adjustments for:
Goodwill and intangible assets (a)	(17,235)		(17,210)
Net pension fund assets	(347)		(317)
Embedded goodwill	(277)		(279)
Deferred tax assets	(57)		(56)
Other	(4)		(2)
Total CET1	17,876		18,032
Other Tier 1 capital:
Preferred stock	4,838		4,838
Other	(4)		(14)
Total Tier 1 capital	$	22,710	$	22,856
Tier 2 capital:
Subordinated debt	$	1,248	$	1,248
Allowance for credit losses	319		291
Other	(1)		(11)
Total Tier 2 capital – Standardized Approach	1,566		1,528
Excess of expected credit losses	48		50
Less: Allowance for credit losses	319		291
Total Tier 2 capital – Advanced Approaches	$	1,295	$	1,287
Total capital:
Standardized Approach	$	24,276	$	24,384
Advanced Approaches	$	24,005	$	24,143

Risk-weighted assets:
Standardized Approach	$	157,399	$	159,096
Advanced Approaches:
Credit Risk	$	91,142	$	90,243
Market Risk	3,238		2,979
Operational Risk	68,525		68,450
Total Advanced Approaches	$	162,905	$	161,672

Average assets for Tier 1 leverage ratio	$	389,581	$	396,643
Total leverage exposure for SLR	$	330,501	$	336,049

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

BNY Mellon 35

The table below presents the factors that impacted CET1 capital.


CET1 generation	1Q23
(in millions)
CET1 – Beginning of period	$	18,032
Net income applicable to common shareholders of The Bank of New York Mellon Corporation	905
Goodwill and intangible assets, net of related deferred tax liabilities	(25)
Gross CET1 generated	880
Capital deployed:
Common stock repurchases	(1,256)
Common stock dividends (a)	(304)
Total capital deployed	(1,560)
Other comprehensive gain:
Unrealized gain on assets available-for-sale	318
Foreign currency translation	103
Unrealized gain on cash flow hedges	5
Defined benefit plans	(3)

Total other comprehensive gain	423
Additional paid-in capital (b)	142
Other (deductions) additions:
Net pension fund assets	(30)
Embedded goodwill	2
Deferred tax assets	(1)
Other	(12)
Total other deductions	(41)
Net CET1 deployed	(156)
CET1 – End of period	$	17,876

(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 March 31, 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 March 31, 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	6	bps	7	bps
Advanced Approaches	6		7

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

Total capital:
Standardized Approach	6		10
Advanced Approaches	6		9

Tier 1 leverage	3		2

SLR	3		2

Stress capital buffer

In August 2022, the Federal Reserve announced that BNY Mellon’s SCB requirement would be 2.5%, equal to the regulatory floor, effective as of Oct. 1, 2022. 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

36 BNY Mellon

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	March 31, 2023
	Minimum required		Minimum ratios with buffers
					Ratios
Eligible external TLAC:
As a percentage of RWA	18.0	%	21.5	%	30.2	%
As a percentage of total leverage exposure	7.5	%	9.5	%	14.9	%

Eligible external LTD:
As a percentage of RWA	7.5	%	N/A		14.7	%
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.

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)	1Q23						March 31, 2023
(in millions)	Average		Minimum		Maximum
Interest rate	$	3.8	$	2.1	$	7.6	$	4.4
Foreign exchange	3.6		2.4		5.7		3.1
Equity	0.1		—		0.3		0.2
Credit	1.8		0.7		3.5		1.9
Diversification	(5.3)		N/M		N/M		(4.9)
Overall portfolio	4.0		2.2		8.9		4.7


VaR (a)	4Q22						Dec. 31, 2022
(in millions)	Average		Minimum		Maximum
Interest rate	$	2.9	$	1.7	$	5.1	$	2.3
Foreign exchange	4.2		2.0		7.0		3.0
Equity	0.2		—		0.4		0.1
Credit	2.6		1.5		4.1		1.8
Diversification	(5.4)		N/M		N/M		(3.5)
Overall portfolio	4.5		3.1		6.7		3.7


VaR (a)	1Q22						March 31, 2022
(in millions)	Average		Minimum		Maximum
Interest rate	$	3.4	$	1.6	$	6.9	$	4.3
Foreign exchange	3.3		2.2		6.0		3.6
Equity	0.2		—		0.5		0.2
Credit	2.2		1.5		3.3		2.0
Diversification	(4.2)		N/M		N/M		(3.9)
Overall portfolio	4.9		2.8		8.1		6.2

(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.

BNY Mellon 37

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.

During the first 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 first 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)	March 31, 2023	Dec. 31, 2022	Sept. 30, 2022	June 30, 2022	March 31, 2022

Revenue range:	Number of days
Less than $(2.5)	—	2	—	1	1
$(2.5) – $0	1	4	3	4	8
$0 – $2.5	20	13	10	10	12
$2.5 – $5.0	26	24	32	24	23
More than $5.0	15	20	19	24	18

(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 $9.0 billion at March 31, 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 $5.7 billion at March 31, 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 March 31, 2023, our OTC derivative assets, including those in hedging relationships, of $1.7 billion included a credit valuation adjustment (“CVA”) deduction of $18 million. Our OTC derivative liabilities, including those in hedging relationships, of $3.0 billion included a debit valuation adjustment (“DVA”) of $4 million related to our own credit spread. Net of hedges, the CVA was unchanged and the DVA increased by $1 million in the first quarter of 2023, which increased investment and other revenue – other trading revenue by $1 million. The net impact decreased investment

38 BNY Mellon

and other revenue – other trading revenue by $2 million in the fourth quarter of 2022 and by less than $1 million in the first 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

	March 31, 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	$	1,417	95	%	$	2,553	98	%
Non-investment grade	77		5	%	63		2	%
Total	$	1,494	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.

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 March 31, 2023. 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)	March 31, 2023		Dec. 31, 2022		March 31, 2022
Up 100 bps rate shock vs. baseline	$	441	$	214	$	268
Long-term up 100 bps, short-term unchanged	109		30		24
Short-term up 100 bps, long-term unchanged	332		184		245
Long-term down 50 bps, short-term unchanged	(61)		(20)		(20)
Down 100 bps rate shock vs. baseline	(463)		(281)		(315)

At March 31, 2023, the impact of a 100 bps upward shift in rates on net interest revenue rose compared with Dec. 31, 2022. The drivers were lower expected deposit interest expense in rising rate scenarios, driven by changes in the forward rate curve to be more downward sloping and lower deposit rate sensitivity.

BNY Mellon 39

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 of U.S. dollar-denominated noninterest-bearing deposits would reduce the net interest revenue sensitivity results in the up 100 basis point scenario in the table above by approximately $290 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 the 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.

40 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.

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	1Q23			4Q22			1Q22
(dollars in millions)
Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP	$	905		$	509		$	699
Add: Amortization of intangible assets	14			16			17
Less: Tax impact of amortization of intangible assets	3			4			4
Adjusted net income applicable to common shareholders of The Bank of New York Mellon Corporation, excluding amortization of intangible assets – Non-GAAP	$	916		$	521		$	712



Average common shareholders’ equity	$	35,604		$	35,259		$	37,363
Less: Average goodwill	16,160			16,229			17,490
Average intangible assets	2,899			2,905			2,979
Add: Deferred tax liability – tax deductible goodwill	1,187			1,181			1,184
Deferred tax liability – intangible assets	660			660			673
Average tangible common shareholders’ equity – Non-GAAP	$	18,392		$	17,966		$	18,751

Return on common equity (annualized) – GAAP	10.3		%	5.7		%	7.6		%

Return on tangible common equity (annualized) – Non-GAAP	20.2		%	11.5		%	15.4		%

BNY Mellon 41

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	March 31, 2023		Dec. 31, 2022		March 31, 2022
(dollars in millions, except per share amounts and unless otherwise noted)
BNY Mellon shareholders’ equity at period end – GAAP	$	40,634	$	40,734	$	41,799
Less: Preferred stock	4,838		4,838		4,838
BNY Mellon common shareholders’ equity at period end – GAAP	35,796		35,896		36,961
Less: Goodwill	16,192		16,150		17,462
Intangible assets	2,890		2,901		2,968
Add: Deferred tax liability – tax deductible goodwill	1,187		1,181		1,184
Deferred tax liability – intangible assets	660		660		673
BNY Mellon tangible common shareholders’ equity at period end – Non-GAAP	$	18,561	$	18,686	$	18,388

Period-end common shares outstanding (in thousands)	789,134		808,445		807,798

Book value per common share – GAAP	$	45.36	$	44.40	$	45.76
Tangible book value per common share – Non-GAAP	$	23.52	$	23.11	$	22.76

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					1Q23 vs.
(dollars in millions)	1Q23		1Q22		1Q22
Investment management and performance fees – GAAP	$	776	$	883	(12)	%
Impact of changes in foreign currency exchange rates	—		(28)
Adjusted investment management and performance fees – Non-GAAP	$	776	$	855	(9)	%

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					1Q23 vs.
(dollars in millions)	1Q23		1Q22		1Q22
Investment management and performance fees – GAAP	$	774	$	882	(12)	%
Impact of changes in foreign currency exchange rates	—		(28)
Adjusted investment management and performance fees – Non-GAAP	$	774	$	854	(9)	%

The following tables present the reconciliations of 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

(dollars in millions)	3Q22




(Loss) before income taxes – GAAP	$	(497)
Impact of notable items (a)	(679)
Adjusted income before income taxes – Non-GAAP	$	182

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

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

(a) Notable items in the third quarter of 2022 include goodwill impairment and severance expense.

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

42 BNY Mellon


Pre-tax operating margin reconciliation – Investment and Wealth Management business segment
(dollars in millions)	1Q23			4Q22			2Q22			1Q22
Income before income taxes – GAAP	$	93		$	125		$	208		$	212

Total revenue – GAAP	$	827		$	825		$	899		$	964
Less: Distribution and servicing expense	86			87			91			79
Adjusted total revenue, net of distribution and servicing expense – Non-GAAP	$	741		$	738		$	808		$	885

Pre-tax operating margin – GAAP (a)	11		%	15		%	23		%	22		%
Adjusted pre-tax operating margin, net of distribution and servicing expense – Non-GAAP (a)	13		%	17		%	26		%	24		%

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

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 March 31, 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 “Supervision and Regulation” in our 2022 Annual Report. The following discussion summarizes certain regulatory, legislative and other developments that may affect BNY Mellon.

Recent bank failures

On March 12 and 13, 2023, following the closures of Silicon Valley Bank (“SVB”) and Signature Bank and the appointment of the Federal Deposit Insurance Corporation (“FDIC”) as the receiver for those banks, the FDIC announced that, under the systemic risk exception set forth in the Federal Deposit Insurance Act (“FDIA”), all insured and uninsured deposits of those banks were transferred to the respective bridge banks for SVB and Signature Bank.

The FDIC also announced that, as required by the FDIA, any losses to the Deposit Insurance Fund (“DIF”) to support uninsured depositors would be recovered by a special assessment. Under the FDIA, the assessment may be on insured depository institutions, depository institution holding companies (with the concurrence of the Treasury Secretary), or both, as the FDIC determines to be appropriate. In March 2023 testimony before Congress, the Chairman of the FDIC stated that the FDIC then preliminarily estimated the losses to the DIF of resolving SVB and Signature Bank to be $22.5 billion in the aggregate. The FDIA provides that the special

BNY Mellon 43

assessment will be prescribed through regulation. The FDIC has discretion with respect to the design and time frame for any special assessment, and, under the FDIA, the FDIC may consider the types of entities that benefit from the action taken, economic conditions, the effects on the industry, and such other factors as the FDIC deems appropriate. The timing, amount and allocation of the special assessment that will be imposed on banking organizations is uncertain, but the impact of the special assessment on our noninterest expense and results of operations may be material.

On May 1, 2023, the FDIC released a comprehensive overview of the deposit insurance system and options for reform to address financial stability concerns stemming from recent bank failures. The FDIC evaluated three primary options: limited coverage, unlimited coverage and targeted coverage. The proposed options would require Congressional action, though some aspects of the report lie within the scope of the FDIC’s rulemaking authority. We are evaluating the impact of the proposed reforms.

The closures of SVB and Signature Bank and adverse developments affecting other banks in March 2023 resulted in heightened levels of market activity and volatility. We experienced increased deposit balances, which resulted in deposits increasing slightly at March 31, 2023 compared to Dec. 31, 2022, and we experienced elevated transaction volumes in parts of the business in the days following the closure of SVB and Signature Bank. On March 16, 2023, BNY Mellon and other large U.S. financial institutions made uninsured deposits into another U.S. financial institution, First Republic Bank. BNY Mellon’s deposit in First Republic Bank totaled $1 billion and had a minimum term of 120 days. On May 1, 2023, the FDIC was appointed as receiver for First Republic Bank. Also on May 1, 2023, JPMorgan Chase acquired the substantial majority of assets and assumed the deposits and certain other liabilities of First Republic Bank from the FDIC receivership, including our deposit with First Republic Bank. The FDIC has indicated that the estimated losses to the DIF of resolving First Republic Bank are expected to be $13 billion, which is expected to result in increased FDIC assessments and increase our noninterest expense in future periods.

These recent bank failures and other developments in the banking industry may result in increased

regulatory activity and restrictions on banks. In addition, these recent developments have highlighted that social media and technology have the potential to accelerate the speed of declines in deposit levels when there is a reduction of confidence in a banking institution.

U.S. debt ceiling

In January 2023, the outstanding national debt of the U.S. government reached its statutory limit. The U.S. Treasury Department has announced that, since then, it has been using extraordinary measures to prevent the U.S. government’s default on its payment obligations, and to extend the time that the U.S. government has to raise its statutory debt limit or otherwise resolve its funding situation. Further delays to raise the Federal debt ceiling could have severe repercussions within the U.S. and to global credit and financial markets and could exacerbate concerns over the sovereign debt of other countries. If the U.S. government does not raise the debt ceiling, it could default on its payment obligations, or experience delays in making payments when due, including in respect of U.S. Treasury securities that play an integral role in financial markets. A payment default or delay by the U.S. government, or continued uncertainty surrounding the U.S. debt ceiling, could result in a variety of adverse effects for financial markets and market participants, as well as for our business, results of operations, liquidity and financial condition.

SEC cybersecurity proposals

On March 15, 2023, the SEC proposed a new rule regarding cybersecurity risk management for entities including broker-dealers, security-based swap dealers, and transfer agents. The proposed rule would require such entities to maintain written policies and procedures to address their cybersecurity risk, immediately notify the SEC of significant cybersecurity incidents, and publicly disclose descriptions of their cybersecurity risks and significant cybersecurity incidents.

The SEC also proposed amendments to Regulation S-P, including a requirement for broker-dealers, investment companies, registered investment advisers, and transfer agents to adopt written policies and procedures for an incident response program with respect to unauthorized access to or use of customer information. The proposal would require these

44 BNY Mellon

entities to notify individuals whose sensitive customer information was accessed or used without authorization not later than 30 days after becoming aware that the information has been compromised. BNY Mellon is evaluating the potential impact of the proposals.

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; 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 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 45


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

Consolidated Income Statement (unaudited)


	Quarter ended
	March 31, 2023		Dec. 31, 2022		March 31, 2022
(in millions)
Fee and other revenue
Investment services fees	$	2,119	$	2,173	$	1,993
Investment management and performance fees	776		783		883
Foreign exchange revenue	176		190		207
Financing-related fees	52		43		45
Distribution and servicing fees	33		33		30
Total fee revenue	3,156		3,222		3,158
Investment and other revenue	79		(360)		70
Total fee and other revenue	3,235		2,862		3,228
Net interest revenue
Interest revenue	3,942		3,197		778
Interest expense	2,814		2,141		80
Net interest revenue	1,128		1,056		698
Total revenue	4,363		3,918		3,926
Provision for credit losses	27		20		2
Noninterest expense
Staff	1,791		1,802		1,702
Software and equipment	429		432		399
Professional, legal and other purchased services	375		415		370
Net occupancy	119		143		122
Sub-custodian and clearing	118		112		118
Distribution and servicing	85		86		79
Bank assessment charges	40		19		35
Business development	39		45		30

Amortization of intangible assets	14		16		17
Other	90		143		134
Total noninterest expense	3,100		3,213		3,006
Income
Income before income taxes	1,236		685		918
Provision for income taxes	260		142		153
Net income	976		543		765
Net loss attributable to noncontrolling interests related to consolidated investment management funds	—		—		8
Net income applicable to shareholders of The Bank of New York Mellon Corporation	976		543		773
Preferred stock dividends	(71)		(34)		(74)
Net income applicable to common shareholders of The Bank of New York Mellon Corporation	$	905	$	509	$	699

46 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
	March 31, 2023		Dec. 31, 2022		March 31, 2022
(in millions)
Net income applicable to common shareholders of The Bank of New York Mellon Corporation	$	905	$	509	$	699
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	$	905	$	509	$	699


Average common shares and equivalents outstanding of The Bank of New York Mellon Corporation	Quarter ended
	March 31, 2023	Dec. 31, 2022	March 31, 2022
(in thousands)
Basic	803,340	811,669	809,469
Common stock equivalents	4,473	4,275	4,878
Less: Participating securities	(95)	(98)	(361)
Diluted	807,718	815,846	813,986

Anti-dilutive securities (a)	4,872	2,170	2,647

(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
	March 31, 2023		Dec. 31, 2022		March 31, 2022
(in dollars)
Basic	$	1.13	$	0.63	$	0.86
Diluted	$	1.12	$	0.62	$	0.86

See accompanying unaudited Notes to Consolidated Financial Statements.

BNY Mellon 47


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

Consolidated Comprehensive Income Statement (unaudited)


	Quarter ended
	March 31, 2023		Dec. 31, 2022		March 31, 2022
(in millions)
Net income	$	976	$	543	$	765
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	103		547		(153)
Unrealized gain (loss) on assets available-for-sale:
Unrealized gain (loss) arising during the period	317		76		(1,531)
Reclassification adjustment	1		342		(3)
Total unrealized gain (loss) on assets available-for-sale	318		418		(1,534)
Defined benefit plans:

Net (loss) arising during the period	—		(306)		—

Amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost	(3)		12		18
Total defined benefit plans	(3)		(294)		18
Net unrealized gain (loss) on cash flow hedges	5		2		(2)
Total other comprehensive income (loss), net of tax (a)	423		673		(1,671)
Total comprehensive income (loss)	1,399		1,216		(906)
Net loss attributable to noncontrolling interests	—		—		8
Other comprehensive (income) loss attributable to noncontrolling interests	—		(12)		3
Comprehensive income (loss) applicable to shareholders of The Bank of New York Mellon Corporation	$	1,399	$	1,204	$	(895)

(a) Other comprehensive income (loss) attributable to The Bank of New York Mellon Corporation shareholders was $423 million for the quarter ended March 31, 2023, $661 million for the quarter ended Dec. 31, 2022 and $(1,668) million for the quarter ended March 31, 2022.

See accompanying unaudited Notes to Consolidated Financial Statements.

48 BNY Mellon


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

Consolidated Balance Sheet (unaudited)


	March 31, 2023		Dec. 31, 2022
(dollars in millions, except per share amounts)
Assets
Cash and due from banks, net of allowance for credit losses of $33 and $29	$	5,564	$	5,030
Interest-bearing deposits with the Federal Reserve and other central banks	117,042		91,655
Interest-bearing deposits with banks, net of allowance for credit losses of $28 and $4 (includes restricted of $4,459 and $6,499)	15,114		17,169
Federal funds sold and securities purchased under resale agreements	26,894		24,298
Securities:
Held-to-maturity, at amortized cost, net of allowance for credit losses of $1 and less than $1 (fair value of $49,067 and $49,992)	54,561		56,194
Available-for-sale, at fair value (amortized cost of $88,872 and $92,484, net of allowance for credit losses of less than $1 and $1)	84,117		86,622
Total securities	138,678		142,816
Trading assets	9,024		9,908
Loans	62,323		66,063
Allowance for credit losses	(170)		(176)
Net loans	62,153		65,887
Premises and equipment	3,248		3,256
Accrued interest receivable	978		858
Goodwill	16,192		16,150
Intangible assets	2,890		2,901
Other assets, net of allowance for credit losses on accounts receivable of $5 and $4 (includes $1,074 and $971, at fair value)	27,335		25,855
Total assets	$	425,112	$	405,783
Liabilities
Deposits:
Noninterest-bearing (principally U.S. offices)	$	70,246	$	78,017
Interest-bearing deposits in U.S. offices	120,207		108,362
Interest-bearing deposits in non-U.S. offices	90,841		92,591
Total deposits	281,294		278,970
Federal funds purchased and securities sold under repurchase agreements	26,540		12,335
Trading liabilities	5,705		5,385
Payables to customers and broker-dealers	22,598		23,435

Other borrowed funds	2,538		397
Accrued taxes and other expenses	4,732		5,410
Other liabilities (including allowance for credit losses on lending-related commitments of $83 and $78, also includes $314 and $221, at fair value)	10,414		8,543
Long-term debt	30,489		30,458
Total liabilities	384,310		364,933
Temporary equity
Redeemable noncontrolling interests	96		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 1,401,562,581 and 1,395,725,198 shares	14		14
Additional paid-in capital	28,650		28,508
Retained earnings	38,465		37,864
Accumulated other comprehensive loss, net of tax	(5,543)		(5,966)
Less: Treasury stock of 612,428,769 and 587,280,598 common shares, at cost	(25,790)		(24,524)
Total The Bank of New York Mellon Corporation shareholders’ equity	40,634		40,734
Nonredeemable noncontrolling interests of consolidated investment management funds	72		7
Total permanent equity	40,706		40,741
Total liabilities, temporary equity and permanent equity	$	425,112	$	405,783

See accompanying unaudited Notes to Consolidated Financial Statements.

BNY Mellon 49


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

Consolidated Statement of Cash Flows (unaudited)


	Three months ended March 31,
(in millions)	2023		2022
Operating activities
Net income	$	976	$	765
Net loss attributable to noncontrolling interests	—		8
Net income applicable to shareholders of The Bank of New York Mellon Corporation	976		773
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Provision for credit losses	27		2
Pension plan contributions	(1)		(1)
Depreciation and amortization	351		437

Deferred tax (benefit)	2		36
Net securities losses (gains)	1		(4)
Change in trading assets and liabilities	989		2,251
Change in accruals and other, net	(553)		(65)
Net cash provided by operating activities	1,792		3,429
Investing activities
Change in interest-bearing deposits with banks	(25)		(2,068)
Change in interest-bearing deposits with the Federal Reserve and other central banks	(24,908)		(34,733)
Purchases of securities held-to-maturity	(273)		(1,299)
Paydowns of securities held-to-maturity	1,063		2,198
Maturities of securities held-to-maturity	811		400
Purchases of securities available-for-sale	(8,917)		(10,902)
Sales of securities available-for-sale	6,581		6,315
Paydowns of securities available-for-sale	904		1,754
Maturities of securities available-for-sale	5,229		3,303
Net change in loans	3,714		(497)

Change in federal funds sold and securities purchased under resale agreements	(2,599)		2,501
Net change in seed capital investments	6		(8)
Purchases of premises and equipment/capitalized software	(261)		(271)
Proceeds from the sale of premises and equipment	—		45


Other, net	923		(639)
Net cash (used for) investing activities	(17,752)		(33,901)
Financing activities
Change in deposits	760		27,557
Change in federal funds purchased and securities sold under repurchase agreements	14,231		1,618
Change in payables to customers and broker-dealers	(826)		1,652
Change in other borrowed funds	2,141		(441)

Net proceeds from the issuance of long-term debt	1,498		1,295
Repayments of long-term debt	(1,750)		(1,250)
Proceeds from the exercise of stock options	—		9
Issuance of common stock	3		130

Treasury stock acquired	(1,256)		(118)

Common cash dividends paid	(304)		(278)
Preferred cash dividends paid	(71)		(74)

Other, net	(13)		(5)
Net cash provided by financing activities	14,413		30,095
Effect of exchange rate changes on cash	41		38
Change in cash and due from banks and restricted cash
Change in cash and due from banks and restricted cash	(1,506)		(339)
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	$	10,023	$	9,544
Cash and due from banks and restricted cash
Cash and due from banks at end of period (unrestricted cash)	$	5,564	$	6,143
Restricted cash at end of period	4,459		3,401
Cash and due from banks and restricted cash at end of period	$	10,023	$	9,544
Supplemental disclosures
Interest paid	$	2,671	$	107
Income taxes paid	160		125
Income taxes refunded	2		5

See accompanying unaudited Notes to Consolidated Financial Statements.

50 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 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	—		—		—		—		—		—		—		—			10
Redemption of subsidiary shares from noncontrolling interests	—		—		—		—		—		—		—		—			(34)
Other net changes in noncontrolling interests	—		—		(8)		—		—		—		65		57			9
Net income	—		—		—		976		—		—		—		976			—
Other comprehensive (loss)	—		—		—		—		423		—		—		423			—
Dividends:
Common stock at $0.37 per share (b)	—		—		—		(304)		—		—		—		(304)			—
Preferred stock	—		—		—		(71)		—		—		—		(71)			—
Repurchase of common stock	—		—		—		—		—		(1,256)		—		(1,256)			—
Common stock issued under employee benefit plans	—		—		5		—		—		—		—		5			—


Stock-based compensation	—		—		145		—		—		—		—		145			—
Excise tax on share repurchases	—		—		—		—		—		(10)		—		(10)			—
Other	—		—		—		—		—		—		—		—			2
Balance at March 31, 2023	$	4,838	$	14	$	28,650	$	38,465	$	(5,543)	$	(25,790)	$	72	$	40,706	(a)	$	96

(a)Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $35,896 million at Dec. 31, 2022 and $35,796 million at March 31, 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 Sept. 30, 2022	$	4,838	$	14	$	28,374	$	37,660	$	(6,627)	$	(24,522)	$	7	$	39,744	(a)	$	152


Shares issued to shareholders of noncontrolling interests	—		—		—		—		—		—		—		—			5
Redemption of subsidiary shares from noncontrolling interests	—		—		—		—		—		—		—		—			(16)
Other net changes in noncontrolling interests	—		—		47		—		—		—		—		47			(42)
Net income (loss)	—		—		—		543		—		—		—		543			—
Other comprehensive (loss)	—		—		—		—		661		—		—		661			12
Dividends:
Common stock at $0.37 per share (b)	—		—		—		(305)		—		—		—		(305)			—
Preferred stock	—		—		—		(34)		—		—		—		(34)			—
Repurchase of common stock	—		—		—		—		—		(2)		—		(2)			—

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



Stock-based compensation	—		—		82		—		—		—		—		82			—

Other	—		—		—		—		—		—		—		—			(2)
Balance at Dec. 31, 2022	$	4,838	$	14	$	28,508	$	37,864	$	(5,966)	$	(24,524)	$	7	$	40,741	(a)	$	109

(a)Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $34,899 million at Sept. 30, 2022 and $35,896 million at Dec. 31, 2022.

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

BNY Mellon 51


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) income, 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	—		—		—		—		—		—		—		—			7
Redemption of subsidiary shares from noncontrolling interests	—		—		—		—		—		—		—		—			(14)
Other net changes in noncontrolling interests	—		—		(5)		—		—		—		10		5			4
Net income (loss)	—		—		—		773		—		—		(8)		765			—
Other comprehensive (loss)	—		—		—		—		(1,668)		—		—		(1,668)			(3)
Dividends:
Common stock at $0.34 per share (b)	—		—		—		(278)		—		—		—		(278)			—
Preferred stock	—		—		—		(74)		—		—		—		(74)			—
Repurchase of common stock	—		—		—		—		—		(118)		—		(118)			—

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



Stock awards and options exercised	—		—		130		—		—		—		—		130			—


Balance at March 31, 2022	$	4,838	$	14	$	28,258	$	37,088	$	(3,881)	$	(24,518)	$	198	$	41,997	(a)	$	155

(a) Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $38,196 million at December 31, 2021 and $36,961 million at March 31, 2022.

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

See accompanying unaudited Notes to Consolidated Financial Statements.

52 BNY Mellon


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

BNY Mellon 53


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 three months of 2023. There were no contingent receipts in the first three months of 2023. At March 31, 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 March 31, 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 March 31, 2023 and Dec. 31, 2022.


Securities at March 31, 2023			Gross unrealized				Fair value
	Amortized cost
(in millions)			Gains		Losses
Available-for-sale:
U.S. Treasury	$	26,578	$	84	$	1,957	$	24,705
Sovereign debt/sovereign guaranteed	10,759		7		475		10,291
Agency residential mortgage-backed securities (“RMBS”)	10,575		110		487		10,198
Agency commercial mortgage-backed securities (“MBS”)	8,560		86		584		8,062
Supranational	8,242		8		339		7,911
Foreign covered bonds	6,234		6		261		5,979
Collateralized loan obligations (“CLOs”)	5,797		2		92		5,707
Non-agency commercial MBS	3,358		—		351		3,007
U.S. government agencies	2,945		52		192		2,805
Foreign government agencies	2,454		2		107		2,349
Non-agency RMBS	2,117		36		196		1,957
Other asset-backed securities (“ABS”)	1,252		—		107		1,145


Other debt securities	1		—		—		1
Total securities available-for-sale (a)(b)	$	88,872	$	393	$	5,148	$	84,117
Held-to-maturity:
Agency RMBS	$	33,116	$	1	$	3,795	$	29,322
U.S. Treasury	10,084		1		750		9,335
U.S. government agencies	4,204		—		468		3,736
Agency commercial MBS	3,969		—		356		3,613
Sovereign debt/sovereign guaranteed	1,503		—		71		1,432
CLOs	983		—		26		957

Supranational	593		—		24		569
Foreign government agencies	67		—		4		63
Non-agency RMBS	29		2		2		29
State and political subdivisions	13		—		2		11
Total securities held-to-maturity	$	54,561	$	4	$	5,498	$	49,067
Total securities	$	143,433	$	397	$	10,646	$	133,184

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

(b) Includes gross unrealized gains of $323 million and gross unrealized losses of $171 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.

54 BNY Mellon


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	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 loss 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)	1Q23		4Q22		1Q22
Realized gross gains	$	14	$	3	$	73
Realized gross losses	(15)		(451)		(69)
Total net securities (losses) gains	$	(1)	$	(448)	$	4

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


Net securities gains (losses)
(in millions)	1Q23		4Q22		1Q22
Non-agency RMBS	$	2	$	—	$	49
U.S. Treasury	(8)		—		11
State and political subdivisions	—		(324)		(13)
Corporate bonds	—		(126)		(47)
Other	5		2		4
Total net securities (losses) gains	$	(1)	$	(448)	$	4

Allowance for credit losses – Securities

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

Credit quality indicators – Securities

At March 31, 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, $171 million of the unrealized losses at March 31, 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.

BNY Mellon 55


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 March 31, 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	$	5,176	$	259	$	19,529	$	1,698	$	24,705	$	1,957
Agency RMBS	4,488		128		4,618		359		9,106		487
Sovereign debt/sovereign guaranteed	2,189		53		5,581		422		7,770		475
Agency commercial MBS	3,271		125		4,382		459		7,653		584
Supranational	2,771		31		3,778		308		6,549		339
CLOs	1,381		17		3,842		75		5,223		92
Foreign covered bonds	1,415		27		3,180		234		4,595		261
Non-agency commercial MBS	453		8		2,479		343		2,932		351
Foreign government agencies	605		5		1,579		102		2,184		107
U.S. government agencies	1,235		62		940		130		2,175		192

Non-agency RMBS	221		5		1,394		191		1,615		196
Other ABS	59		—		1,047		107		1,106		107


Total securities available-for-sale (a)	$	23,264	$	720	$	52,349	$	4,428	$	75,613	$	5,148

(a) Includes $59 million gross unrealized losses for less than 12 months and $112 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.


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	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.

56 BNY Mellon


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 March 31, 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	$	33,116	$	(3,794)	100	%	—	%	—	%	—	%		—	%
U.S. Treasury	10,084		(749)		100		—		—		—			—
U.S. government agencies	4,204		(468)		100		—		—		—			—
Agency commercial MBS	3,969		(356)		100		—		—		—			—
Sovereign debt/sovereign guaranteed (b)	1,503		(71)		100		—		—		—			—
CLOs	983		(26)		100		—		—		—			—
Supranational	593		(24)		100		—		—		—			—
Foreign government agencies	67		(4)		100		—		—		—			—
Non-agency RMBS	29		—		21		59		2		16			2
State and political subdivisions	13		(2)		1		2		2		—			95
Total held-to-maturity securities	$	54,561	$	(5,494)	100	%	—	%	—	%	—	%		—	%

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

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


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.

BNY Mellon 57


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 March 31, 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	$	7,681	1.15	%	$	10,680	1.12	%	$	4,230	1.24	%	$	2,114	2.92	%	$	24,705	1.31	%
Sovereign debt/sovereign guaranteed	3,950		2.57		5,371		1.59		918		1.07		52		3.13		10,291		1.91
Supranational	851		1.23		5,364		2.74		1,696		2.77		—		—		7,911		2.59
Foreign covered bonds	956		1.80		4,563		2.89		460		0.78		—		—		5,979		2.54
Foreign government agencies	439		2.13		1,862		2.18		48		0.93		—		—		2,349		2.14
U.S. government agencies	20		2.99		1,448		3.26		1,167		2.99		170		2.54		2,805		3.10


Other debt securities	—		—		—		—		—		—		1		3.90		1		3.90
Mortgage-backed securities:
Agency RMBS																	10,198		4.45
Non-agency RMBS																	1,957		4.19
Agency commercial MBS																	8,062		2.92
Non-agency commercial MBS																	3,007		3.39
CLOs																	5,707		6.07
Other ABS																	1,145		2.13
Total securities available-for-sale	$	13,897	1.63	%	$	29,288	1.94	%	$	8,519	1.71	%	$	2,337	2.89	%	$	84,117	2.67	%
Held-to-maturity:
U.S. Treasury	$	1,313	1.53	%	$	7,523	1.31	%	$	1,248	1.24	%	$	—	—	%	$	10,084	1.33	%
U.S. government agencies	50		0.74		2,779		1.41		1,114		1.63		261		1.90		4,204		1.49
Sovereign debt/sovereign guaranteed	—		—		1,416		1.07		87		0.83		—		—		1,503		1.06
Supranational	71		1.05		522		1.42		—		—		—		—		593		1.38
Foreign government agencies	—		—		67		0.79		—		—		—		—		67		0.79
State and political subdivisions	1		5.59		—		—		4		4.65		8		4.80		13		4.83
Mortgage-backed securities:
Agency RMBS																	33,116		2.31
Non-agency RMBS																	29		2.52
Agency commercial MBS																	3,969		2.37
CLOs																	983		5.95
Total securities held-to-maturity	$	1,435	1.48	%	$	12,307	1.31	%	$	2,453	1.41	%	$	269	1.98	%	$	54,561	2.09	%
Total securities	$	15,332	1.62	%	$	41,595	1.76	%	$	10,972	1.65	%	$	2,606	2.81	%	$	138,678	2.45	%

(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 March 31, 2023, BNY Mellon had pledged assets of $135 billion, including $87 billion pledged as collateral for potential borrowings 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 March 31, 2023 included $117 billion of securities, $12 billion of loans, $5 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.

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.

58 BNY Mellon


Notes to Consolidated Financial Statements (continued)

At March 31, 2023 and Dec. 31, 2022, pledged assets included $39 billion and $24 billion, respectively, for 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 March 31, 2023 and Dec. 31, 2022, the market value of the securities received that can be sold or repledged was $140 billion and $115 billion, respectively. We routinely sell or repledge these securities through delivery to third parties. As of March 31, 2023 and Dec. 31, 2022, the market value of securities collateral sold or repledged was $109 billion and $78 billion, respectively.

Restricted cash and securities

Cash and securities may be segregated under federal and other regulations or requirements. At March 31, 2023 and Dec. 31, 2022, cash segregated under federal and other regulations or requirements was $4 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 $6 billion at March 31, 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	March 31, 2023		Dec. 31, 2022
(in millions)
Commercial	$	1,784	$	1,732
Commercial real estate	6,337		6,226
Financial institutions	9,348		9,684
Lease financings	640		657
Wealth management loans	10,005		10,302
Wealth management mortgages	8,948		8,966
Other residential mortgages	1,025		345
Capital call financing	3,343		3,438
Other	2,754		2,941
Overdrafts	2,444		4,839
Margin loans	15,695		16,933
Total loans (a)	$	62,323	$	66,063

(a) Net of unearned income of $269 million at March 31, 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.

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.

BNY Mellon 59


Notes to Consolidated Financial Statements (continued)


Allowance for credit losses activity for the quarter ended March 31, 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	$	18	$	184	$	24	$	1	$	1	$	12	$	8	$	6	$	254
Charge-offs	—		—		—		—		—		—		—		—		—
Recoveries	1		—		—		—		—		—		—		—		1
Net recoveries	1		—		—		—		—		—		—		—		1
Provision (a)	2		(7)		—		—		—		2		1		—		(2)
Ending balance	$	21	$	177	$	24	$	1	$	1	$	14	$	9	$	6	$	253
Allowance for:
Loan losses	$	4	$	130	$	8	$	1	$	1	$	13	$	9	$	4	$	170
Lending-related commitments	17		47		16		—		—		1		—		2		83
Individually evaluated for impairment:
Loan balance (b)	$	—	$	54	$	—	$	—	$	—	$	13	$	1	$	—	$	68
Allowance for loan losses	—		—		—		—		—		—		—		—		—

(a) Does not include the provision for credit losses related to other financial instruments of $29 million for the quarter ended March 31, 2023.

(b) Includes collateral-dependent loans of $68 million with $103 million of collateral at fair value.


Allowance for credit losses activity for the quarter ended Dec. 31, 2022									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	$	17	$	176	$	20	$	1	$	1	$	9	$	8	$	4	$	236
Charge-offs	—		—		—		—		—		—		—		—		—
Recoveries	—		—		—		—		—		—		1		—		1
Net recoveries	—		—		—		—		—		—		1		—		1
Provision (a)	1		8		4		—		—		3		(1)		2		17
Ending balance	$	18	$	184	$	24	$	1	$	1	$	12	$	8	$	6	$	254
Allowance for:
Loan losses	$	4	$	137	$	10	$	1	$	1	$	11	$	8	$	4	$	176
Lending-related commitments	14		47		14		—		—		1		—		2		78
Individually evaluated for impairment:
Loan balance (b)	$	—	$	62	$	—	$	—	$	—	$	16	$	1	$	—	$	79
Allowance for loan losses	—		—		—		—		—		—		—		—		—

(a) Does not include the provision for credit losses related to other financial instruments of $3 million for the quarter ended Dec. 31, 2022.

(b) Includes collateral-dependent loans of $79 million with $126 million of collateral at fair value.


Allowance for credit losses activity for the quarter ended March 31, 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	$	12	$	199	$	13	$	1	$	1	$	6	$	7	$	2	$	241
Charge-offs	—		—		—		—		—		—		—		—		—
Recoveries	—		—		—		—		—		—		1		—		1
Net recoveries	—		—		—		—		—		—		1		—		1
Provision (a)	—		(23)		2		—		—		3		(1)		1		(18)
Ending balance	$	12	$	176	$	15	$	1	$	1	$	9	$	7	$	3	$	224
Allowance for:
Loan losses	$	2	$	142	$	7	$	1	$	1	$	8	$	7	$	3	$	171
Lending-related commitments	10		34		8		—		—		1		—		—		53
Individually evaluated for impairment:
Loan balance (b)	$	—	$	121	$	—	$	—	$	—	$	18	$	1	$	—	$	140
Allowance for loan losses	—		1		—		—		—		1		—		—		2

(a) Does not include the provision for credit losses related to other financial instruments of $20 million for the quarter ended March 31, 2022.

(b) Includes collateral-dependent loans of $140 million with $183 million of collateral at fair value.

60 BNY Mellon


Notes to Consolidated Financial Statements (continued)

Nonperforming assets

The table below presents our nonperforming assets.


Nonperforming assets	March 31, 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:

Commercial real estate	$	—	$	54	$	54	$	—	$	54	$	54
Other residential mortgages	29		1		30		30		1		31
Wealth management mortgages	7		12		19		8		14		22

Total nonperforming loans	36		67		103		38		69		107
Other assets owned	—		2		2		—		2		2
Total nonperforming assets	$	36	$	69	$	105	$	38	$	71	$	109

Past due loans

The table below presents our past due loans.


Past due loans and still accruing interest	March 31, 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	$	90	$	—	$	—	$	90	$	43	$	1	$	—	$	44
Wealth management mortgages	22		—		—		22		54		1		—		55
Other residential mortgages	19		2		—		21		5		—		—		5
Margin loans	9		—		—		9		—		—		—		—
Commercial real estate	3		—		—		3		11		—		—		11



Total past due loans	$	143	$	2	$	—	$	145	$	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.

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

Loans modified prior to 2023 are considered a troubled debt restructuring (“TDR”) 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 two loans in the fourth quarter of 2022 with an aggregate recorded investment of $1 million. There were no loans modified in the first quarter of 2022.

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.

BNY Mellon 61


Notes to Consolidated Financial Statements (continued)

The tables below provide information about the credit profile of the loan portfolio by the period of origination.


Credit profile of the loan portfolio													March 31, 2023
													Revolving loans
	Originated, at amortized cost												Amortized cost		Converted to term loans – Amortized cost				Accrued interest receivable
(in millions)	1Q23		2022		2021		2020		2019		Prior to 2019						Total (a)
Commercial:
Investment grade	$	64	$	162	$	105	$	—	$	—	$	93	$	1,215	$	—	$	1,639
Non-investment grade	58		19		6		—		—		—		62		—		145
Total commercial	122		181		111		—		—		93		1,277		—		1,784		$	2
Commercial real estate:
Investment grade	914		1,041		545		356		385		963		223		—		4,427
Non-investment grade	320		450		524		131		349		83		31		22		1,910
Total commercial real estate	1,234		1,491		1,069		487		734		1,046		254		22		6,337		26
Financial institutions:
Investment grade	216		129		186		—		—		20		6,929		—		7,480
Non-investment grade	50		10		—		—		—		—		1,808		—		1,868
Total financial institutions	266		139		186		—		—		20		8,737		—		9,348		89
Wealth management loans:
Investment grade	38		37		57		22		43		192		9,597		—		9,986
Non-investment grade	1		—		—		—		—		—		18		—		19
Total wealth management loans	39		37		57		22		43		192		9,615		—		10,005		58
Wealth management mortgages	167		1,716		1,969		903		763		3,411		19		—		8,948		18
Lease financings	16		—		—		47		10		567		—		—		640		—
Other residential mortgages (b)	1		574		204		5		—		241		—		—		1,025		5
Capital call financing	—		—		—		—		—		—		3,343		—		3,343		15
Other loans	—		—		—		—		—		—		2,754		—		2,754		6
Margin loans	5,384		500		—		—		—		—		9,811		—		15,695		33
Total loans	$	7,229	$	4,638	$	3,596	$	1,464	$	1,550	$	5,570	$	35,810	$	22	$	59,879	$	252

(a) Excludes overdrafts of $2,444 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 less than $1 million in the first quarter of 2023.

62 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 95% of the exposures meeting the investment grade

equivalent criteria of our internal credit rating classification at March 31, 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 63


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 March 31, 2023, less than 1% of the mortgages were past due.

Lease financings

At March 31, 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 March 31, 2023 and $345 million at Dec. 31, 2022. Included in this portfolio at March 31, 2023 were $784 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 $15.7 billion of secured margin loans at March 31, 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 $2.4 billion at March 31, 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 March 31, 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 March 31, 2023 and Dec. 31, 2022.

64 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)
	$	6,973	$	1,424	$	7,753	$	16,150


Foreign currency translation	12		2		28		42
Balance at March 31, 2023
Goodwill	$	6,985	$	1,426	$	8,461	$	16,872
Accumulated impairment losses	—		—		(680)		(680)
	$	6,985	$	1,426	$	7,781	$	16,192


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


Foreign currency translation	(18)		(3)		(29)		(50)

Balance at March 31, 2022	$	7,044	$	1,432	$	8,986	$	17,462

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.

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	(8)		(1)		(5)		—		(14)
Foreign currency translation	—		—		3		—		3
Balance at March 31, 2023	$	185	$	383	$	1,473	$	849	$	2,890


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	(8)		(2)		(7)		—		(17)
Foreign currency translation	(1)		—		(5)		—		(6)
Balance at March 31, 2022	$	221	$	390	$	1,508	$	849	$	2,968

BNY Mellon 65


Notes to Consolidated Financial Statements (continued)

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


Intangible assets	March 31, 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	$	729	$	(544)	$	185	10 years	$	731	$	(539)	$	192
Customer contracts – Market and Wealth Services	280		(268)		12		3 years	280		(267)		13
Customer relationships – Investment and Wealth Management	553		(466)		87		8 years	553		(461)		92
Other	41		(10)		31		14 years	41		(9)		32
Total subject to amortization	$	1,603	$	(1,288)	$	315	10 years	$	1,605	$	(1,276)	$	329
Not subject to amortization: (b)
Tradename	$	1,291	N/A		$	1,291	N/A	$	1,290	N/A		$	1,290
Customer relationships	1,284		N/A		1,284		N/A	1,282		N/A		1,282
Total not subject to amortization	$	2,575	N/A		$	2,575	N/A	$	2,572	N/A		$	2,572
Total intangible assets	$	4,178	$	(1,288)	$	2,890	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.

Note 7–Other assets

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


Other assets	March 31, 2023		Dec. 31, 2022
(in millions)
Accounts receivable	$	6,106	$	4,924
Corporate/bank-owned life insurance	5,425		5,417
Fails to deliver	3,279		2,569
Software	2,275		2,260
Prepaid pension assets	1,809		1,651
Qualified affordable housing project investments	1,272		1,298
Prepaid expense	818		764
Equity method investments	812		803
Renewable energy investments	809		871
Other equity investments (a)	685		695
Federal Reserve Bank stock	480		478
Assets of consolidated investment management funds	436		209
Cash collateral receivable on derivative transactions	421		1,014
Income taxes receivable	375		481
Seed capital (b)	233		218
Fair value of hedging derivatives	177		319
Other (c)	1,923		1,884
Total other assets	$	27,335	$	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 March 31, 2023 and Dec. 31, 2022, other assets include $86 million and $6 million, respectively, of Federal Home Loan Bank stock, at cost.

66 BNY Mellon


Notes to Consolidated Financial Statements (continued)

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 $428 million at March 31, 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)	1Q23		4Q22		1Q22
Upward adjustments	$	—	$	—	$	46		$	283
Downward adjustments	(18)		(1)		—			(30)
Net adjustments	$	(18)	$	(1)	$	46		$	253

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 $1.3 billion at March 31, 2023 and $1.3 billion at Dec. 31, 2022. Commitments to fund future investments in qualified affordable housing projects totaled $622

million at March 31, 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 – $236 million; 2024 – $145 million; 2025 – $173 million; 2026 – $24 million; 2027 – $1 million; and 2028 and thereafter – $43 million.

Tax credits and other tax benefits recognized were $45 million in the first quarter of 2023, $31 million in the fourth quarter of 2022 and $38 million in the first quarter of 2022.

Amortization expense included in the provision for income taxes was $38 million in the first quarter of 2023, $26 million in the fourth quarter of 2022 and $32 million in the first quarter 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 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	March 31, 2023					Dec. 31, 2022
(in millions)	Fair value		Unfunded commitments			Fair value		Unfunded commitments
Seed capital (a) (b)	$	3		$	—	$	3		$	—
Private equity investments (c)	132			49		130			53
Other	5			—		5			—
Total	$	140		$	49	$	138		$	53

(a) Seed capital investments at March 31, 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.

BNY Mellon 67


Notes to Consolidated Financial Statements (continued)

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
	March 31, 2023										March 31, 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	$	1,176	$	925	$	24	$	(15)	$	2,110		$	1,130	$	846	$	25	$	(17)	$	1,984
Investment management and performance fees	—		5		781		(3)		783			—		6		887		(6)		887
Financing-related fees	13		5		—		—		18			3		14		—		—		17
Distribution and servicing fees	—		(23)		55		1		33			1		(4)		32		1		30
Investment and other revenue	60		50		(80)		1		31			47		9		(27)		(1)		28
Total fee and other revenue – contract revenue	1,249		962		780		(16)		2,975			1,181		871		917		(23)		2,946
Fee and other revenue – not in scope of Accounting Standards Codification (“ASC”) 606 (a)(b)	201		52		2		5		260			222		35		(10)		43		290
Total fee and other revenue	$	1,450	$	1,014	$	782	$	(11)	$	3,235		$	1,403	$	906	$	907	$	20	$	3,236

(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 (loss) attributable to noncontrolling interests related to consolidated investment management funds of $— million in the first quarter of 2023 and $(8) million in the first quarter of 2022.


Disaggregation of contract revenue by business segment	Quarter ended
	Dec. 31, 2022
(in millions)	Securities Services		Market and Wealth Services		Investment and Wealth Management		Other		Total
Fee and other revenue – contract revenue:
Investment services fees	$	1,233	$	917	$	24	$	(15)	$	2,159
Investment management and performance fees	—		6		781		(3)		784
Financing-related fees	9		2		1		—		12
Distribution and servicing fees	1		(22)		54		—		33
Investment and other revenue	58		47		(76)		2		31
Total fee and other revenue – contract revenue	1,301		950		784		(16)		3,019
Fee and other revenue – not in scope of ASC 606 (a)(b)	215		53		(11)		(414)		(157)
Total fee and other revenue	$	1,516	$	1,003	$	773	$	(430)	$	2,862

(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.

68 BNY Mellon


Notes to Consolidated Financial Statements (continued)

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 March 31, 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 $50 million at March 31, 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 $196 million at March 31, 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 quarter of 2023 relating to contract liabilities as of Dec. 31, 2022 was $53 million.

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 $57 million at March 31, 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 first quarter of 2023 and $5 million in the first quarter of 2022 and fourth quarter 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 $81 million at March 31, 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.

BNY Mellon 69


Notes to Consolidated Financial Statements (continued)

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
(in millions)	March 31, 2023		Dec. 31, 2022		March 31, 2022
Interest revenue
Deposits with the Federal Reserve and other central banks	$	853	$	630	$	2
Deposits with banks	140		107		14
Federal funds sold and securities purchased under resale agreements	991		726		37
Loans	866		788		260
Securities:
Taxable	1,022		876		434
Exempt from federal income taxes	—		6		10
Total securities	1,022		882		444
Trading securities	70		64		21
Total interest revenue	3,942		3,197		778
Interest expense
Deposits	1,366		1,046		(37)
Federal funds purchased and securities sold under repurchase agreements	892		595		12
Trading liabilities	30		31		4
Other borrowed funds	3		3		3

Customer payables	128		99		—
Long-term debt	395		367		98
Total interest expense	2,814		2,141		80
Net interest revenue	1,128		1,056		698
Provision for credit losses	27		20		2
Net interest revenue after provision for credit losses	$	1,101	$	1,036	$	696

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
	March 31, 2023						March 31, 2022
(in millions)	Domestic pension benefits		Foreign pension benefits		Health care benefits			Domestic pension benefits		Foreign pension benefits		Health care benefits
Service cost	$	—	$	3	$	—		$	—	$	3	$	—
Interest cost	48		8		1			35		8		1
Expected return on assets	(95)		(22)		(2)			(78)		(10)		(2)
Other	2		(3)		(3)			17		1		(1)
Net periodic benefit (credit) cost	$	(45)	$	(14)	$	(4)		$	(26)	$	2	$	(2)

Note 11–Income taxes

BNY Mellon recorded an income tax provision of $260 million (21.0% effective tax rate) in the first quarter of 2023, $153 million (16.7% effective tax rate) in the first quarter of 2022 and $142 million (20.7% effective tax rate) in the fourth quarter of 2022.

Our total tax reserves as of March 31, 2023 were $105 million, compared with $106 million at Dec. 31, 2022. If these tax reserves were unnecessary, $105 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 March 31, 2023 is accrued interest, where applicable, of $32 million. The additional tax benefit related to interest

70 BNY Mellon


Notes to Consolidated Financial Statements (continued)

for the three months ended March 31, 2023 was $1 million, compared with $2 million of tax expense for the three months ended March 31, 2022.

It is reasonably possible the total reserve for uncertain tax positions could decrease within the next 12 months by approximately $11 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.

The following table presents the incremental assets and liabilities included on the consolidated balance sheet as of March 31, 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
	March 31, 2023		Dec. 31, 2022
(in millions)

Trading assets	$	421		$	203
Other assets	15			6
Total assets (a)	$	436		$	209

Other liabilities	$	1		$	1
Total liabilities (b)	$	1		$	1
Nonredeemable noncontrolling interests (c)	$	72		$	7

(a) Includes voting model entities (“VMEs”) with assets of $91 million at March 31, 2023 and $86 million at Dec. 31, 2022.

(b) Includes VMEs with liabilities of $0 million at March 31, 2023 and $1 million at Dec. 31, 2022.

(c) Includes VMEs with nonredeemable noncontrolling interests of $10 million at March 31, 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 March 31, 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	March 31, 2023		Dec. 31, 2022
(in millions)
Other assets	$	2,150	$	2,235
Other liabilities	622		614
Maximum loss exposure	2,772		2,850

BNY Mellon 71


Notes to Consolidated Financial Statements (continued)

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 March 31, 2023 and Dec. 31, 2022.


Preferred stock summary (a)		Total shares issued and outstanding		Carrying value (b)
				(in millions)
		March 31, 2023	Dec. 31, 2022	March 31, 2023		Dec. 31, 2022
	Per annum dividend rate
Series A	Greater of (i) three-month LIBOR plus 0.565% for the related distribution period or (ii) 4.000%	5,001	5,001	$	500	$	500
Series D	4.500% to but excluding June 20, 2023, then a floating rate equal to the three-month LIBOR plus 2.46%	5,000	5,000	494		494
Series F	4.625% to but excluding Sept. 20, 2026, then a floating rate equal to the three-month LIBOR 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.

The table below presents the Parent’s preferred dividends.


Preferred dividends
(dollars in millions, except per share amounts)	Depositary shares per share		1Q23				4Q22				1Q22
			Per share		Total dividend		Per share		Total dividend		Per share		Total dividend
Series A	100	(a)	$	1,327.72	$	7	$	1,044.05	$	5	$	1,011.11	$	5
Series D	100		—		—		2,250.00		12		—		—

Series F	100		2,312.50		23		—		—		2,312.50		23
Series G	100		2,350.00		24		—		—		2,350.00		24
Series H	100		925.00		5		925.00		5		925.00		5
Series I	100		937.50		12		937.50		12		1,270.83		17
Total					$	71			$	34			$	74

(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.

72 BNY Mellon


Notes to Consolidated Financial Statements (continued)

Note 14–Other comprehensive income (loss)


Components of other comprehensive income (loss)	Quarter ended
	March 31, 2023						Dec. 31, 2022						March 31, 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)	$	77	$	26	$	103	$	393	$	154	$	547	$	(120)	$	(33)	$	(153)
Total foreign currency translation	77		26		103		393		154		547		(120)		(33)		(153)
Unrealized (loss) gain on assets available-for-sale:
Unrealized (loss) gain arising during period	419		(102)		317		101		(25)		76		(2,021)		490		(1,531)
Reclassification adjustment (b)	1		—		1		448		(106)		342		(4)		1		(3)
Net unrealized (loss) gain on assets available-for-sale	420		(102)		318		549		(131)		418		(2,025)		491		(1,534)
Defined benefit plans:
Net gain arising during the period	—		—		—		(400)		94		(306)		—		—		—

Amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost (b)	(4)		1		(3)		17		(5)		12		17		1		18
Total defined benefit plans	(4)		1		(3)		(383)		89		(294)		17		1		18
Unrealized (loss) gain on cash flow hedges:
Unrealized hedge (loss) gain arising during period	4		(1)		3		—		—		—		(3)		1		(2)
Reclassification of net loss (gain) to net income:

Foreign exchange (“FX”) contracts – staff expense	3		(1)		2		5		(1)		4		—		—		—

FX contracts – investment and other revenue	—		—		—		(2)		—		(2)		—		—		—
Total reclassifications to net income	3		(1)		2		3		(1)		2		—		—		—
Net unrealized (loss) gain on cash flow hedges	7		(2)		5		3		(1)		2		(3)		1		(2)
Total other comprehensive (loss)	$	500	$	(77)	$	423	$	562	$	111	$	673	$	(2,131)	$	460	$	(1,671)

(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.

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 March 31, 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.

BNY Mellon 73


Notes to Consolidated Financial Statements (continued)


Assets measured at fair value on a recurring basis at March 31, 2023												Total carrying value
(dollars in millions)	Level 1			Level 2			Level 3			Netting (a)

Available-for-sale securities:
U.S. Treasury	$	24,705		$	—		$	—		$	—	$	24,705
Sovereign debt/sovereign guaranteed	3,970			6,321			—			—		10,291
Agency RMBS	—			10,198			—			—		10,198
Agency commercial MBS	—			8,062			—			—		8,062
Supranational	—			7,911			—			—		7,911
Foreign covered bonds	—			5,979			—			—		5,979
CLOs	—			5,707			—			—		5,707
Non-agency commercial MBS	—			3,007			—			—		3,007
U.S. government agencies	—			2,805			—			—		2,805
Foreign government agencies	—			2,349			—			—		2,349
Non-agency RMBS	—			1,957			—			—		1,957
Other ABS	—			1,145			—			—		1,145


Other debt securities	—			1			—			—		1
Total available-for-sale securities	28,675			55,442			—			—		84,117
Trading assets:
Debt instruments	2,500			1,818			—			—		4,318
Equity instruments	3,212			—			—			—		3,212
Derivative assets not designated as hedging:
Interest rate	6			1,279			—			(870)		415
Foreign exchange	—			5,821			—			(4,743)		1,078
Equity and other contracts	—			14			—			(13)		1
Total derivative assets not designated as hedging	6			7,114			—			(5,626)		1,494
Total trading assets	5,718			8,932			—			(5,626)		9,024
Other assets:
Derivative assets designated as hedging:
Interest rate	—			148			—			—		148
Foreign exchange	—			29			—			—		29
Total derivative assets designated as hedging	—			177			—			—		177
Other assets (b)	399			358			—			—		757
Total other assets	399			535			—			—		934
Assets measured at NAV (b)												140
Total assets	$	34,792		$	64,909		$	—		$	(5,626)	$	94,215
Percentage of total assets prior to netting	35		%	65		%	—		%




Liabilities
Trading liabilities:
Debt instruments	$	2,913		$	35		$	—		$	—	$	2,948
Equity instruments	15			—			—			—		15
Derivative liabilities not designated as hedging:
Interest rate	8			1,614			—			(799)		823
Foreign exchange	—			5,915			—			(4,044)		1,871
Equity and other contracts	12			49			—			(13)		48
Total derivative liabilities not designated as hedging	20			7,578			—			(4,856)		2,742
Total trading liabilities	2,948			7,613			—			(4,856)		5,705
Other liabilities:
Derivative liabilities designated as hedging:

Foreign exchange	—			313			—			—		313
Total derivative liabilities designated as hedging	—			313			—			—		313
Other liabilities	—			1			—			—		1
Total other liabilities	—			314			—			—		314
Total liabilities	$	2,948		$	7,927		$	—		$	(4,856)	$	6,019
Percentage of total liabilities prior to netting	27		%	73		%	—		%

(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.

74 BNY Mellon


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	—			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.

BNY Mellon 75


Notes to Consolidated Financial Statements (continued)


Details of certain available-for-sale securities measured at fair value on a recurring basis	March 31, 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	$	1,679		100	%	—	%	—	%	—	%		—	%		$	1,728		100	%	—	%	—	%	—	%	—	%



2007 and earlier	278			5		14		1		42			38			301			5		13		1		45		36
Total non-agency RMBS	$	1,957		87	%	2	%	—	%	6	%		5	%		$	2,029		86	%	2	%	—	%	7	%	5	%
Non-agency commercial MBS originated in:
2009-2023	$	3,007		100	%	—	%	—	%	—	%		—	%		$	2,977		100	%	—	%	—	%	—	%	—	%
Foreign covered bonds:
Canada	$	2,456		100	%	—	%	—	%	—	%		—	%		$	2,384		100	%	—	%	—	%	—	%	—	%
UK	1,142			100		—		—		—			—			1,215			100		—		—		—		—
Australia	716			100		—		—		—			—			696			100		—		—		—		—
Germany	587			100		—		—		—			—			542			100		—		—		—		—
Norway	385			100		—		—		—			—			377			100		—		—		—		—
Other	693			100		—		—		—			—			544			100		—		—		—		—
Total foreign covered bonds	$	5,979		100	%	—	%	—	%	—	%		—	%		$	5,758		100	%	—	%	—	%	—	%	—	%
Sovereign debt/sovereign guaranteed:
Germany	$	2,984		100	%	—	%	—	%	—	%		—	%		$	3,103		100	%	—	%	—	%	—	%	—	%
UK	2,201			100		—		—		—			—			2,225			100		—		—		—		—
France	1,671			100		—		—		—			—			1,665			100		—		—		—		—
Singapore	820			100		—		—		—			—			797			100		—		—		—		—
Canada	746			100		—		—		—			—			702			100		—		—		—		—
Japan	486			—		100		—		—			—			475			—		100		—		—		—
Italy	365			—		—		100		—			—			390			—		—		100		—		—
Austria	272			100		—		—		—			—			177			100		—		—		—		—
Hong Kong	201			100		—		—		—			—			273			100		—		—		—		—
Spain	200			—		40		60		—			—			214			—		40		60		—		—
Other (c)	345			60		10		—		30			—			343			55		9		—		36		—
Total sovereign debt/sovereign guaranteed	$	10,291		88	%	6	%	5	%	1	%		—	%		$	10,364		88	%	6	%	5	%	1	%	—	%
Foreign government agencies:
Canada	$	687		84	%	16	%	—	%	—	%		—	%		$	652		83	%	17	%	—	%	—	%	—	%
Norway	431			100		—		—		—			—			427			100		—		—		—		—
Netherlands	316			100		—		—		—			—			363			100		—		—		—		—
Sweden	292			100		—		—		—			—			260			100		—		—		—		—
France	245			100		—		—		—			—			240			100		—		—		—		—

Other	378			89		11		—		—			—			299			100		—		—		—		—
Total foreign government agencies	$	2,349		94	%	6	%	—	%	—	%		—	%		$	2,241		95	%	5	%	—	%	—	%	—	%

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

(b) At March 31, 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 $103 million at March 31, 2023 and $123 million at Dec. 31, 2022.

76 BNY Mellon


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 March 31, 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	March 31, 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)	$	—	$	33	$	—	$	33		$	—	$	33	$	—	$	33
Other assets (b)	—		430		—		430			—		448		—		448
Total assets at fair value on a nonrecurring basis	$	—	$	463	$	—	$	463		$	—	$	481	$	—	$	481

(a) The fair value of these loans decreased less than $1 million in the first quarter of 2023 and was unchanged in 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 March 31, 2023 and Dec. 31, 2022, by caption on the consolidated balance sheet and by the valuation hierarchy.


Summary of financial instruments	March 31, 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	$	—	$	117,042	$	—	$	117,042	$	117,042
Interest-bearing deposits with banks	—		15,131		—		15,131		15,114
Federal funds sold and securities purchased under resale agreements	—		26,894		—		26,894		26,894
Securities held-to-maturity	10,336		38,731		—		49,067		54,561
Loans (a)	—		61,118		—		61,118		61,513
Other financial assets	5,564		2,003		—		7,567		7,567
Total	$	15,900	$	260,919	$	—	$	276,819	$	282,691
Liabilities:
Noninterest-bearing deposits	$	—	$	70,246	$	—	$	70,246	$	70,246
Interest-bearing deposits	—		206,827		—		206,827		211,048
Federal funds purchased and securities sold under repurchase agreements	—		26,540		—		26,540		26,540
Payables to customers and broker-dealers	—		22,598		—		22,598		22,598

Borrowings	—		3,195		—		3,195		3,195
Long-term debt	—		29,293		—		29,293		30,489
Total	$	—	$	358,699	$	—	$	358,699	$	364,116

(a) Does not include the leasing portfolio.

BNY Mellon 77


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
	March 31, 2023		Dec. 31, 2022
(in millions)
Assets of consolidated investment management funds:
Trading assets	$	421	$	203
Other assets	15		6
Total assets of consolidated investment management funds	$	436	$	209
Liabilities of consolidated investment management funds:

Other liabilities	$	1	$	1
Total liabilities of consolidated investment management funds	$	1	$	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 $10 million at March 31, 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.

78 BNY Mellon


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 first 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 March 31, 2023, $29.7 billion par value of available-for-sale securities were hedged with interest rate swaps designated as fair value hedges that had notional values of $29.7 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 March 31, 2023, $24.7 billion par value of debt was hedged with interest rate swaps designated as fair value hedges that had notional values of $24.7 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 15 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 March 31, 2023, the hedged forecasted foreign currency transactions and designated forward foreign exchange contract hedges were $493 million (notional), with a net pre-tax gain of $1 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 March 31, 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 March 31, 2023, forward foreign exchange contracts with notional amounts totaling $10.1 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 March 31, 2023, there were no non-derivative financial instruments hedging our net investments in foreign subsidiaries.

BNY Mellon 79


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)	1Q23		4Q22		1Q22
Interest rate fair value hedges of available-for-sale securities
Derivative	Interest revenue	$	(435)	$	(114)	$	1,484
Hedged item	Interest revenue	434		113		(1,480)
Interest rate fair value hedges of long-term debt
Derivative	Interest expense	279		132		(741)
Hedged item	Interest expense	(279)		(132)		740
Foreign exchange fair value hedges of available-for-sale securities
Derivative (a)	Foreign exchange revenue	—		2		(1)
Hedged item	Foreign exchange revenue	—		(1)		1


Cash flow hedges of forecasted FX exposures


(Loss) reclassified from OCI into income	Staff expense	(3)		(5)		—
Gain reclassified from OCI into income	Investment and other revenue	—		2		—
(Loss) gain recognized in the consolidated income statement due to fair value and cash flow hedging relationships		$	(4)	$	(3)	$	3

(a) There was no amortization associated with the excluded component in the first quarter of 2023. Includes gains of less than $1 million in the fourth quarter of 2022 and first quarter 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
	1Q23		4Q22		1Q22					1Q23		4Q22		1Q22
FX contracts	$	(111)	$	(648)	$	143			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)	March 31, 2023		Dec. 31, 2022		March 31, 2023		Dec. 31, 2022
Available-for-sale securities (b)	$	29,682	$	31,370	$	(1,979)	$	(2,678)
Long-term debt	$	23,790	$	23,510	$	(949)	$	(1,232)

(a) Includes $320 million and less than $1 million of basis adjustment increases on discontinued hedges associated with available-for-sale securities at March 31, 2023 and Dec. 31, 2022, respectively, and $61 million and $48 million of basis adjustment decreases on discontinued hedges associated with long-term debt at March 31, 2023 and Dec. 31, 2022, respectively.

(b) Carrying amount represents the amortized cost.

80 BNY Mellon


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
	March 31, 2023		Dec. 31, 2022		March 31, 2023		Dec. 31, 2022		March 31, 2023		Dec. 31, 2022
(in millions)
Derivatives designated as hedging instruments: (a)(b)
Interest rate contracts	$	54,443	$	56,142	$	148	$	205	$	—	$	—
Foreign exchange contracts	10,544		10,096		29		114		313		220
Total derivatives designated as hedging instruments					$	177	$	319	$	313	$	220
Derivatives not designated as hedging instruments: (b)(c)
Interest rate contracts	$	177,775	$	190,917	$	1,285	$	1,297	$	1,622	$	1,584
Foreign exchange contracts	868,433		880,948		5,821		9,433		5,915		9,456
Equity contracts	2,991		2,993		14		102		55		13
Credit contracts	220		200		—		—		6		4
Total derivatives not designated as hedging instruments					$	7,120	$	10,832	$	7,598	$	11,057
Total derivatives fair value (d)					$	7,297	$	11,151	$	7,911	$	11,277
Effect of master netting agreements (e)					(5,626)		(8,206)		(4,856)		(8,243)
Fair value after effect of master netting agreements					$	1,671	$	2,945	$	3,055	$	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 $1,414 million and $644 million, respectively, at March 31, 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)	1Q23		4Q22		1Q22
Foreign exchange revenue	$	176	$	190	$	207
Other trading revenue	45		34		5

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 a gain of $7 million in the first quarter of 2023, a loss of $13 million in the first quarter of 2022 and a gain of $11 million in the fourth quarter 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 measures. Risk is monitored and reported to senior

BNY Mellon 81


Notes to Consolidated Financial Statements (continued)

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.


	March 31, 2023		Dec. 31, 2022
(in millions)	March 31, 2023		Dec. 31, 2022
Aggregate fair value of OTC derivatives in net liability positions (a)	$	1,343	$	3,069
Collateral posted	$	1,598	$	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)
	March 31, 2023		Dec. 31, 2022
(in millions)
If The Bank of New York Mellon’s rating changed to: (b)
A3/A-	$	18	$	20
Baa2/BBB	$	638	$	545
Ba1/BB+	$	921	$	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 March 31, 2023 and Dec. 31, 2022, existing collateral arrangements would have required us to post additional collateral of $160 million and $214 million, respectively.

82 BNY Mellon


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 March 31, 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	$	1,084	$	870		$	214	$	38	$	—	$	176
Foreign exchange contracts	5,447		4,743			704		104		—		600
Equity and other contracts	14		13			1		—		—		1
Total derivatives subject to netting arrangements	6,545		5,626			919		142		—		777
Total derivatives not subject to netting arrangements	752		—			752		—		—		752
Total derivatives	7,297		5,626			1,671		142		—		1,529
Reverse repurchase agreements	104,168		86,000		(b)	18,168		18,168		—		—
Securities borrowing	8,726		—			8,726		8,313		—		413
Total	$	120,191	$	91,626		$	28,565	$	26,623	$	—	$	1,942

(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.

BNY Mellon 83


Notes to Consolidated Financial Statements (continued)


Offsetting of derivative liabilities and financial liabilities at March 31, 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	$	1,283	$	799		$	484	$	67	$	—	$	417
Foreign exchange contracts	5,827		4,044			1,783		73		—		1,710
Equity and other contracts	58		13			45		—		—		45
Total derivatives subject to netting arrangements	7,168		4,856			2,312		140		—		2,172
Total derivatives not subject to netting arrangements	743		—			743		—		—		743
Total derivatives	7,911		4,856			3,055		140		—		2,915
Repurchase agreements	109,882		86,000		(b)	23,882		23,864		17		1
Securities lending	2,658		—			2,658		2,611		—		47
Total	$	120,451	$	90,856		$	29,595	$	26,615	$	17	$	2,963

(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.

84 BNY Mellon


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
	March 31, 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	$	85,200	$	3,296	$	3,186	$	745	$	92,427	$	62,401	$	7	$	827	$	553	$	63,788
Agency RMBS	1,712		518		9,500		—		11,730		1,460		493		—		—		1,953
Corporate bonds	98		121		1,017		434		1,670		99		88		782		306		1,275
Sovereign debt/sovereign guaranteed	1,477		—		—		—		1,477		1,008		—		—		—		1,008
State and political subdivisions	34		48		384		144		610		38		49		443		159		689
U.S. government agencies	78		—		55		—		133		161		—		—		—		161
Other debt securities	28		71		81		2		182		13		102		92		7		214
Equity securities	—		46		1,607		—		1,653		—		61		1,681		—		1,742
Total	$	88,627	$	4,100	$	15,830	$	1,325	$	109,882	$	65,180	$	800	$	3,825	$	1,025	$	70,830
Securities lending:
Agency RMBS	$	122	$	—	$	—	$	—	$	122	$	110	$	—	$	—	$	—	$	110
Other debt securities	47		—		—		—		47		66		—		—		—		66
Equity securities	2,489		—		—		—		2,489		1,651		—		—		—		1,651
Total	$	2,658	$	—	$	—	$	—	$	2,658	$	1,827	$	—	$	—	$	—	$	1,827
Total secured borrowings	$	91,285	$	4,100	$	15,830	$	1,325	$	112,540	$	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.

BNY Mellon 85


Notes to Consolidated Financial Statements (continued)

The following table presents a summary of our off-balance sheet credit risks.


Off-balance sheet credit risks	March 31, 2023		Dec. 31, 2022
(in millions)
Lending commitments	$	49,231	$	49,750
Standby letters of credit (“SBLC”) (a)	1,965		1,918
Commercial letters of credit	9		19
Securities lending indemnifications (b)(c)	488,416		491,043

(a)Net of participations totaling $176 million at March 31, 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 $64 billion at March 31, 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 $49 billion at March 31, 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: $29.0 billion in less than one year, $19.6 billion in one to five years and $571 million over five years.

SBLCs principally support obligations of corporate clients and were collateralized with cash and securities of $172 million at March 31, 2023 and $144 million at Dec. 31, 2022. At March 31, 2023, $1.4 billion of the SBLCs will expire within one year, $559 million in one to five years and none 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	March 31, 2023		Dec. 31, 2022

Investment grade	76	%	75	%
Non-investment grade	24	%	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 $9 million at March 31, 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 $83 million at March 31, 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

86 BNY Mellon


Notes to Consolidated Financial Statements (continued)

counterparties. Securities lending indemnifications were secured by collateral of $513 billion at March 31, 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 both March 31, 2023 and Dec. 31, 2022, $64 billion of borrowings at CIBC Mellon, for which BNY Mellon acts as agent on behalf of CIBC Mellon clients, were secured by collateral of $68 billion. 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 March 31, 2023, we had $1.6 billion of unsettled repurchase agreements and $24.7 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 March 31, 2023. The tables below present our credit exposure in the financial institutions and commercial portfolios.


Financial institutions portfolio exposure (in billions)	March 31, 2023
	Loans		Unfunded commitments		Total exposure
Securities industry	$	1.3	$	17.2	$	18.5
Asset managers	1.5		7.8		9.3
Banks	6.0		1.4		7.4
Insurance	0.1		3.8		3.9
Government	—		0.2		0.2
Other	0.4		1.0		1.4
Total	$	9.3	$	31.4	$	40.7


Commercial portfolio exposure (in billions)	March 31, 2023
	Loans		Unfunded commitments		Total exposure
Manufacturing	$	0.6	$	4.0	$	4.6
Services and other	0.9		3.2		4.1
Energy and utilities	0.2		3.7		3.9
Media and telecom	0.1		0.7		0.8
Total	$	1.8	$	11.6	$	13.4

Major concentrations in securities lending are primarily to broker-dealers and are generally collateralized with cash and/or securities.


For the quarter ended March 31, 2023	Securities Services			Market and Wealth Services			Investment and Wealth Management				Other		Consolidated
(dollars in millions)
Total fee and other revenue	$	1,450		$	1,014		$	782		(a)	$	(11)	$	3,235		(a)
Net interest revenue (expense)	666			453			45				(36)		1,128
Total revenue (loss)	2,116			1,467			827			(a)	(47)		4,363			(a)
Provision for credit losses	—			—			—				27		27
Noninterest expense	1,556			769			734				41		3,100
Income (loss) before income taxes	$	560		$	698		$	93		(a)	$	(115)	$	1,236		(a)
Pre-tax operating margin (b)	26		%	48		%	11		%		N/M		28		%
Average assets	$	196,560		$	132,143		$	28,232			$	50,566	$	407,501


For the quarter ended Dec. 31, 2022	Securities Services			Market and Wealth Services			Investment and Wealth Management				Other		Consolidated
(dollars in millions)
Total fee and other revenue	$	1,516		$	1,003		$	773		(a)	$	(430)	$	2,862		(a)
Net interest revenue (expense)	656			396			52				(48)		1,056
Total revenue (loss)	2,172			1,399			825			(a)	(478)		3,918			(a)
Provision for credit losses	11			6			1				2		20
Noninterest expense	1,576			785			699				153		3,213
Income (loss) before income taxes	$	585		$	608		$	125		(a)	$	(633)	$	685		(a)
Pre-tax operating margin (b)	27		%	43		%	15		%		N/M		17		%
Average assets	$	206,810		$	132,306		$	28,488			$	46,915	$	414,519


For the quarter ended March 31, 2022	Securities Services			Market and Wealth Services			Investment and Wealth Management				Other		Consolidated
(dollars in millions)
Total fee and other revenue	$	1,403		$	906		$	907		(a)	$	20	$	3,236		(a)
Net interest revenue (expense)	377			296			57				(32)		698
Total revenue (loss)	1,780			1,202			964			(a)	(12)		3,934			(a)
Provision for credit losses	(10)			(2)			(3)				17		2
Noninterest expense	1,510			708			755				33		3,006
Income (loss) before income taxes	$	280		$	496		$	212		(a)	$	(62)	$	926		(a)
Pre-tax operating margin (b)	16		%	41		%	22		%		N/M		23		%
Average assets	$	220,889		$	141,183		$	35,629			$	42,501	$	440,202


Non-cash investing and financing transactions	Three months ended March 31,
(in millions)	2023		2022

Change in assets of consolidated investment management funds	$	227	$	19
Change in liabilities of consolidated investment management funds	—		2
Change in nonredeemable noncontrolling interests of consolidated investment management funds	65		2
Securities purchased not settled	240		760
Securities sold not settled	(162)		156

Available-for-sale securities transferred to held-to-maturity securities	—		5,160



Premises and equipment/operating lease obligations	98		13

Excise tax on share repurchases	10		—


Share repurchases – first quarter of 2023				Total shares repurchased as part of a publicly announced plan or program	Maximum approximate dollar value of shares that may yet be purchased under the publicly announced plans or programs at March 31, 2023
(dollars in millions, except per share amounts; common shares in thousands)	Total shares repurchased	Average price per share
January 2023	4,342	$	49.61	4,342		$	4,785
February 2023	11,837	50.97		11,837		4,181
March 2023	8,969	48.75		8,969		3,744
First quarter of 2023 (a)	25,148	$	49.94	25,148		$	3,744	(b)



Date: May 5, 2023	By:	/s/ Kurtis R. Kurimsky
		Kurtis R. Kurimsky
		Corporate Controller
		(Duly Authorized Officer and
		Principal Accounting Officer of
		the Registrant)