Bank of New York Mellon Corp

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

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

At Sept. 30, 2024, total assets were $427 billion, compared with $410 billion at Dec. 31, 2023. The increase in total assets was primarily driven by higher securities, federal funds sold and securities purchased under resale agreements and loans, partially offset by lower interest-bearing deposits with the Federal Reserve and other central banks. Deposits totaled $296 billion at Sept. 30, 2024, compared with $284 billion at Dec. 31, 2023. The increase reflects higher interest-bearing and noninterest-bearing deposits. Total interest-bearing deposits as a percentage of total interest-earning assets were 64% at Sept. 30, 2024 and 66% at Dec. 31, 2023.

At Sept. 30, 2024, available funds totaled $154 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 $158 billion at Dec. 31, 2023. Total available funds as a percentage of total assets was 36% at Sept. 30, 2024 and 38% at Dec. 31, 2023. For additional information on our available funds, see “Liquidity and dividends.”

Securities were $142 billion, or 33% of total assets, at Sept. 30, 2024, compared with $126 billion, or 31% of total assets, at Dec. 31, 2023. The increase

primarily reflects higher non-U.S. government, U.S. Treasury and agency residential mortgage-backed securities (“RMBS”) and unrealized pre-tax gains in the first nine months of 2024, partially offset by lower U.S. government agencies securities. For additional information on our securities portfolio, see “Securities” and Note 4 of the Notes to Consolidated Financial Statements.

Loans were $69 billion, or 16% of total assets, at Sept. 30, 2024, compared with $67 billion, or 16% of total assets, at Dec. 31, 2023. The increase was driven by higher loans in the financial institutions portfolio and capital call financing, partially offset by lower overdrafts and commercial and wealth management loans. For additional information on our loan portfolio, see “Loans” and Note 5 of the Notes to Consolidated Financial Statements.

Long-term debt totaled $33 billion at Sept. 30, 2024 and $31 billion at Dec. 31, 2023. Issuances and an increase in the fair value of hedged long-term debt were partially offset by maturities and redemptions. For additional information on long-term debt, see “Liquidity and dividends.”

The Bank of New York Mellon Corporation total shareholders’ equity totaled $42 billion at Sept. 30, 2024 and $41 billion at Dec. 31, 2023. For additional information, see “Capital.”

Country risk exposure

The following table presents BNY’s top 10 exposures by country (excluding the U.S.) as of Sept. 30, 2024, 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.

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(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 65% of our total non-U.S. exposure.

(e) Represents cash balances with exposure to Russia.

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

The war in Ukraine 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 has ceased new banking business in Russia and suspended investment

management purchases of Russian securities. At Sept. 30, 2024, less than 0.1% of our AUC/A and less than 0.01% of our AUM consisted of Russian securities. We will continue to work with multinational clients that depend on our custody and recordkeeping services to manage their exposures.

We are monitoring our exposure to Israel as part of our internal country risk management process. At Sept. 30, 2024, our total exposure to Israel was $252 million and primarily consisted of investment grade short-term interest-bearing deposits and OTC derivatives maturing within six months.

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.

24 BNY

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

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

(b) Includes the impact of hedges.

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

(d) Includes supranational securities. Primarily consists of exposure to UK, Germany and France.

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

(f) Includes net unrealized gains on derivatives hedging securities available-for-sale (including discontinued hedges) of $2,163 million at June 30, 2024 and $1,141 million at Sept. 30, 2024.

(g) At Sept. 30, 2024, includes pre-tax net unrealized losses of $1,026 million related to available-for-sale securities, net of hedges, and $3,657 million related to held-to-maturity securities. The after-tax unrealized losses, net of hedges, related to available-for-sale securities is $774 million and the after-tax equivalent related to held-to-maturity securities is $2,789 million.

The fair value of our securities portfolio, including related hedges, was $139.4 billion at Sept. 30, 2024, compared with $123.3 billion at Dec. 31, 2023. The increase primarily reflects higher non-U.S. government, U.S. Treasury and agency RMBS securities and unrealized pre-tax gains in the first nine months of 2024, partially offset by lower U.S. government agencies securities.

At Sept. 30, 2024, the securities portfolio had a net unrealized loss, including the impact of related hedges, of $4.7 billion, compared with $7.0 billion at Dec. 31, 2023. The improvement in the unrealized loss, including the impact of related hedges, primarily reflects the impact of securities moving closer to maturity and lower market interest rates.

The fair value of the available-for-sale securities totaled $98.1 billion at Sept. 30, 2024, net of hedges, or 70% of the securities portfolio, net of hedges. The fair value of the held-to-maturity securities totaled $41.3 billion at Sept. 30, 2024, or 30% 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 $774 million at Sept. 30, 2024, compared with $1.6 billion at Dec. 31, 2023. The improvement in the net unrealized loss, including the impact of hedges, primarily reflects the impact of securities moving closer to maturity and lower market interest rates.

At Sept. 30, 2024, 98% of the securities in our portfolio were rated AAA/AA-, compared with 99% at Dec. 31, 2023.

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.

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

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

(b) Accumulated basis adjustments on discontinued hedges of securities of $727 million at Sept. 30, 2024, $371 million at June 30, 2024 and $464 million at Sept. 30, 2023 will also be accreted to net interest income over the remaining life of the security. Including the impact of the accretion of discontinued hedges, there was net accretion of $44 million in the third quarter of 2024, net accretion of $25 million in the second quarter of 2024 and net amortization of $19 million in the third quarter of 2023.

Loans

At Sept. 30, 2024, our total lending-related exposure of $122.2 billion increased 6% compared with Dec. 31, 2023, primarily reflecting higher exposure in the financial institutions portfolio.

Our financial institutions and commercial portfolios comprise our largest concentrated risk. These portfolios comprised 49% of our total exposure at Sept. 30, 2024 and 46% at Dec. 31, 2023. Additionally, most of our overdrafts relate to financial institutions.

Financial institutions

The financial institutions portfolio is shown below.

26 BNY

The financial institutions portfolio exposure was $46.4 billion at Sept. 30, 2024, an increase of 17% compared with Dec. 31, 2023, primarily reflecting higher exposure in the securities industry and banks portfolios.

Financial institution exposures are high quality, with 96% of the exposures meeting the investment grade equivalent criteria of our internal credit rating classification at Sept. 30, 2024. 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 85% of the exposures expiring within one year. At Sept. 30, 2024, 46% of the exposure to financial institutions had an expiration within 90 days, compared with 19% at Dec. 31, 2023.

In addition, 65% of the financial institutions exposure is secured. For example, securities industry clients

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

At Sept. 30, 2024, the secured intraday credit provided to dealers in connection with their tri-party repo activity totaled $13.5 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 29% of the exposure in the financial institutions portfolio and are reviewed and reapproved annually.

The asset managers portfolio exposure is high quality, with 96% of the exposures meeting our investment grade equivalent ratings criteria as of Sept. 30, 2024. These exposures are generally short-term liquidity facilities, with the majority to regulated mutual funds.

Our banks portfolio exposure primarily relates to global trade finance. These exposures are short term in nature, with 94% due in less than one year. The investment grade percentage of our banks portfolio exposure was 85% at Sept. 30, 2024, compared with 84% at Dec. 31, 2023. Our non-investment grade exposures are primarily trade finance loans in Brazil.

Commercial

The commercial portfolio is presented below.

The commercial portfolio exposure was $13.4 billion at Sept. 30, 2024, a decrease of 1% from Dec. 31, 2023, primarily reflecting lower exposure in the services and other portfolio, partially offset by higher exposure in the media and telecom 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.

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Wealth management loans

Our wealth management loan exposure was $9.4 billion at Sept. 30, 2024, compared with $9.6 billion at Dec. 31, 2023. 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 $9.2 billion at Sept. 30, 2024, compared with $9.4 billion

at Dec. 31, 2023. Wealth management mortgages primarily consist of loans to high-net-worth individuals, which are secured by residential property. Wealth management mortgages are primarily interest-only, adjustable-rate mortgages with a weighted-average loan-to-value ratio of 61% at origination. At Sept. 30, 2024, less than 1% of the mortgages were past due.

At Sept. 30, 2024, the wealth management mortgage portfolio consisted of the following geographic concentrations: California – 21%; New York – 14%; Florida – 11%; Massachusetts – 8%; and other – 46%.

Commercial real estate

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

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

Our commercial real estate exposure totaled $10.1 billion at Sept. 30, 2024 and $10.2 billion at Dec. 31, 2023. Our income-producing commercial real estate facilities are focused on experienced owners and are structured with moderate leverage based on existing cash flows. Our commercial real estate lending activities also include construction and renovation facilities. Our client base consists of experienced developers and long-term holders of real estate assets. Loans are approved on the basis of existing or projected cash flows and supported by appraisals and knowledge of local market conditions. Development loans are structured with moderate leverage and, in many instances, involve some level of recourse to the developer.

At Sept. 30, 2024, the unsecured portfolio consisted of real estate investment trusts (“REITs”) and real estate operating companies, which are both primarily investment grade.

At Sept. 30, 2024, our commercial real estate portfolio consisted of the following concentrations: New York metro – 34%; REITs and real estate operating companies – 29%; and other – 37%.

Lease financings

The lease financings portfolio exposure totaled $601 million at Sept. 30, 2024 and $599 million at Dec. 31, 2023. At Sept. 30, 2024, nearly all 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. 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

28 BNY totaled $1.1 billion at Sept. 30, 2024 and $1.2 billion at Dec. 31, 2023.

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.

Margin loans

Margin loan exposure of $18.5 billion at Sept. 30, 2024 and $18.0 billion at Dec. 31, 2023 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 $8 billion at Sept. 30, 2024 and $7 billion at Dec. 31, 2023 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.

(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.

Provision for credit losses was $23 million, primarily driven by increases in the allowance related to commercial real estate exposure.

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.

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Based on an evaluation of the allowance for credit losses as discussed in “Critical accounting estimates” in our 2023 Annual Report, we have allocated our allowance for loans and lending-related commitments as presented below.

(a) The allowance allocated to margin loans, overdrafts and other loans was insignificant at Sept. 30, 2024, June 30, 2024, Dec. 31, 2023 and Sept. 30, 2023.

(b) The methodology used to allocate the qualitative reserves was modified in the second quarter of 2024 to align certain specifically identifiable qualitative reserves with the respective class of financing receivables. For additional information, see Note 5 of the Notes to Consolidated Financial Statements.

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 macroeconomic forecast assumptions that are incorporated into our estimate of credit losses through the expected life of the loan portfolio, as well as the credit ratings assigned to each borrower. 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 $51 million, and if commercial real estate property values were decreased 10% and all other credits were rated one grade worse, the quantitative allowance would have

increased by $83 million. Our multi-scenario-based macroeconomic forecast used in determining the Sept. 30, 2024 allowance for credit losses consisted of three scenarios. The baseline scenario reflects positive but slightly declining GDP growth, stable unemployment and slightly declining commercial real estate prices through the end of 2024. The upside scenario reflects higher GDP growth through the fourth quarter 2024 before moderating, declining unemployment through the end of 2024 and stable commercial real estate prices through the end of 2024 compared with the baseline. The downside scenario contemplates negative GDP growth through the fourth quarter of 2024 before moderating, rapidly increasing unemployment through the third quarter of 2025 and sharply lower commercial real estate prices than the baseline. At Sept. 30, 2024, we placed the most weight on our baseline scenario, with the remaining weighting placed on the upside and downside scenarios. From a sensitivity perspective, at Sept. 30, 2024, if we had applied 100% weighting to the downside scenario, the allowance for credit losses would have been approximately $123 million higher.

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Nonperforming assets

The table below presents our nonperforming assets.

Deposits

Total deposits were $296.4 billion at Sept. 30, 2024, an increase of 5%, compared with $283.7 billion at Dec. 31, 2023. The increase reflects higher interest-bearing deposits and noninterest-bearing deposits (principally U.S. offices).

Noninterest-bearing deposits were $61.5 billion at Sept. 30, 2024, compared with $58.3 billion at Dec. 31, 2023. Interest-bearing deposits were primarily demand deposits and totaled $234.9 billion at Sept. 30, 2024, compared with $225.4 billion at Dec. 31, 2023.

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 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.

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.