1. Information Security Identification: Confidential Impact of U.S. Postal Service Network Consolidation on Remittance Mail Lex Litton, Phoenix-Hecht Blaine Carnprobst, BNY Mellon Three Rivers Financial Forum April 23, 2013 1 Phoenix-Hecht ®

2. Information Security Identification: Confidential Session Outline  Three-year plan of U.S. Postal Service changes  Assessment of the overall impacts to First Class Mail & Remittance Mail  Recent news from the U.S. Postal Service  Remittance processor perspective  Billers’ perspective 2

3. Phoenix-Hecht ® Phoenix-Hecht  Phoenix-Hecht provides independent measurements of performance, quality, and pricing to both banks and their customers.  The Phoenix-Hecht Quality Index™ is an annual assessment of individual bank treasury management products, customer service, and relationship managers.  Corporate treasury managers can electronically request individual bank Postal Survey™ or Check Clearing™ times.  Visit http://www.phoenixhecht.com for more information. 3

4. Mail Volume Shifting to a Less Profitable Mix Volume in Billions of Pieces Mail Volume Shifting to a Less Profitable Mix

5. Mail Processing Facility Footprint Network Changes 5

6. Mail Processing Redesign Source: USPS

8. Interim Delivery Stds (1-day intra-plant) Loss of 1-day Full 8a – 4a plan Did 46 including Pasadena. 150+ now scheduled. 5-day delivery in 2013?

9. Phoenix-Hecht ® CONFIDENTIAL

10. Phoenix-Hecht ® CONFIDENTIAL Atlanta

11. Phoenix-Hecht ® Impact of 5-day Delivery on Remittance  Transportation continues to run 7 days; caller delivery continues to operate 7 days  No delivery to physical addresses on Saturday (residential or business). Delivery to PO Box units.  No mail origination operations at any plant on Saturday  B2B – relatively minor impacts.  C2B – loss of volume receipt Monday – with shift toward Wednesday. First Class mail origination on Saturday was 10% of weekly volume.  Consumer confusion regarding Saturday as a mailing day because retail operations at Post Offices continue.

12. Phoenix-Hecht ® CONFIDENTIAL Trend of Average Site in Nationwide Total Float Days

13. Phoenix-Hecht ® CONFIDENTIAL Trend of Average Site in Nationwide Total Float Days Source: Phoenix-Hecht Postal Survey™

14. Phoenix-Hecht ® CONFIDENTIAL Average Site Regional Change in 2012-2 Postal Survey Mail HoursMail DaysAvailabilityTotal Float Nationwide Avg. 2.90.13-0.020.12 Regional Average 3.90.16-0.010.15 Local Average 5.40.26-0.050.21 Source: Phoenix-Hecht Postal Survey™

15. Phoenix-Hecht ® CONFIDENTIAL Fastest Cities in Nationwide Hours (Ten versus 19 last survey sub-50) CityHoursCityHours Boston, MA40.1Baltimore, MD50.1 Atlanta, GA41.5Detroit, MI51.4 Chicago, IL46.5Pittsburgh, PA51.9 Dallas, TX46.7Portland, OR51.9 Louisville, KY47.2Kansas City, MO52.0 Houston, TX47.9Milwaukee, WI52.1 Philadelphia, PA48.2Denver, CO54.1 Cincinnati, OH49.0Los Angeles, CA54.2 Saint Louis, MO49.2Cleveland, OH54.3 Memphis, TN49.3Minneapolis, MN54.7 Phoenix, AZ55.3 Source: Phoenix-Hecht Postal Survey™

16. Phoenix-Hecht ® CONFIDENTIAL Most Deteriorated Cities (Nationwide Mail Hours) CityIncrease San Francisco, CA17.7 Charlotte, NC14.4 Los Angeles, CA8.4 Phoenix, AZ6.4 Cleveland, OH6.2 Baltimore, MD6.0 Memphis, TN6.0 Detroit, MI4.8 Cincinnati, OH4.4 New York, NY3.9 Denver, CO3.9 Seattle, WA3.9 Pittsburgh, PA3.2 Milwaukee, WI2.1 Minneapolis, MN2.0 Dallas, TX2.0 Source: Phoenix-Hecht Postal Survey™

17. Phoenix-Hecht ® CONFIDENTIAL Disadvantage of Non-remittance Address versus City Average AtlantaChicagoDallasLAPhiladelphia Mail Hours29.025.519.818.823.2 Mail Days0.160.090.040.02(0.05) Availability0.850.710.550.800.90 Source: Phoenix-Hecht Postal Survey™

18. Phoenix-Hecht ® CONFIDENTIAL Recent U.S. Postal Service News

19. Information Security Identification: Confidential OPERATE IN 36 COUNTRIES AND OVER 100 MARKETS Institutional and retail investment management Wealth management for individuals and families Full range of financial operations, cash management and global payments services $1.4 trillion assets under management 1,2 7 th largest US asset manager 3 7 th largest global asset manager 4 $178 billion in private client assets 1 Top 3 ranked private bank in US 5 Top 10 US wealth manager 6 $27.9 trillion assets under custody and administration 1 $11.6 trillion outstanding debt serviced 1 $2 trillion global collateral serviced 1,7 $1.4 trillion average payments processed daily 1 Investment ManagementInvestment Services

20. Information Security Identification: Confidential Remittance Processor Impacts: Changes Will Continue Through 2014  Impacts will likely be gradual and will likely have “swings”  Don’t want to respond with a knee-jerk reaction  Will continue keeping customers aware of changes as we’re seeing them 20

21. Information Security Identification: Confidential Remittance Processor Impacts: Lockbox Operation Staffing Changes  Anticipated incoming mail for each shift  Assess changes over time; will need some staffing flexibility  Customer awareness of volume “challenges”  Feb 2014 change to the shift operations 21

22. Information Security Identification: Confidential Remittance Processor Impacts: Evaluation of Customer Daily “Deadlines”  Lockbox “Cut Off” times  Deposit reporting deadlines  Transmission times: A/R data & images Non-lockbox transmission sources: −ACH, EDI & Wire  Image access commitment times  Recognize that end-client systems processing times will limit changes to transmissions 22

23. Information Security Identification: Confidential Remittance Processor Impacts: Float Impact Projections For Clients  Estimated average mail time delays Ongoing mail sampling, though not scientific Phoenix-Hecht Mail Study results  Service Level Agreement (SLA) timing impacts (ie. Processing timeline commitments) 23

24. Information Security Identification: Confidential Remittance Processor Impacts: Consideration of 3rd Party Mail Receipt And Scanning Locations  Pros: Opens other geographic receipt locations  Cons: Not having an established remittance address (e.g. does a Seattle non-remittance address perform any better than a Los Angeles remittance address?) 24

25. Information Security Identification: Confidential Remittance Processor Impacts: BNY Mellon’s Experiences Thus Far  Closure of Pasadena Processing & Distribution Center (P&DC) Mail processing in LA with pickup in Pasadena Potential further change to pickup location  Overall network mail time observations Impacts observed in Phoenix-Hecht 2012-2 Postal Survey Since October survey, mail distribution has moved a little later in Dallas 2013-1 Postal Survey in process Meetings with USPS have helped lessen some impacts, particularly Pasadena. Efforts coordinated with other processors. Experiences among presentation attendees (providers & billers)? 25

26. Information Security Identification: Confidential Biller Impacts: Different responses by industry  “Open Account” bill payment (typically C2B) Property & Casualty Insurance – buying a claim Credit Card Processor – late fees & interest Mortgage – late fees Utilities – late fees & possible shut-off  Transaction payments, e.g. invoices (typically B2B) Could cause product shipment delay Could lead to a decline for additional orders / purchases 26

27. Information Security Identification: Confidential Marketing electronic payment alternatives  ACH pre-authorized debit  Electronic Bill Presentment & Payment  Debit Cards  Credit Cards  Home banking payments 27

28. Information Security Identification: Confidential Where can you get more information?  U.S. Postal Service Network Rationalization Information http://about.usps.com/news/facility- studies/welcome.htm 28

29. Information Security Identification: Confidential Impact of U.S. Postal Service Network Consolidation on Remittance Mail Lex Litton Phoenix-Hecht, Senior Vice President lex@phoenixhecht.com Blaine Carnprobst BNY Mellon, Managing Director, Receivables blaine.carnprobst@bnymellon.com 29 Phoenix-Hecht ®