0001390777 us-gaap:OperatingSegmentsMember bk:InvestmentandWealthManagementSegmentMember 2020-01-01 2020-06-30 0001390777 us-gaap:SovereignDebtMember country:BE bk:PlusAndMinusCreditRatingMember us-gaap:FairValueMeasurementsRecurringMember 2019-12-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~[ X ]~~ ☒Quarterly Report Pursuant Toto Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended ~~Sept.~~June 30, ~~2017~~2020

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

Commission File No. 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.)
~~incorporation or organization)~~

~~225 Liberty~~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
Depositary Shares, each representing 1/4,000th of a share of Series C Noncumulative Perpetual Preferred Stock	BK PrC	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 X☒No ~~___~~☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yes X☒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.

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 X☒

~~Indicate the number~~As of June 30, 2020, 885,861,714 shares ~~outstanding of each~~ of the ~~issuer’s classes of~~registrant’s common stock, ~~as of the latest practicable date.~~$0.01 par value per share, were outstanding.



	~~Class~~	~~Outstanding as of~~
		~~Sept. 30, 2017~~
	~~Common Stock, $0.01 par value~~	~~1,024,022,353~~

THE BANK OF NEW YORK MELLON CORPORATION

~~Third~~Second Quarter ~~2017~~2020 Form 10-Q

Table of Contents



	Page
Consolidated Financial Highlights (unaudited)	2

Part I - Financial Information
Items 2. and 3. Management’s Discussion and Analysis of Financial Condition and Results of Operations; Quantitative and Qualitative Disclosures about Market Risk:
General	4
Overview	4
Key ~~third~~second quarter ~~2017~~2020 and subsequent events	4
Highlights of ~~third~~second quarter ~~2017~~2020 results	5
Impact of coronavirus pandemic on our business	6
Fee and other revenue	7
Net interest revenue	10
~~Average balances and interest rates~~	11
Noninterest expense	13
Income taxes	13
Review of businesses	14
~~Review of businesses~~Critical accounting estimates	1421
~~Critical accounting estimates~~Consolidated balance sheet review	2321
~~Consolidated balance sheet review~~Liquidity and dividends	2432
~~Liquidity and dividends~~	33
Capital	37
Trading activities and risk management	41
Asset/liability management	44
~~Asset/liability management~~Off-balance sheet arrangements	4744
~~Off-balance sheet arrangements~~	48
Supplemental information - Explanation of GAAP and Non-GAAP financial measures	4945
Recent accounting and regulatory developments	5347
Website information	5648

Item 1. Financial Statements:
Consolidated Income Statement (unaudited)	5749
Consolidated Comprehensive Income Statement (unaudited)	5951
Consolidated Balance Sheet (unaudited)	6052
Consolidated Statement of Cash Flows (unaudited)	6153
Consolidated Statement of Changes in Equity (unaudited)	6254



	Page
Notes to Consolidated Financial Statements:
Note 1—Basis of presentation	6357
Note 2—Accounting ~~change~~changes and new accounting guidance	6357
Note 3—Acquisitions and dispositions	6462
Note 4—Securities	6462
Note 5—Loans and asset quality	6967
Note 6—Goodwill and intangible assets	7573
Note 7—Other assets	7774
Note 8—Contract revenue	76
Note 9—Net interest revenue	78
Note 9—10—Employee benefit plans	78
~~Note 10—Income taxes~~	79
Note 11—~~Variable interest entities and securitization~~Income taxes	79
Note 12—Variable interest entities and securitization	80
Note 13—Preferred stock	81
Note ~~13—~~14—Other comprehensive income (loss)	82
Note ~~14—~~15—Fair value measurement	83
Note ~~15—~~16—Fair value option	89
Note 17—Derivative instruments	90
Note ~~16—Derivative instruments~~18—Commitments and contingent liabilities	9096
Note ~~17—Commitments and contingent liabilities~~19—Lines of business	98101
Note ~~18—Lines of business~~	~~102~~
~~Note 19—~~20—Supplemental information to the Consolidated Statement of Cash Flows	~~105~~104

Item 4. Controls and Procedures	~~106~~105
Forward-looking Statements	~~107~~106

Part II - Other Information
Item 1. Legal ~~Proceedings~~Proceedings.	~~109~~108
Item 1A. Risk Factors.	~~109~~108
Item 2. Unregistered Sales of Equity Securities and Use of ~~Proceeds~~Proceeds.	~~111~~109
Item 6. ~~Exhibits~~Exhibits.	~~111~~110

Index to Exhibits	~~112~~111
Signature	~~114~~113

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

Consolidated Financial Highlights (unaudited)


	Quarter ended									Year-to-date						Quarter ended									Year-to-date
(dollar amounts in millions, except per share amounts and unless otherwise noted)	Sept. 30, 2017			June 30, 2017			Sept. 30, 2016			Sept. 30, 2017			Sept. 30, 2016
(dollars in millions, except per share amounts and unless otherwise noted)																June 30, 2020			March 31, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Results applicable to common shareholders of The Bank of New York Mellon Corporation:
Net income	$	983		$	926		$	974		$	2,789		$	2,603		$	901		$	944		$	969		$	1,845		$	1,879
Basic earnings per share	0.94			0.88			0.90			2.66			2.39			$	1.01		$	1.05		$	1.01		$	2.06		$	1.95
Diluted earnings per share	0.94			0.88			0.90			2.64			2.38			$	1.01		$	1.05		$	1.01		$	2.06		$	1.95

Fee and other revenue	$	3,167		$	3,120		$	3,150		$	9,305		$	9,119		$	3,176		$	3,332		$	3,112		$	6,508		$	6,144
Income from consolidated investment management funds	10			10			17			53			21
Income (loss) from consolidated investment management funds																54			(38		)	10			16			36
Net interest revenue	839			826			774			2,457			2,307			780			814			802			1,594			1,643
Total revenue	$	4,016		$	3,956		$	3,941		$	11,815		$	11,447		$	4,010		$	4,108		$	3,924		$	8,118		$	7,823

Return on common equity (annualized) ~~(a)~~	10.6		%	10.4		%	10.8		%	10.4		%	9.8		%	9.4		%	10.1		%	10.4		%	9.7		%	10.2		%
Adjusted return on common equity (annualized) – Non-GAAP (a)(b)	11.0		%	10.8		%	11.3		%	10.9		%	10.3		%

Return on tangible common equity (annualized) – Non-GAAP (a)(c)	21.9		%	21.9		%	23.5		%	22.0		%	21.5		%
Adjusted return on tangible common equity (annualized) – Non-GAAP (a)(b)(c)	22.0		%	22.1		%	23.6		%	22.1		%	21.7		%
Return on tangible common equity (annualized) – Non-GAAP (a)																18.5		%	20.4		%	21.2		%	19.4		%	20.9		%

Return on average assets (annualized)	1.13		%	1.09		%	1.10		%	1.09		%	0.96		%	0.87		%	0.99		%	1.13		%	0.93		%	1.12		%

Fee revenue as a percentage of total revenue	78		%	79		%	79		%	79		%	79		%	79		%	81		%	79		%	80		%	78		%

Percentage of non-U.S. total revenue	36		%	35		%	36		%	35		%	34		%
Non-U.S. revenue as a percentage of total revenue																36		%	36		%	36		%	36		%	36		%

Pre-tax operating margin (a)	34		%	33		%	33		%	33		%	31		%
Adjusted pre-tax operating margin – Non-GAAP (a)(b)	35		%	35		%	35		%	34		%	33		%
Pre-tax operating margin																29		%	30		%	33		%	30		%	32		%

Net interest margin	1.15		%	1.14		%	1.05		%	1.14		%	1.00		%	0.88		%	1.01		%	1.12		%	0.94		%	1.16		%
Net interest margin on a fully taxable equivalent (“FTE”) basis – Non-GAAP (d)	1.16		%	1.16		%	1.06		%	1.16		%	1.02		%
Net interest margin on a fully taxable equivalent (“FTE”) basis – Non-GAAP (b)																0.88		%	1.01		%	1.12		%	0.94		%	1.16		%

Assets under management (“AUM”) at period end (in billions) (e)	$	1,824		$	1,771		$	1,715		$	1,824		$	1,715
Assets under custody and/or administration (“AUC/A”) at period end (in trillions) (f)	$	32.2		$	31.1		$	30.5		$	32.2		$	30.5
Market value of securities on loan at period end (in billions) (g)	$	382		$	336		$	288		$	382		$	288
Assets under custody and/or administration (“AUC/A”) at period end (in trillions) (c)																$	37.3		$	35.2		$	35.5		$	37.3		$	35.5
Assets under management (“AUM”) at period end (in billions) (d)																$	1,961		$	1,796		$	1,843		$	1,961		$	1,843
Market value of securities on loan at period end (in billions) (e)																$	384		$	389		$	369		$	384		$	369

Average common shares and equivalents outstanding (in thousands): (h)
Average common shares and equivalents outstanding (in thousands):
Basic	1,035,337			1,035,829			1,062,248			1,037,431			1,071,457			889,020			894,122			951,281			891,642			956,887
Diluted	1,041,138			1,041,879			1,067,682			1,043,585			1,077,150			890,561			896,689			953,928			893,603			959,957

Selected average balances:
Interest-earning assets	$	291,841		$	289,496		$	296,703		$	288,283		$	308,560		$	357,562		$	323,936		$	287,417		$	340,749		$	284,816
Assets of operations	$	344,966		$	341,607		$	350,190		$	340,588		$	362,092
Total assets	$	345,709		$	342,515		$	351,230		$	341,510		$	363,290		$	415,359		$	385,278		$	342,384		$	400,318		$	339,292
Interest-bearing deposits	$	142,490		$	142,336		$	155,109		$	141,558		$	160,728		$	210,643		$	197,632		$	167,545		$	204,138		$	163,734
Noninterest-bearing deposits																$	72,411		$	60,577		$	52,956		$	66,494		$	53,765
Long-term debt	$	28,138		$	27,398		$	23,930		$	27,148		$	22,779		$	28,122		$	27,231		$	27,681		$	27,677		$	27,966
Noninterest-bearing deposits	$	70,168		$	73,886		$	81,619		$	72,524		$	82,861
Preferred stock	$	3,542		$	3,542		$	3,284		$	3,542		$	2,798		$	4,010		$	3,542		$	3,542		$	3,776		$	3,542
Total The Bank of New York Mellon Corporation common shareholders’ equity	$	36,780		$	35,862		$	35,767		$	35,876		$	35,616		$	38,476		$	37,664		$	37,487		$	38,070		$	37,287

Other information at period end:
Cash dividends per common share	$	0.24		$	0.19		$	0.19		$	0.62		$	0.53		$	0.31		$	0.31		$	0.28		$	0.62		$	0.56
Common dividend payout ratio	26		%	22		%	21		%	23		%	22		%	31		%	30		%	28		%	30		%	29		%
Common dividend yield (annualized)	1.8		%	1.5		%	1.9		%	1.6		%	1.8		%	3.2		%	3.7		%	2.5		%	3.2		%	2.6		%
Closing stock price per common share	$	53.02		$	51.02		$	39.88		$	53.02		$	39.88		$	38.65		$	33.68		$	44.15		$	38.65		$	44.15
Market capitalization	$	54,294		$	52,712		$	42,167		$	54,294		$	42,167		$	34,239		$	29,822		$	41,619		$	34,239		$	41,619
Book value per common share (a)	$	36.11		$	35.26		$	34.19		$	36.11		$	34.19
Tangible book value per common share – Non-GAAP (a)(c)	$	18.19		$	17.53		$	16.67		$	18.19		$	16.67
Book value per common share																$	44.21		$	42.47		$	40.30		$	44.21		$	40.30
Tangible book value per common share – Non-GAAP (a)																$	23.31		$	21.53		$	20.45		$	23.31		$	20.45
Full-time employees	52,900			52,800			52,300			52,900			52,300			48,300			47,900			49,100			48,300			49,100
Common shares outstanding (in thousands)	1,024,022			1,033,156			1,057,337			1,024,022			1,057,337			885,862			885,443			942,662			885,862			942,662

2 BNY Mellon

Consolidated Financial Highlights (unaudited)(continued)

Regulatory and Capital ratios Sept. 30, 2017
June 30, 2017
Dec. 31, 2016
Average liquidity coverage ratio (“LCR”) (i)
119 % 116 % 114 %

Regulatory capital ratios: (j)

Standardized:
Common equity Tier 1 (“CET1”) ratio 12.3 % 12.0 % 12.3 %
Tier 1 capital ratio 14.6
14.3
14.5
Total (Tier 1 plus Tier 2) capital ratio 15.6
14.8
15.2
Advanced:
CET1 ratio 11.1
10.8
10.6
Tier 1 capital ratio 13.2
12.9
12.6
Total (Tier 1 plus Tier 2) capital ratio 14.0
13.2
13.0

Leverage capital ratio (j)
6.8
6.7
6.6
Supplementary leverage ratio (“SLR”) (j)
6.3
6.2
6.0

BNY Mellon shareholders’ equity to total assets ratio – GAAP 11.4
11.3
11.6
BNY Mellon common shareholders’ equity to total assets ratio – GAAP 10.4
10.3
10.6

Selected regulatory capital ratios – fully phased-in – Non-GAAP: (k)

Estimated CET1 ratio:
Standardized Approach 11.9 % 11.5 % 11.3 %
Advanced Approach 10.7
10.4
9.7

Estimated SLR 6.1
6.0
5.6



Regulatory capital and other ratios	June 30, 2020		March 31, 2020		Dec. 31, 2019
Average liquidity coverage ratio (“LCR”)	112	%	115	%	120	%

Regulatory capital ratios: (f)
Advanced:
Common Equity Tier 1 (“CET1”) ratio	12.6	%	11.4	%	11.5	%
Tier 1 capital ratio	15.4		13.5		13.7
Total capital ratio	16.3		14.3		14.4
Standardized:
CET1 ratio	12.7	%	11.3	%	12.5	%
Tier 1 capital ratio	15.6		13.5		14.8
Total capital ratio	16.6		14.4		15.8

Tier 1 leverage ratio	6.2	%	6.0	%	6.6	%
Supplementary leverage ratio (“SLR”) (g)	8.2		5.6		6.1

BNY Mellon shareholders’ equity to total assets ratio	9.9	%	8.8	%	10.9	%
BNY Mellon common shareholders’ equity to total assets ratio	8.9		8.0		9.9


(a)	~~See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning~~Return on ~~page 49 for a reconciliation of Non-GAAP measures.~~

~~(b)~~

Non-GAAP information for all periods presented excludes the amortization of intangible assets and merger and integration (“M&I”), litigation and restructuring charges. Non-GAAP information for the third quarter of 2016 and for the first nine months of 2016 also excludes a recovery of the previously impaired loan to Sentinel Management Group, Inc. (“Sentinel”). Additionally, the pre-tax operating margin (Non-GAAP) excludes the net income attributable to noncontrolling interests of consolidated investment management funds.


~~(c)~~	~~Tangible~~tangible common equity ~~– Non-GAAP~~ 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 4945 for the reconciliation of Non-GAAP measures.


~~(d)~~(b)	See ~~“Average balances and~~“Net interest ~~rates”~~revenue” on page 1110 for a reconciliation of this Non-GAAP ~~measures.~~measure.


~~(e)~~	~~Excludes securities lending cash management assets and assets managed in the Investment Services business.~~


~~(f)~~(c)	Includes the AUC/A of CIBC Mellon Global Securities Services Company (“CIBC Mellon”), a joint venture with the Canadian Imperial Bank of Commerce, of $1.3 trillion at ~~Sept.~~June 30, ~~2017 and~~2020, $1.2 trillion at ~~both~~March 31, 2020 and $1.4 trillion at June 30, ~~2017 and Sept. 30, 2016.~~2019.


~~(g)~~(d)	Excludes securities lending cash management assets and assets managed in the Investment Services business.


(e)	Represents the total amount of securities on loan in our agency securities lending program managed by the Investment Services business. Excludes securities for which BNY Mellon acts as an agent on behalf of CIBC Mellon clients, which totaled ~~$68 billion at Sept. 30, 2017, $66~~$62 billion at June 30, ~~2017~~2020, $59 billion at March 31, 2020 and $64 billion at ~~Sept.~~June 30, ~~2016.~~2019.

~~(h)~~

Beginning in the third quarter of 2017, vested stock awards to retirement eligible employees are included in common shares outstanding for earnings per share purposes. This change increased both average basic and average diluted shares outstanding by approximately 6 million for the quarter, which resulted in a de minimis impact to both basic and diluted earnings per share. For additional information, see the “Consolidated Income Statement” beginning on page 57.


~~(i)~~	~~For additional information on our LCR, see “Liquidity and dividends” beginning on page 33.~~

~~(j)~~(f)

For our CET1, Tier 1 capital and Total capital ratios, our effective capital ratios under U.S. capital rules are the lower of the ratios as calculated under the Standardized and Advanced Approaches. The leverage capital ratio is based on Tier I capital, as phased-in, and quarterly average total assets. The SLR is based on Tier 1 capital, as phased-in, and average quarterly assets and certain off-balance sheet exposures. For additional information on our capital ratios, see “Capital” beginning on page 37.

~~(k)~~(g)

The ~~estimated fully phased-in CET1~~SLR at June 30, 2020 reflects the exclusion of certain central bank placements and the temporary exclusion of U.S. Treasury securities from the leverage exposure. This temporary exclusion increased our consolidated SLR ~~ratios (Non-GAAP) are based on our interpretation of the U.S. capital rules, which are being gradually phased-in over a multi-year period. For additional information on these Non-GAAP ratios, see~~by 40 basis points. See “Capital” beginning on page ~~37.~~37 for additional information.

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, ~~2016~~2019 (“~~2016~~2019 Annual Report”).

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

~~How we reported results~~

Throughout this Form 10-Q, certain measures, which are noted as “Non-GAAP financial measures,” exclude certain items or otherwise include components that differ from U.S. generally accepted accounting principles (“GAAP”). BNY Mellon believes that these measures are useful to investors because they permit a focus on period-to-period comparisons using measures that relate to our ability to enhance revenues and limit expenses in circumstances where such matters are within our control or because they provide additional information about our ability to meet fully phased-in capital requirements. Certain immaterial reclassifications have been made to prior periods to place them on a basis comparable with the current period presentation. See “Supplemental information - Explanation of GAAP and Non-GAAP financial measures” beginning on page 49 for a reconciliation of financial measures presented in accordance with GAAP to adjusted Non-GAAP financial measures. See “Net interest revenue,” including the “Average balances and interest rates” beginning on page 10 for information on measures presented on a fully taxable equivalent basis. Also see “Capital” beginning on page 37 for information on our fully phased-in capital requirements.

Overview

~~The Bank of New York Mellon Corporation was~~Established in 1784 by Alexander Hamilton, we were the first company listed on the New York Stock Exchange (NYSE: BK). With a ~~rich~~ history of~~maintaining our financial strength and stability through all business cycles,~~ more than 235 years, BNY Mellon is a global ~~investments~~ company ~~dedicated to improving lives through investing.~~

~~We manage~~that manages and ~~service~~services assets for financial institutions, corporations and individual investors in 35 ~~countries and more than 100 markets. As of Sept. 30, 2017,~~ countries.

BNY Mellon ~~had $32.2 trillion in assets under custody and/or administration (“AUC/A”)~~has two business segments, Investment Services and Investment and Wealth Management (formerly Investment Management), which offer a comprehensive set of capabilities and ~~$1.8 trillion in assets under management (“AUM”).~~

~~BNY Mellon is focused on enhancing our clients’ experience by leveraging our scale and~~deep expertise across the investment lifecycle, enabling the Company to ~~deliver innovative and strategic~~provide solutions ~~for our clients, and building trusted relationships that drive value. We hold a unique position in the global financial services industry. We service both the~~to buy-side and sell-side ~~providing us~~market participants, as well as leading institutional and wealth management clients globally.

The diagram below presents our two business segments and lines of business, with ~~distinctive marketplace insights that enable us to support our clients’ success.~~the remaining operations in the Other segment.

BNY Mellon’s businesses benefit from global growth in financial assets, the globalization of the investment process, changes in demographics and the continued evolution of the regulatory landscape—each providing us with opportunities to advise and service clients.

Key ~~third~~second quarter ~~2017~~2020 and subsequent events

~~Definitive agreement to sell CenterSquare Investment Management~~Emily Portney named Chief Financial Officer

In September 2017, we announced that we entered into a definitive agreement to sell CenterSquare Investment Management (“CenterSquare”), one of our Investment Management boutiques. CenterSquare had approximately $9 billion in AUM in U.S. and global real estate and infrastructure investments. The transaction is subject to standard regulatory and other required approvals and is expected to be completed in the fourth quarter of 2017 or first quarter of 2018.

~~4 BNY Mellon~~

~~Charles W. Scharf named chief executive officer; Gerald L. Hassell, chairman, to retire~~

In July ~~2017, Charles W. Scharf~~2020, Emily Portney was appointed ~~chief executive officer~~Chief Financial Officer, succeeding Michael P. Santomassimo, and ~~member~~joined the Company’s Executive Committee. Ms. Portney previously led the client management, sales and services teams for the Asset Servicing business globally and oversaw the Americas region for the Asset Servicing business. She has also previously held senior financial roles.

CCAR and common stock repurchases

In March 2020, we and the other members of the ~~board~~Financial Services Forum announced the temporary suspension of ~~directors of the Company. Mr. Scharf succeeds Gerald L. Hassell, who will continue as the Company’s chairman of the board of directors~~share repurchases until ~~his retirement at~~ the end of the ~~year. After Mr. Hassell’s retirement, Mr. Scharf will become chairman, effective Jan. 1, 2018.~~second quarter of 2020 to preserve capital and liquidity in order to further the objective of using capital and liquidity to support clients and customers.

~~Resolution plan~~

4 BNY Mellon

~~As required by the Dodd-Frank Act, the Parent must submit annually to the Board of Governors of~~

On June 25, 2020, the Federal Reserve ~~System (“Federal Reserve”)~~released the results of its annual stress tests for 2020 and the Federal Deposit Insurance Corporation (“FDIC”) a plan for its rapid and orderly resolution in the event of material financial distress or failure. The Parent filed its most recent resolution plan on July 1, 2017. We believe the 2017 resolution plan addresses all shortcomings and deficiencies identified by the FDIC andadditional sensitivity analyses that the Federal Reserve conducted in light of the ~~Company’s 2015 resolution plan.~~coronavirus pandemic. The ~~public portion of our 2017 resolution plan is available on the Federal Reserve’s and FDIC’s websites.~~

~~In September 2017, the~~ Federal Reserve ~~and FDIC extended~~also notified BNY Mellon that its stress capital buffer (“SCB”) requirement will be 2.5%, which equals the ~~filing deadline by one year to July~~regulatory floor. The SCB will be effective on Oct. 1, ~~2019 for the Parent’s next resolution plan.~~ 2020.

~~Increase in cash dividend on common stock~~

~~BNY Mellon’s 2017 capital plan submitted in connection with our~~The Federal Reserve also announced that it has required participating Comprehensive Capital Analysis and Review (“CCAR”) ~~included~~firms, including us, to update and resubmit their capital plans and that, as a ~~26%~~result, unless otherwise approved by the Federal Reserve, participating firms would not be permitted, during the third quarter of 2020, to conduct open market common stock repurchases, to increase intheir common stock dividends or to pay common stock dividends that exceed average net income for the ~~quarterly cash dividend to $0.24 per common share.~~preceding four quarters. The ~~first payment of the increased quarterly cash dividend was made on Aug. 11, 2017.~~Federal Reserve also stated that it may extend these limitations quarter-by-quarter.

Highlights of ~~third~~second quarter ~~2017~~2020 results

~~We reported net income applicable to common shareholders of $983 million, or $0.94 per diluted common share, in the third quarter of 2017.~~ Net income applicable to common shareholders was ~~$974~~$901 million, or ~~$0.90 per diluted common share, in the third quarter of 2016 and $926 million, or $0.88~~$1.01 per diluted common share, in the second quarter of ~~2017~~.

~~Highlights of~~2020. Net income applicable to common shareholders was $969 million, or $1.01 per diluted common share, in the ~~third~~second quarter of ~~2017 include:~~

~~AUC/A totaled a record $32.2 trillion at Sept. 30, 2017~~2019. The highlights below are based on the second quarter of 2020 compared with ~~$30.5 trillion at Sept. 30, 2016. The 6% increase~~the second quarter of 2019, unless otherwise noted.

Total revenue of $4.0 billion increased 2% primarily ~~reflects~~reflecting:

Fee revenue increased 2% primarily reflecting higher fees in Pershing and Asset Servicing, partially offset by money market ~~values,~~fee waivers, lower investment management fees and the ~~favorable~~unfavorable impact of a ~~weaker~~stronger U.S. ~~dollar and net new business. (See “Investment Services business” beginning on page 19.)~~

AUM totaled a record $1.82 trillion at Sept. 30, 2017 compared with $1.72 trillion at Sept. 30, 2016. The 6% increase primarily reflects higher market values, net inflows and the favorable impact of a weaker U.S. dollar (principally versus the British pound). AUM excludes securities lending cash management assets and assets managed in the Investment Services business. (See “Investment Management business” beginning on page 16.)

Investment services fees totaled $1.92 billion, an increase of 1% compared with $1.89 billion in the third quarter of 2016. The increase primarily reflects higher money market fees, higher equity market values and net new business, partially offset by lower Depositary Receipts revenue. (See “Investment Services business” beginning on page 19.)

Investment management and performance fees totaled $901 million, an increase of 5% compared with $860 million in the third quarter of 2016. The increase primarily reflects higher equity market values and money market fees. (See “Investment Management business” beginning on page 16.)

Foreign exchange and other trading revenue totaled $173 million compared with $183 million in the third quarter of 2016. Foreign exchange revenue totaled $158 million, a decrease of 10% compared with $175 million in the third quarter of 2016, primarily reflecting lower volatility and lower Depositary Receipt-related foreign exchange activity, partially offset by higher volumes.dollar. (See “Fee and other revenue” beginning on page 7.)

Investment and other income totaled $63 million compared with $92 million in the third quarter of 2016. The decrease primarily reflects lower other income driven by our investments in renewable energy and lower seed capital gains. (See “Fee and other revenue” beginning on page 7.)

~~BNY Mellon 5~~

Net interest revenue ~~totaled $839 million compared with $774 million in the third quarter of 2016. The 8% increase was~~decreased 3% primarily ~~driven by higher~~reflecting lower interest rates on interest-earning assets, partially offset by the benefit of lower ~~average~~deposit and funding rates and higher deposits, securities portfolio and ~~loans~~. Net interest margin was 1.15% in the third quarter of 2017 compared with 1.05% in the third quarter of 2016. The net interest margin (FTE) (Non-GAAP) was 1.16% in the third quarter of 2017 compared with 1.06% in the third quarter of 2016.loans. (See “Net interest revenue” on page 10.)

~~The provision~~Provision for credit losses was ~~a credit~~$143 million primarily reflecting increased downgrades and the continuation of ~~$6 million in~~ the ~~third quarter of 2017 and a credit of $19 million in the third quarter of 2016.~~challenging

macroeconomic outlook. (See ~~“Asset quality and allowance~~“Consolidated balance sheet review - Allowance for credit losses” beginning on page 29.)

Noninterest expense ~~totaled $2.65 billion compared with $2.64 billion~~increased 1% primarily reflecting the continued investments in ~~the third quarter of 2016. The increase primarily reflects~~ technology and higher ~~software~~staff and ~~professional, legal and other purchased services~~pension expenses,, partially offset by lower ~~litigation~~business development (travel and marketing) expense and ~~bank assessment charges.~~the favorable impact of a stronger U.S. dollar. (See “Noninterest expense” ~~beginning~~ on page 13.)

~~The provision for income taxes was $348 million and the effective rate was 25.4% in the third quarter of 2017 compared with an income tax provision of $324 million and an effective~~Effective tax rate of ~~24.6% in the third quarter of 2016.~~18.3%. (See “Income taxes” on page ~~14.~~13.)

Capital and liquidity

~~The net unrealized pre-tax gain on~~CET1 ratio was 12.6% under the ~~total investment securities portfolio was $257 million at Sept. 30, 2017 compared with a pre-tax gain of $151 million~~Advanced Approaches at June 30, ~~2017. The increase was primarily driven by a decrease in long-term interest rates. (See “Investment securities” beginning on page 25.)~~

~~Our CET1 ratio under the Advanced Approach was 11.1% at Sept. 30, 2017 and 10.8% at June 30, 2017. The increase was primarily driven by CET1 generation. Our CET1 ratio~~2020, compared with 11.3% under the Standardized Approach ~~was 12.3%~~ at ~~Sept. 30, 2017~~March 31, 2020. The increase in the CET1 ratio primarily reflects capital generated through earnings and ~~12.0% at June 30, 2017.~~unrealized gains on assets available-for-sale, partially offset by capital deployed through dividend payments. (See “Capital” beginning on page 37.)

~~Our estimated CET1 ratio (Non-GAAP) calculated under~~Tier 1 capital increased $2.55 billion, including the Advanced Approach on a fully phased-in basis was 10.7% at Sept. 30, 2017 and 10.4% at June 30, 2017. The increase primarily reflects CET1 generation. Our estimated CET1 ratio (Non-GAAP) calculated under the Standardized Approach on a fully phased-in basis was 11.9% at Sept. 30, 2017 and 11.5% at June 30, 2017.issuance of $1 billion of preferred stock. (See “Capital” beginning on page 37.)

Highlights of our principal businesses

Investment Services

Total revenue increased 3%.

Fee revenue increased 5%.

Income before income taxes decreased 8%.

AUC/A of $37.3 trillion, increased 5%, primarily reflecting higher client inflows, market values and net new business, partially offset by the unfavorable impact of a stronger U.S. dollar.

Investment and Wealth Management

Total revenue decreased 3%.

Income before income taxes decreased 15%.

AUM of $2.0 trillion, increased 6%, primarily reflecting higher market values and net inflows, partially offset by the unfavorable impact of a stronger U.S. dollar (principally versus the British pound).

See “Review of businesses” and Note 19 of the Notes to Consolidated Financial Statements for additional information on our businesses.

6 BNY Mellon 5

Impact of coronavirus pandemic on our business

The coronavirus pandemic has had a significant effect on the global macroeconomic environment. The following discusses the areas of our business that have been impacted and could continue to be impacted by the current environment.

At the end of June 2020, approximately 95% of our employees continued to work from home and be fully operational with minimal disruption to servicing our clients. However, our continued reliance on work-from-home arrangements may result in increased operational risks.

Market volatility associated with the performance of global equity and fixed income markets and lower interest rates has had, and may continue to have, a considerable impact on all of our businesses. Our lower-risk diversified fee-based business model benefits from heightened volatility and a flight-to-quality on a relative basis compared with other credit-focused financial institutions.

Our Investment Services businesses were favorably impacted by higher client volumes in the first and second quarters of 2020 compared with the prior year. The significant increases in market volatility also resulted in increased client activity in foreign exchange, and higher asset servicing, clearing services in Pershing, as well as clearance and collateral management fee revenue. However, the heightened volumes and volatility were lower in the second quarter compared with the first quarter of 2020.

This volatility coupled with the interest rate environment also led to an increase in deposit levels from the prior year as our clients increased the levels of cash placed with us. This favorably impacted net interest revenue. However, the low interest rate environment has begun to more than offset that benefit and is expected to continue to reduce our net interest revenue and margin.

Given the recent levels of short-term interest rates, money market mutual funds have begun to waive fees, which reduced fee revenue in the second quarter of 2020. See further discussion of money market fee waivers in “Fee and other revenue.”

As discussed above under “Key second quarter 2020 and subsequent events,” we and the other members of the Financial Services Forum announced in March 2020 that we would suspend share repurchases through the second quarter of 2020. Additionally, in connection with the Federal Reserve’s release of the CCAR results in June 2020, BNY Mellon announced that it will not conduct open market common stock repurchases in the third quarter of 2020, as required of all participating CCAR firms, and will continue the current quarterly common stock dividend of $0.31 per share. See “Recent regulatory developments” for additional information related to the 2020 CCAR results.

The significant changes in market values during 2020 have impacted revenue related to seed capital investments (net of hedges) in our Investment and Wealth Management business, which benefited the second quarter of 2020 and negatively impacted the first quarter of 2020. Also, in the second quarter, the Investment and Wealth Management business was negatively impacted by higher money market fee waivers.

During the first quarter of 2020, we purchased $2.2 billion of commercial paper and certificates of deposit (“CDs”) from affiliated money market mutual funds in order to provide liquidity support to the funds. We also purchased $650 million in the first quarter of 2020 and $1.1 billion in the second quarter of 2020 of commercial paper and CDs from third-party money market mutual funds and funded this purchase through the Federal Reserve Bank of Boston’s Money Market Mutual Fund Liquidity Facility (“MMLF”) program. See “Recent regulatory developments” in the First Quarter 2020 Form 10-Q for additional information on the MMLF.

The need to apply macroeconomic forecasting in the current environment in conjunction with the new expected credit loss accounting guidance has resulted in and may continue to result in heightened levels of credit loss provisioning. The continuing effects of the pandemic could also result in increased credit losses and charge offs.

In addition, a prolonged economic downturn may result in other asset write-downs and impairments, including, but not limited to, equity investments, goodwill and intangibles.

6 BNY Mellon

It is difficult to forecast the impact of the coronavirus, together with related public health measures, on our results with certainty because so much depends on how the health crisis evolves, its impact on the global economy as well as actions taken by central banks and governments to support the economy.

The current macroeconomic environment has also resulted in responses by governmental and regulatory bodies. See “Recent regulatory developments” for additional information on legislative and regulatory

developments in response to the coronavirus pandemic.

For further discussion of the current and potential impact of the coronavirus pandemic see Item 1A. Risk Factors “The coronavirus pandemic is adversely affecting us and creates significant risks and uncertainties for our business, and the ultimate impact of the pandemic on us will depend on future developments, which are highly uncertain and cannot be predicted.”

Fee and other revenue


Fee and other revenue																				YTD17																					YTD20
										3Q17 vs.										vs.											2Q20 vs.										vs.
(dollars in millions, unless otherwise noted)	3Q17			2Q17			3Q16			2Q17		3Q16		YTD17			YTD16			YTD16		2Q20			1Q20			2Q19			1Q20		2Q19		YTD20			YTD19			YTD19
Investment services fees:
Asset servicing (a)	$	1,105		$	1,085		$	1,067		2	%	4	%	$	3,253		$	3,176		2	%
Clearing services	383			394			349			(3	)	10		1,153			1,049			10
Issuer services	288			241			337			20		(15	)	780			815			(4	)
Treasury services	141			140			137			1		3		420			407			3
Asset servicing fees (a)																						$	1,173		$	1,159		$	1,141		1	%	3	%	$	2,332		$	2,263		3	%
Clearing services fees (b)																						431			470			410			(8	)	5		901			808			12
Issuer services fees																						277			263			291			5		(5	)	540			542			—
Treasury services fees																						144			149			140			(3	)	3		293			272			8
Total investment services fees	1,917			1,860			1,890			3		1		5,606			5,447			3		2,025			2,041			1,982			(1	)	2		4,066			3,885			5
Investment management and performance fees	901			879			860			3		5		2,622			2,502			5		786			862			833			(9	)	(6	)	1,648			1,674			(2	)
Foreign exchange and other trading revenue	173			165			183			5		(5	)	502			540			(7	)	166			319			166			(48	)	—		485			336			44
Financing-related fees	54			53			58			2		(7	)	162			169			(4	)	58			59			50			(2	)	16		117			101			16
Distribution and servicing	40			41			43			(2	)	(7	)	122			125			(2	)	27			31			31			(13	)	(13	)	58			62			(6	)
Investment and other income	63			122			92			N/M		N/M		262			271			N/M		105			11			43			N/M				116			78			N/M
Total fee revenue	3,148			3,120			3,126			1		1		9,276			9,054			2		3,167			3,323			3,105			(5	)	2		6,490			6,136			6
Net securities gains	19			—			24			N/M		N/M		29			65			N/M		9			9			7			N/M				18			8			N/M
Total fee and other revenue	$	3,167		$	3,120		$	3,150		2	%	1	%	$	9,305		$	9,119		2	%	$	3,176		$	3,332		$	3,112		(5	)%	2	%	$	6,508		$	6,144		6	%

Fee revenue as a percentage of total revenue	78		%	79		%	79		%					79		%	79		%			79		%	81		%	79		%					80		%	78		%

AUM at period end (in billions) (b)	$	1,824		$	1,771		$	1,715		3	%	6	%	$	1,824		$	1,715		6	%
AUC/A at period end (in trillions) (c)	$	32.2		$	31.1		$	30.5		4	%	6	%	$	32.2		$	30.5		6	%	$	37.3		$	35.2		$	35.5		6	%	5	%	$	37.3		$	35.5		5	%
AUM at period end (in billions) (d)																						$	1,961		$	1,796		$	1,843		9	%	6	%	$	1,961		$	1,843		6	%

(a)

Asset servicing fees include the fees from the Clearance and Collateral Management business and also include securities lending revenue of ~~$47 million in the third quarter of 2017, $48~~$56 million in the second quarter of ~~2017,~~2020, $51 million in the ~~third~~first quarter of ~~2016, $144~~2020, $44 million in the second quarter of 2019, $107 million in the first ~~nine~~six months of ~~2017~~2020 and ~~$153~~$92 million in the first ~~nine~~six months of ~~2016.~~2019.


(b)	Clearing services fees are almost entirely earned by our Pershing business.


(c)	Consists of AUC/A primarily from the Asset Servicing business and, to a lesser extent, the Clearance and Collateral Management, Issuer Services, Pershing and Wealth Management businesses. Includes the AUC/A of CIBC Mellon of $1.3 trillion at June 30, 2020, $1.2 trillion at March 31, 2020 and $1.4 trillion at June 30, 2019.


(d)	Excludes securities lending cash management assets and assets managed in the Investment Services business.


~~(c)~~	~~Includes the AUC/A of CIBC Mellon of $1.3 trillion at Sept. 30, 2017 and $1.2 trillion~~ ~~at both~~ ~~June 30, 2017 and Sept. 30, 2016.~~

N/M - Not meaningful.

Fee and other revenue increased 1%2% compared with the ~~third~~second quarter of ~~2016~~2019 and ~~2% (unannualized)~~decreased 5% compared with the ~~second~~first quarter of ~~2017.~~2020. The increase compared with the ~~third~~second quarter of ~~2016~~2019 primarily reflects higher investment ~~management~~ and ~~performance fees,~~other income, asset servicing fees and clearing services fees, partially offset by lower ~~issuer services fees,~~ investment management and ~~other income and~~performance fees. The decrease compared with the first quarter of 2020 primarily reflects lower foreign exchange and other trading ~~revenue.~~revenue, investment management and performance fees and clearing

services fees, partially offset by higher investment and other income.

Money market fee waivers

Given the recent levels of short-term interest rates, money market mutual fund fees and other similar fees have begun to be waived to protect investors from negative returns. The fee waivers are initially primarily impacting clearing services fees in Pershing, and to a lesser extent revenue in our other

BNY Mellon 7

businesses including investment management fees and distribution and servicing revenue in Investment Management (formerly Asset Management) and fees in other Investment Services businesses, but also result in lower distribution and servicing expense. Money market fee waivers are highly sensitive to changes in short-term interest rates and are difficult to predict, but are expected to grow over the coming quarters.

The following table presents the impact of money market fee waivers on our consolidated fee revenue, net of distribution and servicing expense. A majority of the money market fee waivers were driven by low short-term interest rates. An increase in money market balances in the second quarter 2020 compared with the first quarter 2020 resulted in an approximate $50 million increase in total fee and other revenue which partially offset the increase in money market fee waivers.



Money market fee waivers
(in millions)	2Q20			1Q20
Investment services fees:
Clearing services fees	$	(50	)	$	(9	)
Issuer services fees	(1		)	—
Treasury services fees	(2		)	—
Total investment services fees	(53		)	(9		)
Investment management and performance fees	(30		)	(14		)
Distribution and servicing revenue	(3		)	—
Total fee and other revenue	(86		)	(23		)
Less: Distribution and servicing expense	7			—
Net impact of money market fee waivers	$	(79	)	$	(23	)

Impact to revenue by line of business:
Asset Servicing	$	(1	)	$	—
Pershing	(60		)	(9		)
Issuer Services	(1		)	—
Investment Management	(24		)	(14		)
Total impact to revenue by line of business	$	(86	)	$	(23	)

Note: The line of business revenue for management reporting purposes reflects the impact of revenue transferred between the businesses.

Assuming quarter-end money market balances, we expect the impact from fee waivers, net of lower distribution and servicing expense, to increase in the third quarter of 2020 by approximately $30 million to $45 million and to increase an incremental $25 million in the fourth quarter of 2020, for a full run rate of approximately $135 million to $150 million. This impact may be partially offset depending on the levels of money market balances.

Investment services fees

Investment services fees increased 2% compared with the second quarter of 2019 and decreased 1% compared with the first quarter of 2020 reflecting the following:

Asset servicing fees increased 3% compared with the second quarter of 2019 and 1% compared with the first quarter of 2020. Both increases primarily reflect higher volumes from existing clients.

Clearing services fees increased 5% compared with the second quarter of 2019 and decreased 8% compared with the first quarter of 2020. The increase compared with the second quarter of ~~2017~~2019 primarily reflects ~~seasonally~~ higher ~~issuer services fees, investment management~~money market balances and ~~performance fees, asset servicing fees and net securities gains,~~clearing volumes, partially offset by ~~lower investment and other income.~~

~~Investment services fees~~

~~Investment services fees were impacted by~~ the ~~following~~impact of rate-driven money market fee waivers. The decrease compared with the ~~third~~first quarter of ~~2016~~2020 primarily reflects the impact of rate-driven money market fee waivers and ~~the second quarter of 2017:~~lower clearing volumes, partially offset by higher money market balances.

~~Asset servicing~~Issuer services fees ~~increased 4% compared with the third quarter of 2016 and 2% (unannualized)~~decreased 5% compared with the second quarter of ~~2017.~~2019 and increased 5% compared with the first quarter of 2020. The

decrease compared with the second quarter of 2019 primarily reflects lower Depositary Receipts and Corporate Trust fees. The increase compared with the ~~third~~first quarter of ~~2016~~2020 primarily reflects higher ~~equity market values~~Depositary Receipts fees.

Treasury services fees increased 3% compared with the second quarter of 2019 and ~~net new business, including growth in collateral management, partially offset by~~decreased 3% compared with the ~~impact~~first quarter of ~~downsizing the retail UK transfer agency business.~~2020. The increase compared with the second quarter of ~~2017 was~~2019 primarily ~~driven by the favorable impact of a weaker U.S. dollar and~~reflects higher ~~equity market values.~~

~~Clearing services fees increased 10%~~liquidity fees. The decrease compared with the ~~third~~first quarter of ~~2016 and decreased 3% (unannualized) compared with the second quarter of 2017. The increase was primarily driven by~~ ~~higher money market fees and growth in long-term mutual fund assets.~~ ~~The decrease~~2020 primarily reflects lower ~~clearance volumes.~~

~~Issuer services fees decreased 15% compared with the third quarter of 2016 and increased 20% (unannualized) compared with the second quarter of 2017. The decrease primarily reflects~~ ~~fewer corporate actions, lost business and lower fees due to a reduction in shares outstanding in certain depositary receipts programs, partially offset by higher Corporate Trust revenue. The increase~~

~~BNY Mellon 7~~

~~compared with the second quarter of 2017 primarily reflects seasonality in Depositary Receipts revenue and higher Corporate Trust revenue.~~

~~Treasury services fees increased 3% compared with the third quarter of 2016 and 1% (unannualized) compared with the second quarter of 2017. Both increases primarily reflect~~ ~~higher~~ payment volumes ~~partially offset by higher compensating balance credits provided to clients, which reduces fee revenue~~ and ~~increases net interest revenue.~~

other fees.

See the “Investment Services business” in “Review of businesses” for additional details.

Investment management and performance fees

Investment management and performance fees ~~increased 5% compared with the third quarter of 2016 and 3% (unannualized)~~decreased 6% compared with the second quarter of ~~2017, primarily reflecting higher equity market values~~2019 and ~~money market fees. The increase~~9% compared with the ~~third~~first quarter of ~~2016 also reflects higher performance fees.~~2020. The ~~increase~~decrease compared with the second quarter of ~~2017 also~~2019 primarily reflects money market fee waivers, the favorable impact of a weaker U.S. dollar. Changes in currency rates had an insignificant impact on the growth rate of investment management and performance fees compared with the third quarter of 2016. Performance fees were $15 millionunfavorable change in the ~~third quarter~~mix of ~~2017, $8 million in the third quarter of 2016 and $17 million in~~AUM since the second quarter of ~~2017.~~

Total AUM for the Investment Management business increased 6% compared with Sept. 30, 2016 and 3% compared with June 30, 2017. The increase compared with Sept. 30, 2016 primarily reflects higher market values, net inflows2019 and the ~~favorable~~unfavorable impact of

8 BNY Mellon

a ~~weaker~~stronger U.S. dollar (principally versus the British pound). The decrease compared with the first quarter of 2020 primarily reflects the timing of performance fees and money market fee waivers. On a constant currency basis (Non-GAAP), investment management and performance fees decreased 5% compared with the second quarter of 2019. Performance fees were $5 million in the second quarter of 2020, $2 million in the second quarter of 2019 and $50 million in the first quarter of 2020.

AUM was $2.0 trillion at June 30, 2020, an increase of 6% compared with June 30, ~~2017~~2019, primarily ~~reflects~~reflecting higher market values and net inflows, partially offset by the ~~favorable~~unfavorable impact of a ~~weaker~~stronger U.S. dollar (principally versus the British pound)~~, higher market values~~.

See “Investment and net inflows. Net long-term inflows of fixed income and multi-asset and alternative investments were offset by outflows of index, equity and liability-driven investments in the third quarter of 2017. Net short-term inflows of $10 billion in the third quarter of 2017 were a result of increased distribution through our liquidity portals.

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

Foreign exchange and other trading revenue


Foreign exchange and other trading revenue	Foreign exchange and other trading revenue										Foreign exchange and other trading revenue
(in millions)	3Q17		2Q17		3Q16		YTD17		YTD16		2Q20			1Q20		2Q19		YTD20		YTD19
Foreign exchange	$	158	$	151	$	175	$	463	$	512	$	174		$	253	$	150	$	427	$	310
Other trading revenue	15		14		8		39		28
Other trading (loss) revenue											(8		)	66		16		58		26
Total foreign exchange and other trading revenue	$	173	$	165	$	183	$	502	$	540	$	166		$	319	$	166	$	485	$	336

Foreign exchange and other trading revenue ~~decreased 5% compared with the third quarter of 2016 and increased 5% (unannualized)~~was unchanged compared with the second quarter of ~~2017.~~2019 and decreased 48% compared with the first quarter of 2020.

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, and the impact of foreign currency hedging activities. ~~Foreign~~In the second quarter of 2020, foreign exchange revenue ~~decreased 10% compared with the third quarter~~totaled $174 million, an increase of ~~2016, primarily reflecting lower volatility and lower Depositary Receipt-related foreign exchange activity, partially offset by higher volumes. Foreign exchange revenue increased 5% (unannualized)~~16% compared with the second quarter of ~~2017 reflecting~~2019 and a decrease of 31% compared with the first quarter of 2020. The increase compared with the second quarter of 2019 reflects higher volatility partially offset by the negative impact of foreign currency translation hedging (mostly offset in investment and other income). The decrease compared with the first quarter of 2020 reflects lower volumes. and volatility and the negative impact of

foreign currency translation hedging. Foreign exchange revenue is primarily reported in the Investment Services business and, to a lesser extent, the Investment and Wealth Management business and the Other segment.

~~Our custody clients may enter into foreign exchange transactions~~Other trading losses totaled $8 million in a number of ways, including through our standing instruction programs. While the shift of custody clients from our standing instruction programs to other trading options has abated, our foreign exchange revenue continues to be impacted by changes in volume and volatility. For the quarter ended Sept. 30, 2017, our total revenue for all types of foreign exchange trading transactions was $158 million, or 4% of our total revenue, and approximately 28% of our foreign exchange revenue was generated by transactions in our standing instruction programs.

~~8 BNY Mellon~~

~~Financing-related fees~~

Financing-related fees, which are primarily reported in the Investment Services business and the Other segment, include capital markets fees, loan commitment fees and credit-related fees. Financing-related fees decreased compared with the third quarter of 2016 primarily reflecting lower syndication fees. Financing-related fees increased compared with the second quarter of ~~2017 primarily reflecting higher underwriting fees.~~

~~Distribution and servicing fees~~

~~Distribution and servicing fees decreased~~2020 compared with other trading revenue of $16 million in the ~~third~~second quarter of ~~2016~~2019 and other trading revenue of $66 million in the first quarter of 2020. Both decreases primarily ~~reflecting fees paid to introducing brokers, partially offset by higher money market fees.~~reflect the impact of Investment Management seed capital hedging activities. Other trading revenue is reported in all three business segments.

Investment and other income

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


Investment and other income	Investment and other income														Investment and other income
(in millions)	3Q17		2Q17			3Q16			YTD17			YTD16			2Q20		1Q20			2Q19			YTD20			YTD19
Corporate/bank-owned life insurance	$	37	$	43		$	34		$	110		$	96		$	36	$	36		$	32		$	72		$	62
Lease-related gains	—		51			—			52			44
Expense reimbursements from joint venture	18		17			18			49			52			19		21			19			40			38
Equity investment income (loss)	—		7			(1		)	33			(8		)
Seed capital gains (a)	6		10			16			25			38
Asset-related gains (losses)	1		(5		)	8			(1		)	9
Asset-related gains															3		4			1			7			2
Seed capital gains (losses) (a)															23		(31		)	8			(8		)	10
Other income (loss)	1		(1		)	17			(6		)	40			24		(19		)	(17		)	5			(34		)
Total investment and other income	$	63	$	122		$	92		$	262		$	271		$	105	$	11		$	43		$	116		$	78

(a)

Excludes ~~the gains (losses) on~~ seed capital ~~investments in~~gains related to consolidated investment management funds, which are reflected in operations of consolidated investment management funds, net of noncontrolling interests. The gains on seed capital investments in consolidated investment management funds were $7 million in the third quarter of 2017, $7 million in the second quarter of 2017, $8 million in the third quarter of 2016, $29 million in the first nine months of 2017 and $15 million in the first nine months of 2016.funds.

Investment and other income ~~decreased~~increased compared with both the ~~third quarter of 2016 and~~ second quarter of ~~2017.~~2019 and first quarter of 2020. Both increases primarily reflect equity investment gains, including seed capital investments, foreign currency translation gains and a one-time fee in the Asset Servicing business. The ~~decrease~~increase compared with the ~~third~~first quarter of 2016 primarily reflects lower other income driven by increased pre-tax losses on our investments in renewable energy and lower seed capital gains. The pre-tax losses on the renewable energy investments are2020 was partially offset by ~~corresponding tax benefits and credits recorded as~~ a ~~reduction to~~one-time fee in the ~~provision for income taxes. The decrease compared with the second quarter of 2017 primarily reflects lease-related gains~~Pershing business recorded in the ~~second~~first quarter of ~~2017 and lower income from corporate/bank-owned life insurance.~~2020.

Year-to-date ~~2017~~2020 compared with year-to-date ~~2016~~2019

Fee and other revenue increased 2%6% compared with the first ~~nine~~six months of ~~2016,~~2019, primarily reflecting higher ~~investment management and performance fees, clearing services fees and asset servicing fees, partially offset by lower~~ foreign exchange and other trading revenue, net securities gains and issuer services fees. The 5% increase in investment management and performance fees primarily reflects higher market values, money market fees and performance fees, partially offset by the unfavorable impact of a stronger U.S. dollar (principally versus the British pound). The 10% increase in clearing services fees, ~~primarily reflects higher money market fees and growth in long-term mutual fund assets. The 2% increase in~~ asset servicing fees ~~primarily reflects net new business, including growth in collateral management~~ and ~~higher equity market values, partially offset by the unfavorable impact of a stronger U.S. dollar~~investment and ~~the impact of downsizing the retail UK transfer agency business.~~other income. The ~~7% decrease~~44% increase in foreign exchange and other trading revenue primarily reflects ~~lower~~higher volatility and ~~lower Depositary Receipts-related foreign exchange activity.~~volumes. The ~~4% decrease~~12% increase in ~~issuer~~clearing services fees primarily reflects ~~lower Depositary Receipts revenue.~~

BNY Mellon 9

higher transaction fees and money market balances, partially offset by money market fee waivers. The 3% increase in asset servicing fees primarily reflects higher volumes from existing clients. The increase in

investment and other income revenue primarily reflects one-time fees in the Pershing and Asset Servicing businesses.

Net interest revenue


Net interest revenue																				YTD17																					YTD20
										3Q17 vs.										vs.											2Q20 vs.										vs.
(dollars in millions)	3Q17			2Q17			3Q16			2Q17		3Q16		YTD17			YTD16			YTD16		2Q20			1Q20			2Q19			1Q20		2Q19		YTD20			YTD19			YTD19
Net interest revenue	$	839		$	826		$	774		2	%	8	%	$	2,457		$	2,307		7	%
Tax equivalent adjustment	12			12			12			N/M				36			39			N/M
Net interest revenue – GAAP																						$	780		$	814		$	802		(4	)%	(3	)%	$	1,594		$	1,643		(3	)%
Add: Tax equivalent adjustment																						2			2			4			N/M				4			8			N/M
Net interest revenue (FTE) – Non-GAAP (a)	$	851		$	838		$	786		2	%	8	%	$	2,493		$	2,346		6	%	$	782		$	816		$	806		(4	)%	(3	)%	$	1,598		$	1,651		(3	)%

Average interest-earning assets	$	291,841		$	289,496		$	296,703		1	%	(2	)%	$	288,283		$	308,560		(7	)%	$	357,562		$	323,936		$	287,417		10	%	24	%	$	340,749		$	284,816		20	%

Net interest margin	1.15		%	1.14		%	1.05		%	1	bps	10	bps	1.14		%	1.00		%	14	bps
Net interest margin – GAAP																						0.88		%	1.01		%	1.12		%	(13	) bps	(24	) bps	0.94		%	1.16		%	(22	) bps
Net interest margin (FTE) – Non-GAAP (a)	1.16		%	1.16		%	1.06		%	—		10	bps	1.16		%	1.02		%	14	bps	0.88		%	1.01		%	1.12		%	(13	) bps	(24	) bps	0.94		%	1.16		%	(22	) 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.

~~FTE - fully taxable equivalent.~~

N/M - Not meaningful.

bps - basis points.

Net interest revenue ~~increased 8% compared with the third quarter of 2016 and 2% (unannualized)~~decreased 3% compared with the second quarter of ~~2017~~2019 and 4% compared with the first quarter of 2020. The decrease compared with the second quarter of 2019 primarily ~~reflecting higher~~reflects lower interest rates on interest-earning assets, partially offset by the benefit of lower ~~average~~deposit and funding rates and higher deposits, securities portfolio and loans. The ~~sequential increase also reflects an additional~~decrease compared with the first quarter of 2020 was primarily driven by lower interest rates on interest-earning ~~day during~~assets. This was partially offset by the ~~quarter.~~benefit of lower deposit and funding rates, higher securities portfolio and the impact of hedging activities (primarily offset in foreign exchange and other trading revenue).

Net interest margin ~~increased 10~~decreased 24 basis points compared with the ~~third~~second quarter of ~~2016,~~2019 and 13 basis points compared with the first quarter of 2020. Both decreases primarily ~~reflecting~~reflect lower asset yields and higher interest-earning assets, partially offset by lower deposit rates.

Average interest-earning assets of $358 billion in the ~~factors listed above.~~second quarter of 2020 increased 24% compared with the second quarter of 2019 and 10% compared with the first quarter of 2020. Both increases primarily reflect higher interest-bearing deposits with the Federal Reserve and other central banks and securities portfolio.

Average non-U.S. dollar deposits comprised approximately ~~30%~~25% of our average total deposits in the ~~third~~second quarter of ~~2017.~~ 2020. Approximately ~~45%~~40% of the average non-U.S. dollar deposits in the ~~third~~second quarter of ~~2017~~2020 were ~~euro-denominated.~~euro denominated.

~~Year-to-date 2017 compared with year-to-date 2016~~

Net interest revenue ~~increased 7%~~in future quarters will depend on the level and mix of client deposits, deposit rates, as well as the level and shape of the yield curve, which may result in lower yields on interest-earning assets.

Year-to-date 2020 compared with year-to-date 2019

Net interest revenue decreased 3% compared with the first ~~nine~~six months of ~~2016,~~2019, primarily driven by ~~higher~~lower interest rates on interest-earning assets, partially offset by the benefit of lower deposit and funding rates and higher deposits, securities portfolio and loans. The decrease in net interest margin primarily reflects lower ~~premium amortization,~~asset yields and higher interest-earning assets, partially offset by lower ~~average~~deposit and funding rates and higher deposits and securities portfolio.

Average interest-earning ~~assets.~~assets of $341 billion in the first six months of 2020 increased 20% compared with the first six months of 2019. The increase inprimarily reflects higher interest-bearing deposits with the ~~net interest margin was primarily driven by the factors listed above.~~Federal Reserve and other central banks, securities portfolio and loans.

10 BNY Mellon


Average balances and interest rates	Quarter ended																						Quarter ended
	Sept. 30, 2017							June 30, 2017							Sept. 30, 2016								June 30, 2020							March 31, 2020						June 30, 2019
(dollar amounts in millions, presented on an FTE basis)	Average balance			Interest		Average rates		Average balance			Interest		Average rates		Average balance			Interest			Average rates
(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																							$	94,229	$	(7	)	(0.03	)%	$	80,403	$	80	0.39	%	$	61,756	$	113	0.72	%
Interest-bearing deposits with banks (primarily foreign banks)	$	15,899		$	34	0.86	%	$	14,832		$	27	0.73	%	$	14,066		$	26		0.74	%	21,093		40			0.76		17,081		58		1.37		13,666		64		1.87
Interest-bearing deposits held at the Federal Reserve and other central banks	70,430			89		0.50		69,316			71		0.41		74,102			37			0.20
Federal funds sold and securities purchased under resale agreements(a)	28,120			119		1.67		26,873			86		1.29		26,376			62			0.93		30,265		61			0.82		34,109		396		4.67		38,038		568		5.99
Margin loans	13,206			87		2.60		15,058			87		2.32		18,132			67			1.48		12,791		40			1.28		12,984		87		2.69		10,920		119		4.36
Non-margin loans:
Domestic offices	29,950			216		2.87		30,734			207		2.70		30,534			171			2.22		31,185		172			2.21		31,720		238		3.02		29,492		284		3.86
Foreign offices	12,788			67		2.09		13,001			65		1.99		12,912			47			1.45		12,743		58			1.84		11,170		71		2.55		9,961		81		3.29
Total non-margin loans	42,738			283		2.64		43,735			272		2.49		43,446			218			1.99		43,928		230			2.10		42,890		309		2.89		39,453		365		3.71
Securities:
U.S. Government obligations	25,349			106		1.67		25,928			106		1.64		25,279			94			1.49
U.S. Government agency obligations	61,710			309		2.00		59,533			290		1.95		56,464			240			1.70
State and political subdivisions – tax-exempt	3,226			25		3.06		3,298			26		3.09		3,598			27			2.98
U.S. government obligations																							27,901		105			1.52		23,175		108		1.87		18,870		103		2.19
U.S. government agency obligations																							74,583		358			1.92		69,046		400		2.32		66,445		428		2.58
State and political subdivisions (b)																							1,025		7			2.98		1,033		8		3.06		1,735		13		2.89
Other securities(b)	28,804			98		1.34		28,468			81		1.15		33,064			102			1.23		45,511		93			0.82		36,375		86		0.95		30,770		157		2.04
Trading securities(b)	2,359			13		2.26		2,455			18		2.85		2,176			13			2.62		6,236		18			1.13		6,840		40		2.36		5,764		39		2.72
Total securities(b)	121,448			551		1.81		119,682			521		1.74		120,581			476			1.58		155,256		581			1.50		136,469		642		1.88		123,584		740		2.40
Total interest-earning assets ~~(a)~~(b)	$	291,841		$	1,163	1.59	%	$	289,496		$	1,064	1.47	%	$	296,703		$	886		1.19	%	$	357,562	$	945		1.06	%	$	323,936	$	1,572	1.95	%	$	287,417	$	1,969	2.74	%
Allowance for loan losses	(165		)					(164		)					(165		)
Cash and due from banks	4,961							4,972							4,189
Other assets	48,329							47,303							49,463
Assets of consolidated investment management funds	743							908							1,040
Noninterest-earning assets																							57,797							61,342						54,967
Total assets	$	345,709						$	342,515						$	351,230							$	415,359						$	385,278					$	342,384
Liabilities
Interest-bearing liabilities:
Interest-bearing deposits:
Money market rate accounts	$	7,509		$	1	0.06	%	$	7,379		$	1	0.04	%	$	7,346		$	1		0.06	%
Savings	837			1		0.76		1,014			2		0.75		1,201			1			0.41
Demand deposits	5,932			5		0.27		5,659			2		0.14		2,681			3			0.36
Time deposits	29,934			24		0.32		34,757			15		0.18		45,186			7			0.07
Domestic offices																							$	102,135	$	15		0.06	%	$	99,915	$	170	0.69	%	$	74,180	$	251	1.36	%
Foreign offices	98,278			26		0.10		93,527			12		0.05		98,695			(18		)	(0.08	)	108,508		(32		)	(0.12	)	97,717		70		0.29		93,365		181		0.78
Total interest-bearing deposits	142,490			57		0.16		142,336			32		0.09		155,109			(6		)	(0.02	)	210,643		(17		)	(0.03	)	197,632		240		0.49		167,545		432		1.04
Federal funds purchased and securities sold under repurchase agreements	21,403			70		1.30		17,970			38		0.84		9,585			6			0.24
Federal funds purchased and securities sold under repurchase agreements (a)																							14,209		1			0.03		13,919		275		7.96		11,809		372		12.64
Trading liabilities	1,434			2		0.54		1,216			2		0.61		735			2			1.11		1,974		2			0.39		1,626		7		1.61		1,735		11		2.47
Other borrowed funds	2,197			7		1.38		1,193			4		1.24		874			1			0.76		2,272		7			1.30		719		4		2.27		2,455		20		3.36
Commercial paper	2,736			8		1.15		2,215			5		0.95		1,173			1			0.35		191		1			1.02		1,581		6		1.56		2,957		18		2.43
Payables to customers and broker-dealers	18,516			19		0.42		20,609			16		0.30		16,873			3			0.07		18,742		(1		)	(0.01	)	16,386		30		0.73		15,666		69		1.76
Long-term debt	28,138			149		2.07		27,398			129		1.87		23,930			93			1.54		28,122		170			2.42		27,231		194		2.83		27,681		241		3.45
Total interest-bearing liabilities	$	216,914		$	312	0.57	%	$	212,937		$	226	0.42	%	$	208,279		$	100		0.19	%	$	276,153	$	163		0.24	%	$	259,094	$	756	1.17	%	$	229,848	$	1,163	2.03	%
Total noninterest-bearing deposits	70,168							73,886							81,619								72,411							60,577						52,956
Other liabilities	17,728							15,545							21,343
Liabilities and obligations of consolidated investment management funds	35							111							238
Other noninterest-bearing liabilities																							24,121							24,229						18,362
Total liabilities	304,845							302,479							311,479								372,685							343,900						301,166
Temporary equity
Redeemable noncontrolling interests	188							172							179								74							66						53
Permanent equity
Total BNY Mellon shareholders’ equity	40,322							39,404							39,051
Total The Bank of New York Mellon Corporation shareholders’ equity																							42,486							41,206						41,029
Noncontrolling interests	354							460							521								114							106						136
Total permanent equity	40,676							39,864							39,572								42,600							41,312						41,165
Total liabilities, temporary equity and permanent equity	$	345,709						$	342,515						$	351,230							$	415,359						$	385,278					$	342,384
Net interest revenue (FTE) – Non-GAAP				$	851						$	838						$	786
Net interest margin (FTE) – Non-GAAP						1.16	%						1.16	%							1.06	%
Net interest revenue (FTE) – Non-GAAP (c)																									$	782						$	816					$	806
Net interest margin (FTE) – Non-GAAP (b)(c)																												0.88	%					1.01	%					1.12	%
Less: Tax equivalent adjustment (b)				12							12							12							2							2						4
Net interest revenue – GAAP				$	839						$	826						$	774						$	780						$	814					$	802
Net interest margin – GAAP						1.15	%						1.14	%							1.05	%						0.88	%					1.01	%					1.12	%


~~Note:~~	~~Interest and average rates were calculated on a taxable equivalent basis using dollar amounts in thousands and actual number of days in the year.~~

(a)

~~Interest income~~Includes the average impact of offsetting under enforceable netting agreements of approximately $67 billion for the second quarter of 2020, $80 billion for the first quarter of 2020 and ~~average~~$51 billion for the second quarter of 2019. On a Non-GAAP basis, excluding the impact of offsetting, the yield ~~are presented~~ on ~~an FTE~~federal funds sold and securities purchased under resale agreements would have been 0.26% for the second quarter of 2020, 1.39% for the first quarter of 2020 and 2.57% for the second quarter of 2019. On a Non-GAAP basis, ~~(Non-GAAP).~~excluding the impact of offsetting, the rate on federal funds purchased and securities sold under repurchase agreements would have been 0.00% for the second quarter of 2020, 1.18% for the first quarter of 2020 and 2.39% for the second quarter of 2019. 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)	~~Based on the applicable tax rate of 35%.~~

~~BNY Mellon 11~~

Average balances and interest rates Year-to-date
Sept. 30, 2017 Sept. 30, 2016
(dollar amounts in millions, presented on an FTE basis) Average balance
Interest
Average rates
Average balance
Interest
Average rates
Assets
Interest-earning assets:
Interest-bearing deposits with banks (primarily foreign banks) $ 15,153
$ 83
0.73 % $ 14,455
$ 76
0.70 %
Interest-bearing deposits held at the Federal Reserve and other central banks 68,613
217
0.42
86,947
170
0.26
Federal funds sold and securities purchased under resale agreements 26,779
272
1.36
25,275
167
0.88
Margin loans 14,663
249
2.27
18,420
194
1.41
Non-margin loans:
Domestic offices 30,545
611
2.67
29,488
493
2.23
Foreign offices 13,126
189
1.93
13,112
144
1.47
Total non-margin loans 43,671
800
2.45
42,600
637
2.00
Securities:
U.S. Government obligations 25,835
316
1.64
24,778
278
1.50
U.S. Government agency obligations 59,384
870
1.95
56,161
727
1.73
State and political subdivisions – tax-exempt 3,298
77
3.09
3,784
83
2.92
Other securities 28,531
267
1.25
33,592
309
1.23
Trading securities 2,356
48
2.74
2,548
45
2.37
Total securities 119,404
1,578
1.76
120,863
1,442
1.59
Total interest-earning assets (a)
$ 288,283
$ 3,199
1.48 % $ 308,560
$ 2,686
1.16 %
Allowance for loan losses (166 ) (162 )
Cash and due from banks 5,010
4,070

Other assets 47,461
49,624

Assets of consolidated investment management funds 922
1,198

Total assets $ 341,510
$ 363,290

Liabilities
Interest-bearing liabilities:
Interest-bearing deposits:
Money market rate accounts $ 7,466
$ 3
0.05 % $ 7,337
$ 3
0.06 %
Savings 980
5
0.70
1,203
3
0.36
Demand deposits 5,656
8
0.18
1,782
5
0.40
Time deposits 33,354
50
0.20
44,832
19
0.06
Foreign offices 94,102
32
0.05
105,574
(9 ) (0.01 )
Total interest-bearing deposits 141,558
98
0.09
160,728
21
0.02
Federal funds purchased and securities sold under repurchase agreements 19,465
132
0.90
15,471
28
0.24
Trading liabilities 1,188
6
0.65
650
5
1.05
Other borrowed funds 1,409
13
1.26
827
5
0.90
Commercial paper 2,374
18
1.01
1,657
5
0.37
Payables to customers and broker-dealers 19,360
42
0.29
16,870
9
0.07
Long-term debt 27,148
397
1.93
22,779
267
1.55
Total interest-bearing liabilities $ 212,502
$ 706
0.44 % $ 218,982
$ 340
0.21 %
Total noninterest-bearing deposits 72,524
82,861

Other liabilities 16,299
21,993

Liabilities and obligations of consolidated investment management funds 129
250

Total liabilities 301,454
324,086

Temporary equity
Redeemable noncontrolling interests 174
183

Permanent equity
Total BNY Mellon shareholders’ equity 39,418
38,414

Noncontrolling interests 464
607

Total permanent equity 39,882
39,021

Total liabilities, temporary equity and permanent equity $ 341,510
$ 363,290

Net interest revenue (FTE) – Non-GAAP $ 2,493
$ 2,346

Net interest margin (FTE) – Non-GAAP 1.16 % 1.02 %
Less: Tax equivalent adjustment (b)
36
39

Net interest revenue – GAAP $ 2,457
$ 2,307

Net interest margin – GAAP 1.14 % 1.00 %


~~Note:~~	~~Interest and average~~Average rates were calculated on ~~a taxable equivalent~~an FTE basis, ~~using dollar amounts in thousands and actual number~~at tax rates of ~~days in the year.~~approximately 21%.


(c)	See “Net interest revenue” on page 10 for a reconciliation of this Non-GAAP measure.

BNY Mellon 11



Average balances and interest rates	Year-to-date
	June 30, 2020						June 30, 2019
(dollars in millions; average rates annualized)	Average balance		Interest		Average rates		Average balance		Interest		Average rates
Assets
Interest-earning assets:
Interest-bearing deposits with the Federal Reserve and other central banks	$	87,316	$	73	0.16	%	$	62,665	$	252	0.80	%
Interest-bearing deposits with banks (primarily foreign banks)	19,087		98		1.03		13,761		127		1.86
Federal funds sold and securities purchased under resale agreements (a)	32,187		457		2.86		33,528		1,042		6.26
Margin loans	12,887		127		1.99		11,790		254		4.35
Non-margin loans:
Domestic offices	31,453		410		2.62		28,838		553		3.85
Foreign offices	11,956		129		2.17		10,235		167		3.30
Total non-margin loans	43,409		539		2.49		39,073		720		3.71
Securities:
U.S. government obligations	25,538		213		1.68		21,220		232		2.21
U.S. government agency obligations	71,815		758		2.11		65,660		855		2.60
State and political subdivisions (b)	1,029		15		3.02		1,969		28		2.80
Other securities (b)	40,943		179		0.88		29,715		308		2.08
Trading securities (b)	6,538		58		1.77		5,435		75		2.81
Total securities (b)	145,863		1,223		1.68		123,999		1,498		2.42
Total interest-earning assets (b)	$	340,749	$	2,517	1.48	%	$	284,816	$	3,893	2.75	%
Noninterest-earning assets	59,569						54,476
Total assets	$	400,318					$	339,292
Liabilities
Interest-bearing liabilities:
Interest-bearing deposits:
Domestic offices	$	101,025	$	185	0.37	%	$	72,381	$	475	1.32	%
Foreign offices	103,113		38		0.07		91,353		348		0.77
Total interest-bearing deposits	204,138		223		0.22		163,734		823		1.01
Federal funds purchased and securities sold under repurchase agreements (a)	14,064		276		3.95		11,865		703		11.95
Trading liabilities	1,800		9		0.94		1,521		18		2.37
Other borrowed funds	1,495		11		1.53		2,878		44		3.08
Commercial paper	886		7		1.50		2,171		26		2.43
Payables to customers and broker-dealers	17,564		29		0.33		15,887		139		1.76
Long-term debt	27,677		364		2.62		27,966		489		3.48
Total interest-bearing liabilities	$	267,624	$	919	0.69	%	$	226,022	$	2,242	2.00	%
Total noninterest-bearing deposits	66,494						53,765
Other noninterest-bearing liabilities	24,174						18,494
Total liabilities	358,292						298,281
Temporary equity
Redeemable noncontrolling interests	70						65
Permanent equity
Total The Bank of New York Mellon Corporation shareholders’ equity	41,846						40,829
Noncontrolling interests	110						117
Total permanent equity	41,956						40,946
Total liabilities, temporary equity and permanent equity	$	400,318					$	339,292
Net interest revenue (FTE) – Non-GAAP (c)			$	1,598					$	1,651
Net interest margin (FTE) – Non-GAAP (b)(c)					0.94	%					1.16	%
Less: Tax equivalent adjustment (b)			4						8
Net interest revenue – GAAP			$	1,594					$	1,643
Net interest margin – GAAP					0.94	%					1.16	%

(a)

~~Interest income~~Includes the average impact of offsetting under enforceable netting agreements of approximately $73 billion for the first six months of 2020 and ~~average~~$47 billion for the first six months of 2019. On a Non-GAAP basis, excluding the impact of offsetting, the yield ~~are presented~~ on ~~an FTE~~federal funds sold and securities purchased under resale agreements would have been 0.87% for the first six months of 2020 and 2.59% for the first six months of 2019. On a Non-GAAP basis, ~~(Non-GAAP).~~excluding the impact of offsetting, the rate on federal funds purchased and securities sold under repurchase agreements would have been 0.64% for the first six months of 2020 and 2.39% for the first six months of 2019. 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)	~~Based~~Average rates were calculated on ~~the applicable~~an FTE basis, at tax ~~rate~~rates of ~~35%~~approximately 21%.

~~12 BNY Mellon~~

~~Noninterest expense~~

Noninterest expense YTD17
3Q17 vs. vs.
(dollars in millions) 3Q17
2Q17
3Q16
2Q17
3Q16
YTD17
YTD16
YTD16
Staff $ 1,469
$ 1,417
$ 1,467
4 % — % $ 4,358
$ 4,338
— %
Professional, legal and other purchased services 305
319
292
(4 ) 4
936
860
9
Software 175
173
156
1
12
514
470
9
Net occupancy 141
139
143
1
(1 ) 416
437
(5 )
Distribution and servicing 109
104
105
5
4
313
307
2
Sub-custodian 62
65
59
(5 ) 5
191
188
2
Furniture and equipment 58
59
59
(2 ) (2 ) 174
187
(7 )
Bank assessment charges (a)
51
59
61
(14 ) (16 ) 167
166
1
Business development 49
63
52
(22 ) (6 ) 163
174
(6 )
Other (a)
177
192
170
(8 ) 4
536
546
(2 )
Amortization of intangible assets 52
53
61
(2 ) (15 ) 157
177
(11 )
M&I, litigation and restructuring charges 6
12
18
N/M N/M 26
42
N/M
Total noninterest expense – GAAP $ 2,654
$ 2,655
$ 2,643
— % — % $ 7,951
$ 7,892
1 %

Staff expense as a percentage of total revenue 37 % 36 % 37 % 37 % 38 %

Full-time employees at period end 52,900
52,800
52,300
— % 1 % 52,900
52,300
1 %

Memo:
Adjusted total noninterest expense excluding amortization of intangible assets and M&I, litigation and restructuring charges – Non-GAAP $ 2,596
$ 2,590
$ 2,564
— % 1 % $ 7,768
$ 7,673
1 %


~~(a)~~(c)	~~In the first quarter~~See “Net interest revenue” on page 10 for a reconciliation of ~~2017, we began disclosing bank assessment charges on a quarterly basis. The bank assessment charges were previously included in other expense. All prior periods were reclassified.~~this Non-GAAP measure.

~~N/M - Not meaningful.~~

12 BNY Mellon

Noninterest expense



Noninterest expense															YTD20
							2Q20 vs.								vs.
(dollars in millions)	2Q20		1Q20		2Q19		1Q20		2Q19		YTD20		YTD19		YTD19
Staff	$	1,464	$	1,482	$	1,421	(1	)%	3	%	$	2,946	$	2,945	—	%
Software and equipment	345		326		304		6		13		671		587		14
Professional, legal and other purchased services	337		330		337		2		—		667		662		1
Net occupancy	137		135		138		1		(1	)	272		275		(1	)
Sub-custodian and clearing	120		105		115		14		4		225		220		2
Distribution and servicing	85		91		94		(7	)	(10	)	176		185		(5	)
Bank assessment charges	35		35		31		—		13		70		62		13
Business development	20		42		56		(52	)	(64	)	62		101		(39	)
Amortization of intangible assets	26		26		30		—		(13	)	52		59		(12	)
Other	117		140		121		(16	)	(3	)	257		250		3
Total noninterest expense	$	2,686	$	2,712	$	2,647	(1	)%	1	%	$	5,398	$	5,346	1	%

Full-time employees at period end	48,300		47,900		49,100		1	%	(2	)%

Total noninterest expense increased ~~less than~~ 1% ~~compared with the third quarter of 2016 and decreased slightly~~ compared with the second quarter of ~~2017.~~2019 and decreased 1% compared with the first quarter of 2020. The increase compared with the second quarter of 2019 primarily reflects the continued investments in technology and higher staff and pension expenses, partially offset by lower business development (travel and marketing) expense and the favorable impact of a stronger U.S. dollar. The investments in technology are included in staff, software and equipment, and professional, legal and other purchased services ~~expenses, partially offset by lower litigation expense and bank assessment charges.~~expenses. The decrease compared with the first quarter of 2020 primarily reflects lower other ~~professional, legal and other purchased services~~ and business development (travel and marketing) expenses ~~as well as lower bank assessment charges,~~and the favorable impact of a stronger U.S. dollar, partially offset by higher ~~staff expense. Excluding amortization of intangible assets~~software and ~~M&I, litigation~~equipment and ~~restructuring charges, total noninterest expense, as adjusted (Non-GAAP), increased 1% compared with the third quarter of 2016~~sub-custodian and ~~less than 1% (unannualized) compared with the second quarter of 2017.~~clearing expenses.

~~We continue~~Our investments in technology infrastructure and platforms are expected to ~~invest in our risk management, regulatory compliance and other control functions to improve our safety and soundness and in light of increased global regulatory requirements.~~continue. As a result, we expect to incur higher technology-related expenses in 2020 than in 2019 and higher pension expense as a result of ~~the submission~~a lower expected rate of ~~our 2017 resolution~~return on plan assets. These increases are expected to be offset by decreases in other expenses as we ~~began~~continue to ~~experience a modest decrease in the expenses relating to these functions in the third quarter of 2017.~~manage overall expenses.

~~Staff expense~~

Given our mix of fee-based businesses, which are staffed with high-quality professionals, staff expense comprised 55% of total noninterest expense in the third quarter of 2017, 56% in the third quarter of 2016 and 53%~~in the second quarter of 2017.~~

Staff expense increased slightly compared with the third quarter of 2016 as the annual employee merit increase was offset by lower severance. Staff expense increased 4% (unannualized) compared with the second quarter of 2017, primarily due to higher incentives expense reflecting stronger performance and the annual employee merit increase.

~~Non-staff expense~~

Non-staff expense includes certain expenses that vary with the levels of business activity and levels of expensed business investments, fixed infrastructure costs and expenses associated with corporate activities related to technology, compliance, legal, productivity initiatives and business development.

~~BNY Mellon 13~~

Non-staff expense totaled $1.2 billion, an increase of 1% compared with the third quarter of 2016 and a decrease of 4% (unannualized) compared with the second quarter of 2017. The increase primarily reflects higher software and professional, legal and other purchased services expenses, partially offset by lower litigation expense and bank assessment charges. The decrease primarily reflects lower other, professional, legal and other purchases services and business development expenses as well as lower bank assessment charges. The decrease in professional, legal and other purchased services was driven by lower consulting expense related to resolution planning.

Year-to-date ~~2017~~2020 compared with year-to-date ~~2016~~2019

Noninterest expense increased 1% compared with the first ~~nine~~six months of ~~2016,~~2019, primarily reflecting the continued investments in technology and higher ~~consulting~~software and ~~software~~equipment, staff and pension expenses, partially offset by the favorable impact of a stronger U.S. dollar and lower ~~net occupancy. The increase in consulting expense primarily reflects higher regulatory~~business development (travel and ~~compliance costs. Net occupancy expense decreased as we continue to benefit from the savings generated by the business improvement process.~~marketing) expense.

Income taxes

BNY Mellon recorded an income tax provision of ~~$348~~$216 million ~~(25.4%~~ (18.3% effective tax rate) in the ~~third~~second quarter of ~~2017. The income tax provision was $324~~2020, $264 million ~~(24.6%~~ (20.5% effective tax rate) in the ~~third~~second quarter of ~~2016~~2019 and ~~$332~~$265 million ~~(25.4%~~ (21.6% effective tax rate) in the ~~second~~first quarter of ~~2017.~~2020. For additional information, see Note 1011 of the Notes to Consolidated Financial Statements.

We expect the effective tax rate to be approximately 25-26% in 2017 based on current income tax rates. Based on our expected revenue growth as well as the mix of earnings we project for next year, we expect our effective tax rate may rise approximately 100 basis points in 2018.

Any legislation affecting income tax rates could have an impact on our future effective tax rate, the significance of which would depend on the timing, nature and scope of any such legislation, as well as the level and composition of our earnings.

BNY Mellon 13

Review of businesses

We have an internal information system that produces performance data along product and service lines for our two principal businesses, Investment Services and Investment and Wealth Management (formerly Investment Management), and the Other segment.

Business accounting principles

Our business data has been determined on an internal management basis of accounting, rather than the generally accepted accounting principles 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 businesses, 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 business and how our businesses are presented and analyzed, see Note 1824 of the Notes to Consolidated Financial ~~Statements.~~Statements in our 2019 Annual Report.

Business results are subject to reclassification when organizational changes are ~~made or when improvements are made~~made. There were no significant organizational changes in the ~~measurement principles.~~second quarter of 2020. The results are also subject to refinements in revenue and expense allocation methodologies, which are typically reflected on a prospective basis.

In the first quarter of 2020, we reclassified the results of certain services provided between the segments from noninterest expense to fee and other revenue. This activity is offset in the Other segment and relates to services that are also provided to third parties and provides consistency with the reporting of the revenues. This adjustment had no impact on income before taxes of the businesses. Also in the first quarter of 2020, we reclassified the results related to certain lending activities from the Wealth Management business to the Pershing business. These loans were originated by the Wealth Management business as a service to Pershing clients. This resulted in an increase in total revenue, noninterest expense and income before taxes in the Pershing business and corresponding decrease in the Wealth Management business. Prior periods were restated in the first quarter of 2020 for both reclassifications.

The results of our businesses may be influenced by client and other activities that vary by quarter. In the first quarter, ~~incentives~~staff expense typically increases reflecting the vesting of long-term stock awards for retirement-eligible employees. In ~~the third quarter, Depositary Receipts revenue is typically higher due to an increased level of client dividend payments. Also in~~ the third quarter, volume-related fees may decline due to reduced client activity. In the third quarter, staff expense typically increases reflecting the annual employee merit increase. In the fourth quarter, we typically incur higher business development and marketing ~~expenses.~~expenses; however, 2020 is expected to be different given the impact of the coronavirus pandemic. In our Investment and Wealth Management business, performance fees are typically higher in the fourth ~~quarter,~~and first quarters, as ~~the fourth quarter represents~~those quarters represent the end of the measurement period for many of the performance fee-eligible relationships.

The results of our businesses 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 Investment Services business, we typically have more foreign ~~currency denominated~~currency-denominated expenses than revenues. However, our Investment

~~14 BNY Mellon~~

and Wealth Management business typically has more foreign ~~currency denominated~~currency-denominated revenues than expenses. Overall, currency fluctuations impact the year-over-year growth rate in the Investment and Wealth Management

business more than the Investment Services business. However, currency fluctuations, in isolation, are not expected to significantly impact net income on a consolidated basis.

~~The following table presents key market metrics at period end and on an average basis.~~

Key market metrics YTD17
3Q17 vs. vs.
3Q17
2Q17
1Q17
4Q16
3Q16
2Q17
3Q16
YTD17
YTD16
YTD16
Standard & Poor’s (“S&P”) 500 Index (a)
2519
2423
2363
2239
2168
4 % 16 % 2519
2168
16 %
S&P 500 Index – daily average 2467
2398
2326
2185
2162
3
14
2397
2065
16
FTSE 100 Index (a)
7373
7313
7323
7143
6899
1
7
7373
6899
7
FTSE 100 Index – daily average 7380
7391
7274
6923
6765
—
9
7348
6326
16
MSCI EAFE (a)
1974
1883
1793
1684
1702
5
16
1974
1702
16
MSCI EAFE – daily average 1934
1856
1749
1660
1677
4
15
1847
1640
13
Barclays Capital Global Aggregate Bond^SM Index (a)(b)
480
471
459
451
486
2
(1 ) 480
486
(1 )
NYSE and NASDAQ share volume (in billions)
179
199
186
189
186
(10 ) (4 ) 565
608
(7 )
JPMorgan G7 Volatility Index – daily average (c)
8.17
7.98
10.10
10.24
10.19
2
(20 ) 8.75
10.63
(18 )
Average interest on excess reserves paid by the Federal Reserve 1.25 % 1.04 % 0.79 % 0.55 % 0.50 % 21 bps 75 bps 1.03 % 0.50 % 53 bps

Foreign exchange rates vs. U.S. dollar:

British pound (a)
$ 1.34
$ 1.30
$ 1.25
$ 1.23
$ 1.30
3 % 3 % $ 1.34
$ 1.30
3 %
British pound – average rate 1.31
1.28
1.24
1.24
1.31
2
—
1.28
1.39
(8 )
Euro (a)
1.18
1.14
1.07
1.05
1.12
4
5
1.18
1.12
5
Euro – average rate 1.17
1.10
1.07
1.08
1.12
6
4
1.13
1.12
1


~~(a)~~	~~Period end.~~


~~(b)~~	~~Unhedged in U.S. dollar terms.~~


~~(c)~~	~~The JPMorgan G7 Volatility Index is based on the implied volatility in 3-month currency options.~~

~~bps - basis points.~~

Fee revenue in Investment and Wealth Management, and to a lesser extent in Investment Services, is impacted by the value of market indices. At ~~Sept.~~June 30, ~~2017,~~2020, we estimate 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 ~~$0.02~~$0.03 to ~~$0.04.~~

$0.06.

See Note 1819 of the Notes to Consolidated Financial Statements for the consolidating schedules which show the contribution of our businesses to our overall profitability.

14 BNY Mellon 15

Investment ~~Management~~Services business

YTD17
3Q17 vs. vs.
(dollars in millions) 3Q17
2Q17
1Q17
4Q16
3Q16
2Q17
3Q16
YTD17
YTD16
YTD16
Revenue:
Investment management fees:
Mutual funds $ 332
$ 314
$ 299
$ 297
$ 309
6 % 7 % $ 945
$ 913
4 %
Institutional clients 367
362
348
340
362
1
1
1,077
1,040
4
Wealth management 172
169
167
164
166
2
4
508
478
6
Investment management fees (a)
871
845
814
801
837
3
4
2,530
2,431
4
Performance fees 15
17
12
32
8
N/M
88
44
28
57
Investment management and performance fees 886
862
826
833
845
3
5
2,574
2,459
5
Distribution and servicing 51
53
52
48
49
(4 ) 4
156
144
8
Other (a)
(19 ) (16 ) (1 ) (1 ) (18 ) N/M
N/M
(36 ) (59 ) N/M
Total fee and other revenue (a)
918
899
877
880
876
2
5
2,694
2,544
6
Net interest revenue 82
87
86
80
82
(6 ) —
255
247
3
Total revenue 1,000
986
963
960
958
1
4
2,949
2,791
6
Provision for credit losses (2 ) —
3
6
—
N/M
N/M
1
—
N/M
Noninterest expense (ex. amortization of intangible assets) 687
683
668
672
680
1
1
2,038
2,024
1
Amortization of intangible assets 15
15
15
22
22
—
(32 ) 45
60
(25 )
Total noninterest expense 702
698
683
694
702
1
—
2,083
2,084
—
Income before taxes $ 300
$ 288
$ 277
$ 260
$ 256
4 % 17 % $ 865
$ 707
22 %
Income before taxes (ex. amortization of intangible assets) – Non-GAAP
$ 315
$ 303
$ 292
$ 282
$ 278
4 % 13 % $ 910
$ 767
19 %

Pre-tax operating margin 30 % 29 % 29 % 27 % 27 % 29 % 25 %
Adjusted pre-tax operating margin – Non-GAAP (b)
35 % 34 % 34 % 33 % 33 % 35 % 31 %

Average balances:
Average loans $ 16,724
$ 16,560
$ 16,153
$ 15,673
$ 15,308
1 % 9 % $ 16,481
$ 14,795
11 %
Average deposits $ 12,374
$ 14,866
$ 15,781
$ 15,511
$ 15,600
(17 )% (21 )% $ 14,283
$ 15,696
(9 )%



																										YTD20
(dollars in millions)																2Q20 vs.										vs.
(dollars in millions)	2Q20			1Q20			4Q19			3Q19			2Q19			1Q20		2Q19		YTD20			YTD19			YTD19
Revenue:
Investment services fees:
Asset servicing fees (a)	$	1,164		$	1,147		$	1,138		$	1,138		$	1,126		1	%	3	%	$	2,311		$	2,237		3	%
Clearing services fees (b)	431			470			421			419			411			(8	)	5		901			809			11
Issuer services fees	277			263			264			324			291			5		(5	)	540			542			—
Treasury services fees	144			149			147			139			140			(3	)	3		293			272			8
Total investment services fees	2,016			2,029			1,970			2,020			1,968			(1	)	2		4,045			3,860			5
Foreign exchange and other trading revenue	178			261			151			160			153			(32	)	16		439			310			42
Other (c)	145			146			115			116			112			(1	)	29		291			224			30
Total fee and other revenue	2,339			2,436			2,236			2,296			2,233			(4	)	5		4,775			4,394			9
Net interest revenue	768			806			778			761			783			(5	)	(2	)	1,574			1,587			(1	)
Total revenue	3,107			3,242			3,014			3,057			3,016			(4	)	3		6,349			5,981			6
Provision for credit losses	145			149			(5		)	(15		)	(4		)	N/M		N/M		294			4			N/M
Noninterest expense (excluding amortization of intangible assets)	1,971			1,969			2,160			1,952			1,943			—		1		3,940			3,904			1
Amortization of intangible assets	18			18			19			21			20			—		(10	)	36			40			(10	)
Total noninterest expense	1,989			1,987			2,179			1,973			1,963			—		1		3,976			3,944			1
Income before income taxes	$	973		$	1,106		$	840		$	1,099		$	1,057		(12	)%	(8	)%	$	2,079		$	2,033		2	%

Pre-tax operating margin	31		%	34		%	28		%	36		%	35		%					33		%	34		%

Securities lending revenue	$	51		$	46		$	40		$	39		$	40		11	%	28	%	$	97		$	84		15	%

Total revenue by line of business:
Asset Servicing	$	1,463		$	1,531		$	1,411		$	1,411		$	1,397		(4	)%	5	%	$	2,994		$	2,812		6	%
Pershing	578			653			579			575			572			(11	)	1		1,231			1,133			9
Issuer Services	431			419			415			466			446			3		(3	)	850			842			1
Treasury Services	340			339			329			312			317			—		7		679			634			7
Clearance and Collateral Management	295			300			280			293			284			(2	)	4		595			560			6
Total revenue by line of business	$	3,107		$	3,242		$	3,014		$	3,057		$	3,016		(4	)%	3	%	$	6,349		$	5,981		6	%

Average balances:
Average loans	$	43,113		$	41,789		$	38,721		$	37,005		$	36,404		3	%	18	%	$	42,451		$	36,818		15	%
Average deposits	$	268,467		$	242,187		$	215,388		$	208,044		$	201,146		11	%	33	%	$	255,327		$	198,131		29	%

(a)

~~Total fee~~Asset servicing fees include the fees from the Clearance and ~~other revenue includes the impact of the consolidated investment management funds, net of noncontrolling interests. See page 52 for a breakdown of the revenue line items in the Investment~~Collateral Management business impacted by the consolidated investment management funds. Additionally, other revenue includes asset servicing, treasury services, foreign exchange and other trading revenue and investment and other income.business.


(b)	~~Excludes amortization of intangible assets, provision for credit losses~~Clearing services fees are almost entirely earned by our Pershing business.


(c)	Other revenue includes investment management and performance fees, financing-related fees, distribution and servicing ~~expense. See “Supplemental information – Explanation of GAAP~~revenue, securities gains and ~~Non-GAAP financial measures” beginning on page 49 for the reconciliation of this Non-GAAP measure.~~losses and investment and other income.

N/M - Not meaningful.

16 BNY Mellon 15

AUM trends (a)
3Q17 vs.
(dollars in billions) 3Q17
2Q17
1Q17
4Q16
3Q16
2Q17
3Q16
AUM at period end, by product type:
Equity $ 158
$ 163
$ 158
$ 153
$ 156
(3 )% 1 %
Fixed income 206
198
191
186
194
4
6
Index 333
324
330
312
302
3
10
Liability-driven investments (b)
622
607
584
554
607
2
2
Multi-asset and alternative investments 207
192
188
181
189
8
10
Cash 298
287
276
262
267
4
12
Total AUM $ 1,824
$ 1,771
$ 1,727
$ 1,648
$ 1,715
3 % 6 %

AUM at period end, by client type:
Institutional $ 1,285
$ 1,265
$ 1,243
$ 1,182
$ 1,234
2 % 4 %
Mutual funds 447
418
397
381
396
7
13
Private client 92
88
87
85
85
5
8
Total AUM $ 1,824
$ 1,771
$ 1,727
$ 1,648
$ 1,715
3 % 6 %

Changes in AUM:
Beginning balance of AUM $ 1,771
$ 1,727
$ 1,648
$ 1,715
$ 1,664

Net inflows (outflows):
Long-term strategies:
Equity (2 ) (2 ) (4 ) (5 ) (6 )
Fixed income 4
2
2
(1 ) (1 )
Liability-driven investments (b)
(2 ) 15
14
(7 ) 4

Multi-asset and alternative investments 3
1
2
3
7

Total long-term active strategies inflows (outflows) 3
16
14
(10 ) 4

Index (3 ) (13 ) —
(1 ) (3 )
Total long-term strategies inflows (outflows) —
3
14
(11 ) 1

Short term strategies:
Cash 10
11
13
(3 ) (1 )
Total net inflows (outflows) 10
14
27
(14 ) —

Net market impact/other 17
1
41
(11 ) 80

Net currency impact 26
29
11
(42 ) (29 )
Ending balance of AUM $ 1,824
$ 1,771
$ 1,727
$ 1,648
$ 1,715
3 % 6 %



Investment Services business metrics
(dollars in millions, unless otherwise noted)											2Q20 vs.
(dollars in millions, unless otherwise noted)	2Q20		1Q20		4Q19		3Q19		2Q19		1Q20		2Q19
AUC/A at period end (in trillions) (a)	$	37.3	$	35.2	$	37.1	$	35.8	$	35.5	6	%	5	%
Market value of securities on loan at period end (in billions) (b)	$	384	$	389	$	378	$	362	$	369	(1	)%	4	%

Pershing:
Net new assets (U.S. platform) (in billions) (c)	$	11	$	31	$	33	$	19	$	21	N/M		N/M
Average active clearing accounts (U.S. platform) (in thousands)	6,507		6,437		6,340		6,283		6,254		1	%	4	%
Average long-term mutual fund assets (U.S. platform)	$	547,579	$	549,206	$	573,475	$	547,522	$	532,384	—	%	3	%
Average investor margin loans (U.S. platform)	$	9,235	$	9,419	$	9,420	$	9,222	$	9,440	(2	)%	(2	)%

Clearance and Collateral Management:
Average tri-party collateral management balances (in billions)	$	3,573	$	3,724	$	3,562	$	3,550	$	3,400	(4	)%	5	%

(a)

~~Excludes securities lending cash management assets~~Consists of AUC/A primarily from the Asset Servicing business and, ~~assets managed in~~to a lesser extent, the ~~Investment~~Clearance and Collateral Management, Issuer Services ~~business.~~and Pershing businesses. Includes the AUC/A of CIBC Mellon of $1.3 trillion at June 30, 2020, $1.2 trillion at March 31, 2020, $1.5 trillion at Dec. 31, 2019and$1.4 trillion at Sept. 30, 2019 and June 30, 2019.


(b)	~~Includes currency overlay AUM.~~

~~Business description~~

Our Investment Management business consists of our affiliated investment management boutiques, Wealth Management business and global distribution companies. See pages 19 and 20 of our 2016 Annual Report for additional information on our Investment Management business.

~~Review of financial results~~

AUM increased 6% compared with Sept. 30, 2016 primarily reflecting higher market values, net inflows and the favorable impact of the weaker U.S. dollar (principally versus the British pound). The increase compared with June 30, 2017 primarily reflects the favorable impact of the weaker U.S. dollar (principally versus the British pound), higher market values and net inflows.

Net long-term inflows of fixed income and multi-asset and alternative investments were offset by outflows of index, equity and liability-driven investments in the third quarter of 2017. Net short-term inflows of $10 billion in the third quarter of 2017 were a result of increased distribution through our liquidity portals. Market and regulatory trends have driven investable assets toward investments in lower fee asset management products, which negatively impacted our investment management fees.

Total revenue increased 4% compared with the third quarter of 2016 and 1% (unannualized) compared with the second quarter of 2017. Both increases primarily reflect higher investment management and performance fees.

~~Revenue generated in the Investment Management business included 41% from non-U.S. sources in the~~

~~BNY Mellon 17~~

~~third quarter of 2017, compared with 40% in both the third quarter of 2016 and second quarter of 2017.~~

Investment management fees in the Investment Management business increased 4% compared with the third quarter of 2016 and 3% (unannualized) compared with the second quarter of 2017. Both increases primarily reflect higher equity market values and money market fees. The increase compared with the second quarter of 2017 also reflects the favorable impact of a weaker U.S. dollar.

~~Distribution and servicing fees increased compared with the third quarter of 2016 primarily reflecting higher money market fees.~~

~~Other revenue decreased compared with the third quarter of 2016 primarily reflecting higher payments to Investment Services related to higher money market fees.~~

Net interest revenue was unchanged compared with the third quarter of 2016 and decreased 6% (unannualized) compared with the second quarter of 2017. The decrease primarily reflects lower average deposits. Average loans increased 9% compared with the third quarter of 2016 and 1% compared with the second quarter of 2017. Average deposits decreased 21% compared with the third quarter of 2016 and 17% compared with the second quarter of 2017.

Noninterest expense, excluding amortization of intangible assets, increased 1% compared with the third quarter of 2016 and 1% (unannualized) compared with the second quarter of 2017. The increase compared with the third quarter of 2016 primarily reflects higher other and distribution and servicing expenses, partially offset by lower severance expense. The increase compared with the second quarter of 2017 primarily reflects higher distribution and servicing expense.

~~Year-to-date 2017 compared with year-to-date 2016~~

Income before taxes increased 22% compared with the first nine months of 2016, primarily reflecting revenue growth of 6%, partially offset by a 1% increase in noninterest expense, excluding amortization of intangible assets. Fee and other revenue increased 6% primarily reflecting higher investment management and performance fees. The increase in investment management and performance fees primarily reflects higher market values, money market fees and performance fees, partially offset by the unfavorable impact of a stronger U.S. dollar (principally versus the British pound). Net interest revenue increased 3% primarily due to higher interest rates and average loans, partially offset by lower average deposits. Noninterest expense, excluding amortization of intangible assets, increased 1% primarily reflecting higher incentives expense, driven by stronger performance, partially offset by the favorable impact of a stronger U.S. dollar (principally versus the British pound).

~~18 BNY Mellon~~

~~Investment Services business~~

YTD17
(dollar amounts in millions, unless otherwise noted) 3Q17 vs. vs.
3Q17
2Q17
1Q17
4Q16
3Q16
2Q17
3Q16
YTD17
YTD16
YTD16
Revenue:
Investment services fees:
Asset servicing $ 1,081
$ 1,061
$ 1,038
$ 1,043
$ 1,039
2 % 4 % $ 3,180
$ 3,098
3 %
Clearing services 381
393
375
354
347
(3 ) 10
1,149
1,045
10
Issuer services 288
241
250
211
336
20
(14 ) 779
813
(4 )
Treasury services 141
139
139
139
136
1
4
419
402
4
Total investment services fees 1,891
1,834
1,802
1,747
1,858
3
2
5,527
5,358
3
Foreign exchange and other trading revenue 154
145
153
157
177
6
(13 ) 452
506
(11 )
Other (a)
142
136
129
128
148
4
(4 ) 407
403
1
Total fee and other revenue 2,187
2,115
2,084
2,032
2,183
3
—
6,386
6,267
2
Net interest revenue 777
761
707
713
715
2
9
2,245
2,084
8
Total revenue 2,964
2,876
2,791
2,745
2,898
3
2
8,631
8,351
3
Provision for credit losses (2 ) (3 ) —
—
1
N/M N/M (5 ) 8
N/M
Noninterest expense (ex. amortization of intangible assets) 1,837
1,889
1,812
1,786
1,812
(3 ) 1
5,538
5,401
3
Amortization of intangible assets 37
38
37
38
39
(3 ) (5 ) 112
117
(4 )
Total noninterest expense 1,874
1,927
1,849
1,824
1,851
(3 ) 1
5,650
5,518
2
Income before taxes $ 1,092
$ 952
$ 942
$ 921
$ 1,046
15 % 4 % $ 2,986
$ 2,825
6 %
Income before taxes (ex. amortization of intangible assets) – Non-GAAP
$ 1,129
$ 990
$ 979
$ 959
$ 1,085
14 % 4 % $ 3,098
$ 2,942
5 %

Pre-tax operating margin 37 % 33 % 34 % 34 % 36 % 35 % 34 %

Adjusted pre-tax operating margin (ex. provision for credit losses and amortization of intangible assets) – Non-GAAP
38 % 34 % 35 % 35 % 37 % 36 % 35 %

Investment services fees as a percentage of noninterest expense (ex. amortization of intangible assets) 103 % 97 % 99 % 98 % 103 % 100 % 99 %

Securities lending revenue $ 41
$ 42
$ 40
$ 44
$ 42
(2 )% (2 )% $ 123
$ 126
(2 )%

Metrics:
Average loans $ 38,038
$ 40,931
$ 42,818
$ 45,832
$ 44,329
(7 )% (14 )% $ 40,578
$ 44,373
(9 )%
Average deposits $ 198,299
$ 200,417
$ 197,690
$ 213,531
$ 220,316
(1 )% (10 )% $ 198,796
$ 219,344
(9 )%

AUC/A at period end (in trillions) (b)
$ 32.2
$ 31.1
$ 30.6
$ 29.9
$ 30.5
4 % 6 % $ 32.2
$ 30.5
6 %
Market value of securities on loan at period end (in billions) (c)
$ 382
$ 336
$ 314
$ 296
$ 288
14 % 33 % $ 382
$ 288
33 %

Asset servicing:

Estimated new business wins
(AUC/A) (in billions)
$ 166
$ 152
$ 109
$ 141
$ 150

Clearing services:
Average active clearing accounts (U.S. platform) (in thousands)
6,203
6,159
6,058
5,960
5,942
1 % 4 %
Average long-term mutual fund assets (U.S. platform) $ 500,998
$ 480,532
$ 460,977
$ 438,460
$ 443,112
4 % 13 %
Average investor margin loans (U.S. platform) $ 8,886
$ 9,812
$ 10,740
$ 10,562
$ 10,834
(9 )% (18 )%

Depositary Receipts:

Number of sponsored programs 938
1,025
1,050
1,062
1,094
(8 )% (14 )%

Broker-Dealer:
Average tri-party repo balances (in billions)
$ 2,534
$ 2,498
$ 2,373
$ 2,307
$ 2,212
1 % 15 %


~~(a)~~	~~Other revenue includes investment management fees, financing-related fees, distribution and servicing revenue and investment and other income.~~


~~(b)~~	~~Includes the AUC/A of CIBC Mellon of $1.3 trillion at Sept. 30, 2017 and $1.2 trillion at June 30, 2017, March 31, 2017, Dec. 31, 2016 and Sept. 30, 2016.~~

~~(c)~~

Represents the total amount of securities on loan in our agency securities lending program managed by the Investment Services business. Excludes securities for which BNY Mellon acts as agent on behalf of CIBC Mellon clients, which totaled ~~$68~~$62 billion at June 30, 2020, $59 billion at March 31, 2020, $60 billion at Dec. 31, 2019, $66 billion at Sept. 30, ~~2017, $66~~2019 and $64 billion at June 30, ~~2017, $65 billion at March 31, 2017, $63 billion at Dec. 31, 2016~~2019.


(c)	Net new assets represent net flows of assets (e.g., net cash deposits and ~~$64 billion at Sept. 30, 2016.~~net securities transfers) in customer accounts in Pershing LLC, a U.S. broker-dealer.

N/M - Not meaningful.

~~BNY Mellon 19~~

Business description

BNY Mellon Investment Services provides business services and technology solutions ~~across the investments process~~ to entities including financial institutions, corporations, foundations and endowments, public funds and government agencies. Our lines of business include: Asset Servicing, Pershing, Issuer Services, Treasury Services and Clearance and Collateral Management. For information on the drivers of the Investment Services fee revenue, see Note 10 of the Notes to Consolidated Financial Statements in our 2019 Annual Report.

We are one of the leading global investment services providers with ~~$32.2~~$37.3 trillion of AUC/A at ~~Sept.~~June 30, ~~2017.~~2020.

~~We are~~The Asset Servicing business provides a comprehensive suite of solutions. As one of the ~~primary provider of U.S. government securities clearance~~largest global custody and fund accounting providers and a ~~provider~~trusted partner, we offer services for the safekeeping of ~~non-U.S. government securities clearance.~~assets in capital markets globally as well as alternative investment and structured product strategies. We provide custody and foreign exchange services, support exchange-traded funds and unit investment trusts and provide our clients outsourcing capabilities. Our robust digital and data offerings enable us to ~~settle~~provide fully integrated technology solutions for our clients. We deliver securities ~~transactions in approximately 100 markets.~~

~~We are a leading provider of tri-party repo collateral services with approximately $2.5 trillion serviced globally~~lending and ~~approximately $1.6 trillion of the U.S. tri-party repo market.~~

financing solutions on both an agency and principal basis. Our agency securities lending program is one of the largest lenders of U.S. and non-U.S. securities, servicing a lendable asset pool of ~~approximately $3.3 trillion in 33 separate markets.~~

~~We serve as trustee and/or paying agent on more than 50,000 debt-related issuances globally.~~

~~As one of the largest providers of depositary receipts services in the world, we served as depositary for~~ ~~938~~ ~~sponsored American and global depositary receipts programs at~~ ~~Sept. 30, 2017, acting in partnership with leading companies from 59 countries.~~

We offer asset servicing, clearing services, issuer services and treasury services to our clients. BNY Mellon’s comprehensive suite of asset servicing solutions includes: custody, foreign exchange, fund services, securities finance, investment manager outsourcing, performance and risk analytics, alternative investment services, broker-dealer services, and collateral and liquidity services.

As one of the largest fund accounting providers and a trusted partner, we offer services to ensure the safekeeping of assets in capital markets globally. These services include financial reporting, tax reporting services, calculating and reporting net asset values (“NAV”), computing yields, maintaining brokerage account records, and providing

~~administrative support to clients so they may meet their Securities and Exchange Commission (“SEC”) and other compliance requirements.~~

approximately $4.0 trillion in 34 separate markets. Our alternative investment services and structured products business provides a full range of solutions for alternative investment managers, including prime custody, fund accounting, and client and regulatory reporting services. We also support exchange-traded funds and unit investment trusts, providing fund administration, custody, basket creation and dissemination, authorized participant interaction and order processing, among other services.

Securities finance delivers solutions on both an agency and principal basis. The principal finance program supports a diverse group of client segments, including hedge and liquid alternative funds and other institutional clients.

Inmarket-leading liquidity services ~~our market leading~~ portal enables cash investments for institutional clients ~~via money market funds, deposit products, and direct investments in money market securities,~~ and includes fund research and analytics.

~~Our broker-dealer services business clears and settles equity and fixed-income transactions globally and serves as custodian for tri-party repo collateral worldwide.~~

~~Clearing services, primarily~~ Pershing ~~LLC, an indirect subsidiary of BNY Mellon (“Pershing”) and its affiliates,~~ provides execution, clearing, custody, business and technology solutions, ~~to financial organizations globally,~~ delivering dependable operational support ~~robust trading services, flexible technology, an expansive array of~~to broker-dealers, wealth managers and registered investment advisors (RIAs) globally.

The Issuer Services business includes Corporate Trust and ~~retirement solutions, practice management support and service excellence.~~

Depositary Receipts. Our collateral services include collateral management, administration and segregation. We offer innovative solutions, like new collateral types and transaction structures, automation and efficiency, access to global markets, and industry expertise, to help financial institutions and institutional investors mine opportunities from liquidity, financing, risk and balance sheet challenges.

~~Our corporate trust~~Corporate Trust business delivers a full range of issuer and related investor services, including trustee, paying agency, fiduciary, escrow and other financial services.

~~20 BNY Mellon~~

Our treasury services include customizable solutions and innovative technology that deliver high-quality cash management, payment and trade support for corporate and institutional global treasury needs. 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.

~~We also provide credit facilities~~Our Treasury Services business provides global payments, liquidity management and ~~solutions to support our clients globally.~~trade finance services for financial institutions, corporations and the public sector.

~~Role of~~

16 BNY Mellon

Our Clearance and Collateral Management business clears and settles equity and fixed-income transactions globally and serves as ~~a trustee, for mortgage-backed securitizations~~

~~BNY Mellon acts as trustee and document~~ custodian for ~~certain mortgage-backed security (“MBS”) securitization trusts. The role~~tri-party repo collateral worldwide. We are the primary provider of ~~trustee for MBS securitizations is limited; our primary role as trustee is to calculate~~U.S. government securities clearance and ~~distribute monthly bond payments to bondholders. As~~ a ~~document custodian, we hold the mortgage, note,~~provider of non-U.S. government securities clearance. Our collateral services include collateral management, administration and ~~related documents provided to us by the loan originator or seller~~segregation. We offer innovative solutions and provide periodic reporting to these parties. BNY Mellon, either as document custodian or trustee, does not receive mortgage underwriting files (the files that contain information related to the creditworthinessindustry expertise which help financial institutions and institutional investors with their liquidity, financing, risk and balance sheet challenges. We are a leading provider of tri-party collateral management services with an average of $3.6 trillion serviced globally including approximately $2.6 trillion of the borrower). As trustee or custodian, we have no responsibility or liability for the quality of the portfolio; we are liable only for performance of our limited duties as described above and in the trust documents. BNY Mellon is indemnified by the servicers or directly from trust assets under the governing agreements. BNY Mellon may appear as the named plaintiff in legal actions brought by servicers in foreclosure and other related proceedings because the trustee is the nominee owner of the mortgage loans within the trusts.U.S. tri-party repo market.

BNY Mellon also has been named as a defendant in legal actions brought by MBS investors alleging that the trustee has expansive duties under the governing agreements, including to investigate and pursue claims against other parties to the MBS transaction. For additional information on our legal proceedings related to this matter, see Note 17 of the Notes to Consolidated Financial Statements.

Review of financial results

AUC/A of $37.3 trillion increased 6%5% compared with ~~Sept.~~June 30, ~~2016 to a record $32.2 trillion,~~2019, primarily reflecting higher client inflows, market values and net new business, partially offset by the ~~favorable~~unfavorable impact of a ~~weaker~~stronger U.S. ~~dollar and net new business.~~dollar. AUC/A consisted of

~~37%~~ 33% equity securities and ~~63% fixed income~~67% fixed-income securities at ~~Sept.~~June 30, ~~2017, compared with 34%~~2020 and 35% equity securities and ~~66% fixed income~~65% fixed-income securities at ~~Sept.~~June 30, ~~2016.~~2019.

~~Investment services fees~~Total revenue of $3.1 billion increased ~~2% compared with the third quarter of 2016 and~~ 3% ~~(unannualized)~~ compared with the second quarter of ~~2017, reflecting the following factors:~~

~~Asset servicing fees (custody, fund services, broker-dealer services, securities finance, collateral~~2019 and ~~liquidity services) increased~~decreased 4% compared with the ~~third~~first quarter of ~~2016 and 2% (unannualized)~~2020. The drivers of total revenue by line of business are indicated below.

Asset Servicing revenue of $1.5 billion increased 5% compared with the second quarter of ~~2017. The increase~~2019 and decreased 4% compared with the ~~third~~first quarter of ~~2016 primarily reflects~~ ~~higher equity market values and net new business, including growth in collateral management, partially offset by the impact of downsizing the retail UK transfer agency business.~~2020. The increase compared with the second quarter of ~~2017 was primarily driven~~2019 reflects higherforeign exchange and other trading revenue, partially offset by ~~the favorable impact of a weaker U.S. dollar and higher equity market values.~~

~~Clearing services fees increased 10%~~lower net interest revenue. The decrease compared with the ~~third~~first quarter of ~~2016 primarily driven by~~2020 reflects lower foreign exchange and other trading revenue and net interest revenue. Total revenue in the second quarter of 2020 also benefited from higher ~~money market fees~~volumes from existing clients and ~~growth in long-term mutual fund assets.~~ ~~Clearing services fees decreased 3% (unannualized)~~a one-time fee.

Pershing revenue of $578 million increased 1% compared with the second quarter of ~~2017 primarily reflecting lower clearance volumes.~~

~~Issuer services fees (Depositary Receipts~~2019 and ~~Corporate Trust)~~ decreased ~~14%~~11% compared with the ~~third~~first quarter of ~~2016 and increased 20% (unannualized) compared with the second quarter of 2017. The decrease compared with the third quarter of 2016 primarily reflects~~ ~~fewer corporate actions, lost business and lower fees due to a reduction in shares outstanding in certain depositary receipts programs, partially offset by higher Corporate Trust revenue.~~2020. The increase compared with the second quarter of ~~2017~~2019 primarily reflects ~~seasonality in Depositary Receipts revenue~~higher money market balances and ~~higher Corporate Trust revenue.~~clearing volumes, partially offset by the impact of rate-driven money market fee waivers. The

~~Treasury services fees (global payments, trade finance and cash management) increased 4%~~

decrease compared with the ~~third~~first quarter of ~~2016~~2020 primarily reflects the impact of rate-driven money market fee waivers, a one-time fee recorded in the first quarter of 2020 and ~~1% (unannualized)~~lower clearing volumes, partially offset by higher money market balances.

Issuer Services revenue of $431 million decreased 3% compared with the second quarter of ~~2017~~2019 and increased 3% compared with the first quarter of 2020. The decrease compared with the second quarter of 2019 reflects lower Depositary Receipts and Corporate Trust fees. The increase compared with the first quarter of 2020 primarily ~~reflecting~~reflects higher ~~payment volumes, partially offset~~Depositary Receipts fees.

Treasury Services revenue of $340 million increased 7% compared with the second quarter of 2019 and increased slightly compared with the first quarter of 2020. The increase compared with the second quarter of 2019 primarily reflects higher net interest revenue driven by deposit growth and higher ~~compensating~~

fees.

~~BNY Mellon 21~~

~~balance credits provided to clients, which reduces fee~~Clearance and Collateral Management revenue of $295 million increased 4% compared with the second quarter of 2019 and decreased 2% compared with the first quarter of 2020. The increase compared with the second quarter of 2019 primarily reflects higher net interest revenue and ~~increases net interest revenue.~~growth in collateral management and clearance volumes, mostly from non-U.S. clients. The decrease compared with the first quarter of 2020 primarily reflects lower collateral management fees.

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 ~~new~~ regulations and reduce their operating costs.

~~Foreign exchange and other trading revenue decreased 13% compared with~~The provision for credit losses of $145 million in the ~~third~~second quarter of ~~2016~~2020 primarily ~~reflecting lower volatility~~reflects increased downgrades and ~~lower Depositary Receipt-related foreign exchange activity, partially offset by higher volumes. Foreign exchange and other trading revenue~~the continuation of the challenging macroeconomic outlook.

Noninterest expense of $2.0 billion increased ~~6% (unannualized)~~1% compared with the second quarter of ~~2017 primarily reflecting higher volumes~~.

~~Other revenue decreased 4%~~2019 and slightly compared with the ~~third~~first quarter of ~~2016 and increased 4% (unannualized)~~2020. The increase compared with the second quarter of 2017. The third quarter of 2016 results include termination fees related to the clearing services business. Both comparisons reflect higher payments from Investment Management related to higher money market fees.

~~Net interest revenue increased 9% compared with the third quarter of 2016~~2019 was primarily ~~reflecting the impact of the higher interest rates,~~driven by continued investments in technology, partially offset by lower ~~average deposits~~business development and ~~loans. Net interest revenue increased 2% (unannualized)~~staff expenses. The slight increase compared with the ~~second~~first quarter of ~~2017 primarily reflecting higher interest rates.~~2020 reflects

Noninterest expense, excluding amortization of intangible assets, increased 1% compared with the third quarter of 2016 and decreased 3% (unannualized) compared with the second quarter of 2017. The increase primarily reflects additional

BNY Mellon 17

continued investments in technology, ~~related-costs, partially~~ offset by lower staff expense. ~~The decrease primarily reflects lower consulting expense, volume-related clearing and sub-custodian expenses and lower business development expense.~~

Year-to-date ~~2017~~2020 compared with year-to-date ~~2016~~2019

~~Income before taxes~~Total revenue of $6.3 billion increased 6% compared with the first ~~nine~~six months of ~~2016, primarily driven by~~2019. Asset Servicing revenue ~~growth~~ of ~~3%, partially offset by a 3% increase in noninterest expense, excluding amortization of intangible assets. Fee and other revenue~~$3.0 billion increased 2%6%, primarily reflecting higher ~~clearing services and asset servicing fees, partially offset by lower~~ foreign exchange and other trading revenue and higher volumes from existing clients, partially offset by lower net interest revenue. ~~The increase in~~Pershing revenue of $1.2 billion increased 9%, primarily reflecting higher clearing ~~services fees primarily reflects higher~~volumes and money market ~~fees and growth in long-term mutual fund assets. The increase in asset servicing fees primarily reflects net new business, including growth in collateral management and higher equity market values,~~balances, partially offset by the impact of ~~downsizing~~rate-driven money market fee waivers.

Issuer Services revenue of $850 million increased 1%, primarily reflecting higher Depositary Receipts and Corporate Trust fees. Treasury Services revenue of $679 million increased 7%, primarily reflecting higher fees and net interest revenue. Clearance and Collateral Management revenue of $595 million increased 6%, primarily reflecting growth in collateral management and clearance volumes and higher net interest revenue.

Noninterest expense of $4.0 billion increased 1% compared with the first six months of 2019 primarily reflecting continued investments in technology, partially offset by lower business development (travel and marketing) and staff expenses.

Investment and Wealth Management business (formerly Investment Management business)



																										YTD20
																2Q20 vs.										vs.
(dollars in millions)	2Q20			1Q20			4Q19			3Q19			2Q19			1Q20		2Q19		YTD20			YTD19			YTD19
Revenue:
Investment management fees (a)	$	782		$	812		$	836		$	830		$	831		(4	)%	(6	)%	$	1,594		$	1,641		(3	)%
Performance fees	5			50			48			2			2			N/M		150		55			33			67
Investment management and performance fees (b)	787			862			884			832			833			(9	)	(6	)	1,649			1,674			(1	)
Distribution and servicing	34			43			44			45			44			(21	)	(23	)	77			89			(13	)
Other (a)	17			(59		)	(4		)	(39		)	(23		)	N/M		N/M		(42		)	(40		)	N/M
Total fee and other revenue (a)	838			846			924			838			854			(1	)	(2	)	1,684			1,723			(2	)
Net interest revenue	48			52			47			49			59			(8	)	(19	)	100			126			(21	)
Total revenue	886			898			971			887			913			(1	)	(3	)	1,784			1,849			(4	)
Provision for credit losses	7			9			—			—			(2		)	N/M		N/M		16			(1		)	N/M
Noninterest expense (excluding amortization of intangible assets)	650			687			722			582			646			(5	)	1		1,337			1,306			2
Amortization of intangible assets	8			8			9			10			9			—		(11	)	16			18			(11	)
Total noninterest expense	658			695			731			592			655			(5	)	—		1,353			1,324			2
Income before income taxes	$	221		$	194		$	240		$	295		$	260		14	%	(15	)%	$	415		$	526		(21	)%

Pre-tax operating margin	25		%	22		%	25		%	33		%	29		%					23		%	28		%
Adjusted pre-tax operating margin – Non-GAAP (c)	28		%	24		%	27		%	37		%	32		%					26		%	32		%

Total revenue by line of business:
Investment Management (formerly Asset Management)	$	621		$	620		$	692		$	608		$	622		—	%	—	%	$	1,241		$	1,262		(2	)%
Wealth Management	265			278			279			279			291			(5	)	(9	)	543			587			(7	)
Total revenue by line of business	$	886		$	898		$	971		$	887		$	913		(1	)%	(3	)%	$	1,784		$	1,849		(4	)%

Average balances:
Average loans	$	11,791		$	12,124		$	12,022		$	12,013		$	12,205		(3	)%	(3	)%	$	11,958		$	12,271		(3	)%
Average deposits	$	17,491		$	16,144		$	15,195		$	14,083		$	14,615		8	%	20	%	$	16,817		$	15,211		11	%


(a)	Total fee and other revenue includes the impact of the consolidated investment management funds, net of noncontrolling interests. Additionally, other revenue includes asset servicing fees, treasury services fees, foreign exchange and other trading revenue and investment and other income.


(b)	On a constant currency basis, investment management and performance fees decreased 4% (Non-GAAP) compared with the second quarter of 2019. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 45 for the reconciliation of this Non-GAAP measure.


(c)	Net of distribution and servicing expense. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 45 for the reconciliation of this Non-GAAP measure.

N/M - Not meaningful.

18 BNY Mellon



AUM trends																2Q20 vs.
(dollars in billions)	2Q20			1Q20			4Q19			3Q19			2Q19			1Q20		2Q19
AUM at period end, by product type: (a)
Equity	$	141		$	120		$	154		$	147		$	152		18	%	(7	)%
Fixed income	224			211			224			211			209			6		7
Index	333			274			339			321			322			22		3
Liability-driven investments	752			705			728			742			709			7		6
Multi-asset and alternative investments	185			171			192			182			184			8		1
Cash	326			315			273			278			267			3		22
Total AUM by product type	$	1,961		$	1,796		$	1,910		$	1,881		$	1,843		9	%	6	%

Changes in AUM: (a)
Beginning balance of AUM	$	1,796		$	1,910		$	1,881		$	1,843		$	1,841
Net inflows (outflows):
Long-term strategies:
Equity	(2		)	(2		)	(6		)	(4		)	(2		)
Fixed income	4			—			5			2			(4		)
Liability-driven investments	(2		)	(5		)	(3		)	(4		)	1
Multi-asset and alternative investments	—			(1		)	3			(1		)	1
Total long-term active strategies (outflows)	—			(8		)	(1		)	(7		)	(4		)
Index	9			3			(5		)	(3		)	(22		)
Total long-term strategies inflows (outflows)	9			(5		)	(6		)	(10		)	(26		)
Short-term strategies:
Cash	11			43			(7		)	11			2
Total net inflows (outflows)	20			38			(13		)	1			(24		)
Net market impact	143			(91		)	(20		)	66			42
Net currency impact	2			(61		)	62			(29		)	(16		)
Ending balance of AUM	$	1,961		$	1,796		$	1,910		$	1,881		$	1,843		9	%	6	%

Wealth Management client assets (b)	$	254		$	236		$	266		$	259		$	257		8	%	(1	)%

(a) Excludes securities lending cash management assets and assets managed in the Investment Services business.

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

Business description

Our Investment and Wealth Management business consists of two 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 ~~UK transfer agency business~~clients globally. BNY Mellon Wealth Management provides investment management, custody, wealth and estate planning and private banking services. See pages 16 and 17 of our 2019 Annual Report for additional information on our Investment and Wealth Management business.

Review of financial results

AUM increased 6% compared with June 30, 2019 primarily reflecting higher market values and net inflows, partially offset by the unfavorable impact of a stronger U.S. ~~dollar.~~dollar (principally versus the British pound).

Net long-term strategy inflows were $9 billion in the second quarter of 2020, primarily resulting from inflows of index funds. Short-term strategy inflows were $11 billion in the second quarter of 2020. Market and regulatory trends have resulted in increased demand for lower fee asset management products and for performance-based fees.

Total revenue of $886 million decreased 3% compared with the second quarter of 2019 and 1% compared with the first quarter of 2020.

Investment Management revenue of $621 million decreased slightly compared with the second quarter of 2019 and increased slightly compared with the first quarter of 2020. The decrease compared with the second quarter of 2019 primarily reflects the unfavorable change in ~~foreign exchange~~the mix of AUM since the second quarter of 2019 and ~~other trading~~the impact of money market fee waivers, partially offset by equity investment gains (net of hedges), including seed capital. The increase compared with the first quarter of 2020 primarily reflects equity investment gains (net of hedges), including seed capital, partially offset

BNY Mellon 19

by the timing of performance fees and the impact of money market fee waivers.

Wealth Management revenue of $265 million decreased 9% compared with the second quarter of 2019 and 5% compared with the first quarter of 2020. Both decreases primarily reflect lower net interest revenue and a shift within portfolios to lower fee asset classes.

Revenue generated in the Investment and Wealth Management business included 40% from non-U.S. sources in the second quarter of 2020, compared with 38% in the second quarter of 2019 and 42% in the first quarter of 2020.

Noninterest expense of $658 million increased slightly compared with the second quarter of 2019 and decreased 5% compared with the first quarter of 2020. The increase compared with the second quarter of 2019 primarily reflects higher continued investments in technology. The decrease compared with the first quarter of 2020 primarily reflects lower ~~volatility~~staff and ~~lower Depositary Receipt-related foreign exchange activity. Net interest~~other expenses.

Year-to-date 2020 compared with year-to-date 2019

Total revenue ~~increased 8%~~of $1.8 billion decreased 4% compared with the first six months of 2019. Investment Management revenue of $1.2 billion decreased 2% primarily ~~due to higher interest rates,~~reflecting an unfavorable change in the mix of AUM, equity investment losses (net of hedges), including seed capital, and the impact of fee waivers, partially offset by higher performance fees and market values. Wealth Management revenue of $543 million decreased 7% reflecting lower ~~average deposits.~~ net interest revenue.

Noninterest expense ~~excluding amortization~~ of ~~intangible assets,~~$1.4 billion increased 3%2% compared with the first six months of 2019, primarily reflecting higher ~~expenses from regulatory~~professional, legal and ~~compliance costs~~other purchased services expense and ~~additional~~higher investments in technology, ~~investments,~~ partially offset by ~~lower litigation expense and~~ the favorable impact of a stronger U.S. ~~dollar.~~dollar (principally versus the British pound).

~~22 BNY Mellon~~

Other segment

(in millions) 3Q17
2Q17
1Q17
4Q16
3Q16
YTD17
YTD16
Revenue:
Fee and other revenue $ 69
$ 113
$ 72
$ 42
$ 100
$ 254
$ 324
Net interest (expense) revenue (20 ) (22 ) (1 ) 38
(23 ) (43 ) (24 )
Total revenue 49
91
71
80
77
211
300
Provision for credit losses (2 ) (4 ) (8 ) 1
(20 ) (14 ) (26 )
Noninterest expense (ex. M&I and restructuring charges) 77
28
106
108
88
211
282
M&I and restructuring charges —
—
1
2
—
1
2
Total noninterest expense 77
28
107
110
88
212
284
(Loss) income before taxes $ (26 ) $ 67
$ (28 ) $ (31 ) $ 9
$ 13
$ 42
(Loss) income before taxes (ex. M&I and restructuring charges) – Non-GAAP
$ (26 ) $ 67
$ (27 ) $ (29 ) $ 9
$ 14
$ 44

Average loans and leases $ 1,182
$ 1,302
$ 1,341
$ 2,142
$ 1,941
$ 1,275
$ 1,853




(in millions)	2Q20			1Q20			4Q19			3Q19			2Q19			YTD20			YTD19
Fee revenue (loss)	$	29		$	21		$	817		$	(5	)	$	24		$	50		$	41
Net securities gains (losses)	9			9			(23		)	(1		)	7			18			8
Total fee and other revenue (loss)	38			30			794			(6		)	31			68			49
Net interest (expense)	(36		)	(44		)	(10		)	(80		)	(40		)	(80		)	(70		)
Total revenue (loss)	2			(14		)	784			(86		)	(9		)	(12		)	(21		)
Provision for credit losses	(9		)	11			(3		)	(1		)	(2		)	2			(4		)
Noninterest expense	39			30			54			25			29			69			78
(Loss) income before income taxes	$	(28	)	$	(55	)	$	733		$	(110	)	$	(36	)	$	(83	)	$	(95	)

Average loans and leases	$	1,815		$	1,961		$	1,974		$	1,817		$	1,764		$	1,887		$	1,774

See page 2618 of our ~~2016~~2019 Annual Report for additional information on the Other segment.

Review of financial results

~~Total fee~~Fee revenue, net securities gains (losses) and net interest expense include corporate treasury and other investment activity, including hedging activity which offsets between fee revenue ~~decreased $31 million compared with the third quarter of 2016~~ and ~~$44~~net interest expense.

Fee revenue increased $5 million compared with the second quarter of ~~2017. The decrease~~2019 and $8 million compared with the ~~third~~first quarter of ~~2016~~2020, primarily ~~reflects lower other~~reflecting higher

equity investment income, driven by increased losses on our investments in renewable energy, and lower asset-related and net securities gains. The decrease compared with the second quarter of 2017 primarily reflects lease-related gains recorded in the second quarter of 2017 and lower income from corporate/bank-owned life insurance, partially offset by ~~higher net securities~~sequentially lower foreign currency translation gains.

Net interest expense decreased ~~$3 million compared with the third quarter of 2016 and $2~~$4 million compared with the second quarter of ~~2017. Both decreases primarily reflect higher interest rates.~~

~~Noninterest expense, excluding M&I~~2019 and ~~restructuring charges, decreased $11~~$8 million compared with the ~~third~~first quarter of ~~2016 and~~2020, primarily reflecting corporate treasury activity.

Noninterest expense increased ~~$49~~$10 million compared with the second quarter of ~~2017. The decrease was~~2019 and $9 million compared to the first quarter of 2020, primarily ~~driven by lower litigation and other expenses. The increase was primarily driven by~~reflecting higher staff ~~expense resulting from a methodology change in~~expense.

20 BNY Mellon

Year-to-date 2020 compared with year-to-date 2019

Losses before taxes decreased $12 million compared with the ~~second quarter~~first six months of ~~2017 for allocating employee benefits expense to the business segments with no impact to consolidated results. The increase was~~2019. Total loss decreased $9 million, primarily reflecting higher foreign currency translation gains and net securities gains, partially offset by ~~lower other and professional, legal and other purchased services expenses.~~

corporate treasury activity.

~~Year-to-date 2017 compared with year-to-date 2016~~

Income before taxes decreased $29 million compared with the first nine months of 2016. Fee and other revenue decreased $70 million primarily reflecting lower net securities gains and lower other income driven by increased pre-tax losses on our investments in renewable energy. Net interest expense increased $19 million reflecting the impact of higher crediting rates to the businesses. Noninterest expense, excluding M&I and restructuring charges, decreased $71 million primarily reflecting lower staff, other and litigation expenses.

Critical accounting estimates

Our significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements in our ~~2016~~2019 Annual ~~Report.~~Report and in Note 2 of the Notes to Consolidated Financial Statements in this Form 10-Q. Our critical accounting estimates are those related to the allowance for ~~loan~~credit losses, ~~and allowance for lending-related commitments,~~ fair value of financial instruments and derivatives, ~~other-than-temporary impairment (“OTTI”),~~ goodwill and other intangibles and ~~pension accounting,~~litigation and regulatory contingencies, as referenced below.



Critical ~~policy~~accounting estimates	Reference
Allowance for ~~loan~~credit losses ~~and allowance for lending-related commitments~~	~~2016 Annual Report,~~First quarter 2020 Form 10-Q, pages ~~29-31.~~19-20.
Fair value of financial instruments and derivatives	~~2016~~2019 Annual Report, pages ~~31-32.~~
~~OTTI~~	~~2016 Annual Report, page 33.~~23-24.
Goodwill and other intangibles	~~Second quarter 2017 Form 10-Q, page 24.~~
~~Pension accounting~~	~~2016~~2019 Annual Report, pages ~~34-36.~~24-25 and First quarter 2020 Form 10-Q, pages 20-21. Also, see below.
Litigation and regulatory contingencies	“Legal proceedings” in Note 18 of the Notes to Consolidated Financial Statements.

Goodwill and other intangible assets

BNY Mellon’s business segments include six reporting units for which goodwill impairment testing is performed on an annual basis. The Investment Services segment is comprised of four reporting units and the Investment and Wealth Management segment is comprised of two reporting units.

In the second quarter of 2020, we performed our annual goodwill impairment test on all six reporting units using an income approach to estimate fair values of each reporting unit. Estimated cash flows used in the income approach were based on management’s projections as of March 31, 2020. The discount rate applied to these cash flows was 10% and incorporated a 7% market equity risk premium. Estimated cash flows extend far into the future, and, by their nature, are difficult to estimate over such an extended time frame.

As a result of the annual goodwill impairment test of the six reporting units, no goodwill impairment was recognized. The fair values of five of the Company’s reporting units were substantially in excess of the respective reporting units’ carrying value. The Investment Management (formerly Asset Management) reporting unit, with $7.2 billion of allocated goodwill, which is one of the two reporting units in the Investment and Wealth Management segment, exceeded its carrying value by approximately 5%. For the Investment Management reporting unit, in the future, small changes in the assumptions, such as changes in the level of AUM and operating margin, could produce a non-cash goodwill impairment. See “Critical accounting estimates” in our 2019 Annual Report for additional information on the annual goodwill impairment test.

~~BNY Mellon 23~~

As of June 30, 2020, 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 ~~ensure that the~~undertake overall liquidity risk, including ~~intra-day~~intraday liquidity risk, that ~~we undertake~~ 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.~~June 30, ~~2017,~~2020, total assets were ~~$354~~$442 billion, compared with ~~$333~~$382 billion at Dec. 31, ~~2016.~~2019. The increase in total assets was primarily driven by higher

BNY Mellon 21

securities and interest-bearing deposits with the Federal Reserve and other central banks, ~~partially offset by lower loans.~~resulting from significant deposit inflows. Deposits totaled ~~$231~~$305 billion at ~~Sept.~~June 30, ~~2017 and $221~~2020, compared with $259 billion at Dec. 31, ~~2016, and were driven by higher~~2019. The increase reflects the current macroeconomic environment. Total interest-bearing deposits ~~in non-U.S. offices. At Sept. 30, 2017, total interest-bearing deposits were 50%~~as a percentage of total interest-earning assets ~~compared with 51%~~were 59% at June 30, 2020 and 62% at Dec. 31, ~~2016.~~2019. The higher level of client deposits received in the first six months of 2020 was primarily placed in the securities portfolio or with the Federal Reserve and other central banks.

At ~~Sept.~~June 30, ~~2017, we had $43~~2020, available funds totaled $172 billion ~~of liquid funds (which~~which include 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) and $82 billion of cash (including $76 billion of overnight deposits with the Federal Reserve and other central banks) for a total of $125 billion of available funds.~~agreements. This compares with available funds of ~~$104~~$145 billion at Dec. 31, ~~2016.~~2019. Total available funds as a percentage of total assets were ~~35%~~39% at ~~Sept.~~June 30, ~~2017 compared with 31%~~2020 and 38% at Dec. 31, ~~2016.~~2019. For additional information on our ~~liquid funds and~~ available funds, see “Liquidity and dividends.”

~~Investment securities~~Securities were ~~$120.0~~$155 billion, or ~~34%~~35% of total assets, at ~~Sept.~~June 30, ~~2017,~~2020, compared with ~~$114.7~~$123 billion, or ~~34%~~32% of total assets, at Dec. 31, ~~2016.~~2019. The increase in ~~investment~~ securities primarily reflects ~~additional~~ investments in ~~commercial mortgage-~~

~~backed~~U.S. Treasury securities, ~~(“MBS”) and~~agency residential mortgage-backed securities (“RMBS”), ~~partially offset by fewer investments~~sovereign debt/sovereign guaranteed securities, commercial paper/CDs and an increase in ~~consumer asset-backed securities (“ABS”).~~unrealized pre-tax gain. For additional information on our ~~investment~~ securities portfolio, see ~~“Investment securities”~~“Securities” and Note 4 of the Notes to Consolidated Financial Statements.

Loans were ~~$59.1~~$55.4 billion, or ~~17%~~13% of total assets, at ~~Sept.~~June 30, ~~2017,~~2020, compared with ~~$64.5~~$55.0 billion, or ~~19%~~14% of total assets, at Dec. 31, ~~2016.~~2019. The ~~decrease in loans~~increase was

primarily driven by higher overdrafts and higher loans in the commercial portfolio, partially offset by lower ~~margin~~ loans ~~and loans to~~in the financial ~~institutions.~~institutions portfolio. For additional information on our loan portfolio, see “Loans” and Note 5 of the Notes to Consolidated Financial Statements.

Long-term debt totaled ~~$28.4~~$27.6 billion at ~~Sept.~~June 30, ~~2017~~2020 and ~~$24.5~~$27.5 billion at Dec. 31, ~~2016. The~~2019. Issuances of $2.25 billion and an increase ~~reflects issuances~~in the fair value of ~~$4.75 billion,~~hedged long-term debt were partially offset by ~~the maturity of $500 million~~maturities and ~~the redemption of trust preferred securities.~~a redemption. For additional information on long-term debt, see “Liquidity and dividends.”

The Bank of New York Mellon Corporation total shareholders’ equity increased to ~~$40.5 billion from $38.8~~$43.7 billion at June 30, 2020 from $41.5 billion at Dec. 31, ~~2016.~~2019. For additional information, ~~on our capital,~~ see “Capital.”

Country risk exposure

~~We have exposure to~~The following table presents BNY Mellon’s top 10 exposures by country (excluding the U.S.) as of June 30, 2020, as well as certain countries with ~~higher~~higher-risk profiles, and is presented on an internal risk ~~profiles. Exposure described below reflects the country of operations and risk of the immediate counterparty.~~management basis. We ~~continue to~~ monitor our exposure to these and other countries as part of our internal country risk management process. ~~See “Risk management”~~

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.

22 BNY Mellon



Country risk exposure at June 30, 2020	Interest-bearing deposits										Total exposure
(in billions)	Central banks		Banks		Lending (a)		Securities (b)		Other (c)		Total exposure
Top 10 country exposure:
United Kingdom (“UK”)	$	15.0	$	0.5	$	1.4	$	5.6	$	2.3	$	24.8
Germany	16.7		0.7		0.7		4.3		0.3		22.7
Japan	19.2		0.9		0.2		0.7		0.1		21.1
Canada	—		2.3		0.2		4.4		0.9		7.8
Belgium	5.9		0.5		0.2		0.5		—		7.1
China	—		2.9		1.5		—		0.1		4.5
France	—		0.1		—		3.1		0.3		3.5
Ireland	0.7		0.1		0.3		0.7		1.5		3.3
Luxembourg	0.8		—		0.1		0.1		1.8		2.8
Spain	—		0.2		—		2.4		0.1		2.7
Total Top 10 country exposure	$	58.3	$	8.2	$	4.6	$	21.8	$	7.4	$	100.3	(d)

Select country exposure:
Italy	$	0.1	$	0.4	$	—	$	1.1	$	—	$	1.6
Brazil	—		—		1.2		0.1		0.1		1.4
Total select country exposure	$	0.1	$	0.4	$	1.2	$	1.2	$	0.1	$	3.0


(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 80% of our total non-U.S. exposure.

Based on our internal country risk management process at June 30, 2020, our largest country risk exposure was to the UK, which withdrew from the European Union (“EU”) on Jan. 31, 2020. For additional information, see “Other Matters - UK’s Withdrawal from the EU (“Brexit”)” and“Risk Factors - The UK’s withdrawal from the EU may have negative effects on global economic conditions, global financial markets, and our business and results of operations” both included in our ~~2016~~2019 Annual ~~Report for additional information on how our exposures are managed.~~Report.

~~BNY Mellon has a limited economic interest in the performance of assets of consolidated investment management funds, and therefore they are excluded from this disclosure.~~

~~Italy and Spain~~

Events in recent years have resulted in increased focus on Italy and Spain. We had net exposure of $1.3 billion to Italy and $2.0 billion to Spain at Sept. 30, 2017. We had net exposure of $1.2 billion to Italy and $2.0 billion to Spain at Dec. 31, 2016. At both Sept. 30, 2017 and Dec. 31, 2016,Brazil. The country risk exposure to Italy ~~and Spain~~ primarily ~~consisted~~consists of investment grade

~~24 BNY Mellon~~

sovereign debt. ~~Investment securities~~The country risk exposure ~~totaled $1.2 billion in Italy and $1.7 billion in Spain at Sept. 30, 2017 and $1.1 billion in Italy and $1.8 billion in Spain at Dec. 31, 2016~~.to Brazil

~~Brazil~~

~~Current conditions in Brazil have resulted in increased focus on its economic and political stability.~~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. In addition, at Sept. 30, 2017 and Dec. 31, 2016, we had total net exposure to Brazil of $1.4 billion and $1.3 billion, respectively. This included $1.2 billion and $1.3 billion, respectively, in loans, which are primarily short-term trade finance loans extended to large financial institutions. At Sept. 30, 2017 and Dec. 31, 2016, we held $140 million and $73 million, respectively, of noninvestment grade sovereign debt.

~~Turkey~~

Events in recent years have resulted in increased focus on exposure to Turkey. We mainly provide treasury and issuer services, as well as foreign exchange products primarily to the top-10 largest financial institutions in the country. As of Sept. 30, 2017 and Dec. 31, 2016, our exposure totaled $780 million and $713 million, respectively, consisting primarily of syndicated credit facilities and trade finance loans.

~~Investment securities~~Securities

In the discussion of our ~~investment~~ 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 for our ~~investment~~ securities portfolio could indicate increased credit risk for us and could be accompanied by a reduction in the fair value of our ~~investment~~ securities portfolio.

BNY Mellon 23

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

Investment securities
portfolio

(dollars in millions)
June 30, 2017

3Q17
change in
unrealized
gain (loss)

Sept. 30, 2017
Fair value
as a % of amortized
cost (a)

Unrealized
gain (loss)

Ratings (b)

BB+
and
lower

Fair
value

Amortized
cost

Fair
value

AAA/
AA-
A+/
A-
BBB+/
BBB-
Not
rated
Agency RMBS $ 49,544
$ 81
$ 50,121
$ 49,917
100 % $ (204 ) 100 % — % — % — % — %
U.S. Treasury 25,325
(5 ) 25,256
25,159
100
(97 ) 100
—
—
—
—
Sovereign debt/sovereign guaranteed (c)
14,025
6
13,951
14,102
101
151
72
6
21
1
—
Non-agency RMBS (d)
1,239
9
885
1,185
84
300
—
1
3
87
9
Non-agency RMBS 627
9
555
594
97
39
7
4
17
71
1
European floating rate
notes (e)
523
(1 ) 393
387
98
(6 ) 63
37
—
—
—
Commercial MBS 10,574
5
11,051
11,033
100
(18 ) 99
1
—
—
—
State and political subdivisions 3,299
1
3,109
3,141
101
32
80
17
—
—
3
Foreign covered bonds (f)
2,471
1
2,612
2,626
101
14
100
—
—
—
—
Corporate bonds 1,318
4
1,262
1,275
101
13
17
69
14
—
—
CLOs 2,642
1
2,542
2,550
100
8
99
—
—
1
—
U.S. government agencies 2,210
2
2,480
2,496
101
16
100
—
—
—
—
Consumer ABS 1,330
1
1,152
1,157
100
5
89
4
5
2
—
Other (g)
3,758
(8 ) 4,118
4,122
100
4
81
17
—
—
2
Total investment securities $ 118,885
(h) $ 106
$ 119,487
$ 119,744
(h) 100 % $ 257
(h)(i) 93 % 3 % 3 % 1 % — %



Securities portfolio	March 31, 2020			2Q20 change in unrealized gain (loss)			June 30, 2020					Fair value as a % of amortized cost (a)		Unrealized gain (loss)				Ratings (b)
	March 31, 2020						June 30, 2020															BBB+/ BBB-		BB+ and lower		A1+/A2 & SP-1+
(dollars in millions)	Fair value						Amortized cost		Fair value									AAA/ AA-		A+/ A-		BBB+/ BBB-		BB+ and lower		A1+/A2 & SP-1+		Not rated
Agency RMBS	$	57,074		$	455		$	58,874	$	60,401		103	%	$	1,527			100	%	—	%	—	%	—	%	—	%	—	%
U.S. Treasury	24,825			(31		)	28,224		28,651			102		427				100		—		—		—		—		—
Sovereign debt/sovereign guaranteed (c)	13,833			47			16,698		16,868			101		170				75		6		18		1		—		—
Agency commercial mortgage-backed securities (“MBS”)	11,416			159			11,339		11,731			103		392				100		—		—		—		—		—
Foreign covered bonds (d)	5,349			62			5,548		5,598			101		50				100		—		—		—		—		—
Supranational	4,339			27			5,434		5,484			101		50				100		—		—		—		—		—
U.S. government agencies	3,346			29			4,984		5,056			101		72				100		—		—		—		—		—
Collateralized loan obligations (“CLOs”)	4,098			149			4,526		4,432			98		(94		)		99		—		—		—		—		1
Foreign government agencies (e)	2,761			14			3,536		3,575			101		39				95		5		—		—		—		—
Commercial paper/CDs	3,465			5			3,386		3,392			100		6				—		—		—		—		100		—
Other asset-backed securities (“ABS”)	2,220			56			2,724		2,743			101		19				99		—		1		—		—		—
Non-agency commercial MBS	2,446			140			2,517		2,602			103		85				100		—		—		—		—		—
Non-agency RMBS (f)	1,548			66			1,537		1,672			109		135				50		8		2		24		—		16
State and political subdivisions	1,001			12			1,166		1,196			103		30				76		22		—		—		1		1
Corporate bonds	818			28			789		831			105		42				19		68		13		—		—		—
Other	1			—			1		1			100		—				—		—		—		—		—		100
Total securities	$	138,540	(g)	$	1,218		$	151,283	$	154,233	(g)	102	%	$	2,950		(g)(h)	94	%	2	%	2	%	—	%	2	%	—	%


(a)	Amortized cost ~~before~~reflects historical impairments.


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


(c)	Primarily consists of exposure to UK, France, Germany, Spain, Italy and ~~the Netherlands.~~Singapore.


(d)	~~These~~Primarily consists of exposure to Canada, UK, Australia and Norway.


(e)	Primarily consists of exposure to Germany, the Netherlands and Sweden.


(f)	Includes RMBS that were included in the former Grantor Trust of $535 million at March 31, 2020 and were marked-to-market in 2009. We believe these RMBS would receive higher credit ratings if these ratings incorporated, as additional credit enhancements, the difference between the written-down amortized cost and the current face amount of each of these securities.


~~(e)~~	~~Includes RMBS and commercial MBS. Primarily consists of exposure to UK and the Netherlands.~~


~~(f)~~	~~Primarily consists of exposure to Canada, Australia, the Netherlands, Norway and UK.~~$538 million at June 30, 2020.


(g)	~~Includes commercial paper with a fair value of $700 million and~~ ~~$700 million~~ ~~and money market funds with a fair value of $896 million and~~ ~~$939 million~~ ~~at June 30, 2017 and Sept. 30, 2017, respectively.~~


~~(h)~~	Includes net unrealized losses on derivatives hedging securities available-for-sale (including terminated hedges) of ~~$251~~$1,846 million at March 31, 2020 and $1,817 million at June 30, ~~2017 and $238 million at~~ ~~Sept. 30, 2017~~. 2020.


~~(i)~~(h)	~~Unrealized~~Includes unrealized gains of ~~$324~~$1,582 million at ~~Sept.~~June 30, ~~2017~~2020 related to available-for-sale securities, net of hedges.

~~BNY Mellon 25~~

The fair value of our ~~investment~~ securities portfolio, including related hedges, was ~~$119.7~~$154.2 billion at ~~Sept.~~June 30, ~~2017,~~2020, compared with ~~$114.3~~$122.7 billion at Dec. 31, ~~2016.~~ 2019. The ~~higher level of securities~~increase primarily reflects ~~additional~~ investments in ~~commercial MBS and~~U.S. Treasury securities, agency RMBS, ~~partially offset~~sovereign debt/ sovereign guaranteed securities, commercial paper/CDs and an increase in unrealized pre-tax gain. At June 30, 2020, the securities portfolio, including the impact of interest rate swap hedges, is 74% fixed rate and 26% floating rate.

Included in the securities portfolio at June 30, 2020 were $1.2 billion of commercial paper and $697 million of CDs purchased from affiliated money market mutual funds in order to provide liquidity support to the funds. Additionally, at June 30, 2020, the securities portfolio included $1.5 billion of commercial paper and CDs purchased from money market mutual funds managed by ~~a decrease in consumer ABS.~~third parties and funded through the MMLF program.

At ~~Sept.~~June 30, ~~2017,~~2020, the ~~total investment~~ securities portfolio had a net unrealized ~~pre-tax~~ gain, ~~of $257 million compared with a pre-tax loss of $221 million at Dec. 31, 2016,~~ including the impact of related ~~hedges.~~hedges, of $3.0 billion, compared with $796 million at Dec. 31, 2019. The increase in the net unrealized pre-tax gain was primarily driven by ~~a decrease in long-term~~lower market interest rates.

The unrealized gain ~~net of tax,~~(after-tax) on our available-for-sale ~~investment~~ securities portfolio, net of hedges, included in accumulated other comprehensive income (“OCI”) was ~~$226 million~~$1.2 billion at ~~Sept.~~June 30, ~~2017,~~2020, compared with $45361 million at Dec. 31, ~~2016.~~2019. The increase in the unrealized gain, net of tax, was primarily driven by lower market interest rates.

At ~~Sept.~~June 30, ~~2017, 93%~~2020, 94% of the securities in our portfolio were rated AAA/AA-, ~~unchanged~~ compared with 95% at Dec. 31, ~~2016.~~ 2019.

~~We routinely test our investment securities for OTTI. See “Critical accounting estimates” for additional information regarding OTTI.~~

24 BNY Mellon

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 details of securities by level in the fair value hierarchy.

The following table presents the amortizable purchase premium (net of discount) related to the ~~investment~~ securities portfolio and accretable discount related to the 2009 restructuring of the ~~investment~~ securities portfolio.


Net premium amortization and discount accretion of investment securities (a)
Net premium amortization and discount accretion of securities (a)
(dollars in millions)	3Q17		2Q17		1Q17		4Q16		3Q16		2Q20		1Q20		4Q19		3Q19		2Q19
Amortizable purchase premium (net of discount) relating to investment securities:
Amortizable purchase premium (net of discount) relating to securities:
Balance at period end	$	2,053	$	2,111	$	2,058	$	2,188	$	2,267	$	1,693	$	1,555	$	1,319	$	1,308	$	1,315
Estimated average life remaining at period end (in years)	5.0		5.0		4.9		4.9		4.5		3.7		3.8		4.3		4.2		4.5
Amortization	$	140	$	134	$	138	$	146	$	163	$	125	$	101	$	100	$	95	$	91
Accretable discount related to the prior restructuring of the investment securities portfolio:
Accretable discount related to the prior restructuring of the securities portfolio:
Balance at period end	$	302	$	279	$	299	$	315	$	331	$	145	$	159	$	163	$	171	$	181
Estimated average life remaining at period end (in years)	6.5		6.3		6.2		6.2		5.9		5.8		6.1		6.3		6.3		6.3
Accretion	$	24	$	25	$	25	$	25	$	24	$	10	$	11	$	12	$	13	$	13


(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.

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

Net securities gains (losses)
(in millions) 3Q17
2Q17
3Q16
YTD17
YTD16
Agency RMBS $ 4
$ —
$ 9
$ 5
$ 22
U.S. Treasury 1
(1 ) (1 ) —
4
Foreign covered bonds —
—
—
—
10
Non-agency RMBS (1 ) —
(1 ) (2 ) 1
Other 15
1
17
26
28
Total net securities gains $ 19
$ —
$ 24
$ 29
$ 65

On a quarterly basis, we perform our impairment analysis using several factors, including projected loss severities and default rates. In the third quarter of 2017, this analysis resulted in other-than-temporary credit losses of $1 million primarily in our non-agency RMBS portfolio. At Sept. 30, 2017, if we were to increase or decrease each of our projected loss severity and default rates by 100 basis points on each of the positions in our non-agency RMBS

portfolio, including the securities previously held by the Grantor Trust, credit-related impairment charges on these securities would have increased or decreased by less than $1 million (pre-tax). See Note 4 of the Notes to Consolidated Financial Statements for the projected weighted-average default rates and loss severities.

The following table shows the fair value of the European floating rate notes by geographical location at Sept. 30, 2017. The net unrealized loss on these securities was $6 million at Sept. 30, 2017, compared with $11 million at Dec. 31, 2016.

European floating rate notes at Sept. 30, 2017 (a)
(in millions) RMBS
Other
Total fair
value

United Kingdom $ 169
$ 58
$ 227
Netherlands 160
—
160
Total fair value $ 329
$ 58
$ 387


~~(a)~~	~~Sixty-three percent of these securities are in the AAA to AA- ratings category.~~

~~26 BNY Mellon~~

~~See Note 14 of the Notes to Consolidated Financial Statements for details of securities by level in the fair value hierarchy.~~

Loans

~~Loans~~


Total exposure – consolidated	Sept. 30, 2017						Dec. 31, 2016						June 30, 2020						Dec. 31, 2019
(in billions)	Loans		Unfunded commitments		Total exposure		Loans		Unfunded commitments		Total exposure		Loans		Unfunded commitments		Total exposure		Loans		Unfunded commitments		Total exposure
Non-margin loans:
Financial institutions	$	11.9	$	32.7	$	44.6	$	14.7	$	33.7	$	48.4	$	10.8	$	35.5	$	46.3	$	12.5	$	34.4	$	46.9
Commercial	3.0		16.6		19.6		2.6		17.5		20.1		2.4		11.8		14.2		1.8		12.6		14.4
Subtotal institutional	14.9		49.3		64.2		17.3		51.2		68.5		13.2		47.3		60.5		14.3		47.0		61.3
Wealth management loans and mortgages	16.3		1.1		17.4		15.6		1.3		16.9		15.9		0.9		16.8		16.2		0.8		17.0
Commercial real estate	4.9		3.5		8.4		4.7		3.2		7.9		6.2		3.2		9.4		5.6		3.6		9.2
Lease financings	1.3		—		1.3		1.7		—		1.7		1.0		—		1.0		1.1		—		1.1
Other residential mortgages	0.7		—		0.7		0.9		—		0.9		0.5		—		0.5		0.5		—		0.5
Overdrafts	5.8		—		5.8		5.5		—		5.5		4.2		—		4.2		2.7		—		2.7
Other	1.3		—		1.3		1.2		—		1.2		1.5		—		1.5		1.2		—		1.2
Subtotal non-margin loans	45.2		53.9		99.1		46.9		55.7		102.6		42.5		51.4		93.9		41.6		51.4		93.0
Margin loans	13.9		—		13.9		17.6		0.1		17.7		12.9		0.1		13.0		13.4		0.1		13.5
Total	$	59.1	$	53.9	$	113.0	$	64.5	$	55.8	$	120.3	$	55.4	$	51.5	$	106.9	$	55.0	$	51.5	$	106.5

At ~~Sept.~~June 30, ~~2017,~~2020, total exposures of ~~$113.0~~$106.9 billion ~~decreased 6%~~increased slightly compared with Dec. 31, ~~2016,~~ 2019, primarily reflecting ~~lower margin loans and exposure to financial institutions,~~higher overdrafts, partially offset by ~~higher wealth management loans~~lower financial institutions exposure and ~~mortgages.~~margin loans.

Our financial institutions and commercial portfolios comprise our largest concentrated risk. These portfolios comprised 57% of our total exposure at ~~both Sept.~~June 30, ~~2017~~2020 and 58% at Dec. 31, ~~2016.~~2019. Additionally, most of our overdrafts relate to financial institutions.

BNY Mellon 25

Financial institutions

The financial institutions portfolio is shown below.


Financial institutions portfolio exposure (dollar amounts in billions)	Sept. 30, 2017										Dec. 31, 2016
	Loans		Unfunded commitments		Total exposure		% Inv. grade		% due <1 yr.		Loans		Unfunded commitments		Total exposure
Financial institutions portfolio exposure (dollars in billions)																	June 30, 2020										Dec. 31, 2019
																	Loans		Unfunded commitments		Total exposure		% Inv. grade		% due <1 yr.		Loans		Unfunded commitments		Total exposure
Securities industry	$	2.9	$	19.0	$	21.9	99	%	99	%	$	3.8	$	19.2	$	23.0	$	1.6	$	24.5	$	26.1	98	%	99	%	$	2.9	$	23.4	$	26.3
Banks																	7.0		1.1		8.1		82		98		7.4		1.1		8.5
Asset managers	1.6		6.5		8.1		97		87		1.5		6.2		7.7		1.3		6.3		7.6		99		84		1.3		6.4		7.7
Banks	6.3		1.4		7.7		68		94		7.9		2.0		9.9
Insurance	0.1		3.4		3.5		99		17		0.1		3.8		3.9		0.1		2.7		2.8		100		16		—		2.7		2.7
Government	—		1.0		1.0		91		46		0.1		0.9		1.0		0.1		0.2		0.3		100		64		0.1		0.3		0.4
Other	1.0		1.4		2.4		98		45		1.3		1.6		2.9		0.7		0.7		1.4		96		55		0.8		0.5		1.3
Total	$	11.9	$	32.7	$	44.6	93	%	86	%	$	14.7	$	33.7	$	48.4	$	10.8	$	35.5	$	46.3	95	%	90	%	$	12.5	$	34.4	$	46.9

The financial institutions portfolio exposure was ~~$44.6~~$46.3 billion at ~~Sept.~~June 30, ~~2017,~~2020, a decrease of 1% compared with ~~$48.4 billion at~~ Dec. 31, ~~2016. The decrease~~2019, primarily ~~reflects~~reflecting lower exposure ~~in the~~to banks and the securities ~~industry portfolios.~~industry.

Financial institution exposures are ~~high-quality,~~high quality, with ~~93%~~95% of the exposures meeting the investment grade equivalent criteria of our internal credit rating classification at ~~Sept.~~June 30, ~~2017.~~2020. 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. The exposure to financial institutions is generally short-term. Of these exposures, 86% expire within one year and 61% expire within 90 days. In addition, 80% of the financial institutions exposure is secured. For example, securities industry clients and asset managers often borrow against marketable securities held in custody.

~~BNY Mellon 27~~

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.

In addition, 75% 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 90% of the exposures expiring within one year. At June 30, 2020, 14% of the exposure to

financial institutions had an expiration within 90 days, compared with 18% at Dec. 31, 2019.

At ~~Sept.~~June 30, ~~2017,~~2020, the secured intraday credit provided to dealers in connection with their tri-party repo activity totaled ~~$18.5~~$20.6 billion and was ~~primarily~~ 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 nearly half of the exposure in the financial institutions portfolio and are reviewed and reapproved annually.

Our ~~bank~~banks exposure primarily relates to our global trade finance. These exposures are short-term in nature, with ~~94%~~98% due in less than one year. The investment grade percentage of our bank exposure was ~~68%~~82% at ~~Sept.~~June 30, ~~2017,~~2020, compared with ~~69%~~77% at Dec. 31, ~~2016.~~2019. Our non-investment grade exposures are primarily trade finance loans in Brazil.

The asset ~~manager~~managers portfolio exposure ~~was~~is high-quality, with ~~97%~~99% of the exposures meeting our investment grade equivalent ratings criteria as of ~~Sept.~~June 30, ~~2017.~~2020. These exposures are generally short-term liquidity facilities, with the ~~vast~~ majority to regulated mutual funds.

26 BNY Mellon

Commercial

The commercial portfolio is presented below.


Commercial portfolio exposure	Sept. 30, 2017										Dec. 31, 2016						June 30, 2020										Dec. 31, 2019
(dollar amounts in billions)	Loans		Unfunded commitments		Total exposure		% Inv. grade		% due <1 yr.		Loans		Unfunded commitments		Total exposure
(dollars in billions)																	Loans		Unfunded commitments		Total exposure		% Inv. grade		% due <1 yr.		Loans		Unfunded commitments		Total exposure
Manufacturing	$	1.4	$	6.3	$	7.7	96	%	22	%	$	1.1	$	6.7	$	7.8	$	1.1	$	3.5	$	4.6	94	%	15	%	$	0.9	$	4.2	$	5.1
Services and other	0.9		4.4		5.3		95		28		0.6		4.3		4.9		1.1		3.3		4.4		94		33		0.6		3.7		4.3
Energy and utilities	0.6		4.5		5.1		95		7		0.6		4.7		5.3		0.1		4.1		4.2		89		4		0.3		3.7		4.0
Media and telecom	0.1		1.4		1.5		95		15		0.3		1.8		2.1		0.1		0.9		1.0		93		—		—		1.0		1.0
Total	$	3.0	$	16.6	$	19.6	95	%	19	%	$	2.6	$	17.5	$	20.1	$	2.4	$	11.8	$	14.2	92	%	16	%	$	1.8	$	12.6	$	14.4

The commercial portfolio exposure ~~decreased to $19.6~~was $14.2 billion at ~~Sept.~~June 30, ~~2017,~~2020, a decrease of 1% from ~~$20.1 billion at~~ Dec. 31, ~~2016,~~2019, primarily ~~reflecting~~driven by lower manufacturing exposure, partially offset by increased exposure in ~~the media and telecom portfolio.~~

~~Utilities-related exposure represents approximately 78% of the~~ energy and ~~utilities portfolio. The remaining~~utilities.

We have $741 million of total direct exposure to the oil and gas industry, most of which is reflected in the energy and utilities portfolio ~~which includes~~in the table above. This exposure is to exploration and production, ~~companies,~~ refining ~~pipelines~~ and integrated companies and was ~~76%~~65% investment grade at ~~both Sept.~~June 30, ~~2017~~2020 and 91% at Dec. 31, ~~2016.~~2019.

~~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
Sept. 30, 2017
June 30, 2017
March 31, 2017
Dec. 31, 2016
Sept. 30, 2016

Financial institutions 93 % 93 % 93 % 92 % 93 %
Commercial 95 % 96 % 95 % 94 % 94 %

Our credit strategy is to focus on investment grade clients that are active users of our non-credit services. The ~~execution~~following table summarizes the percentage of ~~our strategy has resulted in 93% of our~~the financial institutions ~~portfolio~~ and ~~95% of our~~ commercial portfolio ~~rated as~~exposures that are investment ~~grade at Sept. 30, 2017.~~grade.



Percentage of the portfolios that are investment grade
	Quarter ended
	June 30, 2020		March 31, 2020		Dec. 31, 2019		Sept. 30, 2019		June 30, 2019
Financial institutions	95	%	96	%	95	%	95	%	95	%
Commercial	92	%	94	%	96	%	95	%	95	%

Wealth management loans and mortgages

Our wealth management exposure was ~~$17.4~~$16.8 billion at ~~Sept.~~June 30, ~~2017,~~2020, compared with ~~$16.9~~$17.0 billion at Dec. 31, ~~2016.~~2019. Wealth management loans and mortgages primarily consist of loans to high-net-worth individuals, which are secured by marketable securities and/or residential property. Wealth management mortgages are primarily interest-only, adjustable-rate mortgages with a weighted-average loan-to-value ratio of 62% at origination. ~~In the wealth management portfolio, less~~Less than 1% of the mortgages were past due at ~~Sept.~~June 30, ~~2017.~~2020.

At ~~Sept.~~June 30, ~~2017,~~2020, the wealth management mortgage portfolio consisted of the following geographic concentrations: California - ~~24%~~23%; New York - ~~19%~~17%; Massachusetts - ~~11%~~10%; Florida - 8%; and other - ~~38%~~42%.

28 BNY Mellon 27

Commercial real estate

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



Composition of commercial real estate portfolio by asset class	June 30, 2020				Dec. 31, 2019
	Total exposure		Percentage secured		Total exposure		Percentage secured
(in billions)	Total exposure		Percentage secured		Total exposure		Percentage secured
Office	$	3.2	40	%	$	3.1	40	%
Residential	3.1		44		3.1		44
Retail	1.0		9		1.0		8
Hotels	0.6		2		0.6		2
Mixed-use	0.6		2		0.6		2
Healthcare	0.3		1		0.3		—
Other	0.6		2		0.5		4
Total commercial real estate	$	9.4	65	%	$	9.2	65	%

Our commercial real estate exposure totaled ~~$8.4~~$9.4 billion at ~~Sept.~~June 30, ~~2017,~~2020, compared with ~~$7.9~~$9.2 billion at Dec. 31, ~~2016.~~2019. 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.~~June 30, 2017, 59% of our commercial real estate portfolio was secured. The secured portfolio is diverse by project type, with 45% secured by residential buildings, 35% secured by office buildings, 12% secured by retail properties and 8% secured by other categories. Approximately 97% of2020, the unsecured portfolio consists of real estate investment trusts (“REITs”) and real estate operating companies, which are both ~~predominantly~~primarily investment grade.

At ~~Sept.~~June 30, ~~2017,~~2020, our commercial real estate portfolio ~~consists~~consisted of the following concentrations: New York metro - ~~40%~~41%; REITs and real estate operating companies - ~~40%~~35%; and other - ~~20%~~24%.

Lease financings

The ~~leasing~~lease financings portfolio exposure totaled ~~$1.3~~$1.0 billion at ~~Sept.~~June 30, ~~2017 compared with $1.7~~2020 and $1.1 billion at Dec. 31, ~~2016.~~2019. At ~~Sept.~~June 30, ~~2017,~~2020, approximately ~~94%~~98% of ~~the~~ leasing ~~portfolio~~ exposure was investment grade, or investment grade ~~equivalent.~~

~~At Sept. 30, 2017, the lease financings portfolio~~equivalent and consisted of exposures backed by well-diversified assets, ~~including~~primarily large-ticket transportation ~~equipment.~~equipment and real estate. The largest component of our lease residual value exposure is freight-related rail cars. Assets are both domestic and

foreign-based, with primary concentrations in the U.S. and Germany.

Other residential mortgages

The other residential mortgages portfolio primarily consists of 1-4 family residential mortgage loans and totaled ~~$741~~$450 million at ~~Sept.~~June 30, ~~2017~~2020 and ~~$854~~$494 million at Dec. 31, ~~2016.~~2019. Included in this portfolio at ~~Sept.~~June 30, ~~2017 are $181~~2020 were $81 million of mortgage loans

purchased in 2005, 2006 and the first quarter of 2007, ~~that are predominantly prime mortgage loans, with a small portion~~ of ~~Alt-A loans. As of Sept. 30, 2017, the purchased loans in this portfolio had a weighted-average loan-to-value ratio of 76% at origination and 11%~~which 25% of the serviced loan balance was at least 60 days delinquent. The properties securing the prime and Alt-A mortgage loans were located (in order of concentration) in California, Florida, Virginia, the tri-state area (New York, New Jersey and Connecticut) and Maryland.

To determine the projected loss on the prime and Alt-A mortgage portfolios, we calculate the total estimated defaults of these mortgages and multiply that amount by an estimate of realizable value upon sale in the marketplace (severity).

Overdrafts

Overdrafts primarily relate to custody and securities clearance ~~clients. Overdrafts occur on a daily basis in the custody and securities clearance business~~clients and are generally repaid within two business days.

Other loans

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

Margin loans

Margin ~~loans are~~loan exposure of $13.0 billion at June 30, 2020 and $13.5 billion at Dec. 31, 2019 was collateralized with marketable ~~securities, and borrowers~~securities. Borrowers are required to maintain a daily collateral margin in excess of 100% of the value of the loan. Margin loans included ~~$4.2~~$3.6 billion at ~~Sept.~~June 30, ~~2017~~2020 and ~~$6.3 billion at~~ Dec. 31, ~~2016~~2019 related to a term loan program that offers fully collateralized loans to broker-dealers.

28 BNY Mellon

~~Asset quality and allowance~~

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 (“SBLC”) and overdrafts associated with our custody and securities clearance businesses.

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

~~BNY Mellon 29~~


Allowance for credit losses activity	Sept. 30, 2017			June 30, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2020				March 31, 2020				Dec. 31, 2019			June 30, 2019
(dollar amounts in millions)
(dollars in millions)													June 30, 2020				March 31, 2020				Dec. 31, 2019			June 30, 2019
Beginning balance of allowance for credit losses
Impact of adopting ASU 2016-13													N/A				(55		)	(a)	N/A			N/A
Provision for credit losses													143				169			(a)	(8		)	(8		)
Net recoveries (charge-offs):
Loans:
Other residential mortgages													3				—				—			2
Wealth management loans and mortgages													—				—				—			(1		)
Other financial instruments													—				(1		)		N/A			N/A
Net recoveries (charge-offs)													3				(1		)		—			1
Ending balance of allowance for credit losses													$	475			$	329			$	216		$	241

Allowance for loan losses													$	302			$	140			$	122		$	146
Allowance for lending-related commitments													152				148				94			95
Allowance for financial instruments													21			(b)	41			(b)	N/A			N/A
Total allowance for credit losses													$	475			$	329			$	216		$	241

Non-margin loans	$	45,196		$	47,516		$	46,868		$	48,411		$	42,488			$	49,253			$	41,567		$	41,794
Margin loans	13,872			14,157			17,590			17,557			12,909				13,115				13,386			10,602
Total loans	$	59,068		$	61,673		$	64,458		$	65,968		$	55,397			$	62,368			$	54,953		$	52,396
Beginning balance of allowance for credit losses	$	270		$	276		$	274		$	280
Provision for credit losses	(6		)	(7		)	7			(19		)
Net recoveries:
Other residential mortgages	1			1			—			—
Financial institutions	—			—			—			13
Net recoveries	1			1			—			13
Ending balance of allowance for credit losses	$	265		$	270		$	281		$	274
Allowance for loan losses	$	161		$	165		$	169		$	148
Allowance for lending-related commitments	104			105			112			126
Allowance for loan losses as a percentage of total loans	0.27		%	0.27		%	0.26		%	0.22		%	0.55		%		0.22		%		0.22		%	0.28		%
Allowance for loan losses as a percentage of non-margin loans	0.36			0.35			0.36			0.31			0.71				0.28				0.29			0.35
Total allowance for credit losses as a percentage of total loans	0.45			0.44			0.44			0.42
Total allowance for credit losses as a percentage of non-margin loans	0.59			0.57			0.60			0.57
Allowance for loan losses and lending-related commitments as a percentage of total loans													0.82				0.46				0.39			0.46
Allowance for loan losses and lending-related commitments as a percentage of non-margin loans													1.07				0.58				0.52			0.58


(a)	In the first quarter of 2020, we adopted new accounting guidance included in ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses On Financial Instruments, on a prospective basis. See Note 2 of the Notes to Consolidated Financial Statement for additional information. Includes the reclassification of credit-related reserves on accounts receivable of $4 million.


(b)	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.

N/A - Not applicable.

Net recoveries were $1 million in the third quarter of 2017 and second quarter of 2017. Net recoveries in the third quarter of 2016 of $13 million were recorded in the financial institutions portfolio.

The provision for credit losses was ~~a credit of $6 million in the third quarter of 2017, a credit of $7~~$143 million in the second quarter of ~~2017~~2020, primarily driven by our commercial real estate portfolio and ~~a credit of $19 million in~~reflecting increased downgrades and the ~~third quarter of 2016.~~

~~The total allowance for credit losses was $265 million at Sept. 30, 2017, $281 million at Dec. 31, 2016 and $274 million at Sept. 30, 2016. The ratio~~continuation of the total allowance for credit losses to non-margin loans was 0.59% at Sept. 30, 2017, 0.60% at Dec. 31, 2016 and 0.57% at Sept. 30, 2016. The ratio of the allowance for loan losses to non-margin loans was 0.36% at Sept. 30, 2017, 0.36% at Dec. 31, 2016 and 0.31% at Sept. 30, 2016.challenging macroeconomic outlook.

We had ~~$13.9~~$12.9 billion of secured margin loans on our balance sheet at ~~Sept.~~June 30, ~~2017~~2020 compared with ~~$17.6~~$13.4 billion at Dec. 31, ~~2016 and $17.6 billion at Sept. 30, 2016.~~2019. We have rarely suffered a loss on these types of ~~loans and do not allocate any of our allowance for credit losses to them.~~loans. As a result, we believe that the ratio of ~~total~~ allowance for ~~credit~~loan losses and lending-related commitments as a percentage of non-margin loans is a more appropriate metric to measure the adequacy of the reserve.

Reverse repurchase agreements at June 30, 2020 were fully secured with high quality collateral. As a result, there was no allowance for credit losses related to these assets at June 30, 2020. This compares to an $18 million allowance at March 31, 2020. The decrease is driven by a reduction in exposure and improvement in collateral liquidity and values related to reverse repurchase agreements collateralized by non-agency debt securities.

The allowance for loan losses and allowance for lending-related commitments represent management’s estimate of ~~probable~~lifetime expected losses ~~inherent~~ in our credit portfolio. This evaluation process is subject to numerous estimates and judgments. ~~For additional information on this process, see “Critical~~

~~accounting estimates” in our 2016 Annual Report.~~ To the extent actual results differ from forecasts or

BNY Mellon 29

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” and Note 12 of the Notes to Consolidated Financial Statements, ~~both in our 2016 Annual Report,~~ we have allocated our allowance for ~~credit losses~~loans and lending-related commitments as ~~follows.~~presented below.

Allocation of allowance Sept. 30, 2017
June 30, 2017
Dec. 31, 2016
Sept. 30, 2016

Commercial 31 % 30 % 29 % 33 %
Commercial real estate 28
28
26
23
Foreign 13
13
13
11
Financial institutions 9
8
9
11

Wealth management (a)
8
9
8
7
Other residential mortgages 8
8
10
10
Lease financing 3
4
5
5
Total 100 % 100 % 100 % 100 %



Allocation of allowance for loan losses and lending-related commitments
	June 30, 2020		March 31, 2020		(a)	Dec. 31, 2019		June 30, 2019
	June 30, 2020		March 31, 2020		(a)	Dec. 31, 2019		June 30, 2019
Commercial real estate	81	%	72	%		35	%	30	%
Commercial	9		9			28		32
Foreign	—		—		(b)	11		13
Financial institutions	4		6			9		9
Wealth management (c)	2		3			9		8
Other residential mortgages	3		5			6		6
Lease financings	1		5			2		2
Total	100	%	100	%		100	%	100	%


(a)	In the first quarter of 2020, we adopted new accounting guidance included in ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, on a prospective basis. See Note 2 of the Notes to Consolidated Financial Statement for additional information.


(b)	The allowance related to foreign exposure has been reclassified to the respective classes of financing receivables.


(c)	Includes the allowance for credit losses on wealth management mortgages.

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 ~~loss.~~losses.

~~The~~Our allowance for credit ~~rating~~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 in our estimate of credit ~~is a significant variable~~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 ~~determining the allowance.~~key inputs. If each credit were rated one grade better, the allowance would have decreased by ~~$65~~$125 million, ~~while~~and if each credit were rated one grade worse, the allowance would have increased by ~~$109~~$202 million. ~~Similarly,~~Our multi-scenario based macroeconomic forecast used in determining the June 30, 2020

allowance for credit losses consisted of three recessionary scenarios, each of varying severity and duration. The baseline scenario reflects moderate recovery across most key variables, whereas the upside scenario is principally a V-shaped recovery, and the downside scenario is reflective of W-shaped recovery in GDP and unemployment and deeper reductions in asset prices compared to the baseline. We placed the most weight on our baseline scenario, with the remaining weighting resulting in slightly more weight placed on the downside scenario than the upside scenario. From a sensitivity perspective, at June 30, 2020, if we had applied 100% weighting to the ~~loss given default were one rating worse,~~downside scenario, the allowance for credit losses would have been approximately $245 million higher.

Nonperforming assets

The table below presents our nonperforming assets.



Nonperforming assets	June 30, 2020			Dec. 31, 2019
(dollars in millions)
Nonperforming loans:
Other residential mortgages	$	58		$	62
Wealth management loans and mortgages	28			24
Total nonperforming loans	86			86
Other assets owned	2			3
Total nonperforming assets	$	88		$	89
Nonperforming assets ratio	0.16		%	0.16		%
Nonperforming assets ratio, excluding margin loans	0.21			0.21
Allowance for loan losses/nonperforming loans (a)	351.2			141.9
Allowance for loan losses/nonperforming assets (a)	343.2			137.1
Allowance for loan losses and lending-related commitments/nonperforming loans (a)(b)	527.9			251.2
Allowance for loan losses and lending-related commitments/nonperforming assets (a)(b)	515.9			242.7


(a)	In the first quarter of 2020, we adopted new accounting guidance included in ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, on a prospective basis. See Note 2 of the Notes to Consolidated Financial Statement for additional information.


(b)	Total allowance for credit losses includes both the allowance for credit losses on loans and lending-related commitments.

~~30 BNY Mellon~~

Lost interest

~~allowance~~Interest revenue would have increased by ~~$41~~$1 million ~~while~~in the second quarter of 2020 and first quarter of 2020, $4 million in the second quarter of 2019, $3 million in the first six months of 2020 and $7 million in the first six months of 2019, if ~~the loss given default were one rating better, the allowance would have decreased by $29 million. For impaired credits, if the net carrying value of the~~nonperforming

30 BNY Mellon

loans ~~was 10% higher~~at period-end had been performing for the entire respective periods.

Loan modifications

Due to the coronavirus pandemic, there have been two forms of relief provided for classifying loans as troubled debt restructurings (“TDRs”): The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and the Interagency Guidance. See Note 2 of the Notes to Consolidated Financial Statements for additional details on this guidance. Financial institutions may account for eligible loan modifications either under the CARES Act or ~~lower,~~ the ~~allowance would~~Interagency Guidance and we have ~~decreased~~elected to apply both, as applicable, in providing borrowers with loan modification relief in response to the coronavirus pandemic. We modified loans totaling $282 million in the second quarter of 2020 by providing short-term loan payment forbearances or ~~increased by~~modified principal and/or interest payments. We did not identify these modifications as TDRs. These loans were primarily residential mortgage and commercial real estate loans. During the loan modification period, these loans are not reported as nonperforming or past due. We modified other residential mortgage loans totaling less than $1 million ~~respectively.~~in both the second quarter of 2019 and first quarter of 2020.

~~Nonperforming assets~~

~~The following table shows the distribution of nonperforming assets.~~

Nonperforming assets Sept. 30, 2017
June 30, 2017
Dec. 31, 2016
(dollars in millions)
Nonperforming loans:
Other residential mortgages $ 80
$ 84
$ 91
Wealth management loans and mortgages 8
10
8
Financial institutions 2
2
—
Lease financings —
—
4
Total nonperforming loans 90
96
103
Other assets owned 4
4
4
Total nonperforming assets $ 94
$ 100
$ 107
Nonperforming assets ratio 0.16 % 0.16 % 0.17 %
Nonperforming assets ratio, excluding margin loans 0.21
0.21
0.23
Allowance for loan losses/nonperforming loans 178.9
171.9
164.1
Allowance for loan losses/nonperforming assets 171.3
165.0
157.9
Total allowance for credit losses/nonperforming loans 294.4
281.3
272.8
Total allowance for credit losses/nonperforming assets 281.9
270.0
262.6

Nonperforming assets activity Sept. 30, 2017
June 30, 2017
Dec. 31, 2016
(in millions)
Balance at beginning of quarter $ 100
$ 107
$ 109
Additions 3
2
4
Return to accrual status (1 ) —
—
Charge-offs —
—
—
Paydowns/sales (8 ) (9 ) (6 )
Balance at end of quarter $ 94
$ 100
$ 107

~~Nonperforming assets decreased $13 million compared with Dec. 31, 2016, primarily reflecting lower other residential mortgages and lease financings.~~

The nonperforming assets ratio was 0.16% at Sept. 30, 2017, 0.16% at June 30, 2017 and 0.17% at Dec. 31, 2016. The ratio of the allowance for loan losses to nonperforming loans was 178.9% at Sept. 30, 2017, 171.9% at June 30, 2017 and 164.1% at Dec. 31, 2016. The ratio of the total allowance for credit losses to nonperforming loans was 294.4% at Sept. 30, 2017, 281.3% at June 30, 2017 and 272.8% at Dec. 31, 2016.

Deposits

Increased volatility coupled with the interest rate environment led to an increase in deposit levels as our clients increased the levels of cash placed with us. Total deposits were ~~$231.0~~$305.5 billion at ~~Sept.~~June 30, ~~2017,~~2020, an increase of 4%18%, compared with ~~$221.5~~$259.5 billion at

Dec. 31, 2016. The increase in deposits primarily reflects higher interest-bearing deposits in non-U.S. offices and noninterest-bearing deposits in U.S. offices, partially offset by lower interest-bearing deposits in U.S. offices.2019.

Noninterest-bearing deposits were ~~$80.4~~$78.1 billion at ~~Sept.~~June 30, ~~2017~~2020 compared with ~~$78.3~~$57.6 billion at Dec. 31, ~~2016.~~2019. Interest-bearing deposits were ~~$150.6~~$227.4 billion at ~~Sept.~~June 30, ~~2017~~2020 compared with ~~$143.2~~$201.9 billion at Dec. 31, ~~2016.~~2019. See “Impact of coronavirus pandemic on our business” for additional information.

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,~~broker-

dealers, commercial paper and other borrowed funds. Certain ~~other~~short-term borrowings, for example, securities sold under repurchase agreements, require the delivery of securities as collateral.

~~See “Liquidity and dividends” for a discussion of long-term debt and liquidity metrics that we monitor.~~

~~BNY Mellon 31~~

Information related to federal funds purchased and securities sold under repurchase agreements is presented below.


Federal funds purchased and securities sold under repurchase agreements	Federal funds purchased and securities sold under repurchase agreements									Federal funds purchased and securities sold under repurchase agreements
	Quarter ended									Quarter ended
(dollars in millions)	Sept. 30, 2017			June 30, 2017			Sept. 30, 2016			June 30, 2020			March 31, 2020			June 30, 2019
Maximum month-end balance during the quarter	$	21,850		$	19,786		$	11,184		$	14,512		$	16,644		$	12,127
Average daily balance(a)	$	21,403		$	17,970		$	9,585		$	14,209		$	13,919		$	11,809
Weighted-average rate during the quarter(a)	1.30		%	0.84		%	0.24		%	0.03		%	7.96		%	12.64		%
Ending balance(b)	$	10,314		$	10,934		$	8,052		$	14,512		$	13,128		$	11,757
Weighted-average rate at period end(b)	1.35		%	0.93		%	0.25		%	0.00		%	3.93		%	14.43		%

(a)

Includes the average impact of offsetting under enforceable netting agreements of $66,606 million in the second quarter of 2020, $80,216 million in the first quarter of 2020 and $50,710 million in the second quarter of 2019. On a Non-GAAP basis, excluding the impact of offsetting, the weighted-average rates would have been 0.00% for the second quarter of 2020, 1.18% for the first quarter of 2020 and 2.39% for the second quarter of 2019. We believe providing the rates excluding the impact of netting is useful to investors as it is more reflective of the actual rates paid.


(b)	Includes the impact of offsetting under enforceable netting agreements of $48,615 million at June 30, 2020, $80,203 million at March 31, 2020 and $78,433 million at June 30, 2019.

Fluctuations of federal funds purchased and securities sold under repurchase agreements ~~between periods resulted from~~reflect changes in overnight borrowing opportunities. The ~~increase~~decreases in the weighted-average rates compared with ~~Sept.~~June 30, ~~2016,~~2019and March 31, 2020 primarily ~~reflects increases in~~reflect lower interest rates and repurchase agreement activity with the ~~Fed Funds effective rate.~~Fixed Income Clearing Corporation (“FICC”), where we record interest expense gross, 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.

BNY Mellon 31

Information related to payables to customers and broker-dealers is presented below.

																			Payables to customers and broker-dealers
	Quarter ended									Quarter ended
(dollars in millions)	Sept. 30, 2017			June 30, 2017			Sept. 30, 2016			June 30, 2020			March 31, 2020			June 30, 2019
Maximum month-end balance during the quarter	$	21,563		$	21,622		$	21,162		$	25,012		$	24,016		$	19,149
Average daily balance (a)	$	21,280		$	21,078		$	20,616		$	23,944		$	20,629		$	18,679
Weighted-average rate during the quarter (a)	0.42		%	0.30		%	0.07		%	(0.01		)%	0.73		%	1.76		%
Ending balance	$	21,176		$	21,622		$	21,162		$	25,012		$	24,016		$	18,946
Weighted-average rate at period end	0.43		%	0.34		%	0.07		%	(0.01		)%	0.28		%	1.73		%


(a)	The weighted-average rate is calculated based on, and is applied to, the average interest-bearing payables to customers and broker-dealers, which were ~~$18,516 million in the third quarter of 2017, $20,609~~$18,742 million in the second quarter of ~~2017 and $16,873~~2020, $16,386 million in the ~~third~~first quarter of ~~2016~~. 2020 and $15,666 million in the second quarter of 2019.

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

Information related to commercial paper is presented below.


Commercial paper	Quarter ended
										Quarter ended
(dollars in millions)	Sept. 30, 2017			June 30, 2017			Sept. 30, 2016			June 30, 2020			March 31, 2020			June 30, 2019
Maximum month-end balance during the quarter	$	4,277		$	2,193		$	1,000		$	665		$	3,379		$	8,894
Average daily balance	$	2,736		$	2,215		$	1,173		$	191		$	1,581		$	2,957
Weighted-average rate during the quarter	1.15		%	0.95		%	0.35		%	1.02		%	1.56		%	2.43		%
Ending balance	$	2,501		$	876		$	—		$	665		$	1,121		$	8,894
Weighted-average rate at period end	1.18		%	0.98		%	—		%	0.02		%	1.57		%	2.35		%

The Bank of New York Mellon ~~our largest bank subsidiary,~~ 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. The ~~increase~~fluctuations in the commercial paper balances ~~compared with prior periods,~~ primarily ~~reflects management~~reflect funding of ~~overall liquidity. The increase~~investments in ~~weighted-average rates, compared with prior periods, primarily reflects increases in the Fed Funds effective rate and the issuance of higher-yielding term commercial paper.~~short-term assets.

Information related to other borrowed funds is presented below.


Other borrowed funds	Quarter ended
										Quarter ended
(dollars in millions)	Sept. 30, 2017			June 30, 2017			Sept. 30, 2016			June 30, 2020			March 31, 2020			June 30, 2019
Maximum month-end balance during the quarter	$	3,353		$	2,379		$	993		$	2,451		$	1,544		$	2,732
Average daily balance	$	2,197		$	1,193		$	874		$	2,272		$	719		$	2,455
Weighted-average rate during the quarter	1.38		%	1.24		%	0.76		%	1.30		%	2.27		%	3.36		%
Ending balance	$	3,353		$	1,338		$	993		$	1,628		$	1,544		$	1,921
Weighted-average rate at period end	1.56		%	1.69		%	0.75		%	1.37		%	2.01		%	3.84		%

Other borrowed funds primarily include borrowings from the Federal Home Loan Bank, ~~(“FHLB”),~~the Federal Reserve Bank of Boston under the MMLF program, overdrafts of sub-custodian account balances in our Investment Services businesses, ~~capital~~finance lease ~~obligations~~liabilities and borrowings under lines of credit by our Pershing subsidiaries. Overdrafts typically relate to timing differences for settlements. The decrease in other borrowed funds compared with June 30, 2019 primarily reflects a decrease in borrowings from the Federal Home Loan Bank, partially offset by borrowings from the Federal Reserve Bank of Boston under the MMLF program. The increase in other borrowed funds ~~balances~~ compared with ~~both prior periods~~March 31, 2020 primarily reflects higher borrowings from the ~~FHLB. The increase compared with Sept. 30, 2016 also reflects an increase~~Federal Reserve Bank of Boston under the MMLF program, partially offset by lower overdrafts of sub-custodian account balances in ~~capital lease obligations as a result of converting an operating lease to a capital lease.~~

our Investment Services businesses and borrowings from the Federal Home Loan Bank.

~~32 BNY Mellon~~

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 ~~rollover~~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 tointo cash, the inability to hold or raise

32 BNY Mellon

cash, low overnight deposits, deposit run-off or contingent liquidity events.

We also manage liquidity risks on an intra-day basis. Intraday liquidity risk is the risk that BNY Mellon cannot access funds during the business day to make payments or settle immediate obligations, usually in real time. Intraday liquidity risk can arise from timing mismatches, market constraints from an inability to convert assets to cash, an inability to raise cash intraday, low overnight deposits and/or adverse stress 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. See “Impact of coronavirus pandemic on our business” for additional information.

The Parent’s policy is to have access to sufficient unencumbered cash and cash equivalents at each quarter-end to cover maturities and other forecasted debt redemptions, net interest payments and net tax payments for the following 18-month period, and to provide sufficient collateral to satisfy transactions subject to Section 23A of the Federal Reserve Act. As of ~~Sept.~~June 30, ~~2017,~~2020, the Parent was in compliance with this policy.

For additional information on our liquidity policy, see “Risk Management - Liquidity ~~risk”~~Risk” in our ~~2016 Annual Report. Our overall approach to liquidity management is further described in “Liquidity and dividends” in our 2016~~2019 Annual Report.

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 ~~liquid funds (which include~~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), cash and due from banks, and interest-bearing deposits with the Federal Reserve and other central banks.~~agreements. The following table presents our total available ~~funds, including liquid~~ funds at period end and on an average basis.


Available and liquid funds	Sept. 30, 2017			Dec. 31, 2016			Average
Available funds																June 30, 2020			Dec. 31, 2019			Average
(dollars in millions)	Sept. 30, 2017			Dec. 31, 2016			3Q17			2Q17			3Q16									2Q20			1Q20			2Q19			YTD20			YTD19
Available funds:
Liquid funds:
Cash and due from banks																$	4,776		$	4,830		$	4,102		$	4,595		$	5,083		$	4,348		$	4,969
Interest-bearing deposits with the Federal Reserve and other central banks																112,728			95,042			94,229			80,403			61,756			87,316			62,665
Interest-bearing deposits with banks	$	15,256		$	15,086		$	15,899		$	14,832		$	14,066		18,045			14,811			21,093			17,081			13,666			19,087			13,761
Federal funds sold and securities purchased under resale agreements	27,883			25,801			28,120			26,873			26,376			36,638			30,182			30,265			34,109			38,038			32,187			33,528
Total liquid funds	43,139			40,887			44,019			41,705			40,442
Cash and due from banks	5,557			4,822			4,961			4,972			4,189
Interest-bearing deposits with the Federal Reserve and other central banks	75,808			58,041			70,430			69,316			74,102
Total available funds	$	124,504		$	103,750		$	119,410		$	115,993		$	118,733		$	172,187		$	144,865		$	149,689		$	136,188		$	118,543		$	142,938		$	114,923
Total available funds as a percentage of total assets	35		%	31		%	35		%	34		%	34		%	39		%	38		%	36		%	35		%	35		%	36		%	34		%

~~We had $43 billion of liquid funds at Sept. 30, 2017 and $41 billion~~atDec. 31, 2016. Of the $43 billion in liquid funds held at Sept. 30, 2017, $15 billion was placed in interest-bearing deposits with large, highly rated global financial institutions with a weighted-average life to maturity of approximately nine days. Of the $15 billion, $3 billion was placed with banks in the Eurozone.

Total available funds were ~~$125~~$172.2 billion at ~~Sept.~~June 30, ~~2017,~~2020, compared with ~~$104~~$144.9 billion at Dec. 31, ~~2016.~~

2019. The increase was primarily due to ~~an increase in~~higher interest-bearing deposits with the Federal Reserve and other central banks.

~~On an average basis for the nine months ended Sept. 30, 2017 and the nine months ended Sept. 30, 2016,~~Average non-core sources of funds, such as ~~money market rate accounts,~~ federal funds purchased and securities sold under repurchase agreements, trading liabilities, commercial paper and other ~~borrowings,~~borrowed funds, were ~~$31.9~~$18.2 billion for the six months ended June 30, 2020 and ~~$25.9~~$18.4 billion ~~respectively.~~for the six months ended June 30, 2019. The ~~increase~~

~~BNY Mellon 33~~

decrease primarily reflects a decrease in other borrowed funds and commercial paper, partially offset by an increase in federal funds purchased and securities sold under repurchase agreements.

Average foreign deposits, primarily from our European-based Investment Services ~~business,~~businesses, were ~~$94.1~~$103.1 billion for the ~~nine~~six months ended ~~Sept.~~June 30, ~~2017,~~2020, compared with ~~$105.6~~$91.4 billion for the ~~nine~~six months ended ~~Sept.~~June 30, ~~2016. Domestic savings,~~2019. Average interest-bearing ~~demand and time~~domestic deposits ~~averaged $40.0~~were $101.0 billion for the ~~nine~~six months ended ~~Sept.~~June 30, ~~2017~~2020 and ~~$47.8~~$72.4 billion for the ~~nine~~six months ended ~~Sept.~~June 30, ~~2016.~~2019. The ~~decrease~~increase primarily reflects ~~a decrease in time deposits, partially offset by an increase in demand deposits.~~increased client activity.

Average payables to customers and broker-dealers were ~~$19.4~~$17.6 billion for the ~~nine~~six months ended ~~Sept.~~June 30, ~~2017~~2020 and ~~$16.9~~$15.9 billion for the ~~nine~~six months ended ~~Sept.~~June 30, ~~2016.~~2019. Payables to customers and broker-dealers are driven by customer trading activity and market volatility.

~~Long-term~~

BNY Mellon 33

Average long-term debt ~~averaged $27.1~~was $27.7 billion for the ~~nine~~six months ended ~~Sept.~~June 30, ~~2017~~2020 and ~~$22.8~~$28.0 billion for ~~the nine~~six months ended ~~Sept.~~June 30, ~~2016, reflecting issuances of long-term debt.~~2019.

Average noninterest-bearing deposits ~~decreased~~increased to ~~$72.5~~$66.5 billion for the ~~nine~~six months ended ~~Sept.~~June 30, ~~2017~~2020 from ~~$82.9~~$53.8 billion for the ~~nine~~six months ended ~~Sept.~~June 30, ~~2016,~~2019, primarily reflecting ~~a decrease in~~ client ~~deposits.~~activity.

A significant reduction in our Investment Services business would reduce our access to deposits. See

“Asset/liability management” for additional factors that could impact our deposit balances.

Sources of liquidity

In the second quarter of 2017, we entered into a support agreement with certain key subsidiaries to facilitate the provision of capital and liquidity resources in the event of material financial distress or failure. Pursuant to the support agreement, the Parent transferred its intercompany loans and most of its cash to our intermediate holding company (“IHC”), and will continue to transfer cash and other liquid financial assets to the IHC, subject to certain amounts retained by the Parent to meet its near-term cash needs. In connection with the initial transfer, the IHC issued unsecured subordinated funding notes to the Parent. The IHC has also provided the Parent with a committed line of credit that allows the Parent to draw funds necessary to service near-term obligations. The Parent’s and the IHC’s obligations under the support agreement are secured.

The Parent’s three 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 ~~IHC.~~

The Parent had cash of $416 million at Sept. 30, 2017, compared with $8.7 billion at Dec. 31, 2016, a decrease of $8.3 billion, primarily reflecting the transfer of cash to the IHC pursuant to the support agreement.intermediate holding company (“IHC”).

~~34 BNY Mellon~~

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



Credit ratings at ~~Sept.~~June 30, ~~2017~~2020
	Moody’s		S&P	Fitch		DBRS
Parent:
Long-term senior debt	A1		A	AA-		AA ~~(low)~~
Subordinated debt	A2		A-	A+A		~~A (high)~~AA (low)
Preferred stock	Baa1		BBB	~~BBB~~BBB+		A ~~(low)~~
Outlook - ~~Parent:~~Parent	Stable		Stable	Stable		Stable

The Bank of New York Mellon:
Long-term senior debt	Aa2		AA-	AA		AA (high)
Subordinated debt	~~Aa3~~NR		A	A+NR		NR
Long-term deposits	Aa1		AA-	AA+		AA (high)
Short-term deposits	P1		A-1+	F1+		R-1 (high)
Commercial paper	P1		A-1+	F1+		R-1 (high)

BNY Mellon, N.A.:
Long-term senior debt	Aa2	(a)	AA-	AA	(a)	AA (high)
Long-term deposits	Aa1		AA-	AA+		AA (high)
Short-term deposits	P1		A-1+	F1+		R-1 (high)

Outlook - ~~Banks:~~Banks	Stable		Stable	Stable		Stable


(a)	Represents senior debt issuer default rating.

NR - Not rated.

Long-term debt totaled ~~$28.4~~$27.6 billion at ~~Sept.~~ June 30, ~~2017~~ 2020 and ~~$24.5~~ $27.5 billion at Dec. 31, ~~2016. The~~2019. Issuances of $2.25 billion and an increase ~~reflects issuances~~in the fair value of ~~$4.75 billion,~~hedged long-term debt were partially offset by ~~the maturity~~maturities of ~~$500 million~~$1.75 billion and ~~the~~a redemption of ~~trust preferred securities.~~$1.25 billion. The Parent has ~~$250 million~~$2.2 billion of long-term debt that will mature in the remainder of ~~2017.~~2020.

In July 2020, the Parent redeemed $1.1 billion of 2.6% senior notes due in August ~~2017, we~~2020 at par plus accrued and unpaid interest.

In May 2020, the Parent issued ~~$750 million~~1,000,000 depositary shares, each representing a 1/100th interest in a share of ~~fixed rate senior subordinated notes maturing in 2029~~the Parent’s Series G Noncumulative Perpetual Preferred Stock (the “Series G Preferred Stock”). The Series G Preferred Stock has an aggregate

liquidation preference of $1 billion. The Parent will pay dividends on the Series G Preferred Stock, if declared by its board of directors on each March 20 and September 20, at an annual ~~interest~~ rate equal to 4.70% from the original issue date to but excluding, Sept. 20, 2025; and at a floating rate equal to the five-year treasury rate (as defined in the certificate of ~~3.30%.~~designation) on the date that is three business days prior to the reset date plus 4.358% for each reset period, from and including Sept. 20, 2025. The floating rate will initially reset on Sept. 20, 2025 and subsequently on each date falling on the fifth anniversary of the preceding reset date.

The Bank of New York Mellon ~~our largest bank subsidiary,~~may issue notes and CDs. There were no CDs outstanding at June 30, 2020. At Dec. 31, 2019, $1.1 billion of CDs were

34 BNY Mellon

outstanding. At June 30, 2020 and Dec. 31, 2019, $32 million and $1.3 billion, respectively, of notes were outstanding.

The Bank of New York Mellon also issues commercial paper that matures within 397 days from the date of issue and is not redeemable prior to maturity or subject to voluntary prepayment. The average commercial paper ~~borrowings were $2.7~~outstanding was $886 million for the six months ended June 30, 2020 and $2.2 billion infor the ~~third quarter of 2017 and $1.2 billion in the third quarter of 2016.~~six months ended June 30, 2019. Commercial paper outstanding was ~~$2.5~~$665 million at June 30, 2020 and $4.0 billion ~~at Sept. 30, 2017. There was no commercial paper outstanding~~ at Dec. 31, ~~2016.~~2019.

Subsequent to ~~Sept.~~June 30, ~~2017,~~2020, our U.S. bank subsidiaries could declare dividends to the Parent of approximately ~~$6.2 billion,~~$796 million, without the need for a regulatory waiver. In addition, at ~~Sept.~~June 30, ~~2017,~~2020, non-bank subsidiaries of the Parent had liquid assets of approximately ~~$1.6 billion.~~$1.6 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 1719 of the Notes to Consolidated Financial Statements in our ~~2016~~2019 Annual Report.

Pershing LLC has uncommitted lines of credit in place for liquidity purposes which are guaranteed by the Parent. Pershing LLC has ~~eight~~three separate uncommitted lines of credit amounting to ~~$1.5 billion~~$750 million in aggregate. There were no borrowings under these lines in the ~~third~~second quarter of ~~2017.~~2020. Pershing Limited, an indirect UK-based subsidiary of BNY Mellon, has ~~two~~three separate uncommitted lines of credit amounting to ~~$250~~$350 million in aggregate. Average borrowings under these lines were $6$31 million, in aggregate, in the ~~third~~second quarter of ~~2017.~~2020.

BNY Mellon Capital Markets, LLC also has an uncommitted line of credit in place for $100 million for liquidity purposes. There were no borrowings under this line in the second quarter of 2020.

The double leverage ratio is the ratio of our equity investment in subsidiaries divided by our consolidated ~~parent~~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

~~BNY Mellon 35~~

high level of unencumbered available liquid assets held in its principal subsidiaries (such as central bank ~~deposits~~deposit placements and government securities), the Company’s cash generating fee-based business model, with ~~fees~~fee revenue representing ~~approximately 80%~~79% of total revenue in the second quarter of 2020, and the dividend capacity of our banking subsidiaries. Our double leverage ratio was ~~123.2%~~116.6% at ~~Sept.~~June 30, ~~2017~~2020 and ~~119.1%~~116.9% at Dec. 31, ~~2016,~~2019, and within the range targeted by management.

Uses of funds

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

In ~~August 2017,~~May 2020, a quarterly cash dividend of $0.31 per common share was paid to common ~~shareholders of $0.24 per common share.~~shareholders. Our common stock dividend payout ratio was ~~23%~~31% for the ~~first nine months~~second quarter of ~~2017. The Federal Reserve’s instructions for~~2020.

In March 2020, we and the ~~2017 CCAR provided that, for large bank holding companies like us, dividend payout ratios exceeding 30%~~other members of ~~after-tax net income would receive particularly close scrutiny.~~

the Financial Services Forum announced the temporary suspension of share repurchases until the end of the second quarter of 2020 to preserve capital and liquidity in order to further the objective of using capital and liquidity to support clients and customers.In the ~~third~~second quarter of ~~2017,~~2020, we repurchased ~~12 million~~61.2 thousand common shares from employees, primarily in connection with the employees’ payment of taxes upon the vesting of restricted stock, at an average price of ~~$52.74~~$43.59 per common share for a total cost of ~~$650~~$3 million.

In connection with the Federal Reserve’s release of the CCAR results in June 2020, BNY Mellon announced that it will not conduct open market common stock repurchases in the third quarter of 2020 and will resume the common stock repurchase program as early as possible, depending on factors such as prevailing market conditions, our outlook for the economic environment, the additional capital analysis required by the Federal Reserve, and whether the Federal Reserve keeps the limitations for the third quarter of 2020 in place for subsequent quarters. The Federal Reserve has announced that it will conduct additional analysis for all participating CCAR firms, including us, later this year and will not allow participating firms to make open market common

BNY Mellon 35

stock repurchases during the third quarter of 2020. See “Recent regulatory developments” for additional information related to the 2020 CCAR results.

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~~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 ~~the~~BNY Mellon’s consolidated HQLA at ~~Sept.~~June 30, ~~2017,~~2020, and the average HQLA and average LCR for the ~~third~~second quarter of ~~2017.~~2020.


Consolidated HQLA and LCR	Sept. 30, 2017			June 30, 2020
(dollars in billions)
Securities (a)	$	105		$	125
Cash (b)	70			107
Total consolidated HQLA (c)	$	175		$	232

Total consolidated HQLA - average (c)	$	162
Total consolidated HQLA – average (c)				$	210
Average LCR	119		%	112		%


(a)	Primarily includes ~~U.S. Treasury, U.S. agency, sovereign securities,~~ securities of U.S. government-sponsored enterprises, U.S. Treasury, sovereign securities, U.S. agency and investment-grade corporate ~~debt and publicly traded common equity.~~debt.


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


(c)	Consolidated HQLA presented before adjustments. After haircuts and the impact of trapped liquidity, consolidated HQLA totaled ~~$137~~$167 billion at ~~Sept.~~June 30, ~~2017~~2020 and averaged ~~$126~~$156 billion for the ~~third~~second quarter of ~~2017.~~2020.

~~The U.S. LCR rule became fully phased-in on Jan. 1, 2017 and requires~~ BNY Mellon and each of our affected domestic bank subsidiaries ~~to meet an LCR of at least 100%. The LCR for BNY Mellon and each of our domestic bank subsidiaries was~~were compliant with the U.S. LCR requirements ~~for~~of at least 100% throughout the ~~third~~second quarter of ~~2017. For additional information on the LCR, see “Supervision and Regulation - Liquidity Standards - Basel III and U.S. Rules and Proposals” in our 2016 Annual Report.~~2020.

We also perform liquidity stress tests to evaluate whether the Company maintains sufficient liquidity resources under multiple stress scenarios. Stress tests are based on scenarios that measure liquidity risks under unlikely but plausible conditions. We perform these tests under various time horizons ranging from one day to one year in a base case, as well as supplemental tests to determine whether the Company’s liquidity is sufficient for severe market events and firm-specific events. Under our scenario testing program, the results of the tests indicate that the Company has sufficient liquidity.

As part of our resolution planning, we monitor, among other measures, our Resolution Liquidity Adequacy and Positioning (“RLAP”). The RLAP methodologies are designed to ensure that the liquidity needs of certain key subsidiaries in a stress environment can be met by available resources held at the entity or at the Parent or IHC, as applicable.

~~36 BNY Mellon~~

Statement of cash flows

The following summarizes the activity reflected on the consolidated statement of cash flows. While this information may be helpful to highlight certain macro trends and business strategies, the cash flow analysis may not be as relevant when analyzing changes in our

net earnings and net assets. We believe that in addition to the traditional cash flow analysis, the discussion related to liquidity and dividends and asset/liability management herein may provide more useful context in evaluating our liquidity position and related activity.

Net cash provided by operating activities was ~~$3.4~~$5.1 billion in the ~~nine~~six months ended ~~Sept.~~June 30, ~~2017,~~2020, compared with ~~$1.6~~net cash used for operating activities of $2.5 billion in the ~~nine~~six months ended ~~Sept.~~June 30, ~~2016.~~2019. In the ~~first nine~~six months ~~of 2017,~~ended June 30, 2020, cash flows provided by operations ~~were principally the result of earnings. In the first nine months of 2016, cash flows provided by operations were principally the result of~~primarily resulted from earnings and changes in accruals. In the six months ended June 30, 2019, cash flows used for operations primarily resulted from changes in accruals and trading activities, partially offset by ~~changes in accruals.~~earnings.

Net cash used for investing activities was ~~$14.0~~$58.7 billion in the ~~nine~~six months ended ~~Sept.~~June 30, ~~2017,~~2020, compared with ~~cash provided by investing activities~~

~~of $21.1~~$11.4 billion in the ~~nine~~six months ended ~~Sept.~~June 30, ~~2016.~~2019. In the ~~first nine~~six months ~~of 2017,~~ended June 30, 2020, net cash used for investing activities primarily reflects net changes in securities, change in interest-bearing deposits with the Federal Reserve and other central banks ~~was a significant use of funds. In the first nine months of 2016, changes in interest-bearing deposits with the Federal Reserve~~ and ~~other central banks was a significant source of funds, partially offset by~~ changes in federal funds sold and securities purchased under resale agreements. In the six months ended June 30, 2019, net cash used for investing activities primarily reflects changes in federal funds sold and securities purchased under resale agreements, partially offset by changes in loans.

Net cash provided by financing activities was ~~$11.2~~$53.4 billion in the ~~nine~~six months ended ~~Sept.~~June 30, ~~2017,~~2020, compared with ~~cash used for financing activities of $24.2~~$13.2 billion in the ~~nine~~six months ended ~~Sept.~~June 30, ~~2016.~~2019. In the ~~first nine~~six months ~~of 2017, the proceeds from the issuance of long-term debt,~~ended June 30, 2020, net cash provided by financing activity reflects changes in deposits and ~~increases~~payables to customers and broker-dealers, partially offset by changes in commercial paper. In the six months ended June 30, 2019, net cash provided by financing activities primarily reflects changes in deposits and changes in commercial paper, ~~and other borrowed funds were significant sources of funds,~~ partially offset by ~~common stock repurchased. In the first nine months~~repayment of ~~2016, changes in deposits,~~long-term debt, changes in federal funds purchased and securities sold under repurchase agreements ~~repayment of long-term debt~~ and ~~treasury stock repurchases were significant uses of funds, partially offset by the issuance of long-term debt.~~changes in other borrowed funds.

36 BNY Mellon

Capital


Capital data (dollar amounts in millions except per share amounts; common shares in thousands)	Sept. 30, 2017			June 30, 2017			Dec. 31, 2016
Capital data (dollars in millions, except per share amounts; common shares in thousands)										June 30, 2020			March 31, 2020			Dec. 31, 2019
Average common equity to average assets	10.6		%	10.5		%	10.2		%	9.3		%	9.8		%	10.7		%

At period end:
BNY Mellon shareholders’ equity to total assets ratio	11.4		%	11.3		%	11.6		%	9.9		%	8.8		%	10.9		%
BNY Mellon common shareholders’ equity to total assets ratio	10.4		%	10.3		%	10.6		%	8.9		%	8.0		%	9.9		%
Total BNY Mellon shareholders’ equity	$	40,523		$	39,974		$	38,811		$	43,697		$	41,145		$	41,483
Total BNY Mellon common shareholders’ equity	$	36,981		$	36,432		$	35,269		$	39,165		$	37,603		$	37,941
BNY Mellon tangible common shareholders’ equity – Non-GAAP (a)	$	18,630		$	18,106		$	16,957		$	20,650		$	19,068		$	19,216
Book value per common share ~~(a)~~	$	36.11		$	35.26		$	33.67		$	44.21		$	42.47		$	42.12
Tangible book value per common share – Non-GAAP (a)	$	18.19		$	17.53		$	16.19		$	23.31		$	21.53		$	21.33
Closing stock price per common share	$	53.02		$	51.02		$	47.38		$	38.65		$	33.68		$	50.33
Market capitalization	$	54,294		$	52,712		$	49,630		$	34,239		$	29,822		$	45,331
Common shares outstanding	1,024,022			1,033,156			1,047,488			885,862			885,443			900,683

Cash dividends per common share	$	0.24		$	0.19		$	0.19		$	0.31		$	0.31		$	0.31
Common dividend payout ratio	26		%	22		%	25		%	31		%	30		%	20		%
Common dividend yield	1.8		%	1.5		%	1.6		%	3.2		%	3.7		%	2.4		%


(a)	See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 4945 for a reconciliation of GAAP to Non-GAAP.

~~BNY Mellon 37~~

The Bank of New York Mellon Corporation total shareholders’ equity increased to ~~$40.5~~$43.7 billion at ~~Sept.~~June 30, ~~2017~~2020 from ~~$38.8~~$41.5 billion at Dec. 31, ~~2016.~~2019. The increase primarily reflects earnings, ~~foreign currency translation adjustments, $638 million resulting from~~the issuance of preferred stock ~~awards, the exercise of stock options~~ and ~~stock issued for employee benefit plans, and the~~ unrealized gain ~~in our investment~~on securities ~~portfolio,~~available-for-sale, partially offset by ~~share~~common stock repurchases and ~~dividends.~~dividend payments.

In May 2020, the Parent issued 1,000,000 depositary shares, each representing a 1/100th interest in a share of the Parent’s Series G Preferred Stock. The Series G Preferred Stock has an aggregate liquidation preference of $1 billion. The Parent will pay dividends on the Series G Preferred Stock, if declared by its board of directors on each March 20 and September 20, at an annual rate equal to 4.70% from the original issue date to but excluding, Sept. 20, 2025; and at a floating rate equal to the five-year treasury rate (as defined in the certificate of designation) on the date that is three business days prior to the reset date plus 4.358% for each reset period, from and including Sept. 20, 2025. The floating rate will initially reset on Sept. 20, 2025 and subsequently on each date falling on the fifth anniversary of the preceding reset date.

The unrealized gain ~~net of tax,~~(after-tax) on our available-for-sale ~~investment~~ securities portfolio, ~~recorded~~net of hedges, included in accumulated ~~other comprehensive income~~OCI was ~~$226 million~~$1.2 billion at ~~Sept.~~June 30, ~~2017,~~2020, compared with ~~$45~~$361 million at Dec. 31, ~~2016.~~2019. The increase in the unrealized gain, net of tax, was primarily driven by ~~a decrease in long-term~~lower market interest rates.

Our 2017 capital plan, submitted in connection with our CCAR, included the authorization to repurchase an average of $650 million of common stock each quarter starting in the third quarter of 2017 and continuing through the second quarter of 2018.

In the ~~third quarter of 2017,~~six months ended June 30, 2020, we repurchased 1221.7 million common shares at an average price of ~~$52.74~~$45.43 per common share for a total ~~cost~~ of ~~$650 million.~~$988 million under the current program prior to the temporary suspension of share repurchases in March 2020.

~~Also included~~In connection with the Federal Reserve’s release of the CCAR results in June 2020, BNY Mellon announced that it will not conduct open market common stock repurchases in the ~~2017~~third quarter of 2020 and will resume the common stock repurchase program as early as possible, depending on factors such as prevailing market conditions, our outlook for the economic environment, the additional capital ~~plan was a 26% increase~~analysis required by the Federal Reserve, and whether the Federal Reserve keeps the limitations for the third quarter of 2020 in place for subsequent quarters. The Federal Reserve has announced that it will conduct additional analysis for all participating CCAR firms, including us, later this year and will not allow participating firms to make open market common stock repurchases during the ~~quarterly cash dividend to $0.24 per common share. The first payment~~third quarter of ~~the increased quarterly cash dividend was made on Aug. 11, 2017.~~2020. For additional information, see “Recent Regulatory Developments.”

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

BNY Mellon 37

Parent to maintain its status as a financial holding company (“FHC”), our U.S. bank subsidiaries and BNY Mellon must, among other things, qualify as “well capitalized.”

As of ~~Sept.~~June 30, ~~2017~~2020 and Dec. 31, ~~2016~~, 2019,BNY Mellon and our U.S. bank subsidiaries were “well capitalized.”

Failure to satisfy regulatory standards, including “well capitalized” status or capital adequacy rules more generally, could result in limitations on our activities and adversely affect our financial condition. See the discussion of these matters in “Supervision and Regulation - Regulated Entities of BNY Mellon and Ancillary Regulatory Requirements” and “Risk Factors - Operational 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”~~condition,” both of which are in our ~~2016~~2019 Annual Report.

The “well capitalized” and other capital categories (where applicable), as established by applicable regulations for bank holding companies and depository institutions, have been established by those regulations solely for purposes of implementing their respective requirements (for example, eligibility for financial holding company status in the case of bank holding companies and prompt corrective action measures in the case of depository institutions). A bank holding company’s or depository institution’s qualification for a capital category may not constitute an accurate representation of the entity’s overall financial condition or prospects.

The U.S. banking agencies’ capital rules are based on the framework adopted by the Basel Committee on Banking Supervision (“BCBS”), as amended from time to time. For additional information on these capital requirements, see “Supervision and Regulation” in our ~~2016~~2019 Annual ~~Report. BNY Mellon is subject to the U.S. capital rules, which are being gradually phased-in over a multi-year period through 2018.~~

~~Our estimated CET1~~Report and SLR ratios on a fully phased-in basis are based on our current interpretation of the U.S. capital rules. Our risk-based capital adequacy is determined using the higher of risk-weighted assets (“RWAs”) determined using the Advanced Approach and Standardized Approach.

“Recent regulatory developments” in this Form 10-Q.

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

~~38 BNY Mellon~~

The transitional capital ratios for Sept. 30, 2017 and June 30, 2017 included in the following table were negatively impacted by the additional phase-in requirements that became effective on Jan. 1, 2017.

Consolidated and largest bank subsidiary regulatory capital ratios Sept. 30, 2017
Well capitalized
Minimum
required

Capital
ratios

June 30, 2017
Dec. 31, 2016
(a)
Consolidated regulatory capital ratios: (b)

Standardized Approach:
CET1 ratio N/A
(c) 6.5 % 12.3 % 12.0 % 12.3 %
Tier 1 capital ratio 6 % 8
14.6
14.3
14.5
Total (Tier 1 plus Tier 2) capital ratio 10
10
15.6
14.8
15.2
Advanced Approach:
CET1 ratio N/A
(c) 6.5 % 11.1 % 10.8 % 10.6 %
Tier 1 capital ratio 6 % 8
13.2
12.9
12.6
Total (Tier 1 plus Tier 2) capital ratio 10
10
14.0
13.2
13.0
Leverage capital ratio (b)
N/A
(c) 4
6.8
6.7
6.6
SLR (d)
5
(c)(e) 3
6.3
6.2
6.0

Selected regulatory capital ratios – fully phased-in – Non-GAAP: (c)

Estimated CET1 ratio:
Standardized Approach 8.5 % (e) 6.5 % 11.9 % 11.5 % 11.3 %
Advanced Approach 8.5
(e) 6.5
10.7
10.4
9.7
Estimated SLR 5
(e) 3
6.1
6.0
5.6

The Bank of New York Mellon regulatory capital ratios: (b)

Advanced Approach:
CET1 ratio 6.5 % 5.75 % 14.8 % 14.1 % 13.6 %
Tier 1 capital ratio 8
7.25
15.1
14.4
13.9
Total (Tier 1 plus Tier 2) capital ratio 10
9.25
15.5
14.8
14.2
Leverage capital ratio 5
4
7.8
7.6
7.2
SLR (d)
6
3
7.1
6.9
6.5

Selected regulatory capital ratios – fully phased-in – Non-GAAP:

Estimated SLR 6 % 3 % 6.8 % 6.7 % 6.1 %



Consolidated and largest bank subsidiary regulatory capital ratios	June 30, 2020								March 31, 2020		Dec. 31, 2019
	Well capitalized			Minimum required			Capital ratios		Capital ratios		Capital ratios
	Well capitalized			Minimum required		(a)	Capital ratios		Capital ratios		Capital ratios
Consolidated regulatory capital ratios: (b)
Advanced Approaches:
CET1 ratio	N/A		(c)	8.5	%		12.6	%	11.4	%	11.5	%
Tier 1 capital ratio	6	%		10			15.4		13.5		13.7
Total capital ratio	10	%		12			16.3		14.3		14.4
Standardized Approach:
CET1 ratio	N/A		(c)	8.5	%		12.7	%	11.3	%	12.5	%
Tier 1 capital ratio	6	%		10			15.6		13.5		14.8
Total capital ratio	10	%		12			16.6		14.4		15.8
Tier 1 leverage ratio	N/A		(c)	4			6.2		6.0		6.6
SLR (d)(e)	N/A		(c)	5			8.2		5.6		6.1

The Bank of New York Mellon regulatory capital ratios: (b)
Advanced Approaches:
CET1 ratio	6.5	%		7	%		17.1	%	15.5	%	15.1	%
Tier 1 capital ratio	8			8.5			17.1		15.5		15.1
Total capital ratio	10			10.5			17.2		15.6		15.2
Tier 1 leverage ratio	5			4			6.7		6.7		6.9
SLR (d)	6			3			8.4		6.2		6.4


(a)	Minimum requirements for ~~Sept.~~June 30, ~~2017~~2020 include ~~Basel III~~ minimum thresholds plus currently applicable buffers.

(b)

The U.S. global systemically important banks (“G-SIB”) surcharge of 1.5% is subject to change. The countercyclical capital buffer is currently set to 0%.


(c)	The Federal Reserve’s regulations do not establish well capitalized thresholds for these measures for ~~bank holding companies.~~BHCs.


(d)	~~The SLR does not become a binding measure until the first quarter of 2018.~~ The SLR is based on Tier 1 capital ~~as phased-in,~~ and ~~average quarterly assets and~~total leverage exposure, which includes certain off-balance sheet exposures. The SLR at June 30, 2020 reflects the exclusion of certain central bank placements from leverage exposure.


(e)	~~Fully phased-in Basel III minimum with expected buffers. See page 41 for~~The SLR at June 30, 2020 reflects the ~~capital ratios with~~temporary exclusion of U.S. Treasury securities from the ~~phase-in of the capital conservation buffer and the U.S. G-SIB surcharge, as well as the introduction of the~~leverage exposure which increased our consolidated SLR ~~buffer.~~ by 40 basis points.

38 BNY Mellon

Our CET1 ratio determined under the Advanced ~~Approach~~Approaches was ~~11.1%~~12.6% at ~~Sept.~~June 30, ~~2017~~2020 and ~~10.6%~~11.5% at Dec. 31, ~~2016.~~2019. The increase primarily reflects ~~CET1 generation,~~capital generated through earnings and unrealized gains on assets available-for-sale, partially offset by capital deployed through common stock repurchased, prior to the ~~additional phase-in requirements under the U.S. capital rules that became effective Jan. 1, 2017.~~temporary suspension of share repurchases in March 2020, and dividend payments.

Our estimated CET1 ratio (Non-GAAP) calculated under the Advanced Approach on a fully phased-in basis was 10.7% at Sept. 30, 2017 and 9.7% at Dec. 31, 2016. The increase primarily reflects CET1 generation. Our estimated CET1 ratio (Non-GAAP) calculated under the Standardized Approach on a

~~fully phased-in basis was 11.9% at Sept. 30, 2017 and 11.3% at Dec. 31, 2016.~~

The estimated fully phased-in SLR (Non-GAAP) of 6.1% at Sept. 30, 2017 and 5.6% at Dec. 31, 2016 was based on our interpretation of the U.S. capital rules, as supplemented by the Federal Reserve’s final rules on the SLR. BNY Mellon will be subject to an enhanced SLR, which will require a buffer in excess of 2% over the minimum SLR of 3%. The insured depository institution subsidiaries of the U.S. global systemically important banks (“G-SIBs”), including

~~BNY Mellon 39~~

~~those of BNY Mellon, must maintain a 6% SLR to be considered “well capitalized.”~~

~~For additional information on the U.S. capital rules, see “Supervision and Regulation - Capital Requirements - Generally” in our 2016 Annual Report.~~

~~The Advanced Approach capital ratios are significantly impacted by RWAs for operational risk.~~ 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.

Management views the estimated fully phased-in CET1 and other risk-based capital ratios and SLR as key measures in monitoring BNY Mellon’s capital position and progress against future regulatory capital standards. Additionally, the presentation of the estimated fully phased-in CET1 and other risk-based capital ratios and SLR are intended to allow investors to compare these ratios with estimates presented by other companies.

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.

~~Minimum capital ratios and capital buffers~~

The U.S. capital rules include a series of buffers and surcharges over required minimums that apply to bank holding companies, including BNY Mellon, which are being phased-in over time. Banking organizations with a risk-based ratio or SLR above the minimum required level, but with a risk-based ratio or SLR below the minimum level with buffers

will face constraints on dividends, equity repurchases and discretionary executive compensation based on the amount of the shortfall. Different regulatory capital minimums, buffers and surcharges apply to our banking subsidiaries.

The U.S. capital rules introduced a capital conservation buffer and countercyclical capital buffer that add to the minimum regulatory capital ratios. The capital conservation buffer–1.25% for 2017 and 2.5% when fully phased-in on Jan. 1, 2019–is designed to absorb losses during periods of economic stress and applies to all banking organizations. During periods of excessive growth, the capital conservation buffer may be expanded through the imposition of a countercyclical capital buffer that may be as high as an additional 2.5%. The countercyclical capital buffer, when applicable, applies only to Advanced Approach banking organizations. The countercyclical capital buffer is currently set to zero with respect to U.S. exposures, but it could increase if the banking agencies determine that systemic vulnerabilities are meaningfully above normal.

BNY Mellon is subject to an additional G-SIB surcharge, which is implemented as an extension of the capital conservation buffer and must be satisfied with CET1 capital. For 2017, the G-SIB surcharge applicable to BNY Mellon is 0.75%, and, when fully phased-in on Jan. 1, 2019, as calculated, applying metrics as currently applicable to BNY Mellon, would be 1.5%.

The following table presents ~~the principal minimum~~our capital ~~ratio requirements with buffers~~components and surcharges, as phased-in, applicable to the Parent and The Bank of New York Mellon. This table does not include the imposition of a countercyclical capital buffer. The U.S. capital rules also provide for transitional arrangements for qualifying instruments, deductions and adjustments, which are not reflected in this table. Buffers and surcharges are not applicable to the leverage capital ratio. These buffers, other than the SLR buffer, and surcharge began to phase-in on Jan. 1, 2016 and will be fully implemented on Jan. 1, 2019.

RWAs.

~~40 BNY Mellon~~

Capital ratio requirements Well capitalized
Minimum ratios

Minimum ratios with buffers, as phased-in (a)
2017
2018
2019

Capital conservation buffer (CET1) 1.25 % 1.875 % 2.5 %
U.S. G-SIB surcharge (CET1) (b)(c)
0.75 % 1.125 % 1.5 %

Consolidated:
CET1 ratio N/A
4.5 % 6.5 % 7.5 % 8.5 %
Tier 1 capital ratio 6.0 % 6.0 % 8.0 % 9.0 % 10.0 %
Total capital ratio 10.0 % 8.0 % 10.0 % 11.0 % 12.0 %

Enhanced SLR buffer (Tier 1 capital) N/A
N/A
2.0 % 2.0 %
SLR N/A
3.0 % N/A
5.0 % 5.0 %

Bank subsidiaries: (c)

CET1 ratio 6.5 % 4.5 % 5.75 % 6.375 % 7.0 %
Tier 1 capital ratio 8.0 % 6.0 % 7.25 % 7.875 % 8.5 %
Total capital ratio 10.0 % 8.0 % 9.25 % 9.875 % 10.5 %

SLR 6.0 % 3.0 % N/A
6.0 % (d) 6.0 % (d)



Capital components and risk-weighted assets	June 30, 2020			March 31, 2020			Dec. 31, 2019
(in millions)	June 30, 2020			March 31, 2020			Dec. 31, 2019
CET1:
Common shareholders’ equity	$	39,165		$	37,603		$	37,941
Adjustments for:
Goodwill and intangible assets (a)	(18,515		)	(18,535		)	(18,725		)
Net pension fund assets	(270		)	(269		)	(272		)
Equity method investments	(297		)	(290		)	(311		)
Deferred tax assets	(48		)	(46		)	(46		)
Other	—			2			(47		)
Total CET1	20,035			18,465			18,540
Other Tier 1 capital:
Preferred stock	4,532			3,542			3,542
Other	(89		)	(74		)	(86		)
Total Tier 1 capital	$	24,478		$	21,933		$	21,996
Tier 2 capital:
Subordinated debt	$	1,248		$	1,248		$	1,248
Allowance for credit losses	463			314			216
Other	(6		)	(1		)	(11		)
Total Tier 2 capital – Standardized Approach	1,705			1,561			1,453
Excess of expected credit losses	217			101			—
Less: Allowance for credit losses	463			314			216
Total Tier 2 capital – Advanced Approaches	$	1,459		$	1,348		$	1,237
Total capital:
Standardized Approach	$	26,183		$	23,494		$	23,449
Advanced Approaches	$	25,937		$	23,281		$	23,233

Risk-weighted assets:
Standardized Approach	$	157,290		$	163,006		$	148,695
Advanced Approaches:
Credit Risk	$	95,647		$	97,093		$	95,490
Market Risk	2,793			3,630			4,020
Operational Risk	60,900			61,838			61,388
Total Advanced Approaches	$	159,340		$	162,561		$	160,898

Average assets for Tier 1 leverage ratio	$	394,394		$	366,058		$	334,869
Total leverage exposure for SLR	$	297,300		$	392,807		$	362,452


(a)	~~Countercyclical capital buffer currently set to 0%.~~ Reduced by deferred tax liabilities associated with intangible assets and tax-deductible goodwill.


~~(b)~~	~~The fully phased-in U.S. G-SIB surcharge of 1.5% applicable to BNY Mellon is subject to change.~~


~~(c)~~	~~The U.S. G-SIB surcharge is not applicable to the regulatory capital ratios of the bank subsidiaries.~~


~~(d)~~	~~Well capitalized threshold.~~

BNY Mellon 39

The table below presents the factors that impacted ~~the transitional and fully phased-in CET1.~~CET1 capital.


Estimated CET1 generation	Quarter ended Sept. 30, 2017
CET1 generation							2Q20
(in millions)	Transitional basis (a)			Fully phased-in - Non-GAAP (b)
CET1 – Beginning of period	$	18,371		$	17,629		$	18,465
Net income applicable to common shareholders of The Bank of New York Mellon Corporation	983			983			901
Goodwill and intangible assets, net of related deferred tax liabilities	(33		)	(26		)	20
Gross CET1 generated	950			957			921
Capital deployed:
Common stock dividends	(253		)	(253		)
Common stock repurchased	(650		)	(650		)
Common stock dividend payments							(278		)
Common stock repurchases							(3		)
Total capital deployed	(903		)	(903		)	(281		)
Other comprehensive income:
Foreign currency translation	281			281			115
Unrealized loss on assets available-for-sale	13			16
Unrealized gain on assets available-for-sale							746
Defined benefit plans	12			15			19
Unrealized gain on cash flow hedges							4
Total other comprehensive income	306			312			884
Additional paid-in capital (c)	156			156
Other additions (deductions):
Additional paid-in capital (a)							58
Other (deductions):
Embedded goodwill							(7		)
Net pension fund assets							(1		)
Deferred tax assets	(1		)	(2		)	(2		)
Embedded goodwill	(9		)	(8		)
Other							(2		)
Total other deductions	(10		)	(10		)	(12		)
Net CET1 generated	499			512			1,570
CET1 – End of period	$	18,870		$	18,141		$	20,035


(a)	~~Reflects transitional adjustments to CET1 required under the U.S. capital rules.~~


~~(b)~~	~~Estimated.~~


~~(c)~~	Primarily related to stock awards, the exercise of stock options and stock issued for employee benefit plans.

~~BNY Mellon 41~~

The following table presents the components of our transitional and fully phased-in CET1, Tier 1 and Tier 2 capital, the RWAs determined under both the Standardized and Advanced Approaches, the average assets used for leverage capital purposes and the total leverage exposure for estimated SLR purposes.

Capital components and ratios Sept. 30, 2017 June 30, 2017 Dec. 31, 2016
(dollars in millions)
Transitional
Approach (a)

Fully
phased-in - Non-GAAP (b)

Transitional
Approach (a)

Fully
phased-in - Non-GAAP (b)

Transitional
Approach (a)

Fully
phased-in - Non-GAAP (b)

CET1:
Common shareholders’ equity $ 37,195
$ 36,981
$ 36,652
$ 36,432
$ 35,794
$ 35,269
Goodwill and intangible assets (17,876 ) (18,351 ) (17,843 ) (18,325 ) (17,314 ) (18,312 )
Net pension fund assets (72 ) (90 ) (72 ) (90 ) (55 ) (90 )
Equity method investments (334 ) (348 ) (325 ) (340 ) (313 ) (344 )
Deferred tax assets (31 ) (39 ) (30 ) (37 ) (19 ) (32 )
Other (12 ) (12 ) (11 ) (11 ) —
(1 )
Total CET1 18,870
18,141

18,371
17,629
18,093
16,490
Other Tier 1 capital:
Preferred stock 3,542
3,542
3,542
3,542
3,542
3,542
Deferred tax assets (8 ) —
(7 ) —
(13 ) —
Net pension fund assets (19 ) —
(18 ) —
(36 ) —
Other (34 ) (34 ) (24 ) (24 ) (121 ) (121 )
Total Tier 1 capital $ 22,351
$ 21,649

$ 21,864
$ 21,147
$ 21,465
$ 19,911
Tier 2 capital:
Subordinated debt $ 1,300
$ 1,250
$ 550
$ 550
$ 550
$ 550
Allowance for credit losses 265
265
270
270
281
281
Trust preferred securities —
—
—
—
148
—
Other (7 ) (7 ) (7 ) (7 ) (12 ) (11 )
Total Tier 2 capital - Standardized Approach 1,558
1,508

813
813
967
820
Excess of expected credit losses 49
49
59
59
50
50
Less: Allowance for credit losses 265
265
270
270
281
281
Total Tier 2 capital - Advanced Approach $ 1,342
$ 1,292

$ 602
$ 602
$ 736
$ 589
Total capital:
Standardized Approach $ 23,909
$ 23,157
$ 22,677
$ 21,960
$ 22,432
$ 20,731
Advanced Approach $ 23,693
$ 22,941
$ 22,466
$ 21,749
$ 22,201
$ 20,500

Risk-weighted assets:
Standardized Approach $ 153,494
$ 152,995
$ 153,179
$ 152,645
$ 147,671
$ 146,475
Advanced Approach:
Credit Risk $ 98,201
$ 97,672
$ 99,030
$ 98,465
$ 97,659
$ 96,391
Market Risk 2,996
2,996
3,225
3,225
2,836
2,836
Operational Risk 68,625
68,625
67,788
67,788
70,000
70,000
Total Advanced Approach $ 169,822
$ 169,293

$ 170,043
$ 169,478
$ 170,495
$ 169,227

Standardized Approach:
CET1 ratio 12.3 % 11.9 % 12.0 % 11.5 % 12.3 % 11.3 %
Tier 1 capital ratio 14.6
14.2
14.3
13.9
14.5
13.6
Total (Tier 1 plus Tier 2) capital ratio 15.6
15.1
14.8
14.4
15.2
14.2
Advanced Approach:
CET1 ratio 11.1 % 10.7 % 10.8 % 10.4 % 10.6 % 9.7 %
Tier 1 capital ratio 13.2
12.8
12.9
12.5
12.6
11.8
Total (Tier 1 plus Tier 2) capital ratio 14.0
13.6
13.2
12.8
13.0
12.1

Average assets for leverage capital purposes $ 327,555
$ 324,423
$ 326,809

Total leverage exposure for SLR purposes $ 355,960
$ 352,448
$ 355,083


~~(a)~~	~~Reflects transitional adjustments to CET1, Tier 1 capital and Tier 2 capital required in 2017 and 2016 under the U.S. capital rules.~~


~~(b)~~	~~Estimated.~~

~~42 BNY Mellon~~

The following table shows the impact on the consolidated capital ratios at ~~Sept.~~June 30, ~~2017~~2020 of a $100 million increase or decrease in common equity, or a $1 billion increase or decrease in RWAs, quarterly average assets or total leverage exposure.


Sensitivity of consolidated capital ratios at Sept. 30, 2017
Sensitivity of consolidated capital ratios at June 30, 2020					Sensitivity of consolidated capital ratios at June 30, 2020
	Increase or decrease of				Increase or decrease of
(in basis points)	$100 million in common equity		$1 billion in RWA, quarterly average assets or total leverage exposure		$100 million in common equity		$1 billion in RWA, quarterly average assets or total leverage exposure
CET1:
Standardized Approach	7	bps	8	bps	6	bps	8	bps
Advanced Approach	6		7
Advanced Approaches					6		8

Tier 1 capital:
Standardized Approach	7		10		6		10
Advanced Approach	6		8
Advanced Approaches					6		10

Total capital:
Standardized Approach	7		10		6		11
Advanced Approach	6		8
Advanced Approaches					6		10

Leverage capital	3		2
Tier 1 leverage					3		2

SLR	3		2		3		3

Estimated CET1 ratio, fully phased-in – Non-GAAP:
Standardized Approach	7		8
Advanced Approach	6		6

Estimated SLR, fully phased-in – Non-GAAP	3		2

Capital ratios vary depending on the size of the balance sheet at ~~quarter-end~~period end and the levels and types of investments in assets. The balance sheet size fluctuates from ~~quarter~~period to ~~quarter~~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.

~~Supplementary Leverage Ratio~~

BNY Mellon has presented its consolidated and largest bank subsidiary’s estimated fully phased-in SLRs based on its interpretation of the U.S. capital rules, which are being gradually phased-in over a multi-year period and on the application of such rules to BNY Mellon’s businesses as currently conducted.

~~BNY Mellon 43~~

~~The following table presents the components of our SLR on both the transitional and fully phased-in basis for~~Effective April 1, 2020, custody banks, including BNY Mellon and ~~our largest bank subsidiary,~~ The Bank of New York ~~Mellon.~~Mellon, are permitted to exclude certain central bank placements from leverage exposure used in the SLR calculation. Also, effective April 1, 2020 and lasting through March 31, 2021, BHCs are permitted to exclude U.S. Treasury securities from the leverage exposure used in the SLR calculation. This temporary exclusion increased our consolidated SLR by 40 basis points. See “Supervision and Regulation” in our 2019 Annual Report and “Recent regulatory developments” in our First Quarter 2020 Form 10-Q for additional information.

Stress capital buffer

In June 2020, the Federal Reserve notified BNY Mellon that its stress capital buffer (“SCB”) requirement will be 2.5%, equal to the regulatory minimum, effective as of Oct. 1, 2020. The SCB replaces the current 2.5% capital conservation buffer for Standardized Approach capital ratios.

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 do not cause a breach of the firm’s capital ratios, including the applicable capital buffer. In conjunction with the release of the 2020 CCAR results, the Federal Reserve has imposed restrictions on capital distributions for the third quarter of 2020. For more detail regarding these restrictions, see “Recent regulatory developments - CCAR 2020 results” in this Quarterly Report on Form 10-Q.

Total Loss-Absorbing Capacity (“TLAC”)

The final TLAC rule establishing external TLAC, external long-term debt (“LTD”) and related requirements for U.S. G-SIBs, including BNY

40 BNY Mellon

Mellon, at the top-tier holding company level became effective on Jan. 1, 2019.The following summarizes the minimum requirements for BNY Mellon’s external TLAC and external LTD ratios, plus currently applicable buffers.

SLR Sept. 30, 2017 June 30, 2017 Dec. 31, 2016
(dollars in millions) Transitional basis
Fully
phased-in -
Non-GAAP (a)

Transitional basis
Fully
phased-in -
Non-GAAP (a)

Transitional basis
Fully
phased-in -
Non-GAAP (a)

Consolidated:
Total Tier 1 capital $ 22,351
$ 21,649
$ 21,864
$ 21,147
$ 21,465
$ 19,911

Total leverage exposure:
Quarterly average total assets $ 345,709
$ 345,709
$ 342,515
$ 342,515
$ 344,142
$ 344,142
Less: Amounts deducted from Tier 1 capital 18,154
18,856
18,092
18,810
17,333
18,887
Total on-balance sheet assets, as adjusted 327,555
326,853

324,423
323,705
326,809
325,255
Off-balance sheet exposures:
Potential future exposure for derivative contracts (plus certain other items) 6,213
6,213
6,014
6,014
6,021
6,021
Repo-style transaction exposures 1,034
1,034
631
631
533
533
Credit-equivalent amount of other off-balance sheet exposures (less SLR exclusions) 21,860
21,860
22,098
22,098
23,274
23,274
Total off-balance sheet exposures 29,107
29,107

28,743
28,743
29,828
29,828
Total leverage exposure $ 356,662
$ 355,960

$ 353,166
$ 352,448
$ 356,637
$ 355,083

SLR - Consolidated (b)
6.3 % 6.1 % 6.2 % 6.0 % 6.0 % 5.6 %

The Bank of New York Mellon, our largest bank subsidiary:
Tier 1 capital $ 20,718
$ 19,955
$ 19,897
$ 19,125
$ 19,011
$ 17,708
Total leverage exposure $ 292,759
$ 292,421
$ 286,983
$ 286,634
$ 291,022
$ 290,230

SLR - The Bank of New York Mellon (b)
7.1 % 6.8 % 6.9 % 6.7 % 6.5 % 6.1 %



	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 and Advanced Approaches.

(b) Buffer to be met using only CET1.


~~(a)~~(c)	~~Estimated.~~

~~(b)~~

The estimated fully phased-in SLR (Non-GAAP) is based on our interpretation of the U.S. capital rules. When the SLR is fully phased-in in 2018 as a required minimum ratio, we expect to maintain an SLR of over 5%. The minimum required SLR is 3% and there is a 2% buffer, in addition to the minimum, that is applicable to U.S. G-SIBs. The insured depository institution subsidiaries of the U.S. G-SIBs, including those of BNY Mellon, must maintain a 6% SLRBuffer to be ~~considered “well-capitalized.”~~met using only Tier 1 capital.

External TLAC consists of the Parent’s Tier 1 capital and eligible unsecured LTD issued by it that has a remaining term to maturity of at least one year and satisfies certain other conditions. Eligible LTD consists of the unpaid principal balance of eligible unsecured debt securities, subject to haircuts for amounts due to be paid within two years, that satisfy certain other conditions. Debt issued prior to Dec. 31, 2016 has been permanently grandfathered to the extent these instruments otherwise would be ineligible only due to containing impermissible acceleration rights or being governed by foreign law.

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



TLAC and LTD ratios	June 30, 2020
	Minimum required		Minimum ratios with buffers
					Ratios
Eligible external TLAC:
As a percentage of RWA	18.0	%	21.5	%	28.7	%
As a percentage of total leverage exposure	7.5	%	9.5	%	15.4	%

Eligible external LTD:
As a percentage of RWA	7.5	%	N/A		12.5	%
As a percentage of total leverage exposure	4.5	%	N/A		6.7	%

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~~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 account of potential variability of market liquidity; and

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

See Note 1617 of the Notes to Consolidated Financial Statements for additional information on the VaR methodology.

~~44 BNY Mellon~~

In an effort to improve our enterprise level risk management capabilities, we have changed our VaR model from Monte Carlo simulation to historical simulation for both management and RWA calculations. This change was effective as of Jan. 1, 2017. In addition to this model enhancement, the impact of credit valuation adjustment (“CVA”) is now included.

The following tables indicate the calculated VaR amounts for the trading portfolio for the designated periods using the ~~newly implemented~~ historical simulation VaR model. ~~The impact of changes in methodology is not material.~~

BNY Mellon 41



VaR (a)	2Q20							June 30, 2020
(in millions)	Average			Minimum		Maximum
Interest rate	$	3.0		$	2.1	$	4.9	$	2.2
Foreign exchange	3.4			2.2		5.9		2.4
Equity	0.5			0.4		1.4		0.4
Credit	3.5			1.8		10.2		2.8
Diversification	(5.7		)	N/M		N/M		(4.0		)
Overall portfolio	4.7			3.1		11.4		3.8


VaR (a)	3Q17							Sept. 30, 2017			1Q20							March 31, 2020
(in millions)	Average			Minimum		Maximum					Average			Minimum		Maximum
Interest rate	$	3.3		$	2.8	$	4.2	$	2.7		$	4.9		$	3.2	$	11.3	$	5.1
Foreign exchange	3.7			3.1		5.6		4.8			3.1			1.7		6.3		4.5
Equity	0.9			0.8		1.1		0.9			1.4			0.8		2.3		0.9
Credit	1.0			0.6		1.4		1.0			3.4			1.2		12.1		9.8
Diversification	(5.1		)	N/M		N/M		(5.3		)	(6.4		)	N/M		N/M		(9.9		)
Overall portfolio	3.8			3.2		5.3		4.1			6.4			3.5		14.3		10.4


VaR (a)	2Q17							June 30, 2017			2Q19							June 30, 2019
(in millions)	Average			Minimum		Maximum					Average			Minimum		Maximum
Interest rate	$	3.3		$	2.8	$	4.1	$	4.0		$	4.2		$	3.3	$	5.2	$	3.8
Foreign exchange	4.3			3.4		5.8		4.6			2.7			1.9		4.2		2.3
Equity	0.2			0.1		1.1		1.1			0.8			0.6		0.9		0.7
Credit	1.1			0.5		1.4		0.8			0.8			0.5		1.2		0.9
Diversification	(4.8		)	N/M		N/M		(5.8		)	(3.2		)	N/M		N/M		(3.2		)
Overall portfolio	4.1			3.3		5.4		4.7			5.3			4.0		6.9		4.5


VaR (a)	YTD17							YTD20
(in millions)	Average			Minimum		Maximum		Average			Minimum		Maximum
Interest rate	$	3.5		$	2.8	$	4.9	$	4.0		$	2.1	$	11.3
Foreign exchange	3.9			2.6		5.8		3.2			1.7		6.3
Equity	0.4			0.1		1.1		0.9			0.4		2.3
Credit	1.1			0.5		1.7		3.5			1.2		12.1
Diversification	(4.9		)	N/M		N/M		(6.1		)	N/M		N/M
Overall portfolio	4.0			3.2		5.4		5.5			3.1		14.3



VaR (a)	YTD19
(in millions)	Average			Minimum		Maximum
Interest rate	$	4.1		$	3.2	$	5.3
Foreign exchange	3.3			1.9		6.4
Equity	0.7			0.6		1.1
Credit	0.7			0.4		1.2
Diversification	(3.1		)	N/M		N/M
Overall portfolio	5.7			4.0		9.5


(a)	~~Beginning Jan. 1, 2017, the~~ VaR figures reflect the impact of the CVA and hedges as per the guidance included in ASC 820, Fair Value Measurement. VaR exposure does not include the impact of the Company’s consolidated investment management funds and seed capital investments.

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

~~The following tables indicate the calculated VaR amounts for the trading portfolio for the designated periods as previously reported under the former Monte Carlo simulation VaR model.~~

VaR (a)
3Q16 Sept. 30, 2016
(in millions) Average
Minimum
Maximum
Interest rate $ 7.3
$ 5.4
$ 8.9
$ 7.9
Foreign exchange 4.2
3.2
7.5
3.7
Equity 0.6
0.5
0.8
0.6
Credit 0.3
0.3
0.4
0.4
Diversification (5.8 ) N/M
N/M
(5.7 )
Overall portfolio 6.6
5.0
7.7
6.9

VaR (a)
YTD16
(in millions) Average
Minimum
Maximum
Interest rate $ 6.3
$ 4.3
$ 8.9
Foreign exchange 2.8
1.2
11.1
Equity 0.6
0.4
0.8
Credit 0.3
0.2
0.4
Diversification (4.0 ) N/M
N/M
Overall portfolio 6.0
4.3
7.7


~~(a)~~	~~VaR figures do not reflect the impact of the CVA guidance in ASC 820, Fair Value Measurement. This is consistent with the regulatory treatment.~~ VaR exposure does not include the impact of the Company’s consolidated investment management funds and seed capital investments.

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

The decrease in VaR at June 30, 2020 compared with March 31, 2020 reflects lower market volatility in the second quarter of 2020.

The interest rate component of VaR represents instruments whose values are predominantly ~~vary with the level or volatility of~~driven by U.S. Treasury securities interest ~~rates.~~rate levels. These instruments include, but are not limited ~~to: sovereign debt,~~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:~~to, currency balances, spot and forward transactions, currency options ~~exchange-traded futures and 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:~~to, common stock, exchange-traded funds, preferred stock, listed equity options (puts and calls), ~~over-the-counter (“OTC”)~~OTC equity options, equity total return swaps, equity index futures and other equity derivative products.

~~BNY Mellon 45~~

The credit component of VaR represents instruments whose values are predominantly ~~vary with the~~driven by credit ~~worthiness of counterparties.~~spread levels, i.e., idiosyncratic default risk. These instruments include, but are not limited to, ~~credit derivatives (credit default swaps and exchange-traded credit index instruments) and~~securities with exposures from corporate and municipal credit ~~spreads, and mortgage prepayments. Credit derivatives are used to hedge various credit exposures.~~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 ~~third~~second quarter of ~~2017,~~2020, interest rate risk generated ~~37%~~29% of average gross VaR, foreign exchange risk generated ~~42%~~33% of average gross VaR, equity risk ~~accounted for 10%~~generated 5% of average gross VaR and credit risk generated ~~11%~~33% of average gross VaR. During the ~~third~~second quarter of ~~2017,~~2020, our daily trading loss did not exceed our calculated VaR amount of the overall portfolio.

42 BNY Mellon

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

Distribution of trading revenue (loss) (a)

Quarter ended
(dollars in millions) Sept. 30, 2017
June 30,
2017
March 31,
2017
Dec. 31, 2016
Sept. 30, 2016
Revenue range: Number of days
Less than $(2.5) —
—
—
—
—
$(2.5) – $0 1
2
1
3
6
$0 – $2.5 29
31
31
28
22
$2.5 – $5.0 29
27
26
23
25
More than $5.0 4
4
4
7
11



Distribution of trading revenue (loss) (a)
	Quarter ended
(dollars in millions)	June 30, 2020	March 31, 2020	Dec. 31, 2019	Sept. 30, 2019	June 30, 2019
(dollars in millions)	June 30, 2020	March 31, 2020	Dec. 31, 2019	Sept. 30, 2019	June 30, 2019
Revenue range:	Number of days
Less than $(2.5)	6	—	3	2	—
$(2.5) – $0	12	3	5	7	4
$0 – $2.5	17	19	23	26	30
$2.5 – $5.0	15	19	24	22	23
More than $5.0	14	21	7	7	7


(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.

The number of days when revenue was generated decreased compared with the first quarter of 2020 driven by lower volumes and volatility in the second quarter of 2020.

Trading assets include debt and equity instruments and derivative assets, primarily interest rate and foreign exchange contracts, not designated as hedging instruments. Trading assets were ~~$4.7~~$14.2 billion at ~~Sept.~~June 30, ~~2017~~2020 and ~~$5.7~~$13.6 billion atDec. 31, ~~2016.~~2019.

Trading liabilities include debt and equity instruments and derivative liabilities, primarily interest rate and

foreign exchange contracts, not designated as hedging instruments. Trading liabilities were ~~$3.3~~$5.6 billion at ~~Sept.~~June 30, ~~2017~~2020 and ~~$4.4~~$4.8 billion at Dec. 31, ~~2016.~~2019.

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~~.derivatives.

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

At ~~Sept.~~June 30, ~~2017,~~2020, our OTC derivative assets, including those in hedging relationships, of ~~$3.6~~$4.3 billion included a ~~CVA~~credit valuation adjustment (“CVA”) deduction of ~~$30~~$41 million. Our OTC derivative liabilities, including those in hedging relationships, of ~~$3.2~~$3.9 billion included a debit valuation adjustment (“DVA”) of $2$1 million related to our own credit spread. Net of hedges, the CVA ~~decreased~~increased by $1$2 million and the DVA ~~was unchanged in the third quarter of 2017. The net impact of these adjustments~~ increased ~~foreign exchange and other trading revenue~~ by less than $1 million in the ~~third quarter of 2017.~~

~~In the~~ second quarter of ~~2017, net of hedges, the CVA~~2020, which decreased ~~by $3 million and the DVA decreased by $1 million. The net impact of these adjustments increased~~ foreign exchange and other trading revenue by $2 ~~million in the second quarter of 2017.~~

~~In the third quarter of 2016, net of hedges, the CVA decreased by $8 million and the DVA decreased by $4~~ million. The net impact ~~of these adjustments~~ increased foreign exchange and other trading revenue by $4 million in the ~~third~~first quarter of ~~2016.~~2020 and $1 million in the second quarter of 2019.

The table below summarizes the ~~risk~~distribution of credit ratings for our foreign exchange and interest rate derivative ~~counterparty credit exposure during~~counterparties over the past five ~~quarters. This information~~quarters, which indicates the ~~degree~~level of ~~risk to which we are exposed.~~counterparty credit associated with these trading activities. Significant changes in counterparty credit ratings ~~classifications for our foreign exchange and other trading activity~~ could ~~result in increased~~alter the level of credit risk ~~for us.~~faced by BNY Mellon.

~~46 BNY Mellon~~


Foreign exchange and other trading counterparty risk rating profile (a)	Foreign exchange and other trading counterparty risk rating profile (a)										Foreign exchange and other trading counterparty risk rating profile (a)
											Quarter ended
	Quarter ended										June 30, 2020		March 31, 2020		Dec. 31, 2019		Sept. 30, 2019		June 30, 2019
	Sept. 30, 2017		June 30, 2017		March 31, 2017		Dec. 31, 2016		Sept. 30, 2016		June 30, 2020		March 31, 2020		Dec. 31, 2019		Sept. 30, 2019		June 30, 2019
Rating:
AAA to AA-	41	%	44	%	43	%	35	%	45	%	56	%	56	%	54	%	55	%	54	%
A+ to A-	30		27		36		39		32		18		24		24		24		26
BBB+ to BBB-	24		22		17		22		19		18		14		17		16		17
Noninvestment grade (BB+ and lower)	5		7		4		4		4
BB+ and lower (b)											8		6		5		5		3
Total	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%


(a)	Represents credit rating agency equivalent of internal credit ratings.


(b)	Non-investment grade.

BNY Mellon 43

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 ~~are~~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. The model incorporates management’s assumptions regarding interest rates, ~~balance changes on core deposits,~~ market spreads, changes in the prepayment behavior of loans and securities and the impact of

derivative financial instruments used for interest rate risk management purposes. These assumptions have been developed through a combination of historical analysis and future expected pricing behavior and are inherently uncertain. ~~As a result, the earnings simulation model cannot precisely estimate net interest revenue or the impact of higher or lower interest rates on net interest revenue.~~ 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.

~~The~~In the table below, ~~relies on certain critical assumptions regarding~~we use the ~~balance sheet and depositors’ behavior related~~earnings simulation model to interest rate fluctuations and the prepayment and extension risk in certain of our assets. Generally, there has been an inverse relationship between interest rates and client deposit levels. To the extent that actual behavior is different from that assumed in the models, there could be a change in interest rate sensitivity.

~~We evaluate the effect on earnings by running~~run various interest rate ramp scenarios from a baseline scenario. The interest rate ramp scenarios ~~are reviewed to~~ examine the impact of large interest rate movements. In each scenario, all ~~currencies~~currencies’ interest rates are shifted higher or lower. ~~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 following table shows net interest revenue sensitivity for BNY Mellon.~~

Estimated changes in net interest revenue
(in millions)
Sept. 30, 2017
June 30,
2017
March 31,
2017
Dec. 31, 2016
Sept. 30, 2016
up 200 bps parallel rate ramp vs. baseline (a)
$ (2 ) $ (69 ) $ (136 ) $ 6
$ 62
up 100 bps parallel rate ramp vs. baseline (a)
112
58
87
145
147
Long-term up 50 bps, short-term unchanged (b)
113
92
92
81
116
Long-term down 50 bps, short-term unchanged (b)
(129 ) (85 ) (104 ) (88 ) (128 )


~~(a)~~	~~In the parallel rate ramp, both short-term and long-term rates move~~ ~~in four equal quarterly increments.~~


~~(b)~~	~~Long-term is equal to or greater than one year.~~

~~bps - basis points.~~

~~The baseline scenario used for the calculations in the estimated changes in net interest revenue table above as of Sept. 30, 2017, June 30, 2017, March 31, 2017 and Dec. 31, 2016 arebased on our quarter-end balance sheet and the spot yield curve. The baseline scenario used for Sept. 30, 2016 was based on implied forward yield curves. We revised the~~

~~methodology as of Dec. 31, 2016 as we believe using the spot yield curve for~~Typically, the baseline scenario ~~provides~~uses the average deposit balances of the last month of the quarter. However, during the month of March we experienced a ~~more accurate reflection of net interest revenue sensitivity given the recent~~significant increase in ~~short-term interest rates~~deposits and a corresponding increase in central bank placements. To normalize the ~~implied forward rates. Because interest rates and~~analysis, we used the ~~implied forward yield curves were lower in prior periods, the impact of using a~~

~~BNY Mellon 47~~

~~spot yield curve versus an implied forward yield curve was not as significant.~~first quarter average for these balances. The 100 basis point ramp scenario assumes rates ~~increase~~change 25 basis points above or below the yield curve in each of the next four quarters and the 200 basis point ramp scenario assumes a 50 basis point per quarter ~~increase.~~

~~Our~~change. 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 net interest revenue sensitivity ~~table above incorporates assumptions about~~methodology assumes static deposit levels and also assumes that no management actions will be taken to mitigate the ~~impact~~effects of ~~changes in interest rates on depositor behavior based on historical experience. Given the current historically low~~ interest rate ~~environment~~changes.

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



Estimated changes in net interest revenue (in millions)	June 30, 2020			March 31, 2020			June 30, 2019
Up 200 bps parallel rate ramp vs. baseline (a)	$	591		$	557		$	380
Up 100 bps parallel rate ramp vs. baseline (a)	349			334			200
Down 100 bps parallel rate ramp vs. baseline (a)	315			100			(179		)
Long-term up 50 bps, short-term unchanged (b)	153			166			171
Long-term down 50 bps, short-term unchanged (b)	(173		)	(158		)	(192		)


(a)	In the parallel rate ramp, both short-term and long-term rates move in four equal quarterly increments.


(b)	Long-term is equal to or greater than one year.

The down 100 basis point scenario was impacted by a change in our deposit assumptions. Specifically, we increased the ~~potential change~~amount of deposit balances to which we would pass through negative central bank rates in the ~~implementation~~scenario.

To illustrate the net interest revenue sensitivity to deposit runoff, we note that a $5 billion instantaneous reduction of ~~monetary policy,~~U.S. dollar denominated noninterest-bearing deposits would reduce the ~~impact of depositor behavior is highly uncertain. The lower~~net interest revenue sensitivity results in the ramp up 100 basis point and 200 basis point ~~scenario compared with the 100 basis point scenario is driven by the assumption of increased deposit runoff and forecasted changes~~scenarios in the ~~deposit pricing.~~table above by approximately $35 million and approximately $65 million, respectively. The impact would be smaller if the runoff was assumed to be a mixture of interest-bearing and noninterest-bearing deposits.

~~Growth~~For a discussion of factors impacting the growth or contraction of deposits, see “Risk Factors - Our business, financial condition and results of operations could ~~also~~ be adversely affected ~~by the following factors:~~if we do not effectively manage our liquidity,” in our 2019 Annual Report.

~~Monetary policy;~~

~~Global economic uncertainty;~~

~~Our ratings relative to other financial institutions’ ratings; and~~

~~Regulatory reform.~~

~~Any of these events could change our assumptions about depositor behavior and have a significant impact on our balance sheet and net interest revenue.~~

Off-balance sheet arrangements

Off-balance sheet arrangements discussed in this section are limited to certain guarantees, retained or contingent interests and obligations arising out of unconsolidated variable interest entities (“VIEs”). ~~For BNY Mellon, these items include certain credit guarantees and a securitization.~~ Guarantees include ~~lending-related guarantees~~SBLCs issued as part of our corporate banking business and securities lending indemnifications issued as part of our Investment Services business. See Note 1718 of the Notes to Consolidated Financial Statements for a further discussion of our off-balance sheet arrangements.

4844 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 based on estimated fully phased-in CET1 and other risk-based capital ratios, the estimated fully phased-in SLR and tangible common shareholders’ equity. BNY Mellon believes that the CET1 and other risk-based capital ratios, on a ~~fully phased-in~~tangible basis ~~and the SLR, on~~as a ~~fully phased-in basis, are measures of capital strength that provide additional useful~~supplement to generally accepted accounting principles (“GAAP”) information, ~~to investors, supplementing the capital ratios~~ which ~~are, or were, required by regulatory authorities. The tangible common shareholders’ equity ratio, which excludes~~exclude goodwill and intangible assets, net of deferred tax ~~liabilities, includes changes in investment securities valuations which are reflected in total shareholders’ equity. BNY Mellon believes~~liabilities. We believe that the return on tangible common equity ~~measure~~ is an additional useful ~~measure~~information for investors because it presents a measure of those assets that can generate ~~income. BNY Mellon has provided a measure of~~income, and the tangible book value per common share ~~which it believes provides~~is additional useful information ~~as to~~because it presents the level of tangible assets in relation to shares of common stock outstanding.

BNY Mellon has presented revenue measures, which exclude the effect of noncontrolling interests related to consolidated investment management funds, and expense measures, which exclude amortization of intangible assets and M&I, litigation and restructuring charges. Operating margin, operating leverage and return on equity measures, which

exclude some or all of these items, as well as the recovery related to Sentinel, are also presented. Operating margin measures may also exclude the provision for credit losses and distribution and servicing expense. BNY Mellon believes that these measures are useful to investors because they permit a focus on period-to-period comparisons, which relate to the ability of BNY Mellon to enhance revenues and limit expenses in circumstances where such matters are within BNY Mellon’s control. M&I expenses primarily relate to acquisitions and generally continue for approximately three years after the transaction. Litigation charges represent accruals for loss contingencies that are both probable and reasonably estimable, but exclude standard business-related legal fees. Restructuring charges relate to our streamlining actions and Operational Excellence Initiatives. Excluding the charges mentioned above permits investors to view expenses on a basis consistent with how management views the business.

The presentation of ~~income from consolidated~~the growth rates of investment management ~~funds, net of net income attributable to noncontrolling interests related to the consolidation of certain investment management funds,~~and performance fees on a constant currency basis permits investors to ~~view revenue~~assess the significance of changes in foreign currency exchange

rates. Growth rates on a constant currency basis ~~consistent with how management views~~were determined by applying the ~~business. BNY Mellon believes~~current period foreign currency exchange rates to the prior period revenue. We believe that ~~these presentations,~~this presentation, as a supplement to GAAP information, ~~give~~gives investors a clearer picture of the related revenue results ~~of its primary businesses.~~without the variability caused by fluctuations in foreign currency exchange rates.

~~Each of these measures as described above is used by management to monitor financial performance, both on a company-wide and on a business-level basis.~~

BNY Mellon 49has also included the adjusted pre-tax operating margin – Non-GAAP, which is the pre-tax operating margin for the Investment and Wealth Management business 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 relative to industry competitors.

The following table presents the reconciliation of the ~~pre-tax operating margin ratio.~~

Pre-tax operating margin 3Q17
2Q17
3Q16
YTD17
YTD16
(dollars in millions)
Income before income taxes – GAAP $ 1,368
$ 1,308
$ 1,317
$ 3,882
$ 3,573
Less: Net income attributable to noncontrolling interests of consolidated investment management funds 3
3
9
24
6
Add: Amortization of intangible assets 52
53
61
157
177
M&I, litigation and restructuring charges 6
12
18
26
42
Recovery related to Sentinel —
—
(13 ) —
(13 )
Income before income taxes, as adjusted – Non-GAAP (a)
$ 1,423
$ 1,370
$ 1,374
$ 4,041
$ 3,773

Fee and other revenue – GAAP $ 3,167
$ 3,120
$ 3,150
$ 9,305
$ 9,119
Income from consolidated investment management funds – GAAP 10
10
17
53
21
Net interest revenue – GAAP 839
826
774
2,457
2,307
Total revenue – GAAP 4,016
3,956
3,941
11,815
11,447
Less: Net income attributable to noncontrolling interests of consolidated investment management funds 3
3
9
24
6
Total revenue, as adjusted – Non-GAAP (a)
$ 4,013
$ 3,953
$ 3,932
$ 11,791
$ 11,441

Pre-tax operating margin – GAAP (b)(c)
34 % 33 % 33 % 33 % 31 %
Adjusted pre-tax operating margin – Non-GAAP (a)(b)(c)
35 % 35 % 35 % 34 % 33 %


~~(a)~~	Non-GAAP information for all periods presented excludes the net income attributable to noncontrolling interests of consolidated investment management funds, amortization of intangible assets and M&I, litigation and restructuring charges. Non-GAAP information for the third quarter of 2016 and for the first nine months of 2016 also excludes a recovery of the previously impaired Sentinel loan.


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

~~(c)~~

Our GAAP earnings include tax-advantaged investments such as low income housing, renewable energy, corporate/bank-owned life insurance and tax-exempt securities. The benefits of these investments are primarily reflected in tax expense. If reported on a tax-equivalent basis, these investments would increase revenue and income before taxes by $102 million for the third quarter of 2017, $106 million for the second quarter of 2017, $74 million for the third quarter of 2016, $309 million for the first nine months of 2017 and $225 million for the first nine months of 2016 and would increase our pre-tax operating margin by approximately 1.6% for the third quarter of 2017, ~~1.8% for the second quarter of 2017, 1.2% for the third quarter of 2016, 1.7% for the first nine months of 2017 and 1.3% for the first nine months of 2016.~~

~~The following table presents the reconciliation of operating leverage.~~

Operating leverage 3Q17
2Q17
3Q16
3Q17 vs.
(dollars in millions) 2Q17
3Q16
Total revenue – GAAP $ 4,016
$ 3,956
$ 3,941
1.52 % 1.90 %
Less: Net income attributable to noncontrolling interests of consolidated investment management funds 3
3
9

Total revenue, as adjusted – Non-GAAP $ 4,013
$ 3,953
$ 3,932
1.52 % 2.06 %

Total noninterest expense – GAAP $ 2,654
$ 2,655
$ 2,643
(0.04 )% 0.42 %
Less: Amortization of intangible assets 52
53
61

M&I, litigation and restructuring charges 6
12
18

Total noninterest expense, as adjusted – Non-GAAP $ 2,596
$ 2,590
$ 2,564
0.23 % 1.25 %

Operating leverage – GAAP (a)
156 bps 148 bps
Adjusted operating leverage – Non-GAAP (a)(b)
129 bps 81 bps


~~(a)~~	~~Operating leverage is the rate of increase (decrease) in total revenue less the rate of increase (decrease) in total noninterest expense.~~


~~(b)~~	Non-GAAP operating leverage for all periods presented excludes the net income attributable to noncontrolling interests of consolidated investment management funds, amortization of intangible assets and M&I, litigation and restructuring charges.

~~bps - basis points.~~

~~50 BNY Mellon~~

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

Return on common equity and tangible common equity 3Q17
2Q17
3Q16
YTD17
YTD16
(dollars in millions)
Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP $ 983
$ 926
$ 974
$ 2,789
$ 2,603
Add: Amortization of intangible assets 52
53
61
157
177
Less: Tax impact of amortization of intangible assets 17
19
21
54
62
Adjusted net income applicable to common shareholders of The Bank of New York Mellon Corporation excluding amortization of intangible assets – Non-GAAP 1,018
960
1,014
2,892
2,718
Add: M&I, litigation and restructuring charges 6
12
18
26
42
Recovery related to Sentinel —
—
(13 ) —
(13 )
Less: Tax impact of M&I, litigation and restructuring charges —
3
5
5
13
Tax impact of recovery related to Sentinel —
—
(5 ) —
(5 )
Adjusted net income applicable to common shareholders of The Bank of New York Mellon Corporation, as adjusted – Non-GAAP (a)
$ 1,024
$ 969
$ 1,019
$ 2,913
$ 2,739

Average common shareholders’ equity $ 36,780
$ 35,862
$ 35,767
$ 35,876
$ 35,616
Less: Average goodwill 17,497
17,408
17,463
17,415
17,549
Average intangible assets 3,487
3,532
3,711
3,532
3,770
Add: Deferred tax liability – tax deductible goodwill (b)
1,561
1,542
1,477
1,561
1,477
Deferred tax liability – intangible assets (b)
1,092
1,095
1,116
1,092
1,116
Average tangible common shareholders’ equity – Non-GAAP $ 18,449
$ 17,559
$ 17,186
$ 17,582
$ 16,890

Return on common equity – GAAP (c)
10.6 % 10.4 % 10.8 % 10.4 % 9.8 %
Adjusted return on common equity – Non-GAAP (a)(c)
11.0 % 10.8 % 11.3 % 10.9 % 10.3 %

Return on tangible common equity – Non-GAAP (c)
21.9 % 21.9 % 23.5 % 22.0 % 21.5 %
Adjusted return on tangible common equity – Non-GAAP (a)(c)
22.0 % 22.1 % 23.6 % 22.1 % 21.7 %


~~(a)~~	Non-GAAP information for all periods presented excludes the amortization of intangible assets and M&I, litigation and restructuring charges. Non-GAAP information for the third quarter of 2016 and for the first nine months of 2016 also excludes a recovery of the previously impaired Sentinel loan.


~~(b)~~	~~Deferred tax liabilities are based on fully phased-in Basel III capital rules.~~


~~(c)~~	~~Quarterly returns are annualized.~~

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

Book value per common share Sept. 30, 2017
June 30,
2017
Dec. 31, 2016
Sept. 30, 2016
(dollars in millions, unless otherwise noted)
BNY Mellon shareholders’ equity at period end – GAAP $ 40,523
$ 39,974
$ 38,811
$ 39,695
Less: Preferred stock 3,542
3,542
3,542
3,542
BNY Mellon common shareholders’ equity at period end – GAAP 36,981
36,432
35,269
36,153
Less: Goodwill 17,543
17,457
17,316
17,449
Intangible assets 3,461
3,506
3,598
3,671
Add: Deferred tax liability – tax deductible goodwill (a)
1,561
1,542
1,497
1,477
Deferred tax liability – intangible assets (a)
1,092
1,095
1,105
1,116
BNY Mellon tangible common shareholders’ equity at period end – Non-GAAP $ 18,630
$ 18,106
$ 16,957
$ 17,626

Period-end common shares outstanding (in thousands)
1,024,022
1,033,156
1,047,488
1,057,337

Book value per common share – GAAP $ 36.11
$ 35.26
$ 33.67
$ 34.19
Tangible book value per common share – Non-GAAP $ 18.19
$ 17.53
$ 16.19
$ 16.67



Return on common equity and tangible common equity reconciliation	2Q20			1Q20			2Q19			YTD20			YTD19
(dollars in millions)
Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP	$	901		$	944		$	969		$	1,845		$	1,879
Add: Amortization of intangible assets	26			26			30			52			59
Less: Tax impact of amortization of intangible assets	6			6			7			12			14
Adjusted net income applicable to common shareholders of The Bank of New York Mellon Corporation, excluding amortization of intangible assets – Non-GAAP	$	921		$	964		$	992		$	1,885		$	1,924

Average common shareholders’ equity	$	38,476		$	37,664		$	37,487		$	38,070		$	37,287
Less: Average goodwill	17,243			17,311			17,343			17,277			17,360
Average intangible assets	3,058			3,089			3,178			3,073			3,193
Add: Deferred tax liability – tax deductible goodwill (a)	1,119			1,109			1,094			1,119			1,094
Deferred tax liability – intangible assets (a)	664			666			687			664			687
Average tangible common shareholders’ equity – Non-GAAP	$	19,958		$	19,039		$	18,747		$	19,503		$	18,515

Return on common shareholders’ equity – GAAP	9.4		%	10.1		%	10.4		%	9.7		%	10.2		%
Return on tangible common shareholders’ equity – Non-GAAP	18.5		%	20.4		%	21.2		%	19.4		%	20.9		%


(a)	Deferred tax liabilities are based on fully phased-in ~~Basel III~~U.S. capital rules.

BNY Mellon 5145

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



Book value and tangible book value per common share reconciliation	June 30, 2020		March 31, 2020		Dec. 31, 2019		June 30, 2019
(dollars in millions, except per share amounts and unless otherwise noted)
BNY Mellon shareholders’ equity at period end – GAAP	$	43,697	$	41,145	$	41,483	$	41,533
Less: Preferred stock	4,532		3,542		3,542		3,542
BNY Mellon common shareholders’ equity at period end – GAAP	39,165		37,603		37,941		37,991
Less: Goodwill	17,253		17,240		17,386		17,337
Intangible assets	3,045		3,070		3,107		3,160
Add: Deferred tax liability – tax deductible goodwill (a)	1,119		1,109		1,098		1,094
Deferred tax liability – intangible assets (a)	664		666		670		687
BNY Mellon tangible common shareholders’ equity at period end – Non-GAAP	$	20,650	$	19,068	$	19,216	$	19,275

Period-end common shares outstanding (in thousands)	885,862		885,443		900,683		942,662

Book value per common share – GAAP	$	44.21	$	42.47	$	42.12	$	40.30
Tangible book value per common share – Non-GAAP	$	23.31	$	21.53	$	21.33	$	20.45


(a)	Deferred tax liabilities are based on fully phased-in U.S. capital rules.

The following table presents the impact of changes in foreign currency exchange rates on our consolidated investment management ~~funds, net of noncontrolling interests.~~and performance fees.

Income from consolidated investment management funds, net of noncontrolling interests
YTD17
YTD16
(in millions) 3Q17
2Q17
3Q16
Income from consolidated investment management funds $ 10
$ 10
$ 17
$ 53
$ 21
Less: Net income attributable to noncontrolling interests of consolidated investment management funds 3
3
9
24
6
Income from consolidated investment management funds, net of noncontrolling interests $ 7
$ 7
$ 8
$ 29
$ 15



Constant currency reconciliation – Consolidated	2Q20		2Q19			2Q20 vs.
(dollars in millions)	2Q20		2Q19			2Q19
Investment management and performance fees – GAAP	$	786	$	833		(6	)%
Impact of changes in foreign currency exchange rates	—		(9		)
Adjusted investment management and performance fees – Non-GAAP	$	786	$	824		(5	)%

The following table presents the ~~revenue line items~~impact of changes in foreign currency exchange rates on investment management and performance fees reported in the Investment and Wealth Management ~~business impacted by the consolidated investment management funds.~~business.

Income from consolidated investment management funds, net of noncontrolling interests - Investment Management business
(in millions) 3Q17
2Q17
1Q17
4Q16
3Q16
YTD17
YTD16
Investment management fees $ 1
$ 2
$ 2
$ 4
$ 2
$ 5
$ 7
Other (Investment income (loss)) 6
5
13
(3 ) 6
24
8
Income from consolidated investment management funds, net of noncontrolling interests $ 7
$ 7
$ 15
$ 1
$ 8
$ 29
$ 15



Constant currency reconciliation – Investment and Wealth Management business						2Q20 vs.
(dollars in millions)	2Q20		2Q19			2Q19
Investment management and performance fees – GAAP	$	787	$	833		(6	)%
Impact of changes in foreign currency exchange rates	—		(9		)
Adjusted investment management and performance fees – Non-GAAP	$	787	$	824		(4	)%

The following table presents the reconciliation of the pre-tax operating margin for the Investment and Wealth Management business.


Pre-tax operating margin - Investment Management business
Pre-tax operating margin reconciliation – Investment and Wealth Management business																						Pre-tax operating margin reconciliation – Investment and Wealth Management business
(dollars in millions)	3Q17			2Q17			1Q17			4Q16			3Q16			YTD17			YTD16			2Q20			1Q20			4Q19			3Q19			2Q19			YTD20			YTD19
Income before income taxes – GAAP	$	300		$	288		$	277		$	260		$	256		$	865		$	707		$	221		$	194		$	240		$	295		$	260		$	415		$	526
Add: Amortization of intangible assets	15			15			15			22			22			45			60
Provision for credit losses	(2		)	—			3			6			—			1			—
Adjusted income before income taxes, excluding amortization of intangible assets and provision for credit losses – Non-GAAP	$	313		$	303		$	295		$	288		$	278		$	911		$	767

Total revenue – GAAP	$	1,000		$	986		$	963		$	960		$	958		$	2,949		$	2,791		$	886		$	898		$	971		$	887		$	913		$	1,784		$	1,849
Less: Distribution and servicing expense	110			104			101			98			104			315			306			86			91			93			98			94			177			185
Adjusted total revenue, net of distribution and servicing expense – Non-GAAP	$	890		$	882		$	862		$	862		$	854		$	2,634		$	2,485		$	800		$	807		$	878		$	789		$	819		$	1,607		$	1,664

Pre-tax operating margin – GAAP (a)	30		%	29		%	29		%	27		%	27		%	29		%	25		%	25		%	22		%	25		%	33		%	29		%	23		%	28		%
Adjusted pre-tax operating margin, excluding amortization of intangible assets, provision for credit losses and distribution and servicing expense – Non-GAAP (a)	35		%	34		%	34		%	33		%	33		%	35		%	31		%
Adjusted pre-tax operating margin, net of distribution and servicing expense – Non-GAAP (a)																						28		%	24		%	27		%	37		%	32		%	26		%	32		%


(a)	Income before taxes divided by total revenue.

5246 BNY Mellon

Recent accounting and regulatory developments

~~Recently issued~~Recent accounting ~~standards~~developments

The following ~~Accounting Standards Updates (“ASUs”)~~ASU issued by the ~~Financial Accounting Standards Board (“FASB”) have~~FASB had not yet been ~~adopted.~~adopted as of June 30, 2020.

ASU ~~2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities~~2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting

In ~~August 2017,~~March 2020, the FASB issued an ASU~~Derivatives~~, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides temporary optional expedients and ~~Hedging: Targeted Improvements~~exceptions for applying U.S. GAAP to ~~Accounting for Hedging Activities. The objective of this ASU is to improve the~~ financial ~~reporting of~~contracts, hedging relationships ~~to better portray the economic results of an entity’s risk management activities~~ and ~~to simplify the application of hedge accounting guidance.~~

~~The most significant impact of the new guidance to the Company relates to the new accounting alternatives for fair value hedges of interest~~other transactions affected by reference rate risk, specifically, the ability to hedge only the benchmark component of the contractual cash flows, partial-term hedging and the introduction of the “last of layer” method for hedges of portfolios of prepayable financial assets. The guidance also changed presentation and disclosure requirements and made changes to how the shortcut method is applied which may result in the Company using that method going forward for certain hedging relationships.

reform. This ASU is effective for the first quarter of 2019, with early adoption permitted. Certain transition elections are available including the ability to reclassify a debt security from held-to-maturity to available-for-sale if it is eligible to be hedged under the last of layer method with any unrealized gain or loss at the transfer date being recorded in other comprehensive income. If this ASU is adopted early, the new guidance will be applicable as of the beginning of that year. ~~BNY Mellon is currently assessing the impacts of the new standard.~~

~~ASU 2017-07, Compensation-Retirement Benefits - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost~~

~~In March 2017, the FASB issued an ASU,~~ ~~Compensation-Retirement Benefits - Improving the~~

~~Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The ASU requires the disaggregation of the service cost component from the other components of the net benefit cost in the income statement. The~~ ASU also permits ~~only the service cost component of net benefit cost~~an entity to ~~be eligible for capitalization. The ASU is effective for the first quarter of 2018, with early adoption permitted.~~make a one-time election to sell and/or transfer held-to-maturity securities that are affected by reference rate reform and were classified as held-to-maturity on or before Jan. 1, 2020. The guidance in this ASU ~~should~~can be ~~applied retrospectively for the presentation~~adopted as of the service cost component and the other components in the income statement, and prospectively for the capitalization of the service cost component in assets. BNY Mellon is assessing the impacts of the new standard. For information on the components of our pension and post-retirement health plan costs, see Note 9 of the Notes to Consolidated Financial Statements in this Form 10-Q and Note 16 of the Notes to Consolidated Financial Statements in our 2016 Annual Report. To the extent that our recent trend of having a net credit for pension and other post-retirement costs continues, the standard will result in an increase to staff expense and a reduction in other expense.

~~ASU 2016-18, Statement of Cash Flows~~ – ~~Restricted Cash~~

~~In November 2016, the FASB issued an ASU,~~ ~~Statement of Cash Flows – Restricted Cash~~. This ASU provides guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows and is effective for the first quarter of 2018. Earlier application is permitted. BNY Mellon isMarch 12, 2020 through Dec. 31, 2022. We are assessing the impacts of the new standard, and expects to include restricted cash (which totaled $4 billion as of Sept. 30, 2017) with cash and due from banks when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.

~~ASU 2016-15, Statement of Cash Flows~~ – ~~Classification of Certain Cash Receipts and Cash Payments~~

~~In August 2016, the FASB issued an ASU,~~ ~~Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments~~. This ASU provides guidance on eight specific cash flow presentation issues and is effective for the first quarter of 2018. Earlier application is permitted, however all of the amendments must be adopted in the same period. BNY Mellon is assessing the impacts of the new

~~BNY Mellon 53~~

~~standard, and does~~but would not expect ~~this ASU to materially affect the results of operations or financial condition.~~

~~ASU 2016-13, Financial Instruments~~ – ~~Credit Losses~~

~~In June 2016, the FASB issued an ASU,~~ ~~Financial Instruments – Credit Losses~~. This ASU introduces a new current expected credit losses model, which will apply to financial assets subject to credit losses and measured at amortized cost, including held-to-maturity securities and certain off-balance sheet credit exposures. The guidance will also change current practice for the impairment model for available-for-sale debt securities. The available-for-sale debt securities model will require the use of an allowance to record estimated credit losses and subsequent recoveries. This ASU is effective for the first quarter of 2020. Earlier application is permitted beginning with the first quarter of 2019. BNY Mellon has begun its implementation efforts and is currently identifying key interpretive issues, and will assess existing credit loss forecasting models and processes against the new guidance to determine what modifications may be required. The extent of the impact to our financial statements upon adoption depends on several factors including the remaining expected life of financial instruments at the time of adoption, the establishment of an allowance for expected credit loss on held-to-maturity securities, and the macroeconomic conditions and forecasts that exist at that date.

~~ASU 2014-09, Revenue from Contracts with Customers~~

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers~~. This ASU, as amended, provides guidance on the recognition of revenue related to the transfer of promised goods or services to customers, guidance on accounting for certain contract costs and additional disclosure requirements about revenue and contract costs. The standard supersedes most existing revenue recognition guidance and is effective for the first quarter of 2018 using either the retrospective or cumulative effect transition method upon adoption.

The Company has completed its evaluation of the potential impact of this guidance on our accounting policies, and based on that evaluation, the timing of most of our revenue recognition will remain the same and the impacts will not be material. The impacts primarily relate to deferring and amortizing certain

sales commission costs related to obtaining customer contracts and the timing of recognizing the contra revenue related to certain payments made to customers. The Company plans to adopt the guidance as of Jan. 1, 2018 using the cumulative effect transition method. The Company is currently developing the disclosures required about revenue and contract costs and finalizing changes to internal control.

~~ASU 2016-02, Leases~~

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~. The primary objective of this ASU is to increase transparency and comparability by recognizing lease assets and liabilities on the balance sheet and expand related disclosures. ASU 2016-02 requires a “right-of-use” asset and a payment obligation liability on the balance sheet for most leases and subleases. Additionally, depending on the lease classification under the standard, it may result in different expense recognition patterns and classification than under existing accounting principles. For leases classified as finance leases, it will result in higher expense recognition in the earlier periods and lower expense in the later periods of the lease.

The standard is effective for the first quarter of 2019, with early adoption permitted. We will utilize the modified retrospective transition approach as of the beginning of the earliest period presented, which will result in a cumulative effect recorded in the earliest period presented. Additionally, the standard allows for various optional practical expedients to assist with the implementation and reporting requirements. We are currently evaluating the potential impact of the leasing standard on our consolidated financial statements and evaluating the practical expedients that may be elected. Upon adoption, the implementation of the leasing standard is expected to result in an immaterial increase in both assets and liabilities.

~~ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities~~

~~In January 2016, the FASB issued ASU 2016-01,~~ ~~Recognition and Measurement of Financial Assets and Financial Liabilities. The ASU requires investments in equity securities that do not result in consolidation and are not accounted for under the equity method to be measured at fair value with~~

~~54 BNY Mellon~~

changes in the fair value recognized through net income, unless one of two available exceptions apply. The first exception, a scope exception, allows Federal Reserve Bank stock, FHLB stock and other exchange memberships held by broker dealers to remain accounted for at cost, less impairment. The second exception, a practicability exception, will be available for equity investments that do not have readily determinable fair values and do not qualify for the practical expedient to estimate fair value under ASC 820, ~~Fair Value Measurement. To the extent the practicability exception applies, such investments will be accounted for at cost adjusted for impairment, if any, plus or minus changes from observable price changes.~~

The amendments also require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from the entity’s “own credit risk” when the entity has elected to measure the liability at fair value. The amendments also eliminate the requirement to disclose the methods and significant assumptions used to estimate the fair values of financial instruments measured at amortized cost that are on the balance sheet.

~~The Company plans to adopt this guidance in the first quarter of 2018 using the cumulative effect method of adoption. BNY Mellon does not expect the adoption of~~ this ASU to have a material impact ~~to the financial statements.~~on BNY Mellon.

Recent regulatory developments

For a summary of additional regulatory matters relevant to our operations, see ~~Supervision and Regulation~~“Recent regulatory developments” in our ~~2016~~Form 10-Q for the quarter ended March 31, 2020 and “Supervision and Regulation” in our 2019 Annual Report. The following discussions summarize certain regulatory, legislative and other developments that may affect BNY Mellon, the impact of many of which we are still evaluating.

~~Final Rule on Qualified Financial Contracts~~CCAR 2020 results

On ~~Sept. 1, 2017,~~June 25, 2020, the Federal Reserve ~~adopted a final rule to require U.S. global systemically important banking organizations (“G-SIBs”)~~released the results of its stress tests for 2020 and additional sensitivity analyses that the ~~U.S. operations~~Federal Reserve conducted in light of ~~foreign G-SIBs to amend their covered qualified financial contracts (“QFCs”).~~the coronavirus pandemic. The ~~FDIC adopted a substantially equivalent proposal~~Federal Reserve also notified BNY Mellon that its SCB requirement will be 2.5%, which equals the regulatory floor. The SCB will be effective on Oct. ~~30, 2017~~1, 2020. For additional information regarding the SCB, see “Recent regulatory developments - Changes to CCAR and ~~the Office of the Comptroller of the Currency is expected to do so~~Stress Capital Buffer” in ~~the near future. QFCs generally include derivatives, repurchase agreements and securities lending arrangements, among others. The final rule includes two key requirements.~~our First ~~the final rule generally requires~~Quarter

2020 Form 10-Q and “Supervision and Regulation - Capital Planning and Stress Testing” in our 2019 Annual Report.

In light of the changes in the financial markets and the economy, the Federal Reserve announced that ~~QFCs~~all banking institutions subject to CCAR, including BNY Mellon, will be required to resubmit their capital plans. In connection with the capital plan resubmission, the Federal Reserve may recalculate CCAR firms’ SCBs (including BNY Mellon’s). For the third quarter of ~~G-SIBs explicitly provide~~2020, all CCAR firms, including BNY Mellon, will only be permitted to repurchase stock in connection with employee benefit plans, pay common stock dividends that ~~any resolution stays applicable~~do not exceed an amount equal to the ~~exercise~~average of ~~default rights~~the firm’s net income for the four preceding calendar quarters provided that the amount of the common stock dividend is not increased, and pay scheduled dividends on additional Tier 1 and Tier 2 capital instruments. The Federal Reserve has stated that it may extend these limitations quarter-by-quarter. Consistent with these limitations, for the third quarter, BNY Mellon plans to maintain its quarterly common stock dividend of $0.31 per share and to suspend its open market common stock repurchases.

Volcker Covered Funds Regulations Revision

On June 25, 2020, the Federal Reserve, OCC, FDIC, Securities and Exchange Commission (“SEC”) and Commodity Futures Trading Commission (“CFTC”) finalized a second major set of amendments to the implementing regulations for the provisions of the Dodd-Frank Act commonly referred to as the “Volcker Rule”. This set of amendments, which follows revisions to the proprietary trading provisions of the Volcker Rule in 2019, contains a number of targeted amendments to the Volcker Rule regulations, principally focused on the restrictions on banking entities’ investments in, sponsorship of, and other relationships with covered funds. BNY Mellon’s preliminary assessment is that the changes are favorable and reduce certain compliance burdens; however, the general prohibitions and requirements with respect to ~~such QFCs~~investment in, sponsoring of and ~~to any resolution transfers under U.S. special resolution regimes apply to such~~transactions with covered QFCs. Second, the final rule requires that QFCs of G-SIBs be amended to neither permit the exercise of default or cross-default rights against entities covered by the final rule based on the resolution or bankruptcy of an affiliate of such entities, nor allow for any transfer restrictions with respect to such QFCs.funds would remain in place.

The ~~final rule allows G-SIBs~~provision that may have the most targeted benefits to ~~comply~~BNY Mellon concerns transactions with covered funds which we sponsor or advise. The amendments exempt certain transactions from the

BNY Mellon 47

currently applicable prohibitions, including intraday credit extensions and certain payment, clearing and settlement transactions, subject to certain conditions. Additionally, the ~~rule by adhering~~amendments narrow the definition of “ownership interest,” which may reduce the compliance burden on BNY Mellon investments. The amendments will become effective on Oct. 1, 2020.

CRR “Quick Fix”

On June 27, 2020, a so-called “quick fix” to the ~~International Swaps and Derivatives Association 2015 Universal Resolution Stay Protocol (the “Protocol”~~Capital Requirements Regulation (“CRR Quick Fix”) orbecame applicable. Among other things, the CRR Quick Fix enables EU credit institutions, such as The Bank of New York Mellon SA/NV, to exclude central bank deposits from leverage ratio calculations under certain conditions, including a ~~similar protocol that accomplishes~~declaration of “exceptional circumstances” from the ~~contractual amendments required by~~credit institution’s competent authority. The leverage ratio will become a binding requirement in the rule. BNY Mellon entities that engage in QFC activities covered by the Protocol have adhered to the Protocol. Compliance with the Federal Reserve’s final rule will be required on a phased-in basis beginning on Jan. 1, 2019. BNY Mellon is evaluating the impactEU, as part of the ~~new regulations~~Capital Requirements Regulation 2, on June 28, 2021. The extent to which the UK implements the leverage ratio exclusion of the CRR Quick Fix depends on its ~~activities.~~policy stance after the end of the transition period under the EU withdrawal agreement.

~~Resolution plan~~

As required by the Dodd-Frank Act, BNY Mellon must submit annually to the Federal Reserve and the FDIC a plan for its rapid and orderly resolution in the event of material financial distress or failure. BNY Mellon filed its most recent resolution plan on July 1, 2017. We believe the 2017 resolution plan addresses all shortcomings and deficiencies identified by the FDIC and the Federal Reserve in the Company’s 2015 resolution plan. The public portion of our 2017 resolution plan is available on the Federal Reserve’s and FDIC’s websites.

~~In September 2017, the Federal Reserve and FDIC extended the filing deadline by one year to July 1, 2019 for the Parent’s next resolution plan.~~

~~BNY Mellon 55~~

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 SEC, ~~filings,~~ 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 and any proxy statement mailed by us in connection with the solicitation of proxies;~~5;

Financial statements and footnotes prepared using eXtensible Business Reporting Language (“XBRL”);

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~~Directors’ Code of Conduct and the Charters of the Audit, Finance, Corporate Governance, ~~and~~ Nominating ~~Corporate~~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 ~~the~~our website ~~listed above~~ or ~~any other websites~~social media channels referenced herein are not incorporated by reference into this Quarterly Report on Form 10-Q.

5648 BNY Mellon

Item 1. Financial Statements

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

Consolidated Income Statement (unaudited)



	Quarter ended									Year-to-date
(in millions)	June 30, 2020			March 31, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Fee and other revenue
Investment services fees:
Asset servicing fees	$	1,173		$	1,159		$	1,141		$	2,332		$	2,263
Clearing services fees	431			470			410			901			808
Issuer services fees	277			263			291			540			542
Treasury services fees	144			149			140			293			272
Total investment services fees	2,025			2,041			1,982			4,066			3,885
Investment management and performance fees	786			862			833			1,648			1,674
Foreign exchange and other trading revenue	166			319			166			485			336
Financing-related fees	58			59			50			117			101
Distribution and servicing	27			31			31			58			62
Investment and other income	105			11			43			116			78
Total fee revenue	3,167			3,323			3,105			6,490			6,136
Net securities gains	9			9			7			18			8
Total fee and other revenue	3,176			3,332			3,112			6,508			6,144
Operations of consolidated investment management funds
Investment income (loss)	54			(38		)	10			16			36
Interest of investment management fund note holders	—			—			—			—			—
Income (loss) from consolidated investment management funds	54			(38		)	10			16			36
Net interest revenue
Interest revenue	943			1,570			1,965			2,513			3,885
Interest expense	163			756			1,163			919			2,242
Net interest revenue	780			814			802			1,594			1,643
Total revenue	4,010			4,108			3,924			8,118			7,823
Provision for credit losses	143			169			(8		)	312			(1		)
Noninterest expense
Staff	1,464			1,482			1,421			2,946			2,945
Software and equipment	345			326			304			671			587
Professional, legal and other purchased services	337			330			337			667			662
Net occupancy	137			135			138			272			275
Sub-custodian and clearing	120			105			115			225			220
Distribution and servicing	85			91			94			176			185
Bank assessment charges	35			35			31			70			62
Business development	20			42			56			62			101
Amortization of intangible assets	26			26			30			52			59
Other	117			140			121			257			250
Total noninterest expense	2,686			2,712			2,647			5,398			5,346
Income
Income before income taxes	1,181			1,227			1,285			2,408			2,478
Provision for income taxes	216			265			264			481			501
Net income	965			962			1,021			1,927			1,977
Net (income) loss attributable to noncontrolling interests related to consolidated investment management funds	(15		)	18			(4		)	3			(14		)
Net income applicable to shareholders of The Bank of New York Mellon Corporation	950			980			1,017			1,930			1,963
Preferred stock dividends	(49		)	(36		)	(48		)	(85		)	(84		)
Net income applicable to common shareholders of The Bank of New York Mellon Corporation	$	901		$	944		$	969		$	1,845		$	1,879

Quarter ended Year-to-date
Sept. 30, 2017
June 30, 2017
Sept. 30, 2016
Sept. 30, 2017
Sept. 30, 2016
(in millions)
Fee and other revenue
Investment services fees:
Asset servicing $ 1,105
$ 1,085
$ 1,067
$ 3,253
$ 3,176
Clearing services 383
394
349
1,153
1,049
Issuer services 288
241
337
780
815
Treasury services 141
140
137
420
407
Total investment services fees 1,917
1,860
1,890
5,606
5,447
Investment management and performance fees 901
879
860
2,622
2,502
Foreign exchange and other trading revenue 173
165
183
502
540
Financing-related fees 54
53
58
162
169
Distribution and servicing 40
41
43
122
125
Investment and other income 63
122
92
262
271
Total fee revenue 3,148
3,120
3,126
9,276
9,054
Net securities gains — including other-than-temporary impairment 18
—
27
28
67
Noncredit-related portion of other-than-temporary impairment
(recognized in other comprehensive income)
(1 ) —
3
(1 ) 2
Net securities gains 19
—
24
29
65
Total fee and other revenue 3,167
3,120
3,150
9,305
9,119
Operations of consolidated investment management funds
Investment income 10
10
20
57
27
Interest of investment management fund note holders —
—
3
4
6
Income from consolidated investment management funds 10
10
17
53
21
Net interest revenue
Interest revenue 1,151
1,052
874
3,163
2,647
Interest expense 312
226
100
706
340
Net interest revenue 839
826
774
2,457
2,307
Total revenue 4,016
3,956
3,941
11,815
11,447
Provision for credit losses (6 ) (7 ) (19 ) (18 ) (18 )
Noninterest expense
Staff 1,469
1,417
1,467
4,358
4,338
Professional, legal and other purchased services 305
319
292
936
860
Software 175
173
156
514
470
Net occupancy 141
139
143
416
437
Distribution and servicing 109
104
105
313
307
Sub-custodian 62
65
59
191
188
Furniture and equipment 58
59
59
174
187
Bank assessment charges (a)
51
59
61
167
166
Business development 49
63
52
163
174
Other (a)
177
192
170
536
546
Amortization of intangible assets 52
53
61
157
177
Merger and integration, litigation and restructuring charges 6
12
18
26
42
Total noninterest expense 2,654
2,655
2,643
7,951
7,892
Income
Income before income taxes 1,368
1,308
1,317
3,882
3,573
Provision for income taxes 348
332
324
949
897
Net income 1,020
976
993
2,933
2,676
Net (income) loss attributable to noncontrolling interests (includes $(3), $(3), $(9), $(24) and $(6) related to consolidated investment management funds, respectively) (2 ) (1 ) (6 ) (18 ) 1
Net income applicable to shareholders of The Bank of New York Mellon Corporation 1,018
975
987
2,915
2,677
Preferred stock dividends (35 ) (49 ) (13 ) (126 ) (74 )
Net income applicable to common shareholders of The Bank of New York Mellon Corporation $ 983
$ 926
$ 974
$ 2,789
$ 2,603


~~(a)~~	In the first quarter of 2017, we began disclosing bank assessment charges on a quarterly basis. The bank assessment charges were previously included in other expense. All prior periods were reclassified.

BNY Mellon 5749

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

Consolidated Income Statement (unaudited)(continued)


Net income applicable to common shareholders of The Bank of New York Mellon Corporation used for the earnings per share calculation	Quarter ended						Year-to-date				Quarter ended						Year-to-date
	Sept. 30, 2017		June 30, 2017		Sept. 30, 2016		Sept. 30, 2017		Sept. 30, 2016
(in millions)	Sept. 30, 2017		June 30, 2017		Sept. 30, 2016		Sept. 30, 2017		Sept. 30, 2016		June 30, 2020		March 31, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Net income applicable to common shareholders of The Bank of New York Mellon Corporation	$	983	$	926	$	974	$	2,789	$	2,603	$	901	$	944	$	969	$	1,845	$	1,879
Less: Earnings allocated to participating securities (a)	8		13		15		35		39
Less: Earnings allocated to participating securities											1		3		4		4		9
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	$	975	$	913	$	959	$	2,754	$	2,564	$	900	$	941	$	965	$	1,841	$	1,870

Average common shares and equivalents outstanding of The Bank of New York Mellon Corporation (a)
Quarter ended Year-to-date
Sept. 30, 2017
June 30, 2017
Sept. 30, 2016
Sept. 30, 2017
Sept. 30, 2016
(in thousands)
Basic 1,035,337
1,035,829
1,062,248
1,037,431
1,071,457
Common stock equivalents 9,226
15,598
15,406
14,216
15,306
Less: Participating securities (3,425 ) (9,548 ) (9,972 ) (8,062 ) (9,613 )
Diluted 1,041,138
1,041,879
1,067,682
1,043,585
1,077,150

Anti-dilutive securities (b)
8,059
16,256
32,232
13,906
32,699

Earnings per share applicable to common shareholders of The Bank of New York Mellon Corporation (c)
Quarter ended Year-to-date
Sept. 30, 2017
June 30, 2017
Sept. 30, 2016
Sept. 30, 2017
Sept. 30, 2016
(in dollars)
Basic $ 0.94
$ 0.88
$ 0.90
$ 2.66
$ 2.39
Diluted $ 0.94
$ 0.88
$ 0.90
$ 2.64
$ 2.38



Average common shares and equivalents outstanding of The Bank of New York Mellon Corporation	Quarter ended						Year-to-date
(in thousands)	June 30, 2020		March 31, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Basic	889,020		894,122		951,281		891,642		956,887
Common stock equivalents	2,044		3,941		3,891		2,866		4,894
Less: Participating securities	(503	)	(1,374	)	(1,244	)	(905	)	(1,824	)
Diluted	890,561		896,689		953,928		893,603		959,957

Anti-dilutive securities (a)	1,578		2,584		3,999		2,052		4,704

(a)

Beginning in the third quarter of 2017, vested stock awards to retirement eligible employees are included in common shares outstanding for earnings per share purposes. This change increased both average basic and average diluted shares outstanding by approximately 6 million and reduced earnings allocated to participating securities by $6 million for the quarter, which resulted in a de minimis impact to both basic and diluted earnings per share.


~~(b)~~	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.


~~(c)~~	Basic and diluted earnings per share under the two-class method are determined on the net income applicable to common shareholders of The Bank of New York Mellon Corporation reported on the income statement less earnings allocated to participating securities.



Earnings per share applicable to common shareholders of The Bank of New York Mellon Corporation	Quarter ended						Year-to-date
(in dollars)	June 30, 2020		March 31, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Basic	$	1.01	$	1.05	$	1.01	$	2.06	$	1.95
Diluted	$	1.01	$	1.05	$	1.01	$	2.06	$	1.95

See accompanying unaudited Notes to Consolidated Financial Statements.

5850 BNY Mellon

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

Consolidated Comprehensive Income Statement (unaudited)



	Quarter ended									Year-to-date
(in millions)	June 30, 2020			March 31, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Net income	$	965		$	962		$	1,021		$	1,927		$	1,977
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	115			(369		)	10			(254		)	39
Unrealized gain on assets available-for-sale:
Unrealized gain arising during the period	753			183			287			936			526
Reclassification adjustment	(7		)	(7		)	(5		)	(14		)	(6		)
Total unrealized gain on assets available-for-sale	746			176			282			922			520
Defined benefit plans:
Net (loss) arising during the period	—			—			—			—			(9		)
Amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost	19			18			10			37			20
Total defined benefit plans	19			18			10			37			11
Net unrealized gain (loss) on cash flow hedges	4			(11		)	—			(7		)	5
Total other comprehensive income (loss), net of tax (a)	884			(186		)	302			698			575
Total comprehensive income	1,849			776			1,323			2,625			2,552
Net (income) loss attributable to noncontrolling interests	(15		)	18			(4		)	3			(14		)
Other comprehensive loss (income) attributable to noncontrolling interests	—			2			—			2			(2		)
Comprehensive income applicable to shareholders of The Bank of New York Mellon Corporation	$	1,834		$	796		$	1,319		$	2,630		$	2,536

Quarter ended Year-to-date
Sept. 30, 2017
June 30, 2017
Sept. 30, 2016
Sept. 30, 2017
Sept. 30, 2016
(in millions)
Net income $ 1,020
$ 976
$ 993
$ 2,933
$ 2,676
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments 286
330
(186 ) 741
(433 )
Unrealized gain on assets available-for-sale:
Unrealized gain (loss) arising during the period 28
91
(53 ) 213
227
Reclassification adjustment (12 ) (1 ) (15 ) (19 ) (43 )
Total unrealized gain (loss) on assets available-for-sale 16
90
(68 ) 194
184
Defined benefit plans:
Net gain arising during the period —
—
—
2
2
Amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost 15
16
14
49
43
Total defined benefit plans 15
16
14
51
45
Net unrealized gain (loss) on cash flow hedges —
1
2
11
(4 )
Total other comprehensive income (loss), net of tax (a)
317
437
(238 ) 997
(208 )
Total comprehensive income 1,337
1,413
755
3,930
2,468
Net (income) loss attributable to noncontrolling interests (2 ) (1 ) (6 ) (18 ) 1
Other comprehensive (income) loss attributable to noncontrolling interests (5 ) (6 ) 5
(13 ) 23
Comprehensive income applicable to shareholders of The Bank of New York Mellon Corporation $ 1,330
$ 1,406
$ 754
$ 3,899
$ 2,492

(a)

Other comprehensive income (loss) attributable to The Bank of New York Mellon Corporation shareholders was ~~$312 million for the quarter ended Sept. 30, 2017, $431~~$884 million for the quarter ended June 30, ~~2017, $(233)~~2020, $(184) million for the quarter ended ~~Sept. 30, 2016, $984~~March 31, 2020, $302 million for the ~~nine months~~quarter ended ~~Sept.~~June 30, ~~2017 and $(185)~~2019, $700 million for the ~~nine~~six months ended ~~Sept.~~June 30, ~~2016.~~2020 and $573 million for the six months ended June 30, 2019.

See accompanying unaudited Notes to Consolidated Financial Statements.

BNY Mellon 5951

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

Consolidated Balance Sheet (unaudited)



	June 30, 2020			Dec. 31, 2019
(dollars in millions, except per share amounts)
Assets
Cash and due from banks (including allowance for credit losses of $4 at June 30, 2020) (a)	$	4,776		$	4,830
Interest-bearing deposits with the Federal Reserve and other central banks	112,728			95,042
Interest-bearing deposits with banks (including allowance for credit losses of $1 at June 30, 2020; $2,210 and $2,437 is restricted) (a)	18,045			14,811
Federal funds sold and securities purchased under resale agreements (including allowance for credit losses of $- at June 30, 2020) (a)	36,638			30,182
Securities:
Held-to-maturity (including allowance for credit losses of less than $1 at June 30, 2020; fair value of $45,983 and $34,805) (a)	44,615			34,483
Available-for-sale (including allowance for credit losses of $12 at June 30, 2020; amortized cost of $106,668 and $87,435) (a)	110,067			88,550
Total securities	154,682			123,033
Trading assets	14,150			13,571
Loans	55,397			54,953
Allowance for credit losses (a)	(302		)	(122		)
Net loans	55,095			54,831
Premises and equipment	3,598			3,625
Accrued interest receivable	540			624
Goodwill	17,253			17,386
Intangible assets	3,045			3,107
Other assets (including allowance for credit losses on accounts receivable of $4 at June 30, 2020, also includes $529 and $419, at fair value) (a)	21,306			20,221
Subtotal assets of operations	441,856			381,263
Assets of consolidated investment management funds, at fair value	460			245
Total assets	$	442,316		$	381,508
Liabilities
Deposits:
Noninterest-bearing (principally U.S. offices)	$	78,100		$	57,630
Interest-bearing deposits in U.S. offices	121,242			101,542
Interest-bearing deposits in non-U.S. offices	106,128			100,294
Total deposits	305,470			259,466
Federal funds purchased and securities sold under repurchase agreements	14,512			11,401
Trading liabilities	5,595			4,841
Payables to customers and broker-dealers	25,012			18,758
Commercial paper	665			3,959
Other borrowed funds	1,628			599
Accrued taxes and other expenses	5,029			5,642
Other liabilities (including allowance for credit losses on lending-related commitments of $152 and $94, also includes $964 and $607, at fair value) (a)	12,869			7,612
Long-term debt (includes $399 and $387, at fair value)	27,566			27,501
Subtotal liabilities of operations	398,346			339,779
Liabilities of consolidated investment management funds, at fair value	4			1
Total liabilities	398,350			339,780
Temporary equity
Redeemable noncontrolling interests	157			143
Permanent equity
Preferred stock – par value $0.01 per share; authorized 100,000,000 shares; issued 45,826 and 35,826 shares	4,532			3,542
Common stock – par value $0.01 per share; authorized 3,500,000,000 shares; issued 1,381,361,699 and 1,374,443,376 shares	14			14
Additional paid-in capital	27,702			27,515
Retained earnings	33,224			31,894
Accumulated other comprehensive loss, net of tax	(1,943		)	(2,638		)
Less: Treasury stock of 495,499,985 and 473,760,338 common shares, at cost	(19,832		)	(18,844		)
Total The Bank of New York Mellon Corporation shareholders’ equity	43,697			41,483
Nonredeemable noncontrolling interests of consolidated investment management funds	112			102
Total permanent equity	43,809			41,585
Total liabilities, temporary equity and permanent equity	$	442,316		$	381,508


(a)	In the first quarter of 2020, we adopted new accounting guidance included in ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, on a prospective basis. See Note 2 of the Notes to Consolidated Financial Statements for additional information.

Sept. 30, 2017
Dec. 31, 2016
(dollars in millions, except per share amounts)
Assets
Cash and due from:
Banks $ 5,557
$ 4,822
Interest-bearing deposits with the Federal Reserve and other central banks 75,808
58,041
Interest-bearing deposits with banks 15,256
15,086
Federal funds sold and securities purchased under resale agreements 27,883
25,801
Securities:

Held-to-maturity (fair value of $39,928 and $40,669) 39,995
40,905
Available-for-sale 80,054
73,822
Total securities 120,049
114,727
Trading assets 4,666
5,733
Loans 59,068
64,458
Allowance for loan losses (161 ) (169 )
Net loans 58,907
64,289
Premises and equipment 1,631
1,303
Accrued interest receivable 547
568
Goodwill 17,543
17,316
Intangible assets 3,461
3,598
Other assets (includes $827 and $1,339, at fair value) 22,287
20,954
Subtotal assets of operations 353,595
332,238
Assets of consolidated investment management funds, at fair value 802
1,231
Total assets $ 354,397
$ 333,469
Liabilities

Deposits:

Noninterest-bearing (principally U.S. offices) $ 80,380
$ 78,342
Interest-bearing deposits in U.S. offices 46,023
52,049
Interest-bearing deposits in non-U.S. offices 104,593
91,099
Total deposits 230,996
221,490
Federal funds purchased and securities sold under repurchase agreements 10,314
9,989
Trading liabilities 3,253
4,389
Payables to customers and broker-dealers 21,176
20,987
Commercial paper 2,501
—
Other borrowed funds 3,353
754
Accrued taxes and other expenses
6,070
5,867
Other liabilities (including allowance for lending-related commitments of $104 and $112, also includes $812 and $597, at fair value) 7,195
5,635
Long-term debt (includes $369 and $363, at fair value) 28,408
24,463
Subtotal liabilities of operations 313,266
293,574
Liabilities of consolidated investment management funds, at fair value 27
315
Total liabilities 313,293
293,889
Temporary equity

Redeemable noncontrolling interests 197
151
Permanent equity

Preferred stock – par value $0.01 per share; authorized 100,000,000 shares; issued 35,826 and 35,826 shares 3,542
3,542
Common stock – par value $0.01 per share; authorized 3,500,000,000 shares; issued 1,352,363,932 and 1,333,706,427 shares 14
13
Additional paid-in capital 26,588
25,962
Retained earnings 24,757
22,621
Accumulated other comprehensive loss, net of tax (2,781 ) (3,765 )
Less: Treasury stock of 328,341,579 and 286,218,126 common shares, at cost (11,597 ) (9,562 )
Total The Bank of New York Mellon Corporation shareholders’ equity 40,523
38,811
Nonredeemable noncontrolling interests of consolidated investment management funds 384
618
Total permanent equity 40,907
39,429
Total liabilities, temporary equity and permanent equity $ 354,397
$ 333,469

See accompanying unaudited Notes to Consolidated Financial Statements.

6052 BNY Mellon

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

Consolidated Statement of Cash Flows (unaudited)



	Six months ended June 30,
(in millions)	2020			2019
Operating activities
Net income	$	1,927		$	1,977
Net loss (income) attributable to noncontrolling interests	3			(14		)
Net income applicable to shareholders of The Bank of New York Mellon Corporation	1,930			1,963
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Provision for credit losses (a)	312			(1		)
Pension plan contributions	(12		)	(22		)
Depreciation and amortization	744			635
Deferred tax (benefit)	(363		)	(110		)
Net securities (gains)	(18		)	(8		)
Change in trading assets and liabilities	171			(1,306		)
Change in accruals and other, net	2,361			(3,665		)
Net cash provided by (used for) operating activities	5,125			(2,514		)
Investing activities
Change in interest-bearing deposits with banks	(3,710		)	(1,618		)
Change in interest-bearing deposits with the Federal Reserve and other central banks	(18,117		)	(1,714		)
Purchases of securities held-to-maturity	(14,499		)	(3,739		)
Paydowns of securities held-to-maturity	3,541			2,078
Maturities of securities held-to-maturity	1,836			1,380
Purchases of securities available-for-sale	(44,865		)	(21,503		)
Sales of securities available-for-sale	8,414			6,346
Paydowns of securities available-for-sale	4,416			3,226
Maturities of securities available-for-sale	12,241			14,143
Net change in loans	(610		)	4,116
Sales of loans and other real estate	2			52
Change in federal funds sold and securities purchased under resale agreements	(6,516		)	(14,401		)
Net change in seed capital investments	19			25
Purchases of premises and equipment/capitalized software	(623		)	(717		)
Other, net	(275		)	940
Net cash (used for) investing activities	(58,746		)	(11,386		)
Financing activities
Change in deposits	47,576			14,255
Change in federal funds purchased and securities sold under repurchase agreements	3,155			(2,486		)
Change in payables to customers and broker-dealers	6,260			(778		)
Change in other borrowed funds	1,036			(1,328		)
Change in commercial paper	(3,294		)	6,955
Net proceeds from the issuance of long-term debt	2,246			1,248
Repayments of long-term debt	(3,000		)	(2,750		)
Proceeds from the exercise of stock options	33			35
Issuance of common stock	6			16
Issuance of preferred stock	990			—
Treasury stock acquired	(988		)	(1,305		)
Common cash dividends paid	(560		)	(540		)
Preferred cash dividends paid	(85		)	(84		)
Other, net	15			7
Net cash provided by financing activities	53,390			13,245
Effect of exchange rate changes on cash	(50		)	(11		)
Change in cash and due from banks and restricted cash
Change in cash and due from banks and restricted cash	(281		)	(666		)
Cash and due from banks and restricted cash at beginning of period	7,267			8,258
Cash and due from banks and restricted cash at end of period	$	6,986		$	7,592
Cash and due from banks and restricted cash
Cash and due from banks at end of period (unrestricted cash)	$	4,776		$	5,556
Restricted cash at end of period	2,210			2,036
Cash and due from banks and restricted cash at end of period	$	6,986		$	7,592
Supplemental disclosures
Interest paid	$	1,013		$	2,238
Income taxes paid	756			461
Income taxes refunded	11			347


(a)	In the first quarter of 2020, we adopted new accounting guidance included in ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, on a prospective basis. See Note 2 of the Notes to Consolidated Financial Statements for additional information.

Nine months ended Sept. 30,
(in millions) 2017
2016
Operating activities
Net income $ 2,933
$ 2,676
Net (income) loss attributable to noncontrolling interests (18 ) 1
Net income applicable to shareholders of The Bank of New York Mellon Corporation 2,915
2,677
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses (18 ) (18 )
Pension plan contributions (12 ) (17 )
Depreciation and amortization 1,044
1,118
Deferred tax expense (benefit) 272
(282 )
Net securities (gains) (29 ) (65 )
Change in trading assets and liabilities (66 ) 1,680
Originations of loans held-for-sale —
(350 )
Proceeds from the sales of loans originated for sale —
802
Change in accruals and other, net (756 ) (3,988 )
Net cash provided by operating activities 3,350
1,557
Investing activities
Change in interest-bearing deposits with banks 507
880
Change in interest-bearing deposits with the Federal Reserve and other central banks (14,467 ) 33,473
Purchases of securities held-to-maturity (5,878 ) (4,169 )
Paydowns of securities held-to-maturity 3,332
3,577
Maturities of securities held-to-maturity 3,412
2,933
Purchases of securities available-for-sale (18,974 ) (21,491 )
Sales of securities available-for-sale 3,531
5,624
Paydowns of securities available-for-sale 7,047
6,552
Maturities of securities available-for-sale 4,820
7,610
Net change in loans 5,283
(2,884 )
Sales of loans and other real estate 369
172
Change in federal funds sold and securities purchased under resale agreements (2,082 ) (10,456 )
Net change in seed capital investments (52 ) (57 )
Purchases of premises and equipment/capitalized software (933 ) (495 )
Proceeds from the sale of premises and equipment —
65
Acquisitions, net of cash —
(38 )
Dispositions, net of cash —
1
Other, net 82
(239 )
Net cash (used for) provided by investing activities (14,003 ) 21,058
Financing activities
Change in deposits 4,459
(18,378 )
Change in federal funds purchased and securities sold under repurchase agreements 325
(6,950 )
Change in payables to customers and broker-dealers 177
(743 )
Change in other borrowed funds 2,187
427
Change in commercial paper 2,501
—
Net proceeds from the issuance of long-term debt 4,739
4,982
Repayments of long-term debt (796 ) (2,453 )
Proceeds from the exercise of stock options 383
129
Issuance of common stock 24
20
Issuance of preferred stock —
990
Treasury stock acquired (2,035 ) (1,550 )
Common cash dividends paid (653 ) (576 )
Preferred cash dividends paid (126 ) (74 )
Other, net 46
(2 )
Net cash provided by (used for) financing activities 11,231
(24,178 )
Effect of exchange rate changes on cash 157
(17 )
Change in cash and due from banks
Change in cash and due from banks 735
(1,580 )
Cash and due from banks at beginning of period 4,822
6,537
Cash and due from banks at end of period $ 5,557
$ 4,957
Supplemental disclosures
Interest paid $ 721
$ 371
Income taxes paid 316
597
Income taxes refunded 19
293

See accompanying unaudited Notes to Consolidated Financial Statements.

BNY Mellon 6153

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																Non- redeemable noncontrolling interests of consolidated investment management funds			Total permanent equity				Redeemable non- controlling interests/ temporary equity			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													Preferred stock		Common stock		Additional paid-in capital		Retained earnings			Accumulated other comprehensive (loss), net of tax			Treasury stock
Balance at Dec. 31, 2016	$	3,542	$	13	$	25,962		$	22,621		$	(3,765	)	$	(9,562	)	$	618		$	39,429		(a)	$	151
Balance at March 31, 2020																											$	3,542	$	14	$	27,644	$	32,601		$	(2,827	)	$	(19,829	)	$	94	$	41,239		(a)	$	140
Shares issued to shareholders of noncontrolling interests	—		—		—			—			—			—			—			—				40			—		—		—		—			—			—			—		—				17
Redemption of subsidiary shares from noncontrolling interests	—		—		—			—			—			—			—			—				(16		)
Other net changes in noncontrolling interests	—		—		(11		)	—			—			—			(258		)	(269		)		15			—		—		—		—			—			—			3		3				—
Net income (loss)	—		—		—			2,915			—			—			24			2,939				(6		)
Net income																											—		—		—		950			—			—			15		965				—
Other comprehensive income	—		—		—			—			984			—			—			984				13			—		—		—		—			884			—			—		884				—
Dividends:
Common stock at $0.62 per share	—		—		—			(653		)	—			—			—			(653		)		—
Common stock at $0.31 per share																											—		—		—		(278		)	—			—			—		(278		)		—
Preferred stock	—		—		—			(126		)	—			—			—			(126		)		—			—		—		—		(49		)	—			—			—		(49		)		—
Repurchase of common stock	—		—		—			—			—			(2,035		)	—			(2,035		)		—			—		—		—		—			—			(3		)	—		(3		)		—
Common stock issued under:
Employee benefit plans	—		—		21			—			—			—			—			21				—
Direct stock purchase and dividend reinvestment plan	—		—		18			—			—			—			—			18				—
Common stock issued under employee benefit plans																											—		—		6		—			—			—			—		6				—
Preferred stock issued																											990		—		—		—			—			—			—		990				—
Stock awards and options exercised	—		1		598			—			—			—			—			599				—			—		—		52		—			—			—			—		52				—
Balance at Sept. 30, 2017	$	3,542	$	14	$	26,588		$	24,757		$	(2,781	)	$	(11,597	)	$	384		$	40,907		(a)	$	197
Balance at June 30, 2020																											$	4,532	$	14	$	27,702	$	33,224		$	(1,943	)	$	(19,832	)	$	112	$	43,809		(a)	$	157


(a)	Includes total The Bank of New York Mellon Corporation common shareholders’ equity of ~~$35,269~~$37,603 million at March 31, 2020 and $39,165 million at June 30, 2020.



	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, 2019	$	3,542	$	14	$	27,515		$	31,894		$	(2,638	)	$	(18,844	)	$	102		$	41,585		(a)	$	143
Impact of adopting ASU 2016-13, Financial Instruments – Credit Losses	—		—		—			45			(5		)	—			—			40				—
Adjusted balance at Jan. 1, 2020	3,542		14		27,515			31,939			(2,643		)	(18,844		)	102			41,625				143
Shares issued to shareholders of noncontrolling interests	—		—		—			—			—			—			—			—				17
Redemption of subsidiary shares from noncontrolling interests	—		—		—			—			—			—			—			—				(16		)
Other net changes in noncontrolling interests	—		—		(5		)	—			—			—			10			5				(2		)
Net income (loss)	—		—		—			980			—			—			(18		)	962				—
Other comprehensive (loss)	—		—		—			—			(184		)	—			—			(184		)		(2		)
Dividends:
Common stock at $0.31 per share	—		—		—			(282		)	—			—			—			(282		)		—
Preferred stock	—		—		—			(36		)	—			—			—			(36		)		—
Repurchase of common stock	—		—		—			—			—			(985		)	—			(985		)		—
Common stock issued under employee benefit plans	—		—		9			—			—			—			—			9				—
Stock awards and options exercised	—		—		125			—			—			—			—			125				—
Balance at March 31, 2020	$	3,542	$	14	$	27,644		$	32,601		$	(2,827	)	$	(19,829	)	$	94		$	41,239		(a)	$	140


(a)	Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $37,941 million at Dec. 31, ~~2016~~2019 and ~~$36,981~~$37,603 million at ~~Sept. 30, 2017.~~March 31, 2020.

54 BNY Mellon

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

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



	The Bank of New York Mellon Corporation shareholders															Nonredeemable noncontrolling interests of consolidated investment management funds		Total permanent equity				Redeemable non- controlling interests/ temporary equity
(in millions, except per share amount)	Preferred stock		Common stock		Additional paid-in capital		Retained earnings			Accumulated other comprehensive (loss), net of tax			Treasury stock
Balance at March 31, 2019	$	3,542	$	14	$	27,349	$	29,382		$	(2,990	)	$	(16,072	)	$	122	$	41,347		(a)	$	122
Shares issued to shareholders of noncontrolling interests	—		—		—		—			—			—			—		—				16
Other net changes in noncontrolling interests	—		—		2		—			—			—			40		42				(2		)
Net income	—		—		—		1,017			—			—			4		1,021				—
Other comprehensive income	—		—		—		—			302			—			—		302				—
Dividends:
Common stock at $0.28 per share	—		—		—		(270		)	—			—			—		(270		)		—
Preferred stock	—		—		—		(48		)	—			—			—		(48		)		—
Repurchase of common stock	—		—		—		—			—			(750		)	—		(750		)		—
Common stock issued under employee benefit plans	—		—		6		—			—			—			—		6				—
Stock awards and options exercised	—		—		49		—			—			—			—		49				—
Balance at June 30, 2019	$	3,542	$	14	$	27,406	$	30,081		$	(2,688	)	$	(16,822	)	$	166	$	41,699		(a)	$	136


(a)	Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $37,683 million at March 31, 2019 and $37,991 million at June 30, 2019.



	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, 2019	$	3,542	$	14	$	27,515		$	31,894		$	(2,638	)	$	(18,844	)	$	102		$	41,585		(a)	$	143
Impact of adopting ASU 2016-13, Financial Instruments – Credit Losses	—		—		—			45			(5		)	—			—			40				—
Adjusted balance at Jan. 1, 2020	3,542		14		27,515			31,939			(2,643		)	(18,844		)	102			41,625				143
Shares issued to shareholders of noncontrolling interests	—		—		—			—			—			—			—			—				34
Redemption of subsidiary shares from noncontrolling interests	—		—		—			—			—			—			—			—				(16		)
Other net changes in noncontrolling interests	—		—		(5		)	—			—			—			13			8				(2		)
Net income (loss)	—		—		—			1,930			—			—			(3		)	1,927				—
Other comprehensive income (loss)	—		—		—			—			700			—			—			700				(2		)
Dividends:
Common stock at $0.62 per share	—		—		—			(560		)	—			—			—			(560		)		—
Preferred stock	—		—		—			(85		)	—			—			—			(85		)		—
Repurchase of common stock	—		—		—			—			—			(988		)	—			(988		)		—
Common stock issued under employee benefit plans	—		—		15			—			—			—			—			15				—
Preferred stock issued	990		—		—			—			—			—			—			990				—
Stock awards and options exercised	—		—		177			—			—			—			—			177				—
Balance at June 30, 2020	$	4,532	$	14	$	27,702		$	33,224		$	(1,943	)	$	(19,832	)	$	112		$	43,809		(a)	$	157


(a)	Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $37,941 million at Dec. 31, 2019 and $39,165 million at June 30, 2020.

BNY Mellon 55

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

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



	The Bank of New York Mellon Corporation shareholders															Nonredeemable noncontrolling interests of consolidated investment management funds		Total permanent equity				Redeemable non- controlling interests/ temporary equity
(in millions, except per share amount)	Preferred stock		Common stock		Additional paid-in capital		Retained earnings			Accumulated other comprehensive (loss), net of tax			Treasury stock
Balance at Dec. 31, 2018	$	3,542	$	14	$	27,118	$	28,652		$	(3,171	)	$	(15,517	)	$	101	$	40,739		(a)	$	129
Reclassification of certain tax effects related to adopting ASU 2018-02	—		—		—		90			(90		)	—			—		—				—
Adjusted balance at Jan. 1, 2019	3,542		14		27,118		28,742			(3,261		)	(15,517		)	101		40,739				129
Shares issued to shareholders of noncontrolling interests	—		—		—		—			—			—			—		—				36
Redemption of subsidiary shares from noncontrolling interests	—		—		—		—			—			—			—		—				(7		)
Other net changes in noncontrolling interests	—		—		21		—			—			—			51		72				(24		)
Net income	—		—		—		1,963			—			—			14		1,977				—
Other comprehensive income	—		—		—		—			573			—			—		573				2
Dividends:
Common stock at $0.56 per share	—		—		—		(540		)	—			—			—		(540		)		—
Preferred stock	—		—		—		(84		)	—			—			—		(84		)		—
Repurchase of common stock	—		—		—		—			—			(1,305		)	—		(1,305		)		—
Common stock issued under:
Employee benefit plans	—		—		16		—			—			—			—		16				—
Direct stock purchase and dividend reinvestment plan	—		—		11		—			—			—			—		11				—
Stock awards and options exercised	—		—		240		—			—			—			—		240				—
Balance at June 30, 2019	$	3,542	$	14	$	27,406	$	30,081		$	(2,688	)	$	(16,822	)	$	166	$	41,699		(a)	$	136


(a)	Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $37,096 million at Dec. 31, 2018 and $37,991 million at June 30, 2019.

See accompanying unaudited Notes to Consolidated Financial Statements.

6256 BNY Mellon

Notes to Consolidated Financial Statements

Note ~~1 -~~ 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 in our 2019 Annual Report.

The accompanying consolidated financial statements are unaudited. In the opinion of management, all adjustments necessary 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 ~~BNY Mellon’s~~our 2019 Annual ~~Report on Form 10-K for the year ended Dec. 31, 2016.~~Report. Certain 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. Amounts subject to estimates are items such as the allowance for loan losses and lending-related commitments, the fair value of financial instruments and derivatives, other-than-temporary impairment, goodwill and other intangibles and pension accounting. Among other effects, such changes in estimates could result in future impairments of investment securities, goodwill and intangible assets and establishment of allowances for loan losses and lending-related commitments as well as changes in pension and post-retirement expense.

Note ~~2 -~~ 2–Accounting ~~change~~changes and new accounting guidance

~~ASU 2017-04, Simplifying the Test for Goodwill Impairment~~

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Simplifying the Test for Goodwill Impairment. This ASU simplifies the annual goodwill impairment test by eliminating Step 2.~~ The ~~Step 2 calculation estimated the implied goodwill using the fair values of all assets, including previously unrecorded intangibles, and liabilities at the date of the test. Step 2~~following accounting guidance was required if the first step of the annual test indicated that the fair value of a reporting unit is less than its carrying value. After adopting this ASU, the amount of any goodwill impairment will be determined by the excess of the carrying value of a reporting unit over its fair value. The Company early adopted ~~this ASU in the second quarter of 2017, in conjunction with its annual goodwill impairment test. The annual test did not result in any impairment.~~

~~ASU 2016-09, Compensation~~ – ~~Stock Compensation~~

~~In March 2016, the FASB issued ASU 2016-09,~~ ~~Compensation~~ – ~~Stock Compensation~~. This ASU simplifies several aspects of the accounting for share-based payment transactions, including income tax consequences, recognition of forfeitures and classification on the statement of cash flows. The Company adopted this ASU effective Jan. 1, 2017.

For the first nine months of 2017, we recorded an income tax benefit of $45 million related to the vesting of stock awards and option exercises in the provision for income taxes. Previously, this had been recorded directly to additional paid-in capital. The impact in future periods will vary depending on the number of restricted stock units vesting (which primarily occurs in the first quarter of ~~each year),~~2020.

Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments

In June 2016, the ~~number~~Financial Accounting Standards Board (“FASB”) issued an ASU, Financial Instruments – Credit Losses: Measurement of ~~stock options exercised~~Credit Losses on Financial Instruments. This ASU introduces a new current expected credit losses model, which applies to financial assets subject to credit losses and measured at amortized cost, including held-to-maturity securities and certain off-balance sheet credit exposures. The guidance also changes current practice for the ~~change in value since~~impairment model for available-for-sale debt securities by requiring the ~~grant date.~~

~~We continue~~use of an allowance to apply our accounting policy election for estimating forfeitures. Additionally, beginning in the quarter ended March 31, 2017, we report excess tax benefits related to stock-based compensation as operating activities on the statementrecord estimated credit losses and subsequent recoveries. The standard requires a cumulative effect of ~~cash flows and the employee taxes paid will continue~~initial application to be ~~reported as financing activities.~~recognized in retained earnings at the date of initial application.

In conjunction with adopting the new standard, we developed expected credit loss models and approaches that include consideration of multiple forecast scenarios and other methodologies. On Jan. 1, 2020, we adopted this new accounting guidance on a prospective basis and recognized a $45 million after-tax increase in retained earnings primarily attributable to a reduction to the allowance for credit losses for our commercial lending portfolios. The comparative financial information for prior periods has not been restated. See the Consolidated Balance Sheet and Notes 4 and 5 for the disclosures required by this ASU.

BNY Mellon 6357

Notes to Consolidated Financial Statements(continued)

The table below presents the reconciliation of the allowance for credit losses (pre-tax).



Allowance for credit losses
(in millions)
Allowance for credit losses – Dec. 31, 2019	$	216
Impact of adopting ASU 2016-13:
Securities	7
Loans (a)	(69		)
Other	3
Total impact of adoption of ASU 2016-13	(59		)
Reclassification of credit-related reserves on accounts receivable	4
Allowance for credit losses – Jan. 1, 2020	$	161


(a)	Includes $48 million related to loans and $21 million for lending-related commitments.

Significant accounting policies

Loans

Loans are reported at amortized cost, net of any unearned income and deferred fees and costs. Certain loan origination and upfront commitment fees, as well as certain direct loan origination and commitment costs, are deferred and amortized as a yield adjustment over the lives of the related loans. Loans held for sale are carried at the lower of cost or fair value.

Troubled debt restructuring/loan modifications

A modified loan is 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. Credit losses related to TDRs are accounted for under an individual evaluation methodology (see “Allowance for credit losses” below). Credit losses for anticipated TDRs are accounted for similarly to TDRs and are identified when there is a reasonable expectation that a TDR will be executed with the borrower and when we expect the modification to affect the timing or amount of payments and/or the payment term.

may account for eligible loan modifications either under the CARES Act or the Interagency Guidance. The Company has elected to apply both the CARES Act and the Interagency Guidance, as applicable, in providing borrowers with loan modification relief in response to the coronavirus pandemic.

The CARES Act, which became law on March 27, 2020, provides that financial institutions may, subject to certain conditions, elect to temporarily suspend the U.S. GAAP requirements with respect to loan modifications related to the coronavirus pandemic that were current as of Dec. 31, 2019 and that would otherwise be identified and treated as TDRs.

This TDR relief is applicable to modifications that were made from March 1, 2020 until the earlier of Dec. 31, 2020 or 60 days from the date the national emergency related to the coronavirus pandemic officially ends.

Various banking regulators issued guidance in the April 7, 2020 “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (revised)” (“Interagency Guidance”) on loan modification treatment pursuant to which financial institutions can apply the U.S. GAAP requirements for loan modifications. In accordance with this guidance, a loan modification is not considered a TDR if the modification is related to the coronavirus pandemic, the borrower had been current when the modification program was implemented, and the modification includes payment deferrals for not more than 6 months.

Nonperforming assets

Commercial loans are placed on nonaccrual status when principal or interest is past due 90 days or more, or when there is reasonable doubt that interest or principal will be collected.

When a first or second lien residential mortgage loan reaches 90 days delinquent, it is subject to an individual evaluation of credit loss and placed on nonaccrual status.

When a loan is placed on nonaccrual status, previously accrued and uncollected interest is reversed against current period interest revenue. Interest receipts on nonaccrual loans are recognized as interest revenue or are applied to principal when

58 BNY Mellon

Notes to Consolidated Financial Statements(continued)

we believe the ultimate collectability of principal is in doubt. Nonaccrual loans generally are restored to an accrual basis when principal and interest become current and remain current for a specified period.

“Allowance for credit losses” below provides additional information regarding the individual evaluation of credit losses for nonperforming loans.

Allowance for credit losses

The accounting policy for estimating credit losses related to financial assets measured at amortized cost, including loans and lending-related commitments changed beginning in the first quarter of 2020 as a result of the adoption of ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments. This ASU also included targeted amendments with respect to credit losses for available-for-sale debt securities. The accounting policy for determining the allowances has been identified as a “critical accounting estimate” as it requires us to make numerous complex and subjective estimates and assumptions relating to amounts which are judgmental and inherently uncertain.

Credit quality is monitored by management and is reflected within the allowance for credit losses. The allowance represents management’s estimate of expected credit losses over the expected contractual life of the financial instruments as of the balance sheet date. The allowance methodology is designed to provide procedural discipline in assessing the appropriateness of the allowance.

A quantitative methodology and qualitative framework is used to estimate the allowance for credit losses. The qualitative framework is described in further detail within “Allowance for credit losses - Other” below. The quantitative component of our estimate uses models and methodologies that categorize financial assets based on product type, collateral type, and other credit trends and risk characteristics, including relevant information about past events, current conditions and reasonable and supportable forecasts of future economic conditions that affect the collectability of the recorded amounts. The allowance may be determined using various methods, including discounted cash flow methods, loss-rate methods, probability of default methods or other methods that we determine to be appropriate. We estimate our expected credit losses using the

probability of default method for the majority of our financial assets. We measure expected credit losses of financial assets on a collective (pool) basis when similar risk characteristics exist. For a financial asset that does not share risk characteristics with other assets, expected credit losses are measured based on an individual evaluation method.

In our estimate, with the exception of our small home equity line of credit portfolio, available-for-sale debt securities, and individually evaluated financial assets, we utilize a multi-scenario macroeconomic forecast which includes a weighting of baseline, stronger near-term growth and moderate recession scenarios. This approach allows us to develop our estimate using a wide span of economic input variables. Our baseline scenario reflects a view on likely performance of each global region and the other two scenarios are designed relative to the baseline scenario. The scenarios include both a reasonable and supportable forecast period as well as a reversion period. The reasonable and supportable forecast is typically over a two to three-year horizon, followed by a reversion period in which the economic data reverts to long-term historical experience. In general, the forecasts across the alternative economic scenarios tend to revert toward the long-term trends after the forecast period, which is the period in which the confidence interval is considered reasonable and supportable. The speed at which the scenario specific forecasts revert is based on observed historical patterns of mean reversion that are reflected in our model parameter estimates. Certain macroeconomic variables such as unemployment or home prices take longer to revert after a contraction, though specific recovery times are scenario-specific. Reversion will usually take longer the further away the scenario specific forecast is from the historical mean. On a quarterly basis, within a developed governance structure, we update these scenarios for current economic conditions and may adjust the scenario weighting based on our economic outlook.

Allowance for credit losses - Loans and lending-related commitments

The allowance for credit losses on loans is presented as a valuation allowance to loans, and the allowance for credit losses on lending-related commitments is recorded in other liabilities. The components of the allowance for credit losses on loans and lending-related commitments consist of the following three elements:

BNY Mellon 59

Notes to Consolidated Financial Statements(continued)

a pooled allowance component for higher risk-rated and pass-rated commercial and institutional credits;

a pooled allowance component for residential mortgage loans; and

an asset-specific allowance component involving individually evaluated credits of $1 million or greater.

The first element, a pooled allowance component for higher risk-rated and pass-rated commercial and institutional credits, is based on our expected credit loss model. Individual credit analyses are performed on such loans before being assigned a credit rating. All borrowers are collectively evaluated based on their credit rating. The loss expected in each loan incorporates the borrower’s credit rating, facility rating and maturity. The loss given default, derived from the facility rating, incorporates a recovery expectation, and for unfunded lending exposures, an estimate of the use of the facility at default (usage given default). The borrower’s probability of default is derived from the associated credit rating. For each of the different parameters, specific credit models are developed for each segment of our portfolio, including commercial loans and lease financing, commercial real estate, financial institutions, and other. Segmentation is established based on risk characteristics of the loans and how risk is monitored. We use both internal and external data in the development of these parameters. In estimating the term of the exposures and resulting effect on the measurement of expected credit loss, we consider the impact of potential prepayments as well as the effect of borrower extension options. Borrower ratings are reviewed at least annually and are periodically mapped to third-party databases, including rating agency and default and recovery databases, to ensure ongoing consistency and validity. Higher risk-rated loans and lending-related commitments are reviewed quarterly.

The second element, a pooled allowance component for residential mortgage loans, is determined by first segregating our mortgage pools into two categories: (i) our wealth management mortgages and (ii) our legacy mortgage portfolio disclosed as other residential mortgages. We then apply models to each portfolio to predict prepayments, default rates and loss severity. We consider historical loss experience and use a loan-level, multi-period default model which further segments each portfolio by product

type including first lien fixed rate mortgages, first lien adjustable rate mortgages, second lien mortgages, and interest-only mortgages. We calculate the mortgage loss up to loan contractual maturity and embed a reasonable and supportable forecast and macroeconomic variable inputs which are described above. For home equity lines of credit, probability of default and loss given default are based on external data from third-party databases due to the small size of the portfolio and limited internal data. Our legacy mortgage portfolio and home equity line of credit portfolios represent small sub-segments of our mortgage loans.

The third element, individually evaluated credits, is based on individual analysis of loans of $1 million and greater which no longer share the risk characteristics with other loans. Factors we consider in measuring the extent of expected credit loss include the payment status, collateral value, the borrower’s financial condition, guarantor support, the probability of collecting scheduled principal and interest payments when due, anticipated modifications of payment structure or term for troubled borrowers, and recoveries if they can be reasonably estimated. We measure the expected credit loss as the difference between the amortized cost basis in the loan and the present value of the expected future cash flows from the borrower which is generally discounted at the loan’s effective interest rate, or the fair value of the collateral, if the loan is collateral dependent. We generally consider nonperforming loans as well as loans that have been or are anticipated to be modified under a troubled debt restructuring for individual evaluation given the risk characteristics of such loans.

Allowance for credit losses - Securities - Debt

When estimating expected credit losses, we segment our available-for-sale and held-to-maturity debt securities portfolios by major asset class. This is influenced by whether the security is structured or non-structured (i.e., direct obligation), as well as the issuer type.

Debt securities are classified as available-for-sale securities when we intend to hold the securities for an indefinite period of time or when the securities may be used for tactical asset/liability management purposes and may be sold from time to time to effectively manage interest rate exposure, prepayment risk and liquidity needs. Available-for-sale securities

60 BNY Mellon

Notes to Consolidated Financial Statements(continued)

are measured at fair value. The difference between fair value and amortized cost represents the unrealized gains or losses on assets classified as available-for-sale, and is recorded net of tax as an addition to, or deduction from, other comprehensive income, unless we determine that this difference or a portion thereof represents an expected credit loss. If we determine that a credit loss exists, the amount is recognized as an allowance for credit losses in securities - available-for sale, with a corresponding adjustment to the provision for credit losses. We evaluate credit losses at the individual security level and do not recognize credit losses if the fair value exceeds amortized cost, and if we determine that a credit loss exists, we limit the recognition of the loss to the difference between fair value and amortized cost. In our determination of whether an expected credit loss exists, we routinely conduct periodic reviews and examine various quantitative and qualitative factors that are unique to each portfolio, including the severity of the unrealized loss position, agency rating, credit enhancement, cash flow deterioration and other factors. The measurement of an expected credit loss is then based on the best estimate of the present value of cash flows to be collected from the debt security. Generally, cash flows are discounted at the effective interest rate implicit in the debt security. Changes to the present value of cash flows due to the passage of time are recognized within the allowance for credit losses.

We estimate expected credit losses for held-to-maturity debt securities using a similar methodology as described in the first allowance element within “Allowance for credit losses - Loans and lending-related commitments” above. The allowance for credit losses on held-to-maturity debt securities are recorded in securities - held-to-maturity. The components of the credit loss calculation for each major portfolio or asset class include a probability of default and loss given default and their values depend on the forecast behavior of variables in the macroeconomic environment. For structured debt securities, we estimated expected credit losses at the individual security level and use a cash flow model to project principal losses. Generally, cash flows are discounted at the effective interest rate implicit in the debt security. The difference is reflected in the allowance for credit losses, and changes to the present value of cash flows due to the passage of time are recognized within the allowance for credit losses.

We currently do not require an estimate of expected credit losses to be measured and recorded for U.S. Treasury securities, agency debt securities, as well as other debt securities that meet certain conditions that are based on a combination of factors such as guarantees, credit ratings, and other credit quality factors. These assets are monitored within our established governance structure on a recurring basis to determine if any changes are warranted.

Allowance for credit losses – Other financial instruments

We also estimate expected credit losses associated with margin loans, reverse repurchase agreements, security lending indemnifications, and deposits with third-party financial institutions using a similar methodology as described in the first allowance element within “Allowance for credit losses - Loans and lending-related commitments” above. The allowance for credit losses on reverse repurchase agreements are recorded in federal funds sold and securities purchased under resale agreements; the allowance for credit losses on securities lending indemnifications is recorded in other liabilities and the allowance for credit losses on deposits with third party financial institutions is recorded in cash and due from banks or interest-bearing deposits with banks. Our reverse repurchase agreements are short term and subject to continuous overcollateralization by our counterparties and timely collateral replenishment, when necessary. As a result, we estimate the expected credit loss related to the uncollateralized portion of the asset at the balance sheet date, if any, and when there is a reasonable expectation that the counterparty will not replenish the collateral in compliance with the terms of the repurchase agreement. This method is also applied to margin lending arrangements and securities lending indemnifications.

Allowance for credit losses - Other

We do not apply our credit loss measurement methodologies to accrued interest receivable balances related to our loan, debt securities and deposits with third party financial institutions assets given our nonaccrual policy that requires charge-off of interest receivable when deemed uncollectible. Accrued interest receivable related to these instruments is presented in total with other interest-bearing instruments in the consolidated balance sheet. Accrued interest receivable related to each major loan

BNY Mellon 61

Notes to Consolidated Financial Statements(continued)

class is disclosed within our credit quality disclosure in Note ~~3 - Acquisitions~~5.

Our policy for credit losses related to purchased financial assets requires an evaluation to be performed prior to the effective purchase date to determine if more than an insignificant decline in credit quality has occurred during the period between the origination and purchase date, or in the case of debt securities, the period between the issuance and purchase date. If we purchase a financial asset with more than insignificant deterioration in credit quality, the measurement of expected credit loss is performed using the methodologies described above, and the credit loss is recorded as an allowance for credit losses on the purchase date. Subsequent to purchase, changes (favorable and unfavorable) in expected cash flows are recognized immediately in net income by adjusting the allowance. We evaluate various factors in the determination of whether a more than an insignificant decline in credit quality has occurred and these factors vary depending upon the type of asset purchased. Such factors include changes in risk rating and/or agency rating, collateral deterioration, payment status, purchase price, credit spreads, and other factors. We did not purchase any such assets during the first six months of 2020 and did not own such assets as of June 30, 2020.

We apply a separate credit loss methodology to accounts receivables to estimate the expected credit losses associated with these short-term receivables which historically have not resulted in significant credit losses. The allowance for credit losses on accounts receivable is reflected in other assets.

The qualitative component of our estimate for the allowance for credit losses is intended to capture expected losses that may not have been fully captured in the quantitative component. Through an established governance structure, management determines the qualitative allowance each period based on an evaluation of various internal and environmental factors which include: scenario weighting and sensitivity risk, credit concentration risk, economic conditions and other considerations. We may also make adjustments for idiosyncratic

risks. Once determined in the aggregate, our qualitative allowance is then allocated to each of our financial instrument portfolios except for debt securities and those instruments carried in other assets based on the respective instruments’ quantitative allowance balances. The allocation of this additional 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 loss.

Note 3–Acquisitions and dispositions

We sometimes structure our acquisitions with both an initial payment and later contingent payments tied to post-closing revenue or income growth. Contingent payments totaled $2$3 million in the ~~third~~second quarter of ~~2017~~2020 and the first ~~nine~~six months of ~~2017.~~2020.

At ~~Sept.~~June 30, ~~2017,~~2020, we are potentially obligated to pay additional consideration which, using reasonable assumptions, could range from $0$5 million to $1610 millionover the nexttwo years, but could be higher as certain of the arrangements do not contain a contractual maximum.~~The acquisition described below did~~ ~~not have a material impact on BNY Mellon’s results of operations.~~

~~Acquisition~~Transaction in ~~2016~~2019

On ~~April 1, 2016,~~Nov. 8, 2019, BNY Mellon, ~~acquired~~along with the ~~assets~~other holders of ~~Atherton Lane Advisers,~~Promontory Interfinancial Network, LLC ~~a U.S.-based investment manager with approximately $2.45 billion~~(“PIN”), completed the sale of their interests in ~~AUM and servicer for approximately 700 high-net-worth clients, for cash~~PIN. BNY Mellon recorded an after-tax gain of ~~$38~~$622 million ~~plus contingent payments measured at $22 million. Goodwill related to~~on the sale of this acquisition totaled $29 million and is included in the Investment Management business. The customer relationship intangible asset related to this acquisition is included in the Investment Management business, with an estimated life of 14 years, and totaled $30 million at acquisition.equity investment.

Note ~~4 -~~ 4–Securities

On Jan. 1, 2020, we adopted ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments on a prospective basis. See Note 2 for the significant accounting policy related to securities.

The following tables present the amortized cost, the gross unrealized gains and losses and the fair value of securities at ~~Sept.~~June 30, ~~2017~~2020 and Dec. 31, ~~2016.~~2019.

Securities at Sept. 30, 2017
Gross
unrealized

Amortized cost
Fair
value

(in millions) Gains
Losses
Available-for-sale:
U.S. Treasury $ 15,389
$ 236
$ 123
$ 15,502
U.S. government agencies 866
4
6
864
State and political subdivisions 3,091
57
24
3,124
Agency RMBS 24,546
135
250
24,431
Non-agency RMBS 491
37
3
525
Other RMBS 270
3
8
265
Commercial MBS 960
9
4
965
Agency commercial MBS 9,026
41
57
9,010
CLOs 2,542
9
1
2,550
Other asset-backed securities 1,152
5
—
1,157
Foreign covered bonds 2,529
20
7
2,542
Corporate bonds 1,262
21
8
1,275
Sovereign debt/sovereign guaranteed 12,393
195
23
12,565
Other debt securities 3,149
12
10
3,151
Equity securities 2
2
—
4
Money market funds 939
—
—
939
Non-agency RMBS (a)
885
304
4
1,185
Total securities available-for-sale (b)
$ 79,492
$ 1,090
$ 528
$ 80,054
Held-to-maturity:
U.S. Treasury $ 9,867
$ 21
$ 29
$ 9,859
U.S. government agencies 1,614
—
6
1,608
State and political subdivisions 18
—
1
17
Agency RMBS 25,575
96
185
25,486
Non-agency RMBS 64
5
—
69
Other RMBS 65
—
1
64
Commercial MBS 6
—
—
6
Agency commercial MBS 1,118
5
5
1,118
Foreign covered bonds 83
1
—
84
Sovereign debt/sovereign guaranteed 1,558
32
—
1,590
Other debt securities 27
—
—
27
Total securities held-to-maturity $ 39,995
$ 160
$ 227
$ 39,928
Total securities $ 119,487
$ 1,250
$ 755
$ 119,982


~~(a)~~	~~Previously included in the Grantor Trust. The Grantor Trust was dissolved in 2011.~~

~~(b)~~

Includes gross unrealized gains of $53 million and gross unrealized losses of $155 million recorded in accumulated other comprehensive income related to investment securities that were transferred from available-for-sale to held-to-maturity. The unrealized gains and losses are primarily related to Agency RMBS and will be amortized into net interest revenue over the contractual lives of the securities.

6462 BNY Mellon

Notes to Consolidated Financial Statements(continued)


Securities at Dec. 31, 2016			Gross unrealized
Securities at June 30, 2020							Securities at June 30, 2020		Gross unrealized				Fair value
	Amortized cost				Gross unrealized										Fair value		Amortized cost
(in millions)			Gains						Losses
Available-for-sale:
Agency RMBS									$	26,005	$	516	$	84	$	26,437
U.S. Treasury									23,537		1,600		—		25,137
Sovereign debt/sovereign guaranteed									15,724		165		2		15,887
Agency commercial mortgage-backed securities (“MBS”)									9,357		633		2		9,988
Foreign covered bonds									5,469		53		3		5,519
Supranational									5,385		64		1		5,448
Collateralized loan obligations (“CLOs”)									4,526		4		98		4,432
Foreign government agencies									3,536		42		—		3,578
U.S. government agencies									2,635		173		2		2,806
Other asset-backed securities (“ABS”)									2,724		29		10		2,743
Non-agency commercial MBS									2,517		129		16		2,630
Commercial paper/certificates of deposit (“CDs”)									1,849		4		—		1,853
Non-agency RMBS (a)									1,464		149		15		1,598
State and political subdivisions									1,150		31		2		1,179
Corporate bonds									789		42		—		831
Other debt securities									1		—		—		1
Total securities available-for-sale (b)(c)									$	106,668	$	3,634	$	235	$	110,067
Held-to-maturity:
Agency RMBS									$	32,869	$	1,108	$	9	$	33,968
U.S. Treasury	$	14,373	$	115	$	181	$	14,307	4,687		114		1		4,800
U.S. government agencies	366		2		9		359		2,349		6		3		2,352
Agency commercial MBS									1,982		108		—		2,090
Commercial paper/CDs									1,537		2		—		1,539
Sovereign debt/sovereign guaranteed									974		41		—		1,015
Foreign covered bonds									79		—		—		79
Non-agency RMBS									73		3		2		74
Supranational									49		—		—		49
State and political subdivisions	3,392		38		52		3,378		16		1		—		17
Agency RMBS	22,929		148		341		22,736
Non-agency RMBS	620		31		13		638
Other RMBS	517		4		8		513
Commercial MBS	931		8		11		928
Agency commercial MBS	6,505		28		84		6,449
CLOs	2,593		6		1		2,598
Other asset-backed securities	1,729		4		6		1,727
Foreign covered bonds	2,126		24		9		2,141
Corporate bonds	1,391		22		17		1,396
Sovereign debt/sovereign guaranteed	12,248		261		20		12,489
Other debt securities	1,952		19		10		1,961
Equity securities	2		1		—		3
Money market funds	842		—		—		842
Non-agency RMBS (a)	1,080		286		9		1,357
Total securities available-for-sale (b)	$	73,596	$	997	$	771	$	73,822
Held-to-maturity:
U.S. Treasury	$	11,117	$	22	$	41	$	11,098
U.S. government agencies	1,589		—		6		1,583
State and political subdivisions	19		—		1		18
Agency RMBS	25,221		57		299		24,979
Non-agency RMBS	78		4		2		80
Other RMBS	142		—		4		138
Commercial MBS	7		—		—		7
Agency commercial MBS	721		1		10		712
Foreign covered bonds	74		1		—		75
Sovereign debt/sovereign guaranteed	1,911		42		—		1,953
Other debt securities	26		—		—		26
Total securities held-to-maturity	$	40,905	$	127	$	363	$	40,669	$	44,615	$	1,383	$	15	$	45,983
Total securities	$	114,501	$	1,124	$	1,134	$	114,491	$	151,283	$	5,017	$	250	$	156,050


(a)	~~Previously~~Includes $538 million that was included in the former Grantor Trust. ~~The Grantor Trust was dissolved in 2011.~~


(b)	In the first quarter of 2020, we adopted new accounting guidance included in ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, on a prospective basis. The allowance for credit loss on available-for-sale securities of $12 millionprimarily relates to CLOs. See Note 2 for additional information.

(c)

Includes gross unrealized gains of ~~$62~~$28 million and gross unrealized losses of ~~$190~~$55 million recorded in accumulated other comprehensive income related to ~~investment~~ securities that were transferred from available-for-sale to held-to-maturity. The unrealized gains and losses are primarily related to Agency RMBS and will be amortized into net interest revenue over the contractual lives of the securities.



Securities at Dec. 31, 2019			Gross unrealized
	Amortized cost						Fair value
(in millions)			Gains		Losses
Available-for-sale:
Agency RMBS	$	27,022	$	164	$	143	$	27,043
U.S. Treasury	14,979		472		20		15,431
Sovereign debt/sovereign guaranteed	12,548		109		11		12,646
Agency commercial MBS	9,231		203		17		9,417
Foreign covered bonds	4,189		15		7		4,197
CLOs	4,078		1		16		4,063
Supranational	3,697		18		6		3,709
Foreign government agencies	2,638		7		2		2,643
Non-agency commercial MBS	2,134		46		2		2,178
Other ABS	2,141		7		5		2,143
U.S. government agencies	1,890		61		2		1,949
Non-agency RMBS (a)	1,038		202		7		1,233
State and political subdivisions	1,017		27		—		1,044
Corporate bonds	832		21		—		853
Other debt securities	1		—		—		1
Total securities available-for-sale (b)	$	87,435	$	1,353	$	238	$	88,550
Held-to-maturity:
Agency RMBS	$	27,357	$	292	$	46	$	27,603
U.S. Treasury	3,818		28		3		3,843
Agency commercial MBS	1,326		21		3		1,344
U.S. government agencies	1,023		1		2		1,022
Sovereign debt/sovereign guaranteed	756		31		—		787
Non-agency RMBS	80		4		1		83
Foreign covered bonds	79		—		—		79
Supranational	27		—		—		27
State and political subdivisions	17		—		—		17
Total securities held-to-maturity	$	34,483	$	377	$	55	$	34,805
Total securities	$	121,918	$	1,730	$	293	$	123,355


(a)	Includes $640 million that was included in the former Grantor Trust.


(b)	Includes gross unrealized gains of $32 million and gross unrealized losses of $65 million recorded in accumulated other comprehensive income related to securities that were transferred from available-for-sale to held-to-maturity. The unrealized gains and losses are primarily related to Agency RMBS and will be amortized into net interest revenue over the contractual lives of the securities.

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



Net securities gains (losses)
(in millions)	2Q20			1Q20			2Q19			YTD20			YTD19
Realized gross gains	$	16		$	12		$	12		$	28		$	17
Realized gross losses	(7		)	(3		)	(5		)	(10		)	(9		)
Recognized gross impairments	—			—			—			—			—
Total net securities gains	$	9		$	9		$	7		$	18		$	8

BNY Mellon 63

Net securities gains (losses)
(in millions) 3Q17
2Q17
3Q16
YTD17
YTD16
Realized gross gains $ 20
$ 3
$ 26
$ 34
$ 71
Realized gross losses —
(2 ) (1 ) (2 ) (1 )
Recognized gross impairments (1 ) (1 ) (1 ) (3 ) (5 )
Total net securities gains $ 19
$ —
$ 24
$ 29
$ 65

Notes to Consolidated Financial Statements(continued)

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



Net securities gains
(in millions)	2Q20		1Q20		2Q19		YTD20		YTD19
Supranational	$	6	$	—	$	—	$	6	$	—
U.S. Treasury	1		5		3		6		4
Other	2		4		4		6		4
Total net securities gains	$	9	$	9	$	7	$	18	$	8

Allowance for credit losses - Securities

In ~~September 2017, other residential mortgage-backed~~the first quarter of 2020, we adopted new accounting guidance included in ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, on a prospective basis. The allowance for credit losses related to securities ~~with an aggregate amortized cost~~was $7 million on Jan. 1, 2020 and $12 million at June 30, 2020. The increase reflects additional credit deterioration in the available-for-sale CLO portfolio. For additional information about the review of ~~$74 million~~securities under previous other-than-temporary impairment guidance, refer to Notes 1 and ~~fair value of $76 million were transferred from held-to-maturity securities~~4, both Notes to ~~available-for-sale securities. Due to recent ratings downgrades, the Company no longer intends to hold these securities to maturity.~~Consolidated Financial Statements, in our 2019 Annual Report.

~~Temporarily impaired securities~~

Credit quality indicators - Securities

At ~~Sept.~~June 30, ~~2017,~~2020, the gross unrealized losses on the ~~investment~~ securities portfolio were primarily attributable to an increase in ~~interest rates~~credit spreads 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, ~~$155~~$55 million of the unrealized losses at ~~Sept.~~June 30, ~~2017~~2020 and ~~$190~~$65 million at Dec. 31, ~~2016~~2019 reflected in the available-for-sale sections of the tables below relate to certain securities (primarily Agency RMBS) that were transferred in prior periods 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 fair value and unrealized losses would be reflected in the held-to-maturity sections of 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.

64 BNY Mellon 65

Notes to Consolidated Financial Statements(continued)

The following ~~tables show~~table shows the aggregate ~~related~~ fair value of ~~investments~~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 ~~at Sept. 30, 2017 and Dec. 31, 2016.~~without an allowance for credit losses.

Temporarily impaired securities at Sept. 30, 2017 Less than 12 months 12 months or more Total
(in millions) Fair
value
Unrealized
losses
Fair
value
Unrealized
losses
Fair
value
Unrealized
losses
Available-for-sale:
U.S. Treasury $ 7,900
$ 111
$ 495
$ 12
$ 8,395
$ 123
U.S. government agencies 399
6
—
—
399
6
State and political subdivisions 310
4
384
20
694
24
Agency RMBS 8,935
72
4,145
178
13,080
250
Non-agency RMBS 5
—
156
3
161
3
Other RMBS 72
4
83
4
155
8
Commercial MBS 193
2
92
2
285
4
Agency commercial MBS 3,610
47
561
10
4,171
57
CLOs 449
1
—
—
449
1
Foreign covered bonds 1,017
7
28
—
1,045
7
Corporate bonds 306
3
144
5
450
8
Sovereign debt/sovereign guaranteed 2,263
20
137
3
2,400
23
Other debt securities 1,347
9
84
1
1,431
10
Non-agency RMBS (a)
8
2
13
2
21
4
Total securities available-for-sale (b)
$ 26,814
$ 288
$ 6,322
$ 240
$ 33,136
$ 528
Held-to-maturity:
U.S. Treasury $ 7,281
$ 29
$ —
$ —
$ 7,281
$ 29
U.S. government agencies 1,459
5
99
1
1,558
6
State and political subdivisions —
—
4
1
4
1
Agency RMBS 17,125
172
847
13
17,972
185
Other RMBS 15
—
35
1
50
1
Agency commercial MBS 557
5
—
—
557
5
Total securities held-to-maturity $ 26,437
$ 211
$ 985
$ 16
$ 27,422
$ 227
Total temporarily impaired securities $ 53,251
$ 499
$ 7,307
$ 256
$ 60,558
$ 755



Available-for-sale securities in an unrealized loss position at June 30, 2020 (a)	Less than 12 months				12 months or more				Total
	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
(in millions)
Agency RMBS	$	2,809	$	5	$	6,030	$	79	$	8,839	$	84
Sovereign debt/sovereign guaranteed	1,952		2		110		—		2,062		2
Agency commercial MBS	266		—		350		2		616		2
Foreign covered bonds	1,003		2		281		1		1,284		3
Supranational	931		1		233		—		1,164		1
CLOs	3,522		68		575		19		4,097		87
U.S. government agencies	79		2		—		—		79		2
Other ABS	760		6		203		4		963		10
Non-agency commercial MBS	476		15		39		1		515		16
Non-agency RMBS (b)	508		7		96		7		604		14
State and political subdivisions	79		2		2		—		81		2
Total securities available-for-sale (c)	$	12,385	$	110	$	7,919	$	113	$	20,304	$	223


(a)	~~Previously included in the Grantor Trust. The Grantor Trust was dissolved in 2011.~~Includes $530 million of securities with an unrealized loss of greater than $1 million.


(b)	~~Gross~~Includes $42 million of securities with an unrealized ~~losses~~loss of $1 million for less than 12 months and $1 million of securities with an unrealized loss of less than $1 million for 12 months or more that were included in the former Grantor Trust.

(c)

Includes gross unrealized losses of ~~$155~~$55 million ~~were~~for 12 months or more recorded in accumulated other comprehensive income ~~and~~ related to ~~investment~~ securities that were transferred from available-for-sale to held-to-maturity. The unrealized losses are primarily related to Agency RMBS and will be amortized into net interest revenue over the contractual lives of the securities. There were no0 gross unrealized losses for less than 12 months.

~~66 BNY Mellon~~

The following table presents the temporarily impaired securities under the disclosure guidance that existed prior to the adoption of ASU 2016-13 and shows 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.

~~Notes to Consolidated Financial Statements(continued)~~


Temporarily impaired securities at Dec. 31, 2016	Less than 12 months				12 months or more				Total
Temporarily impaired securities at Dec. 31, 2019													Less than 12 months				12 months or more				Total
(in millions)	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Available-for-sale:
Agency RMBS													$	8,373	$	33	$	5,912	$	110	$	14,285	$	143
U.S. Treasury	$	8,489	$	181	$	—	$	—	$	8,489	$	181	1,976		16		766		4		2,742		20
Sovereign debt/sovereign guaranteed													4,045		10		225		1		4,270		11
Agency commercial MBS													1,960		12		775		5		2,735		17
Foreign covered bonds													1,009		4		690		3		1,699		7
CLOs													1,066		2		1,499		14		2,565		16
Supranational													1,336		6		360		—		1,696		6
Foreign government agencies													1,706		2		47		—		1,753		2
Non-agency commercial MBS													525		2		45		—		570		2
Other ABS													456		3		305		2		761		5
U.S. government agencies	257		9		—		—		257		9		377		2		—		—		377		2
Non-agency RMBS (a)													101		—		113		7		214		7
State and political subdivisions	1,058		33		131		19		1,189		52		—		—		16		—		16		—
Agency RMBS	14,766		141		1,673		200		16,439		341
Non-agency RMBS	21		—		332		13		353		13
Other RMBS	26		—		136		8		162		8
Commercial MBS	302		7		163		4		465		11
Agency commercial MBS	3,570		78		589		6		4,159		84
CLOs	443		1		404		—		847		1
Other asset-backed securities	276		1		357		5		633		6
Foreign covered bonds	712		9		—		—		712		9
Corporate bonds	594		16		7		1		601		17		82		—		21		—		103		—
Sovereign debt/sovereign guaranteed	1,521		20		63		—		1,584		20
Other debt securities	742		10		50		—		792		10
Non-agency RMBS (a)	25		—		47		9		72		9
Total securities available-for-sale (b)	$	32,802	$	506	$	3,952	$	265	$	36,754	$	771	$	23,012	$	92	$	10,774	$	146	$	33,786	$	238
Held-to-maturity:
U.S. Treasury	$	6,112	$	41	$	—	$	—	$	6,112	$	41
U.S. government agencies	1,533		6		—		—		1,533		6
State and political subdivisions	—		—		4		1		4		1
Agency RMBS	19,498		297		102		2		19,600		299
Non-agency RMBS	4		—		48		2		52		2
Other RMBS	15		—		123		4		138		4
Agency commercial MBS	621		10		—		—		621		10
Total securities held-to-maturity	$	27,783	$	354	$	277	$	9	$	28,060	$	363
Total temporarily impaired securities	$	60,585	$	860	$	4,229	$	274	$	64,814	$	1,134


(a)	~~Previously~~Includes $2 million of securities with an unrealized loss of less than $1 million for less than 12 months and $2 million of securities with an unrealized loss of less than $1 million for 12 months or more that were included in the former Grantor Trust. ~~The Grantor Trust was dissolved in 2011.~~

(b)

Includes gross unrealized losses of $65 million for 12 months or more ~~of $190 million~~ recorded in accumulated other comprehensive income related to ~~investment~~ securities that were transferred from available-for-sale to held-to-maturity. The unrealized losses are primarily related to Agency RMBS and will be amortized into net interest revenue over the contractual lives of the securities. There were no0 gross unrealized losses for less than 12 months.

BNY Mellon 65

Notes to Consolidated Financial Statements(continued)

The following table shows 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 a reduction in the fair value of our securities portfolio.



Held-to-maturity securities portfolio at June 30, 2020 (a)					Ratings (b)
			Net unrealized gain								BB+ and lower		A1+/A2/SP-1+
(dollars in millions)	Amortized cost		Net unrealized gain		AAA/ AA-		A+/ A-		BBB+/ BBB-		BB+ and lower		A1+/A2/SP-1+		Not rated
Agency RMBS	$	32,869	$	1,099	100	%	—	%	—	%	—	%	—	%	—	%
U.S. Treasury	4,687		113		100		—		—		—		—		—
U.S. government agencies	2,349		3		100		—		—		—		—		—
Agency commercial MBS	1,982		108		100		—		—		—		—		—
Commercial paper/CDs	1,537		2		—		—		—		—		100		—
Sovereign debt/sovereign guaranteed (c)	974		41		100		—		—		—		—		—
Foreign covered bonds (d)	79		—		100		—		—		—		—		—
Non-agency RMBS	73		1		42		43		2		12		—		1
Supranational	49		—		100		—		—		—		—		—
State and political subdivisions	16		1		6		2		6		—		—		86
Total held-to-maturity securities	$	44,615	$	1,368	96	%	1	%	—	%	—	%	3	%	—	%


(a)	In the first quarter of 2020, we adopted new accounting guidance included in ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, on a prospective basis. See Note 2 for additional information.


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


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


(d)	Primarily consists of exposure to Canada.

Maturity distribution

The following table shows the maturity distribution by carrying amount and yield (on a tax equivalent basis) of our ~~investment~~ securities ~~portfolio at~~ ~~Sept. 30, 2017~~.portfolio.


Maturity distribution and yield on investment securities at Sept. 30, 2017	U.S. Treasury				U.S. government agencies				State and political subdivisions				Other bonds, notes and debentures				Mortgage/ asset-backed and equity securities
Maturity distribution and yields on securities at June 30, 2020																							U.S. Treasury				U.S. government agencies				State and political subdivisions				Other bonds, notes and debentures				Mortgage/ asset-backed
(dollars in millions)	Amount		Yield (a)		Amount		Yield (a)		Amount		Yield (a)		Amount		Yield (a)		Amount		Yield (a)		Total		Amount		Yield (a)		Amount		Yield (a)		Amount		Yield (a)		Amount		Yield (a)		Amount		Yield (a)		Total
Securities available-for-sale:
One year or less	$	2,223	1.02	%	$	—	—	%	$	438	2.60	%	$	3,852	1.01	%	$	—	—	%	$	6,513	$	5,348	0.50	%	$	25	2.55	%	$	178	2.92	%	$	13,826	0.71	%	$	—	—	%	$	19,377
Over 1 through 5 years	5,790		1.66		174		1.29		1,576		3.07		12,648		0.99		—		—		20,188		10,350		1.52		1,038		1.22		646		3.29		16,098		0.68		—		—		28,132
Over 5 through 10 years	4,002		1.90		690		2.46		912		3.34		2,835		0.81		—		—		8,439		6,171		1.67		1,623		2.56		107		2.42		2,838		0.53		—		—		10,739
Over 10 years	3,487		3.11		—		—		198		2.36		198		1.64		—		—		3,883		3,268		3.11		120		2.06		248		2.37		355		0.97		—		—		3,991
Mortgage-backed securities	—		—		—		—		—		—		—		—		36,381		2.78		36,381		—		—		—		—		—		—		—		—		40,653		2.24		40,653
Asset-backed securities	—		—		—		—		—		—		—		—		3,707		2.32		3,707		—		—		—		—		—		—		—		—		7,175		2.18		7,175
Equity securities (b)	—		—		—		—		—		—		—		—		943		—		943
Total	$	15,502	1.96	%	$	864	2.23	%	$	3,124	3.04	%	$	19,533	0.97	%	$	41,031	2.68	%	$	80,054	$	25,137	1.54	%	$	2,806	2.04	%	$	1,179	2.96	%	$	33,117	0.69	%	$	47,828	2.23	%	$	110,067
Securities held-to-maturity:
One year or less	$	4,943	0.97	%	$	731	0.99	%	$	—	—	%	$	700	0.60	%	$	—	—	%	$	6,374	$	1,899	0.41	%	$	—	—	%	$	—	—	%	$	1,646	1.21	%	$	—	—	%	$	3,545
Over 1 through 5 years	3,517		1.67		883		1.38		2		6.88		307		0.59		—		—		4,709		2,788		1.91		1,696		1.12		3		5.66		919		0.66		—		—		5,406
Over 5 through 10 years	1,407		1.92		—		—		2		6.86		661		0.73		—		—		2,070		—		—		212		1.98		—		—		31		0.92		—		—		243
Over 10 years	—		—		—		—		14		5.32		—		—		—		—		14		—		—		441		2.33		13		4.76		43		0.35		—		—		497
Mortgage-backed securities	—		—		—		—		—		—		—		—		26,828		2.80		26,828		—		—		—		—		—		—		—		—		34,924		2.87		34,924
Total	$	9,867	1.36	%	$	1,614	1.20	%	$	18	5.64	%	$	1,668	0.65	%	$	26,828	2.80	%	$	39,995	$	4,687	1.32	%	$	2,349	1.42	%	$	16	4.91	%	$	2,639	1.00	%	$	34,924	2.87	%	$	44,615


(a)	Yields are based upon the amortized cost of securities.


~~(b)~~	~~Includes money market funds.~~

66 BNY Mellon 67

Notes to Consolidated Financial Statements(continued)

~~Other-than-temporary impairment~~

We conduct periodic reviews of all securities to determine whether OTTI has occurred. Such reviews may incorporate the use of economic models. Various inputs to the economic models are used to determine if an unrealized loss on securities is other-than-temporary. For example, the most significant inputs related to non-agency RMBS are:

Default rate - the number of mortgage loans expected to go into default over the life of the transaction, which is driven by the roll rate of loans in each performance bucket that will ultimately migrate to default; and

~~Severity - the loss expected to be realized when a loan defaults.~~

To determine if an unrealized loss is other-than-temporary, we project total estimated defaults of the underlying assets (mortgages) and multiply that calculated amount by an estimate of realizable value upon sale of these assets in the marketplace (severity) in order to determine the projected collateral loss. In determining estimated default rate and severity assumptions, we review the performance of the underlying securities, industry studies and market forecasts, as well as our view of the economic outlook affecting collateral. We also evaluate the current credit enhancement underlying the bond to determine the impact on cash flows. If we determine that a given security will be subject to a write-down or loss, we record the expected credit loss as a charge to earnings.

The table below shows the projected weighted-average default rates and loss severities for the 2007, 2006 and late 2005 non-agency RMBS and the securities previously held in the Grantor Trust that we established in connection with the restructuring of our investment securities portfolio in 2009, at ~~Sept. 30, 2017~~ ~~and~~ ~~Dec. 31, 2016~~.

Projected weighted-average default rates and loss severities
Sept. 30, 2017 Dec. 31, 2016
Default rate
Severity
Default rate
Severity
Alt-A 22 % 54 % 30 % 54 %
Subprime 38 % 66 % 49 % 70 %
Prime 13 % 39 % 18 % 39 %

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

The following tables reflect investment securities credit losses recorded in earnings. The beginning balance represents the credit loss component for which OTTI occurred on debt securities in prior periods. The additions represent the first time a debt security was credit impaired or when subsequent credit impairments have occurred. The deductions represent credit losses on securities that have been sold, are required to be sold, or for which it is our intention to sell.

Debt securities credit loss roll forward
(in millions) 3Q17
3Q16
Beginning balance as of June 30 $ 85
$ 91
Add: Initial OTTI credit losses —
—
Subsequent OTTI credit losses 1
1
Less: Realized losses for securities sold 2
5
Ending balance as of Sept. 30 $ 84
$ 87

Debt securities credit loss roll forward
(in millions) YTD17
YTD16
Beginning balance as of Jan. 1 $ 88
$ 91
Add: Initial OTTI credit losses —
—
Subsequent OTTI credit losses 3
5
Less: Realized losses for securities sold 7
9
Ending balance as of Sept. 30 $ 84
$ 87

Pledged assets

At ~~Sept.~~June 30, ~~2017,~~2020, BNY Mellon had pledged assets of ~~$108~~$139 billion, including ~~$87~~$109 billion pledged as collateral for potential borrowings at the Federal Reserve Discount Window and $4$6 billion pledged as collateral for borrowing at the Federal Home Loan Bank. The components of the assets pledged at ~~Sept.~~June 30, ~~2017~~2020 included ~~$92~~$121 billion of securities, ~~$13~~$12 billion of loans, $2$5 billion of trading assets and $1 billion of interest-bearing deposits with banks.

~~68 BNY Mellon~~

~~Notes to Consolidated Financial Statements(continued)~~

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, ~~2016,~~2019, BNY Mellon had pledged assets of ~~$102~~$118 billion, including ~~$84~~$80 billion pledged as collateral for potential borrowing at the Federal Reserve Discount ~~Window.~~Window and $6 billion pledged as collateral for borrowing at the Federal Home Loan Bank. The components of the assets pledged at Dec. 31, ~~2016~~2019 included ~~$87~~$98 billion of securities, $8$13 billion of loans, $4$7 billion of trading assets and less than $1 billion of interest-bearing deposits with ~~banks and $3 billion of trading assets.~~banks.

At ~~Sept.~~June 30, ~~2017~~2020 and Dec. 31, ~~2016,~~2019, pledged assets included ~~$13~~$21 billion and $6$29 billion, respectively, for which the recipients were permitted to sell or repledge the assets delivered.

At June 30, 2020, we pledged commercial paper and CDs totaling $1.5 billion as collateral to the Federal Reserve Bank of Boston to secure non-recourse borrowings under the Federal Reserve’s Money Market Mutual Fund Liquidity Facility (“MMLF”) program.

We also obtain securities as collateral, including receipts under resale agreements, securities borrowed, derivative contracts and custody agreements, on terms which permit us to sell or repledge the securities to others. At ~~Sept.~~June 30, ~~2017~~2020 and Dec. 31, ~~2016,~~2019, the market value of the securities received that can be sold or repledged was ~~$68~~$107 billion and ~~$50~~$153 billion, respectively. We routinely sell or repledge these securities through delivery to third parties. As of ~~Sept.~~June 30, ~~2017~~2020 and Dec. 31, ~~2016,~~2019, the market value

of securities collateral sold or repledged was ~~$39~~$72 billion and ~~$20~~$107 billion, respectively.

Restricted cash and securities

Cash and securities may ~~also~~ be segregated under federal and other regulations or requirements. At ~~Sept.~~both June 30, ~~2017~~2020 and Dec. 31, ~~2016,~~2019, cash segregated under federal and other regulations or requirements was ~~$4 billion and $3 billion, respectively.~~$2 billion. Restricted cash is included in interest-bearing deposits with banks on the consolidated balance sheet. Securities segregated ~~for these purposes~~under federal and other regulations or requirements were $2$6 billion at ~~Sept.~~June 30, ~~2017~~2020 and $2$1 billion at Dec. 31, ~~2016.~~2019. Restricted securities were sourced from securities purchased under resale agreements ~~at Sept. 30, 2017 and Dec. 31, 2016~~ and are included in federal funds sold and securities purchased under resale agreements on the consolidated balance sheet.

Note ~~5 -~~ 5–Loans and asset quality

Loans

The table below provides the details of our loan ~~portfolio and industry concentrations of credit risk at Sept. 30, 2017 and Dec. 31, 2016.~~portfolio.


Loans	Sept. 30, 2017		Dec. 31, 2016		June 30, 2020		Dec. 31, 2019
(in millions)
Domestic:
Commercial					$	2,192	$	1,442
Commercial real estate					6,217		5,575
Financial institutions	$	5,155	$	6,342	3,804		4,852
Commercial	2,698		2,286
Lease financings					439		537
Wealth management loans and mortgages	16,161		15,555		15,753		16,050
Commercial real estate	4,921		4,639
Lease financings	823		989
Other residential mortgages	741		854		450		494
Overdrafts	1,487		1,055		1,073		524
Other	1,159		1,202		1,489		1,167
Margin loans	13,720		17,503		11,476		11,907
Total domestic	46,865		50,425		42,893		42,548
Foreign:
Commercial					253		347
Commercial real estate					11		7
Financial institutions	6,741		8,347		6,949		7,626
Commercial	305		331
Lease financings					589		576
Wealth management loans and mortgages	104		99		122		140
Commercial real estate	6		15
Lease financings	522		736
Other (primarily overdrafts)	4,373		4,418		3,147		2,230
Margin loans	152		87		1,433		1,479
Total foreign	12,203		14,033		12,504		12,405
Total loans (a)	$	59,068	$	64,458	$	55,397	$	54,953


(a)	Net of unearned income of $~~414~~292 million at ~~Sept.~~June 30, ~~2017~~2020 and $~~527~~313 million at Dec. 31, ~~2016~~2019 primarily onrelated to domestic and foreign lease financings.

BNY Mellon 67

Notes to Consolidated Financial Statements(continued)

Our loan portfolio consists of ~~three~~3 portfolio segments: commercial, lease financings and mortgages. We manage our portfolio at the class level, which consists of ~~six~~6 classes of financing receivables: commercial, commercial real estate, financial institutions, lease financings, wealth

management loans and mortgages, and other residential mortgages.

The following tables are presented for each class of financing ~~receivable~~receivables and provide additional information about our credit ~~risks and~~risks.

Allowance for credit losses

On Jan. 1, 2020, we adopted ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, on a prospective basis. See Note 2 for the ~~adequacy of our~~significant accounting policy related to allowance for credit ~~losses.~~losses on loans and lending-related commitments.

Activity in the allowance for credit losses on loans and lending-related commitments is presented below.



Allowance for credit losses activity for the quarter ended June 30, 2020											Wealth management loans and mortgages			Other residential mortgages
(in millions)	Commercial		Commercial real estate		Financial institutions			Lease financings			Wealth management loans and mortgages			Other residential mortgages			Total
Beginning balance	$	26	$	208	$	18		$	13		$	9		$	14		$	288
Charge-offs	—		—		—			—			—			—			—
Recoveries	—		—		—			—			—			3			3
Net recoveries	—		—		—			—			—			3			3
Provision	14		164		(2		)	(10		)	2			(5		)	163
Ending balance (a)	$	40	$	372	$	16		$	3		$	11		$	12		$	454
Allowance for:
Loan losses	$	23	$	244	$	11		$	3		$	9		$	12		$	302
Lending-related commitments	17		128		5			—			2			—			152
Individually evaluated for impairment:
Loan balance	$	—	$	—	$	—		$	—		$	18	(b)	$	—		$	18
Allowance for loan losses	—		—		—			—			—			—			—


(a)	Includes $11 million of allowance for credit losses related to foreign loans, primarily financial institutions.


(b)	Includes collateral dependent loans of $18 million with $26 million of collateral at fair value.



Allowance for credit losses activity for the quarter ended March 31, 2020											Wealth management loans and mortgages				Other residential mortgages
(in millions)	Commercial			Commercial real estate		Financial institutions			Lease financings		Wealth management loans and mortgages				Other residential mortgages			Foreign			(a)	Total
Balance at Dec. 31, 2019	$	60		$	76	$	20		$	3	$	20			$	13		$	24			$	216
Impact of adopting ASU 2016-13	(43		)	14		(6		)	—		(12		)		2			(24		)		(69		)
Balance at Jan. 1, 2020	17			90		14			3		8				15			—				147
Charge-offs	—			—		—			—		—				—			—				—
Recoveries	—			—		—			—		—				—			—				—
Net (charge-offs) recoveries	—			—		—			—		—				—			—				—
Provision	9			118		4			10		1				(1		)	—				141
Ending balance (b)	$	26		$	208	$	18		$	13	$	9			$	14		$	—			$	288
Allowance for:
Loan losses	$	13		$	83	$	10		$	13	$	7			$	14		$	—			$	140
Lending-related commitments	13			125		8			—		2				—			—				148
Individually evaluated for impairment:
Loan balance	$	—		$	—	$	—		$	—	$	18		(c)	$	—		$	—			$	18
Allowance for loan losses	—			—		—			—		—				—			—				—


(a)	The allowance related to foreign exposure has been reclassified to financial institutions ($10 million), commercial ($10 million) and lease financings ($4 million).


(b)	Includes $12 million of allowance for credit losses related to foreign loans, primarily financial institutions.


(c)	Includes collateral dependent loans of $18 million with $26 million of collateral at fair value.

68 BNY Mellon

Notes to Consolidated Financial Statements(continued)



Allowance for credit losses activity for the quarter ended June 30, 2019												Wealth management loans and mortgages			Other residential mortgages			All other			Foreign		Total
(in millions)	Commercial			Commercial real estate			Financial institutions			Lease financings		Wealth management loans and mortgages			Other residential mortgages			All other			Foreign		Total
Beginning balance	$	82		$	74		$	23		$	4	$	21		$	15		$	—		$	29	$	248
Charge-offs	—			—			—			—		(1		)	—			—			—		(1		)
Recoveries	—			—			—			—		—			2			—			—		2
Net (charge-offs) recoveries	—			—			—			—		(1		)	2			—			—		1
Provision	(5		)	(2		)	(2		)	—		—			(3		)	—			4		(8		)
Ending balance	$	77		$	72		$	21		$	4	$	20		$	14		$	—		$	33	$	241
Allowance for:
Loan losses	$	23		$	57		$	8		$	4	$	17		$	14		$	—		$	23	$	146
Lending-related commitments	54			15			13			—		3			—			—			10		95
Individually evaluated for impairment:
Loan balance	$	96		$	—		$	—		$	—	$	16		$	—		$	—		$	—	$	112
Allowance for loan losses	10			—			—			—		—			—			—			—		10
Collectively evaluated for impairment:
Loan balance	$	1,356		$	5,192		$	4,574		$	662	$	15,563		$	549		$	12,849	(a)	$	11,539	$	52,284
Allowance for loan losses	13			57			8			4		17			14			—			23		136


(a)	Includes $1,575 million of domestic overdrafts, $10,152 million of margin loans and $1,122 million of other loans at June 30, 2019.



Allowance for credit losses activity for the six months ended June 30, 2020											Wealth management loans and mortgages			Other residential mortgages			Foreign			Total
(in millions)	Commercial			Commercial real estate		Financial institutions			Lease financings
Balance at Dec. 31, 2019	$	60		$	76	$	20		$	3	$	20		$	13		$	24		$	216
Impact of adopting ASU 2016-13	(43		)	14		(6		)	—		(12		)	2			(24		)	(69		)
Balance at Jan. 1, 2020	17			90		14			3		8			15			—			147
Charge-offs	—			—		—			—		—			—			—			—
Recoveries	—			—		—			—		—			3			—			3
Net recoveries	—			—		—			—		—			3			—			3
Provision	23			282		2			—		3			(6		)	—			304
Ending balance	$	40		$	372	$	16		$	3	$	11		$	12		$	—		$	454



Allowance for credit losses activity for the six months ended June 30, 2019													Wealth management loans and mortgages			Other residential mortgages			All other		Foreign		Total
(in millions)	Commercial			Commercial real estate			Financial institutions			Lease financings			Wealth management loans and mortgages			Other residential mortgages			All other		Foreign		Total
Beginning balance	$	81		$	75		$	22		$	5		$	21		$	16		$	—	$	32	$	252
Charge-offs	(11		)	—			—			—			(1		)	—			—		—		(12		)
Recoveries	—			—			—			—			—			2			—		—		2
Net (charge-offs) recoveries	(11		)	—			—			—			(1		)	2			—		—		(10		)
Provision	7			(3		)	(1		)	(1		)	—			(4		)	—		1		(1		)
Ending balance	$	77		$	72		$	21		$	4		$	20		$	14		$	—	$	33	$	241

BNY Mellon 69

Notes to Consolidated Financial Statements(continued)

~~Allowance for credit losses~~

~~Transactions in the allowance for credit losses are summarized as follows.~~

Allowance for credit losses activity for the quarter ended Sept. 30, 2017 Wealth management loans and mortgages
Other
residential
mortgages

(in millions) Commercial
Commercial
real estate

Financial
institutions

Lease
financings

All
other

Foreign
Total
Beginning balance $ 80
$ 75
$ 23
$ 10
$ 25
$ 23
$ —
$ 34
$ 270
Charge-offs —
—
—
—
—
—
—
—
—
Recoveries —
—
—
—
—
1
—
—
1
Net recoveries —
—
—
—
—
1
—
—
1
Provision 1
—
—
(1 ) (4 ) (3 ) —
1
(6 )
Ending balance $ 81
$ 75
$ 23
$ 9
$ 21
$ 21
$ —
$ 35
$ 265
Allowance for:
Loan losses $ 26
$ 57
$ 7
$ 9
$ 17
$ 21
$ —
$ 24
$ 161
Lending-related commitments 55
18
16
—
4
—
—
11
104
Individually evaluated for impairment:
Loan balance $ —
$ —
$ 2
$ —
$ 5
$ —
$ —
$ —
$ 7
Allowance for loan losses —
—
2
—
—
—
—
—
2
Collectively evaluated for impairment:
Loan balance $ 2,698
$ 4,921
$ 5,153
$ 823
$ 16,156
$ 741
$ 16,366
(a) $ 12,203
$ 59,061
Allowance for loan losses 26
57
5
9
17
21
—
24
159


~~(a)~~	~~Includes $1,487 million of domestic overdrafts, $13,720 million of margin loans and $1,159 million of other loans at Sept. 30, 2017.~~

Allowance for credit losses activity for the quarter ended June 30, 2017 Wealth management loans and mortgages
Other
residential
mortgages

(in millions) Commercial
Commercial
real estate

Financial
institutions

Lease
financings

All
other

Foreign
Total
Beginning balance $ 82
$ 73
$ 23
$ 10
$ 26
$ 25
$ —
$ 37
$ 276
Charge-offs —
—
—
—
—
—
—
—
—
Recoveries —
—
—
—
—
1
—
—
1
Net recoveries —
—
—
—
—
1
—
—
1
Provision (2 ) 2
—
—
(1 ) (3 ) —
(3 ) (7 )
Ending balance $ 80
$ 75
$ 23
$ 10
$ 25
$ 23
$ —
$ 34
$ 270
Allowance for:
Loan losses $ 26
$ 55
$ 7
$ 10
$ 21
$ 23
$ —

$ 23
$ 165
Lending-related commitments 54
20
16
—
4
—
—

11
105
Individually evaluated for impairment:
Loan balance $ —
$ —
$ 2
$ —
$ 7
$ —
$ —

$ —
$ 9
Allowance for loan losses —
—
2
—
3
—
—

—
5
Collectively evaluated for impairment:
Loan balance $ 2,580
$ 5,017
$ 5,952
$ 847
$ 16,024
$ 780
$ 15,950
(a) $ 14,514
$ 61,664
Allowance for loan losses 26
55
5
10
18
23
—

23
160


~~(a)~~	~~Includes $855 million of domestic overdrafts, $13,973 million of margin loans and $1,122 million of other loans at June 30, 2017.~~

~~70 BNY Mellon~~

~~Notes to Consolidated Financial Statements(continued)~~

Allowance for credit losses activity for the quarter ended Sept. 30, 2016 Wealth management loans and mortgages
Other
residential
mortgages

All
other

Foreign
Total
(in millions) Commercial
Commercial
real estate

Financial
institutions

Lease
financings

Beginning balance $ 90
$ 63
$ 29
$ 14
$ 18
$ 29
$ —
$ 37
$ 280
Charge-offs —
—
—
—
—
(1 ) —
—
(1 )
Recoveries —
—
13
—
—
1
—
—
14
Net recoveries —
—
13
—
—
—
—
—
13
Provision 1
—
(13 ) —
—
(1 ) —
(6 ) (19 )
Ending balance $ 91
$ 63
$ 29
$ 14
$ 18
$ 28
$ —
$ 31
$ 274
Allowance for:
Loan losses $ 22
$ 45
$ 9
$ 14
$ 14
$ 28
$ —
$ 16
$ 148
Lending-related commitments 69
18
20
—
4
—
—
15
126
Individually evaluated for impairment:
Loan balance $ —
$ 1
$ —
$ 4
$ 4
$ —
$ —
$ —
$ 9
Allowance for loan losses —
1
—
2
—
—
—
—
3
Collectively evaluated for impairment:
Loan balance $ 2,292
$ 4,693
$ 6,783
$ 1,013
$ 15,027
$ 901
$ 20,189
(a) $ 15,061
$ 65,959
Allowance for loan losses 22
44
9
12
14
28
—
16
145


~~(a)~~	~~Includes $1,580 million of domestic overdrafts, $17,487 million of margin loans and $1,122 million of other loans at Sept. 30, 2016.~~

Allowance for credit losses activity for the nine months ended Sept. 30, 2017 Wealth management loans and mortgages
Other
residential
mortgages
All
other
Foreign
Total
(in millions) Commercial
Commercial
real estate
Financial
institutions
Lease
financings
Beginning balance $ 82
$ 73
$ 26
$ 13
$ 23
$ 28
$ —
$ 36
$ 281
Charge-offs —
—
—
—
—
(1 ) —
—
(1 )
Recoveries —
—
—
—
—
3
—
—
3
Net recoveries —
—
—
—
—
2
—
—
2
Provision (1 ) 2
(3 ) (4 ) (2 ) (9 ) —
(1 ) (18 )
Ending balance $ 81
$ 75
$ 23
$ 9
$ 21
$ 21
$ —
$ 35
$ 265

Allowance for credit losses activity for the nine months ended Sept. 30, 2016 Wealth management loans and mortgages
Other
residential
mortgages
All
other
Foreign
Total
(in millions) Commercial
Commercial
real estate
Financial
institutions
Lease
financings
Beginning balance $ 82
$ 59
$ 31
$ 15
$ 19
$ 34
$ —
$ 35
$ 275
Charge-offs —
—
—
—
—
(1 ) —
—
(1 )
Recoveries —
—
13
—
—
4
—
1
18
Net recoveries —
—
13
—
—
3
—
1
17
Provision 9
4
(15 ) (1 ) (1 ) (9 ) —
(5 ) (18 )
Ending balance $ 91
$ 63
$ 29
$ 14
$ 18
$ 28
$ —
$ 31
$ 274

~~BNY Mellon 71~~

~~Notes to Consolidated Financial Statements(continued)~~

Nonperforming assets

The table below presents our nonperforming assets.



Nonperforming assets	June 30, 2020						Dec. 31, 2019
	Recorded investment
	With an allowance		Without an allowance
(in millions)					Total
Nonperforming loans:
Other residential mortgages	$	58	$	—	$	58	$	62
Wealth management loans and mortgages	10		18		28		24
Total nonperforming loans	68		18		86		86
Other assets owned	—		2		2		3
Total nonperforming assets	$	68	$	20	$	88	$	89

Nonperforming assets
(in millions)
Sept. 30, 2017
Dec. 31, 2016

Nonperforming loans:
Other residential mortgages $ 80
$ 91
Wealth management loans and mortgages 8
8
Financial institutions 2
—
Lease financings —
4
Total nonperforming loans 90
103
Other assets owned 4
4
Total nonperforming assets $ 94
$ 107

At ~~Sept.~~June 30, ~~2017~~,2020, undrawn commitments to borrowers whose loans were classified as nonaccrual or reduced rate were not material.

~~Lost interest~~

~~The table below presents the amount of lost interest income.~~

Lost interest
(in millions) 3Q17
2Q17
3Q16
YTD17
YTD16
Amount by which interest income recognized on nonperforming loans exceeded reversals $ —
$ —
$ —
$ —
$ —
Amount by which interest income would have increased if nonperforming loans at period end had been performing for the entire period $ 1
$ 1
$ 1
$ 4
$ 4

~~Impaired loans~~

~~The tables below present information about our impaired loans. We use the discounted cash flow method as the primary method for valuing impaired loans.~~

Impaired loans 3Q17 2Q17 3Q16 YTD17 YTD16
(in millions)
Average
recorded
investment

Interest
income
recognized
Average
recorded
investment

Interest
income
recognized

Average
recorded
investment
Interest
income
recognized
Average
recorded
investment
Interest
income
recognized
Average
recorded
investment
Interest
income
recognized
Impaired loans with an allowance:
Commercial real estate $ —
$ —
$ —
$ —
$ 1
$ —
$ —
$ —
$ 1
$ —
Financial institutions 2
—
1
—
—
—
1
—
—
—
Wealth management loans and mortgages 2
—
3
—
3
—
3
—
5
—
Lease financings —
—
—
—
4
—
1
—
3
—
Total impaired loans with an allowance 4
—
4
—
8
—
5
—
9
—
Impaired loans without an allowance:

Commercial real estate —
—
—
—
1
—
—
—
1
—
Financial institutions —
—
—
—
85
—
—
—
128
—
Wealth management loans and mortgages 4
—
3
—
3
—
3
—
2
—
Total impaired
loans without an allowance (a)
4
—
3
—
89
—
3
—
131
—
Total impaired loans $ 8
$ —
$ 7
$ —
$ 97
$ —
$ 8
$ —
$ 140
$ —


~~(a)~~	When the discounted cash flows, collateral value or market price equals or exceeds the carrying value of the loan, then the loan does not require an allowance under the accounting standard related to impaired loans.

~~72 BNY Mellon~~

~~Notes to Consolidated Financial Statements(continued)~~

Impaired loans Sept. 30, 2017 Dec. 31, 2016
(in millions)
Recorded
investment

Unpaid
principal
balance

Related
allowance (a)

Recorded
investment

Unpaid
principal
balance

Related
allowance (a)

Impaired loans with an allowance:
Commercial real estate $ —
$ 3
$ —
$ —
$ 3
$ —
Financial institutions 2
2
2
—
—
—
Wealth management loans and mortgages 1
1
—
3
3
3
Lease financings —
—
—
4
4
2
Total impaired loans with an allowance 3
6
2
7
10
5
Impaired loans without an allowance:

Wealth management loans and mortgages 4
4
N/A
2
2
N/A
Total impaired loans without an allowance (b)
4
4
N/A
2
2
N/A
Total impaired loans (c)
$ 7
$ 10
$ 2
$ 9
$ 12
$ 5


~~(a)~~	~~The allowance for impaired loans is included in the allowance for loan losses.~~


~~(b)~~	When the discounted cash flows, collateral value or market price equals or exceeds the carrying value of the loan, then the loan does not require an allowance under the accounting standard related to impaired loans.


~~(c)~~	~~Excludes an aggregate of less than $1 million of impaired loans in amounts individually less than~~ ~~$1 million~~ ~~at both~~ ~~Sept. 30, 2017~~ ~~and~~ ~~Dec. 31, 2016, respectively. The allowance for loan losses associated with these loans totaled less than~~ ~~$1 million~~ ~~at both~~ ~~Sept. 30, 2017~~ ~~and~~ ~~Dec. 31, 2016, respectively.~~

Past due loans

The table below presents our past due loans.


Past due loans and still accruing interest	Sept. 30, 2017								Dec. 31, 2016								June 30, 2020								Dec. 31, 2019
	Days past due						Total past due		Days past due						Total past due		Days past due						Total past due		Days past due						Total past due
(in millions)	30-59		60-89		≥90				30-59		60-89		≥90				30-59		60-89		≥90				30-59		60-89		≥90
Commercial real estate	$	51	$	60	$	—	$	111	$	78	$	—	$	—	$	78
Wealth management loans and mortgages	86		15		1		102		21		2		—		23		$	31	$	6	$	—	$	37	$	22	$	5	$	—	$	27
Other residential mortgages	20		3		5		28		20		6		7		33		5		1		—		6		8		3		—		11
Financial institutions	—		—		—		—		1		27		—		28		—		—		—		—		1		30		—		31
Commercial real estate																	—		—		—		—		6		12		—		18
Total past due loans	$	157	$	78	$	6	$	241	$	120	$	35	$	7	$	162	$	36	$	7	$	—	$	43	$	37	$	50	$	—	$	87

~~Troubled~~Loan modifications

Due to the coronavirus pandemic, there have been two forms of relief provided for classifying loans as TDRs: The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and the Interagency Guidance. See Note 2 for additional details on the CARES Act and Interagency Guidance. Financial institutions may account for eligible loan modifications either under the CARES Act or the Interagency Guidance. The Company has elected to apply both the CARES Act and the Interagency Guidance, as applicable, in providing borrowers with loan modification relief in response to the coronavirus pandemic. We modified loans totaling $282 million in the second quarter of 2020 by providing short-term loan payment forbearances or modified principal and/or interest payments. We did

not identify these modifications as troubled debt restructurings (“TDRs”)

~~A modified loan is considered a TDR if the debtor is experiencing financial difficulties~~. These loans were primarily residential mortgage and ~~the creditor grants a concession to the debtor that would not~~

~~otherwise be considered. A TDR may include a transfer of~~commercial real estate ~~or other assets from~~loans. During the ~~debtor to the creditor, or a~~loan modification ~~of the term of the loan. Not all modified~~period, these loans are ~~considered TDRs.~~

~~The following table presents our TDRs.~~

TDRs 3Q17 2Q17 3Q16

Outstanding
recorded investment

Outstanding
recorded investment

Outstanding
recorded investment
(dollars in millions)
Number of
contracts

Pre-modification Post-modification Number of contracts
Pre-modification Post-modification Number of contracts
Pre-modification Post-modification
Other residential mortgages 19
$ 5
$ 5
16
$ 4
$ 4
17
$ 4
$ 4
Wealth management loans and mortgages 1
2
2
—
—
—
—
—
—
Total TDRs 20
$ 7
$ 7
16
$ 4
$ 4
17
$ 4
$ 4

~~BNY Mellon 73~~

~~Notes to Consolidated Financial Statements(continued)~~

~~Other residential mortgages~~

~~The modifications of the~~not reported as nonperforming or past due. We modified other residential mortgage loans totaling $1 million in both the ~~third quarter of 2017,~~ second quarter of ~~2017~~2019 and ~~third~~first quarter of 2016 consisted of reducing the stated interest rates and, in certain cases, a forbearance of default and extending the maturity dates. The modified loans are primarily collateral dependent for which the value is based on the fair value of the collateral.2020.

~~TDRs that subsequently defaulted~~

~~There were three residential mortgage loans that had been restructured in a TDR during the previous 12~~

~~months and have subsequently defaulted in the third quarter of 2017. The total recorded investment of these loans was less than $1 million.~~

Credit quality indicators

Our credit strategy is to focus on ~~investment grade~~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.

70 BNY Mellon

Notes to Consolidated Financial Statements(continued)

The ~~following tables present~~table below provides information about the credit ~~quality indicators.~~

~~Commercial~~profile of the loan portfolio by the period of origination.


Commercial loan portfolio – Credit risk profile by creditworthiness category	Commercial				Commercial real estate					Financial institutions
	Sept. 30, 2017		Dec. 31, 2016		Sept. 30, 2017		Dec. 31, 2016			Sept. 30, 2017		Dec. 31, 2016
Credit profile of the loan portfolio									Credit profile of the loan portfolio													June 30, 2020
																											Revolving loans
														Originated, at amortized cost													Amortized cost		Converted to term loans - Amortized cost				Accrued interest receivable
(in millions)	Sept. 30, 2017		Dec. 31, 2016			Sept. 30, 2017		Dec. 31, 2016							Sept. 30, 2017		Dec. 31, 2016		YTD20		2019			2018		2017						2016				Prior to 2016	Total (a)
Commercial:
Investment grade	$	2,857	$	2,397	$	4,339	$	3,823		$	9,217	$	11,459	$					107	$	213		$	106	$	554	$	57	$	—	$	1,054	$	—	$	2,091
Non-investment grade	146		220		588		831			2,679		3,230		40		69		12		—			3		—		230		—		354
Total	$	3,003	$	2,617	$	4,927	$	4,654		$	11,896	$	14,689
Total commercial														147		282		118		554			60		—		1,284		—		2,445		$	3
Commercial real estate:
Investment grade														500		1,212		806		550			431		422		292		—		4,213
Non-investment grade														77		410		459		179			421		212		228		29		2,015
Total commercial real estate														577		1,622		1,265		729			852		634		520		29		6,228		8
Financial institutions:
Investment grade														27		247		133		125			14		181		7,934		—		8,661
Non-investment grade														53		29		—		—			—		—		2,010		—		2,092
Total financial institutions														80		276		133		125			14		181		9,944		—		10,753		25
Wealth management loans and mortgages:
Investment grade														34		81		12		171			56		85		6,877		—		7,316
Non-investment grade														—		—		—		—			—		35		79		—		114
Wealth management mortgages														491		1,126		719		1,360			1,736		2,976		37		—		8,445
Total wealth management loans and mortgages														525		1,207		731		1,531			1,792		3,096		6,993		—		15,875		27
Lease financings														45		20		20		12			29		902		—		—		1,028		—
Other residential mortgages														—		—		—		—			—		450		—		—		450		2
Other loans														—		—		—		—			—		—		1,530		—		1,530		1
Margin loans														2,552		1,000		—		—			—		—		9,357		—		12,909		11
Total loans														$	3,926	$	4,407	$	2,267	$	2,951		$	2,747	$	5,263	$	29,628	$	29	$	51,218	$	77


(a)	Excludes overdrafts of $4,179 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 ~~rating criteria largely consistent with those of~~ the ~~public rating agencies. Each customer in the portfolio is~~ assigned an internal credit ~~rating. These internal credit~~ ratings, which are generally consistent with ~~the ratings categories~~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 June 30, 2020. In addition, 75% 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 90% expiring within one year.

Wealth management loans and mortgages

Wealth management loans and mortgages – Credit risk
profile by internally assigned grade
(in millions) Sept. 30, 2017
Dec. 31, 2016
Wealth management loans:
Investment grade $ 7,128
$ 7,127
Non-investment grade 135
260
Wealth management mortgages 9,002
8,267
Total $ 16,265
$ 15,654

Wealth management non-mortgage 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

BNY Mellon 71

Notes to Consolidated Financial Statements(continued)

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, including business assets, fixed assets or a modest amount of commercial real estate. For the loans collateralized by other assets, the credit quality of the obligor is carefully analyzed, but we do not consider this portfolio of loans to be investment grade.

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 62% at origination. InDelinquency rate is a key indicator of credit quality in the wealth management ~~portfolio,~~portfolio. At June 30, 2020, less

~~74 BNY Mellon~~

~~Notes to Consolidated Financial Statements(continued)~~

than 1% of the mortgages were past ~~due at Sept. 30, 2017.~~due.

Lease financing

At June 30, 2020, the lease financings portfolio consisted of exposures backed by well-diversified assets, primarily large-ticket transportation equipment and real estate. The largest component of our lease residual value exposure is freight-related rail. Assets are both domestic and foreign-based, with primary concentrations in the U.S. and Germany.

Other residential mortgages

The other residential mortgage portfolio primarily consists of 1-4 family residential mortgage loans and totaled ~~$741~~$450 million at ~~Sept.~~June 30, ~~2017~~2020 and ~~$854~~$494 million at Dec. 31, ~~2016.~~2019. These loans are not

typically correlated to external ratings. Included in this portfolio at ~~Sept.~~June 30, ~~2017 are $181~~2020 were $81 million of mortgage loans purchased in 2005, 2006 and the first quarter of 2007, ~~that are predominantly prime mortgage loans, with a small portion~~ of ~~Alt-A loans. As of Sept. 30, 2017, the purchased loans in this portfolio had a weighted-average loan-to-value ratio of 76% at origination and 11%~~which 25% of the serviced loan balance was at least 60 days delinquent. The properties securing the prime and Alt-A mortgage loans were located (in order of concentration) in California, Florida, Virginia, the tri-state area (New York, New Jersey and Connecticut) and Maryland.

Overdrafts

Overdrafts primarily relate to custody and securities clearance clients and totaled ~~$5.8~~$4.2 billion at ~~Sept.~~June 30,

~~2017~~ 2020 and ~~$5.5~~$2.7 billion at Dec. 31, ~~2016.~~2019. Overdrafts occur on a daily basis ~~in the custody and securities clearance business~~ and are generally repaid within two business days.

Other loans

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

Margin loans

We had ~~$13.9~~$12.9 billion of secured margin loans ~~on our balance sheet~~ at ~~Sept.~~June 30, ~~2017~~2020, compared with ~~$17.6~~$13.4 billion at Dec. 31, ~~2016.~~2019. 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 and do not allocate any of our~~loans.

Reverse repurchase agreements

Reverse repurchase agreements at June 30, 2020 were fully secured with high quality collateral. As a result, there was 0 allowance for credit losses related to ~~margin loans.~~

~~Reverse~~these assets at June 30, 2020. This compares to an $18 million allowance at March 31, 2020. The decrease is driven by a reduction in exposure and improvement in collateral liquidity and values related to reverse repurchase agreements collateralized by non-agency debt securities.

Reverse repurchase agreements are transactions fully collateralized with high-quality liquid securities. These transactions carry minimal credit risk and therefore are not allocated an allowance for credit losses.

72 BNY Mellon

Notes to Consolidated Financial Statements(continued)

Note ~~6 -~~ 6–Goodwill and intangible assets

Goodwill

The tables below provide a breakdown of goodwill by business.

Goodwill by business
(in millions)
Investment
Management
Investment
Services
Other
Consolidated
Balance at Dec. 31, 2016 $ 9,000
$ 8,269
$ 47
$ 17,316
Foreign currency translation 120
107
—
227
Balance at Sept. 30, 2017 $ 9,120
$ 8,376
$ 47
$ 17,543


Goodwill by business (in millions)	Investment Management			Investment Services			Other		Consolidated			Investment Services			Investment and Wealth Management			Other			Consolidated
Balance at Dec. 31, 2015	$	9,207		$	8,366		$	45	$	17,618
Acquisitions	29			(1		)	—		28
Balance at Dec. 31, 2019												$	8,332		$	9,007		$	47		$	17,386
Foreign currency translation	(167		)	(30		)	—		(197		)	(24		)	(109		)	—			(133		)
Other (a)	2			(4		)	2		—			47			—			(47		)	—
Balance at Sept. 30, 2016	$	9,071		$	8,331		$	47	$	17,449
Balance at June 30, 2020												$	8,355		$	8,898		$	—		$	17,253


(a)	~~Other changes in~~Reflects the transfer of goodwill ~~include purchase price adjustments and certain other reclassifications.~~associated with the Capital Markets business.



Goodwill by business (in millions)	Investment Services			Investment and Wealth Management			Other		Consolidated
Balance at Dec. 31, 2018	$	8,333		$	8,970		$	47	$	17,350
Foreign currency translation	(6		)	(7		)	—		(13		)
Balance at June 30, 2019	$	8,327		$	8,963		$	47	$	17,337

~~BNY Mellon 75~~

~~Notes to Consolidated Financial Statements(continued)~~

Intangible assets

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


Intangible assets – net carrying amount by business (in millions)	Investment Management			Investment Services			Other		Consolidated			Investment Services			Investment and Wealth Management			Other		Consolidated
Balance at Dec. 31, 2016	$	1,717		$	1,032		$	849	$	3,598
Balance at Dec. 31, 2019												$	678		$	1,580		$	849	$	3,107
Amortization	(45		)	(112		)	—		(157		)	(36		)	(16		)	—		(52		)
Foreign currency translation	16			4			—		20			—			(10		)	—		(10		)
Balance at Sept. 30, 2017	$	1,688		$	924		$	849	$	3,461
Balance at June 30, 2020												$	642		$	1,554		$	849	$	3,045



Intangible assets – net carrying amount by business (in millions)	Investment Services			Investment and Wealth Management			Other		Consolidated
Balance at Dec. 31, 2018	$	758		$	1,613		$	849	$	3,220
Amortization	(41		)	(18		)	—		(59		)
Foreign currency translation	—			(1		)	—		(1		)
Balance at June 30, 2019	$	717		$	1,594		$	849	$	3,160

BNY Mellon 73

Intangible assets – net carrying amount by business
(in millions)
Investment
Management
Investment
Services
Other
Consolidated
Balance at Dec. 31, 2015 $ 1,807
$ 1,186
$ 849
$ 3,842
Acquisitions 30
2
—
32
Amortization (60 ) (117 ) —
(177 )
Foreign currency translation (27 ) 1
—
(26 )
Balance at Sept. 30, 2016 $ 1,750
$ 1,072
$ 849
$ 3,671

Notes to Consolidated Financial Statements(continued)

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



Intangible assets	June 30, 2020								Dec. 31, 2019
(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—Investment Services	$	1,514	$	(1,244	)	$	270	10 years	$	1,520	$	(1,214	)	$	306
Customer relationships—Investment and Wealth Management	709		(554		)	155		10 years	712		(544		)	168
Other	64		(19		)	45		14 years	64		(16		)	48
Total subject to amortization	2,287		(1,817		)	470		10 years	2,296		(1,774		)	522
Not subject to amortization: (b)
Tradenames	1,291		N/A			1,291		N/A	1,293		N/A			1,293
Customer relationships	1,284		N/A			1,284		N/A	1,292		N/A			1,292
Total not subject to amortization	2,575		N/A			2,575		N/A	2,585		N/A			2,585
Total intangible assets	$	4,862	$	(1,817	)	$	3,045	N/A	$	4,881	$	(1,774	)	$	3,107

Intangible assets Sept. 30, 2017 Dec. 31, 2016
(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 relationships—Investment Management $ 1,483
$ (1,221 ) $ 262
11 years $ 1,439
$ (1,136 ) $ 303
Customer contracts—Investment Services 2,257
(1,705 ) 552
10 years 2,249
(1,590 ) 659
Other 25
(22 ) 3
2 years 37
(33 ) 4
Total subject to amortization 3,765
(2,948 ) 817
10 years 3,725
(2,759 ) 966
Not subject to amortization: (b)

Trade name 1,350
N/A
1,350
N/A 1,348
N/A
1,348
Customer relationships 1,294
N/A
1,294
N/A 1,284
N/A
1,284
Total not subject to amortization 2,644
N/A
2,644
N/A 2,632
N/A
2,632
Total intangible assets $ 6,409
$ (2,948 ) $ 3,461
N/A $ 6,357
$ (2,759 ) $ 3,598


(a)	Excludes fully amortized intangible assets.


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

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)
2020		$	104
2021		81
2022		63
2023		52
2024		45

For the year ended
Dec. 31,
Estimated amortization expense
(in millions)

2017 $ 209
2018 180
2019 109
2020 98
2021 75

Impairment testing

The goodwill impairment test is performed at least annually at the reporting unit level. Intangible assets not subject to amortization are tested for impairment annually or more often if events or circumstances indicate they may be impaired.

BNY Mellon’s three business segments include ~~eight~~6 reporting units for which goodwill impairment testing is performed on an annual basis. InThe Investment Services segment is comprised of 4 reporting units and the ~~second quarter~~Investment and Wealth Management segment is comprised of ~~2017, BNY Mellon conducted an annual goodwill impairment test on all eight~~2 reporting units.

~~76 BNY Mellon~~

~~Notes to Consolidated Financial Statements(continued)~~

As a result of the annual goodwill impairment test of the ~~eight~~6 reporting units noconducted in the second quarter of 2020, 0 goodwill impairment was recognized.

Note ~~7 -~~ 7–Other assets

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


Other assets	Sept. 30, 2017		Dec. 31, 2016		June 30, 2020		Dec. 31, 2019
(in millions)
Corporate/bank-owned life insurance	$	4,824	$	4,789	$	5,245	$	5,219
Accounts receivable	3,899		4,060		3,404		3,802
Fails to deliver	3,532		1,732		3,201		1,671
Software	1,513		1,451		1,778		1,590
Prepaid pension assets					1,545		1,464
Equity in a joint venture and other investments					1,146		1,102
Renewable energy investments	1,344		1,282		1,083		1,144
Equity in a joint venture and other investments	1,153		1,063
Qualified affordable housing project investments					962		1,024
Prepaid expense					544		491
Federal Reserve Bank stock					477		466
Income taxes receivable	1,020		1,172		194		388
Qualified affordable housing project investments	988		914
Prepaid pension assets	951		836
Prepaid expenses	512		438
Federal Reserve Bank stock	474		466
Seed capital					149		184
Fair value of hedging derivatives	344		784		137		21
Due from customers on acceptances	318		340
Seed capital	302		395
Other (a)	1,113		1,232		1,441		1,655
Total other assets	$	22,287	$	20,954	$	21,306	$	20,221


(a)	At ~~Sept.~~June 30, ~~2017,~~2020 and Dec. 31, 2019, other assets include ~~$76~~$7 million and $22 million, respectively, of Federal Home Loan Bank stock, at cost.

74 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 income on the consolidated income statement. Our non-readily marketable equity securities totaled $106 million at June 30, 2020 and $61 million at Dec. 31, 2019 and are included in equity in a joint venture and other 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)	2Q20		1Q20		2Q19			YTD20		YTD19			Life-to-date
Upward adjustments	$	2	$	4	$	2		$	6	$	2		$	38
Downward adjustments	—		—		(1		)	—		(1		)	(4		)
Net adjustments	$	2	$	4	$	1		$	6	$	1		$	34

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 ~~$988 million~~$1.0 billion at ~~Sept.~~both June 30, ~~2017~~2020 and ~~$914 million at~~ Dec. 31, ~~2016.~~2019. Commitments to fund future investments in qualified

affordable housing projects totaled ~~$439~~$363 million at ~~Sept.~~June 30, ~~2017~~2020 and ~~$369~~$422 million at Dec. 31, ~~2016.~~2019 and are recorded in other liabilities. A summary of the commitments to fund future investments is as follows: ~~2017~~2020 – ~~$75~~$72 million; ~~2018~~2021 –

~~$161~~ $179 million; ~~2019~~2022 – ~~$107~~$82 million; ~~2020~~2023 – ~~$79~~$5 million; ~~2021~~2024 – $1$1 million; and ~~2022~~2025 and thereafter – ~~$16~~$24 million.

Tax credits and other tax benefits recognized were ~~$39 million in the third quarter of 2017, $39 million in the third quarter of 2016,~~ $38 million in the second quarter of ~~2017, $115~~2020, $38 million in the first ~~nine months~~quarter of ~~2017~~2020 and ~~$115~~$39 million in the second quarter of 2019, $76 million in the first ~~nine~~six months of ~~2016.~~2020 and $78 million in the first six months of 2019.

Amortization expense included in the provision for income taxes was ~~$29 million in the third quarter of 2017, $30 million in the third quarter of 2016, $28~~$31 million in the second quarter of ~~2017, $84~~2020, $31 million in the first ~~nine months~~quarter of ~~2017~~2020 and ~~$86~~$32 million in the second quarter of 2019, $62 million in the first ~~nine~~six months of ~~2016.~~2020 and $64 million in the first six months of 2019.

~~Certain seed capital and private equity investments~~

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

In our Investment and Wealth Management business, ~~we manage investment assets, including equities, fixed income, money market and alternative investment funds for institutions and other investors. As part of that activity,~~ we make seed capital investments in certain ~~funds. BNY Mellon~~funds we manage. We also ~~holds~~hold private equity investments, specifically in small business investment companies (“SBICs”), which are compliant with the Volcker ~~Rule.~~Rule, and certain other corporate investments. Seed capital, ~~and~~ private equity and other corporate investments are ~~generally~~ included in other ~~assets. Certain risk retention investments in our CLOs are classified as available-for-sale securities.~~

assets on the consolidated balance sheet. The fair value of certain of these investments ~~has been~~was estimated using the NAV per share ~~of BNY Mellon’s~~for our ownership interest in the funds.

The table below presents information ~~about~~on our investments ~~in seed capital and private equity investments that have been~~ valued using NAV.



Investments valued using NAV	June 30, 2020					Dec. 31, 2019
(in millions)	Fair value		Unfunded commitments			Fair value		Unfunded commitments
Seed capital (a)	$	56		$	12	$	59		$	—
Private equity investments (SBICs) (b)	91			58		89			55
Other (c)	40			—		33			—
Total	$	187		$	70	$	181		$	55

Seed capital and private equity investments valued using NAV
Sept. 30, 2017 Dec. 31, 2016
(dollar amounts in millions)
Fair
value

Unfunded
commitments

Redemption
frequency
Redemption
notice period

Fair
value

Unfunded
commitments

Redemption
frequency
Redemption
notice period
Seed capital and other funds (a)
$ 97
$ 2
Daily-quarterly 1-95 days $ 171
$ 1
Daily-quarterly 1-180 days
Private equity investments (SBICs) (b)
54
47
N/A N/A 43
46
N/A N/A
Total $ 151
$ 49
$ 214
$ 47

(a)

~~Other funds include various~~Primarily includes leveraged loans ~~hedge funds~~ and structured credit ~~funds. Redemption notice periods vary by fund.~~funds, which are generally not redeemable. Distributions from such investments will be received as the underlying investments in the funds, which have lives of six to 11 years at June 30, 2020 and lives of six years at Dec. 31, 2019, are liquidated.


(b)	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.


(c)	Primarily includes investments in funds that relate to deferred compensation arrangements with employees. Investments in funds can be redeemed on a monthly to quarterly basis with redemption notice periods of up to 95 days.

BNY Mellon 7775

Notes to Consolidated Financial Statements(continued)

Note 8–Contract revenue

Fee revenue in Investment Services and Investment and Wealth Management 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 fee schedules. See Note 10 of the Notes to Consolidated Financial Statements in our 2019 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 2019 Annual Report for additional information on our principal businesses, Investment

Services and Investment and Wealth Management, and the primary services provided.

Disaggregation of contract revenue

Contract revenue is included in fee revenue on the consolidated income statement. The following table presents fee 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 the generally accepted accounting principles used for consolidated financial reporting.



Disaggregation of contract revenue by business segment
	Quarter ended
	June 30, 2020											March 31, 2020											June 30, 2019 (a)
(in millions)	IS			IWM			Other			Total		IS			IWM			Other			Total		IS			IWM			Other			Total
Fee revenue - contract revenue:
Investment services fees:
Asset servicing fees	$	1,147		$	25		$	(15	)	$	1,157	$	1,127		$	23		$	(11	)	$	1,139	$	1,095		$	20		$	(6	)	$	1,109
Clearing services fees	431			—			—			431		470			—			—			470		411			—			(1		)	410
Issuer services fees	277			—			—			277		263			—			—			263		291			—			—			291
Treasury services fees	144			—			1			145		149			—			—			149		140			1			—			141
Total investment services fees	1,999			25			(14		)	2,010		2,009			23			(11		)	2,021		1,937			21			(7		)	1,951
Investment management and performance fees	4			792			(5		)	791		5			862			(4		)	863		4			833			(4		)	833
Financing-related fees	23			1			—			24		28			—			—			28		16			—			1			17
Distribution and servicing	(7		)	34			—			27		(12		)	43			—			31		(13		)	44			—			31
Investment and other income	62			(41		)	3			24		72			(50		)	—			22		69			(48		)	—			21
Total fee revenue - contract revenue	2,081			811			(16		)	2,876		2,102			878			(15		)	2,965		2,013			850			(10		)	2,853
Fee and other revenue - not in scope of Accounting Standards Codification (“ASC”) 606 (b)(c)	258			27			54			339		334			(32		)	45			347		220			4			41			265
Total fee and other revenue	$	2,339		$	838		$	38		$	3,215	$	2,436		$	846		$	30		$	3,312	$	2,233		$	854		$	31		$	3,118


(a)	Restated to reflect the first quarter 2020 business segment reclassifications. There was no impact on total revenue, by type or in aggregate.


(b)	Primarily includes foreign exchange and other trading revenue, investment and other income (loss), financing-related fees, asset servicing fees, net securities gains (losses), all of which are accounted for using other accounting guidance.


(c)	The Investment and Wealth Management business includes income (loss) from consolidated investment management funds, net of noncontrolling interests, of $39 millionin the second quarter of 2020, $(20) million in the first quarter of 2020 and $6 millionin the second quarter of 2019.

IS - Investment Services segment.

IWM - Investment and Wealth Management segment.

76 BNY Mellon

Notes to Consolidated Financial Statements(continued)



Disaggregation of contract revenue by business segment	Year-to-date
	June 30, 2020											June 30, 2019 (a)
(in millions)	IS			IWM			Other			Total		IS			IWM			Other			Total
Fee revenue - contract revenue:
Investment services fees:
Asset servicing fees	$	2,274		$	48		$	(26	)	$	2,296	$	2,176		$	40		$	(14	)	$	2,202
Clearing services fees	901			—			—			901		809			—			(1		)	808
Issuer services fees	540			—			—			540		542			—			—			542
Treasury services fees	293			—			1			294		272			1			—			273
Total investment services fees	4,008			48			(25		)	4,031		3,799			41			(15		)	3,825
Investment management and performance fees	9			1,654			(9		)	1,654		8			1,674			(8		)	1,674
Financing-related fees	51			1			—			52		33			—			1			34
Distribution and servicing	(19		)	77			—			58		(27		)	89			—			62
Investment and other income	134			(91		)	3			46		138			(97		)	—			41
Total fee revenue - contract revenue	4,183			1,689			(31		)	5,841		3,951			1,707			(22		)	5,636
Fee and other revenue - not in scope of ASC 606 (b)(c)	592			(5		)	99			686		443			16			71			530
Total fee and other revenue	$	4,775		$	1,684		$	68		$	6,527	$	4,394		$	1,723		$	49		$	6,166


(a)	Restated to reflect the first quarter 2020 business segment reclassifications. There was no impact on total revenue, by type or in aggregate.


(b)	Primarily includes foreign exchange and other trading revenue, investment and other income (loss), financing-related fees, asset servicing fees, net securities gains (losses), all of which are accounted for using other accounting guidance.


(c)	The Investment and Wealth Management business includes income from consolidated investment management funds, net of noncontrolling interests, of $19 million in the first six months of 2020 and $22 million in the first six months of 2019.

IS - Investment Services segment.

IWM - Investment and Wealth Management segment.

Contract balances

Our clients are billed based on fee schedules that are agreed upon in each customer contract. Receivables from customers were $2.4 billion at both June 30, 2020 and Dec. 31, 2019.

Contract assets represent accrued revenues that have not yet been billed to the customers due to certain contractual terms other than the passage of time and were $69 million at June 30, 2020 and $32 million at Dec. 31, 2019. 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 $195 million at June 30, 2020 and $168 million at Dec. 31, 2019. Contract liabilities are included in other liabilities on the consolidated balance sheet. Revenue recognized in the second quarter of 2020 relating to contract liabilities as of March 31, 2020 was $58 million. Revenue recognized in the first six months of 2020 relating to contract liabilities as of Dec. 31, 2019 was $78 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 $80 million at June 30, 2020 and $86 million at Dec. 31, 2019. Capitalized sales incentives are amortized based on the transfer of goods or services to which the assets relate and typically average nine years. The amortization of capitalized sales incentives, which is primarily included in staff expense on the consolidated income statement, totaled $5 million in the second quarter of 2020, second quarter of 2019 and first quarter of 2020 and $10 million in both the first six months of 2020 and first six months of 2019.

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

BNY Mellon 77

Notes to Consolidated Financial Statements(continued)

$14 million at June 30, 2020 and $16 million at Dec. 31, 2019. These capitalized costs are amortized on a straight-line basis over the expected contract period, which generally ranges from seven to nine years. The amortization is included in other expense on the consolidated income statement and totaled $2 million in the second quarter of 2020 and second quarter of 2019, $1 million in the first quarter of 2020 and $3 million in the first six months of 2020 and first six months of 2019. There were 0 impairments recorded on capitalized contract costs in the first six months of 2020.

Unsatisfied performance obligations

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

Note ~~8 -~~ 9–Net interest revenue

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



Net interest revenue	Quarter ended								Year-to-date
(in millions)	June 30, 2020			March 31, 2020		June 30, 2019			June 30, 2020		June 30, 2019
Interest revenue
Deposits with the Federal Reserve and other central banks	$	(7	)	$	80	$	113		$	73	$	252
Deposits with banks	40			58		64			98		127
Federal funds sold and securities purchased under resale agreements	61			396		568			457		1,042
Margin loans	40			87		119			127		254
Non-margin loans	230			309		365			539		720
Securities:
Taxable	556			594		687			1,150		1,393
Exempt from federal income taxes	6			6		10			12		22
Total securities	562			600		697			1,162		1,415
Trading securities	17			40		39			57		75
Total interest revenue	943			1,570		1,965			2,513		3,885
Interest expense
Deposits	(17		)	240		432			223		823
Federal funds purchased and securities sold under repurchase agreements	1			275		372			276		703
Trading liabilities	2			7		11			9		18
Other borrowed funds	7			4		20			11		44
Commercial paper	1			6		18			7		26
Customer payables	(1		)	30		69			29		139
Long-term debt	170			194		241			364		489
Total interest expense	163			756		1,163			919		2,242
Net interest revenue	780			814		802			1,594		1,643
Provision for credit losses	143			169		(8		)	312		(1		)
Net interest revenue after provision for credit losses	$	637		$	645	$	810		$	1,282	$	1,644

78 BNY Mellon

Net interest revenue Quarter ended Year-to-date
Sept. 30, 2017
June 30, 2017
Sept. 30, 2016
Sept. 30, 2017
Sept. 30, 2016
(in millions)
Interest revenue
Non-margin loans $ 283
$ 272
$ 218
$ 800
$ 637
Margin loans 87
87
67
249
194
Securities:
Taxable 510
476
434
1,447
1,307
Exempt from federal income taxes 16
16
17
49
53
Total securities 526
492
451

1,496
1,360
Deposits with banks 34
27
26
83
76
Deposits with the Federal Reserve and other central banks 89
71
37
217
170
Federal funds sold and securities purchased under resale agreements 119
86
62
272
167
Trading assets 13
17
13
46
43
Total interest revenue 1,151
1,052
874

3,163
2,647
Interest expense
Deposits 57
32
(6 ) 98
21
Federal funds purchased and securities sold under repurchase agreements 70
38
6
132
28
Trading liabilities 2
2
2
6
5
Other borrowed funds 7
4
1
13
5
Commercial paper 8
5
1
18
5
Customer payables 19
16
3
42
9
Long-term debt 149
129
93
397
267
Total interest expense 312
226
100

706
340
Net interest revenue 839
826
774

2,457
2,307
Provision for credit losses (6 ) (7 ) (19 ) (18 ) (18 )
Net interest revenue after provision for credit losses $ 845
$ 833
$ 793

$ 2,475
$ 2,325

Notes to Consolidated Financial Statements(continued)

Note ~~9 -~~ 10–Employee benefit plans

The components of net periodic benefit (credit) cost are ~~as follows.~~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																											Quarter ended
Net periodic benefit (credit) cost	Sept. 30, 2017									June 30, 2017									Sept. 30, 2016									June 30, 2020									March 31, 2020									June 30, 2019
(in millions)	Domestic pension benefits			Foreign pension benefits			Health care benefits			Domestic pension benefits			Foreign pension benefits			Health care benefits			Domestic pension benefits			Foreign pension benefits			Health care benefits			Domestic pension benefits			Foreign pension benefits			Health care benefits			Domestic pension benefits			Foreign pension benefits			Health care benefits			Domestic pension benefits			Foreign pension benefits			Health care benefits
Service cost	$	—		$	7		$	—		$	—		$	7		$	—		$	—		$	8		$	1		$	—		$	3		$	—		$	—		$	3		$	—		$	—		$	3		$	—
Interest cost	45			8			2			45			8			2			45			9			2			39			6			1			39			7			1			45			8			1
Expected return on assets	(81		)	(12		)	(2		)	(81		)	(12		)	(2		)	(82		)	(13		)	(2		)	(79		)	(9		)	(2		)	(80		)	(10		)	(1		)	(84		)	(12		)	(2		)
Other	17			9			(1		)	17			9			(1		)	17			4			(1		)	21			3			—			22			3			(1		)	13			1			—
Net periodic benefit (credit) cost	$	(19	)	$	12		$	(1	)	$	(19	)	$	12		$	(1	)	$	(20	)	$	8		$	—		$	(19	)	$	3		$	(1	)	$	(19	)	$	3		$	(1	)	$	(26	)	$	—		$	(1	)



Net periodic benefit (credit) cost	Year-to-date
	June 30, 2020									June 30, 2019
(in millions)	Domestic pension benefits			Foreign pension benefits			Health care benefits			Domestic pension benefits			Foreign pension benefits			Health care benefits
Service cost	$	—		$	6		$	—		$	—		$	6		$	—
Interest cost	78			13			2			89			16			3
Expected return on assets	(159		)	(19		)	(3		)	(168		)	(23		)	(4		)
Other	43			6			(1		)	26			1			(1		)
Net periodic benefit (credit) cost	$	(38	)	$	6		$	(2	)	$	(53	)	$	—		$	(2	)

~~78 BNY Mellon~~

~~Notes to Consolidated Financial Statements(continued)~~

Net periodic benefit (credit) cost Year-to-date
Sept. 30, 2017 Sept. 30, 2016
(in millions) Domestic pension benefits
Foreign pension benefits
Health care benefits
Domestic pension benefits
Foreign pension benefits
Health care benefits
Service cost $ —
$ 21
$ —
$ —
$ 24
$ 3
Interest cost 135
24
6
135
27
6
Expected return on assets (243 ) (36 ) (6 ) (246 ) (39 ) (6 )
Other 51
27
(3 ) 52
13
(3 )
Net periodic benefit (credit) cost $ (57 ) $ 36
$ (3 ) $ (59 ) $ 25
$ —

Note ~~10 -~~ 11–Income taxes

Our total tax reserves as of ~~Sept.~~June 30, ~~2017~~2020 were ~~$157~~$178 million compared with ~~$143~~$173 million at ~~June 30, 2017.~~Dec. 31, 2019. If these tax reserves were unnecessary, ~~$157~~$178 million would affect the effective tax rate in future periods. We recognize accrued interest and penalties, if applicable, related to income taxes in income tax expense. Included in the balance sheet at ~~Sept.~~June 30, ~~2017~~2020 is accrued interest, where applicable, of ~~$24~~

$34 million. The additional tax expense related to interest for the ~~nine~~six months ended ~~Sept.~~June 30, ~~2017~~2020 was $7$3 million, compared with $2$6 million for the ~~nine~~six months ended ~~Sept.~~June 30, ~~2016.~~2019.

It is reasonably possible the total reserve for uncertain tax positions could decrease within the next 12 months by approximately ~~$57~~$100 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 ~~2013.~~2016. Our New York State,New York City and UK income tax returns are closed to examination through 2012.

BNY Mellon 79

Notes to Consolidated Financial Statements(continued)

Note ~~11 -~~ 12–Variable interest entities and securitization

~~BNY Mellon has~~We have variable interests in ~~VIEs,~~variable interest entities (“VIEs”), which include investments in retail, institutional and alternative investment funds, including ~~collateralized loan obligation (“CLO”)~~CLO structures in which we provide asset management services, some of which are consolidated. ~~The investment funds are offered to our retail and institutional clients to provide them~~

~~with access to investment vehicles with specific investment objectives and strategies that address the client’s investment needs.~~

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

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

~~The VIEs discussed above are included in the scope of ASU 2015-02, which was adopted effective Jan. 1, 2015, and are reviewed for consolidation based on the guidance in ASC 810,~~ ~~Consolidation~~.We reconsider and reassess whether or not we are the primary beneficiary of a VIE when governing documents or contractual arrangements are changed that would reallocate the obligation to absorb expected losses or receive expected residual returns between BNY Mellon and the other investors. This could occur when BNY Mellon disposes of its variable interests in the fund, when additional variable interests are issued to other investors or when we acquire additional variable interests in the VIE.

The following ~~tables present~~table presents the incremental assets and liabilities included in ~~BNY Mellon’s~~the consolidated ~~financial statements, after applying intercompany eliminations,~~balance sheet as of ~~Sept.~~June 30, ~~2017~~2020 and Dec. 31, ~~2016.~~ 2019. 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 by BNY Mellon.~~

VIE.



Consolidated investments	June 30, 2020							Dec. 31, 2019
(in millions)	Investment Management funds			Securitization		Total consolidated investments		Investment Management funds			Securitization		Total consolidated investments
Trading assets	$	450		$	400	$	850	$	229		$	400	$	629
Other assets	10			—		10		16			—		16
Total assets	$	460	(a)	$	400	$	860	$	245	(b)	$	400	$	645
Other liabilities	$	4		$	399	$	403	$	1		$	387	$	388
Total liabilities	$	4	(a)	$	399	$	403	$	1	(b)	$	387	$	388
Nonredeemable noncontrolling interests	$	112	(a)	$	—	$	112	$	102	(b)	$	—	$	102

~~BNY Mellon 79~~

~~Notes to Consolidated Financial Statements(continued)~~

Investments consolidated at Sept. 30, 2017
(in millions)
Investment
Management
funds
Securitization
Total
consolidated
investments

Securities - Available-for-sale $ —
$ 400
$ 400
Trading assets 576
—
576
Other assets 226
—
226
Total assets $ 802
(a) $ 400
$ 1,202
Other liabilities $ 27
$ 369
$ 396
Total liabilities $ 27
(a) $ 369
$ 396
Nonredeemable noncontrolling interests $ 384
(a) $ —
$ 384


(a)	Includes voting model entities (“VMEs”) with assets of ~~$90~~$283 million, liabilities of $2$1 million and nonredeemable noncontrolling interests of ~~$20~~$37 million.

Investments consolidated at Dec. 31, 2016
(in millions)
Investment
Management
funds
Securitization
Total
consolidated
investments

Securities - Available-for-sale $ —
$ 400
$ 400
Trading assets 979
—
979
Other assets 252
—
252
Total assets $ 1,231
(a) $ 400
$ 1,631
Trading liabilities $ 282
$ —
$ 282
Other liabilities 33
363
396
Total liabilities $ 315
(a) $ 363
$ 678
Nonredeemable noncontrolling interests $ 618
(a) $ —
$ 618


~~(a)~~(b)	Includes VMEs with assets of ~~$114~~$50 million, liabilities of $3$1 million and nonredeemable noncontrolling interests of ~~$25~~$1 million.

~~BNY Mellon has~~

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

Non-consolidated VIEs

As of ~~Sept.~~June 30, ~~2017~~2020 and Dec. 31, ~~2016,~~2019, the following assets and liabilities related to the VIEs where ~~BNY Mellon is~~ we are

not the primary beneficiary ~~are~~were included in our consolidated ~~financial statements~~balance sheets and primarily ~~relate~~related to accounting for our investments in qualified affordable housing and renewable energy projects.

Non-consolidated VIEs at Sept. 30, 2017
(in millions) Assets
Liabilities
Maximum loss exposure
Securities - Available-for-sale (a)
$ 143
$ —
$ 143
Other 2,559
439
3,321


~~(a)~~	~~Investments in the Company’s sponsored CLOs.~~

Non-consolidated VIEs at Dec. 31, 2016
(in millions) Assets
Liabilities
Maximum loss exposure
Securities - Available-for-sale (a)
$ 42
$ —
$ 42
Other 2,400
369
2,769


~~(a)~~	~~Investments in the Company’s sponsored CLOs.~~

The maximum loss exposure indicated in the ~~above tables~~table below relates solely to ~~BNY Mellon’s~~our investments in, and unfunded commitments to, the VIEs.



Non-consolidated VIEs	June 30, 2020						Dec. 31, 2019
(in millions)	Assets		Liabilities		Maximum loss exposure		Assets		Liabilities		Maximum loss exposure
Securities - Available-for-sale (a)	$	199	$	—	$	199	$	208	$	—	$	208
Other	2,237		363		2,609		2,400		422		2,822


(a)	Includes investments in the Company’s sponsored CLOs.

80 BNY Mellon

Notes to Consolidated Financial Statements(continued)

Note ~~12 -~~ 13–Preferred stock

~~BNY Mellon~~The Parent has 100 million authorized shares of preferred stock with a par value of $0.01 per share. The following table summarizes ~~BNY Mellon’s~~the Parent’s preferred stock issued and outstanding at ~~Sept.~~June 30, ~~2017~~2020 and Dec. 31, ~~2016.~~2019.


Preferred stock summary (a)	Preferred stock summary (a)	Total shares issued and outstanding				Carrying value (b)					Preferred stock summary (a)	Total shares issued and outstanding			Carrying value (b)
								(in millions)
		Total shares issued and outstanding				Total shares issued and outstanding				(in millions)					June 30, 2020		Dec. 31, 2019		June 30, 2020	Dec. 31, 2019
	Per annum dividend rate		Sept. 30, 2017			Total shares issued and outstanding				Dec. 31, 2016		Total shares issued and outstanding	Per annum dividend rate		June 30, 2020		Dec. 31, 2019		June 30, 2020	Dec. 31, 2019
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	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 C	5.2%		5,825		5,825	568			568		5.2%	5,825		5,825	568			568
Series D	4.50% 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		4.50% 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 E	4.95% to and including June 20, 2020, then a floating rate equal to the three-month LIBOR plus 3.42%	10,000		10,000		990			990		4.95% to but excluding June 20, 2020, then a floating rate equal to the three-month LIBOR plus 3.42%	10,000		10,000	990			990
Series F	4.625% to and including Sept. 20, 2026, then a floating rate equal to the three-month LIBOR plus 3.131%	10,000		10,000		990			990		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											4.70% to but excluding Sept. 20, 2025, then a floating rate equal to the five-year treasury rate plus 4.358%	10,000		—	990			—
Total	Total	35,826		35,826		$	3,542		$	3,542	Total	45,826		35,826	$	4,532		$	3,542


(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 C, Series D, Series E, Series F and Series FG preferred stock is recorded net of issuance costs.

~~On Sept. 20, 2017, The Bank of New York Mellon Corporation paid~~In May 2020, the ~~following dividends for the noncumulative perpetual preferred stock for the dividend period ending in September 2017 to holders of record as of the close of business on Sept. 5, 2017:~~

~~$1,022.22 per share on the Series A Preferred Stock (equivalent to $10.2222 per Normal Preferred Capital Security of Mellon Capital IV,~~Parent issued 1,000,000 depositary shares, each representing a 1/100th interest in a share of the Parent’s Series AG Noncumulative Perpetual Preferred ~~Stock);~~

~~$1,300.00 per share~~Stock (the “Series G Preferred Stock”). The Parent will pay dividends on the Series CG Preferred Stock, ~~(equivalent~~if declared by its board of directors on each March 20 and September 20, at an annual rate of 4.70%, from the original issue date to ~~$0.3250 per depositary share, each representing a 1/4,000th interest in a share of the Series C Preferred Stock); and~~but

~~$2,312.50 per share~~excluding Sept. 20, 2025; and at a floating rate equal to the five-year treasury rate on the ~~Series F Preferred Stock (equivalent~~date that is three business days prior to ~~$23.1250 per depositary share,~~the reset date plus 4.358% for each ~~representing a 1/100th interest in a share~~reset period, from and including Sept. 20, 2025. The floating rate will initially reset on Sept. 20, 2025 and subsequently on each date falling on the fifth anniversary of the ~~Series F Preferred Stock).~~preceding reset date.

The table below presents the dividends paid on the Parent’s preferred stock.



Preferred dividends paid
(dollars in millions, except per share amounts)	Depositary shares per share		2Q20				1Q20				2Q19				YTD20				YTD19
(dollars in millions, except per share amounts)	Depositary shares per share		Per share		Total dividend		Per share		Total dividend		Per share		Total dividend		Per share		Total dividend		Per share		Total dividend
Series A	100	(a)	$	1,022.22	$	5	$	1,011.11	$	5	$	1,022.22	$	5	$	2,033.33	$	10	$	2,022.22	$	10
Series C	4,000		1,300.00		8		1,300.00		8		1,300.00		7		2,600.00		16		2,600.00		15
Series D	100		2,250.00		11		N/A		—		2,250.00		11		2,250.00		11		2,250.00		11
Series E	100		2,475.00		25		N/A		—		2,475.00		25		2,475.00		25		2,475.00		25
Series F	100		N/A		—		2,312.50		23		N/A		—		2,312.50		23		2,312.50		23
Total					$	49			$	36			$	48			$	85			$	84


(a)	Represents Normal Preferred Capital Securities.

N/A - Not applicable.

For additional information on the preferred stock, see Note 1315 of the Notes to Consolidated Financial Statements in our ~~2016~~2019 Annual Report.

Terms of the Series A, Series C, Series D, Series E and Series F preferred stock are more fully described in each of their Certificates of Designations, each of which is filed as an Exhibit to this Form 10-Q.

BNY Mellon 81

Notes to Consolidated Financial Statements(continued)

Note ~~13 -~~ 14–Other comprehensive income (loss)



Components of other comprehensive income (loss)	Quarter ended
	June 30, 2020									March 31, 2020									June 30, 2019
(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)	$	104		$	11		$	115		$	(265	)	$	(104	)	$	(369	)	$	29		$	(19	)	$	10
Total foreign currency translation	104			11			115			(265		)	(104		)	(369		)	29			(19		)	10
Unrealized gain (loss) on assets available-for-sale:
Unrealized gain (loss) arising during period	989			(236		)	753			243			(60		)	183			384			(97		)	287
Reclassification adjustment (b)	(9		)	2			(7		)	(9		)	2			(7		)	(7		)	2			(5		)
Net unrealized gain (loss) on assets available-for-sale	980			(234		)	746			234			(58		)	176			377			(95		)	282
Defined benefit plans:
Amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost (b)	24			(5		)	19			24			(6		)	18			12			(2		)	10
Total defined benefit plans	24			(5		)	19			24			(6		)	18			12			(2		)	10
Unrealized gain (loss) on cash flow hedges:
Unrealized hedge gain (loss) arising during period	3			(1		)	2			(13		)	3			(10		)	2			(2		)	—
Reclassification of net (gain) loss to net income:
Foreign exchange (“FX”) contracts - staff expense	3			(1		)	2			(1		)	—			(1		)	—			—			—
Total reclassifications to net income	3			(1		)	2			(1		)	—			(1		)	—			—			—
Net unrealized gain (loss) on cash flow hedges	6			(2		)	4			(14		)	3			(11		)	2			(2		)	—
Total other comprehensive income (loss)	$	1,114		$	(230	)	$	884		$	(21	)	$	(165	)	$	(186	)	$	420		$	(118	)	$	302

Components of other comprehensive income (loss) Quarter ended
Sept. 30, 2017 June 30, 2017 Sept. 30, 2016
(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)
$ 221
$ 65
$ 286
$ 249
$ 81
$ 330
$ (104 ) $ (82 ) $ (186 )
Total foreign currency translation 221
65
286
249
81
330
(104 ) (82 ) (186 )
Unrealized gain (loss) on assets available-for-sale:
Unrealized gain (loss) arising during period 47
(19 ) 28
146
(55 ) 91
(87 ) 34
(53 )
Reclassification adjustment (b)
(19 ) 7
(12 ) —
(1 ) (1 ) (24 ) 9
(15 )
Net unrealized gain (loss) on assets available-for-sale 28
(12 ) 16
146
(56 ) 90
(111 ) 43
(68 )
Defined benefit plans:
Net gain (loss) arising during the period —
—
—
—
—
—
—
—
—
Amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost (b)
25
(10 ) 15
24
(8 ) 16
22
(8 ) 14
Total defined benefit plans 25
(10 ) 15
24
(8 ) 16
22
(8 ) 14
Unrealized gain (loss) on cash flow hedges:
Unrealized hedge gain (loss) arising during period (2 ) —
(2 ) (8 ) 4
(4 ) (24 ) 7
(17 )
Reclassification adjustment (b)
3
(1 ) 2
9
(4 ) 5
28
(9 ) 19
Net unrealized gain (loss) on cash flow hedges 1
(1 ) —
1
—
1
4
(2 ) 2
Total other comprehensive income (loss) $ 275
$ 42
$ 317
$ 420
$ 17
$ 437
$ (189 ) $ (49 ) $ (238 )


(a)	Includes the impact of hedges of net investments in foreign subsidiaries. See Note 1617 for additional information.

(b)

The reclassification adjustment related to the unrealized gain (loss) on assets available-for-sale is recorded as net securities gains on the ~~Consolidated Income Statement.~~consolidated income statement. The amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost is recorded as staff expense on the Consolidated Income Statement. See Note 16 of the Notes to Consolidated Financial Statements for the location of the reclassification adjustment related to cash flow hedges on the Consolidated Income Statement.consolidated income statement.


Components of other comprehensive income (loss)	Year-to-date																		Year-to-date
	Sept. 30, 2017									Sept. 30, 2016									June 30, 2020									June 30, 2019
(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			Pre-tax amount			Tax (expense) benefit			After-tax amount
Foreign currency translation:
Foreign currency translation adjustments arising during the period (a)	$	566		$	175		$	741		$	(223	)	$	(210	)	$	(433	)	$	(161	)	$	(93	)	$	(254	)	$	56		$	(17	)	$	39
Total foreign currency translation	566			175			741			(223		)	(210		)	(433		)	(161		)	(93		)	(254		)	56			(17		)	39
Unrealized gain (loss) on assets available-for-sale:
Unrealized gain (loss) arising during period	357			(144		)	213			338			(111		)	227			1,232			(296		)	936			706			(180		)	526
Reclassification adjustment (b)	(29		)	10			(19		)	(65		)	22			(43		)	(18		)	4			(14		)	(8		)	2			(6		)
Net unrealized gain (loss) on assets available-for-sale	328			(134		)	194			273			(89		)	184			1,214			(292		)	922			698			(178		)	520
Defined benefit plans:
Net gain (loss) arising during the period	3			(1		)	2			3			(1		)	2			—			—			—			(11		)	2			(9		)
Amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost (b)	74			(25		)	49			65			(22		)	43			48			(11		)	37			25			(5		)	20
Total defined benefit plans	77			(26		)	51			68			(23		)	45			48			(11		)	37			14			(3		)	11
Unrealized gain (loss) on cash flow hedges:
Unrealized hedge gain (loss) arising during period	4			(1		)	3			(115		)	38			(77		)
Reclassification adjustment (b)	13			(5		)	8			110			(37		)	73
Net unrealized gain (loss) on cash flow hedges	17			(6		)	11			(5		)	1			(4		)
Unrealized (loss) gain on cash flow hedges:
Unrealized hedge (loss) gain arising during period																			(10		)	2			(8		)	8			(6		)	2
Reclassification of net loss (gain) to net income:
FX contracts - staff expense																			2			(1		)	1			1			2			3
Total reclassifications to net income																			2			(1		)	1			1			2			3
Net unrealized (loss) gain on cash flow hedges																			(8		)	1			(7		)	9			(4		)	5
Total other comprehensive income (loss)	$	988		$	9		$	997		$	113		$	(321	)	$	(208	)	$	1,093		$	(395	)	$	698		$	777		$	(202	)	$	575


(a)	Includes the impact of hedges of net investments in foreign subsidiaries. See Note 1617 for additional information.

(b)

82 BNY Mellon

Notes to Consolidated Financial Statements(continued)

Note ~~14 -~~ 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 1820 of the Notes to Consolidated Financial Statements in our ~~2016~~2019 Annual Report for

information on how we determine fair value and the fair value hierarchy.

The following tables present the financial instruments carried at fair value at ~~Sept.~~June 30, ~~2017~~2020 and Dec. 31, ~~2016,~~2019, 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. ~~There were no material transfers between Level 1 and Level 2 during the third quarter of 2017.~~


Assets measured at fair value on a recurring basis at Sept. 30, 2017													Total carrying value
(dollar amounts in millions)	Level 1			Level 2			Level 3			Netting (a)
Assets measured at fair value on a recurring basis at June 30, 2020															Assets measured at fair value on a recurring basis at June 30, 2020												Total carrying value
(dollars in millions)															Level 1			Level 2			Level 3			Netting (a)
Available-for-sale securities:
Agency RMBS															$	—		$	26,437		$	—		$	—		$	26,437
U.S. Treasury	$	15,502		$	—		$	—		$	—		$	15,502	25,137			—			—			—			25,137
Sovereign debt/sovereign guaranteed															8,570			7,317			—			—			15,887
Agency commercial MBS															—			9,988			—			—			9,988
Foreign covered bonds															—			5,519			—			—			5,519
Supranational															—			5,448			—			—			5,448
CLOs															—			4,432			—			—			4,432
Foreign government agencies															—			3,578			—			—			3,578
U.S. government agencies	—			864			—			—			864		—			2,806			—			—			2,806
Sovereign debt/sovereign guaranteed	74			12,491			—			—			12,565
Other ABS															—			2,743			—			—			2,743
Non-agency commercial MBS															—			2,630			—			—			2,630
Commercial paper/CDs															—			1,853			—			—			1,853
Non-agency RMBS (b)															—			1,598			—			—			1,598
State and political subdivisions	—			3,124			—			—			3,124		—			1,179			—			—			1,179
Agency RMBS	—			24,431			—			—			24,431
Non-agency RMBS	—			525			—			—			525
Other RMBS	—			265			—			—			265
Commercial MBS	—			965			—			—			965
Agency commercial MBS	—			9,010			—			—			9,010
CLOs	—			2,550			—			—			2,550
Other asset-backed securities	—			1,157			—			—			1,157
Equity securities	4			—			—			—			4
Money market funds (b)	939			—			—			—			939
Corporate bonds	—			1,275			—			—			1,275		—			831			—			—			831
Other debt securities	—			3,151			—			—			3,151		—			1			—			—			1
Foreign covered bonds	2,284			258			—			—			2,542
Non-agency RMBS (c)	—			1,185			—			—			1,185
Total available-for-sale securities	18,803			61,251			—			—			80,054		33,707			76,360			—			—			110,067
Trading assets:
Debt and equity instruments (b)	433			1,016			—			—			1,449
Debt instruments															4,782			2,775			—			—			7,557
Equity instruments (c)															2,397			—			—			—			2,397
Derivative assets not designated as hedging:
Interest rate	3			6,731			—			(5,301		)	1,433		5			5,496			—			(2,436		)	3,065
Foreign exchange	—			4,879			—			(3,120		)	1,759		—			4,322			—			(3,204		)	1,118
Equity and other contracts	1			73			—			(49		)	25		2			11			—			—			13
Total derivative assets not designated as hedging	4			11,683			—			(8,470		)	3,217		7			9,829			—			(5,640		)	4,196
Total trading assets	437			12,699			—			(8,470		)	4,666		7,186			12,604			—			(5,640		)	14,150
Other assets:
Derivative assets designated as hedging:
Interest rate	—			307			—			—			307
Foreign exchange	—			37			—			—			37		—			137			—			—			137
Total derivative assets designated as hedging	—			344			—			—			344		—			137			—			—			137
Other assets (d)	148			184			—			—			332		52			153			—			—			205
Other assets measured at net asset value (d)													151
Total other assets	148			528			—			—			827
Assets measured at NAV (d)																											187
Subtotal assets of operations at fair value	19,388			74,478			—			(8,470		)	85,547		40,945			89,254			—			(5,640		)	124,746
Percentage of assets of operations prior to netting	21		%	79		%	—		%						31		%	69		%	—		%
Assets of consolidated investment management funds	398			404			—			—			802		416			44			—			—			460
Total assets	$	19,786		$	74,882		$	—		$	(8,470	)	$	86,349	$	41,361		$	89,298		$	—		$	(5,640	)	$	125,206
Percentage of total assets prior to netting	21		%	79		%	—		%						32		%	68		%	—		%

BNY Mellon 83

Notes to Consolidated Financial Statements(continued)


Liabilities measured at fair value on a recurring basis at Sept. 30, 2017													Total carrying value
(dollar amounts in millions)	Level 1			Level 2			Level 3			Netting (a)
Liabilities measured at fair value on a recurring basis at June 30, 2020															Liabilities measured at fair value on a recurring basis at June 30, 2020												Total carrying value
(dollars in millions)															Level 1			Level 2			Level 3			Netting (a)
Trading liabilities:
Debt and equity instruments	$	684		$	159		$	—		$	—		$	843
Debt instruments															$	2,589		$	75		$	—		$	—		$	2,664
Equity instruments															20			—			—			—			20
Derivative liabilities not designated as hedging:
Interest rate	3			6,681			—			(5,705		)	979		7			4,661			—			(2,680		)	1,988
Foreign exchange	—			4,463			—			(3,095		)	1,368		—			4,036			—			(3,134		)	902
Equity and other contracts	3			135			—			(75		)	63		1			23			—			(3		)	21
Total derivative liabilities not designated as hedging	6			11,279			—			(8,875		)	2,410		8			8,720			—			(5,817		)	2,911
Total trading liabilities	690			11,438			—			(8,875		)	3,253		2,617			8,795			—			(5,817		)	5,595
Long-term debt (b)	—			369			—			—			369
Long-term debt (c)															—			399			—			—			399
Other liabilities – derivative liabilities designated as hedging:
Interest rate	—			494			—			—			494		—			915			—			—			915
Foreign exchange	—			318			—			—			318		—			49			—			—			49
Total other liabilities – derivative liabilities designated as hedging	—			812			—			—			812		—			964			—			—			964
Subtotal liabilities of operations at fair value	690			12,619			—			(8,875		)	4,434		2,617			10,158			—			(5,817		)	6,958
Percentage of liabilities of operations prior to netting	5		%	95		%	—		%						20		%	80		%	—		%
Liabilities of consolidated investment management funds	2			25			—			—			27		—			4			—			—			4
Total liabilities	$	692		$	12,644		$	—		$	(8,875	)	$	4,461	$	2,617		$	10,162		$	—		$	(5,817	)	$	6,962
Percentage of total liabilities prior to netting	5		%	95		%	—		%						20		%	80		%	—		%

(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 $538 million in Level 2 that was included in the former Grantor Trust.


(c)	Includes certain interests in securitizations.


~~(c)~~	~~Previously included in the Grantor Trust. The Grantor Trust was dissolved in 2011.~~


(d)	Includes seed capital, private equity investments and ~~seed capital.~~other assets.

84 BNY Mellon

Notes to Consolidated Financial Statements(continued)



Assets measured at fair value on a recurring basis at Dec. 31, 2019													Total carrying value
(dollars in millions)	Level 1			Level 2			Level 3			Netting (a)
Available-for-sale securities:
Agency RMBS	$	—		$	27,043		$	—		$	—		$	27,043
U.S. Treasury	15,431			—			—			—			15,431
Sovereign debt/sovereign guaranteed	7,784			4,862			—			—			12,646
Agency commercial MBS	—			9,417			—			—			9,417
Foreign covered bonds	—			4,197			—			—			4,197
CLOs	—			4,063			—			—			4,063
Supranational	—			3,709			—			—			3,709
Foreign government agencies	—			2,643			—			—			2,643
Non-agency commercial MBS	—			2,178			—			—			2,178
Other ABS	—			2,143			—			—			2,143
U.S. government agencies	—			1,949			—			—			1,949
Non-agency RMBS (b)	—			1,233			—			—			1,233
State and political subdivisions	—			1,044			—			—			1,044
Corporate bonds	—			853			—			—			853
Other debt securities	—			1			—			—			1
Total available-for-sale securities	23,215			65,335			—			—			88,550
Trading assets:
Debt instruments	1,568			4,243			—			—			5,811
Equity instruments (c)	4,539			—			—			—			4,539
Derivative assets not designated as hedging:
Interest rate	4			3,686			—			(1,792		)	1,898
Foreign exchange	—			5,331			—			(4,021		)	1,310
Equity and other contracts	—			19			—			(6		)	13
Total derivative assets not designated as hedging	4			9,036			—			(5,819		)	3,221
Total trading assets	6,111			13,279			—			(5,819		)	13,571
Other assets:
Derivative assets designated as hedging:
Foreign exchange	—			21			—			—			21
Total derivative assets designated as hedging	—			21			—			—			21
Other assets (d)	38			179			—			—			217
Assets measured at NAV (d)													181
Subtotal assets of operations at fair value	29,364			78,814			—			(5,819		)	102,540
Percentage of assets of operations prior to netting	27		%	73		%	—		%
Assets of consolidated investment management funds	212			33			—			—			245
Total assets	$	29,576		$	78,847		$	—		$	(5,819	)	$	102,785
Percentage of total assets prior to netting	27		%	73		%	—		%

Assets measured at fair value on a recurring basis at Dec. 31, 2016
Total carrying
value

(dollar amounts in millions) Level 1
Level 2
Level 3
Netting (a)

Available-for-sale securities:
U.S. Treasury $ 14,307
$ —
$ —
$ —
$ 14,307
U.S. government agencies —
359
—
—
359
Sovereign debt/sovereign guaranteed 66
12,423
—
—
12,489
State and political subdivisions —
3,378
—
—
3,378
Agency RMBS —
22,736
—
—
22,736
Non-agency RMBS —
638
—
—
638
Other RMBS —
513
—
—
513
Commercial MBS —
928
—
—
928
Agency commercial MBS —
6,449
—
—
6,449
CLOs —
2,598
—
—
2,598
Other asset-backed securities —
1,727
—
—
1,727
Equity securities 3
—
—
—
3
Money market funds (b)
842
—
—
—
842
Corporate bonds —
1,396
—
—
1,396
Other debt securities —
1,961
—
—
1,961
Foreign covered bonds 1,876
265
—
—
2,141
Non-agency RMBS (c)
—
1,357
—
—
1,357
Total available-for-sale securities 17,094
56,728
—
—
73,822
Trading assets:
Debt and equity instruments (b)
240
2,013
—
—
2,253
Derivative assets not designated as hedging:
Interest rate 4
7,583
—
(6,047 ) 1,540
Foreign exchange —
6,104
—
(4,172 ) 1,932
Equity and other contracts —
46
—
(38 ) 8
Total derivative assets not designated as hedging 4
13,733
—
(10,257 ) 3,480
Total trading assets 244
15,746
—
(10,257 ) 5,733
Other assets:

Derivative assets designated as hedging:
Interest rate —
415
—
—
415
Foreign exchange —
369
—
—
369
Total derivative assets designated as hedging —
784
—
—
784
Other assets (d)
268
73
—
—
341
Other assets measured at net asset value (d)
214
Total other assets 268
857
—
—
1,339
Subtotal assets of operations at fair value 17,606
73,331
—
(10,257 ) 80,894
Percentage of assets of operations prior to netting 19 % 81 % — %
Assets of consolidated investment management funds 464
767
—
—
1,231
Total assets $ 18,070
$ 74,098
$ —
$ (10,257 ) $ 82,125
Percentage of total assets prior to netting 20 % 80 % — %

BNY Mellon 85

Notes to Consolidated Financial Statements(continued)


Liabilities measured at fair value on a recurring basis at Dec. 31, 2016													Total carrying value
(dollar amounts in millions)	Level 1			Level 2			Level 3			Netting (a)
Liabilities measured at fair value on a recurring basis at Dec. 31, 2019															Liabilities measured at fair value on a recurring basis at Dec. 31, 2019												Total carrying value
(dollars in millions)															Level 1			Level 2			Level 3			Netting (a)
Trading liabilities:
Debt and equity instruments	$	349		$	236		$	—		$	—		$	585
Debt instruments															$	1,477		$	107		$	—		$	—		$	1,584
Equity instruments															73			—			—			—			73
Derivative liabilities not designated as hedging:
Interest rate	4			7,629			—			(6,634		)	999		6			3,244			—			(1,986		)	1,264
Foreign exchange	—			6,103			—			(3,363		)	2,740		—			5,340			—			(3,428		)	1,912
Equity and other contracts	—			115			—			(50		)	65		3			6			—			(1		)	8
Total derivative liabilities not designated as hedging	4			13,847			—			(10,047		)	3,804		9			8,590			—			(5,415		)	3,184
Total trading liabilities	353			14,083			—			(10,047		)	4,389		1,559			8,697			—			(5,415		)	4,841
Long-term debt (b)	—			363			—			—			363
Long-term debt (c)															—			387			—			—			387
Other liabilities – derivative liabilities designated as hedging:
Interest rate	—			545			—			—			545		—			350			—			—			350
Foreign exchange	—			52			—			—			52		—			257			—			—			257
Total other liabilities – derivative liabilities designated as hedging	—			597			—			—			597		—			607			—			—			607
Subtotal liabilities of operations at fair value	353			15,043			—			(10,047		)	5,349		1,559			9,691			—			(5,415		)	5,835
Percentage of liabilities of operations prior to netting	2		%	98		%	—		%						14		%	86		%	—		%
Liabilities of consolidated investment management funds	3			312			—			—			315		1			—			—			—			1
Total liabilities	$	356		$	15,355		$	—		$	(10,047	)	$	5,664	$	1,560		$	9,691		$	—		$	(5,415	)	$	5,836
Percentage of total liabilities prior to netting	2		%	98		%	—		%						14		%	86		%	—		%

(a)


(b)	Includes $640 million in Level 2 that was included in the former Grantor Trust.


(c)	Includes certain interests in securitizations.


~~(c)~~	~~Previously included in the Grantor Trust. The Grantor Trust was dissolved in 2011.~~


(d)	Includes seed capital, private equity investments and ~~seed capital.~~other assets.

86 BNY Mellon

Notes to Consolidated Financial Statements(continued)


Details of certain items measured at fair value on a recurring basis	Sept. 30, 2017										Dec. 31, 2016
	Total carrying value ~~(b)~~		Ratings (a)								Total carrying value (b)		Ratings (a)
			AAA/ AA-		A+/ A-		BBB+/ BBB-		BB+ and lower				AAA/ AA-		A+/ A-		BBB+/ BBB-		BB+ and lower
(dollar amounts in millions)			AAA/ AA-		A+/ A-		BBB+/ BBB-		BB+ and lower				AAA/ AA-		A+/ A-		BBB+/ BBB-		BB+ and lower
Non-agency RMBS, originated in:
2007	$	42	—	%	—	%	—	%	100	%	$	58	—	%	—	%	—	%	100	%
Details of certain available-for-sale securities measured at fair value on a recurring basis																					June 30, 2020											Dec. 31, 2019
																					Total carrying value ~~(b)~~			Ratings (a)								Total carrying value		Ratings (a)
																								AAA/ AA-		A+/ A-		BBB+/ BBB-		BB+ and lower				AAA/ AA-		A+/ A-		BBB+/ BBB-		BB+ and lower
(dollars in millions)																							(b)	AAA/ AA-		A+/ A-		BBB+/ BBB-		BB+ and lower				AAA/ AA-		A+/ A-		BBB+/ BBB-		BB+ and lower
Non-agency RMBS (c), originated in:
2007-2020																					$	938		82	%	1	%	—	%	17	%	$	464	55	%	1	%	—	%	44	%
2006	85		—		—		—		100		98		—		—		—		100		250			—		22		—		78		291		—		21		—		79
2005	152		20		3		18		59		180		23		5		9		63		262			5		2		7		86		305		5		2		8		85
2004 and earlier	246		4		2		27		67		302		5		3		24		68		148			21		22		8		49		173		22		24		4		50
Total non-agency RMBS	$	525	8	%	2	%	14	%	76	%	$	638	9	%	3	%	14	%	74	%	$	1,598		51	%	6	%	2	%	41	%	$	1,233	25	%	9	%	3	%	63	%
Commercial MBS - Domestic, originated in:
2009-2017	$	909	89	%	11	%	—	%	—	%	$	674	84	%	16	%	—	%	—	%
2008	5		100		—		—		—		14		100		—		—		—
2007	—		—		—		—		—		190		71		29		—		—
2006	—		—		—		—		—		3		7		93		—		—
Total commercial MBS - Domestic	$	914	89	%	11	%	—	%	—	%	$	881	81	%	19	%	—	%	—	%
Non-agency commercial MBS originated in:
2009-2020																					$	2,630		100	%	—	%	—	%	—	%	$	2,178	98	%	2	%	—	%	—	%
Foreign covered bonds:
Canada	$	1,648	100	%	—	%	—	%	—	%	$	1,320	100	%	—	%	—	%	—	%	$	2,241		100	%	—	%	—	%	—	%	$	1,798	100	%	—	%	—	%	—	%
UK																					1,093			100		—		—		—		984		100		—		—		—
Australia	261		100		—		—		—		40		100		—		—		—		750			100		—		—		—		431		100		—		—		—
Netherlands	177		100		—		—		—		160		100		—		—		—
United Kingdom	136		100		—		—		—		280		100		—		—		—
Norway																					533			100		—		—		—		287		100		—		—		—
Germany																					407			100		—		—		—		357		100		—		—		—
Other	320		100		—		—		—		341		100		—		—		—		495			100		—		—		—		340		100		—		—		—
Total foreign covered bonds	$	2,542	100	%	—	%	—	%	—	%	$	2,141	100	%	—	%	—	%	—	%	$	5,519		100	%	—	%	—	%	—	%	$	4,197	100	%	—	%	—	%	—	%
European floating rate notes - available-for-sale:
United Kingdom	$	204	87	%	13	%	—	%	—	%	$	379	90	%	10	%	—	%	—	%
Netherlands	113		37		63		—		—		125		100		—		—		—
Ireland	—		—		—		—		—		58		—		—		100		—
Total European floating rate notes - available-for-sale	$	317	69	%	31	%	—	%	—	%	$	562	83	%	7	%	10	%	—	%
Sovereign debt/sovereign guaranteed:
United Kingdom	$	3,036	100	%	—	%	—	%	—	%	$	3,209	100	%	—	%	—	%	—	%
UK																					$	3,773		100	%	—	%	—	%	—	%	$	3,318	100	%	—	%	—	%	—	%
Germany																					2,346			100		—		—		—		1,997		100		—		—		—
France	1,993		100		—		—		—		1,998		100		—		—		—		2,238			100		—		—		—		1,272		100		—		—		—
Spain	1,740		—		—		100		—		1,749		—		—		100		—		1,961			—		4		96		—		1,453		—		6		94		—
Italy																					1,069			—		—		100		—		1,260		—		—		100		—
Singapore																					931			100		—		—		—		742		100		—		—		—
Ireland																					676			29		71		—		—		301		—		100		—		—
Netherlands																					564			100		—		—		—		791		100		—		—		—
Canada																					502			100		—		—		—		271		100		—		—		—
Japan																					434			—		100		—		—		274		—		100		—		—
Belgium																					411			100		—		—		—		79		100		—		—		—
Austria																					331			100		—		—		—		240		100		—		—		—
Hong Kong																					330			100		—		—		—		411		100		—		—		—
Other (d)																					321			45		—		21		34		237		39		4		—		57
Total sovereign debt/sovereign guaranteed																					$	15,887		74	%	6	%	19	%	1	%	$	12,646	73	%	5	%	21	%	1	%
Foreign government agencies:
Germany	1,688		100		—		—		—		1,347		100		—		—		—		$	1,398		100	%	—	%	—	%	—	%	$	1,131	100	%	—	%	—	%	—	%
Italy	1,169		—		—		100		—		1,130		—		—		100		—
Netherlands	1,016		100		—		—		—		1,061		100		—		—		—		730			100		—		—		—		678		100		—		—		—
Ireland	832		—		100		—		—		736		—		100		—		—
Belgium	809		100		—		—		—		1,005		100		—		—		—
Other (c)	282		48		3		—		49		254		71		—		—		29
Total sovereign debt/sovereign guaranteed	$	12,565	69	%	7	%	23	%	1	%	$	12,489	70	%	6	%	23	%	1	%
Non-agency RMBS (d), originated in:
2007	$	337	—	%	—	%	—	%	100	%	$	387	—	%	—	%	—	%	100	%
2006	345		—		—		—		100		391		—		—		—		100
2005	387		1		1		1		97		437		—		2		1		97
2004 and earlier	116		2		2		22		74		142		2		2		17		79
Total non-agency RMBS (d)	$	1,185	—	%	1	%	3	%	96	%	$	1,357	—	%	1	%	2	%	97	%
Canada																					321			62		38		—		—		71		—		100		—		—
France																					281			100		—		—		—		42		100		—		—		—
Sweden																					276			100		—		—		—		202		100		—		—		—
Finland																					241			100		—		—		—		245		100		—		—		—
Other																					331			84		16		—		—		274		79		21		—		—
Total foreign government agencies																					$	3,578		95	%	5	%	—	%	—	%	$	2,643	95	%	5	%	—	%	—	%


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


(b)	At ~~Sept.~~June 30, ~~2017~~2020 and Dec. 31, ~~2016, foreign covered bonds and~~2019, 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 ~~noninvestment~~$538 million at June 30, 2020 and $640 million at Dec. 31, 2019 that were included in the former Grantor Trust.


(d)	Includes non-investment grade sovereign debt/sovereign guaranteed securities related to Brazil of ~~$140~~$109 million at ~~Sept.~~June 30, ~~2017~~2020 and ~~$73~~$134 million at Dec. 31, ~~2016.~~


~~(d)~~	~~Previously included in the Grantor Trust. The Grantor Trust was dissolved in 2011.~~2019.

~~Changes in Level 3 fair value measurements~~

Our classification of a financial instrument in Level 3 of the valuation hierarchy is based on the significance of the unobservable factors to the overall fair value measurement. However, these instruments generally include other observable components that are actively quoted or validated to third-party sources; accordingly, the gains and losses in the table below include changes in fair value due to observable parameters as well as the unobservable parameters in our valuation methodologies. We also manage the

risks of Level 3 financial instruments using securities and derivatives positions that are Level 1 or Level 2 instruments which are not included in the table; accordingly, the gains or losses below do not reflect the effect of our risk management activities related to the Level 3 instruments.

~~The Company has a Level 3 Pricing Committee which evaluates the valuation techniques used in~~

BNY Mellon 87

Notes to Consolidated Financial Statements(continued)

~~determining the fair value of Level 3 assets and liabilities.~~

~~There were no financial instruments recorded at fair value on a recurring basis classified in Level 3 of the valuation hierarchy in the first nine months of 2017.~~

The table below includes a roll forward of the balance sheet amount for the three and nine months ended Sept. 30, 2016 (including the change in fair value), for financial instruments classified in Level 3 of the valuation hierarchy.

Fair value measurements for assets using significant unobservable inputs Loans
(in millions) 3Q16
YTD16
Fair value at the beginning of the period $ 101
$ —
Transfers into Level 3 —
19
Total gains for the period included in earnings (a)
—
2
Purchases and sales:
Purchases —
113
Issuances 1
1
Sales (102 ) (135 )
Fair value at Sept. 30, 2016 $ —
$ —
Change in unrealized gains for the period included in earnings for assets held at the end of the reporting period $ —
$ —


~~(a)~~	~~Reported in investment and other income.~~

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. ~~An example~~

Examples would be the recording of an impairment of an ~~asset.~~asset and non-readily marketable equity securities carried at cost with upward or downward adjustments.

The following ~~tables present~~table presents the financial instruments carried on the consolidated balance sheet by caption and by level in the fair value hierarchy as of ~~Sept.~~June 30, ~~2017~~2020 and Dec. 31, ~~2016, for which a nonrecurring change in fair value has been recorded during the quarters ended Sept. 30, 2017 and Dec. 31, 2016.~~

2019.


Assets measured at fair value on a nonrecurring basis at Sept. 30, 2017							Total carrying value
Assets measured at fair value on a nonrecurring basis							Total carrying value		June 30, 2020								Dec. 31, 2019
Assets measured at fair value on a nonrecurring basis															Total carrying value								Total carrying value
(in millions)	Level 1		Level 2		Level 3		Total carrying value		Level 1		Level 2		Level 3		Total carrying value		Level 1		Level 2		Level 3		Total carrying value
Loans (a)	$	—	$	75	$	7	Total carrying value		$	—	$	53	$	—	$	53	$	—	$	58	$	—	$	58
Other assets (b)	—		4		—		4		—		107		—		107		—		64		—		64
Total assets at fair value on a nonrecurring basis	$	—	$	79	$	7	$	86	$	—	$	160	$	—	$	160	$	—	$	122	$	—	$	122

Assets measured at fair value on a nonrecurring basis at Dec. 31, 2016
Total carrying
value

(in millions) Level 1
Level 2
Level 3
Loans (a)
$ —
$ 84
$ 7
$ 91
Other assets (b)
—
4
—
4
Total assets at fair value on a nonrecurring basis $ —
$ 88
$ 7
$ 95

(a)

~~During the quarters ended Sept. 30, 2017 and Dec. 31, 2016, the~~The fair value of these loans decreased less than $1 million in the second quarter of 2020 and ~~$1 million, respectively,~~the fourth quarter of 2019, based on the fair value of the underlying collateral, ~~based on~~as required by guidance in ASC ~~310, Receivables,~~326, Financial Instruments – Credit Losses, with an offset to the allowance for credit losses.


(b)	Includes non-readily marketable equity securities carried at cost with upward or downward adjustments and other assets received in satisfaction of debt.

Estimated fair value of financial instruments

The following tables present the estimated fair value and the carrying amount of financial instruments not carried at fair value on the consolidated balance sheet at ~~Sept.~~June 30, ~~2017~~2020 and Dec. 31, ~~2016,~~2019, by caption on the consolidated balance sheet and by the valuation

hierarchy.

hierarchy. See Note 18 of the Notes to Consolidated Financial Statements in our 2016 Annual Report for additional information regarding the financial instruments within the scope of this disclosure, and the methods and significant assumptions used to estimate their fair value.

~~88 BNY Mellon~~

~~Notes to Consolidated Financial Statements(continued)~~


Summary of financial instruments	Sept. 30, 2017										June 30, 2020
(in millions)	Level 1		Level 2		Level 3		Total estimated fair value		Carrying amount		Level 1		Level 2		Level 3		Total estimated fair value		Carrying amount
Assets:
Interest-bearing deposits with the Federal Reserve and other central banks	$	—	$	75,808	$	—	$	75,808	$	75,808	$	—	$	112,728	$	—	$	112,728	$	112,728
Interest-bearing deposits with banks	—		15,254		—		15,254		15,256		—		18,063		—		18,063		18,045
Federal funds sold and securities purchased under resale agreements	—		27,883		—		27,883		27,883		—		36,638		—		36,638		36,638
Securities held-to-maturity	9,943		29,985		—		39,928		39,995		5,815		40,168		—		45,983		44,615
Loans (a)	—		57,709		—		57,709		57,562		—		54,377		—		54,377		54,067
Other financial assets	5,557		1,169		—		6,726		6,726		4,776		1,165		—		5,941		5,941
Total	$	15,500	$	207,808	$	—	$	223,308	$	223,230	$	10,591	$	263,139	$	—	$	273,730	$	272,034
Liabilities:
Noninterest-bearing deposits	$	—	$	80,380	$	—	$	80,380	$	80,380	$	—	$	78,100	$	—	$	78,100	$	78,100
Interest-bearing deposits	—		148,967		—		148,967		150,616		—		226,917		—		226,917		227,370
Federal funds purchased and securities sold under repurchase agreements	—		10,314		—		10,314		10,314		—		14,512		—		14,512		14,512
Payables to customers and broker-dealers	—		21,176		—		21,176		21,176		—		25,012		—		25,012		25,012
Commercial paper	—		2,501		—		2,501		2,501		—		665		—		665		665
Borrowings	—		3,544		—		3,544		3,544		—		1,852		—		1,852		1,852
Long-term debt	—		28,335		—		28,335		28,039		—		28,875		—		28,875		27,167
Total	$	—	$	295,217	$	—	$	295,217	$	296,570	$	—	$	375,933	$	—	$	375,933	$	374,678


(a)	Does not include the leasing portfolio.

88 BNY Mellon

Summary of financial instruments Dec. 31, 2016
(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 $ —
$ 58,041
$ —
$ 58,041
$ 58,041
Interest-bearing deposits with banks —
15,091
—
15,091
15,086
Federal funds sold and securities purchased under resale agreements —
25,801
—
25,801
25,801
Securities held-to-maturity 11,173
29,496
—
40,669
40,905
Loans (a)
—
62,829
—
62,829
62,564
Other financial assets 4,822
1,112
—
5,934
5,934
Total $ 15,995
$ 192,370
$ —
$ 208,365
$ 208,331
Liabilities:
Noninterest-bearing deposits $ —
$ 78,342
$ —
$ 78,342
$ 78,342
Interest-bearing deposits —
141,418
—
141,418
143,148
Federal funds purchased and securities sold under repurchase agreements —
9,989
—
9,989
9,989
Payables to customers and broker-dealers —
20,987
—
20,987
20,987
Borrowings —
960
—
960
960
Long-term debt —
24,184
—
24,184
24,100
Total $ —
$ 275,880
$ —
$ 275,880
$ 277,526

Notes to Consolidated Financial Statements(continued)



Summary of financial instruments	Dec. 31, 2019
(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	$	—	$	95,042	$	—	$	95,042	$	95,042
Interest-bearing deposits with banks	—		14,832		—		14,832		14,811
Federal funds sold and securities purchased under resale agreements	—		30,182		—		30,182		30,182
Securities held-to-maturity	4,630		30,175		—		34,805		34,483
Loans (a)	—		54,194		—		54,194		53,718
Other financial assets	4,830		1,233		—		6,063		6,063
Total	$	9,460	$	225,658	$	—	$	235,118	$	234,299
Liabilities:
Noninterest-bearing deposits	$	—	$	57,630	$	—	$	57,630	$	57,630
Interest-bearing deposits	—		200,846		—		200,846		201,836
Federal funds purchased and securities sold under repurchase agreements	—		11,401		—		11,401		11,401
Payables to customers and broker-dealers	—		18,758		—		18,758		18,758
Commercial paper	—		3,959		—		3,959		3,959
Borrowings	—		917		—		917		917
Long-term debt	—		27,858		—		27,858		27,114
Total	$	—	$	321,369	$	—	$	321,369	$	321,615


(a)	Does not include the leasing portfolio.

~~The table below summarizes the carrying amount of the hedged financial instruments, the notional amount of the hedge and the unrealized gain (loss) (estimated fair value) of the derivatives.~~

Hedged financial instruments
Carrying
amount

Notional amount of hedge

Unrealized
(in millions) Gain
(Loss)
Sept. 30, 2017
Securities available-for-sale $ 12,416
$ 12,333
$ 56
$ (337 )
Long-term debt 24,249
24,200
249
(157 )
Dec. 31, 2016
Securities available-for-sale $ 9,184
$ 9,233
$ 83
$ (342 )
Long-term debt 20,511
20,450
330
(203 )

~~BNY Mellon 89~~

~~Notes to Consolidated Financial Statements(continued)~~

Note ~~15 -~~ 16–Fair value option

We elected fair value as an alternative measurement for selected financial assets and ~~financial liabilities.~~

liabilities that are not otherwise required to be measured at fair value, including the assets and liabilities of consolidated investment management funds and certain long-term debt. The following table presents the assets and liabilities ~~by type,~~ of consolidated investment management funds, ~~recorded~~ at fair value.



Assets and liabilities of consolidated investment management funds, at fair value
	June 30, 2020		Dec. 31, 2019
(in millions)	June 30, 2020		Dec. 31, 2019
Assets of consolidated investment management funds:
Trading assets	$	450	$	229
Other assets	10		16
Total assets of consolidated investment management funds	$	460	$	245
Liabilities of consolidated investment management funds:
Other liabilities	4		1
Total liabilities of consolidated investment management funds	$	4	$	1

Assets and liabilities of consolidated investment management funds, at fair value
Sept. 30, 2017
Dec. 31, 2016
(in millions)
Assets of consolidated investment management funds:
Trading assets $ 576
$ 979
Other assets 226
252
Total assets of consolidated investment management funds $ 802
$ 1,231
Liabilities of consolidated investment management funds:
Trading liabilities $ —
$ 282
Other liabilities 27
33
Total liabilities of consolidated investment management funds $ 27
$ 315

BNY Mellon values the assets and liabilities of its 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 value of the assets and liabilities are recorded in the consolidated income statement as investment income of consolidated investment management funds and in the interest of investment management fund note holders, respectively.

We have elected the fair value option on $240 million of long-term debt. The fair value of this long-term debt was $~~369~~399 million at ~~Sept.~~June 30, ~~2017~~2020 and ~~$363~~$387 million at Dec. 31, ~~2016.~~2019. The long-term debt is valued using observable market inputs and is included in Level 2 of the valuation hierarchy.

The following table presents the changes in fair value of long-term debt recorded in foreign exchange and ~~certain loans for which we elected the fair value option that we previously held in 2016, and the location of the changes~~other trading revenue in the consolidated income statement.

Impact of changes in fair value in the income statement (a)
(in millions) 3Q17
2Q17
3Q16
YTD17
YTD16
Loans:
Investment and other income $ —
$ —
$ (1 ) $ —
$ 13
Long-term debt:
Foreign exchange and other trading revenue $ (1 ) $ (4 ) $ 2
$ (6 ) $ (17 )



Change in fair value of long-term debt (a)
(in millions)	2Q20			1Q20			2Q19			YTD20			YTD19
Foreign exchange and other trading revenue	$	(2	)	$	(10	)	$	(7	)	$	(12	)	$	(12	)


(a)	The changes in fair value ~~of the loans and long-term debt~~ are approximately offset by an economic ~~hedges~~hedge included in foreign exchange and other trading revenue.

BNY Mellon 89

Notes to Consolidated Financial Statements(continued)

Note ~~16 -~~ 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. 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 no0 counterparty default losses recorded in the ~~third~~second quarter of ~~2017 or the third quarter of 2016.~~2020.

Hedging derivatives

We utilize interest rate swap agreements to manage our exposure to interest rate fluctuations. ~~For~~We enter into fair value hedges ~~of available-for-sale investment securities, deposits and long-term debt, the hedge documentation specifies the terms of the hedged items and the~~as an interest rate ~~swaps and indicates that the derivative is hedging a fixed rate item and is a fair value hedge, that the hedge exposure is~~risk management strategy to ~~the changes in the fair value of the hedged item due to changes in benchmark interest rates, and that the strategy is to eliminate~~reduce fair value variability by converting certain fixed rate interest payments associated with available-for-sale securities and long-term debt to ~~LIBOR.~~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.

~~90 BNY Mellon~~

~~Notes to Consolidated Financial Statements(continued)~~

The available-for-sale ~~investment~~ securities hedged consist of U.S. Treasury, ~~bonds,~~ agency and non-agency commercial MBS, sovereign ~~debt~~debt/sovereign guaranteed, corporate bonds and foreign covered ~~bonds that had original maturities~~bonds. At June 30, 2020, $13.9 billion par value of 30 years or less at initial purchase. The swaps on all of these investment securities are not callable. All of these securities are hedged with “pay fixed rate, receive variable rate” swaps of similar maturity, repricing and fixed rate coupon. At Sept. 30, 2017, $12.4 billion face amount ofavailable-for-sale securities were hedged with interest rate swaps designated as fair value hedges that had notional values of ~~$12.3~~$13.9 billion.

The fixed rate long-term debt instruments hedged generally have original maturities of five to 30 years. ~~We issue both callable and non-callable debt. The non-callable~~In fair value hedging relationships, debt is hedged with “receive fixed rate, pay variable rate” ~~swaps with similar maturity, repricing and fixed rate coupon. Callable debt is hedged with callable swaps where the call dates of the swaps exactly match the call dates of the debt.~~swaps. At ~~Sept.~~June 30, ~~2017, $24.2~~2020, $13.9 billion par value of debt was

hedged with interest rate swaps designated as fair value hedges that had notional values of ~~$24.2~~$13.9 billion.

In addition, we ~~enter into~~utilize forward foreign exchange ~~hedges.~~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 ~~nine~~12 months or less as cash flow hedges to hedge our foreign exchange exposure to currencies such as Indian rupee, British pound, Hong Kong dollar, Singapore dollar and Polish zloty ~~Canadian dollar and Japanese yen foreign exchange exposure with respect to foreign currency forecasted~~used in revenue and expense transactions infor entities that have the U.S. dollar as their functional currency. As of ~~Sept.~~June 30, ~~2017,~~2020, the hedged forecasted foreign currency transactions and designated forward foreign exchange contract hedges were ~~$539~~$312 million (notional), with a pre-tax loss of $9$3 million recorded in accumulated ~~other comprehensive income.~~OCI. This loss will be reclassified to ~~income or expense~~earnings over the next ~~nine~~12 months.

We also utilize forward foreign exchange contracts as fair value hedges of the foreign exchange risk associated with available-for-sale securities. Forward points are designated as an excluded component and amortized into earnings over the hedge period. The unamortized derivative value associated with the excluded component is recognized in accumulated OCI. At June 30, 2020, $131 million par value of available-for-sale securities was hedged with foreign currency forward contracts that had a notional value of $131 million.

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 ~~two years.~~one year. The derivatives employed are designated as hedges of changes in value of our foreign investments due to exchange rates. ~~Changes in the value of the forward foreign exchange contracts offset the changes in value of the foreign investments due to changes in foreign exchange rates.~~ The change in fair market value of these forward foreign exchange contracts is ~~deferred and~~ reported within foreign currency translation adjustments in shareholders’ equity, net of tax. At ~~Sept.~~June 30, ~~2017,~~2020, forward foreign exchange contracts with notional amounts totaling ~~$7.8~~$7.6 billion were designated as net investment hedges.

In addition to forward foreign exchange contracts, we also designate non-derivative financial instruments as hedges of our net investments in foreign subsidiaries. Those non-derivative financial instruments designated as hedges of our net investments in ~~foreign subsidiaries were all long-term liabilities of~~

90 BNY Mellon ~~in various currencies, and, at Sept. 30, 2017, had a combined U.S. dollar equivalent value of $181 million.~~

~~Ineffectiveness related to derivatives and hedging relationships was recorded in income as follows:~~

Ineffectiveness Nine months ended
(in millions) Sept. 30, 2017
Sept. 30, 2016
Fair value hedges of securities $ (13.3 ) $ (5.4 )
Fair value hedges of long-term debt 0.1
(23.0 )
Cash flow hedges —
—
Other (a)
—
—
Total $ (13.2 ) $ (28.4 )


~~(a)~~	~~Includes ineffectiveness recorded on foreign exchange hedges.~~

~~BNY Mellon 91~~

Notes to Consolidated Financial Statements(continued)

foreign subsidiaries were all long-term liabilities of BNY Mellon and, at June 30, 2020, had a combined U.S. dollar equivalent carrying value of $172 million.

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)	2Q20			1Q20			2Q19			YTD20			YTD19
Interest rate fair value hedges of available-for-sale securities
Derivative	Interest revenue	$	19		$	(1,033	)	$	(486	)	$	(1,014	)	$	(869	)
Hedged item	Interest revenue	(15		)	1,011			480			996			856
Interest rate fair value hedges of long-term debt
Derivative	Interest expense	47			714			300			761			485
Hedged item	Interest expense	(49		)	(708		)	(298		)	(757		)	(482		)
Foreign exchange fair value hedges of available-for-sale securities
Derivative (a)	Other revenue	5			7			(5		)	12			1
Hedged item	Other revenue	(5		)	(7		)	5			(12		)	—
Cash flow hedges of forecasted FX exposures
(Loss) gain reclassified from OCI into income	Staff expense	(3		)	1			—			(2		)	(1		)
(Loss) recognized in the consolidated income statement due to fair value and cash flow hedging relationships		$	(1	)	$	(15	)	$	(4	)	$	(16	)	$	(10	)

(a)

Includes gains of less than $1 million in the second quarter of 2020 and first quarter of 2020, a de minimis gain in the second quarter of 2019, a gain of less than $1 million in the first six months of 2020 and a gain of $1 million in the first six months of 2019 associated with the amortization of the excluded component. At June 30, 2020 and Dec. 31, 2019, the remaining accumulated OCI balance associated with the excluded component was de minimis.

The following table presents the impact of hedging derivatives used in net investment hedging relationships.



Impact of derivative instruments used in net investment hedging relationships
(in millions)
Derivatives in net investment hedging relationships	Gain or (loss) recognized in accumulated OCI on derivatives											Location of gain or (loss) reclassified from accumulated OCI into income	Gain or (loss) reclassified from accumulated OCI into income
Derivatives in net investment hedging relationships	2Q20			1Q20		2Q19		YTD20		YTD19			2Q20		1Q20		2Q19		YTD20		YTD19
FX contracts	$	(45	)	$	437	$	76	$	392	$	70	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)
	Carrying amount of hedged asset or liability				Hedge accounting basis adjustment increase (decrease) (a)
(in millions)	June 30, 2020		Dec. 31, 2019		June 30, 2020		Dec. 31, 2019
Available-for-sale securities (b)(c)	$	13,952	$	13,792	$	1,817	$	687
Long-term debt	$	14,956	$	13,945	$	919	$	116


(a)	Includes $196 million and $53 million of basis adjustment increases on discontinued hedges associated with available-for-sale securities at June 30, 2020 and Dec. 31, 2019, respectively, and $156 million and $200 million of basis adjustment decreases on discontinued hedges associated with long-term debt at June 30, 2020 and Dec. 31, 2019, respectively.


(b)	Excludes hedged items where only foreign currency risk is the designated hedged risk, as the basis adjustments related to foreign currency hedges will not reverse through the consolidated income statement in future periods. The carrying amount excluded for available-for-sale securities was $131 million at June 30, 2020 and $142 million at Dec. 31, 2019.


(c)	Carrying amount represents the amortized cost.

BNY Mellon 91

Notes to Consolidated Financial Statements(continued)

The following table summarizes the notional amount and ~~credit exposure~~carrying values of our total derivative portfolio at ~~Sept.~~June 30, ~~2017~~2020 and Dec. 31, ~~2016~~.2019.



Impact of derivative instruments on the balance sheet	Notional value				Asset derivatives fair value						Liability derivatives fair value
	June 30, 2020		Dec. 31, 2019		June 30, 2020			Dec. 31, 2019			June 30, 2020			Dec. 31, 2019
(in millions)	June 30, 2020		Dec. 31, 2019		June 30, 2020			Dec. 31, 2019			June 30, 2020			Dec. 31, 2019
Derivatives designated as hedging instruments: (a)(b)
Interest rate contracts	$	27,775	$	28,365	$	—		$	—		$	915		$	350
Foreign exchange contracts	8,040		8,390		137			21			49			257
Total derivatives designated as hedging instruments					$	137		$	21		$	964		$	607
Derivatives not designated as hedging instruments: (b)(c)
Interest rate contracts	$	217,613	$	306,790	$	5,501		$	3,690		$	4,668		$	3,250
Foreign exchange contracts	781,991		848,961		4,322			5,331			4,036			5,340
Equity contracts	1,657		3,189		13			19			22			5
Credit contracts	165		165		—			—			2			4
Total derivatives not designated as hedging instruments					$	9,836		$	9,040		$	8,728		$	8,599
Total derivatives fair value (d)					$	9,973		$	9,061		$	9,692		$	9,206
Effect of master netting agreements (e)					(5,640		)	(5,819		)	(5,817		)	(5,415		)
Fair value after effect of master netting agreements					$	4,333		$	3,242		$	3,875		$	3,791

Impact of derivative instruments on the balance sheet Notional value
Asset derivatives
fair value

Liability derivatives
fair value
(in millions) Sept. 30, 2017
Dec. 31, 2016
Sept. 30, 2017
Dec. 31, 2016
Sept. 30, 2017
Dec. 31, 2016
Derivatives designated as hedging instruments: (a)

Interest rate contracts $ 36,533
$ 29,683
$ 307
$ 415
$ 494
$ 545
Foreign exchange contracts 8,399
7,796
37
369
318
52
Total derivatives designated as hedging instruments $ 344
$ 784
$ 812
$ 597
Derivatives not designated as hedging instruments: (b)

Interest rate contracts $ 283,384
$ 325,412
$ 6,734
$ 7,587
$ 6,684
$ 7,633
Foreign exchange contracts 639,336
530,729
4,879
6,104
4,463
6,103
Equity contracts 1,354
1,167
74
46
134
112
Credit contracts 180
160
—
—
4
3
Total derivatives not designated as hedging instruments $ 11,687
$ 13,737
$ 11,285
$ 13,851
Total derivatives fair value (c)
$ 12,031
$ 14,521
$ 12,097
$ 14,448
Effect of master netting agreements (d)
(8,470 ) (10,257 ) (8,875 ) (10,047 )
Fair value after effect of master netting agreements $ 3,561
$ 4,264
$ 3,222
$ 4,401


(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.


~~(c)~~(d)	Fair values are on a gross basis, before consideration of master netting agreements, as required by ASC 815, Derivatives and Hedging.


~~(d)~~(e)	Effect of master netting agreements includes cash collateral received and paid of ~~$834~~$869 million and ~~$1,239~~$1,046 million, respectively, at ~~Sept.~~June 30, ~~2017~~2020, and ~~$1,119~~$1,022 million and ~~$909~~$618 million, respectively, at Dec. 31, ~~2016~~2019.

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 and other trading revenue on the consolidated income statement.

The following ~~tables present~~table presents our foreign exchange and other trading revenue.



Foreign exchange and other trading revenue
(in millions)	2Q20			1Q20		2Q19		YTD20		YTD19
Foreign exchange	$	174		$	253	$	150	$	427	$	310
Other trading (loss) revenue	(8		)	66		16		58		26
Total foreign exchange and other trading revenue	$	166		$	319	$	166	$	485	$	336

Foreign exchange revenue includes income from purchasing and selling foreign currencies and

currency forwards, futures and options. Other trading revenue reflects results from trading in cash instruments, including fixed income and equity securities and 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 ~~impact~~foreign currency, interest rate or market risks inherent in some of ~~derivative instruments used~~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 ~~fair value, cash flow~~staff expense on the consolidated income statement and ~~net investment hedging relationships~~were gains of $28 million in the ~~income statement.~~second quarter of 2020 and $5 million in the second quarter of 2019, losses of $41 million in the first quarter of 2020 and $13 million in the first six months of 2020 and a gain of $23 million in the first six months of 2019.

Impact of derivative instruments in the income statement
(in millions)

Derivatives in fair value hedging relationships
Location of
gain or (loss)
recognized in income
on derivatives

Gain or (loss) recognized in income
on derivatives

Location of
gain or (loss)
recognized in income
on hedged item

Gain or (loss) recognized
in hedged item
3Q17
2Q17
3Q16
3Q17
2Q17
3Q16
Interest rate contracts Net interest revenue $ (33 ) $ 2
$ (174 ) Net interest revenue $ 31
$ (9 ) $ 168

Derivatives in cash flow hedging
relationships
Gain or (loss)
recognized in
accumulated OCI
on derivatives
(effective portion)

Location of gain or
(loss) reclassified
from accumulated
OCI into income
(effective portion)

Gain or (loss)
reclassified
from accumulated
OCI into income
(effective portion)

Location of gain or
(loss) recognized in
income on derivatives
(ineffective portion and
amount excluded from
effectiveness testing)

Gain or (loss) recognized
in income on derivatives
(ineffectiveness portion
and amount excluded from
effectiveness testing)
3Q17
2Q17
3Q16
3Q17
2Q17
3Q16
3Q17
2Q17
3Q16
FX contracts $ —
$ —
$ (7 ) Net interest revenue $ —
$ —
$ (6 ) Net interest revenue $ —
$ —
$ —
FX contracts 3
(1 ) —
Other revenue —
—
—
Other revenue —
—
—
FX contracts (1 ) —
(19 ) Trading revenue (1 ) —
(19 ) Trading revenue —
—
—
FX contracts (4 ) (7 ) 2
Salary expense (2 ) (9 ) (3 ) Salary expense —
—
—
Total $ (2 ) $ (8 ) $ (24 ) $ (3 ) $ (9 ) $ (28 ) $ —
$ —
$ —

92 BNY Mellon

Notes to Consolidated Financial Statements(continued)

Derivatives in net
investment hedging
relationships
Gain or (loss)
recognized in
accumulated OCI
on derivatives
(effective portion)

Location of gain or
(loss) reclassified
from accumulated
OCI into income
(effective portion)

Gain or (loss)
reclassified
from accumulated
OCI into income
(effective portion)

Location of gain or
(loss) recognized in
income on derivatives
(ineffective portion and
amount excluded from
effectiveness testing)

Gain or (loss) recognized
in income on derivatives
(ineffectiveness portion
and amount excluded from
effectiveness testing)
3Q17
2Q17
3Q16
3Q17
2Q17
3Q16
3Q17
2Q17
3Q16
FX contracts $ (206 ) $ (274 ) $ 47
Net interest revenue $ —
$ —
$ —
Other revenue $ —
$ —
$ —

Impact of derivative instruments in the income statement
(in millions)

Derivatives in fair value hedging relationships
Location of
gain or (loss)
recognized in income
on derivatives
Gain or (loss) recognized in income on derivatives
Location of
gain or (loss)
recognized in income
on hedged item

Gain or (loss) recognized
in hedged item
YTD17
YTD16
YTD17
YTD16
Interest rate contracts Net interest revenue $ (21 ) $ (445 ) Net interest revenue $ 8
$ 417

Derivatives in cash flow hedging
relationships
Gain or (loss)
recognized in
accumulated OCI
on derivatives
(effective portion)

Location of gain or
(loss) reclassified
from accumulated
OCI into income
(effective portion)

Gain or (loss) reclassified
from accumulated
OCI into income
(effective portion)

Location of gain or
(loss) recognized in
income on derivatives
(ineffective portion and
amount excluded from
effectiveness testing)

Gain or (loss) recognized
in income on derivatives
(ineffectiveness portion
and amount excluded from
effectiveness testing)
YTD17
YTD16
YTD17
YTD16
YTD17
YTD16
FX contracts $ —
$ (16 ) Net interest revenue $ —
$ (16 ) Net interest revenue $ —
$ —
FX contracts 2
—
Other revenue —
—
Other revenue —
—
FX contracts 2
(89 ) Trading revenue 2
(89 ) Trading revenue —
—
FX contracts —
(10 ) Salary expense (15 ) (5 ) Salary expense —
—
Total $ 4
$ (115 ) $ (13 ) $ (110 ) $ —
$ —

Derivatives in net
investment hedging
relationships
Gain or (loss)
recognized in
accumulated OCI
on derivatives
(effective portion)

Location of gain or
(loss) reclassified
from accumulated
OCI into income
(effective portion)

Gain or (loss)
reclassified
from accumulated
OCI into income
(effective portion)

Location of gain or
(loss) recognized in
income on derivatives
(ineffective portion and
amount excluded from
effectiveness testing)

Gain or (loss) recognized
in income on derivatives
(ineffectiveness portion
and amount excluded from
effectiveness testing)
YTD17
YTD16
YTD17
YTD16
YTD17
YTD16
FX contracts $ (576 ) $ 320
Net interest revenue $ —
$ —
Other revenue $ —
$ —

~~Trading activities (including trading derivatives)~~

We manage trading risk through a system of position limits, a ~~VaR~~value-at-risk (“VaR”) methodology based on historical simulation and other market sensitivity measures. Risk is monitored and reported to senior management by a separate unit, independent from trading, on a daily basis. Based on certain assumptions, the VaR methodology is designed to capture the potential overnight pre-tax dollar loss from adverse changes in fair values of all trading positions. The calculation assumes a one-day holding period, utilizes a 99% confidence level and incorporates non-linear product characteristics. The VaR model is one of several statistical models used to develop economic capital results, which are allocated to lines of business for computing risk-adjusted performance.

~~As the~~ VaR methodology does not evaluate risk attributable to extraordinary financial, economic or other ~~occurrences,~~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 ininto other risk management materials.

~~BNY Mellon 93~~

~~Notes to Consolidated Financial Statements(continued)~~

~~The following table presents our foreign exchange and other trading revenue.~~

Foreign exchange and other trading revenue
(in millions) 3Q17
2Q17
3Q16
YTD17
YTD16
Foreign exchange $ 158
$ 151
$ 175
$ 463
$ 512
Other trading revenue 15
14
8
39
28
Total foreign exchange and other trading revenue $ 173
$ 165
$ 183
$ 502
$ 540

Foreign exchange revenue includes income from purchasing and selling foreign currencies and currency forwards, futures and options. Other trading revenue reflects results from futures and forward contracts, interest rate swaps, structured foreign currency swaps, options, equity derivatives and fixed income and equity securities.

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 ~~14 of the Notes to Consolidated Financial Statements.~~15.

Disclosure of contingent features in ~~OTC~~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.



	June 30, 2020		Dec. 31, 2019
(in millions)	June 30, 2020		Dec. 31, 2019
Aggregate fair value of OTC derivatives in net liability positions (a)	$	5,951	$	3,442
Collateral posted	$	6,372	$	3,671


(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, ~~and the subsidiary through which BNY Mellon~~ enters into the substantial majority of ~~its~~our OTC derivative contracts and/or collateral ~~agreements, contain provisions that~~agreements. As such, the contingent features may ~~require us to take certain actions~~be triggered if The Bank of New York Mellon’s ~~public debt~~long-term issuer rating ~~fell to a certain level. Early termination provisions, or “close-out”~~

was downgraded.

agreements, in those contracts could trigger immediate payment of outstanding contracts that are in net liability positions. Certain collateral agreements would require The Bank of New York Mellon to immediately post additional collateral to cover some or all of The Bank of New York Mellon’s liabilities to a counterparty.

The following table shows the fair value of contracts falling under early termination provisions that were in net liability positions ~~as of Sept. 30, 2017~~ for three key ratings triggers.


If The Bank of New York Mellon’s rating was changed to (Moody’s/S&P)	Potential close-out exposures (fair value) (a)
Potential close-out exposures (fair value) (a)					Potential close-out exposures (fair value) (a)
					June 30, 2020		Dec. 31, 2019
(in millions)					June 30, 2020		Dec. 31, 2019
If The Bank of New York Mellon’s rating changed to: (b)
A3/A-		$	92	million	$	31	$	56
Baa2/BBB		$	430	million	$	558	$	608
Ba1/BB+		$	1,899	million	$	2,981	$	2,084


(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.~~levels, and do not reflect collateral posted.


(b)	Represents ratings by Moody’s/S&P.

The aggregated fair value of contracts impacting potential trade close-out amounts and collateral obligations can fluctuate from quarter to quarter due to changes in market conditions, changes in the composition of counterparty trades, new business or changes to the agreement definitions establishing close-out or collateral obligations.

~~Additionally, if~~BNY Mellon 93

Notes to Consolidated Financial Statements(continued)

If The Bank of New York Mellon’s debt rating had fallen below investment grade on ~~Sept.~~June 30, ~~2017,~~2020 and Dec. 31, 2019, existing collateral arrangements would

have required us to post an additional ~~$151~~collateral of $31 million ~~of collateral.~~

and $63 million, respectively.

~~94 BNY Mellon~~

~~Notes to Consolidated Financial Statements(continued)~~

Offsetting assets and liabilities

The following tables present derivative ~~instruments~~ and financial instruments ~~that are either subject to an enforceable netting agreement or offset by collateral arrangements.~~and their related offsets. There were no derivative instruments or financial instruments subject to a legally enforceable netting agreement for which we are not currently netting.


Offsetting of derivative assets and financial assets at Sept. 30, 2017
Offsetting of derivative assets and financial assets at June 30, 2020														Offsetting of derivative assets and financial assets at June 30, 2020
	Gross assets recognized		Gross amounts offset in the balance sheet			Net assets recognized on the balance sheet		Gross amounts not offset in the balance sheet						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						(a)			Financial instruments		Cash collateral received		Net amount
Derivatives subject to netting arrangements:
Interest rate contracts	$	6,182	$	5,301		$	881	$	189	$	—	$	692	$	3,549	$	2,436		$	1,113	$	384	$	—	$	729
Foreign exchange contracts	4,281		3,120			1,161		82		—		1,079		4,026		3,204			822		7		—		815
Equity and other contracts	69		49			20		—		—		20		9		—			9		1		—		8
Total derivatives subject to netting arrangements	10,532		8,470			2,062		271		—		1,791		7,584		5,640			1,944		392		—		1,552
Total derivatives not subject to netting arrangements	1,499		—			1,499		—		—		1,499		2,389		—			2,389		—		—		2,389
Total derivatives	12,031		8,470			3,561		271		—		3,290		9,973		5,640			4,333		392		—		3,941
Reverse repurchase agreements	36,118		19,171		(b)	16,947		16,890		—		57		72,781		48,615		(b)	24,166		24,140		—		26
Securities borrowing	10,936		—			10,936		10,627		—		309		12,472		—			12,472		11,843		—		629
Total	$	59,085	$	27,641		$	31,444	$	27,788	$	—	$	3,656	$	95,226	$	54,255		$	40,971	$	36,375	$	—	$	4,596


(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, 2019
	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	$	2,394	$	1,792		$	602	$	207	$	—	$	395
Foreign exchange contracts	4,861		4,021			840		44		—		796
Equity and other contracts	9		6			3		—		—		3
Total derivatives subject to netting arrangements	7,264		5,819			1,445		251		—		1,194
Total derivatives not subject to netting arrangements	1,797		—			1,797		—		—		1,797
Total derivatives	9,061		5,819			3,242		251		—		2,991
Reverse repurchase agreements	112,355		93,794		(b)	18,561		18,554		—		7
Securities borrowing	11,621		—			11,621		11,278		—		343
Total	$	133,037	$	99,613		$	33,424	$	30,083	$	—	$	3,341

Offsetting of derivative assets and financial assets at Dec. 31, 2016
Gross assets recognized
Gross amounts offset in the balance sheet

Net assets recognized
on 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 $ 7,205
$ 6,047
$ 1,158
$ 321
$ —
$ 837
Foreign exchange contracts 5,265
4,172
1,093
202
—
891
Equity and other contracts 44
38
6
—
—
6
Total derivatives subject to netting arrangements 12,514
10,257
2,257
523
—
1,734
Total derivatives not subject to netting arrangements 2,007
—
2,007
—
—
2,007
Total derivatives 14,521
10,257
4,264
523
—
3,741
Reverse repurchase agreements 17,588
481
(b) 17,107
17,104
—
3
Securities borrowing 8,694
—
8,694
8,425
—
269
Total $ 40,803
$ 10,738
$ 30,065
$ 26,052
$ —
$ 4,013


(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.

94 BNY Mellon 95

Notes to Consolidated Financial Statements(continued)



Offsetting of derivative liabilities and financial liabilities at June 30, 2020						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	$	5,563	$	2,680		$	2,883	$	2,849	$	—	$	34
Foreign exchange contracts	3,690		3,134			556		150		—		406
Equity and other contracts	22		3			19		—		—		19
Total derivatives subject to netting arrangements	9,275		5,817			3,458		2,999		—		459
Total derivatives not subject to netting arrangements	417		—			417		—		—		417
Total derivatives	9,692		5,817			3,875		2,999		—		876
Repurchase agreements	59,794		48,615		(b)	11,179		11,175		—		4
Securities lending	982		—			982		962		—		20
Total	$	70,468	$	54,432		$	16,036	$	15,136	$	—	$	900

Offsetting of derivative liabilities and financial liabilities at Sept. 30, 2017 Net liabilities recognized on 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 $ 7,103
$ 5,705
$ 1,398
$ 1,311
$ —
$ 87
Foreign exchange contracts 4,074
3,095
979
234
—
745
Equity and other contracts 130
75
55
49
—
6
Total derivatives subject to netting arrangements 11,307
8,875
2,432
1,594
—
838
Total derivatives not subject to netting arrangements 790
—
790
—
—
790
Total derivatives 12,097
8,875
3,222
1,594
—
1,628
Repurchase agreements 27,321
19,171
(b) 8,150
8,149
—
1
Securities lending 1,904
—
1,904
1,812
—
92
Total $ 41,322
$ 28,046
$ 13,276
$ 11,555
$ —
$ 1,721


(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 ~~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 liabilities and financial liabilities at Dec. 31, 2016						Net liabilities recognized on the balance sheet
Offsetting of derivative liabilities and financial liabilities at Dec. 31, 2019												Offsetting of derivative liabilities and financial liabilities at Dec. 31, 2019					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						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 liabilities recognized on the balance sheet								Net amount			(a)	Cash collateral pledged			Net liabilities recognized in the balance sheet			Net amount
Derivatives subject to netting arrangements:
Interest rate contracts	$	8,116	$	6,634		$	1,482	$	1,266	$	216			$	3,550	$	1,986		$	1,564		$	1,539		$	25
Foreign exchange contracts	4,957		3,363			1,594		355		—		1,239		4,873		3,428			1,445			74			—				1,371
Equity and other contracts	104		50			54		54		—		—		5		1			4			2			—			2
Total derivatives subject to netting arrangements	13,177		10,047			3,130		1,675		—		1,455		8,428		5,415			3,013			1,615			—			1,398
Total derivatives not subject to netting arrangements	1,271		—			1,271		—		—		1,271		778		—			778			—			—			778
Total derivatives	14,448		10,047			4,401		1,675		—		2,726		9,206		5,415			3,791			1,615			—			2,176
Repurchase agreements	8,703		481		(b)	8,222		8,222		—		—		104,451		93,794		(b)	10,657			10,657			—			—
Securities lending	1,615		—			1,615		1,522		—		93		718		—			718			694			—			24
Total	$	24,766	$	10,528		$	14,238	$	11,419	$	—	$	2,819	$	114,375	$	99,209		$	15,166		$	12,966		$	—		$	2,200


(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 ~~Fixed Income Clearing Corporation,~~FICC, where we settle government securities transactions on a net basis for payment and delivery through the Fedwire system.

96 BNY Mellon 95

Notes to Consolidated Financial Statements(continued)

Secured borrowings

The following ~~tables present~~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
	June 30, 2020								Dec. 31, 2019
	Remaining contractual maturity						Total		Remaining contractual maturity						Total
(in millions)	Overnight and continuous		Up to 30 days		30 days or more		Total		Overnight and continuous		Up to 30 days		30 days or more		Total
Repurchase agreements:
U.S. Treasury	$	52,950	$	300	$	109	$	53,359	$	94,788	$	10	$	—	$	94,798
U.S. government agencies	642		—		—		642		594		16		—		610
Agency RMBS	1,384		—		149		1,533		4,234		774		—		5,008
Corporate bonds	195		23		1,272		1,490		266		236		1,617		2,119
Other debt securities	93		79		1,749		1,921		40		188		1,079		1,307
Equity securities	—		98		751		849		31		99		479		609
Total	$	55,264	$	500	$	4,030	$	59,794	$	99,953	$	1,323	$	3,175	$	104,451
Securities lending:
U.S. government agencies	$	21	$	—	$	—	$	21	$	19	$	—	$	—	$	19
Other debt securities	191		—		—		191		201		—		—		201
Equity securities	770		—		—		770		498		—		—		498
Total	$	982	$	—	$	—	$	982	$	718	$	—	$	—	$	718
Total secured borrowings	$	56,246	$	500	$	4,030	$	60,776	$	100,671	$	1,323	$	3,175	$	105,169

Repurchase agreements and securities lending transactions accounted for as secured borrowings at Sept. 30, 2017
Remaining contractual maturity of the agreements
(in millions) Overnight and continuous
Up to 30 days
30 days or more
Total
Repurchase agreements:
U.S. Treasury $ 21,432
$ —
$ —
$ 21,432
U.S. government agencies 489
110
—
599
Agency RMBS 1,798
190
—
1,988
Corporate bonds 282
—
940
1,222
Other debt securities 254
—
871
1,125
Equity securities 466
—
489
955
Total $ 24,721
$ 300
$ 2,300
$ 27,321
Securities lending:
U.S. government agencies $ 15
$ —
$ —
$ 15
Other debt securities 477
—
—
477
Equity securities 1,412
—
—
1,412
Total $ 1,904
$ —
$ —
$ 1,904
Total borrowings $ 26,625
$ 300
$ 2,300
$ 29,225

Repurchase agreements and securities lending transactions accounted for as secured borrowings at Dec. 31, 2016
Remaining contractual maturity of the agreements
(in millions) Overnight and continuous
Up to 30 days
30 days or more
Total
Repurchase agreements:
U.S. Treasury $ 2,488
$ 4
$ —
$ 2,492
U.S. government agencies 396
10
—
406
Agency RMBS 3,294
386
—
3,680
Corporate bonds 304
—
694
998
Other debt securities 146
—
563
709
Equity securities 375
—
43
418
Total $ 7,003
$ 400
$ 1,300
$ 8,703
Securities lending:
U.S. government agencies $ 39
$ —
$ —
$ 39
Other debt securities 477
—
—
477
Equity securities 1,099
—
—
1,099
Total $ 1,615
$ —
$ —
$ 1,615
Total borrowings $ 8,618
$ 400
$ 1,300
$ 10,318

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.

~~BNY Mellon 97~~

~~Notes to Consolidated Financial Statements(continued)~~

Note ~~17 -~~ 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 ~~risk~~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.

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


Off-balance sheet credit risks	Sept. 30, 2017		Dec. 31, 2016		June 30, 2020		Dec. 31, 2019
(in millions)
Lending commitments	$	49,983	$	51,270	$	49,147	$	49,119
Standby letters of credit (a)	3,619		4,185
Standby letters of credit (“SBLC”) (a)					2,291		2,298
Commercial letters of credit	265		339		59		74
Securities lending indemnifications ~~(b)~~(c)	406,434		317,690		417,924		408,378


(a)	Net of participations totaling ~~$681~~$145 million at ~~Sept.~~June 30, ~~2017~~2020 and ~~$662~~$146 million at Dec. 31, ~~2016.~~2019.


(b)	Excludes the indemnification for securities for which BNY Mellon acts as an agent on behalf of CIBC Mellon clients, which totaled ~~$65~~$58 billion at ~~Sept.~~June 30, ~~2017~~2020 and ~~$61~~$57 billion at Dec. 31, ~~2016.~~2019.


(c)	Includes cash collateral, invested in indemnified repurchase agreements, held by us as securities lending agent of $40 billion at June 30, 2020 and $37 billion at Dec. 31, 2019.

96 BNY Mellon

Notes to Consolidated Financial Statements(continued)

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: ~~$29.8~~$32.6 billion in less than one year, ~~$20.0~~$16.2 billion in one to five years and ~~$158~~$319 million over five years.

~~Standby letters of credit (“SBLC”)~~SBLCs principally support obligations of corporate ~~obligations~~clients and were collateralized with cash and securities of ~~$178~~$185 million at ~~Sept.~~June 30, ~~2017~~2020 and ~~$293~~$184 million at Dec. 31, ~~2016.~~2019. At ~~Sept.~~June 30, ~~2017, $2.3~~2020, $1.7 billion of the SBLCs will expire within one year, ~~and $1.2 billion~~$545 million in one to five years and ~~$48~~$7 million in 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. ~~The allowance for lending-related commitments was $104 million at Sept. 30, 2017 and $112 million at Dec. 31, 2016.~~

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	June 30, 2020		Dec. 31, 2019
	June 30, 2020		Dec. 31, 2019
Investment grade	89	%	90	%
Non-investment grade	11	%	10	%

Standby letters of credit Sept. 30, 2017
Dec. 31, 2016

Investment grade 86 % 89 %
Non-investment grade 14 % 11 %

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 ~~$265~~$59 million at ~~Sept.~~June 30, ~~2017~~2020 and ~~$339~~$74 million at Dec. 31, ~~2016.~~2019.

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 $152 million at June 30, 2020 and $94 million at Dec. 31, 2019.

~~98 BNY Mellon~~

~~Notes to Consolidated Financial Statements(continued)~~

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, which normally matures in less than 90 days.~~contract.

We typically lend securities with indemnification against borrower default. We generally require the borrower to provide collateral with a minimum value of102%of the fair value of the securities borrowed, which is monitored on a daily basis, thus reducing credit risk. Market risk can also arise in securities lending transactions. These risks are controlled through policies limiting the level of risk that can be undertaken. Securities lending transactions are generally entered into only with highly rated counterparties.Securities lending indemnifications were secured by collateral of$~~424~~438 billionatJune 30, 2020 and $428 billion at ~~Sept. 30, 2017~~ ~~and~~ ~~$331 billion~~ at Dec. 31, ~~2016.~~2019.

CIBC Mellon, a joint venture between BNY Mellon and the Canadian Imperial Bank of Commerce (“CIBC”), engages in securities lending activities. CIBC Mellon, BNY Mellon and CIBC jointly and severally indemnify securities lenders against specific types of borrower default. At ~~Sept.~~ June 30, ~~2017~~2020 and Dec. 31, ~~2016, $65~~2019, $58 billion and ~~$61~~$57 billion, respectively, of borrowings at CIBC Mellon, for which BNY Mellon acts as agent on behalf of CIBC Mellon clients, were secured by collateral of ~~$69~~ $62 billion and ~~$64~~$61 billion, respectively. If, upon a default, a borrower’s collateral was not sufficient to cover its related obligations, certain losses related to the indemnification could be covered by the indemnitors.

BNY Mellon 97

Notes to Consolidated Financial Statements(continued)

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 June 30, 2020, we had 0 unsettled repurchase agreements and 0 unsettled reverse repurchase agreements.

Industry concentrations

We have significant industry concentrations related to credit exposure at ~~Sept.~~June 30, ~~2017.~~2020. The tables below present our credit exposure in the financial institutions and commercial portfolios.


Financial institutions portfolio exposure (in billions)	Sept. 30, 2017						June 30, 2020
	Loans		Unfunded commitments		Total exposure		Loans		Unfunded commitments		Total exposure
Securities industry	$	2.9	$	19.0	$	21.9	$	1.6	$	24.5	$	26.1
Banks							7.0		1.1		8.1
Asset managers	1.6		6.5		8.1		1.3		6.3		7.6
Banks	6.3		1.4		7.7
Insurance	0.1		3.4		3.5		0.1		2.7		2.8
Government	—		1.0		1.0		0.1		0.2		0.3
Other	1.0		1.4		2.4		0.7		0.7		1.4
Total	$	11.9	$	32.7	$	44.6	$	10.8	$	35.5	$	46.3



Commercial portfolio exposure (in billions)	June 30, 2020
Commercial portfolio exposure (in billions)	Loans		Unfunded commitments		Total exposure
Manufacturing	$	1.1	$	3.5	$	4.6
Services and other	1.1		3.3		4.4
Energy and utilities	0.1		4.1		4.2
Media and telecom	0.1		0.9		1.0
Total	$	2.4	$	11.8	$	14.2

Commercial portfolio
exposure
(in billions)
Sept. 30, 2017
Loans
Unfunded
commitments

Total
exposure

Manufacturing $ 1.4
$ 6.3
$ 7.7
Services and other 0.9
4.4
5.3
Energy and utilities 0.6
4.5
5.1
Media and telecom 0.1
1.4
1.5
Total $ 3.0
$ 16.6
$ 19.6

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

~~Exposure~~Sponsored Member Repo Program

BNY Mellon is a sponsoring member in the FICC sponsored member program, where we submit eligible overnight repurchase and reverse repurchase transactions in U.S. Treasury securities (“Sponsored

Member Transactions”) between BNY Mellon and our sponsored member clients for ~~certain administrative errors~~

Innovation and clearing through FICC pursuant to the FICC Government Securities Division rulebook (the “FICC Rules”). We also guarantee to FICC the prompt and full payment and performance of our sponsored member clients’ respective obligations under the FICC Rules in connection with ~~certain offshore tax-exempt funds that we manage, we may be liable to the funds~~such clients’ Sponsored Member Transactions. We minimize our credit exposure under this guaranty by obtaining a security interest in our sponsored member clients’ collateral and rights under Sponsored Member Transactions. See “Offsetting assets and liabilities” in Note 17 for certain administrative errors. The errors relate to the resident status of such funds, potentially exposing the Company to a tax liability related to the funds’ earnings. The Company is in discussions with tax authorities regarding the funds. We believe we are appropriately accruedadditional information on our repurchase and ~~the additional reasonably possible exposure is not significant.~~reverse repurchase agreements.

Indemnification arrangements

We have provided standard representations for underwriting agreements, acquisition and divestiture agreements, sales of loans and commitments, and other similar types of arrangements and customary indemnification for claims and legal proceedingsrelated to providing financial services that are not otherwise included above. Insurance has been purchased to mitigate certain of these risks. Generally, there are no stated or notional amounts included in these indemnifications and the contingencies triggering the obligation for indemnification are not expected to occur. Furthermore, often counterparties to these transactions provide us with comparable indemnifications. We are unable to develop an estimate of the maximum payout under these

~~BNY Mellon 99~~

~~Notes to Consolidated Financial Statements(continued)~~

indemnifications for several reasons. In addition to the lack of a stated or notional amount in a majority of such indemnifications, we are unable to predict the nature of events that would trigger indemnification or the level of indemnification for a certain event. We believe, however, that the possibility that we will have to make any material payments for these indemnifications is remote. At ~~Sept.~~June 30, ~~2017~~2020 and Dec. 31, ~~2016,~~2019, we have not recorded any material liabilities under these arrangements.

Clearing and settlement exchanges

We are a noncontrolling equity investor in, and/or member of, several industry clearing or settlement exchanges through which foreign exchange, securities, derivatives or other transactions settle. Certain of these industry clearing and settlement exchanges require their members to guarantee their

98 BNY Mellon

Notes to Consolidated Financial Statements(continued)

obligations and liabilities and/or to provide liquidity support in the event other members do not honor their obligations. We believe the likelihood that a clearing or settlement exchange (of which we are a member) would become insolvent is remote. Additionally, certain settlement exchanges have implemented loss allocation policies that enable the exchange to allocate settlement losses to the members of the exchange. It is not possible to quantify such mark-to-market loss until the loss occurs. Any ancillary costs that occur as a result of any mark-to-market loss cannot be quantified. In addition, we also sponsor clients as members on clearing and settlement exchanges and guarantee their obligations. At ~~Sept.~~June 30, ~~2017~~2020 and Dec. 31, ~~2016,~~2019, we ~~have~~did not ~~recorded~~record any material liabilities under these arrangements.

Legal proceedings

In the ordinary course of business, ~~BNY~~The Bank of New York Mellon Corporation and its subsidiaries are routinely named as defendants in or made parties to pending and potential legal actions. We also are subject to governmental and regulatory examinations, information-gathering requests, investigations and proceedings (both formal and informal). Claims for significant monetary damages are often asserted in many of these legal actions, while claims for disgorgement, restitution, penalties and/or other remedial actions or sanctions may be sought in governmental and regulatory matters. It is inherently difficult to predict the eventual outcomes of such matters given their complexity and the particular facts and circumstances at issue in each of these matters. However, on the basis of our current

knowledge and understanding, we do not believe that judgments, settlements or orders, if any, arising from these matters (either individually or in the aggregate, after giving effect to applicable reserves and insurance coverage) will have a material adverse effect on the consolidated financial position or liquidity of BNY Mellon, although they could have a material effect on ~~net income~~our results of operations in a given period.

In view of the inherent unpredictability of outcomes in litigation ~~and governmental~~ and regulatory matters, particularly where (i) the damages sought are substantial or indeterminate, (ii) the proceedings are in the early stages, or (iii) the matters involve novel legal theories or a large number of parties, as a matter of course there is considerable uncertainty surrounding the timing or ultimate resolution of litigation and ~~governmental and~~ regulatory matters, including a possible eventual loss,

fine, penalty or business impact, if any, associated with each such matter. In accordance with applicable accounting guidance, ~~BNY Mellon establishes~~we establish accruals for litigation ~~and governmental~~ and regulatory matters when those matters proceed to a stage where they present loss contingencies that are both probable and reasonably estimable. In such cases, there may be a possible exposure to loss in excess of any amounts accrued. ~~BNY Mellon will continue to~~We regularly monitor such matters for developments that could affect the amount of the accrual, and will adjust the accrual amount as appropriate. If the loss contingency in question is not both probable and reasonably estimable, ~~BNY Mellon does~~we do not establish an accrual and the matter ~~will continue~~continues to be monitored for any developments that would make the loss contingency both probable and reasonably estimable. ~~BNY Mellon believes~~We believe that ~~its~~our accruals for legal proceedings are appropriate and, in the aggregate, are not material to the consolidated financial position of BNY Mellon, although future accruals could have a material effect on ~~net income~~the results of operations in a given period. In addition, if we have the potential to recover a portion of an estimated loss from a third party, we record a receivable up to the amount of the accrual that is probable of recovery.

For certain of those matters described here for which a loss contingency may, in the future, be reasonably possible (whether in excess of a related accrued liability or where there is no accrued liability), BNY Mellon is currently unable to estimate a range of reasonably possible loss. For those matters described here where BNY Mellon is able to estimate a reasonably possible loss, the aggregate range of such reasonably possible loss is up to ~~$940~~$730 million in excess of the accrued liability (if any) related to those matters.

For matters where a reasonably possible loss is denominated in a foreign currency, our estimate is adjusted quarterly based on prevailing exchange rates. We do not consider potential recoveries when estimating reasonably possible losses.

~~100 BNY Mellon~~

~~Notes to Consolidated Financial Statements(continued)~~

The following describes certain judicial, regulatory and arbitration proceedings involving BNY Mellon:

Mortgage-Securitization Trusts Proceedings

The Bank of New York Mellon has been named as a defendant in a number of legal actions brought by MBS investors alleging that the trustee has expansive duties under the governing agreements, including the duty to investigate and pursue breach of representation and warranty claims against other parties to the MBS transactions. ~~These~~NaN actions ~~include a lawsuit brought~~

BNY Mellon 99

Notes to Consolidated Financial Statements(continued)

commenced in August 2014, December 2014, December 2015 and February 2017 are pending in New York ~~State court on June 18, 2014,~~federal court; and ~~later re-filed~~1 action commenced in ~~federal court, by a group of institutional investors who purport to sue on behalf of 253 MBS trusts.~~May 2016 is pending in New York state court.

Matters Related to R. Allen Stanford

In late December 2005, Pershing LLC (“Pershing”) became a clearing firm for Stanford Group Co. (“SGC”), a registered broker-dealer that was part of a group of entities ultimately controlled by R. Allen Stanford (“Stanford”). Stanford International Bank (“SIB”), also controlled by Stanford, issued certificates of deposit (“CDs”). Some investors allegedly wired funds from their SGC accounts to purchase CDs. In 2009, the ~~SEC~~Securities and Exchange Commission (“SEC”) charged Stanford with operating a Ponzi scheme in connection with the sale of CDs, and SGC was placed into receivership. Alleged purchasers of CDs have filed 152 putative class action proceedings against Pershing: one in November 2009 in Texas federal court, and one in May 2016 in New Jersey federal court. NaN lawsuits have been filed against Pershing ~~that are pending~~ in ~~Texas, including two putative class actions.~~Louisiana, Florida and New Jersey federal courts in January 2010, January and February 2015, October 2015 and May 2016. The purchasers allege that Pershing, as SGC’s clearing firm, assisted Stanford in a fraudulent scheme and assert contractual, statutory and common law claims. In March 2019, a group of investors filed a putative class action against The ~~remaining FINRA action has~~Bank of New York Mellon in New Jersey federal court, making the same allegations as in the prior actions brought against Pershing. All of the cases that have been ~~resolved~~brought in federal court against Pershing and ~~dismissed.~~the case brought against The Bank of New York Mellon have been consolidated in Texas federal court for discovery purposes. On Dec. 19, 2019, the Court of Appeals for the Fifth Circuit affirmed the dismissal of 6 individual federal lawsuits brought under Florida law, which will also apply to four other similarly situated cases. On March 18, 2020, the plaintiffs in those lawsuits filed a Petition for Writ of Certiorari seeking permission to appeal to the United States Supreme Court. Financial Industry Regulatory Authority, Inc. (“FINRA”) arbitration proceedings also have been initiated by alleged purchasers asserting similar claims.

Brazilian Postalis Litigation

BNY Mellon Servicos Financeiros DTVM S.A. (“DTVM”), a subsidiary that provides ~~a number of~~ asset services in Brazil, acts as administrator for certain investment funds in which ~~the exclusive investor is~~ a public pension fund for postal

workers called Postalis-Instituto de Seguridade Social dos Correios e Telégrafos (“Postalis”). invested. On Aug. 22, 2014, Postalis sued DTVM in Rio de Janeiro, Brazil for losses related to a Postalis ~~investment~~ fund for which DTVM ~~serves as fund~~is administrator. Postalis alleges that DTVM failed to properly perform ~~alleged~~ duties, including ~~duties~~ to conduct due diligence of and exert control over the ~~fund manager, Atlântica Administração de Recursos (“Atlântica”), and Atlântica’s investments.~~manager. On March 12, 2015, Postalis filed a lawsuit in Rio de Janeiro against DTVM and

BNY Mellon Administração de Ativos Ltda. (“Ativos”) alleging failure to properly perform ~~alleged~~ duties relating to another fund of which DTVM is administrator and Ativos is ~~investment~~ manager. On Dec. 14, 2015, ~~Associaceã~~Associacão ~~Dos~~dos Profissionais ~~Dos Correiros~~dos Correios (“ADCAP”), a Brazilian postal workers association, filed a lawsuit in São Paulo against DTVM and other defendants alleging that DTVM improperly contributed to Postalis investment ~~losses in the Postalis portfolio.~~losses. On March 20, 2017, the lawsuit was dismissed without prejudice, and ADCAP has appealed that decision. On Dec. 17, 2015, Postalis filed ~~three additional~~3 lawsuits in Rio de Janeiro against DTVM and Ativos alleging failure to properly perform ~~alleged~~ duties ~~and liabilities for losses~~ with respect to investments in several other funds. On Feb. 4, 2016, Postalis filed ~~another~~a lawsuit in Brasilia against DTVM, Ativos and BNY Mellon Alocação de Patrimônio Ltda. (“Alocação de Patrimônio”), an investment management subsidiary, alleging failure to properly perform duties and liability for losses with respect to investments in various ~~other~~ funds of which the defendants were administrator and/or manager. ~~The~~On Jan. 16, 2018, the Brazilian Federal Prosecution Service (“MPF”) filed a civil lawsuit ~~has been transferred to~~in São ~~Paulo.~~Paulo against DTVM alleging liability for Postalis losses based on alleged failures to properly perform certain duties as administrator to certain funds in which Postalis invested or as controller of Postalis’s own investment portfolio. On April 18, 2018, the court dismissed the lawsuit without prejudice, and the MPF has appealed that decision. In addition, the Tribunal de Contas da Uniao, an administrative tribunal, has initiated two proceedings with the purpose of determining liability for losses to two investment funds administered by DTVM in which Postalis was the exclusive investor. On Oct. 4, 2019, Postalis and another pension fund filed a request for arbitration in São Paulo against DTVM and Ativos alleging liability for losses to an investment fund for which DTVM was administrator and Ativos was manager. On Oct. 25, 2019, Postalis filed a lawsuit in Rio de Janeiro against DTVM and Alocação de Patrimônio, alleging liability for losses in another fund for which DTVM was administrator and Alocação de Patrimônio and Ativos were managers.

~~Depositary Receipt Litigation~~

~~Between late December 2015 and February 2016, four putative class action lawsuits were filed against~~100 BNY Mellon asserting claims relating to BNY Mellon’s foreign exchange pricing when converting dividends and other distributions from non-U.S. companies in its role as depositary bank to Depositary Receipt issuers. The claims are for breach of contract and violations of ERISA. The lawsuits have been consolidated into two suits that are pending in federal court in the Southern District of New York.

Notes to Consolidated Financial Statements(continued)

Brazilian Silverado Litigation

DTVM acts as administrator for the Fundo de Investimento em Direitos Creditórios Multisetorial Silverado Maximum (“Silverado Maximum Fund”), which invests in commercial credit receivables. On June 2, 2016, the Silverado Maximum Fund sued DTVM in its capacity as administrator, along with Deutsche Bank S.A. - Banco Alemão in its capacity as custodian and Silverado Gestão e Investimentos Ltda. in its capacity as investment manager. The Fund alleges that each of the defendants failed to fulfill its respective duty, and caused losses to the Fund for which the defendants are jointly and severally liable.

German Tax Matters

German authorities are investigating past “cum/ex” trading, which involved the purchase of equity securities on or shortly before the dividend date, but settled after that date, potentially resulting in an unwarranted refund of withholding tax. German authorities have taken the view that past cum/ex trading may have resulted in tax avoidance or evasion. European subsidiaries of BNY Mellon ~~101~~

~~Notes to Consolidated Financial Statements(continued)~~

~~Depositary Receipt Pre-Release Inquiry~~

have been informed by German authorities about investigations into potential cum/ex trading by certain third-party investment funds, where one of the subsidiaries had acquired entities that served as depositary and/or fund manager for those third-party investment funds. We have received information requests from the authorities relating to pre-acquisition activity and are cooperating fully with those requests. We have not received any tax demand concerning cum/ex trading. In August 2019, the District Court of Bonn ordered that one of these subsidiaries be joined as a secondary party in connection with the prosecution of unrelated individual defendants. Trial commenced in September 2019. In March ~~2014,~~2020, the ~~Staff~~court stated that it would refrain from taking action against the subsidiary in order to expedite the conclusion of the ~~U.S. Securities~~trial. The court convicted the unrelated individual defendants, and ~~Exchange Commission’s Enforcement Division (the “Staff”) commenced an investigation into certain issuers~~determined that the cum/ex trading activities of ~~American Depositary Receipts (“ADRs”), including BNY Mellon, for~~ the ~~period of 2011 to 2015. The Staff has issued several requests to BNY Mellon for information relating to the pre-release of ADRs.~~relevant third-party investment funds were unlawful. In ~~May 2017, BNY Mellon began discussions~~connection with the ~~Staff about a possible resolution~~acquisition of the ~~investigation. BNY Mellon has fully cooperated with this matter.~~subject entities, we obtained an indemnity for liabilities from the sellers that we intend to pursue as necessary.

Note ~~18 -~~ 19–Lines of business

We have an internal information system that produces performance data along product and service lines for our ~~two~~2 principal businesses and the Other segment. The primary products and services and types of revenue for our principal businesses and a description of the Other segment are presented in Note 24 of the Notes to Consolidated Financial Statements in our 2019 Annual Report.

Business accounting principles

BNY Mellon 101

Notes to Consolidated Financial Statements(continued)

The accounting policies of the businesses are the same as those described in Note 1 of the Notes to Consolidated Financial Statements in our ~~2016~~2019 Annual Report.

~~The primary types of revenue for our two principal businesses and the Other segment are presented below.~~



~~Business~~	~~Primary types of revenue~~
~~Investment Management~~	• ~~Investment management and performance fees from:~~ ~~Mutual funds~~ ~~Institutional clients~~ ~~Private clients~~ ~~High-net-worth individuals and families, endowments and foundations and related entities~~ • ~~Distribution and servicing fees~~ • ~~Other revenue from seed capital investments~~
~~Investment Services~~	• ~~Asset servicing fees, including custody fees, fund services, broker-dealer services, securities finance and collateral and liquidity services~~ • ~~Issuer services fees, including Depositary Receipts and Corporate Trust~~ • ~~Clearing services fees~~ • ~~Treasury services fees, including global payments, trade finance and cash management~~ • ~~Foreign exchange revenue~~ • ~~Financing-related fees and net interest revenue from credit-related activities~~
~~Other segment~~	• ~~Net interest revenue and lease-related gains (losses) from leasing operations~~ • ~~Gain (loss) on securities and net interest revenue from corporate treasury activity~~ • ~~Other trading revenue from derivatives and other trading activity~~ • ~~Results of business exits~~

The results of our businesses are presented and analyzed on an internal management reporting basis.

Revenue amounts reflect fee and other revenue generated by each ~~business.~~business and include revenue for services provided between the segments that are also provided to third parties. Fee and other revenue transferred between businesses under revenue transfer agreements is included within other revenue in each business.

Revenues and expenses associated with specific client bases are included in those businesses. For example, foreign exchange activity associated

with clients using custody products is included in Investment Services.

Net interest revenue is allocated to businesses based on the yields on the assets and liabilities generated by each business. We employ a funds transfer pricing system that matches funds with the specific assets and liabilities of each business based on their interest sensitivity and maturity characteristics.

The provision for credit losses associated with the respective credit portfolios is reflected in each business segment.

~~102 BNY Mellon~~

~~Notes to Consolidated Financial Statements(continued)~~

Incentives expense related to restricted stock is allocated to the businesses.

Support and other indirect expenses, including services provided between segments that are not provided to third parties or not subject to a revenue transfer agreement, are allocated to businesses based on internally developed ~~methodologies.~~methodologies and reflected in noninterest expense.

Recurring FDIC expense is allocated to the businesses based on average deposits generated within each business.

Litigation expense is generally recorded in the business in which the charge occurs.

Management of the ~~investment~~ securities portfolio is a shared service contained in the Other segment. As a result, gains and losses associated with the valuation of the securities portfolio are generally included in the Other segment.

Client deposits serve as the primary funding source for our ~~investment~~ securities portfolio.

We typically allocate all interest revenue to the businesses generating the deposits. Accordingly, accretion related to the portion of the ~~investment~~ securities portfolio restructured in 2009 has been included in the results of the businesses.

~~M&I expense is a corporate level item and is recorded in the Other segment.~~

~~Restructuring charges relate to corporate-level initiatives and were therefore recorded in the Other segment.~~

Balance sheet assets and liabilities and their related income or expense are specifically assigned to each business. Businesses with a net liability position have been allocated assets.

Goodwill and intangible assets are reflected within individual businesses.

The following consolidating schedules ~~presents~~present the contribution of our businesses to our overall profitability.


For the quarter ended Sept. 30, 2017	Investment Management				Investment Services			Other			Consolidated
(dollar amounts in millions)	Investment Management				Investment Services			Other			Consolidated
Fee and other revenue	$	918		(a)	$	2,187		$	69		$	3,174		(a)
For the quarter ended June 30, 2020															Investment Services			Investment and Wealth Management				Other			Consolidated
(dollars in millions)															Investment Services			Investment and Wealth Management				Other			Consolidated
Total fee and other revenue															$	2,339		$	838		(a)	$	38		$	3,215		(a)
Net interest revenue (expense)	82				777			(20		)	839				768			48				(36		)	780
Total revenue	1,000			(a)	2,964			49			4,013			(a)	3,107			886			(a)	2			3,995			(a)
Provision for credit losses	(2		)		(2		)	(2		)	(6		)		145			7				(9		)	143
Noninterest expense	702				1,874			77			2,653			(b)	1,989			658				39			2,686
Income (loss) before taxes	$	300		(a)	$	1,092		$	(26	)	$	1,366		(a)(b)
Income (loss) before income taxes															$	973		$	221		(a)	$	(28	)	$	1,166		(a)
Pre-tax operating margin ~~(c)~~(b)	30		%		37		%	N/M			34		%		31		%	25		%		N/M			29		%
Average assets	$	31,689			$	252,461		$	61,559		$	345,709			$	335,288		$	30,327			$	49,744		$	415,359


(a)	~~Both~~Total fee and other revenue ~~and total revenue include the~~includes net income from consolidated investment management funds of $7$39 million, representing ~~$10~~$54 million of income and noncontrolling interests of ~~$3 million~~. ~~Income~~$15 million. Total revenue and income before income taxes isare net of noncontrolling interests of ~~$3 million~~. $15 million.


(b)	~~Noninterest expense includes a loss attributable to noncontrolling interest of $1 million related to other consolidated subsidiaries.~~


~~(c)~~	Income before income taxes divided by total revenue.

N/M - Not meaningful.

102 BNY Mellon

Notes to Consolidated Financial Statements(continued)


For the quarter ended June 30, 2017	Investment Management				Investment Services			Other			Consolidated
(dollar amounts in millions)	Investment Management				Investment Services			Other			Consolidated
Fee and other revenue	$	899		(a)	$	2,115		$	113		$	3,127		(a)
For the quarter ended March 31, 2020															Investment Services			Investment and Wealth Management				Other			Consolidated
(dollars in millions)															Investment Services			Investment and Wealth Management				Other			Consolidated
Total fee and other revenue															$	2,436		$	846		(a)	$	30		$	3,312		(a)
Net interest revenue (expense)	87				761			(22		)	826				806			52				(44		)	814
Total revenue	986			(a)	2,876			91			3,953			(a)
Total revenue (loss)															3,242			898			(a)	(14		)	4,126			(a)
Provision for credit losses	—				(3		)	(4		)	(7		)		149			9				11			169
Noninterest expense	698				1,927			28			2,653			(b)	1,987			695				30			2,712
Income before taxes	$	288		(a)	$	952		$	67		$	1,307		(a)(b)
Income (loss) before income taxes															$	1,106		$	194		(a)	$	(55	)	$	1,245		(a)
Pre-tax operating margin ~~(c)~~(b)	29		%		33		%	N/M			33		%		34		%	22		%		N/M			30		%
Average assets	$	31,355			$	254,724		$	56,436		$	342,515			$	304,089		$	30,543			$	50,646		$	385,278


(a)	~~Both~~Total fee and other revenue includes net loss from consolidated investment management funds of $20 million, representing $38 million of losses and a loss attributable to noncontrolling interests of $18 million. Total revenue and income before income taxes are net of a loss attributable to noncontrolling interests of $18 million.


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

N/M - Not meaningful.



For the quarter ended June 30, 2019	Investment Services			Investment and Wealth Management				Other			Consolidated
(dollars in millions)	Investment Services			Investment and Wealth Management				Other			Consolidated
Total fee and other revenue	$	2,233		$	854		(a)	$	31		$	3,118		(a)
Net interest revenue (expense)	783			59				(40		)	802
Total revenue (loss)	3,016			913			(a)	(9		)	3,920			(a)
Provision for credit losses	(4		)	(2		)		(2		)	(8		)
Noninterest expense	1,963			655				29			2,647
Income (loss) before income taxes	$	1,057		$	260		(a)	$	(36	)	$	1,281		(a)
Pre-tax operating margin (b)	35		%	29		%		N/M			33		%
Average assets	$	264,781		$	29,793			$	47,810		$	342,384


(a)	Total fee and other revenue ~~include the~~includes net income from consolidated investment management funds of $7$6 million, representing $10 million of income and noncontrolling interests of $4 million. Total revenue and income before income taxes are net of noncontrolling interests of $4 million.


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

N/M - Not meaningful.



For the six months ended June 30, 2020	Investment Services			Investment and Wealth Management				Other			Consolidated
(dollars in millions)	Investment Services			Investment and Wealth Management				Other			Consolidated
Total fee and other revenue	$	4,775		$	1,684		(a)	$	68		$	6,527		(a)
Net interest revenue (expense)	1,574			100				(80		)	1,594
Total revenue (loss)	6,349			1,784			(a)	(12		)	8,121			(a)
Provision for credit losses	294			16				2			312
Noninterest expense	3,976			1,353				69			5,398
Income (loss) before income taxes	$	2,079		$	415		(a)	$	(83	)	$	2,411		(a)
Pre-tax operating margin (b)	33		%	23		%		N/M			30		%
Average assets	$	319,689		$	30,435			$	50,194		$	400,318


(a)	Total fee and other revenue includes net income from consolidated investment management funds of $19 million, representing $16 million of income and a loss attributable to noncontrolling interests of $3 million. ~~Income~~Total revenue and income before income taxes isare net of a loss attributable to noncontrolling interests of $3 million.


(b)	~~Noninterest expense includes a loss attributable to noncontrolling interest of $2 millionrelated to other consolidated subsidiaries.~~


~~(c)~~	Income before income taxes divided by total revenue.

N/M - Not meaningful.

BNY Mellon 103

Notes to Consolidated Financial Statements(continued)


For the quarter ended Sept. 30, 2016	Investment Management				Investment Services			Other			Consolidated
(dollar amounts in millions)	Investment Management				Investment Services			Other			Consolidated
Fee and other revenue	$	876		(a)	$	2,183		$	100		$	3,159		(a)
For the six months ended June 30, 2019															Investment Services			Investment and Wealth Management				Other			Consolidated
(dollars in millions)															Investment Services			Investment and Wealth Management				Other			Consolidated
Total fee and other revenue															$	4,394		$	1,723		(a)	$	49		$	6,166		(a)
Net interest revenue (expense)	82				715			(23		)	774				1,587			126				(70		)	1,643
Total revenue	958			(a)	2,898			77			3,933			(a)
Total revenue (loss)															5,981			1,849			(a)	(21		)	7,809			(a)
Provision for credit losses	—				1			(20		)	(19		)		4			(1		)		(4		)	(1		)
Noninterest expense	702				1,851			88			2,641			(b)	3,944			1,324				78			5,346
Income before taxes	$	256		(a)	$	1,046		$	9		$	1,311		(a)(b)
Income (loss) before income taxes															$	2,033		$	526		(a)	$	(95	)	$	2,464		(a)
Pre-tax operating margin ~~(c)~~(b)	27		%		36		%	N/M			33		%		34		%	28		%		N/M			32		%
Average assets	$	30,392			$	275,714		$	45,124		$	351,230			$	260,432		$	30,819			$	48,041		$	339,292


(a)	~~Both~~Total fee and other revenue ~~and total revenue include~~includes net income from consolidated investment management funds of $8$22 million, representing ~~$17~~$36 million of income and noncontrolling interests of $9$14 million. ~~Income~~Total revenue and income before income taxes isare net of noncontrolling interests of $9$14 million.


(b)	~~Noninterest expense includes a loss attributable to noncontrolling interest of $2 millionrelated to other consolidated subsidiaries.~~


~~(c)~~	Income before income taxes divided by total revenue.

N/M - Not meaningful.

For the nine months ended Sept. 30, 2017 Investment
Management
Investment
Services
Other
Consolidated

(dollar amounts in millions)
Fee and other revenue $ 2,694
(a) $ 6,386
$ 254
$ 9,334
(a)
Net interest revenue (expense) 255
2,245
(43 ) 2,457

Total revenue 2,949
(a) 8,631
211
11,791
(a)
Provision for credit losses 1
(5 ) (14 ) (18 )
Noninterest expense 2,083
5,650
212
7,945
(b)
Income before taxes $ 865
(a) $ 2,986
$ 13
$ 3,864
(a)(b)
Pre-tax operating margin (c)
29 % 35 % N/M
33 %
Average assets $ 31,372
$ 252,675
$ 57,463
$ 341,510


~~(a)~~	Both total fee and other revenue and total revenue include net income from consolidated investment management funds of $29 million, representing $53 million of income and noncontrolling interests of $24 million. Income before taxes is net of noncontrolling interests of $24 million.


~~(b)~~	~~Noninterest expense includes a loss attributable to noncontrolling interest of $6 million related to other consolidated subsidiaries.~~


~~(c)~~	~~Income before taxes divided by total revenue.~~

~~N/M - Not meaningful.~~

For the nine months ended Sept. 30, 2016 Investment
Management
Investment
Services
Other
Consolidated

(dollar amounts in millions)
Fee and other revenue $ 2,544
(a) $ 6,267
$ 324
$ 9,135
(a)
Net interest revenue (expense) 247
2,084
(24 ) 2,307

Total revenue 2,791
(a) 8,351
300
11,442
(a)
Provision for credit losses —
8
(26 ) (18 )
Noninterest expense 2,084
5,518
284
7,886
(b)
Income before taxes $ 707
(a) $ 2,825
$ 42
$ 3,574
(a)(b)
Pre-tax operating margin (c)
25 % 34 % N/M
31 %
Average assets $ 30,048
$ 275,410
$ 57,832
$ 363,290


~~(a)~~	Both total fee and other revenue and total revenue include net income from consolidated investment management funds of $15 million, representing $21 million of income and noncontrolling interests of $6 million. Income before taxes is net of a loss attributable to noncontrolling interests of $6 million.


~~(b)~~	~~Noninterest expense includes a loss attributable to noncontrolling interest of $6 million related to other consolidated subsidiaries.~~


~~(c)~~	~~Income before taxes divided by total revenue.~~

~~N/M - Not meaningful.~~

~~104 BNY Mellon~~

~~Notes to Consolidated Financial Statements(continued)~~

Note ~~19 -~~ 20–Supplemental information to the Consolidated Statement of Cash Flows

~~Noncash~~Non-cash investing and financing transactions that, appropriately, are not reflected in the ~~Consolidated Statement~~consolidated statement of ~~Cash Flows~~cash flows are listed below.

Noncash investing and financing transactions Nine months ended Sept. 30,
(in millions) 2017
2016
Transfers from loans to other assets for other real estate owned (“OREO”) $ 3
$ 4
Change in assets of consolidated VIEs 429
392
Change in liabilities of consolidated VIEs 288
14
Change in nonredeemable noncontrolling interests of consolidated investment management funds 234
238
Securities purchased not settled 1,277
229
Securities sales not settled —
218
Securities matured not settled 350
—
Held-to-maturity securities transferred to available-for-sale 74
10
Premises and equipment/capitalized software funded by capital lease obligations 347
12



Non-cash investing and financing transactions	Six months ended June 30,
(in millions)	2020		2019
Change in assets of consolidated investment management funds	$	215	$	76
Change in liabilities of consolidated investment management funds	3		4
Change in nonredeemable noncontrolling interests of consolidated investment management funds	10		65
Securities purchased not settled	1,730		1,113
Securities matured not settled	—		10
Premises and equipment/capitalized software funded by finance lease obligations	—		14
Premises and equipment/operating lease obligations	66		1,272		(a)
Investment redemptions not settled	—		—


(a)	Includes $1,244 million related to the adoption of ASU 2016-02, Leases, and $28 million related to new or modified leases.

104 BNY Mellon ~~105~~

Item 4. Controls and Procedures

Disclosure controls and procedures

Our management, including the Chief Executive Officer and Chief Financial Officer, with participation by the members of the Disclosure Committee, has responsibility for ensuring that there is an adequate and effective process for establishing, maintaining, and evaluating disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in our SEC reports is timely recorded, processed, summarized and reported and that information required to be disclosed by BNY Mellon is accumulated and communicated to BNY Mellon’s management to allow timely decisions regarding the required disclosure. In addition, our ethics hotline can also be used by employees and others for the anonymous communication of concerns about financial controls or reporting matters. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

As of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.

Changes in internal control over financial reporting

In the ordinary course of business, we may routinely modify, upgrade or enhance our internal controls and procedures for financial reporting. There have not been any changes in our internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act during the ~~third~~second quarter of ~~2017~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~106~~ BNY Mellon 105

Forward-looking Statements

Some statements in this ~~document~~Quarterly Report are forward-looking. These include all statements about the usefulness of Non-GAAP measures, the future results of BNY Mellon, our businesses, financial, liquidity and capital condition, results of operations, liquidity, risk and capital management and processes, goals, strategies, outlook, objectives, expectations (including those regarding our performance results, expenses, nonperforming assets, products, impacts of currency fluctuations, impacts of money market fee waivers, impacts of trends on our businesses, regulatory, technology, market, economic or accounting developments and the impacts of such developments on our businesses, legal proceedings and other ~~contingencies,~~contingencies), effective tax rate, net interest revenue, estimates (including those regarding expenses, losses inherent in our credit portfolios and capital ratios), intentions (including those regarding our ~~resolution strategy)~~capital returns and expenses, including our investments in technology and pension expense), targets, opportunities, potential actions, growth and ~~initiatives.~~initiatives, including the potential effects of the coronavirus pandemic on any of the foregoing.

In this report, any other report, any press release or any written or oral statement that BNY Mellon or its executives may make, words, such as “estimate,” “forecast,” “project,” “anticipate,” “likely,” “target,” “expect,” “intend,” “continue,” “seek,” “believe,” “plan,” “goal,” “could,” “should,” “would,” “may,” “might,” “will,” “strategy,” “synergies,” “opportunities,” ~~“trends”~~“trends,” “future,” “potentially,” “outlook” and words of similar meaning, may signify forward-looking statements.

Actual results may differ materially from those expressed or implied as a result of a number of factors, including those discussed in ~~the~~ “Risk Factors” ~~section of~~in this Quarterly Report and our ~~2016~~2019 Annual Report, ~~and this Form 10-Q,~~ such as: ~~an information security event~~

a communications or technology disruption or failure within our infrastructure or the infrastructure of third parties that results in a loss of information, delays our ability to access information or impacts our ability to provide services to our clients may materially adversely affect our business, financial condition and results of operations;

a cybersecurity incident, or a failure to protect our computer systems, networks and information and our clients’ information against cybersecurity threats, could result in the theft, loss, unauthorized access to, disclosure, use or

alteration of information, system or network failures, or loss of access to information; any such incident or failure could adversely impact our ability to conduct our businesses, damage our reputation and cause losses;

our business may be materially adversely affected by operational risk;

the coronavirus pandemic is adversely affecting us and creates significant risks and uncertainties for our business, and the ultimate impact of the pandemic on us will depend on future developments, which are highly uncertain and cannot be predicted;

our risk management framework may not be effective in mitigating risk and reducing the potential for losses;

we are subject to extensive government rulemaking, policies, regulation and supervision; these rules and regulations have, and in the future may, compel us to change how we manage our businesses, which could have a material adverse effect on our business, financial condition and results of operations;

regulatory or enforcement actions or litigation could materially adversely affect our results of operations or harm our businesses or reputation;

our businesses may be negatively affected by adverse events, publicity, government scrutiny or other reputational harm;

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;

a failure or circumvention of our ~~technology or that of~~controls and procedures could have a ~~third party or vendor, or if we neglect to update our technology, develop and market new technology to meet clients’ needs or protect our intellectual property and any~~ material adverse effect ~~on our business; a determination that our resolution plan is not credible and any material negative impact~~ on our business, reputation, results of operations and financial ~~condition and~~ condition;

the application of our Title I preferred resolution strategy or resolution under the Title II orderly liquidation authority could adversely affect the Parent’s liquidity and ~~any adverse effects on our liquidity,~~ financial condition and the Parent’s security holders; ~~extensive government rulemaking regulation,~~

impacts from climate change, natural disasters, acts of terrorism, pandemics, global conflicts and ~~supervision, which~~other geopolitical events may have a negative impact on our business and operations;

we are dependent on fee-based business for a substantial majority of our revenue and our fee-based revenues could be adversely affected by slowing in market activity, weak financial markets, underperformance and/or negative

106 BNY Mellon

Forward-looking Statements (continued)

trends in savings rates or in investment preferences;

weakness and volatility in financial markets and the ~~future~~economy generally may ~~compel us to change how we manage~~materially adversely affect our ~~businesses,~~business, results of operations and financial condition;

changes in interest rates and yield curves could have a material adverse effect on our ~~business, financial condition~~profitability;

transitions away from and ~~results~~the anticipated replacement of ~~operations and have increased our compliance and operational risks and costs; failure to satisfy regulatory standards, including “well capitalized” and~~

“well managed” status or capital adequacy and liquidity rules, and any resulting limitations on our activities, or adverse effects on our business and financial condition; regulatory or enforcement actions or litigation and any material adverse effect on our results of operations or harm to our businesses or reputation; adverse events, publicity, government scrutiny or other reputational harm and any negative effect on our businesses; operational risk and any material adverse effect on our business; failure or circumvention of our controls and procedures and any material adverse effect on our business, reputation, results of operations and financial condition; failure of our risk management framework to be effective in mitigating risk and reducing the potential for losses; change or uncertainty in monetary, taxLIBOR and other ~~governmental policies and the~~IBORs could adversely impact on our businesses, profitability and ability to compete; political, economic, legal, operational and other risks inherent in operating globally and any adverse effect on our business; acts of terrorism, natural disasters, pandemics and global conflicts and any negative impact on our business and operations; ongoing concerns about the financial stability of certain countries, the failure or instability of any of our significant global counterparties, new barriers to global trade or a breakup of the EU or Eurozone and any material adverse effect on our business and results of operations;

the ~~United Kingdom’s referendum decision to leave~~UK’s withdrawal from the EU ~~and any~~may have negative effects on global economic conditions, global financial markets, and our business and results of operations; ~~weakness and volatility in financial markets and the economy generally and any material adverse effect~~

we may experience losses on ~~our business, results of operations and financial condition; changes in interest rates and any material adverse effect on our profitability; write-downs of~~ securities ~~that we own and other losses~~ related to volatile and illiquid market conditions, ~~and any reduction in~~reducing our earnings ~~or impact on~~and impacting our financial condition; our dependence on fee-based business for a substantial majority of our revenue and the adverse effects of a slowing in market activity, weak financial markets, underperformance and/or negative trends in savings rates or in investment preferences; any adverse effect on our foreign exchange revenues from decreased market volatility or cross-border investment activity of our clients;

the failure or perceived weakness of any of our significant clients or counterparties, many of whom are major financial institutions and sovereign entities, and our assumption of credit and counterparty risk, ~~which~~ could expose us to loss and adversely affect our business;

our business, financial condition and results of operations could be adversely affected if we do not effectively manage our liquidity;

we could incur losses if our allowance for credit losses, including loan and lending-related commitments reserves, is inadequate;

any material reduction in our credit ratings or the credit ratings of

~~BNY Mellon 107~~

~~Forward-looking Statements~~ ~~(continued)~~

our principal bank subsidiaries, ~~which~~The Bank of New York Mellon or BNY Mellon, N.A., could increase the cost of funding and borrowing to us and our rated subsidiaries and have a material adverse effect on our results of operations and financial condition and on the value of the securities we issue; any adverse effect on our business, financial condition and results of operations of not effectively managing our liquidity; the potential to incur losses if our allowance for credit losses is inadequate; the risks relating to

new lines of business, new products and services or transformational or strategic project initiatives may subject us to additional risks, and the failure to implement these initiatives ~~which~~ could affect our results of operations; ~~the~~

we are subject to competition in all aspects of our business, which could negatively affect our ability to maintain or increase our profitability;

our business may be adversely affected if we are unable to attract and retain employees;

our strategic transactions present risks and uncertainties ~~relating to our strategic transactions~~ and ~~any~~could have an adverse effect on our business, results of operations and financial condition; competition in all aspects of our business and any negative effect on our ability to maintain or increase our profitability; failure to attract and retain employees and any adverse effect on our business;

tax law changes or challenges to our tax positions ~~and any adverse effect on~~with respect to historical transactions may adversely affect our net income, effective tax rate and our overall results of operations and financial condition; ~~changes in accounting standards~~

our ability to return capital to shareholders is subject to the discretion of our Board of Directors and ~~any material impact on our reported financial condition, results of operations,~~

cash flows and other financial data; risks associated with being a non-operating holding company, including our dependence on dividends from our subsidiaries to meet obligations, to provide funds for payment of dividends and for stock repurchases; and the impact of provisions ofmay be limited by U.S. banking laws and regulations, including those governing capital and the approval of our capital plan, applicable provisions of Delaware law or our failure to pay full and timely dividends on our preferred ~~stock,~~stock;

the Parent is a non-operating holding company, and as a result, is dependent on dividends from its subsidiaries and extensions of credit from its IHC to meet its obligations, including with respect to its securities, and to provide funds for share repurchases and payment of dividends to its stockholders; and

changes in accounting standards governing the preparation of our financial statements and future events could have a material impact on our ~~ability to return capital to shareholders.~~reported financial condition, results of operations, cash flows and other financial data.

Investors should consider all risk factors discussed in this Quarterly Report and our ~~2016~~2019 Annual Report ~~this Form 10-Q~~ and any subsequent reports filed with the SEC by BNY Mellon pursuant to the Exchange Act. All forward-looking statements speak only as of the date on which such statements are made, and BNY Mellon undertakes no obligation to update any statement to reflect events or circumstances after the date on which such forward-looking statement is made or to reflect the occurrence of unanticipated events. The contents of BNY Mellon’s website or any other ~~websites~~website referenced herein are not part of this report.

~~108~~ BNY Mellon 107

Part II - Other Information

Item 1. Legal ~~Proceedings~~Proceedings.

The information required by this Item is set forth in the “Legal proceedings” section in Note 1718 of the Notes to Consolidated Financial Statements, which portion is incorporated herein by reference in response to this item.

Item 1A. Risk ~~Factors~~Factors.

The following discussion supplements the discussion of risk factors that could affect our business, financial condition or results of operations set forth in Part I, Item ~~1A,~~1A., Risk Factors, on pages 9075 through ~~116~~99 of our ~~2016~~2019 Annual Report. The discussion of Risk Factors, as so supplemented, sets forth our most significant risk factors that could affect our business, financial condition or results of operations. However, other factors, besides ~~that~~those discussed below or in our ~~2016~~2019 Annual Report or other of our reports filed with or furnished to the SEC, also could adversely affect our business, financial condition or ~~results.~~results of operations. We cannot assure you that the risk factors described below or elsewhere in this report and such other reports address all potential risks that we may face. These risk factors also serve to describe factors which may cause our results to differ materially from those described in forward-looking statements included herein or in other documents or statements that make reference to this Form 10-Q. See ~~Forward-looking~~“Forward-looking Statements.”

~~If our resolution plan~~The coronavirus pandemic is ~~determined not to be credible or not to facilitate an orderly resolution under the U.S. Bankruptcy Code,~~adversely affecting us and creates significant risks and uncertainties for our business, ~~reputation, results~~and the ultimate impact of ~~operations~~the pandemic on us will depend on future developments, which are highly uncertain and cannot be predicted.

The coronavirus pandemic has negatively affected the global economy, decreased liquidity in fixed income markets, created significant volatility and disruption in financial ~~condition could be materially negatively impacted. The application~~and equity markets, increased unemployment levels and disrupted businesses in many industries. This has resulted in increased demand on our transaction processing and clearance capabilities in many of our ~~Title I preferred resolution strategy or resolution~~Investment Services businesses and volatility in the levels and mix of the assets under ~~the Title II orderly liquidation authority could adversely affect~~management of our ~~liquidity~~Investment and ~~financial condition and our security holders.~~

~~Large BHCs must develop and submit~~Wealth Management business. Moreover, governmental actions in response to the ~~Federal Reserve~~pandemic are meaningfully influencing the interest rate environment, which has reduced, and the FDIC for review plans for their rapid and orderly resolution in the event of material financial distress or failure. BNY Mellon and The Bank of New York Mellon each file periodic complementary resolution plans. In April 2016, the Federal Reserve and the FDIC jointly determined that our 2015 resolution plan was not credible or would not facilitate an orderly resolution under the U.S. Bankruptcy Code. The agencies issued a joint notice of deficiencies and shortcomings and the actions thatis expected to

~~must be taken~~continue to ~~address them, which~~reduce, our net interest margin. As a result, we ~~responded~~have granted and may continue to grant money market fee waivers. The effects of the pandemic have resulted, and could continue to result, in higher and more volatile provisions for credit losses for financial instruments subject to ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, held by us. The continuing effects of the pandemic could also result in increased credit losses and charge-offs, particularly if our credit exposures continue to increase and as more clients and customers experience credit deterioration, as well as increased risk of other asset write-downs and impairments, including, but not limited to, equity investments, goodwill and intangibles. Any of these events could potentially result in a material adverse impact on our business and results of operations.

In addition, reliance on work-from-home capabilities by us, our clients and other industry participants, as well as the potential inability to maintain critical staff in operational facilities due to stay-at-home orders across jurisdictions, illness and quarantines present heightened cybersecurity, information security and operational risks. Any disruption to our ability to deliver services to our clients and customers could result in potential liability to our clients and customers, regulatory fines, penalties or other sanctions, increased operational costs or harm to our reputation.

The pandemic has resulted in an ~~Oct. 1, 2016 submission. In December 2016,~~increase in our balance sheet and volatility in risk-weighted assets, as we experience elevated deposit levels. Moreover, on March 15, 2020, we, along with the agencies jointly determined that our Oct. 1, 2016 submission adequately remedied the identified deficiencies. If the agencies determine that our future submissions are not credible or would not facilitate an orderly resolution under the U.S. Bankruptcy Code, and we fail to address the deficiencies in a timely manner, the agencies may jointly impose more stringent capital, leverage or liquidity requirements or restrictions on our growth, activities or operations. If we continue to fail to adequately remedy any deficiencies identified in future submissions, we could be required to divest assets or operations that the agencies determine necessary to facilitate our orderly resolution.

Following the receipt of feedback from the Federal Reserve and the FDIC in April 2016 on our 2015 resolution plan, we determined that, in the event of our material financial distress or failure, our preferred resolution strategy under Title Iother member banks of the ~~Dodd-Frank Act is a single point of entry strategy.~~

~~In connection with our single point of entry resolution strategy,~~Financial Services Forum, announced that we ~~have established the IHC to facilitate the provision of capital and liquidity resources to certain key subsidiaries in the event of material financial distress or failure. In~~would temporarily suspend share repurchases through the second quarter of ~~2017, we entered into a binding~~2020 to preserve capital and liquidity in order to further our objective of using our capital and liquidity to support ~~agreement~~our clients and customers. Further, in June 2020, the Federal Reserve announced that it has required ~~the IHC~~participating CCAR firms, including us, to ~~provide~~update and resubmit their capital plans and that, support. The support agreement required the Parent to transfer its intercompany loans and most of its cash to the IHC, and requires the Parent to continue to transfer cash and other liquid financial assets to the IHC.

If our projected liquidity resources deteriorate so severely that resolution of the Parent becomes imminent, the committed line of credit the IHC provided to the Parent will automatically terminate, with all amounts outstanding becoming due and payable, and the support agreement will require the Parent to transfer most of its remaining assets (other than stock in subsidiaries and a cash reserve to fund bankruptcy expenses) to the IHC. Asas a result, unless otherwise approved by the Federal Reserve, participating firms would not be permitted, during ~~a period~~the third quarter of ~~severe financial stress~~2020, to conduct open market common stock repurchases, to increase their common stock dividends or to pay common stock dividends that exceed average net income for the ~~Parent might commence bankruptcy proceedings at an earlier time than~~preceding four quarters. The Federal Reserve also stated that it ~~otherwise would if the support agreement had not been implemented.~~

~~If the Parent were to become subject to a bankruptcy proceeding and our single point of entry strategy is successful, creditors of some or all of our material~~may extend these limitations quarter-by-quarter. Our

108 BNY Mellon ~~109~~

Part II - Other Information (continued)

~~entities would receive full recoveries~~ability to resume our common stock repurchase program and maintain our common stock dividend depends on ~~their claims, while~~factors such as prevailing market conditions, our outlook for the ~~Parent’s security holders, including unsecured debt holders, could face significant losses, potentially including~~economic environment, the ~~loss~~performance of ~~their entire investment. It is possible that~~our business, the ~~application~~additional capital analysis required by the Federal Reserve, and whether the Federal Reserve keeps the limitations for the third quarter of ~~the single point of entry strategy –~~2020 in place for subsequent quarters.

The extent to which the ~~Parent would be the only legal entity to enter resolution proceedings – could result in greater losses to holders of~~pandemic impacts our unsecured debt securities and other securities than the losses that could result from the application of a different resolution strategy. Further, if the single point of entry strategy is not successful, ourbusiness, financial condition, liquidity and ~~financial condition would be adversely affected and~~results of operations, as well as our ~~security holders may, as a consequence, be in a worse position than if the strategy had not been implemented.~~

In addition, Title II of the Dodd-Frank Act established an orderly liquidation process in the event of the failure of a large systemically important financial institution, such as BNY Mellon, in order to avoid or mitigate serious adverse effectsregulatory capital, will depend on ~~the U.S. financial system. Specifically, when a U.S. G-SIB, such as BNY Mellon is in default or danger of default, and certain specified conditions~~future developments, which are ~~met, the FDIC may be appointed receiver under the orderly liquidation authority, and BNY Mellon would be resolved under that authority instead of the U.S. Bankruptcy Code.~~

highly

~~U.S. supervisors have indicated that a single point of entry strategy may~~uncertain and cannot be a desirable strategy to resolve a large financial institution such as BNY Mellon under Title II in a manner that would, similar to our preferred strategy under our Title I resolution plan, impose losses on shareholders, unsecured debt holderspredicted, including the scope and ~~other unsecured creditors~~duration of the ~~top-tier holding company (in~~pandemic, the effectiveness of our case, the Parent), while permitting the holding company’s subsidiaries to continue to operate and remain solvent. Under such a strategy, assuming the Parent entered resolution proceedings and its subsidiaries remained solvent, losses at the subsidiary level could be transferredwork-from-home arrangements, actions taken by governmental authorities in response to the ~~Parent~~pandemic, as well as the direct and ~~ultimately borne by~~indirect impact on us, our clients and customers, and third parties. As the ~~Parent’s security holders (including holders~~pandemic adversely affects the United States or the global economy, or our business, financial condition, liquidity or results of operations, it may also have the effect of heightening many of the ~~Parent’s unsecured debt securities), while third-party creditors of~~other risks described in the ~~Parent’s subsidiaries would receive full recoveries~~section entitled “Risk Factors” in our most recent Annual Report on ~~their claims. Accordingly, the Parent’s security holders (including holders of unsecured debt securities~~Form 10-K and ~~other unsecured creditors) could face losses in excess of what otherwise would have been the case.~~any subsequent Quarterly Reports on Form 10-Q.

~~110 BNY Mellon~~

~~Part II - Other Information~~ ~~(continued)~~

Item 2. Unregistered Sales of Equity Securities and Use of ~~Proceeds~~Proceeds.


(c)	The following table discloses repurchases of our common stock made in the ~~third~~second quarter of ~~2017.~~2020. All of the Company’s preferred stock outstanding has preference over the Company’s common stock with respect to the payment of dividends.

Issuer purchases of equity securities

Share repurchases - third quarter of 2017 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 Sept. 30, 2017
(dollars in millions, except per share information; common shares in thousands) Total shares
repurchased
Average price
per share

July 2017 7
$ 51.08
7
$ 2,600

August 2017 12,300
52.74
12,300
1,951

September 2017 9
52.29
9
1,950

Third quarter of 2017 (a)
12,316
$ 52.74
12,316
$ 1,950
(b)



Share repurchases – second quarter of 2020				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 June 30, 2020
(dollars in millions, except per share amounts; common shares in thousands)	Total shares repurchased	Average price per share
April 2020	48	$	45.41	48		$	931
May 2020	7	35.66		7		931
June 2020	6	38.28		6		N/A
Second quarter of 2020 (a)	61	$	43.59	61		N/A		(b)


(a)	~~Includes 32 thousand~~Reflects shares repurchased ~~at a purchase price of $2 million~~ from employees, primarily in connection with the employees’ payment of taxes upon the vesting of restricted stock. ~~The average price per share of open market purchases was $52.74.~~

(b)

~~Represents~~The Federal Reserve has announced that it will conduct additional analysis for all participating CCAR firms later this year and will not allow participating firms to make open market common stock repurchases during the ~~maximum value of the shares authorized to be repurchased through the second~~third quarter of ~~2018, including employee benefit plan repurchases,~~2020. We are permitted to continue to repurchase shares from employees, primarily in connection with the ~~Federal Reserve’s non-objection to our 2017 capital plan.~~employees’ payment of taxes upon the vesting of restricted stock.

N/A - Not applicable.

OnIn June ~~28, 2017,~~2019, in connection with the Federal Reserve’s non-objection to our ~~2017~~2019 capital plan, BNY Mellon announced a share repurchase plan providing for the repurchase of up to ~~$2.6~~$3.94 billion of common stock ~~and up to an additional $500 million of common stock contingent on a prior issuance of $500 million of noncumulative perpetual preferred stock. The 2017 capital plan began~~starting in the third quarter of ~~2017~~2019 and ~~continues~~continuing through the second quarter of ~~2018.~~2020. This ~~new~~ share repurchase plan ~~replaces~~replaced all previously authorized share repurchase plans.

In March 2020, we and the other members of the Financial Services Forum announced the temporary suspension of share repurchases until the end of the second quarter of 2020 to preserve capital and liquidity in order to further the objective of using capital and liquidity to support clients and customers.

In connection with the Federal Reserve’s release of the CCAR results in June 2020, BNY Mellon announced that it will not conduct open market common stock repurchases in the third quarter of 2020 and will resume the common stock repurchase program as early as possible, depending on factors such as prevailing market conditions, our outlook for the economic environment, the additional capital analysis required by the Federal Reserve, and whether the Federal Reserve keeps the limitations for the third quarter of 2020 in place for subsequent quarters. The Federal Reserve has announced that it will conduct additional analysis for all participating CCAR firms later this year and will not allow participating firms to

BNY Mellon 109

Part II - Other Information (continued)

make open market common stock repurchases during the third quarter of 2020.

Share repurchases may be executed through open market repurchases, in privately negotiated transactions or by other means, including through repurchase plans designed to comply with Rule 10b5-1 and ~~through~~other derivative, accelerated share

repurchase and other structured transactions. The timing and exact amount of any common stock repurchases will depend on various factors, including market conditions and the common stock trading price; the Company’s capital position, liquidity and financial performance; alternative uses of capital; and legal and regulatory considerations.

Item 6. ~~Exhibits~~Exhibits.

The list of exhibits required to be filed as exhibits to this report appears below.

110 BNY Mellon ~~111~~

Index to Exhibits



Exhibit No.	Description	Method of Filing
3.1	Restated Certificate of Incorporation of The Bank of New York Mellon Corporation.	Previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 000-52710) as filed with the Commission on July 2, 2007, and incorporated herein by reference.
3.2	Certificate of Designations of The Bank of New York Mellon Corporation with respect to Series A Noncumulative Preferred Stock, dated June 15, ~~2007~~2007..	Previously filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K (File No. 000-52710) as filed with the Commission on July 5, 2007, and incorporated herein by reference.
3.3	Certificate of Designations of The Bank of New York Mellon Corporation with respect to Series C Noncumulative Perpetual Preferred Stock, dated Sept. 13, 2012.	Previously filed as Exhibit 3.2 to the Company’s Registration Statement on Form 8A12B (File No. 001-35651) as filed with the Commission on Sept. 14, 2012, and incorporated herein by reference.
3.4	Certificate of Designations of The Bank of New York Mellon Corporation with respect to the Series D Noncumulative Perpetual Preferred Stock, dated May 16, 2013.	Previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 001-35651) as filed with the Commission on May 16, 2013, and incorporated herein by reference.
3.5	Certificate of Designations of The Bank of New York Mellon Corporation with respect to the Series E Noncumulative Perpetual Preferred Stock, dated April 27, 2015.	Previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 001-35651) as filed with the Commission on April 28, 2015, and incorporated herein by reference.
3.6	Certificate of Designations of The Bank of New York Mellon Corporation with respect to the Series F Noncumulative Perpetual Preferred Stock, dated July 29, 2016.	Previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 001-35651) as filed with the Commission on Aug. 1, 2016, and incorporated herein by reference.
3.7	~~Amended and Restated By-Laws~~Certificate of Designations of The Bank of New York Mellon Corporation ~~as amended and restated on Oct. 13, 2015.~~with respect to the Series G Noncumulative Perpetual Preferred Stock, dated May 15, 2020.	Previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 001-35651) as filed with the Commission on ~~Oct.~~May 19, ~~2015,~~2020, and incorporated herein by reference.
3.8	Certificate of Amendment to the Company’s Restated Certificate of Incorporation, as filed with the Secretary of State of the State of Delaware on April 9, 2019.	Previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 001-35651) as filed with the Commission on April 10, 2019, and incorporated herein by reference.

BNY Mellon 111

Index to Exhibits (continued)



Exhibit No.	Description	Method of Filing
3.9	Amended and Restated By-Laws of The Bank of New York Mellon Corporation, as amended and restated on Feb. 12, 2018.	Previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 001-35651) as filed with the Commission on Feb. 13, 2018, and incorporated herein by reference.
4.1	None of the instruments defining the rights of holders of long-term debt of the Parent or any of its subsidiaries represented long-term debt in excess of 10% of the total assets of the Company as of ~~Sept.~~June 30, ~~2017.~~2020. The Company hereby agrees to furnish to the Commission, upon request, a copy of any such instrument.	N/A

~~112 BNY Mellon~~

~~Index to Exhibits~~ ~~(continued)~~



~~Exhibit No.~~	~~Description~~	~~Method of Filing~~
~~12.1~~	~~Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends.~~	~~Filed herewith.~~
31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith.
31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith.
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Furnished herewith.
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Furnished herewith.
101.INS	Inline XBRL Instance Document.	~~Filed herewith.~~The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document.	Filed herewith.
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.	Filed herewith.
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.	Filed herewith.
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.	Filed herewith.
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.	Filed herewith.
104	The cover page of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, formatted in inline XBRL.	The cover page interactive data file is embedded within the inline XBRL document and included in Exhibit 101.

112 BNY Mellon ~~113~~

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	THE BANK OF NEW YORK MELLON CORPORATION
	(Registrant)




Date: ~~November 7, 2017~~August 6, 2020	By:	/s/ Kurtis R. Kurimsky
		Kurtis R. Kurimsky
		Corporate Controller
		(Duly Authorized Officer and
		Principal Accounting Officer of
		the Registrant)

~~114~~ BNY Mellon 113



Regulatory and Capital ratios	Sept. 30, 2017		June 30, 2017		Dec. 31, 2016
Average liquidity coverage ratio (“LCR”) (i)	119	%	116	%	114	%

Regulatory capital ratios: (j)
Standardized:
Common equity Tier 1 (“CET1”) ratio	12.3	%	12.0	%	12.3	%
Tier 1 capital ratio	14.6		14.3		14.5
Total (Tier 1 plus Tier 2) capital ratio	15.6		14.8		15.2
Advanced:
CET1 ratio	11.1		10.8		10.6
Tier 1 capital ratio	13.2		12.9		12.6
Total (Tier 1 plus Tier 2) capital ratio	14.0		13.2		13.0

Leverage capital ratio (j)	6.8		6.7		6.6
Supplementary leverage ratio (“SLR”) (j)	6.3		6.2		6.0

BNY Mellon shareholders’ equity to total assets ratio – GAAP	11.4		11.3		11.6
BNY Mellon common shareholders’ equity to total assets ratio – GAAP	10.4		10.3		10.6

Selected regulatory capital ratios – fully phased-in – Non-GAAP: (k)
Estimated CET1 ratio:
Standardized Approach	11.9	%	11.5	%	11.3	%
Advanced Approach	10.7		10.4		9.7

Estimated SLR	6.1		6.0		5.6



Key market metrics																										YTD17
																3Q17 vs.										vs.
	3Q17			2Q17			1Q17			4Q16			3Q16			2Q17		3Q16		YTD17			YTD16			YTD16
Standard & Poor’s (“S&P”) 500 Index (a)	2519			2423			2363			2239			2168			4	%	16	%	2519			2168			16	%
S&P 500 Index – daily average	2467			2398			2326			2185			2162			3		14		2397			2065			16
FTSE 100 Index (a)	7373			7313			7323			7143			6899			1		7		7373			6899			7
FTSE 100 Index – daily average	7380			7391			7274			6923			6765			—		9		7348			6326			16
MSCI EAFE (a)	1974			1883			1793			1684			1702			5		16		1974			1702			16
MSCI EAFE – daily average	1934			1856			1749			1660			1677			4		15		1847			1640			13
Barclays Capital Global Aggregate Bond^SM Index (a)(b)	480			471			459			451			486			2		(1	)	480			486			(1	)
NYSE and NASDAQ share volume (in billions)	179			199			186			189			186			(10	)	(4	)	565			608			(7	)
JPMorgan G7 Volatility Index – daily average (c)	8.17			7.98			10.10			10.24			10.19			2		(20	)	8.75			10.63			(18	)
Average interest on excess reserves paid by the Federal Reserve	1.25		%	1.04		%	0.79		%	0.55		%	0.50		%	21	bps	75	bps	1.03		%	0.50		%	53	bps

Foreign exchange rates vs. U.S. dollar:
British pound (a)	$	1.34		$	1.30		$	1.25		$	1.23		$	1.30		3	%	3	%	$	1.34		$	1.30		3	%
British pound – average rate	1.31			1.28			1.24			1.24			1.31			2		—		1.28			1.39			(8	)
Euro (a)	1.18			1.14			1.07			1.05			1.12			4		5		1.18			1.12			5
Euro – average rate	1.17			1.10			1.07			1.08			1.12			6		4		1.13			1.12			1



AUM trends (a)																3Q17 vs.
(dollars in billions)	3Q17			2Q17			1Q17			4Q16			3Q16			2Q17		3Q16
AUM at period end, by product type:
Equity	$	158		$	163		$	158		$	153		$	156		(3	)%	1	%
Fixed income	206			198			191			186			194			4		6
Index	333			324			330			312			302			3		10
Liability-driven investments (b)	622			607			584			554			607			2		2
Multi-asset and alternative investments	207			192			188			181			189			8		10
Cash	298			287			276			262			267			4		12
Total AUM	$	1,824		$	1,771		$	1,727		$	1,648		$	1,715		3	%	6	%

AUM at period end, by client type:
Institutional	$	1,285		$	1,265		$	1,243		$	1,182		$	1,234		2	%	4	%
Mutual funds	447			418			397			381			396			7		13
Private client	92			88			87			85			85			5		8
Total AUM	$	1,824		$	1,771		$	1,727		$	1,648		$	1,715		3	%	6	%

Changes in AUM:
Beginning balance of AUM	$	1,771		$	1,727		$	1,648		$	1,715		$	1,664
Net inflows (outflows):
Long-term strategies:
Equity	(2		)	(2		)	(4		)	(5		)	(6		)
Fixed income	4			2			2			(1		)	(1		)
Liability-driven investments (b)	(2		)	15			14			(7		)	4
Multi-asset and alternative investments	3			1			2			3			7
Total long-term active strategies inflows (outflows)	3			16			14			(10		)	4
Index	(3		)	(13		)	—			(1		)	(3		)
Total long-term strategies inflows (outflows)	—			3			14			(11		)	1
Short term strategies:
Cash	10			11			13			(3		)	(1		)
Total net inflows (outflows)	10			14			27			(14		)	—
Net market impact/other	17			1			41			(11		)	80
Net currency impact	26			29			11			(42		)	(29		)
Ending balance of AUM	$	1,824		$	1,771		$	1,727		$	1,648		$	1,715		3	%	6	%



																										YTD17
(dollar amounts in millions, unless otherwise noted)																3Q17 vs.										vs.
	3Q17			2Q17			1Q17			4Q16			3Q16			2Q17		3Q16		YTD17			YTD16			YTD16
Revenue:
Investment services fees:
Asset servicing	$	1,081		$	1,061		$	1,038		$	1,043		$	1,039		2	%	4	%	$	3,180		$	3,098		3	%
Clearing services	381			393			375			354			347			(3	)	10		1,149			1,045			10
Issuer services	288			241			250			211			336			20		(14	)	779			813			(4	)
Treasury services	141			139			139			139			136			1		4		419			402			4
Total investment services fees	1,891			1,834			1,802			1,747			1,858			3		2		5,527			5,358			3
Foreign exchange and other trading revenue	154			145			153			157			177			6		(13	)	452			506			(11	)
Other (a)	142			136			129			128			148			4		(4	)	407			403			1
Total fee and other revenue	2,187			2,115			2,084			2,032			2,183			3		—		6,386			6,267			2
Net interest revenue	777			761			707			713			715			2		9		2,245			2,084			8
Total revenue	2,964			2,876			2,791			2,745			2,898			3		2		8,631			8,351			3
Provision for credit losses	(2		)	(3		)	—			—			1			N/M		N/M		(5		)	8			N/M
Noninterest expense (ex. amortization of intangible assets)	1,837			1,889			1,812			1,786			1,812			(3	)	1		5,538			5,401			3
Amortization of intangible assets	37			38			37			38			39			(3	)	(5	)	112			117			(4	)
Total noninterest expense	1,874			1,927			1,849			1,824			1,851			(3	)	1		5,650			5,518			2
Income before taxes	$	1,092		$	952		$	942		$	921		$	1,046		15	%	4	%	$	2,986		$	2,825		6	%
Income before taxes (ex. amortization of intangible assets) – Non-GAAP	$	1,129		$	990		$	979		$	959		$	1,085		14	%	4	%	$	3,098		$	2,942		5	%

Pre-tax operating margin	37		%	33		%	34		%	34		%	36		%					35		%	34		%
Adjusted pre-tax operating margin (ex. provision for credit losses and amortization of intangible assets) – Non-GAAP	38		%	34		%	35		%	35		%	37		%					36		%	35		%

Investment services fees as a percentage of noninterest expense (ex. amortization of intangible assets)	103		%	97		%	99		%	98		%	103		%					100		%	99		%

Securities lending revenue	$	41		$	42		$	40		$	44		$	42		(2	)%	(2	)%	$	123		$	126		(2	)%

Metrics:
Average loans	$	38,038		$	40,931		$	42,818		$	45,832		$	44,329		(7	)%	(14	)%	$	40,578		$	44,373		(9	)%
Average deposits	$	198,299		$	200,417		$	197,690		$	213,531		$	220,316		(1	)%	(10	)%	$	198,796		$	219,344		(9	)%

AUC/A at period end (in trillions) (b)	$	32.2		$	31.1		$	30.6		$	29.9		$	30.5		4	%	6	%	$	32.2		$	30.5		6	%
Market value of securities on loan at period end (in billions) (c)	$	382		$	336		$	314		$	296		$	288		14	%	33	%	$	382		$	288		33	%

Asset servicing:
Estimated new business wins (AUC/A) (in billions)	$	166		$	152		$	109		$	141		$	150

Clearing services:
Average active clearing accounts (U.S. platform) (in thousands)	6,203			6,159			6,058			5,960			5,942			1	%	4	%
Average long-term mutual fund assets (U.S. platform)	$	500,998		$	480,532		$	460,977		$	438,460		$	443,112		4	%	13	%
Average investor margin loans (U.S. platform)	$	8,886		$	9,812		$	10,740		$	10,562		$	10,834		(9	)%	(18	)%

Depositary Receipts:
Number of sponsored programs	938			1,025			1,050			1,062			1,094			(8	)%	(14	)%

Broker-Dealer:
Average tri-party repo balances (in billions)	$	2,534		$	2,498		$	2,373		$	2,307		$	2,212		1	%	15	%



Investment securities portfolio (dollars in millions)	June 30, 2017			3Q17 change in unrealized gain (loss)			Sept. 30, 2017					Fair value as a % of amortized cost (a)		Unrealized gain (loss)				Ratings (b)
	June 30, 2017						Sept. 30, 2017																	BB+ and lower
	Fair value						Amortized cost		Fair value									AAA/ AA-		A+/ A-		BBB+/ BBB-		BB+ and lower		Not rated
Agency RMBS	$	49,544		$	81		$	50,121	$	49,917		100	%	$	(204	)		100	%	—	%	—	%	—	%	—	%
U.S. Treasury	25,325			(5		)	25,256		25,159			100		(97		)		100		—		—		—		—
Sovereign debt/sovereign guaranteed (c)	14,025			6			13,951		14,102			101		151				72		6		21		1		—
Non-agency RMBS (d)	1,239			9			885		1,185			84		300				—		1		3		87		9
Non-agency RMBS	627			9			555		594			97		39				7		4		17		71		1
European floating rate notes (e)	523			(1		)	393		387			98		(6		)		63		37		—		—		—
Commercial MBS	10,574			5			11,051		11,033			100		(18		)		99		1		—		—		—
State and political subdivisions	3,299			1			3,109		3,141			101		32				80		17		—		—		3
Foreign covered bonds (f)	2,471			1			2,612		2,626			101		14				100		—		—		—		—
Corporate bonds	1,318			4			1,262		1,275			101		13				17		69		14		—		—
CLOs	2,642			1			2,542		2,550			100		8				99		—		—		1		—
U.S. government agencies	2,210			2			2,480		2,496			101		16				100		—		—		—		—
Consumer ABS	1,330			1			1,152		1,157			100		5				89		4		5		2		—
Other (g)	3,758			(8		)	4,118		4,122			100		4				81		17		—		—		2
Total investment securities	$	118,885	(h)	$	106		$	119,487	$	119,744	(h)	100	%	$	257		(h)(i)	93	%	3	%	3	%	1	%	—	%



European floating rate notes at Sept. 30, 2017 (a)
(in millions)	RMBS		Other		Total fair value
United Kingdom	$	169	$	58	$	227
Netherlands	160		—		160
Total fair value	$	329	$	58	$	387



Allocation of allowance	Sept. 30, 2017		June 30, 2017		Dec. 31, 2016		Sept. 30, 2016
Allocation of allowance	Sept. 30, 2017		June 30, 2017		Dec. 31, 2016		Sept. 30, 2016
Commercial	31	%	30	%	29	%	33	%
Commercial real estate	28		28		26		23
Foreign	13		13		13		11
Financial institutions	9		8		9		11
Wealth management (a)	8		9		8		7
Other residential mortgages	8		8		10		10
Lease financing	3		4		5		5
Total	100	%	100	%	100	%	100	%



Nonperforming assets activity	Sept. 30, 2017			June 30, 2017			Dec. 31, 2016
(in millions)	Sept. 30, 2017			June 30, 2017			Dec. 31, 2016
Balance at beginning of quarter	$	100		$	107		$	109
Additions	3			2			4
Return to accrual status	(1		)	—			—
Charge-offs	—			—			—
Paydowns/sales	(8		)	(9		)	(6		)
Balance at end of quarter	$	94		$	100		$	107



Capital ratio requirements	Well capitalized		Minimum ratios		Minimum ratios with buffers, as phased-in (a)
	Well capitalized		Minimum ratios		2017		2018			2019
Capital conservation buffer (CET1)					1.25	%	1.875	%		2.5	%
U.S. G-SIB surcharge (CET1) (b)(c)					0.75	%	1.125	%		1.5	%

Consolidated:
CET1 ratio	N/A		4.5	%	6.5	%	7.5	%		8.5	%
Tier 1 capital ratio	6.0	%	6.0	%	8.0	%	9.0	%		10.0	%
Total capital ratio	10.0	%	8.0	%	10.0	%	11.0	%		12.0	%

Enhanced SLR buffer (Tier 1 capital)	N/A				N/A		2.0	%		2.0	%
SLR	N/A		3.0	%	N/A		5.0	%		5.0	%

Bank subsidiaries: (c)
CET1 ratio	6.5	%	4.5	%	5.75	%	6.375	%		7.0	%
Tier 1 capital ratio	8.0	%	6.0	%	7.25	%	7.875	%		8.5	%
Total capital ratio	10.0	%	8.0	%	9.25	%	9.875	%		10.5	%

SLR	6.0	%	3.0	%	N/A		6.0	%	(d)	6.0	%	(d)



Capital components and ratios	Sept. 30, 2017						June 30, 2017						Dec. 31, 2016
(dollars in millions)	Transitional Approach (a)			Fully phased-in - Non-GAAP (b)			Transitional Approach (a)			Fully phased-in - Non-GAAP (b)			Transitional Approach (a)			Fully phased-in - Non-GAAP (b)
CET1:
Common shareholders’ equity	$	37,195		$	36,981		$	36,652		$	36,432		$	35,794		$	35,269
Goodwill and intangible assets	(17,876		)	(18,351		)	(17,843		)	(18,325		)	(17,314		)	(18,312		)
Net pension fund assets	(72		)	(90		)	(72		)	(90		)	(55		)	(90		)
Equity method investments	(334		)	(348		)	(325		)	(340		)	(313		)	(344		)
Deferred tax assets	(31		)	(39		)	(30		)	(37		)	(19		)	(32		)
Other	(12		)	(12		)	(11		)	(11		)	—			(1		)
Total CET1	18,870			18,141			18,371			17,629			18,093			16,490
Other Tier 1 capital:
Preferred stock	3,542			3,542			3,542			3,542			3,542			3,542
Deferred tax assets	(8		)	—			(7		)	—			(13		)	—
Net pension fund assets	(19		)	—			(18		)	—			(36		)	—
Other	(34		)	(34		)	(24		)	(24		)	(121		)	(121		)
Total Tier 1 capital	$	22,351		$	21,649		$	21,864		$	21,147		$	21,465		$	19,911
Tier 2 capital:
Subordinated debt	$	1,300		$	1,250		$	550		$	550		$	550		$	550
Allowance for credit losses	265			265			270			270			281			281
Trust preferred securities	—			—			—			—			148			—
Other	(7		)	(7		)	(7		)	(7		)	(12		)	(11		)
Total Tier 2 capital - Standardized Approach	1,558			1,508			813			813			967			820
Excess of expected credit losses	49			49			59			59			50			50
Less: Allowance for credit losses	265			265			270			270			281			281
Total Tier 2 capital - Advanced Approach	$	1,342		$	1,292		$	602		$	602		$	736		$	589
Total capital:
Standardized Approach	$	23,909		$	23,157		$	22,677		$	21,960		$	22,432		$	20,731
Advanced Approach	$	23,693		$	22,941		$	22,466		$	21,749		$	22,201		$	20,500

Risk-weighted assets:
Standardized Approach	$	153,494		$	152,995		$	153,179		$	152,645		$	147,671		$	146,475
Advanced Approach:
Credit Risk	$	98,201		$	97,672		$	99,030		$	98,465		$	97,659		$	96,391
Market Risk	2,996			2,996			3,225			3,225			2,836			2,836
Operational Risk	68,625			68,625			67,788			67,788			70,000			70,000
Total Advanced Approach	$	169,822		$	169,293		$	170,043		$	169,478		$	170,495		$	169,227

Standardized Approach:
CET1 ratio	12.3		%	11.9		%	12.0		%	11.5		%	12.3		%	11.3		%
Tier 1 capital ratio	14.6			14.2			14.3			13.9			14.5			13.6
Total (Tier 1 plus Tier 2) capital ratio	15.6			15.1			14.8			14.4			15.2			14.2
Advanced Approach:
CET1 ratio	11.1		%	10.7		%	10.8		%	10.4		%	10.6		%	9.7		%
Tier 1 capital ratio	13.2			12.8			12.9			12.5			12.6			11.8
Total (Tier 1 plus Tier 2) capital ratio	14.0			13.6			13.2			12.8			13.0			12.1

Average assets for leverage capital purposes	$	327,555					$	324,423					$	326,809
Total leverage exposure for SLR purposes				$	355,960					$	352,448					$	355,083



Operating leverage	3Q17		2Q17		3Q16		3Q17 vs.
(dollars in millions)	3Q17		2Q17		3Q16		2Q17		3Q16
Total revenue – GAAP	$	4,016	$	3,956	$	3,941	1.52	%	1.90	%
Less: Net income attributable to noncontrolling interests of consolidated investment management funds	3		3		9
Total revenue, as adjusted – Non-GAAP	$	4,013	$	3,953	$	3,932	1.52	%	2.06	%

Total noninterest expense – GAAP	$	2,654	$	2,655	$	2,643	(0.04	)%	0.42	%
Less: Amortization of intangible assets	52		53		61
M&I, litigation and restructuring charges	6		12		18
Total noninterest expense, as adjusted – Non-GAAP	$	2,596	$	2,590	$	2,564	0.23	%	1.25	%

Operating leverage – GAAP (a)							156	bps	148	bps
Adjusted operating leverage – Non-GAAP (a)(b)							129	bps	81	bps



	Nine months ended Sept. 30,
(in millions)	2017			2016
Operating activities
Net income	$	2,933		$	2,676
Net (income) loss attributable to noncontrolling interests	(18		)	1
Net income applicable to shareholders of The Bank of New York Mellon Corporation	2,915			2,677
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	(18		)	(18		)
Pension plan contributions	(12		)	(17		)
Depreciation and amortization	1,044			1,118
Deferred tax expense (benefit)	272			(282		)
Net securities (gains)	(29		)	(65		)
Change in trading assets and liabilities	(66		)	1,680
Originations of loans held-for-sale	—			(350		)
Proceeds from the sales of loans originated for sale	—			802
Change in accruals and other, net	(756		)	(3,988		)
Net cash provided by operating activities	3,350			1,557
Investing activities
Change in interest-bearing deposits with banks	507			880
Change in interest-bearing deposits with the Federal Reserve and other central banks	(14,467		)	33,473
Purchases of securities held-to-maturity	(5,878		)	(4,169		)
Paydowns of securities held-to-maturity	3,332			3,577
Maturities of securities held-to-maturity	3,412			2,933
Purchases of securities available-for-sale	(18,974		)	(21,491		)
Sales of securities available-for-sale	3,531			5,624
Paydowns of securities available-for-sale	7,047			6,552
Maturities of securities available-for-sale	4,820			7,610
Net change in loans	5,283			(2,884		)
Sales of loans and other real estate	369			172
Change in federal funds sold and securities purchased under resale agreements	(2,082		)	(10,456		)
Net change in seed capital investments	(52		)	(57		)
Purchases of premises and equipment/capitalized software	(933		)	(495		)
Proceeds from the sale of premises and equipment	—			65
Acquisitions, net of cash	—			(38		)
Dispositions, net of cash	—			1
Other, net	82			(239		)
Net cash (used for) provided by investing activities	(14,003		)	21,058
Financing activities
Change in deposits	4,459			(18,378		)
Change in federal funds purchased and securities sold under repurchase agreements	325			(6,950		)
Change in payables to customers and broker-dealers	177			(743		)
Change in other borrowed funds	2,187			427
Change in commercial paper	2,501			—
Net proceeds from the issuance of long-term debt	4,739			4,982
Repayments of long-term debt	(796		)	(2,453		)
Proceeds from the exercise of stock options	383			129
Issuance of common stock	24			20
Issuance of preferred stock	—			990
Treasury stock acquired	(2,035		)	(1,550		)
Common cash dividends paid	(653		)	(576		)
Preferred cash dividends paid	(126		)	(74		)
Other, net	46			(2		)
Net cash provided by (used for) financing activities	11,231			(24,178		)
Effect of exchange rate changes on cash	157			(17		)
Change in cash and due from banks
Change in cash and due from banks	735			(1,580		)
Cash and due from banks at beginning of period	4,822			6,537
Cash and due from banks at end of period	$	5,557		$	4,957
Supplemental disclosures
Interest paid	$	721		$	371
Income taxes paid	316			597
Income taxes refunded	19			293



Securities at Sept. 30, 2017			Gross unrealized
	Amortized cost						Fair value
(in millions)			Gains		Losses
Available-for-sale:
U.S. Treasury	$	15,389	$	236	$	123	$	15,502
U.S. government agencies	866		4		6		864
State and political subdivisions	3,091		57		24		3,124
Agency RMBS	24,546		135		250		24,431
Non-agency RMBS	491		37		3		525
Other RMBS	270		3		8		265
Commercial MBS	960		9		4		965
Agency commercial MBS	9,026		41		57		9,010
CLOs	2,542		9		1		2,550
Other asset-backed securities	1,152		5		—		1,157
Foreign covered bonds	2,529		20		7		2,542
Corporate bonds	1,262		21		8		1,275
Sovereign debt/sovereign guaranteed	12,393		195		23		12,565
Other debt securities	3,149		12		10		3,151
Equity securities	2		2		—		4
Money market funds	939		—		—		939
Non-agency RMBS (a)	885		304		4		1,185
Total securities available-for-sale (b)	$	79,492	$	1,090	$	528	$	80,054
Held-to-maturity:
U.S. Treasury	$	9,867	$	21	$	29	$	9,859
U.S. government agencies	1,614		—		6		1,608
State and political subdivisions	18		—		1		17
Agency RMBS	25,575		96		185		25,486
Non-agency RMBS	64		5		—		69
Other RMBS	65		—		1		64
Commercial MBS	6		—		—		6
Agency commercial MBS	1,118		5		5		1,118
Foreign covered bonds	83		1		—		84
Sovereign debt/sovereign guaranteed	1,558		32		—		1,590
Other debt securities	27		—		—		27
Total securities held-to-maturity	$	39,995	$	160	$	227	$	39,928
Total securities	$	119,487	$	1,250	$	755	$	119,982



Nonperforming assets (in millions)	Sept. 30, 2017		Dec. 31, 2016
Nonperforming assets (in millions)	Sept. 30, 2017		Dec. 31, 2016
Nonperforming loans:
Other residential mortgages	$	80	$	91
Wealth management loans and mortgages	8		8
Financial institutions	2		—
Lease financings	—		4
Total nonperforming loans	90		103
Other assets owned	4		4
Total nonperforming assets	$	94	$	107



Impaired loans	3Q17				2Q17				3Q16				YTD17				YTD16
(in millions)	Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
Impaired loans with an allowance:
Commercial real estate	$	—	$	—	$	—	$	—	$	1	$	—	$	—	$	—	$	1	$	—
Financial institutions	2		—		1		—		—		—		1		—		—		—
Wealth management loans and mortgages	2		—		3		—		3		—		3		—		5		—
Lease financings	—		—		—		—		4		—		1		—		3		—
Total impaired loans with an allowance	4		—		4		—		8		—		5		—		9		—
Impaired loans without an allowance:
Commercial real estate	—		—		—		—		1		—		—		—		1		—
Financial institutions	—		—		—		—		85		—		—		—		128		—
Wealth management loans and mortgages	4		—		3		—		3		—		3		—		2		—
Total impaired loans without an allowance (a)	4		—		3		—		89		—		3		—		131		—
Total impaired loans	$	8	$	—	$	7	$	—	$	97	$	—	$	8	$	—	$	140	$	—



TDRs	3Q17							2Q17							3Q16
		Outstanding recorded investment							Outstanding recorded investment							Outstanding recorded investment
(dollars in millions)	Number of contracts	Pre-modification			Post-modification			Number of contracts	Pre-modification			Post-modification			Number of contracts	Pre-modification			Post-modification
Other residential mortgages	19		$	5		$	5	16		$	4		$	4	17		$	4		$	4
Wealth management loans and mortgages	1		2			2		—		—			—		—		—			—
Total TDRs	20		$	7		$	7	16		$	4		$	4	17		$	4		$	4



Non-consolidated VIEs at Sept. 30, 2017
(in millions)	Assets		Liabilities		Maximum loss exposure
Securities - Available-for-sale (a)	$	143	$	—	$	143
Other	2,559		439		3,321



Non-consolidated VIEs at Dec. 31, 2016
(in millions)	Assets		Liabilities		Maximum loss exposure
Securities - Available-for-sale (a)	$	42	$	—	$	42
Other	2,400		369		2,769



Hedged financial instruments	Carrying amount		Notional amount of hedge
					Unrealized
(in millions)					Gain		(Loss)
Sept. 30, 2017
Securities available-for-sale	$	12,416	$	12,333	$	56	$	(337	)
Long-term debt	24,249		24,200		249		(157		)
Dec. 31, 2016
Securities available-for-sale	$	9,184	$	9,233	$	83	$	(342	)
Long-term debt	20,511		20,450		330		(203		)



Ineffectiveness	Nine months ended
(in millions)	Sept. 30, 2017			Sept. 30, 2016
Fair value hedges of securities	$	(13.3	)	$	(5.4	)
Fair value hedges of long-term debt	0.1			(23.0		)
Cash flow hedges	—			—
Other (a)	—			—
Total	$	(13.2	)	$	(28.4	)



Impact of derivative instruments in the income statement (in millions)
Derivatives in fair value hedging relationships	Location of gain or (loss) recognized in income on derivatives	Gain or (loss) recognized in income on derivatives								Location of gain or (loss) recognized in income on hedged item	Gain or (loss) recognized in hedged item
Derivatives in fair value hedging relationships		3Q17			2Q17		3Q16				3Q17		2Q17			3Q16
Interest rate contracts	Net interest revenue	$	(33	)	$	2	$	(174	)	Net interest revenue	$	31	$	(9	)	$	168



Derivatives in cash flow hedging relationships	Gain or (loss) recognized in accumulated OCI on derivatives (effective portion)									Location of gain or (loss) reclassified from accumulated OCI into income (effective portion)	Gain or (loss) reclassified from accumulated OCI into income (effective portion)									Location of gain or (loss) recognized in income on derivatives (ineffective portion and amount excluded from effectiveness testing)	Gain or (loss) recognized in income on derivatives (ineffectiveness portion and amount excluded from effectiveness testing)
Derivatives in cash flow hedging relationships	3Q17			2Q17			3Q16				3Q17			2Q17			3Q16				3Q17		2Q17		3Q16
FX contracts	$	—		$	—		$	(7	)	Net interest revenue	$	—		$	—		$	(6	)	Net interest revenue	$	—	$	—	$	—
FX contracts	3			(1		)	—			Other revenue	—			—			—			Other revenue	—		—		—
FX contracts	(1		)	—			(19		)	Trading revenue	(1		)	—			(19		)	Trading revenue	—		—		—
FX contracts	(4		)	(7		)	2			Salary expense	(2		)	(9		)	(3		)	Salary expense	—		—		—
Total	$	(2	)	$	(8	)	$	(24	)		$	(3	)	$	(9	)	$	(28	)		$	—	$	—	$	—



Offsetting of derivative liabilities and financial liabilities at Sept. 30, 2017						Net liabilities recognized on 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	$	7,103	$	5,705		$	1,398	$	1,311	$	—	$	87
Foreign exchange contracts	4,074		3,095			979		234		—		745
Equity and other contracts	130		75			55		49		—		6
Total derivatives subject to netting arrangements	11,307		8,875			2,432		1,594		—		838
Total derivatives not subject to netting arrangements	790		—			790		—		—		790
Total derivatives	12,097		8,875			3,222		1,594		—		1,628
Repurchase agreements	27,321		19,171		(b)	8,150		8,149		—		1
Securities lending	1,904		—			1,904		1,812		—		92
Total	$	41,322	$	28,046		$	13,276	$	11,555	$	—	$	1,721



Repurchase agreements and securities lending transactions accounted for as secured borrowings at Sept. 30, 2017
	Remaining contractual maturity of the agreements
(in millions)	Overnight and continuous		Up to 30 days		30 days or more		Total
Repurchase agreements:
U.S. Treasury	$	21,432	$	—	$	—	$	21,432
U.S. government agencies	489		110		—		599
Agency RMBS	1,798		190		—		1,988
Corporate bonds	282		—		940		1,222
Other debt securities	254		—		871		1,125
Equity securities	466		—		489		955
Total	$	24,721	$	300	$	2,300	$	27,321
Securities lending:
U.S. government agencies	$	15	$	—	$	—	$	15
Other debt securities	477		—		—		477
Equity securities	1,412		—		—		1,412
Total	$	1,904	$	—	$	—	$	1,904
Total borrowings	$	26,625	$	300	$	2,300	$	29,225



Share repurchases - third quarter of 2017				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 Sept. 30, 2017
(dollars in millions, except per share information; common shares in thousands)	Total shares repurchased	Average price per share
July 2017	7	$	51.08	7		$	2,600
August 2017	12,300	52.74		12,300		1,951
September 2017	9	52.29		9		1,950
Third quarter of 2017 (a)	12,316	$	52.74	12,316		$	1,950	(b)

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