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, 20172022
or
[ ]☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


Commission File No.Number 001-35651



THE BANK OF NEW YORK MELLON CORPORATION
(Exact name of registrant as specified in its charter)

Delaware13-2614959
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
incorporation or organization)


225 Liberty240 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 classTrading
symbol(s)		Name of each exchange
on which registered
Common Stock, $0.01 par valueBKNew York Stock Exchange
6.244% Fixed-to-Floating Rate Normal Preferred Capital Securities of Mellon Capital IVBK/PNew 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.

Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Large accelerated filer [ X ]Smaller reporting company [ ]
Accelerated filer [ ]Emerging growth company [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)☐


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


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


Indicate the numberAs of June 30, 2022, 808,103,223 shares outstanding of each of the issuer’s classes ofregistrant’s common stock, as of the latest practicable date.

$0.01 par value per share, were outstanding.

ClassOutstanding as of
Sept. 30, 2017
Common Stock, $0.01 par value1,024,022,353



THE BANK OF NEW YORK MELLON CORPORATION


ThirdSecond Quarter 20172022 Form 10-Q
Table of Contents
Page
Consolidated Financial Highlights (unaudited)
2
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 second quarter 2022 and subsequent events
4
OverviewHighlights of second quarter 2022 results
45
Key third quarter 2017 events
4
Highlights of third quarter 2017 results
5
Fee and other revenue
76
Net interest revenue
10
Noninterest expense
13
Income taxes
13
Net interest revenueReview of business segments
1014
Average balances and interest rates
Critical accounting estimates
1123
Noninterest expense
13
Income taxes
14
Review of businesses
14
Critical accounting estimates
23
Consolidated balance sheet review
24
Liquidity and dividends
33
Capital
37
Trading activities and risk management
4441
Asset/liability management
4743
Off-balance sheet arrangements
48
Supplemental information -– Explanation of GAAP and Non-GAAP financial measures
4945
Recent accounting and regulatory developments
5347
Website information
5649
Item 1. Financial Statements:
Consolidated Income Statement (unaudited)
5750
Consolidated Comprehensive Income Statement (unaudited)
5952
Consolidated Balance Sheet (unaudited)
6053
Consolidated Statement of Cash Flows (unaudited)
6154
Consolidated Statement of Changes in Equity (unaudited)
6255
Page
Notes to Consolidated Financial Statements:
Note 1—Basis of presentation
58
Page
Notes to Consolidated Financial Statements:
Note 1—Basis of presentation2—Acquisitions and dispositions
6358
Note 2—Accounting change and new accounting guidance3—Securities
6358
Note 3—Acquisitions
64
Note 4—Securities
64
Note 5—Loans and asset quality
6964
Note 6—5—Goodwill and intangible assets
7571
Note 7—6—Other assets
7772
Note 7—Contract revenue
74
Note 8—Net interest revenue
7876
Note 9—Employee benefit plans
7877
Note 10—Income taxes
7977
Note 11—Variable interest entities and securitization
7977
Note 12—Preferred stock
8179
Note 13—Other comprehensive income (loss)
8280
Note 14—Fair value measurement
8381
Note 15—Fair value option
9086
Note 16—Derivative instruments
9086
Note 17—Commitments and contingent liabilities
9893
Note 18—Lines of businessBusiness segments
10299
Note 19—Supplemental information to the Consolidated Statement of Cash Flows
105101
Item 4. Controls and Procedures
106102
Forward-looking Statements
107103
Part II -– Other Information
Item 1. Legal Proceedings
Proceedings.
109105
Item 1A. Risk Factors
109
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Proceeds.
111105
Item 6. Exhibits
Exhibits.
111105
Index to Exhibits
112106
Signature
114108




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


Consolidated Financial Highlights (unaudited)

Quarter endedYear-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)(dollars in millions, except per share amounts and unless otherwise noted)June 30, 2022March 31, 2022June 30, 2021June 30, 2022June 30, 2021
Results applicable to common shareholders of The Bank of New York Mellon Corporation:   Results applicable to common shareholders of The Bank of New York Mellon Corporation:
Net income$983
$926
$974
 $2,789
$2,603
Net income$835 $699 $991 $1,534 $1,849 
Basic earnings per share0.94
0.88
0.90
 2.66
2.39
Basic earnings per share$1.03 $0.86 $1.14 $1.89 $2.11 
Diluted earnings per share0.94
0.88
0.90
 2.64
2.38
Diluted earnings per share$1.03 $0.86 $1.13 $1.88 $2.10 
   
Fee and other revenue$3,167
$3,120
$3,150
 $9,305
$9,119
Fee and other revenue$3,430 $3,228 $3,315 $6,658 $6,581 
Income from consolidated investment management funds10
10
17
 53
21
Net interest revenue839
826
774
 2,457
2,307
Net interest revenue824 698 645 1,522 1,300 
Total revenue$4,016
$3,956
$3,941
 $11,815
$11,447
Total revenue$4,254 $3,926 $3,960 $8,180 $7,881 
   
Return on common equity (annualized) (a)
10.6%10.4%10.8% 10.4%9.8%
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 average assets (annualized)
1.13%1.09%1.10% 1.09%0.96%
Return on common equity (annualized)
Return on common equity (annualized)
9.3 %7.6 %9.8 %8.4 %9.2 %
Return on tangible common equity (annualized) – Non-GAAP (a)
Return on tangible common equity (annualized) – Non-GAAP (a)
19.2 %15.4 %18.6 %17.2 %17.3 %
   
Fee revenue as a percentage of total revenue78%79%79% 79%79%Fee revenue as a percentage of total revenue78 %80 %81 %79 %82 %
   
Percentage of non-U.S. total revenue36%35%36% 35%34%
Non-U.S. revenue as a percentage of total revenueNon-U.S. revenue as a percentage of total revenue36 %35 %38 %35 %38 %
   
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 marginPre-tax operating margin26 %23 %32 %25 %31 %
   
Net interest margin1.15%1.14%1.05% 1.14%1.00%Net interest margin0.89 %0.75 %0.67 %0.82 %0.67 %
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)
Net interest margin on a fully taxable equivalent (“FTE”) basis – Non-GAAP (b)
0.89 %0.76 %0.67 %0.83 %0.67 %
   
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)
Assets under custody and/or administration (“AUC/A”) at period end (in trillions) (c)
$43.0 $45.5 $45.0 $43.0 $45.0 
Assets under management (“AUM”) at period end (in billions) (d)
Assets under management (“AUM”) at period end (in billions) (d)
$1,937 $2,266 $2,320 $1,937 $2,320 
   
Average common shares and equivalents outstanding (in thousands): (h)
   
Average common shares and equivalents outstanding (in thousands):
Average common shares and equivalents outstanding (in thousands):
Basic1,035,337
1,035,829
1,062,248
 1,037,431
1,071,457
Basic810,903 809,469 869,460 810,233 876,006 
Diluted1,041,138
1,041,879
1,067,682
 1,043,585
1,077,150
Diluted813,590 813,986 873,475 813,894 879,409 
   
Selected average balances:   Selected average balances:
Interest-earning assets$291,841
$289,496
$296,703
 $288,283
$308,560
Interest-earning assets$370,782 $373,186 $388,285 $371,997 $392,766 
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
Total assets$437,623 $440,202 $452,329 $438,924 $456,332 
Interest-bearing deposits$142,490
$142,336
$155,109
 $141,558
$160,728
Interest-bearing deposits$219,124 $223,243 $239,466 $221,172 $242,275 
Noninterest-bearing depositsNoninterest-bearing deposits$91,893 $90,179 $85,802 $91,060 $84,622 
Long-term debt$28,138
$27,398
$23,930
 $27,148
$22,779
Long-term debt$26,195 $25,588 $25,275 $25,893 $25,734 
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
Preferred stock$4,838 $4,838 $4,541 $4,838 $4,541 
Total The Bank of New York Mellon Corporation common shareholders’ equity$36,780
$35,862
$35,767
 $35,876
$35,616
Total The Bank of New York Mellon Corporation common shareholders’ equity$36,199 $37,363 $40,393 $36,778 $40,556 
   
Other information at period end:   Other information at period end:
Cash dividends per common share$0.24
$0.19
$0.19
 $0.62
$0.53
Cash dividends per common share$0.34 $0.34 $0.31 $0.68 $0.62 
Common dividend payout ratio26%22%21% 23%22%Common dividend payout ratio33 %40 %28 %36 %30 %
Common dividend yield (annualized)
1.8%1.5%1.9% 1.6%1.8%
Common dividend yield (annualized)
3.3 %2.8 %2.4 %3.3 %2.4 %
Closing stock price per common share$53.02
$51.02
$39.88
 $53.02
$39.88
Closing stock price per common share$41.71 $49.63 $51.23 $41.71 $51.23 
Market capitalization$54,294
$52,712
$42,167
 $54,294
$42,167
Market capitalization$33,706 $40,091 $44,220 $33,706 $44,220 
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 shareBook value per common share$44.73 $45.76 $47.20 $44.73 $47.20 
Tangible book value per common share – Non-GAAP (a)
Tangible book value per common share – Non-GAAP (a)
$22.02 $22.76 $25.64 $22.02 $25.64 
Full-time employees52,900
52,800
52,300
 52,900
52,300
Full-time employees50,800 49,600 48,800 50,800 48,800 
Common shares outstanding (in thousands)
1,024,022
1,033,156
1,057,337
 1,024,022
1,057,337
Common shares outstanding (in thousands)
808,103 807,798 863,174 808,103 863,174 

2 BNY Mellon


Consolidated Financial Highlights (unaudited)(continued)

Regulatory capital and other ratiosJune 30, 2022March 31, 2022Dec. 31, 2021
Average liquidity coverage ratio (“LCR”)111 %109 %109 %
Regulatory capital ratios: (e)
Advanced:
Common Equity Tier 1 (“CET1”) ratio10.0 %10.4 %11.4 %
Tier 1 capital ratio12.8 13.2 14.2 
Total capital ratio13.6 13.9 15.0 
Standardized:
CET1 ratio10.1 %10.1 %11.2 %
Tier 1 capital ratio12.9 12.9 14.0 
Total capital ratio13.8 13.7 14.9 
Tier 1 leverage ratio5.2 %5.3 %5.5 %
Supplementary leverage ratio (“SLR”)6.2 6.2 6.6 
BNY Mellon shareholders’ equity to total assets ratio9.1 %8.8 %9.7 %
BNY Mellon common shareholders’ equity to total assets ratio8.0 7.8 8.6 
(a)    Return on tangible common equity and tangible book value per common share, Non-GAAP measures, exclude goodwill and intangible assets, net of deferred tax liabilities. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 45 for the reconciliation of Non-GAAP measures.
(b)    See “Net interest revenue” on page 10 for a reconciliation of this Non-GAAP measure.
(c)    Consists of AUC/A primarily from the Asset Servicing line of business and, to a lesser extent, the Clearance and Collateral Management, Issuer Services, Pershing and Wealth Management lines of business. Includes the AUC/A of CIBC Mellon Global Securities Services Company (“CIBC Mellon”), a joint venture with the Canadian Imperial Bank of Commerce, of $1.5 trillion at June 30, 2022 and $1.7 trillion at March 31, 2022 and June 30, 2021.
(d)    Excludes assets managed outside of the Investment and Wealth Management business segment.
(e)    For our CET1, Tier 1 capital and Total capital ratios, our effective capital ratios under U.S. capital rules are the lower of the ratios as calculated under the Standardized and Advanced Approaches. For additional information on our capital ratios, see “Capital” beginning on page 37.


Regulatory and Capital ratiosSept. 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”) ratio12.3%12.0%12.3%
Tier 1 capital ratio14.6
14.3
14.5
Total (Tier 1 plus Tier 2) capital ratio15.6
14.8
15.2
Advanced:   
CET1 ratio11.1
10.8
10.6
Tier 1 capital ratio13.2
12.9
12.6
Total (Tier 1 plus Tier 2) capital ratio14.0
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 – GAAP11.4
11.3
11.6
BNY Mellon common shareholders’ equity to total assets ratio – GAAP10.4
10.3
10.6
    
Selected regulatory capital ratios – fully phased-in – Non-GAAP: (k)
   
Estimated CET1 ratio:   
Standardized Approach11.9%11.5%11.3%
Advanced Approach10.7
10.4
9.7
    
Estimated SLR6.1
6.0
5.6
(a)See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning 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 common equity – Non-GAAP and tangible book value per common share – Non-GAAP exclude goodwill and intangible assets, net of deferred tax liabilities. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 49 for the reconciliation of Non-GAAP measures.
(d)See “Average balances and interest rates” on page 11 for a reconciliation of Non-GAAP measures.
(e)Excludes securities lending cash management assets and assets managed in the Investment Services business.
(f)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. 30, 2017 and $1.2 trillion at both June 30, 2017 and Sept. 30, 2016.
(g)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 billion at June 30, 2017 and $64 billion at Sept. 30, 2016.
(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)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)The estimated fully phased-in CET1 and 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 “Capital” beginning on page 37.



BNY Mellon 3

Part I - Financial Information


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 (“20162021 (the “2021 Annual Report”).


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


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 wasEstablished in 1784 by Alexander Hamilton, we were the first company listed on the New York Stock Exchange (NYSE: BK). With a rich history ofmaintaining 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.

Wehelping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for financial institutions, corporations andor individual investors, BNY Mellon delivers informed investment and wealth management and investment services 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 three business segments, Securities Services, Market and $1.8 trillion in assets under management (“AUM”).

BNY Mellon is focused on enhancing our clients’ experience by leveraging our scaleWealth Services and Investment and Wealth Management, which offer a comprehensive set of capabilities and deep expertise across the investment lifecycle, enabling the Company to deliver innovative and strategicprovide 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 theto buy-side and sell-side providing usmarket participants, as well as leading institutional and wealth management clients globally.

The diagram below presents our three 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 demographicsbk-20220630_g1.jpg


Key second quarter 2022 and the continued evolution of the regulatory landscape—each providing us with opportunities to advise and service clients.subsequent events


Leadership succession
Key third quarter 2017 events

Definitive agreement to sell CenterSquare Investment Management

In September 2017,July 2022, we announced that we entered intoDermot McDonogh was appointed to the position of Chief Financial Officer (“CFO”), effective Feb. 1, 2023, succeeding Emily Portney, who has served in that role since July 19, 2020. Mr. McDonogh will join BNY Mellon on Nov. 1, 2022. Ms. Portney will continue serving as CFO through Jan. 31, 2023, at which time she will assume a definitive agreement to sell CenterSquare Investmentnew position leading the Company’s Treasury Services, Credit Services and Clearance & Collateral Management (“CenterSquare”), onebusinesses.

Mr. McDonogh most recently served as the chief operating officer of our Investment Management boutiques. CenterSquare had approximately $9 billion in AUM in U.S.the Europe, Middle East and global real estateAfrica region for Goldman Sachs International and infrastructure investments. The transaction is subject to standard regulatory and other required approvals and is expected to be completed inas 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 was appointed chief executive officer and member of the board of directors of the Company. Mr. Scharf succeeds Gerald L. Hassell, who will continue as the Company’s chairman of the board of directors until his retirement at the end of the year. After Mr. Hassell’s retirement, Mr. Scharf will become chairman, effective Jan. 1, 2018.Goldman Sachs International Bank since 2015.

Resolution plan

As required by the Dodd-Frank Act, the Parent must submit annually to the Board of Governors of the Federal Reserve System (“Federal Reserve”) 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 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.


Increase in cash dividend on common stock


BNY Mellon’s 2017 capital plan submitted in connection withIn July, our Comprehensive Capital Analysis and Review (“CCAR”) includedBoard of Directors approved a 26%9% increase in the quarterly cash dividend on common stock, from $0.34 to $0.24$0.37 per common share. The first payment of the increased quarterly cash dividend was made on Aug. 11, 2017.

4 BNY Mellon

Highlights of thirdsecond quarter 20172022 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$835 million, or $0.90 per diluted common share, in the third quarter of 2016 and $926 million, or $0.88$1.03 per diluted common share, in the second quarter of 2017.

Highlights of2022. Net income applicable to common shareholders was $991 million, or $1.13 per diluted common share, in the thirdsecond quarter of 2017 include:

AUC/A totaled a record $32.2 trillion at Sept. 30, 20172021. The highlights below are based on the second quarter of 2022 compared with $30.5 trillion at Sept. 30, 2016. The 6% increasethe second quarter of 2021, unless otherwise noted.

•Total revenue of $4.3 billion increased 7%, primarily reflectsreflecting:
•Fee and other revenue increased 3%, primarily reflecting:
•Fee revenue increased 4%, primarily reflecting lower money market fee waivers, higher market values,client activity and higher foreign exchange revenue, partially offset by the favorableunfavorable impact of a weakerstronger 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 equitylower market values and net newthe impact of lost 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 valuesprior year in both Pershing 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.Corporate Trust. (See “Fee and other revenue” beginning on page 7.6.)
•Investment and other income totaled $63 million compared with $92 million in the third quarter of 2016. The decreaserevenue was unchanged, primarily reflects lower other income drivenreflecting higher strategic equity investment gains, offset by our investments in renewable energy and lower seed capital gains.results. (See “Fee and other revenue” beginning on page 7.6.)


BNY Mellon 5

•Net interest revenue totaled $839 million compared with $774 million in the third quarter of 2016. The 8% increase wasincreased 28%, primarily driven byreflecting higher interest rates on interest-earning assets and a change in asset mix, partially offset by higher funding expense and lower average deposits 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.interest-earning assets. (See “Net interest revenue” on page 10.10.)
The provision•Provision for credit losses was $47 million compared with a creditbenefit of $6$86 million, primarily reflecting changes in the third quarter of 2017 and a credit of $19 million in the third quarter of 2016.macroeconomic forecast. (See “Asset quality and allowance“Consolidated balance sheet review – Allowance for credit losses” beginning on page 29.31.)
•Noninterest expense totaled $2.65 billion compared with $2.64 billion inincreased 12%, including 4% increase due to higher litigation reserves. The remainder of the third quarter of 2016. The increase primarily reflects higher softwareinvestments in growth, infrastructure and professional, legalefficiency initiatives and other purchased serviceshigher revenue-related expenses,, including the impact of inflation, partially offset by lower litigation expense and bank assessment charges.the favorable impact of a stronger U.S. dollar. (See “Noninterest expense” beginning on page 13.13.)
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%21.1% includes ~1.5% impact due to increase in the third quarter of 2016.litigation reserves. (See “Income taxes” on page 14.13.)


Metrics

The•AUC/A of $43.0 trillion decreased 4%, primarily reflecting lower market values and the unfavorable impact of a stronger U.S. dollar, partially offset by client inflows and net unrealized pre-tax gain onnew business.
•AUM of $1.9 trillion decreased 17%, primarily reflecting lower market values and the total investment securities portfoliounfavorable impact of a stronger U.S. dollar, partially offset by net inflows.

Capital and liquidity

•Our CET1 ratio calculated under the Advanced Approaches was $257 million at Sept. 30, 2017 compared with a pre-tax gain of $151 million10.0% 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%2022, and 10.1% at Sept. 30, 2017 and 10.8% at June 30, 2017. The increase was primarily driven by CET1 generation. Our CET1 ratioMarch 31, 2022 under the Standardized Approach was 12.3% at Sept. 30, 2017Approach. The decrease primarily reflects unrealized losses on securities available-for-sale, foreign currency translation and 12.0% at June 30, 2017.capital deployed through dividends, partially offset by capital generated through earnings and lower risk-weighted assets (“RWA”). (See “Capital” beginning on page 37.37.)
Our estimated CET1 ratio (Non-GAAP) calculated under the Advanced Approach on a fully phased-in basis•Tier 1 leverage was 10.7% at Sept. 30, 2017 and 10.4%5.2% at June 30, 2017.2022, compared with 5.3% at March 31, 2022. The increase primarily reflects CET1 generation. Our estimated CET1 ratio (Non-GAAP) calculated underdecrease was driven by the Standardized Approach on a fully phased-in basis was 11.9% at Sept. 30, 2017 and 11.5% at June 30, 2017.decrease in capital, partially offset by lower average assets. (See “Capital” beginning on page 37.37.)

•Dividends to common shareholders were $279 million (including dividend-equivalents on share-based awards).

Highlights of our principal business segments

Securities Services
•Total revenue increased 12%.
•Income before income taxes decreased 24%; includes a 40% reduction due to higher litigation reserves and provision for credit losses.
•Pre-tax operating margin of 17%; or 21% excluding higher litigation reserves (Non-GAAP). (See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 45 for a reconciliation of this Non-GAAP measure.)



6 BNY Mellon 5


Market and Wealth Services
•Total revenue increased 10%.
•Income before income taxes increased 9%.
•Pre-tax operating margin of 46%.

Investment and Wealth Management
•Total revenue decreased 10%.
•Income before income taxes decreased 36%.
•Pre-tax operating margin of 23%; adjusted pre-tax operating margin – Non-GAAP of 26%. (See
“Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 45 for a reconciliation of this Non-GAAP measure.)

See “Review of business segments” and Note 18 of the Notes to Consolidated Financial Statements for additional information on our business segments.


Fee and other revenue


Fee and other revenueYTD22
(dollars in millions, unless otherwise noted)2Q22 vs. vs.
2Q221Q222Q211Q222Q21YTD22YTD21YTD21
Investment services fees$2,206 $1,993 $2,076 11 %6 %$4,199 $4,132 2 %
Investment management and performance fees (a)
833 883 889 (6)(6)1,716 1,779 (4)
Foreign exchange revenue222 207 184 7 21 429 415 3 
Financing-related fees44 45 48 (2)(8)89 99 (10)
Distribution and servicing fees34 30 27 13 26 64 56 14 
Total fee revenue3,339 3,158 3,224 6 4 6,497 6,481 — 
Investment and other revenue91 70 91 N/MN/M161 100 N/M
Total fee and other revenue$3,430 $3,228 $3,315 6 %3 %$6,658 $6,581 1 %
Fee revenue as a percentage of total revenue78 %80 %81 %79 %82 %
AUC/A at period end (in trillions) (b)
$43.0 $45.5 $45.0 (5)%(4)%$43.0 $45.0 (4)%
AUM at period end (in billions) (c)
$1,937 $2,266 $2,320 (15)%(17)%$1,937 $2,320 (17)%
Fee and other revenue        YTD17
    3Q17 vs.   vs.
(dollars in millions, unless otherwise noted)3Q17
2Q17
3Q16
2Q17
3Q16
 YTD17
YTD16
YTD16
Investment services fees:         
Asset servicing (a)
$1,105
$1,085
$1,067
2 %4 % $3,253
$3,176
2 %
Clearing services383
394
349
(3)10
 1,153
1,049
10
Issuer services288
241
337
20
(15) 780
815
(4)
Treasury services141
140
137
1
3
 420
407
3
Total investment services fees1,917
1,860
1,890
3
1
 5,606
5,447
3
Investment management and performance fees901
879
860
3
5
 2,622
2,502
5
Foreign exchange and other trading revenue173
165
183
5
(5) 502
540
(7)
Financing-related fees54
53
58
2
(7) 162
169
(4)
Distribution and servicing40
41
43
(2)(7) 122
125
(2)
Investment and other income63
122
92
N/M
N/M
 262
271
N/M
Total fee revenue3,148
3,120
3,126
1
1
 9,276
9,054
2
Net securities gains19
—
24
N/M
N/M
 29
65
N/M
Total fee and other revenue$3,167
$3,120
$3,150
2 %1 % $9,305
$9,119
2 %
          
Fee revenue as a percentage of total revenue78%79%79%   79%79% 
          
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 %
(a)    Excludes seed capital gains (losses) related to consolidated investment management funds.
(a)Asset servicing fees include securities lending revenue of $47 million in the third quarter of 2017, $48 million in the second quarter of 2017, $51 million in the third quarter of 2016, $144 million in the first nine months of 2017 and $153 million in the first nine months of 2016.
(b)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.
(b)    Consists of AUC/A primarily from the Asset Servicing line of business and, to a lesser extent, the Clearance and Collateral Management, Issuer Services, Pershing and Wealth Management lines of business. Includes the AUC/A of CIBC Mellon of $1.5 trillion at June 30, 2022 and $1.7 trillion at March 31, 2022 and June 30, 2021.
(c)    Excludes assets managed outside of the Investment and Wealth Management business segment.
N/M -– Not meaningful.




Fee and other revenue increased 1% compared with the third quarter of 2016 and 2% (unannualized)4% compared with the second quarter of 2017.2021 and 6% compared with the first quarter of 2022.The increases compared with the second quarter of 2021 and first quarter of 2022 primarily reflect higher investment services fees and foreign exchange revenue, partially offset by lower investment management and performance fees.

Investment and other revenue was unchanged compared with the second quarter of 2021 and increased $21 million compared with the first quarter of 2022. Compared with the second quarter of 2021, higher strategic equity investment gains were offset by lower seed capital results. The increase compared with the thirdfirst quarter of 20162022 primarily reflects higher fixed-income trading results and strategic equity investment management and performance fees, asset servicing fees and clearing services fees,gains, partially offset by lower issuerseed capital results.
Money market fee waivers

In recent periods, low short-term interest rates resulted in money market mutual fund fees and other similar fees being waived to protect investors from negative returns. The fee waivers impacted fee revenues in most of our businesses, but also resulted 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.

The following table presents the impact of money market fee waivers on our consolidated fee revenue, net of distribution and servicing expense. In the second quarter of 2022, the net impact of money market fee waivers was $66 million, down from $199 million in the first quarter of 2022, driven by higher interest rates.
6 BNY Mellon

Money market fee waivers
(in millions)2Q221Q222Q21YTD22YTD21
Investment services fees$(26)$(126)$(148)$(152)$(257)
Investment management and performance fees(40)(85)(115)(125)(204)
Distribution and servicing fees(2)(11)(13)(13)(26)
Total fee revenue(68)(222)(276)(290)(487)
Less: Distribution and servicing expense2 23 24 25 47 
Net impact of money market fee waivers$(66)$(199)$(252)$(265)$(440)
Impact to investment services fees by line of business: (a)
Asset Servicing$— $(19)$(30)$(19)$(45)
Issuer Services(1)(11)(16)(12)(27)
Pershing(25)(90)(91)(115)(168)
Treasury Services— (6)(11)(6)(17)
Total impact of investment services fees by line of business$(26)$(126)$(148)$(152)$(257)
Impact to fee revenue by line of business: (a)
Asset Servicing$(1)$(28)$(50)$(29)$(79)
Issuer Services(1)(14)(22)(15)(37)
Pershing(29)(107)(99)(136)(193)
Treasury Services— (8)(16)(8)(25)
Investment Management(37)(63)(85)(100)(146)
Wealth Management— (2)(4)(2)(7)
Total impact to fee revenue by line of business$(68)$(222)$(276)$(290)$(487)
(a)    The line of business revenue for management reporting purposes reflects the impact of revenue transferred between the businesses.


Investment services fees investment

Investment services fees increased 6% compared with the second quarter of 2021 and other income and foreign exchange and other trading revenue.11% compared with the first quarter of 2022. The increase compared with the second quarter of 20172021 primarily reflects seasonallylower money market fee waivers and higher issuerclient activity, partially offset by the impact of lost business in the prior year in Pershing and Corporate Trust and the unfavorable impact of a stronger U.S. dollar. The increase compared with thefirst quarter of 2022 primarily reflects lower money market fee waivers, the accelerated amortization of deferred costs for depositary receipts services fees, investmentrelated to Russia recorded in the first quarter of 2022 and higher client activity, partially offset by lower market values.

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

Investment management and performance fees asset servicing fees and net securities gains, partially offset by lower investment and other income.


Investment servicesmanagement and performance fees

Investment services fees were impacted by the following compared with the third quarter of 2016 and the second quarter of 2017:

Asset servicing fees increased 4% compared with the third quarter of 2016 and 2% (unannualized) decreased 6% compared with the second quarter of 2017. The
increase compared with the third2021 and 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.2022. The increasedecrease compared with the second quarter of 2017 was2021 primarily driven byreflects lower market values, the favorableunfavorable impact of a weakerstronger U.S. dollar, and higher equity market values.an unfavorable change in
Clearing services fees increased 10%the mix of AUM and lower equity income, partially offset by lower money market fee waivers. The decrease compared with the thirdfirst quarter of 20162022 primarily reflects lower market values, timing of performance fees and the unfavorable impact of a stronger U.S. dollar, partially offset by lower money market fee waivers. Performance fees were $5 million in the second quarter of 2022, $14 million in the second quarter of 2021 and $34 million in the first quarter of 2022. On a constant currency basis (Non-GAAP), investment management and performance fees decreased 3% (unannualized) compared with the second quarter of 2017. The increase was primarily driven by higher money market fees2021. See “Supplemental information – Explanation of GAAP and growth in long-term mutual fund assets. The decrease 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.

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) compared with the second quarter of 2017, primarily reflecting higher equity market values and money market fees. The increase compared with the third quarter of 2016 also reflects higher performance fees. The increase compared with the second quarter of 2017 also reflects the favorable impact of a weaker U.S. dollar. Changes in currency rates had an insignificant impactNon-GAAP financial measures” beginning on the growth rate of investment management and performance fees compared with the third quarter of 2016. Performance fees were $15 million in the third quarter of 2017, $8 million in the third quarter of 2016 and $17 million in the second quarter of 2017.

Total AUMpage 45 for the Investment Management business increased 6% compared with Sept.reconciliation of Non-GAAP measures.

AUM was $1.9 trillion at June 30, 2016 and 3%2022, a decrease of 17% compared with June 30, 2017. The increase compared with Sept. 30, 20162021, primarily reflects higherreflecting lower market values net inflows and the favorableunfavorable impact of a weakerstronger U.S. dollar, (principally versus the British pound). The increase compared with June 30, 2017 primarily reflects the favorable impact of a 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 werepartially offset by outflows of index, equitynet inflows.

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

BNY Mellon 7

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 revenue15
14
8
39
28
Total foreign exchange and other trading revenue$173
$165
$183
$502
$540


Foreign exchange and other trading revenue decreased 5% compared with the third quarter of 2016 and increased 5% (unannualized) compared with the second quarter of 2017.

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 exchange revenue decreased 10% compared with the third quarter of 2016, primarily reflecting lower volatilityactivities and lower Depositary Receipt-related foreign exchange activity, partially offset by higher volumes.currency remeasurement gain (loss). Foreign exchange revenue increased 5% (unannualized)21% compared with the second quarter of 2017 reflecting2021 and 7% compared with the first quarter of 2022. Both increases primarily reflect higher volumes.volatility. Foreign exchange revenue is primarily reported in the InvestmentSecurities Services business segment and, to a lesser extent, the Market and Wealth Services and Investment and Wealth Management business segments and the Other segment.


Our custody clients may enter intoInvestment and other revenue

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


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

Investment and other revenue
(in millions)2Q221Q222Q21YTD22YTD21
(Loss) income from consolidated investment management funds$(24)$(20)$13 $(44)$30 
Seed capital (losses) gains (a)
(24)(8)18 (32)21 
Other trading revenue (loss)45 5 (1)50 (8)
Renewable energy investment (losses)(44)(44)(41)(88)(122)
Corporate/bank-owned life insurance28 33 29 61 62 
Other investments gains (b)
78 61 23 139 34 
Disposal gains— — 6 — 6 
Expense reimbursements from joint venture26 27 25 53 48 
Other income6 12 17 18 27 
Net securities gains— 4 2 4 2 
Total investment and other revenue$91 $70 $91 $161 $100 
(a)    Includes gains (losses) on investments in BNY Mellon funds which hedge deferred incentive awards.
(b)    Includes strategic equity, private equity and other investments.


Investment and other revenue was $91 million in the second quarter of 2022 compared with $91 million in the second quarter of 2021 and $70 million in the first quarter of 2022. Compared with the second quarter of 2021, higher strategic equity investment gains were offset by lower seed capital results. The increase compared with the first quarter of 2022 primarily reflects higher fixed-income trading results
and strategic equity investment gains, partially offset by lower seed capital results.

Year-to-date 2022 compared with year-to-date 2021

Fee revenue increased less than 1% compared with the first six months of 2021, primarily reflecting higher investment services fees and foreign exchange transactions
8 BNY Mellon

revenue, partially offset by lower investment management and performance fees. The 2% increase in investment services fees primarily reflects lower money market fee waivers and higher market values and client activity, partially offset by the accelerated amortization of deferred costs for depositary receipts services related to Russia recorded in the first quarter of 2022, the impact of lost business in the prior year in Pershing and Corporate Trust and the unfavorable impact of 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, ourstronger U.S. dollar. The 3% increase in foreign exchange revenue continues to be impacted by changesprimarily reflects higher volatility. The 4% decrease in volumeinvestment management and volatility. Forperformance fees primarily reflects the quarter ended Sept. 30, 2017, our total revenue for all typesunfavorable impact of foreign exchange trading transactions was $158 million, or 4% of our total revenue,a stronger U.S. dollar, lower equity income 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 reportedan unfavorable change in the mix of AUM, partially offset by lower money market fee waivers.

Investment Services business and the Other segment, include capital markets fees, loan commitment fees and credit-related fees. Financing-related fees decreasedother revenue increased $61 million compared with the thirdfirst six months of 2021, primarily reflecting higher strategic equity investment gains and a $39 million impairment for a renewable energy investment recorded in the first quarter of 2016 primarily reflecting2021, partially offset by lower syndication fees. Financing-related feesseed capital results.
BNY Mellon 9

Net interest revenue

Net interest revenueYTD22
2Q22 vs. vs.
(dollars in millions)2Q221Q222Q211Q222Q21YTD22YTD21YTD21
Net interest revenue – GAAP$824 $698 $645 18 %28 %$1,522 $1,300 17 %
Add: Tax equivalent adjustment3 3 3 N/MN/M6 6 N/M
Net interest revenue (FTE) – Non-GAAP (a)
$827 $701 $648 18 %28 %$1,528 $1,306 17 %
Average interest-earning assets$370,782 $373,186 $388,285 (1)%(5)%$371,997 $392,766 (5)%
Net interest margin – GAAP0.89 %0.75 %0.67 %14  bps22  bps0.82 %0.67 %15  bps
Net interest margin (FTE) – Non-GAAP (a)
0.89 %0.76 %0.67 %13  bps22  bps0.83 %0.67 %16  bps
(a)    Net interest revenue (FTE) – Non-GAAP and net interest margin (FTE) – Non-GAAP include the tax equivalent adjustments on tax-exempt income, which allows for comparisons of amounts arising from both taxable and tax-exempt sources and is consistent with industry practice. The adjustment to an FTE basis has no impact on net income.
N/M – Not meaningful.
bps – basis points.


Net interest revenue increased 28% compared with the second quarter of 2017 primarily reflecting higher underwriting fees.

Distribution2021 and servicing fees

Distribution and servicing fees decreased18% compared with the thirdfirst quarter of 20162022. The increase compared with the second quarter of 2021 primarily reflecting fees paid to introducing brokers,reflects higher interest rates on interest-earning assets and a change in asset mix, partially offset by higher money market fees.

Investmentfunding expense and other income

Investment and other income   
(in millions)3Q17
2Q17
3Q16
YTD17
YTD16
Corporate/bank-owned life insurance$37
$43
$34
$110
$96
Lease-related gains—
51
—
52
44
Expense reimbursements from joint venture18
17
18
49
52
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
Other income (loss)1
(1)17
(6)40
Total investment and other income$63
$122
$92
$262
$271
(a)Excludes the gains (losses) on seed capital investments in 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.


Investment and other income decreasedlower interest-earning assets. The increase compared with both the thirdfirst quarter of 2016 and2022 primarily reflects higher interest rates on interest-earning assets, partially offset by higher funding expense.

Net interest margin increased 22 basis points compared with the second quarter of 2017. The decrease2021 and 14 basis points compared with the thirdfirst quarter of 20162022. The changes compared with the second quarter of 2021 and the first quarter of 2022 primarily reflects lower other income driven by increased pre-tax losses on our investments in renewable energyreflect the factors mentioned above.

Average interest-earning assets decreased 5% compared with the second quarter of 2021 and lower seed capital gains. The pre-tax losses on1% compared with the renewable energy investments are offset by corresponding tax benefits and credits recorded as a reduction to the provision for income taxes.first quarter of 2022. The decrease compared with the second quarter of 20172021 primarily reflects lease-related gains recorded inlower interest-bearing deposits with the second quarter of 2017 and lower income from corporate/bank-owned life insurance.

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

FeeFederal Reserve and other revenue increased 2%central banks, securities balances and interest-bearing deposits with banks. The decrease was partially offset by larger loan balances. The decrease compared with the first nine monthsquarter of 2016,2022 primarily reflecting higher investment management and performance fees, clearing services fees and asset servicing fees,reflects lower securities balances, 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 and the impact of downsizing the retail UK transfer agency business. The 7% decrease in foreign exchange and other trading revenue primarily reflects lower volatility and lower Depositary Receipts-related foreign exchange activity. The 4% decrease in issuer services fees primarily reflects lower Depositary Receipts revenue.larger loan balances.





BNY Mellon 9

Net interest revenue

Net interest revenue        YTD17
    3Q17 vs.   vs.
(dollars in millions)3Q17
2Q17
3Q16
2Q17
3Q16
 YTD17
YTD16
YTD16
Net interest revenue$839
$826
$774
2%8 % $2,457
$2,307
7 %
Tax equivalent adjustment12
12
12
N/MN/M 36
39
N/M
Net interest revenue (FTE) – Non-GAAP (a)
$851
$838
$786
2%8 % $2,493
$2,346
6 %
          
Average interest-earning assets$291,841
$289,496
$296,703
1%(2)% $288,283
$308,560
(7)%
          
Net interest margin1.15%1.14%1.05%1 bps10 bps 1.14%1.00%14 bps
Net interest margin (FTE) – Non-GAAP (a)
1.16%1.16%1.06%—
10 bps 1.16%1.02%14 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) compared with the second quarter of 2017 primarily reflecting higher interest rates, partially offset by lower average deposits and loans. The sequential increase also reflects an additional interest-earning day during the quarter.

Net interest margin increased 10 basis points compared with the third quarter of 2016, primarily reflecting the factors listed above.

Average non-U.S. dollar deposits comprised approximately 30%25% of our average total deposits in the thirdsecond quarter of 2017.2022. Approximately 45%40% of the average non-U.S. dollar deposits in the thirdsecond quarter of 20172022 were euro-denominated.


Year-to-date 20172022 compared with year-to-date 20162021


Net interest revenue increased 7%17% compared with the first ninesix months of 2016,2021, primarily driven by higher interest rates on interest-earning assets and lower premium amortization,a change in asset mix, partially offset by higher funding expense and lower average deposits and interest-earning assets. The increase in the net interest margin was primarily driven byreflects the factors listedmentioned above.


Average interest-earning assets decreased 5% compared with the first six months of 2021. The decrease primarily reflects lower interest-bearing deposits with the Federal Reserve and other central banks, interest-bearing deposits with banks and securities balances. The decrease was partially offset by larger loan balances.


10 BNY Mellon


Average balances and interest ratesQuarter ended
June 30, 2022March 31, 2022June 30, 2021
(dollars in millions; average rates annualized)Average
balance		InterestAverage
rates		Average
balance		InterestAverage
rates		Average balanceInterestAverage rates
Assets
Interest-earning assets:
Interest-bearing deposits with the Federal Reserve and other central banks$102,844 $99 0.38 %$100,303 $2 0.01 %$114,564 $(25)(0.09)%
Interest-bearing deposits with banks (primarily foreign banks)18,097 33 0.74 17,181 14 0.33 22,465 11 0.20 
Federal funds sold and securities purchased under resale agreements (a)
24,212 116 1.91 27,006 37 0.56 27,857 25 0.36 
Loans69,036 370 2.15 66,810 260 1.57 60,520 237 1.57 
Securities:
U.S. government obligations41,267 110 1.07 40,868 74 0.74 33,212 59 0.71 
U.S. government agency obligations64,939 258 1.59 67,055 245 1.46 72,809 244 1.34 
State and political subdivisions (b)
2,065 11 2.13 2,337 13 2.16 2,768 14 1.94 
Other securities (b)
43,635 142 1.31 45,541 115 1.02 47,451 112 0.95 
Total investment securities (b)
151,906 521 1.37 155,801 447 1.15 156,240 429 1.10 
Trading securities (b)
4,687 23 1.91 6,085 21 1.43 6,639 11 0.72 
Total securities (b)
156,593 544 1.39 161,886 468 1.16 162,879 440 1.08 
Total interest-earning assets (b)
$370,782 $1,162 1.25 %$373,186 $781 0.84 %$388,285 $688 0.71 %
Noninterest-earning assets66,841 67,016 64,044 
Total assets$437,623 $440,202 $452,329 
Liabilities and equity
Interest-bearing liabilities:
Interest-bearing deposits$219,124 $90 0.16 %$223,243 $(37)(0.07)%$239,466 $(49)(0.08)%
Federal funds purchased and securities sold under repurchase agreements (a)
12,610 77 2.47 12,864 12 0.36 13,773 (5)(0.17)
Trading liabilities3,231 10 1.25 3,372 4 0.53 2,282 2 0.38 
Other borrowed funds437 2 2.14 458 3 2.36 298 1 2.21 
Commercial paper5 — 1.61 4 — 0.09 — — — 
Payables to customers and broker-dealers16,592 9 0.21 16,661 — 0.01 16,811 — (0.01)
Long-term debt26,195 147 2.22 25,588 98 1.53 25,275 91 1.43 
Total interest-bearing liabilities$278,194 $335 0.48 %$282,190 $80 0.11 %$297,905 $40 0.05 %
Total noninterest-bearing deposits91,893 90,179 85,802 
Other noninterest-bearing liabilities26,354 25,419 23,317 
Total liabilities396,441 397,788 407,024 
Total The Bank of New York Mellon Corporation shareholders’ equity41,037 42,201 44,934 
Noncontrolling interests145 213 371 
Total liabilities and equity$437,623 $440,202 $452,329 
Net interest revenue (FTE) – Non-GAAP (b)(c)
$827 $701 $648 
Net interest margin (FTE) – Non-GAAP (b)(c)
0.89 %0.76 %0.67 %
Less: Tax equivalent adjustment3 3 3 
Net interest revenue – GAAP$824 $698 $645 
Net interest margin – GAAP0.89 %0.75 %0.67 %
(a)Includes the average impact of offsetting under enforceable netting agreements of approximately $33 billion for the second quarter of 2022, $53 billion for the first quarter of 2022 and $41 billion for the second quarter of 2021. On a Non-GAAP basis, excluding the impact of offsetting, the yield on federal funds sold and securities purchased under resale agreements would have been 0.80% for the second quarter of 2022, 0.19% for the first quarter of 2022 and 0.15% for the second quarter of 2021. On a Non-GAAP basis, excluding the impact of offsetting, the rate on federal funds purchased and securities sold under repurchase agreements would have been 0.68% for the second quarter of 2022, 0.07% for the first quarter of 2022 and (0.04)% for the second quarter of 2021. We believe providing the rates excluding the impact of netting is useful to investors as it is more reflective of the actual rates earned and paid.
(b)    Average rates were calculated on an FTE basis, at tax rates of approximately 21%.
(c)    See “Net interest revenue” on page 10 for the reconciliation of this Non-GAAP measure.

Average balances and interest ratesQuarter ended
 Sept. 30, 2017 June 30, 2017 Sept. 30, 2016
(dollar amounts in millions, presented on an FTE basis)
Average
balance

Interest
Average
rates

 
Average
balance

Interest
Average
rates

 Average balance
Interest
Average rates
Assets           
Interest-earning assets:           
Interest-bearing deposits with banks (primarily foreign banks)$15,899
$34
0.86% $14,832
$27
0.73% $14,066
$26
0.74 %
Interest-bearing deposits held at the Federal Reserve and other central banks70,430
89
0.50
 69,316
71
0.41
 74,102
37
0.20
Federal funds sold and securities purchased under resale agreements28,120
119
1.67
 26,873
86
1.29
 26,376
62
0.93
Margin loans13,206
87
2.60
 15,058
87
2.32
 18,132
67
1.48
Non-margin loans:           
Domestic offices29,950
216
2.87
 30,734
207
2.70
 30,534
171
2.22
Foreign offices12,788
67
2.09
 13,001
65
1.99
 12,912
47
1.45
Total non-margin loans42,738
283
2.64
 43,735
272
2.49
 43,446
218
1.99
Securities:           
U.S. Government obligations25,349
106
1.67
 25,928
106
1.64
 25,279
94
1.49
U.S. Government agency obligations61,710
309
2.00
 59,533
290
1.95
 56,464
240
1.70
State and political subdivisions – tax-exempt3,226
25
3.06
 3,298
26
3.09
 3,598
27
2.98
Other securities28,804
98
1.34
 28,468
81
1.15
 33,064
102
1.23
Trading securities2,359
13
2.26
 2,455
18
2.85
 2,176
13
2.62
Total securities121,448
551
1.81
 119,682
521
1.74
 120,581
476
1.58
Total interest-earning assets (a)
$291,841
$1,163
1.59% $289,496
$1,064
1.47% $296,703
$886
1.19 %
Allowance for loan losses(165)   (164)   (165)  
Cash and due from banks4,961
   4,972
   4,189
  
Other assets48,329
   47,303
   49,463
  
Assets of consolidated investment management funds743
   908
   1,040
  
Total assets$345,709
   $342,515
   $351,230
  
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 %
Savings837
1
0.76
 1,014
2
0.75
 1,201
1
0.41
Demand deposits5,932
5
0.27
 5,659
2
0.14
 2,681
3
0.36
Time deposits29,934
24
0.32
 34,757
15
0.18
 45,186
7
0.07
Foreign offices98,278
26
0.10
 93,527
12
0.05
 98,695
(18)(0.08)
Total interest-bearing deposits142,490
57
0.16
 142,336
32
0.09
 155,109
(6)(0.02)
Federal funds purchased and securities sold under repurchase agreements21,403
70
1.30
 17,970
38
0.84
 9,585
6
0.24
Trading liabilities1,434
2
0.54
 1,216
2
0.61
 735
2
1.11
Other borrowed funds2,197
7
1.38
 1,193
4
1.24
 874
1
0.76
Commercial paper2,736
8
1.15
 2,215
5
0.95
 1,173
1
0.35
Payables to customers and broker-dealers18,516
19
0.42
 20,609
16
0.30
 16,873
3
0.07
Long-term debt28,138
149
2.07
 27,398
129
1.87
 23,930
93
1.54
Total interest-bearing liabilities$216,914
$312
0.57% $212,937
$226
0.42% $208,279
$100
0.19 %
Total noninterest-bearing deposits70,168
   73,886
   81,619
  
Other liabilities17,728
   15,545
   21,343
  
Liabilities and obligations of consolidated investment management funds35
   111
   238
  
Total liabilities304,845
   302,479
   311,479
  
Temporary equity           
Redeemable noncontrolling interests188
   172
   179
  
Permanent equity           
Total BNY Mellon shareholders’ equity40,322
   39,404
   39,051
  
Noncontrolling interests354
   460
   521
  
Total permanent equity40,676
   39,864
   39,572
  
Total liabilities, temporary equity and permanent equity$345,709
   $342,515
   $351,230
  
Net interest revenue (FTE) – Non-GAAP $851
   $838
   $786
 
Net interest margin (FTE) – Non-GAAP  1.16%   1.16%   1.06 %
Less: Tax equivalent adjustment (b)
 12
   12
   12
 
Net interest revenue – GAAP $839
   $826
   $774
 
Net interest margin – GAAP  1.15%   1.14%   1.05 %
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 and average yield are presented on an FTE basis (Non-GAAP).
(b)Based on the applicable tax rate of 35%.



BNY Mellon 11


Average balances and interest ratesYear-to-date
June 30, 2022June 30, 2021
(dollars in millions; average rates annualized)Average balanceInterestAverage ratesAverage balanceInterestAverage rates
Assets
Interest-earning assets:
Interest-bearing deposits with the Federal Reserve and other central banks$101,600 $101 0.20 %$120,216 $(41)(0.07)%
Interest-bearing deposits with banks (primarily foreign banks)17,641 47 0.54 21,892 25 0.24 
Federal funds sold and securities purchased under resale agreements (a)
25,602 153 1.20 28,518 57 0.40 
Loans67,929 630 1.87 58,665 467 1.60 
Securities:
U.S. government obligations41,069 184 0.90 30,998 122 0.80 
U.S. government agency obligations65,991 503 1.52 75,202 515 1.37 
State and political subdivisions (b)
2,200 24 2.15 2,648 26 1.93 
Other securities (b)
44,583 257 1.16 47,242 228 0.97 
Total investment securities (b)
153,843 968 1.26 156,090 891 1.14 
Trading securities (b)
5,382 44 1.64 7,385 30 0.85 
Total securities (b)
159,225 1,012 1.27 163,475 921 1.13 
Total interest-earning assets (b)
$371,997 $1,943 1.05 %$392,766 $1,429 0.73 %
Noninterest-earning assets66,927 63,566 
Total assets$438,924 $456,332 
Liabilities and equity
Interest-bearing liabilities:
Interest-bearing deposits$221,172 $53 0.05 %$242,275 $(86)(0.07)%
Federal funds purchased and securities sold under repurchase agreements (a)
12,736 89 1.41 14,526 (8)(0.12)
Trading liabilities3,301 14 0.88 2,255 5 0.45 
Other borrowed funds448 5 2.25 314 3 2.11 
Commercial paper5 — 0.89 — — — 
Payables to customers and broker-dealers16,626 9 0.11 17,249 (1)(0.01)
Long-term debt25,893 245 1.88 25,734 210 1.63 
Total interest-bearing liabilities$280,181 $415 0.30 %$302,353 $123 0.08 %
Total noninterest-bearing deposits91,060 84,622 
Other noninterest-bearing liabilities25,888 23,933 
Total liabilities397,129 410,908 
Total The Bank of New York Mellon Corporation shareholders’ equity41,616 45,097 
Noncontrolling interests179 327 
Total liabilities and equity$438,924 $456,332 
Net interest revenue (FTE) – Non-GAAP (b)(c)
$1,528 $1,306 
Net interest margin (FTE) – Non-GAAP (b)(c)
0.83 %0.67 %
Less: Tax equivalent adjustment6 6 
Net interest revenue – GAAP$1,522 $1,300 
Net interest margin – GAAP0.82 %0.67 %
(a)    Includes the average impact of offsetting under enforceable netting agreements of approximately $43 billion for the first six months of 2022 and $39 billion for the first six months of 2021. On a Non-GAAP basis, excluding the impact of offsetting, the yield on federal funds sold and securities purchased under resale agreements would have been 0.45% for the first six months of 2022 and 0.17% for the first six months of 2021. On a Non-GAAP basis, excluding the impact of offsetting, the rate on federal funds purchased and securities sold under repurchase agreements would have been 0.32% for the first six months of 2022 and (0.03)% for the first six months of 2021. We believe providing the rates excluding the impact of netting is useful to investors as it is more reflective of the actual rates earned and paid.
(b)    Average rates were calculated on an FTE basis, at tax rates of approximately 21%.
(c)    See “Net interest revenue” on page 10 for the reconciliation of this Non-GAAP measure.

Average balances and interest ratesYear-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 banks68,613
217
0.42
 86,947
170
0.26
Federal funds sold and securities purchased under resale agreements26,779
272
1.36
 25,275
167
0.88
Margin loans14,663
249
2.27
 18,420
194
1.41
Non-margin loans:       
Domestic offices30,545
611
2.67
 29,488
493
2.23
Foreign offices13,126
189
1.93
 13,112
144
1.47
Total non-margin loans43,671
800
2.45
 42,600
637
2.00
Securities:       
U.S. Government obligations25,835
316
1.64
 24,778
278
1.50
U.S. Government agency obligations59,384
870
1.95
 56,161
727
1.73
State and political subdivisions – tax-exempt3,298
77
3.09
 3,784
83
2.92
Other securities28,531
267
1.25
 33,592
309
1.23
Trading securities2,356
48
2.74
 2,548
45
2.37
Total securities119,404
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 banks5,010
   4,070
  
Other assets47,461
   49,624
  
Assets of consolidated investment management funds922
   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 %
Savings980
5
0.70
 1,203
3
0.36
Demand deposits5,656
8
0.18
 1,782
5
0.40
Time deposits33,354
50
0.20
 44,832
19
0.06
Foreign offices94,102
32
0.05
 105,574
(9)(0.01)
Total interest-bearing deposits141,558
98
0.09
 160,728
21
0.02
Federal funds purchased and securities sold under repurchase agreements19,465
132
0.90
 15,471
28
0.24
Trading liabilities1,188
6
0.65
 650
5
1.05
Other borrowed funds1,409
13
1.26
 827
5
0.90
Commercial paper2,374
18
1.01
 1,657
5
0.37
Payables to customers and broker-dealers19,360
42
0.29
 16,870
9
0.07
Long-term debt27,148
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 deposits72,524
   82,861
  
Other liabilities16,299
   21,993
  
Liabilities and obligations of consolidated investment management funds129
   250
  
Total liabilities301,454
   324,086
  
Temporary equity       
Redeemable noncontrolling interests174
   183
  
Permanent equity       
Total BNY Mellon shareholders’ equity39,418
   38,414
  
Noncontrolling interests464
   607
  
Total permanent equity39,882
   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 rates were calculated on a taxable equivalent basis using dollar amounts in thousands and actual number of days in the year.
(a)Interest income and average yield are presented on an FTE basis (Non-GAAP).
(b)Based on the applicable tax rate of 35%.




12 BNY Mellon


Noninterest expense


Noninterest expenseYTD22
2Q22 vs. vs.
(dollars in millions)2Q221Q222Q211Q222Q21YTD22YTD21YTD21
Staff$1,623 $1,702 $1,518 (5)%7 %$3,325 $3,120 7 %
Software and equipment405 399 365 2 11 804 727 11 
Professional, legal and other purchased services379 370 363 2 4 749 706 6 
Sub-custodian and clearing131 118 132 11 (1)249 256 (3)
Net occupancy125 122 122 2 2 247 245 1 
Distribution and servicing90 79 73 14 23 169 147 15 
Business development43 30 22 43 95 73 41 78 
Bank assessment charges37 35 35 6 6 72 69 4 
Amortization of intangible assets17 17 20 — (15)34 44 (23)
Other262 134 128 96 105 396 274 45 
Total noninterest expense$3,112 $3,006 $2,778 4 %12 %$6,118 $5,629 9 %
Full-time employees at period end50,800 49,600 48,800 2 %4 %50,800 48,800 4 %
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 services305
319
292
(4)4
 936
860
9
Software175
173
156
1
12
 514
470
9
Net occupancy141
139
143
1
(1) 416
437
(5)
Distribution and servicing109
104
105
5
4
 313
307
2
Sub-custodian62
65
59
(5)5
 191
188
2
Furniture and equipment58
59
59
(2)(2) 174
187
(7)
Bank assessment charges (a)
51
59
61
(14)(16) 167
166
1
Business development49
63
52
(22)(6) 163
174
(6)
Other (a)
177
192
170
(8)4
 536
546
(2)
Amortization of intangible assets52
53
61
(2)(15) 157
177
(11)
M&I, litigation and restructuring charges6
12
18
N/MN/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 revenue37%36%37%   37%38% 
          
Full-time employees at period end52,900
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)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.
N/M - Not meaningful.



Total noninterest expense increased less than 1% compared with the third quarter of 2016 and decreased slightly12% compared with the second quarter of 2017.2021 and 4% compared with the first quarter of 2022. The increaseincreases compared with the second quarter of 2021 and the first quarter of 2022 primarily reflectsreflect higher investments in growth, infrastructure and efficiency initiatives and higher litigation reserves and revenue-related expenses, including the impact of inflation, partially offset by the favorable impact of a stronger U.S. dollar. The investments in growth, infrastructure and efficiency initiatives are primarily included in staff, software and equipment, and professional, legal and other purchased services expenses,expenses. The increase compared with the first quarter of 2022 was also partially offset by lower litigationstaff expense and bank assessment charges. The decrease primarily reflects lower other, professional, legal and other purchased services and business development expenses as well as lower bank assessment charges, partially offsetdriven by higher staff expense. Excluding amortizationthe annual vesting of intangible assets and M&I, litigation and restructuring charges, total noninterest expense, as adjusted (Non-GAAP), increased 1% compared withstock-based awards to retirement eligible employees recorded in the thirdfirst quarter of 2016 and less than 1% (unannualized) compared with the second quarter of 2017.2022.

We continue 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. As a result of the submission of our 2017 resolution plan, we began to experience a modest decrease in the expenses relating to these functions in the third quarter of 2017.
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 20172022 compared with year-to-date 20162021


Noninterest expense increased 1%9% compared with the first ninesix months of 2016,2021, primarily reflecting higher consultinginvestments in growth, infrastructure and softwareefficiency initiatives and higher litigation reserves and revenue-related expenses, including the impact of inflation, partially offset by lower net occupancy. The increase in consulting expense primarily reflects higher regulatory and compliance costs. Net occupancy expense decreased as we continue to benefit from the savings generated by the business improvement process.favorable impact of a stronger U.S. dollar.


Income taxes


BNY Mellon recorded an income tax provision of $348$231 million (25.4% effective tax rate) in the third quarter of 2017. The income tax provision was $324 million (24.6% effective tax rate) in the third quarter of 2016 and $332 million (25.4%(21.1% effective tax rate) in the second quarter of 2017.2022, $241 million (19.0% effective tax rate) in the second quarter of 2021 and $153 million (16.7% effective tax rate) in the first quarter of 2022. For additional information, see Note 10 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 businessesbusiness segments


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


Business segment accounting principles


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


For information on the accounting principles of our businesses, the primary types of revenue by business and how our businesses are presented and analyzed, see Note 18 of the Notes to Consolidated Financial Statements. For information on the primary products and services in each line of business, the primary types of revenue by line of business and how our business segments are presented and analyzed, see Note 24 of the Notes to Consolidated Financial Statements in our 2021 Annual Report.


Business segment results are subject to reclassification when organizational changes are made, or when improvementsfor refinements in revenue and expense allocation methodologies. Refinements are madetypically reflected on a prospective basis. There were no reclassification or organizational changes in the measurement principles.second quarter of 2022.


The results of our businessesbusiness segments may be influenced by client and other activities that vary by quarter. In the first quarter, incentivesstaff expense typically increases reflecting the vesting of long-term stock awards for retirement-eligible employees. InPrior to 2022, in the third quarter, Depositary Receipts revenue isstaff expense typically higher due to an increased level of client dividend payments. Alsoreflecting the annual employee merit increase. In 2022, this increase was reflected in the second quarter.
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. In our Investment and Wealth Management business segment, performance fees are typically higher in the fourth quarter,and first quarters, as the fourth quarter representsthose quarters represent the end of the measurement period for many of the performance fee-eligible relationships.


The results of our businessesbusiness segments may also be impacted by the translation of financial results denominated in foreign currencies to the U.S. dollar. We are primarily impacted by activities denominated in the British pound and the euro. On a consolidated basis and in our InvestmentSecurities Services and Market and Wealth Services business segments, we typically have more foreign currency denominatedcurrency-denominated expenses than revenues. However, our Investment


14 BNY Mellon

and Wealth Management business segment typically has more foreign currency denominatedcurrency-denominated revenues than expenses. Overall, currency fluctuations impact the year-over-year growth rate in the Investment and Wealth Management
business segment more than the InvestmentSecurities Services business.and Market and Wealth Services business segments. 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 average2467
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 average7380
7391
7274
6923
6765
—
9
 7348
6326
16
MSCI EAFE (a)
1974
1883
1793
1684
1702
5
16
 1974
1702
16
MSCI EAFE – daily average1934
1856
1749
1660
1677
4
15
 1847
1640
13
Barclays Capital Global Aggregate BondSM 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 Reserve1.25%1.04%0.79%0.55%0.50%21  bps75  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 rate1.31
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 rate1.17
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 the Investment and Wealth Management business segment, and to a lesser extent in Investmentthe Securities Services and Market and Wealth Services business segments, is impacted by the value ofglobal market indices.fluctuations. At Sept.June 30, 2017,2022, we estimateestimated 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$0.04 to $0.04.
$0.07.

See Note 18 of the Notes to Consolidated Financial Statements for the consolidating schedules which show the contribution of our businessesbusiness segments to our overall profitability.

14 BNY Mellon



Securities Services business segment

YTD22
(dollars in millions, unless otherwise noted)2Q22 vs. vs.
2Q221Q224Q213Q212Q211Q222Q21YTD22YTD21YTD21
Revenue:
Investment services fees:
Asset Servicing$995 $999 $984 $979 $960 — %4 %$1,994 $1,913 4 %
Issuer Services309 141 253 281 281 119 10 450 527 (15)
Total investment services fees1,304 1,140 1,237 1,260 1,241 14 5 2,444 2,440 — 
Foreign exchange revenue155 148 148 125 129 5 20 303 301 1 
Other fees (a)
54 41 28 30 25 32 116 95 55 73 
Total fee revenue1,513 1,329 1,413 1,415 1,395 14 8 2,842 2,796 2 
Investment and other revenue36 74 53 73 38 N/MN/M110 68 N/M
Total fee and other revenue1,549 1,403 1,466 1,488 1,433 10 8 2,952 2,864 3 
Net interest revenue457 377 367 349 354 21 29 834 710 17 
Total revenue2,006 1,780 1,833 1,837 1,787 13 12 3,786 3,574 6 
Provision for credit losses13 (10)(7)(19)(58)N/MN/M3 (108)N/M
Noninterest expense (excluding amortization of intangible assets)1,647 1,502 1,481 1,535 1,393 10 18 3,149 2,804 12 
Amortization of intangible assets9 8 9 8 7 13 29 17 15 13 
Total noninterest expense1,656 1,510 1,490 1,543 1,400 10 18 3,166 2,819 12 
Income before income taxes$337 $280 $350 $313 $445 20 %(24)%$617 $863 (29)%
Pre-tax operating margin17 %16 %19 %17 %25 %16 %24 %
Securities lending revenue (b)
$45 $39 $45 $45 $42 15 %7 %$84 $83 1 %
Total revenue by line of business:
Asset Servicing$1,534 $1,512 $1,456 $1,437 $1,382 1 %11 %$3,046 $2,806 9 %
Issuer Services472 268 377 400 405 76 17 740 768 (4)
Total revenue by line of business$2,006 $1,780 $1,833 $1,837 $1,787 13 %12 %$3,786 $3,574 6 %
Selected average balances:
Average loans$11,386 $10,150 $9,764 $8,389 $8,485 12 %34 %$10,772 $8,430 28 %
Average deposits$191,191 $192,156 $200,272 $198,680 $203,147 (1)%(6)%$191,671 $201,505 (5)%
Selected metrics:
AUC/A at period end
(in trillions) (c)
$31.0 $33.7 $34.6 $33.8 $33.7 (8)%(8)%$31.0 $33.7 (8)%
Market value of securities on loan at period end (in billions) (d)
$441 $449 $447 $443 $456 (2)%(3)%$441 $456 (3)%
(a)    Other fees primarily include financing-related fees.
(b)    Included in investment services fees reported in the Asset Servicing line of business.
(c)    Consists of AUC/A primarily from the Asset Servicing line of business and, to a lesser extent, the Issuer Services line of business. Includes the AUC/A of CIBC Mellon of $1.5 trillion at June 30, 2022 and $1.7 trillion at March 31, 2022, Dec. 31, 2021, Sept. 30, 2021 and June 30, 2021.
(d)    Represents the total amount of securities on loan in our agency securities lending program. Excludes securities for which BNY Mellon 15acts as agent on behalf of CIBC Mellon clients, which totaled $70 billion at June 30, 2022, $78 billion at March 31, 2022, $71 billion at Dec. 31, 2021, $68 billion at Sept. 30, 2021 and $63 billion at June 30, 2021.
N/M – Not meaningful.


Investment Management 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 clients367
362
348
340
362
1
1
 1,077
1,040
4
Wealth management172
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 fees15
17
12
32
8
N/M
88
 44
28
57
Investment management and performance fees886
862
826
833
845
3
5
 2,574
2,459
5
Distribution and servicing51
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 revenue82
87
86
80
82
(6)—
 255
247
3
Total revenue1,000
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 assets15
15
15
22
22
—
(32) 45
60
(25)
Total noninterest expense702
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 margin30%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)%
(a)
Total fee 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 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.
(b)
Excludes amortization of intangible assets, provision for credit losses and distribution and servicing expense. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 49 for the reconciliation of this Non-GAAP measure.
N/M - Not meaningful.



16 BNY Mellon

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 income206
198
191
186
194
4
6
Index333
324
330
312
302
3
10
Liability-driven investments (b)
622
607
584
554
607
2
2
Multi-asset and alternative investments207
192
188
181
189
8
10
Cash298
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 funds447
418
397
381
396
7
13
Private client92
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 income4
2
2
(1)(1)  
Liability-driven investments (b)
(2)15
14
(7)4
  
Multi-asset and alternative investments3
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:       
Cash10
11
13
(3)(1)  
Total net inflows (outflows)10
14
27
(14)—
  
Net market impact/other17
1
41
(11)80
  
Net currency impact26
29
11
(42)(29)  
Ending balance of AUM$1,824
$1,771
$1,727
$1,648
$1,715
3 %6%
(a)
Excludes securities lending cash management assets and assets managed in the Investment Services business.
(b)
Includes currency overlay AUM.



Business segment description


Our Investment ManagementThe Securities Services business segment consists of our affiliated investment management boutiques, Wealth Managementtwo distinct lines of business, Asset Servicing 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,Issuer Services, 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 Managementprovide 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 services381
393
375
354
347
(3)10
 1,149
1,045
10
Issuer services288
241
250
211
336
20
(14) 779
813
(4)
Treasury services141
139
139
139
136
1
4
 419
402
4
Total investment services fees1,891
1,834
1,802
1,747
1,858
3
2
 5,527
5,358
3
Foreign exchange and other trading revenue154
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 revenue2,187
2,115
2,084
2,032
2,183
3
—
 6,386
6,267
2
Net interest revenue777
761
707
713
715
2
9
 2,245
2,084
8
Total revenue2,964
2,876
2,791
2,745
2,898
3
2
 8,631
8,351
3
Provision for credit losses(2)(3)—
—
1
N/MN/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 assets37
38
37
38
39
(3)(5) 112
117
(4)
Total noninterest expense1,874
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 margin37%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 programs938
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 billion at Sept. 30, 2017, $66 billion at June 30, 2017, $65 billion at March 31, 2017, $63 billion at Dec. 31, 2016 and $64 billion at Sept. 30, 2016.
N/M - Not meaningful.


BNY Mellon 19

Business description

BNY Mellon Investment Services provides business and technology solutions across the investments processtransaction lifecycle to financial institutions, corporations, foundationsour global asset owner and endowments, public funds and government agencies.

asset manager clients. We are one of the leading global investment services providers with $32.2$31.0 trillion of AUC/A at Sept.June 30, 2017.2022. For

information on the drivers of the Securities Services fee revenue, see Note 10 of the Notes to Consolidated Financial Statements in our 2021 Annual Report.

The Asset Servicing business provides a comprehensive suite of solutions. We are one of the primary providerlargest global custody and front to back outsourcing partners. We offer services for the safekeeping of U.S. government securities clearance and a provider of non-U.S. government securities clearance. We provide services to settle securities transactionsassets in approximately 100 markets.capital markets globally as well as fund
We are a leading provider of tri-party repo collateral services with approximately $2.5 trillion serviced globally and approximately $1.6 trillion of the U.S. tri-party repo market.
BNY Mellon 15

accounting services, exchange-traded funds servicing, transfer agency, trust and depository, front-to-back capabilities as well as data and analytics solutions for our clients. We deliver foreign exchange, and securities lending and financing solutions, on both an agency and principal basis. Our agency securities lending program is one of the largest lenders of U.S. and non-U.S. securities, servicing a lendable asset pool of approximately $3.3$4.3 trillion in 3334 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.

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.


The Issuer Services business includes Corporate Trust and Depositary Receipts. 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 business and technology solutions to financial organizations globally, delivering dependable operational support, robust trading services, flexible technology, an expansive array of investment and retirement solutions, practice management support and service excellence.

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 trustCorporate 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 also provide credit facilities and solutions to support our clients globally.

Role of BNY Mellon, 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 of trustee for MBS securitizations is limited; our primary role as trustee is to calculate and distribute monthly bond payments to bondholders. As a document custodian, we hold the mortgage, note, and related documents provided to us by the loan originator or seller 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 creditworthinessare one of the borrower). As trustee or custodian, we have no responsibility or liability for the qualitylargest providers of the portfolio; we are liable only for performance of our limited duties as described above anddepositary receipts services in the trust documents. BNY Mellon is indemnified by the servicers or directlyworld, partnering with leading companies 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.more than 50 countries.

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 increased 6%of $31.0 trillion decreased 8% compared with Sept.June 30, 2016 to a record $32.2 trillion,2021, primarily reflecting higherlower market values and the favorableunfavorable impact of a weakerstronger U.S. dollar, andpartially offset by net new business. AUC/A consistedbusiness and client inflows.

Total revenue of
37% equity securities and 63% fixed income securities at Sept. 30, 2017, compared with 34% equity securities and 66% fixed income securities at Sept. 30, 2016.

Investment services fees $2.0 billion increased 2% compared with the third quarter of 2016 and 3% (unannualized)12% compared with the second quarter of 2017, reflecting the following factors:

Asset servicing fees (custody, fund services, broker-dealer services, securities finance, collateral2021 and liquidity services) increased 4%13% compared with the thirdfirst quarter of 2016 and 2% (unannualized)2022. The drivers of total revenue by line of business are indicated below.

Asset Servicing revenue of $1.5 billion increased 11% compared with the second quarter of 2017. The increase2021 and 1% compared with the thirdfirst 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.2022. The increase compared with the second quarter of 2017 was2021 primarily drivenreflects higher net interest revenue, lower money market fee waivers and higher foreign exchange revenue and client activity, partially offset by the favorableunfavorable impact of a weakerstronger U.S. dollar and higher equitylower market values. The increase
Clearing services fees increased 10%
compared with the thirdfirst quarter of 2016 primarily driven2022 was impacted by higher money market fees the same factors and growthwas partially offset by a gain on a strategic equity investment recorded in long-term mutual fund assets. Clearing services fees decreased 3% (unannualized)the first quarter of 2022.

Issuer Services revenue of $472 million increased 17% compared with the second quarter of 2017 primarily reflecting lower clearance volumes.
Issuer services fees (Depositary Receipts2021 and Corporate Trust) decreased 14%76% compared with the thirdfirst 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.2022. The increase compared with the second quarter of 20172021 primarily reflects seasonalityhigher net interest revenue in Corporate Trust, higher Depositary Receipts revenue and higherlower money market fee waivers, partially offset by the impact of lost business in the prior year in Corporate Trust revenue.
Treasury services fees (global payments, trade finance and cash management) increased 4%Trust. The increase compared with the thirdfirst quarter of 2016 and 1% (unannualized) compared with2022 primarily reflects the secondaccelerated amortization of deferred costs for depositary receipts services related to Russia recorded in the first quarter of 2017 primarily reflecting2022, higher payment volumes, partially offset byDepositary Receipts revenue, higher compensating


BNY Mellon 21

balance credits provided to clients, which reduces fee revenue and increases net interest revenue.revenue in Corporate Trust and lower money market fee waivers.


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 third quarterNoninterest expense of 2016 primarily reflecting lower volatility and lower Depositary Receipt-related foreign exchange activity, partially offset by higher volumes. Foreign exchange and other trading revenue$1.7 billion increased 6% (unannualized)18% compared with the second quarter of 2017 primarily reflecting higher volumes.

Other revenue decreased 4%2021 and 10% compared with the thirdfirst quarter of 2016 and increased 4% (unannualized)2022. The increase compared with the second quarter of 2017.2021 primarily reflects higher investments in growth, infrastructure and efficiency initiatives, litigation reserves and revenue-related expenses, including the impact of inflation, partially offset by the favorable impact of a stronger U.S. dollar. 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%increase compared with the thirdfirst quarter of 2016 primarily reflecting the impact of the higher interest rates, partially offset by lower average deposits and loans. Net interest revenue increased 2% (unannualized) compared with the second quarter of 2017 primarily reflecting higher interest rates.

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 increase2022 primarily reflects additional 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.higher litigation reserves.


Year-to-date 20172022 compared with year-to-date 20162021


Income before taxesTotal revenue of $3.8 billion increased 6% compared with the first ninesix months of 2016,2021. Asset Servicing revenue of $3.0 billion increased 9%, primarily driven byreflecting higher net interest revenue, growth of 3%,lower money market fee waivers and higher client activity, partially offset by the unfavorable impact of a 3% increase in noninterest expense, excludingstronger U.S. dollar. Issuer Services revenue of $740 million
16 BNY Mellon

decreased 4%, primarily reflecting accelerated amortization of intangible assets. Feedeferred costs for depositary receipts services related to Russia recorded in the first quarter of 2022 and otherthe impact of lost business in the prior year in Corporate Trust, partially offset by higher net interest revenue and lower money market fee waivers in Corporate Trust.

Noninterest expense of $3.2 billion increased 2%12% compared with the first six months of 2021, primarily reflecting investments in growth, infrastructure and efficiency initiatives, higher clearinglitigation reserves and revenue-related expenses, including the impact of inflation, partially offset by the favorable impact of a stronger U.S. dollar.
BNY Mellon 17

Market and Wealth Services business segment

YTD22
(dollars in millions, unless otherwise noted)2Q22 vs. vs.
2Q221Q224Q213Q212Q211Q222Q21YTD22YTD21YTD21
Revenue:
Investment services fees:
Pershing$479 $433 $412 $427 $439 11 %9 %$912 $898 2 %
Treasury Services176 170 170 168 160 4 10 346 324 7 
Clearance and Collateral Management240 243 236 228 228 (1)5 483 454 6 
Total investment services fees895 846 818 823 827 6 8 1,741 1,676 4 
Foreign exchange revenue22 26 21 23 23 (15)(4)48 44 9 
Other fees (a)
46 34 31 31 32 35 44 80 69 16 
Total fee revenue963 906 870 877 882 6 9 1,869 1,789 4 
Investment and other revenue11 — 6 13 21 N/MN/M11 28 N/M
Total fee and other revenue974 906 876 890 903 8 8 1,880 1,817 3 
Net interest revenue340 296 297 283 289 15 18 636 578 10 
Total revenue1,314 1,202 1,173 1,173 1,192 9 10 2,516 2,395 5 
Provision for credit losses4 (2)(3)(16)(19)N/MN/M2 (48)N/M
Noninterest expense (excluding amortization of intangible assets)700 706 670 665 647 (1)8 1,406 1,320 7 
Amortization of intangible assets2 2 4 3 5 — (60)4 14 (71)
Total noninterest expense702 708 674 668 652 (1)8 1,410 1,334 6 
Income before income taxes$608 $496 $502 $521 $559 23 %9 %$1,104 $1,109 — %
Pre-tax operating margin46 %41 %43 %44 %47 %44 %46 %
Total revenue by line of business:
Pershing$636 $570 $553 $566 $590 12 %8 %$1,206 $1,195 1 %
Treasury Services373 338 331 326 319 10 17 711 636 12 
Clearance and Collateral Management305 294 289 281 283 4 8 599 564 6 
Total revenue by line of business$1,314 $1,202 $1,173 $1,173 $1,192 9 %10 %$2,516 $2,395 5 %
Selected average balances:
Average loans$42,391 $42,113 $40,812 $39,041 $38,360 1 %11 %$42,253 $36,736 15 %
Average deposits$94,716 $95,704 $100,653 $101,253 $102,896 (1)%(8)%$95,207 $104,976 (9)%
Selected metrics:
AUC/A at period end (in trillions) (b)
$11.8 $11.6 $11.8 $11.2 $11.1 2 %6 %
Pershing:
AUC/A at period end (in trillions)
$2.2 $2.5 $2.6 $2.6 $2.8 (12)%(21)%
Net new assets (U.S. platform) (in billions) (c)
$16 $18 $69 $13 $47 N/MN/M
Average active clearing accounts (in thousands)
7,432 7,432 7,334 7,259 7,290 — %2 %
Treasury Services:
Average daily U.S. dollar payment volumes237,763 240,403 245,634 232,144 230,346 (1)%3 %
Clearance and Collateral Management:
Average tri-party collateral management balances (in billions)
$5,207 $5,026 $4,972 $4,516 $3,898 4 %34 %
(a)    Other fees primarily include financing-related fees.
(b)    Consists of AUC/A from the Clearance and Collateral Management and Pershing lines of business.
(c)    Net new assets represent net flows of assets (e.g., net cash deposits and net securities transfers, including dividends and interest) in customer accounts in Pershing LLC, a U.S. broker-dealer.
N/M – Not meaningful.


18 BNY Mellon

Business segment description

The Market and Wealth Services business segment consists of three distinct lines of business, Pershing, Treasury Services and Clearance and Collateral Management, which provide business services and asset servicing fees,technology solutions to entities including financial institutions, corporations, foundations and endowments, public funds and government agencies. For information on the drivers of the Market and Wealth Services fee revenue, see Note 10 of the Notes to Consolidated Financial Statements in our 2021 Annual Report.

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

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

Our Clearance and Collateral Management business clears and settles equity and fixed-income transactions globally and serves as custodian for tri-party repo collateral worldwide. We are the primary provider of U.S. government securities clearance and a provider of non-U.S. government securities clearance. Our collateral services include collateral management, administration and segregation. We offer innovative solutions and industry expertise which help financial institutions and institutional investors with their financing, risk and balance sheet challenges. We are a leading provider of tri-party collateral management services with an average of $5.2 trillion serviced globally, including approximately $4.1 trillion of the U.S. tri-party repo market at June 30, 2022.

Review of financial results

AUC/A of $11.8 trillion increased 6% compared with June 30, 2021, primarily reflecting client inflows, partially offset by lower foreign exchange and other trading revenue. The increase in clearing services fees primarily reflects higher 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 partially offset by the impact of downsizing the retail UK transfer agency business and the unfavorable impact of a stronger U.S. dollar.

Total revenue of $1.3 billion increased 10% compared with the second quarter of 2021 and 9% compared with the first quarter of 2022. The decrease in foreign exchangedrivers
of total revenue by line of business are indicated below.

Pershing revenue of $636 million increased 8% compared with the second quarter of 2021 and other trading revenue12% compared with the first quarter of 2022. The increase compared with the second quarter of 2021 primarily reflects lower volatilitymoney market fee waivers and higher transaction activity, partially offset by the impact of prior year lost business. The increase compared with the first quarter of 2022 primarily reflects lower Depositary Receipt-related foreign exchange activity. Net interest revenue increased 8% primarily due to higher interest rates,money market fee waivers, partially offset by lower average deposits. equity markets and lower transaction activity.

Treasury Services revenue of $373 million increased 17% compared with the second quarter of 2021 and 10% compared with the first quarter of 2022. The increase compared with the second quarter of 2021 primarily reflects higher net interest revenue, lower money market fee waivers and higher payment volumes. The increase compared with the first quarter of 2022 primarily reflects higher net interest revenue and lower money market fee waivers.

Clearance and Collateral Management revenue of $305 million increased 8% compared with the second quarter of 2021 and 4% compared with the first quarter of 2022. The increase compared with the second quarter of 2021 primarily reflects higher net interest revenue and clearance volumes. The increase compared with the first quarter of 2022 primarily reflects higher net interest revenue.

Noninterest expense excluding amortization of intangible assets,$702 million increased 3%8% compared with the second quarter of 2021 and decreased 1% compared with the first quarter of 2022. The increase compared with the second quarter of 2021 primarily reflects higher investments in growth, infrastructure and efficiency initiatives, including the impact of inflation. The decrease compared with the first quarter of 2022 primarily reflects lower staff expense.

Year-to-date 2022 compared with year-to-date 2021

Total revenue of $2.5 billion increased 5% compared with the first six months of 2021. Pershing revenue of $1.2 billion increased 1%, primarily reflecting lower money market fee waivers and growth from existing clients, partially offset by the impact of prior year lost business. Treasury Services revenue of $711 million increased 12%, primarily reflecting higher expenses from regulatorynet interest revenue, lower money market fee
BNY Mellon 19

waivers and compliance costshigher payment volumes. Clearance and additional technologyCollateral Management revenue of $599 million increased 6%, primarily reflecting higher net interest revenue and clearance volumes.

Noninterest expense of $1.4 billion increased 6% compared with the first six months of 2021 primarily
reflecting higher investments in growth, infrastructure and efficiency initiatives, including the impact of inflation, partially offset by lower litigation expense and the favorable impact of a stronger U.S. dollar.



Investment and Wealth Management business segment

YTD22
2Q22 vs. vs.
(dollars in millions)2Q221Q224Q213Q212Q211Q222Q21YTD22YTD21YTD21
Revenue:
Investment management fees$825 $848 $864 $893 $876 (3)%(6)%$1,673 $1,726 (3)%
Performance fees5 34 32 21 14 N/M(64)39 54 (28)
Investment management and performance fees (a)
830 882 896 914 890 (6)(7)1,712 1,780 (4)
Distribution and servicing fees51 32 28 28 28 59 82 83 56 48 
Other fees (b)
(31)1 22 20 16 N/MN/M(30)38 N/M
Total fee revenue850 915 946 962 934 (7)(9)1,765 1,874 (6)
Investment and other
revenue (c)
(13)(8)23 23 18 N/MN/M(21)21 N/M
Total fee and other
revenue (c)
837 907 969 985 952 (8)(12)1,744 1,895 (8)
Net interest revenue62 57 51 47 47 9 32 119 95 25 
Total revenue899 964 1,020 1,032 999 (7)(10)1,863 1,990 (6)
Provision for credit losses— (3)(6)(7)(4)N/MN/M(3)— N/M
Noninterest expense (excluding amortization of intangible assets)685 748 741 684 669 (8)2 1,433 1,371 5 
Amortization of intangible assets6 7 7 7 8 (14)(25)13 15 (13)
Total noninterest expense691 755 748 691 677 (8)2 1,446 1,386 4 
Income before income taxes$208 $212 $278 $348 $326 (2)%(36)%$420 $604 (30)%
Pre-tax operating margin23 %22 %27 %34 %33 %23 %30 %
Adjusted pre-tax operating margin – Non-GAAP (d)
26 %24 %29 %36 %35 %25 %33 %
Total revenue by line of business:
Investment Management$603 $658 $709 $727 $700 (8)%(14)%$1,261 $1,398 (10)%
Wealth Management296 306 311 305 299 (3)(1)602 592 2 
Total revenue by line of business$899 $964 $1,020 $1,032 $999 (7)%(10)%$1,863 $1,990 (6)%
Average balances:
Average loans$14,087 $13,228 $12,737 $12,248 $11,871 6 %19 %$13,660 $11,742 16 %
Average deposits$20,802 $22,501 $18,374 $17,270 $17,466 (8)%19 %$21,647 $18,317 18 %
(a)    On a constant currency basis, investment management and performance fees decreased 3% (Non-GAAP) compared with the second quarter of 2021. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 45 for the reconciliation of this Non-GAAP measure.
(b)    Other fees primarily include investment services fees.
(c)    Investment and other revenue and total fee and other revenue are net of income (loss) attributable to noncontrolling interests related to consolidated investment management funds.
(d)    Net of distribution and servicing expense. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 45 for the reconciliation of this Non-GAAP measure.
N/M – Not meaningful.

2220 BNY Mellon


AUM trends2Q22 vs.
(dollars in billions)2Q221Q224Q213Q212Q211Q222Q21
AUM by product type: (a)
Equity$139 $168 $187 $180 $187 (17)%(26)%
Fixed income226 248 267 269 272 (9)(17)
Index387 440 467 436 440 (12)(12)
Liability-driven investments641 812 890 843 841 (21)(24)
Multi-asset and alternative investments188 215 228 218 222 (13)(15)
Cash356 383 395 364 358 (7)(1)
Total AUM$1,937��$2,266 $2,434 $2,310 $2,320 (15)%(17)%
Changes in AUM: (a)
Beginning balance of AUM$2,266 $2,434 $2,310 $2,320 $2,214 
Net inflows (outflows):
Long-term strategies:
Equity(4)(4)(4)(5)(3)
Fixed income(1)(5)— 1 8 
Liability-driven investments12 17 1 16 11 
Multi-asset and alternative investments(5)(4)1 (2)1 
Total long-term active strategies inflows (outflows)2 4 (2)10 17 
Index12 (5)(2)(3)(5)
Total long-term strategies inflows (outflows)14 (1)(4)7 12 
Short-term strategies:
Cash(26)(11)31 7 13 
Total net (outflows) inflows(12)(12)27 14 25 
Net market impact(241)(130)96 4 79 
Net currency impact(76)(26)1 (28)2 
Ending balance of AUM$1,937 $2,266 $2,434 $2,310 $2,320 (15)%(17)%
Wealth Management client assets (b)
$264 $305 $321 $307 $305 (13)%(13)%
(a)    Excludes assets managed outside of the Investment and Wealth Management business segment.
(b)    Includes AUM and AUC/A in the Wealth Management line of business.


Business segment description

Our Investment and Wealth Management business segment consists of two distinct lines of business, Investment Management and Wealth Management. Our investment firms deliver a highly diversified portfolio of investment strategies independently, and through our global distribution network, to institutional and retail clients globally. BNY Mellon Wealth Management provides investment management, custody, wealth and estate planning, private banking services, investment servicing and information management. See pages 20 and 21 of our 2021 Annual Report for additional information on our Investment and Wealth Management business segment.

In May 2022, we entered into a definitive agreement to sell BNY Alcentra Group Holdings, Inc. (together with its subsidiaries, “Alcentra”). At April 30, 2022, Alcentra had $38 billion in AUM concentrated in senior secured loans, high yield bonds, private credit, structured credit, special situations and multi-strategy
credit strategies. The transaction is expected to be completed early in the first calendar quarter of 2023, subject to customary closing conditions, including certain regulatory approvals.

Review of financial results

AUM decreased 17% compared with June 30, 2021, primarily reflecting lower market values and the unfavorable impact of a stronger U.S. dollar, partially offset by net inflows.

Net long-term strategy inflows were $14 billion in the second quarter of 2022, driven by inflows of index and liability-driven investments, partially offset by outflows of multi-asset and alternative investments and equity funds. Short-term strategy outflows were $26 billion in the second quarter of 2022. Market and regulatory trends have resulted in increased demand for lower fee asset management products and for performance-based fees.

BNY Mellon 21

Total revenue of $899 million decreased 10% compared with the second quarter of 2021 and 7% compared with the first quarter of 2022. Investment Management revenue of $603 million decreased 14% compared with the second quarter of 2021 and 8% compared with the first quarter of 2022. The decrease compared with the second quarter of 2021 primarily reflects the unfavorable impact of a stronger U.S. dollar, lower seed capital results and market values, an unfavorable change in the mix of AUM and lower equity income, partially offset by lower money market fee waivers. The decrease compared with the first quarter of 2022 primarily reflects lower market values, timing of performance fees and the unfavorable impact of a stronger U.S. dollar, partially offset by lower money market fee waivers.

Wealth Management revenue of $296 million decreased 1% compared with the second quarter of 2021 and 3% compared with the first quarter of 2022. Both decreases primarily reflect lower market values, partially offset by higher net interest revenue.

Revenue generated in the Investment and Wealth Management business segment included 35% from non-U.S. sources in the second quarter of 2022, compared with 38% in the second quarter of 2021 and 39% in the first quarter of 2022.
Noninterest expense of $691 million increased 2% compared with the second quarter of 2021 and decreased 8% compared with the first quarter of 2022. The increase compared with the second quarter of 2021 primarily reflects higher investments in growth initiatives and distribution and servicing expenses, partially offset by favorable impact of a stronger U.S. dollar. The decrease compared with the first quarter of 2022 primarily reflects lower staff expense.

Year-to-date 2022 compared with year-to-date 2021

Total revenue of $1.9 billion decreased 6% compared with the first six months of 2021. Investment Management revenue of $1.3 billion decreased 10%, primarily reflecting the unfavorable impact of a stronger U.S. dollar, lower seed capital results and equity income, partially offset by lower money market fee waivers. Wealth Management revenue of $602 million increased 2%, primarily reflecting higher net interest revenue, partially offset by lower market values.

Noninterest expense of $1.4 billion increased 4% compared with the first six months of 2021, primarily reflecting higher investments in growth initiatives and distribution and servicing expenses, partially offset by the favorable impact of a stronger U.S. dollar.


Other segment


(in millions)2Q221Q224Q213Q212Q21YTD22YTD21
Fee revenue$13 $8 $2 $12 $13 $21 $22 
Investment and other revenue62 12 19 23 9 74 (27)
Total fee and other revenue75 20 21 35 22 95 (5)
Net interest expense(35)(32)(38)(38)(45)(67)(83)
Total revenue40 (12)(17)(3)(23)28 (88)
Provision for credit losses30 17 (1)(3)(5)47 (13)
Noninterest expense63 33 55 16 49 96 90 
(Loss) before income taxes$(53)$(62)$(71)$(16)$(67)$(115)$(165)
Average loans and leases$1,172 $1,319 $1,337 $1,528 $1,804 $1,244 $1,757 
        
(in millions)3Q17
2Q17
1Q17
4Q16
3Q16
YTD17
YTD16
Revenue:       
Fee and other revenue$69
$113
$72
$42
$100
$254
$324
Net interest (expense) revenue(20)(22)(1)38
(23)(43)(24)
Total revenue49
91
71
80
77
211
300
Provision for credit losses(2)(4)(8)1
(20)(14)(26)
Noninterest expense (ex. M&I and restructuring charges)77
28
106
108
88
211
282
M&I and restructuring charges—
—
1
2
—
1
2
Total noninterest expense77
28
107
110
88
212
284
(Loss) income before taxes$(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




See page 2622 of our 20162021 Annual Report for additional information on the Other segment.


Review of financial results


Total revenue includes corporate treasury and other investment activity, including hedging activity, which
has an offsetting impact between fee and other revenue decreased $31 million compared with the third quarter of 2016 and $44net interest expense.

Total revenue increased $63 million compared with the second quarter of 2017. The decrease2021 and $52 million compared with the thirdfirst quarter of 20162022. Both increases primarily reflects lower other income, driven by increasedreflect a strategic equity investment gain.
22 BNY Mellon

The provision for credit 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 recordedwas $30 million in the second quarter of 20172022 and lower income from corporate/bank-owned life insurance, partially offset by higher net securities gains.was primarily related to changes in the macroeconomic forecast and an increase in cash balances with exposure to Russia.


Net interestNoninterest expense decreased $3 million compared with the third quarter of 2016 and $2increased $14 million compared with the second quarter of 2017. Both decreases primarily reflect higher interest rates.

Noninterest expense, excluding M&I2021 and restructuring charges, decreased $11 million compared with the third quarter of 2016 and increased $49 million compared with the second quarter of 2017. The decrease was primarily driven by lower litigation and other expenses. The increase was primarily driven by higher staff expense resulting from a methodology change in the second quarter of 2017 for allocating employee benefits expense to the business segments with no impact to consolidated results. The increase was partially offset by lower other and professional, legal and other purchased services expenses.
Year-to-date 2017 compared with year-to-date 2016

Income before taxes decreased $29$30 million compared with the first ninequarter of 2022. Both increases primarily reflect higher staff expense.

Year-to-date 2022 compared with year-to-date 2021

Loss before income taxes decreased $50 million compared with the first six months of 2016. Fee2021. Total fee and other revenue decreased $70increased $100 million, primarily reflecting lower net securitieshigher strategic equity investment gains and lower other income driven by increased pre-taxa $39 million impairment for a renewable energy investment recorded in the first quarter of 2021.

The provision for credit losses on our investmentswas $47 million in renewable energy. Net interestthe first six months of 2022 and was primarily related to changes in the macroeconomic forecast and an increase in cash balances with exposure to Russia.

Noninterest expense increased $19$6 million reflectingcompared with the impactfirst six months of higher crediting rates to the businesses. Noninterest expense, excluding M&I and restructuring charges, decreased $71 million2021, primarily reflecting lowerhigher staff other and litigation expenses.expense.


Critical accounting estimates


Our significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements in our 20162021 Annual Report. Our critical accounting estimates are those related to the allowance for loancredit 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 policyaccounting estimatesReference
Allowance for loancredit losses and allowance for lending-related commitments20162021 Annual Report, pages 29-31.25-26, and “Allowance for credit losses.”
Fair value of financial instrumentsGoodwill and derivativesother intangibles20162021 Annual Report, pages 31-32.26-27. Also see below.
OTTILitigation and regulatory contingencies2016 Annual Report, page 33.
Goodwill and other intangiblesSecond quarter 2017 Form 10-Q, page 24.
Pension accounting2016 Annual Report, pages 34-36.“Legal proceedings” in Note 17 of the Notes to Consolidated Financial Statements.

Goodwill and other intangibles

BNY Mellon’s business segments include six reporting units for which goodwill impairment testing is performed on an annual basis.

In the second quarter of 2022, 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 April 1, 2022. The discount rate applied to these cash flows was 10% and incorporated a 6.125% 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 four of the Company’s reporting units were substantially in excess of the respective reporting units’ carrying value. The Issuer Services reporting unit, with $2.4 billion of allocated goodwill, which is one of the two reporting units in the Securities Services business segment, exceeded its carrying value by approximately 10%. The Investment Management reporting unit, with $7.2 billion of allocated goodwill, which is one of the two reporting units in the Investment and Wealth Management business segment, exceeded its carrying value by approximately 6%. In the future, small changes in the assumptions for either reporting unit, such as changes in estimated cash flows, long-term growth rates or discount rates, could produce a non-cash goodwill impairment. See “Critical accounting estimates” in our 2021 Annual Report for additional information on the annual goodwill impairment test.

As of June 30, 2022, 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.



BNY Mellon 23


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 theundertake overall liquidity risk, including intra-dayintraday 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, 2017,2022, total assets were $354$453 billion, compared with $333$444 billion at Dec. 31, 2016.2021. The increase in total assets was primarily driven by higher interest-bearing deposits with the Federal Reserve and other central banks, partially offset by lower loans.securities and federal funds sold and securities purchased under resale agreements. Deposits totaled $231$326 billion at Sept.June 30, 2017 and $2212022, compared with $320 billion at Dec. 31, 2016, and were driven2021. The increase reflects higher noninterest-bearing deposits (principally U.S. offices), partially offset by higherlower interest-bearing deposits in U.S. and non-U.S. offices. At Sept. 30, 2017, totalTotal interest-bearing deposits were 50%as a percentage of total interest-earning assets compared with 51%were 57% at June 30, 2022 and 60% at Dec. 31, 2016.2021.


At Sept.June 30, 2017, we had $432022, available funds totaled $170 billion of liquid funds (which includeand included cash and due from banks, interest-bearing deposits with the Federal Reserve and other central banks, interest-bearing deposits with banks and federal funds sold and securities purchased under resale agreements) 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$155 billion at Dec. 31, 2016.2021. Total available funds as a percentage of total assets were 35%38% at Sept.June 30, 2017 compared with 31%2022 and 35% at Dec. 31, 2016.2021. For additional information on our liquid funds and available funds, see “Liquidity and dividends.”


Investment securities
Securities were $120.0$151 billion, or 34%33% of total assets, at Sept.June 30, 2017,2022, compared with $114.7$159 billion, or 34%36% of total assets, at Dec. 31, 2016.2021. The increase in investment securitiesdecrease primarily reflects additional investments in commercial mortgage-
backed securities (“MBS”)unrealized pre-tax losses and lower agency residential mortgage-backed securities (“RMBS”), partially offset by fewer investments in consumer asset-backed securities (“ABS”).higher U.S. Treasury securities. For additional information on our investment securities portfolio, see “Investment securities”“Securities” and Note 43 of the Notes to Consolidated Financial Statements.


Loans were $59.1$69 billion, or 17%15% of total assets, at Sept.June 30, 2017,2022, compared with $64.5$68 billion, or 19%15% of total assets, at Dec. 31, 2016.2021. The decreaseincrease was driven by higher loans in loans was primarily drivennearly all portfolios, partially offset by lower margin loans and loans to financial institutions.loans. For additional information on our loan portfolio, see “Loans” and Note 54 of the Notes to Consolidated Financial Statements.


Long-term debt totaled $28.4$28 billion at Sept.June 30, 20172022 and $24.5$26 billion at Dec. 31, 2016. The increase reflects issuances of $4.75 billion,2021. Issuances were partially offset by redemptions and a decrease in the maturityfair value of $500 million and the redemption of trust preferred securities.hedged long-term debt. For additional information on long-term debt, see “Liquidity and dividends.”


The Bank of New York Mellon Corporation total shareholders’ equity increaseddecreased to $40.5$41 billion at June 30, 2022 from $38.8$43 billion at Dec. 31, 2016.2021. For additional information, on our capital, see “Capital.”


Country risk exposure


We have exposure toThe following table presents BNY Mellon’s top 10 exposures by country (excluding the U.S.) as of June 30, 2022, as well as certain countries with higher risk profiles. Exposure described below reflectsThe exposure is presented on an internal risk management basis and has not been reduced by the country of operations and risk of the immediate counterparty.allowance for credit losses. We continue to monitor our exposure to these and other countries as part of our internal country risk management process. See “Risk management” in

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.

24 BNY Mellon

Country risk exposure at June 30, 2022Interest-bearing depositsTotal exposure
(in billions)Central
banks		Banks
Lending (a)
Securities (b)
Other (c)
Top 10 country exposure:
Germany$22.9 $0.7 $0.8 $4.3 $0.7 $29.4 
United Kingdom (“UK”)11.7 0.1 1.3 4.0 5.3 22.4 
Japan7.8 1.1 — 0.5 0.2 9.6 
Canada— 2.4 0.1 3.8 1.5 7.8 
Belgium5.4 0.7 0.1 0.1 — 6.3 
Netherlands3.7 — 0.2 1.4 0.2 5.5 
Luxembourg1.2 0.2 1.1 — 2.1 4.6 
Ireland0.8 0.3 0.4 — 1.8 3.3 
Singapore— 1.1 — 1.5 0.5 3.1 
South Korea0.1 0.2 2.3 0.2 0.2 3.0 
Total Top 10 country exposure$53.6 $6.8 $6.3 $15.8 $12.5 $95.0 (d)
Select country exposure:
Brazil$— $0.1 $0.8 $0.1 $0.2 $1.2 
Russia— 0.1 (e)— — — 0.1 
Total select country exposure$— $0.2 $0.8 $0.1 $0.2 $1.3 
(a)Lending includes loans, acceptances, issued letters of credit, net of participations, and lending-related commitments.
(b)    Securities includes 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 75% of our 2016 Annual Report for additional information on how our exposures are managed.total non-U.S. exposure.

(e)    Represents cash balances with exposure to Russia.
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 SpainBrazil is primarily consisted of investment grade


24 BNY Mellon

sovereign debt. Investment securities 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.

Brazil

Current conditions in Brazil have resulted in increased focus on its economic and political stability.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

The war in Ukraine has increased our focus on Russia. The country risk exposure to BrazilRussia consists of $1.4 billioncash balances related to our securities services businesses and $1.3 billion, respectively. This included $1.2 billion and $1.3 billion, respectively,may increase 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 primarilythe future to the top-10 largest financial institutionsextent cash is received for the benefit of our clients that is subject to distribution restrictions. BNY Mellon has ceased new banking business in the country. AsRussia and suspended investment management purchases of Sept.Russian securities. At June 30, 20172022, 0.1% of our
AUC/A and Dec. 31, 2016,less than 0.01% of our exposure totaled $780 millionAUM consisted of Russian securities. We will continue to work with multinational clients that depend on our custody and $713 million, respectively, consisting primarily of syndicated credit facilities and trade finance loans.record keeping services to manage their exposures.


Investment securitiesSecurities


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 an increase in the allowance for credit losses and/or a reduction in the fair value of our investment securities portfolio.


BNY Mellon 25

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


Securities portfolioMarch 31, 2022
2Q22
change in
unrealized
gain (loss)
June 30, 2022
Fair value as a % of amortized
cost (a)
Unrealized
gain (loss)
% Floating
rate (b)
Ratings (c)
BBB+/
BBB-		BB+
and
lower
(dollars in millions)Fair
value
Amortized
cost (a)
Fair
value		AAA/
AA-		A+/
A-		Not
rated
U.S. Treasury$39,929 $(271)$43,707 $42,547 97 %$(1,160)50 %100 %— %— %— %— %
Agency RMBS45,780 (1,244)45,448 42,241 93 (3,207)13 100 — — — — 
Sovereign debt/sovereign guaranteed (d)
13,131 (128)12,901 12,577 97 (324)14 86 4 9 1 — 
Agency commercial mortgage-backed securities (“MBS”)12,423 (196)12,798 12,257 96 (541)37 100 — — — — 
Supranational7,802 (59)8,131 7,949 98 (182)58 100 — — — — 
Collateralized loan obligations (“CLOs”)5,815 (144)6,230 6,046 97 (184)100 99 — — — 1 
Foreign covered bonds (e)
6,252 (66)6,010 5,831 97 (179)48 100 — — — — 
U.S. government agencies6,297 (119)6,064 5,671 94 (393)33 100 — — — — 
Non-agency commercial MBS3,104 (101)3,270 3,045 93 (225)49 100 — — — — 
Foreign government agencies (f)
2,771 (24)2,684 2,599 97 (85)25 92 8 — — — 
Non-agency RMBS2,538 (82)2,447 2,346 96 (101)50 85 3 — 7 5 
State and political subdivisions2,161 (71)2,276 2,049 90 (227)23 90 9 — — 1 
Other asset-backed securities (“ABS”)1,880 (30)1,771 1,668 94 (103)18 100 — — — — 
Corporate bonds1,483 (41)1,455 1,342 92 (113)43 17 67 16 — — 
Other1 — 1 1 100 — — — — — — 100 
Total securities$151,367 (g)$(2,576)$155,193 $148,169 (g)95 %$(7,024)(g)(h)36 %98 %1 %1 %— %— %
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. Treasury25,325
 (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 RMBS627
 9
555
594
 97
39
 7
4
17
71
1
European floating rate
notes (e)
523
 (1)393
387
 98
(6) 63
37
—
—
—
Commercial MBS10,574
 5
11,051
11,033
 100
(18) 99
1
—
—
—
State and political subdivisions3,299
 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 bonds1,318
 4
1,262
1,275
 101
13
 17
69
14
—
—
CLOs2,642
 1
2,542
2,550
 100
8
 99
—
—
1
—
U.S. government agencies2,210
 2
2,480
2,496
 101
16
 100
—
—
—
—
Consumer ABS1,330
 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%—%
(a)Amortized cost before impairments.
(b)Represents ratings by S&P, or the equivalent.
(c)Primarily consists of exposure to UK, France, Germany, Spain, Italy and the Netherlands.
(d)These RMBS were included in the former Grantor Trust 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.
(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 of $251 million at June 30, 2017 and $238 million at Sept. 30, 2017.
(i)
Unrealized gains of $324 million at Sept. 30, 2017 related to available-for-sale securities, net of hedges.

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

(b)    Includes the impact of hedges.
BNY Mellon 25(c)    Represents ratings by Standard & Poor’s (“S&P”) or the equivalent.
(d)    Primarily consists of exposure to Germany, UK, France, Singapore, Italy and Canada.

(e)    Primarily consists of exposure to Canada, UK, Australia, Germany and Norway.
(f)    Primarily consists of exposure to Canada, Norway, the Netherlands, Sweden, France and Finland.
(g)    Includes net unrealized gains on derivatives hedging securities available-for-sale (including terminated hedges) of $914 million at March 31, 2022 and $1,764 million at June 30, 2022.
(h)    At June 30, 2022, includes net unrealized losses of $2,585 million related to available-for-sale securities, net of hedges, and $4,439 million related to held-to-maturity securities.


The fair value of our investment securities portfolio, including related hedges, was $119.7$148.2 billion at Sept.June 30, 2017,2022, compared with $114.3$158.0 billion at Dec. 31, 2016.2021. The higher level of securitiesdecrease primarily reflects additional investments in commercial MBSunrealized pre-tax losses and lower agency RMBS, partially offset by a decreasean increase in consumer ABS.U.S. Treasury securities.


At Sept.June 30, 2017,2022, 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. Thehedges, of $7.0 billion, compared with a net unrealized pre-tax gain, including the impact of related hedges, of $384 million at Dec. 31, 2021. The increase in the net unrealized loss, including the impact of hedges, was primarily driven by a decrease in long-termhigher market interest rates.

The fair value of the available-for-sale securities totaled $93.0 billion at June 30, 2022, net of hedges, or 63% of the securities portfolio, net of hedges. The fair value of the held-to-maturity securities totaled $55.1 billion at June 30, 2022, or 37% of the securities portfolio, net of hedges.
The unrealized gain, net of tax,loss (after-tax) on our available-for-sale investment securities portfolio, net of hedges, included in accumulated other comprehensive income (“OCI”) was $226 million$2.0 billion at Sept.June 30, 2017,2022, compared with $45an unrealized gain (after-tax), net of hedges, of $362 million at Dec. 31, 2016.2021. The increase in the unrealized loss, net of tax, was primarily driven by higher market interest rates.


At Sept.June 30, 2017, 93%2022, 98% of the securities in our portfolio were rated AAA/AA-, unchanged compared with 96% at Dec. 31, 2016. 2021.


We routinely test our investmentSee Note 3 of the Notes to Consolidated Financial Statements for the pre-tax net securities gains (losses) by security type. See Note 14 of the Notes to Consolidated Financial Statements for OTTI. See “Critical accounting estimates” for additional information regarding OTTI.securities by level in the fair value hierarchy.

26 BNY Mellon

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 securities (a)
(dollars in millions)2Q221Q224Q213Q212Q21
Amortizable purchase premium (net of discount) relating to securities:
Balance at period-end$1,541 $1,761 $1,972 $2,120 $2,067 
Estimated average life remaining at period-end (in years)
4.7 4.7 4.4 4.5 4.4 
Amortization$105 $130 $158 $168 $183 
Accretable discount related to the prior restructuring of the securities portfolio:
Balance at period-end$55 $62 $109 $115 $118 
Estimated average life remaining at period-end (in years)
7.3 7.0 6.1 6.0 6.1 
Accretion$7 $9 $11 $11 $9 
(a)    Amortization of purchase premium decreases net interest revenue while accretion of discount increases net interest revenue. Both were recorded on a level yield basis.


Loans
Net premium amortization and discount accretion of investment securities (a)
     
(dollars in millions)3Q17
2Q17
1Q17
4Q16
3Q16
Amortizable purchase premium (net of discount) relating to investment securities:     
Balance at period end$2,053
$2,111
$2,058
$2,188
$2,267
Estimated average life remaining at period end (in years)
5.0
5.0
4.9
4.9
4.5
Amortization$140
$134
$138
$146
$163
Accretable discount related to the prior restructuring of the investment securities portfolio:     
Balance at period end$302
$279
$299
$315
$331
Estimated average life remaining at period end (in years)
6.5
6.3
6.2
6.2
5.9
Accretion$24
$25
$25
$25
$24
(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.



Total exposure – consolidatedJune 30, 2022Dec. 31, 2021
(in billions)LoansUnfunded
commitments		Total
exposure		LoansUnfunded
commitments		Total
exposure
Financial institutions$10.6 $32.2 $42.8 $10.2 $30.6 $40.8 
Commercial2.4 11.6 14.0 2.1 11.9 14.0 
Wealth management loans10.9 0.6 11.5 9.8 0.5 10.3 
Wealth management mortgages8.8 0.3 9.1 8.2 0.4 8.6 
Commercial real estate6.1 4.0 10.1 6.0 3.3 9.3 
Lease financings0.7 — 0.7 0.7 — 0.7 
Other residential mortgages0.4 — 0.4 0.3 — 0.3 
Overdrafts3.8 — 3.8 3.1 — 3.1 
Capital call financing3.6 2.5 6.1 2.3 1.5 3.8 
Other2.7 — 2.7 2.6 — 2.6 
Margin loans19.3 — 19.3 22.5 — 22.5 
Total$69.3 $51.2 $120.5 $67.8 $48.2 $116.0 
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. Treasury1
(1)(1)—
4
Foreign covered bonds—
—
—
—
10
Non-agency RMBS(1)—
(1)(2)1
Other15
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
Netherlands160
—
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

Total exposure – consolidatedSept. 30, 2017 Dec. 31, 2016
(in billions)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
Commercial3.0
16.6
19.6
 2.6
17.5
20.1
Subtotal institutional14.9
49.3
64.2
 17.3
51.2
68.5
Wealth management loans and mortgages16.3
1.1
17.4
 15.6
1.3
16.9
Commercial real estate4.9
3.5
8.4
 4.7
3.2
7.9
Lease financings1.3
—
1.3
 1.7
—
1.7
Other residential mortgages0.7
—
0.7
 0.9
—
0.9
Overdrafts5.8
—
5.8
 5.5
—
5.5
Other1.3
—
1.3
 1.2
—
1.2
Subtotal non-margin loans45.2
53.9
99.1
 46.9
55.7
102.6
Margin loans13.9
—
13.9
 17.6
0.1
17.7
Total$59.1
$53.9
$113.0
 $64.5
$55.8
$120.3



At Sept.June 30, 2017,2022, total exposureslending-related exposure of $113.0$120.5 billion decreased 6%increased 4% compared with Dec. 31, 2016,2021, primarily reflecting lower margin loans andhigher exposure toin the capital call financing, financial institutions, partially offset by higher wealth management loans and mortgages.commercial real estate portfolios and higher overdrafts, partially offset by lower margin loans.
Our financial institutions and commercial portfolios comprise our largest concentrated risk. These portfolios comprised 57%47% of our total exposure at both Sept.June 30, 20172022 and Dec. 31, 2016.2021. Additionally, most of our overdrafts relate to financial institutions.



BNY Mellon 27

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)
Financial institutions
portfolio exposure
(dollars in billions)
June 30, 2022Dec. 31, 2021
LoansUnfunded
commitments		Total
exposure		% Inv.
grade		% due
<1 yr.		LoansUnfunded
commitments		Total
exposure
Securities industry$2.9
$19.0
$21.9
99%99% $3.8
$19.2
$23.0
Securities industry$1.6 $18.0 $19.6 98 %97 %$1.7 $17.5 $19.2 
Asset managers1.6
6.5
8.1
97
87
 1.5
6.2
7.7
Asset managers2.0 7.5 9.5 98 82 1.7 7.1 8.8 
Banks6.3
1.4
7.7
68
94
 7.9
2.0
9.9
Banks6.4 1.7 8.1 86 96 5.8 1.5 7.3 
Insurance0.1
3.4
3.5
99
17
 0.1
3.8
3.9
Insurance0.1 3.6 3.7 100 8 0.2 3.4 3.6 
Government—
1.0
1.0
91
46
 0.1
0.9
1.0
Government0.1 0.2 0.3 100 45 0.1 0.2 0.3 
Other1.0
1.4
2.4
98
45
 1.3
1.6
2.9
Other0.4 1.2 1.6 98 61 0.7 0.9 1.6 
Total$11.9
$32.7
$44.6
93%86% $14.7
$33.7
$48.4
Total$10.6 $32.2 $42.8 96 %84 %$10.2 $30.6 $40.8 




The financial institutions portfolio exposure was $44.6$42.8 billion at Sept.June 30, 2017,2022, an increase of 5% compared with $48.4 billion at Dec. 31, 2016. The decrease2021, primarily reflects lowerreflecting higher exposure in the banks, asset managers and securities industry portfolios.


Financial institution exposures are high-quality, with 93%96% of the exposures meeting the investment grade equivalent criteria of our internal credit rating classification at Sept.June 30, 2017.2022. 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.


The exposure to financial institutions is generally short-term, with 84% of the exposures expiring within one year. At June 30, 2022, 14% of the exposure to financial institutions had an expiration within 90 days, compared with 17% at Dec. 31, 2021.

In addition, 65% of the financial institutions exposure is secured. For example, securities industry clients
and asset managers often borrow against marketable securities held in custody.

At Sept.June 30, 2017,2022, the secured intradayintra-day credit provided to dealers in connection with their tri-party repo activity totaled $18.5$16.9 billion and was primarily included in the securities industry portfolio. Dealers secure the outstanding intradayintra-day credit with high-quality liquid collateral having a market value in excess of the amount of the outstanding credit.
Secured intraday credit facilities represent approximately 39% of the exposure in the financial institutions portfolio and are reviewed and reapproved annually.

The asset managers portfolio exposure is high-quality, with 98% of the exposures meeting our investment grade equivalent ratings criteria as of June 30, 2022. These exposures are generally short-term liquidity facilities, with the majority to regulated mutual funds.

Our bankbanks portfolio exposure primarily relates to our global trade finance. These exposures are short-term in nature, with 94%96% due in less than one year. The investment grade percentage of our bankbanks portfolio exposure was 68%86% at Sept.June 30, 2017,2022, compared with 69%88% at Dec. 31, 2016.

The asset manager portfolio exposure was high-quality with 97% of the exposures meeting our investment2021. Our non-investment grade equivalent ratings criteria as of Sept. 30, 2017. These exposures are generally short-term liquidity facilities, with the vast majority to regulated mutual funds.primarily trade finance loans in Brazil.


28 BNY Mellon

Commercial


The commercial portfolio is presented below.


Commercial portfolio exposureSept. 30, 2017 Dec. 31, 2016Commercial portfolio exposureJune 30, 2022Dec. 31, 2021
(dollar amounts in billions)Loans
Unfunded
commitments

Total
exposure

% Inv.
grade

% due
<1 yr.

 Loans
Unfunded
commitments

Total
exposure

(dollars in billions)(dollars in billions)LoansUnfunded
commitments		Total
exposure		% Inv.
grade		% due
<1 yr.		LoansUnfunded
commitments		Total
exposure
Manufacturing$1.4
$6.3
$7.7
96%22% $1.1
$6.7
$7.8
Manufacturing$0.8 $4.0 $4.8 96 %22 %$0.6 $3.9 $4.5 
Services and other0.9
4.4
5.3
95
28
 0.6
4.3
4.9
Services and other1.2 3.1 4.3 96 39 1.0 3.2 4.2 
Energy and utilities0.6
4.5
5.1
95
7
 0.6
4.7
5.3
Energy and utilities0.3 3.8 4.1 94 5 0.4 3.9 4.3 
Media and telecom0.1
1.4
1.5
95
15
 0.3
1.8
2.1
Media and telecom0.1 0.7 0.8 87 2 0.1 0.9 1.0 
Total$3.0
$16.6
$19.6
95%19% $2.6
$17.5
$20.1
Total$2.4 $11.6 $14.0 95 %21 %$2.1 $11.9 $14.0 




The commercial portfolio exposure decreased to $19.6was $14.0 billion at Sept.June 30, 2017,2022, unchanged from $20.1 billion at Dec. 31, 2016,2021, primarily reflecting higher exposure to the manufacturing and services and other portfolios, partially offset by lower exposure in the media and telecom portfolio.

Utilities-related exposure represents approximately 78% ofto the energy and utilities portfolio. The remaining exposure in the energy and utilities portfolio, which includes exposure to explorationmedia and production companies, refining, pipelines and integrated companies, was 76% investment grade at both Sept. 30, 2017 and Dec. 31, 2016.telecom portfolios.


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 institutions93%93%93%92%93%
Commercial95%96%95%94%94%


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


Percentage of the portfolios that are investment grade
Quarter ended
June 30, 2022March 31, 2022Dec. 31, 2021Sept. 30, 2021June 30, 2021
Financial institutions96 %97 %96 %96 %96 %
Commercial95 %94 %94 %93 %93 %


Wealth management loans and mortgages


Our wealth management loan exposure was $17.4$11.5 billion at Sept.June 30, 2017,2022, compared with $16.9$10.3 billion
at Dec. 31, 2021. Wealth management loans primarily consist of loans to high-net-worth individuals, a majority of which are secured by the customers’ investment management accounts or custody accounts.

Wealth management mortgages

Our wealth management mortgage exposure was $9.1 billion at June 30, 2022, compared with $8.6 billion at Dec. 31, 2016.2021. 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%61% at origination. In the wealth management portfolio,At June 30, 2022, less than 1% of the mortgages were past due at Sept. 30, 2017.due.


At Sept.June 30, 2017,2022, the wealth management mortgage portfolio consisted of the following geographic concentrations: California - 24%– 22%; New York - 19%– 15%; Florida – 10%; Massachusetts - 11%; Florida -– 8%; and other - 38%– 45%.



28 BNY Mellon 29


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 classJune 30, 2022Dec. 31, 2021
Total
exposure
Percentage
secured (a)
Total
exposure
Percentage
secured (a)
(in billions)
Residential$4.0 83 %$3.6 81 %
Office2.8 77 2.6 77 
Retail0.9 57 0.9 58 
Mixed-use0.8 33 0.7 37 
Hotels0.7 44 0.5 23 
Healthcare0.4 47 0.4 25 
Other0.5 51 0.6 45 
Total commercial real estate$10.1 69 %$9.3 66 %
(a)    Represents the percentage of exposure secured by real estate in each asset class.


Our commercial real estate exposure totaled $8.4$10.1 billion at Sept.June 30, 2017, compared with $7.92022 and $9.3 billion at Dec. 31, 2016.2021. 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% of2022, the unsecured portfolio consistsconsisted of real estate investment trusts (“REITs”) and real estate operating companies, which are both predominantlyprimarily investment grade.


At Sept.June 30, 2017,2022, our commercial real estate portfolio consistsconsisted of the following concentrations: New York metro - 40%– 35%; REITs and real estate operating companies - 40%– 31%; and other - 20%– 34%.


Lease financings


The leasinglease financings portfolio exposure totaled $1.3 billion$702 million at Sept.June 30, 2017 compared with $1.7 billion2022 and $731 million at Dec. 31, 2016.2021. At Sept.June 30, 2017,2022, approximately 94%99% of the leasing portfolio exposure was investment grade, or investment grade equivalent.

At Sept. 30, 2017, the lease financings portfolioequivalent and consisted of exposures backed by well-diversified assets, includingprimarily real estate and large-ticket transportation equipment. The largest components of our lease residual value exposure

relate to aircraft and freight-related rail cars. Assets are both domestic and foreign-based, with primary concentrations in Germany and the U.S.

Other residential mortgages


The other residential mortgages portfolio primarily consists of 1-4 family residential mortgage loans and totaled $741$369 million at Sept.June 30, 20172022 and $854$299 million at Dec. 31, 2016.2021. Included in this portfolio at Sept.June 30, 2017 are $1812022 were $96 million of fixed-rate jumbo mortgage loans
purchased in 2005, 2006 and the firstsecond quarter of 2007 that are predominantly prime mortgage loans,2022 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%69% at origination and 11% 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.origination.

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 businessclients and are generally repaid within two business days.


Capital call financing

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

Other loans


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


30 BNY Mellon

Margin loans


Margin loans areloan exposure of $19.3 billion at June 30, 2022 and $22.5 billion at Dec. 31, 2021 was collateralized with marketable securities, and borrowerssecurities. Borrowers are required to maintain a daily collateral margin in
excess of 100% of the value of the loan. Margin loans included $4.2$5.6 billion at Sept.June 30, 20172022 and $6.3$7.7 billion at Dec. 31, 20162021 related to a term loan program that offers fully collateralized loans to broker-dealers.


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 and overdrafts associated with our custody and securities clearance businesses.


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

Allowance for credit losses activityJune 30, 2022March 31, 2022Dec. 31, 2021June 30, 2021
(dollars in millions)
Beginning balance of allowance for credit losses$263 $260 $291 $419 
Provision for credit losses47 2 (17)(86)
Net recoveries (charge-offs):
Loans:
Other residential mortgages1 1 2 — 
Financial institutions— — — 2 
Other loans— — (16)— 
Other financial instruments(1)— — — 
Net recoveries (charge-offs)— 1 (14)2 
Ending balance of allowance for credit losses$310 $263 $260 $335 
Allowance for loan losses$181 $171 $196 $269 
Allowance for lending-related commitments62 53 45 50 
Allowance for financial instruments (a)
67 39 19 16 
Total allowance for credit losses$310 $263 $260 $335 
Total loans, at period end$69,347 $68,052 $67,787 $63,547 
Allowance for loan losses as a percentage of total loans0.26 %0.25 %0.29 %0.42 %
Allowance for loan losses and lending-related commitments as a percentage of total loans0.35 %0.33 %0.36 %0.50 %
(a)    Includes allowance for credit losses on federal funds sold and securities purchased under resale agreements, available-for-sale securities, held-to-maturity securities, accounts receivable, cash and due from banks and interest-bearing deposits with banks.



BNY Mellon 29

Allowance for credit losses activitySept. 30, 2017
June 30, 2017
Dec. 31, 2016
Sept. 30, 2016
(dollar amounts in millions)
Non-margin loans$45,196
$47,516
$46,868
$48,411
Margin loans13,872
14,157
17,590
17,557
Total loans$59,068
$61,673
$64,458
$65,968
Beginning balance of allowance for credit losses$270
$276
$274
$280
Provision for credit losses(6)(7)7
(19)
Net recoveries:    
Other residential mortgages1
1
—
—
Financial institutions—
—
—
13
Net recoveries1
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 commitments104
105
112
126
Allowance for loan losses as a percentage of total loans0.27%0.27%0.26%0.22%
Allowance for loan losses as a percentage of non-margin loans0.36
0.35
0.36
0.31
Total allowance for credit losses as a percentage of total loans0.45
0.44
0.44
0.42
Total allowance for credit losses as a percentage of non-margin loans0.59
0.57
0.60
0.57


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$47 million in the second quarter of 2017 and a credit of $19 million2022, primarily driven by changes in the third quarter of 2016.macroeconomic forecast.

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 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.

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


The allowance for loan losses and allowance for lending-related commitments represent management’s estimate of probablelifetime expected losses inherent in our credit portfolio. This evaluation process is subject to numerous estimates and judgments. For additional information on this process, see “CriticalTo the
accounting estimates” in our 2016 Annual Report. To the extent actual results differ from forecasts or management’s judgment, the allowance for credit losses may be greater or less than future charge-offs.


Based on an evaluation of the allowance for credit losses as discussed in “Critical accounting estimates” and Note 1 of the Notes to Consolidated Financial Statements, bothestimates,” in our 20162021 Annual Report, we have allocated our allowance for credit lossesloans and lending-related commitments as follows.presented below.


BNY Mellon 31

 Allocation of allowanceSept. 30, 2017
June 30, 2017
Dec. 31, 2016
Sept. 30, 2016
 
 Commercial31%30%29%33%
 Commercial real estate28
28
26
23
 Foreign13
13
13
11
 Financial institutions9
8
9
11
 
Wealth management (a)
8
9
8
7
 Other residential mortgages8
8
10
10
 Lease financing3
4
5
5
 Total100%100%100%100%
(a)Includes the allowance for wealth management mortgages.

Allocation of allowance for loan losses and
  lending-related commitments (a)
June 30, 2022March 31, 2022Dec. 31, 2021June 30, 2021
(dollars in millions)$%$%$%$%
Commercial real estate$184 75 %$176 78 %$199 82 %$289 90 %
Financial institutions21 9 15 7 13 5 6 2 
Commercial16 6 12 5 12 5 8 2 
Other residential mortgages7 3 7 3 7 3 8 2 
Wealth management mortgages7 3 9 4 6 2 4 1 
Capital call financing6 2 3 1 2 1 1 1 
Lease financings1 1 1 1 1 1 2 1 
Wealth management loans1 1 1 1 1 1 1 1 
Total$243 100 %$224 100 %$241 100 %$319 100 %

(a)    The allowance allocated to margin loans, overdrafts and other loans was insignificant at June 30, 2022, March 31, 2022, Dec. 31, 2021 and June 30, 2021.


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.


TheOur allowance for credit ratinglosses 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 variablelosses 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 eachcommercial real estate property values were increased 10% and all other credit were rated one grade better, the quantitative allowance would have decreased by $65$36 million, whileand if eachcommercial real estate property values were decreased 10% and all other credit were rated one grade worse, the quantitative allowance would have increased by $109$70 million. Similarly, ifOur multi-scenario based macroeconomic forecast used in determining the loss given default were one rating worse, the


30 BNY Mellon

allowance would have increased by $41 million, while 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
loans was 10% higher or lower, the allowance would have decreased or increased by less than $1 million, respectively.


Nonperforming assets

The following table shows the distribution of nonperforming assets.

Nonperforming assetsSept. 30, 2017
June 30, 2017
Dec. 31, 2016
(dollars in millions)
Nonperforming loans:   
Other residential mortgages$80
$84
$91
Wealth management loans and mortgages8
10
8
Financial institutions2
2
—
Lease financings—
—
4
Total nonperforming loans90
96
103
Other assets owned4
4
4
Total nonperforming assets$94
$100
$107
Nonperforming assets ratio0.16%0.16%0.17%
Nonperforming assets ratio, excluding margin loans0.21
0.21
0.23
Allowance for loan losses/nonperforming loans178.9
171.9
164.1
Allowance for loan losses/nonperforming assets171.3
165.0
157.9
Total allowance for credit losses/nonperforming loans294.4
281.3
272.8
Total allowance for credit losses/nonperforming assets281.9
270.0
262.6


Nonperforming assets activitySept. 30, 2017
June 30, 2017
Dec. 31, 2016
(in millions)
Balance at beginning of quarter$100
$107
$109
Additions3
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 total2022 allowance for credit losses consisted of three scenarios. The baseline scenario reflects flat GDP growth, continued moderate labor market recovery and continuing strong growth in commercial real estate prices through the end of 2022 that will begin to nonperforming loans was 294.4% at Sept. 30, 2017, 281.3%moderate in 2023. The upside scenario reflects faster GDP growth and labor market recovery and higher commercial real estate prices compared with the baseline. The downside scenario contemplates negative GDP growth through the first quarter of 2023 with subsequent stabilization as well as increasing unemployment through 2023 and lower
commercial real estate prices than the baseline. In the second quarter of 2022, we placed the most weight on our baseline and downside scenarios, with the remaining weighting placed on the upside scenario. From a sensitivity perspective, at June 30, 2017 and 272.8% at Dec. 31, 2016.2022, if we had applied 100% weighting to the downside scenario, the allowance for credit losses would have been approximately $93 million higher.


Nonperforming assets

The table below presents our nonperforming assets.

Nonperforming assetsJune 30, 2022Dec. 31, 2021
(dollars in millions)
Nonperforming loans:
Commercial real estate$54 $54 
Other residential mortgages35 39 
Wealth management mortgages22 25 
Total nonperforming loans111 118 
Other assets owned3 2 
Total nonperforming assets$114 $120 
Nonperforming assets ratio0.16 %0.18 %
Allowance for loan losses/nonperforming loans163.1 166.1 
Allowance for loan losses/nonperforming assets158.8 163.3 
Total allowance for credit losses/nonperforming loans218.9 204.2 
Total allowance for credit losses/nonperforming assets213.2 200.8 


Deposits


Total deposits were $231.0$325.8 billion at Sept.June 30, 2017,2022, an increase of 4%2%, compared with $221.5$319.7 billion at
Dec. 31, 2016.2021. The increase in deposits primarily reflects higher interest-bearing deposits in non-U.S. offices and noninterest-bearing deposits in(principally U.S. offices,offices), partially offset by lower interest-bearing deposits in U.S. and non-U.S. offices.


32 BNY Mellon

Noninterest-bearing deposits were $80.4$106.1 billion at Sept.June 30, 20172022, compared with $78.3$93.7 billion at Dec. 31, 2016.2021. Interest-bearing deposits were $150.6primarily demand deposits and totaled $219.7 billion at Sept.June 30, 20172022, compared with $143.2$226.0 billion at Dec. 31, 2016.2021.


Short-term borrowings


We fund ourselves primarily through deposits and, to a lesser extent, other short-term borrowings and long-term debt. Short-term borrowings consist of federal funds purchased and securities sold under repurchase agreements, payables to customers and broker-dealers, commercial paper and other borrowed funds. Certain othershort-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 federalFederal funds purchased and securities sold under repurchase agreements is presented below.

Federal funds purchased and securities sold under
repurchase agreements
 Quarter ended
(dollars in millions)Sept. 30, 2017
June 30, 2017
Sept. 30, 2016
Maximum month-end balance during the quarter$21,850
$19,786
$11,184
Average daily balance$21,403
$17,970
$9,585
Weighted-average rate during the quarter1.30%0.84%0.24%
Ending balance$10,314
$10,934
$8,052
Weighted-average rate at period end1.35%0.93%0.25%


Fluctuationsinclude repurchase agreement activity with the Fixed Income Clearing Corporation (“FICC”), where we record interest expense gross, but the ending and average balances reflect the impact of federal funds purchasedoffsetting under enforceable netting agreements. This activity primarily relates to government securities collateralized resale and securities sold under repurchase agreements between periods resulted from changes in overnight borrowing opportunities. The increase inexecuted with clients that are novated to and settle with the weighted-average rates, compared with Sept. 30, 2016, primarily reflects increases in the Fed Funds effective rate.FICC.

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

Payables to customers and broker-dealers
 Quarter ended
(dollars in millions)Sept. 30, 2017
June 30, 2017
Sept. 30, 2016
Maximum month-end balance during the quarter$21,563
$21,622
$21,162
Average daily balance (a)
$21,280
$21,078
$20,616
Weighted-average rate during the quarter (a)
0.42%0.30%0.07%
Ending balance$21,176
$21,622
$21,162
Weighted-average rate at period end0.43%0.34%0.07%
(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 million in the second quarter of 2017 and $16,873 million in the third quarter of 2016.



Payables to customers and broker-dealers represent funds awaiting re-investmentreinvestment 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 paperQuarter ended
(dollars in millions)Sept. 30, 2017
June 30, 2017
Sept. 30, 2016
Maximum month-end balance during the quarter$4,277
$2,193
$1,000
Average daily balance$2,736
$2,215
$1,173
Weighted-average rate during the quarter1.15%0.95%0.35%
Ending balance$2,501
$876
$—
Weighted-average rate at period end1.18%0.98%—%



The Bank of New York Mellon our largest bank subsidiary, issuesmay issue commercial paper that matures within 397 days from the date of issue and is not redeemable prior to maturity or subject to voluntary prepayment. The increase in commercial paper balances, compared with prior periods, primarily reflects management of overall liquidity. The increase 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.

Information related to other borrowed funds is presented below.

Other borrowed fundsQuarter ended
(dollars in millions)Sept. 30, 2017
June 30, 2017
Sept. 30, 2016
Maximum month-end balance during the quarter$3,353
$2,379
$993
Average daily balance$2,197
$1,193
$874
Weighted-average rate during the quarter1.38%1.24%0.76%
Ending balance$3,353
$1,338
$993
Weighted-average rate at period end1.56%1.69%0.75%



Other borrowed funds primarily include borrowings from the Federal Home Loan Bank (“FHLB”), overdrafts of sub-custodian account balances in our InvestmentSecurities Services businesses, capitalfinance lease obligationsliabilities, and borrowings under lines of credit by our Pershing subsidiaries. Overdrafts typically relate to timing differences for settlements. The increase in other borrowed funds balances compared with both prior periods primarily reflects borrowings from the FHLB. The increase compared with Sept. 30, 2016 also reflects an increase in capital lease obligations as a result of converting an operating lease to a capital lease.



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 rolloverroll 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 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. For additional information, see “Risk Management – Liquidity Risk” in our 2021 Annual Report.


The Parent’s policy is to have access to sufficient unencumbered cash and cash equivalents at each quarter-end to cover maturities and other forecasted debt redemptions, net interest payments and net tax payments for the following 18-month period, and to provide sufficient collateral to satisfy transactions subject to Section 23A of the Federal Reserve Act. As of Sept.June 30, 2017,2022, the Parent was in compliance with this policy. For additional information

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 ourthe transfer of liquidity policy, see “Risk Management - Liquidity risk” in our 2016 Annual Report. Our overall approachamong 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 liquidity management is further described in “Liquidityenable BNY Mellon to meet its intraday obligations under normal and dividends” in our 2016 Annual Report.reasonably severe stressed conditions.


We define available funds for internal liquidity management purposes as liquid funds (which includecash 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), cashagreements.
BNY Mellon 33

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

Available fundsJune 30, 2022Dec. 31, 2021Average
(dollars in millions)2Q221Q222Q21YTD22YTD21
Cash and due from banks$5,185 $6,061 $5,640 $6,040 $5,938 $5,839 $5,830 
Interest-bearing deposits with the Federal Reserve and other central banks125,372 102,467 102,844 100,303 114,564 101,600 120,216 
Interest-bearing deposits with banks16,639 16,630 18,097 17,181 22,465 17,641 21,892 
Federal funds sold and securities purchased under resale agreements22,940 29,607 24,212 27,006 27,857 25,602 28,518 
Total available funds$170,136 $154,765 $150,793 $150,530 $170,824 $150,682 $176,456 
Total available funds as a percentage of total assets38 %35 %34 %34 %38 %34 %39 %


Total available funds were $170.1 billion at June 30, 2022, compared with $154.8 billion at Dec. 31, 2021. The increase was primarily due from banks, andto higher interest-bearing deposits with the Federal Reserve and other central banks. The following table presents our total availablebanks, partially offset by lower federal funds including liquid funds, at period endsold and on an average basis.
securities purchased under resale agreements.


Available and liquid fundsSept. 30, 2017
Dec. 31, 2016
Average
(dollars in millions)3Q17
2Q17
3Q16
Available funds:     
Liquid funds:     
Interest-bearing deposits with banks$15,256
$15,086
$15,899
$14,832
$14,066
Federal funds sold and securities purchased under resale agreements27,883
25,801
28,120
26,873
26,376
Total liquid funds43,139
40,887
44,019
41,705
40,442
Cash and due from banks5,557
4,822
4,961
4,972
4,189
Interest-bearing deposits with the Federal Reserve and other central banks75,808
58,041
70,430
69,316
74,102
Total available funds$124,504
$103,750
$119,410
$115,993
$118,733
Total available funds as a percentage of total assets35%31%35%34%34%


We had $43 billion of liquid funds at Sept. 30, 2017 and $41 billionatDec. 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 billion at Sept. 30, 2017, compared with $104 billion at Dec. 31, 2016.
The increase was primarily due to an increase in 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, other borrowed funds and commercial paper were $16.5 billion for the first six months of 2022 and other borrowings, were $31.9$17.1 billion and $25.9 billion, respectively.for the first six months of 2021. The increase


BNY Mellon 33

decrease primarily reflects an increase inlower federal funds purchased and securities sold under repurchase agreements.agreements, partially offset by higher trading liabilities and other borrowed funds.


Average interest-bearing foreign deposits, primarily from our European-based Investmentbusinesses included in the Securities Services business,and Market and Wealth Services segments, were $94.1$104.8 billion for the ninefirst six months ended Sept. 30, 2017,of 2022, compared with $105.6$114.5 billion for the ninefirst six months ended Sept. 30, 2016. Domestic savings,of 2021. Average interest-bearing demand and timedomestic deposits averaged $40.0were $116.4 billion for the ninefirst six months ended Sept. 30, 2017of 2022 and $47.8$127.7 billion for the ninefirst six months ended Sept. 30, 2016.of 2021. The decreasedecreases primarily reflects a decrease in time deposits, partially offset by an increase in demand deposits.reflect client activity.


Average payables to customers and broker-dealers were $19.4$16.6 billion for the ninefirst six months ended Sept. 30, 2017of 2022 and $16.9$17.2 billion for the ninefirst six months ended Sept. 30, 2016. of 2021.
Payables to customers and broker-dealers are driven by customer trading activity and market volatility.


Long-termAverage long-term debt averaged $27.1was $25.9 billion for the ninefirst six months ended Sept. 30, 2017of 2022 and $22.8$25.7 billion for the ninefirst six months ended Sept. 30, 2016, reflecting issuances of long-term debt.2021.


Average noninterest-bearing deposits decreasedincreased to $72.5$91.1 billion for the ninefirst six months ended Sept. 30, 2017of 2022 from $82.9$84.6 billion for the ninefirst six months ended Sept. 30, 2016,of 2021, primarily reflecting a decrease in client deposits.activity.


A significant reduction of client activity in our InvestmentSecurities Services and Market and Wealth Services business segments would reduce our access to deposits. See
“Asset/ “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.intermediate holding company (“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.



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:



34 BNY Mellon

Credit ratings at Sept.June 30, 20172022
Moody’sS&PFitchDBRS
Parent:
Long-term senior debtA1AAA-AA (low)
Subordinated debtA2A-A+AA (high)AA (low)
Preferred stockBaa1BBBBBBBBB+A (low)
Outlook - Parent:– ParentStableStableStableStable
The Bank of New York Mellon:
Long-term senior debtAa2AA-AAAA
Subordinated debtAa3AA+NR
Long-term depositsAa1AA-AA+AA
Short-term depositsP1A-1+F1+R-1 (high)
Commercial paperP1A-1+F1+R-1 (high)
BNY Mellon, N.A.:
Long-term senior debtAa2AA-
AA
(a)AA
Long-term depositsAa1AA-AA+AA
Short-term depositsP1A-1+F1+R-1 (high)
Outlook - Banks:StableStableStableStable
(a)RepresentsLong-term senior debt issuer default rating.Aa2AA-AAAA (high)
Subordinated debtNRANRNR
Long-term depositsAa1AA-AA+AA (high)
Short-term depositsP1A-1+F1+R-1 (high)
Commercial paperP1A-1+F1+R-1 (high)
BNY Mellon, N.A.:
Long-term senior debtAa2(a)AA-
AA
(a)AA (high)
Long-term depositsAa1AA-AA+AA (high)
Short-term depositsP1A-1+F1+R-1 (high)
Outlook – BanksStableStableStableStable
(a)    Represents senior debt issuer default rating.
NR -– Not rated.




Long-term debt totaled $28.4$27.6 billion at Sept.June 30, 20172022 and $24.5$25.9 billion at Dec. 31, 2016. The increase reflects issuances2021. Issuances of $4.75$5.0 billion were partially offset by redemptions of $2.3 billion and a decrease in the maturityfair value of $500 million and the redemption of trust preferred securities.hedged long-term debt. The Parent has $250 million$1.0 billion of long-term debt that will maturematuring in the remainder of 2017.2022.


In August 2017, weJuly 2022, the Parent issued $750 million$1.25 billion of fixed to floating rate senior subordinated notes maturing in 2029 at2026. The annual fixed interest rate is 4.414% from issuance to, but excluding, July 24, 2025, and then an annual interest rate of 3.30%.the compounded secured overnight financing rate (“SOFR”) plus 134.5 basis points. The Parent also issued $500 million of fixed to floating rate senior notes maturing in 2030. The annual fixed interest rate is 4.596% from issuance to, but excluding, July 26, 2029, and then an annual interest rate of SOFR plus 175.5 basis points.


The Bank of New York Mellon our largest bank subsidiary,may issue notes and certificates of deposit (“CDs”). At June 30, 2022 and Dec. 31, 2021, $30 million of notes were outstanding. At June 30, 2022, $20 million of CDs were outstanding. There were no CDs outstanding at Dec. 31, 2021.

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 billion in the third quarter of 2017 and $1.2 billion in the third quarter of 2016. Commercial paper outstanding was $2.5 billion at Sept. 30, 2017. There was no commercial paper outstanding at June 30, 2022 and Dec. 31, 2016.2021. The average commercial

paper outstanding was $5 million for the first six months of 2022. There was no average commercial paper outstanding for the first six months of 2021.

Subsequent to Sept.June 30, 2017,2022, our U.S. bank subsidiaries could declare dividends to the Parent of approximately $6.2$2.3 billion, without the need for a regulatory waiver. In addition, at Sept.June 30, 2017,2022, non-bank subsidiaries of the Parent had liquid assets of approximately $1.6$3.3 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, both in our 20162021 Annual Report.


Pershing LLC has uncommitted lines of credit in place for liquidity purposes which are guaranteed by the Parent. Pershing LLC has eighttwo separate uncommitted lines of credit amounting to $1.5 billion$350 million in aggregate. There were no average borrowings under these lines in the thirdsecond quarter of 2017.2022. Pershing Limited, an indirect UK-based subsidiary of BNY Mellon, has two separate uncommitted lines of credit amounting to $250$254 million in aggregate. Average borrowings under these lines were $6$5 million, in aggregate, in the thirdsecond quarter of 2017.2022.


BNY Mellon 35

The double leverage ratio is the ratio of our equity investment in subsidiaries divided by our consolidated parentParent 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 depositsdeposit placements and government securities), the Company’s cash generating fee-based business model, with feesfee revenue representing approximately 80%78% of total revenue in the second quarter of 2022, and the dividend capacity of our banking subsidiaries. Our double leverage ratio was 123.2%119.2% at Sept.June 30, 20172022 and 119.1%119.3% at Dec. 31, 2016,2021, 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 2022, a quarterly cash dividend of $0.34 per common share was paid to common shareholders of $0.24 per common share.shareholders. Our common stock dividend payout ratio was 23%33% for the first nine monthssecond quarter of 2017.2022.

In July, our Board of Directors approved a 9% increase in the quarterly cash dividend on common stock, from $0.34 to $0.37 per share. The Federal Reserve’s instructions forincreased quarterly cash dividend is expected to be paid on Aug. 5, 2022.

In June 2021, our Board of Directors authorized the 2017 CCAR provided that, for large bank holding companies like us, dividend payout ratios exceeding 30%repurchase of after-tax net income would receive particularly close scrutiny.

Inup to $6.0 billion of common shares over the six quarters beginning in the third quarter of 2017,2021 and continuing through the fourth quarter of 2022. This new share repurchase plan replaced all previously authorized share repurchase plans.

In the second quarter of 2022, we repurchased 12 million46 thousand common shares at an average price of $52.74$60.87 per common share, for a total cost of $650$3 million.


Liquidity coverage ratio (“LCR”)


U.S. regulators have established an LCR that requires certain banking organizations, including BNY Mellon, to maintain a minimum amount of unencumbered high qualityhigh-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 theBNY Mellon’s consolidated HQLA at Sept.June 30, 2017,2022, and the average HQLA and average LCR for the thirdsecond quarter of 2017.2022.


Consolidated HQLA and LCRSept. 30, 2017
(dollars in billions)
Securities (a)
$105
Cash (b)
70
Total consolidated HQLA (c)
$175
  
Total consolidated HQLA - average (c)
$162
Average LCR119%
Consolidated HQLA and LCRJune 30, 2022
(dollars in billions)
Cash (a)
$125
Securities (b)
110
Total consolidated HQLA (c)
$235
(a)
Total consolidated HQLA – average (c)
Primarily includes U.S. Treasury, U.S. agency, sovereign securities, securities of U.S. government-sponsored enterprises, investment-grade corporate debt and publicly traded common equity.$
212
(b)Average LCRPrimarily includes cash on deposit with central banks.111%
(c)Consolidated HQLA presented before adjustments. After haircuts and the impact of trapped liquidity, consolidated HQLA totaled $137 billion at Sept. 30, 2017 and averaged $126 billion for the third quarter of 2017.


(a)    Primarily includes cash on deposit with central banks.
The(b)    Primarily includes securities of U.S. LCR rule became fully phased-in on Jan. 1, 2017government-sponsored enterprises, U.S. Treasury, sovereign securities, U.S. agency and requires investment-grade corporate debt.
(c)    Consolidated HQLA presented before adjustments. After haircuts and the impact of trapped liquidity, consolidated HQLA totaled $163 billion at June 30, 2022 and averaged $146 billion for the second quarter of 2022.


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 waswere compliant with the U.S. LCR requirements forof at least 100% throughout the thirdsecond 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.2022.


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$8.4 billion in the ninesix months ended Sept.June 30, 2017,2022, compared with $1.6 billionnet cash used for operating activities of $345 million in the ninesix months ended Sept.June 30, 2016.
36 BNY Mellon

2021. In the first ninesix months of 2017,ended June 30, 2022, cash flows provided by operations were principally the result ofprimarily resulted from changes in trading assets and liabilities and earnings. In the first ninesix months of 2016,ended June 30, 2021, cash flows provided byused for operations were principally the result of earnings andprimarily resulted from changes in trading activities,accruals, partially offset by changes in accruals.earnings.


Net cash used for investing activities was $14.0$24.6 billion in the ninesix months ended Sept.June 30, 2017,2022, compared with net cash provided by investing activities
of $21.1$3.9 billion in the ninesix months ended Sept.June 30, 2016.2021. In the first ninesix months of 2017,ended June 30, 2022, net cash used for investing activities primarily reflects changes 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, 2021, net cash provided by investing activities primarily reflects changes in interest-bearing deposits with the Federal Reserve and other

central banks, partially offset by net changes in loans and changes in interest-bearing deposits with banks.

Net cash provided by financing activities was $11.2$15.6 billion in the ninesix months ended Sept.June 30, 2017,2022, compared with net cash used for financing activities of $24.2$3.5 billion in the ninesix months ended Sept.June 30, 2016.2021. In the first ninesix months of 2017, theended June 30, 2022, net cash provided by financing activities primarily reflects changes in deposits and net proceeds from the issuance of long-term debt, partially offset by repayments of long-term debt. In the six months ended June 30, 2021, net cash used for financing activities primarily reflects repayments of long-term debt, changes in deposits, changes in payables to customers and increases in commercial paperbroker-dealers and other borrowed funds were significant sources of funds,treasury stock acquired, partially offset by common stock repurchased. Innet proceeds from the first nine monthsissuance of 2016, changes in deposits,long-term debt and 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.agreements.




Capital


Capital dataJune 30, 2022March 31, 2022Dec. 31, 2021
(dollars in millions, except per share amounts; common shares in thousands)
BNY Mellon shareholders’ equity to total assets ratio9.1 %8.8 %9.7 %
BNY Mellon common shareholders’ equity to total assets ratio8.0 %7.8 %8.6 %
Total BNY Mellon shareholders’ equity$40,984 $41,799 $43,034 
Total BNY Mellon common shareholders’ equity$36,146 $36,961 $38,196 
BNY Mellon tangible common shareholders’ equity – Non-GAAP (a)
$17,796 $18,388 $19,547 
Book value per common share$44.73 $45.76 $47.50 
Tangible book value per common share – Non-GAAP (a)
$22.02 $22.76 $24.31 
Closing stock price per common share$41.71 $49.63 $58.08 
Market capitalization$33,706 $40,091 $46,705 
Common shares outstanding808,103 807,798 804,145 
Cash dividends per common share$0.34 $0.34 $0.34 
Common dividend payout ratio33 %40 %34 %
Common dividend yield3.3 %2.8 %2.3 %
Capital data
(dollar amounts in millions except per share amounts; common shares in thousands)
Sept. 30, 2017
June 30, 2017
Dec. 31, 2016
Average common equity to average assets10.6%10.5%10.2%
    
At period end:   
BNY Mellon shareholders’ equity to total assets ratio11.4%11.3%11.6%
BNY Mellon common shareholders’ equity to total assets ratio10.4%10.3%10.6%
Total BNY Mellon shareholders’ equity$40,523
$39,974
$38,811
Total BNY Mellon common shareholders’ equity$36,981
$36,432
$35,269
BNY Mellon tangible common shareholders’ equity – Non-GAAP (a)
$18,630
$18,106
$16,957
Book value per common share (a)
$36.11
$35.26
$33.67
Tangible book value per common share – Non-GAAP (a)
$18.19
$17.53
$16.19
Closing stock price per common share$53.02
$51.02
$47.38
Market capitalization$54,294
$52,712
$49,630
Common shares outstanding1,024,022
1,033,156
1,047,488
    
Cash dividends per common share$0.24
$0.19
$0.19
Common dividend payout ratio26%22%25%
Common dividend yield1.8%1.5%1.6%
(a)See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 49 for a reconciliation of GAAP to Non-GAAP.

(a)    See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 45 for a reconciliation of GAAP to Non-GAAP.




BNY Mellon 37


The Bank of New York Mellon Corporation total shareholders’ equity increaseddecreased to $40.5$41.0 billion at Sept.June 30, 20172022 from $38.8$43.0 billion at Dec. 31, 2016.2021. The increasedecrease primarily reflects earnings,unrealized losses on securities available-for-sale, foreign currency translation adjustments, $638 million resulting from stock awards, the exercise of stock options and stock issued for employee benefit plans, and the unrealized gain in our investment securities portfolio,dividend payments, partially offset by share repurchases and dividends.earnings.


The unrealized gain, net of tax,loss (after-tax) on our available-for-sale investment securities portfolio, recordednet of hedges, included in accumulated other comprehensive income was $226 million$2.0
billion at Sept.June 30, 2017,2022, compared with $45an unrealized gain (after-tax), net of hedges, of $362 million at Dec. 31, 2016.2021. The increase in the unrealized gain,loss, net of tax, was primarily driven by a decrease in long-termhigher 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 quarterfirst six months of 2017,2022, we repurchased 122.0 million common shares at an average price of $52.74$61.62 per common share for a total cost of $650$121 million.


Also included
BNY Mellon 37

In June 2021, our Board of Directors authorized the repurchase of up to $6.0 billion of common shares over the six quarters beginning in the 2017 capitalthird quarter of 2021 and continuing through the fourth quarter of 2022. This new share repurchase plan wasreplaced all previously authorized share repurchase plans.

In July, our Board of Directors approved a 26%9% increase in the quarterly cash dividend on common stock, from $0.34 to $0.24$0.37 per common share. The first payment of the increased quarterly cash dividend was madeis expected to be paid on Aug. 11, 2017.5, 2022.


Capital adequacy


Regulators establish certain levels of capital for bank holding companies (“BHCs”) and banks, including BNY Mellon and our bank subsidiaries, in accordance with established quantitative measurements. For the Parent to maintain its status as a financial holding company (“FHC”), our U.S. bank subsidiaries and BNY Mellon must, among other things, qualify as “well capitalized.”

As of Sept. June
30, 20172022 and Dec. 31, 2016, 2021, 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– Capital and Liquidity Risk -– Failure to satisfy regulatory standards, including “well capitalized” and “well managed” status or capital adequacy and liquidity rules more generally, could result in limitations on our activities and adversely affect our business and financial condition”condition,” both of which are in our 20162021 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 20162021 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 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.





38 BNY Mellon

The table below presents our consolidated and largest bank subsidiary regulatory capital ratios.
The transitional capital ratios
Consolidated and largest bank subsidiary regulatory capital ratiosJune 30, 2022March 31, 2022Dec. 31, 2021
Well capitalizedMinimum requiredCapital
ratios		Capital
ratios		Capital
ratios
(a)
Consolidated regulatory capital ratios: (b)
Advanced Approaches:
CET1 ratioN/A(c)8.5 %10.0 %10.4 %11.4 %
Tier 1 capital ratio6 %10 12.8 13.2 14.2 
Total capital ratio10 12 13.6 13.9 15.0 
Standardized Approach:
CET1 ratioN/A(c)8.5 %10.1 %10.1 %11.2 %
Tier 1 capital ratio6 %10 12.9 12.9 14.0 
Total capital ratio10 12 13.8 13.7 14.9 
Tier 1 leverage ratioN/A(c)4 5.2 5.3 5.5 
SLR (d)
N/A(c)5 6.2 6.2 6.6 
The Bank of New York Mellon regulatory capital ratios: (b)
Advanced Approaches:
CET1 ratio6.5 %7 %14.4 %15.1 %16.5 %
Tier 1 capital ratio8 8.5 14.4 15.1 16.5 
Total capital ratio10 10.5 14.5 15.1 16.5 
Tier 1 leverage ratio5 4 5.8 5.9 6.0 
SLR (d)
6 3 7.2 7.1 7.6 
(a)    Minimum requirements 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 ratiosSept. 30, 2017    
Well capitalized
 Minimum
required
 
Capital
ratios

 June 30, 2017
 Dec. 31, 2016
 (a)  
Consolidated regulatory capital ratios: (b)
         
Standardized Approach:         
CET1 ratioN/A
(c)6.5% 12.3% 12.0% 12.3%
Tier 1 capital ratio6% 8
 14.6
 14.3
 14.5
Total (Tier 1 plus Tier 2) capital ratio10
 10
 15.6
 14.8
 15.2
Advanced Approach:         
CET1 ratioN/A
(c)6.5% 11.1% 10.8% 10.6%
Tier 1 capital ratio6% 8
 13.2
 12.9
 12.6
Total (Tier 1 plus Tier 2) capital ratio10
 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 Approach8.5%(e)6.5% 11.9% 11.5% 11.3%
Advanced Approach8.5
(e)6.5
 10.7
 10.4
 9.7
Estimated SLR5
(e)3
 6.1
 6.0
 5.6
          
The Bank of New York Mellon regulatory capital ratios: (b)
         
Advanced Approach:         
CET1 ratio6.5% 5.75% 14.8% 14.1% 13.6%
Tier 1 capital ratio8
 7.25
 15.1
 14.4
 13.9
Total (Tier 1 plus Tier 2) capital ratio10
 9.25
 15.5
 14.8
 14.2
Leverage capital ratio5
 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 SLR6% 3% 6.8% 6.7% 6.1%
(a)
Minimum requirements for Sept. 30, 20172022 include Basel III minimum thresholds plus currently applicable buffers.
(b)
For our CET1, Tier 1 capital and Total capital ratios, our effective capital ratios under U.S. capital rules are the lower of the ratios as calculated under the Standardized and Advanced Approaches. The leverage capital ratio is based on Tier 1 capital, as phased-in and quarterly average total assets.
(c)
The Federal Reserve’s regulations do not establish well capitalized thresholds for these measures for bank holding companies.
(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 certain off-balance sheet exposures.
(e)
Fully phased-in Basel III minimum with expected buffers. See page 41 for the capital ratios with the phase-in of the capital conservation buffer and the U.S. G-SIB surcharge, as well as the introduction of the SLR buffer.


Our CET1 ratio determined under the Advanced Approach was 11.1% at Sept. 30, 2017 and 10.6% at Dec. 31, 2016. The increase primarily reflects CET1 generation, partially offset by the additional phase-in requirements under the U.S. capital rules that became effective Jan. 1, 2017.

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”G-SIB”), 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 surcharge 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, 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%1.5%. 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 Mellon0%. The SCB requirement 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%2.5%, 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 capital ratio requirements with buffers and surcharges, as phased-in, applicableequal to the Parentregulatory minimum for Standardized Approach capital ratios.
(b)    For our CET1, Tier 1 capital and The Bank of New York Mellon. This table does not include the imposition of a countercyclicalTotal capital buffer. Theratios, our effective capital ratios under 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 thanlower of the SLR buffer, and surcharge began to phase-in on Jan. 1, 2016 and will be fully implemented on Jan. 1, 2019.


40 BNY Mellon

Capital ratio requirementsWell 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 ratioN/A
 4.5% 6.5% 7.5% 8.5% 
Tier 1 capital ratio6.0% 6.0% 8.0% 9.0% 10.0% 
Total capital ratio10.0% 8.0% 10.0% 11.0% 12.0% 
           
Enhanced SLR buffer (Tier 1 capital)N/A
   N/A
 2.0% 2.0% 
SLRN/A
 3.0% N/A
 5.0% 5.0% 
           
Bank subsidiaries: (c)
          
CET1 ratio6.5% 4.5% 5.75% 6.375% 7.0% 
Tier 1 capital ratio8.0% 6.0% 7.25% 7.875% 8.5% 
Total capital ratio10.0% 8.0% 9.25% 9.875% 10.5% 
           
SLR6.0% 3.0% N/A
 6.0%(d)6.0%(d)
(a)
Countercyclical capital buffer currently set to 0%.
(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.


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

Estimated CET1 generationQuarter ended Sept. 30, 2017
(in millions)
Transitional basis (a)

Fully phased-in - Non-GAAP (b)

CET1 – Beginning of period$18,371
$17,629
Net income applicable to common shareholders of The Bank of New York Mellon Corporation983
983
Goodwill and intangible assets, net of related deferred tax liabilities(33)(26)
Gross CET1 generated950
957
Capital deployed:  
Common stock dividends(253)(253)
Common stock repurchased(650)(650)
Total capital deployed(903)(903)
Other comprehensive income:  
Foreign currency translation281
281
Unrealized loss on assets available-for-sale13
16
Defined benefit plans12
15
Total other comprehensive income306
312
Additional paid-in capital (c)
156
156
Other additions (deductions):  
Deferred tax assets(1)(2)
Embedded goodwill(9)(8)
Total other deductions(10)(10)
Net CET1 generated499
512
CET1 – End of period$18,870
$18,141
(a)Reflects transitional adjustments to CET1 requiredratios as calculated 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 Tier 1 leverage ratio is based on Tier 1 capital and quarterly average total assets.
(c)    The Federal Reserve’s regulations do not establish well capitalized thresholds for these measures for BHCs.
(d)    The SLR is based on Tier 1 capital and total leverage exposure, which includes certain off-balance sheet exposures.
38 BNY Mellon

Our CET1 ratio was 10.0% under the Advanced Approaches at June 30, 2022 and 11.2% at Dec. 31, 2021 under the average assetsStandardized Approach. The decrease was primarily driven by unrealized losses on securities available-for-sale, foreign currency translation, capital deployed through dividends and higher RWAs, partially offset by capital generated through earnings.

In the first quarter of 2022, we implemented the Standardized Approach for Counterparty Credit Risk (“SA-CCR”), which replaced the current exposure method used to measure derivative counterparty exposure. This resulted in increases to the RWA of $4 billion for leverage capital purposesthe Advanced Approaches and $6 billion for the Standardized Approach, as well as an increase of $8 billion in the total leverage exposure used for estimatedthe SLR purposes.at March 31, 2022.


Capital components and ratiosSept. 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 CET118,870
18,141

18,371
17,629
 18,093
16,490
Other Tier 1 capital:        
Preferred stock3,542
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 losses265
265
 270
270
 281
281
Trust preferred securities—
—
 —
—
 148
—
Other(7)(7) (7)(7) (12)(11)
Total Tier 2 capital - Standardized Approach1,558
1,508

813
813
 967
820
Excess of expected credit losses49
49
 59
59
 50
50
Less: Allowance for credit losses265
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 Risk2,996
2,996
 3,225
3,225
 2,836
2,836
Operational Risk68,625
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 ratio12.3%11.9% 12.0%11.5% 12.3%11.3%
Tier 1 capital ratio14.6
14.2
 14.3
13.9
 14.5
13.6
Total (Tier 1 plus Tier 2) capital ratio15.6
15.1
 14.8
14.4
 15.2
14.2
Advanced Approach:        
CET1 ratio11.1%10.7% 10.8%10.4% 10.6%9.7%
Tier 1 capital ratio13.2
12.8
 12.9
12.5
 12.6
11.8
Total (Tier 1 plus Tier 2) capital ratio14.0
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 underTier 1 leverage ratio was 5.2% at June 30, 2022, compared with 5.5% at Dec. 31, 2021. The decrease reflects the U.S. capital rules.
(b)Estimated.



42 BNY Mellon

The following table shows the impact on the consolidated capital ratios at Sept. 30, 2017 of a $100 million increase or decrease in common equity, or a $1 billion increase or decrease in RWAs, quarterlycapital, partially offset by lower average assets or total leverage exposure.assets.


Sensitivity of consolidated capital ratios at Sept. 30, 2017
 Increase or decrease of
(in basis points)
$100 million
in common 
equity
$1 billion in 
RWA, quarterly
average assets or total leverage exposure
CET1:    
Standardized Approach7bps8bps
Advanced Approach6 7 
     
Tier 1 capital:    
Standardized Approach7 10 
Advanced Approach6 8 
     
Total capital:    
Standardized Approach7 10 
Advanced Approach6 8 
     
Leverage capital3 2 
     
SLR3 2 
     
Estimated CET1 ratio, fully phased-in – Non-GAAP:    
Standardized Approach7 8 
Advanced Approach6 6 
     
Estimated SLR, fully phased-in – Non-GAAP3 2 
CapitalRisk-based capital ratios vary depending on the size of the balance sheet at quarter-endperiod-end and the levels and types of investments in assets.assets, and leverage ratios vary based on the average size of the balance sheet over the quarter. The balance sheet size fluctuates from quarterperiod to quarterperiod 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

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 has presentedmay make to its consolidatedbusinesses. As a consequence of these factors, our capital ratios may materially change, and largest bank subsidiary’s estimated fully phased-in SLRs based on its interpretationmay be volatile over time and from period to period.

Under the Advanced Approaches, our operational loss risk model is informed by external losses, including fines and penalties levied against institutions in the financial services industry, particularly those that
relate to businesses in which we operate, and as a result, external losses have impacted and could in the future impact the amount of the U.S. capital rules, whichthat we are being gradually phased-in over a multi-year period and on the application of such rulesrequired to BNY Mellon’s businesses as currently conducted.hold.



BNY Mellon 43


The following table presents theour capital components of our SLR on both the transitional and fully phased-in basis for RWAs.

Capital components and risk-weighted assets
June 30, 2022March 31, 2022Dec. 31, 2021
(in millions)
CET1:
Common shareholders’ equity$36,146 $36,961 $38,196 
Adjustments for:
Goodwill and intangible assets (a)
(18,350)(18,573)(18,649)
Net pension fund assets(388)(410)(400)
Embedded goodwill(291)(301)(300)
Deferred tax assets(53)(55)(55)
Other3 (43)(46)
Total CET117,067 17,579 18,746 
Other Tier 1 capital:
Preferred stock4,838 4,838 4,838 
Other(81)(82)(99)
Total Tier 1 capital$21,824 $22,335 $23,485 
Tier 2 capital:
Subordinated debt$1,248 $1,248 $1,248 
Allowance for credit losses300 253 250 
Other(6)(1)(11)
Total Tier 2 capital – Standardized Approach1,542 1,500 1,487 
Excess of expected credit losses46 — — 
Less: Allowance for credit losses300 253 250 
Total Tier 2 capital – Advanced Approaches$1,288 $1,247 $1,237 
Total capital:
Standardized Approach$23,366 $23,835 $24,972 
Advanced Approaches$23,112 $23,582 $24,722 
Risk-weighted assets:
Standardized Approach$169,710 $173,629 $167,608 
Advanced Approaches:
Credit Risk$97,703 $102,049 $98,310 
Market Risk3,541 2,942 3,069 
Operational Risk68,675 64,100 63,688 
Total Advanced Approaches$169,919 $169,091 $165,067 
Average assets for Tier 1 leverage ratio$418,467 $420,778 $430,102 
Total leverage exposure for SLR$351,552 $361,464 $354,033 
(a)    Reduced by deferred tax liabilities associated with intangible assets and tax-deductible goodwill.
BNY Mellon and our largest bank subsidiary, The Bank of New York Mellon.39


The table below presents the factors that impacted CET1 capital.
SLRSept. 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 capital18,154
18,856
 18,092
18,810
 17,333
18,887
Total on-balance sheet assets, as adjusted327,555
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 exposures1,034
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 exposures29,107
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%

CET1 generation2Q22
(in millions)
CET1 – Beginning of period$17,579
Net income applicable to common shareholders of The Bank of New York Mellon Corporation835
Goodwill and intangible assets, net of related deferred tax liabilities223
Gross CET1 generated1,058
Capital deployed:
Common stock dividends (a)
(279)
Common stock repurchases(3)
Total capital deployed(282)
Other comprehensive loss:
Unrealized loss on assets available-for-sale(882)
Foreign currency translation(552)
Unrealized loss on cash flow hedges(5)
Defined benefit plans13
(a)Total other comprehensive lossEstimated.(1,426)
Additional paid-in capital (b)
58
Other additions:
Net pension fund assets22
Embedded goodwill10
Deferred tax assets2
Other46
Total other additions80
Net CET1 deployed(512)
CET1 – End of period$17,067
(a)    Includes dividend-equivalents on share-based awards.
(b)    Primarily related to stock awards, the exercise of stock options and stock issued for employee benefit plans.


The following table shows the impact on the consolidated capital ratios at June 30, 2022 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 June 30, 2022
 Increase or decrease of
(in basis points)$100 million
in common 
equity		$1 billion in RWA, quarterly average assets or total leverage exposure
CET1:
Standardized Approach6bps6bps
Advanced Approaches66
Tier 1 capital:
Standardized Approach68
Advanced Approaches68
Total capital:
Standardized Approach68
Advanced Approaches68
Tier 1 leverage21
SLR32
Stress capital buffer

In August 2021, the Federal Reserve announced that BNY Mellon’s SCB requirement would be 2.5%, equal to the regulatory floor, effective as of Oct. 1, 2021. The SCB replaced the static 2.5% capital conservation buffer for Standardized Approach capital ratios for CCAR BHCs. The SCB does not apply to bank subsidiaries, which remain subject to the static 2.5% capital conservation buffer. In June 2022, the Federal Reserve notified BNY Mellon that its SCB requirement will remain at 2.5%, effective from Oct. 1, 2022. See “Recent Regulatory Developments” in this Form 10-Q and “Supervision and Regulation” in our 2021 Annual Report for additional information.

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

Total Loss-Absorbing Capacity (“TLAC”)

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

(b)The estimated fully phased-in SLR (Non-GAAP) is based on our interpretation
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 ratiosRegulatory minimum of 6% plus the greater 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% SLR to be considered “well-capitalized.”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.
(c)    Buffer to be 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
40 BNY Mellon

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 ratiosJune 30, 2022
Minimum
required		Minimum ratios
with buffers
Ratios
Eligible external TLAC:
As a percentage of RWA18.0 %21.5 %27.5 %
As a percentage of total leverage exposure7.5 %9.5 %13.3 %
Eligible external LTD:
As a percentage of RWA7.5 %N/A13.0 %
As a percentage of total leverage exposure4.5 %N/A6.3 %
N/A – Not applicable.


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


Trading activities and risk management


Our trading activities are focused on acting as a market-maker for our customers, facilitating customer trades and risk mitigatingrisk-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 widefirm-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 16 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

VaR (a)
2Q22June 30, 2022
(in millions)AverageMinimumMaximum
Interest rate$5.8 $4.0 $9.3 $6.5 
Foreign exchange3.7 2.7 10.2 3.3 
Equity0.4 0.2 0.9 0.3 
Credit1.7 1.0 3.8 1.8 
Diversification(4.7)N/MN/M(4.7)
Overall portfolio6.9 4.7 11.4 7.2 


VaR (a)
1Q22March 31, 2022
(in millions)AverageMinimumMaximum
Interest rate$3.4 $1.6 $6.9 $4.3 
Foreign exchange3.3 2.2 6.0 3.6 
Equity0.2 — 0.5 0.2 
Credit2.2 1.5 3.3 2.0 
Diversification(4.2)N/MN/M(3.9)
Overall portfolio4.9 2.8 8.1 6.2 


VaR (a)
2Q21June 30, 2021
(in millions)AverageMinimumMaximum
Interest rate$2.2 $1.6 $2.7 $1.9 
Foreign exchange2.6 1.9 3.7 2.3 
Equity0.1 — 0.3 0.2 
Credit1.8 1.4 2.6 2.0 
Diversification(3.7)N/MN/M(3.5)
Overall portfolio3.0 2.5 4.5 2.9 


BNY Mellon 41

VaR (a)
YTD22
(in millions)AverageMinimumMaximum
Interest rate$4.6 $1.6 $9.3 
Foreign exchange3.5 2.2 10.2 
Equity0.3 — 0.9 
Credit2.0 1.0 3.8 
Diversification(4.5)N/MN/M
Overall portfolio5.9 2.8 11.4 


VaR (a)
YTD21
(in millions)AverageMinimumMaximum
Interest rate$2.1 $1.6 $2.7 
Foreign exchange2.7 1.9 3.9 
Equity0.1 — 0.9 
Credit1.8 1.3 2.8 
Diversification(3.6)N/MN/M
Overall portfolio3.1 2.5 4.9 
(a)    VaR exposure does not include the impact of changes in methodology is not material.the Company’s consolidated investment management funds and seed capital investments.

VaR (a)
3Q17Sept. 30, 2017
(in millions)Average
Minimum
Maximum
Interest rate$3.3
$2.8
$4.2
$2.7
Foreign exchange3.7
3.1
5.6
4.8
Equity0.9
0.8
1.1
0.9
Credit1.0
0.6
1.4
1.0
Diversification(5.1)N/M
N/M
(5.3)
Overall portfolio3.8
3.2
5.3
4.1

VaR (a)
2Q17June 30, 2017
(in millions)Average
Minimum
Maximum
Interest rate$3.3
$2.8
$4.1
$4.0
Foreign exchange4.3
3.4
5.8
4.6
Equity0.2
0.1
1.1
1.1
Credit1.1
0.5
1.4
0.8
Diversification(4.8)N/M
N/M
(5.8)
Overall portfolio4.1
3.3
5.4
4.7

VaR (a)
YTD17
(in millions)Average
Minimum
Maximum
Interest rate$3.5
$2.8
$4.9
Foreign exchange3.9
2.6
5.8
Equity0.4
0.1
1.1
Credit1.1
0.5
1.7
Diversification(4.9)N/M
N/M
Overall portfolio4.0
3.2
5.4
(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)
3Q16Sept. 30, 2016
(in millions)Average
Minimum
Maximum
Interest rate$7.3
$5.4
$8.9
$7.9
Foreign exchange4.2
3.2
7.5
3.7
Equity0.6
0.5
0.8
0.6
Credit0.3
0.3
0.4
0.4
Diversification(5.8)N/M
N/M
(5.7)
Overall portfolio6.6
5.0
7.7
6.9

VaR (a)
YTD16
(in millions)Average
Minimum
Maximum
Interest rate$6.3
$4.3
$8.9
Foreign exchange2.8
1.2
11.1
Equity0.6
0.4
0.8
Credit0.3
0.2
0.4
Diversification(4.0)N/M
N/M
Overall portfolio6.0
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 interest rate component of VaR represents instruments whose values are predominantly vary with the level or volatility ofdriven by 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 thedriven by credit worthiness of counterparties.spread levels, i.e., idiosyncratic default risk. These instruments include, but are not limited to, single
issuer credit derivatives (credit default swaps, and exchange-traded credit index instruments) andsecurities 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 thirdsecond quarter of 2017,2022, interest rate risk generated 37%50% of average gross VaR, foreign exchange risk generated 42%32% of average gross VaR, equity risk accounted for 10%generated 3% of average gross VaR and credit risk generated 11%15% of average gross VaR. During the thirdsecond quarter of 2017,2022, our daily trading loss did not exceed our calculated VaR amount of the overall portfolio.


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


Distribution of trading revenue (loss) (a)
Quarter ended
(dollars in millions)June 30, 2022March 31, 2022Dec. 31, 2021Sept. 30, 2021June 30, 2021
Revenue range:Number of days
Less than $(2.5)1 1 — — — 
$(2.5) – $04 8 3 2 7 
$0 – $2.510 12 27 23 22 
$2.5 – $5.024 23 21 30 25 
More than $5.024 18 12 9 10 
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) – $01
2
1
3
6
$0 – $2.529
31
31
28
22
$2.5 – $5.029
27
26
23
25
More than $5.04
4
4
7
11
(a)(a)    Trading revenue (loss) includes realized and unrealized gains and losses primarily related to spot and forward foreign exchange transactions, derivatives and securities trades for our customers and excludes any associated commissions, underwriting fees and net interest revenue.




Trading assets include debt and equity instruments and derivative assets, primarily interest rate and foreign exchange contracts, not designated as hedging instruments. Trading assets were $4.7$10.8 billion at Sept.June 30, 20172022 and $5.7$16.6 billion atDec. 31, 2016.2021.


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, 20172022 and $4.4$5.5 billion at Dec. 31, 2016.2021.


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,
42 BNY Mellon

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, 2017,2022, our OTC derivative assets, including those in hedging relationships, of $3.6 billion included a CVAcredit valuation adjustment (“CVA”) deduction of $30$23 million. Our OTC derivative liabilities, including those in hedging relationships, of $3.2$2.4 billion included a debit valuation adjustment (“DVA”) of $2$4 million related to our own credit spread. Net of hedges, the CVA decreased by $1 million and the DVA was unchangedincreased by $1 million in the thirdsecond quarter of 2017.2022, which increased investment and other revenue - other trading revenue by $2 million. The net impact decreased investment and other revenue - other trading revenue by less than $1 million in the first quarter of these adjustments2022 and increased foreign exchangeinvestment and other revenue - other trading revenue by $1 million in the third quarter of 2017.

In the second quarter of 2017, net of hedges, the CVA 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 2017.2021.

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 quarter of 2016.


The table below summarizes the riskdistribution of credit ratings for our foreign exchange and interest rate derivative counterparty credit exposure duringcounterparties over the past five quarters. This informationquarters, which indicates the degreelevel of risk to which we are exposed.counterparty credit associated with these trading activities. Significant changes in counterparty credit ratings classifications for ourcould alter the level of credit risk faced by BNY Mellon. Total exposure to foreign exchange and other trading activity could resultinterest rate derivative counterparties with an A+ to A- rating, and in the aggregate, increased risk for us.at June 30, 2022 compared with June 30, 2021.

Foreign exchange and other trading counterparty risk rating profile (a)
Quarter ended
June 30, 2022March 31, 2022Dec. 31, 2021Sept. 30, 2021June 30, 2021
Rating:
AAA to AA-36 %39 %51 %52 %52 %
A+ to A-44 47 27 17 19 
BBB+ to BBB-14 11 18 25 24 
BB+ and
lower (b)
6 3 4 6 5 
Total100 %100 %100 %100 %100 %
(a)    Represents credit rating agency equivalent of internal credit ratings.
(b)    Non-investment grade.



46 BNY Mellon

Foreign exchange and other trading counterparty risk
rating profile (a)
 Quarter ended
 Sept. 30, 2017
June 30,
2017
March 31,
2017
Dec. 31, 2016
Sept. 30, 2016
Rating:     
AAA to AA-41%44%43%35%45%
A+ to A-30
27
36
39
32
BBB+ to BBB-24
22
17
22
19
Noninvestment grade (BB+ and lower)5
7
4
4
4
Total100%100%100%100%100%
(a)Represents credit rating agency equivalent of internal credit ratings.


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 areinclude 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. revenue between a baseline scenario and hypothetical interest rate scenarios. Interest rate sensitivity is quantified by calculating the change in pre-tax net interest revenue between the scenarios over a 12-month measurement period.

The modelbaseline scenario incorporates the market’s forward rate expectations and management’s assumptions regarding interestclient deposit rates, balance changes on core deposits, marketcredit spreads, changes in the prepayment behavior of loans and securities and the impact of
derivative financial instruments used for interest rate risk management purposes.purposes as of June 30, 2022. 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. Client deposit levels and mix are key assumptions impacting net interest revenue in the baseline as well as the hypothetical interest rate scenarios. The earnings simulation model assumes static deposit levels and mix and it also assumes that no management actions will be taken to mitigate the effects of interest rate changes. Typically, the baseline scenario uses the average deposit balances of the quarter.


TheIn the table below, relies on certain critical assumptions regardingwe use the balance sheet and depositors’ behavior relatedearnings 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 various interest rate ramp scenarios from a baseline scenario. The interest rate ramp scenarios are reviewed to examineassess the impact of largevarious hypothetical interest rate movements.scenarios compared to the baseline scenario. In each scenario,of the scenarios, all currenciescurrencies’ interest rates are instantaneously shifted higher or lower. InterestThe scenarios assume instantaneous rate sensitivity is quantified by calculatingchanges at the change in pre-tax netstart of the forecast. Long-term interest revenue between the scenarios over a 12-month measurement period.rates are defined as all tenors equal to or

BNY Mellon 43

greater than three years and short-term interest rates are defined as all tenors equal to or less than three months. Interim term points are interpolated where applicable. The scenarios are intended to provide information on a basis that is consistent with industry practice.

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


Estimated changes in net interest revenue
(in millions)
June 30, 2022March 31, 2022June 30, 2021
Up 100 bps rate shock vs. baseline$161 $268 $857 
Long-term up 100 bps, short-term unchanged42 24 214 
Short-term up 100 bps, long-term unchanged119 245 643 
Long-term down 50 bps, short-term unchanged(18)(20)(113)
Down 100 bps rate shock vs. baseline(370)(315)648 
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 decrease in nearly all of the rate sensitivities compared with March 31, 2022 was primarily due to a higher 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 thedriven by higher market rates.
methodology as of Dec. 31, 2016 as we believe usingWhile the spot yield curve for the baseline scenario provides a more accurate reflection of net interest revenue sensitivity given the recent increasescenario calculations assume static deposit balances to facilitate consistent period-over-period comparisons, it is likely that a portion of deposits would run off in a rising short-term rate environment. Noninterest-bearing deposits are particularly sensitive to changes in short-term interest rates andrates.

To illustrate the implied forward rates. Because interest rates and 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. The 100 basis point ramp scenario assumes rates increase 25 basis points above 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 net interest revenue sensitivity table above incorporates assumptions aboutto deposit run-off, we estimate that a $5 billion instantaneous reduction of U.S. dollar denominated noninterest-bearing deposits would reduce the impact of changes innet interest rates on depositor behavior based on historical experience. Given the current historically low interest rate environment and the potential change to the implementation of monetary policy, the impact of depositor behavior is highly uncertain. The lowerrevenue sensitivity results in the ramp up 200100 basis point scenario compared with the 100 basis point scenario is driven by the assumption of increased deposit runoff and forecasted changesbaseline in the deposit pricing.table above by approximately $205 million. The impact would be smaller if the run-off was assumed to be a mixture of interest-bearing and noninterest-bearing deposits.


GrowthFor 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 2021 Annual Report.

Monetary policy;
Global economic uncertainty;
44 BNY Mellon

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 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 issued as part of our corporate banking business and securities lending indemnifications issued as part of our Investment Services business. See Note 17 of the Notes to Consolidated Financial Statements for a further discussion of our off-balance sheet arrangements.



48 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-intangible basis and the SLR, onas a fully phased-in basis, are measures of capital strength that provide additional usefulsupplement to GAAP information, to investors, supplementing the capital ratios which are, or were, required by regulatory authorities. The tangible common shareholders’ equity ratio, which excludesexclude goodwill and intangible assets, net of deferred tax liabilities, includes changes in investment securities valuations which are reflected in total shareholders’ equity. BNY Mellon believesliabilities. We believe that the return on tangible common equity measure– Non-GAAP is an additional useful measureinformation for investors because it presents a measure of those assets that can generate income. BNY Mellon has provided a measure ofincome, and the tangible book value per common share which it believes provides– Non-GAAP is additional useful information as tobecause it presents the level of tangible assets in relation to shares of common stock outstanding.


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

BNY Mellon has presented revenue measures, which excludepre-tax operating margin, excluding an increase in litigation reserves for the effect of noncontrolling interests relatedSecurities Services business segment. This measure is provided 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 expensesthe financial measures on a basis consistent with how management views the business.businesses.


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


The presentationfollowing table presents the reconciliation of income fromthe return on common equity and tangible common equity.

Return on common equity and tangible common equity reconciliation2Q221Q222Q21YTD22YTD21
(dollars in millions)
Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP$835 $699 $991 $1,534 $1,849 
Add:  Amortization of intangible assets17 17 20 34 44 
Less: Tax impact of amortization of intangible assets4 4 5 8 11 
Adjusted net income applicable to common shareholders of The Bank of New York Mellon Corporation, excluding amortization of intangible assets – Non-GAAP$848 $712 $1,006 $1,560 $1,882 
Average common shareholders’ equity$36,199 $37,363 $40,393 $36,778 $40,556 
Less: Average goodwill17,347 17,490 17,517 17,418 17,506 
Average intangible assets2,949 2,979 2,975 2,964 2,987 
Add: Deferred tax liability – tax deductible goodwill1,187 1,184 1,163 1,187 1,163 
  Deferred tax liability – intangible assets668 673 675 668 675 
Average tangible common shareholders’ equity – Non-GAAP$17,758 $18,751 $21,739 $18,251 $21,901 
Return on common equity (annualized) – GAAP
9.3 %7.6 %9.8 %8.4 %9.2 %
Return on tangible common equity (annualized) – Non-GAAP
19.2 %15.4 %18.6 %17.2 %17.3 %


BNY Mellon 45

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

Book value and tangible book value per common share reconciliationJune 30, 2022March 31, 2022Dec. 31, 2021June 30, 2021
(dollars in millions, except per share amounts and unless otherwise noted)
BNY Mellon shareholders’ equity at period end – GAAP$40,984 $41,799 $43,034 $45,281 
Less: Preferred stock4,838 4,838 4,838 4,541 
BNY Mellon common shareholders’ equity at period end – GAAP36,146 36,961 38,196 40,740 
Less: Goodwill17,271 17,462 17,512 17,487 
Intangible assets2,934 2,968 2,991 2,964 
Add: Deferred tax liability – tax deductible goodwill1,187 1,184 1,178 1,163 
Deferred tax liability – intangible assets668 673 676 675 
BNY Mellon tangible common shareholders’ equity at period end – Non-GAAP$17,796 $18,388 $19,547 $22,127 
Period-end common shares outstanding (in thousands)
808,103 807,798 804,145 863,174 
Book value per common share – GAAP$44.73 $45.76 $47.50 $47.20 
Tangible book value per common share – Non-GAAP$22.02 $22.76 $24.31 $25.64 


The following table presents the impact of changes in foreign currency exchange rates on our consolidated investment management funds, net of net income attributable to noncontrolling interests related to the consolidation of certain investment management funds, permits investors to view revenue on a basis consistent with how management views the business. BNY Mellon believes that these presentations, as a supplement to GAAP information, give investors a clearer picture of the results of its primary businesses.and performance fees.


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.
Constant currency reconciliation – Consolidated2Q222Q212Q22 vs.
(dollars in millions)2Q21
Investment management and performance fees – GAAP$833 $889 (6)%
Impact of changes in foreign currency exchange rates— (33)
Adjusted investment management and performance fees – Non-GAAP$833 $856 (3)%





BNY Mellon 49

The following table presents the reconciliation of the pre-tax operating margin ratio.for the Securities Services business segment.


Pre-tax operating margin3Q17
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 funds3
3
9
24
6
Add: Amortization of intangible assets52
53
61
157
177
M&I, litigation and restructuring charges6
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 – GAAP10
10
17
53
21
Net interest revenue – GAAP839
826
774
2,457
2,307
Total revenue – GAAP4,016
3,956
3,941
11,815
11,447
Less: Net income attributable to noncontrolling interests of consolidated investment management funds3
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%
Pre-tax operating margin reconciliation – Securities Services business segment
(dollars in millions)2Q22
Income before income taxes – GAAP$337
Add: Increase in litigation reserves92
Adjusted income before income taxes, excluding increase in litigation reserves – Non-GAAP$429
(a)Total revenue – GAAPNon-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.$2,006
(b)
Pre-tax operating margin - GAAP (a)
Income before taxes divided by total revenue.
17%
(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 ourAdjusted 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.
excluding increase in litigation reserves – Non-GAAP		21%


(a)    Income before taxes divided by total revenue.


The following table presents the reconciliationimpact of operating leverage.

Operating leverage3Q17
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 funds3
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 assets52
53
61
  
M&I, litigation and restructuring charges6
12
18
  
Total noninterest expense, as adjusted – Non-GAAP$2,596
$2,590
$2,564
0.23 %1.25%
      
Operating leverage – GAAP (a)
   156 bps148 bps
Adjusted operating leverage – Non-GAAP (a)(b)
   129 bps81 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 returnschanges in foreign currency exchange rates on common equity and tangible common equity.

Return on common equity and tangible common equity3Q17
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 assets52
53
61
157
177
Less: Tax impact of amortization of intangible assets17
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-GAAP1,018
960
1,014
2,892
2,718
Add: M&I, litigation and restructuring charges6
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 goodwill17,497
17,408
17,463
17,415
17,549
Average intangible assets3,487
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 shareSept. 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 stock3,542
3,542
3,542
3,542
BNY Mellon common shareholders’ equity at period end – GAAP36,981
36,432
35,269
36,153
Less: Goodwill17,543
17,457
17,316
17,449
Intangible assets3,461
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
(a)Deferred tax liabilities are based on fully phased-in Basel III capital rules.







BNY Mellon 51

The following table presents income from consolidated investment management funds, net of noncontrolling interests.

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 funds3
3
9
24
6
Income from consolidated investment management funds, net of noncontrolling interests$7
$7
$8
$29
$15


The following table presents the revenue line itemsand performance fees reported in the Investment and Wealth Management business impacted by the consolidated investment management funds.segment.


Constant currency reconciliation – Investment and Wealth Management business segment
2Q22 vs.
(dollars in millions)2Q222Q212Q21
Investment management and performance fees – GAAP
$830 $890 (7)%
Impact of changes in foreign currency exchange rates— (33)
Adjusted investment management and performance fees – Non-GAAP$830 $857 (3)%


46 BNY Mellon
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



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


Pre-tax operating margin reconciliation – Investment and Wealth Management business segment
(dollars in millions)2Q221Q224Q213Q212Q21YTD22YTD21
Income before income taxes – GAAP$208 $212 $278 $348 $326 $420 $604 
Total revenue – GAAP$899 $964 $1,020 $1,032 $999 $1,863 $1,990 
Less: Distribution and servicing expense
91 79 75 76 74 170 149 
Adjusted total revenue, net of distribution and servicing expense – Non-GAAP$808 $885 $945 $956 $925 $1,693 $1,841 
Pre-tax operating margin – GAAP (a)
23 %22 %27 %34 %33 %23 %30 %
Adjusted pre-tax operating margin, net of distribution and servicing expense – Non-GAAP (a)
26 %24 %29 %36 %35 %25 %33 %
Pre-tax operating margin - Investment Management business      
(dollars in millions)3Q17
2Q17
1Q17
4Q16
3Q16
YTD17
YTD16
Income before income taxes – GAAP$300
$288
$277
$260
$256
$865
$707
Add: Amortization of intangible assets15
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
Less:  Distribution and servicing expense
110
104
101
98
104
315
306
Adjusted total revenue, net of distribution and servicing expense – Non-GAAP$890
$882
$862
$862
$854
$2,634
$2,485
        
Pre-tax operating margin – GAAP (a)
30%29%29%27%27%29%25%
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%
(a)(a)    Income before taxes divided by total revenue.






52 BNY Mellon

Recent accounting and regulatory developments


Recently issuedRecent accounting standardsdevelopments


The following Accounting Standards Updates (“ASUs”)accounting guidance issued by the Financial Accounting Standards Board (“FASB”) haveand Securities and Exchange Commission (“SEC”) staff has not yet been adopted.adopted as of June 30, 2022.


ASU 2017-12,Accounting Standards Update (“ASU”) 2022-01, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities(Topic 815): Fair Value Hedging – Portfolio Layer Method


In August 2017,March 2022, the FASB issued an ASU 2022-01, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities. The objective of this ASU is to improve the financial reporting of 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(Topic 815): Fair Value Hedging – Portfolio Layer Method, which provides guidance to the Company relates to the new accounting alternatives for fair value hedges of interest rate risk, specifically,that expands the ability to hedge onlyinterest rate risk by permitting the benchmark componentuse of multiple hedged layers of a single closed portfolio of assets and will (1) Allow multiple layer hedging within the same closed portfolio, (2) Expand the scope of the contractual cash flows, partial-termportfolio layer method to include non-prepayable assets, (3) Expand the eligible hedging instruments to be utilized in a single-layer hedge, and (4) Permit held-to-maturity debt securities to be transferred to available-for-sale at the introductiondate of adoption, provided such transferred securities are designated in a portfolio layer method hedge within 30 days of the “last of layer” method for hedges of portfolios of prepayable financial assets. adoption date.

The guidancestandard also changed presentationprovides further guidance and disclosure requirements and made changeswith respect to how the shortcuthedge basis adjustments related to portfolio layer method hedges.

BNY Mellon is applied which may result in the Company using that method going forward for certain hedging relationships.

currently evaluating this guidance. This ASU is effective for the first quarter of 2019,Jan. 1, 2023 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 to be eligible for capitalization. The ASU is effective for the first quarter of 2018, with early adoption permitted. The guidance in this ASU should be applied retrospectively for the presentation 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 is 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 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, 2022-02, Financial Instruments – Credit Losses. (Topic 326): Troubled Debt Restructurings and Vintage Disclosures

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

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

BNY Mellon 47

We are currently evaluating this guidance. The 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 2019,2023 with early adoption permitted. We will utilize

Staff Accounting Bulletin No. 121

In March 2022, the modifiedSEC staff released Staff Accounting Bulletin No. 121 (“SAB 121”). SAB 121 expresses the staff’s views regarding the accounting for entities that have obligations to safeguard “crypto-assets” held for their platform users. SAB 121 provides that these entities should present a liability and corresponding asset in respect of the crypto-assets safeguarded for their platform users, with the liability and asset measured at the fair value of the crypto-assets. This differs from the accounting treatment of non-crypto-assets held in custody, which do not result in assets recorded on a custodian’s balance sheet. This guidance was effective for interim and annual periods ending after June 15, 2022 with retrospective transition approachapplication as of the beginning of the earliestfiscal year to which the interim or annual period presented, which will resultrelates. Currently, BNY Mellon does not hold in a cumulative effect recorded incustody any assets that would be impacted by the earliest period presented. Additionally, the standard allows for various optional practical expedients to assist with the implementation and reporting requirements.standards of SAB 121. We are currently evaluating the potentialapplicability and impact of the leasing standard onSAB 121 to 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.digital asset custody initiatives.


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.

Recent regulatory developments


For a summary of additional regulatory matters relevant to our operations, see Supervision and Regulation“Recent regulatory developments” in our 2016Form 10-Q for the quarter ended March 31, 2022, and “Supervision and Regulation” in our 2021 Annual Report. The following discussions summarize certain regulatory, legislative and other developments that may affect BNY Mellon.


Final Rule on Qualified Financial ContractsFederal Reserve Stress Test 2022 Results


On Sept. 1, 2017,June 23, 2022, the Federal Reserve adoptedreleased the results of its stress tests for 2022. The Federal Reserve also notified BNY Mellon that its indicative SCB requirement for the present stress test cycle will be 2.5%, which equals the regulatory floor. BNY Mellon expects that its final SCB will be confirmed later in 2022. The SCB will be effective on Oct. 1, 2022.

Consistent with the SCB framework, BNY Mellon increased its quarterly common stock dividend to $0.37 per share in the third quarter of 2022.
Securities and Exchange Commission (“SEC”) Proposed Amendments to Disclosure, Naming and Investment Practices Rules for Funds and Advisers

On May 25, 2022, the SEC proposed for public comment a final ruleframework requiring certain registered investment companies (“RICs”), including mutual funds, closed end funds and exchange-traded funds, that consider environmental, social and governance (“ESG”) factors in their investment process to provide additional disclosures in their registration statements and shareholder reports. The disclosure requirements would vary depending on the fund’s investment strategy. The SEC also proposed similar amendments to the disclosure requirements for registered investment advisers (“RIAs”) that consider ESG factors as part of their advisory business. Specifically, the proposal would require U.S. global systemically important banking organizationsRIAs to provide a description of the ESG factors they consider in providing advisory services and how they are incorporated when formulating investment advice.

Also on May 25, 2022, the SEC proposed for comment amendments to RIC naming convention rules. The proposal would expand the scope of terms that the SEC considers materially deceptive and misleading in a RIC’s name without a corresponding policy to invest at least 80% of the fund’s net asset value (plus certain borrowings) in the manner suggested by the fund’s name (“G-SIBs”) and the U.S. operations of foreign G-SIBs to amend their covered qualified financial contracts (“QFCs”80% Policy”). The FDIC adoptedproposal would require an 80% Policy for a substantially equivalent proposal on Oct. 30, 2017RIC with a name that indicates that the fund’s investment decisions incorporate one or more ESG factors and the Office of the Comptroller of the Currency is expected to do so in the near future. QFCs generally include derivatives, repurchase agreements and securities lending arrangements, among others. The final rule includes two key requirements. First, the final rule generally requires
that QFCs of G-SIBs explicitly provide that any resolution stays applicable to the exercise of default rights with respect to such QFCs and to any resolution transfers under U.S. special resolution regimes apply to such 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.

The final rule allows G-SIBs to comply with the rule by adhering to the International Swaps and Derivatives Association 2015 Universal Resolution Stay Protocol (the “Protocol”)fund that includes “growth” or a similar protocol that accomplishes the contractual amendments required by the rule. BNY Mellon entities that engage“value” 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.its name. BNY Mellon is evaluating the potential impact of the new regulations on its activities.proposals.


Resolution planEU Intermediate Parent Undertaking (“EU IPU”) Requirements


AsUnder the Capital Requirements Directive V, certain non-EU banking groups with more than EUR40 billion of assets in the EU are required byto establish a single EU IPU to serve as an EU holding company for all EU credit institutions and certain EU investment firms in the Dodd-Frank Act,group. Following further review, BNY Mellon must submit annuallycurrently is not required 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 availableestablish an EU IPU structure on the Federal Reserve’sbasis of its existing legal entity structure and FDIC’s websites.operations.

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.




48 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, DirectorsDirectors’ Code of Conduct and the Charters of the Audit, Finance, Corporate Governance, and Nominating Corporateand 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 theour website listed above or any other websitessocial media channels referenced herein are not incorporated by reference into this Quarterly Report on Form 10-Q.

BNY Mellon 49


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



Consolidated Income Statement (unaudited)


Quarter endedYear-to-date
June 30, 2022March 31, 2022June 30, 2021June 30, 2022June 30, 2021
(in millions)
Fee and other revenue
Investment services fees$2,206 $1,993 $2,076 $4,199 $4,132 
Investment management and performance fees833 883 889 1,716 1,779 
Foreign exchange revenue222 207 184 429 415 
Financing-related fees44 45 48 89 99 
Distribution and servicing fees34 30 27 64 56 
Total fee revenue3,339 3,158 3,224 6,497 6,481 
Investment and other revenue91 70 91 161 100 
Total fee and other revenue3,430 3,228 3,315 6,658 6,581 
Net interest revenue
Interest revenue1,159 778 685 1,937 1,423 
Interest expense335 80 40 415 123 
Net interest revenue824 698 645 1,522 1,300 
Total revenue4,254 3,926 3,960 8,180 7,881 
Provision for credit losses47 2 (86)49 (169)
Noninterest expense
Staff1,623 1,702 1,518 3,325 3,120 
Software and equipment405 399 365 804 727 
Professional, legal and other purchased services379 370 363 749 706 
Sub-custodian and clearing131 118 132 249 256 
Net occupancy125 122 122 247 245 
Distribution and servicing90 79 73 169 147 
Business development43 30 22 73 41 
Bank assessment charges37 35 35 72 69 
Amortization of intangible assets17 17 20 34 44 
Other262 134 128 396 274 
Total noninterest expense3,112 3,006 2,778 6,118 5,629 
Income
Income before income taxes1,095 918 1,268 2,013 2,421 
Provision for income taxes231 153 241 384 462 
Net income864 765 1,027 1,629 1,959 
Net loss (income) attributable to noncontrolling interests related to consolidated investment management funds5 8 (5)13 (10)
Net income applicable to shareholders of The Bank of New York Mellon Corporation869 773 1,022 1,642 1,949 
Preferred stock dividends(34)(74)(31)(108)(100)
Net income applicable to common shareholders of The Bank of New York Mellon Corporation$835 $699 $991 $1,534 $1,849 

50 BNY Mellon
  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 services383
394
349
 1,153
1,049
Issuer services288
241
337
 780
815
Treasury services141
140
137
 420
407
Total investment services fees1,917
1,860
1,890
 5,606
5,447
Investment management and performance fees901
879
860
 2,622
2,502
Foreign exchange and other trading revenue173
165
183
 502
540
Financing-related fees54
53
58
 162
169
Distribution and servicing40
41
43
 122
125
Investment and other income63
122
92
 262
271
Total fee revenue3,148
3,120
3,126
 9,276
9,054
Net securities gains — including other-than-temporary impairment18
—
27
 28
67
Noncredit-related portion of other-than-temporary impairment
(recognized in other comprehensive income)
(1)—
3
 (1)2
Net securities gains19
—
24
 29
65
Total fee and other revenue3,167
3,120
3,150
 9,305
9,119
Operations of consolidated investment management funds      
Investment income10
10
20
 57
27
Interest of investment management fund note holders—
—
3
 4
6
Income from consolidated investment management funds10
10
17
 53
21
Net interest revenue      
Interest revenue1,151
1,052
874
 3,163
2,647
Interest expense312
226
100
 706
340
Net interest revenue839
826
774
 2,457
2,307
Total revenue4,016
3,956
3,941
 11,815
11,447
Provision for credit losses(6)(7)(19) (18)(18)
Noninterest expense      
Staff1,469
1,417
1,467
 4,358
4,338
Professional, legal and other purchased services305
319
292
 936
860
Software175
173
156
 514
470
Net occupancy141
139
143
 416
437
Distribution and servicing109
104
105
 313
307
Sub-custodian62
65
59
 191
188
Furniture and equipment58
59
59
 174
187
Bank assessment charges (a)
51
59
61
 167
166
Business development49
63
52
 163
174
Other (a)
177
192
170
 536
546
Amortization of intangible assets52
53
61
 157
177
Merger and integration, litigation and restructuring charges6
12
18
 26
42
Total noninterest expense2,654
2,655
2,643
 7,951
7,892
Income      
Income before income taxes1,368
1,308
1,317
 3,882
3,573
Provision for income taxes348
332
324
 949
897
Net income1,020
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 Corporation1,018
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 57
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 calculationQuarter endedYear-to-date
June 30, 2022March 31, 2022June 30, 2021June 30, 2022June 30, 2021
(in millions)
Net income applicable to common shareholders of The Bank of New York Mellon Corporation$835 $699 $991 $1,534 $1,849 
Less: Earnings allocated to participating securities— — 1 — 2 
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$835 $699 $990 $1,534 $1,847 
Net income applicable to common shareholders of The Bank of New York Mellon Corporation used for the earnings per share calculationQuarter ended Year-to-date
Sept. 30, 2017
June 30, 2017
Sept. 30, 2016
 Sept. 30, 2017
Sept. 30, 2016
(in millions) 
Net income applicable to common shareholders of The Bank of New York Mellon Corporation$983
$926
$974
 $2,789
$2,603
Less:  Earnings allocated to participating securities (a)
8
13
15
 35
39
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




Average common shares and equivalents outstanding of The Bank of New York Mellon CorporationQuarter endedYear-to-date
June 30, 2022March 31, 2022June 30, 2021June 30, 2022June 30, 2021
(in thousands)
Basic810,903 809,469 869,460 810,233 876,006 
Common stock equivalents2,834 4,878 4,315 3,915 3,904 
Less: Participating securities(147)(361)(300)(254)(501)
Diluted813,590 813,986 873,475 813,894 879,409 
Anti-dilutive securities (a)
4,112 2,647 547 3,205 807 
(a)    Represents stock options, restricted stock, restricted stock units and participating securities outstanding but not included in the computation of diluted average common shares because their effect would be anti-dilutive.
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) 
Basic1,035,337
1,035,829
1,062,248
 1,037,431
1,071,457
Common stock equivalents9,226
15,598
15,406
 14,216
15,306
Less: Participating securities(3,425)(9,548)(9,972) (8,062)(9,613)
Diluted1,041,138
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 CorporationQuarter endedYear-to-date
June 30, 2022March 31, 2022June 30, 2021June 30, 2022June 30, 2021
(in dollars)
Basic$1.03 $0.86 $1.14 $1.89 $2.11 
Diluted$1.03 $0.86 $1.13 $1.88 $2.10 

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
(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.



See accompanying unaudited Notes to Consolidated Financial Statements.



58 BNY Mellon 51
The Bank of New York Mellon Corporation (and its subsidiaries)

Consolidated Comprehensive Income Statement (unaudited)


Quarter endedYear-to-date
June 30, 2022March 31, 2022June 30, 2021June 30, 2022June 30, 2021
(in millions)
Net income$864 $765 $1,027 $1,629 $1,959 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments(555)(153)51 (708)(99)
Unrealized (loss) gain on assets available-for-sale:
Unrealized (loss) gain arising during the period(882)(1,531)77 (2,413)(626)
Reclassification adjustment— (3)(1)(3)(1)
Total unrealized (loss) gain on assets available-for-sale(882)(1,534)76 (2,416)(627)
Defined benefit plans:
Amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost13 18 25 31 47 
Total defined benefit plans13 18 25 31 47 
Net unrealized (loss) on cash flow hedges(5)(2)(3)(7)(6)
Total other comprehensive (loss), net of tax (a)
(1,429)(1,671)149 (3,100)(685)
Total comprehensive (loss) income(565)(906)1,176 (1,471)1,274 
Net loss (income) attributable to noncontrolling interests5 8 (5)13 (10)
Other comprehensive loss (gain) attributable to noncontrolling interests3 3 — 6 — 
Comprehensive (loss) income applicable to shareholders of The Bank of New York Mellon Corporation$(557)$(895)$1,171 $(1,452)$1,264 
 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 adjustments286
330
(186) 741
(433)
Unrealized gain on assets available-for-sale:      
Unrealized gain (loss) arising during the period28
91
(53) 213
227
Reclassification adjustment(12)(1)(15) (19)(43)
Total unrealized gain (loss) on assets available-for-sale16
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 cost15
16
14
 49
43
Total defined benefit plans15
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 income1,337
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 million for the quarter ended June 30, 2017, $(233) million for the quarter ended Sept. 30, 2016, $984 million for the nine months ended Sept. 30, 2017 and $(185) million for the nine months ended Sept. 30, 2016.

(a)    Other comprehensive (loss) income attributable to The Bank of New York Mellon Corporation shareholders was $(1,426) million for the quarter ended June 30, 2022, $(1,668) million for the quarter ended March 31, 2022, $149 million for the quarter ended June 30, 2021, $(3,094) million for the six months ended June 30, 2022 and $(685) million for the six months ended June 30, 2021.



See accompanying unaudited Notes to Consolidated Financial Statements.



52 BNY Mellon 59
The Bank of New York Mellon Corporation (and its subsidiaries)

Consolidated Balance Sheet (unaudited)


June 30, 2022Dec. 31, 2021
(dollars in millions, except per share amounts)
Assets
Cash and due from banks, net of allowance for credit losses of $51 and $3$5,185 $6,061 
Interest-bearing deposits with the Federal Reserve and other central banks125,372 102,467 
Interest-bearing deposits with banks, net of allowance for credit losses of $2 and $2 (includes restricted of $4,441 and $3,822)16,639 16,630 
Federal funds sold and securities purchased under resale agreements22,940 29,607 
Securities:
Held-to-maturity, at amortized cost, net of allowance for credit losses of $1 and less than $1 (fair value of $55,127 and $56,775)59,566 56,866 
Available-for-sale, at fair value (amortized cost of $95,627 and $100,774, net of allowance for credit losses of $9 and $10)91,278 101,839 
Total securities150,844 158,705 
Trading assets10,759 16,577 
Loans69,347 67,787 
Allowance for credit losses(181)(196)
Net loans69,166 67,591 
Premises and equipment3,354 3,431 
Accrued interest receivable548 457 
Goodwill17,271 17,512 
Intangible assets2,934 2,991 
Other assets, net of allowance for credit losses on accounts receivable of $4 and $4 (includes $1,268 and $1,187, at fair value)27,609 22,409 
Total assets$452,621 $444,438 
Liabilities
Deposits:
Noninterest-bearing (principally U.S. offices)$106,060 $93,695 
Interest-bearing deposits in U.S. offices117,075 120,903 
Interest-bearing deposits in non-U.S. offices102,678 105,096 
Total deposits325,813 319,694 
Federal funds purchased and securities sold under repurchase agreements11,434 11,566 
Trading liabilities5,595 5,469 
Payables to customers and broker-dealers25,769 25,150 
Other borrowed funds520 749 
Accrued taxes and other expenses
5,011 5,767 
Other liabilities (including allowance for credit losses on lending-related commitments of $62 and $45, also includes $31 and $496, at fair value)9,724 6,721 
Long-term debt27,610 25,931 
Total liabilities411,476 401,047 
Temporary equity
Redeemable noncontrolling interests154 161 
Permanent equity
Preferred stock – par value $0.01 per share; authorized 100,000,000 shares; issued 48,826 and 48,826 shares4,838 4,838 
Common stock – par value $0.01 per share; authorized 3,500,000,000 shares; issued 1,395,313,459 and 1,389,397,912 shares14 14 
Additional paid-in capital28,316 28,128 
Retained earnings37,644 36,667 
Accumulated other comprehensive loss, net of tax(5,307)(2,213)
Less: Treasury stock of 587,210,236 and 585,252,546 common shares, at cost(24,521)(24,400)
Total The Bank of New York Mellon Corporation shareholders’ equity40,984 43,034 
Nonredeemable noncontrolling interests of consolidated investment management funds7 196 
Total permanent equity40,991 43,230 
Total liabilities, temporary equity and permanent equity$452,621 $444,438 
  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 banks75,808
58,041
Interest-bearing deposits with banks15,256
15,086
Federal funds sold and securities purchased under resale agreements27,883
25,801
Securities: 

Held-to-maturity (fair value of $39,928 and $40,669)39,995
40,905
Available-for-sale80,054
73,822
Total securities120,049
114,727
Trading assets4,666
5,733
Loans59,068
64,458
Allowance for loan losses(161)(169)
Net loans58,907
64,289
Premises and equipment1,631
1,303
Accrued interest receivable547
568
Goodwill17,543
17,316
Intangible assets3,461
3,598
Other assets (includes $827 and $1,339, at fair value)22,287
20,954
Subtotal assets of operations353,595
332,238
Assets of consolidated investment management funds, at fair value802
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. offices46,023
52,049
Interest-bearing deposits in non-U.S. offices104,593
91,099
Total deposits230,996
221,490
Federal funds purchased and securities sold under repurchase agreements10,314
9,989
Trading liabilities3,253
4,389
Payables to customers and broker-dealers21,176
20,987
Commercial paper2,501
—
Other borrowed funds3,353
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 operations313,266
293,574
Liabilities of consolidated investment management funds, at fair value27
315
Total liabilities313,293
293,889
Temporary equity 

Redeemable noncontrolling interests197
151
Permanent equity 

Preferred stock – par value $0.01 per share; authorized 100,000,000 shares; issued 35,826 and 35,826 shares3,542
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 shares14
13
Additional paid-in capital26,588
25,962
Retained earnings24,757
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’ equity40,523
38,811
Nonredeemable noncontrolling interests of consolidated investment management funds384
618
Total permanent equity40,907
39,429
Total liabilities, temporary equity and permanent equity$354,397
$333,469




See accompanying unaudited Notes to Consolidated Financial Statements.


60 BNY Mellon 53
The Bank of New York Mellon Corporation (and its subsidiaries)

Consolidated Statement of Cash Flows (unaudited)


Six months ended June 30,
(in millions)20222021
Operating activities
Net income$1,629 $1,959 
Net loss (income) attributable to noncontrolling interests13 (10)
Net income applicable to shareholders of The Bank of New York Mellon Corporation1,642 1,949 
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Provision for credit losses49 (169)
Pension plan contributions(2)(16)
Depreciation and amortization859 938 
Deferred tax (benefit)145 274 
Net securities (gains)(4)(2)
Change in trading assets and liabilities6,730 176 
Change in accruals and other, net(1,000)(3,495)
Net cash provided by (used for) operating activities8,419 (345)
Investing activities
Change in interest-bearing deposits with banks39 (2,924)
Change in interest-bearing deposits with the Federal Reserve and other central banks(28,461)13,409 
Purchases of securities held-to-maturity(1,836)(5,449)
Paydowns of securities held-to-maturity4,124 5,869 
Maturities of securities held-to-maturity748 834 
Purchases of securities available-for-sale(20,522)(25,820)
Sales of securities available-for-sale8,788 7,624 
Paydowns of securities available-for-sale3,204 7,081 
Maturities of securities available-for-sale5,970 8,999 
Net change in loans(1,957)(7,017)
Sales of loans and other real estate— 1 
Change in federal funds sold and securities purchased under resale agreements6,655 1,129 
Net change in seed capital investments(14)(55)
Purchases of premises and equipment/capitalized software(871)(465)
Proceeds from the sale of premises and equipment45 27 
Dispositions, net of cash— 8 
Other, net(507)648 
Net cash (used for) provided by investing activities(24,595)3,899 
Financing activities
Change in deposits13,036 (1,428)
Change in federal funds purchased and securities sold under repurchase agreements(60)1,214 
Change in payables to customers and broker-dealers870 (1,360)
Change in other borrowed funds(202)107 
Net proceeds from the issuance of long-term debt4,939 2,691 
Repayments of long-term debt(2,250)(2,750)
Proceeds from the exercise of stock options9 32 
Issuance of common stock6 6 
Treasury stock acquired(121)(1,317)
Common cash dividends paid(557)(550)
Preferred cash dividends paid(108)(100)
Other, net(5)(6)
Net cash provided by (used for) financing activities15,557 (3,461)
Effect of exchange rate changes on cash362 (41)
Change in cash and due from banks and restricted cash
Change in cash and due from banks and restricted cash(257)52 
Cash and due from banks and restricted cash at beginning of period9,883 9,419 
Cash and due from banks and restricted cash at end of period$9,626 $9,471 
Cash and due from banks and restricted cash
Cash and due from banks at end of period (unrestricted cash)$5,185 $5,154 
Restricted cash at end of period4,441 4,317 
Cash and due from banks and restricted cash at end of period$9,626 $9,471 
Supplemental disclosures
Interest paid$374 $145 
Income taxes paid262 266 
Income taxes refunded38 10 
 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 Corporation2,915
 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 amortization1,044
 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 activities3,350
 1,557
Investing activities   
Change in interest-bearing deposits with banks507
 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-maturity3,332
 3,577
Maturities of securities held-to-maturity3,412
 2,933
Purchases of securities available-for-sale(18,974) (21,491)
Sales of securities available-for-sale3,531
 5,624
Paydowns of securities available-for-sale7,047
 6,552
Maturities of securities available-for-sale4,820
 7,610
Net change in loans5,283
 (2,884)
Sales of loans and other real estate369
 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, net82
 (239)
Net cash (used for) provided by investing activities(14,003) 21,058
Financing activities   
Change in deposits4,459
 (18,378)
Change in federal funds purchased and securities sold under repurchase agreements325
 (6,950)
Change in payables to customers and broker-dealers177
 (743)
Change in other borrowed funds2,187
 427
Change in commercial paper2,501
 —
Net proceeds from the issuance of long-term debt4,739
 4,982
Repayments of long-term debt(796) (2,453)
Proceeds from the exercise of stock options383
 129
Issuance of common stock24
 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, net46
 (2)
Net cash provided by (used for) financing activities11,231
 (24,178)
Effect of exchange rate changes on cash157
 (17)
Change in cash and due from banks   
Change in cash and due from banks735
 (1,580)
Cash and due from banks at beginning of period4,822
 6,537
Cash and due from banks at end of period$5,557
 $4,957
Supplemental disclosures   
Interest paid$721
 $371
Income taxes paid316
 597
Income taxes refunded19
 293




See accompanying unaudited Notes to Consolidated Financial Statements.


54 BNY Mellon 61
The Bank of New York Mellon Corporation (and its subsidiaries)

Consolidated Statement of Changes in Equity (unaudited)


The Bank of New York Mellon Corporation shareholdersNonredeemable
noncontrolling
interests of
consolidated
investment
management
funds		Total
permanent
equity		Redeemable
non-
controlling
interests/
temporary
equity
(in millions, except per
share amount)		Preferred stockCommon
stock		Additional
paid-in
capital		Retained
earnings		Accumulated other comprehensive (loss), net
of tax		Treasury
stock
Balance at March 31, 2022$4,838 $14 $28,258 $37,088 $(3,881)$(24,518)$198 $41,997 (a)$155 
Shares issued to shareholders of noncontrolling interests— — — — — — — — 2 
Other net changes in noncontrolling interests— — — — — — (186)(186)— 
Net income (loss)— — — 869 — — (5)864 — 
Other comprehensive (loss)— — — — (1,426)— — (1,426)(3)
Dividends:
Common stock at $0.34 per
  share (b)
— — — (279)— — — (279)— 
Preferred stock— — — (34)— — — (34)— 
Repurchase of common stock— — — — — (3)— (3)— 
Common stock issued under employee benefit plans— — 5 — — — — 5 — 
Stock awards and options exercised— — 53 — — — — 53 — 
Balance at June 30, 2022$4,838 $14 $28,316 $37,644 $(5,307)$(24,521)$7 $40,991 (a)$154 
(a)Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $36,961 million at March 31, 2022 and $36,146 million at June 30, 2022.
(b)    Includes dividend-equivalents on share-based awards.


The Bank of New York Mellon Corporation shareholdersNonredeemable
noncontrolling
interests of
consolidated
investment
management
funds		Total
permanent
equity		Redeemable
non-
controlling
interests/
temporary
equity
(in millions, except per
share amount)		Preferred stockCommon
stock		Additional
paid-in
capital		Retained
earnings		Accumulated other comprehensive (loss), net of taxTreasury
stock
Balance at Dec. 31, 2021$4,838 $14 $28,128 $36,667 $(2,213)$(24,400)$196 $43,230 (a)$161 
Shares issued to shareholders of noncontrolling interests— — — — — — — — 7 
Redemption of subsidiary shares from noncontrolling interests— — — — — — — — (14)
Other net changes in noncontrolling interests— — (5)— — — 10 5 4 
Net income— — — 773 — — (8)765 — 
Other comprehensive (loss)— — — — (1,668)— — (1,668)(3)
Dividends:
Common stock at $0.34 per
  share (b)
— — — (278)— — — (278)— 
Preferred stock— — — (74)— — — (74)— 
Repurchase of common stock— — — — — (118)— (118)— 
Common stock issued under employee benefit plans— — 5 — — — — 5 — 
Stock awards and options exercised— — 130 — — — — 130 — 
Balance at March 31, 2022$4,838 $14 $28,258 $37,088 $(3,881)$(24,518)$198 $41,997 (a)$155 
(a)Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $38,196 million at Dec. 31, 2021 and $36,961 million at March 31, 2022.
(b)    Includes dividend-equivalents on share-based awards.


BNY Mellon 55
 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

(in millions, except per
share amount)		Preferred stock
Common
stock

Additional
paid-in
capital

Retained
earnings

Accumulated
other
comprehensive (loss) income,
net of tax
Treasury
stock

Balance at Dec. 31, 2016$3,542
$13
$25,962
$22,621
$(3,765)$(9,562)$618
$39,429
(a)$151
Shares issued to shareholders of noncontrolling interests—
—
—
—
—
—
—
—
 40
Redemption of subsidiary shares from noncontrolling interests—
—
—
—
—
—
—
—
 (16)
Other net changes in noncontrolling interests—
—
(11)—
—
—
(258)(269) 15
Net income (loss)—
—
—
2,915
—
—
24
2,939
 (6)
Other comprehensive income—
—
—
—
984
—
—
984
 13
Dividends:          
Common stock at $0.62 per
share		—
—
—
(653)—
—
—
(653) —
Preferred stock—
—
—
(126)—
—
—
(126) —
Repurchase of common stock—
—
—
—
—
(2,035)—
(2,035) —
Common stock issued under:          
Employee benefit plans—
—
21
—
—
—
—
21
 —
Direct stock purchase and dividend reinvestment plan—
—
18
—
—
—
—
18
 —
Stock awards and options exercised—
1
598
—
—
—
—
599
 —
Balance at Sept. 30, 2017$3,542
$14
$26,588
$24,757
$(2,781)$(11,597)$384
$40,907
(a)$197
(a)Includes total 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 shareholdersNonredeemable
noncontrolling
interests of
consolidated
investment
management
funds		Total
permanent
equity		Redeemable
non-
controlling
interests/
temporary
equity
(in millions, except per
share amount)		Preferred stockCommon
stock		Additional
paid-in
capital		Retained
earnings		Accumulated other comprehensive (loss) income, net of taxTreasury
stock
Balance at March 31, 2021$4,541 $14 $27,928 $34,822 $(1,819)$(20,532)$262 $45,216 (a)$187 
Shares issued to shareholders of noncontrolling interests— — — — — — — — 6 
Redemption of subsidiary shares from noncontrolling interests— — — — — — — — (22)
Other net changes in noncontrolling interests— — 9 — — — 77 86 (2)
Net income— — — 1,022 — — 5 1,027 — 
Other comprehensive income— — — — 149 — — 149 — 
Dividends:
Common stock at $0.31 per
  share (b)
— — — (273)— — — (273)— 
Preferred stock— — — (31)— — — (31)— 
Repurchase of common stock— — — — — (618)— (618)— 
Common stock issued under employee benefit plans— — 5 — — — — 5 — 
Stock awards and options exercised— — 64 — — — — 64 — 
Balance at June 30, 2021$4,541 $14 $28,006 $35,540 $(1,670)$(21,150)$344 $45,625 (a)$169 
(a)    Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $40,413 million at March 31, 2021 and $40,740 million at June 30, 2021.
(b)    Includes dividend-equivalents on share-based awards.


The Bank of New York Mellon Corporation shareholdersNonredeemable
noncontrolling
interests of
consolidated
investment
management
funds		Total
permanent
equity		Redeemable
non-
controlling
interests/
temporary
equity
(in millions, except per
share amount)		Preferred stockCommon
stock		Additional
paid-in
capital		Retained
earnings		Accumulated other comprehensive (loss), net
of tax		Treasury
stock
Balance at Dec. 31, 2021$4,838 $14 $28,128 $36,667 $(2,213)$(24,400)$196 $43,230 (a)$161 
Shares issued to shareholders of noncontrolling interests— — — — — — — — 9 
Redemption of subsidiary shares from noncontrolling interests— — — — — — — — (14)
Other net changes in noncontrolling interests— — (5)— — — (176)(181)4 
Net income (loss)— — — 1,642 — — (13)1,629 — 
Other comprehensive (loss)— — — — (3,094)— — (3,094)(6)
Dividends:
Common stock at $0.68 per
  share (b)
— — — (557)— — — (557)— 
Preferred stock— — — (108)— — — (108)— 
Repurchase of common stock— — — — — (121)— (121)— 
Common stock issued under employee benefit plans— — 10 — — — — 10 — 
Preferred stock issued— — — — — — — — — 
Stock awards and options exercised— — 183 — — — — 183 — 
Balance at June 30, 2022$4,838 $14 $28,316 $37,644 $(5,307)$(24,521)$7 $40,991 (a)$154 
(a)Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $38,196 million at Dec. 31, 2021 and $36,146 million at June 30, 2022.
(b)Includes dividend equivalents on share-based awards.

56 BNY Mellon
The Bank of $35,269 million at Dec. 31, 2016 and $36,981 million at Sept. 30, 2017.New York Mellon Corporation (and its subsidiaries)


The Bank of New York Mellon Corporation shareholdersNonredeemable
noncontrolling
interests of
consolidated
investment
management
funds		Total
permanent
equity		Redeemable
non-
controlling
interests/
temporary
equity
(in millions, except per
share amount)		Preferred stockCommon
stock		Additional
paid-in
capital		Retained
earnings		Accumulated other comprehensive (loss), net
of tax		Treasury
stock
Balance at Dec. 31, 2020$4,541 $14 $27,823 $34,241 $(985)$(19,833)$143 $45,944 (a)$176 
Shares issued to shareholders of noncontrolling interests— — — — — — — — 29 
Redemption of subsidiary shares from noncontrolling interests— — — — — — — — (52)
Other net changes in noncontrolling interests— — (24)— — — 191 167 16 
Net income— — — 1,949 — — 10 1,959 — 
Other comprehensive (loss)— — — — (685)— — (685)— 
Dividends:
Common stock at $0.62 per
  share
— — — (550)— — — (550)— 
Preferred stock— — — (100)— — — (100)— 
Repurchase of common stock— — — — — (1,317)— (1,317)— 
Common stock issued under employee benefit plans— — 10 — — — — 10 — 
Stock awards and options exercised— — 197 — — — — 197 — 
Balance at June 30, 2021$4,541 $14 $28,006 $35,540 $(1,670)$(21,150)$344 $45,625 (a)$169 
(a)Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $41,260 million at Dec. 31, 2020 and $40,740 million at June 30, 2021.


See accompanying unaudited Notes to Consolidated Financial Statements.



62 BNY Mellon 57
Notes to Consolidated Financial Statements


Note 1 - 1–Basis of presentation


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 to its subsidiaries.

Basis of presentation


The accounting and financial reporting policies of BNY Mellon, a global financial services company, conform to U.S. generally accepted accounting principles (“GAAP”) and prevailing industry practices. For information on our significant accounting and reporting policies, see Note 1 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended Dec. 31, 2021 (the “2021 Annual Report”).


The accompanying consolidated financial statements are unaudited. In the opinion of management, all adjustments necessary, consisting of normal recurring adjustments, for a fair presentation of financial position, results of operations and cash flows for the periods presented have been made. These financial statements should be read in conjunction with BNY Mellon’sour Consolidated Financial Statements included in our 2021 Annual Report on Form 10-K for the year ended Dec. 31, 2016.Report. Certain additional immaterial reclassifications have been made to prior periods to place them on a basis comparable with the current period presentation.


Use of estimates


The preparation of financial statements in conformity with U.S. GAAP requires management to make
estimates based upon assumptions about future economic and market conditions which affect reported amounts and related disclosures in our financial statements. Although our current estimates contemplate current conditions and how we expect them to change in the future, it is reasonably possible that actual conditions could be worse than anticipated in those estimates, which could materially affect our results of operations and financial condition. 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 - Accounting change2–Acquisitions and new accounting guidancedispositions

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 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), the number of stock options exercised and the change in value since the grant date.

We continue 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 statement of cash flows and the employee taxes paid will continue to be reported as financing activities.



BNY Mellon 63
Notes to Consolidated Financial Statements(continued)

Note 3 - Acquisitions


We sometimes structure our acquisitions with both an initial payment and later contingent payments tied to post-closing revenue or income growth. ContingentThere were no contingent payments totaled $2 million in the third quarter of 2017 and the first ninesix months of 2017.2022.


At Sept.June 30, 2017,2022, we are potentially obligated to pay additional considerationwhich, using reasonable assumptions and estimates, could range from $0$15 million to $16$45 millionover the nexttwo three years, but could be higher as certain.

Goodwill and intangible assets related to acquisitions completed in 2021 totaled $99 million and $70 million, respectively. See Note 3 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.

AcquisitionNotes to Consolidated Financial Statements in 2016

On April 1, 2016, BNY Mellon acquired the assets of Atherton Lane Advisers, LLC, a U.S.-based investment manager with approximately $2.45 billion in AUM and servicerour 2021 Annual Report for approximately 700 high-net-worth clients, for cash of $38 million, plus contingent payments measured at $22 million. Goodwillinformation related to 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.2021 acquisitions.



Note 4 - 3–Securities


The following tables present the amortized cost, the gross unrealized gains and losses and the fair value of securities at Sept.June 30, 20172022 and Dec. 31, 2016.2021.


58 BNY Mellon
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 agencies866
4
6
864
State and political subdivisions3,091
57
24
3,124
Agency RMBS24,546
135
250
24,431
Non-agency RMBS491
37
3
525
Other RMBS270
3
8
265
Commercial MBS960
9
4
965
Agency commercial MBS9,026
41
57
9,010
CLOs2,542
9
1
2,550
Other asset-backed securities1,152
5
—
1,157
Foreign covered bonds2,529
20
7
2,542
Corporate bonds1,262
21
8
1,275
Sovereign debt/sovereign guaranteed12,393
195
23
12,565
Other debt securities3,149
12
10
3,151
Equity securities2
2
—
4
Money market funds939
—
—
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 agencies1,614
—
6
1,608
State and political subdivisions18
—
1
17
Agency RMBS25,575
96
185
25,486
Non-agency RMBS64
5
—
69
Other RMBS65
—
1
64
Commercial MBS6
—
—
6
Agency commercial MBS1,118
5
5
1,118
Foreign covered bonds83
1
—
84
Sovereign debt/sovereign guaranteed1,558
32
—
1,590
Other debt securities27
—
—
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.


64 BNY Mellon
Notes to Consolidated Financial Statements(continued)

Securities at June 30, 2022Gross
unrealized		Fair
value
Amortized cost
(in millions)GainsLosses
Available-for-sale:
U.S. Treasury$32,360 $114 $2,007 $30,467 
Sovereign debt/sovereign guaranteed11,429 6 343 11,092 
Agency residential mortgage-backed securities (“RMBS”)8,501 130 328 8,303 
Agency commercial mortgage-backed securities (“MBS”)8,479 110 410 8,179 
Supranational7,806 6 264 7,548 
Foreign covered bonds6,010 3 185 5,828 
Collateralized loan obligations (“CLOs”)5,247 1 151 5,097 
Non-agency commercial MBS3,270 — 267 3,003 
Foreign government agencies2,620 — 84 2,536 
Non-agency RMBS2,413 57 159 2,311 
State and political subdivisions2,262 2 241 2,023 
U.S. government agencies2,003 58 136 1,925 
Other asset-backed securities (“ABS”)1,771 — 103 1,668 
Corporate bonds1,455 — 158 1,297 
Other debt securities1 — — 1 
Total securities available-for-sale (a)(b)
$95,627 $487 $4,836 $91,278 
Held-to-maturity:
Agency RMBS$36,947 $12 $3,019 $33,940 
U.S. Treasury11,347 — 685 10,662 
Agency commercial MBS4,319 2 298 4,023 
U.S. government agencies4,061 — 380 3,681 
Sovereign debt/sovereign guaranteed1,472 2 28 1,446 
CLOs983 — 34 949 
Supranational325 — 10 315 
Foreign government agencies64 — 1 63 
Non-agency RMBS34 2 1 35 
State and political subdivisions14 — 1 13 
Total securities held-to-maturity (a)
$59,566 $18 $4,457 $55,127 
Total securities$155,193 $505 $9,293 $146,405 
(a)    The amortized cost of available-for-sale and held-to-maturity securities are net of the allowance for credit loss of $9 million and $1 million, respectively. The allowance for credit loss related to available-for-sale securities primarily relates to CLOs.
(b)    Includes gross unrealized gains of $407 million and gross unrealized losses of $200 million recorded in accumulated other comprehensive income related to securities that were transferred from available-for-sale to held-to-maturity. The unrealized gains primarily relate to agency RMBS, U.S. Treasury securities and agency commercial MBS. The unrealized losses primarily relate to agency RMBS and U.S. Treasury securities. The unrealized gains and losses will be amortized into net interest revenue over the contractual lives of the securities.
Securities at Dec. 31, 2021Gross
unrealized
Amortized costFair
value
(in millions)GainsLosses
Available-for-sale:
U.S. Treasury$28,966 $771 $328 $29,409 
Agency RMBS14,333 270 73 14,530 
Sovereign debt/sovereign guaranteed13,367 79 67 13,379 
Agency commercial MBS8,102 345 42 8,405 
Supranational7,599 24 50 7,573 
Foreign covered bonds6,236 25 23 6,238 
CLOs4,441 3 5 4,439 
Non-agency commercial MBS3,083 65 23 3,125 
Non-agency RMBS2,641 132 25 2,748 
Foreign government agencies2,694 9 17 2,686 
U.S. government agencies2,464 99 27 2,536 
State and political subdivisions2,543 11 40 2,514 
Other ABS2,205 7 22 2,190 
Corporate bonds2,099 19 52 2,066 
Other debt securities1 — — 1 
Total securities available-for-sale (a)(b)
$100,774 $1,859 $794 $101,839 
Held-to-maturity:
Agency RMBS$36,167 $428 $388 $36,207 
U.S. Treasury11,617 36 103 11,550 
Agency commercial MBS4,068 41 52 4,057 
U.S. government agencies2,998 — 71 2,927 
CLOs983 — 1 982 
Sovereign debt/sovereign guaranteed922 18 2 938 
Supranational54 — — 54 
Non-agency RMBS43 2 — 45 
State and political subdivisions14 1 — 15 
Total securities held-to-maturity$56,866 $526 $617 $56,775 
Total securities$157,640 $2,385 $1,411 $158,614 
(a)    The amortized cost of available-for-sale securities is net of the allowance for credit loss of $10 million. The allowance for credit loss primarily relates to CLOs.
(b)    Includes gross unrealized gains of $455 million and gross unrealized losses of $75 million recorded in accumulated other comprehensive income related to securities that were transferred from available-for-sale to held-to-maturity. The unrealized gains primarily relate to U.S. Treasury securities, agency RMBS and agency commercial MBS. The unrealized losses primarily relate to U.S. Treasury securities and agency RMBS. The unrealized gains and losses will be amortized into net interest revenue over the contractual lives of the securities.


Securities at Dec. 31, 2016Gross
unrealized

 Amortized cost
Fair
value

(in millions)Gains
Losses
Available-for-sale:    
U.S. Treasury$14,373
$115
$181
$14,307
U.S. government agencies366
2
9
359
State and political subdivisions3,392
38
52
3,378
Agency RMBS22,929
148
341
22,736
Non-agency RMBS620
31
13
638
Other RMBS517
4
8
513
Commercial MBS931
8
11
928
Agency commercial MBS6,505
28
84
6,449
CLOs2,593
6
1
2,598
Other asset-backed securities1,729
4
6
1,727
Foreign covered bonds2,126
24
9
2,141
Corporate bonds1,391
22
17
1,396
Sovereign debt/sovereign guaranteed12,248
261
20
12,489
Other debt securities1,952
19
10
1,961
Equity securities2
1
—
3
Money market funds842
—
—
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 agencies1,589
—
6
1,583
State and political subdivisions19
—
1
18
Agency RMBS25,221
57
299
24,979
Non-agency RMBS78
4
2
80
Other RMBS142
—
4
138
Commercial MBS7
—
—
7
Agency commercial MBS721
1
10
712
Foreign covered bonds74
1
—
75
Sovereign debt/sovereign guaranteed1,911
42
—
1,953
Other debt securities26
—
—
26
Total securities held-to-maturity$40,905
$127
$363
$40,669
Total securities$114,501
$1,124
$1,134
$114,491
BNY Mellon 59
(a)Previously included in the Grantor Trust. The Grantor Trust was dissolved in 2011.
Notes to Consolidated Financial Statements (continued)
(b)Includes gross unrealized gains of $62 million and gross unrealized losses 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 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 realized gains and losses, on a gross basis.

Net securities gains (losses)
(in millions)2Q221Q222Q21YTD22YTD21
Realized gross gains$7 $73 $6 $80 $18 
Realized gross losses(7)(69)(4)(76)(16)
Total net securities gains$— $4 $2 $4 $2 


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


Net securities gains (losses)
(in millions)2Q221Q222Q21YTD22YTD21
Non-agency RMBS$— $49 $— $49 $2 
U.S. Treasury1 11 — 12 (4)
State and political subdivisions— (13)— (13)— 
Corporate bonds(4)(47)— (51)— 
Other3 4 2 7 4 
Total net securities gains$— $4 $2 $4 $2 
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




In September 2017, other residential mortgage-backed securitiesthe second quarter of 2022, agency RMBS and agency commercial MBS, with an aggregate amortized cost of $74$975 million and fair value of $76$906 million were transferred from held-to-maturityavailable-for-sale securities to available-for-saleheld-to-maturity securities. Due to recent ratings downgrades,In the Company no longer intends to hold thesefirst quarter of 2022, agency RMBS, U.S. government agencies and agency commercial MBS, with an aggregate amortized cost of $5.3 billion and fair value of $5.2 billion were transferred from available-for-sale securities to maturity.held-to-maturity securities. Both transfers reduce the impact of changes in interest rates on accumulated other comprehensive income.


Temporarily impaired
Allowance for credit losses – Securities

The allowance for credit losses related to securities was $10 million at June 30, 2022 and $10 million at Dec. 31, 2021, and primarily relates to the available-for-sale CLO portfolio.


Credit quality indicators – Securities

At Sept.June 30, 2017,2022, the gross unrealized losses on the investment securities portfolio were primarily attributable to an increase in interest rates from the date of purchase, and for certain securities that were transferred from available-for-sale to held-to-maturity, an increase in interest rates through the date they were transferred. Specifically, $155$200 million of the unrealized losses at Sept.June 30, 20172022 and $190$75 million at Dec. 31, 20162021 reflected in the available-for-sale sections of the tables below relate to certain securities (primarily Agency RMBS) that were previously 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 ofsecurities portfolio in the following tables. We do not intend to sell these securities, and it is not more likely than not that we will have to sell these securities.




60 BNY Mellon 65
Notes to Consolidated Financial Statements(continued)

The following tables show the aggregate related fair value of investmentsavailable-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, 2017without an allowance for credit losses.

Available-for-sale securities in an unrealized loss position without an allowance for credit losses at June 30, 2022Less than 12 months12 months or moreTotal
Fair
value		Unrealized
losses		Fair
value		Unrealized
losses		Fair
value		Unrealized
losses
(in millions)
U.S. Treasury$26,959 $1,593 $3,198 $414 $30,157 $2,007 
Sovereign debt/sovereign guaranteed8,200 221 1,409 122 9,609 343 
Agency RMBS7,709 305 297 23 8,006 328 
Agency commercial MBS6,511 353 805 57 7,316 410 
Supranational4,480 179 904 85 5,384 264 
CLOs4,748 135 313 12 5,061 147 
Foreign covered bonds4,307 151 481 34 4,788 185 
Non-agency commercial MBS2,565 205 438 62 3,003 267 
Foreign government agencies1,966 59 381 25 2,347 84 
Non-agency RMBS1,245 73 823 86 2,068 159 
State and political subdivisions1,306 173 461 68 1,767 241 
U.S. government agencies1,517 113 182 23 1,699 136 
Other ABS1,087 71 495 32 1,582 103 
Corporate bonds653 49 559 109 1,212 158 
Total securities available-for-sale (a)
$73,253 $3,680 $10,746 $1,152 $83,999 $4,832 
(a)    Includes $134 million gross unrealized losses for less than 12 months and Dec. 31, 2016.$66 million of gross unrealized losses for 12 months or more recorded in accumulated other comprehensive income related to securities that were transferred from available-for-sale to held-to-maturity. The unrealized losses are primarily related to agency RMBS and U.S. Treasury securities and will be amortized into net interest revenue over the contractual lives of the securities.


Available-for-sale securities in an unrealized loss position without an allowance for credit losses at Dec. 31, 2021Less than 12 months12 months or moreTotal
Fair
value		Unrealized
losses		Fair
value		Unrealized
losses		Fair
value		Unrealized
losses
(in millions)
U.S. Treasury$16,855 $235 $1,944 $93 $18,799 $328 
Sovereign debt/sovereign guaranteed6,040 66 58 1 6,098 67 
Agency RMBS4,089 44 457 29 4,546 73 
Supranational3,093 44 305 6 3,398 50 
Agency commercial MBS2,233 39 585 3 2,818 42 
Foreign covered bonds2,694 23 — — 2,694 23 
CLOs1,808 3 318 2 2,126 5 
Non-agency RMBS1,573 20 345 5 1,918 25 
State and political subdivisions1,848 40 13 — 1,861 40 
U.S. government agencies1,780 27 — — 1,780 27 
Other ABS1,383 20 201 2 1,584 22 
Foreign government agencies1,446 17 15 — 1,461 17 
Corporate bonds1,247 42 198 10 1,445 52 
Non-agency commercial MBS947 16 222 7 1,169 23 
Total securities available-for-sale (a)
$47,036 $636 $4,661 $158 $51,697 $794 
(a)    Includes $47 million of gross unrealized losses for less than 12 months and $28 million of gross unrealized losses for 12 months or more recorded in accumulated other comprehensive income related to securities that were transferred from available-for-sale to held-to-maturity. The unrealized losses are primarily related to U.S. Treasury securities and agency RMBS and will be amortized into net interest revenue over the contractual lives of the securities.



BNY Mellon 61
Temporarily impaired securities at Sept. 30, 2017Less 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 agencies399
6
 —
—
 399
6
State and political subdivisions310
4
 384
20
 694
24
Agency RMBS8,935
72
 4,145
178
 13,080
250
Non-agency RMBS5
—
 156
3
 161
3
Other RMBS72
4
 83
4
 155
8
Commercial MBS193
2
 92
2
 285
4
Agency commercial MBS3,610
47
 561
10
 4,171
57
CLOs449
1
 —
—
 449
1
Foreign covered bonds1,017
7
 28
—
 1,045
7
Corporate bonds306
3
 144
5
 450
8
Sovereign debt/sovereign guaranteed2,263
20
 137
3
 2,400
23
Other debt securities1,347
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 agencies1,459
5
 99
1
 1,558
6
State and political subdivisions—
—
 4
1
 4
1
Agency RMBS17,125
172
 847
13
 17,972
185
Other RMBS15
—
 35
1
 50
1
Agency commercial MBS557
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
(a)Previously included in the Grantor Trust. The Grantor Trust was dissolved in 2011.
(b)Gross unrealized losses for 12 months or more of $155 million were 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 no gross unrealized losses for less than 12 months.


66 BNY Mellon
Notes to Consolidated Financial Statements(continued)

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

Held-to-maturity securities portfolio at June 30, 2022
Ratings (a)
Net unrealized gain (loss)BB+
and
lower
(dollars in millions)Amortized
cost		AAA/
AA-		A+/
A-		BBB+/
BBB-		Not
rated
Agency RMBS$36,947 $(3,007)100 %— %— %— %— %
U.S. Treasury11,347 (685)100 — — — — 
Agency commercial MBS4,319 (296)100 — — — — 
U.S. government agencies4,061 (380)100 — — — — 
Sovereign debt/sovereign guaranteed (b)
1,472 (26)100 — — — — 
CLOs983 (34)100 — — — — 
Supranational325 (10)100 — — — — 
Foreign government agencies64 (1)100 — — — — 
Non-agency RMBS34 1 22 59 2 16 1 
State and political subdivisions14 (1)3 2 3 — 92 
Total held-to-maturity securities$59,566 $(4,439)100 %— %— %— %— %
(a)    Represents ratings by Standard & Poor’s (“S&P”) or the equivalent.
(b)    Primarily consists of exposure to Germany, France and UK.


Held-to-maturity securities portfolio at Dec. 31, 2021
Ratings (a)
Net unrealized gain (loss)BB+
and
lower
(dollars in millions)Amortized
cost		AAA/
AA-		A+/
A-		BBB+/
BBB-		Not
rated
Agency RMBS$36,167 $40 100 %— %— %— %— %
U.S. Treasury11,617 (67)100 — — — — 
Agency commercial MBS4,068 (11)100 — — — — 
U.S. government agencies2,998 (71)100 — — — — 
CLOs983 (1)100 — — — — 
Sovereign debt/sovereign guaranteed (b)
922 16 100 — — — — 
Supranational54 — 100 — — — — 
Non-agency RMBS43 2 23 59 2 15 1 
State and political subdivisions14 1 5 2 5 — 88 
Total held-to-maturity securities$56,866 $(91)100 %— %— %— %— %
(a)    Represents ratings by S&P or the equivalent.
(b)    Primarily consists of exposure to France, UK and Germany.


62 BNY Mellon
Temporarily impaired securities at Dec. 31, 2016Less 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$8,489
$181
 $—
$—
 $8,489
$181
U.S. government agencies257
9
 —
—
 257
9
State and political subdivisions1,058
33
 131
19
 1,189
52
Agency RMBS14,766
141
 1,673
200
 16,439
341
Non-agency RMBS21
—
 332
13
 353
13
Other RMBS26
—
 136
8
 162
8
Commercial MBS302
7
 163
4
 465
11
Agency commercial MBS3,570
78
 589
6
 4,159
84
CLOs443
1
 404
—
 847
1
Other asset-backed securities276
1
 357
5
 633
6
Foreign covered bonds712
9
 —
—
 712
9
Corporate bonds594
16
 7
1
 601
17
Sovereign debt/sovereign guaranteed1,521
20
 63
—
 1,584
20
Other debt securities742
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
Held-to-maturity:        
U.S. Treasury$6,112
$41
 $—
$—
 $6,112
$41
U.S. government agencies1,533
6
 —
—
 1,533
6
State and political subdivisions—
—
 4
1
 4
1
Agency RMBS19,498
297
 102
2
 19,600
299
Non-agency RMBS4
—
 48
2
 52
2
Other RMBS15
—
 123
4
 138
4
Agency commercial MBS621
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 included in the Grantor Trust. The Grantor Trust was dissolved in 2011.
Notes to Consolidated Financial Statements (continued)
(b)Includes gross unrealized losses 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 no gross unrealized losses for less than 12 months.


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 yields on securities at June 30, 2022
Within 1 year1-5 years5-10 yearsAfter 10 yearsTotal
(dollars in millions)Amount
Yield (a)
Amount
Yield (a)
Amount
Yield (a)
Amount
Yield (a)
Amount
Yield (a)
Available-for-sale:
U.S. Treasury$3,978 1.84 %$15,195 1.05 %$9,052 1.15 %$2,242 2.92 %$30,467 1.32 %
Sovereign debt/sovereign guaranteed3,750 1.27 6,242 0.79 1,020 0.38 80 1.78 11,092 0.91 
Supranational905 1.05 4,964 1.15 1,662 1.50 17 (0.09)7,548 1.21 
Foreign covered bonds1,503 1.27 3,735 1.09 590 0.08 — — 5,828 1.03 
Foreign government agencies583 0.91 1,918 0.99 35 0.16 — — 2,536 0.96 
State and political subdivisions145 3.47 646 1.63 1,030 1.61 202 2.33 2,023 1.81 
U.S. government agencies— — 579 2.19 1,160 2.22 186 2.52 1,925 2.24 
Corporate bonds114 2.30 357 2.59 804 1.61 22 2.01 1,297 1.92 
Other debt securities— — — — — — 1 3.70 1 3.70 
Mortgage-backed securities:
Agency RMBS8,303 2.14 
Non-agency RMBS2,311 3.20 
Agency commercial MBS8,179 2.31 
Non-agency commercial MBS3,003 2.45 
CLOs5,097 2.15 
Other ABS1,668 1.72 
Total securities available-for-sale$10,978 1.48 %$33,636 1.06 %$15,353 1.22 %$2,750 2.78 %$91,278 1.57 %
Held-to-maturity:
U.S. Treasury$1,590 1.91 %$7,800 1.26 %$1,957 1.16 %$— — %$11,347 1.33 %
U.S. government agencies— — 1,937 1.20 1,864 1.52 260 1.90 4,061 1.39 
Sovereign debt/sovereign guaranteed193 0.25 1,190 0.87 89 0.53 — — 1,472 0.77 
Supranational— — 325 0.70 — — — — 325 0.70 
Foreign government agencies— — 64 0.79 — — — — 64 0.79 
State and political subdivisions1 5.51 1 5.76 4 4.65 8 4.80 14 4.84 
Mortgage-backed securities:
Agency RMBS36,947 2.29 
Non-agency RMBS34 1.80 
Agency commercial MBS4,319 2.28 
CLOs983 2.10 
Total securities held-to-maturity$1,784 1.73 %$11,317 1.19 %$3,914 1.32 %$268 1.98 %$59,566 2.00 %
Total securities$12,762 1.52 %$44,953 1.09 %$19,267 1.24 %$3,018 2.72 %$150,844 1.73 %
(a)    Yields are based upon the amortized cost of securities and consider the contractual coupon, amortization of premiums and accretion of discounts, excluding the effect of related hedging derivatives.


Maturity distribution and yield on investment securities at Sept. 30, 2017U.S. Treasury 
U.S. government
agencies
 
State and political
subdivisions
 Other bonds, notes and debentures 
Mortgage/
asset-backed and
equity securities
  
(dollars in millions)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
Over 1 through 5 years5,790
1.66
 174
1.29
 1,576
3.07
 12,648
0.99
 —
—
 20,188
Over 5 through 10 years4,002
1.90
 690
2.46
 912
3.34
 2,835
0.81
 —
—
 8,439
Over 10 years3,487
3.11
 —
—
 198
2.36
 198
1.64
 —
—
 3,883
Mortgage-backed securities—
—
 —
—
 —
—
 —
—
 36,381
2.78
 36,381
Asset-backed securities—
—
 —
—
 —
—
 —
—
 3,707
2.32
 3,707
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
Securities held-to-maturity:                
One year or less$4,943
0.97% $731
0.99% $—
—% $700
0.60% $—
—% $6,374
Over 1 through 5 years3,517
1.67
 883
1.38
 2
6.88
 307
0.59
 —
—
 4,709
Over 5 through 10 years1,407
1.92
 —
—
 2
6.86
 661
0.73
 —
—
 2,070
Over 10 years—
—
 —
—
 14
5.32
 —
—
 —
—
 14
Mortgage-backed securities—
—
 —
—
 —
—
 —
—
 26,828
2.80
 26,828
Total$9,867
1.36% $1,614
1.20% $18
5.64% $1,668
0.65% $26,828
2.80% $39,995
(a)Yields are based upon the amortized cost of securities.
(b)Includes money market funds.


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-A22%54% 30%54%
Subprime38%66% 49%70%
Prime13%39% 18%39%

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. Treasury1
(1)(1)—
4
Foreign covered bonds—
—
—
—
10
Non-agency RMBS(1)—
(1)(2)1
Other15
1
17
26
28
Total net securities gains$19
$—
$24
$29
$65


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 losses1
1
Less: Realized losses for securities sold2
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 losses3
5
Less: Realized losses for securities sold7
9
Ending balance as of Sept. 30$84
$87


Pledged assets


At Sept.June 30, 2017,2022, BNY Mellon had pledged assets of $108$140 billion, including $87$111 billion pledged as collateral for potential borrowings at the Federal Reserve Discount Window and $4$8 billion pledged as collateral for borrowing at the Federal Home Loan Bank. The components of the assets pledged at Sept.June 30, 20172022 included $92$123 billion of securities, $13 billion of loans, $2$3 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, 2016,2021, BNY Mellon had pledged assets of $102$144 billion, including $84$112 billion pledged as collateral for potential borrowing at the Federal Reserve Discount Window.Window and $7 billion pledged as collateral for borrowing at the Federal Home Loan Bank. The components of the assets pledged at Dec. 31, 20162021 included $87$126 billion of securities, $8$12 billion of loans, $4$5 billion of trading assets and $1 billion of interest-bearing deposits with banks and $3 billion of trading assets.banks.

BNY Mellon 63
Notes to Consolidated Financial Statements (continued)
At Sept.June 30, 20172022 and Dec. 31, 2016,2021, pledged assets included $13$21 billion and $6$24 billion, respectively, for which the recipients were permitted to sell or repledge the assets delivered.


We also obtain securities as collateral, including receipts under resale agreements, securities borrowed, derivative contracts and custody agreements, on terms which permit us to sell or repledge the securities to others. At Sept.June 30, 20172022 and Dec. 31, 2016,2021, the market value of the securities received that can be sold or repledged was $68$92 billion and $50$122 billion, respectively. We routinely sell or repledge these securities through delivery to third parties. As of Sept.June 30, 20172022 and Dec. 31, 2016,2021, the market value of securities collateral sold or repledged was $39$57 billion and $20$78 billion, respectively.


Restricted cash and securities


Cash and securities may also be segregated under federal and other regulations or requirements. At Sept.June 30, 20172022 and Dec. 31, 2016,2021, cash segregated under federal and other regulations or requirements was $4 billion and $3 billion, respectively.billion. Restricted cash is primarily included in interest-bearing deposits with banks on the consolidated balance sheet. Securities segregated for these purposesunder federal and other regulations or requirements were $2$5 billion at Sept.June 30, 20172022 and $2$4 billion at Dec. 31, 2016.2021. 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 - 4–Loans and asset quality


Loans


The table below provides the details of our loan portfolioportfolio.

LoansJune 30, 2022Dec. 31, 2021
(in millions)
Commercial$2,423 $2,128 
Commercial real estate6,095 6,033 
Financial institutions10,627 10,232 
Lease financings702 731 
Wealth management loans10,853 9,792 
Wealth management mortgages8,777 8,200 
Other residential mortgages369 299 
Capital call financing3,602 2,284 
Other2,790 2,541 
Overdrafts3,793 3,060 
Margin loans19,316 22,487 
Total loans (a)
$69,347 $67,787 
(a)Net of unearned income of $235 million at June 30, 2022 and industry concentrations of credit risk$240 million at Sept. 30, 2017 and Dec. 31, 2016.2021 primarily related to lease financings.



We disclose information related to our loans and asset quality by the class of the financing receivable in the following tables.
64 BNY Mellon
LoansSept. 30, 2017
Dec. 31, 2016
(in millions)
Domestic:  
Financial institutions$5,155
$6,342
Commercial2,698
2,286
Wealth management loans and mortgages16,161
15,555
Commercial real estate4,921
4,639
Lease financings823
989
Other residential mortgages741
854
Overdrafts1,487
1,055
Other1,159
1,202
Margin loans13,720
17,503
Total domestic46,865
50,425
Foreign:  
Financial institutions6,741
8,347
Commercial305
331
Wealth management loans and mortgages104
99
Commercial real estate6
15
Lease financings522
736
Other (primarily overdrafts)4,373
4,418
Margin loans152
87
Total foreign12,203
14,033
Total loans (a)
$59,068
$64,458
(a)
Net of unearned income of $414 million at Sept. 30, 2017 and $527 million at Dec. 31, 2016 primarily on domestic and foreign lease financings.


Our loan portfolio consists of three portfolio segments: commercial, lease financings and mortgages. We manage our portfolio at the class level which consists of six 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 and provide additional information about our credit risks and the adequacy of our allowance for credit losses.



BNY Mellon 69
Notes to Consolidated Financial Statements(continued)

Allowance for credit losses


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


Allowance for credit losses activity for the quarter ended June 30, 2022Wealth management loansWealth management mortgagesOther
residential
mortgages		Capital call financing
(in millions)CommercialCommercial
real estate		Financial
institutions		Lease
financings		Total
Beginning balance$12 $176 $15 $1 $1 $9 $7 $3 $224 
Charge-offs— — — — — — — — — 
Recoveries— — — — — — 1 — 1 
Net (charge-offs) recoveries— — — — — — 1 — 1 
Provision (a)
4 8 6 — — (2)(1)3 18 
Ending balance$16 $184 $21 $1 $1 $7 $7 $6 $243 
Allowance for:
Loan losses$4 $147 $10 $1 $1 $6 $7 $5 $181 
Lending-related commitments12 37 11 — — 1 — 1 62 
Individually evaluated for impairment:
Loan balance (b)
$— $121 $— $— $— $14 $1 $— $136 
Allowance for loan losses— 1 — — — — — — 1 
(a)    Does not include the provision for credit losses related to other financial instruments of $29 million for the quarter ended June 30, 2022.
(b)    Includes collateral-dependent loans of $136 million with $179 million of collateral at fair value.


Allowance for credit losses activity for the quarter ended March 31, 2022Wealth management loansWealth management mortgagesOther
residential
mortgages		Capital call financing
(in millions)CommercialCommercial
real estate		Financial
institutions		Lease
financings		Total
Beginning balance$12 $199 $13 $1 $1 $6 $7 $2 $241 
Charge-offs— — — — — — — — — 
Recoveries— — — — — — 1 — 1 
Net recoveries— — — — — — 1 — 1 
Provision (a)
— (23)2 — — 3 (1)1 (18)
Ending balance$12 $176 $15 $1 $1 $9 $7 $3 $224 
Allowance for:
Loan losses$2 $142 $7 $1 $1 $8 $7 $3 $171 
Lending-related commitments10 34 8 — — 1 — — 53 
Individually evaluated for impairment:
Loan balance (b)
$— $121 $— $— $— $18 $1 $— $140 
Allowance for loan losses— 1 — — — 1 — — 2 
(a)    Does not include the provision for credit losses related to other financial instruments of $20 million for the quarter ended March 31, 2022.
(b)    Includes collateral-dependent loans of $140 million with $183 million of collateral at fair value.


BNY Mellon 65
Allowance for credit losses activity for the quarter ended Sept. 30, 2017Wealth 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
Provision1
—
—
(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
$161
Lending-related commitments55
18
16
—
4
—
—
 11
104
Individually evaluated for impairment:          
Loan balance$—
$—
$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 losses26
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, 2017Wealth 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 commitments54
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 losses26
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 June 30, 2021
Wealth management loans (a)
Wealth management mortgages (a)
Other
residential
mortgages
Capital call financing (a)
Total
(in millions)CommercialCommercial
real estate		Financial
institutions		Lease
financings
Beginning balance$11 $365 $6 $2 $— $6 $9 $1 $400 
Charge-offs— — — — — — (1)— (1)
Recoveries— — 2 — — — 1 — 3 
Net recoveries— — 2 — — — — — 2 
Provision (b)
(3)(76)(2)— 1 (2)(1)— (83)
Ending balance$8 $289 $6 $2 $1 $4 $8 $1 $319 
Allowance for:
Loan losses$3 $248 $3 $2 $1 $3 $8 $1 $269 
Lending-related commitments5 41 3 — — 1 — — 50 
Individually evaluated for impairment:
Loan balance (c)
$— $26 $— $— $— $17 $1 $— $44 
Allowance for loan losses— 3 — — — — — — 3 
(a)    In 2021, we began disclosing wealth management loans and wealth management mortgages separately and capital call financing loans. Beginning balances and the activity for the second quarter of 2021 have been revised to be comparable.
(b)    Does not include the provision for credit losses benefit related to other financial instruments of $3 million for the second quarter of 2021.
(c)    Includes collateral-dependent loans of $44 million with $50 million of collateral at fair value.


Allowance for credit losses activity for the six months ended June 30, 2022Other
residential
mortgages		Capital call financingTotal
(in millions)CommercialCommercial
real estate		Financial
institutions		Lease
financings		Wealth management loansWealth management mortgages
Beginning balance$12 $199 $13 $1 $1 $6 $7 $2 $241 
Charge-offs— — — — — — — — — 
Recoveries— — — — — — 2 — 2 
Net recoveries— — — — — — 2 — 2 
Provision (b)
4 (15)8 — — 1 (2)4 — 
Ending balance$16 $184 $21 $1 $1 $7 $7 $6 $243 
(a)    Does not include provision for credit losses related to other financial instruments of $49 million for the six months ended June 30, 2022.


Allowance for credit losses activity for the six months ended June 30, 2021Other
residential
mortgages
Capital call financing (a)
Total
(in millions)CommercialCommercial
real estate		Financial
institutions		Lease
financings
Wealth management loans (a)
Wealth management mortgages (a)
Beginning balance$16 $430 $10 $2 $1 $7 $13 $— $479 
Charge-offs— — — — — (1)(1)— (2)
Recoveries— — 2 — — — 3 — 5 
Net recoveries (charge-offs)— — 2 — — (1)2 — 3 
Provision (b)
(8)(141)(6)— — (2)(7)1 (163)
Ending balance$8 $289 $6 $2 $1 $4 $8 $1 $319 
(a)    In 2021, we began disclosing wealth management loans and wealth management mortgages separately and capital call financing loans. Beginning balances and the activity for the first six months of 2021 have been revised to be comparable.
(b)    Does not include provision for credit losses benefit related to other financial instruments of $6 million for the six months ended June 30, 2021.


66 BNY Mellon
Allowance for credit losses activity for the quarter ended Sept. 30, 2016Wealth 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
Provision1
—
(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
$148
Lending-related commitments69
18
20
—
4
—
—
 15
126
Individually evaluated for impairment:          
Loan balance$—
$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 losses22
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, 2017Wealth 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, 2016Wealth 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
Provision9
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 assetsJune 30, 2022Dec. 31, 2021
Recorded investmentRecorded investment
With an
allowance		Without an allowanceWith an
allowance		Without an allowance
(in millions)TotalTotal
Nonperforming loans:
Commercial real estate$— $54 $54 $12 $42 $54 
Other residential mortgages34 1 35 38 1 39 
Wealth management mortgages9 13 22 8 17 25 
Total nonperforming loans43 68 111 58 60 118 
Other assets owned— 3 3 — 2 2 
Total nonperforming assets$43 $71 $114 $58 $62 $120 
 
Nonperforming assets
(in millions)
Sept. 30, 2017
Dec. 31, 2016
 
 Nonperforming loans:  
 Other residential mortgages$80
$91
 Wealth management loans and mortgages8
8
 Financial institutions2
—
 Lease financings—
4
 Total nonperforming loans90
103
 Other assets owned4
4
 Total nonperforming assets$94
$107




At Sept. 30, 2017, 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 loans3Q172Q173Q16 YTD17YTD16
(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 institutions2
—
1
—
—
—
 1
—
—
—
Wealth management loans and mortgages2
—
3
—
3
—
 3
—
5
—
Lease financings—
—
—
—
4
—
 1
—
3
—
Total impaired loans with an allowance4
—
4
—
8
—
 5
—
9
—
Impaired loans without an allowance:
           
Commercial real estate—
—
—
—
1
—
 —
—
1
—
Financial institutions—
—
—
—
85
—
 —
—
128
—
Wealth management loans and mortgages4
—
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 loansSept. 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 institutions2
2
2
 —
—
—
Wealth management loans and mortgages1
1
—
 3
3
3
Lease financings—
—
—
 4
4
2
Total impaired loans with an allowance3
6
2
 7
10
5
Impaired loans without an allowance:
       
Wealth management loans and mortgages4
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 interestSept. 30, 2017 Dec. 31, 2016Past due loans and still accruing interestJune 30, 2022Dec. 31, 2021
Past due loans and still accruing interestDays past dueTotal
past due		Days past dueTotal
past due
(in millions)30-5960-89≥9030-5960-89≥90
Capital call financingCapital call financing$— $120 $— $120 $— $— $— $— 
Commercial real estateCommercial real estate39 — — 39 3 — — 3 
Wealth management loansWealth management loans26 1 — 27 33 — — 33 
Financial institutionsFinancial institutions9 10 — 19 31 — — 31 
Other residential mortgagesOther residential mortgages8 — — 8 2 1 — 3 
Wealth management mortgagesWealth management mortgages— — — — 24 — — 24 
Days past due
Total
past due

 Days past due
Total
past due

(in millions)30-59
60-89
≥90
30-59
60-89
≥90
Commercial real estate$51
$60
$—
$111
 $78
$—
$—
$78
Wealth management loans and mortgages86
15
1
102
 21
2
—
23
Other residential mortgages20
3
5
28
 20
6
7
33
Financial institutions—
—
—
—
 1
27
—
28
Total past due loans$157
$78
$6
$241

$120
$35
$7
$162
Total past due loans$82 (a)$131 (a)$— $213 $93 $1 $— $94 

(a)    Past due loans for 30-59 days of $26 million and past due loans for 60-89 days of $121 million have been collected since June 30, 2022.



Loan modifications
Troubled debt restructurings (“TDRs”)


A modified loan is considered a TDRtroubled debt restructuring (“TDR”) if the debtor is experiencing financial difficulties and the creditor grants a concession to the debtor that would not
otherwise be considered. A TDR may include a transfer of real estate or other assets from the debtor to the creditor, or a modification of the term of the loan. Not all modified loans are considered TDRs. There were no TDRs in the first six months of 2022.

Due to the coronavirus pandemic, there were two forms of relief provided for classifying loans as TDRs: The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the relevant provisions of which were extended by the
Consolidated Appropriations Act, 2021, and the Interagency Guidance. The extension period ended Jan. 1, 2022. See Note 1 of the Notes to Consolidated Financial Statements in our 2021 Annual Report for additional details on the CARES Act, Consolidated Appropriations Act, 2021, and Interagency Guidance. Loans modified under the CARES Act or Interagency Guidance totaled $3 million in the second quarter of 2021. Nearly all of the modifications were short-term loan payment forbearances or modified principal and/or interest payments. These loans were primarily residential mortgage and commercial real estate loans. We did not identify any of the modifications as TDRs. At June 30, 2022, the unpaid principal balance of the loans modified under the CARES Act or Interagency Guidance was $122 million.

The following table presents our TDRs.

TDRs3Q17 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 mortgages19
 $5
 $5
 16
 $4
 $4
 17
 $4
 $4
Wealth management loans and mortgages1
 2
 2
 —
 —
 —
 —
 —
 —
Total TDRs20
 $7
 $7
 16
 $4
 $4
 17
 $4
 $4




BNY Mellon 7367
Notes to Consolidated Financial Statements(continued)

Other residential mortgages

The modifications of the other residential mortgage loans in the third quarter of 2017, second quarter of 2017 and third 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.

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 gradeinvestment-grade clients that are active users of our non-credit services. Each customer is assigned an internal credit rating, which is mapped to an external rating agency grade equivalent, if possible, based upon a number of
dimensions, which are continually evaluated and may change over time.


The following tables presentbelow provide information about the credit quality indicators.

Commercialprofile of the loan portfolio by the period of origination.


Credit profile of the loan portfolioJune 30, 2022
Revolving loans
Originated, at amortized costAmortized costConverted to term loans – Amortized costAccrued
interest
receivable
(in millions)YTD222021202020192018Prior to 2018
Total (a)
Commercial:
Investment grade$375 $324 $20 $— $17 $145 $1,409 $— $2,290 
Non-investment grade86 6 — — — — 41 — 133 
Total commercial461 330 20 — 17 145 1,450 — 2,423 $2 
Commercial real estate:
Investment grade568 1,288 452 814 173 890 233 — 4,418 
Non-investment grade387 469 156 378 189 50 23 25 1,677 
Total commercial real estate955 1,757 608 1,192 362 940 256 25 6,095 12 
Financial institutions:
Investment grade162 566 — — — 38 8,240 — 9,006 
Non-investment grade60 — — — — — 1,561 — 1,621 
Total financial institutions222 566 — — — 38 9,801 — 10,627 26 
Wealth management loans:
Investment grade22 105 18 71 — 226 10,353 — 10,795 
Non-investment grade— — — — — — 58 — 58 
Total wealth management loans22 105 18 71 — 226 10,411 — 10,853 22 
Wealth management mortgages1,169 2,031 959 805 508 3,289 16 — 8,777 17 
Lease financings19 — 54 13 8 608 — — 702 — 
Other residential mortgages— — — — — 369 — — 369 1 
Capital call financing— — — — — — 3,602 — 3,602 10 
Other loans— — — — — — 2,790 — 2,790 3 
Margin loans5,119 500 — — — — 13,697 — 19,316 17 
Total loans$7,967 $5,289 $1,659 $2,081 $895 $5,615 $42,023 $25 $65,554 $110 
(a)    Excludes overdrafts of $3,793 million. Overdrafts occur on a daily basis primarily in the custody and securities clearance business and are generally repaid within two business days.

68 BNY Mellon
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
(in millions)  
Investment grade$2,857
$2,397
 $4,339
$3,823
 $9,217
$11,459
Non-investment grade146
220
 588
831
 2,679
3,230
Total$3,003
$2,617
 $4,927
$4,654
 $11,896
$14,689
Notes to Consolidated Financial Statements (continued)

Credit profile of the loan portfolioDec. 31, 2021
Revolving loans
Originated, at amortized costAmortized costConverted to term loans – Amortized costAccrued
interest
receivable
(in millions)20212020201920182017Prior to 2017
Total (a)
Commercial:
Investment grade$348 $20 $— $8 $145 $— $1,450 $— $1,971 
Non-investment grade81 — — — — — 76 — 157 
Total commercial429 20 — 8 145 — 1,526 — 2,128 $1 
Commercial real estate:
Investment grade1,577 528 683 173 298 601 205 — 4,065 
Non-investment grade660 97 568 351 50 95 121 26 1,968 
Total commercial real estate2,237 625 1,251 524 348 696 326 26 6,033 7 
Financial institutions:
Investment grade705 — — — — 60 8,015 — 8,780 
Non-investment grade20 — — — — — 1,432 — 1,452 
Total financial institutions725 — — — — 60 9,447 — 10,232 11 
Wealth management loans:
Investment grade117 18 73 6 104 122 9,320 — 9,760 
Non-investment grade1 — — — — — 31 — 32 
Total wealth management loans118 18 73 6 104 122 9,351 — 9,792 12 
Wealth management mortgages2,058 1,008 855 542 885 2,838 14 — 8,200 14 
Lease financings25 67 15 10 2 612 — — 731 — 
Other residential mortgages— — — — — 299 — — 299 1 
Capital call financing— — — — — — 2,284 — 2,284 3 
Other loans— — — — — — 2,541 — 2,541 2 
Margin loans7,697 — — — — — 14,790 — 22,487 10 
Total loans$13,289 $1,738 $2,194 $1,090 $1,484 $4,627 $40,279 $26 $64,727 $61 

(a)    Excludes overdrafts of $3,060 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 categoriesthose 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 96% of the exposures meeting the investment grade
equivalent criteria of our internal credit rating classification at June 30, 2022. In addition, 65% of the financial institutions exposure is secured. For example, securities industry clients and asset managers often borrow against marketable securities held in custody. The exposure to financial institutions is generally short-term, with 84% 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 grade135
260
Wealth management mortgages9,002
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 loan portfolio, therefore, would equate to investment grade external ratings. Wealth management loans are provided to select customers based on the pledge of other types of assets, including business assets, fixed assets or a modest amount of commercial real estate.assets. For the loans collateralized by other assets, the credit quality of the obligor is carefully analyzed,
BNY Mellon 69
Notes to Consolidated Financial Statements (continued)
but we do not consider this portfolioportion of loanswealth management loan portfolio to be investment grade.


Wealth management mortgages

Credit quality indicators for wealth management mortgages are not correlated to external ratings. Wealth management mortgages are typically loans to high-net-worth individuals, which are secured primarily by residential property. These loans are primarily interest-only, adjustable rate mortgages with a weighted-average loan-to-value ratio of 62%61% at origination. InDelinquency rate is a key indicator of credit quality in the wealth management portfolio,portfolio. At June 30, 2022, less


74 BNY Mellon
Notes to Consolidated Financial Statements(continued)

than 1% of the mortgages were past due at Sept. 30, 2017.due.


At Sept.June 30, 2017,2022, the wealth management mortgage portfolio consisted of the following geographic concentrations: California - 24%– 22%; New York - 19%– 15%; Florida – 10%; Massachusetts - 11%; Florida -– 8%; and other - 38%– 45%.


Lease financings

At June 30, 2022, the lease financings portfolio consisted of exposures backed by well-diversified assets, primarily real estate and large-ticket transportation equipment. The largest components of our lease residual value exposure relate to aircraft and freight-related rail cars. Assets are both domestic and foreign-based, with primary concentrations in Germany and the U.S.

Other residential mortgages


The other residential mortgagemortgages portfolio primarily consists of 1-4 family residential mortgage loans and totaled $741$369 million at Sept.June 30, 20172022 and $854$299 million at Dec. 31, 2016.2021. Included in this portfolio at June 30, 2022 were $96 million of fixed-rate jumbo mortgage loans purchased in the second quarter of
2022 with a weighted-average loan-to-value ratio of 69% at origination. These loans are not typically correlated to external ratings. Included in this portfolio at Sept. 30, 2017

Capital call financing

Capital call financing includes loans to private equity funds that are $181 million of mortgage loans purchased in 2005, 2006secured by the fund investors’ capital commitments 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% 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.funds’ right to call capital.

Overdrafts

Overdrafts primarily relate to custody and securities clearance clients and totaled $5.8 billion at Sept. 30,
2017 and $5.5 billion at Dec. 31, 2016. 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 incomefixed-income securities.


Margin loans


We had $13.9$19.3 billion of secured margin loans on our balance sheet at Sept.June 30, 20172022, compared with $17.6$22.5 billion at Dec. 31, 2016.2021. 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 loansloans.

Overdrafts

Overdrafts primarily relate to custody and do not allocate any of oursecurities clearance clients and totaled $3.8 billion at June 30, 2022 and $3.1 billion at Dec. 31, 2021. Overdrafts occur on a daily basis and are generally repaid within two business days.

Reverse repurchase agreements

Reverse repurchase agreements at June 30, 2022 and Dec. 31, 2021 were fully secured with high quality collateral. As a result, there was no allowance for credit losses related to margin loans.

Reverse repurchase agreements

Reverse repurchase agreements are transactions fully collateralized with high-quality liquid securities. These transactions carry minimal credit riskthese assets at June 30, 2022 and therefore are not allocated an allowance for credit losses.

Dec. 31, 2021.


70 BNY Mellon
Notes to Consolidated Financial Statements (continued)
Note 6 - 5–Goodwill and intangible assets


Goodwill


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


Goodwill by business segment

(in millions)
Securities
Services		Market and Wealth ServicesInvestment
and Wealth
Management		Consolidated
Balance at Dec. 31, 2021$7,062 $1,435 $9,015 $17,512 
Foreign currency translation(87)(10)(144)(241)
Balance at June 30, 2022$6,975 $1,425 $8,871 $17,271 
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 translation120
107
—
227
Balance at Sept. 30, 2017$9,120
$8,376
$47
$17,543




Goodwill by business segment

(in millions)
Securities
Services		Market and Wealth ServicesInvestment
and Wealth
Management		Consolidated
Balance at Dec. 31, 2020$7,033 $1,423 $9,040 $17,496 
Dispositions— — (5)(5)
Foreign currency translation(22)1 17 (4)
Balance at June 30, 2021$7,011 $1,424 $9,052 $17,487 

Goodwill by business
(in millions)
Investment
Management
Investment
Services
Other
Consolidated
Balance at Dec. 31, 2015$9,207
$8,366
$45
$17,618
Acquisitions29
(1)—
28
Foreign currency translation(167)(30)—
(197)
Other (a)
2
(4)2
—
Balance at Sept. 30, 2016$9,071
$8,331
$47
$17,449
(a)Other changes in goodwill include purchase price adjustments and certain other reclassifications.



BNY Mellon 75
Notes to Consolidated Financial Statements(continued)


Intangible assets


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


Intangible assets – net carrying amount by business segment
(in millions)
Securities
Services		Market and Wealth ServicesInvestment
and Wealth
Management		OtherConsolidated
Balance at Dec. 31, 2021$230 $392 $1,520 $849 $2,991 
Amortization(17)(4)(13)— (34)
Foreign currency translation(6)— (17)— (23)
Balance at June 30, 2022$207 $388 $1,490 $849 $2,934 


Intangible assets – net carrying amount by business segment
(in millions)
Securities
Services		Market and Wealth ServicesInvestment
and Wealth
Management		OtherConsolidated
Balance at Dec. 31, 2020$194 $414 $1,555 $849 $3,012 
Disposition— — (6)— (6)
Amortization(15)(14)(15)— (44)
Foreign currency translation— — 2 — 2 
Balance at June 30, 2021$179 $400 $1,536 $849 $2,964 


BNY Mellon 71
Intangible assets – net carrying amount by business
(in millions)
Investment
Management
Investment
Services
Other
Consolidated
Balance at Dec. 31, 2016$1,717
$1,032
$849
$3,598
Amortization(45)(112)—
(157)
Foreign currency translation16
4
—
20
Balance at Sept. 30, 2017$1,688
$924
$849
$3,461


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
Acquisitions30
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 assetsJune 30, 2022Dec. 31, 2021
(dollars in millions)Gross
carrying
amount		Accumulated
amortization		Net
carrying
amount		Remaining
weighted-
average
amortization
period		Gross
carrying
amount		Accumulated
amortization		Net
carrying
amount
Subject to amortization: (a)
Customer contracts—Securities Services$739 $(532)$207 11 years$747 $(518)$229 
Customer contracts—Market and Wealth Services314 (297)17 4 years378 (356)22 
Customer relationships—Investment and Wealth Management553 (451)102 9 years568 (456)112 
Other47 (11)36 13 years47 (8)39 
Total subject to amortization1,653 (1,291)362 10 years1,740 (1,338)402 
Not subject to amortization: (b)
Tradename1,290 N/A1,290 N/A1,294 N/A1,294 
Customer relationships1,282 N/A1,282 N/A1,295 N/A1,295 
Total not subject to amortization2,572 N/A2,572 N/A2,589 N/A2,589 
Total intangible assets$4,225 $(1,291)$2,934 N/A$4,329 $(1,338)$2,991 
Intangible assetsSept. 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 Services2,257
(1,705)552
10 years 2,249
(1,590)659
Other25
(22)3
2 years 37
(33)4
Total subject to amortization3,765
(2,948)817
10 years 3,725
(2,759)966
Not subject to amortization: (b)
        
Trade name1,350
N/A
1,350
N/A 1,348
N/A
1,348
Customer relationships1,294
N/A
1,294
N/A 1,284
N/A
1,284
Total not subject to amortization2,644
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)(a)    Excludes fully amortized intangible assets.
(b)Intangible assets not subject to amortization have an indefinite life.


(b)Intangible assets not subject to amortization have an indefinite life.
N/A – Not applicable.


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


For the year ended
Dec. 31,
Estimated amortization expense
(in millions)
2022$67 
202357 
202450 
202543 
202634 
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 eight6 reporting units for which goodwill impairment testing is performed on an annual basis. In the second quarter of 2017, BNY Mellon conducted an annual goodwill impairment test on all eight reporting units.


76 BNY Mellon
Notes to Consolidated Financial Statements(continued)

As a result of the annual goodwill impairment test of the eight6 reporting units conducted in the second quarter of 2022, no goodwill impairment was recognized.

Note 7 - 6–Other assets


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


Other assetsJune 30, 2022Dec. 31, 2021
(in millions)
Corporate/bank-owned life insurance$5,380 $5,359 
Fails to deliver5,037 1,561 
Accounts receivable4,199 4,178 
Software2,147 2,096 
Prepaid pension assets1,996 1,946 
Qualified affordable housing project investments1,258 1,153 
Renewable energy investments944 1,027 
Equity method investments850 939 
Prepaid expense756 476 
Other equity investments (a)
622 449 
Income taxes receivable577 538 
Fair value of hedging derivatives525 206 
Federal Reserve Bank stock476 472 
Seed capital (b)
374 357 
Assets of consolidated investment management funds196 462 
Other (c)
2,272 1,190 
Total other assets$27,609 $22,409 
(a)     Includes strategic equity, private equity and other investments.
(b)    Includes investments in BNY Mellon funds which hedge deferred incentive awards.
(c)    At June 30, 2022 and Dec. 31, 2021, other assets include $6 million and $7 million, respectively, of Federal Home Loan Bank stock, at cost.


72 BNY Mellon
Other assetsSept. 30, 2017
Dec. 31, 2016
(in millions)
Corporate/bank-owned life insurance$4,824
$4,789
Accounts receivable3,899
4,060
Fails to deliver3,532
1,732
Software1,513
1,451
Renewable energy investments1,344
1,282
Equity in a joint venture and other investments1,153
1,063
Income taxes receivable1,020
1,172
Qualified affordable housing project investments

988
914
Prepaid pension assets951
836
Prepaid expenses512
438
Federal Reserve Bank stock474
466
Fair value of hedging derivatives344
784
Due from customers on acceptances318
340
Seed capital302
395
Other (a)
1,113
1,232
Total other assets$22,287
$20,954
(a)
Notes to Consolidated Financial Statements (continued)
At Sept. 30, 2017, other assets include $76 million of Federal Home Loan Bank stock, at cost.


Non-readily marketable equity securities

Non-readily marketable equity securities do not have readily determinable fair values. These investments are valued using a measurement alternative where the investments are carried at cost, less any impairment, and plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. The observable price changes are recorded in investment and other revenue on the consolidated income statement. Our non-readily marketable equity securities totaled $424 million at June 30, 2022 and $264 million at Dec. 31, 2021 and are included in other equity investments in the table above.

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

Adjustments on non-readily marketable equity securitiesLife-to-date
(in millions)2Q221Q222Q21YTD22YTD21
Upward adjustments$76 $46 $6 $122 $6 $280 
Downward adjustments(7)— — (7)— (11)
Net adjustments$69 $46 $6 $115 $6 $269 


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$1.3 billion at Sept.June 30, 20172022 and $914 million$1.2 billion at Dec. 31, 2016.2021. Commitments to fund future investments in qualified affordable housing projects totaled $439$623 million at Sept.June 30, 20172022 and $369$543 million at Dec. 31, 2016.
2021 and are recorded in other liabilities on the consolidated balance sheet. A summary of the commitments to fund future investments is as follows: 2017remainder of 2022 – $75$150 million; 20182023 –
$161 $205 million; 20192024 – $107$125 million; 20202025 – $79$90 million; 20212026 – $1$21 million; and 20222027 and thereafter – $16$32 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, $1152022, $38 million in the first nine monthsquarter of 2017 and $1152022, $38 million in the second quarter of 2021, $76 million in the first ninesix months of 2016.2022 and $76 million in the first six months of 2021.


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$33 million in the second quarter of 2017, $842022, $32 million in the first nine monthsquarter of 2017 and $862022, $32 million in the second quarter of 2021, $65 million in the first ninesix months of 2016.2022 and $64 million in the first six months of 2021.


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,segment, we make seed capital investments in certain funds. BNY Mellonfunds we manage. We also holdshold private equity investments, specifically inprimarily 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 beenwas estimated using the NAV per share of BNY Mellon’sfor our ownership interest in the funds.


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

Investments valued using NAVJune 30, 2022Dec. 31, 2021
(in millions)Fair valueUnfunded 
commitments		Fair valueUnfunded
commitments
Seed capital (a)(b)
$90 $19 $101 $21 
Private equity investments (c)
129 62 113 61 
Other4 — 4 — 
Total$223 $81 $218 $82 
(a)Primarily includes leveraged loans and structured credit funds, which are generally not redeemable. Distributions from such investments will be received as the underlying investments in seed capitalthe funds, which have lives of three to 11 years at both June 30, 2022 and Dec. 31, 2021, are liquidated.
(b)    Includes investments in funds that relate to deferred compensation arrangements with employees.
(c)    Private equity investments primarily include Volcker Rule-compliant investments in SBICs that invest in various sectors of the economy. Private equity investments do not have redemption rights. Distributions from such investments will be received as the underlying investments in the private equity investments, thatwhich have been valued using NAV.a life of 10 years, are liquidated.
BNY Mellon 73

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-quarterly1-95 days $171
 $1
Daily-quarterly1-180 days
Private equity investments (SBICs) (b)
54
 47
N/AN/A 43
 46
N/AN/A
Total$151
 $49
   $214
 $47
  
(a)Other funds include various leveraged loans, hedge funds and structured credit funds. Redemption notice periods vary by fund.
(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 are liquidated.


BNY Mellon 77
Notes to Consolidated Financial Statements(continued)

Note 7–Contract revenue

Fee and other revenue in the Securities Services, Market and Wealth Services and Investment and Wealth Management business segments is primarily variable, based on levels of assets under custody and/or administration, assets under management and the level of client-driven transactions, as specified in fee schedules. See Note 10 of the Notes to Consolidated Financial Statements in our 2021 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 2021 Annual Report for additional information on our principal business segments, Securities Services,
Market and Wealth Services and Investment and Wealth Management, and the primary services provided.

Disaggregation of contract revenue

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

Disaggregation of contract revenue by business segment
Quarter ended
June 30, 2022June 30, 2021
(in millions)Securities ServicesMarket and Wealth ServicesInvestment and Wealth ManagementOtherTotalSecurities ServicesMarket and Wealth ServicesInvestment and Wealth ManagementOtherTotal
Fee and other revenue – contract revenue:
Investment services fees$1,294 $898 $24 $(17)$2,199 $1,238 $817 $24 $(17)$2,062 
Investment management and performance fees— 6 822 (2)826 — 4 870 (4)870 
Financing-related fees11 4 — — 15 4 12 — — 16 
Distribution and servicing fees1 (17)51 (1)34 1 (1)28 (1)27 
Investment and other revenue54 38 (66)1 27 32 — (7)— 25 
Total fee and other revenue – contract revenue1,360 929 831 (19)3,101 1,275 832 915 (22)3,000 
Fee and other revenue – not in scope of Accounting Standards Codification (“ASC”) 606 (a)(b)
189 45 6 94 334 158 71 37 44 310 
Total fee and other revenue$1,549 $974 $837 $75 $3,435 $1,433 $903 $952 $22 $3,310 
(a)    Primarily includes investment services fees, foreign exchange revenue, financing-related fees and investment and other revenue, all of which are accounted for using other accounting guidance.
(b)    The Investment and Wealth Management business segment is net of (loss) income attributable to noncontrolling interests related to consolidated investment management funds of $(5) million in the second quarter of 2022 and $5 million in the second quarter of 2021.


Disaggregation of contract revenue by business segmentQuarter ended
March 31, 2022
(in millions)Securities ServicesMarket and Wealth ServicesInvestment and Wealth ManagementOtherTotal
Fee and other revenue – contract revenue:
Investment services fees$1,130 $846 $25 $(17)$1,984 
Investment management and performance fees— 6 887 (6)887 
Financing-related fees3 14 — — 17 
Distribution and servicing fees1 (4)32 1 30 
Investment and other revenue47 9 (27)(1)28 
Total fee and other revenue – contract revenue1,181 871 917 (23)2,946 
Fee and other revenue – not in scope of ASC 606 (a)(b)
222 35 (10)43 290 
Total fee and other revenue$1,403 $906 $907 $20 $3,236 
(a)    Primarily includes investment services fees, foreign exchange revenue, financing-related fees and investment and other revenue, all of which are accounted for using other accounting guidance.
(b)    The Investment and Wealth Management business segment is net of (loss) attributable to noncontrolling interests related to consolidated investment management funds of $(8) million in the first quarter of 2022.

74 BNY Mellon
Notes to Consolidated Financial Statements (continued)
Disaggregation of contract revenue by business segment
Year-to-date
June 30, 2022June 30, 2021
(in millions)Securities ServicesMarket and Wealth ServicesInvestment and Wealth ManagementOtherTotalSecurities ServicesMarket and Wealth ServicesInvestment and Wealth ManagementOtherTotal
Fee and other revenue – contract revenue:
Investment services fees$2,424 $1,744 $49 $(34)$4,183 $2,425 $1,664 $49 $(34)$4,104 
Investment management and performance fees— 12 1,709 (8)1,713 — 8 1,753 (9)1,752 
Financing-related fees14 18 — — 32 9 27 — — 36 
Distribution and servicing fees2 (21)83 — 64 3 (2)56 (1)56 
Investment and other revenue101 47 (93)— 55 65 3 (18)— 50 
Total fee and other revenue – contract revenue2,541 1,800 1,748 (42)6,047 2,502 1,700 1,840 (44)5,998 
Fee and other revenue – not in scope of ASC 606 (a)(b)
411 80 (4)137 624 362 117 55 39 573 
Total fee and other revenue$2,952 $1,880 $1,744 $95 $6,671 $2,864 $1,817 $1,895 $(5)$6,571 
(a)    Primarily includes investment services fees, foreign exchange revenue, financing-related fees and investment and other revenue, all of which are accounted for using other accounting guidance.
(b)    The Investment and Wealth Management business segment is net of (loss) income attributable to noncontrolling interests related to consolidated investment management funds of $(13) million in the first six months of 2022 and $10 million in the first six months of 2021.


Contract balances

Our clients are billed based on fee schedules that are agreed upon in each customer contract. Receivables from customers were $2.5 billion at June 30, 2022 and Dec. 31, 2021.

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 $79 million at June 30, 2022 and $42 million at Dec. 31, 2021. 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 $193 million at June 30, 2022 and $163 million at Dec. 31, 2021. Contract liabilities are included in other liabilities on the consolidated balance sheet. Revenue recognized in the second quarter of 2022 relating to contract liabilities as of March 31, 2022 was $63 million. Revenue recognized in the first six months of 2022 relating to contract liabilities as of Dec. 31, 2021 was $85 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 $60 million at June 30, 2022 and $64 million at Dec. 31, 2021. 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 $4 million in the second quarter of 2022, $5 million in the second quarter of 2021 and first quarter of 2022, $9 million in the first six months of 2022 and $10 million in the first six months of 2021.

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 $20 million at June 30, 2022 and $23 million at Dec. 31, 2021. 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 professional, legal and other purchased services and other expenses on the
BNY Mellon 75
Notes to Consolidated Financial Statements (continued)
consolidated income statement and totaled less than $1 million in the second quarter of 2022, second quarter of 2021 and first quarter of 2022 and $1 million in the first six months of 2022 and first six months of 2021.

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 - 8–Net interest revenue


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


Net interest revenueQuarter endedYear-to-date
(in millions)June 30, 2022March 31, 2022June 30, 2021June 30, 2022June 30, 2021
Interest revenue
Deposits with the Federal Reserve and other central banks$99 $2 $(25)$101 $(41)
Deposits with banks33 14 11 47 25 
Federal funds sold and securities purchased under resale agreements116 37 25 153 57 
Loans370 260 237 630 467 
Securities:
Taxable509 434 415 943 865 
Exempt from federal income taxes10 10 11 20 20 
Total securities519 444 426 963 885 
Trading securities22 21 11 43 30 
Total interest revenue1,159 778 685 1,937 1,423 
Interest expense
Deposits90 (37)(49)53 (86)
Federal funds purchased and securities sold under repurchase agreements77 12 (5)89 (8)
Trading liabilities10 4 2 14 5 
Other borrowed funds2 3 1 5 3 
Customer payables9 — — 9 (1)
Long-term debt147 98 91 245 210 
Total interest expense335 80 40 415 123 
Net interest revenue824 698 645 1,522 1,300 
Provision for credit losses47 2 (86)49 (169)
Net interest revenue after provision for credit losses$777 $696 $731 $1,473 $1,469 


76 BNY Mellon
Net interest revenueQuarter 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 loans87
87
67
 249
194
Securities:      
Taxable510
476
434
 1,447
1,307
Exempt from federal income taxes16
16
17
 49
53
Total securities526
492
451

1,496
1,360
Deposits with banks34
27
26
 83
76
Deposits with the Federal Reserve and other central banks89
71
37
 217
170
Federal funds sold and securities purchased under resale agreements119
86
62
 272
167
Trading assets13
17
13
 46
43
Total interest revenue1,151
1,052
874

3,163
2,647
Interest expense      
Deposits57
32
(6) 98
21
Federal funds purchased and securities sold under repurchase agreements70
38
6
 132
28
Trading liabilities2
2
2
 6
5
Other borrowed funds7
4
1
 13
5
Commercial paper8
5
1
 18
5
Customer payables19
16
3
 42
9
Long-term debt149
129
93
 397
267
Total interest expense312
226
100

706
340
Net interest revenue839
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 - 9–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) costQuarter ended
June 30, 2022March 31, 2022June 30, 2021
(in millions)Domestic pension benefitsForeign pension benefitsHealth care benefitsDomestic pension benefitsForeign pension benefitsHealth care benefitsDomestic pension benefitsForeign pension benefitsHealth care benefits
Service cost$— $3 $— $— $3 $— $— $3 $— 
Interest cost35 7 1 35 8 1 34 7 1 
Expected return on assets(78)(9)(1)(78)(10)(2)(75)(8)(1)
Other17 1 (1)17 1 (1)24 3 — 
Net periodic benefit (credit) cost$(26)$2 $(1)$(26)$2 $(2)$(17)$5 $— 
Net periodic benefit (credit) costQuarter ended
Sept. 30, 2017 June 30, 2017 Sept. 30, 2016
(in millions)Domestic pension benefits
Foreign pension benefits
Health care benefits
 Domestic pension benefits
Foreign pension benefits
Health care benefits
 Domestic pension benefits
Foreign pension benefits
Health care benefits
Service cost$—
$7
$—
 $—
$7
$—
 $—
$8
$1
Interest cost45
8
2
 45
8
2
 45
9
2
Expected return on assets(81)(12)(2) (81)(12)(2) (82)(13)(2)
Other17
9
(1) 17
9
(1) 17
4
(1)
Net periodic benefit (credit) cost$(19)$12
$(1) $(19)$12
$(1) $(20)$8
$—




Net periodic benefit (credit) costYear-to-date
June 30, 2022June 30, 2021
(in millions)Domestic pension benefitsForeign pension benefitsHealth care benefitsDomestic pension benefitsForeign pension benefitsHealth care benefits
Service cost$— $6 $— $— $7 $— 
Interest cost70 15 2 68 13 2 
Expected return on assets(156)(19)(3)(150)(17)(3)
Other34 2 (2)49 7 — 
Net periodic benefit (credit) cost$(52)$4 $(3)$(33)$10 $(1)




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
$3
Interest cost135
24
6
 135
27
6
Expected return on assets(243)(36)(6) (246)(39)(6)
Other51
27
(3) 52
13
(3)
Net periodic benefit (credit) cost$(57)$36
$(3) $(59)$25
$—


Note 10 - 10–Income taxes


BNY Mellon recorded an income tax provision of $348$231 million (25.4% effective tax rate) in the third quarter of 2017. The income tax provision was $324 million (24.6% effective tax rate) in the third quarter of 2016 and $332 million (25.4%(21.1% effective tax rate) in the second quarter of 2017.2022, $241 million (19.0% effective tax rate) in the second quarter of 2021 and $153 million (16.7% effective tax rate) in the first quarter of 2022.


Our total tax reserves as of Sept.June 30, 20172022 were $157$143 million compared with $143$138 million at June 30, 2017.Dec. 31, 2021. If these tax reserves were unnecessary, $157$143 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, 20172022 is accrued interest, where applicable, of $24$43 million. The additional tax expense related to interest
for the ninesix months ended Sept.June 30, 20172022 was $7$4 million, compared with $2$4 million for the ninesix months ended Sept.June 30, 2016.2021.


It is reasonably possible the total reserve for uncertain tax positions could decrease within the next 12 months by approximately $57$21 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 income tax returns are closed to examination through 2014. Our New York City andincome tax returns are closed to examination through 2012. Our UK income tax returns are closed to examination through 2012.2019.



Note 11 - 11–Variable interest entities and securitization


BNY Mellon hasWe 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 earnsWe 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 investswe invest in qualified affordable housing and renewable energy projects, which are designed to generate a return primarily through the
BNY Mellon 77
Notes to Consolidated Financial Statements (continued)
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 presenttable presents the incremental assets and liabilities included in BNY Mellon’sthe consolidated financial statements, after applying intercompany eliminations,balance sheet as of Sept.June 30, 20172022 and Dec. 31, 2016.2021. 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 investment management funds
June 30, 2022Dec. 31, 2021
(in millions)
Trading assets$191 $443 
Other assets5 19 
Total assets (a)
$196 $462 
Other liabilities$1 $3 
Total liabilities (b)
$1 $3 
Nonredeemable noncontrolling
  interests (c)
$7 $196 
(a)    Includes voting model entities (“VMEs”) with assets of $105 million at June 30, 2022 and $187 million at Dec. 31, 2021.
(b)    Includes VMEs with liabilities of $1 million at June 30, 2022 and $2 million at Dec. 31, 2021.
(c)    Includes VMEs with nonredeemable noncontrolling interests of $7 million at June 30, 2022 and $43 million at Dec. 31, 2021.


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 assets576
 —
576
Other assets226
 —
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 million, liabilities of $2 million and nonredeemable noncontrolling interests of $20 million.


Investments consolidated at Dec. 31, 2016
(in millions)
Investment
Management
funds
Securitization
Total
consolidated
investments

Securities - Available-for-sale$—
 $400
$400
Trading assets979
 —
979
Other assets252
 —
252
Total assets$1,231
(a)$400
$1,631
Trading liabilities$282
 $—
$282
Other liabilities33
 363
396
Total liabilities$315
(a)$363
$678
Nonredeemable noncontrolling interests$618
(a)$—
$618
(a)Includes VMEs with assets of $114 million, liabilities of $3 million and nonredeemable noncontrolling interests of $25 million.


BNY Mellon hasWe 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, 20172022 and Dec. 31, 2016,2021, the following assets and liabilities related to the VIEs where BNY Mellon iswe are not the primary beneficiary arewere included in our consolidated financial statementsbalance sheets and primarily relaterelated 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
Other2,559
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
Other2,400
369
2,769
(a)Investments in the Company’s sponsored CLOs.


The maximum loss exposure indicated in the above tablesfollowing table relates solely to BNY Mellon’sour investments in, and unfunded commitments to, the VIEs.





80 BNY Mellon
Non-consolidated VIEsJune 30, 2022Dec. 31, 2021
(in millions)AssetsLiabilitiesMaximum
loss exposure		AssetsLiabilitiesMaximum
loss exposure
Securities – Available-for-sale (a)
$162 $— $162 $189 $— $189 
Other2,384 623 3,022 2,385 543 2,946 
(a)    Includes investments in the Company’s sponsored CLOs.


78 BNY Mellon
Notes to Consolidated Financial Statements(continued)

Note 12 - 12–Preferred stock


BNY MellonThe Parent has 100 million authorized shares of preferred stock with a par value of $0.01 per share. The following table summarizes BNY Mellon’sthe Parent’s preferred stock issued and outstanding at Sept.June 30, 20172022 and Dec. 31, 2016.2021.


Preferred stock summary (a)
Total shares issued and outstanding
Carrying value (b)
(in millions)
June 30, 2022Dec. 31, 2021June 30, 2022Dec. 31, 2021
Per annum dividend rate
Series AGreater of (i) three-month LIBOR plus 0.565% for the related distribution period or (ii) 4.000%5,001 5,001 $500 $500 
Series D4.500% to but excluding June 20, 2023, then a floating rate equal to the three-month LIBOR plus 2.46%5,000 5,000 494 494 
Series F4.625% 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 G4.700% to but excluding Sept. 20, 2025, then a floating rate equal to the five-year treasury rate plus 4.358%10,000 10,000 990 990 
Series H3.700% to but excluding March 20, 2026, then a floating rate equal to the five-year treasury rate plus 3.352%5,825 5,825 577 577 
Series I3.750% to but excluding Dec. 20, 2026, then a floating rate equal to the five-year treasury rate plus 2.630%13,000 13,000 1,287 1,287 
Total48,826 48,826 $4,838 $4,838 
Preferred stock summary (a)
Total shares issued and outstanding 
Carrying value (b)
  (in millions)
 Per annum dividend rateSept. 30, 2017
Dec. 31, 2016
Sept. 30, 2017
Dec. 31, 2016
Series AGreater of (i) three-month LIBOR plus 0.565% for the related distribution period; or (ii) 4.000%5,001
5,001
 $500
$500
Series C5.2%5,825
5,825
 568
568
Series D4.50% 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 E4.95% 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
Series F4.625% 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
Total35,826
35,826
 $3,542
$3,542
(a)(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 and Series F preferred stock is recorded net of issuance costs.


On Sept. 20, 2017, The Bank of New York Mellon Corporation paid the following dividends for the noncumulative perpetual preferred stock for the dividend period ending in September 2017 to holderswith a liquidation preference of record as$100,000 per share.
(b)    The carrying value of the closeSeries D, Series F, Series G, Series H and Series I preferred stock is recorded net of business on Sept. 5, 2017:issuance costs.


$1,022.22 per share
The table below presents the Parent’s preferred dividends.

Preferred dividends
(dollars in millions, except per share amounts)Depositary shares
per share		2Q221Q222Q21YTD22YTD21
Per shareTotal
dividend		Per shareTotal
dividend		Per shareTotal
dividend		Per shareTotal
dividend		Per shareTotal
dividend
Series A100 (a)$1,022.22 $5 $1,011.11 $5 $1,011.11 $5 $2,033.33 $10 $2,022.22 $10 
Series D100 2,250.00 11 N/A— 2,250.00 11 2,250.00 11 2,250.00 11 
Series E100 N/AN/AN/AN/A911.68 9 N/AN/A1,836.50 18 
Series F100 N/A— 2,312.50 23 N/A— 2,312.50 23 2,312.50 23 
Series G100 N/A— 2,350.00 24 N/A— 2,350.00 24 2,350.00 24 
Series H100 925.00 6 925.00 5 925.00 6 1,850.00 11 2,333.06 14 
Series I100 937.50 12 1,270.83 17 N/AN/A2,208.33 29 N/AN/A
Total$34 $74 $31 $108 $100 
(a)    Represents Normal Preferred Capital Securities.
N/A – Not applicable.


In December 2021, all of the outstanding shares of the Series E preferred stock were redeemed.

All of the outstanding shares of the Series A preferred stock are owned by Mellon Capital IV, a 100% owned finance subsidiary of the Parent, which will pass through any dividend on the Series A Preferred Stock (equivalentpreferred stock to $10.2222 perthe holders of its Normal Preferred Capital SecuritySecurities. The Parent’s obligations under the trust and other agreements relating to Mellon Capital IV
have the effect of providing a full and unconditional guarantee, on a subordinated basis, of payments due on the Normal Preferred Capital Securities. No other subsidiary of the Parent guarantees the securities of Mellon Capital IV, each representing a 1/100th interest in a share of the Series A Preferred Stock);IV.
$1,300.00 per share on the Series C Preferred Stock (equivalent to $0.3250 per depositary share, each representing a 1/4,000th interest in a share of the Series C Preferred Stock); and

$2,312.50 per share on the Series F Preferred Stock (equivalent to $23.1250 per depositary share, each representing a 1/100th interest in a share of the Series F Preferred Stock).

For additional information on the preferred stock, see Note 1315 of the Notes to Consolidated Financial Statements in our 20162021 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 8179
Notes to Consolidated Financial Statements(continued)

Note 13 - 13–Other comprehensive income (loss)


Components of other comprehensive income (loss)Quarter ended
June 30, 2022March 31, 2022June 30, 2021
(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)
$(436)$(119)$(555)$(120)$(33)$(153)$38 $13 $51 
Total foreign currency translation(436)(119)(555)(120)(33)(153)38 13 51 
Unrealized (loss) gain on assets available-for-sale:
Unrealized (loss) gain arising during period(1,167)285 (882)(2,021)490 (1,531)106 (29)77 
Reclassification adjustment (b)
— — — (4)1 (3)(2)1 (1)
Net unrealized (loss) gain on assets available-for-sale(1,167)285 (882)(2,025)491 (1,534)104 (28)76 
Defined benefit plans:
Amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost (b)
17 (4)13 17 1 18 27 (2)25 
Total defined benefit plans17 (4)13 17 1 18 27 (2)25 
Unrealized (loss) on cash flow hedges:
Unrealized hedge (loss) arising during period(8)2 (6)(3)1 (2)— — — 
Reclassification of net loss (gain) to net income:
Foreign exchange (“FX”) contracts – staff expense1 — 1 — — — (4)1 (3)
Total reclassifications to net income1 — 1 — — — (4)1 (3)
Net unrealized (loss) on cash flow hedges(7)2 (5)(3)1 (2)(4)1 (3)
Total other comprehensive (loss) income$(1,593)$164 $(1,429)$(2,131)$460 $(1,671)$165 $(16)$149 
(a)    Includes the impact of hedges of net investments in foreign subsidiaries. See Note 16 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. The amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost is recorded as other expense on the consolidated income statement.


Components of other comprehensive income (loss)Year-to-date
June 30, 2022June 30, 2021
(in millions)Pre-tax
amount		Tax
(expense)
benefit		After-tax
amount		Pre-tax
amount		Tax
(expense)
benefit		After-tax
amount
Foreign currency translation:
Foreign currency translation adjustments arising during the period (a)
$(556)$(152)$(708)$(89)$(10)$(99)
Total foreign currency translation(556)(152)(708)(89)(10)(99)
Unrealized (loss) on assets available-for-sale:
Unrealized (loss) arising during period(3,188)775 (2,413)(820)194 (626)
Reclassification adjustment (b)
(4)1 (3)(2)1 (1)
Net unrealized (loss) on assets available-for-sale(3,192)776 (2,416)(822)195 (627)
Defined benefit plans:
Amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost (b)
34 (3)31 55 (8)47 
Total defined benefit plans34 (3)31 55 (8)47 
Unrealized (loss) on cash flow hedges:
Unrealized hedge (loss) gain arising during period(11)3 (8)1 — 1 
Reclassification of net losses (gains) to net income:
FX contracts – staff expense1 — 1 (9)2 (7)
Total reclassifications to net income1 — 1 (9)2 (7)
Net unrealized (loss) on cash flow hedges(10)3 (7)(8)2 (6)
Total other comprehensive (loss)$(3,724)$624 $(3,100)$(864)$179 $(685)
(a)    Includes the impact of hedges of net investments in foreign subsidiaries. See Note 16 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. The amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost is recorded as other expense on the consolidated income statement.


80 BNY Mellon
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 translation221
65
286
 249
81
330
 (104)(82)(186)
Unrealized gain (loss) on assets available-for-sale:           
Unrealized gain (loss) arising during period47
(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-sale28
(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 plans25
(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 hedges1
(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 16 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. 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.

(continued)

Components of other comprehensive income (loss)Year-to-date
 Sept. 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

Foreign currency translation:       
Foreign currency translation adjustments arising during the period (a)
$566
$175
$741
 $(223)$(210)$(433)
Total foreign currency translation566
175
741
 (223)(210)(433)
Unrealized gain (loss) on assets available-for-sale:       
Unrealized gain (loss) arising during period357
(144)213
 338
(111)227
Reclassification adjustment (b)
(29)10
(19) (65)22
(43)
Net unrealized gain (loss) on assets available-for-sale328
(134)194
 273
(89)184
Defined benefit plans:       
Net gain (loss) arising during the period3
(1)2
 3
(1)2
Amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost (b)
74
(25)49
 65
(22)43
Total defined benefit plans77
(26)51
 68
(23)45
Unrealized gain (loss) on cash flow hedges:       
Unrealized hedge gain (loss) arising during period4
(1)3
 (115)38
(77)
Reclassification adjustment (b)
13
(5)8
 110
(37)73
Net unrealized gain (loss) on cash flow hedges17
(6)11
 (5)1
(4)
Total other comprehensive income (loss)$988
$9
$997
 $113
$(321)$(208)
(a)Includes the impact of hedges of net investments in foreign subsidiaries. See Note 16 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. 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.




82 BNY Mellon
Notes to Consolidated Financial Statements(continued)

Note 14 - 14–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 20162021 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, 20172022 and Dec. 31, 2016,2021, 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

Assets measured at fair value on a recurring basis at June 30, 2022Total carrying
value
(dollars in millions)Level 1Level 2Level 3
Netting (a)
Available-for-sale securities:
U.S. Treasury$30,467 $— $— $— $30,467 
Sovereign debt/sovereign guaranteed4,933 6,159 — — 11,092 
Agency RMBS— 8,303 — — 8,303 
Agency commercial MBS— 8,179 — — 8,179 
Supranational— 7,548 — — 7,548 
Foreign covered bonds— 5,828 — — 5,828 
CLOs— 5,097 — — 5,097 
Non-agency commercial MBS— 3,003 — — 3,003 
Foreign government agencies— 2,536 — — 2,536 
Non-agency RMBS— 2,311 — — 2,311 
State and political subdivisions— 2,023 — — 2,023 
U.S. government agencies— 1,925 — — 1,925 
Other ABS— 1,668 — — 1,668 
Corporate bonds— 1,297 — — 1,297 
Other debt securities— 1 — — 1 
Total available-for-sale securities35,400 55,878 — — 91,278 
Trading assets:
Debt instruments1,059 1,203 — — 2,262 
Equity instruments5,428 — — — 5,428 
Derivative assets not designated as hedging:
Interest rate18 1,632 — (920)730 
Foreign exchange— 10,555 — (8,387)2,168 
Equity and other contracts3 240 — (72)171 
Total derivative assets not designated as hedging21 12,427 — (9,379)3,069 
Total trading assets6,508 13,630 — (9,379)10,759 
Other assets:
Derivative assets designated as hedging:
Interest rate— 57 — — 57 
Foreign exchange— 468 — — 468 
Total derivative assets designated as hedging— 525 — — 525 
Other assets (b)
285 235 — — 520 
Total other assets285 760 — — 1,045 
Assets measured at NAV (b)
223 
Total assets$42,193 $70,268 $— $(9,379)$103,305 
Percentage of total assets prior to netting38 %62 %— %



BNY Mellon 81
Notes to Consolidated Financial Statements (continued)
Liabilities measured at fair value on a recurring basis at June 30, 2022Total carrying
value
(dollars in millions)Level 1Level 2Level 3
Netting (a)
Trading liabilities:
Debt instruments$3,067 $38 $— $— $3,105 
Equity instruments90 — — — 90 
Derivative liabilities not designated as hedging:
Interest rate7 1,766 — (1,255)518 
Foreign exchange— 10,426 — (8,563)1,863 
Equity and other contracts1 54 — (36)19 
Total derivative liabilities not designated as hedging8 12,246 — (9,854)2,400 
Total trading liabilities3,165 12,284 — (9,854)5,595 
Other liabilities:
Derivative liabilities designated as hedging:
Interest rate— 3 — — 3 
Foreign exchange— 27 — — 27 
Total derivative liabilities designated as hedging— 30 — — 30 
Other liabilities— 1 — — 1 
Total other liabilities— 31 — — 31 
Total liabilities$3,165 $12,315 $— $(9,854)$5,626 
Percentage of total liabilities prior to netting20 %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 seed capital, private equity investments and other assets.
82 BNY Mellon
Notes to Consolidated Financial Statements (continued)
Assets and liabilities measured at fair value on a recurring basis at Dec. 31, 2021Total carrying
value
(dollars in millions)Level 1Level 2Level 3
Netting (a)
Assets
Available-for-sale securities:
U.S. Treasury$29,409 $— $— $— $29,409 
Agency RMBS— 14,530 — — 14,530 
Sovereign debt/sovereign guaranteed6,017 7,362 — — 13,379 
Agency commercial MBS— 8,405 — — 8,405 
Supranational— 7,573 — — 7,573 
Foreign covered bonds— 6,238 — — 6,238 
CLOs— 4,439 — — 4,439 
Non-agency commercial MBS— 3,125 — — 3,125 
Non-agency RMBS— 2,748 — — 2,748 
Foreign government agencies— 2,686 — — 2,686 
U.S. government agencies— 2,536 — — 2,536 
State and political subdivisions— 2,514 — — 2,514 
Other ABS— 2,190 — — 2,190 
Corporate bonds— 2,066 — — 2,066 
Other debt securities— 1 — — 1 
Total available-for-sale securities35,426 66,413 — — 101,839 
Trading assets:
Debt instruments1,447 2,750 — — 4,197 
Equity instruments9,766 — — — 9,766 
Derivative assets not designated as hedging:
Interest rate6 3,253 — (1,424)1,835 
Foreign exchange— 6,279 — (5,501)778 
Equity and other contracts— 49 — (48)1 
Total derivative assets not designated as hedging6 9,581 — (6,973)2,614 
Total trading assets11,219 12,331 — (6,973)16,577 
Other assets:
Derivative assets designated as hedging:
Foreign exchange— 206 — — 206 
Total derivative assets designated as hedging— 206 — — 206 
Other assets (b)
438 325 — — 763 
Total other assets438 531 — — 969 
Assets measured at NAV (b)
218 
Total assets$47,083 $79,275 $— $(6,973)$119,603 
Percentage of total assets prior to netting37 %63 %— %
Liabilities
Trading liabilities:
Debt instruments$2,452 $46 $— $— $2,498 
Equity instruments40 — — — 40 
Derivative liabilities not designated as hedging:
Interest rate1 2,834 — (2,028)807 
Foreign exchange— 6,215 — (4,111)2,104 
Equity and other contracts5 211 — (196)20 
Total derivative liabilities not designated as hedging6 9,260 — (6,335)2,931 
Total trading liabilities2,498 9,306 — (6,335)5,469 
Other liabilities:
Derivative liabilities designated as hedging:
Interest rate— 453 — — 453 
Foreign exchange— 40 — — 40 
Total derivative liabilities designated as hedging— 493 — — 493 
Other liabilities1 2 — — 3 
Total other liabilities1 495 — — 496 
Total liabilities$2,499 $9,801 $— $(6,335)$5,965 
Percentage of total liabilities prior to netting20 %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 seed capital, private equity investments and other assets.
BNY Mellon 83
Notes to Consolidated Financial Statements (continued)
Details of certain available-for-sale securities measured at fair value on a recurring basisJune 30, 2022Dec. 31, 2021
Total
carrying
value (b)
Ratings (a)
Total
carrying value (b)
Ratings (a)
AAA/
AA-		A+/
A-		BBB+/
BBB-		BB+ and
lower		Not ratedAAA/
AA-		A+/
A-		BBB+/
BBB-		BB+ and
lower		Not rated
(dollars in millions)
Non-agency RMBS, originated in:
2008-2022$1,970 100 %— %— %— %— %$2,190 100 %— %— %— %— %
200759 — 6 — 50 44 114 — 4 — 39 57 
2006100 — 34 — 50 16 181 — 24 — 33 43 
2005102 5 4 1 41 49 167 3 5 1 37 54 
2004 and earlier80 15 9 5 57 14 96 16 10 5 57 12 
Total non-agency RMBS$2,311 86 %2 %— %7 %5 %$2,748 81 %2 %— %8 %9 %
Non-agency commercial MBS originated in:
2009-2022$3,003 100 %— %— %— %— %$3,125 100 %— %— %— %— %
Foreign covered bonds:
Canada$2,307 100 %— %— %— %— %$2,332 100 %— %— %— %— %
UK1,168 100 — — — — 1,141 100 — — — — 
Australia648 100 — — — — 762 100 — — — — 
Germany593 100 — — — — 638 100 — — — — 
Norway385 100 — — — — 457 100 — — — — 
Other727 100 — — — — 908 100 — — — — 
Total foreign covered bonds$5,828 100 %— %— %— %— %$6,238 100 %— %— %— %— %
Sovereign debt/sovereign guaranteed:
Germany$3,077 100 %— %— %— %— %$3,585 100 %— %— %— %— %
UK1,879 100 — — — — 1,969 100 — — — — 
France1,532 100 — — — — 1,921 100 — — — — 
Singapore1,184 100 — — — — 1,018 100 — — — — 
Italy773 — — 100 — — 1,382 — — 100 — — 
Canada613 100 — — — — 630 100 — — — — 
Spain470 — 18 82 — — 782 — 8 92 — — 
Hong Kong448 100 — — — — 531 100 — — — — 
Japan412 — 100 — — — 363 — 100 — — — 
Other (c)
704 78 5 — 17 — 1,198 71 19 — 10 — 
Total sovereign debt/sovereign guaranteed$11,092 84 %5 %10 %1 %— %$13,379 78 %5 %16 %1 %— %
Foreign government agencies:
Canada$640 83 %17 %— %— %— %$566 78 %22 %— %— %— %
Norway478 100 — — — — 269 100 — — — — 
Netherlands406 100 — — — — 765 100 — — — — 
Sweden280 100 — — — — 252 100 — — — — 
France249 100 — — — — 301 100 — — — — 
Finland248 100 — — — — 267 100 — — — — 
Other235 64 36 — — — 266 64 36 — — — 
Total foreign government agencies$2,536 92 %8 %— %— %— %$2,686 92 %8 %— %— %— %
(a)Represents ratings by S&P or the equivalent.
(b)    At June 30, 2022 and Dec. 31, 2021, sovereign debt/sovereign guaranteed securities were no material transfers betweenincluded in Level 1 and Level 2 duringin the third quartervaluation hierarchy. All other assets in the table are Level 2 assets in the valuation hierarchy.
(c)    Includes non-investment grade sovereign debt/sovereign guaranteed securities related to Brazil of 2017.$120 million at June 30, 2022 and $119 million at Dec. 31, 2021.




Assets measured at fair value on a recurring basis at Sept. 30, 2017Total carrying
value
(dollar amounts in millions)Level 1
Level 2
Level 3
Netting (a)

Available-for-sale securities:     
U.S. Treasury$15,502
$—
$—
$—
$15,502
U.S. government agencies—
864
—
—
864
Sovereign debt/sovereign guaranteed74
12,491
—
—
12,565
State and political subdivisions—
3,124
—
—
3,124
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 securities4
—
—
—
4
Money market funds (b)
939
—
—
—
939
Corporate bonds—
1,275
—
—
1,275
Other debt securities—
3,151
—
—
3,151
Foreign covered bonds2,284
258
—
—
2,542
Non-agency RMBS (c)
—
1,185
—
—
1,185
Total available-for-sale securities18,803
61,251
—
—
80,054
Trading assets:     
Debt and equity instruments (b)
433
1,016
—
—
1,449
Derivative assets not designated as hedging:     
Interest rate3
6,731
—
(5,301)1,433
Foreign exchange—
4,879
—
(3,120)1,759
Equity and other contracts1
73
—
(49)25
Total derivative assets not designated as hedging4
11,683
—
(8,470)3,217
Total trading assets437
12,699
—
(8,470)4,666
Other assets:     
Derivative assets designated as hedging:     
Interest rate—
307
—
—
307
Foreign exchange—
37
—
—
37
Total derivative assets designated as hedging—
344
—
—
344
Other assets (d)
148
184
—
—
332
Other assets measured at net asset value (d)
    151
Total other assets148
528
—
—
827
Subtotal assets of operations at fair value19,388
74,478
—
(8,470)85,547
Percentage of assets of operations prior to netting21%79%—%  
Assets of consolidated investment management funds398
404
—
—
802
Total assets$19,786
$74,882
$—
$(8,470)$86,349
Percentage of total assets prior to netting21%79%—%  


84 BNY Mellon 83
Notes to Consolidated Financial Statements(continued)

Liabilities measured at fair value on a recurring basis at Sept. 30, 2017Total carrying
value
(dollar amounts in millions)Level 1
Level 2
Level 3
Netting (a)

Trading liabilities:     
Debt and equity instruments$684
$159
$—
$—
$843
Derivative liabilities not designated as hedging:     
Interest rate3
6,681
—
(5,705)979
Foreign exchange—
4,463
—
(3,095)1,368
Equity and other contracts3
135
—
(75)63
Total derivative liabilities not designated as hedging6
11,279
—
(8,875)2,410
Total trading liabilities690
11,438
—
(8,875)3,253
Long-term debt (b)
—
369
—
—
369
Other liabilities – derivative liabilities designated as hedging:
     
Interest rate—
494
—
—
494
Foreign exchange—
318
—
—
318
Total other liabilities – derivative liabilities designated as hedging—
812
—
—
812
Subtotal liabilities of operations at fair value690
12,619
—
(8,875)4,434
Percentage of liabilities of operations prior to netting5%95%—%  
Liabilities of consolidated investment management funds2
25
—
—
27
Total liabilities$692
$12,644
$—
$(8,875)$4,461
Percentage of total liabilities prior to netting5%95%—%  
(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 certain interests in securitizations.
(c)Previously included in the Grantor Trust. The Grantor Trust was dissolved in 2011.
(d)Includes private equity investments and seed capital.


84 BNY Mellon
Notes to Consolidated Financial Statements(continued)

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 guaranteed66
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 securities3
—
—
—
3
Money market funds (b)
842
—
—
—
842
Corporate bonds—
1,396
—
—
1,396
Other debt securities—
1,961
—
—
1,961
Foreign covered bonds1,876
265
—
—
2,141
Non-agency RMBS (c)
—
1,357
—
—
1,357
Total available-for-sale securities17,094
56,728
—
—
73,822
Trading assets:     
Debt and equity instruments (b)
240
2,013
—
—
2,253
Derivative assets not designated as hedging:     
Interest rate4
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 hedging4
13,733
—
(10,257)3,480
Total trading assets244
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 assets268
857
—
—
1,339
Subtotal assets of operations at fair value17,606
73,331
—
(10,257)80,894
Percentage of assets of operations prior to netting19%81%—%  
Assets of consolidated investment management funds464
767
—
—
1,231
Total assets$18,070
$74,098
$—
$(10,257)$82,125
Percentage of total assets prior to netting20%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)

Trading liabilities:     
Debt and equity instruments$349
$236
$—
$—
$585
Derivative liabilities not designated as hedging:     
Interest rate4
7,629
—
(6,634)999
Foreign exchange—
6,103
—
(3,363)2,740
Equity and other contracts—
115
—
(50)65
Total derivative liabilities not designated as hedging4
13,847
—
(10,047)3,804
Total trading liabilities353
14,083
—
(10,047)4,389
Long-term debt (b)
—
363
—
—
363
Other liabilities – derivative liabilities designated as hedging:
     
Interest rate—
545
—
—
545
Foreign exchange—
52
—
—
52
Total other liabilities – derivative liabilities designated as hedging—
597
—
—
597
Subtotal liabilities of operations at fair value353
15,043
—
(10,047)5,349
Percentage of liabilities of operations prior to netting2%98%—%  
Liabilities of consolidated investment management funds3
312
—
—
315
Total liabilities$356
$15,355
$—
$(10,047)$5,664
Percentage of total liabilities prior to netting2%98%—%  
(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 certain interests in securitizations.
(c)Previously included in the Grantor Trust. The Grantor Trust was dissolved in 2011.
(d)Includes private equity investments and seed capital.



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) 
Non-agency RMBS, originated in:             
2007$42
 —%—%—%100% $58
 —%—%—%100%
200685
 —
—
—
100
 98
 —
—
—
100
2005152
 20
3
18
59
 180
 23
5
9
63
2004 and earlier246
 4
2
27
67
 302
 5
3
24
68
Total non-agency RMBS$525
 8%2%14%76% $638
 9%3%14%74%
Commercial MBS - Domestic, originated in:             
2009-2017$909
 89%11%—%—% $674
 84%16%—%—%
20085
 100
—
—
—
 14
 100
—
—
—
2007—
 —
—
—
—
 190
 71
29
—
—
2006—
 —
—
—
—
 3
 7
93
—
—
Total commercial MBS - Domestic$914
 89%11%—%—% $881
 81%19%—%—%
Foreign covered bonds:             
Canada$1,648
 100%—%—%—% $1,320
 100%—%—%—%
Australia261
 100
—
—
—
 40
 100
—
—
—
Netherlands177
 100
—
—
—
 160
 100
—
—
—
United Kingdom136
 100
—
—
—
 280
 100
—
—
—
Other320
 100
—
—
—
 341
 100
—
—
—
Total foreign covered bonds$2,542
 100%—%—%—% $2,141
 100%—%—%—%
European floating rate notes - available-for-sale:             
United Kingdom$204
 87%13%—%—% $379
 90%10%—%—%
Netherlands113
 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%—%—%—%
France1,993
 100
—
—
—
 1,998
 100
—
—
—
Spain1,740
 —
—
100
—
 1,749
 —
—
100
—
Germany1,688
 100
—
—
—
 1,347
 100
—
—
—
Italy1,169
 —
—
100
—
 1,130
 —
—
100
—
Netherlands1,016
 100
—
—
—
 1,061
 100
—
—
—
Ireland832
 —
100
—
—
 736
 —
100
—
—
Belgium809
 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%
2006345
 —
—
—
100
 391
 —
—
—
100
2005387
 1
1
1
97
 437
 —
2
1
97
2004 and earlier116
 2
2
22
74
 142
 2
2
17
79
Total non-agency RMBS (d)
$1,185
 —%1%3%96% $1,357
 —%1%2%97%
(a)Represents ratings by S&P, or the equivalent.
(b)At Sept. 30, 2017 and Dec. 31, 2016, foreign covered bonds and 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 grade sovereign debt/sovereign guaranteed securities related to Brazil of $140 million at Sept. 30, 2017 and $73 million at Dec. 31, 2016.
(d)Previously included in the Grantor Trust. The Grantor Trust was dissolved in 2011.


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 inputsLoans
(in millions)3Q16
YTD16
Fair value at the beginning of the period$101
$—
Transfers into Level 3—
19
Total gains for the period included in earnings (a)
—
2
Purchases and sales:  
Purchases—
113
Issuances1
1
Sales(102)(135)
Fair value at Sept. 30, 2016$—
$—
Change in unrealized gains for the period included in earnings for assets held at the end of the reporting period$—
$—
(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 exampleExamples would be the recording of an impairment of an asset.
an asset and non-readily marketable equity securities carried at cost with upward or downward adjustments.

The following tables presenttable 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, 20172022 and Dec. 31, 2016, for which a nonrecurring change in2021.

Assets measured at fair value on a nonrecurring basisJune 30, 2022Dec. 31, 2021
Total carrying
value		Total carrying
value
(in millions)Level 1Level 2Level 3Level 1Level 2Level 3
Loans (a)
$— $37 $— $37 $— $42 $— $42 
Other assets (b)
— 426 — 426 — 265 — 265 
Total assets at fair value on a nonrecurring basis$— $463 $— $463 $— $307 $— $307 
(a)    The fair value has been recorded duringof these loans was unchanged in the quarters ended Sept. 30, 2017second quarter of 2022 and Dec. 31, 2016.
the fourth quarter of 2021, based on the fair value of the underlying collateral, as required by guidance in ASC 326, Financial Instruments – Credit Losses, with an offset to the allowance for credit losses.

(b)    Includes non-readily marketable equity securities carried at cost with upward or downward adjustments and other assets received in satisfaction of debt.

Assets measured at fair value on a nonrecurring basis at Sept. 30, 2017
Total carrying
value

(in millions)Level 1
Level 2
Level 3
Loans (a)
$—
$75
$7
$82
Other assets (b)
—
4
—
4
Total assets at fair value on a nonrecurring basis$—
$79
$7
$86


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 fair value of these loans decreased less than $1 million and $1 million, respectively, based on the fair value of the underlying collateral based on guidance in ASC 310, Receivables, with an offset to the allowance for credit losses.
(b)Includes 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, 20172022 and Dec. 31, 2016,2021, by caption on the consolidated balance sheet and by the valuation
hierarchy.

Summary of financial instrumentsJune 30, 2022
(in millions)Level 1Level 2Level 3Total
estimated
fair value		Carrying
amount
Assets:
Interest-bearing deposits with the Federal Reserve and other central banks$— $125,372 $— $125,372 $125,372 
Interest-bearing deposits with banks— 16,645 — 16,645 16,639 
Federal funds sold and securities purchased under resale agreements— 22,940 — 22,940 22,940 
Securities held-to-maturity11,823 43,304 — 55,127 59,566 
Loans (a)
— 68,107 — 68,107 68,464 
Other financial assets5,185 1,484 — 6,669 6,669 
Total$17,008 $277,852 $— $294,860 $299,650 
Liabilities:
Noninterest-bearing deposits$— $106,060 $— $106,060 $106,060 
Interest-bearing deposits— 216,221 — 216,221 219,753 
Federal funds purchased and securities sold under repurchase agreements— 11,434 — 11,434 11,434 
Payables to customers and broker-dealers— 25,769 — 25,769 25,769 
Borrowings— 768 — 768 768 
Long-term debt— 26,531 — 26,531 27,610 
Total$— $386,783 $— $386,783 $391,394 
(a)    Does not include the leasing portfolio.

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 85
Notes to Consolidated Financial Statements(continued)

Summary of financial instrumentsSept. 30, 2017
(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$—
$75,808
$—
$75,808
$75,808
Interest-bearing deposits with banks—
15,254
—
15,254
15,256
Federal funds sold and securities purchased under resale agreements—
27,883
—
27,883
27,883
Securities held-to-maturity9,943
29,985
—
39,928
39,995
Loans (a)
—
57,709
—
57,709
57,562
Other financial assets5,557
1,169
—
6,726
6,726
Total$15,500
$207,808
$—
$223,308
$223,230
Liabilities:     
Noninterest-bearing deposits$—
$80,380
$—
$80,380
$80,380
Interest-bearing deposits—
148,967
—
148,967
150,616
Federal funds purchased and securities sold under repurchase agreements—
10,314
—
10,314
10,314
Payables to customers and broker-dealers—
21,176
—
21,176
21,176
Commercial paper—
2,501
—
2,501
2,501
Borrowings—
3,544
—
3,544
3,544
Long-term debt—
28,335
—
28,335
28,039
Total$—
$295,217
$—
$295,217
$296,570
(a)Does not include the leasing portfolio.


Summary of financial instrumentsDec. 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-maturity11,173
29,496
—
40,669
40,905
Loans (a)
—
62,829
—
62,829
62,564
Other financial assets4,822
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
(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 debt24,249
24,200
249
(157)
Dec. 31, 2016 
Securities available-for-sale$9,184
$9,233
$83
$(342)
Long-term debt20,511
20,450
330
(203)


BNY Mellon 89
Notes to Consolidated Financial Statements(continued)

Summary of financial instrumentsDec. 31, 2021
(in millions)Level 1Level 2Level 3Total estimated
fair value		Carrying
amount
Assets:
Interest-bearing deposits with the Federal Reserve and other central banks$— $102,467 $— $102,467 $102,467 
Interest-bearing deposits with banks— 16,636 — 16,636 16,630 
Federal funds sold and securities purchased under resale agreements— 29,607 — 29,607 29,607 
Securities held-to-maturity12,488 44,287 — 56,775 56,866 
Loans (a)
— 67,026 — 67,026 66,860 
Other financial assets6,061 1,239 — 7,300 7,300 
Total$18,549 $261,262 $— $279,811 $279,730 
Liabilities:
Noninterest-bearing deposits$— $93,695 $— $93,695 $93,695 
Interest-bearing deposits— 224,665 — 224,665 225,999 
Federal funds purchased and securities sold under repurchase agreements— 11,566 — 11,566 11,566 
Payables to customers and broker-dealers— 25,150 — 25,150 25,150 
Borrowings— 956 — 956 956 
Long-term debt— 26,701 — 26,701 25,931 
Total$— $382,733 $— $382,733 $383,297 
(a)    Does not include the leasing portfolio.


Note 15 - 15–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 subordinated notes associated with certain equity investments. 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, 2022Dec. 31, 2021
(in millions)
Assets of consolidated investment management funds:
Trading assets$191 $443 
Other assets5 19 
Total assets of consolidated investment management funds$196 $462 
Liabilities of consolidated investment management funds:
Other liabilities1 3 
Total liabilities of consolidated investment management funds$1 $3 
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 assets226
252
Total assets of consolidated investment management funds$802
$1,231
Liabilities of consolidated investment management funds:  
Trading liabilities$—
$282
Other liabilities27
33
Total liabilities of consolidated investment management funds$27
$315




BNY Mellon valuesThe assets and liabilities of the consolidated investment management funds are included in other assets and other liabilities on the consolidated balance sheet. We value the assets and liabilities of 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 fair value of the assets and liabilities are recorded in theas income statement as investment income of(loss) from consolidated investment management funds, which is included in investment and other revenue in the interest of investment management fund note holders, respectively.consolidated income statement.


We have elected the fair value option on $240$15 million of long-term debt.subordinated notes associated with certain equity investments. The fair value of this long-term debtthese of subordinated notes was $369 million at Sept. 30, 2017 and $363$15 million at June 30, 2022 and Dec. 31, 2016.2021. The long-term debt issubordinated notes were 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 and certain loans for which we elected the fair value option that we previously held in 2016, and the location of the changes in the 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)
(a)The changes in fair value of the loans and long-term debt are approximately offset by economic hedges included in foreign exchange and other trading revenue.


Note 16 - 16–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
86 BNY Mellon
Notes to Consolidated Financial Statements (continued)
agreements and collateral arrangements to minimize the credit risk of derivative financial instruments. We enter into offsetting positions to reduce exposure to foreign currency, interest rate and equity price risk.


Use of derivative financial instruments involves reliance on counterparties. Failure of a counterparty to honor its obligation under a derivative contract is a risk we assume whenever we engage in a derivative contract. There were no counterparty default losses recorded in the thirdsecond quarter of 2017 or the third quarter of 2016.2022.


Hedging derivatives


We utilize interest rate swap agreements to manage our exposure to interest rate fluctuations. ForWe 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 theas 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 isrisk 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 eliminatereduce 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 debtdebt/sovereign guaranteed, state and political subdivisions, corporate bonds and foreign covered bonds that had original maturitiesbonds. At June 30, 2022, $30.4 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$30.4 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-callableIn fair value hedging relationships, fixed rate 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, $24.22022, $22.2 billion par value of debt was hedged with interest rate swaps designated as fair value hedges that had notional values of $24.2$22.2 billion.


In addition, we enter intoutilize 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 nine12 months or less as cash flow hedges to hedge our foreign exchange exposure to currencies such as Indian rupee, British pound, euro, Hong Kong dollar, Polish zloty and Singapore dollar Polish zloty, Canadian dollar and Japanese yen foreign exchange exposure with respect to foreign currency forecastedused in revenue and expense transactions infor entities that have the U.S. dollar as their functional currency. As of Sept.June 30, 2017,2022, the hedged forecasted foreign currency transactions and designated forward foreign exchange contract hedges were $539$343 million (notional), with a net pre-tax loss of $9$8 million recorded in accumulated other comprehensive income.income (“OCI”). This loss will be reclassified to income or expenseearnings over the next nine12 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, 2022, $125 million par value of available-for-sale securities was hedged with foreign currency forward contracts that had a notional value of $125 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, 2017,2022, forward foreign exchange contracts with notional amounts totaling $7.8$8.6 billion were designated as net investment hedges.


In additionFrom time to forward foreign exchange contracts,time, we also designate non-derivative financial instruments as hedges of our net investments in foreign subsidiaries. ThoseAt June 30, 2022, there were 0 non-derivative financial instruments designated as hedges ofhedging our net investments in foreign subsidiaries were all long-term liabilities of subsidiaries.
BNY Mellon in various currencies, and, at Sept. 30, 2017, had a combined U.S. dollar equivalent value of $181 million.87

Ineffectiveness related to derivatives and hedging relationships was recorded in income as follows:

IneffectivenessNine 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 debt0.1
(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)

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)2Q221Q222Q21YTD22YTD21
Interest rate fair value hedges of available-for-sale securities
DerivativeInterest revenue$866 $1,484 $(325)$2,350 $466 
Hedged itemInterest revenue(858)(1,480)322 (2,338)(463)
Interest rate fair value hedges of long-term debt
DerivativeInterest expense(292)(741)22 (1,033)(331)
Hedged itemInterest expense291 740 (21)1,031 330 
Foreign exchange fair value hedges of available-for-sale securities
Derivative (a)
Foreign exchange revenue(1)(1)(1)(2)7 
Hedged itemForeign exchange revenue2 1 1 3 (6)
Cash flow hedges of forecasted FX exposures
(Loss) gain reclassified from OCI into incomeStaff expense(1)— 4 (1)9 
Gain recognized in the consolidated income statement due to fair value and cash flow hedging relationships$7 $3 $2 $10 $12 
(a)    Includes gains of $1 million in the second quarter of 2022, less than $1 million in the first quarter of 2022 and second quarter of 2021, $1 million in the first six months of 2022 and less than $1 million in the first six months of 2021associated with the amortization of the excluded component. At June 30, 2022 and Dec. 31, 2021, 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 relationshipsGain or (loss) recognized in accumulated
OCI on derivatives		Location of gain or (loss) reclassified from accumulated OCI into incomeGain or (loss) reclassified from
accumulated OCI into income
2Q221Q222Q21YTD22YTD212Q221Q222Q21YTD22YTD21
FX contracts$505 $143 $(62)$648 $20 Net interest revenue$— $— $— $— $— 


The following table presents information on the hedged items in fair value hedging relationships.

Hedged items in fair value hedging relationshipsCarrying amount of hedged
asset or liability
Hedge accounting basis adjustment increase (decrease) (a)
(in millions)June 30, 2022Dec. 31, 2021June 30, 2022Dec. 31, 2021
Available-for-sale securities (b)(c)
$30,383 $24,400 $(1,764)$590 
Long-term debt$21,416 $22,447 $(833)$183 
(a)    Includes $104 million and $165 million of basis adjustment increases on discontinued hedges associated with available-for-sale securities at June 30, 2022 and Dec. 31, 2021, respectively, and $56 million and $72 million of basis adjustment decreases on discontinued hedges associated with long-term debt at June 30, 2022 and Dec. 31, 2021, 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 $125 million at June 30, 2022 and $141 million at Dec. 31, 2021.
(c)    Carrying amount represents the amortized cost.
88 BNY Mellon
Notes to Consolidated Financial Statements (continued)
The following table summarizes the notional amount and credit exposurecarrying values of our total derivative portfolioportfolio.

Impact of derivative instruments on the balance sheetNotional valueAsset derivatives
fair value		Liability derivatives
fair value
June 30, 2022Dec. 31, 2021June 30, 2022Dec. 31, 2021June 30, 2022Dec. 31, 2021
(in millions)
Derivatives designated as hedging instruments: (a)(b)
Interest rate contracts$52,621 $46,717 $57 $— $3 $453 
Foreign exchange contracts9,074 10,367 468 206 27 40 
Total derivatives designated as hedging instruments  $525 $206 $30 $493 
Derivatives not designated as hedging instruments: (b)(c)
Interest rate contracts$233,360 $193,747 $1,650 $3,259 $1,773 $2,835 
Foreign exchange contracts936,363 915,694 10,555 6,279 10,426 6,215 
Equity contracts5,419 9,659 243 49 52 211 
Credit contracts255 190 — — 3 5 
Total derivatives not designated as hedging instruments$12,448 $9,587 $12,254 $9,266 
Total derivatives fair value (d)
$12,973 $9,793 $12,284 $9,759 
Effect of master netting agreements (e)
(9,379)(6,973)(9,854)(6,335)
Fair value after effect of master netting agreements$3,594 $2,820 $2,430 $3,424 
(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 Sept.clearing organizations, cash collateral exchanged is deemed a settlement of the derivative each day. The settlement reduces the gross fair value of derivative assets and liabilities and results in a corresponding decrease in the effect of master netting agreements, with no impact to the consolidated balance sheet.
(c)    The fair value of asset derivatives and liability derivatives not designated as hedging instruments is recorded as trading assets and trading liabilities, respectively, on the consolidated balance sheet.
(d)Fair values are on a gross basis, before consideration of master netting agreements, as required by ASC 815, Derivatives and Hedging.
(e)    Effect of master netting agreements includes cash collateral received and paid of $1,965 million and $2,440 million, respectively, at June 30, 20172022, and $1,424 million and $786 million, respectively, at Dec. 31, 2016.2021.


Impact of derivative instruments on the balance sheetNotional 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 contracts8,399
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 contracts639,336
530,729
 4,879
6,104
 4,463
6,103
Equity contracts1,354
1,167
 74
46
 134
112
Credit contracts180
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 balance sheet.
(b)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 balance sheet.
(c)Fair values are on a gross basis, before consideration of master netting agreements, as required by ASC 815, Derivatives and Hedging.
(d)
Effect of master netting agreements includes cash collateral received and paid of $834 million and $1,239 million, respectively, at Sept. 30, 2017, and $1,119 million and $909 million, respectively, at Dec. 31, 2016.


The following tables present the impact of derivative instruments used in fair value, cash flow and net investment hedging relationships in the income statement.

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 contractsNet 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 $—
$—
$—
FX contracts3
(1)—
 Other revenue —
—
—
 Other revenue —
—
—
FX contracts(1)—
(19) Trading revenue (1)—
(19) Trading revenue —
—
—
FX contracts(4)(7)2
 Salary expense (2)(9)(3) Salary expense —
—
—
Total$(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 contractsNet 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 contracts2
—
 Other revenue —
—
 Other revenue —
—
FX contracts2
(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)


Our trading activities are focused on acting as a market-maker for our customers, facilitating customer trades and risk-mitigating economic hedging in compliance with the Volcker Rule. The change in the fair value of the derivatives utilized in our trading activities is recorded in foreign exchange revenue and investment and other revenue on the consolidated income statement.

The following table presents our foreign exchange revenue and other trading revenue.

Foreign exchange revenue and other trading revenue
(in millions)2Q221Q222Q21YTD22YTD21
Foreign exchange revenue$222 $207 $184 $429 $415 
Other trading revenue (loss)45 5 (1)50 (8)


Foreign exchange revenue includes income from purchasing and selling foreign currencies, currency forwards, futures and options as well as foreign currency remeasurement. Other trading revenue reflects results from trading in cash instruments, including fixed income and equity securities, and
trading and economic hedging activity with non-foreign exchange derivatives.

We also use derivative financial instruments as risk-mitigating economic hedges, which are not formally designated as accounting hedges. This includes hedging the foreign currency, interest rate or market risks inherent in some of our balance sheet exposures, such as seed capital investments and deposits, as well as certain investment management fee revenue streams. We also use total return swaps to economically hedge obligations arising from the Company’s deferred compensation plan whereby the participants defer compensation and earn a return linked to the performance of investments they select. The gains or losses on these total return swaps are recorded in staff expense on the consolidated income statement and were a loss of $30 million in the second quarter of 2022, a gain of $13 million in the second quarter of 2021, losses of $13 million in the first quarter of 2022 and $43 million in the first six months of 2022, and a gain of $23 million in the first six months of 2021.

We manage trading risk through a system of position limits, a VaRvalue-at-risk (“VaR”) methodology based on historical simulation and other market sensitivity
BNY Mellon 89
Notes to Consolidated Financial Statements (continued)
measures. Risk is monitored and reported to senior management by a separate unit, independent from trading, on a daily basis. Based on certain assumptions, the VaR methodology is designed to capture the potential overnight pre-tax dollar loss from adverse changes in fair values of all trading positions. The calculation assumes a one-dayone-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 revenue15
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.14.


Disclosure of contingent features in OTCover-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, 2022Dec. 31, 2021
(in millions)
Aggregate fair value of OTC derivatives in net liability positions (a)
$3,603 $3,606 
Collateral posted$4,210 $5,388 
(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 itsour OTC derivative contracts and/or collateral agreements, contain provisions thatagreements. As such, the contingent features may require us to take certain actionsbe triggered if The Bank of New York Mellon’s public debtlong-term issuer rating fell to a certain level. Early termination provisions, or “close-out”
were 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.


Potential close-out exposures (fair value) (a)
June 30, 2022Dec. 31, 2021
(in millions)
If The Bank of New York Mellon’s rating changed to: (b)
A3/A-$138 $56 
Baa2/BBB$463 $563 
Ba1/BB+$1,589 $1,778 
(a)    The amounts represent potential total close-out values if The Bank of New York Mellon’s long-term issuer rating were to immediately drop to the indicated levels, and do not reflect collateral posted.
(b)    Represents ratings by Moody’s/S&P.


90 BNY Mellon
If The Bank of New York Mellon’s rating was changed to (Moody’s/S&P)
Potential close-out exposures (fair value) (a)
 
A3/A- $92 million
Baa2/BBB $430 million
Ba1/BB+ $1,899 million
(a)The amounts represent potential total close-out values if The Bank of New York Mellon’s rating were
Notes to immediately drop to the indicated levels.Consolidated Financial Statements (continued)


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, ifIf The Bank of New York Mellon’s debt rating had fallen below investment grade on Sept.June 30, 2017,2022 and Dec. 31, 2021, existing collateral arrangements would
have required us to post an additional $151collateral of $146 million of collateral.and $71 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 June 30, 2022
Gross assets recognizedGross amounts offset in the balance sheetNet assets recognized in the balance sheetGross amounts not offset in the balance sheet
(in millions)(a)Financial instrumentsCash collateral receivedNet amount
Derivatives subject to netting arrangements:
Interest rate contracts$1,227 $920 $307 $69 $— $238 
Foreign exchange contracts10,402 8,387 2,015 59 — 1,956 
Equity and other contracts228 72 156 41 — 115 
Total derivatives subject to netting arrangements11,857 9,379 2,478 169 — 2,309 
Total derivatives not subject to netting arrangements1,116 — 1,116 — — 1,116 
Total derivatives12,973 9,379 3,594 169 — 3,425 
Reverse repurchase agreements51,894 37,436 (b)14,458 14,458 — — 
Securities borrowing8,482 — 8,482 8,082 — 400 
Total$73,349 $46,815 $26,534 $22,709 $— $3,825 
(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, 2021
Gross assets recognizedGross amounts offset in the balance sheetNet assets recognized
in the
balance sheet		Gross amounts not offset in the balance sheet
(in millions)(a)Financial instrumentsCash collateral receivedNet amount
Derivatives subject to netting arrangements:
Interest rate contracts$2,132 $1,424 $708 $206 $— $502 
Foreign exchange contracts6,122 5,501 621 69 — 552 
Equity and other contracts48 48 — — — — 
Total derivatives subject to netting arrangements8,302 6,973 1,329 275 — 1,054 
Total derivatives not subject to netting arrangements1,491 — 1,491 — — 1,491 
Total derivatives9,793 6,973 2,820 275 — 2,545 
Reverse repurchase agreements72,661 54,709 (b)17,952 17,922 — 30 
Securities borrowing11,655 — 11,655 11,036 — 619 
Total$94,109 $61,682 $32,427 $29,233 $— $3,194 
(a)Includes the effect of netting agreements and net cash collateral received. The offset related to the OTC derivatives was allocated to the various types of derivatives based on the net positions.
(b)Offsetting of reverse repurchase agreements relates to our involvement in the FICC, where we settle government securities transactions on a net basis for payment and delivery through the Fedwire system.

BNY Mellon 91
Offsetting of derivative assets and financial assets at Sept. 30, 2017    
 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$6,182
$5,301
 $881
$189
$—
$692
Foreign exchange contracts4,281
3,120
 1,161
82
—
1,079
Equity and other contracts69
49
 20
—
—
20
Total derivatives subject to netting arrangements10,532
8,470
 2,062
271
—
1,791
Total derivatives not subject to netting arrangements1,499
—
 1,499
—
—
1,499
Total derivatives12,031
8,470
 3,561
271
—
3,290
Reverse repurchase agreements36,118
19,171
(b)16,947
16,890
—
57
Securities borrowing10,936
—
 10,936
10,627
—
309
Total$59,085
$27,641
 $31,444
$27,788
$—
$3,656
(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, 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, 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 contracts5,265
4,172
 1,093
202
—
891
Equity and other contracts44
38
 6
—
—
6
Total derivatives subject to netting arrangements12,514
10,257
 2,257
523
—
1,734
Total derivatives not subject to netting arrangements2,007
—
 2,007
—
—
2,007
Total derivatives14,521
10,257
 4,264
523
—
3,741
Reverse repurchase agreements17,588
481
(b)17,107
17,104
—
3
Securities borrowing8,694
—
 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, where we settle government securities transactions on a net basis for payment and delivery through the Fedwire system.




BNY Mellon 95
Notes to Consolidated Financial Statements(continued)

Offsetting of derivative liabilities and financial liabilities at June 30, 2022Net liabilities recognized in the balance sheet
Gross liabilities recognizedGross amounts offset in the balance sheetGross amounts not offset in the balance sheet
(in millions)(a)Financial instrumentsCash collateral pledgedNet amount
Derivatives subject to netting arrangements:
Interest rate contracts$1,639 $1,255 $384 $103 $— $281 
Foreign exchange contracts9,723 8,563 1,160 143 — 1,017 
Equity and other contracts52 36 16 — — 16 
Total derivatives subject to netting arrangements11,414 9,854 1,560 246 — 1,314 
Total derivatives not subject to netting arrangements870 — 870 — — 870 
Total derivatives12,284 9,854 2,430 246 — 2,184 
Repurchase agreements47,048 37,436 (b)9,612 9,597 9 6 
Securities lending1,822 — 1,822 1,723 — 99 
Total$61,154 $47,290 $13,864 $11,566 $9 $2,289 
(a)Includes the effect of netting agreements and net cash collateral paid. The offset related to the OTC derivatives was allocated to the various types of derivatives based on the net positions.
(b)Offsetting of repurchase agreements relates to our involvement in the FICC, where we settle government securities transactions on a net basis for payment and delivery through the Fedwire system.


Offsetting of derivative liabilities and financial liabilities at Dec. 31, 2021Net liabilities recognized
in the
balance sheet
Gross liabilities recognizedGross amounts offset in the balance sheetGross amounts not offset in the balance sheet
(in millions)(a)Financial instrumentsCash collateral pledgedNet amount
Derivatives subject to netting arrangements:
Interest rate contracts$3,263 $2,028 $1,235 $1,197 $— $38 
Foreign exchange contracts5,619 4,111 1,508 29 — 1,479 
Equity and other contracts211 196 15 — — 15 
Total derivatives subject to netting arrangements9,093 6,335 2,758 1,226 — 1,532 
Total derivatives not subject to netting arrangements666 — 666 — — 666 
Total derivatives9,759 6,335 3,424 1,226 — 2,198 
Repurchase agreements64,734 54,709 (b)10,025 10,025 — — 
Securities lending1,541 — 1,541 1,478 — 63 
Total$76,034 $61,044 $14,990 $12,729 $— $2,261 
(a)Includes the effect of netting agreements and net cash collateral paid. The offset related to the OTC derivatives was allocated to the various types of derivatives based on the net positions.
(b)Offsetting of repurchase agreements relates to our involvement in the FICC, where we settle government securities transactions on a net basis for payment and delivery through the Fedwire system.


92 BNY Mellon
Offsetting of derivative liabilities and financial liabilities at Sept. 30, 2017Net 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 contracts4,074
3,095
 979
234
—
745
Equity and other contracts130
75
 55
49
—
6
Total derivatives subject to netting arrangements11,307
8,875
 2,432
1,594
—
838
Total derivatives not subject to netting arrangements790
—
 790
—
—
790
Total derivatives12,097
8,875
 3,222
1,594
—
1,628
Repurchase agreements27,321
19,171
(b)8,150
8,149
—
1
Securities lending1,904
—
 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, 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

   
 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$8,116
$6,634
 $1,482
$1,266
$—
$216
Foreign exchange contracts4,957
3,363
 1,594
355
—
1,239
Equity and other contracts104
50
 54
54
—
—
Total derivatives subject to netting arrangements13,177
10,047
 3,130
1,675
—
1,455
Total derivatives not subject to netting arrangements1,271
—
 1,271
—
—
1,271
Total derivatives14,448
10,047
 4,401
1,675
—
2,726
Repurchase agreements8,703
481
(b)8,222
8,222
—
—
Securities lending1,615
—
 1,615
1,522
—
93
Total$24,766
$10,528
 $14,238
$11,419
$—
$2,819
(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, where we settle government securities transactions on a net basis for payment and delivery through the Fedwire system.


96 BNY Mellon
Notes to Consolidated Financial Statements(continued)

Secured borrowings


The following tables presenttable 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, 2022Dec. 31, 2021
Remaining contractual maturityTotalRemaining contractual maturityTotal
(in millions)Overnight and continuousUp to 30 days30-90 daysOver 90 daysOvernight and continuousUp to 30 days30-90 daysOver 90
days
Repurchase agreements:
U.S. Treasury$39,367 $— $1,358 $83 $40,808 $56,556 $304 $450 $— $57,310 
Agency RMBS1,401 1 — — 1,402 2,795 1 — — 2,796 
Corporate bonds58 180 743 227 1,208 97 77 870 270 1,314 
Sovereign debt/sovereign guaranteed695 223 — — 918 160 — — — 160 
U.S. government agencies430 — — — 430 503 — — — 503 
State and political subdivisions17 39 179 64 299 44 16 630 155 845 
Other debt securities7 59 17 1 84 — 30 245 — 275 
Equity securities— 121 1,778 — 1,899 — 276 1,255 — 1,531 
Total$41,975 $623 $4,075 $375 $47,048 $60,155 $704 $3,450 $425 $64,734 
Securities lending:
Agency RMBS$138 $— $— $— $138 $152 $— $— $— $152 
Other debt securities71 — — — 71 88 — — — 88 
Equity securities1,613 — — — 1,613 1,301 — — — 1,301 
Total$1,822 $— $— $— $1,822 $1,541 $— $— $— $1,541 
Total secured borrowings$43,797 $623 $4,075 $375 $48,870 $61,696 $704 $3,450 $425 $66,275 
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 agencies489
110
—
599
Agency RMBS1,798
190
—
1,988
Corporate bonds282
—
940
1,222
Other debt securities254
—
871
1,125
Equity securities466
—
489
955
Total$24,721
$300
$2,300
$27,321
Securities lending:    
U.S. government agencies$15
$—
$—
$15
Other debt securities477
—
—
477
Equity securities1,412
—
—
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 agencies396
10
—
406
Agency RMBS3,294
386
—
3,680
Corporate bonds304
—
694
998
Other debt securities146
—
563
709
Equity securities375
—
43
418
Total$7,003
$400
$1,300
$8,703
Securities lending:    
U.S. government agencies$39
$—
$—
$39
Other debt securities477
—
—
477
Equity securities1,099
—
—
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 - 17–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 riskrisks not recognized on the balance sheet. Our off-balance sheet risks are managed and monitored in manners similar to those used for on-balance sheet risks.


BNY Mellon 93
Notes to Consolidated Financial Statements (continued)
The following table presents a summary of our off-balance sheet credit risks.


Off-balance sheet credit risksJune 30, 2022Dec. 31, 2021
(in millions)
Lending commitments$48,976 $46,183 
Standby letters of credit (“SBLC”) (a)
2,029 1,971 
Commercial letters of credit144 56 
Securities lending
indemnifications (b)(c)
491,439 487,298 
Off-balance sheet credit risksSept. 30, 2017
Dec. 31, 2016
(in millions)
Lending commitments$49,983
$51,270
Standby letters of credit (a)
3,619
4,185
Commercial letters of credit265
339
Securities lending indemnifications (b)
406,434
317,690
(a)Net of participations totaling $681 million at Sept. 30, 2017 and $662 million at Dec. 31, 2016.
(b)
Excludes the indemnification for securities for which BNY Mellon acts as an agent on behalf of CIBC Mellon clients, which totaled $65 billion at Sept. 30, 2017 and $61 billion at Dec. 31, 2016.

(a)Net of participations totaling $141 million at June 30, 2022 and $128 million at Dec. 31, 2021.

(b)Excludes the indemnification for securities for which BNY Mellon acts as an agent on behalf of CIBC Mellon clients, which totaled $67 billion at June 30, 2022 and $67 billion at Dec. 31, 2021.
(c)Includes cash collateral, invested in indemnified repurchase agreements, held by us as securities lending agent of $53 billion at June 30, 2022 and $48 billion at Dec. 31, 2021.


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$28.2 billion in less than one year, $20.0 billion in one to five years and $158 million$0.8 billion over five years.


Standby letters of credit (“SBLC”)SBLCs principally support obligations of corporate obligationsclients and were collateralized with cash and securities of $178$162 million at Sept.June 30, 20172022 and $293$172 million at Dec. 31, 2016.2021. At Sept.June 30, 2017, $2.32022, $1.3 billion of the SBLCs will expire within one year, and $1.2 billion$736 million in one to five years and $48 million innone 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 creditJune 30, 2022Dec. 31, 2021
Investment grade77 %85 %
Non-investment grade23 %15 %
Standby letters of creditSept. 30, 2017
Dec. 31, 2016
  
Investment grade86%89%
Non-investment grade14%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$144 million at Sept.June 30, 20172022 and $339$56 million at Dec. 31, 2016.2021.


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 $62 million at June 30, 2022 and $45 million at Dec. 31, 2021.



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
94 BNY Mellon
Notes to Consolidated Financial Statements (continued)
counterparties. Securities lending indemnifications were secured by collateral of $424516 billion at Sept.June 30, 20172022 and $331511 billion at Dec. 31, 2016.2021.


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, 20172022 and Dec. 31, 2016, $652021, $67 billion and $61 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 billion and $64 billion, respectively.$71 billion. If, upon a default, a borrower’s collateral was not sufficient to cover its related obligations, certain losses related to the indemnification could be covered by the indemnitors.


Unsettled repurchase and reverse repurchase agreements

In the normal course of business, we enter into repurchase agreements and reverse repurchase agreements that settle at a future date. In repurchase agreements, BNY Mellon receives cash from and provides securities as collateral to a counterparty at settlement. In reverse repurchase agreements, BNY Mellon advances cash to and receives securities as collateral from the counterparty at settlement. These transactions are recorded on the consolidated balance sheet on the settlement date. At June 30, 2022, we had $921 million of unsettled repurchase agreements and $4.1 billion of unsettled reverse repurchase agreements. At Dec. 31, 2021, we had $2.6 billion of unsettled repurchase agreements and $9.1 billion of unsettled reverse repurchase agreements.

Industry concentrations


We have significant industry concentrations related to credit exposure at Sept.June 30, 2017.2022. The tables below present our credit exposure in the financial institutions and commercial portfolios.


Financial institutions
portfolio exposure
(in billions)
June 30, 2022
LoansUnfunded
commitments		Total exposure
Securities industry$1.6 $18.0 $19.6 
Asset managers2.0 7.5 9.5 
Banks6.4 1.7 8.1 
Insurance0.1 3.6 3.7 
Government0.1 0.2 0.3 
Other0.4 1.2 1.6 
Total$10.6 $32.2 $42.8 
Financial institutions
portfolio exposure
(in billions)
Sept. 30, 2017
Loans
Unfunded
commitments

Total
exposure

Securities industry$2.9
$19.0
$21.9
Asset managers1.6
6.5
8.1
Banks6.3
1.4
7.7
Insurance0.1
3.4
3.5
Government—
1.0
1.0
Other1.0
1.4
2.4
Total$11.9
$32.7
$44.6
Commercial portfolio
exposure
(in billions)
June 30, 2022
LoansUnfunded
commitments		Total exposure
Manufacturing$0.8 $4.0 $4.8 
Services and other1.2 3.1 4.3 
Energy and utilities0.3 3.8 4.1 
Media and telecom0.1 0.7 0.8 
Total$2.4 $11.6 $14.0 


Commercial portfolio
exposure
(in billions)
Sept. 30, 2017
Loans
Unfunded
commitments

Total
exposure

Manufacturing$1.4
$6.3
$7.7
Services and other0.9
4.4
5.3
Energy and utilities0.6
4.5
5.1
Media and telecom0.1
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.


ExposureSponsored member repo program

BNY Mellon is a sponsoring member in the FICC sponsored member program, where we submit eligible repurchase and reverse repurchase transactions in U.S. Treasury and agency 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 fundssuch 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 16 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 9995
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, 20172022 and Dec. 31, 2016,2021, 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 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, 20172022 and Dec. 31, 2016,2021, we havedid not recordedrecord any material liabilities under these arrangements.


Legal proceedings


In the ordinary course of business, BNYThe 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
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 incomeour 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 establisheswe 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 toWe 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 doeswe do not establish an accrual and the matter will continuecontinues to be monitored for any developments that would make the loss contingency both probable and reasonably estimable. BNY Mellon believesWe believe that itsour 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 incomethe 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$550 millionin excess of the accrued liability (if any) related to those matters.


10096 BNY Mellon
Notes to Consolidated Financial Statements(continued)

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.

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. TheseNaN actions include a lawsuit broughtcommenced in December 2014, December 2015 and February 2017 are pending in New York Statefederal court. In New York state court, on June 18, 2014,actions commenced in May 2016; September 2021; and later re-filed in federal court, by a group of institutional investors who purport to sue on behalf of 253 MBS trusts.October 2021, December 2021 and February 2022 (three related cases) are pending.


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 SECSecurities and Exchange Commission 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. On Nov. 5, 2021, the court dismissed the class action filed in New Jersey. NaN lawsuits remain against Pershing that are pending in Texas, including two putative class actions.Louisiana and New Jersey federal courts, which were filed in January 2010, 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 FINRABank of New York Mellon in New Jersey federal court, making the same allegations as in the prior actions brought against Pershing. On Nov. 12, 2021, the court dismissed the class action against The Bank of New York Mellon and that matter has concluded.
All the cases that have been resolved and dismissed.brought in federal court against Pershing have been consolidated in Texas federal court for discovery purposes. Various alleged Stanford CD purchasers asserted similar claims in Financial Industry Regulatory Authority, Inc. (“FINRA”) arbitration proceedings.


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 fundis 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, AssociaceãAssociacão Dosdos Profissionais Dos Correirosdos 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.appealed. On Aug. 4, 2021, the appellate court overturned the dismissal and sent the lawsuit to a state lower court. On Dec. 17, 2015, Postalis filed three additional3 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 May 20, 2021, the court in one of those lawsuits entered a judgment of approximately $3 million against DTVM and Ativos. On Aug. 23, 2021, DTVM and Ativos filed an appeal of the May 20 decision. On June 7, 2022, the appellate court partially granted and partially denied the appeal, reducing the judgment to approximately $2 million. DTVM and Ativos intend to file a further appeal. On Feb. 4, 2016, Postalis filed anothera 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. TheOn Jan. 16, 2018, the Brazilian Federal Prosecution Service (“MPF”) filed a civil lawsuit has been transferred toin São Paulo.Paulo

Depositary Receipt Litigation
Between late December 2015 and February 2016, four putative class action lawsuits were filed against BNY Mellon asserting claims relating97
Notes to Consolidated Financial Statements (continued)
against DTVM alleging liability for Postalis losses based on alleged failures to BNY Mellon’s foreign exchange pricing when converting dividendsproperly 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. On Aug. 4, 2021, the appellate court overturned the dismissal and other distributionsreturned the lawsuit to the lower court. On April 11, 2022, DTVM appealed the Aug. 4 decision to Brazil’s Superior Court of Justice. In addition, the Tribunal de Contas da União (“TCU”), an administrative tribunal, has initiated 3 proceedings with the purpose of determining liability for losses to 3 investment funds administered by DTVM in which Postalis was an investor. On Sept. 9, 2020, TCU rendered a decision in one of the proceedings, finding DTVM and two former Postalis directors jointly and severally liable for approximately $50 million. TCU also imposed on DTVM a fine of approximately $2 million. DTVM’s administrative appeal of the decision was denied. On Feb. 25, 2022, DTVM filed a lawsuit in Brazil federal court in Brasilia seeking annulment of TCU’s decision and an injunction preventing TCU from non-U.S. companiesenforcing the judgment. 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 March 26, 2021, DTVM and Ativos filed a lawsuit challenging the decision rendered by the Arbitration Court with respect to its role as depositary bankjurisdiction over the case. 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. On May 9, 2022, the court found DTVM and Alocação de Patrimônio jointly and severally liable for approximately $20 million; they intend 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 pendingappeal. On June 19, 2020, a lawsuit was filed in federal court in Rio de Janeiro against DTVM, Postalis, and various other defendants alleging liability against DTVM for certain Postalis losses in an investment fund of which DTVM was administrator. On Feb. 10, 2021, Postalis and another pension fund served DTVM in a lawsuit filed in Rio de Janeiro, alleging liability for losses in another investment fund for which DTVM was administrator and the Southern District of New York.other defendant was manager.



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 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. 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 2020, the court stated that it would refrain from taking action against the subsidiary in order to expedite the conclusion of the trial. The court convicted the unrelated individual defendants, and determined that the cum/ex trading activities of the relevant third-party investment funds were unlawful. In November and December 2020, we received secondary liability notices from the German tax authorities totaling approximately $150 million related to pre-acquisition activity in various funds for which the entities we acquired were depositary and/or fund manager. We have appealed the notices. In connection with the acquisition of the subject entities, we obtained an indemnity for liabilities from the sellers that we intend to pursue as necessary.



98 BNY Mellon 101
Notes to Consolidated Financial Statements(continued)

Depositary Receipt Pre-Release Inquiry
In March 2014, the Staff of the U.S. Securities and Exchange Commission’s Enforcement Division (the “Staff”) commenced an investigation into certain issuers 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. In May 2017, BNY Mellon began discussions with the Staff about a possible resolution of the investigation. BNY Mellon has fully cooperated with this matter.

Note 18 - Lines of business18–Business segments


We have an internal information system that produces performance data along product and service lines for our two3 principal business segments and the Other segment. The primary products and services and types of revenue for our principal businesses and a description of the Other segment.segment are presented in Note 24 of the Notes to Consolidated Financial Statements in our 2021 Annual Report.


Business accounting principles


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


Business segment results are subject to reclassification when organizational changes are made, or when improvementsfor refinements in revenue and expense allocation methodologies. Refinements are madetypically reflected on a prospective basis. There were no reclassification or organization changes in the measurement principles.second quarter of 2022.


The accounting policies of the businesses are the same as those described in Note 1 of the Notes to Consolidated Financial Statements in our 20162021 Annual Report.


The primary types of revenue for our two principal businesses and the Other segment are presented below.

BusinessPrimary 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 businessesbusiness segments 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 revenuefees in each business.segment.
•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.the Securities Services segment.

•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 and RSUs is allocated to the businesses.segments.
•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 the 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. BusinessesSegments with a net liability position have been allocated assets.
•Goodwill and intangible assets are reflected within individual businesses.

BNY Mellon 99
Notes to Consolidated Financial Statements (continued)
The following consolidating schedules presentspresent the contribution of our businessessegments to our overall profitability.


For the quarter ended June 30, 2022Securities
Services		Market and Wealth ServicesInvestment
and Wealth Management		OtherConsolidated
(dollars in millions)
Total fee and other revenue$1,549 $974 $837 (a)$75 $3,435 (a)
Net interest revenue (expense)457 340 62 (35)824 
Total revenue2,006 1,314 899 (a)40 4,259 (a)
Provision for credit losses13 4 — 30 47 
Noninterest expense1,656 702 691 63 3,112 
Income (loss) before income taxes$337 $608 $208 (a)$(53)$1,100 (a)
Pre-tax operating margin (b)
17 %46 %23 %N/M26 %
Average assets$219,797 $141,952 $33,668 $42,206 $437,623 
(a)Total fee and other revenue, total revenue and income before taxes are net of loss attributable to noncontrolling interests related to consolidated investment management funds of $5 million.
(b)    Income before income taxes divided by total revenue.
N/M – Not meaningful.


For the quarter ended March 31, 2022Securities
Services		Market and Wealth ServicesInvestment
and Wealth Management		OtherConsolidated
(dollars in millions)
Total fee and other revenue$1,403 $906 $907 (a)$20 $3,236 (a)
Net interest revenue (expense)377 296 57 (32)698 
Total revenue (loss)1,780 1,202 964 (a)(12)3,934 (a)
Provision for credit losses(10)(2)(3)17 2 
Noninterest expense1,510 708 755 33 3,006 
Income (loss) before income taxes$280 $496 $212 (a)$(62)$926 (a)
Pre-tax operating margin (b)
16 %41 %22 %N/M23 %
Average assets$220,889 $141,183 $35,629 $42,501 $440,202 
(a)Total fee and other revenue, total revenue and income before taxes are net of loss attributable to noncontrolling interests related to consolidated investment management funds of $8 million.
(b)Income before income taxes divided by total revenue.
N/M – Not meaningful.


For the quarter ended June 30, 2021Securities
Services		Market and Wealth ServicesInvestment
and Wealth Management		OtherConsolidated
(dollars in millions)
Total fee and other revenue$1,433 $903 $952 (a)$22 $3,310 (a)
Net interest revenue (expense)354 289 47 (45)645 
Total revenue (loss)1,787 1,192 999 (a)(23)3,955 (a)
Provision for credit losses(58)(19)(4)(5)(86)
Noninterest expense1,400 652 677 49 2,778 
Income (loss) before income taxes$445 $559 $326 (a)$(67)$1,263 (a)
Pre-tax operating margin (b)
25 %47 %33 %N/M32 %
Average assets$231,152 $144,297 $30,370 $46,510 $452,329 
(a)Total fee and other revenue, total revenue and income before taxes are net of income attributable to noncontrolling interests related to consolidated investment management funds of $5 million.
(b)Income before income taxes divided by total revenue.
N/M – Not meaningful.

100 BNY Mellon
For the quarter ended Sept. 30, 2017Investment
Management
 Investment
Services
 Other
 Consolidated
 
(dollar amounts in millions)
Fee and other revenue$918
(a) $2,187
 $69
 $3,174
(a) 
Net interest revenue (expense)82
 777
 (20) 839
 
Total revenue1,000
(a)2,964
 49
 4,013
(a)
Provision for credit losses(2) (2) (2) (6) 
Noninterest expense702
 1,874
 77
 2,653
(b)
Income (loss) before taxes$300
(a) $1,092
 $(26) $1,366
(a)(b)
Pre-tax operating margin (c)
30% 37% N/M
 34% 
Average assets$31,689
 $252,461
 $61,559
 $345,709
 
(a)
Both fee and other revenue and total revenue include the net income from consolidated investment management funds of $7 million representing $10 million of income and noncontrolling interests of $3 million. Income before taxes is net of noncontrolling interests of $3 million.
(b)Noninterest expense includes a loss attributable to noncontrolling interest of $1 million related to other consolidated subsidiaries.
(c)Income before taxes divided by total revenue.
N/M - Not meaningful.


For the quarter ended June 30, 2017
Investment
Management

 
Investment
Services

 Other
 Consolidated
 
(dollar amounts in millions)
Fee and other revenue$899
(a) $2,115
 $113
 $3,127
(a) 
Net interest revenue (expense)87
 761
 (22) 826
 
Total revenue986
(a)2,876
 91
 3,953
(a)
Provision for credit losses—
 (3) (4) (7) 
Noninterest expense698
 1,927
 28
 2,653
(b)
Income before taxes$288
(a) $952
 $67
 $1,307
(a)(b)
Pre-tax operating margin (c)
29% 33% N/M
 33% 
Average assets$31,355
 $254,724
 $56,436
 $342,515
 
(a)Both fee and other revenue and total revenue include the net income from consolidated investment management funds of $7 million, representing $10 million of income and noncontrolling interests of $3 million. Income before taxes is net of 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 taxes divided by total revenue.
N/M - Not meaningful.



BNY Mellon 103
Notes to Consolidated Financial Statements(continued)

For the quarter ended Sept. 30, 2016Investment
Management
 Investment
Services
 Other
 Consolidated
 
(dollar amounts in millions)
Fee and other revenue$876
(a) $2,183
 $100
 $3,159
(a) 
Net interest revenue (expense)82
 715
 (23) 774
 
Total revenue958
(a)2,898
 77
 3,933
(a)
Provision for credit losses—
 1
 (20) (19) 
Noninterest expense702
 1,851
 88
 2,641
(b)
Income before taxes$256
(a) $1,046
 $9
 $1,311
(a)(b)
Pre-tax operating margin (c)
27% 36% N/M
 33% 
Average assets$30,392
 $275,714
 $45,124
 $351,230
 
(a)Both fee and other revenue and total revenue include net income from consolidated investment management funds of $8 million, representing $17 million of income and noncontrolling interests of $9 million. Income before taxes is net of noncontrolling interests of $9 million.
(b)
Noninterest expense includes a loss attributable to noncontrolling interest of $2 millionrelated to other consolidated subsidiaries.
(c)Income before taxes divided by total revenue.
N/M - Not meaningful.


For the nine months ended Sept. 30, 2017Investment
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 revenue2,949
(a)8,631
 211
 11,791
(a) 
Provision for credit losses1
 (5) (14) (18) 
Noninterest expense2,083
 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, 2016Investment
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 revenue2,791
(a)8,351
 300
 11,442
(a)
Provision for credit losses—
 8
 (26) (18) 
Noninterest expense2,084
 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)

For the six months ended June 30, 2022Securities
Services		Market and Wealth ServicesInvestment
and Wealth Management		OtherConsolidated
(dollars in millions)
Total fee and other revenue$2,952 $1,880 $1,744 (a)$95 $6,671 (a)
Net interest revenue (expense)834 636 119 (67)1,522 
Total revenue3,786 2,516 1,863 (a)28 8,193 (a)
Provision for credit losses3 2 (3)47 49 
Noninterest expense3,166 1,410 1,446 96 6,118 
Income (loss) before income taxes$617 $1,104 $420 (a)$(115)$2,026 (a)
Pre-tax operating margin (b)
16 %44 %23 %N/M25 %
Average assets$220,340 $141,570 $34,643 $42,371 $438,924 
(a)Total fee and other revenue, total revenue and income before taxes are net of loss attributable to noncontrolling interests related to consolidated investment management funds of $13 million.
(b)    Income before income taxes divided by total revenue.
N/M – Not meaningful.


For the six months ended June 30, 2021Securities
Services		Market and Wealth ServicesInvestment
and Wealth Management		OtherConsolidated
(dollars in millions)
Total fee and other revenue (loss)$2,864 $1,817 $1,895 (a)$(5)$6,571 (a)
Net interest revenue (expense)710 578 95 (83)1,300 
Total revenue3,574 2,395 1,990 (a)(88)7,871 (a)
Provision for credit losses(108)(48)— (13)(169)
Noninterest expense2,819 1,334 1,386 90 5,629 
Income before income taxes$863 $1,109 $604 (a)$(165)$2,411 (a)
Pre-tax operating margin (b)
24 %46 %30 %N/M31 %
Average assets$229,620 $146,546 $31,213 $48,953 $456,332 
(a)Total fee and other revenue, total revenue and income before taxes are net of income attributable to noncontrolling interests related to consolidated investment management funds of $10 million.
(b)    Income before income taxes divided by total revenue.
N/M – Not meaningful.


Note 19 - 19–Supplemental information to the Consolidated Statement of Cash Flows


NoncashNon-cash investing and financing transactions that, appropriately, are not reflected in the Consolidated Statementconsolidated statement of Cash Flowscash flows are listed below.


Non-cash investing and financing transactionsSix months ended June 30,
(in millions)20222021
Transfers from loans to other assets for other real estate owned$2 $1 
Change in assets of consolidated investment management funds266 74 
Change in liabilities of consolidated investment management funds2 4 
Change in nonredeemable noncontrolling interests of consolidated investment management funds189 201 
Securities purchased not settled323 866 
Securities sold not settled64 100 
Available-for-sale securities transferred to held-to-maturity906 5,945 
Premises and equipment/operating lease obligations67 56 

Noncash investing and financing transactionsNine 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 VIEs429
 392
Change in liabilities of consolidated VIEs288
 14
Change in nonredeemable noncontrolling interests of consolidated investment management funds234
 238
Securities purchased not settled1,277
 229
Securities sales not settled—
 218
Securities matured not settled350
 —
Held-to-maturity securities transferred to available-for-sale74
 10
Premises and equipment/capitalized software funded by capital lease obligations347
 12


BNY Mellon 105101
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 thirdsecond quarter of 20172022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.




106102 BNY Mellon
Forward-looking Statements


Some statements in this documentQuarterly 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, deposits, 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), human capital management (including related ambitions, objectives, aims and goals), 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,” “ambition,” “objective,” “aim,” “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 the war in Ukraine, as well as those discussed in the “Risk Factors” section ofin our 20162021 Annual Report, and this Form 10-Q, such as: an information security event
•errors or delays in our operational and transaction processing, or those of third parties, may materially adversely affect our business, financial condition, results of operations and reputation;
•our risk management framework, models and processes may not be effective in identifying or mitigating risk and reducing the potential for losses;
•our business may be adversely affected if we are unable to attract, retain and motivate employees;
•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 and any material adverse effect onmay materially adversely affect our business, financial condition and results of operations;
•a cybersecurity incident, or a failure in our computer systems, networks and information, or those of third parties, 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 technology or that of a third party or vendor, or if ability to conduct our businesses, damage our reputation and cause losses;
•we neglectare subject 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 the application of our Title I preferred resolution strategy or resolution under the Title II orderly liquidation authority and any adverse effects on our liquidity, financial condition and security holders; extensive government rulemaking, policies, regulation and supervision whichthat impact our operations. Changes to and introduction of new rules and regulations have compelled, 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 and have increased our compliance and operational risks and costs; failure to satisfy regulatory standards, including “well capitalized” and
operations;
“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 oncould materially adversely affect 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;
•a failure or circumvention of our controls and procedures and anycould have a material adverse effect on our business, reputation,financial condition, 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, tax and other governmental policies and the 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 the EU and any 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 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 reputation;
•we own and other losses related to volatile and illiquid market conditions and any reduction in our earnings or impact on our financial condition; our dependenceare dependent on fee-based business for a substantial majority of our revenue and the adverse effects of aour fee-based revenues could be adversely affected by slowing in market activity, weak financial markets, underperformance and/or negative trends in savings rates or in investment preferences; any
•weakness and volatility in financial markets and the economy generally may materially adversely affect our business, financial condition and results of operations;
•changes in interest rates and yield curves have had, and may in the future continue to have, a material adverse effect on our foreign exchange revenuesprofitability;
•we may experience losses on securities related to volatile and illiquid market conditions, reducing our earnings and impacting our financial condition;
BNY Mellon 103
Forward-looking Statements (continued)
•transitions away from decreased market volatility or cross-border investment activityand the replacement of LIBOR and other IBORs could adversely impact our clients; business, financial condition and results of operations;
•the failure or perceived weakness of any of our significant clients or counterparties, many of whom are major financial institutions or sovereign entities, and our assumption of credit, counterparty and counterpartyconcentration risk, which could expose us to loss and adversely affect our business;
•we could incur losses if our allowance for credit losses, including loan and lending-related commitment reserves, is inadequate or if our expectations of future economic conditions deteriorate;
•our business, financial condition and results of operations could be adversely affected if we do not effectively manage our liquidity;
•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;
•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;
•our ability to return capital to shareholders is subject to the discretion of our Board of Directors and may be limited by U.S. banking laws and regulations, including those governing capital and capital planning, applicable provisions of Delaware law and our failure to pay full and timely dividends on our preferred stock;
•any material reduction in our credit ratings or the credit ratings of


BNY Mellon 107
Forward-looking Statements (continued)

our principal bank subsidiaries, whichThe 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 business, financial condition and results of operations and financial condition and on the value of the securities we issue; any adverse effect on
•the application of our business,Title I preferred resolution strategy or resolution under the Title II orderly liquidation authority could adversely affect the Parent’s liquidity and 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 Parent’s security holders;
•new lines of business, new products and services or transformational or strategic project initiatives subject us to new or additional risks, and the failure to implement these initiatives which could affect our results of operations; the risks and uncertainties relating
•we are subject to our strategic transactions and any adverse effect on our business, results of operations and financial condition; competition in all aspects of our business, and any negative effect onwhich could negatively affect our ability to maintain or increase our profitability; failure to attract
•our strategic transactions present risks and retain employeesuncertainties and anycould have an adverse effect on our business; business, financial condition and results of operations;
•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 businesses may be negatively affected by adverse events, publicity, government scrutiny or other reputational harm;
•climate change concerns could adversely affect our business, affect client activity levels and damage our reputation;
•impacts from natural disasters, climate change, acts of terrorism, pandemics, global conflicts and other geopolitical events may have a negative impact on our business and operations;
•tax law changes or challenges to our tax positions and any adverse effect onwith respect to historical transactions may adversely affect our net income, effective tax rate and our overall results of operations and financial condition; and
•changes in accounting standards governing the preparation of our financial statements and anyfuture events could have a 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 of U.S. banking laws and regulations, including those governing capital and the approval of our capital plan, applicable provisions of Delaware law or failure to pay full and timely dividends on our preferred stock, on our ability to return capital to shareholders.data.


Investors should consider all risk factors discussed in our 20162021 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 websiteswebsite referenced herein are not part of this report.




108104 BNY Mellon
Part II -– Other Information

Item 1. Legal Proceedings.
Item 1. Legal Proceedings

The information required by this Item is set forth in the “Legal proceedings” section in Note 17 of the Notes to Consolidated Financial Statements, which portion is incorporated herein by reference in response to this item.


Item 1A. Risk 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, Risk Factors, on pages 90 through 116 of our 2016 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 discussed below or in our 2016 Annual Report or other of our reports filed with or furnished to the SEC, also could adversely affect our business or results. 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 Statements.

If our resolution plan is determined not to be credible or not to facilitate an orderly resolution under the U.S. Bankruptcy Code, our business, reputation, results of operations and financial condition could be materially negatively impacted. The application of our Title I preferred resolution strategy or resolution under the Title II orderly liquidation authority could adversely affect our liquidity and financial condition and our security holders.

Large BHCs must develop and submit to the Federal Reserve 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 that
must be taken to address them, which we responded to in an Oct. 1, 2016 submission. In December 2016, 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 I of the Dodd-Frank Act is a single point of entry strategy.

In connection with our single point of entry resolution strategy, 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 the second quarter of 2017, we entered into a binding support agreement that required the IHC to provide 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. As a result, during a period of severe financial stress the Parent might commence bankruptcy proceedings at an earlier time than 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


BNY Mellon 109
Part II - Other Information (continued)

entities would receive full recoveries on their claims, while the Parent’s security holders, including unsecured debt holders, could face significant losses, potentially including the loss of their entire investment. It is possible that the application of the single point of entry strategy – in which the Parent would be the only legal entity to enter resolution proceedings – could result in greater losses to holders of 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, our liquidity and financial condition would be adversely affected and 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 effects 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 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.

U.S. supervisors have indicated that a single point of entry strategy may 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 holders and other unsecured creditors of the top-tier holding company (in 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 transferred to the Parent and ultimately borne by the Parent’s security holders (including holders of the Parent’s unsecured debt securities), while third-party creditors of the Parent’s subsidiaries would receive full recoveries on their claims. Accordingly, the Parent’s security holders (including holders of unsecured debt securities and other unsecured creditors) could face losses in excess of what otherwise would have been the case.




110 BNY Mellon
Part II - Other Information (continued)

Item 2. Unregistered Sales of Equity Securities and Use of ProceedsProceeds.

(c)The following table discloses repurchases of our common stock made in the third quarter of 2017. All of the Company’s preferred stock outstanding has preference over the Company’s common stock with respect to the payment of dividends.



(c)    The following table discloses repurchases of our common stock made in the second quarter of 2022. 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 – second quarter of 2022Total 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, 2022
(dollars in millions, except per share amounts; common shares in thousands)Total shares
repurchased		Average price
per share
April 20224 $53.27 4 $2,632 
May 20221 53.47 1 2,632 
June 202241 61.82 41 2,629 
Second quarter of 2022 (a)
46 $60.87 46 $2,629 (b)
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 20177
 $51.08
 7
 $2,600
 
August 201712,300
 52.74
 12,300
 1,951
 
September 20179
 52.29
 9
 1,950
 
Third quarter of 2017 (a)
12,316
 $52.74
 12,316
 $1,950
(b)
(a)Includes 32 thousand 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 maximum value of the shares authorized to be repurchased through the second quarter of 2018, including employee benefit plan repurchases, in connection with the Federal Reserve’s non-objection to our 2017 capital plan.

(a)    Includes 46 thousand shares repurchased at a purchase price of $3 million from employees, primarily in connection with the employees’ payment of taxes upon the vesting of restricted stock. There were no open market repurchases in the second quarter of 2022.

(b)    Represents the maximum value of the shares to be repurchased through the fourth quarter of 2022 under the share repurchase plan announced in June 2021 and includes shares repurchased in connection with employee benefit plans.


OnIn June 28, 2017,2021, in connection with the Federal Reserve’s non-objection to our 2017 capital plan, BNY Mellonrelease of the 2021 CCAR stress tests, we announced a share repurchase planprogram approved by our Board of Directors providing for the repurchase of up to $2.6$6.0 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 beganshares beginning in the third quarter of 20172021 and continuescontinuing through the secondfourth quarter of 2018.2022. This new share repurchase plan replacesreplaced all previously authorized share repurchase plans.


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 throughother 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 limitations and considerations.



Item 6. ExhibitsExhibits.


The list of exhibits required to be filed as exhibits to this report appears below.

BNY Mellon 105


BNY Mellon 111
Index to Exhibits

Exhibit No.DescriptionMethod of Filing
3.1
Restated Certificate of Incorporation of The Bank of New York Mellon Corporation.
3.2Certificate of Amendment to The Bank of New York Mellon Corporation’s Restated Certificate of Incorporation, as filed with the Secretary of State of the State of Delaware on April 9, 2019.
3.3Certificate of Designations of The Bank of New York Mellon Corporation with respect to the Series A Noncumulative Preferred Stock, dated June 15, 2007.2007.
3.33.4
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.

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.
3.73.6
Amended and Restated By-LawsCertificate 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.
4.13.7Certificate of Designations of The Bank of New York Mellon Corporation with respect to the Series H Noncumulative Perpetual Preferred Stock, dated Nov. 2, 2020.
3.8Certificate of Designations of The Bank of New York Mellon Corporation with respect to the Series I Noncumulative Perpetual Preferred Stock, dated Nov. 16, 2021.
3.9Amended and Restated By-Laws of The Bank of New York Mellon Corporation, as amended and restated on Feb. 12, 2018.
106 BNY Mellon
Index to Exhibits (continued)
Exhibit No.DescriptionMethod of Filing
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, 2017.2022. The Company hereby agrees to furnish to the Commission, upon request, a copy of any such instrument.
N/A


112 BNY Mellon

31.1
Exhibit No.DescriptionMethod 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.
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.
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.
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.
101.INSInline 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.SCHInline XBRL Taxonomy Extension Schema Document.Filed herewith.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.Filed herewith.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.Filed herewith.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.Filed herewith.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.Filed herewith.
104
The cover page of The Bank of New York Mellon Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, formatted in inline XBRL.
The cover page interactive data file is embedded within the inline XBRL document and included in Exhibit 101.





BNY Mellon 113107












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: August 5, 2022By:
Date: November 7, 2017By:/s/ Kurtis R. Kurimsky
Kurtis R. Kurimsky
Corporate Controller
(Duly Authorized Officer and
Principal Accounting Officer of
the Registrant)




108 BNY Mellon


114 BNY Mellon