Loans and asset quality (Tables)

6 Months Ended

Jun. 30, 2012

Details of Loan Distribution and Industry Concentrations of Credit Risk

The table below provides the details of our loan distribution and industry concentrations of credit risk at June 30, 2012 and Dec. 31, 2011.

Loans (in millions)	June 30, 2012		Dec. 31, 2011
Domestic:
Financial institutions	$	4,835	$	4,606
Commercial		814		752
Wealth management loans and mortgages		7,916		7,342
Commercial real estate		1,595		1,449
Lease financings (a)		1,505		1,558
Other residential mortgages		1,773		1,923
Overdrafts		2,750		2,958
Other		599		623
Margin loans		13,462		12,760
Total domestic		35,249		33,971
Foreign:
Financial institutions		5,681		6,538
Commercial		573		528
Lease financings (a)		1,023		1,051
Other (primarily overdrafts)		2,905		1,891
Total foreign		10,182		10,008
Total loans	$	45,431	$	43,979

(a) Net of unearned income on domestic and foreign lease financings of $1,225 million at June 30, 2012 and $1,343 million at Dec. 31, 2011.

Allowance for Credit Losses Activity

Transactions in the allowance for credit losses are summarized as follows:

Allowance for credit losses activity for the quarter ended June 30, 2012											Wealth
(in millions)	Commercial		Commercial real estate		Financial institutions			Lease financing			management loans and mortgages			Other residential mortgages			All Other (a)			Foreign		Total
Beginning balance	$	97	$	33	$	53		$	62		$	34		$	165		$	-		$	50	$	494
Charge-offs		-		-		(4	)		-			-			(7	)		-			-		(11	)
Recoveries		1		-		-			-			-			2			-			-		3
Net (charge-offs) recoveries		1		-		(4	)		-			-			(5	)		-			-		(8	)
Provision		5		-		(10	)		(6	)		(8	)		(7	)		-			7		(19	)
Ending balance	$	103	$	33	$	39		$	56		$	26		$	153		$	-		$	57	$	467
Allowance for:
Loans losses	$	42	$	23	$	18		$	56		$	21		$	153		$	-		$	49	$	362
Unfunded commitments		61		10		21			-			5			-			-			8		105
Individually evaluated for impairment:
Loan balance	$	62	$	29	$	3		$	-		$	31		$	-		$	-		$	9	$	134
Allowance for loan losses		16		6		-			-			7			-			-			5		34
Collectively evaluated for impairment:
Loan balance	$	752	$	1,566	$	4,832		$	1,505		$	7,885		$	1,773		$	16,811	(a)	$	10,173	$	45,297
Allowance for loan losses		26		17		18			56			14			153			-			44		328

(a) Includes $2,750 million of domestic overdrafts, $13,462 million of margin loans and $599 million of other loans at June 30, 2012.

Allowance for credit losses activity for the quarter ended March 31, 2012												Wealth
(in millions)	Commercial		Commercial real estate			Financial institutions			Lease financing			management loans and mortgages		Other residential mortgages			All Other (a)			Foreign			Total
Beginning balance	$	91	$	34		$	63		$	66		$	29	$	156		$	-		$	58		$	497
Charge-offs		-		-			-			-			-		(10	)		-			-			(10	)
Recoveries		-		-			-			-			-		2			-			-			2
Net (charge-offs) recoveries		-		-			-			-			-		(8	)		-			-			(8	)
Provision		6		(1	)		(10	)		(4	)		5		17			-			(8	)		5
Ending balance	$	97	$	33		$	53		$	62		$	34	$	165		$	-		$	50		$	494
Allowance for:
Loans losses	$	36	$	22		$	30		$	62		$	29	$	165		$	-		$	42		$	386
Unfunded commitments		61		11			23			-			5		-			-			8			108
Individually evaluated for impairment:
Loan balance	$	66	$	38		$	14		$	-		$	31	$	-		$	-		$	10		$	159
Allowance for loan losses		17		6			5			-			7		-			-			3			38
Collectively evaluated for impairment:
Loan balance	$	697	$	1,403		$	4,881		$	1,518		$	7,281	$	1,854		$	15,964	(a)	$	9,271		$	42,869
Allowance for loan losses		19		16			25			62			22		165			-			39			348

(a) Includes $1,971 million of domestic overdrafts, $13,144 million of margin loans and $849 million of other loans at March 31, 2012.

Allowance for credit losses activity for the quarter ended June 30, 2011													Wealth
(in millions)	Commercial			Commercial real estate			Financial institutions			Lease financing			management loans and mortgages		Other residential mortgages			All Other (a)			Foreign			Total
Beginning balance	$	100		$	34		$	17		$	93		$	29	$	213		$	2		$	66		$	554
Charge-offs		(4	)		(1	)		(1	)		-			-		(9	)		-			(6	)		(21	)
Recoveries		1			-			1			-			-		-			-			-			2
Net (charge-offs) recoveries		(3	)		(1	)		-			-			-		(9	)		-			(6	)		(19	)
Provision		(1	)		(6	)		7			(2	)		2		(4	)		(2	)		6			-
Ending balance	$	96		$	27		$	24		$	91		$	31	$	200		$	-		$	66		$	535
Allowance for:
Loans losses	$	42		$	21		$	4		$	91		$	25	$	200		$	-		$	58		$	441
Unfunded commitments		54			6			20			-			6		-			-			8			94
Individually evaluated for impairment:
Loan balance	$	31		$	28		$	3		$	-		$	28	$	-		$	-		$	13		$	103
Allowance for loan losses		13			3			-			-			5		-			-			6			27
Collectively evaluated for impairment:
Loan balance	$	823		$	1,443		$	5,506		$	1,562		$	6,790	$	2,080		$	14,746	(a)	$	9,094		$	42,044
Allowance for loan losses		29			18			4			91			20		200			-			52			414

(a) Includes $4,629 million of domestic overdrafts, $9,520 million of margin loans and $597 million of other loans at June 30, 2011.

Allowance for credit losses activity for the six months ended June 30, 2012												Wealth
(in millions)	Commercial		Commercial real estate			Financial institutions			Lease financing			management loans and mortgages			Other residential mortgages			All Other		Foreign			Total
Beginning balance	$	91	$	34		$	63		$	66		$	29		$	156		$	-	$	58		$	497
Charge-offs		-		-			(4	)		-			-			(16	)		-		-			(20	)
Recoveries		1		-			-			-			-			3			-		-			4
Net (charge-offs) recoveries		1		-			(4	)		-			-			(13	)		-		-			(16	)
Provision		11		(1	)		(20	)		(10	)		(3	)		10			-		(1	)		(14	)
Ending balance	$	103	$	33		$	39		$	56		$	26		$	153		$	-	$	57		$	467

Allowance for credit losses activity for the six months ended June 30, 2011												Wealth
(in millions)	Commercial			Commercial real estate			Financial institutions			Lease financing		management loans and mortgages			Other residential mortgages			All Other			Foreign			Total
Beginning balance	$	93		$	40		$	11		$	90	$	41		$	235		$	1		$	60		$	571
Charge-offs		(4	)		(4	)		(1	)		-		-			(25	)		-			(6	)		(40	)
Recoveries		2			-			2			-		-			-			-			-			4
Net (charge-offs) recoveries		(2	)		(4	)		1			-		-			(25	)		-			(6	)		(36	)
Provision		5			(9	)		12			1		(10	)		(10	)		(1	)		12			-
Ending balance	$	96		$	27		$	24		$	91	$	31		$	200		$	-		$	66		$	535

Nonperforming Assets

The table below sets forth information about our nonperforming assets.

Nonperforming assets (in millions)	June 30, 2012		March 31, 2012		Dec. 31, 2011
Loans:
Other residential mortgages	$	177	$	188	$	203
Wealth management		35		35		32
Commercial		31		32		21
Commercial real estate		30		39		40
Foreign		9		10		10
Financial institutions		3		14		23
Total nonperforming loans	$	285	$	318	$	329
Other assets owned		9		13		12
Total nonperforming assets (a)	$	294	$	331	$	341

(a) Loans of consolidated investment management funds are not part of BNY Mellon’s loan portfolio. Included in these loans are nonperforming loans of $155 million at June 30, 2012, $180 million at March 31, 2012 and $101 million at Dec. 31, 2011. These loans are recorded at fair value and therefore do not impact the provision for credit losses and allowance for loan losses, and accordingly are excluded from the nonperforming assets table above.

Lost Interest

Lost interest (in millions)	2Q12		1Q12		2Q11		YTD12		YTD11
Amount by which interest income recognized on nonperforming loans exceeded reversals	$	1	$	-	$	1	$	2	$	1
Amount by which interest income would have increased if nonperforming loans at period-end had been performing for the entire year	$	5	$	5	$	5	$	10	$	10

Information about Impaired Loans

The table below sets forth information about our impaired loans. We use the discounted cash flow method as the primary method for valuing impaired loans.

Impaired loans	Quarter ended
	June 30, 2012				March 31, 2012				June 30, 2011
(in millions)	Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
Impaired loans with an allowance:
Commercial	$	64	$	1	$	46	$	1	$	28	$	-
Commercial real estate		31		-		35		-		18		-
Financial institutions		6		-		16		-		4		-
Wealth management loans and mortgages		28		-		28		-		39		1
Foreign		10		-		10		-		10		-
Total impaired loans with an allowance		139		1		135		1		99		1
Impaired loans without an allowance:
Commercial		-		-		-		-		2		-
Commercial real estate		3		-		3		-		14		-
Financial institutions		2		-		3		-		-		-
Wealth management loans and mortgages		3		-		3		-		2		-
Total impaired loans without an allowance (a)		8		-		9		-		18		-
Total impaired loans	$	147	$	1	$	144	$	1	$	117	$	1

(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.

Impaired loans	Year-to-date
	June 30, 2012				June 30, 2011
(in millions)	Average recorded investment		Interest income recognized		Average recorded Investment		Interest income recognized
Impaired loans with an allowance:
Commercial	$	51	$	2	$	28	$	-
Commercial real estate		32		-		21		-
Financial institutions		11		-		4		-
Wealth management loans and mortgages		28		-		43		1
Foreign		10		-		9		-
Total impaired loans with an allowance		132		2		105		1
Impaired loans without an allowance:
Commercial		-		-		2		-
Commercial real estate		3		-		16		-
Financial institutions		2		-		-		-
Wealth management loans and mortgages		3		-		1		-
Total impaired loans without an allowance (a)		8		-		19		-
Total impaired loans	$	140	$	2	$	124	$	1

(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.

Impaired loans	June 30, 2012						Dec. 31, 2011
(in millions)	Recorded investment		Unpaid principal balance		Related allowance (a)		Recorded investment		Unpaid principal balance		Related allowance (a)
Impaired loans with an allowance:
Commercial (a)	$	62	$	66	$	16	$	26	$	31	$	9
Commercial real estate		27		28		6		35		41		7
Financial institutions		1		1		-		21		21		7
Wealth management loans and mortgages		28		28		7		27		27		5
Foreign		9		17		5		10		18		4
Total impaired loans with an allowance		127		140		34		119		138		32
Impaired loans without an allowance:
Commercial		-		-		N/A		-		-		N/A
Commercial real estate		2		2		N/A		3		3		N/A
Financial institutions		2		9		N/A		3		9		N/A
Wealth management loans and mortgages		3		3		N/A		3		3		N/A
Total impaired loans without an allowance (b)		7		14		N/A		9		15		N/A
Total impaired loans (c)	$	134	$	154	$	34	$	128	$	153	$	32

(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 $2 million of impaired loans in amounts individually less than $1 million at both June 30, 2012 and Dec. 31, 2011. The allowance for loan loss associated with these loans totaled less than $1 million at both June 30, 2012 and Dec. 31, 2011.

N/A –  Not applicable.

Information about Past Due Loans

The table below sets forth information about our past due loans.

Past due loans and still accruing	June 30, 2012								Dec. 31, 2011
	Days past due						Total		Days past due						Total
(in millions)	30-59		60-89		>90		past due		30-59		60-89		>90		past due
Domestic:
Wealth management loans and mortgages	$	49	$	21	$	-	$	70	$	89	$	3	$	-	$	92
Other residential mortgages		31		6		11		48		36		10		13		59
Financial institutions		19		-		-		19		36		-		-		36
Commercial		-		-		-		-		60		7		-		67
Commercial real estate		7		1		-		8		47		9		-		56
Total domestic		106		28		11		145		268		29		13		310
Foreign		-		-		-		-		-		-		-		-
Total past due loans	$	106	$	28	$	11	$	145	$	268	$	29	$	13	$	310

Troubled Debt Restructurings

The following table presents TDRs that occurred during the second quarter of 2012.

TDRs during the second quarter of 2012
			Outstanding recorded investment
(dollars in millions)	Number of contracts		Pre- modification		Post- modification
Other residential mortgages		52	$	15	$	16
Commercial		1		4		4
Total TDRs		53	$	19	$	20

Credit Quality Indicators - Commercial Portfolio - Credit Risk Profile by Creditworthiness Category

The following tables set forth information about credit quality indicators.

Commercial loan portfolio

Commercial loan portfolio—Credit risk profile by creditworthiness category
	Commercial				Commercial real estate				Financial institutions
(in millions)	June 30, 2012		Dec. 31, 2011		June 30, 2012		Dec. 31, 2011		June 30, 2012		Dec. 31, 2011
Investment grade	$	1,018	$	906	$	1,113	$	1,062	$	8,899	$	9,643
Non investment grade		369		374		482		387		1,617		1,501
Total	$	1,387	$	1,280	$	1,595	$	1,449	$	10,516	$	11,144

Credit Quality Indicators - Wealth Management Loans and Mortgages - Credit Risk Profile by Internally Assigned Grade

Wealth management loans and mortgages

Wealth management loans and mortgages – Credit risk profile by internally assigned grade
(in millions)	June 30, 2012		Dec. 31, 2011
Wealth management loans:
Investment grade	$	3,905	$	3,450
Noninvestment grade		109		111
Wealth management mortgages		3,902		3,781
Total	$	7,916	$	7,342