Loans and asset quality (Tables)

12 Months Ended

Dec. 31, 2015

The table below provides the details of our loan portfolio and industry concentrations of credit risk at Dec. 31, 2015 and 2014.



Loans	Dec. 31,
(in millions)	2015		2014
Domestic:
Financial institutions	$	6,640	$	5,603
Commercial	2,115		1,390
Wealth management loans and mortgages	13,247		11,095
Commercial real estate	3,899		2,524
Lease financings	1,007		1,282
Other residential mortgages	1,055		1,222
Overdrafts	911		1,348
Other	1,137		1,113
Margin loans	19,340		20,034
Total domestic	49,351		45,611
Foreign:
Financial institutions	9,259		7,716
Commercial	227		252
Wealth management loans and mortgages	100		89
Commercial real estate	46		6
Lease financings	850		889
Other (primarily overdrafts)	3,637		4,569
Margin loans	233		—
Total foreign	14,352		13,521
Total loans (a)	$	63,703	$	59,132


(a)	Net of unearned income of $674 million at Dec. 31, 2015 and $866 million at Dec. 31, 2014 primarily on domestic and foreign lease financings.

Allowance for Credit Losses Activity

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



Allowance for credit losses activity for the year ended Dec. 31, 2015											Wealth management loans and mortgages			Other residential mortgages
(in millions)	Commercial		Commercial real estate		Financial institutions			Lease financings			Wealth management loans and mortgages			Other residential mortgages			All Other			Foreign			Total
Beginning balance	$	60	$	50	$	31		$	32		$	22		$	41		$	—		$	44		$	280
Charge-offs	—		—		(170		)	—			—			(2		)	—			—			(172		)
Recoveries	—		—		1			—			—			6			—			—			7
Net (charge-offs) recoveries	—		—		(169		)	—			—			4			—			—			(165		)
Provision	22		9		169			(17		)	(3		)	(11		)	—			(9		)	160
Ending balance	$	82	$	59	$	31		$	15		$	19		$	34		$	—		$	35		$	275
Allowance for:
Loan losses	$	24	$	37	$	9		$	15		$	15		$	34		$	—		$	23		$	157
Lending-related commitments	58		22		22			—			4			—			—			12			118
Individually evaluated for impairment:
Loan balance	$	—	$	1	$	171		$	—		$	8		$	—		$	—		$	—		$	180
Allowance for loan losses	—		1		—			—			1			—			—			—			2
Collectively evaluated for impairment:
Loan balance	$	2,115	$	3,496	$	6,469		$	1,007		$	13,239		$	1,035		$	21,388	(a)	$	14,352		$	63,101
Allowance for loan losses	24		36		9			15			14			34			—			23			155


(a)	Includes $911 million of domestic overdrafts, $19,340 million of margin loans and $1,137 million of other loans at Dec. 31, 2015.



Allowance for credit losses activity for the year ended Dec. 31, 2014													Wealth management loans and mortgages			Other residential mortgages
(in millions)	Commercial			Commercial real estate			Financial institutions			Lease financings			Wealth management loans and mortgages			Other residential mortgages			All Other			Foreign			Total
Beginning balance	$	83		$	41		$	49		$	37		$	24		$	54		$	—		$	56		$	344
Charge-offs	(12		)	(2		)	—			—			(1		)	(2		)	—			(3		)	(20		)
Recoveries	1			—			1			—			—			2			—			—			4
Net (charge-offs) recoveries	(11		)	(2		)	1			—			(1		)	—			—			(3		)	(16		)
Provision	(12		)	11			(19		)	(5		)	(1		)	(13		)	—			(9		)	(48		)
Ending balance	$	60		$	50		$	31		$	32		$	22		$	41		$	—		$	44		$	280
Allowance for:
Loan losses	$	17		$	32		$	17		$	32		$	17		$	41		$	—		$	35		$	191
Lending-related commitments	43			18			14			—			5			—			—			9			89
Individually evaluated for impairment:
Loan balance	$	—		$	—		$	—		$	—		$	8		$	—		$	—		$	—		$	8
Allowance for loan losses	—			—			—			—			1			—			—			—			1
Collectively evaluated for impairment:
Loan balance	$	1,390		$	2,503		$	5,603		$	1,282		$	11,087		$	1,222		$	22,495	(a)	$	13,521		$	59,103
Allowance for loan losses	17			32			17			32			16			41			—			35			190


(a)	Includes $1,348 million of domestic overdrafts, $20,034 million of margin loans and $1,113 million of other loans at Dec. 31, 2014.



Allowance for credit losses activity for the year ended Dec. 31, 2013												Wealth management loans and mortgages			Other residential mortgages			All Other				Foreign			Total
(in millions)	Commercial			Commercial real estate			Financial institutions		Lease financings			Wealth management loans and mortgages			Other residential mortgages			All Other				Foreign			Total
Beginning balance	$	104		$	30		$	36	$	49		$	30		$	88		$	2			$	48		$	387
Charge-offs	(4		)	(1		)	—		—			(1		)	(8		)	—				(3		)	(17		)
Recoveries	1			—			4		—			—			4			—				—			9
Net (charge-offs)	(3		)	(1		)	4		—			(1		)	(4		)	—				(3		)	(8		)
Provision	(18		)	12			9		(12		)	(5		)	(30		)	(2		)		11			(35		)
Ending balance	$	83		$	41		$	49	$	37		$	24		$	54		$	—			$	56		$	344
Allowance for:
Loan losses	$	21		$	21		$	10	$	37		$	19		$	54		$	—			$	48		$	210
Lending-related commitments	62			20			39		—			5			—			—				8			134
Individually evaluated for impairment:
Loan balance	$	15		$	3		$	—	$	—		$	12		$	—		$	—			$	6		$	36
Allowance for loan losses	2			1			—		—			3			—			—				1			7
Collectively evaluated for impairment:
Loan balance	$	1,519		$	1,998		$	4,511	$	1,322		$	9,731		$	1,385		$	17,734		(a)	$	13,421		$	51,621
Allowance for loan losses	19			20			10		37			16			54			—				47			203


(a)	Includes $1,314 million of domestic overdrafts, $15,652 million of margin loans and $768 million of other loans at Dec. 31, 2013.

Nonperforming Assets

The table below presents the distribution of our nonperforming assets.



Nonperforming assets (in millions)	Dec. 31, 2015		Dec. 31, 2014
Nonperforming assets (in millions)	Dec. 31, 2015		Dec. 31, 2014
Nonperforming loans:
Financial institutions	$	171	$	—
Other residential mortgages	102		112
Wealth management loans and mortgages	11		12
Commercial real estate	2		1
Total nonperforming loans	286		125
Other assets owned	6		3
Total nonperforming assets (a)	$	292	$	128

(a)

Loans of consolidated investment management funds are not part of BNY Mellon’s loan portfolio. Included in the loans of consolidated investment management funds are nonperforming loans of $53 million at Dec. 31, 2014. 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. In the second quarter of 2015, BNY Mellon adopted the new accounting guidance included in ASU 2015-02, Consolidations. As a result, we deconsolidated substantially all of the loans of consolidated investment management funds retrospectively to Jan. 1, 2015.

Lost Interest

The table below presents the amount of lost interest income.



Lost interest
(in millions)	2015		2014		2013
Amount by which interest income recognized on nonperforming loans exceeded reversals
Total	$	—	$	1	$	2
Foreign	—		—		—
Amount by which interest income would have increased if nonperforming loans at year-end had been performing for the entire year
Total	$	6	$	7	$	9
Foreign	—		—		—

Information about Impaired Loans

The tables below provide information about our impaired loans. We use the discounted cash flow method as the primary method for valuing impaired loans.



Impaired loans	2015				2014				2013
(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	$	—	$	—	$	11	$	—	$	37	$	1
Commercial real estate	1		—		2		—		5		—
Financial institutions	—		—		—		—		1		—
Wealth management loans and mortgages	6		—		8		—		17		—
Foreign	—		—		3		—		8		—
Total impaired loans with an allowance	7		—		24		—		68		1
Impaired loans without an allowance:
Commercial	—		—		—		—		2		—
Commercial real estate	—		—		1		—		6		—
Financial institutions	—		—		—		—		1		—
Wealth management loans and mortgages	2		—		2		—		3		—
Total impaired loans without an allowance (a)	2		—		3		—		12		—
Total impaired loans	$	9	$	—	$	27	$	—	$	80	$	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	Dec. 31, 2015						Dec. 31, 2014
(in millions)	Recorded investment		Unpaid principal balance		Related allowance (a)		Recorded investment		Unpaid principal balance		Related allowance (a)
Impaired loans with an allowance:
Wealth management loans and mortgages	$	6	$	7	$	1	$	6	$	6	$	1
Commercial real estate	1		3		1		—		—		—
Total impaired loans with an allowance	7		10		2		6		6		1
Impaired loans without an allowance:
Financial institutions	171		312		N/A		—		—		N/A
Wealth management loans and mortgages	2		2		N/A		2		2		N/A
Commercial real estate	—		—		N/A		1		3		N/A
Total impaired loans without an allowance (b)	173		314		N/A		3		5		N/A
Total impaired loans (c)	$	180	$	324	$	2	$	9	$	11	$	1


(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 and less than $1 million of impaired loans in amounts individually less than $1 million at Dec. 31, 2015 and Dec. 31, 2014, respectively. The allowance for loan loss associated with these loans totaled less than $1 million at both Dec. 31, 2015 and Dec. 31, 2014.

Information about Past Due Loans

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



Past due loans and still accruing interest	Dec. 31, 2015								Dec. 31, 2014
	Days past due						Total past due		Days past due						Total past due
(in millions)	30-59		60-89		>90		Total past due		30-59		60-89		>90		Total past due
Commercial real estate	$	57	$	11	$	—	$	68	$	79	$	—	$	—	$	79
Wealth management loans and mortgages	69		2		1		72		45		—		1		46
Other residential mortgages	22		5		4		31		23		3		5		31
Total past due loans	$	148	$	18	$	5	$	171	$	147	$	3	$	6	$	156

Troubled Debt Restructurings

The following table presents TDRs that occurred in 2015 and 2014.



TDRs	2015							2014
		Outstanding recorded investment							Outstanding recorded investment
(dollars in millions)	Number of contracts	Pre-modification			Post-modification			Number of contracts	Pre-modification			Post-modification
Other residential mortgages	68		$	13		$	16	108		$	17		$	20
Wealth management loans and mortgages	4		—			—		1		—			—
Foreign	—		—			—		1		5			4
Total TDRs	72		$	13		$	16	110		$	22		$	24

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)	Dec. 31, 2015		Dec. 31, 2014		Dec. 31, 2015		Dec. 31, 2014		Dec. 31, 2015		Dec. 31, 2014
Investment grade	$	2,026	$	1,381	$	2,678	$	1,641	$	13,965	$	11,576
Non-investment grade	316		261		1,267		889		1,934		1,743
Total	$	2,342	$	1,642	$	3,945	$	2,530	$	15,899	$	13,319

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)	Dec. 31, 2015		Dec. 31, 2014
Wealth management loans:
Investment grade	$	6,529	$	5,621
Non-investment grade	171		29
Wealth management mortgages	6,647		5,534
Total	$	13,347	$	11,184