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Loans and Asset Quality (Tables)
 9 Months Ended
Sep. 30, 2013
Receivables [Abstract]  
Loan Portfolio
The table below provides the details of our loan distribution and industry concentrations of credit risk at Sept. 30, 2013 and Dec. 31, 2012.

Loans
Sept. 30, 2013

 
Dec. 31, 2012

(in millions)
 
Domestic:
 
 
 
Financial institutions
$
3,725

 
$
5,455

Commercial
1,544

 
1,306

Wealth management loans and mortgages
9,381

 
8,796

Commercial real estate
1,970

 
1,677

Lease financings (a)
1,278

 
1,329

Other residential mortgages
1,433

 
1,632

Overdrafts
1,487

 
2,228

Other
701

 
639

Margin loans
15,146

 
13,397

Total domestic
36,665

 
36,459

Foreign:
 
 
 
Financial institutions
8,950

 
5,833

Commercial
100

 
111

Wealth management loans and mortgages
63

 
68

Commercial real estate
17

 
63

Lease financings (a)
954

 
1,025

Other (primarily overdrafts)
3,389

 
3,070

Total foreign
13,473

 
10,170

Total loans
$
50,138

 
$
46,629

(a)
Net of unearned income on domestic and foreign lease financings of $1,041 million at Sept. 30, 2013 and $1,135 million at Dec. 31, 2012.
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 Sept. 30, 2013
Wealth
management
loans and
mortgages

Other residential mortgages

 
 
 
 
(in millions)
Commercial

Commercial
real estate

Financial
institutions

Lease
financings

All
Other

 
Foreign

Total

Beginning balance
$
93

$
30

$
34

$
41

$
19

$
75

$
—

 
$
45

$
337

Charge-offs
(1
)
—

—

—

—

(1
)
—

 
—

(2
)
Recoveries
—

—

—

—

—

1

—

 
1

2

Net (charge-offs) recoveries
(1
)
—

—

—

—

—

—

 
1

—

Provision
(1
)
2

7

(2
)
(1
)
(5
)
—

 
2

2

Ending balance
$
91

$
32

$
41

$
39

$
18

$
70

$
—

 
$
48

$
339

Allowance for:
 
 
 
 
 
 
 
 
 
 
Loans losses
$
17

$
19

$
7

$
39

$
14

$
70

$
—

 
$
40

$
206

Unfunded commitments
74

13

34

—

4

—

—

 
8

133

Individually evaluated for impairment:
 
 
 
 
 
 
 
 
 
 
Loan balance
$
15

$
3

$
1

$
—

$
13

$
—

$
—

 
$
9

$
41

Allowance for loan losses
3

1

—

—

3

—

—

 
4

11

Collectively evaluated for impairment:
 
 
 
 
 
 
 
 
 
 
Loan balance
$
1,529

$
1,967

$
3,724

$
1,278

$
9,368

$
1,433

$
17,334

(a)
$
13,464

$
50,097

Allowance for loan losses
14

18

7

39

11

70

—

 
36

195

(a)
Includes $1,487 million of domestic overdrafts, $15,146 million of margin loans and $701 million of other loans at Sept. 30, 2013.


Allowance for credit losses activity for the quarter ended June 30, 2013
Wealth
management
loans and
mortgages

Other residential mortgages

 
 
 
 
(in millions)
Commercial

Commercial
real estate

Financial
institutions

Lease
financings

All
Other

 
Foreign

Total

Beginning balance
$
97

$
31

$
33

$
39

$
29

$
81

$
2


$
46

$
358

Charge-offs
—

—

—

—

—

(3
)
—


—

(3
)
Recoveries
—

—

—

—

—

1

—


—

1

Net (charge-offs)
—

—

—

—

—

(2
)
—


—

(2
)
Provision
(4
)
(1
)
1

2

(10
)
(4
)
(2
)
 
(1
)
(19
)
Ending balance
$
93

$
30

$
34

$
41

$
19

$
75

$
—


$
45

$
337

Allowance for:
 
 
 
 
 
 
 
 
 
 
Loans losses
$
19

$
18

$
7

$
41

$
15

$
75

$
—


$
37

$
212

Unfunded commitments
74

12

27

—

4

—

—


8

125

Individually evaluated for impairment:
 
 
 
 
 
 
 
 
 
 
Loan balance
$
54

$
15

$
2

$
—

$
14

$
—

$
—


$
9

$
94

Allowance for loan losses
3

1

—

—

3

—

—


4

11

Collectively evaluated for impairment:
 
 
 
 
 
 
 
 
 
 
Loan balance
$
1,457

$
2,060

$
3,944

$
1,282

$
9,176

$
1,505

$
16,853

(a)
$
13,936

$
50,213

Allowance for loan losses
16

17

7

41

12

75

—


33

201

(a)
Includes $1,762 million of domestic overdrafts, $14,434 million of margin loans and $657 million of other loans at June 30, 2013.


Allowance for credit losses activity for the quarter ended Sept. 30, 2012
Wealth
management
loans and
mortgages

Other
residential
mortgages

All
Other

 
Foreign

Total

(in millions)
Commercial

Commercial
real estate

Financial
institutions

Lease
financings

 
Beginning balance
$
103

$
33

$
39

$
56

$
26

$
153

$
—


$
57

$
467

Charge-offs
(1
)
—

(4
)
—

—

(3
)
—


—

(8
)
Recoveries
—

—

—

—

—

2

—


—

2

Net (charge-offs)
(1
)
—

(4
)
—

—

(1
)
—


—

(6
)
Provision
(4
)
2

2

(1
)
7

(11
)
2


(2
)
(5
)
Ending balance
$
98

$
35

$
37

$
55

$
33

$
141

$
2


$
55

$
456

Allowance for:
 
 
 
 
 
 
 
 
 
 
Loans losses
$
32

$
26

$
11

$
55

$
28

$
141

$
1


$
45

$
339

Unfunded commitments
66

9

26

—

5

—

1


10

117

Individually evaluated for impairment:
 
 
 
 
 
 
 
 
 
 
Loan balance
$
60

$
28

$
3

$
—

$
38

$
—

$
—


$
9

$
138

Allowance for loan losses
12

5

—

—

7

—

—


4

28

Collectively evaluated for impairment:
 
 
 
 
 
 
 
 
 
 
Loan balance
$
727

$
1,652

$
4,439

$
1,444

$
8,177

$
1,701

$
15,791

(a)
$
11,820

$
45,751

Allowance for loan losses
20

21

11

55

21

141

1


41

311

(a)
Includes $2,070 million of domestic overdrafts, $13,036 million of margin loans and $685 million of other loans at Sept. 30, 2012.


Allowance for credit losses activity for the nine months ended Sept. 30, 2013
Wealth
management
loans and
mortgages

Other
residential
mortgages

All
Other

 
Foreign

Total

(in millions)
Commercial

Commercial
real estate

Financial
institutions

Lease
financings

 
Beginning balance
$
104

$
30

$
36

$
49

$
30

$
88

$
2

 
$
48

$
387

Charge-offs
(3
)
—

—

—

—

(7
)
—

 
—

(10
)
Recoveries
—

—

—

—

—

2

—

 
1

3

Net (charge-offs)
(3
)
—

—

—

—

(5
)
—

 
1

(7
)
Provision
(10
)
2

5

(10
)
(12
)
(13
)
(2
)
 
(1
)
(41
)
Ending balance
$
91

$
32

$
41

$
39

$
18

$
70

$
—

 
$
48

$
339



Allowance for credit losses activity for the nine months ended Sept. 30, 2012
Wealth
management
loans and
mortgages

Other
residential
mortgages

All
Other

 
Foreign

Total

(in millions)
Commercial

Commercial
real estate

Financial
institutions

Lease
financings

 
Beginning balance
$
91

$
34

$
63

$
66

$
29

$
156

$
—

 
$
58

$
497

Charge-offs
(1
)
—

(8
)
—

—

(19
)
—

 
—

(28
)
Recoveries
1

—

—

—

—

5

—

 
—

6

Net (charge-offs)
—

—

(8
)
—

—

(14
)
—

 
—

(22
)
Provision
7

1

(18
)
(11
)
4

(1
)
2

 
(3
)
(19
)
Ending balance
$
98

$
35

$
37

$
55

$
33

$
141

$
2

 
$
55

$
456
Nonperforming Assets
The table below presents the distribution of our nonperforming assets. 

Nonperforming assets
Sept. 30, 2013

 
Dec. 31, 2012

(in millions)
 
Nonperforming loans:
 
 
 
Other residential mortgages
$
128

 
$
158

Commercial
15

 
27

Wealth management loans and mortgages
12

 
30

Foreign loans
9

 
9

Commercial real estate
4

 
18

Financial institutions
1

 
3

Total nonperforming loans
169

 
245

Other assets owned
3

 
4

Total nonperforming assets (a)
$
172

 
$
249

(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 $31 million at Sept. 30, 2013 and $174 million at Dec. 31, 2012. 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
3Q13

2Q13

3Q12

YTD13

YTD12

(in millions)
Amount by which interest income recognized on nonperforming loans exceeded reversals
$
1

$
1

$
2

$
1

$
3

Amount by which interest income would have increased if nonperforming loans at period-end had been performing for the entire period
$
3

$
3

$
3

$
8

$
12
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
 
Sept. 30, 2013
 
June 30, 2013
 
Sept. 30, 2012
(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
$
30

 
$
—

 
$
50

 
$
1

 
$
61

 
$
1

Commercial real estate
2

 
—

 
2

 
—

 
26

 
—

Financial institutions
—

 
—

 
1

 
—

 
1

 
—

Wealth management loans and mortgages
10

 
—

 
19

 
—

 
28

 
—

Foreign
9

 
—

 
9

 
—

 
9

 
—

Total impaired loans with an allowance
51

 
—

 
81

 
1

 
125

 
1

Impaired loans without an allowance:
 
 
 
 
 
 
 
 
 
 
 
Commercial
4

 
—

 
4

 
—

 
—

 
—

Commercial real estate
7

 
—

 
13

 
—

 
2

 
—

Financial institutions
2

 
—

 
2

 
—

 
2

 
—

Wealth management loans and mortgages
4

 
—

 
4

 
—

 
6

 
—

Total impaired loans without an allowance (a)
17

 
—

 
23

 
—

 
10

 
—

Total impaired loans
$
68

 
$
—

 
$
104

 
$
1

 
$
135

 
$
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
 
Sept. 30, 2013
 
Sept. 30, 2012
(in millions)
Average
recorded
investment

 
Interest
income
recognized

 
Average
recorded
investment

 
Interest
income
recognized

Impaired loans with an allowance:
 
 
 
 
 
 
 
Commercial
$
43

 
$
1

 
$
53

 
$
3

Commercial real estate
6

 
—

 
31

 
—

Financial institutions
—

 
—

 
9

 
—

Wealth management loans and mortgages
18

 
—

 
28

 
—

Foreign
9

 
—

 
10

 
—

Total impaired loans with an allowance
76

 
1

 
131

 
3

Impaired loans without an allowance:
 
 
 
 
 
 
 
Commercial
2

 
—

 
—

 
—

Commercial real estate
7

 
—

 
3

 
—

Financial institutions
2

 
—

 
2

 
—

Wealth management loans and mortgages
4

 
—

 
4

 
—

Total impaired loans without an allowance (a)
15

 
—

 
9

 
—

Total impaired loans
$
91

 
$
1

 
$
140

 
$
3

(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
Sept. 30, 2013
 
Dec. 31, 2012
(in millions)
Recorded
investment

 
Unpaid
principal
balance

 
Related
allowance (a)

 
Recorded
investment

 
Unpaid
principal
balance

 
Related
allowance (a)

Impaired loans with an allowance:
 
 
 
 
 
 
 
 
 
 
 
Commercial
$
15

 
$
19

 
$
3

 
$
57

 
$
61

 
$
12

Commercial real estate
2

 
3

 
1

 
15

 
16

 
1

Financial institutions
—

 
—

 
—

 
1

 
1

 
—

Wealth management loans and mortgages
10

 
10

 
3

 
28

 
28

 
7

Foreign
9

 
17

 
4

 
9

 
17

 
4

Total impaired loans with an allowance
36

 
49

 
11

 
110

 
123

 
24

Impaired loans without an allowance:
 
 
 
 
 
 
 
 
 
 
 
Commercial
—

 
—

 
N/A

 
—

 
—

 
N/A

Commercial real estate
1

 
2

 
N/A

 
2

 
2

 
N/A

Financial institutions
1

 
7

 
N/A

 
1

 
8

 
N/A

Wealth management loans and mortgages
3

 
3

 
N/A

 
4

 
4

 
N/A

Total impaired loans without an allowance (b)
5

 
12

 
N/A

 
7

 
14

 
N/A

Total impaired loans (c)
$
41

 
$
61

 
$
11

 
$
117

 
$
137

 
$
24

(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 $1 million and $2 million of impaired loans in amounts individually less than $1 million at Sept. 30, 2013 and Dec. 31, 2012, respectively. The allowance for loan loss associated with these loans totaled less than $1 million at both Sept. 30, 2013 and Dec. 31, 2012.
Information about Past Due Loans
The table below sets forth information about our past due loans. 

Past due loans and still accruing interest
Sept. 30, 2013
 
Dec. 31, 2012
 
Days past due
Total
past due

 
Days past due
Total
past due

(in millions)
30-59

60-89

>90

30-59

60-89

>90

Domestic:
 
 
 
 
 
 
 
 
 
Commercial real estate
$
28

$
3

$
—

$
31

 
$
44

$
—

$
—

$
44

Wealth management loans and mortgages
23

3

6

32

 
33

7

1

41

Commercial
—

—

—

—

 
—

60

—

60

Other residential mortgages
24

4

7

35

 
50

9

5

64

Total domestic
75

10

13

98

 
127

76

6

209

Foreign
—

—

—

—

 
—

—

—

—

Total past due loans
$
75

$
10

$
13

$
98

 
$
127

$
76

$
6

$
209
Troubled Debt Restructurings
The following table presents TDRs that occurred in the third quarter of 2013, second quarter of 2013 and the third quarter of 2012.

TDRs
3Q13
 
2Q13
 
3Q12
 
 
Outstanding
recorded investment
 
 
Outstanding
recorded investment
 
 
Outstanding
recorded investment
(dollars in millions)
Number of contracts

Pre-modification

Post-modification

 
Number of contracts

Pre-modification

Post-modification

 
Number of contracts

Pre-modification

Post-modification

Other residential mortgages
34

$
8

$
9

 
28

$
5

$
7

 
48

$
14

$
14

Wealth management loans and mortgages
—

—

—

 
—

—

—

 
4

2

2

Total TDRs
34

$
8

$
9

 
28

$
5

$
7

 
52

$
16

$
16
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)
Sept. 30, 2013

 
Dec. 31, 2012

 
Sept. 30, 2013

 
Dec. 31, 2012

 
Sept. 30, 2013

 
Dec 31,
2012

Investment grade
$
1,287

 
$
1,064

 
$
1,514

 
$
1,289

 
$
11,003

 
$
9,935

Noninvestment grade
357

 
353

 
473

 
451

 
1,672

 
1,353

Total
$
1,644

 
$
1,417

 
$
1,987

 
$
1,740

 
$
12,675

 
$
11,288
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)
Sept. 30, 2013

 
Dec. 31, 2012

Wealth management loans:
 
 
 
Investment grade
$
4,687

 
$
4,597

Noninvestment grade
63

 
125

Wealth management mortgages
4,694

 
4,142

Total
$
9,444

 
$
8,864