Loans and Asset Quality (Tables)

3 Months Ended

Mar. 31, 2014

The table below provides the details of our loan portfolio and industry concentrations of credit risk at March 31, 2014 and Dec. 31, 2013.



Loans	March 31, 2014		Dec. 31, 2013
(in millions)	March 31, 2014		Dec. 31, 2013
Domestic:
Financial institutions	$	4,492	$	4,511
Commercial	1,754		1,534
Wealth management loans and mortgages	9,922		9,743
Commercial real estate	2,128		2,001
Lease financings (a)	1,308		1,322
Other residential mortgages	1,346		1,385
Overdrafts	1,078		1,314
Other	788		768
Margin loans	16,430		15,652
Total domestic	39,246		38,230
Foreign:
Financial institutions	9,084		9,848
Commercial	205		113
Wealth management loans and mortgages	82		75
Commercial real estate	17		9
Lease financings (a)	860		945
Other (primarily overdrafts)	4,542		2,437
Total foreign	14,790		13,427
Total loans	$	54,036	$	51,657


(a)	Net of unearned income on domestic and foreign lease financings of $934 million at March 31, 2014 and $1,020 million at Dec. 31, 2013.

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 March 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	—			—		—			—			—			(1		)	—			—			(1		)
Recoveries	—			—		—			—			—			1			—			—			1
Net (charge-offs) recoveries	—			—		—			—			—			—			—			—			—
Provision	(4		)	1		(1		)	(2		)	(1		)	(4		)	—			(7		)	(18		)
Ending balance	$	79		$	42	$	48		$	35		$	23		$	50		$	—		$	49		$	326
Allowance for:
Loan losses	$	20		$	23	$	9		$	35		$	18		$	50		$	—		$	43		$	198
Lending-related commitments	59			19		39			—			5			—			—			6			128
Individually evaluated for impairment:
Loan balance	$	13		$	3	$	—		$	—		$	10		$	—		$	—		$	7		$	33
Allowance for loan losses	3			1		—			—			2			—			—			2			8
Collectively evaluated for impairment:
Loan balance	$	1,741		$	2,125	$	4,492		$	1,308		$	9,912		$	1,346		$	18,296	(a)	$	14,783		$	54,003
Allowance for loan losses	17			22		9			35			16			50			—			41			190


(a)	Includes $1,078 million of domestic overdrafts, $16,430 million of margin loans and $788 million of other loans at March 31, 2014.



Allowance for credit losses activity for the quarter ended Dec. 31, 2013											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	$	91		$	32	$	41	$	39		$	18	$	70		$	—		$	48		$	339
Charge-offs	(1		)	—		—		—			—		(2		)	—			(3		)	(6		)
Recoveries	—			—		3		—			—		2			—			—			5
Net (charge-offs) recoveries	(1		)	—		3		—			—		—			—			(3		)	(1		)
Provision	(7		)	9		5		(2		)	6		(16		)	—			11			6
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.



Allowance for credit losses activity for the quarter ended March 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	(2		)	—		—			—			—			(3		)	—			—			(5		)
Recoveries	—			—		—			—			—			—			—			—			—
Net (charge-offs)	(2		)	—		—			—			—			(3		)	—			—			(5		)
Provision	(5		)	1		(3		)	(10		)	(1		)	(4		)	—			(2		)	(24		)
Ending balance	$	97		$	31	$	33		$	39		$	29		$	81		$	2		$	46		$	358
Allowance for:
Loan losses	$	22		$	19	$	11		$	39		$	25		$	81		$	2		$	38		$	237
Lending-related commitments	75			12		22			—			4			—			—			8			121
Individually evaluated for impairment:
Loan balance	$	54		$	16	$	3		$	—		$	31		$	—		$	—		$	9		$	113
Allowance for loan losses	7			1		—			—			7			—			—			5			20
Collectively evaluated for impairment:
Loan balance	$	1,297		$	1,806	$	4,917		$	1,295		$	8,888		$	1,570		$	16,658	(a)	$	12,680		$	49,111
Allowance for loan losses	15			18		11			39			18			81			2			33			217


(a)	Includes $2,772 million of domestic overdrafts, $13,242 million of margin loans and $644 million of other loans at March 31, 2013.

Nonperforming Assets

The table below presents the distribution of our nonperforming assets.



Nonperforming assets	March 31, 2014		Dec. 31, 2013
(in millions)	March 31, 2014		Dec. 31, 2013
Nonperforming loans:
Other residential mortgages	$	107	$	117
Commercial	13		15
Wealth management loans and mortgages	12		11
Foreign	7		6
Commercial real estate	4		4
Total nonperforming loans	143		153
Other assets owned	3		3
Total nonperforming assets (a)	$	146	$	156

(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 $74 million at March 31, 2014 and $16 million at Dec. 31, 2013. 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



Lost interest
(in millions)	1Q14		4Q13		1Q13
Amount by which interest income recognized on nonperforming loans exceeded reversals	$	—	$	1	$	1
Amount by which interest income would have increased if nonperforming loans at period-end had been performing for the entire period	$	2	$	2	$	3

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
	March 31, 2014				Dec. 31, 2013				March 31, 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	$	14	$	—	$	15	$	—	$	56	$	1
Commercial real estate	3		—		2		—		9		—
Financial institutions	—		—		—		—		1		—
Wealth management loans and mortgages	9		—		10		—		27		—
Foreign	6		—		7		—		9		—
Total impaired loans with an allowance	32		—		34		—		102		1
Impaired loans without an allowance:
Commercial	—		—		—		—		—		—
Commercial real estate	1		—		1		—		8		—
Financial institutions	—		—		1		—		1		—
Wealth management loans and mortgages	2		—		3		—		4		—
Total impaired loans without an allowance (a)	3		—		5		—		13		—
Total impaired loans	$	35	$	—	$	39	$	—	$	115	$	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	March 31, 2014						Dec. 31, 2013
(in millions)	Recorded investment		Unpaid principal balance		Related allowance (a)		Recorded investment		Unpaid principal balance		Related allowance (a)
Impaired loans with an allowance:
Commercial	$	13	$	13	$	3	$	15	$	20	$	2
Commercial real estate	2		3		1		2		4		1
Financial institutions	—		—		—		—		—		—
Wealth management loans and mortgages	9		9		2		9		9		3
Foreign	7		11		2		6		17		1
Total impaired loans with an allowance	31		36		8		32		50		7
Impaired loans without an allowance:
Commercial real estate	1		2		N/A		1		1		N/A
Financial institutions	—		—		N/A		—		—		N/A
Wealth management loans and mortgages	1		1		N/A		3		3		N/A
Total impaired loans without an allowance (b)	2		3		N/A		4		4		N/A
Total impaired loans (c)	$	33	$	39	$	8	$	36	$	54	$	7


(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 March 31, 2014 and Dec. 31, 2013. The allowance for loan loss associated with these loans totaled less than $1 million at both March 31, 2014 and Dec. 31, 2013.

Information about Past Due Loans

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



Past due loans and still accruing interest	March 31, 2014								Dec. 31, 2013
	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:
Financial institutions (a)	$	—	$	—	$	312	$	312	$	37	$	—	$	—	$	37
Wealth management loans and mortgages	57		—		1		58		45		3		1		49
Commercial real estate	42		—		—		42		22		2		—		24
Other residential mortgages	15		5		7		27		32		6		6		44
Total domestic	114		5		320		439		136		11		7		154
Foreign	—		—		—		—		—		—		—		—
Total past due loans	$	114	$	5	$	320	$	439	$	136	$	11	$	7	$	154


(a)	Past due loans at March 31, 2014 include a loan to an asset manager, Sentinel Management Group, Inc. (“Sentinel”), which was reestablished as a fully collateralized performing loan in the first quarter of 2014.

Troubled Debt Restructurings

The following table presents TDRs that occurred in the first quarter of 2014, fourth quarter of 2013 and first quarter of 2013.



TDRs	1Q14							4Q13							1Q13
			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	31		$	5		$	5	30		$	6		$	8	31		$	5		$	6
Foreign	1		5			4		—		—			—		—		—			—
Total TDRs	32		$	10		$	9	30		$	6		$	8	31		$	5		$	6

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)	March 31, 2014		Dec. 31, 2013		March 31, 2014		Dec. 31, 2013		March 31, 2014		Dec. 31, 2013
Investment grade	$	1,630	$	1,323	$	1,518	$	1,444	$	11,961	$	12,598
Non-investment grade	329		324		627		566		1,615		1,761
Total	$	1,959	$	1,647	$	2,145	$	2,010	$	13,576	$	14,359

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)	March 31, 2014		Dec. 31, 2013
Wealth management loans:
Investment grade	$	5,009	$	4,920
Non-investment grade	67		64
Wealth management mortgages	4,928		4,834
Total	$	10,004	$	9,818