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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended ~~June~~September 30, 2021

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

Commission File Number 001-35651

THE BANK OF NEW YORK MELLON CORPORATION

(Exact name of registrant as specified in its charter)


Delaware			13-2614959
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

240 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 class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	BK	New York Stock Exchange
6.244% Fixed-to-Floating Rate Normal Preferred Capital Securities of Mellon Capital IV	BK/P	New 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ 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

☐

Emerging growth 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 ☒

As of ~~June~~Sept. 30, 2021, ~~863,173,678~~825,821,063 shares of the registrant’s common stock, $0.01 par value per share, were outstanding.

THE BANK OF NEW YORK MELLON CORPORATION

~~Second~~Third Quarter 2021 Form 10-Q

Table of Contents


			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~~third quarter 2021 ~~and subsequent~~ events			4
Highlights of ~~second~~third quarter 2021 results			5
Impact of coronavirus pandemic on our business			6

Fee and other revenue			7
Net interest revenue			11

Noninterest expense			14
Income taxes			14
Review of businesses			15
Critical accounting estimates			2322
Consolidated balance sheet review			2322
Liquidity and dividends			3432
Capital			3836
Trading activities and risk management			4341
Asset/liability management			4543
Supplemental information – Explanation of GAAP and Non-GAAP financial measures			4745
Recent regulatory developments			4947
Other matters			5047
Website information			5047

Item 1. Financial Statements:
Consolidated Income Statement (unaudited)			5149
Consolidated Comprehensive Income Statement (unaudited)			5351
Consolidated Balance Sheet (unaudited)			5452
Consolidated Statement of Cash Flows (unaudited)			5553
Consolidated Statement of Changes in Equity (unaudited)			5654


			Page
Notes to Consolidated Financial Statements:
Note 1—Basis of presentation			5957

Note 2—Acquisitions and dispositions			6058
Note 3—Securities			6058
Note 4—Loans and asset quality			6563

Note 5—Goodwill and intangible assets			7270
Note 6—Other assets			7371
Note 7—Contract revenue			7573
Note 8—Net interest revenue			7775
Note 9—Employee benefit plans			7876
Note 10—Income taxes			7876
Note 11—Variable interest entities and securitization			7876
Note 12—Preferred stock			8078
Note 13—Other comprehensive income (loss)			8179
Note 14—Fair value measurement			8280
Note 15—Fair value option			8886
Note 16—Derivative instruments			8986
Note 17—Commitments and contingent liabilities			9593
Note 18—Lines of business			~~100~~98
Note 19—Supplemental information to the Consolidated Statement of Cash Flows			~~103~~101

Item 4. Controls and Procedures			~~104~~102
Forward-looking Statements			~~105~~103

Part II – Other Information
Item 1. Legal Proceedings.			~~107~~105

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.			~~107~~105
Item 6. Exhibits.			~~107~~105

Index to Exhibits			~~108~~106
Signature			~~110~~108

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

Consolidated Financial Highlights (unaudited)


		Quarter ended										Year-to-date								Quarter ended										Year-to-date
(dollars in millions, except per share amounts and unless otherwise noted)	(dollars in millions, except per share amounts and unless otherwise noted)	June 30, 2021			March 31, 2021			June 30, 2020				June 30, 2021			June 30, 2020				(dollars in millions, except per share amounts and unless otherwise noted)	Sept. 30, 2021			June 30, 2021			Sept. 30, 2020				Sept. 30, 2021			Sept. 30, 2020
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:																		Results applicable to common shareholders of The Bank of New York Mellon Corporation:
Net income	Net income	$	991		$	858		$	901			$	1,849		$	1,845			Net income	$	881		$	991		$	876			$	2,730		$	2,721
Basic earnings per share	Basic earnings per share	$	1.14		$	0.97		$	1.01			$	2.11		$	2.06			Basic earnings per share	$	1.04		$	1.14		$	0.98			$	3.15		$	3.05
Diluted earnings per share	Diluted earnings per share	$	1.13		$	0.97		$	1.01			$	2.10		$	2.06			Diluted earnings per share	$	1.04		$	1.13		$	0.98			$	3.14		$	3.04

Fee and other revenue	Fee and other revenue	$	3,315		$	3,266		$	3,230		(a)	$	6,581		$	6,524		(a)	Fee and other revenue	$	3,394		$	3,315		$	3,144		(a)	$	9,975		$	9,668		(a)
Net interest revenue	Net interest revenue	645			655			780				1,300			1,594				Net interest revenue	641			645			703				1,941			2,297
Total revenue	Total revenue	$	3,960		$	3,921		$	4,010			$	7,881		$	8,118			Total revenue	$	4,035		$	3,960		$	3,847			$	11,916		$	11,965

Return on common equity (annualized)	Return on common equity (annualized)	9.8		%	8.5		%	9.4		%		9.2		%	9.7		%		Return on common equity (annualized)	8.8		%	9.8		%	8.7		%		9.1		%	9.4		%
Return on tangible common equity (annualized) – Non-GAAP (b)	Return on tangible common equity (annualized) – Non-GAAP (b)	18.6		%	16.1		%	18.5		%		17.3		%	19.4		%		Return on tangible common equity (annualized) – Non-GAAP (b)	16.8		%	18.6		%	16.7		%		17.1		%	18.5		%

Return on average assets (annualized)	Return on average assets (annualized)	0.88		%	0.76		%	0.87		%		0.82		%	0.93		%		Return on average assets (annualized)	0.78		%	0.88		%	0.84		%		0.81		%	0.90		%

Fee revenue as a percentage of total revenue	Fee revenue as a percentage of total revenue	81		%	83		%	77		%	(a)	82		%	78		%	(a)	Fee revenue as a percentage of total revenue	81		%	81		%	80		%	(a)	82		%	79		%	(a)

Non-U.S. revenue as a percentage of total revenue	Non-U.S. revenue as a percentage of total revenue	38		%	37		%	36		%		38		%	36		%		Non-U.S. revenue as a percentage of total revenue	38		%	38		%	37		%		38		%	37		%

Pre-tax operating margin	Pre-tax operating margin	32		%	29		%	29		%		31		%	30		%		Pre-tax operating margin	29		%	32		%	30		%		30		%	30		%

Net interest margin	Net interest margin	0.67		%	0.66		%	0.88		%		0.67		%	0.94		%		Net interest margin	0.67		%	0.67		%	0.79		%		0.67		%	0.89		%
Net interest margin on a fully taxable equivalent (“FTE”) basis – Non-GAAP (c)	Net interest margin on a fully taxable equivalent (“FTE”) basis – Non-GAAP (c)	0.67		%	0.67		%	0.88		%		0.67		%	0.94		%		Net interest margin on a fully taxable equivalent (“FTE”) basis – Non-GAAP (c)	0.68		%	0.67		%	0.79		%		0.67		%	0.89		%

Assets under custody and/or administration (“AUC/A”) at period end (in trillions) (d)	Assets under custody and/or administration (“AUC/A”) at period end (in trillions) (d)	$	45.0		$	41.7		$	37.3			$	45.0		$	37.3			Assets under custody and/or administration (“AUC/A”) at period end (in trillions) (d)	$	45.3		$	45.0		$	38.6			$	45.3		$	38.6
Assets under management (“AUM”) at period end (in billions) (e)	Assets under management (“AUM”) at period end (in billions) (e)	$	2,320		$	2,214		$	1,961			$	2,320		$	1,961			Assets under management (“AUM”) at period end (in billions) (e)	$	2,310		$	2,320		$	2,041			$	2,310		$	2,041
Market value of securities on loan at period end (in billions) (f)	Market value of securities on loan at period end (in billions) (f)	$	456		$	445		$	384			$	456		$	384			Market value of securities on loan at period end (in billions) (f)	$	443		$	456		$	378			$	443		$	378

Average common shares and equivalents outstanding (in thousands):	Average common shares and equivalents outstanding (in thousands):																		Average common shares and equivalents outstanding (in thousands):
Basic	Basic	869,460			882,558			889,020				876,006			891,642				Basic	844,088			869,460			889,499				865,374			891,050
Diluted	Diluted	873,475			885,655			890,561				879,409			893,603				Diluted	849,028			873,475			891,069				869,324			892,793

Selected average balances:	Selected average balances:																		Selected average balances:
Interest-earning assets	Interest-earning assets	$	388,285		$	397,297		$	357,562			$	392,766		$	340,749			Interest-earning assets	$	381,065		$	388,285		$	357,634			$	388,823		$	346,418
Total assets	Total assets	$	452,329		$	460,379		$	415,359			$	456,332		$	400,318			Total assets	$	446,761		$	452,329		$	414,865			$	453,106		$	405,203
Interest-bearing deposits	Interest-bearing deposits	$	239,466		$	245,115		$	210,643			$	242,275		$	204,138			Interest-bearing deposits	$	233,363		$	239,466		$	211,500			$	239,272		$	206,610
Noninterest-bearing deposits	Noninterest-bearing deposits	$	85,802		$	83,429		$	72,411			$	84,622		$	66,494			Noninterest-bearing deposits	$	85,581		$	85,802		$	67,610			$	84,945		$	66,869
Long-term debt	Long-term debt	$	25,275		$	26,199		$	28,122			$	25,734		$	27,677			Long-term debt	$	25,751		$	25,275		$	26,511			$	25,740		$	27,285
Preferred stock	Preferred stock	$	4,541		$	4,541		$	4,010			$	4,541		$	3,776			Preferred stock	$	4,541		$	4,541		$	4,532			$	4,541		$	4,029
Total The Bank of New York Mellon Corporation common shareholders’ equity	Total The Bank of New York Mellon Corporation common shareholders’ equity	$	40,393		$	40,720		$	38,476			$	40,556		$	38,070			Total The Bank of New York Mellon Corporation common shareholders’ equity	$	39,755		$	40,393		$	39,924			$	40,286		$	38,693

Other information at period end:	Other information at period end:																		Other information at period end:
Cash dividends per common share	Cash dividends per common share	$	0.31		$	0.31		$	0.31			$	0.62		$	0.62			Cash dividends per common share	$	0.34		$	0.31		$	0.31			$	0.96		$	0.93
Common dividend payout ratio	Common dividend payout ratio	27		%	32		%	31		%		30		%	30		%		Common dividend payout ratio	33		%	27		%	32		%		31		%	31		%
Common dividend yield (annualized)	Common dividend yield (annualized)	2.4		%	2.7		%	3.2		%		2.4		%	3.2		%		Common dividend yield (annualized)	2.6		%	2.4		%	3.6		%		2.5		%	3.6		%
Closing stock price per common share	Closing stock price per common share	$	51.23		$	47.29		$	38.65			$	51.23		$	38.65			Closing stock price per common share	$	51.84		$	51.23		$	34.34			$	51.84		$	34.34
Market capitalization	Market capitalization	$	44,220		$	41,401		$	34,239			$	44,220		$	34,239			Market capitalization	$	42,811		$	44,220		$	30,430			$	42,811		$	30,430
Book value per common share	Book value per common share	$	47.20		$	46.16		$	44.21			$	47.20		$	44.21			Book value per common share	$	47.30		$	47.20		$	45.58			$	47.30		$	45.58
Tangible book value per common share – Non-GAAP (b)	Tangible book value per common share – Non-GAAP (b)	$	25.64		$	24.88		$	23.31			$	25.64		$	23.31			Tangible book value per common share – Non-GAAP (b)	$	24.88		$	25.64		$	24.60			$	24.88		$	24.60
Full-time employees	Full-time employees	48,800			48,000			48,300				48,800			48,300				Full-time employees	48,900			48,800			48,600				48,900			48,600
Common shares outstanding (in thousands)	Common shares outstanding (in thousands)	863,174			875,481			885,862				863,174			885,862				Common shares outstanding (in thousands)	825,821			863,174			886,136				825,821			886,136

2 BNY Mellon

Consolidated Financial Highlights (unaudited) (continued)


Regulatory capital and other ratios	Regulatory capital and other ratios	June 30, 2021		March 31, 2021		Dec. 31, 2020		Regulatory capital and other ratios	Sept. 30, 2021		June 30, 2021		Dec. 31, 2020
Average liquidity coverage ratio (“LCR”)	Average liquidity coverage ratio (“LCR”)	110	%	110	%	110	%	Average liquidity coverage ratio (“LCR”)	111	%	110	%	110	%

Regulatory capital ratios: (g)	Regulatory capital ratios: (g)							Regulatory capital ratios: (g)
Advanced:	Advanced:							Advanced:
Common Equity Tier 1 (“CET1”) ratio	Common Equity Tier 1 (“CET1”) ratio	12.7	%	12.6	%	13.1	%	Common Equity Tier 1 (“CET1”) ratio	11.8	%	12.7	%	13.1	%
Tier 1 capital ratio	Tier 1 capital ratio	15.3		15.3		15.8		Tier 1 capital ratio	14.5		15.3		15.8
Total capital ratio	Total capital ratio	16.0		16.1		16.7		Total capital ratio	15.2		16.0		16.7
Standardized:	Standardized:							Standardized:
CET1 ratio	CET1 ratio	12.6	%	12.6	%	13.4	%	CET1 ratio	11.7	%	12.6	%	13.4	%
Tier 1 capital ratio	Tier 1 capital ratio	15.2		15.2		16.1		Tier 1 capital ratio	14.4		15.2		16.1
Total capital ratio	Total capital ratio	16.2		16.2		17.1		Total capital ratio	15.3		16.2		17.1

Tier 1 leverage ratio	Tier 1 leverage ratio	6.0	%	5.8	%	6.3	%	Tier 1 leverage ratio	5.7	%	6.0	%	6.3	%
Supplementary leverage ratio (“SLR”) (h)	Supplementary leverage ratio (“SLR”) (h)	7.5		8.1		8.6		Supplementary leverage ratio (“SLR”) (h)	7.0		7.5		8.6

BNY Mellon shareholders’ equity to total assets ratio	BNY Mellon shareholders’ equity to total assets ratio	9.7	%	9.7	%	9.8	%	BNY Mellon shareholders’ equity to total assets ratio	9.3	%	9.7	%	9.8	%
BNY Mellon common shareholders’ equity to total assets ratio	BNY Mellon common shareholders’ equity to total assets ratio	8.7		8.7		8.8		BNY Mellon common shareholders’ equity to total assets ratio	8.3		8.7		8.8

(a) In the first quarter of 2021, we reclassified certain items within total revenue on the consolidated income statement and reclassified prior periods to be comparable with current period presentation. See Note 1 of the Notes to Consolidated Financial Statements for additional information.

(b) 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 4745 for the reconciliation of Non-GAAP measures.

(d) Consists of AUC/A primarily from the Asset Servicing business and, to a lesser extent, the Clearance and Collateral Management, Issuer Services, Pershing and Wealth Management businesses. Includes the AUC/A of CIBC Mellon Global Securities Services Company (“CIBC Mellon”), a joint venture with the Canadian Imperial Bank of Commerce, of $1.7 trillion at Sept. 30, 2021 and June 30, 2021 ~~$1.6~~and $1.4 trillion at ~~March 31, 2021 and $1.3 trillion at June~~Sept. 30, 2020.

(e) Excludes securities lending cash management assets and assets managed in the Investment Services business.

(f) 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, 2021, $63 billion at June 30, 2021 ~~$64 billion at March 31, 2021~~ and $62 billion at ~~June~~Sept. 30, 2020.

(g) 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 ~~38.~~36.

(h) The SLR at ~~March 31, 2021 and~~ Dec. 31, 2020 ~~reflect~~reflects the temporary exclusion of U.S. Treasury securities from the leverage exposure, which increased our SLR by ~~68 basis points and~~ 72 basis ~~points, respectively.~~points. The temporary exclusion ceased to apply beginning April 1, 2021. See “Capital” beginning on page 3836 for additional information.

BNY Mellon 3


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, 2020 (“2020 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.”

Overview

Established in 1784 by Alexander Hamilton, we were the first company listed on the New York Stock Exchange (NYSE: BK). With a history of more than 235 years, BNY Mellon is a global company that manages and services assets for financial institutions, corporations and individual investors in 35 countries.

BNY Mellon has two business segments, Investment Services and Investment and Wealth Management, which offer a comprehensive set of capabilities and deep expertise across the investment lifecycle, enabling the Company to provide solutions to buy-side and sell-side market participants, as well as leading institutional and wealth management clients globally.

The diagram below presents our two business segments and lines of business, with the remaining operations in the Other segment.

Key ~~second~~third quarter 2021 ~~and subsequent~~ events

Share repurchase program and increase in cash dividend on common stock

In June 2021, our Board of Directors approved the repurchase of up to $6.0 billion of common stock starting in the third quarter of 2021 and continuing through the fourth quarter of 2022.

Additionally, in July, our Board of Directors approved a 10% increase in the quarterly cash dividend on common stock, from $0.31 to $0.34 per share. This increased quarterly cash dividend ~~will be~~was paid on Aug. 9, 2021.

4 BNY Mellon

Highlights of ~~second~~third quarter 2021 results

Net income applicable to common shareholders was ~~$991~~$881 million, or ~~$1.13~~$1.04 per diluted common share, in the ~~second~~third quarter of 2021. Net income applicable to common shareholders was ~~$901~~$876 million, or ~~$1.01~~$0.98 per diluted common share, in the ~~second~~third quarter of 2020. The highlights below are based on the ~~second~~third quarter of 2021 compared with the ~~second~~third quarter of 2020, unless otherwise noted.

•Total revenue of $4.0 billion ~~decreased 1%~~increased 5%, primarily reflecting:

•Fee and other revenue increased 8%, primarily reflecting:

•Fee revenue increased 4%6%, primarily reflecting the positive impact of higher markets, higher client volumes and the favorable impact of a weaker U.S. dollar, ~~and higher client volumes,~~ partially offset by higher money market fee waivers. (See “Fee and other revenue” beginning on page 7.)

•Other revenue ~~decreased~~increased primarily reflecting ~~lower gains related to seed capital investments.~~strategic equity investment gains. (See “Fee and other revenue” beginning on page 7.)

•Net interest revenue decreased ~~17%~~9%, primarily reflecting lower interest rates on interest-earning ~~assets.~~assets and the impact of hedging activities (primarily offset in fee and other revenue). This was partially offset by the benefit of lower funding and deposit rates ~~lower debt balances, a larger securities portfolio~~ and higher deposit and loan balances. (See “Net interest revenue” on page 11.)

•Provision for credit losses was a benefit of ~~$86~~$45 million primarily driven by an improvement in the macroeconomic forecast. (See “Consolidated balance sheet review – Allowance for credit losses” beginning on page ~~31.~~29.)

•Noninterest expense increased 3%9%, 3% of which was due to higher litigation reserves. The remainder of the increase primarily ~~reflecting~~reflects higher revenue-related expenses, investments in growth,

infrastructure and efficiency initiatives and the unfavorable impact of a weaker U.S. ~~dollar, investments in efficiency and growth initiatives and higher revenue-related expenses.~~dollar. (See “Noninterest expense” on page 14.)

•Effective tax rate of ~~19.0%~~18.8%. (See “Income taxes” on page 14.)

Capital and liquidity

•CET1 ratio was 11.7% at Sept. 30, 2021, compared with 12.6% at June 30, ~~2021, unchanged compared with March 31,~~ 2021. ~~Capital generated through earnings was offset by~~The decrease primarily reflects capital deployed through common stock repurchases and dividends, ~~and higher risk-weighted assets.~~partially offset by capital generated through earnings. (See “Capital” beginning on page ~~38.~~36.)

•Tier 1 leverage was 5.7% at Sept. 30, 2021, compared with 6.0% at June 30, ~~2021, compared with 5.8% at March 31,~~ 2021. The ~~increase~~decrease reflects ~~capital generation and~~lower Tier 1 common equity driven by common share repurchases, partially offset by lower average assets. (See “Capital” beginning on page ~~38.~~36.)

•Repurchased ~~12.8~~38.1 million common shares for ~~$618 million.~~$2.0 billion.

Highlights of our principal businesses

Investment Services

•Total revenue ~~decreased 4%~~increased 3%.

•Income before income taxes ~~increased 3%~~decreased 9%.

•AUC/A of ~~$45.0~~$45.3 trillion increased ~~21%~~17%, primarily reflecting higher market values, client inflows and net new ~~business and the favorable impact of a weaker U.S. dollar.~~business.

Investment and Wealth Management

•Total revenue increased ~~13%~~12%.

•Income before income taxes increased ~~48%~~42%.

•AUM of $2.3 trillion increased ~~18%~~13%, primarily reflecting higher market values, net inflows and the favorable impact of a weaker U.S. ~~dollar (principally versus the British pound) and net inflows.~~dollar.

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

BNY Mellon 5

Impact of coronavirus pandemic on our business

See “Impact of coronavirus pandemic on our business” in our 2020 Annual Report for the areas of our business that have been impacted and could continue to be impacted by the coronavirus pandemic and its effect on the global macroeconomic environment. The following updates those disclosures.

Short-term interest rates have remained low through the ~~second quarter~~first nine months of 2021, which ~~has continued to result~~resulted in lower net interest revenue and ~~higher~~continued money market fee waivers. This has been partially offset by higher average deposit balances and higher money market balances compared with 2020.

Equity market levels have continued to improve in the first ~~six~~nine months of 2021, resulting in increased asset-based fees in Investment Services and Investment and Wealth Management.

The macroeconomic outlook continued to improve through the first ~~and second~~three quarters of 2021, resulting in decreases in the allowance for credit losses and benefits to the provision for credit losses.

The restrictions on common stock dividends and share repurchases ended on June 30, 2021. In the third quarter of 2021, BNY Mellon increased the

quarterly cash dividend on common stock, from $0.31 to $0.34 per share, and repurchased 38.1 million common shares at an average price of $52.55 per common share for a total of $2.0 billion.

It is difficult to forecast the impact of the coronavirus, together with related public health measures, on our results with certainty because so much depends on how the health crisis evolves and its impact on the global economy, as well as actions taken by central banks and governments to support the economy and the availability, use and effectiveness of vaccines.

The current macroeconomic environment has also resulted in responses by governmental and regulatory bodies. See “Supervision and Regulation – Pandemic-Related Measures” in our 2020 Annual Report for additional information on legislative and regulatory developments in response to the coronavirus pandemic.

For further discussion of the current and potential impact of the coronavirus pandemic, see “Risk Factors – 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,” in our 2020 Annual Report.

6 BNY Mellon

Fee and other revenue


Fee and other revenue	Fee and other revenue																						YTD21		Fee and other revenue																						YTD21
(dollars in millions, unless otherwise noted)	(dollars in millions, unless otherwise noted)											2Q21 vs.											vs.		(dollars in millions, unless otherwise noted)											3Q21 vs.											vs.
		2Q21			1Q21			2Q20				1Q21		2Q20		YTD21			YTD20				YTD20			3Q21			2Q21			3Q20				2Q21		3Q20		YTD21			YTD20				YTD20
Investment services fees:	Investment services fees:																								Investment services fees:
Asset servicing fees (a)	Asset servicing fees (a)	$	1,200		$	1,199		$	1,173			—	%	2	%	$	2,399		$	2,332			3	%	Asset servicing fees (a)	$	1,223		$	1,200		$	1,168			2	%	5	%	$	3,622		$	3,500			3	%
Clearing services fees (b)	Clearing services fees (b)	435			455			431				(4)		1		890			901				(1)		Clearing services fees (b)	423			435			397				(3)		7		1,313			1,298				1
Issuer services fees	Issuer services fees	281			245			277				15		1		526			540				(3)		Issuer services fees	280			281			295				—		(5)		806			835				(3)
Treasury services fees	Treasury services fees	160			157			144				2		11		317			293				8		Treasury services fees	165			160			152				3		9		482			445				8
Total investment services fees	Total investment services fees	2,076			2,056			2,025				1		3		4,132			4,066				2		Total investment services fees	2,091			2,076			2,012				1		4		6,223			6,078				2
Investment management and performance fees	Investment management and performance fees	889			890			786				—		13		1,779			1,648				8		Investment management and performance fees	913			889			835				3		9		2,692			2,483				8
Foreign exchange revenue	Foreign exchange revenue	184			231			193			(c)	(20)		(5)		415			438			(c)	(5)		Foreign exchange revenue	185			184			149			(c)	1		24		600			587			(c)	2
Financing-related fees	Financing-related fees	48			51			58				(6)		(17)		99			117				(15)		Financing-related fees	48			48			49				—		(2)		147			166				(11)
Distribution and servicing	Distribution and servicing	27			29			27				(7)		—		56			58				(3)		Distribution and servicing	28			27			29				4		(3)		84			87				(3)
Total fee revenue	Total fee revenue	3,224			3,257			3,089			(c)	(1)		4		6,481			6,327			(c)	2		Total fee revenue	3,265			3,224			3,074			(c)	1		6		9,746			9,401			(c)	4
Investment and other income	Investment and other income	89			9			132			(c)	N/M				98			179			(c)	N/M		Investment and other income	127			89			61			(c)	N/M				225			240			(c)	N/M
Net securities gains	Net securities gains	2			—			9				N/M				2			18				N/M		Net securities gains	2			2			9				N/M				4			27				N/M
Total other revenue	Total other revenue	91			9			141				N/M				100			197				N/M		Total other revenue	129			91			70				N/M				229			267				N/M
Total fee and other revenue	Total fee and other revenue	$	3,315		$	3,266		$	3,230			2	%	3	%	$	6,581		$	6,524			1	%	Total fee and other revenue	$	3,394		$	3,315		$	3,144			2	%	8	%	$	9,975		$	9,668			3	%

Fee revenue as a percentage of total revenue	Fee revenue as a percentage of total revenue	81		%	83		%	77		%	(c)					82		%	78		%	(c)			Fee revenue as a percentage of total revenue	81		%	81		%	80		%	(c)					82		%	79		%	(c)

AUC/A at period end (in trillions) (d)	AUC/A at period end (in trillions) (d)	$	45.0		$	41.7		$	37.3			8	%	21	%	$	45.0		$	37.3			21	%	AUC/A at period end (in trillions) (d)	$	45.3		$	45.0		$	38.6			1	%	17	%	$	45.3		$	38.6			17	%
AUM at period end (in billions) (e)	AUM at period end (in billions) (e)	$	2,320		$	2,214		$	1,961			5	%	18	%	$	2,320		$	1,961			18	%	AUM at period end (in billions) (e)	$	2,310		$	2,320		$	2,041			—	%	13	%	$	2,310		$	2,041			13	%

(a) Asset servicing fees include the fees from the Clearance and Collateral Management business and also include securities lending revenue of $48 million in the third quarter of 2021, $45 million in the second quarter of 2021, ~~$45~~$40 million in the third quarter of 2020, $138 million in the first ~~quarter~~nine months of 2021 ~~$56 million in the second quarter of 2020, $90~~and $147 million in the first ~~six months of 2021 and $107 million in the first six~~nine months of 2020.

(b) Clearing services fees are almost entirely earned by our Pershing business.

(c) In the first quarter of 2021, we reclassified certain items within total revenue on the consolidated income statement and reclassified prior periods to be comparable with the current period presentation. See Note 1 of the Notes to Consolidated Financial Statements for additional information.

(d) Consists of AUC/A primarily from the Asset Servicing business and, to a lesser extent, the Clearance and Collateral Management, Issuer Services, Pershing and Wealth Management businesses. Includes the AUC/A of CIBC Mellon of $1.7 trillion at Sept. 30, 2021 and June 30, 2021 ~~$1.6~~and $1.4 trillion at ~~March 31, 2021 and $1.3 trillion at June~~Sept. 30, 2020.

(e) Excludes securities lending cash management assets and assets managed in the Investment Services business.

N/M – Not meaningful.

Fee revenue increased 4%6% compared with the ~~second~~third quarter of 2020 and ~~decreased~~ 1% compared with the ~~first~~second quarter of 2021. The increase compared with the ~~second~~third quarter of 2020 primarily reflects higher investment management and performance fees, asset servicing fees, ~~and treasury~~clearing services ~~fees, partially offset by lower financing-related~~ fees and foreign exchange ~~revenue.~~revenue, partially offset by higher money market fee waivers. The ~~decrease~~increase compared with the ~~first~~second quarter of 2021 primarily reflects higher asset servicing fees, investment management and performance fees and lower ~~foreign exchange revenue and clearing services fees,~~money market fee waivers, partially offset by ~~higher issuer~~lower clearing services fees. Excluding money market fee waivers, fee revenue increased 11% (Non-GAAP). See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 45 for the reconciliation of Non-GAAP measures.

Other revenue ~~decreased $50~~increased $59 million compared with the third quarter of 2020 and $38 million compared with the second quarter of ~~2020 and increased $82 million compared with the first quarter of~~ 2021. ~~The decrease compared with the second quarter of 2020~~Both increases primarily ~~reflects lower gains related to seed capital investments. The increase compared with the first~~

~~quarter of 2021 primarily reflects a $39 million impairment related to a renewable energy~~reflect strategic equity investment ~~recorded in the first quarter of 2021, gains from other investments and disposals, and higher other income.~~gains.

Money market fee waivers

Given the continued low short-term interest rates, money market mutual fund fees and other similar fees are being waived to protect investors from negative returns. The fee waivers have primarily impacted fee revenues in Pershing and Investment Management, but also resulted in lower distribution and servicing expense. The fee waivers also began to impact fee revenues in our other businesses in the second half of 2020. Money market fee waivers are highly sensitive to changes in short-term interest rates and are difficult to predict. Assuming no change in money market

BNY Mellon 7

balances, we expect to recover over 50% of the pre-tax income related to fee waivers with a 25 basis point increase in the Fed Funds rate and we expect to recover nearly 100% of the pre-tax income related to fee waivers when the Fed Funds rate increases 100 basis points.

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~~third quarter of 2021, the net impact of money market fee waivers was ~~$252~~$233 million, updown from ~~$188~~$252 million in the ~~first~~second quarter of 2021, driven by ~~lower~~slightly higher short-term interest ~~rates and higher money market balances.~~rates.


Money market fee waivers	Money market fee waivers											Money market fee waivers
(in millions)	(in millions)	2Q21		1Q21		2Q20		YTD21		YTD20		(in millions)	3Q21		2Q21		3Q20		YTD21		YTD20
Investment services fees:	Investment services fees:											Investment services fees:
Asset servicing fees	Asset servicing fees	$	(42)	$	(22)	$	—	$	(64)	$	—	Asset servicing fees	$	(40)	$	(42)	$	(1)	$	(104)	$	(1)
Clearing services fees	Clearing services fees	(88)		(74)		(50)		(162)		(59)		Clearing services fees	(84)		(88)		(57)		(246)		(116)
Issuer services fees	Issuer services fees	(15)		(10)		(1)		(25)		(1)		Issuer services fees	(16)		(15)		(1)		(41)		(2)
Treasury services fees	Treasury services fees	(3)		(3)		(2)		(6)		(2)		Treasury services fees	(2)		(3)		(3)		(8)		(5)
Total investment services fees	Total investment services fees	(148)		(109)		(53)		(257)		(62)		Total investment services fees	(142)		(148)		(62)		(399)		(124)
Investment management and performance fees	Investment management and performance fees	(115)		(89)		(30)		(204)		(44)		Investment management and performance fees	(109)		(115)		(42)		(313)		(86)
Distribution and servicing revenue	Distribution and servicing revenue	(13)		(13)		(3)		(26)		(3)		Distribution and servicing revenue	(11)		(13)		(6)		(37)		(9)
Total fee revenue	Total fee revenue	(276)		(211)		(86)		(487)		(109)		Total fee revenue	(262)		(276)		(110)		(749)		(219)
Less: Distribution and servicing expense	Less: Distribution and servicing expense	24		23		7		47		7		Less: Distribution and servicing expense	29		24		9		76		16
Net impact of money market fee waivers	Net impact of money market fee waivers	$	(252)	$	(188)	$	(79)	$	(440)	$	(102)	Net impact of money market fee waivers	$	(233)	$	(252)	$	(101)	$	(673)	$	(203)

Impact to revenue by line of business (a):	Impact to revenue by line of business (a):											Impact to revenue by line of business (a):
Asset Servicing	Asset Servicing	$	(50)	$	(29)	$	(1)	$	(79)	$	(1)	Asset Servicing	$	(47)	$	(50)	$	(4)	$	(126)	$	(5)
Pershing	Pershing	(99)		(94)		(60)		(193)		(69)		Pershing	(102)		(99)		(73)		(295)		(142)
Issuer Services	Issuer Services	(22)		(15)		(1)		(37)		(1)		Issuer Services	(22)		(22)		(2)		(59)		(3)
Treasury Services	Treasury Services	(16)		(9)		—		(25)		—		Treasury Services	(13)		(16)		(1)		(38)		(1)
Investment Management	Investment Management	(85)		(61)		(24)		(146)		(38)		Investment Management	(76)		(85)		(28)		(222)		(66)
Wealth Management	Wealth Management	(4)		(3)		—		(7)		—		Wealth Management	(2)		(4)		(2)		(9)		(2)
Total impact to revenue by line of business	Total impact to revenue by line of business	$	(276)	$	(211)	$	(86)	$	(487)	$	(109)	Total impact to revenue by line of business	$	(262)	$	(276)	$	(110)	$	(749)	$	(219)

(a) The line of business revenue for management reporting purposes reflects the impact of revenue transferred between the businesses.

We expect the impact from money market fee waivers, net of distribution and servicing expense, for the fourth quarter of 2021 to approximate ~~$225 million in~~ the third quarter of 2021, based on implied forward rates and money market balances as of the end of the ~~second~~third quarter of 2021. Fee waivers in subsequent periods will continue to be dependent on short-term interest rates and the level of money market balances.

Investment services fees

Investment services fees increased 3%4% compared with the ~~second~~third quarter of 2020 and 1% compared with the ~~first~~second quarter of 2021, reflecting the following:

•Asset servicing fees increased 5% compared with the third quarter of 2020 and 2% compared with the second ~~quarter of 2020 and was up slightly compared with the first~~ quarter of 2021. The increase compared with the ~~second~~third quarter of 2020 primarily reflects higher ~~client activity,~~ market values and ~~tri-party collateral management balances, partially offset by higher~~

~~money market fee waivers, and lower intraday credit fees and clearance volumes. The slight increase compared with the first quarter of 2021 primarily reflects~~ higher ~~tri-party collateral management balances,~~client activity, partially offset by higher money market fee ~~waivers~~waivers. The increase compared with the second quarter of 2021 primarily reflects higher market values and ~~lower clearance volumes.~~client activity.

•Clearing services fees increased 1%7% compared with the ~~second~~third quarter of 2020 and decreased 4%3% compared with the ~~first~~second quarter of 2021. The increase compared with the ~~second~~third quarter of 2020 primarily reflects higher market values, client activity and balances, partially offset by higher money market fee waivers. The decrease compared with the ~~first~~second quarter of 2021 ~~primarily~~ reflects lower clearance volumes, partially offset by higher market values.

•Issuer services fees ~~increased 1%~~decreased 5% compared with the third quarter of 2020 and were essentially unchanged compared with the second quarter of ~~2020 and 15%~~2021. The decrease compared with the ~~first~~third quarter of ~~2021. Both increases~~2020 primarily reflects higher money market fee waivers and lower Corporate Trust revenue, partially offset by higher Depositary Receipts revenue. Compared with the second quarter of 2021, lower Corporate Trust revenue was offset by seasonally higher Depositary Receipts revenue.

8 BNY Mellon

~~primarily reflect higher Depositary Receipts revenue, partially offset by money market fee waivers in Corporate Trust. The increase~~•Treasury services fees increased 9% compared with the third quarter of 2020 and 3% compared with the second quarter of ~~2020 also reflects higher Corporate Trust revenue.~~

•~~Treasury services fees increased 11% compared with the second quarter of 2020 and 2% compared with the first quarter of~~ 2021. ~~The increase compared with the second quarter of 2020~~Both increases primarily ~~reflects~~reflect higher payment volumes. ~~The increase compared with first quarter of 2021 primarily reflects net new business.~~

See “Investment Services business” in “Review of businesses” for additional details.

Investment management and performance fees

Investment management and performance fees increased ~~13%~~9% compared with the ~~second~~third quarter of 2020 and ~~decreased slightly~~3% compared with the ~~first~~second quarter of 2021. The increase compared with the ~~second~~third quarter of 2020 primarily reflects ~~the impact of~~ higher market values and equity income, the favorable impact of a weaker U.S. dollar and higher performance fees, ~~and net inflows,~~ partially offset by higher money market fee waivers. The ~~decrease~~increase compared with the ~~first~~second quarter of 2021 primarily reflects ~~the timing of~~higher market values and performance fees and ~~higher~~lower money market fee ~~waivers, offset by the impact of higher market values, equity investment gains and net inflows.~~waivers. Performance fees were $21 million in the third quarter of 2021, $7 million in the third quarter of 2020 and $14 million in the second ~~quarter of 2021, $5 million in the second quarter of 2020 and $40 million in the first~~ quarter of 2021. On a constant currency basis (Non-GAAP), investment management and performance fees increased 9%7% compared with the ~~second~~third quarter of 2020. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 45 for the reconciliation of Non-GAAP measures.

AUM was $2.3 trillion at ~~June~~Sept. 30, 2021, an increase of ~~18%~~13% compared with ~~June~~Sept. 30, 2020, primarily reflecting higher market values, net inflows and the favorable impact of a weaker U.S. ~~dollar (principally versus the British pound) and net inflows.~~dollar.

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

Foreign exchange revenue

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, the impact of foreign currency hedging activities and foreign currency remeasurement gain (loss). InForeign exchange revenue increased 24% compared with the ~~second~~third quarter of ~~2021, foreign exchange revenue totaled $184 million, decreases of 5%~~2020 and 1% compared with the second quarter of ~~2020 and 20%~~2021. The increase compared with the ~~first quarter of 2021. The decrease compared with the second~~third quarter of 2020 primarily reflects ~~lower volatility, partially offset by~~ higher volumes. ~~The decrease compared with the first quarter of 2021 primarily reflects lower volumes and volatility.~~ Foreign exchange revenue is primarily reported in the Investment Services business and, to a lesser extent, the Investment and Wealth Management business and the Other segment.

~~Financing-related fees~~

Financing-related fees, which are primarily reported in the Investment Services business, include capital market fees, loan commitment fees and credit-related fees. Financing-related fees totaled $48 million in the second quarter of 2021, $58 million in the second quarter of 2020 and $51 million in the first quarter of 2021. Both decreases primarily reflect lower underwriting fees.

Investment and other income

Investment and other income 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 and other income or loss. 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

~~BNY Mellon 9~~

and fixed income trading, and other hedging activity. Investments in renewable energy generate losses in other income 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.

BNY Mellon 9

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


Investment and other income	Investment and other income													Investment and other income
(in millions)	(in millions)	2Q21		1Q21		2Q20		(a)	YTD21		YTD20		(a)	(in millions)	3Q21		2Q21		3Q20		(a)	YTD21		YTD20		(a)
Income from consolidated investment management funds		$	13	$	17	$	54		$	30	$	16
Seed capital gains (losses) (b)		18		3		23			21		(8)
Other trading (loss) revenue		(1)		(7)		(8)			(8)		58
(Loss) income from consolidated investment management funds														(Loss) income from consolidated investment management funds	$	(7)	$	13	$	27		$	23	$	43
Seed capital gains (b)														Seed capital gains (b)	7		18		9			28		1
Other trading revenue (loss)														Other trading revenue (loss)	20		(1)		(14)			12		44
Renewable energy investment (losses)	Renewable energy investment (losses)	(41)		(81)		(34)			(122)		(68)			Renewable energy investment (losses)	(42)		(41)		(34)			(164)		(102)
Corporate/bank-owned life insurance	Corporate/bank-owned life insurance	29		33		36			62		72			Corporate/bank-owned life insurance	33		29		33			95		105
Other investments gains (c)	Other investments gains (c)	23		11		13			34		6			Other investments gains (c)	70		23		11			104		17
Disposal gains	Disposal gains	6		—		—			6		—			Disposal gains	7		6		—			13		—
Expense reimbursements from joint venture	Expense reimbursements from joint venture	25		23		19			48		40			Expense reimbursements from joint venture	25		25		23			73		63
Other income	Other income	17		10		29			27		63			Other income	14		17		6			41		69
Total investment and other income	Total investment and other income	$	89	$	9	$	132		$	98	$	179		Total investment and other income	$	127	$	89	$	61		$	225	$	240

(a) In the first quarter of 2021, we reclassified certain items within total revenue on the consolidated income statement and reclassified prior periods to be comparable with the current period presentation. See Note 1 of the Notes to Consolidated Financial Statements for additional information.

(b) Includes gains (losses) on investments in BNY Mellon funds which hedge deferred incentive awards.

Investment and other income was $127 million in the third quarter of 2021 compared with $61 million in the third quarter of 2020 and $89 million in the second quarter of ~~2021~~2021. The increases compared with ~~$132 million in~~ the ~~second~~third quarter of 2020 and ~~$9 million in the first quarter of 2021. The decrease compared with the~~ second quarter of 2020 primarily reflects lower gains related to seed capital investments reflected in the income from consolidated investment management funds and seed capital gains (losses) line items. The increase compared with the first quarter of 2021 primarily ~~reflects the $39 million impairment related to a renewable energy~~reflect strategic equity investment ~~recorded in the first quarter of 2021, gains from other investments and disposals and higher other income.~~gains.

Year-to-date 2021 compared with year-to-date 2020

Fee revenue increased 2%4% compared with the first ~~six~~nine months of 2020, primarily reflecting higher investment management and performance fees and

asset servicing ~~fees, partially offset by lower foreign exchange revenue and financing-related~~ fees. The 8% increase in investment management and performance fees primarily reflects higher market values and the favorable impact of a

weaker U.S. dollar, ~~equity investment gains and net inflows,~~ partially offset by higher money market fee waivers. The 3% increase in asset servicing fees primarily reflects higher market values, client activity ~~market values~~ and the favorable impact of a weaker U.S. dollar, partially offset by higher money market fee waivers.

The decrease in other revenue primarily reflects one-time fees in the Asset Servicing and Pershing businesses ~~recorded~~ in the first ~~six~~nine months of 2020, an impairment related to a renewable energy investment recorded in the first quarter of 2021 and lower ~~derivative and~~ fixed income trading results, partially offset by ~~higher gains related to seed capital.~~strategic equity investment and disposal gains.

10 BNY Mellon

Net interest revenue


Net interest revenue	Net interest revenue															YTD21		Net interest revenue															YTD21
								2Q21 vs.								vs.									3Q21 vs.								vs.
(dollars in millions)	(dollars in millions)	2Q21		1Q21		2Q20		1Q21		2Q20		YTD21		YTD20		YTD20		(dollars in millions)	3Q21		2Q21		3Q20		2Q21		3Q20		YTD21		YTD20		YTD20
Net interest revenue – GAAP	Net interest revenue – GAAP	$	645	$	655	$	780	(2)	%	(17)	%	$	1,300	$	1,594	(18)	%	Net interest revenue – GAAP	$	641	$	645	$	703	(1)	%	(9)	%	$	1,941	$	2,297	(15)	%
Add: Tax equivalent adjustment	Add: Tax equivalent adjustment	3		3		2		N/M				6		4		N/M		Add: Tax equivalent adjustment	3		3		2		N/M				9		6		N/M
Net interest revenue (FTE) – Non-GAAP (a)	Net interest revenue (FTE) – Non-GAAP (a)	$	648	$	658	$	782	(2)	%	(17)	%	$	1,306	$	1,598	(18)	%	Net interest revenue (FTE) – Non-GAAP (a)	$	644	$	648	$	705	(1)	%	(9)	%	$	1,950	$	2,303	(15)	%

Average interest-earning assets	Average interest-earning assets	$	388,285	$	397,297	$	357,562	(2)	%	9	%	$	392,766	$	340,749	15	%	Average interest-earning assets	$	381,065	$	388,285	$	357,634	(2)	%	7	%	$	388,823	$	346,418	12	%


Net interest margin – GAAP	Net interest margin – GAAP	0.67	%	0.66	%	0.88	%	1	bps	(21)	bps	0.67	%	0.94	%	(27)	bps	Net interest margin – GAAP	0.67	%	0.67	%	0.79	%	—	bps	(12)	bps	0.67	%	0.89	%	(22)	bps
Net interest margin (FTE) – Non-GAAP (a)	Net interest margin (FTE) – Non-GAAP (a)	0.67	%	0.67	%	0.88	%	—	bps	(21)	bps	0.67	%	0.94	%	(27)	bps	Net interest margin (FTE) – Non-GAAP (a)	0.68	%	0.67	%	0.79	%	1	bps	(11)	bps	0.67	%	0.89	%	(22)	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 decreased ~~17%~~9% compared with the ~~second~~third quarter of 2020 and 2%1% compared with the ~~first~~second quarter of 2021. The decrease compared with the ~~second~~third quarter of 2020 primarily reflects lower interest rates on interest-earning assets and the impact of hedging activities (primarily offset in fee and other revenue). This was partially offset by the benefit of lower funding and deposit rates ~~lower debt balances, a larger securities portfolio~~ and higher deposit and loan balances. The decrease compared with the ~~first~~second quarter of 2021 ~~was~~ primarily reflects a decline in interest-earning assets driven by lower ~~interest rates on interest-earning assets, partially offset by the benefit of lower funding and deposit rates.~~deposits.

Net interest margin decreased 2112 basis points compared with the ~~second~~third quarter of 2020 and ~~increased 1 basis point~~was unchanged compared with the ~~first~~second quarter of 2021. The decrease compared with the ~~second~~third quarter of 2020 primarily reflects the factors mentioned above.

Average interest-earning assets increased 9%7% compared with the ~~second~~third quarter of 2020 and decreased 2% compared with the ~~first~~second quarter of 2021. The increase compared with the ~~second~~third quarter of 2020 primarily reflects higher interest-bearing deposits with the Federal Reserve and other central banks ~~a larger securities portfolio~~ and ~~higher~~margin loan balances. The decrease compared with the ~~first~~second quarter of 2021 primarily reflects lower interest-bearing deposits with the Federal Reserve and other central ~~banks, partially offset by higher loan balances.~~banks.

Average non-U.S. dollar deposits comprised approximately 25% of our average total deposits in the ~~second~~third quarter of 2021. Approximately 40% of the average non-U.S. dollar deposits in the ~~second~~third quarter of 2021 were euro denominated.

Net interest revenue in future periods will depend on the level and mix of client deposits and deposit rates, as well as the level and shape of the yield curve, which may result in lower yields on interest-earning assets.

Due to lower interest rates, net interest revenue has been trending lower and we expect net interest revenue to decrease in 2021 compared with 2020.

Year-to-date 2021 compared with year-to-date 2020

Net interest revenue decreased ~~18%~~15% compared with the first ~~six~~nine months of 2020, primarily driven by lower interest rates on interest-earning assets, partially offset by the benefit of lower ~~deposit~~funding and ~~funding~~deposit rates, a larger securities portfolio, higher deposit balances and lower debt balances. The decrease in the net interest margin primarily reflects the factors mentioned above.

Average interest-earning assets increased ~~15%~~12% compared with the first ~~six~~nine months of 2020. The increase primarily reflects higher interest-bearing deposits with the Federal Reserve and other central banks, ~~and~~ a larger securities ~~portfolio.~~portfolio and higher loan balances.

BNY Mellon 11


Average balances and interest rates	Average balances and interest rates	Quarter ended															Average balances and interest rates		Quarter ended
		June 30, 2021						March 31, 2021						June 30, 2020						Sept. 30, 2021										June 30, 2021					Sept. 30, 2020
(dollars in millions; average rates annualized)	(dollars in millions; average rates annualized)	Average balance		Interest		Average rates		Average balance		Interest		Average rates			Average balance		Interest				Average rates		(dollars in millions; average rates annualized)	Average balance		Interest		Average rates			Average balance		Interest			Average rates		Average balance		Interest			Average rates
Assets	Assets																						Assets
Interest-earning assets:	Interest-earning assets:																						Interest-earning assets:
Interest-bearing deposits with the Federal Reserve and other central banks	Interest-bearing deposits with the Federal Reserve and other central banks	$	114,564	$	(25)	(0.09)	%	$	125,930	$	(16)	(0.05)	%		$	94,229	$	(7)			(0.03)	%	Interest-bearing deposits with the Federal Reserve and other central banks	$	108,110	$	(21)	(0.07)	%		$	114,564	$	(25)		(0.09)	%	$	90,670	$	(10)		(0.04)	%
Interest-bearing deposits with banks (primarily foreign banks)	Interest-bearing deposits with banks (primarily foreign banks)	22,465		11		0.20		21,313		14		0.27			21,093		40				0.76		Interest-bearing deposits with banks (primarily foreign banks)	20,465		12		0.22			22,465		11			0.20		19,202		20			0.42
Federal funds sold and securities purchased under resale agreements (a)	Federal funds sold and securities purchased under resale agreements (a)	27,857		25		0.36		29,186		32		0.44			30,265		61				0.82		Federal funds sold and securities purchased under resale agreements (a)	29,304		32		0.44			27,857		25			0.36		30,342		48			0.63
Margin loans	Margin loans	18,995		49		1.04		15,891		45		1.14			12,791		40				1.28		Margin loans	20,374		52		1.02			18,995		49			1.04		12,870		41			1.24
Non-margin loans:	Non-margin loans:																						Non-margin loans:
Domestic offices	Domestic offices	36,455		173		1.90		31,218		157		2.02			31,185		172				2.21		Domestic offices	36,872		175		1.90			36,455		173			1.90		30,053		160			2.12
Foreign offices	Foreign offices	5,070		15		1.14		9,680		28		1.18			12,743		58				1.84		Foreign offices	3,960		11		1.11			5,070		15			1.14		10,693		39			1.45
Total non-margin loans	Total non-margin loans	41,525		188		1.81		40,898		185		1.82			43,928		230				2.10		Total non-margin loans	40,832		186		1.82			41,525		188			1.81		40,746		199			1.94
Securities:	Securities:																						Securities:
U.S. government obligations ~~(b)~~	U.S. government obligations ~~(b)~~	33,212		59		0.71		28,759		63		0.90			27,901		75				1.08		U.S. government obligations ~~(b)~~	36,255		67		0.73			33,212		59			0.71		30,073		76		(b)	1.00		(b)
U.S. government agency obligations ~~(b)~~	U.S. government agency obligations ~~(b)~~	72,809		244		1.34		77,623		271		1.40			74,583		341				1.83		U.S. government agency obligations ~~(b)~~	70,199		234		1.34			72,809		244			1.34		78,300		308		(b)	1.58		(b)
State and political subdivisions (b)(c)		2,768		14		1.94		2,526		12		1.92			1,025		7				2.98
Other securities (b)(c)		47,451		112		0.95		47,030		116		0.99			45,511		140				1.23
State and political subdivisions (c)																							State and political subdivisions (c)	2,628		13		2.07			2,768		14			1.94		1,500		9		(b)	2.51		(b)
Other securities (c)																							Other securities (c)	47,334		112		0.94			47,451		112			0.95		46,719		115		(b)	0.98		(b)
Total investment securities (c)	Total investment securities (c)	156,240		429		1.10		155,938		462		1.19			149,020		563				1.51		Total investment securities (c)	156,416		426		1.09			156,240		429			1.10		156,592		508			1.30
Trading securities (c)	Trading securities (c)	6,639		11		0.72		8,141		19		0.95			6,236		18				1.13		Trading securities (c)	5,564		9		0.53			6,639		11			0.72		7,212		16			0.91
Total securities (c)	Total securities (c)	162,879		440		1.08		164,079		481		1.18			155,256		581				1.50		Total securities (c)	161,980		435		1.07			162,879		440			1.08		163,804		524			1.28
Total interest-earning assets (c)	Total interest-earning assets (c)	$	388,285	$	688	0.71	%	$	397,297	$	741	0.75	%		$	357,562	$	945			1.06	%	Total interest-earning assets (c)	$	381,065	$	696	0.73	%		$	388,285	$	688		0.71	%	$	357,634	$	822		0.92	%
Noninterest-earning assets	Noninterest-earning assets	64,044						63,082							57,797								Noninterest-earning assets	65,696							64,044							57,231
Total assets	Total assets	$	452,329					$	460,379						$	415,359							Total assets	$	446,761						$	452,329						$	414,865
Liabilities	Liabilities																						Liabilities
Interest-bearing liabilities:	Interest-bearing liabilities:																						Interest-bearing liabilities:
Interest-bearing deposits:	Interest-bearing deposits:																						Interest-bearing deposits:
Domestic offices	Domestic offices	$	126,953	$	(8)	(0.02)	%	$	128,543	$	(7)	(0.02)	%		$	102,135	$	15			0.06	%	Domestic offices	$	123,617	$	(5)	(0.02)	%		$	126,953	$	(8)		(0.02)	%	$	102,767	$	(4)		(0.01)	%
Foreign offices	Foreign offices	112,513		(41)		(0.15)		116,572		(30)		(0.10)			108,508		(32)				(0.12)		Foreign offices	109,746		(39)		(0.14)			112,513		(41)			(0.15)		108,733		(25)			(0.09)
Total interest-bearing deposits	Total interest-bearing deposits	239,466		(49)		(0.08)		245,115		(37)		(0.06)			210,643		(17)				(0.03)		Total interest-bearing deposits	233,363		(44)		(0.08)			239,466		(49)			(0.08)		211,500		(29)			(0.05)
Federal funds purchased and securities sold under repurchase agreements (a)	Federal funds purchased and securities sold under repurchase agreements (a)	13,773		(5)		(0.17)		15,288		(3)		(0.07)			14,209		1				0.03		Federal funds purchased and securities sold under repurchase agreements (a)	13,415		2		0.08			13,773		(5)			(0.17)		16,850		6			0.13
Trading liabilities	Trading liabilities	2,282		2		0.38		2,227		3		0.53			1,974		2				0.39		Trading liabilities	2,821		1		0.11			2,282		2			0.38		2,692		2			0.30
Other borrowed funds	Other borrowed funds	298		1		2.21		331		2		2.01			2,272		7				1.30		Other borrowed funds	383		3		2.53			298		1			2.21		873		3			1.40
Commercial paper	Commercial paper	—		—		—		—		—		—			191		1				1.02		Commercial paper	11		—		0.07			—		—			—		2,274		—			0.09
Payables to customers and broker-dealers	Payables to customers and broker-dealers	16,811		—		(0.01)		17,691		(1)		(0.01)			18,742		(1)				(0.01)		Payables to customers and broker-dealers	16,648		(1)		(0.01)			16,811		—			(0.01)		18,501		—			(0.01)
Long-term debt	Long-term debt	25,275		91		1.43		26,199		119		1.81			28,122		170				2.42		Long-term debt	25,751		91		1.39			25,275		91			1.43		26,511		135			2.01
Total interest-bearing liabilities	Total interest-bearing liabilities	$	297,905	$	40	0.05	%	$	306,851	$	83	0.11	%		$	276,153	$	163			0.24	%	Total interest-bearing liabilities	$	292,392	$	52	0.07	%		$	297,905	$	40		0.05	%	$	279,201	$	117		0.16	%
Total noninterest-bearing deposits	Total noninterest-bearing deposits	85,802						83,429							72,411								Total noninterest-bearing deposits	85,581							85,802							67,610
Other noninterest-bearing liabilities	Other noninterest-bearing liabilities	23,317						24,556							24,121								Other noninterest-bearing liabilities	24,164							23,317							23,393
Total liabilities	Total liabilities	407,024						414,836							372,685								Total liabilities	402,137							407,024							370,204
Temporary equity	Temporary equity																						Temporary equity
Redeemable noncontrolling interests	Redeemable noncontrolling interests	57						85							74								Redeemable noncontrolling interests	46							57							82
Permanent equity	Permanent equity																						Permanent equity
Total The Bank of New York Mellon Corporation shareholders’ equity	Total The Bank of New York Mellon Corporation shareholders’ equity	44,934						45,261							42,486								Total The Bank of New York Mellon Corporation shareholders’ equity	44,296							44,934							44,456
Noncontrolling interests	Noncontrolling interests	314						197							114								Noncontrolling interests	282							314							123
Total permanent equity	Total permanent equity	45,248						45,458							42,600								Total permanent equity	44,578							45,248							44,579
Total liabilities, temporary equity and permanent equity	Total liabilities, temporary equity and permanent equity	$	452,329					$	460,379						$	415,359							Total liabilities, temporary equity and permanent equity	$	446,761						$	452,329						$	414,865
Net interest revenue (FTE) – Non-GAAP (d)	Net interest revenue (FTE) – Non-GAAP (d)			$	648					$	658						$	782					Net interest revenue (FTE) – Non-GAAP (d)			$	644						$	648						$	705
Net interest margin (FTE) – Non-GAAP (c)(d)	Net interest margin (FTE) – Non-GAAP (c)(d)					0.67	%					0.67	%								0.88	%	Net interest margin (FTE) – Non-GAAP (c)(d)					0.68	%							0.67	%						0.79	%
Less: Tax equivalent adjustment	Less: Tax equivalent adjustment			3						3							2						Less: Tax equivalent adjustment			3							3							2
Net interest revenue – GAAP	Net interest revenue – GAAP			$	645					$	655						$	780					Net interest revenue – GAAP			$	641						$	645						$	703
Net interest margin – GAAP	Net interest margin – GAAP					0.67	%					0.66	%								0.88	%	Net interest margin – GAAP					0.67	%							0.67	%						0.79	%

(a) Includes the average impact of offsetting under enforceable netting agreements of approximately $47 billion for the third quarter of 2021, $41 billion for the second quarter of 2021 ~~$37~~and $43 billion for the ~~first quarter of 2021 and $67 billion for the second~~third quarter of 2020. 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 0.17% for the third quarter of 2021, 0.15% for the second quarter of 2021 ~~0.19% for the first quarter of 2021~~ and 0.26% for the ~~second~~third quarter of 2020. 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 0.02% for the third quarter of 2021, (0.04)% for the second quarter of 2021 ~~(0.02)%~~and 0.04% for the ~~first quarter of 2021 and 0.00% for the second~~third quarter of 2020. 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) In the second quarter of 2021, we reclassified the impact of hedging within the categories comprising total investment securities to align the impact of hedging with the securities being hedged and reclassified prior periods to be comparable. The change reduced the income and average rates previously reported for U.S. government obligations and U.S. government agency obligations and increased the income and average rates for Other securities.

(d) See “Net interest revenue” on page 11 for the reconciliation of this Non-GAAP measure.

12 BNY Mellon


Average balances and interest rates	Average balances and interest rates	Year-to-date												Average balances and interest rates	Year-to-date
		June 30, 2021						June 30, 2020							Sept. 30, 2021						Sept. 30, 2020
(dollars in millions; average rates annualized)	(dollars in millions; average rates annualized)	Average balance		Interest		Average rates		Average balance		Interest		Average rates		(dollars in millions; average rates annualized)	Average balance		Interest		Average rates		Average balance		Interest			Average rates
Assets	Assets													Assets
Interest-earning assets:	Interest-earning assets:													Interest-earning assets:
Interest-bearing deposits with the Federal Reserve and other central banks	Interest-bearing deposits with the Federal Reserve and other central banks	$	120,216	$	(41)	(0.07)	%	$	87,316	$	73	0.16	%	Interest-bearing deposits with the Federal Reserve and other central banks	$	116,136	$	(62)	(0.07)	%	$	88,442	$	63		0.09	%
Interest-bearing deposits with banks (primarily foreign banks)	Interest-bearing deposits with banks (primarily foreign banks)	21,892		25		0.24		19,087		98		1.03		Interest-bearing deposits with banks (primarily foreign banks)	21,411		37		0.23		19,126		118			0.83
Federal funds sold and securities purchased under resale agreements (a)	Federal funds sold and securities purchased under resale agreements (a)	28,518		57		0.40		32,187		457		2.86		Federal funds sold and securities purchased under resale agreements (a)	28,783		89		0.41		31,567		505			2.14
Margin loans	Margin loans	17,452		94		1.09		12,887		127		1.99		Margin loans	18,436		146		1.06		12,882		168			1.74
Non-margin loans:	Non-margin loans:													Non-margin loans:
Domestic offices	Domestic offices	33,851		330		1.96		31,453		410		2.62		Domestic offices	34,869		505		1.94		30,983		570			2.45
Foreign offices	Foreign offices	7,362		43		1.17		11,956		129		2.17		Foreign offices	6,216		54		1.15		11,532		168			1.95
Total non-margin loans	Total non-margin loans	41,213		373		1.82		43,409		539		2.49		Total non-margin loans	41,085		559		1.82		42,515		738			2.32
Securities:	Securities:													Securities:
U.S. government obligations ~~(b)~~	U.S. government obligations ~~(b)~~	30,998		122		0.80		25,538		139		1.10		U.S. government obligations ~~(b)~~	32,770		189		0.77		27,061		215		(b)	1.06		(b)
U.S. government agency obligations ~~(b)~~	U.S. government agency obligations ~~(b)~~	75,202		515		1.37		71,815		728		2.03		U.S. government agency obligations ~~(b)~~	73,516		749		1.36		73,992		1,036		(b)	1.87		(b)
State and political subdivisions (b)(c)		2,648		26		1.93		1,029		15		3.02
Other securities (b)(c)		47,242		228		0.97		40,943		283		1.38
State and political subdivisions (c)														State and political subdivisions (c)	2,641		39		1.97		1,187		24		(b)	2.80		(b)
Other securities (c)														Other securities (c)	47,273		340		0.96		42,883		398		(b)	1.24		(b)
Total investment securities (c)	Total investment securities (c)	156,090		891		1.14		139,325		1,165		1.67		Total investment securities (c)	156,200		1,317		1.13		145,123		1,673			1.54
Trading securities (c)	Trading securities (c)	7,385		30		0.85		6,538		58		1.77		Trading securities (c)	6,772		39		0.76		6,763		74			1.46
Total securities (c)	Total securities (c)	163,475		921		1.13		145,863		1,223		1.68		Total securities (c)	162,972		1,356		1.11		151,886		1,747			1.53
Total interest-earning assets (c)	Total interest-earning assets (c)	$	392,766	$	1,429	0.73	%	$	340,749	$	2,517	1.48	%	Total interest-earning assets (c)	$	388,823	$	2,125	0.73	%	$	346,418	$	3,339		1.29	%
Noninterest-earning assets	Noninterest-earning assets	63,566						59,569						Noninterest-earning assets	64,283						58,785
Total assets	Total assets	$	456,332					$	400,318					Total assets	$	453,106					$	405,203
Liabilities	Liabilities													Liabilities
Interest-bearing liabilities:	Interest-bearing liabilities:													Interest-bearing liabilities:
Interest-bearing deposits:	Interest-bearing deposits:													Interest-bearing deposits:
Domestic offices	Domestic offices	$	127,744	$	(15)	(0.02)	%	$	101,025	$	185	0.37	%	Domestic offices	$	126,353	$	(20)	(0.02)	%	$	101,610	$	181		0.24	%
Foreign offices	Foreign offices	114,531		(71)		(0.13)		103,113		38		0.07		Foreign offices	112,919		(110)		(0.13)		105,000		13			0.02
Total interest-bearing deposits	Total interest-bearing deposits	242,275		(86)		(0.07)		204,138		223		0.22		Total interest-bearing deposits	239,272		(130)		(0.07)		206,610		194			0.13
Federal funds purchased and securities sold under repurchase agreements (a)	Federal funds purchased and securities sold under repurchase agreements (a)	14,526		(8)		(0.12)		14,064		276		3.95		Federal funds purchased and securities sold under repurchase agreements (a)	14,152		(6)		(0.05)		15,000		282			2.51
Trading liabilities	Trading liabilities	2,255		5		0.45		1,800		9		0.94		Trading liabilities	2,445		6		0.32		2,099		11			0.66
Other borrowed funds	Other borrowed funds	314		3		2.11		1,495		11		1.53		Other borrowed funds	337		6		2.27		1,286		14			1.50
Commercial paper	Commercial paper	—		—		—		886		7		1.50		Commercial paper	4		—		0.07		1,352		7			0.70
Payables to customers and broker-dealers	Payables to customers and broker-dealers	17,249		(1)		(0.01)		17,564		29		0.33		Payables to customers and broker-dealers	17,047		(2)		(0.01)		17,879		29			0.22
Long-term debt	Long-term debt	25,734		210		1.63		27,677		364		2.62		Long-term debt	25,740		301		1.55		27,285		499			2.43
Total interest-bearing liabilities	Total interest-bearing liabilities	$	302,353	$	123	0.08	%	$	267,624	$	919	0.69	%	Total interest-bearing liabilities	$	298,997	$	175	0.08	%	$	271,511	$	1,036		0.51	%
Total noninterest-bearing deposits	Total noninterest-bearing deposits	84,622						66,494						Total noninterest-bearing deposits	84,945						66,869
Other noninterest-bearing liabilities	Other noninterest-bearing liabilities	23,933						24,174						Other noninterest-bearing liabilities	24,010						23,913
Total liabilities	Total liabilities	410,908						358,292						Total liabilities	407,952						362,293
Temporary equity	Temporary equity													Temporary equity
Redeemable noncontrolling interests	Redeemable noncontrolling interests	71						70						Redeemable noncontrolling interests	62						74
Permanent equity	Permanent equity													Permanent equity
Total The Bank of New York Mellon Corporation shareholders’ equity	Total The Bank of New York Mellon Corporation shareholders’ equity	45,097						41,846						Total The Bank of New York Mellon Corporation shareholders’ equity	44,827						42,722
Noncontrolling interests	Noncontrolling interests	256						110						Noncontrolling interests	265						114
Total permanent equity	Total permanent equity	45,353						41,956						Total permanent equity	45,092						42,836
Total liabilities, temporary equity and permanent equity	Total liabilities, temporary equity and permanent equity	$	456,332					$	400,318					Total liabilities, temporary equity and permanent equity	$	453,106					$	405,203
Net interest revenue (FTE) – Non-GAAP (d)	Net interest revenue (FTE) – Non-GAAP (d)			$	1,306					$	1,598			Net interest revenue (FTE) – Non-GAAP (d)			$	1,950					$	2,303
Net interest margin (FTE) – Non-GAAP (c)(d)	Net interest margin (FTE) – Non-GAAP (c)(d)					0.67	%					0.94	%	Net interest margin (FTE) – Non-GAAP (c)(d)					0.67	%						0.89	%
Less: Tax equivalent adjustment	Less: Tax equivalent adjustment			6						4				Less: Tax equivalent adjustment			9						6
Net interest revenue – GAAP	Net interest revenue – GAAP			$	1,300					$	1,594			Net interest revenue – GAAP			$	1,941					$	2,297
Net interest margin – GAAP	Net interest margin – GAAP					0.67	%					0.94	%	Net interest margin – GAAP					0.67	%						0.89	%

(a) Includes the average impact of offsetting under enforceable netting agreements of approximately ~~$39~~$42 billion for the first ~~six~~nine months of 2021 and ~~$73~~$63 billion for the first ~~six~~nine months of 2020. 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 0.17% for the first ~~six~~nine months of 2021 and ~~0.87%~~0.71% for the first ~~six~~nine months of 2020. 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 ~~(0.03)~~(0.01)% for the first ~~six~~nine months of 2021 and ~~0.64%~~0.48% for the first ~~six~~nine months of 2020. 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.

(d) See “Net interest revenue” on page 11 for the reconciliation of this Non-GAAP measure.

BNY Mellon 13

Noninterest expense


Noninterest expense	Noninterest expense															YTD21		Noninterest expense															YTD21
								2Q21 vs.								vs.									3Q21 vs.								vs.
(dollars in millions)	(dollars in millions)	2Q21		1Q21		2Q20		1Q21		2Q20		YTD21		YTD20		YTD20		(dollars in millions)	3Q21		2Q21		3Q20		2Q21		3Q20		YTD21		YTD20		YTD20
Staff	Staff	$	1,518	$	1,602	$	1,464	(5)	%	4	%	$	3,120	$	2,946	6	%	Staff	$	1,584	$	1,518	$	1,466	4	%	8	%	$	4,704	$	4,412	7	%
Software and equipment	Software and equipment	365		362		345		1		6		727		671		8		Software and equipment	372		365		340		2		9		1,099		1,011		9
Professional, legal and other purchased services	Professional, legal and other purchased services	363		343		337		6		8		706		667		6		Professional, legal and other purchased services	363		363		355		—		2		1,069		1,022		5
Sub-custodian and clearing	Sub-custodian and clearing	132		124		120		6		10		256		225		14		Sub-custodian and clearing	129		132		119		(2)		8		385		344		12
Net occupancy	Net occupancy	122		123		137		(1)		(11)		245		272		(10)		Net occupancy	120		122		136		(2)		(12)		365		408		(11)
Distribution and servicing	Distribution and servicing	73		74		85		(1)		(14)		147		176		(16)		Distribution and servicing	76		73		85		4		(11)		223		261		(15)
Bank assessment charges	Bank assessment charges	35		34		35		3		—		69		70		(1)		Bank assessment charges	34		35		30		(3)		13		103		100		3
Business development																		Business development	22		22		17		—		29		63		79		(20)
Amortization of intangible assets	Amortization of intangible assets	20		24		26		(17)		(23)		44		52		(15)		Amortization of intangible assets	19		20		26		(5)		(27)		63		78		(19)
Business development		22		19		20		16		10		41		62		(34)
Other	Other	128		146		117		(12)		9		274		257		7		Other	199		128		107		55		86		473		364		30
Total noninterest expense	Total noninterest expense	$	2,778	$	2,851	$	2,686	(3)	%	3	%	$	5,629	$	5,398	4	%	Total noninterest expense	$	2,918	$	2,778	$	2,681	5	%	9	%	$	8,547	$	8,079	6	%

Full-time employees at period end	Full-time employees at period end	48,800		48,000		48,300		2	%	1	%	48,800		48,300		1	%	Full-time employees at period end	48,900		48,800		48,600		—	%	1	%	48,900		48,600		1	%

Total noninterest expense increased 3%9% compared with the ~~second~~third quarter of 2020 and ~~decreased 3%~~5% compared with the ~~first~~second quarter of 2021. The increase compared with the ~~second~~third quarter of 2020 primarily reflects higher revenue-related expenses and litigation reserves, investments in growth, infrastructure and efficiency initiatives and the unfavorable impact of a weaker U.S. ~~dollar, investments in efficiency and growth initiatives and higher revenue-related expenses.~~dollar. The investments in ~~efficiency~~growth, infrastructure and ~~growth~~efficiency initiatives are primarily included in staff, software and equipment, and professional, legal and other purchased services expenses. The ~~decrease~~increase compared with the ~~first~~second quarter of 2021 primarily reflects ~~lower staff expense driven by increased expense for awards to retirement eligible employees recorded~~higher litigation reserves, investments in ~~the first quarter of 2021.~~growth, infrastructure and efficiency initiatives and higher revenue-related expenses.

We expect total reported noninterest expense to increase approximately 3%4% for the full-year 2021 compared to 2020. This is driven by an unfavorable impact of foreign exchange rates, incremental investments in growth, infrastructure and efficiency opportunities and higher volume- and revenue-related expenses, partially offset by the 1% year-over-year impact of notable items. Notable items include increased litigation reserves in both years and in 2020 ~~notable items, which were litigation expense,~~also included severance and real estate charges. ~~Notable items comprised 1% of total noninterest expense in 2020.~~ Noninterest expense could be impacted if foreign exchange rates change from ~~June~~Sept. 30, 2021 levels, volume- and revenue-related expenses increase or there are unexpected charges or expenses.

Year-to-date 2021 compared with year-to-date 2020

Noninterest expense increased 4%6% compared with the first ~~six~~nine months of 2020, primarily reflecting investments in ~~efficiency~~growth, infrastructure and ~~growth~~efficiency initiatives, the unfavorable impact of a weaker U.S. dollar and higher revenue-related expenses ~~partially offset by lower distribution~~ and ~~servicing, net occupancy and business development (travel and marketing) expenses.~~litigation reserves.

Income taxes

BNY Mellon recorded an income tax provision of $219 million (18.8% effective tax rate) in the third quarter of 2021, $213 million (18.4% effective tax rate) in the third quarter of 2020 and $241 million (19.0% effective tax rate) in the second ~~quarter of 2021, $216 million (18.3% effective tax rate) in the second quarter of 2020 and $221 million (19.2% effective tax rate) in the first~~ quarter of 2021. For additional information, see Note 10 of the Notes to Consolidated Financial Statements.

14 BNY Mellon

Review of businesses

We have an internal information system that produces performance data along product and service lines for our two principal businesses, Investment Services and Investment and Wealth Management, and the Other segment.

Business 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, 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 business and how our businesses are presented and analyzed, see Note 24 of the Notes to Consolidated Financial Statements in our 2020 Annual Report.

Business results are subject to reclassification when organizational changes are made, or for refinements in revenue and expense allocation methodologies. Refinements are typically reflected on a prospective basis. There were no reclassification or organizational changes in the ~~second~~third quarter of 2021.

The results of our businesses may be influenced by client and other activities that vary by quarter. In the first quarter, staff expense typically increases reflecting the vesting of long-term stock awards for retirement-eligible employees. In the third quarter, Depositary Receipts revenue is typically higher due to an increased level of client dividend payments. Also in the third quarter, volume-related fees may decline

due to reduced client activity, and staff expense typically increases reflecting the annual employee merit increase. In the fourth quarter, we typically incur higher business development and marketing expenses; however, 2020 was an exception given the impact of the coronavirus pandemic. In our Investment and Wealth Management business, performance fees are typically higher in the fourth and first quarters, as those quarters represent the end of the measurement period for many of the performance fee-eligible relationships.

The results of our businesses 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 Investment Services business, we typically have more foreign currency-denominated expenses than revenues. However, our Investment and Wealth Management business typically has more foreign currency-denominated revenues than expenses. Overall, currency fluctuations impact the year-over-year growth rate in the Investment and Wealth Management business more than the Investment Services business. However, currency fluctuations, in isolation, are not expected to significantly impact net income on a consolidated basis.

Fee revenue in Investment and Wealth Management, and to a lesser extent in Investment Services, is impacted by the value of market indices. At ~~June~~Sept. 30, 2021, we estimated 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 $0.04 to $0.07.

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

BNY Mellon 15

Investment Services business


																												YTD21																													YTD21
(dollars in millions)	(dollars in millions)																2Q21 vs.											vs.		(dollars in millions)																3Q21 vs.											vs.
		2Q21			1Q21			4Q20			3Q20			2Q20			1Q21		2Q20		YTD21			YTD20				YTD20			3Q21			2Q21			1Q21			4Q20			3Q20			2Q21		3Q20		YTD21			YTD20				YTD20
Revenue:	Revenue:																													Revenue:
Investment services fees:	Investment services fees:																													Investment services fees:
Asset servicing fees (a)	Asset servicing fees (a)	$	1,192		$	1,191		$	1,130		$	1,156		$	1,164		—	%	2	%	$	2,383		$	2,311			3	%	Asset servicing fees (a)	$	1,216		$	1,192		$	1,191		$	1,130		$	1,156		2	%	5	%	$	3,599		$	3,467			4	%
Clearing services fees (b)	Clearing services fees (b)	435			455			418			397			431			(4)		1		890			901				(1)		Clearing services fees (b)	423			435			455			418			397			(3)		7		1,313			1,298				1
Issuer services fees	Issuer services fees	281			245			257			295			277			15		1		526			540				(3)		Issuer services fees	280			281			245			257			295			—		(5)		806			835				(3)
Treasury services fees	Treasury services fees	160			157			156			152			144			2		11		317			293				8		Treasury services fees	164			160			157			156			152			3		8		481			445				8
Total investment services fees	Total investment services fees	2,068			2,048			1,961			2,000			2,016			1		3		4,116			4,045				2		Total investment services fees	2,083			2,068			2,048			1,961			2,000			1		4		6,199			6,045				3
Foreign exchange revenue	Foreign exchange revenue	152			193			163			126			164			(21)		(7)		345			392			(c)	(12)		Foreign exchange revenue	148			152			193			163			126			(3)		17		493			518			(c)	(5)
Other (d)	Other (d)	116			104			111			120			159			12		(27)		220			338			(c)	(35)		Other (d)	147			116			104			111			120			27		23		367			458			(c)	(20)
Total fee and other revenue	Total fee and other revenue	2,336			2,345			2,235			2,246			2,339			—		—		4,681			4,775				(2)		Total fee and other revenue	2,378			2,336			2,345			2,235			2,246			2		6		7,059			7,021				1
Net interest revenue	Net interest revenue	643			645			670			681			768			—		(16)		1,288			1,574				(18)		Net interest revenue	632			643			645			670			681			(2)		(7)		1,920			2,255				(15)
Total revenue	Total revenue	2,979			2,990			2,905			2,927			3,107			—		(4)		5,969			6,349				(6)		Total revenue	3,010			2,979			2,990			2,905			2,927			1		3		8,979			9,276				(3)
Provision for credit losses	Provision for credit losses	(77)			(79)			31			(10)			145			N/M				(156)			294				N/M		Provision for credit losses	(35)			(77)			(79)			31			(10)			N/M				(191)			284				N/M
Noninterest expense (excluding amortization of intangible assets)	Noninterest expense (excluding amortization of intangible assets)	2,040			2,084			2,157			2,002			1,971			(2)		4		4,124			3,940				5		Noninterest expense (excluding amortization of intangible assets)	2,200			2,040			2,084			2,157			2,002			8		10		6,324			5,942				6
Amortization of intangible assets	Amortization of intangible assets	12			17			17			18			18			(29)		(33)		29			36				(19)		Amortization of intangible assets	11			12			17			17			18			(8)		(39)		40			54				(26)
Total noninterest expense	Total noninterest expense	2,052			2,101			2,174			2,020			1,989			(2)		3		4,153			3,976				4		Total noninterest expense	2,211			2,052			2,101			2,174			2,020			8		9		6,364			5,996				6
Income before income taxes	Income before income taxes	$	1,004		$	968		$	700		$	917		$	973		4	%	3	%	$	1,972		$	2,079			(5)	%	Income before income taxes	$	834		$	1,004		$	968		$	700		$	917		(17)	%	(9)	%	$	2,806		$	2,996			(6)	%

Pre-tax operating margin	Pre-tax operating margin	34		%	32		%	24		%	31		%	31		%					33		%	33		%				Pre-tax operating margin	28		%	34		%	32		%	24		%	31		%					31		%	32		%

Securities lending revenue	Securities lending revenue	$	42		$	41		$	36		$	37		$	51		2	%	(18)	%	$	83		$	97			(14)	%	Securities lending revenue	$	45		$	42		$	41		$	36		$	37		7	%	22	%	$	128		$	134			(4)	%

Total revenue by line of business:	Total revenue by line of business:																													Total revenue by line of business:
Asset Servicing	Asset Servicing	$	1,382		$	1,424		$	1,357		$	1,354		$	1,463		(3)	%	(6)	%	$	2,806		$	2,994			(6)	%	Asset Servicing	$	1,437		$	1,382		$	1,424		$	1,357		$	1,354		4	%	6	%	$	4,243		$	4,348			(2)	%
Pershing	Pershing	590			605			563			538			578			(2)		2		1,195			1,231				(3)		Pershing	566			590			605			563			538			(4)		5		1,761			1,769				—
Issuer Services	Issuer Services	405			363			385			435			431			12		(6)		768			850				(10)		Issuer Services	400			405			363			385			435			(1)		(8)		1,168			1,285				(9)
Treasury Services	Treasury Services	319			317			325			323			340			1		(6)		636			679				(6)		Treasury Services	326			319			317			325			323			2		1		962			1,002				(4)
Clearance and Collateral Management	Clearance and Collateral Management	283			281			275			277			295			1		(4)		564			595				(5)		Clearance and Collateral Management	281			283			281			275			277			(1)		1		845			872				(3)
Total revenue by line of business	Total revenue by line of business	$	2,979		$	2,990		$	2,905		$	2,927		$	3,107		—	%	(4)	%	$	5,969		$	6,349			(6)	%	Total revenue by line of business	$	3,010		$	2,979		$	2,990		$	2,905		$	2,927		1	%	3	%	$	8,979		$	9,276			(3)	%

Average balances:	Average balances:																													Average balances:

Average loans	Average loans	$	46,845		$	43,468		$	41,437		$	40,308		$	43,113		8	%	9	%	$	45,166		$	42,451			6	%	Average loans	$	47,430		$	46,845		$	43,468		$	41,437		$	40,308		1	%	18	%	$	45,929		$	41,731			10	%
Average deposits	Average deposits	$	313,923		$	315,088		$	292,631		$	263,621		$	268,467		—	%	17	%	$	314,502		$	255,327			23	%	Average deposits	$	308,645		$	313,923		$	315,088		$	292,631		$	263,621		(2)	%	17	%	$	312,528		$	258,112			21	%

(a) Asset servicing fees include the fees from the Clearance and Collateral Management business.

(b) Clearing services fees are almost entirely earned by our Pershing business.

(d) Other revenue includes investment management and performance fees, financing-related fees, distribution and servicing revenue, securities gains and losses and investment and other income.

N/M – Not meaningful.

16 BNY Mellon


Investment Services business metrics	Investment Services business metrics											2Q21 vs.				Investment Services business metrics											3Q21 vs.
(dollars in millions, unless otherwise noted)	(dollars in millions, unless otherwise noted)	2Q21		1Q21		4Q20		3Q20		2Q20		1Q21		2Q20		(dollars in millions, unless otherwise noted)	3Q21		2Q21		1Q21		4Q20		3Q20		2Q21		3Q20
AUC/A at period end (in trillions) (a)	AUC/A at period end (in trillions) (a)	$	45.0	$	41.7	$	41.1	$	38.6	$	37.3	8	%	21	%	AUC/A at period end (in trillions) (a)	$	45.3	$	45.0	$	41.7	$	41.1	$	38.6	1	%	17	%
Market value of securities on loan at period end (in billions) (b)	Market value of securities on loan at period end (in billions) (b)	$	456	$	445	$	435	$	378	$	384	2	%	19	%	Market value of securities on loan at period end (in billions) (b)	$	443	$	456	$	445	$	435	$	378	(3)	%	17	%

Pershing:	Pershing:															Pershing:
Net new assets (U.S. platform) (in billions) (c)	Net new assets (U.S. platform) (in billions) (c)	$	40	$	28	$	28	$	12	$	11	N/M				Net new assets (U.S. platform) (in billions) (c)	$	7	$	40	$	28	$	28	$	12	N/M
Average active clearing accounts (U.S. platform) (in thousands)	Average active clearing accounts (U.S. platform) (in thousands)	6,889		6,757		6,635		6,556		6,507		2	%	6	%	Average active clearing accounts (U.S. platform) (in thousands)	6,849		6,889		6,757		6,635		6,556		(1)	%	4	%
Average long-term mutual fund assets (U.S. platform)	Average long-term mutual fund assets (U.S. platform)	$	730,954	$	678,556	$	630,086	$	597,312	$	547,579	8	%	33	%	Average long-term mutual fund assets (U.S. platform)	$	736,843	$	730,954	$	678,556	$	630,086	$	597,312	1	%	23	%
Average investor margin loans (U.S. platform)	Average investor margin loans (U.S. platform)	$	12,097	$	10,937	$	10,097	$	9,350	$	9,235	11	%	31	%	Average investor margin loans (U.S. platform)	$	13,050	$	12,097	$	10,937	$	10,097	$	9,350	8	%	40	%

Clearance and Collateral Management:	Clearance and Collateral Management:															Clearance and Collateral Management:
Average tri-party collateral management balances (in billions)	Average tri-party collateral management balances (in billions)	$	3,898	$	3,638	$	3,555	$	3,417	$	3,573	7	%	9	%	Average tri-party collateral management balances (in billions)	$	4,516	$	3,898	$	3,638	$	3,555	$	3,417	16	%	32	%

(a) Consists of AUC/A primarily from the Asset Servicing business and, to a lesser extent, the Clearance and Collateral Management, Issuer Services, Pershing and Wealth Management businesses. Includes the AUC/A of CIBC Mellon of $1.7 trillion at Sept. 30, 2021 and June 30, 2021,, ~~$1.6~~ $1.6 trillion at March 31, 2021, $1.5 trillion at Dec. 31, 2020 and $1.4 trillionat Sept. 30, ~~2020 and$1.3 trillion at June 30,~~ 2020.

(b) 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, 2021, $63 billion at June 30, 2021, $64 billion at March 31, 2021, $68 billion at Dec. 31, 2020 and $62 billion at Sept. ~~30, 2020 and June~~ 30, 2020.

(c) Net new assets represent net flows of assets excluding dividends and interest (e.g., net cash deposits and net securities transfers) in customer accounts in Pershing LLC, a U.S. broker-dealer.

N/M – Not meaningful.

Business description

BNY Mellon Investment Services provides business services and technology solutions to entities including financial institutions, corporations, foundations and endowments, public funds and government agencies. Our lines of business include: Asset Servicing, Pershing, Issuer Services, Treasury Services and Clearance and Collateral Management. For information on the drivers of the Investment Services fee revenue, see Note 10 of the Notes to Consolidated Financial Statements in our 2020 Annual Report.

We are one of the leading global investment services providers with ~~$45.0~~$45.3 trillion of AUC/A at ~~June~~Sept. 30, 2021.

The Asset Servicing business provides a comprehensive suite of solutions. As one of the largest global custody and fund accounting providers and a trusted partner, we offer services for the safekeeping of assets in capital markets globally as well as alternative investment and structured product strategies. We provide custody and foreign exchange services, support exchange-traded funds and unit investment trusts and provide our clients outsourcing capabilities. Our robust digital and data offerings enable us to provide fully integrated technology solutions for our clients. We deliver 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 $5.0 trillion in 34 separate markets. Our market-leading liquidity services portal enables cash investments for institutional clients and includes fund research and analytics.

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

The Issuer Services business includes Corporate Trust and Depositary Receipts. Our Corporate Trust business delivers a full range of issuer and related investor services, including trustee, paying agency, fiduciary, escrow and other financial services. 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 are one of the largest providers of depositary receipts services in the world, partnering with leading companies from more than 50 countries.

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

BNY Mellon 17

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 liquidity, financing, risk and balance sheet challenges. We are a leading provider of tri-party collateral management services with an average of ~~$3.9~~$4.5 trillion serviced globally, including approximately ~~$2.7~~$3.4 trillion of the U.S. tri-party repo market at ~~June~~Sept. 30, 2021.

Review of financial results

AUC/A of ~~$45.0~~$45.3 trillion increased ~~21%~~17% compared with ~~June~~Sept. 30, 2020, primarily reflecting higher market values, client inflows and net new ~~business and the favorable impact of a weaker U.S. dollar.~~business. AUC/A consisted of ~~38%~~37% equity securities and ~~62%~~63% fixed-income securities at ~~June~~Sept. 30, 2021 and ~~33%~~34% equity securities and ~~67%~~66% fixed-income securities at ~~June~~Sept. 30, 2020.

Total revenue of $3.0 billion ~~decreased 4%~~increased 3% compared with the ~~second~~third quarter of 2020 and ~~decreased slightly~~1% compared with the ~~first~~second quarter of 2021. The drivers of total revenue by line of business are indicated below.

Asset Servicing revenue of $1.4 billion ~~decreased~~increased 6% compared with the ~~second~~third quarter of 2020 and 3%4% compared with the ~~first quarter of 2021. The decrease compared with the~~ second quarter of 2020 includes lower net interest revenue, higher money market fee waivers and lower foreign exchange revenue, partially offset by higher client activity and market values. The decrease compared with the first quarter of 2021 primarily reflects lower foreign exchange revenue and higher money market fee waivers.

~~Pershing revenue of $590 million increased 2% compared with the second quarter of 2020 and decreased 2% compared with the first~~ quarter of 2021. The increase compared with the third quarter of 2020 primarily reflects higher market values, strategic equity investment gains, higher client activity and foreign exchange revenue, partially offset by higher money market fee waivers and lower net interest revenue. The increase compared with the second quarter of 2021 primarily reflects strategic equity investment gains and higher market levels and client activity.

Pershing revenue of $566 million increased 5% compared with the third quarter of 2020 and decreased 4% compared with the second quarter of 2021. The increase compared with the third quarter of 2020 primarily reflects higher market values, client ~~activity~~balances and ~~balances,~~activity, partially offset by higher money market fee waivers. The decrease compared with the ~~first~~second quarter of 2021 ~~primarily~~ reflects lower

clearance volumes and net interest revenue, partially offset by higher market values.

Issuer Services revenue of ~~$405~~$400 million decreased 6%8% compared with the ~~second~~third quarter of 2020 and ~~increased 12%~~1% compared with the ~~first~~second quarter of 2021. The decrease compared with the ~~second~~third quarter of 2020 primarily reflects higher money market fee waivers and lower fees and net interest revenue in Corporate Trust, partially offset by higher Depositary Receipts revenue. The ~~increase~~decrease compared with the ~~first~~second quarter of 2021 primarily reflects lower fees and net interest revenue in Corporate Trust, partially offset by seasonally higher Depositary Receipts revenue.

Treasury Services revenue of $326 million increased 1% compared with the third quarter of 2020 and 2% compared with the second quarter of 2021. The increase compared with the third quarter of 2020 primarily reflects higher payment volumes and higher net interest revenue driven by higher deposit balances, partially offset by higher money market fee ~~waivers in Corporate Trust.~~

Treasury Services revenue of $319 million decreased 6% compared with the second quarter of 2020 and increased 1% compared with the first quarter of 2021. The decrease compared with the second quarter of 2020 primarily reflects lower interest rates and higher money market fee waivers, partially offset by higher payment volumes and deposits.waivers. The increase compared with the ~~first~~second quarter of 2021 primarily reflects higher net interest revenue and ~~net new business, partially offset by higher money market fee waivers.~~payment volumes.

Clearance and Collateral Management revenue of ~~$283~~$281 million increased 1% compared with the third quarter of 2020 and decreased 4%1% compared with the second quarter of ~~2020 and increased 1%~~2021. The increase compared with the ~~first quarter of 2021. The decrease compared with the second~~third quarter of 2020 primarily reflects ~~lower net interest revenue, intraday credit~~higher non-U.S. collateral management fees driven by balances and higher clearance volumes, partially offset by ~~higher tri-party collateral management balances. The increase compared with the first quarter of 2021 primarily reflects higher tri-party collateral management balances, partially offset by~~ lower ~~clearance volumes.~~intraday credit fees and net interest revenue.

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 regulations and reduce their operating costs.

Noninterest expense of ~~$2.1~~$2.2 billion increased 3%9% compared with the third quarter of 2020 and 8% compared with the second quarter of ~~2020~~2021. Both increases primarily reflect higher litigation reserves, higher revenue-related expenses and ~~decreased 2% compared with the first quarter of 2021. The increase compared with the second quarter of 2020 primarily reflects the unfavorable impact of a weaker U.S. dollar,~~ investments in growth, infrastructure and efficiency ~~and~~initiatives.

18 BNY Mellon

growth initiatives and higher revenue-related expenses. The decrease compared with the first quarter of 2021 primarily reflects lower staff and litigation expenses, partially offset by higher revenue-related expenses.

Year-to-date 2021 compared with year-to-date 2020

Total revenue of ~~$6.0~~$9.0 billion decreased 6%3% compared with the first ~~six~~nine months of 2020. Asset Servicing revenue of ~~$2.8~~$4.2 billion decreased 6%2%, primarily reflecting lower net interest revenue ~~higher money market fee waivers~~ and ~~lower foreign exchange revenue, partially offset by higher client activity and market values. Pershing revenue of $1.2 billion decreased 3%, primarily reflecting~~ higher money market fee waivers, partially offset by higher market values and client ~~volumes.~~activity. Pershing revenue of $1.8 billion decreased slightly, primarily reflecting higher money market fee waivers and lower clearance volumes, partially offset by higher market values and client balances and activity. Issuer Services revenue of

~~$768 million~~ $1.2 billion decreased ~~10%~~9%, primarily reflecting lower ~~net~~ interest ~~revenue~~rates and higher money market fee waivers in Corporate Trust. Treasury Services

revenue of ~~$636~~$962 million decreased 6%4%, primarily reflecting lower interest rates and higher money market fee waivers, partially offset by higher payment volumes and deposits. Clearance and Collateral Management revenue of ~~$564~~$845 million decreased 5%3%, primarily reflecting lower net interest revenue, lower intra-day credit fees and clearance volumes.

Noninterest expense of ~~$4.2~~$6.4 billion increased 4%6% compared with the first ~~six~~nine months of 2020 primarily ~~reflects~~reflecting investments in growth, infrastructure and efficiency initiatives, higher litigation reserves and ~~growth initiatives,~~revenue-related expenses and the unfavorable impact of a weaker U.S. ~~dollar, higher revenue-related expenses and litigation expense.~~dollar.

~~BNY Mellon 19~~

Investment and Wealth Management business


																											YTD21																												YTD21
																	2Q21 vs.										vs.																		3Q21 vs.										vs.
(dollars in millions)	(dollars in millions)	2Q21			1Q21			4Q20			3Q20			2Q20			1Q21		2Q20		YTD21			YTD20			YTD20		(dollars in millions)	3Q21			2Q21			1Q21			4Q20			3Q20			2Q21		3Q20		YTD21			YTD20			YTD20
Revenue:	Revenue:																												Revenue:
Investment management fees (a)	Investment management fees (a)	$	876		$	850		$	839		$	828		$	782		3	%	12	%	$	1,726		$	1,594		8	%	Investment management fees (a)	$	893		$	876		$	850		$	839		$	828		2	%	8	%	$	2,619		$	2,422		8	%
Performance fees	Performance fees	14			40			45			7			5			N/M		180		54			55			(2)		Performance fees	21			14			40			45			7			N/M		200		75			62			21
Investment management and performance fees (b)	Investment management and performance fees (b)	890			890			884			835			787			—		13		1,780			1,649			8		Investment management and performance fees (b)	914			890			890			884			835			3		9		2,694			2,484			8
Distribution and servicing	Distribution and servicing	28			28			29			31			34			—		(18)		56			77			(27)		Distribution and servicing	28			28			28			29			31			—		(10)		84			108			(22)
Other (a)	Other (a)	34			25			27			5			17			N/M				59			(42)			N/M		Other (a)	43			34			25			27			5			N/M				102			(37)			N/M
Total fee and other revenue (a)	Total fee and other revenue (a)	952			943			940			871			838			1		14		1,895			1,684			13		Total fee and other revenue (a)	985			952			943			940			871			3		13		2,880			2,555			13
Net interest revenue	Net interest revenue	47			48			50			47			48			(2)		(2)		95			100			(5)		Net interest revenue	47			47			48			50			47			—		—		142			147			(3)
Total revenue	Total revenue	999			991			990			918			886			1		13		1,990			1,784			12		Total revenue	1,032			999			991			990			918			3		12		3,022			2,702			12
Provision for credit losses	Provision for credit losses	(4)			4			(8)			12			7			N/M				—			16			N/M		Provision for credit losses	(7)			(4)			4			(8)			12			N/M				(7)			28			N/M
Noninterest expense (excluding amortization of intangible assets)	Noninterest expense (excluding amortization of intangible assets)	669			702			678			653			650			(5)		3		1,371			1,337			3		Noninterest expense (excluding amortization of intangible assets)	684			669			702			678			653			2		5		2,055			1,990			3
Amortization of intangible assets	Amortization of intangible assets	8			7			9			8			8			14		—		15			16			(6)		Amortization of intangible assets	7			8			7			9			8			(13)		(13)		22			24			(8)
Total noninterest expense	Total noninterest expense	677			709			687			661			658			(5)		3		1,386			1,353			2		Total noninterest expense	691			677			709			687			661			2		5		2,077			2,014			3
Income before income taxes	Income before income taxes	$	326		$	278		$	311		$	245		$	221		17	%	48	%	$	604		$	415		46	%	Income before income taxes	$	348		$	326		$	278		$	311		$	245		7	%	42	%	$	952		$	660		44	%

Pre-tax operating margin	Pre-tax operating margin	33		%	28		%	32		%	27		%	25		%					30		%	23		%			Pre-tax operating margin	34		%	33		%	28		%	32		%	27		%					31		%	24		%
Adjusted pre-tax operating margin – Non-GAAP (c)	Adjusted pre-tax operating margin – Non-GAAP (c)	35		%	30		%	34		%	29		%	28		%					33		%	26		%			Adjusted pre-tax operating margin – Non-GAAP (c)	36		%	35		%	30		%	34		%	29		%					34		%	27		%

Total revenue by line of business:	Total revenue by line of business:																												Total revenue by line of business:
Investment Management	Investment Management	$	700		$	698		$	714		$	641		$	621		—	%	13	%	$	1,398		$	1,241		13	%	Investment Management	$	727		$	700		$	698		$	714		$	641		4	%	13	%	$	2,125		$	1,882		13	%
Wealth Management	Wealth Management	299			293			276			277			265			2		13		592			543			9		Wealth Management	305			299			293			276			277			2		10		897			820			9
Total revenue by line of business	Total revenue by line of business	$	999		$	991		$	990		$	918		$	886		1	%	13	%	$	1,990		$	1,784		12	%	Total revenue by line of business	$	1,032		$	999		$	991		$	990		$	918		3	%	12	%	$	3,022		$	2,702		12	%

Average balances:	Average balances:																												Average balances:
Average loans	Average loans	$	11,871		$	11,610		$	11,497		$	11,503		$	11,791		2	%	1	%	$	11,742		$	11,958		(2)	%	Average loans	$	12,248		$	11,871		$	11,610		$	11,497		$	11,503		3	%	6	%	$	11,912		$	11,805		1	%
Average deposits	Average deposits	$	17,466		$	19,177		$	18,144		$	17,570		$	17,491		(9)	%	—	%	$	18,317		$	16,817		9	%	Average deposits	$	17,270		$	17,466		$	19,177		$	18,144		$	17,570		(1)	%	(2)	%	$	17,964		$	17,070		5	%

(a) Total fee and other revenue ~~includes the impact~~is net of ~~the~~income attributable to noncontrolling interests related to consolidated investment management ~~funds, net of noncontrolling interests.~~funds. Additionally, other revenue includes asset servicing fees, treasury services fees, foreign exchange revenue and investment and other income.

(b) On a constant currency basis, investment management and performance fees increased 9%8% (Non-GAAP) compared with the ~~second~~third quarter of 2020. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 4745 for the reconciliation of this Non-GAAP measure.

(c) Net of distribution and servicing expense. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page ~~47.~~45.

N/M – Not meaningful.

20 BNY Mellon 19


AUM trends	AUM trends											2Q21 vs.				AUM trends											3Q21 vs.
(dollars in billions)	(dollars in billions)	2Q21		1Q21		4Q20		3Q20		2Q20		1Q21		2Q20		(dollars in billions)	3Q21		2Q21		1Q21		4Q20		3Q20		2Q21		3Q20
AUM at period end, by product type: (a)	AUM at period end, by product type: (a)															AUM at period end, by product type: (a)
Equity	Equity	$	187	$	173	$	170	$	149	$	141	8	%	33	%	Equity	$	180	$	187	$	173	$	170	$	149	(4)	%	21	%
Fixed income	Fixed income	272		261		259		241		224		4		21		Fixed income	269		272		261		259		241		(1)		12
Index	Index	440		419		393		350		333		5		32		Index	436		440		419		393		350		(1)		25
Liability-driven investments	Liability-driven investments	841		802		855		788		752		5		12		Liability-driven investments	843		841		802		855		788		—		7
Multi-asset and alternative investments	Multi-asset and alternative investments	222		214		209		193		185		4		20		Multi-asset and alternative investments	218		222		214		209		193		(2)		13
Cash	Cash	358		345		325		320		326		4		10		Cash	364		358		345		325		320		2		14
Total AUM by product type		$	2,320	$	2,214	$	2,211	$	2,041	$	1,961	5	%	18	%
Total AUM																Total AUM	$	2,310	$	2,320	$	2,214	$	2,211	$	2,041	—	%	13	%

Changes in AUM: (a)	Changes in AUM: (a)															Changes in AUM: (a)
Beginning balance of AUM	Beginning balance of AUM	$	2,214	$	2,211	$	2,041	$	1,961	$	1,796					Beginning balance of AUM	$	2,320	$	2,214	$	2,211	$	2,041	$	1,961
Net inflows (outflows):	Net inflows (outflows):															Net inflows (outflows):
Long-term strategies:	Long-term strategies:															Long-term strategies:
Equity	Equity	(3)		—		(2)		(4)		(2)						Equity	(5)		(3)		—		(2)		(4)
Fixed income	Fixed income	8		8		5		1		4						Fixed income	1		8		8		5		1
Liability-driven investments	Liability-driven investments	11		8		15		14		(2)						Liability-driven investments	16		11		8		15		14
Multi-asset and alternative investments	Multi-asset and alternative investments	1		(2)		—		(3)		—						Multi-asset and alternative investments	(2)		1		(2)		—		(3)
Total long-term active strategies inflows	Total long-term active strategies inflows	17		14		18		8		—						Total long-term active strategies inflows	10		17		14		18		8
Index	Index	(5)		3		(3)		(3)		9						Index	(3)		(5)		3		(3)		(3)
Total long-term strategies inflows	Total long-term strategies inflows	12		17		15		5		9						Total long-term strategies inflows	7		12		17		15		5
Short-term strategies:	Short-term strategies:															Short-term strategies:
Cash	Cash	13		19		5		(10)		11						Cash	7		13		19		5		(10)
Total net inflows (outflows)	Total net inflows (outflows)	25		36		20		(5)		20						Total net inflows (outflows)	14		25		36		20		(5)
Net market impact	Net market impact	79		(36)		93		41		143						Net market impact	4		79		(36)		93		41
Net currency impact	Net currency impact	2		3		57		44		2						Net currency impact	(28)		2		3		57		44

Ending balance of AUM	Ending balance of AUM	$	2,320	$	2,214	$	2,211	$	2,041	$	1,961	5	%	18	%	Ending balance of AUM	$	2,310	$	2,320	$	2,214	$	2,211	$	2,041	—	%	13	%

Wealth Management client assets (b)	Wealth Management client assets (b)	$	305	$	292	$	286	$	265	$	254	4	%	20	%	Wealth Management client assets (b)	$	307	$	305	$	292	$	286	$	265	1	%	16	%

(a) Excludes securities lending cash management assets and assets managed in the Investment Services business.

(b) Includes AUM and AUC/A in the Wealth Management business.

Business description

Our Investment and Wealth Management business 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 19 and 20 of our 2020 Annual Report for additional information on our Investment and Wealth Management business.

Review of financial results

AUM increased ~~18%~~13% compared with ~~June~~Sept. 30, 2020 primarily reflecting higher market values, net inflows and the favorable impact of a weaker U.S. ~~dollar (principally versus the British pound) and net inflows.~~dollar.

Net long-term strategy inflows were ~~$12~~$7 billion in the ~~second~~third quarter of 2021, driven by ~~inflows of~~ liability-driven ~~and fixed income~~ investments, partially offset by ~~outflows of index and~~ equity funds. Short-term strategy inflows were ~~$13~~$7 billion in the ~~second~~third quarter of 2021. Market and regulatory trends have resulted in increased demand for lower fee asset management products and for performance-based fees.

Total revenue of ~~$999 million~~$1.0 billion increased ~~13%~~12% compared with the ~~second~~third quarter of 2020 and 1%3% compared with the ~~first~~second quarter of 2021.

Investment Management revenue of ~~$700~~$727 million increased 13% compared with the ~~second~~third quarter of 2020 and ~~increased slightly~~4% compared with the ~~first~~second quarter of 2021. The increase compared with the ~~second~~third quarter of 2020 primarily reflects ~~the impact of~~ higher market values and equity income, strategic equity investment gains, the favorable impact of a weaker U.S. dollar and higher performance fees, ~~and net inflows,~~ partially offset by ~~the impact of~~ money market fee waivers. The ~~slight~~ increase compared with the second quarter of 2021 primarily reflects higher market

20 BNY Mellon 21

~~with the first quarter of 2021 primarily reflects the impact of higher market~~ values, ~~equity investment gains (net of hedges), including seed capital, and net inflows, partially offset by the timing of performance fees and higher~~lower money market fee ~~waivers.~~waivers and higher performance fees.

Wealth Management revenue of ~~$299~~$305 million increased ~~13%~~10% compared with the ~~second~~third quarter of 2020 and 2% compared with the ~~first~~second quarter of 2021. Both increases primarily reflect ~~the impact of~~ higher market values.

Revenue generated in the Investment and Wealth Management business included 38% from non-U.S. sources in the ~~second~~third quarter of 2021, compared with ~~40%~~41% in the ~~second~~third quarter of 2020 and 38% in the ~~first~~second quarter of 2021.

Noninterest expense of ~~$677~~$691 million increased 3%5% compared with the third quarter of 2020 and 2% compared with the second quarter of ~~2020~~2021. Both increases primarily reflect higher revenue-related expenses and ~~decreased 5% compared with the first quarter of 2021.~~investments in growth initiatives. The increase compared with the ~~second~~third quarter of 2020 ~~primarily~~also reflects the unfavorable impact of a weaker U.S.

~~weaker U.S.~~ dollar, ~~and higher staff expense,~~ partially offset by lower distribution and servicing ~~expense. The decrease compared with the first quarter of 2021 primarily reflects lower staff~~ expense.

Year-to-date 2021 compared with year-to-date 2020

Total revenue of ~~$2.0~~$3.0 billion increased 12% compared with the first ~~six~~nine months of 2020. Investment Management revenue of ~~$1.4~~$2.1 billion increased 13% primarily reflecting higher market values, the favorable impact of a weaker U.S. dollar, ~~and~~higher equity ~~investment gains (net of hedges), including~~income and seed capital gains, partially offset by higher money market fee waivers. Wealth Management revenue of ~~$592~~$897 million increased 9%, primarily reflecting higher market values.

Noninterest expense of ~~$1.4~~$2.1 billion increased 2%3% compared with the first ~~six~~nine months of 2020, primarily reflecting higher revenue-related expenses, investments in growth initiatives and the unfavorable impact of a weaker U.S. dollar, ~~and higher staff expense,~~ partially offset by lower distribution and servicing expense.

Other segment


(in millions)	(in millions)	2Q21		1Q21		4Q20		3Q20		2Q20		YTD21		YTD20			(in millions)	3Q21		2Q21		1Q21		4Q20		3Q20		YTD21		YTD20
Fee revenue	Fee revenue	$	13	$	9	$	11	$	7	$	10	$	22	$	16	(a)	Fee revenue	$	12	$	13	$	9	$	11	$	7	$	34	$	23	(a)
Other revenue	Other revenue	9		(36)		(28)		13		28		(27)		52		(a)	Other revenue	23		9		(36)		(28)		13		(4)		65		(a)
Total fee and other revenue	Total fee and other revenue	22		(27)		(17)		20		38		(5)		68			Total fee and other revenue	35		22		(27)		(17)		20		30		88
Net interest (expense)	Net interest (expense)	(45)		(38)		(40)		(25)		(36)		(83)		(80)			Net interest (expense)	(38)		(45)		(38)		(40)		(25)		(121)		(105)
Total revenue	Total revenue	(23)		(65)		(57)		(5)		2		(88)		(12)			Total revenue	(3)		(23)		(65)		(57)		(5)		(91)		(17)
Provision for credit losses	Provision for credit losses	(5)		(8)		(8)		7		(9)		(13)		2			Provision for credit losses	(3)		(5)		(8)		(8)		7		(16)		9
Noninterest expense	Noninterest expense	49		41		64		—		39		90		69			Noninterest expense	16		49		41		64		—		106		69
(Loss) before income taxes	(Loss) before income taxes	$	(67)	$	(98)	$	(113)	$	(12)	$	(28)	$	(165)	$	(83)		(Loss) before income taxes	$	(16)	$	(67)	$	(98)	$	(113)	$	(12)	$	(181)	$	(95)

Average loans and leases	Average loans and leases	$	1,804	$	1,711	$	1,794	$	1,805	$	1,815	$	1,757	$	1,887		Average loans and leases	$	1,528	$	1,804	$	1,711	$	1,794	$	1,805	$	1,680	$	1,861

See page 21 of our 2020 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 inbetween fee and other revenue and net interest expense.

Total revenue increased $2 million compared with the third quarter of 2020 and increased $20 million

~~Fee~~compared with the second quarter of 2021. The increase compared with the second quarter of 2021 primarily reflects investment and ~~other revenue~~disposal gains.

Noninterest expense increased $16 million compared with the third quarter of 2020 and decreased ~~$16~~$33 million compared with the second quarter of ~~2020 and increased $49 million~~2021. The increase compared with the ~~first~~third quarter of ~~2021.~~2020 primarily reflects higher staff expense. The decrease compared with the second quarter of ~~2020 was impacted by lower net securities gains. The increase compared with the first quarter of~~ 2021 primarily reflects ~~an impairment of a renewable energy investment recorded in the first quarter of 2021.~~

lower staff expense and professional, legal and other purchased services.

22 BNY Mellon 21

~~Noninterest expense increased $10 million compared with the second quarter of 2020 and $8 million compared with the first quarter of 2021. Both increases primarily reflect higher staff expense.~~

Year-to-date 2021 compared with year-to-date 2020

(Loss) before income taxes increased ~~$82~~$86 million compared with the first ~~six~~nine months of 2020. Total fee and other revenue decreased ~~$73~~$58 million, primarily reflecting an impairment of a renewable energy investment recorded in the first quarter of 2021 and lower net securities gains. Noninterest expense increased ~~$21~~$37 million compared with the first ~~six~~nine months of 2020, primarily reflecting higher staff expense.

Critical accounting estimates

Our significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements in our 2020 Annual Report. Our critical accounting estimates are those related to the allowance for credit losses, fair value of financial instruments and derivatives, goodwill and other intangibles and litigation and regulatory contingencies, as referenced below.


Critical accounting estimates			Reference
Allowance for credit losses			2020 Annual Report, pages 24-26, and “Allowance for credit losses.”
Fair value of financial instruments and derivatives			2020 Annual Report, pages 26-28.
Goodwill and other intangibles			2020 Annual Report, pages 28-29. Also see below.28-29, and second quarter 2021 Form 10-Q, page 23.
Litigation and regulatory contingencies			“Legal proceedings” in Note 17 of the Notes to Consolidated Financial Statements.

~~Goodwill and other intangible assets~~

BNY Mellon’s business segments include six reporting units for which goodwill impairment testing is performed on an annual basis. The Investment Services segment is comprised of four reporting units and the Investment and Wealth Management segment is comprised of two reporting units.

~~In the second quarter of 2021, 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 March 31, 2021. The discount rate applied to these cash flows was 10% and incorporated a 6% 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 all six of the Company’s reporting units were substantially in excess of the respective reporting units’ carrying value. The Investment Management reporting unit, with $7.3 billion of allocated goodwill, which is one of the two reporting units in the Investment and Wealth Management segment, exceeded its carrying value by approximately 25%. For the Investment Management reporting unit, in the future, small changes in the assumptions, such as changes in the level of AUM and operating margin, could produce a non-cash goodwill impairment. See “Critical accounting estimates” in our 2020 Annual Report for additional information on the annual goodwill impairment test.

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 undertake overall liquidity risk, including intraday liquidity risk, that 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 ~~June~~Sept. 30, 2021, total assets were ~~$467~~$471 billion, compared with $470 billion at Dec. 31, 2020. The ~~decrease~~increase in total assets was primarily driven by higher loans and other assets, partially offset by lower

~~BNY Mellon 23~~

interest-bearing deposits with the Federal Reserve and other central ~~banks, partially offset by higher loans.~~banks. Deposits totaled ~~$339~~$343 billion at ~~June~~Sept. 30, 2021, compared with $342 billion at Dec. 31, 2020. The ~~decrease~~increase reflects higher noninterest-bearing deposits (principally U.S. offices), partially offset by lower interest-bearing deposits in both non-U.S. and U.S. ~~offices, partially offset by higher noninterest-bearing deposits (principally U.S. offices).~~offices. Total interest-bearing deposits as a percentage of total interest-earning assets were ~~61%~~60% at ~~June~~Sept. 30, 2021 and 63% at Dec. 31, 2020.

At ~~June~~Sept. 30, 2021, available funds totaled ~~$183~~$182 billion, which include 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. This compares with available funds of $196 billion at Dec. 31, 2020. Total available funds as a percentage of total assets were 39% at ~~June~~Sept. 30, 2021 and 42% at Dec. 31, 2020. For additional information on our available funds, see “Liquidity and dividends.”

Securities were ~~$155.9~~$157 billion, or 33% of total assets, at ~~June~~Sept. 30, 2021, compared with ~~$156.4~~$156 billion, or 33% of total assets, at Dec. 31, 2020. The ~~decrease~~increase primarily reflects ~~lower~~investments in U.S. Treasury securities and agency commercial mortgage-backed securities (“MBS”), partially offset by decreases in agency residential mortgage-backed securities (“RMBS”) and ~~a decrease in~~ unrealized pre-tax ~~gain, partially offset by an increase in U.S. Treasury securities.~~gains. For additional information on our securities portfolio, see “Securities” and Note 3 of the Notes to Consolidated Financial Statements.

Loans were ~~$63.5~~$64 billion, or 14% of total assets, at ~~June~~Sept. 30, 2021, compared with ~~$56.5~~$56 billion, or 12% of total assets, at Dec. 31, 2020. The increase was

primarily driven by higher margin loans, overdrafts and ~~overdrafts.~~wealth management loans and mortgages exposure, partially offset by lower financial institutions exposure. For additional information on our loan portfolio, see “Loans” and Note 4 of the Notes to Consolidated Financial Statements.

22 BNY Mellon

Long-term debt totaled ~~$25.6~~$25 billion at ~~June~~Sept. 30, 2021 and ~~$26.0~~$26 billion at Dec. 31, 2020. Redemptions ~~a maturity~~and maturities and a decrease in the fair value of hedged long-term debt were partially offset by issuances. For additional information on long-term debt, see “Liquidity and dividends.”

The Bank of New York Mellon Corporation total shareholders’ equity decreased to ~~$45.3~~$44 billion at ~~June~~Sept. 30, 2021 from ~~$45.8~~$46 billion at Dec. 31, 2020. For additional information, see “Capital.”

Country risk exposure

The following table presents BNY Mellon’s top 10 exposures by country (excluding the U.S.) as of ~~June~~ Sept.

30, 2021, as well as certain countries with higher risk profiles, and is presented on an internal risk management basis. We monitor our exposure to these and other countries as part of our internal country risk management process.

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, 2021		Interest-bearing deposits										Total exposure
Country risk exposure at Sept. 30, 2021														Country risk exposure at Sept. 30, 2021	Interest-bearing deposits															Total exposure
(in billions)	(in billions)	Central banks		Banks		Lending (a)		Securities (b)		Other (c)				Total exposure				(in billions)	Central banks		Banks			Lending (a)			Securities (b)				Other (c)
Top 10 country exposure:	Top 10 country exposure:															Top 10 country exposure:
United Kingdom (“UK”)	United Kingdom (“UK”)	$	19.6	$	0.4	$	1.6	$	3.4	$	3.8	$	28.8			United Kingdom (“UK”)	$	18.4	$	0.2		$	1.3		$	3.5		$	3.0		$	26.4
Germany	Germany	22.2		0.6		0.6		4.3		0.5		28.2				Germany	19.0		0.7			0.8			4.5			0.4			25.4
Canada																Canada	—		5.0			0.4			4.0			1.0			10.4
Belgium																Belgium	8.4		0.8			0.1			0.1			—			9.4
Japan	Japan	18.2		0.9		—		0.5		0.2		19.8				Japan	6.6		0.3			—			0.4			0.1			7.4
Belgium		8.6		0.7		0.1		0.2		—		9.6
Canada		—		3.9		0.3		3.7		1.2		9.1
Netherlands	Netherlands	4.3		—		0.3		2.0		0.1		6.7				Netherlands	4.2		0.1			0.2			1.9			0.1			6.5
Luxembourg	Luxembourg	1.4		0.1		0.2		0.1		2.8		4.6				Luxembourg	1.4		0.1			0.6			0.1			2.7			4.9
Ireland																Ireland	0.8		0.2			0.4			0.2			2.3			3.9
China	China	—		2.5		1.3		—		0.1		3.9				China	—		2.6			0.8			—			0.3			3.7
Ireland		0.7		0.2		0.4		0.2		2.3		3.8
France	France	—		0.4		—		2.8		0.3		3.5				France	—		0.5			0.1			2.7			0.2			3.5
Total Top 10 country exposure	Total Top 10 country exposure	$	75.0	$	9.7	$	4.8	$	17.2	$	11.3	$	118.0	(d)		Total Top 10 country exposure	$	58.8	$	10.5		$	4.7		$	17.4		$	10.1		$	101.5	(d)

Select country exposure:	Select country exposure:															Select country exposure:
Italy	Italy	$	0.1	$	—	$	—	$	1.7	$	—	$	1.8			Italy	$	—	$	0.4		$	—		$	1.6		$	—		$	2.0
Brazil	Brazil	—		—		0.9		0.1		0.4		1.4				Brazil	—		—			0.8			0.1			0.3			1.2
Total select country exposure	Total select country exposure	$	0.1	$	—	$	0.9	$	1.8	$	0.4	$	3.2			Total select country exposure	$	—	$	0.4		$	0.8		$	1.7		$	0.3		$	3.2

(a) Lending includes loans, acceptances, issued letters of credit, net of participations, and lending-related commitments.

(b) Securities include 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 total non-U.S. exposure.

Events in recent years have resulted in increased focus on Italy and Brazil. The country risk exposure to Italy primarily consists of investment grade sovereign debt. The country risk exposure to Brazil is primarily short-term trade finance loans extended to large financial institutions. We also have operations in Brazil providing investment services and investment management services.

Securities

In the discussion of our 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 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.

BNY Mellon 2523

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


Securities portfolio	Securities portfolio	March 31, 2021			2Q21 change in unrealized gain (loss)		June 30, 2021						Fair value as a % of amortized cost (a)		Unrealized gain (loss)				% Floating rate (b)				Ratings (c)												Securities portfolio	June 30, 2021						3Q21 change in unrealized gain (loss)			Sept. 30, 2021							Fair value as a % of amortized cost (a)			Unrealized gain (loss)			% Floating rate (b)				Ratings (c)
																	BBB+/ BBB-					BB+ and lower	A1+/A2 & SP-1																												BBB+/ BBB-						BB+ and lower			A1+/A2 & SP-1
(dollars in millions)	(dollars in millions)						Fair value				Amortized cost (a)														Fair value								AAA/ AA-		A+/ A-				Not rated						(dollars in millions)		Fair value															Amortized cost (a)		Fair value								AAA/ AA-		A+/ A-		Not rated
Agency RMBS	Agency RMBS	$	58,831				$	66	$	53,154	$	53,944					101	%	$	790			14	%			100	%	—	%	—	%	—	%	—		%	—		%	Agency RMBS		$	53,944					$	(100)		$	52,223		$	52,913		101	%	$	690			13	%			100	%	—	%	—	%	—	%	—	%	—	%
U.S. Treasury	U.S. Treasury	30,595			(28)		34,112		34,267				100		155				53				100		—		—		—		—		—		U.S. Treasury	34,267						(31)			35,920			36,044				100			124			53				100		—		—		—		—		—
Sovereign debt/sovereign guaranteed (d)	Sovereign debt/sovereign guaranteed (d)	14,571			(6)		14,098		14,209				101		111				16				75		5		19		1		—		—		Sovereign debt/sovereign guaranteed (d)	14,209						(34)			13,968			14,045				101			77			15				77		5		17		1		—		—
Agency commercial mortgage-backed securities (“MBS”)		11,730			72		11,360		11,678				103		318				30				100		—		—		—		—		—
Agency commercial MBS																																			Agency commercial MBS	11,678						(78)			12,309			12,549				102			240			24				100		—		—		—		—		—
Supranational	Supranational	7,505			—		8,121		8,157				100		36				56				100		—		—		—		—		—		Supranational	8,157						(17)			7,985			8,004				100			19			56				100		—		—		—		—		—
Foreign covered bonds (e)	Foreign covered bonds (e)	6,542			(10)		6,752		6,793				101		41				35				100		—		—		—		—		—		Foreign covered bonds (e)	6,793						(12)			6,917			6,946				100			29			37				100		—		—		—		—		—
U.S. government agencies	U.S. government agencies	5,469			43		5,446		5,460				100		14				25				100		—		—		—		—		—		U.S. government agencies	5,460						(8)			5,420			5,426				100			6			25				100		—		—		—		—		—
Collateralized loan obligations (“CLOs”)	Collateralized loan obligations (“CLOs”)	4,754			(1)		5,137		5,139				100		2				100				99		—		—		—		—		1		Collateralized loan obligations (“CLOs”)	5,139						—			5,202			5,204				100			2			100				99		—		—		1		—		—
Non-agency commercial MBS	Non-agency commercial MBS	2,948			41		3,181		3,263				103		82				24				99		1		—		—		—		—		Non-agency commercial MBS	3,263						(23)			3,108			3,167				102			59			25				100		—		—		—		—		—
Foreign government agencies (f)	Foreign government agencies (f)	2,697			(4)		2,693		2,708				101		15				13				92		8		—		—		—		—		Foreign government agencies (f)	2,708						(6)			2,670			2,679				100			9			17				92		8		—		—		—		—
State and political subdivisions	State and political subdivisions	2,649			27		2,610		2,621				100		11				—				83		10		—		—		6		1		State and political subdivisions	2,621						(17)			2,665			2,659				100			(6)			—				87		10		—		—		2		1
Non-agency RMBS (g)	Non-agency RMBS (g)	2,509			(5)		2,391		2,530				106		139				50				74		4		—		11		—		11		Non-agency RMBS (g)	2,530						(7)			2,515			2,647				105			132			44				77		4		—		9		—		10
Other asset-backed securities (“ABS”)	Other asset-backed securities (“ABS”)	2,628			(1)		2,446		2,456				100		10				19				100		—		—		—		—		—		Other asset-backed securities (“ABS”)	2,456						(5)			2,307			2,312				100			5			16				100		—		—		—		—		—
Corporate bonds	Corporate bonds	2,238			50		2,348		2,347				100		(1)				—				16		68		16		—		—		—		Corporate bonds	2,347						(17)			2,395			2,377				99			(18)			—				15		67		18		—		—		—

Other	Other	1			—		1		1				100		—				—				—		—		—		—		—		100		Other	1						—			1			1				100			—			—				—		—		—		—		—		100
Total securities	Total securities	$	155,667	(h)	$	244	$	153,850	$	155,573	(h)		101	%	$	1,723	(h)(i)		31		%		96	%	2	%	2	%	—	%	—	%	—	%	Total securities	$	155,573		(h)			$	(355)		$	155,605		$	156,973		(h)	101		%	$	1,368	(h)(i)	30	%			96	%	2	%	2	%	—	%	—	%	—	%

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

(b) Includes the impact of hedges.

(d) Primarily consists of exposure to Germany, France, Italy, UK, Singapore and Spain.

(e) Primarily consists of exposure to Canada, UK, Australia, Germany and Norway.

(f) Primarily consists of exposure to the Netherlands, Canada, France, Norway and Sweden.

(g) Includes RMBS that were included in the former Grantor Trust of ~~$451 million at March 31, 2021 and~~ $416 million at June 30, 2021 and $387 million at Sept. 30, 2021.

(h) Includes net unrealized losses on derivatives hedging securities available-for-sale (including terminated hedges) of ~~$634 million at March 31, 2021 and~~ $927 million at June 30, 2021 and $742 million at Sept. 30, 2021.

(i) Includes unrealized gains of ~~$1,129~~$927 million at ~~June~~Sept. 30, 2021 related to available-for-sale securities, net of hedges, and ~~$594~~$441 million related to held-to-maturity securities.

The fair value of our securities portfolio, including related hedges, was ~~$155.6~~$157.0 billion at ~~June~~Sept. 30, 2021, compared with $156.3 billion at Dec. 31, 2020. The ~~decrease~~increase primarily reflects ~~lower~~investments in U.S. Treasury securities and agency commercial MBS, partially offset by decreases in agency RMBS and ~~a decrease in~~ unrealized pre-tax ~~gain, partially offset by an increase in U.S. Treasury securities.~~gains.

At ~~June~~Sept. 30, 2021, the securities portfolio had a net unrealized gain, including the impact of related hedges, of ~~$1.7~~$1.4 billion, compared with $3.2 billion at Dec. 31, 2020. The decrease in the net unrealized gain, including the impact of hedges, was primarily driven by higher market interest rates.

The fair value of the available-for-sale securities totaled ~~$102.7~~$100.3 billion at ~~June~~Sept. 30, 2021, net of hedges, or ~~66%~~64% of the securities portfolio, net of hedges. The fair value of the held-to-maturity securities totaled ~~$52.9~~$56.7 billion at ~~June~~Sept. 30, 2021, or ~~34%~~36% of the securities portfolio, net of hedges.

The unrealized gain (after-tax) on our available-for-sale securities portfolio, net of hedges, included in accumulated other comprehensive income was ~~$854~~$703 million at ~~June~~Sept. 30, 2021, compared with $1.5 billion at Dec. 31, 2020. The decrease in the unrealized gain, net of tax, was primarily driven by higher market interest rates.

At ~~June~~Sept. 30, 2021, 96% of the securities in our portfolio were rated AAA/AA-, compared with 95% at Dec. 31, 2020.

See 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 securities by level in the fair value hierarchy.

2624 BNY Mellon

The following table presents the amortizable purchase premium (net of discount) related to the securities portfolio and accretable discount related to the 2009 restructuring of the securities portfolio.


Net premium amortization and discount accretion of securities (a)	Net premium amortization and discount accretion of securities (a)											Net premium amortization and discount accretion of securities (a)
(dollars in millions)	(dollars in millions)	2Q21		1Q21		4Q20		3Q20		2Q20		(dollars in millions)	3Q21		2Q21		1Q21		4Q20		3Q20
Amortizable purchase premium (net of discount) relating to securities:	Amortizable purchase premium (net of discount) relating to securities:											Amortizable purchase premium (net of discount) relating to securities:
Balance at period-end	Balance at period-end	$	2,067	$	2,195	$	2,283	$	2,050	$	1,693	Balance at period-end	$	2,120	$	2,067	$	2,195	$	2,283	$	2,050
Estimated average life remaining at period-end (in years)	Estimated average life remaining at period-end (in years)	4.4		4.3		3.9		3.8		3.7		Estimated average life remaining at period-end (in years)	4.5		4.4		4.3		3.9		3.8
Amortization	Amortization	$	183	$	189	$	181	$	161	$	125	Amortization	$	168	$	183	$	189	$	181	$	161
Accretable discount related to the prior restructuring of the securities portfolio:	Accretable discount related to the prior restructuring of the securities portfolio:											Accretable discount related to the prior restructuring of the securities portfolio:
Balance at period-end	Balance at period-end	$	118	$	121	$	130	$	133	$	145	Balance at period-end	$	115	$	118	$	121	$	130	$	133
Estimated average life remaining at period-end (in years)	Estimated average life remaining at period-end (in years)	6.1		5.9		5.6		5.7		5.8		Estimated average life remaining at period-end (in years)	6.0		6.1		5.9		5.6		5.7
Accretion	Accretion	$	9	$	12	$	8	$	9	$	10	Accretion	$	11	$	9	$	12	$	8	$	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


Total exposure – consolidated	Total exposure – consolidated	June 30, 2021						Dec. 31, 2020						Total exposure – consolidated	Sept. 30, 2021						Dec. 31, 2020
(in billions)	(in billions)	Loans		Unfunded commitments		Total exposure		Loans		Unfunded commitments		Total exposure		(in billions)	Loans		Unfunded commitments		Total exposure		Loans		Unfunded commitments		Total exposure
Non-margin loans:	Non-margin loans:													Non-margin loans:
Financial institutions	Financial institutions	$	10.7	$	32.4	$	43.1	$	11.2	$	32.8	$	44.0	Financial institutions	$	9.4	$	32.1	$	41.5	$	11.2	$	32.8	$	44.0
Commercial	Commercial	1.7		12.3		14.0		1.4		12.7		14.1		Commercial	1.7		11.9		13.6		1.4		12.7		14.1
Subtotal institutional	Subtotal institutional	12.4		44.7		57.1		12.6		45.5		58.1		Subtotal institutional	11.1		44.0		55.1		12.6		45.5		58.1
Wealth management loans and mortgages	Wealth management loans and mortgages	17.5		1.1		18.6		16.4		1.1		17.5		Wealth management loans and mortgages	18.0		1.3		19.3		16.4		1.1		17.5
Commercial real estate	Commercial real estate	6.1		3.5		9.6		6.1		3.2		9.3		Commercial real estate	6.4		3.6		10.0		6.1		3.2		9.3
Lease financings	Lease financings	0.9		—		0.9		1.0		—		1.0		Lease financings	0.8		—		0.8		1.0		—		1.0
Other residential mortgages	Other residential mortgages	0.3		—		0.3		0.4		—		0.4		Other residential mortgages	0.3		—		0.3		0.4		—		0.4
Overdrafts	Overdrafts	4.3		—		4.3		2.7		—		2.7		Overdrafts	4.6		—		4.6		2.7		—		2.7
Other	Other	2.1		—		2.1		1.9		—		1.9		Other	2.3		—		2.3		1.9		—		1.9
Subtotal non-margin loans	Subtotal non-margin loans	43.6		49.3		92.9		41.1		49.8		90.9		Subtotal non-margin loans	43.5		48.9		92.4		41.1		49.8		90.9
Margin loans	Margin loans	19.9		0.1		20.0		15.4		0.1		15.5		Margin loans	20.8		0.1		20.9		15.4		0.1		15.5
Total	Total	$	63.5	$	49.4	$	112.9	$	56.5	$	49.9	$	106.4	Total	$	64.3	$	49.0	$	113.3	$	56.5	$	49.9	$	106.4

At ~~June~~Sept. 30, 2021, total lending-related exposure of ~~$112.9~~$113.3 billion increased 6% compared with Dec. 31, 2020, primarily reflecting higher margin loans, overdrafts and wealth management ~~loans~~ and mortgages exposure, partially offset by lower financial institutions exposure.

Our financial institutions and commercial portfolios comprise our largest concentrated risk. These portfolios comprised ~~51%~~49% of our total exposure at ~~June~~Sept. 30, 2021 and 55% at Dec. 31, 2020. Additionally, most of our overdrafts relate to financial institutions.

BNY Mellon 2725

Financial institutions

The financial institutions portfolio is shown below.


Financial institutions portfolio exposure (dollars in billions)	Financial institutions portfolio exposure (dollars in billions)	June 30, 2021										Dec. 31, 2020						Financial institutions portfolio exposure (dollars in billions)	Sept. 30, 2021										Dec. 31, 2020
		Loans		Unfunded commitments		Total exposure		% Inv. grade		% due <1 yr.		Loans		Unfunded commitments		Total exposure			Loans		Unfunded commitments		Total exposure		% Inv. grade		% due <1 yr.		Loans		Unfunded commitments		Total exposure
Securities industry	Securities industry	$	2.4	$	20.2	$	22.6	97	%	99	%	$	2.3	$	21.6	$	23.9	Securities industry	$	2.0	$	18.8	$	20.8	97	%	99	%	$	2.3	$	21.6	$	23.9
Asset managers	Asset managers	1.5		6.9		8.4		98		81		1.4		6.4		7.8		Asset managers	1.5		7.4		8.9		98		77		1.4		6.4		7.8
Banks	Banks	6.0		1.1		7.1		85		95		6.7		1.1		7.8		Banks	4.9		1.7		6.6		86		88		6.7		1.1		7.8
Insurance	Insurance	0.2		3.0		3.2		100		22		0.1		2.8		2.9		Insurance	0.3		3.0		3.3		100		17		0.1		2.8		2.9
Government	Government	0.1		0.2		0.3		100		44		0.1		0.2		0.3		Government	0.1		0.1		0.2		100		—		0.1		0.2		0.3
Other	Other	0.5		1.0		1.5		96		44		0.6		0.7		1.3		Other	0.6		1.1		1.7		97		58		0.6		0.7		1.3
Total	Total	$	10.7	$	32.4	$	43.1	96	%	87	%	$	11.2	$	32.8	$	44.0	Total	$	9.4	$	32.1	$	41.5	96	%	84	%	$	11.2	$	32.8	$	44.0

The financial institutions portfolio exposure was ~~$43.1~~$41.5 billion at ~~June~~Sept. 30, 2021, a decrease of 2%6% compared with Dec. 31, 2020, primarily reflecting lower exposure to the securities industry and ~~banks~~bank portfolios, partially offset by higher exposure to the asset managers, ~~portfolio.~~insurance and other portfolios.

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~~Sept. 30, 2021. 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. 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 ~~87%~~84% of the exposures expiring within one year. At ~~June~~Sept. 30, 2021, ~~16%~~56% of the exposure to financial institutions had an expiration within 90 days, compared with 18% at Dec. 31, 2020.

Secured intraday credit facilities represent approximately 40% of the exposure in the financial institutions portfolio and are reviewed and reapproved annually.

In addition, ~~71%~~68% of the financial institutions exposure is secured. For example, securities industry clients and asset managers often borrow against marketable securities held in custody.

At ~~June~~Sept. 30, 2021, the secured intra-day credit provided to dealers in connection with their tri-party repo activity totaled ~~$17.2~~$17.7 billion and was included in the securities industry portfolio. Dealers secure the outstanding intraday credit with high-quality liquid collateral having a market value in excess of the amount of the outstanding credit.

The asset managers portfolio exposure is high-quality, with 98% of the exposures meeting our investment grade equivalent ratings criteria as of ~~June~~Sept. 30, 2021. These exposures are generally short-term liquidity facilities, with the majority to regulated mutual funds.

Our banks exposure primarily relates to our global trade finance. These exposures are short-term in nature, with ~~95%~~88% due in less than one year. The investment grade percentage of our banks exposure was ~~85%~~86% at ~~both June~~Sept. 30, 2021 and 85% at Dec. 31, 2020. Our non-investment grade exposures are primarily trade finance loans in Brazil.

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Commercial

The commercial portfolio is presented below.


Commercial portfolio exposure	Commercial portfolio exposure	June 30, 2021										Dec. 31, 2020						Commercial portfolio exposure	Sept. 30, 2021										Dec. 31, 2020
(dollars in billions)	(dollars in billions)	Loans		Unfunded commitments		Total exposure		% Inv. grade		% due <1 yr.		Loans		Unfunded commitments		Total exposure		(dollars in billions)	Loans		Unfunded commitments		Total exposure		% Inv. grade		% due <1 yr.		Loans		Unfunded commitments		Total exposure
Manufacturing	Manufacturing	$	0.6	$	3.9	$	4.5	96	%	18	%	$	0.5	$	4.1	$	4.6	Manufacturing	$	0.5	$	4.0	$	4.5	96	%	17	%	$	0.5	$	4.1	$	4.6
Energy and utilities	Energy and utilities	0.3		4.0		4.3		89		5		0.3		3.9		4.2		Energy and utilities	0.3		3.9		4.2		88		3		0.3		3.9		4.2
Services and other	Services and other	0.7		3.5		4.2		95		40		0.6		3.8		4.4		Services and other	0.8		3.2		4.0		94		33		0.6		3.8		4.4
Media and telecom	Media and telecom	0.1		0.9		1.0		93		11		—		0.9		0.9		Media and telecom	0.1		0.8		0.9		93		8		—		0.9		0.9
Total	Total	$	1.7	$	12.3	$	14.0	93	%	20	%	$	1.4	$	12.7	$	14.1	Total	$	1.7	$	11.9	$	13.6	93	%	17	%	$	1.4	$	12.7	$	14.1

The commercial portfolio exposure was ~~$14.0~~$13.6 billion at ~~June~~Sept. 30, 2021, a decrease of 1%4% from Dec. 31, 2020, primarily driven by lower exposure to the services and other portfolio.

We have ~~$676~~$563 million of total direct exposure to the oil and gas industry at ~~June~~Sept. 30, 2021, most of which is reflected in the energy and utilities portfolio in the table above. This exposure is to exploration and production, refining and integrated companies and was ~~65%~~58% investment grade at ~~June~~Sept. 30, 2021 and 66% at Dec. 31, 2020.

Our credit strategy is to focus on investment grade clients that are active users of our non-credit services. 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	Percentage of the portfolios that are investment grade												Percentage of the portfolios that are investment grade
		Quarter ended										Quarter ended
		June 30, 2021		March 31, 2021		Dec. 31, 2020		Sept. 30, 2020		June 30, 2020			Sept. 30, 2021		June 30, 2021			March 31, 2021			Dec. 31, 2020			Sept. 30, 2020
Financial institutions	Financial institutions	96	%	96	%	95	%	95	%	95	%		96	%	96		%	96		%	95		%	95		%
Commercial	Commercial	93	%	92	%	92	%	93	%	92	%		Commercial	93		%	93		%	92		%	92		%	93	%

Wealth management loans and mortgages

Our wealth management exposure was ~~$18.6~~$19.3 billion at ~~June~~Sept. 30, 2021, compared with $17.5 billion at Dec. 31, 2020. 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% at origination. Less than 1% of the mortgages were past due at ~~June~~Sept. 30, 2021.

At ~~June~~Sept. 30, 2021, the wealth management mortgage portfolio consisted of the following geographic concentrations: California – 22%; New York – 16%; ~~Massachusetts~~Florida – 9%; ~~Florida~~Massachusetts – 9%; and other – 44%.

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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 class	Composition of commercial real estate portfolio by asset class	June 30, 2021				Dec. 31, 2020				Composition of commercial real estate portfolio by asset class	Sept. 30, 2021				Dec. 31, 2020
		Total exposure		Percentage secured (a)		Total exposure		Percentage secured (a)			Total exposure		Percentage secured (a)		Total exposure		Percentage secured (a)
(in billions)	(in billions)									(in billions)

Residential	Residential	$	3.4	82	%	$	3.3	86	%	Residential	$	3.5	82	%	$	3.3	86	%
Office	Office	2.6		77		2.8		75		Office	2.6		76		2.8		75
Retail	Retail	0.9		57		1.0		52		Retail	0.8		57		1.0		52
Mixed-use	Mixed-use	0.7		21		0.7		22		Mixed-use	0.7		24		0.7		22
Hotels	Hotels	0.6		20		0.6		20		Hotels	0.5		20		0.6		20
Healthcare	Healthcare	0.4		22		0.4		25		Healthcare	0.4		27		0.4		25
Other(b)	Other(b)	1.0		11		0.5		23		Other(b)	1.5		7		0.5		23
Total commercial real estate	Total commercial real estate	$	9.6	60	%	$	9.3	64	%	Total commercial real estate	$	10.0	58	%	$	9.3	64	%

(a) Represents the ~~amount~~percentage of exposure secured ~~exposure~~by real estate in each asset class.

(b) Includes subscription lines to real-estate related private equity funds and are secured by the fund investors’ capital commitments and the funds’ right to call capital.

Our commercial real estate exposure totaled ~~$9.6~~$10.0 billion at ~~June~~Sept. 30, 2021 and $9.3 billion at Dec. 31, 2020. 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 ~~June~~Sept. 30, 2021, the unsecured portfolio consisted of real estate investment trusts (“REITs”) and real estate operating companies, which are both primarily investment grade.

At ~~June~~Sept. 30, 2021, our commercial real estate portfolio consisted of the following concentrations: New York metro – ~~35%~~33%; REITs and real estate operating companies – ~~40%~~42%; and other – 25%.

Lease financings

The lease financings portfolio exposure totaled ~~$0.9~~$0.8 billion at ~~June~~Sept. 30, 2021 and $1.0 billion at Dec. 31, 2020. At ~~June~~Sept. 30, 2021, approximately 98% of leasing exposure was investment grade, or investment grade equivalent and consisted of exposures backed by well-diversified assets, primarily real estate and large-ticket transportation equipment. The largest ~~component~~components of our lease residual value exposure is

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

Other residential mortgages

The other residential mortgages portfolio primarily consists of 1-4 family residential mortgage loans and totaled ~~$339~~$317 million at ~~June~~Sept. 30, 2021 and $389 million at Dec. 31, 2020. Included in this portfolio at ~~June~~Sept. 30, 2021 were ~~$59~~$54 million of mortgage loans purchased in 2005, 2006 and the first quarter of 2007.

Overdrafts

Overdrafts primarily relate to custody and securities clearance clients 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-income securities.

Margin loans

Margin loan exposure of ~~$20.0~~$20.9 billion at ~~June~~Sept. 30, 2021 and $15.5 billion at Dec. 31, 2020 was collateralized with marketable securities. Borrowers are required to maintain a daily collateral margin in excess of 100% of the value of the loan. Margin loans included ~~$7.3~~$7.1 billion at ~~June~~Sept. 30, 2021 and $4.6 billion at Dec. 31, 2020 related to a term loan program that offers fully collateralized loans to broker-dealers.

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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 activity	Allowance for credit losses activity	June 30, 2021			March 31, 2021			Dec. 31, 2020				June 30, 2020			Allowance for credit losses activity	Sept. 30, 2021			June 30, 2021					Dec. 31, 2020			Sept. 30, 2020
(dollars in millions)	(dollars in millions)										June 30, 2020				Sept. 30, 2021							Sept. 30, 2020

Beginning balance of allowance for credit losses	Beginning balance of allowance for credit losses	$	419		$	501		$	486							$	329		Beginning balance of allowance for credit losses		$		335	$	419					$	486	$	475

Provision for credit losses	Provision for credit losses	(86)			(83)			15				143			Provision for credit losses	(45)			(86)					15			9

Net recoveries (charge-offs):	Net recoveries (charge-offs):														Net recoveries (charge-offs):
Loans:	Loans:														Loans:
Other residential mortgages															Other residential mortgages	1			—					—			1
Financial institutions	Financial institutions	2			—			—				—			Financial institutions	—			2					—			—
Other residential mortgages		—			2			—				3
Wealth management loans and mortgages	Wealth management loans and mortgages	—			(1)			—				—			Wealth management loans and mortgages	—			—					—			—

Other financial instruments	Other financial instruments	—			—			—				—			Other financial instruments	—			—					—			1
Net recoveries	Net recoveries	2			1			—				3			Net recoveries	1			2					—			2

Ending balance of allowance for credit losses	Ending balance of allowance for credit losses	$	335		$	419		$	501			$	475		Ending balance of allowance for credit losses	$	291		$	335				$	501		$	486

Allowance for loan losses	Allowance for loan losses	$	269		$	327		$	358			$	302		Allowance for loan losses	$	233		$	269				$	358		$	325
Allowance for lending-related commitments	Allowance for lending-related commitments	50			73			121				152			Allowance for lending-related commitments	40			50					121			135
Allowance for financial instruments (a)	Allowance for financial instruments (a)	16			19			22				21			Allowance for financial instruments (a)	18			16					22			26
Total allowance for credit losses	Total allowance for credit losses	$	335		$	419		$	501			$	475		Total allowance for credit losses	$	291		$	335				$	501		$	486

Non-margin loans	Non-margin loans	$	43,624		$	42,839		$	41,053			$	42,488		Non-margin loans	$	43,507		$	43,624				$	41,053		$	41,993
Margin loans	Margin loans	19,923			17,893			15,416				12,909			Margin loans	20,821			19,923					15,416			13,498
Total loans	Total loans	$	63,547		$	60,732		$	56,469			$	55,397		Total loans	$	64,328		$	63,547				$	56,469		$	55,491

Allowance for loan losses as a percentage of total loans	Allowance for loan losses as a percentage of total loans	0.42		%	0.54		%	0.63		%		0.55		%	Allowance for loan losses as a percentage of total loans	0.36		%	0.42		%			0.63		%	0.59		%
Allowance for loan losses as a percentage of non-margin loans	Allowance for loan losses as a percentage of non-margin loans	0.62			0.76			0.87				0.71			Allowance for loan losses as a percentage of non-margin loans	0.54			0.62					0.87			0.77
Allowance for loan losses and lending-related commitments as a percentage of total loans	Allowance for loan losses and lending-related commitments as a percentage of total loans	0.50			0.66			0.85				0.82			Allowance for loan losses and lending-related commitments as a percentage of total loans	0.42			0.50					0.85			0.83
Allowance for loan losses and lending-related commitments as a percentage of non-margin loans	Allowance for loan losses and lending-related commitments as a percentage of non-margin loans	0.73			0.93			1.17				1.07			Allowance for loan losses and lending-related commitments as a percentage of non-margin loans	0.63			0.73					1.17			1.10

(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.

The provision for credit losses was a benefit of ~~$86~~$45 million in the ~~second~~third quarter of 2021, primarily driven by an improved macroeconomic forecast.

We had ~~$19.9~~$20.8 billion of secured margin loans on our balance sheet at ~~June~~Sept. 30, 2021 compared with $15.4 billion at Dec. 31, 2020. We have rarely suffered a loss on these types of loans. As a result, we believe that the ratio of allowance for loan losses and lending-related commitments 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 lifetime expected losses in our credit portfolio. This evaluation process is subject to numerous estimates and judgments. 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,” in our 2020 Annual Report, we have allocated our allowance for loans and lending-related commitments as presented below.

BNY Mellon 3129


Allocation of allowance for loan losses and lending-related commitments	Allocation of allowance for loan losses and lending-related commitments												Allocation of allowance for loan losses and lending-related commitments
		June 30, 2021		March 31, 2021			Dec. 31, 2020			June 30, 2020					Sept. 30, 2021		June 30, 2021			Dec. 31, 2020			Sept. 30, 2020

Commercial real estate	Commercial real estate		90		%	91		%	89		%	81		%	Commercial real estate	82		%	90		%	89		%	84	%
Other													Other		6		—			—			—
Commercial	Commercial	3		2			3			9			Commercial		4		3			3			6
Financial institutions	Financial institutions	2		2			2			4			Financial institutions		3		2			2			2
Other residential mortgages	Other residential mortgages	3		2			3			3			Other residential mortgages		2		3			3			4
Wealth management (a)	Wealth management (a)	1		2			2			2			Wealth management (a)		2		1			2			3
Lease financings	Lease financings	1		1			1			1			Lease financings		1		1			1			1
Total	Total	100	%	100		%	100		%	100		%	Total		100	%	100		%	100		%	100		%

(a) Includes the allowance for credit losses on wealth management mortgages.

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 losses.

Our allowance for credit losses 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 losses 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 key inputs. If each credit were rated one grade better, the quantitative allowance would have decreased by ~~$84~~$67 million, and if each credit were rated one grade worse, the quantitative allowance would have increased by ~~$112~~$125 million. Our multi-scenario based macroeconomic forecast used in determining the ~~June~~Sept. 30, 2021 allowance for credit losses consisted of three scenarios. The baseline scenario reflects moderate and flat GDP growth and unemployment recovery ~~but with declining~~and stable commercial real estate prices through mid-2022 that begin to ~~recover later~~increase in ~~2021.~~the second half of 2022. The upside scenario reflects faster GDP growth and unemployment recovery and ~~less severe~~higher commercial real estate ~~declines than~~prices compared with the baseline. The downside scenario contemplates negative GDP growth throughout 2021 and increasing unemployment ~~throughout 2021~~through 2022 and ~~steeper declines in~~lower commercial real estate prices than the baseline. Consistent with the first ~~quarter~~and second quarters of 2021, we placed the most weight on our baseline scenario,

with the remaining weighting resulting in slightly more weight placed on

the downside scenario than the upside scenario. From a sensitivity perspective, at ~~June~~Sept. 30, 2021, if we had applied 100% weighting to the downside scenario, the quantitative allowance for credit losses would have been approximately ~~$150~~$110 million higher.

Nonperforming assets

The table below presents our nonperforming assets.


Nonperforming assets	Nonperforming assets	June 30, 2021			Dec. 31, 2020			Nonperforming assets	Sept. 30, 2021	Dec. 31, 2020
(dollars in millions)	(dollars in millions)							(dollars in millions)				Dec. 31, 2020
Nonperforming loans:	Nonperforming loans:														Nonperforming loans:
Other residential mortgages	Other residential mortgages	$	39		$	57					Other residential mortgages		$	40			$	57
Wealth management loans and mortgages	Wealth management loans and mortgages	24			30						Wealth management loans and mortgages	26				30

Commercial real estate	Commercial real estate	26			1						Commercial real estate	25				1

Other											Other	16				—
Total nonperforming loans	Total nonperforming loans	89			88						Total nonperforming loans	107				88
Other assets owned	Other assets owned	1			1						Other assets owned	1				1
Total nonperforming assets	Total nonperforming assets	$	90		$	89					Total nonperforming assets	$	108			$	89
Nonperforming assets ratio	Nonperforming assets ratio	0.14		%	0.16		%				Nonperforming assets ratio	0.17		%		0.16		%
Nonperforming assets ratio, excluding margin loans	Nonperforming assets ratio, excluding margin loans	0.21			0.22						Nonperforming assets ratio, excluding margin loans	0.25				0.22
Allowance for loan losses/nonperforming loans	Allowance for loan losses/nonperforming loans	302.2			406.8						Allowance for loan losses/nonperforming loans	217.8				406.8
Allowance for loan losses/nonperforming assets	Allowance for loan losses/nonperforming assets	298.9			402.2						Allowance for loan losses/nonperforming assets	215.7				402.2
Total allowance for credit losses/nonperforming loans	Total allowance for credit losses/nonperforming loans	358.4			544.3						Total allowance for credit losses/nonperforming loans	255.1				544.3
Total allowance for credit losses/nonperforming assets	Total allowance for credit losses/nonperforming assets	354.4			538.2						Total allowance for credit losses/nonperforming assets	252.8				538.2

Nonperforming assets increased ~~slightly~~$19 million compared with Dec. 31, 2020, reflecting higher commercial real estate loans and others loans, partially offset by lower other residential mortgages and wealth management loans and mortgages.

Lost interest

Interest revenue would have increased by $1 million in the ~~second quarter of 2021, first~~third quarter of 2021, second quarter of ~~2020, $2 million in the first six months~~2021 and third quarter of ~~2021 and~~2020, $3 million in the first ~~six~~nine months of 2021 and $4 million in the first nine months of 2020, if nonperforming loans at period-end had been performing for the entire respective periods.

Loan modifications

Due to the coronavirus pandemic, there have been two forms of relief provided for classifying loans as troubled debt restructurings (“TDRs”): The Coronavirus Aid, Relief, and Economic Security Act ~~(the~~

30 BNY Mellon

(the “CARES Act”), the relevant provisions of which were extended by the Consolidated Appropriations Act, 2021, and the Interagency Guidance. See Note 1

~~32 BNY Mellon~~

of the Notes to Consolidated Financial Statements of our 2020 Annual Report for additional details on this guidance. Financial institutions may account for eligible loan modifications either under the CARES Act or the Interagency Guidance and we have elected to apply both, as applicable, in providing borrowers with loan modification relief in response to the coronavirus pandemic. We modified loans of $23 million in the third quarter of 2021, $106 million in the third quarter of 2020 and $3 million in the second ~~quarter of 2021, $282 million in the second quarter of 2020 and $6 million in the first~~ 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 also modified loans of $56 million in the third quarter of 2020, a majority of which were commercial real estate loans, by providing long-term loan payment modifications and an extension of maturity. We did not identify any of the modifications as TDRs. There were no long-term loan modifications in the third quarter of 2021 and second quarter of 2021. At ~~June~~Sept. 30, 2021, the unpaid principal balance of the loans modified under the CARES Act or Interagency Guidance was ~~$77~~$94 million.

Deposits

Total deposits were ~~$338.7~~$343.1 billion at ~~June~~Sept. 30, 2021, ~~a decrease of 1%,~~an increase, compared with $341.5 billion at Dec. 31, 2020. The ~~decrease~~increase primarily reflects higher noninterest-bearing deposits (principally U.S. offices), partially offset by lower interest-bearing deposits in both non-U.S. and U.S. ~~offices, partially offset by higher noninterest-bearing deposits (principally U.S. offices).~~offices.

Noninterest-bearing deposits were ~~$94.1~~$100.5 billion at ~~June~~Sept. 30, 2021 compared with $83.8 billion at Dec. 31, 2020. Interest-bearing deposits were ~~$244.6~~$242.6 billion at ~~June~~Sept. 30, 2021, compared with $257.7 billion at Dec. 31, 2020.

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 short-term borrowings, for example, securities sold under repurchase agreements, require the delivery of securities as collateral.

Information related to federal funds purchased and securities sold under repurchase agreements is presented below.

																					Federal funds purchased and securities sold under repurchase agreements
		Quarter ended										Quarter ended
(dollars in millions)	(dollars in millions)	June 30, 2021			March 31, 2021			June 30, 2020			(dollars in millions)	Sept. 30, 2021			June 30, 2021			Sept. 30, 2020
Maximum month-end balance during the quarter	Maximum month-end balance during the quarter	$	14,071		$	15,863		$	14,512		Maximum month-end balance during the quarter	$	13,712		$	14,071		$	17,248
Average daily balance (a)	Average daily balance (a)	$	13,773		$	15,288		$	14,209		Average daily balance (a)	$	13,415		$	13,773		$	16,850
Weighted-average rate during the quarter (a)	Weighted-average rate during the quarter (a)	(0.17)		%	(0.07)		%	0.03		%	Weighted-average rate during the quarter (a)	0.08		%	(0.17)		%	0.13		%
Ending balance (b)	Ending balance (b)	$	12,425		$	15,150		$	14,512		Ending balance (b)	$	11,973		$	12,425		$	15,907
Weighted-average rate at period end (b)	Weighted-average rate at period end (b)	(0.25)		%	(0.12)		%	0.00		%	Weighted-average rate at period end (b)	0.15		%	(0.25)		%	0.16		%

(a) Includes the average impact of offsetting under enforceable netting agreements of $47,411 million in the third quarter of 2021, $41,173 million in the second quarter of 2021 ~~$37,377~~and $42,862 million in the ~~first quarter of 2021 and $66,606 million in the second~~third quarter of 2020. On a Non-GAAP basis, excluding the impact of offsetting, the weighted-average rates would have been 0.02% for the third quarter of 2021, (0.04)% for the second quarter of 2021 ~~(0.02)%~~and 0.04% for the ~~first quarter of 2021 and 0.00% for the second~~third quarter of 2020. We believe providing the rates excluding the impact of netting is useful to investors as it is more reflective of the actual rates paid.

(b) Includes the impact of offsetting under enforceable netting agreements of $49,195 million at Sept. 30, 2021, $41,122 million at June 30, 2021 ~~$33,544~~and $54,629 million at ~~March 31, 2021 and $48,615 million at June~~Sept. 30, 2020.

Fluctuations of federal funds purchased and securities sold under repurchase agreements reflect changes in overnight borrowing opportunities. The decrease of the weighted-average rates compared with ~~June~~Sept. 30, 2020 primarily reflects lower interest rates and repurchase agreement activity with the Fixed Income Clearing Corporation (the “FICC”), where we record interest expense gross, but the ending and average balances reflect the impact of offsetting under enforceable netting agreements. This activity primarily relates to government securities collateralized resale and repurchase agreements executed with clients that are novated to and settle with the FICC.

BNY Mellon 3331

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


Payables to customers and broker-dealers	Payables to customers and broker-dealers										Payables to customers and broker-dealers
		Quarter ended											Quarter ended
(dollars in millions)	(dollars in millions)	June 30, 2021			March 31, 2021			June 30, 2020				(dollars in millions)	Sept. 30, 2021			June 30, 2021			Sept. 30, 2020
Maximum month-end balance during the quarter	Maximum month-end balance during the quarter	$	23,704		$	25,124		$	25,012			Maximum month-end balance during the quarter	$	26,002		$	23,704		$	24,188
Average daily balance (a)	Average daily balance (a)	$	23,760		$	24,772		$	23,944			Average daily balance (a)	$	23,923		$	23,760		$	23,847
Weighted-average rate during the quarter (a)	Weighted-average rate during the quarter (a)	(0.01)		%	(0.01)		%	(0.01)		%		Weighted-average rate during the quarter (a)	(0.01)		%	(0.01)		%	(0.01)		%
Ending balance	Ending balance	$	23,704		$	23,827		$	25,012			Ending balance	$	26,002		$	23,704		$	23,514
Weighted-average rate at period end	Weighted-average rate at period end	(0.01)		%	(0.01)		%	(0.01)		%		Weighted-average rate at period end	(0.01)		%	(0.01)		%	(0.01)		%

(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 $16,648 million in the third quarter of 2021, $16,811 million in the second quarter of 2021 ~~$17,691~~and $18,501 million in the ~~first quarter of 2021 and $18,742 million in the second~~third quarter of 2020.

Payables to customers and broker-dealers represent funds awaiting reinvestment and short sale proceeds payable on demand. Payables to customers and broker-dealers are driven by customer trading activity and market volatility.

Information related to commercial paper is presented below.

~~Commercial paper~~

~~Quarter ended~~

~~(dollars in millions)~~

~~June 30, 2021~~

~~March 31, 2021~~

~~June 30, 2020~~

~~Maximum month-end balance during the quarter~~

—

~~665~~

~~Average daily balance~~

—

~~191~~

~~Weighted-average rate during the quarter~~

—

~~1.02~~

~~Ending balance~~

—

~~665~~

~~Weighted-average rate at period end~~

—

~~0.02~~


Commercial paper	Quarter ended
(dollars in millions)	Sept. 30, 2021			June 30, 2021			Sept. 30, 2020
Maximum month-end balance during the quarter	$	—		$	—		$	5,000
Average daily balance	$	11		$	—		$	2,274
Weighted-average rate during the quarter	0.07		%	—		%	0.09		%
Ending balance	$	—		$	—		$	671
Weighted-average rate at period end	—		%	—		%	0.09		%

The Bank of New York Mellon is authorized to 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 decrease in the commercial paper compared with ~~June~~Sept. 30, 2020 primarily reflects the continuation of elevated deposit levels.

Information related to other borrowed funds is presented below.


Other borrowed funds	Other borrowed funds	Quarter ended									Other borrowed funds	Quarter ended
(dollars in millions)	(dollars in millions)	June 30, 2021			March 31, 2021			June 30, 2020			(dollars in millions)	Sept. 30, 2021			June 30, 2021			Sept. 30, 2020
Maximum month-end balance during the quarter	Maximum month-end balance during the quarter	$	451		$	348		$	2,451		Maximum month-end balance during the quarter	$	876		$	451		$	948
Average daily balance	Average daily balance	$	298		$	331		$	2,272		Average daily balance	$	383		$	298		$	873
Weighted-average rate during the quarter	Weighted-average rate during the quarter	2.21		%	2.01		%	1.30		%	Weighted-average rate during the quarter	2.53		%	2.21		%	1.40		%
Ending balance	Ending balance	$	451		$	348		$	1,628		Ending balance	$	767		$	451		$	420
Weighted-average rate at period end	Weighted-average rate at period end	2.51		%	2.05		%	1.37		%	Weighted-average rate at period end	1.80		%	2.51		%	1.66		%

Other borrowed funds primarily include overdrafts of sub-custodian account balances in our Investment Services businesses, finance lease liabilities and borrowings under lines of credit by our Pershing subsidiaries. Borrowings from the Federal Reserve Bank of Boston under the Money Market Mutual Fund Liquidity Facility (the “MMLF”) program are also included in other borrowed funds at ~~June~~Sept. 30, 2020. Overdrafts typically relate to timing differences for settlements. The ~~decrease~~increase in other borrowed funds compared with Sept. 30, 2020 and June 30, 2021 primarily reflects higher overdrafts of sub-custodian account balances in our Investment Services business and borrowings under lines of credit by our Pershing subsidiaries. The increase compared to Sept. 30, 2020 ~~reflects a decline in~~was partially offset by lower borrowings from the Federal Reserve Bank of Boston under the MMLF program. ~~The increase in other borrowed funds compared with March 31, 2021 reflects higher overdrafts of sub-custodian account balances in our Investment Services businesses.~~

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 roll 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 into cash, the inability to hold or raise cash, low overnight deposits, deposit run-off or contingent liquidity events.

32 BNY Mellon

Changes in economic conditions or exposure to credit, market, operational, legal and reputational

~~34 BNY Mellon~~

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 2020 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 ~~June~~Sept. 30, 2021, the Parent was in compliance with this policy.

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 the transfer of liquidity among 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 enable BNY Mellon to meet its intraday obligations under normal and reasonably severe stressed conditions.

We define available funds for internal liquidity management purposes as 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. The following table presents our total available funds at period end and on an average basis.


Available funds	Available funds	June 30, 2021			Dec. 31, 2020			Average															Available funds	Sept. 30, 2021		Dec. 31, 2020			Average
(dollars in millions)	(dollars in millions)							2Q21			1Q21			2Q20			YTD21			YTD20									Dec. 31, 2020			3Q21			2Q21			3Q20			YTD21			YTD20
Cash and due from banks	Cash and due from banks	$	5,154		$	6,252		$	5,938		$	5,720		$	4,102		$	5,830		$	4,348				Cash and due from banks	$	6,752					$	5,990		$	5,938		$	4,332		$	5,884		$	4,343
Interest-bearing deposits with the Federal Reserve and other central banks	Interest-bearing deposits with the Federal Reserve and other central banks	126,355			141,775			114,564			125,930			94,229			120,216			87,316					Interest-bearing deposits with the Federal Reserve and other central banks	126,959			141,775			108,110			114,564			90,670			116,136			88,442
Interest-bearing deposits with banks	Interest-bearing deposits with banks	21,270			17,300			22,465			21,313			21,093			21,892			19,087					Interest-bearing deposits with banks	20,057			17,300			20,465			22,465			19,202			21,411			19,126
Federal funds sold and securities purchased under resale agreements	Federal funds sold and securities purchased under resale agreements	29,762			30,907			27,857			29,186			30,265			28,518			32,187					Federal funds sold and securities purchased under resale agreements	28,497			30,907			29,304			27,857			30,342			28,783			31,567
Total available funds	Total available funds	$	182,541		$	196,234		$	170,824		$	182,149		$	149,689		$	176,456		$	142,938				Total available funds	$	182,265		$	196,234		$	163,869		$	170,824		$	144,546		$	172,214		$	143,478
Total available funds as a percentage of total assets	Total available funds as a percentage of total assets	39		%	42		%	38		%	40		%	36		%	39		%	36		%			Total available funds as a percentage of total assets	39		%	42		%	37		%	38		%	35		%	38		%	35		%

Total available funds were ~~$182.5~~$182.3 billion at ~~June~~Sept. 30, 2021, compared with $196.2 billion at Dec. 31, 2020. The decrease was primarily due to lower interest-bearing deposits with the Federal Reserve and other central banks and federal funds sold and securities purchased under resale agreements, partially offset by higher interest-bearing deposits with banks.

Average non-core sources of funds, such as federal funds purchased and securities sold under repurchase agreements, trading liabilities, other borrowed funds and commercial paper were ~~$17.1~~$16.9 billion for the first ~~six~~nine months of 2021 and ~~$18.2~~$19.7 billion for the first ~~six~~nine months of 2020. The decrease ~~primarily~~ reflects lower commercial paper, other borrowed funds and ~~commercial paper, partially offset by higher~~ federal funds purchased and securities sold under repurchase agreements, ~~and~~partially offset by higher trading liabilities.

Average foreign deposits, primarily from our European-based Investment Services business, were ~~$114.5~~$112.9 billion for the first ~~six~~nine months of 2021,

compared with ~~$103.1~~$105.0 billion for the first ~~six~~nine months of 2020. Average interest-bearing domestic deposits were ~~$127.7~~$126.4 billion for the first ~~six~~nine months of 2021 and ~~$101.0~~$101.6 billion for the first ~~six~~nine months of 2020. The increase primarily reflects ~~increased~~ client activity.

Average payables to customers and broker-dealers were ~~$17.2~~$17.0 billion for the first ~~six~~nine months of 2021 and ~~$17.6~~$17.9 billion for the first ~~six~~nine months of 2020. Payables to customers and broker-dealers are driven by customer trading activity and market volatility.

Average long-term debt was $25.7 billion for the first ~~six~~nine months of 2021 and ~~$27.7~~$27.3 billion for the first ~~six~~nine months of 2020.

BNY Mellon 33

Average noninterest-bearing deposits increased to ~~$84.6~~$84.9 billion for the first ~~six~~nine months of 2021 from ~~$66.5~~$66.9 billion for the first ~~six~~nine months of 2020, primarily reflecting client activity.

~~BNY Mellon 35~~

A significant reduction in our Investment Services business would reduce our access to deposits. See “Asset/liability management” for additional factors that could impact our deposit balances.

Sources of liquidity

The Parent’s 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 intermediate holding company (“IHC”).

Our ability to access the capital markets on favorable terms, or at all, is partially dependent on our credit ratings, which are as follows:

Credit ratings at ~~June~~Sept. 30, 2021

Moody’s

S&P

Fitch

DBRS

Parent:

Long-term senior debt

AA-

Subordinated debt

A-

AA (low)

Preferred stock

Baa1

BBB

BBB+

Outlook – Parent

Stable

The Bank of New York Mellon:

Long-term senior debt

Aa2

AA-

AA (high)

Subordinated debt

Long-term deposits

Aa1

AA-

AA+

AA (high)

Short-term deposits

A-1+

F1+

R-1 (high)

Commercial paper

A-1+

F1+

R-1 (high)

BNY Mellon, N.A.:

Long-term senior debt

Aa2

(a)

AA-

(a)

AA (high)

Long-term deposits

Aa1

AA-

AA+

AA (high)

Short-term deposits

A-1+

F1+

R-1 (high)

Outlook – Banks

Stable

(a) Represents senior debt issuer default rating.

NR – Not rated.

Long-term debt totaled ~~$25.6~~$25.0 billion at ~~June~~Sept. 30, 2021 and $26.0 billion at Dec. 31, 2020. Redemptions and maturities of ~~$2.3~~$4.3 billion ~~a maturity of $500 million~~ and a decrease in the fair value of hedged long-term debt were partially offset by issuances of ~~$2.7~~$3.7 billion. The Parent has ~~$1.5 billion of~~no long-term debt ~~that will mature~~maturing in the remainder of 2021.

In ~~July~~October 2021, the Parent issued ~~$500~~$700 million of fixed rate senior notes maturing in ~~2026~~2024 at an annual interest rate of ~~1.05%~~0.85%, $400 million of floating rate senior notes maturing in 2024 at an annual interest rate of the compounded secured overnight financing rate (“SOFR”) plus 20 basis points and ~~$500~~$400 million of fixed rate senior notes maturing in ~~2031~~2029 at an annual interest rate of ~~1.80%~~1.90%.

The Bank of New York Mellon may issue notes and CDs. At ~~June~~Sept. 30, 2021 and Dec. 31, 2020, $30

million of notes were outstanding. There were no CDs outstanding at ~~June~~Sept. 30, 2021 and $100 million was outstanding at Dec. 31, 2020.

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. There was no commercial paper outstanding at ~~June~~Sept. 30, 2021 and Dec. 31, 2020. The average commercial paper outstanding was ~~$886~~$4 million for the first ~~six~~nine months of 2021 and $1.4 billion for the first nine months of 2020.

Subsequent to ~~June~~Sept. 30, 2021, our U.S. bank subsidiaries could declare dividends to the Parent of approximately ~~$1.6~~$1.5 billion, without the need for a regulatory waiver. In addition, at ~~June~~Sept. 30, 2021,

34 BNY Mellon

non-bank subsidiaries of the Parent had liquid assets of approximately ~~$3.3~~$3.9 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 19 of the Notes to

~~36 BNY Mellon~~

Consolidated Financial Statements, both in our 2020 Annual Report.

Pershing LLC has uncommitted lines of credit in place for liquidity purposes which are guaranteed by the Parent. Pershing LLC has two separate uncommitted lines of credit amounting to $350 million in aggregate. ~~There were no~~Average borrowings under these lines were $4 million in the ~~second~~third quarter of 2021. Pershing Limited, an indirect UK-based subsidiary of BNY Mellon, has two separate uncommitted lines of credit amounting to ~~$269~~$266 million in aggregate. Average borrowings under these lines were ~~$14~~$30 million, in aggregate, in the ~~second~~third quarter of 2021.

The double leverage ratio is the ratio of our equity investment in subsidiaries divided by our consolidated Parent 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 high level of unencumbered available liquid assets held in its principal subsidiaries (such as central bank deposit placements and government securities), the Company’s cash generating fee-based business model, with fee revenue representing 81% of total revenue in the ~~second~~third quarter of 2021, and the dividend capacity of our banking subsidiaries. Our double leverage ratio was ~~114.4%~~117.7% at ~~June~~Sept. 30, 2021 and 114.3% at Dec. 31, 2020, and within the range targeted by management.

Uses of funds

The Parent’s major uses of funds are repurchases of common stock, payment of dividends, principal and interest payments on its borrowings, acquisitions and additional investments in its subsidiaries.

In ~~May~~August 2021, a quarterly dividend of ~~$0.31~~$0.34 per common share was paid to common shareholders. Our common stock dividend payout ratio was ~~27%~~33% for the ~~second~~third quarter of 2021.

In ~~July 2021, our Board of Directors approved a 10% increase in~~ the ~~quarterly cash dividend on common stock, from $0.31 to $0.34 per share. This increased quarterly cash dividend will be paid on Aug. 9, 2021.~~

~~In the second~~third quarter of 2021, we repurchased ~~12.8~~38.1 million common shares at an average price of ~~$48.17~~$52.55 per common share, for a total cost of ~~$618 million.~~

~~In June 2021, our Board of Directors approved the repurchase of up to $6.0 billion of common stock starting in the third quarter of 2021 and continuing through the fourth quarter of 2022.~~

See “Recent regulatory developments” for additional information on the 2021 CCAR. Also see “Supervision and Regulation – Capital Planning and Stress Testing – Payment of Dividends, Stock Repurchases and Other Capital Distributions” in our 2020 Annual Report for additional information related to the 2020 CCAR.$2.0 billion.

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-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 BNY Mellon’s consolidated HQLA at ~~June~~Sept. 30, 2021, and the average HQLA and average LCR for the ~~second~~third quarter of 2021.


Consolidated HQLA and LCR	~~June~~Sept. 30, 2021
(dollars in billions)
Securities (a)	$	121
Cash (b)	~~126~~127
Total consolidated HQLA (c)	$	~~247~~248

Total consolidated HQLA – average (c)	$	~~236~~229
Average LCR	~~110~~111		%

(a) Primarily includes securities of U.S. government-sponsored enterprises, U.S. Treasury, sovereign securities, U.S. agency and investment-grade corporate debt.

(b) Primarily includes cash on deposit with central banks.

(c) Consolidated HQLA presented before adjustments. After haircuts and the impact of trapped liquidity, consolidated HQLA totaled ~~$170~~$174 billion at ~~June~~Sept. 30, 2021 and averaged ~~$160~~$156 billion for the ~~second~~third quarter of 2021.

BNY Mellon and each of our affected domestic bank subsidiaries were compliant with the U.S. LCR requirements of at least 100% throughout the ~~second~~third quarter of 2021.

~~BNY Mellon 37~~

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

BNY Mellon 35

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 used for operating activities was ~~$345~~$291 million in the ~~six~~nine months ended ~~June~~Sept. 30, 2021, compared with net cash provided by operations of ~~$5.1~~$5.9 billion in the ~~six~~nine months ended ~~June~~Sept. 30, 2020. In the ~~six~~nine months ended ~~June~~Sept. 30, 2021 cash flows used for operations primarily resulted from changes in ~~accruals,~~trading assets and liabilities, partially offset by earnings. In the ~~six~~nine months ended ~~June~~Sept. 30, 2020, cash flows provided by operations primarily resulted from earnings and changes in ~~accruals.~~trading assets and liabilities.

Net cash ~~provided by~~used for investing activities was ~~$3.9~~$259 million in the nine months ended Sept. 30, 2021, compared with $44.3 billion in the ~~six~~nine months ended ~~June~~Sept. 30, 2020. In the nine months ended Sept. 30, 2021, ~~compared with~~ net cash used for investing activities ~~of $58.7 billion~~primarily reflects the net change in ~~the six months ended June 30,~~loans and securities, offset

~~2020. In the six months ended June 30, 2021, net cash provided~~ by ~~investing activities primarily reflects change~~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. In the ~~six~~nine months ended ~~June~~Sept. 30, 2020, net cash used for investing activities primarily reflects net changes in securities ~~change~~and changes in interest-bearing deposits with the Federal Reserve and other central ~~banks and changes in federal funds sold and securities purchased under resale agreements.~~banks.

Net cash ~~used for~~provided by financing activities was ~~$3.5~~$2.2 billion in the ~~six~~nine months ended ~~June~~Sept. 30, 2021, compared with ~~net cash provided by financing activities of $53.4~~$38.1 billion in the ~~six~~nine months ended ~~June~~Sept. 30, 2020. In the ~~six~~nine months ended ~~June~~Sept. 30, 2021, net cash used for financing activities primarily reflects repayments of long-term debt, changes in deposits, changes in payables to customers and broker-dealers and treasury stock acquired, partially offset by net proceeds from the issuance of long-term debt and change in federal funds purchased and securities sold under repurchase agreements. In the six months ended June 30, 2020, net cash provided by financing activities primarily reflects changes in deposits, issuances of long-term debt and changes in payables to customers and broker-dealers, partially offset by repayments of long-term debt and common stock repurchases. In the nine months ended Sept. 30, 2020, net cash provided by financing activity reflects changes in deposits, payables to customers and broker-dealers and federal funds purchased and securities sold under repurchase agreements, partially offset by changes in commercial paper.

Capital


Capital data	Capital data	June 30, 2021			March 31, 2021			Dec. 31, 2020			Capital data	Sept. 30, 2021			June 30, 2021			Dec. 31, 2020
(dollars in millions, except per share amounts; common shares in thousands)	(dollars in millions, except per share amounts; common shares in thousands)	June 30, 2021			March 31, 2021			Dec. 31, 2020			(dollars in millions, except per share amounts; common shares in thousands)	Sept. 30, 2021			June 30, 2021			Dec. 31, 2020
Average common equity to average assets	Average common equity to average assets	8.9		%	8.8		%	9.3		%	Average common equity to average assets	8.9		%	8.9		%	9.3		%

At period end:	At period end:										At period end:
BNY Mellon shareholders’ equity to total assets ratio	BNY Mellon shareholders’ equity to total assets ratio	9.7		%	9.7		%	9.8		%	BNY Mellon shareholders’ equity to total assets ratio	9.3		%	9.7		%	9.8		%
BNY Mellon common shareholders’ equity to total assets ratio	BNY Mellon common shareholders’ equity to total assets ratio	8.7		%	8.7		%	8.8		%	BNY Mellon common shareholders’ equity to total assets ratio	8.3		%	8.7		%	8.8		%
Total BNY Mellon shareholders’ equity	Total BNY Mellon shareholders’ equity	$	45,281		$	44,954		$	45,801		Total BNY Mellon shareholders’ equity	$	43,601		$	45,281		$	45,801
Total BNY Mellon common shareholders’ equity	Total BNY Mellon common shareholders’ equity	$	40,740		$	40,413		$	41,260		Total BNY Mellon common shareholders’ equity	$	39,060		$	40,740		$	41,260
BNY Mellon tangible common shareholders’ equity – Non-GAAP (a)	BNY Mellon tangible common shareholders’ equity – Non-GAAP (a)	$	22,127		$	21,779		$	22,563		BNY Mellon tangible common shareholders’ equity – Non-GAAP (a)	$	20,545		$	22,127		$	22,563
Book value per common share	Book value per common share	$	47.20		$	46.16		$	46.53		Book value per common share	$	47.30		$	47.20		$	46.53
Tangible book value per common share – Non-GAAP (a)	Tangible book value per common share – Non-GAAP (a)	$	25.64		$	24.88		$	25.44		Tangible book value per common share – Non-GAAP (a)	$	24.88		$	25.64		$	25.44
Closing stock price per common share	Closing stock price per common share	$	51.23		$	47.29		$	42.44		Closing stock price per common share	$	51.84		$	51.23		$	42.44
Market capitalization	Market capitalization	$	44,220		$	41,401		$	37,634		Market capitalization	$	42,811		$	44,220		$	37,634
Common shares outstanding	Common shares outstanding	863,174			875,481			886,764			Common shares outstanding	825,821			863,174			886,764

Cash dividends per common share	Cash dividends per common share	$	0.31		$	0.31		$	0.31		Cash dividends per common share	$	0.34		$	0.31		$	0.31
Common dividend payout ratio	Common dividend payout ratio	27		%	32		%	39		%	Common dividend payout ratio	33		%	27		%	39		%
Common dividend yield	Common dividend yield	2.4		%	2.7		%	2.9		%	Common dividend yield	2.6		%	2.4		%	2.9		%

(a) See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 4745 for a reconciliation of GAAP to Non-GAAP.

3836 BNY Mellon

The Bank of New York Mellon Corporation total shareholders’ equity decreased to ~~$45.3~~$43.6 billion at ~~June~~Sept. 30, 2021 from $45.8 billion at Dec. 31, 2020. The decrease primarily reflects common stock repurchases, dividend payments and unrealized losses on securities available-for-sale, partially offset by earnings.

In the first ~~six~~nine months of 2021, we repurchased ~~29.6~~67.7 million common shares at an average price of ~~$44.49~~$49.03 per common share for a total of ~~$1.3 billion under the share repurchase program that was in place through the second quarter of 2021.~~$3.3 billion.

In December 2020, the Federal Reserve released the results of the second round of CCAR stress tests during 2020 and extended the restriction on common stock dividends and open market common stock repurchases applicable to participating CCAR BHCs, including us, to the first quarter of 2021, with certain modifications. In March 2021, the Federal Reserve extended these restrictions through the second quarter of 2021. The temporary restrictions on dividends and share repurchases ended for BNY Mellon after June 30, 2021. ~~Starting in the third quarter of 2021,~~After these temporary restrictions were lifted, BNY Mellon ~~will continue~~continued to be subject to ~~the normal constraints under~~ the stress capital buffer (“SCB”) ~~framework.~~framework, which would impose restrictions on capital distributions on an incremental basis if BNY Mellon’s risk-based capital ratios decline into the buffer zone.

In June 2021, the Federal Reserve released the results of its stress tests for 2021. Our Board of Directors subsequently authorized the repurchase of up to $6.0

billion of common shares over the six quarters

beginning in the third quarter of 2021 and continuing through the fourth quarter of 2022. This new share repurchase plan ~~replaces~~replaced all previously authorized share repurchase plans. ~~See “Recent regulatory developments” for additional information on the 2021 CCAR results.~~

Capital adequacy

Regulators establish certain levels of capital for 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 ~~June~~Sept. 30, 2021 and Dec. 31, 2020, 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 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,” both of which are in our 2020 Annual Report.

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 2020 Annual Report.

BNY Mellon 3937

The table below presents our consolidated and largest bank subsidiary regulatory capital ratios.


Consolidated and largest bank subsidiary regulatory capital ratios	Consolidated and largest bank subsidiary regulatory capital ratios	June 30, 2021								March 31, 2021		Dec. 31, 2020		Consolidated and largest bank subsidiary regulatory capital ratios	Sept. 30, 2021								June 30, 2021		Dec. 31, 2020
		Well capitalized			Minimum required			Capital ratios		Capital ratios		Capital ratios			Well capitalized			Minimum required			Capital ratios		Capital ratios		Capital ratios
							(a)													(a)
Consolidated regulatory capital ratios: (b)	Consolidated regulatory capital ratios: (b)													Consolidated regulatory capital ratios: (b)
Advanced Approaches:	Advanced Approaches:													Advanced Approaches:
CET1 ratio	CET1 ratio	N/A		(c)	8.5	%		12.7	%	12.6	%	13.1	%	CET1 ratio	N/A		(c)	8.5	%		11.8	%	12.7	%	13.1	%
Tier 1 capital ratio	Tier 1 capital ratio	6	%		10			15.3		15.3		15.8		Tier 1 capital ratio	6	%		10			14.5		15.3		15.8
Total capital ratio	Total capital ratio	10			12			16.0		16.1		16.7		Total capital ratio	10			12			15.2		16.0		16.7
Standardized Approach:	Standardized Approach:													Standardized Approach:
CET1 ratio	CET1 ratio	N/A		(c)	8.5	%		12.6	%	12.6	%	13.4	%	CET1 ratio	N/A		(c)	8.5	%		11.7	%	12.6	%	13.4	%
Tier 1 capital ratio	Tier 1 capital ratio	6	%		10			15.2		15.2		16.1		Tier 1 capital ratio	6	%		10			14.4		15.2		16.1
Total capital ratio	Total capital ratio	10			12			16.2		16.2		17.1		Total capital ratio	10			12			15.3		16.2		17.1
Tier 1 leverage ratio	Tier 1 leverage ratio	N/A		(c)	4			6.0		5.8		6.3		Tier 1 leverage ratio	N/A		(c)	4			5.7		6.0		6.3
SLR (d)(e)	SLR (d)(e)	N/A		(c)	5			7.5		8.1		8.6		SLR (d)(e)	N/A		(c)	5			7.0		7.5		8.6

The Bank of New York Mellon regulatory capital ratios: (b)	The Bank of New York Mellon regulatory capital ratios: (b)													The Bank of New York Mellon regulatory capital ratios: (b)
Advanced Approaches:	Advanced Approaches:													Advanced Approaches:
CET1 ratio	CET1 ratio	6.5	%		7	%		16.7	%	16.8	%	17.1	%	CET1 ratio	6.5	%		7	%		16.5	%	16.7	%	17.1	%
Tier 1 capital ratio	Tier 1 capital ratio	8			8.5			16.7		16.8		17.1		Tier 1 capital ratio	8			8.5			16.5		16.7		17.1
Total capital ratio	Total capital ratio	10			10.5			16.8		17.0		17.3		Total capital ratio	10			10.5			16.5		16.8		17.3
Tier 1 leverage ratio	Tier 1 leverage ratio	5			4			6.1		6.1		6.4		Tier 1 leverage ratio	5			4			6.1		6.1		6.4
SLR (d)	SLR (d)	6			3			8.0		8.2		8.5		SLR (d)	6			3			7.8		8.0		8.5

(a) Minimum requirements for ~~June~~Sept. 30, 2021 include minimum thresholds plus currently applicable buffers. The U.S. global systemically important banks (“G-SIB”) surcharge of 1.5% is subject to change. The countercyclical capital buffer is currently set to 0%. The stress capital buffer (“SCB”) requirement is 2.5%, equal to the regulatory minimum for Standardized Approach capital ratios.

(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 Tier 1 leverage ratio is based on Tier 1 capital and quarterly average total assets.

(d) The SLR is based on Tier 1 capital and total leverage exposure, which includes certain off-balance sheet exposures.

(e) The consolidated SLR at ~~March 31, 2021 and~~ Dec. 31, 2020 reflects the temporary exclusion of U.S. Treasury securities from total leverage exposure which increased our consolidated SLR by ~~68 basis points and~~ 72 basis ~~points, respectively.~~points. The temporary exclusion ceased to apply beginning April 1, 2021.

Our CET1 ratio under the Standardized Approach was ~~12.6%~~11.7% at ~~June~~Sept. 30, 2021 and ~~was~~ 13.1% at Dec. 31, 2020 under the Advanced Approaches. The decrease was primarily driven by common stock repurchases, dividend payments, unrealized losses on securities available-for-sale ~~dividend payments~~ and an increase in RWAs, partially offset by capital generated through earnings.

Tier 1 leverage was 5.7% at Sept. 30, 2021, compared with 6.0% at June 30, 2021. The decrease reflects lower Tier 1 common equity driven by common share repurchases, partially offset by lower average assets.

Capital ratios vary depending on the size of the balance sheet at period-end and the levels and types of investments in assets. The balance sheet size fluctuates from period to period 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.

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 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.

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

38 BNY Mellon

result external losses have impacted and could in the future impact the amount of capital that we are required to hold.

~~40 BNY Mellon~~

The following table presents our capital components and RWAs.


Capital components and risk-weighted assets	Capital components and risk-weighted assets							Capital components and risk-weighted assets
		June 30, 2021		March 31, 2021		Dec. 31, 2020			Sept. 30, 2021		June 30, 2021		Dec. 31, 2020
(in millions)	(in millions)							(in millions)
CET1:	CET1:							CET1:
Common shareholders’ equity	Common shareholders’ equity	$	40,740	$	40,413	$	41,260	Common shareholders’ equity	$	39,060	$	40,740	$	41,260
Adjustments for:	Adjustments for:							Adjustments for:
Goodwill and intangible assets (a)	Goodwill and intangible assets (a)	(18,613)		(18,634)		(18,697)		Goodwill and intangible assets (a)	(18,515)		(18,613)		(18,697)
Net pension fund assets	Net pension fund assets	(308)		(321)		(319)		Net pension fund assets	(304)		(308)		(319)
Equity method investments	Equity method investments	(305)		(307)		(306)		Equity method investments	(299)		(305)		(306)
Deferred tax assets	Deferred tax assets	(55)		(53)		(54)		Deferred tax assets	(55)		(55)		(54)
Other	Other	(3)		(8)		(9)		Other	(43)		(3)		(9)
Total CET1	Total CET1	21,456		21,090		21,875		Total CET1	19,844		21,456		21,875
Other Tier 1 capital:	Other Tier 1 capital:							Other Tier 1 capital:
Preferred stock	Preferred stock	4,541		4,541		4,541		Preferred stock	4,541		4,541		4,541
Other	Other	(101)		(97)		(106)		Other	(93)		(101)		(106)
Total Tier 1 capital	Total Tier 1 capital	$	25,896	$	25,534	$	26,310	Total Tier 1 capital	$	24,292	$	25,896	$	26,310
Tier 2 capital:	Tier 2 capital:							Tier 2 capital:
Subordinated debt	Subordinated debt	$	1,248	$	1,248	$	1,248	Subordinated debt	$	1,248	$	1,248	$	1,248
Allowance for credit losses	Allowance for credit losses	326		409		490		Allowance for credit losses	282		326		490
Other	Other	(6)		(1)		(10)		Other	(6)		(6)		(10)
Total Tier 2 capital – Standardized Approach	Total Tier 2 capital – Standardized Approach	1,568		1,656		1,728		Total Tier 2 capital – Standardized Approach	1,524		1,568		1,728
Excess of expected credit losses	Excess of expected credit losses	45		127		247		Excess of expected credit losses	—		45		247
Less: Allowance for credit losses	Less: Allowance for credit losses	326		409		490		Less: Allowance for credit losses	282		326		490
Total Tier 2 capital – Advanced Approaches	Total Tier 2 capital – Advanced Approaches	$	1,287	$	1,374	$	1,485	Total Tier 2 capital – Advanced Approaches	$	1,242	$	1,287	$	1,485
Total capital:	Total capital:							Total capital:
Standardized Approach	Standardized Approach	$	27,464	$	27,190	$	28,038	Standardized Approach	$	25,816	$	27,464	$	28,038
Advanced Approaches	Advanced Approaches	$	27,183	$	26,908	$	27,795	Advanced Approaches	$	25,534	$	27,183	$	27,795

Risk-weighted assets:	Risk-weighted assets:							Risk-weighted assets:
Standardized Approach	Standardized Approach	$	169,885	$	167,510	$	163,848	Standardized Approach	$	169,216	$	169,885	$	163,848
Advanced Approaches:	Advanced Approaches:							Advanced Approaches:
Credit Risk	Credit Risk	$	101,282	$	99,398	$	98,262	Credit Risk	$	99,631	$	101,282	$	98,262
Market Risk	Market Risk	3,010		3,599		4,226		Market Risk	3,113		3,010		4,226
Operational Risk	Operational Risk	65,088		64,038		63,938		Operational Risk	64,863		65,088		63,938
Total Advanced Approaches	Total Advanced Approaches	$	169,380	$	167,035	$	166,426	Total Advanced Approaches	$	167,607	$	169,380	$	166,426

Average assets for Tier 1 leverage ratio	Average assets for Tier 1 leverage ratio	$	432,954	$	440,968	$	417,982	Average assets for Tier 1 leverage ratio	$	427,461	$	432,954	$	417,982
Total leverage exposure for SLR	Total leverage exposure for SLR	$	346,455	$	314,334	$	304,823	Total leverage exposure for SLR	$	347,856	$	346,455	$	304,823

(a) Reduced by deferred tax liabilities associated with intangible assets and tax-deductible goodwill.

The table below presents the factors that impacted CET1 capital.


CET1 generation	~~2Q21~~3Q21
(in millions)
CET1 – Beginning of period	$	~~21,090~~21,456
Net income applicable to common shareholders of The Bank of New York Mellon Corporation	~~991~~881
Goodwill and intangible assets, net of related deferred tax liabilities	2198
Gross CET1 generated	~~1,012~~979
Capital deployed:
Common stock dividends (a)	~~(273)~~(296)
Common stock repurchases	~~(618)~~(2,001)
Total capital deployed	~~(891)~~(2,297)
Other comprehensive income:
Unrealized ~~gain~~loss on assets available-for-sale	76(152)
Foreign currency translation	51(202)
Unrealized loss on cash flow hedges	~~(3)~~(1)
Defined benefit plans	2522

Total other comprehensive income	~~149~~(333)
Additional paid-in capital (b)	7869
Other additions (deductions):
Net pension fund assets	134
Embedded goodwill	26
~~Deferred tax assets~~	~~(2)~~
Other	5(40)
Total other ~~additions~~deductions	18(30)
Net CET1 ~~generated~~deployed	~~366~~(1,612)
CET1 – End of period	$	~~21,456~~19,844

(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~~Sept. 30, 2021 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, 2021

Sensitivity of consolidated capital ratios at Sept. 30, 2021

Increase or decrease of

(in basis points)

$100 million
in common
equity

$1 billion in RWA, quarterly average assets or total leverage exposure

(in basis points)

$100 million
in common
equity

$1 billion in RWA, quarterly average assets or total leverage exposure

CET1:

Standardized Approach

bps

Standardized Approach

bps

Advanced Approaches

Tier 1 capital:

Standardized Approach

Advanced Approaches

Total capital:

Standardized Approach

Advanced Approaches

Tier 1 leverage

SLR

BNY Mellon 4139

From April 1, 2020 through March 31, 2021, BHCs were permitted to temporarily exclude U.S. Treasury securities from total leverage exposure used in the SLR calculation. This temporary exclusion increased our consolidated SLR by ~~68 basis points at March 31, 2021 and~~ 72 basis points at Dec. 31, 2020. The temporary exclusion also impacted the TLAC and LTD calculations. BNY Mellon and The Bank of New York Mellon, as custody banks, will continue to be able to exclude certain central bank placements from the total leverage exposure used in the SLR calculation, consistent with the amendments to the SLR finalized by the U.S. banking agencies in 2019 pursuant to the Economic Growth, Regulatory Relief, and Consumer Protection Act.

Stress capital buffer

In August ~~2020,~~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, ~~2020.~~2021. The SCB ~~replaces~~replaced the ~~current~~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. See “Recent regulatory developments” for additional information on the SCB.

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. ~~In conjunction with the release of the 2020 CCAR results, the Federal Reserve imposed restrictions on capital distributions as described earlier in “Capital.”~~

Total Loss-Absorbing Capacity (“TLAC”)

The final TLAC rule establishing external TLAC, external long-term debt (“LTD”) and related requirements for U.S. G-SIBs, including BNY Mellon, at the top-tier holding company level became effective on Jan. 1, 2019. The following summarizes the minimum requirements for BNY Mellon’s external TLAC and external LTD ratios, plus currently applicable buffers.


	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 ratios	Regulatory minimum of 6% plus the greater of the 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.

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 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 ratios	TLAC and LTD ratios	June 30, 2021						TLAC and LTD ratios	Sept. 30, 2021
		Minimum required		Minimum ratios with buffers					Minimum required		Minimum ratios with buffers
						Ratios							Ratios
Eligible external TLAC:	Eligible external TLAC:							Eligible external TLAC:
As a percentage of RWA	As a percentage of RWA	18.0	%	21.5	%	28.2	%	As a percentage of RWA	18.0	%	21.5	%	27.3	%
As a percentage of total leverage exposure	As a percentage of total leverage exposure	7.5	%	9.5	%	13.8	%	As a percentage of total leverage exposure	7.5	%	9.5	%	13.3	%

Eligible external LTD:	Eligible external LTD:							Eligible external LTD:
As a percentage of RWA	As a percentage of RWA	7.5	%	N/A		11.6	%	As a percentage of RWA	7.5	%	N/A		11.4	%
As a percentage of total leverage exposure	As a percentage of total leverage exposure	4.5	%	N/A		5.7	%	As a percentage of total leverage exposure	4.5	%	N/A		5.5	%

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.

4240 BNY Mellon

Trading activities and risk management

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

The following tables indicate the calculated VaR amounts for the trading portfolio for the designated periods using the historical simulation VaR model.


VaR (a)	VaR (a)	2Q21						June 30, 2021		VaR (a)	3Q21						Sept. 30, 2021
(in millions)	(in millions)	Average		Minimum		Maximum				(in millions)	Average		Minimum		Maximum
Interest rate	Interest rate	$	2.2	$	1.6	$	2.7	$	1.9	Interest rate	$	2.1	$	1.5	$	3.1	$	1.6
Foreign exchange	Foreign exchange	2.6		1.9		3.7		2.3		Foreign exchange	2.3		1.9		4.0		2.8
Equity	Equity	0.1		—		0.3		0.2		Equity	0.1		—		0.2		0.1
Credit	Credit	1.8		1.4		2.6		2.0		Credit	1.5		1.1		2.2		1.8
Diversification	Diversification	(3.7)		N/M				(3.5)		Diversification	(2.6)		N/M				(2.9)
Overall portfolio	Overall portfolio	3.0		2.5		4.5		2.9		Overall portfolio	3.4		2.4		5.2		3.4


VaR (a)	VaR (a)	1Q21						March 31, 2021		VaR (a)	2Q21						June 30, 2021
(in millions)	(in millions)	Average		Minimum		Maximum				(in millions)	Average		Minimum		Maximum
Interest rate	Interest rate	$	2.1	$	1.6	$	2.7	$	2.5	Interest rate	$	2.2	$	1.6	$	2.7	$	1.9
Foreign exchange	Foreign exchange	2.7		2.2		3.9		3.0		Foreign exchange	2.6		1.9		3.7		2.3
Equity	Equity	0.1		0.1		0.9		0.1		Equity	0.1		—		0.3		0.2
Credit	Credit	1.8		1.3		2.8		2.2		Credit	1.8		1.4		2.6		2.0
Diversification	Diversification	(3.5)		N/M				(4.3)		Diversification	(3.7)		N/M				(3.5)
Overall portfolio	Overall portfolio	3.2		2.5		4.9		3.5		Overall portfolio	3.0		2.5		4.5		2.9


VaR (a)	VaR (a)	2Q20						June 30, 2020		VaR (a)	3Q20						Sept. 30, 2020
(in millions)	(in millions)	Average		Minimum		Maximum				(in millions)	Average		Minimum		Maximum
Interest rate	Interest rate	$	3.0	$	2.1	$	4.9	$	2.2	Interest rate	$	2.1	$	1.7	$	2.6	$	2.2
Foreign exchange	Foreign exchange	3.4		2.2		5.9		2.4		Foreign exchange	2.6		2.0		3.7		2.5
Equity	Equity	0.5		0.4		1.4		0.4		Equity	0.3		0.1		0.6		0.1
Credit	Credit	3.5		1.8		10.2		2.8		Credit	2.2		1.5		3.5		2.3
Diversification	Diversification	(5.7)		N/M				(4.0)		Diversification	(3.8)		N/M				(3.7)
Overall portfolio	Overall portfolio	4.7		3.1		11.4		3.8		Overall portfolio	3.4		2.4		4.6		3.4


VaR (a)	VaR (a)	YTD21								VaR (a)	YTD21
(in millions)	(in millions)	Average		Minimum		Maximum		(in millions)	Average		Minimum		Maximum
Interest rate	Interest rate	$	2.1	$	1.6	$	2.7			Interest rate	$	2.1	$	1.5	$	3.1
Foreign exchange	Foreign exchange	2.7		1.9		3.9				Foreign exchange	2.6		1.9		4.0
Equity	Equity	0.1		—		0.9				Equity	0.1		—		0.9
Credit	Credit	1.8		1.3		2.8				Credit	1.7		1.1		2.8
Diversification	Diversification	(3.6)		N/M						Diversification	(3.3)		N/M
Overall portfolio	Overall portfolio	3.1		2.5		4.9				Overall portfolio	3.2		2.4		5.2


VaR (a)	VaR (a)	YTD20								VaR (a)	YTD20
(in millions)	(in millions)	Average		Minimum		Maximum		(in millions)	Average		Minimum		Maximum
Interest rate	Interest rate	$	4.0	$	2.1	$	11.3			Interest rate	$	3.4	$	1.7	$	11.3
Foreign exchange	Foreign exchange	3.2		1.7		6.3				Foreign exchange	3.0		1.7		6.3
Equity	Equity	0.9		0.4		2.3				Equity	0.7		0.1		2.3
Credit	Credit	3.5		1.2		12.1				Credit	3.0		1.2		12.1
Diversification	Diversification	(6.1)		N/M						Diversification	(5.3)		N/M
Overall portfolio	Overall portfolio	5.5		3.1		14.3				Overall portfolio	4.8		2.4		14.3

(a) 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 driven by interest rate levels. These instruments include, but are not limited to, U.S. Treasury securities, swaps, swaptions, forward rate agreements, exchange-traded futures and options, and other interest rate derivative products.

BNY Mellon 4341

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, currency balances, spot and forward transactions, currency 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, common stock, exchange-traded funds, preferred stock, listed equity options (puts and calls), OTC equity options, equity total return swaps, equity index futures and other equity derivative products.

The credit component of VaR represents instruments whose values are predominantly driven by credit spread levels, i.e., idiosyncratic default risk. These instruments include, but are not limited to, securities with exposures from corporate and municipal credit 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 ~~second~~third quarter of 2021, interest rate risk generated ~~33%~~35% of average gross VaR, foreign exchange risk generated ~~39%~~38% of average gross VaR, equity risk generated 1%2% of average gross VaR and credit risk generated ~~27%~~25% of average gross VaR. During the ~~second~~third quarter of 2021, our daily trading loss exceeded our calculated VaR amount of the overall portfolio on one occasion.

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)	Distribution of trading revenue (loss) (a)						Distribution of trading revenue (loss) (a)
		Quarter ended						Quarter ended
(dollars in millions)	(dollars in millions)	June 30, 2021	March 31, 2021	Dec. 31, 2020	Sept. 30, 2020	June 30, 2020	(dollars in millions)	Sept. 30, 2021	June 30, 2021	March 31, 2021	Dec. 31, 2020	Sept. 30, 2020
													(dollars in millions)	Sept. 30, 2021	June 30, 2021	March 31, 2021	Dec. 31, 2020	Sept. 30, 2020
Revenue range:	Revenue range:	Number of days					Revenue range:	Number of days
Less than $(2.5)	Less than $(2.5)	—	—	2	4	6	Less than $(2.5)	—	—	—	2	4
$(2.5) – $0	$(2.5) – $0	7	6	12	10	12	$(2.5) – $0	2	7	6	12	10
$0 – $2.5	$0 – $2.5	22	17	11	23	17	$0 – $2.5	23	22	17	11	23
$2.5 – $5.0	$2.5 – $5.0	25	21	26	16	15	$2.5 – $5.0	30	25	21	26	16
More than $5.0	More than $5.0	10	17	11	12	14	More than $5.0	9	10	17	11	12

(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 ~~$15.5~~$17.9 billion at ~~June~~Sept. 30, 2021 and $15.3 billion at Dec. 31, 2020.

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 ~~$6.5~~$5.2 billion at ~~June~~Sept. 30, 2021 and $6.0 billion at Dec. 31, 2020.

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, we consider credit risk in arriving at the fair value of our 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 ~~June~~Sept. 30, 2021, our OTC derivative assets, including those in hedging relationships, of ~~$4.8~~$4.4 billion included a credit valuation adjustment (“CVA”) deduction of ~~$28~~$27 million. Our OTC derivative liabilities, including those in hedging relationships, of ~~$3.3~~$3.1 billion included a debit valuation adjustment (“DVA”) of $1$2 million related to our own credit spread. Net of hedges, the CVA ~~decreased~~increased less than $1 million and the DVA ~~increased~~was unchanged in the third quarter of 2021, which decreased other trading revenue by less than $1 million. The net impact increased other trading

42 BNY Mellon

revenue by $1 million in the second quarter of 2021 ~~which increased other trading revenue by $1 million. The net impact decreased other trading revenue by $1~~

~~44 BNY Mellon~~

and $3 million in the ~~first quarter of 2021 and $2 million in the second~~third quarter of 2020.

The table below summarizes the distribution of credit ratings for our foreign exchange and interest rate derivative counterparties over the past five quarters, which indicates the level of counterparty credit associated with these trading activities. Significant changes in counterparty credit ratings could alter the level of credit risk faced by BNY Mellon.


Foreign exchange and other trading counterparty risk rating profile (a)	Foreign exchange and other trading counterparty risk rating profile (a)											Foreign exchange and other trading counterparty risk rating profile (a)
		Quarter ended											Quarter ended
		June 30, 2021		March 31, 2021		Dec. 31, 2020		Sept. 30, 2020		June 30, 2020			Sept. 30, 2021		June 30, 2021		March 31, 2021		Dec. 31, 2020		Sept. 30, 2020

Rating:	Rating:												Rating:
AAA to AA-	AAA to AA-	52	%	45	%	46	%	54	%	56	%	AAA to AA-	52	%	52	%	45	%	46	%	54	%
A+ to A-	A+ to A-	19		26		28		20		18		A+ to A-	17		19		26		28		20
BBB+ to BBB-	BBB+ to BBB-	24		22		18		17		18		BBB+ to BBB-	25		24		22		18		17
BB+ and lower (b)	BB+ and lower (b)	5		7		8		9		8		BB+ and lower (b)	6		5		7		8		9
Total	Total	100	%	100	%	100	%	100	%	100	%	Total	100	%	100	%	100	%	100	%	100	%

(a) Represents credit rating agency equivalent of internal credit ratings.

(b) Non-investment grade.

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 include 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 ~~model~~baseline scenario incorporates the market’s forward rate expectations and management’s assumptions regarding ~~interest~~client deposit rates, ~~market~~credit spreads, changes in the prepayment behavior of loans and securities and the impact of derivative financial instruments used for interest rate risk management purposes. These assumptions have been developed

through a combination of historical analysis and future expected pricing behavior and are inherently uncertain. 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.

In Client deposit levels and mix are key assumptions impacting net interest revenue in the ~~table below, we use~~baseline as well as the hypothetical interest rate scenarios. The earnings simulation model to run various interest rate ramp scenarios from a baseline scenario. The interest rate ramp scenarios examine the impact of large interest rate movements. In each scenario, all currencies’ interest rates are shifted higher or lower. Typically, the baseline scenario uses the average deposit balances of the last month of the quarter. The 100 basis point ramp scenario assumes rates change 25 basis points above or below the yield curve in each of the next four quarters and the 200 basis point ramp scenario assumes a 50 basis point per quarter change. 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 net interest revenue sensitivity methodology 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.

In the table below, we use the earnings simulation model to assess the impact of various hypothetical interest rate scenarios compared to the baseline scenario. Beginning in the third quarter of 2021, we have refined our scenario analysis by replacing gradual rate ramp scenarios with scenarios that reflect the impact of instantaneous interest rate shock movements. In each of the new scenarios, all currencies’ interest rates are instantaneously shifted higher or lower. The scenarios assume instantaneous rate changes at the start of the forecast. Long-term interest rates are defined as all tenors equal to or 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 refined 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, 2021 March 31, 2021 June 30, 2020
Up 200 bps parallel rate ramp vs. baseline (a)
$ 890 $ 1,024 $ 591
Up 100 bps parallel rate ramp vs. baseline (a)
477 551 349
Down 100 bps parallel rate ramp vs. baseline (a)
430 384 315
Long-term up 50 bps, short-term unchanged (b)
123 120 153
Long-term down 50 bps, short-term unchanged (b)
(132) (116) (173)

~~(a)~~In Prior periods have been updated to reflect the ~~parallel~~impact of instantaneous interest 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.~~shock movements.


Estimated changes in net interest revenue (in millions)	Sept. 30, 2021		June 30, 2021		Sept. 30, 2020
Up 100 bps rate shock vs. baseline	$	840	$	857	$	628
Long-term up 100 bps, short-term unchanged	239		214		267
Short-term up 100 bps, long-term unchanged	601		643		361
Long-term down 50 bps, short-term unchanged	(117)		(113)		(150)
Down 100 bps rate shock vs. baseline	794		648		639

BNY Mellon 43

The slight decreases in certain of the ~~ramp up~~rising rate sensitivities compared with ~~March 31,~~June 30, 2021 are ~~primarily~~ driven by ~~a decrease in deposit levels and the impact of hedging long-term debt.~~slightly lower client deposits.

While the net interest revenue sensitivity ~~scenarios~~scenario calculations assume static deposit balances to facilitate consistent period-over-period comparisons, it is likely that a portion of the recent monetary policy-driven deposit inflows would run-off in a rising short-term rate ~~environments, such as the up 100 bps and up 200 bps parallel ramps.~~environment. Noninterest-bearing deposits are particularly sensitive to changes in short-term rates.

~~BNY Mellon 45~~

To illustrate the net interest revenue sensitivity to deposit runoff, we note that a $5 billion instantaneous reduction of U.S. dollar denominated noninterest-bearing deposits would reduce the net interest revenue sensitivity results in the ~~ramp~~ up 100 basis point ~~and 200 basis point scenarios~~scenario in the table above by approximately ~~$30 million and approximately $65 million, respectively.~~$60 million. The impact would be smaller if

the ~~runoff~~run-off was assumed to be a mixture of interest-bearing and noninterest-bearing deposits.

Additionally, given the continued low short-term interest rates, money market mutual fund fees and other similar fees are being waived to protect investors from negative returns. See “Fee and other revenue” beginning on page 7 for additional details on the impact of money market fee waivers on fee revenues.

For a discussion of factors impacting the growth or contraction of deposits, see “Risk Factors – Our business, financial condition and results of operations could be adversely affected if we do not effectively manage our liquidity,” in our 2020 Annual Report.

4644 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 on a tangible basis as a supplement to GAAP information, which exclude goodwill and intangible assets, net of deferred tax liabilities. We believe that the return on tangible common equity – Non-GAAP is additional useful information for investors because it presents a measure of those assets that can generate income, and the tangible book value per common share – Non-GAAP is additional useful information because it presents the level of tangible assets in relation to shares of common stock outstanding.

BNY Mellon has presented the measure of fee revenue, excluding money market fee waivers – Non-GAAP. We believe that this measure is useful information for investors for evaluating the impact of current interest rates and market conditions on fee revenue growth rates and the performance of our business.

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 also included the adjusted pre-tax operating margin – Non-GAAP, which is the pre-tax operating margin for the Investment and Wealth Management business, 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 relative to industry competitors.

The following table presents the reconciliation of the return on common equity and tangible common equity.


Return on common equity and tangible common equity reconciliation	Return on common equity and tangible common equity reconciliation	2Q21			1Q21			2Q20			YTD21			YTD20			Return on common equity and tangible common equity reconciliation	3Q21			2Q21			3Q20			YTD21			YTD20
(dollars in millions)	(dollars in millions)																(dollars in millions)
Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP	Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP	$	991		$	858		$	901		$	1,849		$	1,845		Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP	$	881		$	991		$	876		$	2,730		$	2,721
Add: Amortization of intangible assets	Add: Amortization of intangible assets	20			24			26			44			52			Add: Amortization of intangible assets	19			20			26			63			78
Less: Tax impact of amortization of intangible assets	Less: Tax impact of amortization of intangible assets	5			6			6			11			12			Less: Tax impact of amortization of intangible assets	4			5			7			15			19
Adjusted net income applicable to common shareholders of The Bank of New York Mellon Corporation, excluding amortization of intangible assets – Non-GAAP	Adjusted net income applicable to common shareholders of The Bank of New York Mellon Corporation, excluding amortization of intangible assets – Non-GAAP	$	1,006		$	876		$	921		$	1,882		$	1,885		Adjusted net income applicable to common shareholders of The Bank of New York Mellon Corporation, excluding amortization of intangible assets – Non-GAAP	$	896		$	1,006		$	895		$	2,778		$	2,780

Average common shareholders’ equity	Average common shareholders’ equity	$	40,393		$	40,720		$	38,476		$	40,556		$	38,070		Average common shareholders’ equity	$	39,755		$	40,393		$	39,924		$	40,286		$	38,693
Less: Average goodwill	Less: Average goodwill	17,517			17,494			17,243			17,506			17,277			Less: Average goodwill	17,474			17,517			17,357			17,495			17,304
Average intangible assets	Average intangible assets	2,975			3,000			3,058			2,987			3,073			Average intangible assets	2,953			2,975			3,039			2,976			3,062
Add: Deferred tax liability – tax deductible goodwill	Add: Deferred tax liability – tax deductible goodwill	1,163			1,153			1,119			1,163			1,119			Add: Deferred tax liability – tax deductible goodwill	1,173			1,163			1,132			1,173			1,132
Deferred tax liability – intangible assets	Deferred tax liability – intangible assets	675			665			664			675			664			Deferred tax liability – intangible assets	673			675			666			673			666
Average tangible common shareholders’ equity – Non-GAAP	Average tangible common shareholders’ equity – Non-GAAP	$	21,739		$	22,044		$	19,958		$	21,901		$	19,503		Average tangible common shareholders’ equity – Non-GAAP	$	21,174		$	21,739		$	21,326		$	21,661		$	20,125

Return on common shareholders’ equity – GAAP	Return on common shareholders’ equity – GAAP	9.8		%	8.5		%	9.4		%	9.2		%	9.7		%	Return on common shareholders’ equity – GAAP	8.8		%	9.8		%	8.7		%	9.1		%	9.4		%
Return on tangible common shareholders’ equity – Non-GAAP	Return on tangible common shareholders’ equity – Non-GAAP	18.6		%	16.1		%	18.5		%	17.3		%	19.4		%	Return on tangible common shareholders’ equity – Non-GAAP	16.8		%	18.6		%	16.7		%	17.1		%	18.5		%

BNY Mellon 4745

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 reconciliation	Book value and tangible book value per common share reconciliation	June 30, 2021		March 31, 2021		Dec. 31, 2020		June 30, 2020		Book value and tangible book value per common share reconciliation	Sept. 30, 2021		June 30, 2021		Dec. 31, 2020		Sept. 30, 2020
(dollars in millions, except per share amounts and unless otherwise noted)	(dollars in millions, except per share amounts and unless otherwise noted)									(dollars in millions, except per share amounts and unless otherwise noted)
BNY Mellon shareholders’ equity at period end – GAAP	BNY Mellon shareholders’ equity at period end – GAAP	$	45,281	$	44,954	$	45,801	$	43,697	BNY Mellon shareholders’ equity at period end – GAAP	$	43,601	$	45,281	$	45,801	$	44,917
Less: Preferred stock	Less: Preferred stock	4,541		4,541		4,541		4,532		Less: Preferred stock	4,541		4,541		4,541		4,532
BNY Mellon common shareholders’ equity at period end – GAAP	BNY Mellon common shareholders’ equity at period end – GAAP	40,740		40,413		41,260		39,165		BNY Mellon common shareholders’ equity at period end – GAAP	39,060		40,740		41,260		40,385
Less: Goodwill	Less: Goodwill	17,487		17,469		17,496		17,253		Less: Goodwill	17,420		17,487		17,496		17,357
Intangible assets	Intangible assets	2,964		2,983		3,012		3,045		Intangible assets	2,941		2,964		3,012		3,026
Add: Deferred tax liability – tax deductible goodwill	Add: Deferred tax liability – tax deductible goodwill	1,163		1,153		1,144		1,119		Add: Deferred tax liability – tax deductible goodwill	1,173		1,163		1,144		1,132
Deferred tax liability – intangible assets	Deferred tax liability – intangible assets	675		665		667		664		Deferred tax liability – intangible assets	673		675		667		666
BNY Mellon tangible common shareholders’ equity at period end – Non-GAAP	BNY Mellon tangible common shareholders’ equity at period end – Non-GAAP	$	22,127	$	21,779	$	22,563	$	20,650	BNY Mellon tangible common shareholders’ equity at period end – Non-GAAP	$	20,545	$	22,127	$	22,563	$	21,800

Period-end common shares outstanding (in thousands)	Period-end common shares outstanding (in thousands)	863,174		875,481		886,764		885,862		Period-end common shares outstanding (in thousands)	825,821		863,174		886,764		886,136

Book value per common share – GAAP	Book value per common share – GAAP	$	47.20	$	46.16	$	46.53	$	44.21	Book value per common share – GAAP	$	47.30	$	47.20	$	46.53	$	45.58
Tangible book value per common share – Non-GAAP	Tangible book value per common share – Non-GAAP	$	25.64	$	24.88	$	25.44	$	23.31	Tangible book value per common share – Non-GAAP	$	24.88	$	25.64	$	25.44	$	24.60

The following table presents the impact of money market fee waivers on our consolidated fee revenue.


Fee revenue reconciliation	3Q21		3Q20		3Q21 vs.
(dollars in millions)					3Q20
Fee revenue	$	3,265	$	3,074	6	%
Less: Money market fee waivers	(262)		(110)
Fee revenue, excluding money market fee waivers – Non-GAAP	$	3,527	$	3,184	11	%

The following table presents the impact of changes in foreign currency exchange rates on our consolidated investment management and performance fees.


Constant currency reconciliation – Consolidated	Constant currency reconciliation – Consolidated	2Q21		2Q20		2Q21 vs.		Constant currency reconciliation – Consolidated	3Q21		3Q20		3Q21 vs.
(dollars in millions)	(dollars in millions)					2Q20		(dollars in millions)					3Q20
Investment management and performance fees – GAAP	Investment management and performance fees – GAAP	$	889	$	786	13	%	Investment management and performance fees – GAAP	$	913	$	835	9	%
Impact of changes in foreign currency exchange rates	Impact of changes in foreign currency exchange rates	—		31				Impact of changes in foreign currency exchange rates	—		15
Adjusted investment management and performance fees – Non-GAAP	Adjusted investment management and performance fees – Non-GAAP	$	889	$	817	9	%	Adjusted investment management and performance fees – Non-GAAP	$	913	$	850	7	%

The following table presents the impact of changes in foreign currency exchange rates on investment management and performance fees reported in the Investment and Wealth Management business.


Constant currency reconciliation – Investment and Wealth Management business	Constant currency reconciliation – Investment and Wealth Management business					2Q21 vs.		Constant currency reconciliation – Investment and Wealth Management business					3Q21 vs.
(dollars in millions)	(dollars in millions)	2Q21		2Q20		2Q20		(dollars in millions)	3Q21		3Q20		3Q20
Investment management and performance fees – GAAP	Investment management and performance fees – GAAP	$	890	$	787	13	%	Investment management and performance fees – GAAP	$	914	$	835	9	%
Impact of changes in foreign currency exchange rates	Impact of changes in foreign currency exchange rates	—		31				Impact of changes in foreign currency exchange rates	—		15
Adjusted investment management and performance fees – Non-GAAP	Adjusted investment management and performance fees – Non-GAAP	$	890	$	818	9	%	Adjusted investment management and performance fees – Non-GAAP	$	914	$	850	8	%

46 BNY Mellon

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


Pre-tax operating margin reconciliation – Investment and Wealth Management business	Pre-tax operating margin reconciliation – Investment and Wealth Management business																						Pre-tax operating margin reconciliation – Investment and Wealth Management business
(dollars in millions)	(dollars in millions)	2Q21			1Q21			4Q20			3Q20			2Q20			YTD21			YTD20			(dollars in millions)	3Q21			2Q21			1Q21			4Q20			3Q20			YTD21			YTD20
Income before income taxes – GAAP	Income before income taxes – GAAP	$	326		$	278		$	311		$	245		$	221		$	604		$	415		Income before income taxes – GAAP	$	348		$	326		$	278		$	311		$	245		$	952		$	660

Total revenue – GAAP	Total revenue – GAAP	$	999		$	991		$	990		$	918		$	886		$	1,990		$	1,784		Total revenue – GAAP	$	1,032		$	999		$	991		$	990		$	918		$	3,022		$	2,702
Less: Distribution and servicing expense	Less: Distribution and servicing expense	74			75			76			85			86			149			177			Less: Distribution and servicing expense	76			74			75			76			85			225			262
Adjusted total revenue, net of distribution and servicing expense – Non-GAAP	Adjusted total revenue, net of distribution and servicing expense – Non-GAAP	$	925		$	916		$	914		$	833		$	800		$	1,841		$	1,607		Adjusted total revenue, net of distribution and servicing expense – Non-GAAP	$	956		$	925		$	916		$	914		$	833		$	2,797		$	2,440

Pre-tax operating margin – GAAP (a)	Pre-tax operating margin – GAAP (a)	33		%	28		%	32		%	27		%	25		%	30		%	23		%	Pre-tax operating margin – GAAP (a)	34		%	33		%	28		%	32		%	27		%	31		%	24		%
Adjusted pre-tax operating margin, net of distribution and servicing expense – Non-GAAP (a)	Adjusted pre-tax operating margin, net of distribution and servicing expense – Non-GAAP (a)	35		%	30		%	34		%	29		%	28		%	33		%	26		%	Adjusted pre-tax operating margin, net of distribution and servicing expense – Non-GAAP (a)	36		%	35		%	30		%	34		%	29		%	34		%	27		%

(a) Income before taxes divided by total revenue.

~~48 BNY Mellon~~

Recent regulatory developments

For a summary of additional regulatory matters relevant to our operations, see “Recent regulatory developments” in our Form 10-Q for the ~~quarter~~quarters ended March 31, 2021 and June 30, 2021 and “Supervision and Regulation” in our 2020 Annual Report. ~~The following discussions summarize certain regulatory, legislative and other developments that may affect BNY Mellon.~~

~~CCAR 2021 Results~~

On June 24, 2021, the Federal Reserve released the results of its stress tests for 2021. 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 2021. The SCB will be effective on Oct. 1, 2021.

The temporary restrictions on dividends and share repurchases imposed as a result of the coronavirus pandemic ended for BNY Mellon after June 30, 2021. Starting in the third quarter of 2021, BNY Mellon will continue to be subject to the normal constraints under the SCB framework. For additional information regarding the SCB, see “Supervision and Regulation – Capital Planning and Stress Testing” in our 2020 Annual Report.

Consistent with the SCB framework, BNY Mellon increased its quarterly common stock dividend to $0.34 per share in the third quarter of 2021 and our Board has authorized the repurchase of up to $6.0 billion of common shares over the six quarters beginning in the third quarter of 2021 and continuing through the fourth quarter of 2022. This new share repurchase plan replaces all previously authorized share repurchase plans.

~~NSFR Compliance Date~~

The final NSFR rule became effective on July 1, 2021. Under the final rule, the NSFR is expressed as a ratio of available stable funding to the required stable funding amount. BNY Mellon is required to maintain an NSFR of 1.0 and is in compliance with the NSFR. NSFR disclosure requirements will be effective in 2023.

~~EU/UK Trade and Cooperation Agreement~~

The EU-UK Trade and Cooperation Agreement (“EU-UK Agreement”) entered into force and became provisionally effective on Jan. 1, 2021. The EU-UK Agreement was ratified by the European Parliament in April 2021 and became fully effective. Under the EU-UK Agreement, the EU and UK have agreed to make their best endeavors to ensure that internationally agreed standards in the financial services sector for regulation and supervision are implemented and applied in their territory and establish a framework for structured regulatory cooperation on financial services. For more information regarding the impact of Brexit on the UK regulatory framework and related developments, see “Supervision and Regulation – Effects of ‘Brexit’ on UK Regulatory Framework” in the 2020 Annual Report.

~~Financial Services Act 2021 (UK)~~

The Financial Services Act 2021 (previously the Financial Services Bill 2020) received royal assent and entered into force in April 2021. The Financial Services Act 2021 makes several changes to the UK financial services regulatory framework. This includes providing the framework for implementation of the elements of the EU Capital Requirements Regulation 2 (“CRR2”) that do not already form part of EU retained law in the UK, and the framework for implementation of the EU Investment Firms Directive / Regulation (“IFD/IFR”) in the UK (modified for the UK environment as “UK IFPR”).

The Financial Services Act 2021 grants rulemaking powers to the Prudential Regulatory Authority (“PRA”) with respect to UK capital requirements directive/regulation matters, and the Financial Conduct Authority (“FCA”), with respect to UK IFPR matters. The Financial Services Act 2021 also enables Her Majesty’s Treasury to set commencement dates for various UK CRR2/UK IFPR provisions. Pursuant to this authority, Her Majesty’s Treasury has confirmed that the UK’s version of the CRR2 (“UK CRR2”) and the UK IFPR will come into effect on Jan. 1, 2022. For more information regarding the CRR2 and the UK IFPR, see “Supervision and Regulation – Operations and Regulations Outside the United States” and “Supervision and Regulation – Effects of ‘Brexit’ on UK Regulatory Framework” in the 2020 Annual Report.

~~BNY Mellon 49~~

~~EU Leverage Ratio~~

On June 28, 2021, the CRR2 leverage ratio became a binding requirement for EU credit institutions, such as The Bank of New York Mellon SA/NV. The European Central Bank (“ECB”) granted an optional exclusion for central bank deposits from the leverage ratio calculation that came into effect on the same date and will expire on March 31, 2022. It replaces the central bank deposits exclusion granted by the ECB in April 2020 in relation to the leverage ratio reporting requirements. The Bank of New York Mellon SA/NV is planning to use the exclusion.

Other matters

On March 5, 2021, the administrator of LIBOR announced that it would cease the publication of non-U.S. dollar London Interbank Offered Rate (“LIBOR”) settings and one-week and two-month U.S. dollar LIBOR settings on Dec. 31, 2021 and would cease the publication of the other U.S. dollar LIBOR settings on June 30, 2023. On the same day, the UK Financial Conduct Authority (“FCA”) made a related announcement regarding when LIBOR settings will cease to be provided by any administrator or no longer be representative. The International Swaps and Derivatives Association (“ISDA”) also announced that the FCA’s announcement was an index cessation event under its fallbacks protocol for all LIBOR settings and that consequently, the fallback spread adjustment was fixed as of the date of the announcement.

In April 2021, New York state adopted legislation that provides a statutory fallback mechanism to replace LIBOR with a benchmark rate based on SOFR for New York-law governed contracts that reference U.S. dollar LIBOR and either have no fallback provisions or provisions that are based on LIBOR. The New York legislation also has a safe

harbor regarding the selection and use of that SOFR-based benchmark rate.

The U.S. bank regulators have issued guidance strongly encouraging banking organizations to cease using U.S. dollar LIBOR as a reference rate in new contracts as soon as practicable and in any event by Dec. 31, 2021. We are continuing to work to facilitate an orderly transition from interbank offered rates, including LIBOR, to alternative reference rates for us and our clients.

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, 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;

•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

BNY Mellon 47

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, Directors’ Code of Conduct and the Charters of the Audit, Finance, Corporate Governance, Nominating and 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 our website or social media channels referenced herein are not incorporated by reference into this Quarterly Report on Form 10-Q.

5048 BNY Mellon


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

Consolidated Income Statement (unaudited)


		Quarter ended							Year-to-date							Quarter ended								Year-to-date
		June 30, 2021		March 31, 2021		June 30, 2020			June 30, 2021		June 30, 2020					Sept. 30, 2021		June 30, 2021		Sept. 30, 2020				Sept. 30, 2021		Sept. 30, 2020
(in millions)	(in millions)												(in millions)
Fee and other revenue	Fee and other revenue														Fee and other revenue
Investment services fees:	Investment services fees:														Investment services fees:
Asset servicing fees	Asset servicing fees	$	1,200	$	1,199	$	1,173				$	2,399	$	2,332			Asset servicing fees	$	1,223	$	1,200	$	1,168			$	3,622	$	3,500
Clearing services fees	Clearing services fees	435		455		431			890		901				Clearing services fees	423		435		397				1,313		1,298
Issuer services fees	Issuer services fees	281		245		277			526		540				Issuer services fees	280		281		295				806		835
Treasury services fees	Treasury services fees	160		157		144			317		293				Treasury services fees	165		160		152				482		445
Total investment services fees	Total investment services fees	2,076		2,056		2,025			4,132		4,066				Total investment services fees	2,091		2,076		2,012				6,223		6,078
Investment management and performance fees	Investment management and performance fees	889		890		786			1,779		1,648				Investment management and performance fees	913		889		835				2,692		2,483
Foreign exchange revenue	Foreign exchange revenue	184		231		193		(a)	415		438		(a)		Foreign exchange revenue	185		184		149		(a)		600		587		(a)
Financing-related fees	Financing-related fees	48		51		58			99		117				Financing-related fees	48		48		49				147		166
Distribution and servicing	Distribution and servicing	27		29		27			56		58				Distribution and servicing	28		27		29				84		87
Total fee revenue	Total fee revenue	3,224		3,257		3,089		(a)	6,481		6,327		(a)		Total fee revenue	3,265		3,224		3,074		(a)		9,746		9,401		(a)
Investment and other income	Investment and other income	89		9		132		(a)	98		179		(a)		Investment and other income	127		89		61		(a)		225		240		(a)
Net securities gains	Net securities gains	2		0		9			2		18				Net securities gains	2		2		9				4		27
Total other revenue	Total other revenue	91		9		141		(a)	100		197		(a)		Total other revenue	129		91		70		(a)		229		267		(a)
Total fee and other revenue	Total fee and other revenue	3,315		3,266		3,230			6,581		6,524				Total fee and other revenue	3,394		3,315		3,144				9,975		9,668
Net interest revenue	Net interest revenue														Net interest revenue
Interest revenue	Interest revenue	685		738		943			1,423		2,513				Interest revenue	693		685		820				2,116		3,333
Interest expense	Interest expense	40		83		163			123		919				Interest expense	52		40		117				175		1,036
Net interest revenue	Net interest revenue	645		655		780			1,300		1,594				Net interest revenue	641		645		703				1,941		2,297
Total revenue	Total revenue	3,960		3,921		4,010			7,881		8,118				Total revenue	4,035		3,960		3,847				11,916		11,965
Provision for credit losses	Provision for credit losses	(86)		(83)		143			(169)		312				Provision for credit losses	(45)		(86)		9				(214)		321
Noninterest expense	Noninterest expense														Noninterest expense
Staff	Staff	1,518		1,602		1,464			3,120		2,946				Staff	1,584		1,518		1,466				4,704		4,412
Software and equipment	Software and equipment	365		362		345			727		671				Software and equipment	372		365		340				1,099		1,011
Professional, legal and other purchased services	Professional, legal and other purchased services	363		343		337			706		667				Professional, legal and other purchased services	363		363		355				1,069		1,022
Sub-custodian and clearing	Sub-custodian and clearing	132		124		120			256		225				Sub-custodian and clearing	129		132		119				385		344
Net occupancy	Net occupancy	122		123		137			245		272				Net occupancy	120		122		136				365		408
Distribution and servicing	Distribution and servicing	73		74		85			147		176				Distribution and servicing	76		73		85				223		261
Bank assessment charges	Bank assessment charges	35		34		35			69		70				Bank assessment charges	34		35		30				103		100
Business development															Business development	22		22		17				63		79
Amortization of intangible assets	Amortization of intangible assets	20		24		26			44		52				Amortization of intangible assets	19		20		26				63		78
Business development		22		19		20			41		62
Other	Other	128		146		117			274		257				Other	199		128		107				473		364
Total noninterest expense	Total noninterest expense	2,778		2,851		2,686			5,629		5,398				Total noninterest expense	2,918		2,778		2,681				8,547		8,079
Income	Income														Income
Income before income taxes	Income before income taxes	1,268		1,153		1,181			2,421		2,408				Income before income taxes	1,162		1,268		1,157				3,583		3,565
Provision for income taxes	Provision for income taxes	241		221		216			462		481				Provision for income taxes	219		241		213				681		694
Net income	Net income	1,027		932		965			1,959		1,927				Net income	943		1,027		944				2,902		2,871
Net (income) loss attributable to noncontrolling interests related to consolidated investment management funds		(5)		(5)		(15)			(10)		3
Net loss (income) attributable to noncontrolling interests related to consolidated investment management funds															Net loss (income) attributable to noncontrolling interests related to consolidated investment management funds	4		(5)		(7)				(6)		(4)
Net income applicable to shareholders of The Bank of New York Mellon Corporation	Net income applicable to shareholders of The Bank of New York Mellon Corporation	1,022		927		950			1,949		1,930				Net income applicable to shareholders of The Bank of New York Mellon Corporation	947		1,022		937				2,896		2,867
Preferred stock dividends	Preferred stock dividends	(31)		(69)		(49)			(100)		(85)				Preferred stock dividends	(66)		(31)		(61)				(166)		(146)
Net income applicable to common shareholders of The Bank of New York Mellon Corporation	Net income applicable to common shareholders of The Bank of New York Mellon Corporation	$	991	$	858	$	901		$	1,849	$	1,845			Net income applicable to common shareholders of The Bank of New York Mellon Corporation	$	881	$	991	$	876			$	2,730	$	2,721

BNY Mellon 5149


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 calculation	Net income applicable to common shareholders of The Bank of New York Mellon Corporation used for the earnings per share calculation	Quarter ended						Year-to-date				Net income applicable to common shareholders of The Bank of New York Mellon Corporation used for the earnings per share calculation	Quarter ended						Year-to-date
		June 30, 2021		March 31, 2021		June 30, 2020		June 30, 2021		June 30, 2020			Sept. 30, 2021		June 30, 2021		Sept. 30, 2020		Sept. 30, 2021		Sept. 30, 2020
(in millions)	(in millions)											(in millions)
Net income applicable to common shareholders of The Bank of New York Mellon Corporation	Net income applicable to common shareholders of The Bank of New York Mellon Corporation	$	991	$	858	$	901	$	1,849	$	1,845	Net income applicable to common shareholders of The Bank of New York Mellon Corporation	$	881	$	991	$	876	$	2,730	$	2,721
Less: Earnings allocated to participating securities	Less: Earnings allocated to participating securities	1		1		1		2		4		Less: Earnings allocated to participating securities	—		1		1		2		5
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	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	$	990	$	857	$	900	$	1,847	$	1,841	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	$	881	$	990	$	875	$	2,728	$	2,716


Average common shares and equivalents outstanding of The Bank of New York Mellon Corporation	Average common shares and equivalents outstanding of The Bank of New York Mellon Corporation	Quarter ended			Year-to-date		Average common shares and equivalents outstanding of The Bank of New York Mellon Corporation	Quarter ended			Year-to-date
		June 30, 2021	March 31, 2021	June 30, 2020	June 30, 2021	June 30, 2020		Sept. 30, 2021	June 30, 2021	Sept. 30, 2020	Sept. 30, 2021	Sept. 30, 2020
(in thousands)	(in thousands)						(in thousands)
Basic	Basic	869,460	882,558	889,020	876,006	891,642	Basic	844,088	869,460	889,499	865,374	891,050
Common stock equivalents	Common stock equivalents	4,315	3,824	2,044	3,904	2,866	Common stock equivalents	5,297	4,315	2,173	4,401	2,522
Less: Participating securities	Less: Participating securities	(300)	(727)	(503)	(501)	(905)	Less: Participating securities	(357)	(300)	(603)	(451)	(779)
Diluted	Diluted	873,475	885,655	890,561	879,409	893,603	Diluted	849,028	873,475	891,069	869,324	892,793

Anti-dilutive securities (a)	Anti-dilutive securities (a)	547	4,133	1,578	807	2,052	Anti-dilutive securities (a)	517	547	1,485	739	1,828

(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.


Earnings per share applicable to common shareholders of The Bank of New York Mellon Corporation	Earnings per share applicable to common shareholders of The Bank of New York Mellon Corporation	Quarter ended						Year-to-date				Earnings per share applicable to common shareholders of The Bank of New York Mellon Corporation	Quarter ended						Year-to-date
		June 30, 2021		March 31, 2021		June 30, 2020		June 30, 2021		June 30, 2020			Sept. 30, 2021		June 30, 2021		Sept. 30, 2020		Sept. 30, 2021		Sept. 30, 2020
(in dollars)	(in dollars)											(in dollars)
Basic	Basic	$	1.14	$	0.97	$	1.01	$	2.11	$	2.06	Basic	$	1.04	$	1.14	$	0.98	$	3.15��	$	3.05
Diluted	Diluted	$	1.13	$	0.97	$	1.01	$	2.10	$	2.06	Diluted	$	1.04	$	1.13	$	0.98	$	3.14	$	3.04

See accompanying unaudited Notes to Consolidated Financial Statements.

50 BNY Mellon


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

Consolidated Comprehensive Income Statement (unaudited)


	Quarter ended						Year-to-date
	Sept. 30, 2021		June 30, 2021		Sept. 30, 2020		Sept. 30, 2021		Sept. 30, 2020
(in millions)
Net income	$	943	$	1,027	$	944	$	2,902	$	2,871
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(202)		51		331		(301)		77
Unrealized (loss) gain on assets available-for-sale:
Unrealized (loss) gain arising during the period	(150)		77		233		(776)		1,169
Reclassification adjustment	(2)		(1)		(6)		(3)		(20)
Total unrealized (loss) gain on assets available-for-sale	(152)		76		227		(779)		1,149
Defined benefit plans:



Amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost	22		25		20		69		57
Total defined benefit plans	22		25		20		69		57
Net unrealized (loss) gain on cash flow hedges	(1)		(3)		8		(7)		1
Total other comprehensive (loss) income, net of tax (a)	(333)		149		586		(1,018)		1,284
Total comprehensive income	610		1,176		1,530		1,884		4,155
Net loss (income) attributable to noncontrolling interests	4		(5)		(7)		(6)		(4)
Other comprehensive loss attributable to noncontrolling interests	—		—		(2)		—		—
Comprehensive income applicable to shareholders of The Bank of New York Mellon Corporation	$	614	$	1,171	$	1,521	$	1,878	$	4,151

(a) Other comprehensive (loss) income attributable to The Bank of New York Mellon Corporation shareholders was $(333) million for the quarter ended Sept. 30, 2021, $149 million for the quarter ended June 30, 2021, $584 million for the quarter ended Sept. 30, 2020, $(1,018) million for the nine months ended Sept. 30, 2021 and $1,284 million for the nine months ended Sept. 30, 2020.

See accompanying unaudited Notes to Consolidated Financial Statements.

BNY Mellon 51


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

Consolidated Balance Sheet (unaudited)


	Sept. 30, 2021		Dec. 31, 2020
(dollars in millions, except per share amounts)
Assets
Cash and due from banks, net of allowance for credit losses of $2 and $4	$	6,752	$	6,252
Interest-bearing deposits with the Federal Reserve and other central banks	126,959		141,775
Interest-bearing deposits with banks, net of allowance for credit losses of $2 and $3 (includes restricted of $4,201 and $3,167)	20,057		17,300
Federal funds sold and securities purchased under resale agreements	28,497		30,907
Securities:
Held-to-maturity, at amortized cost, net of allowance for credit losses of less than $1 and less than $1 (fair value of $56,708 and $49,224)	56,267		47,946
Available-for-sale, at fair value (amortized cost of $99,338 and $105,141, net of allowance for credit losses of $10 and $11)	101,007		108,495
Total securities	157,274		156,441
Trading assets	17,854		15,272
Loans	64,328		56,469
Allowance for credit losses	(233)		(358)
Net loans	64,095		56,111
Premises and equipment	3,422		3,602
Accrued interest receivable	464		510
Goodwill	17,420		17,496
Intangible assets	2,941		3,012
Other assets, net of allowance for credit losses on accounts receivable of $4 and $4 (includes $1,313 and $1,009, at fair value)	24,798		20,955
Total assets	$	470,533	$	469,633
Liabilities
Deposits:
Noninterest-bearing (principally U.S. offices)	$	100,498	$	83,854
Interest-bearing deposits in U.S. offices	130,468		133,479
Interest-bearing deposits in non-U.S. offices	112,173		124,212
Total deposits	343,139		341,545
Federal funds purchased and securities sold under repurchase agreements	11,973		11,305
Trading liabilities	5,152		6,031
Payables to customers and broker-dealers	26,002		25,085

Other borrowed funds	767		350
Accrued taxes and other expenses	5,609		5,696
Other liabilities (including allowance for credit losses on lending-related commitments of $40 and $121, also includes $433 and $1,110, at fair value)	8,796		7,517
Long-term debt (includes $400 and $400, at fair value)	25,043		25,984
Total liabilities	426,481		423,513
Temporary equity
Redeemable noncontrolling interests	178		176
Permanent equity
Preferred stock – par value $0.01 per share; authorized 100,000,000 shares; issued 45,826 and 45,826 shares	4,541		4,541
Common stock – par value $0.01 per share; authorized 3,500,000,000 shares; issued 1,389,042,033 and 1,382,306,327 shares	14		14
Additional paid-in capital	28,075		27,823
Retained earnings	36,125		34,241
Accumulated other comprehensive loss, net of tax	(2,003)		(985)
Less: Treasury stock of 563,220,970 and 495,542,796 common shares, at cost	(23,151)		(19,833)
Total The Bank of New York Mellon Corporation shareholders’ equity	43,601		45,801
Nonredeemable noncontrolling interests of consolidated investment management funds	273		143
Total permanent equity	43,874		45,944
Total liabilities, temporary equity and permanent equity	$	470,533	$	469,633

See accompanying unaudited Notes to Consolidated Financial Statements.

52 BNY Mellon


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

Consolidated ~~Comprehensive Income~~ Statement of Cash Flows (unaudited)

Quarter ended Year-to-date
June 30, 2021 March 31, 2021 June 30, 2020 June 30, 2021 June 30, 2020
(in millions)
Net income $ 1,027 $ 932 $ 965 $ 1,959 $ 1,927
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments 51 (150) 115 (99) (254)
Unrealized gain (loss) on assets available-for-sale:
Unrealized (loss) gain arising during the period 77 (703) 753 (626) 936
Reclassification adjustment (1) 0 (7) (1) (14)
Total unrealized gain (loss) on assets available-for-sale 76 (703) 746 (627) 922
Defined benefit plans:
Amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost 25 22 19 47 37
Total defined benefit plans 25 22 19 47 37
Net unrealized (loss) gain on cash flow hedges (3) (3) 4 (6) (7)
Total other comprehensive income (loss), net of tax (a)
149 (834) 884 (685) 698
Total comprehensive income 1,176 98 1,849 1,274 2,625
Net (income) loss attributable to noncontrolling interests (5) (5) (15) (10) 3
Other comprehensive loss attributable to noncontrolling interests 0 0 0 0 2
Comprehensive income applicable to shareholders of The Bank of New York Mellon Corporation $ 1,171 $ 93 $ 1,834 $ 1,264 $ 2,630

(a) Other comprehensive (loss) income attributable to The Bank of New York Mellon Corporation shareholders was $149 million for the quarter ended June 30, 2021, $(834) million for the quarter ended March 31, 2021, $884 million for the quarter ended June 30, 2020, $(685) million for the six months ended June 30, 2021 and $700 million for the six months ended June 30, 2020.


	Nine months ended Sept. 30,
(in millions)	2021		2020
Operating activities
Net income	$	2,902	$	2,871
Net (income) attributable to noncontrolling interests	(6)		(4)
Net income applicable to shareholders of The Bank of New York Mellon Corporation	2,896		2,867
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Provision for credit losses	(214)		321
Pension plan contributions	(5)		(18)
Depreciation and amortization	1,406		1,175
Deferred tax (benefit)	255		(351)
Net securities (gains)	(4)		(27)
Change in trading assets and liabilities	(3,466)		1,736
Change in accruals and other, net	(1,159)		200
Net cash (used for) provided by operating activities	(291)		5,903
Investing activities
Change in interest-bearing deposits with banks	(2,005)		(3,808)
Change in interest-bearing deposits with the Federal Reserve and other central banks	11,450		(9,775)
Purchases of securities held-to-maturity	(7,587)		(23,507)
Paydowns of securities held-to-maturity	8,601		6,291
Maturities of securities held-to-maturity	1,242		5,477
Purchases of securities available-for-sale	(38,201)		(56,860)
Sales of securities available-for-sale	8,846		10,824
Paydowns of securities available-for-sale	10,132		7,300
Maturities of securities available-for-sale	13,396		21,113
Net change in loans	(7,823)		(537)
Sales of loans and other real estate	1		10
Change in federal funds sold and securities purchased under resale agreements	2,343		525
Net change in seed capital investments	(83)		20
Purchases of premises and equipment/capitalized software	(841)		(956)
Proceeds from the sale of premises and equipment	34		—

Dispositions, net of cash	8		—
Other, net	228		(417)
Net cash (used for) investing activities	(259)		(44,300)
Financing activities
Change in deposits	4,805		35,736
Change in federal funds purchased and securities sold under repurchase agreements	806		4,299
Change in payables to customers and broker-dealers	954		4,627
Change in other borrowed funds	432		(183)
Change in commercial paper	—		(3,288)
Net proceeds from the issuance of long-term debt	3,689		2,245
Repayments of long-term debt	(4,250)		(4,400)
Proceeds from the exercise of stock options	45		36
Issuance of common stock	10		9
Issuance of preferred stock	—		990
Treasury stock acquired	(3,318)		(988)

Common cash dividends paid	(846)		(838)
Preferred cash dividends paid	(166)		(146)

Other, net	4		36
Net cash provided by financing activities	2,165		38,135
Effect of exchange rate changes on cash	(81)		(10)
Change in cash and due from banks and restricted cash
Change in cash and due from banks and restricted cash	1,534		(272)
Cash and due from banks and restricted cash at beginning of period	9,419		7,267
Cash and due from banks and restricted cash at end of period	$	10,953	$	6,995
Cash and due from banks and restricted cash
Cash and due from banks at end of period (unrestricted cash)	$	6,752	$	4,104
Restricted cash at end of period	4,201		2,891
Cash and due from banks and restricted cash at end of period	$	10,953	$	6,995
Supplemental disclosures
Interest paid	$	226	$	1,166
Income taxes paid	376		1,112
Income taxes refunded	36		23

See accompanying unaudited Notes to Consolidated Financial Statements.

BNY Mellon 53


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

Consolidated ~~Balance Sheet~~ ~~(unaudited)~~

June 30, 2021 Dec. 31, 2020
(dollars in millions, except per share amounts)
Assets
Cash and due from banks, net of allowance for credit losses of $2 and $4 $ 5,154 $ 6,252
Interest-bearing deposits with the Federal Reserve and other central banks 126,355 141,775
Interest-bearing deposits with banks, net of allowance for credit losses of $1 and $3 (includes restricted of $4,317 and $3,167) 21,270 17,300
Federal funds sold and securities purchased under resale agreements 29,762 30,907
Securities:
Held-to-maturity, at amortized cost, net of allowance for credit losses of less than $1 and less than $1 (fair value of $52,919 and $49,224) 52,325 47,946
Available-for-sale, at fair value (amortized cost of $101,525 and $105,141, net of allowance for credit losses of $9 and $11) 103,581 108,495
Total securities 155,906 156,441
Trading assets 15,520 15,272
Loans 63,547 56,469
Allowance for credit losses (269) (358)
Net loans 63,278 56,111
Premises and equipment 3,442 3,602
Accrued interest receivable 492 510
Goodwill 17,487 17,496
Intangible assets 2,964 3,012
Other assets, net of allowance for credit losses on accounts receivable of $4 and $4 (includes $1,222 and $1,009, at fair value) 25,333 20,955
Total assets $ 466,963 $ 469,633
Liabilities
Deposits:
Noninterest-bearing (principally U.S. offices) $ 94,081 $ 83,854
Interest-bearing deposits in U.S. offices 130,344 133,479
Interest-bearing deposits in non-U.S. offices 114,245 124,212
Total deposits 338,670 341,545
Federal funds purchased and securities sold under repurchase agreements 12,425 11,305
Trading liabilities 6,451 6,031
Payables to customers and broker-dealers 23,704 25,085
Other borrowed funds 451 350
Accrued taxes and other expenses
5,213 5,696
Other liabilities (including allowance for credit losses on lending-related commitments of $50 and $121, also includes $582 and $1,110, at fair value) (a)
8,626 7,517
Long-term debt (includes $400 and $400, at fair value) 25,629 25,984
Total liabilities 421,169 423,513
Temporary equity
Redeemable noncontrolling interests 169 176
Permanent equity
Preferred stock – par value $0.01 per share; authorized 100,000,000 shares; issued 45,826 and 45,826 shares 4,541 4,541
Common stock – par value $0.01 per share; authorized 3,500,000,000 shares; issued 1,388,316,851 and 1,382,306,327 shares 14 14
Additional paid-in capital 28,006 27,823
Retained earnings 35,540 34,241
Accumulated other comprehensive loss, net of tax (1,670) (985)
Less: Treasury stock of 525,143,173 and 495,542,796 common shares, at cost (21,150) (19,833)
Total The Bank of New York Mellon Corporation shareholders’ equity 45,281 45,801
Nonredeemable noncontrolling interests of consolidated investment management funds 344 143
Total permanent equity 45,625 45,944
Total liabilities, temporary equity and permanent equity $ 466,963 $ 469,633

~~See accompanying unaudited Notes to Consolidated Financial Statements.~~

~~54 BNY Mellon~~


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

~~Consolidated Statement of Cash Flows~~ ~~(unaudited)~~

Six months ended June 30,
(in millions) 2021 2020
Operating activities
Net income $ 1,959 $ 1,927
Net (income) loss attributable to noncontrolling interests (10) 3
Net income applicable to shareholders of The Bank of New York Mellon Corporation 1,949 1,930
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Provision for credit losses (a)
(169) 312
Pension plan contributions (16) (12)
Depreciation and amortization 938 744
Deferred tax (benefit) 274 (363)
Net securities (gains) (2) (18)
Change in trading assets and liabilities 176 171
Change in accruals and other, net (3,495) 2,361
Net cash (used for) provided by operating activities (345) 5,125
Investing activities
Change in interest-bearing deposits with banks (2,924) (3,710)
Change in interest-bearing deposits with the Federal Reserve and other central banks 13,409 (18,117)
Purchases of securities held-to-maturity (5,449) (14,499)
Paydowns of securities held-to-maturity 5,869 3,541
Maturities of securities held-to-maturity 834 1,836
Purchases of securities available-for-sale (25,820) (44,865)
Sales of securities available-for-sale 7,624 8,414
Paydowns of securities available-for-sale 7,081 4,416
Maturities of securities available-for-sale 8,999 12,241
Net change in loans (7,017) (610)
Sales of loans and other real estate 1 2
Change in federal funds sold and securities purchased under resale agreements 1,129 (6,516)
Net change in seed capital investments (55) 19
Purchases of premises and equipment/capitalized software (465) (623)
Proceeds from the sale of premises and equipment 27 0
Dispositions, net of cash 8 0
Other, net 648 (275)
Net cash provided by (used for) investing activities 3,899 (58,746)
Financing activities
Change in deposits (1,428) 47,576
Change in federal funds purchased and securities sold under repurchase agreements 1,214 3,155
Change in payables to customers and broker-dealers (1,360) 6,260
Change in other borrowed funds 107 1,036
Change in commercial paper 0 (3,294)
Net proceeds from the issuance of long-term debt 2,691 2,246
Repayments of long-term debt (2,750) (3,000)
Proceeds from the exercise of stock options 32 33
Issuance of common stock 6 6
Issuance of preferred stock 0 990
Treasury stock acquired (1,317) (988)
Common cash dividends paid (550) (560)
Preferred cash dividends paid (100) (85)
Other, net (6) 15
Net cash (used for) provided by financing activities (3,461) 53,390
Effect of exchange rate changes on cash (41) (50)
Change in cash and due from banks and restricted cash
Change in cash and due from banks and restricted cash 52 (281)
Cash and due from banks and restricted cash at beginning of period 9,419 7,267
Cash and due from banks and restricted cash at end of period $ 9,471 $ 6,986
Cash and due from banks and restricted cash
Cash and due from banks at end of period (unrestricted cash) $ 5,154 $ 4,776
Restricted cash at end of period 4,317 2,210
Cash and due from banks and restricted cash at end of period $ 9,471 $ 6,986
Supplemental disclosures
Interest paid $ 145 $ 1,013
Income taxes paid 266 756
Income taxes refunded 10 11

~~See accompanying unaudited Notes to Consolidated Financial Statements.~~

~~BNY Mellon 55~~


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

~~Consolidated~~ Statement of Changes in Equity (unaudited)


		The Bank of New York Mellon Corporation shareholders												Nonredeemable noncontrolling interests of consolidated investment management funds		Total permanent equity			Redeemable non- controlling interests/ temporary equity			The Bank of New York Mellon Corporation shareholders												Nonredeemable noncontrolling interests of consolidated investment management funds		Total permanent equity			Redeemable non- controlling interests/ temporary equity
(in millions, except per share amount)	(in millions, except per share amount)	Preferred stock		Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive (loss), net of tax		Treasury stock									(in millions, except per share amount)	Preferred stock		Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive (loss), net of tax		Treasury stock
Balance at March 31, 2021		$	4,541	$	14	$	27,928	$	34,822	$	(1,819)	$	(20,532)	$	262	$	45,216	(a)	$	187
Balance at June 30, 2021																					Balance at June 30, 2021	$	4,541	$	14	$	28,006	$	35,540	$	(1,670)	$	(21,150)	$	344	$	45,625	(a)	$	169

Shares issued to shareholders of noncontrolling interests	Shares issued to shareholders of noncontrolling interests	—		—		—		—		—		—		—		—			6		Shares issued to shareholders of noncontrolling interests	—		—		—		—		—		—		—		—			8
Redemption of subsidiary shares from noncontrolling interests		—		—		—		—		—		—		—		—			(22)

Other net changes in noncontrolling interests	Other net changes in noncontrolling interests	—		—		9		—		—		—		77		86			(2)		Other net changes in noncontrolling interests	—		—		—		—		—		—		(67)		(67)			1
Net income		—		—		—		1,022		—		—		5		1,027			—
Other comprehensive income		—		—		—		—		149		—		—		149			—
Net income (loss)																					Net income (loss)	—		—		—		947		—		—		(4)		943			—
Other comprehensive (loss)																					Other comprehensive (loss)	—		—		—		—		(333)		—		—		(333)			—
Dividends:	Dividends:																				Dividends:
Common stock at $0.31 per share (b)		—		—		—		(273)		—		—		—		(273)			—
Common stock at $0.34 per share (b)																					Common stock at $0.34 per share (b)	—		—		—		(296)		—		—		—		(296)			—
Preferred stock	Preferred stock	—		—		—		(31)		—		—		—		(31)			—		Preferred stock	—		—		—		(66)		—		—		—		(66)			—
Repurchase of common stock	Repurchase of common stock	—		—		—		—		—		(618)		—		(618)			—		Repurchase of common stock	—		—		—		—		—		(2,001)		—		(2,001)			—

Common stock issued under employee benefit plans	Common stock issued under employee benefit plans	—		—		5		—		—		—		—		5			—		Common stock issued under employee benefit plans	—		—		4		—		—		—		—		4			—

Stock awards and options exercised	Stock awards and options exercised	—		—		64		—		—		—		—		64			—		Stock awards and options exercised	—		—		65		—		—		—		—		65			—
Balance at June 30, 2021		$	4,541	$	14	$	28,006	$	35,540	$	(1,670)	$	(21,150)	$	344	$	45,625	(a)	$	169
Balance at Sept. 30, 2021																					Balance at Sept. 30, 2021	$	4,541	$	14	$	28,075	$	36,125	$	(2,003)	$	(23,151)	$	273	$	43,874	(a)	$	178

(a)Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $40,740 million at June 30, 2021 and $39,060 million at Sept. 30, 2021.

(b) Includes dividend-equivalents on share-based awards.


	The Bank of New York Mellon Corporation shareholders												Nonredeemable 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 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 shareholders Nonredeemable
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), 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 — — — — — — — — 23
Redemption of subsidiary shares from noncontrolling interests — — — — — — — — (30)
Other net changes in noncontrolling interests — — (33) — — — 114 81 18
Net income — — — 927 — — 5 932 —
Other comprehensive (loss) — — — — (834) — — (834) 0
Dividends:
Common stock at $0.31 per
share (b)
— — — (277) — — — (277) —
Preferred stock — — — (69) — — — (69) —
Repurchase of common stock — — — — — (699) — (699) —
Common stock issued under employee benefit plans — — 5 — — — — 5 —
Stock awards and options exercised — — 133 — — — — 133 —
Balance at March 31, 2021 $ 4,541 $ 14 $ 27,928 $ 34,822 $ (1,819) $ (20,532) $ 262 $ 45,216 (a) $ 187

~~(a)Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $41,260 million at Dec. 31, 2020 and $40,413 million at March 31, 2021.~~

~~(b) Includes dividend-equivalents on share-based awards.~~

5654 BNY Mellon


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

The Bank of New York Mellon Corporation shareholders Nonredeemable
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), net
of tax Treasury
stock
Balance at March 31, 2020 $ 3,542 $ 14 $ 27,644 $ 32,601 $ (2,827) $ (19,829) $ 94 $ 41,239 (a) $ 140
Shares issued to shareholders of noncontrolling interests — — — — — — — — 17
Other net changes in noncontrolling interests — — 0 — — — 3 3 0
Net income — — — 950 — — 15 965 —
Other comprehensive income — — — — 884 — — 884 0
Dividends:
Common stock at $0.31 per
share
— — — (278) — — — (278) —
Preferred stock — — — (49) — — — (49) —
Repurchase of common stock — — — — — (3) — (3) —
Common stock issued under employee benefit plans — — 6 — — — — 6 —
Preferred stock issued 990 — — — — — 990 —
Stock awards and options exercised — — 52 — — — — 52 —
Balance at June 30, 2020 $ 4,532 $ 14 $ 27,702 $ 33,224 $ (1,943) $ (19,832) $ 112 $ 43,809 (a) $ 157
Consolidated Statement of Changes in Equity (unaudited)(continued)


	The Bank of New York Mellon Corporation shareholders												Nonredeemable 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), net of tax		Treasury stock
Balance at June 30, 2020	$	4,532	$	14	$	27,702	$	33,224	$	(1,943)	$	(19,832)	$	112	$	43,809	(a)	$	157


Shares issued to shareholders of noncontrolling interests	—		—		—		—		—		—		—		—			21
Redemption of subsidiary shares from noncontrolling interests	—		—		—		—		—		—		—		—			(1)
Other net changes in noncontrolling interests	—		—		—		—		—		—		132		132			—
Net income	—		—		—		937		—		—		7		944			—
Other comprehensive income	—		—		—		—		584		—		—		584			2
Dividends:
Common stock at $0.31 per share	—		—		—		(279)		—		—		—		(279)			—
Preferred stock	—		—		—		(61)		—		—		—		(61)			—


Common stock issued under employee benefit plans	—		—		6		—		—		—		—		6			—



Stock awards and options exercised	—		—		33		—		—		—		—		33			—


Balance at Sept. 30, 2020	$	4,532	$	14	$	27,741	$	33,821	$	(1,359)	$	(19,832)	$	251	$	45,168	(a)	$	179

(a) Includes total The Bank of New York Mellon Corporation common shareholders’ equity of ~~$37,603 million at March 31, 2020 and~~ $39,165 million at June 30, 2020 and $40,385 million at Sept. 30, 2020.


		The Bank of New York Mellon Corporation shareholders												Nonredeemable noncontrolling interests of consolidated investment management funds		Total permanent equity			Redeemable non- controlling interests/ temporary equity			The Bank of New York Mellon Corporation shareholders												Nonredeemable noncontrolling interests of consolidated investment management funds		Total permanent equity			Redeemable non- controlling interests/ temporary equity
(in millions, except per share amount)	(in millions, except per share amount)	Preferred stock		Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive (loss), net of tax		Treasury stock									(in millions, except per share amount)	Preferred stock		Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive (loss), net of tax		Treasury stock
Balance at Dec. 31, 2020	Balance at Dec. 31, 2020	$	4,541	$	14	$	27,823	$	34,241	$	(985)	$	(19,833)	$	143	$	45,944	(a)	$	176	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	Shares issued to shareholders of noncontrolling interests	—		—		—		—		—		—		—		—			29		Shares issued to shareholders of noncontrolling interests	—		—		—		—		—		—		—		—			37
Redemption of subsidiary shares from noncontrolling interests	Redemption of subsidiary shares from noncontrolling interests	—		—		—		—		—		—		—		—			(52)		Redemption of subsidiary shares from noncontrolling interests	—		—		—		—		—		—		—		—			(52)
Other net changes in noncontrolling interests	Other net changes in noncontrolling interests	—		—		(24)		—		—		—		191		167			16		Other net changes in noncontrolling interests	—		—		(24)		—		—		—		124		100			17
Net income	Net income	—		—		—		1,949		—		—		10		1,959			—		Net income	—		—		—		2,896		—		—		6		2,902			—
Other comprehensive (loss)	Other comprehensive (loss)	—		—		—		—		(685)		—		—		(685)			0		Other comprehensive (loss)	—		—		—		—		(1,018)		—		—		(1,018)			—
Dividends:	Dividends:																				Dividends:
Common stock at $0.62 per share (b)		—		—		—		(550)		—		—		—		(550)			—
Common stock at $0.96 per share (b)																					Common stock at $0.96 per share (b)	—		—		—		(846)		—		—		—		(846)			—
Preferred stock	Preferred stock	—		—		—		(100)		—		—		—		(100)			—		Preferred stock	—		—		—		(166)		—		—		—		(166)			—
Repurchase of common stock	Repurchase of common stock	—		—		—		—		—		(1,317)		—		(1,317)			—		Repurchase of common stock	—		—		—		—		—		(3,318)		—		(3,318)			—

Common stock issued under employee benefit plans	Common stock issued under employee benefit plans	—		—		10		—		—		—		—		10			—		Common stock issued under employee benefit plans	—		—		14		—		—		—		—		14			—

Stock awards and options exercised	Stock awards and options exercised	—		—		197		—		—		—		—		197			—		Stock awards and options exercised	—		—		262		—		—		—		—		262			—
Balance at June 30, 2021		$	4,541	$	14	$	28,006	$	35,540	$	(1,670)	$	(21,150)	$	344	$	45,625	(a)	$	169
Balance at Sept. 30, 2021																					Balance at Sept. 30, 2021	$	4,541	$	14	$	28,075	$	36,125	$	(2,003)	$	(23,151)	$	273	$	43,874	(a)	$	178

(a) Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $41,260 million at Dec. 31, 2020 and ~~$40,740~~$39,060 million at ~~June~~Sept. 30, 2021.

(b) Includes dividend-equivalents on share-based awards.

BNY Mellon 5755


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

The Bank of New York Mellon Corporation shareholders Nonredeemable
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), net
of tax Treasury
stock
Balance at Dec. 31, 2019 $ 3,542 $ 14 $ 27,515 $ 31,894 $ (2,638) $ (18,844) $ 102 $ 41,585 (a) $ 143
Impact of adopting ASU 2016-13, Financial Instruments – Credit Losses
— — — 45 (5) — — 40 —
Adjusted balance at Jan. 1, 2020 3,542 14 27,515 31,939 (2,643) (18,844) 102 41,625 143
Shares issued to shareholders of noncontrolling interests — — — — — — — — 34
Redemption of subsidiary shares from noncontrolling interests — — — — — — — — (16)
Other net changes in noncontrolling interests — — (5) — — — 13 8 (2)
Net income (loss) — — — 1,930 — — (3) 1,927 —
Other comprehensive income (loss) — — — — 700 — — 700 (2)
Dividends:
Common stock at $0.62 per
share
— — — (560) — — — (560) —
Preferred stock — — — (85) — — — (85) —
Repurchase of common stock — — — — — (988) — (988) —
Common stock issued under employee benefit plans — — 15 — — — — 15 —
Preferred stock issued 990 — — — — — — 990 —
Stock awards and options exercised — — 177 — — — — 177 —
Balance at June 30, 2020 $ 4,532 $ 14 $ 27,702 $ 33,224 $ (1,943) $ (19,832) $ 112 $ 43,809 (a) $ 157
Consolidated Statement of Changes in Equity (unaudited)(continued)


	The Bank of New York Mellon Corporation shareholders												Nonredeemable 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), net of tax		Treasury stock
Balance at Dec. 31, 2019	$	3,542	$	14	$	27,515	$	31,894	$	(2,638)	$	(18,844)	$	102	$	41,585	(a)	$	143
Impact of adopting ASU 2016-13, Financial Instruments – Credit Losses	—		—		—		45		(5)		—		—		40			—
Adjusted balance at Jan. 1, 2020	3,542		14		27,515		31,939		(2,643)		(18,844)		102		41,625			143
Shares issued to shareholders of noncontrolling interests	—		—		—		—		—		—		—		—			55
Redemption of subsidiary shares from noncontrolling interests	—		—		—		—		—		—		—		—			(17)
Other net changes in noncontrolling interests	—		—		(5)		—		—		—		145		140			(2)
Net income	—		—		—		2,867		—		—		4		2,871			—
Other comprehensive income	—		—		—		—		1,284		—		—		1,284			—
Dividends:
Common stock at $0.93 per share	—		—		—		(839)		—		—		—		(839)			—
Preferred stock	—		—		—		(146)		—		—		—		(146)			—
Repurchase of common stock	—		—		—		—		—		(988)		—		(988)			—

Common stock issued under employee benefit plans	—		—		21		—		—		—		—		21			—


Preferred stock issued	990		—		—		—		—		—		—		990			—
Stock awards and options exercised	—		—		210		—		—		—		—		210			—


Balance at Sept. 30, 2020	$	4,532	$	14	$	27,741	$	33,821	$	(1,359)	$	(19,832)	$	251	$	45,168	(a)	$	179

(a) Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $37,941 million at Dec. 31, 2019 and ~~$39,165~~$40,385 million at ~~June~~Sept. 30, 2020.

See accompanying unaudited Notes to Consolidated Financial Statements.

5856 BNY Mellon


Notes to Consolidated Financial Statements

Note 1–Basis of presentation

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 in our 2020 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 our 2020 Annual Report.

In order to combine items of a similar nature within total revenue and to simplify our income statement presentation, in the first quarter of 2021, we made the following reporting changes. The reclassifications had no impact on consolidated total revenue or total revenue for the business segments. Prior periods were reclassified to be comparable with the current period presentation.

•Other trading revenue was reclassified from foreign exchange and other trading revenue to investment and other income.

•Foreign exchange and other trading revenue was renamed foreign exchange revenue.

•The impact of foreign currency remeasurement was reclassified from investment and other income to foreign exchange revenue.

•Income (loss) from consolidated investment management funds was reclassified to investment and other income.

•Investment and other income was reclassified from fee revenue to other revenue. Other revenue includes investment and other income and net securities gains (losses).

In addition, the assets and liabilities of consolidated investment management funds were reclassified to other assets and other liabilities, respectively, on the consolidated balance sheet. The reclassifications had no impact on total assets or total liabilities. Prior periods were reclassified to be comparable with the current period presentation.

The table below summarizes the effects of the reclassifications on the consolidated income statement.


Consolidated income statement reclassifications	Consolidated income statement reclassifications		Quarter ended		Year-to-date		Consolidated income statement reclassifications	Quarter ended			Year-to-date
			June 30, 2020					Sept. 30, 2020
(in millions)	(in millions)	June 30, 2020					Sept. 30, 2020

Before reclassifications	Before reclassifications								Before reclassifications
Foreign exchange and other trading revenue	Foreign exchange and other trading revenue		$	166	$	485		Foreign exchange and other trading revenue		$	137		$	622
Total fee revenue	Total fee revenue		$	3,167	$	6,490	Total fee revenue	$	3,108		$	9,598
Investment and other income	Investment and other income		$	105	$	116	Investment and other income	$	46		$	162
Income from consolidated investment management funds	Income from consolidated investment management funds		$	54	$	16	Income from consolidated investment management funds	$	27		$	43

After reclassifications	After reclassifications						After reclassifications
Foreign exchange revenue	Foreign exchange revenue		$	193	$	438	Foreign exchange revenue	$	149		$	587
Total fee revenue	Total fee revenue		$	3,089	$	6,327	Total fee revenue	$	3,074		$	9,401
Investment and other income	Investment and other income		$	132	$	179	Investment and other income	$	61		$	240

The table below summarizes the effects of the reclassifications on the business segments.

Business segment reclassifications

Year-to-date

Sept. 30, 2020

(in millions)

~~YTD20~~

Investment Services business

Before reclassifications

Foreign exchange and other trading revenue

~~439~~585

Other revenue

~~291~~391

After reclassifications

Foreign exchange revenue

~~392~~518

Other revenue

~~338~~458

Other segment

Before reclassifications

Fee revenue

5061

Net securities gains

1827

After reclassifications

Fee revenue

1623

Other revenue

5265

Certain additional immaterial reclassifications have been made to prior periods to place them on a basis comparable with the current period presentation.

BNY Mellon 5957


Notes to Consolidated Financial Statements (continued)

~~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.

Note 2–Acquisitions and dispositions

In the fourth quarter of 2020, BNY Mellon entered into agreements to sell 2 legal ~~entities, with one of the~~entities. Those sales ~~closing~~closed in the first ~~quarter~~and third quarters of ~~2021 and the other closing in July~~ 2021. BNY Mellon recorded a total after-tax loss of $34 million on these transactions in the fourth quarter of ~~2020.~~2020 and a $4 million gain in the third quarter of 2021.

Note 3–Securities

The following tables present the amortized cost, the gross unrealized gains and losses and the fair value of securities at ~~June~~Sept. 30, 2021 and Dec. 31, 2020.


Securities at June 30, 2021				Gross unrealized				Fair value
Securities at Sept. 30, 2021										Securities at Sept. 30, 2021			Gross unrealized				Fair value
		Amortized cost		Gross unrealized							Amortized cost
(in millions)	(in millions)							Fair value		(in millions)			Gains		Losses
Available-for-sale:	Available-for-sale:									Available-for-sale:
U.S. Treasury	U.S. Treasury	$	24,731	$	881	$	175			U.S. Treasury	$	25,392	$	795	$	226	$	25,961
Agency residential mortgage-backed securities (“RMBS”)	Agency residential mortgage-backed securities (“RMBS”)	17,522		366		45		17,843		Agency residential mortgage-backed securities (“RMBS”)	14,616		339		47		14,908
Sovereign debt/sovereign guaranteed	Sovereign debt/sovereign guaranteed	13,093		128		26		13,195		Sovereign debt/sovereign guaranteed	12,999		112		42		13,069
Agency commercial mortgage-backed securities (“MBS”)										Agency commercial mortgage-backed securities (“MBS”)	8,139		430		25		8,544
Supranational	Supranational	8,066		44		15		8,095		Supranational	7,931		34		26		7,939
Agency commercial mortgage-backed securities (“MBS”)		7,377		483		6		7,854
Foreign covered bonds	Foreign covered bonds	6,752		46		5		6,793		Foreign covered bonds	6,917		38		9		6,946
Collateralized loan obligations (“CLOs”)	Collateralized loan obligations (“CLOs”)	5,137		6		4		5,139		Collateralized loan obligations (“CLOs”)	5,202		5		3		5,204
U.S. government agencies		3,242		118		10		3,350
Non-agency commercial MBS	Non-agency commercial MBS	3,181		110		11		3,280		Non-agency commercial MBS	3,108		90		16		3,182
Foreign government agencies	Foreign government agencies	2,693		20		5		2,708		Foreign government agencies	2,670		16		7		2,679
State and political subdivisions	State and political subdivisions	2,595		24		13		2,606		State and political subdivisions	2,651		15		22		2,644
U.S. government agencies										U.S. government agencies	2,541		115		13		2,643
Non-agency RMBS (a)	Non-agency RMBS (a)	2,341		149		13		2,477		Non-agency RMBS (a)	2,469		144		15		2,598
Corporate bonds										Corporate bonds	2,395		29		47		2,377
Other asset-backed securities (“ABS”)	Other asset-backed securities (“ABS”)	2,446		17		7		2,456		Other asset-backed securities (“ABS”)	2,307		14		9		2,312
Corporate bonds		2,348		35		36		2,347

Other debt securities	Other debt securities	1		0		0		1		Other debt securities	1		—		—		1
Total securities available-for-sale (b)(c)	Total securities available-for-sale (b)(c)	$	101,525	$	2,427	$	371	$	103,581	Total securities available-for-sale (b)(c)	$	99,338	$	2,176	$	507	$	101,007
Held-to-maturity:	Held-to-maturity:									Held-to-maturity:
Agency RMBS	Agency RMBS	$	35,632	$	673	$	201	$	36,104	Agency RMBS	$	37,607	$	631	$	230	$	38,008
U.S. Treasury	U.S. Treasury	9,381		72		9		9,444		U.S. Treasury	10,528		52		31		10,549
Agency commercial MBS	Agency commercial MBS	3,983		77		15		4,045		Agency commercial MBS	4,170		64		29		4,205
U.S. government agencies	U.S. government agencies	2,204		2		34		2,172		U.S. government agencies	2,879		1		41		2,839
Sovereign debt/sovereign guaranteed	Sovereign debt/sovereign guaranteed	1,005		28		2		1,031		Sovereign debt/sovereign guaranteed	969		23		3		989

Supranational	Supranational	55		0		0		55		Supranational	54		—		—		54
Non-agency RMBS	Non-agency RMBS	50		3		0		53		Non-agency RMBS	46		3		—		49
State and political subdivisions	State and political subdivisions	15		0		0		15		State and political subdivisions	14		1		—		15
Total securities held-to-maturity	Total securities held-to-maturity	$	52,325	$	855	$	261	$	52,919	Total securities held-to-maturity	$	56,267	$	775	$	334	$	56,708
Total securities	Total securities	$	153,850	$	3,282	$	632	$	156,500	Total securities	$	155,605	$	2,951	$	841	$	157,715

(a) Includes ~~$416~~$387 million that was included in the former Grantor Trust.

(b) The amortized cost of available-for-sale securities is net of the allowance for credit loss of $9$10 million. The allowance for credit loss primarily relates to CLOs.

(c) Includes gross unrealized gains of ~~$225~~$477 million and gross unrealized losses of ~~$85~~$80 million recorded in accumulated other comprehensive income related to securities that were transferred from available-for-sale to held-to-maturity. The unrealized gains are primarily related to agency RMBS, U.S. Treasury securities, agency commercial MBS and U.S. government agency securities and 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.

6058 BNY Mellon


Notes to Consolidated Financial Statements (continued)


Securities at Dec. 31, 2020	Securities at Dec. 31, 2020			Gross unrealized						Securities at Dec. 31, 2020			Gross unrealized
		Amortized cost						Fair value			Amortized cost						Fair value
(in millions)	(in millions)			Gains		Losses				(in millions)			Gains		Losses
Available-for-sale:	Available-for-sale:									Available-for-sale:
U.S. Treasury	U.S. Treasury	$	23,557	$	1,358	$	21	$	24,894	U.S. Treasury	$	23,557	$	1,358	$	21	$	24,894
Agency RMBS	Agency RMBS	21,919		479		51		22,347		Agency RMBS	21,919		479		51		22,347
Sovereign debt/sovereign guaranteed	Sovereign debt/sovereign guaranteed	12,202		190		1		12,391		Sovereign debt/sovereign guaranteed	12,202		190		1		12,391
Agency commercial MBS	Agency commercial MBS	8,605		625		2		9,228		Agency commercial MBS	8,605		625		2		9,228
Supranational	Supranational	7,086		75		1		7,160		Supranational	7,086		75		1		7,160
Foreign covered bonds	Foreign covered bonds	6,658		68		1		6,725		Foreign covered bonds	6,658		68		1		6,725
CLOs	CLOs	4,706		7		10		4,703		CLOs	4,706		7		10		4,703
Foreign government agencies	Foreign government agencies	4,086		49		0		4,135		Foreign government agencies	4,086		49		—		4,135
U.S. government agencies	U.S. government agencies	3,680		174		1		3,853		U.S. government agencies	3,680		174		1		3,853
Other ABS	Other ABS	3,135		32		3		3,164		Other ABS	3,135		32		3		3,164
Non-agency commercial MBS	Non-agency commercial MBS	2,864		159		6		3,017		Non-agency commercial MBS	2,864		159		6		3,017
Non-agency RMBS (a)	Non-agency RMBS (a)	2,178		157		9		2,326		Non-agency RMBS (a)	2,178		157		9		2,326
State and political subdivisions	State and political subdivisions	2,270		39		1		2,308		State and political subdivisions	2,270		39		1		2,308
Corporate bonds	Corporate bonds	1,945		50		1		1,994		Corporate bonds	1,945		50		1		1,994
Commercial paper/certificates of deposit (“CDs”)	Commercial paper/certificates of deposit (“CDs”)	249		0		0		249		Commercial paper/certificates of deposit (“CDs”)	249		—		—		249
Other debt securities	Other debt securities	1		0		0		1		Other debt securities	1		—		—		1
Total securities available-for-sale (b)(c)	Total securities available-for-sale (b)(c)	$	105,141	$	3,462	$	108	$	108,495	Total securities available-for-sale (b)(c)	$	105,141	$	3,462	$	108	$	108,495
Held-to-maturity:	Held-to-maturity:									Held-to-maturity:
Agency RMBS	Agency RMBS	$	38,355	$	1,055	$	14	$	39,396	Agency RMBS	$	38,355	$	1,055	$	14	$	39,396
U.S. Treasury	U.S. Treasury	2,938		90		0		3,028		U.S. Treasury	2,938		90		—		3,028
U.S. government agencies	U.S. government agencies	2,816		4		6		2,814		U.S. government agencies	2,816		4		6		2,814
Agency commercial MBS	Agency commercial MBS	2,659		105		2		2,762		Agency commercial MBS	2,659		105		2		2,762
Sovereign debt/sovereign guaranteed	Sovereign debt/sovereign guaranteed	1,050		42		0		1,092		Sovereign debt/sovereign guaranteed	1,050		42		—		1,092
Non-agency RMBS	Non-agency RMBS	58		3		0		61		Non-agency RMBS	58		3		—		61
Supranational	Supranational	55		0		0		55		Supranational	55		—		—		55
State and political subdivisions	State and political subdivisions	15		1		0		16		State and political subdivisions	15		1		—		16
Total securities held-to-maturity	Total securities held-to-maturity	$	47,946	$	1,300	$	22	$	49,224	Total securities held-to-maturity	$	47,946	$	1,300	$	22	$	49,224
Total securities	Total securities	$	153,087	$	4,762	$	130	$	157,719	Total securities	$	153,087	$	4,762	$	130	$	157,719

(a) Includes $487 million that was included in the former Grantor Trust.

(b) The amortized cost of available-for-sale securities is net of the allowance for credit loss of $11 million. The allowance for credit loss primarily relates to CLOs.

(c) Includes gross unrealized gains of $75 million and gross unrealized losses of $44 million recorded in accumulated other comprehensive income related to securities that were transferred from available-for-sale to held-to-maturity. The unrealized gains are primarily related to agency commercial MBS 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)	Net securities gains (losses)											Net securities gains (losses)
(in millions)	(in millions)	2Q21		1Q21		2Q20		YTD21		YTD20		(in millions)	3Q21		2Q21		3Q20		YTD21		YTD20
Realized gross gains	Realized gross gains	$	6	$	12	$	16	$	18	$	28	Realized gross gains	$	3	$	6	$	10	$	21	$	38
Realized gross losses	Realized gross losses	(4)		(12)		(7)		(16)		(10)		Realized gross losses	(1)		(4)		(1)		(17)		(11)

Total net securities gains	Total net securities gains	$	2	$	0	$	9	$	2	$	18	Total net securities gains	$	2	$	2	$	9	$	4	$	27

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


Net securities gains (losses)	Net securities gains (losses)											Net securities gains (losses)
(in millions)	(in millions)	2Q21		1Q21		2Q20		YTD21		YTD20		(in millions)	3Q21		2Q21		3Q20		YTD21		YTD20
U.S. Treasury												U.S. Treasury	$	—	$	—	$	1	$	(4)	$	7
Foreign government agencies												Foreign government agencies	—		—		5		1		7
Supranational	Supranational	$	0	$	0	$	6	$	0	$	6	Supranational	—		—		—		—		6
U.S. Treasury		0		(4)		1		(4)		6
Other	Other	2		4		2		6		6		Other	2		2		3		7		7
Total net securities gains	Total net securities gains	$	2	$	0	$	9	$	2	$	18	Total net securities gains	$	2	$	2	$	9	$	4	$	27

In the third quarter of 2021, agency RMBS, U.S. Treasury securities and U.S. government agencies with an aggregate amortized cost of $4.81 billion and fair value of $5.08 billion were transferred from available-for-sale securities to held-to-maturity securities to reduce the impact of changes in interest rates on accumulated other comprehensive income.

In the second quarter of 2021, U.S. Treasury securities and agency commercial MBS with an aggregate amortized cost of $5.95 billion and fair value of $5.96 billion were transferred from available-for-sale securities to held-to-maturity securities to reduce the impact of changes in interest rates on accumulated other comprehensive income.

Allowance for credit losses – Securities

The allowance for credit losses related to securities was $10 million at ~~June~~Sept. 30, 2021 and $11 million at Dec. 31, 2020, and primarily relates to the available-for-sale CLO portfolio.

BNY Mellon 59


Notes to Consolidated Financial Statements (continued)

Credit quality indicators – Securities

At ~~June~~Sept. 30, 2021, the gross unrealized losses on the securities portfolio were primarily attributable to an increase in credit spreads 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, ~~$85~~$80 million of the unrealized losses at ~~June~~Sept. 30, 2021 and $44 million at Dec. 31, 2020 reflected in the ~~available-for-sale sections of the~~ tables below relate to certain securities ~~(primarily U.S. Treasury securities and agency RMBS)~~ that were previously transferred ~~in the second quarter of 2021 and prior periods~~ from available-for-sale to held-to-maturity. The unrealized losses will be amortized into net

~~BNY Mellon 61~~


~~Notes to Consolidated Financial Statements~~ ~~(continued)~~

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 securities 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.

The following tables show the aggregate fair value of available-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 without an allowance for credit losses.


Available-for-sale securities in an unrealized loss position without an allowance for credit losses at June 30, 2021 (a)		Less than 12 months						12 months or more							Total
		Fair value		Unrealized losses				Fair value			Unrealized losses				Fair value			Unrealized losses
Available-for-sale securities in an unrealized loss position without an allowance for credit losses at Sept. 30, 2021 (a)						Available-for-sale securities in an unrealized loss position without an allowance for credit losses at Sept. 30, 2021 (a)	Less than 12 months														12 months or more						Total
																					Fair value		Unrealized losses				Fair value		Unrealized losses			Fair value		Unrealized losses
(in millions)	(in millions)						Fair value						Unrealized losses				Fair value			Unrealized losses											Fair value					Unrealized losses	(in millions)
Agency RMBS	Agency RMBS					Agency RMBS				$	2,830			$	16									$	491	$	31			$		3,321	$	47
U.S. Treasury	U.S. Treasury	5,451		175				0			0				5,451			175			U.S. Treasury	12,106		222				46		4			12,152		226
Sovereign debt/sovereign guaranteed	Sovereign debt/sovereign guaranteed	2,988		26				120			0				3,108			26			Sovereign debt/sovereign guaranteed	3,921		42				104		—			4,025		42
Agency commercial MBS	Agency commercial MBS	917		5				292			1				1,209			6			Agency commercial MBS	1,945		24				561		1			2,506		25
Foreign covered bonds	Foreign covered bonds	1,196		5				14			0				1,210			5			Foreign covered bonds	1,637		9				93		—			1,730		9
Supranational	Supranational	1,603		15				133			0				1,736			15			Supranational	2,357		23				268		3			2,625		26
CLOs	CLOs	741		1				402			3				1,143			4			CLOs	422		1				337		2			759		3
Foreign government agencies	Foreign government agencies	793		5				0			0				793			5			Foreign government agencies	947		7				42		—			989		7
U.S. government agencies	U.S. government agencies	1,155		10				0			0				1,155			10			U.S. government agencies	904		13				—		—			904		13
Other ABS	Other ABS	962		6				158			1				1,120			7			Other ABS	1,066		8				144		1			1,210		9
Non-agency commercial MBS	Non-agency commercial MBS	651		11				101			0				752			11			Non-agency commercial MBS	766		13				137		3			903		16

Non-agency RMBS (b)	Non-agency RMBS (b)	1,102		9				242			4				1,344			13			Non-agency RMBS (b)	1,190		11				318		4			1,508		15
State and political subdivisions	State and political subdivisions	1,043		13				15			0				1,058			13			State and political subdivisions	1,607		22				21		—			1,628		22
Corporate bonds	Corporate bonds	1,403		36				0			0				1,403			36			Corporate bonds	1,577		47				—		—			1,577		47

Total securities available-for-sale (c)	Total securities available-for-sale (c)	$	21,308	$	327			$	1,997		$	44			$	23,305		$	371		Total securities available-for-sale (c)	$	33,275	$	458			$	2,562	$	49		$	35,837	$	507

(a) Includes ~~$6.0~~$8.7 billion of securities with an unrealized loss of greater than $1 million.

(b) Includes $1 million of securities with an unrealized loss of less than $1 million for less than 12 months and $7$2 million of securities with an unrealized loss of less than $1 million for 12 months or more that were included in the former Grantor Trust.

(c) Includes ~~$50~~$49 million gross unrealized losses for less than 12 months and gross unrealized losses of ~~$35~~$31 million 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.

6260 BNY Mellon


Notes to Consolidated Financial Statements (continued)


Available-for-sale securities in an unrealized loss position without an allowance for credit losses at Dec. 31, 2020 (a)	Available-for-sale securities in an unrealized loss position without an allowance for credit losses at Dec. 31, 2020 (a)	Less than 12 months				12 months or more						Total				Available-for-sale securities in an unrealized loss position without an allowance for credit losses at Dec. 31, 2020 (a)	Less than 12 months						12 months or more						Total
		Fair value		Unrealized losses		Fair value		Unrealized losses				Fair value		Unrealized losses			Fair value		Unrealized losses				Fair value			Unrealized losses			Fair value			Unrealized losses
(in millions)	(in millions)									(in millions)
Available-for-sale:	Available-for-sale:															Available-for-sale:
Agency RMBS	Agency RMBS	$	850	$	4			$	1,965	$	47						$	2,815	$	51	Agency RMBS	$	850		$	4		$	1,965		$	47		$	2,815	$	51
U.S. Treasury	U.S. Treasury	4,253		21		0		0				4,253		21		U.S. Treasury	4,253		21				—			—			4,253			21
Sovereign debt/sovereign guaranteed	Sovereign debt/sovereign guaranteed	1,349		1		135		0				1,484		1		Sovereign debt/sovereign guaranteed	1,349		1				135			—			1,484			1
Agency commercial MBS	Agency commercial MBS	440		1		266		1				706		2		Agency commercial MBS	440		1				266			1			706			2
Foreign covered bonds	Foreign covered bonds	468		1		90		0				558		1		Foreign covered bonds	468		1				90			—			558			1
Supranational	Supranational	1,041		1		132		0				1,173		1		Supranational	1,041		1				132			—			1,173			1
CLOs	CLOs	1,849		6		579		4				2,428		10		CLOs	1,849		6				579			4			2,428			10
U.S. government agencies	U.S. government agencies	160		1		0		0				160		1		U.S. government agencies	160		1				—			—			160			1

Other ABS	Other ABS	449		2		226		1				675		3		Other ABS	449		2				226			1			675			3
Non-agency commercial MBS	Non-agency commercial MBS	468		4		170		2				638		6		Non-agency commercial MBS	468		4				170			2			638			6
Non-agency RMBS (b)	Non-agency RMBS (b)	973		3		103		6				1,076		9		Non-agency RMBS (b)	973		3				103			6			1,076			9
State and political subdivisions	State and political subdivisions	273		1		2		0				275		1		State and political subdivisions	273		1				2			—			275			1
Corporate bonds	Corporate bonds	282		1		0		0				282		1		Corporate bonds	282		1				—			—			282			1

Total securities available-for-sale (c)	Total securities available-for-sale (c)	$	12,855	$	47	$	3,668	$	61			$	16,523	$	108	Total securities available-for-sale (c)	$	12,855	$	47			$	3,668		$	61		$	16,523		$	108

(a) Includes $1.6 billion of securities with an unrealized loss of greater than $1 million.

(b) Includes $16 million of securities with an unrealized loss of less than $1 million for less than 12 months and $2 million of securities with an unrealized loss of less than $1 million for 12 months or more that were included in the former Grantor Trust.

(c) Includes gross unrealized losses of $44 million 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 will be amortized into net interest revenue over the contractual lives of the securities. There were 0 gross unrealized losses for less than 12 months.

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, 2021								Ratings (a)
Held-to-maturity securities portfolio at Sept. 30, 2021																				Held-to-maturity securities portfolio at Sept. 30, 2021									Ratings (a)
				Net unrealized gain (loss)										BB+ and lower		A1+/A2/SP-1									Net unrealized gain (loss)										BB+ and lower		A1+/A2/SP-1
(dollars in millions)	(dollars in millions)	Amortized cost				AAA/ AA-		A+/ A-		BBB+/ BBB-		Not rated						(dollars in millions)	Amortized cost								AAA/ AA-		A+/ A-		BBB+/ BBB-		Not rated
Agency RMBS	Agency RMBS	$	35,632			$	472			100	%	0	%	0	%	0	%	0	%	0	%	Agency RMBS	$	37,607			$	401			100	%	—	%	—	%	—	%	—	%	—	%
U.S. Treasury	U.S. Treasury	9,381		63				100		0		0		0		0		0		U.S. Treasury	10,528				21				100		—		—		—		—		—
U.S. government agencies	U.S. government agencies	2,204		(32)				100		0		0		0		0		0		U.S. government agencies	2,879				(40)				100		—		—		—		—		—
Agency commercial MBS	Agency commercial MBS	3,983		62				100		0		0		0		0		0		Agency commercial MBS	4,170				35				100		—		—		—		—		—
Sovereign debt/sovereign guaranteed (b)	Sovereign debt/sovereign guaranteed (b)	1,005		26				100		0		0		0		0		0		Sovereign debt/sovereign guaranteed (b)	969				20				100		—		—		—		—		—

Non-agency RMBS	Non-agency RMBS	50		3				24		59		1		15		0		1		Non-agency RMBS	46				3				24		59		1		15		—		1
Supranational	Supranational	55		0				100		0		0		0		0		0		Supranational	54				—				100		—		—		—		—		—
State and political subdivisions	State and political subdivisions	15		0				5		2		5		0		0		88		State and political subdivisions	14				1				5		2		5		—		—		88

Total held-to-maturity securities	Total held-to-maturity securities	$	52,325	$	594			100	%	0	%	0	%	0	%	0	%	0	%	Total held-to-maturity securities	$	56,267			$	441			100	%	—	%	—	%	—	%	—	%	—	%

(a) Represents ratings by Standard & Poor’s (“S&P”) or the equivalent.

(b) Primarily consists of exposure to France, UK and Germany.

BNY Mellon 6361


Notes to Consolidated Financial Statements (continued)


Held-to-maturity securities portfolio at Dec. 31, 2020	Held-to-maturity securities portfolio at Dec. 31, 2020							Ratings (a)												Held-to-maturity securities portfolio at Dec. 31, 2020									Ratings
				Net unrealized gain (loss)										BB+ and lower		A1+/A2/SP-1									Net unrealized gain (loss)										BB+ and lower		A1+/A2/SP-1
(dollars in millions)	(dollars in millions)	Amortized cost				AAA/ AA-		A+/ A-		BBB+/ BBB-		Not rated						(dollars in millions)	Amortized cost								AAA/ AA-		A+/ A-		BBB+/ BBB-		Not rated
Agency RMBS	Agency RMBS	$	38,355			$	1,041			100	%	0	%	0	%	0	%	0	%	0	%	Agency RMBS	$	38,355			$	1,041			100	%	—	%	—	%	—	%	—	%	—	%
U.S. Treasury	U.S. Treasury	2,938		90				100		0		0		0		0		0		U.S. Treasury	2,938				90				100		—		—		—		—		—
U.S. government agencies	U.S. government agencies	2,816		(2)				100		0		0		0		0		0		U.S. government agencies	2,816				(2)				100		—		—		—		—		—
Agency commercial MBS	Agency commercial MBS	2,659		103				100		0		0		0		0		0		Agency commercial MBS	2,659				103				100		—		—		—		—		—
Sovereign debt/sovereign guaranteed ~~(b)~~(a)	Sovereign debt/sovereign guaranteed ~~(b)~~(a)	1,050		42				98		0		0		0		2		0		Sovereign debt/sovereign guaranteed ~~(b)~~(a)	1,050				42				98		—		—		—		2		—

Non-agency RMBS	Non-agency RMBS	58		3				28		55		2		14		0		1		Non-agency RMBS	58				3				28		55		2		14		—		1
Supranational	Supranational	55		0				100		0		0		0		0		0		Supranational	55				—				100		—		—		—		—		—
State and political subdivisions	State and political subdivisions	15		1				6		2		6		0		0		86		State and political subdivisions	15				1				6		2		6		—		—		86

Total held-to-maturity securities	Total held-to-maturity securities	$	47,946	$	1,278			100	%	0	%	0	%	0	%	0	%	0	%	Total held-to-maturity securities	$	47,946			$	1,278			100	%	—	%	—	%	—	%	—	%	—	%

(a) ~~Represents ratings by Standard & Poor’s (“S&P”) or the equivalent.~~

~~(b)~~ Primarily consists of exposure to France, UK and Germany.

Maturity distribution

The following table shows the maturity distribution by carrying amount and yield (on a tax equivalent basis) of our securities portfolio.


Maturity distribution and yields on securities at June 30, 2021		U.S. Treasury				U.S. government agencies				State and political subdivisions				Other bonds, notes and debentures				Mortgage/ asset-backed
Maturity distribution and yields on securities at Sept. 30, 2021																								Maturity distribution and yields on securities at Sept. 30, 2021	U.S. Treasury				U.S. government agencies				State and political subdivisions				Other bonds, notes and debentures				Mortgage/ asset-backed
(dollars in millions)	(dollars in millions)	Amount		Yield (a)		Amount		Yield (a)		Amount		Yield (a)		Amount		Yield (a)		Amount		Yield (a)		Total		(dollars in millions)	Amount		Yield (a)		Amount		Yield (a)		Amount		Yield (a)		Amount		Yield (a)		Amount		Yield (a)		Total
Securities available-for-sale:	Securities available-for-sale:																							Securities available-for-sale:
One year or less	One year or less	$	2,881	1.57	%	$	45	0.20	%	$	382	1.90	%	$	8,424	0.49	%	$	—	—	%	$	11,732	One year or less	$	2,159	1.44	%	$	195	0.21	%	$	235	2.44	%	$	7,710	0.58	%	$	—	—	%	$	10,299
Over 1 through 5 years	Over 1 through 5 years	8,494		1.25		1,808		0.88		540		2.64		18,877		0.52		—		—		29,719		Over 1 through 5 years	8,883		1.01		1,720		0.95		633		2.07		19,077		0.49		—		—		30,313
Over 5 through 10 years	Over 5 through 10 years	11,183		1.28		1,358		2.39		1,378		1.53		5,667		0.79		—		—		19,586		Over 5 through 10 years	12,051		1.22		614		2.00		1,499		1.55		6,146		0.74		—		—		20,310
Over 10 years	Over 10 years	2,879		3.11		139		1.98		306		2.28		171		0.54		—		—		3,495		Over 10 years	2,868		3.10		114		1.91		277		2.26		78		1.14		—		—		3,337
Mortgage-backed securities	Mortgage-backed securities	—		—		—		—		—		—		—		—		31,454		2.24		31,454		Mortgage-backed securities	—		—		—		—		—		—		—		—		29,232		1.93		29,232
Asset-backed securities	Asset-backed securities	—		—		—		—		—		—		—		—		7,595		1.44		7,595		Asset-backed securities	—		—		—		—		—		—		—		—		7,516		1.38		7,516
Total	Total	$	25,437	1.51	%	$	3,350	1.53	%	$	2,606	1.91	%	$	33,139	0.56	%	$	39,049	2.09	%	$	103,581	Total	$	25,961	1.35	%	$	2,643	1.17	%	$	2,644	1.83	%	$	33,011	0.56	%	$	36,748	1.81	%	$	101,007
Securities held-to-maturity:	Securities held-to-maturity:																							Securities held-to-maturity:
One year or less	One year or less	$	1,379	1.91	%	$	0	0	%	$	1	5.54	%	$	48	0.24	%	$	—	—	%	$	1,428	One year or less	$	1,653	1.27	%	$	—	—	%	$	1	5.52	%	$	94	0.45	%	$	—	—	%	$	1,748
Over 1 through 5 years	Over 1 through 5 years	4,831		0.97		408		0.66		1		5.69		930		0.69		—		—		6,170		Over 1 through 5 years	5,978		0.95		862		0.68		1		5.72		848		0.70		—		—		7,689
Over 5 through 10 years	Over 5 through 10 years	3,171		1.18		1,513		1.08		0		0		82		0.60		—		—		4,766		Over 5 through 10 years	2,897		1.21		1,869		1.08		4		4.65		81		0.59		—		—		4,851
Over 10 years	Over 10 years	0		0		283		2.16		13		4.75		0		0		—		—		296		Over 10 years	—		—		148		1.88		8		4.80		—		—		—		—		156
Mortgage-backed securities	Mortgage-backed securities	—		—		—		—		—		—		—		—		39,665		2.32		39,665		Mortgage-backed securities	—		—		—		—		—		—		—		—		41,823		2.27		41,823
Total	Total	$	9,381	1.18	%	$	2,204	1.14	%	$	15	4.89	%	$	1,060	0.66	%	$	39,665	2.32	%	$	52,325	Total	$	10,528	1.07	%	$	2,879	1.00	%	$	14	4.89	%	$	1,023	0.66	%	$	41,823	2.27	%	$	56,267

(a) Yields are based upon the amortized cost of securities and do not reflect the impact of hedging.

Pledged assets

At ~~June~~Sept. 30, 2021, BNY Mellon had pledged assets of $141 billion, including ~~$111~~$110 billion pledged as collateral for potential borrowings at the Federal Reserve Discount Window and $7 billion pledged as collateral for borrowing at the Federal Home Loan Bank. The components of the assets pledged at ~~June~~Sept. 30, 2021 included $123 billion of securities, ~~$13~~$12 billion of loans, $5 billion of trading assets and ~~less than~~ $1 billion of interest-bearing deposits with banks.

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, 2020, BNY Mellon had pledged assets of $141 billion, including $113 billion pledged as collateral for potential borrowing at the Federal Reserve Discount Window and $5 billion pledged as collateral for borrowing at the Federal Home Loan Bank. The components of the assets pledged at Dec. 31, 2020 included $124 billion of securities, $11 billion of loans, $6 billion of trading assets and less than $1 billion of interest-bearing deposits with banks.

6462 BNY Mellon


Notes to Consolidated Financial Statements (continued)

~~than $1 billion of interest-bearing deposits with banks.~~

At ~~June~~Sept. 30, 2021 and Dec. 31, 2020, pledged assets included ~~$22~~$23 billion and $18 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 ~~June~~Sept. 30, 2021 and Dec. 31, 2020, the market value of the securities received that can be sold or repledged was ~~$111~~$119 billion and $121 billion, respectively. We routinely sell or repledge these securities through delivery to third parties. As of ~~June~~Sept. 30, 2021 and Dec. 31, 2020, the market value of securities collateral sold or repledged was ~~$65~~$71 billion and $84 billion, respectively.

Restricted cash and securities

Cash and securities may be segregated under federal and other regulations or requirements. At ~~June~~Sept. 30, 2021 and Dec. 31, 2020, cash segregated under federal and other regulations or requirements was $4 billion and $3 billion, respectively. Restricted cash is included in interest-bearing deposits with banks on the consolidated balance sheet. Securities segregated under federal and other regulations or requirements were $2$3 billion at ~~June~~Sept. 30, 2021 and $6 billion at Dec. 31, 2020. Restricted securities were sourced from securities purchased under resale agreements and are included in federal funds sold and securities purchased under resale agreements on the consolidated balance sheet.

Note 4–Loans and asset quality

Loans

The table below provides the details of our loan portfolio.


Loans	Loans	June 30, 2021		Dec. 31, 2020		Loans	Sept. 30, 2021		Dec. 31, 2020
(in millions)	(in millions)					(in millions)
Domestic:	Domestic:					Domestic:
Commercial	Commercial	$	1,653	$	1,356	Commercial	$	1,659	$	1,356
Commercial real estate	Commercial real estate	5,888		6,056		Commercial real estate	6,081		6,056
Financial institutions	Financial institutions	4,544		4,495		Financial institutions	4,049		4,495
Lease financings	Lease financings	356		431		Lease financings	297		431
Wealth management loans and mortgages	Wealth management loans and mortgages	17,358		16,211		Wealth management loans and mortgages	17,819		16,211
Other residential mortgages	Other residential mortgages	339		389		Other residential mortgages	317		389
Overdrafts	Overdrafts	1,409		651		Overdrafts	1,667		651
Other	Other	2,009		1,823		Other	2,308		1,823
Margin loans	Margin loans	17,022		13,141		Margin loans	17,915		13,141
Total domestic	Total domestic	50,578		44,553		Total domestic	52,112		44,553
Foreign:	Foreign:					Foreign:
Commercial	Commercial	16		73		Commercial	16		73
Commercial real estate	Commercial real estate	161		0		Commercial real estate	311		—
Financial institutions	Financial institutions	6,188		6,750		Financial institutions	5,399		6,750
Lease financings	Lease financings	567		559		Lease financings	476		559
Wealth management loans and mortgages	Wealth management loans and mortgages	174		146		Wealth management loans and mortgages	168		146
Other (primarily overdrafts)	Other (primarily overdrafts)	2,962		2,113		Other (primarily overdrafts)	2,940		2,113
Margin loans	Margin loans	2,901		2,275		Margin loans	2,906		2,275
Total foreign	Total foreign	12,969		11,916		Total foreign	12,216		11,916
Total loans (a)	Total loans (a)	$	63,547	$	56,469	Total loans (a)	$	64,328	$	56,469

(a) Net of unearned income of ~~$255~~$247 million at ~~June~~Sept. 30, 2021 and $274 million at Dec. 31, 2020 primarily related to domestic and foreign lease financings.

Our loan portfolio consists of 3 portfolio segments: commercial, lease financings and mortgages. We manage our portfolio at the class level, which consists of 6 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 receivables and provide additional information about our credit risks.

BNY Mellon 6563


Notes to Consolidated Financial Statements (continued)

Allowance for credit losses

Activity in the allowance for credit losses 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 Sept. 30, 2021									Wealth management loans and mortgages			Other residential mortgages
(in millions)	Commercial		Commercial real estate		Financial institutions		Lease financings				Other					Total
Beginning balance	$	8	$	289	$	7	$	2	$	5		$	8	$	—		$	319


Charge-offs	—		—		—		—		—			—		—			—
Recoveries	—		—		—		—		—			1		—			1
Net recoveries	—		—		—		—		—			1		—			1
Provision (a)	2		(63)		2		(1)		—			(3)		16			(47)
Ending balance (b)	$	10	$	226	$	9	$	1	$	5		$	6	$	16		$	273
Allowance for:
Loan losses	$	2	$	199	$	5	$	1	$	4		$	6	$	16		$	233
Lending-related commitments	8		27		4		—		1			—		—			40
Individually evaluated for impairment:
Loan balance (c)	$	—	$	25	$	—	$	—	$	18		$	1	$	16		$	60
Allowance for loan losses	—		3		—		—		—			—		16			19

(a) Does not include the provision for credit losses related to other financial instruments of $2 million for the third quarter 2021.

(b) Includes $4 million of allowance for credit losses related to foreign loans, primarily financial institutions.

Allowance for credit losses activity for the quarter ended June 30, 2021 Wealth management loans and mortgages Other
residential
mortgages
(in millions) Commercial Commercial
real estate Financial
institutions Lease
financings Total
Beginning balance $ 11 $ 365 $ 7 $ 2 $ 6 $ 9 $ 400
Charge-offs 0 0 0 0 0 (1) (1)
Recoveries 0 0 2 0 0 1 3
Net recoveries 0 0 2 0 0 0 2
Provision (a)
(3) (76) (2) 0 (1) (1) (83)
Ending balance (b)
$ 8 $ 289 $ 7 $ 2 $ 5 $ 8 $ 319
Allowance for:
Loan losses $ 3 $ 248 $ 4 $ 2 $ 4 $ 8 $ 269
Lending-related commitments 5 41 3 0 1 0 50
Individually evaluated for impairment:
Loan balance (c)
$ 0 $ 26 $ 0 $ 0 $ 17 $ 1 $ 44
Allowance for loan losses 0 3 0 0 0 0 3


Allowance for credit losses activity for the quarter ended June 30, 2021									Wealth management loans and mortgages		Other residential mortgages
(in millions)	Commercial		Commercial real estate		Financial institutions		Lease financings						Total


Beginning balance	$	11	$	365	$	7	$	2	$	6	$	9		$	400
Charge-offs	—		—		—		—		—		(1)			(1)
Recoveries	—		—		2		—		—		1			3
Net recoveries	—		—		2		—		—		—			2
Provision (a)	(3)		(76)		(2)		—		(1)		(1)			(83)
Ending balance (b)	$	8	$	289	$	7	$	2	$	5	$	8		$	319
Allowance for:
Loan losses	$	3	$	248	$	4	$	2	$	4	$	8		$	269
Lending-related commitments	5		41		3		—		1		—			50
Individually evaluated for impairment:
Loan balance (c)	$	—	$	26	$	—	$	—	$	17	$	1		$	44
Allowance for loan losses	—		3		—		—		—		—			3

(a) Does not include the provision for credit losses benefit related to other financial instruments of $3 million for the second quarter 2021.

(b) Includes $4 million of allowance for credit losses related to foreign loans, primarily financial institutions.

Allowance for credit losses activity for the quarter ended March 31, 2021 Wealth management loans and mortgages Other
residential
mortgages
(in millions) Commercial Commercial
real estate Financial
institutions Lease
financings Total
Beginning balance $ 16 $ 430 $ 10 $ 2 $ 8 $ 13 $ 479
Charge-offs 0 0 0 0 (1) 0 (1)
Recoveries 0 0 0 0 0 2 2
Net (charge-offs) recoveries 0 0 0 0 (1) 2 1
Provision (a)
(5) (65) (3) 0 (1) (6) (80)
Ending balance (b)
$ 11 $ 365 $ 7 $ 2 $ 6 $ 9 $ 400
Allowance for:
Loan losses $ 4 $ 303 $ 4 $ 2 $ 5 $ 9 $ 327
Lending-related commitments 7 62 3 0 1 0 73
Individually evaluated for impairment:
Loan balance (c)
$ 0 $ 26 $ 0 $ 0 $ 18 $ 1 $ 45
Allowance for loan losses 0 5 0 0 0 0 5

~~(a) Does not include the provision for credit losses benefit related to other financial instruments of $3 million for the first quarter 2021.~~

~~(b) Includes $3 million of allowance for credit losses related to foreign loans, primarily financial institutions.~~

~~(c) Includes collateral-dependent loans of $45 million with $59 million of collateral at fair value.~~

6664 BNY Mellon


Notes to Consolidated Financial Statements (continued)


Allowance for credit losses activity for the quarter ended June 30, 2020										Wealth management loans and mortgages		Other residential mortgages								Total
Allowance for credit losses activity for the quarter ended Sept. 30, 2020																Allowance for credit losses activity for the quarter ended Sept. 30, 2020										Wealth management loans and mortgages		Other residential mortgages										Total
(in millions)	(in millions)	Commercial		Commercial real estate		Financial institutions		Lease financings						Wealth management loans and mortgages	Other residential mortgages								Total		(in millions)					Commercial		Commercial real estate		Financial institutions		Lease financings			Wealth management loans and mortgages	Other residential mortgages	Total
Beginning balance	Beginning balance	$	26	$	208	$	18	$	13							$	288	Beginning balance	$	40		$			372	$	11	$	12							$	454

Charge-offs	Charge-offs	0		0		0		0		0		0											0		Charge-offs	—		—		—		—		—		—							—
Recoveries	Recoveries	0		0		0		0		0		3								3			Recoveries	—		—		—		—		—		1							1
Net recoveries	Net recoveries	0		0		0		0		0		3								3			Net recoveries	—		—		—		—		—		1							1
Provision (a)	Provision (a)	14		164		(2)		(10)		2		(5)								163			Provision (a)	(13)		14		(5)		—		4		5							5
Ending balance (b)	Ending balance (b)	$	40	$	372	$	16	$	3	$	11	$	12							$	454		Ending balance (b)	$	27	$	386	$	11	$	3	$	15	$	18						$	460
Allowance for:	Allowance for:																						Allowance for:
Loan losses	Loan losses	$	23	$	244	$	11	$	3	$	9	$	12							$	302		Loan losses	$	14	$	270	$	7	$	3	$	13	$	18						$	325
Lending-related commitments	Lending-related commitments	17		128		5		0		2		0								152			Lending-related commitments	13		116		4		—		2		—							135
Individually evaluated for impairment:	Individually evaluated for impairment:																						Individually evaluated for impairment:
Loan balance (c)	Loan balance (c)	$	0	$	0	$	0	$	0	$	18	$	0							$	18		Loan balance (c)	$	—	$	—	$	—	$	—	$	17	$	—						$	17
Allowance for loan losses	Allowance for loan losses	0		0		0		0		0		0								0			Allowance for loan losses	—		—		—		—		—		—							—

(a) Does not include the provision for credit losses ~~benefit~~ related to other financial instruments of ~~$20~~$4 million for the ~~second~~third quarter 2020.

(b) Includes ~~$11~~$8 million of allowance for credit losses related to foreign loans, primarily financial institutions.


Allowance for credit losses activity for the six months ended June 30, 2021										Wealth management loans and mortgages		Other residential mortgages				Total
Allowance for credit losses activity for the nine months ended Sept. 30, 2021														Allowance for credit losses activity for the nine months ended Sept. 30, 2021								Wealth management loans and mortgages		Other residential mortgages		Other					Total
(in millions)	(in millions)	Commercial		Commercial real estate		Financial institutions		Lease financings						Wealth management loans and mortgages	Other residential mortgages						Total							(in millions)		Commercial				Commercial real estate			Financial institutions	Lease financings		Wealth management loans and mortgages	Total
Beginning balance	Beginning balance	$	16	$	430	$	10	$	2			$	479			Beginning balance		$	16	$			430	$	10	$	8	$	13				$	—		$	479

Charge-offs	Charge-offs	0		0		0		0		(1)		(1)				(2)			Charge-offs	—		—		—		—		(1)			(1)			—				(2)
Recoveries	Recoveries	0		0		2		0		0		3				5			Recoveries	—		—		2		—		—			4			—				6
Net recoveries (charge-offs)	Net recoveries (charge-offs)	0		0		2		0		(1)		2				3			Net recoveries (charge-offs)	—		—		2		—		(1)			3			—				4
Provision (a)	Provision (a)	(8)		(141)		(5)		0		(2)		(7)				(163)			Provision (a)	(6)		(204)		(3)		(1)		(2)			(10)			16				(210)
Ending balance	Ending balance	$	8	$	289	$	7	$	2	$	5	$	8			$	319		Ending balance	$	10	$	226	$	9	$	1	$	5		$	6		$	16			$	273

(a) Does not include provision for credit losses benefit related to other financial instruments of $64 million for the ~~six~~nine months ended ~~June~~Sept. 30, 2021.


Allowance for credit losses activity for the six months ended June 30, 2020										Wealth management loans and mortgages		Other residential mortgages			Foreign			Total
Allowance for credit losses activity for the nine months ended Sept. 30, 2020														Allowance for credit losses activity for the nine months ended Sept. 30, 2020										Wealth management loans and mortgages		Other residential mortgages					Foreign			Total
(in millions)	(in millions)	Commercial		Commercial real estate		Financial institutions		Lease financings				Wealth management loans and mortgages		Other residential mortgages							Foreign		Total					(in millions)		Commercial							Commercial real estate		Financial institutions		Lease financings		Wealth management loans and mortgages	Total
Balance at Dec. 31, 2019	Balance at Dec. 31, 2019	$	60	$	76	$	20	$	3	$	216				Balance at Dec. 31, 2019		$	60		$					76	$	20	$	20				$	13		$	24	$	216
Impact of adopting ASU 2016-13	Impact of adopting ASU 2016-13	(43)		14		(6)		0		(12)		2			(24)			(69)			Impact of adopting ASU 2016-13	(43)		14		(6)		—			(12)			2					(24)		(69)
Balance at Jan. 1, 2020	Balance at Jan. 1, 2020	17		90		14		3		8		15			0			147			Balance at Jan. 1, 2020	17		90		14		3			8			15					—		147
Charge-offs	Charge-offs	0		0		0		0		0		0			0			0			Charge-offs	—		—		—		—			—			—					—		—
Recoveries	Recoveries	0		0		0		0		0		3			0			3			Recoveries	—		—		—		—			—			4					—		4
Net recoveries	Net recoveries	0		0		0		0		0		3			0			3			Net recoveries	—		—		—		—			—			4					—		4
Provision (a)	Provision (a)	23		282		2		0		3		(6)			0			304			Provision (a)	10		296		(3)		—			7			(1)					—		309
Ending balance	Ending balance	$	40	$	372	$	16	$	3	$	11	$	12		$	0		$	454		Ending balance	$	27	$	386	$	11	$	3		$	15		$	18				$	—	$	460

(a) Does not include provision for credit losses related to other financial instruments of $8$12 million for the ~~six~~nine months ended ~~June~~Sept. 30, 2020.

BNY Mellon 6765


Notes to Consolidated Financial Statements (continued)

Nonperforming assets

The table below presents our nonperforming assets.


Nonperforming assets	Nonperforming assets	June 30, 2021						Dec. 31, 2020						Nonperforming assets	Sept. 30, 2021						Dec. 31, 2020
		Recorded investment						Recorded investment							Recorded investment						Recorded investment
		With an allowance		Without an allowance				With an allowance		Without an allowance					With an allowance		Without an allowance				With an allowance		Without an allowance
(in millions)	(in millions)					Total						Total		(in millions)					Total						Total
Nonperforming loans:	Nonperforming loans:													Nonperforming loans:

Other residential mortgages	Other residential mortgages	$	38	$	1	$	39	$	57	$	0	$	57	Other residential mortgages	$	39	$	1	$	40	$	57	$	—	$	57
Wealth management loans and mortgages	Wealth management loans and mortgages	6		18		24		10		20		30		Wealth management loans and mortgages	8		18		26		10		20		30
Commercial real estate	Commercial real estate	26		0		26		1		0		1		Commercial real estate	25		—		25		1		—		1
Other														Other	16		—		16		—		—		—
Total nonperforming loans	Total nonperforming loans	70		19		89		68		20		88		Total nonperforming loans	88		19		107		68		20		88
Other assets owned	Other assets owned	0		1		1		0		1		1		Other assets owned	—		1		1		—		1		1
Total nonperforming assets	Total nonperforming assets	$	70	$	20	$	90	$	68	$	21	$	89	Total nonperforming assets	$	88	$	20	$	108	$	68	$	21	$	89

At ~~June~~Sept. 30, 2021 and Dec. 31, 2020, undrawn commitments to borrowers whose loans were classified as nonaccrual or reduced rate were not material.

Past due loans

The table below presents our past due loans.


Past due loans and still accruing interest	Past due loans and still accruing interest	June 30, 2021								Dec. 31, 2020								Past due loans and still accruing interest	Sept. 30, 2021								Dec. 31, 2020
		Days past due						Total past due		Days past due						Total past due			Days past due						Total past due		Days past due						Total past due
(in millions)	(in millions)	30-59		60-89		≥90				30-59		60-89		≥90				(in millions)	30-59		60-89		≥90				30-59		60-89		≥90
Wealth management loans and mortgages	Wealth management loans and mortgages	$	27	$	1	$	0	$	28	$	54	$	1	$	0	$	55	Wealth management loans and mortgages	$	73	$	11	$	—	$	84	$	54	$	1	$	—	$	55
Commercial real estate	Commercial real estate	21		0		0		21		19		16		0		35		Commercial real estate	27		—		—		27		19		16		—		35
Financial institutions																		Financial institutions	10		—		—		10		11		—		—		11
Other residential mortgages	Other residential mortgages	3		0		0		3		3		1		0		4		Other residential mortgages	3		—		—		3		3		1		—		4
Financial institutions		0		0		0		0		11		0		0		11
Total past due loans	Total past due loans	$	51	$	1	$	0	$	52	$	87	$	18	$	0	$	105	Total past due loans	$	113	$	11	$	—	$	124	$	87	$	18	$	—	$	105

Loan modifications

Due to the coronavirus pandemic, there have been 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. See Note 1 of the Notes to Consolidated Financial Statements in our 2020 Annual Report for additional details on the CARES Act, Consolidated Appropriations Act, 2021, and Interagency Guidance. Financial institutions may account for eligible loan modifications either under the CARES Act or the Interagency Guidance. The

Company has elected to apply both the CARES Act and the Interagency Guidance, as applicable, in providing borrowers with loan modification relief in response to the coronavirus pandemic. We modified

loans of $23 million in the third quarter of 2021, $106 million in the third quarter of 2020 and $3 million in the second ~~quarter of 2021, $282 million in the second quarter of 2020 and $6 million in the first~~ 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 also modified loans of $56 million in the third quarter of 2020, a majority of which were commercial real estate loans, by providing long-term loan payment modifications and an extension of maturity. We did not identify any of the modifications as TDRs. There were no long-term loan modifications in the third quarter of 2021 and second quarter of 2021. At ~~June~~Sept. 30, 2021, the unpaid principal balance of the loans modified under the CARES Act or Interagency Guidance was ~~$77~~$94 million.

6866 BNY Mellon


Notes to Consolidated Financial Statements (continued)

Credit quality indicators

Our credit strategy is to focus on investment-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 tables below provide information about the credit profile of the loan portfolio by the period of origination.


Credit profile of the loan portfolio	Credit profile of the loan portfolio													June 30, 2021								Credit profile of the loan portfolio													Sept. 30, 2021
														Revolving loans																					Revolving loans
		Originated, at amortized cost												Amortized cost		Converted to term loans – Amortized cost				Accrued interest receivable			Originated, at amortized cost												Amortized cost		Converted to term loans – Amortized cost				Accrued interest receivable
(in millions)	(in millions)	YTD21		2020		2019		2018		2017		Prior to 2017						Total (a)				(in millions)	YTD21		2020		2019		2018		2017		Prior to 2017						Total (a)
Commercial:	Commercial:																					Commercial:
Investment grade	Investment grade	$	583	$	20	$	0	$	0	$	207	$	57	$	635	$	0	$	1,502			Investment grade	$	401	$	20	$	—	$	—	$	195	$	57	$	818	$	—	$	1,491
Non-investment grade	Non-investment grade	94		23		0		0		0		0		50		0		167				Non-investment grade	90		23		—		—		—		—		71		—		184
Total commercial	Total commercial	677		43		0		0		207		57		685		0		1,669		$	1	Total commercial	491		43		—		—		195		57		889		—		1,675		$	—
Commercial real estate:	Commercial real estate:																					Commercial real estate:
Investment grade	Investment grade	1,161		450		818		116		279		556		378		0		3,758				Investment grade	1,265		524		793		166		275		651		670		—		4,344
Non-investment grade	Non-investment grade	652		153		605		402		76		222		155		26		2,291				Non-investment grade	613		92		625		355		74		106		157		26		2,048
Total commercial real estate	Total commercial real estate	1,813		603		1,423		518		355		778		533		26		6,049		7		Total commercial real estate	1,878		616		1,418		521		349		757		827		26		6,392		8
Financial institutions:	Financial institutions:																					Financial institutions:
Investment grade	Investment grade	514		101		0		0		0		82		8,233		0		8,930				Investment grade	759		—		—		—		—		72		6,949		—		7,780
Non-investment grade	Non-investment grade	37		0		0		0		0		0		1,765		0		1,802				Non-investment grade	45		—		6		—		—		—		1,617		—		1,668
Total financial institutions	Total financial institutions	551		101		0		0		0		82		9,998		0		10,732		13		Total financial institutions	804		—		6		—		—		72		8,566		—		9,448		10
Wealth management loans and mortgages:	Wealth management loans and mortgages:																					Wealth management loans and mortgages:
Investment grade	Investment grade	58		16		75		5		153		144		9,063		0		9,514				Investment grade	67		15		74		4		153		125		9,500		—		9,938
Non-investment grade	Non-investment grade	2		0		0		0		0		0		38		0		40				Non-investment grade	2		—		—		—		—		—		28		—		30
Wealth management mortgages	Wealth management mortgages	988		1,063		929		583		1,012		3,374		29		0		7,978				Wealth management mortgages	1,468		1,036		899		561		944		3,084		27		—		8,019
Total wealth management loans and mortgages	Total wealth management loans and mortgages	1,048		1,079		1,004		588		1,165		3,518		9,130		0		17,532		27		Total wealth management loans and mortgages	1,537		1,051		973		565		1,097		3,209		9,555		—		17,987		28
Lease financings	Lease financings	17		92		16		11		6		781		0		0		923		0		Lease financings	23		81		15		11		4		639		—		—		773		—
Other residential mortgages	Other residential mortgages	0		0		0		0		0		339		0		0		339		1		Other residential mortgages	—		—		—		—		—		317		—		—		317		1
Other loans	Other loans	0		0		0		0		0		0		2,064		0		2,064		1		Other loans	—		—		—		—		—		—		2,362		—		2,362		1
Margin loans	Margin loans	5,408		1,900		0		0		0		0		12,615		0		19,923		8		Margin loans	6,254		800		—		—		—		—		13,767		—		20,821		8
Total loans	Total loans	$	9,514	$	3,818	$	2,443	$	1,117	$	1,733	$	5,555	$	35,025	$	26	$	59,231	$	58	Total loans	$	10,987	$	2,591	$	2,412	$	1,097	$	1,645	$	5,051	$	35,966	$	26	$	59,775	$	56

(a) Excludes overdrafts of ~~$4,316~~$4,553 million. Overdrafts occur on a daily basis primarily in the custody and securities clearance business and are generally repaid within two business days.

BNY Mellon 6967


Notes to Consolidated Financial Statements (continued)


Credit profile of the loan portfolio	Credit profile of the loan portfolio													Dec. 31, 2020								Credit profile of the loan portfolio													Dec. 31, 2020
														Revolving loans																					Revolving loans
		Originated, at amortized cost												Amortized cost		Converted to term loans – Amortized cost				Accrued interest receivable			Originated, at amortized cost												Amortized cost		Converted to term loans – Amortized cost				Accrued interest receivable
(in millions)	(in millions)	2020		2019		2018		2017		2016		Prior to 2016						Total (a)				(in millions)	2020		2019		2018		2017		2016		Prior to 2016						Total (a)
Commercial:	Commercial:																					Commercial:
Investment grade	Investment grade	$	128	$	18	$	71	$	420	$	57	$	0	$	493	$	0	$	1,187			Investment grade	$	128	$	18	$	71	$	420	$	57	$	—	$	493	$	—	$	1,187
Non-investment grade	Non-investment grade	142		0		6		0		0		0		94		0		242				Non-investment grade	142		—		6		—		—		—		94		—		242
Total commercial	Total commercial	270		18		77		420		57		0		587		0		1,429		$	2	Total commercial	270		18		77		420		57		—		587		—		1,429		$	2
Commercial real estate:	Commercial real estate:																					Commercial real estate:
Investment grade	Investment grade	778		1,010		458		543		312		346		127		0		3,574				Investment grade	778		1,010		458		543		312		346		127		—		3,574
Non-investment grade	Non-investment grade	285		619		643		159		376		144		229		27		2,482				Non-investment grade	285		619		643		159		376		144		229		27		2,482
Total commercial real estate	Total commercial real estate	1,063		1,629		1,101		702		688		490		356		27		6,056		8		Total commercial real estate	1,063		1,629		1,101		702		688		490		356		27		6,056		8
Financial institutions:	Financial institutions:																					Financial institutions:
Investment grade	Investment grade	132		146		47		125		13		156		8,760		0		9,379				Investment grade	132		146		47		125		13		156		8,760		—		9,379
Non-investment grade	Non-investment grade	84		36		0		0		0		0		1,746		0		1,866				Non-investment grade	84		36		—		—		—		—		1,746		—		1,866
Total financial institutions	Total financial institutions	216		182		47		125		13		156		10,506		0		11,245		12		Total financial institutions	216		182		47		125		13		156		10,506		—		11,245		12
Wealth management loans and mortgages:	Wealth management loans and mortgages:																					Wealth management loans and mortgages:
Investment grade	Investment grade	18		85		11		147		59		112		7,786		0		8,218				Investment grade	18		85		11		147		59		112		7,786		—		8,218
Non-investment grade	Non-investment grade	0		0		0		0		0		0		54		0		54				Non-investment grade	—		—		—		—		—		—		54		—		54
Wealth management mortgages	Wealth management mortgages	1,117		1,044		637		1,188		1,515		2,546		38		0		8,085				Wealth management mortgages	1,117		1,044		637		1,188		1,515		2,546		38		—		8,085
Total wealth management loans and mortgages	Total wealth management loans and mortgages	1,135		1,129		648		1,335		1,574		2,658		7,878		0		16,357		27		Total wealth management loans and mortgages	1,135		1,129		648		1,335		1,574		2,658		7,878		—		16,357		27
Lease financings	Lease financings	116		18		14		9		20		813		0		0		990		0		Lease financings	116		18		14		9		20		813		—		—		990		—
Other residential mortgages	Other residential mortgages	0		0		0		0		0		389		0		0		389		1		Other residential mortgages	—		—		—		—		—		389		—		—		389		1
Other loans	Other loans	0		0		0		0		0		0		1,904		0		1,904		1		Other loans	—		—		—		—		—		—		1,904		—		1,904		1
Margin loans	Margin loans	4,614		0		0		0		0		0		10,802		0		15,416		8		Margin loans	4,614		—		—		—		—		—		10,802		—		15,416		8
Total loans	Total loans	$	7,414	$	2,976	$	1,887	$	2,591	$	2,352	$	4,506	$	32,033	$	27	$	53,786	$	59	Total loans	$	7,414	$	2,976	$	1,887	$	2,591	$	2,352	$	4,506	$	32,033	$	27	$	53,786	$	59

(a) Excludes overdrafts of $2,683 million. Overdrafts occur on a daily basis primarily in the custody and securities clearance business and are generally repaid within two business days.

Commercial

The commercial loan portfolio is divided into investment grade and non-investment grade categories based on the assigned internal credit ratings, which are generally consistent with those 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~~Sept. 30, 2021. In addition, ~~71%~~68% 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 ~~87%~~84% expiring within one year.

Wealth management loans and mortgages

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 portfolio, therefore, would equate to investment grade

7068 BNY Mellon


Notes to Consolidated Financial Statements (continued)

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. For the loans collateralized by other assets, the credit quality of the obligor is carefully analyzed, but we do not consider this portfolio of loans to be investment grade.

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% at origination. Delinquency rate is a key indicator of credit quality in the wealth management portfolio. At ~~June~~Sept. 30, 2021, less than 1% of the mortgages were past due.

At ~~June~~Sept. 30, 2021, the wealth management mortgage portfolio consisted of the following geographic concentrations: California – 22%; New York – 16%; ~~Massachusetts~~ Florida – 9%; ~~Florida~~ Massachusetts – 9%; and other – 44%.

Lease financings

At ~~June~~Sept. 30, 2021, the lease financings portfolio consisted of exposures backed by well-diversified assets, primarily real estate and large-ticket transportation equipment. The largest ~~component~~components of our lease residual value exposure isrelate 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 ~~$339~~$317 million at ~~June~~Sept. 30, 2021 and $389 million at Dec. 31, 2020. These loans are not typically correlated to external ratings. Included in this portfolio at ~~June~~Sept. 30, 2021 were ~~$59~~$54 million of mortgage loans purchased in 2005, 2006 and the first quarter of 2007.

Overdrafts

Overdrafts primarily relate to custody and securities clearance clients and totaled ~~$4.3~~$4.6 billion at ~~June~~Sept. 30, 2021 and $2.7 billion at Dec. 31, 2020. Overdrafts occur on a daily basis 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-income securities.

Margin loans

We had ~~$19.9~~$20.8 billion of secured margin loans at ~~June~~Sept. 30, 2021, compared with $15.4 billion at Dec. 31, 2020. 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 loans.

Reverse repurchase agreements

Reverse repurchase agreements at ~~June~~Sept. 30, 2021 were fully secured with high quality collateral. As a result, there was 0no allowance for credit losses related to these assets at ~~June~~Sept. 30, 2021.

BNY Mellon 7169


Notes to Consolidated Financial Statements (continued)

Note 5–Goodwill and intangible assets

Goodwill

The tables below provide a breakdown of goodwill by business.


Goodwill by business (in millions)	Goodwill by business (in millions)	Investment Services		Investment and Wealth Management		Other		Consolidated		Goodwill by business (in millions)	Investment Services		Investment and Wealth Management		Other		Consolidated
Balance at Dec. 31, 2020	Balance at Dec. 31, 2020	$	8,456	$	9,040	$	0	$	17,496	Balance at Dec. 31, 2020	$	8,456	$	9,040	$	—	$	17,496
Dispositions	Dispositions	0		(5)		0		(5)		Dispositions	—		(5)		—		(5)
Foreign currency translation	Foreign currency translation	(21)		17		0		(4)		Foreign currency translation	(48)		(23)		—		(71)
Balance at June 30, 2021		$	8,435	$	9,052	$	0	$	17,487
Balance at Sept. 30, 2021										Balance at Sept. 30, 2021	$	8,408	$	9,012	$	—	$	17,420


Goodwill by business (in millions)	Goodwill by business (in millions)	Investment Services		Investment and Wealth Management		Other		Consolidated		Goodwill by business (in millions)	Investment Services		Investment and Wealth Management		Other		Consolidated
Balance at Dec. 31, 2019	Balance at Dec. 31, 2019	$	8,332	$	9,007	$	47	$	17,386	Balance at Dec. 31, 2019	$	8,332	$	9,007	$	47	$	17,386

Foreign currency translation	Foreign currency translation	(24)		(109)		0		(133)		Foreign currency translation	21		(50)		—		(29)
Other (a)	Other (a)	47		0		(47)		0		Other (a)	47		—		(47)		—
Balance at June 30, 2020		$	8,355	$	8,898	$	0	$	17,253
Balance at Sept. 30, 2020										Balance at Sept. 30, 2020	$	8,400	$	8,957	$	—	$	17,357

(a) Reflects the transfer of goodwill associated with Capital Markets business.

Intangible assets

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


Intangible assets – net carrying amount by business (in millions)	Intangible assets – net carrying amount by business (in millions)	Investment Services		Investment and Wealth Management		Other		Consolidated		Intangible assets – net carrying amount by business (in millions)	Investment Services		Investment and Wealth Management		Other		Consolidated
Balance at Dec. 31, 2020	Balance at Dec. 31, 2020	$	608	$	1,555	$	849	$	3,012	Balance at Dec. 31, 2020	$	608	$	1,555	$	849	$	3,012
Disposition	Disposition	0		(6)		0		(6)		Disposition	—		(6)		—		(6)
Amortization	Amortization	(29)		(15)		0		(44)		Amortization	(41)		(22)		—		(63)
Foreign currency translation	Foreign currency translation	0		2		0		2		Foreign currency translation	—		(2)		—		(2)
Balance at June 30, 2021		$	579	$	1,536	$	849	$	2,964
Balance at Sept. 30, 2021										Balance at Sept. 30, 2021	$	567	$	1,525	$	849	$	2,941


Intangible assets – net carrying amount by business (in millions)	Intangible assets – net carrying amount by business (in millions)	Investment Services		Investment and Wealth Management		Other		Consolidated		Intangible assets – net carrying amount by business (in millions)	Investment Services		Investment and Wealth Management		Other		Consolidated
Balance at Dec. 31, 2019	Balance at Dec. 31, 2019	$	678	$	1,580	$	849	$	3,107	Balance at Dec. 31, 2019	$	678	$	1,580	$	849	$	3,107
Amortization	Amortization	(36)		(16)		0		(52)		Amortization	(54)		(24)		—		(78)
Foreign currency translation	Foreign currency translation	0		(10)		0		(10)		Foreign currency translation	1		(4)		—		(3)
Balance at June 30, 2020		$	642	$	1,554	$	849	$	3,045
Balance at Sept. 30, 2020										Balance at Sept. 30, 2020	$	625	$	1,552	$	849	$	3,026

7270 BNY Mellon


Notes to Consolidated Financial Statements (continued)

The table below provides a breakdown of intangible assets by type.


Intangible assets	Intangible assets	June 30, 2021							Dec. 31, 2020						Intangible assets	Sept. 30, 2021							Dec. 31, 2020
(in millions)	(in millions)	Gross carrying amount		Accumulated amortization		Net carrying amount		Remaining weighted- average amortization period	Gross carrying amount		Accumulated amortization		Net carrying amount		(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)	Subject to amortization: (a)														Subject to amortization: (a)
Customer contracts—Investment Services	Customer contracts—Investment Services	$	1,060	$	(853)	$	207	10 years	$	1,435	$	(1,199)	$	236	Customer contracts—Investment Services	$	1,059	$	(864)	$	195	9 years	$	1,435	$	(1,199)	$	236
Customer relationships—Investment and Wealth Management	Customer relationships—Investment and Wealth Management	697		(573)		124		9 years	705		(564)		141		Customer relationships—Investment and Wealth Management	609		(491)		118		9 years	705		(564)		141
Other	Other	58		(18)		40		14 years	59		(15)		44		Other	46		(7)		39		14 years	59		(15)		44
Total subject to amortization	Total subject to amortization	1,815		(1,444)		371		10 years	2,199		(1,778)		421		Total subject to amortization	1,714		(1,362)		352		10 years	2,199		(1,778)		421
Not subject to amortization: (b)	Not subject to amortization: (b)														Not subject to amortization: (b)
Tradename	Tradename	1,295		N/A		1,295		N/A	1,295		N/A		1,295		Tradename	1,294		N/A		1,294		N/A	1,295		N/A		1,295
Customer relationships	Customer relationships	1,298		N/A		1,298		N/A	1,296		N/A		1,296		Customer relationships	1,295		N/A		1,295		N/A	1,296		N/A		1,296
Total not subject to amortization	Total not subject to amortization	2,593		N/A		2,593		N/A	2,591		N/A		2,591		Total not subject to amortization	2,589		N/A		2,589		N/A	2,591		N/A		2,591
Total intangible assets	Total intangible assets	$	4,408	$	(1,444)	$	2,964	N/A	$	4,790	$	(1,778)	$	3,012	Total intangible assets	$	4,303	$	(1,362)	$	2,941	N/A	$	4,790	$	(1,778)	$	3,012

(a) Excludes fully amortized intangible assets.

(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)
2021		$	81
2022		63
2023		53
2024		45
2025		38

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 3 business segments include 6 reporting units for which goodwill impairment testing is performed on an annual basis. The Investment Services segment is comprised of 4 reporting units and the Investment and Wealth Management segment is comprised of 2 reporting units. As a result of the annual goodwill impairment test of the six reporting units conducted in the second quarter of 2021, 0no goodwill impairment was recognized.

Note 6–Other assets

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


Other assets	Other assets	June 30, 2021		Dec. 31, 2020		Other assets	Sept. 30, 2021		Dec. 31, 2020
(in millions)	(in millions)					(in millions)
Corporate/bank-owned life insurance	Corporate/bank-owned life insurance	$	5,327	$	5,301	Corporate/bank-owned life insurance	$	5,349	$	5,301
Accounts receivable	Accounts receivable	4,693		3,619		Accounts receivable	4,187		3,619
Fails to deliver	Fails to deliver	3,911		1,371		Fails to deliver	3,531		1,371
Software	Software	1,944		1,884		Software	1,999		1,884
Prepaid pension assets	Prepaid pension assets	1,646		1,556		Prepaid pension assets	1,683		1,556
Equity in a joint venture and other investments	Equity in a joint venture and other investments	1,331		1,259		Equity in a joint venture and other investments	1,409		1,259
Qualified affordable housing project investments	Qualified affordable housing project investments	1,096		1,145		Qualified affordable housing project investments	1,104		1,145
Renewable energy investments	Renewable energy investments	1,090		1,206		Renewable energy investments	1,066		1,206
Income taxes receivable	Income taxes receivable	738		599		Income taxes receivable	610		599
Assets of consolidated investment management funds	Assets of consolidated investment management funds	561		487		Assets of consolidated investment management funds	505		487
Prepaid expense	Prepaid expense	561		477		Prepaid expense	488		477
Federal Reserve Bank stock	Federal Reserve Bank stock	475		479		Federal Reserve Bank stock	470		479
Seed capital	Seed capital	271		215		Seed capital	255		215
Fair value of hedging derivatives	Fair value of hedging derivatives	77		19		Fair value of hedging derivatives	238		19
Other (a)	Other (a)	1,612		1,338		Other (a)	1,904		1,338
Total other assets	Total other assets	$	25,333	$	20,955	Total other assets	$	24,798	$	20,955

(a) At ~~June~~Sept. 30, 2021 and Dec. 31, 2020, other assets include $7 million and $7 million, respectively, 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

BNY Mellon 7371


Notes to Consolidated Financial Statements (continued)

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 income on the consolidated income statement. Our non-readily marketable equity securities totaled ~~$144~~$212 million at ~~June~~Sept. 30, 2021 and $129 million at Dec. 31, 2020 and are included in equity in a joint venture and other investments in the table above.

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


Adjustments on non-readily marketable equity securities	Adjustments on non-readily marketable equity securities											Life-to-date		Adjustments on non-readily marketable equity securities											Life-to-date
(in millions)	(in millions)	2Q21		1Q21		2Q20		YTD21		YTD20		Life-to-date		(in millions)	3Q21		2Q21		3Q20		YTD21		YTD20		Life-to-date
Upward adjustments	Upward adjustments	$	6	$	0	$	2	$	6	$	6	$	59	Upward adjustments	$	55	$	6	$	4	$	61	$	10	$	114
Downward adjustments	Downward adjustments	0		0		0		0		0		(4)		Downward adjustments	—		—		—		—		—		(4)
Net adjustments	Net adjustments	$	6	$	0	$	2	$	6	$	6	$	55	Net adjustments	$	55	$	6	$	4	$	61	$	10	$	110

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 $1.1 billion at ~~June~~Sept. 30, 2021 and Dec. 31, 2020. Commitments to fund future investments in qualified affordable housing projects totaled ~~$450~~$480 million at ~~June~~Sept. 30, 2021 and $514 million at Dec. 31, 2020 and are recorded in other liabilities on the consolidated balance sheet. A summary of the commitments to

fund future investments is as follows: 2021 – ~~$132~~$77 million; 2022 – ~~$110~~$163 million; 2023 – ~~$151~~$162 million; 2024 – ~~$36~~$58 million; 2025 – $1$2 million; and 2026 and thereafter – ~~$20~~$18 million.

Tax credits and other tax benefits recognized were $38 million in the ~~second quarter of 2021, $38 million in the first~~third quarter of 2021, $38 million in the second quarter of 2021, $35 million in the third quarter of 2020, ~~$76~~$114 million in the first ~~six~~nine months of 2021 and ~~$76~~$111 million in the first ~~six~~nine months of 2020.

Amortization expense included in the provision for income taxes was $32 million in the ~~second~~third quarter of 2021, $32 million in the ~~first~~second quarter of 2021, ~~$31~~$30 million in the ~~second~~third quarter of 2020, ~~$64~~$96 million in the first ~~six~~nine months of 2021 and ~~$62~~$92 million in the first ~~six~~nine months of 2020.

Investments valued using net asset value (“NAV”) per share

In our Investment and Wealth Management business, we make seed capital investments in certain funds we manage. We also hold private equity investments, ~~specifically~~primarily small business investment companies (“SBICs”), which are compliant with the Volcker Rule, and certain other corporate investments. Seed capital, private equity and other corporate investments are included in other assets on the consolidated balance sheet. The fair value of certain of these investments was estimated using the NAV per share for our ownership interest in the funds.

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


Investments valued using NAV	Investments valued using NAV	June 30, 2021					Dec. 31, 2020					Investments valued using NAV	Sept. 30, 2021					Dec. 31, 2020
(in millions)	(in millions)	Fair value		Unfunded commitments			Fair value		Unfunded commitments			(in millions)	Fair value		Unfunded commitments			Fair value		Unfunded commitments
Seed capital (a)	Seed capital (a)	$	57		$	17	$	52		$	22	Seed capital (a)	$	59		$	25	$	52		$	22
Private equity investments (SBICs) (b)		110			57		102			52
Private equity investments (b)												Private equity investments (b)	114			61		102			52
Other (c)	Other (c)	46			0		47			0		Other (c)	46			—		47			—
Total	Total	$	213		$	74	$	201		$	74	Total	$	219		$	86	$	201		$	74

(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 the funds, which have lives of three to 11 years at both ~~June~~Sept. 30, 2021 and Dec. 31, 2020, are liquidated.

(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, which have a life of 10 years, are liquidated.

(c) Primarily includes investments in funds that relate to deferred compensation arrangements with employees. Investments in funds can be redeemed on a monthly to quarterly basis with redemption notice periods of up to 95 days.

7472 BNY Mellon


Notes to Consolidated Financial Statements (continued)

Note 7–Contract revenue

Fee and other revenue in Investment Services and Investment and Wealth Management 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 2020 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 2020 Annual Report for additional information on our principal businesses, Investment 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 table presents fee and other revenue, disaggregated by type, related to contracts with customers 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	Disaggregation of contract revenue by business segment																									Disaggregation of contract revenue by business segment
		Quarter ended																									Quarter ended
		June 30, 2021								March 31, 2021								June 30, 2020									Sept. 30, 2021								June 30, 2021								Sept. 30, 2020
(in millions)	(in millions)	IS		IWM		Other		Total		IS		IWM		Other		Total		IS		IWM		Other		Total		(in millions)	IS		IWM		Other		Total		IS		IWM		Other		Total		IS		IWM		Other		Total
Fee and other revenue – contract revenue:	Fee and other revenue – contract revenue:																									Fee and other revenue – contract revenue:
Investment services fees:	Investment services fees:																									Investment services fees:
Asset servicing fees	Asset servicing fees	$	1,175	$	24	$	(16)	$	1,183	$	1,175	$	25	$	(18)	$	1,182	$	1,147	$	25	$	(15)	$	1,157	Asset servicing fees	$	1,199	$	25	$	(17)	$	1,207	$	1,175	$	24	$	(16)	$	1,183	$	1,143	$	25	$	(13)	$	1,155
Clearing services fees	Clearing services fees	435		0		0		435		455		0		0		455		431		0		0		431		Clearing services fees	423		—		—		423		435		—		—		435		397		—		—		397
Issuer services fees	Issuer services fees	281		0		0		281		245		0		0		245		277		0		0		277		Issuer services fees	280		—		—		280		281		—		—		281		296		—		—		296
Treasury services fees	Treasury services fees	164		0		(1)		163		159		0		1		160		144		0		1		145		Treasury services fees	168		1		—		169		164		—		(1)		163		153		1		(2)		152
Total investment services fees	Total investment services fees	2,055		24		(17)		2,062		2,034		25		(17)		2,042		1,999		25		(14)		2,010		Total investment services fees	2,070		26		(17)		2,079		2,055		24		(17)		2,062		1,989		26		(15)		2,000
Investment management and performance fees	Investment management and performance fees	4		870		(4)		870		4		883		(5)		882		4		792		(5)		791		Investment management and performance fees	5		901		(6)		900		4		870		(4)		870		4		838		(3)		839
Financing-related fees	Financing-related fees	16		0		0		16		20		0		0		20		23		1		0		24		Financing-related fees	16		—		—		16		16		—		—		16		13		1		1		15
Distribution and servicing	Distribution and servicing	0		28		(1)		27		1		28		0		29		(7)		34		0		27		Distribution and servicing	(1)		28		1		28		—		28		(1)		27		(2)		31		—		29
Investment and other income	Investment and other income	32		(7)		0		25		36		(11)		0		25		62		(41)		3		24		Investment and other income	38		(10)		—		28		32		(7)		—		25		57		(33)		(2)		22
Total fee and other revenue – contract revenue	Total fee and other revenue – contract revenue	2,107		915		(22)		3,000		2,095		925		(22)		2,998		2,081		811		(16)		2,876		Total fee and other revenue – contract revenue	2,128		945		(22)		3,051		2,107		915		(22)		3,000		2,061		863		(19)		2,905
Fee and other revenue – not in scope of Accounting Standards Codification (“ASC”) 606 (a)(b)	Fee and other revenue – not in scope of Accounting Standards Codification (“ASC”) 606 (a)(b)	229		37		44		310		250		18		(5)		263		258		27		54		339		Fee and other revenue – not in scope of Accounting Standards Codification (“ASC”) 606 (a)(b)	250		40		57		347		229		37		44		310		185		8		39		232
Total fee and other revenue	Total fee and other revenue	$	2,336	$	952	$	22	$	3,310	$	2,345	$	943	$	(27)	$	3,261	$	2,339	$	838	$	38	$	3,215	Total fee and other revenue	$	2,378	$	985	$	35	$	3,398	$	2,336	$	952	$	22	$	3,310	$	2,246	$	871	$	20	$	3,137

(a) Primarily includes asset servicing fees, foreign exchange revenue, financing-related fees, investment and other income ~~(loss)~~ and net securities gains, ~~(losses),~~ all of which are accounted for using other accounting guidance.

(b) The revenue in the Investment and Wealth Management business segment is net of income (loss) attributable to noncontrolling interests related to consolidated investment management funds of $(4) million in the third quarter of 2021, $5 million in the second quarter of 2021 and ~~first quarter of 2021 and $15~~$7 million in the ~~second~~third quarter of 2020.

IS – Investment Services business segment.

IWM – Investment and Wealth Management business segment.

BNY Mellon 7573


Notes to Consolidated Financial Statements (continued)


Disaggregation of contract revenue by business segment	Disaggregation of contract revenue by business segment																			Disaggregation of contract revenue by business segment
		Year-to-date																Year-to-date
		June 30, 2021								June 30, 2020									Sept. 30, 2021						Sept. 30, 2020
(in millions)	(in millions)	IS		IWM		Other		Total		IS		IWM		Other		Total				(in millions)	IS		IWM		Other		Total		IS		IWM		Other		Total
Fee and other revenue – contract revenue:	Fee and other revenue – contract revenue:																			Fee and other revenue – contract revenue:
Investment services fees:	Investment services fees:																			Investment services fees:
Asset servicing fees	Asset servicing fees	$	2,350	$	49	$	(34)	$	2,365	$	2,274	$	48	$	(26)	$	2,296			Asset servicing fees	$	3,549	$	74	$	(51)	$	3,572	$	3,417	$	73	$	(39)	$	3,451
Clearing services fees	Clearing services fees	890		0		—		890		901		0		0		901				Clearing services fees	1,313		—		—		1,313		1,298		—		—		1,298
Issuer services fees	Issuer services fees	526		0		0		526		540		0		0		540				Issuer services fees	806		—		—		806		836		—		—		836
Treasury services fees	Treasury services fees	323		0		0		323		293		0		1		294				Treasury services fees	491		1		—		492		446		1		(1)		446
Total investment services fees	Total investment services fees	4,089		49		(34)		4,104		4,008		48		(25)		4,031				Total investment services fees	6,159		75		(51)		6,183		5,997		74		(40)		6,031
Investment management and performance fees	Investment management and performance fees	8		1,753		(9)		1,752		9		1,654		(9)		1,654				Investment management and performance fees	13		2,654		(15)		2,652		13		2,492		(12)		2,493
Financing-related fees	Financing-related fees	36		0		0		36		51		1		0		52				Financing-related fees	52		—		—		52		64		2		1		67
Distribution and servicing	Distribution and servicing	1		56		(1)		56		(19)		77		0		58				Distribution and servicing	—		84		—		84		(21)		108		—		87
Investment and other income	Investment and other income	68		(18)		0		50		134		(91)		3		46				Investment and other income	106		(28)		—		78		191		(124)		1		68
Total fee and other revenue – contract revenue	Total fee and other revenue – contract revenue	4,202		1,840		(44)		5,998		4,183		1,689		(31)		5,841				Total fee and other revenue – contract revenue	6,330		2,785		(66)		9,049		6,244		2,552		(50)		8,746
Fee and other revenue – not in scope of ASC 606 (a)(b)	Fee and other revenue – not in scope of ASC 606 (a)(b)	479		55		39		573		592		(5)		99		686				Fee and other revenue – not in scope of ASC 606 (a)(b)	729		95		96		920		777		3		138		918
Total fee and other revenue	Total fee and other revenue	$	4,681	$	1,895	$	(5)	$	6,571	$	4,775	$	1,684	$	68	$	6,527			Total fee and other revenue	$	7,059	$	2,880	$	30	$	9,969	$	7,021	$	2,555	$	88	$	9,664

(b) The revenue in the Investment and Wealth Management business segment is net of income ~~(loss)~~ attributable to noncontrolling interests related to consolidated investment management funds of ~~$10~~$6 million in the first ~~six~~nine months of 2021 and ~~$(3)~~$4 million in the first ~~six~~nine months of 2020.

IS – Investment Services business segment.

IWM – Investment and Wealth Management business segment.

Contract balances

Our clients are billed based on fee schedules that are agreed upon in each customer contract. Receivables from customers were ~~$2.7~~$2.5 billion at ~~June~~Sept. 30, 2021 and $2.4 billion at Dec. 31, 2020.

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 ~~$113~~$108 million at ~~June~~Sept. 30, 2021 and $32 million at Dec. 31, 2020. 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 ~~$189~~$185 million at ~~June~~Sept. 30, 2021 and $167 million at Dec. 31, 2020. Contract liabilities are included in other liabilities on the consolidated balance sheet. Revenue recognized in the ~~second~~third quarter of 2021 relating to contract liabilities as of ~~March 31,~~June 30, 2021 was ~~$67~~$68 million. Revenue recognized in the first ~~six~~nine months of 2021 relating to contract liabilities as of Dec. 31, 2020 was ~~$83~~$101 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 ~~$67~~$62 million at ~~June~~Sept. 30, 2021 and $73 million at Dec. 31, 2020. 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 $5 million in the third quarter of 2021, $6 million in the third quarter of 2020, $5 million in the second quarter of 2021, ~~second quarter of 2020 and first quarter of 2021 and $10~~$15 million in the first ~~six~~nine months of 2021 and $16 million in the first ~~six~~nine months of 2020.

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~~

7674 BNY Mellon


Notes to Consolidated Financial Statements (continued)

the inception of a contract which enables the fulfillment of the performance obligation, and totaled ~~$18~~$19 million at ~~June~~Sept. 30, 2021 and $15 million at Dec. 31, 2020. 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 consolidated income statement and totaled less than $1 million in the ~~second~~third quarter of 2021, $2$1 million in the ~~second~~third quarter of 2020, less than $1 million in the ~~first~~second quarter of 2021, $1 million in the first ~~six~~nine months of 2021 and $3$4 million in the first ~~six~~nine months of 2020.

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–Net interest revenue

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


Net interest revenue	Net interest revenue	Quarter ended						Year-to-date				Net interest revenue	Quarter ended						Year-to-date
(in millions)	(in millions)	June 30, 2021		March 31, 2021		June 30, 2020		June 30, 2021		June 30, 2020		(in millions)	Sept. 30, 2021		June 30, 2021		Sept. 30, 2020		Sept. 30, 2021		Sept. 30, 2020
Interest revenue	Interest revenue											Interest revenue
Deposits with the Federal Reserve and other central banks	Deposits with the Federal Reserve and other central banks	$	(25)	$	(16)	$	(7)	$	(41)	$	73	Deposits with the Federal Reserve and other central banks	$	(21)	$	(25)	$	(10)	$	(62)	$	63
Deposits with banks	Deposits with banks	11		14		40		25		98		Deposits with banks	12		11		20		37		118
Federal funds sold and securities purchased under resale agreements	Federal funds sold and securities purchased under resale agreements	25		32		61		57		457		Federal funds sold and securities purchased under resale agreements	32		25		48		89		505
Margin loans	Margin loans	49		45		40		94		127		Margin loans	52		49		41		146		168
Non-margin loans	Non-margin loans	188		185		230		373		539		Non-margin loans	186		188		199		559		738
Securities:	Securities:											Securities:
Taxable	Taxable	415		450		556		865		1,150		Taxable	413		415		499		1,278		1,649
Exempt from federal income taxes	Exempt from federal income taxes	11		9		6		20		12		Exempt from federal income taxes	11		11		7		31		19
Total securities	Total securities	426		459		562		885		1,162		Total securities	424		426		506		1,309		1,668
Trading securities	Trading securities	11		19		17		30		57		Trading securities	8		11		16		38		73
Total interest revenue	Total interest revenue	685		738		943		1,423		2,513		Total interest revenue	693		685		820		2,116		3,333
Interest expense	Interest expense											Interest expense
Deposits	Deposits	(49)		(37)		(17)		(86)		223		Deposits	(44)		(49)		(29)		(130)		194
Federal funds purchased and securities sold under repurchase agreements	Federal funds purchased and securities sold under repurchase agreements	(5)		(3)		1		(8)		276		Federal funds purchased and securities sold under repurchase agreements	2		(5)		6		(6)		282
Trading liabilities	Trading liabilities	2		3		2		5		9		Trading liabilities	1		2		2		6		11
Other borrowed funds	Other borrowed funds	1		2		7		3		11		Other borrowed funds	3		1		3		6		14
Commercial paper	Commercial paper	0		0		1		0		7		Commercial paper	—		—		—		—		7
Customer payables	Customer payables	0		(1)		(1)		(1)		29		Customer payables	(1)		—		—		(2)		29
Long-term debt	Long-term debt	91		119		170		210		364		Long-term debt	91		91		135		301		499
Total interest expense	Total interest expense	40		83		163		123		919		Total interest expense	52		40		117		175		1,036
Net interest revenue	Net interest revenue	645		655		780		1,300		1,594		Net interest revenue	641		645		703		1,941		2,297
Provision for credit losses	Provision for credit losses	(86)		(83)		143		(169)		312		Provision for credit losses	(45)		(86)		9		(214)		321
Net interest revenue after provision for credit losses	Net interest revenue after provision for credit losses	$	731	$	738	$	637	$	1,469	$	1,282	Net interest revenue after provision for credit losses	$	686	$	731	$	694	$	2,155	$	1,976

BNY Mellon 7775


Notes to Consolidated Financial Statements (continued)

Note 9–Employee benefit plans

The components of net periodic benefit (credit) cost are presented below. The service cost component is reflected in staff expense, whereas the remaining components are reflected in other expense.


Net periodic benefit (credit) cost	Net periodic benefit (credit) cost	Quarter ended																		Net periodic benefit (credit) cost	Quarter ended
		June 30, 2021						March 31, 2021						June 30, 2020							Sept. 30, 2021						June 30, 2021						Sept. 30, 2020
(in millions)	(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		(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	Service cost	$	0	$	3	$	0	$	0	$	4	$	0	$	0	$	3	$	0	Service cost	$	—	$	4	$	—	$	—	$	3	$	—	$	—	$	3	$	—
Interest cost	Interest cost	34		7		1		34		6		1		39		6		1		Interest cost	35		6		1		34		7		1		39		7		2
Expected return on assets	Expected return on assets	(75)		(8)		(1)		(75)		(9)		(2)		(79)		(9)		(2)		Expected return on assets	(75)		(9)		(2)		(75)		(8)		(1)		(80)		(10)		(2)
Other	Other	24		3		0		25		4		0		21		3		0		Other	24		3		—		24		3		—		22		2		(1)
Net periodic benefit (credit) cost	Net periodic benefit (credit) cost	$	(17)	$	5	$	0	$	(16)	$	5	$	(1)	$	(19)	$	3	$	(1)	Net periodic benefit (credit) cost	$	(16)	$	4	$	(1)	$	(17)	$	5	$	—	$	(19)	$	2	$	(1)


Net periodic benefit (credit) cost	Net periodic benefit (credit) cost	Year-to-date												Net periodic benefit (credit) cost	Year-to-date
		June 30, 2021						June 30, 2020							Sept. 30, 2021						Sept. 30, 2020
(in millions)	(in millions)	Domestic pension benefits		Foreign pension benefits		Health care benefits		Domestic pension benefits		Foreign pension benefits		Health care benefits		(in millions)	Domestic pension benefits		Foreign pension benefits		Health care benefits		Domestic pension benefits		Foreign pension benefits		Health care benefits
Service cost	Service cost	$	0	$	7	$	0	$	0	$	6	$	0	Service cost	$	—	$	11	$	—	$	—	$	9	$	—
Interest cost	Interest cost	68		13		2		78		13		2		Interest cost	103		19		3		117		20		4
Expected return on assets	Expected return on assets	(150)		(17)		(3)		(159)		(19)		(3)		Expected return on assets	(225)		(26)		(5)		(239)		(29)		(5)
Other	Other	49		7		0		43		6		(1)		Other	73		10		—		65		8		(2)
Net periodic benefit (credit) cost	Net periodic benefit (credit) cost	$	(33)	$	10	$	(1)	$	(38)	$	6	$	(2)	Net periodic benefit (credit) cost	$	(49)	$	14	$	(2)	$	(57)	$	8	$	(3)

Note 10–Income taxes

Our total tax reserves as of ~~June~~Sept. 30, 2021 were ~~$117~~$120 million compared with $119 million at Dec. 31, 2020. If these tax reserves were unnecessary, ~~$117~~$120 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 ~~June~~Sept. 30, 2021 is accrued interest, where applicable, of ~~$31~~$33 million. The additional tax expense related to interest for the ~~six~~nine months ended ~~June~~Sept. 30, 2021 was $4$6 million, compared with $3$5 million for the ~~six~~nine months ended ~~June~~Sept. 30, 2020.

It is reasonably possible the total reserve for uncertain tax positions could decrease within the next 12 months by approximately $1 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 2016. Our New York State income tax returns are closed to examination through 2014. Our New York City income tax returns are closed to examination through 2012. Our UK income tax returns are closed to examination through 2018.

Note 11–Variable interest entities and securitization

We have variable interests in variable interest entities (“VIEs”), which include investments in retail, institutional and alternative investment funds, including CLO structures in which we provide asset management services, some of which are consolidated.

We earn management fees from these funds as well as performance fees in certain funds and may also provide start-up capital for new funds. The funds are primarily financed by our customers’ investments in the funds’ equity or debt.

~~Additionally, we invest in qualified affordable housing and renewable energy projects, which are designed to generate a return primarily through the~~

7876 BNY Mellon


Notes to Consolidated Financial Statements (continued)

Additionally, we invest in qualified affordable housing and renewable energy projects, which are designed to generate a return primarily through the realization of tax credits. The projects, which are structured as limited partnerships and limited liability companies, are also VIEs, but are not consolidated.

The following table presents the incremental assets and liabilities included in the consolidated balance

sheet as of ~~June~~Sept. 30, 2021 and Dec. 31, 2020. 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.


Consolidated investments	Consolidated investments	June 30, 2021							Dec. 31, 2020							Consolidated investments	Sept. 30, 2021							Dec. 31, 2020
(in millions)	(in millions)	Investment Management funds			Securitization		Total consolidated investments		Investment Management funds			Securitization		Total consolidated investments		(in millions)	Investment Management funds			Securitization		Total consolidated investments		Investment Management funds			Securitization		Total consolidated investments
Trading assets	Trading assets	$	544		$	400	$	944	$	482		$	400	$	882	Trading assets	$	487		$	400	$	887	$	482		$	400	$	882
Other assets	Other assets	17			0		17		5			0		5		Other assets	18			—		18		5			—		5
Total assets	Total assets	$	561	(a)	$	400	$	961	$	487	(b)	$	400	$	887	Total assets	$	505	(a)	$	400	$	905	$	487	(b)	$	400	$	887

Other liabilities	Other liabilities	$	7		$	400	$	407	$	3		$	400	$	403	Other liabilities	$	5		$	400	$	405	$	3		$	400	$	403
Total liabilities	Total liabilities	$	7	(a)	$	400	$	407	$	3	(b)	$	400	$	403	Total liabilities	$	5	(a)	$	400	$	405	$	3	(b)	$	400	$	403
Nonredeemable noncontrolling interests	Nonredeemable noncontrolling interests	$	344	(a)	$	0	$	344	$	143	(b)	$	0	$	143	Nonredeemable noncontrolling interests	$	273	(a)	$	—	$	273	$	143	(b)	$	—	$	143

(a) Includes voting model entities (“VMEs”) with assets of ~~$160~~$185 million, liabilities of $2$1 million and nonredeemable noncontrolling interests of ~~$40~~$48 million.

(b) Includes VMEs with assets of $314 million, liabilities of $3 million and nonredeemable noncontrolling interests of $76 million.

We 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 ~~June~~Sept. 30, 2021 and Dec. 31, 2020, the following assets and liabilities related to the VIEs where we are

not the primary beneficiary were included in our consolidated balance sheets and primarily related to accounting for our investments in qualified affordable housing and renewable energy projects.

The maximum loss exposure indicated in the following table relates solely to our investments in, and unfunded commitments to, the VIEs.


Non-consolidated VIEs	Non-consolidated VIEs	June 30, 2021						Dec. 31, 2020						Non-consolidated VIEs	Sept. 30, 2021						Dec. 31, 2020
(in millions)	(in millions)	Assets		Liabilities		Maximum loss exposure		Assets		Liabilities		Maximum loss exposure		(in millions)	Assets		Liabilities		Maximum loss exposure		Assets		Liabilities		Maximum loss exposure
Securities – Available-for-sale (a)	Securities – Available-for-sale (a)	$	212	$	0	$	212	$	217	$	0	$	217	Securities – Available-for-sale (a)	$	208	$	—	$	208	$	217	$	—	$	217
Other	Other	2,400		450		2,865		2,565		514		3,096		Other	2,380		480		2,882		2,565		514		3,096

(a) Includes investments in the Company’s sponsored CLOs.

BNY Mellon 7977


Notes to Consolidated Financial Statements (continued)

Note 12–Preferred stock

The Parent has 100 million authorized shares of preferred stock with a par value of $0.01 per share. The following table summarizes the Parent’s preferred stock issued and outstanding at ~~June~~Sept. 30, 2021 and Dec. 31, 2020.


Preferred stock summary (a)	Preferred stock summary (a)		Total shares issued and outstanding		Carrying value (b)				Preferred stock summary (a)		Total shares issued and outstanding		Carrying value (b)
					(in millions)								(in millions)
			June 30, 2021	Dec. 31, 2020	June 30, 2021		Dec. 31, 2020				Sept. 30, 2021	Dec. 31, 2020	Sept. 30, 2021		Dec. 31, 2020
		Per annum dividend rate								Per annum dividend rate
Series A	Series A	Greater of (i) three-month LIBOR plus 0.565% for the related distribution period or (ii) 4.000%	5,001	5,001	$	500	$	500	Series A	Greater of (i) three-month LIBOR plus 0.565% for the related distribution period or (ii) 4.000%	5,001	5,001	$	500	$	500
Series D	Series D	4.500% 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 D	4.500% 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 E	Series E	4.950% to but excluding June 20, 2020, then a floating rate equal to the three-month LIBOR plus 3.42%	10,000	10,000	990		990		Series E	4.950% to but excluding June 20, 2020, then a floating rate equal to the three-month LIBOR plus 3.42%	10,000	10,000	990		990
Series F	Series F	4.625% 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 F	4.625% 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 G	Series G	4.700% 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 G	4.700% 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 H	Series H	3.700% 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 H	3.700% 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
Total	Total		45,826	45,826	$	4,541	$	4,541	Total		45,826	45,826	$	4,541	$	4,541

(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 D, Series E, Series F, Series G and Series H preferred stock is recorded net of issuance costs.

The table below presents the dividends paid on the Parent’s preferred stock.


Preferred dividends paid	Preferred dividends paid																							Preferred dividends paid
(dollars in millions, except per share amounts)	(dollars in millions, except per share amounts)	Depositary shares per share		2Q21				1Q21				2Q20				YTD21				YTD20				(dollars in millions, except per share amounts)	Depositary shares per share		3Q21				2Q21				3Q20				YTD21				YTD20
				Per share		Total dividend		Per share		Total dividend		Per share		Total dividend		Per share		Total dividend		Per share		Total dividend					Per share		Total dividend		Per share		Total dividend		Per share		Total dividend		Per share		Total dividend		Per share		Total dividend
Series A	Series A	100	(a)	$	1,011.11	$	5	$	1,011.11	$	5	$	1,022.22	$	5	$	2,022.22	$	10	$	2,033.33	$	10	Series A	100	(a)	$	1,011.11	$	5	$	1,011.11	$	5	$	1,011.11	$	5	$	3,033.33	$	15	$	3,044.44	$	15
Series C	Series C	4,000		N/A				N/A				1,300.00		8		N/A				2,600.00		16		Series C	4,000		N/A				N/A				1,300.00		7		N/A				3,900.00		23
Series D	Series D	100		2,250.00		11		N/A		—		2,250.00		11		2,250.00		11		2,250.00		11		Series D	100		N/A		—		2,250.00		11		N/A		—		2,250.00		11		2,250.00		11
Series E	Series E	100		911.68		9		924.82		9		2,475.00		25		1,836.50		18		2,475.00		25		Series E	100		898.50		10		911.68		9		962.65		10		2,735.00		28		3,437.65		35
Series F	Series F	100		N/A		—		2,315.50		23		N/A		—		2,315.50		23		2,312.50		23		Series F	100		2,312.50		23		N/A		—		2,312.50		23		4,625.00		46		4,625.00		46
Series G	Series G	100		N/A		—		2,350.00		24		N/A		—		2,350.00		24		N/A		—		Series G	100		2,350.00		23		N/A		—		1,579.72		16		4,700.00		47		1,579.72		16
Series H	Series H	100		925.00		6		1,408.06		8		N/A				2,333.06		14		N/A				Series H	100		925.00		5		925.00		6		N/A				3,258.06		19		N/A
Total	Total					$	31			$	69			$	49			$	100			$	85	Total					$	66			$	31			$	61			$	166			$	146

(a) Represents Normal Preferred Capital Securities.

N/A – Not applicable.

In December 2020, all of the outstanding shares of the Series C 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 to the holders of its Normal Preferred Capital Securities. 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.

For additional information on the preferred stock, see Note 15 of the Notes to Consolidated Financial Statements in our 2020 Annual Report.

8078 BNY Mellon


Notes to Consolidated Financial Statements (continued)

Note 13–Other comprehensive income (loss)


Components of other comprehensive income (loss)	Components of other comprehensive income (loss)	Quarter ended																		Components of other comprehensive income (loss)	Quarter ended
		June 30, 2021						March 31, 2021						June 30, 2020							Sept. 30, 2021						June 30, 2021						Sept. 30, 2020
(in millions)	(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		(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:																			Foreign currency translation:
Foreign currency translation adjustments arising during the period (a)	Foreign currency translation adjustments arising during the period (a)	$	38	$	13	$	51	$	(127)	$	(23)	$	(150)	$	104	$	11	$	115	Foreign currency translation adjustments arising during the period (a)	$	(158)	$	(44)	$	(202)	$	38	$	13	$	51	$	262	$	69	$	331
Total foreign currency translation	Total foreign currency translation	38		13		51		(127)		(23)		(150)		104		11		115		Total foreign currency translation	(158)		(44)		(202)		38		13		51		262		69		331
Unrealized gain (loss) on assets available-for-sale:	Unrealized gain (loss) on assets available-for-sale:																			Unrealized gain (loss) on assets available-for-sale:
Unrealized gain (loss) arising during period		106		(29)		77		(926)		223		(703)		989		(236)		753
Unrealized (loss) gain arising during period																				Unrealized (loss) gain arising during period	(201)		51		(150)		106		(29)		77		297		(64)		233
Reclassification adjustment (b)	Reclassification adjustment (b)	(2)		1		(1)		0		0		0		(9)		2		(7)		Reclassification adjustment (b)	(2)		—		(2)		(2)		1		(1)		(9)		3		(6)
Net unrealized gain (loss) on assets available-for-sale		104		(28)		76		(926)		223		(703)		980		(234)		746
Net unrealized (loss) gain on assets available-for-sale																				Net unrealized (loss) gain on assets available-for-sale	(203)		51		(152)		104		(28)		76		288		(61)		227
Defined benefit plans:	Defined benefit plans:																			Defined benefit plans:

Amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost (b)	Amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost (b)	27		(2)		25		28		(6)		22		24		(5)		19		Amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost (b)	28		(6)		22		27		(2)		25		24		(4)		20
Total defined benefit plans	Total defined benefit plans	27		(2)		25		28		(6)		22		24		(5)		19		Total defined benefit plans	28		(6)		22		27		(2)		25		24		(4)		20
Unrealized (loss) gain on cash flow hedges:	Unrealized (loss) gain on cash flow hedges:																			Unrealized (loss) gain on cash flow hedges:
Unrealized hedge gain arising during period	Unrealized hedge gain arising during period	0		0		0		1		0		1		3		(1)		2		Unrealized hedge gain arising during period	1		—		1		—		—		—		9		(1)		8
Reclassification of net loss (gain) to net income:	Reclassification of net loss (gain) to net income:																			Reclassification of net loss (gain) to net income:

FX contracts – staff expense	FX contracts – staff expense	(4)		1		(3)		(5)		1		(4)		3		(1)		2		FX contracts – staff expense	(2)		—		(2)		(4)		1		(3)		—		—		—
Total reclassifications to net income	Total reclassifications to net income	(4)		1		(3)		(5)		1		(4)		3		(1)		2		Total reclassifications to net income	(2)		—		(2)		(4)		1		(3)		—		—		—
Net unrealized (loss) gain on cash flow hedges	Net unrealized (loss) gain on cash flow hedges	(4)		1		(3)		(4)		1		(3)		6		(2)		4		Net unrealized (loss) gain on cash flow hedges	(1)		—		(1)		(4)		1		(3)		9		(1)		8
Total other comprehensive income (loss)		$	165	$	(16)	$	149	$	(1,029)	$	195	$	(834)	$	1,114	$	(230)	$	884
Total other comprehensive (loss) income																				Total other comprehensive (loss) income	$	(334)	$	1	$	(333)	$	165	$	(16)	$	149	$	583	$	3	$	586

(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)	Components of other comprehensive income (loss)	Year-to-date												Components of other comprehensive income (loss)	Year-to-date
		June 30, 2021						June 30, 2020							Sept. 30, 2021						Sept. 30, 2020
(in millions)	(in millions)	Pre-tax amount		Tax (expense) benefit		After-tax amount		Pre-tax amount		Tax (expense) benefit		After-tax amount		(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:													Foreign currency translation:
Foreign currency translation adjustments arising during the period (a)	Foreign currency translation adjustments arising during the period (a)	$	(89)	$	(10)	$	(99)	$	(161)	$	(93)	$	(254)	Foreign currency translation adjustments arising during the period (a)	$	(247)	$	(54)	$	(301)	$	101	$	(24)	$	77
Total foreign currency translation	Total foreign currency translation	(89)		(10)		(99)		(161)		(93)		(254)		Total foreign currency translation	(247)		(54)		(301)		101		(24)		77
Unrealized (loss) gain on assets available-for-sale:	Unrealized (loss) gain on assets available-for-sale:													Unrealized (loss) gain on assets available-for-sale:
Unrealized (loss) gain arising during period	Unrealized (loss) gain arising during period	(820)		194		(626)		1,232		(296)		936		Unrealized (loss) gain arising during period	(1,021)		245		(776)		1,529		(360)		1,169
Reclassification adjustment (b)	Reclassification adjustment (b)	(2)		1		(1)		(18)		4		(14)		Reclassification adjustment (b)	(4)		1		(3)		(27)		7		(20)
Net unrealized (loss) gain on assets available-for-sale	Net unrealized (loss) gain on assets available-for-sale	(822)		195		(627)		1,214		(292)		922		Net unrealized (loss) gain on assets available-for-sale	(1,025)		246		(779)		1,502		(353)		1,149
Defined benefit plans:	Defined benefit plans:													Defined benefit plans:

Amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost (b)	Amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost (b)	55		(8)		47		48		(11)		37		Amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost (b)	83		(14)		69		72		(15)		57
Total defined benefit plans	Total defined benefit plans	55		(8)		47		48		(11)		37		Total defined benefit plans	83		(14)		69		72		(15)		57
Unrealized gain (loss) on cash flow hedges:	Unrealized gain (loss) on cash flow hedges:													Unrealized gain (loss) on cash flow hedges:
Unrealized hedge gain (loss) arising during period	Unrealized hedge gain (loss) arising during period	1		0		1		(10)		2		(8)		Unrealized hedge gain (loss) arising during period	2		—		2		(1)		1		—
Reclassification of net (gains) losses to net income:	Reclassification of net (gains) losses to net income:													Reclassification of net (gains) losses to net income:

FX contracts – staff expense	FX contracts – staff expense	(9)		2		(7)		2		(1)		1		FX contracts – staff expense	(11)		2		(9)		2		(1)		1
Total reclassifications to net income	Total reclassifications to net income	(9)		2		(7)		2		(1)		1		Total reclassifications to net income	(11)		2		(9)		2		(1)		1
Net unrealized (loss) on cash flow hedges	Net unrealized (loss) on cash flow hedges	(8)		2		(6)		(8)		1		(7)		Net unrealized (loss) on cash flow hedges	(9)		2		(7)		1		—		1
Total other comprehensive (loss) income	Total other comprehensive (loss) income	$	(864)	$	179	$	(685)	$	1,093	$	(395)	$	698	Total other comprehensive (loss) income	$	(1,198)	$	180	$	(1,018)	$	1,676	$	(392)	$	1,284

(a) Includes the impact of hedges of net investments in foreign subsidiaries. See Note 16 for additional information.

BNY Mellon 8179


Notes to Consolidated Financial Statements (continued)

Note 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 20 of the Notes to Consolidated Financial Statements in our 2020 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 ~~June~~Sept. 30, 2021 and Dec. 31, 2020, 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.


Assets measured at fair value on a recurring basis at June 30, 2021													Total carrying value
Assets measured at fair value on a recurring basis at Sept. 30, 2021															Assets measured at fair value on a recurring basis at Sept. 30, 2021												Total carrying value
(dollars in millions)	(dollars in millions)	Level 1			Level 2			Level 3			Netting (a)		Total carrying value		(dollars in millions)	Level 1			Level 2			Level 3			Netting (a)
Assets:	Assets:														Assets:
Available-for-sale securities:	Available-for-sale securities:														Available-for-sale securities:
U.S. Treasury	U.S. Treasury	$	25,437		$	0		$	0		$	—	$	25,437	U.S. Treasury	$	25,961		$	—		$	—		$	—	$	25,961
Agency RMBS	Agency RMBS	0			17,843			0			—		17,843		Agency RMBS	—			14,908			—			—		14,908
Sovereign debt/sovereign guaranteed	Sovereign debt/sovereign guaranteed	5,734			7,461			0			—		13,195		Sovereign debt/sovereign guaranteed	5,587			7,482			—			—		13,069
Agency commercial MBS															Agency commercial MBS	—			8,544			—			—		8,544
Supranational	Supranational	0			8,095			0			—		8,095		Supranational	—			7,939			—			—		7,939
Agency commercial MBS		0			7,854			0			—		7,854
Foreign covered bonds	Foreign covered bonds	0			6,793			0			—		6,793		Foreign covered bonds	—			6,946			—			—		6,946
CLOs	CLOs	0			5,139			0			—		5,139		CLOs	—			5,204			—			—		5,204
U.S. government agencies		0			3,350			0			—		3,350
Non-agency commercial MBS	Non-agency commercial MBS	0			3,280			0			—		3,280		Non-agency commercial MBS	—			3,182			—			—		3,182
Foreign government agencies	Foreign government agencies	0			2,708			0			—		2,708		Foreign government agencies	—			2,679			—			—		2,679
State and political subdivisions	State and political subdivisions	0			2,606			0			—		2,606		State and political subdivisions	—			2,644			—			—		2,644
U.S. government agencies															U.S. government agencies	—			2,643			—			—		2,643
Non-agency RMBS (b)	Non-agency RMBS (b)	0			2,477			0			—		2,477		Non-agency RMBS (b)	—			2,598			—			—		2,598
Corporate bonds															Corporate bonds	—			2,377			—			—		2,377
Other ABS	Other ABS	0			2,456			0			—		2,456		Other ABS	—			2,312			—			—		2,312
Corporate bonds		0			2,347			0			—		2,347

Other debt securities	Other debt securities	0			1			0			—		1		Other debt securities	—			1			—			—		1
Total available-for-sale securities	Total available-for-sale securities	31,171			72,410			0			—		103,581		Total available-for-sale securities	31,548			69,459			—			—		101,007
Trading assets:	Trading assets:														Trading assets:
Debt instruments	Debt instruments	1,752			1,449			0			—		3,201		Debt instruments	1,811			2,604			—			—		4,415
Equity instruments (c)	Equity instruments (c)	7,542			0			0			—		7,542		Equity instruments (c)	9,274			—			—			—		9,274
Derivative assets not designated as hedging:	Derivative assets not designated as hedging:														Derivative assets not designated as hedging:
Interest rate	Interest rate	4			3,670			0			(1,601)		2,073		Interest rate	4			3,420			—			(1,455)		1,969
Foreign exchange	Foreign exchange	0			6,774			0			(4,073)		2,701		Foreign exchange	—			6,351			—			(4,251)		2,100
Equity and other contracts	Equity and other contracts	1			5			0			(3)		3		Equity and other contracts	6			259			—			(169)		96
Total derivative assets not designated as hedging	Total derivative assets not designated as hedging	5			10,449			0			(5,677)		4,777		Total derivative assets not designated as hedging	10			10,030			—			(5,875)		4,165
Total trading assets	Total trading assets	9,299			11,898			0			(5,677)		15,520		Total trading assets	11,095			12,634			—			(5,875)		17,854
Other assets:	Other assets:														Other assets:
Derivative assets designated as hedging:	Derivative assets designated as hedging:														Derivative assets designated as hedging:

Foreign exchange	Foreign exchange	0			77			0			—		77		Foreign exchange	—			238			—			—		238
Total derivative assets designated as hedging	Total derivative assets designated as hedging	0			77			0			—		77		Total derivative assets designated as hedging	—			238			—			—		238
Other assets (d)	Other assets (d)	494			438			0			—		932		Other assets (d)	531			325			—			—		856
Total other assets	Total other assets	494			515			0			—		1,009		Total other assets	531			563			—			—		1,094
Assets measured at NAV (d)	Assets measured at NAV (d)												213		Assets measured at NAV (d)												219
Total assets	Total assets	$	40,964		$	84,823		$	0		$	(5,677)	$	120,323	Total assets	$	43,174		$	82,656		$	—		$	(5,875)	$	120,174
Percentage of total assets prior to netting	Percentage of total assets prior to netting	33		%	67		%	0		%					Percentage of total assets prior to netting	34		%	66		%	—		%

8280 BNY Mellon


Notes to Consolidated Financial Statements (continued)


Liabilities measured at fair value on a recurring basis at June 30, 2021													Total carrying value
Liabilities measured at fair value on a recurring basis at Sept. 30, 2021															Liabilities measured at fair value on a recurring basis at Sept. 30, 2021												Total carrying value
(dollars in millions)	(dollars in millions)	Level 1			Level 2			Level 3			Netting (a)		Total carrying value		(dollars in millions)	Level 1			Level 2			Level 3			Netting (a)
Liabilities:	Liabilities:														Liabilities:
Trading liabilities:	Trading liabilities:														Trading liabilities:
Debt instruments	Debt instruments	$	3,536		$	39		$	0		$	—	$	3,575	Debt instruments	$	2,331		$	68		$	—		$	—	$	2,399
Equity instruments	Equity instruments	121			0			0			—		121		Equity instruments	61			—			—			—		61
Derivative liabilities not designated as hedging:	Derivative liabilities not designated as hedging:														Derivative liabilities not designated as hedging:
Interest rate	Interest rate	2			3,162			0			(2,063)		1,101		Interest rate	3			2,986			—			(1,844)		1,145
Foreign exchange	Foreign exchange	0			6,175			0			(4,531)		1,644		Foreign exchange	—			6,218			—			(4,685)		1,533
Equity and other contracts	Equity and other contracts	3			94			0			(87)		10		Equity and other contracts	—			14			—			—		14
Total derivative liabilities not designated as hedging	Total derivative liabilities not designated as hedging	5			9,431			0			(6,681)		2,755		Total derivative liabilities not designated as hedging	3			9,218			—			(6,529)		2,692
Total trading liabilities	Total trading liabilities	3,662			9,470			0			(6,681)		6,451		Total trading liabilities	2,395			9,286			—			(6,529)		5,152
Long-term debt (c)	Long-term debt (c)	0			400			0			—		400		Long-term debt (c)	—			400			—			—		400
Other liabilities:	Other liabilities:														Other liabilities:
Derivative liabilities designated as hedging:	Derivative liabilities designated as hedging:														Derivative liabilities designated as hedging:
Interest rate	Interest rate	0			469			0			—		469		Interest rate	—			421			—			—		421
Foreign exchange	Foreign exchange	0			106			0			—		106		Foreign exchange	—			7			—			—		7
Total derivative liabilities designated as hedging	Total derivative liabilities designated as hedging	0			575			0			—		575		Total derivative liabilities designated as hedging	—			428			—			—		428
Other liabilities	Other liabilities	1			6			0			—		7		Other liabilities	1			4			—			—		5
Total other liabilities	Total other liabilities	1			581			0			—		582		Total other liabilities	1			432			—			—		433
Total liabilities	Total liabilities	$	3,663		$	10,451		$	0		$	(6,681)	$	7,433	Total liabilities	$	2,396		$	10,118		$	—		$	(6,529)	$	5,985
Percentage of total liabilities prior to netting	Percentage of total liabilities prior to netting	26		%	74		%	0		%					Percentage of total liabilities prior to netting	19		%	81		%	—		%

(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 ~~$416~~$387 million in Level 2 that was included in the former Grantor Trust.

(d) Includes seed capital, private equity investments and other assets.

BNY Mellon 8381


Notes to Consolidated Financial Statements (continued)


Assets measured at fair value on a recurring basis at Dec. 31, 2020	Assets measured at fair value on a recurring basis at Dec. 31, 2020												Total carrying value		Assets measured at fair value on a recurring basis at Dec. 31, 2020												Total carrying value
(dollars in millions)	(dollars in millions)	Level 1			Level 2			Level 3			Netting (a)				(dollars in millions)	Level 1			Level 2			Level 3			Netting (a)
Assets:	Assets:														Assets:
Available-for-sale securities:	Available-for-sale securities:														Available-for-sale securities:
U.S. Treasury	U.S. Treasury	$	24,894		$	0		$	0		$	—	$	24,894	U.S. Treasury	$	24,894		$	—		$	—		$	—	$	24,894
Agency RMBS	Agency RMBS	0			22,347			0			—		22,347		Agency RMBS	—			22,347			—			—		22,347
Sovereign debt/sovereign guaranteed	Sovereign debt/sovereign guaranteed	5,909			6,482			0			—		12,391		Sovereign debt/sovereign guaranteed	5,909			6,482			—			—		12,391
Agency commercial MBS	Agency commercial MBS	0			9,228			0			—		9,228		Agency commercial MBS	—			9,228			—			—		9,228
Supranational	Supranational	0			7,160			0			—		7,160		Supranational	—			7,160			—			—		7,160
Foreign covered bonds	Foreign covered bonds	0			6,725			0			—		6,725		Foreign covered bonds	—			6,725			—			—		6,725
CLOs	CLOs	0			4,703			0			—		4,703		CLOs	—			4,703			—			—		4,703
Foreign government agencies	Foreign government agencies	0			4,135			0			—		4,135		Foreign government agencies	—			4,135			—			—		4,135
U.S. government agencies	U.S. government agencies	0			3,853			0			—		3,853		U.S. government agencies	—			3,853			—			—		3,853
Other ABS	Other ABS	0			3,164			0			—		3,164		Other ABS	—			3,164			—			—		3,164
Non-agency commercial MBS	Non-agency commercial MBS	0			3,017			0			—		3,017		Non-agency commercial MBS	—			3,017			—			—		3,017
Non-agency RMBS (b)	Non-agency RMBS (b)	0			2,326			0			—		2,326		Non-agency RMBS (b)	—			2,326			—			—		2,326
State and political subdivisions	State and political subdivisions	0			2,308			0			—		2,308		State and political subdivisions	—			2,308			—			—		2,308
Corporate bonds	Corporate bonds	0			1,994			0			—		1,994		Corporate bonds	—			1,994			—			—		1,994
Commercial paper/CDs	Commercial paper/CDs	0			249			0			—		249		Commercial paper/CDs	—			249			—			—��		249
Other debt securities	Other debt securities	0			1			0			—		1		Other debt securities	—			1			—			—		1
Total available-for-sale securities	Total available-for-sale securities	30,803			77,692			0			—		108,495		Total available-for-sale securities	30,803			77,692			—			—		108,495
Trading assets:	Trading assets:														Trading assets:
Debt instruments	Debt instruments	1,803			3,868			0			—		5,671		Debt instruments	1,803			3,868			—			—		5,671
Equity instruments (c)	Equity instruments (c)	5,775			0			0			—		5,775		Equity instruments (c)	5,775			—			—			—		5,775
Derivative assets not designated as hedging:	Derivative assets not designated as hedging:														Derivative assets not designated as hedging:
Interest rate	Interest rate	5			4,477			0			(1,952)		2,530		Interest rate	5			4,477			—			(1,952)		2,530
Foreign exchange	Foreign exchange	0			7,688			0			(6,392)		1,296		Foreign exchange	—			7,688			—			(6,392)		1,296
Equity and other contracts	Equity and other contracts	0			2			0			(2)		0		Equity and other contracts	—			2			—			(2)		—
Total derivative assets not designated as hedging	Total derivative assets not designated as hedging	5			12,167			0			(8,346)		3,826		Total derivative assets not designated as hedging	5			12,167			—			(8,346)		3,826
Total trading assets	Total trading assets	7,583			16,035			0			(8,346)		15,272		Total trading assets	7,583			16,035			—			(8,346)		15,272
Other assets:	Other assets:														Other assets:
Derivative assets designated as hedging:	Derivative assets designated as hedging:														Derivative assets designated as hedging:

Foreign exchange	Foreign exchange	0			19			0			—		19		Foreign exchange	—			19			—			—		19
Total derivative assets designated as hedging	Total derivative assets designated as hedging	0			19			0			—		19		Total derivative assets designated as hedging	—			19			—			—		19
Other assets (d)	Other assets (d)	504			285			0			—		789		Other assets (d)	504			285			—			—		789
Total other assets	Total other assets	504			304			0			—		808		Total other assets	504			304			—			—		808
Assets measured at NAV (d)	Assets measured at NAV (d)												201		Assets measured at NAV (d)												201
Total assets	Total assets	$	38,890		$	94,031		$	0		$	(8,346)	$	124,776	Total assets	$	38,890		$	94,031		$	—		$	(8,346)	$	124,776
Percentage of total assets prior to netting	Percentage of total assets prior to netting	29		%	71		%	0		%					Percentage of total assets prior to netting	29		%	71		%	—		%

8482 BNY Mellon


Notes to Consolidated Financial Statements (continued)


Liabilities measured at fair value on a recurring basis at Dec. 31, 2020	Liabilities measured at fair value on a recurring basis at Dec. 31, 2020												Total carrying value		Liabilities measured at fair value on a recurring basis at Dec. 31, 2020												Total carrying value
(dollars in millions)	(dollars in millions)	Level 1			Level 2			Level 3			Netting (a)				(dollars in millions)	Level 1			Level 2			Level 3			Netting (a)
Liabilities:	Liabilities:														Liabilities:
Trading liabilities:	Trading liabilities:														Trading liabilities:
Debt instruments	Debt instruments	$	2,287		$	35		$	0		$	—	$	2,322	Debt instruments	$	2,287		$	35		$	—		$	—	$	2,322
Equity instruments	Equity instruments	11			0			0			—		11		Equity instruments	11			—			—			—		11
Derivative liabilities not designated as hedging:	Derivative liabilities not designated as hedging:														Derivative liabilities not designated as hedging:
Interest rate	Interest rate	2			3,878			0			(2,348)		1,532		Interest rate	2			3,878			—			(2,348)		1,532
Foreign exchange	Foreign exchange	0			7,622			0			(5,484)		2,138		Foreign exchange	—			7,622			—			(5,484)		2,138
Equity and other contracts	Equity and other contracts	7			34			0			(13)		28		Equity and other contracts	7			34			—			(13)		28
Total derivative liabilities not designated as hedging	Total derivative liabilities not designated as hedging	9			11,534			0			(7,845)		3,698		Total derivative liabilities not designated as hedging	9			11,534			—			(7,845)		3,698
Total trading liabilities	Total trading liabilities	2,307			11,569			0			(7,845)		6,031		Total trading liabilities	2,307			11,569			—			(7,845)		6,031
Long-term debt (c)	Long-term debt (c)	0			400			0			—		400		Long-term debt (c)	—			400			—			—		400
Other liabilities:	Other liabilities:														Other liabilities:
Derivative liabilities designated as hedging:	Derivative liabilities designated as hedging:														Derivative liabilities designated as hedging:
Interest rate	Interest rate	0			666			0			—		666		Interest rate	—			666			—			—		666
Foreign exchange	Foreign exchange	0			441			0			—		441		Foreign exchange	—			441			—			—		441
Total derivative liabilities designated as hedging	Total derivative liabilities designated as hedging	0			1,107			0			—		1,107		Total derivative liabilities designated as hedging	—			1,107			—			—		1,107
Other liabilities	Other liabilities	1			2			0			—		3		Other liabilities	1			2			—			—		3
Total other liabilities	Total other liabilities	1			1,109			0			—		1,110		Total other liabilities	1			1,109			—			—		1,110
Total liabilities	Total liabilities	$	2,308		$	13,078		$	0		$	(7,845)	$	7,541	Total liabilities	$	2,308		$	13,078		$	—		$	(7,845)	$	7,541
Percentage of total liabilities prior to netting	Percentage of total liabilities prior to netting	15		%	85		%	0		%					Percentage of total liabilities prior to netting	15		%	85		%	—		%

(b) Includes $487 million in Level 2 that was included in the former Grantor Trust.

(d) Includes seed capital, private equity investments and other assets.

BNY Mellon 8583


Notes to Consolidated Financial Statements (continued)


Details of certain available-for-sale securities measured at fair value on a recurring basis	Details of certain available-for-sale securities measured at fair value on a recurring basis	June 30, 2021											Dec. 31, 2020											Details of certain available-for-sale securities measured at fair value on a recurring basis	Sept. 30, 2021															Dec. 31, 2020
		Total carrying value(b)			Ratings (a)								Total carrying value			Ratings (a)									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					AAA/ AA-	A+/ A-		BBB+/ BBB-		BB+ and lower		A1+/A2 & SP-1		Not rated				AAA/ AA-			A+/ A-	BBB+/ BBB-		BB+ and lower		A1+/A2 & SP-1		Not rated
(dollars in millions)	(dollars in millions)			(b)											Total carrying value									(dollars in millions)																														Total carrying value (b)
Non-agency RMBS (c), originated in:	Non-agency RMBS (c), originated in:																					Non-agency RMBS (c), originated in:
2008-2021	2008-2021	$	1,828		100	%	0	%	0	%	0	%	$	1,548		100	%	0	%	0	%	0	%	2008-2021	$	1,996		100	%	—	%	—	%	—	%	—	%	—	%		$	1,548		100	%	—	%	—	%	—	%	—	%
2007	2007	135			0		4		0		96		179					12		3		0		85		2007	124			—		4		—		40		—		56			179			12		3		—		42		—		43
2006	2006	207			0		24		0		76		237			0		23		0		77		2006	194			—		24		—		33		—		43			237			—		23		—		40		—		37
2005	2005	193			3		6		1		90		227			3		0		7		90		2005	179			3		5		1		40		—		51			227			3		—		7		52		—		38
2004 and earlier	2004 and earlier	114			18		9		5		68		135			19		10		11		60		2004 and earlier	105			16		10		5		57		—		12			135			19		10		11		54		—		6
Total non-agency RMBS	Total non-agency RMBS	$	2,477		75	%	3	%	0	%	22	%	$	2,326		69	%	3	%	1	%	27	%	Total non-agency RMBS	$	2,598		78	%	3	%	—	%	9	%	—	%	10	%		$	2,326		69	%	3	%	1	%	16	%	—	%	11	%
Non-agency commercial MBS originated in:	Non-agency commercial MBS originated in:																							Non-agency commercial MBS originated in:
2009-2021	2009-2021	$	3,280		99	%	1	%	0	%	0	%	$	3,017		99	%	1	%	0	%	0	%	2009-2021	$	3,182		100	%	—	%	—	%	—	%	—	%	—	%		$	3,017		99	%	1	%	—	%	—	%	—	%	—	%
Foreign covered bonds:	Foreign covered bonds:																							Foreign covered bonds:
Canada	Canada	$	2,294		100	%	0	%	0	%	0	%	$	2,552		100	%	0	%	0	%	0	%	Canada	$	2,537		100	%	—	%	—	%	—	%	—	%	—	%		$	2,552		100	%	—	%	—	%	—	%	—	%	—	%
UK	UK	1,313			100		0		0		0		1,259			100		0		0		0		UK	1,220			100		—		—		—		—		—			1,259			100		—		—		—		—		—
Australia	Australia	866			100		0		0		0		951			100		0		0		0		Australia	865			100		—		—		—		—		—			951			100		—		—		—		—		—
Germany																								Germany	666			100		—		—		—		—		—			494			100		—		—		—		—		—
Norway	Norway	719			100		0		0		0		703			100		0		0		0		Norway	621			100		—		—		—		—		—			703			100		—		—		—		—		—
Germany		625			100		0		0		0		494			100		0		0		0
Other	Other	976			100		0		0		0		766			100		0		0		0		Other	1,037			100		—		—		—		—		—			766			100		—		—		—		—		—
Total foreign covered bonds	Total foreign covered bonds	$	6,793		100	%	0	%	0	%	0	%	$	6,725		100	%	0	%	0	%	0	%	Total foreign covered bonds	$	6,946		100	%	—	%	—	%	—	%	—	%	—	%		$	6,725		100	%	—	%	—	%	—	%	—	%	—	%
Sovereign debt/sovereign guaranteed:	Sovereign debt/sovereign guaranteed:																							Sovereign debt/sovereign guaranteed:
Germany	Germany	$	3,429		100	%	0	%	0	%	0	%	$	2,222		100	%	0	%	0	%	0	%	Germany	$	3,651		100	%	—	%	—	%	—	%	—	%	—	%		$	2,222		100	%	—	%	—	%	—	%	—	%	—	%
France	France	1,898			100		0		0		0		1,697			100		0		0		0		France	1,852			100		—		—		—		—		—			1,697			100		—		—		—		—		—
Italy	Italy	1,724			0		0		100		0		2,010			0		0		100		0		Italy	1,536			—		—		100		—		—		—			2,010			—		—		100		—		—		—
UK																								UK	1,203			99		—		—		—		1		—			1,089			100		—		—		—		—		—
Singapore	Singapore	1,209			100		0		0		0		984			100		0		0		0		Singapore	1,102			100		—		—		—		—		—			984			100		—		—		—		—		—
Spain	Spain	1,081			0		9		91		0		1,920			0		5		95		0		Spain	998			—		9		91		—		—		—			1,920			—		5		95		—		—		—
UK		1,041			100		0		0		0		1,089			100		0		0		0
Canada	Canada	662			100		0		0		0		572			100		0		0		0		Canada	651			100		—		—		—		—		—			572			100		—		—		—		—		—
Hong Kong	Hong Kong	472			100		0		0		0		29			100		0		0		0		Hong Kong	568			100		—		—		—		—		—			29			100		—		—		—		—		—
Japan		399			0		100		0		0		408			0		100		0		0
Netherlands	Netherlands	350			100		0		0		0		491			100		0		0		0		Netherlands	340			100		—		—		—		—		—			491			100		—		—		—		—		—
Austria	Austria	293			100		0		0		0		256			100		0		0		0		Austria	306			100		—		—		—		—		—			256			100		—		—		—		—		—
Japan																								Japan	296			—		100		—		—		—		—			408			—		100		—		—		—		—
Ireland	Ireland	241			0		100		0		0		252			0		100		0		0		Ireland	235			—		100		—		—		—		—			252			—		100		—		—		—		—
Other (d)	Other (d)	396			67		0		0		33		461			73		0		0		27		Other (d)	331			60		—		—		40		—		—			461			73		—		—		27		—		—
Total sovereign debt/sovereign guaranteed	Total sovereign debt/sovereign guaranteed	$	13,195		73	%	6	%	20	%	1	%	$	12,391		62	%	6	%	31	%	1	%	Total sovereign debt/sovereign guaranteed	$	13,069		75	%	5	%	19	%	1	%	—	%	—	%		$	12,391		62	%	6	%	31	%	1	%	—	%	—	%
Foreign government agencies:	Foreign government agencies:																							Foreign government agencies:
Netherlands	Netherlands	$	916		100	%	0	%	0	%	0	%	$	847		100	%	0	%	0	%	0	%	Netherlands	$	834		100	%	—	%	—	%	—	%	—	%	—	%		$	847		100	%	—	%	—	%	—	%	—	%	—	%
Canada	Canada	543			77		23		0		0		511			75		25		0		0		Canada	572			78		22		—		—		—		—			511			75		25		—		—		—		—
France	France	283			100		0		0		0		305			100		0		0		0		France	277			100		—		—		—		—		—			305			100		—		—		—		—		—
Norway																								Norway	270			100		—		—		—		—		—			273			100		—		—		—		—		—
Sweden	Sweden	276			100		0		0		0		281			100		0		0		0		Sweden	253			100		—		—		—		—		—			281			100		—		—		—		—		—
Norway		251			100		0		0		0		273			100		0		0		0
Finland	Finland	196			100		0		0		0		225			100		0		0		0		Finland	205			100		—		—		—		—		—			225			100		—		—		—		—		—
Germany	Germany	30			100		0		0		0		1,473			100		0		0		0		Germany	—			—		—		—		—		—		—			1,473			100		—		—		—		—		—
Other	Other	213			54		46		0		0		220			55		45		0		0		Other	268			64		36		—		—		—		—			220			55		45		—		—		—		—
Total foreign government agencies	Total foreign government agencies	$	2,708		92	%	8	%	0	%	0	%	$	4,135		95	%	5	%	0	%	0	%	Total foreign government agencies	$	2,679		92	%	8	%	—	%	—	%	—	%	—	%		$	4,135		95	%	5	%	—	%	—	%	—	%	—	%

(a) Represents ratings by S&P or the equivalent.

(b) At ~~June~~Sept. 30, 2021 and Dec. 31, 2020, 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 ~~$416~~$387 million at ~~June~~Sept. 30, 2021 and $487 million at Dec. 31, 2020 that were included in the former Grantor Trust.

(d) Includes non-investment grade sovereign debt/sovereign guaranteed securities related to Brazil of ~~$129~~$134 million at ~~June~~Sept. 30, 2021 and $125 million at Dec. 31, 2020.

8684 BNY Mellon


Notes to Consolidated Financial Statements (continued)

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. Examples would be the recording of an impairment of

an asset and non-readily marketable equity securities carried at cost with upward or downward adjustments.

The following table presents the financial instruments carried on the consolidated balance sheet by caption and level in the fair value hierarchy as of ~~June~~Sept. 30, 2021 and Dec. 31, 2020.


Assets measured at fair value on a nonrecurring basis	Assets measured at fair value on a nonrecurring basis	June 30, 2021								Dec. 31, 2020							Assets measured at fair value on a nonrecurring basis		Sept. 30, 2021												Dec. 31, 2020
								Total carrying value											Total carrying value	Assets measured at fair value on a nonrecurring basis											Total carrying value												Total carrying value
(in millions)	(in millions)	Level 1		Level 2		Level 3					Level 1		Level 2		Level 3		Total carrying value					Level 1			Level 2			Level 3						Level 1			Level 2			Level 3
Loans (a)	Loans (a)	$	0	$	45	$	0	$	45		$	0	$	48	$	0			Loans (a)		$	—		$	42		$	—		$	42		$	—		$	48		$	—		$	48
Other assets (b)	Other assets (b)	0		145		0		145			0		131		0			131			Other assets (b)		—			214			—			214			—			131			—			131
Total assets at fair value on a nonrecurring basis	Total assets at fair value on a nonrecurring basis	$	0	$	190	$	0	$	190		$	0	$	179	$	0	$	179		Total assets at fair value on a nonrecurring basis		$	—		$	256		$	—		$	256		$	—		$	179		$	—		$	179

(a) The fair value of these loans was unchanged in the third quarter of 2021 and decreased less than $1 million in ~~both the second quarter of 2021 and~~ the fourth quarter of 2020, 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.

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 ~~June~~Sept. 30, 2021 and Dec. 31, 2020, by caption on the consolidated balance sheet and by the valuation hierarchy.


Summary of financial instruments	Summary of financial instruments	June 30, 2021										Summary of financial instruments	Sept. 30, 2021
(in millions)	(in millions)	Level 1		Level 2		Level 3		Total estimated fair value		Carrying amount		(in millions)	Level 1		Level 2		Level 3		Total estimated fair value		Carrying amount
Assets:	Assets:											Assets:
Interest-bearing deposits with the Federal Reserve and other central banks	Interest-bearing deposits with the Federal Reserve and other central banks	$	0	$	126,355	$	0	$	126,355	$	126,355	Interest-bearing deposits with the Federal Reserve and other central banks	$	—	$	126,959	$	—	$	126,959	$	126,959
Interest-bearing deposits with banks	Interest-bearing deposits with banks	0		21,275		0		21,275		21,270		Interest-bearing deposits with banks	—		20,063		—		20,063		20,057
Federal funds sold and securities purchased under resale agreements	Federal funds sold and securities purchased under resale agreements	0		29,762		0		29,762		29,762		Federal funds sold and securities purchased under resale agreements	—		28,497		—		28,497		28,497
Securities held-to-maturity	Securities held-to-maturity	10,475		42,444		0		52,919		52,325		Securities held-to-maturity	11,538		45,170		—		56,708		56,267
Loans (a)	Loans (a)	0		62,517		0		62,517		62,355		Loans (a)	—		63,513		—		63,513		63,322
Other financial assets	Other financial assets	5,154		1,149		0		6,303		6,303		Other financial assets	6,752		1,186		—		7,938		7,938
Total	Total	$	15,629	$	283,502	$	0	$	299,131	$	298,370	Total	$	18,290	$	285,388	$	—	$	303,678	$	303,040
Liabilities:	Liabilities:											Liabilities:
Noninterest-bearing deposits	Noninterest-bearing deposits	$	0	$	94,081	$	0	$	94,081	$	94,081	Noninterest-bearing deposits	$	—	$	100,498	$	—	$	100,498	$	100,498
Interest-bearing deposits	Interest-bearing deposits	0		243,703		0		243,703		244,589		Interest-bearing deposits	—		241,183		—		241,183		242,641
Federal funds purchased and securities sold under repurchase agreements	Federal funds purchased and securities sold under repurchase agreements	0		12,425		0		12,425		12,425		Federal funds purchased and securities sold under repurchase agreements	—		11,973		—		11,973		11,973
Payables to customers and broker-dealers	Payables to customers and broker-dealers	0		23,704		0		23,704		23,704		Payables to customers and broker-dealers	—		26,002		—		26,002		26,002

Borrowings	Borrowings	0		642		0		642		642		Borrowings	—		929		—		929		929
Long-term debt	Long-term debt	0		26,463		0		26,463		25,229		Long-term debt	—		25,741		—		25,741		24,643
Total	Total	$	0	$	401,018	$	0	$	401,018	$	400,670	Total	$	—	$	406,326	$	—	$	406,326	$	406,686

(a) Does not include the leasing portfolio.

BNY Mellon 8785


Notes to Consolidated Financial Statements (continued)


Summary of financial instruments	Summary of financial instruments	Dec. 31, 2020										Summary of financial instruments	Dec. 31, 2020
(in millions)	(in millions)	Level 1		Level 2		Level 3		Total estimated fair value		Carrying amount		(in millions)	Level 1		Level 2		Level 3		Total estimated fair value		Carrying amount
Assets:	Assets:											Assets:
Interest-bearing deposits with the Federal Reserve and other central banks	Interest-bearing deposits with the Federal Reserve and other central banks	$	0	$	141,775	$	0	$	141,775	$	141,775	Interest-bearing deposits with the Federal Reserve and other central banks	$	—	$	141,775	$	—	$	141,775	$	141,775
Interest-bearing deposits with banks	Interest-bearing deposits with banks	0		17,310		0		17,310		17,300		Interest-bearing deposits with banks	—		17,310		—		17,310		17,300
Federal funds sold and securities purchased under resale agreements	Federal funds sold and securities purchased under resale agreements	0		30,907		0		30,907		30,907		Federal funds sold and securities purchased under resale agreements	—		30,907		—		30,907		30,907
Securities held-to-maturity	Securities held-to-maturity	4,120		45,104		0		49,224		47,946		Securities held-to-maturity	4,120		45,104		—		49,224		47,946
Loans (a)	Loans (a)	0		53,586		0		53,586		55,121		Loans (a)	—		53,586		—		53,586		55,121
Other financial assets	Other financial assets	6,252		1,160		0		7,412		7,412		Other financial assets	6,252		1,160		—		7,412		7,412
Total	Total	$	10,372	$	289,842	$	0	$	300,214	$	300,461	Total	$	10,372	$	289,842	$	—	$	300,214	$	300,461
Liabilities:	Liabilities:											Liabilities:
Noninterest-bearing deposits	Noninterest-bearing deposits	$	0	$	83,854	$	0	$	83,854	$	83,854	Noninterest-bearing deposits	$	—	$	83,854	$	—	$	83,854	$	83,854
Interest-bearing deposits	Interest-bearing deposits	0		257,287		0		257,287		257,691		Interest-bearing deposits	—		257,287		—		257,287		257,691
Federal funds purchased and securities sold under repurchase agreements	Federal funds purchased and securities sold under repurchase agreements	0		11,305		0		11,305		11,305		Federal funds purchased and securities sold under repurchase agreements	—		11,305		—		11,305		11,305
Payables to customers and broker-dealers	Payables to customers and broker-dealers	0		25,085		0		25,085		25,085		Payables to customers and broker-dealers	—		25,085		—		25,085		25,085
Borrowings	Borrowings	0		563		0		563		563		Borrowings	—		563		—		563		563
Long-term debt	Long-term debt	0		27,306		0		27,306		25,584		Long-term debt	—		27,306		—		27,306		25,584
Total	Total	$	0	$	405,400	$	0	$	405,400	$	404,082	Total	$	—	$	405,400	$	—	$	405,400	$	404,082

(a) Does not include the leasing portfolio.

Note 15–Fair value option

We elected fair value as an alternative measurement for selected financial assets and liabilities that are not otherwise required to be measured at fair value, including the assets and liabilities of consolidated investment management funds and certain long-term debt. The following table presents the assets and liabilities of consolidated investment management funds, at fair value.


Assets and liabilities of consolidated investment management funds, at fair value	Assets and liabilities of consolidated investment management funds, at fair value					Assets and liabilities of consolidated investment management funds, at fair value
		June 30, 2021		Dec. 31, 2020			Sept. 30, 2021		Dec. 31, 2020
(in millions)	(in millions)					(in millions)
Assets of consolidated investment management funds:	Assets of consolidated investment management funds:					Assets of consolidated investment management funds:
Trading assets	Trading assets	$	544	$	482	Trading assets	$	487	$	482
Other assets	Other assets	17		5		Other assets	18		5
Total assets of consolidated investment management funds	Total assets of consolidated investment management funds	$	561	$	487	Total assets of consolidated investment management funds	$	505	$	487
Liabilities of consolidated investment management funds:	Liabilities of consolidated investment management funds:					Liabilities of consolidated investment management funds:

Other liabilities	Other liabilities	7		3		Other liabilities	5		3
Total liabilities of consolidated investment management funds	Total liabilities of consolidated investment management funds	$	7	$	3	Total liabilities of consolidated investment management funds	$	5	$	3

BNY Mellon values 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 value of the assets and liabilities are recorded as income (loss) from consolidated investment management funds, which is included in investment and other income in the consolidated income statement.

We have elected the fair value option on $240 million of long-term debt. The fair value of this long-term debt was $400 million at ~~June~~Sept. 30, 2021 and $400 million at Dec. 31, 2020. The long-term debt is 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 recorded in other trading revenue (loss) which is included in investment and other income in the consolidated income statement.


Change in fair value of long-term debt (a)	Change in fair value of long-term debt (a)											Change in fair value of long-term debt (a)

(in millions)	(in millions)	2Q21		1Q21		2Q20		YTD21		YTD20		(in millions)	3Q21		2Q21		3Q20		YTD21		YTD20
Investment and other income – other trading revenue		$	0	$	0	$	(2)	$	0	$	(12)
Investment and other income – other trading revenue (loss)												Investment and other income – other trading revenue (loss)	$	—	$	—	$	(1)	$	—	$	(13)

(a) The changes in fair value are approximately offset by an economic hedge included in other trading revenue.

~~88 BNY Mellon~~


~~Notes to Consolidated Financial Statements~~ ~~(continued)~~

Note 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~~market-

86 BNY Mellon


Notes to Consolidated Financial Statements (continued)

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 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 0no counterparty default losses recorded in the ~~second~~third quarter of 2021.

Hedging derivatives

We utilize interest rate swap agreements to manage our exposure to interest rate fluctuations. We enter into fair value hedges as an interest rate risk management strategy to reduce fair value variability by converting certain fixed rate interest payments associated with available-for-sale securities and long-term debt to 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.

The available-for-sale securities hedged consist of U.S. Treasury, agency and non-agency commercial MBS, sovereign debt/sovereign guaranteed, corporate bonds and foreign covered bonds. At ~~June~~Sept. 30, 2021, ~~$24.4~~$24.7 billion par value of available-for-sale securities were hedged with interest rate swaps designated as fair value hedges that had notional values of ~~$24.4~~$24.7 billion.

The fixed rate long-term debt instruments hedged generally have original maturities of five to 30 years. In fair value hedging relationships, fixed rate debt is hedged with “receive fixed rate, pay variable rate” swaps. At ~~June~~Sept. 30, 2021, ~~$22.6~~$21.1 billion par value of debt was hedged with interest rate swaps designated

as fair value hedges that had notional values of ~~$22.6~~$21.1 billion.

In addition, we utilize forward foreign exchange 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 15 months or less as cash flow hedges to hedge our foreign exchange exposure to currencies such as Indian rupee, British pound, Hong Kong dollar, Polish zloty, Singapore dollar and euro used in revenue and expense transactions for entities that have the U.S. dollar as their functional currency. As of ~~June~~Sept. 30, 2021, the hedged forecasted foreign currency transactions and designated forward foreign exchange contract hedges were ~~$360~~$330 million (notional), with a net pre-tax gain of $2$1 million recorded in accumulated OCI. Over the next 12 months, a gain of $3$1 million will be reclassified to earnings.

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~~Sept. 30, 2021, ~~$147~~$143 million par value of available-for-sale securities was hedged with foreign currency forward contracts that had a notional value of ~~$147~~$143 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 one year. The derivatives employed are designated as hedges of changes in value of our foreign investments due to exchange rates. The change in fair market value of these forward foreign exchange contracts is reported within foreign currency translation adjustments in shareholders’ equity, net of tax. At ~~June~~Sept. 30, 2021, forward foreign exchange contracts with notional amounts totaling ~~$8.4~~$8.3 billion were designated as net investment hedges.

~~In addition~~From time to ~~forward foreign exchange contracts,~~time, we also designate non-derivative financial instruments as hedges of our net investments in foreign subsidiaries. ~~Those~~At Sept. 30, 2021, there were 0 non-derivative financial instruments hedging our net investments in foreign subsidiaries.

BNY Mellon 8987


Notes to Consolidated Financial Statements (continued)

designated as hedges of our net investments in foreign subsidiaries were all long-term liabilities of BNY Mellon and, at June 30, 2021, had a combined U.S. dollar equivalent carrying value of $181 million.

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	Income statement impact of fair value and cash flow hedges												Income statement impact of fair value and cash flow hedges
(in millions)	(in millions)	Location of gains (losses)	2Q21		1Q21		2Q20		YTD21		YTD20			(in millions)	Location of gains (losses)	3Q21		2Q21		3Q20		YTD21		YTD20
Interest rate fair value hedges of available-for-sale securities	Interest rate fair value hedges of available-for-sale securities													Interest rate fair value hedges of available-for-sale securities
Derivative	Derivative	Interest revenue	$	(325)	$	791	$	19	$	466	$	(1,014)		Derivative	Interest revenue	$	183	$	(325)	$	150	$	649	$	(864)
Hedged item	Hedged item	Interest revenue	322		(785)		(15)		(463)		996			Hedged item	Interest revenue	(184)		322		(140)		(647)		856
Interest rate fair value hedges of long-term debt	Interest rate fair value hedges of long-term debt													Interest rate fair value hedges of long-term debt
Derivative	Derivative	Interest expense	22		(353)		47		(331)		761			Derivative	Interest expense	(96)		22		(68)		(427)		693
Hedged item	Hedged item	Interest expense	(21)		351		(49)		330		(757)			Hedged item	Interest expense	96		(21)		66		426		(691)
Foreign exchange fair value hedges of available-for-sale securities	Foreign exchange fair value hedges of available-for-sale securities													Foreign exchange fair value hedges of available-for-sale securities
Derivative (a)	Derivative (a)	Foreign exchange revenue	(1)		8		(5)		7		(12)			Derivative (a)	Foreign exchange revenue	—		(1)		1		7		(11)
Hedged item	Hedged item	Foreign exchange revenue	1		(7)		5		(6)		12			Hedged item	Foreign exchange revenue	—		1		1		(6)		13

Cash flow hedges of forecasted FX exposures	Cash flow hedges of forecasted FX exposures													Cash flow hedges of forecasted FX exposures

Gain (loss) reclassified from OCI into income	Gain (loss) reclassified from OCI into income	Staff expense	4		5		(3)		9		(2)			Gain (loss) reclassified from OCI into income	Staff expense	2		4		—		11		(2)
Gain (loss) recognized in the consolidated income statement due to fair value and cash flow hedging relationships	Gain (loss) recognized in the consolidated income statement due to fair value and cash flow hedging relationships		$	2	$	10	$	(1)	$	12	$	(16)		Gain (loss) recognized in the consolidated income statement due to fair value and cash flow hedging relationships		$	1	$	2	$	10	$	13	$	(6)

(a) Includes gains of less than $1 million in the ~~second quarter of 2021, first~~third quarter of 2021, second quarter of 2021 and third quarter of 2020 and gains of $1 million in the first ~~six~~nine months of 2021 and first ~~six~~nine months of 2020 associated with the amortization of the excluded component. At ~~June~~Sept. 30, 2021 and Dec. 31, 2020, 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	Impact of derivative instruments used in net investment hedging relationships																								Impact of derivative instruments used in net investment hedging relationships
(in millions)	(in millions)																					(in millions)
Derivatives in net investment hedging relationships	Derivatives in net investment hedging relationships	Gain or (loss) recognized in accumulated OCI on derivatives										Location of gain or (loss) reclassified from accumulated OCI into income	Gain or (loss) reclassified from accumulated OCI into income									Derivatives in net investment hedging relationships		Gain or (loss) recognized in accumulated OCI on derivatives											Location of gain or (loss) reclassified from accumulated OCI into income		Gain or (loss) reclassified from accumulated OCI into income
		2Q21		1Q21		2Q20		YTD21		YTD20				2Q21		1Q21		2Q20		YTD21				YTD20		Derivatives in net investment hedging relationships	3Q21		2Q21		3Q20		YTD21					Location of gain or (loss) reclassified from accumulated OCI into income		3Q21		2Q21		3Q20		YTD21		YTD20
FX contracts	FX contracts	$	(62)	$	82	$	(45)	$	20	$	392		Net interest revenue	$	0	$	0	$	0	$	0	$	0				$	201	$	(62)	$	(289)	$	221	$	103			Net interest revenue	$	—	$	—	$	—	$	—	$	—

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


Hedged items in fair value hedging relationships	Hedged items in fair value hedging relationships	Carrying amount of hedged asset or liability						Hedge accounting basis adjustment increase (decrease) (a)						Hedged items in fair value hedging relationships	Carrying amount of hedged asset or liability				Hedge accounting basis adjustment increase (decrease) (a)

(in millions)	(in millions)			June 30, 2021			Dec. 31, 2020			June 30, 2021			Dec. 31, 2020										(in millions)	Sept. 30, 2021	Dec. 31, 2020	Sept. 30, 2021	Dec. 31, 2020
Available-for-sale securities (b)(c)	Available-for-sale securities (b)(c)	$	24,330		$	17,536		$	927		$	1,428		Available-for-sale securities (b)(c)	$	24,662	$	17,536	$	742	$	1,428
Long-term debt	Long-term debt	$	23,159		$	14,784		$	482		$	783		Long-term debt	$	21,565	$	14,784	$	395	$	783

(a) Includes ~~$159~~$182 million and $177 million of basis adjustment increases on discontinued hedges associated with available-for-sale securities at ~~June~~Sept. 30, 2021 and Dec. 31, 2020, respectively, and ~~$89~~$80 million and $118 million of basis adjustment decreases on discontinued hedges associated with long-term debt at ~~June~~Sept. 30, 2021 and Dec. 31, 2020, 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 ~~$147~~$143 million at ~~June~~Sept. 30, 2021 and $148 million at Dec. 31, 2020.

9088 BNY Mellon


Notes to Consolidated Financial Statements (continued)

The following table summarizes the notional amount and carrying values of our total derivative portfolio.


Impact of derivative instruments on the balance sheet	Impact of derivative instruments on the balance sheet	Notional value				Asset derivatives fair value						Liability derivatives fair value				Impact of derivative instruments on the balance sheet	Notional value						Asset derivatives fair value						Liability derivatives fair value
		June 30, 2021		Dec. 31, 2020		June 30, 2021		Dec. 31, 2020				June 30, 2021		Dec. 31, 2020			Sept. 30, 2021		Dec. 31, 2020				Sept. 30, 2021			Dec. 31, 2020			Sept. 30, 2021			Dec. 31, 2020
(in millions)	(in millions)									(in millions)
Derivatives designated as hedging instruments: (a)(b)	Derivatives designated as hedging instruments: (a)(b)															Derivatives designated as hedging instruments: (a)(b)
Interest rate contracts	Interest rate contracts	$	46,961	$	31,360			$	0	$	0						$	469	$	666	Interest rate contracts	$	45,771		$	31,360		$	—		$	—		$	421	$	666
Foreign exchange contracts	Foreign exchange contracts	8,916		8,706		77		19				106		441		Foreign exchange contracts	8,749		8,706				238			19			7			441
Total derivatives designated as hedging instruments	Total derivatives designated as hedging instruments					$	77	$	19			$	575	$	1,107	Total derivatives designated as hedging instruments							$	238		$	19		$	428		$	1,107
Derivatives not designated as hedging instruments: (b)(c)	Derivatives not designated as hedging instruments: (b)(c)															Derivatives not designated as hedging instruments: (b)(c)
Interest rate contracts	Interest rate contracts	$	231,744	$	198,865	$	3,674	$	4,482			$	3,164	$	3,880	Interest rate contracts	$	195,065	$	198,865			$	3,424		$	4,482		$	2,989		$	3,880
Foreign exchange contracts	Foreign exchange contracts	852,013		813,003		6,774		7,688				6,175		7,622		Foreign exchange contracts	925,721		813,003				6,351			7,688			6,218			7,622
Equity contracts	Equity contracts	6,998		5,142		6		2				93		37		Equity contracts	8,214		5,142				265			2			9			37
Credit contracts	Credit contracts	165		165		0		0				4		4		Credit contracts	190		165				—			—			5			4
Total derivatives not designated as hedging instruments	Total derivatives not designated as hedging instruments					$	10,454	$	12,172			$	9,436	$	11,543	Total derivatives not designated as hedging instruments							$	10,040		$	12,172		$	9,221		$	11,543
Total derivatives fair value (d)	Total derivatives fair value (d)					$	10,531	$	12,191			$	10,011	$	12,650	Total derivatives fair value (d)							$	10,278		$	12,191		$	9,649		$	12,650
Effect of master netting agreements (e)	Effect of master netting agreements (e)					(5,677)		(8,346)				(6,681)		(7,845)		Effect of master netting agreements (e)							(5,875)			(8,346)			(6,529)			(7,845)
Fair value after effect of master netting agreements	Fair value after effect of master netting agreements					$	4,854	$	3,845			$	3,330	$	4,805	Fair value after effect of master netting agreements							$	4,403		$	3,845		$	3,120		$	4,805

(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 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 ~~$1,022~~$1,060 million and ~~$2,026~~$1,714 million, respectively, at ~~June~~Sept. 30, 2021, and $1,552 million and $1,051 million, respectively, at Dec. 31, 2020.

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 income on the consolidated income statement.

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


Foreign exchange revenue and other trading revenue	Foreign exchange revenue and other trading revenue													Foreign exchange revenue and other trading revenue
(in millions)	(in millions)	2Q21		1Q21		2Q20			YTD21		YTD20				(in millions)	3Q21		2Q21		3Q20			YTD21		YTD20
Foreign exchange revenue	Foreign exchange revenue	$	184	$	231	$	193	(a)	$	415	$	438	(a)		Foreign exchange revenue	$	185	$	184	$	149	(a)	$	600	$	587	(a)
Other trading (loss) revenue		(1)		(7)		(8)		(a)	(8)		58		(a)
Other trading revenue (loss)															Other trading revenue (loss)	20		(1)		(14)		(a)	12		44		(a)

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 $2 million in the third quarter of 2021, gains of $12 million in the third quarter of 2020, $13 million in the second quarter of 2021 ~~$28 million in the second quarter of 2020, $10~~and $21 million in the first ~~quarter~~nine months of 2021 and ~~$23~~a loss of $1 million in the first nine months of 2020.

BNY Mellon 9189


Notes to Consolidated Financial Statements (continued)

~~million in the first six months of 2021 and a loss of $13 million in the first six months of 2020.~~

We manage trading risk through a system of position limits, a value-at-risk (“VaR”) methodology based on historical simulation and other market sensitivity 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-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.

VaR methodology does not evaluate risk attributable to extraordinary financial, economic or other 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 into other risk management materials.

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.

Disclosure of contingent features in over-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, 2021		Dec. 31, 2020			Sept. 30, 2021		Dec. 31, 2020
(in millions)	(in millions)					(in millions)
Aggregate fair value of OTC derivatives in net liability positions (a)	Aggregate fair value of OTC derivatives in net liability positions (a)	$	5,244	$	5,235	Aggregate fair value of OTC derivatives in net liability positions (a)	$	4,790	$	5,235
Collateral posted	Collateral posted	$	5,711	$	5,568	Collateral posted	$	5,216	$	5,568

(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, enters into the substantial majority of our OTC derivative contracts and/or collateral agreements. As such, the contingent features may be triggered if The Bank of New York Mellon’s long-term issuer rating were downgraded.

The following table shows the fair value of contracts falling under early termination provisions that were in net liability positions for three key ratings triggers.


Potential close-out exposures (fair value) (a)	Potential close-out exposures (fair value) (a)					Potential close-out exposures (fair value) (a)
		June 30, 2021		Dec. 31, 2020			Sept. 30, 2021		Dec. 31, 2020
(in millions)	(in millions)					(in millions)
If The Bank of New York Mellon’s rating changed to: (b)	If The Bank of New York Mellon’s rating changed to: (b)					If The Bank of New York Mellon’s rating changed to: (b)
A3/A-	A3/A-	$	56	$	79	A3/A-	$	45	$	79
Baa2/BBB	Baa2/BBB	$	507	$	813	Baa2/BBB	$	465	$	813
Ba1/BB+	Ba1/BB+	$	3,102	$	2,859	Ba1/BB+	$	2,597	$	2,859

(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.

9290 BNY Mellon


Notes to Consolidated Financial Statements (continued)

If The Bank of New York Mellon’s debt rating had fallen below investment grade on ~~June~~Sept. 30, 2021 and Dec. 31, 2020, existing collateral arrangements would

have required us to post additional collateral of ~~$43~~$47 million and $41 million, respectively.

Offsetting assets and liabilities

The following tables present derivative and financial instruments 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, 2021
Offsetting of derivative assets and financial assets at Sept. 30, 2021															Offsetting of derivative assets and financial assets at Sept. 30, 2021
		Gross assets recognized		Gross amounts offset in the balance sheet			Net assets recognized in the balance sheet		Gross amounts not offset in the balance sheet							Gross assets recognized		Gross amounts offset in the balance sheet			Net assets recognized in the balance sheet		Gross amounts not offset in the balance sheet
(in millions)	(in millions)					(a)			Financial instruments		Cash collateral received		Net amount		(in millions)					(a)			Financial instruments		Cash collateral received		Net amount
Derivatives subject to netting arrangements:	Derivatives subject to netting arrangements:														Derivatives subject to netting arrangements:
Interest rate contracts	Interest rate contracts	$	2,412	$	1,601		$	811	$	239	$	0	$	572	Interest rate contracts	$	2,238	$	1,456		$	782	$	223	$	—	$	559
Foreign exchange contracts	Foreign exchange contracts	6,186		4,073			2,113		107		0		2,006		Foreign exchange contracts	5,943		4,251			1,692		66		—		1,626
Equity and other contracts	Equity and other contracts	7		3			4		0		0		4		Equity and other contracts	265		168			97		28		—		69
Total derivatives subject to netting arrangements	Total derivatives subject to netting arrangements	8,605		5,677			2,928		346		0		2,582		Total derivatives subject to netting arrangements	8,446		5,875			2,571		317		—		2,254
Total derivatives not subject to netting arrangements	Total derivatives not subject to netting arrangements	1,926		—			1,926		—		—		1,926		Total derivatives not subject to netting arrangements	1,832		—			1,832		—		—		1,832
Total derivatives	Total derivatives	10,531		5,677			4,854		346		0		4,508		Total derivatives	10,278		5,875			4,403		317		—		4,086
Reverse repurchase agreements	Reverse repurchase agreements	59,689		41,122		(b)	18,567		18,555		0		12		Reverse repurchase agreements	66,757		49,195		(b)	17,562		17,536		—		26
Securities borrowing	Securities borrowing	11,195		—			11,195		10,344		—		851		Securities borrowing	10,935		—			10,935		10,355		—		580
Total	Total	$	81,415	$	46,799		$	34,616	$	29,245	$	0	$	5,371	Total	$	87,970	$	55,070		$	32,900	$	28,208	$	—	$	4,692

(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, 2020	Offsetting of derivative assets and financial assets at Dec. 31, 2020														Offsetting of derivative assets and financial assets at Dec. 31, 2020
		Gross assets recognized		Gross amounts offset in the balance sheet			Net assets recognized in the balance sheet		Gross amounts not offset in the balance sheet							Gross assets recognized		Gross amounts offset in the balance sheet			Net assets recognized in the balance sheet		Gross amounts not offset in the balance sheet
(in millions)	(in millions)					(a)			Financial instruments		Cash collateral received		Net amount		(in millions)					(a)			Financial instruments		Cash collateral received		Net amount
Derivatives subject to netting arrangements:	Derivatives subject to netting arrangements:														Derivatives subject to netting arrangements:
Interest rate contracts	Interest rate contracts	$	2,972	$	1,952		$	1,020	$	311	$	0	$	709	Interest rate contracts	$	2,972	$	1,952		$	1,020	$	311	$	—	$	709
Foreign exchange contracts	Foreign exchange contracts	7,128		6,392			736		146		0		590		Foreign exchange contracts	7,128		6,392			736		146		—		590
Equity and other contracts	Equity and other contracts	2		2			0		0		0		0		Equity and other contracts	2		2			—		—		—		—
Total derivatives subject to netting arrangements	Total derivatives subject to netting arrangements	10,102		8,346			1,756		457		0		1,299		Total derivatives subject to netting arrangements	10,102		8,346			1,756		457		—		1,299
Total derivatives not subject to netting arrangements	Total derivatives not subject to netting arrangements	2,089		—			2,089		—		—		2,089		Total derivatives not subject to netting arrangements	2,089		—			2,089		—		—		2,089
Total derivatives	Total derivatives	12,191		8,346			3,845		457		0		3,388		Total derivatives	12,191		8,346			3,845		457		—		3,388
Reverse repurchase agreements	Reverse repurchase agreements	78,828		59,561		(b)	19,267		19,252		0		15		Reverse repurchase agreements	78,828		59,561		(b)	19,267		19,252		—		15
Securities borrowing	Securities borrowing	11,640		—			11,640		11,166		—		474		Securities borrowing	11,640		—			11,640		11,166		—		474
Total	Total	$	102,659	$	67,907		$	34,752	$	30,875	$	0	$	3,877	Total	$	102,659	$	67,907		$	34,752	$	30,875	$	—	$	3,877

(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 9391


Notes to Consolidated Financial Statements (continued)


Offsetting of derivative liabilities and financial liabilities at June 30, 2021							Net liabilities recognized in the balance sheet
Offsetting of derivative liabilities and financial liabilities at Sept. 30, 2021													Offsetting of derivative liabilities and financial liabilities at Sept. 30, 2021							Net liabilities recognized in the balance sheet
		Gross liabilities recognized		Gross amounts offset in the balance sheet					Gross amounts not offset in the balance sheet							Gross liabilities recognized		Gross amounts offset in the balance sheet						Gross amounts not offset in the balance sheet
(in millions)	(in millions)					(a)			Financial instruments		Cash collateral pledged		Net liabilities recognized in the balance sheet		Net amount						(in millions)		(a)			Cash collateral pledged			Net liabilities recognized in the balance sheet			Net amount
Derivatives subject to netting arrangements:	Derivatives subject to netting arrangements:														Derivatives subject to netting arrangements:
Interest rate contracts	Interest rate contracts	$	3,619	$	2,063		$	1,556	$	1,486	$	70			Interest rate contracts	$	3,389	$	1,844		$	1,545		$	1,503		$	42
Foreign exchange contracts	Foreign exchange contracts	5,793		4,531			1,262		497		0		765		Foreign exchange contracts	5,744		4,685			1,059			247			—					812
Equity and other contracts	Equity and other contracts	93		87			6		0		0		6		Equity and other contracts	9		—			9			—			—			9
Total derivatives subject to netting arrangements	Total derivatives subject to netting arrangements	9,505		6,681			2,824		1,983		0		841		Total derivatives subject to netting arrangements	9,142		6,529			2,613			1,750			—			863
Total derivatives not subject to netting arrangements	Total derivatives not subject to netting arrangements	506		—			506		—		—		506		Total derivatives not subject to netting arrangements	507		—			507			—			—			507
Total derivatives	Total derivatives	10,011		6,681			3,330		1,983		0		1,347		Total derivatives	9,649		6,529			3,120			1,750			—			1,370
Repurchase agreements	Repurchase agreements	52,216		41,122		(b)	11,094		11,093		1		0		Repurchase agreements	59,510		49,195		(b)	10,315			10,308			2			5
Securities lending	Securities lending	1,331		—			1,331		1,253		—		78		Securities lending	1,658		—			1,658			1,581			—			77
Total	Total	$	63,558	$	47,803		$	15,755	$	14,329	$	1	$	1,425	Total	$	70,817	$	55,724		$	15,093		$	13,639		$	2		$	1,452

(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, 2020	Offsetting of derivative liabilities and financial liabilities at Dec. 31, 2020						Net liabilities recognized in the balance sheet								Offsetting of derivative liabilities and financial liabilities at Dec. 31, 2020						Net liabilities recognized in the balance sheet
		Gross liabilities recognized		Gross amounts offset in the balance sheet					Gross amounts not offset in the balance sheet							Gross liabilities recognized		Gross amounts offset in the balance sheet					Gross amounts not offset in the balance sheet
(in millions)	(in millions)					(a)			Cash collateral pledged		Net liabilities recognized in the balance sheet		Net amount		(in millions)					(a)			Cash collateral pledged		Net liabilities recognized in the balance sheet		Net amount
Derivatives subject to netting arrangements:	Derivatives subject to netting arrangements:												Derivatives subject to netting arrangements:
Interest rate contracts	Interest rate contracts	$	4,533	$	2,348		$	2,185	$	2,115			$	70	Interest rate contracts	$	4,533	$	2,348		$	2,185	$	2,115			$	70
Foreign exchange contracts	Foreign exchange contracts	7,280		5,484			1,796		143				0		1,653		Foreign exchange contracts	7,280		5,484			1,796		143		—		1,653
Equity and other contracts	Equity and other contracts	37		13			24		7		0		17		Equity and other contracts	37		13			24		7		—		17
Total derivatives subject to netting arrangements	Total derivatives subject to netting arrangements	11,850		7,845			4,005		2,265		0		1,740		Total derivatives subject to netting arrangements	11,850		7,845			4,005		2,265		—		1,740
Total derivatives not subject to netting arrangements	Total derivatives not subject to netting arrangements	800		—			800		—		—		800		Total derivatives not subject to netting arrangements	800		—			800		—		—		800
Total derivatives	Total derivatives	12,650		7,845			4,805		2,265		0		2,540		Total derivatives	12,650		7,845			4,805		2,265		—		2,540
Repurchase agreements	Repurchase agreements	69,831		59,561		(b)	10,270		10,270		0		0		Repurchase agreements	69,831		59,561		(b)	10,270		10,270		—		—
Securities lending	Securities lending	1,035		—			1,035		983		—		52		Securities lending	1,035		—			1,035		983		—		52
Total	Total	$	83,516	$	67,406		$	16,110	$	13,518	$	0	$	2,592	Total	$	83,516	$	67,406		$	16,110	$	13,518	$	—	$	2,592

(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.

9492 BNY Mellon


Notes to Consolidated Financial Statements (continued)

Secured borrowings

The following table 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	Repurchase agreements and securities lending transactions accounted for as secured borrowings																	Repurchase agreements and securities lending transactions accounted for as secured borrowings
		June 30, 2021								Dec. 31, 2020									Sept. 30, 2021								Dec. 31, 2020
		Remaining contractual maturity						Total		Remaining contractual maturity						Total			Remaining contractual maturity						Total		Remaining contractual maturity						Total
(in millions)	(in millions)	Overnight and continuous		Up to 30 days		30 days or more				Overnight and continuous		Up to 30 days		30 days or more				(in millions)	Overnight and continuous		Up to 30 days		30 days or more				Overnight and continuous		Up to 30 days		30 days or more
Repurchase agreements:	Repurchase agreements:																	Repurchase agreements:
U.S. Treasury	U.S. Treasury	$	44,545	$	47	$	0	$	44,592	$	62,381	$	0	$	0	$	62,381	U.S. Treasury	$	52,216	$	144	$	—	$	52,360	$	62,381	$	—	$	—	$	62,381
Corporate bonds	Corporate bonds	243		184		1,480		1,907		190		218		1,436		1,844		Corporate bonds	217		16		1,161		1,394		190		218		1,436		1,844
Agency RMBS																		Agency RMBS	1,369		—		—		1,369		3,117		—		80		3,197
U.S. government agencies																		U.S. government agencies	985		—		—		985		425		—		—		425
State and political subdivisions																		State and political subdivisions	57		48		857		962		66		40		864		970
Sovereign debt/sovereign guaranteed	Sovereign debt/sovereign guaranteed	433		0		1,244		1,677		0		0		0		0		Sovereign debt/sovereign guaranteed	578		—		349		927		—		—		—		—
Agency RMBS		1,239		0		0		1,239		3,117		0		80		3,197
State and political subdivisions		31		27		749		807		66		40		864		970
U.S. government agencies		726		0		0		726		425		0		0		425
Other debt securities	Other debt securities	63		14		115		192		7		21		138		166		Other debt securities	1		5		198		204		7		21		138		166
Equity securities	Equity securities	0		75		1,001		1,076		0		21		827		848		Equity securities	—		230		1,079		1,309		—		21		827		848
Total	Total	$	47,280	$	347	$	4,589	$	52,216	$	66,186	$	300	$	3,345	$	69,831	Total	$	55,423	$	443	$	3,644	$	59,510	$	66,186	$	300	$	3,345	$	69,831
Securities lending:	Securities lending:																	Securities lending:
Agency RMBS	Agency RMBS	$	167	$	0	$	0	$	167	$	161	$	0	$	0	$	161	Agency RMBS	$	123	$	—	$	—	$	123	$	161	$	—	$	—	$	161
Other debt securities	Other debt securities	86		0		0		86		52		0		0		52		Other debt securities	119		—		—		119		52		—		—		52
Equity securities	Equity securities	1,078		0		0		1,078		822		0		0		822		Equity securities	1,416		—		—		1,416		822		—		—		822
Total	Total	$	1,331	$	0	$	0	$	1,331	$	1,035	$	0	$	0	$	1,035	Total	$	1,658	$	—	$	—	$	1,658	$	1,035	$	—	$	—	$	1,035
Total secured borrowings	Total secured borrowings	$	48,611	$	347	$	4,589	$	53,547	$	67,221	$	300	$	3,345	$	70,866	Total secured borrowings	$	57,081	$	443	$	3,644	$	61,168	$	67,221	$	300	$	3,345	$	70,866

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.

Note 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 risks 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 9593


Notes to Consolidated Financial Statements (continued)

The following table presents a summary of our off-balance sheet credit risks.


Off-balance sheet credit risks	Off-balance sheet credit risks	June 30, 2021		Dec. 31, 2020		Off-balance sheet credit risks	Sept. 30, 2021		Dec. 31, 2020
(in millions)	(in millions)					(in millions)
Lending commitments	Lending commitments	$	47,098	$	47,577	Lending commitments	$	46,892	$	47,577
Standby letters of credit (“SBLC”) (a)	Standby letters of credit (“SBLC”) (a)	2,182		2,265		Standby letters of credit (“SBLC”) (a)	1,993		2,265
Commercial letters of credit	Commercial letters of credit	98		60		Commercial letters of credit	146		60
Securities lending indemnifications (b)(c)	Securities lending indemnifications (b)(c)	495,340		469,121		Securities lending indemnifications (b)(c)	485,626		469,121

(a)Net of participations totaling ~~$129~~$126 million at ~~June~~Sept. 30, 2021 and $154 million at Dec. 31, 2020.

(b)Excludes the indemnification for securities for which BNY Mellon acts as an agent on behalf of CIBC Mellon clients, which totaled ~~$61~~$64 billion at ~~June~~Sept. 30, 2021 and $62 billion at Dec. 31, 2020.

(c)Includes cash collateral, invested in indemnified repurchase agreements, held by us as securities lending agent of ~~$47~~$50 billion at ~~June~~Sept. 30, 2021 and $41 billion at Dec. 31, 2020.

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: ~~$29.5~~$28.0 billion in less than one year, ~~$17.0~~$18.1 billion in one to five years and ~~$638~~$787 million over five years.

SBLCs principally support obligations of corporate clients and were collateralized with cash and securities of ~~$131~~$163 million at ~~June~~Sept. 30, 2021 and $194 million at Dec. 31, 2020. At ~~June~~Sept. 30, 2021, ~~$1.5~~$1.4 billion of the SBLCs will expire within one year, ~~$702~~$558 million in one to five years and ~~NaN~~none 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.

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 credit	Standby letters of credit	June 30, 2021		Dec. 31, 2020			Standby letters of credit		Sept. 30, 2021		Dec. 31, 2020

Investment grade	Investment grade		86		%	82		%	Investment grade	85		%	82	%
Non-investment grade	Non-investment grade	14	%	18		%	Non-investment grade		15	%	18		%

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 ~~$98~~$146 million at ~~June~~Sept. 30, 2021 and $60 million at Dec. 31, 2020.

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 ~~$50~~$40 million at ~~June~~Sept. 30, 2021 and $121 million at Dec. 31, 2020.

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.

We typically lend securities with indemnification against borrower default. We generally require the borrower to provide collateral with a minimum value of 102% 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

9694 BNY Mellon


Notes to Consolidated Financial Statements (continued)

counterparties. Securities lending indemnifications were secured by collateral of $~~522~~511 billion at ~~June~~Sept. 30, 2021 and $493 billion at Dec. 31, 2020.

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 ~~June~~Sept. 30, 2021 and Dec. 31, 2020, ~~$61~~$64 billion and $62 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 ~~$64~~$68 billion and $66 billion, respectively. 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~~Sept. 30, 2021, we had ~~$2.6~~$3.7 billion of unsettled repurchase agreements and ~~$6.4~~$10.4 billion of unsettled reverse repurchase agreements.

Industry concentrations

We have significant industry concentrations related to credit exposure at ~~June~~Sept. 30, 2021. The tables below present our credit exposure in the financial institutions and commercial portfolios.

Financial institutions
portfolio exposure
(in billions)
June 30, 2021
Loans Unfunded
commitments Total exposure
Securities industry $ 2.4 $ 20.2 $ 22.6
Asset managers 1.5 6.9 8.4
Banks 6.0 1.1 7.1
Insurance 0.2 3.0 3.2
Government 0.1 0.2 0.3
Other 0.5 1.0 1.5
Total $ 10.7 $ 32.4 $ 43.1


Financial institutions portfolio exposure (in billions)	Sept. 30, 2021
	Loans		Unfunded commitments		Total exposure
Securities industry	$	2.0	$	18.8	$	20.8
Asset managers	1.5		7.4		8.9
Banks	4.9		1.7		6.6
Insurance	0.3		3.0		3.3
Government	0.1		0.1		0.2
Other	0.6		1.1		1.7
Total	$	9.4	$	32.1	$	41.5


Commercial portfolio exposure (in billions)	Commercial portfolio exposure (in billions)	June 30, 2021						Commercial portfolio exposure (in billions)	Sept. 30, 2021
		Loans		Unfunded commitments		Total exposure			Loans		Unfunded commitments		Total exposure
Manufacturing	Manufacturing	$	0.6	$	3.9	$	4.5	Manufacturing	$	0.5	$	4.0	$	4.5
Energy and utilities	Energy and utilities	0.3		4.0		4.3		Energy and utilities	0.3		3.9		4.2
Services and other	Services and other	0.7		3.5		4.2		Services and other	0.8		3.2		4.0
Media and telecom	Media and telecom	0.1		0.9		1.0		Media and telecom	0.1		0.8		0.9
Total	Total	$	1.7	$	12.3	$	14.0	Total	$	1.7	$	11.9	$	13.6

Major concentrations in securities lending are primarily to broker-dealers and are generally collateralized with cash and/or securities.


	Six months ended June 30,
(in millions)	2021		2020
Operating activities
Net income	$	1,959	$	1,927
Net (income) loss attributable to noncontrolling interests	(10)		3
Net income applicable to shareholders of The Bank of New York Mellon Corporation	1,949		1,930
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Provision for credit losses (a)	(169)		312
Pension plan contributions	(16)		(12)
Depreciation and amortization	938		744
Deferred tax (benefit)	274		(363)
Net securities (gains)	(2)		(18)
Change in trading assets and liabilities	176		171
Change in accruals and other, net	(3,495)		2,361
Net cash (used for) provided by operating activities	(345)		5,125
Investing activities
Change in interest-bearing deposits with banks	(2,924)		(3,710)
Change in interest-bearing deposits with the Federal Reserve and other central banks	13,409		(18,117)
Purchases of securities held-to-maturity	(5,449)		(14,499)
Paydowns of securities held-to-maturity	5,869		3,541
Maturities of securities held-to-maturity	834		1,836
Purchases of securities available-for-sale	(25,820)		(44,865)
Sales of securities available-for-sale	7,624		8,414
Paydowns of securities available-for-sale	7,081		4,416
Maturities of securities available-for-sale	8,999		12,241
Net change in loans	(7,017)		(610)
Sales of loans and other real estate	1		2
Change in federal funds sold and securities purchased under resale agreements	1,129		(6,516)
Net change in seed capital investments	(55)		19
Purchases of premises and equipment/capitalized software	(465)		(623)
Proceeds from the sale of premises and equipment	27		0

Dispositions, net of cash	8		0
Other, net	648		(275)
Net cash provided by (used for) investing activities	3,899		(58,746)
Financing activities
Change in deposits	(1,428)		47,576
Change in federal funds purchased and securities sold under repurchase agreements	1,214		3,155
Change in payables to customers and broker-dealers	(1,360)		6,260
Change in other borrowed funds	107		1,036
Change in commercial paper	0		(3,294)
Net proceeds from the issuance of long-term debt	2,691		2,246
Repayments of long-term debt	(2,750)		(3,000)
Proceeds from the exercise of stock options	32		33
Issuance of common stock	6		6
Issuance of preferred stock	0		990
Treasury stock acquired	(1,317)		(988)

Common cash dividends paid	(550)		(560)
Preferred cash dividends paid	(100)		(85)

Other, net	(6)		15
Net cash (used for) provided by financing activities	(3,461)		53,390
Effect of exchange rate changes on cash	(41)		(50)
Change in cash and due from banks and restricted cash
Change in cash and due from banks and restricted cash	52		(281)
Cash and due from banks and restricted cash at beginning of period	9,419		7,267
Cash and due from banks and restricted cash at end of period	$	9,471	$	6,986
Cash and due from banks and restricted cash
Cash and due from banks at end of period (unrestricted cash)	$	5,154	$	4,776
Restricted cash at end of period	4,317		2,210
Cash and due from banks and restricted cash at end of period	$	9,471	$	6,986
Supplemental disclosures
Interest paid	$	145	$	1,013
Income taxes paid	266		756
Income taxes refunded	10		11


For the quarter ended June 30, 2021		Investment Services			Investment and Wealth Management				Other		Consolidated
For the quarter ended Sept. 30, 2021															For the quarter ended Sept. 30, 2021	Investment Services			Investment and Wealth Management				Other		Consolidated
(dollars in millions)	(dollars in millions)	Investment Services			Investment and Wealth Management				Other		Consolidated				(dollars in millions)
Total fee and other revenue	Total fee and other revenue														Total fee and other revenue	$	2,378		$	985		(a)	$	35	$	3,398		(a)
Net interest revenue (expense)	Net interest revenue (expense)	643			47				(45)		645				Net interest revenue (expense)	632			47				(38)		641
Total revenue (loss)	Total revenue (loss)	2,979			999			(a)	(23)		3,955			(a)	Total revenue (loss)	3,010			1,032			(a)	(3)		4,039			(a)
Provision for credit losses	Provision for credit losses	(77)			(4)				(5)		(86)				Provision for credit losses	(35)			(7)				(3)		(45)
Noninterest expense	Noninterest expense	2,052			677				49		2,778				Noninterest expense	2,211			691				16		2,918
Income (loss) before income taxes	Income (loss) before income taxes	$	1,004		$	326		(a)	$	(67)	$	1,263		(a)	Income (loss) before income taxes	$	834		$	348		(a)	$	(16)	$	1,166		(a)
Pre-tax operating margin (b)	Pre-tax operating margin (b)	34		%	33		%		N/M		32		%		Pre-tax operating margin (b)	28		%	34		%		N/M		29		%
Average assets	Average assets	$	383,330		$	30,370			$	38,629	$	452,329			Average assets	$	379,273		$	30,195			$	37,293	$	446,761


For the quarter ended March 31, 2021		Investment Services			Investment and Wealth Management				Other		Consolidated
For the quarter ended June 30, 2021															For the quarter ended June 30, 2021	Investment Services			Investment and Wealth Management				Other		Consolidated
(dollars in millions)	(dollars in millions)	Investment Services			Investment and Wealth Management				Other		Consolidated				(dollars in millions)
Total fee and other revenue (loss)
Total fee and other revenue															Total fee and other revenue	$	2,336		$	952		(a)	$	22	$	3,310		(a)
Net interest revenue (expense)	Net interest revenue (expense)	645			48				(38)		655				Net interest revenue (expense)	643			47				(45)		645
Total revenue (loss)	Total revenue (loss)	2,990			991			(a)	(65)		3,916			(a)	Total revenue (loss)	2,979			999			(a)	(23)		3,955			(a)
Provision for credit losses	Provision for credit losses	(79)			4				(8)		(83)				Provision for credit losses	(77)			(4)				(5)		(86)
Noninterest expense	Noninterest expense	2,101			709				41		2,851				Noninterest expense	2,052			677				49		2,778
Income (loss) before income taxes	Income (loss) before income taxes	$	968		$	278		(a)	$	(98)	$	1,148		(a)	Income (loss) before income taxes	$	1,004		$	326		(a)	$	(67)	$	1,263		(a)
Pre-tax operating margin (b)	Pre-tax operating margin (b)	32		%	28		%		N/M		29		%		Pre-tax operating margin (b)	34		%	33		%		N/M		32		%
Average assets	Average assets	$	385,054		$	32,066			$	43,259	$	460,379			Average assets	$	383,330		$	30,370			$	38,629	$	452,329


For the quarter ended June 30, 2020		Investment Services			Investment and Wealth Management				Other		Consolidated
For the quarter ended Sept. 30, 2020															For the quarter ended Sept. 30, 2020	Investment Services			Investment and Wealth Management				Other		Consolidated
(dollars in millions)	(dollars in millions)	Investment Services			Investment and Wealth Management				Other		Consolidated				(dollars in millions)
Total fee and other revenue	Total fee and other revenue														Total fee and other revenue	$	2,246		$	871		(a)	$	20	$	3,137		(a)
Net interest revenue (expense)	Net interest revenue (expense)	768			48				(36)		780				Net interest revenue (expense)	681			47				(25)		703
Total revenue		3,107			886			(a)	2		3,995			(a)
Total revenue (loss)															Total revenue (loss)	2,927			918			(a)	(5)		3,840			(a)
Provision for credit losses	Provision for credit losses	145			7				(9)		143				Provision for credit losses	(10)			12				7		9
Noninterest expense	Noninterest expense	1,989			658				39		2,686				Noninterest expense	2,020			661				—		2,681
Income (loss) before income taxes	Income (loss) before income taxes	$	973		$	221		(a)	$	(28)	$	1,166		(a)	Income (loss) before income taxes	$	917		$	245		(a)	$	(12)	$	1,150		(a)
Pre-tax operating margin (b)	Pre-tax operating margin (b)	31		%	25		%		N/M		29		%		Pre-tax operating margin (b)	31		%	27		%		N/M		30		%
Average assets	Average assets	$	335,288		$	30,327			$	49,744	$	415,359			Average assets	$	329,324		$	30,160			$	55,381	$	414,865


For the six months ended June 30, 2021		Investment Services			Investment and Wealth Management				Other		Consolidated
For the nine months ended Sept. 30, 2021															For the nine months ended Sept. 30, 2021	Investment Services			Investment and Wealth Management				Other		Consolidated
(dollars in millions)	(dollars in millions)	Investment Services			Investment and Wealth Management				Other		Consolidated				(dollars in millions)
Total fee and other revenue (loss)
Total fee and other revenue															Total fee and other revenue	$	7,059		$	2,880		(a)	$	30	$	9,969		(a)
Net interest revenue (expense)	Net interest revenue (expense)	1,288			95				(83)		1,300				Net interest revenue (expense)	1,920			142				(121)		1,941
Total revenue (loss)	Total revenue (loss)	5,969			1,990			(a)	(88)		7,871			(a)	Total revenue (loss)	8,979			3,022			(a)	(91)		11,910			(a)
Provision for credit losses	Provision for credit losses	(156)			0				(13)		(169)				Provision for credit losses	(191)			(7)				(16)		(214)
Noninterest expense	Noninterest expense	4,153			1,386				90		5,629				Noninterest expense	6,364			2,077				106		8,547
Income (loss) before income taxes	Income (loss) before income taxes	$	1,972		$	604		(a)	$	(165)	$	2,411		(a)	Income (loss) before income taxes	$	2,806		$	952		(a)	$	(181)	$	3,577		(a)
Pre-tax operating margin (b)	Pre-tax operating margin (b)	33		%	30		%		N/M		31		%		Pre-tax operating margin (b)	31		%	31		%		N/M		30		%
Average assets	Average assets	$	384,187		$	31,213			$	40,932	$	456,332			Average assets	$	382,531		$	30,870			$	39,705	$	453,106


For the six months ended June 30, 2020		Investment Services			Investment and Wealth Management				Other		Consolidated
For the nine months ended Sept. 30, 2020															For the nine months ended Sept. 30, 2020	Investment Services			Investment and Wealth Management				Other		Consolidated
(dollars in millions)	(dollars in millions)	Investment Services			Investment and Wealth Management				Other		Consolidated				(dollars in millions)
Total fee and other revenue	Total fee and other revenue														Total fee and other revenue	$	7,021		$	2,555		(a)	$	88	$	9,664		(a)
Net interest revenue (expense)	Net interest revenue (expense)	1,574			100				(80)		1,594				Net interest revenue (expense)	2,255			147				(105)		2,297
Total revenue (loss)	Total revenue (loss)	6,349			1,784			(a)	(12)		8,121			(a)	Total revenue (loss)	9,276			2,702			(a)	(17)		11,961			(a)
Provision for credit losses	Provision for credit losses	294			16				2		312				Provision for credit losses	284			28				9		321
Noninterest expense	Noninterest expense	3,976			1,353				69		5,398				Noninterest expense	5,996			2,014				69		8,079
Income (loss) before income taxes	Income (loss) before income taxes	$	2,079		$	415		(a)	$	(83)	$	2,411		(a)	Income (loss) before income taxes	$	2,996		$	660		(a)	$	(95)	$	3,561		(a)
Pre-tax operating margin (b)	Pre-tax operating margin (b)	33		%	23		%		N/M		30		%		Pre-tax operating margin (b)	32		%	24		%		N/M		30		%
Average assets	Average assets	$	319,689		$	30,435			$	50,194	$	400,318			Average assets	$	322,924		$	30,343			$	51,936	$	405,203


Non-cash investing and financing transactions	Non-cash investing and financing transactions	Six months ended June 30,				Non-cash investing and financing transactions	Nine months ended Sept. 30,
(in millions)	(in millions)	2021		2020		(in millions)	2021		2020
Transfers from loans to other assets for other real estate owned	Transfers from loans to other assets for other real estate owned	$	1	$	0	Transfers from loans to other assets for other real estate owned	$	1	$	1
Change in assets of consolidated investment management funds	Change in assets of consolidated investment management funds	74		215		Change in assets of consolidated investment management funds	18		343
Change in liabilities of consolidated investment management funds	Change in liabilities of consolidated investment management funds	4		3		Change in liabilities of consolidated investment management funds	2		3
Change in nonredeemable noncontrolling interests of consolidated investment management funds	Change in nonredeemable noncontrolling interests of consolidated investment management funds	201		10		Change in nonredeemable noncontrolling interests of consolidated investment management funds	130		149
Securities purchased not settled	Securities purchased not settled	866		1,730		Securities purchased not settled	531		846
Securities sold not settled	Securities sold not settled	100		0		Securities sold not settled	29		—

Available-for-sale securities transferred to held-to-maturity	Available-for-sale securities transferred to held-to-maturity	5,945		0		Available-for-sale securities transferred to held-to-maturity	11,028		—

Premises and equipment/capitalized software funded by finance lease obligations						Premises and equipment/capitalized software funded by finance lease obligations	11		—
Premises and equipment/operating lease obligations	Premises and equipment/operating lease obligations	56		66		Premises and equipment/operating lease obligations	72		126


Share repurchases – second quarter of 2021				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 June 30, 2021
(dollars in millions, except per share amounts; common shares in thousands)	Total shares repurchased	Average price per share
April 2021	12,063	$	48.01	12,063		$	3,171
May 2021	507	50.07		507		3,146
June 2021	264	51.94		264		3,132
Second quarter of 2021 (a)	12,834	$	48.17	12,834		$	6,000	(b)


Share repurchases – third quarter of 2021				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, 2021
(dollars in millions, except per share amounts; common shares in thousands)	Total shares repurchased	Average price per share
July 2021	12,471	$	50.02	12,471		$	5,376
August 2021	25,601	53.79		25,601		3,999
September 2021	6	53.62		6		3,999
Third quarter of 2021 (a)	38,078	$	52.55	38,078		$	3,999	(b)



Date: ~~August~~November 5, 2021	By:	/s/ Kurtis R. Kurimsky
		Kurtis R. Kurimsky
		Corporate Controller
		(Duly Authorized Officer and
		Principal Accounting Officer of
		the Registrant)