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BK Bank Of New York Mellon

Filed: 6 May 21, 6:23am
0001390777us-gaap:NondesignatedMemberus-gaap:OperatingSegmentsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeContractMemberus-gaap:FairValueMeasurementsRecurringMember2020-12-31

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 March 31, 2021
or
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)
Delaware13-2614959
(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 classTrading
symbol(s)
Name of each exchange
on which registered
Common Stock, $0.01 par valueBKNew York Stock Exchange
6.244% Fixed-to-Floating Rate Normal Preferred Capital Securities of Mellon Capital IVBK/PNew 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 filerAccelerated filer
Non-accelerated filerSmaller 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 March 31, 2021, 875,480,847 shares of the registrant’s common stock, $0.01 par value per share, were outstanding.



THE BANK OF NEW YORK MELLON CORPORATION

First Quarter 2021 Form 10-Q
Table of Contents 
Page
Consolidated Financial Highlights (unaudited)
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
Overview
Net interest revenue
Noninterest expense
Income taxes
Review of businesses
Critical accounting estimates
Consolidated balance sheet review
Liquidity and dividends
Capital
Trading activities and risk management
Asset/liability management
Supplemental information – Explanation of GAAP and Non-GAAP financial measures
Website information
Item 1. Financial Statements:
Consolidated Income Statement (unaudited)
Consolidated Comprehensive Income Statement (unaudited)
Consolidated Balance Sheet (unaudited)
Consolidated Statement of Cash Flows (unaudited)
Consolidated Statement of Changes in Equity (unaudited)



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

Consolidated Financial Highlights (unaudited)

Quarter ended
(dollars in millions, except per share amounts and unless
  otherwise noted)
March 31, 2021Dec. 31, 2020March 31, 2020
Results applicable to common shareholders of The Bank of New York Mellon Corporation:
Net income$858 $702 $944 
Basic earnings per share$0.97 $0.79 $1.05 
Diluted earnings per share$0.97 $0.79 $1.05 
Fee and other revenue (a)
$3,266 $3,163 $3,294 
Net interest revenue655 680 814 
Total revenue$3,921 $3,843 $4,108 
Return on common equity (annualized)
8.5 %6.9 %10.1 %
Return on tangible common equity (annualized) – Non-GAAP (b)
16.1 %13.0 %20.4 %
Return on average assets (annualized)
0.76 %0.64 %0.99 %
Fee revenue as a percentage of total revenue (a)
83 %81 %79 %
Non-U.S. revenue as a percentage of total revenue37 %38 %36 %
Pre-tax operating margin29 %24 %30 %
Net interest margin0.66 %0.72 %1.01 %
Net interest margin on a fully taxable equivalent (“FTE”) basis – Non-GAAP (c)
0.67 %0.72 %1.01 %
Assets under custody and/or administration (“AUC/A”) at period end (in trillions) (d)
$41.7 $41.1 $35.2 
Assets under management (“AUM”) at period end (in billions) (e)
$2,214 $2,211 $1,796 
Market value of securities on loan at period end (in billions) (f)
$445 $435 $389 
Average common shares and equivalents outstanding (in thousands):
Basic882,558 889,928 894,122 
Diluted885,655 891,846 896,689 
Selected average balances:
Interest-earning assets$397,297 $378,674 $323,936 
Total assets$460,379 $437,488 $385,278 
Interest-bearing deposits$245,115 $231,318 $197,632 
Noninterest-bearing deposits$83,429 $75,840 $60,577 
Long-term debt$26,199 $25,704 $27,231 
Preferred stock$4,541 $4,827 $3,542 
Total The Bank of New York Mellon Corporation common shareholders’ equity$40,720 $40,712 $37,664 
Other information at period end:
Cash dividends per common share$0.31 $0.31 $0.31 
Common dividend payout ratio32 %39 %30 %
Common dividend yield (annualized)
2.7 %2.9 %3.7 %
Closing stock price per common share$47.29 $42.44 $33.68 
Market capitalization$41,401 $37,634 $29,822 
Book value per common share$46.16 $46.53 $42.47 
Tangible book value per common share – Non-GAAP (b)
$24.88 $25.44 $21.53 
Full-time employees48,000 48,500 47,900 
Common shares outstanding (in thousands)
875,481 886,764 885,443 
2 BNY Mellon


Consolidated Financial Highlights (unaudited) (continued)

Regulatory capital and other ratiosMarch 31, 2021Dec. 31, 2020
Average liquidity coverage ratio (“LCR”)110 %110 %
Regulatory capital ratios: (g)
Advanced:
Common Equity Tier 1 (“CET1”) ratio12.6 %13.1 %
Tier 1 capital ratio15.3 15.8 
Total capital ratio16.1 16.7 
Standardized:
CET1 ratio12.6 %13.4 %
Tier 1 capital ratio15.2 16.1 
Total capital ratio16.2 17.1 
Tier 1 leverage ratio5.8 %6.3 %
Supplementary leverage ratio (“SLR”) (h)
8.1 8.6 
BNY Mellon shareholders’ equity to total assets ratio9.7 %9.8 %
BNY Mellon common shareholders’ equity to total assets ratio8.7 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 42 for the reconciliation of Non-GAAP measures.
(c)    See “Net interest revenue” on page 10 for a reconciliation of this Non-GAAP measure.
(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 $1.6 trillion at March 31, 2021, $1.5 trillion at Dec. 31, 2020 and $1.2 trillion at March 31, 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 $64 billion at March 31, 2021, $68 billion at Dec. 31, 2020 and $59 billion at March 31, 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 34.
(h)    The SLR at March 31, 2021 and Dec. 31, 2020 reflect the exclusion of certain central bank placements and the temporary exclusion of U.S. Treasury securities from the leverage exposure. The 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 ceased to apply beginning April 1, 2021. See “Capital” beginning on page 34 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.

bk-20210331_g1.jpg



Highlights of first quarter 2021 results

Net income applicable to common shareholders was $858 million, or $0.97 per diluted common share, in the first quarter of 2021. Net income applicable to common shareholders was $944 million, or $1.05 per diluted common share, in the first quarter of 2020. The highlights below are based on the first quarter of 2021 compared with the first quarter of 2020, unless otherwise noted.

Total revenue of $3.9 billion decreased 5%, primarily reflecting:
Fee revenue increased 1%, primarily reflecting the positive impact of higher markets, higher client volumes and balances and the favorable impact of a weaker U.S. dollar, partially offset by higher money market fee waivers. (See “Fee and other revenue” beginning on page 7.)
4 BNY Mellon


Other revenue includes a $39 million impairment for a renewable energy investment. (See “Fee and other revenue” beginning on page 7.)
Net interest revenue decreased 20%, primarily reflecting lower interest rates on interest-earning assets. This was partially offset by the benefit of lower deposit and funding rates, higher deposit balances and a larger securities portfolio. (See “Net interest revenue” on page 10.)
Provision for credit losses was a benefit of $83 million primarily driven by an improvement in the macroeconomic forecast. (See “Consolidated balance sheet review – Allowance for credit losses” beginning on page 27.)
Noninterest expense increased 5%, primarily reflecting higher staff expense, the unfavorable impact of a weaker U.S. dollar and higher technology-related expenses, partially offset by lower business development (travel and marketing) and distribution and servicing expenses. (See “Noninterest expense” on page 12.)
Effective tax rate of 19.2%. (See “Income taxes” on page 12.)

Capital and liquidity

CET1 ratio was 12.6% under the Standardized Approach at March 31, 2021, compared with 13.1% under the Advanced Approaches at Dec.
31, 2020. The decrease in the CET1 ratio primarily reflects unrealized losses on securities available-for-sale, capital deployed through common stock repurchases and dividends and an increase in risk-weighted assets (“RWAs”) under the Standardized Approach, partially offset by capital generated through earnings. (See “Capital” beginning on page 34.)
Repurchased 16.8 million common shares for $699 million.

Highlights of our principal businesses

Investment Services
Total revenue decreased 8%.
Income before income taxes decreased 12%.
AUC/A of $41.7 trillion increased 18%, primarily reflecting higher market values, net new business and the favorable impact of a weaker U.S. dollar.

Investment and Wealth Management
Total revenue increased 10%.
Income before income taxes increased 43%.
AUM of $2.2 trillion increased 23%, primarily reflecting higher market values, the favorable impact of a weaker U.S. dollar (principally versus the British pound) and net inflows.

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 first quarter of 2021, which has continued to result in lower net interest revenue and higher money market fee waivers. This has been partially offset by higher deposit balances and higher money market balances.

Equity markets and activity improved in the first quarter of 2021, resulting in increased volumes compared to the fourth quarter of 2020 in most of our Investment Services businesses and increased asset-based fees in Investment Services and Investment and Wealth Management.

The macroeconomic outlook also improved as of the end of the first quarter of 2021, resulting in a decrease in the allowance for credit losses and a benefit of $83 million to the provision for credit losses.

We suspended common stock repurchases for most of 2020, beginning in March 2020, while maintaining our quarterly common stock dividend of $0.31 per share. In June 2020, the Federal Reserve announced that participating Comprehensive Capital Analysis and Review (“CCAR”) bank holding companies (“BHCs”), including us, must update and resubmit their capital plans and that, as a result, CCAR BHCs were not permitted to conduct open market common stock repurchases in the third quarter of 2020, a
restriction subsequently extended through the fourth quarter of 2020. For the first and second quarters of 2021, the Federal Reserve permitted common stock dividends and repurchases subject to the limitations that the aggregate amounts per quarter not exceed average net income over the prior four quarters and that common stock dividends not be increased. If a CCAR BHC ceases to be subject to temporary restrictions on distributions beginning in the third quarter of 2021, it will continue to be subject to the normal constraints under the stress capital buffer (“SCB”) framework. See “Recent regulatory developments” for additional information related to the temporary restrictions on capital distributions.

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
1Q21 vs.
(dollars in millions, unless otherwise noted)1Q214Q201Q204Q201Q20
Investment services fees:
Asset servicing fees (a)
$1,199 $1,138 $1,159 5 %3 %
Clearing services fees (b)
455 418 470 9 (3)
Issuer services fees245 257 263 (5)(7)
Treasury services fees157 156 149 1 5 
Total investment services fees2,056 1,969 2,041 4 1 
Investment management and performance fees890 884 862 1 3 
Foreign exchange revenue (c)
231 187 245 24 (6)
Financing-related fees51 46 59 11 (14)
Distribution and servicing29 28 31 4 (6)
Total fee revenue (c)
3,257 3,114 3,238 5 1 
Investment and other income (c)
9 43 47 N/MN/M
Net securities gains N/MN/M
Total other revenue9 49 56 N/MN/M
Total fee and other revenue (c)
$3,266 $3,163 $3,294 3 %(1)%
Fee revenue as a percentage of total revenue (c)
83 %81 %79 %
AUC/A at period end (in trillions) (d)
$41.7 $41.1 $35.2 1 %18 %
AUM at period end (in billions) (e)
$2,214 $2,211 $1,796  %23 %
(a)    Asset servicing fees include the fees from the Clearance and Collateral Management business and also include securities lending revenue of $45 million in the first quarter of 2021, $39 million in the fourth quarter of 2020 and $51 million in the first quarter 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 $1.6 trillion at March 31, 2021, $1.5 trillion at Dec. 31, 2020 and $1.2 trillion at March 31, 2020.
(e)    Excludes securities lending cash management assets and assets managed in the Investment Services business.
N/M – Not meaningful.


Fee revenue increased 1% compared with the first quarter of 2020 and 5% compared with the fourth quarter of 2020. The increase compared with the first quarter of 2020 primarily reflects higher investment management and performance fees, asset servicing fees, clearing services fees and the favorable impact of a weaker U.S. dollar, partially offset by higher money market fee waivers and lower foreign exchange revenue. The increase compared with the fourth quarter of 2020 primarily reflects higher asset servicing fees, clearing services fees, foreign exchange revenue and investment management and performance fees, partially offset by higher money market fee waivers.

Other revenue decreased $47 million compared with the first quarter of 2020. The decrease primarily reflects a $39 million impairment related to a renewable energy investment.

Money market fee waivers

Given the recent levels of 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 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.

BNY Mellon 7


The following table presents the impact of money market fee waivers on our consolidated fee revenue, net of distribution and servicing expense. In the first quarter of 2021, the net impact of money market fee waivers was $188 million, up from $134 million in the fourth quarter of 2020, driven by low short-term interest rates and higher money market balances.

Money market fee waivers
(in millions)1Q214Q201Q20
Investment services fees:
Asset servicing fees$(22)$(13)$— 
Clearing services fees(74)(64)(9)
Issuer services fees(10)(6)— 
Treasury services fees(3)(2)— 
Total investment services fees(109)(85)(9)
Investment management and performance fees(89)(56)(14)
Distribution and servicing revenue(13)(8)— 
Total fee revenue(211)(149)(23)
Less: Distribution and servicing expense23 15 — 
Net impact of money market fee waivers$(188)$(134)$(23)
Impact to revenue by line of business (a):
Asset Servicing$(29)$(13)$— 
Pershing(94)(85)(9)
Issuer Services(15)(10)— 
Treasury Services(9)(5)— 
Investment Management(61)(34)(14)
Wealth Management(3)(2)— 
Total impact to revenue by line of business$(211)$(149)$(23)
(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, to approximate $220 million in the second quarter of 2021, based on implied forward rates and money market balances as of the end of the first quarter of 2021. Fee waivers in subsequent periods will continue to be dependent on the level of short-term interest rates and money market balances.

Investment services fees

Investment services fees increased 1% compared with the first quarter of 2020 and 4% compared with the fourth quarter of 2020, reflecting the following:
Asset servicing fees increased 3% compared with the first quarter of 2020 and 5% compared with the fourth quarter of 2020. The increase compared with the first quarter of 2020 primarily
reflects higher client volumes and market values, partially offset by higher money market fee waivers. The increase compared with the fourth quarter of 2020 primarily reflects higher client volumes, partially offset by higher money market fee waivers.
Clearing services fees decreased 3% compared with the first quarter of 2020 and increased 9% compared with the fourth quarter of 2020. The decrease compared with the first quarter of 2020 primarily reflects the impact of money market fee waivers, partially offset by higher market values and client volumes. The increase compared with the fourth quarter of 2020 primarily reflects higher clearance volumes and market values.
Issuer services fees decreased 7% compared with the first quarter of 2020 and 5% compared with the fourth quarter of 2020. Both decreases primarily reflect higher money market fee waivers in Corporate Trust and lower Depositary Receipts revenue.
Treasury services fees increased 5% compared with the first quarter of 2020 and 1% compared with the fourth quarter of 2020. The increase compared with the first quarter of 2020 primarily reflects higher payment volumes.

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

Investment management and performance fees

Investment management and performance fees increased 3% compared with the first quarter of 2020 and 1% compared with the fourth quarter of 2020. Both increases primarily reflect the impact of higher market values and the favorable impact of a weaker U.S. dollar, partially offset by the impact of money market fee waivers. Performance fees were $40 million in the first quarter of 2021, $50 million in the first quarter of 2020 and $45 million in the fourth quarter of 2020. On a constant currency basis (Non-GAAP), investment management and performance fees increased 1% compared with the first quarter of 2020.

AUM was $2.2 trillion at March 31, 2021, an increase of 23% compared with March 31, 2020, primarily reflecting higher market values, the favorable impact of a weaker U.S. dollar (principally versus the British pound) and net inflows.
8 BNY Mellon


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). In the first quarter of 2021, foreign exchange revenue totaled $231 million, a decrease of 6% compared with the first quarter of 2020 and an increase of 24% compared with the fourth quarter of 2020. The decrease compared with the first quarter of 2020 primarily reflects lower volatility, partially offset by the positive impact of foreign currency hedging. The increase compared with the fourth quarter of 2020 primarily reflects higher volumes. 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 $51 million in the first quarter of 2021, $59 million in the first quarter of 2020 and $46 million in the fourth quarter of 2020. The decrease compared with the first quarter of 2020 primarily reflects lower underwriting fees. The increase compared with the fourth quarter of 2020 primarily reflects higher 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, 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 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.

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

Investment and other income (a)
(in millions)1Q214Q201Q20
Income (loss) from consolidated investment management funds$17 $41 $(38)
Seed capital gains (losses) (b)
3 22 (31)
Other trading (loss) revenue(7)(31)66 
Renewable energy investment (losses)(81)(27)(34)
Corporate/bank-owned life insurance33 43 36 
Other investments gains (losses) (c)
11 18 (7)
Disposal (losses) (61)— 
Expense reimbursements from joint venture23 22 21 
Other income10 16 34 
Total investment and other income$9 $43 $47 
(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.
(c)    Includes strategic equity, private equity and other investments.


Investment and other income was $9 million in the first quarter of 2021 compared with $47 million in the first quarter of 2020 and $43 million in the fourth quarter of 2020. The decrease compared with the first quarter of 2020 and fourth quarter of 2020 primarily reflects the $39 million impairment related to a renewable energy investment. The decrease compared with the first quarter of 2020 also reflects lower derivative and fixed income trading results and a one-time fee in Pershing recorded in the first quarter of 2020, partially offset by higher investment income
BNY Mellon 9


(from consolidated investment management funds, seed capital and other investments), net of hedging reflected in other trading revenue.

The decrease compared with the fourth quarter of 2020 also reflects lower investment income (from
consolidated investment management funds, seed capital, corporate/bank-owned life insurance and other investments), net of hedging reflected in other trading revenue, partially offset by losses on business sales recorded in the fourth quarter of 2020.


Net interest revenue

Net interest revenue
1Q21 vs.
(dollars in millions)1Q214Q201Q204Q201Q20
Net interest revenue – GAAP$655 $680 $814 (4)%(20)%
Add: Tax equivalent adjustment3 N/MN/M
Net interest revenue (FTE) – Non-GAAP (a)
$658 $683 $816 (4)%(19)%
Average interest-earning assets$397,297 $378,674 $323,936 5 %23 %
Net interest margin – GAAP0.66 %0.72 %1.01 %(6) bps(35) bps
Net interest margin (FTE) – Non-GAAP (a)
0.67 %0.72 %1.01 %(5) bps(34) 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 20% compared with the first quarter of 2020 and 4% compared with the fourth quarter of 2020. The decrease compared with the first quarter of 2020 primarily reflects lower interest rates on interest-earning assets, partially offset by the benefit of lower deposit and funding rates, higher deposit balances and a larger securities portfolio. The decrease compared with the fourth quarter of 2020 was primarily driven by lower interest rates on interest-earning assets, partially offset by the benefit of lower deposit and funding rates, and higher deposit and loan balances.

Net interest margin decreased 35 basis points compared with the first quarter of 2020 and 6 basis points compared with the fourth quarter of 2020. The decreases primarily reflect the factors mentioned above.

Average interest-earning assets increased 23% compared with the first quarter of 2020 and 5% compared with the fourth quarter of 2020. The increase compared with the first quarter of 2020 primarily reflects higher interest-bearing deposits
with the Federal Reserve and other central banks and a larger securities portfolio. The increase compared with the fourth quarter of 2020 primarily reflects higher interest-bearing deposits with the Federal Reserve and other central banks, interest-bearing deposits with banks (primarily foreign banks) and margin loans.

Average non-U.S. dollar deposits comprised approximately 25% of our average total deposits in the first quarter of 2021. Approximately 40% of the average non-U.S. dollar deposits in the first 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.
10 BNY Mellon


Average balances and interest ratesQuarter ended
March 31, 2021Dec. 31, 2020March 31, 2020
(dollars in millions; average rates annualized)Average
balance
InterestAverage
rates
Average
balance
InterestAverage
rates
Average balanceInterestAverage rates
Assets
Interest-earning assets:
Interest-bearing deposits with the Federal Reserve and other central banks$125,930 $(16)(0.05)%$112,274 $(13)(0.04)%$80,403 $80 0.39 %
Interest-bearing deposits with banks (primarily foreign banks)21,313 14 0.27 19,281 16 0.32 17,081 58 1.37 
Federal funds sold and securities purchased under resale agreements (a)
29,186 32 0.44 28,389 40 0.55 34,109 396 4.67 
Margin loans15,891 45 1.14 14,097 43 1.23 12,984 87 2.69 
Non-margin loans:
Domestic offices31,218 157 2.02 30,855 161 2.08 31,720 238 3.02 
Foreign offices9,680 28 1.18 9,776 32 1.31 11,170 71 2.55 
Total non-margin loans40,898 185 1.82 40,631 193 1.90 42,890 309 2.89 
Securities:
U.S. government obligations28,759 101 1.43 27,783 102 1.46 23,175 108 1.87 
U.S. government agency obligations77,623 291 1.50 79,712 311 1.56 69,046 400 2.32 
State and political subdivisions (b)
2,526 12 1.92 2,104 12 2.01 1,033 3.06 
Other securities (b)
47,030 58 0.50 46,280 56 0.48 36,375 86 0.95 
Total investment securities (b)
155,938 462 1.19 155,879 481 1.23 129,629 602 1.86 
Trading securities (b)
8,141 19 0.95 8,123 19 0.95 6,840 40 2.36 
Total securities (b)
164,079 481 1.18 164,002 500 1.22 136,469 642 1.88 
Total interest-earning assets (c)
$397,297 $741 0.75 %$378,674 $779 0.82 %$323,936 $1,572 1.95 %
Noninterest-earning assets63,082 58,814 61,342 
Total assets$460,379 $437,488 $385,278 
Liabilities
Interest-bearing liabilities:
Interest-bearing deposits:
Domestic offices$128,543 $(7)(0.02)%$119,012 $(5)(0.02)%$99,915 $170 0.69 %
Foreign offices116,572 (30)(0.10)112,306 (28)(0.10)97,717 70 0.29 
Total interest-bearing deposits245,115 (37)(0.06)231,318 (33)(0.06)197,632 240 0.49 
Federal funds purchased and securities sold under repurchase agreements (a)
15,288 (3)(0.07)14,452 0.01 13,919 275 7.96 
Trading liabilities2,227 3 0.53 2,408 0.72 1,626 1.61 
Other borrowed funds331 2 2.01 338 1.71 719 2.27 
Commercial paper   275 — 0.10 1,581 1.56 
Payables to customers and broker-dealers17,691 (1)(0.01)17,521 (1)(0.01)16,386 30 0.73 
Long-term debt26,199 119 1.81 25,704 123 1.88 27,231 194 2.83 
Total interest-bearing liabilities$306,851 $83 0.11 %$292,016 $96 0.13 %$259,094 $756 1.17 %
Total noninterest-bearing deposits83,429 75,840 60,577 
Other noninterest-bearing liabilities24,556 23,783 24,229 
Total liabilities414,836 391,639 343,900 
Temporary equity
Redeemable noncontrolling interests85 74 66 
Permanent equity
Total The Bank of New York Mellon Corporation shareholders’ equity45,261 45,539 41,206 
Noncontrolling interests197 236 106 
Total permanent equity45,458 45,775 41,312 
Total liabilities, temporary equity and permanent equity$460,379 $437,488 $385,278 
Net interest revenue (FTE) – Non-GAAP (c)
$658 $683 $816 
Net interest margin (FTE) – Non-GAAP (b)(c)
0.67 %0.72 %1.01 %
Less: Tax equivalent adjustment (b)
3 
Net interest revenue – GAAP$655 $680 $814 
Net interest margin – GAAP0.66 %0.72 %1.01 %
(a)    Includes the average impact of offsetting under enforceable netting agreements of approximately $37 billion for the first quarter of 2021, $41 billion for the fourth quarter of 2020 and $80 billion for the first 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 0.19% for the first quarter of 2021, 0.23% for the fourth quarter of 2020 and 1.39% for the first 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 first quarter of 2021, 0.00% for the fourth quarter of 2020 and 1.18% for the first 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)    Average rates were calculated on an FTE basis, at tax rates of approximately 21%.
(c)    See “Net interest revenue” on page 10 for the reconciliation of this Non-GAAP measure.
BNY Mellon 11


Noninterest expense

Noninterest expense
1Q21 vs.
(dollars in millions)1Q214Q201Q204Q201Q20
Staff$1,602 $1,554 $1,482 3 %8 %
Software and equipment362 359 326 1 11 
Professional, legal and other purchased services343 381 330 (10)4 
Sub-custodian and clearing124 116 105 7 18 
Net occupancy123 173 135 (29)(9)
Distribution and servicing74 75 91 (1)(19)
Bank assessment charges34 24 35 42 (3)
Amortization of intangible assets24 26 26 (8)(8)
Business development19 26 42 (27)(55)
Other146 191 140 (24)4 
Total noninterest expense$2,851 $2,925 $2,712 (3)%5 %
Full-time employees at period end48,000 48,500 47,900 (1)% %


Total noninterest expense increased 5% compared with the first quarter of 2020 and decreased 3% compared with the fourth quarter of 2020. The increase compared with the first quarter of 2020 primarily reflects higher staff expense, the unfavorable impact of a weaker U.S. dollar and higher technology-related expenses, partially offset by lower business development (travel and marketing) and distribution and servicing expenses. Staff expense includes the impact of an incentive reversal in the first quarter of 2020, the impact of a higher share price on share-based awards and increased expense for awards to retirement eligible employees. The technology-related expenses are included in staff, software and equipment, and professional, legal and other purchased services expenses. The decrease compared with the fourth quarter of 2020 primarily reflects lower severance, litigation and professional, legal and other purchased services expenses and real estate charges recorded in the fourth quarter of 2020, partially offset by higher other staff expense.

As we continue to manage overall expenses, we expect total reported noninterest expense to increase slightly for the full-year 2021 compared to 2020. This includes an unfavorable impact of foreign exchange rates which is expected to offset the impact of 2020 notable items, which were litigation expense, severance and real estate charges. Expenses could be impacted if foreign exchange rates change from March 31, 2021 levels, revenue-related or volume-related expenses increase or there are unexpected charges or expenses.

Income taxes

BNY Mellon recorded an income tax provision of $221 million (19.2% effective tax rate) in the first quarter of 2021, $265 million (21.6% effective tax rate) in the first quarter of 2020 and $148 million (16.4% effective tax rate) in the fourth quarter of 2020. For additional information, see Note 10 of the Notes to Consolidated Financial Statements.

12 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 organization changes in the first 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 March 31, 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 $0.03 to $0.06.

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 13


Investment Services business

(dollars in millions)1Q21 vs.
1Q214Q203Q202Q201Q204Q201Q20
Revenue:
Investment services fees:
Asset servicing fees (a)
$1,191 $1,130 $1,156 $1,164 $1,147 5 %4 %
Clearing services fees (b)
455 418 397 431 470 9 (3)
Issuer services fees245 257 295 277 263 (5)(7)
Treasury services fees157 156 152 144 149 1 5 
Total investment services fees2,048 1,961 2,000 2,016 2,029 4 1 
Foreign exchange revenue (c)
193 163 126 164 228 18 (15)
Other (c)(d)
104 111 120 159 179 (6)(42)
Total fee and other revenue2,345 2,235 2,246 2,339 2,436 5 (4)
Net interest revenue645 670 681 768 806 (4)(20)
Total revenue2,990 2,905 2,927 3,107 3,242 3 (8)
Provision for credit losses(79)31 (10)145 149 N/MN/M
Noninterest expense (excluding amortization of
intangible assets)
2,084 2,157 2,002 1,971 1,969 (3)6 
Amortization of intangible assets17 17 18 18 18  (6)
Total noninterest expense2,101 2,174 2,020 1,989 1,987 (3)6 
Income before income taxes$968 $700 $917 $973 $1,106 38 %(12)%
Pre-tax operating margin32 %24 %31 %31 %34 %
Securities lending revenue$41 $36 $37 $51 $46 14 %(11)%
Total revenue by line of business:
Asset Servicing$1,424 $1,357 $1,354 $1,463 $1,531 5 %(7)%
Pershing605 563 538 578 653 7 (7)
Issuer Services363 385 435 431 419 (6)(13)
Treasury Services317 325 323 340 339 (2)(6)
Clearance and Collateral Management281 275 277 295 300 2 (6)
Total revenue by line of business$2,990 $2,905 $2,927 $3,107 $3,242 3 %(8)%
Average balances:
Average loans$43,468 $41,437 $40,308 $43,113 $41,789 5 %4 %
Average deposits$315,088 $292,631 $263,621 $268,467 $242,187 8 %30 %
(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.
(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)    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.
14 BNY Mellon


Investment Services business metrics1Q21 vs.
(dollars in millions, unless otherwise noted)1Q214Q203Q202Q201Q204Q201Q20
AUC/A at period end (in trillions) (a)
$41.7 $41.1 $38.6 $37.3 $35.2 1 %18 %
Market value of securities on loan at period end (in billions) (b)
$445 $435 $378 $384 $389 2 %14 %
Pershing:
Net new assets (U.S. platform) (in billions) (c)
$28 $28 $12 $11 $31 N/MN/M
Average active clearing accounts (U.S. platform) (in thousands)
6,757 6,635 6,556 6,507 6,437 2 %5 %
Average long-term mutual fund assets (U.S. platform)$678,556 $630,086 $597,312 $547,579 $549,206 8 %24 %
Average investor margin loans (U.S. platform)$10,937 $10,097 $9,350 $9,235 $9,419 8 %16 %
Clearance and Collateral Management:
Average tri-party collateral management balances (in billions)
$3,638 $3,555 $3,417 $3,573 $3,724 2 %(2)%
(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 $1.6 trillion at March 31, 2021, $1.5 trillion at Dec. 31, 2020, $1.4 trillion at Sept. 30, 2020, $1.3 trillion at June 30, 2020 and $1.2 trillion at March 31, 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 $64 billion at March 31, 2021, $68 billion at Dec. 31, 2020, $62 billion at Sept. 30, 2020 and June 30, 2020 and $59 billion at March 31, 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 $41.7 trillion of AUC/A at March 31, 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 $4.7 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 15


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 $3.6 trillion serviced globally, including approximately $2.5 trillion of the U.S. tri-party repo market at March 31, 2021.

Review of financial results

AUC/A of $41.7 trillion increased 18% compared with March 31, 2020, primarily reflecting higher market values, net new business and the favorable impact of a weaker U.S. dollar. AUC/A consisted of 38% equity securities and 62% fixed-income securities at March 31, 2021 and 31% equity securities and 69% fixed-income securities at March 31, 2020.

Total revenue of $3.0 billion decreased 8% compared with the first quarter of 2020 and increased 3% compared with the fourth quarter of 2020. The drivers of total revenue by line of business are indicated below.

Asset Servicing revenue of $1.4 billion decreased 7% compared with the first quarter of 2020 and increased 5% compared with the fourth quarter of 2020. The decrease compared with the first quarter of 2020 primarily reflects lower interest rates and foreign exchange revenue and higher money market fee waivers, partially offset by higher client volumes and market values. The increase compared with the fourth quarter of 2020 primarily reflects higher client and foreign exchange volumes, partially offset by higher money market fee waivers.

Pershing revenue of $605 million decreased 7% compared with the first quarter of 2020 and increased 7% compared with the fourth quarter of 2020. The decrease compared with the first quarter of 2020
primarily reflects the impact of money market fee waivers and a one-time fee recorded in the first quarter of 2020, partially offset by higher market values and client volumes. The increase compared with the fourth quarter of 2020 primarily reflects higher clearance volumes and market values.

Issuer Services revenue of $363 million decreased 13% compared with the first quarter of 2020 and 6% compared with the fourth quarter of 2020. Both decreases primarily reflect lower interest rates and higher money market fee waivers in Corporate Trust and lower Depositary Receipts revenue.

Treasury Services revenue of $317 million decreased 6% compared with the first quarter of 2020 and 2% compared with the fourth quarter of 2020. Both decreases primarily reflect lower interest rates and higher money market fee waivers. The decrease compared with the first quarter of 2020 was partially offset by higher payment volumes and deposit levels.

Clearance and Collateral Management revenue of $281 million decreased 6% compared with the first quarter of 2020 and increased 2% compared with the fourth quarter of 2020. The decrease compared with the first quarter of 2020 primarily reflects lower interest rates and intraday credit fees. The increase compared with the fourth quarter of 2020 primarily reflects higher clearance volumes.

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 billion increased 6% compared with the first quarter of 2020 and decreased 3% compared with the fourth quarter of 2020. The increase compared with the first quarter of 2020 was primarily driven by technology-related expense, higher staff, volume-related and litigation expenses and the unfavorable impact of a weaker U.S. dollar. The decrease compared with the fourth quarter of 2020 primarily reflects lower litigation and severance expenses.
16 BNY Mellon


Investment and Wealth Management business

1Q21 vs.
(dollars in millions)1Q214Q203Q202Q201Q204Q201Q20
Revenue:
Investment management fees (a)
$850 $839 $828 $782 $812 1 %5 %
Performance fees40 45 50 N/M(20)
Investment management and performance fees (b)
890 884 835 787 862 1 3 
Distribution and servicing28 29 31 34 43 (3)(35)
Other (a)
25 27 17 (59)N/MN/M
Total fee and other revenue (a)
943 940 871 838 846  11 
Net interest revenue48 50 47 48 52 (4)(8)
Total revenue991 990 918 886 898  10 
Provision for credit losses4 (8)12 N/MN/M
Noninterest expense (excluding amortization of intangible assets)702 678 653 650 687 4 2 
Amortization of intangible assets7 (22)(13)
Total noninterest expense709 687 661 658 695 3 2 
Income before income taxes$278 $311 $245 $221 $194 (11)%43 %
Pre-tax operating margin28 %32 %27 %25 %22 %
Adjusted pre-tax operating marginNon-GAAP (c)
30 %34 %29 %28 %24 %
Total revenue by line of business:
Investment Management$698 $714 $641 $621 $620 (2)%13 %
Wealth Management293 276 277 265 278 6 5 
Total revenue by line of business$991 $990 $918 $886 $898  %10 %
Average balances:
Average loans$11,610 $11,497 $11,503 $11,791 $12,124 1 %(4)%
Average deposits$19,177 $18,144 $17,570 $17,491 $16,144 6 %19 %
(a)    Total fee and other revenue includes the impact of the consolidated investment management funds, net of noncontrolling interests. 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 1% (Non-GAAP) compared with the first quarter of 2020. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 42 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 42.
N/M – Not meaningful.


BNY Mellon 17


AUM trends1Q21 vs.
(dollars in billions)1Q214Q203Q202Q201Q204Q201Q20
AUM at period end, by product type: (a)
Equity$173 $170 $149 $141 $120 2 %44 %
Fixed income261 259 241 224 211 1 24 
Index419 393 350 333 274 7 53 
Liability-driven investments802 855 788 752 705 (6)14 
Multi-asset and alternative investments214 209 193 185 171 2 25 
Cash345 325 320 326 315 6 10 
Total AUM by product type$2,214 $2,211 $2,041 $1,961 $1,796  %23 %
Changes in AUM: (a)
Beginning balance of AUM$2,211 $2,041 $1,961 $1,796 $1,910 
Net inflows (outflows):
Long-term strategies:
Equity (2)(4)(2)(2)
Fixed income8 — 
Liability-driven investments8 15 14 (2)(5)
Multi-asset and alternative investments(2)— (3)— (1)
Total long-term active strategies inflows (outflows)14 18 — (8)
Index3 (3)(3)
Total long-term strategies inflows (outflows)17 15 (5)
Short-term strategies:
Cash19 (10)11 43 
Total net inflows (outflows)36 20 (5)20 38 
Net market impact(36)93 41 143 (91)
Net currency impact3 57 44 (61)
Ending balance of AUM$2,214 $2,211 $2,041 $1,961 $1,796  %23 %
Wealth Management client assets (b)
$292 $286 $265 $254 $236 2 %24 %
(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 23% compared with March 31, 2020 primarily reflecting higher market values, the favorable impact of a weaker U.S. dollar (principally versus the British pound) and net inflows.

Net long-term strategy inflows were $17 billion in the first quarter of 2021, driven by fixed income and liability-driven investments. Short-term strategy inflows were $19 billion in the first 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 $991 million increased 10% compared with the first quarter of 2020 and increased slightly compared with the fourth quarter of 2020.

Investment Management revenue of $698 million increased 13% compared with the first quarter of 2020 and decreased 2% compared with the fourth quarter of 2020. The increase compared with the first quarter of 2020 primarily reflects the impact of higher market values, equity investment gains, including seed capital, and the favorable impact of a weaker U.S. dollar, partially offset by the impact of money market fee waivers. The decrease compared with the fourth quarter of 2020 primarily reflects the impact of money market fee waivers and lower equity
18 BNY Mellon


investment gains, including seed capital, partially offset by higher market values and the favorable impact of a weaker U.S. dollar.

Wealth Management revenue of $293 million increased 5% compared with the first quarter of 2020 and 6% compared with the fourth quarter of 2020. Both increases reflect the impact of higher market values. The increase compared with the fourth quarter of 2020 also reflects a loss on a business sale recorded in the fourth quarter of 2020.

Revenue generated in the Investment and Wealth Management business included 38% from non-U.S.
sources in the first quarter of 2021, compared with 42% in the first quarter of 2020 and 41% in the fourth quarter of 2020.

Noninterest expense of $709 million increased 2% compared with the first quarter of 2020 and 3% compared with the fourth quarter of 2020. The increase compared with the first quarter of 2020 primarily reflects higher staff expense and the unfavorable impact of a weaker dollar, partially offset by lower distribution and servicing and other expenses. The increase compared with the fourth quarter of 2020 primarily reflects timing of other staff expense, partially offset by lower severance expense.

Other segment

(in millions)1Q214Q203Q202Q201Q20
Fee revenue (a)
$9 $11 $$10 $
Other revenue (a)
(36)(28)13 28 24 
Total fee and other revenue(27)(17)20 38 30 
Net interest (expense)(38)(40)(25)(36)(44)
Total revenue(65)(57)(5)(14)
Provision for credit losses(8)(8)(9)11 
Noninterest expense41 64 — 39 30 
(Loss) before income taxes$(98)$(113)$(12)$(28)$(55)
Average loans and leases$1,711 $1,794 $1,805 $1,815 $1,961 
(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.


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 offsets between fee and other revenue and net interest expense.

Other revenue decreased $60 million compared with the first quarter of 2020 and $8 million compared with the fourth quarter of 2020. Both decreases
primarily reflect an impairment of a renewable energy investment. The decrease compared with the fourth quarter of 2020 was partially offset by a loss on a sale of a business recorded in the fourth quarter of 2020.

Noninterest expense increased $11 million compared with the first quarter of 2020, primarily reflecting higher staff expense. Noninterest expense decreased $23 million compared with the fourth quarter of 2020, primarily reflecting real estate charges and severance expense both recorded in the fourth quarter of 2020, partially offset by higher other staff expense.

BNY Mellon 19


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 estimatesReference
Allowance for credit losses2020 Annual Report, pages 24-26, and “Allowance for credit losses.”
Fair value of financial instruments and derivatives2020 Annual Report, pages 26-28.
Goodwill and other intangibles2020 Annual Report, pages 28-29.
Litigation and regulatory contingencies“Legal proceedings” in Note 17 of the Notes to Consolidated Financial Statements.


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 March 31, 2021, total assets were $465 billion, compared with $470 billion at Dec. 31, 2020. The decrease in total assets was primarily driven by lower interest-bearing deposits with the Federal Reserve and other central banks. Deposits totaled $337 billion at March 31, 2021, compared with $342 billion at
Dec. 31, 2020. The decrease reflects lower interest-bearing deposits in non-U.S. offices, partially offset by higher noninterest-bearing deposits (principally U.S. offices). Total interest-bearing deposits as a percentage of total interest-earning assets were 60% at March 31, 2021 and 63% at Dec. 31, 2020.

At March 31, 2021, available funds totaled $184 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 March 31, 2021 and 42% at Dec. 31, 2020. For additional information on our available funds, see “Liquidity and dividends.”

Securities were $155.8 billion, or 34% of total assets, at March 31, 2021, compared with $156.4 billion, or 33% of total assets, at Dec. 31, 2020. The decrease primarily reflects lower agency residential mortgage-backed securities (“RMBS”), foreign government agency, and U.S. government agency securities and a decrease in unrealized pre-tax gain, partially offset by increases in U.S. treasury and sovereign debt/sovereign guaranteed securities. For additional information on our securities portfolio, see “Securities” and Note 3 of the Notes to Consolidated Financial Statements.

Loans were $60.7 billion, or 13% of total assets, at March 31, 2021, compared with $56.5 billion, or 12% of total assets, at Dec. 31, 2020. The increase was primarily driven by higher margin loans and overdrafts. For additional information on our loan portfolio, see “Loans” and Note 4 of the Notes to Consolidated Financial Statements.

Long-term debt totaled $25.4 billion at March 31, 2021 and $26.0 billion at Dec. 31, 2020. A redemption, maturity 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 $45.0 billion at March 31, 2021 from $45.8 billion at Dec. 31, 2020. For additional information, see “Capital.”

20 BNY Mellon


Country risk exposure

The following table presents BNY Mellon’s top 10 exposures by country (excluding the U.S.) as of March 31, 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.

Country risk exposure at March 31, 2021Interest-bearing depositsTotal exposure
(in billions)Central banksBanks
Lending (a)
Securities (b)
Other (c)
Top 10 country exposure:
United Kingdom (“UK”)$17.6 $0.4 $1.3 $3.5 $2.8 $25.6 
Germany17.6 0.7 0.7 4.3 0.5 23.8 
Japan18.4 1.0 — 0.6 0.1 20.1 
Belgium8.6 0.9 0.1 0.2 — 9.8 
Canada— 3.9 0.1 3.7 0.9 8.6 
Netherlands4.3 0.1 0.2 1.9 0.1 6.6 
Luxembourg2.4 0.1 0.2 0.1 2.3 5.1 
China— 2.5 1.7 — 0.1 4.3 
Ireland1.70.30.30.21.84.3
Australia— 2.5 0.3 0.9 0.3 4.0 
Total Top 10 country exposure$70.6 $12.4 $4.9 $15.4 $8.9 $112.2 (d)
Select country exposure:
Italy$0.1 $0.3 $— $1.8 $— $2.2 
Brazil— — 1.0 0.1 0.1 1.2 
Total select country exposure$0.1 $0.3 $1.0 $1.9 $0.1 $3.4 
(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 21


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

Securities portfolioDec. 31, 2020
1Q21
change in
unrealized
gain (loss)
March 31, 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
(dollars in millions)Fair
value
Amortized
cost (a)
Fair
value
AAA/
AA-
A+/
A-
Not
rated
Agency RMBS$61,740 $(742)$58,107 $58,831 101 %$724 14 %100 %— %— %— %— %— %
U.S. Treasury26,958 (280)30,412 30,595 101 183 55 100 — — — — — 
Sovereign debt/sovereign guaranteed (d)
13,452 (83)14,454 14,571 101 117 16 73 21 — — 
Agency commercial mortgage-backed securities (“MBS”)11,685 (175)11,484 11,730 102 246 33 100 — — — — — 
Supranational7,208 (31)7,469 7,505 100 36 56 100 — — — — — 
Foreign covered bonds (e)
6,725 (16)6,491 6,542 101 51 34 100 — — — — — 
U.S. government agencies6,577 (110)5,498 5,469 99 (29)25 100 — — — — — 
Collateralized loan obligations (“CLOs”)4,703 4,751 4,754 100 100 99 — — — — 
Non-agency commercial MBS2,992 (87)2,907 2,948 101 41 24 99 — — — — 
Foreign government agencies (f)
4,132 (27)2,678 2,697 101 19 14 92 — — — — 
State and political subdivisions2,324 (55)2,665 2,649 99 (16)— 74 — 17 — 
Other asset-backed securities (“ABS”)3,164 (18)2,617 2,628 100 11 19 100 — — — — — 
Non-agency RMBS (g)
2,387 (7)2,365 2,509 106 144 53 71 13 — 11 
Corporate bonds1,994 (100)2,289 2,238 98 (51)— 15 68 17 — — — 
Commercial paper/certificates of deposit (“CDs”)249 —   — — — — — — — — — 
Other— 1 1 100 — — — — — — — 100 
Total securities$156,291 (h)$(1,725)$154,188 $155,667 (h)101 %$1,479 (h)(i)30 %95 %%%— %— %— %
(a)    Amortized cost reflects historical impairments, and is net of the allowance for credit losses.
(b)    Includes the impact of hedges.
(c)    Represents ratings by Standard & Poor’s (“S&P”) or the equivalent.
(d)    Primarily consists of exposure to Germany, France, Italy, Spain, UK and Singapore.
(e)    Primarily consists of exposure to Canada, UK, Australia and Norway.
(f)    Primarily consists of exposure to the Netherlands, Canada, France and Sweden.
(g)    Includes RMBS that were included in the former Grantor Trust of $487 million at Dec. 31, 2020 and $451 million at March 31, 2021.
(h)    Includes net unrealized losses on derivatives hedging securities available-for-sale (including terminated hedges) of $1,428 million at Dec. 31, 2020 and $634 million at March 31, 2021.
(i)    Includes unrealized gains of $1,022 million at March 31, 2021 related to available-for-sale securities, net of hedges, and $457 million related to held-to-maturity securities.


The fair value of our securities portfolio, including related hedges, was $155.7 billion at March 31, 2021, compared with $156.3 billion at Dec. 31, 2020. The decrease primarily reflects lower agency RMBS, foreign government agency, and U.S. government agency securities and a decrease in unrealized pre-tax gain, partially offset by increases in U.S. treasury and sovereign debt/sovereign guaranteed securities.

At March 31, 2021, the securities portfolio had a net unrealized gain, including the impact of related hedges, of $1.5 billion, compared with $3.2 billion at Dec. 31, 2020. The decrease in the net unrealized gain was primarily driven by higher market interest rates.

The fair value of the available-for-sale securities totaled $107.2 billion at March 31, 2021, net of hedges, or 69% of the securities portfolio, net of hedges. The fair value of the held-to-maturity
securities totaled $48.5 billion at March 31, 2021, or 31% 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 $776 million at March 31, 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 March 31, 2021, 95% of the securities in our portfolio were rated AAA/AA-, unchanged compared with 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.
22 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)
(dollars in millions)1Q214Q203Q202Q201Q20
Amortizable purchase premium (net of discount) relating to securities:
Balance at period-end$2,195 $2,283 $2,050 $1,693 $1,555 
Estimated average life remaining at period-end (in years)
4.3 3.9 3.8 3.7 3.8 
Amortization$189 $181 $161 $125 $101 
Accretable discount related to the prior restructuring of the securities portfolio:
Balance at period-end$121 $130 $133 $145 $159 
Estimated average life remaining at period-end (in years)
5.9 5.6 5.7 5.8 6.1 
Accretion$12 $$$10 $11 
(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 – consolidatedMarch 31, 2021Dec. 31, 2020
(in billions)LoansUnfunded
commitments
Total
exposure
LoansUnfunded
commitments
Total
exposure
Non-margin loans:
Financial institutions$11.0 $32.8 $43.8 $11.2 $32.8 $44.0 
Commercial1.4 12.3 13.7 1.4 12.7 14.1 
Subtotal institutional12.4 45.1 57.5 12.6 45.5 58.1 
Wealth management loans and mortgages16.6 1.4 18.0 16.4 1.1 17.5 
Commercial real estate5.9 3.5 9.4 6.1 3.2 9.3 
Lease financings1.0  1.0 1.0 — 1.0 
Other residential mortgages0.4  0.4 0.4 — 0.4 
Overdrafts4.8  4.8 2.7 — 2.7 
Other1.7  1.7 1.9 — 1.9 
Subtotal non-margin loans42.8 50.0 92.8 41.1 49.8 90.9 
Margin loans17.9 0.1 18.0 15.4 0.1 15.5 
Total$60.7 $50.1 $110.8 $56.5 $49.9 $106.4 


At March 31, 2021, total lending-related exposure of $110.8 billion increased 4% compared with Dec. 31, 2020, primarily reflecting higher margin loans and overdrafts.
Our financial institutions and commercial portfolios comprise our largest concentrated risk. These portfolios comprised 52% of our total exposure at March 31, 2021 and 55% at Dec. 31, 2020. Additionally, most of our overdrafts relate to financial institutions.


BNY Mellon 23


Financial institutions

The financial institutions portfolio is shown below.

Financial institutions
portfolio exposure
(dollars in billions)
March 31, 2021Dec. 31, 2020
LoansUnfunded
commitments
Total
exposure
% Inv.
grade
% due
<1 yr.
LoansUnfunded
commitments
Total
exposure
Securities industry$2.3 $21.3 $23.6 98 %99 %$2.3 $21.6 $23.9 
Asset managers1.4 6.5 7.9 98 85 1.4 6.4 7.8 
Banks6.4 1.1 7.5 85 96 6.7 1.1 7.8 
Insurance0.1 3.0 3.1 100 19 0.1 2.8 2.9 
Government0.1 0.2 0.3 100 44 0.1 0.2 0.3 
Other0.7 0.7 1.4 96 65 0.6 0.7 1.3 
Total$11.0 $32.8 $43.8 96 %89 %$11.2 $32.8 $44.0 


The financial institutions portfolio exposure was $43.8 billion at March 31, 2021, a slight decrease compared with Dec. 31, 2020, primarily reflecting lower loans to the banks portfolio and lower unfunded commitments to the securities industry portfolio, partially offset by a higher unfunded commitments to the insurance portfolio.

Financial institution exposures are high-quality, with 96% of the exposures meeting the investment grade equivalent criteria of our internal credit rating classification at March 31, 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.

In addition, 73% 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 89% of the exposures expiring within one year. At both March 31, 2021 and Dec. 31, 2020, 18% of the exposure to financial institutions had an expiration within 90 days.

At March 31, 2021 and Dec. 31, 2020, the secured intraday credit provided to dealers in connection with their tri-party repo activity totaled $18.2 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.

Our banks exposure primarily relates to our global trade finance. These exposures are short-term in nature, with 96% due in less than one year. The investment grade percentage of our banks exposure was 85% at both March 31, 2021 and Dec. 31, 2020. Our non-investment grade exposures are primarily trade finance loans in Brazil.

The asset managers portfolio exposure is high-quality, with 98% of the exposures meeting our investment grade equivalent ratings criteria as of March 31, 2021. These exposures are generally short-term liquidity facilities, with the majority to regulated mutual funds.
24 BNY Mellon


Commercial

The commercial portfolio is presented below.

Commercial portfolio exposureMarch 31, 2021Dec. 31, 2020
(dollars in billions)LoansUnfunded
commitments
Total
exposure
% Inv.
grade
% due
<1 yr.
LoansUnfunded
commitments
Total
exposure
Manufacturing$0.4 $4.0 $4.4 95 %22 %$0.5 $4.1 $4.6 
Energy and utilities0.3 4.0 4.3 88 5 0.3 3.9 4.2 
Services and other0.7 3.5 4.2 94 40 0.6 3.8 4.4 
Media and telecom 0.8 0.8 92 4 — 0.9 0.9 
Total$1.4 $12.3 $13.7 92 %21 %$1.4 $12.7 $14.1 


The commercial portfolio exposure was $13.7 billion at March 31, 2021, a decrease of 3% from Dec. 31, 2020, primarily driven by lower exposure to the manufacturing and services and other portfolios.

We have $725 million of total direct exposure to the oil and gas industry at March 31, 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 66% investment grade at March 31, 2021 and 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
Quarter ended
March 31, 2021Dec. 31, 2020Sept. 30, 2020June 30, 2020March 31, 2020
Financial institutions96 %95 %95 %95 %96 %
Commercial92 %92 %93 %92 %94 %
Wealth management loans and mortgages

Our wealth management exposure was $18.0 billion at March 31, 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 March 31, 2021.

At March 31, 2021, the wealth management mortgage portfolio consisted of the following geographic concentrations: California – 22%; New York – 16%; Massachusetts – 10%; Florida – 8%; and other – 44%.

BNY Mellon 25


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 classMarch 31, 2021Dec. 31, 2020
Total
exposure
Percentage
secured (a)
Total
exposure
Percentage
secured (a)
(in billions)
Residential$3.2 86 %$3.3 86 %
Office2.7 76 2.8 75 
Retail0.9 58 1.0 52 
Mixed-use0.7 22 0.7 22 
Hotels0.6 20 0.6 20 
Healthcare0.5 22 0.4 25 
Other0.8 14 0.5 23 
Total commercial real estate$9.4 63 %$9.3 64 %
(a)    Represents the amount of secured exposure in each asset class.


Our commercial real estate exposure totaled $9.4 billion at March 31, 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 March 31, 2021, the unsecured portfolio consisted of real estate investment trusts (“REITs”) and real estate operating companies, which are both primarily investment grade.

At March 31, 2021, our commercial real estate portfolio consisted of the following concentrations: New York metro – 39%; REITs and real estate operating companies – 37%; and other – 24%.

Lease financings

The lease financings portfolio exposure totaled $1.0 billion at both March 31, 2021 and Dec. 31, 2020. At March 31, 2021, approximately 98% of leasing exposure was investment grade, or investment grade equivalent and consisted of exposures backed by well-diversified assets, primarily large-ticket transportation equipment and real estate. The largest component of our lease residual value exposure is
freight-related rail cars. Assets are both domestic and foreign-based, with primary concentrations in the U.S. and Germany.

Other residential mortgages

The other residential mortgages portfolio primarily consists of 1-4 family residential mortgage loans and totaled $364 million at March 31, 2021 and $389 million at Dec. 31, 2020. Included in this portfolio at March 31, 2021 were $63 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 $18.0 billion at March 31, 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 $6.1 billion at March 31, 2021 and $4.6 billion at Dec. 31, 2020 related to a term loan program that offers fully collateralized loans to broker-dealers.
26 BNY Mellon


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 activityMarch 31, 2021Dec. 31, 2020March 31, 2020
(dollars in millions)
Beginning balance of allowance for credit losses$501 $486 $216 
Impact of adopting ASU 2016-13N/AN/A(55)(a)
Provision for credit losses(83)15 169 
Net recoveries (charge-offs):
Loans:
Other residential mortgages2 — — 
Wealth management loans and mortgages(1)— — 
Other financial instruments — (1)
Net recoveries (charge-offs)1 — (1)
Ending balance of allowance for credit losses$419 $501 $329 
Allowance for loan losses$327 $358 $140 
Allowance for lending-related commitments73 121 148 
Allowance for financial instruments (b)
19 22 41 
Total allowance for credit losses$419 $501 $329 
Non-margin loans$42,839 $41,053 $49,253 
Margin loans17,893 15,416 13,115 
Total loans$60,732 $56,469 $62,368 
Allowance for loan losses as a percentage of total loans0.54 %0.63 %0.22 %
Allowance for loan losses as a percentage of non-margin loans0.76 0.87 0.28 
Allowance for loan losses and lending-related commitments as a percentage of total loans0.66 0.85 0.46 
Allowance for loan losses and lending-related commitments as a percentage of non-margin loans0.93 1.17 0.58 
(a)    In 2020, we adopted new accounting guidance included in ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments. Includes the reclassification of credit-related reserves on accounts receivable of $4 million.
(b)    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.
N/A – Not applicable.


The provision for credit losses was a benefit of $83 million in the first quarter of 2021, primarily driven by an improved macroeconomic forecast.

We had $17.9 billion of secured margin loans on our balance sheet at March 31, 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 27


Allocation of allowance for loan losses and lending-related commitmentsMarch 31, 2021Dec. 31, 2020March 31, 2020
Commercial real estate91 %89 %72 %
Commercial2 
Financial institutions2 
Other residential mortgages2 
Wealth management (a)
2 
Lease financings1 
Total100 %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 $123 million, and if each credit were rated one grade worse, the quantitative allowance would have increased by $139 million. Our multi-scenario based macroeconomic forecast used in determining the March 31, 2021 allowance for credit losses consisted of three scenarios. The baseline scenario reflects moderate and flat GDP growth and unemployment recovery but with declining commercial real estate prices that begin to recover later in 2021. The upside scenario reflects faster GDP growth and unemployment recovery and less severe commercial real estate declines than the baseline. The downside scenario contemplates negative GDP growth and increasing unemployment throughout 2021 and steeper declines in commercial real estate prices than the baseline. Consistent with the fourth quarter of 2020, 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 March 31, 2021, if we had
applied 100% weighting to the downside scenario, the quantitative allowance for credit losses would have been approximately $190 million higher.

Nonperforming assets

The table below presents our nonperforming assets.

Nonperforming assetsMarch 31, 2021Dec. 31, 2020
(dollars in millions)
Nonperforming loans:
Other residential mortgages$56 $57 
Wealth management loans and mortgages28 30 
Commercial real estate26 
Total nonperforming loans110 88 
Other assets owned2 
Total nonperforming assets$112 $89 
Nonperforming assets ratio0.18 %0.16 %
Nonperforming assets ratio, excluding margin loans0.26 0.22 
Allowance for loan losses/nonperforming loans297.3 406.8 
Allowance for loan losses/nonperforming assets292.0 402.2 
Total allowance for credit losses/nonperforming loans363.6 544.3 
Total allowance for credit losses/nonperforming assets357.1 538.2 


Nonperforming assets increased $23 million compared with Dec. 31, 2020, primarily reflecting an increase in nonperforming loans in the commercial real estate portfolio.

Lost interest

Interest revenue would have increased by $1 million in the first quarter of 2021, fourth quarter of 2020 and first quarter 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 “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 of our 2020 Annual Report for additional details on this guidance. Financial institutions may account for eligible loan modifications either under the CARES
28 BNY Mellon


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 $6 million in the first quarter of 2021, less than $1 million in the first quarter of 2020 and $16 million in the fourth quarter of 2020. 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 $14 million of commercial real estate loans in the first quarter of 2021 by providing payment modifications and an extension of maturity. We did not identify any of the modifications as TDRs. At March 31, 2021, the unpaid principal balance of the loans modified under the CARES Act or Interagency Guidance was $91 million.

Deposits

Total deposits were $336.8 billion at March 31, 2021, a decrease of 1%, compared with $341.5 billion at Dec. 31, 2020. The decrease primarily reflects lower interest-bearing deposits in non-U.S. offices, partially offset by higher noninterest-bearing deposits (principally U.S. offices).

Noninterest-bearing deposits were $95.3 billion at March 31, 2021 compared with $83.8 billion at Dec. 31, 2020. Interest-bearing deposits were $241.5 billion at March 31, 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
(dollars in millions)March 31, 2021Dec. 31, 2020March 31, 2020
Maximum month-end balance during the quarter$15,863 $15,479 $16,644 
Average daily balance (a)
$15,288 $14,452 $13,919 
Weighted-average rate during the quarter (a)
(0.07)%0.01 %7.96 %
Ending balance (b)
$15,150 $11,305 $13,128 
Weighted-average rate at period end (b)
(0.12)%(0.03)%3.93 %
(a)    Includes the average impact of offsetting under enforceable netting agreements of $37,377 million in the first quarter of 2021, $40,641 million in the fourth quarter of 2020 and $80,216 million in the first quarter of 2020. On a Non-GAAP basis, excluding the impact of offsetting, the weighted-average rates would have been (0.02)% for the first quarter of 2021, 0.00% for the fourth quarter of 2020 and 1.18% for the first 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 $33,544 million at March 31, 2021, $59,561 million at Dec. 31, 2020 and $80,203 million at March 31, 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 March 31, 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 29


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

Payables to customers and broker-dealers
Quarter ended
(dollars in millions)March 31, 2021Dec. 31, 2020March 31, 2020
Maximum month-end balance during the quarter$25,124 $25,085 $24,016 
Average daily balance (a)
$24,772 $23,589 $20,629 
Weighted-average rate during the quarter (a)
(0.01)%(0.01)%0.73 %
Ending balance$23,827 $25,085 $24,016 
Weighted-average rate at period end(0.01)%(0.01)%0.28 %
(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 $17,691 million in the first quarter of 2021, $17,521 million in the fourth quarter of 2020 and $16,386 million in the first 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 paperQuarter ended
(dollars in millions)March 31, 2021Dec. 31, 2020March 31, 2020
Maximum month-end balance during the quarter$ $450 $3,379 
Average daily balance$ $275 $1,581 
Weighted-average rate during the quarter %0.10 %1.56 %
Ending balance$ $— $1,121 
Weighted-average rate at period end %— %1.57 %


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 March 31, 2020 primarily reflects the continuation of elevated deposit levels.

Information related to other borrowed funds is presented below.

Other borrowed fundsQuarter ended
(dollars in millions)March 31, 2021Dec. 31, 2020March 31, 2020
Maximum month-end balance during the quarter$348 $505 $1,544 
Average daily balance$331 $338 $719 
Weighted-average rate during the quarter2.01 %1.71 %2.27 %
Ending balance$348 $350 $1,544 
Weighted-average rate at period end2.05 %0.79 %2.01 %


Other borrowed funds primarily include overdrafts of sub-custodian account balances in our Investment Services businesses, finance lease liabilities, borrowings under lines of credit by our Pershing subsidiaries and borrowings from the Federal Home Loan Bank. 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 Dec. 31, 2020 and March 31, 2020. Overdrafts typically relate to timing differences for settlements. The decreases in other borrowed funds compared with March 31, 2020 and Dec. 31, 2020 reflect lower overdrafts of sub-custodian account balances in our Investment Services businesses. The decrease in other borrowed funds compared with March 31, 2020 also reflects a decline in borrowings from the Federal Reserve Bank of Boston under the MMLF program and the Federal Home Loan Bank.

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.

30 BNY Mellon


Changes in economic conditions or exposure to credit, market, operational, legal and reputational 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 March 31, 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 fundsMarch 31, 2021Dec. 31, 2020Average
(dollars in millions)1Q214Q201Q20
Cash and due from banks$5,991 $6,252 $5,720 $4,993 $4,595 
Interest-bearing deposits with the Federal Reserve and other central banks125,524 141,775 125,930 112,274 80,403 
Interest-bearing deposits with banks23,763 17,300 21,313 19,281 17,081 
Federal funds sold and securities purchased under resale agreements28,263 30,907 29,186 28,389 34,109 
Total available funds$183,541 $196,234 $182,149 $164,937 $136,188 
Total available funds as a percentage of total assets39 %42 %40 %38 %35 %


Total available funds were $183.5 billion at March 31, 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.

Average non-core sources of funds, such as federal funds purchased and securities sold under repurchase agreements, trading liabilities, commercial paper and other borrowed funds, were $17.8 billion for both the first three months of 2021 and the first three months of 2020.

Average foreign deposits, primarily from our European-based Investment Services business, were $116.6 billion for the first three months of 2021, compared with $97.7 billion for the first three months of 2020. Average interest-bearing domestic deposits were $128.5 billion for the first three months of 2021 and $99.9 billion for the first three months of 2020.
The increase primarily reflects increased client activity.

Average payables to customers and broker-dealers were $17.7 billion for the first three months of 2021 and $16.4 billion for the first three months of 2020. Payables to customers and broker-dealers are driven by customer trading activity and market volatility.

Average long-term debt was $26.2 billion for the first three months of 2021 and $27.2 billion for the first three months of 2020.

Average noninterest-bearing deposits increased to $83.4 billion for the first three months of 2021 from $60.6 billion for the first three months of 2020, primarily reflecting client activity.

A significant reduction in our Investment Services business would reduce our access to deposits. See
BNY Mellon 31


“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 March 31, 2021
  Moody’sS&PFitchDBRS
Parent: 
Long-term senior debtA1AAA-AA
Subordinated debtA2A-AAA (low)
Preferred stockBaa1BBBBBB+A
Outlook – ParentStableStableStableStable
The Bank of New York Mellon:
Long-term senior debtAa2AA-AAAA (high)
Subordinated debtNRANRNR
Long-term depositsAa1AA-AA+AA (high)
Short-term depositsP1A-1+F1+R-1 (high)
Commercial paperP1A-1+F1+R-1 (high)
BNY Mellon, N.A.:
Long-term senior debtAa2(a)AA-
AA 
(a)AA (high)
Long-term depositsAa1AA-AA+AA (high)
Short-term depositsP1A-1+F1+R-1 (high)
Outlook – BanksStableStableStableStable
(a)    Represents senior debt issuer default rating.
NR – Not rated.


Long-term debt totaled $25.4 billion at March 31, 2021 and $26.0 billion at Dec. 31, 2020. A redemption of $1.0 billion, a maturity of $500 million and a decrease in the fair value of hedged long-term debt were partially offset by issuances of $1.2 billion. The Parent has $2.75 billion of long-term debt that will mature in the remainder of 2021.

In April 2021, the Parent redeemed $1.25 billion of the outstanding 2.050% senior notes due May 2021 at par plus accrued and unpaid interest.

In April 2021, the Parent issued $600 million of fixed rate senior notes maturing in 2024 at an annual interest rate of 0.50%, $500 million of fixed rate senior notes maturing in 2028 at an annual interest rate of 1.65% and $400 million of floating rate senior notes maturing in 2024 at an annual interest rate of the compounded secured overnight financing rate (“SOFR”) plus 26 basis points.

The Bank of New York Mellon may issue notes and CDs. At March 31, 2021 and Dec. 31, 2020, $30 million of notes were outstanding. There were no CDs outstanding at March 31, 2021 and $100 million 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 March 31, 2021 and Dec. 31, 2020. The average commercial paper outstanding was $1.6 billion for the first three months of 2020.

Subsequent to March 31, 2021, our U.S. bank subsidiaries could declare dividends to the Parent of approximately $1.9 billion, without the need for a regulatory waiver. In addition, at March 31, 2021, non-bank subsidiaries of the Parent had liquid assets of approximately $3.6 billion. Restrictions on our ability to obtain funds from our subsidiaries are
32 BNY Mellon


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 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 borrowings under these lines in the first quarter of 2021. Pershing Limited, an indirect UK-based subsidiary of BNY Mellon, has two separate uncommitted lines of credit amounting to $267 million in aggregate. Average borrowings under these lines were $71 million, in aggregate, in the first 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 83% of total revenue in the first quarter of 2021, and the dividend capacity of our banking subsidiaries. Our double leverage ratio was 115.7% at March 31, 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 February 2021, a quarterly dividend of $0.31 per common share was paid to common shareholders. Our common stock dividend payout ratio was 32% for the first quarter of 2021.

In the first quarter of 2021, we repurchased 16.8 million common shares at an average price of $41.68 per common share, for a total cost of $699 million.

See “Recent regulatory developments” for additional information on the modified restrictions on common stock repurchases and common stock dividends applicable to the first and second quarters of 2021. 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.

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 March 31, 2021, and the average HQLA and average LCR for the first quarter of 2021.

Consolidated HQLA and LCRMarch 31, 2021
(dollars in billions)
Securities (a)
$120 
Cash (b)
126 
Total consolidated HQLA (c)
$246 
Total consolidated HQLA – average (c)
$243 
Average LCR110 %
(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 $182 billion at March 31, 2021 and averaged $176 billion for the first 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 first quarter of 2021.
BNY Mellon 33


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 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 $3.2 billion in the three months ended March 31, 2021, compared with $1.7 billion in the three months ended March 31, 2020. In the three months ended March 31, 2021 cash flows used for operations primarily resulted from changes in trading assets and liabilities and change in accruals and other, net, partially offset by earnings. In the three months ended March 31, 2020, cash flows used for operations primarily resulted from changes in accruals and other, net, partially offset by earnings and changes in trading assets and liabilities.

Net cash provided by investing activities was $4.7 billion in the three months ended March 31, 2021,
compared with net cash used for investing activities of $78.6 billion in the three months ended March 31, 2020. In the three months ended March 31, 2021, net cash provided by investing activities primarily reflects changes in interest-bearing deposits with the Federal Reserve and other central banks, partially offset by changes in interest-bearing deposits with banks and net change in loans. In the three months ended March 31, 2020, net cash used for investing activities primarily reflects changes in interest-bearing deposits with the Federal Reserve and other central banks and net changes in securities, loans and interest-bearing deposits with banks.

Net cash used for financing activities was $1.5 billion in the three months ended March 31, 2021, compared with net cash provided by financing activities of $82.9 billion in the three months ended March 31, 2020. In the three months ended March 31, 2021, net cash used for financing activities primarily reflects changes in deposits, repayments of long-term debt and changes in payables to customers and broker-dealers, partially offset by changes in federal funds purchased and securities sold under repurchased agreements. In the three months ended March 31, 2020, net cash provided by financing activities primarily reflects changes in deposits.

Capital

Capital data
(dollars in millions, except per share amounts; common shares in thousands)
March 31, 2021Dec. 31, 2020
Average common equity to average assets8.8 %9.3 %
At period end:
BNY Mellon shareholders’ equity to total assets ratio9.7 %9.8 %
BNY Mellon common shareholders’ equity to total assets ratio8.7 %8.8 %
Total BNY Mellon shareholders’ equity$44,954 $45,801 
Total BNY Mellon common shareholders’ equity$40,413 $41,260 
BNY Mellon tangible common shareholders’ equity – Non-GAAP (a)
$21,779 $22,563 
Book value per common share$46.16 $46.53 
Tangible book value per common share – Non-GAAP (a)
$24.88 $25.44 
Closing stock price per common share$47.29 $42.44 
Market capitalization$41,401 $37,634 
Common shares outstanding875,481 886,764 
Cash dividends per common share$0.31 $0.31 
Common dividend payout ratio32 %39 %
Common dividend yield2.7 %2.9 %
(a)    See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 42 for a reconciliation of GAAP to Non-GAAP.


34 BNY Mellon


The Bank of New York Mellon Corporation total shareholders’ equity decreased to $45.0 billion at March 31, 2021 from $45.8 billion at Dec. 31, 2020. The decrease primarily reflects unrealized losses on securities available-for-sale, common stock repurchases and dividends, partially offset by earnings.

The unrealized gain (after-tax) on our available-for-sale securities portfolio, net of hedges, included in accumulated other comprehensive income was $776 million at March 31, 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.

In the first quarter of 2021, we repurchased 16.8 million common shares at an average price of $41.68 per common share for a total of $699 million under the current program.

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. Under the modified restrictions, we are authorized to conduct open market common stock repurchases in an amount up to approximately $600 million in the second quarter of 2021. See “Recent regulatory developments” for additional information on the restrictions on capital distributions.
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 March 31, 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 35


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

Consolidated and largest bank subsidiary regulatory capital ratiosMarch 31, 2021Dec. 31, 2020
Well capitalizedMinimum requiredCapital
ratios
Capital
ratios
(a)
Consolidated regulatory capital ratios: (b)
Advanced Approaches:
CET1 ratioN/A(c)8.5 %12.6 %13.1 %
Tier 1 capital ratio%10 15.3 15.8 
Total capital ratio10 12 16.1 16.7 
Standardized Approach:
CET1 ratioN/A(c)8.5 %12.6 %13.4 %
Tier 1 capital ratio%10 15.2 16.1 
Total capital ratio10 12 16.2 17.1 
Tier 1 leverage ratioN/A(c)5.8 6.3 
SLR (d)(e)
N/A(c)8.1 8.6 
The Bank of New York Mellon regulatory capital ratios: (b)
Advanced Approaches:
CET1 ratio6.5 %%16.8 %17.1 %
Tier 1 capital ratio8.5 16.8 17.1 
Total capital ratio10 10.5 17.0 17.3 
Tier 1 leverage ratio6.1 6.4 
SLR (d)
8.2 8.5 
(a)    Minimum requirements for March 31, 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.
(c)    The Federal Reserve’s regulations do not establish well capitalized thresholds for these measures for BHCs.
(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. The temporary exclusion ceased to apply beginning April 1, 2021.


Our CET1 ratio was 12.6% at March 31, 2021 determined under the Standardized Approach and was 13.1% at Dec. 31, 2020 under the Advanced Approaches. The decrease primarily reflects unrealized losses on securities available-for-sale, capital deployed through common stock repurchases and dividends and an increase in RWAs under the Standardized Approach, partially offset by capital generated through earnings.

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

36 BNY Mellon


The following table presents our capital components and RWAs.

Capital components and risk-weighted assetsMarch 31, 2021Dec. 31, 2020
(in millions)
CET1:
Common shareholders’ equity$40,413 $41,260 
Adjustments for:
Goodwill and intangible assets (a)
(18,634)(18,697)
Net pension fund assets(321)(319)
Equity method investments(307)(306)
Deferred tax assets(53)(54)
Other(8)(9)
Total CET121,090 21,875 
Other Tier 1 capital:
Preferred stock4,541 4,541 
Other(97)(106)
Total Tier 1 capital$25,534 $26,310 
Tier 2 capital:
Subordinated debt$1,248 $1,248 
Allowance for credit losses409 490 
Other(1)(10)
Total Tier 2 capital – Standardized Approach1,656 1,728 
Excess of expected credit losses127 247 
Less: Allowance for credit losses409 490 
Total Tier 2 capital – Advanced Approaches$1,374 $1,485 
Total capital:
Standardized Approach$27,190 $28,038 
Advanced Approaches$26,908 $27,795 
Risk-weighted assets:
Standardized Approach$167,510 $163,848 
Advanced Approaches:
Credit Risk$99,398 $98,262 
Market Risk3,599 4,226 
Operational Risk64,038 63,938 
Total Advanced Approaches$167,035 $166,426 
Average assets for Tier 1 leverage ratio$440,968 $417,982 
Total leverage exposure for SLR$314,334 $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 generation1Q21
(in millions)
CET1 – Beginning of period$21,875 
Net income applicable to common shareholders of The Bank of New York Mellon Corporation858 
Goodwill and intangible assets, net of related deferred tax liabilities63 
Gross CET1 generated921 
Capital deployed:
Common stock dividends (a)
(277)
Common stock repurchases(699)
Total capital deployed(976)
Other comprehensive income:
Unrealized loss on assets available-for-sale(703)
Foreign currency translation(150)
Unrealized loss on cash flow hedges(3)
Defined benefit plans22 
Total other comprehensive income(834)
Additional paid-in capital (b)
105 
Other additions (deductions):
Net pension fund assets(2)
Embedded goodwill(1)
Deferred tax assets1 
Other1 
Total other deductions(1)
Net CET1 deployed(785)
CET1 – End of period$21,090 
(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 March 31, 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 March 31, 2021
 Increase or decrease of
(in basis points)$100 million
in common 
equity
$1 billion in RWA, quarterly average assets or total leverage exposure
CET1:
Standardized Approach6bps8bps
Advanced Approaches68
Tier 1 capital:
Standardized Approach69
Advanced Approaches69
Total capital:
Standardized Approach610
Advanced Approaches610
Tier 1 leverage21
SLR33

BNY Mellon 37


Effective April 1, 2020 and lasting 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. See “Recent regulatory developments” for additional information.

Stress capital buffer

In August 2020, 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. The SCB replaces the current 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.

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” and “Recent regulatory developments.”

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 ratiosRegulatory 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.
(c)    Buffer to be met using only Tier 1 capital.


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 ratiosMarch 31, 2021
Minimum
required
Minimum ratios
with buffers
Ratios
Eligible external TLAC:
As a percentage of RWA18.0 %21.5 %27.5 %
As a percentage of total leverage exposure7.5 %9.5 %14.6 %
Eligible external LTD:
As a percentage of RWA7.5 %N/A11.4 %
As a percentage of total leverage exposure4.5 %N/A6.1 %
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.
38 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)
1Q21March 31, 2021
(in millions)AverageMinimumMaximum
Interest rate$2.1 $1.6 $2.7 $2.5 
Foreign exchange2.7 2.2 3.9 3.0 
Equity0.1 0.1 0.9 0.1 
Credit1.8 1.3 2.8 2.2 
Diversification(3.5)N/MN/M(4.3)
Overall portfolio3.2 2.5 4.9 3.5 

VaR (a)
4Q20Dec. 31, 2020
(in millions)AverageMinimumMaximum
Interest rate$2.2 $1.8 $3.0 $1.8 
Foreign exchange2.5 1.9 3.6 3.0 
Equity0.1 — 0.7 0.7 
Credit1.8 1.2 2.7 2.1 
Diversification(3.1)N/MN/M(3.7)
Overall portfolio3.5 2.3 4.7 3.9 

VaR (a)
1Q20March 31, 2020
(in millions)AverageMinimumMaximum
Interest rate$4.9 $3.2 $11.3 $5.1 
Foreign exchange3.1 1.7 6.3 4.5 
Equity1.4 0.8 2.3 0.9 
Credit3.4 1.2 12.1 9.8 
Diversification(6.4)N/MN/M(9.9)
Overall portfolio6.4 3.5 14.3 10.4 
(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.

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
BNY Mellon 39


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 first quarter of 2021, interest rate risk generated 31% of average gross VaR, foreign exchange risk generated 40% of average gross VaR, equity risk generated 2% of average gross VaR and credit risk generated 27% of average gross VaR. During the first quarter of 2021, our daily trading loss did not exceed our calculated VaR amount of the overall portfolio.

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)
Quarter ended
(dollars in millions)March 31, 2021Dec. 31, 2020Sept. 30, 2020June 30, 2020March 31, 2020
Revenue range:Number of days
Less than $(2.5) — 
$(2.5) – $06 12 10 12 
$0 – $2.517 11 23 17 19 
$2.5 – $5.021 26 16 15 19 
More than $5.017 11 12 14 21 
(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 $16.9 billion at March 31, 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 $4.6 billion at March 31, 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 March 31, 2021, our OTC derivative assets, including those in hedging relationships, of $3.5 billion included a credit valuation adjustment (“CVA”) deduction of $24 million. Our OTC derivative liabilities, including those in hedging relationships, of $2.9 billion included a debit valuation adjustment (“DVA”) of $2 million related to our own credit spread. Net of hedges, the CVA increased $1 million and the DVA decreased by less than $1 million in the first quarter of 2021, which decreased other trading revenue by $1 million. The net impact increased other trading revenue by less than $1 million in the fourth quarter of 2020 and increased other trading revenue by $4 million in the first 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)
Quarter ended
March 31, 2021Dec. 31, 2020Sept. 30, 2020June 30, 2020March 31, 2020
Rating:
AAA to AA-45 %46 %54 %56 %56 %
A+ to A-26 28 20 18 24 
BBB+ to BBB-22 18 17 18 14 
BB+ and
lower (b)
7 
Total100 %100 %100 %100 %100 %
(a)    Represents credit rating agency equivalent of internal credit ratings.
(b)    Non-investment grade.


40 BNY Mellon


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. The model incorporates management’s assumptions regarding interest rates, market 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 the table below, we use 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. However, during the months of December 2020 and March 2020, we experienced a significant increase in deposits and a corresponding increase in central bank placements. To normalize the analysis, we used the fourth and first quarter 2020 averages, respectively, for these balances. 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 also assumes that no management actions will be taken to mitigate the effects of interest rate changes.

The following table shows net interest revenue sensitivity for BNY Mellon.

Estimated changes in net interest revenue
(in millions)
March 31, 2021Dec. 31, 2020March 31, 2020
Up 200 bps parallel rate ramp vs. baseline (a)
$1,024 $826 $557 
Up 100 bps parallel rate ramp vs. baseline (a)
551 449 334 
Down 100 bps parallel rate ramp vs. baseline (a)
384 411 100 
Long-term up 50 bps, short-term unchanged (b)
120 125 166 
Long-term down 50 bps, short-term unchanged (b)
(116)(144)(158)
(a)    In the parallel 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.


The increases in the scenarios compared with Dec. 31, 2020 and March 31, 2020 are primarily driven by increased deposits.

While the net interest revenue sensitivity scenarios 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 rising rate environments, such as the up 100 bps and up 200 bps parallel ramps. Noninterest-bearing deposits are particularly sensitive to changes in short-term rates.

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 in the table above by approximately $30 million and approximately $65 million, respectively. The impact would be smaller if the runoff was assumed to be a mixture of interest-bearing and noninterest-bearing deposits.

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.

BNY Mellon 41


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 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 is additional useful information because it presents the level of tangible assets in relation to shares of common stock outstanding.

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 reconciliation1Q214Q201Q20
(dollars in millions)
Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP$858 $702 $944 
Add:  Amortization of intangible assets24 26 26 
Less: Tax impact of amortization of intangible assets6 
Adjusted net income applicable to common shareholders of The Bank of New York Mellon Corporation, excluding amortization of intangible assets – Non-GAAP$876 $722 $964 
Average common shareholders’ equity$40,720 $40,712 $37,664 
Less: Average goodwill17,494 17,411 17,311 
Average intangible assets3,000 3,019 3,089 
Add: Deferred tax liability – tax deductible goodwill1,153 1,144 1,109 
  Deferred tax liability – intangible assets665 667 666 
Average tangible common shareholders’ equity – Non-GAAP$22,044 $22,093 $19,039 
Return on common shareholders’ equity – GAAP
8.5 %6.9 %10.1 %
Return on tangible common shareholders’ equity – Non-GAAP16.1 %13.0 %20.4 %


42 BNY Mellon


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 reconciliationMarch 31, 2021Dec. 31, 2020March 31, 2020
(dollars in millions, except per share amounts and unless otherwise noted)
BNY Mellon shareholders’ equity at period end – GAAP$44,954 $45,801 $41,145 
Less: Preferred stock4,541 4,541 3,542 
BNY Mellon common shareholders’ equity at period end – GAAP40,413 41,260 37,603 
Less: Goodwill17,469 17,496 17,240 
Intangible assets2,983 3,012 3,070 
Add: Deferred tax liability – tax deductible goodwill1,153 1,144 1,109 
Deferred tax liability – intangible assets665 667 666 
BNY Mellon tangible common shareholders’ equity at period end – Non-GAAP$21,779 $22,563 $19,068 
Period-end common shares outstanding (in thousands)
875,481 886,764 885,443 
Book value per common share – GAAP$46.16 $46.53 $42.47 
Tangible book value per common share – Non-GAAP$24.88 $25.44 $21.53 


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

Constant currency reconciliation – Consolidated1Q211Q201Q21 vs.
(dollars in millions)1Q20
Investment management and performance fees – GAAP$890 $862 3 %
Impact of changes in foreign currency exchange rates 23 
Adjusted investment management and performance fees – Non-GAAP$890 $885 1 %


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
1Q21 vs.
(dollars in millions)1Q211Q201Q20
Investment management and performance fees GAAP
$890 $862 3 %
Impact of changes in foreign currency exchange rates— 23 
Adjusted investment management and performance fees – Non-GAAP$890 $885 1 %


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
(dollars in millions)1Q214Q203Q202Q201Q20
Income before income taxes – GAAP$278 $311 $245 $221 $194 
Total revenue – GAAP$991 $990 $918 $886 $898 
Less: Distribution and servicing expense
75 76 85 86 91 
Adjusted total revenue, net of distribution and servicing expense – Non-GAAP$916 $914 $833 $800 $807 
Pre-tax operating margin – GAAP (a)
28 %32 %27 %25 %22 %
Adjusted pre-tax operating margin, net of distribution and servicing expense – Non-GAAP (a)
30 %34 %29 %28 %24 %
(a)    Income before taxes divided by total revenue.

BNY Mellon 43


Recent regulatory developments

For a summary of additional regulatory matters relevant to our operations, see “Supervision and Regulation” in our 2020 Annual Report. The following discussions summarize certain regulatory, legislative and other developments that may affect BNY Mellon.

End of Temporary Restrictions on Capital Distributions

On March 25, 2021, the Federal Reserve announced that the temporary restrictions on the dividends and share repurchases of certain BHCs that are subject to CCAR currently in effect will end after June 30, 2021 for the CCAR BHCs that remain above all of their minimum risk-based capital requirements after completion of the current round of stress tests. For the first quarter of 2021, CCAR BHCs, such as BNY Mellon, were generally authorized to repurchase stock in connection with employee benefit plans; pay dividends and make share repurchases that, in the aggregate, do not exceed an amount equal to the firm’s average net income for the four preceding quarters, provided that common stock dividends would not be increased; and redeem and make scheduled payments on additional Tier 1 and Tier 2 capital instruments. The Federal Reserve has announced that these restrictions will remain in place for the second quarter of 2021. The Federal Reserve has also announced that after June 30, 2021, the CCAR BHCs that are no longer subject to these temporary restrictions will continue to be subject to the normal constraints under the SCB framework. For additional information regarding the SCB framework, capital planning and stress testing, see “Supervision and Regulation – Capital Planning and Stress Testing” in our 2020 Annual Report.

Expiration of Certain Temporary Relief Measures and Facilities

On March 19, 2021, the Federal Reserve announced that the temporary exclusions of on-balance sheet amounts of U.S. Treasury securities from the SLR calculations for certain BHCs and depository institutions which were put in place by the U.S. banking agencies in 2020 expired as scheduled on March 31, 2021. 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.

Also on March 31, 2021, the MMLF program, which was designed to provide indirect liquidity to money market mutual funds, expired as scheduled. For additional information regarding these and other temporary measures, see “Supervision and Regulation – Pandemic-Related Measures” in our 2020 Annual Report.

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 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 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.

44 BNY Mellon


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 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.
BNY Mellon 45

The Bank of New York Mellon Corporation (and its subsidiaries)
Consolidated Income Statement (unaudited)

Quarter ended
March 31, 2021Dec. 31, 2020March 31, 2020
(in millions)
Fee and other revenue
Investment services fees:
Asset servicing fees$1,199 $1,138 $1,159 
Clearing services fees455 418 470 
Issuer services fees245 257 263 
Treasury services fees157 156 149 
Total investment services fees2,056 1,969 2,041 
Investment management and performance fees890 884 862 
Foreign exchange revenue (a)
231 187 245 
Financing-related fees51 46 59 
Distribution and servicing29 28 31 
Total fee revenue (a)
3,257 3,114 3,238 
Investment and other income (a)
9 43 47 
Net securities gains0 
Total other revenue (a)
9 49 56 
Total fee and other revenue (a)
3,266 3,163 3,294 
Net interest revenue
Interest revenue738 776 1,570 
Interest expense83 96 756 
Net interest revenue655 680 814 
Total revenue3,921 3,843 4,108 
Provision for credit losses(83)15 169 
Noninterest expense
Staff1,602 1,554 1,482 
Software and equipment362 359 326 
Professional, legal and other purchased services343 381 330 
Sub-custodian and clearing124 116 105 
Net occupancy123 173 135 
Distribution and servicing74 75 91 
Bank assessment charges34 24 35 
Amortization of intangible assets24 26 26 
Business development19 26 42 
Other146 191 140 
Total noninterest expense2,851 2,925 2,712 
Income
Income before income taxes1,153 903 1,227 
Provision for income taxes221 148 265 
Net income932 755 962 
Net (income) loss attributable to noncontrolling interests related to consolidated investment management funds(5)(5)18 
Net income applicable to shareholders of The Bank of New York Mellon Corporation927 750 980 
Preferred stock dividends(69)(48)(36)
Net income applicable to common shareholders of The Bank of New York Mellon Corporation$858 $702 $944 
(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.
46 BNY Mellon

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 calculationQuarter ended
(in millions)March 31, 2021Dec. 31, 2020March 31, 2020
Net income applicable to common shareholders of The Bank of New York Mellon Corporation$858 $702 $944 
Less: Earnings allocated to participating securities1 
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$857 $701 $941 


Average common shares and equivalents outstanding of The Bank of New York Mellon CorporationQuarter ended
(in thousands)March 31, 2021Dec. 31, 2020March 31, 2020
Basic882,558 889,928 894,122 
Common stock equivalents3,824 2,654 3,941 
Less: Participating securities(727)(736)(1,374)
Diluted885,655 891,846 896,689 
Anti-dilutive securities (a)
4,133 1,493 2,584 
(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 CorporationQuarter ended
(in dollars)March 31, 2021Dec. 31, 2020March 31, 2020
Basic$0.97 $0.79 $1.05 
Diluted$0.97 $0.79 $1.05 


See accompanying unaudited Notes to Consolidated Financial Statements.
BNY Mellon 47

The Bank of New York Mellon Corporation (and its subsidiaries)
Consolidated Comprehensive Income Statement (unaudited)

Quarter ended
(in millions)March 31, 2021Dec. 31, 2020March 31, 2020
Net income$932 $755 $962 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments(150)431 (369)
Unrealized gain (loss) on assets available-for-sale:
Unrealized (loss) gain arising during the period(703)33 183 
Reclassification adjustment0 (5)(7)
Total unrealized (loss) gain on assets available-for-sale(703)28 176 
Defined benefit plans:
Net (loss) arising during the period0 (107)
Amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost22 20 18 
Total defined benefit plans22 (87)18 
Net unrealized (loss) gain on cash flow hedges(3)(11)
Total other comprehensive (loss) income, net of tax (a)
(834)376 (186)
Total comprehensive income98 1,131 776 
Net (income) loss attributable to noncontrolling interests(5)(5)18 
Other comprehensive (income) loss attributable to noncontrolling interests0 (2)
Comprehensive income applicable to shareholders of The Bank of New York Mellon Corporation$93 $1,124 $796 
(a)    Other comprehensive (loss) income attributable to The Bank of New York Mellon Corporation shareholders was $(834) million for the quarter ended March 31, 2021, $374 million for the quarter ended Dec. 31, 2020 and $(184) million for the quarter ended March 31, 2020.


See accompanying unaudited Notes to Consolidated Financial Statements.
48 BNY Mellon

The Bank of New York Mellon Corporation (and its subsidiaries)
Consolidated Balance Sheet (unaudited)

March 31, 2021Dec. 31, 2020
(dollars in millions, except per share amounts)
Assets
Cash and due from banks, net of allowance for credit losses of $3 and $4$5,991 $6,252 
Interest-bearing deposits with the Federal Reserve and other central banks125,524 141,775 
Interest-bearing deposits with banks, net of allowance for credit losses of $2 and $3 (includes restricted of $3,379 and $3,167)23,763 17,300 
Federal funds sold and securities purchased under resale agreements28,263 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 $48,489 and $49,224)48,032 47,946 
Available-for-sale, at fair value (amortized cost of $106,156 and $105,141, net of allowance for credit losses of $10 and $11)107,812 108,495 
Total securities155,844 156,441 
Trading assets16,884 15,272 
Loans60,732 56,469 
Allowance for credit losses(327)(358)
Net loans60,405 56,111 
Premises and equipment3,521 3,602 
Accrued interest receivable485 510 
Goodwill17,469 17,496 
Intangible assets2,983 3,012 
Other assets, net of allowance for credit losses on accounts receivable of $4 and $4 (includes $1,159 and $1,009, at fair value) (a)
23,852 20,955 
Total assets$464,984 $469,633 
Liabilities
Deposits:
Noninterest-bearing (principally U.S. offices)$95,306 $83,854 
Interest-bearing deposits in U.S. offices132,558 133,479 
Interest-bearing deposits in non-U.S. offices108,904 124,212 
Total deposits336,768 341,545 
Federal funds purchased and securities sold under repurchase agreements15,150 11,305 
Trading liabilities4,566 6,031 
Payables to customers and broker-dealers23,827 25,085 
Other borrowed funds348 350 
Accrued taxes and other expenses
4,916 5,696 
Other liabilities (including allowance for credit losses on lending-related commitments of $73 and $121, also includes $441 and $1,110, at fair value) (a)
8,656 7,517 
Long-term debt (includes $400 and $400, at fair value)25,350 25,984 
Total liabilities419,581 423,513 
Temporary equity
Redeemable noncontrolling interests187 176 
Permanent equity
Preferred stock – par value $0.01 per share; authorized 100,000,000 shares; issued 45,826 and 45,826 shares4,541 4,541 
Common stock – par value $0.01 per share; authorized 3,500,000,000 shares; issued 1,387,789,904 and 1,382,306,327 shares14 14 
Additional paid-in capital27,928 27,823 
Retained earnings34,822 34,241 
Accumulated other comprehensive loss, net of tax(1,819)(985)
Less: Treasury stock of 512,309,057 and 495,542,796 common shares, at cost(20,532)(19,833)
Total The Bank of New York Mellon Corporation shareholders’ equity44,954 45,801 
Nonredeemable noncontrolling interests of consolidated investment management funds262 143 
Total permanent equity45,216 45,944 
Total liabilities, temporary equity and permanent equity$464,984 $469,633 
(a)    In the first quarter of 2021, we reclassified the assets and liabilities of consolidated investment management funds, at fair value, to other assets and other liabilities, respectively. Prior periods have been reclassified. See Note 1 of the Notes to Consolidated Financial Statements for additional information.


See accompanying unaudited Notes to Consolidated Financial Statements.
BNY Mellon 49

The Bank of New York Mellon Corporation (and its subsidiaries)
Consolidated Statement of Cash Flows (unaudited)

Three months ended March 31,
(in millions)20212020
Operating activities
Net income$932 $962 
Net (income) attributable to noncontrolling interests(5)18 
Net income applicable to shareholders of The Bank of New York Mellon Corporation927 980 
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Provision for credit losses (a)
(83)169 
Pension plan contributions(7)(6)
Depreciation and amortization466 354 
Deferred tax (benefit)275 (300)
Net securities (gains)0 (9)
Change in trading assets and liabilities(3,074)2,419 
Change in accruals and other, net(1,678)(5,292)
Net cash (used for) operating activities(3,174)(1,685)
Investing activities
Change in interest-bearing deposits with banks(6,385)(6,066)
Change in interest-bearing deposits with the Federal Reserve and other central banks13,940 (52,370)
Purchases of securities held-to-maturity(3,425)(5,151)
Paydowns of securities held-to-maturity2,969 1,503 
Maturities of securities held-to-maturity161 1,310 
Purchases of securities available-for-sale(12,247)(22,222)
Sales of securities available-for-sale3,209 3,107 
Paydowns of securities available-for-sale3,498 2,042 
Maturities of securities available-for-sale3,878 4,727 
Net change in loans(4,254)(7,626)
Sales of loans and other real estate1 
Change in federal funds sold and securities purchased under resale agreements2,630 2,739 
Net change in seed capital investments(38)18 
Purchases of premises and equipment/capitalized software(220)(264)
Dispositions, net of cash8 
Other, net953 (349)
Net cash provided by (used for) investing activities4,678 (78,601)
Financing activities
Change in deposits(2,922)79,678 
Change in federal funds purchased and securities sold under repurchase agreements3,936 1,775 
Change in payables to customers and broker-dealers(1,229)5,329 
Change in other borrowed funds5 961 
Change in commercial paper0 (2,838)
Net proceeds from the issuance of long-term debt1,196 998 
Repayments of long-term debt(1,500)(1,750)
Proceeds from the exercise of stock options26 30 
Issuance of common stock3 
Treasury stock acquired(699)(985)
Common cash dividends paid(277)(282)
Preferred cash dividends paid(69)(36)
Other, net10 (3)
Net cash (used for) provided by financing activities(1,520)82,880 
Effect of exchange rate changes on cash(33)(56)
Change in cash and due from banks and restricted cash
Change in cash and due from banks and restricted cash(49)2,538 
Cash and due from banks and restricted cash at beginning of period9,419 7,267 
Cash and due from banks and restricted cash at end of period$9,370 $9,805 
Cash and due from banks and restricted cash
Cash and due from banks at end of period (unrestricted cash)$5,991 $5,091 
Restricted cash at end of period3,379 4,714 
Cash and due from banks and restricted cash at end of period$9,370 $9,805 
Supplemental disclosures
Interest paid$126 $851 
Income taxes paid122 185 
Income taxes refunded4 10 


See accompanying unaudited Notes to Consolidated Financial Statements.
50 BNY Mellon

The Bank of New York Mellon Corporation (and its subsidiaries)
Consolidated Statement of Changes in Equity (unaudited)

The Bank of New York Mellon Corporation shareholdersNonredeemable
noncontrolling
interests of
consolidated
investment
management
funds
Total
permanent
equity
Redeemable
non-
controlling
interests/
temporary
equity
(in millions, except per
share amount)
Preferred stockCommon
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 income    (834)  (834) 
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.


The Bank of New York Mellon Corporation shareholdersNonredeemable
noncontrolling
interests of
consolidated
investment
management
funds
Total
permanent
equity
Redeemable
non-
controlling
interests/
temporary
equity
(in millions, except per
share amount)
Preferred stockCommon
stock
Additional
paid-in
capital
Retained
earnings
Accumulated other comprehensive (loss), net
of tax
Treasury
stock
Balance at Sept. 30, 2020$4,532 $14 $27,741 $33,821 $(1,359)$(19,832)$251 $45,168 (a)$179 
Shares issued to shareholders of noncontrolling interests— — — — — — — — 25 
Redemption of subsidiary shares from noncontrolling interests— — — — — — — — (14)
Other net changes in noncontrolling interests— — 17 — — — (113)(96)(16)
Net income— — — 750 — — 755 — 
Other comprehensive income— — — — 370 — — 370 
Dividends:
Common stock at $0.31 per
  share
— — — (278)— — — (278)— 
Preferred stock— — — (33)— — — (33)— 
Repurchase of common stock— — — — — (1)— (1)— 
Common stock issued under employee benefit plans— — — — — — — 
Preferred stock redemption(583)— — — — — — (583)— 
Preferred stock issued577 — — — — — — 577 — 
Stock awards and options exercised— — 60 — — — — 60 — 
Amortization of preferred stock discount15 — — (15)— — — — 
Other— — — (4)— — — 
Balance at Dec. 31, 2020$4,541 $14 $27,823 $34,241 $(985)$(19,833)$143 $45,944 (a)$176 
(a)Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $40,385 million at Sept. 30, 2020 and $41,260 million at Dec. 31, 2020.
BNY Mellon 51

The Bank of New York Mellon Corporation (and its subsidiaries)
Consolidated Statement of Changes in Equity (unaudited) (continued) 

The Bank of New York Mellon Corporation shareholdersNonredeemable
noncontrolling
interests of
consolidated
investment
management
funds
Total
permanent
equity
Redeemable
non-
controlling
interests/
temporary
equity
(in millions, except per
share amount)
Preferred stockCommon
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, 20193,542 14 27,515 31,939 (2,643)(18,844)102 41,625 143 
Shares issued to shareholders of noncontrolling interests— — — — — — — — 17 
Redemption of subsidiary shares from noncontrolling interests— — — — — — — — (16)
Other net changes in noncontrolling interests— — (5)— — — 10 (2)
Net income— — — 980 — — (18)962 — 
Other comprehensive income— — — — (184)— — (184)(2)
Dividends:
Common stock at $0.31 per
  share
— — — (282)— — — (282)— 
Preferred stock— — — (36)— — — (36)— 
Repurchase of common stock— — — — — (985)— (985)— 
Common stock issued under employee benefit plans— — — — — — — 
Stock awards and options exercised— — 125 — — — — 125 — 
Balance at March 31, 2020$3,542 $14 $27,644 $32,601 $(2,827)$(19,829)$94 $41,239 (a)$140 
(a)    Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $37,941 million at Dec. 31, 2019 and $37,603 million at March 31, 2020.


See accompanying unaudited Notes to Consolidated Financial Statements.
52 BNY Mellon

Notes to Consolidated Financial Statements
Note 1–Basis of presentation

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 to its subsidiaries.

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 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 reclassificationsQuarter ended
Dec. 31, 2020March 31, 2020
(in millions)
Before reclassifications
Foreign exchange and other trading revenue$167 $319 
Total fee revenue$3,116 $3,323 
Investment and other income$22 $11 
Income (loss) from consolidated investment management funds$41 $(38)
After reclassifications
Foreign exchange revenue$187 $245 
Total fee revenue$3,114 $3,238 
Investment and other income$43 $47 


The table below summarizes the effects of the reclassifications on the consolidated balance sheet.

Consolidated balance sheet reclassificationsDec. 31, 2020
(in millions)
Before reclassifications
Other assets$20,468 
Assets of consolidated investment management funds, at fair value$487 
Other liabilities$7,514 
Liabilities of consolidated investment management funds, at fair value$
After reclassifications
Other assets$20,955 
Other liabilities$7,517 


BNY Mellon 53

Notes to Consolidated Financial Statements (continued)
The table below summarizes the effects of the reclassifications on the business segments.

Business segment reclassifications
(in millions)4Q203Q202Q201Q20
Investment Services business
Before reclassifications
Foreign exchange and other trading revenue$180 $146 $178 $261 
Other revenue$94 $100 $145 $146 
After reclassifications
Foreign exchange revenue$163 $126 $164 $228 
Other revenue$111 $120 $159 $179 
Other segment
Before reclassifications
Fee (loss) revenue$(23)$11 $29 $21 
Net securities gains$$$$
After reclassifications
Fee revenue$11 $$10 $
Other (loss) revenue$(28)$13 $28 $24 


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, one of which closed in the first quarter of 2021. The remaining transaction is expected to close in the second quarter of 2021. BNY Mellon recorded a total after-tax loss of $34 million on these transactions in the fourth quarter of 2020.

Note 3–Securities

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

Securities at March 31, 2021Gross
unrealized
Fair
value
Amortized cost
(in millions)GainsLosses
Available-for-sale:
U.S. Treasury$27,474 $730 $276 $27,928 
Agency residential mortgage-backed securities (“RMBS”)19,501 405 60 19,846 
Sovereign debt/sovereign guaranteed13,453 141 34 13,560 
Agency commercial mortgage-backed securities (“MBS”)8,797 446 27 9,216 
Supranational7,414 44 20 7,438 
Foreign covered bonds6,491 55 6,542 
Collateralized loan obligations (“CLOs”)4,751 4,754 
Non-agency commercial MBS2,907 80 28 2,959 
U.S. government agencies2,823 113 17 2,919 
Foreign government agencies2,678 24 2,698 
State and political subdivisions2,650 19 35 2,634 
Other asset-backed securities (“ABS”)2,617 20 2,628 
Non-agency RMBS (a)
2,310 156 15 2,451 
Corporate bonds2,289 32 83 2,238 
Other debt securities
Total securities available-for-sale (b)(c)
$106,156 $2,272 $616 $107,812 
Held-to-maturity:
Agency RMBS$38,606 $728 $346 $38,988 
U.S. Treasury2,938 72 3,010 
Agency commercial MBS2,687 69 30 2,726 
U.S. government agencies2,675 68 2,608 
Sovereign debt/sovereign guaranteed1,001 30 1,029 
Non-agency RMBS55 58 
Supranational55 55 
State and political subdivisions15 15 
Total securities held-to-maturity$48,032 $904 $447 $48,489 
Total securities$154,188 $3,176 $1,063 $156,301 
(a)    Includes $451 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 $10 million. The allowance for credit loss primarily relates to CLOs.
(c)    Includes gross unrealized gains of $72 million and gross unrealized losses of $39 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.
54 BNY Mellon

Notes to Consolidated Financial Statements (continued)
Securities at Dec. 31, 2020Gross
unrealized
Amortized costFair
value
(in millions)GainsLosses
Available-for-sale:
U.S. Treasury$23,557 $1,358 $21 $24,894 
Agency RMBS21,919 479 51 22,347 
Sovereign debt/sovereign guaranteed12,202 190 12,391 
Agency commercial MBS8,605 625 9,228 
Supranational7,086 75 7,160 
Foreign covered bonds6,658 68 6,725 
CLOs4,706 10 4,703 
Foreign government agencies4,086 49 4,135 
U.S. government agencies3,680 174 3,853 
Other ABS3,135 32 3,164 
Non-agency commercial MBS2,864 159 3,017 
Non-agency RMBS (a)
2,178 157 2,326 
State and political subdivisions2,270 39 2,308 
Corporate bonds1,945 50 1,994 
Commercial paper/certificates of deposit (“CDs”)249 249 
Other debt securities
Total securities available-for-sale (b)(c)
$105,141 $3,462 $108 $108,495 
Held-to-maturity:
Agency RMBS$38,355 $1,055 $14 $39,396 
U.S. Treasury2,938 90 3,028 
U.S. government agencies2,816 2,814 
Agency commercial MBS2,659 105 2,762 
Sovereign debt/sovereign guaranteed1,050 42 1,092 
Non-agency RMBS58 61 
Supranational55 55 
State and political subdivisions15 16 
Total securities held-to-maturity$47,946 $1,300 $22 $49,224 
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)
(in millions)1Q214Q201Q20
Realized gross gains$12 $$12 
Realized gross losses(12)(2)(3)
Total net securities gains$0 $$


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

Net securities gains (losses)
(in millions)1Q214Q201Q20
U.S. Treasury$(4)$$
Other4 
Total net securities gains$0 $$


Allowance for credit losses – Securities

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

Credit quality indicators – Securities

At March 31, 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, $39 million of the unrealized losses at March 31, 2021 and $44 million at Dec. 31, 2020 reflected in the available-for-sale sections of the tables below relate to certain securities (primarily agency RMBS) that were transferred in prior periods from available-for-sale to held-to-maturity. The unrealized losses will be amortized into net 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.

BNY Mellon 55

Notes to Consolidated Financial Statements (continued)
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 March 31, 2021 (a)
Less than 12 months12 months or moreTotal
Fair
value
Unrealized
losses
Fair
value
Unrealized
losses
Fair
value
Unrealized
losses
(in millions)
Agency RMBS$1,452 $22 $604 $38 $2,056 $60 
U.S. Treasury9,032 276 9,032 276 
Sovereign debt/sovereign guaranteed3,751 34 190