0001390777-19-000050.txt : 20190227 0001390777-19-000050.hdr.sgml : 20190227 20190227065413 ACCESSION NUMBER: 0001390777-19-000050 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 181 CONFORMED PERIOD OF REPORT: 20181231 FILED AS OF DATE: 20190227 DATE AS OF CHANGE: 20190227 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Bank of New York Mellon Corp CENTRAL INDEX KEY: 0001390777 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 132614959 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-35651 FILM NUMBER: 19635755 BUSINESS ADDRESS: STREET 1: 240 GREENWICH STREET CITY: NEW YORK STATE: NY ZIP: 10286 BUSINESS PHONE: 212-495-1784 MAIL ADDRESS: STREET 1: 240 GREENWICH STREET CITY: NEW YORK STATE: NY ZIP: 10286 FORMER COMPANY: FORMER CONFORMED NAME: Bank of New York Mellon CORP DATE OF NAME CHANGE: 20070221 10-K 1 form10-k_4q18.htm FORM 10-K Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

FORM 10-K

[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Fiscal Year Ended December 31, 2018
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File No. 001-35651

THE BANK OF NEW YORK MELLON CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
13-2614959
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Stock, $0.01 par value
New York Stock Exchange
Depositary Shares, each representing 1/4,000th of a share of Series C Noncumulative Perpetual Preferred Stock
New York Stock Exchange
6.244% Fixed-to-Floating Rate Normal Preferred Capital Securities of Mellon Capital IV (Fully and unconditionally guaranteed by The Bank of New York Mellon Corporation)
New York Stock Exchange
 
 
Securities registered pursuant to Section 12(g) of the Act:
Title of class
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þ

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 þ 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer    þ    Accelerated filer ¨
Non-accelerated filer    ¨    Smaller reporting company ¨
Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No þ

As of June 30, 2018, the aggregate market value of the registrant’s common stock, $0.01 par value per share, held by nonaffiliates of the registrant was $53,885,206,227.

As of January 31, 2019, 954,548,741 shares of the registrant’s common stock, $0.01 par value per share, were outstanding.


DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference in the following parts of this Form 10-K:
The Bank of New York Mellon Corporation 2019 Proxy Statement-Part III
The Bank of New York Mellon Corporation 2018 Annual Report to Shareholders-Parts I, II and IV
 



Available Information

This Form 10-K filed by The Bank of New York Mellon Corporation (“BNY Mellon” or the “Company”) with the Securities and Exchange Commission (the “SEC”) contains the Exhibits listed on the Index to Exhibits beginning on page 15, including those portions of BNY Mellon’s 2018 Annual Report to Shareholders (the “Annual Report”), which are incorporated herein by reference. The Annual Report and BNY Mellon’s Proxy Statement for its 2019 Annual Meeting (the “Proxy”) will be available on our website at www.bnymellon.com. We also make available on our website, free of charge, the following materials:

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 soon as reasonably practicable after we electronically file such materials with, or furnish them to, the SEC pursuant to Section 13(a) of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), and any proxy statement mailed by us in connection with the solicitation of proxies;
Financial statements and footnotes prepared using eXtensible Business Reporting Language (“XBRL”);
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.

The contents of BNY Mellon’s website or any other websites referenced herein are not part of this Form 10-K.
 
Forward-looking Statements

In this Form 10-K, and other public disclosures of BNY Mellon, words such as “estimate,” “forecast,” “project,” “anticipate,” “likely,” “target,” “expect,” “intend,” “continue,” “seek,” “believe,” “plan,” “goal,” “could,” “should,” “would,” “may,” “might,” “will,” “strategy,” “synergies,” “opportunities,” “trends,” “future” and words of similar meaning signify forward-looking statements. Some statements in this document are forward-looking. These include all statements about the usefulness of Non-GAAP measures, the future results of BNY Mellon, our businesses, financial, liquidity and capital condition, results of operations, liquidity, risk and capital management and processes, goals, strategies, outlook, objectives, expectations (including those regarding our performance results, expenses, nonperforming assets, seasonality in our businesses, impacts of currency fluctuations, impacts of trends on our businesses, regulatory, technology, market, economic or accounting developments, legal proceedings and other contingencies), effective tax rate, estimates (including those regarding expenses, losses inherent in our credit portfolios, capital ratios and the tax benefit related to U.S. tax legislation), intentions (including those regarding our capital returns and investment in technology), targets, opportunities, growth and initiatives.

These forward-looking statements, and other forward-looking statements contained in other public disclosures of BNY Mellon (including those incorporated into this Form 10-K), are based on assumptions that involve risks and uncertainties and that are subject to change based on various important factors (some of which are beyond BNY Mellon’s control), including those factors described in the Annual Report under “Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) – Risk Factors.” Actual results may differ materially from those expressed or implied as a result of a number of factors, including those discussed in the “Risk Factors” section of our Annual Report, such as:

a communications or technology disruption or failure that results in a loss of information, delays our ability to access information or impacts our ability to provide services to our clients may materially adversely affect our business, financial condition and results of operations;

BNY Mellon 1



a cybersecurity incident, or a failure to protect our computer systems, networks and information and our clients’ information against cybersecurity threats, could result in the theft, loss, unauthorized access to, disclosure, use or alteration of information, system or network failures, or loss of access to information; any such incident or failure could adversely impact our ability to conduct our businesses, damage our reputation and cause losses;
our business may be materially adversely affected by operational risk;
our risk management framework may not be effective in mitigating risk and reducing the potential for losses;
we are subject to extensive government rulemaking, regulation and supervision; these rules and regulations have, and in the future may, compel us to change how we manage our businesses, which could have a material adverse effect on our business, financial condition and results of operations; in addition, these rules and regulations have increased our compliance and operational risk and costs;
regulatory or enforcement actions or litigation could materially adversely affect our results of operations or harm our businesses or reputation;
our businesses may be negatively affected by adverse events, publicity, government scrutiny or other reputational harm;
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;
a failure or circumvention of our controls and procedures could have a material adverse effect on our business, reputation, results of operations and financial condition;
the application of our Title I preferred resolution strategy or resolution under the Title II orderly liquidation authority could adversely affect the Parent’s liquidity and financial condition and the Parent’s security holders;
if our resolution plan is determined not to be credible or not to facilitate an orderly resolution under the U.S. Bankruptcy Code, our business, reputation, results of operations and financial condition could be materially negatively impacted;
acts of terrorism, impacts from climate change, natural disasters, pandemics, global conflicts and
 
other geopolitical events may have a negative impact on our business and operations;
we are dependent on fee-based business for a substantial majority of our revenue and our fee-based revenues could be adversely affected by slowing in market activity, weak financial markets, underperformance and/or negative trends in savings rates or in investment preferences;
weakness and volatility in financial markets and the economy generally may materially adversely affect our business, results of operations and financial condition;
transitions away from, or changes in the calculation of, LIBOR and other benchmark rates could adversely impact our business and results of operations;
the United Kingdom’s referendum decision to leave the EU has had and may continue to have negative effects on global economic conditions, global financial markets, and our business and results of operations;
changes in interest rates and yield curves could have a material adverse effect on our profitability;
we may experience write-downs of securities that we own and other losses related to volatile and illiquid market conditions, reducing our earnings and impacting our financial condition;
our FX revenue may be adversely affected by decreases in market volatility and the cross-border investment activity of our clients;
the failure or perceived weakness of any of our significant counterparties, many of whom are major financial institutions and sovereign entities, and our assumption of credit and counterparty risk, could expose us to loss and adversely affect our business;
our business, financial condition and results of operations could be adversely affected if we do not effectively manage our liquidity;
we could incur losses if our allowance for credit losses, including loan and lending-related commitments reserves, is inadequate;
any material reduction in our credit ratings or the credit ratings of our principal bank subsidiaries, The Bank of New York Mellon or BNY Mellon, N.A., could increase the cost of funding and borrowing to us and our rated subsidiaries and have a material adverse effect on our results of operations and financial condition and on the value of the securities we issue;

2 BNY Mellon



new lines of business, new products and services or transformational or strategic project initiatives may subject us to additional risks, and the failure to implement these initiatives could affect our results of operations;
we are subject to competition in all aspects of our business, which could negatively affect our ability to maintain or increase our profitability;
our business may be adversely affected if we are unable to attract and retain employees;
our strategic transactions present risks and uncertainties and could have an adverse effect on our business, results of operations and financial condition;
tax law changes or challenges to our tax positions with respect to historical transactions may adversely affect our net income, effective tax rate and our overall results of operations and financial condition;
our ability to return capital to shareholders is subject to the discretion of our Board of Directors and may be limited by U.S. banking laws and regulations, including those governing capital and the approval of our capital plan, applicable
 
provisions of Delaware law or our failure to pay full and timely dividends on our preferred stock;
the Parent is a non-operating holding company, and as a result, is dependent on dividends from its subsidiaries and extensions of credit from its IHC to meet its obligations, including with respect to its securities, and to provide funds for share repurchases and payment of dividends to its stockholders; and,
changes in accounting standards governing the preparation of our financial statements and future events could have a material impact on our reported financial condition, results of operations, cash flows and other financial data.

All forward-looking statements speak only as of the date on which such statements are made, and BNY Mellon undertakes no obligation to update any statement to reflect events or circumstances after the date on which such forward-looking statement is made or to reflect the occurrence of unanticipated events. The contents of BNY Mellon’s website or any other websites referenced herein are not part of this report.

BNY Mellon 3



THE BANK OF NEW YORK MELLON CORPORATION

FORM 10-K INDEX

 
 
 
 
 
 
PART I
 
 
 
 
 
 
 
 
 
 
 
PART II
 
 
 
 
 
 
 
 
 
 
 
PART III
 
 
 
 
 
 
 
 
 
 
 
PART IV
 
 
 
 
 



PART I
 


ITEM 1. BUSINESS

Description of Business

The Bank of New York Mellon Corporation, a Delaware corporation (NYSE symbol: BK), is a global company headquartered in New York, New York, with $33.1 trillion in assets under custody and/or administration and $1.7 trillion in assets under management as of Dec. 31, 2018. With its subsidiaries, BNY Mellon has been in business since 1784.

We divide our businesses into two business segments, Investment Services and Investment Management. We also have an Other segment, which includes the leasing portfolio, corporate treasury activities (including our investment securities portfolio), derivatives and other trading activity, corporate and bank-owned life insurance, renewable energy investments and business exits.

For a further discussion of BNY Mellon’s products and services, see the “Overview,” “Summary of financial highlights,” “Fee and other revenue,” “Review of businesses” and “International operations” sections in the MD&A section in the Annual Report and Notes 23 and 24 of the Notes to Consolidated Financial Statements in the Annual Report, of which portions are incorporated herein by reference. See the “Available Information” section on page 1 of this Form 10-K, which is incorporated herein by reference, for a description of how to access financial and other information regarding BNY Mellon.

Our two principal U.S. banking subsidiaries engage in trust and custody activities, investment management services, banking services and various securities-related activities. Our two principal U.S. banking subsidiaries are:

The Bank of New York Mellon, a New York state-chartered bank, which houses our Investment Services businesses, including Asset Servicing, Issuer Services, Treasury Services, Clearance and Collateral Management, as well as the bank-advised business of Asset Management; and

 
BNY Mellon, National Association (“BNY Mellon, N.A.”), a national bank, which houses our Wealth Management business.
We have four other U.S. bank and/or trust company subsidiaries concentrating on trust products and services across the United States: The Bank of New York Mellon Trust Company, National Association, BNY Mellon Trust of Delaware, BNY Mellon Investment Servicing Trust Company and BNY Mellon Trust Company of Illinois. Most of our asset management businesses, along with our Pershing businesses, are direct or indirect non-bank subsidiaries of BNY Mellon.

Each of our bank and trust company subsidiaries is subject to regulation by the applicable bank regulatory authority. The deposits of our U.S. banking subsidiaries are insured by the Federal Deposit Insurance Corporation to the extent provided by law.

BNY Mellon’s banking subsidiaries outside the United States are subject to regulation by non-U.S. regulatory authorities in addition to the Board of Governors of the Federal Reserve System (the “Federal Reserve”).  The Bank of New York Mellon SA/NV (“BNY Mellon SA/NV”) is the main banking subsidiary of The Bank of New York Mellon in continental Europe. It is authorized and regulated as a credit institution by the National Bank of Belgium and is also supervised by the European Central Bank. BNY Mellon SA/NV has its principal office in Brussels and branches in Amsterdam, the Netherlands; Dublin, Ireland; Frankfurt, Germany; London, England; the City of Luxembourg, Luxembourg; and Paris, France.  BNY Mellon SA/NV’s activities are in the Investment Services segment of BNY Mellon with a focus on global custody, asset servicing and collateral management. For additional discussion, see the “MD&A –Supervision and Regulation” section in the Annual Report.

Primary Subsidiaries

Exhibit 21.1 to this Form 10-K presents a list of BNY Mellon’s primary subsidiaries as of Dec. 31, 2018.


BNY Mellon 5



Supervision and Regulation

Information on the supervision and regulation of BNY Mellon can be found in the “MD&A – Supervision and Regulation” section in the Annual Report, which is incorporated herein by reference.

Competition

BNY Mellon is subject to competition in all aspects and areas of our business. Our Investment Services business competes with domestic and international financial services firms that offer custody services, corporate trust services, clearing services, collateral management services, credit services, securities brokerage, foreign exchange services, derivatives, depositary receipt services and cash management services and related products, as well as a wide range of technology service providers, such as financial services data processing firms. Our Investment Management business competes with domestic and international asset management firms, hedge funds, investment banking companies and other financial services companies, including trust banks, brokerage firms, and insurance companies, as well as a wide range of technology service providers. Competition is based on a number of factors including, among others, customer service, quality and range of products and services offered, technological innovation and expertise, price, reputation, rates, lending limits and customer convenience.

Many of our competitors, with the particular exception of financial holding companies, banks and trust companies, are not subject to regulation as extensive as that described under the “MD&A — Supervision and Regulation” section in the Annual Report and, as a result, may have a competitive advantage over us and our subsidiaries in certain respects.

Many broad-based financial services firms have the ability to offer a wide range of products, from loans, deposit-taking and insurance to brokerage and asset management, which may enhance their competitive position.

 
We also face intense competition in attracting and retaining qualified employees, and must compete with institutions whose compensatory arrangements are not subject to the same regulatory and supervisory frameworks that apply to us. For further discussion see “MD&A — Risk Factors – Our business may be adversely affected if we are unable to attract and retain employees” in the Annual Report, which is incorporated herein by reference.

As part of our business strategy, we seek to distinguish ourselves from competitors by the level of service we deliver to our clients. We also believe that technological innovation is an important competitive factor, and, for this reason, have made and continue to make substantial investments in this area.

The ability to maintain operations during unexpected events and to recover quickly from unexpected events is a competitive factor. We continue to evaluate and strengthen our business continuity and operational resiliency capabilities and have increased our investments in technology to steadily enhance those capabilities, including our ability to resume and sustain our operations.

For additional discussion regarding competition, see “MD&A — Risk Factors – We are subject to competition in all aspects of our business, which could negatively affect our ability to maintain or increase our profitability” in the Annual Report, which is incorporated herein by reference.

Employees

At Dec. 31, 2018, BNY Mellon and its subsidiaries had approximately 51,300 full-time employees.


6 BNY Mellon



Statistical Disclosures by Bank Holding Companies

I.
Distribution of Assets, Liabilities and Stockholders’ Equity; Interest Rates and Interest Differential

Information required by this section of Guide 3 is presented in the Annual Report in the “Net interest revenue” and “Supplemental Information (unaudited) – Rate/volume analysis” sections in the MD&A and in Note 10 of the Notes to Consolidated Financial Statements, which portions are incorporated herein by reference.

II. Securities Portfolio

A.
Book Value of Securities;
B.
Maturity Distribution and Yields of Securities; and
C.
Aggregate Book Value and Market Value of Securities Where Issuer Exceeds 10% of Stockholders’ Equity

Information required by these sections of Guide 3 is presented in the Annual Report in the “Net interest revenue” and “Consolidated balance sheet review – Securities” sections in the MD&A and in Notes 1 and 4 of the Notes to Consolidated Financial Statements, which portions are incorporated herein by reference.

III. Loan Portfolio

A.
Types of Loans; and
B.
Maturities and Sensitivities of Loans to Changes in Interest Rates

Information required by these sections of Guide 3 is presented in the Annual Report in the “Consolidated balance sheet review – Loans” section in the MD&A and Notes 1 and 5 of the Notes to Consolidated Financial Statements, which portions are incorporated herein by reference.

C.
Risk Elements; and
D.
Other Interest-bearing Assets

Information required by these sections of Guide 3 is included in the Annual Report in the “Consolidated balance sheet review – Loans” and “– Nonperforming
 
assets” and “International operations – Country risk exposure” and “– Cross-border outstandings” sections in the MD&A and Notes 1 and 5 of the Notes to Consolidated Financial Statements, which portions are incorporated herein by reference.

IV. Summary of Loan Loss Experience

Information required by this section of Guide 3 is included in the Annual Report in the “Critical accounting estimates – Allowance for loan losses and allowance for lending-related commitments” section in the MD&A, which portion is incorporated herein by reference, and below.

When losses on specific loans are identified, the portion deemed uncollectible is charged off. The allocation of the reserve for credit losses is presented in the “Consolidated balance sheet review – Asset quality and allowance for credit losses” section in the MD&A, as required by Guide 3, which is incorporated herein by reference.

Further information on our credit policies, the factors that influenced management’s judgment in determining the level of the reserve for credit exposure, and the analyses of the reserve for credit exposure are set forth in the Annual Report in the “Risk Management – Credit risk” and “Critical accounting estimates” sections in the MD&A and Notes 1 and 5 of the Notes to Consolidated Financial Statements, which portions are incorporated herein by reference.

V. Deposits

Information required by this section of Guide 3 is set forth in the Annual Report in the “Net interest revenue” and “Consolidated balance sheet review – Deposits” sections in the MD&A and in Note 8 of the Notes to Consolidated Financial Statements, which portions are incorporated herein by reference.

VI. Return on Equity and Assets

Information required by this section of Guide 3 is set forth in the Annual Report in the “Financial Summary” section, which is incorporated herein by reference.


BNY Mellon 7



VII. Short-Term Borrowings

Information required by this section of Guide 3 is set forth in the Annual Report in the “Consolidated balance sheet review – Short-term borrowings” section in the MD&A, which portion is incorporated herein by reference.

ITEM 1A. RISK FACTORS

The information required by this Item is set forth in the Annual Report under “MD&A – Risk Factors,” which portion is incorporated herein by reference.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

We believe that our owned and leased facilities are suitable and adequate for our business needs. At a number of the locations described below, we are not currently occupying all of the space under our control. Where commercially reasonable and to the extent it is not needed for future expansion, we seek to sell, lease or sublease this excess space. The following is a description of our principal properties, which are utilized by all of our business segments, as of Dec. 31, 2018:

New York area properties
We own our 23-story building located at 240 Greenwich Street in downtown Manhattan that serves as our corporate headquarters. We lease approximately 325,000 square feet of space in an office building located at 225 Liberty Street in downtown Manhattan, virtually all of which has been sublet to a third party as of Jan. 1, 2019. In addition, we lease approximately 272,000 square feet of space at 200 Park Avenue, approximately 318,000 square feet of space in Brooklyn and approximately 485,000 square feet of space in Jersey City.

Pittsburgh properties
We lease under a long-term, triple net lease the entire 54-story office building at BNY Mellon Center, 500 Grant Street. In addition, we own a 14-story office building located at 500 Ross Street.

Boston area properties
We lease approximately 226,000 square feet of space located at One Boston Place, 201 Washington Street.
 
Additionally, we lease approximately 384,000 square feet of space in Everett, Massachusetts and approximately 304,000 square feet of space in Westborough, Massachusetts.

United Kingdom properties
We have a number of leased office locations in London (including approximately 234,000 square feet of space at BNY Mellon Centre at 160-162 Queen Victoria Street and approximately 152,000 square feet of space at The Tower at One Canada Square at Canary Wharf), and leased space totaling 144,000 square feet in Manchester. We have other leased office locations throughout the United Kingdom, including locations in Poole, Leeds, Liverpool and Edinburgh.

Poland properties
We lease approximately 234,000 square feet of space in Wroclaw, Poland.

India properties
We lease approximately 828,000 square feet of space in Pune, India and approximately 827,000 square feet of space in Chennai, India.

Other properties
We also lease (and in a few instances own) office space and other facilities at numerous other locations globally, including properties located in New York, New Jersey, Connecticut, Pennsylvania, Massachusetts, Florida, Delaware, Texas, California, Illinois, Washington and Tennessee; Brussels, Belgium; Toronto, Canada; Wexford, Dublin and Cork, Ireland; Luxembourg; Frankfurt, Germany; Singapore; Hong Kong and Shanghai, China; Seoul, Korea; Tokyo, Japan; Sydney, Australia; and Rio de Janeiro, Brazil.

ITEM 3. LEGAL PROCEEDINGS

The information required by this Item is set forth in the “Legal proceedings” section in Note 21 of the Notes to Consolidated Financial Statements in the Annual Report, which portion is incorporated herein by reference.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.


8 BNY Mellon


PART II
 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is listed on the New York Stock Exchange under the ticker symbol BK. Certain of our depositary shares, each representing 1/4,000th interest in a share of our Series C noncumulative perpetual preferred stock, are listed on the New York Stock Exchange under the ticker symbol BK PrC. Mellon Capital IV’s 6.244% Fixed-to-Floating Rate Normal Preferred Capital Securities are also listed on the New York Stock Exchange under the ticker symbol BK/P. Information relating to the closing price per share of our common stock and our common stock dividend for each full quarterly period during fiscal years 2017 and 2018 is set forth in the “Selected Quarterly Data” section in the Annual Report, which is incorporated herein by reference. As of Jan. 31, 2019, there were 27,700 holders of record of our common stock.

For additional information about dividends and a discussion of potential regulatory limitations on our receipt of funds from our regulated subsidiaries and our payment of dividends to stockholders, see the “Liquidity and dividends” and “Supervision and Regulation – Capital Planning and Stress Testing –Payment of Dividends, Stock Repurchases and Other Capital Distributions” sections in the MD&A in the Annual Report and Notes 14 and 18 of the Notes to Consolidated Financial Statements in the Annual Report, which portions are incorporated herein by reference.

Additional information about our common stock, including information about share repurchases during the fourth quarter of 2018 and existing Board of Directors authorizations with respect to purchases by us of our common stock and other equity securities is provided in the “Capital – Issuer purchases of equity securities” section of the MD&A in the Annual Report and Note 14 of the Notes to Consolidated Financial Statements in the Annual Report, which portions are incorporated herein by reference. Share repurchases may be executed through open market repurchases, in privately negotiated transactions or by other means, including through repurchase plans designed to comply with Rule 10b5-1 and other derivative, accelerated share repurchase and other structured transactions.

 
ITEM 6. SELECTED FINANCIAL DATA

The information required by this Item is set forth in the “Financial Summary” section and the “Summary of financial highlights” section in the MD&A in the Annual Report and Notes 1, 2 and 3 of the Notes to Consolidated Financial Statements in the Annual Report, which portions are incorporated herein by reference.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information required by this Item is set forth in the MD&A and Notes 3, 11, 13, 18, 21 and 22 of the Notes to Consolidated Financial Statements in the Annual Report, which portions are incorporated herein by reference.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this Item is set forth in the “Critical accounting estimates,” “Off-balance sheet arrangements,” “Risk Management,” “Trading activities and risk management” and “Asset/liability management” sections in the MD&A in the Annual Report and “Derivative financial instruments” under Note 1 and Notes 19, 21 and 22 of the Notes to Consolidated Financial Statements in the Annual Report, which portions are incorporated herein by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Reference is made to Item 15 on page 14 hereof for a detailed listing of the items under Exhibits and Financial Statements, which are incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.


BNY Mellon 9



ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, including the Chief Executive Officer and Chief Financial Officer, with participation by the members of the Disclosure Committee, has responsibility for ensuring that there is an adequate and effective process for establishing, maintaining, and evaluating disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in our SEC reports is timely recorded, processed, summarized and reported and that information required to be disclosed by BNY Mellon is accumulated and communicated to BNY Mellon’s management to allow timely decisions regarding the required disclosure. In addition, our ethics hotline can be used by employees and others for the anonymous communication of concerns about financial controls or reporting matters. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

As of Dec. 31, 2018, an evaluation was carried out under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and
 
procedures as defined in Exchange Act Rule 13a-15(e). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

In the ordinary course of business, we may routinely modify, upgrade or enhance our internal controls and procedures for financial reporting. There have not been any changes in our internal controls over financial reporting as defined in Rule 13a-15(f) of the Exchange Act during the fourth quarter of 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management Report on Internal Control over Financial Reporting and Report of Independent Registered Public Accounting Firm

See “Report of Management on Internal Control Over Financial Reporting” and “Report of Independent Registered Public Accounting Firm” on pages 116 and 117 of the Annual Report, each of which is incorporated herein by reference.

ITEM 9B. OTHER INFORMATION

Not applicable.


10 BNY Mellon


PART III
 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item is included below and in the Proxy in the following sections: “Section 16(a) Beneficial Ownership Reporting Compliance” under the heading “Additional Information - Information on Stock Ownership;” “Background” under the heading “Item 1 - Election of Directors - Resolution;” “Nominees” under the heading “Item 1 - Election of Directors;” and “Board Meetings and Committee Information - Committees and Committee Charters” and “- Audit Committee” under the heading “Item 1 - Election of Directors - Corporate Governance and Board Information,” which are incorporated herein by reference.
CODE OF ETHICS

We have adopted a code of ethics for our employees which we refer to as our Code of Conduct. The Code of Conduct applies to all employees of BNY Mellon or an entity that is more than 50% owned by us, including our Chief Executive Officer (principal executive officer), Chief Financial Officer (principal financial officer) and Controller (principal accounting officer). The Code of Conduct is posted on our
 
website at www.bnymellon.com/ethics/codeofconduct.pdf. We also have a code of ethics for our directors, which we refer to as our Directors’ Code of Conduct. The Directors’ Code of Conduct applies to all directors of BNY Mellon. The Directors’ Code of Conduct is posted on our website at www.bnymellon.com/governance/directorscodeofconduct.pdf. We intend to disclose on our website any amendments to or waivers of the Code of Conduct relating to executive officers (including the officers specified above) and will disclose any amendments to or waivers of the Directors’ Code of Conduct relating to our directors.

EXECUTIVE OFFICERS OF THE REGISTRANT

The positions of Chairman of the Board, Chief Executive Officer and President are each held for the year for which the Board of Directors was elected and until the appointment and qualification of a successor or until earlier death, resignation, disqualification or removal. All other executive officers serve at the pleasure of the appointing authority. No executive officer has a family relationship to any other executive officer or director or nominee for director.

Name
Age
Positions and offices
 
 
 
Bridget E. Engle
55
Ms. Engle has served as Senior Executive Vice President and Chief Information Officer of BNY Mellon since June 2017. From April 2015 to March 2017, Ms. Engle served as Bank of America Corporation’s Chief Information Officer for Global Commercial Banking and Markets Technology. From 2011 to April 2015, Ms. Engle was Bank of America’s Chief Information Officer for Consumer Banking.


 
 
 
 
 
Thomas P. (Todd) Gibbons
62
Mr. Gibbons has served as Vice Chairman and Chief Executive Officer of Clearing, Markets and Client Management of BNY Mellon since January 2018 and was Vice Chairman and Chief Financial Officer of BNY Mellon from July 2008 to January 2018.

 
 
 
 
 
Mitchell E. Harris
64
Mr. Harris has served as Senior Executive Vice President and Chief Executive Officer of Investment Management of BNY Mellon since February 2016 and was President of Investment Management from May 2011 to February 2016.

 
 
 
 
 
Monique R. Herena
48
Ms. Herena has served as Senior Executive Vice President and Chief Human Resources Officer of BNY Mellon since April 2014. From 2013 to April 2014, Ms. Herena served as Senior Vice President Human Resources and Chief Human Resources Officer Global Groups, Functions and Corporate for PepsiCo Inc.

 
 
 
 
 
Hani A. Kablawi
50
Mr. Kablawi has served as Senior Executive Vice President and Chairman of EMEA and Chief Executive Officer of Global Asset Servicing of BNY Mellon since January 2018 and was Chief Executive Officer of EMEA Investment Services from July 2016 to January 2018. Mr. Kablawi previously served as Chief Executive Officer of EMEA Asset Servicing from January 2012 to July 2016.

 
 
 
 
 

BNY Mellon 11



Name
Age
Positions and offices
Kurtis R. Kurimsky
45
Mr. Kurimsky has served as Vice President and Controller of BNY Mellon since July 2015 and was Acting Controller from February 2015 to July 2015. Mr. Kurimsky previously served as Deputy Controller of BNY Mellon from May 2014 to February 2015. From October 2006 to April 2014, Mr. Kurimsky served as a partner in the Financial Services Practice at KPMG LLP.

 
 
 
 
 
Francis (Frank) La Salla
55
Mr. La Salla has served as Senior Executive Vice President and Chief Executive Officer of Issuer Services of BNY Mellon since January 2018 and was Chief Executive Officer of Corporate Trust from May 2017 to January 2018. Mr. La Salla previously served as Chief Executive Officer of Global Structured Products and Alternative Investment Services from March 2014 to May 2017. From May 2003 to March 2014, Mr. La Salla was Managing Director at Pershing LLC, a wholly-owned subsidiary of BNY Mellon, where he was Co-Head of Global Client Relationships and Head of Trading Services.

 
 
 
 
 
J. Kevin McCarthy
54
Mr. McCarthy has served as Senior Executive Vice President and General Counsel of BNY Mellon since April 2014 and was Senior Deputy General Counsel, with oversight of the legal teams supporting BNY Mellon’s Litigation, Enforcement, Employment Law, Asset Servicing and corporate center functions, from August 2013 to April 2014. From September 2010 to August 2013, Mr. McCarthy served as Deputy General Counsel for the Litigation, Enforcement and Employment Law functions at BNY Mellon.

 
 
 
 
 
Lester J. Owens
61
Mr. Owens has served as Senior Executive Vice President and Head of Operations of BNY Mellon since February 2019. From 2007 to December 2018, Mr. Owens served as managing director responsible for Wholesale Banking Operations at JPMorgan Chase & Co., with additional responsibility for Corporate & Investment Bank Client Onboarding from 2017 through 2018.
 
 
 
 
 
Roman Regelman
47
Mr. Regelman has served as Senior Executive Vice President and Head of Digital of BNY Mellon since September 2018. From 2011 to August 2018, Mr. Regelman was partner, managing director and co-leader of the financial institutions digital business at Boston Consulting Group.
 
 
 
 
 
Michael P. Santomassimo
43
Mr. Santomassimo has served as Senior Executive Vice President and Chief Financial Officer of BNY Mellon since January 2018 and was Chief Financial Officer of Investment Services from July 2016 to January 2018. Mr. Santomassimo served as Chief Financial Officer, Banking, at JPMorgan Chase & Co., which included Investment Banking (Advisory and Equity and Debt Capital Markets) as well as Treasury Services from December 2013 to June 2016 and Chief Financial Officer, Technology & Operations, for the same division at JPMorgan Chase & Co. from December 2012 to December 2013.

 
 
 
 
 
Charles W. Scharf
53
Mr. Scharf has served as a director and Chief Executive Officer of BNY Mellon since July 2017. In January 2018, Mr. Scharf became Chairman of BNY Mellon. From October 2012 through December 2016, Mr. Scharf served as director and Chief Executive Officer of Visa Inc.


 
 
 
 
 
Akash Shah
33
Mr. Shah has served as Senior Executive Vice President and Head of Strategy of BNY Mellon since July 2018. From 2006 to July 2018, Mr. Shah worked at McKinsey & Company, mostly recently as a partner and co-head the Capital Markets & Investment Banking practice.
 
 
 
 
 
James S. Wiener
51
Mr. Wiener has served as Senior Executive Vice President and Chief Risk Officer of BNY Mellon since November 2014. Mr. Wiener served as a senior partner at Oliver Wyman Group from 2003 to November 2014.

 
 
 
 
 




12 BNY Mellon



ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is included in the Proxy in the following sections: “Director Compensation” under the heading “Item 1 - Election of Directors;” “Compensation Discussion and Analysis” and “Executive Compensation Tables and Other Compensation Disclosure” under the heading “Item 2 - Advisory Vote on Compensation;” “Board Meetings and Committee Information - Committees and Committee Charters” and “- Human Resources and Compensation Committee” under the heading “Item 1 - Election of Directors - Corporate Governance and Board Information,” which are incorporated herein by reference. The information incorporated herein by reference to the section “Report of the HRC Committee” under the heading “Item 2 - Advisory Vote on Compensation - Compensation Discussion and Analysis” is deemed furnished hereunder.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item is included in the Proxy in the following sections: “Equity Compensation Plans” and “Information on Stock Ownership” under the heading “Additional Information,” which are incorporated herein by reference.


 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item is included in the Proxy in the following sections: “Business Relationships and Related Party Transactions Policy” under the heading “Additional Information - Other Information;” “Director Independence” under the heading “Item 1 - Election of Directors - Corporate Governance and Board Information;” and “Board Meetings and Committee Information - Committees and Committee Charters,” “- Audit Committee,” “- Corporate Governance, Nominating and Social Responsibility Committee” and “- Human Resources and Compensation Committee” under the heading “Item 1 - Election of Directors - Corporate Governance and Board Information,” which are incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item is included in the Proxy in the following section: “Item 3 – Ratification of KPMG LLP,” which is incorporated herein by reference.


BNY Mellon 13


PART IV
 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)
The financial statements, schedules and exhibits required for this Form 10-K are incorporated by reference as indicated in the following index. Page numbers refer to pages of the Annual Report for Items (1) and (2) Financial Statements and Schedules.

(1)(2)
Financial Statements and Schedules
Page No.
 
 
 
 
Consolidated Income Statement
119-120
 
Consolidated Comprehensive Income Statement
121
 
Consolidated Balance Sheet
122
 
Consolidated Statement of Cash Flows
123
 
Consolidated Statement of Changes in Equity
124-125
 
Notes to Consolidated Financial Statements
126-198
 
Report of Independent Registered Public Accounting Firm
199
 
 
 
 
Selected Quarterly Data (unaudited)
108
 
 
 
(3)
Exhibits
 
 
See (b) below.
 


(b)
The exhibits listed on the Index to Exhibits on pages 15 through 22 hereof are incorporated by reference or filed or furnished herewith in response to this Item.


(c)
Other Financial Data

None.

ITEM 16. FORM 10-K SUMMARY

None.


14 BNY Mellon


INDEX TO EXHIBITS
 

Pursuant to the rules and regulations of the SEC, BNY Mellon has filed certain agreements as exhibits to this Form 10-K. These agreements may contain representations and warranties by the parties to such agreements. These representations and warranties have been made solely for the benefit of the other party or parties to such agreements and (i) may have been qualified by disclosures made to such other party or parties, (ii) were made only as of the date of such agreements or such other date(s) as may be specified in such agreements and are subject to more recent developments, which may not be fully reflected in BNY Mellon’s public disclosure, (iii) may reflect the allocation of risk among the parties to such agreements and (iv) may apply materiality standards that are different from what may be viewed as material to investors. Accordingly, these representations and warranties may not describe BNY Mellon’s actual state of affairs at the date hereof and should not be relied upon.

Exhibit
 
Description
 
Method of Filing
 
 
 
 
 
3.1
 
Restated Certificate of Incorporation of The Bank of New York Mellon Corporation.



 

3.2
 
Certificate of Designations of The Bank of New York Mellon Corporation with respect to Series A Noncumulative Preferred Stock, dated June 15, 2007.

 

3.3
 
Certificate of Designations of The Bank of New York Mellon Corporation with respect to Series C Noncumulative Perpetual Preferred Stock, dated Sept. 13, 2012.
 

3.4
 
Certificate of Designations of The Bank of New York Mellon Corporation with respect to Series D Noncumulative Perpetual Preferred Stock, dated May 16, 2013.
 
3.5
 
Certificate of Designations of The Bank of New York Mellon Corporation with respect to Series E Noncumulative Perpetual Preferred Stock, dated April 27, 2015.
 
3.6
 
Certificate of Designations of The Bank of New York Mellon Corporation with respect to Series F Noncumulative Perpetual Preferred Stock, dated July 29, 2016.
 
3.7
 
Amended and Restated By-Laws of The Bank of New York Mellon Corporation, as amended and restated on July 10, 2007 and subsequently amended on April 14, 2009, Aug. 11, 2009, Feb. 9, 2010, July 2, 2010, Oct. 12, 2010, Oct. 8, 2013, March 5, 2015, Oct. 13, 2015 and Feb. 12, 2018.

 

BNY Mellon 15


INDEX TO EXHIBITS (continued)
 

Exhibit
 
Description
 
Method of Filing
 
 
 
 
 
 
4.1
 
 
None of the instruments defining the rights of holders of long-term debt of the Parent or any of its subsidiaries represented long-term debt in excess of 10% of the total assets of the Company as of Dec. 31, 2018. The Company hereby agrees to furnish to the Commission, upon request, a copy of any such instrument.
 
N/A
10.1
*
The Bank of New York Company, Inc. Excess Contribution Plan as amended through July 10, 1990.
 
Previously filed as Exhibit 10(b) to The Bank of New York Company, Inc.’s Annual Report on Form 10-K (File No. 001-06152) for the year ended Dec. 31, 1990, and incorporated herein by reference.

10.2
*
Amendments dated Feb. 23, 1994 and Nov. 9, 1993 to The Bank of New York Company, Inc. Excess Contribution Plan.
 

10.3
*
Amendment to The Bank of New York Company, Inc. Excess Contribution Plan dated as of Nov. 1, 1995.
 
10.4
*
Amendment to The Bank of New York Company, Inc. Excess Contribution Plan dated as of Nov. 12, 2002.
 
10.5
*
Amendment to The Bank of New York Company, Inc. Excess Contribution Plan dated as of Oct. 9, 2006.

 
10.6
*
The Bank of New York Company, Inc. Excess Benefit Plan as amended through Dec. 8, 1992.
 
Previously filed as Exhibit 10(d) to The Bank of New York Company, Inc.’s Annual Report on Form 10-K (File No. 001-06152) for the year ended Dec. 31, 1992, and incorporated herein by reference.
10.7
*
Amendment dated as of Aug. 11, 1994 to The Bank of New York Company, Inc. Excess Benefit Plan.
 
10.8
*
Amendment dated as of Nov. 1, 1995 to The Bank of New York Company, Inc. Excess Benefit Plan.
 

16 BNY Mellon


INDEX TO EXHIBITS (continued)
 

Exhibit
 
Description
 
Method of Filing
 
 
 
 
 
 
10.9
*
Amendment dated as of July 1, 1996 to The Bank of New York Company, Inc. Excess Benefit Plan.
 
10.10
*
The Bank of New York Company, Inc. Supplemental Executive Retirement Plan.
 
Previously filed as Exhibit 10(n) to The Bank of New York Company, Inc.’s Annual Report on Form 10-K (File No. 001-06152) for the year ended Dec. 31, 1992, and incorporated herein by reference.
10.11
*
Amendment dated as of March 9, 1993 to The Bank of New York Company, Inc. Supplemental Executive Retirement Plan.
 
10.12
*
Amendment dated as of Oct. 11, 1994 to The Bank of New York Company, Inc. Supplemental Executive Retirement Plan.
 
10.13
*
Amendment dated as of July 1, 1996 to The Bank of New York Company, Inc. Supplemental Executive Retirement Plan.
 
10.14
*
Amendment dated as of Nov. 12, 1996 to The Bank of New York Company, Inc. Supplemental Executive Retirement Plan.
 
10.15
*
Amendment dated as of July 11, 2000 to The Bank of New York Company, Inc. Supplemental Executive Retirement Plan.
 
10.16
*
Amendment dated as of Feb. 13, 2001 to The Bank of New York Company, Inc. Supplemental Executive Retirement Plan.
 
10.17
*
Amendment dated as of Jan. 1, 2006 to The Bank of New York Company, Inc. Supplemental Executive Retirement Plan.
 

BNY Mellon 17


INDEX TO EXHIBITS (continued)
 

Exhibit
 
Description
 
Method of Filing
 
 
 
 
 
 
10.18
*
Deferred Compensation Plan for Non-Employee Directors of The Bank of New York Company, Inc.
 
10.19
*
Amendment dated as of Nov. 8, 1994 to Deferred Compensation Plan for Non-Employee Directors of The Bank of New York Company, Inc.
 
10.20
*
Amendment dated Feb. 11, 1997 to Deferred Compensation Plan for Non-Employee Directors of The Bank of New York Company, Inc.
 
10.21
*
Amendment to Deferred Compensation Plan for Non-Employee Directors of The Bank of New York Company, Inc. dated as of July 11, 2000.
 
10.22
*
Amendment dated as of Nov. 12, 2002 to Deferred Compensation Plan for Non-Employee Directors of The Bank of New York Company, Inc.
 
10.23
*
Mellon Financial Corporation Director Equity Plan (2006).
 

10.24
*
The Bank of New York Mellon Corporation Deferred Compensation Plan for Directors, effective Jan. 1, 2008.
 
10.25
 
 
Lease dated as of Dec. 29, 2004, between 500 Grant Street Associates Limited Partnership and The Bank of New York Mellon with respect to BNY Mellon Center.
 

10.26
*
The Bank of New York Mellon Corporation Deferred Compensation Plan for Employees.
 
10.27
*
Form of Long Term Incentive Plan Deferred Stock Unit Agreement for Directors of The Bank of New York Corporation.

 


18 BNY Mellon


INDEX TO EXHIBITS (continued)
 

Exhibit
 
Description
 
Method of Filing
 
 
 
 
 
 
10.28
*
Amendment to The Bank of New York Company, Inc. Supplemental Executive Retirement Plan, dated as of Jan. 1, 2009.
 
10.29
*
Amendment to The Bank of New York Company, Inc. Excess Benefit Plan, dated as of Jan. 1, 2009.
 
10.30
*
Amendment to The Bank of New York Company, Inc. Excess Contribution Plan, dated as of Jan. 1, 2009.
 
10.31
*
The Bank of New York Mellon Corporation Policy Regarding Shareholder Approval of Future Senior Officers Severance Arrangements, adopted July 12, 2010.

 

10.32
*
2011 Form of Executive Stock Option Agreement.
 

10.33
*
The Bank of New York Mellon Corporation Long-Term Incentive Plan.
 

10.34
*
Amended and Restated Long-Term Incentive Plan of The Bank of New York Mellon Corporation.
 
10.35
*
2012 Form of Nonstatutory Stock Option Agreement.

 
10.36
*
The Bank of New York Mellon Corporation Defined Contribution IRC 401(a)(17) Plan.

 
10.37
 
Lease agreement by and between The Bank of New York Mellon and WFP Tower Co. L.P., dated June 25, 2014.
 

BNY Mellon 19


INDEX TO EXHIBITS (continued)
 

Exhibit
 
Description
 
Method of Filing
 
 
 
 
 
 
10.38
*
Amendment to The Bank of New York Company, Inc. Supplemental Executive Retirement Plan, dated as of Dec. 31, 2014.

 
10.39
*
2015 Form of Performance Share Unit Agreement.
 
10.40
*
2015 Form of Restricted Stock Unit Agreement.
 
10.41
*
The Bank of New York Mellon Corporation Defined Contribution IRC 401(a)(17) Plan (as amended and restated).
 
10.42
*
Amendment dated as of Dec. 14, 2015 to The Bank of New York Company, Inc. Excess Benefit Plan.

 
10.43
*
The Bank of New York Mellon Corporation Executive Severance Plan (as amended effective Feb. 19, 2016).
 

10.44
*
The Bank of New York Mellon Corporation 2016 Executive Incentive Compensation Plan.
 
10.45
*
Form of Amended and Restated Indemnification Agreement with Directors of The Bank of New York Mellon Corporation.
 
10.46
*
Form of Amended and Restated Indemnification Agreement with Executive Officers of The Bank of New York Mellon Corporation.
 
10.47
*
The Bank of New York Mellon Corporation Executive Severance Plan, as amended.
 
10.48
*
2016 Form of Restricted Stock Unit Agreement.
 

20 BNY Mellon


INDEX TO EXHIBITS (continued)
 

Exhibit
 
Description
 
Method of Filing
 
 
 
 
 
 
10.49
*
2016 Form of Performance Share Unit Agreement.
 
10.50
*
Letter Agreement, dated July 13, 2017, between The Bank of New York Mellon Corporation and Charles W. Scharf.
 
10.51
*
2017 Form of Performance Share Unit Agreement.
 
10.52
*
2017 Form of Restricted Stock Unit Agreement.
 
10.53
*
The Bank of New York Mellon Corporation Executive Severance Plan, as amended on Feb. 12, 2018.
 
10.54
*
2018 Form of Performance Share Unit Agreement
 
10.55
*
2018 Form of Restricted Stock Unit Agreement
 
10.56
*
Amendment dated as of Oct. 18, 2018 to The Bank of New York Company, Inc. Excess Benefit Plan
 
13.1
 
 
All portions of The Bank of New York Mellon Corporation 2018 Annual Report to Shareholders that are incorporated herein by reference. The remaining portions are furnished for the information of the SEC and are not “filed” as part of this filing.

 
21.1
 
 
Primary subsidiaries of the Company.
 

23.1
 
 
Consent of KPMG LLP.
 

24.1
 
 
Power of Attorney.
 


BNY Mellon 21


INDEX TO EXHIBITS (continued)
 

Exhibit
 
Description
 
Method of Filing
 
 
 
 
 
 
31.1
 
 
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 
31.2
 
 
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

32.1
 
 
Certification of the Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
32.2
 
 
Certification of the Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
101.INS
 
XBRL Instance Document.
 
Filed herewith.
101.SCH
 
XBRL Taxonomy Extension Schema Document.

 
Filed herewith.
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document.

 
Filed herewith.
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document.

 
Filed herewith.
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document.

 
Filed herewith.
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document.
 
Filed herewith.
* Management contract or compensatory plan arrangement.


22 BNY Mellon



SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, BNY Mellon has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
The Bank of New York Mellon Corporation
 
 
 
 
By:
/s/ Charles W. Scharf
 
 
Charles W. Scharf
 
 
Chairman and Chief Executive Officer
 
 
 
 
 
DATED: February 27, 2019


Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of BNY Mellon and in the capacities and on the date indicated.

 
Signature
 
 
Capacities
 
 
 
 
 
By:
/s/ Charles W. Scharf
 
 
Director and Principal Executive Officer
 
Charles W. Scharf
 
 
 
 
Chairman and Chief Executive Officer
 
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Michael P. Santomassimo
 
 
Principal Financial Officer
 
Michael P. Santomassimo
 
 
 
 
Chief Financial Officer
 
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Kurtis R. Kurimsky
 
 
Principal Accounting Officer
 
Kurtis R. Kurimsky
 
 
 
 
Corporate Controller
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Steven D. Black; Linda Z. Cook; Joseph J. Echevarria; Edward P. Garden; Jeffrey A. Goldstein; John M. Hinshaw; Edmund F. Kelly; Jennifer B. Morgan; Mark A. Nordenberg; Elizabeth E. Robinson; Samuel C. Scott III
 
 
Directors
 
 
 
 
 
 
 
 
 
 
By:
/s/ J. Kevin McCarthy
 
 
DATED: February 27, 2019
 
J. Kevin McCarthy
 
 
 
 
Attorney-in-fact
 
 
 

BNY Mellon 23

EX-13.1 2 form10-k_ex131x4q18.htm ALL PORTIONS OF 2018 ANNUAL REPORT TO SHAREHOLDERS Exhibit



Financial Section

Exhibit 13.1


THE BANK OF NEW YORK MELLON CORPORATION
2018 Annual Report
Table of Contents 
 
 
Page
 
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations:
 
Results of Operations:
 
Key 2018 events
 
Acronyms
 
 
Page
Financial Statements:
 
 
 
Notes to Consolidated Financial Statements:
 
Note 2 - Accounting changes and new accounting guidance
Note 9 - Contract revenue
Note 10 - Net interest revenue
Note 11 - Income taxes
Note 12 - Long-term debt
Note 13 - Variable interest entities and securitization
Note 14 - Shareholders’ equity
Note 15 - Other comprehensive income (loss)
Note 16 - Stock-based compensation
Note 17 - Employee benefit plans
Note 18 - Company financial information (Parent Corporation)
Note 19 - Fair value measurement
Note 20 - Fair value option
Note 21 - Commitments and contingent liabilities
Note 22 - Derivative instruments
Note 23 - Lines of business
Note 24 - International operations
Note 25 - Supplemental information to the Consolidated Statement of Cash Flows
 
 
 
 
Corporate Information
Inside back cover



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

(dollar amounts in millions, except per common share
amounts and unless otherwise noted)
2018

2017

2016

2015

2014

Selected income statement information:
 
 
 

 
 
Fee and other revenue
$
12,794

$
12,165

$
12,073

$
12,082

$
12,649

(Loss) income from consolidated investment management funds
(13
)
70

26

86

163

Net interest revenue
3,611

3,308

3,138

3,026

2,880

Total revenue
16,392

15,543

15,237

15,194

15,692

Provision for credit losses
(11
)
(24
)
(11
)
160

(48
)
Noninterest expense
11,211

10,957

10,523

10,799

12,177

Income before income taxes
5,192

4,610

4,725

4,235

3,563

Provision for income taxes
938

496

1,177

1,013

912

Net income
4,254

4,114

3,548

3,222

2,651

Net loss (income) attributable to noncontrolling interests (a)
12

(24
)
(1
)
(64
)
(84
)
Net income applicable to shareholders of The Bank of New York Mellon Corporation
4,266

4,090

3,547

3,158

2,567

Preferred stock dividends
(169
)
(175
)
(122
)
(105
)
(73
)
Net income applicable to common shareholders of The Bank of New York Mellon Corporation
$
4,097

$
3,915

$
3,425

$
3,053

$
2,494

Earnings per share applicable to common shareholders of The Bank of New York Mellon Corporation:
 
 
 
 
 
Basic
$
4.06

$
3.74

$
3.16

$
2.73

$
2.17

Diluted
$
4.04

$
3.72

$
3.15

$
2.71

$
2.15

Average common shares and equivalents outstanding of The Bank of New York Mellon Corporation (in thousands):
 
 
 
 
 
Basic
1,002,922

1,034,281

1,066,286

1,104,719

1,129,897

Diluted
1,007,141

1,040,290

1,072,013

1,112,511

1,137,480

Selected balance sheet information (at period-end):
 
 
 
 
 
Interest-earning assets
$
308,749

$
316,261

$
280,332

$
338,955

$
317,646

Total assets
362,873

371,758

333,469

393,780

385,303

Deposits
238,778

244,322

221,490

279,610

265,869

Long-term debt
29,163

27,979

24,463

21,547

20,264

Preferred stock
3,542

3,542

3,542

2,552

1,562

Total The Bank of New York Mellon Corporation common shareholders’ equity
37,096

37,709

35,269

35,485

35,879

At Dec. 31
 
 
 
 
 
Assets under custody and/or administration (in trillions) (b)
$
33.1

$
33.3

$
29.9

$
28.9

$
28.5

Assets under management (in billions) (c)
1,722

1,893

1,648

1,625

1,686

Market value of securities on loan (in billions) (d)
373

408

296

277

289

Selected ratios:
 
 
 
 
 
Return on common equity
10.8
%
10.8
%
9.6
%
8.6
%
6.8
%
Return on tangible common equity – Non-GAAP (e)
22.5

23.9

21.2

19.7

16.0

Return on average assets
1.19

1.14

0.96

0.82

0.67

Pre-tax operating margin
32

30

31

28

23

Fee revenue as a percentage of total revenue
78

78

79

79

80

Percentage of non-U.S. total revenue
37

36

34

36

38

Net interest margin
1.25

1.14

1.03

0.96

0.95

(a)
Primarily attributable to noncontrolling interests related to consolidated investment management funds.
(b)
Includes the assets under custody and/or administration of CIBC Mellon Global Securities Services Company (“CIBC Mellon”), a joint venture with the Canadian Imperial Bank of Commerce, of $1.2 trillion at Dec. 31, 2018, $1.3 trillion at Dec. 31, 2017, $1.2 trillion at Dec. 31, 2016, $1.0 trillion at Dec. 31, 2015 and $1.1 trillion at Dec. 31, 2014.
(c)
Excludes securities lending cash management assets and assets managed in the Investment Services business.
(d)
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 $58 billion at Dec. 31, 2018, $71 billion at Dec. 31, 2017, $63 billion at Dec. 31, 2016, $55 billion at Dec. 31, 2015 and $65 billion at Dec. 31, 2014.
(e)
Return on tangible common equity, a Non-GAAP measure, excludes goodwill and intangible assets, net of deferred tax liabilities. See “Supplemental information - Explanation of GAAP and Non-GAAP financial measures” beginning on page 105 for the reconciliation of the Non-GAAP measure.


2 BNY Mellon


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

(dollar amounts in millions, except per common share
amounts and unless otherwise noted)
2018

2017

2016

2015

2014

Cash dividends per common share
$
1.04

$
0.86

$
0.72

$
0.68

$
0.66

Common dividend payout ratio
26
%
23
%
23
%
25
%
31
%
Common dividend yield
2.2
%
1.6
%
1.5
%
1.6
%
1.6
%
Closing stock price per common share
$
47.07

$
53.86

$
47.38

$
41.22

$
40.57

Market capitalization (in billions)
$
45.2

$
54.6

$
49.6

$
44.7

$
45.4

Book value per common share
$
38.63

$
37.21

$
33.67

$
32.69

$
32.09

Tangible book value per common share – Non-GAAP (a)
$
19.04

$
18.24

$
16.19

$
15.27

$
14.70

Full-time employees
51,300

52,500

52,000

51,200

50,300

Year-end common shares outstanding (in thousands)
960,426

1,013,442

1,047,488

1,085,343

1,118,228

Average total equity to average total assets
12.1
%
11.7
%
10.7
%
10.2
%
10.2
%
Capital ratios (at period-end):
 
 
 
 
 
Consolidated regulatory capital ratios - fully phased-in basis: (b)(c)
 
 
 
 
 
Advanced:
 
 
 
 
 
CET1 ratio
10.7
%
10.3
%
9.7
%
9.5
%
9.8
%
Tier 1 capital ratio
12.8

12.3

11.8

11.0

10.8

Total (Tier 1 plus Tier 2) capital ratio
13.6

13.0

12.1

11.1

11.0

Standardized:
 
 
 
 
 
CET1 ratio
11.7

11.5

11.3

10.2

10.6

Tier 1 capital ratio
14.1

13.7

13.6

11.8

11.6

Total (Tier 1 plus Tier 2) capital ratio
15.1

14.7

14.2

12.0

12.0

Tier 1 leverage ratio
6.6

6.4

N/A
N/A
N/A
Supplementary leverage ratio (“SLR”)
6.0

5.9

5.6

4.9

4.4

 
 
 
 
 
 
Consolidated regulatory capital ratios - transitional basis: (b)(d)
 
 
 
 
 
Advanced:
 
 
 
 
 
CET1 ratio
N/A
10.7
%
10.6
%
10.8
%
11.2
%
Tier 1 capital ratio
N/A
12.7

12.6

12.3

12.2

Total (Tier 1 plus Tier 2) capital ratio
N/A
13.4

13.0

12.5

12.5

Tier 1 leverage ratio
N/A
6.6

6.6

6.0

5.6

SLR
N/A
6.1

6.0

5.4

N/A
 
 
 
 
 
 
BNY Mellon shareholders’ equity to total assets ratio
11.2
%
11.1
%
11.6
%
9.7
%
9.7
%
BNY Mellon common shareholders’ equity to total assets ratio
10.2

10.1

10.6

9.0

9.3

(a)
Tangible book value per common share – Non-GAAP excludes goodwill and intangible assets, net of deferred tax liabilities. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 105 for the reconciliation of the Non-GAAP measure.
(b)
Risk-based capital ratios at Dec. 31, 2014 do not reflect the adoption of accounting guidance related to Consolidations in Accounting Standards Update (“ASU”) 2015-02.
(c)
For our Common Equity Tier 1 (“CET1”), Tier 1 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. Beginning Jan. 1, 2018, consolidated regulatory ratios are fully phased-in. The consolidated regulatory ratios for all prior periods are presented on an estimated fully phased-in basis. For additional information on our regulatory capital ratios, see “Capital” beginning on page 45.
(d)
Reflects transitional adjustments to CET1, Tier 1 capital and Tier 2 capital required in period periods under U.S. capital rules.



BNY Mellon 3

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

General

In this Annual Report, 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.

BNY Mellon’s actual results of future operations may differ from those estimated or anticipated in certain forward-looking statements contained herein for reasons which are discussed below and under the heading “Forward-looking Statements.” When used in this Annual Report, words such as “estimate,” “forecast,” “project,” “anticipate,” “likely,” “target,” “expect,” “intend,” “continue,” “seek,” “believe,” “plan,” “goal,” “could,” “should,” “would,” “may,” “might,” “will,” “strategy,” “synergies,” “opportunities,” “trends,” “future” and words of similar meaning, may signify forward-looking statements.

Certain business terms and commonly used acronyms used in this Annual Report are defined in the Glossary and Acronyms sections.

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 more than 230-year history, 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 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.

businesses4q18.jpg


Key 2018 events

Share repurchase program and increase in cash dividend on common stock

In June 2018, our Board of Directors approved the repurchase of up to $2.4 billion of common stock starting in the third quarter of 2018 and continuing through the second quarter of 2019.

In July 2018, our Board of Directors approved a 17% increase in the quarterly cash dividend per common share, from $0.24 to $0.28 per share. The first payment of the increased quarterly cash dividend was made on Aug. 10, 2018.

In December 2018, our Board of Directors approved the repurchase of $830 million of additional common stock, all of which was repurchased in the fourth quarter of 2018. These repurchases were in addition to the repurchase of $2.4 billion of common stock previously approved by the Board.



4 BNY Mellon

Results of Operations (continued)
 

Corporate headquarters

In July 2018, BNY Mellon relocated its corporate headquarters to 240 Greenwich Street in lower Manhattan.

Summary of financial highlights

We reported net income applicable to common shareholders of BNY Mellon of $4.1 billion, or $4.04 per diluted common share, in 2018, including a net charge of $168 million, or $(0.17) per diluted common share, related to severance, expenses associated with consolidating real estate and litigation expense, partially offset by adjustments to provisional estimates for U.S. tax legislation. In 2017, net income applicable to common shareholders of BNY Mellon was $3.9 billion, or $3.72 per diluted common share, including a net benefit of $160 million, or $0.15 per diluted common share, related to the estimated net benefit related to U.S. tax legislation, partially offset by severance, litigation expense and other charges.

Highlights of 2018 results

Assets under custody and/or administration (“AUC/A”) totaled $33.1 trillion at Dec. 31, 2018 compared with $33.3 trillion at Dec. 31, 2017. The 1% decrease primarily reflects lower market values and the unfavorable impact of a stronger U.S. dollar on a spot basis, partially offset by net new business. (See “Investment Services business” beginning on page 14.)
Assets under management (“AUM”) totaled $1.7 trillion at Dec. 31, 2018 compared with $1.9 trillion at Dec. 31, 2017. The 9% decrease primarily reflects the unfavorable impact of a stronger U.S. dollar (principally versus the British pound) on a spot basis, lower market values, net outflows, the divestiture of CenterSquare Investment Management (“CenterSquare”) and other changes. AUM excludes securities lending cash management assets and assets managed in the Investment Services business. (See “Investment Management business” beginning on page 17.)
Investment services fees totaled $7.8 billion in 2018, an increase of 5% compared with $7.5 billion in 2017, primarily reflecting higher equity market values, net new business, including growth in collateral management and higher Depositary Receipts revenue, partially offset by
 
the previously disclosed lost business in Pershing. (See “Investment Services business” beginning on page 14.)
Investment management and performance fees totaled $3.7 billion in 2018 compared with $3.6 billion in 2017, an increase of 3%, primarily reflecting higher market values, performance fees and the favorable impact of a weaker U.S. dollar (principally versus the British pound), partially offset by the impact of net outflows. On a constant currency basis (Non-GAAP), investment management and performance fees increased 2% compared with 2017. (See “Investment Management business” beginning on page 17.)
Foreign exchange and other trading revenue totaled $732 million in 2018 compared with $668 million in 2017. Foreign exchange revenue totaled $663 million in 2018, an increase of 4% compared with $638 million in 2017. The increase in foreign exchange revenue primarily reflects higher volumes, partially offset by foreign currency hedging. (See “Fee and other revenue” beginning on page 7.)
Net interest revenue totaled $3.6 billion in 2018 compared with $3.3 billion in 2017, an increase of 9%. The increase primarily reflects higher interest rates. Net interest margin was 1.25% in 2018 compared with 1.14% in 2017. (See “Net interest revenue” beginning on page 9.)
The provision for credit losses was a credit of $11 million in 2018 and a credit of $24 million in 2017. (See “Asset quality and allowance for credit losses” beginning on page 35.)
Noninterest expense totaled $11.2 billion in 2018 compared with $11.0 billion in 2017. The 2% increase primarily reflects investments in technology, expenses associated with consolidating our real estate and the unfavorable impact of a weaker U.S. dollar, partially offset by lower bank assessment charges. (See “Noninterest expense” beginning on page 12.)
The provision for income taxes was $938 million (18.1% effective tax rate) in 2018, including the impact of the adjustments to provisional estimates for U.S. tax legislation and the tax impact of severance, expenses associated with consolidating real estate and litigation expense. (See “Income taxes” on page 12.)
The net unrealized pre-tax loss on our total securities portfolio was $907 million at Dec. 31,


BNY Mellon 5

Results of Operations (continued)
 

2018, compared with a pre-tax loss of $85 million at Dec. 31, 2017, including the impact of related hedges. The increase in net unrealized pre-tax loss was primarily driven by an increase in interest rates. (See “Securities” beginning on page 29.)
Our CET1 ratio calculated under the Advanced Approach was 10.7% at Dec. 31, 2018 and 10.7%, on a transitional basis, at Dec. 31, 2017. The ratio was unchanged compared to Dec. 31, 2017, reflecting capital deployed through common stock repurchases and dividend payments, and the final phase-in requirements under U.S. capital rules, offset by capital generated through earnings and lower risk-weighted assets (“RWAs”). (See “Capital” beginning on page 45.)
Our SLR was 6.0% at Dec. 31, 2018 and 6.1%, on a transitional basis, at Dec. 31, 2017. (See “Capital” beginning on page 45.)

Results for 2017

In 2017, we reported net income applicable to common shareholders of BNY Mellon of $3.9 billion, or $3.72 per diluted common share. These results were primarily driven by:

Investment services fees totaled $7.5 billion in 2017, an increase of 3% compared with $7.2 billion in 2016, primarily reflecting higher money market fees, higher equity market values and net new business, including growth in collateral management, partially offset by the previously disclosed lost business in Pershing and lower volumes in certain Depositary Receipts programs.
Investment management and performance fees totaled $3.6 billion in 2017 compared with $3.4 billion in 2016, an increase of 7%, primarily reflecting higher market values, money market fees and performance fees, partially offset by the unfavorable impact of a stronger U.S. dollar (principally versus the British pound).
Foreign exchange and other trading revenue totaled $668 million in 2017 compared with $701 million in 2016. Foreign exchange revenue totaled $638 million in 2017, a decrease of 7%, compared with $687 million in 2016. The decrease in foreign exchange revenue primarily reflects lower volatility, partially offset by higher volumes.
 
The provision for credit losses was a credit of $24 million in 2017.
Noninterest expense totaled $11.0 billion in 2017 compared with $10.5 billion in 2016. The 4% increase primarily reflects higher staff, software, and professional, legal and other purchased services expenses.
The provision for income taxes was $496 million (10.8% effective tax rate), including the estimated tax benefit related to U.S. tax legislation.

Results for 2016

In 2016, we reported net income applicable to common shareholders of BNY Mellon of $3.4 billion, or $3.15 per diluted common share. These results were primarily driven by:

Investment services fees totaled $7.2 billion, primarily reflecting higher money market fees and securities lending revenue, partially offset by the unfavorable impact of lost business on clearing services fees, the unfavorable impact of a stronger U.S. dollar and the downsizing of the UK transfer agency business.
Investment management and performance fees totaled $3.4 billion, primarily reflecting the unfavorable impact of a stronger U.S. dollar (principally versus the British pound), net outflows of AUM and lower performance fees, partially offset by higher market values and money market fees.
Foreign exchange and other trading revenue totaled $701 million, of which $687 million represented foreign exchange revenue. The decrease in foreign exchange revenue primarily reflects the impact of clients migrating to lower margin products and lower volumes.
The provision for credit losses was a credit of $11 million.
Noninterest expense totaled $10.5 billion primarily reflecting lower expenses in nearly all categories, driven by the favorable impact of a stronger U.S. dollar, lower staff, other, litigation and legal expenses and the benefit of the business improvement process. The decrease was partially offset by higher bank assessment charges, distribution and servicing and software expenses.
The provision for income taxes was $1.2 billion (24.9% effective tax rate) in 2016.


6 BNY Mellon

Results of Operations (continued)
 

Fee and other revenue

Fee and other revenue
 
 
 
2018

2017

 
 
 
 
 vs.

 vs.

(dollars in millions, unless otherwise noted)
2018

2017

2016

2017

2016

Investment services fees:
 
 
 
 
 
Asset servicing (a)
$
4,608

$
4,383

$
4,244

5
 %
3
 %
Clearing services
1,578

1,553

1,404

2

11

Issuer services
1,099

977

1,026

12

(5
)
Treasury services
554

557

547

(1
)
2

Total investment services fees
7,839

7,470

7,221

5

3

Investment management and performance fees
3,685

3,584

3,350

3

7

Foreign exchange and other trading revenue
732

668

701

10

(5
)
Financing-related fees
207

216

219

(4
)
(1
)
Distribution and servicing
139

160

166

(13
)
(4
)
Investment and other income
240

64

341

N/M
N/M
Total fee revenue
12,842

12,162

11,998

6

1

Net securities (losses) gains
(48
)
3

75

N/M
N/M
Total fee and other revenue
$
12,794

$
12,165

$
12,073

5
 %
1
 %
 
 
 
 
 
 
Fee revenue as a percentage of total revenue
78
%
78
%
79
%
 
 
 
 
 
 
 
 
AUC/A at period end (in trillions) (b)
$
33.1

$
33.3

$
29.9

(1
)%
11
 %
AUM at period end (in billions) (c)
$
1,722

$
1,893

$
1,648

(9
)%
15
 %
(a)
Asset servicing fees include securities lending revenue of $220 million in 2018, $195 million in 2017 and $207 million in 2016.
(b)
Includes the AUC/A of CIBC Mellon of $1.2 trillion at Dec. 31, 2018, $1.3 trillion at Dec. 31, 2017 and $1.2 trillion at Dec. 31, 2016.
(c)
Excludes securities lending cash management assets and assets managed in the Investment Services business.


Fee and other revenue increased 5% compared with 2017. The increase primarily reflects higher asset servicing fees, investment and other income, issuer servicing fees and investment management and performance fees, partially offset by net securities losses.

Investment services fees

Investment services fees increased 5% compared with 2017 reflecting the following:

Asset servicing fees increased 5%, primarily reflecting growth in collateral management, higher equity market values and securities lending volumes.
Clearing services fees increased 2%, primarily driven by higher equity market values and average long-term mutual funds balances, partially offset by the previously disclosed lost business.
Issuer services fees increased 12%, primarily reflecting higher Depositary Receipts revenue and higher volumes in Corporate Trust.
Treasury services fees decreased 1%, primarily reflecting higher compensating balance credits
 
provided to clients, which reduce fee revenue and increase net interest revenue, partially offset by higher volumes.

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

Investment management and performance fees

Investment management and performance fees increased 3% compared with 2017, primarily reflecting higher market values, performance fees and the favorable impact of a weaker U.S. dollar (principally versus the British pound), partially offset by the impact of net outflows. On a constant currency basis (Non-GAAP), investment management and performance fees increased 2% compared with 2017. Performance fees were $144 million in 2018, $94 million in 2017 and $60 million in 2016.

AUM was $1.7 trillion at Dec. 31, 2018, a decrease of 9% compared with $1.9 trillion at Dec. 31, 2017. The decrease primarily reflects the unfavorable impact of a stronger U.S. dollar (principally versus the British pound) on a spot basis, lower market values, net


BNY Mellon 7

Results of Operations (continued)
 

outflows, the divestiture of CenterSquare and other changes.

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

Foreign exchange and other trading revenue

Foreign exchange and other trading revenue
 
(in millions)
2018

2017

2016

Foreign exchange
$
663

$
638

$
687

Other trading revenue
69

30

14

Total foreign exchange and other trading revenue
$
732

$
668

$
701



Foreign exchange and other trading revenue increased 10% compared with 2017.

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, and the impact of foreign currency hedging activities. In 2018, foreign exchange revenue totaled $663 million, an increase of 4% compared with 2017, primarily reflecting higher volumes, partially offset by foreign currency hedging. Foreign exchange revenue is primarily reported in the Investment Services business and, to a lesser extent, the Investment Management business and the Other segment.

Total other trading revenue was $69 million in 2018, compared with $30 million in 2017. The increase primarily reflects gains on Investment Management hedging activities. Other trading revenue is reported in all three business segments.


Financing-related fees

Financing-related fees, which are primarily reported in the Investment Services business and the Other segment, include capital markets fees, loan commitment fees and credit-related fees. Financing-related fees totaled $207 million in 2018 compared with $216 million in 2017, primarily reflecting lower fees on standby letters of credit and underwriting.

 
Distribution and servicing fees

Distribution and servicing fees earned from mutual funds are primarily based on average assets in the funds and the sales of funds that we manage or administer and are primarily reported in the Investment Management business. These fees, which include 12b-1 fees, fluctuate with the overall level of net sales, the relative mix of sales between share classes, the funds’ market values and money market fee waivers.

Distribution and servicing fees were $139 million in 2018 compared with $160 million in 2017. The decrease primarily reflects the impact of lower fees from mutual funds.

Investment and other income

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

Investment and other income
 
 
 
(in millions)
2018

2017

2016

Corporate/bank-owned life insurance
$
145

$
153

$
149

Expense reimbursements from joint venture
71

64

67

Asset-related gains (losses)
70

(1
)
10

Equity investment income (loss)
4

37

(10
)
Seed capital gains (a)
3

32

44

Lease-related gains
1

56

38

Other (loss) income
(54
)
(277
)
43

Total investment and other income
$
240

$
64

$
341

(a)
Excludes seed capital gains related to consolidated investment management funds, which are reflected in operations of consolidated investment management funds.


Investment and other income includes corporate and bank-owned life insurance contracts, expense reimbursements from our CIBC Mellon joint venture, gains or losses from asset-related activity, equity investments, seed capital, lease-related activity and other (loss) income. Expense reimbursements from our CIBC Mellon joint venture relate to expenses incurred by BNY Mellon on behalf of the CIBC Mellon joint venture. Asset-related gains (losses) include real estate, loan and other asset dispositions. Other (loss) income primarily includes foreign currency remeasurement gain (loss), other investments, including renewable energy, and various miscellaneous revenues. 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.


8 BNY Mellon

Results of Operations (continued)
 

Investment and other income was $240 million in 2018 compared with $64 million in 2017. The increase primarily reflects the impact of U.S. tax legislation on our renewable energy investments recorded in 2017.

Net securities losses

Net securities losses were $48 million in 2018, primarily reflecting the sale of debt securities.

2017 compared with 2016

Fee and other revenue totaled $12.2 billion in 2017 compared with $12.1 billion in 2016. The increase primarily reflects higher investment services fees and investment management and performance fees, partially offset by lower investment and other income and net securities gains.

 
The increase in investment services fees primarily reflects higher money market fees, higher equity market values and net new business, including growth in collateral management, partially offset by previously disclosed lost business in Pershing and lower volumes in certain Depositary Receipts programs.

The increase in investment management and performance fees primarily reflects higher market values, money market fees and performance fees, partially offset by the unfavorable impact of a stronger U.S. dollar on an average basis (principally versus the British pound).

The decrease in investment and other income primarily reflects the impact of U.S. tax legislation on our renewable energy investments.


Net interest revenue

Net interest revenue
 
 
 
2018

2017

 
 
 
 
 vs.

 vs.

(dollars in millions)
2018

2017

2016

2017

2016

Net interest revenue
$
3,611

$
3,308

$
3,138

9
 %
5
 %
Add: Tax equivalent adjustment
20

47

51

N/M
N/M
Net interest revenue on a fully taxable equivalent
basis (“FTE”) – Non-GAAP (a)
$
3,631

$
3,355

$
3,189

8
 %
5
 %
 
 
 
 
 
 
Average interest-earning assets
$
289,916

$
290,522

$
303,379


(4
)%
 
 
 
 
 
 
Net interest margin
1.25
%
1.14
%
1.03
%
11
 bps
11
 bps
Net interest margin (FTE) – Non-GAAP (a)
1.25
%
1.15
%
1.05
%
10
 bps
10
 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.


Net interest revenue increased 9% compared with 2017, primarily reflecting higher interest rates.

Net interest margin increased 11 basis points compared with 2017, primarily reflecting higher yields on interest-earning assets, partially offset by higher interest rates paid on interest-bearing liabilities.

Average interest-earning assets were $290 billion in 2018 compared with $291 billion in 2017. The decrease primarily reflects lower loans and interest-bearing deposits with the Federal Reserve and other central banks, partially offset by higher trading securities.

 
Average non-U.S. dollar deposits comprised approximately 30% of our average total deposits in 2018 and 2017. Approximately 45% of the average non-U.S. dollar deposits in 2018 and 2017 were euro-denominated.

2017 compared with 2016

Net interest revenue increased 5% compared with 2016, primarily driven by higher interest rates, partially offset by lower interest-earning assets driven by lower average deposits. The 11 basis points increase in the net interest margin primarily reflects higher yields on interest-earning assets, partially offset by higher interest rates paid on interest-bearing liabilities.


BNY Mellon 9

Results of Operations (continued)
 

Average balances and interest rates
2018
(dollar amounts in millions, presented on an FTE basis)
Average balance

 
Interest

 
Average rates

Assets
 
 
 
 
 
Interest-earning assets:
 
 
 
 
 
Interest-bearing deposits with banks (primarily foreign banks)
$
14,740

 
$
219

 
1.48
%
Interest-bearing deposits with the Federal Reserve and other central banks
68,408

 
531

 
0.78

Federal funds sold and securities purchased under resale agreements (a)
27,883

 
1,116

 
4.00

Margin loans
14,397

 
510

 
3.54

Non-margin loans:
 
 
 
 
 
Domestic offices:
 
 
 
 
 
Consumer
9,789

 
319

 
3.26

Commercial
19,853

 
701

 
3.53

Foreign offices
11,771

 
336

 
2.85

Total non-margin loans
41,413

 
1,356

(b)
3.27

Securities:
 
 
 
 
 
U.S. government obligations
23,908

 
486

 
2.03

U.S. government agency obligations
63,902

 
1,518

 
2.37

State and political subdivisions
2,565

 
69

 
2.69

Other securities:
 
 
 
 
 
Domestic offices
8,186

 
341

 
4.17

Foreign offices
19,848

 
179

 
0.90

Total other securities
28,034

 
520

 
1.85

Trading securities (primarily domestic)
4,666

 
127

 
2.74

Total securities
123,075

 
2,720

 
2.21

Total interest-earning assets
$
289,916

 
$
6,452

 
2.23
%
Noninterest-earning assets
53,858

 
 
 
 
Total assets
$
343,774

 
 
 
 
Liabilities
 
 
 
 
 
Interest-bearing liabilities:
 
 
 
 
 
Interest-bearing deposits:
 
 
 
 
 
Domestic offices
$
59,226

 
$
537

 
0.91
%
Foreign offices
95,475

 
340

 
0.36

Total interest-bearing deposits
154,701

 
877

 
0.57

Federal funds purchased and securities sold under repurchase agreements (a)
15,546

 
758

 
4.88

Trading liabilities
1,310

 
29

 
2.21

Other borrowed funds:
 
 
 
 
 
Domestic offices
2,122

 
55

 
2.57

Foreign offices
423

 
3

 
0.73

Total other borrowed funds
2,545

 
58

 
2.26

Commercial paper
2,607

 
51

 
1.97

Payables to customers and broker-dealers
16,353

 
191

 
1.17

Long-term debt
28,257

 
857

 
3.03

Total interest-bearing liabilities
$
221,319

 
$
2,821

 
1.27
%
Total noninterest-bearing deposits
63,814

 
 
 
 
Other noninterest-bearing liabilities
16,952

 
 
 
 
Total liabilities
302,085

 
 
 
 
Temporary equity
 
 
 
 
 
Redeemable noncontrolling interests
187

 
 
 
 
Permanent equity
 
 
 
 
 
Total The Bank of New York Mellon Corporation shareholders’ equity
41,360

 
 
 
 
Noncontrolling interests
142

 
 
 
 
Total permanent equity
41,502

 
 
 
 
Total liabilities, temporary equity and permanent equity
$
343,774

 
 
 
 
Net interest revenue (FTE) – Non-GAAP
 
 
$
3,631

 
 
Net interest margin (FTE) – Non-GAAP
 
 
 
 
1.25
%
Less: Tax equivalent adjustment (c)
 
 
20

 
 
Net interest revenue - GAAP
 
 
$
3,611

 
 
Net interest margin- GAAP
 
 
 
 
1.25
%
Percentage of assets attributable to foreign offices (d)
31
%
 
 
 
 
Percentage of liabilities attributable to foreign offices (d)
34

 
 
 
 
Note: Interest and average rates were calculated on a taxable equivalent basis using dollar amounts in thousands and actual number of days in the year.
(a)
Includes the average impact of offsetting under enforceable netting agreements of approximately $25 billion in 2018.
(b)
Includes fees of $7 million in 2018. Non-accrual loans are included in average loans; the associated income, which was recognized on a cash basis, is included in interest income.
(c)
The tax equivalent adjustment relates to tax-exempt securities, primarily state and political subdivisions, and is based on the U.S. federal statutory tax rate of 21%, adjusted for applicable state income taxes, net of the related federal tax benefit.
(d)
Includes the Cayman Islands branch office.


10 BNY Mellon

Results of Operations (continued)
 

Average balances and interest rates (continued)
2017
 
2016
(dollar amounts in millions, presented on an FTE basis)
Average balance

 
Interest

 
Average rates

 
Average balance

 
Interest

 
Average rates

Assets
 
 
 
 
 
 
 
 
 
 
 
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposits with banks (primarily foreign banks)
$
14,879

 
$
120

 
0.80
%
 
$
14,704

 
$
104

 
0.70
 %
Interest-bearing deposits with the Federal Reserve and other
central banks
70,213

 
319

 
0.45

 
80,593

 
198

 
0.25

Federal funds sold and securities purchased under resale agreements (a)
27,192

 
423

 
1.55

 
25,767

 
233

 
0.91

Margin loans
14,500

 
343

 
2.36

 
18,201

 
265

 
1.46

Non-margin loans:
 
 
 
 
 
 
 
 
 
 
 
Domestic offices:
 
 
 
 
 
 
 
 
 
 
 
Consumer
9,548

 
298

 
3.12

 
8,483

 
259

 
3.05

Commercial
20,976

 
521

 
2.49

 
21,820

 
417

 
1.91

Foreign offices
12,915

 
258

 
2.00

 
13,177

 
197

 
1.50

Total non-margin loans
43,439

 
1,077

(b)
2.48

 
43,480

 
873

(b)
2.01

Securities:
 
 
 
 
 
 
 
 
 
 
 
U.S. government obligations
25,674

 
425

 
1.66

 
25,074

 
378

 
1.51

U.S. government agency obligations
60,268

 
1,195

 
1.98

 
56,384

 
986

 
1.75

State and political subdivisions
3,226

 
100

 
3.09

 
3,703

 
110

 
2.96

Other securities:
 
 
 
 
 
 
 
 
 
 
 
Domestic offices
9,141

 
215

 
2.35

 
12,326

 
210

 
1.71

Foreign offices
19,541

 
150

 
0.77

 
20,664