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LOANS TO FINANCIAL ADVISORS, NET
 9 Months Ended
Jun. 30, 2023
Receivables [Abstract]  
LOANS TO FINANCIAL ADVISORS, NET BANK LOANS, NET
Bank client receivables are comprised of loans originated or purchased by our Bank segment and include securities-based loans (“SBL”), corporate loans (commercial and industrial (“C&I”) loans, commercial real estate (“CRE”) loans, and real estate investment trust (“REIT”) loans), residential mortgage loans, and tax-exempt loans. These receivables are collateralized by first and, to a lesser extent, second mortgages on residential or other real property, other assets of the borrower, a pledge of revenue, securities or are unsecured. We segregate our loan portfolio into six loan portfolio segments: SBL, C&I, CRE, REIT, residential mortgage, and tax-exempt. See Note 2 of our 2022 Form 10-K for a discussion of accounting policies related to bank loans and the allowance for credit losses.

Loan balances in the following tables are presented at amortized cost (outstanding principal balance net of unamortized purchase discounts or premiums, unearned income, deferred origination fees and costs, and charge-offs), except for certain held for sale loans recorded at fair value. Bank loans are presented on our Condensed Consolidated Statements of Financial Condition at amortized cost (or fair value where applicable) less the allowance for credit losses (“ACL”). As it pertains to TriState Capital Bank’s loans acquired as of June 1, 2022, the amortized cost of such purchased loans reflects the fair value of the loans on the acquisition date, and as described further in Note 3 of our 2022 Form 10-K, the purchase discount on such loans is accreted to interest income over the weighted-average life of the underlying loans, which may vary based on prepayments.

The following table presents the balances for held for investment loans by portfolio segment and held for sale loans.
$ in millionsJune 30, 2023September 30, 2022
SBL$14,227 $15,297 
C&I loans10,663 11,173 
CRE loans7,091 6,549 
REIT loans1,715 1,592 
Residential mortgage loans8,422 7,386 
Tax-exempt loans1,548 1,501 
Total loans held for investment43,666 43,498 
Held for sale loans135 137 
Total loans held for sale and investment43,801 43,635 
Allowance for credit losses(456)(396)
Bank loans, net (1)
$43,345 $43,239 
ACL as a % of total loans held for investment1.04 %0.91 %
Accrued interest receivable on bank loans (included in “Other receivables, net”)$197 $137 

(1) Bank loans, net as of June 30, 2023 and September 30, 2022 are presented net of $68 million and $112 million, respectively, of net unamortized discount, unearned income, and deferred loan fees and costs. The net unamortized discount primarily arose from the acquisition date fair value purchase discount on bank loans acquired in the TriState Capital acquisition. See Note 3 of our 2022 Form 10-K for further information.

See Note 6 for more information regarding bank loans, net pledged with the FHLB and FRB and Note 14 for more information regarding borrowings from the FHLB.

Held for sale loans

We originated or purchased $699 million and $2.13 billion of loans held for sale during the three and nine months ended June 30, 2023, respectively, and, exclusive of the loans acquired on June 1, 2022 in our acquisition of TriState Capital, we originated or purchased $683 million and $2.65 billion of loans held for sale during the three and nine months ended June 30, 2022, respectively. The majority of these loans were purchases of the guaranteed portions of Small Business Administration (“SBA”) loans that were initially classified as loans held for sale upon purchase and subsequently transferred to trading instruments once they had been securitized into pools. Proceeds from the sales of these loans held for sale and not securitized amounted to $221 million and $574 million during the three and nine months ended June 30, 2023, respectively, and $345 million and $1.02 billion during the three and nine months ended June 30, 2022, respectively. Net gains resulting from such sales were insignificant for each of the three and nine months ended June 30, 2023 and 2022.
Purchases and sales of loans held for investment

The following table presents purchases and sales of loans held for investment by portfolio segment.
$ in millionsC&I loansCRE loansREIT loansResidential mortgage loansTotal
Three months ended June 30, 2023
Purchases$3 $— $— $94 $97 
Sales$441 $— $— $— $441 
Nine months ended June 30, 2023
Purchases$360 $39 $24 $394 $817 
Sales$588 $— $— $— $588 
Three months ended June 30, 2022
Purchases$439 $— $— $383 $822 
Sales$33 $— $— $— $33 
Nine months ended June 30, 2022
Purchases$1,219 $— $— $790 $2,009 
Sales$145 $— $— $— $145 

Sales in the preceding table represent the recorded investment (i.e., net of charge-offs and discounts or premiums) of loans held for investment that were transferred to loans held for sale and subsequently sold to a third party during the respective period. As more fully described in Note 2 of our 2022 Form 10-K, corporate loan sales generally occur as part of our credit management activities.

Aging analysis of loans held for investment

The following table presents information on delinquency status of our loans held for investment.
$ in millions30-89 days and accruing90 days or more and accruing Total past due and accruingNonaccrual with allowanceNonaccrual with no allowanceCurrent and accruingTotal loans held for investment
June 30, 2023      
SBL$— $— $— $— $— $14,227 $14,227 
C&I loans— — — 75 — 10,588 10,663 
CRE loans— — — 29 14 7,048 7,091 
REIT loans— — — — — 1,715 1,715 
Residential mortgage loans2 — 2 — 9 8,411 8,422 
Tax-exempt loans— — — — — 1,548 1,548 
Total loans held for investment$2 $— $2 $104 $23 $43,537 $43,666 
September 30, 2022      
SBL$— $— $— $— $— $15,297 $15,297 
C&I loans— — — 32 — 11,141 11,173 
CRE loans— — — 12 16 6,521 6,549 
REIT loans— — — — — 1,592 1,592 
Residential mortgage loans4 — 4 — 14 7,368 7,386 
Tax-exempt loans— — — — — 1,501 1,501 
Total loans held for investment$4 $— $4 $44 $30 $43,420 $43,498 

The preceding table includes $118 million and $63 million at June 30, 2023 and September 30, 2022, respectively, of nonaccrual loans which were current pursuant to their contractual terms. The table also includes troubled debt restructurings of $30 million, $7 million, and $10 million for C&I loans, CRE loans, and residential first mortgage loans, respectively, at June 30, 2023, and $11 million, $9 million, and $10 million for C&I loans, CRE loans and residential first mortgage loans, respectively, at September 30, 2022.

Other real estate owned, included in “Other assets” on our Condensed Consolidated Statements of Financial Condition, was insignificant at both June 30, 2023 and September 30, 2022.
Collateral-dependent loans

A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the sale of the underlying collateral. Collateral-dependent loans are recorded based upon the fair value of the collateral less the estimated selling costs.
Loan type ($ in millions)
Nature of collateralJune 30, 2023September 30, 2022
C&I loansCommercial real estate and other business assets$9 $11 
CRE loansOffice, healthcare, industrial, and retail real estate$42 $21 
Residential mortgage loansSingle family homes$4 $6 

The recorded investments in residential mortgage loans secured by one-to-four family residential properties for which formal foreclosure proceedings were in process were $4 million and $5 million as of June 30, 2023 and September 30, 2022, respectively.

Credit quality indicators

The credit quality of our bank loan portfolio is summarized monthly by management using internal risk ratings, which align with the standard asset classification system utilized by bank regulators.  These classifications are divided into three groups: Not Classified (Pass), Special Mention, and Classified or Adverse Rating (Substandard, Doubtful and Loss). These terms are defined as follows:

Pass – Loans which are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less costs to acquire and sell, of any underlying collateral and generally are performing in accordance with the contractual terms.

Special Mention – Loans which have potential weaknesses that deserve management’s close attention. These loans are not adversely classified and do not expose us to sufficient risk to warrant an adverse classification.

Substandard – Loans which are inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged, if any. Loans with this classification are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans which have all the weaknesses inherent in loans classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of currently-known facts, conditions and values.

Loss – Loans which are considered by management to be uncollectible and of such little value that their continuance on our books as an asset, without establishment of a specific valuation allowance or charge-off, is not warranted.  We do not have any loan balances within this classification because, in accordance with our accounting policy, loans, or a portion thereof considered to be uncollectible are charged-off prior to the assignment of this classification.
The following tables present our held for investment bank loan portfolio by credit quality indicator. Loans classified as special mention, substandard or doubtful are all considered to be “criticized” loans.
June 30, 2023
Loans by origination fiscal year
$ in millions20232022202120202019PriorRevolving loansTotal
SBL
Risk rating:
Pass$20$18$83$44$16$38$13,999$14,218
Special mention (1)
——————44
Substandard (1)
——————55
Doubtful————————
Total SBL$20$18$83$44$16$38$14,008$14,227
C&I loans
Risk rating:
Pass$551$1,142$1,115$1,109$974$2,904$2,646$10,441
Special mention—1029——19765
Substandard———61186315157
Doubtful————————
Total C&I loans$551$1,152$1,144$1,170$992$2,986$2,668$10,663
CRE loans
Risk rating:
Pass$776$2,356$1,151$787$618$1,040$209$6,937
Special mention7—534—22—68
Substandard———21272—86
Doubtful————————
Total CRE loans$783$2,356$1,156$823$630$1,134$209$7,091
REIT loans
Risk rating:
Pass$279$201$211$103$55$175$691$1,715
Special mention————————
Substandard————————
Doubtful————————
Total REIT loans$279$201$211$103$55$175$691$1,715
Residential mortgage loans
Risk rating:
Pass$1,407$2,921$1,630$939$446$1,020$33$8,396
Special mention——2—24—8
Substandard—2———16—18
Doubtful————————
Total residential mortgage loans$1,407$2,923$1,632$939$448$1,040$33$8,422
Tax-exempt loans
Risk rating:
Pass$90$297$162$56$100$843$—$1,548
Special mention————————
Substandard————————
Doubtful————————
Total tax-exempt loans$90$297$162$56$100$843$—$1,548

(1) These balances relate to loans which were collateralized by private securities or securities with a limited trading market as of June 30, 2023.
September 30, 2022
Loans by origination fiscal year
$ in millions20222021202020192018PriorRevolving loansTotal
SBL
Risk rating:
Pass$14$27$72$44$36$41$15,063$15,297
Special mention————————
Substandard————————
Doubtful————————
Total SBL$14$27$72$44$36$41$15,063$15,297
C&I loans
Risk rating:
Pass$1,011$1,448$1,301$1,124$1,389$2,200$2,380$10,853
Special mention1028337—826166
Substandard1—602840614149
Doubtful————5——5
Total C&I loans$1,022$1,476$1,364$1,189$1,434$2,288$2,400$11,173
CRE loans
Risk rating:
Pass$1,916$1,345$892$707$816$551$176$6,403
Special mention—1——362—39
Substandard——14174630—107
Doubtful————————
Total CRE loans$1,916$1,346$906$724$898$583$176$6,549
REIT loans
Risk rating:
Pass$169$230$96$53$40$222$782$1,592
Special mention————————
Substandard————————
Doubtful————————
Total REIT loans$169$230$96$53$40$222$782$1,592
Residential mortgage loans
Risk rating:
Pass$2,984$1,704$1,023$477$290$843$35$7,356
Special mention11—2—4—8
Substandard1———120—22
Doubtful————————
Total residential mortgage loans$2,986$1,705$1,023$479$291$867$35$7,386
Tax-exempt loans
Risk rating:
Pass$264$169$56$115$192$705$—$1,501
Special mention————————
Substandard————————
Doubtful————————
Total tax-exempt loans$264$169$56$115$192$705$—$1,501
We also monitor the credit quality of the residential mortgage loan portfolio utilizing FICO scores and loan-to-value (“LTV”) ratios. A FICO score measures a borrower’s creditworthiness by considering factors such as payment and credit history. LTV measures the carrying value of the loan as a percentage of the value of the property securing the loan. The following table presents the held for investment residential mortgage loan portfolio by FICO score and by LTV ratio at origination.
June 30, 2023
Loans by origination fiscal year
$ in millions20232022202120202019PriorRevolving loansTotal
FICO score:
Below 600$7$1$3$2$3$55$—$71
600 - 699791551068530803538
700 - 7991,1102,3531,239681327624236,357
800 +2094122801708327761,437
FICO score not available224154119
Total$1,407$2,923$1,632$939$448$1,040$33$8,422
LTV ratio:
Below 80%$974$2,243$1,276$732$334$801$31$6,391
80%+43368035620711423922,031
Total$1,407$2,923$1,632$939$448$1,040$33$8,422

September 30, 2022
Loans by origination fiscal year
$ in millions20222021202020192018PriorRevolving loansTotal
FICO score:
Below 600$1$3$2$3$1$54$—$64
600 - 699155112903220684481
700 - 7992,4031,301744353219470225,512
800 +424284184874827361,306
FICO score not available353432323
Total$2,986$1,705$1,023$479$291$867$35$7,386
LTV ratio:
Below 80%$2,287$1,333$797$358$226$661$31$5,693
80%+6993722261216520641,693
Total$2,986$1,705$1,023$479$291$867$35$7,386
Allowance for credit losses

The following table presents changes in the allowance for credit losses on held for investment bank loans by portfolio segment.
$ in millionsSBLC&I loansCRE loansREIT loansResidential mortgage loansTax-exempt loansTotal
Three months ended June 30, 2023     
Balance at beginning of period
$5 $219 $100 $15 $74 $2 $415 
Provision/(benefit) for credit losses— (8)55 1 6 — 54 
Net (charge-offs)/recoveries:
      
Charge-offs— (6)(9)— — — (15)
Recoveries— — — — — — — 
Net (charge-offs)/recoveries
— (6)(9)— — — (15)
Foreign exchange translation adjustment
— 1 1 — — — 2 
Balance at end of period
$5 $206 $147 $16 $80 $2 $456 
ACL by loan portfolio segment as a % of total ACL1.1 %45.3 %32.2 %3.5 %17.5 %0.4 %100.0 %
Nine months ended June 30, 2023
Balance at beginning of period
$3 $226 $87 $21 $57 $2 $396 
Provision/(benefit) for credit losses2 10 66 (5)23 — 96 
Net (charge-offs)/recoveries:
     
Charge-offs— (30)(10)— — — (40)
Recoveries— — 3 — — — 3 
Net (charge-offs)/recoveries
— (30)(7)— — — (37)
Foreign exchange translation adjustment
— — 1 — — — 1 
Balance at end of period
$5 $206 $147 $16 $80 $2 $456 
ACL by loan portfolio segment as a % of total ACL1.1 %45.3 %32.2 %3.5 %17.5 %0.4 %100.0 %
Three months ended June 30, 2022
Balance at beginning of period
$3 $195 $71 $25 $32 $2 $328 
Initial allowance on acquired purchased credit deteriorated (“PCD”) loans— 1 2 — — — 3 
Provision/(benefit) for credit losses:
Initial provision for credit losses on non-PCD loans acquired with TriState Capital Bank2 5 19 — — — 26 
Provision/(benefit) for credit losses(1)17 — (2)16 — 30 
Total provision/(benefit) for credit losses1 22 19 (2)16 — 56 
Net (charge-offs)/recoveries:
     
Charge-offs— (11)(4)— — — (15)
Recoveries— — 5 — — — 5 
Net (charge-offs)/recoveries— (11)1 — — — (10)
Foreign exchange translation adjustment
— — — — — — — 
Balance at end of period
$4 $207 $93 $23 $48 $2 $377 
ACL by loan portfolio segment as a % of total ACL1.1 %54.9 %24.7 %6.1 %12.7 %0.5 %100.0 %
Nine months ended June 30, 2022
Balance at beginning of period
$4 $191 $66 $22 $35 $2 $320 
Initial allowance on acquired PCD loans— 1 2 — — — 3 
Provision/(benefit) for credit losses:
Initial provision for credit losses on non-PCD loans acquired with TriState Capital Bank2 5 19 — — — 26 
Provision/(benefit) for credit losses(2)24 5 1 12 — 40 
Total provision/(benefit) for credit losses— 29 24 1 12 — 66 
Net (charge-offs)/recoveries:
    
Charge-offs— (14)(4)— — — (18)
Recoveries— — 5 — 1 — 6 
Net (charge-offs)/recoveries
— (14)1 — 1 — (12)
Foreign exchange translation adjustment
— — — — — — — 
Balance at end of period
$4 $207 $93 $23 $48 $2 $377 
ACL by loan portfolio segment as a % of total ACL1.1 %54.9 %24.7 %6.1 %12.7 %0.5 %100.0 %
The allowance for credit losses on held for investment bank loans increased $41 million and $60 million during the three and nine months ended June 30, 2023, respectively, primarily resulting from provisions for credit losses of $54 million and $96 million, respectively, partially offset by net charge-offs of certain loans during the period. The provision for credit losses for the three months ended June 30, 2023 largely reflected the impacts of a weaker economic outlook for the CRE portfolio as reflected in Moody’s CRE Price Index utilized in our Current Expected Credit Losses (“CECL”) model and to a lesser extent loan downgrades. The provision for credit losses for the nine months ended June 30, 2023 primarily reflected the impacts of a weakened macroeconomic outlook for certain loan portfolios, including the aforementioned impact of a weaker economic outlook for the CRE portfolio as reflected in Moody’s CRE Price Index utilized in our CECL model as well as loan downgrades during the period. These increases were partially offset by the impact of loan repayments and sales, which had a larger impact than provisions on new loans during the period.

The allowance for credit losses on unfunded lending commitments, which is included in “Other payables” on our Condensed Consolidated Statements of Financial Condition, was $28 million, $21 million, and $19 million at June 30, 2023, March 31, 2023 and September 30, 2022, respectively. The increase in the allowance for credit losses on unfunded lending commitments for the three and nine months ended June 30, 2023 was primarily due to the aforementioned impact of a weaker economic outlook for the CRE portfolio as reflected in Moody’s CRE Price Index utilized in our CECL model.
LOANS TO FINANCIAL ADVISORS, NET
Loans to financial advisors are primarily comprised of loans originated as a part of our recruiting activities. See Note 2 of our 2022 Form 10-K for a discussion of our accounting policies related to loans to financial advisors and the related allowance for credit losses. The following table presents the balances for our loans to financial advisors and the related accrued interest receivable.
$ in millionsJune 30, 2023September 30, 2022
Affiliated with the firm as of period-end (1)
$1,142 $1,173 
No longer affiliated with the firm as of period-end (2)
11 8 
Total loans to financial advisors1,153 1,181 
Allowance for credit losses(31)(29)
Loans to financial advisors, net$1,122 $1,152 
Accrued interest receivable on loans to financial advisors (included in “Other receivables, net”)
$5 $5 
Allowance for credit losses as a percent of total loans to financial advisors
2.69 %2.46 %

(1) These loans were predominantly current.
(2) These loans were predominantly past due for a period of 180 days or more.