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LOANS TO FINANCIAL ADVISORS, NET
 9 Months Ended
Jun. 30, 2024
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 2023 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 2023 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, 2024September 30, 2023
SBL$15,429 $14,606 
C&I loans9,956 10,406 
CRE loans7,619 7,221 
REIT loans1,755 1,668 
Residential mortgage loans9,245 8,662 
Tax-exempt loans1,431 1,541 
Total loans held for investment45,435 44,104 
Held for sale loans170 145 
Total loans held for sale and investment45,605 44,249 
Allowance for credit losses(456)(474)
Bank loans, net (1)
$45,149 $43,775 
ACL as a % of total loans held for investment1.00 %1.07 %
Accrued interest receivable on bank loans (included in “Other receivables, net”)$211 $200 

(1)Bank loans, net as of June 30, 2024 and September 30, 2023 are presented net of $8 million and $52 million, respectively, of net unamortized discounts, unearned income, and deferred loan fees and costs, which included $51 million and $84 million, respectively, of net unamortized discounts that arose from the acquisition date fair value purchase discount on bank loans acquired in the TriState Capital Holdings, Inc. (“TriState Capital”) acquisition. See Note 3 of our 2023 Form 10-K for additional information.

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

Held for sale loans

We originated or purchased $856 million and $1.85 billion of loans held for sale during the three and nine months ended June 30, 2024, respectively, and $699 million and $2.13 billion during the three and nine months ended June 30, 2023, 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 $200 million and $443 million during the three and nine months ended June 30, 2024, respectively, and $221 million and $574 million during the three and nine months ended June 30, 2023, respectively. Net gains resulting from such sales were insignificant for each of the three and nine months ended June 30, 2024 and 2023.
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, 2024
Purchases$218 $— $5 $112 $335 
Sales$159 $— $— $— $159 
Nine months ended June 30, 2024
Purchases$738 $— $5 $234 $977 
Sales$322 $— $9 $— $331 
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 

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 2023 Form 10-K, corporate loan sales generally occur as part of our credit management activities.

Past due, nonaccrual, and modified loans

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, 2024      
SBL$8 $2 $10 $— $— $15,419 $15,429 
C&I loans— — — 61 — 9,895 9,956 
CRE loans— — — 70 19 7,530 7,619 
REIT loans— — — — — 1,755 1,755 
Residential mortgage loans6 — 6 — 8 9,231 9,245 
Tax-exempt loans— — — — — 1,431 1,431 
Total loans held for investment$14 $2 $16 $131 $27 $45,261 $45,435 
September 30, 2023      
SBL$9 $— $9 $— $— $14,597 $14,606 
C&I loans— — — 69 2 10,335 10,406 
CRE loans— — — 35 13 7,173 7,221 
REIT loans— — — — — 1,668 1,668 
Residential mortgage loans2 — 2 — 9 8,651 8,662 
Tax-exempt loans— — — — — 1,541 1,541 
Total loans held for investment$11 $— $11 $104 $24 $43,965 $44,104 

The preceding table includes $56 million and $96 million at June 30, 2024 and September 30, 2023, respectively, of nonaccrual loans which were current pursuant to their contractual terms.

In the normal course of business, we may modify the original terms of a loan agreement. In certain circumstances, we may agree to modify the original terms of a loan agreement to a borrower experiencing financial difficulty, which may include a borrower in default, financial distress, bankruptcy or other circumstances. Modifications of loans to borrowers experiencing financial difficulty are designed to reduce our loss exposure while providing borrowers with an opportunity to work through financial difficulties, often to avoid foreclosure or bankruptcy. Loan modifications to borrowers experiencing financial difficulty typically involve principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay (i.e., payment or maturity forbearance greater than six months), or a term extension, or any combination thereof. Modified loans to
borrowers experiencing financial difficulty are subject to our nonaccrual policies. Loans to borrowers experiencing financial difficulty which were modified during the three and nine months ended June 30, 2024 were not significant.

Prior to September 30, 2023, loan modifications to borrowers experiencing financial difficulty, to the extent significant, were considered TDRs. On October 1, 2023, we adopted ASU 2022-02, which eliminated the recognition and measurement guidance for TDRs. See Note 2 for additional information about this guidance. As of September 30, 2023, TDRs were $21 million, $3 million, and $10 million for C&I loans, CRE loans and residential first mortgage loans, respectively.

Other real estate owned, included in “Other assets” on our Condensed Consolidated Statements of Financial Condition, was insignificant at both June 30, 2024 and September 30, 2023.

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. The following table presents the amortized cost of our collateral-dependent loans and the nature of the collateral.
$ in millionsNature of collateralJune 30, 2024September 30, 2023
C&I loansCommercial real estate and other business assets$9 $11 
CRE loansOffice, multi-family residential, healthcare, medical office, and industrial real estate$134 $47 
Residential mortgage loansSingle family homes$4 $5 

CRE collateral dependent loans as of June 30, 2024 included certain loans that were placed on nonaccrual status with an associated allowance during the nine months ended June 30, 2024. The recorded investments in residential mortgage loans secured by one-to-four family residential properties for which formal foreclosure proceedings were in process were $2 million and $4 million as of June 30, 2024 and September 30, 2023, 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.
As of and for the nine months ended June 30, 2024
Loans by origination fiscal year
$ in millions20242023202220212020PriorRevolving loansTotal
SBL
Risk rating:
Pass$67$33$15$77$30$52$15,146$15,420
Special mention
————————
Substandard (1)
9——————9
Doubtful————————
Total SBL$76$33$15$77$30$52$15,146$15,429
Gross charge-offs
$—$—$—$—$—$—$—$—
C&I loans
Risk rating:
Pass$470$586$1,084$758$602$3,383$2,943$9,826
Special mention——5—3815159
Substandard————39201271
Doubtful————————
Total C&I loans$470$586$1,089$758$679$3,418$2,956$9,956
Gross charge-offs
$—$—$—$3$4$30$—$37
CRE loans
Risk rating:
Pass$682$1,176$2,210$977$690$1,205$392$7,332
Special mention—5927—3820—144
Substandard——9599616135
Doubtful—————8—8
Total CRE loans$682$1,235$2,246$982$737$1,329$408$7,619
Gross charge offs
$—$—$—$—$—$8$—$8
REIT loans
Risk rating:
Pass$145$232$182$216$95$250$558$1,678
Special mention—12———135277
Substandard————————
Doubtful————————
Total REIT loans$145$244$182$216$95$263$610$1,755
Gross charge-offs
$—$—$—$—$—$—$—$—
Residential mortgage loans
Risk rating:
Pass$1,028$1,678$2,784$1,525$874$1,304$32$9,225
Special mention——1——5—6
Substandard——3——11—14
Doubtful————————
Total residential mortgage loans$1,028$1,678$2,788$1,525$874$1,320$32$9,245
Gross charge-offs
$—$—$—$—$—$—$—$—
Tax-exempt loans
Risk rating:
Pass$62$57$266$153$54$839$—$1,431
Special mention————————
Substandard————————
Doubtful————————
Total tax-exempt loans$62$57$266$153$54$839$—$1,431
Gross charge-offs
$—$—$—$—$—$—$—$—

(1)As of June 30, 2024, these balances relate to loans which were collateralized by private securities or other financial instruments with a limited trading market.
September 30, 2023
Loans by origination fiscal year
$ in millions20232022202120202019PriorRevolving loansTotal
SBL
Risk rating:
Pass$74$18$83$40$15$59$14,293$14,582
Special mention————————
Substandard (1)
——————2424
Doubtful————————
Total SBL$74$18$83$40$15$59$14,317$14,606
C&I loans
Risk rating:
Pass$672$1,148$1,091$965$1,020$2,675$2,564$10,135
Special mention—52969——4107
Substandard———62176517161
Doubtful
—————3—3
Total C&I loans$672$1,153$1,120$1,096$1,037$2,743$2,585$10,406
CRE loans
Risk rating:
Pass$1,130$2,344$1,115$766$604$845$220$7,024
Special mention7——14555—81
Substandard——5321267—116
Doubtful————————
Total CRE loans$1,137$2,344$1,120$812$621$967$220$7,221
REIT loans
Risk rating:
Pass$258$200$214$101$172$176$547$1,668
Special mention————————
Substandard————————
Doubtful————————
Total REIT loans$258$200$214$101$172$176$547$1,668
Residential mortgage loans
Risk rating:
Pass$1,765$2,889$1,607$919$433$992$31$8,636
Special mention——2—25—9
Substandard—2—1—14—17
Doubtful————————
Total residential mortgage loans$1,765$2,891$1,609$920$435$1,011$31$8,662
Tax-exempt loans
Risk rating:
Pass$147$279$161$54$97$803$—$1,541
Special mention————————
Substandard————————
Doubtful————————
Total tax-exempt loans$147$279$161$54$97$803$—$1,541

(1)As of September 30, 2023, these balances relate to loans which were collateralized by private securities or other financial instruments with a limited trading market.
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 LTV ratio at origination and by FICO score.
June 30, 2024
Loans by origination fiscal year
$ in millions20242023202220212020PriorRevolving loansTotal
FICO score:
Below 600$1$7$13$5$3$15$—$44
600 - 699435311152451293436
700 - 7998381,0121,599806480652195,406
800 +1456021,06566034552093,346
FICO score not available14—214113
Total$1,028$1,678$2,788$1,525$874$1,320$32$9,245
LTV ratio:
Below 80%$757$1,185$2,144$1,201$677$1,006$31$7,001
80%+27149364432419731412,244
Total$1,028$1,678$2,788$1,525$874$1,320$32$9,245

September 30, 2023
Loans by origination fiscal year
$ in millions20232022202120202019PriorRevolving loansTotal
FICO score:
Below 600$7$1$3$2$3$55$—$71
600 - 699991541068330794555
700 - 7991,3812,3271,218666320609206,541
800 +2744072791687726561,476
FICO score not available423153119
Total$1,765$2,891$1,609$920$435$1,011$31$8,662
LTV ratio:
Below 80%$1,244$2,218$1,257$716$323$780$29$6,567
80%+52167335220411223122,095
Total$1,765$2,891$1,609$920$435$1,011$31$8,662
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, 2024     
Balance at beginning of period
$6 $196 $181 $19 $67 $2 $471 
Provision/(benefit) for credit losses(1)(20)16 1 (6)— (10)
Net (charge-offs)/recoveries:
      
Charge-offs— (6)(1)— — — (7)
Recoveries— — — — 1 — 1 
Net (charge-offs)/recoveries
— (6)(1)— 1 — (6)
Foreign exchange translation adjustment
— — 1 — — — 1 
Balance at end of period
$5 $170 $197 $20 $62 $2 $456 
Nine months ended June 30, 2024
Balance at beginning of period
$7 $214 $161 $16 $74 $2 $474 
Provision/(benefit) for credit losses(2)(9)43 4 (13)— 23 
Net (charge-offs)/recoveries:
     
Charge-offs— (37)(8)— — — (45)
Recoveries— 2 — — 1 — 3 
Net (charge-offs)/recoveries
— (35)(8)— 1 — (42)
Foreign exchange translation adjustment
— — 1 — — — 1 
Balance at end of period
$5 $170 $197 $20 $62 $2 $456 
ACL by loan portfolio segment as a % of total ACL1.1 %37.3 %43.2 %4.4 %13.6 %0.4 %100.0 %
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 
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 %

The allowance for credit losses on held for investment bank loans decreased $15 million during the three months ended June 30, 2024, primarily resulting from a bank loan benefit for credit losses of $10 million and net charge-offs on certain loans in the current quarter. The bank loan benefit for credit losses for the three months ended June 30, 2024 primarily reflected the positive impacts of net loan repayments, sales, and improved loan grades on the C&I loan portfolio, and an improvement in forecasted home prices on the residential mortgage portfolio, partially offset by the impact of loan downgrades in our CRE portfolio.

The allowance for credit losses on held for investment bank loans decreased $18 million during the nine months ended June 30, 2024, primarily resulting from net-charges off during the period, partially offset by the bank loan provision for credit losses of $23 million. The bank loan provision for credit losses for the nine months ended June 30, 2024 primarily reflected the impacts
of loan growth, specific reserves, loan downgrades, and charge-offs in our C&I and CRE loan portfolios, partially offset by the favorable impacts of an improved economic forecast, loan repayments, and loan sales.
The allowance for credit losses on unfunded lending commitments, which is included in “Other payables” on our Condensed Consolidated Statements of Financial Condition, was $22 million, $20 million, and $22 million at June 30, 2024, March 31, 2024, and September 30, 2023, respectively.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 2023 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, 2024September 30, 2023
Affiliated with the firm as of period-end (1)
$1,282 $1,158 
No longer affiliated with the firm as of period-end (2)
14 10 
Total loans to financial advisors1,296 1,168 
Allowance for credit losses(38)(32)
Loans to financial advisors, net$1,258 $1,136 
Accrued interest receivable on loans to financial advisors (included in “Other receivables, net”)
$8 $6 
Allowance for credit losses as a percent of total loans to financial advisors
2.93 %2.74 %

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