FAIR VALUE

12 Months Ended

Sep. 30, 2024

Fair Value Disclosures [Abstract]

FAIR VALUE

FAIR VALUE

Our “Financial instruments” and “Financial instrument liabilities” on our Consolidated Statements of Financial Condition are recorded at fair value. See Note 2 for additional information about such instruments and our significant accounting policies related to fair value. The following tables present assets and liabilities measured at fair value on a recurring basis.

$ in millions	Level 1		Level 2		Level 3		Netting adjustments (1)		Balance as of September 30, 2024
Assets at fair value on a recurring basis:
Trading assets:
Municipal and provincial obligations	$	2	$	304	$	—	$	—	$	306
Corporate obligations	12		630		—		—		642
Government and agency obligations	49		144		—		—		193
Agency mortgage-backed securities (“MBS”), collateralized mortgage obligations (“CMOs”) and asset-backed securities (“ABS”)	—		205		—		—		205
Non-agency CMOs and ABS	—		95		—		—		95
Total debt securities	63		1,378		—		—		1,441
Equity securities	14		2		—		—		16
Brokered certificates of deposit	—		20		—		—		20
Other	—		—		3		—		3
Total trading assets	77		1,400		3		—		1,480
Available-for-sale securities (2)	704		7,556		—		—		8,260
Derivative assets:
Interest rate	3		335		—		(246)		92
Foreign exchange	—		7		—		—		7
Other	—		—		4		—		4
Total derivative assets	3		342		4		(246)		103
All other investments:
Government and agency obligations (3)	91		—		—		—		91
Other	101		1		7		—		109
Total all other investments	192		1		7		—		200
Other assets - client-owned fractional shares	133		—		—		—		133
Subtotal	1,109		9,299		14		(246)		10,176
Other investments - private equity - measured at NAV									102
Total assets at fair value on a recurring basis	$	1,109	$	9,299	$	14	$	(246)	$	10,278
Liabilities at fair value on a recurring basis:
Trading liabilities:
Municipal and provincial obligations	$	5	$	—	$	—	$	—	$	5
Corporate obligations	—		598		—		—		598
Government and agency obligations	243		6		—		—		249
Agency MBS and CMOs	—		26		—		—		26
Total debt securities	248		630		—		—		878
Equity securities	97		1		—		—		98
Total trading liabilities	345		631		—		—		976
Derivative liabilities:
Interest rate	3		343		—		(123)		223
Foreign exchange	—		1		—		—		1
Total derivative liabilities	3		344		—		(123)		224
Other payables - repurchase liabilities related to client-owned fractional shares	133		—		—		—		133
Total liabilities at fair value on a recurring basis	$	481	$	975	$	—	$	(123)	$	1,333

$ in millions	Level 1		Level 2		Level 3		Netting adjustments (1)		Balance as of September 30, 2023
Assets at fair value on a recurring basis:
Trading assets:
Municipal and provincial obligations	$	—	$	239	$	—	$	—	$	239
Corporate obligations	22		620		—		—		642
Government and agency obligations	24		117		—		—		141
Agency MBS, CMOs, and ABS	—		35		—		—		35
Non-agency CMOs and ABS	—		68		—		—		68
Total debt securities	46		1,079		—		—		1,125
Equity securities	20		2		—		—		22
Brokered certificates of deposit	—		36		—		—		36
Other	—		—		4		—		4
Total trading assets	66		1,117		4		—		1,187
Available-for-sale securities (2)	1,240		7,941		—		—		9,181
Derivative assets:
Interest rate	14		503		—		(261)		256
Foreign exchange	—		9		—		—		9
Total derivative assets	14		512		—		(261)		265
All other investments:
Government and agency obligations (3)	71		—		—		—		71
Other	102		2		30		—		134
Total all other investments	173		2		30		—		205
Other assets - client-owned fractional shares	98		—		—		—		98
Subtotal	1,591		9,572		34		(261)		10,936
Other investments - private equity - measured at NAV									101
Total assets at fair value on a recurring basis	$	1,591	$	9,572	$	34	$	(261)	$	11,037
Liabilities at fair value on a recurring basis:
Trading liabilities:
Municipal and provincial obligations	$	10	$	—	$	—	$	—	$	10
Corporate obligations	—		514		—		—		514
Government and agency obligations	161		1		—		—		162
Total debt securities	171		515		—		—		686
Equity securities	30		—		—		—		30
Total trading liabilities	201		515		—		—		716
Derivative liabilities:
Interest rate	13		563		—		(88)		488
Foreign exchange	—		2		—		—		2
Total derivative liabilities	13		565		—		(88)		490
Other payables - repurchase liabilities related to client-owned fractional shares	98		—		—		—		98
Total liabilities at fair value on a recurring basis	$	312	$	1,080	$	—	$	(88)	$	1,304

(1)Netting adjustments represent the impact of counterparty and collateral netting on our derivative balances included on our Consolidated Statements of Financial Condition. See Note 6 for additional information.

(2)Our available-for-sale securities primarily consist of agency MBS, agency CMOs and U.S. Treasuries. See Note 5 for additional information.

(3)These assets are primarily comprised of U.S. Treasuries purchased to meet certain deposit requirements with clearing organizations.

Level 3 recurring fair value measurements

The following tables present the changes in fair value for Level 3 assets and liabilities measured at fair value on a recurring basis. The realized and unrealized gains and losses in the tables may include changes in fair value that were attributable to both observable and unobservable inputs. In the following tables, gains/(losses) on trading and derivative instruments are reported in “Principal transactions” and gains/(losses) on other investments are reported in “Other” revenues on our Consolidated Statements of Income and Comprehensive Income.

Year ended September 30, 2024 Level 3 instruments at fair value
	Financial assets
	Trading assets		Derivative assets		Other investments
$ in millions	Other		Other		All other
Fair value beginning of year	$	4	$	—	$	30
Total gains/(losses) included in earnings	—		4		(3)
Purchases and contributions	100		—		—
Sales and distributions	(101)		—		(20)
Transfers:
Into Level 3	—		—		—
Out of Level 3	—		—		—
Fair value end of year	$	3	$	4	$	7
Unrealized gains/(losses) for the year included in earnings for instruments held at the end of the year	$	(3)	$	4	$	—

Year ended September 30, 2023 Level 3 instruments at fair value
	Financial assets				Financial liabilities
	Trading assets		Other investments		Derivative liabilities
$ in millions	Other		All other		Other
Fair value beginning of year	$	1	$	29	$	(3)
Total gains/(losses) included in earnings	(1)		1		2
Purchases and contributions	70		—		—
Sales and distributions	(66)		—		1
Transfers:
Into Level 3	—		—		—
Out of Level 3	—		—		—
Fair value end of year	$	4	$	30	$	—
Unrealized gains/(losses) for the year included in earnings for instruments held at the end of the year	$	—	$	—	$	—

As of September 30, 2024, 12% of our assets and 2% of our liabilities were measured at fair value on a recurring basis. In comparison, as of September 30, 2023, 14% of our assets and 2% of our liabilities were measured at fair value on a recurring basis. As of both September 30, 2024 and 2023, Level 3 assets represented less than 1% of our assets measured at fair value on a recurring basis.

Investments in private equity measured at net asset value per share

As a practical expedient, we utilize NAV or its equivalent to determine the recorded value of a portion of our private equity investments portfolio.  We utilize NAV when the fund investment does not have a readily determinable fair value and the NAV of the fund is calculated in a manner consistent with the measurement principles of investment company accounting, including measurement of the investments at fair value.

Our private equity portfolio as of September 30, 2024 primarily included investments in third-party funds, including growth equity, venture capital, and mezzanine lending fund investments. Our investments cannot be redeemed directly with the funds.

Our investments are monetized through the liquidation of underlying assets of fund investments, the timing of which is uncertain.

The following table presents the recorded value and unfunded commitments related to our private equity investments portfolio.

$ in millions	Recorded value		Unfunded commitment
September 30, 2024
Private equity investments measured at NAV	$	102	$	26
Private equity investments not measured at NAV	7
Total private equity investments	$	109
September 30, 2023
Private equity investments measured at NAV	$	101	$	29
Private equity investments not measured at NAV	7
Total private equity investments	$	108

Financial instruments measured at fair value on a nonrecurring basis

The following table presents assets measured at fair value on a nonrecurring basis along with the valuation techniques and significant unobservable inputs used in the valuation of the assets classified as level 3. These inputs represent those that a market participant would take into account when pricing these instruments. Weighted averages are calculated by weighting each input by the relative fair value of the related financial instrument.

$ in millions	Level 2		Level 3		Total fair value		Valuation technique(s)	Unobservable input	Range (weighted-average)
September 30, 2024
Bank loans:
Residential mortgage loans	$	2	$	7	$	9	Collateral or discounted cash flow (1)	Prepayment rate	7 yrs. - 12 yrs. (10.5 yrs.)
Corporate loans	$	—	$	106	$	106	Collateral or discounted cash flow (1)	Recovery rate	0% - 37% (37%)
September 30, 2023
Bank loans:
Residential mortgage loans	$	2	$	8	$	10	Collateral or discounted cash flow (1)	Prepayment rate	7 yrs. - 12 yrs. (10.3 yrs.)
Corporate loans	$	—	$	84	$	84	Collateral or discounted cash flow (1)	Recovery rate	22% - 65% (53%)
Loans held for sale	$	2	$	—	$	2	N/A	N/A	N/A

(1)The valuation techniques used to estimate the fair values are based on collateral value less selling costs for the collateral-dependent loans and discounted cash flows for loans that are not collateral-dependent. Unobservable inputs used in the collateral valuation technique are not meaningful and unobservable inputs used in the discounted cash flow valuation technique are presented in the table.

Financial instruments not recorded at fair value

Many, but not all, of the financial instruments we hold were recorded at fair value on the Consolidated Statements of Financial Condition.  The following table presents the estimated fair value and fair value hierarchy of financial assets and liabilities that are not recorded at fair value on the Consolidated Statements of Financial Condition at September 30, 2024 and 2023. This table excludes financial instruments that are carried at amounts which approximate fair value.

$ in millions	Level 2		Level 3		Total estimated fair value		Carrying amount
September 30, 2024
Financial assets:
Bank loans, net	$	183	$	45,002	$	45,185	$	45,879
Financial liabilities:
Bank deposits - certificates of deposit	$	2,623	$	—	$	2,623	$	2,612
Other borrowings - subordinated notes payable	$	97	$	—	$	97	$	99
Senior notes payable	$	1,874	$	—	$	1,874	$	2,040
September 30, 2023
Financial assets:
Bank loans, net	$	142	$	42,622	$	42,764	$	43,679
Financial liabilities:
Bank deposits - certificates of deposit	$	2,817	$	—	$	2,817	$	2,831
Other borrowings - subordinated notes payable	$	94	$	—	$	94	$	100
Senior notes payable	$	1,640	$	—	$	1,640	$	2,039

Short-term financial instruments: The carrying value of short-term financial instruments, such as cash and cash equivalents, including amounts segregated for regulatory purposes and restricted cash, and the majority of collateralized agreements and collateralized financings are recorded at amounts that approximate the fair value of these instruments. These financial instruments generally expose us to limited credit risk and have no stated maturities or have short-term maturities and carry interest rates that approximate market rates. Under the fair value hierarchy, cash and cash equivalents, including amounts segregated for regulatory purposes and restricted cash, are classified as Level 1 and collateralized agreements and financings are classified as Level 2.

Bank loans, net: These financial instruments are primarily comprised of loans originated or purchased by our Bank segment and include SBL, C&I loans, commercial and residential real estate loans, REIT loans, and tax-exempt loans intended to be held until maturity or payoff. These financial instruments are primarily recorded at amounts that result from the application of the methodologies for loans held for investment summarized in Note 2. Certain bank loans are held for sale, which are carried at the lower of cost or market value. A portion of these loans held for sale, as well as certain held for investment loans which have been written-down, are recorded at fair value as nonrecurring fair value measurements and therefore are excluded from the preceding table.

The fair values for both variable and fixed-rate loans held for investment are estimated using a discounted cash flow analysis based on interest rates currently being offered for loans with similar terms to borrowers of similar credit quality, which includes our estimate of future credit losses expected to be incurred. The majority of these loans are classified as Level 3 under the fair value hierarchy. Refer to Note 2 for information regarding the fair value policies specific to loans held for sale.

Receivables and other assets: Brokerage client receivables, other receivables, and certain other assets are recorded at amounts that approximate fair value and are classified as Levels 2 and 3 under the fair value hierarchy. As specified under GAAP, the FHLB and FRB stock are recorded at cost, which we have determined to approximate their estimated fair value, and are classified as Level 2 under the fair value hierarchy.

Loans to financial advisors, net: These financial instruments are primarily comprised of loans to financial advisors, primarily offered for recruiting and retention purposes. Loans to financial advisors, net are recorded at amounts that approximate fair value and are classified as Level 2 under the fair value hierarchy. Refer to Note 2 for information regarding loans to financial advisors, net.

Bank deposits: The fair values for demand deposits are equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts of money market and savings accounts approximate their fair values as substantially all of these deposits are variable-rate accounts and short-term in nature. Demand deposits and money market and savings accounts are classified as Level 2 under the fair value hierarchy. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies current interest rates based on the remaining term of the deposit. Fixed-rate certificates of deposit were classified as Level 2 under the fair value hierarchy.

Payables: Brokerage client payables and other payables are recorded at amounts that approximate fair value and are classified as Level 2 under the fair value hierarchy.

Other borrowings: Other borrowings primarily include 5.75% fixed-to-floating subordinated notes due 2030 and our Bank segment’s borrowings from the FHLB. The fair value of the subordinated notes is estimated by discounting scheduled cash flows through the estimated maturity using market rates for borrowings of similar maturities and is classified as Level 2 under the fair value hierarchy. FHLB advances reflect terms that approximate current market rates for similar loans and therefore, their carrying value approximates fair value. Our FHLB advances are classified as Level 2 under the fair value hierarchy.

Senior notes payable: The fair value of our senior notes payable is calculated based upon recent trades of those debt securities in the market. Our senior notes payable are classified as Level 2 under the fair value hierarchy.