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Loans and Allowance for Credit Losses (Tables)
 9 Months Ended
Sep. 30, 2020
Receivables [Abstract]  
Net Loans
The following table presents our recorded investment in loans, by segment, as of the dates indicated:
(In millions)
September 30, 2020December 31, 2019
Domestic(1):
Commercial and financial:
Fund Finance (2)
$10,012 $10,270 
Leveraged loans
3,038 3,342 
Overdrafts
2,223 1,739 
Other(3)
2,735 3,411 
Commercial real estate
1,944 1,766 
Total domestic
19,952 20,528 
Foreign(1):
Commercial and financial:
Fund Finance(2)
4,262 3,145 
Leveraged loans
1,222 1,119 
Overdrafts
1,570 1,517 
Other(3)
29 — 
Total foreign
7,083 5,781 
Total loans
27,035 26,309 
Allowance for loan losses
(134)(74)
Loans, net of allowance
$26,901 $26,235 
(1) Domestic and foreign categorization is based on the borrower’s country of domicile.
(2) Fund finance loans include primarily $5,345 million loans to real money funds, $7,654 million private equity capital call finance loans and $860 million loans to business development companies as of September 30, 2020, compared to $6,040 million loans to real money funds, $6,076 million private equity capital call finance loans and $932 million loans to business development companies as of December 31, 2019.
(3) Includes $1,859 million securities finance loans, $850 million loans to municipalities and $55 million other loans as of September 30, 2020 and $2,537 million securities finance loans, $848 million loans to municipalities and $26 million other loans as of December 31, 2019.
Amortized cost basis, by year of origination and credit quality indicator
The following tables present our recorded investment in each class of loans by credit quality indicator as of the dates indicated:
September 30, 2020Commercial and FinancialCommercial Real EstateTotal Loans
(In millions)
Investment grade$20,095 $1,755 $21,850 
Speculative4,811 189 5,000 
Special mention126 — 126 
Substandard35 — 35 
Doubtful24 — 24 
Total(1)
$25,091 $1,944 $27,035 
December 31, 2019Commercial and FinancialCommercial Real EstateTotal Loans 
(In millions)
Investment grade$19,501 $1,766 $21,267 
Speculative5,008 — 5,008 
Special mention25 — 25 
Substandard9 — 9 
Total(1)
$24,543 $1,766 $26,309 

(1) Loans Include $3,793 million and $3,256 million of overdrafts as of September 30, 2020 and December 31, 2019, respectively. Overdrafts are short-term in nature and do not present a significant credit risk to us.
The following table presents the amortized cost basis, by year of origination and credit quality indicator as of September 30, 2020. For origination years before the fifth annual period, we present the aggregate amortized cost basis of loans. For purchased loans, the date of issuance is used to determine the year of origination, not the date of acquisition. For modified, extended or renewed lending arrangements, we evaluate whether a credit event has occurred which would consider the loan to be a new arrangement.
(In millions)20202019201820172016PriorRevolving Loans
Total(1)(2)
Domestic loans:
Commercial and financial:
Risk Rating:
Investment grade$2,206 $420 $5 $141 $200 $— $11,388 $14,360 
Speculative391 943 877 694 43 — 537 3,485 
Special mention— 28 59 39 — — — 126 
Substandard— 5 — — 30 — — 35 
Doubtful— 2 — — — — — 2 
Total commercial and financing$2,597 $1,398 $941 $874 $273 $— $11,925 $18,008 
Commercial real estate:
Risk Rating:
Investment grade$178 $417 $657 $277 $197 $29 $— $1,755 
Speculative— 132 57 — — — — 189 
Total commercial real estate$178 $549 $714 $277 $197 $29 $— $1,944 
Non-U.S. loans:
Commercial and financial:
Risk Rating:
Investment grade$1,527 $— $— $— $— $— $4,208 $5,735 
Speculative258 401 337 157 26 64 83 1,326 
Doubtful— — — 22 — — — 22 
Total commercial and financing$1,785 $401 $337 $179 $26 $64 $4,291 $7,083 
Total loans$4,560 $2,348 $1,992 $1,330 $496 $93 $16,216 $27,035 
Off-balance sheet commitments and guarantees:
Unfunded credit facilities$— $— $— $— $— $— $33,736 $33,736 
Indemnified securities financing379,052 — — — — — — 379,052 
Standby letters of credit— — — — — — 3,240 3,240 
Total off-balance sheet commitments and guarantees$379,052 $— $— $— $— $— $36,976 $416,028 
Total financing receivables and off-balance sheet commitments and guarantees$383,612 $2,348 $1,992 $1,330 $496 $93 $53,192 $443,063 
(1) Any reserve associated with accrued interest is not material.
(2) As of September 30, 2020, accrued interest receivable of $111 million included in the amortized cost basis of loans has been excluded from the amortized cost basis within this table.
Schedule of Activity in the Allowance for Loan Losses
The following table presents the activity in the allowance for credit losses by portfolio and class for the periods indicated:
Three Months Ended September 30, 2020
Commercial and Financial
(In millions)Leveraged Loans
Other Loans(1)
Commercial Real EstateHeld-to-Maturity SecuritiesOff-Balance Sheet CommitmentsAll Other Total Credit Reserve
Allowance for credit losses:
Beginning balance$113 $20 $8 $3 $18 $1 $163 
Charge-offs(2)
(14)— — — — — (14)
Provision3 — — — (3)— — 
FX translation4 — — — — — 4 
Ending balance$106 $20 $8 $3 $15 $1 $153 
(1) Includes $15 million allowance for credit losses on Fund Finance loans and $5 million on other loans.
(2) Related to the sale of leveraged loans in the third quarter of 2020.
Nine Months Ended September 30, 2020
Commercial and Financial
(In millions)Leveraged LoansOther LoansCommercial Real EstateHeld-to-Maturity SecuritiesOff-Balance Sheet CommitmentsAll OtherTotal Credit Reserve
Allowance for credit losses:
Beginning balance
$61 $10 $2 $— $19 $1 $93 
Charge-offs(1)
(33)— — — — — (33)
Provision
73 10 6 3 (4)— 88 
FX translation
5 — — — — — 5 
Ending balance
$106 $20 $8 $3 $15 $1 $153 
(1) Primarily related to the sale of leveraged loans in the third and second quarters of 2020.
Loans are reviewed on a regular basis, and any provisions for loan losses that are recorded reflect management's estimate of the amount necessary to maintain the allowance for loan losses at a level considered appropriate to absorb estimated incurred losses in the loan portfolio. We recorded no provision for credit losses in the third quarter of 2020, reflecting slightly improving economic forecasts and limited negative credit migration. The economic forecast utilized in the third quarter of 2020 reflects a slightly improving economic outlook relative to the second quarter of 2020, with the expectation of an economic recovery over the coming quarters. However, the economic forecast remains highly uncertain, particularly since future economic activity remains dependent on the impact of the COVID-19 pandemic. If future data and forecasts deviate relative to the forecasts utilized to determine our allowance for credit losses as of September 30, 2020, or if credit risk migration is higher or lower than forecasted for reasons independent of the economic forecast, our allowance for credit losses will also change.
Allowance for Loan Losses under Incurred Loss Methodology for the period ended September 30, 2019
The following table presents activity in the allowance for loan losses as of September 30, 2019 under the incurred loss methodology:
(In millions)Three Months Ended September 30, 2019
Allowance for loan losses:
Beginning balance$72 
Provision for credit losses(1)
2 
Charge-offs(1)
(2)
Other(2)
(1)
Ending balance$71 
(In millions)Nine Months Ended September 30, 2019
Allowance for loan losses:
Beginning balance$67 
Provision for credit losses(1)
7 
Charge-offs(1)
(2)
Other(2)
(1)
Ending balance$71 
(1) The provisions and charge offs for credit losses were primarily attributable to exposure to purchased leveraged loans to non-investment grade loans.
(2) Consists primarily of FX translation.