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Loans and Allowance for Credit Losses
 3 Months Ended
Mar. 31, 2025
Credit Loss [Abstract]  
Loans and Allowance for Credit Losses Loans and Allowance for Credit Losses
We segregate our loans into two segments: commercial and financial loans and commercial real estate loans. We further classify commercial and
financial loans as fund finance loans, leveraged loans, collateralized loan obligations in loan form, overdrafts and other loans. These classifications reflect their risk characteristics, their initial measurement attributes and the methods we use to monitor and assess credit risk. For additional information on our loans, including our internal risk-rating system used to assess our risk of credit loss for each loan, refer to pages 141 to 146 in Note 4 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2024 Form 10-K.
The following table presents our recorded investment in loans, by segment, as of the dates indicated:
(In millions)March 31, 2025December 31, 2024
Domestic(1):
Commercial and financial:
Fund finance(2)
$16,413 $16,347 
Leveraged loans2,795 2,742 
Overdrafts1,596 1,208 
Collateralized loan obligations in loan form95 50 
Other(3)
2,691 3,220 
Commercial real estate2,696 2,842 
Total domestic$26,286 $26,409 
Foreign(1):
Commercial and financial:
Fund finance(2)
$6,736 $6,601 
Leveraged loans1,069 1,082 
Overdrafts1,424 772 
Collateralized loan obligations in loan form9,170 8,336 
Total foreign18,399 16,791 
Total loans(4)
44,685 43,200 
Allowance for credit losses(176)(174)
Loans, net of allowance$44,509 $43,026 
(1) Domestic and foreign categorization is based on the borrower’s country of domicile.
(2) Fund finance loans include primarily $11.78 billion private equity capital call finance loans, $7.84 billion loans to real money funds and $1.50 billion loans to business development companies as of March 31, 2025, compared to $11.54 billion private equity capital call finance loans, $8.09 billion loans to real money funds and $1.44 billion loans to business development companies as of December 31, 2024.
(3) Includes $2.48 billion securities finance loans and $214 million loans to municipalities as of March 31, 2025 and $3.01 billion securities finance loans and $214 million loans to municipalities as of December 31, 2024.
(4) As of March 31, 2025, excluding overdrafts, floating rate loans totaled $38.90 billion and fixed rate loans totaled $2.76 billion. We have entered into interest rate swap agreements to hedge the forecasted cash flows associated with EURIBOR indexed floating-rate loans. See Note 10 to the consolidated financial statements in our 2024 Form 10-K for additional details.
The commercial and financial segment is composed of primarily fund finance loans, purchased leveraged loans, purchased collateralized loan obligations in loan form, overdrafts and other loans. Fund finance loans are composed of revolving credit lines providing liquidity and leverage to mutual fund and private equity fund clients. These classifications
reflect their risk characteristics, their initial measurement attributes and the methods we use to monitor and assess credit risk.
Certain loans are pledged as collateral for access to the Federal Reserve's discount window. As of March 31, 2025 and December 31, 2024, the loans pledged as collateral totaled $14.40 billion and $13.90 billion, respectively.
As of March 31, 2025, we had three loans totaling $227 million on non-accrual status, of which one loan totaling $101 million was more than 90 days contractually past due. As of December 31, 2024, we had two loans totaling $191 million, on non-accrual status, of which one loan totaling $101 million was more than 90 days contractually past due.
In the first quarter of 2025, we purchased $1.76 billion of collateralized loan obligations in loan form, which were all investment grade.
We sold $100 million of leveraged loans in first quarter of 2025, of which $20 million remained unsettled and was held-for-sale and carried at the lower of cost or market as of March 31, 2025. We recorded a charge-off against the allowance for these loans of $9 million in the first quarter of 2025.
Allowance for Credit Losses
We recognize an allowance for credit losses in accordance with ASC 326 for financial assets held at amortized cost and off-balance sheet commitments. The allowance for credit losses is reviewed on a regular basis, and any provision for credit losses is recorded to reflect the amount necessary to maintain the allowance for expected credit losses at a level which represents what management does not expect to recover due to expected credit losses. For additional discussion on the allowance for credit losses for investment securities, please refer to Note 3 to the consolidated financial statements in this Form 10-Q.
When the allowance is recorded, a provision for credit loss expense is recognized in net income. The allowance for credit losses for financial assets (excluding investment securities, as discussed in Note 3) represents the portion of the amortized cost basis, including accrued interest for financial assets held at amortized cost, which management does not expect to recover due to expected credit losses and is presented on the statement of condition as an offset to the amortized cost basis. The accrued interest balance is presented separately on the statement of condition within accrued interest and fees receivable. The allowance for off-balance sheet commitments is presented within other liabilities. Loans are charged off to the allowance for credit losses in the reporting period in which either an event occurs that confirms the existence of a loss on a loan, including a sale of a
loan below its carrying value, or a portion of a loan is determined to be uncollectible.
The allowance for credit losses may be determined using various methods, including discounted cash flow methods, loss-rate methods, probability-of-default methods, and other quantitative or qualitative methods as determined by us. The method used to estimate expected credit losses may vary depending on the type of financial asset, our ability to predict the timing of cash flows, and the information available to us.
The allowance for credit losses as reported in our consolidated statement of condition is adjusted by the provision for credit losses, which is reported in earnings, and reduced by the charge-off of principal amounts, net of recoveries.
We measure expected credit losses of financial assets on a collective (pool) basis when similar risk characteristics exist. Each reporting period, we assess whether the assets in the pool continue to display similar risk characteristics.
For a financial asset that does not share risk characteristics with other assets, expected credit losses are measured separately using one or more of the methods noted above. As of March 31, 2025, we had four loans totaling $49 million in the commercial and financial segment and five loans totaling $401 million in the commercial real estate segment that no longer met the similar risk characteristics of their collective pool. As of March 31, 2025, $100 million of our allowance for credit losses was related to these loans.
When the asset is collateral-dependent, which means when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral, the allowance for credit losses are determined based on the fair value of the collateral, adjusted for the estimated costs to sell.
Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. In future periods, factors and forecasts then prevailing may result in significant changes in the allowance for credit losses in those future periods.
We estimate credit losses over the contractual life of the financial asset, while factoring in prepayment activity, where supported by data, over a three year reasonable and supportable forecast period. We utilize a baseline, upside and downside scenario which are applied based on a probability weighting, in order to better reflect management’s expectation of expected credit losses given existing market conditions and the changes in the economic environment. The multiple scenarios are based on a
three-year horizon (or less depending on contractual maturity) and then revert linearly over a two-year period to a ten-year historical average thereafter. The contractual term excludes expected extensions, renewals and modifications, but includes prepayment assumptions where applicable.
As part of our allowance methodology, we establish qualitative reserves to address any risks inherent in our portfolio that are not addressed through our quantitative reserve assessment. These factors may relate to, among other things, legislation changes or new regulation, credit concentration, loan markets, scenario weighting and overall model limitations. The qualitative adjustments are applied to our portfolio of financial instruments under the existing governance structure and are inherently judgmental.
For additional information on the allowance for credit losses, refer to pages 141 to 146 in Note 4 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2024 Form 10-K.
Credit Quality
Credit quality for financial assets held at amortized cost is continuously monitored by management and is reflected within the allowance for credit losses.
We use an internal risk-rating system to assess our risk of credit loss for each loan. This risk-rating process incorporates the use of risk-rating tools in conjunction with management judgment. Qualitative and quantitative inputs are captured in a systematic manner, and following a formal review and approval process, an internal credit rating based on our credit scale is assigned.
When computing allowance levels, credit loss assumptions are estimated using models that categorize asset pools based on loss history, delinquency status and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. In future periods, evaluations of the overall asset portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the allowance and credit loss expense in those future periods.
Credit quality is assessed and monitored by evaluating various attributes in order to enable timely detection of any concerns with the customer’s credit rating. The results of those evaluations are utilized in underwriting new loans and transactions with
counterparties and in our process for estimation of expected credit losses.
In assessing the risk rating assigned to each individual loan, among the factors considered are the borrower's debt capacity, collateral coverage, payment history and delinquency experience, financial flexibility and earnings strength, the expected amounts and source of repayment, the level and nature of contingencies, if any, and the industry and geography in which the borrower operates. These factors are based on an evaluation of historical and current information, and involve subjective assessment and interpretation. Credit counterparties are evaluated and risk-rated on an individual basis at least annually. Management considers the ratings to be current as of March 31, 2025.
Our internal risk rating methodology assigns risk ratings to counterparties ranging from Investment Grade, Speculative, Special Mention, Substandard, Doubtful and Loss.
•Investment Grade: Counterparties with strong credit quality and low expected credit risk and probability of default. Approximately 87% of our loans were rated as investment grade as of March 31, 2025 with external credit ratings, or equivalent, of "BBB-" or better.
•Speculative: Counterparties that have the ability to repay but face significant uncertainties, such as adverse business or financial circumstances that could affect credit risk or economic downturns. Loans to counterparties rated as speculative account for approximately 11% of our loans as of March 31, 2025, and are concentrated in leveraged loans. Approximately 91% of those leveraged loans have an external credit rating, or equivalent, of "BB" or "B" as of March 31, 2025.
•Special Mention: Counterparties with potential weaknesses that, if uncorrected, may result in deterioration of repayment prospects.
•Substandard: Counterparties with well-defined weakness that jeopardizes repayment with the possibility we will sustain some loss.
•Doubtful: Counterparties with well-defined weakness which make collection or liquidation in full highly questionable and improbable.
•Loss: Counterparties which are uncollectible or have little value.
The following tables present our recorded loans to counterparties by risk rating, as noted above, as of the dates indicated:
March 31, 2025Commercial and FinancialCommercial Real EstateTotal Loans
(In millions)
Investment grade$37,104 $1,747 $38,851 
Speculative4,651 463 5,114 
Special mention165 85 250 
Substandard49 174 223 
Doubtful— 227 227 
Total(1)(2)
$41,969 $2,696 $44,665 
December 31, 2024Commercial and FinancialCommercial Real EstateTotal Loans 
(In millions)
Investment grade$35,831 $1,969 $37,800 
Speculative4,278 409 4,687 
Special mention187 62 249 
Substandard48 211 259 
Doubtful— 191 191 
Total(1)(2)
$40,344 $2,842 $43,186 
(1) Loans include $3.02 billion and $1.98 billion of overdrafts as of March 31, 2025 and December 31, 2024, respectively. Overdrafts are short-term in nature and do not present a significant credit risk to us. As of March 31, 2025, $2.70 billion overdrafts were investment grade and $0.32 billion overdrafts were speculative.
(2) Total does not include $20 million and $14 million of loans classified as held-for-sale as of March 31, 2025 and December 31, 2024, respectively.
For additional information about credit quality, refer to pages 142 to 146 in Note 4 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2024 Form 10-K.
The following table presents the amortized cost basis, by year of origination and credit quality indicator, as of March 31, 2025. 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)20252024202320222021PriorRevolving Loans
Total(1)
Domestic loans:
Commercial and financial:
Risk Rating:
Investment grade$1,812 $875 $222 $39 $47 $203 $17,163 $20,361 
Speculative418 1,651 133 133 284 116 405 3,140 
Special mention— 47 — — 15 — — 62 
Substandard— — — 12 — — — 12 
Total commercial and financing$2,230 $2,573 $355 $184 $346 $319 $17,568 $23,575 
Commercial real estate:
Risk Rating:
Investment grade$— $41 $63 $344 $317 $982 $— $1,747 
Speculative— — 153 20 31 259 — 463 
Special mention— — — — — 85 — 85 
Substandard— — — — — 174 — 174 
Doubtful— — — — — 227 — 227 
Total commercial real estate$— $41 $216 $364 $348 $1,727 $— $2,696 
Non-U.S. loans:
Commercial and financial:
Risk Rating:
Investment grade$2,786 $3,836 $1,634 $724 $1,696 $— $6,067 $16,743 
Speculative376 660 50 51 186 57 131 1,511 
Special mention43 — 36 — — 24 — 103 
Substandard— — — — 37 — — 37 
Total commercial and financing$3,205 $4,496 $1,720 $775 $1,919 $81 $6,198 $18,394 
Total loans(2)
$5,435 $7,110 $2,291 $1,323 $2,613 $2,127 $23,766 $44,665 
(1) Any reserve associated with accrued interest is not material. As of March 31, 2025, accrued interest receivable of $340 million included in the amortized cost basis of loans has been excluded from the amortized cost basis within this table.
(2) Total does not include $20 million of loans classified as held-for-sale as of March 31, 2025.
The following table presents the amortized cost basis, by year of origination and credit quality indicator as of December 31, 2024:
(In millions)20242023202220212020PriorRevolving Loans
Total(1)
Domestic loans:
Commercial and financial:
Risk Rating:
Investment grade$1,946 $223 $89 $47 $6 $197 $18,044 $20,552 
Speculative1,834 173 154 387 53 155 136 2,892 
Special mention47 10 — 54 — — — 111 
Substandard— — 12 — — — — 12 
Total commercial and financing$3,827 $406 $255 $488 $59 $352 $18,180 $23,567 
Commercial real estate:
Risk Rating:
Investment grade$41 $63 $488 $278 $128 $971 $— $1,969 
Speculative— 153 20 69 100 67 — 409 
Special mention— — — — — 62 — 62 
Substandard— — — — — 211 — 211 
Doubtful— — — — — 191 — 191 
Total commercial real estate$41 $216 $508 $347 $228 $1,502 $— $2,842 
Non-U.S. loans:
Commercial and financial:
Risk Rating:
Investment grade$4,243 $1,796 $1,152 $2,187 $— $— $5,901 $15,279 
Speculative607 174 44 246 46 43 226 1,386 
Special mention— 35 26 15 — — — 76 
Substandard— — — 36 — — — 36 
Total commercial and financing$4,850 $2,005 $1,222 $2,484 $46 $43 $6,127 $16,777 
Total loans(2)
$8,718 $2,627 $1,985 $3,319 $333 $1,897 $24,307 $43,186 
(1) Any reserve associated with accrued interest is not material. As of December 31, 2024, accrued interest receivable of $327 million included in the amortized cost basis of loans has been excluded from the amortized cost basis within this table.
(2) Total does not include $14 million of loans classified as held-for-sale as of December 31, 2024.
The following tables present the activity in the allowance for credit losses by portfolio and class for the periods indicated:
Three Months Ended March 31, 2025
Commercial and Financial
(In millions)Leveraged Loans
Other Loans(1)
Commercial Real EstateOff-Balance Sheet CommitmentsTotal
Allowance for credit losses:
Beginning balance$68 $4 $102 $9 $183 
Provision6 2 3 1 12 
Charge-offs(2)
(9)— — — (9)
Ending balance$65 $6 $105 $10 $186 
(1) Includes $4 million allowance for credit losses on Fund Finance loans and $2 million on other loans.
(2) Related to the sale of leveraged loans in the first quarter of 2025.
Three Months Ended March 31, 2024
Commercial and Financial
(In millions)Leveraged Loans
Other Loans(1)
Commercial Real EstateHeld-to-Maturity SecuritiesOff-Balance Sheet CommitmentsAll Other Total
Allowance for credit losses:
Beginning balance$72 $4 $60 $1 $14 $(1)$150 
Provision
5 1 25 — (4)— 27 
Charge-offs(2)
(6)— (25)— — — (31)
Ending balance$71 $5 $60 $1 $10 $(1)$146 
(1) Includes $4 million allowance for credit losses on Fund Finance loans and $1 million on other loans.
(2) Related to the sale of commercial real estate and leveraged loans in the first quarter of 2024.
Loans are reviewed on a regular basis, and any provisions for credit 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 expected credit losses in the loan portfolio. In the first quarter of 2025, we recorded a $12 million provision for credit losses, compared to $27 million in the same period of 2024, primarily reflecting an increase in loan loss reserves associated with certain commercial real estate loans.
Allowance estimates remain subject to continued model and economic uncertainty and management may use qualitative adjustments in the allowance estimates. If future data and forecasts deviate relative to the forecasts utilized to determine our allowance for credit losses as of March 31, 2025, 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.