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Loans and Allowance for Credit Losses
 12 Months Ended
Dec. 31, 2025
Receivables [Abstract]  
Loans and Allowance for Credit Losses Loans and Allowance for Credit Losses
Loans are generally recorded at their principal amount outstanding, net of the allowance for credit losses, unearned income, and any net unamortized deferred loan origination fees. Loans that are classified as held-for-sale are measured at lower of cost or fair value on an individual basis.
Interest income related to loans is recognized in our consolidated statement of income using the interest method, or on a basis approximating a level rate of return over the term of the loan. Fees received for providing loan commitments and letters of credit that we anticipate will result in loans typically are deferred and amortized to interest income over the term of the related loan, beginning with the initial borrowing. Fees on commitments and letters of credit are amortized to software and processing fees over the commitment period when funding is not known or expected.
The following table presents our recorded investment in loans, as of the dates indicated:
(In millions)December 31, 2025December 31, 2024
Subscription finance$13,138 $11,544 
Fund finance(1)
10,916 10,244 
Collateralized loan obligations(2)
12,809 9,488 
Commercial2,851 3,881 
Commercial real estate2,471 2,842 
Overdrafts1,962 1,980 
Other(3)
2,635 3,221 
Total loans(4)(5)
46,782 43,200 
Allowance for credit losses(193)(174)
Loans, net of allowance for credit losses
$46,589 $43,026 
(1) Fund finance loans primarily include loans to real money funds and business development companies of $8.30 billion and $1.75 billion, respectively, as of December 31, 2025, compared to $7.90 billion and $1.44 billion, respectively, as of December 31, 2024.
(2) Collateralized loan obligations include broadly syndicated and middle market CLO loans of $10.30 billion and $2.51 billion, respectively, as of December 31, 2025, compared to $8.39 billion and $1.10 billion, respectively, as of December 31, 2024.
(3) Includes securities finance loans and loans to municipalities of $2.52 billion and $0.12 billion, respectively, as of December 31, 2025 and $3.01 billion and $0.21 billion, respectively, as of December 31, 2024.
(4) Excluding overdrafts, floating rate loans and fixed rate loans totaled $42.37 billion and $2.45 billion, respectively, as of December 31, 2025. We have entered into interest rate swap agreements to hedge forecasted cash flows associated with EURIBOR indexed floating-rate loans. See Note 10 for additional details.
(5) Non-U.S. loans totaled $18.78 billion and $16.79 billion as of December 31, 2025 and 2024, respectively.
We segregate our loans into two segments: commercial and financial and commercial real estate. We further classify commercial and financial loans as subscription finance, fund finance loans, collateralized loan obligations, commercial, overdrafts and other loans.
Certain loans are pledged as collateral for access to the Federal Reserve’s discount window. As of December 31, 2025 and 2024, the loans pledged as collateral totaled $15.11 billion and $13.90 billion, respectively.
We generally place loans on non-accrual status once principal or interest payments are 90 days contractually past due, or earlier if management determines that full collection is not probable. Loans 90 days past due, but considered both well-secured and in the process of collection, may be excluded from non-accrual status. When we place a loan on non-accrual status, the accrual of interest is discontinued and previously recorded, but unpaid interest is reversed and generally charged against interest income. For loans on non-accrual status, income is recognized on a cash basis after recovery of principal, if and when interest payments are received. Loans may be removed from non-accrual status when repayment is reasonably assured and performance under the terms of the loan has been demonstrated. As of December 31, 2025, we had four loans totaling $258 million on non-accrual status, of which no loans were 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 2025, we originated $5.57 billion of CLO loans, consisting of $5.01 billion in broadly syndicated and $0.56 billion in middle market CLO loans, which were all investment grade as of December 31, 2025.
We sold $1.16 billion of total loans, which consisted entirely of commercial loans in 2025. We recorded a charge-off against the allowance for these loans of $15 million in 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.
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 accrued expenses and 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, PD 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 December 31, 2025, we had three loans totaling $98 million in the commercial and financial segment and 4 loans totaling $296 million in the commercial real estate segment that no longer met the similar risk characteristics of their collective pool. As of December 31, 2025, $120 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.
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 December 31, 2025.
Our internal risk rating methodology assigns risk ratings to counterparties ranging from Investment Grade, Sub-Investment Grade, Special Mention, Substandard, Doubtful and Loss.
•Investment Grade: Counterparties with strong credit quality and low expected credit risk and probability of default. Approximately 91% of our loans were rated as investment grade as of December 31, 2025 with external credit ratings, or equivalent, of “BBB-” or better.
•Sub-Investment Grade: 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 sub-investment grade account for approximately 8% of our loans as of December 31, 2025, and are concentrated in leveraged loans. Approximately 87% of those leveraged loans have an external credit rating, or equivalent, of “BB” or “B” as of December 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 investment in loans to counterparties by risk rating, as noted above, as of the dates indicated:
December 31, 2025Commercial and FinancialCommercial Real EstateTotal Loans
(In millions)
Investment grade$40,854 $1,402 $42,256 
Sub-investment grade
3,157 641 3,798 
Special mention110 132 242 
Substandard48 165 213 
Doubtful50 131 181 
Total(1)(2)
$44,219 $2,471 $46,690 
December 31, 2024Commercial and FinancialCommercial Real EstateTotal Loans 
(In millions)
Investment grade$35,831 $1,969 $37,800 
Sub-investment grade
4,278 409 4,687 
Special mention187 62 249 
Substandard48 211 259 
Doubtful— 191 191 
Total(1)(2)
$40,344 $2,842 $43,186 
(1) Loans include $1.96 billion and $1.98 billion of overdrafts as of December 31, 2025 and 2024, respectively. Overdrafts are short-term in nature and do not present a significant credit risk to us. As of December 31, 2025, $1.90 billion overdrafts were investment grade and $0.06 billion overdrafts were sub-investment grade.
(2) Total does not include $92 million and $14 million of loans classified as held-for-sale as of December 31, 2025 and 2024, respectively.
Financial assets held at amortized cost that are not loans are disaggregated based on product type. This includes our fees receivable balance, which have had no history of credit losses, and are evaluated collectively as a pool.
Securities purchased under a resale agreement and securities-financing within our principal business utilize the collateral maintenance provisions included within ASC 326. An allowance for credit losses is recognized for any remaining exposure based on counterparty type.
The allowance for credit losses for off-balance sheet credit exposures, recorded in accrued expenses and other liabilities in our consolidated statement of condition, represents management’s estimate of credit losses primarily in outstanding letters and lines of credit and other credit-enhancement facilities provided to our clients and outstanding as of the balance sheet date. The allowance is evaluated quarterly by management. Factors considered in evaluating the appropriate level of this allowance are similar to those considered with respect to the allowance for credit losses on financial assets held at amortized cost. Provisions to maintain the allowance at a level considered by us to be appropriate to absorb estimated credit losses in outstanding facilities are recorded in the provision for credit losses in our consolidated statement of income.
The following table presents the amortized cost basis, by year of origination and credit quality indicator as of December 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)
Commercial and financial:
Risk Rating:
Investment grade$8,896 $4,153 $692 $504 $1,313 $119 $25,177 $40,854 
Sub-investment grade
911 1,224 109 46 133 111 623 3,157 
Special mention3 100 — — — 7 — 110 
Substandard— 48 — — — — — 48 
Doubtful— — 10 — 40 — — 50 
Total commercial and financing$9,810 $5,525 $811 $550 $1,486 $237 $25,800 $44,219 
Commercial real estate:
Risk Rating:
Investment grade$— $41 $166 $328 $318 $549 $— $1,402 
Sub-investment grade
— — 47 — 31 563 — 641 
Special mention66 — — 20 — 46 — 132 
Substandard— — — — — 165 — 165 
Doubtful— — — — — 131 — 131 
Total commercial real estate$66 $41 $213 $348 $349 $1,454 $— $2,471 
Total loans(2)
$9,876 $5,566 $1,024 $898 $1,835 $1,691 $25,800 $46,690 
(1) Any reserve associated with accrued interest is not material. As of December 31, 2025, accrued interest receivable of $338 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 $92 million of loans classified as held-for-sale as of December 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)
Commercial and financial:
Risk Rating:
Investment grade$6,189 $2,019 $1,241 $2,234 $6 $197 $23,945 $35,831 
Sub-investment grade
2,441 347 198 633 99 198 362 4,278 
Special mention47 45 26 69 — — — 187 
Substandard— — 12 36 — — — 48 
Total commercial and financing$8,677 $2,411 $1,477 $2,972 $105 $395 $24,307 $40,344 
Commercial real estate:
Risk Rating:
Investment grade$41 $63 $488 $278 $128 $971 $— $1,969 
Sub-investment grade
— 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 
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 years ended December 31, 2025 and 2024:
Year End December 31, 2025
Commercial and Financial
(In millions)
Commercial Loans
Other Loans(1)
Commercial Real EstateOff-Balance Sheet CommitmentsAll Other Total
Allowance for credit losses:
Beginning balance$68 $4 $102 $9 $— $183 
Provision16 1 41 (1)2 59 
Charge-offs(2)
(15)— (24)— — (39)
Ending balance$69 $5 $119 $8 $2 $203 
(1) Primarily includes $2 million allowance for credit losses on both subscription finance and fund finance loans.
(2) Primarily related to a commercial real estate loan and certain commercial loans in 2025.
Year Ended December 31, 2024
Commercial and Financial
(In millions)
Commercial Loans
Other Loans(1)
Commercial Real EstateHeld-to-Maturity SecuritiesOff-Balance Sheet CommitmentsTotal
Allowance for credit losses:
Beginning balance$72 $3 $60 $1 $14 $150 
Provision13 1 67 (1)(5)75 
Charge-offs(2)
(17)— (25)— — (42)
Ending balance$68 $4 $102 $— $9 $183 
(1) Primarily includes $2 million allowance for credit losses on fund finance loans and $1 million related to subscription finance.
(2) Related to the sale of commercial real estate and commercial loans in 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 2025, we recorded a $59 million provision for credit losses, primarily reflecting the evolving macroeconomic environment and an increase in loan loss reserves associated with certain commercial real estate and commercial 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 December 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.