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Loans and Allowance for Credit Losses
 3 Months Ended
Mar. 31, 2026
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 and commercial real estate loans. We further classify commercial and financial loans as subscription finance, fund finance, CLOs, commercial, overdrafts and other loans. 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 Note 4 of the notes to consolidated financial statements in our 2025 Form 10-K.
The following table presents our recorded investment in loans, as of the dates indicated:
(In millions)March 31, 2026December 31, 2025
Subscription Finance$14,415 $13,138 
Fund finance(1)
11,060 10,916 
Collateralized loan obligations(2)
13,046 12,809 
Commercial2,523 2,851 
Commercial real estate2,311 2,471 
Overdrafts3,345 1,962 
Other(3)
2,490 2,635 
Total loans(4)(5)
49,190 46,782 
Allowance for credit losses(168)(193)
Loans, net of allowance$49,022 $46,589 
(1) Fund finance loans primarily include loans to real money funds and business development companies of $8.74 billion and $1.57 billion, respectively, as of March 31, 2026, compared to $8.30 billion and $1.75 billion, respectively, as of December 31, 2025.
(2) CLOs include broadly syndicated and middle market CLO loans of $10.23 billion and $2.81 billion, respectively, as of March 31, 2026, compared to $10.30 billion and $2.51 billion, respectively, as of December 31, 2025.
(3) Includes securities finance loans and loans to municipalities of $2.37 billion and $0.12 billion, respectively, as of March 31, 2026, compared to $2.52 billion and $0.12 billion, respectively, as of December 31, 2025.
(4) Excluding overdrafts, floating rate loans and fixed rate loans totaled $43.49 billion and $2.35 billion, respectively, as of March 31, 2026. 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 2025 Form 10-K for additional details.
(5) Non-U.S. loans totaled $20.36 billion and $18.78 billion as of March 31, 2026 and December 31, 2025, respectively.
Certain loans are pledged as collateral for access to the Federal Reserve's discount window. As of March 31, 2026 and December 31, 2025, the loans pledged as collateral totaled $16.88 billion and $15.11 billion, respectively.
As of March 31, 2026, we had three loans totaling $216 million on non-accrual status, of which no loans were more than 90 days contractually past due. 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.
In the first quarter of 2026, we originated $1.64 billion of CLO loans, consisting of $1.23 billion in broadly syndicated and $0.41 billion in middle market CLO loans, which were all investment grade as of March 31, 2026.
We sold $156 million of total loans in the first quarter of 2026, which consisted entirely of commercial loans. We recorded a charge-off against the allowance for these loans of $40 million in the first quarter of 2026.
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 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, 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, 2026, we had two loans totaling $29 million in the commercial and financial segment and four loans totaling $295 million in the commercial real estate segment that no longer met the similar risk characteristics of their collective pool. As of March 31, 2026, $95 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 Note 4 of the notes to consolidated financial statements in our 2025 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, 2026.
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 92% of our loans were rated as investment grade as of March 31, 2026 with external credit ratings, or equivalent, of "BBB-" or better.
•Sub-Investment Grade (previously referred to as 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 sub-investment grade account for approximately 7% of our loans as of March 31, 2026, and are concentrated in leveraged loans. Approximately 84% of those leveraged loans have an external credit rating, or equivalent, of "BB" or "B" as of March 31, 2026.
•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:
March 31, 2026Commercial and FinancialCommercial Real EstateTotal Loans
(In millions)
Investment grade$43,827 $1,305 $45,132 
Sub-investment grade
2,879 579 3,458 
Special mention70 132 202 
Substandard28 165 193 
Doubtful— 130 130 
Total(1)(2)
$46,804 $2,311 $49,115 
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 
(1) Loans include $3.35 billion and $1.96 billion of overdrafts as of March 31, 2026 and December 31, 2025, respectively. Overdrafts are short-term in nature and do not present a significant credit risk to us. As of March 31, 2026, $2.85 billion overdrafts were investment grade and $0.49 billion overdrafts were sub-investment grade.
(2) Total does not include $74 million and $92 million of loans classified as held-for-sale as of March 31, 2026 and December 31, 2025, respectively.
For additional information about credit quality, refer to Note 4 of the notes to consolidated financial statements in our 2025 Form 10-K.
The following table presents the amortized cost basis, by year of origination and credit quality indicator, as of March 31, 2026. 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)20262025202420232022PriorRevolving Loans
Total(1)
Commercial and financial:
Risk Rating:
Investment grade$4,496 $6,873 $4,041 $161 $288 $1,225 $26,743 $43,827 
Sub-investment grade
491 642 1,123 106 36 241 240 2,879 
Special mention— — 70 — — — — 70 
Substandard— — 28 — — — — 28 
Total commercial and financial$4,987 $7,515 $5,262 $267 $324 $1,466 $26,983 $46,804 
Commercial real estate:
Risk Rating:
Investment grade$— $— $41 $166 $269 $829 $— $1,305 
Sub-investment grade
— — — 47 — 532 — 579 
Special mention— 67 — — 20 45 — 132 
Substandard— — — — — 165 — 165 
Doubtful— — — — — 130 — 130 
Total commercial real estate$— $67 $41 $213 $289 $1,701 $— $2,311 
Total loans(2)
$4,987 $7,582 $5,303 $480 $613 $3,167 $26,983 $49,115 
(1) Any reserve associated with accrued interest is not material. As of March 31, 2026, accrued interest receivable of $311 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 $74 million of loans classified as held-for-sale as of March 31, 2026.
The following table presents the amortized cost basis, by year of origination and credit quality indicator as of December 31, 2025:
(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 financial$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 tables present the activity in the allowance for credit losses by portfolio and class for the periods indicated:
Three Months Ended March 31, 2026
Commercial and Financial
(In millions)Commercial Loans
Other Loans(1)
Commercial Real EstateOff-Balance Sheet CommitmentsAll Other Total
Allowance for credit losses:
Beginning balance$69 $5 $119 $8 $2 $203 
Provision10 6 (1)1 — 16 
Charge-offs(2)
(40)— — — — (40)
Ending balance$39 $11 $118 $9 $2 $179 
(1) Includes $4 million allowance for credit losses on both fund finance and subscription finance and $3 million on CLO loans.
(2) Related to the sale of certain commercial loans in the first quarter of 2026.
Three Months Ended March 31, 2025
Commercial and Financial
(In millions)
Commercial Loans
Other Loans(1)
Commercial Real EstateOff-Balance Sheet CommitmentsTotal
Allowance for credit losses:
Beginning balance$68 $4 $102 $9 $183 
Provision
6 2 3 1 12 
Charge-offs(2)
(9)— — — (9)
Ending balance$65 $6 $105 $10 $186 
(1) Includes $2 million allowance for credit losses on both fund finance and subscription finance and $1 million on both CLO loans and other loans.
(2) Related to the sale of certain commercial loans in the first quarter of 2025.
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 2026, we recorded a $16 million provision for credit losses, compared to $12 million in the same period of 2025, primarily reflecting provision for certain commercial loans and the evolving macroeconomic environment.
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, 2026, 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.