Credit Losses on Financial Assets Measured at Amortized Cost

9 Months Ended

Aug. 31, 2024

Credit Loss [Abstract]

Credit Losses on Financial Assets Measured at Amortized Cost

Credit Losses on Financial Assets Measured at Amortized Cost

Automobile Loans. On November 20, 2023, we entered into an agreement to sell all of our membership interests in our automobile loans business, Foursight. Refer to Note 5, Assets

Held for Sale and Discontinued Operations for additional details.

Allowance for credit losses related to our automobile loans:

$ in thousands	Three Months Ended  August 31, 2023		Nine Months Ended  August 31, 2023
Beginning balance	$	78,622	$	79,614
Provision for doubtful accounts	11,788		29,398
Charge-offs, net of recoveries	(10,635)		(29,237)
Ending balance	$	79,775	$	79,775

Refer to Note 12, Credit Losses on Financial Assets Measured at Amortized Cost, in our consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended November 30, 2023 for additional information regarding credit losses related to our automobile loans.

Secured Financing Receivables. In evaluating secured financing receivables (reverse repurchases agreements, securities borrowing arrangements, and margin loans), the underlying collateral maintenance provisions are taken into consideration. The underlying contractual collateral maintenance for significantly all of our secured financing receivables requires that the counterparty continually adjust the collateralization amount, securing the credit exposure on these contracts. Collateralization levels for our secured financing receivables are initially established based upon the counterparty, the type of acceptable collateral that is monitored daily and adjusted to mitigate the potential of any credit losses. Credit losses are not recognized for secured financing receivables where the underlying collateral’s fair value is equal to or exceeds the asset’s amortized cost basis. In cases where the collateral’s fair value does not equal or exceed the amortized cost basis, the allowance for credit losses, if any, is limited to the difference between the fair value of the collateral at the reporting date and the amortized cost basis of the financial assets.

Broker Receivables. Our receivables from brokers, dealers, and clearing organizations include deposits of cash with exchange clearing organizations to meet margin requirements, amounts due from clearing organizations for daily variation settlements, securities failed-to-deliver or receive, receivables and payables for fees and commissions, and receivables arising from unsettled securities or loans transactions. These receivables generally do not give rise to material credit risk and have a remote probability of default either because of their short-term nature or due to the credit protection framework inherent in the design and operations of brokers, dealers and clearing organizations. As such, generally, no allowance for credit losses is held against these receivables.

Other Financial Assets. For all other financial assets measured at amortized cost, we estimate expected credit losses over the financial assets’ life as of the reporting date based on relevant information about past events, current conditions, and reasonable and supportable forecasts. During the nine months ended August 31, 2024, we recognized bad debt expense of $26.2 million related to receivables associated with our asset management arrangements with Weiss Multi-Strategy Advisers.

Investment Banking Fee Receivables. Our allowance for credit losses on our investment banking fee receivables uses a provisioning matrix based on the shared risk characteristics and historical loss experience for such receivables. In some instances, we may adjust the allowance calculated based on the provision matrix to incorporate a specific allowance based on the unique credit risk profile of a receivable. The provisioning matrix

is periodically updated to reflect changes in the underlying portfolio’s credit characteristics and most recent historical loss data.

Allowance for credit losses for investment banking receivables:

	Three Months Ended  August 31,				Nine Months Ended  August 31,
$ in thousands	2024		2023		2024		2023
Beginning balance	$	2,868	$	2,069	$	6,306	$	5,914
Bad debt expense	1,059		1,827		3,146		3,574
Charge-offs	(1)		(39)		(2,720)		(3,106)
Recoveries collected	(197)		(111)		(3,003)		(2,636)
Ending balance (1)	$	3,729	$	3,746	$	3,729	$	3,746

(1)Substantially all of the allowance for doubtful accounts balances relate to mergers and acquisitions and restructuring fee receivables, which include recoverable expense receivables.