•

Wealth Management.

Wealth management loans includes loans extended to private bank clients, including wealth management and other clients. These loans are used to finance investments in both financial and nonfinancial assets, bridge cash flow timing gaps or provide liquidity for other needs. Substantially all of such loans are secured by securities, residential real estate, commercial real estate or other assets.

•

Commercial Real Estate.

Commercial real estate loans include originated loans (other than those extended to private bank clients) that are directly or indirectly secured by hotels, retail stores, multifamily housing complexes and commercial and industrial properties. Commercial real estate loans also includes loans extended to clients who warehouse assets that are directly or indirectly backed by commercial real estate. In addition, commercial real estate includes loans purchased by the firm.

•

Residential Real Estate.

Residential real estate loans primarily includes loans extended by the firm to clients (other than those extended to private bank clients) who warehouse assets that are directly or indirectly secured by residential real estate and loans purchased by the firm.

•

Installment.

Installment loans are unsecured and are originated by the firm.

•

Credit Cards.

Credit card loans are loans made pursuant to revolving lines of credit issued to consumers by the firm.

•

Other.

Other loans primarily includes loans extended to clients who warehouse assets that are directly or indirectly secured by consumer loans, including auto loans and private student loans, and other assets. Other loans also includes unsecured consumer and credit card loans purchased by the firm.

Credit Quality

Risk Assessment.

The firm’s risk assessment process includes evaluating the credit quality of its loans. For corporate loans and a majority of wealth management, real estate and other loans, the firm performs credit reviews which include initial and ongoing analyses of its borrowers, resulting in an internal credit rating. A credit review is an independent analysis of the capacity and willingness of a borrower to meet its financial obligations and is performed on an annual basis or more frequently if circumstances change that indicate that a review may be necessary. The determination of internal credit ratings also incorporates assumptions with respect to the nature of and outlook for the borrower’s industry and the economic environment.

The table below presents gross loans by an internally determined public rating agency equivalent or other credit metrics and the concentration of secured and unsecured loans.



$ in millions	Investment- Grade	Non-Investment- Grade	Other Metrics/ Unrated	Total
As of June 2021
Accounting Method
Amortized cost	$41,387	$64,523	$13,401	$119,311
Fair value	2,323	5,306	4,887	12,516
Held for sale	110	1,263	608	1,981
Total	$43,820	$71,092	$18,896	$133,808
Loan Type
Corporate	$11,370	$35,980	$ 464	$ 47,814
Wealth management	28,195	5,477	6,283	39,955
Real estate:
Commercial	1,668	16,970	830	19,468
Residential	687	10,234	1,297	12,218
Consumer:
Installment	–	–	3,257	3,257
Credit cards	–	–	5,210	5,210
Other	1,900	2,431	1,555	5,886
Total	$43,820	$71,092	$18,896	$133,808
Secured	86%	93%	47%	84%
Unsecured	14%	7%	53%	16%
Total	100%	100%	100%	100%
As of December 2020
Accounting Method
Amortized cost	$33,532	$58,250	$11,783	$103,565
Fair value	2,084	5,925	5,616	13,625
Held for sale	224	2,152	423	2,799
Total	$35,840	$66,327	$17,822	$119,989
Loan Type
Corporate	$ 9,478	$38,704	$ 477	$ 48,659
Wealth management	22,098	5,331	5,594	33,023
Real estate:
Commercial	1,792	17,480	1,018	20,290
Residential	636	3,852	1,262	5,750
Consumer:
Installment	–	–	3,823	3,823
Credit cards	–	–	4,270	4,270
Other	1,836	960	1,378	4,174
Total	$35,840	$66,327	$17,822	$119,989
Secured	83%	90%	46%	82%
Unsecured	17%	10%	54%	18%
Total	100%	100%	100%	100%

In the table above:

•

Wealth management loans included in the other metrics/unrated category primarily consists of loans backed by residential real estate and securities, and real estate loans included in the other metrics/unrated category primarily consists of purchased loans. The firm’s risk assessment process for these loans includes reviewing certain key metrics, such as

loan-to-value

ratio, delinquency status, collateral values, expected cash flows, the Fair Isaac Corporation (FICO) credit score (which measures a borrower’s creditworthiness by considering factors such as payment and credit history) and other risk factors.

•

For installment and credit card loans included in the other metrics/unrated category, the evaluation of credit quality incorporates the borrower’s FICO credit score. FICO credit scores are periodically refreshed by the firm to assess the updated creditworthiness of the borrower. See “Vintage” below for information about installment and credit card loans by FICO credit scores.

The firm also assigns a regulatory risk rating to its loans based on the definitions provided by the U.S. federal bank regulatory agencies. Total loans included 89% of loans as of June 2021 and 85% of loans as of December 2020 that were rated

pass/non-criticized.

Vintage.

The tables below present gross loans accounted for at amortized cost (excluding installment and credit card loans) by an internally determined public rating agency equivalent or other credit metrics and origination year for term loans.



	As of June 2021

$ in millions		Investment- Grade	Non-Investment- Grade	Other Metrics/ Unrated	Total
2021		$ 2,357	$ 3,683	$ 126	$ 6,166
2020		1,466	5,887	–	7,353
2019		601	5,022	–	5,623
2018		1,864	3,006	–	4,870
2017		803	2,324	–	3,127
2016 or earlier		369	2,646	45	3,060
Revolving		3,316	10,562	76	13,954
Corporate		10,776	33,130	247	44,153
2021		454	326	534	1,314
2020		551	247	–	798
2019		725	380	–	1,105
2018		270	130	–	400
2017		373	30	–	403
2016 or earlier		585	251	–	836
Revolving		23,828	2,214	1,935	27,977
Wealth management		26,786	3,578	2,469	32,833
2021		191	2,129	82	2,402
2020		580	2,965	14	3,559
2019		70	1,818	–	1,888
2018		134	1,675	7	1,816
2017		26	1,458	10	1,494
2016 or earlier		–	782	465	1,247
Revolving		404	4,499	12	4,915
Commercial real estate		1,405	15,326	590	17,321
2021		413	309	116	838
2020		–	986	116	1,102
2019		–	34	223	257
2018		–	104	190	294
2017		8	55	136	199
2016 or earlier		–	1	62	63
Revolving		175	8,656	112	8,943
Residential real estate		596	10,145	955	11,696
2021		243	377	101	721
2020		–	64	421	485
2019		–	29	24	53
2018		–	183	32	215
2017		–	6	8	14
Revolving		1,581	1,685	87	3,353
Other		1,824	2,344	673	4,841
Total		$41,387	$64,523	$4,934	$110,844
Percentage of total		37%	58%	5%	100%



	As of December 2020

$ in millions		Investment- Grade	Non-Investment- Grade	Other Metrics/ Unrated	Total
2020		$ 1,978	$ 7,545	$ 140	$ 9,663
2019		889	6,106	–	6,995
2018		2,076	3,555	–	5,631
2017		851	3,083	–	3,934
2016		268	1,262	–	1,530
2015 or earlier		351	2,073	–	2,424
Revolving		2,662	11,891	48	14,601
Corporate		9,075	35,515	188	44,778
2020		497	313	–	810
2019		723	403	–	1,126
2018		298	87	–	385
2017		377	30	–	407
2016		22	20	–	42
2015 or earlier		531	264	–	795
Revolving		18,077	2,085	1,424	21,586
Wealth management		20,525	3,202	1,424	25,151
2020		848	3,071	55	3,974
2019		76	1,965	–	2,041
2018		137	2,164	25	2,326
2017		26	1,734	12	1,772
2016		–	165	9	174
2015 or earlier		–	775	526	1,301
Revolving		461	5,047	–	5,508
Commercial real estate		1,548	14,921	627	17,096
2020		402	976	115	1,493
2019		–	90	271	361
2018		–	123	249	372
2017		9	83	152	244
2016		–	1	–	1
2015 or earlier		–	–	70	70
Revolving		225	2,470	–	2,695
Residential real estate		636	3,743	857	5,236
2020		242	84	466	792
2019		–	67	29	96
2018		–	46	–	46
2017		–	8	–	8
Revolving		1,506	664	99	2,269
Other		1,748	869	594	3,211
Total		$33,532	$58,250	$3,690	$95,472
Percentage of total		35%	61%	4%	100%

In the tables above, revolving loans which converted to term loans were not material as of both June 2021 and December 2020.

The table below presents gross installment loans by refreshed FICO credit scores and origination year and gross credit card loans by refreshed FICO credit scores.



$ in millions	Greater than or equal to 660	Less than 660	Total
As of June 2021
2021	$ 674	$ 5	$ 679
2020	988	38	1,026
2019	837	84	921
2018	471	74	545
2017	69	13	82
2016	3	1	4
Installment	3,042	215	3,257
Credit cards	4,077	1,133	5,210
Total	$7,119	$1,348	$8,467
Percentage of total:
Installment	93%	7%	100%
Credit cards	78%	22%	100%
Total	84%	16%	100%
As of December 2020
2020	$1,321	$ 38	$1,359
2019	1,225	132	1,357
2018	792	150	942
2017	128	30	158
2016	6	1	7
Installment	3,472	351	3,823
Credit cards	3,398	872	4,270
Total	$6,870	$1,223	$8,093
Percentage of total:
Installment	91%	9%	100%
Credit cards	80%	20%	100%
Total	85%	15%	100%

In the table above, credit card loans consist of revolving lines of credit.

Credit Concentrations.

The table below presents the concentration of gross loans by region.



$ in millions	Carrying Value	Americas	EMEA	Asia	Total
As of June 2021
Corporate	$ 47,814	57%	33%	10%	100%
Wealth management	39,955	86%	11%	3%	100%
Commercial real estate	19,468	70%	22%	8%	100%
Residential real estate	12,218	90%	8%	2%	100%
Consumer:
Installment	3,257	100%	–	–	100%
Credit cards	5,210	100%	–	–	100%
Other	5,886	85%	13%	2%	100%
Total	$133,808	75%	19%	6%	100%
As of December 2020
Corporate	$ 48,659	60%	31%	9%	100%
Wealth management	33,023	88%	10%	2%	100%
Commercial real estate	20,290	71%	19%	10%	100%
Residential real estate	5,750	88%	9%	3%	100%
Consumer:
Installment	3,823	100%	–	–	100%
Credit cards	4,270	100%	–	–	100%
Other	4,174	81%	17%	2%	100%
Total	$119,989	75%	19%	6%	100%

In the table above:

•

EMEA represents Europe, Middle East and Africa.

•

The top five industry concentrations for corporate loans as of June 2021 were 19% for technology, media & telecommunications (17% as of December 2020), 18% for funds (13% as of December 2020), 16% for diversified industrials (17% as of December 2020), 10% for natural resources & utilities (12% as of December 2020), and 7% for healthcare (7% as of December 2020).

Nonaccrual and Past Due Loans.

Loans accounted for at amortized cost (other than credit card loans) are placed on nonaccrual status when it is probable that the firm will not collect all principal and interest due under the contractual terms, regardless of the delinquency status or if a loan is past due for 90 days or more, unless the loan is both well collateralized and in the process of collection. At that time, all accrued but uncollected interest is reversed against interest income and interest subsequently collected is recognized on a cash basis to the extent the loan balance is deemed collectible. Otherwise, all cash received is used to reduce the outstanding loan balance. A loan is considered past due when a principal or interest payment has not been made according to its contractual terms. Credit card loans are not placed on nonaccrual status and accrue interest until the loan is paid in full or is

charged-off.

In certain circumstances, the firm may modify the original terms of a loan agreement by granting a concession to a borrower experiencing financial difficulty, typically in the form of a modification of loan covenants, but may also include forbearance of interest or principal, payment extensions or interest rate reductions. These modifications, to the extent significant, are considered troubled debt restructurings (TDRs). Loan modifications that extend payment terms for a period of less than 90 days are generally considered insignificant and therefore not reported as TDRs.

The firm adopted the relief issued under the Coronavirus Aid, Relief, and Economic Security Act, as amended, and certain interpretive guidance issued by the U.S. banking agencies that provides for certain modified loans that would otherwise meet the definition of a TDR to not be classified as such. Loans accounted for at amortized cost that were not classified as TDRs as a result of this relief and interpretive guidance were $133 million as of June 2021 and were $184 million as of December 2020.

The table below presents information about past due loans.



$ in millions	30-89 days	90 days or more	Total
As of June 2021
Corporate	$ –	$ 80	$ 80
Wealth management	–	39	39
Commercial real estate	14	190	204
Residential real estate	1	17	18
Consumer:
Installment	21	7	28
Credit cards	49	36	85
Other	15	5	20
Total	$100	$374	$474
Total divided by gross loans at amortized cost			0.4%
As of December 2020
Corporate	$ –	$294	$294
Wealth management	58	34	92
Commercial real estate	49	183	232
Residential real estate	4	23	27
Consumer:
Installment	42	16	58
Credit cards	46	31	77
Other	20	4	24
Total	$219	$585	$804
Total divided by gross loans at amortized cost			0.8%

The table below presents information about nonaccrual loans.



	As of

$ in millions		June 2021	December 2020
Corporate		$2,074	$2,651
Wealth management		59	61
Commercial real estate		689	649
Residential real estate		18	25
Installment		43	44
Other		–	122
Total		$2,883	$3,552
Total divided by gross loans at amortized cost		2.4%	3.4%

In the table above:

•

Nonaccrual loans included $286 million as of June 2021 and $533 million as of December 2020 of loans that were 30 days or more past due.

•

Loans that were 90 days or more past due and still accruing were not material as of both June 2021 and December 2020.

•

Nonaccrual loans included $234 million as of June 2021 and $315 million as of December 2020 of corporate and commercial real estate loans that were modified in a troubled debt restructuring. The firm’s lending commitments related to these loans were not material as of both June 2021 and December 2020. Installment loans that were modified in a troubled debt restructuring were not material as of both June 2021 and December 2020.

Allowance for Credit Losses

The firm’s allowance for credit losses consists of the allowance for losses on loans and lending commitments accounted for at amortized cost. Loans and lending commitments accounted for at fair value or accounted for at the lower of cost or fair value are not subject to an allowance for credit losses.

To determine the allowance for credit losses, the firm classifies its loans and lending commitments accounted for at amortized cost into wholesale and consumer portfolios. These portfolios represent the level at which the firm has developed and documented its methodology to determine the allowance for credit losses. The allowance for credit losses is measured on a collective basis for loans that exhibit similar risk characteristics using a modeled approach and asset-specific basis for loans that do not share similar risk characteristics.

The allowance for credit losses takes into account the weighted average of a range of forecasts of future economic conditions over the expected life of the loan and lending commitments. The expected life of each loan or lending commitment is determined based on the contractual term adjusted for extension options or demand features. The forecasts include baseline, favorable and adverse economic scenarios over a three-year period. For loans with expected lives beyond three years, the model reverts to historical loss information based on a

non-linear

modeled approach. The forecasted economic scenarios consider a number of risk factors relevant to the wholesale and consumer portfolios described below. The firm applies judgment in weighing individual scenarios each quarter based on a variety of factors, including the firm’s internally derived economic outlook, market consensus, recent macroeconomic conditions and industry trends.

The allowance for credit losses also includes qualitative components which allow management to reflect the uncertain nature of economic forecasting, capture uncertainty regarding model inputs, and account for model imprecision and concentration risk.

Management’s estimate of credit losses entails judgment about loan collectability at the reporting dates, and there are uncertainties inherent in those judgments. The allowance for credit losses is subject to a governance process that involves review and approval by senior management within the firm’s independent risk oversight and control functions. Personnel within the firm’s independent risk oversight and control functions are responsible for forecasting the economic variables that underlie the economic scenarios that are used in the modeling of expected credit losses. While management uses the best information available to determine this estimate, future adjustments to the allowance may be necessary based on, among other things, changes in the economic environment or variances between actual results and the original assumptions used.

The table below presents gross loans and lending commitments accounted for at amortized cost by portfolio.



	As of

	June 2021			December 2020

$ in millions		Loans	Lending Commitments		Loans	Lending Commitments
Wholesale
Corporate		$ 44,153	$148,973		$ 44,778	$127,756
Wealth management		32,833	3,382		25,151	2,314
Commercial real estate		17,321	4,151		17,096	4,154
Residential real estate		11,696	2,410		5,236	1,804
Other		4,841	5,461		3,211	4,841
Consumer
Installment		3,257	8		3,823	4
Credit cards		5,210	28,529		4,270	21,640
Total		$119,311	$192,914		$103,565	$162,513

In the table above:

•

Wholesale loans included $2.84 billion as of June 2021 and $3.51 billion as of December 2020 of nonaccrual loans for which the allowance for credit losses was measured on an asset-specific basis. The allowance for credit losses on these loans was $557 million as of June 2021 and $649 million as of December 2020. These loans included $317 million as of June 2021 and $584 million as of December 2020 of loans which did not require a reserve as the loan was deemed to be recoverable.

•

Credit card lending commitments included $26.57 billion as of June 2021 and $21.64 billion as of December 2020 related to credit card lines issued by the firm to consumers. These credit card lines are cancellable by the firm. Credit card lending commitments also included approximately $2.0 billion as of June 2021 related to a commitment to acquire the General Motors

co-branded

credit card portfolio.

See Note 18 for further information about lending commitments.

The following is a description of the methodology used to calculate the allowance for credit losses:

Wholesale.

The allowance for credit losses for wholesale loans and lending commitments that exhibit similar risk characteristics is measured using a modeled approach. These models determine the probability of default and loss given default based on various risk factors, including internal credit ratings, industry default and loss data, expected life, macroeconomic indicators, the borrower’s capacity to meet its financial obligations, the borrower’s country of risk and industry, loan seniority and collateral type. For lending commitments, the methodology also considers probability of drawdowns or funding. In addition, for loans backed by real estate, risk factors include the

loan-to-value

ratio, debt service ratio and home price index. The most significant inputs to the forecast model for wholesale loans and lending commitments include unemployment rates, GDP, credit spreads, commercial and industrial delinquency rates, short- and long-term interest rates, and oil prices.

The allowance for loan losses for wholesale loans that do not share similar risk characteristics, such as nonaccrual loans or loans in a troubled debt restructuring, is calculated using the present value of expected future cash flows discounted at the loan’s original effective rate, the observable market price of the loan or the fair value of the collateral.

Wholesale loans are

charged-off

against the allowance for loan losses when deemed to be uncollectible.

Consumer.

The allowance for credit losses for consumer loans that exhibit similar risk characteristics is calculated using a modeled approach which classifies consumer loans into pools based on borrower-related and exposure-related characteristics that differentiate a pool’s risk characteristics from other pools. The factors considered in determining a pool are generally consistent with the risk characteristics used for internal credit risk measurement and management and include key metrics, such as FICO credit scores, delinquency status, loan vintage and macroeconomic indicators. The most significant inputs to the forecast model for consumer loans include unemployment rates and delinquency rates. The expected life of revolving credit card loans is determined by modeling expected future draws and the timing and amount of repayments allocated to the funded balance. The firm also recognizes an allowance for credit losses on commitments to acquire loans. However, no allowance for credit losses is recognized on credit card lending commitments as they are cancellable by the firm.

The allowance for credit losses for consumer loans that do not share similar risk characteristics, such as loans in a troubled debt restructuring, is calculated using the present value of expected future cash flows discounted at the loan’s original effective rate.

Six Months Ended June 2021.

The allowance for credit losses decreased by $338 million during the six months ended June 2021.

The provision for credit losses for wholesale and consumer loans and lending commitments reflected a reserve reduction driven by improved broader economic conditions and lower credit loss expectations, partially offset by growth in the firm’s wholesale and consumer lending portfolios, including a provision for credit losses of $185 million relating to the pending acquisition of the General Motors

co-branded

credit card portfolio.

Net (charge-offs)/recoveries for the six months ended June 2021 for wholesale loans were not material and net (charge-offs)/recoveries for consumer loans were primarily related to credit cards.

Forecast model inputs as of June 2021.

When modeling expected credit losses, the firm employs a weighted, multivariate forecast, which includes baseline, adverse and favorable economic scenarios. As of June 2021, the forecasted economic scenarios were most heavily weighted towards the baseline and adverse scenarios. The forecast model incorporated adjustments to reflect the impact of the coronavirus

(COVID-19)

pandemic-related economic support programs provided by national governments.

The table below presents the forecasted range (across the baseline, adverse and favorable scenarios) of the U.S. unemployment and U.S. GDP growth rates used in the forecast model as of June 2021.



	U.S. Unemployment Rate	Growth/(Decline) in U.S. GDP
Forecast for the quarter ended:
December 2021	4.6% to 9.5%	5.3% to (2.4)%
June 2022	4.2% to 9.7%	7.2% to (2.4)%
December 2022	3.9% to 8.0%	8.8% to (0.5)%

In the table above:

•

U.S. unemployment rate represents the rate forecasted as of the respective

quarter-end.

•

Growth/(decline) in U.S. GDP represents the change in quarterly U.S. GDP relative to the U.S. GDP for the fourth quarter of 2019

(pre-pandemic

levels).

•

While the U.S. unemployment and U.S. GDP growth rates are significant inputs to the forecast model, the model contemplates a variety of other inputs across a range of scenarios to provide a forecast of future economic conditions. Given the complex nature of the forecasting process, no single economic variable can be viewed in isolation and independently of other inputs.

Three Months Ended June 2020.

The allowance for credit losses increased by $1.19 billion during the three months ended June 2020.

The provision for credit losses for wholesale and consumer loans reflected the continued impact of the COVID-19 pandemic on macroeconomic indicators such as unemployment and GDP, which deteriorated in the second quarter and resulted in higher modeled expected losses and lower recoveries. In addition, the provision for credit losses for wholesale loans was impacted by ratings downgrades and asset-specific provisions primarily related to borrowers in the diversified industrials, technology, media & telecommunications, and natural resource industries.

Net (charge-offs)/recoveries for the three months ended June 2020 for wholesale loans were substantially all related to corporate loans and net (charge-offs)/recoveries for consumer loans were primarily related to installment loans.

Six Months Ended June 2020.

The allowance for credit losses increased by $2.59 billion during the six months ended June 2020 reflecting $679 million relating to the impact of CECL adoption and $1.91 billion from activity during the period.

The provision for credit losses for wholesale and consumer loans reflected the impact of the COVID-19 pandemic on economic conditions, which resulted in higher modeled expected losses and lower recoveries. In addition, the provision for credit losses for wholesale loans was impacted by ratings downgrades and asset-specific provisions primarily related to borrowers in the technology, media & telecommunications, diversified industrials, and oil and gas industries. Besides the weaker economic outlook related to the COVID-19 pandemic, the provision for credit losses for consumer loans for the six months ended June 2020 was also impacted by the continued seasoning of the credit card portfolio.

Net (charge-offs)/recoveries for the six months ended June 2020 for wholesale loans were substantially all related to corporate loans and net (charge-offs)/recoveries for consumer loans were primarily related to installment loans.

Fair Value of Loans by Level

The table below presents loans held for investment accounted for at fair value under the fair value option by level within the fair value hierarchy.



$ in millions	Level 1	Level 2	Level 3	Total
As of June 2021
Loan Type
Corporate	$ –	$ 1,934	$ 852	$ 2,786
Wealth management	–	7,059	63	7,122
Commercial real estate	–	757	920	1,677
Residential real estate	–	299	118	417
Other	–	238	276	514
Total	$ –	$10,287	$2,229	$12,516
As of December 2020
Loan Type
Corporate	$ –	$ 1,822	$ 929	$ 2,751
Wealth management	–	7,809	63	7,872
Commercial real estate	–	857	1,104	1,961
Residential real estate	–	234	260	494
Other	–	225	322	547
Total	$ –	$10,947	$2,678	$13,625

The gains/(losses) as a result of changes in the fair value of loans held for investment for which the fair value option was elected were $101 million for the three months ended June 2021, $12 million for the three months ended June 2020, $193 million for the six months ended June 2021 and $(15) million for the six months ended June 2020. These gains/(losses) were included in other principal transactions.

See Note 4 for an overview of the firm’s fair value measurement policies and the valuation techniques and significant inputs used to determine the fair value of loans.

Significant Unobservable Inputs

The table below presents the amount of level 3 loans, and ranges and weighted averages of significant unobservable inputs used to value such loans.

As of June 2021

As of December 2020

$ in millions

Amount or

Range

Weighted
Average

Amount or

Range

Weighted
Average

Corporate

Level 3 assets

$852

$929

Yield

2.0% to 37.2%

11.5%

1.1% to 45.2%

12.4%

Recovery rate

15.0% to 98.6%

51.1%

15.0% to 58.0%

31.0%

Duration (years)

2.0 to 5.0

3.4

1.5 to 5.3

3.4

Commercial real estate

Level 3 assets

$920

$1,104

Yield

1.0% to 19.7%

13.4%

4.5% to 19.3%

11.0%

Recovery rate

9.1% to 99.5%

54.3%

3.0% to 99.8%

66.5%

Duration (years)

0.3 to 4.3

1.6

0.3 to 4.8

2.6

Residential real estate

Level 3 assets

$118

$260

Yield

1.5% to 13.5%

10.7%

2.0% to 14.0%

12.1%

Duration (years)

0.4 to 2.4

0.9

0.6 to 2.6

1.7

Wealth management and other

Level 3 assets

$339

$385

Yield

3.5% to 18.7%

9.7%

2.8% to 18.7%

8.0%

Duration (years)

3.7 to 5.0

4.0

0.9 to 5.5

4.1

In the table above:

•

Ranges represent the significant unobservable inputs that were used in the valuation of each type of loan.

•

Weighted averages are calculated by weighting each input by the relative fair value of the loan.

•

The ranges and weighted averages of these inputs are not representative of the appropriate inputs to use when calculating the fair value of any one loan. For example, the highest yield for residential real estate loans is appropriate for valuing a specific residential real estate loan but may not be appropriate for valuing any other residential real estate loan. Accordingly, the ranges of inputs do not represent uncertainty in, or possible ranges of, fair value measurements of level 3 loans.

•

Increases in yield or duration used in the valuation of level 3 loans would have resulted in a lower fair value measurement, while increases in recovery rate would have resulted in a higher fair value measurement as of both June 2021 and December 2020. Due to the distinctive nature of each level 3 loan, the interrelationship of inputs is not necessarily uniform within each product type.

•

Loans are valued using discounted cash flows.

Level 3 Rollforward

The table below presents a summary of the changes in fair value for level 3 loans.



	Three Months Ended June					Six Months Ended June

$ in millions		2021		2020			2021		2020
Beginning balance		$2,531		$2,753			$2,678		$1,890
Net realized gains/(losses)		21		16			47		37
Net unrealized gains/(losses)		22		10			(11	)	(53	)
Purchases		35		58			68		397
Sales		–		–			–		(7	)
Settlements		(249	)	(173	)		(377	)	(379	)
Transfers into level 3		51		163			94		787
Transfers out of level 3		(182	)	(168	)		(270	)	(13	)
Ending balance		$2,229		$2,659			$2,229		$2,659

In the table above:

•

Changes in fair value are presented for loans that are classified in level 3 as of the end of the period.

•

Net unrealized gains/(losses) relates to loans that were still held at

period-end.

•

Purchases includes originations and secondary purchases.

•

Transfers between levels of the fair value hierarchy are reported at the beginning of the reporting period in which they occur. If a loan was transferred to level 3 during a reporting period, its entire gain or loss for the period is classified in level 3.

The table below presents information, by loan type, for loans included in the summary table above.



	Three Months Ended June					Six Months Ended June

$ in millions		2021		2020			2021		2020
Corporate
Beginning balance		$ 976		$1,044			$ 929		$ 752
Net realized gains/(losses)		8		4			16		10
Net unrealized gains/(losses)		3		(1	)		(8	)	(17	)
Purchases		32		37			51		64
Sales		–		–			–		(7	)
Settlements		(136	)	(60	)		(133	)	(79	)
Transfers into level 3		50		83			94		229
Transfers out of level 3		(81	)	(168	)		(97	)	(13	)
Ending balance		$ 852		$ 939			$ 852		$ 939
Commercial real estate
Beginning balance		$1,028		$1,063			$1,104		$ 591
Net realized gains/(losses)		7		7			13		16
Net unrealized gains/(losses)		–		(13	)		(18	)	(37	)
Purchases		3		16			17		285
Settlements		(68	)	(47	)		(148	)	(171	)
Transfers into level 3		1		58			–		400
Transfers out of level 3		(51	)	–			(48	)	–
Ending balance		$ 920		$1,084			$ 920		$1,084
Residential real estate
Beginning balance		$ 176		$ 260			$ 260		$ 221
Net realized gains/(losses)		3		2			6		1
Net unrealized gains/(losses)		(19	)	15			(24	)	1
Purchases		–		5			–		42
Settlements		(17	)	(15	)		(28	)	(39	)
Transfers into level 3		–		1			–		42
Transfers out of level 3		(25	)	–			(96	)	–
Ending balance		$ 118		$ 268			$ 118		$ 268
Wealth management and other
Beginning balance		$ 351		$ 386			$ 385		$ 326
Net realized gains/(losses)		3		3			12		10
Net unrealized gains/(losses)		38		9			39		–
Purchases		–		–			–		6
Settlements		(28	)	(51	)		(68	)	(90	)
Transfers into level 3		–		21			–		116
Transfers out of level 3		(25	)	–			(29	)	–
Ending balance		$ 339		$ 368			$ 339		$ 368

Level 3 Rollforward Commentary

Three Months Ended June 2021.

The net realized and unrealized gains on level 3 loans of $43 million (reflecting $21 million of net realized gains and $22 million of net unrealized gains) for the three months ended June 2021 included gains of $32 million reported in other principal transactions and $11 million reported in interest income.

The drivers of the net unrealized gains on level 3 loans for the three months ended June 2021 were not material.

The drivers of transfers into level 3 loans during the three months ended June 2021 were not material.

Transfers out of level 3 loans during the three months ended June 2021 primarily reflected transfers of certain corporate loans and commercial real estate to level 2 (in each case, principally due to increased price transparency as a result of market evidence, including market transactions in these instruments).

Six Months Ended June 2021.

The net realized and unrealized gains on level 3 loans of $36 million (reflecting $47 million of net realized gains and $11 million of net unrealized losses) for the six months ended June 2021 included gains of $19 million reported in other principal transactions and $17 million reported in interest income.

The drivers of the net unrealized

losse

s on level 3 loans for the six months ended June 2021 were not material.

The drivers of transfers into level 3

loans

during the six months ended June 2021 reflected transfers of certain corporate loans from level 2 (principally due to reduced price transparency as a result of a lack of market evidence including fewer market transactions in these instruments).

Transfers out of level 3 loans during the six months ended June 2021 primarily reflected transfers of certain corporate loans and residential real estate to level 2 (in each case, principally due to increased price transparency as a result of market evidence, including market transactions in these instruments).

Three Months Ended June 2020.

The net realized and unrealized gains on level 3 loans of $26 million (reflecting $16 million of net realized gains and $10 million of net unrealized gains) for the three months ended June 2020 included gains of $15 million reported in other principal transactions and $11 million reported in interest income.

The drivers of the net unrealized gains on level 3 loans for the three months ended June 2020 were not material.

Transfers into level 3 loans during the three months ended June 2020 primarily reflected transfers of certain corporate loans from level 2 (principally due to reduced price transparency as a result of a lack of market evidence, including fewer market transactions in these instruments).

Transfers out of level 3 loans during the three months ended June 2020 reflected transfers of certain corporate loans to level 2 (principally due to certain unobservable yield and duration inputs no longer being significant to the valuation of these instruments).

Six Months Ended June 2020.

The net realized and unrealized losses on level 3 loans of $16 million (reflecting $37 million of net realized gains and $53 million of net unrealized losses) for the six months ended June 2020 included gains/(losses) of $(35) million reported in other principal transactions and $19 million reported in interest income.

The drivers of the net unrealized losses on level 3 loans for the six months ended June 2020 were not material.

Transfers into level 3 loans during the six months ended June 2020 primarily reflected transfers of certain loans backed by commercial real estate and corporate loans from level 2 (in each case, principally due to reduced price transparency as a result of a lack of market evidence, including fewer market transactions in these instruments).

The drivers of transfers out of level 3 loans during the six months ended June 2020 were not material.

Estimated Fair Value

The table below presents the estimated fair value of loans that are not accounted for at fair value and in what level of the fair value hierarchy they would have been classified if they had been included in the firm’s fair value hierarchy.



	Carrying Value		Estimated Fair Value
$ in millions	Carrying Value			Level 2	Level 3	Total
As of June 2021
Amortized cost		$116,040		$70,217	$46,798	$117,015
Held for sale		$ 1,981		$ 1,475	$ 515	$ 1,990
As of December 2020
Amortized cost		$ 99,691		$52,793	$48,512	$101,305
Held for sale		$ 2,799		$ 1,541	$ 1,271	$ 2,812