Loans

9 Months Ended

Sep. 30, 2021

Note 9.

Loans

Loans include (i) loans held for investment that are accounted for at amortized cost net of allowance for loan losses or at fair value under the fair value option and (ii) loans held for sale that are accounted for at the lower of cost or fair value. Interest on loans is recognized over the life of the loan and is recorded on an accrual basis.

The table below presents information about loans.



$ in millions	Amortized Cost		Fair Value	Held For Sale	Total
As of September 2021
Loan Type
Corporate	$ 48,943		$ 3,020	$2,144	$ 54,107
Wealth management	35,159		6,616	–	41,775
Commercial real estate	17,892		1,655	2,160	21,707
Residential real estate	12,356		351	652	13,359
Consumer:
Installment	3,449		–	–	3,449
Credit cards	6,251		–	–	6,251
Other	5,308		462	538	6,308
Total loans, gross	129,358		12,104	5,494	146,956
Allowance for loan losses	(3,332	)	–	–	(3,332	)
Total loans	$126,026		$12,104	$5,494	$143,624
As of December 2020
Loan Type
Corporate	$ 44,778		$ 2,751	$1,130	$ 48,659
Wealth management	25,151		7,872	–	33,023
Commercial real estate	17,096		1,961	1,233	20,290
Residential real estate	5,236		494	20	5,750
Consumer:
Installment	3,823		–	–	3,823
Credit cards	4,270		–	–	4,270
Other	3,211		547	416	4,174
Total loans, gross	103,565		13,625	2,799	119,989
Allowance for loan losses	(3,874	)	–	–	(3,874	)
Total loans	$ 99,691		$13,625	$2,799	$116,115

The following is a description of the loan types in the table above:

•

Corporate.

Corporate loans includes term loans, revolving lines of credit, letter of credit facilities and bridge loans, and are principally used for operating and general corporate purposes, or in connection with acquisitions. Corporate loans may be secured or unsecured, depending on the loan purpose, the risk profile of the borrower and other factors.

•

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 includes 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 September 2021
Accounting Method
Amortized cost	$47,429	$67,434	$14,495	$129,358
Fair value	2,502	5,279	4,323	12,104
Held for sale	1,151	4,163	180	5,494
Total	$51,082	$76,876	$18,998	$146,956
Loan Type
Corporate	$14,048	$39,809	$ 250	$ 54,107
Wealth management	29,631	5,595	6,549	41,775
Real estate:
Commercial	3,463	17,903	341	21,707
Residential	1,247	11,051	1,061	13,359
Consumer:
Installment	–	–	3,449	3,449
Credit cards	–	–	6,251	6,251
Other	2,693	2,518	1,097	6,308
Total	$51,082	$76,876	$18,998	$146,956
Secured	87%	92%	42%	84%
Unsecured	13%	8%	58%	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 September 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 September 2021

$ in millions		Investment- Grade	Non-Investment- Grade	Other Metrics/ Unrated	Total
2021		$ 2,910	$ 8,217	$ –	$ 11,127
2020		2,241	5,263	19	7,523
2019		458	4,377	–	4,835
2018		1,853	2,965	–	4,818
2017		755	2,029	–	2,784
2016 or earlier		258	2,157	–	2,415
Revolving		4,127	11,249	65	15,441
Corporate		12,602	36,257	84	48,943
2021		967	618	875	2,460
2020		537	248	–	785
2019		636	400	–	1,036
2018		320	106	–	426
2017		369	31	–	400
2016 or earlier		578	247	–	825
Revolving		24,796	2,273	2,158	29,227
Wealth management		28,203	3,923	3,033	35,159
2021		329	2,715	33	3,077
2020		322	2,194	–	2,516
2019		72	1,460	–	1,532
2018		212	1,055	–	1,267
2017		453	740	–	1,193
2016 or earlier		419	741	17	1,177
Revolving		1,096	6,034	–	7,130
Commercial real estate		2,903	14,939	50	17,892
2021		381	43	191	615
2020		287	274	110	671
2019		–	3	205	208
2018		–	93	177	270
2017		8	53	127	188
2016 or earlier		–	1	58	59
Revolving		435	9,910	–	10,345
Residential real estate		1,111	10,377	868	12,356
2021		104	428	246	778
2020		–	75	400	475
2019		–	31	21	52
2018		–	33	–	33
2017		–	6	9	15
Revolving		2,506	1,365	84	3,955
Other		2,610	1,938	760	5,308
Total		$ 47,429	$ 67,434	$ 4,795	$ 119,658
Percentage of total		40%	56%	4%	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 September 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 September 2021
2021	$1,380	$ 19	$1,399
2020	816	40	856
2019	658	74	732
2018	347	56	403
2017	47	10	57
2016	2	–	2
Installment	3,250	199	3,449
Credit cards	4,665	1,586	6,251
Total	$7,915	$1,785	$9,700
Percentage of total:
Installment	94%	6%	100%
Credit cards	75%	25%	100%
Total	82%	18%	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 September 2021
Corporate	$ 54,107	56%	36%	8%	100%
Wealth management	41,775	86%	11%	3%	100%
Commercial real estate	21,707	75%	19%	6%	100%
Residential real estate	13,359	92%	5%	3%	100%
Consumer:
Installment	3,449	100%	–	–	100%
Credit cards	6,251	100%	–	–	100%
Other	6,308	88%	10%	2%	100%
Total	$146,956	75%	20%	5%	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 September 2021 were 20% for technology, media & telecommunications (17% as of December 2020), 19% for funds (13% as of December 2020), 15% for diversified industrials (17% as of December 2020), 8% for natural resources & utilities (12% as of December 2020), and 8% for financial institutions (10% 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 $219 million as of September 2021 and were $184 million as of December 2020.

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

	September 2021			December 2020

$ in millions		Loans	Lending Commitments		Loans	Lending Commitments
Wholesale
Corporate		$ 48,943	$150,464		$ 44,778	$127,756
Wealth management		35,159	4,014		25,151	2,314
Commercial real estate		17,892	4,183		17,096	4,154
Residential real estate		12,356	2,785		5,236	1,804
Other		5,308	5,183		3,211	4,841
Consumer
Installment		3,449	11		3,823	4
Credit cards		6,251	31,718		4,270	21,640
Total		$129,358	$198,358		$103,565	$162,513

In the table above:

•

Wholesale loans included $2.66 billion as of September 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 $575 million as of September 2021 and $649 million as of December 2020. These loans included $161 million as of September 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 $29.79 billion as of September 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 September 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 TDR, 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 TDR, is calculated using the present value of expected future cash flows discounted at the loan’s original effective rate.

The provision for credit losses reflected growth in the firm’s wholesale and consumer

lending portfolios

, including a provision for credit losses of approximately $185 million relating to the pending acquisition of the General Motors co-branded credit card portfolio, partially offset by reserve reduction driven by improved broader economic conditions.

Net (charge-offs)/recoveries for the nine months ended September 2021 for wholesale loans were primarily related to corporate loans and net (charge-offs)/recoveries for consumer loans were primarily related to credit cards.

Forecast model inputs as of September 2021.

When modeling expected credit losses, the firm employs a weighted, multivariate forecast, which includes baseline, adverse and favorable economic scenarios. As of September 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 September 2021.



	U.S. Unemployment Rate	Growth/(Decline) in U.S. GDP
Forecast for the quarter ended:
December 2021	4.1% to 6.2%	3.8% to 1.5%
June 2022	3.6% to 9.5%	5.8% to (1.0)%
December 2022	3.4% to 9.7%	7.4% to (0.9)%

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 September 2020.

The allowance for credit losses decreased by $62 million during the three months ended September 2020.

The provision for credit losses reflected ratings downgrades and asset-specific provisions related to wholesale loans (relating to borrowers in the technology, media & telecommunications, diversified industrials and natural resources industries), and growth in consumer loans, partially offset by reserve reductions from paydowns on corporate lines of credit.

Net (charge-offs)/recoveries for the three months ended September 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.

Nine Months Ended September 2020.

The allowance for credit losses increased by $2.53 billion during the nine months ended September 2020 reflecting $679 million relating to the impact of CECL adoption and $1.85 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 asset-specific provisions and ratings downgrades primarily related to borrowers in the technology, media & telecommunications, diversified industrials, and natural resources industries. Besides the weaker economic outlook related to the

COVID-19

pandemic, the provision for credit losses for consumer loans for the nine months ended September 2020 was also impacted by the continued seasoning of the credit card portfolio.

Net (charge-offs)/recoveries for the nine months ended September 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 September 2021
Loan Type
Corporate	$ –	$ 2,245	$ 775	$ 3,020
Wealth management	–	6,553	63	6,616
Commercial real estate	–	719	936	1,655
Residential real estate	–	185	166	351
Other	–	203	259	462
Total	$ –	$ 9,905	$2,199	$12,104
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 as a result of changes in the fair value of loans held for investment for which the fair value option was elected were $30 million for the three months ended September 2021, $64 million for the three months ended September 2020, $223 million for the nine months ended September 2021 and $49 million for the nine months ended September 2020. These gains 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 September 2021

As of December 2020

$ in millions

Amount or

Range

Weighted
Average

Amount or

Range

Weighted
Average

Corporate

Level 3 assets

$775

$929

Yield

2.3% to 40.3%

8.9%

1.1% to 45.2%

12.4%

Recovery rate

20.0% to 94.4%

56.0%

15.0% to 58.0%

31.0%

Duration (years)

1.7 to 4.5

3.2

1.5 to 5.3

3.4

Commercial real estate

Level 3 assets

$936

$1,104

Yield

7.0% to 25.4%

14.4%

4.5% to 19.3%

11.0%

Recovery rate

2.5% to 99.5%

39.6%

3.0% to 99.8%

66.5%

Duration (years)

0.2 to 4.1

1.4

0.3 to 4.8

2.6

Residential real estate

Level 3 assets

$166

$260

Yield

2.0% to 13.5%

11.0%

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

$322

$385

Yield

3.5% to 18.7%

7.9%

2.8% to 18.7%

8.0%

Duration (years)

3.1 to 5.7

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 September 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 September					Nine Months Ended September

$ in millions		2021		2020			2021		2020
Beginning balance		$2,229		$2,659			$2,678		$1,890
Net realized gains/(losses)		23		23			72		60
Net unrealized gains/(losses)		(16	)	76			(31	)	34
Purchases		74		181			140		557
Sales		(13	)	(17	)		(17	)	(31	)
Settlements		(181	)	(221	)		(555	)	(567	)
Transfers into level 3		93		166			181		928
Transfers out of level 3		(10	)	(40	)		(269	)	(44	)
Ending balance		$2,199		$2,827			$2,199		$2,827

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 September					Nine Months Ended September

$ in millions		2021		2020			2021		2020
Corporate
Beginning balance		$852		$ 939			$ 929		$ 752
Net realized gains/(losses)		11		7			21		14
Net unrealized gains/(losses)		(16	)	1			(24	)	(5	)
Purchases		17		132			63		184
Sales		(13	)	(9	)		(13	)	(18	)
Settlements		(81	)	(58	)		(208	)	(110	)
Transfers into level 3		15		23			103		230
Transfers out of level 3		(10	)	(32	)		(96	)	(44	)
Ending balance		$775		$1,003			$ 775		$1,003
Commercial real estate
Beginning balance		$920		$1,084			$1,104		$ 591
Net realized gains/(losses)		9		11			33		38
Net unrealized gains/(losses)		11		43			(15	)	4
Purchases		–		40			19		323
Sales		–		(5	)		(3	)	(10	)
Settlements		(82	)	(120	)		(227	)	(278	)
Transfers into level 3		78		121			78		498
Transfers out of level 3		–		(8	)		(53	)	–
Ending balance		$936		$1,166			$ 936		$1,166
Residential real estate
Beginning balance		$118		$ 268			$ 260		$ 221
Net realized gains/(losses)		3		3			6		7
Net unrealized gains/(losses)		1		11			(36	)	8
Purchases		57		1			58		43
Sales		–		(2	)		(1	)	(2	)
Settlements		(13	)	(22	)		(45	)	(57	)
Transfers into level 3		–		10			–		49
Transfers out of level 3		–		–			(76	)	–
Ending balance		$166		$ 269			$ 166		$ 269
Wealth management and other
Beginning balance		$339		$ 368			$ 385		$ 326
Net realized gains/(losses)		–		2			12		1
Net unrealized gains/(losses)		(12	)	21			44		27
Purchases		–		8			–		7
Sales		–		(1	)		–		(1	)
Settlements		(5	)	(21	)		(75	)	(122	)
Transfers into level 3		–		12			–		151
Transfers out of level 3		–		–			(44	)	–
Ending balance		$322		$ 389			$ 322		$ 389

Level 3 Rollforward Commentary

Three Months Ended September 2021.

The net realized and unrealized gains on level 3 loans of $7 million (reflecting $23 million of net realized gains and $16 million of net unrealized losses) for the three months ended September 2021 included losses of $7 million reported in other principal transactions and gains of $14 million reported in interest income.

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

The drivers of both the transfers into level 3 loans and transfers out of level 3 loans during the three months ended September 2021 were not material.

Nine Months Ended September 2021.

The net realized and unrealized gains on level 3 loans of $41 million (reflecting $72 million of net realized gains and $31 million of net unrealized losses) for the nine months ended September 2021 included gains of $15 million reported in other principal transactions and $26 million reported in interest income.

The drivers of the net unrealized losses on level 3 loans for the nine months ended September 2021 were not material.

Transfers into level 3 loans during the nine months ended September 2021 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 nine months ended September 2021 primarily reflected transfers of certain corporate loans and loans backed by 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 September 2020.

The net realized and unrealized gains on level 3 loans of $99 million (reflecting $23 million of net realized gains and $76 million of net unrealized gains) for the three months ended September 2020 included gains of $86 million reported in other principal transactions and $13 million reported in interest income.

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

Transfers into level 3 loans during the three months ended September 2020 primarily reflected transfers of certain loans backed by commercial real estate from level 2 (principally due to certain unobservable inputs becoming significant to the valuation of these instruments) and transfers of certain other loans backed by commercial real estate 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).

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

Nine Months Ended September 2020.

The net realized and unrealized gains on level 3 loans of $94 million (reflecting $60 million of net realized gains and $34 million of net unrealized gains) for the nine months ended September 2020 included gains of $70 million reported in other principal transactions and $24 million reported in interest income.

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

Transfers into level 3 loans during the nine months ended September 2020 primarily reflected transfers of certain loans backed by commercial real estate, corporate loans and wealth management and other 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 nine months ended September 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 September 2021
Amortized cost		$126,026		$71,984	$55,179	$127,163
Held for sale		$ 5,494		$ 2,898	$ 2,618	$ 5,516
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