Goldman Sachs 2015 Annual Report Download - page 168

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Impact of Credit Spreads on Borrowings
The table below presents the net gains/(losses) attributable
to the impact of changes in the firm’s own credit spreads on
borrowings for which the fair value option was elected. The
firm calculates the fair value of borrowings by discounting
future cash flows at a rate which incorporates the firm’s
credit spreads.
Year Ended December
$ in millions 2015 2014 2013
Net gains/(losses) including hedges $255 $144 $(296)
Net gains/(losses) excluding hedges 255 142 (317)
Note 9.
Loans Receivable
Loans receivable is comprised of loans held for investment
that are accounted for at amortized cost net of allowance
for loan losses. Interest on loans receivable is recognized
over the life of the loan and is recorded on an accrual basis.
The table below presents details about loans receivable.
As of December
$ in millions 2015 2014
Corporate loans $20,740 $14,310
Loans to private wealth management clients 13,961 11,289
Loans backed by commercial real estate 5,271 2,425
Loans backed by residential real estate 2,316 321
Other loans 3,533 821
Total loans receivable, gross 45,821 29,166
Allowance for loan losses (414) (228)
Total loans receivable $45,407 $28,938
As of December 2015 and December 2014, the fair value of
loans receivable was $45.19 billion and $28.90 billion,
respectively. As of December 2015, had these loans been
carried at fair value and included in the fair value hierarchy,
$23.91 billion and $21.28 billion would have been
classified in level 2 and level 3, respectively. As of
December 2014, had these loans been carried at fair value
and included in the fair value hierarchy, $13.75 billion and
$15.15 billion would have been classified in level 2 and
level 3, respectively.
The firm also extends lending commitments that are held
for investment and accounted for on an accrual basis. As of
December 2015 and December 2014, such lending
commitments were $93.92 billion and $66.22 billion,
respectively, substantially all of which were extended to
corporate borrowers. The carrying value and the estimated
fair value of such lending commitments were liabilities of
$291 million and $3.32 billion, respectively, as of
December 2015, and $199 million and $1.86 billion,
respectively, as of December 2014. Had these commitments
been included in the firm’s fair value hierarchy, they would
have primarily been classified in level 3 as of both
December 2015 and December 2014.
The following is a description of the captions in the table
above:
‰Corporate Loans. Corporate loans include term loans,
revolving lines of credit, letter of credit facilities and
bridge loans, and are principally used for operating
liquidity 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.
‰Loans to Private Wealth Management Clients. Loans
to the firm’s private wealth management clients include
loans used by clients to finance private asset purchases,
employ leverage for strategic investments in real or
financial assets, bridge cash flow timing gaps or provide
liquidity for other needs. Such loans are primarily secured
by securities or other assets.
‰Loans Backed by Commercial Real Estate. Loans
backed by commercial real estate include loans extended
by the firm that are directly or indirectly secured by
hotels, retail stores, multifamily housing complexes and
commercial and industrial properties. Loans backed by
commercial real estate also include loans purchased by
the firm.
‰Loans Backed by Residential Real Estate. Loans
backed by residential real estate include loans extended
by the firm to clients who warehouse assets that are
directly or indirectly secured by residential real estate.
Loans backed by residential real estate also include loans
purchased by the firm.
‰Other Loans. Other loans primarily include 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.
156 Goldman Sachs 2015 Form 10-K