Morgan Stanley 2015 Annual Report Download - page 119

additional collateral, or reduce debt positions, when necessary. These credit lines are primarily uncommitted loan facilities,
as the Company reserves the right to not make any advances, or may terminate these credit lines at any time. Factors
considered in the review of these loans include, but are not limited to, the loan amount, the client’s credit profile, the degree
of leverage, collateral diversification, price volatility and liquidity of the collateral.
Residential real estate loans consist of first and second lien mortgages, including HELOC loans. The Company’s
underwriting policy is designed to ensure that all borrowers pass an assessment of capacity and willingness to pay, which
includes an analysis utilizing industry standard credit scoring models (e.g., Fair Isaac Corporation (“FICO”) scores), debt
ratios and assets of the borrower. Loan-to-value ratios are determined based on independent third-party property appraisal/
valuations, and security lien position is established through title/ownership reports. The vast majority of mortgage and
HELOC loans are held for investment in the Wealth Management business segment’s loan portfolio.
For the year ended December 31, 2015, loans and lending commitments associated with the Wealth Management business
segment lending activities increased by approximately 29%, mainly due to growth in PLA, LAL and residential real estate
loans.
Wealth Management Lending Activities by Remaining Contractual Maturity.
At December 31, 2015
Years to Maturity
Less than 1 1-3 3-5 Over 5 Total
(dollars in millions)
Securities-based lending and other loans .............. $ 25,975 $ 1,004 $ 889 $ 749 $ 28,617
Residential real estate loans ........................ — — 35 20,870 20,905
Total ...................................... $ 25,975 $ 1,004 $ 924 $ 21,619 $ 49,522
Lending commitments ............................. 5,143 286 115 277 5,821
Total loans and lending commitments ............ $ 31,118 $ 1,290 $ 1,039 $ 21,896 $ 55,343
At December 31, 2014
Years to Maturity
Less than 1 1-3 3-5 Over 5 Total
(dollars in millions)
Securities-based lending and other loans .............. $ 19,408 $ 1,071 $ 750 $ 768 $ 21,997
Residential real estate loans ........................ — — — 15,825 15,825
Total ...................................... $ 19,408 $ 1,071 $ 750 $ 16,593 $ 37,822
Lending commitments ............................ 4,192 290 131 301 4,914
Total loans and lending commitments ............ $ 23,600 $ 1,361 $ 881 $ 16,894 $ 42,736
At December 31, 2015 and December 31, 2014, approximately 99.9% of the Wealth Management business segment loans
held for investment were current, while approximately 0.1% were on nonaccrual status because the loans were past due for a
period of 90 days or more or payment of principal or interest was in doubt.
The Wealth Management business segment also provides margin lending to clients and had an outstanding balance of $14.7
billion and $13.7 billion at December 31, 2015 and December 31, 2014, respectively, which were classified within Customer
and other receivables within the consolidated statements of financial condition.
In addition, the Wealth Management business segment has employee loans that are granted primarily in conjunction with
programs established by the Company to recruit and retain certain employees. These loans, recorded in Customer and other
receivables in the consolidated statements of financial condition, are full recourse, require periodic payments and have
repayment terms ranging from 2 to 12 years. The Company establishes an allowance for loan amounts it does not consider
recoverable from terminated employees, which is recorded in Compensation and benefits expense.
113