Morgan Stanley 2015 Annual Report Download - page 193

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Company utilizes the following credit quality indicators, which are consistent with U.S. banking regulators’ definitions
of criticized exposures, in its credit monitoring process for loans held for investment:
•Pass. A credit exposure rated pass has a continued expectation of timely repayment, all obligations of the
borrower are current, and the obligor complies with material terms and conditions of the lending agreement.
•Special Mention. Extensions of credit that have potential weakness that deserve management’s close attention and,
if left uncorrected, may, at some future date, result in the deterioration of the repayment prospects or collateral
position.
•Substandard. Obligor has a well-defined weakness that jeopardizes the repayment of the debt and has a high
probability of payment default with the distinct possibility that the Company will sustain some loss if noted
deficiencies are not corrected.
•Doubtful. Inherent weakness in the exposure makes the collection or repayment in full, based on existing facts,
conditions and circumstances, highly improbable, and the amount of loss is uncertain.
•Loss. Extensions of credit classified as loss are considered uncollectible and are charged off.
Loans considered as doubtful or loss are considered impaired. Substandard loans are regularly reviewed for impairment.
When a loan is impaired, the impairment is measured based on the present value of expected future cash flows discounted at
the loan’s effective interest rate or, as a practical expedient, the observable market price of the loan or the fair value of the
collateral if the loan is collateral dependent. For further information, see Note 2.
Credit Quality Indicators for Loans Held for Investment, Gross of Allowance for Loan Losses, by Product Type.
At December 31, 2015
Corporate Consumer
Residential
Real Estate
Wholesale
Real Estate Total
(dollars in millions)
Pass .......................................... $ 22,040 $ 21,528 $ 20,828 $ 6,839 $ 71,235
Special mention ................................ 300———300
Substandard ................................... 1,202 — 35 — 1,237
Doubtful ...................................... 12———12
Loss ..........................................—————
Total loans .................................... $ 23,554 $ 21,528 $ 20,863 $ 6,839 $ 72,784
At December 31, 2014
Corporate Consumer
Residential
Real Estate
Wholesale
Real Estate Total
(dollars in millions)
Pass .......................................... $ 17,847 $ 16,576 $ 15,688 $ 5,298 $ 55,409
Special mention ................................ 1,683———1,683
Substandard ................................... 127 — 47 — 174
Doubtful ...................................... 2——— 2
Loss ..........................................—————
Total loans .................................... $ 19,659 $ 16,576 $ 15,735 $ 5,298 $ 57,268
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