Quarterly report pursuant to Section 13 or 15(d)

Loans, Notes and Mortgages

v2.4.0.6
Loans, Notes and Mortgages
3 Months Ended
Mar. 31, 2012
Loans, Notes and Mortgages [Abstract]  
Loans, Notes and Mortgages
Note 10.
Loans, Notes and Mortgages
Loans, notes and mortgages include:
Consumer loans, which are substantially secured, including residential mortgages, home equity loans, and other loans to individuals for household, family, or other personal expenditures;
Commercial loans, including corporate and institutional loans (including corporate and financial sponsor, non-investment grade lending commitments), commercial mortgages, asset-backed loans, small- and middle-market business loans, and other loans to businesses; and
Other loans, which include securities-backed loans and loans classified as held-for-sale.
The table below presents information on Merrill Lynch’s loans outstanding at March 31, 2012 and December 31, 2011.
Age Analysis of Outstanding Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(dollars in millions)
March 31, 2012
 
30-59 Days
 
60-89 Days
 
90 Days or more
 
Total Past
 
Total Current or Less Than
 
Nonperforming
 
Loans Measured at
 
Total
 
Past Due
 
Past Due
 
Past Due
 
Due
 
30 Days Past Due
 
Loans (1)
 
Fair Value
 
Outstanding
Consumer loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Residential mortgage
$
11

 
$
6

 
$

 
$
17

 
$
421

 
$
27

 
$

 
$
465

 Home equity
1

 
1

 

 
2

 
110

 
3

 

 
115

             Total consumer
12

 
7

 

 
19

 
531

 
30

 

 
580

Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 U.S. commercial

 

 
1

 
1

 
3,589

 
68

 

 
3,658

 Commercial real estate

 

 

 

 
628

 
89

 

 
717

 Non-U.S. commercial

 

 

 

 
3,029

 
62

 

 
3,091

             Total commercial loans

 

 
1

 
1

 
7,246

 
219

 

 
7,466

 Commercial loans measured at
     fair value

 

 

 

 

 

 
1,276

 
1,276

             Total commercial

 

 
1

 
1

 
7,246

 
219

 
1,276

 
8,742

         Other (2)

 

 

 

 
9,684

 

 
1,498

 
11,182

             Total loans
$
12

 
$
7

 
$
1

 
$
20

 
$
17,461

 
$
249

 
$
2,774

 
$
20,504

         Allowance for loan losses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(75
)
             Total loans, net
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
20,429

Age Analysis of Outstanding Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(dollars in millions)
December 31, 2011
 
30-59 Days
 
60-89 Days
 
90 Days or more
 
Total Past
 
Total Current or Less Than
 
Nonperforming
 
Loans Measured at
 
Total
 
Past Due
 
Past Due
 
Past Due
 
Due
 
30 Days Past Due
 
Loans (1)
 
Fair Value
 
Outstanding
Consumer loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Residential mortgage
$
20

 
$
4

 
$

 
$
24

 
$
420

 
$
25

 
$

 
$
469

 Home equity

 

 

 

 
117

 
4

 

 
121

             Total consumer
20

 
4

 

 
24

 
537

 
29

 

 
590

Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 U.S. commercial

 
1

 
2

 
3

 
3,753

 
85

 

 
3,841

 Commercial real estate

 

 

 

 
667

 
108

 

 
775

 Non-U.S. commercial

 

 

 

 
3,040

 
65

 

 
3,105

             Total commercial loans

 
1

 
2

 
3

 
7,460

 
258

 

 
7,721

 Commercial loans measured at
     fair value

 

 

 

 

 

 
909

 
909

             Total commercial

 
1

 
2

 
3

 
7,460

 
258

 
909

 
8,630

         Other (3)

 

 

 

 
10,013

 

 
1,413

 
11,426

             Total loans
$
20

 
$
5

 
$
2

 
$
27

 
$
18,010

 
$
287

 
$
2,322

 
$
20,646

         Allowance for loan losses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(72
)
             Total loans, net
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
20,574

(1)
Excludes loans measured at fair value.
(2)
Includes securities-backed loans and loans held-for-sale of $8.9 billion and $2.3 billion, respectively, as of March 31, 2012.
(3)
Includes securities-backed loans and loans held-for-sale of $8.9 billion and $2.5 billion, respectively, as of December 31, 2011.
Merrill Lynch monitors the credit quality of its loans on an ongoing basis. Merrill Lynch’s commercial loans are evaluated using the internal classifications of pass rated or reservable criticized as the primary credit quality indicators. The term reservable criticized refers to those commercial loans that are internally classified or listed by Merrill Lynch as Special Mention, Substandard or Doubtful, which are asset categories defined by regulatory authorities. These assets have an elevated level of risk and may have a high probability of default or total loss. Pass rated refers to all loans not considered reservable criticized. In addition to these primary credit quality indicators, Merrill Lynch uses other credit quality indicators for certain types of loans. The table below presents credit quality indicators for Merrill Lynch’s commercial loan portfolio, excluding loans accounted for under the fair value option, at March 31, 2012 and December 31, 2011.

(dollars in millions)
March 31, 2012
 
 U.S Commercial
 
Commercial Real Estate
 
Non-U.S. Commercial
     Risk Ratings
 
 
 
 
 
Pass rated
$
3,454

 
$
478

 
$
2,949

Reservable criticized
204

 
239

 
142

     Total Commercial Credit
$
3,658

 
$
717

 
$
3,091


(dollars in millions)
December 31, 2011
 
U.S. Commercial
 
Commercial Real Estate
 
Non-U.S. Commercial
     Risk Ratings
 
 
 
 
 
Pass rated
$
3,594

 
$
511

 
$
2,967

Reservable criticized
247

 
264

 
138

     Total Commercial Credit
$
3,841

 
$
775

 
$
3,105

Activity in the allowance for loan losses, which is primarily associated with commercial loans, is presented below:
(dollars in millions)
 
 
 
 
For the Three Months Ended
March 31, 2012
 
For the Three Months Ended
March 31, 2011
Allowance for loan losses, at beginning of period
$
72

 
$
170

Provision for loan losses
3

 
(28
)
Charge-offs
(3
)
 
(66
)
Recoveries
3

 
1

Net charge-offs

 
(65
)
Other

 
1

Allowance for loan losses, at end of period
$
75

 
$
78

 
 
 
 

Consumer loans, substantially all of which are collateralized, consisted of approximately 23,000 individual loans at March 31, 2012. Commercial loans consisted of approximately 1,000 separate loans.
Merrill Lynch’s outstanding loans include $2.2 billion and $2.5 billion of loans held for sale at March 31, 2012 and December 31, 2011, respectively. Loans held for sale are loans that Merrill Lynch expects to sell prior to maturity. At March 31, 2012, such loans consisted of $0.9 billion of consumer loans, primarily residential mortgages, and $1.3 billion of commercial loans. At December 31, 2011, such loans consisted of $1.0 billion of consumer loans, primarily residential mortgages, and $1.5 billion of commercial loans.
In some cases, Merrill Lynch enters into single name and index credit default swaps to mitigate credit exposure related to funded and unfunded commercial loans. The notional value of these swaps totaled $3.2 billion and $3.4 billion at March 31, 2012 and December 31, 2011, respectively.
The following tables provide information regarding Merrill Lynch’s net credit default protection associated with its funded and unfunded commercial loans as of March 31, 2012 and December 31, 2011:

Net Credit Default Protection by Maturity Profile
 
 
March 31,
2012
December 31,
2011
Less than or equal to one year
14
%
16
%
Greater than one year and less than or equal to five years
84

82

Greater than five years
2

2

Total net credit default protection
100
%
100
%
 
 
 



Net Credit Default Protection by Credit Exposure Debt Rating

(dollars in millions)
 
 
 
 
 
March 31, 2012
 
December 31, 2011
Ratings(1)
Net
Notional
 
Percent
 
Net
Notional
 
Percent
AA
$
(565
)
 
17.5
%
 
$
(661
)
 
19.4
%
A
(1,588
)
 
49.1
 
(1,542
)
 
45.1

BBB
(659
)
 
20.4
 
(637
)
 
18.6

BB
(181
)
 
5.6
 
(190
)
 
5.6

B
(85
)
 
2.6
 
(190
)
 
5.6

CCC and below
(155
)
 
4.8
 
(195
)
 
5.7

Total net credit default protection
$
(3,233
)
 
100
%
 
$
(3,415
)
 
100.0
%

(1)Merrill Lynch considers ratings of BBB- or higher to meet the definition of investment grade.