| Investment Securities |
|
|
|
Note 8. |
Investment Securities |
Investment securities on the Condensed Consolidated Balance Sheets include:
|
|
• |
Investments within the scope of Investment Accounting that are held by ML & Co. and certain of its non-broker-dealer subsidiaries consist of debt securities, which are classified as available-for-sale, and are used for investment, liquidity management, and/or collateral management purposes. |
|
|
• |
Non-qualifying investments are those that are not within the scope of Investment Accounting and consist principally of equity investments, including investments in partnerships and joint ventures. Included in non-qualifying investments are investments accounted for under the equity method of accounting, which consist of investments in (i) partnerships and certain limited liability corporations where Merrill Lynch has more than a minor influence (generally defined as three to five percent interest) and (ii) corporate entities where Merrill Lynch has the ability to exercise significant influence over the investee (generally defined as ownership and voting interest of 20% to 50%). Also included in non-qualifying investments are private equity investments that Merrill Lynch holds for capital appreciation and/or current income and which are accounted for at fair value in accordance with the Investment Company Guide, as well as private equity investments accounted for at fair value under the fair value option election. |
Investment securities reported on the Condensed Consolidated Balance Sheets at September 30, 2012 and December 31, 2011 are presented below.
|
|
|
|
|
|
|
|
|
|
(dollars in millions) |
|
September 30, 2012 |
|
|
December 31, 2011 |
Investment securities |
|
|
|
|
|
|
Available-for-sale |
$ |
822 |
|
|
|
$ |
694 |
|
Non-qualifying |
|
|
|
|
|
|
Equity investments |
3,110 |
|
|
|
3,810 |
|
Other investments |
2,457 |
|
|
|
2,180 |
|
Total |
$ |
6,389 |
|
|
|
$ |
6,684 |
|
|
|
|
|
|
For the three and nine months ended September 30, 2012, other-than-temporary impairment ("OTTI") losses related to non-agency mortgage-backed available-for-sale securities were $0 million and $6 million, respectively. For the three and nine months ended September 30, 2011, OTTI losses related to non-agency mortgage-backed available-for-sale securities were $12 million and $59 million, respectively. Net impairment losses recognized in earnings represent the credit component of OTTI losses on available-for-sale debt securities and total OTTI losses for available-for-sale debt securities that Merrill Lynch does not intend to hold to recovery. Those amounts were $0 million and $6 million for the three and nine months ended September 30, 2012 and $5 million and $49 million for the three and nine months ended September 30, 2011, respectively. Refer to Note 1 for Merrill Lynch's accounting policy regarding OTTI of investment securities.
Information regarding investment securities subject to Investment Accounting follows.
|
|
|
|
|
|
|
|
|
(dollars in millions) |
|
September 30, 2012 |
|
Amortized
Cost
|
|
Fair
Value
|
Available-for-Sale |
|
|
|
Securities, mortgage-backed and asset-backed: |
|
|
|
Corporate ABS |
$ |
371 |
|
|
$ |
372 |
|
Non-agency mortgage backed securities |
45 |
|
|
45 |
|
Subtotal |
416 |
|
|
417 |
|
U.S. Government and agencies |
405 |
|
|
405 |
|
Total available-for-sale securities |
$ |
821 |
|
|
$ |
822 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in millions) |
|
December 31, 2011 |
|
Amortized
Cost
|
|
Fair
Value
|
Available-for-Sale |
|
|
|
|
|
Securities, mortgage-backed and asset-backed: |
|
|
|
|
|
Corporate ABS |
$ |
47 |
|
|
$ |
47 |
|
Non-agency mortgage backed securities |
249 |
|
|
249 |
|
Subtotal |
296 |
|
|
296 |
|
U.S. Government and agencies |
398 |
|
|
398 |
|
Total available-for-sale securities |
$ |
694 |
|
|
$ |
694 |
|
|
|
|
|
There were no material gross unrealized gains or losses associated with available-for-sale securities as of September 30, 2012 or December 31, 2011. Additionally, there were no individual securities that had been in a continuous unrealized loss position for a year or more as of September 30, 2012 or December 31, 2011.
The amortized cost and fair value of available-for-sale debt securities by expected maturity for mortgage-backed securities and contractual maturity for other debt securities at September 30, 2012 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-Sale |
|
|
Amortized
Cost
|
|
Fair
Value
|
|
Due in one year or less |
$ |
413 |
|
|
$ |
413 |
|
|
Due after one year through five years |
302 |
|
|
303 |
|
|
Due after five years through ten years |
106 |
|
|
106 |
|
|
Total(1)
|
$ |
821 |
|
|
$ |
822 |
|
|
|
|
|
|
|
|
|
(1) |
Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay their obligations with or without prepayment penalties. |
The proceeds and gross realized gains (losses) from the sale of available-for-sale securities during the three and nine months ended September 30, 2012 and September 30, 2011 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in millions) |
|
|
Three Months Ended September 30, 2012 |
|
Nine Months Ended September 30, 2012 |
|
Three Months Ended September 30, 2011 |
|
Nine Months Ended September 30, 2011 |
Proceeds |
$ |
19 |
|
|
$ |
22 |
|
|
$ |
423 |
|
|
$ |
3,876 |
|
Gross realized gains |
5 |
|
|
5 |
|
|
2 |
|
|
46 |
|
Gross realized losses |
— |
|
|
— |
|
|
— |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
Equity Method Investments
At September 30, 2012 and December 31, 2011, Merrill Lynch held certain investments that were accounted for under the equity method of accounting, none of which were individually material. Other revenues for the nine months ended September 30, 2011 included a gain of $377 million associated with the sale of Merrill Lynch's remaining investment in BlackRock, Inc.
|