Loans, Notes and Mortgages

v2.4.0.6

Loans, Notes and Mortgages	9 Months Ended
	Sep. 30, 2012
Loans and Leases Receivable, Net of Deferred Income [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 September 30, 2012 and December 31, 2011. Age Analysis of Outstanding Loans                             (dollars in millions) September 30, 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 $ 9   $ 4   $ —   $ 13   $ 423   $ 22   $ —   $ 458  Home equity —   —   —   —   97   3   —   100              Total consumer 9   4   —   13   520   25   —   558 Commercial                                U.S. commercial —   —   —   —   3,146   43   —   3,189  Commercial real estate —   —   —   —   543   28   —   571  Non-U.S. commercial —   —   —   —   2,923   42   —   2,965              Total commercial loans —   —   —   —   6,612   113   —   6,725  Commercial loans measured at      fair value —   —   —   —   —   —   1,219   1,219              Total commercial —   —   —   —   6,612   113   1,219   7,944          Other (2) —   —   —   —   9,670   —   1,461   11,131              Total loans $ 9   $ 4   $ —   $ 13   $ 16,802   $ 138   $ 2,680   $ 19,633          Allowance for loan losses                             (69 )              Total loans, net                             $ 19,564 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 $9.1 billion and $2.0 billion, respectively, as of September 30, 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 based on primary credit quality indicators. 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 September 30, 2012 and December 31, 2011. (dollars in millions) September 30, 2012    U.S. Commercial   Commercial Real Estate   Non-U.S. Commercial      Risk Ratings           Pass rated $ 3,025   $ 446   $ 2,833 Reservable criticized 164   125   132      Total Commercial Credit $ 3,189   $ 571   $ 2,965 (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 Nine Months Ended September 30, 2012   For the Nine Months Ended September 30, 2011 Allowance for loan losses, at beginning of period $ 72   $ 170 Provision for loan losses (1 )   24 Charge-offs (12 )   (108 ) Recoveries 9   3 Net charge-offs (3 )   (105 ) Other 1   1 Allowance for loan losses, at end of period $ 69   $ 90         Consumer loans, substantially all of which are collateralized, consisted of approximately 23,000 individual loans at September 30, 2012. Commercial loans consisted of approximately 900 separate loans. Merrill Lynch’s outstanding loans include $2.0 billion and $2.5 billion of loans held for sale at September 30, 2012 and December 31, 2011, respectively. Loans held for sale are loans that Merrill Lynch expects to sell prior to maturity. At September 30, 2012, such loans consisted of $0.9 billion of consumer loans, primarily residential mortgages, and $1.1 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 $2.6 billion and $3.4 billion at September 30, 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 September 30, 2012 and December 31, 2011: Net Credit Default Protection by Maturity Profile     September 30, 2012 December 31, 2011 Less than or equal to one year 22 % 16 % Greater than one year and less than or equal to five years 77 82 Greater than five years 1 2 Total net credit default protection 100 % 100 %       Net Credit Default Protection by Credit Exposure Debt Rating (dollars in millions)           September 30, 2012   December 31, 2011 Ratings(1) Net Notional   Percent   Net Notional   Percent AA $ (583 )   22.7 %   $ (661 )   19.4 % A (1,195 )   46.4   (1,542 )   45.1 BBB (550 )   21.4   (637 )   18.6 BB (85 )   3.3   (190 )   5.6 B (40 )   1.6   (190 )   5.6 CCC and below (119 )   4.6   (195 )   5.7 Total net credit default protection $ (2,572 )   100 %   $ (3,415 )   100.0 % (1)Merrill Lynch considers ratings of BBB- or higher to meet the definition of investment grade.