Loans, Notes and Mortgages
|6 Months Ended|
Jun. 30, 2013
|Loans and Leases Receivable, Net of Deferred Income [Abstract]|
|Loans Notes And Mortgages Disclosure [Text Block]||
Loans, notes, mortgages and related commitments to extend credit include:
The table below presents information on Merrill Lynch’s loans outstanding at June 30, 2013 and December 31, 2012.
Merrill Lynch monitors credit quality based on primary credit quality indicators. Within consumer loans, the primary credit quality indicators are the refreshed LTV ratios and the refreshed Fair Isaac Corporation ("FICO") score. Refreshed LTV measures the carrying value of the loan as a percentage of the value of property securing the loan, which is refreshed quarterly. Home equity loans are evaluated using the refreshed combined loan-to-value ratio ("CLTV"), which measures the carrying value of the combined loans that have liens against the property and the available line of credit as a percentage of the appraised value of the property securing the loan, which is refreshed quarterly. FICO score measures the creditworthiness of the borrower based on the financial obligations of the borrower and the borrower's credit history. At a minimum, FICO scores are refreshed quarterly, and in many cases, more frequently.
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 tables below present credit quality indicators for Merrill Lynch's consumer and commercial loan portfolios, excluding loans accounted for under the fair value option, at June 30, 2013 and December 31, 2012.
(1) Excludes PCI loans
Activity in the allowance for loan losses, which is primarily associated with commercial loans, is presented below:
Consumer loans, substantially all of which are collateralized, consisted of approximately 42,000 individual loans at June 30, 2013. Commercial loans consisted of approximately 400 separate loans.
Merrill Lynch’s outstanding loans include $1.4 billion and $2.3 billion of loans held for sale at June 30, 2013 and December 31, 2012, respectively. Loans held for sale are loans that Merrill Lynch expects to sell prior to maturity. At June 30, 2013, such loans consisted of $0.7 billion of consumer loans, primarily residential mortgages, and $0.7 billion of commercial loans. At December 31, 2012, such loans consisted of $1.4 billion of consumer loans, primarily residential mortgages, and $0.9 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 $1.5 billion and $2.0 billion at June 30, 2013 and December 31, 2012, respectively.
The following tables provide information regarding Merrill Lynch’s net credit default protection associated with its funded and unfunded commercial loans as of June 30, 2013 and December 31, 2012:
Net Credit Default Protection by Maturity Profile
Net Credit Default Protection by Credit Exposure Debt Rating
(1) Merrill Lynch considers ratings of BBB- or higher to meet the definition of investment grade.
Purchased Credit-Impaired Loans
During the three and six months ended June 30, 2013, Merrill Lynch acquired certain residential mortgage loans from Bank of America, the majority of which are accounted for as PCI loans. Such PCI loans had an aggregate unpaid principal balance of $5.3 billion and an aggregate carrying value of $4.1 billion at the dates of acquisition. The following table below provides details of these loans:
(1) Represents undiscounted expected principal and interest cash flows
As of June 30, 2013, the aggregate unpaid principal balance and aggregate carrying value of PCI loans was $5.1 billion and $4.0 billion, respectively.
The table below shows activity for the accretable yield on these loans. The amount of accretable yield is affected by changes in credit outlooks, including items such as default rates and loss severities, prepayment speeds, which can change the amount and period of time over which interest payments are expected to be received, and the interest rates on variable rate loans. The reclassifications from nonaccretable difference during the three and six months ended June 30, 2013 were due to increases in expected cash flows driven by improved home prices and lower expected defaults, along with a decrease in prepayment speeds as a result of rising interest rates. Changes in the prepayment assumption affect the expected remaining life of the portfolio, which results in a change to the amount of future interest cash flows.
Loans notes and mortgages.
No definition available.