Bank of America 2009 Annual Report Download - page 82

The following table presents commercial real estate credit quality data
by non-homebuilder and homebuilder property types. Commercial real
estate primarily includes commercial loans secured by non owner-occu-
pied real estate which is dependent on the sale or lease of the real
estate as the primary source of repayment.
Table 32 Commercial Real Estate Credit Quality Data
December 31 Year Ended December 31
Nonperforming Loans and
Foreclosed Properties
(1)
Utilized Reservable
Criticized Exposure
(2)
Net Charge-offs Net Charge-off Ratios
(3)
(Dollars in millions) 2009 2008 2009 2008 2009 2008 2009 2008
Commercial real estate – non-homebuilder
Office $ 729 $95 $ 3,822 $ 801 $ 249 $– 2.01% –%
Multi-family rental
546 232 2,496 822 217 13 1.96 0.18
Shopping centers/retail
1,157 204 3,469 1,442 239 10 2.30 0.11
Hotels/motels
160 91,140 67 540.08 0.09
Industrial/warehouse
442 91 1,757 464 82 –1.34 –
Multi-use
416 17 1,578 409 146 24 2.58 0.38
Land and land development
968 455 1,657 1,281 286 –8.00 –
Other
(4)
417 88 2,210 973 140 22 1.72 0.42
Total non-homebuilder 4,835 1,191 18,129 6,259 1,364 73 2.13 0.15
Commercial real estate – homebuilder (5) 3,228 3,036 5,675 7,571 1,338 814 14.41 6.25
Total commercial real estate $8,063 $4,227 $23,804 $13,830 $2,702 $887 3.69 1.41
(1) Includes commercial foreclosed properties of $777 million and $321 million at December 31, 2009 and 2008.
(2) Utilized reservable criticized exposure corresponds to the Special Mention, Substandard and Doubtful asset categories defined by regulatory authorities. This is defined as loans, excluding those accounted for under
the fair value option, SBLCs and bankers’ acceptances.
(3) Net charge-off ratios are calculated as net charge-offs divided by average outstanding loans excluding loans accounted for under the fair value option during the year for each loan and lease category.
(4) Represents loans to borrowers whose primary business is commercial real estate, but the exposure is not secured by the listed property types or is unsecured.
(5) Homebuilder includes condominiums and residential land.
At December 31, 2009, we had total committed non-homebuilder
exposure of $84.4 billion compared to $84.1 billion at December 31,
2008. The increase was due to the Merrill Lynch acquisition, largely off-
set by repayments and net charge-offs. Non-homebuilder nonperforming
loans and foreclosed properties were $4.8 billion, or 7.73 percent of total
non-homebuilder loans and foreclosed properties at December 31, 2009
compared to $1.2 billion, or 2.21 percent at December 31, 2008, with
the increase driven by deterioration in the shopping center/retail, office,
and land and land development portfolios.
Non-homebuilder utilized reservable criticized exposure increased
$11.9 billion to $18.1 billion, or 27.27 percent of total non-homebuilder
utilized reservable exposure at December 31, 2009 compared to $6.3
billion, or 10.66 percent, at December 31, 2008. The increase was
driven primarily by office, shopping center/retail and multi-family rental
property types which have been the most adversely affected by high
unemployment and the slowdown in consumer spending.
For the non-homebuilder portfolio, net charge-offs increased $1.3 bil-
lion for 2009 compared to 2008 with the increase concentrated in
non-homebuilder land and land development, office, shopping center/
retail and multi-family rental property types.
Within our total non-homebuilder exposure, at December 31, 2009,
we had total committed non-homebuilder construction and land develop-
ment exposure of $24.5 billion compared to $27.8 billion at
December 31, 2008. Non-homebuilder construction and land develop-
ment exposure is mostly secured and diversified across property types
and geographies. Assets in the non-homebuilder construction and land
development portfolio face significant challenges in the current rental
market. Weak rental demand and cash flows and declining property valu-
ations have resulted in increased levels of reservable criticized exposure
and nonperforming loans and foreclosed properties. Nonperforming loans
and foreclosed properties and utilized reservable criticized exposure for
the non-homebuilder construction and land development portfolio
increased $2.0 billion and $6.1 billion from December 31, 2008 to $2.6
billion and $8.9 billion at December 31, 2009.
At December 31, 2009, we had committed homebuilder exposure of
$10.4 billion compared to $16.2 billion at December 31, 2008 of which
$7.3 billion and $11.0 billion were funded secured loans. The decline in
homebuilder committed exposure was driven by repayments, charge-offs,
reduced new home construction and continued risk mitigation initiatives.
Homebuilder nonperforming loans and foreclosed properties stabilized
due to the slowdown in the rate of home price declines. Homebuilder uti-
lized reservable criticized exposure decreased by $1.9 billion driven by
higher net charge-offs. The nonperforming loans, leases and foreclosed
properties and the utilized reservable criticized ratios for the homebuilder
portfolio were 42.16 percent and 74.44 percent at December 31, 2009
compared to 27.07 percent and 66.33 percent at December 31, 2008.
Lower loan balances and exposures in 2009 drove a portion of the
increase in the ratios. Net charge-offs for the homebuilder portfolio
increased $524 million in 2009 from 2008.
Commercial – Foreign
The commercial – foreign loan portfolio is managed primarily in Global
Banking. Outstanding loans, excluding loans accounted for under the fair
value option, decreased due to repayments as borrowers accessed the
capital markets to refinance bank debt and aggressively managed working
capital and investment spending, partially offset by the acquisition of
Merrill Lynch. Reduced merger and acquisition activity was also a factor
contributing to modest new loan origination. Net charge-offs increased
primarily due to deterioration in the portfolio, particularly in financial serv-
ices, consumer dependent and housing-related sectors. For additional
information on the commercial – foreign portfolio, refer to the Foreign
Portfolio discussion beginning on page 86.
80 Bank of America 2009