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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-K
(Mark One)
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[ü] |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal
year ended December 31, 2010
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or
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[ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
Commission file number:
1-6523
Exact name of registrant as
specified in its charter:
Bank of America
Corporation
State or other jurisdiction of
incorporation or organization:
Delaware
IRS Employer Identification No.:
56-0906609
Address of principal executive offices:
Bank of America Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255
Registrants telephone number, including area code:
(704) 386-5681
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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Title of each class
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Name of each exchange on which registered
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Common Stock, par value $0.01 per share
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New York Stock Exchange
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London Stock Exchange
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Tokyo Stock Exchange
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Depositary Shares, each Representing a
1/1,000th
interest in a share of
6.204% Non-Cumulative Preferred Stock, Series D
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New York Stock Exchange
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Depositary Shares, each Representing a
1/1,000th
interest in a share of Floating Rate Non-Cumulative Preferred
Stock, Series E
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New York Stock Exchange
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Depositary Shares, each Representing a
1/1,000th
Interest in a Share of 8.20% Non-Cumulative Preferred Stock,
Series H
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New York Stock Exchange
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Depositary Shares, each Representing a
1/1,000th
interest in a share of 6.625% Non-Cumulative Preferred Stock,
Series I
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New York Stock Exchange
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Depositary Shares, each Representing a
1/1,000th
interest in a share of 7.25% Non-Cumulative Preferred Stock,
Series J
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New York Stock Exchange
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7.25% Non-Cumulative Perpetual Convertible Preferred Stock,
Series L
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New York Stock Exchange
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Depositary Shares, each representing a
1/1,200th
interest in a share of Bank of America Corporation Floating Rate
Non-Cumulative Preferred Stock, Series 1
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New York Stock Exchange
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Depositary Shares, each representing a
1/1,200th
interest in a share of Bank of America Corporation Floating Rate
Non-Cumulative Preferred Stock, Series 2
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New York Stock Exchange
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Depositary Shares, each representing a
1/1,200th
interest in a share of Bank of America Corporation 6.375%
Non-Cumulative Preferred Stock, Series 3
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New York Stock Exchange
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Depositary Shares, each representing a
1/1,200th
interest in a share of Bank of America Corporation Floating Rate
Non-Cumulative Preferred Stock, Series 4
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New York Stock Exchange
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Depositary Shares, each representing a
1/1,200th
interest in a share of Bank of America Corporation Floating Rate
Non-Cumulative Preferred Stock, Series 5
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New York Stock Exchange
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Depositary Shares, each representing a
1/40th
interest in a share of Bank of America Corporation 6.70%
Non-cumulative Perpetual Preferred Stock, Series 6
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New York Stock Exchange
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Depositary Shares, each representing a
1/40th
interest in a share of Bank of America Corporation 6.25%
Non-cumulative Perpetual Preferred Stock, Series 7
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New York Stock Exchange
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Depositary Shares, each representing a
1/1,200th
interest in a share of Bank of America Corporation 8.625%
Non-Cumulative Preferred Stock, Series 8
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New York Stock Exchange
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6.75% Trust Preferred Securities of Countrywide
Capital IV (and the guarantees related thereto)
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New York Stock Exchange
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7.00% Capital Securities of Countrywide Capital V (and the
guarantees related thereto)
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New York Stock Exchange
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Capital Securities of BAC Capital Trust I (and the
guarantee related thereto)
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New York Stock Exchange
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Capital Securities of BAC Capital Trust II (and the
guarantee related thereto)
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New York Stock Exchange
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Capital Securities of BAC Capital Trust III (and the
guarantee related thereto)
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New York Stock Exchange
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57/8%
Capital Securities of BAC Capital Trust IV (and the
guarantee related thereto)
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New York Stock Exchange
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6% Capital Securities of BAC Capital Trust V (and the
guarantee related thereto)
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New York Stock Exchange
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6% Capital Securities of BAC Capital Trust VIII (and the
guarantee related thereto)
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New York Stock Exchange
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61/4%
Capital Securities of BAC Capital Trust X (and the
guarantee related thereto)
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New York Stock Exchange
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67/8%
Capital Securities of BAC Capital Trust XII (and the
guarantee related thereto)
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New York Stock Exchange
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Title of each class
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Name of each exchange on which registered
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Floating Rate Preferred Hybrid Income Term Securities of BAC
Capital Trust XIII (and the guarantee related thereto)
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New York Stock Exchange
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5.63% Fixed to Floating Rate Preferred Hybrid Income Term
Securities of BAC Capital Trust XIV (and the guarantee
related thereto)
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New York Stock Exchange
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MBNA Capital A 8.278% Capital Securities, Series A (and the
guarantee related thereto)
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New York Stock Exchange
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MBNA Capital B Floating Rate Capital Securities, Series B
(and the guarantee related thereto)
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New York Stock Exchange
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MBNA Capital D 8.125% Trust Preferred Securities,
Series D (and the guarantee related thereto)
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New York Stock Exchange
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MBNA Capital E 6.10% Trust Originated Preferred Securities,
Series E (and the guarantee related thereto)
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New York Stock Exchange
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Preferred Securities of Fleet Capital Trust VIII (and the
guarantee related thereto)
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New York Stock Exchange
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Preferred Securities of Fleet Capital Trust IX (and the
guarantee related thereto)
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New York Stock Exchange
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1.50% Basket
CYCLEStm,
due July 29, 2011, Linked to an 80/20 Basket of
Four Indices and an Exchange Traded Fund
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NYSE Amex
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1.25% Basket
CYCLEStm,
due September 27, 2011, Linked to a Basket of Four
Indices
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NYSE Amex
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1.50% Index
CYCLEStm,
due December 28, 2011, Linked to a Basket of Health Care
Stocks
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NYSE Amex
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61/2% Subordinated
InterNotessm,
due 2032
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New York Stock Exchange
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51/2% Subordinated
InterNotessm,
due 2033
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New York Stock Exchange
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57/8% Subordinated
InterNotessm,
due 2033
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New York Stock Exchange
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6% Subordinated
InterNotessm,
due 2034
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New York Stock Exchange
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Minimum Return
Index
EAGLES®,
due March 25, 2011, Linked to the Dow Jones Industrial
Averagesm
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NYSE Amex
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1.75% Index
CYCLEStm,
due April 28, 2011, Linked to the S&P
500®
Index
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NYSE Amex
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Return Linked Notes, due June 27, 2011, Linked to an
80/20 Basket of Four Indices and an Exchange Traded
Fund
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NYSE Amex
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Return Linked Notes, due August 25, 2011, Linked to the Dow
Jones EURO STOXX
50®
Index
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NYSE Amex
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Minimum Return Index
EAGLES®,
due October 3, 2011, Linked to the S&P
500®
Index
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NYSE Amex
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Minimum Return Index
EAGLES®,
due October 28, 2011, Linked to the AMEX Biotechnology Index
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NYSE Amex
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Return Linked Notes, due October 27, 2011, Linked to a
Basket of Three Indices
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NYSE Amex
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Minimum Return Index
EAGLES®,
due November 23, 2011, Linked to a Basket of Five Indices
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NYSE Amex
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Minimum Return
Index
EAGLES®,
due December 27, 2011, Linked to the Dow Jones Industrial
Averagesm
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NYSE Amex
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0.25% Senior Notes Optionally Exchangeable Into a Basket of
Three Common Stocks, due February 2012
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NYSE Amex
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Return Linked Notes, due December 29, 2011 Linked to a
Basket of Three Indices
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NYSE Amex
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Market-Linked Step Up Notes Linked to the S&P
500®
Index, due December 23, 2011
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NYSE Arca, Inc.
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Market-Linked Step Up Notes Linked to the S&P
500®
Index, due November 26, 2012
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NYSE Arca, Inc.
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Market Index
Target-Term
Securities®
Linked to the Dow Jones Industrial
Averagesm,
due December 2, 2014
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NYSE Arca, Inc.
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Market-Linked Step Up Notes Linked to the S&P
500®
Index, due November 28, 2011
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NYSE Arca, Inc.
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Market-Linked Step Up Notes Linked to the S&P
500®
Index, due October 28, 2011
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NYSE Arca, Inc.
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Market-Linked Step Up Notes Linked to the Russell
2000®
Index, due October 28, 2011
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NYSE Arca, Inc.
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Notes Linked to the S&P
500®
Index, due October 4, 2011
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NYSE Arca, Inc.
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Market Index Target-Term
Securities®,
Linked to the S&P
500®
Index, due September 27, 2013
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NYSE Arca, Inc.
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Leveraged Index Return
Notes®,
Linked to the S&P
500®
Index, due July 27, 2012
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NYSE Arca, Inc.
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Market Index Target-Term
Securities®,
Linked to the S&P
500®
Index, due July 26, 2013
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NYSE Arca, Inc.
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Leveraged Index Return
Notes®,
Linked to the S&P
500®
Index, due June 29, 2012
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NYSE Arca, Inc.
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Leveraged Index Return
Notes®,
Linked to the S&P
500®
Index, due June 1, 2012
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NYSE Arca, Inc.
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Market Index
Target-Term
Securities®,
Linked to the Dow Jones Industrial
Averagesm,
due May 31, 2013
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NYSE Arca, Inc.
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Market Index Target-Term
Securities®,
Linked to the S&P
500®
Index, due April 25, 2014
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NYSE Arca, Inc.
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Market Index Target-Term
Securities®,
Linked to the S&P
500®
Index, due March 28, 2014
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NYSE Arca, Inc.
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Market Index Target-Term
Securities®,
Linked to the S&P
500®
Index, due February 28, 2014
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NYSE Arca, Inc.
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Market-Linked Step Up Notes Linked to the S&P
500®
Index, due January 27, 2012
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NYSE Arca, Inc.
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Accelerated Return
Notes®,
Linked to the S&P
500®
Index, due March 25, 2011
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Market Index
Target-Term
Securities®
Linked to the Dow Jones Industrial
Averagesm,
due January 30, 2015
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NYSE Arca, Inc.
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Strategic Accelerated
Redemption Securities®
Linked to the S&P
500®
Index, due January 30, 2012
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NYSE Arca, Inc.
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Market Index Target-Term
Securities®
Linked to the S&P
500®
Index, due February 27, 2015
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NYSE Arca, Inc.
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Capped Leveraged Return
Notes®
Linked to the S&P
500®
Index, due February 24, 2012
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NYSE Arca, Inc.
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Market-Linked Step Up Notes Linked to the S&P
500®
Index, due February 25, 2013
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NYSE Arca, Inc.
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Market Index
Target-Term
Securities®
Linked to the Dow Jones Industrial
Averagesm,
due March 27, 2015
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NYSE Arca, Inc.
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Capped Leveraged Index Return
Notes®
Linked to the S&P
500®
Index, due March 30, 2012
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NYSE Arca, Inc.
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Strategic Accelerated
Redemption Securities®
Linked to the S&P
500®
Index, due March 30, 2012
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NYSE Arca, Inc.
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Market Index
Target-Term
Securities®
Linked to the Dow Jones Industrial
Averagesm,
due April 24, 2015
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NYSE Arca, Inc.
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Capped Leveraged Index Return
Notes®
Linked to the S&P
500®
Index, due April 27, 2012
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NYSE Arca, Inc.
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Strategic Accelerated
Redemption Securities®
Linked to the S&P
500®
Index, due April 27, 2012
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NYSE Arca, Inc.
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Accelerated Return
Notes®
Linked to the S&P
500®
Index due July 29, 2011
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NYSE Arca, Inc.
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Capped Leveraged Index Return
Notes®
Linked to the S&P
500®
Index, due May 25, 2012
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NYSE Arca, Inc.
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Market Index
Target-Term
Securities®
Linked to the Dow Jones Industrial
Averagesm,
due May 29, 2015
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NYSE Arca, Inc.
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Market Index
Target-Term
Securities®
Linked to the Dow Jones Industrial
Averagesm,
due June 26, 2015
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NYSE Arca, Inc.
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Capped Leveraged Index Return
Notes®
Linked to the S&P
500®
Index, due June 29, 2012
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NYSE Arca, Inc.
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Accelerated Return
Notes®
Linked to the S&P
500®
Index due September 30, 2011
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NYSE Arca, Inc.
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Capped Leveraged Index Return
Notes®
Linked to the S&P
500®
Index, due July 27, 2012
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NYSE Arca, Inc.
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Market Index Target-Term
Securities®
Linked to the S&P
500®
Index, due July 31, 2015.
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NYSE Arca, Inc.
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Capped Leveraged Index Return
Notes®
Linked to the S&P
500®
Index, due August 31, 2012
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NYSE Arca, Inc.
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Securities registered pursuant to
Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ü No
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes
No ü
Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days. Yes ü No
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). Yes ü No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K.
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large accelerated
filer ü
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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(do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Act). Yes
No ü
The aggregate market value of the registrants common stock
(Common Stock) held on June 30, 2010 by
non-affiliates was approximately $144,131,140,753 (based on the
June 30, 2010 closing price of Common Stock of $14.37 per
share as reported on the New York Stock Exchange). As of
February 15, 2011, there were 10,121,154,770 shares of
Common Stock outstanding.
Documents Incorporated by reference: Portions of the definitive
proxy statement relating to the registrants annual meeting
of stockholders to be held on May 11, 2011 are incorporated
by reference in this
Form 10-K
in response to items 10, 11, 12, 13 and 14 of Part III.
Table
of Contents
Bank of America
Corporation and Subsidiaries
Part I
Bank of America
Corporation and Subsidiaries
General
Bank of America Corporation (together, with its consolidated
subsidiaries, Bank of America, the Corporation, our company, we
or us) is a Delaware corporation, a bank holding company and a
financial holding company under the Gramm-Leach-Bliley Act. When
used in this report, the Corporation may refer to
the Corporation individually, the Corporation and its
subsidiaries, or certain of the Corporations subsidiaries
or affiliates. Our principal executive offices are located in
the Bank of America Corporate Center, 100 North Tryon Street,
Charlotte, North Carolina 28255.
Bank of America is one of the worlds largest financial
institutions, serving individual consumers, small- and
middle-market businesses, large corporations and governments
with a full range of banking, investing, asset management and
other financial and risk management products and services.
Through our banking subsidiaries (the Banks) and various
nonbanking subsidiaries throughout the United States and in
certain international markets, we provide a diversified range of
banking and nonbanking financial services and products through
six business segments: Deposits, Global Card Services, Home
Loans & Insurance, Global Commercial Banking, Global
Banking & Markets (GBAM) and Global
Wealth & Investment Management (GWIM), with the
remaining operations recorded in All Other. Effective
January 1, 2010, we realigned the Global Corporate and
Investment Banking portion of the former Global Banking
business segment with the former Global Markets
business segment to form GBAM and to reflect
Global Commercial Banking as a standalone segment.
We are a global franchise, serving customers and clients around
the world with operations in all 50 U.S. states, the
District of Columbia and more than 40
non-U.S. countries.
As of December 31, 2010, our U.S. retail banking
footprint includes approximately 80 percent of the
U.S. population, and we serve approximately 57 million
consumer and small business relationships with approximately
5,900 retail banking offices, approximately 18,000 ATMs,
nationwide call centers, and the leading online and mobile
banking platforms. We have banking centers in 13 of the 15
fastest growing states and have leadership positions in market
share for deposits in seven of those states. We offer
industry-leading support to approximately four million small
business owners. We have the No. 1 market share in
U.S. retail deposits and are the No. 1 issuer of debit
cards in the United States. We have the No. 2 market share
in credit card products in the United States and we are the
No. 1 credit card lender in Europe. We have approximately
5,300 mortgage loan officers
and are the No. 1 mortgage servicer and No. 2 mortgage
originator in the United States.
In addition, as of December 31, 2010, our commercial and
corporate clients include 98 percent of the
U.S. Fortune 1,000 and 85 percent of the Global
Fortune 500 and we serve more than 11,000 issuer clients and
3,500 institutional investors. We are the No. 1 treasury
services provider in the United States and a leading provider
globally. We are a leading provider globally in corporate and
investment banking and trading across a broad range of asset
classes serving corporations, governments, institutions and
individuals around the world. We have one of the largest wealth
management businesses in the world with nearly 17,000 financial
and wealth advisors and 3,000 other client-facing professionals
and more than $2.2 trillion in net client balances, and we are a
leading wealth manager for
high-net-worth
and ultra-high-net-worth clients. Additional information
relating to our businesses and our subsidiaries is included in
the information set forth in pages 38 through 51 of Item 7,
Managements Discussion and Analysis of Financial Condition
and Results of Operations (MD&A) and
Note 26 Business Segment Information to
the Notes to the Consolidated Financial Statements in
Item 8, Financial Statements and Supplementary Data
(Consolidated Financial Statements).
Bank of Americas website is www.bankofamerica.com. Our
Annual Reports on
Form 10-K,
Quarterly Reports on
Form 10-Q,
Current Reports on
Form 8-K
and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of
1934 are available on our website at
http://investor.bankofamerica.com
under the heading SEC Filings as soon as reasonably practicable
after we electronically file such material with, or furnish it
to, the Securities and Exchange Commission (SEC). In addition,
we make available on
http://investor.bankofamerica.com
under the heading Corporate Governance: (i) our Code of
Ethics (including our insider trading policy); (ii) our
Corporate Governance Guidelines; and (iii) the charter of
each committee of our Board of Directors (the Board) (accessible
by clicking on the committee names under the Committee
Composition link), and we also intend to disclose any amendments
to our Code of Ethics, or waivers of our Code of Ethics on
behalf of our Chief Executive Officer, Chief Financial Officer
or Chief Accounting Officer, on our website. All of these
corporate governance materials are also available free of charge
in print to stockholders who request them in writing to: Bank of
America Corporation, Attention: Shareholder Relations, Hearst
Tower, 214 North Tryon Street, NC1-027-20-05, Charlotte, North
Carolina 28202.
Bank of America
2010 1
Competition
We operate in a highly competitive environment. Our competitors
include banks, thrifts, credit unions, investment banking firms,
investment advisory firms, brokerage firms, investment
companies, insurance companies, mortgage banking companies,
credit card issuers, mutual fund companies and
e-commerce
and other internet-based companies in addition to those
competitors discussed more specifically below. We compete with
some of these competitors globally and with others on a regional
or product basis. Competition is based on a number of factors
including, among others, customer service, quality and range of
products and services offered, price, reputation, interest rates
on loans and deposits, lending limits and customer convenience.
Our ability to continue to compete effectively also depends in
large part on our ability to attract new employees and retain
and motivate our existing employees, while managing compensation
and other costs.
More specifically, our Deposits business segment competes
with banks, thrifts, credit unions, finance companies and other
nonbank organizations offering financial services. Our Global
Commercial Banking business segment competes with local,
regional and international banks and nonbank financial
organizations. Our GBAM and GWIM business segments
compete with U.S. and international commercial banking and
investment banking firms, investment advisory firms, brokerage
firms, investment companies, mutual funds, hedge funds, private
equity funds, trust banks, multi-family offices, advice
boutiques and other organizations offering similar services and
other investment alternatives available to investors. Our
Home Loans & Insurance business segment
competes with banks, thrifts, mortgage brokers, Fannie Mae
(FNMA) and Freddie Mac (FHLMC) (collectively, the government
sponsored enterprises (GSEs)), and other nonbank organizations
offering mortgage banking, mortgage and insurance related
services. Our Global Card Services business segment
competes in the United States and internationally with banks,
consumer finance companies and retail stores with private label
credit and debit cards.
We also compete actively for funds. A primary source of funds
for the Banks is deposits, and competition for deposits includes
other deposit-taking organizations, such as banks, thrifts and
credit unions, as well as money market mutual funds. Investment
banks and other entities that became bank holding companies and
financial holding companies as a result of the recent financial
crisis are also competitors for deposits. In addition, we
compete for funding in the domestic and international short-term
and long-term debt securities capital markets.
Over time, certain sectors of the financial services industry
have become more concentrated, as institutions involved in a
broad range of financial services have been acquired by or
merged into other firms or have declared bankruptcy. As a
result, this consolidation within the financial services
industry has significantly increased the capital base and
geographic reach of some of our competitors and also hastened
the globalization of the securities markets. These developments
could result in our remaining competitors gaining greater
capital and other resources or having stronger local presences
and longer operating histories outside the United States.
Our ability to expand certain of our banking operations in
additional U.S. states remains subject to various federal
and state laws. See Government Supervision and
Regulation General below for a more detailed
discussion of interstate banking and branching legislation and
certain state legislation.
Employees
As of December 31, 2010, there were approximately
288,000 full-time equivalent employees with Bank of
America. Of these employees, approximately 80,700 were employed
within Deposits, approximately 15,000 were employed
within Global Card Services, approximately 58,200 were
employed within Home Loans & Insurance,
approximately 7,100 were employed within Global Commercial
Banking, approximately 34,300 were employed within GBAM
and approximately 40,300 were employed within GWIM.
The remainder were employed elsewhere within our company
including various staff and support functions.
None of our domestic employees is subject to a collective
bargaining agreement. Management considers our employee
relations to be good.
Acquisition and
Disposition Activity
As part of our operations, we regularly evaluate the potential
acquisition of, and hold discussions with, various financial
institutions and other businesses of a type eligible for
financial holding company ownership or control. In addition, we
regularly analyze the values of, and submit bids for, the
acquisition of customer-based funds and other liabilities and
assets of such financial institutions and other businesses. We
also regularly consider the potential disposition of certain of
our assets, branches, subsidiaries or lines of businesses. As a
general rule, we publicly announce any material acquisitions or
dispositions when a material definitive agreement has been
reached.
On January 1, 2009, we completed the acquisition of Merrill
Lynch. Additional information on our acquisitions is included in
Note 2 Merger and Restructuring Activity
to the Consolidated Financial Statements which is
incorporated herein by reference.
Government
Supervision and Regulation
The following discussion describes, among other things, elements
of an extensive regulatory framework applicable to bank holding
companies, financial holding companies and banks, including
specific information about Bank of America. U.S. federal
regulation of banks, bank holding companies and financial
holding companies is intended primarily for the protection of
depositors and the Deposit Insurance Fund (DIF) rather than for
the protection of stockholders and creditors. For additional
information about recent regulatory programs, initiatives and
legislation that impact us, see Regulatory Matters in the
MD&A beginning on page 56.
2 Bank
of America 2010
General
As a registered financial holding company and bank holding
company, Bank of America Corporation is subject to the
supervision of, and regular inspection by, the Board of
Governors of the Federal Reserve System (Federal Reserve Board).
The Banks are organized as national banking associations, which
are subject to regulation, supervision and examination by the
Office of the Comptroller of the Currency (Comptroller or OCC),
the Federal Deposit Insurance Corporation (FDIC), the Federal
Reserve Board and other federal and state regulatory agencies.
A U.S. financial holding company, and the companies under
its control, are permitted to engage in activities considered
financial in nature as defined by the
Gramm-Leach-Bliley Act and related Federal Reserve Board
interpretations (including, without limitation, insurance and
securities activities), and therefore may engage in a broader
range of activities than permitted for bank holding companies
and their subsidiaries, which are only permitted to engage in
activities that are closely related to the business of banking.
Unless otherwise limited by the Federal Reserve Board, a
financial holding company may engage directly or indirectly in
activities considered financial in nature, either de novo or by
acquisition, provided the financial holding company gives the
Federal Reserve Board
after-the-fact
notice of the new activities. The Gramm-Leach-Bliley Act also
permits national banks, such as the Banks, to engage in
activities considered financial in nature through a financial
subsidiary, subject to certain conditions and limitations and
with the approval of the OCC. If the Federal Reserve Board finds
that any of the Banks is not well-capitalized or well-managed,
we would be required to enter into an agreement with the Federal
Reserve Board to comply with all applicable capital and
management requirements, which may contain additional
limitations or conditions relating to our activities.
U.S. bank holding companies (including bank holding
companies that also are financial holding companies) are also
required to obtain the prior approval of the Federal Reserve
Board before acquiring more than five percent of any class of
voting stock of any non-affiliated bank. Pursuant to the
Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 (Interstate Banking and Branching Act), a bank holding
company may acquire banks located in states other than its home
state without regard to the permissibility of such acquisitions
under state law, but subject to any state requirement that the
bank has been organized and operating for a minimum period of
time, not to exceed five years, and the federal requirement that
the bank holding company, after and as a result of the proposed
acquisition, controls no more than 10 percent of the total
amount of deposits of insured depository institutions in the
United States and no more than 30 percent or such lesser or
greater amount set by state law of such deposits in that state.
Subject to certain restrictions, the Interstate Banking and
Branching Act also authorizes banks to merge across state lines
to create interstate banks. At December 31, 2010, we
controlled approximately 12 percent of the total amount of
deposits of insured depository institutions in the United States.
In addition to banking laws, regulations and regulatory
agencies, we are subject to various other laws and regulations,
as well as supervision and examination by other regulatory
agencies, all of which directly or indirectly affect our
operations and management and our ability to make distributions
to stockholders. For example, our U.S. broker dealer
subsidiaries are subject to regulation by and supervision of the
Securities and Exchange Commission (SEC), the New York Stock
Exchange and the Financial Industry Regulatory Authority
(FINRA); our commodities businesses in the United States are
subject to regulation by and supervision of the Commodities
Futures Trading Commission (CFTC); and our insurance activities
are subject to licensing and regulation by state insurance
regulatory agencies.
Our
non-U.S. businesses
are also subject to extensive regulation by various
non-U.S. regulators,
including governments, securities exchanges, central banks and
other regulatory bodies, in the jurisdictions in which those
businesses operate. Our financial services operations in the
United Kingdom (U.K.) are subject to regulation by and
supervision of the Financial Services Authority (FSA). In July
of 2010, the U.K. proposed abolishing the FSA and replacing it
with the Financial Policy Committee within the Bank of England
(FPC) and two new Regulators, the Prudential Regulatory
Authority (PRA) and the Consumer Protection and Markets
Authority (CPMA). Our U.K. regulated entities will be subject to
the supervision of the FPC within the Bank of England for
prudential matters and the CPMA for conduct of business matters.
The new financial regulatory structure is intended to be in
place by the end of 2012. We continue to monitor the development
and potential impact of this regulatory restructuring.
Bank of America
2010 3
Changes in
Legislation and Regulations
Proposals to change the laws and regulations governing the
banking and financial services industries are frequently
introduced in Congress, in state legislatures and before the
various bank regulatory or financial regulatory agencies as well
as by lawmakers and regulators in jurisdictions outside the
United States where we operate. Congress and the federal
government have continued to evaluate and develop legislation,
programs and initiatives designed to, among other things,
stabilize the financial and housing markets, stimulate the
economy, including the federal governments foreclosure
prevention program, and prevent future financial crises by
further regulating the financial services industry. As a result
of the recent financial crisis and the ongoing challenging
economic environment, we anticipate additional legislative and
regulatory proposals and initiatives as well as continued
legislative and regulatory scrutiny of the financial services
industry. However, at this time we cannot determine the final
form of any proposed programs or initiatives or related
legislation, the likelihood and timing of any other future
proposals or legislation, and the impact they might have on us.
On July 21, 2010, the Dodd-Frank Wall Street Reform and
Consumer Protection Act (Financial Reform Act) was signed into
law. The Financial Reform Act provides for sweeping financial
regulatory reform and will alter the way in which we conduct
certain businesses.
The Financial Reform Act contains a broad range of significant
provisions that could affect our businesses, including, without
limitation, the following:
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mandating that the Federal Reserve Board limit debit card
interchange fees;
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banning banking organizations from engaging in proprietary
trading and restricting their sponsorship of, or investing in,
hedge funds and private equity funds, subject to limited
exceptions;
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increasing regulation of the derivative markets through measures
that broaden the derivative instruments subject to regulation
and requiring clearing and exchange trading as well as imposing
additional capital and margin requirements for derivative market
participants;
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changing the assessment base used in calculating FDIC deposit
insurance fees from assessable deposits to total assets less
tangible capital;
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providing for heightened capital, liquidity, and prudential
regulation and supervision over systemically important financial
institutions;
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providing for new resolution authority to establish a process to
unwind large systemically important financial institutions and
requiring the development and implementation of recovery and
resolution plans;
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creating a new regulatory body to set requirements around the
terms and conditions of consumer financial products and
expanding the role of state regulators in enforcing consumer
protection requirements over banks.
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disqualifying trust preferred securities and certain other
hybrid capital securities from Tier 1 capital;
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including a variety of corporate governance and executive
compensation provisions and requirements; and
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requiring securitizers to retain a portion of the risk that
would otherwise be transferred into certain securitization
transactions.
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The Financial Reform Act has had, and will continue to have, a
significant and negative impact on our earnings through fee
reductions, higher costs and new restrictions, by reducing
available capital. The Financial Reform Act also has had and may
continue to have a material adverse impact on the value of
certain assets and liabilities held on our balance sheet. As
previously announced on July 16, 2010, as a result of the
Financial Reform Act and its related rules and subject to final
rulemaking over the next year, we believe that our debit card
revenue will be adversely impacted beginning in the third
quarter of 2011. In 2010, our estimate of revenue loss due to
the Financial
Reform Act was approximately $2.0 billion annually. As a
result, we recorded a non-tax deductible goodwill impairment
charge for Global Card Services of $10.4 billion in
2010. The goodwill impairment analysis includes limited
mitigation actions within Global Card Services to
recapture the lost revenue. We have identified other potential
mitigation actions, but they are in the early stages of
development and some of them may impact other segments. For
additional information, refer to Complex Accounting
Estimates Goodwill and Intangible Assets
Global Card Services Impairment, in the
MD&A beginning on page 110 and
Note 10 Goodwill and Intangible Assets
to the Consolidated Financial Statements.
We anticipate that the final regulations associated with the
Financial Reform Act will include limitations on certain
activities, including limitations on the use of a banks
own capital for proprietary trading and sponsorship or
investment in hedge funds and private equity funds (Volcker
Rule). Regulations implementing the Volcker Rule are required to
be in place by October 21, 2011, and the Volcker Rule
becomes effective 12 months after such rules are final or
on July 21, 2012, whichever is earlier. The Volcker Rule
then gives banking entities two years from the effective date
(with opportunities for additional extensions) to bring
activities and investments into conformance. In anticipation of
the adoption of the final regulations, we have begun winding
down our proprietary trading line of business. The ultimate
impact of the Volcker Rule or the winding down of this business,
and the time it will take to comply or complete, continues to
remain uncertain. The final regulations issued may impose
additional operational and compliance costs on us.
Additionally, the Financial Reform Act includes measures to
broaden the scope of derivative instruments subject to
regulation by requiring clearing and exchange trading of certain
derivatives, imposing new capital and margin requirements for
certain market participants and imposing position limits on
certain
over-the-counter
derivatives. The Financial Reform Act grants the
U.S. Commodity Futures Trading Commission (CFTC) and the
SEC substantial new authority and requires numerous rulemakings
by these agencies. Generally, the CFTC and SEC have until
July 16, 2011 to promulgate the rulemakings necessary to
implement these regulations. The ultimate impact of these
derivatives regulations, and the time it will take to comply,
continues to remain uncertain. The final regulations will impose
additional operational and compliance costs on us and may
require us to restructure certain businesses and negatively
impact our revenues and results of operations.
Although the ratings agencies have indicated that our credit
ratings currently reflect their expectation that, if necessary,
we would receive significant support from the
U.S. government, all three major ratings agencies have
indicated they will reevaluate, and could reduce the uplift they
include in our ratings for government support for reasons
arising from financial services regulatory reform proposals or
legislation. In the event of certain credit ratings downgrades,
our access to credit markets, liquidity and our related funding
costs would be materially adversely affected. For additional
information about our credit ratings, see Capital Management and
Liquidity Risk in the MD&A beginning on pages 63 and 67,
respectively.
Most provisions of the Financial Reform Act require various
federal banking and securities regulators to issue regulations
to clarify and implement its provisions or to conduct studies on
significant issues. These proposed regulations and studies are
generally subject to a public notice and comment period. The
timing of issuance of final regulations, their effective dates
and their potential impacts to our businesses will be determined
over the coming months and years. As a result, the ultimate
impact of the Financial Reform Acts final rules on our
businesses and results of operations will depend on regulatory
interpretation and rulemaking, as well as the success of any of
our actions to mitigate the negative earnings impact of certain
provisions.
4 Bank
of America 2010
Capital and
Operational Requirements
The Federal Reserve Board, the OCC and the FDIC have issued
substantially similar risk-based and leverage capital guidelines
applicable to U.S. banking organizations. In addition,
these regulatory agencies may from time to time require that a
banking organization maintain capital above the minimum
prescribed levels, whether because of its financial condition or
actual or anticipated growth. The Federal Reserve Boards
risk-based guidelines define a three-tier capital framework.
Tier 1 capital includes common shareholders equity,
common equivalent securities (CES), trust preferred securities
and noncontrolling interests in limited amounts and qualifying
preferred stock, less goodwill and other adjustments. The
Financial Reform Act includes a provision under which our
previously issued and outstanding trust preferred securities in
the aggregate amount of $19.9 billion (approximately
137 basis points (bps) of Tier 1 capital) at
December 31, 2010, will no longer qualify as Tier 1
capital effective January 1, 2013. Tier 2 capital
consists of preferred stock not qualifying as Tier 1
capital, mandatorily convertible debt, limited amounts of
subordinated debt, other qualifying term debt, the allowance for
credit losses up to 1.25 percent of risk-weighted assets
and other adjustments. Tier 3 capital includes subordinated
debt that (i) is unsecured, (ii) is fully paid,
(iii) has an original maturity of at least two years,
(iv) is not redeemable before maturity without prior
approval by the Federal Reserve Board and (v) includes a
lock-in clause precluding payment of either interest or
principal if the payment would cause the issuing banks
risk-based capital ratio to fall or remain below the required
minimum. The sum of Tier 1 and Tier 2 capital less
investments in unconsolidated subsidiaries represents qualifying
total capital. Risk-based capital ratios are calculated by
dividing Tier 1 and total capital by risk-weighted assets,
which is calculated by assigning assets and off-balance sheet
exposures to one of four categories of risk-weights, based
primarily on relative credit risk. The minimum Tier 1
capital ratio is four percent and the minimum total capital
ratio is eight percent. A well-capitalized
institution must generally maintain capital ratios 200 bps
higher than the minimum guidelines.
Our Tier 1 and total risk-based capital ratios under these
guidelines at December 31, 2010 were 11.24 percent and
15.77 percent. At December 31, 2010, we had no
subordinated debt that qualified as Tier 3 capital. While
not an explicit requirement of law or regulation, bank
regulatory agencies have stated that they expect shares of
common stock to be the primary component of a financial holding
companys Tier 1 capital and that financial holding
companies should maintain a Tier 1 common capital ratio of
at least four percent. The Tier 1 common capital ratio is
determined by dividing Tier 1 common capital by
risk-weighted assets. We calculate Tier 1 common capital as
Tier 1 capital, which includes CES, less preferred stock,
trust preferred securities, hybrid securities and noncontrolling
interest. As of December 31, 2010, our Tier 1 common
capital ratio was 8.60 percent.
The leverage ratio is determined by dividing Tier 1 capital
by adjusted quarterly average total assets, after certain
adjustments. Well-capitalized bank holding companies
must have a minimum Tier 1 leverage ratio of four percent
and not be subject to a Federal Reserve Board directive to
maintain higher capital levels. Well-Capitalized
national banks must maintain a Tier 1 leverage ratio of at
least five percent and not be subject to a Federal Reserve Board
directive to maintain higher capital levels. Our leverage ratio
at December 31, 2010 was 7.21 percent, which exceeded
our leverage ratio requirement. For additional information about
our calculation of regulatory capital and capital composition,
see Capital Management Regulatory Capital in the
MD&A beginning on page 63, and
Note 18 Regulatory Requirements and
Restrictions to the Consolidated Financial Statements.
The Federal Deposit Insurance Corporation Improvement Act of
1991 (FDICIA), among other things, identifies five capital
categories for insured
depository institutions (well-capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized
and critically undercapitalized) and requires the respective
federal regulatory agencies to implement systems for
prompt corrective action for insured depository
institutions that do not meet minimum capital requirements
within such categories. FDICIA imposes progressively restrictive
constraints on operations, management and capital distributions,
depending on the category in which an institution is classified.
Failure to meet the capital guidelines could also subject a
banking institution to capital-raising requirements. An
undercapitalized bank must develop a capital
restoration plan and its parent holding company must guarantee
that banks compliance with the plan. The liability of the
parent holding company under any such guarantee is limited to
the lesser of five percent of the banks assets at the time
it became undercapitalized or the amount needed to
comply with the plan. Furthermore, in the event of the
bankruptcy of the parent holding company, such guarantee would
take priority over the parents general unsecured
creditors. In addition, FDICIA requires the various regulatory
agencies to prescribe certain non-capital standards for safety
and soundness relating generally to operations and management,
asset quality and executive compensation, and permits regulatory
action against a financial institution that does not meet such
standards.
The various regulatory agencies have adopted substantially
similar regulations that define the five capital categories
identified by FDICIA, using the total risk-based capital,
Tier 1 risk-based capital and leverage capital ratios as
the relevant capital measures. Such regulations establish
various degrees of corrective action to be taken when an
institution is considered undercapitalized. Under the
regulations, a well-capitalized institution must
have a Tier 1 risk-based capital ratio of at least six
percent, a total risk-based capital ratio of at least ten
percent and a leverage ratio of at least five percent and not be
subject to a capital directive order. Under these guidelines,
each of the Banks was considered well capitalized as of
December 31, 2010.
Pursuant to FDICIA, regulators also must take into
consideration: (a) concentrations of credit risk;
(b) interest rate risk; and (c) risks from
non-traditional banking activities, such as derivatives,
securities and insurance activities, as well as an
institutions ability to manage those risks, when
determining the adequacy of an institutions capital. This
evaluation is made as a part of the institutions regular
safety and soundness examination. In addition, Bank of America
Corporation, and any Bank with significant trading activity,
must incorporate a measure for market risk in their regulatory
capital calculations.
In June 2004, the Basel Committee on Banking Supervision (the
Basel Committee) published the Basel II Accord with the
intent of more closely aligning regulatory capital requirements
with underlying risks, similar to economic capital. While
economic capital is measured to cover unexpected losses, the
Corporation also manages regulatory capital to adhere to
regulatory standards of capital adequacy. The Basel Committee,
which consists of central banks and bank supervisors from 13
countries including the United States, does not possess any
formal supervisory or legal authority over institutions in its
member countries. Instead, the Basel Committee formulates
supervisory guidelines that it recommends to its member
countries with the expectation that these guidelines will be
implemented in a manner best suited to each countrys own
national system.
The Basel II Final Rule (Basel II) was published in
December 2007 and established requirements for
U.S. implementation of the Basel II Rules and provided
detailed requirements for a new regulatory capital framework.
This regulatory capital framework includes requirements related
to credit and operational risk (Pillar 1), supervisory
requirements (Pillar 2) and disclosure requirements (Pillar
3). The Corporation began Basel II parallel implementation
on April 1, 2010.
Bank of America
2010 5
Designated U.S. financial institutions are required to
complete a minimum parallel qualification period under
Basel II of four consecutive successful quarters before
receiving regulatory approval to report regulatory capital using
the Basel II methodology and exiting the parallel period.
During the parallel period, the resulting capital calculations
under both the current risk-based capital rules (Basel
I) and Basel II will be reported to the financial
institutions regulatory supervisors. Once the parallel
period is successfully completed and we have received approval
to exit parallel, we will transition to Basel II as the
methodology for calculating regulatory capital. Basel II
provides for a three-year transitional floor subsequent to
exiting parallel, after which Basel I may be discontinued. The
Collins Amendment within the Financial Reform Act and the
U.S. banking regulators subsequent Notice of Proposed
Rulemaking published by the Federal Reserve Board on
December 14, 2010 propose however that the current
three-year transitional floors under Basel II be replaced
with a permanent risk based capital floor as defined under Basel
I.
On December 16, 2010, U.S. regulators issued a Notice
of Proposed Rulemaking on the Risk-Based Capital Guidelines for
Market Risk (Market Risk Rules), reflecting partial adoption of
the Basel Committees July 2009 consultative document on
the topic. We anticipate U.S. regulators will adopt the
Market Risk Rules in mid-2011. This change is expected to
significantly increase the capital requirements for our trading
assets and liabilities, including derivatives exposures which
meet the definition established by the regulatory agencies. We
continue to evaluate the capital impact of the proposed rules
and currently anticipate being fully compliant with any final
rules by the projected implementation date of year-end 2011.
On December 16, 2010, the Basel Committee issued
Basel III: A global regulatory framework for more
resilient banks and banking systems (Basel III), proposing
a January 2013 implementation date for Basel III. If implemented
by U.S. regulators as proposed, Basel III could
significantly increase our capital requirements. Basel III
and the Financial Reform Act propose the disqualification of
trust preferred securities from Tier 1 capital, with the
Financial Reform Act proposing that the disqualification be
phased in from 2013 to 2015. Basel III also proposes the
deduction of certain assets from capital (deferred tax assets,
mortgage servicing rights (MSRs), investments in financial firms
and pension assets, among others, within prescribed
limitations), the inclusion of other comprehensive income in
capital, increased capital for counterparty credit risk, and new
minimum capital and buffer requirements. The phase-in period for
the capital deductions is proposed to occur in 20 percent
increments from 2014 through 2018 with full implementation by
December 31, 2018. The increase in capital requirements for
counterparty credit risk is proposed to be effective January
2013. The phase-in period for the new minimum capital
requirements and related buffers is proposed to occur between
2013 and 2019. U.S. regulators are expected to begin the
final rulemaking processes for Basel III in early 2011 and
have indicated a goal to adopt final rules by year-end 2011 or
early 2012. For additional information on our MSRs, refer to
Note 25 Mortgage Servicing Rights to the
Consolidated Financial Statements. For additional information on
deferred tax assets, refer to Note 21 Income
Taxes to the Consolidated Financial Statements.
If Basel III is implemented in the U.S. consistent
with Basel Committee rules, beginning in January 2013, we would
be required to maintain minimum capital ratio requirements of
6.0 percent for Tier 1 capital and 8.0 percent
for Total capital. The proposed minimum requirement for common
equity Tier 1 capital is 3.5 percent in 2013 and would
increase to 4.5 percent in 2015. Basel III also
includes three capital buffers which would be phased in over
time and impact all three capital ratios. These buffers include
a capital conservation buffer that would start at
0.63 percent in 2016 and increase to 2.5 percent in
2019. Thus, the minimum capital ratio requirements including the
capital conservation buffer in 2019 would be 7.0 percent
for common equity Tier 1 capital, 8.5 percent for
Tier 1 capital and 10.5 percent
for Total capital. If ratios fall below the minimum requirement
plus the capital conservation buffer, such as 10.5 percent
for Total capital, an institution would be required to restrict
dividends, share repurchases and discretionary bonuses.
Additionally, Basel III also includes a countercyclical
buffer of up to 2.5 percent that regulators could require
in periods of excess credit growth. The countercyclical buffer
is to be comprised of loss-absorbing capital, such as common
equity, and is meant to retain additional capital during periods
of strong credit expansion, providing incremental protection in
the event of a material market downturn. The ratios presented
above do not include the third buffer requirement for
systemically important financial institutions, which the Basel
Committee continues to assess and has not yet quantified. The
countercyclical and systemic buffers are scheduled to be phased
in from 2013 through 2019. U.S. regulators are expected to
begin the rulemaking processes for Basel III in early 2011
and have indicated a goal to adopt final rules by end of 2011 or
early 2012.
These regulatory changes also require approval by the regulatory
agencies of analytical models used as part of our capital
measurement and assessment, especially in the case of more
complex models. If these more complex models are not approved,
it could require financial institutions to hold additional
capital, which in some cases could be significant.
We expect to maintain a Tier 1 common capital ratio in
excess of 8 percent as the regulatory rule changes are
implemented without needing to raise new equity capital. We have
made the implementation and mitigation of these regulatory
changes a strategic priority. We also note there remains
significant uncertainty on the final impacts as the
U.S. has issued only final rules for Basel II and a
Notice of Proposed Rulemaking for the Market Risk Rules at this
time. Impacts may change as the U.S. finalizes rules for
Basel III and the regulatory agencies interpret the final
rules during the implementation process.
In addition to the capital proposals, in December 2010 the Basel
Committee proposed two measures of liquidity risk. The Liquidity
Coverage Ratio identifies the amount of unencumbered, high
quality liquid assets a financial institution holds that can be
used to offset the net cash outflows the institution would
encounter under an acute
30-day
stress scenario. The Net Stable Funding Ratio measures the
amount of longer-term, stable sources of funding employed by a
financial institution relative to the liquidity profiles of the
assets funded and the potential for contingent calls on funding
liquidity arising from off-balance sheet commitments and
obligations, over a one-year period. These two minimum liquidity
standards are also considered part of Basel III. The Basel
Committee expects the Liquidity Coverage Ratio to be implemented
in January 2015 and the Net Stable Funding Ratio to be
implemented in January 2018, following observation periods
beginning in 2012. We continue to monitor the development and
potential impact of these capital proposals.
Distributions
Our funds for cash distributions to our stockholders are derived
from a variety of sources, including cash and temporary
investments. The primary source of such funds, and funds used to
pay principal and interest on our indebtedness, is dividends
received from the Banks. Each of the Banks is subject to various
regulatory policies and requirements relating to the payment of
dividends, including requirements to maintain capital above
regulatory minimums. The appropriate federal regulatory
authority is authorized to determine, under certain
circumstances relating to the financial condition of a bank or
bank holding company, that the payment of dividends would be an
unsafe or unsound practice and to prohibit payment thereof. For
additional information regarding the restrictions on our ability
to receive dividends or other distributions from the Banks, see
Item 1A. Risk Factors.
6 Bank
of America 2010
In addition, the ability of Bank of America Corporation and the
Banks to pay dividends may be affected by the various minimum
capital requirements and the capital and non-capital standards
established under FDICIA, as described above. The right of Bank
of America Corporation, our stockholders and our creditors to
participate in any distribution of the assets or earnings of our
subsidiaries is further subject to the prior claims of creditors
of the respective subsidiaries.
For additional information regarding the requirements relating
to the payment of dividends, including the minimum capital
requirements, see Note 15 Shareholders
Equity and Note 18 Regulatory
Requirements and Restrictions to the Consolidated Financial
Statements.
Source of
Strength
According to the Financial Reform Act and Federal Reserve Board
policy, bank holding companies are expected to act as a source
of financial strength to each subsidiary bank and to commit
resources to support each such subsidiary. This support may be
required at times when a bank holding company may not be able to
provide such support. Similarly, under the cross-guarantee
provisions of the FDICIA, in the event of a loss suffered or
anticipated by the FDIC either as a result of
default of a banking subsidiary or related to FDIC assistance
provided to such a subsidiary in danger of default
the affiliate banks of such a subsidiary may be assessed for the
FDICs loss, subject to certain exceptions.
Deposit
Insurance
Deposits placed at the U.S. Banks are insured by the FDIC,
subject to limits and conditions of applicable law and the
FDICs regulations. Pursuant to the Financial Reform Act,
FDIC insurance coverage limits were permanently increased to
$250,000 per customer. The Financial Reform Act also provides
for unlimited FDIC insurance coverage for non-interest bearing
demand deposit accounts for a two-year period beginning on
December 31, 2010 and ending on January 1, 2013. The
FDIC administers the DIF, and all insured depository
institutions are required to pay assessments to the FDIC that
fund the DIF. The Financial Reform Act changed the methodology
for calculating deposit insurance assessments from the amount of
an insured depository institutions domestic deposits to
its total assets minus tangible capital. On February 7,
2011 the FDIC issued a new regulation implementing revisions to
the assessment system mandated by the Financial Reform Act. The
new regulation will be effective April 1, 2011 and will be
reflected in the June 30, 2011 FDIC fund balance and the
invoices for assessments due September 30, 2011. As a
result of the new regulations, we expect to incur higher annual
deposit insurance assessments. We have identified potential
mitigation actions, but they are in the early stages of
development and we are not able to directly control the basis or
the amount of premiums that we are required to pay for FDIC
insurance or for other fees or assessment obligations imposed on
financial institutions. Any future increases in required deposit
insurance premiums or other bank industry fees could have a
significant adverse impact on our financial condition and
results of operations.
The FDIC is required to maintain at least a designated minimum
ratio of the DIF to insured deposits in the United States. The
Financial Reform Act requires the FDIC to assess insured
depository institutions to achieve a DIF ratio of at least
1.35 percent by September 30, 2020. The FDIC has
recently adopted new regulations that establish a long-term
target DIF ratio of greater than two percent. As a result of the
ongoing instability in the economy and the failure of other
U.S. depository institutions, the DIF ratio is currently
below the required targets and the FDIC has adopted a
restoration plan that will result in
substantially higher deposit insurance assessments for all
depository institutions over the coming years. Deposit insurance
assessment rates are subject to change by the FDIC and will be
impacted by the overall economy and the stability of the banking
industry as a whole.
Transactions with
Affiliates
The U.S. Banks are subject to restrictions under federal
law that limit certain types of transactions between the Banks
and their non-bank affiliates. In general, the U.S. Banks
are subject to quantitative and qualitative limits on extensions
of credit, purchases of assets and certain other transactions
involving Bank of America and its non-bank affiliates.
Transactions between the U.S. Banks and their non-bank
affiliates are required to be on arms length terms.
Privacy and
Information Security
We are subject to many U.S., state and international laws and
regulations governing requirements for maintaining policies and
procedures to protect the non-public confidential information of
our customers. The Gramm-Leach-Bliley Act requires the Banks to
periodically disclose Bank of Americas privacy policies
and practices relating to sharing such information and enables
retail customers to opt out of our ability to market to
affiliates and non-affiliates under certain circumstances.
Additional
Information
See also the following additional information which is
incorporated herein by reference: Net Interest Income (under the
captions Financial Highlights Net Interest Income
and Supplemental Financial Data in the MD&A and
Tables I, II and XIII of the Statistical Tables);
Securities (under the caption Balance Sheet Analysis
Assets Debt Securities and Market Risk
Management Interest Rate Risk Management for
Nontrading Activities Securities in the MD&A
and Note 1 Summary of Significant Accounting
Principles and Note 5 Securities to
the Consolidated Financial Statements); Outstanding Loans and
Leases (under the caption Balance Sheet Overview
Assets Loans and Leases and Credit Risk Management
in the MD&A, Table IV of the Statistical Tables, and
Note 1 Summary of Significant Accounting
Principles and Note 6 Outstanding Loans
and Leases to the Consolidated Financial Statements);
Deposits (under the caption Balance Sheet Overview
Liabilities Deposits and Liquidity Risk
Funding and Liquidity Risk Management in the MD&A and
Note 11 Deposits to the Consolidated
Financial Statements); Short-term Borrowings (under the caption
Balance Sheet Overview Liabilities
Commercial Paper and Other Short-term Borrowings and Liquidity
Risk Funding and Liquidity Risk Management in the
MD&A, and Note 12 Federal Funds Sold,
Securities Borrowed or Purchased Under Agreements to Resell and
Short-term Borrowings and Note 13
Long-term Debt to the Consolidated Financial Statements);
Trading Account Assets and Liabilities (under the caption
Balance Sheet Overview Assets Trading
Accounts Assets and Market Risk Management Trading
Risk Management in the MD&A and Note 3
Trading Account Assets and Liabilities to the Consolidated
Financial Statements); Market Risk Management (under the caption
Market Risk Management in the MD&A); Liquidity Risk
Management (under the caption Liquidity Risk in the MD&A);
Compliance Risk Management (under the caption Compliance Risk
Management in the MD&A) and Operational Risk Management
(under the caption Operational Risk Management in the
MD&A); and Performance by Geographic Area (under
Note 28 Performance by Geographical Area
to the Consolidated Financial Statements).
Bank of America
2010 7
In the course of conducting our business operations, we are
exposed to a variety of risks, some of which are inherent in the
financial services industry and others of which are more
specific to our own businesses. The following discussion
addresses some of the key risks that could affect our
businesses, operations, and financial condition. Other factors
that could affect our financial condition and operations are
discussed in Forward-looking Statements in the MD&A.
However, other factors besides those discussed below or
elsewhere in this report could also adversely affect our
businesses, operations, and financial condition. Therefore, the
risk factors below should not be considered a complete list of
potential risks that we may face.
Our businesses and results of operations have been, and may
continue to be, materially and adversely affected by the
U.S. and international financial markets and economic
conditions generally.
Our businesses and results of operations are materially affected
by the financial markets and general economic conditions in the
United States and abroad, including factors such as the level
and volatility of short-term and long-term interest rates,
inflation, home prices, unemployment and under-employment
levels, bankruptcies, household income, consumer spending,
fluctuations in both debt and equity capital markets, liquidity
of the global financial markets, the availability and cost of
capital and credit, investor sentiment and confidence in the
financial markets, and the strength of the U.S. economy and
the
non-U.S. economies
in which we operate. The deterioration of any of these
conditions can adversely affect our consumer and commercial
businesses and securities portfolios, our level of charge-offs
and provision for credit losses, our capital levels and
liquidity and our results of operations.
U.S. financial markets have improved from the severe
financial crisis that dominated the domestic economy in the
second half of 2008 and early 2009, but mortgage markets remain
fragile. The financial crisis that gripped the European Union
beginning in spring 2010 directly affected U.S. financial
market behavior and the financial services industry. Any
intensification of Europes financial crisis or the
inability to address the sources of future financial turmoil in
Europe may adversely affect the U.S. and international
financial markets and the financial services industry. Such
adverse effect may involve declines in liquidity, loss of
investor confidence in the financial services industry,
disruptions in credit markets, declines in the values of many
asset classes, reductions in home prices and increased
unemployment.
Although the U.S. economy has continued to recover
throughout 2010 and growth of real Gross Domestic Product
strengthened in the second half of 2010, the elevated levels of
unemployment and household debt, along with continued stress in
the consumer and commercial real estate markets, pose challenges
for domestic economic performance and the banking environment.
Consumer spending, exports and business investment in equipment
and software rose during 2010, and showed accelerated momentum
in the second half of 2010, but labor markets and housing
markets remain weak and pose risks. The sustained high
unemployment rate and the lengthy duration of unemployment have
directly impaired consumer finances and pose risks to the
financial services sector. The housing market remains weak and
the elevated levels of distressed and delinquent mortgages add a
significant degree of risk to the mortgage market, in addition
to risks inherent to the business of banking. The risks related
to the distressed mortgage market may be accentuated by attempts
to forestall foreclosure proceedings, as well as state and
federal investigations into foreclosure practices throughout the
financial services industry. These factors may adversely affect
credit quality, bank lending and the general financial services
sector.
These conditions, as well as any further challenges stemming
from the continuing global economic recovery and recent
financial reform initiatives, such as the Financial Reform Act,
could have a material adverse effect on our businesses and
results of operations in the future.
For additional information about economic conditions and
challenges discussed above, see Executive Summary
2010 Economic and Business Environment in the MD&A
beginning on page 25.
Liquidity
Risk
Liquidity Risk is
the Potential Inability to Meet Our Contractual and Contingent
Financial Obligations, on- or Off-Balance Sheet, as they Become
Due.
Adverse changes to our credit ratings from the major credit
ratings agencies could have a material adverse effect on our
liquidity, cash flows, competitive position, financial condition
and results of operations by significantly limiting our access
to the funding or capital markets, increasing our borrowing
costs, or triggering additional collateral or funding
requirements under certain bilateral provisions of our trading
and collateralized financing contracts.
Our borrowing costs and ability to raise funds are directly
impacted by our credit ratings. In addition, credit ratings may
be important to customers or counterparties when we compete in
certain markets and when we seek to engage in certain
transactions including OTC derivatives. Credit ratings and
outlooks are opinions on our creditworthiness and that of our
obligations or securities, including long-term debt, short-term
borrowings, preferred stock and other securities, including
asset securitizations. Our credit ratings are subject to ongoing
review by the ratings agencies and thus may change from time to
time based on a number of factors, including our own financial
strength and operations as well as factors not under our
control, such as rating-agency-specific criteria or frameworks
for our industry or certain security types, which are subject to
revision from time to time, and conditions affecting the
financial services industry generally.
There can be no assurance that we will maintain our current
ratings. A reduction in certain of our credit ratings or the
ratings of certain asset-backed securitizations would likely
have a material adverse effect on our liquidity, access to
credit markets, the related cost of funds, our businesses and on
certain trading revenues, particularly in those businesses where
counterparty creditworthiness is critical. In connection with
certain
over-the-counter
(OTC) derivatives contracts and other trading agreements,
counterparties may require us to provide additional collateral
or to terminate these contracts and agreements and collateral
financing arrangements in the event of a credit ratings
downgrade. Termination of these contracts and agreements could
cause us to sustain losses and impair our liquidity by requiring
us to make significant cash payments or securities movements. If
Bank of America Corporations or Bank of America,
N.A.s commercial paper or short-term credit ratings (which
currently have the following ratings:
P-1 by
Moodys,
A-1 by
S&P and F1+ by Fitch) were downgraded by one or more
levels, the potential loss of short-term funding sources such as
commercial paper or repurchase agreement financing and the
effect on our incremental cost of funds would be material.
The ratings agencies have indicated that, as a systemically
important financial institution, our credit ratings currently
reflect their expectation that, if necessary, we would receive
significant support from the U.S. government. All three
major ratings agencies, however, have indicated they will
reevaluate and could reduce the uplift they include in our
ratings for government support for reasons arising from
financial services regulatory reform proposals or legislation.
In February 2010, S&P affirmed our current credit ratings
but revised the outlook to negative from stable based on its
belief that it is less certain whether the U.S. government
would be willing to provide extraordinary support. On
July 27, 2010, Moodys affirmed our current ratings
but revised the outlook to negative from stable due to its
expectation for lower levels of government support over time as
a result of the passage of the Financial Reform Act. Also, on
October 22, 2010, Fitch placed our credit ratings on Rating
Watch Negative from stable outlook due to proposed rulemaking
that could negatively impact its assessment of future systemic
government
8 Bank
of America 2010
support. Any expectation that government support may be
diminished or withheld in the future would likely have a
negative impact on the companys credit ratings. The timing
of the agencies assessment of potential government
support, as well as its impact on our ratings, is currently
uncertain.
For additional information about the companys credit
ratings, see Liquidity Risk Credit
Ratings in the MD&A beginning on page 70.
Our liquidity, cash flows, financial condition and results of
operations, and competitive position may be significantly
adversely affected if we are unable to access capital markets,
continue to raise deposits, sell assets on favorable terms, or
if there is an increase in our borrowing costs.
Liquidity is essential to our businesses. We fund our assets
primarily with globally sourced deposits in our bank entities,
as well as secured and unsecured liabilities transacted in the
capital markets. We rely on certain unsecured and secured
funding sources, such as the commercial paper and repo markets,
which are typically short-term and credit-sensitive in nature.
We also engage in asset securitization transactions to fund
consumer lending activities. Our liquidity could be
significantly adversely affected by an inability to access the
capital markets; illiquidity or volatility in the capital
markets; unforeseen outflows of cash, including customer
deposits, funding for commitments and contingencies; inability
to sell assets on favorable terms; or negative perceptions about
our short- or long-term business prospects, including changes in
our credit ratings. Several of these factors may arise due to
circumstances beyond our control, such as a general market
disruption, negative views about the financial services industry
generally, changes in the regulatory environment, actions by
credit ratings agencies or an operational problem that affects
third parties or us. For example, during the recent financial
crisis our ability to raise funding was at times adversely
affected in the U.S. and international markets.
Our cost of obtaining funding is directly related to prevailing
market interest rates and to our credit spreads. Credit spreads
are the amount in excess of the interest rate of
U.S. Treasury securities, or other benchmark securities, of
the same maturity that we need to pay to our funding providers.
Increases in interest rates and our credit spreads can
significantly increase the cost of our funding. Changes in our
credit spreads are market-driven, and may be influenced by
market perceptions of our creditworthiness. Changes to interest
rates and our credit spreads occur continuously and may be
unpredictable and highly volatile.
For additional information about our liquidity position and
other liquidity matters, including credit ratings and outlooks
and the policies and procedures we use to manage our liquidity
risks, see Capital Management and Liquidity Risk in the
MD&A beginning on pages 63 and 67, respectively.
Bank of America Corporation is a holding company and as such
we are dependent upon our subsidiaries for liquidity, including
our ability to pay dividends to stockholders.
Bank of America Corporation is a separate and distinct legal
entity from our banking and nonbanking subsidiaries. We evaluate
and manage liquidity on a legal entity basis. Legal entity
liquidity is an important consideration as there are legal and
other limitations on our ability to utilize liquidity from one
legal entity to satisfy the liquidity requirements of another,
including Bank of America Corporation. For instance, Bank of
America Corporation depends on dividends, distributions and
other payments from our banking and nonbanking subsidiaries to
fund dividend payments on our common stock and preferred stock
and to fund all payments on our other obligations, including
debt obligations. Many of our subsidiaries, including our bank
and broker-dealer subsidiaries, are subject to laws that
restrict dividend payments or authorize regulatory bodies to
block or reduce the flow of funds from those subsidiaries to
Bank of America Corporation. In addition, our bank and
broker-dealer subsidiaries are subject to restrictions on their
ability to lend or transact with affiliates and to minimum
regulatory capital requirements, as well as restrictions on
their ability to use funds deposited with them in bank or
brokerage accounts to fund their businesses. Additional
restrictions on
related-party transactions, increased capital requirements and
additional limitations on the use of funds on deposit in bank or
brokerage accounts, as well as lower earnings, can reduce the
amount of funds available to meet the obligations of Bank of
America Corporation and even require Bank of America Corporation
to provide additional funding to such subsidiaries. Regulatory
action of that kind could impede access to funds we need to make
payments on our obligations or dividend payments. In addition,
our right to participate in a distribution of assets upon a
subsidiarys liquidation or reorganization is subject to
the prior claims of the subsidiarys creditors. For a
further discussion regarding our ability to pay dividends, see
Note 15 Shareholders Equity and
Note 18 Regulatory Requirements and
Restrictions to the Consolidated Financial Statements.
Mortgage
and Housing Market-Related Risk
We have been, and expect to continue to be, required to
repurchase loans
and/or
reimburse the GSEs and monoline bond insurance companies
(monolines) for losses due to claims related to representations
and warranties made in connection with mortgage-backed
securities and other loans, and have received similar claims,
and may receive additional claims, from whole loan purchasers
and private-label securitization investors. The resolution of
these claims could have a material adverse effect on our cash
flows, financial condition, and results of operations.
We have securitized and continue to securitize first-lien
mortgage loans generally in the form of mortgage-backed
securities (MBS) guaranteed by the GSEs or, in the case of
Federal Housing Administration insured and U.S. Department
of Veterans Affairs guaranteed mortgage loans, by the Government
National Mortgage Association. We and our legacy companies and
certain subsidiaries have also sold pools of first-lien
mortgages and home equity loans as private-label securitizations
or in the form of whole loans. In certain cases, all or a
portion of the private-label MBS were insured by monolines or
other non-GSE counterparties. In connection with these
securitizations and other transactions, we or our subsidiaries
or legacy companies made various representations and warranties.
Breaches of these representations and warranties may result in a
requirement that we repurchase mortgage loans, or indemnify or
provide other remedies to counterparties.
On December 31, 2010, we reached agreements with Freddie Mac
(FHLMC) and Fannie Mae (FNMA), collectively the GSEs, where the
Corporation paid $2.8 billion to resolve repurchase claims
involving first-lien residential mortgage loans sold directly to
the GSEs by entities related to legacy Countrywide
(Countrywide). The agreement with FHLMC extinguishes all
outstanding and potential mortgage repurchase and make-whole
claims arising out of any alleged breaches of selling
representations and warranties related to loans sold directly by
legacy Countrywide to FHLMC through 2008, subject to certain
exceptions we do not believe will be material. The agreement
with FNMA substantially resolves the existing pipeline of
repurchase and make-whole claims outstanding as of
September 20, 2010 arising out of alleged breaches of
selling representations and warranties related to loans sold
directly by legacy Countrywide to FNMA. These agreements with
the GSEs do not cover outstanding and potential mortgage
repurchase and make-whole claims arising out of any alleged
breaches of selling representations and warranties to legacy
Bank of America first-lien residential mortgage loans sold
directly to the GSEs, loans sold to the GSEs other than
described above, loan servicing obligations, other contractual
obligations or loans contained in private-label securitizations.
In addition, we have other unresolved representation and
warranty claims from the GSEs and certain monolines, and other
non-GSE counterparties, and certain monolines have instituted
litigation against us with respect to representations and
warranties claims.
We have experienced increasing repurchase and similar requests
from non-GSE counterparties, including monolines, private-label
MBS securitization investors and whole loan purchasers. We
expect additional activity in this
Bank of America
2010 9
area going forward and the volume of repurchase requests from
monolines, whole loan purchasers and investors in private-label
MBS could increase in the future. It is reasonably possible that
future losses may occur and our estimate is that the upper range
of loss related to non-GSE sales could be $7.0 billion to
$10.0 billion over existing accruals. This estimate does
not represent a probable loss, is based on currently available
information, significant judgment, and a number of assumptions
that are subject to change. A significant portion of this
estimate relates to loans originated through legacy Countrywide,
and the repurchase liability is generally limited to the
original seller of the loan. Future provisions and possible loss
or range of loss may be impacted if actual results are different
from our assumptions regarding economic conditions, home prices
and other matters and may vary by counterparty. We expect that
the resolution of the repurchase claims process with the non-GSE
counterparties will likely be a protracted process, and we will
vigorously contest any request for repurchase if we conclude
that a valid basis for the repurchase claim does not exist.
The resolution of claims related to alleged breaches of these
representations and warranties and repurchase claims could have
a material adverse effect on our financial condition, cash flows
and results of operations, and could exceed existing estimates
and accruals. In addition, any accruals or estimates we have
made are based on assumptions which are subject to change.
For additional information about our representations and
warranties exposure and past activities, see Recent
Events Representations and Warrants Liability, in
the MD&A on page 33, Recent Events
Private-label Residential Mortgage-backed Securities Matters, in
the MD&A on page 35, Off-Balance Sheet Arrangements
and Contractual Obligations Representations and
Warranties, in the MD&A beginning on page 52, and
Note 9 Representations and Warranties
Obligations and Corporate Guarantees to the Consolidated
Financial Statements and Representations.
Continued, or increasing, declines in the domestic and
international housing markets, including home prices, may
adversely affect the companys consumer and commercial
portfolios and have a significant adverse effect on our
financial condition and results of operations.
Economic deterioration throughout 2009 and weakness in the
economic recovery in 2010 was accompanied by continued stress in
the U.S. and international housing markets, including
declines in home prices. These declines in the housing market,
with falling home prices and increasing foreclosures, have
negatively impacted the demand for many of our products and the
credit performance of our consumer and commercial portfolios.
Additionally, our mortgage loan production volume is generally
influenced by the rate of growth in residential mortgage debt
outstanding and the size of the residential mortgage market,
which has declined due to reduced activity in the housing
market. Continued high unemployment rates in the U.S. have
added another element to the financial challenges facing
U.S. consumers and further compounded these stresses in the
U.S. housing market as employment conditions may be
compelling some consumers to delay new home purchases or miss
payments on existing mortgages.
Conditions in the housing market have also resulted in
significant write-downs of asset values in several asset
classes, notably mortgage-backed securities and exposure to
monolines. These conditions may negatively affect the value of
real estate which could negatively affect our exposure to
representations and warranties. While there were continued
indications throughout the past year that the U.S. economy
is stabilizing, the performance of our overall consumer and
commercial portfolios may not significantly improve in the near
future. A protracted continuation or worsening of these
difficult housing market conditions would likely exacerbate the
adverse effects outlined above and have a significant adverse
effect on our financial condition and results of operations.
We temporarily suspended our foreclosure sales nationally in
the fourth quarter of 2010 to conduct an assessment of our
foreclosure processes. Subsequently, numerous state and federal
investigations of foreclosure
processes across our industry have been initiated. Those
investigations and any irregularities that might be found in our
foreclosure processes, along with any remedial steps taken in
response to governmental investigations or to our own internal
assessment, could have a material adverse effect on our
financial condition and results of operations.
On October 1, 2010, we voluntarily stopped taking
residential mortgage foreclosure proceedings to judgment in
states where foreclosure requires a court order following a
legal proceeding (judicial states). On October 8, 2010, we
stopped foreclosure sales in all states in order to complete an
assessment of the related business processes. These actions
generally did not affect the initiation and processing of
foreclosures prior to judgment or sale of vacant real estate
owned properties. We took these precautionary steps in order to
ensure our processes for handling foreclosures include the
appropriate controls and quality assurance. Our review has
involved an assessment of the foreclosure process, including a
review of completed foreclosure affidavits in pending
proceedings.
As a result of that review, we identified and implemented
process and control enhancements, and we intend to monitor
ongoing quality results of each process. After these
enhancements were put in place, we resumed foreclosure sales in
most states where foreclosures are handled without judicial
supervision (non-judicial states) during the fourth quarter of
2010, and expect sales to resume in the remaining non-judicial
states in the first quarter of 2011. We also commenced a rolling
process of preparing, as necessary, affidavits of indebtedness
in pending foreclosure proceedings in order to resume the
process of taking these foreclosure proceedings to judgment in
judicial states, beginning with properties believed to be
vacant, and with properties for which the mortgage was
originated on a non-owner-occupied basis. The process of
preparing affidavits in pending proceedings is expected to
continue in the first quarter of 2011, and could result in
prolonged adversary proceedings that delay certain foreclosure
sales.
Law enforcement authorities in all 50 states and the
U.S. Department of Justice and other federal agencies,
including certain bank supervisory authorities, continue to
investigate alleged irregularities in the foreclosure practices
of residential mortgage servicers. Authorities have publicly
stated that the scope of the investigations extends beyond
foreclosure documentation practices to include mortgage loan
modification and loss mitigation practices. The Corporation is
cooperating with these investigations and is dedicating
significant resources to address these issues. The current
environment of heightened regulatory scrutiny has the potential
to subject the Corporation to inquiries or investigations that
could significantly adversely affect its reputation. Such
investigations by state and federal authorities, as well as any
other governmental or regulatory scrutiny of our foreclosure
processes, could result in material fines, penalties, equitable
remedies (including requiring default servicing or other process
changes), or other enforcement actions, and result in
significant legal costs in responding to governmental
investigations and additional litigation.
While we cannot predict the ultimate impact of the temporary
delay in foreclosure sales, or any issues that may arise as a
result of alleged irregularities with respect to previously
completed foreclosure activities, we may be subject to
additional borrower and non-borrower litigation and governmental
and regulatory scrutiny related to our past and current
foreclosure activities. This scrutiny may extend beyond our
pending foreclosure matters to issues arising out of alleged
irregularities with respect to previously completed foreclosure
activities. Our costs increased in the fourth quarter of 2010
and we expect that additional costs incurred in connection with
our foreclosure process assessment will continue into 2011 due
to the additional resources necessary to perform the foreclosure
process assessment, to revise affidavit filings and to implement
other operational changes. This will likely result in higher
noninterest expense, including higher servicing costs and legal
expenses, in Home Loans & Insurance. It is also
possible that the temporary suspension of foreclosure sales may
result in additional costs and
10 Bank
of America 2010
expenses, including costs associated with the maintenance of
properties or possible home price declines, while foreclosures
are delayed. In addition, required process changes could
increase our default servicing costs over the longer term.
Finally, the time to complete foreclosure sales may increase
temporarily, which may result in an increase in non-performing
loans and servicing advances and may impact the collectability
of such advances and the value of our MSRs, MBS and real estate
owned properties. An increase in the time to complete
foreclosure sales also may inflate the amount of highly
delinquent loans in the Corporations mortgage statistics,
result in increasing levels of consumer nonperforming loans, and
could have a dampening effect on net interest margin as
non-performing assets rise. Accordingly, delays in foreclosure
sales, including any delays beyond those currently anticipated,
and our continued process enhancements and any issues that may
arise out of alleged irregularities in our foreclosure process
could increase the costs associated with our mortgage operations.
Loan sales have not been materially impacted by the temporary
delay in foreclosure sales or the review of our foreclosure
process. However, delays in foreclosure sales could negatively
affect the valuation of our real estate owned properties and MBS
that are serviced by us. With respect to GSE MBS, while there
would be no credit impairment to security holders due to the
guarantee provided by the agencies, the valuation of certain MBS
could be negatively affected under certain scenarios due to
changes in the timing of cash flows. The impact on GSE MBS
depends on, among other factors, how long the underlying loans
are affected by foreclosure delays and would vary among
securities. With respect to non-GSE MBS, under certain scenarios
the timing and amount of cash flows could be negatively
affected. The ultimate impact on non-GSE MBS depends on the same
factors that impact GSE MBS, as well as the level of credit
enhancement, including subordination. In addition, as a result
of our foreclosure process assessment and related control
enhancements that we have implemented, there may continue to be
delays in foreclosure sales, including a continued backlog of
foreclosure proceedings, and evictions from real estate owned
properties.
Failure to satisfy our obligations as servicer in the
residential mortgage securitization process, including
obligations related to residential mortgage foreclosure actions,
along with other losses we could incur in our capacity as
servicer, could have a material adverse effect on our financial
condition and results of operations.
Bank of America and its legacy companies have securitized, and
continue to securitize, a significant portion of the residential
mortgage loans that they have originated or acquired. The
Corporation services a large portion of the loans it or its
subsidiaries have securitized and also services loans on behalf
of third-party securitization vehicles. In addition to
identifying specific servicing criteria, pooling and servicing
arrangements entered into in connection with a securitization or
whole loan sale typically impose standards of care on the
servicer, with respect to its activities, that may include the
obligation to adhere to the accepted servicing practices of
prudent mortgage lenders
and/or to
exercise the degree of care and skill that the servicer employs
when servicing loans for its own account. Many non-GSE
residential mortgage-backed securitizations and whole loan
servicing agreements also require the servicer to indemnify the
trustee or other investor for or against failures by the
servicer to perform its servicing obligations or acts or
omissions that involve willful malfeasance, bad faith, or gross
negligence in the performance of, or reckless disregard of, the
servicers duties.
Servicing agreements with the GSEs generally provide the GSEs
with broader rights relative to the servicer than are found in
servicing agreements with private investors. For example, each
GSE typically has the right to demand
that the servicer repurchase loans that breach the sellers
representations and warranties made in connection with the
initial sale of the loans, even if the servicer was not the
seller. The GSEs also reserve the contractual right to demand
indemnification or loan repurchase for certain servicing
breaches. In addition, our agreements with the GSEs and their
first mortgage seller/servicer guides provide for timelines to
resolve delinquent loans through workout efforts or liquidation,
if necessary.
With regard to alleged irregularities in foreclosure
process-related activities referred to above, a servicer may
incur costs or losses if the servicer elects or is required to
re-execute or re-file documents or take other action in its
capacity as a servicer in connection with pending or completed
foreclosures. The servicer also may incur costs or losses if the
validity of a foreclosure action is challenged by a borrower. If
a court were to overturn a foreclosure because of errors or
deficiencies in the foreclosure process, the servicer may have
liability to a title insurer of the property sold in
foreclosure. These costs and liabilities may not be reimbursable
to the servicer. A servicer may also incur costs or losses
associated with private-label securitizations or other loan
investors relating to delays or alleged deficiencies in
processing documents necessary to comply with state law
governing foreclosures.
The servicer may be subject to deductions by insurers for
mortgage insurance or guarantee benefits relating to delays or
alleged deficiencies. Additionally, if the servicer commits a
material breach of its servicing obligations that is not cured
within specified timeframes, including those related to default
servicing and foreclosure, it could be terminated as servicer
under servicing agreements under certain circumstances. Any of
these actions may harm the servicers reputation, increase
its servicing costs or otherwise adversely affect its financial
condition and results of operations.
Mortgage notes, assignments or other documents are often
required to be maintained and are often necessary to enforce
mortgages loans. There has been significant public commentary
regarding the common industry practice of recording mortgages in
the name of Mortgage Electronic Registration Systems, Inc.
(MERS), as nominee on behalf of the note holder, and whether
securitization trusts own the loans purported to be conveyed to
them and have valid liens securing those loans. We currently use
the MERS system for a substantial portion of the residential
mortgage loans that we originate, including loans that have been
sold to investors or securitization trusts. Additionally,
certain legal challenges have been made to the process for
transferring mortgage loans to securitization trusts, asserting
that having a mortgagee of record that is different than the
holder of the mortgage note could break the chain of
title and cloud the ownership of the loan. In order to
foreclose on a mortgage loan, in certain cases it may be
necessary or prudent for an assignment of the mortgage to be
made to the holder of the note, which in the case of a mortgage
held in the name of MERS as nominee would need to be completed
by MERS. As such, our practice is to obtain assignments of
mortgages from MERS prior to instituting foreclosure. If certain
required documents are missing or defective, or if the use of
MERS is found not to be effective, we could be obligated to cure
certain defects or in some circumstances be subject to
additional costs and expenses, which could have a material
adverse effect on our cash flows, financial condition and
results of operations.
We may also face negative reputational costs from these
servicing risks, which could reduce our future business
opportunities in this area or cause that business to be on less
favorable terms to us.
For additional information concerning our servicing risks, see
Recent Events Certain Servicing-related Issues, in
the MD&A beginning on page 34.
Bank of America
2010 11
Credit
Risk
Credit Risk is
the Risk of Loss Arising from a Borrower, Obligor or
Counterparty Default when a Borrower, Obligor or Counterparty
does not Meet its Obligations.
Increased credit risk, due to economic or market disruptions,
insufficient credit loss reserves or concentration of credit
risk, may necessitate increased provisions for credit losses and
could have an adverse effect on our financial condition and
results of operations.
When we loan money, commit to loan money or enter into a letter
of credit or other contract with a counterparty, we incur credit
risk, or the risk of losses if our borrowers do not repay their
loans or our counterparties fail to perform according to the
terms of their agreements. A number of our products expose us to
credit risk, including loans, leases and lending commitments,
derivatives, trading account assets and assets
held-for-sale.
As one of the nations largest lenders, the credit quality
of our consumer and commercial portfolios has a significant
impact on our earnings.
Although credit quality generally continued to show improvement
throughout 2010, net charge-offs, nonperforming loans, leases
and foreclosed properties remained elevated. Global and national
economic conditions continue to weigh on our credit portfolios.
Economic or market disruptions are likely to increase our credit
exposure to customers, obligors or other counterparties due to
the increased risk that they may default on their obligations to
us. These potential increases in delinquencies and default rates
could adversely affect our consumer credit card, home equity,
consumer real estate and purchased credit-impaired portfolios,
through increased charge-offs and provisions for credit losses.
In addition, this increased credit risk could also adversely
affect our commercial loan portfolios where we have experienced
continued losses, particularly in our commercial real estate
portfolios, reflecting broad-based stress across industries,
property types and borrowers.
We estimate and establish an allowance for credit risks and
credit losses inherent in our lending activities (including
unfunded lending commitments), excluding those measured at fair
value, through a charge to earnings. The amount of allowance is
determined based on our evaluation of the potential credit
losses included within our loan portfolio. The process for
determining the amount of the allowance, which is critical to
our operating results and financial condition, requires
difficult, subjective and complex judgments, including forecasts
of economic conditions and how our borrowers will react to those
conditions. Our ability to assess future economic conditions or
the creditworthiness of our customers, obligors or other
counterparties is imperfect. The ability of our borrowers to
repay their loans will likely be impacted by changes in economic
conditions, which in turn could impact the accuracy of our
forecasts. As with any such assessments, there is also the
chance that we will fail to identify the proper factors or that
we will fail to accurately estimate the impacts of factors that
we identify. In addition, we may underestimate the credit losses
in our loan portfolios and suffer unexpected losses if the
models and approaches we use to establish reserves and make
judgments in extending credit to our borrowers and other
counterparties become less predictive of future behaviors,
valuations, assumptions or estimates. Although we believe that
our allowance for credit losses was in compliance with
applicable standards at December 31, 2010, there is no
guarantee that it will be sufficient to address future credit
losses, particularly if economic conditions worsen. In such an
event we may need to increase the
size of our allowance in 2011, which would adversely affect our
financial condition and results of operations.
In the ordinary course of our business, we also may be subject
to a concentration of credit risk to a particular industry,
country, counterparty, borrower or issuer. A deterioration in
the financial condition or prospects of a particular industry or
a failure or downgrade of, or default by, any particular entity
or group of entities could have a material adverse impact on our
businesses, and the processes by which we set limits and monitor
the level of our credit exposure to individual entities,
industries and countries may not function as we have
anticipated. While our activities expose us to many different
industries and counterparties, we routinely execute a high
volume of transactions with counterparties in the financial
services industry, including brokers and dealers, commercial
banks, investment funds and insurers. This has resulted in
significant credit concentration with respect to this industry.
In the ordinary course of business, we also enter into
transactions with sovereign nations, U.S. states and
U.S. municipalities. Unfavorable economic or political
conditions, disruptions to capital markets, currency
fluctuations, social instability and changes in government
policies could impact the operating budgets or credit ratings of
sovereign nations, U.S. states and U.S. municipalities
and expose us to credit risk.
We also have a concentration of credit risk with respect to our
consumer real estate, consumer credit card and commercial real
estate portfolios, which represent a large percentage of our
overall credit portfolio. The economic downturn has adversely
affected these portfolios and further exposed us to this
concentration of risk. Continued economic weakness or
deterioration in real estate values or household incomes could
result in materially higher credit losses.
For additional information about our credit risk and credit risk
management policies and procedures, see Credit Risk Management
in the MD&A beginning on page 71 and
Note 1 Summary of Significant Accounting
Principles to the Consolidated Financial Statements.
We could suffer losses as a result of the actions of or
deterioration in the commercial soundness of our counterparties
and other financial services institutions.
Our ability to engage in routine trading and funding
transactions could be adversely affected by the actions and
commercial soundness of other market participants. We have
exposure to many different industries and counterparties, and we
routinely execute transactions with counterparties in the
financial services industry, including brokers and dealers,
commercial banks, investment banks, mutual and hedge funds and
other institutional clients. Financial services institutions and
other counterparties are inter-related because of trading,
funding, clearing or other relationships. As a result, defaults
by, or even rumors or questions about, one or more financial
services institutions, or the financial services industry
generally, have led to market-wide liquidity problems and could
lead to significant future liquidity problems, including losses
or defaults by us or by other institutions. Many of these
transactions expose us to credit risk in the event of default of
a counterparty or client. In addition, our credit risk may be
impacted when the collateral held by us cannot be realized or is
liquidated at prices not sufficient to recover the full amount
of the loan or derivatives exposure due us. Any such losses
could materially adversely affect our financial condition and
results of operations.
12 Bank
of America 2010
Our derivatives businesses may expose us to unexpected risks
and potential losses.
We are party to a large number of derivatives transactions,
including credit derivatives. Our derivatives businesses may
expose us to unexpected market, credit and operational risks
that could cause us to suffer unexpected losses and have an
adverse effect on our financial condition and results of
operations. Severe declines in asset values, unanticipated
credit events or unforeseen circumstances that may cause
previously uncorrelated factors to become correlated (and vice
versa) may create losses resulting from risks not appropriately
taken into account in the development, structuring or pricing of
a derivative instrument.
Many derivative instruments are individually negotiated and
non-standardized, which can make exiting, transferring or
settling some positions difficult. Many derivatives require that
we deliver to the counterparty the underlying security, loan or
other obligation in order to receive payment. In a number of
cases, we do not hold, and may not be able to obtain, the
underlying security, loan or other obligation. This could cause
us to forfeit the payments due to us under these contracts or
result in settlement delays with the attendant credit and
operational risk, as well as increased costs to us.
Derivatives contracts and other transactions entered into with
third parties are not always confirmed by the counterparties or
settled on a timely basis. While a transaction remains
unconfirmed or during any delay in settlement, we are subject to
heightened credit and operational risk and in the event of
default may find it more difficult to enforce the contract. In
addition, as new and more complex derivatives products have been
created, covering a wider array of underlying credit and other
instruments, disputes about the terms of the underlying
contracts may arise, which could impair our ability to
effectively manage our risk exposures from these products and
subject us to increased costs.
For a further discussion of our derivatives exposure, see
Note 4 Derivatives to the Consolidated
Financial Statements.
Market
Risk
Market Risk is
the Risk that Values of Assets and Liabilities or Revenues will
be Adversely Affected by Changes in Market Conditions Such as
Market Volatility. Market Risk is Inherent in the Financial
Instruments Associated with our Operations and Activities,
Including Loans, Deposits, Securities, Short-Term Borrowings,
Long-Term Debt, Trading Account Assets and Liabilities, and
Derivatives.
Our businesses and results of operations have been, and may
continue to be, significantly adversely affected by changes in
the levels of market volatility and by other financial or
capital market conditions.
Our businesses and results of operations may be adversely
affected by market risk factors such as changes in interest and
currency exchange rates, equity and futures prices, the implied
volatility of interest rates, credit spreads and other economic
and business factors. These market risks may adversely affect,
for example, (i) the value of our on- and off-balance sheet
securities, trading assets, other financial instruments, and
MSRs, (ii) the cost of debt capital and our access to
credit markets, (iii) the value of assets under management,
which could reduce our fee income relating to those assets,
(iv) customer allocation of capital among investment
alternatives, (v) the volume of client activity in our
trading operations, and (vi) the general profitability and
risk level of the transactions in which we engage. Any of these
developments could have a significant adverse impact on our
financial condition and results of operations.
We use various models and strategies to assess and control our
market risk exposures but those are subject to inherent
limitations. For example, our models, which rely on historical
trends and assumptions, may not be sufficiently predictive of
future results due to limited historical patterns, extreme or
unanticipated market movements and illiquidity, especially
during severe market downturns or stress events. The models that
we use to assess and control our market risk exposures also
reflect assumptions about the degree of correlation or lack
thereof among prices of various asset classes or other market
indicators. In times of market stress or other unforeseen
circumstances, such as the market conditions experienced in 2008
and 2009, previously uncorrelated indicators may become
correlated, or previously correlated indicators may move in
different directions. These types of market movements have at
times limited the effectiveness of our hedging strategies and
have caused us to incur significant losses, and they may do so
in the future. These changes in correlation can be exacerbated
where other market participants are using risk or trading models
with assumptions or algorithms that are similar to ours. In
these and other cases, it may be difficult to reduce our risk
positions due to the activity of other market participants or
widespread market dislocations, including circumstances where
asset values are declining significantly or no market exists for
certain assets. To the extent that we make investments directly
in securities that do not have an established liquid trading
market or are otherwise subject to restrictions on sale or
hedging, we may not be able to reduce our positions and
therefore reduce our risk associated with such positions.
For additional information about market risk and our market risk
management policies and procedures, see Market Risk Management
in the MD&A beginning on page 100.
Declines in the value of certain of our assets could have an
adverse effect on our results of operations.
We have a large portfolio of financial instruments that we
measure at fair value including, among others, certain corporate
loans and loan commitments, loans
held-for-sale,
repurchase agreements and long-term deposits. We also have
trading account assets and liabilities, derivatives assets and
liabilities,
available-for-sale
debt and marketable equity securities, consumer-related MSRs and
certain other assets that are valued at fair value. We determine
the fair values of these instruments based on the fair value
hierarchy under applicable accounting guidance. The fair values
of these financial instruments include adjustments for market
liquidity, credit quality and other transaction specific
factors, where appropriate.
Gains or losses on these instruments can have a direct and
significant impact on our results of operations, unless we have
effectively hedged our exposures. For example,
changes in interest rates, among other things, can impact the
value of our MSRs and can result in substantially higher or
lower mortgage banking income and earnings, depending upon our
ability to fully hedge the performance of our MSRs. Fair values
may be impacted by declining values of the underlying assets or
the prices at which observable market transactions occur and the
continued availability of these transactions. The financial
strength of counterparties, such as monolines, with whom we have
economically hedged some of our exposure to these assets, also
will affect the fair value of these assets. Sudden declines and
significant volatility in the prices of assets may substantially
curtail or eliminate the trading activity for these assets,
which may make it very difficult to sell, hedge or value such
assets. The inability to sell or effectively hedge assets
reduces our ability to limit losses in such positions and the
difficulty in valuing assets may increase our risk-weighted
assets, which requires us to maintain additional capital and
increases our funding costs.
Bank of America
2010 13
Asset values also directly impact revenues in our asset
management businesses. We receive asset-based management fees
based on the value of our clients portfolios or
investments in funds managed by us and, in some cases, we also
receive incentive fees based on increases in the value of such
investments. Declines in asset values can reduce the value of
our clients portfolios or fund assets, which in turn can
result in lower fees earned for managing such assets.
For additional information about fair value measurements, see
Note 22 Fair Value Measurements to the
Consolidated Financial Statements. For additional information
about our asset management businesses, see Business Segment
Operations Global Wealth & Investment
Management in the MD&A beginning on page 48.
Our commodities activities, particularly our physical
commodities business, subject us to performance, environmental
and other risks that may result in significant cost and
liabilities.
As part of our commodities business, we enter into
exchange-traded contracts, financially settled OTC derivatives,
contracts for physical delivery and contracts providing for the
transportation, transmission
and/or
storage rights on or in vessels, barges, pipelines, transmission
lines or storage facilities. Commodity, related storage,
transportation or other contracts expose us to the risk that the
price of the underlying commodity or the cost of storing or
transporting commodities may rise or fall. In addition,
contracts relating to physical ownership
and/or
delivery can expose us to numerous other risks, including
performance and environmental risks. For example, our
counterparties may not be able to pass changes in the price of
commodities to their customers and therefore may not be able to
meet their performance obligations. Our actions to mitigate the
aforementioned risks may not prove adequate to address every
contingency. In addition, insurance covering some of these risks
may not be available, and the proceeds, if any, from insurance
recovery may not be adequate to cover liabilities with respect
to particular incidents. As a result, our financial condition
and results of operations may be adversely affected by such
events.
Regulatory
and Legal Risk
Bank regulatory agencies may require us to hold higher levels
of regulatory capital, increase our regulatory capital ratios,
or increase liquidity which could result in the need to issue
additional securities that qualify as regulatory capital or to
liquidate company assets.
We are subject to the risk-based capital guidelines issued by
the Federal Reserve Board. These guidelines establish regulatory
capital requirements for banking institutions to meet minimal
requirements as well as to qualify as a
well-capitalized institution. (A
well-capitalized institution must generally maintain
capital ratios 200 bps higher than the minimum guidelines.)
The risk-based capital rules have been further supplemented by
required leverage ratios, defined as so-called Tier 1 (the
highest grade) capital divided by quarterly average total
assets, after certain adjustments. If any of our insured
depository institutions fails to maintain its status as
well- capitalized under the capital rules of their
primary federal regulator, the Federal Reserve Board will
require us to enter into an agreement to bring the insured
depository institution or institutions back into a
well-capitalized status. For the duration of such an
agreement, the Federal Reserve Board may impose restrictions on
the activities in which we may engage. If we were to fail to
enter into such an agreement, or fail to comply with the terms
of such agreement, the Federal Reserve Board may impose more
severe restrictions on the activities in which we may engage,
including requiring us to cease and desist in activities
permitted under the Gramm-Leach-Bliley Act.
It is possible that in the future increases in regulatory
capital requirements, changes in how regulatory capital is
calculated or increases to liquidity requirements, may cause the
loss of our well-capitalized status unless we
increase our capital levels by issuing additional common stock,
thus diluting
our existing shareholders, or by selling assets. For example,
the Financial Reform Act includes a provision under which our
previously issued and outstanding trust preferred securities
will no longer qualify as Tier 1 capital effective
January 1, 2013. The exclusion of trust preferred
securities from Tier 1 capital will be phased in
incrementally over a three-year phase-in period. The treatment
of trust preferred securities during the phase-in period remains
unclear and is subject to future rulemaking.
On December 16, 2010, the Basel Committee issued Basel III,
proposing a January 2013 implementation date for Basel III. If
implemented by U.S. regulators as proposed, Basel III
could significantly increase our capital requirements.
Basel III and the Financial Reform Act propose the
disqualification of trust preferred securities from Tier 1
capital, with the Financial Reform Act proposing that the
disqualification be phased in from 2013 to 2015. Basel III
also proposes the deduction of certain assets from capital
(deferred tax assets, mortgage servicing rights (MSRs),
investments in financial firms and pension assets, among others,
within prescribed limitations), the inclusion of other
comprehensive income in capital, increased capital for
counterparty credit risk, and new minimum capital and buffer
requirements. U.S. regulators are expected to begin the
final rulemaking processes for Basel III in early
2011 and have indicated a goal to adopt final rules by
year-end 2011 or early 2012. In addition to the capital
proposals, in December 2010 the Basel Committee proposed two
measures of liquidity risk. The Liquidity Coverage Ratio
identifies the amount of unencumbered, high quality liquid
assets a financial institution holds that can be used to offset
the net cash outflows the institution would encounter under an
acute 30-day
stress scenario. The Net Stable Funding Ratio measures the
amount of longer-term, stable sources of funding employed by a
financial institution relative to the liquidity profiles of the
assets funded and the potential for contingent calls on funding
liquidity arising from off-balance sheet commitments and
obligations, over a one-year period. The Basel Committee expects
the Liquidity Coverage Ratio to be implemented in January 2015
and the Net Stable Funding Ratio to be implemented in January
2018, following observation periods beginning in 2012.
Any requirement that we increase our regulatory capital,
regulatory capital ratios or liquidity could have a material
adverse effect on our financial condition and results of
operations, as we may need to liquidate certain assets, perhaps
on terms unfavorable to us and contrary to our business plans.
Such a requirement could also compel us to issue additional
securities, which could dilute our current common
stockholders.For additional information about the proposals
described above and their potential effect on our required
levels of regulatory capital, see Item 1.
Business Capital and Operational Requirements on
page 5 and Capital Management Regulatory
Capital in the MD&A beginning on page 63.
Government measures to regulate the financial industry,
including the Financial Reform Act, either individually, in
combination or in the aggregate, could require us to change
certain of our business practices, impose significant additional
costs on us, limit the products that we offer, limit our ability
to pursue business opportunities in an efficient manner, require
us to increase our regulatory capital, impact the value of
assets that we hold, significantly reduce our revenues or
otherwise materially and adversely affect our businesses,
financial condition or results of operations.
As a financial institution, we are heavily regulated at the
state, federal and international levels. As a result of the
financial crisis and related global economic downturn that began
in 2007, we have faced and expect to continue to face increased
public and legislative scrutiny as well as stricter and more
comprehensive regulation of our financial services practices.
These regulatory and legislative measures, either individually,
in combination or in the aggregate, could require us to change
certain of our business practices, impose significant additional
costs on us, limit the products that we offer, limit our ability
to pursue business opportunities in an efficient manner, require
us to increase our regulatory capital, impact the value of
assets that we hold,
14 Bank
of America 2010
significantly reduce our revenues or otherwise materially and
adversely affect our businesses, financial condition, or results
of operations.
Throughout 2009 and 2010, several major regulatory and
legislative initiatives were adopted that will have significant
future impacts on our businesses and financial results. For
example, in November 2009, the Federal Reserve Board issued
amendments to Regulation E, which implements the Electronic
Fund Transfer Act. The rules became effective on
July 1, 2010 for new customers and August 16, 2010 for
existing customers. These amendments limit the way we and other
banks charge an overdraft fee for non-recurring debit card
transactions that overdraw a consumers account unless the
consumer affirmatively consents to the banks payment of
overdrafts for those transactions. In addition, in May 2009, the
Credit Card Accountability Responsibility and Disclosure
(CARD) Act of 2009 was signed into law. The majority
of the CARD Act provisions became effective in February 2010.
The CARD Act legislation contains comprehensive credit card
reform related to credit card industry practices, including
significantly restricting banks ability to change interest
rates and assess fees to reflect individual consumer risk,
changing the way payments are applied and requiring changes to
consumer credit card disclosures. Complying with the
Regulation E amendments and the CARD Act has required us to
invest significant management attention and resources to make
the necessary disclosure and systems changes and has adversely
affected, and will likely continue to adversely affect, our
earnings.
In July 2010, the Financial Reform Act was signed into law. The
Financial Reform Act, among other reforms, (i) mandates
that the Federal Reserve Board limit debit card interchange
fees; (ii) bans banking organizations from engaging in
proprietary trading and restricts their sponsorship of, or
investing in, hedge funds and private equity funds, subject to
limited exceptions; (iii) increases regulation of the
over-the-counter
derivative markets through measures that broaden the derivative
instruments subject to regulation, requiring clearing and
exchange trading and imposing additional capital and margin
requirements for derivative market participants;
(iv) changes the assessment base used in calculating FDIC
deposit insurance fees from assessable deposits to total assets
less tangible capital; (v) provides for heightened capital,
liquidity, and prudential regulation and supervision over
systemically important financial institutions;
(vi) provides for resolution authority to establish a
process to unwind large systemically important financial
companies; (vii) creates a new regulatory body to set
requirements around the terms and conditions of consumer
financial products and expands the role of state regulators in
enforcing consumer protection requirements over banks;
(viii) disqualifies trust preferred securities and other
hybrid capital securities from Tier 1 capital;
(ix) includes a variety of corporate governance and
executive compensation provisions and requirements; and
(x) requires securitizers to retain a portion of the risk
that would otherwise be transferred into certain securitization
transactions.
Many of these provisions have begun to be or will be phased in
over the next several months or years and will be subject both
to further rulemaking and the discretion of applicable
regulatory bodies. The ultimate impact of the final rules on our
businesses and results of operations will depend on regulatory
interpretation and rulemaking, as well as the success of any of
our actions to mitigate the negative earnings impact of certain
provisions. For instance, in December 2010, the Federal Reserve
Board requested comment on a proposed rule that would establish
debit card interchange fee standards and prohibit network
exclusivity arrangements and routing restrictions. The proposed
rule would establish standards for determining whether a debit
card interchange fee received by a card issuer is reasonable and
proportional to the cost incurred by the issuer for the
transaction. Depending upon which cap is ultimately adopted, the
final rule could have a significant adverse effect on our
financial condition and results of operations and could result
in additional goodwill impairment charges within our Global
Card Services business segment.
We also anticipate that the final regulations associated with
the Financial Reform Act will include limitations on certain
activities, including limitations on
the use of a banks own capital for proprietary trading and
sponsorship or investment in hedge funds and private equity
funds (Volcker Rule). Regulations implementing the Volcker Rule
are required to be in place by October 21, 2011, and the
Volcker Rule becomes effective 12 months after such rules
are final or on July 21, 2012, whichever is earlier. The
Volcker Rule then gives banking entities two years from the
effective date (with opportunities for additional extensions) to
bring activities and investments into conformance. In
anticipation of the adoption of the final regulations, we have
begun winding down our proprietary trading line of business. The
ultimate impact of the Volcker Rule or the winding down of this
business, and the time it will take to comply or complete,
continues to remain uncertain. The final regulations issued may
impose additional operational and compliance costs on us.
Additionally, the Financial Reform Act includes measures to
broaden the scope of derivative instruments subject to
regulation by requiring clearing and exchange trading of certain
derivatives, imposing new capital and margin requirements for
certain market participants and imposing position limits on
certain
over-the-counter
derivatives. The Financial Reform Act grants the
U.S. Commodity Futures Trading Commission (CFTC) and the
SEC substantial new authority and requires numerous rulemakings
by these agencies. Generally, the CFTC and SEC have until
July 16, 2011 to promulgate the rulemakings necessary to
implement these regulations. The ultimate impact of these
derivatives regulations, and the time it will take to comply,
continues to remain uncertain. The final regulations will impose
additional operational and compliance costs on us and may
require us to restructure certain businesses and negatively
impact our revenues and results of operations.
The Financial Reform Act provided for a new resolution authority
to establish a process to unwind large systemically important
financial institutions. As part of that process we will be
required to develop and implement a recovery and resolution plan
which will be subject to review by the FDIC and the Federal
Reserve Board to determine whether our plan is credible and
viable. As a result of FDIC and Federal Reserve Board review, we
could be required to take certain actions over the next several
years which could impose operational costs and could potentially
result in the divestiture or restructuring of certain businesses
and subsidiaries.
Although we cannot predict the full effect of the Financial
Reform Act on our operations, it, as well as the future rules
implementing its reforms, could result in a significant loss of
revenue, impose additional costs on us, require us to increase
our regulatory capital or otherwise materially adversely affect
our businesses, financial condition and results of operations.
In addition, Congress and the Administration have signaled
growing interest in reforming the U.S. corporate income
tax. While the timing of consideration of such legislative
reform is unclear, possible approaches include lowering the 35%
corporate tax rate, modifying the taxation of income earned
outside of the U.S. and limiting or eliminating various
other deductions, tax credits
and/or other
tax preferences. It is not possible at this time to quantify
either the one-time impact from remeasuring deferred tax assets
and liabilities that might result upon enactment of tax reform
or the ongoing impact reform might have on income tax expense,
but it is possible either of these impacts could adversely
affect our financial condition and results of operations.
Other countries have also proposed and, in some cases, adopted
certain regulatory changes targeted at financial institutions or
that otherwise affect us. For example, the European Union has
adopted increased capital requirements and the U.K. has
(i) increased liquidity requirements for local financial
institutions, including regulated U.K. subsidiaries of non-U.K.
bank holding companies and other financial institutions as well
as branches of non-U.K. banks located in the U.K;
(ii) adopted a Bank Tax Levy which will apply to the
aggregate balance sheet of branches and subsidiaries of non-U.K.
banks and banking groups operating in the U.K.;
(iii) proposed the creation and production of recovery and
resolution plans (commonly referred to as living wills) by U.K.
regulated entities; and (iv) announced the expectation of
corporate
Bank of America
2010 15
income tax rate reductions of one percent to be enacted during
each of 2011, 2012 and 2013 that would favorably impact income
tax expense on future earnings but which would result in
adjustments to the carrying value of deferred tax assets and
related one-time charges to income tax expenses of nearly
$400 million for each one percent reduction (however, it is
possible that the full three percent rate reductions could be
enacted in 2011, which would result in a 2011 charge of
approximately $1.1 billion). We are also monitoring other
international legislative proposals that could materially impact
us, such as changes to income tax laws. Currently, in the U.K.,
net operating loss carry forwards (NOLs) have an indefinite
life. Were the U.K. taxing authorities to introduce limitations
on the future utilization of NOLs and the Corporation was unable
to document its continued ability to fully utilize its NOLs, it
would be required to establish a valuation allowance by a charge
to income tax expense. Depending upon the nature of the
limitations, such a change could be material in the period of
enactment. In addition, in 2010 the FSA issued a policy
statement regarding payment protection insurance (PPI) that
requires companies to review their sales practices and to
proactively remediate certain problems, if discovered. As a
result of this review, we may be required to record additional
liabilities.
For additional information about the regulatory initiatives
discussed above, see Regulatory Matters in the MD&A
beginning on page 56. For additional information about PPI,
see Note 14 Commitments and
Contingencies Payment Protection
Insurance Claims Matter to the Consolidated Financial
Statements.
During the last ten years, the Corporation and its subsidiaries
and legacy companies have sold over $2.0 trillion of loans to
the GSEs. Each GSE is currently in a conservatorship, with its
primary regulator, the Federal Housing Finance Agency, acting as
conservator. We cannot predict if, when or how the
conservatorships will end, or any associated changes to the
GSEs business structure that could result. We also cannot
predict whether the conservatorships will end in receivership.
There are several proposed approaches to reform the GSEs which,
if enacted, could change the structure of the GSEs and the
relationship among the GSEs, the government, and the private
markets. We expect dialogue concerning GSE reform to continue
and additional proposals to be advanced. We cannot predict the
prospects for the enactment, timing or content of legislative or
rulemaking proposals regarding the future status of the GSEs.
Accordingly, there continues to be uncertainty regarding the
future of the GSEs, including whether they will continue to
exist in their current form. GSE reform, if enacted, could
result in a significant change to the business operations of
Home Loans & Insurance.
Finally, since the financial crisis began several years ago, an
increasing number of bank failures has imposed significant costs
on the FDIC in resolving those failures, and the
regulators deposit insurance fund has been depleted. In
order to maintain a strong funding position and restore reserve
ratios of the deposit insurance fund, the FDIC has increased,
and may increase in the future, assessment rates of insured
institutions, including Bank of America.
Deposits placed at the U.S. Banks are insured by the FDIC,
subject to limits and conditions of applicable law and the
FDICs regulations. Pursuant to the Financial Reform Act,
FDIC insurance coverage limits were permanently increased to
$250,000 per customer. The Financial Reform Act also provides
for unlimited FDIC insurance coverage for non-interest bearing
demand deposit accounts for a two-year period beginning on
December 31, 2010 and ending on January 1, 2013. The
FDIC administers the DIF, and all insured depository
institutions are required to pay assessments to the FDIC that
fund the DIF. The Financial Reform Act changed the methodology
for calculating deposit insurance assessments from the amount of
an insured depository institutions domestic deposits to
its total assets minus tangible capital. On February 7,
2011 the FDIC issued a new regulation implementing revisions to
the assessment system mandated by the Financial Reform Act. The
new regulation will be effective April 1, 2011 and will be
reflected in the June 30, 2011 FDIC fund balance and the
invoices for assessments due
September 30, 2011. As a result of the new regulations, we
expect to incur higher annual deposit insurance assessments. We
have identified potential mitigation actions, but they are in
the early stages of development and we are not able to directly
control the basis or the amount of premiums that we are required
to pay for FDIC insurance or for other fees or assessment
obligations imposed on financial institutions. Any future
increases in required deposit insurance premiums or other bank
industry fees could have a significant adverse impact on our
financial condition and results of operations.
We face substantial potential legal liability and significant
regulatory action, which could have material adverse effects on
our cash flows, financial condition and results of operations,
or cause significant reputational harm to us.
We face significant legal risks in our businesses, and the
volume of claims and amount of damages and penalties claimed in
litigation and regulatory proceedings against us and other
financial institutions remain high and are increasing. Increased
litigation costs, substantial legal liability or significant
regulatory action against us could have material adverse effects
on our financial condition and results of operations or cause
significant reputational harm to us, which in turn could
adversely impact our business prospects. In addition, we
continue to face increased litigation risk and regulatory
scrutiny as a result of the Countrywide and Merrill Lynch
acquisitions. As a result of ongoing challenging economic
conditions and the increased level of defaults over recent
years, we have continued to experience increased litigation and
other disputes with counterparties regarding relative rights and
responsibilities. These litigation and regulatory matters and
any related settlements could have a material adverse effect on
our cash flows, financial condition and results of operations.
They could also negatively impact our reputation and lead to
volatility of our stock price. For a further discussion of
litigation risks, see Note 14 Commitments
and Contingencies to the Consolidated Financial Statements.
Changes in governmental fiscal and monetary policy could
adversely affect our financial condition and results of
operations.
Our businesses and earnings are affected by domestic and
international fiscal and monetary policy. For example, the
Federal Reserve Board regulates the supply of money and credit
in the United States and its policies determine in large part
our cost of funds for lending, investing and capital raising
activities and the return we earn on those loans and
investments, both of which affect our net interest margin. The
actions of the Federal Reserve Board also can materially affect
the value of financial instruments we hold, such as debt
securities and MSRs, and its policies also can affect our
borrowers, potentially increasing the risk that they may fail to
repay their loans. Our businesses and earnings are also affected
by the fiscal or other policies that are adopted by various
U.S. regulatory authorities,
non-U.S. governments
and international agencies. Changes in domestic and
international fiscal and monetary policies are beyond our
control and difficult to predict but could have an adverse
impact on our capital requirements and the costs of running our
businesses, in turn adversely impacting our financial condition
and results of operations.
Risk
of the Competitive Environment in which We Operate
We face significant and increasing competition in the
financial services industry.
We operate in a highly competitive environment. Over
time, there has been substantial consolidation among companies
in the financial services industry, and this trend accelerated
in recent years as the credit crisis led to numerous mergers and
asset acquisitions among industry participants and in certain
cases reorganization, restructuring, or even bankruptcy. This
trend has also hastened the globalization of the securities and
financial services markets. We will continue to experience
intensified competition as further
16 Bank
of America 2010
consolidation in the financial services industry in connection
with current market conditions may produce larger,
better-capitalized and more geographically diverse companies
that are capable of offering a wider array of financial products
and services at more competitive prices. To the extent we expand
into new business areas and new geographic regions, we may face
competitors with more experience and more established
relationships with clients, regulators and industry participants
in the relevant market, which could adversely affect our ability
to compete. In addition, technological advances and the growth
of
e-commerce
have made it possible for non-depository institutions to offer
products and services that traditionally were banking products,
and for financial institutions to compete with technology
companies in providing electronic and internet-based financial
solutions. Increased competition may negatively affect our
results of operations by creating pressure to lower prices on
our products and services and reducing market share.
Damage to our reputation could significantly harm our
businesses, including our competitive position and business
prospects.
Our ability to attract and retain investors, customers, clients
and employees could be adversely affected to the extent our
reputation is damaged. Significant harm to our reputation can
arise from many sources, including employee misconduct,
litigation or regulatory outcomes, failing to deliver minimum
standards of service and quality, compliance failures, unethical
behavior, unintended disclosure of confidential information, and
the activities of our clients, customers and counterparties.
Actions by the financial services industry generally or by
certain members or individuals in the industry also can
significantly adversely affect our reputation.
Our actual or perceived failure to address various issues also
could give rise to reputational risk that could cause
significant harm to us and our business prospects, including
failure to properly address operational risks. These issues
include legal and regulatory requirements, privacy, properly
maintaining customer and associate personal information, record
keeping, protecting against money-laundering, sales and trading
practices, ethical issues, and the proper identification of the
legal, reputational, credit, liquidity and market risks inherent
in our products.
We could suffer significant reputational harm if we fail to
properly identify and manage potential conflicts of interest.
Management of potential conflicts of interests has become
increasingly complex as we expand our business activities
through more numerous transactions, obligations and interests
with and among our clients. The failure to adequately address,
or the perceived failure to adequately address, conflicts of
interest could affect the willingness of clients to deal with
us, or give rise to litigation or enforcement actions, which
could adversely affect our businesses.
We continue to face increased public and regulatory scrutiny
resulting from the financial crisis, including our foreclosure
practices, modifications of mortgages, volume of lending,
compensation practices, our acquisitions of Countrywide and
Merrill Lynch, and the suitability of certain trading and
investment businesses. Failure to appropriately address any of
these issues could also give rise to additional regulatory
restrictions, legal risks and reputational harm, which could,
among other consequences, increase the size and number of
litigation claims and damages asserted or subject us to
enforcement actions, fines and penalties and cause us to incur
related costs and expenses.
Our ability to attract and retain qualified employees is
critical to the success of our businesses and failure to do so
could adversely affect our business prospects, including our
competitive position and results of operations.
Our performance is heavily dependent on the talents and efforts
of highly skilled individuals. Competition for qualified
personnel within the financial services industry and from
businesses outside the financial services industry has been, and
is expected to continue to be, intense even during difficult
economic times. Our competitors include
non-U.S.-based
institutions and institutions otherwise not subject to
compensation and hiring regulations imposed on
U.S. institutions and financial institutions in particular.
The difficulty we face in competing for key personnel is
exacerbated in emerging markets, where we
are often competing for qualified employees with entities that
may have a significantly greater presence or more extensive
experience in the region.
In order to attract and retain qualified personnel, we must
provide market-level compensation. As a large financial and
banking institution, we may be subject to limitations on
compensation practices (which may or may not affect our
competitors) by the Federal Reserve Board, the FDIC or other
regulators around the world. Any future limitations on executive
compensation imposed by legislators and regulators could
adversely affect our ability to attract and maintain qualified
employees. Furthermore, a substantial portion of our annual
bonus compensation paid to our senior employees has in recent
years taken the form of long-term equity awards. The value of
long-term equity awards to senior employees generally has been
negatively affected by the significant decline in the market
price of our common stock. If we are unable to continue to
attract and retain qualified individuals, our business
prospects, including our competitive position and results of
operations, could be adversely affected.
Our inability to adapt our products and services to evolving
industry standards and consumer preferences could harm our
businesses.
Our business model is based on a diversified mix of businesses
that provide a broad range of financial products and services,
delivered through multiple distribution channels. Our success
depends, in part, on our ability to adapt our products and
services to evolving industry standards. There is increasing
pressure by competitors to provide products and services at
lower prices. This can reduce our net interest margin and
revenues from our fee-based products and services. In addition,
the widespread adoption of new technologies, including internet
services, could require us to incur substantial expenditures to
modify or adapt our existing products and services. We might not
be successful in developing or introducing new products and
services, responding or adapting to changes in consumer spending
and saving habits, achieving market acceptance of our products
and services, or sufficiently developing and maintaining loyal
customers.
Risks
Related to Risk Management
Our risk management framework may not be effective in
mitigating risk and reducing the potential for significant
losses.
Our risk management framework is designed to minimize risk and
loss to us. We seek to identify, measure, monitor, report and
control our exposure to the types of risk to which we are
subject, including strategic, credit, market, liquidity,
compliance, fiduciary, operational and reputational risks, among
others. While we employ a broad and diversified set of risk
monitoring and mitigation techniques, those techniques are
inherently limited because they cannot anticipate the existence
or future development of currently unanticipated or unknown
risks. For example, recent economic conditions, heightened
legislative and regulatory scrutiny of the financial services
industry and increases in the overall complexity of our
operations, among other developments, have resulted in the
creation of a variety of previously unanticipated or unknown
risks, highlighting the intrinsic limitations of our risk
monitoring and mitigation techniques. As such, we may incur
future losses due to the development of such previously
unanticipated or unknown risks.
For additional information about our risk management policies
and procedures, see Managing Risk in the MD&A beginning on
page 59.
A failure in or breach of our operational or security systems
or infrastructure, or those of third parties, could disrupt our
businesses, result in the disclosure of confidential information
or damage our reputation. Any such failure also could have a
significant adverse effect on our reputation, cash flows,
financial condition, and results of operations.
Our businesses are highly dependent on our ability to process
and monitor, on a continuous basis, a large number of
transactions, many of which are highly complex, across numerous
and diverse markets in many currencies. The potential for
operational risk exposure exists throughout our organization,
including losses resulting from unauthorized trades by any
employees.
Bank of America
2010 17
Integral to our performance is the continued efficacy of our
internal processes, systems, relationships with third parties
and the vast array of employees and key executives in our
day-to-day
and ongoing operations. Our financial, accounting, data
processing or other operating systems and facilities may fail to
operate properly or become disabled as a result of events that
are wholly or partially beyond our control and adversely affect
our ability to process these transactions or provide these
services. We must continuously update these systems to support
our operations and growth. This updating entails significant
costs and creates risks associated with implementing new systems
and integrating them with existing ones.
In addition, we also face the risk of operational failure,
termination or capacity constraints of any of the clearing
agents, exchanges, clearing houses or other financial
intermediaries we use to facilitate our securities transactions.
In recent years, there has been significant consolidation among
clearing agents, exchanges and clearing houses, which has
increased our exposure to operational failure, termination or
capacity constraints of the particular financial intermediaries
that we use and could affect our ability to find adequate and
cost-effective alternatives in the event of any such failure,
termination or constraint. Industry consolidation, whether among
market participants or financial intermediaries, increases the
risk of operational failure as disparate complex systems need to
be integrated, often on an accelerated basis.
Furthermore, the interconnectivity of multiple financial
institutions with central agents, exchanges and clearing houses,
and the increased centrality of these entities under proposed
and potential regulation, increases the risk that an operational
failure at one institution or entity may cause an industry-wide
operational failure that could adversely impact our own business
operations. Any such failure, termination or constraint could
adversely affect our ability to effect transactions, service our
clients, manage our exposure to risk or expand our businesses
and could have a significant adverse impact on our liquidity,
financial condition, and results of operations.
Our operations rely on the secure processing, storage and
transmission of confidential and other information in our
computer systems and networks. Although we take protective
measures and endeavor to modify them as circumstances warrant,
the security of our computer systems, software and networks may
be vulnerable to breaches, unauthorized access, misuse, computer
viruses or other malicious code and other events that could have
a security impact. Additionally, breaches of security may occur
through intentional or unintentional acts by those having
authorized or unauthorized access to our or our clients or
counterparties confidential or other information. If one
or more of such events occur, this potentially could jeopardize
our or our clients or counterparties confidential
and other information processed and stored in, and transmitted
through, our computer systems and networks, or otherwise cause
interruptions or malfunctions in our, our clients, our
counterparties or third parties operations, which
could result in significant losses or reputational damage to us.
We may be required to expend significant additional resources to
modify our protective measures or to investigate and remediate
vulnerabilities or other exposures arising from operational and
security risks, and we may be subject to litigation and
financial losses that are either not insured against or not
fully covered through any insurance maintained by us.
We routinely transmit and receive personal, confidential and
proprietary information by
e-mail and
other electronic means. We have discussed and worked with
clients, vendors, service providers, counterparties and other
third parties to develop secure transmission capabilities, but
we do not have, and may be unable to put in place, secure
capabilities with all of our clients, vendors, service
providers, counterparties and other third parties, and we may
not be able to ensure that these third parties have appropriate
controls in place to protect the confidentiality of the
information. Any interception, misuse or mishandling of
personal, confidential or proprietary information being sent to
or received from a client, vendor, service provider,
counterparty or other third party could result in legal
liability, regulatory action and
reputational harm for us and could have a significant adverse
effect on our competitive position, financial condition and
results of operations.
With regard to the physical infrastructure that supports our
operations, we have taken measures to implement backup systems
and other safeguards, but our ability to conduct business may be
adversely affected by any disruption to that infrastructure.
Such disruptions could involve electrical, communications,
internet, transportation or other services used by us or third
parties with whom we conduct business. These disruptions may
occur as a result of events that affect only our facilities or
those of our clients or other business partners but they could
also be the result of events with a broader impact globally,
regionally or in the cities where those facilities are located.
The costs associated with such disruptions, including any loss
of business, could have a significant adverse effect on our
results of operations or financial condition.
Any of these operational and security risks could lead to
significant and negative consequences, including reputational
harm as well as loss of customers and business opportunities,
which in turn could have a significant adverse effect on our
businesses, financial condition and results of operations. For a
further discussion of operational risks and our operational risk
management, see Operational Risk Management in the MD&A
beginning on page 106.
Risk
Related to Past Acquisitions
Any failure to successfully integrate or otherwise realize
the expected benefits from our recent acquisitions could
adversely affect our results of operations.
There are significant risks and uncertainties associated with
mergers and acquisitions. We have made several significant
acquisitions in the last several years, including Merrill Lynch
and Countrywide, and the success of these acquisitions faces
numerous challenges. In particular, the success of our
acquisition of Merrill Lynch in 2009 will continue to depend, in
part, on our ability to realize the anticipated benefits and
cost savings from combining the businesses of Bank of America
and Merrill Lynch. If we are not able to successfully integrate
these businesses, the anticipated benefits and cost savings of
the acquisition may not be realized fully or may take longer to
realize than expected. For example, we may fail to realize the
growth opportunities and cost savings anticipated to be derived
from the acquisition. With regard to any of our acquisitions, a
significant decline in asset valuations or cash flows may also
cause us not to realize expected benefits. These failures could
in turn negatively affect our financial condition, including
adversely impacting the carrying value of the acquisition
premium or goodwill. Our ability to achieve these objectives has
also been made more difficult as a result of the substantial
challenges that we are facing in our businesses because of the
current economic environment.
In addition, it is possible that the integration process could
result in disruption of our and Merrill Lynchs ongoing
businesses or inconsistencies in standards, controls, procedures
and policies that adversely affect our ability to maintain
sufficiently strong relationships with clients, customers,
depositors and employees or to achieve the anticipated benefits
of the acquisition. Integration efforts may also divert
management attention and resources. These integration matters
could have an adverse effect on us for an undetermined period.
We will be subject to similar risks and difficulties in
connection with any future acquisitions or decisions to
downsize, sell or close units or otherwise change the business
mix of the Corporation.
Risk
of Being an International Business
We are subject to numerous political, economic, market,
reputational, operational, legal, regulatory and other risks in
the
non-U.S. jurisdictions
in which we operate which could adversely impact our
businesses.
We do business throughout the world, including in developing
regions of the world commonly known as emerging markets. Our
businesses and revenues derived from
non-U.S. jurisdictions
are subject to risk of loss from currency fluctuations, social
or judicial instability, changes in governmental
18 Bank
of America 2010
policies or policies of central banks, expropriation,
nationalization
and/or
confiscation of assets, price controls, capital controls,
exchange controls, other restrictive actions, unfavorable
political and diplomatic developments and changes in
legislation. These risks are especially acute in emerging
markets. As in the United States, many
non-U.S. jurisdictions
in which we do business have been negatively impacted by
recessionary conditions. While a number of these jurisdictions
are showing signs of recovery, others continue to experience
increasing levels of stress. In addition, the risk of default on
sovereign debt in some
non-U.S. jurisdictions
is increasing and could expose us to substantial losses. Any
such unfavorable conditions or developments could have an
adverse impact on our businesses and results of operations.
Our
non-U.S. businesses
are also subject to extensive regulation by various
non-U.S. regulators,
including governments, securities exchanges, central banks and
other regulatory bodies, in the jurisdictions in which those
businesses operate. In many countries, the laws and regulations
applicable to the financial services and securities industries
are uncertain and evolving, and it may be difficult for us to
determine the exact requirements of local laws in every market
or manage our relationships with multiple regulators in various
jurisdictions. Our inability to remain in compliance with local
laws in a particular market and manage our relationships with
regulators could have a significant and adverse effect not only
on our businesses in that market but also on our reputation
generally.
We also invest or trade in the securities of corporations and
governments located in
non-U.S. jurisdictions,
including emerging markets. Revenues from the trading of
non-U.S. securities
may be subject to negative fluctuations as a result of the above
factors. Furthermore, the impact of these fluctuations could be
magnified, because
non-U.S. trading
markets, particularly in emerging market countries, are
generally smaller, less liquid and more volatile than
U.S. trading markets.
We are subject to geopolitical risks, including acts or threats
of terrorism, and actions taken by the U.S. or other
governments in response
and/or
military conflicts, that could adversely affect business and
economic conditions abroad as well as in the United States.
For a further discussion of our
non-U.S. credit
and trading portfolio, see Credit Risk Management
Non-U.S. Portfolio
in the MD&A beginning on page 94.
Risk
from Accounting Changes
Changes in accounting standards or inaccurate estimates or
assumptions in the application of accounting policies could
adversely affect our financial condition and results of
operations.
Our accounting policies and methods are fundamental to how we
record and report our financial condition and results of
operations. Some of these policies require use of estimates and
assumptions that may affect the reported value of our assets or
liabilities and results of operations and are critical because
they require management to make difficult, subjective and
complex judgments about matters that are inherently uncertain.
If those assumptions, estimate or judgments were incorrectly
made, we could be required to correct and restate prior period
financial statements.
Accounting standard-setters and those who interpret the
accounting standards (such as the Financial Accounting Standards
Board (FASB), the SEC, banking regulators and our independent
registered public accounting firm) may also amend or even
reverse their previous interpretations or positions on how
various standards should be applied. These changes can be hard
to predict and can materially impact how we record and report
our financial condition and results of operations. In some
cases, we could be required to apply a new or revised standard
retroactively, resulting in the Corporation needing to revise
and republish prior period financial statements. For a further
discussion of some of our critical accounting policies and
standards and recent accounting changes, see Complex Accounting
Estimates in the MD&A beginning on page 107 and
Note 1 Summary of Significant Accounting
Principles to the Consolidated Financial Statements.
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Item 1B.
|
Unresolved
Staff Comments
|
There are no unresolved written comments that were received from
the SEC Staff 180 days or more before the end of our 2010 fiscal
year relating to our periodic or current reports filed under the
Securities Exchange Act of 1934.
As of December 31, 2010, our principal offices and other
materially important properties consisted of the following:
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|
|
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Primary Business
|
|
|
|
Bank Occupied Space and Amount
|
Facility Name
|
|
Location
|
|
Property Type
|
|
Segment
|
|
Property Status
|
|
Leased to
3rd
Parties
|
Corporate
Center
|
|
Charlotte,
NC
|
|
60 story building
|
|
Principal Executive
Offices All Business
Segments
|
|
Owned
|
|
Directly occupy 50% (624,153 sq. ft.)
of building while subleasing an
additional 48% (576,233 sq. ft.) of the space.
|
1 Bank of
America Center
|
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Charlotte,
NC
|
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30 story building
|
|
Deposits, Home
Loans & Insurance,
GBAM and GWIM
|
|
Owned
|
|
Directly occupy 21% (159,000 sq. ft.)
of building while subleasing an additional 10%
(75,000 sq. ft.) of the space.
|
4 World
Financial Center
|
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New York,
NY
|
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34 story building
(North Tower)
|
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GBAM
|
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49%
Owned (1)
|
|
Directly occupy 100% (1,803,157 sq. ft.)
of building
|
One Bryant
Park
|
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New York,
NY
|
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51 Story building
|
|
GBAM
|
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49.9%
Owned (1)
|
|
Directly occupy 74% (1,834,969 sq. ft.)
of building
|
100 Federal St.
Boston
|
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Boston, MA
|
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37 story building
|
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GWIM
|
|
Owned
|
|
Directly occupy 65% (818,019 sq. ft.)
of building while subleasing an
additional 35% (434,160 sq. ft.) of the space.
|
Hopewell Office
Park Campus
|
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Hopewell,
NJ
|
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8 building campus
|
|
GWIM
|
|
Owned
|
|
Directly occupy 100% (1,606,025 sq. ft.)
of campus.
|
Concord
Campus
|
|
Concord, CA
|
|
4 building campus
|
|
All Business
Segments
|
|
Owned
|
|
Directly occupy 100% (1,075,241 sq. ft.)
of campus.
|
Villa Park
Campus
|
|
Richmond,
VA
|
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3 building campus
|
|
All Business
Segments
|
|
Leased
|
|
Directly occupy 84% (770,322 sq. ft.)
of campus.
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*
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All Business Segments consists of
Deposits, Global Card Services, Home Loans &
Insurance, Global Commercial Banking, GBAM and GWIM.
|
(1) |
|
Represents percentage ownership
interest in entity that owns the property.
|
We own or lease approximately 120 million square feet in
26,910 locations globally, including approximately
112 million square feet in the United States (all 50
U.S. states, the District of Columbia, the U.S. Virgin
Islands and Puerto Rico) and approximately eight million square
feet in 44
non-U.S. countries.
We believe our owned and leased properties are adequate for our
business needs and are well maintained. We continue to evaluate
our current and
projected space requirements and may determine from time to time
that certain of our premises and facilities are no longer
necessary for our operations. There is no assurance that we will
be able to dispose of any such excess premises, and we may incur
costs in connection with such disposition, including costs that
could be material to our results of operations in any given
period.
Bank of America
2010 19
|
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Item 3.
|
Legal
Proceedings
|
See Litigation and Regulatory Matters in Note 14
Commitments and Contingencies to the Consolidated Financial
Statements for Bank of Americas litigation disclosure
which is incorporated herein by reference.
|
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Item 4.
|
Removed
and Reserved
|
The name, age and position of each of our current executive
officers are listed below along with such officers
business experience. Unless otherwise indicated, executive
officers are appointed by the Board to hold office until their
successors are elected and qualified or until their earlier
resignation or removal.
David C. Darnell (58) President, Global Commercial
Banking since July 2005. Mr. Darnell joined the
Corporation in 1979 and served in a number of senior leadership
roles before becoming the President of Global Commercial Banking.
Barbara J. Desoer (58) President, Bank of America Home
Loans and Insurance since July 2008; Chief Technology and
Operations Officer from August 2004 to July 2008.
Ms. Desoer joined a predecessor of the Corporation in 1977
and served in a number of senior leadership roles before
becoming Chief Technology and Operations Officer.
Sallie L. Krawcheck (46) President, Global Wealth and
Investment Management since August 2009; Chairman of Global
Wealth Management of Citigroup, Inc. from January 2007 until
December 2008; Chief Executive Officer of Global Wealth
Management of Citigroup, Inc. from January 2007 to September
2008; Chief Financial Officer and Head of Strategy of Citigroup,
Inc. from November 2004 to January 2007.
Terrence P. Laughlin (56) Legacy Asset Servicing
Executive since February 2011; Credit Loss Mitigation
Strategies & Secondary Markets Executive from August
2010 to February 2011; Chief Executive Officer and President of
OneWest Bank, FSB from March 2009 to July 2010; Chairman of
Merrill Lynch Bank & Trust Co., FSB from February
2005 to May 2008.
Thomas K. Montag (54) President, Global Banking and
Markets since August 2009; President, Global Markets from
January 2009 to August 2009; Executive Vice President and Head
of Global Sales and Trading of Merrill Lynch & Co.,
Inc. from August 2008 to December 2008; Co-head, Global
Securities of The Goldman Sachs Group, Inc. from 2006 to 2008;
Co-president, Japanese Operations of The Goldman Sachs Group,
Inc. from 2002 to 2007; Member, Management Committee of The
Goldman Sachs Group, Inc. from 2002 to 2008; Member, Fixed
Income, Currency and Commodities & Equities Executive
Committee of The Goldman Sachs Group, Inc. from 2000 to 2008.
Brian T. Moynihan (51) President and Chief Executive
Officer since January 2010; President, Consumer and Small
Business Banking from August 2009 to December 2009;
President, Global Banking and Wealth Management from January
2009 to August 2009; General Counsel from December 2008 to
January 2009; President, Global Corporate and Investment Banking
from October 2007 to December 2008; President, Global Wealth and
Investment Management from April 2004 to October 2007.
Charles H. Noski (58) Executive Vice President and Chief
Financial Officer since May 2010. Mr. Noski has served
as a director of Microsoft Corporation since November 2003;
director of Air Products and Chemicals, Inc. from October 2000
to January 2004 and from May 2005 to May 2010; director of
Morgan Stanley from September 2005 to April 2010; director of
Automatic Data Processing, Inc. from April 2008 to May 2010.
Edward P. OKeefe (55) General Counsel since
January 2009; Deputy General Counsel and Head of Litigation from
December 2008 to January 2009; Global Compliance and Operational
Risk Executive and Senior Privacy Executive from September 2008
to December 2008; Deputy General Counsel for Staff Support from
January 2005 to September 2008.
Joe L. Price (50) President, Consumer and Small Business
Banking since February 2010; Chief Financial Officer from
January 2007 to January 2010; Global Corporate and Investment
Banking Risk Management Executive from June 2003 to December
2006.
Bruce R. Thompson (46) Chief Risk Officer since
January 2010; Head of Global Capital Markets from July 2008 to
January 2010; Co-head of Capital Markets (now Global Capital
Markets) from October 2007 to July 2008;
Co-head of
Global Credit Products from June 2007 to October 2007; Co-head
of Global Leveraged Finance from March 2007 to June 2007; Head
of U.S. Leveraged Finance Capital Markets from May 2006 to
March 2007; Managing Director of Banc of America Securities LLC,
a subsidiary of the Corporation, from 1996 to May 2006.
20 Bank
of America 2010
Part II
Bank of America
Corporation and Subsidiaries
Item 5. Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
The principal market on which our common stock is traded is the
New York Stock Exchange. Our common stock is also listed on the
London Stock Exchange, and certain shares are listed on the
Tokyo Stock Exchange. The following table sets forth the high
and low closing sales prices of the common stock on the New York
Stock Exchange for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
High
|
|
|
Low
|
|
2009
|
|
first
|
|
$
|
14.33
|
|
|
$
|
3.14
|
|
|
|
second
|
|
|
14.17
|
|
|
|
7.05
|
|
|
|
third
|
|
|
17.98
|
|
|
|
11.84
|
|
|
|
fourth
|
|
|
18.59
|
|
|
|
14.58
|
|
2010
|
|
first
|
|
|
18.04
|
|
|
|
14.45
|
|
|
|
second
|
|
|
19.48
|
|
|
|
14.37
|
|
|
|
third
|
|
|
15.67
|
|
|
|
12.32
|
|
|
|
fourth
|
|
|
13.56
|
|
|
|
10.95
|
|
|
|
|
|
|
|
|
|
|
|
|
As of February 15, 2011, there were 247,064 registered
shareholders of common stock. During 2009 and 2010, we paid
dividends on the common stock on a quarterly basis.
The following table sets forth dividends paid per share of our
common stock for the periods indicated:
|
|
|
|
|
|
|
|
|
Quarter
|
|
Dividend
|
|
2009
|
|
first
|
|
$
|
0.01
|
|
|
|
second
|
|
|
0.01
|
|
|
|
third
|
|
|
0.01
|
|
|
|
fourth
|
|
|
0.01
|
|
2010
|
|
first
|
|
|
0.01
|
|
|
|
second
|
|
|
0.01
|
|
|
|
third
|
|
|
0.01
|
|
|
|
fourth
|
|
|
0.01
|
|
|
|
|
|
|
|
|
For additional information regarding our ability to pay
dividends, see Note 15 Shareholders Equity
and Note 18 Regulatory Requirements and
Restrictions to the Consolidated Financial Statements, which
are incorporated herein by reference.
For information on our equity compensation plans, see
Item 12 beginning on page 244 of this report and
Note 20 Stock-Based Compensation Plans to the
Consolidated Financial Statements both of which are incorporated
herein by reference.
The table below presents share repurchase activity for the three
months ended December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased as
|
|
|
Remaining Buyback
|
|
|
|
|
|
|
|
|
|
Part of Publicly
|
|
|
Authority
|
|
|
|
Common Shares
|
|
|
Weighted-Average
|
|
|
Announced
|
|
|
|
|
(Dollars in millions, except per
share information; shares in thousands)
|
|
Repurchased (1)
|
|
|
Per Share Price
|
|
|
Programs
|
|
|
Amounts
|
|
|
Shares
|
|
October 1 31, 2010
|
|
|
252
|
|
|
$
|
13.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 1 30, 2010
|
|
|
5
|
|
|
$
|
12.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 1 31, 2010
|
|
|
101
|
|
|
$
|
12.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
December 31, 2010
|
|
|
358
|
|
|
$
|
13.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Consists of shares acquired by the
Corporation in connection with satisfaction of tax withholding
obligations on vested restricted stock or restricted stock units
and certain forfeitures from terminations of employment related
to awards under equity incentive plans.
|
We did not have any unregistered sales of our equity securities
in 2010.
|
|
Item 6.
|
Selected
Financial Data
|
See Table 6 in the MD&A on page 32 and Table XII of
the Statistical Tables on page 125 which are incorporated
herein by reference.
Bank of America
2010 21
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
This report on
Form 10-K,
the documents that it incorporates by reference and the
documents into which it may be incorporated by reference may
contain, and from time to time Bank of America Corporation
(collectively with its subsidiaries, the Corporation) and its
management may make, certain statements that constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements can
be identified by the fact that they do not relate strictly to
historical or current facts. Forward-looking statements often
use words such as expects, anticipates,
believes, estimates,
targets, intends, plans,
goal and other similar expressions or future or
conditional verbs such as will, may,
might, should, would and
could. The forward-looking statements made represent
the current expectations, plans or forecasts of the Corporation
regarding the Corporations future results and revenues,
and future business and economic conditions more generally,
including statements concerning: the adequacy of the liability
for the remaining representations and warranties exposure to the
government-sponsored enterprises (GSEs) and the future impact to
earnings; the potential assertion and impact of additional
claims not addressed by the GSE agreements; the expected
repurchase claims on the
2004-2008
loan vintages; representations and warranties liabilities (also
commonly referred to as reserves), and range of possible loss
estimates, expenses and repurchase claims and resolution of
those claims; the proposal to modestly increase dividends in the
second half of 2011; the charge to income tax expense resulting
from a reduction in the United Kingdom (U.K.) corporate income
tax rate; future payment protection insurance claims in the
U.K.; future risk-weighted assets and any mitigation efforts to
reduce risk-weighted assets; net interest income; credit trends
and conditions, including credit losses, credit reserves,
charge-offs, delinquency trends and nonperforming asset levels;
consumer and commercial service charges, including the impact of
changes in the Corporations overdraft policy as well as
from the Electronic Fund Transfer Act and the
Corporations ability to mitigate a decline in revenues;
liquidity; capital levels determined by or established in
accordance with accounting principles generally accepted in the
United States of America (GAAP) and with the requirements of
various regulatory agencies, including our ability to comply
with any Basel capital requirements endorsed by
U.S. regulators without raising additional capital; the
revenue impact of the Credit Card Accountability Responsibility
and Disclosure Act of 2009 (the CARD Act); the revenue impact
resulting from, and any mitigation actions taken in response to,
the Dodd-Frank Wall Street Reform and Consumer Protection Act
(the Financial Reform Act) including the impact of the Volcker
Rule and derivatives regulations; mortgage production levels;
long-term debt levels; run-off of loan portfolios; the impact of
various legal proceedings discussed in Litigation and
Regulatory Matters in Note 14 Commitments
and Contingencies to the Consolidated Financial Statements; the
number of delayed foreclosure sales and the resulting financial
impact and other similar matters; and other matters relating to
the Corporation and the securities that we may offer from time
to time. The foregoing is not an exclusive list of all
forward-looking statements the Corporation makes. These
statements are not guarantees of future results or performance
and involve certain risks, uncertainties and assumptions that
are difficult to predict and often are beyond the
Corporations control. Actual outcomes and results may
differ materially from those expressed in, or implied by, the
Corporations forward-looking statements.
You should not place undue
reliance on any forward-looking statement and should consider
the following uncertainties and risks, as well as the risks and
uncertainties more fully discussed elsewhere in this report,
including Item 1A. Risk Factors, and in any of
the Corporations subsequent Securities and Exchange
Commission (SEC) filings: the Corporations resolution of
certain
representations and warranties
obligations with the GSEs and our ability to resolve any
remaining claims; the Corporations ability to resolve any
representations and warranties obligations with monolines and
private investors; failure to satisfy our obligations as
servicer in the residential mortgage securitization process; the
adequacy of the liability
and/or range
of possible loss estimates for the representations and
warranties exposures to the GSEs, monolines and private-label
and other investors; the potential assertion and impact of
additional claims not addressed by the GSE agreements; the
foreclosure review and assessment process, the effectiveness of
the Corporations response and any governmental or private
third-party claims asserted in connection with these foreclosure
matters; the adequacy of the reserve for future payment
protection insurance claims in the U.K.; negative economic
conditions generally including continued weakness in the
U.S. housing market, high unemployment in the U.S., as well
as economic challenges in many
non-U.S. countries
in which we operate and sovereign debt challenges; the
Corporations mortgage modification policies and related
results; the level and volatility of the capital markets,
interest rates, currency values and other market indices;
changes in consumer, investor and counterparty confidence in,
and the related impact on, financial markets and institutions,
including the Corporation as well as its business partners; the
Corporations credit ratings and the credit ratings of its
securitizations; estimates of the fair value of certain of the
Corporations assets and liabilities; legislative and
regulatory actions in the U.S. (including the impact of the
Financial Reform Act, the Electronic Fund Transfer Act, the
CARD Act and related regulations and interpretations) and
internationally; the identification and effectiveness of any
initiatives to mitigate the negative impact of the Financial
Reform Act; the impact of litigation and regulatory
investigations, including costs, expenses, settlements and
judgments as well as any collateral effects on our ability to do
business and access the capital markets; various monetary, tax
and fiscal policies and regulations of the U.S. and
non-U.S. governments;
changes in accounting standards, rules and interpretations
(including new consolidation guidance), inaccurate estimates or
assumptions in the application of accounting policies, including
in determining reserves, applicable guidance regarding goodwill
accounting and the impact on the Corporations financial
statements; increased globalization of the financial services
industry and competition with other U.S. and international
financial institutions; adequacy of the Corporations risk
management framework; the Corporations ability to attract
new employees and retain and motivate existing employees;
technology changes instituted by the Corporation, its
counterparties or competitors; mergers and acquisitions and
their integration into the Corporation, including the
Corporations ability to realize the benefits and cost
savings from and limit any unexpected liabilities acquired as a
result of the Merrill Lynch and Countrywide acquisitions; the
Corporations reputation, including the effects of
continuing intense public and regulatory scrutiny of the
Corporation and the financial services industry; the effects of
any unauthorized disclosures of our or our customers
private or confidential information and any negative publicity
directed toward the Corporation; and decisions to downsize, sell
or close units or otherwise change the business mix of the
Corporation.
Forward-looking statements speak
only as of the date they are made, and the Corporation
undertakes no obligation to update any forward-looking statement
to reflect the impact of circumstances or events that arise
after the date the forward-looking statement was made.
Notes to the Consolidated Financial Statements referred to in
the Managements Discussion and Analysis of Financial
Condition and Results of Operations (MD&A) are incorporated
by reference into the MD&A. Certain prior period amounts
have been reclassified to conform to current period presentation.
Bank of America
2010 23
Executive
Summary
Business
Overview
The Corporation is a Delaware corporation, a bank holding
company and a financial holding company. When used in this
report, the Corporation may refer to the Corporation
individually, the Corporation and its subsidiaries, or certain
of the Corporations subsidiaries or affiliates. Our
principal executive offices are located in the Bank of America
Corporate Center in Charlotte, North Carolina. Through our
banking and various nonbanking subsidiaries throughout the
United States and in certain international markets, we provide a
diversified range of banking and nonbanking financial services
and products through six business segments: Deposits, Global
Card Services, Home Loans & Insurance, Global
Commercial Banking, Global Banking & Markets
(GBAM) and Global Wealth & Investment
Management (GWIM), with the remaining operations recorded in
All Other. Effective January 1, 2010, we realigned
the Global Corporate and Investment Banking portion of the
former Global Banking business segment with the former
Global Markets business segment to form GBAM
and to reflect Global Commercial Banking as a
standalone segment. At December 31, 2010, the Corporation
had $2.3 trillion in assets and approximately
288,000 full-time equivalent employees.
On January 1, 2009, we acquired Merrill Lynch &
Co., Inc. (Merrill Lynch) and, as a result, we now have one of
the largest wealth management businesses in the world with
nearly 17,000 wealth advisors, an additional 3,000 client-facing
professionals and more than $2.2 trillion in client assets.
Additionally, we are a global leader in corporate and investment
banking and trading across a broad range of asset classes
serving corporations, governments, institutions and individuals
around the world.
As of December 31, 2010, we operate in all 50 states,
the District of Columbia and more than 40
non-U.S. countries.
Our retail banking footprint covers approximately
80 percent of the U.S. population and in the U.S., we
serve approximately 57 million consumer and small business
relationships with 5,900 banking centers, 18,000 ATMs,
nationwide call centers, and leading online and mobile banking
platforms. We have banking centers in 13 of the 15 fastest
growing states and have leadership positions in market share for
deposits in seven of those states. We offer industry-leading
support to approximately four million small business owners.
For information on recent and proposed legislative and
regulatory initiatives that may affect our business, see
Regulatory Matters beginning on page 56.
The table below provides selected consolidated financial data
for 2010 and 2009.
Table
1 Selected
Financial Data
|
|
|
|
|
|
|
|
|
(Dollars in millions, except per
share information)
|
|
2010
|
|
|
2009
|
|
Income statement
|
|
|
|
|
|
|
|
|
Revenue, net of interest expense (FTE
basis) (1)
|
|
$
|
111,390
|
|
|
$
|
120,944
|
|
Net income (loss)
|
|
|
(2,238
|
)
|
|
|
6,276
|
|
Net income, excluding goodwill impairment
charges (2)
|
|
|
10,162
|
|
|
|
6,276
|
|
Diluted earnings (loss) per common share
|
|
|
(0.37
|
)
|
|
|
(0.29
|
)
|
Diluted earnings (loss) per common share, excluding goodwill
impairment
charges (2)
|
|
|
0.86
|
|
|
|
(0.29
|
)
|
Dividends paid per common share
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
|
|
|
|
|
|
|
|
Performance ratios
|
|
|
|
|
|
|
|
|
Return on average assets
|
|
|
n/m
|
|
|
|
0.26
|
%
|
Return on average assets, excluding goodwill impairment
charges (2)
|
|
|
0.42
|
%
|
|
|
0.26
|
|
Return on average tangible shareholders
equity (1)
|
|
|
n/m
|
|
|
|
4.18
|
|
Return on average tangible shareholders equity, excluding
goodwill impairment charges
(1, 2)
|
|
|
7.11
|
|
|
|
4.18
|
|
Efficiency ratio (FTE
basis) (1)
|
|
|
74.61
|
|
|
|
55.16
|
|
Efficiency ratio (FTE basis), excluding goodwill impairment
charges (1,
2)
|
|
|
63.48
|
|
|
|
55.16
|
|
|
|
|
|
|
|
|
|
|
Asset quality
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses at December 31
|
|
$
|
41,885
|
|
|
$
|
37,200
|
|
Allowance for loan and lease losses as a percentage of total
loans and leases outstanding at December
31 (3)
|
|
|
4.47
|
%
|
|
|
4.16
|
%
|
Nonperforming loans, leases and foreclosed properties at
December
31 (3)
|
|
$
|
32,664
|
|
|
$
|
35,747
|
|
Net charge-offs
|
|
|
34,334
|
|
|
|
33,688
|
|
Net charge-offs as a percentage of average loans and leases
outstanding (3,
4)
|
|
|
3.60
|
%
|
|
|
3.58
|
%
|
Ratio of the allowance for loan and lease losses at December 31
to net charge-offs
(3, 5)
|
|
|
1.22
|
|
|
|
1.10
|
|
|
|
|
|
|
|
|
|
|
Balance sheet at year
end
|
|
|
|
|
|
|
|
|
Total loans and leases
|
|
$
|
940,440
|
|
|
$
|
900,128
|
|
Total assets
|
|
|
2,264,909
|
|
|
|
2,230,232
|
|
Total deposits
|
|
|
1,010,430
|
|
|
|
991,611
|
|
Total common shareholders equity
|
|
|
211,686
|
|
|
|
194,236
|
|
Total shareholders equity
|
|
|
228,248
|
|
|
|
231,444
|
|
|
|
|
|
|
|
|
|
|
Capital ratios at year
end
|
|
|
|
|
|
|
|
|
Tier 1 common equity
|
|
|
8.60
|
%
|
|
|
7.81
|
%
|
Tier 1 capital
|
|
|
11.24
|
|
|
|
10.40
|
|
Total capital
|
|
|
15.77
|
|
|
|
14.66
|
|
Tier 1 leverage
|
|
|
7.21
|
|
|
|
6.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Fully taxable-equivalent (FTE)
basis, return on average tangible shareholders equity
(ROTE) and the efficiency ratio are non-GAAP measures. Other
companies may define or calculate these measures differently.
For additional information on these measures and ratios, see
Supplemental Financial Data beginning on page 36, and for a
corresponding reconciliation to GAAP financial measures, see
Table XIII.
|
(2) |
|
Net income (loss), diluted earnings
(loss) per common share, return on average assets, ROTE and the
efficiency ratio have been calculated excluding the impact of
goodwill impairment charges of $12.4 billion in 2010 and
accordingly, these are non-GAAP measures. For additional
information on these measures and ratios, see Supplemental
Financial Data beginning on page 36, and for a
corresponding reconciliation to GAAP financial measures, see
Table XIII.
|
(3) |
|
Balances and ratios do not include
loans accounted for under the fair value option. For additional
exclusions on nonperforming loans, leases and foreclosed
properties, see Nonperforming Consumer Loans and Foreclosed
Properties Activity beginning on page 81 and corresponding
Table 33, and Nonperforming Commercial Loans, Leases and
Foreclosed Properties Activity and corresponding Table 41 on
page 89.
|
(4) |
|
Net charge-offs as a percentage of
average loans and leases outstanding excluding purchased
credit-impaired (PCI) loans were 3.73 percent and
3.71 percent for 2010 and 2009.
|
(5) |
|
Ratio of the allowance for loan and
lease losses to net charge-offs excluding (PCI) loans was
1.04 percent and 1.00 percent for 2010 and 2009.
|
n/m = not meaningful
24 Bank
of America 2010
2010 Economic and
Business Environment
The banking environment and markets in which we conduct our
businesses will continue to be strongly influenced by
developments in the U.S. and global economies, as well as
the continued implementation and rulemaking from recent
financial reforms. The global economy continued to recover in
2010, but growth was very uneven across countries and regions.
Emerging nations, led by China, India and Brazil, expanded
rapidly, while the U.S., U.K., Europe and Japan continued to
grow modestly.
United
States
In the U.S., the economy began to recover early in 2010, fueled
by moderate growth in consumption and inventory rebuilding, but
slowed in late spring, coincident with the intensification of
Europes financial crisis. A slowdown in consumption and
domestic demand growth contributed to weak employment gains and
an unemployment rate that drifted close to 10 percent.
Year-over-year
inflation measures receded below one percent and stock market
indices declined. Concerns about high unemployment and fears
that the U.S. might incur deflation led the Federal Reserve
to adopt a second round of quantitative easing that involved
purchases of $600 billion of U.S. Treasury securities
scheduled to occur through June 2011. The announcement of this
policy led to lower interest rates. Bond yields rebounded in the
second half of 2010 as the U.S. economy reaccelerated,
driven by stronger consumer spending, rapid growth of exports
and business investment in equipment and software. The strong
holiday retail season provided healthy economic momentum toward
year end. Despite only moderate economic growth in 2010,
corporate profits rose sharply, benefiting from strong
productivity gains and constraints on hiring and operating
costs. Cautious business financial practices resulted in a
record-breaking $1.5 trillion in free cash flows at
non-financial businesses.
The housing market remained weak throughout 2010. Home sales
were soft, despite lower home prices and low interest rates.
There were delays in the foreclosure process on the large number
of distressed mortgages and the supply of unsold homes remained
high. Based on available Home Price Index (HPI) information, the
mild improvement in home prices that occurred in the second half
of 2009 continued into early 2010. However, housing prices
renewed a downward trend in the second half of 2010, due in part
to the expiration of tax incentives for home buyers.
Credit quality of bank loans to businesses and households
improved significantly in 2010 and the continued economic
recovery improved the environment for bank lending. Bank
commercial and industrial loans to businesses increased in the
last few months of 2010, following their steep recession-related
declines, reflecting increasing loan demand relating to stronger
production, inventory building and capital spending. Rising
disposable personal income, household deleveraging and improving
household finances contributed to improving consumer credit
quality.
Europe
In Europe, a financial crisis emerged in mid-2010, triggered by
high budget deficits and rising direct and contingent sovereign
debt in Greece, Ireland, Italy, Portugal and Spain that created
concerns about the ability of these European Union (EU)
peripheral nations to continue to service their debt
obligations. These conditions impacted financial markets and
resulted in high and volatile bond yields on the sovereign debt
of many EU nations. The financial crisis and efforts by the
European Commission, European Central Bank (ECB) and
International Monetary Fund (IMF) to negotiate a financial
support package to financially challenged EU nations unsettled
global financial markets and contributed to Euro exchange rate
and interest rate volatility. Economic performance of certain EU
core nations, led by Germany, remained healthy
throughout 2010, while the economies of Greece, Ireland, Italy,
Portugal and Spain experienced recessionary conditions and
slowing
growth in response to the financial crisis and the
implementation of fiscal austerity programs. Additionally, Spain
and Irelands economies declined as a result of material
deterioration in their housing sectors. Uncertainty over the
outcome of the EU governments financial support programs
and worries about sovereign finances continued through year end.
For information on our exposure in Europe, see
Non-U.S. Portfolio
beginning on page 94 and Note 28
Performance by Geographical Area to the Consolidated
Financial Statements.
Asia
Asia, excluding Japan, continued to outperform all other regions
in 2010 with strong growth across most countries. China and
India continued to lead the region in terms of growth and China
became the second largest economy in the world after the U.S.,
eclipsing Japan. Growth across the region became broader based
with consumer demand, investment activity and exports all
performing well. Asia remained well positioned to withstand
global shocks because of record international reserves, current
account surpluses and reduced external leverage. Many Asian
nations, including China, Taiwan, South Korea, Thailand and
Malaysia, are net external creditors, with China and Japan among
the largest holders of U.S. Treasury bonds. Bank balance
sheets have improved across most of the region and asset quality
issues have remained manageable. Among the key challenges faced
by the region were large capital inflows that placed
appreciation pressures on most currencies against the
U.S. Dollar (USD), complicating monetary policy and adding
to excess liquidity pressures. Most countries in the region,
including China, India, South Korea, Thailand and Indonesia,
began to withdraw fiscal stimulus and tighten monetary policy
with hikes in interest rates as growth gathered momentum and as
food and broader price inflation pressures began to increase.
Japan performed well early in the year, but the economy weakened
at the end of the year due to weakening consumer demand, and
appreciation of the yen that hurt export competitiveness. For
information on our exposure in Asia, see
Non-U.S. Portfolio
beginning on page 94 and Note 28
Performance by Geographical Area to the Consolidated
Financial Statements.
Emerging
Nations
In the emerging nations, inflation pressures began to mount and
their central banks raised interest rates or took steps to
tighten monetary policy and slow bank lending. Strong growth in
emerging nations and their favorable economic outlooks attracted
capital from the industrialized nations. The excess global
liquidity generated by the accommodative monetary policies of
the Federal Reserve, Bank of Japan and other central banks also
flowed into emerging nations. These capital inflows put upward
pressure on many emerging nation currencies. As a result, some
emerging nations, such as Brazil, experienced strong currency
appreciation. However, in other nations, that peg their
currencies to the U.S. dollar, currency appreciation was
muted causing inflationary pressures and rapid real estate price
appreciation. Global economic momentum, along with the generally
weak U.S. dollar and easing monetary policies in several
industrialized nations, contributed to rising prices for
industrial commodities in these emerging nations. Through year
end, inflation pressures in key emerging nations continued to
mount. For more information on our emerging nations exposure,
see Table 48 on page 95.
Performance
Overview
In 2010, we reported a net loss of $2.2 billion compared to
net income of $6.3 billion in 2009. After preferred stock
dividends and accretion of $1.4 billion in 2010 compared
with $8.5 billion in 2009, net loss applicable to common
shareholders was $3.6 billion, or $0.37 per diluted common
share, compared to $2.2 billion, or $0.29 per diluted
common share in 2009. Our 2010 results reflected, among other
things, $12.4 billion in goodwill impairment charges,
including non-cash, non-tax deductible goodwill impairment
charges of
Bank of America
2010 25
$10.4 billion in Global Card Services and
$2.0 billion in Home Loans & Insurance.
For more information about the goodwill impairment charges in
2010, see Complex Accounting Estimates beginning on
page 107 and Note 10 Goodwill and
Intangible Assets to the Consolidated Financial Statements.
Excluding the $12.4 billion of goodwill impairment charges,
net income was $10.2 billion for 2010. After preferred
stock dividends and accretion, net income applicable to common
shareholders, excluding the goodwill impairment charges was
$8.8 billion, or $0.86 per diluted common share, for 2010.
Revenue, net of interest expense on a FTE basis decreased
$9.6 billion or eight percent to $111.4 billion in
2010.
Net interest income on a FTE basis increased $4.3 billion
to $52.7 billion for 2010 compared to 2009. The increase
was due to the impact of deposit pricing and the adoption of new
consolidation guidance. The increase was partially offset by
lower commercial and consumer loan levels and lower rates on the
core assets and trading assets and liabilities.
Noninterest income decreased $13.8 billion to
$58.7 billion in 2010 compared to $72.5 billion in
2009. Contributing to the decline was lower mortgage banking
income, down $6.1 billion, largely due to $6.8 billion
in representations and warranties provision, and decreases in
equity investment income of $4.8 billion, gains on sales of
debt securities of $2.2 billion, trading account profits of
$2.2 billion, service charges of $1.6 billion and
insurance income of $694 million, compared to 2009. These
declines were partially offset by an increase in other income of
$2.4 billion and a decrease in impairment losses of
$1.9 billion.
Representations and warranties expense increased
$4.9 billion to $6.8 billion in 2010 compared to
$1.9 billion in 2009. The increase was primarily driven by
a $4.1 billion provision for representations and warranties
in the fourth quarter of 2010. The fourth quarter provision
includes $3.0 billion related to the impact of the
agreements reached with the GSEs on December 31, 2010,
pursuant to which we paid $2.8 billion to resolve
repurchase claims involving certain residential mortgage loans
sold directly to the GSEs by entities related to legacy
Countrywide Financial Corporation (Countrywide) as well as
adjustments made to the representations and warranties liability
for other loans sold
directly to the GSEs and not covered by these agreements. For
more information about the GSE agreements, see Recent Events
beginning on page 33 and Note 9
Representations and Warranties Obligations and Corporate
Guarantees to the Consolidated Financial Statements.
The provision for credit losses decreased $20.1 billion to
$28.4 billion in 2010 compared to 2009. The provision for
credit losses was $5.9 billion lower than net charge-offs
in 2010, resulting in a reduction in reserves, compared with the
2009 provision for credit losses that was $14.9 billion
higher than net charge-offs, reflecting reserve additions
throughout the year. The reserve reduction in 2010 was due to
improving portfolio trends across most of the consumer and
commercial businesses, particularly the U.S. credit card,
consumer lending and small business products, as well as core
commercial loan portfolios.
Noninterest expense increased $16.4 billion to
$83.1 billion in 2010 compared to 2009. The increase was
driven by the $12.4 billion of goodwill impairment charges
recognized in 2010. Excluding the goodwill impairment charges,
noninterest expense increased $4.0 billion in 2010 compared
to 2009, driven by a $3.6 billion increase in personnel
costs reflecting the build-out of several businesses and a
$1.6 billion increase in litigation expense, partially
offset by lower merger and restructuring charges.
FTE basis, net income excluding the goodwill impairment
charges, noninterest expense excluding goodwill impairment
charges and net income applicable to common shareholders
excluding the goodwill impairment charges are non-GAAP measures.
For corresponding reconciliations to GAAP financial measures,
see Table XIII.
Segment
Results
Effective January 1, 2010, management realigned the former
Global Banking and Global Markets business
segments into Global Commercial Banking and GBAM.
Prior year amounts have been reclassified to conform to the
current period presentation. These changes did not have an
impact on the previously reported consolidated results of the
Corporation. For additional information related to the business
segments, see Note 26 Business Segment
Information to the Consolidated Financial Statements.
Table
2 Business
Segment Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Revenue (1)
|
|
|
Net Income (Loss)
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Deposits
|
|
$
|
13,181
|
|
|
$
|
13,890
|
|
|
$
|
1,352
|
|
|
$
|
2,576
|
|
Global Card
Services (2)
|
|
|
25,621
|
|
|
|
29,046
|
|
|
|
(6,603
|
)
|
|
|
(5,261
|
)
|
Home Loans & Insurance
|
|
|
10,647
|
|
|
|
16,903
|
|
|
|
(8,921
|
)
|
|
|
(3,851
|
)
|
Global Commercial Banking
|
|
|
10,903
|
|
|
|
11,141
|
|
|
|
3,181
|
|
|
|
(290
|
)
|
Global Banking & Markets
|
|
|
28,498
|
|
|
|
32,623
|
|
|
|
6,319
|
|
|
|
10,058
|
|
Global Wealth & Investment Management
|
|
|
16,671
|
|
|
|
16,137
|
|
|
|
1,347
|
|
|
|
1,716
|
|
All
Other (2)
|
|
|
5,869
|
|
|
|
1,204
|
|
|
|
1,087
|
|
|
|
1,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total FTE basis
|
|
|
111,390
|
|
|
|
120,944
|
|
|
|
(2,238
|
)
|
|
|
6,276
|
|
FTE adjustment
|
|
|
(1,170
|
)
|
|
|
(1,301
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consolidated
|
|
$
|
110,220
|
|
|
$
|
119,643
|
|
|
$
|
(2,238
|
)
|
|
$
|
6,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Total revenue is net of interest
expense and is on a FTE basis which is a non-GAAP measure. For
more information on this measure, see Supplemental Financial
Data beginning on page 36, and for a corresponding
reconciliation to a GAAP financial measure, see Table XIII.
|
(2) |
|
In 2010, Global Card Services
and All Other are presented in accordance with new
consolidation guidance. Accordingly, current year Global Card
Services results are comparable to prior year results which
are presented on a managed basis. For more information on the
reconciliation of Global Card Services and All
Other, see Note 26 Business Segment
Information to the Consolidated Financial Statements.
|
Deposits net income decreased from the prior year due to
a decline in revenue and higher noninterest expense. Net
interest income increased as a result of a customer shift to
more liquid products and continued pricing discipline, partially
offset by a lower net interest income allocation related to
asset and liability management (ALM) activities. The noninterest
income decline was driven by the impact of Regulation E,
which was effective in the third quarter of 2010 and our
overdraft policy changes implemented in late 2009. Noninterest
expense increased as a higher proportion of banking center sales
and service
costs was aligned to Deposits from the other segments,
and increased litigation expenses. The increase was partially
offset by the absence of a special Federal Deposit Insurance
Corporation (FDIC) assessment in 2009.
Global Card Services net loss increased compared to the
prior year due primarily to a $10.4 billion goodwill
impairment charge. Revenue decreased compared to the prior year
driven by lower average loans, reduced interest and fee income
primarily resulting from the implementation of the CARD Act and
the impact of recording a reserve related to future payment
protection
26 Bank
of America 2010
insurance claims in the U.K. that have not yet been asserted.
Provision for credit losses improved due to lower delinquencies
and bankruptcies as a result of the improved economic
environment, which resulted in reserve reductions in 2010
compared to reserve increases in the prior year. Noninterest
expense increased primarily due to the goodwill impairment
charge.
Home Loans & Insurance net loss increased in
2010 compared to the prior year primarily due to an increase in
representations and warranties provision and a $2.0 billion
goodwill impairment charge, partially offset by a decline in
provision for credit losses driven by improving portfolio
trends. Mortgage banking income declined driven by increased
representations and warranties provision and lower production
volume reflecting a drop in the overall size of the mortgage
market. Noninterest expense increased primarily due to the
goodwill impairment charge, higher litigation expense and an
increase in default-related servicing expense, partially offset
by lower production expense and insurance losses.
Global Commercial Banking net income increased due to
lower credit costs. Revenue was negatively impacted by
additional costs related to our agreement to purchase certain
retail automotive loans. Net interest income increased due to a
growth in average deposits, partially offset by a lower net
interest income allocation related to ALM activities. Credit
pricing discipline offset the impact of the decline in average
loan balances. The provision for credit losses decreased driven
by improvements from stabilizing values in the commercial real
estate portfolio.
GBAM net income decreased driven by the absence of the
gain in the prior year related to the contribution of our
merchant processing business to a joint venture. Additionally,
the decrease was driven by lower sales and trading revenue due
to more favorable market conditions in the prior year, partially
offset by credit valuation gains on derivative liabilities and
gains on legacy assets compared to losses in the prior year.
Provision for credit losses declined driven by lower net
charge-offs and reserve levels, as well as a reduction in
reservable criticized balances. Noninterest expense increased
driven by higher compensation costs as a result of the
recognition of expense on a proportionately larger amount of
prior year incentive deferrals and investments in infrastructure
and personnel associated with further development of the
business. Income tax expense was adversely affected by a charge
related to the U.K. tax rate reduction impacting the carrying
value of deferred tax assets.
GWIM net income decreased driven by higher noninterest
expense and the tax-related effect of the sale of the Columbia
Management long-term asset management business partially offset
by higher noninterest income and lower credit costs. Revenue
increased driven by higher asset management fees and
transactional revenue. Provision for credit losses decreased
driven by stabilization of the portfolios and the recognition of
a single large commercial charge-off in 2009. Noninterest
expense increased due primarily to higher revenue-related
expenses, support costs and personnel costs associated with
further investment in the business.
All Other net income decreased compared to the prior year
driven primarily by decreases in net interest income and
noninterest income, partially offset by a lower provision for
credit losses. Revenue decreased due primarily to lower equity
investment gains as the prior year included a gain resulting
from the sale of a portion of our investment in China
Construction Bank (CCB) combined with reduced gains on the sale
of debt securities. The decrease in the provision for credit
losses was due to improving portfolio trends in the residential
mortgage portfolio.
Bank of America
2010 27
Financial
Highlights
Net Interest
Income
Net interest income on a FTE basis increased $4.3 billion
to $52.7 billion for 2010 compared to 2009. The increase
was due to the impact of deposit pricing and the adoption of new
consolidation guidance which contributed $10.5 billion to
net interest income in 2010. The increase was partially offset
by lower commercial and consumer loan levels, the sale of First
Republic in 2010 and lower rates on the core assets and trading
assets and liabilities, including derivatives exposure. The net
interest yield on a FTE basis increased 13 basis points
(bps) to 2.78 percent for 2010 compared to 2009 due to
these same factors.
Noninterest
Income
Table
3 Noninterest
Income
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
Card income
|
|
$
|
8,108
|
|
|
$
|
8,353
|
|
Service charges
|
|
|
9,390
|
|
|
|
11,038
|
|
Investment and brokerage services
|
|
|
11,622
|
|
|
|
11,919
|
|
Investment banking income
|
|
|
5,520
|
|
|
|
5,551
|
|
Equity investment income
|
|
|
5,260
|
|
|
|
10,014
|
|
Trading account profits
|
|
|
10,054
|
|
|
|
12,235
|
|
Mortgage banking income
|
|
|
2,734
|
|
|
|
8,791
|
|
Insurance income
|
|
|
2,066
|
|
|
|
2,760
|
|
Gains on sales of debt securities
|
|
|
2,526
|
|
|
|
4,723
|
|
Other income (loss)
|
|
|
2,384
|
|
|
|
(14
|
)
|
Net impairment losses recognized in earnings on
available-for-sale
debt securities
|
|
|
(967
|
)
|
|
|
(2,836
|
)
|
|
|
|
|
|
|
|
|
|
Total noninterest
income
|
|
$
|
58,697
|
|
|
$
|
72,534
|
|
|
|
|
|
|
|
|
|
|
Noninterest income decreased $13.8 billion to
$58.7 billion for 2010 compared to 2009. The following
items highlight the significant changes.
|
|
|
Card income decreased $245 million due to the
implementation of the CARD Act partially offset by the impact of
the new consolidation guidance and higher interchange income.
|
|
Service charges decreased $1.6 billion largely due to the
impact of Regulation E, which became effective in the third
quarter of 2010 and the impact of our overdraft policy changes
implemented in late 2009.
|
|
Equity investment income decreased by $4.8 billion, as net
gains on the sales of certain strategic investments during 2010,
including Itaú Unibanco, MasterCard, Santander and a
portion of our investment in BlackRock, Inc. (BlackRock) were
less than gains in 2009 that included a $7.3 billion gain
related to the sale of a portion of our investment in CCB and
the $1.1 billion gain related to our BlackRock investment.
|
|
Trading account profits decreased $2.2 billion due to more
favorable market conditions in the prior year and investor
concerns regarding sovereign debt fears and regulatory
uncertainty. Net credit valuation gains on derivative
liabilities of $262 million for 2010 compared to losses of
$662 million for 2009.
|
|
Mortgage banking income decreased $6.1 billion due to an
increase of $4.9 billion in representations and warranties
provision and lower volume and margins.
|
|
Insurance income decreased $694 million due to a liability
recorded for future claims related to payment protection
insurance (PPI) sold in the U.K.
|
|
Gains on sales of debt securities decreased $2.2 billion
driven by a lower volume of sales of debt securities. The
decrease also included the impact of losses in 2010 related to
portfolio restructuring activities.
|
|
Other income (loss) improved by $2.4 billion. The prior
year included a net negative fair value adjustment of
$4.9 billion on structured liabilities compared to a net
positive adjustment of $18 million in 2010, and the prior
year
|
|
|
|
also included a $3.8 billion gain on the contribution of
our merchant processing business to a joint venture. Legacy
asset write-downs included in other income (loss) were
$1.7 billion in 2009 compared to net gains of
$256 million in 2010.
|
|
Impairment losses recognized in earnings on
available-for-sale
(AFS) debt securities decreased $1.9 billion reflecting
lower impairment write-downs on non-agency residential
mortgage-backed securities (RMBS) and collateralized debt
obligations (CDOs).
|
Provision for
Credit Losses
The provision for credit losses decreased $20.1 billion to
$28.4 billion in 2010 compared to 2009. The provision for
credit losses was $5.9 billion lower than net charge-offs
for 2010, resulting in a reduction in reserves primarily due to
improving portfolio trends throughout the year across the
consumer and commercial businesses.
The provision for credit losses related to our consumer
portfolio decreased $11.4 billion to $25.4 billion for
2010 compared to 2009. The provision for credit losses related
to our commercial portfolio including the provision for unfunded
lending commitments decreased $8.7 billion to
$3.0 billion for 2010 compared to 2009.
Net charge-offs totaled $34.3 billion, or 3.60 percent
of average loans and leases for 2010 compared with
$33.7 billion, or 3.58 percent for 2009. For more
information on the provision for credit losses, see Provision
for Credit Losses on page 96.
Noninterest
Expense
Table
4 Noninterest
Expense
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
Personnel
|
|
$
|
35,149
|
|
|
$
|
31,528
|
|
Occupancy
|
|
|
4,716
|
|
|
|
4,906
|
|
Equipment
|
|
|
2,452
|
|
|
|
2,455
|
|
Marketing
|
|
|
1,963
|
|
|
|
1,933
|
|
Professional fees
|
|
|
2,695
|
|
|
|
2,281
|
|
Amortization of intangibles
|
|
|
1,731
|
|
|
|
1,978
|
|
Data processing
|
|
|
2,544
|
|
|
|
2,500
|
|
Telecommunications
|
|
|
1,416
|
|
|
|
1,420
|
|
Other general operating
|
|
|
16,222
|
|
|
|
14,991
|
|
Goodwill impairment
|
|
|
12,400
|
|
|
|
|
|
Merger and restructuring charges
|
|
|
1,820
|
|
|
|
2,721
|
|
|
|
|
|
|
|
|
|
|
Total noninterest
expense
|
|
$
|
83,108
|
|
|
$
|
66,713
|
|
|
|
|
|
|
|
|
|
|
Excluding the goodwill impairment charges of $12.4 billion,
noninterest expense increased $4.0 billion for 2010
compared to 2009. The increase was driven by a $3.6 billion
increase in personnel costs reflecting the build out of several
businesses, the recognition of expense on proportionally larger
prior year incentive deferrals and the U.K. payroll tax on
certain year-end incentive payments, as well as a
$1.6 billion increase in litigation costs. These increases
were partially offset by a $901 million decline in pre-tax
merger and restructuring charges compared to the prior year. The
prior year included a special FDIC assessment of
$724 million.
Income Tax
Expense
Income tax expense was $915 million for 2010 compared to a
benefit of $1.9 billion for 2009. The effective tax rate
for 2010 was not meaningful due to the impact of non-deductible
goodwill impairment charges of $12.4 billion.
The effective tax rate for 2010 excluding goodwill impairment
charges from pre-tax income was 8.3 percent compared to
(44.0) percent for 2009, primarily driven by an increase in
pre-tax income excluding the non-deductible goodwill impairment
charges. Also impacting the 2010 effective tax rate was a
28 Bank
of America 2010
$392 million charge from a U.K. law change referred to
below and a $1.7 billion tax benefit from the release of a
portion of the deferred tax asset valuation allowance related to
acquired capital loss carryforward tax benefits compared to
$650 million in 2009. For more information, see
Note 21 Income Taxes to the Consolidated
Financial Statements.
During 2010, the U.K. government enacted a tax law change
reducing the corporate income tax rate by one percent effective
for the 2011 U.K. tax financial year beginning on April 1,
2011. This reduction favorably affects
income tax expense on future U.K. earnings, but also required us
to re-measure our U.K. net deferred tax assets using the lower
tax rate. The U.K. corporate tax rate reduction resulted in an
income tax charge of $392 million in 2010. If future rate
reductions were to be enacted as suggested in U.K. Treasury
announcements and assuming no change in the deferred tax asset
balance, a similar charge to income tax expense for each one
percent reduction in the rate would result during each period of
enactment. For more information, see Regulatory Matters
beginning on page 56.
Balance
Sheet Overview
Table
5 Selected
Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
Average Balance
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds sold and securities borrowed or purchased under
agreements to resell
|
|
$
|
209,616
|
|
|
$
|
189,933
|
|
|
$
|
256,943
|
|
|
$
|
235,764
|
|
Trading account assets
|
|
|
194,671
|
|
|
|
182,206
|
|
|
|
213,745
|
|
|
|
217,048
|
|
Debt securities
|
|
|
338,054
|
|
|
|
311,441
|
|
|
|
323,946
|
|
|
|
271,048
|
|
Loans and leases
|
|
|
940,440
|
|
|
|
900,128
|
|
|
|
958,331
|
|
|
|
948,805
|
|
Allowance for loan and lease losses
|
|
|
(41,885
|
)
|
|
|
(37,200
|
)
|
|
|
(45,619
|
)
|
|
|
(33,315
|
)
|
All other assets
|
|
|
624,013
|
|
|
|
683,724
|
|
|
|
732,256
|
|
|
|
803,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,264,909
|
|
|
$
|
2,230,232
|
|
|
$
|
2,439,602
|
|
|
$
|
2,443,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
1,010,430
|
|
|
$
|
991,611
|
|
|
$
|
988,586
|
|
|
$
|
980,966
|
|
Federal funds purchased and securities loaned or sold under
agreements to repurchase
|
|
|
245,359
|
|
|
|
255,185
|
|
|
|
353,653
|
|
|
|
369,863
|
|
Trading account liabilities
|
|
|
71,985
|
|
|
|
65,432
|
|
|
|
91,669
|
|
|
|
72,207
|
|
Commercial paper and other short-term borrowings
|
|
|
59,962
|
|
|
|
69,524
|
|
|
|
76,676
|
|
|
|
118,781
|
|
Long-term debt
|
|
|
448,431
|
|
|
|
438,521
|
|
|
|
490,497
|
|
|
|
446,634
|
|
All other liabilities
|
|
|
200,494
|
|
|
|
178,515
|
|
|
|
205,290
|
|
|
|
209,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
2,036,661
|
|
|
|
1,998,788
|
|
|
|
2,206,371
|
|
|
|
2,198,423
|
|
Shareholders
equity
|
|
|
228,248
|
|
|
|
231,444
|
|
|
|
233,231
|
|
|
|
244,645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity
|
|
$
|
2,264,909
|
|
|
$
|
2,230,232
|
|
|
$
|
2,439,602
|
|
|
$
|
2,443,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2010, total assets were $2.3 trillion, an
increase of $34.7 billion, or two percent, from
December 31, 2009. Average total assets in 2010 decreased
$3.5 billion from 2009. At December 31, 2010, total
liabilities were $2.0 trillion, an increase of
$37.9 billion, or two percent, from December 31, 2009.
Average total liabilities for 2010 increased $7.9 billion
from 2009.
Period-end balance sheet amounts may vary from average balance
sheet amounts due to liquidity and balance sheet management
functions, primarily involving our portfolios of highly liquid
assets, that are designed to ensure the adequacy of capital
while enhancing our ability to manage liquidity requirements for
the Corporation and for our customers, and to position the
balance sheet in accordance with the Corporations risk
appetite. The execution of these functions requires the use of
balance sheet and capital-related limits including spot, average
and risk-weighted asset limits, particularly in our trading
businesses. One of our key metrics, Tier 1 leverage ratio,
is calculated based on adjusted quarterly average total assets.
Impact of
Adopting New Consolidation Guidance
On January 1, 2010, the Corporation adopted new
consolidation guidance resulting in the consolidation of certain
former qualifying special purpose entities and VIEs that were
not recorded on the Corporations Consolidated Balance
Sheet prior to that date. The adoption of this new consolidation
guidance resulted in a net incremental increase in assets of
$100.4 billion, including $69.7 billion resulting from
consolidation of credit card trusts and $30.7 billion from
consolidation of other special purpose entities including
multi-seller conduits, and a net increase of $106.7 billion
in total liabilities, including $84.4 billion of long-term
debt. These amounts are net of retained interests in
securitizations held on the Consolidated Balance Sheet at
December 31, 2009 and a $10.8 billion increase in the
allowance for loan and lease losses, the majority of which
relates to credit card receivables. The Corporation recorded a
$6.2 billion charge,
net-of-tax,
to retained earnings on January 1, 2010 for the cumulative
effect of the adoption of this new consolidation guidance due
primarily to the increase in the allowance for loan and lease
losses, and a $116 million charge to accumulated other
comprehensive income (OCI). The initial recording of these
assets, related allowance for loan and lease losses and
liabilities on the Corporations Consolidated Balance Sheet
had no impact at the date of adoption on consolidated results of
operations. For additional detail on the impact of adopting this
new consolidation guidance, refer to Note 8
Securitizations and Other Variable Interest Entities to the
Consolidated Financial Statements.
Bank of America
2010 29
Assets
Federal Funds
Sold and Securities Borrowed or Purchased Under Agreements to
Resell
Federal funds transactions involve lending reserve balances on a
short-term basis. Securities borrowed and securities purchased
under agreements to resell are utilized to accommodate customer
transactions, earn interest rate spreads and obtain securities
for settlement. Year-end federal funds sold and securities
borrowed or purchased under agreements to resell increased
$19.7 billion and average amounts increased
$21.2 billion in 2010 compared to 2009, attributable
primarily to a favorable rate environment and increased customer
activity.
Trading Account
Assets
Trading account assets consist primarily of fixed-income
securities (including government and corporate debt), and equity
and convertible instruments. Year-end trading account assets
increased $12.5 billion in 2010 compared to 2009 primarily
due to the adoption of new consolidation guidance as well as the
consolidation of a VIE late in 2010. Average trading account
assets decreased slightly in 2010 as compared to 2009.
Debt
Securities
Debt securities include U.S. Treasury and agency
securities, mortgage-backed securities (MBS), principally agency
MBS, foreign bonds, corporate bonds and municipal debt. We use
the debt securities portfolio primarily to manage interest rate
and liquidity risk and to take advantage of market conditions
that create more economically attractive returns on these
investments. Year-end and average balances of debt securities
increased $26.6 billion and $52.9 billion in 2010
compared to 2009 due to agency MBS purchases. For additional
information on AFS debt securities, see Market Risk
Management Securities beginning on page 103 and
Note 5 Securities to the Consolidated
Financial Statements.
Loans and
Leases
Year-end and average loans and leases increased
$40.3 billion to $940.4 billion and $9.5 billion
to $958.3 billion in 2010 compared to 2009. The increase
was primarily due to the impact of adopting new consolidation
guidance partially offset by continued deleveraging by
consumers, tighter underwriting and the elevated levels of
liquidity of commercial clients. For a more detailed discussion
of the loan portfolio, see Credit Risk Management beginning on
page 71 and Note 6 Outstanding Loans
and Leases to the Consolidated Financial Statements.
Allowance for
Loan and Lease Losses
Year-end and average allowance for loan lease losses increased
$4.7 billion and $12.3 billion in 2010 compared to
2009 primarily due to the $10.8 billion of reserves
recorded on January 1, 2010 in connection with the adoption
of new consolidation guidance and reserve additions in the PCI
portfolio throughout 2010. These were partially offset by
reserve reductions during 2010 due to the impacts of the
improving economy. For a more detailed discussion of the
Allowance for Loan and Lease Losses, see Allowance for Loan and
Lease Losses beginning on page 97.
All Other
Assets
Year-end and average other assets decreased $59.7 billion
and $71.5 billion in 2010 compared to 2009 driven primarily
by the sale of strategic investments and goodwill impairment
charges.
Liabilities
Deposits
Year-end and average deposits increased $18.8 billion to
$1.0 trillion and $7.6 billion to $988.6 billion in
2010 compared to 2009. The increase was attributable to growth
in our noninterest-bearing deposits, NOW and money market
accounts primarily driven by affluent, and commercial and
corporate clients, partially offset by a decrease in time
deposits as a result of customer shift to more liquid products.
Federal Funds
Purchased and Securities Loaned or Sold Under Agreements to
Repurchase
Federal funds transactions involve borrowing reserve balances on
a short-term basis. Securities loaned and securities sold under
agreements to repurchase are collateralized borrowing
transactions utilized to accommodate customer transactions, earn
interest rate spreads and finance assets on the balance sheet.
Year-end and average federal funds purchased and securities
loaned or sold under agreements to repurchase decreased
$9.8 billion and $16.2 billion in 2010 compared to
2009 primarily due to lower funding requirements.
Trading Account
Liabilities
Trading account liabilities consist primarily of short positions
in fixed-income securities (including government and corporate
debt), equity and convertible instruments. Year-end and average
trading account liabilities increased $6.5 billion and
$19.5 billion in 2010 compared to 2009 due to trading
activity in fixed-income securities.
Commercial Paper
and Other Short-term Borrowings
Commercial paper and other short-term borrowings provide a
funding source to supplement deposits in our ALM strategy.
Year-end and average commercial paper and other short-term
borrowings decreased $9.6 billion to $60.0 billion and
decreased $42.1 billion to $76.7 billion in 2010
compared to 2009 as a result of our strengthened liquidity
position.
Long-term
Debt
Year-end and average long-term debt increased by
$9.9 billion to $448.4 billion and $43.9 billion
to $490.5 billion in 2010 compared to 2009. The increases
were attributable to the $84.4 billion impact of new
consolidation guidance as discussed on page 29 offset by
maturities outpacing new issuances and the Corporations
strategy to reduce our long-term debt. For additional
information on long-term debt, see Note 13
Long-term Debt to the Consolidated Financial Statements.
All Other
Liabilities
Year-end all other liabilities increased $22.0 billion in
2010 compared to 2009 driven primarily by adoption of new
consolidation guidance.
Shareholders
Equity
Year-end and average shareholders equity decreased
$3.2 billion and $11.4 billion in 2010 compared to
2009. The decrease was driven primarily by the goodwill
impairment charges of $12.4 billion and the impact of
adopting new consolidation guidance as we recorded a
$6.2 billion charge to retained earnings for newly
consolidated loans partially offset by changes in accumulated
OCI.
30 Bank
of America 2010
Cash Flows
Overview
The Corporations operating assets and liabilities support
our global markets and lending activities. We believe that cash
flows from operations, available cash balances and our ability
to generate cash through short- and long-term debt are
sufficient to fund our operating liquidity needs. Our investing
activities primarily include the AFS securities portfolio and
other short-term investments. In addition, our financing
activities reflect cash flows related to raising customer
deposits and issuing long-term debt as well as preferred and
common stock.
Cash and cash equivalents decreased $12.9 billion during
2010 due to repayment and maturities of certain long-term debt
and net purchases of AFS securities partially offset by deposit
growth. Cash and cash equivalents increased $88.5 billion
during 2009 which reflected our strengthened liquidity. The
following discussion outlines the significant activities that
impacted our cash flows during 2010 and 2009.
During 2010, net cash provided by operating activities was
$82.6 billion compared to $129.7 billion in 2009. The
more significant adjustments to net
income (loss) to arrive at cash provided by operating activities
included the decreases in the provision for credit losses,
decreases in trading and derivative assets, and in 2010, the
goodwill impairment charges.
During 2010, net cash of $30.3 billion was used in
investing activities primarily for net purchases of AFS debt
securities. During 2009, net cash provided by investing
activities was $157.9 billion, in part, from net sales, pay
downs and maturities of AFS securities associated with our
management of interest rate risk, and net cash received from the
acquisition of Merrill Lynch.
During 2010, the net cash used in financing activities of
$65.4 billion primarily reflected the net decreases in
long-term debt as maturities outpaced new issuances. During
2009, net cash used in financing activities was
$199.6 billion reflecting the declines in commercial paper
and other short-term borrowings due, in part to lower Federal
Home Loan Bank (FHLB) balances as a result of our strong
liquidity position and a decrease in long-term debt as
maturities outpaced new issuances.
Bank of America
2010 31
Table
6 Five
Year Summary of Selected Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions, except per
share information)
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Income statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
$
|
51,523
|
|
|
$
|
47,109
|
|
|
$
|
45,360
|
|
|
$
|
34,441
|
|
|
$
|
34,594
|
|
Noninterest income
|
|
|
|
58,697
|
|
|
|
72,534
|
|
|
|
27,422
|
|
|
|
32,392
|
|
|
|
38,182
|
|
Total revenue, net of interest expense
|
|
|
|
110,220
|
|
|
|
119,643
|
|
|
|
72,782
|
|
|
|
66,833
|
|
|
|
72,776
|
|
Provision for credit losses
|
|
|
|
28,435
|
|
|
|
48,570
|
|
|
|
26,825
|
|
|
|
8,385
|
|
|
|
5,010
|
|
Goodwill impairment
|
|
|
|
12,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger and restructuring charges
|
|
|
|
1,820
|
|
|
|
2,721
|
|
|
|
935
|
|
|
|
410
|
|
|
|
805
|
|
All other noninterest
expense (1)
|
|
|
|
68,888
|
|
|
|
63,992
|
|
|
|
40,594
|
|
|
|
37,114
|
|
|
|
34,988
|
|
Income (loss) before income taxes
|
|
|
|
(1,323
|
)
|
|
|
4,360
|
|
|
|
4,428
|
|
|
|
20,924
|
|
|
|
31,973
|
|
Income tax expense (benefit)
|
|
|
|
915
|
|
|
|
(1,916
|
)
|
|
|
420
|
|
|
|
5,942
|
|
|
|
10,840
|
|
Net income (loss)
|
|
|
|
(2,238
|
)
|
|
|
6,276
|
|
|
|
4,008
|
|
|
|
14,982
|
|
|
|
21,133
|
|
Net income (loss) applicable to common shareholders
|
|
|
|
(3,595
|
)
|
|
|
(2,204
|
)
|
|
|
2,556
|
|
|
|
14,800
|
|
|
|
21,111
|
|
Average common shares issued and outstanding (in thousands)
|
|
|
|
9,790,472
|
|
|
|
7,728,570
|
|
|
|
4,592,085
|
|
|
|
4,423,579
|
|
|
|
4,526,637
|
|
Average diluted common shares issued and outstanding (in
thousands)
|
|
|
|
9,790,472
|
|
|
|
7,728,570
|
|
|
|
4,596,428
|
|
|
|
4,463,213
|
|
|
|
4,580,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets
|
|
|
|
n/m
|
|
|
|
0.26
|
%
|
|
|
0.22
|
%
|
|
|
0.94
|
%
|
|
|
1.44
|
%
|
Return on average common shareholders equity
|
|
|
|
n/m
|
|
|
|
n/m
|
|
|
|
1.80
|
|
|
|
11.08
|
|
|
|
16.27
|
|
Return on average tangible common shareholders
equity (2)
|
|
|
|
n/m
|
|
|
|
n/m
|
|
|
|
4.72
|
|
|
|
26.19
|
|
|
|
38.23
|
|
Return on average tangible shareholders
equity (2)
|
|
|
|
n/m
|
|
|
|
4.18
|
|
|
|
5.19
|
|
|
|
25.13
|
|
|
|
37.80
|
|
Total ending equity to total ending assets
|
|
|
|
10.08
|
%
|
|
|
10.38
|
|
|
|
9.74
|
|
|
|
8.56
|
|
|
|
9.27
|
|
Total average equity to total average assets
|
|
|
|
9.56
|
|
|
|
10.01
|
|
|
|
8.94
|
|
|
|
8.53
|
|
|
|
8.90
|
|
Dividend payout
|
|
|
|
n/m
|
|
|
|
n/m
|
|
|
|
n/m
|
|
|
|
72.26
|
|
|
|
45.66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss)
|
|
|
$
|
(0.37
|
)
|
|
$
|
(0.29
|
)
|
|
$
|
0.54
|
|
|
$
|
3.32
|
|
|
$
|
4.63
|
|
Diluted earnings (loss)
|
|
|
|
(0.37
|
)
|
|
|
(0.29
|
)
|
|
|
0.54
|
|
|
|
3.29
|
|
|
|
4.58
|
|
Dividends paid
|
|
|
|
0.04
|
|
|
|
0.04
|
|
|
|
2.24
|
|
|
|
2.40
|
|
|
|
2.12
|
|
Book value
|
|
|
|
20.99
|
|
|
|
21.48
|
|
|
|
27.77
|
|
|
|
32.09
|
|
|
|
29.70
|
|
Tangible book
value (2)
|
|
|
|
12.98
|
|
|
|
11.94
|
|
|
|
10.11
|
|
|
|
12.71
|
|
|
|
13.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market price per share of common
stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing
|
|
|
$
|
13.34
|
|
|
$
|
15.06
|
|
|
$
|
14.08
|
|
|
$
|
41.26
|
|
|
$
|
53.39
|
|
High closing
|
|
|
|
19.48
|
|
|
|
18.59
|
|
|
|
45.03
|
|
|
|
54.05
|
|
|
|
54.90
|
|
Low closing
|
|
|
|
10.95
|
|
|
|
3.14
|
|
|
|
11.25
|
|
|
|
41.10
|
|
|
|
43.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market capitalization
|
|
|
$
|
134,536
|
|
|
$
|
130,273
|
|
|
$
|
70,645
|
|
|
$
|
183,107
|
|
|
$
|
238,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average balance sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases
|
|
|
$
|
958,331
|
|
|
$
|
948,805
|
|
|
$
|
910,871
|
|
|
$
|
776,154
|
|
|
$
|
652,417
|
|
Total assets
|
|
|
|
2,439,602
|
|
|
|
2,443,068
|
|
|
|
1,843,985
|
|
|
|
1,602,073
|
|
|
|
1,466,681
|
|
Total deposits
|
|
|
|
988,586
|
|
|
|
980,966
|
|
|
|
831,157
|
|
|
|
717,182
|
|
|
|
672,995
|
|
Long-term debt
|
|
|
|
490,497
|
|
|
|
446,634
|
|
|
|
231,235
|
|
|
|
169,855
|
|
|
|
130,124
|
|
Common shareholders equity
|
|
|
|
212,681
|
|
|
|
182,288
|
|
|
|
141,638
|
|
|
|
133,555
|
|
|
|
129,773
|
|
Total shareholders equity
|
|
|
|
233,231
|
|
|
|
244,645
|
|
|
|
164,831
|
|
|
|
136,662
|
|
|
|
130,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset
quality (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit
losses (4)
|
|
|
$
|
43,073
|
|
|
$
|
38,687
|
|
|
$
|
23,492
|
|
|
$
|
12,106
|
|
|
$
|
9,413
|
|
Nonperforming loans, leases and foreclosed
properties (5)
|
|
|
|
32,664
|
|
|
|
35,747
|
|
|
|
18,212
|
|
|
|
5,948
|
|
|
|
1,856
|
|
Allowance for loan and lease losses as a percentage of total
loans and leases
outstanding (5)
|
|
|
|
4.47
|
%
|
|
|
4.16
|
%
|
|
|
2.49
|
%
|
|
|
1.33
|
%
|
|
|
1.28
|
%
|
Allowance for loan and lease losses as a percentage of total
nonperforming loans and
leases (5,
6)
|
|
|
|
136
|
|
|
|
111
|
|
|
|
141
|
|
|
|
207
|
|
|
|
505
|
|
Allowance for loan and lease losses as a percentage of total
nonperforming loans and leases excluding the purchased
credit-impaired loan
portfolio (5,
6)
|
|
|
|
116
|
|
|
|
99
|
|
|
|
136
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Net charge-offs
|
|
|
$
|
34,334
|
|
|
$
|
33,688
|
|
|
$
|
16,231
|
|
|
$
|
6,480
|
|
|
$
|
4,539
|
|
Net charge-offs as a percentage of average loans and leases
outstanding (5)
|
|
|
|
3.60
|
%
|
|
|
3.58
|
%
|
|
|
1.79
|
%
|
|
|
0.84
|
%
|
|
|
0.70
|
%
|
Nonperforming loans and leases as a percentage of total loans
and leases
outstanding (5)
|
|
|
|
3.27
|
|
|
|
3.75
|
|
|
|
1.77
|
|
|
|
0.64
|
|
|
|
0.25
|
|
Nonperforming loans, leases and foreclosed properties as a
percentage of total loans, leases and foreclosed
properties (5)
|
|
|
|
3.48
|
|
|
|
3.98
|
|
|
|
1.96
|
|
|
|
0.68
|
|
|
|
0.26
|
|
Ratio of the allowance for loan and lease losses at December 31
to net charge-offs
|
|
|
|
1.22
|
|
|
|
1.10
|
|
|
|
1.42
|
|
|
|
1.79
|
|
|
|
1.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital ratios (year
end)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-based capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 common
|
|
|
|
8.60
|
%
|
|
|
7.81
|
%
|
|
|
4.80
|
%
|
|
|
4.93
|
%
|
|
|
6.82
|
%
|
Tier 1
|
|
|
|
11.24
|
|
|
|
10.40
|
|
|
|
9.15
|
|
|
|
6.87
|
|
|
|
8.64
|
|
Total
|
|
|
|
15.77
|
|
|
|
14.66
|
|
|
|
13.00
|
|
|
|
11.02
|
|
|
|
11.88
|
|
Tier 1 leverage
|
|
|
|
7.21
|
|
|
|
6.88
|
|
|
|
6.44
|
|
|
|
5.04
|
|
|
|
6.36
|
|
Tangible
equity (2)
|
|
|
|
6.75
|
|
|
|
6.40
|
|
|
|
5.11
|
|
|
|
3.73
|
|
|
|
4.47
|
|
Tangible common
equity (2)
|
|
|
|
5.99
|
|
|
|
5.56
|
|
|
|
2.93
|
|
|
|
3.46
|
|
|
|
4.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Excludes merger and restructuring
charges and goodwill impairment charges.
|
(2) |
|
Tangible equity ratios and tangible
book value per share of common stock are non-GAAP measures.
Other companies may define or calculate these measures
differently. For additional information on these ratios, see
Supplemental Financial Data beginning on page 36 and for
corresponding reconciliations to GAAP financial measures, see
Table XIII.
|
(3) |
|
For more information on the impact
of the PCI loan portfolio on asset quality, see Consumer
Portfolio Credit Risk Management beginning on page 72 and
Commercial Portfolio Credit Risk Management beginning on
page 83.
|
(4) |
|
Includes the allowance for loan and
lease losses and the reserve for unfunded lending commitments.
|
(5) |
|
Balances and ratios do not include
loans accounted for under the fair value option. For additional
exclusions on nonperforming loans, leases and foreclosed
properties, see Nonperforming Consumer Loans and Foreclosed
Properties Activity beginning on page 81 and corresponding
Table 33 and Nonperforming Commercial Loans, Leases and
Foreclosed Properties Activity and corresponding Table 41 on
page 89.
|
(6) |
|
Allowance for loan and lease losses
includes $22.9 billion, $17.7 billion,
$11.7 billion, $6.5 billion and $5.4 billion
allocated to products that are excluded from nonperforming
loans, leases and foreclosed properties at December 31,
2010, 2009, 2008, 2007 and 2006, respectively.
|
n/m = not meaningful
n/a = not applicable
32 Bank
of America 2010
Recent
Events
Representations
and Warranties Liability
On December 31, 2010, we reached agreements with Freddie
Mac (FHLMC) and Fannie Mae (FNMA), collectively the GSEs, where
the Corporation paid $2.8 billion to resolve repurchase
claims involving first-lien residential mortgage loans sold
directly to the GSEs by entities related to legacy Countrywide
(Countrywide). The agreement with FHLMC extinguishes all
outstanding and potential mortgage repurchase and make-whole
claims arising out of any alleged breaches of selling
representations and warranties related to loans sold directly by
legacy Countrywide to FHLMC through 2008, subject to certain
exceptions we do not believe will be material. The agreement
with FNMA substantially resolves the existing pipeline of
repurchase and make-whole claims outstanding as of
September 20, 2010 arising out of alleged breaches of
selling representations and warranties related to loans sold
directly by legacy Countrywide to FNMA. These agreements with
the GSEs do not cover outstanding and potential mortgage
repurchase and make-whole claims arising out of any alleged
breaches of selling representations and warranties to legacy
Bank of America first-lien residential mortgage loans sold
directly to the GSEs or other loans sold directly to the GSEs
other than described above, loan servicing obligations, other
contractual obligations or loans contained in private-label
securitizations.
As a result of these agreements and associated adjustments made
to the representations and warranties liability for other loans
sold directly to the GSEs and not covered by the agreements, the
Corporation recorded a provision of $3.0 billion during the
fourth quarter of 2010. We believe that our remaining exposure
to representations and warranties for first-lien residential
mortgage loans sold directly to the GSEs has been accounted for
as a result of these agreements and the associated adjustments
to our recorded liability for representations and warranties for
first-lien residential mortgage for loans sold directly to the
GSEs and not covered by the agreements as discussed above. We
believe our predictive repurchase models, utilizing our
historical repurchase experience with the GSEs while considering
current developments, including the recent agreements,
projections of future defaults as well as certain assumptions
regarding economic conditions, home prices and other matters,
allows us to reasonably estimate the liability for obligations
under representations and warranties on loans sold to the GSEs.
However, future provisions for representations and warranties
liability to the GSEs may be affected if actual experience is
different from our historical experience with the GSEs or our
projections of future defaults, and assumptions regarding
economic conditions, home prices and other matters, that are
incorporated in the provision calculation.
Although our experience with non-GSE claims remains limited, we
expect additional activity in this area going forward and that
the volume of repurchase claims from monolines, whole-loan
investors and investors in private-label securitizations could
increase in the future. It is reasonably possible that future
losses may occur, and our estimate is that the upper range of
possible loss related to non-GSE sales could be $7 billion
to $10 billion over existing accruals. This estimate does
not represent a probable loss, is based on currently available
information, significant judgment, and a number of assumptions
that are subject to change. A significant portion of this
estimate relates to loans originated through legacy Countrywide,
and the repurchase liability is generally limited to the
original seller of the loan. Future provisions and possible loss
or range of loss may be impacted if actual results are different
from our assumptions regarding economic conditions, home prices
and other matters and may vary by counterparty. The resolution
of the repurchase claims process with the non-GSE counterparties
will likely be a protracted process, and we will vigorously
contest any request for repurchase if we conclude that a valid
basis for the repurchase claim does not exist. For additional
information about representations and warranties, see
Note 9 Representations and Warranties
Obligations and Corporate Guarantees to the Consolidated
Financial Statements and Representations and Warranties
beginning on page 52.
Goodwill
In 2010, we recorded a $10.4 billion goodwill impairment
charge in Global Card Services and a $2.0 billion
goodwill impairment charge in Home Loans &
Insurance. These goodwill impairment charges are non-cash,
non-tax deductible and have no impact on our reported
Tier 1 and tangible equity ratios. Our consumer and small
business card products, including the debit card business, are
part of an integrated platform within Global Card
Services. Based on the provisions of the Financial Reform
Act which limit the interchange fees that may be charged with
respect to electronic debit interchange, we estimate a revenue
loss, beginning in the third quarter of 2011, of approximately
$2.0 billion annually based on current volumes and assuming
limited mitigation within this segment. Accordingly, we
performed a goodwill impairment analysis during the three months
ended September 30, 2010. This analysis indicated that the
implied fair value of the goodwill in Global Card Services
was less than the carrying value, and accordingly, we
recorded a $10.4 billion charge to reduce the carrying
value to fair value.
During the three months ended December 31, 2010, we
performed a goodwill impairment analysis for Home
Loans & Insurance as it was likely that there had
been a decline in its fair value as a result of increased
uncertainties, including existing and potential litigation
exposure and other related risks, higher servicing costs
including loss mitigation efforts, foreclosure related issues
and the redeployment of centralized sales resources to address
servicing needs. This analysis indicated that the implied fair
value of the goodwill in Home Loans & Insurance
was less than the carrying value, and accordingly, we
recorded a $2 billion charge to reduce the carrying value
of goodwill in Home Loans & Insurance.
For additional information on the goodwill impairment charges,
see Complex Accounting Estimates Goodwill and
Intangible Assets beginning on page 110 and
Note 10 Goodwill and Intangible Assets
to the Consolidated Financial Statements.
Review of
Foreclosure Processes
On October 1, 2010, we voluntarily stopped taking
residential mortgage foreclosure proceedings to judgment in
states where foreclosure requires a court order following a
legal proceeding (judicial states). On October 8, 2010, we
stopped foreclosure sales in all states in order to complete an
assessment of the related business processes. These actions
generally did not affect the initiation and processing of
foreclosures prior to judgment, or sale of vacant real estate
owned properties. We took these precautionary steps in order to
ensure our processes for handling foreclosures include the
appropriate controls and quality assurance. Our review has
involved an assessment of the foreclosure process, including a
review of completed foreclosure affidavits in pending
proceedings.
As a result of that review, we identified and implemented
process and control enhancements, and we intend to monitor
ongoing quality results of each process. The process and control
enhancements implemented as a result of our review are intended
to strengthen the controls related to preparation, execution and
notarization of affidavits in judicial states and strengthen our
oversight of lawyers in the attorney network who conduct
foreclosure proceedings on our behalf, both in judicial states
and in states where foreclosures are handled without judicial
supervision (non-judicial states). This oversight includes a
periodic review of a sample of foreclosure files maintained by
these attorneys, and
on-site
reviews of law firms in the attorney network. In addition, our
process and control enhancements for both judicial and
non-judicial states include strengthening the controls related
to the preparation and execution of other foreclosure loan
documentation, including notices of default and pre-foreclosure
loss mitigation affidavits, as well as enhanced associate
training. After these enhancements were put in place, we resumed
foreclosure sales in most non-judicial states during the fourth
quarter of 2010, and expect sales to resume in the remaining
non-judicial states in the
Bank of America
2010 33
first quarter of 2011. We also commenced a rolling process of
preparing, as necessary, affidavits of indebtedness in pending
foreclosure proceedings in order to resume the process of taking
these foreclosure proceedings to judgment in judicial states,
beginning with properties believed to be vacant, and with
properties for which the mortgage was originated on a
non-owner-occupied basis. The process of preparing affidavits in
pending proceedings is expected to continue in the first quarter
of 2011, and could result in prolonged adversary proceedings
that delay certain foreclosure sales.
Law enforcement authorities in all 50 states and the
U.S. Department of Justice (DOJ) and other federal
agencies, including certain bank supervisory authorities,
continue to investigate alleged irregularities in the
foreclosure practices of residential mortgage servicers.
Authorities have publicly stated that the scope of the
investigations extends beyond foreclosure documentation
practices to include mortgage loan modification and loss
mitigation practices. The Corporation is cooperating with these
investigations and is dedicating significant resources to
address these issues. The current environment of heightened
regulatory scrutiny has the potential to subject the Corporation
to inquiries or investigations that could significantly
adversely affect its reputation. Such investigations by state
and federal authorities, as well as any other governmental or
regulatory scrutiny of our foreclosure processes, could result
in material fines, penalties, equitable remedies (including
requiring default servicing or other process changes), or other
enforcement actions, and result in significant legal costs in
responding to governmental investigations and additional
litigation.
While we cannot predict the ultimate impact of the temporary
delay in foreclosure sales, or any issues that may arise as a
result of alleged irregularities with respect to previously
completed foreclosure activities, we may be subject to
additional borrower and non-borrower litigation and governmental
and regulatory scrutiny related to our past and current
foreclosure activities. This scrutiny may extend beyond our
pending foreclosure matters to issues arising out of alleged
irregularities with respect to previously completed foreclosure
activities. Our costs increased in the fourth quarter of 2010
and we expect that additional costs incurred in connection with
our foreclosure process assessment will continue into 2011 due
to the additional resources necessary to perform the foreclosure
process assessment, to revise affidavit filings and to implement
other operational changes. This will likely result in higher
noninterest expense, including higher servicing costs and legal
expenses, in Home Loans & Insurance. It is also
possible that the temporary suspension in foreclosure sales may
result in additional costs and expenses, including costs
associated with the maintenance of properties or possible home
price declines while foreclosures are delayed. In addition,
required process changes could increase our default servicing
costs over the longer term. Finally, the time to complete
foreclosure sales may increase temporarily, which may result in
an increase in nonperforming loans and servicing advances and
may impact the collectability of such advances and the value of
our mortgage servicing rights (MSR) asset, MBS and real estate
owned properties. An increase in the time to complete
foreclosure sales also may inflate the amount of highly
delinquent loans in the Corporations mortgage statistics,
result in increasing levels of consumer nonperforming loans, and
could have a dampening effect on net interest margin as
nonperforming assets increase. Accordingly, delays in
foreclosure sales, including any delays beyond those currently
anticipated, our continued process enhancements and any issues
that may arise out of alleged irregularities in our foreclosure
process could increase the costs associated with our mortgage
operations.
Loan sales have not been materially impacted by the temporary
delay in foreclosure sales or the review of our foreclosure
process. However, delays in foreclosure sales could negatively
impact the valuation of our real estate owned properties and MBS
that are serviced by us. With respect to agency MBS, while there
would be no credit impairment to security holders due to the
guarantee provided by the agencies, the valuation of certain MBS
could be negatively affected under certain scenarios due to
changes in the timing of cash flows. The impact on agency MBS
depends on, among other factors, how
long the underlying loans are affected by foreclosure delays and
would vary among securities. With respect to non-agency MBS,
under certain scenarios the timing and amount of cash flows
could be negatively affected. The ultimate impact on the
non-agency MBS depends on the same factors that impact agency
MBS, as well as the level of credit enhancement, including
subordination. In addition, as a result of our foreclosure
process assessment and related control enhancements that we have
implemented, there may continue to be delays in foreclosure
sales, including a continued backlog of foreclosure proceedings,
and evictions from real estate owned properties.
Certain
Servicing-related Issues
The Corporation and its legacy companies have securitized, and
continue to securitize, a significant portion of the residential
mortgage loans that we have originated or acquired. The
Corporation services a large portion of the loans it or its
subsidiaries have securitized and also services loans on behalf
of third-party securitization vehicles. In addition to
identifying specific servicing criteria, pooling and servicing
arrangements entered into in connection with a securitization or
whole loan sale typically impose standards of care on the
servicer, with respect to its activities, that may include the
obligation to adhere to the accepted servicing practices of
prudent mortgage lenders
and/or to
exercise the degree of care and skill that the servicer employs
when servicing loans for its own account. Many non-agency
residential mortgage-backed securitizations and whole loan
servicing agreements also require the servicer to indemnify the
trustee or other investor for or against failures by the
servicer to perform its servicing obligations or acts or
omissions that involve willful malfeasance, bad faith or gross
negligence in the performance of, or reckless disregard of, the
servicers duties.
Servicing agreements with the GSEs generally provide the GSEs
with broader rights relative to the servicer than are found in
servicing agreements with private investors. For example, each
GSE typically has the right to demand that the servicer
repurchase loans that breach the sellers representations
and warranties made in connection with the initial sale of the
loans even if the servicer was not the seller. The GSEs also
reserve the contractual right to demand indemnification or loan
repurchase for certain servicing breaches although we believe
that repurchase or indemnification demands solely for servicing
breaches are rare. In addition, our agreements with the GSEs and
their first mortgage seller/servicer guides provide for
timelines to resolve delinquent loans through workout efforts or
liquidation, if necessary. In the fourth quarter of 2010, we
recorded an expense of $230 million for compensatory fees
that we expect to be assessed by the GSEs as a result of
foreclosure delays.
With regard to alleged irregularities in foreclosure
process-related activities, a servicer may incur costs or losses
if the servicer elects or is required to re-execute or re-file
documents or take other action in its capacity as a servicer in
connection with pending or completed foreclosures. The servicer
also may incur costs or losses if the validity of a foreclosure
action is challenged by a borrower. If a court were to overturn
a foreclosure because of errors or deficiencies in the
foreclosure process, the servicer may have liability to a title
insurer of the property sold in foreclosure. These costs and
liabilities may not be reimbursable to the servicer. A servicer
may also incur costs or losses associated with private-label
securitizations or other loan investors relating to delays or
alleged deficiencies in processing documents necessary to comply
with state law governing foreclosures.
The servicer may be subject to deductions by insurers for
mortgage insurance or guarantee benefits relating to delays or
alleged deficiencies. Additionally, if the servicer commits a
material breach of its servicing obligations that is not cured
within specified timeframes, including those related to default
servicing and foreclosure, it could be terminated as servicer
under servicing agreements under certain circumstances. Any of
these actions may harm the servicers reputation, increase
its servicing costs or otherwise adversely affect its financial
condition and results of operations.
34 Bank
of America 2010
Mortgage notes, assignments or other documents are often
required to be maintained and are often necessary to enforce
mortgage loans. We have processes in place to satisfy document
delivery and maintenance requirements in accordance with
securitization transaction standards. Additionally, there has
been significant public commentary regarding the common industry
practice of recording mortgages in the name of Mortgage
Electronic Registration Systems, Inc. (MERS), as nominee on
behalf of the note holder, and whether securitization trusts own
the loans purported to be conveyed to them and have valid liens
securing those loans. We believe that the process for mortgage
loan transfers into securitization trusts is based on a
well-established body of law that establishes ownership of
mortgage loans by the securitization trusts and we believe that
we have substantially executed this process. We currently use
the MERS system for a substantial portion of the residential
mortgage loans that we originate, including loans that have been
sold to investors or securitization trusts. Although the GSEs do
not require the use of MERS, the GSEs permit standard forms of
mortgages and deeds of trust that use MERS and we believe that
loans that employ these forms are considered to be properly
documented for the GSEs purposes. We believe that the use
of MERS is a widespread practice in the industry. Certain legal
challenges have been made to the process for transferring
mortgage loans to securitization trusts asserting that having a
mortgagee of record that is different than the holder of the
mortgage note could break the chain of title and
cloud the ownership of the loan. Under the Uniform Commercial
Code, a securitization trust or other investor should have good
title to a mortgage loan if, among other means, either the note
is endorsed in blank or to the named transferee and delivered to
the holder or its designee, which may be a document custodian.
In order to foreclose on a mortgage loan, in certain cases it
may be necessary or prudent for an assignment of the mortgage to
be made to the holder of the note, which in the case of a
mortgage held in the name of MERS as nominee would need to be
completed by MERS. As such, our practice is to obtain
assignments of mortgages from MERS prior to instituting
foreclosure. If certain required documents are missing or
defective, or if the use of MERS is found not to be effective,
we could be obligated to cure
certain defects or in some circumstances otherwise be subject to
additional costs and expenses, which could have a material
adverse effect on our results of operations, cash flows and
financial condition.
Private-label
Residential Mortgage-backed Securities Matters
On October 18, 2010, Countrywide Home Loans Servicing, LP
(which changed its name to BAC Home Loans Servicing, LP), a
wholly-owned subsidiary of the Corporation, received a letter,
in its capacity as servicer under certain pooling and servicing
agreements for 115 private-label residential MBS securitizations
(subsequently increased to 225 securitizations) from investors
purportedly owning interests in RMBS issued in the
securitizations. The letter asserted breaches of certain loan
servicing obligations, including an alleged failure to provide
notice to the trustee and other parties to the pooling and
servicing agreements of breaches of representations and
warranties with respect to mortgage loans included in the
securitization transactions. On November 4, 2010, the
servicer responded in writing to the letter, stating among other
things that the letter had identified no facts indicating that
the servicer had breached any of its obligations, and asking
that the signatories of the letter provide evidence that they
met the minimum voting interest requirements for investor action
contained in the relevant contracts. BAC Home Loans Servicing,
LP and Gibbs & Bruns LLP on behalf of certain
investors including those who signed the letter, as well as The
Bank of New York Mellon, as trustee, have agreed to a short
extension of any time periods commenced by the letter to permit
the parties to explore dialogue around the issues raised. There
are a number of questions about the validity of the assertions
set forth in the letter, including whether these purported
investors have standing to bring these claims. The servicer
intends to challenge the assertions in the letter and to fully
enforce its rights under the relevant contracts.
For additional information about representations and warranties,
see Note 9 Representations and Warranties
Obligations and Corporate Guarantees to the Consolidated
Financial Statements, Representations and Warranties beginning
on page 52 and Item 1A. Risk Factors of this
Form 10-K.
Bank of America
2010 35
Supplemental
Financial Data
We view net interest income and related ratios and analyses
(i.e., efficiency ratio and net interest yield) on a FTE basis.
Although these are non-GAAP measures, we believe managing the
business with net interest income on a FTE basis provides a more
accurate picture of the interest margin for comparative
purposes. To derive the FTE basis, net interest income is
adjusted to reflect tax-exempt income on an equivalent
before-tax basis with a corresponding increase in income tax
expense. For purposes of this calculation, we use the federal
statutory tax rate of 35 percent. This measure ensures
comparability of net interest income arising from taxable and
tax-exempt sources.
As mentioned above, certain performance measures including the
efficiency ratio and net interest yield utilize net interest
income (and thus total revenue) on a FTE basis. The efficiency
ratio measures the costs expended to generate a dollar of
revenue, and net interest yield evaluates how many basis points
we are earning over the cost of funds. During our annual
planning process, we set efficiency targets for the Corporation
and each line of business. We believe the use of these non-GAAP
measures provides additional clarity in assessing our results.
Targets vary by year and by business and are based on a variety
of factors including maturity of the business, competitive
environment, market factors and other items including our risk
appetite.
We also evaluate our business based on the following ratios that
utilize tangible equity, a non-GAAP measure. Return on average
tangible common shareholders equity measures our earnings
contribution as a percentage of common shareholders equity
plus any Common Equivalent Securities (CES) less goodwill and
intangible assets, (excluding MSRs), net of related deferred tax
liabilities. ROTE measures our earnings contribution as a
percentage of
average shareholders equity less goodwill and intangible
assets (excluding MSRs), net of related deferred tax
liabilities. The tangible common equity ratio represents common
shareholders equity plus any CES less goodwill and
intangible assets (excluding MSRs), net of related deferred tax
liabilities divided by total assets less goodwill and intangible
assets (excluding MSRs), net of related deferred tax
liabilities. The tangible equity ratio represents total
shareholders equity less goodwill and intangible assets
(excluding MSRs), net of related deferred tax liabilities
divided by total assets less goodwill and intangible assets
(excluding MSRs), net of related deferred tax liabilities.
Tangible book value per common share represents ending common
shareholders equity less goodwill and intangible assets
(excluding MSRs), net of related deferred tax liabilities
divided by ending common shares outstanding plus the number of
common shares issued upon conversion of common equivalent
shares. These measures are used to evaluate our use of equity
(i.e., capital). In addition, profitability, relationship and
investment models all use ROTE as key measures to support our
overall growth goals.
The aforementioned supplemental data and performance measures
are presented in Tables 6 and 7 and Statistical Tables XII and
XIV. In addition, in Table 7 and Statistical Table XIV, we have
excluded the impact of goodwill impairment charges of
$12.4 billion recorded in 2010 when presenting earnings and
diluted earnings per common share, the efficiency ratio, return
on average assets, return on average common shareholders
equity, return on average tangible common shareholders
equity and ROTE. Accordingly, these are non-GAAP measures.
Statistical Tables XIII and XV provide reconciliations of these
non-GAAP measures with financial measures defined by GAAP. We
believe the use of these non-GAAP measures provides additional
clarity in assessing the results of the Corporation. Other
companies may define or calculate these measures and ratios
differently.
Table
7 Five
Year Supplemental Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions, except per
share information)
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Fully taxable-equivalent basis
data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
$
|
52,693
|
|
|
$
|
48,410
|
|
|
$
|
46,554
|
|
|
$
|
36,190
|
|
|
$
|
35,818
|
|
Total revenue, net of interest expense
|
|
|
|
111,390
|
|
|
|
120,944
|
|
|
|
73,976
|
|
|
|
68,582
|
|
|
|
74,000
|
|
Net interest
yield (1)
|
|
|
|
2.78
|
%
|
|
|
2.65
|
%
|
|
|
2.98
|
%
|
|
|
2.60
|
%
|
|
|
2.82
|
%
|
Efficiency ratio
|
|
|
|
74.61
|
|
|
|
55.16
|
|
|
|
56.14
|
|
|
|
54.71
|
|
|
|
48.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance ratios, excluding
goodwill impairment
charges
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
|
|
|
$
|
0.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
|
|
|
|
0.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Efficiency ratio
|
|
|
|
63.48
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets
|
|
|
|
0.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average common shareholders equity
|
|
|
|
4.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average tangible common shareholders equity
|
|
|
|
7.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average tangible shareholders equity
|
|
|
|
7.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Calculation includes fees earned on
overnight deposits placed with the Federal Reserve of
$368 million and $379 million for 2010 and 2009. The
Corporation did not have fees earned on overnight deposits
during 2008, 2007 and 2006.
|
(2) |
|
Performance ratios are calculated
excluding the impact of goodwill impairment charges of
$12.4 billion recorded during 2010.
|
36 Bank
of America 2010
Core Net Interest
Income
We manage core net interest income which is reported net
interest income on a FTE basis adjusted for the impact of
market-based activities. As discussed in the GBAM
business segment section beginning on page 45, we
evaluate our market-based results and strategies on a total
market-based revenue approach by combining net interest income
and noninterest income for GBAM. In addition, 2009 is
presented on a managed basis which is adjusted for loans that we
originated and subsequently sold into credit card
securitizations. Noninterest income, rather than net interest
income and provision for credit
losses, was recorded for securitized assets as we are
compensated for servicing the securitized assets and we recorded
servicing income and gains or losses on securitizations, where
appropriate. 2010 is presented in accordance with new
consolidation guidance. An analysis of core net interest income,
core average earning assets and core net interest yield on
earning assets, all of which adjust for the impact of these two
non-core items from reported net interest income on a FTE basis,
is shown below. We believe the use of this non-GAAP presentation
provides additional clarity in assessing our results.
Table
8 Core
Net Interest Income
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
Net interest
income
(1)
|
|
|
|
|
|
|
|
|
As
reported (2)
|
|
$
|
52,693
|
|
|
$
|
48,410
|
|
Impact of market-based net interest
income (3)
|
|
|
(4,430
|
)
|
|
|
(6,117
|
)
|
|
|
|
|
|
|
|
|
|
Core net interest income
|
|
|
48,263
|
|
|
|
42,293
|
|
Impact of
securitizations (4)
|
|
|
n/a
|
|
|
|
10,524
|
|
|
|
|
|
|
|
|
|
|
Core net interest
income
|
|
|
48,263
|
|
|
|
52,817
|
|
|
|
|
|
|
|
|
|
|
Average earning assets
|
|
|
|
|
|
|
|
|
As reported
|
|
|
1,897,573
|
|
|
|
1,830,193
|
|
Impact of market-based earning
assets (3)
|
|
|
(504,360
|
)
|
|
|
(481,376
|
)
|
|
|
|
|
|
|
|
|
|
Core average earning assets
|
|
|
1,393,213
|
|
|
|
1,348,817
|
|
Impact of
securitizations (5)
|
|
|
n/a
|
|
|
|
83,640
|
|
|
|
|
|
|
|
|
|
|
Core average earning
assets
|
|
|
1,393,213
|
|
|
|
1,432,457
|
|
|
|
|
|
|
|
|
|
|
Net interest yield
contribution (1)
|
|
|
|
|
|
|
|
|
As
reported (2)
|
|
|
2.78
|
%
|
|
|
2.65
|
%
|
Impact of market-based
activities (3)
|
|
|
0.68
|
|
|
|
0.49
|
|
|
|
|
|
|
|
|
|
|
Core net interest yield on earning assets
|
|
|
3.46
|
|
|
|
3.14
|
|
Impact of securitizations
|
|
|
n/a
|
|
|
|
0.55
|
|
|
|
|
|
|
|
|
|
|
Core net interest yield on
earning assets
|
|
|
3.46
|
%
|
|
|
3.69
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
FTE basis
|
(2) |
|
Balance and calculation include
fees earned on overnight deposits placed with the Federal
Reserve of $368 million and $379 million for 2010 and
2009.
|
(3) |
|
Represents the impact of
market-based amounts included in GBAM.
|
(4) |
|
Represents the impact of
securitizations utilizing actual bond costs which is different
from the business segment view which utilizes funds transfer
pricing methodologies.
|
(5) |
|
Represents average securitized
loans less accrued interest receivable and certain securitized
bonds retained.
|
n/a = not applicable
Core net interest income decreased $4.6 billion to
$48.3 billion for 2010 compared to 2009. The decrease was
driven by lower loan levels compared to managed loan levels in
2009, and lower yields for the discretionary and credit card
portfolios. These impacts were partially offset by lower rates
on deposits.
Core average earning assets decreased $39.2 billion to $1.4
trillion for 2010 compared to 2009. The decrease was primarily
due to lower
commercial loan levels and lower consumer loan levels compared
to managed consumer loan levels in 2009. The impact was
partially offset by increased securities levels in 2010.
Core net interest yield decreased 23 bps to
3.46 percent for 2010 compared to 2009 due to the factors
noted above.
Bank of America
2010 37
Business
Segment Operations
Segment
Description and Basis of Presentation
We report the results of our operations through six business
segments: Deposits, Global Card Services, Home
Loans & Insurance, Global Commercial Banking, GBAM
and GWIM, with the remaining operations recorded in
All Other. Effective January 1, 2010, we realigned
the Global Corporate and Investment Banking portion of the
former Global Banking segment with the former Global
Markets business segment to form GBAM and to
reflect Global Commercial Banking as a standalone
segment. Prior period amounts have been reclassified to conform
to current period presentation.
We prepare and evaluate segment results using certain non-GAAP
methodologies and performance measures, many of which are
discussed in Supplemental Financial Data beginning on
page 36. In addition, return on average tangible
shareholders equity for the segments is calculated as net
income, excluding goodwill impairment charges, divided by
average allocated equity less goodwill and a percentage of
intangible assets (excluding MSRs). We begin by evaluating the
operating results of the segments which by definition exclude
merger and restructuring charges.
The management accounting and reporting process derives segment
and business results by utilizing allocation methodologies for
revenue and expense. The net income derived for the businesses
is dependent upon revenue and cost allocations using an
activity-based costing model, funds transfer pricing, and other
methodologies and assumptions management believes are
appropriate to reflect the results of the business.
Total revenue, net of interest expense, includes net interest
income on a FTE basis and noninterest income. The adjustment of
net interest income to a FTE basis results in a corresponding
increase in income tax expense. The segment results also reflect
certain revenue and expense methodologies that are utilized to
determine net income. For presentation purposes, in segments
where the total of liabilities and equity exceeds assets, which
are generally deposit-taking segments, we allocate assets to
match liabilities. The net interest income of the businesses
includes the results of a funds transfer pricing
process that matches assets and liabilities with similar
interest rate sensitivity and maturity characteristics. Net
interest income of the business segments also includes an
allocation of net interest income generated by our ALM
activities.
Our ALM activities include an overall interest rate risk
management strategy that incorporates the use of interest rate
contracts to manage fluctuations in earnings that are caused by
interest rate volatility. Our goal is to manage interest rate
sensitivity so that movements in interest rates do not
significantly adversely affect net interest income. Our ALM
activities are allocated to the business segments and fluctuate
based on performance. ALM activities include external product
pricing decisions including deposit pricing strategies, the
effects of our internal funds transfer pricing process and the
net effects of other ALM activities.
Certain expenses not directly attributable to a specific
business segment are allocated to the segments. The most
significant of these expenses include data and item processing
costs and certain centralized or shared functions. Data
processing costs are allocated to the segments based on
equipment usage. Item processing costs are allocated to the
segments based on the volume of items processed for each
segment. The costs of certain centralized or shared functions
are allocated based on methodologies that reflect utilization.
Equity is allocated to business segments and related businesses
using a risk-adjusted methodology incorporating each
segments credit, market, interest rate, strategic and
operational risk components. The nature of these risks is
discussed further beginning on page 59. We benefit from the
diversification of risk across these components which is
reflected as a reduction to allocated equity for each segment.
The total amount of average equity reflects both risk-based
capital and the portion of goodwill and intangibles specifically
assigned to the business segments.
For more information on selected financial information for the
business segments and reconciliations to consolidated total
revenue, net income (loss) and year-end total assets, see
Note 26 Business Segment Information to
the Consolidated Financial Statements.
38 Bank
of America 2010
Deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
% Change
|
|
Net interest
income (1)
|
|
$
|
8,128
|
|
|
$
|
7,089
|
|
|
|
15
|
%
|
Noninterest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges
|
|
|
5,058
|
|
|
|
6,796
|
|
|
|
(26
|
)
|
All other income (loss)
|
|
|
(5
|
)
|
|
|
5
|
|
|
|
n/m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
5,053
|
|
|
|
6,801
|
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue, net of interest expense
|
|
|
13,181
|
|
|
|
13,890
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses
|
|
|
201
|
|
|
|
343
|
|
|
|
(41
|
)
|
Noninterest expense
|
|
|
10,831
|
|
|
|
9,501
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
2,149
|
|
|
|
4,046
|
|
|
|
(47
|
)
|
Income tax
expense (1)
|
|
|
797
|
|
|
|
1,470
|
|
|
|
(46
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,352
|
|
|
$
|
2,576
|
|
|
|
(48
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest
yield (1)
|
|
|
1.99
|
%
|
|
|
1.75
|
%
|
|
|
|
|
Return on average equity
|
|
|
5.58
|
|
|
|
10.92
|
|
|
|
|
|
Return on average tangible shareholders equity
|
|
|
21.70
|
|
|
|
46.00
|
|
|
|
|
|
Efficiency
ratio (1)
|
|
|
82.17
|
|
|
|
68.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earning assets
|
|
$
|
409,359
|
|
|
$
|
405,104
|
|
|
|
1
|
%
|
Total assets
|
|
|
435,994
|
|
|
|
431,564
|
|
|
|
1
|
|
Total deposits
|
|
|
411,001
|
|
|
|
406,823
|
|
|
|
1
|
|
Allocated equity
|
|
|
24,204
|
|
|
|
23,594
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year end
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earning assets
|
|
$
|
403,926
|
|
|
$
|
417,713
|
|
|
|
(3
|
)%
|
Total assets
|
|
|
432,334
|
|
|
|
444,612
|
|
|
|
(3
|
)
|
Total deposits
|
|
|
406,856
|
|
|
|
419,583
|
|
|
|
(3
|
)
|
Allocated equity
|
|
|
24,273
|
|
|
|
24,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
n/m = not meaningful
Deposits includes the results of consumer deposit
activities which consist of a comprehensive range of products
provided to consumers and small businesses. In addition,
Deposits includes an allocation of ALM activities. In the
U.S., we serve approximately 57 million consumer and small
business relationships through a franchise that stretches coast
to coast through 32 states and the District of Columbia
utilizing our network of approximately 5,900 banking centers,
18,000 ATMs, nationwide call centers and leading online and
mobile banking platforms.
At December 31, 2010, our active online banking customer
base was 29.3 million subscribers compared to
29.6 million at December 31, 2009, and our active bill
pay users paid $304.3 billion of bills online during 2010
compared to $302.4 billion in 2009.
Our deposit products include traditional savings accounts, money
market savings accounts, CDs and IRAs, and noninterest-and
interest-bearing checking accounts. Deposit products provide a
relatively stable source of funding and liquidity. We earn net
interest spread revenue from investing this liquidity in earning
assets through client-facing lending and ALM activities. The
revenue is allocated to the deposit products using our funds
transfer pricing process which takes into account the interest
rates and maturity characteristics of the deposits. Deposits
also generates fees such as account service fees,
non-sufficient funds fees, overdraft charges and ATM fees.
Deposits includes the net impact of migrating customers
and their related deposit balances between GWIM and
Deposits. For more information on the migration of
customer balances, see GWIM beginning on page 48.
Regulation E became effective July 1, 2010 for new
customers and August 16, 2010 for existing customers. These
rules partially impacted the third quarter of 2010 and fully
impacted the fourth quarter of 2010. In late 2009, we
implemented changes in our overdraft policies which negatively
impacted revenue. These changes were intended to help customers
limit overdraft fees. For more information on Regulation E,
see Regulatory Matters beginning on page 56.
Net income fell $1.2 billion, or 48 percent, to
$1.4 billion due to lower revenue and higher noninterest
expense. Net interest income increased $1.0 billion, or
15 percent, to $8.1 billion as a result of a customer
shift to more liquid products and continued pricing discipline,
partially offset by a lower net interest income allocation
related to ALM activities. Average deposits increased
$4.2 billion from a year ago due to the transfer of certain
deposits from other client managed businesses and organic
growth, partially offset by the expected run-off of higher-cost
legacy Countrywide deposits.
Noninterest income fell $1.7 billion, or 26 percent,
to $5.1 billion, primarily driven by the decline in service
charges due to the implementation of Regulation E and the
impact of our overdraft policy changes. The impact of
Regulation E, which was in effect beginning in the third
quarter and fully in effect in the fourth quarter of 2010, and
overdraft policy changes, which were in effect for the full year
of 2010, was a reduction in service charges during 2010 of
approximately $1.7 billion. In 2011, the incremental
reduction to service charges related to Regulation E and
overdraft policy changes is expected to be approximately $1.1
billion, or a full-year impact of approximately
$2.8 billion, net of identified mitigation actions.
Noninterest expense increased $1.3 billion, or
14 percent, to $10.8 billion as a result of a higher
proportion of costs associated with banking center sales and
service efforts being aligned to Deposits from the other
consumer segments and increased litigation expenses in 2010.
Noninterest expense includes FDIC charges of $896 million
compared to $1.2 billion during 2009 which included a
special FDIC assessment.
Bank of America
2010 39
Global
Card Services
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009 (1)
|
|
|
% Change
|
|
Net interest
income (2)
|
|
$
|
17,821
|
|
|
$
|
19,972
|
|
|
|
(11
|
)%
|
Noninterest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Card income
|
|
|
7,658
|
|
|
|
8,553
|
|
|
|
(10
|
)
|
All other income
|
|
|
142
|
|
|
|
521
|
|
|
|
(73
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
7,800
|
|
|
|
9,074
|
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue, net of interest expense
|
|
|
25,621
|
|
|
|
29,046
|
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses
|
|
|
12,648
|
|
|
|
29,553
|
|
|
|
(57
|
)
|
Goodwill impairment
|
|
|
10,400
|
|
|
|
|
|
|
|
n/m
|
|
All other noninterest expense
|
|
|
6,953
|
|
|
|
7,726
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(4,380
|
)
|
|
|
(8,233
|
)
|
|
|
47
|
|
Income tax expense
(benefit) (2)
|
|
|
2,223
|
|
|
|
(2,972
|
)
|
|
|
175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(6,603
|
)
|
|
$
|
(5,261
|
)
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest
yield (2)
|
|
|
10.10
|
%
|
|
|
9.43
|
%
|
|
|
|
|
Return on average tangible shareholders equity
|
|
|
22.50
|
|
|
|
n/m
|
|
|
|
|
|
Efficiency
ratio (2)
|
|
|
67.73
|
|
|
|
26.60
|
|
|
|
|
|
Efficiency ratio, excluding goodwill impairment
charge (2)
|
|
|
27.14
|
|
|
|
26.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases
|
|
$
|
176,232
|
|
|
$
|
211,981
|
|
|
|
(17
|
)%
|
Total earning assets
|
|
|
176,525
|
|
|
|
211,737
|
|
|
|
(17
|
)
|
Total assets
|
|
|
181,766
|
|
|
|
228,438
|
|
|
|
(20
|
)
|
Allocated equity
|
|
|
36,567
|
|
|
|
41,031
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year end
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases
|
|
$
|
167,367
|
|
|
$
|
196,289
|
|
|
|
(15
|
)%
|
Total earning assets
|
|
|
168,224
|
|
|
|
196,046
|
|
|
|
(14
|
)
|
Total assets
|
|
|
169,762
|
|
|
|
212,668
|
|
|
|
(20
|
)
|
Allocated equity
|
|
|
27,490
|
|
|
|
42,842
|
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Prior year amounts are presented on
a managed basis for comparative purposes. For information on
managed basis, refer to Note 26 Business
Segment Information to the Consolidated Financial Statements
beginning on page 233.
|
(2) |
|
FTE basis
|
n/m = not meaningful
Global Card Services provides a broad offering of
products including U.S. consumer and business card,
consumer lending, international card and debit card to consumers
and small businesses. We provide credit card products to
customers in the U.S., Canada, Ireland, Spain and the U.K. We
offer a variety of co-branded and affinity credit and debit card
products and are one of the leading issuers of credit cards
through endorsed marketing in the U.S. and Europe.
On February 22, 2010, the majority of the provisions of the
CARD Act became effective and negatively impacted net interest
income during 2010 due to restrictions on our ability to reprice
credit cards based on risk and on card income due to
restrictions imposed on certain fees. The 2010 full-year impact
on revenue was approximately $1.5 billion. For more
information on the CARD Act, see Regulatory Matters beginning on
page 56.
The Corporation reports its Global Card Services results
in accordance with new consolidation guidance. Under this new
consolidation guidance, we consolidated all credit card trusts
on January 1, 2010. Accordingly, current year results are
comparable to prior year results that are presented on a managed
basis. For more information on managed basis, refer to
Note 26 Business Segment Information to
the Consolidated Financial Statements and for more information
on the new consolidation guidance, refer to Balance Sheet
Overview Impact of Adopting New Consolidation
Guidance beginning on page 29 and
Note 8 Securitizations and Other Variable
Interest Entities to the Consolidated Financial Statements.
As a result of the Financial Reform Act, which was signed into
law on July 21, 2010, we believe that our debit card
revenue in Global Card Services will be adversely
impacted beginning in the third quarter of 2011. Based on 2010
volumes, our estimate of revenue loss due to the debit card
interchange fee standards to be adopted under the Financial
Reform Act was approximately $2.0 billion annually. This
estimate resulted in a $10.4 billion goodwill impairment
charge for Global Card Services. Depending on the final
rulemaking under the Durbin Amendment, additional goodwill
impairment may occur in Global Card Services. For
additional information, refer to Regulatory
Matters Debit Interchange Fees on page 57 and
Complex Accounting Estimates beginning on page 107.
Global Card Services recorded a net loss of
$6.6 billion primarily due to the $10.4 billion
goodwill impairment charge in 2010. Excluding this charge,
Global Card Services would have reported net income of
$3.8 billion compared to a net loss of $5.3 billion in
the prior year, primarily due to a decrease in provision for
credit losses. Revenue decreased $3.4 billion, or
12 percent, to $25.6 billion, driven by lower average
loans, reduced interest and fee income primarily resulting from
the implementation of the CARD Act and the impact of recording
an incremental reserve of $592 million for future payment
protection insurance claims in the U.K. that have not yet been
asserted. For more information on payment protection insurance,
refer to Note 14 Commitments and
Contingencies to the Consolidated Financial Statements.
Net interest income decreased $2.2 billion, or
11 percent, to $17.8 billion as average loans
decreased $35.7 billion partially offset by lower funding
costs. The decline in average loans was due to the elevated
level of net charge-offs and risk mitigation strategies that
were implemented throughout the recent economic cycle.
Noninterest income decreased $1.3 billion, or
14 percent, to $7.8 billion driven by lower card
income primarily due to the implementation of the CARD Act and
the impact of recording a reserve related to future payment
protection insurance claims. The decrease was partially offset
by higher interchange income during 2010 and the gain on the
sale of our MasterCard equity holdings.
Provision for credit losses improved $16.9 billion due to
lower delinquencies and bankruptcies as a result of the improved
economic environment. This resulted in reserve reductions of
$7.0 billion in 2010 compared to reserve increases of
$3.4 billion in 2009. The prior year included a reserve
addition due to maturing securitizations which had an
unfavorable impact on the 2009 provision expense. In addition,
net charge-offs declined $6.5 billion in 2010 compared to
2009.
Excluding the goodwill impairment charge of $10.4 billion,
noninterest expense decreased $773 million primarily driven
by a higher proportion of costs associated with banking center
sales and service efforts being aligned to Deposits from
Global Card Services.
40 Bank
of America 2010
Home
Loans & Insurance
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
% Change
|
|
Net interest
income (1)
|
|
$
|
4,690
|
|
|
$
|
4,975
|
|
|
|
(6
|
)%
|
Noninterest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage banking income
|
|
|
3,079
|
|
|
|
9,321
|
|
|
|
(67
|
)
|
Insurance income
|
|
|
2,257
|
|
|
|
2,346
|
|
|
|
(4
|
)
|
All other income
|
|
|
621
|
|
|
|
261
|
|
|
|
138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
5,957
|
|
|
|
11,928
|
|
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue, net of interest expense
|
|
|
10,647
|
|
|
|
16,903
|
|
|
|
(37
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses
|
|
|
8,490
|
|
|
|
11,244
|
|
|
|
(24
|
)
|
Goodwill impairment
|
|
|
2,000
|
|
|
|
|
|
|
|
n/m
|
|
All other noninterest expense
|
|
|
13,163
|
|
|
|
11,705
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(13,006
|
)
|
|
|
(6,046
|
)
|
|
|
(115
|
)
|
Income tax
benefit (1)
|
|
|
(4,085
|
)
|
|
|
(2,195
|
)
|
|
|
(86
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(8,921
|
)
|
|
$
|
(3,851
|
)
|
|
|
(132
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest
yield (1)
|
|
|
2.52
|
%
|
|
|
2.58
|
%
|
|
|
|
|
Efficiency
ratio (1)
|
|
|
142.42
|
|
|
|
69.25
|
|
|
|
|
|
Efficiency ratio, excluding goodwill impairment
charge (1)
|
|
|
123.63
|
|
|
|
69.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases
|
|
$
|
129,236
|
|
|
$
|
130,519
|
|
|
|
(1
|
)%
|
Total earning assets
|
|
|
186,455
|
|
|
|
193,152
|
|
|
|
(3
|
)
|
Total assets
|
|
|
226,352
|
|
|
|
230,123
|
|
|
|
(2
|
)
|
Allocated equity
|
|
|
26,170
|
|
|
|
20,530
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year end
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases
|
|
$
|
122,935
|
|
|
$
|
131,302
|
|
|
|
(6
|
)%
|
Total earning assets
|
|
|
173,033
|
|
|
|
188,349
|
|
|
|
(8
|
)
|
Total assets
|
|
|
213,455
|
|
|
|
232,588
|
|
|
|
(8
|
)
|
Allocated equity
|
|
|
23,542
|
|
|
|
27,148
|
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
n/m = not meaningful
Home Loans & Insurance generates revenue by
providing an extensive line of consumer real estate products and
services to customers nationwide. Home Loans &
Insurance products are available to our customers through a
retail network of 5,900 banking centers, mortgage loan officers
in approximately 750 locations and a sales force offering our
customers direct telephone and online access to our products.
These products are also offered through our correspondent loan
acquisition channels. On February 4, 2011, we announced
that we are exiting the reverse mortgage origination business.
In October 2010, we exited the first mortgage wholesale
acquisition channel. These strategic changes were made to allow
greater focus on our retail and correspondent channels.
Home Loans & Insurance products include fixed
and adjustable-rate first-lien mortgage loans for home purchase
and refinancing needs, reverse mortgages, home equity lines of
credit and home equity loans. First mortgage products are either
sold into the secondary mortgage market to investors, while
retaining MSRs and the Bank of America customer relationships,
or are held on our balance sheet in All Other for ALM
purposes. Home Loans & Insurance is not
impacted by the Corporations first mortgage production
retention decisions as Home Loans & Insurance
is compensated for the decision on a management accounting
basis with a corresponding offset recorded in All Other.
Funded home equity lines of credit and home equity loans are
held on the Home Loans & Insurance balance
sheet. In addition, Home Loans & Insurance
offers property, casualty, life, disability and credit
insurance.
On February 3, 2011, we announced that we had entered into
an agreement to sell the lender-placed and voluntary property
and casualty insurance assets and liabilities of Balboa
Insurance Company (Balboa) and affiliated
entities for an upfront cash payment of approximately
$700 million, subject to certain closing and other
adjustments, as well as additional future payments. Balboa is a
wholly-owned subsidiary and part of Home Loans &
Insurance.
Home Loans & Insurance includes the impact of
transferring customers and their related loan balances between
GWIM and Home Loans & Insurance based on
client segmentation thresholds. For more information on the
migration of customer balances, see GWIM beginning on
page 48.
Home Loans & Insurance recorded a net loss of
$8.9 billion compared to a net loss of $3.9 billion in
2009 primarily due to an increase of $4.9 billion in
representations and warranties provision and the
$2.0 billion goodwill impairment charge recorded in 2010,
partially offset by a decline in provision for credit losses of
$2.8 billion. For additional information on representations
and warranties, see Note 9 Representations
and Warranties Obligations and Corporate Guarantees to the
Consolidated Financial Statements and Representations and
Warranties on page 52.
Provision for credit losses decreased $2.8 billion to
$8.5 billion driven by improving portfolio trends which led
to lower reserve additions, including those associated with the
Countrywide PCI home equity portfolio.
Noninterest expense increased $3.5 billion primarily due to
the goodwill impairment charge, higher litigation expense and
default-related and other loss mitigation expenses, partially
offset by lower production expense and insurance losses.
See Complex Accounting Estimates Goodwill and
Intangible Assets beginning on page 110 and
Note 10 Goodwill and Intangible Assets
to the Consolidated Financial Statements for a discussion of
the goodwill impairment charge for Home Loans &
Insurance.
Bank of America
2010 41
Mortgage Banking
Income
Home Loans & Insurance mortgage banking income
is categorized into production and servicing income. Production
income is comprised of revenue from the fair value gains and
losses recognized on our interest rate lock commitments (IRLCs)
and loans
held-for-sale
(LHFS), the related secondary market execution, and costs
related to representations and warranties in the sales
transactions along with other obligations incurred in the sales
of mortgage loans. In addition, production income includes
revenue, which is eliminated in All Other, for transfers
of mortgage loans from Home Loans & Insurance
to the ALM portfolio related to the Corporations
mortgage production retention decisions.
Servicing income includes income earned in connection with
servicing activities and MSR valuation adjustments, net of
economic hedge activities. The costs associated with our
servicing activities are included in noninterest expense.
Servicing activities include collecting cash for principal,
interest and escrow payments from borrowers, disbursing customer
draws for lines of credit and accounting for and remitting
principal and interest payments to investors and escrow payments
to third parties. Our home retention efforts are also part of
our servicing activities, along with responding to customer
inquiries and supervising foreclosures and property
dispositions. In an effort to avoid foreclosure, Bank of America
evaluates various workout options prior to foreclosure sale
which has resulted in elongated default timelines. Our servicing
agreements with certain loan investors require us to comply with
usual and customary standards in the liquidation of delinquent
mortgage loans. Our agreements with the GSEs provide timelines
to complete the liquidation of delinquent loans. In instances
where we fail to meet these timelines, our agreements provide
the GSEs with the option to assess compensatory fees. In 2010,
the Corporation recorded an expense of approximately
$230 million for estimated compensatory fees that it
expects to be assessed by the GSEs as a result of foreclosure
delays. Additionally, we may face demands and claims from
private-label securitization investors concerning alleged
breaches of customary servicing standards. For additional
information on our servicing activities, see Recent
Events Certain Servicing-related Issues beginning on
page 34.
On October 18, 2010, Countrywide Home Loans Servicing, LP
(which changed its name to BAC Home Loans Servicing, LP), a
wholly-owned subsidiary of the Corporation, received a letter,
in its capacity as servicer under certain pooling and servicing
agreements for 115 private-label residential MBS securitizations
(subsequently increased to 225 securitizations). The letter
asserted breaches of certain servicing obligations. For
additional information, see Recent Events
Private-label Residential Mortgage-backed Securities Matters on
page 35.
The table below summarizes the components of mortgage banking
income.
Mortgage
Banking Income
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
Production income:
|
|
|
|
|
|
|
|
|
Core production revenue
|
|
$
|
6,098
|
|
|
$
|
7,352
|
|
Representations and warranties provision
|
|
|
(6,786
|
)
|
|
|
(1,851
|
)
|
|
|
|
|
|
|
|
|
|
Total production income (loss)
|
|
|
(688
|
)
|
|
|
5,501
|
|
|
|
|
|
|
|
|
|
|
Servicing income:
|
|
|
|
|
|
|
|
|
Servicing fees
|
|
|
6,475
|
|
|
|
6,219
|
|
Impact of customer
payments (1)
|
|
|
(3,760
|
)
|
|
|
(4,491
|
)
|
Fair value changes of MSRs, net of economic hedge
results (2)
|
|
|
376
|
|
|
|
1,539
|
|
Other servicing-related revenue
|
|
|
676
|
|
|
|
553
|
|
|
|
|
|
|
|
|
|
|
Total net servicing income
|
|
|
3,767
|
|
|
|
3,820
|
|
|
|
|
|
|
|
|
|
|
Total Home Loans &
Insurance mortgage banking income
|
|
|
3,079
|
|
|
|
9,321
|
|
Other business segments mortgage
banking loss (3)
|
|
|
(345
|
)
|
|
|
(530
|
)
|
|
|
|
|
|
|
|
|
|
Total consolidated mortgage
banking income
|
|
$
|
2,734
|
|
|
$
|
8,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents the change in the market
value of the MSR asset due to the impact of customer payments
received during the year.
|
(2) |
|
Includes sale of MSRs.
|
(3) |
|
Includes the effect of transfers of
mortgage loans from Home Loans & Insurance to
the ALM portfolio in All Other.
|
The production loss of $688 million represented a decrease
of $6.2 billion as representations and warranties provision
increased $4.9 billion to $6.8 billion which includes
provision of $3.0 billion related to the GSE agreements as
well as adjustments to the representations and warranties
liability for other loans sold directly to the GSEs and not
covered by those agreements. Also contributing to the
representations and warranties provision for the year was our
continued evaluation of non-GSE exposure to repurchases and
similar claims, which led to the determination that we have
developed sufficient repurchase experience with certain non-GSE
counterparties to record a liability related to existing and
future projected claims from such counterparties. For additional
information on representations and warranties, see
Note 9 Representations and Warranties
Obligations and Corporate Guarantees to the Consolidated
Financial Statements, Recent Events Representations
and Warranties Liability on page 33 and Representations and
Warranties beginning on page 52. In addition, core
production revenue, which excludes representations and
warranties provision, declined $1.3 billion due to a
decline in volume driven by a drop in the overall size of the
mortgage market and a decline in market share.
Net servicing income remained relatively flat as lower MSR
results, net of hedges, were offset by a lower impact of
customer payments and higher fee income. For additional
information on MSRs and the related hedge instruments, see
Mortgage Banking Risk Management on page 106.
42 Bank
of America 2010
Home
Loans & Insurance Key Statistics
|
|
|
|
|
|
|
|
|
(Dollars in millions, except as
noted)
|
|
2010
|
|
|
2009
|
|
Loan production
|
|
|
|
|
|
|
|
|
Home Loans & Insurance:
|
|
|
|
|
|
|
|
|
First mortgage
|
|
$
|
287,236
|
|
|
$
|
354,506
|
|
Home equity
|
|
|
7,626
|
|
|
|
10,488
|
|
Total Corporation
(1):
|
|
|
|
|
|
|
|
|
First mortgage
|
|
|
298,038
|
|
|
|
378,105
|
|
Home equity
|
|
|
8,437
|
|
|
|
13,214
|
|
|
|
|
|
|
|
|
|
|
Year end
|
|
|
|
|
|
|
|
|
Mortgage servicing portfolio
(in billions) (2)
|
|
$
|
2,057
|
|
|
$
|
2,151
|
|
Mortgage loans serviced for investors (in billions)
|
|
|
1,628
|
|
|
|
1,716
|
|
Mortgage servicing rights:
|
|
|
|
|
|
|
|
|
Balance
|
|
|
14,900
|
|
|
|
19,465
|
|
Capitalized mortgage servicing rights (% of loans serviced for
investors)
|
|
|
92
|
bps
|
|
|
113
|
bps
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In addition to loan production in
Home Loans & Insurance, the remaining first
mortgage and home equity loan production is primarily in
GWIM.
|
(2) |
|
Servicing of residential mortgage
loans, home equity lines of credit, home equity loans and
discontinued real estate mortgage loans.
|
First mortgage production in Home Loans & Insurance
was $287.2 billion in 2010 compared to
$354.5 billion in 2009. The decrease of $67.3 billion
was primarily due to a drop in the overall size of the mortgage
market driven by weaker market demand for both refinance and
purchase transactions combined with a decrease in market share.
Home equity production was $7.6 billion in 2010 compared to
$10.5 billion in 2009. The decrease of $2.9 billion
was primarily due to more stringent underwriting guidelines for
home equity lines of credit and loans as well as lower consumer
demand.
At December 31, 2010, the consumer MSR balance was
$14.9 billion, which represented 92 bps of the related
unpaid principal balance compared to $19.5 billion, or
113 bps of the related unpaid principal balance at
December 31, 2009. The decrease in the consumer MSR balance
was driven by the impact of declining mortgage rates partially
offset by the addition of new MSRs recorded in connection with
sales of loans. In addition, elevated servicing costs, due to
higher personnel expenses associated with default-related
servicing activities, reduced expected cash flows. These factors
together resulted in the 21 bps decrease in capitalized
MSRs as a percentage of loans serviced.
Bank of America
2010 43
Global
Commercial Banking
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
% Change
|
|
Net interest
income (1)
|
|
$
|
8,086
|
|
|
$
|
8,054
|
|
|
|
|
%
|
Noninterest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges
|
|
|
2,105
|
|
|
|
2,078
|
|
|
|
1
|
|
All other income
|
|
|
712
|
|
|
|
1,009
|
|
|
|
(29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
2,817
|
|
|
|
3,087
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue, net of interest expense
|
|
|
10,903
|
|
|
|
11,141
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses
|
|
|
1,971
|
|
|
|
7,768
|
|
|
|
(75
|
)
|
Noninterest expense
|
|
|
3,874
|
|
|
|
3,833
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
5,058
|
|
|
|
(460
|
)
|
|
|
n/m
|
|
Income tax expense
(benefit) (1)
|
|
|
1,877
|
|
|
|
(170
|
)
|
|
|
n/m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
3,181
|
|
|
$
|
(290
|
)
|
|
|
n/m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest
yield (1)
|
|
|
2.94
|
%
|
|
|
3.19
|
%
|
|
|
|
|
Return on average tangible shareholders equity
|
|
|
15.20
|
|
|
|
n/m
|
|
|
|
|
|
Return on average equity
|
|
|
7.64
|
|
|
|
n/m
|
|
|
|
|
|
Efficiency
ratio (1)
|
|
|
35.52
|
|
|
|
34.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases
|
|
$
|
203,339
|
|
|
$
|
229,102
|
|
|
|
(11
|
)%
|
Total earning assets
|
|
|
275,356
|
|
|
|
252,309
|
|
|
|
9
|
|
Total assets
|
|
|
306,302
|
|
|
|
283,936
|
|
|
|
8
|
|
Total deposits
|
|
|
148,565
|
|
|
|
129,832
|
|
|
|
14
|
|
Allocated equity
|
|
|
41,624
|
|
|
|
41,931
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year end
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases
|
|
$
|
193,573
|
|
|
$
|
215,237
|
|
|
|
(10
|
)%
|
Total earning assets
|
|
|
277,551
|
|
|
|
264,855
|
|
|
|
5
|
|
Total assets
|
|
|
310,131
|
|
|
|
295,947
|
|
|
|
5
|
|
Total deposits
|
|
|
161,260
|
|
|
|
147,023
|
|
|
|
10
|
|
Allocated equity
|
|
|
40,607
|
|
|
|
42,975
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
n/m = not meaningful
Global Commercial Banking provides a wide range of
lending-related products and services, integrated working
capital management and treasury solutions to clients through our
network of offices and client relationship teams along with
various product partners. Our clients include business banking
and middle-market companies, commercial real estate firms and
governments, and are generally defined as companies with annual
sales up to $2 billion. Our lending products and services
include commercial loans and commitment facilities, real estate
lending, asset-based lending and indirect consumer loans. Our
capital management and treasury solutions include treasury
management, foreign exchange and short-term investing options.
Global Commercial Banking recorded 2010 net income
of $3.2 billion compared to a 2009 net loss of
$290 million, with the improvement driven by lower credit
costs.
Net interest income remained relatively flat as growth in
average deposits from our existing clients of
$18.7 billion, or 14 percent, was offset by a lower
net interest income allocation related to ALM activities. In
addition, net interest income benefited from credit pricing
discipline, which negated the impact of the $25.8 billion,
or 11 percent, decline in average loan balances.
Noninterest income decreased $270 million, or nine percent,
largely due to additional costs related to our agreement to
purchase certain retail automotive loans. For further
information, see Note 14 Commitments
and Contingencies to the Consolidated Financial Statements.
The provision for credit losses decreased $5.8 billion to
$2.0 billion for 2010 compared to 2009. The decrease was
driven by improvements primarily in the commercial real estate
portfolios reflecting stabilizing values and in the
U.S. commercial portfolio resulting from improved borrower
credit profiles. Additionally, all other portfolios experienced
lower net charge-offs attributable to more stable economic
conditions.
Global Commercial
Banking Revenue
Global Commercial Banking revenues can also be
categorized as treasury services revenue primarily from capital
and treasury management, and business lending revenue derived
from credit related products and services. Treasury services
revenue for 2010 was $4.3 billion, an increase of
$62 million compared to 2009. Revenue growth was driven by
net interest income from increased deposits, partially offset by
lower treasury service charges. As clients manage through
current economic conditions, we have seen usage of certain
treasury services decline and increased conversion of paper to
electronic services. These actions combined with our clients
leveraging compensating balances to offset fees have decreased
treasury service charges. Business lending revenue for 2010 was
$6.6 billion, a decrease of $299 million compared to
2009, largely due to additional costs related to our agreement
to purchase certain retail automotive loans. Despite client
deleveraging in the first half of 2010 and continued low loan
demand, commercial and industrial loan balances began to
stabilize and show moderate growth during the latter part of
2010. Commercial real estate loan balances declined due to
continued client deleveraging and our management of
nonperforming loans. Credit pricing discipline negated the
impact of the decline in average loan balances on net interest
income.
44 Bank
of America 2010
Global
Banking & Markets
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
% Change
|
|
Net interest
income (1)
|
|
$
|
7,989
|
|
|
$
|
9,553
|
|
|
|
(16
|
)%
|
Noninterest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges
|
|
|
2,126
|
|
|
|
2,044
|
|
|
|
4
|
|
Investment and brokerage services
|
|
|
2,441
|
|
|
|
2,662
|
|
|
|
(8
|
)
|
Investment banking income
|
|
|
5,408
|
|
|
|
5,927
|
|
|
|
(9
|
)
|
Trading account profits
|
|
|
9,689
|
|
|
|
11,803
|
|
|
|
(18
|
)
|
All other income
|
|
|
845
|
|
|
|
634
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
20,509
|
|
|
|
23,070
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue, net of interest expense
|
|
|
28,498
|
|
|
|
32,623
|
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses
|
|
|
(155
|
)
|
|
|
1,998
|
|
|
|
(108
|
)
|
Noninterest expense
|
|
|
18,038
|
|
|
|
15,921
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
10,615
|
|
|
|
14,704
|
|
|
|
(28
|
)
|
Income tax
expense (1)
|
|
|
4,296
|
|
|
|
4,646
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,319
|
|
|
$
|
10,058
|
|
|
|
(37
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average equity
|
|
|
12.01
|
%
|
|
|
20.32
|
%
|
|
|
|
|
Return on average tangible shareholders equity
|
|
|
15.05
|
|
|
|
25.82
|
|
|
|
|
|
Efficiency
ratio (1)
|
|
|
63.30
|
|
|
|
48.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trading-related assets
|
|
$
|
499,433
|
|
|
$
|
508,163
|
|
|
|
(2
|
)%
|
Total loans and leases
|
|
|
98,604
|
|
|
|
110,811
|
|
|
|
(11
|
)
|
Total market-based earning assets
|
|
|
504,360
|
|
|
|
481,376
|
|
|
|
5
|
|
Total earning assets
|
|
|
598,613
|
|
|
|
588,252
|
|
|
|
2
|
|
Total assets
|
|
|
758,958
|
|
|
|
778,870
|
|
|
|
(3
|
)
|
Total deposits
|
|
|
109,792
|
|
|
|
104,868
|
|
|
|
5
|
|
Allocated equity
|
|
|
52,604
|
|
|
|
49,502
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year end
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trading-related assets
|
|
$
|
413,563
|
|
|
$
|
410,755
|
|
|
|
1
|
%
|
Total loans and leases
|
|
|
100,010
|
|
|
|
95,930
|
|
|
|
4
|
|
Total market-based earning assets
|
|
|
416,174
|
|
|
|
404,315
|
|
|
|
3
|
|
Total earning assets
|
|
|
509,269
|
|
|
|
498,765
|
|
|
|
2
|
|
Total assets
|
|
|
655,535
|
|
|
|
649,876
|
|
|
|
1
|
|
Total deposits
|
|
|
111,447
|
|
|
|
102,093
|
|
|
|
9
|
|
Allocated equity
|
|
|
49,054
|
|
|
|
53,260
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GBAM provides financial products, advisory services,
financing, securities clearing, settlement and custody services
globally to our institutional investor clients in support of
their investing and trading activities. We also work with our
commercial and corporate clients to provide debt and equity
underwriting and distribution capabilities, merger-related and
other advisory services, and risk management products using
interest rate, equity, credit, currency and commodity
derivatives, foreign exchange, fixed-income and mortgage-related
products. As a result of our market-making activities in these
products, we may be required to manage positions in government
securities, equity and equity-linked securities, high-grade and
high-yield corporate debt securities, commercial paper, MBS and
asset-backed securities (ABS). Underwriting debt and equity
issuances, securities research and certain market-based
activities are executed through our global broker/dealer
affiliates which are our primary dealers in several countries.
GBAM is a leader in the global distribution of
fixed-income, currency and energy commodity products and
derivatives. GBAM also has one of the largest equity
trading operations in the world and is a leader in the
origination and distribution of equity and equity-related
products. Our corporate banking services provide a wide range of
lending-related products and services, integrated working
capital management and treasury solutions to clients through our
network of offices and client relationship teams along with
various product partners. Our corporate clients are generally
defined as companies with annual sales greater than
$2 billion.
GBAM also includes the results of our merchant processing
joint venture, Banc of America Merchant Services, LLC.
In 2009, we entered into a joint venture agreement with First
Data Corporation (First Data) to form Banc of America
Merchant Services, LLC. The joint venture provides payment
solutions, including credit, debit and prepaid cards, and check
and
e-commerce
payments to merchants ranging from small businesses to corporate
and commercial clients worldwide. In addition to Bank of America
and First Data, the remaining stake was initially held by a
third party. During 2010, the third party sold its interest to
the joint venture, thus increasing the Corporations
ownership interest in the joint venture to 49 percent. For
additional information on the joint venture agreement, see
Note 5 Securities to the Consolidated
Financial Statements.
Net income decreased $3.7 billion to $6.3 billion due
to a $4.1 billion decline in revenues and an increase in
noninterest expenses of $2.1 billion. This was partially
offset by lower provision expense reflecting improvement in
borrower credit profiles. Additionally, income tax expense was
negatively affected from a change in the U.K. corporate income
tax rate that impacted the carrying value of the deferred tax
asset by approximately $390 million.
Net interest income decreased $1.6 billion to
$8.0 billion due to tighter spreads on trading related
assets and lower average loan and lease balances, partially
offset by higher earned spreads on deposits. The
$12.2 billion, or 11 percent, decline in average loans
and leases was driven by reduced client demand. Net interest
income is comprised of both markets-based revenue
Bank of America
2010 45
from our trading activities and banking-based revenue which is
related to our credit and treasury service products.
Noninterest income decreased $2.6 billion due in part to
the prior year gain of $3.8 billion related to the
contribution of the merchant processing business to the joint
venture. While overall sales and trading revenue were flat
year-over-year,
the market in 2009 was more favorable but results were muted by
losses on legacy positions. Noninterest expense increased
$2.1 billion driven mainly by higher compensation costs
from investments in infrastructure, professional fees and
litigations expense.
Components of
Global Banking & Markets
Sales and Trading
Revenue
Sales and trading revenue is segregated into fixed-income
including investment and non-investment grade corporate debt
obligations, commercial mortgage-backed securities (CMBS), RMBS
and CDOs; currencies including interest rate and foreign
exchange contracts; commodities including primarily futures,
forwards, swaps and options; and equity income from
equity-linked derivatives and cash equity activity.
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
Sales and trading revenue
(1,
2)
|
|
|
|
|
|
|
|
|
Fixed income, currencies and commodities (FICC)
|
|
$
|
13,158
|
|
|
$
|
12,723
|
|
Equity income
|
|
|
4,145
|
|
|
|
4,902
|
|
|
|
|
|
|
|
|
|
|
Total sales and trading
revenue
|
|
$
|
17,303
|
|
|
$
|
17,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes $274 million and
$353 million of net interest income on a FTE basis for 2010
and 2009.
|
(2) |
|
Includes $2.4 billion and
$2.6 billion of investment and brokerage services revenue
for 2010 and 2009.
|
Sales and trading revenue decreased $322 million, or two
percent, to $17.3 billion in 2010 compared to 2009 due to
increased investor risk aversion and more favorable market
conditions in the prior year. We recorded net credit spread
gains on derivative liabilities during 2010 of $242 million
compared to losses of $801 million in 2009.
FICC revenue increased $435 million to $13.2 billion
due to significantly lower market disruption charges, partially
offset by lower revenue in our rates and currencies, commodities
and credit products due to diminished client activity and
European debt deterioration. Gains on legacy assets, primarily
in trading account profits (losses) and other income (loss),
were $321 million for 2010 compared to write-downs of
$3.8 billion in 2009. Legacy losses in the prior year were
primarily driven by our CMBS, CDO and leveraged finance exposure.
Equity income was $4.1 billion in 2010 compared to
$4.9 billion in 2009 driven by a decline in client flows
and market conditions in the derivatives business.
Investment
Banking Income
Product specialists within GBAM underwrite and distribute
debt and equity issuances and certain other loan products, and
provide advisory services. To provide a complete discussion of
our consolidated investment banking income, the table below
presents total investment banking income for the Corporation of
which, 93 percent in 2010 and 94 percent in 2009 is
recorded in GBAM with the remainder reported in GWIM
and Global Commercial Banking.
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
Investment banking
income
|
|
|
|
|
|
|
|
|
Advisory
(1)
|
|
$
|
1,019
|
|
|
$
|
1,167
|
|
Debt issuance
|
|
|
3,267
|
|
|
|
3,124
|
|
Equity issuance
|
|
|
1,499
|
|
|
|
1,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,785
|
|
|
|
6,255
|
|
Offset for intercompany
fees (2)
|
|
|
(265
|
)
|
|
|
(704
|
)
|
|
|
|
|
|
|
|
|
|
Total investment banking
income
|
|
$
|
5,520
|
|
|
$
|
5,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Advisory includes fees on debt and
equity advisory services and mergers and acquisitions.
|
(2) |
|
Represents the offset to fees paid
on the Corporations transactions.
|
Equity issuance fees decreased $465 million in 2010
primarily reflecting lower levels of industry-wide activity and
a decline in market-based revenue pools. Debt issuance fees
increased $143 million consistent with a five percent
increase in global fee pools in 2010. Strong performance within
debt issuance was mainly driven by higher revenues within
leveraged finance. Advisory fees decreased $148 million
during 2010.
Global Corporate
Banking
Client relationship teams along with product partners work with
our customers to provide them with a wide range of
lending-related products and services, integrated working
capital management and treasury solutions through the
Corporations global network of offices. Global Corporate
Banking lending revenues of $3.4 billion for 2010 increased
$567 million compared to 2009. The increase in 2010 is
primarily due to higher fees and the negative impact of hedge
results in 2009. Treasury services revenue of $2.8 billion
for 2010 decreased $3.9 billion primarily due to a
$3.8 billion pre-tax gain in the prior year related to the
contribution of the merchant processing business to a joint
venture. Equity investment income from the joint venture was
$133 million for 2010. During 2010, we sold our trust
administration business and in connection with the sale provided
certain commitments to the acquirer. See
Note 14 Commitments and Contingencies
to the Consolidated Financial Statements for additional
information.
46 Bank
of America 2010
Collateralized
Debt Obligation Exposure
CDO vehicles hold diversified pools of fixed-income securities
and issue multiple tranches of debt securities including
commercial paper, mezzanine and equity securities. Our
CDO-related exposure can be divided into funded and unfunded
super senior liquidity commitment exposure, other super senior
exposure (i.e., cash positions and derivative contracts),
warehouse, and sales and trading positions. For more information
on our CDO positions, see Note 8
Securitizations and Other Variable Interest Entities to the
Consolidated Financial Statements. Super senior exposure
represents the most senior class of commercial paper or notes
that are issued by the CDO vehicles. These financial instruments
benefit from the subordination of all other securities issued by
the CDO vehicles.
In 2010, we incurred $573 million of losses resulting from
our CDO-related exposure compared to $2.2 billion in
CDO-related losses in 2009. This included $357 million in
2010 related to counterparty risk on our CDO-related exposure
compared to $910 million in 2009. Also included in these
losses were
other-than-temporary
impairment (OTTI) write-downs of $251 million in 2010
compared to losses of $1.2 billion in 2009 related to CDOs
and retained positions classified as AFS debt securities.
As presented in the table below, at December 31, 2010, our
hedged and unhedged super senior CDO exposure before
consideration of insurance, net of write-downs, was
$2.0 billion compared to $3.6 billion at
December 31, 2009.
Super Senior
Collateralized Debt Obligation Exposure
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
|
Retained
|
|
|
Total
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
|
Subprime (1)
|
|
|
Positions
|
|
|
Subprime
|
|
|
Non-Subprime (2)
|
|
|
Total
|
|
Unhedged
|
|
|
$
|
721
|
|
|
$
|
156
|
|
|
$
|
877
|
|
|
$
|
338
|
|
|
$
|
1,215
|
|
Hedged (3)
|
|
|
|
583
|
|
|
|
|
|
|
|
583
|
|
|
|
189
|
|
|
|
772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
1,304
|
|
|
$
|
156
|
|
|
$
|
1,460
|
|
|
$
|
527
|
|
|
$
|
1,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Classified as subprime when
subprime consumer real estate loans make up at least
35 percent of the original net exposure value of the
underlying collateral.
|
(2) |
|
Includes highly-rated
collateralized loan obligations and CMBS super senior exposure.
|
(3) |
|
Hedged amounts are presented at
carrying value before consideration of the insurance.
|
We value our CDO structures using market-standard models to
model the specific collateral composition and cash flow
structure of each deal. Key inputs to the models are prepayment
rates, default rates and severities for each collateral type,
and other relevant contractual features. Unrealized losses
recorded in accumulated OCI on super senior cash positions and
retained positions from liquidated CDOs in aggregate decreased
$382 million during 2010 to $466 million at
December 31, 2010.
At December 31, 2010, total super senior exposure of
$2.0 billion was marked at 18 percent, including
$156 million of retained positions from
liquidated CDOs marked at 42 percent, $527 million of
non-subprime exposure marked at 39 percent and the
remaining $1.3 billion of subprime exposure marked at
14 percent of the original exposure amounts.
The table below presents our original total notional,
mark-to-market
receivable and credit valuation adjustment for credit default
swaps and other positions with monolines. The receivable for
super senior CDOs reflects hedge gains recorded from inception
of the contracts in connection with write-downs on the super
senior CDOs in the table above.
Credit Default
Swaps with Monoline Financial Guarantors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
December 31, 2009
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
Super Senior
|
|
|
Guaranteed
|
|
|
|
|
|
|
Super Senior
|
|
|
Guaranteed
|
|
|
|
|
(Dollars in millions)
|
|
|
CDOs
|
|
|
Positions
|
|
|
Total
|
|
|
|
CDOs
|
|
|
Positions
|
|
|
Total
|
|
Notional
|
|
|
$
|
3,241
|
|
|
$
|
35,183
|
|
|
$
|
38,424
|
|
|
|
$
|
3,757
|
|
|
$
|
38,834
|
|
|
$
|
42,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark-to-market
or guarantor receivable
|
|
|
$
|
2,834
|
|
|
$
|
6,367
|
|
|
$
|
9,201
|
|
|
|
$
|
2,833
|
|
|
$
|
8,256
|
|
|
$
|
11,089
|
|
Credit valuation adjustment
|
|
|
|
(2,168
|
)
|
|
|
(3,107
|
)
|
|
|
(5,275
|
)
|
|
|
|
(1,873
|
)
|
|
|
(4,132
|
)
|
|
|
(6,005
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
666
|
|
|
$
|
3,260
|
|
|
$
|
3,926
|
|
|
|
$
|
960
|
|
|
$
|
4,124
|
|
|
$
|
5,084
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit valuation adjustment %
|
|
|
|
77
|
%
|
|
|
49
|
%
|
|
|
57
|
%
|
|
|
|
66
|
%
|
|
|
50
|
%
|
|
|
54
|
%
|
(Write-downs) gains
|
|
|
$
|
(386
|
)
|
|
$
|
362
|
|
|
$
|
(24
|
)
|
|
|
$
|
(961
|
)
|
|
$
|
98
|
|
|
$
|
(863
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total monoline exposure, net of credit valuation adjustments,
decreased $1.2 billion during 2010. This decrease was
driven by positive valuation adjustments on legacy assets and
terminated monoline contracts.
Other CDO
Exposure
With the Merrill Lynch acquisition, we acquired a loan with a
carrying value of $4.2 billion as of December 31, 2010
that is collateralized by U.S. super senior ABS CDOs.
Merrill Lynch originally provided financing to the borrower
for an amount equal to approximately 75 percent of the fair
value of the collateral. The loan, which is recorded in All
Other, has full recourse to the borrower and all scheduled
payments on the loan have been received. Events of default under
the loan are customary events of default, including failure to
pay interest when due and failure to pay principal at maturity.
Collateral for the loan is excluded from our CDO exposure
discussions and the applicable tables.
Bank of America
2010 47
Global
Wealth & Investment Management
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
% Change
|
|
Net interest
income (1)
|
|
$
|
5,831
|
|
|
$
|
5,988
|
|
|
|
(3
|
)%
|
Noninterest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment and brokerage services
|
|
|
8,832
|
|
|
|
8,425
|
|
|
|
5
|
|
All other income
|
|
|
2,008
|
|
|
|
1,724
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
10,840
|
|
|
|
10,149
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue, net of interest expense
|
|
|
16,671
|
|
|
|
16,137
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses
|
|
|
646
|
|
|
|
1,061
|
|
|
|
(39
|
)
|
Noninterest expense
|
|
|
13,598
|
|
|
|
12,397
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
2,427
|
|
|
|
2,679
|
|
|
|
(9
|
)
|
Income tax
expense (1)
|
|
|
1,080
|
|
|
|
963
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,347
|
|
|
$
|
1,716
|
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest
yield (1)
|
|
|
2.37
|
%
|
|
|
2.64
|
%
|
|
|
|
|
Return on average tangible shareholders equity
|
|
|
18.40
|
|
|
|
27.63
|
|
|
|
|
|
Return on average equity
|
|
|
7.44
|
|
|
|
10.35
|
|
|
|
|
|
Efficiency
ratio (1)
|
|
|
81.57
|
|
|
|
76.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases
|
|
$
|
99,491
|
|
|
$
|
103,384
|
|
|
|
(4
|
)%
|
Total earning assets
|
|
|
245,812
|
|
|
|
226,856
|
|
|
|
8
|
|
Total assets
|
|
|
266,638
|
|
|
|
249,887
|
|
|
|
7
|
|
Total deposits
|
|
|
236,350
|
|
|
|
225,979
|
|
|
|
5
|
|
Allocated equity
|
|
|
18,098
|
|
|
|
16,582
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year end
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases
|
|
$
|
101,020
|
|
|
$
|
99,571
|
|
|
|
1
|
%
|
Total earning assets
|
|
|
275,598
|
|
|
|
227,796
|
|
|
|
21
|
|
Total assets
|
|
|
297,301
|
|
|
|
250,963
|
|
|
|
18
|
|
Total deposits
|
|
|
266,444
|
|
|
|
224,839
|
|
|
|
19
|
|
Allocated equity
|
|
|
18,349
|
|
|
|
17,730
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GWIM consists of three primary businesses: Merrill
Lynch Global Wealth Management (MLGWM), U.S. Trust, Bank of
America Private Wealth Management (U.S. Trust) and
Retirement Services.
MLGWMs advisory business provides a high-touch
client experience through a network of approximately 15,500
financial advisors focused on clients with more than $250,000 in
total investable assets. MLGWM also includes Merrill
Edge, a new integrated investing and banking service which is
targeted at clients with less than $250,000 in total assets.
Merrill Edge provides team-based investment advice and guidance,
brokerage services, a self-directed online investing platform
and key banking capabilities including access to the
Corporations branch network and ATMs. In addition,
MLGWM includes the Private Banking &
Investments Group.
U.S. Trust, together with MLGWMs
Private Banking & Investments Group, provides
comprehensive wealth management solutions targeted at wealthy
and ultra-wealthy clients with investable assets of more than
$5 million, as well as customized solutions to meet
clients wealth structuring, investment management, trust
and banking needs, including specialty asset management services.
Retirement Services partners with financial advisors to
provide institutional and personal retirement solutions
including investment management,
administration, recordkeeping and custodial services for 401(k),
pension, profit-sharing, equity award and non-qualified deferred
compensation plans. Retirement Services also provides
comprehensive investment advisory services to individuals, small
to large corporations and pension plans. Included in
Retirement Services results is the consolidation of
a collective investment fund that did not have a significant
impact on our consolidated results. For additional information,
see Note 8 Securitizations and Other
Variable Interest Entities to the Consolidated Financial
Statements.
GWIM results also include the BofA Global Capital
Management (BACM) business, which is comprised primarily of the
cash and liquidity asset management business that Bank of
America retained following the sale of the Columbia Management
long-term asset management business on May 1, 2010. The
historical results of Columbia Managements long-term asset
management business were transferred to All Other along
with the Corporations economic ownership interest in
BlackRock.
Revenue from MLGWM was $13.1 billion, up four
percent in 2010 compared to 2009. Revenue from
U.S. Trust was $2.7 billion, up five percent in
2010 compared to 2009. Revenue from Retirement Services
was $950 million, up four percent compared to 2009.
48 Bank
of America 2010
GWIM results include the impact of migrating clients and
their related deposit and loan balances to or from
Deposits, Home Loans & Insurance and the
ALM portfolio as presented in the table below. The directional
shift of total deposits migrated was mainly due to client
segmentation threshold changes. Subsequent to the date of
migration, the associated net interest income, noninterest
income and noninterest expense are recorded in the business to
which the clients migrated.
Migration
Summary
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
Average
|
|
|
|
|
|
|
|
|
Total deposits GWIM from (to) Deposits
|
|
$
|
3,086
|
|
|
$
|
(30,638
|
)
|
Total loans GWIM to Home Loans &
Insurance and the ALM portfolio
|
|
|
(1,405
|
)
|
|
|
(12,033
|
)
|
Year end
|
|
|
|
|
|
|
|
|
Total deposits GWIM from (to) Deposits
|
|
$
|
7,232
|
|
|
$
|
(42,521
|
)
|
Total loans GWIM to Home Loans &
Insurance and the ALM portfolio
|
|
|
(1,625
|
)
|
|
|
(17,241
|
)
|
|
|
|
|
|
|
|
|
|
Net income decreased $369 million, or 22 percent, to
$1.3 billion driven in part by higher noninterest expense,
the tax-related effect of the sale of the Columbia Management
long-term asset management business and lower net interest
income, partially offset by higher noninterest income and lower
credit costs. Net interest income decreased $157 million,
or three percent, to $5.8 billion as the positive impact of
higher deposit levels was more than offset by lower revenue from
corporate ALM activity. Noninterest income increased
$691 million, or seven percent, to $10.8 billion
primarily due to higher asset management fees driven by stronger
markets, continued long-term assets under management flows and
higher transactional activity. Provision for credit losses
decreased $415 million, or 39 percent, to
$646 million driven by stabilization of the portfolios and
the recognition of a single large
commercial charge-off in 2009. Noninterest expense increased
$1.2 billion, or 10 percent, to $13.6 billion driven
by increases in revenue-related expenses, higher support costs
and personnel costs associated with further investment in the
business.
Client
Balances
The table below presents client balances which consist of assets
under management, client brokerage assets, assets in custody,
client deposits, and loans and leases.
Client
Balances by Type
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(Dollars in millions)
|
|
|
2010
|
|
|
2009
|
|
Assets under management
|
|
|
$
|
643,955
|
|
|
$
|
749,851
|
|
Client brokerage
assets (1)
|
|
|
|
1,480,231
|
|
|
|
1,402,977
|
|
Assets in custody
|
|
|
|
126,203
|
|
|
|
144,012
|
|
Client deposits
|
|
|
|
266,444
|
|
|
|
224,839
|
|
Loans and leases
|
|
|
|
101,020
|
|
|
|
99,571
|
|
Less: Client brokerage assets, assets in custody and deposits
included in assets under management
|
|
|
|
(379,310
|
)
|
|
|
(348,738
|
)
|
|
|
|
|
|
|
|
|
|
|
Total client
balances (2)
|
|
|
$
|
2,238,543
|
|
|
$
|
2,272,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Client brokerage assets include
non-discretionary brokerage and fee-based assets.
|
(2) |
|
2009 balance includes the Columbia
Management long-term asset management business representing
$114.6 billion, net of eliminations, which was sold on
May 1, 2010.
|
The decrease in client balances was due to the sale of the
Columbia Management long-term asset management business,
outflows in MLGWMs non-fee based brokerage assets
and outflows in BACMs money market assets due to the
continued low rate environment, partially offset by higher
market levels and inflows in client deposits, long-term assets
under management (AUM) and fee-based brokerage assets.
Bank of America
2010 49
All
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009 (2)
|
|
|
% Change
|
|
Net interest
income (1)
|
|
$
|
148
|
|
|
$
|
2,029
|
|
|
|
(93
|
)%
|
Noninterest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Card income
|
|
|
2
|
|
|
|
1,138
|
|
|
|
(100
|
)
|
Equity investment income
|
|
|
4,532
|
|
|
|
10,589
|
|
|
|
(57
|
)
|
Gains on sales of debt securities
|
|
|
2,314
|
|
|
|
4,437
|
|
|
|
(48
|
)
|
All other loss
|
|
|
(1,127
|
)
|
|
|
(5,590
|
)
|
|
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
5,721
|
|
|
|
10,574
|
|
|
|
(46
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue, net of interest expense
|
|
|
5,869
|
|
|
|
12,603
|
|
|
|
(53
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses
|
|
|
4,634
|
|
|
|
8,002
|
|
|
|
(42
|
)
|
Merger and restructuring charges
|
|
|
1,820
|
|
|
|
2,721
|
|
|
|
(33
|
)
|
All other noninterest expense
|
|
|
2,431
|
|
|
|
2,909
|
|
|
|
(16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(3,016
|
)
|
|
|
(1,029
|
)
|
|
|
(193
|
)
|
Income tax benefit
(1)
|
|
|
(4,103
|
)
|
|
|
(2,357
|
)
|
|
|
(74
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,087
|
|
|
$
|
1,328
|
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases
|
|
$
|
250,956
|
|
|
$
|
260,755
|
|
|
|
(4
|
)%
|
Total
assets (3)
|
|
|
263,592
|
|
|
|
338,703
|
|
|
|
(22
|
)
|
Total deposits
|
|
|
55,769
|
|
|
|
88,736
|
|
|
|
(37
|
)
|
Allocated equity
|
|
|
33,964
|
|
|
|
51,475
|
|
|
|
(34
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year end
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases
|
|
$
|
255,155
|
|
|
$
|
250,868
|
|
|
|
2
|
%
|
Total
assets (3)
|
|
|
186,391
|
|
|
|
233,293
|
|
|
|
(20
|
)
|
Total deposits
|
|
|
38,162
|
|
|
|
65,434
|
|
|
|
(42
|
)
|
Allocated equity
|
|
|
44,933
|
|
|
|
23,303
|
|
|
|
92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
FTE basis
|
(2) |
|
2009 is presented on an as adjusted
basis for comparative purposes, which excludes the
securitization offset. For more information on All Other,
including the securitization offset, see
Note 26 Business Segment Information to
the Consolidated Financial Statements.
|
(3) |
|
Includes elimination of
segments excess asset allocations to match liabilities
(i.e., deposits) of $621.3 billion and $537.1 billion
for 2010 and 2009, and $645.8 billion and
$586.0 billion at December 31, 2010 and 2009.
|
The 2009 presentation above of All Other excludes the
securitization offset to make it comparable with the 2010
presentation. In 2009, Global Card Services was presented
on a managed basis with the difference between managed and held
reported as the securitization offset. With the adoption of new
consolidation guidance on January 1, 2010, we consolidated
all credit card securitizations that were previously
unconsolidated, such that All Other no longer includes
the securitization offset. For additional information on the
securitization offset included in All Other, see
Note 26 Business Segment Information to
the Consolidated Financial Statements.
All Other, as presented above, consists of two broad
groupings, Equity Investments and
Other. Equity Investments includes
Corporate Investments, Global Principal Investments and
Strategic Investments. Other can be segregated into the
following categories: liquidating businesses, merger and
restructuring charges, ALM functions (i.e., residential mortgage
portfolio and investment securities) and related activities
(i.e., economic hedges, fair value option on structured
liabilities), and the impact of certain allocation
methodologies. For additional information on the other
activities included in All Other, see
Note 26 Business Segment Information to
the Consolidated Financial Statements.
The tables below present the components of All Others
equity investments at December 31, 2010 and 2009, and
also a reconciliation of All Others equity
investment income to the total consolidated equity investment
income for 2010 and 2009.
Equity
Investments
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
Corporate Investments
|
|
$
|
|
|
|
$
|
2,731
|
|
Global Principal Investments
|
|
|
11,656
|
|
|
|
14,071
|
|
Strategic and other investments
|
|
|
22,545
|
|
|
|
27,838
|
|
|
|
|
|
|
|
|
|
|
Total equity investments
included in All
Other
|
|
$
|
34,201
|
|
|
$
|
44,640
|
|
|
|
|
|
|
|
|
|
|
Equity
Investment Income
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
Corporate Investments
|
|
$
|
(293
|
)
|
|
$
|
(88
|
)
|
Global Principal Investments
|
|
|
2,304
|
|
|
|
1,222
|
|
Strategic and other investments
|
|
|
2,521
|
|
|
|
9,455
|
|
|
|
|
|
|
|
|
|
|
Total equity investment income included in All Other
|
|
|
4,532
|
|
|
|
10,589
|
|
Total equity investment income included in the business segments
|
|
|
728
|
|
|
|
(575
|
)
|
|
|
|
|
|
|
|
|
|
Total consolidated equity
investment income
|
|
$
|
5,260
|
|
|
$
|
10,014
|
|
|
|
|
|
|
|
|
|
|
50 Bank
of America 2010
In 2010, the $2.7 billion Corporate Investments equity
securities portfolio, which consisted of highly liquid
publicly-traded equity securities, was sold as a result of a
change in our investment portfolio objectives shifting more to
interest earnings and reducing our exposure to equity market
risk, which contributed to the $293 million loss in 2010.
Global Principal Investments (GPI) is comprised of a diversified
portfolio of investments in private equity, real estate and
other alternative investments. These investments are made either
directly in a company or held through a fund with related income
recorded in equity investment income. GPI had unfunded equity
commitments of $1.4 billion and $2.5 billion at
December 31, 2010 and 2009, related to certain of these
investments. During 2010, we sold our exposure of
$2.9 billion in certain private equity funds, comprised of
$1.5 billion in funded exposure and $1.4 billion in
unfunded commitments in these funds as we continue to reduce our
equity exposure.
Affiliates of the Corporation may, from time to time, act as
general partner, fund manager
and/or
investment advisor to certain Corporation-sponsored real estate
private equity funds. In this capacity, these affiliates manage
and/or
provide investment advisory services to such real estate private
equity funds primarily for the benefit of third-party
institutional and private clients. These activities, which are
recorded in GPI, inherently involve risk to us and to the fund
investors, and in certain situations may result in losses. In
2010, we recorded a loss of $163 million related to a
consolidated real estate private equity fund for which we were
the general partner and investment advisor. In late 2010, the
general partner and investment advisor responsibilities were
transferred to an independent third-party asset manager.
Strategic Investments includes primarily our investment in CCB
of $19.7 billion as well as our $2.6 billion remaining
investment in BlackRock. At December 31, 2010, we owned
approximately 10 percent, or 25.6 billion common
shares of CCB. During 2010, we sold certain rights related to
our investment in CCB resulting in a gain of $432 million.
Also during 2010, we sold our Itaú Unibanco and Santander
equity investments resulting in a net gain of approximately
$800 million and a portion of our interest in BlackRock
resulting in a gain of $91 million.
All Other reported net income of $1.1 billion in
2010 compared to $1.3 billion in 2009 with the decline due
to decreases in net interest income and noninterest income
compared to the prior year. The decrease in net interest income
was driven by a $1.4 billion lower funding differential on
certain securitizations and the impact of capital raises
occurring throughout 2009 that were not allocated to the
businesses. Noninterest income decreased $4.9 billion, as
the prior year included a $7.3 billion gain resulting from
sales of shares of CCB and an increase of $1.4 billion on
net gains on the sale of debt securities. This was offset by net
negative fair value adjustments of $4.9 billion on
structured liabilities in 2009 compared to a net positive
adjustment of $18 million in 2010 and higher valuation
adjustments and gains on sales of select investments in GPI.
Also in 2010, we sold our investments in Itaú Unibanco and
Santander resulting in a net gain of
approximately $800 million, as well as the gains on CCB and
BlackRock. For more information on the sales of these
investments, see Note 5 Securities to
the Consolidated Financial Statements.
Provision for credit losses decreased $3.4 billion to
$4.6 billion due to improving portfolio trends in the
residential mortgage portfolio partially offset by further
deterioration in the Countrywide purchased credit-impaired
discontinued real estate portfolio.
The income tax benefit in 2010 was $4.1 billion compared to
$2.4 billion in 2009, driven by an increase in the pre-tax
loss as well as the release of a higher portion of a deferred
tax asset valuation allowance.
During 2010, we completed the sale of First Republic at book
value and as a result, we removed $17.4 billion of loans
and $17.8 billion of deposits from the Corporations
Consolidated Balance Sheet.
Off-Balance
Sheet Arrangements and Contractual Obligations
We have contractual obligations to make future payments on debt
and lease agreements. Additionally, in the normal course of
business, we enter into contractual arrangements whereby we
commit to future purchases of products or services from
unaffiliated parties. Obligations that are legally binding
agreements whereby we agree to purchase products or services
with a specific minimum quantity defined at a fixed, minimum or
variable price over a specified period of time are defined as
purchase obligations. Included in purchase obligations are
commitments to purchase loans of $2.6 billion and vendor
contracts of $7.1 billion. The most significant vendor
contracts include communication services, processing services
and software contracts. Other long-term liabilities include our
contractual funding obligations related to the Qualified Pension
Plans,
Non-U.S. Pension
Plans, Nonqualified Pension Plans, and Postretirement Health and
Life Plans (the Plans). Obligations to the Plans are based on
the current and projected obligations of the Plans, performance
of the Plans assets and any participant contributions, if
applicable. During 2010 and 2009, we contributed
$378 million and $414 million to the Plans, and we
expect to make at least $306 million of contributions
during 2011.
Debt, lease, equity and other obligations are more fully
discussed in Note 13 Long-term Debt and
Note 14 Commitments and Contingencies to
the Consolidated Financial Statements. The Plans are more fully
discussed in Note 19 Employee Benefit Plans
to the Consolidated Financial Statements.
We enter into commitments to extend credit such as loan
commitments, standby letters of credit (SBLCs) and commercial
letters of credit to meet the financing needs of our customers.
For a summary of the total unfunded, or off-balance sheet,
credit extension commitment amounts by expiration date, see the
table in Note 14 Commitments and
Contingencies to the Consolidated Financial Statements.
Table 9 presents total long-term debt and other obligations at
December 31, 2010.
Table
9 Long-term
Debt and Other Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
Due after
|
|
|
Due after
|
|
|
|
|
|
|
|
|
|
Due in
|
|
|
1 Year through
|
|
|
3 Years through
|
|
|
Due after
|
|
|
|
|
(Dollars in millions)
|
|
1 Year or Less
|
|
|
3 Years
|
|
|
5 Years
|
|
|
5 Years
|
|
|
Total
|
|
Long-term debt and capital leases
|
|
$
|
89,251
|
|
|
$
|
138,603
|
|
|
$
|
69,539
|
|
|
$
|
151,038
|
|
|
$
|
448,431
|
|
Operating lease obligations
|
|
|
3,016
|
|
|
|
4,716
|
|
|
|
2,894
|
|
|
|
6,624
|
|
|
|
17,250
|
|
Purchase obligations
|
|
|
5,257
|
|
|
|
2,490
|
|
|
|
1,603
|
|
|
|
1,077
|
|
|
|
10,427
|
|
Time deposits
|
|
|
181,280
|
|
|
|
17,548
|
|
|
|
4,752
|
|
|
|
4,178
|
|
|
|
207,758
|
|
Other long-term liabilities
|
|
|
696
|
|
|
|
1,047
|
|
|
|
770
|
|
|
|
1,150
|
|
|
|
3,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt and other
obligations
|
|
$
|
279,500
|
|
|
$
|
164,404
|
|
|
$
|
79,558
|
|
|
$
|
164,067
|
|
|
$
|
687,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank of America
2010 51
Representations
and Warranties
We securitize first-lien residential mortgage loans generally in
the form of MBS guaranteed by GSEs or the Government National
Mortgage Association (GNMA) in the case of the Federal Housing
Administration (FHA) insured and U.S. Department of Veterans
Affairs (VA) guaranteed mortgage loans. In addition, in prior
years, legacy companies and certain subsidiaries have sold pools
of first-lien residential mortgage loans and home equity loans
as private-label securitizations or in the form of whole loans.
In connection with these transactions, we or our subsidiaries or
legacy companies make or have made various representations and
warranties. Breaches of these representations and warranties may
result in the requirement to repurchase mortgage loans or to
otherwise make whole or provide other remedy to a
whole-loan
buyer or securitization trust (collectively, repurchase claims).
Our operations are currently structured to attempt to limit the
risk of repurchase and accompanying credit exposure by seeking
to ensure consistent production of mortgages in accordance with
our underwriting procedures and by servicing those mortgages
consistent with our contractual obligations.
The fair value of probable losses to be absorbed under the
representations and warranties obligations and the guarantees is
recorded as an accrued liability when the loans are sold. The
liability for probable losses is updated by accruing a
representations and warranties provision in mortgage banking
income. This is done throughout the life of the loan as
necessary when additional relevant information becomes
available. The methodology used to estimate the liability for
representations and warranties is a function of the
representations and warranties given and considers a variety of
factors, which include, depending on the counterparty, actual
defaults, estimated future defaults, historical loss experience,
estimated home prices, estimated probability that a repurchase
request will be received, number of payments made by the
borrower prior to default and estimated probability that a loan
will be required to be repurchased. Historical experience also
considers recent events such as the agreements with the GSEs on
December 31, 2010 as discussed in the following section. Changes
to any one of these factors could significantly impact the
estimate of our liability. Given that these factors vary by
counterparty, we analyze our representations and warranties
obligations based on the specific counterparty with whom the
sale was made. Although the timing and volume has varied, we
have experienced in recent periods increasing repurchase and
similar requests from buyers and insurers, including monolines.
Generally the volume of unresolved repurchase claims from the
FHA and VA for loans in GNMA-guaranteed securities is not
significant because the requests are limited in number and are
typically resolved quickly. We expect that efforts to attempt to
assert repurchase requests by monolines,
whole-loan
investors and private-label securitization investors may
increase in the future. See Recent Events
Private-label Residential Mortgage-backed Securities Matters, on
page 35 for additional information. We perform a
loan-by-loan
review of all properly presented repurchase claims and have and
will continue to contest such demands that we do not believe are
valid. In addition, we may reach a bulk settlement with a
counterparty (in lieu of the
loan-by-loan
review process), on terms determined to be advantageous to the
Corporation. Overall, disputes with respect to repurchase claims
have increased with monoline insurers,
whole-loan
buyers and
private-label
securitization investors. For additional information, see
Note 9 Representations and Warranties
Obligations and Corporate Guarantees to the Consolidated
Financial Statements.
At December 31, 2010, our total unresolved repurchase
claims totaled approximately $10.7 billion compared to
$7.6 billion at the end of 2009. The liability for
representations and warranties and corporate guarantees, is
included in accrued expenses and other liabilities and the
related provision is included in mortgage banking income. At
December 31, 2010 and 2009, the liability was
$5.4 billion and $3.5 billion. For 2010 and 2009, the
provision for representations and warranties and corporate
guarantees was $6.8 billion and $1.9 billion. The
representations and warranties provision of $6.8 billion,
includes a provision of $3.0 billion in the fourth quarter
of 2010 related to the GSE agreements as well as adjustments to
the representations and warranties liability for other loans
sold directly to the GSEs and not covered by those agreements.
Also contributing to the increase in representations and
warranties provision for the year was our continued evaluation
of exposure to non-GSE repurchases and similar claims, which led
to the determination that we have developed sufficient
repurchase experience with certain non-GSE counterparties to
record a liability related to existing and future projected
claims from such counterparties. Representations and warranties
provision may vary significantly each period as the methodology
used to estimate the expense continues to be refined based on
the level and type of repurchase claims presented, defects
identified, the latest experience gained on repurchase claims
and other relevant facts and circumstances, which could have a
material adverse impact on our earnings for any particular
period.
Government-sponsored
Enterprises
During the last ten years, Bank of America and our subsidiaries
have sold over $2.0 trillion of loans to the GSEs and we have an
established history of working with them on repurchase claims.
Our experience with them continues to evolve and any disputes
are generally related to areas such as the reasonableness of
stated income, occupancy and undisclosed liabilities, and are
typically focused on the 2004 through 2008 vintages. On
December 31, 2010, we reached agreements with the GSEs and
paid $2.8 billion to the GSEs pursuant to such agreements,
resolving repurchase claims involving certain residential
mortgage loans sold directly to them by entities related to
legacy Countrywide. As a result of these agreements, as well as
adjustments to the representations and warranties liability for
other loans sold directly to the GSEs and not covered by those
agreements, we adjusted our liability for representations and
warranties. For additional information regarding these
agreements, see Note 9 Representations and
Warranties Obligations and Corporate Guarantees to the
Consolidated Financial Statements.
Our current repurchase claims experience with the GSEs is
predominantly concentrated in the 2004 through 2008 origination
vintages where we believe that our exposure to representations
and warranties liability is most significant. Our repurchase
claims experience related to loans originated prior to 2004 has
not been significant and we believe that the changes made to our
operations and underwriting policies have reduced our exposure
after 2008. The cumulative repurchase claims for 2007 exceed all
other vintages. The volume of loans originated in 2007 was
significantly higher than any other vintage which, together with
the high delinquency level in this vintage, helps to explain the
high level of repurchase claims compared to the other vintages.
52 Bank
of America 2010
Cumulative
GSE Repurchase Claims by Vintage
|
|
|
(1) |
|
Exposure at default (EAD)
represents the unpaid principal balance at the time of default
or the unpaid principal balance as of December 31, 2010.
|
Bank of America and legacy Countrywide sold approximately $1.1
trillion of loans originated from 2004 through 2008 to the GSEs.
As of December 31, 2010, slightly less than 10 percent
of the loans in these vintages have defaulted or are
180 days or more past due (severely delinquent). At least
25 payments have been made on approximately 55 percent of
severely delinquent or defaulted loans. Through
December 31, 2010, we have received approximately
$21.6 billion in repurchase claims associated with these
vintages, representing approximately two percent of the loans
sold to the GSEs in these vintages. Including the agreement
reached with FNMA on December 31, 2010, we have resolved
$18.2 billion of these claims with a net loss experience of
approximately 27 percent. The claims resolved and the loss
rate do not include $839 million in claims extinguished as
a result of the
agreement with FHLMC due to the global nature of the agreement
and, specifically, the absence of a formal apportionment of the
agreement amount between current and future claims. Our
collateral loss severity rate on approved repurchases has
averaged approximately 45 to 55 percent. Although the level
of repurchase claims from the GSEs has been elevated for the
last few quarters, the agreements with the GSEs have resulted in
a decrease in the total number of outstanding repurchase claims
at December 31, 2010 compared to December 31, 2009.
Based on the information derived from the historical GSE
experience, including the GSE agreements discussed on the
previous page, we believe we are 70 percent to
75 percent through the receipt of the GSE repurchase claims
that we ultimately expect to receive.
Bank of America
2010 53
The table below highlights our experience with the GSEs related
to loans originated from 2004 through 2008.
Table
10 Overview
of GSE Balances 20042008
Originations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legacy Orginator
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of
|
|
(Dollars in billions)
|
|
Countrywide
|
|
|
Other
|
|
|
Total
|
|
|
Total
|
|
Original funded balance
|
|
$
|
846
|
|
|
$
|
272
|
|
|
$
|
1,118
|
|
|
|
|
|
Principal payments
|
|
|
(406
|
)
|
|
|
(133
|
)
|
|
|
(539
|
)
|
|
|
|
|
Defaults
|
|
|
(31
|
)
|
|
|
(3
|
)
|
|
|
(34
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total outstanding balance at
December 31, 2010
|
|
$
|
409
|
|
|
$
|
136
|
|
|
$
|
545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding principal balance 180 days or more past due
(severely delinquent)
|
|
$
|
59
|
|
|
$
|
14
|
|
|
$
|
73
|
|
|
|
|
|
Defaults plus severely delinquent (principal at risk)
|
|
|
90
|
|
|
|
17
|
|
|
|
107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments made by
borrower:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 13
|
|
|
|
|
|
|
|
|
|
$
|
16
|
|
|
|
15
|
%
|
13-24
|
|
|
|
|
|
|
|
|
|
|
32
|
|
|
|
30
|
|
25-36
|
|
|
|
|
|
|
|
|
|
|
33
|
|
|
|
31
|
|
Greater than 36
|
|
|
|
|
|
|
|
|
|
|
26
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total payments made by
borrower
|
|
|
|
|
|
|
|
|
|
$
|
107
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding GSE pipeline of
representations and warranties claims (all vintages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009
|
|
|
|
|
|
|
|
|
|
$
|
3.3
|
|
|
|
|
|
As of December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
2.8
|
|
|
|
|
|
Cumulative representations and
warranties losses
2004-2008
vintages
|
|
|
|
|
|
|
|
|
|
$
|
6.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our liability for obligations under representations and
warranties given to the GSEs considers the recent agreements and
their impact on the repurchase rates on future repurchase claims
we might receive on loans that have defaulted or that we
estimate will default. We believe that our remaining exposure to
representations and warranties for loans sold directly to the
GSEs has been accounted for as a result of these agreements and
the associated adjustments to our recorded liability for
representations and warranties for other loans sold directly to
the GSEs and not covered by the agreements. We believe our
predictive repurchase models, utilizing our historical
repurchase experience with the GSEs while considering current
developments, including the recent agreements, projections of
future defaults as well as certain assumptions regarding
economic conditions, home prices and other matters, allows us to
reasonably estimate the liability for obligations under
representations and warranties on loans sold to the GSEs.
However, future provisions and possible loss or range of loss
associated with representations and warranties made to the GSEs
may be impacted if actual results are different from our
assumptions regarding economic conditions, home prices and other
matters.
Transactions with
Investors Other than Government-sponsored Entities
In prior years, legacy companies and certain subsidiaries have
sold pools of first-lien mortgage loans and home equity loans as
private-label securitizations or in the form of whole loans. The
loans sold include prime loans, including loans with a loan
balance in excess of the conforming loan limit, Alt-A,
pay-option, home equity and subprime loans. Many of the loans
sold in the form of whole loans were subsequently pooled with
other mortgages into private-label securitizations issued or
sponsored by the third-party buyer of the whole loans. In some
of the private-label securitizations, monolines have insured all
or some of the issued bonds or certificates. In connection with
these securitizations and whole loan sales, we or our
subsidiaries or our legacy companies made various
representations and warranties. Breaches of these
representations and warranties may result in the requirement to
repurchase mortgage loans from or to otherwise make whole or
provide other remedy to a whole-loan buyer or securitization
trust.
As detailed in Table 11, legacy companies and certain
subsidiaries sold loans originated from 2004 through 2008 with a
principal balance of $963 billion to investors other than
GSEs, of which approximately $478 billion in
principal has been paid and $216 billion have defaulted, or
are severely delinquent (i.e., 180 days or more past due)
and are considered principal at-risk at December 31, 2010.
As of December 31, 2010, we had received $13.7 billion
of repurchase claims on these
2004-2008
loan vintages, of which $6.0 billion have been resolved and
$7.7 billion remain outstanding. Of the $7.7 billion
of repurchase claims that remain outstanding, we have reviewed
$4.1 billion that we have declined to repurchase. We have
recognized losses of $1.7 billion on the resolved
repurchase claims, $631 million of which relates to
monolines and $1.1 billion of which relates to whole loan
and private-label investors, as described in more detail below.
As it relates to private investors, including those who have
invested in private-label securitizations, a contractual
liability to repurchase mortgage loans generally arises only if
counterparties prove there is a breach of the representations
and warranties that materially and adversely affects the
interest of the investor or all investors in a securitization
trust, or that there is a breach of other standards established
by the terms of the related sale agreement. We believe that the
longer a loan performs, the less likely an underwriting
representations and warranties breach would have had a material
impact on the loans performance or that a breach even
exists. Because the majority of the borrowers in this population
would have made a significant amount of payments if they are not
yet 180 days or more delinquent, we believe that the
principal balance at the greatest risk for repurchase requests
in this population of private-label investors is a combination
of loans that have already defaulted and those that are
currently 180 days or more past due. Additionally, the
obligation to repurchase mortgage loans also requires that
counterparties have the contractual right to demand repurchase
of the loans. Based on a recent court ruling that dismissed a
case against legacy Countrywide, we believe private-label
securitization investors must generally aggregate
25 percent of the voting interests in each of the tranches
of a particular securitization to instruct the securitization
trustee to investigate potential repurchase claims. While a
securitization trustee may elect to investigate or demand
repurchase of loans on its own, individual investors typically
have limited rights under the contracts to present repurchase
claims directly. Also, the motivation of some private-label
securitization investors to assert repurchase claims may be
diminished by the fact that their investment is not materially
impacted by the losses due to the credit enhancement coverage
provided by cash flows from the tranches rated below AAA, for
example.
Any amounts paid related to repurchase claims from a monoline
are paid to the securitization trust and are applied in
accordance with the terms of the
54 Bank
of America 2010
governing securitization documents, which may include use by the
securitization trust to repay any outstanding monoline advances
or reduce future advances from the monolines. To the extent that
a monoline has not advanced funds or does not anticipate that it
will be required to advance funds to the securitization trust,
the likelihood of receiving a repurchase request from a monoline
may be reduced as the monoline would receive limited or no
benefit from the payment of repurchase claims. Moreover, some
monolines are not
currently performing their obligations under the financial
guaranty policies they issued which may, in certain
circumstances, impact their ability to present repurchase claims.
Table 11 details the population of loans sold as whole-loans or
in non-agency securitizations by entity and product together
with the principal at-risk stratified by the number of payments
the borrower made prior to default or becoming severely
delinquent.
Table
11 Overview
of Non-Agency Securitization and Whole Loan Balances
2004-2008
Originations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal Balance
|
|
|
|
|
|
|
|
|
|
|
|
Principal at Risk
|
|
|
|
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
Borrower
|
|
|
Borrower
|
|
|
Borrower
|
|
|
|
|
Original
|
|
|
Principal
|
|
|
Principal Balance
|
|
|
Defaulted
|
|
|
|
|
|
|
|
|
Made
|
|
|
Made
|
|
|
Made
|
|
(Dollars in billions)
|
|
|
Principal
|
|
|
Balance
|
|
|
180 Days or More
|
|
|
Principal
|
|
|
Principal at
|
|
|
Borrower Made
|
|
|
13 to 24
|
|
|
25 to 36
|
|
|
> 36
|
|
By Entity
|
|
|
Balance
|
|
|
12/31/2010
|
|
|
Past Due
|
|
|
Balance
|
|
|
Risk
|
|
|
< 13 Payments
|
|
|
Payments
|
|
|
Payments
|
|
|
Payments
|
|
Bank of America
|
|
|
$
|
100
|
|
|
$
|
34
|
|
|
$
|
4
|
|
|
$
|
3
|
|
|
$
|
7
|
|
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
2
|
|
Countrywide
|
|
|
|
716
|
|
|
|
293
|
|
|
|
86
|
|
|
|
80
|
|
|
|
166
|
|
|
|
24
|
|
|
|
46
|
|
|
|
49
|
|
|
|
47
|
|
Merrill Lynch
|
|
|
|
65
|
|
|
|
22
|
|
|
|
7
|
|
|
|
10
|
|
|
|
17
|
|
|
|
3
|
|
|
|
4
|
|
|
|
3
|
|
|
|
7
|
|
First Franklin
|
|
|
|
82
|
|
|
|
23
|
|
|
|
7
|
|
|
|
19
|
|
|
|
26
|
|
|
|
4
|
|
|
|
6
|
|
|
|
4
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
(1, 2,
3)
|
|
|
$
|
963
|
|
|
$
|
372
|
|
|
$
|
104
|
|
|
$
|
112
|
|
|
$
|
216
|
|
|
$
|
32
|
|
|
$
|
58
|
|
|
$
|
58
|
|
|
$
|
68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By Product
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
|
$
|
302
|
|
|
$
|
124
|
|
|
$
|
16
|
|
|
$
|
11
|
|
|
$
|
27
|
|
|
$
|
2
|
|
|
$
|
6
|
|
|
$
|
8
|
|
|
$
|
11
|
|
Alt-A
|
|
|
|
172
|
|
|
|
82
|
|
|
|
22
|
|
|
|
21
|
|
|
|
43
|
|
|
|
7
|
|
|
|
12
|
|
|
|
12
|
|
|
|
12
|
|
Pay option
|
|
|
|
150
|
|
|
|
65
|
|
|
|
30
|
|
|
|
20
|
|
|
|
50
|
|
|
|
5
|
|
|
|
15
|
|
|
|
16
|
|
|
|
14
|
|
Subprime
|
|
|
|
245
|
|
|
|
82
|
|
|
|
36
|
|
|
|
43
|
|
|
|
79
|
|
|
|
16
|
|
|
|
19
|
|
|
|
17
|
|
|
|
27
|
|
Home Equity
|
|
|
|
88
|
|
|
|
18
|
|
|
|
|
|
|
|
16
|
|
|
|
16
|
|
|
|
2
|
|
|
|
5
|
|
|
|
5
|
|
|
|
4
|
|
Other
|
|
|
|
6
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
963
|
|
|
$
|
372
|
|
|
$
|
104
|
|
|
$
|
112
|
|
|
$
|
216
|
|
|
$
|
32
|
|
|
$
|
58
|
|
|
$
|
58
|
|
|
$
|
68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes $186 billion of
original principal balance related to transactions with monoline
participation.
|
(2) |
|
Excludes transactions sponsored by
Bank of America and Merrill Lynch where no representations or
warranties were assumed.
|
(3) |
|
Includes exposures on third-party
sponsored transactions related to legacy entity originations.
|
As of December 31, 2010, approximately 22 percent of
the loans sold to non-GSEs that were originated from 2004 to
2008 have defaulted or are severely delinquent. As shown in
Table 11, at least 25 payments have been made on approximately
58 percent of the loans included in principal at-risk. We
believe many of the defaults observed in these securitizations
have been, and continue to be, driven by external factors like
the substantial depreciation in home prices, persistently high
unemployment and other negative economic trends, diminishing the
likelihood that any loan defect (assuming one exists at all) was
the cause of the loans default.
We believe the agreements for private-label securitizations
generally contain less rigorous representations and warranties
and generally impose higher burdens on investors seeking loan
repurchases than the comparable agreements with the GSEs. For
example, borrower fraud representations and warranties were
generally not given in private-label securitizations. The
following represent some of the typical private-label
securitization transaction terms (which differ substantially
from those provided in GSE transactions):
|
|
|
Representation of material compliance with underwriting
guidelines (which often explicitly permit exceptions).
|
|
Few transactions contain a representation that there has been no
fraud or material misrepresentation by a borrower or third party.
|
|
Many representations include materiality qualifiers.
|
|
Breach of representation must materially and adversely affect
certificate holders interest in the loan.
|
|
No representation that the mortgage is of investment quality.
|
|
Offering documents included extensive disclosures, including
detailed risk factors, description of underwriting practices and
guidelines, and loan attributes.
|
|
Only parties to a pooling and servicing agreement (e.g., the
trustee) can bring repurchase claims. Certificate holders cannot
bring claims directly and do not have access to loan files. At
least 25 percent of each tranche of certificate holders is
generally required in order to direct a trustee to review
|
|
|
|
loan files for potential claims. In addition, certificate
holders must bear costs of a trustees loan file review.
|
|
Repurchase liability is generally limited to the seller.
|
These factors lead us to believe that only a portion of the
principal at-risk with respect to loans included in
private-label securitizations will be the subject of a
repurchase request and only a portion of those requests would
ultimately result in a repurchase. Although our experience with
non-GSE claims remains limited, we expect additional activity in
this area going forward and that the volume of repurchase claims
from monolines, whole-loan investors and investors in
private-label securitizations could increase in the future. It
is reasonably possible that future losses may occur, and our
estimate is that the upper range of possible loss related to
non-GSE sales could be $7 billion to $10 billion over
existing accruals. This estimate does not represent a probable
loss, is based on currently available information, significant
judgment, and a number of assumptions that are subject to
change. A significant portion of this estimate relates to loans
originated through legacy Countrywide, and the repurchase
liability is generally limited to the original seller of the
loan. Future provisions and possible loss or range of loss may
be impacted if actual results are different from our assumptions
regarding economic conditions, home prices and other matters and
may vary by counterparty. The resolution of the repurchase
claims process with the non-GSE counterparties will likely be a
protracted process, and we will vigorously contest any request
for repurchase if we conclude that a valid basis for the
repurchase claim does not exist.
The following discussion provides more detailed information
related to non-GSE counterparties.
Monoline
Insurers
Legacy companies have sold $185.6 billion of loans
originated from 2004 through 2008 into monoline-insured
securitizations, which are included in Table 11, including
$106.2 billion of first-lien mortgages and
$79.4 billion of
Bank of America
2010 55
second-lien mortgages. Of these balances, $45.8 billion of
the first-lien mortgages and $48.5 billion of the
second-lien mortgages have paid off and $32.9 billion of
the first-lien mortgages and $14.5 billion of the
second-lien mortgages have defaulted or are severely delinquent
and are considered principal at-risk at December 31, 2010.
At least 25 payments have been made on approximately
52 percent of the loans included in principal at-risk. Of
the first-lien mortgages sold, $41.0 billion, or
39 percent, were sold as whole loans to other institutions
which subsequently included these loans with those of other
originators in private-label securitization transactions in
which the monolines typically insured one or more securities.
Through December 31, 2010, we have received
$5.6 billion of representations and warranties claims
related to the monoline-insured transactions. Of these
repurchase claims, $799 million have been resolved, with
losses of $631 million. The majority of these resolved
claims related to second-lien mortgages and $678 million of
these claims were resolved through repurchase or indemnification
while $121 million were rescinded by the investor or paid
in full. At December 31, 2010, the unpaid principal balance
of loans related to unresolved monoline repurchase requests was
$4.8 billion, including $3.0 billion that have been
reviewed where it is believed a valid defect has not been
identified which would constitute an actionable breach of
representations and warranties and $1.8 billion that are in
the process of review. We have had limited experience with most
of the monoline insurers in the repurchase process, which has
constrained our ability to resolve the open claims with such
counterparties. Also, certain monoline insurers have instituted
litigation against legacy Countrywide and Bank of America, which
limits our relationship with such monoline insurers and ability
to enter into constructive dialogue to resolve the open claims.
It is not possible at this time to reasonably estimate future
repurchase obligations with respect to those monolines with whom
we have limited repurchase experience and, therefore, no
liability has been recorded in connection with these monolines,
other than a liability for repurchase requests that are in the
process of review and repurchase requests where we have
determined that there are valid loan defects. However, certain
other monoline insurers have engaged with us in a consistent
repurchase process and we have used that experience to record a
liability related to existing and projected future claims from
such counterparties.
Whole Loan Sales
and Private-label Securitizations
Legacy entities, and to a lesser extent Bank of America, sold
loans in whole loan sales or via private-label securitizations
with a total principal balance of $777.1 billion originated
from 2004 through 2008, which are included in Table 11, of which
$384.0 billion have been paid off and $169.0 billion
have defaulted or are severely delinquent and are considered
principal at-risk at December 31, 2010. At least 25
payments have been made on approximately 60 percent of the
loans included in principal at-risk. We have received
approximately $8.1 billion of representations and
warranties claims from whole loan investors and private-label
securitization investors related to these vintages, including
$5.6 billion from whole loan investors, $800 million
from one private-label securitization counterparty which were
submitted prior to 2008 and $1.7 billion in recent demands
from private-label securitization investors. Private-label
securitization investors generally do not have the contractual
right to demand repurchase of loans directly. The inclusion of
the $1.7 billion in recent demands from private-label
securitization investors does not mean that we believe these
claims have satisfied the contractual thresholds required for
these investors to direct the securitization trustee to take
action or are otherwise procedurally or substantively valid.
Additionally, certain private-label securitizations are insured
by the monolines, which are not reflected in these figures
regarding whole loan sales and private-label securitizations.
We have resolved $5.2 billion of the claims received from
whole loan investors and private-label securitization investors
with losses of $1.1 billion. Approximately
$2.1 billion of these claims were resolved through
repurchase
or indemnification and $3.1 billion were rescinded by the
investor. Claims outstanding related to these vintages totaled
$2.9 billion at December 31, 2010, $1.1 billion
of which we have reviewed and declined to repurchase based on an
assessment of whether a material breach exists, $91 million
of which are in the process of review and $1.7 billion of
which are demands from private-label securitization investors
received in the fourth quarter of 2010. The majority of the
claims that we have received so far are from whole loan
investors and until we have meaningful repurchase experiences
with counterparties other than whole loan investors, it is not
possible to determine whether a loss related to our
private-label securitizations has occurred or is probable.
However, certain whole loan investors have engaged with us in a
consistent repurchase process and we have used that experience
to record a liability related to existing and future claims from
such counterparties.
On October 18, 2010, Countrywide Home Loans Servicing, LP
(which changed its name to BAC Home Loans Servicing, LP), a
wholly-owned subsidiary of the Corporation, received a letter,
in its capacity as servicer on 115 private-label securitizations
which was subsequently extended to 225 securitizations. The
letter asserted breaches of certain servicing obligations,
including an alleged failure to provide notice of breaches of
representations and warranties with respect to mortgage loans
included in the transactions. See Recent Events
Private-label Residential Mortgage-backed Securities Matters on
page 35 for additional information.
See Complex Accounting Estimates Representations and
Warranties on page 112 for information related to our
estimated liability for representations and warranties and
corporate guarantees related to mortgage-related
securitizations. For additional information regarding
representations and warranties and disputes involving monolines,
whole loan sales and private-label securitizations, see
Note 9 Representations and Warranties
Obligations and Corporate Guarantees and
Note 14 Commitments and Contingencies to
the Consolidated Financial Statements.
Regulatory
Matters
Refer to Item 1A. Risk Factors for additional
information on recent or proposed legislative and regulatory
initiatives as well as other risks to which we are exposed,
including among others, enhanced regulatory scrutiny or
potential legal liability as a result of the recent financial
crisis.
Financial Reform
Act
On July 21, 2010, the Financial Reform Act was signed into
law. The Financial Reform Act enacts sweeping financial
regulatory reform and will alter the way in which we conduct
certain businesses, increase our costs and reduce our revenues.
Background
The Financial Reform Act mandates that the Federal Reserve limit
debit card interchange fees. Provisions in the legislation also
ban banking organizations from engaging in proprietary trading
and restrict their sponsorship of, or investing in, hedge funds
and private equity funds, subject to limited exceptions. The
Financial Reform Act increases regulation of the derivative
markets through measures that broaden the derivative instruments
subject to regulation and requires clearing and exchange trading
as well as imposing additional capital and margin requirements
for derivative market participants. The Financial Reform Act
also changes the methodology for calculating deposit insurance
assessments from the amount of an insured depository
institutions domestic deposits to its total assets minus
tangible capital; provides for resolution authority to establish
a process to unwind large systemically important financial
companies; creates a new regulatory body to set requirements
regarding the terms and conditions of consumer financial
products and expands the role of state regulators in enforcing
consumer protection requirements over banks; includes new
minimum leverage and risk-based
56 Bank
of America 2010
capital requirements for large financial institutions;
disqualifies trust preferred securities and other hybrid capital
securities from Tier 1 capital; and requires securitizers
to retain a portion of the risk that would otherwise be
transferred into certain securitization transactions. Many of
these provisions have begun to be phased-in or will be phased-in
over the next several months or years and will be subject both
to further rulemaking and the discretion of applicable
regulatory bodies.
The Financial Reform Act will continue to have a significant and
negative impact on our earnings through fee reductions, higher
costs and new restrictions, as well as reduce available capital.
The Financial Reform Act may also continue to have a material
adverse impact on the value of certain assets and liabilities
held on our balance sheet. The ultimate impact of the Financial
Reform Act on our businesses and results of operations will
depend on regulatory interpretation and rulemaking, as well as
the success of any of our actions to mitigate the negative
earnings impact of certain provisions. For information on the
impact of the Financial Reform Act on our credit ratings, see
Liquidity Risk beginning on page 67.
The Financial Reform Act and other proposed regulatory
initiatives may also have an adverse impact on capital. During
2010, the Basel Committee on Banking Supervision finalized rules
on certain capital and liquidity measurements. For additional
information on these rules, see Regulatory Capital
Regulatory Capital Changes beginning on page 64.
Debit
Interchange Fees
The limits that the Financial Reform Act places on debit
interchange fees will significantly reduce our debit card
interchange revenues. Interchange fees, or swipe
fees, are charges that merchants pay to us and other credit card
companies and card-issuing banks for processing electronic
payment transactions. The legislation, which provides the
Federal Reserve with authority over interchange fees received or
charged by a card issuer, requires that fees must be
reasonable and proportional to the costs of
processing such transactions. The Federal Reserve considered the
functional similarity between debit card transactions and
traditional checking transactions and the incremental costs
incurred by a card issuer in processing a particular debit card
transaction. In addition, the legislation prohibits card issuers
and networks from entering into exclusive arrangements requiring
that debit card transactions be processed on a single network or
only two affiliated networks, and allows merchants to determine
transaction routing.
On December 16, 2010, the Federal Reserve issued a proposed
rule that would establish debit card interchange fee standards
and prohibit network exclusivity arrangements and routing
restrictions. The Federal Reserve requested comments on two
alternative interchange fee standards that would apply to all
covered issuers: one based on each issuers costs, with a
safe harbor initially set at $0.07 per transaction and a cap
initially set at $0.12 per transaction; and the other a
stand-alone cap initially set at $0.12 per transaction. The
Federal Reserve also requested comment on possible frameworks
for an adjustment to the interchange fees to reflect certain
issuer costs associated with fraud prevention. If the Federal
Reserve adopts either of these proposed standards in the final
rule, the maximum allowable interchange fee received by covered
issuers for debit card transactions would be more than
70 percent lower than the 2009 average once the new rule
takes effect on July 21, 2011. The proposed rule would also
prohibit issuers and networks from restricting the number of
networks over which debit card transactions may be processed.
The Federal Reserve requested comment on two alternative
approaches: one alternative would require at least two
unaffiliated networks per debit card, and the other would
require at least two unaffiliated networks per debit card for
each type of cardholder authorization method (such as signature
or PIN). Under both alternatives, the issuers and networks would
be prohibited from inhibiting a merchants ability to
direct the routing of debit card transactions over any network
that the issuer enabled to process them.
As previously announced on July 16, 2010, as a result of
the Financial Reform Act and its related rules and subject to
final rulemaking over the next year, we believe that our debit
card revenue will be adversely impacted beginning in the third
quarter of 2011. Our consumer and small business card products,
including the debit card business, are part of an integrated
platform within the Global Card Services business
segment. In 2010, our estimate of revenue loss due to the debit
card interchange fee standards to be adopted under the Financial
Reform Act was approximately $2.0 billion annually based on
2010 volumes. As a result, we recorded a non-tax deductible
goodwill impairment charge for Global Card Services of
$10.4 billion in 2010. We have identified other potential
mitigation actions within Global Card Services, but they
are in the early stages of development and some of them may
impact other segments. The impairment charge, which is a
non-cash item, had no impact on our reported Tier 1 and
tangible equity ratios. If the Federal Reserve sets the final
interchange fee standards at the lowest proposed fee
alternative, as described above (i.e., $0.07 per transaction)
the lower interchange revenue may result in additional
impairment of goodwill in Global Card Services. In view
of the uncertainty with model inputs including the final ruling,
changes in the economic outlook and the corresponding impact to
revenues and asset quality, and the impacts of mitigation
actions, it is not possible to estimate the amount or range of
amounts of additional goodwill impairment, if any, associated
with changes to interchange fee standards. For more information
on goodwill and the impairment charge, refer to
Note 10 Goodwill and Intangible Assets
to the Consolidated Financial Statements and Complex
Accounting Estimates beginning on page 107.
Limitations on
Certain Activities
We anticipate that the final regulations associated with the
Financial Reform Act will include limitations on certain
activities, including limitations on the use of a banks
own capital for proprietary trading and sponsorship or
investment in hedge funds and private equity funds (Volcker
Rule). Regulations implementing the Volcker Rule are required to
be in place by October 21, 2011, and the Volcker Rule
becomes effective twelve months after such rules are final or on
July 21, 2012, whichever is earlier. The Volcker Rule then
gives banking entities two years from the effective date (with
opportunities for additional extensions) to bring activities and
investments into conformance. In anticipation of the adoption of
the final regulations, we have begun winding down our
proprietary trading line of business. The ultimate impact of the
Volcker Rule or the winding down of this business, and the time
it will take to comply or complete, continues to remain
uncertain. The final regulations issued may impose additional
operational and compliance costs on us.
Derivatives
The Financial Reform Act includes measures to broaden the scope
of derivative instruments subject to regulation by requiring
clearing and exchange trading of certain derivatives, imposing
new capital and margin requirements for certain market
participants and imposing position limits on certain
over-the-counter
(OTC) derivatives. The Financial Reform Act grants the
U.S. Commodity Futures Trading Commission (CFTC) and the
SEC substantial new authority and requires numerous rulemakings
by these agencies. Generally, the CFTC and SEC have until
July 16, 2011 to promulgate the rulemakings necessary to
implement these regulations. The ultimate impact of these
derivatives regulations, and the time it will take to comply,
continues to remain uncertain. The final regulations will impose
additional operational and compliance costs on us and may
require us to restructure certain businesses and negatively
impact our revenues and results of operations.
FDIC Deposit
Insurance Assessments
Since the financial crisis began several years ago, an
increasing number of bank failures has imposed significant costs
on the FDIC in resolving those failures, and the
regulators deposit insurance fund has been depleted. In
order to
Bank of America
2010 57
maintain a strong funding position and restore reserve ratios of
the deposit insurance fund, the FDIC has increased, and may
increase in the future, assessment rates of insured
institutions, including Bank of America.
Deposits placed at the U.S. Banks are insured by the FDIC,
subject to limits and conditions of applicable law and the
FDICs regulations. Pursuant to the Financial Reform Act,
FDIC insurance coverage limits were permanently increased to
$250,000 per customer. The Financial Reform Act also provides
for unlimited FDIC insurance coverage for non-interest bearing
demand deposit accounts for a two-year period beginning on
December 31, 2010 and ending on January 1, 2013. The
FDIC administers the Deposit Insurance Fund, and all insured
depository institutions are required to pay assessments to the
FDIC that fund the Deposit Insurance Fund. The Financial Reform
Act changed the methodology for calculating deposit insurance
assessments from the amount of an insured depository
institutions domestic deposits to its total assets minus
tangible capital. On February 7, 2011 the FDIC issued a new
regulation implementing revisions to the assessment system
mandated by the Financial Reform Act. The new regulation will be
effective April 1, 2011 and will be reflected in the
June 30, 2011 FDIC fund balance and the invoices for
assessments due September 30, 2011. As a result of the new
regulations, we expect to incur higher annual deposit insurance
assessments. We have identified potential mitigation actions,
but they are in the early stages of development and we are not
able to directly control the basis or the amount of premiums
that we are required to pay for FDIC insurance or for other fees
or assessment obligations imposed on financial institutions. Any
future increases in required deposit insurance premiums or other
bank industry fees could have a significant adverse impact on
our financial condition and results of operations.
CARD
Act
On May 22, 2009, the CARD Act was signed into law. The
majority of the CARD Act provisions became effective in February
2010. The CARD Act legislation contains comprehensive credit
card reform related to credit card industry practices including
significantly restricting banks ability to change interest
rates and assess fees to reflect individual consumer risk,
changing the way payments are applied and requiring changes to
consumer credit card disclosures. The provisions of the CARD Act
negatively impacted net interest income and card income during
2010, and are expected to negatively impact future net interest
income due to the restrictions on our ability to reprice credit
cards based on risk, and card income due to restrictions imposed
on certain fees. The 2010 full-year decrease in revenue was
approximately $1.5 billion.
Regulation E
On November 12, 2009, the Federal Reserve issued amendments
to Regulation E which implements the Electronic
Fund Transfer Act. The rules became effective on
July 1, 2010 for new customers and August 16, 2010 for
existing customers. These amendments limit the way we and other
banks charge an overdraft fee for non-recurring debit card
transactions that overdraw a consumers account unless the
consumer affirmatively consents to the banks payment of
overdrafts for those transactions. Under previously announced
plans, we do not offer customers the opportunity to opt-in to
overdraft services related to non-recurring debit card
transactions. However, customers are able to opt-in on a
withdrawal-by-withdrawal
basis to access cash through the Bank of America ATM network
where the bank is able to alert customers that the transaction
may overdraw their account and result in a fee if they choose to
proceed. The impact of Regulation E, which was in effect
beginning in the third quarter and fully in effect in the fourth
quarter of 2010, and our overdraft policy changes, which were in
effect for the full year of 2010, was a reduction in service
charges during 2010 of approximately $1.7 billion. In 2011,
the incremental reduction to service charges related to
Regulation E and overdraft policy changes is expected
to be approximately $1.1 billion, or a full-year impact of
approximately $2.8 billion, net of identified mitigation
action.
U.K. Corporate
Income Tax Rate
On July 27, 2010, the U.K. government enacted a law change
reducing the corporate income tax rate by one percent effective
for the 2011 U.K. tax financial year beginning on April 1,
2011. While this rate reduction favorably affects income tax
expense on future U.K. earnings, it also required us to
remeasure our U.K. net deferred tax assets using the lower tax
rate, which resulted in a charge to income tax expense of
$392 million in 2010. A future rate reduction of one
percent per year is generally expected to be enacted in each of
2011, 2012 and 2013, which would result in a similar charge to
income tax expense of nearly $400 million during each of
the three years. The U.K. Treasury has asked for taxpayer views
on whether the U.K. government should alternatively enact the
full remaining three-percent reduction entirely during 2011,
which would accelerate the possible charges into 2011 for a
total of approximately $1.1 billion.
Final Regulatory
Guidance on Consolidation
On January 21, 2010, the Federal Reserve, Office of the
Comptroller of the Currency, FDIC and Office of Thrift
Supervision (collectively, joint agencies) issued a final rule
regarding risk-based capital requirements related to the impact
of the adoption of new consolidation guidance. The impact on the
Corporation on January 1, 2010 due to the new consolidation
guidance and the final rule was an increase in risk-weighted
assets of $21.3 billion and a reduction in capital of
$9.7 billion. The overall impact of the new consolidation
guidance and the final rule was a decrease in Tier 1
capital and Tier 1 common ratios of 76 bps and
73 bps. For more information, see Balance Sheet
Overview Impact of Adopting New Consolidation
Guidance on page 29, Capital Management beginning on
page 63 and Liquidity Risk beginning on page 67.
Payment
Protection Insurance
In the U.K., the Corporation sells PPI through its Global
Card Services business to credit card customers and has
previously sold this insurance to consumer loan customers. In
response to an elevated level of customer complaints of
misleading sales tactics across the industry, heightened media
coverage and pressure from consumer advocacy groups, the U.K.
Financial Services Authority (FSA) has investigated and raised
concerns about the way some companies have handled complaints
relating to the sale of these insurance policies. In August
2010, the FSA issued a policy statement on the assessment and
remediation of PPI claims which is applicable to the
Corporations U.K. consumer businesses and is intended to
address concerns among consumers and regulators regarding the
handling of PPI complaints across the industry. The policy
statement sets standards for the sale of PPI that apply to
current and prior sales, and in the event a company does not or
did not comply with the standards, it is alleged that the
insurance was incorrectly sold, giving the customer rights to
remedies. Given the new regulatory guidance, in 2010, the
Corporation had a liability of $630 million based on its current
claims history and an estimate of future claims that have yet to
be asserted against the Corporation. For additional information
on PPI, see Note 14 Commitments and
Contingencies to the Consolidated Financial
Statements Payment Protection Insurance Claims
Matter on page 196.
U.K. Bank
Levy
On June 22, 2010, the U.K. government announced that it
intended to introduce an annual bank levy. Beginning in 2011,
the bank levy will be payable on the consolidated liabilities,
subject to certain exclusions and offsets, of U.K. group
companies and U.K. branches of foreign banking groups as of each
year-end balance sheet date. As currently proposed, the bank
levy rate for 2011 and
58 Bank
of America 2010
future years will be 0.075 percent per annum for certain
short-term liabilities with a rate of 0.0375 percent per
annum for longer maturity liabilities and certain deposits. The
legislation is expected to be enacted in the third quarter of
2011. We currently estimate that the cost of the U.K. bank levy
will be approximately $125 million annually beginning in
2011.
Regulatory
Guidance on Collateral Dependent Loans
On February 23, 2010, regulators issued clarifying
guidance, effective in the first quarter of 2010, on modified
consumer real estate loans that specifies criteria required to
demonstrate a borrowers capacity to repay the modified
loan. In connection with this guidance, we reviewed our modified
consumer real estate loans and determined that a portion of
these loans did not meet the criteria and, therefore, were
deemed collateral dependent. The guidance requires that a
modified loan deemed to be collateral dependent be written down
to its estimated collateral value even if that loan is
performing. The application of this guidance resulted in
$1.0 billion of net charge-offs in 2010, of which
$822 million were home equity, $207 million were
residential mortgage and $9 million were discontinued real
estate.
Making Home
Affordable Program
On March 4, 2009, the U.S. Treasury provided details
related to the $75 billion Making Home Affordable program
(MHA) which is focused on reducing the number of foreclosures
and making it easier for customers to refinance loans. The MHA
consists of the Home Affordable Modification Program (HAMP)
which provides guidelines on first-lien loan modifications, and
the Home Affordable Refinance Program (HARP) which provides
guidelines for loan refinancing.
As part of the MHA program, on April 28, 2009, the
U.S. government announced intentions to create the
second-lien modification program (2MP) that is designed to
reduce the monthly payments on qualifying home equity loans and
lines of credit under certain conditions, including completion
of a HAMP modification on the first mortgage on the property.
This program provides incentives to lenders to modify all
eligible loans that fall under the guidelines of this program.
Additional clarification on government guidelines for the
program was announced early in 2010. On April 8, 2010, we
began early implementation of the 2MP with the mailing of trial
modification offers to eligible home equity customers. We will
modify eligible second liens under this initiative regardless of
whether the MHA modified first lien is serviced by
the Corporation or another participating servicer.
On April 5, 2010, we implemented the Home Affordable
Foreclosure Alternatives (HAFA) program, which is another
addition to the HAMP that assists borrowers with non-retention
options, such as short sale or
deed-in-lieu
options, instead of foreclosure. The HAFA program provides
incentives to lenders to assist all eligible borrowers that fall
under the guidelines of this program. Our first goal is to work
with the borrower to determine if a loan modification or other
homeownership retention solution is available before pursuing
non-retention options such as short sales. Short sales are an
important option for homeowners who are facing financial
difficulty and do not have a viable option to remain in the
home. HAFAs short sale guidelines are designed to
streamline and standardize the process and will be compatible
with Bank of Americas new cooperative short sale program.
During 2010, 285,000 loan modifications were completed with a
total unpaid principal balance of $65.7 billion, including
109,000 loans with a total unpaid principal amount of
$25.5 billion that were converted from trial-period to
permanent modifications under the MHA, which include HAMP
first-lien modifications and 2MP second-lien modifications. In
addition, on March 26, 2010, the U.S. government
announced new changes to the MHA program guidelines that include
principal forgiveness options to the HAMP for a
sub-segment
of qualified HAMP borrowers. The details around eligibility,
forgiveness arrangements and the incentive structures are still
being finalized. However, we
implemented a forgiveness program on a subset of HAMP eligible
products under the National Home Retention Program (NHRP) in
2010.
In addition to the programs described above, we have implemented
several programs designed to help our customers. For information
on these programs, refer to Credit Risk Management beginning on
page 71. We will continue to help our customers address
financial challenges through these government programs and our
own home retention programs.
Stress
Tests
The Corporation has established management routines to
periodically conduct stress tests to evaluate potential impacts
to the Corporation under hypothetical economic scenarios. These
stress tests will facilitate our contingency planning and
management of capital and liquidity. These processes were also
used to conduct the recent secondary stress testing imposed by
the Federal Reserve and were incorporated into the Capital Plan
that was submitted as part of this request, which included a
proposed modest increase in our common dividend in the second
half of 2011. The results of these stress tests may influence
bank regulatory supervisory requirements concerning the
Corporation and may impact the amount or timing of dividends or
distributions to the Corporations stockholders. For
additional information, see Capital Management beginning on
page 63 and Liquidity Risk beginning on page 67.
Other
Matters
The Corporation has established guidelines and policies for
managing capital across its subsidiaries. The guidance for the
Corporations subsidiaries with regulatory capital
requirements, including branch operations of banking
subsidiaries, requires each entity to maintain satisfactory
capital levels. This includes setting internal capital targets
for the U.S. bank subsidiaries to exceed well
capitalized levels.
The U.K. has adopted increased capital and liquidity
requirements for local financial institutions, including
regulated U.K. subsidiaries of non-U.K. bank holding companies
and other financial institutions as well as branches of non-U.K.
banks located in the U.K. In addition, the U.K. has proposed the
creation and production of recovery and resolution plans
(commonly referred to as living wills) by such entities. We are
currently monitoring the impact of these initiatives.
Managing
Risk
Overview
Risk is inherent in every activity that we undertake. Our
business exposes us to strategic, credit, market, liquidity,
compliance, operational and reputational risk. We must manage
these risks to maximize our long-term results by ensuring the
integrity of our assets and the quality of our earnings.
Strategic risk is the risk that results from adverse business
decisions, ineffective or inappropriate business plans, or
failure to respond to changes in the competitive environment,
business cycles, customer preferences, product obsolescence,
regulatory environment, business strategy execution,
and/or other
inherent risks of the business including reputational risk.
Credit risk is the risk of loss arising from a borrowers
or counterpartys inability to meet its obligations. Market
risk is the risk that values of assets and liabilities or
revenues will be adversely affected by changes in market
conditions such as interest rate movements. Liquidity risk is
the inability to meet contractual and contingent financial
obligations, on- or off-balance sheet, as they come due.
Compliance risk is the risk that arises from the failure to
adhere to laws, rules, regulations, or internal policies and
procedures. Operational risk is the risk of loss resulting from
inadequate or failed internal processes, people and systems, or
external events. Reputational risk is the potential that
negative publicity regarding an organizations conduct or
business practices will adversely affect its profitability,
operations or customer base, or require costly
Bank of America
2010 59
litigation or other measures. Reputational risk is evaluated
within all of the risk categories and throughout the risk
management process, and as such is not discussed separately
herein. The following sections, Strategic Risk Management
beginning on page 62, Capital Management beginning on
page 63, Liquidity Risk beginning on page 67, Credit
Risk Management beginning on page 71, Market Risk
Management beginning on page 100, Compliance Risk
Management on page 106 and Operational Risk Management
beginning on page 106, address in more detail the specific
procedures, measures and analyses of the major categories of
risk that we manage.
In choosing when and how to take risks, we evaluate our capacity
for risk and seek to protect our brand and reputation, our
financial flexibility, the value of our assets and the strategic
potential of our Corporation. We intend to maintain a strong and
flexible financial position that will allow us to successfully
weather challenging economic times and take advantage of
opportunities to grow. We also intend to focus on maintaining
our relevance and value to customers, associates and
shareholders. To achieve these objectives, we have built a
comprehensive risk management culture and have implemented
governance and control measures to maintain that culture.
Our risk management infrastructure is continually evolving to
meet the heightened challenges posed by the increased complexity
of the financial services industry and markets, by our increased
size and global footprint, and by the financial crisis. We have
a defined risk framework and clearly articulated risk appetite
which is approved annually by the Corporations Board of
Directors (the Board).
We take a comprehensive approach to risk management. Risk
management planning is fully integrated with strategic,
financial and customer/client planning so that goals and
responsibilities are aligned across the organization. Risk is
managed in a systematic manner by focusing on the Corporation as
a whole as well as managing risk across the enterprise and
within individual business units, products, services and
transactions, and across all geographic locations. We maintain a
governance structure that delineates the responsibilities for
risk management activities, as well as governance and oversight
of those activities, by executive management and the Board.
Executive management assesses, and the Board oversees, the
risk-adjusted returns of each business segment through review
and approval of strategic and financial operating plans. By
allocating economic capital to and establishing a risk appetite
for a business segment, we seek to effectively manage the
ability to take on risk. Economic capital is assigned to each
business segment using a risk-adjusted methodology incorporating
each segments stand-alone credit, market, interest rate
and operational risk components, and is used to measure
risk-adjusted returns. Businesses operate within their credit,
market, compliance and operational risk standards and limits in
order to adhere to the risk appetite. These limits are based on
analyses of risk and reward in each line of business, and
executive management is responsible for tracking and reporting
performance measurements as well as any exceptions to guidelines
or limits. The Board monitors financial performance, execution
of the strategic and financial operating plans, compliance with
the risk appetite and the adequacy of internal controls through
its committees.
On December 14, 2010, the Board completed its annual review
and approval of the Risk Framework and the Risk Appetite
Statement for the Corporation. The Risk Framework defines the
accountability of the Corporation and its associates and the
Risk Appetite Statement defines the parameters under which we
will take risk. Both documents are intended to enable us to
maximize our long-term results and ensure the integrity of our
assets and the quality of our earnings. The Risk Framework is
designed to be used by our associates to understand risk
management activities, including their individual roles and
accountabilities. It also defines how risk management is
integrated into our core business processes, and it defines the
risk management governance structure, including
managements involvement. The risk management
responsibilities of the lines of business, governance and
control functions, and Corporate Audit are also clearly defined,
and reflects how the
Board-approved risk appetite influences business and risk
strategy. The risk management process contains four elements:
identify and measure risk, mitigate and control risk, monitor
and test risk, and report and review risk, and is applied across
all business activities to enable an integrated and
comprehensive review of risk consistent with the Boards
Risk Appetite Statement.
Risk Management
Processes and Methods
To support our corporate goals and objectives, risk appetite,
and business and risk strategies, we maintain a governance
structure that delineates the responsibilities for risk
management activities, as well as governance and oversight of
those activities, by management and the Board. All associates
have accountability for risk management. Each associates
risk management responsibilities falls into one of three major
categories: lines of business, governance and control (Global
Risk Management and enterprise control functions) and Corporate
Audit.
Line of business managers and associates are accountable for
identifying, managing and escalating attention, as appropriate,
to all risks in their business units, including existing and
emerging risks. Line of business managers must ensure that their
business activities are conducted within the risk appetite
defined by management and approved by the Board. The limits and
controls for each business must be consistent with the Risk
Appetite Statement. Line of business associates in client and
customer facing businesses are responsible for
day-to-day
business activities, including developing and delivering
profitable products and services, fulfilling customer requests
and maintaining desirable customer relationships. These
associates are accountable for conducting their daily work in
accordance with policies and procedures. It is the
responsibility of each associate to protect the Corporation and
defend the interests of the shareholders.
Governance and control functions are comprised of Global Risk
Management and the enterprise control functions. Global Risk
Management is led by the Chief Risk Officer (CRO). The CRO leads
senior management in managing risk, is independent from the
Corporations lines of business and enterprise control
functions, and maintains sufficient autonomy to develop and
implement meaningful risk management measures. This position
serves to protect the Corporation and its shareholders. The CRO
reports to the Chief Executive Officer (CEO) and is the
management team lead or a participant in Board-level risk
governance committees. The CRO has the mandate to ensure that
appropriate risk management practices are in place, effective
and consistent with our overall business strategy and risk
appetite. Global Risk Management is comprised of two types of
risk teams, Enterprise Risk Teams and independent line of
business risk teams, which report to the CRO and are independent
from the lines of business and enterprise control functions.
Enterprise Risk Teams are responsible for setting and
establishing enterprise policies, programs and standards,
assessing program adherence, providing enterprise-level risk
oversight, and reporting and monitoring for systemic and
emerging risk issues. In addition, the Enterprise Risk Teams are
responsible for monitoring and ensuring that risk limits are
reasonable and consistent with the risk appetite. These risk
teams also carry out risk-based oversight of the enterprise
control functions.
Independent line of business risk teams are responsible for
establishing policies, limits, standards, controls, metrics and
thresholds within the defined corporate standards for the lines
of business to which they are aligned. The independent line of
business risk teams are responsible for ensuring that risk
limits and standards are reasonable and consistent with the risk
appetite.
Enterprise control functions are independent of the lines of
business and have risk governance and control responsibilities
for enterprise programs. In this role, they are responsible for
setting policies, standards and limits; providing risk
reporting; monitoring for systemic risk issues including
existing, emerging and reputational; and implementing procedures
and controls at the enterprise and line of business levels for
their respective control functions. Enterprise control functions
consist of the Chief Financial Officer group, Global
60 Bank
of America 2010
Technology and Operations, Global Human Resources, Global
Marketing and Corporate Affairs, and Legal.
The Corporate Audit function and the Corporate General Auditor
maintain independence from the lines of business and governance
and control functions by reporting directly to the Audit
Committee of the Board. Corporate Audit provides independent
assessment and validation through testing of key processes and
controls across the Corporation. Corporate Audit provides an
independent assessment of the Corporations management and
internal control systems. Corporate Audit activities are
designed to provide reasonable assurance that resources are
adequately protected; significant financial, managerial and
operating information is materially complete, accurate and
reliable; and employees actions are in compliance with the
Corporations policies, standards, procedures, and
applicable laws and regulations.
To ensure that the Corporations goals and objectives, risk
appetite, and business and risk strategies are achieved, we
utilize a risk management process that is applied across the
execution of all business activities. This risk management
process, which is an integral part of our Risk Framework,
enables the Corporation to review risk in an integrated and
comprehensive manner across all risk categories and make
strategic and business decisions based on that comprehensive
view. Corporate goals and objectives and our risk appetite are
established by management, approved by the Board, and are key
drivers to setting business and risk strategy.
One of the key tools of the risk management process is the use
of Risk and Control Self Assessments (RCSAs). RCSAs are the
primary method for facilitating the management of Business
Environment and Internal Control Factor (BEICF) data. The
end-to-end
RCSA process incorporates risk identification and assessment of
the control environment; monitoring, reporting and escalating
risk; quality assurance and data validation; and integration
with the risk appetite. The RCSA process also incorporates
documentation by either the line of business or enterprise
control function of the business environment, risks, controls,
and monitoring and reporting. This results in a comprehensive
risk management view that enables understanding of and action on
operational risks and controls for all of our processes,
products, activities and systems.
The formal processes used to manage risk represent a part of our
overall risk management process. Corporate culture and the
actions of our associates
are also critical to effective risk management. Through our Code
of Ethics, we set a high standard for our associates. The Code
of Ethics provides a framework for all of our associates to
conduct themselves with the highest integrity in the delivery of
our products or services to our customers. We instill a strong
and comprehensive risk management culture through
communications, training, policies, procedures, and
organizational roles and responsibilities. Additionally, we
continue to strengthen the link between the associate
performance management process and individual compensation to
encourage associates to work toward enterprise-wide risk goals.
Board Oversight
of Risk
We maintain a governance structure that delineates the
responsibilities for risk management activities, as well as
governance and oversight of those activities, by management and
the Board. The majority of our directors, including the Chairman
of the Board, are considered independent and meet the
requirements of our Director Independence Categorical Standards
and the criteria for independence in the listing standards of
the New York Stock Exchange. Also, all members of the Audit and
Enterprise Risk Committees are independent and all members of
the Credit Committee are non-management directors.
The Board is responsible for the oversight of the management of
the Corporation. As part of its oversight, the Board oversees
the management of the various types of risk faced by the
Corporation. Our corporate risk management governance structure
is designed to align the interests of the Board and management
with those of our stockholders and to foster integrity
throughout the Corporation.
The Board, under the leadership of its independent Chairman,
oversees the management of the Corporation through the
governance structure, which includes Board committees and
management committees. The Board maintains standing committees
to oversee risk. The committees with the majority of risk
oversight responsibilities include the Credit, Enterprise Risk
and Audit Committees.
Bank of America
2010 61
The figure below illustrates the inter-relationship between the
Board, Board level committees and management level committees
with the majority of risk oversight responsibilities for the
Corporation.
(1) Compliance
Risk activities, including Ethics Oversight, are required to be
reviewed by the Audit Committee and Operational Risk activities
are required to be reviewed by the Enterprise Risk Committee.
(2) The
Disclosure Committee assists the CEO and CFO in fulfilling their
responsibility for the accuracy and timeliness of the
Corporations disclosures and reports the results of the
process to the Audit Committee.
The Credit Committee is responsible for oversight of senior
managements identification and management of the
Corporations credit exposures on an enterprise-wide basis,
as well as the Corporations responses to trends affecting
those exposures. The Credit Committee is also responsible for
oversight of senior managements actions relating to the
adequacy of the allowance for credit losses and the
Corporations credit-related policies.
The Enterprise Risk Committee is responsible for exercising
oversight of senior managements responsibility to identify
the material risks facing the Corporation and oversight of
senior managements planning for and management of the
Corporations material risks, including market risk,
interest rate risk, liquidity risk, operational risk and
reputational risk. The Enterprise Risk Committee also oversees
senior managements establishment of policies and
guidelines articulating the Corporations risk tolerances
for material categories of risk, the performance and functioning
of the Corporations overall risk management function, and
senior managements establishment of appropriate systems
that support control of market risk, interest rate risk and
liquidity risk.
The Audit Committee is responsible for assisting the Board in
overseeing the integrity of the Corporations Consolidated
Financial Statements and the effectiveness of the
Corporations system of internal controls and policies and
procedures for managing and assessing risk, including compliance
with legal and regulatory requirements. The Audit Committee also
provides approval and direct oversight of the independent
registered public accounting firm, including such firms
assessment of managements assertion of the effectiveness
of the Corporations disclosure controls and procedures and
the Corporations internal control over financial
reporting; and oversight of such accountants appointment,
compensation, qualifications and independence. The Audit
Committee also oversees the corporate audit function.
The Credit, Enterprise Risk and Audit Committees provide
enterprise-wide oversight of the Corporations management
and handling of risk. Each of these three committees reports
regularly to the Board on risk-related matters within its
responsibilities and together they provide the Board with
integrated, thorough insight about our management of strategic,
credit, market, liquidity, compliance, legal, operational and
reputational risks. At meetings of each Board committee and our
Board, directors receive updates from management regarding all
aspects of enterprise risk management, including our performance
against our identified risk appetite.
Executive management develops for Board approval the
Corporations Risk Framework, Risk Appetite Statement, and
strategic and financial operating plans. Management and the
Board, through the Credit, Enterprise Risk and Audit Committees,
monitor financial performance, execution of the strategic and
financial operating plans, compliance with the risk appetite,
and the adequacy of internal controls.
Strategic
Risk Management
Strategic risk is embedded in every line of business and is one
of the major risk categories along with credit, market,
liquidity, compliance, operational and reputational risks. It is
the risk that results from adverse business decisions,
62 Bank
of America 2010
ineffective or inappropriate business plans, or failure to
respond to changes in the competitive environment, business
cycles, customer preferences, product obsolescence, regulatory
environment, business strategy execution
and/or other
inherent risks of the business including reputational risk. In
the financial services industry, strategic risk is high due to
changing customer, competitive and regulatory environments. Our
appetite for strategic risk is assessed within the context of
the strategic plan, with strategic risks selectively and
carefully considered in the context of the evolving marketplace.
Strategic risk is managed in the context of our overall
financial condition and assessed, managed and acted on by the
Chief Executive Officer and executive management team.
Significant strategic actions, such as material acquisitions or
capital actions, are reviewed and approved by the Board.
Executive management and the Board approve a strategic plan
every two to three years. Annually, executive management
develops a financial operating plan and the Board reviews and
approves the plan. With oversight by the Board, executive
management ensures that the plans are consistent with the
Corporations strategic plan, core operating tenets and
risk appetite. The following are assessed in their reviews:
forecasted earnings and returns on capital, the current risk
profile, current capital and liquidity requirements, staffing
levels and changes required to support the plan, stress testing
results, and other qualitative factors such as market growth
rates and peer analysis. With oversight by the Board, executive
management performs similar analyses throughout the year, and
defines changes to the financial forecast or the risk, capital
or liquidity positions as deemed appropriate to balance and
optimize between achieving the targeted risk appetite and
shareholder returns and maintaining the targeted financial
strength.
We use proprietary models to measure the capital requirements
for credit, country, market, operational and strategic risks.
The economic capital assigned to each line of business is based
on its unique risk exposures. With oversight by the Board,
executive management assesses the risk-adjusted returns of each
business in approving strategic and financial operating plans.
The businesses use economic capital to define business
strategies, price products and transactions, and evaluate client
profitability.
Capital
Management
Bank of America manages its capital position to maintain a
strong and flexible financial position in order to perform
through economic cycles, take advantage of organic growth
opportunities, maintain ready access to financial markets,
remain a source of financial strength for its subsidiaries, and
return capital to its shareholders as appropriate.
To determine the appropriate level of capital, we assess the
results of our Internal Capital Adequacy Assessment Process
(ICAAP), the current economic and market environment, and
feedback from investors, ratings agencies and regulators. Based
upon this analysis we set capital guidelines for Tier 1
common capital and Tier 1 capital to ensure we can maintain
an adequate capital position in a severe adverse economic
scenario. We also target to maintain capital in excess of the
capital required per our economic capital measurement process
(see Economic Capital on page 66). Management and the Board
annually approve a comprehensive Capital Plan which documents
the ICAAP and related results, analysis and support for the
capital guidelines, and planned capital actions and capital
adequacy assessment.
The ICAAP incorporates capital forecasts, stress test results,
economic capital, qualitative risk assessments and assessment of
regulatory changes. We generate monthly regulatory capital and
economic capital forecasts that are aligned to the most recent
earnings, balance sheet and risk forecasts. We utilize quarterly
stress tests to assess the potential impacts to earnings,
capital and liquidity for a variety of economic stress
scenarios. We perform qualitative risk assessments to identify
and assess material risks not fully captured in the forecasts,
stress tests or economic capital. Given the significant proposed
regulatory capital changes, we also regularly assess the
potential capital
impacts and monitor associated mitigation actions. Management
continuously assesses ICAAP results and provides documented
quarterly assessments of the adequacy of the capital guidelines
and capital position to the Board.
Capital management is integrated into the risk and governance
processes, as capital is a key consideration in development of
the strategic plan, risk appetite and risk limits. Economic
capital is allocated to each business unit and used to perform
risk-adjusted return analysis at the business unit, client
relationship and transaction level.
Regulatory
Capital
As a financial services holding company, we are subject to the
risk-based capital guidelines (Basel I) issued by the
Federal Reserve. At December 31, 2010, we operated banking
activities primarily under two charters: Bank of America, N.A.
and FIA Card Services, N.A. which are subject to the risk-based
capital guidelines issued by the Office of the Comptroller of
the Currency (OCC). Under these guidelines, the Corporation and
its affiliated banking entities measure capital adequacy based
on Tier 1 common capital, Tier 1 capital and Total
capital (Tier 1 plus Tier 2 capital). Capital ratios
are calculated by dividing each capital amount by risk-weighted
assets. Additionally, Tier 1 capital is divided by adjusted
quarterly average total assets to derive the Tier 1
leverage ratio.
Tier 1 capital is calculated as the sum of core
capital elements. The predominate components of core
capital elements are qualifying common stockholders
equity, any CES and qualifying noncumulative perpetual preferred
stock. Also included in Tier 1 capital are qualifying trust
preferred capital debt securities (Trust Securities),
hybrid securities and qualifying non-controlling interest in
subsidiaries which are subject to the rules governing
restricted core capital elements. Goodwill, other
disallowed intangible assets, disallowed deferred tax assets and
the cumulative changes in fair value of all financial
liabilities accounted for under a fair value option that are
included in retained earnings and are attributable to changes in
the companys own creditworthiness are deducted from the
sum of the core capital elements. Total capital is Tier 1
plus supplementary Tier 2 capital elements such as
qualifying subordinated debt, a limited portion of the allowance
for loan and lease losses, and a portion of net unrealized gains
on AFS marketable equity securities. Tier 1 common capital
is not an official regulatory ratio, but was introduced by the
Federal Reserve during the Supervisory Capital Assessment
Program in 2009. Tier 1 common capital is Tier 1
capital less preferred stock, Trust Securities, hybrid
securities and qualifying non-controlling interest in
subsidiaries.
Risk-weighted assets are calculated for credit risk for all on-
and off-balance sheet credit exposures and for market risk on
trading assets and liabilities, including derivative exposures.
Credit risk risk-weighted assets are calculated by assigning a
prescribed risk-weight to all on-balance sheet assets and to the
credit equivalent amount of certain off-balance sheet exposures.
The risk-weight is defined in the regulatory rules based upon
the obligor or guarantor type and collateral if applicable.
Off-balance sheet exposures include financial guarantees,
unfunded lending commitments, letters of credit and derivatives.
Market risk risk-weighted assets are calculated using risk
models for the trading account positions, including all foreign
exchange and commodity positions regardless of the applicable
accounting guidance. Under Basel I there are no risk-weighted
assets calculated for operational risk. Any assets that are a
direct deduction from the computation of capital are excluded
from risk-weighted assets and adjusted average total assets
consistent with regulatory guidance.
For additional information on these and other regulatory
requirements, see Note 18 Regulatory
Requirements and Restrictions to the Consolidated Financial
Statements.
Capital
Composition and Ratios
On January 21, 2010, the joint agencies issued a final rule
regarding the impact of the new consolidation guidance on
risk-based capital. The incremental impact on January 1,
2010 was an increase in assets of $100.4 billion and
risk-weighted assets of $21.3 billion and a reduction in
Tier 1 common
Bank of America
2010 63
capital and Tier 1 capital of $9.7 billion. The
overall effect of the new consolidation guidance and the final
rule was a decrease in Tier 1 capital and Tier 1
common capital ratios of 76 bps and 73 bps on
January 1, 2010.
We continued to strengthen capital in 2010 as evidenced by the
$4.7 billion growth in Tier 1 common capital or
$14.4 billion before the impact of the new consolidation
guidance. The increase was driven by the $10.2 billion in
earnings generated in 2010, excluding the goodwill impairment
charges of $12.4 billion. Tier 1 capital and Total
capital grew by $3.2 billion and $3.5 billion in 2010
or by $13.0 billion and $12.9 billion when adjusted
for the impact of the new consolidation guidance.
Risk-weighted assets declined by $87 billion in 2010
including the impact of the new consolidation guidance. The
risk-weighted asset reduction is consistent with our continued
efforts to reduce non-core assets and legacy loan portfolios.
As a result of the increased capital position and reduced
risk-weighted assets, the Tier 1 common capital ratio
increased 79 bps to 8.60 percent, the Tier 1
capital ratio increased 84 bps to 11.24 percent and
Total capital increased 111 bps to 15.77 percent in
2010. When adjusted for the impacts of the new consolidation
guidance, the growth in the ratios was more significant.
The Tier 1 leverage ratio increased 33 bps to
7.21 percent, reflecting both the strengthening of the
capital position previously mentioned and a $62 billion
reduction in adjusted quarterly average total assets including
the impact of the new consolidation guidance.
The $12.4 billion goodwill impairment charges recognized
during 2010 did not impact the regulatory capital ratios.
The table below presents the Corporations capital ratios
and related information at December 31, 2010 and 2009.
Table
12 Regulatory
Capital
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(Dollars in billions)
|
|
2010
|
|
|
2009
|
|
Tier 1 common equity ratio
|
|
|
8.60
|
%
|
|
|
7.81
|
%
|
Tier 1 capital ratio
|
|
|
11.24
|
|
|
|
10.40
|
|
Total capital ratio
|
|
|
15.77
|
|
|
|
14.66
|
|
Tier 1 leverage ratio
|
|
|
7.21
|
|
|
|
6.88
|
|
Risk-weighted assets
|
|
$
|
1,456
|
|
|
$
|
1,543
|
|
Adjusted quarterly average total
assets (1)
|
|
|
2,270
|
|
|
|
2,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Reflects adjusted average total
assets for the three months ended December 31, 2010 and
2009.
|
The table below presents the capital composition at
December 31, 2010 and 2009.
Table
13 Capital
Composition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(Dollars in millions)
|
|
|
2010
|
|
|
|
2009
|
|
Total common shareholders equity
|
|
|
$
|
211,686
|
|
|
|
$
|
194,236
|
|
Goodwill
|
|
|
|
(73,861
|
)
|
|
|
|
(86,314
|
)
|
Nonqualifying intangible assets (includes core deposit
intangibles, affinity relationships, customer relationships and
other intangibles)
|
|
|
|
(6,846
|
)
|
|
|
|
(8,299
|
)
|
Net unrealized gains or losses on AFS debt and marketable equity
securities and net losses on derivatives recorded in accumulated
OCI,
net-of-tax
|
|
|
|
(4,137
|
)
|
|
|
|
1,034
|
|
Unamortized net periodic benefit costs recorded in accumulated
OCI,
net-of-tax
|
|
|
|
3,947
|
|
|
|
|
4,092
|
|
Exclusion of fair value adjustment related to structured
notes (1)
|
|
|
|
2,984
|
|
|
|
|
2,981
|
|
Common Equivalent Securities
|
|
|
|
|
|
|
|
|
19,290
|
|
Disallowed deferred tax asset
|
|
|
|
(8,663
|
)
|
|
|
|
(7,080
|
)
|
Other
|
|
|
|
29
|
|
|
|
|
454
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Tier 1 common
capital
|
|
|
|
125,139
|
|
|
|
|
120,394
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
|
16,562
|
|
|
|
|
17,964
|
|
Trust preferred securities
|
|
|
|
21,451
|
|
|
|
|
21,448
|
|
Noncontrolling interest
|
|
|
|
474
|
|
|
|
|
582
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Tier 1
capital
|
|
|
|
163,626
|
|
|
|
|
160,388
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt qualifying as Tier 2 capital
|
|
|
|
41,270
|
|
|
|
|
43,284
|
|
Allowance for loan and lease losses
|
|
|
|
41,885
|
|
|
|
|
37,200
|
|
Reserve for unfunded lending commitments
|
|
|
|
1,188
|
|
|
|
|
1,487
|
|
Allowance for loan and lease losses exceeding 1.25 percent
of risk-weighted assets
|
|
|
|
(24,690
|
)
|
|
|
|
(18,721
|
)
|
45 percent of the pre-tax net unrealized gains on AFS
marketable equity securities
|
|
|
|
4,777
|
|
|
|
|
1,525
|
|
Other
|
|
|
|
1,538
|
|
|
|
|
907
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital
|
|
|
$
|
229,594
|
|
|
|
$
|
226,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents loss on structured
notes,
net-of-tax,
that is excluded from Tier 1 common capital, Tier 1
capital and Total capital for regulatory purposes.
|
Regulatory
Capital Changes
In June 2004, the Basel II Accord was published by the
Basel Committee on Banking Supervision (the Basel Committee)
with the intent of more closely aligning regulatory capital
requirements with underlying risks, similar to economic capital.
While economic capital is measured to cover unexpected losses,
we also manage regulatory capital to adhere to regulatory
standards of capital adequacy.
The Basel II Final Rule (Basel II) which was published
in December 2007 established requirements for
U.S. implementation of the Basel Committees
Basel II Accord and provides detailed requirements for a
new regulatory capital framework. This regulatory capital
framework includes requirements related to credit and
operational risk (Pillar 1), supervisory requirements
(Pillar 2) and disclosure requirements (Pillar 3). We
began the Basel II parallel qualification period on
April 1, 2010.
Designated U.S. financial institutions are required to
complete a minimum parallel qualification period under
Basel II of four consecutive successful quarters before
receiving regulatory approval to report regulatory capital using
the Basel II methodology and exiting the parallel period.
During the parallel period, the resulting capital calculations
under both the current risk-based capital rules (Basel
I) and Basel II will be reported to the financial
institutions regulatory supervisors. Once the parallel
period is successfully completed and we have received approval
to exit parallel, we will transition to Basel II as the
methodology for calculating regulatory capital. Basel II
provides for a three-year transitional floor subsequent to
exiting parallel, after which Basel I may be discontinued. The
Collins Amendment within the Financial
64 Bank
of America 2010
Reform Act and the U.S. banking regulators subsequent
Notice of Proposed Rulemaking published by the Federal Reserve
on December 14, 2010 propose however that the current
three-year transitional floors under Basel II be replaced
with a permanent risk based capital floor as defined under Basel
I.
On December 16, 2010, U.S. regulators issued a Notice
of Proposed Rulemaking on the Risk-Based Capital Guidelines for
Market Risk (Market Risk Rules), reflecting partial adoption of
the Basel Committees July 2009 consultative document on
the topic. We anticipate U.S. regulators will adopt the
Market Risk Rules in mid-2011. This change is expected to
significantly increase the capital requirements for our trading
assets and liabilities, including derivatives exposures which
meet the definition established by the regulatory agencies. We
continue to evaluate the capital impact of the proposed rules
and currently anticipate being fully compliant with any final
rules by the projected implementation date of year-end 2011.
On December 16, 2010, the Basel Committee issued
Basel III: A global regulatory framework for more
resilient banks and banking systems (Basel III), proposing
a January 2013 implementation date for Basel III. If implemented
by U.S. regulators as proposed, Basel III could
significantly increase our capital requirements. Basel III
and the Financial Reform Act propose the disqualification of
trust preferred securities from Tier 1 capital, with the
Financial Reform Act proposing the disqualification be phased in
from 2013 to 2015. Basel III also proposes the deduction of
certain assets from capital (deferred tax assets, MSRs,
investments in financial firms and pension assets, among others,
within prescribed limitations), the inclusion of other
comprehensive income in capital, increased capital for
counterparty credit risk, and new minimum capital and buffer
requirements. The phase-in period for the capital deductions is
proposed to occur in 20 percent increments from 2014
through 2018 with full implementation by December 31, 2018.
The increase in capital requirements for counterparty credit
risk is proposed to be effective January 2013. The phase-in
period for the new minimum capital requirements and related
buffers is proposed to occur between 2013 and 2019.
U.S. regulators are expected to begin the final rulemaking
processes for Basel III in early 2011 and have indicated a
goal to adopt final rules by year-end 2011 or early 2012. For
additional information on our MSRs, refer to
Note 25 Mortgage Servicing Rights to the
Consolidated Financial Statements. For additional information on
deferred tax assets, refer to Note 21 Income
Taxes to the Consolidated Financial Statements.
If Basel III is implemented in the U.S. consistent
with Basel Committee rules, beginning in January 2013, we would
be required to maintain minimum capital ratio requirements of
6.0 percent for Tier 1 capital and 8.0 percent
for Total capital. Basel III also includes a proposed
minimum requirement for common equity Tier 1 capital of
3.5 percent beginning in 2013 which would
increase to 4.5 percent in 2015. Basel III also
includes three capital buffers which would be phased in over
time and impact all three capital ratios. These buffers include
a capital conservation buffer that would start at
0.63 percent in 2016 and increase to 2.5 percent in
2019. Thus, the minimum capital ratio requirements including the
capital conservation buffer in 2019 would be 7.0 percent
for common equity Tier 1 capital, 8.5 percent for
Tier 1 capital and 10.5 percent for Total capital. If
ratios fall below the minimum requirement plus the capital
conservation buffer, such as 10.5 percent for Total
capital, an institution would be required to restrict dividends,
share repurchases and discretionary bonuses. Additionally,
Basel III also includes a countercyclical buffer of up to
2.5 percent that regulators could require in periods of
excess credit growth. The countercyclical buffer is to be
comprised of loss-absorbing capital, such as common equity, and
is meant to retain additional capital during periods of excess
credit growth providing incremental protection in the event of a
material market downturn. The ratios presented above do not
include the third buffer requirement for systemically important
financial institutions, which the Basel Committee continues to
assess and has not yet quantified. The countercyclical and
systemic buffers are scheduled to be phased in from 2013 through
2019. U.S. regulators are expected to begin the rulemaking
processes for Basel III in early 2011 and have indicated a
goal to adopt final rules by the end of 2011 or early 2012.
These regulatory changes also require approval by the agencies
of analytical models used as part of our capital measurement and
assessment, especially in the case of more complex models. If
these more complex models are not approved, it could require
financial institutions to hold additional capital, which in some
cases could be significant.
We expect to maintain a Tier 1 common capital ratio in
excess of eight percent as the regulatory rule changes are
implemented without needing to raise new equity capital. We have
made the implementation and mitigation of these regulatory
changes a strategic priority. We also note there remains
significant uncertainty on the final impacts as the
U.S. has issued final rules only for Basel II and a
Notice of Proposal Rulemaking for the Market Risk Rules at this
time. Impacts may change as the U.S. finalizes rules and
the regulatory agencies interpret the final rules for Basel III
during the implementation process.
Bank of America,
N.A. and FIA Card Services, N.A. Regulatory Capital
The table below presents regulatory capital information for Bank
of America N.A. and FIA Card Services, N.A. at December 31,
2010 and 2009. The goodwill impairment charges recognized in
2010 did not impact the regulatory capital ratios.
Table
14 Bank
of America, N.A. and FIA Card Services, N.A. Regulatory
Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
|
2010
|
|
|
2009
|
|
(Dollars in millions)
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
Tier 1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank of America, N.A.
|
|
|
|
10.78
|
%
|
|
$
|
114,345
|
|
|
|
10.30
|
%
|
|
$
|
111,916
|
|
FIA Card Services, N.A.
|
|
|
|
15.30
|
|
|
|
25,589
|
|
|
|
15.21
|
|
|
|
28,831
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank of America, N.A.
|
|
|
|
14.26
|
|
|
|
151,255
|
|
|
|
13.76
|
|
|
|
149,528
|
|
FIA Card Services, N.A.
|
|
|
|
16.94
|
|
|
|
28,343
|
|
|
|
17.01
|
|
|
|
32,244
|
|
Tier 1 leverage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank of America, N.A.
|
|
|
|
7.83
|
|
|
|
114,345
|
|
|
|
7.38
|
|
|
|
111,916
|
|
FIA Card Services, N.A.
|
|
|
|
13.21
|
|
|
|
25,589
|
|
|
|
23.09
|
|
|
|
28,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Bank of America, N.A. Tier 1 and Total capital ratio
increased 48 bps to 10.78 percent and 50 bps to
14.26 percent at December 31, 2010 compared to
December 31, 2009. The increase in the ratios was driven by
$11.1 billion
in earnings generated in 2010 combined with a $26.4 billion
decline in risk-weighted assets. The Tier 1 leverage ratio
increased 45 bps to 7.83 percent benefiting from the
improvement in Tier 1 capital combined with a
$56.0 billion
Bank of America
2010 65
decrease in adjusted quarterly average total assets. The
reduction in risk-weighted assets and adjusted quarterly average
total assets is consistent with our continued efforts to reduce
non-core assets and legacy loan portfolios.
The FIA Card Services, N.A. Tier 1 capital ratio increased
9 bps to 15.30 percent and Total capital ratio
decreased 7 bps to 16.94 percent compared to
December 31, 2009. The increase in Tier 1 capital
ratio was due to a decrease in risk-weighted assets of
$22.3 billion. The decrease in the Total capital ratio was
due to a reduction in Tier 2 capital resulting from a
$390 million decrease in qualifying term subordinated debt
combined with a net increase in the allowance for credit losses
limitation of $269 million. The Tier 1 leverage ratio
decreased to 13.21 percent at December 31, 2010 from
23.09 percent at December 31, 2009 due to a
$68.9 billion increase in adjusted quarterly average total
assets. The increase in adjusted quarterly average total assets
was the result of the adoption of new consolidation guidance.
Broker/Dealer
Regulatory Capital
Bank of Americas principal U.S. broker/dealer
subsidiaries are Merrill Lynch, Pierce, Fenner & Smith
(MLPF&S) and Merrill Lynch Professional Clearing Corp
(MLPCC). MLPCC is a subsidiary of MLPF&S and provides
clearing and settlement services. Both entities are subject to
the net capital requirements of SEC
Rule 15c3-1.
Both entities are also registered as futures commission
merchants and subject to the Commodity Futures Trading
Commission (CFTC) Regulation 1.17.
MLPF&S has elected to compute the minimum capital
requirement in accordance with the Alternative Net Capital
Requirement as permitted by SEC
Rule 15c3-1.
At December 31, 2010, MLPF&Ss regulatory net
capital as defined by
Rule 15c3-1
was $9.8 billion and exceeded the minimum requirement of
$736 million by $9.1 billion. MLPCCs net capital
of $2.3 billion exceeded the minimum requirement by
$2.1 billion.
In accordance with the Alternative Net Capital Requirements,
MLPF&S is required to maintain tentative net capital in
excess of $1 billion and notify the SEC in the event its
tentative net capital is less than $5 billion. At
December 31, 2010, MLPF&S had tentative net capital in
excess of the minimum and notification requirements.
Economic
Capital
Our economic capital measurement process provides a risk-based
measurement of the capital required for unexpected credit,
market and operational losses over a one-year time horizon at a
99.97 percent confidence level, consistent with a
AA credit rating. Economic capital is allocated to
each business unit based upon its risk positions and
contribution to enterprise risk, and is used for capital
adequacy, performance measurement and risk management purposes.
The strategic planning process utilizes economic capital with
the goal of allocating risk appropriately and measuring returns
consistently across all businesses and activities.
Credit Risk
Capital
Economic capital for credit risk captures two types of risks:
default risk, which represents the loss of principal due to
outright default or the borrowers inability to repay an
obligation in full, and migration risk, which represents
potential loss in market value due to credit deterioration over
the one-year capital time horizon. Credit risk is assessed and
modeled for all on- and off-balance sheet credit exposures
within
sub-categories
for commercial, retail, counterparty and investment securities.
The economic capital methodology captures dimensions such as
concentration and country risk and originated securitizations.
The economic capital methodology is based on the probability
of default, loss given default, exposure at default and maturity
for each credit exposure, and the portfolio correlations across
exposures. See page 71 for more information on Credit Risk
Management.
Market Risk
Capital
Market risk reflects the potential loss in the value of
financial instruments or portfolios due to movements in foreign
exchange and interest rates, credit spreads, and security and
commodity prices. Bank of Americas primary market risk
exposures are in its trading portfolio, equity investments, MSRs
and the interest rate exposure of its core balance sheet.
Economic capital is determined by utilizing the same models the
Corporation used to manage these risks including, for example,
Value-at-Risk, simulation, stress testing and scenario analysis.
See page 100 for additional information on Market Risk
Management.
Operational Risk
Capital
We calculate operational risk capital at the business unit level
using actuarial-based models and historical loss data. We
supplement the calculations with scenario analysis and risk
control assessments. See Operational Risk Management beginning
on page 106 for more information.
Capital
Actions
The Corporation held a special meeting of stockholders on
February 23, 2010 at which we obtained stockholder approval
of an amendment to our amended and restated certificate of
incorporation to increase the number of authorized shares of our
common stock from 10.0 billion to 11.3 billion. On
February 24, 2010, approximately 1.3 billion shares of
common stock were issued through the conversion of CES into
common stock. For more information regarding this conversion,
see Preferred Stock Issuances and Exchanges on page 67.
In January 2009, we issued approximately 1.4 billion shares
of common stock in connection with the acquisition of Merrill
Lynch. For additional information regarding the Merrill Lynch
acquisition, see Note 2 Merger and
Restructuring Activity to the Consolidated Financial
Statements. In addition, in 2009, we issued warrants to purchase
approximately 199.1 million shares of common stock in
connection with preferred stock issuances to the
U.S. government. For more information, see Preferred Stock
Issuances and Exchanges on page 67. In 2009, we issued
1.3 billion shares of common stock at an average price of
$10.77 per share through an
at-the-market
issuance program resulting in gross proceeds of approximately
$13.5 billion. In addition, during 2010 and 2009, we issued
approximately 98.6 million and 7.4 million shares
under employee stock plans.
Troubled Asset
Relief Program Related Asset Sales
We received notification from the Federal Reserve confirming
that we fulfilled our commitment to increase equity by
$3.0 billion through asset sales to be completed by
December 31, 2010. The commitment was made in connection
with the approval we received in December 2009 to repurchase the
preferred stock that we issued as a result of our participation
in the Troubled Asset Relief Program (TARP).
There were no common shares repurchased in 2010 except for
shares acquired under equity incentive plans, as discussed in
Item 5. Market for Registrants Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities of
this
Form 10-K.
Currently, there is no existing Board authorized share
repurchase program. For more information regarding our common
share issuances, see Note 15
Shareholders Equity to the Consolidated Financial
Statements.
We currently intend to modestly increase the common stock
dividends in the second half of 2011 subject to approval by the
Federal Reserve.
66 Bank
of America 2010
Common Stock
Dividends
The table below is a summary of our declared quarterly cash
dividends on common stock during 2010 and through
February 25, 2011.
Table
15 Common
Stock Cash Dividend Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend
|
|
Declaration Date
|
|
|
Record Date
|
|
|
|
Payment Date
|
|
|
|
Per Share
|
|
January 26, 2011
|
|
|
|
March 4, 2011
|
|
|
|
|
March 25, 2011
|
|
|
|
$
|
0.01
|
|
October 25, 2010
|
|
|
|
December 3, 2010
|
|
|
|
|
December 24, 2010
|
|
|
|
|
0.01
|
|
July 28, 2010
|
|
|
|
September 3, 2010
|
|
|
|
|
September 24, 2010
|
|
|
|
|
0.01
|
|
April 28, 2010
|
|
|
|
June 4, 2010
|
|
|
|
|
June 25, 2010
|
|
|
|
|
0.01
|
|
January 27, 2010
|
|
|
|
March 5, 2010
|
|
|
|
|
March 26, 2010
|
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock
Issuances and Exchanges
In 2009, we completed an offer to exchange outstanding
depositary shares of portions of certain series of preferred
stock up to approximately 200 million shares of common
stock at an average price of $12.70 per share. In addition, we
also entered into agreements with certain holders of other
non-government perpetual preferred shares to exchange their
holdings of approximately $10.9 billion aggregate
liquidation preference of perpetual preferred stock into
approximately 800 million shares of common stock. In total,
the exchange offer and these privately negotiated exchanges
covered the exchange of $14.8 billion aggregate liquidation
preference of perpetual preferred stock into 1.0 billion
shares of common stock. In 2009, we recorded an increase to
retained earnings and net income applicable to common
shareholders of $576 million related to these exchanges.
This represents the net of a $2.6 billion benefit due to
the excess of the carrying value of our non-convertible
preferred stock over the fair value of the common stock
exchanged. This was partially offset by a $2.0 billion
inducement to convertible preferred shareholders representing
the excess of the fair value of the common stock exchanged,
which was accounted for as an induced conversion of convertible
preferred stock, over the fair value of the common stock that
would have been issued under the original conversion terms.
On December 2, 2009, we received approval from the
U.S. Treasury and Federal Reserve to repay the
U.S. governments $45.0 billion preferred stock
investment provided under TARP. In accordance with the approval,
on December 9, 2009, we repurchased all outstanding shares
of Cumulative Perpetual Preferred Stock Series N,
Series Q and Series R issued to the U.S. Treasury
as part of the TARP. While participating in the TARP we recorded
$7.4 billion in dividends and accretion on the TARP
Preferred Stock and repayment saved us approximately
$3.6 billion in annual dividends and accretion. We did not
repurchase the related common stock warrants issued to the
U.S. Treasury in connection with its TARP investment. The
U.S. Treasury auctioned these warrants in March 2010. For
more detail on the TARP Preferred Stock, refer to
Note 15 Shareholders Equity to the
Consolidated Financial Statements.
We repurchased the TARP Preferred Stock through the use of
$25.7 billion in excess liquidity and $19.3 billion in
proceeds from the sale of 1.3 billion units of CES valued
at $15.00 per unit. The CES consisted of depositary shares
representing interests in shares of Common Equivalent Junior
Preferred Stock Series S (Common Equivalent Stock) and
warrants (Contingent Warrants) to purchase an aggregate
60 million shares of the Corporations common stock.
Each depositary share represented a
1/1,000th
interest in a share of Common Equivalent Stock and each
Contingent Warrant granted the holder the right to purchase
0.0467 of a share of a common stock for $0.01 per share. Each
depositary share entitled the holder, through the depository, to
a proportional fractional interest in all rights and preferences
of the Common Equivalent Stock, including conversion, dividend,
liquidation and voting rights.
The Corporation held a special meeting of stockholders on
February 23, 2010 at which we obtained stockholder approval
of an amendment to our amended and restated certificate of
incorporation to increase the number of
authorized shares of our common stock. Following effectiveness
of the amendment, on February 24, 2010, the Common
Equivalent Stock converted in full into our common stock and the
Contingent Warrants automatically expired without becoming
exercisable, and the CES ceased to exist.
On October 15, 2010, all of the outstanding shares of the
mandatory convertible Preferred Stock, Series 2 and
Series 3, of Merrill Lynch automatically converted into an
aggregate of 50 million shares of the Corporations
Common Stock in accordance with the terms of these preferred
securities.
For more information on cash dividends declared on preferred
stock, see Table III.
Enterprise-wide
Stress Testing
As a part of our core risk management practices, we conduct
enterprise-wide stress tests on a periodic basis to better
understand earnings, capital and liquidity sensitivities to
certain economic and business scenarios, including economic and
market conditions that are more severe than anticipated. These
enterprise-wide stress tests provide an understanding of the
potential impacts from our risk profile to earnings, capital and
liquidity, and serve as a key component of our capital
management practices. Scenarios are selected by a group
comprised of senior line of business, risk and finance
executives. Impacts to each line of business from each scenario
are then determined and analyzed, primarily leveraging the
models and processes utilized in everyday management routines.
Impacts are assessed along with potential mitigating actions
that may be taken. Analysis from such stress scenarios is
compiled for and reviewed through our Risk Oversight Committee
(ROC), Asset Liability Market Risk Committee (ALMRC) and the
Boards Enterprise Risk Committee, and serves to inform and
be incorporated, along with other core business processes, into
decision-making by management and the Board. We have made
substantial investments to establish stress testing capabilities
as a core business process.
Liquidity
Risk
Funding and
Liquidity Risk Management
We define liquidity risk as the potential inability to meet our
contractual and contingent financial obligations, on- or
off-balance sheet, as they come due. Our primary liquidity
objective is to ensure adequate funding for our businesses
throughout market cycles, including periods of financial stress.
To achieve that objective, we analyze and monitor our liquidity
risk, maintain excess liquidity and access diverse funding
sources including our stable deposit base. We define excess
liquidity as readily available assets, limited to cash and
high-quality, liquid, unencumbered securities that we can use to
meet our funding requirements as those obligations arise.
Global funding and liquidity risk management activities are
centralized within Corporate Treasury. We believe that a
centralized approach to funding and liquidity risk management
enhances our ability to monitor liquidity requirements,
maximizes access to funding sources, minimizes borrowing costs
and facilitates timely responses to liquidity events.
The Enterprise Risk Committee approves the Corporations
liquidity policy and contingency funding plan, including
establishing liquidity risk tolerance levels. The ALMRC, in
conjunction with the Board and its committees, monitors our
liquidity position and reviews the impact of strategic decisions
on our liquidity. ALMRC is responsible for managing liquidity
risks and ensuring exposures remain within the established
tolerance levels. ALMRC delegates additional oversight
responsibilities to the ROC, which reports to ALMRC. The ROC
reviews and monitors our liquidity position, cash flow
forecasts, stress testing scenarios and results, and implements
our liquidity limits and guidelines. For more information, refer
to Board Oversight of Risk beginning on page 61.
Under this governance framework, we have developed certain
funding and liquidity risk management practices which include:
maintaining excess
Bank of America
2010 67
liquidity at the parent company and selected subsidiaries,
including our bank and broker/dealer subsidiaries; determining
what amounts of excess liquidity are appropriate for these
entities based on analysis of debt maturities and other
potential cash outflows, including those that we may experience
during stressed market conditions; diversifying funding sources,
considering our asset profile and legal entity structure; and
performing contingency planning.
Global Excess
Liquidity Sources and Other Unencumbered Assets
We maintain excess liquidity available to the parent company and
selected subsidiaries in the form of cash and high-quality,
liquid, unencumbered securities. These assets serve as our
primary means of liquidity risk mitigation and we call these
assets our Global Excess Liquidity Sources. Our cash
is primarily on deposit with central banks, such as the Federal
Reserve. We limit the composition of high-quality, liquid,
unencumbered securities to U.S. government securities,
U.S. agency securities, U.S. agency MBS and a select
group of
non-U.S. government
securities. We believe we can quickly obtain cash for these
securities, even in stressed market conditions, through
repurchase agreements or outright sales. We hold our Global
Excess Liquidity Sources in entities that allow us to meet the
liquidity requirements of our global businesses and we consider
the impact of potential regulatory, tax, legal and other
restrictions that could limit the transferability of funds among
entities.
Our global excess liquidity sources increased $122 billion
to $336 billion at December 31, 2010 compared to
$214 billion at December 31, 2009 and were maintained
as presented in the table below. This increase was due primarily
to liquidity generated by our bank subsidiaries through deposit
growth, loan repayments combined with lower loan demand and
other factors.
Table
16 Global
Excess Liquidity Sources
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(Dollars in billions)
|
|
|
2010
|
|
|
|
2009
|
|
Parent company
|
|
|
$
|
121
|
|
|
|
$
|
99
|
|
Bank subsidiaries
|
|
|
|
180
|
|
|
|
|
89
|
|
Broker/dealers
|
|
|
|
35
|
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
Total global excess liquidity
sources
|
|
|
$
|
336
|
|
|
|
$
|
214
|
|
|
As noted above, the excess liquidity available to the parent
company is held in cash and high-quality, liquid, unencumbered
securities and totaled $121 billion and $99 billion at
December 31, 2010 and 2009. Typically, parent company cash
is deposited overnight with Bank of America, N.A.
Our bank subsidiaries excess liquidity sources at
December 31, 2010 and 2009 were $180 billion and
$89 billion. These amounts are distinct from the cash
deposited by the parent company, as described above. In addition
to their excess liquidity sources, our bank subsidiaries hold
significant amounts of other unencumbered securities that we
believe could also be used to generate liquidity, such as
investment-grade ABS, MBS and municipal bonds. Another way our
bank subsidiaries can generate incremental liquidity is by
pledging a range of other unencumbered loans and securities to
certain Federal Home Loan Banks and the Federal Reserve Discount
Window. The cash we could have obtained by borrowing against
this pool of specifically identified eligible assets was
approximately $170 billion and $187 billion at
December 31, 2010 and 2009. We have established operational
procedures to enable us to borrow against these assets,
including regularly monitoring our total pool of eligible loans
and securities collateral. Due to regulatory restrictions,
liquidity generated by the bank subsidiaries can only be used to
fund obligations within the bank subsidiaries and cannot be
transferred to the parent company or nonbank subsidiaries.
Our broker/dealer subsidiaries excess liquidity sources at
December 31, 2010 and 2009 consisted of $35 billion
and $26 billion in cash and high-quality, liquid,
unencumbered securities. Our broker/dealers also held
significant amounts of other unencumbered securities we believe
could also be used to generate additional liquidity, including
investment-grade corporate securities and equities. Liquidity
held in a broker/dealer subsidiary is only available to meet the
obligations of that entity and cannot be transferred to the
parent company or to any other subsidiary, often due to
regulatory restrictions and minimum requirements.
Time to Required
Funding and Stress Modeling
We use a variety of metrics to determine the appropriate amounts
of excess liquidity to maintain at the parent company and our
bank and broker/dealer subsidiaries. One metric we use to
evaluate the appropriate level of excess liquidity at the parent
company is Time to Required Funding. This debt
coverage measure indicates the number of months that the parent
company can continue to meet its unsecured contractual
obligations as they come due using only its Global Excess
Liquidity Sources without issuing any new debt or accessing any
additional liquidity sources. We define unsecured contractual
obligations for purposes of this metric as maturities of senior
or subordinated debt issued or guaranteed by Bank of America
Corporation or Merrill Lynch & Co., Inc., including
certain unsecured debt instruments, primarily structured notes,
which we may be required to settle for cash prior to maturity.
The ALMRC has established a target for Time to Required Funding
of 21 months. Time to Required Funding was 24 months
at December 31, 2010 compared to 25 months at
December 31, 2009.
We utilize liquidity stress models to assist us in determining
the appropriate amounts of excess liquidity to maintain at the
parent company and our bank and broker/dealer subsidiaries.
These risk sensitive models have become increasingly important
in analyzing our potential contractual and contingent cash
outflows beyond those outflows considered in the Time to
Required Funding analysis.
We evaluate the liquidity requirements under a range of
scenarios with varying levels of severity and time horizons.
These scenarios incorporate market-wide and Corporation-specific
events, including potential credit ratings downgrades for the
parent company and our subsidiaries. We consider and utilize
scenarios based on historical experience, regulatory guidance,
and both expected and unexpected future events.
The types of contractual and contingent cash outflows we
consider in our scenarios may include, but are not limited to:
upcoming contractual maturities of unsecured debt and reductions
in new debt issuance; diminished access to secured financing
markets; potential deposit withdrawals and reduced rollover of
maturing term deposits by customers; increased draws on loan
commitments and liquidity facilities; additional collateral that
counterparties could call if our credit ratings were downgraded;
collateral, margin and subsidiary capital requirements arising
from losses; and potential liquidity required to maintain
businesses and finance customer activities.
We consider all sources of funds that we could access during
each stress scenario and focus particularly on matching
available sources with corresponding liquidity requirements by
legal entity. We also use the stress modeling results to manage
our asset-liability profile and establish limits and guidelines
on certain funding sources and businesses.
Basel III
Liquidity Standards
In December 2010, the Basel Committee on Bank Supervision issued
International framework for liquidity risk measurement,
standards and monitoring, which includes two measures of
liquidity risk. These two minimum liquidity measures were
initially introduced in guidance in December 2009 and are
considered part of Basel III.
The first liquidity measure is the Liquidity Coverage Ratio
(LCR) which identifies the amount of unencumbered, high quality
liquid assets a financial institution holds that can be used to
offset the net cash outflows the institution would encounter
under an acute
30-day
stress scenario. The second
68 Bank
of America 2010
liquidity measure is the Net Stable Funding Ratio (NSFR) which
measures the amount of longer-term, stable sources of funding
employed by a financial institution relative to the liquidity
profiles of the assets funded and the potential for contingent
calls on funding liquidity arising from off-balance sheet
commitments and obligations over a one-year period. The Basel
Committee expects the LCR to be implemented in January 2015 and
the NSFR in January 2018, following observation periods
beginning in 2012. We continue to monitor the development and
the potential impact of these evolving proposals and expect to
be able to meet the final requirements.
Diversified
Funding Sources
We fund our assets primarily with a mix of deposits and secured
and unsecured liabilities through a globally coordinated funding
strategy. We diversify our funding globally across products,
programs, markets, currencies and investor bases.
We fund a substantial portion of our lending activities through
our deposit base which was $1.0 trillion and $992 billion
at December 31, 2010 and 2009. Deposits are primarily
generated by our Deposits, Global Commercial Banking, GWIM
and GBAM segments. These deposits are diversified by
clients, product type and geography. Certain of our
U.S. deposits are insured by the FDIC. We consider a
substantial portion of our deposits to be a stable, low-cost and
consistent source of funding. We believe this deposit funding is
generally less sensitive to interest rate changes, market
volatility or changes in our credit ratings than wholesale
funding sources.
Certain consumer lending activities, primarily in our banking
subsidiaries, may be funded through securitizations. Included in
these consumer lending activities are the extension of mortgage,
credit card, auto loans, home equity loans and lines of credit.
If securitization markets are not available to us on favorable
terms, we typically finance these loans with deposits or with
wholesale borrowings. For additional information on
securitizations, see Note 8 Securitizations
and Other Variable Interest Entities to the Consolidated
Financial Statements.
Our trading activities are primarily funded on a secured basis
through securities lending and repurchase agreements; these
amounts will vary based on customer activity and market
conditions. We believe funding these activities in the secured
financing markets is more cost-efficient and less sensitive to
changes in our credit ratings than unsecured financing.
Repurchase agreements are generally short-term and often
overnight. Disruptions in secured financing markets for
financial institutions have occurred in prior market cycles
which resulted in adverse changes in terms or significant
reductions in the availability of such financing. We manage the
liquidity risks arising from secured funding by sourcing funding
globally from a diverse group of counterparties, providing a
range of securities collateral and pursuing longer durations,
when appropriate.
Unsecured debt, both short- and long-term, is also an important
source of funding. We may issue unsecured debt through
syndicated U.S. registered offerings, U.S. registered
and unregistered medium-term note programs,
non-U.S. medium-term
note programs,
non-U.S. private
placements, U.S. and
non-U.S. commercial
paper and through other methods. We distribute a significant
portion of our debt offerings through our retail and
institutional sales forces to a large, diversified global
investor base. Maintaining relationships with our investors is
an important aspect of our funding strategy. We may, from time
to time, purchase outstanding Bank of America Corporation debt
securities in various transactions, depending upon prevailing
market conditions, liquidity and other factors. In addition, we
may also make markets in our debt instruments to provide
liquidity for investors.
In addition, our parent company, bank and broker-dealer
subsidiaries regularly access short-term secured and unsecured
markets through federal funds purchased, commercial paper and
other short-term borrowings to
support customer activities, short-term financing requirements
and cash management.
At December 31, 2010, commercial paper and other short-term
borrowings included $6.7 billion of VIEs that were
consolidated in accordance with new consolidation guidance
effective January 1, 2010. For average and year-end balance
discussions, see Balance Sheet Overview beginning on
page 29. For more information, see
Note 12 Federal Funds Sold,
Securities Borrowed or Purchased Under Agreements to Resell and
Short-term Borrowings to the Consolidated Financial
Statements.
We issue the majority of our long-term unsecured debt at the
parent company and Bank of America, N.A. During 2010, the parent
company and Bank of America, N.A. issued $28.8 billion and
$3.5 billion of long-term senior unsecured debt.
We issue long-term unsecured debt in a variety of maturities and
currencies to achieve cost-efficient funding and to maintain an
appropriate maturity profile. While the cost and availability of
unsecured funding may be negatively impacted by general market
conditions or by matters specific to the financial services
industry or the Corporation, we seek to mitigate refinancing
risk by actively managing the amount of our borrowings that we
anticipate will mature within any month or quarter.
The primary benefits of our centralized funding strategy include
greater control, reduced funding costs, wider name recognition
by investors and greater flexibility to meet the variable
funding requirements of subsidiaries. Where regulations, time
zone differences or other business considerations make parent
company funding impractical, certain other subsidiaries may
issue their own debt.
At December 31, 2010 and 2009, our long-term debt was in
the currencies presented in the table below.
Table
17 Long-term
Debt By Major Currency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(Dollars in millions)
|
|
|
2010
|
|
|
|
2009
|
|
U.S. Dollar
|
|
|
$
|
302,487
|
|
|
|
$
|
281,692
|
|
Euros
|
|
|
|
87,482
|
|
|
|
|
99,917
|
|
Japanese Yen
|
|
|
|
19,901
|
|
|
|
|
19,903
|
|
British Pound
|
|
|
|
16,505
|
|
|
|
|
16,460
|
|
Australian Dollar
|
|
|
|
6,924
|
|
|
|
|
7,973
|
|
Canadian Dollar
|
|
|
|
6,628
|
|
|
|
|
4,894
|
|
Swiss Franc
|
|
|
|
3,069
|
|
|
|
|
2,666
|
|
Other
|
|
|
|
5,435
|
|
|
|
|
5,016
|
|
|
Total long-term debt
|
|
|
$
|
448,431
|
|
|
|
$
|
438,521
|
|
|
At December 31, 2010, the above table includes
$71.0 billion of primarily U.S. Dollar long-term debt
of VIEs that were consolidated in accordance with new
consolidation guidance effective January 1, 2010.
We use derivative transactions to manage the duration, interest
rate and currency risks of our borrowings, considering the
characteristics of the assets they are funding. For further
details on our ALM activities, refer to Interest Rate Risk
Management for Nontrading Activities beginning on page 103.
We also diversify our funding sources by issuing various types
of debt instruments including structured notes, which are debt
obligations that pay investors with returns linked to other debt
or equity securities, indices, currencies or commodities. We
typically hedge the returns we are obligated to pay on these
notes with derivative positions
and/or in
the underlying instruments so that from a funding perspective,
the cost is similar to our other unsecured long-term debt. We
could be required to immediately settle certain structured note
obligations for cash or other securities under certain
circumstances, which we consider for liquidity planning
purposes. We believe, however, that a portion of such borrowings
will remain outstanding beyond the
Bank of America
2010 69
earliest put or redemption date. We had outstanding structured
notes of $61.1 billion and $57.0 billion at
December 31, 2010 and 2009.
Substantially all of our senior and subordinated debt
obligations contain no provisions that could trigger a
requirement for an early repayment, require additional
collateral support, result in changes to terms, accelerate
maturity or create additional financial obligations upon an
adverse change in our credit ratings, financial ratios,
earnings, cash flows or stock price.
We participated in the FDICs Temporary Liquidity Guarantee
Program (TLGP) which allowed us to issue senior unsecured debt
that the FDIC guaranteed in return for a fee based on the amount
and maturity of the debt. At December 31, 2010, we had
$27.5 billion outstanding under the program. We no longer
issue debt under this program and all of our debt issued under
TLGP will mature by June 30, 2012. Under this program, our
debt received the highest long-term ratings from the major
credit ratings agencies which resulted in a lower total cost of
issuance than if we had issued non-FDIC guaranteed long-term
debt. The associated FDIC fee for the 2009 issuances was
$554 million and is being amortized into expense over the
stated term of the debt.
For additional information on debt funding, see
Note 13 Long-term Debt to the
Consolidated Financial Statements.
Contingency
Planning
We maintain contingency funding plans that outline our potential
responses to liquidity stress events at various levels of
severity. These policies and plans are based on stress scenarios
and include potential funding strategies, and communication and
notification procedures that we would implement in the event we
experienced stressed liquidity conditions. We periodically
review and test the contingency funding plans to validate
efficacy and assess readiness.
Our U.S. bank subsidiaries can access contingency funding
through the Federal Reserve Discount Window. Certain
non-U.S. subsidiaries
have access to central bank facilities in the jurisdictions in
which they operate. While we do not rely on these sources in our
liquidity modeling, we maintain the policies, procedures and
governance processes that would enable us to access these
sources if necessary.
Credit
Ratings
Our borrowing costs and ability to raise funds are directly
impacted by our credit ratings. In addition, credit ratings may
be important to customers or counterparties when we compete in
certain markets and when we seek to engage in certain
transactions including OTC derivatives. Thus, it is our
objective to maintain high-quality credit ratings.
Credit ratings and outlooks are opinions on our creditworthiness
and that of our obligations or securities, including long-term
debt, short-term borrowings, preferred stock and other
securities, including asset securitizations. Our credit ratings
are subject to ongoing review by the ratings agencies and thus
may change from time to time based on a number of factors,
including our own financial strength, performance, prospects and
operations as well as factors not under our control, such as
ratings agency-specific criteria or frameworks for our industry
or certain security types, which are subject to revision from
time to time, and conditions affecting the financial services
industry generally. In light of the recent difficulties in the
financial services industry and financial markets, there can be
no assurance that we will maintain our current ratings.
During 2009 and 2010, the ratings agencies took numerous
actions, many of which were negative, to adjust our credit
ratings and the outlooks for those ratings. Currently, Bank of
America Corporations long-term senior debt
and outlook expressed by the ratings agencies are as follows: A2
(negative) by Moodys Investors Services, Inc.
(Moodys), A (negative) by Standard and Poors Ratings
Services, a division of The McGraw-Hill Companies, Inc.
(S&P), and A+ (Rating Watch Negative) by Fitch, Inc.
(Fitch). Bank of America, N.A.s long-term debt and outlook
currently are as follows: A+ (negative), Aa3 (negative) and A+
(Rating Watch Negative) by those same three credit ratings
agencies, respectively. The ratings agencies have indicated
that, as a systemically important financial institution, our
credit ratings currently reflect their expectation that, if
necessary, we would receive significant support from the
U.S. government. All three ratings agencies, however, have
indicated they will reevaluate, and could reduce the uplift they
include in our ratings for government support for reasons
arising from financial services regulatory reform proposals or
legislation. In February 2010, S&P affirmed our current
credit ratings but revised the outlook to negative from stable
based on its belief that it is less certain whether the
U.S. government would be willing to provide extraordinary
support. On July 27, 2010, Moodys affirmed our
current ratings but revised the outlook to negative from stable
due to its expectation for lower levels of government support
over time as a result of the passage of the Financial Reform
Act. Also, on October 22, 2010, Fitch placed our credit
ratings on Rating Watch Negative from stable outlook due to
proposed rulemaking that could negatively impact its assessment
of future systemic government support. Other factors that
influence our credit ratings include changes to the ratings
agencies methodologies, the ratings agencies
assessment of the general operating environment, our relative
positions in the markets in which we compete, reputation,
liquidity position, diversity of funding sources, the level and
volatility of earnings, corporate governance and risk management
policies, capital position, capital management practices and
current or future regulatory and legislative initiatives.
A reduction in certain of our credit ratings or the ratings of
certain asset-backed securitizations would likely have a
material adverse effect on our liquidity, access to credit
markets, the related cost of funds, our businesses and on
certain trading revenues, particularly in those businesses where
counterparty creditworthiness is critical. Under the terms of
certain OTC derivatives contracts and other trading agreements,
in the event of a credit ratings downgrade, the counterparties
to those agreements may require us to provide additional
collateral or to terminate these contracts or agreements. Such
collateral calls or terminations could cause us to sustain
losses, impair our liquidity, or both, by requiring us to
provide the counterparties with additional collateral in the
form of cash or highly liquid securities. If Bank of America
Corporations or Bank of America, N.A.s commercial
paper or short-term credit ratings (which currently have the
following ratings:
P-1 by
Moodys,
A-1 by
S&P and F1+ by Fitch) were downgraded by one or more
levels, the potential loss of short-term funding sources such as
commercial paper or repo financing and effect on our incremental
cost of funds would be material. For information regarding the
additional collateral and termination payments that would be
required in connection with certain OTC derivative contracts and
other trading agreements as a result of such a credit ratings
downgrade, see Note 4 Derivatives to the
Consolidated Financial Statements and Item 1A. Risk Factors.
The credit ratings of Merrill Lynch & Co., Inc. from
the three major credit ratings agencies are the same as those of
Bank of America Corporation. The major credit ratings agencies
have indicated that the primary drivers of Merrill Lynchs
credit ratings are Bank of America Corporations credit
ratings.
70 Bank
of America 2010
Credit
Risk Management
Credit quality continued to show improvement during 2010;
although, net charge-offs, and nonperforming loans, leases and
foreclosed properties remained elevated. Signs of economic
stability and our proactive credit risk management initiatives
positively impacted the credit portfolio as charge-offs and
delinquencies continued to improve across almost all portfolios
along with risk rating improvements in the commercial portfolio.
Global and national economic uncertainty, regulatory initiatives
and reform, however, continued to weigh on the credit portfolios
through December 31, 2010. For more information, see 2010
Economic and Business Environment on page 25. Credit
metrics were also impacted by loans added to the balance sheet
on January 1, 2010 in connection with the adoption of new
consolidation guidance.
Credit risk is the risk of loss arising from the inability of a
borrower or counterparty to meet its obligations. Credit risk
can also arise from operational failures that result in an
erroneous advance, commitment or investment of funds. We define
the credit exposure to a borrower or counterparty as the loss
potential arising from all product classifications including
loans and leases, deposit overdrafts, derivatives, assets
held-for-sale
and unfunded lending commitments which include loan commitments,
letters of credit and financial guarantees. Derivative positions
are recorded at fair value and assets
held-for-sale
are recorded at fair value or the lower of cost or fair value.
Certain loans and unfunded commitments are accounted for under
the fair value option. Credit risk for these categories of
assets is not accounted for as part of the allowance for credit
losses but as part of the fair value adjustments recorded in
earnings. For derivative positions, our credit risk is measured
as the net replacement cost in the event the counterparties with
contracts in which we are in a gain position fail to perform
under the terms of those contracts. We use the current
mark-to-market
value to represent credit exposure without giving consideration
to future
mark-to-market
changes. The credit risk amounts take into consideration the
effects of legally enforceable master netting agreements and
cash collateral. Our consumer and commercial credit extension
and review procedures take into account funded and unfunded
credit exposures. For additional information on derivative and
credit extension commitments, see Note 4
Derivatives and Note 14 Commitments and
Contingencies to the Consolidated Financial Statements.
We manage credit risk based on the risk profile of the borrower
or counterparty, repayment sources, the nature of underlying
collateral, and other support given current events, conditions
and expectations. We classify our portfolios as either consumer
or commercial and monitor credit risk in each as discussed below.
We proactively refine our underwriting and credit management
practices, as well as credit standards, to meet the changing
economic environment. To actively mitigate losses and enhance
customer support in our consumer businesses, we have expanded
collections, loan modification and customer assistance
infrastructures. We also have implemented a number of actions to
mitigate losses in the commercial businesses including
increasing the frequency and intensity of portfolio monitoring,
hedging activity and our practice of transferring management of
deteriorating commercial exposures to independent special asset
officers as credits approach criticized levels.
Since January 2008, and through 2010, Bank of America and
Countrywide have completed nearly 775,000 loan modifications
with customers. During 2010, we completed nearly 285,000
customer loan modifications with a total unpaid principal
balance of approximately $65.7 billion, which included
109,000 customers who converted from trial period to permanent
modifications under the governments MHA program. Of the
loan modifications
completed in 2010, in terms of both the volume of modifications
and the unpaid principal balance associated with the underlying
loans, most were in the portfolio serviced for investors and
were not on our balance sheet. The most common types of
modifications during the year include a combination of rate
reduction and capitalization of past due amounts which represent
68 percent of the volume of modifications completed in
2010, while principal forbearance represented 15 percent
and capitalization of past due amounts represented nine percent.
We also provide rate reductions, rate and payment extensions,
principal forgiveness and other actions. These modification
types are generally considered troubled debt restructurings
(TDRs). For more information on TDRs and portfolio impacts, see
Nonperforming Consumer Loans and Foreclosed Properties Activity
beginning on page 81 and Note 6
Outstanding Loans and Leases to the Consolidated Financial
Statements.
On October 1, 2010, we voluntarily stopped taking
residential mortgage foreclosure proceedings to judgment in
judicial states. On October 8, 2010, we stopped foreclosure
sales in all states in order to complete an assessment of the
related business processes. As a result of that assessment, we
identified and began implementing process and control
enhancements and we intend to monitor ongoing quality results of
each process. After these enhancements were put in place, we
resumed foreclosure sales in most non-judicial states during the
fourth quarter of 2010, and expect sales to resume in the
remaining non-judicial states in the first quarter of 2011. The
process of preparing affidavits in pending proceedings in
judicial states is expected to continue into the first quarter
of 2011 and could result in prolonged adversary proceedings that
delay certain foreclosure sales. We took these precautionary
steps in order to ensure our processes for handling foreclosures
include the appropriate controls and quality assurance. These
initiatives further support our credit risk management and
mitigation efforts. For more information, see Recent Events
beginning on page 33.
Certain European countries, including Greece, Ireland, Italy,
Portugal and Spain, continue to experience varying degrees of
financial stress. Risks and ongoing concerns about the debt
crisis in Europe could result in a disruption of the financial
markets which could have a detrimental impact on the global
economic recovery, including the impact of non-sovereign debt in
these countries. For more information on our direct sovereign
and non-sovereign exposures in these countries, see
Non-U.S. Portfolio
beginning on page 94.
The Financial Accounting Standards Board (FASB) issued new
disclosure guidance, effective on a prospective basis for the
Corporations 2010 year-end reporting, that addresses
disclosure of loans and other financing receivables and the
related allowance. The new disclosure guidance defines a
portfolio segment as the level at which an entity develops and
documents a systematic methodology to determine the allowance
for credit losses, and a class of financing receivables as the
level of disaggregation of portfolio segments based on the
initial measurement attribute, risk characteristics and methods
for assessing risk. The Corporations portfolio segments
are home loans, credit card and other consumer, and commercial.
The classes within the home loans portfolio segment are
residential mortgage, home equity and discontinued real estate.
The classes within the credit card and other consumer portfolio
segment are U.S. credit card,
non-U.S. credit
card, direct/indirect consumer and other consumer. The classes
within the commercial portfolio segment are
U.S. commercial, commercial real estate, commercial lease
financing,
non-U.S. commercial
and U.S. small business commercial. Under this new
disclosure guidance, the allowance is presented by portfolio
segment.
Bank of America
2010 71
Consumer
Portfolio Credit Risk Management
Credit risk management for the consumer portfolio begins with
initial underwriting and continues throughout a borrowers
credit cycle. Statistical techniques in conjunction with
experiential judgment are used in all aspects of portfolio
management including underwriting, product pricing, risk
appetite, setting credit limits and establishing operating
processes and metrics to quantify and balance risks and returns.
Statistical models are built using detailed behavioral
information from external sources such as credit bureaus
and/or
internal historical experience. These models are a component of
our consumer credit risk management process and are used, in
part, to help determine both new and existing credit decisions,
portfolio management strategies including authorizations and
line management, collection practices and strategies,
determination of the allowance for loan and lease losses, and
economic capital allocations for credit risk.
For information on our accounting policies regarding
delinquencies, nonperforming status, charge-offs and TDRs for
the consumer portfolio, see Note 1 Summary
of Significant Accounting Principles to the Consolidated
Financial Statements.
Consumer Credit
Portfolio
Although unemployment rates remained at elevated levels,
improvement in the U.S. economy and stabilization in the
labor markets during 2010 resulted in lower losses and lower
delinquencies in almost all consumer portfolios during 2010 when
compared to 2009 on a managed basis. However, economic
deterioration throughout 2009 and weakness in the economic
recovery in 2010 drove continued stress in the housing markets
and tighter availability of credit in the market place resulting
in elevated net charge-offs in most portfolios. In addition,
during 2010, our consumer real estate portfolios were impacted
by net charge-offs on certain modified loans deemed to be
collateral dependent pursuant to clarification of regulatory
guidance. For more
information on regulatory guidance on collateral dependent
modified loans, see Regulatory Matters beginning on page 56.
Under the new consolidation guidance, we consolidated all
previously off-balance sheet securitized credit card receivables
along with certain home equity and auto loan securitization
trusts. The 2010 consumer credit card credit quality statistics
include the impact of consolidation of VIEs. The following
tables include the December 31, 2009 balances as well as
the January 1, 2010 balances to show the impact of the
adoption of the new consolidation guidance. Accordingly, the
December 31, 2010 credit quality statistics under the new
consolidation guidance should be compared to the amounts
presented in the January 1, 2010 column.
The table below presents our outstanding consumer loans and the
Countrywide PCI loan portfolio. Loans that were acquired from
Countrywide and considered credit-impaired were written down to
fair value upon acquisition. In addition to being included in
the Outstandings columns in the table below, these
loans are also shown separately, net of purchase accounting
adjustments, in the Countrywide Purchased Credit-impaired
Loan Portfolio column. Loans that were acquired from
Merrill Lynch were recorded at fair value including those that
were considered credit-impaired upon acquisition. The Merrill
Lynch consumer PCI loan portfolio did not materially alter the
reported credit quality statistics of the consumer portfolios
and is, therefore, excluded from the Countrywide Purchased
Credit-impaired Loan Portfolio column and the following
discussion. For additional information, see
Note 6 Outstanding Loans and Leases to
the Consolidated Financial Statements. The impact of the
Countrywide PCI loan portfolio on certain credit statistics is
reported where appropriate. See Countrywide Purchased
Credit-impaired Loan Portfolio beginning on page 78 for
more information. Under certain circumstances, loans that were
originally classified as discontinued real estate loans upon
acquisition have been subsequently modified from pay option or
subprime loans into loans with more conventional terms and are
now included in the residential mortgage portfolio shown below.
Table
18 Consumer
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Countrywide Purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit-impaired Loan
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio
|
|
|
|
Outstandings
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
December 31
|
|
|
January 1
|
|
|
December 31
|
|
|
|
|
(Dollars in millions)
|
|
2010 (1)
|
|
|
2010 (1)
|
|
|
2009
|
|
|
2010 (1)
|
|
|
2009
|
|
Residential
mortgage (2)
|
|
$
|
257,973
|
|
|
$
|
242,129
|
|
|
$
|
242,129
|
|
|
$
|
10,592
|
|
|
$
|
11,077
|
|
Home equity
|
|
|
137,981
|
|
|
|
154,202
|
|
|
|
149,126
|
|
|
|
12,590
|
|
|
|
13,214
|
|
Discontinued real
estate (3)
|
|
|
13,108
|
|
|
|
14,854
|
|
|
|
14,854
|
|
|
|
11,652
|
|
|
|
13,250
|
|
U.S. credit card
|
|
|
113,785
|
|
|
|
129,642
|
|
|
|
49,453
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Non-U.S.
credit card
|
|
|
27,465
|
|
|
|
31,182
|
|
|
|
21,656
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Direct/Indirect
consumer (4)
|
|
|
90,308
|
|
|
|
99,812
|
|
|
|
97,236
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Other
consumer (5)
|
|
|
2,830
|
|
|
|
3,110
|
|
|
|
3,110
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
Total
|
|
$
|
643,450
|
|
|
$
|
674,931
|
|
|
$
|
577,564
|
|
|
$
|
34,834
|
|
|
$
|
37,541
|
|
|
|
|
|
(1) |
|
Balances reflect the impact of new
consolidation guidance. Adoption of the new consolidation
guidance did not impact the Countrywide PCI loan portfolio.
|
(2) |
|
Outstandings include
non-U.S.
residential mortgages of $90 million and $552 million
at December 31, 2010 and 2009.
|
(3) |
|
Outstandings include
$11.8 billion and $13.4 billion of pay option loans
and $1.3 billion and $1.5 billion of subprime loans at
December 31, 2010 and 2009. We no longer originate these
products.
|
(4) |
|
Outstandings include dealer
financial services loans of $42.9 billion and
$41.6 billion, consumer lending loans of $12.9 billion
and $19.7 billion, U.S. securities-based lending margin
loans of $16.6 billion and $12.9 billion, student
loans of $6.8 billion and $10.8 billion,
non-U.S.
consumer loans of $8.0 billion and $8.0 billion and
other consumer loans of $3.1 billion and $4.2 billion
at December 31, 2010 and 2009, respectively.
|
(5) |
|
Outstandings include consumer
finance loans of $1.9 billion and $2.3 billion, other
non-U.S.
consumer loans of $803 million and $709 million and
consumer overdrafts of $88 million and $144 million at
December 31, 2010 and 2009.
|
n/a = not applicable
72 Bank
of America 2010
The table below presents our accruing consumer loans past due
90 days or more and our consumer nonperforming loans.
Nonperforming loans do not include past due consumer credit card
loans, consumer non-real estate-secured loans or unsecured
consumer loans as these loans are generally charged off no later
than the end of the month in which the loan becomes
180 days past due. Real estate-secured past due consumer
loans insured by the FHA are reported as accruing as opposed to
nonperforming since the
principal repayment is insured by the FHA. FHA insured loans
accruing past due 90 days or more are primarily related to
our purchases of delinquent loans pursuant to our servicing
agreements with GNMA. Additionally, nonperforming loans and
accruing balances past due 90 days or more do not include
the Countrywide PCI loans even though the customer may be
contractually past due.
Table
19 Consumer
Credit Quality
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruing Past Due 90 Days or More
|
|
|
Nonperforming
|
|
|
|
|
December 31
|
|
|
January 1
|
|
|
December 31
|
|
|
December 31
|
|
|
January 1
|
|
|
December 31
|
|
(Dollars in millions)
|
|
|
2010 (1)
|
|
|
2010 (1)
|
|
|
2009
|
|
|
2010 (1)
|
|
|
2010 (1)
|
|
|
2009
|
|
Residential mortgage
(2, 3)
|
|
|
$
|
16,768
|
|
|
$
|
11,680
|
|
|
$
|
11,680
|
|
|
$
|
17,691
|
|
|
$
|
16,596
|
|
|
$
|
16,596
|
|
Home
equity (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,694
|
|
|
|
4,252
|
|
|
|
3,804
|
|
Discontinued real
estate (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
331
|
|
|
|
249
|
|
|
|
249
|
|
U.S. credit card
|
|
|
|
3,320
|
|
|
|
5,408
|
|
|
|
2,158
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Non-U.S.
credit card
|
|
|
|
599
|
|
|
|
814
|
|
|
|
515
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Direct/Indirect consumer
|
|
|
|
1,058
|
|
|
|
1,492
|
|
|
|
1,488
|
|
|
|
90
|
|
|
|
86
|
|
|
|
86
|
|
Other consumer
|
|
|
|
2
|
|
|
|
3
|
|
|
|
3
|
|
|
|
48
|
|
|
|
104
|
|
|
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
21,747
|
|
|
$
|
19,397
|
|
|
$
|
15,844
|
|
|
$
|
20,854
|
|
|
$
|
21,287
|
|
|
$
|
20,839
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Balances reflect the impact of new
consolidation guidance.
|
(2) |
|
Our policy is to classify consumer
real estate-secured loans as nonperforming at 90 days past
due, except Countrywide PCI loans and FHA loans as referenced in
footnote (3).
|
(3) |
|
At December 31, 2010 and 2009,
balances accruing past due 90 days or more represent loans
insured by the FHA. These balances include $8.3 billion and
$2.2 billion of loans that are no longer accruing interest
or interest has been curtailed by the FHA although principal is
still insured and $8.5 billion and $9.5 billion of
loans that were still accruing interest. Our policy is to
classify delinquent consumer loans secured by real estate and
insured by the FHA as accruing past due 90 days or more.
|
n/a = not applicable
Accruing consumer loans and leases past due 90 days or more
as a percentage of outstanding consumer loans and leases were
3.38 percent (0.90 percent excluding the Countrywide
PCI and FHA insured loan portfolios) and 2.74 percent
(0.79 percent excluding the Countrywide PCI and FHA insured
loan portfolios) at December 31, 2010 and 2009.
Nonperforming consumer loans as a percentage of outstanding
consumer loans were
3.24 percent (3.76 percent excluding the Countrywide
PCI and FHA insured loan portfolios) and 3.61 percent
(3.95 percent excluding the Countrywide PCI and FHA insured
loan portfolios) at December 31, 2010 and 2009.
The table below presents net charge-offs and related ratios for
our consumer loans and leases for 2010 and 2009 (managed basis
for 2009).
Table
20 Consumer
Net Charge-offs, Net Losses and Related Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Charge-offs
|
|
|
Net Charge-offs
(1, 2)
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Held basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
$
|
3,670
|
|
|
$
|
4,350
|
|
|
|
1.49
|
%
|
|
|
1.74
|
%
|
Home equity
|
|
|
6,781
|
|
|
|
7,050
|
|
|
|
4.65
|
|
|
|
4.56
|
|
Discontinued real estate
|
|
|
68
|
|
|
|
101
|
|
|
|
0.49
|
|
|
|
0.58
|
|
U.S. credit card
|
|
|
13,027
|
|
|
|
6,547
|
|
|
|
11.04
|
|
|
|
12.50
|
|
Non-U.S.
credit card
|
|
|
2,207
|
|
|
|
1,239
|
|
|
|
7.88
|
|
|
|
6.30
|
|
Direct/Indirect consumer
|
|
|
3,336
|
|
|
|
5,463
|
|
|
|
3.45
|
|
|
|
5.46
|
|
Other consumer
|
|
|
261
|
|
|
|
428
|
|
|
|
8.89
|
|
|
|
12.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held
|
|
$
|
29,350
|
|
|
$
|
25,178
|
|
|
|
4.51
|
|
|
|
4.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Losses
|
|
|
Net Losses
(1)
|
|
Supplemental managed basis
data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. credit card
|
|
|
n/a
|
|
|
$
|
16,962
|
|
|
|
n/a
|
|
|
|
12.07
|
|
Non-U.S.
credit card
|
|
|
n/a
|
|
|
|
2,223
|
|
|
|
n/a
|
|
|
|
7.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total credit card
managed
|
|
|
n/a
|
|
|
$
|
19,185
|
|
|
|
n/a
|
|
|
|
11.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Net charge-off and net loss ratios
are calculated as held net charge-offs or managed net losses
divided by average outstanding held or managed loans and leases.
|
(2) |
|
Net charge-off ratios excluding the
Countrywide PCI and FHA insured loan portfolio were
1.79 percent and 1.83 percent for residential
mortgage, 5.10 percent and 5.00 percent for home
equity, 4.20 percent and 5.57 percent for discontinued
real estate and 5.02 percent and 4.53 percent for the
total held portfolio for 2010 and 2009. These are the only
product classifications materially impacted by the Countrywide
PCI loan portfolio for 2010 and 2009. For all loan and lease
categories, the net charge-offs were unchanged.
|
n/a = not applicable
We believe that the presentation of information adjusted to
exclude the impact of the Countrywide PCI and FHA insured loan
portfolios is more representative of the ongoing operations and
credit quality of the business. As a result, in the following
discussions of the residential mortgage, home
equity and discontinued real estate portfolios, we provide
information that is adjusted to exclude the impact of the
Countrywide PCI and FHA insured loan portfolios. In addition,
beginning on page 78, we separately disclose information on
the Countrywide PCI loan portfolio.
Bank of America
2010 73
Residential
Mortgage
The residential mortgage portfolio, which excludes the
discontinued real estate portfolio acquired with Countrywide,
makes up the largest percentage of our consumer loan portfolio
at 40 percent of consumer loans at December 31, 2010.
Approximately 14 percent of the residential mortgage
portfolio is in GWIM and represents residential mortgages
that are originated for the home purchase and refinancing needs
of our affluent clients. The remaining portion of the portfolio
is mostly in All Other and is comprised of both
residential loans originated for our customers and used in our
overall ALM activities as well as purchased loans.
Outstanding balances in the residential mortgage portfolio
increased $15.8 billion at December 31, 2010 compared
to December 31, 2009 as new FHA insured origination volume
was partially offset by paydowns, the sale
of First Republic, transfers to foreclosed properties and
charge-offs. In addition, FHA repurchases of delinquent loans
pursuant to our servicing agreements with GNMA also increased
the residential mortgage portfolio during 2010. At
December 31, 2010 and 2009, the residential mortgage
portfolio included $53.9 billion and $12.9 billion of
outstanding loans that were insured by the FHA. On this portion
of the residential mortgage portfolio, we are protected against
principal loss as a result of FHA insurance. The table below
presents certain residential mortgage key credit statistics on
both a reported basis and excluding the Countrywide PCI and FHA
insured loan portfolios. We believe the presentation of
information adjusted to exclude the impacts of the Countrywide
PCI and FHA insured loan portfolios is more representative of
the credit risk in this portfolio. For more information on the
Countrywide PCI loan portfolio, see the discussion beginning on
page 78.
Table
21 Residential
Mortgage Key Credit Statistics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
|
|
|
Excluding Countrywide Purchased Credit-impaired
|
|
|
|
|
|
|
and
|
|
|
|
Reported Basis
|
|
|
FHA Insured Loans
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Outstandings
|
|
$
|
257,973
|
|
|
$
|
242,129
|
|
|
$
|
193,435
|
|
|
$
|
218,147
|
|
Accruing past due 90 days or more
|
|
|
16,768
|
|
|
|
11,680
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Nonperforming loans
|
|
|
17,691
|
|
|
|
16,596
|
|
|
|
17,691
|
|
|
|
16,596
|
|
Percent of portfolio with refreshed LTVs greater than 90 but
less than 100
|
|
|
15
|
%
|
|
|
12
|
%
|
|
|
10
|
%
|
|
|
11
|
%
|
Percent of portfolio with refreshed LTVs greater than 100
|
|
|
32
|
|
|
|
27
|
|
|
|
23
|
|
|
|
23
|
|
Percent of portfolio with refreshed FICOs below 620
|
|
|
20
|
|
|
|
17
|
|
|
|
14
|
|
|
|
12
|
|
Percent of portfolio in the 2006 and 2007 vintages
|
|
|
32
|
|
|
|
42
|
|
|
|
38
|
|
|
|
42
|
|
Net charge-off ratio
|
|
|
1.49
|
|
|
|
1.74
|
|
|
|
1.79
|
|
|
|
1.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
n/a = not applicable
The following discussion presents the residential mortgage
portfolio excluding the Countrywide PCI and FHA insured loan
portfolios.
We have mitigated a portion of our credit risk on the
residential mortgage portfolio through the use of synthetic
securitization vehicles and long-term standby agreements with
FNMA and FHLMC as described in Note 6
Outstanding Loans and Leases to the Consolidated Financial
Statements. At December 31, 2010 and 2009, the synthetic
securitization vehicles referenced $53.9 billion and
$70.7 billion of residential mortgage loans and provided
loss protection up to $1.1 billion and $1.4 billion.
At December 31, 2010 and 2009, the Corporation had a
receivable of $722 million and $1.0 billion from these
vehicles for reimbursement of losses. The Corporation records an
allowance for credit losses on loans referenced by the synthetic
securitization vehicles. The reported net charge-offs for the
residential mortgage portfolio do not include the benefit of
amounts reimbursable from these vehicles. Adjusting for the
benefit of the credit protection from the synthetic
securitizations, the residential mortgage net charge-off ratio
for 2010 would have been reduced by seven bps compared to
27 bps for 2009. Synthetic securitizations and the
protection provided by FNMA and FHLMC together mitigated risk on
35 percent of our residential mortgage portfolio at both
December 31, 2010 and 2009. These credit protection
agreements reduce our regulatory risk-weighted assets due to the
transfer of a portion of our credit risk to unaffiliated
parties. At December 31, 2010 and 2009, these transactions
had the cumulative effect of reducing our risk-weighted assets
by $8.6 billion and $16.8 billion, and increased our
Tier 1 capital ratio by seven bps and 11 bps and our
Tier 1 common capital ratio by five bps and eight bps. At
December 31, 2010 and 2009, $14.3 billion and
$6.6 billion in loans were protected by long-term standby
agreements. The Corporation does not record an allowance for
credit losses on loans protected by these long-term standby
agreements.
Nonperforming residential mortgage loans increased
$1.1 billion compared to December 31, 2009 as new
inflows, which continued to slow in 2010 due to favorable
delinquency trends, continued to outpace nonperforming loans
returning to performing status, charge-offs, and paydowns and
payoffs. At December 31, 2010, $12.7 billion, or
72 percent, of the nonperforming residential mortgage loans
were 180 days or more past due and had been written down to
the fair value of the underlying collateral. Net charge-offs
decreased $680 million to $3.7 billion in 2010, or
1.79 percent of total average residential mortgage loans
compared to 1.83 percent for 2009 driven primarily by
favorable delinquency trends which were due in part to
improvement in the U.S. economy. Net charge-off ratios were
further impacted by lower loan balances primarily due to
paydowns, the sale of First Republic and charge-offs.
Certain risk characteristics of the residential mortgage
portfolio continued to contribute to higher losses. These
characteristics include loans with a high refreshed
loan-to-value
(LTV), loans originated at the peak of home prices in 2006 and
2007, loans to borrowers located in California and Florida where
we have concentrations and where significant declines in home
prices have been experienced, as well as interest-only loans.
Although the following disclosures address each of these risk
characteristics separately, there is significant overlap in
loans with these characteristics, which contributed to a
disproportionate share of the losses in the portfolio. The
residential mortgage loans with all of these higher risk
characteristics comprised five percent and seven percent of the
residential mortgage portfolio at December 31, 2010 and
2009, but accounted for 26 percent of the residential
mortgage net charge-offs in 2010 compared to 31 percent in
2009.
74 Bank
of America 2010
Residential mortgage loans with a greater than 90 percent
but less than 100 percent refreshed LTV represented
10 percent and 11 percent of the residential mortgage
portfolio at December 31, 2010 and 2009. Loans with a
refreshed LTV greater than 100 percent represented
23 percent of the residential mortgage loan portfolio at
both December 31, 2010 and 2009. Of the loans with a
refreshed LTV greater than 100 percent, 88 percent
were performing at both December 31, 2010 and 2009. Loans
with a refreshed LTV greater than 100 percent reflect loans
where the outstanding carrying value of the loan is greater than
the most recent valuation of the property securing the loan. The
majority of these loans have a refreshed LTV greater than
100 percent due primarily to home price deterioration from
the weakened economy. Loans to borrowers with refreshed FICO
scores below 620 represented 14 percent and 12 percent
of the residential mortgage portfolio at December 31, 2010
and 2009.
The 2006 and 2007 vintage loans, which represented
38 percent and 42 percent of our residential mortgage
portfolio at December 31, 2010 and 2009, have higher
refreshed LTVs and accounted for 67 percent and
69 percent of nonperforming residential mortgage loans at
December 31, 2010 and 2009. These vintages of loans
accounted for 77 percent of residential mortgage net
charge-offs during 2010 and 75 percent during 2009.
The table below presents outstandings, nonperforming loans and
net charge-offs by certain state concentrations for the
residential mortgage portfolio. California and Florida combined
represented 42 percent of outstandings and 48 percent
of nonperforming loans at December 31, 2010. These states
accounted for 54 percent of the net charge-offs for 2010
compared to 58 percent for 2009. The Los Angeles-Long
Beach-Santa Ana Metropolitan Statistical Area (MSA) within
California represented 13 percent of outstandings at both
December 31, 2010 and 2009, but comprised only seven
percent of net charge-offs for both 2010 and 2009.
Table
22 Residential
Mortgage State Concentrations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
Year Ended December 31
|
|
|
|
Outstandings
|
|
|
Nonperforming
|
|
|
Net Charge-offs
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
California
|
|
$
|
68,341
|
|
|
$
|
81,508
|
|
|
$
|
6,389
|
|
|
$
|
5,967
|
|
|
$
|
1,392
|
|
|
$
|
1,726
|
|
Florida
|
|
|
13,616
|
|
|
|
15,088
|
|
|
|
2,054
|
|
|
|
1,912
|
|
|
|
604
|
|
|
|
796
|
|
New York
|
|
|
12,545
|
|
|
|
15,752
|
|
|
|
772
|
|
|
|
632
|
|
|
|
44
|
|
|
|
66
|
|
Texas
|
|
|
9,077
|
|
|
|
9,865
|
|
|
|
492
|
|
|
|
534
|
|
|
|
52
|
|
|
|
59
|
|
Virginia
|
|
|
6,960
|
|
|
|
7,496
|
|
|
|
450
|
|
|
|
450
|
|
|
|
72
|
|
|
|
89
|
|
Other
U.S./Non-U.S.
|
|
|
82,896
|
|
|
|
88,438
|
|
|
|
7,534
|
|
|
|
7,101
|
|
|
|
1,506
|
|
|
|
1,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total residential mortgage
loans (1)
|
|
$
|
193,435
|
|
|
$
|
218,147
|
|
|
$
|
17,691
|
|
|
$
|
16,596
|
|
|
$
|
3,670
|
|
|
$
|
4,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total FHA insured
loans
|
|
|
53,946
|
|
|
|
12,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Countrywide purchased
credit-impaired residential mortgage portfolio
|
|
|
10,592
|
|
|
|
11,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total residential mortgage loan
portfolio
|
|
$
|
257,973
|
|
|
$
|
242,129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amount excludes the Countrywide PCI
residential mortgage and FHA insured loan portfolios.
|
Of the residential mortgage loans, $62.5 billion, or
32 percent, at December 31, 2010 are interest-only
loans of which 87 percent were performing. Nonperforming
balances on interest-only residential mortgage loans were
$8.0 billion, or 45 percent of total nonperforming
residential mortgages. Additionally, net charge-offs on the
interest-only portion of the portfolio represented
53 percent of the total residential mortgage net
charge-offs during 2010.
The Community Reinvestment Act (CRA) encourages banks to meet
the credit needs of their communities for housing and other
purposes, particularly in neighborhoods with low or moderate
incomes. At December 31, 2010, our CRA portfolio was eight
percent of the residential mortgage loan balances but comprised
17 percent of nonperforming residential mortgage loans.
This portfolio also represented 23 percent of residential
mortgage net charge-offs during 2010.
For information on representations and warranties related to our
residential mortgage portfolio, see Representations and
Warranties beginning on page 52 and
Note 9 Representations and Warranties
Obligations and Corporate Guarantees to the Consolidated
Financial Statements.
Home
Equity
The home equity portfolio makes up 21 percent of the
consumer portfolio and is comprised of home equity lines of
credit, home equity loans and reverse mortgages. At
December 31, 2010, approximately 88 percent of the
home equity portfolio was included in Home Loans &
Insurance, while the remainder of the portfolio was
primarily in GWIM. Outstanding balances in the home
equity portfolio decreased $11.1 billion at
December 31, 2010 compared to December 31, 2009 due to
charge-offs, paydowns and the sale of First Republic, partially
offset by the adoption of new consolidation guidance, which
resulted in the consolidation of $5.1 billion of home
equity loans on January 1, 2010. Of the loans in the home
equity portfolio at December 31, 2010 and 2009,
$24.8 billion and $26.0 billion, or 18 percent
for both periods, were in first-lien positions (20 percent
and 19 percent excluding the Countrywide PCI home equity
loan portfolio). For more information on the Countrywide PCI
home equity loan portfolio, see the discussion beginning on
page 78.
Home equity unused lines of credit totaled $80.1 billion at
December 31, 2010 compared to $92.7 billion at
December 31, 2009. This decrease was due primarily to
account attrition as well as line management initiatives on
deteriorating accounts and the sale of First Republic, which
more than offset new production. The home equity line of credit
utilization rate was 59 percent at December 31, 2010
compared to 57 percent at December 31, 2009.
Bank of America
2010 75
The table below presents certain home equity key credit
statistics on both a reported basis as well as excluding the
Countrywide PCI loan portfolio. We believe the presentation of
information adjusted to exclude the impacts of the Countrywide
PCI loan portfolio is more representative of the credit risk in
this portfolio.
Table
23 Home
Equity Key Credit Statistics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
|
|
|
Excluding Countrywide Purchased Credit-
|
|
|
|
Reported Basis
|
|
|
impaired Loans
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Outstandings
|
|
$
|
137,981
|
|
|
$
|
149,126
|
|
|
$
|
125,391
|
|
|
$
|
135,912
|
|
Nonperforming loans
|
|
|
2,694
|
|
|
|
3,804
|
|
|
|
2,694
|
|
|
|
3,804
|
|
Percent of portfolio with refreshed CLTVs greater than 90 but
less than 100
|
|
|
11
|
%
|
|
|
12
|
%
|
|
|
11
|
%
|
|
|
12
|
%
|
Percent of portfolio with refreshed CLTVs greater than 100
|
|
|
34
|
|
|
|
35
|
|
|
|
30
|
|
|
|
31
|
|
Percent of portfolio with refreshed FICOs below 620
|
|
|
14
|
|
|
|
13
|
|
|
|
12
|
|
|
|
13
|
|
Percent of portfolio in the 2006 and 2007 vintages
|
|
|
50
|
|
|
|
52
|
|
|
|
47
|
|
|
|
49
|
|
Net charge-off ratio
|
|
|
4.65
|
|
|
|
4.56
|
|
|
|
5.10
|
|
|
|
5.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following discussion presents the home equity portfolio
excluding the Countrywide PCI loan portfolio.
Nonperforming home equity loans decreased $1.1 billion to
$2.7 billion compared to December 31, 2009 driven
primarily by charge-offs, including those recorded in connection
with regulatory guidance clarifying the timing of charge-offs on
collateral dependent modified loans, and nonperforming loans
returning to performing status which together outpaced
delinquency inflows and the impact of the adoption of new
consolidation guidance. At December 31, 2010,
$916 million, or 34 percent, of the nonperforming home
equity loans were 180 days or more past due and had been
written down to their fair values. Net charge-offs decreased
$269 million to $6.8 billion, or 5.10 percent, of
total average home equity loans for 2010 compared to
$7.1 billion, or 5.00 percent, for 2009. The decrease
was primarily driven by favorable portfolio trends due in part
to improvement in the U.S. economy. This was partially
offset by $822 million of net charge-offs related to the
implementation of regulatory guidance on collateral dependent
modified loans and $463 million of net charge-offs related
to home equity loans that were consolidated on January 1,
2010 under new consolidation guidance. Net charge-off ratios
were further impacted by lower loan balances primarily as a
result of charge-offs, paydowns and the sale of First Republic.
There are certain risk characteristics of the home equity
portfolio which have contributed to higher losses including
loans with a high refreshed combined
loan-to-value
(CLTV), loans originated at the peak of home prices in 2006 and
2007 and loans in geographic areas that have experienced the
most significant declines in home prices. Home price declines
coupled with the fact that most home equity loans are secured by
second-lien positions have significantly reduced and, in some
cases, eliminated all collateral value after consideration of
the first-lien position. Although the following disclosures
address each of these risk characteristics separately, there is
significant overlap in loans with these characteristics, which
has contributed to a
disproportionate share of losses in the portfolio. Home equity
loans with all of these higher risk characteristics comprised
10 percent and 11 percent of the total home equity
portfolio at December 31, 2010 and 2009, but have accounted
for 29 percent of the home equity net charge-offs in 2010
compared to 38 percent in 2009.
Home equity loans with greater than 90 percent but less
than 100 percent refreshed CLTVs comprised 11 percent
and 12 percent of the home equity portfolio at
December 31, 2010 and 2009. Loans with refreshed CLTVs
greater than 100 percent comprised 30 percent and
31 percent of the home equity portfolio at
December 31, 2010 and 2009. Of those loans with a refreshed
CLTV greater than 100 percent, 97 percent were
performing at December 31, 2010 while 95 percent were
performing at December 31, 2009. Home equity loans and
lines of credit with a refreshed CLTV greater than
100 percent reflect loans where the carrying value and
available line of credit of the combined loans are equal to or
greater than the most recent valuation of the property securing
the loan. Depending on the LTV of the first lien, there may be
collateral in excess of the first lien that is available to
reduce the severity of loss on the second lien. The majority of
these high refreshed CLTV ratios are due to home price declines.
In addition, loans to borrowers with a refreshed FICO score
below 620 represented 12 percent and 13 percent of the
home equity loans at December 31, 2010 and 2009. Of the
total home equity portfolio, 75 percent and 72 percent
at December 31, 2010 and 2009 were interest-only loans.
The 2006 and 2007 vintage loans, which represent 47 percent
and 49 percent of our home equity portfolio at
December 31, 2010 and 2009, have higher refreshed CLTVs and
accounted for 57 percent of nonperforming home equity loans
at December 31, 2010 compared to 62 percent at
December 31, 2009. These vintages of loans accounted for
66 percent of net charge-offs in 2010 compared to
72 percent in 2009.
76 Bank
of America 2010
The table below presents outstandings, nonperforming loans and
net charge-offs by certain state concentrations for the home
equity loan portfolio. California and Florida combined
represented 40 percent of the total home equity portfolio
and 44 percent of nonperforming home equity loans at
December 31, 2010. These states accounted for
55 percent of the home equity net charge-offs for 2010
compared to 60 percent of the home equity net charge-offs
for 2009. In the New York area, the New York-Northern New
Jersey-Long Island MSA made up 11 percent of outstanding
home equity loans at both December 31, 2010 and 2009. This
MSA comprised only six percent
of net charge-offs for both 2010 and 2009. The Los Angeles-Long
Beach-Santa Ana MSA within California made up 11 percent of
outstanding home equity loans at both December 31, 2010 and
2009 and comprised 11 percent of net charge-offs for 2010
compared to 13 percent for 2009.
For information on representations and warranties related to our
home equity portfolio, see Representations and Warranties
beginning on page 52 and Note 9
Representations and Warranties Obligations and Corporate
Guarantees to the Consolidated Financial Statements.
Table
24 Home
Equity State Concentrations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31
|
|
|
December 31
|
|
|
|
Outstandings
|
|
|
Nonperforming
|
|
|
Net Charge-offs
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
California
|
|
$
|
35,426
|
|
|
$
|
38,573
|
|
|
$
|
708
|
|
|
$
|
1,178
|
|
|
$
|
2,341
|
|
|
$
|
2,669
|
|
Florida
|
|
|
15,028
|
|
|
|
16,735
|
|
|
|
482
|
|
|
|
731
|
|
|
|
1,420
|
|
|
|
1,583
|
|
New Jersey
|
|
|
8,153
|
|
|
|
8,732
|
|
|
|
169
|
|
|
|
192
|
|
|
|
219
|
|
|
|
225
|
|
New York
|
|
|
8,061
|
|
|
|
8,752
|
|
|
|
246
|
|
|
|
274
|
|
|
|
273
|
|
|
|
262
|
|
Massachusetts
|
|
|
5,657
|
|
|
|
6,155
|
|
|
|
71
|
|
|
|
90
|
|
|
|
102
|
|
|
|
93
|
|
Other
U.S./Non-U.S.
|
|
|
53,066
|
|
|
|
56,965
|
|
|
|
1,018
|
|
|
|
1,339
|
|
|
|
2,426
|
|
|
|
2,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total home equity
loans (1)
|
|
$
|
125,391
|
|
|
$
|
135,912
|
|
|
$
|
2,694
|
|
|
$
|
3,804
|
|
|
$
|
6,781
|
|
|
$
|
7,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Countrywide purchased
credit-impaired home
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
equity loan portfolio
|
|
|
12,590
|
|
|
|
13,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total home equity loan
portfolio
|
|
$
|
137,981
|
|
|
$
|
149,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amount excludes the Countrywide PCI
home equity loan portfolio.
|
Discontinued Real
Estate
The discontinued real estate portfolio, totaling
$13.1 billion at December 31, 2010, consisted of pay
option and subprime loans acquired in the Countrywide
acquisition. Upon acquisition, the majority of the discontinued
real estate portfolio was considered credit-impaired and written
down to fair value. At December 31, 2010, the Countrywide
PCI loan portfolio comprised $11.7 billion, or
89 percent, of the total discontinued real estate
portfolio. This portfolio is included in All Other and is
managed as part of our overall ALM activities. See Countrywide
Purchased Credit-impaired Loan Portfolio beginning on
page 78 for more information on the discontinued real
estate portfolio.
At December 31, 2010, the purchased discontinued real
estate portfolio that was not credit-impaired was
$1.4 billion. Loans with greater than 90 percent
refreshed LTVs and CLTVs comprised 29 percent of the
portfolio and those with refreshed FICO scores below 620
represented 46 percent of the portfolio. California
represented 37 percent of the portfolio and 34 percent
of the nonperforming loans while Florida represented
10 percent of the portfolio and 15 percent of the
nonperforming loans at December 31, 2010. The Los
Angeles-Long Beach-Santa Ana MSA within California made up
16 percent of outstanding discontinued real estate loans at
December 31, 2010.
Pay option adjustable-rate mortgages (ARMs), which are included
in the discontinued real estate portfolio, have interest rates
that adjust monthly and minimum required payments that adjust
annually, subject to resetting of the loan if minimum payments
are made and deferred interest limits are reached. Annual
payment adjustments are subject to a 7.5 percent maximum
change. To ensure that contractual loan payments are adequate to
repay a loan, the fully amortizing loan payment amount is
re-established after the initial five or
10-year
period and again every five years thereafter. These payment
adjustments are not subject to the 7.5 percent limit and
may be substantial due to changes in interest rates and the
addition of unpaid interest to the loan
balance. Payment advantage ARMs have interest rates that are
fixed for an initial period of five years. Payments are subject
to reset if the minimum payments are made and deferred interest
limits are reached. If interest deferrals cause a loans
principal balance to reach a certain level within the first
10 years of the life of the loan, the payment is reset to
the interest-only payment; then at the
10-year
point, the fully amortizing payment is required.
The difference between the frequency of changes in the
loans interest rates and payments along with a limitation
on changes in the minimum monthly payments of 7.5 percent
per year can result in payments that are not sufficient to pay
all of the monthly interest charges (i.e., negative
amortization). Unpaid interest charges are added to the loan
balance until the loan balance increases to a specified limit,
which can be no more than 115 percent of the original loan
amount, at which time a new monthly payment amount adequate to
repay the loan over its remaining contractual life is
established.
At December 31, 2010, the unpaid principal balance of pay
option loans was $14.6 billion, with a carrying amount of
$11.8 billion, including $11.0 billion of loans that
were credit-impaired upon acquisition. The total unpaid
principal balance of pay option loans with accumulated negative
amortization was $12.5 billion including $858 million
of negative amortization. The percentage of borrowers electing
to make only the minimum payment on option ARMs was
69 percent at December 31, 2010. We continue to
evaluate our exposure to payment resets on the acquired
negative-amortizing loans including the Countrywide PCI pay
option loan portfolio and have taken into consideration several
assumptions regarding this evaluation (e.g., prepayment rates).
Based on our expectations, 11 percent and three percent of
the pay option loan portfolio are expected to reset in 2011 and
2012. Approximately four percent are expected to reset
thereafter and approximately 82 percent are expected to
default or repay prior to being reset.
Bank of America
2010 77
Countrywide
Purchased Credit-impaired Loan Portfolio
Loans acquired with evidence of credit quality deterioration
since origination and for which it is probable at purchase that
we will be unable to collect all contractually required payments
are accounted for under the accounting guidance for PCI loans,
which addresses accounting for differences between contractual
and expected cash flows to be collected from the
purchasers initial investment in loans if those
differences are attributable, at least in part, to credit
quality. Evidence of credit quality deterioration as of the
acquisition date may include statistics such as past due status,
refreshed FICO scores and refreshed LTVs. PCI loans are recorded
at fair value upon acquisition and
the applicable accounting guidance prohibits carrying over or
recording valuation allowances in the initial accounting. The
Merrill Lynch PCI consumer loan portfolio did not materially
alter the reported credit quality statistics of the consumer
portfolios. As such, the Merrill Lynch consumer PCI loans are
excluded from the following discussion and credit statistics.
Acquired loans from Countrywide that were considered
credit-impaired were written down to fair value at the
acquisition date. The following table presents the unpaid
principal balance, carrying value, allowance for loan and lease
losses and the net carrying value as a percentage of the unpaid
principal balance for the Countrywide PCI loan portfolio at
December 31, 2010.
Table
25 Countrywide
Purchased Credit-impaired Loan Portfolio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
Unpaid
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
% of
|
|
|
|
Principal
|
|
|
Carrying
|
|
|
Related
|
|
|
Value Net of
|
|
|
Unpaid Principal
|
|
(Dollars in millions)
|
|
Balance
|
|
|
Value
|
|
|
Allowance
|
|
|
Allowance
|
|
|
Balance
|
|
Residential mortgage
|
|
$
|
11,481
|
|
|
$
|
10,592
|
|
|
$
|
229
|
|
|
$
|
10,363
|
|
|
|
90.26
|
%
|
Home equity
|
|
|
15,072
|
|
|
|
12,590
|
|
|
|
4,514
|
|
|
|
8,076
|
|
|
|
53.58
|
|
Discontinued real estate
|
|
|
14,893
|
|
|
|
11,652
|
|
|
|
1,591
|
|
|
|
10,061
|
|
|
|
67.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Countrywide purchased
credit-impaired loan portfolio
|
|
$
|
41,446
|
|
|
$
|
34,834
|
|
|
$
|
6,334
|
|
|
$
|
28,500
|
|
|
|
68.76
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of the unpaid principal balance at December 31, 2010,
$15.5 billion was 180 days or more past due, including
$10.9 billion of first-lien and $4.6 billion of home
equity. Of the $25.9 billion that is less than
180 days past due, $21.5 billion, or 83 percent
of the total unpaid principal balance, was current based on the
contractual terms while $2.2 billion, or eight percent, was
in early stage delinquency. During 2010, we recorded
$2.3 billion of provision for credit losses on PCI loans
which was comprised mainly of $1.4 billion for home equity
and $689 million for discontinued real estate loans
compared to a total provision for PCI loans of $3.3 billion
in 2009. Provision expense in 2010 was driven primarily by a
slower pace of expected recovery in home prices, the result of a
deteriorating view on defaults on more seasoned loans in the
portfolio and a reassessment of modification and short sale
benefits as we gain more experience with troubled borrowers. The
Countrywide PCI allowance for loan losses increased
$2.5 billion from December 31, 2009 to
$6.3 billion at December 31, 2010 as a result of the
increase in the provision for credit losses and the
reclassification of a portion of nonaccretable difference to the
allowance. For further information on the PCI loan portfolio,
see Note 6 Outstanding Loans and Leases
to the Consolidated Financial Statements.
Additional information on the Countrywide PCI residential
mortgage, home equity and discontinued real estate loan
portfolios follows.
Purchased
Credit-impaired Residential Mortgage Loan
Portfolio
The Countrywide PCI residential mortgage loan portfolio
outstandings were $10.6 billion at December 31, 2010
and comprised 30 percent of the total Countrywide PCI loan
portfolio. Those loans to borrowers with a refreshed FICO score
below 620 represented 38 percent of the Countrywide PCI
residential mortgage loan portfolio at December 31, 2010.
Refreshed LTVs greater than 90 percent represented
68 percent of the PCI residential mortgage loan portfolio
after consideration of purchase accounting adjustments and
82 percent based on the unpaid principal balance at
December 31, 2010. Those loans that were originally
classified as discontinued real estate loans upon acquisition
and have been subsequently modified are now included in the
residential mortgage outstandings. The table below presents
outstandings net of purchase accounting adjustments, by certain
state concentrations.
Table
26 Outstanding
Countrywide Purchased
Credit-impaired
Loan Portfolio Residential Mortgage State
Concentrations
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
California
|
|
$
|
5,882
|
|
|
$
|
6,142
|
|
Florida
|
|
|
779
|
|
|
|
843
|
|
Virginia
|
|
|
579
|
|
|
|
617
|
|
Maryland
|
|
|
271
|
|
|
|
278
|
|
Texas
|
|
|
164
|
|
|
|
166
|
|
Other
U.S./Non-U.S.
|
|
|
2,917
|
|
|
|
3,031
|
|
|
|
|
|
|
|
|
|
|
Total Countrywide purchased
credit-impaired residential mortgage loan portfolio
|
|
$
|
10,592
|
|
|
$
|
11,077
|
|
|
|
|
|
|
|
|
|
|
78 Bank
of America 2010
Purchased
Credit-impaired Home Equity Loan Portfolio
The Countrywide PCI home equity loan portfolio outstandings were
$12.6 billion at December 31, 2010 and comprised
36 percent of the total Countrywide PCI loan portfolio.
Those loans with a refreshed FICO score below 620 represented
26 percent of the Countrywide PCI home equity loan
portfolio at December 31, 2010. Refreshed CLTVs greater
than 90 percent represented 85 percent of the PCI home
equity loan portfolio after consideration of purchase accounting
adjustments and 85 percent based on the unpaid principal
balance at December 31, 2010. The table below presents
outstandings net of purchase accounting adjustments, by certain
state concentrations.
Table
27 Outstanding
Countrywide Purchased
Credit-impaired
Loan Portfolio Home Equity State
Concentrations
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
California
|
|
$
|
4,178
|
|
|
$
|
4,311
|
|
Florida
|
|
|
750
|
|
|
|
765
|
|
Virginia
|
|
|
532
|
|
|
|
550
|
|
Arizona
|
|
|
520
|
|
|
|
542
|
|
Colorado
|
|
|
375
|
|
|
|
416
|
|
Other
U.S./Non-U.S.
|
|
|
6,235
|
|
|
|
6,630
|
|
|
|
|
|
|
|
|
|
|
Total Countrywide purchased
credit-impaired home equity loan portfolio
|
|
$
|
12,590
|
|
|
$
|
13,214
|
|
|
|
|
|
|
|
|
|
|
Purchased
Credit-impaired Discontinued Real Estate Loan
Portfolio
The Countrywide PCI discontinued real estate loan portfolio
outstandings were $11.7 billion at December 31, 2010
and comprised 34 percent of the total Countrywide PCI loan
portfolio. Those loans to borrowers with a refreshed FICO score
below 620 represented 62 percent of the Countrywide PCI
discontinued real estate loan portfolio at December 31,
2010. Refreshed LTVs and CLTVs greater than 90 percent
represented 55 percent of the PCI discontinued real estate
loan portfolio after consideration of purchase accounting
adjustments and 83 percent based on the unpaid principal
balance at December 31, 2010. Those loans that were
originally classified as discontinued real estate loans upon
acquisition and have been subsequently modified are now excluded
from this portfolio and included in the Countrywide PCI
residential mortgage loan portfolio, but remain in the PCI loan
pool. The table below presents outstandings net of purchase
accounting adjustments, by certain state concentrations.
Table
28 Outstanding
Countrywide Purchased Credit-impaired Loan Portfolio
Discontinued Real Estate State Concentrations
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
California
|
|
$
|
6,322
|
|
|
$
|
7,148
|
|
Florida
|
|
|
1,121
|
|
|
|
1,315
|
|
Washington
|
|
|
368
|
|
|
|
421
|
|
Virginia
|
|
|
344
|
|
|
|
399
|
|
Arizona
|
|
|
339
|
|
|
|
430
|
|
Other
U.S./Non-U.S.
|
|
|
3,158
|
|
|
|
3,537
|
|
|
|
|
|
|
|
|
|
|
Total Countrywide purchased
credit-impaired discontinued real estate loan
portfolio
|
|
$
|
11,652
|
|
|
$
|
13,250
|
|
|
|
|
|
|
|
|
|
|
U.S. Credit
Card
Prior to the adoption of new consolidation guidance, the
U.S. credit card portfolio was reported on both a held and
managed basis. Managed basis assumed that securitized loans were
not sold into credit card securitizations and presented credit
quality information as if the loans had not been sold. Under the
new consolidation guidance effective January 1, 2010, we
consolidated the credit card securitization trusts and the new
held basis is comparable to the previously reported managed
basis. For more information on the adoption of the new
consolidation guidance, see
Note 8 Securitizations and Other
Variable Interest Entities to the Consolidated Financial
Statements.
The table below presents certain U.S. credit card key
credit statistics on a held basis for 2010 and managed basis for
December 31, 2009.
Table
29 U.S.
Credit Card Key Credit Statistics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
January 1
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2010
(1)
|
|
|
2010 (1)
|
|
|
2009
|
|
Outstandings
|
|
$
|
113,785
|
|
|
$
|
129,642
|
|
|
$
|
49,453
|
|
Accruing past due 30 days or more
|
|
|
5,913
|
|
|
|
9,866
|
|
|
|
3,907
|
|
Accruing past due 90 days or more
|
|
|
3,320
|
|
|
|
5,408
|
|
|
|
2,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
Net charge-offs
|
|
|
|
|
|
|
|
|
Amount
|
|
$
|
13,027
|
|
|
$
|
6,547
|
|
Ratios
|
|
|
11.04
|
%
|
|
|
12.50
|
%
|
Supplemental managed basis
data
|
|
|
|
|
|
|
|
|
Amount
|
|
|
n/a
|
|
|
$
|
16,962
|
|
Ratios
|
|
|
n/a
|
|
|
|
12.07
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Balances reflect the impact of new
consolidation guidance.
|
n/a = not applicable
The consumer U.S. credit card portfolio is managed in
Global Card Services. Outstandings in the
U.S. credit card loan portfolio increased
$64.3 billion compared to December 31, 2009 due to the
adoption of the new consolidation guidance. Compared to 2009,
net charge-offs increased $6.5 billion to
$13.0 billion also due to the adoption of the new
consolidation guidance. U.S. credit card loans 30 days
or more past due and still accruing interest increased
$2.0 billion while loans 90 days or more past due and
still accruing interest increased $1.2 billion compared to
December 31, 2009 due to the adoption of new consolidation
guidance.
Compared to December 31, 2009 on a managed basis,
outstandings decreased $15.9 billion primarily as a result
of charge-offs and lower origination volume. Net losses
decreased $3.9 billion due to lower levels of delinquencies
and bankruptcies as a result of improvement in the
U.S. economy compared to 2009 on a managed basis. The net
charge-off ratio was 11.04 percent of total average
U.S. credit card loans in 2010 compared to
12.07 percent in 2009 on a managed basis. U.S. credit
card loans 30 days or more past due and still accruing
interest decreased $4.0 billion and loans 90 days or
more past due and still accruing interest decreased
$2.1 billion compared to December 31, 2009 on a
managed basis. These declines were due to improvement in the
U.S. economy including stabilization in the levels of
unemployment.
Bank of America
2010 79
The table below presents certain state concentrations for the
U.S. credit card portfolio on a held basis for 2010 and
managed basis for December 31, 2009.
Table
30 U.S.
Credit Card State Concentrations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
Year Ended December 31
|
|
|
|
Outstandings
|
|
|
Accruing Past Due 90 Days or More
|
|
|
Net Charge-offs
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
California
|
|
$
|
17,028
|
|
|
$
|
20,048
|
|
|
$
|
612
|
|
|
$
|
1,097
|
|
|
$
|
2,752
|
|
|
$
|
3,558
|
|
Florida
|
|
|
9,121
|
|
|
|
10,858
|
|
|
|
376
|
|
|
|
676
|
|
|
|
1,611
|
|
|
|
2,178
|
|
Texas
|
|
|
7,581
|
|
|
|
8,653
|
|
|
|
207
|
|
|
|
345
|
|
|
|
784
|
|
|
|
960
|
|
New York
|
|
|
6,862
|
|
|
|
7,839
|
|
|
|
192
|
|
|
|
295
|
|
|
|
694
|
|
|
|
855
|
|
New Jersey
|
|
|
4,579
|
|
|
|
5,168
|
|
|
|
132
|
|
|
|
189
|
|
|
|
452
|
|
|
|
559
|
|
Other U.S.
|
|
|
68,614
|
|
|
|
77,076
|
|
|
|
1,801
|
|
|
|
2,806
|
|
|
|
6,734
|
|
|
|
8,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. credit card
portfolio
|
|
$
|
113,785
|
|
|
$
|
129,642
|
|
|
$
|
3,320
|
|
|
$
|
5,408
|
|
|
$
|
13,027
|
|
|
$
|
16,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unused lines of credit for U.S. credit card totaled
$399.7 billion at December 31, 2010 compared to
$438.5 billion at December 31, 2009 on a managed
basis. The $38.8 billion decrease was driven by a
combination of account management initiatives on higher risk or
inactive accounts and tighter underwriting standards for new
originations.
Non-U.S.
Credit Card
Prior to the adoption of new consolidation guidance, the
non-U.S. credit
card portfolio was reported on both a held and managed basis.
Under the new consolidation guidance effective January 1,
2010, we consolidated the credit card securitization trusts and
the new held basis is comparable to the previously reported
managed basis. For more information on the adoption of the new
consolidation guidance, see Note 8
Securitizations and Other Variable Interest Entities to the
Consolidated Financial Statements.
The table below presents certain
non-U.S. credit
card key credit statistics on a held basis for 2010 and managed
basis for December 31, 2009.
Table
31 Non-U.S.
Credit Card Key Credit Statistics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
January 1
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2010
(1)
|
|
|
2010 (1)
|
|
|
2009
|
|
Outstandings
|
|
$
|
27,465
|
|
|
$
|
31,182
|
|
|
$
|
21,656
|
|
Accruing past due 30 days or more
|
|
|
1,354
|
|
|
|
1,744
|
|
|
|
1,104
|
|
Accruing past due 90 days or more
|
|
|
599
|
|
|
|
814
|
|
|
|
515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
Net charge-offs
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
|
|
|
$
|
2,207
|
|
|
$
|
1,239
|
|
Ratio
|
|
|
|
|
|
|
7.88
|
%
|
|
|
6.30
|
%
|
Supplemental managed basis
data
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
|
|
|
|
n/a
|
|
|
$
|
2,223
|
|
Ratio
|
|
|
|
|
|
|
n/a
|
|
|
|
7.43
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Balances reflect the impact of new
consolidation guidance.
|
n/a = not applicable
The consumer
non-U.S. credit
card portfolio is managed in Global Card Services.
Outstandings in the
non-U.S. credit
card portfolio increased $5.8 billion compared to
December 31, 2009 due to the adoption of the new
consolidation guidance. Additionally, net charge-off levels and
ratios for 2010, when compared to 2009, were impacted by the
adoption of the new consolidation guidance. Net charge-offs
increased $1.0 billion to $2.2 billion in 2010.
Outstandings declined $3.7 billion compared to
December 31, 2009 on a managed basis primarily due to
charge-offs, lower origination volume and the strengthening of
the U.S. dollar against certain foreign currencies. Net
losses
were substantially flat for 2010, decreasing $16 million
from managed losses in 2009. The net loss ratio increased to
7.88 percent of total average
non-U.S. credit
card compared to 7.43 percent in 2009, due to the decrease
in outstandings.
Unused lines of credit for
non-U.S. credit
card totaled $60.3 billion at December 31, 2010
compared to $69.6 billion at December 31, 2009 on a
managed basis. The $9.3 billion decrease was driven by the
combination of account management initiatives on inactive
accounts, tighter underwriting standards for new originations
and the strengthening of the U.S. dollar against certain
foreign currencies, particularly the British Pound and the Euro.
Direct/Indirect
Consumer
At December 31, 2010, approximately 48 percent of the
direct/indirect portfolio was included in Global Commercial
Banking (dealer financial services automotive,
marine and recreational vehicle loans), 29 percent was
included in GWIM (principally other non-real
estate-secured, unsecured personal loans and securities-based
lending margin loans), 15 percent was included in Global
Card Services (consumer personal loans and other non-real
estate-secured loans) and the remainder was in All Other
(student loans).
Outstanding loans and leases decreased $6.9 billion to
$90.3 billion at December 31, 2010 compared to
December 31, 2009 as lower outstandings in the Global
Card Services unsecured consumer lending portfolio and the
sale of a portion of the student loan portfolio were partially
offset by the adoption of new consolidation guidance, growth in
securities-based lending and the purchase of auto receivables
within the dealer financial services portfolio. Direct/indirect
loans that were past due 30 days or more and still accruing
interest declined $1.1 billion compared to
December 31, 2009, to $2.6 billion due to a
combination of reduced outstandings and improvement in the
unsecured consumer lending portfolio. Net charge-offs decreased
$2.1 billion to $3.3 billion in 2010, or
3.45 percent of total average direct/indirect loans
compared to 5.46 percent in 2009. This decrease was
primarily driven by reduced outstandings from changes in
underwriting criteria and lower levels of delinquencies and
bankruptcies in the unsecured consumer lending portfolio as a
result of improvement in the U.S. economy including
stabilization in the levels of unemployment. An additional
driver was lower net charge-offs in the dealer financial
services portfolio due to the impact of higher credit quality
originations and higher resale values. Net charge-offs for the
unsecured consumer lending portfolio decreased $1.6 billion
to $2.7 billion and the net charge-off ratio decreased to
16.74 percent in 2010 compared to 17.75 percent in
2009. Net charge-offs for the dealer financial services
portfolio decreased $404 million to $487 million and
the loss rate decreased to 1.08 percent in 2010 compared to
2.16 percent in 2009.
80 Bank
of America 2010
The table below presents certain state concentrations for the
direct/indirect consumer loan portfolio.
Table
32 Direct/Indirect
State Concentrations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
Year Ended December 31
|
|
|
|
Outstandings
|
|
|
Accruing Past Due 90 Days or More
|
|
|
Net Charge-offs
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
California
|
|
$
|
10,558
|
|
|
$
|
11,664
|
|
|
$
|
132
|
|
|
$
|
228
|
|
|
$
|
591
|
|
|
$
|
1,055
|
|
Texas
|
|
|
7,885
|
|
|
|
8,743
|
|
|
|
78
|
|
|
|
105
|
|
|
|
262
|
|
|
|
382
|
|
Florida
|
|
|
6,725
|
|
|
|
7,559
|
|
|
|
80
|
|
|
|
130
|
|
|
|
343
|
|
|
|
597
|
|
New York
|
|
|
4,770
|
|
|
|
5,111
|
|
|
|
56
|
|
|
|
73
|
|
|
|
183
|
|
|
|
272
|
|
Georgia
|
|
|
2,814
|
|
|
|
3,165
|
|
|
|
44
|
|
|
|
52
|
|
|
|
126
|
|
|
|
205
|
|
Other
U.S./Non-U.S.
|
|
|
57,556
|
|
|
|
60,994
|
|
|
|
668
|
|
|
|
900
|
|
|
|
1,831
|
|
|
|
2,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total direct/indirect
loans
|
|
$
|
90,308
|
|
|
$
|
97,236
|
|
|
$
|
1,058
|
|
|
$
|
1,488
|
|
|
$
|
3,336
|
|
|
$
|
5,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Consumer
At December 31, 2010, approximately 69 percent of the
$2.8 billion other consumer portfolio was associated with
portfolios from certain consumer finance businesses that we
previously exited and is included in All Other. The
remainder consisted of the
non-U.S. consumer
loan portfolio, of which the vast majority we previously exited
and is largely in Global Card Services and deposit
overdrafts which are recorded in Deposits.
Nonperforming
Consumer Loans and Foreclosed Properties Activity
Table 33 presents nonperforming consumer loans and foreclosed
properties activity during 2010 and 2009. Nonperforming LHFS are
excluded from nonperforming loans as they are recorded at either
fair value or the lower of cost or fair value. Nonperforming
loans do not include past due consumer credit card loans and in
general, past due consumer loans not secured by real estate as
these loans are generally charged off no later than the end of
the month in which the loan becomes 180 days past due. Real
estate-secured past due consumer loans insured by the FHA are
not reported as nonperforming as principal repayment is insured
by the FHA. Additionally, nonperforming loans do not include the
Countrywide PCI loan portfolio. For further information
regarding nonperforming loans, see Note 1
Summary of Significant Accounting Principles to the
Consolidated Financial Statements. Nonperforming loans remained
relatively flat at $20.9 billion at December 31, 2010
compared to $20.8 billion at December 31, 2009 as
delinquency inflows to nonaccrual loans slowed driven by
favorable portfolio trends due in part to the improving
U.S. economy. These inflows were offset by charge-offs,
nonperforming loans returning to performing status, and paydowns
and payoffs.
The outstanding balance of a real estate-secured loan that is in
excess of the estimated property value, after reducing the
property value for costs to sell, is charged off no later than
the end of the month in which the account becomes 180 days
past due unless repayment of the loan is insured by the FHA. At
December 31, 2010, $15.1 billion, or 69 percent,
of the nonperforming consumer real estate loans and foreclosed
properties had been written down to their fair values. This was
comprised of $13.9 billion of nonperforming loans
180 days or more past due and $1.2 billion of
foreclosed properties.
Foreclosed properties decreased $179 million in 2010. PCI
loans are excluded from nonperforming loans as these loans were
written down to fair value at the acquisition date. However,
once the underlying real estate is acquired by the Corporation
upon foreclosure of the delinquent PCI loan, it is included in
foreclosed properties. Net changes to foreclosed properties
related to PCI loans were an increase of $100 million in
2010. Not included in foreclosed properties at December 31,
2010 was $1.4 billion of real estate that was acquired by
the Corporation upon foreclosure of delinquent FHA insured
loans. We hold this real estate on our balance sheet until we
convey
these properties to the FHA. We exclude these amounts from our
nonperforming loans and foreclosed properties activity as we
will be reimbursed once the property is conveyed to the FHA for
principal and up to certain limits, costs incurred during the
foreclosure process and interest incurred during the holding
period.
Restructured
Loans
Nonperforming loans also include certain loans that have been
modified in TDRs where economic concessions have been granted to
borrowers experiencing financial difficulties. These concessions
typically result from the Corporations loss mitigation
activities and could include reductions in the interest rate,
payment extensions, forgiveness of principal, forbearance or
other actions. Certain TDRs are classified as nonperforming at
the time of restructuring and may only be returned to performing
status after considering the borrowers sustained repayment
performance under revised payment terms for a reasonable period,
generally six months. Nonperforming TDRs, excluding those
modified loans in the Countrywide PCI loan portfolio, are
included in Table 33.
Residential mortgage TDRs totaled $11.8 billion at
December 31, 2010, an increase of $4.6 billion
compared to December 31, 2009. Of these loans,
$3.3 billion were nonperforming representing an increase of
$130 million in 2010, and $8.5 billion were performing
representing an increase of $4.5 billion in 2010 driven by
TDRs returning to performing status and new additions. These
performing TDRs are excluded from nonperforming loans in Table
33. Residential mortgage TDRs deemed collateral dependent
totaled $3.2 billion at December 31, 2010 and included
$921 million of loans classified as nonperforming and
$2.3 billion classified as performing. At December 31,
2010, performing residential mortgage TDRs included
$2.5 billion that were FHA insured.
Home equity TDRs totaled $1.7 billion at December 31,
2010, a decrease of $673 million compared to
December 31, 2009. Of these loans, $541 million were
nonperforming representing a decrease of $1.2 billion in
2010 driven primarily by nonperforming TDRs returning to
performing status and charge-offs taken to comply with
regulatory guidance clarifying the timing of charge-offs on
collateral dependent modified loans. Home equity TDRs that were
performing in accordance with their modified terms were
$1.2 billion representing an increase of $514 million
in 2010. These performing TDRs are excluded from nonperforming
loans in Table 33. Home equity TDRs deemed collateral dependent
totaled $796 million at December 31, 2010 and included
$245 million of loans classified as nonperforming and
$551 million classified as performing.
Discontinued real estate TDRs totaled $395 million at
December 31, 2010, an increase of $13 million in 2010.
Of these loans, $206 million were nonperforming while the
remaining $189 million were classified as
Bank of America
2010 81
performing at December 31, 2010. Discontinued real estate
TDRs deemed collateral dependent totaled $213 million at
December 31, 2010 and included $97 million of loans
classified as nonperforming and $116 million classified as
performing.
We also work with customers that are experiencing financial
difficulty by renegotiating credit card, consumer lending and
small business loans (the renegotiated TDR portfolio), while
complying with Federal Financial Institutions Examination
Council (FFIEC) guidelines. Substantially all renegotiated
portfolio modifications are considered to be TDRs. The
renegotiated TDR portfolio may include modifications, both
short- and long-term, of interest rates or payment amounts or a
combination of interest rates and payment amounts. We make
modifications primarily through internal renegotiation programs
utilizing direct customer contact, but may also utilize external
renegotiation programs. The renegotiated TDR portfolio is
excluded from Table 33 as we do not generally classify consumer
non-real estate loans as nonperforming. At December 31,
2010, our renegotiated TDR portfolio was $12.1 billion of
which $9.2 billion was current or less than 30 days
past due under the modified terms, compared to an
$8.1 billion portfolio, on a held basis at
December 31, 2009, of which $5.9 billion was current
or less than 30 days past due under the modified terms. At
December 31, 2009, our renegotiated
TDR portfolio, on a managed basis, was $15.8 billion of
which $11.5 billion was current or less than 30 days
past due under the modified terms. For more information on the
renegotiated TDR portfolio, see Note 6
Outstanding Loans and Leases to the Consolidated Financial
Statements.
As a result of new accounting guidance on PCI loans, beginning
January 1, 2010, modifications of loans in the PCI loan
portfolio do not result in removal of the loan from the PCI loan
pool. TDRs in the consumer real estate portfolio that were
removed from the PCI loan portfolio prior to the adoption of new
accounting guidance were $2.1 billion and $2.3 billion
at December 31, 2010 and 2009, of which $426 million
and $395 million were nonperforming. These nonperforming
loans are excluded from the table below.
Nonperforming consumer real estate TDRs, included in the table
below, as a percentage of total nonperforming consumer loans and
foreclosed properties, declined to 16 percent at
December 31, 2010 from 21 percent at December 31,
2009. This was due to nonperforming TDRs returning to performing
status and charge-offs, including those charged off to comply
with regulatory guidance clarifying the timing of charge-offs on
collateral dependent modified loans, both of which outpaced new
additions of nonperforming TDRs.
Table
33 Nonperforming
Consumer Loans and Foreclosed Properties Activity
(1)
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
Nonperforming loans
|
|
|
|
|
|
|
|
|
Balance, January 1
|
|
$
|
20,839
|
|
|
$
|
9,888
|
|
|
|
|
|
|
|
|
|
|
Additions to nonperforming loans:
|
|
|
|
|
|
|
|
|
Consolidation of VIEs
|
|
|
448
|
|
|
|
n/a
|
|
New nonaccrual
loans (2)
|
|
|
21,136
|
|
|
|
29,271
|
|
Reductions in nonperforming loans:
|
|
|
|
|
|
|
|
|
Paydowns and payoffs
|
|
|
(2,809
|
)
|
|
|
(1,459
|
)
|
Returns to performing
status (3)
|
|
|
(7,647
|
)
|
|
|
(4,540
|
)
|
Charge-offs (4)
|
|
|
(9,772
|
)
|
|
|
(10,702
|
)
|
Transfers to foreclosed properties
|
|
|
(1,341
|
)
|
|
|
(1,619
|
)
|
|
|
|
|
|
|
|
|
|
Total net additions to nonperforming loans
|
|
|
15
|
|
|
|
10,951
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming loans,
December 31 (5)
|
|
|
20,854
|
|
|
|
20,839
|
|
|
|
|
|
|
|
|
|
|
Foreclosed properties
|
|
|
|
|
|
|
|
|
Balance, January 1
|
|
|
1,428
|
|
|
|
1,506
|
|
|
|
|
|
|
|
|
|
|
Additions to foreclosed properties:
|
|
|
|
|
|
|
|
|
New foreclosed properties
(6, 7)
|
|
|
2,337
|
|
|
|
1,976
|
|
Reductions in foreclosed properties:
|
|
|
|
|
|
|
|
|
Sales
|
|
|
(2,327
|
)
|
|
|
(1,687
|
)
|
Write-downs
|
|
|
(189
|
)
|
|
|
(367
|
)
|
|
|
|
|
|
|
|
|
|
Total net reductions to foreclosed properties
|
|
|
(179
|
)
|
|
|
(78
|
)
|
|
|
|
|
|
|
|
|
|
Total foreclosed properties,
December 31
|
|
|
1,249
|
|
|
|
1,428
|
|
|
|
|
|
|
|
|
|
|
Nonperforming consumer loans and
foreclosed properties, December 31
|
|
$
|
22,103
|
|
|
$
|
22,267
|
|
|
|
|
|
|
|
|
|
|
Nonperforming consumer loans as a percentage of outstanding
consumer loans
|
|
|
3.24
|
%
|
|
|
3.61
|
%
|
Nonperforming consumer loans and foreclosed properties as a
percentage of outstanding consumer loans and
|
|
|
|
|
|
|
|
|
foreclosed properties
|
|
|
3.43
|
|
|
|
3.85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Balances do not include
nonperforming LHFS of $1.0 billion and $1.6 billion at
December 31, 2010 and 2009. For more information on our
definition of nonperforming loans, see the discussion beginning
on page 81.
|
(2) |
|
2009 includes $465 million of
nonperforming loans acquired from Merrill Lynch.
|
(3) |
|
Consumer loans may be returned to
performing status when all principal and interest is current and
full repayment of the remaining contractual principal and
interest is expected, or when the loan otherwise becomes
well-secured and is in the process of collection. Certain TDRs
are classified as nonperforming at the time of restructure and
may only be returned to performing status after considering the
borrowers sustained repayment performance for a reasonable
period, generally six months.
|
(4) |
|
Our policy is not to classify
consumer credit card and consumer loans not secured by real
estate as nonperforming; therefore, the charge-offs on these
loans have no impact on nonperforming activity and accordingly
are excluded from this table.
|
(5) |
|
At December 31, 2010,
67 percent of nonperforming loans are 180 days or more
past due and have been written down through charge-offs to
69 percent of the unpaid principal balance.
|
(6) |
|
Our policy is to record any losses
in the value of foreclosed properties as a reduction in the
allowance for loan and lease losses during the first
90 days after transfer of a loan into foreclosed
properties. Thereafter, all gains and losses in value are
recorded in noninterest expense. New foreclosed properties in
the table above are net of $575 million and
$818 million of charge-offs during 2010 and 2009, taken
during the first 90 days after transfer.
|
(7) |
|
2009 includes $21 million of
foreclosed properties acquired from Merrill Lynch.
|
n/a = not applicable
82 Bank
of America 2010
Commercial
Portfolio Credit Risk Management
Credit risk management for the commercial portfolio begins with
an assessment of the credit risk profile of the borrower or
counterparty based on an analysis of its financial position. As
part of the overall credit risk assessment, our commercial
credit exposures are assigned a risk rating and are subject to
approval based on defined credit approval standards. Subsequent
to loan origination, risk ratings are monitored on an ongoing
basis, and if necessary, adjusted to reflect changes in the
financial condition, cash flow, risk profile, or outlook of a
borrower or counterparty. In making credit decisions, we
consider risk rating, collateral, country, industry and single
name concentration limits while also balancing the total
borrower or counterparty relationship. Our lines of business and
risk management personnel use a variety of tools to continuously
monitor the ability of a borrower or counterparty to perform
under its obligations. We use risk rating aggregations to
measure and evaluate concentrations within portfolios. In
addition, risk ratings are a factor in determining the level of
assigned economic capital and the allowance for credit losses.
For information on our accounting policies regarding
delinquencies, nonperforming status and net charge-offs for the
commercial portfolio, refer to Note 1
Summary of Significant Accounting Principles to the
Consolidated Financial Statements.
Management of
Commercial Credit Risk Concentrations
Commercial credit risk is evaluated and managed with the goal
that concentrations of credit exposure do not result in
undesirable levels of risk. We review, measure and manage
concentrations of credit exposure by industry, product,
geography, customer relationship and loan size. We also review,
measure and manage commercial real estate loans by geographic
location and property type. In addition, within our
international portfolio, we evaluate exposures by region and by
country. Tables 38, 42, 48 and 49 summarize our concentrations.
We also utilize syndication of exposure to third parties, loan
sales, hedging and other risk mitigation techniques to manage
the size and risk profile of the commercial credit portfolio.
As part of our ongoing risk mitigation initiatives, we attempt
to work with clients to modify their loans to terms that better
align with their current ability to pay. In situations where an
economic concession has been granted to a borrower experiencing
financial difficulty, we identify these loans as TDRs.
We account for certain large corporate loans and loan
commitments, including issued but unfunded letters of credit
which are considered utilized for credit risk management
purposes, that exceed our single name credit risk concentration
guidelines under the fair value option. Lending commitments,
both funded and unfunded, are actively managed and monitored,
and as appropriate, credit risk for these lending relationships
may be mitigated through the use of credit derivatives, with the
Corporations credit view and market perspectives
determining the size and timing of the hedging activity. In
addition, we purchase credit protection to cover the funded
portion as well as the unfunded portion of certain other credit
exposures. To lessen the cost of obtaining our desired credit
protection levels, credit exposure may be added within an
industry, borrower or counterparty group by selling protection.
These credit derivatives do not meet the requirements for
treatment as accounting hedges. They are carried at fair value
with changes in fair value recorded in other income (loss).
Commercial Credit
Portfolio
U.S.-based
loan balances continued to decline on weak loan demand as
businesses aggressively managed their working capital and
production capacity by maintaining lean inventories, staff
levels, physical locations and capital expenditures.
Additionally, many borrowers continued to access the capital
markets for financing while reducing their use of bank credit
facilities. Risk mitigation strategies and net charge-offs
further contributed to the decline in loan balances.
Fourth-quarter balances showed stabilization relative to prior
quarters.
Non-U.S. commercial
loans showed strong growth from client demand, driven by
regional economic conditions and the positive impact of our
initiatives in Asia and other emerging markets.
Reservable criticized balances, net charge-offs and
nonperforming loans, leases and foreclosed property balances in
the commercial credit portfolio declined in 2010. These
reductions were driven primarily by the U.S. commercial and
commercial real estate portfolios. U.S. commercial was
driven by broad-based improvements in terms of clients,
industries and lines of business. Commercial real estate also
continued to show signs of stabilization during 2010; however,
levels of stressed commercial real estate loans remained
elevated. Most other credit indicators across the remaining
commercial portfolio have also improved.
Table 34 presents our commercial loans and leases, and related
credit quality information at December 31, 2010 and 2009.
Loans that were acquired from Merrill Lynch that were considered
purchased credit-impaired were written down to fair value upon
acquisition and amounted to $204 million and
$692 million at December 31, 2010 and 2009. These
loans are excluded from the nonperforming loans and accruing
balances 90 days or more past due even though the customer
may be contractually past due.
Table
34 Commercial
Loans and Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruing Past Due
|
|
|
|
Outstandings
|
|
|
Nonperforming
|
|
|
90 Days or More
|
|
|
|
December 31
|
|
|
January 1
|
|
|
December 31
|
|
|
December 31
|
|
|
December 31
|
|
|
December 31
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2010
(1)
|
|
|
2010 (1)
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
U.S.
commercial (2)
|
|
$
|
175,586
|
|
|
$
|
186,675
|
|
|
$
|
181,377
|
|
|
$
|
3,453
|
|
|
$
|
4,925
|
|
|
$
|
236
|
|
|
$
|
213
|
|
Commercial real
estate (3)
|
|
|
49,393
|
|
|
|
69,377
|
|
|
|
69,447
|
|
|
|
5,829
|
|
|
|
7,286
|
|
|
|
47
|
|
|
|
80
|
|
Commercial lease financing
|
|
|
21,942
|
|
|
|
22,199
|
|
|
|
22,199
|
|
|
|
117
|
|
|
|
115
|
|
|
|
18
|
|
|
|
32
|
|
Non-U.S.
commercial
|
|
|
32,029
|
|
|
|
27,079
|
|
|
|
27,079
|
|
|
|
233
|
|
|
|
177
|
|
|
|
6
|
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
278,950
|
|
|
|
305,330
|
|
|
|
300,102
|
|
|
|
9,632
|
|
|
|
12,503
|
|
|
|
307
|
|
|
|
392
|
|
U.S. small business
commercial (4)
|
|
|
14,719
|
|
|
|
17,526
|
|
|
|
17,526
|
|
|
|
204
|
|
|
|
200
|
|
|
|
325
|
|
|
|
624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial loans excluding loans measured at fair value
|
|
|
293,669
|
|
|
|
322,856
|
|
|
|
317,628
|
|
|
|
9,836
|
|
|
|
12,703
|
|
|
|
632
|
|
|
|
1,016
|
|
Total measured at fair
value (5)
|
|
|
3,321
|
|
|
|
4,936
|
|
|
|
4,936
|
|
|
|
30
|
|
|
|
138
|
|
|
|
|
|
|
|
87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial loans and
leases
|
|
$
|
296,990
|
|
|
$
|
327,792
|
|
|
$
|
322,564
|
|
|
$
|
9,866
|
|
|
$
|
12,841
|
|
|
$
|
632
|
|
|
$
|
1,103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Balance reflects impact of new
consolidation guidance.
|
(2) |
|
Excludes U.S. small business
commercial loans.
|
(3) |
|
Includes U.S. commercial real
estate loans of $46.9 billion and $66.5 billion and
non-U.S.
commercial real estate loans of $2.5 billion and
$3.0 billion at December 31, 2010 and 2009.
|
(4) |
|
Includes card-related products.
|
(5) |
|
Commercial loans accounted for
under the fair value option include U.S. commercial loans of
$1.6 billion and $3.0 billion,
non-U.S.
commercial loans of $1.7 billion and $1.9 billion and
commercial real estate loans of $79 million and
$90 million at December 31, 2010 and 2009. See
Note 23 Fair Value Option to the
Consolidated Financial Statements for additional information on
the fair value option.
|
Bank of America
2010 83
Nonperforming commercial loans and leases as a percentage of
outstanding commercial loans and leases were 3.32 percent
(3.35 percent excluding loans accounted for under the fair
value option) and 3.98 percent (4.00 percent excluding
loans accounted for under the fair value option) at
December 31, 2010 and 2009. Accruing commercial loans and
leases past due 90 days or more as a percentage of
outstanding commercial loans and leases were 0.21 percent
(0.22 percent excluding loans accounted for under
the fair value option) and 0.34 percent (0.32 percent
excluding loans accounted for under the fair value option) at
December 31, 2010 and 2009.
Table 35 presents net charge-offs and related ratios for our
commercial loans and leases for 2010 and 2009. Commercial real
estate net charge-offs for 2010 declined in the homebuilder
portfolio and in certain segments of the non-homebuilder
portfolio.
Table
35 Commercial
Net Charge-offs and Related Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Charge-offs
|
|
|
Net Charge-off Ratios
(1)
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
U.S.
commercial (2)
|
|
$
|
881
|
|
|
$
|
2,190
|
|
|
|
0.50
|
%
|
|
|
1.09
|
%
|
Commercial real estate
|
|
|
2,017
|
|
|
|
2,702
|
|
|
|
3.37
|
|
|
|
3.69
|
|
Commercial lease financing
|
|
|
57
|
|
|
|
195
|
|
|
|
0.27
|
|
|
|
0.89
|
|
Non-U.S.
commercial
|
|
|
111
|
|
|
|
537
|
|
|
|
0.39
|
|
|
|
1.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,066
|
|
|
|
5,624
|
|
|
|
1.07
|
|
|
|
1.72
|
|
U.S. small business commercial
|
|
|
1,918
|
|
|
|
2,886
|
|
|
|
12.00
|
|
|
|
15.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
$
|
4,984
|
|
|
$
|
8,510
|
|
|
|
1.64
|
|
|
|
2.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Net charge-off ratios are
calculated as net charge-offs divided by average outstanding
loans and leases excluding loans accounted for under the fair
value option.
|
(2) |
|
Excludes U.S. small business
commercial loans.
|
Table 36 presents commercial credit exposure by type for
utilized, unfunded and total binding committed credit exposure.
Commercial utilized credit exposure includes SBLCs, financial
guarantees, bankers acceptances and commercial letters of
credit for which the Corporation is legally bound to advance
funds under prescribed conditions, during a specified period.
Although funds have not yet been advanced, these exposure types
are considered utilized for credit risk management purposes.
Total commercial committed credit exposure decreased
$68.1 billion, or eight percent, at December 31, 2010
compared to December 31, 2009 driven primarily by
reductions in both funded and unfunded loan and lease exposure.
Total commercial utilized credit exposure decreased
$45.1 billion, or nine percent, at December 31, 2010
compared to December 31, 2009. Utilized
loans and leases declined as businesses continued to
aggressively manage working capital and production capacity,
maintain low inventories and defer capital expenditures as the
economic outlook remained uncertain. Clients also continued to
access the capital markets for their funding needs to reduce
reliance on bank credit facilities. The decline in utilized
loans and leases was also due to the sale of First Republic
effective July 1, 2010 and the transfer of certain
exposures into LHFS partially offset by the increase in conduit
balances related to the adoption of new consolidation guidance.
The utilization rate for loans and leases, letters of credit and
financial guarantees, and bankers acceptances was
57 percent at both December 31, 2010 and 2009.
Table
36 Commercial
Credit Exposure by Type
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
Commercial
Utilized (1)
|
|
|
Commercial Unfunded
(2, 3)
|
|
|
Total Commercial Committed
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Loans and leases
|
|
$
|
296,990
|
|
|
$
|
322,564
|
|
|
$
|
272,172
|
|
|
$
|
298,048
|
|
|
$
|
569,162
|
|
|
$
|
620,612
|
|
Derivative
assets (4)
|
|
|
73,000
|
|
|
|
87,622
|
|
|
|
|
|
|
|
|
|
|
|
73,000
|
|
|
|
87,622
|
|
Standby letters of credit and financial guarantees
|
|
|
62,027
|
|
|
|
67,975
|
|
|
|
1,511
|
|
|
|
1,767
|
|
|
|
63,538
|
|
|
|
69,742
|
|
Debt securities and other
investments (5)
|
|
|
10,216
|
|
|
|
11,754
|
|
|
|
4,546
|
|
|
|
1,508
|
|
|
|
14,762
|
|
|
|
13,262
|
|
Loans
held-for-sale
|
|
|
10,380
|
|
|
|
8,169
|
|
|
|
242
|
|
|
|
781
|
|
|
|
10,622
|
|
|
|
8,950
|
|
Commercial letters of credit
|
|
|
3,372
|
|
|
|
2,958
|
|
|
|
1,179
|
|
|
|
569
|
|
|
|
4,551
|
|
|
|
3,527
|
|
Bankers acceptances
|
|
|
3,706
|
|
|
|
3,658
|
|
|
|
23
|
|
|
|
16
|
|
|
|
3,729
|
|
|
|
3,674
|
|
Foreclosed properties and other
|
|
|
731
|
|
|
|
797
|
|
|
|
|
|
|
|
|
|
|
|
731
|
|
|
|
797
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial credit
exposure
|
|
$
|
460,422
|
|
|
$
|
505,497
|
|
|
$
|
279,673
|
|
|
$
|
302,689
|
|
|
$
|
740,095
|
|
|
$
|
808,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Total commercial utilized exposure
at December 31, 2010 and 2009 includes loans and issued
letters of credit accounted for under the fair value option
including loans outstanding of $3.3 billion and
$4.9 billion and letters of credit with a notional value of
$1.4 billion and $1.7 billion.
|
(2) |
|
Total commercial unfunded exposure
at December 31, 2010 and 2009 includes loan commitments
accounted for under the fair value option with a notional value
of $25.9 billion and $25.3 billion.
|
(3) |
|
Excludes unused business card lines
which are not legally binding.
|
(4) |
|
Derivative assets are carried at
fair value, reflect the effects of legally enforceable master
netting agreements and have been reduced by cash collateral of
$58.3 billion and $51.5 billion at December 31,
2010 and 2009. Not reflected in utilized and committed exposure
is additional derivative collateral held of $17.7 billion
and $16.2 billion which consists primarily of other
marketable securities.
|
(5) |
|
Total commercial committed exposure
consists of $14.2 billion and $9.8 billion of debt
securities and $590 million and $3.5 billion of other
investments at December 31, 2010 and 2009.
|
84 Bank
of America 2010
Table 37 presents commercial utilized reservable criticized
exposure by product type. Criticized exposure corresponds to the
Special Mention, Substandard and Doubtful asset categories as
defined by regulatory authorities. In addition to reservable
loans and leases, excluding those accounted for under the fair
value option, exposure includes SBLCs, financial guarantees,
bankers acceptances and commercial letters of credit for
which we are legally bound to advance funds under prescribed
conditions, during a specified time period. Although funds have
not been advanced, these exposure types are considered utilized
for credit risk management purposes. Total commercial
utilized reservable criticized exposure decreased
$16.1 billion at December 31, 2010 compared to
December 31, 2009, due to decreases across all portfolios,
primarily U.S. commercial and commercial real estate driven
largely by continued paydowns, payoffs and, to a diminishing
extent, charge-offs. Despite the improvements, utilized
reservable criticized levels remain elevated in commercial real
estate. At December 31, 2010, approximately 88 percent
of the loans within commercial utilized reservable criticized
exposure were secured.
Table
37 Commercial
Utilized Reservable Criticized Exposure
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2010
|
|
|
2009
|
|
(Dollars in millions)
|
|
Amount
|
|
|
Percent(1)
|
|
|
Amount
|
|
|
Percent
(1)
|
|
U.S.
commercial (2)
|
|
$
|
17,195
|
|
|
|
7.44
|
%
|
|
$
|
28,259
|
|
|
|
11.77
|
%
|
Commercial real estate
|
|
|
20,518
|
|
|
|
38.88
|
|
|
|
23,804
|
|
|
|
32.13
|
|
Commercial lease financing
|
|
|
1,188
|
|
|
|
5.41
|
|
|
|
2,229
|
|
|
|
10.04
|
|
Non-U.S.
commercial
|
|
|
2,043
|
|
|
|
5.01
|
|
|
|
2,605
|
|
|
|
7.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,944
|
|
|
|
11.81
|
|
|
|
56,897
|
|
|
|
15.26
|
|
U.S. small business commercial
|
|
|
1,677
|
|
|
|
11.37
|
|
|
|
1,789
|
|
|
|
10.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial utilized
reservable criticized exposure
|
|
$
|
42,621
|
|
|
|
11.80
|
|
|
$
|
58,686
|
|
|
|
15.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Percentages are calculated as
commercial utilized reservable criticized exposure divided by
total commercial utilized reservable exposure for each exposure
category.
|
(2) |
|
Excludes U.S. small business
commercial exposure.
|
U.S.
Commercial
At December 31, 2010, 57 percent and 25 percent
of the U.S. commercial loan portfolio, excluding small
business, were included in Global Commercial Banking and
GBAM. The remaining 18 percent was mostly included
in GWIM (business-purpose loans for wealthy clients).
Outstanding U.S. commercial loans, excluding loans
accounted for under the fair value option, decreased
$5.8 billion primarily due to reduced customer demand and
continued client utilization of the capital markets, partially
offset by the adoption of new consolidation guidance which
increased loans by $5.3 billion on January 1, 2010.
Compared to December 31, 2009, reservable criticized
balances and nonperforming loans and leases declined
$11.1 billion and $1.5 billion. The declines were
broad-based in terms of borrowers and industries and were driven
by improved client credit profiles and liquidity. Net
charge-offs decreased $1.3 billion in 2010 compared to 2009.
Commercial Real
Estate
The commercial real estate portfolio is predominantly managed in
Global Commercial Banking and consists of loans made
primarily to public and private developers, homebuilders and
commercial real estate firms. Outstanding loans decreased
$20.1 billion at December 31, 2010 compared
to December 31, 2009 due to portfolio attrition, the sale
of First Republic, transfer of certain assets to LHFS and net
charge-offs. The portfolio remains diversified across property
types and geographic regions. California represents the largest
state concentration at 18 percent of commercial real estate
loans and leases at December 31, 2010. For more information
on geographic and property concentrations, refer to Table 38.
Credit quality for commercial real estate is showing signs of
stabilization; however, we expect that elevated unemployment and
ongoing pressure on vacancy and rental rates will continue to
affect primarily the non-homebuilder portfolio. Compared to
December 31, 2009, nonperforming commercial real estate
loans and foreclosed properties decreased in the homebuilder,
retail and land development property types, partially offset by
an increase in office and multi-use property types. Reservable
criticized balances declined by $3.3 billion primarily due
to stabilization in the homebuilder portfolio and retail and
unsecured segments in the non-homebuilder portfolio, partially
offset by continued deterioration in the multi-family rental and
office property types within the non-homebuilder portfolio. Net
charge-offs decreased $685 million in 2010 compared to 2009
due to declines in the homebuilder portfolio resulting from a
slower rate of declining appraisal values.
Bank of America
2010 85
The table below presents outstanding commercial real estate
loans by geographic region and property type. Commercial real
estate primarily includes commercial loans and leases secured by
non owner-occupied real estate which are dependent on the sale
or lease of the real estate as the primary source of repayment.
The decline in California is due primarily to the sale of First
Republic.
Table
38 Outstanding
Commercial Real Estate Loans
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
By Geographic
Region (1)
|
|
|
|
|
|
|
|
|
California
|
|
$
|
9,012
|
|
|
$
|
14,554
|
|
Northeast
|
|
|
7,639
|
|
|
|
12,089
|
|
Southwest
|
|
|
6,169
|
|
|
|
8,641
|
|
Southeast
|
|
|
5,806
|
|
|
|
7,019
|
|
Midwest
|
|
|
5,301
|
|
|
|
6,662
|
|
Florida
|
|
|
3,649
|
|
|
|
4,589
|
|
Illinois
|
|
|
2,811
|
|
|
|
4,527
|
|
Midsouth
|
|
|
2,627
|
|
|
|
3,459
|
|
Northwest
|
|
|
2,243
|
|
|
|
3,097
|
|
Non-U.S.
|
|
|
2,515
|
|
|
|
2,994
|
|
Other (2)
|
|
|
1,701
|
|
|
|
1,906
|
|
|
|
|
|
|
|
|
|
|
Total outstanding commercial
real estate
loans (3)
|
|
$
|
49,473
|
|
|
$
|
69,537
|
|
|
|
|
|
|
|
|
|
|
By Property Type
|
|
|
|
|
|
|
|
|
Office
|
|
$
|
9,688
|
|
|
$
|
12,511
|
|
Multi-family rental
|
|
|
7,721
|
|
|
|
11,169
|
|
Shopping centers/retail
|
|
|
7,484
|
|
|
|
9,519
|
|
Industrial/warehouse
|
|
|
5,039
|
|
|
|
5,852
|
|
Homebuilder (4)
|
|
|
4,299
|
|
|
|
7,250
|
|
Multi-use
|
|
|
4,266
|
|
|
|
5,924
|
|
Hotels/motels
|
|
|
2,650
|
|
|
|
6,946
|
|
Land and land development
|
|
|
2,376
|
|
|
|
3,215
|
|
Other (5)
|
|
|
5,950
|
|
|
|
7,151
|
|
|
|
|
|
|
|
|
|
|
Total outstanding commercial
real estate
loans (3)
|
|
$
|
49,473
|
|
|
$
|
69,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Distribution is based on geographic
location of collateral.
|
(2) |
|
Includes unsecured outstandings to
real estate investment trusts and national home builders whose
portfolios of properties span multiple geographic regions and
properties in the states of Colorado, Utah, Hawaii, Wyoming and
Montana.
|
(3) |
|
Includes commercial real estate
loans accounted for under the fair value option of
$79 million and $90 million at December 31, 2010
and 2009.
|
(4) |
|
Homebuilder includes condominiums
and residential land.
|
(5) |
|
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.
|
During 2010, we continued to see stabilization in the
homebuilder portfolio. Certain portions of the non-homebuilder
portfolio remain most at-risk as occupancy rates, rental rates
and commercial property prices remain under pressure. We have
adopted a number of proactive risk mitigation initiatives to
reduce utilized and potential exposure in the commercial real
estate portfolios.
86 Bank
of America 2010
The tables below present commercial real estate credit quality
data by non-homebuilder and homebuilder property types. The
homebuilder portfolio includes condominiums and other
residential real estate.
Table
39
Commercial
Real Estate Credit Quality Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
Nonperforming
|
|
|
|
|
|
|
Loans and
|
|
|
|
|
|
|
|
|
|
Foreclosed
|
|
|
Utilized Reservable
|
|
|
|
Properties (1)
|
|
|
Criticized Exposure
(2)
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Commercial real
estate non-homebuilder
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office
|
|
$
|
1,061
|
|
|
$
|
729
|
|
|
$
|
3,956
|
|
|
$
|
3,822
|
|
Multi-family rental
|
|
|
500
|
|
|
|
546
|
|
|
|
2,940
|
|
|
|
2,496
|
|
Shopping centers/retail
|
|
|
1,000
|
|
|
|
1,157
|
|
|
|
2,837
|
|
|
|
3,469
|
|
Industrial/warehouse
|
|
|
420
|
|
|
|
442
|
|
|
|
1,878
|
|
|
|
1,757
|
|
Multi-use
|
|
|
483
|
|
|
|
416
|
|
|
|
1,316
|
|
|
|
1,578
|
|
Hotels/motels
|
|
|
139
|
|
|
|
160
|
|
|
|
1,191
|
|
|
|
1,140
|
|
Land and land development
|
|
|
820
|
|
|
|
968
|
|
|
|
1,420
|
|
|
|
1,657
|
|
Other (3)
|
|
|
168
|
|
|
|
417
|
|
|
|
1,604
|
|
|
|
2,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-homebuilder
|
|
|
4,591
|
|
|
|
4,835
|
|
|
|
17,142
|
|
|
|
18,129
|
|
Commercial real
estate homebuilder
|
|
|
1,963
|
|
|
|
3,228
|
|
|
|
3,376
|
|
|
|
5,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real
estate
|
|
$
|
6,554
|
|
|
$
|
8,063
|
|
|
$
|
20,518
|
|
|
$
|
23,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes commercial foreclosed
properties of $725 million and $777 million at
December 31, 2010 and 2009.
|
(2) |
|
Utilized reservable criticized
exposure corresponds to the Special Mention, Substandard and
Doubtful asset categories defined by regulatory authorities.
This includes loans, excluding those accounted for under the
fair value option, SBLCs and bankers acceptances.
|
(3) |
|
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.
|
Table
40 Commercial
Real Estate Net Charge-offs and Related Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Charge-offs
|
|
|
Net Charge-off Ratios
(1)
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Commercial real
estate non-homebuilder
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office
|
|
$
|
273
|
|
|
$
|
249
|
|
|
|
2.49
|
%
|
|
|
2.01
|
%
|
Multi-family rental
|
|
|
116
|
|
|
|
217
|
|
|
|
1.21
|
|
|
|
1.96
|
|
Shopping centers/retail
|
|
|
318
|
|
|
|
239
|
|
|
|
3.56
|
|
|
|
2.30
|
|
Industrial/warehouse
|
|
|
59
|
|
|
|
82
|
|
|
|
1.07
|
|
|
|
1.34
|
|
Multi-use
|
|
|
143
|
|
|
|
146
|
|
|
|
2.92
|
|
|
|
2.58
|
|
Hotels/motels
|
|
|
45
|
|
|
|
5
|
|
|
|
1.02
|
|
|
|
0.08
|
|
Land and land development
|
|
|
377
|
|
|
|
286
|
|
|
|
13.04
|
|
|
|
8.00
|
|
Other (2)
|
|
|
220
|
|
|
|
140
|
|
|
|
3.14
|
|
|
|
1.72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-homebuilder
|
|
|
1,551
|
|
|
|
1,364
|
|
|
|
2.86
|
|
|
|
2.13
|
|
Commercial real
estate homebuilder
|
|
|
466
|
|
|
|
1,338
|
|
|
|
8.26
|
|
|
|
14.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real
estate
|
|
$
|
2,017
|
|
|
$
|
2,702
|
|
|
|
3.37
|
|
|
|
3.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Net charge-off ratios are
calculated as net charge-offs divided by average outstanding
loans excluding loans accounted for under the fair value option.
|
(2) |
|
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.
|
At December 31, 2010, we had total committed
non-homebuilder exposure of $64.2 billion compared to
$84.4 billion at December 31, 2009, with the decrease
due to the sale of First Republic, repayments and net
charge-offs. Non-homebuilder nonperforming loans and foreclosed
properties were $4.6 billion, or 10.08 percent of
total non-homebuilder loans and foreclosed properties at
December 31, 2010 compared to $4.8 billion, or
7.73 percent, at December 31, 2009. Non-homebuilder
utilized reservable criticized exposure decreased to
$17.1 billion, or 35.55 percent, at December 31,
2010 compared to $18.1 billion, or 27.27 percent, at
December 31, 2009. The decrease in criticized exposure was
primarily in the retail and unsecured segments, with the ratio
increasing due to declining loan balances. For the
non-homebuilder portfolio, net charge-offs increased
$187 million for 2010 compared to 2009. The changes were
concentrated in land development and retail.
At December 31, 2010, we had committed homebuilder exposure
of $6.0 billion compared to $10.4 billion at
December 31, 2009 of which $4.3 billion and
$7.3 billion were funded secured loans. The decline in
homebuilder committed exposure was due to repayments, net
charge-offs,
reductions in new home construction and continued risk
mitigation initiatives. At December 31, 2010, homebuilder
nonperforming loans and foreclosed properties declined
$1.3 billion due to repayments, net charge-offs, fewer risk
rating downgrades and a slowdown in the rate of home price
declines compared to December 31, 2009. Homebuilder
utilized reservable criticized exposure decreased by
$2.3 billion to $3.4 billion due to repayments and net
charge-offs. The nonperforming loans, leases and foreclosed
properties and the utilized reservable criticized ratios for the
homebuilder portfolio were 42.80 percent and
74.27 percent at December 31, 2010 compared to
42.16 percent and 74.44 percent at December 31,
2009. Net charge-offs for the homebuilder portfolio decreased
$872 million in 2010 compared to 2009.
At December 31, 2010 and 2009, the commercial real estate
loan portfolio included $19.1 billion and
$27.4 billion of funded construction and land development
loans that were originated to fund the construction
and/or
rehabilitation of commercial properties. This portfolio is
mostly secured and diversified across property types and
geographies but faces significant challenges in the current
housing and rental markets. Weak rental
Bank of America
2010 87
demand and cash flows, along with declining property valuations
have resulted in elevated levels of reservable criticized
exposure, nonperforming loans and foreclosed properties, and net
charge-offs. Reservable criticized construction and land
development loans totaled $10.5 billion and
$13.9 billion at December 31, 2010 and 2009.
Nonperforming construction and land development loans and
foreclosed properties totaled $4.0 billion and
$5.2 billion at December 31, 2010 and 2009. During a
propertys construction phase, interest income is typically
paid from interest reserves that are established at the
inception of the loan. As construction is completed and the
property is put into service, these interest reserves are
depleted and interest begins to be paid from operating cash
flows. Loans continue to be classified as construction loans
until they are refinanced. We do not recognize interest income
on nonperforming loans regardless of the existence of an
interest reserve.
Non-U.S.
Commercial
The
non-U.S. commercial
loan portfolio is managed primarily in GBAM. Outstanding
loans, excluding loans accounted for under the fair value
option, showed growth from client demand driven by regional
economic conditions and the positive impact of our initiatives
in Asia and other emerging markets. Net charge-offs decreased
$426 million in 2010 compared to 2009 due to stabilization
in the portfolio. For additional information on the
non-U.S. commercial
portfolio, refer to
Non-U.S. Portfolio
beginning on page 94.
U.S. Small
Business Commercial
The U.S. small business commercial loan portfolio is
comprised of business card and small business loans managed in
Global Card Services and Global Commercial
Banking. U.S. small business commercial net charge-offs
decreased $968 million in 2010 compared to 2009. Although
losses remain
elevated, the reduction in net charge-offs was driven by lower
levels of delinquencies and bankruptcies resulting from
U.S. economic improvement as well as the reduction of
higher risk vintages and the impact of higher quality
originations. Of the U.S. small business commercial net
charge-offs for 2010, 79 percent were credit card-related
products compared to 81 percent during 2009.
Commercial Loans
Carried at Fair Value
The portfolio of commercial loans accounted for under the fair
value option is managed primarily in GBAM. Outstanding
commercial loans accounted for under the fair value option
decreased $1.6 billion to an aggregate fair value of
$3.3 billion at December 31, 2010 compared to
December 31, 2009 due primarily to reduced corporate
borrowings under bank credit facilities. We recorded net losses
of $89 million resulting from new originations, loans being
paid off at par value and changes in the fair value of the loan
portfolio during 2010 compared to net gains of $515 million
during 2009. These amounts were primarily attributable to
changes in instrument-specific credit risk and were largely
offset by gains or losses from hedging activities.
In addition, unfunded lending commitments and letters of credit
had an aggregate fair value of $866 million and
$950 million at December 31, 2010 and 2009 and were
recorded in accrued expenses and other liabilities. The
associated aggregate notional amount of unfunded lending
commitments and letters of credit accounted for under the fair
value option were $27.3 billion and $27.0 billion at
December 31, 2010 and 2009. Net gains resulting from new
originations, terminations and changes in the fair value of
commitments and letters of credit of $172 million were
recorded during 2010 compared to net gains of $1.4 billion
for 2009. These gains were primarily attributable to changes in
instrument-specific credit risk.
88 Bank
of America 2010
Nonperforming
Commercial Loans, Leases and Foreclosed Properties
Activity
The table below presents the nonperforming commercial loans,
leases and foreclosed properties activity during 2010 and 2009.
The $2.9 billion decrease at December 31, 2010
compared to December 31, 2009 was driven by paydowns,
payoffs and charge-offs in the commercial real estate and
U.S. commercial portfolios. Approximately 95 percent
of commercial
nonperforming loans, leases and foreclosed properties are
secured and approximately 40 percent are contractually
current. In addition, commercial nonperforming loans are carried
at approximately 68 percent of their unpaid principal
balance before consideration of the allowance for loan and lease
losses as the carrying value of these loans has been reduced to
the estimated net realizable value.
Table
41 Nonperforming
Commercial Loans, Leases and Foreclosed Properties Activity
(1,
2)
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
Nonperforming loans and leases,
January 1
|
|
$
|
12,703
|
|
|
$
|
6,497
|
|
|
|
|
|
|
|
|
|
|
Additions to nonperforming loans and leases:
|
|
|
|
|
|
|
|
|
Merrill Lynch balance, January 1, 2009
|
|
|
|
|
|
|
402
|
|
New nonaccrual loans and leases
|
|
|
7,809
|
|
|
|
16,190
|
|
Advances
|
|
|
330
|
|
|
|
339
|
|
Reductions in nonperforming loans and leases:
|
|
|
|
|
|
|
|
|
Paydowns and payoffs
|
|
|
(3,938
|
)
|
|
|
(3,075
|
)
|
Sales
|
|
|
(841
|
)
|
|
|
(630
|
)
|
Returns to performing
status (3)
|
|
|
(1,607
|
)
|
|
|
(461
|
)
|
Charge-offs (4)
|
|
|
(3,221
|
)
|
|
|
(5,626
|
)
|
Transfers to foreclosed properties
|
|
|
(1,045
|
)
|
|
|
(857
|
)
|
Transfers to loans
held-for-sale
|
|
|
(354
|
)
|
|
|
(76
|
)
|
|
|
|
|
|
|
|
|
|
Total net additions (reductions) to nonperforming loans and
leases
|
|
|
(2,867
|
)
|
|
|
6,206
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming loans and
leases, December 31
|
|
|
9,836
|
|
|
|
12,703
|
|
|
|
|
|
|
|
|
|
|
Foreclosed properties, January
1
|
|
|
777
|
|
|
|
321
|
|
|
|
|
|
|
|
|
|
|
Additions to foreclosed properties:
|
|
|
|
|
|
|
|
|
New foreclosed properties
|
|
|
818
|
|
|
|
857
|
|
Reductions in foreclosed properties:
|
|
|
|
|
|
|
|
|
Sales
|
|
|
(780
|
)
|
|
|
(310
|
)
|
Write-downs
|
|
|
(90
|
)
|
|
|
(91
|
)
|
|
|
|
|
|
|
|
|
|
Total net additions (reductions) to foreclosed properties
|
|
|
(52
|
)
|
|
|
456
|
|
|
|
|
|
|
|
|
|
|
Total foreclosed properties,
December 31
|
|
|
725
|
|
|
|
777
|
|
|
|
|
|
|
|
|
|
|
Nonperforming commercial loans,
leases and foreclosed properties, December 31
|
|
$
|
10,561
|
|
|
$
|
13,480
|
|
|
|
|
|
|
|
|
|
|
Nonperforming commercial loans and leases as a percentage of
outstanding commercial loans and
leases (5)
|
|
|
3.35
|
%
|
|
|
4.00
|
%
|
Nonperforming commercial loans, leases and foreclosed properties
as a percentage of outstanding commercial loans,
leases and foreclosed
properties (5)
|
|
|
3.59
|
|
|
|
4.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Balances do not include
nonperforming LHFS of $1.5 billion and $4.5 billion at
December 31, 2010 and 2009.
|
(2) |
|
Includes U.S. small business
commercial activity.
|
(3) |
|
Commercial loans and leases may be
restored to performing status when all principal and interest is
current and full repayment of the remaining contractual
principal and interest is expected or when the loan otherwise
becomes well-secured and is in the process of collection. TDRs
are generally classified as performing after a sustained period
of demonstrated payment performance.
|
(4) |
|
Business card loans are not
classified as nonperforming; therefore, the charge-offs on these
loans have no impact on nonperforming activity and accordingly
are excluded from this table.
|
(5) |
|
Outstanding commercial loans and
leases exclude loans accounted for under the fair value option.
|
At December 31, 2010, the total commercial TDR balance was
$1.2 billion. Nonperforming TDRs were $952 million and
are included in Table 41. Nonperforming TDRs increased
$466 million while performing TDRs increased
$147 million during 2010.
U.S. commercial TDRs were $356 million, an increase of
$60 million for the year ended December 31, 2010.
Nonperforming U.S. commercial TDRs decreased
$52 million during 2010, while performing TDRs excluded
from nonperforming loans in Table 41 increased $112 million.
At December 31, 2010, the commercial real estate TDR
balance was $815 million, an increase of $547 million
during 2010. Nonperforming TDRs increased $524 million
during the year, while performing TDRs increased
$23 million.
At December 31, 2010 the
non-U.S. commercial
TDR balance was $19 million, an increase of
$6 million. Nonperforming TDRs decreased $6 million
during the year, while performing TDRs increased
$12 million.
Industry
Concentrations
Table 42 presents commercial committed and utilized credit
exposure by industry and the total net credit default protection
purchased to cover the funded and unfunded portions of certain
credit exposures. Our commercial
credit exposure is diversified across a broad range of
industries. The decline in commercial committed exposure of
$68.1 billion from December 31, 2009 to
December 31, 2010 was broad-based across most industries.
Industry limits are used internally to manage industry
concentrations and are based on committed exposures and capital
usage that are allocated on an
industry-by-industry
basis. A risk management framework is in place to set and
approve industry limits, as well as to provide ongoing
monitoring. Managements Credit Risk Committee (CRC)
oversees industry limit governance.
Diversified financials, our largest industry concentration,
experienced a decrease in committed exposure of
$25.8 billion, or 24 percent, at December 31,
2010 compared to December 31, 2009. This decrease was
driven primarily by a reduction in exposure to conduits tied to
the consumer finance industry.
Real estate, our second largest industry concentration,
experienced a decrease in committed exposure of
$21.1 billion, or 23 percent, at December 31,
2010 compared to December 31, 2009 due primarily to
portfolio attrition. Real estate construction and land
development exposure represented 27 percent of the total
real estate industry committed exposure at December 31,
2010. For more information on the commercial real estate and
related portfolios, refer to Commercial Real Estate beginning on
page 85.
Bank of America
2010 89
The $11.8 billion, or 34 percent, decline in
individuals and trusts committed exposure was largely due to the
unwinding of two derivative transactions. Committed exposure in
the banking industry increased $6.3 billion, or 27 percent,
at December 31, 2010 compared to December 31, 2009
primarily due to increases in both traded products and loan
exposure as a result of momentum from growth initiatives. The
decline of $4.5 billion, or 10 percent, in consumer
services was concentrated in gaming and restaurants. Committed
exposure for the commercial services and supplies industry
declined $4.1 billion, or 12 percent, primarily due to
reduced loan demand and the sale of First Republic.
The recent economic downturn has had a residual effect on debt
issued by state and local municipalities and certain exposures
to these municipalities. While historically default rates were
low, stress on the municipalities financials due to the
economic downturn has increased the potential for defaults in
the near term. As part of our overall and ongoing risk
management processes, we continually monitor these exposures
through a rigorous review process. Additionally, internal
communications surrounding certain at-risk counterparties
and/or
sectors are regularly circulated ensuring exposure levels are
compliant with established concentration guidelines.
Monoline and
Related Exposure
Monoline exposure is reported in the insurance industry and
managed under insurance portfolio industry limits. Direct loan
exposure to monolines consisted of revolvers in the amount of
$51 million and $41 million at December 31, 2010
and 2009.
We have indirect exposure to monolines primarily in the form of
guarantees supporting our loans, investment portfolios,
securitizations and credit-enhanced securities as part of our
public finance business and other selected products. Such
indirect exposure exists when we purchase credit protection
from monolines to hedge all or a portion of the credit risk on
certain credit exposures including loans and CDOs. We underwrite
our public finance exposure by evaluating the underlying
securities.
We also have indirect exposure to monolines, primarily in the
form of guarantees supporting our mortgage and other loan sales.
Indirect exposure may exist when credit protection was purchased
from monolines to hedge all or a portion of the credit risk on
certain mortgage and other loan exposures. A loss may occur when
we are required to repurchase a loan and the market value of the
loan has declined or we are required to indemnify or provide
recourse for a guarantors loss. For additional information
regarding our exposure to representations and warranties, see
Note 9 Representations and Warranties
Obligations and Corporate Guarantees to the Consolidated
Financial Statements and Representations and Warranties
beginning on page 52. For additional information regarding
monolines, see Note 14 Commitments and
Contingencies to the Consolidated Financial Statements.
Monoline derivative credit exposure at December 31, 2010
had a notional value of $38.4 billion compared to
$42.6 billion at December 31, 2009.
Mark-to-market
monoline derivative credit exposure was $9.2 billion at
December 31, 2010 compared to $11.1 billion at
December 31, 2009 with the decrease driven by positive
valuation adjustments on legacy assets and terminated monoline
contracts. At December 31, 2010, the counterparty credit
valuation adjustment related to monoline derivative exposure was
$5.3 billion compared to $6.0 billion at
December 31, 2009. This reduced our net
mark-to-market
exposure to $3.9 billion at December 31, 2010 compared
to $5.1 billion at December 31, 2009. At
December 31, 2010, approximately 62 percent of this
exposure was related to one monoline compared to approximately
54 percent at December 31, 2009. We do not hold
collateral against these derivative exposures. For more
information on our monoline exposure, see GBAM beginning
on page 45.
90 Bank
of America 2010
We also have indirect exposure to monolines as we invest in
securities where the issuers have purchased wraps (i.e.,
insurance). For example, municipalities and corporations
purchase insurance in order to reduce their cost of borrowing.
If the ratings agencies downgrade the monolines, the credit
rating of the bond may fall and may have an adverse impact on
the market value of the security. In the case of default, we
first look to the underlying
securities and then to recovery on the purchased insurance.
Investments in securities issued by municipalities and
corporations with purchased wraps at December 31, 2010 and
2009 had a notional value of $2.4 billion and
$5.0 billion.
Mark-to-market
investment exposure was $2.2 billion at December 31,
2010 compared to $4.9 billion at December 31, 2009.
Table
42 Commercial
Credit Exposure by
Industry (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
Commercial Utilized
|
|
|
Total Commercial Committed
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Diversified financials
|
|
$
|
55,196
|
|
|
$
|
69,259
|
|
|
$
|
83,248
|
|
|
$
|
109,079
|
|
Real
estate (2)
|
|
|
58,531
|
|
|
|
75,049
|
|
|
|
72,004
|
|
|
|
93,147
|
|
Government and public education
|
|
|
44,131
|
|
|
|
44,151
|
|
|
|
59,594
|
|
|
|
61,998
|
|
Healthcare equipment and services
|
|
|
30,420
|
|
|
|
29,584
|
|
|
|
47,569
|
|
|
|
46,870
|
|
Capital goods
|
|
|
21,940
|
|
|
|
23,911
|
|
|
|
46,087
|
|
|
|
48,184
|
|
Retailing
|
|
|
24,660
|
|
|
|
23,671
|
|
|
|
43,950
|
|
|
|
42,414
|
|
Consumer services
|
|
|
24,759
|
|
|
|
28,704
|
|
|
|
39,694
|
|
|
|
44,214
|
|
Materials
|
|
|
15,873
|
|
|
|
16,373
|
|
|
|
33,046
|
|
|
|
33,233
|
|
Commercial services and supplies
|
|
|
20,056
|
|
|
|
23,892
|
|
|
|
30,517
|
|
|
|
34,646
|
|
Banks
|
|
|
26,831
|
|
|
|
20,299
|
|
|
|
29,667
|
|
|
|
23,384
|
|
Food, beverage and tobacco
|
|
|
14,777
|
|
|
|
14,812
|
|
|
|
28,126
|
|
|
|
28,079
|
|
Energy
|
|
|
9,765
|
|
|
|
9,605
|
|
|
|
26,328
|
|
|
|
23,619
|
|
Insurance, including monolines
|
|
|
17,263
|
|
|
|
20,613
|
|
|
|
24,417
|
|
|
|
28,033
|
|
Utilities
|
|
|
6,990
|
|
|
|
9,217
|
|
|
|
24,207
|
|
|
|
25,316
|
|
Individuals and trusts
|
|
|
18,278
|
|
|
|
25,941
|
|
|
|
22,899
|
|
|
|
34,698
|
|
Media
|
|
|
11,611
|
|
|
|
14,020
|
|
|
|
20,619
|
|
|
|
22,886
|
|
Transportation
|
|
|
12,070
|
|
|
|
13,724
|
|
|
|
18,436
|
|
|
|
20,101
|
|
Pharmaceuticals and biotechnology
|
|
|
3,859
|
|
|
|
2,875
|
|
|
|
11,009
|
|
|
|
10,626
|
|
Technology hardware and equipment
|
|
|
4,373
|
|
|
|
3,416
|
|
|
|
10,932
|
|
|
|
10,516
|
|
Religious and social organizations
|
|
|
8,409
|
|
|
|
8,920
|
|
|
|
10,823
|
|
|
|
11,374
|
|
Software and services
|
|
|
3,837
|
|
|
|
3,216
|
|
|
|
9,531
|
|
|
|
9,359
|
|
Telecommunication services
|
|
|
3,823
|
|
|
|
3,558
|
|
|
|
9,321
|
|
|
|
9,478
|
|
Consumer durables and apparel
|
|
|
4,297
|
|
|
|
4,409
|
|
|
|
8,836
|
|
|
|
9,998
|
|
Food and staples retailing
|
|
|
3,222
|
|
|
|
3,680
|
|
|
|
6,161
|
|
|
|
6,562
|
|
Automobiles and components
|
|
|
2,090
|
|
|
|
2,379
|
|
|
|
5,941
|
|
|
|
6,359
|
|
Other
|
|
|
13,361
|
|
|
|
10,219
|
|
|
|
17,133
|
|
|
|
14,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial credit exposure
by industry
|
|
$
|
460,422
|
|
|
$
|
505,497
|
|
|
$
|
740,095
|
|
|
$
|
808,186
|
|
Net credit default protection purchased on total
commitments (3)
|
|
|
|
|
|
|
|
|
|
$
|
(20,118
|
)
|
|
$
|
(19,025
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes U.S. small business
commercial exposure.
|
(2) |
|
Industries are viewed from a
variety of perspectives to best isolate the perceived risks. For
purposes of this table, the real estate industry is defined
based on the borrowers or counterparties primary
business activity using operating cash flows and primary source
of repayment as key factors.
|
(3) |
|
Represents net notional credit
protection purchased. See Risk Mitigation below for additional
information.
|
Risk
Mitigation
We purchase credit protection to cover the funded portion as
well as the unfunded portion of certain credit exposures. To
lower the cost of obtaining our desired credit protection
levels, credit exposure may be added within an industry,
borrower or counterparty group by selling protection.
At December 31, 2010 and 2009, net notional credit default
protection purchased in our credit derivatives portfolio to
hedge our funded and unfunded exposures for which we elected the
fair value option, as well as certain other credit exposures,
was $20.1 billion and $19.0 billion. The
mark-to-market
effects, including the cost of net credit default protection
hedging our
credit exposure, resulted in net losses of $546 million
during 2010 compared to net losses of $2.9 billion in 2009.
The average
Value-at-Risk
(VaR) for these credit derivative hedges was $53 million
for 2010 compared to $76 million for 2009. The average VaR
for the related credit exposure was $65 million in 2010
compared to $130 million in 2009. There is a
diversification effect between the net credit default protection
hedging our credit exposure and the related credit exposure such
that the combined average VaR was $41 million for 2010,
compared to $89 million for 2009. Refer to Trading Risk
Management beginning on page 100 for a description of our
VaR calculation for the market-based trading portfolio.
Bank of America
2010 91
Tables 43 and 44 present the maturity profiles and the credit
exposure debt ratings of the net credit default protection
portfolio at December 31, 2010 and 2009. The distribution
of debt ratings for net notional credit default protection
purchased is shown as a negative amount and the net notional
credit protection sold is shown as a positive amount.
Table
43 Net
Credit Default Protection by Maturity Profile
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2010
|
|
|
2009
|
|
Less than or equal to one year
|
|
|
14
|
%
|
|
|
16
|
%
|
Greater than one year and less than or equal to five years
|
|
|
80
|
|
|
|
81
|
|
Greater than five years
|
|
|
6
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
Total net credit default
protection
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
Table
44 Net
Credit Default Protection by Credit Exposure Debt Rating
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2010
|
|
|
2009
|
|
|
|
Net
|
|
|
Percent of
|
|
|
Net
|
|
|
Percent of
|
|
(Dollars in millions)
|
|
Notional
|
|
|
Total
|
|
|
Notional
|
|
|
Total
|
|
Ratings (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AAA
|
|
$
|
|
|
|
|
0.0
|
%
|
|
$
|
15
|
|
|
|
(0.1
|
)%
|
AA
|
|
|
(188
|
)
|
|
|
0.9
|
|
|
|
(344
|
)
|
|
|
1.8
|
|
A
|
|
|
(6,485
|
)
|
|
|
32.2
|
|
|
|
(6,092
|
)
|
|
|
32.0
|
|
BBB
|
|
|
(7,731
|
)
|
|
|
38.4
|
|
|
|
(9,573
|
)
|
|
|
50.4
|
|
BB
|
|
|
(2,106
|
)
|
|
|
10.5
|
|
|
|
(2,725
|
)
|
|
|
14.3
|
|
B
|
|
|
(1,260
|
)
|
|
|
6.3
|
|
|
|
(835
|
)
|
|
|
4.4
|
|
CCC and below
|
|
|
(762
|
)
|
|
|
3.8
|
|
|
|
(1,691
|
)
|
|
|
8.9
|
|
NR (3)
|
|
|
(1,586
|
)
|
|
|
7.9
|
|
|
|
2,220
|
|
|
|
(11.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net credit default
protection
|
|
$
|
(20,118
|
)
|
|
|
100.0
|
%
|
|
$
|
(19,025
|
)
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Ratings are refreshed on a
quarterly basis.
|
(2) |
|
The Corporation considers ratings
of BBB- or higher to meet the definition of investment grade.
|
(3) |
|
In addition to names which have not
been rated, NR includes $(1.5) billion and
$2.3 billion in net credit default swaps index positions at
December 31, 2010 and 2009. While index positions are
principally investment grade, credit default swaps indices
include names in and across each of the ratings categories.
|
In addition to our net notional credit default protection
purchased to cover the funded and unfunded portion of certain
credit exposures, credit derivatives are used for market-making
activities for clients and establishing positions intended to
profit from directional or relative value changes. We execute
the majority of our credit derivative trades in the OTC market
with large, multinational financial institutions, including
broker/dealers and, to a lesser degree, with a variety of other
investors. Because these transactions are executed in the OTC
market, we are subject to settlement risk. We are also
subject to credit risk in the event that these counterparties
fail to perform under the terms of these contracts. In most
cases, credit derivative transactions are executed on a daily
margin basis. Therefore, events such as a credit downgrade,
depending on the ultimate rating level, or a breach of credit
covenants would typically require an increase in the amount of
collateral required of the counterparty, where applicable,
and/or allow
us to take additional protective measures such as early
termination of all trades.
92 Bank
of America 2010
The notional amounts presented in Table 45 represent the total
contract/notional amount of credit derivatives outstanding and
include both purchased and written credit derivatives. The
credit risk amounts are measured as the net replacement cost, in
the event the counterparties with contracts in a gain position
to us fail to perform under the terms of those contracts. For
information on the performance risk of our written credit
derivatives, see Note 4 Derivatives to
the Consolidated Financial Statements.
The credit risk amounts discussed on page 92 and noted in the
table below take into consideration the effects of legally
enforceable master netting agreements while amounts disclosed in
Note 4 Derivatives to the Consolidated
Financial Statements are shown on a gross basis. Credit risk
reflects the potential benefit from offsetting exposure to
non-credit derivative products with the same counterparties that
may be netted upon the occurrence of certain events, thereby
reducing the Corporations overall exposure.
Table
45 Credit
Derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2010
|
|
|
2009
|
|
|
|
Contract/
|
|
|
|
|
|
Contract/
|
|
|
|
|
(Dollars in millions)
|
|
Notional
|
|
|
Credit Risk
|
|
|
Notional
|
|
|
Credit Risk
|
|
Purchased credit
derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit default swaps
|
|
$
|
2,184,703
|
|
|
$
|
18,150
|
|
|
$
|
2,800,539
|
|
|
$
|
25,964
|
|
Total return swaps/other
|
|
|
26,038
|
|
|
|
1,013
|
|
|
|
21,685
|
|
|
|
1,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total purchased credit
derivatives
|
|
|
2,210,741
|
|
|
|
19,163
|
|
|
|
2,822,224
|
|
|
|
27,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written credit
derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit default swaps
|
|
|
2,133,488
|
|
|
|
n/a
|
|
|
|
2,788,760
|
|
|
|
n/a
|
|
Total return swaps/other
|
|
|
22,474
|
|
|
|
n/a
|
|
|
|
33,109
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total written credit
derivatives
|
|
|
2,155,962
|
|
|
|
n/a
|
|
|
|
2,821,869
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total credit
derivatives
|
|
$
|
4,366,703
|
|
|
$
|
19,163
|
|
|
$
|
5,644,093
|
|
|
$
|
27,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
n/a = not applicable
Counterparty
Credit Risk Valuation Adjustments
We record a counterparty credit risk valuation adjustment on
certain derivative assets, including our credit default
protection purchased, in order to properly reflect the credit
quality of the counterparty. These adjustments are necessary as
the market quotes on derivatives do not fully reflect the credit
risk of the counterparties to the derivative assets. We consider
collateral and legally enforceable master netting agreements
that mitigate our credit exposure to each counterparty in
determining the counterparty credit risk valuation adjustment.
All or a portion of these counterparty credit risk valuation
adjustments are reversed or otherwise adjusted in future periods
due to changes in the value of the derivative contract,
collateral and creditworthiness of the counterparty.
During 2010 and 2009, credit valuation gains (losses) of
$731 million and $3.1 billion ($(8) million and
$1.7 billion, net of hedges) were recognized in trading
account profits (losses) for counterparty credit risk related to
derivative assets. For additional information on gains or losses
related to the counterparty credit risk on derivative assets,
refer to Note 4 Derivatives to the
Consolidated Financial Statements. For information on our
monoline counterparty credit risk, see the discussions beginning
on pages 47 and 90, and for information on our CDO-related
counterparty credit risk, see GBAM beginning on
page 45.
Bank of America
2010 93
Non-U.S.
Portfolio
Our
non-U.S. credit
and trading portfolios are subject to country risk. We define
country risk as the risk of loss from unfavorable economic and
political conditions, currency fluctuations, social instability
and changes in government policies. A risk management framework
is in place to measure, monitor and manage
non-U.S. risk
and exposures. Management oversight of country risk, including
cross-border risk, is provided by the Regional Risk Committee, a
subcommittee of the CRC.
The following table sets forth total
non-U.S. exposure
broken out by region at December 31, 2010 and 2009.
Non-U.S. exposure
includes credit
exposure net of local liabilities, securities and other
investments issued by or domiciled in countries other than the
U.S. Total
non-U.S. exposure
can be adjusted for externally guaranteed loans outstanding and
certain collateral types. Exposures which are subject to
external guarantees are reported under the country of the
guarantor. Exposures with tangible collateral are reflected in
the country where the collateral is held. For securities
received, other than cross-border resale agreements,
outstandings are assigned to the domicile of the issuer of the
securities. Resale agreements are generally presented based on
the domicile of the counterparty consistent with FFIEC reporting
requirements.
Table
46 Regional
Non-U.S.
Exposure (1, 2,
3)
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
Europe
|
|
$
|
148,078
|
|
|
$
|
170,796
|
|
Asia Pacific
|
|
|
73,255
|
|
|
|
47,645
|
|
Latin America
|
|
|
14,848
|
|
|
|
19,516
|
|
Middle East and Africa
|
|
|
3,688
|
|
|
|
3,906
|
|
Other
|
|
|
22,188
|
|
|
|
15,799
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
262,057
|
|
|
$
|
257,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Local funding or liabilities are
subtracted from local exposures consistent with FFIEC reporting
requirements.
|
(2) |
|
Derivative assets included in the
exposure amounts have been reduced by the amount of cash
collateral applied of $44.2 billion and $34.3 billion
at December 31, 2010 and 2009.
|
(3) |
|
Generally, resale agreements are
presented based on the domicile of the counterparty, consistent
with FFIEC reporting requirements. Cross-border resale
agreements where the underlying securities are U.S. Treasury
securities, in which case the domicile is the U.S., are excluded
from this presentation.
|
Our total
non-U.S. exposure
was $262.1 billion at December 31, 2010, an increase
of $4.4 billion from December 31, 2009. Our
non-U.S. exposure
remained concentrated in Europe which accounted for
$148.1 billion, or 57 percent, of total
non-U.S. exposure.
The European exposure was mostly in Western Europe and was
distributed across a variety of industries. The decrease of
$22.7 billion in Europe was primarily driven by our efforts
to reduce exposure in the peripheral Eurozone countries and sale
or maturity of securities in the U.K. Select European countries
are further detailed in Table 49. Asia Pacific was our second
largest
non-U.S. exposure
at $73.3 billion, or 28 percent. The
$25.6 billion increase in Asia Pacific was predominantly
driven by a required change in accounting for our CCB
investment, increased securities exposure in Japan, and
increased securities and loan exposure in other Asia Pacific
emerging markets. For more information on the required change in
accounting for our CCB investment, refer to
Note 5 Securities to the Consolidated
Financial Statements. Latin America accounted for
$14.8 billion, or six percent, of total
non-U.S. exposure.
The $4.7 billion decrease in Latin America was primarily
driven by the sale of our equity investments in Itaú
Unibanco and Santander. Other
non-U.S. exposure
was $22.2 billion at
December 31, 2010, an increase of $6.4 billion from
the prior year resulting from an increase in Canadian
cross-border loans. For more information on our Asia Pacific and
Latin America exposure, see
non-U.S. exposure
to selected countries defined as emerging markets on
page 95.
As shown in Table 47, the United Kingdom, France and China had
total cross-border exposure greater than one percent of our
total assets and were the only countries where total
cross-border exposure exceeded one percent of our total assets
at December 31, 2010. At December 31, 2010, Canada and
Japan had total cross-border exposure of $17.9 billion and
$17.0 billion representing 0.79 percent and
0.75 percent of total assets. Canada and Japan were the
only other countries that had total cross-border exposure that
exceeded 0.75 percent of our total assets at
December 31, 2010.
Exposure includes cross-border claims by our
non-U.S. offices
including loans, acceptances, time deposits placed, trading
account assets, securities, derivative assets, other
interest-earning investments and other monetary assets. Amounts
also include unused commitments, SBLCs, commercial letters of
credit and formal guarantees. Sector definitions are consistent
with FFIEC reporting requirements for preparing the Country
Exposure Report.
Table
47 Total
Cross-border Exposure Exceeding One Percent of Total Assets
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exposure as a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross-border
|
|
|
Percentage of
|
|
(Dollars in millions)
|
|
December 31
|
|
|
Public Sector
|
|
|
Banks
|
|
|
Private Sector
|
|
|
Exposure
|
|
|
Total Assets
|
|
United Kingdom
|
|
|
2010
|
|
|
$
|
101
|
|
|
$
|
5,544
|
|
|
$
|
32,354
|
|
|
$
|
37,999
|
|
|
|
1.68
|
%
|
|
|
|
2009
|
|
|
|
157
|
|
|
|
8,478
|
|
|
|
52,080
|
|
|
|
60,715
|
|
|
|
2.73
|
|
France (2)
|
|
|
2010
|
|
|
|
978
|
|
|
|
8,110
|
|
|
|
15,685
|
|
|
|
24,773
|
|
|
|
1.09
|
|
China (2)
|
|
|
2010
|
|
|
|
777
|
|
|
|
21,617
|
|
|
|
1,534
|
|
|
|
23,928
|
|
|
|
1.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
At December 31, 2010, total
cross-border exposure for the United Kingdom, France and China
included derivatives exposure of $2.3 billion,
$1.7 billion and $870 million, respectively, which has
been reduced by the amount of cash collateral applied of
$13.0 billion, $6.9 billion and $130 million,
respectively. Derivative assets were collateralized by other
marketable securities of $96 million, $26 million and
$71 million, respectively, at December 31, 2010.
|
(2) |
|
At December 31, 2009, total
cross-border exposure for France and China was
$17.4 billion and $12.1 billion, representing
0.78 percent and 0.54 percent of total assets.
|
94 Bank
of America 2010
As presented in Table 48,
non-U.S. exposure
to borrowers or counterparties in emerging markets increased
$14.5 billion to $65.1 billion at December 31,
2010 compared to $50.6 billion at December 31, 2009.
The increase was due to an increase in the Asia Pacific region
which was partially offset by a
decrease in Latin America.
Non-U.S. exposure
to borrowers or counterparties in emerging markets represented
25 percent and 20 percent of total
non-U.S. exposure
at December 31, 2010 and 2009.
Table
48 Selected
Emerging Markets
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Emerging
|
|
|
Increase
|
|
|
|
Loans and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local Country
|
|
|
Market
|
|
|
(Decrease)
|
|
|
|
Leases, and
|
|
|
|
|
|
|
|
|
Securities/
|
|
|
Total Cross-
|
|
|
Exposure Net
|
|
|
Exposure at
|
|
|
From
|
|
|
|
Loan
|
|
|
Other
|
|
|
Derivative
|
|
|
Other
|
|
|
border
|
|
|
of Local
|
|
|
December 31,
|
|
|
December 31,
|
|
(Dollars in millions)
|
|
Commitments
|
|
|
Financing (2)
|
|
|
Assets (3)
|
|
|
Investments (4)
|
|
|
Exposure
(5)
|
|
|
Liabilities (6)
|
|
|
2010
|
|
|
2009
|
|
Region/Country
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China
|
|
$
|
1,064
|
|
|
$
|
1,237
|
|
|
$
|
870
|
|
|
$
|
20,757
|
|
|
$
|
23,928
|
|
|
$
|
|
|
|
$
|
23,928
|
|
|
$
|
11,865
|
|
India
|
|
|
3,292
|
|
|
|
1,590
|
|
|
|
607
|
|
|
|
2,013
|
|
|
|
7,502
|
|
|
|
766
|
|
|
|
8,268
|
|
|
|
2,108
|
|
South Korea
|
|
|
621
|
|
|
|
1,156
|
|
|
|
585
|
|
|
|
2,009
|
|
|
|
4,371
|
|
|
|
908
|
|
|
|
5,279
|
|
|
|
268
|
|
Singapore
|
|
|
560
|
|
|
|
75
|
|
|
|
442
|
|
|
|
1,469
|
|
|
|
2,546
|
|
|
|
|
|
|
|
2,546
|
|
|
|
1,678
|
|
Hong Kong
|
|
|
349
|
|
|
|
516
|
|
|
|
242
|
|
|
|
935
|
|
|
|
2,042
|
|
|
|
|
|
|
|
2,042
|
|
|
|
940
|
|
Taiwan
|
|
|
283
|
|
|
|
64
|
|
|
|
84
|
|
|
|
692
|
|
|
|
1,123
|
|
|
|
732
|
|
|
|
1,855
|
|
|
|
1,126
|
|
Thailand
|
|
|
20
|
|
|
|
17
|
|
|
|
39
|
|
|
|
569
|
|
|
|
645
|
|
|
|
24
|
|
|
|
669
|
|
|
|
482
|
|
Other Asia
Pacific (7)
|
|
|
298
|
|
|
|
32
|
|
|
|
145
|
|
|
|
239
|
|
|
|
714
|
|
|
|
|
|
|
|
714
|
|
|
|
(130
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Asia Pacific
|
|
|
6,487
|
|
|
|
4,687
|
|
|
|
3,014
|
|
|
|
28,683
|
|
|
|
42,871
|
|
|
|
2,430
|
|
|
|
45,301
|
|
|
|
18,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Latin America
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brazil
|
|
|
1,033
|
|
|
|
293
|
|
|
|
560
|
|
|
|
2,355
|
|
|
|
4,241
|
|
|
|
1,565
|
|
|
|
5,806
|
|
|
|
(3,648
|
)
|
Mexico
|
|
|
1,917
|
|
|
|
305
|
|
|
|
303
|
|
|
|
1,860
|
|
|
|
4,385
|
|
|
|
|
|
|
|
4,385
|
|
|
|
(1,086
|
)
|
Chile
|
|
|
954
|
|
|
|
132
|
|
|
|
401
|
|
|
|
38
|
|
|
|
1,525
|
|
|
|
1
|
|
|
|
1,526
|
|
|
|
365
|
|
Colombia
|
|
|
132
|
|
|
|
460
|
|
|
|
10
|
|
|
|
75
|
|
|
|
677
|
|
|
|
|
|
|
|
677
|
|
|
|
481
|
|
Peru
|
|
|
231
|
|
|
|
150
|
|
|
|
16
|
|
|
|
121
|
|
|
|
518
|
|
|
|
|
|
|
|
518
|
|
|
|
248
|
|
Other Latin
America (7)
|
|
|
74
|
|
|
|
167
|
|
|
|
10
|
|
|
|
456
|
|
|
|
707
|
|
|
|
153
|
|
|
|
860
|
|
|
|
(154
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Latin America
|
|
|
4,341
|
|
|
|
1,507
|
|
|
|
1,300
|
|
|
|
4,905
|
|
|
|
12,053
|
|
|
|
1,719
|
|
|
|
13,772
|
|
|
|
(3,794
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Middle East and Africa
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United Arab Emirates
|
|
|
967
|
|
|
|
6
|
|
|
|
154
|
|
|
|
49
|
|
|
|
1,176
|
|
|
|
|
|
|
|
1,176
|
|
|
|
456
|
|
Bahrain
|
|
|
78
|
|
|
|
|
|
|
|
3
|
|
|
|
1,079
|
|
|
|
1,160
|
|
|
|
|
|
|
|
1,160
|
|
|
|
27
|
|
South Africa
|
|
|
406
|
|
|
|
7
|
|
|
|
56
|
|
|
|
102
|
|
|
|
571
|
|
|
|
|
|
|
|
571
|
|
|
|
(577
|
)
|
Other Middle East and
Africa (7)
|
|
|
441
|
|
|
|
55
|
|
|
|
132
|
|
|
|
153
|
|
|
|
781
|
|
|
|
|
|
|
|
781
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Middle East and
Africa
|
|
|
1,892
|
|
|
|
68
|
|
|
|
345
|
|
|
|
1,383
|
|
|
|
3,688
|
|
|
|
|
|
|
|
3,688
|
|
|
|
(81
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central and Eastern
Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Russian Federation
|
|
|
264
|
|
|
|
133
|
|
|
|
35
|
|
|
|
104
|
|
|
|
536
|
|
|
|
|
|
|
|
536
|
|
|
|
(133
|
)
|
Turkey
|
|
|
269
|
|
|
|
165
|
|
|
|
14
|
|
|
|
52
|
|
|
|
500
|
|
|
|
|
|
|
|
500
|
|
|
|
112
|
|
Other Central and Eastern
Europe (7)
|
|
|
148
|
|
|
|
210
|
|
|
|
277
|
|
|
|
618
|
|
|
|
1,253
|
|
|
|
|
|
|
|
1,253
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Central and Eastern
Europe
|
|
|
681
|
|
|
|
508
|
|
|
|
326
|
|
|
|
774
|
|
|
|
2,289
|
|
|
|
|
|
|
|
2,289
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total emerging market
exposure
|
|
$
|
13,401
|
|
|
$
|
6,770
|
|
|
$
|
4,985
|
|
|
$
|
35,745
|
|
|
$
|
60,901
|
|
|
$
|
4,149
|
|
|
$
|
65,050
|
|
|
$
|
14,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
There is no generally accepted
definition of emerging markets. The definition that we use
includes all countries in Asia Pacific excluding Japan,
Australia and New Zealand; all countries in Latin America
excluding Cayman Islands and Bermuda; all countries in Middle
East and Africa; and all countries in Central and Eastern
Europe. At December 31, 2010, there was $460 million
in emerging market exposure accounted for under the fair value
option, none at December 31, 2009.
|
(2) |
|
Includes acceptances, due froms,
SBLCs, commercial letters of credit and formal guarantees.
|
(3) |
|
Derivative assets are carried at
fair value and have been reduced by the amount of cash
collateral applied of $1.2 billion and $557 million at
December 31, 2010 and 2009. At December 31, 2010 and
2009, there were $408 million and $616 million of
other marketable securities collateralizing derivative assets.
|
(4) |
|
Generally, cross-border resale
agreements are presented based on the domicile of the
counterparty, consistent with FFIEC reporting requirements.
Cross-border resale agreements where the underlying securities
are U.S. Treasury securities, in which case the domicile is the
U.S., are excluded from this presentation.
|
(5) |
|
Cross-border exposure includes
amounts payable to the Corporation by borrowers or
counterparties with a country of residence other than the one in
which the credit is booked, regardless of the currency in which
the claim is denominated, consistent with FFIEC reporting
requirements.
|
(6) |
|
Local country exposure includes
amounts payable to the Corporation by borrowers with a country
of residence in which the credit is booked regardless of the
currency in which the claim is denominated. Local funding or
liabilities are subtracted from local exposures consistent with
FFIEC reporting requirements. Total amount of available local
liabilities funding local country exposure at December 31,
2010 was $15.7 billion compared to $17.6 billion at
December 31, 2009. Local liabilities at December 31,
2010 in Asia Pacific, Latin America, and Middle East and Africa
were $15.1 billion, $451 million and
$193 million, respectively, of which $7.9 billion was
in Singapore, $1.8 billion in both China and Hong Kong,
$1.2 billion in India, $802 million in South Korea and
$573 million in Taiwan. There were no other countries with
available local liabilities funding local country exposure
greater than $500 million.
|
(7) |
|
No country included in Other Asia
Pacific, Other Latin America, Other Middle East and Africa, and
Other Central and Eastern Europe had total
non-U.S.
exposure of more than $500 million.
|
At December 31, 2010 and 2009, 70 percent and
53 percent of the emerging markets exposure was in Asia
Pacific. Emerging markets exposure in Asia Pacific increased by
$18.3 billion primarily driven by our equity investment in
CCB, which accounted for $10.6 billion, or 58 percent,
of the increase in Asia, and increases in loans in India and
securities in Singapore. The increase in our equity investment
in CCB was driven by a required change in accounting. For more
information on our CCB investment, refer to
Note 5 Securities to the Consolidated
Financial Statements.
At December 31, 2010 and 2009, 21 percent and
35 percent of the emerging markets exposure was in Latin
America. Latin America emerging markets exposure decreased
$3.8 billion driven by the sale of our equity investments
in Itaú Unibanco and Santander, which accounted for
$5.4 billion and $2.5 billion at December 31,
2009, partially offset by increased loans across the region. For
more information on these sales, refer to
Note 5 Securities to the Consolidated
Financial Statements.
At December 31, 2010 and 2009, six percent and seven
percent of the emerging markets exposure was in Middle East and
Africa, with a decrease of
Bank of America
2010 95
$81 million primarily driven by a decrease in securities in
South Africa, offset by increases in loans in the United Arab
Emirates and South Africa, and securities in Bahrain. At
December 31, 2010 and 2009, three percent and five percent
of the emerging markets exposure was in Central and Eastern
Europe.
Certain European countries, including Greece, Ireland, Italy,
Portugal and Spain, are currently experiencing varying degrees
of financial stress. These countries have had certain credit
ratings lowered by ratings services during 2010. Risks from the
debt crisis in Europe could result in a disruption of the
financial markets which could have a detrimental impact on the
global economic recovery and sovereign and non-sovereign debt in
these countries. The table below shows our direct sovereign and
non-sovereign exposures, excluding consumer credit card
exposure, in these countries at December 31, 2010. The
total exposure to these countries was $15.8 billion at
December 31, 2010 compared to $25.5 billion at
December 31, 2009. The $9.7 billion decrease since
December 31, 2009 was driven primarily by the sale or
maturity of sovereign and non-sovereign securities in all
countries.
Table
49 Selected
European Countries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local
|
|
|
Total Non-
|
|
|
|
|
|
|
Loans and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Country
|
|
|
U.S.
|
|
|
|
|
|
|
Leases, and
|
|
|
|
|
|
|
|
|
Securities/
|
|
|
Total Cross-
|
|
|
Exposure Net
|
|
|
Exposure at
|
|
|
|
|
|
|
Loan
|
|
|
Other
|
|
|
Derivative
|
|
|
Other
|
|
|
border
|
|
|
of Local
|
|
|
December 31,
|
|
|
Credit Default
|
|
(Dollars in millions)
|
|
Commitments
|
|
|
Financing (1)
|
|
|
Assets (2)
|
|
|
Investments (3)
|
|
|
Exposure (4)
|
|
|
Liabilities (5)
|
|
|
2010
|
|
|
Protection (6)
|
|
Greece
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sovereign
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
103
|
|
|
$
|
103
|
|
|
$
|
|
|
|
$
|
103
|
|
|
$
|
(23
|
)
|
Non-sovereign
|
|
|
260
|
|
|
|
2
|
|
|
|
43
|
|
|
|
69
|
|
|
|
374
|
|
|
|
|
|
|
|
374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Greece
|
|
$
|
260
|
|
|
$
|
2
|
|
|
$
|
43
|
|
|
$
|
172
|
|
|
$
|
477
|
|
|
$
|
|
|
|
$
|
477
|
|
|
$
|
(23
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ireland
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sovereign
|
|
$
|
7
|
|
|
$
|
326
|
|
|
$
|
22
|
|
|
$
|
52
|
|
|
$
|
407
|
|
|
$
|
|
|
|
$
|
407
|
|
|
$
|
|
|
Non-sovereign
|
|
|
1,641
|
|
|
|
524
|
|
|
|
152
|
|
|
|
267
|
|
|
|
2,584
|
|
|
|
|
|
|
|
2,584
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Ireland
|
|
$
|
1,648
|
|
|
$
|
850
|
|
|
$
|
174
|
|
|
$
|
319
|
|
|
$
|
2,991
|
|
|
$
|
|
|
|
$
|
2,991
|
|
|
$
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Italy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sovereign
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,247
|
|
|
$
|
21
|
|
|
$
|
1,268
|
|
|
$
|
1
|
|
|
$
|
1,269
|
|
|
$
|
(1,136
|
)
|
Non-sovereign
|
|
|
967
|
|
|
|
639
|
|
|
|
560
|
|
|
|
1,310
|
|
|
|
3,476
|
|
|
|
1,792
|
|
|
|
5,268
|
|
|
|
(67
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Italy
|
|
$
|
967
|
|
|
$
|
639
|
|
|
$
|
1,807
|
|
|
$
|
1,331
|
|
|
$
|
4,744
|
|
|
$
|
1,793
|
|
|
$
|
6,537
|
|
|
$
|
(1,203
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portugal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sovereign
|
|
$
|
|
|
|
$
|
|
|
|
$
|
36
|
|
|
$
|
|
|
|
$
|
36
|
|
|
$
|
|
|
|
$
|
36
|
|
|
$
|
(19
|
)
|
Non-sovereign
|
|
|
65
|
|
|
|
55
|
|
|
|
26
|
|
|
|
344
|
|
|
|
490
|
|
|
|
|
|
|
|
490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Portugal
|
|
$
|
65
|
|
|
$
|
55
|
|
|
$
|
62
|
|
|
$
|
344
|
|
|
$
|
526
|
|
|
$
|
|
|
|
$
|
526
|
|
|
$
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sovereign
|
|
$
|
25
|
|
|
$
|
|
|
|
$
|
36
|
|
|
$
|
|
|
|
$
|
61
|
|
|
$
|
40
|
|
|
$
|
101
|
|
|
$
|
(57
|
)
|
Non-sovereign
|
|
|
1,028
|
|
|
|
40
|
|
|
|
382
|
|
|
|
1,872
|
|
|
|
3,322
|
|
|
|
1,835
|
|
|
|
5,157
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Spain
|
|
$
|
1,053
|
|
|
$
|
40
|
|
|
$
|
418
|
|
|
$
|
1,872
|
|
|
$
|
3,383
|
|
|
$
|
1,875
|
|
|
$
|
5,258
|
|
|
$
|
(64
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sovereign
|
|
$
|
32
|
|
|
$
|
326
|
|
|
$
|
1,341
|
|
|
$
|
176
|
|
|
$
|
1,875
|
|
|
$
|
41
|
|
|
$
|
1,916
|
|
|
$
|
(1,235
|
)
|
Non-sovereign
|
|
|
3,961
|
|
|
|
1,260
|
|
|
|
1,163
|
|
|
|
3,862
|
|
|
|
10,246
|
|
|
|
3,627
|
|
|
|
13,873
|
|
|
|
(89
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total selected European
exposure
|
|
$
|
3,993
|
|
|
$
|
1,586
|
|
|
$
|
2,504
|
|
|
$
|
4,038
|
|
|
$
|
12,121
|
|
|
$
|
3,668
|
|
|
$
|
15,789
|
|
|
$
|
(1,324
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes acceptances, due froms,
SBLCs, commercial letters of credit and formal guarantees.
|
(2) |
|
Derivative assets are carried at
fair value and have been reduced by the amount of cash
collateral applied of $2.9 billion at December 31,
2010. At December 31, 2010, there was $41 million of
other marketable securities collateralizing derivative assets.
|
(3) |
|
Generally, cross-border resale
agreements are presented based on the domicile of the
counterparty, consistent with FFIEC reporting requirements.
Cross-border resale agreements where the underlying securities
are U.S. Treasury securities, in which case the domicile is the
U.S., are excluded from this presentation.
|
(4) |
|
Cross-border exposure includes
amounts payable to the Corporation by borrowers or
counterparties with a country of residence other than the one in
which the credit is booked, regardless of the currency in which
the claim is denominated, consistent with FFIEC reporting
requirements.
|
(5) |
|
Local country exposure includes
amounts payable to the Corporation by borrowers with a country
of residence in which the credit is booked regardless of the
currency in which the claim is denominated. Local funding or
liabilities are subtracted from local exposures consistent with
FFIEC reporting requirements. Of the $838 million applied
for exposure reduction, $459 million was in Italy,
$208 million in Ireland, $137 million in Spain and
$34 million in Greece.
|
(6) |
|
Represents net notional credit
default protection purchased to hedge counterparty risk.
|
Provision
for Credit Losses
The provision for credit losses decreased $20.1 billion to
$28.4 billion for 2010 compared to 2009. The provision for
credit losses for the consumer portfolio decreased
$11.4 billion to $25.4 billion for 2010 compared to
2009 reflecting lower delinquencies and decreasing bankruptcies
in the consumer credit card and unsecured consumer lending
portfolios resulting from an improving economic outlook. Also
contributing to the improvement were lower reserve additions in
consumer real estate due to improving portfolio trends. The
addition to reserves in the consumer PCI loan portfolios
reflected further reductions in expected principal cash flows of
$2.2 billion for 2010 compared to $3.5 billion a year
earlier. Consumer net charge-offs of $29.4 billion for 2010
were $4.2 billion higher than the prior year due to the
impact of the adoption of new
consolidation guidance resulting in the consolidation of certain
securitized loan balances in our consumer credit card and home
equity portfolios, offset by benefits from economic improvement
during the year which impacted all consumer portfolios.
The provision for credit losses for the commercial portfolio,
including the provision for unfunded lending commitments,
decreased $8.7 billion to $3.0 billion for 2010
compared to 2009 due to improved borrower credit profiles,
stabilization of appraisal values in the commercial real estate
portfolio and lower delinquencies and bankruptcies in the small
business portfolio. These same factors resulted in a decrease in
commercial net charge-offs of $3.5 billion to
$5.0 billion in 2010 compared to 2009.
96 Bank
of America 2010
Allowance
for Credit Losses
Allowance for
Loan and Lease Losses
The allowance for loan and lease losses is allocated based on
two components, described below, based on whether a loan or
lease is performing or whether it has been individually
identified as being impaired or has been modified as a TDR. We
evaluate the adequacy of the allowance for loan and lease losses
based on the total of these two components. The allowance for
loan and lease losses excludes loans
held-for-sale
and loans accounted for under the fair value option, as fair
value adjustments related to loans measured at fair value
include a credit risk component.
The first component of the allowance for loan and lease losses
covers nonperforming commercial loans, consumer real estate
loans that have been modified in a TDR, renegotiated credit
card, unsecured consumer and small business loans. These loans
are subject to impairment measurement primarily at the loan
level based either on the present value of expected future cash
flows discounted at the loans original effective interest
rate, or discounted at the portfolio average contractual annual
percentage rate, excluding renegotiated and promotionally priced
loans for the renegotiated TDR portfolio. Impairment measurement
may also be based upon the collateral value or the loans
observable market price. When the determined or measured values
are lower than the carrying value of the loan, impairment is
recognized. For purposes of computing this specific loss
component of the allowance, larger impaired loans are evaluated
individually and smaller impaired loans are evaluated as a pool
using historical loss experience for the respective product
types and risk ratings of the loans.
The second component of the allowance for loan and lease losses
covers performing consumer and commercial loans and leases which
have incurred losses that are not yet individually identifiable.
The allowance for consumer and certain homogeneous commercial
loan and lease products is based on aggregated portfolio
evaluations, generally by product type. Loss forecast models are
utilized that consider a variety of factors including, but not
limited to, historical loss experience, estimated defaults or
foreclosures based on portfolio trends, delinquencies, economic
trends and credit scores. Our consumer real estate loss forecast
model estimates the portion of our homogeneous loans that will
default based on individual loan attributes, the most
significant of which are refreshed LTV or CLTV, borrower credit
score as well as vintage and geography, all of which are further
broken down into current delinquency status. Incorporating
refreshed LTV and CLTV into our probability of default allows us
to factor the impact of changes in home prices into our
allowance for loan and lease losses. These loss forecast models
are updated on a quarterly basis to incorporate information
reflecting the current economic environment. Included within
this second component of the allowance for loan and lease losses
and determined separately from the procedures outlined above are
reserves which are maintained to cover uncertainties that affect
our estimate of probable losses including domestic and global
economic uncertainty and large single name defaults. We evaluate
the adequacy of the allowance for loan and lease losses based on
the combined total of these two components. As of
December 31, 2010, inputs to the loss forecast process
resulted in reductions in the allowance for most consumer
portfolios.
The allowance for commercial loan and lease losses is
established by product type after analyzing historical loss
experience by internal risk rating, current economic conditions,
industry performance trends, geographic or obligor
concentrations within each portfolio segment, and any other
pertinent information. The statistical models for commercial
loans are generally updated annually and utilize the
Corporations historical database of actual defaults and
other data. The loan risk ratings and composition of the
commercial portfolios are updated at least quarterly to
incorporate the most recent data reflecting the current economic
environment. For risk-rated commercial loans, we estimate the
probability of default (PD) and the loss given
default (LGD) based on the Corporations historical
experience of defaults and credit losses. Factors considered
when assessing the internal risk rating include the value of the
underlying collateral, if applicable; the industry in which the
obligor operates; the obligors liquidity and other
financial indicators; and other quantitative and qualitative
factors relevant to the obligors credit risk. When
estimating the allowance for loan and lease losses, management
relies not only on models derived from historical experience but
also on its judgment in considering the effect on probable
losses inherent in the portfolios due to the current
macroeconomic environment and trends, inherent uncertainty in
models, and other qualitative factors. As of December 31,
2010, updates to the loan risk ratings and composition resulted
in reductions in the allowance for all commercial portfolios.
We monitor differences between estimated and actual incurred
loan and lease losses. This monitoring process includes periodic
assessments by senior management of loan and lease portfolios
and the models used to estimate incurred losses in those
portfolios.
Additions to, or reductions of, the allowance for loan and lease
losses generally are recorded through charges or credits to the
provision for credit losses. Credit exposures deemed to be
uncollectible are charged against the allowance for loan and
lease losses. Recoveries of previously charged off amounts are
credited to the allowance for loan and lease losses.
The allowance for loan and lease losses for the consumer
portfolio as presented in Table 51 was $34.7 billion at
December 31, 2010, an increase of $6.9 billion from
December 31, 2009. This increase was primarily related to
$10.8 billion of reserves recorded on January 1, 2010
in connection with the adoption of new consolidation guidance,
and higher reserve additions in the non-impaired consumer real
estate portfolios during the first half of 2010 amid continued
stress in the housing market. These items were partially offset
by reserve reductions primarily due to improving credit quality
in the Global Card Services consumer portfolios. With
respect to the consumer PCI loan portfolios, updates to our
expected principal cash flows resulted in an increase in
reserves through provision of $2.2 billion for 2010,
primarily in the home equity and discontinued real estate
portfolios compared to $3.5 billion in 2009.
The allowance for commercial loan and lease losses was
$7.2 billion at December 31, 2010, a $2.2 billion
decrease from December 31, 2009. The decrease was primarily
due to improvements in the U.S. small business commercial
portfolio within Global Card Services due to improved
delinquencies and bankruptcies, as well as in the
U.S. commercial portfolios primarily in Global
Commercial Banking and GBAM, and the commercial real
estate portfolio primarily within Global Commercial Banking
reflecting improved borrower credit profiles as a result of
improving economic conditions.
The allowance for loan and lease losses as a percentage of total
loans and leases outstanding was 4.47 percent at
December 31, 2010 compared to 4.16 percent at
December 31, 2009. The increase in the ratio was mostly due
to consumer reserve increases for securitized loans consolidated
under the new consolidation guidance, which were primarily
credit card loans. The December 31, 2010 and 2009 ratios
above include the impact of the PCI loan portfolio. Excluding
the PCI loan portfolio, the allowance for loan and lease losses
as a percentage of total loans and leases outstanding was
3.94 percent at December 31, 2010 compared to
3.88 percent at December 31, 2009.
Reserve for
Unfunded Lending Commitments
In addition to the allowance for loan and lease losses, we also
estimate probable losses related to unfunded lending commitments
such as letters of credit, financial guarantees and binding loan
commitments, excluding commitments accounted for under the fair
value option. Unfunded lending commitments are subject to the
same assessment as funded loans, including estimates of PD and
LGD. Due to the nature of unfunded commitments, the
Bank of America
2010 97
estimate of probable losses must also consider utilization. To
estimate the portion of these undrawn commitments that is likely
to be drawn by a borrower at the time of estimated default,
analyses of the Corporations historical experience are
applied to the unfunded commitments to estimate the funded
exposure at default (EAD). The expected loss for unfunded
lending commitments is the product of the PD, the LGD and the
EAD, adjusted for any qualitative factors including economic
uncertainty and inherent uncertainty in models.
The reserve for unfunded lending commitments at
December 31, 2010 was $1.2 billion, $299 million
lower than December 31, 2009 primarily driven by accretion
of purchase accounting adjustments on acquired Merrill Lynch
unfunded positions and customer utilizations of previously
unfunded positions.
Table 50 presents a rollforward of the allowance for credit
losses for 2010 and 2009.
Table
50 Allowance
for Credit Losses
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
Allowance for loan and lease
losses, beginning of period, before effect of the January 1
adoption of new consolidation guidance
|
|
$
|
37,200
|
|
|
$
|
23,071
|
|
Allowance related to adoption of new consolidation guidance
|
|
|
10,788
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease
losses, January 1
|
|
|
47,988
|
|
|
|
23,071
|
|
|
|
|
|
|
|
|
|
|
Loans and leases charged
off
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
(3,779
|
)
|
|
|
(4,436
|
)
|
Home equity
|
|
|
(7,059
|
)
|
|
|
(7,205
|
)
|
Discontinued real estate
|
|
|
(77
|
)
|
|
|
(104
|
)
|
U.S. credit card
|
|
|
(13,818
|
)
|
|
|
(6,753
|
)
|
Non-U.S.
credit card
|
|
|
(2,424
|
)
|
|
|
(1,332
|
)
|
Direct/Indirect consumer
|
|
|
(4,303
|
)
|
|
|
(6,406
|
)
|
Other consumer
|
|
|
(320
|
)
|
|
|
(491
|
)
|
|
|
|
|
|
|
|
|
|
Total consumer charge-offs
|
|
|
(31,780
|
)
|
|
|
(26,727
|
)
|
|
|
|
|
|
|
|
|
|
U.S.
commercial (1)
|
|
|
(3,190
|
)
|
|
|
(5,237
|
)
|
Commercial real estate
|
|
|
(2,185
|
)
|
|
|
(2,744
|
)
|
Commercial lease financing
|
|
|
(96
|
)
|
|
|
(217
|
)
|
Non-U.S.
commercial
|
|
|
(139
|
)
|
|
|
(558
|
)
|
|
|
|
|
|
|
|
|
|
Total commercial charge-offs
|
|
|
(5,610
|
)
|
|
|
(8,756
|
)
|
|
|
|
|
|
|
|
|
|
Total loans and leases charged off
|
|
|
(37,390
|
)
|
|
|
(35,483
|
)
|
|
|
|
|
|
|
|
|
|
Recoveries of loans and leases
previously charged off
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
109
|
|
|
|
86
|
|
Home equity
|
|
|
278
|
|
|
|
155
|
|
Discontinued real estate
|
|
|
9
|
|
|
|
3
|
|
U.S. credit card
|
|
|
791
|
|
|
|
206
|
|
Non-U.S.
credit card
|
|
|
217
|
|
|
|
93
|
|
Direct/Indirect consumer
|
|
|
967
|
|
|
|
943
|
|
Other consumer
|
|
|
59
|
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
Total consumer recoveries
|
|
|
2,430
|
|
|
|
1,549
|
|
|
|
|
|
|
|
|
|
|
U.S.
commercial (2)
|
|
|
391
|
|
|
|
161
|
|
Commercial real estate
|
|
|
168
|
|
|
|
42
|
|
Commercial lease financing
|
|
|
39
|
|
|
|
22
|
|
Non-U.S.
commercial
|
|
|
28
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
Total commercial recoveries
|
|
|
626
|
|
|
|
246
|
|
|
|
|
|
|
|
|
|
|
Total recoveries of loans and leases previously charged off
|
|
|
3,056
|
|
|
|
1,795
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs
|
|
|
(34,334
|
)
|
|
|
(33,688
|
)
|
|
|
|
|
|
|
|
|
|
Provision for loan and lease losses
|
|
|
28,195
|
|
|
|
48,366
|
|
Other (3)
|
|
|
36
|
|
|
|
(549
|
)
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses, December 31
|
|
|
41,885
|
|
|
|
37,200
|
|
|
|
|
|
|
|
|
|
|
Reserve for unfunded lending
commitments, January 1
|
|
|
1,487
|
|
|
|
421
|
|
Provision for unfunded lending commitments
|
|
|
240
|
|
|
|
204
|
|
Other (4)
|
|
|
(539
|
)
|
|
|
862
|
|
|
|
|
|
|
|
|
|
|
Reserve for unfunded lending commitments, December 31
|
|
|
1,188
|
|
|
|
1,487
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses,
December 31
|
|
$
|
43,073
|
|
|
$
|
38,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes U.S. small business
commercial charge-offs of $2.0 billion and
$3.0 billion in 2010 and 2009.
|
(2) |
|
Includes U.S. small business
commercial recoveries of $107 million and $65 million
in 2010 and 2009.
|
(3) |
|
The 2009 amount includes a
$750 million reduction in the allowance for loan and lease
losses related to credit card loans of $8.5 billion which
were exchanged for $7.8 billion in
held-to-maturity
debt securities that were issued by the Corporations U.S.
Credit Card Securitization Trust and retained by the Corporation.
|
(4) |
|
The 2010 amount includes the
remaining balance of the acquired Merrill Lynch reserve
excluding those commitments accounted for under the fair value
option, net of accretion, and the impact of funding previously
unfunded positions. All other amounts represent primarily
accretion of the Merrill Lynch purchase accounting adjustment
and the impact of funding previously unfunded positions.
|
n/a = not applicable
98 Bank
of America 2010
Table
50 Allowance
for Credit Losses (continued)
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
Loans and leases outstanding at December
31 (5)
|
|
$
|
937,119
|
|
|
$
|
895,192
|
|
Allowance for loan and lease losses as a percentage of total
loans and leases and outstanding at December
31 (5)
|
|
|
4.47
|
%
|
|
|
4.16
|
%
|
Consumer allowance for loan and lease losses as a percentage of
total consumer loans and leases outstanding at December 31
|
|
|
5.40
|
|
|
|
4.81
|
|
Commercial allowance for loan and lease losses as a percentage
of total commercial loans and leases outstanding at December
31 (5)
|
|
|
2.44
|
|
|
|
2.96
|
|
Average loans and leases
outstanding (5)
|
|
$
|
954,278
|
|
|
$
|
941,862
|
|
Net charge-offs as a percentage of average loans and leases
outstanding (5)
|
|
|
3.60
|
%
|
|
|
3.58
|
%
|
Allowance for loan and lease losses as a percentage of total
nonperforming loans and leases at December 31
(5, 6, 7)
|
|
|
136
|
|
|
|
111
|
|
Ratio of the allowance for loan and lease losses at December 31
to net charge-offs
|
|
|
1.22
|
|
|
|
1.10
|
|
|
|
|
|
|
|
|
|
|
Excluding purchased
credit-impaired
loans: (8)
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses as a percentage of total
loans and leases outstanding at December
31 (5)
|
|
|
3.94
|
%
|
|
|
3.88
|
%
|
Consumer allowance for loan and lease losses as a percentage of
total consumer loans and leases outstanding at December 31
|
|
|
4.66
|
|
|
|
4.43
|
|
Commercial allowance for loan and lease losses as a percentage
of total commercial loans and leases outstanding at December
31 (5)
|
|
|
2.44
|
|
|
|
2.96
|
|
Net charge-offs as a percentage of average loans and leases
outstanding (5)
|
|
|
3.73
|
|
|
|
3.71
|
|
Allowance for loan and lease losses as a percentage of total
nonperforming loans and leases at December 31
(5, 6, 7)
|
|
|
116
|
|
|
|
99
|
|
Ratio of the allowance for loan and lease losses at December 31
to net charge-offs
|
|
|
1.04
|
|
|
|
1.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5) |
|
Outstanding loan and lease balances
and ratios do not include loans accounted for under the fair
value option. Loans accounted for under the fair value option
were $3.3 billion and $4.9 billion at
December 31, 2010 and 2009. Average loans accounted for
under the fair value option were $4.1 billion and
$6.9 billion in 2010 and 2009.
|
(6) |
|
Allowance for loan and lease losses
includes $22.9 billion and $17.7 billion allocated to
products that were excluded from nonperforming loans, leases and
foreclosed properties at December 31, 2010 and 2009.
|
(7) |
|
For more information on our
definition of nonperforming loans, see the discussion beginning
on page 81.
|
(8) |
|
Metrics exclude the impact of
Countrywide consumer PCI loans and Merrill Lynch commercial PCI
loans.
|
For reporting purposes, we allocate the allowance for credit
losses across products. However, the allowance is available to
absorb any credit losses without restriction. Table 51 presents
our allocation by product type.
Table
51 Allocation
of the Allowance for Credit Losses by Product Type
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
January 1,
2010 (1)
|
|
|
December 31, 2009
|
|
|
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
|
|
|
|
Loans and
|
|
|
|
|
|
|
|
|
|
|
|
Loans and
|
|
|
|
|
|
|
Percent
|
|
|
Leases
|
|
|
|
|
|
|
|
|
Percent of
|
|
|
Leases
|
|
(Dollars in millions)
|
|
Amount
|
|
|
of Total
|
|
|
Outstanding (2)
|
|
|
Amount
|
|
|
Amount
|
|
|
Total
|
|
|
Outstanding (2)
|
|
Allowance for loan and lease
losses (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
$
|
4,648
|
|
|
|
11.10
|
%
|
|
|
1.80
|
%
|
|
$
|
4,607
|
|
|
$
|
4,607
|
|
|
|
12.38
|
%
|
|
|
1.90
|
%
|
Home equity
|
|
|
12,934
|
|
|
|
30.88
|
|
|
|
9.37
|
|
|
|
10,733
|
|
|
|
10,160
|
|
|
|
27.31
|
|
|
|
6.81
|
|
Discontinued real estate
|
|
|
1,670
|
|
|
|
3.99
|
|
|
|
12.74
|
|
|
|
989
|
|
|
|
989
|
|
|
|
2.66
|
|
|
|
6.66
|
|
U.S. credit card
|
|
|
10,876
|
|
|
|
25.97
|
|
|
|
9.56
|
|
|
|
15,102
|
|
|
|
6,017
|
|
|
|
16.18
|
|
|
|
12.17
|
|
Non-U.S.
credit card
|
|
|
2,045
|
|
|
|
4.88
|
|
|
|
7.45
|
|
|
|
2,686
|
|
|
|
1,581
|
|
|
|
4.25
|
|
|
|
7.30
|
|
Direct/Indirect consumer
|
|
|
2,381
|
|
|
|
5.68
|
|
|
|
2.64
|
|
|
|
4,251
|
|
|
|
4,227
|
|
|
|
11.36
|
|
|
|
4.35
|
|
Other consumer
|
|
|
161
|
|
|
|
0.38
|
|
|
|
5.67
|
|
|
|
204
|
|
|
|
204
|
|
|
|
0.55
|
|
|
|
6.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer
|
|
|
34,715
|
|
|
|
82.88
|
|
|
|
5.40
|
|
|
|
38,572
|
|
|
|
27,785
|
|
|
|
74.69
|
|
|
|
4.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
commercial (4)
|
|
|
3,576
|
|
|
|
8.54
|
|
|
|
1.88
|
|
|
|
5,153
|
|
|
|
5,152
|
|
|
|
13.85
|
|
|
|
2.59
|
|
Commercial real estate
|
|
|
3,137
|
|
|
|
7.49
|
|
|
|
6.35
|
|
|
|
3,567
|
|
|
|
3,567
|
|
|
|
9.59
|
|
|
|
5.14
|
|
Commercial lease financing
|
|
|
126
|
|
|
|
0.30
|
|
|
|
0.57
|
|
|
|
291
|
|
|
|
291
|
|
|
|
0.78
|
|
|
|
1.31
|
|
Non-U.S.
commercial
|
|
|
331
|
|
|
|
0.79
|
|
|
|
1.03
|
|
|
|
405
|
|
|
|
405
|
|
|
|
1.09
|
|
|
|
1.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
(5)
|
|
|
7,170
|
|
|
|
17.12
|
|
|
|
2.44
|
|
|
|
9,416
|
|
|
|
9,415
|
|
|
|
25.31
|
|
|
|
2.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease
losses
|
|
|
41,885
|
|
|
|
100.00
|
%
|
|
|
4.47
|
|
|
|
47,988
|
|
|
|
37,200
|
|
|
|
100.00
|
%
|
|
|
4.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve for unfunded lending
commitments
|
|
|
1,188
|
|
|
|
|
|
|
|
|
|
|
|
1,487
|
|
|
|
1,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit
losses (6)
|
|
$
|
43,073
|
|
|
|
|
|
|
|
|
|
|
$
|
49,475
|
|
|
$
|
38,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Balances reflect impact of new
consolidation guidance.
|
(2) |
|
Ratios are calculated as allowance
for loan and lease losses as a percentage of loans and leases
outstanding excluding loans accounted for under the fair value
option for each loan and lease category. Loans accounted for
under the fair value option include U.S. commercial loans of
$1.6 billion and $3.0 billion,
non-U.S.
commercial loans of $1.7 billion and $1.9 billion and
commercial real estate loans of $79 million and
$90 million at December 31, 2010 and 2009.
|
(3) |
|
December 31, 2010 is presented
in accordance with new consolidation guidance. December 31,
2009 has not been restated.
|
(4) |
|
Includes allowance for U.S. small
business commercial loans of $1.5 billion and
$2.4 billion at December 31, 2010 and 2009.
|
(5) |
|
Includes allowance for loan and
lease losses for impaired commercial loans of $1.1 billion
and $1.2 billion at December 31, 2010 and 2009.
Included in the $1.1 billion at December 31, 2010 is
$445 million related to U.S. small business commercial
renegotiated TDR loans.
|
(6) |
|
Includes $6.4 billion and
$3.9 billion of allowance for credit losses related to
purchased credit-impaired loans at December 31, 2010 and
2009.
|
Bank of America
2010 99
Market
Risk Management
Market risk is the risk that values of assets and liabilities or
revenues will be adversely affected by changes in market
conditions such as market movements. This risk is inherent in
the financial instruments associated with our operations
and/or
activities including loans, deposits, securities, short-term
borrowings, long-term debt, trading account assets and
liabilities, and derivatives. Market-sensitive assets and
liabilities are generated through loans and deposits associated
with our traditional banking business, customer and other
trading operations, the ALM process, credit risk mitigation
activities and mortgage banking activities. In the event of
market volatility, factors such as underlying market movements
and liquidity have an impact on the results of the Corporation.
Our traditional banking loan and deposit products are nontrading
positions and are generally reported at amortized cost for
assets or the amount owed for liabilities (historical cost).
However, these positions are still subject to changes in
economic value based on varying market conditions, primarily
changes in the levels of interest rates. The risk of adverse
changes in the economic value of our nontrading positions is
managed through our ALM activities. We have elected to account
for certain assets and liabilities under the fair value option.
For further information on the fair value of certain financial
assets and liabilities, see Note 22 Fair
Value Measurements to the Consolidated Financial Statements.
Our trading positions are reported at fair value with changes
currently reflected in income. Trading positions are subject to
various risk factors, which include exposures to interest rates
and foreign exchange rates, as well as mortgage, equity,
commodity, issuer and market liquidity risk factors. We seek to
mitigate these risk exposures by using techniques that encompass
a variety of financial instruments in both the cash and
derivatives markets. The following discusses the key risk
components along with respective risk mitigation techniques.
Interest Rate
Risk
Interest rate risk represents exposures to instruments whose
values vary with the level or volatility of interest rates.
These instruments include, but are not limited to, loans, debt
securities, certain trading-related assets and liabilities,
deposits, borrowings and derivative instruments. Hedging
instruments used to mitigate these risks include derivatives
such as options, futures, forwards and swaps.
Foreign Exchange
Risk
Foreign exchange risk represents exposures to changes in the
values of current holdings and future cash flows denominated in
other currencies. The types of instruments exposed to this risk
include investments in
non-U.S. subsidiaries,
foreign currency-denominated loans and securities, future cash
flows in foreign currencies arising from foreign exchange
transactions, foreign currency-denominated debt and various
foreign exchange derivative instruments whose values fluctuate
with changes in the level or volatility of currency exchange
rates or
non-U.S. interest
rates. Hedging instruments used to mitigate this risk include
foreign exchange options, currency swaps, futures, forwards,
foreign currency-denominated debt and deposits.
Mortgage
Risk
Mortgage risk represents exposures to changes in the value of
mortgage-related instruments. The values of these instruments
are sensitive to prepayment rates, mortgage rates, agency debt
ratings, default, market liquidity, other interest rates,
government participation and interest rate volatility. Our
exposure to these instruments takes several forms. First, we
trade and engage in market-making activities in a variety of
mortgage securities including whole loans, pass-through
certificates, commercial mortgages, and collateralized mortgage
obligations (CMOs) including CDOs using mortgages as
underlying collateral. Second, we originate a variety of MBS
which involves the accumulation of mortgage-related loans in
anticipation of eventual securitization. Third, we may hold
positions in mortgage securities and residential mortgage loans
as part of the ALM portfolio. Fourth, we create MSRs as part of
our mortgage origination activities. See
Note 1 Summary of Significant Accounting
Principles and Note 25 Mortgage
Servicing Rights to the Consolidated Financial Statements
for additional information on MSRs. Hedging instruments used to
mitigate this risk include foreign exchange options, currency
swaps, futures, forwards and foreign currency-denominated debt.
Equity Market
Risk
Equity market risk represents exposures to securities that
represent an ownership interest in a corporation in the form of
domestic and foreign common stock or other equity-linked
instruments. Instruments that would lead to this exposure
include, but are not limited to, the following: common stock,
exchange-traded funds, American Depositary Receipts, convertible
bonds, listed equity options (puts and calls),
over-the-counter
equity options, equity total return swaps, equity index futures
and other equity derivative products. Hedging instruments used
to mitigate this risk include options, futures, swaps,
convertible bonds and cash positions.
Commodity
Risk
Commodity risk represents exposures to instruments traded in the
petroleum, natural gas, power and metals markets. These
instruments consist primarily of futures, forwards, swaps and
options. Hedging instruments used to mitigate this risk include
options, futures and swaps in the same or similar commodity
product, as well as cash positions.
Issuer Credit
Risk
Issuer credit risk represents exposures to changes in the
creditworthiness of individual issuers or groups of issuers. Our
portfolio is exposed to issuer credit risk where the value of an
asset may be adversely impacted by changes in the levels of
credit spreads, by credit migration or by defaults. Hedging
instruments used to mitigate this risk include bonds, credit
default swaps and other credit fixed-income instruments.
Market Liquidity
Risk
Market liquidity risk represents the risk that the level of
expected market activity changes dramatically and, in certain
cases, may even cease to exist. This exposes us to the risk that
we will not be able to transact business and execute trades in
an orderly manner which may impact our results. This impact
could further be exacerbated if expected hedging or pricing
correlations are compromised by the disproportionate demand or
lack of demand for certain instruments. We utilize various risk
mitigating techniques as discussed in more detail below.
Trading
Risk Management
Trading-related revenues represent the amount earned from
trading positions, including market-based net interest income,
in a diverse range of financial instruments and markets. Trading
account assets and liabilities and derivative positions are
reported at fair value. For more information on fair value, see
Note 22 Fair Value Measurements to the
Consolidated Financial Statements. Trading-related revenues can
be volatile and are largely driven by general market conditions
and customer demand. Trading-related revenues are dependent on
the volume and type of transactions, the level of risk assumed,
and the volatility of price and rate movements at any given time
within the ever-changing market environment.
The Global Markets Risk Committee (GRC), chaired by the Global
Markets Risk Executive, has been designated by ALMRC as the
primary governance
100 Bank
of America 2010
authority for Global Markets Risk Management including trading
risk management. The GRCs focus is to take a
forward-looking view of the primary credit and market risks
impacting GBAM and prioritize those that need a proactive
risk mitigation strategy. Market risks that impact lines of
business outside of GBAM are monitored and governed by
their respective governance authorities.
The GRC monitors significant daily revenues and losses by
business and the primary drivers of the revenues or losses.
Thresholds are in place for each of our businesses in order to
determine if the revenue or loss is considered to be significant
for that business. If any of the thresholds are exceeded, an
explanation of the variance is provided to the GRC. The
thresholds are developed in coordination with the respective
risk managers to highlight those revenues or losses that exceed
what is considered to be normal daily income statement
volatility.
The histogram below is a graphic depiction of trading volatility
and illustrates the daily level of trading-related revenue for
the twelve months ended December 31, 2010, as compared with
the twelve months ended December 31, 2009. During the
twelve months ended December 31, 2010, positive
trading-related revenue was recorded for 90 percent of the
trading days of which 75 percent were daily trading gains
of over $25 million, four percent of the trading days had
losses greater than $25 million and the largest loss was
$102 million. This can be compared to the twelve months
ended December 31, 2009, where positive trading-related
revenue was recorded for 88 percent of the trading days of
which 72 percent were daily trading gains of over
$25 million, six percent of the trading days had losses
greater than $25 million and the largest loss was
$100 million.
Histogram
of Daily Trading-related Revenue
To evaluate risk in our trading activities, we focus on the
actual and potential volatility of individual positions as well
as portfolios. VaR is a key statistic used to measure market
risk. In order to manage
day-to-day
risks, VaR is subject to trading limits both for our overall
trading portfolio and within individual businesses. All limit
excesses are communicated to management for review.
A VaR model simulates the value of a portfolio under a range of
hypothetical scenarios in order to generate a distribution of
potential gains and losses. VaR represents the worst loss the
portfolio is expected to experience based on historical trends
with a given level of confidence and depends on the volatility
of the positions in the portfolio and on how strongly their
risks are correlated. Within any VaR model, there are
significant and numerous assumptions that will differ from
company to company. In addition, the accuracy of a VaR model
depends on the availability and quality of historical data for
each of the positions in the portfolio. A VaR model may require
additional modeling assumptions for new products that do not
have extensive historical price data or for illiquid positions
for which accurate daily prices are not consistently available.
A VaR model is an effective tool in estimating ranges of
potential gains and losses on our trading portfolios. There are
however many limitations inherent in a VaR model as it utilizes
historical results over a defined time period to estimate future
performance. Historical results may not always be indicative
of future results and changes in market conditions or in the
composition of the underlying portfolio could have a material
impact on the accuracy of the VaR model. In order for the VaR
model to reflect current market conditions, we update the
historical data underlying our VaR model on a bi-weekly basis
and regularly review the assumptions underlying the model.
We continually review, evaluate and enhance our VaR model so
that it reflects the material risks in our trading portfolio.
Nevertheless, due to the limitations mentioned above, we have
historically used the VaR model as only one of the components in
managing our trading risk and also use other techniques such as
stress testing and desk level limits. Periods of extreme market
stress influence the reliability of these techniques to varying
degrees.
The accuracy of the VaR methodology is reviewed by backtesting
(i.e., comparing actual results against expectations derived
from historical data) the VaR results against the daily profit
and loss. Graphic representation of the backtesting results with
additional explanation of backtesting excesses are reported to
the GRC. Backtesting excesses occur when trading losses exceed
VaR. Senior management reviews and evaluates the results of
these tests. In periods of market stress, the GRC members
communicate daily to discuss losses and VaR limit excesses. As a
result of this process, the lines of business may selectively
reduce risk. Where economically feasible, positions are sold or
macroeconomic hedges are executed to reduce the exposure.
Bank of America
2010 101
The graph below shows daily trading-related revenue and VaR for
the twelve months ended December 31, 2010. Actual losses
did not exceed daily trading VaR in the twelve months ended
December 31, 2010 and 2009. Our VaR model uses a historical
simulation approach based on three years of historical data
and an expected shortfall methodology equivalent to a
99 percent confidence level. Statistically, this means that
losses will exceed VaR, on average, one out of 100 trading days,
or two to three times each year.
Trading
Risk and Return
Daily Trading-related Revenue and VaR
Table 52 presents average, high and low daily trading VaR for
2010 and 2009.
Table
52 Trading
Activities Market Risk VaR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
(Dollars in millions)
|
|
Average
|
|
|
|
High (1)
|
|
|
Low (1)
|
|
|
Average
|
|
|
High (1)
|
|
|
Low (1)
|
|
Foreign exchange
|
|
$
|
23.8
|
|
|
|
$
|
73.1
|
|
|
$
|
4.9
|
|
|
$
|
20.3
|
|
|
$
|
55.4
|
|
|
$
|
6.1
|
|
Interest rate
|
|
|
64.1
|
|
|
|
|
128.3
|
|
|
|
33.2
|
|
|
|
73.7
|
|
|
|
136.7
|
|
|
|
43.6
|
|
Credit
|
|
|
171.5
|
|
|
|
|
287.2
|
|
|
|
122.9
|
|
|
|
183.3
|
|
|
|
338.7
|
|
|
|
123.9
|
|
Real estate/mortgage
|
|
|
83.1
|
|
|
|
|
138.5
|
|
|
|
42.9
|
|
|
|
51.1
|
|
|
|
81.3
|
|
|
|
32.4
|
|
Equities
|
|
|
39.4
|
|
|
|
|
90.9
|
|
|
|
20.8
|
|
|
|
44.6
|
|
|
|
87.6
|
|
|
|
23.6
|
|
Commodities
|
|
|
19.9
|
|
|
|
|
31.7
|
|
|
|
12.8
|
|
|
|
20.2
|
|
|
|
29.1
|
|
|
|
16.0
|
|
Portfolio diversification
|
|
|
(200.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(187.0
|
)
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total market-based trading
portfolio
|
|
$
|
201.3
|
|
|
|
$
|
375.2
|
|
|
$
|
123.0
|
|
|
$
|
206.2
|
|
|
$
|
325.2
|
|
|
$
|
117.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The high and low for the total
portfolio may not equal the sum of the individual components as
the highs or lows of the individual portfolios may have occurred
on different trading days.
|
The decrease in average VaR during 2010 resulted from reduced
exposures in several businesses. In addition, portfolio
diversification increased relative to average VaR, as exposure
changes resulted in reduced correlations across businesses.
Counterparty credit risk is an adjustment to the
mark-to-market
value of our derivative exposures reflecting the impact of the
credit quality of counterparties on our derivative assets. Since
counterparty credit exposure is not included in the VaR
component of the regulatory capital allocation, we do not
include it in our trading VaR, and it is therefore not included
in the daily trading-related revenue illustrated in our
histogram or used for backtesting.
Trading Portfolio
Stress Testing
Because the very nature of a VaR model suggests results can
exceed our estimates, we also stress test our
portfolio. Stress testing estimates the value change in our
trading portfolio that may result from abnormal market
movements. Various scenarios, categorized as either historical
or hypothetical, are regularly run and reported for the overall
trading portfolio and individual businesses. Historical
scenarios simulate the impact of price changes that occurred
during a set of extended historical market events. Generally, a
10-business-day window or longer, representing the most severe
point during a crisis, is selected for each historical scenario.
Hypothetical scenarios provide simulations of anticipated shocks
from predefined market stress events. These stress events
include shocks to underlying market risk variables which may be
well beyond the shocks found in the historical data used to
calculate VaR. As with the historical scenarios, the
hypothetical scenarios are designed to represent a short-term
market disruption. Scenarios are reviewed and updated as
necessary in light of changing positions and new economic or
political information. In addition to the value afforded by the
results themselves, this information provides senior management
with a clear picture of the trend of risk being taken given the
relatively static nature of the shocks applied. Stress testing
for the trading portfolio is also integrated with
enterprise-wide stress testing and incorporated into the limits
framework. A process has been established to promote consistency
between the scenarios used for the trading portfolio and those
used for enterprise-wide stress testing. The scenarios used for
enterprise-wide stress testing purposes differ from the typical
trading portfolio scenarios in that they have a longer time
horizon and the results are forecasted over multiple periods for
use in consolidated capital and liquidity planning. For
additional information on enterprise-wide stress testing, see
page 68.
102 Bank
of America 2010
Interest
Rate Risk Management for Nontrading Activities
Interest rate risk represents the most significant market risk
exposure to our nontrading exposures. Our overall goal is to
manage interest rate risk so that movements in interest rates do
not adversely affect core net interest income. Interest rate
risk is measured as the potential volatility in our core net
interest income caused by changes in market interest rates.
Client-facing activities, primarily lending and deposit-taking,
create interest rate sensitive positions on our balance sheet.
Interest rate risk from these activities, as well as the impact
of changing market conditions, is managed through our ALM
activities.
Simulations are used to estimate the impact on core net interest
income of numerous interest rate scenarios, balance sheet trends
and strategies. These simulations evaluate how changes in
short-term financial instruments, debt securities, loans,
deposits, borrowings and derivative instruments impact core net
interest income. In addition, these simulations incorporate
assumptions about balance sheet dynamics such as loan and
deposit growth and pricing, changes in funding mix, and asset
and liability repricing and
maturity characteristics. These simulations do not include the
impact of hedge ineffectiveness.
Management analyzes core net interest income forecasts utilizing
different rate scenarios with the baseline utilizing
market-based forward interest rates. Management frequently
updates the core net interest income forecast for changing
assumptions and differing outlooks based on economic trends and
market conditions. Thus, we continually monitor our balance
sheet position in an effort to maintain an acceptable level of
exposure to interest rate changes.
We prepare forward-looking forecasts of core net interest
income. The baseline forecast takes into consideration expected
future business growth, ALM positioning and the direction of
interest rate movements as implied by the market-based forward
curve. We then measure and evaluate the impact that alternative
interest rate scenarios have on the static baseline forecast in
order to assess interest rate sensitivity under varied
conditions. The spot and
12-month
forward monthly rates used in our respective baseline forecast
at December 31, 2010 and 2009 are presented in the table
below.
Table
53 Forward
Rates
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2010
|
|
|
2009
|
|
|
|
Federal
|
|
|
Three-Month
|
|
|
10-Year
|
|
|
Federal
|
|
|
Three-Month
|
|
|
10-Year
|
|
|
|
Funds
|
|
|
LIBOR
|
|
|
Swap
|
|
|
Funds
|
|
|
LIBOR
|
|
|
Swap
|
|
Spot rates
|
|
|
0.25
|
%
|
|
|
0.30
|
%
|
|
|
3.39
|
%
|
|
|
0.25
|
%
|
|
|
0.25
|
%
|
|
|
3.97
|
%
|
12-month
forward rates
|
|
|
0.25
|
|
|
|
0.72
|
|
|
|
3.86
|
|
|
|
1.14
|
|
|
|
1.53
|
|
|
|
4.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 54 shows the pre-tax dollar impact to forecasted core net
interest income over the next twelve months from
December 31, 2010 and 2009, resulting from a 100 bps
gradual parallel increase, a 100 bps gradual parallel
decrease, a 100 bps gradual curve flattening (increase in
short-term rates or
decrease in long-term rates) and a 100 bps gradual curve
steepening (decrease in short-term rates or increase in
long-term rates) from the forward market curve. For further
discussion of core net interest income, see page 37.
Table
54 Estimated
Core Net Interest
Income (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
|
|
|
|
|
|
December 31
|
|
Curve Change
|
|
Short Rate (bps)
|
|
|
Long Rate (bps)
|
|
|
2010
|
|
|
2009
|
|
+100 bps Parallel shift
|
|
|
+100
|
|
|
|
+100
|
|
|
$
|
601
|
|
|
$
|
598
|
|
-100 bps Parallel shift
|
|
|
100
|
|
|
|
100
|
|
|
|
(834
|
)
|
|
|
(1,084
|
)
|
Flatteners
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short end
|
|
|
+100
|
|
|
|
|
|
|
|
136
|
|
|
|
127
|
|
Long end
|
|
|
|
|
|
|
100
|
|
|
|
(637
|
)
|
|
|
(616
|
)
|
Steepeners
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short end
|
|
|
100
|
|
|
|
|
|
|
|
(170
|
)
|
|
|
(444
|
)
|
Long end
|
|
|
|
|
|
|
+100
|
|
|
|
493
|
|
|
|
476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Prior periods are reported on a
managed basis.
|
The sensitivity analysis above assumes that we take no action in
response to these rate shifts over the indicated periods. At
December 31, 2010, the exposure as reported reflects
impacts that may be realized in net interest income. At
December 31, 2009, the estimated exposure as reported
reflects impacts that would have been realized primarily in net
interest income and card income.
Our core net interest income was asset sensitive to a parallel
move in interest rates at both December 31, 2010 and 2009.
The change in the interest rate risk position relative to
December 31, 2009 is primarily due to lower short-term
interest rates. As part of our ALM activities, we use
securities, residential mortgages, and interest rate and foreign
exchange derivatives in managing interest rate sensitivity.
Securities
The securities portfolio is an integral part of our ALM position
and is primarily comprised of debt securities including MBS and
to a lesser extent U.S. Treasury, corporate, municipal and
other debt securities. At December 31, 2010 and 2009, AFS
debt securities were $337.6 billion and
$301.6 billion. During 2010 and 2009, we purchased AFS debt
securities of $199.2 billion and $185.1 billion, sold
$97.5 billion and $159.4 billion, and had maturities
and received paydowns of $70.9 billion and
$59.9 billion. We realized $2.5 billion and
$4.7 billion in net gains on sales of debt securities
during 2010 and 2009. In addition, we securitized
$2.4 billion and $14.0 billion of residential mortgage
loans into MBS during 2010 and 2009, which we retained.
Bank of America
2010 103
During 2010, we entered into a series of transactions in our AFS
debt securities portfolio that involved securitizations as well
as sales of non-agency RMBS. These transactions were initiated
following a review of corporate risk objectives in light of
proposed Basel regulatory capital changes and liquidity targets.
For more information on the proposed regulatory capital changes,
see Capital Management Regulatory Capital Changes
beginning on page 64. During 2010, the carrying value of
the non-agency RMBS portfolio was reduced $14.5 billion
primarily as a result of the aforementioned sales and
securitizations as well as paydowns. We recognized net losses of
$922 million on the series of transactions in the AFS debt
securities portfolio, and improved the overall credit quality of
the remaining portfolio such that the percentage of the
non-agency RMBS portfolio that is below investment-grade was
reduced significantly.
Accumulated OCI includes after-tax net unrealized gains of
$7.4 billion and $1.5 billion at December 31,
2010 and 2009, comprised primarily of after-tax net unrealized
gains of $714 million and after-tax net unrealized losses
of $628 million related to AFS debt securities and
after-tax net unrealized gains of $6.7 billion and
$2.1 billion related to AFS equity securities. The 2010
unrealized gain on marketable equity securities was related to
our investment in CCB. See Note 5 Securities
to the Consolidated Financial Statements for further
discussion on marketable equity securities. Total market value
of the AFS debt securities was $337.6 billion and
$301.6 billion at December 31, 2010 and 2009 with a
weighted-average duration of 4.9 and 4.5 years, and
primarily relates to our MBS and U.S. Treasury portfolio.
The amount of pre-tax accumulated OCI related to AFS debt
securities increased by $2.2 billion during 2010 to
$1.1 billion, primarily due to sales of non-agency CMO
positions.
We recognized $967 million of OTTI losses through earnings
on AFS debt securities in 2010 compared to $2.8 billion in
2009. We also recognized $3 million of OTTI losses on AFS
marketable equity securities during 2010 compared to
$326 million in 2009.
The recognition of impairment losses on AFS debt and marketable
equity securities is based on a variety of factors, including
the length of time and extent to which the market value has been
less than cost, the financial condition of the issuer of the
security including credit ratings and the specific events
affecting the operations of the issuer, underlying assets that
collateralize the debt security, other industry and
macroeconomic conditions, and our intent and ability to hold the
security to recovery. We do not intend to sell securities with
unrealized losses and it is not more-likely-than-not that we
will be required to sell those securities before recovery of
amortized cost. Based on our evaluation of these and other
relevant factors, and after consideration of the losses
described in the paragraph above, we do not believe that the AFS
debt and marketable equity securities that are in an unrealized
loss position at December 31, 2010 are
other-than-temporarily
impaired.
Residential
Mortgage Portfolio
At December 31, 2010 and 2009, residential mortgages were
$258.0 billion and $242.1 billion. During 2010 and
2009, we retained $63.8 billion and $26.6 billion in
first mortgages originated by Home Loans &
Insurance. Outstanding residential mortgage loans increased
$15.8 billion in 2010 compared to 2009 as new FHA insured
origination volume was partially offset by paydowns, the sale of
$10.8 billion of residential mortgages related to First
Republic Bank, transfers to foreclosed properties and
charge-offs. In addition, FHA repurchases of delinquent loans
pursuant to our servicing agreements with GNMA also increased
the residential mortgage portfolio during 2010.
During 2010 and 2009, we securitized $2.4 billion and
$14.0 billion of residential mortgage loans into MBS which
we retained. We recognized gains of $68 million on
securitizations completed during 2010. For more information on
these securitizations, see Note 8
Securitizations and Other Variable Interest Entities to the
Consolidated Financial Statements. During 2010 and 2009, we had
no purchases of residential mortgages related to ALM activities.
We sold $443 million of residential mortgages during 2010,
of which $432 million were originated residential mortgages
and $11 million were previously purchased from third
parties. Net gains on these transactions were $21 million.
This compares to sales of $5.9 billion of residential
mortgages during 2009 of which $5.1 billion were originated
residential mortgages and $771 million were previously
purchased from third parties. These sales resulted in gains of
$47 million. We received paydowns of $38.2 billion and
$42.3 billion in 2010 and 2009.
Interest Rate and
Foreign Exchange Derivative Contracts
Interest rate and foreign exchange derivative contracts are
utilized in our ALM activities and serve as an efficient tool to
manage our interest rate and foreign exchange risk. We use
derivatives to hedge the variability in cash flows or changes in
fair value on our balance sheet due to interest rate and foreign
exchange components. For additional information on our hedging
activities, see Note 4 Derivatives to
the Consolidated Financial Statements.
Our interest rate contracts are generally non-leveraged generic
interest rate and foreign exchange basis swaps, options, futures
and forwards. In addition, we use foreign exchange contracts,
including cross-currency interest rate swaps, foreign currency
forward contracts and options to mitigate the foreign exchange
risk associated with foreign currency-denominated assets and
liabilities. Table 55 shows the notional amounts, fair value,
weighted-average receive-fixed and pay-fixed rates, expected
maturity and estimated duration of our open ALM derivatives at
December 31, 2010 and 2009. These amounts do not include
derivative hedges on our MSRs.
Changes to the composition of our derivatives portfolio during
2010 reflect actions taken for interest rate and foreign
exchange rate risk management. The decisions to reposition our
derivatives portfolio are based upon the current assessment of
economic and financial conditions including the interest rate
and foreign currency environments, balance sheet composition and
trends, and the relative mix of our cash and derivative
positions. The notional amount of our option positions increased
to $6.6 billion at December 31, 2010 from
$6.5 billion at December 31, 2009. Our interest rate
swap positions, including foreign exchange contracts, were a net
receive-fixed position of $6.4 billion and
$52.2 billion at December 31, 2010 and 2009. The
decrease in the net notional levels of our interest rate swap
position was driven by the net addition of $51.6 billion in
pay-fixed swaps and $11.5 billion in foreign
currency-denominated receive-fixed swaps, offset by a reduction
of $5.6 billion in U.S. dollar-denominated
receive-fixed swaps. The notional amount of our foreign exchange
basis swaps was $235.2 billion and $122.8 billion at
December 31, 2010 and 2009. The $112.4 billion
notional change was primarily due to new trade activity during
2010 to mitigate cross-currency basis risk on our economic hedge
portfolio. The increase in pay-fixed swaps resulted from hedging
newly purchased U.S. Treasury Bonds with swaps and entering
into additional pay-fixed swaps to hedge variable rate
short-term liabilities. Our futures and forwards net notional
position, which reflects the net of long and short positions,
was a short position of $280 million at December 31,
2010 compared to a long position of $10.6 billion at
December 31, 2009.
104 Bank
of America 2010
The table below includes derivatives utilized in our ALM
activities including those designated as accounting and economic
hedging instruments. The fair value of net ALM contracts
increased $329 million to a gain of $12.6 billion at
December 31, 2010 compared to $12.3 billion at
December 31, 2009. The increase was primarily attributable
to changes in the value of U.S. dollar-
denominated receive-fixed interest rate swaps of
$3.3 billion, foreign exchange contracts of
$2.1 billion and foreign exchange basis swaps of
$197 million. The increase was partially offset by a loss
from the changes in the value of pay-fixed interest rate swaps
of $5.0 billion and option products of $294 million.
Table
55 Asset
and Liability Management Interest Rate and Foreign Exchange
Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
|
|
|
Expected Maturity
|
|
|
Average
|
|
|
|
Fair
|
|
|
|
|
|
Estimated
|
|
(Dollars in millions, average
estimated duration in years)
|
|
Value
|
|
|
Total
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
Thereafter
|
|
|
Duration
|
|
Receive fixed interest rate swaps
(1, 2)
|
|
$
|
7,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.45
|
|
Notional amount
|
|
|
|
|
|
$
|
104,949
|
|
|
$
|
8
|
|
|
$
|
36,201
|
|
|
$
|
7,909
|
|
|
$
|
7,270
|
|
|
$
|
8,094
|
|
|
$
|
45,467
|
|
|
|
|
|
Weighted-average fixed-rate
|
|
|
|
|
|
|
3.94
|
%
|
|
|
1.00
|
%
|
|
|
2.49
|
%
|
|
|
3.90
|
%
|
|
|
3.66
|
%
|
|
|
3.71
|
%
|
|
|
5.19
|
%
|
|
|
|
|
Pay fixed interest rate
swaps (1,
2)
|
|
|
(3,827
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.03
|
|
Notional amount
|
|
|
|
|
|
$
|
156,067
|
|
|
$
|
50,810
|
|
|
$
|
16,205
|
|
|
$
|
1,207
|
|
|
$
|
4,712
|
|
|
$
|
10,933
|
|
|
$
|
72,200
|
|
|
|
|
|
Weighted-average fixed-rate
|
|
|
|
|
|
|
3.02
|
%
|
|
|
2.37
|
%
|
|
|
2.15
|
%
|
|
|
2.88
|
%
|
|
|
2.40
|
%
|
|
|
2.75
|
%
|
|
|
3.76
|
%
|
|
|
|
|
Same-currency basis
swaps (3)
|
|
|
103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional amount
|
|
|
|
|
|
$
|
152,849
|
|
|
$
|
13,449
|
|
|
$
|
49,509
|
|
|
$
|
31,503
|
|
|
$
|
21,085
|
|
|
$
|
11,431
|
|
|
$
|
25,872
|
|
|
|
|
|
Foreign exchange basis swaps
(2, 4, 5)
|
|
|
4,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional amount
|
|
|
|
|
|
|
235,164
|
|
|
|
21,936
|
|
|
|
39,365
|
|
|
|
46,380
|
|
|
|
41,003
|
|
|
|
23,430
|
|
|
|
63,050
|
|
|
|
|
|
Option
products (6)
|
|
|
(120
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
amount (8)
|
|
|
|
|
|
|
6,572
|
|
|
|
(1,180
|
)
|
|
|
2,092
|
|
|
|
2,390
|
|
|
|
603
|
|
|
|
311
|
|
|
|
2,356
|
|
|
|
|
|
Foreign exchange contracts
(2, 5, 7)
|
|
|
4,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
amount (8)
|
|
|
|
|
|
|
109,544
|
|
|
|
59,508
|
|
|
|
5,427
|
|
|
|
10,048
|
|
|
|
13,035
|
|
|
|
2,372
|
|
|
|
19,154
|
|
|
|
|
|
Futures and forward rate contracts
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
amount (8)
|
|
|
|
|
|
|
(280
|
)
|
|
|
(280
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net ALM contracts
|
|
$
|
12,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
|
|
|
|
|
|
Expected Maturity
|
|
|
Average
|
|
|
|
Fair
|
|
|
|
|
|
Estimated
|
|
(Dollars in millions, average
estimated duration in years)
|
|
Value
|
|
|
Total
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
Thereafter
|
|
|
Duration
|
|
Receive fixed interest rate swaps
(1, 2)
|
|
$
|
4,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.34
|
|
Notional amount
|
|
|
|
|
|
$
|
110,597
|
|
|
$
|
15,212
|
|
|
$
|
8
|
|
|
$
|
35,454
|
|
|
$
|
7,333
|
|
|
$
|
8,247
|
|
|
$
|
44,343
|
|
|
|
|
|
Weighted-average fixed-rate
|
|
|
|
|
|
|
3.65
|
%
|
|
|
1.61
|
%
|
|
|
1.00
|
%
|
|
|
2.42
|
%
|
|
|
4.06
|
%
|
|
|
3.48
|
%
|
|
|
5.29
|
%
|
|
|
|
|
Pay fixed interest rate swaps
(1, 2)
|
|
|
1,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.18
|
|
Notional amount
|
|
|
|
|
|
$
|
104,445
|
|
|
$
|
2,500
|
|
|
$
|
50,810
|
|
|
$
|
14,688
|
|
|
$
|
806
|
|
|
$
|
3,729
|
|
|
$
|
31,912
|
|
|
|
|
|
Weighted-average fixed-rate
|
|
|
|
|
|
|
2.83
|
%
|
|
|
1.82
|
%
|
|
|
2.37
|
%
|
|
|
2.24
|
%
|
|
|
3.77
|
%
|
|
|
2.61
|
%
|
|
|
3.92
|
%
|
|
|
|
|
Same-currency basis swaps
(3)
|
|
|
107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional amount
|
|
|
|
|
|
$
|
42,881
|
|
|
$
|
4,549
|
|
|
$
|
8,593
|
|
|
$
|
11,934
|
|
|
$
|
5,591
|
|
|
$
|
5,546
|
|
|
$
|
6,668
|
|
|
|
|
|
Foreign exchange basis swaps
(2, 4, 5)
|
|
|
4,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional amount
|
|
|
|
|
|
|
122,807
|
|
|
|
7,958
|
|
|
|
10,968
|
|
|
|
19,862
|
|
|
|
18,322
|
|
|
|
31,853
|
|
|
|
33,844
|
|
|
|
|
|
Option products
(6)
|
|
|
174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional amount
(8)
|
|
|
|
|
|
|
6,540
|
|
|
|
656
|
|
|
|
2,031
|
|
|
|
1,742
|
|
|
|
244
|
|
|
|
603
|
|
|
|
1,264
|
|
|
|
|
|
Foreign exchange contracts
(2, 5, 7)
|
|
|
2,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional amount
(8)
|
|
|
|
|
|
|
103,726
|
|
|
|
63,158
|
|
|
|
3,491
|
|
|
|
3,977
|
|
|
|
6,795
|
|
|
|
10,585
|
|
|
|
15,720
|
|
|
|
|
|
Futures and forward rate contracts
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional amount
(8)
|
|
|
|
|
|
|
10,559
|
|
|
|
10,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net ALM contracts
|
|
$
|
12,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
At December 31, 2010 and 2009,
the receive-fixed interest rate swap notional amounts that
represented forward starting swaps and will not be effective
until their respective contractual start dates were
$1.7 billion and $2.5 billion, and the forward
starting pay-fixed swap positions were $34.5 billion and
$76.8 billion.
|
(2) |
|
Does not include basis adjustments
on either fixed-rate debt issued by the Corporation or AFS debt
securities which are hedged in fair value hedge relationships
using derivatives designated as hedging instruments that
substantially offset the fair values of these derivatives.
|
(3)
|
|
At December 31, 2010 and
2009, same-currency basis swaps consist of $152.8 billion
and $42.9 billion in both foreign currency and U.S.
dollar-denominated basis swaps in which both sides of the swap
are in the same currency.
|
(4) |
|
Foreign exchange basis swaps
consisted of cross-currency variable interest rate swaps used
separately or in conjunction with receive-fixed interest rate
swaps.
|
(5) |
|
Does not include foreign currency
translation adjustments on certain
non-U.S.
debt issued by the Corporation which substantially offset the
fair values of these derivatives.
|
(6) |
|
Option products of
$6.6 billion at December 31, 2010 are comprised of
$160 million in purchased caps/floors, $8.2 billion in
swaptions and $(1.8) billion in foreign exchange options.
Option products of $6.5 billion at December 31, 2009
are comprised of $177 million in purchased caps/floors and
$6.3 billion in swaptions.
|
(7) |
|
Foreign exchange contracts include
foreign currency-denominated and cross-currency receive-fixed
interest rate swaps as well as foreign currency forward rate
contracts. Total notional amount was comprised of
$57.6 billion in foreign currency-denominated and
cross-currency receive-fixed swaps and $52.0 billion in
foreign currency forward rate contracts at December 31,
2010, and $46.0 billion in foreign currency-denominated and
cross-currency receive-fixed swaps and $57.7 billion in
foreign currency forward rate contracts at December 31,
2009.
|
(8) |
|
Reflects the net of long and short
positions.
|
We use interest rate derivative instruments to hedge the
variability in the cash flows of our assets and liabilities,
including certain compensation costs and other forecasted
transactions (collectively referred to as cash flow hedges). The
net losses on both open and terminated derivative instruments
recorded in accumulated OCI,
net-of-tax,
were $3.2 billion and $2.5 billion at
December 31, 2010 and 2009. These net losses are expected
to be reclassified into earnings in the same period as the
hedged cash flows affect earnings and will decrease income or
increase expense on the respective
hedged cash flows. Assuming no change in open cash flow
derivative hedge positions and no changes to prices or interest
rates beyond what is implied in forward yield curves at
December 31, 2010 the pre-tax net losses are expected to be
reclassified into earnings as follows: $1.8 billion, or
35 percent within the next year, 80 percent within
five years, and 92 percent within 10 years, with the
remaining eight percent thereafter. For more information on
derivatives designated as cash flow hedges, see Note 4
Derivatives to the Consolidated Financial Statements.
Bank of America
2010 105
We hedge our net investment in
non-U.S. operations
determined to have functional currencies other than the
U.S. dollar using forward foreign exchange contracts that
typically settle in less than 180 days, cross-currency
basis swaps, foreign exchange options and foreign
currency-denominated debt. We recorded after-tax losses on
derivatives and foreign currency-denominated debt in accumulated
OCI associated with net investment hedges which were offset by
gains on our net investments in consolidated
non-U.S. entities
at December 31, 2010.
Mortgage
Banking Risk Management
We originate, fund and service mortgage loans, which subject us
to credit, liquidity and interest rate risks, among others. We
determine whether loans will be held for investment or
held-for-sale
at the time of commitment and manage credit and liquidity risks
by selling or securitizing a portion of the loans we originate.
Interest rate risk and market risk can be substantial in the
mortgage business. Fluctuations in interest rates drive consumer
demand for new mortgages and the level of refinancing activity,
which in turn, affects total origination and service fee income.
Typically, a decline in mortgage interest rates will lead to an
increase in mortgage originations and fees and a decrease in the
value of the MSRs driven by higher prepayment expectations.
Hedging the various sources of interest rate risk in mortgage
banking is a complex process that requires complex modeling and
ongoing monitoring. IRLCs and the related residential first
mortgage LHFS are subject to interest rate risk between the date
of the IRLC and the date the loans are sold to the secondary
market. To hedge interest rate risk, we utilize forward loan
sale commitments and other derivative instruments including
purchased options. These instruments are used as economic hedges
of IRLCs and residential first mortgage LHFS. At
December 31, 2010 and 2009, the notional amount of
derivatives economically hedging the IRLCs and residential first
mortgage LHFS was $129.0 billion and $161.4 billion.
MSRs are nonfinancial assets created when the underlying
mortgage loan is sold to investors and we retain the right to
service the loan. We use certain derivatives such as interest
rate options, interest rate swaps, forward settlement contracts,
Eurodollar futures, as well as mortgage-backed and
U.S. Treasury securities as economic hedges of MSRs. The
notional amounts of the derivative contracts and other
securities designated as economic hedges of MSRs at
December 31, 2010 were $1.6 trillion and
$60.3 billion. At December 31, 2009, the notional
amounts of the derivative contracts and other securities
designated as economic hedges of MSRs were $1.3 trillion and
$67.6 billion. In 2010, we recorded gains in mortgage
banking income of $5.0 billion related to the change in
fair value of these economic hedges compared to losses of
$3.8 billion for 2009. For additional information on MSRs,
see Note 25 Mortgage Servicing Rights to the
Consolidated Financial Statements and for more information on
mortgage banking income, see Home Loans & Insurance
beginning on page 41.
Compliance
Risk Management
Compliance risk is the risk posed by the failure to manage
regulatory, legal and ethical issues that could result in
monetary damages, losses or harm to our reputation or image. The
Seven Elements of a Compliance
Program®
provides the framework for the compliance programs that are
consistently applied across the Corporation to manage compliance
risk. This framework includes a common approach to commitment
and accountability, policies and procedures, controls and
supervision, monitoring and testing, regulatory change
management, education and awareness, and reporting.
We approach compliance risk management on an enterprise and line
of business level. The Operational and Compliance Risk
Committee, which is a
sub-committee
of the Operational Risk Committee, provides oversight of
significant compliance risk issues. Within Global Risk
Management, Global
Compliance Risk Management develops and implements the
strategies, policies and practices for assessing and managing
compliance risks across the organization. Through education and
communication efforts, a culture of compliance is emphasized
across the organization.
The lines of business are responsible for all the risks within
the business line, including compliance risks. Compliance risk
executives monitor and test business processes for compliance
and escalate risks and issues needing resolution.
Operational
Risk Management
The Corporation defines operational risk as the risk of loss
resulting from inadequate or failed internal processes, people
and systems or from external events. Operational risk may occur
anywhere in the Corporation, not solely in operations functions,
and its effects may extend beyond financial losses. Operational
risk includes legal risk. Successful operational risk management
is particularly important to diversified financial services
companies because of the nature, volume and complexity of the
financial services business. Global banking guidelines and
country-specific requirements for managing operational risk were
established in a set of rules known as Basel II. Basel II
requires banks have internal operational risk management
processes to assess and measure operational risk exposure and to
set aside appropriate capital to address those exposures.
Under the Basel II Rules, an operational loss event is an
event that results in a loss and is associated with any of the
following seven operational loss event categories: internal
fraud; external fraud; employment practices and workplace
safety; clients, products and business practices; damage to
physical assets; business disruption and system failures; and
execution, delivery and process management. Specific examples of
loss events include robberies, credit card fraud, processing
errors and physical losses from natural disasters.
We approach operational risk management from two perspectives:
(1) at the enterprise level and (2) at the line of
business and enterprise control function levels. The enterprise
level refers to risk across all of the Corporation. The line of
business level includes risk in all of the revenue producing
businesses. Enterprise control functions refer to the business
units that support the Corporations business operations.
The Operational Risk Committee oversees and approves the
Corporations policies and processes to assure sound
operational and compliance risk management and serves as an
escalation point for critical operational risk and compliance
matters within the Corporation. The Operational Risk Committee
reports to the Enterprise Risk Committee of the Board regarding
operational risk activities. Within the Global Risk Management
organization, the Corporate Operational Risk team develops and
guides the strategies, policies, practices, controls and
monitoring tools for assessing and managing operational risks
across the organization as well reporting results to governance
committees and the Board.
The lines of business and enterprise control functions are
responsible for all the risks within the business line,
including operational risks. In addition to enterprise risk
management tools like loss reporting, scenario analysis and risk
and control self-assessments, operational risk executives,
working in conjunction with senior line of business executives,
have developed key tools to help identify, measure, mitigate and
monitor risk in each line of business and enterprise control
function. Examples of these include personnel management
practices, data reconciliation processes, fraud management
units, transaction processing monitoring and analysis, business
recovery planning and new product introduction processes. The
lines of business and enterprise control functions are also
responsible for consistently implementing and monitoring
adherence to corporate practices. Line of business and
enterprise control function management uses the enterprise risk
and control self-assessment process to identify and evaluate the
status of risk and control
106 Bank
of America 2010
issues, including mitigation plans, as appropriate. The goal of
this process is to assess changing market and business
conditions, to evaluate key risks impacting each line of
business and enterprise control function and assess the controls
in place to mitigate the risks. The risk and control self
assessment process is documented at periodic intervals. Key
operational risk indicators for these risks have been developed
and are used to help identify trends and issues on an
enterprise, line of business and enterprise control function
level.
The enterprise control functions participate in two ways to the
operational risk management process. First, these organizations
manage risk in their functional department. Second, they provide
specialized risk management services within their area of
expertise to the enterprise and the lines of business and other
enterprise control functions they support. For example, the
Enterprise Information Management and Supply Chain Management
organizations in the Technology and Operations enterprise
control function, develop risk management practices, such as
information security and supplier management programs. These
groups also work with business and risk executives to develop
and guide appropriate strategies, policies, practices, controls
and monitoring tools for each line of business and enterprise
control function relative to these programs.
Additionally, where appropriate, insurance policies are
purchased to mitigate the impact of operational losses when and
if they occur. These insurance policies are explicitly
incorporated in the structural features of operational risk
evaluation. As insurance recoveries, especially given recent
market events, are subject to legal and financial uncertainty,
the inclusion of these insurance policies are subject to
reductions in their expected mitigating benefits.
Complex
Accounting Estimates
Our significant accounting principles, as described in
Note 1 Summary of Significant Accounting
Principles to the Consolidated Financial Statements are
essential in understanding the MD&A. Many of our
significant accounting principles require complex judgments to
estimate the values of assets and liabilities. We have
procedures and processes in place to facilitate making these
judgments.
The more judgmental estimates are summarized in the following
discussion. We have identified and described the development of
the variables most important in the estimation processes that,
with the exception of accrued taxes, involve mathematical models
to derive the estimates. In many cases, there are numerous
alternative judgments that could be used in the process of
determining the inputs to the models. Where alternatives exist,
we have used the factors that we believe represent the most
reasonable value in developing the inputs. Actual performance
that differs from our estimates of the key variables could
impact net income. Separate from the possible future impact to
net income from input and model variables, the value of our
lending portfolio and market sensitive assets and liabilities
may change subsequent to the balance sheet date, often
significantly, due to the nature and magnitude of future credit
and market conditions. Such credit and market conditions may
change quickly and in unforeseen ways and the resulting
volatility could have a significant, negative effect on future
operating results. These fluctuations would not be indicative of
deficiencies in our models or inputs.
Allowance for
Credit Losses
The allowance for credit losses, which includes the allowance
for loan and lease losses and the reserve for unfunded lending
commitments, represents managements estimate of probable
losses inherent in the Corporations loan portfolio
excluding those loans accounted for under the fair value option.
Changes to the allowance for credit losses are reported in the
Consolidated Statement of Income in the provision for credit
losses. Our process for determining the allowance for credit
losses is discussed in Note 1 Summary of
Significant Accounting Principles to the Consolidated
Financial Statements.
We evaluate our allowance at the portfolio segment level and our
portfolio segments are home loans, credit card and other
consumer, and commercial. Due to the variability in the drivers
of the assumptions used in this process, estimates of the
portfolios inherent risks and overall collectability
change with changes in the economy, individual industries,
countries, and borrowers or counterparties ability
and willingness to repay their obligations. The degree to which
any particular assumption affects the allowance for credit
losses depends on the severity of the change and its
relationship to the other assumptions.
Key judgments used in determining the allowance for credit
losses include risk ratings for pools of commercial loans and
leases, market and collateral values and discount rates for
individually evaluated loans, product type classifications for
consumer and commercial loans and leases, loss rates used for
consumer and commercial loans and leases, adjustments made to
address current events and conditions, considerations regarding
domestic and global economic uncertainty, and overall credit
conditions.
Our estimate for the allowance for loan and lease losses is
sensitive to the loss rates and expected cash flows from our
home loans, and credit card and other consumer portfolio
segments. For each one percent increase in the loss rates on
loans collectively evaluated for impairment in our home loans
portfolio segment excluding PCI loans, coupled with a one
percent decrease in the discounted cash flows on those loans
individually evaluated for impairment within this portfolio
segment, the allowance for loan and lease losses at
December 31, 2010 would have increased by
$141 million. PCI loans within our home loans portfolio
segment are initially recorded at fair value. Applicable
accounting guidance prohibits carry-over or creation of
valuation allowances in the initial accounting. However,
subsequent decreases in the expected principal cash flows from
the date of acquisition result in a charge to the provision for
credit losses and a corresponding increase to the allowance for
loan and lease losses. We subject our PCI portfolio to stress
scenarios to evaluate the potential impact given certain events.
A one percent decrease in the expected principal cash flows
could result in a $297 million impairment of the portfolio,
of which $138 million would be related to our discontinued
real estate portfolio. For each one percent increase in the loss
rates on loans collectively evaluated for impairment within our
credit card and other consumer portfolio segment coupled with a
one percent decrease in the expected cash flows on those loans
individually evaluated for impairment within this portfolio
segment, the allowance for loan and lease losses at
December 31, 2010 would have increased by $152 million.
Our allowance for loan and lease losses is sensitive to the risk
ratings assigned to loans and leases within our Commercial
portfolio segment. Assuming a downgrade of one level in the
internal risk ratings for commercial loans and leases, except
loans and leases already risk-rated Doubtful as defined by
regulatory authorities, the allowance for loan and lease losses
would have increased by $6.7 billion at December 31,
2010. The allowance for loan and lease losses as a percentage of
total loans and leases at December 31, 2010 was
4.47 percent and this hypothetical increase in the
allowance would raise the ratio to 5.19 percent.
These sensitivity analyses do not represent managements
expectations of the deterioration in risk ratings or the
increases in loss rates but are provided as hypothetical
scenarios to assess the sensitivity of the allowance for loan
and lease losses to changes in key inputs. We believe the risk
ratings and loss severities currently in use are appropriate and
that the probability of the alternative scenarios outlined above
occurring within a short period of time is remote.
The process of determining the level of the allowance for credit
losses requires a high degree of judgment. It is possible that
others, given the same information, may at any point in time
reach different reasonable conclusions.
Bank of America
2010 107
Mortgage
Servicing Rights
MSRs are nonfinancial assets that are created when a mortgage
loan is sold and we retain the right to service the loan. We
account for consumer MSRs at fair value with changes in fair
value recorded in the Consolidated Statement of Income in
mortgage banking income. Commercial-related and residential
reverse mortgage MSRs are accounted for using the amortization
method (i.e., lower of cost or market) with impairment
recognized as a reduction of mortgage banking income. At
December 31, 2010, our total MSR balance was
$15.2 billion.
We determine the fair value of our consumer MSRs using a
valuation model that calculates the present value of estimated
future net servicing income. The model incorporates key economic
assumptions including estimates of prepayment rates and
resultant weighted-average lives of the MSRs, and the
option-adjusted spread (OAS) levels. These variables can, and
generally do change from quarter to quarter as market conditions
and projected interest rates change. These assumptions are
subjective in nature and changes in these assumptions could
materially affect our operating results. For example, decreasing
the prepayment rate assumption used in the valuation of our
consumer MSRs by 10 percent while keeping all other
assumptions unchanged could have resulted in an estimated
increase of $907 million in mortgage banking income at
December 31, 2010. This impact provided above does not
reflect any hedge strategies that may be undertaken to mitigate
such risk.
We manage potential changes in the fair value of MSRs through a
comprehensive risk management program. The intent is to mitigate
the effects of changes in the fair value of MSRs through the use
of risk management instruments. To reduce the sensitivity of
earnings to interest rate and market value fluctuations,
securities as well as certain derivatives such as options and
interest rate swaps may be used as economic hedges of the MSRs,
but are not designated as accounting hedges. These instruments
are carried at fair value with changes in fair value recognized
in mortgage banking income. For more information, see Mortgage
Banking Risk Management on page 106.
For additional information on MSRs, including the sensitivity of
weighted-average lives and the fair value of MSRs to changes in
modeled assumptions, see Note 25 Mortgage
Servicing Rights to the Consolidated Financial Statements.
Also, for information on the impact of the time to complete
foreclosure sales on the value of MSRs, see Recent
Events Certain Servicing-related Issues beginning on
page 34.
Fair Value of
Financial Instruments
We determine the fair values of financial instruments based on
the fair value hierarchy under applicable accounting guidance
which requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when
measuring fair value. Applicable accounting guidance establishes
three levels of inputs used to measure fair value. We carry
trading account assets and liabilities, derivative assets and
liabilities, AFS debt and marketable equity securities, certain
MSRs and certain other assets at fair value. Also, we account
for certain corporate loans and loan commitments, LHFS,
commercial paper and other short-term borrowings, securities
financing agreements, asset-backed secured financings, long-term
deposits and long-term debt under the fair value option. For
more information, see Note 22 Fair Value
Measurements and Note 23 Fair Value Option
to the Consolidated Financial Statements.
The fair values of assets and liabilities include adjustments
for market liquidity, credit quality and other deal specific
factors, where appropriate. Valuations of products using models
or other techniques are sensitive to assumptions used for the
significant inputs. Where market data is available, the inputs
used for valuation reflect that information as of our valuation
date. Inputs to valuation models are considered unobservable if
they are supported by little or no market activity. In periods
of extreme volatility, lessened liquidity
or in illiquid markets, there may be more variability in market
pricing or a lack of market data to use in the valuation
process. In keeping with the prudent application of estimates
and management judgment in determining the fair value of assets
and liabilities, we have in place various processes and controls
that include: a model validation policy that requires review and
approval of quantitative models used for deal pricing, financial
statement fair value determination and risk quantification; a
trading product valuation policy that requires verification of
all traded product valuations; and a periodic review and
substantiation of daily profit and loss reporting for all traded
products. Primarily through validation controls, we utilize both
broker and pricing service inputs which can and do include both
market-observable and internally-modeled values
and/or
valuation inputs. Our reliance on this information is tempered
by the knowledge of how the broker
and/or
pricing service develops its data with a higher degree of
reliance applied to those that are more directly observable and
lesser reliance applied to those developed through their own
internal modeling. Similarly, broker quotes that are executable
are given a higher level of reliance than indicative broker
quotes, which are not executable. These processes and controls
are performed independently of the business.
Trading account assets and liabilities are carried at fair value
based primarily on actively traded markets where prices are from
either direct market quotes or observed transactions. Liquidity
is a significant factor in the determination of the fair value
of trading account assets and liabilities. Market price quotes
may not be readily available for some positions, or positions
within a market sector where trading activity has slowed
significantly or ceased. Situations of illiquidity generally are
triggered by market perception of credit uncertainty regarding a
single company or a specific market sector. In these instances,
fair value is determined based on limited available market
information and other factors, principally from reviewing the
issuers financial statements and changes in credit ratings
made by one or more of the ratings agencies.
Trading account profits (losses), which represent the net amount
earned from our trading positions, can be volatile and are
largely driven by general market conditions and customer demand.
Trading account profits (losses) are dependent on the volume and
type of transactions, the level of risk assumed, and the
volatility of price and rate movements at any given time within
the ever-changing market environment. To evaluate risk in our
trading activities, we focus on the actual and potential
volatility of individual positions as well as portfolios. At a
portfolio and corporate level, we use trading limits, stress
testing and tools such as VaR modeling, which estimates a
potential daily loss that we do not expect to exceed with a
specified confidence level, to measure and manage market risk.
For more information on VaR, see Trading Risk Management
beginning on page 100.
The fair values of derivative assets and liabilities traded in
the OTC market are determined using quantitative models that
require the use of multiple market inputs including interest
rates, prices and indices to generate continuous yield or
pricing curves and volatility factors, which are used to value
the positions. The majority of market inputs are actively quoted
and can be validated through external sources including brokers,
market transactions and third-party pricing services. Estimation
risk is greater for derivative asset and liability positions
that are either option-based or have longer maturity dates where
observable market inputs are less readily available or are
unobservable, in which case quantitative-based extrapolations of
rate, price or index scenarios are used in determining fair
values. The Corporation incorporates within its fair value
measurements of OTC derivatives the net credit differential
between the counterparty credit risk and our own credit risk.
The value of the credit differential is determined by reference
to existing direct market reference costs of credit, or where
direct references are not available, a proxy is applied
consistent with direct references for other counterparties that
are similar in credit risk. An estimate of severity of loss is
also used in the
108 Bank
of America 2010
determination of fair value, primarily based on historical
experience adjusted for any more recent name specific
expectations.
Level 3
Assets and Liabilities
Financial assets and liabilities whose values are based on
prices or valuation techniques that require inputs that are both
unobservable and are significant to the overall fair value
measurement are classified as Level 3 under the fair value
hierarchy established in applicable accounting guidance. The
Level 3 financial assets and liabilities include private
equity investments, consumer MSRs, ABS, highly structured,
complex or long-dated derivative contracts, structured notes and
certain CDOs, for which there is not an active market for
identical assets from which to determine fair value or where
sufficient, current market information about similar assets to
use as observable, corroborated data for all significant inputs
into a valuation model is not available. In these cases, the
fair values of these Level 3 financial assets and
liabilities are determined using pricing models, discounted cash
flow methodologies, a net asset value approach for certain
structured securities, or similar techniques for which the
determination of fair value requires significant management
judgment or estimation. In 2010, there were no changes to the
quantitative models, or uses of such models, that resulted in a
material adjustment to the Consolidated Statement of Income.
Table
56 Level 3
Asset and Liability Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
December 31, 2009
|
|
|
|
|
|
|
As a %
|
|
|
|
|
|
|
|
|
As a %
|
|
|
|
|
|
|
|
|
|
of Total
|
|
|
As a %
|
|
|
|
|
|
of Total
|
|
|
As a %
|
|
|
|
Level 3
|
|
|
Level 3
|
|
|
of Total
|
|
|
Level 3
|
|
|
Level 3
|
|
|
of Total
|
|
(Dollars in millions)
|
|
Fair Value
|
|
|
Assets
|
|
|
Assets
|
|
|
Fair Value
|
|
|
Assets
|
|
|
Assets
|
|
Trading account assets
|
|
$
|
15,525
|
|
|
|
19.56
|
%
|
|
|
0.69
|
%
|
|
$
|
21,077
|
|
|
|
20.34
|
%
|
|
|
0.95
|
%
|
Derivative assets
|
|
|
18,773
|
|
|
|
23.65
|
|
|
|
0.83
|
|
|
|
23,048
|
|
|
|
22.24
|
|
|
|
1.03
|
|
Available-for-sale
securities
|
|
|
15,873
|
|
|
|
19.99
|
|
|
|
0.70
|
|
|
|
20,346
|
|
|
|
19.63
|
|
|
|
0.91
|
|
All other Level 3 assets at fair value
|
|
|
29,217
|
|
|
|
36.80
|
|
|
|
1.29
|
|
|
|
39,164
|
|
|
|
37.79
|
|
|
|
1.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Level 3 assets at
fair
value (1)
|
|
$
|
79,388
|
|
|
|
100.00
|
%
|
|
|
3.51
|
%
|
|
$
|
103,635
|
|
|
|
100.00
|
%
|
|
|
4.65
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a %
|
|
|
|
|
|
|
|
|
As a %
|
|
|
|
|
|
|
|
|
|
of Total
|
|
|
As a %
|
|
|
|
|
|
of Total
|
|
|
As a %
|
|
|
|
Level 3
|
|
|
Level 3
|
|
|
of Total
|
|
|
Level 3
|
|
|
Level 3
|
|
|
of Total
|
|
|
|
Fair Value
|
|
|
Liabilities
|
|
|
Liabilities
|
|
|
Fair Value
|
|
|
Liabilities
|
|
|
Liabilities
|
|
Trading account liabilities
|
|
$
|
7
|
|
|
|
0.05
|
%
|
|
|
|
|
|
$
|
396
|
|
|
|
1.81
|
%
|
|
|
0.02
|
%
|
Derivative liabilities
|
|
|
11,028
|
|
|
|
70.90
|
|
|
|
0.54
|
%
|
|
|
15,185
|
|
|
|
69.53
|
|
|
|
0.76
|
|
Long-term debt
|
|
|
2,986
|
|
|
|
19.20
|
|
|
|
0.15
|
|
|
|
4,660
|
|
|
|
21.34
|
|
|
|
0.23
|
|
All other Level 3 liabilities at fair value
|
|
|
1,534
|
|
|
|
9.85
|
|
|
|
0.07
|
|
|
|
1,598
|
|
|
|
7.32
|
|
|
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Level 3 liabilities
at fair value
(1)
|
|
$
|
15,555
|
|
|
|
100.00
|
%
|
|
|
0.76
|
%
|
|
$
|
21,839
|
|
|
|
100.00
|
%
|
|
|
1.09
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Level 3 total assets and
liabilities are shown before the impact of counterparty netting
related to our derivative positions.
|
During 2010, we recognized net gains of $7.1 billion on
Level 3 assets and liabilities which were primarily gains
on net derivatives driven by income earned on IRLCs, which are
considered derivative instruments related to the origination of
mortgage loans that are
held-for-sale.
These gains were partially offset by changes in the value of
MSRs as a result of a decline in interest rates and OTTI losses
on non-agency RMBS. We also recorded pre-tax net unrealized
losses of $193 million in accumulated OCI on Level 3
assets and liabilities during 2010, primarily related to
non-agency RMBS.
Level 3 financial instruments, such as our consumer MSRs,
may be economically hedged with derivatives not classified as
Level 3; therefore, gains or losses associated with
Level 3 financial instruments may be offset by gains or
losses associated with financial instruments classified in other
levels of the fair value hierarchy. The gains and losses
recorded in earnings did not have a significant impact on our
liquidity or capital resources.
We conduct a review of our fair value hierarchy classifications
on a quarterly basis. Transfers into or out of Level 3 are
made if the significant inputs used in the financial models
measuring the fair values of the assets and liabilities became
unobservable or observable, respectively, in the current
marketplace. These transfers are effective as of the beginning
of the quarter.
During 2010, the more significant transfers into Level 3
included $3.2 billion of trading account assets,
$3.5 billion of AFS debt securities, $1.1 billion of
net derivative contracts and $1.9 billion of long-term
debt. Transfers into Level 3 for trading account assets
were driven by reduced price transparency as a result of lower
levels of trading activity for certain municipal auction rate
securities and corporate debt securities as well as a change in
valuation
methodology for certain ABS to a discounted cash flow model.
Transfers into Level 3 for AFS debt securities were due to
an increase in the number of non-agency RMBS and other taxable
securities priced using a discounted cash flow model. Transfers
into Level 3 for net derivative contracts were primarily
related to a lack of price observability for certain credit
default and total return swaps. Transfers in and transfers out
of Level 3 for long-term debt are primarily due to changes
in the impact of unobservable inputs on the value of certain
equity-linked structured notes.
During 2010, the more significant transfers out of Level 3
were $3.4 billion of trading account assets and
$1.8 billion of long-term debt. Transfers out of
Level 3 for trading account assets were driven by increased
price verification of certain mortgage-backed securities,
corporate debt and
non-U.S. government
and agency securities. Transfers out of Level 3 for
long-term debt are the result of a decrease in the significance
of unobservable pricing inputs for certain equity-linked
structured notes.
Global Principal
Investments
Global Principal Investments is included within Equity
Investments in All Other on page 51. Global
Principal Investments is comprised of a diversified portfolio of
private equity, real estate and other alternative investments in
both privately held and publicly traded companies. These
investments are made either directly in a company or held
through a fund. At December 31, 2010, this portfolio
totaled $11.7 billion including $9.7 billion of
non-public investments.
Certain equity investments in the portfolio are subject to
investment-company accounting under applicable accounting
guidance, and accordingly,
Bank of America
2010 109
are carried at fair value with changes in fair value reported in
equity investment income. Initially the transaction price of the
investment is generally considered to be the best indicator of
fair value. Thereafter, valuation of direct investments is based
on an assessment of each individual investment using
methodologies that include publicly traded comparables derived
by multiplying a key performance metric (e.g., earnings before
interest, taxes, depreciation and amortization) of the portfolio
company by the relevant valuation multiple observed for
comparable companies, acquisition comparables, entry-level
multiples and discounted cash flows, and are subject to
appropriate discounts for lack of liquidity or marketability.
Certain factors that may influence changes in fair value include
but are not limited to, recapitalizations, subsequent rounds of
financing and offerings in the equity or debt capital markets.
For fund investments, we generally record the fair value of our
proportionate interest in the funds capital as reported by
the funds respective managers.
Accrued Income
Taxes
Accrued income taxes, reported as a component of accrued
expenses and other liabilities on our Consolidated Balance
Sheet, represents the net amount of current income taxes we
expect to pay to or receive from various taxing jurisdictions
attributable to our operations to date. We currently file income
tax returns in more than 100 jurisdictions and consider many
factors, including statutory, judicial and regulatory
guidance, in estimating the appropriate accrued income
taxes for each jurisdiction.
In applying the applicable accounting guidance, we monitor
relevant tax authorities and change our estimate of accrued
income taxes due to changes in income tax laws and their
interpretation by the courts and regulatory authorities. These
revisions of our estimate of accrued income taxes, which also
may result from our income tax planning and from the resolution
of income tax controversies, may be material to our operating
results for any given period.
Goodwill and
Intangible Assets
Background
The nature of and accounting for goodwill and intangible assets
are discussed in Note 1 Summary of Significant
Accounting Principles and Note 10 Goodwill
and Intangible Assets to the Consolidated Financial
Statements. Goodwill is reviewed for potential impairment at the
reporting unit level on an annual basis, which for the
Corporation is performed as of June 30 and in interim periods if
events or circumstances indicate a potential impairment. See
discussion about the annual impairment test as of June 30,
2010 on page 111. A reporting unit is a business segment or
one level below. As reporting units are determined after an
acquisition or evolve with changes in business strategy,
goodwill is assigned to reporting units and it no longer retains
its association with a particular acquisition. All of the
revenue streams and related activities of a reporting unit,
whether acquired or organic, are available to support the value
of the goodwill.
The Corporations common stock price, consistent with
common stock prices in the financial services industry, remains
volatile primarily due to the continued uncertainty in the
financial markets as well as recent financial reforms including
the Financial Reform Act. Our market capitalization has remained
below our recorded book value during 2010. The fair value of all
reporting units in aggregate as of the June 30, 2010 annual
impairment test was estimated to be $264.4 billion and the
common stock market capitalization of the Corporation as of that
date was $144.2 billion ($134.5 billion at
December 31, 2010). The implied control premium, which is
the amount a buyer would be willing to pay over the current
market price of a publicly traded stock to obtain control, was
63 percent after taking into consideration the outstanding
preferred stock of $18.0 billion as of June 30, 2010.
As none of our reporting units are publicly traded, individual
reporting unit fair value determinations are not directly
correlated to the Corporations stock price. Although we
believe it is reasonable to conclude that market capitalization
could be an indicator of fair value over time, we do not believe
that recent fluctuations in our market capitalization as a
result of the current economic conditions are reflective of
actual cash flows and the fair value of our individual reporting
units.
Estimating the fair value of reporting units and the assets,
liabilities and intangible assets of a reporting unit is a
subjective process that involves the use of estimates and
judgments, particularly related to cash flows, the appropriate
discount rates and an applicable control premium. The fair
values of the reporting units were determined using a
combination of valuation techniques consistent with the market
approach and the income approach and included the use of
independent valuation specialists. Measurement of the fair
values of the assets, liabilities and intangibles of a reporting
unit was consistent with the requirements of the fair value
measurements accounting guidance and includes the use of
estimates and judgments. The fair values of the intangible
assets were determined using the income approach.
The market approach we used estimates the fair value of the
individual reporting units by incorporating any combination of
the tangible capital, book capital and earnings multiples from
comparable publicly traded companies in industries similar to
that of the reporting unit. The relative weight assigned to
these multiples varies among the reporting units based upon
qualitative and quantitative characteristics, primarily the size
and relative profitability of the respective reporting unit
compared to the comparable publicly traded companies. Since the
fair values determined under the market approach are
representative of a noncontrolling interest, a control premium
was added to arrive at the reporting units estimated fair
values on a controlling basis.
For purposes of the income approach, we calculated discounted
cash flows using estimated future cash flows and an appropriate
terminal value. Our discounted cash flow analysis employs a
capital asset pricing model in estimating the discount rate
(i.e., cost of equity financing) for each reporting unit. The
inputs to this model include the risk-free rate of return, beta,
which is a measure of the level of non-diversifiable risk
associated with comparable companies for each specific reporting
unit, market equity risk premium and in certain cases an
unsystematic (company-specific) risk factor. The unsystematic
risk factor is the input that specifically addresses uncertainty
related to our projections of earnings and growth, including the
uncertainty related to loss expectations. We utilized discount
rates that we believe adequately reflect the risk and
uncertainty in the financial markets generally and specifically
in our internally developed forecasts. Expected rates of equity
returns were estimated based on historical market returns and
risk/return rates for similar industries of the reporting unit.
We use our internal forecasts to estimate future cash flows and
actual results may differ from forecasted results.
Global Card
Services Impairment
On July 21, 2010, the Financial Reform Act was signed into
law. Under the Financial Reform Act and its amendment to the
Electronic Fund Transfer Act, the Federal Reserve must
adopt rules within nine months of enactment of the Financial
Reform Act regarding the interchange fees that may be charged
with respect to electronic debit transactions. Those rules will
take effect one year after enactment of the Financial Reform
Act. The Financial Reform Act and the applicable rules are
expected to materially reduce the future revenues generated by
the debit card business of the Corporation.
Our consumer and small business card products, including the
debit card business, are part of an integrated platform within
Global Card Services. During the three months ended
September 30, 2010, our estimate of revenue loss due to the
debit card interchange fee standards to be adopted under the
Financial Reform Act was approximately $2.0 billion
annually based on current volumes. Accordingly, we performed an
impairment test for Global Card Services during the three
months ended September 30, 2010. In step one of the
impairment test, the fair value of Global Card Services
was estimated under the income approach where the
significant assumptions included the
110 Bank
of America 2010
discount rate, terminal value, expected loss rates and expected
new account growth. We also updated our estimated cash flow
valuation to reflect the current strategic plan and other
portfolio assumptions. Based on the results of step one of the
impairment test, we determined that the carrying amount of
Global Card Services, including goodwill, exceeded the
fair value. The carrying amount, fair value and goodwill of the
reporting unit were $39.2 billion, $25.9 billion and
$22.3 billion, respectively. Accordingly, we performed step
two of the goodwill impairment test for this reporting unit. In
step two, we compared the implied fair value of the reporting
units goodwill with the carrying amount of that goodwill.
Under step two of the impairment test, significant assumptions
in measuring the fair value of the assets and liabilities
including discount rates, loss rates and interest rates were
updated to reflect the current economic conditions. Based on the
results of this third-quarter goodwill impairment test for
Global Card Services, the carrying value of the goodwill
assigned to the reporting unit exceeded the implied fair value
by $10.4 billion. Accordingly, we recorded a non-cash,
non-tax deductible goodwill impairment charge of
$10.4 billion to reduce the carrying value of goodwill in
Global Card Services from $22.3 billion to
$11.9 billion. The goodwill impairment test included
limited mitigation actions to recapture lost revenue. Although
we have identified other potential mitigation actions within
Global Card Services, the impact of these actions going
forward did not reduce the goodwill impairment charge because
these actions are in the early stages of development and,
additionally, certain of them may impact segments other than
Global Card Services (e.g., Deposits). The
impairment charge had no impact on the Corporations
reported Tier 1 and tangible equity ratios.
Due to the continued stress on Global Card Services as a
result of the Financial Reform Act, we concluded that an
additional impairment analysis should be performed for this
reporting unit during the three months ended December 31,
2010. In step one of the goodwill impairment test, the fair
value of Global Card Services was estimated under the
income approach. The significant assumptions under the income
approach included the discount rate, terminal value, expected
loss rates and expected new account growth. The carrying amount,
fair value and goodwill for the Global Card Services
reporting unit were $27.5 billion, $27.6 billion
and $11.9 billion, respectively. The estimated fair value
as a percent of the carrying amount at December 31, 2010
was 100 percent. Although fair value exceeded the carrying
amount in step one of the Global Card Services goodwill
impairment test, to further substantiate the value of goodwill,
we also performed the step two test for this reporting unit.
Under step two of the goodwill impairment test for this
reporting unit, significant assumptions in measuring the fair
value of the assets and liabilities of the reporting unit
including discount rates, loss rates and interest rates were
updated to reflect the current economic conditions. The results
of step two of the goodwill impairment test indicated that
remaining balance of goodwill of $11.9 billion was not
impaired as of December 31, 2010.
On December 16, 2010, the Federal Reserve released proposed
regulations to implement the Durbin Amendment of the Financial
Reform Act, which are scheduled to be effective July 21,
2011. The proposed rule includes two alternative interchange fee
standards that would apply to all covered issuers: one based on
each issuers costs, with a safe harbor initially set at
$0.07 per transaction and a cap initially set at $0.12 per
transaction; and the other a stand-alone cap initially set at
$0.12 per transaction. See Regulatory Matters beginning on
page 56 for additional information. Although the range of
revenue loss estimate based on the proposed rule was slightly
higher than our original estimate of $2.0 billion, given
the uncertainty around the potential outcome, we did not change
the revenue loss estimate used in the goodwill impairment test
during the three months ended December 31, 2010. If the
final Federal Reserve rule sets interchange fee standards that
are significantly lower than the interchange fee assumptions we
used in this goodwill impairment test, we will be required to
perform an additional goodwill impairment
test which may result in additional impairment of goodwill in
Global Card Services. In view of the uncertainty with
model inputs including the final ruling, changes in the economic
outlook and the corresponding impact to revenues and asset
quality, and the impacts of mitigation actions, it is not
possible to estimate the amount or range of amounts of
additional goodwill impairment, if any.
Home
Loans & Insurance Impairment
During the three months ended December 31, 2010, we
performed an impairment test for the Home Loans &
Insurance reporting unit as it was likely that there was a
decline in its fair value as a result of increased
uncertainties, including existing and potential litigation
exposure and other related risks, higher current servicing costs
including loss mitigation efforts, foreclosure related issues
and the redeployment of centralized sales resources to address
servicing needs. In step one of the goodwill impairment test,
the fair value of Home Loans & Insurance was
estimated based on a combination of the market approach and the
income approach. Under the market approach valuation,
significant assumptions included market multiples and a control
premium. The significant assumptions for the valuation of
Home Loans & Insurance under the income
approach included cash flow estimates, the discount rate and the
terminal value. These assumptions were updated to reflect the
current strategic plan forecast and to address the increased
uncertainties referenced above. Based on the results of step one
of the impairment test, we determined that the carrying
amount of Home Loans & Insurance, including
goodwill, exceeded the fair value. The carrying amount, fair
value and goodwill for the Home Loans & Insurance
reporting unit were $24.7 billion, $15.1 billion
and $4.8 billion, respectively. Accordingly, we performed
step two of the goodwill impairment test for this reporting
unit. In step two, we compared the implied fair value of the
reporting units goodwill with the carrying amount of that
goodwill. Under step two of the goodwill impairment test,
significant assumptions in measuring the fair value of the
assets and liabilities of the reporting unit including discount
rates, loss rates and interest rates were updated to reflect the
current economic conditions. Based on the results of step two of
the impairment test, the carrying value of the goodwill assigned
to Home Loans & Insurance exceeded the implied
fair value by $2.0 billion. Accordingly, we recorded a
non-cash, non-tax deductible goodwill impairment charge of
$2.0 billion as of December 31, 2010 to reduce the
carrying value of goodwill in the Home Loans &
Insurance reporting unit. The impairment charge had no
impact on the Corporations Tier 1 and tangible equity
ratios.
As we obtain additional information relative to our litigation
exposure, representations and warranties repurchase obligations,
servicing costs and foreclosure related issues, it is possible
that such information, if significantly different than the
assumptions used in this goodwill impairment test, may result in
additional impairment in the Home Loans & Insurance
reporting unit.
Annual Impairment
Test for 2010
We perform our annual goodwill impairment test for all reporting
units as of June 30 each year. In performing the first step of
the June 30, 2010 annual impairment test, we compared the
fair value of each reporting unit to its current carrying
amount, including goodwill. To determine fair value, we utilized
a combination of a market approach and an income approach. Under
the market approach, we compared earnings and equity multiples
of the individual reporting units to multiples of publicly
traded companies comparable to the individual reporting units.
The control premiums used in the June 30, 2010 annual
impairment test ranged from 25 to 35 percent. Under the
income approach, we updated our assumptions to reflect the
current market environment. The discount rates used in the
June 30, 2010 annual impairment test ranged from 11 to
15 percent depending on the relative risk of a reporting
unit. Because growth rates developed by management for
Bank of America
2010 111
individual revenue and expense items have been significantly
affected by the current economic environment and financial
reform, management developed separate long-term forecasts. The
fair value of Global Card Services was estimated under
the income approach which did not include the impact of any
potential future changes that would result from the Financial
Reform Act because it was not signed into law until the third
quarter 2010.
Based on the results of step one of the annual impairment test,
we determined that the carrying amount of the Home
Loans & Insurance and Global Card Services
reporting units, including goodwill, exceeded their fair
value. The carrying amount, fair value and goodwill for the
Home Loans & Insurance reporting unit were
$27.1 billion, $22.5 billion and $4.8 billion,
respectively, and for Global Card Services were
$40.1 billion, $40.1 billion and $22.3 billion,
respectively. Because the carrying amount exceeded the fair
value, we performed step two of the goodwill impairment test for
these reporting units as of June 30, 2010. For all other
reporting units, step two was not required as their fair value
exceeded their carrying amount indicating there was no
impairment.
In step two for both reporting units, we compared the implied
fair value of each reporting units goodwill with the
carrying amount of that goodwill. We determined the implied fair
value of goodwill for a reporting unit by assigning the fair
value of the reporting unit to all of the assets and liabilities
of that unit, including any unrecognized intangible assets, as
if the reporting unit had been acquired in a business
combination. The excess of the fair value of the reporting unit
over the amounts assigned to its assets and liabilities is the
implied fair value of goodwill. Significant assumptions in
measuring the fair value of the assets and liabilities of both
reporting units including discount rates, loss rates and
interest rates were updated to reflect the current economic
conditions. Based on the results of step two of the impairment
test as of June 30, 2010, we determined that goodwill was
not impaired in either Home Loans & Insurance
or Global Card Services.
Representations
and Warranties
The methodology used to estimate the liability for
representations and warranties is a function of the
representations and warranties given and considers a variety of
factors, which include depending upon the counterparty, actual
defaults, estimated future defaults, historical loss experience,
estimated home prices, estimated probability that we will
receive a repurchase request, number of payments made by the
borrower prior to default and estimated probability that we will
be required to repurchase a loan. Changes to any one of these
factors could significantly impact the estimate of our
liability. Representations and warranties provision may vary
significantly each period as the methodology used to estimate
the expense continues to be refined based on the level and type
of repurchase requests presented, defects identified, the latest
experience gained on repurchase requests and other relevant
facts and circumstances. For those claims where we have
established a representations and warranties liability as
discussed in Note 9 Representations and
Warranties Obligations and Corporate Guarantees to the
Consolidated Financial Statements, an assumed simultaneous
increase or decrease of 10 percent in estimated future
defaults, loss severity and the net repurchase rate would result
in an increase of approximately $850 million or decrease of
approximately $950 million in the representations and
warranties liability as of December 31, 2010. These
sensitivities are hypothetical and are intended to provide an
indication of the impact of a significant change in these key
assumptions on the representations and warranties liability. In
reality, changes in one assumption may result in changes in
other assumptions, which may or may not counteract the
sensitivity.
For additional information on representations and warranties,
see Representations and Warranties on page 52,
Note 9 Representations and Warranties Obligations
and Corporate Guarantees and Note 14
Commitments and Contingencies to the Consolidated Financial
Statements.
Litigation
Reserve
In accordance with applicable accounting guidance, the
Corporation establishes an accrued liability for litigation and
regulatory matters when those matters present loss contingencies
that are both probable and estimable. In such cases, there may
be an exposure to loss in excess of any amounts accrued. When a
loss contingency is not both probable and estimable, the
Corporation does not establish an accrued liability. As a
litigation or regulatory matter develops, the Corporation, in
conjunction with any outside counsel handling the matter,
evaluates on an ongoing basis whether such matter presents a
loss contingency that is both probable and estimable. If, at the
time of evaluation, the loss contingency related to a litigation
or regulatory matter is not both probable and estimable, the
matter will continue to be monitored for further developments
that would make such loss contingency both probable and
estimable. Once the loss contingency related to a litigation or
regulatory matter is deemed to be both probable and estimable,
the Corporation will establish an accrued liability with respect
to such loss contingency and record a corresponding amount of
litigation-related expense. The Corporation will continue to
monitor the matter for further developments that could affect
the amount of the accrued liability that has been previously
established.
For a limited number of the matters disclosed in Note 14
Commitments and Contingencies to the Consolidated
Financial Statements for which a loss is probable or reasonably
possible in future periods, whether in excess of a related
accrued liability or where there is no accrued liability, we are
able to estimate a range of possible loss. In determining
whether it is possible to provide an estimate of loss or range
of possible loss, the Corporation reviews and evaluates its
material litigation and regulatory matters on an ongoing basis,
in conjunction with any outside counsel handling the matter, in
light of potentially relevant factual and legal developments.
These may include information learned through the discovery
process, rulings on dispositive motions, settlement discussions,
and other rulings by courts, arbitrators or others. In cases in
which the Corporation possesses sufficient information to
develop an estimate of loss or range of possible loss, that
estimate is aggregated and disclosed in Note 14
Commitments and Contingencies to the Consolidated Financial
Statements. For other disclosed matters for which a loss is
probable or reasonably possible, such an estimate is not
possible. Those matters for which an estimate is not possible
are not included within this estimated range. Therefore, the
estimated range of possible loss represents what we believe to
be an estimate of possible loss only for certain matters meeting
these criteria. It does not represent the Corporations
maximum loss exposure. Information is provided in
Note 14 Commitments and Contingencies to the
Consolidated Financial Statements regarding the nature of all of
these contingencies and, where specified, the amount of the
claim associated with these loss contingencies.
Consolidation and
Accounting for Variable Interest Entities
The entity that has a controlling financial interest in a VIE is
referred to as the primary beneficiary and consolidates the VIE.
In accordance with the new consolidation guidance effective
January 1, 2010, the Corporation is deemed to have a
controlling financial interest and is the primary beneficiary of
a VIE if it has both the power to direct the activities of the
VIE that most significantly impact the VIEs economic
performance and an obligation to absorb losses or the right to
receive benefits that could potentially be significant to the
VIE.
112 Bank
of America 2010
Determining whether an entity has a controlling financial
interest in a VIE requires significant judgment. An entity must
assess the purpose and design of the VIE, including explicit and
implicit contractual arrangements, and the entitys
involvement in both the design of the VIE and its ongoing
activities. The entity must then determine which activities have
the most significant impact on the economic performance of the
VIE and whether the entity has the power to direct such
activities. For VIEs that hold financial assets, the party that
services the assets or makes investment management decisions may
have the power to direct the most significant activities of a
VIE. Alternatively, a third party that has the unilateral right
to replace the servicer or investment manager or to liquidate
the VIE may be deemed to be the party with power. If there are
no significant ongoing activities, the party that was
responsible for the design of the VIE may be deemed to have
power. If the entity determines that it has the power to direct
the most significant activities of the VIE, then the entity must
determine if it has either an obligation to absorb losses or the
right to receive benefits that could potentially be significant
to the VIE. Such economic interests may include investments in
debt or equity instruments issued by the VIE, liquidity
commitments, and explicit and implicit guarantees.
On a quarterly basis, we reassess whether we have a controlling
financial interest and are the primary beneficiary of a VIE. The
quarterly reassessment process considers whether we have
acquired or divested the power to direct the activities of the
VIE through changes in governing documents or other
circumstances. The reassessment also considers whether we have
acquired or disposed of a financial interest that could be
significant to the VIE, or whether an interest in the VIE has
become significant or is no longer significant. The
consolidation status of the VIEs with which we are involved may
change as a result of such reassessments. Changes in
consolidation status are applied prospectively, with assets and
liabilities of a newly consolidated VIE initially recorded at
fair value. A gain or loss may be recognized upon
deconsolidation of a VIE depending on the carrying amounts of
deconsolidated assets and liabilities compared to the fair value
of retained interests and ongoing contractual arrangements.
2009
Compared to 2008
The following discussion and analysis provides a comparison of
our results of operations for 2009 and 2008. This discussion
should be read in conjunction with the Consolidated Financial
Statements and related Notes. Tables 6 and 7 contain financial
data to supplement this discussion.
Overview
Net
Income
Net income totaled $6.3 billion in 2009 compared to
$4.0 billion in 2008. Including preferred stock dividends,
net loss applicable to common shareholders was
$2.2 billion, or $(0.29) per diluted share. Those results
compared with 2008 net income available to common
shareholders of $2.6 billion, or $0.54 per diluted share.
Net Interest
Income
Net interest income on a FTE basis increased $1.9 billion
to $48.4 billion for 2009 compared to 2008. The increase
was driven by the improved rate environment, the acquisitions of
Countrywide and Merrill Lynch, the impact of new draws on
previously securitized accounts and the contribution from
market-based net interest income which benefited from the
Merrill Lynch acquisition. These items were partially offset by
the impact of deleveraging the ALM portfolio earlier in 2009,
lower consumer loan levels and the adverse impact of
nonperforming loans. The net interest yield on a FTE basis
decreased 33 bps to 2.65 percent for 2009 compared to
2008 due to the factors related to the core businesses as
described above.
Noninterest
Income
Noninterest income increased $45.1 billion to
$72.5 billion in 2009 compared to 2008. Card income on a
held basis decreased $5.0 billion primarily due to higher
credit losses on securitized credit card loans and lower fee
income driven by changes in consumer retail purchase and payment
behavior in the stressed economic environment. Investment and
brokerage services increased $6.9 billion primarily due to
the acquisition of Merrill Lynch partially offset by the impact
of lower valuations in the equity markets driven by the market
downturn in late 2008, which improved modestly in 2009, and net
outflows in the cash funds. Investment banking income increased
$3.3 billion due to higher debt, equity and advisory fees
reflecting the increased size of the investment banking platform
from the acquisition of Merrill Lynch. Equity investment income
increased $9.5 billion driven by $7.3 billion in gains
on sales of portions of our CCB investment and a
$1.1 billion gain related to our BlackRock investment.
Trading account profits (losses) increased $18.1 billion
primarily driven by favorable core trading results and reduced
write-downs on legacy assets partially offset by negative credit
valuation adjustments on derivative liabilities of
$662 million due to improvement in the Corporations
credit spreads. Mortgage banking income increased
$4.7 billion driven by higher production and servicing
income of $3.2 billion and $1.5 billion. These
increases were primarily due to increased volume as a result of
the full-year impact of Countrywide and higher refinance
activity partially offset by lower MSR results, net of hedges.
Gains on sales of debt securities increased $3.6 billion
due to the favorable interest rate environment and improved
credit spreads. Gains were primarily driven by sales of agency
MBS and CMOs. The net loss in other decreased $1.6 billion
primarily due to the $3.8 billion gain from the
contribution of our merchant processing business to a joint
venture, reduced support provided to cash funds and lower
write-downs on legacy assets offset by negative credit valuation
adjustments recorded on Merrill Lynch structured notes of
$4.9 billion.
Provision for
Credit Losses
The provision for credit losses increased $21.7 billion to
$48.6 billion for 2009 compared to 2008 reflecting further
deterioration in the economy and housing markets across a broad
range of property types, industries and borrowers. Net
charge-offs totaled $33.7 billion, or 3.58 percent of
average loans and leases for 2009 compared with
$16.2 billion, or 1.79 percent for 2008. The increased
level of net charge-offs is a result of the same factors noted
above.
Noninterest
Expense
Noninterest expense increased $25.2 billion to
$66.7 billion for 2009 compared to 2008. Personnel costs
and other general operating expenses rose due to the addition of
Merrill Lynch and the full-year impact of Countrywide.
Additionally, noninterest expense increased due to higher
litigation costs compared to the prior year, a $425 million
pre-tax charge to pay the U.S. government to terminate its
asset guarantee term sheet and higher FDIC insurance costs
including a $724 million special assessment in 2009.
Income Tax
Expense
Income tax benefit was $1.9 billion for 2009 compared to
expense of $420 million for 2008 and resulted in an
effective tax rate of (44.0) percent compared to
9.5 percent in the prior year. The change in the effective
tax rate from the prior year was due to increased permanent tax
preference items as well as a shift in the geographic mix of our
earnings driven by the addition of Merrill Lynch.
Bank of America
2010 113
Business
Segment Operations
Deposits
Net income decreased $3.0 billion to $2.6 billion
driven by lower net revenue partially offset by an increase in
noninterest expense. Net interest income decreased
$3.8 billion driven by lower net interest income allocation
from ALM activities and spread compression as interest rates
declined. Noninterest income was essentially flat at
$6.8 billion. Noninterest expense increased
$908 million to $9.5 billion primarily due to higher
FDIC insurance including a special FDIC assessment, partially
offset by lower operating costs related to lower transaction
volume due to the economy and productivity initiatives.
Global Card
Services
Net income decreased $6.8 billion to a net loss of
$5.3 billion due to higher provision for credit losses. Net
interest income grew $667 million to $20.0 billion
driven by increased loan spreads. Noninterest income decreased
$2.6 billion to $9.1 billion driven by decreases in
card income and all other income. The decrease in card income
resulted from lower cash advances, credit card interchange and
fee income. All other income in 2008 included the gain
associated with the Visa initial public offering (IPO).
Provision for credit losses increased $10.0 billion to
$29.6 billion primarily driven by higher losses in the
consumer card and consumer lending portfolios from impact of the
economic conditions. Noninterest expense decreased
$1.2 billion to $7.7 billion primarily due to lower
operating and marketing costs, and the impact of certain
benefits associated with the Visa IPO transactions.
Home
Loans & Insurance
Home Loans & Insurance net loss increased
$1.3 billion to a net loss of $3.9 billion as growth
in noninterest income and net interest income was more than
offset by higher provision for credit losses and an increase in
noninterest expense. Net interest income grew $1.7 billion
driven primarily by an increase in average LHFS and home equity
loans. The growth in average LHFS was a result of higher
mortgage loan volume driven by the lower interest rate
environment. The growth in average home equity loans was
attributable to the migration of certain loans from GWIM
to Home Loans & Insurance as well as the
Countrywide acquisition. Noninterest income increased
$5.9 billion to $11.9 billion driven by higher
mortgage banking income which benefited from the Countrywide
acquisition and higher production income, partially offset by
higher representations and warranties provision. Provision for
credit losses increased $5.0 billion to $11.2 billion
driven primarily by higher losses in the home equity portfolio
and reserve increases in the Countrywide home equity PCI
portfolio. Noninterest expense increased $4.7 billion to
$11.7 billion primarily driven by the Countrywide
acquisition as well as increased costs related to higher
production volume.
Global Commercial
Banking
Net income decreased $2.9 billion to a net loss of
$290 million in 2009 as an increase in revenue was more
than offset by increased credit costs. Net interest income was
essentially flat at $8.1 billion. Noninterest income
increased $552 million to $3.1 billion largely driven
by our agreement to
purchase certain retail automotive loans. The provision for
credit losses increased $4.5 billion to $7.8 billion,
driven by reserve additions primarily in the commercial real
estate portfolio and higher net charge-offs across all
portfolios. Noninterest expense increased $501 million
primarily attributable to higher FDIC insurance, including a
special FDIC assessment.
Global
Banking & Markets
Global Banking & Markets recognized net income
of $10.1 billion in 2009 compared to a net loss of
$3.2 billion in 2008 as increased noninterest income driven
by trading account profits was partially offset by higher
noninterest expense. Sales and trading revenue was
$17.6 billion in 2009 compared to a loss of
$6.9 billion in 2008 primarily due to the addition of
Merrill Lynch. Noninterest income also included a
$3.8 billion pre-tax gain related to the contribution of
the merchant processing business into a joint venture.
Noninterest expense increased $8.6 billion, largely
attributable to the Merrill Lynch acquisition.
Global
Wealth & Investment Management
Net income increased $702 million to $1.7 billion in
2009 as higher total revenue was partially offset by increases
in noninterest expense and provision for credit losses. Net
interest income increased $1.2 billion to $6.0 billion
primarily due to the acquisition of Merrill Lynch. Noninterest
income increased $8.6 billion to $10.1 billion
primarily due to higher investment and brokerage services income
and the lower level of support provided to certain cash funds,
partially offset by the impact of lower average equity market
levels and net outflows primarily in the cash complex. Provision
for credit losses increased $397 million to
$1.1 billion, reflecting the weak economy during 2009 which
drove higher net charge-offs in the consumer real estate and
commercial portfolios. Noninterest expense increased
$8.3 billion to $12.4 billion driven by the addition
of Merrill Lynch and higher FDIC insurance, including a special
FDIC assessment, partially offset by lower revenue-related
expenses.
All
Other
Net income in All Other was $1.3 billion in 2009
compared to a net loss of $1.1 billion in 2008 as higher
total revenue driven by increases in noninterest income, net
interest income and an income tax benefit were partially offset
by increased provision for credit losses, merger and
restructuring charges and all other noninterest expense. Net
interest income increased $1.5 billion primarily due to
unallocated net interest income related to increased liquidity
driven in part by capital raises during 2009. Noninterest income
increased $8.2 billion to $10.6 billion driven by
higher equity investment income including a $7.3 billion
gain on the sale of a portion of our CCB investment and gains on
sales of debt securities. These were partially offset by a
$4.9 billion negative valuation adjustment on certain
structured liabilities. Provision for credit losses was
$8.0 billion in 2009 compared to $2.8 billion in 2008
primarily due to higher credit costs related to our ALM
residential mortgage portfolio. Merger and restructuring charges
increased $1.8 billion to $2.7 billion due to the
integration costs associated with the Merrill Lynch and
Countrywide acquisitions.
114 Bank
of America 2010
Table
I Year-to-date
Average Balances and Interest Rates FTE
Basis
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
|
Average
|
|
|
Income/
|
|
|
Yield/
|
|
|
Average
|
|
|
Income/
|
|
|
Yield/
|
|
|
Average
|
|
|
Income/
|
|
|
Yield/
|
|
(Dollars in millions)
|
|
Balance
|
|
|
Expense
|
|
|
Rate
|
|
|
Balance
|
|
|
Expense
|
|
|
Rate
|
|
|
Balance
|
|
|
Expense
|
|
|
Rate
|
|
Earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits placed and other short-term
investments (1)
|
|
$
|
27,419
|
|
|
$
|
292
|
|
|
|
1.06
|
%
|
|
$
|
27,465
|
|
|
$
|
334
|
|
|
|
1.22
|
%
|
|
$
|
10,696
|
|
|
$
|
367
|
|
|
|
3.43
|
%
|
Federal funds sold and securities borrowed or purchased under
agreements to resell
|
|
|
256,943
|
|
|
|
1,832
|
|
|
|
0.71
|
|
|
|
235,764
|
|
|
|
2,894
|
|
|
|
1.23
|
|
|
|
128,053
|
|
|
|
3,313
|
|
|
|
2.59
|
|
Trading account assets
|
|
|
213,745
|
|
|
|
7,050
|
|
|
|
3.30
|
|
|
|
217,048
|
|
|
|
8,236
|
|
|
|
3.79
|
|
|
|
186,579
|
|
|
|
9,259
|
|
|
|
4.96
|
|
Debt
securities (2)
|
|
|
323,946
|
|
|
|
11,850
|
|
|
|
3.66
|
|
|
|
271,048
|
|
|
|
13,224
|
|
|
|
4.88
|
|
|
|
250,551
|
|
|
|
13,383
|
|
|
|
5.34
|
|
Loans and leases
(3):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
mortgage (4)
|
|
|
245,727
|
|
|
|
11,736
|
|
|
|
4.78
|
|
|
|
249,335
|
|
|
|
13,535
|
|
|
|
5.43
|
|
|
|
260,244
|
|
|
|
14,657
|
|
|
|
5.63
|
|
Home equity
|
|
|
145,860
|
|
|
|
5,990
|
|
|
|
4.11
|
|
|
|
154,761
|
|
|
|
6,736
|
|
|
|
4.35
|
|
|
|
135,060
|
|
|
|
7,606
|
|
|
|
5.63
|
|
Discontinued real estate
|
|
|
13,830
|
|
|
|
527
|
|
|
|
3.81
|
|
|
|
17,340
|
|
|
|
1,082
|
|
|
|
6.24
|
|
|
|
10,898
|
|
|
|
858
|
|
|
|
7.87
|
|
U.S. credit card
|
|
|
117,962
|
|
|
|
12,644
|
|
|
|
10.72
|
|
|
|
52,378
|
|
|
|
5,666
|
|
|
|
10.82
|
|
|
|
63,318
|
|
|
|
6,843
|
|
|
|
10.81
|
|
Non-U.S.
credit card
|
|
|
28,011
|
|
|
|
3,450
|
|
|
|
12.32
|
|
|
|
19,655
|
|
|
|
2,122
|
|
|
|
10.80
|
|
|
|
16,527
|
|
|
|
2,042
|
|
|
|
12.36
|
|
Direct/Indirect
consumer (5)
|
|
|
96,649
|
|
|
|
4,753
|
|
|
|
4.92
|
|
|
|
99,993
|
|
|
|
6,016
|
|
|
|
6.02
|
|
|
|
82,516
|
|
|
|
6,934
|
|
|
|
8.40
|
|
Other
consumer (6)
|
|
|
2,927
|
|
|
|
186
|
|
|
|
6.34
|
|
|
|
3,303
|
|
|
|
237
|
|
|
|
7.17
|
|
|
|
3,816
|
|
|
|
321
|
|
|
|
8.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer
|
|
|
650,966
|
|
|
|
39,286
|
|
|
|
6.04
|
|
|
|
596,765
|
|
|
|
35,394
|
|
|
|
5.93
|
|
|
|
572,379
|
|
|
|
39,261
|
|
|
|
6.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. commercial
|
|
|
195,895
|
|
|
|
7,909
|
|
|
|
4.04
|
|
|
|
223,813
|
|
|
|
8,883
|
|
|
|
3.97
|
|
|
|
220,554
|
|
|
|
11,702
|
|
|
|
5.31
|
|
Commercial real
estate (7)
|
|
|
59,947
|
|
|
|
2,000
|
|
|
|
3.34
|
|
|
|
73,349
|
|
|
|
2,372
|
|
|
|
3.23
|
|
|
|
63,208
|
|
|
|
3,057
|
|
|
|
4.84
|
|
Commercial lease financing
|
|
|
21,427
|
|
|
|
1,070
|
|
|
|
4.99
|
|
|
|
21,979
|
|
|
|
990
|
|
|
|
4.51
|
|
|
|
22,290
|
|
|
|
799
|
|
|
|
3.58
|
|
Non-U.S.
commercial
|
|
|
30,096
|
|
|
|
1,091
|
|
|
|
3.62
|
|
|
|
32,899
|
|
|
|
1,406
|
|
|
|
4.27
|
|
|
|
32,440
|
|
|
|
1,503
|
|
|
|
4.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
307,365
|
|
|
|
12,070
|
|
|
|
3.93
|
|
|
|
352,040
|
|
|
|
13,651
|
|
|
|
3.88
|
|
|
|
338,492
|
|
|
|
17,061
|
|
|
|
5.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases
|
|
|
958,331
|
|
|
|
51,356
|
|
|
|
5.36
|
|
|
|
948,805
|
|
|
|
49,045
|
|
|
|
5.17
|
|
|
|
910,871
|
|
|
|
56,322
|
|
|
|
6.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other earning assets
|
|
|
117,189
|
|
|
|
3,919
|
|
|
|
3.34
|
|
|
|
130,063
|
|
|
|
5,105
|
|
|
|
3.92
|
|
|
|
75,972
|
|
|
|
4,161
|
|
|
|
5.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earning assets
(8)
|
|
|
1,897,573
|
|
|
|
76,299
|
|
|
|
4.02
|
|
|
|
1,830,193
|
|
|
|
78,838
|
|
|
|
4.31
|
|
|
|
1,562,722
|
|
|
|
86,805
|
|
|
|
5.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents (1)
|
|
|
174,621
|
|
|
|
368
|
|
|
|
|
|
|
|
196,237
|
|
|
|
379
|
|
|
|
|
|
|
|
45,367
|
|
|
|
73
|
|
|
|
|
|
Other assets, less allowance for loan and lease losses
|
|
|
367,408
|
|
|
|
|
|
|
|
|
|
|
|
416,638
|
|
|
|
|
|
|
|
|
|
|
|
235,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,439,602
|
|
|
|
|
|
|
|
|
|
|
$
|
2,443,068
|
|
|
|
|
|
|
|
|
|
|
$
|
1,843,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. interest-bearing deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
|
|
$
|
36,649
|
|
|
$
|
157
|
|
|
|
0.43
|
%
|
|
$
|
33,671
|
|
|
$
|
215
|
|
|
|
0.64
|
%
|
|
$
|
32,204
|
|
|
$
|
230
|
|
|
|
0.71
|
%
|
NOW and money market deposit accounts
|
|
|
441,589
|
|
|
|
1,405
|
|
|
|
0.32
|
|
|
|
358,712
|
|
|
|
1,557
|
|
|
|
0.43
|
|
|
|
267,831
|
|
|
|
3,781
|
|
|
|
1.41
|
|
Consumer CDs and IRAs
|
|
|
142,648
|
|
|
|
1,723
|
|
|
|
1.21
|
|
|
|
218,041
|
|
|
|
5,054
|
|
|
|
2.32
|
|
|
|
203,887
|
|
|
|
7,404
|
|
|
|
3.63
|
|
Negotiable CDs, public funds and other time deposits
|
|
|
17,683
|
|
|
|
226
|
|
|
|
1.28
|
|
|
|
37,796
|
|
|
|
473
|
|
|
|
1.25
|
|
|
|
32,264
|
|
|
|
1,076
|
|
|
|
3.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. interest-bearing deposits
|
|
|
638,569
|
|
|
|
3,511
|
|
|
|
0.55
|
|
|
|
648,220
|
|
|
|
7,299
|
|
|
|
1.13
|
|
|
|
536,186
|
|
|
|
12,491
|
|
|
|
2.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S.
interest-bearing deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks located in
non-U.S.
countries
|
|
|
18,102
|
|
|
|
144
|
|
|
|
0.80
|
|
|
|
18,688
|
|
|
|
145
|
|
|
|
0.78
|
|
|
|
37,354
|
|
|
|
1,056
|
|
|
|
2.83
|
|
Governments and official institutions
|
|
|
3,349
|
|
|
|
10
|
|
|
|
0.28
|
|
|
|
6,270
|
|
|
|
16
|
|
|
|
0.26
|
|
|
|
10,975
|
|
|
|
279
|
|
|
|
2.54
|
|
Time, savings and other
|
|
|
55,059
|
|
|
|
332
|
|
|
|
0.60
|
|
|
|
57,045
|
|
|
|
347
|
|
|
|
0.61
|
|
|
|
53,695
|
|
|
|
1,424
|
|
|
|
2.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-U.S.
interest-bearing deposits
|
|
|
76,510
|
|
|
|
486
|
|
|
|
0.64
|
|
|
|
82,003
|
|
|
|
508
|
|
|
|
0.62
|
|
|
|
102,024
|
|
|
|
2,759
|
|
|
|
2.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits
|
|
|
715,079
|
|
|
|
3,997
|
|
|
|
0.56
|
|
|
|
730,223
|
|
|
|
7,807
|
|
|
|
1.07
|
|
|
|
638,210
|
|
|
|
15,250
|
|
|
|
2.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds purchased, securities loaned or sold under
agreements to repurchase and other short-term borrowings
|
|
|
430,329
|
|
|
|
3,699
|
|
|
|
0.86
|
|
|
|
488,644
|
|
|
|
5,512
|
|
|
|
1.13
|
|
|
|
455,703
|
|
|
|
12,362
|
|
|
|
2.71
|
|
Trading account liabilities
|
|
|
91,669
|
|
|
|
2,571
|
|
|
|
2.80
|
|
|
|
72,207
|
|
|
|
2,075
|
|
|
|
2.87
|
|
|
|
72,915
|
|
|
|
2,774
|
|
|
|
3.80
|
|
Long-term debt
|
|
|
490,497
|
|
|
|
13,707
|
|
|
|
2.79
|
|
|
|
446,634
|
|
|
|
15,413
|
|
|
|
3.45
|
|
|
|
231,235
|
|
|
|
9,938
|
|
|
|
4.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing
liabilities (8)
|
|
|
1,727,574
|
|
|
|
23,974
|
|
|
|
1.39
|
|
|
|
1,737,708
|
|
|
|
30,807
|
|
|
|
1.77
|
|
|
|
1,398,063
|
|
|
|
40,324
|
|
|
|
2.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing sources:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits
|
|
|
273,507
|
|
|
|
|
|
|
|
|
|
|
|
250,743
|
|
|
|
|
|
|
|
|
|
|
|
192,947
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
205,290
|
|
|
|
|
|
|
|
|
|
|
|
209,972
|
|
|
|
|
|
|
|
|
|
|
|
88,144
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
233,231
|
|
|
|
|
|
|
|
|
|
|
|
244,645
|
|
|
|
|
|
|
|
|
|
|
|
164,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity
|
|
$
|
2,439,602
|
|
|
|
|
|
|
|
|
|
|
$
|
2,443,068
|
|
|
|
|
|
|
|
|
|
|
$
|
1,843,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest spread
|
|
|
|
|
|
|
|
|
|
|
2.63
|
%
|
|
|
|
|
|
|
|
|
|
|
2.54
|
%
|
|
|
|
|
|
|
|
|
|
|
2.67
|
%
|
Impact of noninterest-bearing sources
|
|
|
|
|
|
|
|
|
|
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
0.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income/yield on
earning
assets (1)
|
|
|
|
|
|
$
|
52,325
|
|
|
|
2.76
|
%
|
|
|
|
|
|
$
|
48,031
|
|
|
|
2.62
|
%
|
|
|
|
|
|
$
|
46,481
|
|
|
|
2.97
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Fees earned on overnight deposits
placed with the Federal Reserve, which were included in time
deposits placed and other short-term investments in prior
periods, have been reclassified to cash and cash equivalents,
consistent with the Corporations Consolidated Balance
Sheet presentation of these deposits. Net interest income and
net interest yield are calculated excluding these fees.
|
(2) |
|
Yields on AFS debt securities are
calculated based on fair value rather than the cost basis. The
use of fair value does not have a material impact on net
interest yield.
|
(3) |
|
Nonperforming loans are included in
the respective average loan balances. Income on these
nonperforming loans is recognized on a cash basis. Purchased
credit-impaired loans were written down to fair value upon
acquisition and accrete interest income over the remaining life
of the loan.
|
(4) |
|
Includes
non-U.S.
residential mortgage loans of $410 million and
$622 million in 2010 and 2009. There were no material
non-U.S.
residential mortgage loans prior to January 1, 2009.
|
(5) |
|
Includes
non-U.S.
consumer loans of $7.9 billion, $8.0 billion and
$2.7 billion in 2010, 2009 and 2008, respectively.
|
(6) |
|
Includes consumer finance loans of
$2.1 billion, $2.4 billion and $2.8 billion;
other
non-U.S.
consumer loans of $731 million, $657 million and
$774 million; and consumer overdrafts of $111 million,
$217 million and $247 million in 2010, 2009 and 2008,
respectively.
|
(7) |
|
Includes U.S. commercial real
estate loans of $57.3 billion, $70.7 billion and
$62.1 billion; and
non-U.S.
commercial real estate loans of $2.7 billion,
$2.7 billion and $1.1 billion in 2010, 2009 and 2008,
respectively.
|
(8) |
|
Interest income includes the impact
of interest rate risk management contracts, which decreased
interest income on the underlying assets $1.4 billion,
$456 million and $260 million in 2010, 2009 and 2008,
respectively. Interest expense includes the impact of interest
rate risk management contracts, which increased (decreased)
interest expense on the underlying liabilities
$(3.5) billion, $(3.0) billion and $409 million
in 2010, 2009 and 2008, respectively. For further information on
interest rate contracts, see Interest Rate Risk Management for
Nontrading Activities beginning on page 103.
|
Bank of America
2010 115
Table
II Analysis
of Changes in Net Interest Income FTE
Basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From 2009 to 2010
|
|
|
From 2008 to 2009
|
|
|
|
Due to Change in
(1)
|
|
|
Net
|
|
|
Due to Change
in (1)
|
|
|
Net
|
|
(Dollars in millions)
|
|
Volume
|
|
|
Rate
|
|
|
Change
|
|
|
Volume
|
|
|
Rate
|
|
|
Change
|
|
Increase (decrease) in interest
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits placed and other short-term
investments (2)
|
|
$
|
1
|
|
|
$
|
(43
|
)
|
|
$
|
(42
|
)
|
|
$
|
575
|
|
|
$
|
(608
|
)
|
|
$
|
(33
|
)
|
Federal funds sold and securities borrowed or purchased under
agreements to resell
|
|
|
266
|
|
|
|
(1,328
|
)
|
|
|
(1,062
|
)
|
|
|
2,793
|
|
|
|
(3,212
|
)
|
|
|
(419
|
)
|
Trading account assets
|
|
|
(135
|
)
|
|
|
(1,051
|
)
|
|
|
(1,186
|
)
|
|
|
1,507
|
|
|
|
(2,530
|
)
|
|
|
(1,023
|
)
|
Debt securities
|
|
|
2,585
|
|
|
|
(3,959
|
)
|
|
|
(1,374
|
)
|
|
|
1,091
|
|
|
|
(1,250
|
)
|
|
|
(159
|
)
|
Loans and leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
(192
|
)
|
|
|
(1,607
|
)
|
|
|
(1,799
|
)
|
|
|
(619
|
)
|
|
|
(503
|
)
|
|
|
(1,122
|
)
|
Home equity
|
|
|
(391
|
)
|
|
|
(355
|
)
|
|
|
(746
|
)
|
|
|
1,107
|
|
|
|
(1,977
|
)
|
|
|
(870
|
)
|
Discontinued real estate
|
|
|
(219
|
)
|
|
|
(336
|
)
|
|
|
(555
|
)
|
|
|
507
|
|
|
|
(283
|
)
|
|
|
224
|
|
U.S. credit card
|
|
|
7,097
|
|
|
|
(119
|
)
|
|
|
6,978
|
|
|
|
(1,181
|
)
|
|
|
4
|
|
|
|
(1,177
|
)
|
Non-U.S.
credit card
|
|
|
903
|
|
|
|
425
|
|
|
|
1,328
|
|
|
|
387
|
|
|
|
(307
|
)
|
|
|
80
|
|
Direct/Indirect consumer
|
|
|
(198
|
)
|
|
|
(1,065
|
)
|
|
|
(1,263
|
)
|
|
|
1,465
|
|
|
|
(2,383
|
)
|
|
|
(918
|
)
|
Other consumer
|
|
|
(27
|
)
|
|
|
(24
|
)
|
|
|
(51
|
)
|
|
|
(43
|
)
|
|
|
(41
|
)
|
|
|
(84
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer
|
|
|
|
|
|
|
|
|
|
|
3,892
|
|
|
|
|
|
|
|
|
|
|
|
(3,867
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. commercial
|
|
|
(1,106
|
)
|
|
|
132
|
|
|
|
(974
|
)
|
|
|
182
|
|
|
|
(3,001
|
)
|
|
|
(2,819
|
)
|
Commercial real estate
|
|
|
(436
|
)
|
|
|
64
|
|
|
|
(372
|
)
|
|
|
493
|
|
|
|
(1,178
|
)
|
|
|
(685
|
)
|
Commercial lease financing
|
|
|
(24
|
)
|
|
|
104
|
|
|
|
80
|
|
|
|
(12
|
)
|
|
|
203
|
|
|
|
191
|
|
Non-U.S.
commercial
|
|
|
(121
|
)
|
|
|
(194
|
)
|
|
|
(315
|
)
|
|
|
20
|
|
|
|
(117
|
)
|
|
|
(97
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
|
|
|
|
|
|
|
|
(1,581
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,410
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases
|
|
|
|
|
|
|
|
|
|
|
2,311
|
|
|
|
|
|
|
|
|
|
|
|
(7,277
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other earning assets
|
|
|
(511
|
)
|
|
|
(675
|
)
|
|
|
(1,186
|
)
|
|
|
2,966
|
|
|
|
(2,022
|
)
|
|
|
944
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
|
|
|
|
|
|
|
$
|
(2,539
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(7,967
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in interest
expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. interest-bearing deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
|
|
$
|
20
|
|
|
$
|
(78
|
)
|
|
$
|
(58
|
)
|
|
$
|
9
|
|
|
$
|
(24
|
)
|
|
$
|
(15
|
)
|
NOW and money market deposit accounts
|
|
|
342
|
|
|
|
(494
|
)
|
|
|
(152
|
)
|
|
|
1,277
|
|
|
|
(3,501
|
)
|
|
|
(2,224
|
)
|
Consumer CDs and IRAs
|
|
|
(1,745
|
)
|
|
|
(1,586
|
)
|
|
|
(3,331
|
)
|
|
|
511
|
|
|
|
(2,861
|
)
|
|
|
(2,350
|
)
|
Negotiable CDs, public funds and other time deposits
|
|
|
(252
|
)
|
|
|
5
|
|
|
|
(247
|
)
|
|
|
183
|
|
|
|
(786
|
)
|
|
|
(603
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. interest-bearing deposits
|
|
|
|
|
|
|
|
|
|
|
(3,788
|
)
|
|
|
|
|
|
|
|
|
|
|
(5,192
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S.
interest-bearing deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks located in
non-U.S.
countries
|
|
|
(4
|
)
|
|
|
3
|
|
|
|
(1
|
)
|
|
|
(527
|
)
|
|
|
(384
|
)
|
|
|
(911
|
)
|
Governments and official institutions
|
|
|
(7
|
)
|
|
|
1
|
|
|
|
(6
|
)
|
|
|
(120
|
)
|
|
|
(143
|
)
|
|
|
(263
|
)
|
Time, savings and other
|
|
|
(11
|
)
|
|
|
(4
|
)
|
|
|
(15
|
)
|
|
|
88
|
|
|
|
(1,165
|
)
|
|
|
(1,077
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-U.S.
interest-bearing deposits
|
|
|
|
|
|
|
|
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,251
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits
|
|
|
|
|
|
|
|
|
|
|
(3,810
|
)
|
|
|
|
|
|
|
|
|
|
|
(7,443
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds purchased, securities loaned or sold under
agreements to repurchase and other short-term borrowings
|
|
|
(649
|
)
|
|
|
(1,164
|
)
|
|
|
(1,813
|
)
|
|
|
880
|
|
|
|
(7,730
|
)
|
|
|
(6,850
|
)
|
Trading account liabilities
|
|
|
556
|
|
|
|
(60
|
)
|
|
|
496
|
|
|
|
(30
|
)
|
|
|
(669
|
)
|
|
|
(699
|
)
|
Long-term debt
|
|
|
1,509
|
|
|
|
(3,215
|
)
|
|
|
(1,706
|
)
|
|
|
9,267
|
|
|
|
(3,792
|
)
|
|
|
5,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
|
|
|
|
|
|
|
|
(6,833
|
)
|
|
|
|
|
|
|
|
|
|
|
(9,517
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in interest
income (2)
|
|
|
|
|
|
|
|
|
|
$
|
4,294
|
|
|
|
|
|
|
|
|
|
|
$
|
1,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The changes for each category of
interest income and expense are divided between the portion of
change attributable to the variance in volume and the portion of
change attributable to the variance in rate for that category.
The unallocated change in rate or volume variance is allocated
between the rate and volume variances.
|
(2) |
|
Fees earned on overnight deposits
placed with the Federal Reserve, which were included in the time
deposits placed and other short-term investments line in prior
periods, have been reclassified to cash and cash equivalents,
consistent with the balance sheet presentation of these
deposits. Net interest income is calculated excluding these fees.
|
116 Bank
of America 2010
Table III Preferred
Stock Cash Dividend Summary (as of February 25,
2011)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
Per Annum
|
|
|
Dividend Per
|
|
Preferred Stock
|
|
(in millions)
|
|
|
Declaration Date
|
|
|
Record Date
|
|
|
Payment Date
|
|
|
Dividend Rate
|
|
|
Share
|
|
Series B (1)
|
|
$
|
1
|
|
|
|
January 26, 2011
|
|
|
|
April 11, 2011
|
|
|
|
April 25, 2011
|
|
|
|
7.00
|
%
|
|
$
|
1.75
|
|
|
|
|
|
|
|
|
October 25, 2010
|
|
|
|
January 11, 2011
|
|
|
|
January 25, 2011
|
|
|
|
7.00
|
|
|
|
1.75
|
|
|
|
|
|
|
|
|
July 28, 2010
|
|
|
|
October 11, 2010
|
|
|
|
October 25, 2010
|
|
|
|
7.00
|
|
|
|
1.75
|
|
|
|
|
|
|
|
|
April 28, 2010
|
|
|
|
July 9, 2010
|
|
|
|
July 23, 2010
|
|
|
|
7.00
|
|
|
|
1.75
|
|
|
|
|
|
|
|
|
January 27, 2010
|
|
|
|
April 9, 2010
|
|
|
|
April 23, 2010
|
|
|
|
7.00
|
|
|
|
1.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series D (2)
|
|
$
|
661
|
|
|
|
January 4, 2011
|
|
|
|
February 28, 2011
|
|
|
|
March 14, 2011
|
|
|
|
6.204
|
%
|
|
$
|
0.38775
|
|
|
|
|
|
|
|
|
October 4, 2010
|
|
|
|
November 30, 2010
|
|
|
|
December 14, 2010
|
|
|
|
6.204
|
|
|
|
0.38775
|
|
|
|
|
|
|
|
|
July 2, 2010
|
|
|
|
August 31, 2010
|
|
|
|
September 14, 2010
|
|
|
|
6.204
|
|
|
|
0.38775
|
|
|
|
|
|
|
|
|
April 2, 2010
|
|
|
|
May 28, 2010
|
|
|
|
June 14, 2010
|
|
|
|
6.204
|
|
|
|
0.38775
|
|
|
|
|
|
|
|
|
January 4, 2010
|
|
|
|
February 26, 2010
|
|
|
|
March 15, 2010
|
|
|
|
6.204
|
|
|
|
0.38775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series E (2)
|
|
$
|
487
|
|
|
|
January 4, 2011
|
|
|
|
January 31, 2011
|
|
|
|
February 15, 2011
|
|
|
|
Floating
|
|
|
$
|
0.25556
|
|
|
|
|
|
|
|
|
October 4, 2010
|
|
|
|
October 29, 2010
|
|
|
|
November 15, 2010
|
|
|
|
Floating
|
|
|
|
0.25556
|
|
|
|
|
|
|
|
|
July 2, 2010
|
|
|
|
July 30, 2010
|
|
|
|
August 16, 2010
|
|
|
|
Floating
|
|
|
|
0.25556
|
|
|
|
|
|
|
|
|
April 2, 2010
|
|
|
|
April 30, 2010
|
|
|
|
May 17, 2010
|
|
|
|
Floating
|
|
|
|
0.24722
|
|
|
|
|
|
|
|
|
January 4, 2010
|
|
|
|
January 29, 2010
|
|
|
|
February 16, 2010
|
|
|
|
Floating
|
|
|
|
0.25556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series H (2)
|
|
$
|
2,862
|
|
|
|
January 4, 2011
|
|
|
|
January 15, 2011
|
|
|
|
February 1, 2011
|
|
|
|
8.20
|
%
|
|
$
|
0.51250
|
|
|
|
|
|
|
|
|
October 4, 2010
|
|
|
|
October 15, 2010
|
|
|
|
November 1, 2010
|
|
|
|
8.20
|
|
|
|
0.51250
|
|
|
|
|
|
|
|
|
July 2, 2010
|
|
|
|
July 15, 2010
|
|
|
|
August 2, 2010
|
|
|
|
8.20
|
|
|
|
0.51250
|
|
|
|
|
|
|
|
|
April 2, 2010
|
|
|
|
April 15, 2010
|
|
|
|
May 3, 2010
|
|
|
|
8.20
|
|
|
|
0.51250
|
|
|
|
|
|
|
|
|
January 4, 2010
|
|
|
|
January 15, 2010
|
|
|
|
February 1, 2010
|
|
|
|
8.20
|
|
|
|
0.51250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series I (2)
|
|
$
|
365
|
|
|
|
January 4, 2011
|
|
|
|
March 15, 2011
|
|
|
|
April 1, 2011
|
|
|
|
6.625
|
%
|
|
$
|
0.41406
|
|
|
|
|
|
|
|
|
October 4, 2010
|
|
|
|
December 15, 2010
|
|
|
|
January 3, 2011
|
|
|
|
6.625
|
|
|
|
0.41406
|
|
|
|
|
|
|
|
|
July 2, 2010
|
|
|
|
September 15, 2010
|
|
|
|
October 1, 2010
|
|
|
|
6.625
|
|
|
|
0.41406
|
|
|
|
|
|
|
|
|
April 2, 2010
|
|
|
|
June 15, 2010
|
|
|
|
July 1, 2010
|
|
|
|
6.625
|
|
|
|
0.41406
|
|
|
|
|
|
|
|
|
January 4, 2010
|
|
|
|
March 15, 2010
|
|
|
|
April 1, 2010
|
|
|
|
6.625
|
|
|
|
0.41406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series J (2)
|
|
$
|
978
|
|
|
|
January 4, 2011
|
|
|
|
January 15, 2011
|
|
|
|
February 1, 2011
|
|
|
|
7.25
|
%
|
|
$
|
0.45312
|
|
|
|
|
|
|
|
|
October 4, 2010
|
|
|
|
October 15, 2010
|
|
|
|
November 1, 2010
|
|
|
|
7.25
|
|
|
|
0.45312
|
|
|
|
|
|
|
|
|
July 2, 2010
|
|
|
|
July 15, 2010
|
|
|
|
August 2, 2010
|
|
|
|
7.25
|
|
|
|
0.45312
|
|
|
|
|
|
|
|
|
April 2, 2010
|
|
|
|
April 15, 2010
|
|
|
|
May 3, 2010
|
|
|
|
7.25
|
|
|
|
0.45312
|
|
|
|
|
|
|
|
|
January 4, 2010
|
|
|
|
January 15, 2010
|
|
|
|
February 1, 2010
|
|
|
|
7.25
|
|
|
|
0.45312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series K
(3, 4)
|
|
$
|
1,668
|
|
|
|
January 4, 2011
|
|
|
|
January 15, 2011
|
|
|
|
January 31, 2011
|
|
|
|
Fixed-to-Floating
|
|
|
$
|
40.00
|
|
|
|
|
|
|
|
|
July 2, 2010
|
|
|
|
July 15, 2010
|
|
|
|
July 30, 2010
|
|
|
|
Fixed-to-Floating
|
|
|
|
40.00
|
|
|
|
|
|
|
|
|
January 4, 2010
|
|
|
|
January 15, 2010
|
|
|
|
February 1, 2010
|
|
|
|
Fixed-to-Floating
|
|
|
|
40.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series L
|
|
$
|
3,349
|
|
|
|
December 17, 2010
|
|
|
|
January 3, 2011
|
|
|
|
January 31, 2011
|
|
|
|
7.25
|
%
|
|
$
|
18.125
|
|
|
|
|
|
|
|
|
September 17, 2010
|
|
|
|
October 1, 2010
|
|
|
|
November 1, 2010
|
|
|
|
7.25
|
|
|
|
18.125
|
|
|
|
|
|
|
|
|
June 17, 2010
|
|
|
|
July 1, 2010
|
|
|
|
July 30, 2010
|
|
|
|
7.25
|
|
|
|
18.125
|
|
|
|
|
|
|
|
|
March 17, 2010
|
|
|
|
April 1, 2010
|
|
|
|
April 30, 2010
|
|
|
|
7.25
|
|
|
|
18.125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series M
(3, 4)
|
|
$
|
1,434
|
|
|
|
October 4, 2010
|
|
|
|
October 31, 2010
|
|
|
|
November 15, 2010
|
|
|
|
Fixed-to-Floating
|
|
|
$
|
40.625
|
|
|
|
|
|
|
|
|
April 2, 2010
|
|
|
|
April 30, 2010
|
|
|
|
May 17, 2010
|
|
|
|
Fixed-to-Floating
|
|
|
|
40.625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Dividends are cumulative.
|
(2) |
|
Dividends per depositary share,
each representing a 1/1000th interest in a share of preferred
stock.
|
(3) |
|
Initially pays dividends
semi-annually.
|
(4) |
|
Dividends per depositary share,
each representing a 1/25th interest in a share of preferred
stock.
|
Bank of America
2010 117
Table III Preferred
Stock Cash Dividend Summary (as of February 25, 2011)
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
Per Annum
|
|
|
Dividend Per
|
|
Preferred Stock
|
|
(in millions)
|
|
|
Declaration Date
|
|
|
Record Date
|
|
|
Payment Date
|
|
|
Dividend Rate
|
|
|
Share
|
|
Series 1 (5)
|
|
$
|
146
|
|
|
|
January 4, 2011
|
|
|
|
February 15, 2011
|
|
|
|
February 28, 2011
|
|
|
|
Floating
|
|
|
$
|
0.19167
|
|
|
|
|
|
|
|
|
October 4, 2010
|
|
|
|
November 15, 2010
|
|
|
|
November 29, 2010
|
|
|
|
Floating
|
|
|
|
0.19167
|
|
|
|
|
|
|
|
|
July 2, 2010
|
|
|
|
August 15, 2010
|
|
|
|
August 31, 2010
|
|
|
|
Floating
|
|
|
|
0.19167
|
|
|
|
|
|
|
|
|
April 2, 2010
|
|
|
|
May 15, 2010
|
|
|
|
May 28, 2010
|
|
|
|
Floating
|
|
|
|
0.18542
|
|
|
|
|
|
|
|
|
January 4, 2010
|
|
|
|
February 15, 2010
|
|
|
|
February 26, 2010
|
|
|
|
Floating
|
|
|
|
0.19167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2 (5)
|
|
$
|
526
|
|
|
|
January 4, 2011
|
|
|
|
February 15, 2011
|
|
|
|
February 28, 2011
|
|
|
|
Floating
|
|
|
$
|
0.19167
|
|
|
|
|
|
|
|
|
October 4, 2010
|
|
|
|
November 15, 2010
|
|
|
|
November 29, 2010
|
|
|
|
Floating
|
|
|
|
0.19167
|
|
|
|
|
|
|
|
|
July 2, 2010
|
|
|
|
August 15, 2010
|
|
|
|
August 31, 2010
|
|
|
|
Floating
|
|
|
|
0.19167
|
|
|
|
|
|
|
|
|
April 2, 2010
|
|
|
|
May 15, 2010
|
|
|
|
May 28, 2010
|
|
|
|
Floating
|
|
|
|
0.18542
|
|
|
|
|
|
|
|
|
January 4, 2010
|
|
|
|
February 15, 2010
|
|
|
|
February 26, 2010
|
|
|
|
Floating
|
|
|
|
0.19167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 3 (5)
|
|
$
|
670
|
|
|
|
January 4, 2011
|
|
|
|
February 15, 2011
|
|
|
|
February 28, 2011
|
|
|
|
6.375
|
%
|
|
$
|
0.39843
|
|
|
|
|
|
|
|
|
October 4, 2010
|
|
|
|
November 15, 2010
|
|
|
|
November 29, 2010
|
|
|
|
6.375
|
|
|
|
0.39843
|
|
|
|
|
|
|
|
|
July 2, 2010
|
|
|
|
August 15, 2010
|
|
|
|
August 30, 2010
|
|
|
|
6.375
|
|
|
|
0.39843
|
|
|
|
|
|
|
|
|
April 2, 2010
|
|
|
|
May 15, 2010
|
|
|
|
May 28, 2010
|
|
|
|
6.375
|
|
|
|
0.39843
|
|
|
|
|
|
|
|
|
January 4, 2010
|
|
|
|
February 15, 2010
|
|
|
|
March 1, 2010
|
|
|
|
6.375
|
|
|
|
0.39843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 4 (5)
|
|
$
|
389
|
|
|
|
January 4, 2011
|
|
|
|
February 15, 2011
|
|
|
|
February 28, 2011
|
|
|
|
Floating
|
|
|
$
|
0.25556
|
|
|
|
|
|
|
|
|
October 4, 2010
|
|
|
|
November 15, 2010
|
|
|
|
November 29, 2010
|
|
|
|
Floating
|
|
|
|
0.25556
|
|
|
|
|
|
|
|
|
July 2, 2010
|
|
|
|
August 15, 2010
|
|
|
|
August 31, 2010
|
|
|
|
Floating
|
|
|
|
0.25556
|
|
|
|
|
|
|
|
|
April 2, 2010
|
|
|
|
May 15, 2010
|
|
|
|
May 28, 2010
|
|
|
|
Floating
|
|
|
|
0.24722
|
|
|
|
|
|
|
|
|
January 4, 2010
|
|
|
|
February 15, 2010
|
|
|
|
February 26, 2010
|
|
|
|
Floating
|
|
|
|
0.25556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 5 (5)
|
|
$
|
606
|
|
|
|
January 4, 2011
|
|
|
|
February 1, 2011
|
|
|
|
February 22, 2011
|
|
|
|
Floating
|
|
|
$
|
0.25556
|
|
|
|
|
|
|
|
|
October 4, 2010
|
|
|
|
November 1, 2010
|
|
|
|
November 22, 2010
|
|
|
|
Floating
|
|
|
|
0.25556
|
|
|
|
|
|
|
|
|
July 2, 2010
|
|
|
|
August 1, 2010
|
|
|
|
August 23, 2010
|
|
|
|
Floating
|
|
|
|
0.25556
|
|
|
|
|
|
|
|
|
April 2, 2010
|
|
|
|
May 1, 2010
|
|
|
|
May 21, 2010
|
|
|
|
Floating
|
|
|
|
0.24722
|
|
|
|
|
|
|
|
|
January 4, 2010
|
|
|
|
February 1, 2010
|
|
|
|
February 22, 2010
|
|
|
|
Floating
|
|
|
|
0.25556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 6 (6)
|
|
$
|
65
|
|
|
|
January 4, 2011
|
|
|
|
March 15, 2011
|
|
|
|
March 30, 2011
|
|
|
|
6.70
|
%
|
|
$
|
0.41875
|
|
|
|
|
|
|
|
|
October 4, 2010
|
|
|
|
December 15, 2010
|
|
|
|
December 30, 2010
|
|
|
|
6.70
|
|
|
|
0.41875
|
|
|
|
|
|
|
|
|
July 2, 2010
|
|
|
|
September 15, 2010
|
|
|
|
September 30, 2010
|
|
|
|
6.70
|
|
|
|
0.41875
|
|
|
|
|
|
|
|
|
April 2, 2010
|
|
|
|
June 15, 2010
|
|
|
|
June 30, 2010
|
|
|
|
6.70
|
|
|
|
0.41875
|
|
|
|
|
|
|
|
|
January 4, 2010
|
|
|
|
March 15, 2010
|
|
|
|
March 30, 2010
|
|
|
|
6.70
|
|
|
|
0.41875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 7 (6)
|
|
$
|
17
|
|
|
|
January 4, 2011
|
|
|
|
March 15, 2011
|
|
|
|
March 30, 2011
|
|
|
|
6.25
|
%
|
|
$
|
0.39062
|
|
|
|
|
|
|
|
|
October 4, 2010
|
|
|
|
December 15, 2010
|
|
|
|
December 30, 2010
|
|
|
|
6.25
|
|
|
|
0.39062
|
|
|
|
|
|
|
|
|
July 2, 2010
|
|
|
|
September 15, 2010
|
|
|
|
September 30, 2010
|
|
|
|
6.25
|
|
|
|
0.39062
|
|
|
|
|
|
|
|
|
April 2, 2010
|
|
|
|
June 15, 2010
|
|
|
|
June 30, 2010
|
|
|
|
6.25
|
|
|
|
0.39062
|
|
|
|
|
|
|
|
|
January 4, 2010
|
|
|
|
March 15, 2010
|
|
|
|
March 30, 2010
|
|
|
|
6.25
|
|
|
|
0.39062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 8 (5)
|
|
$
|
2,673
|
|
|
|
January 4, 2011
|
|
|
|
February 15, 2011
|
|
|
|
February 28, 2011
|
|
|
|
8.625
|
%
|
|
$
|
0.53906
|
|
|
|
|
|
|
|
|
October 4, 2010
|
|
|
|
November 15, 2010
|
|
|
|
November 29, 2010
|
|
|
|
8.625
|
|
|
|
0.53906
|
|
|
|
|
|
|
|
|
July 2, 2010
|
|
|
|
August 15, 2010
|
|
|
|
August 31, 2010
|
|
|
|
8.625
|
|
|
|
0.53906
|
|
|
|
|
|
|
|
|
April 2, 2010
|
|
|
|
May 15, 2010
|
|
|
|
May 28, 2010
|
|
|
|
8.625
|
|
|
|
0.53906
|
|
|
|
|
|
|
|
|
January 4, 2010
|
|
|
|
February 15, 2010
|
|
|
|
March 1, 2010
|
|
|
|
8.625
|
|
|
|
0.53906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2
(MC) (7)
|
|
$
|
|
|
|
|
October 4, 2010
|
|
|
|
October 5, 2010
|
|
|
|
October 15, 2010
|
|
|
|
9.00
|
%
|
|
$
|
1,150.00
|
|
|
|
|
|
|
|
|
July 2, 2010
|
|
|
|
August 15, 2010
|
|
|
|
August 30, 2010
|
|
|
|
9.00
|
|
|
|
2,250.00
|
|
|
|
|
|
|
|
|
April 2, 2010
|
|
|
|
May 15, 2010
|
|
|
|
May 28, 2010
|
|
|
|
9.00
|
|
|
|
2,250.00
|
|
|
|
|
|
|
|
|
January 4, 2010
|
|
|
|
February 15, 2010
|
|
|
|
March 1, 2010
|
|
|
|
9.00
|
|
|
|
2,250.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 3
(MC) (8)
|
|
$
|
|
|
|
|
October 4, 2010
|
|
|
|
October 5, 2010
|
|
|
|
October 15, 2010
|
|
|
|
9.00
|
%
|
|
$
|
1,150.00
|
|
|
|
|
|
|
|
|
July 2, 2010
|
|
|
|
August 15, 2010
|
|
|
|
August 30, 2010
|
|
|
|
9.00
|
|
|
|
2,250.00
|
|
|
|
|
|
|
|
|
April 2, 2010
|
|
|
|
May 15, 2010
|
|
|
|
May 28, 2010
|
|
|
|
9.00
|
|
|
|
2,250.00
|
|
|
|
|
|
|
|
|
January 4, 2010
|
|
|
|
February 15, 2010
|
|
|
|
March 1, 2010
|
|
|
|
9.00
|
|
|
|
2,250.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5) |
|
Dividends per depositary share,
each representing a 1/1200th interest in a share of preferred
stock.
|
(6) |
|
Dividends per depositary share,
each representing a 1/40th interest in a share of preferred
stock.
|
(7) |
|
All of the outstanding shares of
the preferred stock of Merrill Lynch & Co., Inc.
converted into 31 million shares of common stock on
October 15, 2010.
|
(8) |
|
All of the outstanding shares of
the preferred stock of Merrill Lynch & Co., Inc.
converted into 19 million shares of common stock on
October 15, 2010.
|
118 Bank
of America 2010
Table IV Outstanding
Loans and Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2010 (1)
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
mortgage (2)
|
|
$
|
257,973
|
|
|
$
|
242,129
|
|
|
$
|
248,063
|
|
|
$
|
274,949
|
|
|
$
|
241,181
|
|
Home equity
|
|
|
137,981
|
|
|
|
149,126
|
|
|
|
152,483
|
|
|
|
114,820
|
|
|
|
87,893
|
|
Discontinued real
estate (3)
|
|
|
13,108
|
|
|
|
14,854
|
|
|
|
19,981
|
|
|
|
n/a
|
|
|
|
n/a
|
|
U.S. credit card
|
|
|
113,785
|
|
|
|
49,453
|
|
|
|
64,128
|
|
|
|
65,774
|
|
|
|
61,195
|
|
Non-U.S.
credit card
|
|
|
27,465
|
|
|
|
21,656
|
|
|
|
17,146
|
|
|
|
14,950
|
|
|
|
10,999
|
|
Direct/Indirect
consumer (4)
|
|
|
90,308
|
|
|
|
97,236
|
|
|
|
83,436
|
|
|
|
76,538
|
|
|
|
59,206
|
|
Other
consumer (5)
|
|
|
2,830
|
|
|
|
3,110
|
|
|
|
3,442
|
|
|
|
4,170
|
|
|
|
5,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer
|
|
|
643,450
|
|
|
|
577,564
|
|
|
|
588,679
|
|
|
|
551,201
|
|
|
|
465,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
commercial (6)
|
|
|
190,305
|
|
|
|
198,903
|
|
|
|
219,233
|
|
|
|
208,297
|
|
|
|
161,982
|
|
Commercial real
estate (7)
|
|
|
49,393
|
|
|
|
69,447
|
|
|
|
64,701
|
|
|
|
61,298
|
|
|
|
36,258
|
|
Commercial lease financing
|
|
|
21,942
|
|
|
|
22,199
|
|
|
|
22,400
|
|
|
|
22,582
|
|
|
|
21,864
|
|
Non-U.S.
commercial
|
|
|
32,029
|
|
|
|
27,079
|
|
|
|
31,020
|
|
|
|
28,376
|
|
|
|
20,681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial loans
|
|
|
293,669
|
|
|
|
317,628
|
|
|
|
337,354
|
|
|
|
320,553
|
|
|
|
240,785
|
|
Commercial loans measured at fair
value (8)
|
|
|
3,321
|
|
|
|
4,936
|
|
|
|
5,413
|
|
|
|
4,590
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
296,990
|
|
|
|
322,564
|
|
|
|
342,767
|
|
|
|
325,143
|
|
|
|
240,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases
|
|
$
|
940,440
|
|
|
$
|
900,128
|
|
|
$
|
931,446
|
|
|
$
|
876,344
|
|
|
$
|
706,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
2010 period is presented in
accordance with new consolidation guidance.
|
(2) |
|
Includes
non-U.S.
residential mortgages of $90 million and $552 million
at December 31, 2010 and 2009. There were no material
non-U.S.
residential mortgage loans prior to January 1, 2009.
|
(3) |
|
Includes $11.8 billion,
$13.4 billion and $18.2 billion of pay option loans,
and $1.3 billion, $1.5 billion and $1.8 billion
of subprime loans at December 31, 2010, 2009 and 2008,
respectively. We no longer originate these products.
|
(4) |
|
Includes dealer financial services
loans of $42.9 billion, $41.6 billion,
$40.1 billion, $37.2 billion and $33.4 billion;
consumer lending loans of $12.9 billion,
$19.7 billion, $28.2 billion, $24.4 billion and
$16.3 billion; U.S. securities-based lending margin loans
of $16.6 billion, $12.9 billion, $0, $0 and $0;
student loans of $6.8 billion, $10.8 billion,
$8.3 billion, $4.7 billion and $4.3 billion;
non-U.S.
consumer loans of $8.0 billion, $8.0 billion,
$1.8 billion, $3.4 billion and $3.9 billion; and
other consumer loans of $3.1 billion, $4.2 billion,
$5.0 billion, $6.8 billion and $1.3 billion at
December 31, 2010, 2009, 2008, 2007 and 2006, respectively.
|
(5) |
|
Includes consumer finance loans of
$1.9 billion, $2.3 billion, $2.6 billion,
$3.0 billion and $2.8 billion, other
non-U.S.
consumer loans of $803 million, $709 million,
$618 million, $829 million and $2.3 billion, and
consumer overdrafts of $88 million, $144 million,
$211 million, $320 million and $172 million at
December 31, 2010, 2009, 2008, 2007 and 2006, respectively.
|
(6) |
|
Includes U.S. small business
commercial loans, including card-related products, of
$14.7 billion, $17.5 billion, $19.1 billion,
$19.3 billion and $15.2 billion at December 31,
2010, 2009, 2008, 2007 and 2006, respectively.
|
(7) |
|
Includes U.S. commercial real
estate loans of $46.9 billion, $66.5 billion,
$63.7 billion, $60.2 billion and $35.7 billion
and non-U.S.
commercial real estate loans of $2.5 billion,
$3.0 billion, $979 million, $1.1 billion and
$578 million at December 31, 2010, 2009, 2008, 2007
and 2006, respectively.
|
(8) |
|
Certain commercial loans are
accounted for under the fair value option and include U.S.
commercial loans of $1.6 billion, $3.0 billion,
$3.5 billion and $3.5 billion,
non-U.S.
commercial loans of $1.7 billion, $1.9 billion,
$1.7 billion and $790 million, and commercial real
estate loans of $79 million, $90 million,
$203 million and $304 million at December 31,
2010, 2009, 2008 and 2007, respectively.
|
n/a = not applicable
Table
V Nonperforming
Loans, Leases and Foreclosed Properties
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
$
|
17,691
|
|
|
$
|
16,596
|
|
|
$
|
7,057
|
|
|
$
|
1,999
|
|
|
$
|
660
|
|
Home equity
|
|
|
2,694
|
|
|
|
3,804
|
|
|
|
2,637
|
|
|
|
1,340
|
|
|
|
289
|
|
Discontinued real estate
|
|
|
331
|
|
|
|
249
|
|
|
|
77
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Direct/Indirect consumer
|
|
|
90
|
|
|
|
86
|
|
|
|
26
|
|
|
|
8
|
|
|
|
4
|
|
Other consumer
|
|
|
48
|
|
|
|
104
|
|
|
|
91
|
|
|
|
95
|
|
|
|
77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
consumer (2)
|
|
|
20,854
|
|
|
|
20,839
|
|
|
|
9,888
|
|
|
|
3,442
|
|
|
|
1,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
commercial (3)
|
|
|
3,453
|
|
|
|
4,925
|
|
|
|
2,040
|
|
|
|
852
|
|
|
|
494
|
|
Commercial real estate
|
|
|
5,829
|
|
|
|
7,286
|
|
|
|
3,906
|
|
|
|
1,099
|
|
|
|
118
|
|
Commercial lease financing
|
|
|
117
|
|
|
|
115
|
|
|
|
56
|
|
|
|
33
|
|
|
|
42
|
|
Non-U.S.
commercial
|
|
|
233
|
|
|
|
177
|
|
|
|
290
|
|
|
|
19
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,632
|
|
|
|
12,503
|
|
|
|
6,292
|
|
|
|
2,003
|
|
|
|
667
|
|
U.S. small business commercial
|
|
|
204
|
|
|
|
200
|
|
|
|
205
|
|
|
|
152
|
|
|
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
commercial (4)
|
|
|
9,836
|
|
|
|
12,703
|
|
|
|
6,497
|
|
|
|
2,155
|
|
|
|
757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming loans and
leases
|
|
|
30,690
|
|
|
|
33,542
|
|
|
|
16,385
|
|
|
|
5,597
|
|
|
|
1,787
|
|
Foreclosed properties
|
|
|
1,974
|
|
|
|
2,205
|
|
|
|
1,827
|
|
|
|
351
|
|
|
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming loans,
leases and foreclosed properties
(5)
|
|
$
|
32,664
|
|
|
$
|
35,747
|
|
|
$
|
18,212
|
|
|
$
|
5,948
|
|
|
$
|
1,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Balances do not include PCI loans
even though the customer may be contractually past due. Loans
accounted for as PCI loans were written down to fair value upon
acquisition and accrete interest income over the remaining life
of the loan. In addition, FHA loans are excluded from
nonperforming loans and foreclosed properties since the
principal payments are insured by the FHA.
|
(2) |
|
In 2010, $2.0 billion in
interest income was estimated to be contractually due on
consumer loans and leases classified as nonperforming at
December 31, 2010 provided that these loans and leases had
been paying according to their terms and conditions, including
TDRs of which $9.9 billion were performing at
December 31, 2010 and not included in the table above.
Approximately $514 million of the estimated
$2.0 billion in contractual interest was received and
included in earnings for 2010.
|
(3) |
|
Excludes U.S. small business
commercial loans.
|
(4) |
|
In 2010, $429 million in
interest income was estimated to be contractually due on
commercial loans and leases classified as nonperforming at
December 31, 2010, including TDRs of which
$238 million were performing at December 31, 2010 and
not included in the table above. Approximately $76 million
of the estimated $429 million in contractual interest was
received and included in earnings for 2010.
|
(5) |
|
Balances do not include loans
accounted for under the fair value option. At December 31,
2010, there were $30 million of nonperforming loans
accounted for under the fair value option. At December 31,
2010, there were $0 of loans or leases past due 90 days or
more and still accruing interest accounted for under the fair
value option.
|
n/a = not applicable
Bank of America
2010 119
Table
VI Accruing
Loans and Leases Past Due 90 Days or More
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
(2)
|
|
$
|
16,768
|
|
|
$
|
11,680
|
|
|
$
|
372
|
|
|
$
|
237
|
|
|
$
|
118
|
|
U.S. credit card
|
|
|
3,320
|
|
|
|
2,158
|
|
|
|
2,197
|
|
|
|
1,855
|
|
|
|
1,991
|
|
Non-U.S.
credit card
|
|
|
599
|
|
|
|
515
|
|
|
|
368
|
|
|
|
272
|
|
|
|
184
|
|
Direct/Indirect consumer
|
|
|
1,058
|
|
|
|
1,488
|
|
|
|
1,370
|
|
|
|
745
|
|
|
|
378
|
|
Other consumer
|
|
|
2
|
|
|
|
3
|
|
|
|
4
|
|
|
|
4
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer
|
|
|
21,747
|
|
|
|
15,844
|
|
|
|
4,311
|
|
|
|
3,113
|
|
|
|
2,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
commercial (3)
|
|
|
236
|
|
|
|
213
|
|
|
|
381
|
|
|
|
119
|
|
|
|
66
|
|
Commercial real estate
|
|
|
47
|
|
|
|
80
|
|
|
|
52
|
|
|
|
36
|
|
|
|
78
|
|
Commercial lease financing
|
|
|
18
|
|
|
|
32
|
|
|
|
23
|
|
|
|
25
|
|
|
|
26
|
|
Non-U.S.
commercial
|
|
|
6
|
|
|
|
67
|
|
|
|
7
|
|
|
|
16
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
307
|
|
|
|
392
|
|
|
|
463
|
|
|
|
196
|
|
|
|
179
|
|
U.S. small business commercial
|
|
|
325
|
|
|
|
624
|
|
|
|
640
|
|
|
|
427
|
|
|
|
199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
632
|
|
|
|
1,016
|
|
|
|
1,103
|
|
|
|
623
|
|
|
|
378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total accruing loans and leases
past due 90 days or more
(4)
|
|
$
|
22,379
|
|
|
$
|
16,860
|
|
|
$
|
5,414
|
|
|
$
|
3,736
|
|
|
$
|
3,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Accruing loans past due
90 days or more do not include PCI loan portfolios of
Countrywide and Merrill Lynch that were considered impaired and
written down to fair value upon acquisition and accrete interest
income over the remaining life of the loan.
|
(2) |
|
Balances represent loans insured by
the FHA.
|
(3) |
|
Excludes U.S. small business
commercial loans.
|
(4) |
|
Balances do not include loans
accounted for under the fair value option. At December 31,
2010, there were no loans past due 90 days or more and
still accruing interest accounted for under the fair value
option. At December 31, 2009, there was $87 million of
loans past due 90 days or more and still accruing interest
accounted for under the fair value option.
|
120 Bank
of America 2010
Table
VII Allowance
for Credit Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Allowance for loan and lease
losses, beginning of period, before effect of the January 1
adoption of new consolidation guidance
|
|
|
$
|
37,200
|
|
|
$
|
23,071
|
|
|
$
|
11,588
|
|
|
$
|
9,016
|
|
|
$
|
8,045
|
|
Allowance related to adoption of new consolidation guidance
|
|
|
|
10,788
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease
losses, January 1
|
|
|
|
47,988
|
|
|
|
23,071
|
|
|
|
11,588
|
|
|
|
9,016
|
|
|
|
8,045
|
|
Loans and leases charged
off
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
|
(3,779
|
)
|
|
|
(4,436
|
)
|
|
|
(964
|
)
|
|
|
(78
|
)
|
|
|
(74
|
)
|
Home equity
|
|
|
|
(7,059
|
)
|
|
|
(7,205
|
)
|
|
|
(3,597
|
)
|
|
|
(286
|
)
|
|
|
(67
|
)
|
Discontinued real estate
|
|
|
|
(77
|
)
|
|
|
(104
|
)
|
|
|
(19
|
)
|
|
|
n/a
|
|
|
|
n/a
|
|
U.S. credit card
|
|
|
|
(13,818
|
)
|
|
|
(6,753
|
)
|
|
|
(4,469
|
)
|
|
|
(3,410
|
)
|
|
|
(3,546
|
)
|
Non-U.S.
credit card
|
|
|
|
(2,424
|
)
|
|
|
(1,332
|
)
|
|
|
(639
|
)
|
|
|
(453
|
)
|
|
|
(292
|
)
|
Direct/Indirect consumer
|
|
|
|
(4,303
|
)
|
|
|
(6,406
|
)
|
|
|
(3,777
|
)
|
|
|
(1,885
|
)
|
|
|
(857
|
)
|
Other consumer
|
|
|
|
(320
|
)
|
|
|
(491
|
)
|
|
|
(461
|
)
|
|
|
(346
|
)
|
|
|
(327
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer charge-offs
|
|
|
|
(31,780
|
)
|
|
|
(26,727
|
)
|
|
|
(13,926
|
)
|
|
|
(6,458
|
)
|
|
|
(5,163
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
commercial (1)
|
|
|
|
(3,190
|
)
|
|
|
(5,237
|
)
|
|
|
(2,567
|
)
|
|
|
(1,135
|
)
|
|
|
(597
|
)
|
Commercial real estate
|
|
|
|
(2,185
|
)
|
|
|
(2,744
|
)
|
|
|
(895
|
)
|
|
|
(54
|
)
|
|
|
(7
|
)
|
Commercial lease financing
|
|
|
|
(96
|
)
|
|
|
(217
|
)
|
|
|
(79
|
)
|
|
|
(55
|
)
|
|
|
(28
|
)
|
Non-U.S.
commercial
|
|
|
|
(139
|
)
|
|
|
(558
|
)
|
|
|
(199
|
)
|
|
|
(28
|
)
|
|
|
(86
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial charge-offs
|
|
|
|
(5,610
|
)
|
|
|
(8,756
|
)
|
|
|
(3,740
|
)
|
|
|
(1,272
|
)
|
|
|
(718
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases charged off
|
|
|
|
(37,390
|
)
|
|
|
(35,483
|
)
|
|
|
(17,666
|
)
|
|
|
(7,730
|
)
|
|
|
(5,881
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries of loans and leases
previously charged off
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
|
109
|
|
|
|
86
|
|
|
|
39
|
|
|
|
22
|
|
|
|
35
|
|
Home equity
|
|
|
|
278
|
|
|
|
155
|
|
|
|
101
|
|
|
|
12
|
|
|
|
16
|
|
Discontinued real estate
|
|
|
|
9
|
|
|
|
3
|
|
|
|
3
|
|
|
|
n/a
|
|
|
|
n/a
|
|
U.S. credit card
|
|
|
|
791
|
|
|
|
206
|
|
|
|
308
|
|
|
|
347
|
|
|
|
452
|
|
Non-U.S.
credit card
|
|
|
|
217
|
|
|
|
93
|
|
|
|
88
|
|
|
|
74
|
|
|
|
67
|
|
Direct/Indirect consumer
|
|
|
|
967
|
|
|
|
943
|
|
|
|
663
|
|
|
|
512
|
|
|
|
247
|
|
Other consumer
|
|
|
|
59
|
|
|
|
63
|
|
|
|
62
|
|
|
|
68
|
|
|
|
110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer recoveries
|
|
|
|
2,430
|
|
|
|
1,549
|
|
|
|
1,264
|
|
|
|
1,035
|
|
|
|
927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
commercial (2)
|
|
|
|
391
|
|
|
|
161
|
|
|
|
118
|
|
|
|
128
|
|
|
|
261
|
|
Commercial real estate
|
|
|
|
168
|
|
|
|
42
|
|
|
|
8
|
|
|
|
7
|
|
|
|
4
|
|
Commercial lease financing
|
|
|
|
39
|
|
|
|
22
|
|
|
|
19
|
|
|
|
53
|
|
|
|
56
|
|
Non-U.S.
commercial
|
|
|
|
28
|
|
|
|
21
|
|
|
|
26
|
|
|
|
27
|
|
|
|
94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial recoveries
|
|
|
|
626
|
|
|
|
246
|
|
|
|
171
|
|
|
|
215
|
|
|
|
415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recoveries of loans and leases previously charged off
|
|
|
|
3,056
|
|
|
|
1,795
|
|
|
|
1,435
|
|
|
|
1,250
|
|
|
|
1,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs
|
|
|
|
(34,334
|
)
|
|
|
(33,688
|
)
|
|
|
(16,231
|
)
|
|
|
(6,480
|
)
|
|
|
(4,539
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan and lease losses
|
|
|
|
28,195
|
|
|
|
48,366
|
|
|
|
26,922
|
|
|
|
8,357
|
|
|
|
5,001
|
|
Other (3)
|
|
|
|
36
|
|
|
|
(549
|
)
|
|
|
792
|
|
|
|
695
|
|
|
|
509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses, December 31
|
|
|
|
41,885
|
|
|
|
37,200
|
|
|
|
23,071
|
|
|
|
11,588
|
|
|
|
9,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve for unfunded lending
commitments, January 1
|
|
|
|
1,487
|
|
|
|
421
|
|
|
|
518
|
|
|
|
397
|
|
|
|
395
|
|
Provision for unfunded lending commitments
|
|
|
|
240
|
|
|
|
204
|
|
|
|
(97
|
)
|
|
|
28
|
|
|
|
9
|
|
Other (4)
|
|
|
|
(539
|
)
|
|
|
862
|
|
|
|
|
|
|
|
93
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve for unfunded lending commitments, December 31
|
|
|
|
1,188
|
|
|
|
1,487
|
|
|
|
421
|
|
|
|
518
|
|
|
|
397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses,
December 31
|
|
|
$
|
43,073
|
|
|
$
|
38,687
|
|
|
$
|
23,492
|
|
|
$
|
12,106
|
|
|
$
|
9,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes U.S. small business
commercial charge-offs of $2.0 billion, $3.0 billion,
$2.0 billion, $931 million and $424 million in
2010, 2009, 2008, 2007 and 2006, respectively.
|
(2) |
|
Includes U.S. small business
commercial recoveries of $107 million, $65 million,
$39 million, $51 million and $54 million in 2010,
2009, 2008, 2007 and 2006, respectively.
|
(3) |
|
The 2009 amount includes a
$750 million reduction in the allowance for loan and lease
losses related to credit card loans of $8.5 billion which
were exchanged for $7.8 billion in
held-to-maturity
debt securities that were issued by the Corporations U.S.
Credit Card Securitization Trust and retained by the
Corporation. The 2008 amount includes the $1.2 billion
addition of the Countrywide allowance for loan losses as of
July 1, 2008. The 2007 and 2006 amounts include
$750 million and $577 million of additions to
allowance for loan losses for certain acquisitions.
|
(4) |
|
The 2010 amount includes the
remaining balance of the acquired Merrill Lynch liability
excluding those commitments accounted for under the fair value
option, net of accretion, and the impact of funding previously
unfunded positions. The 2009 amount represents primarily
accretion of the Merrill Lynch purchase accounting adjustment
and the impact of funding previously unfunded positions. The
2007 amount includes a $124 million addition for reserve
for unfunded lending commitments for a prior acquisition.
|
n/a = not applicable
Bank of America
2010 121
Table
VII Allowance
for Credit Losses (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Loans and leases outstanding at December
31 (5)
|
|
|
$
|
937,119
|
|
|
$
|
895,192
|
|
|
$
|
926,033
|
|
|
$
|
871,754
|
|
|
$
|
706,490
|
|
Allowance for loan and lease losses as a percentage of total
loans and leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
outstanding at December
31 (5)
|
|
|
|
4.47
|
%
|
|
|
4.16
|
%
|
|
|
2.49
|
%
|
|
|
1.33
|
%
|
|
|
1.28
|
%
|
Consumer allowance for loan and lease losses as a percentage of
total consumer loans and leases outstanding at December 31
|
|
|
|
5.40
|
|
|
|
4.81
|
|
|
|
2.83
|
|
|
|
1.23
|
|
|
|
1.19
|
|
Commercial allowance for loan and lease losses as a percentage
of total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
commercial loans and leases outstanding at December
31 (5)
|
|
|
|
2.44
|
|
|
|
2.96
|
|
|
|
1.90
|
|
|
|
1.51
|
|
|
|
1.44
|
|
Average loans and leases
outstanding (5)
|
|
|
$
|
954,278
|
|
|
$
|
941,862
|
|
|
$
|
905,944
|
|
|
$
|
773,142
|
|
|
$
|
652,417
|
|
Net charge-offs as a percentage of average loans and leases
outstanding (5)
|
|
|
|
3.60
|
%
|
|
|
3.58
|
%
|
|
|
1.79
|
%
|
|
|
0.84
|
%
|
|
|
0.70
|
%
|
Allowance for loan and lease losses as a percentage of total
nonperforming loans and leases at December 31
(5, 6, 7)
|
|
|
|
136
|
|
|
|
111
|
|
|
|
141
|
|
|
|
207
|
|
|
|
505
|
|
Ratio of the allowance for loan and lease losses at December 31
to net charge-offs
|
|
|
|
1.22
|
|
|
|
1.10
|
|
|
|
1.42
|
|
|
|
1.79
|
|
|
|
1.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excluding purchased
credit-impaired
loans: (8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses as a percentage of total
loans and leases outstanding at December
31 (5)
|
|
|
|
3.94
|
%
|
|
|
3.88
|
%
|
|
|
2.53
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
Consumer allowance for loan and lease losses as a percentage of
total consumer loans and leases outstanding at December 31
|
|
|
|
4.66
|
|
|
|
4.43
|
|
|
|
2.91
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Commercial allowance for loan and lease losses as a percentage
of total commercial loans and leases outstanding at December
31 (5)
|
|
|
|
2.44
|
|
|
|
2.96
|
|
|
|
1.90
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Net charge-offs as a percentage of average loans and leases
outstanding (5)
|
|
|
|
3.73
|
|
|
|
3.71
|
|
|
|
1.83
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Allowance for loan and lease losses as a percentage of total
nonperforming loans and leases at December 31
(5, 6, 7)
|
|
|
|
116
|
|
|
|
99
|
|
|
|
136
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Ratio of the allowance for loan and lease losses at December 31
to net charge-offs
|
|
|
|
1.04
|
|
|
|
1.00
|
|
|
|
1.38
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5) |
|
Outstanding loan and lease balances
and ratios do not include loans accounted for under the fair
value option. Loans accounted for under the fair value option
were $3.3 billion, $4.9 billion, $5.4 billion and
$4.6 billion at December 31, 2010, 2009, 2008 and
2007, respectively. Average loans accounted for under the fair
value option were $4.1 billion, $6.9 billion,
$4.9 billion and $3.0 billion for 2010, 2009, 2008 and
2007, respectively.
|
(6) |
|
Allowance for loan and lease losses
includes $22.9 billion, $17.7 billion,
$11.7 billion, $6.5 billion and $5.4 billion
allocated to products that were excluded from nonperforming
loans, leases and foreclosed properties at December 31,
2010, 2009, 2008, 2007 and 2006, respectively.
|
(7) |
|
For more information on our
definition of nonperforming loans, see the discussion beginning
on page 81.
|
(8) |
|
Metrics exclude the impact of
Countrywide consumer PCI loans and Merrill Lynch commercial PCI
loans.
|
n/a = not applicable
122 Bank
of America 2010
Table VIII Allocation
of the Allowance for Credit Losses by Product Type
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
(Dollars in millions)
|
|
Amount
|
|
|
of Total
|
|
|
Amount
|
|
|
of Total
|
|
|
Amount
|
|
|
of Total
|
|
|
Amount
|
|
|
of Total
|
|
|
Amount
|
|
|
of Total
|
|
Allowance for loan and lease
losses (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
$
|
4,648
|
|
|
|
11.10
|
%
|
|
$
|
4,607
|
|
|
|
12.38
|
%
|
|
$
|
1,382
|
|
|
|
5.99
|
%
|
|
$
|
207
|
|
|
|
1.79
|
%
|
|
$
|
248
|
|
|
|
2.75
|
%
|
Home equity
|
|
|
12,934
|
|
|
|
30.88
|
|
|
|
10,160
|
|
|
|
27.31
|
|
|
|
5,385
|
|
|
|
23.34
|
|
|
|
963
|
|
|
|
8.31
|
|
|
|
133
|
|
|
|
1.48
|
|
Discontinued real estate
|
|
|
1,670
|
|
|
|
3.99
|
|
|
|
989
|
|
|
|
2.66
|
|
|
|
658
|
|
|
|
2.85
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
U.S. credit card
|
|
|
10,876
|
|
|
|
25.97
|
|
|
|
6,017
|
|
|
|
16.18
|
|
|
|
3,947
|
|
|
|
17.11
|
|
|
|
2,919
|
|
|
|
25.19
|
|
|
|
3,176
|
|
|
|
35.23
|
|
Non-U.S.
credit card
|
|
|
2,045
|
|
|
|
4.88
|
|
|
|
1,581
|
|
|
|
4.25
|
|
|
|
742
|
|
|
|
3.22
|
|
|
|
441
|
|
|
|
3.81
|
|
|
|
336
|
|
|
|
3.73
|
|
Direct/Indirect consumer
|
|
|
2,381
|
|
|
|
5.68
|
|
|
|
4,227
|
|
|
|
11.36
|
|
|
|
4,341
|
|
|
|
18.81
|
|
|
|
2,077
|
|
|
|
17.92
|
|
|
|
1,378
|
|
|
|
15.28
|
|
Other consumer
|
|
|
161
|
|
|
|
0.38
|
|
|
|
204
|
|
|
|
0.55
|
|
|
|
203
|
|
|
|
0.88
|
|
|
|
151
|
|
|
|
1.30
|
|
|
|
289
|
|
|
|
3.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer
|
|
|
34,715
|
|
|
|
82.88
|
|
|
|
27,785
|
|
|
|
74.69
|
|
|
|
16,658
|
|
|
|
72.20
|
|
|
|
6,758
|
|
|
|
58.32
|
|
|
|
5,560
|
|
|
|
61.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
commercial (2)
|
|
|
3,576
|
|
|
|
8.54
|
|
|
|
5,152
|
|
|
|
13.85
|
|
|
|
4,339
|
|
|
|
18.81
|
|
|
|
3,194
|
|
|
|
27.56
|
|
|
|
2,162
|
|
|
|
23.98
|
|
Commercial real estate
|
|
|
3,137
|
|
|
|
7.49
|
|
|
|
3,567
|
|
|
|
9.59
|
|
|
|
1,465
|
|
|
|
6.35
|
|
|
|
1,083
|
|
|
|
9.35
|
|
|
|
588
|
|
|
|
6.52
|
|
Commercial lease financing
|
|
|
126
|
|
|
|
0.30
|
|
|
|
291
|
|
|
|
0.78
|
|
|
|
223
|
|
|
|
0.97
|
|
|
|
218
|
|
|
|
1.88
|
|
|
|
217
|
|
|
|
2.41
|
|
Non-U.S.
commercial
|
|
|
331
|
|
|
|
0.79
|
|
|
|
405
|
|
|
|
1.09
|
|
|
|
386
|
|
|
|
1.67
|
|
|
|
335
|
|
|
|
2.89
|
|
|
|
489
|
|
|
|
5.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
commercial (3)
|
|
|
7,170
|
|
|
|
17.12
|
|
|
|
9,415
|
|
|
|
25.31
|
|
|
|
6,413
|
|
|
|
27.80
|
|
|
|
4,830
|
|
|
|
41.68
|
|
|
|
3,456
|
|
|
|
38.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease
losses
|
|
|
41,885
|
|
|
|
100.00
|
%
|
|
|
37,200
|
|
|
|
100.00
|
%
|
|
|
23,071
|
|
|
|
100.00
|
%
|
|
|
11,588
|
|
|
|
100.00
|
%
|
|
|
9,016
|
|
|
|
100.00
|
%
|
Reserve for unfunded lending
commitments (4)
|
|
|
1,188
|
|
|
|
|
|
|
|
1,487
|
|
|
|
|
|
|
|
421
|
|
|
|
|
|
|
|
518
|
|
|
|
|
|
|
|
397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit
losses (5)
|
|
$
|
43,073
|
|
|
|
|
|
|
$
|
38,687
|
|
|
|
|
|
|
$
|
23,492
|
|
|
|
|
|
|
$
|
12,106
|
|
|
|
|
|
|
$
|
9,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
December 31, 2010 is presented
in accordance with new consolidation guidance. Prior periods
have not been restated.
|
(2) |
|
Includes allowance for U.S. small
business commercial loans of $1.5 billion,
$2.4 billion, $2.4 billion, $1.4 billion and
$578 million at December 31, 2010, 2009, 2008, 2007
and 2006, respectively.
|
(3) |
|
Includes allowance for loan and
lease losses for impaired commercial loans of $1.1 billion,
$1.2 billion, $691 million, $123 million and
$43 million at December 31, 2010, 2009, 2008, 2007 and
2006, respectively. Included in the $1.1 billion at
December 31, 2010 is $445 million related to U.S.
small business commercial renegotiated TDR loans.
|
(4) |
|
Amounts for 2010 and 2009 include
the Merrill Lynch acquisition. The majority of the increase from
December 31, 2008 relates to the fair value of the acquired
Merrill Lynch unfunded lending commitments, excluding
commitments accounted for under the fair value option.
|
(5) |
|
Includes $6.4 billion,
$3.9 billion and $750 million related to PCI loans at
December 31, 2010, 2009 and 2008, respectively.
|
n/a = not applicable
Table
IX Selected
Loan Maturity Data
(1,
2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
Due After
|
|
|
|
|
|
|
|
|
|
|
|
|
One Year
|
|
|
|
|
|
|
|
|
|
Due in One
|
|
|
Through
|
|
|
Due After
|
|
|
|
|
(Dollars in millions)
|
|
Year or Less
|
|
|
Five Years
|
|
|
Five Years
|
|
|
Total
|
|
U.S. commercial
|
|
$
|
62,325
|
|
|
$
|
84,412
|
|
|
$
|
45,141
|
|
|
$
|
191,878
|
|
U.S. commercial real estate
|
|
|
21,097
|
|
|
|
21,084
|
|
|
|
4,777
|
|
|
|
46,958
|
|
Non-U.S. and
other (3)
|
|
|
31,012
|
|
|
|
5,610
|
|
|
|
959
|
|
|
|
37,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total selected loans
|
|
$
|
114,434
|
|
|
$
|
111,106
|
|
|
$
|
50,877
|
|
|
$
|
276,417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of total
|
|
|
41.4
|
%
|
|
|
40.2
|
%
|
|
|
18.4
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sensitivity of selected loans to changes in interest rates for
loans due after one year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed interest rates
|
|
|
|
|
|
$
|
12,164
|
|
|
$
|
25,619
|
|
|
|
|
|
Floating or adjustable interest rates
|
|
|
|
|
|
|
98,942
|
|
|
|
25,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
111,106
|
|
|
$
|
50,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Loan maturities are based on the
remaining maturities under contractual terms.
|
(2) |
|
Includes loans accounted for under
the fair value option.
|
(3) |
|
Loan maturities include other
consumer, commercial real estate and
non-U.S.
commercial loans.
|
Bank of America
2010 123
Table
X Non-exchange
Traded Commodity Contracts
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
Asset
|
|
|
Liability
|
|
(Dollars in millions)
|
|
Positions
|
|
|
Positions
|
|
Net fair value of contracts outstanding, January 1, 2010
|
|
$
|
5,036
|
|
|
$
|
3,758
|
|
Effects of legally enforceable master netting agreements
|
|
|
17,785
|
|
|
|
17,785
|
|
|
|
|
|
|
|
|
|
|
Gross fair value of contracts outstanding, January 1, 2010
|
|
|
22,821
|
|
|
|
21,543
|
|
Contracts realized or otherwise settled
|
|
|
(15,531
|
)
|
|
|
(14,899
|
)
|
Fair value of new contracts
|
|
|
6,240
|
|
|
|
6,734
|
|
Other changes in fair value
|
|
|
1,999
|
|
|
|
2,055
|
|
|
|
|
|
|
|
|
|
|
Gross fair value of contracts outstanding, December 31, 2010
|
|
|
15,529
|
|
|
|
15,433
|
|
Effects of legally enforceable master netting agreements
|
|
|
(10,756
|
)
|
|
|
(10,756
|
)
|
|
|
|
|
|
|
|
|
|
Net fair value of contracts
outstanding, December 31, 2010
|
|
$
|
4,773
|
|
|
$
|
4,677
|
|
|
|
|
|
|
|
|
|
|
Table
XI Non-exchange
Traded Commodity Contract Maturities
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
Asset
|
|
|
Liability
|
|
(Dollars in millions)
|
|
Positions
|
|
|
Positions
|
|
Less than one year
|
|
$
|
9,262
|
|
|
$
|
9,453
|
|
Greater than or equal to one year and less than three years
|
|
|
4,631
|
|
|
|
4,395
|
|
Greater than or equal to three years and less than five years
|
|
|
659
|
|
|
|
682
|
|
Greater than or equal to five years
|
|
|
977
|
|
|
|
903
|
|
|
|
|
|
|
|
|
|
|
Gross fair value of contracts outstanding
|
|
|
15,529
|
|
|
|
15,433
|
|
Effects of legally enforceable master netting agreements
|
|
|
(10,756
|
)
|
|
|
(10,756
|
)
|
|
|
|
|
|
|
|
|
|
Net fair value of contracts
outstanding
|
|
$
|
4,773
|
|
|
$
|
4,677
|
|
|
|
|
|
|
|
|
|
|
124 Bank
of America 2010
Table
XII Selected
Quarterly Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 Quarters
|
|
|
2009 Quarters
|
|
(Dollars in millions, except per
share information)
|
|
Fourth
|
|
|
Third
|
|
|
Second
|
|
|
First
|
|
|
Fourth
|
|
|
Third
|
|
|
Second
|
|
|
First
|
|
Income statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
12,439
|
|
|
$
|
12,435
|
|
|
$
|
12,900
|
|
|
$
|
13,749
|
|
|
$
|
11,559
|
|
|
$
|
11,423
|
|
|
$
|
11,630
|
|
|
$
|
12,497
|
|
Noninterest income
|
|
|
9,959
|
|
|
|
14,265
|
|
|
|
16,253
|
|
|
|
18,220
|
|
|
|
13,517
|
|
|
|
14,612
|
|
|
|
21,144
|
|
|
|
23,261
|
|
Total revenue, net of interest expense
|
|
|
22,398
|
|
|
|
26,700
|
|
|
|
29,153
|
|
|
|
31,969
|
|
|
|
25,076
|
|
|
|
26,035
|
|
|
|
32,774
|
|
|
|
35,758
|
|
Provision for credit losses
|
|
|
5,129
|
|
|
|
5,396
|
|
|
|
8,105
|
|
|
|
9,805
|
|
|
|
10,110
|
|
|
|
11,705
|
|
|
|
13,375
|
|
|
|
13,380
|
|
Goodwill impairment
|
|
|
2,000
|
|
|
|
10,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger and restructuring charges
|
|
|
370
|
|
|
|
421
|
|
|
|
508
|
|
|
|
521
|
|
|
|
533
|
|
|
|
594
|
|
|
|
829
|
|
|
|
765
|
|
All other noninterest
expense (1)
|
|
|
18,494
|
|
|
|
16,395
|
|
|
|
16,745
|
|
|
|
17,254
|
|
|
|
15,852
|
|
|
|
15,712
|
|
|
|
16,191
|
|
|
|
16,237
|
|
Income (loss) before income taxes
|
|
|
(3,595
|
)
|
|
|
(5,912
|
)
|
|
|
3,795
|
|
|
|
4,389
|
|
|
|
(1,419
|
)
|
|
|
(1,976
|
)
|
|
|
2,379
|
|
|
|
5,376
|
|
Income tax expense (benefit)
|
|
|
(2,351
|
)
|
|
|
1,387
|
|
|
|
672
|
|
|
|
1,207
|
|
|
|
(1,225
|
)
|
|
|
(975
|
)
|
|
|
(845
|
)
|
|
|
1,129
|
|
Net income (loss)
|
|
|
(1,244
|
)
|
|
|
(7,299
|
)
|
|
|
3,123
|
|
|
|
3,182
|
|
|
|
(194
|
)
|
|
|
(1,001
|
)
|
|
|
3,224
|
|
|
|
4,247
|
|
Net income (loss) applicable to common shareholders
|
|
|
(1,565
|
)
|
|
|
(7,647
|
)
|
|
|
2,783
|
|
|
|
2,834
|
|
|
|
(5,196
|
)
|
|
|
(2,241
|
)
|
|
|
2,419
|
|
|
|
2,814
|
|
Average common shares issued and outstanding (in thousands)
|
|
|
10,036,575
|
|
|
|
9,976,351
|
|
|
|
9,956,773
|
|
|
|
9,177,468
|
|
|
|
8,634,565
|
|
|
|
8,633,834
|
|
|
|
7,241,515
|
|
|
|
6,370,815
|
|
Average diluted common shares issued and outstanding (in
thousands)
|
|
|
10,036,575
|
|
|
|
9,976,351
|
|
|
|
10,029,776
|
|
|
|
10,005,254
|
|
|
|
8,634,565
|
|
|
|
8,633,834
|
|
|
|
7,269,518
|
|
|
|
6,431,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets
|
|
|
n/m
|
|
|
|
n/m
|
|
|
|
0.50
|
%
|
|
|
0.51
|
%
|
|
|
n/m
|
|
|
|
n/m
|
|
|
|
0.53
|
%
|
|
|
0.68
|
%
|
Four quarter trailing return on average
assets (2)
|
|
|
n/m
|
|
|
|
n/m
|
|
|
|
0.20
|
|
|
|
0.21
|
|
|
|
0.26
|
%
|
|
|
0.20
|
%
|
|
|
0.28
|
|
|
|
0.28
|
|
Return on average common shareholders equity
|
|
|
n/m
|
|
|
|
n/m
|
|
|
|
5.18
|
|
|
|
5.73
|
|
|
|
n/m
|
|
|
|
n/m
|
|
|
|
5.59
|
|
|
|
7.10
|
|
Return on average tangible common shareholders
equity (3)
|
|
|
n/m
|
|
|
|
n/m
|
|
|
|
9.19
|
|
|
|
9.79
|
|
|
|
n/m
|
|
|
|
n/m
|
|
|
|
12.68
|
|
|
|
16.15
|
|
Return on average tangible shareholders
equity (3)
|
|
|
n/m
|
|
|
|
n/m
|
|
|
|
8.98
|
|
|
|
9.55
|
|
|
|
n/m
|
|
|
|
n/m
|
|
|
|
8.86
|
|
|
|
12.42
|
|
Total ending equity to total ending assets
|
|
|
10.08
|
%
|
|
|
9.85
|
%
|
|
|
9.85
|
|
|
|
9.80
|
|
|
|
10.38
|
|
|
|
11.40
|
|
|
|
11.29
|
|
|
|
10.32
|
|
Total average equity to total average assets
|
|
|
9.94
|
|
|
|
9.83
|
|
|
|
9.36
|
|
|
|
9.14
|
|
|
|
10.31
|
|
|
|
10.67
|
|
|
|
10.01
|
|
|
|
9.08
|
|
Dividend payout
|
|
|
n/m
|
|
|
|
n/m
|
|
|
|
3.63
|
|
|
|
3.57
|
|
|
|
n/m
|
|
|
|
n/m
|
|
|
|
3.56
|
|
|
|
2.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.77
|
)
|
|
$
|
0.28
|
|
|
$
|
0.28
|
|
|
$
|
(0.60
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
0.33
|
|
|
$
|
0.44
|
|
Diluted earnings (loss)
|
|
|
(0.16
|
)
|
|
|
(0.77
|
)
|
|
|
0.27
|
|
|
|
0.28
|
|
|
|
(0.60
|
)
|
|
|
(0.26
|
)
|
|
|
0.33
|
|
|
|
0.44
|
|
Dividends paid
|
|
|
0.01
|
|
|
|
0.01
|
|
|
|
0.01
|
|
|
|
0.01
|
|
|
|
0.01
|
|
|
|
0.01
|
|
|
|
0.01
|
|
|
|
0.01
|
|
Book value
|
|
|
20.99
|
|
|
|
21.17
|
|
|
|
21.45
|
|
|
|
21.12
|
|
|
|
21.48
|
|
|
|
22.99
|
|
|
|
22.71
|
|
|
|
25.98
|
|
Tangible book
value (3)
|
|
|
12.98
|
|
|
|
12.91
|
|
|
|
12.14
|
|
|
|
11.70
|
|
|
|
11.94
|
|
|
|
12.00
|
|
|
|
11.66
|
|
|
|
10.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market price per share of common
stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing
|
|
$
|
13.34
|
|
|
$
|
13.10
|
|
|
$
|
14.37
|
|
|
$
|
17.85
|
|
|
$
|
15.06
|
|
|
$
|
16.92
|
|
|
$
|
13.20
|
|
|
$
|
6.82
|
|
High closing
|
|
|
13.56
|
|
|
|
15.67
|
|
|
|
19.48
|
|
|
|
18.04
|
|
|
|
18.59
|
|
|
|
17.98
|
|
|
|
14.17
|
|
|
|
14.33
|
|
Low closing
|
|
|
10.95
|
|
|
|
12.32
|
|
|
|
14.37
|
|
|
|
14.45
|
|
|
|
14.58
|
|
|
|
11.84
|
|
|
|
7.05
|
|
|
|
3.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market capitalization
|
|
$
|
134,536
|
|
|
$
|
131,442
|
|
|
$
|
144,174
|
|
|
$
|
179,071
|
|
|
$
|
130,273
|
|
|
$
|
146,363
|
|
|
$
|
114,199
|
|
|
$
|
43,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average balance sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases
|
|
$
|
940,614
|
|
|
$
|
934,860
|
|
|
$
|
967,054
|
|
|
$
|
991,615
|
|
|
$
|
905,913
|
|
|
$
|
930,255
|
|
|
$
|
966,105
|
|
|
$
|
994,121
|
|
Total assets
|
|
|
2,370,258
|
|
|
|
2,379,397
|
|
|
|
2,494,432
|
|
|
|
2,516,590
|
|
|
|
2,431,024
|
|
|
|
2,398,201
|
|
|
|
2,425,377
|
|
|
|
2,519,134
|
|
Total deposits
|
|
|
1,007,738
|
|
|
|
973,846
|
|
|
|
991,615
|
|
|
|
981,015
|
|
|
|
995,160
|
|
|
|
989,295
|
|
|
|
974,892
|
|
|
|
964,081
|
|
Long-term debt
|
|
|
465,875
|
|
|
|
485,588
|
|
|
|
497,469
|
|
|
|
513,634
|
|
|
|
445,440
|
|
|
|
449,974
|
|
|
|
444,131
|
|
|
|
446,975
|
|
Common shareholders equity
|
|
|
218,728
|
|
|
|
215,911
|
|
|
|
215,468
|
|
|
|
200,380
|
|
|
|
197,123
|
|
|
|
197,230
|
|
|
|
173,497
|
|
|
|
160,739
|
|
Total shareholders equity
|
|
|
235,525
|
|
|
|
233,978
|
|
|
|
233,461
|
|
|
|
229,891
|
|
|
|
250,599
|
|
|
|
255,983
|
|
|
|
242,867
|
|
|
|
228,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset
quality (4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit
losses (5)
|
|
$
|
43,073
|
|
|
$
|
44,875
|
|
|
$
|
46,668
|
|
|
$
|
48,356
|
|
|
$
|
38,687
|
|
|
$
|
37,399
|
|
|
$
|
35,777
|
|
|
$
|
31,150
|
|
Nonperforming loans, leases and foreclosed
properties (6)
|
|
|
32,664
|
|
|
|
34,556
|
|
|
|
35,598
|
|
|
|
35,925
|
|
|
|
35,747
|
|
|
|
33,825
|
|
|
|
30,982
|
|
|
|
25,632
|
|
Allowance for loan and lease losses as a percentage of total
loans and leases
outstanding (6)
|
|
|
4.47
|
%
|
|
|
4.69
|
%
|
|
|
4.75
|
%
|
|
|
4.82
|
%
|
|
|
4.16
|
%
|
|
|
3.95
|
%
|
|
|
3.61
|
%
|
|
|
3.00
|
%
|
Allowance for loan and lease losses as a percentage of total
nonperforming loans and
leases (6, 7)
|
|
|
136
|
|
|
|
135
|
|
|
|
137
|
|
|
|
139
|
|
|
|
111
|
|
|
|
112
|
|
|
|
116
|
|
|
|
122
|
|
Allowance for loan and lease losses as a percentage of total
nonperforming loans and leases excluding the purchased
credit-impaired loan portfolio
(6, 7)
|
|
|
116
|
|
|
|
118
|
|
|
|
121
|
|
|
|
124
|
|
|
|
99
|
|
|
|
101
|
|
|
|
108
|
|
|
|
115
|
|
Net charge-offs
|
|
$
|
6,783
|
|
|
$
|
7,197
|
|
|
$
|
9,557
|
|
|
$
|
10,797
|
|
|
$
|
8,421
|
|
|
$
|
9,624
|
|
|
$
|
8,701
|
|
|
$
|
6,942
|
|
Annualized net charge-offs as a percentage of average loans and
leases
outstanding (6)
|
|
|
2.87
|
%
|
|
|
3.07
|
%
|
|
|
3.98
|
%
|
|
|
4.44
|
%
|
|
|
3.71
|
%
|
|
|
4.13
|
%
|
|
|
3.64
|
%
|
|
|
2.85
|
%
|
Nonperforming loans and leases as a percentage of total loans
and leases
outstanding (6)
|
|
|
3.27
|
|
|
|
3.47
|
|
|
|
3.48
|
|
|
|
3.46
|
|
|
|
3.75
|
|
|
|
3.51
|
|
|
|
3.12
|
|
|
|
2.47
|
|
Nonperforming loans, leases and foreclosed properties as a
percentage of total loans, leases and foreclosed
properties (6)
|
|
|
3.48
|
|
|
|
3.71
|
|
|
|
3.73
|
|
|
|
3.69
|
|
|
|
3.98
|
|
|
|
3.72
|
|
|
|
3.31
|
|
|
|
2.64
|
|
Ratio of the allowance for loan and lease losses at period end
to annualized net charge-offs
|
|
|
1.56
|
|
|
|
1.53
|
|
|
|
1.18
|
|
|
|
1.07
|
|
|
|
1.11
|
|
|
|
0.94
|
|
|
|
0.97
|
|
|
|
1.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital ratios (period
end)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-based capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 common
|
|
|
8.60
|
%
|
|
|
8.45
|
%
|
|
|
8.01
|
%
|
|
|
7.60
|
%
|
|
|
7.81
|
%
|
|
|
7.25
|
%
|
|
|
6.90
|
%
|
|
|
4.49
|
%
|
Tier 1
|
|
|
11.24
|
|
|
|
11.16
|
|
|
|
10.67
|
|
|
|
10.23
|
|
|
|
10.40
|
|
|
|
12.46
|
|
|
|
11.93
|
|
|
|
10.09
|
|
Total
|
|
|
15.77
|
|
|
|
15.65
|
|
|
|
14.77
|
|
|
|
14.47
|
|
|
|
14.66
|
|
|
|
16.69
|
|
|
|
15.99
|
|
|
|
14.03
|
|
Tier 1 leverage
|
|
|
7.21
|
|
|
|
7.21
|
|
|
|
6.68
|
|
|
|
6.44
|
|
|
|
6.88
|
|
|
|
8.36
|
|
|
|
8.17
|
|
|
|
7.07
|
|
Tangible
equity (3)
|
|
|
6.75
|
|
|
|
6.54
|
|
|
|
6.14
|
|
|
|
6.02
|
|
|
|
6.40
|
|
|
|
7.51
|
|
|
|
7.37
|
|
|
|
6.42
|
|
Tangible common
equity (3)
|
|
|
5.99
|
|
|
|
5.74
|
|
|
|
5.35
|
|
|
|
5.22
|
|
|
|
5.56
|
|
|
|
4.80
|
|
|
|
4.66
|
|
|
|
3.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Excludes merger and restructuring
charges and goodwill impairment charges.
|
(2) |
|
Calculated as total net income for
four consecutive quarters divided by average assets for the
period.
|
(3) |
|
Tangible equity ratios and tangible
book value per share of common stock are non-GAAP measures.
Other companies may define or calculate these measures
differently. For additional information on these ratios, see
Supplemental Financial Data beginning on page 36 and for
corresponding reconciliations to GAAP financial measures, see
Table XV.
|
(4) |
|
For more information on the impact
of the PCI loan portfolio on asset quality, see Consumer
Portfolio Credit Risk Management beginning on page 72 and
Commercial Portfolio Credit Risk Management beginning on
page 83.
|
(5) |
|
Includes the allowance for loan and
lease losses and the reserve for unfunded lending commitments.
|
(6) |
|
Balances and ratios do not include
loans accounted for under the fair value option. For additional
exclusions on nonperforming loans, leases and foreclosed
properties, see Nonperforming Consumer Loans and Foreclosed
Properties Activity beginning on page 81 and corresponding
Table 33 and Nonperforming Commercial Loans, Leases and
Foreclosed Properties Activity and corresponding Table 41 on
page 89.
|
(7) |
|
Allowance for loan and lease losses
includes $22.9 billion, $23.7 billion,
$24.3 billion, $26.2 billion, $17.7 billion,
$17.2 billion, $16.5 billion and $14.9 billion
allocated to products that are excluded from nonperforming
loans, leases and foreclosed properties at December 31,
2010, September 30, 2010, June 30, 2010,
March 31, 2010, December 31, 2009, September 30,
2009, June 30, 2009, and March 31, 2009, respectively.
|
n/m = not meaningful
Bank of America
2010 125
Table
XIII Five
Year Reconciliations to GAAP Financial
Measures (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions, except per
share information)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Reconciliation of net interest
income to net interest income on a fully taxable-equivalent
basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
51,523
|
|
|
$
|
47,109
|
|
|
$
|
45,360
|
|
|
$
|
34,441
|
|
|
$
|
34,594
|
|
Fully taxable-equivalent adjustment
|
|
|
1,170
|
|
|
|
1,301
|
|
|
|
1,194
|
|
|
|
1,749
|
|
|
|
1,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income on a fully
taxable-equivalent basis
|
|
$
|
52,693
|
|
|
$
|
48,410
|
|
|
$
|
46,554
|
|
|
$
|
36,190
|
|
|
$
|
35,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of total revenue,
net of interest expense to total revenue, net of interest
expense on a fully taxable-equivalent basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue, net of interest expense
|
|
$
|
110,220
|
|
|
$
|
119,643
|
|
|
$
|
72,782
|
|
|
$
|
66,833
|
|
|
$
|
72,776
|
|
Fully taxable-equivalent adjustment
|
|
|
1,170
|
|
|
|
1,301
|
|
|
|
1,194
|
|
|
|
1,749
|
|
|
|
1,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue, net of interest
expense on a fully taxable-equivalent basis
|
|
$
|
111,390
|
|
|
$
|
120,944
|
|
|
$
|
73,976
|
|
|
$
|
68,582
|
|
|
$
|
74,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of total
noninterest expense to total noninterest expense, excluding
goodwill impairment charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
$
|
83,108
|
|
|
$
|
66,713
|
|
|
$
|
41,529
|
|
|
$
|
37,524
|
|
|
$
|
35,793
|
|
Goodwill impairment charges
|
|
|
(12,400
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense,
excluding goodwill impairment charges
|
|
$
|
70,708
|
|
|
$
|
66,713
|
|
|
$
|
41,529
|
|
|
$
|
37,524
|
|
|
$
|
35,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of income tax
expense (benefit) to income tax expense (benefit) on a fully
taxable-equivalent basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
|
$
|
915
|
|
|
$
|
(1,916
|
)
|
|
$
|
420
|
|
|
$
|
5,942
|
|
|
$
|
10,840
|
|
Fully taxable-equivalent adjustment
|
|
|
1,170
|
|
|
|
1,301
|
|
|
|
1,194
|
|
|
|
1,749
|
|
|
|
1,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) on
a fully taxable-equivalent basis
|
|
$
|
2,085
|
|
|
$
|
(615
|
)
|
|
$
|
1,614
|
|
|
$
|
7,691
|
|
|
$
|
12,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net income
(loss) to net income, excluding goodwill impairment
charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(2,238
|
)
|
|
$
|
6,276
|
|
|
$
|
4,008
|
|
|
$
|
14,982
|
|
|
$
|
21,133
|
|
Goodwill impairment charges
|
|
|
12,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income, excluding goodwill
impairment charges
|
|
$
|
10,162
|
|
|
$
|
6,276
|
|
|
$
|
4,008
|
|
|
$
|
14,982
|
|
|
$
|
21,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net income
(loss) applicable to common shareholders to net income (loss)
applicable to common shareholders, excluding goodwill impairment
charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) applicable to common shareholders
|
|
$
|
(3,595
|
)
|
|
$
|
(2,204
|
)
|
|
$
|
2,556
|
|
|
$
|
14,800
|
|
|
$
|
21,111
|
|
Goodwill impairment charges
|
|
|
12,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) applicable to
common shareholders, excluding goodwill impairment
charges
|
|
$
|
8,805
|
|
|
$
|
(2,204
|
)
|
|
$
|
2,556
|
|
|
$
|
14,800
|
|
|
$
|
21,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of average common
shareholders equity to average tangible common
shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shareholders equity
|
|
$
|
212,681
|
|
|
$
|
182,288
|
|
|
$
|
141,638
|
|
|
$
|
133,555
|
|
|
$
|
129,773
|
|
Common Equivalent Securities
|
|
|
2,900
|
|
|
|
1,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
(82,596
|
)
|
|
|
(86,034
|
)
|
|
|
(79,827
|
)
|
|
|
(69,333
|
)
|
|
|
(66,040
|
)
|
Intangible assets (excluding MSRs)
|
|
|
(10,985
|
)
|
|
|
(12,220
|
)
|
|
|
(9,502
|
)
|
|
|
(9,566
|
)
|
|
|
(10,324
|
)
|
Related deferred tax liabilities
|
|
|
3,306
|
|
|
|
3,831
|
|
|
|
1,782
|
|
|
|
1,845
|
|
|
|
1,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible common
shareholders equity
|
|
$
|
125,306
|
|
|
$
|
89,078
|
|
|
$
|
54,091
|
|
|
$
|
56,501
|
|
|
$
|
55,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of average
shareholders equity to average tangible shareholders
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
$
|
233,231
|
|
|
$
|
244,645
|
|
|
$
|
164,831
|
|
|
$
|
136,662
|
|
|
$
|
130,463
|
|
Goodwill
|
|
|
(82,596
|
)
|
|
|
(86,034
|
)
|
|
|
(79,827
|
)
|
|
|
(69,333
|
)
|
|
|
(66,040
|
)
|
Intangible assets (excluding MSRs)
|
|
|
(10,985
|
)
|
|
|
(12,220
|
)
|
|
|
(9,502
|
)
|
|
|
(9,566
|
)
|
|
|
(10,324
|
)
|
Related deferred tax liabilities
|
|
|
3,306
|
|
|
|
3,831
|
|
|
|
1,782
|
|
|
|
1,845
|
|
|
|
1,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible shareholders
equity
|
|
$
|
142,956
|
|
|
$
|
150,222
|
|
|
$
|
77,284
|
|
|
$
|
59,608
|
|
|
$
|
55,908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of year end
common shareholders equity to year end tangible common
shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shareholders equity
|
|
$
|
211,686
|
|
|
$
|
194,236
|
|
|
$
|
139,351
|
|
|
$
|
142,394
|
|
|
$
|
132,421
|
|
Common Equivalent Securities
|
|
|
|
|
|
|
19,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
(73,861
|
)
|
|
|
(86,314
|
)
|
|
|
(81,934
|
)
|
|
|
(77,530
|
)
|
|
|
(65,662
|
)
|
Intangible assets (excluding MSRs)
|
|
|
(9,923
|
)
|
|
|
(12,026
|
)
|
|
|
(8,535
|
)
|
|
|
(10,296
|
)
|
|
|
(9,422
|
)
|
Related deferred tax liabilities
|
|
|
3,036
|
|
|
|
3,498
|
|
|
|
1,854
|
|
|
|
1,855
|
|
|
|
1,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible common
shareholders equity
|
|
$
|
130,938
|
|
|
$
|
118,638
|
|
|
$
|
50,736
|
|
|
$
|
56,423
|
|
|
$
|
59,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of year end
shareholders equity to year end tangible
shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
$
|
228,248
|
|
|
$
|
231,444
|
|
|
$
|
177,052
|
|
|
$
|
146,803
|
|
|
$
|
135,272
|
|
Goodwill
|
|
|
(73,861
|
)
|
|
|
(86,314
|
)
|
|
|
(81,934
|
)
|
|
|
(77,530
|
)
|
|
|
(65,662
|
)
|
Intangible assets (excluding MSRs)
|
|
|
(9,923
|
)
|
|
|
(12,026
|
)
|
|
|
(8,535
|
)
|
|
|
(10,296
|
)
|
|
|
(9,422
|
)
|
Related deferred tax liabilities
|
|
|
3,036
|
|
|
|
3,498
|
|
|
|
1,854
|
|
|
|
1,855
|
|
|
|
1,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible shareholders
equity
|
|
$
|
147,500
|
|
|
$
|
136,602
|
|
|
$
|
88,437
|
|
|
$
|
60,832
|
|
|
$
|
61,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of year end
assets to year end tangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
2,264,909
|
|
|
$
|
2,230,232
|
|
|
$
|
1,817,943
|
|
|
$
|
1,715,746
|
|
|
$
|
1,459,737
|
|
Goodwill
|
|
|
(73,861
|
)
|
|
|
(86,314
|
)
|
|
|
(81,934
|
)
|
|
|
(77,530
|
)
|
|
|
(65,662
|
)
|
Intangible assets (excluding MSRs)
|
|
|
(9,923
|
)
|
|
|
(12,026
|
)
|
|
|
(8,535
|
)
|
|
|
(10,296
|
)
|
|
|
(9,422
|
)
|
Related deferred tax liabilities
|
|
|
3,036
|
|
|
|
3,498
|
|
|
|
1,854
|
|
|
|
1,855
|
|
|
|
1,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible assets
|
|
$
|
2,184,161
|
|
|
$
|
2,135,390
|
|
|
$
|
1,729,328
|
|
|
$
|
1,629,775
|
|
|
$
|
1,386,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of year end
common shares outstanding to year end tangible common shares
outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding
|
|
|
10,085,155
|
|
|
|
8,650,244
|
|
|
|
5,017,436
|
|
|
|
4,437,885
|
|
|
|
4,458,151
|
|
Assumed conversion of common equivalent
shares (2)
|
|
|
|
|
|
|
1,286,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible common shares
outstanding
|
|
|
10,085,155
|
|
|
|
9,936,244
|
|
|
|
5,017,436
|
|
|
|
4,437,885
|
|
|
|
4,458,151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Presents reconciliations of
non-GAAP measures to GAAP financial measures. We believe the use
of these non-GAAP measures provides additional clarity in
assessing the results of the Corporation. Other companies may
define or calculate non-GAAP measures differently. For more
information on non-GAAP measures and ratios we use in assessing
the results of the Corporation, see Supplemental Financial Data
beginning on page 36.
|
(2) |
|
On February 24, 2010, the
common equivalent shares converted into common shares.
|
126 Bank
of America 2010
Table
XIV Quarterly
Supplemental Financial
Data (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 Quarters
|
|
|
2009 Quarters
|
|
(Dollars in millions, except per
share information)
|
|
Fourth
|
|
|
Third
|
|
|
Second
|
|
|
First
|
|
|
Fourth
|
|
|
Third
|
|
|
Second
|
|
|
First
|
|
Fully taxable-equivalent basis
data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
12,709
|
|
|
$
|
12,717
|
|
|
$
|
13,197
|
|
|
$
|
14,070
|
|
|
$
|
11,896
|
|
|
$
|
11,753
|
|
|
$
|
11,942
|
|
|
$
|
12,819
|
|
Total revenue, net of interest expense
|
|
|
22,668
|
|
|
|
26,982
|
|
|
|
29,450
|
|
|
|
32,290
|
|
|
|
25,413
|
|
|
|
26,365
|
|
|
|
33,086
|
|
|
|
36,080
|
|
Net interest
yield (2)
|
|
|
2.69
|
%
|
|
|
2.72
|
%
|
|
|
2.77
|
%
|
|
|
2.93
|
%
|
|
|
2.62
|
%
|
|
|
2.61
|
%
|
|
|
2.64
|
%
|
|
|
2.70
|
%
|
Efficiency ratio
|
|
|
92.04
|
|
|
|
100.87
|
|
|
|
58.58
|
|
|
|
55.05
|
|
|
|
64.47
|
|
|
|
61.84
|
|
|
|
51.44
|
|
|
|
47.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance ratios, excluding
goodwill impairment
charges (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
|
|
$
|
0.04
|
|
|
$
|
0.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
|
|
|
0.04
|
|
|
|
0.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Efficiency ratio
|
|
|
83.22
|
%
|
|
|
62.33
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets
|
|
|
0.13
|
|
|
|
0.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Four quarter trailing return on average
assets (4)
|
|
|
0.43
|
|
|
|
0.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average common shareholders equity
|
|
|
0.79
|
|
|
|
5.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average tangible common shareholders equity
|
|
|
1.27
|
|
|
|
8.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average tangible shareholders equity
|
|
|
1.96
|
|
|
|
8.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Supplemental financial data on a
FTE basis and performance measures and ratios excluding the
impact of goodwill impairment charges are non-GAAP measures.
Other companies may define or calculate these measures
differently. For additional information on these performance
measures and ratios, see Supplemental Financial Data beginning
on page 36 and for corresponding reconciliations to GAAP
financial measures, see Table XV.
|
(2) |
|
Calculation includes fees earned on
overnight deposits placed with the Federal Reserve of
$63 million, $107 million, $106 million and
$92 million for the fourth, third, second and first
quarters of 2010, and $130 million, $107 million,
$92 million and $50 million for the fourth, third,
second and first quarters of 2009, respectively.
|
(3) |
|
Performance ratios are calculated
excluding the impact of the goodwill impairment charges of
$10.4 billion recorded during the third quarter of 2010 and
$2.0 billion recorded during the fourth quarter of 2010.
|
(4) |
|
Calculated as total net income for
four consecutive quarters divided by average assets for the
period.
|
Bank of America
2010 127
Table
XV Quarterly
Reconciliations to GAAP Financial
Measures (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 Quarters
|
|
|
2009 Quarters
|
|
(Dollars in millions, except per
share information)
|
|
Fourth
|
|
|
Third
|
|
|
Second
|
|
|
First
|
|
|
Fourth
|
|
|
Third
|
|
|
Second
|
|
|
First
|
|
Reconciliation of net interest
income to net interest income on a fully taxable-equivalent
basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
12,439
|
|
|
$
|
12,435
|
|
|
$
|
12,900
|
|
|
$
|
13,749
|
|
|
$
|
11,559
|
|
|
$
|
11,423
|
|
|
$
|
11,630
|
|
|
$
|
12,497
|
|
Fully taxable-equivalent adjustment
|
|
|
270
|
|
|
|
282
|
|
|
|
297
|
|
|
|
321
|
|
|
|
337
|
|
|
|
330
|
|
|
|
312
|
|
|
|
322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income on a fully
taxable-equivalent basis
|
|
$
|
12,709
|
|
|
$
|
12,717
|
|
|
$
|
13,197
|
|
|
$
|
14,070
|
|
|
$
|
11,896
|
|
|
$
|
11,753
|
|
|
$
|
11,942
|
|
|
$
|
12,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of total revenue,
net of interest expense to total revenue, net of interest
expense on a fully taxable-equivalent basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue, net of interest expense
|
|
$
|
22,398
|
|
|
$
|
26,700
|
|
|
$
|
29,153
|
|
|
$
|
31,969
|
|
|
$
|
25,076
|
|
|
$
|
26,035
|
|
|
$
|
32,774
|
|
|
$
|
35,758
|
|
Fully taxable-equivalent adjustment
|
|
|
270
|
|
|
|
282
|
|
|
|
297
|
|
|
|
321
|
|
|
|
337
|
|
|
|
330
|
|
|
|
312
|
|
|
|
322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue, net of interest
expense on a fully taxable-equivalent basis
|
|
$
|
22,668
|
|
|
$
|
26,982
|
|
|
$
|
29,450
|
|
|
$
|
32,290
|
|
|
$
|
25,413
|
|
|
$
|
26,365
|
|
|
$
|
33,086
|
|
|
$
|
36,080
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of total
noninterest expense to total noninterest expense, excluding
goodwill impairment charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
$
|
20,864
|
|
|
$
|
27,216
|
|
|
$
|
17,253
|
|
|
$
|
17,775
|
|
|
$
|
16,385
|
|
|
$
|
16,306
|
|
|
$
|
17,020
|
|
|
$
|
17,002
|
|
Goodwill impairment charges
|
|
|
(2,000
|
)
|
|
|
(10,400
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense,
excluding goodwill impairment charges
|
|
$
|
18,864
|
|
|
$
|
16,816
|
|
|
$
|
17,253
|
|
|
$
|
17,775
|
|
|
$
|
16,385
|
|
|
$
|
16,306
|
|
|
$
|
17,020
|
|
|
$
|
17,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of income tax
expense (benefit) to income tax expense (benefit) on a fully
taxable-equivalent basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
|
$
|
(2,351
|
)
|
|
$
|
1,387
|
|
|
$
|
672
|
|
|
$
|
1,207
|
|
|
$
|
(1,225
|
)
|
|
$
|
(975
|
)
|
|
$
|
(845
|
)
|
|
$
|
1,129
|
|
Fully taxable-equivalent adjustment
|
|
|
270
|
|
|
|
282
|
|
|
|
297
|
|
|
|
321
|
|
|
|
337
|
|
|
|
330
|
|
|
|
312
|
|
|
|
322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) on
a fully taxable-equivalent basis
|
|
$
|
(2,081
|
)
|
|
$
|
1,669
|
|
|
$
|
969
|
|
|
$
|
1,528
|
|
|
$
|
(888
|
)
|
|
$
|
(645
|
)
|
|
$
|
(533
|
)
|
|
$
|
1,451
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net income
(loss) to net income (loss), excluding goodwill impairment
charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(1,244
|
)
|
|
$
|
(7,299
|
)
|
|
$
|
3,123
|
|
|
$
|
3,182
|
|
|
$
|
(194
|
)
|
|
$
|
(1,001
|
)
|
|
$
|
3,224
|
|
|
$
|
4,247
|
|
Goodwill impairment charges
|
|
|
2,000
|
|
|
|
10,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss), excluding
goodwill impairment charges
|
|
$
|
756
|
|
|
$
|
3,101
|
|
|
$
|
3,123
|
|
|
$
|
3,182
|
|
|
$
|
(194
|
)
|
|
$
|
(1,001
|
)
|
|
$
|
3,224
|
|
|
$
|
4,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net income
(loss) applicable to common shareholders to net income (loss)
applicable to common shareholders, excluding goodwill impairment
charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) applicable to common shareholders
|
|
$
|
(1,565
|
)
|
|
$
|
(7,647
|
)
|
|
$
|
2,783
|
|
|
$
|
2,834
|
|
|
$
|
(5,196
|
)
|
|
$
|
(2,241
|
)
|
|
$
|
2,419
|
|
|
$
|
2,814
|
|
Goodwill impairment charges
|
|
|
2,000
|
|
|
|
10,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) applicable to
common shareholders, excluding goodwill impairment
charges
|
|
$
|
435
|
|
|
$
|
2,753
|
|
|
$
|
2,783
|
|
|
$
|
2,834
|
|
|
$
|
(5,196
|
)
|
|
$
|
(2,241
|
)
|
|
$
|
2,419
|
|
|
$
|
2,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of average common
shareholders equity to average tangible common
shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shareholders equity
|
|
$
|
218,728
|
|
|
$
|
215,911
|
|
|
$
|
215,468
|
|
|
$
|
200,380
|
|
|
$
|
197,123
|
|
|
$
|
197,230
|
|
|
$
|
173,497
|
|
|
$
|
160,739
|
|
Common Equivalent Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,760
|
|
|
|
4,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
(75,584
|
)
|
|
|
(82,484
|
)
|
|
|
(86,099
|
)
|
|
|
(86,334
|
)
|
|
|
(86,053
|
)
|
|
|
(86,170
|
)
|
|
|
(87,314
|
)
|
|
|
(84,584
|
)
|
Intangible assets (excluding MSRs)
|
|
|
(10,211
|
)
|
|
|
(10,629
|
)
|
|
|
(11,216
|
)
|
|
|
(11,906
|
)
|
|
|
(12,556
|
)
|
|
|
(13,223
|
)
|
|
|
(13,595
|
)
|
|
|
(9,461
|
)
|
Related deferred tax liabilities
|
|
|
3,121
|
|
|
|
3,214
|
|
|
|
3,395
|
|
|
|
3,497
|
|
|
|
3,712
|
|
|
|
3,725
|
|
|
|
3,916
|
|
|
|
3,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible common
shareholders equity
|
|
$
|
136,054
|
|
|
$
|
126,012
|
|
|
$
|
121,548
|
|
|
$
|
117,397
|
|
|
$
|
107,037
|
|
|
$
|
101,562
|
|
|
$
|
76,504
|
|
|
$
|
70,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Presents reconciliations of
non-GAAP measures to GAAP financial measures. We believe the use
of these non-GAAP measures provides additional clarity in
assessing the results of the Corporation. Other companies may
define or calculate non-GAAP measures differently. For more
information on non-GAAP measures and ratios we use in assessing
the results of the Corporation, see Supplemental Financial Data
beginning on page 36.
|
(2) |
|
On February 24, 2010, the
common equivalent shares converted into common shares.
|
128 Bank
of America 2010
Table
XV Quarterly
Reconciliations to GAAP Financial
Measures (1)
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 Quarters
|
|
|
2009 Quarters
|
|
(Dollars in millions, except per
share information)
|
|
Fourth
|
|
|
Third
|
|
|
Second
|
|
|
First
|
|
|
Fourth
|
|
|
Third
|
|
|
Second
|
|
|
First
|
|
Reconciliation of average
shareholders equity to average tangible shareholders
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
$ 235,525
|
|
|
|
$ 233,978
|
|
|
|
$ 233,461
|
|
|
|
$ 229,891
|
|
|
$
|
250,599
|
|
|
$
|
255,983
|
|
|
$
|
242,867
|
|
|
$
|
228,766
|
|
Goodwill
|
|
|
(75,584
|
)
|
|
|
(82,484
|
)
|
|
|
(86,099
|
)
|
|
|
(86,334
|
)
|
|
|
(86,053
|
)
|
|
|
(86,170
|
)
|
|
|
(87,314
|
)
|
|
|
(84,584
|
)
|
Intangible assets (excluding MSRs)
|
|
|
(10,211
|
)
|
|
|
(10,629
|
)
|
|
|
(11,216
|
)
|
|
|
(11,906
|
)
|
|
|
(12,556
|
)
|
|
|
(13,223
|
)
|
|
|
(13,595
|
)
|
|
|
(9,461
|
)
|
Related deferred tax liabilities
|
|
|
3,121
|
|
|
|
3,214
|
|
|
|
3,395
|
|
|
|
3,497
|
|
|
|
3,712
|
|
|
|
3,725
|
|
|
|
3,916
|
|
|
|
3,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible shareholders
equity
|
|
|
$ 152,851
|
|
|
|
$ 144,079
|
|
|
|
$ 139,541
|
|
|
|
$ 135,148
|
|
|
$
|
155,702
|
|
|
$
|
160,315
|
|
|
$
|
145,874
|
|
|
$
|
138,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of period end
common shareholders equity to period end tangible common
shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shareholders equity
|
|
|
$ 211,686
|
|
|
|
$ 212,391
|
|
|
|
$ 215,181
|
|
|
|
$ 211,859
|
|
|
$
|
194,236
|
|
|
$
|
198,843
|
|
|
$
|
196,492
|
|
|
$
|
166,272
|
|
Common Equivalent Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
(73,861
|
)
|
|
|
(75,602
|
)
|
|
|
(85,801
|
)
|
|
|
(86,305
|
)
|
|
|
(86,314
|
)
|
|
|
(86,009
|
)
|
|
|
(86,246
|
)
|
|
|
(86,910
|
)
|
Intangible assets (excluding MSRs)
|
|
|
(9,923
|
)
|
|
|
(10,402
|
)
|
|
|
(10,796
|
)
|
|
|
(11,548
|
)
|
|
|
(12,026
|
)
|
|
|
(12,715
|
)
|
|
|
(13,245
|
)
|
|
|
(13,703
|
)
|
Related deferred tax liabilities
|
|
|
3,036
|
|
|
|
3,123
|
|
|
|
3,215
|
|
|
|
3,396
|
|
|
|
3,498
|
|
|
|
3,714
|
|
|
|
3,843
|
|
|
|
3,958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible common
shareholders equity
|
|
|
$ 130,938
|
|
|
|
$ 129,510
|
|
|
|
$ 121,799
|
|
|
|
$ 117,402
|
|
|
$
|
118,638
|
|
|
$
|
103,833
|
|
|
$
|
100,844
|
|
|
$
|
69,617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of period end
shareholders equity to period end tangible
shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
$ 228,248
|
|
|
|
$ 230,495
|
|
|
|
$ 233,174
|
|
|
|
$ 229,823
|
|
|
$
|
231,444
|
|
|
$
|
257,683
|
|
|
$
|
255,152
|
|
|
$
|
239,549
|
|
Goodwill
|
|
|
(73,861
|
)
|
|
|
(75,602
|
)
|
|
|
(85,801
|
)
|
|
|
(86,305
|
)
|
|
|
(86,314
|
)
|
|
|
(86,009
|
)
|
|
|
(86,246
|
)
|
|
|
(86,910
|
)
|
Intangible assets (excluding MSRs)
|
|
|
(9,923
|
)
|
|
|
(10,402
|
)
|
|
|
(10,796
|
)
|
|
|
(11,548
|
)
|
|
|
(12,026
|
)
|
|
|
(12,715
|
)
|
|
|
(13,245
|
)
|
|
|
(13,703
|
)
|
Related deferred tax liabilities
|
|
|
3,036
|
|
|
|
3,123
|
|
|
|
3,215
|
|
|
|
3,396
|
|
|
|
3,498
|
|
|
|
3,714
|
|
|
|
3,843
|
|
|
|
3,958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible shareholders
equity
|
|
|
$ 147,500
|
|
|
|
$ 147,614
|
|
|
|
$ 139,792
|
|
|
|
$ 135,366
|
|
|
$
|
136,602
|
|
|
$
|
162,673
|
|
|
$
|
159,504
|
|
|
$
|
142,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of period end
assets to period end tangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
$2,264,909
|
|
|
|
$2,339,660
|
|
|
|
$2,368,384
|
|
|
|
$2,344,634
|
|
|
$
|
2,230,232
|
|
|
$
|
2,259,891
|
|
|
$
|
2,260,853
|
|
|
$
|
2,321,961
|
|
Goodwill
|
|
|
(73,861
|
)
|
|
|
(75,602
|
)
|
|
|
(85,801
|
)
|
|
|
(86,305
|
)
|
|
|
(86,314
|
)
|
|
|
(86,009
|
)
|
|
|
(86,246
|
)
|
|
|
(86,910
|
)
|
Intangible assets (excluding MSRs)
|
|
|
(9,923
|
)
|
|
|
(10,402
|
)
|
|
|
(10,796
|
)
|
|
|
(11,548
|
)
|
|
|
(12,026
|
)
|
|
|
(12,715
|
)
|
|
|
(13,245
|
)
|
|
|
(13,703
|
)
|
Related deferred tax liabilities
|
|
|
3,036
|
|
|
|
3,123
|
|
|
|
3,215
|
|
|
|
3,396
|
|
|
|
3,498
|
|
|
|
3,714
|
|
|
|
3,843
|
|
|
|
3,958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible assets
|
|
|
$2,184,161
|
|
|
|
$2,256,779
|
|
|
|
$2,275,002
|
|
|
|
$2,250,177
|
|
|
$
|
2,135,390
|
|
|
$
|
2,164,881
|
|
|
$
|
2,165,205
|
|
|
$
|
2,225,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of ending common
shares outstanding to ending tangible common shares
outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding
|
|
|
10,085,155
|
|
|
|
10,033,705
|
|
|
|
10,033,017
|
|
|
|
10,032,001
|
|
|
|
8,650,244
|
|
|
|
8,650,314
|
|
|
|
8,651,459
|
|
|
|
6,400,950
|
|
Assumed conversion of common equivalent
shares (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,286,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible common shares
outstanding
|
|
|
10,085,155
|
|
|
|
10,033,705
|
|
|
|
10,033,017
|
|
|
|
10,032,001
|
|
|
|
9,936,244
|
|
|
|
8,650,314
|
|
|
|
8,651,459
|
|
|
|
6,400,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For footnotes see page 128.
Bank of America
2010 129
Table
XVI Quarterly
Average Balances and Interest Rates FTE
Basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter 2010
|
|
|
Third Quarter 2010
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
|
Average
|
|
|
Income/
|
|
|
Yield/
|
|
|
Average
|
|
|
Income/
|
|
|
Yield/
|
|
(Dollars in millions)
|
|
Balance
|
|
|
Expense
|
|
|
Rate
|
|
|
Balance
|
|
|
Expense
|
|
|
Rate
|
|
Earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits placed and other short-term
investments (1)
|
|
$
|
28,141
|
|
|
$
|
75
|
|
|
|
1.07
|
%
|
|
$
|
23,233
|
|
|
$
|
86
|
|
|
|
1.45
|
%
|
Federal funds sold and securities borrowed or purchased under
agreements to resell
|
|
|
243,589
|
|
|
|
486
|
|
|
|
0.79
|
|
|
|
254,820
|
|
|
|
441
|
|
|
|
0.69
|
|
Trading account assets
|
|
|
216,003
|
|
|
|
1,710
|
|
|
|
3.15
|
|
|
|
210,529
|
|
|
|
1,692
|
|
|
|
3.20
|
|
Debt
securities (2)
|
|
|
341,867
|
|
|
|
3,065
|
|
|
|
3.58
|
|
|
|
328,097
|
|
|
|
2,646
|
|
|
|
3.22
|
|
Loans and
leases (3):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
mortgage (4)
|
|
|
254,051
|
|
|
|
2,857
|
|
|
|
4.50
|
|
|
|
237,292
|
|
|
|
2,797
|
|
|
|
4.71
|
|
Home equity
|
|
|
139,772
|
|
|
|
1,410
|
|
|
|
4.01
|
|
|
|
143,083
|
|
|
|
1,457
|
|
|
|
4.05
|
|
Discontinued real estate
|
|
|
13,297
|
|
|
|
118
|
|
|
|
3.57
|
|
|
|
13,632
|
|
|
|
122
|
|
|
|
3.56
|
|
U.S. credit card
|
|
|
112,673
|
|
|
|
3,040
|
|
|
|
10.70
|
|
|
|
115,251
|
|
|
|
3,113
|
|
|
|
10.72
|
|
Non-U.S.
credit card
|
|
|
27,457
|
|
|
|
815
|
|
|
|
11.77
|
|
|
|
27,047
|
|
|
|
875
|
|
|
|
12.84
|
|
Direct/Indirect
consumer (5)
|
|
|
91,549
|
|
|
|
1,088
|
|
|
|
4.72
|
|
|
|
95,692
|
|
|
|
1,130
|
|
|
|
4.68
|
|
Other
consumer (6)
|
|
|
2,796
|
|
|
|
45
|
|
|
|
6.32
|
|
|
|
2,955
|
|
|
|
47
|
|
|
|
6.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer
|
|
|
641,595
|
|
|
|
9,373
|
|
|
|
5.81
|
|
|
|
634,952
|
|
|
|
9,541
|
|
|
|
5.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. commercial
|
|
|
193,608
|
|
|
|
1,894
|
|
|
|
3.88
|
|
|
|
192,306
|
|
|
|
2,040
|
|
|
|
4.21
|
|
Commercial real
estate (7)
|
|
|
51,617
|
|
|
|
432
|
|
|
|
3.32
|
|
|
|
55,660
|
|
|
|
452
|
|
|
|
3.22
|
|
Commercial lease financing
|
|
|
21,363
|
|
|
|
250
|
|
|
|
4.69
|
|
|
|
21,402
|
|
|
|
255
|
|
|
|
4.78
|
|
Non-U.S.
commercial
|
|
|
32,431
|
|
|
|
289
|
|
|
|
3.53
|
|
|
|
30,540
|
|
|
|
282
|
|
|
|
3.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
299,019
|
|
|
|
2,865
|
|
|
|
3.81
|
|
|
|
299,908
|
|
|
|
3,029
|
|
|
|
4.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases
|
|
|
940,614
|
|
|
|
12,238
|
|
|
|
5.18
|
|
|
|
934,860
|
|
|
|
12,570
|
|
|
|
5.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other earning assets
|
|
|
113,325
|
|
|
|
923
|
|
|
|
3.23
|
|
|
|
112,280
|
|
|
|
949
|
|
|
|
3.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earning
assets (8)
|
|
|
1,883,539
|
|
|
|
18,497
|
|
|
|
3.90
|
|
|
|
1,863,819
|
|
|
|
18,384
|
|
|
|
3.93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents (1)
|
|
|
136,967
|
|
|
|
63
|
|
|
|
|
|
|
|
155,784
|
|
|
|
107
|
|
|
|
|
|
Other assets, less allowance for loan and lease losses
|
|
|
349,752
|
|
|
|
|
|
|
|
|
|
|
|
359,794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,370,258
|
|
|
|
|
|
|
|
|
|
|
$
|
2,379,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. interest-bearing deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
|
|
$
|
37,145
|
|
|
$
|
35
|
|
|
|
0.36
|
%
|
|
$
|
37,008
|
|
|
$
|
36
|
|
|
|
0.39
|
%
|
NOW and money market deposit accounts
|
|
|
464,531
|
|
|
|
333
|
|
|
|
0.28
|
|
|
|
442,906
|
|
|
|
359
|
|
|
|
0.32
|
|
Consumer CDs and IRAs
|
|
|
124,855
|
|
|
|
338
|
|
|
|
1.07
|
|
|
|
132,687
|
|
|
|
377
|
|
|
|
1.13
|
|
Negotiable CDs, public funds and other time deposits
|
|
|
16,334
|
|
|
|
47
|
|
|
|
1.16
|
|
|
|
17,326
|
|
|
|
57
|
|
|
|
1.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. interest-bearing deposits
|
|
|
642,865
|
|
|
|
753
|
|
|
|
0.46
|
|
|
|
629,927
|
|
|
|
829
|
|
|
|
0.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S.
interest-bearing deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks located in
non-U.S.
countries
|
|
|
16,827
|
|
|
|
38
|
|
|
|
0.91
|
|
|
|
17,431
|
|
|
|
38
|
|
|
|
0.86
|
|
Governments and official institutions
|
|
|
1,560
|
|
|
|
2
|
|
|
|
0.42
|
|
|
|
2,055
|
|
|
|
2
|
|
|
|
0.36
|
|
Time, savings and other
|
|
|
58,746
|
|
|
|
101
|
|
|
|
0.69
|
|
|
|
54,373
|
|
|
|
81
|
|
|
|
0.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-U.S.
interest-bearing deposits
|
|
|
77,133
|
|
|
|
141
|
|
|
|
0.73
|
|
|
|
73,859
|
|
|
|
121
|
|
|
|
0.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits
|
|
|
719,998
|
|
|
|
894
|
|
|
|
0.49
|
|
|
|
703,786
|
|
|
|
950
|
|
|
|
0.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds purchased, securities loaned or sold under
agreements to repurchase and other short-term borrowings
|
|
|
369,738
|
|
|
|
1,142
|
|
|
|
1.23
|
|
|
|
391,148
|
|
|
|
848
|
|
|
|
0.86
|
|
Trading account liabilities
|
|
|
81,313
|
|
|
|
561
|
|
|
|
2.74
|
|
|
|
95,265
|
|
|
|
635
|
|
|
|
2.65
|
|
Long-term debt
|
|
|
465,875
|
|
|
|
3,254
|
|
|
|
2.78
|
|
|
|
485,588
|
|
|
|
3,341
|
|
|
|
2.74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing
liabilities (8)
|
|
|
1,636,924
|
|
|
|
5,851
|
|
|
|
1.42
|
|
|
|
1,675,787
|
|
|
|
5,774
|
|
|
|
1.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing sources:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits
|
|
|
287,740
|
|
|
|
|
|
|
|
|
|
|
|
270,060
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
210,069
|
|
|
|
|
|
|
|
|
|
|
|
199,572
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
235,525
|
|
|
|
|
|
|
|
|
|
|
|
233,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity
|
|
$
|
2,370,258
|
|
|
|
|
|
|
|
|
|
|
$
|
2,379,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest spread
|
|
|
|
|
|
|
|
|
|
|
2.48
|
%
|
|
|
|
|
|
|
|
|
|
|
2.56
|
%
|
Impact of noninterest-bearing sources
|
|
|
|
|
|
|
|
|
|
|
0.18
|
|
|
|
|
|
|
|
|
|
|
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income/yield on
earning
assets (1)
|
|
|
|
|
|
$
|
12,646
|
|
|
|
2.66
|
%
|
|
|
|
|
|
$
|
12,610
|
|
|
|
2.69
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Fees earned on overnight deposits
placed with the Federal Reserve, which were included in time
deposits placed and other short-term investments in prior
periods, have been reclassified to cash and cash equivalents,
consistent with the Corporations Consolidated Balance
Sheet presentation of these deposits. Net interest income and
net interest yield in the table are calculated excluding these
fees.
|
(2) |
|
Yields on AFS debt securities are
calculated based on fair value rather than the cost basis. The
use of fair value does not have a material impact on net
interest yield.
|
(3) |
|
Nonperforming loans are included in
the respective average loan balances. Income on these
nonperforming loans is recognized on a cash basis. Purchased
credit-impaired loans were written down to fair value upon
acquisition and accrete interest income over the remaining life
of the loan.
|
(4) |
|
Includes
non-U.S.
residential mortgage loans of $96 million,
$502 million, $506 million and $538 million in
the fourth, third, second and first quarters of 2010, and
$550 million in the fourth quarter of 2009, respectively.
|
(5) |
|
Includes
non-U.S.
consumer loans of $7.9 billion, $7.7 billion,
$7.7 billion and $8.1 billion in the fourth, third,
second and first quarters of 2010, and $8.6 billion in the
fourth quarter of 2009, respectively.
|
(6) |
|
Includes consumer finance loans of
$2.0 billion, $2.0 billion, $2.1 billion and
$2.2 billion in the fourth, third, second and first
quarters of 2010, and $2.3 billion in the fourth quarter of
2009, respectively; other
non-U.S.
consumer loans of $791 million, $788 million,
$679 million and $664 million in the fourth, third,
second and first quarters of 2010, and $689 million in the
fourth quarter of 2009, respectively; and consumer overdrafts of
$34 million, $123 million, $155 million and
$132 million in the fourth, third, second and first
quarters of 2010, and $192 million in the fourth quarter of
2009, respectively.
|
(7) |
|
Includes U.S. commercial real
estate loans of $49.0 billion, $53.1 billion,
$61.6 billion and $65.6 billion in the fourth, third,
second and first quarters of 2010, and $68.2 billion in the
fourth quarter of 2009, respectively; and
non-U.S.
commercial real estate loans of $2.6 billion,
$2.5 billion, $2.6 billion and $3.0 billion in
the fourth, third, second and first quarters of 2010, and
$3.1 billion in the fourth quarter of 2009, respectively.
|
(8) |
|
Interest income includes the impact
of interest rate risk management contracts, which decreased
interest income on the underlying assets by $29 million,
$639 million, $479 million and $272 million in
the fourth, third, second and first quarters of 2010 and
$248 million in the fourth quarter of 2009, respectively.
Interest expense includes the impact of interest rate risk
management contracts, which decreased interest expense on the
underlying liabilities by $672 million, $1.0 billion,
$829 million and $970 million in the fourth, third,
second and first quarters of 2010, and $1.1 billion in the
fourth quarter of 2009, respectively. For further information on
interest rate contracts, see Interest Rate Risk Management for
Nontrading Activities beginning on page 103.
|
130 Bank
of America 2010
Table
XVI Quarterly
Average Balances and Interest Rates FTE Basis
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter 2010
|
|
|
First Quarter 2010
|
|
|
Fourth Quarter 2009
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
|
Average
|
|
|
Income/
|
|
|
Yield/
|
|
|
Average
|
|
|
Income/
|
|
|
Yield/
|
|
|
Average
|
|
|
Income/
|
|
|
Yield/
|
|
(Dollars in millions)
|
|
Balance
|
|
|
Expense
|
|
|
Rate
|
|
|
Balance
|
|
|
Expense
|
|
|
Rate
|
|
|
Balance
|
|
|
Expense
|
|
|
Rate
|
|
Earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits placed and other short-term
investments (1)
|
|
$
|
30,741
|
|
|
$
|
70
|
|
|
|
0.93
|
%
|
|
$
|
27,600
|
|
|
$
|
61
|
|
|
|
0.89
|
%
|
|
$
|
28,566
|
|
|
$
|
90
|
|
|
|
1.25
|
%
|
Federal funds sold and securities borrowed or purchased under
agreements to resell
|
|
|
263,564
|
|
|
|
457
|
|
|
|
0.70
|
|
|
|
266,070
|
|
|
|
448
|
|
|
|
0.68
|
|
|
|
244,914
|
|
|
|
327
|
|
|
|
0.53
|
|
Trading account assets
|
|
|
213,927
|
|
|
|
1,853
|
|
|
|
3.47
|
|
|
|
214,542
|
|
|
|
1,795
|
|
|
|
3.37
|
|
|
|
218,787
|
|
|
|
1,800
|
|
|
|
3.28
|
|
Debt
securities (2)
|
|
|
314,299
|
|
|
|
2,966
|
|
|
|
3.78
|
|
|
|
311,136
|
|
|
|
3,173
|
|
|
|
4.09
|
|
|
|
279,231
|
|
|
|
2,921
|
|
|
|
4.18
|
|
Loans and
leases (3):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
mortgage (4)
|
|
|
247,715
|
|
|
|
2,982
|
|
|
|
4.82
|
|
|
|
243,833
|
|
|
|
3,100
|
|
|
|
5.09
|
|
|
|
236,883
|
|
|
|
3,108
|
|
|
|
5.24
|
|
Home equity
|
|
|
148,219
|
|
|
|
1,537
|
|
|
|
4.15
|
|
|
|
152,536
|
|
|
|
1,586
|
|
|
|
4.20
|
|
|
|
150,704
|
|
|
|
1,613
|
|
|
|
4.26
|
|
Discontinued real estate
|
|
|
13,972
|
|
|
|
134
|
|
|
|
3.84
|
|
|
|
14,433
|
|
|
|
153
|
|
|
|
4.24
|
|
|
|
15,152
|
|
|
|
174
|
|
|
|
4.58
|
|
U.S. credit card
|
|
|
118,738
|
|
|
|
3,121
|
|
|
|
10.54
|
|
|
|
125,353
|
|
|
|
3,370
|
|
|
|
10.90
|
|
|
|
49,213
|
|
|
|
1,336
|
|
|
|
10.77
|
|
Non-U.S.
credit card
|
|
|
27,706
|
|
|
|
854
|
|
|
|
12.37
|
|
|
|
29,872
|
|
|
|
906
|
|
|
|
12.30
|
|
|
|
21,680
|
|
|
|
605
|
|
|
|
11.08
|
|
Direct/Indirect
consumer (5)
|
|
|
98,549
|
|
|
|
1,233
|
|
|
|
5.02
|
|
|
|
100,920
|
|
|
|
1,302
|
|
|
|
5.23
|
|
|
|
98,938
|
|
|
|
1,361
|
|
|
|
5.46
|
|
Other
consumer (6)
|
|
|
2,958
|
|
|
|
46
|
|
|
|
6.32
|
|
|
|
3,002
|
|
|
|
48
|
|
|
|
6.35
|
|
|
|
3,177
|
|
|
|
50
|
|
|
|
6.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer
|
|
|
657,857
|
|
|
|
9,907
|
|
|
|
6.03
|
|
|
|
669,949
|
|
|
|
10,465
|
|
|
|
6.30
|
|
|
|
575,747
|
|
|
|
8,247
|
|
|
|
5.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. commercial
|
|
|
195,144
|
|
|
|
2,005
|
|
|
|
4.12
|
|
|
|
202,662
|
|
|
|
1,970
|
|
|
|
3.94
|
|
|
|
207,050
|
|
|
|
2,090
|
|
|
|
4.01
|
|
Commercial real
estate (7)
|
|
|
64,218
|
|
|
|
541
|
|
|
|
3.38
|
|
|
|
68,526
|
|
|
|
575
|
|
|
|
3.40
|
|
|
|
71,352
|
|
|
|
595
|
|
|
|
3.31
|
|
Commercial lease financing
|
|
|
21,271
|
|
|
|
261
|
|
|
|
4.90
|
|
|
|
21,675
|
|
|
|
304
|
|
|
|
5.60
|
|
|
|
21,769
|
|
|
|
273
|
|
|
|
5.04
|
|
Non-U.S.
commercial
|
|
|
28,564
|
|
|
|
256
|
|
|
|
3.59
|
|
|
|
28,803
|
|
|
|
264
|
|
|
|
3.72
|
|
|
|
29,995
|
|
|
|
287
|
|
|
|
3.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
309,197
|
|
|
|
3,063
|
|
|
|
3.97
|
|
|
|
321,666
|
|
|
|
3,113
|
|
|
|
3.92
|
|
|
|
330,166
|
|
|
|
3,245
|
|
|
|
3.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases
|
|
|
967,054
|
|
|
|
12,970
|
|
|
|
5.38
|
|
|
|
991,615
|
|
|
|
13,578
|
|
|
|
5.53
|
|
|
|
905,913
|
|
|
|
11,492
|
|
|
|
5.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other earning assets
|
|
|
121,205
|
|
|
|
994
|
|
|
|
3.29
|
|
|
|
122,097
|
|
|
|
1,053
|
|
|
|
3.50
|
|
|
|
130,487
|
|
|
|
1,222
|
|
|
|
3.72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earning
assets (8)
|
|
|
1,910,790
|
|
|
|
19,310
|
|
|
|
4.05
|
|
|
|
1,933,060
|
|
|
|
20,108
|
|
|
|
4.19
|
|
|
|
1,807,898
|
|
|
|
17,852
|
|
|
|
3.93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents (1)
|
|
|
209,686
|
|
|
|
106
|
|
|
|
|
|
|
|
196,911
|
|
|
|
92
|
|
|
|
|
|
|
|
230,618
|
|
|
|
130
|
|
|
|
|
|
Other assets, less allowance for loan and lease losses
|
|
|
373,956
|
|
|
|
|
|
|
|
|
|
|
|
386,619
|
|
|
|
|
|
|
|
|
|
|
|
392,508
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,494,432
|
|
|
|
|
|
|
|
|
|
|
$
|
2,516,590
|
|
|
|
|
|
|
|
|
|
|
$
|
2,431,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. interest-bearing deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
|
|
$
|
37,290
|
|
|
$
|
43
|
|
|
|
0.46
|
%
|
|
$
|
35,126
|
|
|
$
|
43
|
|
|
|
0.50
|
%
|
|
$
|
33,749
|
|
|
$
|
54
|
|
|
|
0.63
|
%
|
NOW and money market deposit accounts
|
|
|
442,262
|
|
|
|
372
|
|
|
|
0.34
|
|
|
|
416,110
|
|
|
|
341
|
|
|
|
0.33
|
|
|
|
392,212
|
|
|
|
388
|
|
|
|
0.39
|
|
Consumer CDs and IRAs
|
|
|
147,425
|
|
|
|
441
|
|
|
|
1.20
|
|
|
|
166,189
|
|
|
|
567
|
|
|
|
1.38
|
|
|
|
192,779
|
|
|
|
835
|
|
|
|
1.72
|
|
Negotiable CDs, public funds and other time deposits
|
|
|
17,355
|
|
|
|
59
|
|
|
|
1.36
|
|
|
|
19,763
|
|
|
|
63
|
|
|
|
1.31
|
|
|
|
31,758
|
|
|
|
82
|
|
|
|
1.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. interest-bearing deposits
|
|
|
644,332
|
|
|
|
915
|
|
|
|
0.57
|
|
|
|
637,188
|
|
|
|
1,014
|
|
|
|
0.65
|
|
|
|
650,498
|
|
|
|
1,359
|
|
|
|
0.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S.
interest-bearing deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks located in
non-U.S.
countries
|
|
|
19,751
|
|
|
|
36
|
|
|
|
0.72
|
|
|
|
18,424
|
|
|
|
32
|
|
|
|
0.71
|
|
|
|
16,132
|
|
|
|
30
|
|
|
|
0.75
|
|
Governments and official institutions
|
|
|
4,214
|
|
|
|
3
|
|
|
|
0.28
|
|
|
|
5,626
|
|
|
|
3
|
|
|
|
0.22
|
|
|
|
5,779
|
|
|
|
4
|
|
|
|
0.26
|
|
Time, savings and other
|
|
|
52,195
|
|
|
|
77
|
|
|
|
0.60
|
|
|
|
54,885
|
|
|
|
73
|
|
|
|
0.53
|
|
|
|
55,685
|
|
|
|
79
|
|
|
|
0.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-U.S.
interest-bearing deposits
|
|
|
76,160
|
|
|
|
116
|
|
|
|
0.61
|
|
|
|
78,935
|
|
|
|
108
|
|
|
|
0.55
|
|
|
|
77,596
|
|
|
|
113
|
|
|
|
0.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits
|
|
|
720,492
|
|
|
|
1,031
|
|
|
|
0.57
|
|
|
|
716,123
|
|
|
|
1,122
|
|
|
|
0.64
|
|
|
|
728,094
|
|
|
|
1,472
|
|
|
|
0.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds purchased, securities loaned or sold under
agreements to repurchase and other short-term borrowings
|
|
|
454,051
|
|
|
|
891
|
|
|
|
0.79
|
|
|
|
508,332
|
|
|
|
818
|
|
|
|
0.65
|
|
|
|
450,538
|
|
|
|
658
|
|
|
|
0.58
|
|
Trading account liabilities
|
|
|
100,021
|
|
|
|
715
|
|
|
|
2.87
|
|
|
|
90,134
|
|
|
|
660
|
|
|
|
2.97
|
|
|
|
83,118
|
|
|
|
591
|
|
|
|
2.82
|
|
Long-term debt
|
|
|
497,469
|
|
|
|
3,582
|
|
|
|
2.88
|
|
|
|
513,634
|
|
|
|
3,530
|
|
|
|
2.77
|
|
|
|
445,440
|
|
|
|
3,365
|
|
|
|
3.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing
liabilities (8)
|
|
|
1,772,033
|
|
|
|
6,219
|
|
|
|
1.41
|
|
|
|
1,828,223
|
|
|
|
6,130
|
|
|
|
1.35
|
|
|
|
1,707,190
|
|
|
|
6,086
|
|
|
|
1.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing sources:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits
|
|
|
271,123
|
|
|
|
|
|
|
|
|
|
|
|
264,892
|
|
|
|
|
|
|
|
|
|
|
|
267,066
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
217,815
|
|
|
|
|
|
|
|
|
|
|
|
193,584
|
|
|
|
|
|
|
|
|
|
|
|
206,169
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
233,461
|
|
|
|
|
|
|
|
|
|
|
|
229,891
|
|
|
|
|
|
|
|
|
|
|
|
250,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity
|
|
$
|
2,494,432
|
|
|
|
|
|
|
|
|
|
|
$
|
2,516,590
|
|
|
|
|
|
|
|
|
|
|
$
|
2,431,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest spread
|
|
|
|
|
|
|
|
|
|
|
2.64
|
%
|
|
|
|
|
|
|
|
|
|
|
2.84
|
%
|
|
|
|
|
|
|
|
|
|
|
2.51
|
%
|
Impact of noninterest-bearing sources
|
|
|
|
|
|
|
|
|
|
|
0.10
|
|
|
|
|
|
|
|
|
|
|
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income/yield on
earning
assets (1)
|
|
|
|
|
|
$
|
13,091
|
|
|
|
2.74
|
%
|
|
|
|
|
|
$
|
13,978
|
|
|
|
2.92
|
%
|
|
|
|
|
|
$
|
11,766
|
|
|
|
2.59
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For footnotes, see page 130.
Bank of America
2010 131
Glossary
Alt-A Mortgage Alternative-A mortgage, a type
of U.S. mortgage that, for various reasons, is considered
riskier than A-paper, or prime, and less risky than
subprime, the riskiest category. Alt-A interest
rates, which are determined by credit risk, therefore tend to be
between those of prime and subprime home loans. Typically, Alt-A
mortgages are characterized by borrowers with less than full
documentation, lower credit scores and higher LTVs.
Assets in Custody Consist largely of
custodial and non-discretionary trust assets excluding brokerage
assets administered for clients. Trust assets encompass a broad
range of asset types including real estate, private company
ownership interest, personal property and investments.
Assets Under Management (AUM) The total
market value of assets under the investment advisory and
discretion of GWIM which generate asset management fees
based on a percentage of the assets market values. AUM
reflects assets that are generally managed for institutional,
high net-worth and retail clients and are distributed through
various investment products including mutual funds, other
commingled vehicles and separate accounts.
Bridge Financing A loan or security that is
expected to be replaced by permanent financing (debt or equity
securities, loan syndication or asset sales) prior to the
maturity date of the loan. Bridge loans may include an unfunded
commitment, as well as funded amounts, and are generally
expected to be retired in one year or less.
Client Brokerage Assets Include client assets
which are held in brokerage accounts. This includes
non-discretionary brokerage and fee-based assets which generate
brokerage income and asset management fee revenue.
Client Deposits Includes GWIM client
deposit accounts representing both consumer and commercial
demand, regular savings, time, money market, sweep and
non-U.S. accounts.
Committed Credit Exposure Includes any funded
portion of a facility plus the unfunded portion of a facility on
which the lender is legally bound to advance funds during a
specified period under prescribed conditions.
Core Net Interest Income Net interest income
on a fully taxable-equivalent basis excluding the impact of
market-based activities.
Credit Card Accountability Responsibility and Disclosure Act
of 2009 (CARD Act) Legislation signed into law
on May 22, 2009 to provide changes to credit card industry
practices including significantly restricting credit card
issuers ability to change interest rates and assess fees
to reflect individual consumer risk, change the way payments are
applied and requiring changes to consumer credit card
disclosures. The majority of the provisions became effective in
February 2010.
Credit Default Swap (CDS) A derivative
contract that provides protection against the deterioration of
credit quality and allows one party to receive payment in the
event of default by a third party under a borrowing arrangement.
Excess Servicing Income For certain assets
that have been securitized, interest income, fee revenue and
recoveries in excess of interest paid to the investors, gross
credit losses and other trust expenses related to the
securitized receivables are all classified as excess servicing
income, which is a component of card income. Excess servicing
income also includes the changes in fair value of the
Corporations card-related retained interests.
Interest-only Strip A residual interest in a
securitization trust representing the right to receive future
net cash flows from securitized assets after payments to
third-party investors and net credit losses. These arise when
assets are transferred to a SPE as part of an asset
securitization transaction qualifying for sale treatment under
GAAP.
Interest Rate Lock Commitment (IRLC)
Commitment with a loan applicant in which the loan terms,
including interest rate and price, are guaranteed for a
designated period of time subject to credit approval.
Letter of Credit A document issued on behalf
of a customer to a third party promising to pay the third party
upon presentation of specified documents. A
letter of credit effectively substitutes the issuers
credit for that of the customer.
Loan-to-value
(LTV) A commonly used credit quality metric that
is reported in terms of ending and average LTV. Ending LTV is
calculated as the outstanding carrying value of the loan at the
end of the period divided by the estimated value of the property
securing the loan. Estimated property values are primarily
determined by utilizing the Case-Schiller Home Index, a widely
used index based on data from repeat sales of single family
homes. Case-Schiller indices are updated quarterly and are
reported on a three-month or one-quarter lag. An additional
metric related to LTV is combined
loan-to-value
(CLTV) which is similar to the LTV metric, yet combines the
outstanding balance on the residential mortgage loan and the
outstanding carrying value on the home equity loan or available
line of credit, both of which are secured by the same property,
divided by the estimated value of the property. A LTV of
100 percent reflects a loan that is currently secured by a
property valued at an amount exactly equal to the carrying value
or available line of the loan. Under certain circumstances,
estimated values can also be determined by utilizing an
automated valuation method (AVM) or Mortgage Risk Assessment
Corporation (MRAC) index. An AVM is a tool that estimates the
value of a property by reference to large volumes of market data
including sales of comparable properties and price trends
specific to the MSA in which the property being valued is
located. The MRAC index is similar to the Case-Schiller Home
Index in that it is an index that is based on data from repeat
sales of single family homes and is reported on a lag.
Making Home Affordable Program (MHA) A
U.S. Treasury program to reduce the number of foreclosures
and make it easier for homeowners to refinance loans. The
program is comprised of the Home Affordable Modification Program
(HAMP) which provides guidelines on loan modifications and is
designed to help at-risk homeowners avoid foreclosure by
reducing monthly mortgage payments and provides incentives to
lenders to modify all eligible loans that fall under the program
guidelines and the Home Affordable Refinance Program (HARP)
which is available to homeowners who have a proven payment
history on an existing mortgage owned by FNMA or FHLMC and is
designed to help eligible homeowners refinance their mortgage
loans to take advantage of current lower mortgage rates or to
refinance ARMs into more stable fixed-rate mortgages. In
addition, the Second Lien Program is a part of the MHA. For more
information on this program, see the separate definition for the
Second Lien Program.
Mortgage Servicing Right (MSR) The right to
service a mortgage loan when the underlying loan is sold or
securitized. Servicing includes collections for principal,
interest and escrow payments from borrowers and accounting for
and remitting principal and interest payments to investors.
Net Interest Yield Net interest income
divided by average total interest-earning assets.
Nonperforming Loans and Leases Includes loans
and leases that have been placed on nonaccrual status, including
nonaccruing loans whose contractual terms have been restructured
in a manner that grants a concession to a borrower experiencing
financial difficulties (troubled debt restructurings or TDRs).
Loans accounted for under the fair value option, purchased
credit-impaired loans and loans
held-for-sale
are not reported as nonperforming loans and leases. Consumer
credit card loans, business card loans, consumer loans not
secured by real estate, and consumer loans secured by real
estate where repayments are insured by the Federal Housing
Administration are not placed on nonaccrual status and are,
therefore, not reported as nonperforming loans and leases.
Purchased Credit-impaired (PCI) Loan A loan
purchased as an individual loan, in a portfolio of loans or in a
business combination with evidence of deterioration in credit
quality since origination for which it is probable, upon
132 Bank
of America 2010
acquisition, that the investor will be unable to collect all
contractually required payments. These loans are written down to
fair value at the acquisition date.
Second Lien Program (2MP) A MHA program
announced on April 28, 2009 by the U.S. Treasury that
focuses on creating a comprehensive affordability solution for
homeowners. By focusing on shared efforts with lenders to reduce
second mortgage payments,
pay-for-success
incentives for servicers, investors and borrowers, and a payment
schedule for extinguishing second mortgages, the 2MP is designed
to help up to 1.5 million homeowners. The program is
designed to ensure that first and second lien holders are
treated fairly and consistently with priority of liens, and
offers automatic modification of a second lien when a first lien
is modified.
Subprime Loans Although a standard industry
definition for subprime loans (including subprime mortgage
loans) does not exist, the Corporation defines subprime loans as
specific product offerings for higher risk borrowers, including
individuals with one or a combination of high credit risk
factors, such as low FICO scores, high debt to income ratios and
inferior payment history.
Super Senior CDO Exposure Represents the most
senior class of commercial paper or notes that are issued by CDO
vehicles. These financial instruments benefit from the
subordination of all other securities, including AAA-rated
securities, issued by CDO vehicles.
Tier 1 Common Capital Tier 1
capital including CES, less preferred stock, qualifying trust
preferred securities, hybrid securities and qualifying
noncontrolling interest in subsidiaries.
Troubled Asset Relief Program (TARP) A
program established under the Emergency Economic Stabilization
Act of 2008 by the U.S. Treasury to, among other things,
invest in financial institutions through capital infusions and
purchase mortgages, MBS and certain other financial instruments
from financial institutions, in an aggregate amount up to
$700 billion, for the purpose of stabilizing and providing
liquidity to the U.S. financial markets.
Troubled Debt Restructurings (TDRs) Loans
whose contractual terms have been restructured in a manner that
grants a concession to a borrower experiencing financial
difficulties. Concessions could include a reduction in the
interest rate on the loan, payment extensions, forgiveness of
principal, forbearance or other actions intended to maximize
collection. TDRs are generally reported as nonperforming loans
and leases while on nonaccrual status. TDRs that are on accrual
status are reported as performing TDRs through the end of the
calendar year in which the restructuring occurred or the year in
which they are returned to accrual status. In addition, if
accruing TDRs bear less than a market rate of interest at the
time of modification, they are reported as performing TDRs
throughout their remaining lives.
Value-at-Risk
(VaR) A VaR model estimates a range of
hypothetical scenarios to calculate a potential loss which is
not expected to be exceeded with a specified confidence level.
VaR is a key statistic used to measure and manage market risk.
Bank of America
2010 133
Acronyms
|
|
|
|
|
|
ABS
|
|
Asset-backed securities
|
|
|
|
AFS
|
|
Available-for-sale
|
|
|
|
ALM
|
|
Asset and liability management
|
|
|
|
ALMRC
|
|
Asset Liability Market Risk Committee
|
|
|
|
ARM
|
|
Adjustable-rate mortgage
|
|
|
|
ARS
|
|
Auction rate securities
|
|
|
|
BPS
|
|
Basis points
|
|
|
|
CDO
|
|
Collateralized debt obligation
|
|
|
|
CES
|
|
Common Equivalent Securities
|
|
|
|
CMBS
|
|
Commercial mortgage-backed securities
|
|
|
|
CMO
|
|
Collateralized mortgage obligation
|
|
|
|
CRA
|
|
Community Reinvestment Act
|
|
|
|
CRC
|
|
Credit Risk Committee
|
|
|
|
FASB
|
|
Financial Accounting Standards Board
|
|
|
|
FDIC
|
|
Federal Deposit Insurance Corporation
|
|
|
|
FFIEC
|
|
Federal Financial Institutions Examination Council
|
|
|
|
FHA
|
|
Federal Housing Administration
|
|
|
|
FHLMC
|
|
Freddie Mac
|
|
|
|
FICC
|
|
Fixed income, currencies and commodities
|
|
|
|
FICO
|
|
Fair Isaac Corporation (credit score)
|
|
|
|
FNMA
|
|
Fannie Mae
|
|
|
|
FSA
|
|
Financial Services Authority
|
|
|
|
FTE
|
|
Fully taxable-equivalent
|
|
|
|
GAAP
|
|
Generally accepted accounting principles in the United States of
America
|
|
|
|
GNMA
|
|
Government National Mortgage Association
|
|
|
|
GRC
|
|
Global Markets Risk Committee
|
|
|
|
GSE
|
|
Government-sponsored enterprise
|
|
|
|
HAFA
|
|
Home Affordable Foreclosure Alternatives
|
|
|
|
IPO
|
|
Initial public offering
|
|
|
|
LHFS
|
|
Loans held-for-sale
|
|
|
|
LIBOR
|
|
London InterBank Offered Rate
|
|
|
|
MBS
|
|
Mortgage-backed securities
|
|
|
|
MD&A
|
|
Managements Discussion and Analysis of Financial Condition
and Results of Operations
|
|
|
|
MSA
|
|
Metropolitan statistical area
|
|
|
|
OCI
|
|
Other comprehensive income
|
|
|
|
OTC
|
|
Over-the-counter
|
|
|
|
OTTI
|
|
Other-than-temporary impairment
|
|
|
|
PCI
|
|
Purchased credit-impaired
|
|
|
|
PPI
|
|
Payment protection insurance
|
|
|
|
QSPE
|
|
Qualifying special purpose entity
|
|
|
|
RMBS
|
|
Residential mortgage-backed securities
|
|
|
|
ROC
|
|
Risk Oversight Committee
|
|
|
|
ROTE
|
|
Return on average tangible shareholders equity
|
|
|
|
SBLCs
|
|
Standby letters of credit
|
|
|
|
SEC
|
|
Securities and Exchange Commission
|
|
|
|
SPE
|
|
Special purpose entity
|
|
|
|
VA
|
|
Veterans Affairs
|
|
|
|
VIE
|
|
Variable interest entity
|
134 Bank
of America 2010
Item 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
See Market Risk Management beginning on page 100 in the
MD&A and the sections referenced therein for Quantitative
and Qualitative Disclosures about Market Risk.
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of
Management on Internal Control
Over Financial Reporting
The management of Bank of America Corporation is responsible for
establishing and maintaining adequate internal control over
financial reporting.
The Corporations internal control over financial reporting
is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
accounting principles generally accepted in the United States of
America. The Corporations internal control over financial
reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the Corporation;
(ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial
statements in accordance with accounting principles generally
accepted in the United States of America, and that receipts and
expenditures of the Corporation are being made only in
accordance with authorizations of management and directors of
the Corporation; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the Corporations
assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Corporations
internal control over financial reporting as of
December 31, 2010 based on the
framework set forth by the Committee of Sponsoring Organizations
of the Treadway Commission in Internal Control
Integrated Framework. Based on that assessment, management
concluded that, as of December 31, 2010, the
Corporations internal control over financial reporting is
effective based on the criteria established in Internal
Control Integrated Framework.
The Corporations internal control over financial reporting
as of December 31, 2010 has been audited by
PricewaterhouseCoopers, LLP, an independent registered public
accounting firm, as stated in their accompanying report which
expresses an unqualified opinion on the effectiveness of the
Corporations internal control over financial reporting as
of December 31, 2010.
Brian T. Moynihan
Chief Executive Officer and President
Charles H. Noski
Chief Financial Officer and Executive Vice President
Bank of America
2010 135
Report
of Independent Registered Public Accounting Firm
To the Board of
Directors and Shareholders of Bank of America
Corporation:
In our opinion, the accompanying Consolidated Balance Sheet and
the related Consolidated Statement of Income, Consolidated
Statement of Changes in Shareholders Equity and
Consolidated Statement of Cash Flows present fairly, in all
material respects, the financial position of Bank of America
Corporation and its subsidiaries at December 31, 2010 and
2009, and the results of their operations and their cash flows
for each of the three years in the period ended
December 31, 2010 in conformity with accounting principles
generally accepted in the United States of America. Also in our
opinion, the Corporation maintained, in all material respects,
effective internal control over financial reporting as of
December 31, 2010, based on criteria established in
Internal Control Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). The Corporations management is
responsible for these financial statements, for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting, included in the accompanying Report of
Management on Internal Control Over Financial Reporting. Our
responsibility is to express opinions on these financial
statements and on the Corporations internal control over
financial reporting based on our integrated audits. We conducted
our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are
free of material misstatement and whether effective internal
control over financial reporting was maintained in all material
respects. Our audits of the financial statements included
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. Our audit of internal control over financial
reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a
material
weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the
assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our
opinions.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Charlotte, North Carolina
February 25, 2011
136 Bank
of America 2010
Bank of America
Corporation and Subsidiaries
Consolidated
Statement of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
(Dollars in millions, except per
share information)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases
|
|
$
|
50,996
|
|
|
$
|
48,703
|
|
|
$
|
56,017
|
|
Debt securities
|
|
|
11,667
|
|
|
|
12,947
|
|
|
|
13,146
|
|
Federal funds sold and securities borrowed or purchased under
agreements to resell
|
|
|
1,832
|
|
|
|
2,894
|
|
|
|
3,313
|
|
Trading account assets
|
|
|
6,841
|
|
|
|
7,944
|
|
|
|
9,057
|
|
Other interest income
|
|
|
4,161
|
|
|
|
5,428
|
|
|
|
4,151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
75,497
|
|
|
|
77,916
|
|
|
|
85,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
3,997
|
|
|
|
7,807
|
|
|
|
15,250
|
|
Short-term borrowings
|
|
|
3,699
|
|
|
|
5,512
|
|
|
|
12,362
|
|
Trading account liabilities
|
|
|
2,571
|
|
|
|
2,075
|
|
|
|
2,774
|
|
Long-term debt
|
|
|
13,707
|
|
|
|
15,413
|
|
|
|
9,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
23,974
|
|
|
|
30,807
|
|
|
|
40,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
51,523
|
|
|
|
47,109
|
|
|
|
45,360
|
|
Noninterest income
|
|
|
|
|
|
|
|
|
|
|
|
|
Card income
|
|
|
8,108
|
|
|
|
8,353
|
|
|
|
13,314
|
|
Service charges
|
|
|
9,390
|
|
|
|
11,038
|
|
|
|
10,316
|
|
Investment and brokerage services
|
|
|
11,622
|
|
|
|
11,919
|
|
|
|
4,972
|
|
Investment banking income
|
|
|
5,520
|
|
|
|
5,551
|
|
|
|
2,263
|
|
Equity investment income
|
|
|
5,260
|
|
|
|
10,014
|
|
|
|
539
|
|
Trading account profits (losses)
|
|
|
10,054
|
|
|
|
12,235
|
|
|
|
(5,911
|
)
|
Mortgage banking income
|
|
|
2,734
|
|
|
|
8,791
|
|
|
|
4,087
|
|
Insurance income
|
|
|
2,066
|
|
|
|
2,760
|
|
|
|
1,833
|
|
Gains on sales of debt securities
|
|
|
2,526
|
|
|
|
4,723
|
|
|
|
1,124
|
|
Other income (loss)
|
|
|
2,384
|
|
|
|
(14
|
)
|
|
|
(1,654
|
)
|
Other-than-temporary
impairment losses on
available-for-sale
debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other-than-temporary
impairment losses
|
|
|
(2,174
|
)
|
|
|
(3,508
|
)
|
|
|
(3,461
|
)
|
Less: Portion of
other-than-temporary
impairment losses recognized in other comprehensive income
|
|
|
1,207
|
|
|
|
672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net impairment losses recognized in earnings on
available-for-sale
debt securities
|
|
|
(967
|
)
|
|
|
(2,836
|
)
|
|
|
(3,461
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
58,697
|
|
|
|
72,534
|
|
|
|
27,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue, net of interest
expense
|
|
|
110,220
|
|
|
|
119,643
|
|
|
|
72,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit
losses
|
|
|
28,435
|
|
|
|
48,570
|
|
|
|
26,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel
|
|
|
35,149
|
|
|
|
31,528
|
|
|
|
18,371
|
|
Occupancy
|
|
|
4,716
|
|
|
|
4,906
|
|
|
|
3,626
|
|
Equipment
|
|
|
2,452
|
|
|
|
2,455
|
|
|
|
1,655
|
|
Marketing
|
|
|
1,963
|
|
|
|
1,933
|
|
|
|
2,368
|
|
Professional fees
|
|
|
2,695
|
|
|
|
2,281
|
|
|
|
1,592
|
|
Amortization of intangibles
|
|
|
1,731
|
|
|
|
1,978
|
|
|
|
1,834
|
|
Data processing
|
|
|
2,544
|
|
|
|
2,500
|
|
|
|
2,546
|
|
Telecommunications
|
|
|
1,416
|
|
|
|
1,420
|
|
|
|
1,106
|
|
Other general operating
|
|
|
16,222
|
|
|
|
14,991
|
|
|
|
7,496
|
|
Goodwill impairment
|
|
|
12,400
|
|
|
|
|
|
|
|
|
|
Merger and restructuring charges
|
|
|
1,820
|
|
|
|
2,721
|
|
|
|
935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
|
83,108
|
|
|
|
66,713
|
|
|
|
41,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income
taxes
|
|
|
(1,323
|
)
|
|
|
4,360
|
|
|
|
4,428
|
|
Income tax expense
(benefit)
|
|
|
915
|
|
|
|
(1,916
|
)
|
|
|
420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(2,238
|
)
|
|
$
|
6,276
|
|
|
$
|
4,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends and
accretion
|
|
|
1,357
|
|
|
|
8,480
|
|
|
|
1,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) applicable to
common shareholders
|
|
$
|
(3,595
|
)
|
|
$
|
(2,204
|
)
|
|
$
|
2,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share
information
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss)
|
|
$
|
(0.37
|
)
|
|
$
|
(0.29
|
)
|
|
$
|
0.54
|
|
Diluted earnings (loss)
|
|
|
(0.37
|
)
|
|
|
(0.29
|
)
|
|
|
0.54
|
|
Dividends paid
|
|
|
0.04
|
|
|
|
0.04
|
|
|
|
2.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares issued and
outstanding (in thousands)
|
|
|
9,790,472
|
|
|
|
7,728,570
|
|
|
|
4,592,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average diluted common shares
issued and outstanding (in thousands)
|
|
|
9,790,472
|
|
|
|
7,728,570
|
|
|
|
4,596,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to
Consolidated Financial Statements.
Bank of America
2010 137
Bank of America
Corporation and Subsidiaries
Consolidated
Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
108,427
|
|
|
$
|
121,339
|
|
Time deposits placed and other short-term investments
|
|
|
26,433
|
|
|
|
24,202
|
|
Federal funds sold and securities borrowed or purchased under
agreements to resell (includes
$78,599
and $57,775 measured at
fair value and $209,249 and $189,844 pledged as
collateral)
|
|
|
209,616
|
|
|
|
189,933
|
|
Trading account assets (includes
$28,093
and $30,921 pledged as
collateral)
|
|
|
194,671
|
|
|
|
182,206
|
|
Derivative assets
|
|
|
73,000
|
|
|
|
87,622
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
Available-for-sale
(includes $99,925
and $122,708 pledged as
collateral)
|
|
|
337,627
|
|
|
|
301,601
|
|
Held-to-maturity,
at cost (fair value $427
and $9,684)
|
|
|
427
|
|
|
|
9,840
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
338,054
|
|
|
|
311,441
|
|
|
|
|
|
|
|
|
|
|
Loans and leases (includes
$3,321
and $4,936 measured at
fair value and $91,730 and $118,113 pledged as collateral)
|
|
|
940,440
|
|
|
|
900,128
|
|
Allowance for loan and lease losses
|
|
|
(41,885
|
)
|
|
|
(37,200
|
)
|
|
|
|
|
|
|
|
|
|
Loans and leases, net of allowance
|
|
|
898,555
|
|
|
|
862,928
|
|
|
|
|
|
|
|
|
|
|
Premises and equipment, net
|
|
|
14,306
|
|
|
|
15,500
|
|
Mortgage servicing rights (includes
$14,900
and $19,465 measured at
fair value)
|
|
|
15,177
|
|
|
|
19,774
|
|
Goodwill
|
|
|
73,861
|
|
|
|
86,314
|
|
Intangible assets
|
|
|
9,923
|
|
|
|
12,026
|
|
Loans
held-for-sale
(includes $25,942
and $32,795 measured at
fair value)
|
|
|
35,058
|
|
|
|
43,874
|
|
Customer and other receivables
|
|
|
85,704
|
|
|
|
81,996
|
|
Other assets (includes $70,531
and $55,909 measured at
fair value)
|
|
|
182,124
|
|
|
|
191,077
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,264,909
|
|
|
$
|
2,230,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets of consolidated VIEs
included in total assets above (substantially all pledged as
collateral)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading account assets
|
|
$
|
19,627
|
|
|
|
|
|
Derivative assets
|
|
|
2,027
|
|
|
|
|
|
Available-for-sale
debt securities
|
|
|
2,601
|
|
|
|
|
|
Loans and leases
|
|
|
145,469
|
|
|
|
|
|
Allowance for loan and lease losses
|
|
|
(8,935
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases, net of allowance
|
|
|
136,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
held-for-sale
|
|
|
1,953
|
|
|
|
|
|
All other assets
|
|
|
7,086
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets of consolidated
VIEs
|
|
$
|
169,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to
Consolidated Financial Statements.
138 Bank
of America 2010
Bank of America
Corporation and Subsidiaries
Consolidated
Balance Sheet (continued)
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Deposits in U.S. offices:
|
|
|
|
|
|
|
|
|
Noninterest-bearing
|
|
$
|
285,200
|
|
|
$
|
269,615
|
|
Interest-bearing (includes
$2,732
and $1,663 measured at
fair value)
|
|
|
645,713
|
|
|
|
640,789
|
|
Deposits in
non-U.S.
offices:
|
|
|
|
|
|
|
|
|
Noninterest-bearing
|
|
|
6,101
|
|
|
|
5,489
|
|
Interest-bearing
|
|
|
73,416
|
|
|
|
75,718
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
1,010,430
|
|
|
|
991,611
|
|
|
|
|
|
|
|
|
|
|
Federal funds purchased and securities loaned or sold under
agreements to repurchase (includes
$37,424
and $37,325 measured at fair value)
|
|
|
245,359
|
|
|
|
255,185
|
|
Trading account liabilities
|
|
|
71,985
|
|
|
|
65,432
|
|
Derivative liabilities
|
|
|
55,914
|
|
|
|
50,661
|
|
Commercial paper and other short-term borrowings (includes
$7,178
and $1,520 measured at fair value)
|
|
|
59,962
|
|
|
|
69,524
|
|
Accrued expenses and other liabilities (includes
$33,229
and $18,308 measured at fair value and $1,188 and $1,487
of reserve for unfunded lending commitments)
|
|
|
144,580
|
|
|
|
127,854
|
|
Long-term debt (includes
$50,984
and $45,451 measured at fair value)
|
|
|
448,431
|
|
|
|
438,521
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
2,036,661
|
|
|
|
1,998,788
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 8
Securitizations and Other Variable Interest Entities,
Note 9 Representations and Warranties Obligations
and Corporate Guarantees and Note 14
Commitments and Contingencies)
|
|
|
|
|
|
|
|
|
Shareholders
equity
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value; authorized
100,000,000 shares;
issued and outstanding 3,943,660 and
5,246,660 shares
|
|
|
16,562
|
|
|
|
37,208
|
|
Common stock and additional paid-in capital, $0.01 par
value; authorized
12,800,000,000
and
10,000,000,000 shares; issued and outstanding
10,085,154,806 and 8,650,243,926 shares
|
|
|
150,905
|
|
|
|
128,734
|
|
Retained earnings
|
|
|
60,849
|
|
|
|
71,233
|
|
Accumulated other comprehensive income (loss)
|
|
|
(66
|
)
|
|
|
(5,619
|
)
|
Other
|
|
|
(2
|
)
|
|
|
(112
|
)
|
|
|
|
|
|
|
|
|
|
Total shareholders
equity
|
|
|
228,248
|
|
|
|
231,444
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity
|
|
$
|
2,264,909
|
|
|
$
|
2,230,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities of consolidated VIEs
included in total liabilities above
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper and other short-term borrowings (includes
$706
of non-recourse liabilities)
|
|
$
|
6,742
|
|
|
|
|
|
Long-term debt (includes
$66,309
of non-recourse debt)
|
|
|
71,013
|
|
|
|
|
|
All other liabilities (includes
$382
of non-recourse liabilities)
|
|
|
9,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities of
consolidated VIEs
|
|
$
|
86,896
|
|
|
|
|
|
See accompanying Notes to
Consolidated Financial Statements.
Bank of America
2010 139
Bank of America
Corporation and Subsidiaries
Consolidated
Statement of Changes in Shareholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional Paid-in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
Preferred
|
|
|
|
|
|
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
|
|
|
Shareholders
|
|
|
Comprehensive
|
|
(Dollars in millions, shares in
thousands)
|
|
Stock
|
|
|
Shares
|
|
|
Amount
|
|
|
Earnings
|
|
|
Income (Loss)
|
|
|
Other
|
|
|
Equity
|
|
|
Income (Loss)
|
|
Balance, December 31, 2007
|
|
$
|
4,409
|
|
|
|
4,437,885
|
|
|
$
|
60,328
|
|
|
$
|
81,393
|
|
|
$
|
1,129
|
|
|
$
|
(456
|
)
|
|
$
|
146,803
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,008
|
|
|
|
|
|
|
|
|
|
|
|
4,008
|
|
|
$
|
4,008
|
|
Net change in
available-for-sale
debt and marketable equity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,557
|
)
|
|
|
|
|
|
|
(8,557
|
)
|
|
|
(8,557
|
)
|
Net change in derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
944
|
|
|
|
|
|
|
|
944
|
|
|
|
944
|
|
Employee benefit plan adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,341
|
)
|
|
|
|
|
|
|
(3,341
|
)
|
|
|
(3,341
|
)
|
Net change in foreign currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,000
|
)
|
|
|
|
|
|
|
(1,000
|
)
|
|
|
(1,000
|
)
|
Dividends paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,256
|
)
|
|
|
|
|
|
|
|
|
|
|
(10,256
|
)
|
|
|
|
|
Preferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,272
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,272
|
)
|
|
|
|
|
Issuance of preferred stock and stock warrants
|
|
|
33,242
|
|
|
|
|
|
|
|
1,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,742
|
|
|
|
|
|
Stock issued in acquisition
|
|
|
|
|
|
|
106,776
|
|
|
|
4,201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,201
|
|
|
|
|
|
Issuance of common stock
|
|
|
|
|
|
|
455,000
|
|
|
|
9,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,883
|
|
|
|
|
|
Common stock issued under employee plans and related tax effects
|
|
|
|
|
|
|
17,775
|
|
|
|
854
|
|
|
|
|
|
|
|
|
|
|
|
43
|
|
|
|
897
|
|
|
|
|
|
Other
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2008
|
|
|
37,701
|
|
|
|
5,017,436
|
|
|
|
76,766
|
|
|
|
73,823
|
|
|
|
(10,825
|
)
|
|
|
(413
|
)
|
|
|
177,052
|
|
|
|
(7,946
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative adjustment for accounting change
Other-than-temporary
impairments on debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71
|
|
|
|
(71
|
)
|
|
|
|
|
|
|
|
|
|
|
(71
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,276
|
|
|
|
|
|
|
|
|
|
|
|
6,276
|
|
|
|
6,276
|
|
Net change in
available-for-sale
debt and marketable equity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,593
|
|
|
|
|
|
|
|
3,593
|
|
|
|
3,593
|
|
Net change in derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
923
|
|
|
|
|
|
|
|
923
|
|
|
|
923
|
|
Employee benefit plan adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
550
|
|
|
|
|
|
|
|
550
|
|
|
|
550
|
|
Net change in foreign currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
211
|
|
|
|
|
|
|
|
211
|
|
|
|
211
|
|
Dividends paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(326
|
)
|
|
|
|
|
|
|
|
|
|
|
(326
|
)
|
|
|
|
|
Preferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,537
|
)
|
|
|
|
|
|
|
|
|
|
|
(4,537
|
)
|
|
|
|
|
Issuance of preferred stock and stock warrants
|
|
|
26,800
|
|
|
|
|
|
|
|
3,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
|
|
Repayment of preferred stock
|
|
|
(41,014
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,986
|
)
|
|
|
|
|
|
|
|
|
|
|
(45,000
|
)
|
|
|
|
|
Issuance of Common Equivalent Securities
|
|
|
19,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,244
|
|
|
|
|
|
Stock issued in acquisition
|
|
|
8,605
|
|
|
|
1,375,476
|
|
|
|
20,504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,109
|
|
|
|
|
|
Issuance of common stock
|
|
|
|
|
|
|
1,250,000
|
|
|
|
13,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,468
|
|
|
|
|
|
Exchange of preferred stock
|
|
|
(14,797
|
)
|
|
|
999,935
|
|
|
|
14,221
|
|
|
|
576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued under employee plans and related tax effects
|
|
|
|
|
|
|
7,397
|
|
|
|
575
|
|
|
|
|
|
|
|
|
|
|
|
308
|
|
|
|
883
|
|
|
|
|
|
Other
|
|
|
669
|
|
|
|
|
|
|
|
|
|
|
|
(664
|
)
|
|
|
|
|
|
|
(7
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2009
|
|
|
37,208
|
|
|
|
8,650,244
|
|
|
|
128,734
|
|
|
|
71,233
|
|
|
|
(5,619
|
)
|
|
|
(112
|
)
|
|
|
231,444
|
|
|
|
11,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative adjustments for accounting changes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidation of certain variable interest entities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,154
|
)
|
|
|
(116
|
)
|
|
|
|
|
|
|
(6,270
|
)
|
|
|
(116
|
)
|
Credit-related notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(229
|
)
|
|
|
229
|
|
|
|
|
|
|
|
|
|
|
|
229
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,238
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,238
|
)
|
|
|
(2,238
|
)
|
Net change in
available-for-sale
debt and marketable equity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,759
|
|
|
|
|
|
|
|
5,759
|
|
|
|
5,759
|
|
Net change in derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(701
|
)
|
|
|
|
|
|
|
(701
|
)
|
|
|
(701
|
)
|
Employee benefit plan adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
145
|
|
|
|
|
|
|
|
145
|
|
|
|
145
|
|
Net change in foreign currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
237
|
|
|
|
|
|
|
|
237
|
|
|
|
237
|
|
Dividends paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(405
|
)
|
|
|
|
|
|
|
|
|
|
|
(405
|
)
|
|
|
|
|
Preferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,357
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,357
|
)
|
|
|
|
|
Common stock issued under employee plans and related tax effects
|
|
|
|
|
|
|
98,557
|
|
|
|
1,385
|
|
|
|
|
|
|
|
|
|
|
|
103
|
|
|
|
1,488
|
|
|
|
|
|
Mandatory convertible preferred stock conversion
|
|
|
(1,542
|
)
|
|
|
50,354
|
|
|
|
1,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Equivalent Securities conversion
|
|
|
(19,244
|
)
|
|
|
1,286,000
|
|
|
|
19,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
140
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
7
|
|
|
|
146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2010
|
|
$
|
16,562
|
|
|
|
10,085,155
|
|
|
$
|
150,905
|
|
|
$
|
60,849
|
|
|
$
|
(66
|
)
|
|
$
|
(2
|
)
|
|
$
|
228,248
|
|
|
$
|
3,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to
Consolidated Financial Statements.
140 Bank
of America 2010
Bank of America
Corporation and Subsidiaries
Consolidated
Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(2,238
|
)
|
|
$
|
6,276
|
|
|
$
|
4,008
|
|
Reconciliation of net income (loss) to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses
|
|
|
28,435
|
|
|
|
48,570
|
|
|
|
26,825
|
|
Goodwill impairment charges
|
|
|
12,400
|
|
|
|
|
|
|
|
|
|
Gains on sales of debt securities
|
|
|
(2,526
|
)
|
|
|
(4,723
|
)
|
|
|
(1,124
|
)
|
Depreciation and premises improvements amortization
|
|
|
2,181
|
|
|
|
2,336
|
|
|
|
1,485
|
|
Amortization of intangibles
|
|
|
1,731
|
|
|
|
1,978
|
|
|
|
1,834
|
|
Deferred income tax expense (benefit)
|
|
|
608
|
|
|
|
370
|
|
|
|
(5,801
|
)
|
Net (increase) decrease in trading and derivative instruments
|
|
|
20,775
|
|
|
|
59,822
|
|
|
|
(16,973
|
)
|
Net (increase) decrease in other assets
|
|
|
5,213
|
|
|
|
28,553
|
|
|
|
(6,391
|
)
|
Net increase (decrease) in accrued expenses and other liabilities
|
|
|
14,069
|
|
|
|
(16,601
|
)
|
|
|
(8,885
|
)
|
Other operating activities, net
|
|
|
1,946
|
|
|
|
3,150
|
|
|
|
9,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
82,594
|
|
|
|
129,731
|
|
|
|
4,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (increase) decrease in time deposits placed and other
short-term investments
|
|
|
(2,154
|
)
|
|
|
19,081
|
|
|
|
2,203
|
|
Net (increase) decrease in federal funds sold and securities
borrowed or purchased under agreements to resell
|
|
|
(19,683
|
)
|
|
|
31,369
|
|
|
|
53,723
|
|
Proceeds from sales of
available-for-sale
debt securities
|
|
|
100,047
|
|
|
|
164,155
|
|
|
|
120,972
|
|
Proceeds from paydowns and maturities of
available-for-sale
debt securities
|
|
|
70,868
|
|
|
|
59,949
|
|
|
|
26,068
|
|
Purchases of
available-for-sale
debt securities
|
|
|
(199,159
|
)
|
|
|
(185,145
|
)
|
|
|
(184,232
|
)
|
Proceeds from maturities of
held-to-maturity
debt securities
|
|
|
11
|
|
|
|
2,771
|
|
|
|
741
|
|
Purchases of
held-to-maturity
debt securities
|
|
|
(100
|
)
|
|
|
(3,914
|
)
|
|
|
(840
|
)
|
Proceeds from sales of loans and leases
|
|
|
8,046
|
|
|
|
7,592
|
|
|
|
52,455
|
|
Other changes in loans and leases, net
|
|
|
(2,550
|
)
|
|
|
21,257
|
|
|
|
(69,574
|
)
|
Net purchases of premises and equipment
|
|
|
(987
|
)
|
|
|
(2,240
|
)
|
|
|
(2,098
|
)
|
Proceeds from sales of foreclosed properties
|
|
|
3,107
|
|
|
|
1,997
|
|
|
|
1,187
|
|
Cash received upon acquisition, net
|
|
|
|
|
|
|
31,804
|
|
|
|
6,650
|
|
Cash received due to impact of adoption of new consolidation
guidance
|
|
|
2,807
|
|
|
|
|
|
|
|
|
|
Other investing activities, net
|
|
|
9,400
|
|
|
|
9,249
|
|
|
|
(10,185
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(30,347
|
)
|
|
|
157,925
|
|
|
|
(2,930
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in deposits
|
|
|
36,598
|
|
|
|
10,507
|
|
|
|
14,830
|
|
Net decrease in federal funds purchased and securities loaned or
sold under agreements to repurchase
|
|
|
(9,826
|
)
|
|
|
(62,993
|
)
|
|
|
(34,529
|
)
|
Net decrease in commercial paper and other short-term borrowings
|
|
|
(31,698
|
)
|
|
|
(126,426
|
)
|
|
|
(33,033
|
)
|
Proceeds from issuance of long-term debt
|
|
|
52,215
|
|
|
|
67,744
|
|
|
|
43,782
|
|
Retirement of long-term debt
|
|
|
(110,919
|
)
|
|
|
(101,207
|
)
|
|
|
(35,072
|
)
|
Proceeds from issuance of preferred stock
|
|
|
|
|
|
|
49,244
|
|
|
|
34,742
|
|
Repayment of preferred stock
|
|
|
|
|
|
|
(45,000
|
)
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
|
|
|
|
13,468
|
|
|
|
10,127
|
|
Cash dividends paid
|
|
|
(1,762
|
)
|
|
|
(4,863
|
)
|
|
|
(11,528
|
)
|
Excess tax benefits on share-based payments
|
|
|
|
|
|
|
|
|
|
|
42
|
|
Other financing activities, net
|
|
|
5
|
|
|
|
(42
|
)
|
|
|
(56
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(65,387
|
)
|
|
|
(199,568
|
)
|
|
|
(10,695
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
228
|
|
|
|
394
|
|
|
|
(83
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(12,912
|
)
|
|
|
88,482
|
|
|
|
(9,674
|
)
|
Cash and cash equivalents at January 1
|
|
|
121,339
|
|
|
|
32,857
|
|
|
|
42,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at
December 31
|
|
$
|
108,427
|
|
|
$
|
121,339
|
|
|
$
|
32,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow
disclosures
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
21,166
|
|
|
$
|
37,602
|
|
|
$
|
36,387
|
|
Income taxes paid
|
|
|
1,465
|
|
|
|
2,964
|
|
|
|
4,816
|
|
Income taxes refunded
|
|
|
(7,783
|
)
|
|
|
(31
|
)
|
|
|
(116
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2010, the Corporation sold First Republic Bank in a
non-cash transaction that reduced assets and liabilities by
$19.5 billion and $18.1 billion.
|
The Corporation securitized $2.4 billion,
$14.0 billion and $26.1 billion of residential
mortgage loans into mortgage-backed securities which were
retained by the Corporation during 2010, 2009 and 2008,
respectively.
|
During 2009, the Corporation exchanged $14.8 billion of
preferred stock by issuing approximately 1.0 billion shares
of common stock valued at $11.5 billion.
|
During 2009, the Corporation exchanged credit card loans of
$8.5 billion and the related allowance for loan and lease
losses of $750 million for a $7.8 billion
held-to-maturity
debt security that was issued by the Corporations
U.S. credit card securitization trust and retained by the
Corporation.
|
The acquisition-date fair values of non-cash assets acquired and
liabilities assumed in the Merrill Lynch & Co., Inc.
(Merrill Lynch) acquisition were $619.1 billion and
$626.8 billion.
|
Approximately 1.4 billion shares of common stock valued at
approximately $20.5 billion and 376 thousand shares of
preferred stock valued at approximately $8.6 billion were
issued in connection with the Merrill Lynch acquisition.
|
The acquisition-date fair values of non-cash assets acquired and
liabilities assumed in the Countrywide Financial Corporation
(Countrywide) acquisition were $157.4 billion and
$157.8 billion.
|
Approximately 107 million shares of common stock, valued at
approximately $4.2 billion were issued in connection with
the Countrywide acquisition.
|
See accompanying Notes to
Consolidated Financial Statements.
Bank of America
2010 141
Bank
of America Corporation and Subsidiaries
Notes to
Consolidated Financial Statements
NOTE 1 Summary
of Significant Accounting Principles
Bank of America Corporation (collectively with its subsidiaries,
the Corporation), a financial holding company, provides a
diverse range of financial services and products throughout the
U.S. and in certain international markets. The term
the Corporation as used herein may refer to the
Corporation individually, the Corporation and its subsidiaries,
or certain of the Corporations subsidiaries or affiliates.
The Corporation conducts its activities through banking and
nonbanking subsidiaries. On January 1, 2009, the
Corporation acquired Merrill Lynch & Co., Inc.
(Merrill Lynch) in exchange for common and preferred stock with
a value of $29.1 billion. The Corporation operates its
banking activities primarily under two charters: Bank of
America, National Association (Bank of America, N.A.) and FIA
Card Services, N.A. In connection with certain acquisitions
including Merrill Lynch, the Corporation acquired banking
subsidiaries that have been merged into Bank of America, N.A.
with no impact on the Consolidated Financial Statements of the
Corporation.
Principles of
Consolidation and Basis of Presentation
The Consolidated Financial Statements include the accounts of
the Corporation and its majority-owned subsidiaries, and those
variable interest entities (VIEs) where the Corporation is the
primary beneficiary. Intercompany accounts and transactions have
been eliminated. Results of operations of acquired companies are
included from the dates of acquisition and for VIEs, from the
dates that the Corporation became the primary beneficiary.
Assets held in an agency or fiduciary capacity are not included
in the Consolidated Financial Statements. The Corporation
accounts for investments in companies for which it owns a voting
interest of 20 percent to 50 percent and for which it
has the ability to exercise significant influence over operating
and financing decisions using the equity method of accounting or
at fair value under the fair value option. These investments are
included in other assets. Equity method investments are subject
to impairment testing and the Corporations proportionate
share of income or loss is included in equity investment income.
The preparation of the Consolidated Financial Statements in
conformity with accounting principles generally accepted in the
United States of America (GAAP) requires management to make
estimates and assumptions that affect reported amounts and
disclosures. Realized results could differ from those estimates
and assumptions.
The Corporation evaluates subsequent events through the date of
filing with the Securities and Exchange Commission (SEC).
Certain prior period amounts have been reclassified to conform
to current period presentation.
New Accounting
Pronouncements
In March 2010, the Financial Accounting Standards Board (FASB)
issued new accounting guidance on embedded credit derivatives.
This new accounting guidance clarifies the scope exception for
embedded credit derivatives and defines which embedded credit
derivatives are required to be evaluated for bifurcation and
separate accounting. In addition, the guidance extends the
current disclosure requirements for credit derivatives to all
securities with potential embedded derivative features
regardless of the accounting treatment. This new accounting
guidance was effective on July 1, 2010. Upon adoption,
companies may elect the fair value option for any beneficial
interests, including those that would otherwise require
bifurcation under the new
guidance. In connection with the adoption of the guidance on
July 1, 2010, the Corporation elected the fair value option
for $629 million of AFS debt securities, principally
collateralized debt obligations (CDOs), that otherwise may be
subject to bifurcation under the new guidance. In connection
with this election, the Corporation recorded a $229 million
charge to retained earnings on July 1, 2010 as an after-tax
adjustment to reclassify the net unrealized loss on these AFS
debt securities from accumulated other comprehensive income
(OCI) to retained earnings and they were reclassified to trading
account assets. The Corporation did not bifurcate any securities
as a result of adopting the new accounting guidance. The
additional disclosures required by this new guidance are
included in Note 4 Derivatives.
On January 1, 2010, the Corporation adopted new FASB
accounting guidance on transfers of financial assets and
consolidation of VIEs. This new accounting guidance revised sale
accounting criteria for transfers of financial assets,
eliminated the concept of and accounting for qualifying special
purpose entities (QSPEs) and significantly changed the criteria
for consolidation of a VIE. The adoption of this new accounting
guidance resulted in the consolidation of certain VIEs that
previously were QSPEs and VIEs that were not recorded on the
Corporations Consolidated Balance Sheet prior to
January 1, 2010. The adoption of this new accounting
guidance resulted in a net incremental increase in assets of
$100.4 billion and a net increase in liabilities of
$106.7 billion. These amounts are net of retained interests
in securitizations held on the Consolidated Balance Sheet at
December 31, 2009 and net of a $10.8 billion increase
in the allowance for loan and lease losses. The Corporation
recorded a $6.2 billion charge,
net-of-tax,
to retained earnings on January 1, 2010 for the cumulative
effect of the adoption of this new accounting guidance, which
resulted principally from an increase in the allowance for loan
and lease losses related to the newly consolidated loans, and a
$116 million charge to accumulated OCI. Initial recording
of these assets, related allowance and liabilities on the
Corporations Consolidated Balance Sheet had no impact at
the date of adoption on the consolidated results of operations.
On January 1, 2010, the Corporation adopted, on a
prospective basis, new FASB accounting guidance stating that
troubled debt restructuring (TDR) accounting cannot be applied
to individual loans within purchased credit-impaired (PCI) loan
pools. The adoption of this guidance did not have a material
impact on the Corporations consolidated financial
condition or results of operations.
Cash and Cash
Equivalents
Cash and cash equivalents include cash on hand, cash items in
the process of collection, and amounts due from correspondent
banks and the Federal Reserve Bank.
Securities
Financing Agreements
Securities borrowed or purchased under agreements to resell and
securities loaned or sold under agreements to repurchase
(securities financing agreements) are treated as collateralized
financing transactions. These agreements are recorded at the
amounts at which the securities were acquired or sold plus
accrued interest, except for certain securities financing
agreements that the Corporation accounts for under the fair
value option. Changes in the fair value of securities financing
agreements that are accounted for under the fair value option
are recorded in other income (loss). For more
142 Bank
of America 2010
information on securities financing agreements that the
Corporation accounts for under the fair value option, see
Note 23 Fair Value Option.
The Corporations policy is to obtain possession of
collateral with a market value equal to or in excess of the
principal amount loaned under resale agreements. To ensure that
the market value of the underlying collateral remains
sufficient, collateral is generally valued daily and the
Corporation may require counterparties to deposit additional
collateral or may return collateral pledged when appropriate.
Securities financing agreements give rise to negligible credit
risk as a result of these collateral provisions, and
accordingly, no allowance for loan losses is considered
necessary.
Substantially all repurchase and resale activities are
transacted under master repurchase agreements which give the
Corporation, in the event of default by the counterparty, the
right to liquidate securities held and to offset receivables and
payables with the same counterparty. The Corporation offsets
repurchase and resale transactions with the same counterparty on
the Consolidated Balance Sheet where it has such a master
agreement and the transactions have the same maturity date.
In transactions where the Corporation acts as the lender in a
securities lending agreement and receives securities that can be
pledged or sold as collateral, it recognizes an asset on the
Consolidated Balance Sheet at fair value, representing the
securities received, and a liability for the same amount,
representing the obligation to return those securities.
At the end of certain quarterly periods during the three years
ended December 31, 2009, the Corporation had recorded
certain sales of agency mortgage-backed securities (MBS) which,
based on an ongoing internal review and interpretation, should
have been recorded as secured borrowings. These periods and
amounts were as follows: March 31,
2009 $573 million; September 30,
2008 $10.7 billion; December 31,
2007 $2.1 billion; and March 31,
2007 $4.5 billion. As the transferred
securities were recorded at fair value in trading account
assets, the change would have had no impact on consolidated
results of operations. Had the sales been recorded as secured
borrowings, trading account assets and federal funds purchased
and securities loaned or sold under agreements to repurchase
would have increased by the amount of the transactions, however,
the increase in all cases was less than 0.7 percent of
total assets or total liabilities. Accordingly, the Corporation
believes that these transactions did not have a material impact
on the Corporations Consolidated Financial Statements.
In repurchase transactions, typically, the termination date for
a repurchase agreement is before the maturity date of the
underlying security. However, in certain situations, the
Corporation may enter into repurchase agreements where the
termination date of the repurchase transaction is the same as
the maturity date of the underlying security and these
transactions are referred to as
repo-to-maturity
(RTM) transactions. The Corporation enters into RTM transactions
only for high quality, very liquid securities such as
U.S. Department of the Treasury (U.S. Treasury)
securities or securities issued by government-sponsored
enterprises (GSE). The Corporation accounts for RTM transactions
as sales in accordance with applicable accounting guidance, and
accordingly, removes the securities from the Consolidated
Balance Sheet and recognizes a gain or loss in the Consolidated
Statement of Income. At December 31, 2010, the Corporation
had no outstanding RTM transactions compared to
$6.5 billion at December 31, 2009, that had been
accounted for as sales.
Collateral
The Corporation accepts collateral that it is permitted by
contract or custom to sell or repledge and such collateral is
recorded on the Consolidated Balance Sheet. At December 31,
2010 and 2009, the fair value of this collateral was
$401.7 billion and $418.2 billion of which
$257.6 billion and $310.2 billion were sold or
repledged. The primary sources of this collateral are repurchase
agreements and securities borrowed. The Corporation also pledges
securities
and loans as collateral in transactions that include repurchase
agreements, securities loaned, public and trust deposits,
U.S. Treasury tax and loan notes, and other short-term
borrowings. This collateral can be sold or repledged by the
counterparties to the transactions.
In addition, the Corporation obtains collateral in connection
with its derivative contracts. Required collateral levels vary
depending on the credit risk rating and the type of
counterparty. Generally, the Corporation accepts collateral in
the form of cash, U.S. Treasury securities and other
marketable securities. Based on provisions contained in legal
netting agreements, the Corporation nets cash collateral against
the applicable derivative fair value. The Corporation also
pledges collateral on its own derivative positions which can be
applied against derivative liabilities.
Trading
Instruments
Financial instruments utilized in trading activities are carried
at fair value. Fair value is generally based on quoted market
prices or quoted market prices for similar assets and
liabilities. If these market prices are not available, fair
values are estimated based on dealer quotes, pricing models,
discounted cash flow methodologies, or similar techniques where
the determination of fair value may require significant
management judgment or estimation. Realized and unrealized gains
and losses are recognized in trading account profits (losses).
Derivatives and
Hedging Activities
Derivatives are entered into on behalf of customers, for
trading, as economic hedges or as qualifying accounting hedges.
Derivatives utilized by the Corporation include swaps, financial
futures and forward settlement contracts, and option contracts.
A swap agreement is a contract between two parties to exchange
cash flows based on specified underlying notional amounts,
assets
and/or
indices. Financial futures and forward settlement contracts are
agreements to buy or sell a quantity of a financial instrument,
index, currency or commodity at a predetermined future date, and
rate or price. An option contract is an agreement that conveys
to the purchaser the right, but not the obligation, to buy or
sell a quantity of a financial instrument (including another
derivative financial instrument), index, currency or commodity
at a predetermined rate or price during a period or at a date in
the future. Option agreements can be transacted on organized
exchanges or directly between parties.
All derivatives are recorded on the Consolidated Balance Sheet
at fair value, taking into consideration the effects of legally
enforceable master netting agreements that allow the Corporation
to settle positive and negative positions and offset cash
collateral held with the same counterparty on a net basis. For
exchange-traded contracts, fair value is based on quoted market
prices. For non-exchange traded contracts, fair value is based
on dealer quotes, pricing models, discounted cash flow
methodologies or similar techniques for which the determination
of fair value may require significant management judgment or
estimation.
Valuations of derivative assets and liabilities reflect the
value of the instrument including counterparty credit risk.
These values also take into account the Corporations own
credit standing, thus including in the valuation of the
derivative instrument the value of the net credit differential
between the counterparties to the derivative contract.
Trading
Derivatives and Economic Hedges
Derivatives held for trading purposes are included in derivative
assets or derivative liabilities with changes in fair value
included in trading account profits (losses).
Derivatives used as economic hedges, because either they did not
qualify for or were not designated as an accounting hedge, are
also included in derivative assets or derivative liabilities.
Changes in the fair value of
Bank of America
2010 143
derivatives that serve as economic hedges of mortgage servicing
rights (MSRs), interest rate lock commitments (IRLCs) and first
mortgage loans
held-for-sale
(LHFS) that are originated by the Corporation are recorded in
mortgage banking income. Changes in the fair value of
derivatives that serve as asset and liability management (ALM)
economic hedges are recorded in other income (loss). Credit
derivatives used by the Corporation as economic hedges do not
qualify as accounting hedges despite being effective economic
hedges, and changes in the fair value of these derivatives are
included in other income (loss).
Derivatives Used
For Hedge Accounting Purposes (Accounting Hedges)
For accounting hedges, the Corporation formally documents at
inception all relationships between hedging instruments and
hedged items, as well as the risk management objectives and
strategies for undertaking various accounting hedges.
Additionally, the Corporation primarily uses regression analysis
at the inception of a hedge and for each reporting period
thereafter to assess whether the derivative used in a hedging
transaction is expected to be and has been highly effective in
offsetting changes in the fair value or cash flows of a hedged
item. The Corporation discontinues hedge accounting when it is
determined that a derivative is not expected to be or has ceased
to be highly effective as a hedge, and then reflects changes in
fair value of the derivative in earnings after termination of
the hedge relationship.
The Corporation uses its accounting hedges as either fair value
hedges, cash flow hedges or hedges of net investments in foreign
operations. The Corporation manages interest rate and foreign
currency exchange rate sensitivity predominantly through the use
of derivatives. Fair value hedges are used to protect against
changes in the fair value of the Corporations assets and
liabilities that are attributable to interest rate or foreign
exchange volatility. Cash flow hedges are used primarily to
minimize the variability in cash flows of assets or liabilities,
or forecasted transactions caused by interest rate or foreign
exchange fluctuations. For terminated cash flow hedges, the
maximum length of time over which forecasted transactions are
hedged is 26 years, with a substantial portion of the
hedged transactions being less than 10 years. For open or
future cash flow hedges, the maximum length of time over which
forecasted transactions are or will be hedged is less than seven
years.
Changes in the fair value of derivatives designated as fair
value hedges are recorded in earnings, together and in the same
income statement line item with changes in the fair value of the
related hedged item. Changes in the fair value of derivatives
designated as cash flow hedges are recorded in accumulated OCI
and are reclassified into the line item in the income statement
in which the hedged item is recorded and in the same period the
hedged item affects earnings. Hedge ineffectiveness and gains
and losses on the excluded component of a derivative in
assessing hedge effectiveness are recorded in earnings in the
same income statement line item. The Corporation records changes
in the fair value of derivatives used as hedges of the net
investment in foreign operations, to the extent effective, as a
component of accumulated OCI.
If a derivative instrument in a fair value hedge is terminated
or the hedge designation removed, the previous adjustments to
the carrying amount of the hedged asset or liability are
subsequently accounted for in the same manner as other
components of the carrying amount of that asset or liability.
For interest-earning assets and interest-bearing liabilities,
such adjustments are amortized to earnings over the remaining
life of the respective asset or liability. If a derivative
instrument in a cash flow hedge is terminated or the hedge
designation is removed, related amounts in accumulated OCI are
reclassified into earnings in the same period or periods during
which the hedged forecasted transaction affects earnings. If it
is probable that a
forecasted transaction will not occur, any related amounts in
accumulated OCI are reclassified into earnings in that period.
Interest Rate
Lock Commitments
The Corporation enters into IRLCs in connection with its
mortgage banking activities to fund residential mortgage loans
at specified times in the future. IRLCs that relate to the
origination of mortgage loans that will be held for sale are
considered derivative instruments under applicable accounting
guidance. As such, these IRLCs are recorded at fair value with
changes in fair value recorded in mortgage banking income.
In estimating the fair value of an IRLC, the Corporation assigns
a probability to the loan commitment based on an expectation
that it will be exercised and the loan will be funded. The fair
value of the commitments is derived from the fair value of
related mortgage loans which is based on observable market data
and includes the expected net future cash flows related to
servicing of the loans. Changes to the fair value of IRLCs are
recognized based on interest rate changes, changes in the
probability that the commitment will be exercised and the
passage of time. Changes from the expected future cash flows
related to the customer relationship are excluded from the
valuation of IRLCs.
Outstanding IRLCs expose the Corporation to the risk that the
price of the loans underlying the commitments might decline from
inception of the rate lock to funding of the loan. To protect
against this risk, the Corporation utilizes forward loan sales
commitments and other derivative instruments, including interest
rate swaps and options, to economically hedge the risk of
potential changes in the value of the loans that would result
from the commitments. The changes in the fair value of these
derivatives are recorded in mortgage banking income.
Securities
Debt securities are recorded on the Consolidated Balance Sheet
as of the trade date and classified based on managements
intention on the date of purchase. Debt securities which
management has the intent and ability to hold to maturity are
classified as
held-to-maturity
(HTM) and reported at amortized cost. Debt securities that are
bought and held principally for the purpose of resale in the
near term are classified as trading and are carried at fair
value with unrealized gains and losses included in trading
account profits (losses). Other debt securities are classified
as AFS and carried at fair value with net unrealized gains and
losses included in accumulated OCI on an after-tax basis. In
addition, credit-related notes, which include investments in
securities issued by CDOs, collateralized loan obligations
(CLOs) and credit-linked note vehicles, are classified as
trading securities.
The Corporation regularly evaluates each AFS and HTM debt
security where the value has declined below amortized cost to
assess whether the decline in fair value is
other-than-temporary.
In determining whether an impairment is
other-than-temporary,
the Corporation considers the severity and duration of the
decline in fair value, the length of time expected for recovery,
the financial condition of the issuer, and other qualitative
factors, as well as whether the Corporation either plans to sell
the security or it is more-likely-than-not that it will be
required to sell the security before recovery of its amortized
cost. Beginning in 2009, under new accounting guidance for
impairments of debt securities that are deemed to be
other-than-temporary,
the credit component of an
other-than-temporary
impairment (OTTI) loss is recognized in earnings and the
non-credit component is recognized in accumulated OCI in
situations where the Corporation does not intend to sell the
security and it is not more-likely-than-not that the Corporation
will be required to sell the security prior to recovery. Prior
to January 1, 2009, unrealized losses, both the credit and
non-credit components, on AFS debt securities that were deemed
to be
other-than-temporary
were included in current-period earnings. If there is an OTTI on
any individual security classified as HTM, the
144 Bank
of America 2010
Corporation writes down the security to fair value with a
corresponding charge to other income (loss).
Interest on debt securities, including amortization of premiums
and accretion of discounts, is included in interest income.
Realized gains and losses from the sales of debt securities,
which are included in gains (losses) on sales of debt
securities, are determined using the specific identification
method.
Marketable equity securities are classified based on
managements intention on the date of purchase and recorded
on the Consolidated Balance Sheet as of the trade date.
Marketable equity securities that are bought and held
principally for the purpose of resale in the near term are
classified as trading and are carried at fair value with
unrealized gains and losses included in trading account profits
(losses). Other marketable equity securities are accounted for
as AFS and classified in other assets. All AFS marketable equity
securities are carried at fair value with net unrealized gains
and losses included in accumulated OCI on an after-tax basis. If
there is an
other-than-temporary
decline in the fair value of any individual AFS marketable
equity security, the Corporation reclassifies the associated net
unrealized loss out of accumulated OCI with a corresponding
charge to equity investment income. Dividend income on AFS
marketable equity securities is included in equity investment
income. Realized gains and losses on the sale of all AFS
marketable equity securities, which are recorded in equity
investment income, are determined using the specific
identification method.
Equity investments without readily determinable fair values are
recorded in other assets. Impairment testing is based on
applicable accounting guidance and the cost basis is reduced
when impairment is deemed to be
other-than-temporary.
Certain equity investments held by Global Principal Investments,
the Corporations diversified equity investor in private
equity, real estate and other alternative investments, are
subject to investment company accounting under applicable
accounting guidance, and accordingly, are carried at fair value
with changes in fair value reported in equity investment income.
These investments are included in other assets. Initially, the
transaction price of the investment is generally considered to
be the best indicator of fair value. Thereafter, valuation of
direct investments is based on an assessment of each individual
investment using methodologies that include publicly traded
comparables derived by multiplying a key performance metric
(e.g., earnings before interest, taxes, depreciation and
amortization) of the portfolio company by the relevant valuation
multiple observed for comparable companies, acquisition
comparables, entry level multiples and discounted cash flows,
and are subject to appropriate discounts for lack of liquidity
or marketability. Certain factors that may influence changes in
fair value include but are not limited to recapitalizations,
subsequent rounds of financing and offerings in the equity or
debt capital markets. For fund investments, the Corporation
generally records the fair value of its proportionate interest
in the funds capital as reported by the funds
respective managers.
Other investments held by Global Principal Investments are
accounted for under either the equity method or at cost,
depending on the Corporations ownership interest, and are
reported in other assets.
Loans and
Leases
Loans measured at historical cost are reported at their
outstanding principal balances net of any unearned income,
charge-offs, unamortized deferred fees and costs on originated
loans, and for purchased loans, net of any unamortized premiums
or discounts. Loan origination fees and certain direct
origination costs are deferred and recognized as adjustments to
interest income over the lives of the related loans. Unearned
income, discounts and premiums are amortized to interest income
using a level yield methodology. The Corporation elects to
account for certain loans under the fair value option with
changes in fair value reported in mortgage banking income for
residential mortgage loans and other income for commercial loans.
The FASB issued new disclosure guidance, effective on a
prospective basis for the Corporations 2010 year-end
reporting, that addresses disclosure of loans and other
financing receivables and the related allowance. The new
accounting guidance defines a portfolio segment as the level at
which an entity develops and documents a systematic methodology
to determine the allowance for credit losses, and a class of
financing receivables as the level of disaggregation of
portfolio segments based on the initial measurement attribute,
risk characteristics and methods for assessing risk. The
Corporations portfolio segments are home loans, credit
card and other consumer, and commercial. The classes within the
home loans portfolio segment are residential mortgage, home
equity and discontinued real estate. The classes within the
credit card and other consumer portfolio segment are
U.S. credit card,
non-U.S. credit
card, direct/indirect consumer and other consumer. The classes
within the commercial portfolio segment are
U.S. commercial, commercial real estate, commercial lease
financing,
non-U.S. commercial
and U.S. small business commercial. Under this new
accounting guidance, the allowance is presented by portfolio
segment.
Purchased
Credit-impaired Loans
The Corporation purchases loans with and without evidence of
credit quality deterioration since origination. Evidence of
credit quality deterioration as of the purchase date may include
statistics such as past due status, refreshed borrower credit
scores and refreshed
loan-to-value
(LTV) ratios, some of which are not immediately available as of
the purchase date. The Corporation continues to evaluate this
information and other credit-related information as it becomes
available. Purchased loans are considered to be impaired if the
Corporation does not expect to receive all contractually
required cash flows due to concerns about credit quality. The
excess of the cash flows expected to be collected measured as of
the acquisition date, over the estimated fair value is referred
to as the accretable yield and is recognized in interest income
over the remaining life of the loan using a level yield
methodology. The difference between contractually required
payments as of the acquisition date and the cash flows expected
to be collected is referred to as the nonaccretable difference.
The initial fair values for PCI loans are determined by
discounting both principal and interest cash flows expected to
be collected using an observable discount rate for similar
instruments with adjustments that management believes a market
participant would consider in determining fair value. The
Corporation estimates the cash flows expected to be collected
upon acquisition using internal credit risk, interest rate and
prepayment risk models that incorporate managements best
estimate of current key assumptions such as default rates, loss
severity and payment speeds.
Subsequent decreases to expected principal cash flows result in
a charge to provision for credit losses and a corresponding
increase to a valuation allowance included in the allowance for
loan and lease losses. Subsequent increases in expected
principal cash flows result in a recovery of any previously
recorded allowance for loan and lease losses, to the extent
applicable, and a reclassification from nonaccretable difference
to accretable yield for any remaining increase. Changes in
expected interest cash flows may result in reclassifications
to/from the nonaccretable difference. Loan disposals, which may
include sales of loans, receipt of payments in full from the
borrower or foreclosure, result in removal of the loan from the
PCI loan pool at its allocated carrying amount. Beginning on
January 1, 2010, loans modified in a TDR remain within the
PCI loan pools. Prior to January 1, 2010, TDRs were removed
from the PCI loan pools.
Leases
The Corporation provides equipment financing to its customers
through a variety of lease arrangements. Direct financing leases
are carried at the aggregate of lease payments receivable plus
estimated residual value of the
Bank of America
2010 145
leased property less unearned income. Leveraged leases, which
are a form of financing leases, are carried net of nonrecourse
debt. Unearned income on leveraged and direct financing leases
is accreted to interest income over the lease terms using
methods that approximate the interest method.
Allowance for
Credit Losses
The allowance for credit losses, which includes the allowance
for loan and lease losses and the reserve for unfunded lending
commitments, represents managements estimate of probable
losses inherent in the Corporations lending activities.
The allowance for loan and lease losses and the reserve for
unfunded lending commitments exclude amounts for loans and
unfunded lending commitments accounted for under the fair value
option as the fair values of these instruments reflect a credit
component. The allowance for loan and lease losses does not
include amounts related to accrued interest receivable other
than billed interest and fees on credit card receivables as
accrued interest receivable is reversed when a loan is placed on
nonaccrual status. The allowance for loan and lease losses
represents the estimated probable credit losses in funded
consumer and commercial loans and leases while the reserve for
unfunded lending commitments, including standby letters of
credit (SBLCs) and binding unfunded loan commitments, represents
estimated probable credit losses on these unfunded credit
instruments based on utilization assumptions. Credit exposures
deemed to be uncollectible, excluding derivative assets, trading
account assets and loans carried at fair value, are charged
against these accounts. Cash recovered on previously charged off
amounts is recorded as a recovery to these accounts. Management
evaluates the adequacy of the allowance for loan and lease
losses based on the combined total of these two components.
The Corporation performs periodic and systematic detailed
reviews of its lending portfolios to identify credit risks and
to assess the overall collectability of those portfolios. The
allowance on certain homogeneous consumer loan portfolios, which
generally consist of consumer real estate within the home loans
portfolio segment and credit card loans within the credit card
and other consumer portfolio segment, is based on aggregated
portfolio segment evaluations generally by product type. Loss
forecast models are utilized for these portfolios which consider
a variety of factors including, but not limited to, historical
loss experience, estimated defaults or foreclosures based on
portfolio trends, delinquencies, bankruptcies, economic
conditions and credit scores.
The Corporations home loans portfolio segment is comprised
primarily of large groups of homogeneous consumer loans secured
by residential real estate. The amount of losses incurred in the
homogeneous loan pools is estimated based upon how many of the
loans will default and the loss in the event of default. Using
statistically valid modeling methodologies, the Corporation
estimates how many of the homogeneous loans will default based
on the individual loans attributes aggregated into pools
of homogeneous loans with similar attributes. The attributes
that are most significant to the probability of default and are
used to estimate default include refreshed LTV or in the case of
a subordinated lien, refreshed combined
loan-to-value
(CLTV), borrower credit score, months since origination (i.e.,
vintage) and geography, all of which are further broken down by
present collection status (whether the loan is current,
delinquent, in default or in bankruptcy). This estimate is based
on the Corporations historical experience with the loan
portfolio. The estimate is adjusted to reflect an assessment of
environmental factors not yet reflected in the historical data
underlying the loss estimates, such as changes in real estate
values, local and national economies, underwriting standards and
the regulatory environment. The probability of default of a loan
is based on an analysis of the movement of loans with the
measured attributes from either current or each of the
delinquency categories to default over a twelve-month period.
Loans 90 or more days past due or those expected to migrate to
90 or more days past due within the twelve-month period are
assigned a rate of
default that measures the percentage of such loans that will
default over their lives given the assumption that the condition
causing the ultimate default presently exists as of the
measurement date. On home equity loans where the Corporation
holds only a second-lien position and foreclosure is not the
best alternative, the loss severity is estimated at
100 percent.
The allowance on certain commercial loans (except business card
and certain small business loans) is calculated using loss rates
delineated by risk rating and product type. Factors considered
when assessing loss rates include: the value of the underlying
collateral, if applicable, the industry of the obligor, and the
obligors liquidity and other financial indicators along
with certain qualitative factors. These statistical models are
updated regularly for changes in economic and business
conditions. Included in the analysis of consumer and commercial
loan portfolios are reserves which are maintained to cover
uncertainties that affect the Corporations estimate of
probable losses including domestic and global economic
uncertainty and large single name defaults.
The remaining commercial portfolios, including nonperforming
commercial loans, as well as consumer real estate loans modified
in a TDR, renegotiated credit card, unsecured consumer and small
business loans are reviewed in accordance with applicable
accounting guidance on impaired loans and TDRs. If necessary, a
specific allowance is established for these loans if they are
deemed to be impaired. A loan is considered impaired when, based
on current information and events, it is probable that the
Corporation will be unable to collect all amounts due, including
principal
and/or
interest, according to the contractual terms of the agreement,
and once a loan has been identified as impaired, management
measures impairment. Impaired loans and TDRs are primarily
measured based on the present value of payments expected to be
received, discounted at the loans original effective
contractual interest rates, or discounted at the portfolio
average contractual annual percentage rate, excluding
renegotiated and promotionally priced loans for the renegotiated
TDR portfolio. Impaired loans and TDRs may also be measured
based on observable market prices, or for loans that are solely
dependent on the collateral for repayment, the estimated fair
value of the collateral less estimated costs to sell. If the
recorded investment in impaired loans exceeds this amount, a
specific allowance is established as a component of the
allowance for loan and lease losses unless these are consumer
real estate loans that are solely dependent on the collateral
for repayment, in which case the initial amount that exceeds the
fair value of the collateral is charged off.
Generally, prior to performing a detailed property valuation
including a walk-through of a property, the Corporation
initially estimates the fair value of the collateral securing
consumer loans that are solely dependent on the collateral for
repayment using an automated valuation method (AVM). An AVM is a
tool that estimates the value of a property by reference to
market data including sales of comparable properties and price
trends specific to the Metropolitan Statistical Area in which
the property being valued is located. In the event that an AVM
value is not available, the Corporation utilizes publicized
indices or if these methods provide less reliable valuations,
the Corporation uses appraisals or broker price opinions to
estimate the fair value of the collateral. While there is
inherent imprecision in these valuations, the Corporation
believes that they are representative of the portfolio in the
aggregate.
In addition to the allowance for loan and lease losses, the
Corporation also estimates probable losses related to unfunded
lending commitments, such as letters of credit and financial
guarantees, and binding unfunded loan commitments. The reserve
for unfunded lending commitments excludes commitments accounted
for under the fair value option. Unfunded lending commitments
are subject to individual reviews and are analyzed and
segregated by risk according to the Corporations internal
risk rating scale. These risk classifications, in conjunction
with an analysis of historical loss experience, utilization
assumptions, current economic conditions, performance
146 Bank
of America 2010
trends within the portfolio and any other pertinent information,
result in the estimation of the reserve for unfunded lending
commitments.
The allowance for credit losses related to the loan and lease
portfolio is reported separately on the Consolidated Balance
Sheet whereas the reserve for unfunded lending commitments is
reported on the Consolidated Balance Sheet in accrued expenses
and other liabilities. Provision for credit losses related to
the loan and lease portfolio and unfunded lending commitments is
reported in the Consolidated Statement of Income.
Nonperforming
Loans and Leases, Charge-offs and Delinquencies
Nonperforming loans and leases generally include loans and
leases that have been placed on nonaccrual status including
nonaccruing loans whose contractual terms have been restructured
in a manner that grants a concession to a borrower experiencing
financial difficulties. Loans accounted for under the fair value
option, PCI loans and LHFS are not reported as nonperforming
loans and leases.
In accordance with the Corporations policies, non-bankrupt
credit card loans and unsecured consumer loans are charged off
no later than the end of the month in which the account becomes
180 days past due. The outstanding balance of real
estate-secured loans that is in excess of the estimated property
value, less estimated costs to sell, is charged off no later
than the end of the month in which the account becomes
180 days past due unless repayment of the loan is insured
by the Federal Housing Administration (FHA). The estimated
property value, less estimated costs to sell, is determined
using the same process as described for impaired loans in the
Allowance for Credit Losses section beginning on page 146.
Personal property-secured loans are charged off no later than
the end of the month in which the account becomes 120 days
past due. Unsecured accounts in bankruptcy, including credit
cards, are charged off 60 days after bankruptcy
notification. For secured products, accounts in bankruptcy are
written down to the collateral value, less cost to sell, by the
end of the month in which the account becomes 60 days past
due. Consumer credit card loans, consumer loans secured by
personal property and unsecured consumer loans are not placed on
nonaccrual status prior to charge-off and therefore are not
reported as nonperforming loans. Real estate-secured loans are
generally placed on nonaccrual status and classified as
nonperforming at 90 days past due. However, consumer loans
secured by real estate where repayments are insured by the FHA
are not placed on nonaccrual status, and therefore, are not
reported as nonperforming loans. Accrued interest receivable is
reversed when a consumer loan is placed on nonaccrual status.
Interest collections on nonaccruing consumer loans for which the
ultimate collectability of principal is uncertain are applied as
principal reductions; otherwise, such collections are credited
to interest income when received. These loans may be restored to
accrual status when all principal and interest is current and
full repayment of the remaining contractual principal and
interest is expected, or when the loan otherwise becomes
well-secured and is in the process of collection. Consumer loans
whose contractual terms have been modified in a TDR and are
current at the time of restructuring remain on accrual status if
there is demonstrated performance prior to the restructuring and
payment in full under the restructured terms is expected.
Otherwise, the loans are placed on nonaccrual status and
reported as nonperforming until there is sustained repayment
performance for a reasonable period, generally six months.
Consumer TDRs that are on accrual status are reported as
performing TDRs through the end of the calendar year in which
the restructuring occurred or the year in which the loans are
returned to accrual status. In addition, if accruing consumer
TDRs bear less than a market rate of interest at the time of
modification, they are reported as performing TDRs throughout
the remaining lives of the loans.
Commercial loans and leases, excluding business card loans, that
are past due 90 days or more as to principal or interest,
or where reasonable
doubt exists as to timely collection, including loans that are
individually identified as being impaired, are generally placed
on nonaccrual status and classified as nonperforming unless
well-secured and in the process of collection. Commercial loans
and leases whose contractual terms have been modified in a TDR
are placed on nonaccrual status and reported as nonperforming
until the loans have performed for an adequate period of time
under the restructured agreement, generally six months. Accruing
commercial TDRs are reported as performing TDRs through the end
of the calendar year in which the loans are returned to accrual
status. In addition, if accruing commercial TDRs bear less than
a market rate of interest at the time of modification, they are
reported as performing TDRs throughout the remaining lives of
the loans. Accrued interest receivable is reversed when a
commercial loan is placed on nonaccrual status. Interest
collections on nonaccruing commercial loans and leases for which
the ultimate collectability of principal is uncertain are
applied as principal reductions; otherwise, such collections are
credited to income when received. Commercial loans and leases
may be restored to accrual status when all principal and
interest is current and full repayment of the remaining
contractual principal and interest is expected, or when the loan
otherwise becomes well-secured and is in the process of
collection. Business card loans are charged off no later than
the end of the month in which the account becomes 180 days
past due or where 60 days have elapsed since receipt of
notification of bankruptcy filing, whichever comes first. These
loans are not placed on nonaccrual status prior to charge-off
and therefore are not reported as nonperforming loans. Other
commercial loans are generally charged off when all or a portion
of the principal amount is determined to be uncollectible.
The entire balance of a consumer and commercial loan is
contractually delinquent if the minimum payment is not received
by the specified due date on the customers billing
statement. Interest and fees continue to accrue on past due
loans until the date the loan goes into nonaccrual status, if
applicable.
PCI loans are recorded at fair value at the acquisition date.
Although the PCI loans may be contractually delinquent, the
Corporation does not classify these loans as nonperforming as
the loans were written down to fair value at the acquisition
date and the accretable yield is recognized in interest income
over the remaining life of the loan. In addition, reported net
charge-offs exclude write-downs on PCI loan pools as the fair
value already considers the estimated credit losses.
Loans
Held-for-sale
Loans that are intended to be sold in the foreseeable future,
including residential mortgages, loan syndications, and to a
lesser degree, commercial real estate, consumer finance and
other loans, are reported as LHFS and are carried at the lower
of aggregate cost or fair value. The Corporation accounts for
certain LHFS, including first mortgage LHFS, under the fair
value option. Mortgage loan origination costs related to LHFS
which the Corporation accounts for under the fair value option
are recognized in noninterest expense when incurred. Mortgage
loan origination costs for LHFS carried at the lower of cost or
fair value are capitalized as part of the carrying amount of the
loans and recognized as a reduction of mortgage banking income
upon the sale of such loans. LHFS that are on nonaccrual status
and are reported as nonperforming, as defined in the policy
above, are reported separately from nonperforming loans and
leases.
Premises and
Equipment
Premises and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation and amortization are
recognized using the straight-line method over the estimated
useful lives of the assets. Estimated lives range up to
40 years for buildings, up to 12 years for furniture
and
Bank of America
2010 147
equipment, and the shorter of lease term or estimated useful
life for leasehold improvements.
Mortgage
Servicing Rights
The Corporation accounts for consumer-related MSRs at fair value
with changes in fair value recorded in mortgage banking income,
while commercial-related and residential reverse mortgage MSRs
are accounted for using the amortization method (i.e., lower of
cost or market) with impairment recognized as a reduction in
mortgage banking income. To reduce the volatility of earnings
related to interest rate and market value fluctuations, certain
securities and derivatives such as options and interest rate
swaps may be used as economic hedges of the MSRs, but are not
designated as accounting hedges. These economic hedges are
carried at fair value with changes in fair value recognized in
mortgage banking income.
The Corporation estimates the fair value of the consumer-related
MSRs using a valuation model that calculates the present value
of estimated future net servicing income. This is accomplished
through an option-adjusted spread (OAS) valuation approach that
factors in prepayment risk. This approach consists of projecting
servicing cash flows under multiple interest rate scenarios and
discounting these cash flows using risk-adjusted discount rates.
The key economic assumptions used in valuations of MSRs include
weighted-average lives of the MSRs and the OAS levels. The OAS
represents the spread that is added to the discount rate so that
the sum of the discounted cash flows equals the market price,
therefore it is a measure of the extra yield over the reference
discount factor (i.e., the forward swap curve) that the
Corporation expects to earn by holding the asset. These
variables can, and generally do, change from quarter to quarter
as market conditions and projected interest rates change, and
could have an adverse impact on the value of the MSRs and could
result in a corresponding reduction in mortgage banking income.
Goodwill and
Intangible Assets
Goodwill is calculated as the purchase premium after adjusting
for the fair value of net assets acquired. Goodwill is not
amortized but is reviewed for potential impairment on an annual
basis, or when events or circumstances indicate a potential
impairment, at the reporting unit level. A reporting unit, as
defined under applicable accounting guidance, is a business
segment or one level below a business segment. The goodwill
impairment analysis is a two-step test. The first step of the
goodwill impairment test involves comparing the fair value of
each reporting unit with its carrying amount including goodwill.
If the fair value of the reporting unit exceeds its carrying
amount, goodwill of the reporting unit is considered not
impaired; however, if the carrying amount of the reporting unit
exceeds its fair value, the second step must be performed to
measure potential impairment.
The second step involves calculating an implied fair value of
goodwill for each reporting unit for which the first step
indicated possible impairment. The implied fair value of
goodwill is determined in the same manner as the amount of
goodwill recognized in a business combination, which is the
excess of the fair value of the reporting unit, as determined in
the first step, over the aggregate fair values of the assets,
liabilities and identifiable intangibles as if the reporting
unit was being acquired in a business combination. Measurement
of the fair values of the assets and liabilities of a reporting
unit is consistent with the requirements of the fair value
measurements accounting guidance, which defines fair value as an
exit price, meaning the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The
adjustments to measure the assets, liabilities and intangibles
at fair value are for the purpose of measuring the implied fair
value of goodwill and such adjustments are not reflected in the
Consolidated Balance Sheet. If the implied fair value of
goodwill exceeds the goodwill assigned to the reporting unit,
there is no impairment. If the goodwill assigned to a reporting
unit
exceeds the implied fair value of goodwill, an impairment charge
is recorded for the excess. An impairment loss recognized cannot
exceed the amount of goodwill assigned to a reporting unit. An
impairment loss establishes a new basis in the goodwill and
subsequent reversals of goodwill impairment losses are not
permitted under applicable accounting guidance.
For intangible assets subject to amortization, an impairment
loss is recognized if the carrying amount of the intangible
asset is not recoverable and exceeds fair value. The carrying
amount of the intangible asset is considered not recoverable if
it exceeds the sum of the undiscounted cash flows expected to
result from the use of the asset.
Variable Interest
Entities
A VIE is an entity that lacks equity investors or whose equity
investors do not have a controlling financial interest in the
entity through their equity investments. The entity that has a
controlling financial interest in a VIE is referred to as the
primary beneficiary and consolidates the VIE. Prior to
January 1, 2010, the primary beneficiary was the entity
that would absorb a majority of the economic risks and rewards
of the VIE based on an analysis of projected
probability-weighted cash flows. In accordance with the new
accounting guidance on consolidation of VIEs and transfers of
financial assets effective January 1, 2010, the Corporation
is deemed to have a controlling financial interest and is the
primary beneficiary of a VIE if it has both the power to direct
the activities of the VIE that most significantly impact the
VIEs economic performance and an obligation to absorb
losses or the right to receive benefits that could potentially
be significant to the VIE. On a quarterly basis, the Corporation
reassesses whether it has a controlling financial interest in
and is the primary beneficiary of a VIE. The quarterly
reassessment process considers whether the Corporation has
acquired or divested the power to direct the activities of the
VIE through changes in governing documents or other
circumstances. The reassessment also considers whether the
Corporation has acquired or disposed of a financial interest
that could be significant to the VIE, or whether an interest in
the VIE has become significant or is no longer significant. The
consolidation status of the VIEs with which the Corporation is
involved may change as a result of such reassessments. Changes
in consolidation status are applied prospectively, with assets
and liabilities of a newly consolidated VIE initially recorded
at fair value. A gain or loss may be recognized upon
deconsolidation of a VIE depending on the carrying amounts of
deconsolidated assets and liabilities compared to the fair value
of retained interests and ongoing contractual arrangements.
The Corporation primarily uses VIEs for its securitization
activities, in which the Corporation transfers whole loans or
debt securities into a trust or other vehicle such that the
assets are legally isolated from the creditors of the
Corporation. Assets held in a trust can only be used to settle
obligations of the trust. The creditors of these trusts
typically have no recourse to the Corporation except in
accordance with the Corporations obligations under
standard representations and warranties. Prior to 2010,
securitization trusts typically met the definition of a QSPE and
as such were not subject to consolidation.
When the Corporation is the servicer of whole loans held in a
securitization trust, including non-agency residential
mortgages, home equity loans, credit cards, automobile loans and
student loans, the Corporation has the power to direct the most
significant activities of the trust. The Corporation does not
have the power to direct the most significant activities of a
residential mortgage agency trust unless the Corporation holds
substantially all of the issued securities and has the
unilateral right to liquidate the trust. The power to direct the
most significant activities of a commercial mortgage
securitization trust is typically held by the special servicer
or by the party holding specific subordinate securities which
embody certain controlling rights. In accordance with the new
accounting guidance, the Corporation consolidates a whole loan
securitization trust if it has the power to direct the most
significant activities and also holds securities issued by the
trust or has other contractual
148 Bank
of America 2010
arrangements, other than standard representations and
warranties, that could potentially be significant to the trust.
The Corporation may also transfer trading account securities and
AFS securities into municipal bond or resecuritization trusts.
The Corporation consolidates a municipal bond or
resecuritization trust if it has control over the ongoing
activities of the trust such as the remarketing of the
trusts liabilities or, if there are no ongoing activities,
sole discretion over the design of the trust, including the
identification of securities to be transferred in and the
structure of securities to be issued, and also retains
securities or has liquidity or other commitments that could
potentially be significant to the trust. The Corporation does
not consolidate a municipal bond or resecuritization trust if
one or a limited number of third-party investors share
responsibility for the design of the trust or have control over
the significant activities of the trust through liquidation or
other substantive rights.
Other VIEs used by the Corporation include commercial paper
conduits, CDOs, investment vehicles created on behalf of
customers and other investment vehicles. The Corporation
consolidated all previously unconsolidated commercial paper
conduits in accordance with the new accounting guidance on
January 1, 2010. In its role as administrator, the
Corporation has the power to determine which assets are held in
the conduits and the Corporation manages the issuance of
commercial paper. Through liquidity facilities, loss protection
commitments and other arrangements, the Corporation has an
obligation to absorb losses that could potentially be
significant to the VIE.
The Corporation does not routinely serve as collateral manager
for CDOs and, therefore, does not typically have the power to
direct the activities that most significantly impact the
economic performance of a CDO. However, following an event of
default, if the Corporation is a majority holder of senior
securities issued by a CDO and acquires the power to manage the
assets of the CDO, the Corporation consolidates the CDO.
The Corporation consolidates a customer or other investment
vehicle if it has control over the initial design of the vehicle
or manages the assets in the vehicle and also absorbs
potentially significant gains or losses through an investment in
the vehicle, derivative contracts or other arrangements. The
Corporation does not consolidate an investment vehicle if a
single investor controlled the initial design of the vehicle or
manages the assets in the vehicles or if the Corporation does
not have a variable interest that could potentially be
significant to the vehicle.
Retained interests in securitized assets are initially recorded
at fair value. Prior to 2010, retained interests were initially
recorded at an allocated cost basis in proportion to the
relative fair values of the assets sold and interests retained.
In addition, the Corporation may invest in debt securities
issued by unconsolidated VIEs. Quoted market prices are
primarily used to obtain fair values of these debt securities,
which are AFS debt securities or trading account assets.
Generally, quoted market prices for retained residual interests
are not available, therefore, the Corporation estimates fair
values based on the present value of the associated expected
future cash flows. This may require management to estimate
credit losses, prepayment speeds, forward interest yield curves,
discount rates and other factors that impact the value of
retained interests. Retained residual interests in
unconsolidated securitization trusts are classified in trading
account assets or other assets with changes in fair value
recorded in income. The Corporation may also enter into
derivatives with unconsolidated VIEs, which are carried at fair
value with changes in fair value recorded in income.
Fair
Value
The Corporation measures the fair values of its financial
instruments in accordance with accounting guidance that requires
an entity to base fair value on exit price and maximize the use
of observable inputs and minimize the use of unobservable inputs
to determine the exit price. The Corporation categorizes its
financial instruments, based on the priority of inputs to the
valuation technique, into a three-level hierarchy, as described
below. Trading account assets and liabilities, derivative assets
and liabilities, AFS debt and marketable equity securities, MSRs
and certain other assets are carried at fair value in accordance
with applicable accounting guidance. The Corporation has also
elected to account for certain assets and liabilities under the
fair value option, including certain corporate loans and loan
commitments, LHFS, commercial paper and other short-term
borrowings, securities financing agreements, asset-backed
secured financings, long-term deposits and long-term debt. The
following describes the three-level hierarchy.
|
|
Level 1
|
Unadjusted quoted prices in active markets for identical assets
or liabilities. Level 1 assets and liabilities include debt
and equity securities and derivative contracts that are traded
in an active exchange market, as well as certain
U.S. Treasury securities that are highly liquid and are
actively traded in
over-the-counter
markets.
|
|
Level 2
|
Observable inputs other than Level 1 prices, such as quoted
prices for similar assets or liabilities, quoted prices in
markets that are not active, or other inputs that are observable
or can be corroborated by observable market data for
substantially the full term of the assets or liabilities.
Level 2 assets and liabilities include debt securities with
quoted prices that are traded less frequently than
exchange-traded instruments and derivative contracts where value
is determined using a pricing model with inputs that are
observable in the market or can be derived principally from or
corroborated by observable market data. This category generally
includes U.S. government and agency mortgage-backed debt
securities, corporate debt securities, derivative contracts,
residential mortgage loans and certain LHFS.
|
|
Level 3
|
Unobservable inputs that are supported by little or no market
activity and that are significant to the overall fair value of
the assets or liabilities. Level 3 assets and liabilities
include financial instruments for which the determination of
fair value requires significant management judgment or
estimation. The fair value for such assets and liabilities is
generally determined using pricing models, discounted cash flow
methodologies or similar techniques that incorporate the
assumptions a market participant would use in pricing the asset
or liability. This category generally includes certain private
equity investments and other principal investments, retained
residual interests in securitizations, residential MSRs,
asset-backed securities (ABS), highly structured, complex or
long-dated derivative contracts, certain LHFS, IRLCs and certain
CDOs where independent pricing information cannot be obtained
for a significant portion of the underlying assets.
|
Bank of America
2010 149
Income
Taxes
There are two components of income tax expense: current and
deferred. Current income tax expense approximates taxes to be
paid or refunded for the current period. Deferred income tax
expense results from changes in deferred tax assets and
liabilities between periods. These gross deferred tax assets and
liabilities represent decreases or increases in taxes expected
to be paid in the future because of future reversals of
temporary differences in the bases of assets and liabilities as
measured by tax laws and their bases as reported in the
financial statements. Deferred tax assets are also recognized
for tax attributes such as net operating loss carryforwards and
tax credit carryforwards. Valuation allowances are recorded to
reduce deferred tax assets to the amounts management concludes
are more-likely-than-not to be realized.
Income tax benefits are recognized and measured based upon a
two-step model: 1) a tax position must be
more-likely-than-not to be sustained based solely on its
technical merits in order to be recognized, and 2) the
benefit is measured as the largest dollar amount of that
position that is more-likely-than-not to be sustained upon
settlement. The difference between the benefit recognized and
the tax benefit claimed on a tax return is referred to as an
unrecognized tax benefit (UTB). The Corporation records income
tax-related interest and penalties, if applicable, within income
tax expense.
Retirement
Benefits
The Corporation has established retirement plans covering
substantially all full-time and certain part-time employees.
Pension expense under these plans is charged to current
operations and consists of several components of net pension
cost based on various actuarial assumptions regarding future
experience under the plans.
In addition, the Corporation has established unfunded
supplemental benefit plans and supplemental executive retirement
plans (SERPs) for selected officers of the Corporation and its
subsidiaries that provide benefits that cannot be paid from a
qualified retirement plan due to Internal Revenue Code
restrictions. The Corporations current executive officers
do not earn additional retirement income under SERPs. These
plans are nonqualified under the Internal Revenue Code and
assets used to fund benefit payments are not segregated from
other assets of the Corporation; therefore, in general, a
participants or beneficiarys claim to benefits under
these plans is as a general creditor. In addition, the
Corporation has established several postretirement healthcare
and life insurance benefit plans.
Accumulated Other
Comprehensive Income
The Corporation records unrealized gains and losses on AFS debt
and marketable equity securities, gains and losses on cash flow
accounting hedges, unrecognized actuarial gains and losses,
transition obligation and prior service costs on pension and
postretirement plans, foreign currency translation adjustments
and related hedges of net investments in foreign operations in
accumulated OCI,
net-of-tax.
Unrealized gains and losses on AFS debt and marketable equity
securities are reclassified to earnings as the gains or losses
are realized upon sale of the securities. Unrealized losses on
AFS securities deemed to represent OTTI are reclassified to
earnings at the time of the impairment charge. Beginning in
2009, for AFS debt securities that the Corporation does not
intend to sell or it is not more-likely-than-not that it will be
required to sell, only the credit component of an unrealized
loss is reclassified to earnings. Gains or losses on derivatives
accounted for as cash flow hedges are reclassified to earnings
when the hedged transaction affects earnings. Translation gains
or losses on foreign currency translation adjustments are
reclassified to earnings upon the substantial sale or
liquidation of investments in foreign operations.
Earnings Per
Common Share
Earnings per share (EPS) is computed by dividing net income
(loss) allocated to common shareholders by the weighted-average
common shares outstanding. Net income (loss) allocated to common
shareholders represents net income (loss) applicable to common
shareholders which is net income (loss) adjusted for preferred
stock dividends including dividends declared, accretion of
discounts on preferred stock including accelerated accretion
when preferred stock is repaid early, and cumulative dividends
related to the current dividend period that have not been
declared as of period end, less income allocated to
participating securities (see below for additional information).
Diluted earnings (loss) per common share is computed by dividing
income (loss) allocated to common shareholders by the
weighted-average common shares outstanding plus amounts
representing the dilutive effect of stock options outstanding,
restricted stock, restricted stock units, outstanding warrants
and the dilution resulting from the conversion of convertible
preferred stock, if applicable.
On January 1, 2009, the Corporation adopted new accounting
guidance on earnings per share that defines unvested share-based
payment awards that contain nonforfeitable rights to dividends
as participating securities that are included in computing EPS
using the two-class method. The two-class method is an earnings
allocation formula under which EPS is calculated for common
stock and participating securities according to dividends
declared and participating rights in undistributed earnings.
Under this method, all earnings, distributed and undistributed,
are allocated to participating securities and common shares
based on their respective rights to receive dividends.
In an exchange of non-convertible preferred stock, income
allocated to common shareholders is adjusted for the difference
between the carrying value of the preferred stock and the fair
value of the common stock exchanged. In an induced conversion of
convertible preferred stock, income allocated to common
shareholders is reduced by the excess of the fair value of the
common stock exchanged over the fair value of the common stock
that would have been issued under the original conversion terms.
Foreign Currency
Translation
Assets, liabilities and operations of foreign branches and
subsidiaries are recorded based on the functional currency of
each entity. For certain of the foreign operations, the
functional currency is the local currency, in which case the
assets, liabilities and operations are translated, for
consolidation purposes, from the local currency to the
U.S. dollar reporting currency at period-end rates for
assets and liabilities and generally at average rates for
results of operations. The resulting unrealized gains or losses
as well as gains and losses from certain hedges, are reported as
a component of accumulated OCI on an after-tax basis. When the
foreign entitys functional currency is determined to be
the U.S. dollar, the resulting remeasurement currency gains
or losses on foreign currency-denominated assets or liabilities
are included in earnings.
Credit Card and
Deposit Arrangements
Endorsing
Organization Agreements
The Corporation contracts with other organizations to obtain
their endorsement of the Corporations loan and deposit
products. This endorsement may provide to the Corporation
exclusive rights to market to the organizations members or
to customers on behalf of the Corporation. These organizations
endorse the Corporations loan and deposit products and
provide the Corporation with their mailing lists and marketing
activities. These agreements generally have terms that range
from two to five years. The Corporation typically pays royalties
in exchange for the endorsement. Compensation costs related to
the credit card agreements are recorded as contra-revenue in
card income.
150 Bank
of America 2010
Cardholder Reward
Agreements
The Corporation offers reward programs that allow its
cardholders to earn points that can be redeemed for a broad
range of rewards including cash, travel and discounted products.
The Corporation establishes a rewards liability based upon the
points earned that are expected to be redeemed and the average
cost per point redeemed. The points to be redeemed are estimated
based on past redemption behavior, card product type, account
transaction activity and other historical card performance. The
liability is reduced as the points are redeemed. The estimated
cost of the rewards programs is recorded as contra-revenue in
card income.
Insurance Income
and Insurance Expense
Property and casualty and credit life and disability premiums
are generally recognized over the term of the policies on a
pro-rata basis for all policies except for certain of the
lender-placed auto insurance and the guaranteed auto protection
(GAP) policies. For lender-placed auto insurance, premiums are
recognized when collections become probable due to high
cancellation rates experienced early in the life of the policy.
For GAP insurance, revenue recognition is correlated to the
exposure and accelerated over the life of the contract. Mortgage
reinsurance premiums are recognized as earned. Insurance expense
includes insurance claims, commissions and premium taxes, all of
which are recorded in other general operating expense.
NOTE 2 Merger
and Restructuring Activity
Merrill
Lynch
On January 1, 2009, the Corporation acquired Merrill Lynch
through its merger with a subsidiary of the Corporation in
exchange for common and preferred stock with a value of
$29.1 billion. Under the terms of the merger agreement,
Merrill Lynch common shareholders received 0.8595 of a share of
Bank of America Corporation common stock in exchange for each
share of Merrill Lynch common stock. In addition, Merrill Lynch
non-convertible preferred shareholders received Bank of America
Corporation preferred stock having substantially identical
terms. On October 15, 2010, the outstanding Merrill Lynch
convertible preferred stock automatically converted into Bank of
America Corporation common stock in accordance with its terms.
The purchase price was allocated to the acquired assets and
liabilities based on their estimated fair values at the Merrill
Lynch acquisition date as summarized in the table below.
Goodwill of $5.2 billion was calculated as the purchase
premium after adjusting for the fair value of net assets
acquired. No goodwill is deductible for federal income tax
purposes. The goodwill was allocated principally to the
Global Wealth & Investment Management (GWIM)
and Global Banking & Markets (GBAM)
business segments.
Merrill Lynch
Purchase Price Allocation
|
|
|
|
|
(Dollars in billions, except per
share amounts)
|
|
|
|
Purchase price
|
|
|
|
|
Merrill Lynch common shares exchanged (in millions)
|
|
|
1,600
|
|
Exchange ratio
|
|
|
0.8595
|
|
|
|
|
|
|
The Corporations common shares issued (in millions)
|
|
|
1,375
|
|
Purchase price per share of the Corporations common
stock (1)
|
|
$
|
14.08
|
|
|
|
|
|
|
Total value of the
Corporations common stock and cash exchanged for
fractional shares
|
|
$
|
19.4
|
|
Merrill Lynch preferred stock
|
|
|
8.6
|
|
Fair value of outstanding employee stock awards
|
|
|
1.1
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
29.1
|
|
Allocation of the purchase
price
|
|
|
|
|
Merrill Lynch stockholders equity
|
|
|
19.9
|
|
Merrill Lynch goodwill and intangible assets
|
|
|
(2.6
|
)
|
Pre-tax adjustments to reflect acquired assets and liabilities
at fair value:
|
|
|
|
|
Derivatives and securities
|
|
|
(2.1
|
)
|
Loans
|
|
|
(6.1
|
)
|
Intangible
assets (2)
|
|
|
5.4
|
|
Other assets/liabilities
|
|
|
(0.7
|
)
|
Long-term debt
|
|
|
16.0
|
|
|
|
|
|
|
Pre-tax total
adjustments
|
|
|
12.5
|
|
Deferred income taxes
|
|
|
(5.9
|
)
|
|
|
|
|
|
After-tax total
adjustments
|
|
|
6.6
|
|
|
|
|
|
|
Fair value of net assets
acquired
|
|
|
23.9
|
|
|
|
|
|
|
Goodwill resulting from the
Merrill Lynch acquisition
|
|
$
|
5.2
|
|
|
|
|
|
|
|
|
|
(1) |
|
The value of the shares of common
stock exchanged with Merrill Lynch shareholders was based upon
the closing price of the Corporations common stock at
December 31, 2008, the last trading day prior to the date
of acquisition.
|
(2) |
|
Consists of trade name of
$1.5 billion and customer relationship and core deposit
intangibles of $3.9 billion. The amortization life is
10 years for the customer relationship and core deposit
intangibles which are primarily amortized on a straight-line
basis.
|
Bank of America
2010 151
Condensed
Statement of Net Assets Acquired
The following condensed statement of net assets acquired
reflects the values assigned to Merrill Lynchs net assets
as of the acquisition date.
|
|
|
|
|
(Dollars in billions)
|
|
January 1, 2009
|
|
Assets
|
|
|
|
|
Federal funds sold and securities borrowed or purchased under
agreements to resell
|
|
$
|
138.8
|
|
Trading account assets
|
|
|
87.7
|
|
Derivative assets
|
|
|
96.4
|
|
Investment securities
|
|
|
70.5
|
|
Loans and leases
|
|
|
55.9
|
|
Intangible assets
|
|
|
5.4
|
|
Other assets
|
|
|
195.3
|
|
|
|
|
|
|
Total assets
|
|
$
|
650.0
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Deposits
|
|
$
|
98.1
|
|
Federal funds purchased and securities loaned or sold under
agreements to repurchase
|
|
|
111.6
|
|
Trading account liabilities
|
|
|
18.1
|
|
Derivative liabilities
|
|
|
72.0
|
|
Commercial paper and other short-term borrowings
|
|
|
37.9
|
|
Accrued expenses and other liabilities
|
|
|
99.5
|
|
Long-term debt
|
|
|
188.9
|
|
|
|
|
|
|
Total liabilities
|
|
|
626.1
|
|
|
|
|
|
|
Fair value of net assets
acquired
|
|
$
|
23.9
|
|
|
|
|
|
|
Contingencies
The fair value of net assets acquired includes certain
contingent liabilities that were recorded as of the acquisition
date. Merrill Lynch has been named as a defendant in various
pending legal actions and proceedings arising in connection with
its activities as a global diversified financial services
institution. Some of these legal actions and proceedings include
claims for substantial compensatory
and/or
punitive damages or claims for indeterminate amounts of damages.
Merrill Lynch is also involved in investigations
and/or
proceedings by governmental and self-regulatory agencies. Due to
the number of variables and assumptions involved in assessing
the possible outcome of these legal actions, sufficient
information did not exist as of the acquisition date to
reasonably estimate the fair value of these contingent
liabilities. As such, these contingences have been measured in
accordance with applicable accounting guidance which states that
a loss is recognized when it is probable of occurring and the
loss amount can be reasonably estimated. For further
information, see Note 14 Commitments
and Contingencies.
Merger and
Restructuring Charges and Reserves
Merger and restructuring charges are recorded in the
Consolidated Statement of Income and include incremental costs
to integrate the operations of the Corporation and its recent
acquisitions. These charges represent costs associated with
these one-time activities and do not represent ongoing costs of
the fully integrated combined organization. On January 1,
2009, the Corporation adopted new accounting guidance on
business combinations, on a prospective basis, that requires
that acquisition-related transaction and restructuring costs be
charged to expense as incurred. Previously, these expenses were
recorded as an adjustment to goodwill.
The table below presents severance and employee-related charges,
systems integrations and related charges, and other
merger-related charges.
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Severance and employee-related charges
|
|
$
|
455
|
|
|
$
|
1,351
|
|
|
$
|
138
|
|
Systems integrations and related charges
|
|
|
1,137
|
|
|
|
1,155
|
|
|
|
640
|
|
Other
|
|
|
228
|
|
|
|
215
|
|
|
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total merger and restructuring
charges
|
|
$
|
1,820
|
|
|
$
|
2,721
|
|
|
$
|
935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included for 2010 are merger-related charges of
$1.6 billion related to the Merrill Lynch acquisition and
$202 million related to the July 1, 2008 acquisition
of Countrywide Financial Corporation (Countrywide). Included for
2009 are merger-related charges of $1.8 billion related to
the Merrill Lynch acquisition, $843 million related to the
Countrywide acquisition and $97 million related to earlier
acquisitions. Included for 2008 are merger-related charges of
$205 million related to the Countrywide acquisition and
$730 million related to earlier acquisitions.
During 2010, $1.6 billion in merger-related charges for the
Merrill Lynch acquisition included $426 million for
severance and other employee-related costs, $975 million
for systems integration costs and $217 million in other
merger-related costs. In 2009, the $1.8 billion in
merger-related charges for the Merrill Lynch acquisition
included $1.2 billion for severance and other
employee-related costs, $480 million for systems
integration costs and $129 million in other merger-related
costs.
The table below presents the changes in exit cost and
restructuring reserves for 2010 and 2009. Exit cost reserves
were established in purchase accounting resulting in an increase
in goodwill. Restructuring reserves are established by a charge
to merger and restructuring charges, and the restructuring
charges are included in the total merger and restructuring
charges in the table above. Exit costs were not recorded in
purchase accounting for the Merrill Lynch acquisition in
accordance with new accounting guidance on business combinations
which was effective January 1, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exit Cost Reserves
|
|
|
Restructuring Reserves
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Balance, January 1
|
|
$
|
112
|
|
|
$
|
523
|
|
|
$
|
403
|
|
|
$
|
86
|
|
Exit costs and restructuring charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merrill Lynch
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
375
|
|
|
|
949
|
|
Countrywide
|
|
|
(18
|
)
|
|
|
|
|
|
|
54
|
|
|
|
191
|
|
Other
|
|
|
(9
|
)
|
|
|
(24
|
)
|
|
|
|
|
|
|
(6
|
)
|
Cash payments and other
|
|
|
(70
|
)
|
|
|
(387
|
)
|
|
|
(496
|
)
|
|
|
(817
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31
|
|
$
|
15
|
|
|
$
|
112
|
|
|
$
|
336
|
|
|
$
|
403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
n/a = not applicable
At December 31, 2009, there were $403 million of
restructuring reserves related to the Merrill Lynch and
Countrywide acquisitions for severance and other
employee-related costs. During 2010, $429 million was added
to the restructuring reserves related to severance and other
employee-related costs primarily associated with the Merrill
Lynch acquisition. Cash payments and other of $496 million
during 2010 were related to severance and other employee-related
costs primarily associated with the Merrill Lynch acquisition.
Payments associated with the Countrywide acquisition are
expected to continue into 2011, while Merrill Lynch related
payments are anticipated to continue into 2012. At
December 31, 2010, restructuring reserves of
$336 million related principally to Merrill Lynch.
152 Bank
of America 2010
NOTE 3 Trading
Account Assets and Liabilities
The table below presents the components of trading account
assets and liabilities at December 31, 2010 and 2009.
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
Trading account assets
|
|
|
|
|
|
|
|
|
U.S. government and agency securities
(1)
|
|
$
|
60,811
|
|
|
$
|
44,585
|
|
Corporate securities, trading loans and other
|
|
|
49,352
|
|
|
|
57,009
|
|
Equity securities
|
|
|
32,129
|
|
|
|
33,562
|
|
Non-U.S.
sovereign debt
|
|
|
33,523
|
|
|
|
28,143
|
|
Mortgage trading loans and asset-backed securities
|
|
|
18,856
|
|
|
|
18,907
|
|
|
|
|
|
|
|
|
|
|
Total trading account
assets
|
|
$
|
194,671
|
|
|
$
|
182,206
|
|
|
|
|
|
|
|
|
|
|
Trading account
liabilities
|
|
|
|
|
|
|
|
|
U.S. government and agency securities
|
|
$
|
29,340
|
|
|
$
|
26,519
|
|
Equity securities
|
|
|
15,482
|
|
|
|
18,407
|
|
Non-U.S.
sovereign debt
|
|
|
15,813
|
|
|
|
12,897
|
|
Corporate securities and other
|
|
|
11,350
|
|
|
|
7,609
|
|
|
|
|
|
|
|
|
|
|
Total trading account
liabilities
|
|
$
|
71,985
|
|
|
$
|
65,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes $29.7 billion and
$23.5 billion at December 31, 2010 and 2009 of GSE
obligations.
|
NOTE 4 Derivatives
Derivative
Balances
Derivatives are entered into on behalf of customers, for
trading, as economic hedges or as qualifying accounting hedges.
The Corporation enters into derivatives to facilitate client
transactions, for principal trading purposes and to manage risk
exposures. For additional information on the Corporations
derivatives and hedging activities, see
Note 1 Summary of Significant
Accounting Principles. The table below identifies
derivative instruments included on the Corporations
Consolidated Balance Sheet in derivative assets and liabilities
at December 31, 2010 and 2009. Balances are presented on a
gross basis, prior to the application of counterparty and
collateral netting. Total derivative assets and liabilities are
adjusted on an aggregate basis to take into consideration the
effects of legally enforceable master netting agreements and
have been reduced by the cash collateral applied.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
Gross Derivative Assets
|
|
|
Gross Derivative Liabilities
|
|
|
|
|
|
|
Trading
|
|
|
|
|
|
|
|
|
Trading
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
|
|
|
|
|
|
|
Derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
Qualifying
|
|
|
|
|
|
and
|
|
|
Qualifying
|
|
|
|
|
|
|
Contract/
|
|
|
Economic
|
|
|
Accounting
|
|
|
|
|
|
Economic
|
|
|
Accounting
|
|
|
|
|
(Dollars in billions)
|
|
Notional (1)
|
|
|
Hedges
|
|
|
Hedges (2)
|
|
|
Total
|
|
|
Hedges
|
|
|
Hedges (2)
|
|
|
Total
|
|
Interest rate
contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swaps
|
|
$
|
42,719.2
|
|
|
$
|
1,193.9
|
|
|
$
|
14.9
|
|
|
$
|
1,208.8
|
|
|
$
|
1,187.9
|
|
|
$
|
2.2
|
|
|
$
|
1,190.1
|
|
Futures and forwards
|
|
|
9.939.2
|
|
|
|
6.0
|
|
|
|
|
|
|
|
6.0
|
|
|
|
4.7
|
|
|
|
|
|
|
|
4.7
|
|
Written options
|
|
|
2,887.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82.8
|
|
|
|
|
|
|
|
82.8
|
|
Purchased options
|
|
|
3,026.2
|
|
|
|
88.0
|
|
|
|
|
|
|
|
88.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange
contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swaps
|
|
|
630.1
|
|
|
|
26.5
|
|
|
|
3.7
|
|
|
|
30.2
|
|
|
|
28.5
|
|
|
|
2.1
|
|
|
|
30.6
|
|
Spot, futures and forwards
|
|
|
2,652.9
|
|
|
|
41.3
|
|
|
|
|
|
|
|
41.3
|
|
|
|
44.2
|
|
|
|
|
|
|
|
44.2
|
|
Written options
|
|
|
439.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.2
|
|
|
|
|
|
|
|
13.2
|
|
Purchased options
|
|
|
417.1
|
|
|
|
13.0
|
|
|
|
|
|
|
|
13.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swaps
|
|
|
42.4
|
|
|
|
1.7
|
|
|
|
|
|
|
|
1.7
|
|
|
|
2.0
|
|
|
|
|
|
|
|
2.0
|
|
Futures and forwards
|
|
|
78.8
|
|
|
|
2.9
|
|
|
|
|
|
|
|
2.9
|
|
|
|
2.1
|
|
|
|
|
|
|
|
2.1
|
|
Written options
|
|
|
242.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19.4
|
|
|
|
|
|
|
|
19.4
|
|
Purchased options
|
|
|
193.5
|
|
|
|
21.5
|
|
|
|
|
|
|
|
21.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swaps
|
|
|
90.2
|
|
|
|
8.8
|
|
|
|
0.2
|
|
|
|
9.0
|
|
|
|
9.3
|
|
|
|
|
|
|
|
9.3
|
|
Futures and forwards
|
|
|
413.7
|
|
|
|
4.1
|
|
|
|
|
|
|
|
4.1
|
|
|
|
2.8
|
|
|
|
|
|
|
|
2.8
|
|
Written options
|
|
|
86.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.7
|
|
|
|
|
|
|
|
6.7
|
|
Purchased options
|
|
|
84.6
|
|
|
|
6.6
|
|
|
|
|
|
|
|
6.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased credit derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit default swaps
|
|
|
2,184.7
|
|
|
|
69.8
|
|
|
|
|
|
|
|
69.8
|
|
|
|
34.0
|
|
|
|
|
|
|
|
34.0
|
|
Total return swaps/other
|
|
|
26.0
|
|
|
|
0.9
|
|
|
|
|
|
|
|
0.9
|
|
|
|
0.2
|
|
|
|
|
|
|
|
0.2
|
|
Written credit derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit default swaps
|
|
|
2,133.5
|
|
|
|
33.3
|
|
|
|
|
|
|
|
33.3
|
|
|
|
63.2
|
|
|
|
|
|
|
|
63.2
|
|
Total return swaps/other
|
|
|
22.5
|
|
|
|
0.5
|
|
|
|
|
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
|
|
|
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross derivative assets/liabilities
|
|
|
|
|
|
$
|
1,518.8
|
|
|
$
|
18.8
|
|
|
$
|
1,537.6
|
|
|
$
|
1,501.5
|
|
|
$
|
4.3
|
|
|
$
|
1,505.8
|
|
Less: Legally enforceable master netting agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,406.3
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,406.3
|
)
|
Less: Cash collateral applied
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(58.3
|
)
|
|
|
|
|
|
|
|
|
|
|
(43.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative
assets/liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
73.0
|
|
|
|
|
|
|
|
|
|
|
$
|
55.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents the total
contract/notional amount of derivative assets and liabilities
outstanding.
|
(2) |
|
Excludes $4.1 billion of
long-term debt designated as a hedge of foreign currency risk.
|
Bank of America
2010 153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
|
|
|
Gross Derivative Assets
|
|
|
Gross Derivative Liabilities
|
|
|
|
|
|
|
Trading
|
|
|
|
|
|
|
|
|
Trading
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
|
|
|
|
|
|
|
Derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
Qualifying
|
|
|
|
|
|
and
|
|
|
Qualifying
|
|
|
|
|
|
|
Contract/
|
|
|
Economic
|
|
|
Accounting
|
|
|
|
|
|
Economic
|
|
|
Accounting
|
|
|
|
|
(Dollars in billions)
|
|
Notional (1)
|
|
|
Hedges
|
|
|
Hedges (2)
|
|
|
Total
|
|
|
Hedges
|
|
|
Hedges (2)
|
|
|
Total
|
|
Interest rate
contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swaps
|
|
$
|
45,261.5
|
|
|
$
|
1,121.3
|
|
|
$
|
5.6
|
|
|
$
|
1,126.9
|
|
|
$
|
1,105.0
|
|
|
$
|
0.8
|
|
|
$
|
1,105.8
|
|
Futures and forwards
|
|
|
11,842.1
|
|
|
|
7.1
|
|
|
|
|
|
|
|
7.1
|
|
|
|
6.1
|
|
|
|
|
|
|
|
6.1
|
|
Written options
|
|
|
2,865.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84.1
|
|
|
|
|
|
|
|
84.1
|
|
Purchased options
|
|
|
2,626.7
|
|
|
|
84.1
|
|
|
|
|
|
|
|
84.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange
contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swaps
|
|
|
661.9
|
|
|
|
23.7
|
|
|
|
4.6
|
|
|
|
28.3
|
|
|
|
27.3
|
|
|
|
0.5
|
|
|
|
27.8
|
|
Spot, futures and forwards
|
|
|
1,750.8
|
|
|
|
24.6
|
|
|
|
0.3
|
|
|
|
24.9
|
|
|
|
25.6
|
|
|
|
0.1
|
|
|
|
25.7
|
|
Written options
|
|
|
383.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.0
|
|
|
|
|
|
|
|
13.0
|
|
Purchased options
|
|
|
355.3
|
|
|
|
12.7
|
|
|
|
|
|
|
|
12.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swaps
|
|
|
58.5
|
|
|
|
2.0
|
|
|
|
|
|
|
|
2.0
|
|
|
|
2.0
|
|
|
|
|
|
|
|
2.0
|
|
Futures and forwards
|
|
|
79.0
|
|
|
|
3.0
|
|
|
|
|
|
|
|
3.0
|
|
|
|
2.2
|
|
|
|
|
|
|
|
2.2
|
|
Written options
|
|
|
283.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25.1
|
|
|
|
0.4
|
|
|
|
25.5
|
|
Purchased options
|
|
|
273.7
|
|
|
|
27.3
|
|
|
|
|
|
|
|
27.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swaps
|
|
|
65.3
|
|
|
|
6.9
|
|
|
|
0.1
|
|
|
|
7.0
|
|
|
|
6.8
|
|
|
|
|
|
|
|
6.8
|
|
Futures and forwards
|
|
|
387.8
|
|
|
|
10.4
|
|
|
|
|
|
|
|
10.4
|
|
|
|
9.6
|
|
|
|
|
|
|
|
9.6
|
|
Written options
|
|
|
54.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.9
|
|
|
|
|
|
|
|
7.9
|
|
Purchased options
|
|
|
50.9
|
|
|
|
7.6
|
|
|
|
|
|
|
|
7.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased credit derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit default swaps
|
|
|
2,800.5
|
|
|
|
105.5
|
|
|
|
|
|
|
|
105.5
|
|
|
|
45.2
|
|
|
|
|
|
|
|
45.2
|
|
Total return swaps/other
|
|
|
21.7
|
|
|
|
1.5
|
|
|
|
|
|
|
|
1.5
|
|
|
|
0.4
|
|
|
|
|
|
|
|
0.4
|
|
Written credit derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit default swaps
|
|
|
2,788.8
|
|
|
|
44.1
|
|
|
|
|
|
|
|
44.1
|
|
|
|
98.4
|
|
|
|
|
|
|
|
98.4
|
|
Total return swaps/other
|
|
|
33.1
|
|
|
|
1.8
|
|
|
|
|
|
|
|
1.8
|
|
|
|
1.1
|
|
|
|
|
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross derivative assets/liabilities
|
|
|
|
|
|
$
|
1,483.6
|
|
|
$
|
10.6
|
|
|
$
|
1,494.2
|
|
|
$
|
1,459.8
|
|
|
$
|
1.8
|
|
|
$
|
1,461.6
|
|
Less: Legally enforceable master netting agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,355.1
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,355.1
|
)
|
Less: Cash collateral applied
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(51.5
|
)
|
|
|
|
|
|
|
|
|
|
|
(55.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative
assets/liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
87.6
|
|
|
|
|
|
|
|
|
|
|
$
|
50.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents the total
contract/notional amount of derivative assets and liabilities
outstanding.
|
(2) |
|
Excludes $4.4 billion of long-term
debt designated as a hedge of foreign currency risk.
|
ALM and Risk
Management Derivatives
The Corporations ALM and risk management activities
include the use of derivatives to mitigate risk to the
Corporation including both derivatives that are designated as
hedging instruments and economic hedges. Interest rate,
commodity, credit and foreign exchange contracts are utilized in
the Corporations ALM and risk management activities.
The Corporation maintains an overall interest rate risk
management strategy that incorporates the use of interest rate
contracts, which are generally non-leveraged generic interest
rate and basis swaps, options, futures, and forwards, to
minimize significant fluctuations in earnings that are caused by
interest rate volatility. The Corporations goal is to
manage interest rate sensitivity so that movements in interest
rates do not significantly adversely affect earnings. As a
result of interest rate fluctuations, hedged fixed-rate assets
and liabilities appreciate or depreciate in fair value. Gains or
losses on the derivative instruments that are linked to the
hedged fixed-rate assets and liabilities are expected to
substantially offset this unrealized appreciation or
depreciation.
Interest rate and market risk can be substantial in the mortgage
business. Market risk is the risk that values of mortgage assets
or revenues will be adversely affected by changes in market
conditions such as interest rate movements. To hedge interest
rate risk in mortgage banking production income, the Corporation
utilizes forward loan sale commitments and other derivative
instruments including purchased options. The Corporation also
utilizes derivatives such as interest rate options, interest
rate swaps, forward
settlement contracts and euro-dollar futures as economic hedges
of the fair value of MSRs. For additional information on MSRs,
see Note 25 Mortgage Servicing
Rights.
The Corporation uses foreign currency contracts to manage the
foreign exchange risk associated with certain foreign
currency-denominated assets and liabilities, as well as the
Corporations investments in
non-U.S. subsidiaries.
Foreign exchange contracts, which include spot and forward
contracts, represent agreements to exchange the currency of one
country for the currency of another country at an
agreed-upon
price on an
agreed-upon
settlement date. Exposure to loss on these contracts will
increase or decrease over their respective lives as currency
exchange and interest rates fluctuate.
The Corporation enters into derivative commodity contracts such
as futures, swaps, options and forwards as well as
non-derivative commodity contracts to provide price risk
management services to customers or to manage price risk
associated with its physical and financial commodity positions.
The non-derivative commodity contracts and physical inventories
of commodities expose the Corporation to earnings volatility.
Cash flow and fair value accounting hedges provide a method to
mitigate a portion of this earnings volatility.
The Corporation purchases credit derivatives to manage credit
risk related to certain funded and unfunded credit exposures.
Credit derivatives include credit default swaps, total return
swaps and swaptions. These derivatives are
154 Bank
of America 2010
accounted for as economic hedges and changes in fair value are
recorded in other income (loss).
Derivatives
Designated as Accounting Hedges
The Corporation uses various types of interest rate, commodity
and foreign exchange derivative contracts to protect against
changes in the fair value of its assets and liabilities due to
fluctuations in interest rates, exchange rates and commodity
prices (fair value hedges). The Corporation also uses these
types of contracts and equity derivatives to protect against
changes in the cash flows of its assets and liabilities, and
other forecasted transactions (cash flow hedges). The
Corporation hedges its net investment in consolidated
non-U.S. operations
determined to have functional currencies other than the
U.S. dollar using forward exchange contracts,
cross-currency basis swaps, and by issuing foreign
currency-denominated debt (net investment hedges).
Fair Value
Hedges
The table below summarizes certain information related to the
Corporations derivatives designated as fair value hedges
for 2010, 2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
|
|
Hedged
|
|
|
Hedge
|
|
(Dollars in millions)
|
|
Derivative
|
|
|
Item
|
|
|
Ineffectiveness
|
|
Derivatives designated as fair
value hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate risk on long-term
debt (1)
|
|
$
|
2,952
|
|
|
$
|
(3,496
|
)
|
|
$
|
(544
|
)
|
Interest rate and foreign currency risk on long-term
debt (1)
|
|
|
(463
|
)
|
|
|
130
|
|
|
|
(333
|
)
|
Interest rate risk on
available-for-sale
securities (2,
3)
|
|
|
(2,577
|
)
|
|
|
2,667
|
|
|
|
90
|
|
Commodity price risk on commodity
inventory (4)
|
|
|
19
|
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(69
|
)
|
|
$
|
(718
|
)
|
|
$
|
(787
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
Derivatives designated as fair
value hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate risk on long-term
debt (1)
|
|
$
|
(4,858
|
)
|
|
$
|
4,082
|
|
|
$
|
(776
|
)
|
Interest rate and foreign currency risk on long-term
debt (1)
|
|
|
932
|
|
|
|
(858
|
)
|
|
|
74
|
|
Interest rate risk on
available-for-sale
securities (2,
3)
|
|
|
791
|
|
|
|
(1,141
|
)
|
|
|
(350
|
)
|
Commodity price risk on commodity
inventory (4)
|
|
|
(51
|
)
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(3,186
|
)
|
|
$
|
2,134
|
|
|
$
|
(1,052
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
Derivatives designated as fair
value hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate risk on long-term
debt (1)
|
|
$
|
4,340
|
|
|
$
|
(4,143
|
)
|
|
$
|
197
|
|
Interest rate and foreign currency risk on long-term
debt (1)
|
|
|
294
|
|
|
|
(444
|
)
|
|
|
(150
|
)
|
Interest rate risk on
available-for-sale
securities
(2)
|
|
|
32
|
|
|
|
(51
|
)
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,666
|
|
|
$
|
(4,638
|
)
|
|
$
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts are recorded in interest
expense on long-term debt.
|
(2) |
|
Amounts are recorded in interest
income on AFS securities.
|
(3) |
|
Measurement of ineffectiveness in
2010 includes $7 million compared to $354 million in
2009 of interest costs on short forward contracts. The
Corporation considers this as part of the cost of hedging and it
is offset by the fixed coupon receipt on the AFS security that
is recognized in interest income on securities.
|
(4) |
|
Amounts are recorded in trading
account profits.
|
Bank of America
2010 155
Cash Flow
Hedges
The table below summarizes certain information related to the
Corporations derivatives designated as cash flow hedges
and net investment hedges for 2010, 2009 and 2008. During the
next 12 months, net losses in accumulated OCI of
approximately $1.8 billion ($1.1 billion after-tax) on
derivative instruments that qualify as cash flow hedges are
expected to be reclassified into earnings. These net losses
reclassified into earnings are expected to primarily reduce net
interest income related to the respective hedged items.
Amounts related to interest rate risk on variable rate
portfolios reclassified from accumulated OCI increased interest
income on assets by $144 million in 2010, reduced interest
income on assets by $189 million and $156 million in
2009 and 2008 and increased interest expense on liabilities by
$554 million, $1.1 billion and $1.1 billion in
2010, 2009 and 2008, respectively. Amounts reclassified from
accumulated OCI exclude amounts related to derivative interest
accruals which increased interest expense by $88 million
and increased interest income by $160 million for 2010 and
2009, and increased interest expense by $73 million for
2008. Hedge ineffectiveness of $(14) million,
$73 million and $(11) million was recorded in interest
income, and $(16) million, $(2) million and
$4 million was recorded in interest expense in 2010, 2009
and 2008.
Amounts related to commodity price risk reclassified from
accumulated OCI are recorded in trading account profits (losses)
with the underlying hedged item. Amounts related to price risk
on restricted stock awards reclassified from accumulated OCI are
recorded in personnel expense. Amounts related to price risk on
equity investments included in AFS securities reclassified from
accumulated OCI are recorded in equity investment income with
the underlying hedged item.
Amounts related to foreign exchange risk recognized in
accumulated OCI on derivatives exclude gains of
$192 million related to long-term debt designated as a net
investment hedge for 2010 compared to losses of
$387 million for 2009 and $0 for 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
Hedge
|
|
|
|
Gains (losses)
|
|
|
Gains (losses)
|
|
|
Ineffectiveness and
|
|
|
|
Recognized in
|
|
|
in Income
|
|
|
Amounts Excluded
|
|
|
|
Accumulated OCI
|
|
|
Reclassified from
|
|
|
from Effectiveness
|
|
(Dollars in millions, amounts
pre-tax)
|
|
on Derivatives
|
|
|
Accumulated OCI
|
|
|
Testing (1,
2)
|
|
Derivatives designated as cash
flow hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate risk on variable rate portfolios
|
|
$
|
(1,876
|
)
|
|
$
|
(410
|
)
|
|
$
|
(30
|
)
|
Commodity price risk on forecasted purchases and sales
|
|
|
32
|
|
|
|
25
|
|
|
|
11
|
|
Price risk on restricted stock awards
|
|
|
(97
|
)
|
|
|
(33
|
)
|
|
|
|
|
Price risk on equity investments included in
available-for-sale
securities
|
|
|
186
|
|
|
|
(226
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(1,755
|
)
|
|
$
|
(644
|
)
|
|
$
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange risk
|
|
$
|
(482
|
)
|
|
$
|
|
|
|
$
|
(315
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
Derivatives designated as cash
flow hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate risk on variable rate portfolios
|
|
$
|
502
|
|
|
$
|
(1,293
|
)
|
|
$
|
71
|
|
Commodity price risk on forecasted purchases and sales
|
|
|
72
|
|
|
|
70
|
|
|
|
(2
|
)
|
Price risk on equity investments included in
available-for-sale
securities
|
|
|
(332
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
242
|
|
|
$
|
(1,223
|
)
|
|
$
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange risk
|
|
$
|
(2,997
|
)
|
|
$
|
|
|
|
$
|
(142
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
Derivatives designated as cash
flow hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate risk on variable rate portfolios
|
|
$
|
(13
|
)
|
|
$
|
(1,266
|
)
|
|
$
|
(7
|
)
|
Price risk on equity investments included in
available-for-sale
securities
|
|
|
243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
230
|
|
|
$
|
(1,266
|
)
|
|
$
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange risk
|
|
$
|
2,814
|
|
|
$
|
|
|
|
$
|
(192
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Gains (losses).
|
(2) |
|
Amounts related to derivatives
designated as cash flow hedges represent hedge ineffectiveness
and amounts related to net investment hedges represent amounts
excluded from effectiveness testing.
|
156 Bank
of America 2010
The Corporation entered into equity total return swaps to hedge
a portion of cash-settled restricted stock units (RSUs) granted
to certain employees in February 2010 as part of their 2009
compensation. These cash-settled RSUs are accrued as liabilities
over the vesting period and adjusted to fair value based on
changes in the share price of the Corporations common
stock. From time to time, the Corporation may enter into equity
derivatives to minimize the change in the expense to the
Corporation driven by fluctuations in the share price of the
Corporations common stock during the vesting period of any
RSUs that may be granted from time to time, if any, subject to
similar or other terms and conditions. Certain of these
derivatives are designated as cash flow hedges of unrecognized
non-vested awards with the changes in fair value of the hedge
recorded in accumulated OCI and reclassified into earnings in
the
same period as the RSUs affect earnings. The remaining
derivatives are accounted for as economic hedges and changes in
fair value are recorded in personnel expense. For more
information on restricted stock units and related hedges, see
Note 20 Stock-Based Compensation Plans.
Economic
Hedges
Derivatives designated as economic hedges, because either they
did not qualify for or were not designated as accounting hedges,
are used by the Corporation to reduce certain risk exposures.
The table below presents gains (losses) on these derivatives for
2010, 2009 and 2008. These gains (losses) are largely offset by
the income or expense that is recorded on the economically
hedged item.
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Price risk on mortgage banking production income
(1, 2)
|
|
$
|
9,109
|
|
|
$
|
8,898
|
|
|
$
|
892
|
|
Interest rate risk on mortgage banking servicing
income (1)
|
|
|
3,878
|
|
|
|
(4,264
|
)
|
|
|
8,052
|
|
Credit risk on
loans (3)
|
|
|
(119
|
)
|
|
|
(698
|
)
|
|
|
309
|
|
Interest rate and foreign currency risk on long-term debt and
other foreign exchange
transactions (4)
|
|
|
(2,080
|
)
|
|
|
1,572
|
|
|
|
(1,316
|
)
|
Other (5)
|
|
|
(109
|
)
|
|
|
16
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,679
|
|
|
$
|
5,524
|
|
|
$
|
7,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Gains (losses) on these derivatives
are recorded in mortgage banking income.
|
(2) |
|
Includes gains on interest rate
lock commitments related to the origination of mortgage loans
that are
held-for-sale,
which are considered derivative instruments, of
$8.7 billion, $8.4 billion and $1.6 billion for
2010, 2009 and 2008, respectively.
|
(3) |
|
Gains (losses) on these derivatives
are recorded in other income (loss).
|
(4) |
|
The majority of the balance is
related to the revaluation of economic hedges on foreign
currency-denominated debt which is recorded in other income
(loss).
|
(5) |
|
Gains (losses) on these derivatives
are recorded in other income (loss), and for 2010, also in
personnel expense for hedges of certain RSUs.
|
Bank of America
2010 157
Sales and Trading
Revenue
The Corporation enters into trading derivatives to facilitate
client transactions, for principal trading purposes, and to
manage risk exposures arising from trading account assets and
liabilities. It is the Corporations policy to include
these derivative instruments in its trading activities which
include derivatives and non-derivative cash instruments. The
resulting risk from these derivatives is managed on a portfolio
basis as part of the Corporations GBAM business
segment. The related sales and trading revenue generated within
GBAM is
recorded on various income statement line items including
trading account profits (losses) and net interest income as well
as other revenue categories. However, the vast majority of
income related to derivative instruments is recorded in trading
account profits (losses). The table below identifies the amounts
in the respective income statement line items attributable to
the Corporations sales and trading revenue categorized by
primary risk for 2010, 2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
Trading
|
|
|
|
|
|
|
|
|
|
|
|
|
Account
|
|
|
|
|
|
|
|
|
|
|
|
|
Profits
|
|
|
Other
|
|
|
Net Interest
|
|
|
|
|
(Dollars in millions)
|
|
(Losses)
|
|
|
Revenues
(1)
|
|
|
Income
|
|
|
Total
|
|
Interest rate risk
|
|
$
|
2,004
|
|
|
$
|
113
|
|
|
$
|
624
|
|
|
$
|
2,741
|
|
Foreign exchange risk
|
|
|
903
|
|
|
|
3
|
|
|
|
|
|
|
|
906
|
|
Equity risk
|
|
|
1,670
|
|
|
|
2,506
|
|
|
|
21
|
|
|
|
4,197
|
|
Credit risk
|
|
|
4,791
|
|
|
|
617
|
|
|
|
3,652
|
|
|
|
9,060
|
|
Other risk
|
|
|
228
|
|
|
|
39
|
|
|
|
(142
|
)
|
|
|
125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales and trading
revenue
|
|
$
|
9,596
|
|
|
$
|
3,278
|
|
|
$
|
4,155
|
|
|
$
|
17,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
Interest rate risk
|
|
$
|
3,145
|
|
|
$
|
33
|
|
|
$
|
1,068
|
|
|
$
|
4,246
|
|
Foreign exchange risk
|
|
|
972
|
|
|
|
6
|
|
|
|
26
|
|
|
|
1,004
|
|
Equity risk
|
|
|
2,041
|
|
|
|
2,613
|
|
|
|
246
|
|
|
|
4,900
|
|
Credit risk
|
|
|
4,433
|
|
|
|
(2,576
|
)
|
|
|
4,637
|
|
|
|
6,494
|
|
Other risk
|
|
|
1,084
|
|
|
|
13
|
|
|
|
(469
|
)
|
|
|
628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales and trading
revenue
|
|
$
|
11,675
|
|
|
$
|
89
|
|
|
$
|
5,508
|
|
|
$
|
17,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
Interest rate risk
|
|
$
|
1,083
|
|
|
$
|
47
|
|
|
$
|
276
|
|
|
$
|
1,406
|
|
Foreign exchange risk
|
|
|
1,320
|
|
|
|
6
|
|
|
|
13
|
|
|
|
1,339
|
|
Equity risk
|
|
|
(66
|
)
|
|
|
686
|
|
|
|
99
|
|
|
|
719
|
|
Credit risk
|
|
|
(8,276
|
)
|
|
|
(6,881
|
)
|
|
|
4,380
|
|
|
|
(10,777
|
)
|
Other risk
|
|
|
130
|
|
|
|
58
|
|
|
|
(14
|
)
|
|
|
174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales and trading
revenue
|
|
$
|
(5,809
|
)
|
|
$
|
(6,084
|
)
|
|
$
|
4,754
|
|
|
$
|
(7,139
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents investment and brokerage
services and other income recorded in GBAM that the
Corporation includes in its definition of sales and trading
revenue.
|
Credit
Derivatives
The Corporation enters into credit derivatives primarily to
facilitate client transactions and to manage credit risk
exposures. Credit derivatives derive value based on an
underlying third party-referenced obligation or a portfolio of
referenced obligations and generally require the Corporation as
the seller of credit protection to make payments to a buyer upon
the occurrence of a predefined credit event. Such credit events
generally include bankruptcy of the
referenced credit entity and failure to pay under the
obligation, as well as acceleration of indebtedness and payment
repudiation or moratorium. For credit derivatives based on a
portfolio of referenced credits or credit indices, the
Corporation may not be required to make payment until a
specified amount of loss has occurred
and/or may
only be required to make payment up to a specified amount.
158 Bank
of America 2010
Credit derivative instruments in which the Corporation is the
seller of credit protection and their expiration at
December 31, 2010 and 2009 are summarized below. These
instruments are classified as investment and non-
investment grade based on the credit quality of the underlying
reference obligation. The Corporation considers ratings of
BBB-or higher as investment-grade. Non-investment grade includes
non-rated credit derivative instruments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
Carrying Value
|
|
|
|
Less than
|
|
|
One to
|
|
|
Three to
|
|
|
Over Five
|
|
|
|
|
(Dollars in millions)
|
|
One Year
|
|
|
Three Years
|
|
|
Five Years
|
|
|
Years
|
|
|
Total
|
|
Credit default swaps:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment grade
|
|
$
|
158
|
|
|
$
|
2,607
|
|
|
$
|
7,331
|
|
|
$
|
14,880
|
|
|
$
|
24,976
|
|
Non-investment grade
|
|
|
598
|
|
|
|
6,630
|
|
|
|
7,854
|
|
|
|
23,106
|
|
|
|
38,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
756
|
|
|
|
9,237
|
|
|
|
15,185
|
|
|
|
37,986
|
|
|
|
63,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total return swaps/other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment grade
|
|
|
|
|
|
|
|
|
|
|
38
|
|
|
|
60
|
|
|
|
98
|
|
Non-investment grade
|
|
|
1
|
|
|
|
2
|
|
|
|
2
|
|
|
|
415
|
|
|
|
420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1
|
|
|
|
2
|
|
|
|
40
|
|
|
|
475
|
|
|
|
518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total credit
derivatives
|
|
$
|
757
|
|
|
$
|
9,239
|
|
|
$
|
15,225
|
|
|
$
|
38,461
|
|
|
$
|
63,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit-related notes:
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment grade
|
|
|
|
|
|
|
136
|
|
|
|
|
|
|
|
949
|
|
|
|
1,085
|
|
Non-investment grade
|
|
|
9
|
|
|
|
33
|
|
|
|
174
|
|
|
|
2,315
|
|
|
|
2,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total credit-related
notes
|
|
$
|
9
|
|
|
$
|
169
|
|
|
$
|
174
|
|
|
$
|
3,264
|
|
|
$
|
3,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Payout/Notional
|
|
Credit default swaps:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment grade
|
|
$
|
133,691
|
|
|
$
|
466,565
|
|
|
$
|
475,715
|
|
|
$
|
275,434
|
|
|
$
|
1,351,405
|
|
Non-investment grade
|
|
|
84,851
|
|
|
|
314,422
|
|
|
|
178,880
|
|
|
|
203,930
|
|
|
|
782,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
218,542
|
|
|
|
780,987
|
|
|
|
654,595
|
|
|
|
479,364
|
|
|
|
2,133,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total return swaps/other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment grade
|
|
|
|
|
|
|
10
|
|
|
|
15,413
|
|
|
|
4,012
|
|
|
|
19,435
|
|
Non-investment grade
|
|
|
113
|
|
|
|
78
|
|
|
|
951
|
|
|
|
1,897
|
|
|
|
3,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
113
|
|
|
|
88
|
|
|
|
16,364
|
|
|
|
5,909
|
|
|
|
22,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total credit
derivatives
|
|
$
|
218,655
|
|
|
$
|
781,075
|
|
|
$
|
670,959
|
|
|
$
|
485,273
|
|
|
$
|
2,155,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
Carrying Value
|
|
|
|
Less than
|
|
|
One to
|
|
|
Three to
|
|
|
Over Five
|
|
|
|
|
(Dollars in millions)
|
|
One Year
|
|
|
Three Years
|
|
|
Five Years
|
|
|
Years
|
|
|
Total
|
|
Credit default swaps:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment grade
|
|
$
|
454
|
|
|
$
|
5,795
|
|
|
$
|
5,831
|
|
|
$
|
24,586
|
|
|
$
|
36,666
|
|
Non-investment grade
|
|
|
1,342
|
|
|
|
14,012
|
|
|
|
16,081
|
|
|
|
30,274
|
|
|
|
61,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,796
|
|
|
|
19,807
|
|
|
|
21,912
|
|
|
|
54,860
|
|
|
|
98,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total return swaps/other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment grade
|
|
|
1
|
|
|
|
20
|
|
|
|
5
|
|
|
|
540
|
|
|
|
566
|
|
Non-investment grade
|
|
|
|
|
|
|
194
|
|
|
|
3
|
|
|
|
291
|
|
|
|
488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1
|
|
|
|
214
|
|
|
|
8
|
|
|
|
831
|
|
|
|
1,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total credit
derivatives
|
|
$
|
1,797
|
|
|
$
|
20,021
|
|
|
$
|
21,920
|
|
|
$
|
55,691
|
|
|
$
|
99,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Payout/Notional
|
|
Credit default swaps:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment grade
|
|
$
|
147,501
|
|
|
$
|
411,258
|
|
|
$
|
596,103
|
|
|
$
|
335,526
|
|
|
$
|
1,490,388
|
|
Non-investment grade
|
|
|
123,907
|
|
|
|
417,834
|
|
|
|
399,896
|
|
|
|
356,735
|
|
|
|
1,298,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
271,408
|
|
|
|
829,092
|
|
|
|
995,999
|
|
|
|
692,261
|
|
|
|
2,788,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total return swaps/other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment grade
|
|
|
31
|
|
|
|
60
|
|
|
|
1,081
|
|
|
|
8,087
|
|
|
|
9,259
|
|
Non-investment grade
|
|
|
2,035
|
|
|
|
1,280
|
|
|
|
2,183
|
|
|
|
18,352
|
|
|
|
23,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,066
|
|
|
|
1,340
|
|
|
|
3,264
|
|
|
|
26,439
|
|
|
|
33,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total credit
derivatives
|
|
$
|
273,474
|
|
|
$
|
830,432
|
|
|
$
|
999,263
|
|
|
$
|
718,700
|
|
|
$
|
2,821,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Maximum payout/notional for
credit-related notes is the same as these amounts.
|
Bank of America
2010 159
The notional amount represents the maximum amount payable by the
Corporation for most credit derivatives. However, the
Corporation does not solely monitor its exposure to credit
derivatives based on notional amount because this measure does
not take into consideration the probability of occurrence. As
such, the notional amount is not a reliable indicator of the
Corporations exposure to these contracts. Instead, a risk
framework is used to define risk tolerances and establish limits
to help ensure that certain credit risk-related losses occur
within acceptable, predefined limits.
The Corporation economically hedges its market risk exposure to
credit derivatives by entering into a variety of offsetting
derivative contracts and security positions. For example, in
certain instances, the Corporation may purchase credit
protection with identical underlying referenced names to offset
its exposure. The carrying amount and notional amount of written
credit derivatives for which the Corporation held purchased
credit derivatives with identical underlying referenced names
and terms at December 31, 2010 was $43.7 billion and
$1.4 trillion compared to $79.4 billion and $2.3 trillion
at December 31, 2009.
Credit-related notes in the table on page 159 include
investments in securities issued by CDOs, CLOs and credit-linked
note vehicles. These instruments are classified as trading
securities. The carrying value of these instruments equals the
Corporations maximum exposure to loss. The Corporation is
not obligated to make any payments to the entities under the
terms of the securities owned. The Corporation discloses
internal categorizations (i.e., investment-grade, non-investment
grade) consistent with how risk is managed for these instruments.
Credit Risk
Management of Derivatives and
Credit-related
Contingent Features
The Corporation executes the majority of its derivative
contracts in the
over-the-counter
market with large, international financial institutions,
including broker/dealers and, to a lesser degree, with a variety
of non-financial companies. Substantially all of the derivative
transactions are executed on a daily margin basis. Therefore,
events such as a credit ratings downgrade (depending on the
ultimate rating level) or a breach of credit covenants would
typically require an increase in the amount of collateral
required of the counterparty, where applicable,
and/or allow
the Corporation to take additional protective measures such as
early termination of all trades. Further, as previously
described on page 153, the Corporation enters into legally
enforceable master netting agreements which reduce risk by
permitting the closeout and netting of transactions with the
same counterparty upon the occurrence of certain events.
Substantially all of the Corporations derivative contracts
contain credit risk-related contingent features, primarily in
the form of International Swaps and Derivatives Association,
Inc. (ISDA) master agreements that enhance the creditworthiness
of these instruments compared to other obligations of the
respective counterparty with whom the Corporation has transacted
(e.g., other debt or equity). These contingent features may be
for the benefit of the Corporation as well as its counterparties
with respect to changes in the Corporations
creditworthiness. At December 31, 2010 and 2009, the
Corporation held cash and securities collateral of
$76.0 billion and $67.7 billion, and posted cash and
securities collateral of $61.2 billion and
$62.2 billion in the normal course of business under
derivative agreements.
In connection with certain
over-the-counter
derivative contracts and other trading agreements, the
Corporation could be required to provide additional collateral
or to terminate transactions with certain counterparties in the
event of a downgrade of the senior debt ratings of Bank of
America Corporation and its subsidiaries. The amount of
additional collateral required depends on the contract and is
usually a fixed incremental amount
and/or the
market value of the exposure. At December 31, 2010 and
2009, the amount of additional collateral and termination
payments that would have been required for such derivatives and
trading agreements was approximately $1.2 billion and
$2.1 billion if the long-term credit rating of the
Corporation was incrementally downgraded by one level by all
ratings agencies. At December 31, 2010 and 2009, a second
incremental one level downgrade by the ratings agencies would
have required approximately $1.1 billion and
$1.2 billion in additional collateral and termination
payments.
The Corporation records counterparty credit risk valuation
adjustments on derivative assets in order to properly reflect
the credit quality of the counterparty. These adjustments are
necessary as the market quotes on derivatives do not fully
reflect the credit risk of the counterparties to the derivative
assets. The Corporation considers collateral and legally
enforceable master netting agreements that mitigate its credit
exposure to each counterparty in determining the counterparty
credit risk valuation adjustment. All or a portion of these
counterparty credit risk valuation adjustments can be reversed
or otherwise adjusted in future periods due to changes in the
value of the derivative contract, collateral and
creditworthiness of the counterparty. During 2010 and 2009,
credit valuation gains (losses) of $731 million and
$3.1 billion ($(8) million and $1.7 billion, net
of hedges) for counterparty credit risk related to derivative
assets were recognized in trading account profits (losses). At
December 31, 2010 and 2009, the cumulative counterparty
credit risk valuation adjustment reduced the derivative assets
balance by $6.8 billion and $7.9 billion.
In addition, the fair value of the Corporations or its
subsidiaries derivative liabilities is adjusted to reflect
the impact of the Corporations credit quality. During 2010
and 2009, credit valuation gains (losses) of $331 million
and $(662) million ($262 million and
$(662) million, net of hedges) were recognized in trading
account profits (losses) for changes in the Corporations
or its subsidiaries credit risk. At December 31, 2010
and 2009, the Corporations cumulative credit risk
valuation adjustment reduced the derivative liabilities balance
by $1.1 billion and $732 million.
160 Bank
of America 2010
NOTE 5 Securities
The table below presents the amortized cost, gross unrealized
gains and losses in accumulated OCI, and fair value of AFS debt
and marketable equity securities at December 31, 2010 and
2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
(Dollars in millions)
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
Available-for-sale
debt securities, December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and agency securities
|
|
$
|
49,413
|
|
|
$
|
604
|
|
|
$
|
(912
|
)
|
|
$
|
49,105
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
|
190,409
|
|
|
|
3,048
|
|
|
|
(2,240
|
)
|
|
|
191,217
|
|
Agency collateralized mortgage obligations
|
|
|
36,639
|
|
|
|
401
|
|
|
|
(23
|
)
|
|
|
37,017
|
|
Non-agency
residential (1)
|
|
|
23,458
|
|
|
|
588
|
|
|
|
(929
|
)
|
|
|
23,117
|
|
Non-agency commercial
|
|
|
6,167
|
|
|
|
686
|
|
|
|
(1
|
)
|
|
|
6,852
|
|
Non-U.S.
securities
|
|
|
4,054
|
|
|
|
92
|
|
|
|
(7
|
)
|
|
|
4,139
|
|
Corporate bonds
|
|
|
5,157
|
|
|
|
144
|
|
|
|
(10
|
)
|
|
|
5,291
|
|
Other taxable securities, substantially all ABS
|
|
|
15,514
|
|
|
|
39
|
|
|
|
(161
|
)
|
|
|
15,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total taxable securities
|
|
|
330,811
|
|
|
|
5,602
|
|
|
|
(4,283
|
)
|
|
|
332,130
|
|
Tax-exempt securities
|
|
|
5,687
|
|
|
|
32
|
|
|
|
(222
|
)
|
|
|
5,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
debt securities
|
|
$
|
336,498
|
|
|
$
|
5,634
|
|
|
$
|
(4,505
|
)
|
|
$
|
337,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity
debt securities
|
|
|
427
|
|
|
|
|
|
|
|
|
|
|
|
427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
$
|
336,925
|
|
|
$
|
5,634
|
|
|
$
|
(4,505
|
)
|
|
$
|
338,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
marketable equity
securities (2)
|
|
$
|
8,650
|
|
|
$
|
10,628
|
|
|
$
|
(13
|
)
|
|
$
|
19,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
debt securities, December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and agency securities
|
|
$
|
22,648
|
|
|
$
|
414
|
|
|
$
|
(37
|
)
|
|
$
|
23,025
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
|
164,677
|
|
|
|
2,415
|
|
|
|
(846
|
)
|
|
|
166,246
|
|
Agency collateralized mortgage obligations
|
|
|
25,330
|
|
|
|
464
|
|
|
|
(13
|
)
|
|
|
25,781
|
|
Non-agency
residential (1)
|
|
|
37,940
|
|
|
|
1,191
|
|
|
|
(4,028
|
)
|
|
|
35,103
|
|
Non-agency commercial
|
|
|
6,354
|
|
|
|
671
|
|
|
|
(116
|
)
|
|
|
6,909
|
|
Non-U.S.
securities
|
|
|
4,732
|
|
|
|
61
|
|
|
|
(896
|
)
|
|
|
3,897
|
|
Corporate bonds
|
|
|
6,136
|
|
|
|
182
|
|
|
|
(126
|
)
|
|
|
6,192
|
|
Other taxable securities, substantially all ABS
|
|
|
25,469
|
|
|
|
260
|
|
|
|
(478
|
)
|
|
|
25,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total taxable securities
|
|
|
293,286
|
|
|
|
5,658
|
|
|
|
(6,540
|
)
|
|
|
292,404
|
|
Tax-exempt securities
|
|
|
9,340
|
|
|
|
100
|
|
|
|
(243
|
)
|
|
|
9,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
debt securities
|
|
$
|
302,626
|
|
|
$
|
5,758
|
|
|
$
|
(6,783
|
)
|
|
$
|
301,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity
debt securities
|
|
|
9,800
|
|
|
|
|
|
|
|
(100
|
)
|
|
|
9,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
$
|
312,426
|
|
|
$
|
5,758
|
|
|
$
|
(6,883
|
)
|
|
$
|
311,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
marketable equity
securities (2)
|
|
$
|
6,020
|
|
|
$
|
3,895
|
|
|
$
|
(507
|
)
|
|
$
|
9,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
At December 31, 2010, includes
approximately 90 percent prime bonds, eight percent Alt-A
bonds and two percent subprime bonds. At December 31, 2009,
includes approximately 85 percent prime bonds,
10 percent Alt-A bonds and five percent subprime bonds.
|
(2) |
|
Classified in other assets on the
Corporations Consolidated Balance Sheet.
|
At December 31, 2010, the accumulated net unrealized gains
on AFS debt securities included in accumulated OCI were
$714 million, net of the related income tax expense of
$415 million. At December 31, 2010 and 2009, the
Corporation had nonperforming AFS debt securities of
$44 million and $467 million.
At December 31, 2010, both the amortized cost and fair
value of HTM debt securities were $427 million. At
December 31, 2009, the amortized cost and fair value of HTM
debt securities were $9.8 billion and $9.7 billion,
which included ABS that were issued by the Corporations
credit card securitization trust and retained by the Corporation
with an amortized cost of $6.6 billion
and a fair value of $6.4 billion. As a result of the
adoption of new consolidation guidance, the Corporation
consolidated the credit card securitization trusts on
January 1, 2010 and the ABS were eliminated in
consolidation and the related consumer credit card loans were
included in loans and leases on the Corporations
Consolidated Balance Sheet. Additionally, during the three
months ended June 30, 2010, $2.9 billion of debt
securities held in consolidated commercial paper conduits was
reclassified from HTM to AFS as a result of new regulatory
capital requirements related to asset-backed commercial paper
conduits.
Bank of America
2010 161
The Corporation recorded OTTI losses on AFS debt securities as
presented in the table below in 2010 and 2009. Upon initial
impairment of a security, total OTTI losses represent the excess
of the amortized cost over the fair value. For subsequent
impairments of the same security, total OTTI losses represent
additional declines in fair value subsequent to the previously
recorded OTTI loss(es), if applicable. Unrealized OTTI losses
recognized in accumulated OCI represent the non-credit component
of OTTI losses on AFS
debt securities. Net impairment losses recognized in earnings
represent the credit component of OTTI losses on AFS debt
securities. In 2010, for certain securities, the Corporation
recognized credit losses in excess of unrealized losses in
accumulated OCI. In these instances, a portion of the credit
losses recognized in earnings has been offset by an unrealized
gain. Balances in the table exclude $51 million and
$582 million of gross gains recorded in accumulated OCI
related to these securities for 2010 and 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
Non-agency
|
|
|
Non-agency
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Residential
|
|
|
Commercial
|
|
|
Non-U.S.
|
|
|
Corporate
|
|
|
Taxable
|
|
|
|
|
(Dollars in millions)
|
|
MBS
|
|
|
MBS
|
|
|
Securities
|
|
|
Bonds
|
|
|
Securities
|
|
|
Total
|
|
Total OTTI losses (unrealized and realized)
|
|
$
|
(1,305
|
)
|
|
$
|
(19
|
)
|
|
$
|
(276
|
)
|
|
$
|
(6
|
)
|
|
$
|
(568
|
)
|
|
$
|
(2,174
|
)
|
Unrealized OTTI losses recognized in accumulated OCI
|
|
|
817
|
|
|
|
15
|
|
|
|
16
|
|
|
|
2
|
|
|
|
357
|
|
|
|
1,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net impairment losses recognized
in earnings
|
|
$
|
(488
|
)
|
|
$
|
(4
|
)
|
|
$
|
(260
|
)
|
|
$
|
(4
|
)
|
|
$
|
(211
|
)
|
|
$
|
(967
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
Total OTTI losses (unrealized and realized)
|
|
$
|
(2,240
|
)
|
|
$
|
(6
|
)
|
|
$
|
(360
|
)
|
|
$
|
(87
|
)
|
|
$
|
(815
|
)
|
|
$
|
(3,508
|
)
|
Unrealized OTTI losses recognized in accumulated OCI
|
|
|
672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net impairment losses recognized
in earnings
|
|
$
|
(1,568
|
)
|
|
$
|
(6
|
)
|
|
$
|
(360
|
)
|
|
$
|
(87
|
)
|
|
$
|
(815
|
)
|
|
$
|
(2,836
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below presents activity for 2010 and 2009 related to
the credit component recognized in earnings on debt securities
held by the Corporation for which a portion of the OTTI loss
remains in accumulated OCI. At December 31, 2010, those
debt securities with OTTI for which a portion of the OTTI loss
remains in accumulated OCI primarily consisted of non-agency
residential mortgage-backed securities (RMBS) and CDOs.
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
Balance,
January 1
|
|
$
|
442
|
|
|
$
|
|
|
Credit component of
other-than-temporary
impairment not reclassified to accumulated OCI in connection
with the cumulative effect transition
adjustment (1)
|
|
|
|
|
|
|
22
|
|
Additions for the credit component on debt securities on which
other-than-temporary
impairment losses were not previously
recognized (2)
|
|
|
207
|
|
|
|
420
|
|
Additions for the credit component on debt securities on which
other-than-temporary
impairment losses were previously
recognized (2)
|
|
|
406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31
|
|
$
|
1,055
|
|
|
$
|
442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
On January 1, 2009, the
Corporation had securities with $134 million of OTTI
previously recognized in earnings of which $22 million
represented the credit component and $112 million
represented the non-credit component which was reclassified to
accumulated OCI through a cumulative effect transition
adjustment.
|
(2) |
|
In 2010 and 2009, the Corporation
recognized $354 million and $2.4 billion of OTTI
losses on debt securities on which no portion of OTTI loss
remained in accumulated OCI. OTTI losses related to these
securities are excluded from these amounts.
|
The Corporation estimates the portion of loss attributable to
credit using a discounted cash flow model and estimates the
expected cash flows of the underlying collateral using internal
credit, interest rate and prepayment risk models that
incorporate managements best estimate of current key
assumptions such as default rates, loss severity and prepayment
rates. Assumptions
used can vary widely from loan to loan and are influenced by
such factors as loan interest rate, geographical location of the
borrower, borrower characteristics and collateral type. The
Corporation then uses a third-party vendor to determine how the
underlying collateral cash flows will be distributed to each
security issued from the structure. Expected principal and
interest cash flows on an impaired debt security are discounted
using the book yield of each individual impaired debt security.
Based on the expected cash flows derived from the applicable
model, the Corporation expects to recover the unrealized losses
in accumulated OCI on non-agency RMBS. Annual constant
prepayment speed and loss severity rates are projected
considering collateral characteristics such as LTV,
creditworthiness of borrowers (FICO) and geographic
concentrations. The weighted-average severity by collateral type
was 41 percent for prime bonds, 48 percent for Alt-A
bonds and 53 percent for subprime bonds. Additionally,
default rates are projected by considering collateral
characteristics including, but not limited to LTV, FICO and
geographic concentration. Weighted-average life default rates by
collateral type were 38 percent for prime bonds,
58 percent for Alt-A bonds and 62 percent for subprime
bonds.
Significant assumptions used in the valuation of non-agency RMBS
at December 31, 2010 are presented in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range
(1)
|
|
|
|
Weighted-average
|
|
|
10th
Percentile
(2)
|
|
|
90th
Percentile
(2)
|
|
Prepayment speed
|
|
|
12.6
|
%
|
|
|
3.0
|
%
|
|
|
27.1
|
%
|
Loss severity
|
|
|
46.2
|
|
|
|
17.7
|
|
|
|
57.9
|
|
Life default rate
|
|
|
49.1
|
|
|
|
2.2
|
|
|
|
99.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents the range of
inputs/assumptions based upon the underlying collateral.
|
(2) |
|
The value of a variable below which
the indicated percentile of observations will fall.
|
162 Bank
of America 2010
The table below presents the current fair value and the
associated gross unrealized losses on investments in securities
with gross unrealized losses at December 31, 2010 and 2009,
and whether these securities have had gross unrealized losses
for less than twelve months or for twelve months or longer.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than Twelve Months
|
|
|
Twelve Months or Longer
|
|
|
Total
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
(Dollars in millions)
|
|
Fair Value
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Losses
|
|
Temporarily-impaired
available-for-sale
debt securities at December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and agency securities
|
|
$
|
27,384
|
|
|
$
|
(763
|
)
|
|
$
|
2,382
|
|
|
$
|
(149
|
)
|
|
$
|
29,766
|
|
|
$
|
(912
|
)
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
|
85,517
|
|
|
|
(2,240
|
)
|
|
|
|
|
|
|
|
|
|
|
85,517
|
|
|
|
(2,240
|
)
|
Agency collateralized mortgage obligations
|
|
|
3,220
|
|
|
|
(23
|
)
|
|
|
|
|
|
|
|
|
|
|
3,220
|
|
|
|
(23
|
)
|
Non-agency residential
|
|
|
6,385
|
|
|
|
(205
|
)
|
|
|
2,245
|
|
|
|
(274
|
)
|
|
|
8,630
|
|
|
|
(479
|
)
|
Non-agency commercial
|
|
|
47
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
47
|
|
|
|
(1
|
)
|
Non-U.S.
securities
|
|
|
|
|
|
|
|
|
|
|
70
|
|
|
|
(7
|
)
|
|
|
70
|
|
|
|
(7
|
)
|
Corporate bonds
|
|
|
465
|
|
|
|
(9
|
)
|
|
|
22
|
|
|
|
(1
|
)
|
|
|
487
|
|
|
|
(10
|
)
|
Other taxable securities
|
|
|
3,414
|
|
|
|
(38
|
)
|
|
|
46
|
|
|
|
(7
|
)
|
|
|
3,460
|
|
|
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total taxable securities
|
|
|
126,432
|
|
|
|
(3,279
|
)
|
|
|
4,765
|
|
|
|
(438
|
)
|
|
|
131,197
|
|
|
|
(3,717
|
)
|
Tax-exempt securities
|
|
|
2,325
|
|
|
|
(95
|
)
|
|
|
568
|
|
|
|
(119
|
)
|
|
|
2,893
|
|
|
|
(214
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily-impaired
available-for-sale
debt securities
|
|
|
128,757
|
|
|
|
(3,374
|
)
|
|
|
5,333
|
|
|
|
(557
|
)
|
|
|
134,090
|
|
|
|
(3,931
|
)
|
Temporarily-impaired
available-for-sale
marketable equity securities
|
|
|
7
|
|
|
|
(2
|
)
|
|
|
19
|
|
|
|
(11
|
)
|
|
|
26
|
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily-impaired
available-for-sale
securities
|
|
|
128,764
|
|
|
|
(3,376
|
)
|
|
|
5,352
|
|
|
|
(568
|
)
|
|
|
134,116
|
|
|
|
(3,944
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other-than-temporarily
impaired
available-for-sale
debt
securities (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-agency residential
|
|
|
128
|
|
|
|
(11
|
)
|
|
|
530
|
|
|
|
(439
|
)
|
|
|
658
|
|
|
|
(450
|
)
|
Other taxable securities
|
|
|
|
|
|
|
|
|
|
|
223
|
|
|
|
(116
|
)
|
|
|
223
|
|
|
|
(116
|
)
|
Tax-exempt securities
|
|
|
68
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
68
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily-impaired and
other-than-temporarily
impaired
available-for-sale
securities
(2)
|
|
$
|
128,960
|
|
|
$
|
(3,395
|
)
|
|
$
|
6,105
|
|
|
$
|
(1,123
|
)
|
|
$
|
135,065
|
|
|
$
|
(4,518
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Temporarily-impaired
available-for-sale
debt securities at December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and agency securities
|
|
$
|
4,655
|
|
|
$
|
(37
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4,655
|
|
|
$
|
(37
|
)
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
|
53,979
|
|
|
|
(817
|
)
|
|
|
740
|
|
|
|
(29
|
)
|
|
|
54,719
|
|
|
|
(846
|
)
|
Agency collateralized mortgage obligations
|
|
|
965
|
|
|
|
(10
|
)
|
|
|
747
|
|
|
|
(3
|
)
|
|
|
1,712
|
|
|
|
(13
|
)
|
Non-agency residential
|
|
|
6,907
|
|
|
|
(557
|
)
|
|
|
13,613
|
|
|
|
(3,370
|
)
|
|
|
20,520
|
|
|
|
(3,927
|
)
|
Non-agency commercial
|
|
|
1,263
|
|
|
|
(35
|
)
|
|
|
1,711
|
|
|
|
(81
|
)
|
|
|
2,974
|
|
|
|
(116
|
)
|
Non-U.S.
securities
|
|
|
169
|
|
|
|
(27
|
)
|
|
|
3,355
|
|
|
|
(869
|
)
|
|
|
3,524
|
|
|
|
(896
|
)
|
Corporate bonds
|
|
|
1,157
|
|
|
|
(71
|
)
|
|
|
294
|
|
|
|
(55
|
)
|
|
|
1,451
|
|
|
|
(126
|
)
|
Other taxable securities
|
|
|
3,779
|
|
|
|
(70
|
)
|
|
|
932
|
|
|
|
(408
|
)
|
|
|
4,711
|
|
|
|
(478
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total taxable securities
|
|
|
72,874
|
|
|
|
(1,624
|
)
|
|
|
21,392
|
|
|
|
(4,815
|
)
|
|
|
94,266
|
|
|
|
(6,439
|
)
|
Tax-exempt securities
|
|
|
4,716
|
|
|
|
(93
|
)
|
|
|
1,989
|
|
|
|
(150
|
)
|
|
|
6,705
|
|
|
|
(243
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily-impaired
available-for-sale
debt securities
|
|
|
77,590
|
|
|
|
(1,717
|
)
|
|
|
23,381
|
|
|
|
(4,965
|
)
|
|
|
100,971
|
|
|
|
(6,682
|
)
|
Temporarily-impaired
available-for-sale
marketable equity securities
|
|
|
338
|
|
|
|
(113
|
)
|
|
|
1,554
|
|
|
|
(394
|
)
|
|
|
1,892
|
|
|
|
(507
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily-impaired
available-for-sale
securities
|
|
|
77,928
|
|
|
|
(1,830
|
)
|
|
|
24,935
|
|
|
|
(5,359
|
)
|
|
|
102,863
|
|
|
|
(7,189
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other-than-temporarily
impaired
available-for-sale
debt
securities (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-agency residential
|
|
|
51
|
|
|
|
(17
|
)
|
|
|
1,076
|
|
|
|
(84
|
)
|
|
|
1,127
|
|
|
|
(101
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily-impaired and
other-than-temporarily
impaired
available-for-sale
securities
(2)
|
|
$
|
77,979
|
|
|
$
|
(1,847
|
)
|
|
$
|
26,011
|
|
|
$
|
(5,443
|
)
|
|
$
|
103,990
|
|
|
$
|
(7,290
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes
other-than-temporarily
impaired AFS debt securities on which a portion of the OTTI loss
remains in OCI.
|
(2) |
|
At December 31, 2010, the
amortized cost of approximately 8,500 AFS securities exceeded
their fair value by $4.5 billion. At December 31,
2009, the amortized cost of approximately 12,000 AFS securities
exceeded their fair value by $7.3 billion.
|
The Corporation considers the length of time and extent to which
the fair value of AFS debt securities has been less than cost to
conclude that such securities were not
other-than-temporarily
impaired. The Corporation also considers other factors such as
the financial condition of the issuer of the security including
credit ratings and specific events affecting the operations of
the issuer, underlying assets that collateralize the debt
security, and other
industry and macroeconomic conditions. As the Corporation has no
intent to sell securities with unrealized losses and it is not
more-likely-than-not that the Corporation will be required to
sell these securities before recovery of amortized cost, the
Corporation has concluded that the securities are not impaired
on an
other-than-temporary
basis.
Bank of America
2010 163
The amortized cost and fair value of the Corporations
investment in AFS debt securities from Fannie Mae (FNMA), the
Government National Mortgage Association (GNMA), Freddie Mac
(FHLMC) and U.S. Treasury securities where the investment
exceeded 10 percent of consolidated shareholders
equity at December 31, 2010 and 2009 are presented in the
table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2010
|
|
|
2009
|
|
|
|
Amortized
|
|
|
|
|
|
Amortized
|
|
|
|
|
(Dollars in millions)
|
|
Cost
|
|
|
Fair Value
|
|
|
Cost
|
|
|
Fair Value
|
|
Fannie Mae
|
|
$
|
123,662
|
|
|
$
|
123,107
|
|
|
$
|
100,321
|
|
|
$
|
101,096
|
|
Government National Mortgage Association
|
|
|
72,863
|
|
|
|
74,305
|
|
|
|
60,610
|
|
|
|
61,121
|
|
Freddie Mac
|
|
|
30,523
|
|
|
|
30,822
|
|
|
|
29,076
|
|
|
|
29,810
|
|
U.S. Treasury securities
(1)
|
|
|
46,576
|
|
|
|
46,081
|
|
|
|
19,315
|
|
|
|
19,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Investments in U.S. Treasury
securities did not exceed 10 percent of consolidated
shareholders equity at December 31, 2009.
|
The expected maturity distribution of the Corporations MBS
and the contractual maturity distribution of the
Corporations other AFS debt securities, and the yields on
the Corporations AFS debt securities portfolio at
December 31, 2010 are summarized in the table below. Actual
maturities may differ from the contractual or expected
maturities since borrowers may have the right to prepay
obligations with or without prepayment penalties.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
Due in One
|
|
|
Due after One Year
|
|
|
Due after Five Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year or Less
|
|
|
through Five Years
|
|
|
through Ten Years
|
|
|
Due after Ten Years
|
|
|
Total
|
|
(Dollars in millions)
|
|
Amount
|
|
|
Yield (1)
|
|
|
Amount
|
|
|
Yield (1)
|
|
|
Amount
|
|
|
Yield (1)
|
|
|
Amount
|
|
|
Yield (1)
|
|
|
Amount
|
|
|
Yield (1)
|
|
Amortized cost of AFS debt
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and agency securities
|
|
$
|
643
|
|
|
|
5.00
|
%
|
|
$
|
1,731
|
|
|
|
2.30
|
%
|
|
$
|
12,318
|
|
|
|
3.50
|
%
|
|
$
|
34,721
|
|
|
|
4.20
|
%
|
|
$
|
49,413
|
|
|
|
4.00
|
%
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
|
34
|
|
|
|
4.80
|
|
|
|
88,913
|
|
|
|
4.30
|
|
|
|
70,789
|
|
|
|
3.80
|
|
|
|
30,673
|
|
|
|
3.90
|
|
|
|
190,409
|
|
|
|
4.10
|
|
Agency-collateralized mortgage obligations
|
|
|
29
|
|
|
|
0.80
|
|
|
|
13,279
|
|
|
|
2.80
|
|
|
|
13,738
|
|
|
|
0.20
|
|
|
|
9,593
|
|
|
|
2.30
|
|
|
|
36,639
|
|
|
|
3.20
|
|
Non-agency residential
|
|
|
178
|
|
|
|
12.50
|
|
|
|
4,241
|
|
|
|
7.40
|
|
|
|
1,746
|
|
|
|
5.60
|
|
|
|
17,293
|
|
|
|
4.20
|
|
|
|
23,458
|
|
|
|
4.90
|
|
Non-agency commercial
|
|
|
439
|
|
|
|
5.20
|
|
|
|
4,960
|
|
|
|
6.30
|
|
|
|
441
|
|
|
|
9.80
|
|
|
|
327
|
|
|
|
6.70
|
|
|
|
6,167
|
|
|
|
6.50
|
|
Non-U.S.
securities
|
|
|
1,852
|
|
|
|
0.80
|
|
|
|
2,076
|
|
|
|
5.40
|
|
|
|
126
|
|
|
|
3.50
|
|
|
|
|
|
|
|
|
|
|
|
4,054
|
|
|
|
5.30
|
|
Corporate bonds
|
|
|
133
|
|
|
|
1.20
|
|
|
|
3,847
|
|
|
|
2.30
|
|
|
|
1,114
|
|
|
|
3.70
|
|
|
|
63
|
|
|
|
2.20
|
|
|
|
5,157
|
|
|
|
2.60
|
|
Other taxable securities
|
|
|
6,129
|
|
|
|
0.90
|
|
|
|
3,875
|
|
|
|
1.20
|
|
|
|
118
|
|
|
|
11.20
|
|
|
|
5,392
|
|
|
|
3.80
|
|
|
|
15,514
|
|
|
|
2.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total taxable securities
|
|
|
9,437
|
|
|
|
1.62
|
|
|
|
122,922
|
|
|
|
4.16
|
|
|
|
100,390
|
|
|
|
3.35
|
|
|
|
98,062
|
|
|
|
3.91
|
|
|
|
330,811
|
|
|
|
3.98
|
|
Tax-exempt securities
|
|
|
193
|
|
|
|
4.10
|
|
|
|
912
|
|
|
|
4.30
|
|
|
|
1,408
|
|
|
|
3.80
|
|
|
|
3,174
|
|
|
|
4.60
|
|
|
|
5,687
|
|
|
|
4.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amortized cost of AFS debt
securities
|
|
$
|
9,630
|
|
|
|
1.72
|
|
|
$
|
123,834
|
|
|
|
4.16
|
|
|
$
|
101,798
|
|
|
|
3.36
|
|
|
$
|
101,236
|
|
|
|
3.93
|
|
|
$
|
336,498
|
|
|
|
3.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of AFS debt
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and agency securities
|
|
$
|
646
|
|
|
|
|
|
|
$
|
1,769
|
|
|
|
|
|
|
$
|
12,605
|
|
|
|
|
|
|
$
|
34,085
|
|
|
|
|
|
|
$
|
49,105
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
|
36
|
|
|
|
|
|
|
|
90,967
|
|
|
|
|
|
|
|
70,031
|
|
|
|
|
|
|
|
30,183
|
|
|
|
|
|
|
|
191,217
|
|
|
|
|
|
Agency-collateralized mortgage obligations
|
|
|
22
|
|
|
|
|
|
|
|
13,402
|
|
|
|
|
|
|
|
13,920
|
|
|
|
|
|
|
|
9,673
|
|
|
|
|
|
|
|
37,017
|
|
|
|
|
|
Non-agency residential
|
|
|
158
|
|
|
|
|
|
|
|
4,149
|
|
|
|
|
|
|
|
1,739
|
|
|
|
|
|
|
|
17,071
|
|
|
|
|
|
|
|
23,117
|
|
|
|
|
|
Non-agency commercial
|
|
|
448
|
|
|
|
|
|
|
|
5,498
|
|
|
|
|
|
|
|
543
|
|
|
|
|
|
|
|
363
|
|
|
|
|
|
|
|
6,852
|
|
|
|
|
|
Non-U.S.
securities
|
|
|
1,868
|
|
|
|
|
|
|
|
2,140
|
|
|
|
|
|
|
|
131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,139
|
|
|
|
|
|
Corporate bonds
|
|
|
136
|
|
|
|
|
|
|
|
3,929
|
|
|
|
|
|
|
|
1,162
|
|
|
|
|
|
|
|
64
|
|
|
|
|
|
|
|
5,291
|
|
|
|
|
|
Other taxable securities
|
|
|
6,132
|
|
|
|
|
|
|
|
3,863
|
|
|
|
|
|
|
|
118
|
|
|
|
|
|
|
|
5,279
|
|
|
|
|
|
|
|
15,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total taxable securities
|
|
|
9,446
|
|
|
|
|
|
|
|
125,717
|
|
|
|
|
|
|
|
100,249
|
|
|
|
|
|
|
|
96,718
|
|
|
|
|
|
|
|
332,130
|
|
|
|
|
|
Tax-exempt securities
|
|
|
193
|
|
|
|
|
|
|
|
923
|
|
|
|
|
|
|
|
1,408
|
|
|
|
|
|
|
|
2,973
|
|
|
|
|
|
|
|
5,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value of AFS debt
securities
|
|
$
|
9,639
|
|
|
|
|
|
|
$
|
126,640
|
|
|
|
|
|
|
$
|
101,657
|
|
|
|
|
|
|
$
|
99,691
|
|
|
|
|
|
|
$
|
337,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Yields are calculated based on the
amortized cost of the securities.
|
The components of realized gains and losses on sales of debt
securities for 2010, 2009 and 2008 are presented in the table
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Gross gains
|
|
$
|
3,995
|
|
|
$
|
5,047
|
|
|
$
|
1,367
|
|
Gross losses
|
|
|
(1,469
|
)
|
|
|
(324
|
)
|
|
|
(243
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains on sales of debt
securities
|
|
$
|
2,526
|
|
|
$
|
4,723
|
|
|
$
|
1,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense attributable
to realized net gains on sales of debt securities
|
|
$
|
935
|
|
|
$
|
1,748
|
|
|
$
|
416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2010, the Corporation entered into a series of
transactions in its AFS debt securities portfolio that involved
securitizations as well as sales of non-agency RMBS. These
transactions were initiated following a review of corporate risk
objectives in light of proposed Basel regulatory capital changes
and liquidity targets. During 2010, the carrying value of the
non-agency RMBS portfolio was reduced $14.5 billion
primarily as a result of the aforementioned sales and
securitizations as well as paydowns. The Corporation recognized
net losses of $922 million on the series of transactions in
the AFS debt securities portfolio, and improved the overall
credit quality of the remaining portfolio such that the
percentage of the non-agency RMBS portfolio that is below
investment-grade was reduced significantly.
164 Bank
of America 2010
Certain Corporate
and Strategic Investments
At December 31, 2010 and 2009, the Corporation owned
25.6 billion shares representing approximately 10 and
11 percent of China Construction Bank (CCB). During 2010,
the Corporation sold its rights to participate in CCBs
secondary offering resulting in a pre-tax gain of
$432 million recorded in equity investment income. During
2009, the Corporation sold its initial investment of
19.1 billion common shares in CCB for a pre-tax gain of
$7.3 billion. During 2010, the Corporation recorded in
accumulated OCI a $6.7 billion after-tax unrealized gain on
23.6 billion shares of the Corporations investment in
CCB, which previously had been carried at cost. These shares
were reclassified to AFS during 2010 because the sales
restrictions on these shares expire within one year (August
2011), and therefore, in accordance with applicable accounting
guidance, the Corporation recorded the unrealized gain in
accumulated OCI, net of a 10 percent restriction discount.
Sales restrictions on the remaining two billion CCB shares
continue until August 2013, and these shares continue to be
carried at cost. At December 31, 2010, the cost basis of
all remaining CCB shares was $9.2 billion, the carrying
value was $19.7 billion and the fair value was
$20.8 billion. At December 31, 2009, both the cost
basis and the carrying value were $9.2 billion and the fair
value was $22.0 billion. Dividend income on this investment
is recorded in equity investment income and during 2010, the
Corporation recorded dividend income of $535 million from
CCB. The investment is recorded in other assets. The Corporation
remains a significant shareholder in CCB and intends to continue
the important long-term strategic alliance with CCB originally
entered into in 2005. As part of this alliance, the Corporation
expects to continue to provide advice and assistance to CCB.
During 2010, the Corporation sold various strategic investments
which included the Corporations investment of
188.4 million preferred shares and 56.5 million common
shares in Itaú Unibanco Holding S.A. (Itaú Unibanco)
at a price of $3.9 billion. The Itaú Unibanco
investment was accounted for at fair value and recorded as AFS
marketable equity securities in other assets with unrealized
gains recorded,
net-of-tax,
in accumulated OCI. The cost basis of this investment was
$2.6 billion and, after transaction costs, the pre-tax gain
was $1.2 billion which was recorded in equity investment
income. In addition, the Corporation sold its 24.9 percent
ownership interest in Grupo Financiero Santander, S.A.B. de C.V.
to an affiliate of its parent company, Banco Santander, S.A.,
the majority interest holder. The investment was accounted for
under the equity method of accounting and recorded in other
assets. This sale resulted in a pre-tax loss of
$428 million which was recorded in equity investment
income. The Corporation also sold all of its Class B units
in
MasterCard Worldwide, Inc. (MasterCard), which were acquired
primarily upon MasterCards initial public offering and
recorded in other assets. This sale resulted in a pre-tax gain
of $440 million which was recorded in equity investment
income. Also during the year, the Corporation sold its exposure
of $2.9 billion in certain private equity funds recorded in
other assets, comprised of $1.5 billion in capital and
$1.4 billion in unfunded commitments resulting in a loss of
$163 million which was recorded in equity investment income.
As part of the acquisition of Merrill Lynch, the Corporation
acquired an economic ownership in BlackRock Inc. (BlackRock), a
publicly traded investment company. During 2010, the Corporation
sold 51.2 million shares consisting of 48.9 million
preferred and 2.3 million common shares for net proceeds of
$8.3 billion resulting in a pre-tax gain of
$91 million, lowering its ownership to 13.6 million
preferred shares, or 7 percent. The carrying value of this
investment at December 31, 2010 and 2009 was
$2.2 billion and $10.0 billion and the fair value was
$2.6 billion and $15.0 billion. Following the sale,
the Corporations remaining interest is held at cost due to
restrictions that affect the marketability of the preferred
shares. The investment is recorded in other assets. During 2009,
BlackRock completed its purchase of Barclays Global Investors,
an asset management business, from Barclays PLC which had the
effect of diluting the Corporations ownership interest in
BlackRock from approximately 50 percent to approximately
34 percent and, for accounting purposes, was treated as a
sale of a portion of the Corporations ownership interest.
As a result, upon closing of this transaction, the Corporation
recorded an adjustment to its investment in BlackRock resulting
in a pre-tax gain of $1.1 billion which was recorded in
equity investment income.
In 2010, a third-party investor in a joint venture in which the
Corporation held a 46.5 percent ownership interest sold its
interest to the joint venture, resulting in an increase in the
Corporations ownership interest to 49 percent. The
joint venture was formed in 2009 with First Data Corporation
(First Data) creating Banc of America Merchant Services, LLC.
Under the terms of the agreement, the Corporation contributed
its merchant processing business to the joint venture and First
Data contributed certain merchant processing contracts and
personnel resources. In 2009, the Corporation recorded in other
income a pre-tax gain of $3.8 billion related to this
transaction. The investment in the joint venture, which was
initially recorded at a fair value of $4.7 billion, is
accounted for under the equity method of accounting with income
recorded in equity investment income. The carrying value at both
December 31, 2010 and 2009 was $4.7 billion.
Bank of America
2010 165
NOTE 6 Outstanding
Loans and Leases
The table below presents total outstanding loans and leases at
December 31, 2010 and 2009 and an age analysis at
December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
December 31, 2009
|
|
|
|
|
|
|
90 Days or
|
|
|
Total Past
|
|
|
Total Current
|
|
|
Purchased
|
|
|
Loans
|
|
|
|
|
|
|
|
|
|
30-89 Days
|
|
|
More
|
|
|
Due 30 Days
|
|
|
or Less Than 30
|
|
|
Credit -
|
|
|
Measured at
|
|
|
Total
|
|
|
Total
|
|
(Dollars in millions)
|
|
Past Due
(1)
|
|
|
Past Due
(2)
|
|
|
or More
|
|
|
Days Past Due
(3)
|
|
|
Impaired
(4)
|
|
|
Fair Value
|
|
|
Outstandings
(5)
|
|
|
Outstandings
|
|
Home loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
mortgage (6)
|
|
$
|
8,274
|
|
|
$
|
33,240
|
|
|
$
|
41,514
|
|
|
$
|
205,867
|
|
|
$
|
10,592
|
|
|
|
|
|
|
$
|
257,973
|
|
|
$
|
242,129
|
|
Home equity
|
|
|
2,086
|
|
|
|
2,291
|
|
|
|
4,377
|
|
|
|
121,014
|
|
|
|
12,590
|
|
|
|
|
|
|
|
137,981
|
|
|
|
149,126
|
|
Discontinued real
estate (7)
|
|
|
107
|
|
|
|
419
|
|
|
|
526
|
|
|
|
930
|
|
|
|
11,652
|
|
|
|
|
|
|
|
13,108
|
|
|
|
14,854
|
|
Credit card and other
consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. credit card
|
|
|
2,593
|
|
|
|
3,320
|
|
|
|
5,913
|
|
|
|
107,872
|
|
|
|
|
|
|
|
|
|
|
|
113,785
|
|
|
|
49,453
|
|
Non-U.S.
credit card
|
|
|
755
|
|
|
|
599
|
|
|
|
1,354
|
|
|
|
26,111
|
|
|
|
|
|
|
|
|
|
|
|
27,465
|
|
|
|
21,656
|
|
Direct/Indirect
consumer (8)
|
|
|
1,608
|
|
|
|
1,104
|
|
|
|
2,712
|
|
|
|
87,596
|
|
|
|
|
|
|
|
|
|
|
|
90,308
|
|
|
|
97,236
|
|
Other
consumer (9)
|
|
|
90
|
|
|
|
50
|
|
|
|
140
|
|
|
|
2,690
|
|
|
|
|
|
|
|
|
|
|
|
2,830
|
|
|
|
3,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer
|
|
|
15,513
|
|
|
|
41,023
|
|
|
|
56,536
|
|
|
|
552,080
|
|
|
|
34,834
|
|
|
|
|
|
|
|
643,450
|
|
|
|
577,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. commercial
|
|
|
946
|
|
|
|
1,453
|
|
|
|
2,399
|
|
|
|
173,185
|
|
|
|
2
|
|
|
|
|
|
|
|
175,586
|
|
|
|
181,377
|
|
Commercial real
estate (10)
|
|
|
721
|
|
|
|
3,554
|
|
|
|
4,275
|
|
|
|
44,957
|
|
|
|
161
|
|
|
|
|
|
|
|
49,393
|
|
|
|
69,447
|
|
Commercial lease financing
|
|
|
118
|
|
|
|
31
|
|
|
|
149
|
|
|
|
21,793
|
|
|
|
|
|
|
|
|
|
|
|
21,942
|
|
|
|
22,199
|
|
Non-U.S.
commercial
|
|
|
27
|
|
|
|
6
|
|
|
|
33
|
|
|
|
31,955
|
|
|
|
41
|
|
|
|
|
|
|
|
32,029
|
|
|
|
27,079
|
|
U.S. small business commercial
|
|
|
360
|
|
|
|
438
|
|
|
|
798
|
|
|
|
13,921
|
|
|
|
|
|
|
|
|
|
|
|
14,719
|
|
|
|
17,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial loans
|
|
|
2,172
|
|
|
|
5,482
|
|
|
|
7,654
|
|
|
|
285,811
|
|
|
|
204
|
|
|
|
|
|
|
|
293,669
|
|
|
|
317,628
|
|
Commercial loans measured at fair
value (11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,321
|
|
|
|
3,321
|
|
|
|
4,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
2,172
|
|
|
|
5,482
|
|
|
|
7,654
|
|
|
|
285,811
|
|
|
|
204
|
|
|
|
3,321
|
|
|
|
296,990
|
|
|
|
322,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases
|
|
$
|
17,685
|
|
|
$
|
46,505
|
|
|
$
|
64,190
|
|
|
$
|
837,891
|
|
|
$
|
35,038
|
|
|
$
|
3,321
|
|
|
$
|
940,440
|
|
|
$
|
900,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
outstandings
|
|
|
1.88
|
%
|
|
|
4.95
|
%
|
|
|
6.83
|
%
|
|
|
89.10
|
%
|
|
|
3.72
|
%
|
|
|
0.35
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Home loans includes
$2.3 billion of FHA insured loans, $818 million of
nonperforming loans and $156 million of TDRs that were
removed from the Countrywide PCI loan portfolio prior to the
adoption of new accounting guidance effective January 1,
2010.
|
(2) |
|
Home loans includes
$16.8 billion of FHA insured loans and $372 million of
TDRs that were removed from the Countrywide PCI loan portfolio
prior to the adoption of new accounting guidance effective
January 1, 2010.
|
(3) |
|
Home loans includes
$1.1 billion of nonperforming loans as all principal and
interest are not current or are TDRs that have not demonstrated
sustained repayment performance.
|
(4) |
|
PCI loan amounts are shown gross of
the valuation allowance and exclude $1.6 billion of PCI
home loans from the Merrill Lynch acquisition which are included
in their appropriate aging categories.
|
(5) |
|
Periods subsequent to
January 1, 2010 are presented in accordance with new
consolidation guidance.
|
(6) |
|
Total outstandings include
non-U.S.
residential mortgages of $90 million and $552 million
at December 31, 2010 and 2009.
|
(7) |
|
Total outstandings include
$11.8 billion and $13.4 billion of pay option loans
and $1.3 billion and $1.5 billion of subprime loans at
December 31, 2010 and 2009. The Corporation no longer
originates these products.
|
(8) |
|
Total outstandings include dealer
financial services loans of $42.9 billion and
$41.6 billion, consumer lending of $12.9 billion and
$19.7 billion, U.S. securities-based lending margin loans
of $16.6 billion and $12.9 billion, student loans of
$6.8 billion and $10.8 billion,
non-U.S.
consumer loans of $8.0 billion and $8.0 billion, and
other consumer loans of $3.1 billion and $4.2 billion
at December 31, 2010 and 2009.
|
(9) |
|
Total outstandings include consumer
finance loans of $1.9 billion and $2.3 billion, other
non-U.S.
consumer loans of $803 million and $709 million, and
consumer overdrafts of $88 million and $144 million at
December 31, 2010 and 2009.
|
(10) |
|
Total outstandings include U.S.
commercial real estate loans of $46.9 billion and
$66.5 billion, and
non-U.S.
commercial real estate loans of $2.5 billion and
$3.0 billion at December 31, 2010 and 2009.
|
(11) |
|
Certain commercial loans are
accounted for under the fair value option and include U.S.
commercial loans of $1.6 billion and $3.0 billion,
non-U.S.
commercial loans of $1.7 billion and $1.9 billion, and
commercial real estate loans of $79 million and
$90 million at December 31, 2010 and 2009. See
Note 22 Fair Value Measurements and
Note 23 Fair Value Option for
additional information.
|
The Corporation mitigates a portion of its credit risk on the
residential mortgage portfolio through the use of synthetic
securitization vehicles. These vehicles issue long-term notes to
investors, the proceeds of which are held as cash collateral.
The Corporation pays a premium to the vehicles to purchase
mezzanine loss protection on a portfolio of residential
mortgages owned by the Corporation. Cash held in the vehicles is
used to reimburse the Corporation in the event that losses on
the mortgage portfolio exceed 10 basis points (bps) of the
original pool balance, up to the remaining amount of purchased
loss protection of $1.1 billion and $1.4 billion at
December 31, 2010 and 2009. The vehicles are variable
interest entities from which the Corporation purchases credit
protection and in which the Corporation does not have a variable
interest; accordingly, these vehicles are not consolidated by
the Corporation. Amounts due from the vehicles are recorded in
other income (loss) when the Corporation recognizes a
reimbursable loss, as described above. Amounts are collected
when reimbursable losses are realized through
the sale of the underlying collateral. At December 31, 2010
and 2009, the Corporation had a receivable of $722 million
and $1.0 billion from these vehicles for reimbursement of
losses. At December 31, 2010 and 2009, $53.9 billion
and $70.7 billion of residential mortgage loans were
referenced under these agreements. The Corporation records an
allowance for credit losses on these loans without regard to the
existence of the purchased loss protection as the protection
does not represent a guarantee of individual loans.
In addition, the Corporation has entered into long-term standby
agreements with FNMA and FHLMC on loans totaling
$14.3 billion and $6.6 billion at December 31,
2010 and 2009, providing full protection on residential mortgage
loans that become severely delinquent. The Corporation does not
record an allowance for credit losses on these loans as the
loans are individually insured.
166 Bank
of America 2010
Nonperforming
Loans and Leases
The table below includes the Corporations nonperforming
loans and leases, including nonperforming TDRs, and loans
accruing past due 90 days or more at December 31, 2010
and 2009. Nonperforming loans and leases exclude performing TDRs
and loans accounted for under the fair value option.
Nonperforming LHFS are excluded from nonperforming loans and
leases as they are recorded at either fair value or the lower of
cost or fair value. In addition, PCI, consumer credit card,
business card loans and in general, consumer
loans not secured by real estate, including renegotiated loans,
are not considered nonperforming and are therefore excluded from
nonperforming loans and leases in the table. See
Note 1 Summary of Significant Accounting
Principles for further information on the criteria to
determine if a loan is classified as nonperforming. Real
estate-secured past due consumer loans insured by the FHA are
reported as performing since the principal repayment is insured
by the FHA.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruing Past Due
|
|
|
|
Nonperforming Loans and Leases
|
|
|
90 Days or More
|
|
|
|
December 31
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Home loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
mortgage (1)
|
|
$
|
17,691
|
|
|
$
|
16,596
|
|
|
$
|
16,768
|
|
|
$
|
11,680
|
|
Home equity
|
|
|
2,694
|
|
|
|
3,804
|
|
|
|
|
|
|
|
|
|
Discontinued real estate
|
|
|
331
|
|
|
|
249
|
|
|
|
|
|
|
|
|
|
Credit card and other
consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. credit card
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
3,320
|
|
|
|
2,158
|
|
Non-U.S.
credit card
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
599
|
|
|
|
515
|
|
Direct/Indirect consumer
|
|
|
90
|
|
|
|
86
|
|
|
|
1,058
|
|
|
|
1,488
|
|
Other consumer
|
|
|
48
|
|
|
|
104
|
|
|
|
2
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer
|
|
|
20,854
|
|
|
|
20,839
|
|
|
|
21,747
|
|
|
|
15,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. commercial
|
|
|
3,453
|
|
|
|
4,925
|
|
|
|
236
|
|
|
|
213
|
|
Commercial real estate
|
|
|
5,829
|
|
|
|
7,286
|
|
|
|
47
|
|
|
|
80
|
|
Commercial lease financing
|
|
|
117
|
|
|
|
115
|
|
|
|
18
|
|
|
|
32
|
|
Non-U.S.
commercial
|
|
|
233
|
|
|
|
177
|
|
|
|
6
|
|
|
|
67
|
|
U.S. small business commercial
|
|
|
204
|
|
|
|
200
|
|
|
|
325
|
|
|
|
624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
9,836
|
|
|
|
12,703
|
|
|
|
632
|
|
|
|
1,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer and
commercial
|
|
$
|
30,690
|
|
|
$
|
33,542
|
|
|
$
|
22,379
|
|
|
$
|
16,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Residential mortgage loans accruing
past due 90 days or more represent loans insured by the
FHA. At December 31, 2010 and 2009, residential mortgage
includes $8.3 billion and $2.2 billion of loans that
are no longer accruing interest as interest has been curtailed
by the FHA although principal is still insured.
|
n/a = not applicable
Included in certain loan categories in nonperforming loans and
leases in the table above are TDRs that were classified as
nonperforming. At December 31, 2010 and 2009, the
Corporation had $3.0 billion and $2.9 billion of
residential mortgages, $535 million and $1.7 billion
of home equity, $75 million and $43 million of
discontinued real estate, $175 million and
$227 million of U.S. commercial, $770 million and
$246 million of commercial real estate and $7 million
and $13 million of
non-U.S. commercial
loans that were TDRs and classified as nonperforming.
As a result of new accounting guidance on PCI loans, beginning
January 1, 2010, modification of a PCI loan no longer
results in removal of the loan from the PCI loan pool. TDRs in
the consumer real estate portfolio that were removed from the
PCI loan portfolio prior to the adoption of the new accounting
guidance were $2.1 billion and $2.3 billion at
December 31, 2010 and 2009, of which $426 million and
$395 million were nonperforming. These nonperforming loans
are excluded from the table above.
Credit Quality
Indicators
The Corporation monitors credit quality within its three
portfolio segments based on primary credit quality indicators.
Within the home loans portfolio segment, the primary credit
quality indicators used are refreshed LTV and refreshed FICO
score. Refreshed LTV measures the carrying value of the loan
as a percentage of the value of property securing the loan,
refreshed quarterly. Home equity loans are measured using
combined LTV 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, refreshed quarterly. Refreshed FICO
score measures the creditworthiness of the borrower based on the
financial obligations of the borrower and the borrowers
credit history. At a minimum, FICO scores are refreshed
quarterly, and in many cases, more frequently. Refreshed FICO
score is also a primary credit quality indicator for the credit
card and other consumer portfolio segment and the business card
portfolio within U.S. small business commercial. The
Corporations commercial loans are evaluated using pass
rated or reservable criticized as the primary credit quality
indicator. The term reservable criticized refers to those
commercial loans that are internally classified or listed by the
Corporation as special mention, substandard or doubtful. These
assets pose an elevated risk and may have a high probability of
default or total loss. Pass rated refers to all loans not
considered criticized. In addition to these primary credit
quality indicators, the Corporation uses other credit quality
indicators for certain types of loans.
See Note 1 Summary of Significant
Accounting Principles for additional information.
Bank of America
2010 167
The tables below present certain credit quality indicators
related to the Corporations home loans, credit card and
other consumer loans, and commercial loan portfolio segments at
December 31, 2010.
Home
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Countrywide
|
|
|
|
|
|
|
Countrywide
|
|
|
|
|
|
Countrywide
|
|
|
|
|
|
Discontinued
|
|
|
|
Residential
|
|
|
Residential
|
|
|
Home
|
|
|
Home Equity
|
|
|
Discontinued
|
|
|
Real Estate
|
|
(Dollars in millions)
|
|
Mortgage
(1)
|
|
|
Mortgage PCI
(2)
|
|
|
Equity (1,
3)
|
|
|
PCI (2,
3)
|
|
|
Real Estate
(1)
|
|
|
PCI
(2)
|
|
Refreshed LTV
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 90 percent
|
|
$
|
130,260
|
|
|
$
|
3,390
|
|
|
$
|
73,680
|
|
|
$
|
1,883
|
|
|
$
|
1,033
|
|
|
$
|
5,248
|
|
Greater than 90 percent but less than 100 percent
|
|
|
19,907
|
|
|
|
1,654
|
|
|
|
14,038
|
|
|
|
1,186
|
|
|
|
155
|
|
|
|
1,578
|
|
Greater than 100 percent
|
|
|
43,268
|
|
|
|
5,548
|
|
|
|
37,673
|
|
|
|
9,521
|
|
|
|
268
|
|
|
|
4,826
|
|
FHA
Loans (4)
|
|
|
53,946
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total home loans
|
|
$
|
247,381
|
|
|
$
|
10,592
|
|
|
$
|
125,391
|
|
|
$
|
12,590
|
|
|
$
|
1,456
|
|
|
$
|
11,652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Refreshed FICO score
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 620
|
|
$
|
27,483
|
|
|
$
|
4,016
|
|
|
$
|
15,494
|
|
|
$
|
3,206
|
|
|
$
|
663
|
|
|
$
|
7,168
|
|
Greater than or equal to 620
|
|
|
165,952
|
|
|
|
6,576
|
|
|
|
109,897
|
|
|
|
9,384
|
|
|
|
793
|
|
|
|
4,484
|
|
FHA
Loans (4)
|
|
|
53,946
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total home loans
|
|
$
|
247,381
|
|
|
$
|
10,592
|
|
|
$
|
125,391
|
|
|
$
|
12,590
|
|
|
$
|
1,456
|
|
|
$
|
11,652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Excludes Countrywide PCI loans.
|
(2) |
|
Excludes PCI home loans related to
the Merrill Lynch acquisition.
|
(3) |
|
Refreshed LTV is reported using a
combined LTV, which measures the carrying value of the combined
loans with liens against the property and the available line of
credit as a percentage of the appraised value securing the loan.
|
(4) |
|
Credit quality indicators are not
reported for FHA insured loans as principal repayment is insured
by the FHA.
|
Credit Card
and Other Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
U.S. Credit
|
|
|
Non-U.S.
|
|
|
Direct/Indirect
|
|
|
Other
|
|
(Dollars in millions)
|
|
Card
|
|
|
Credit Card
|
|
|
Consumer
|
|
|
Consumer
(1)
|
|
Refreshed FICO score
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 620
|
|
$
|
14,159
|
|
|
$
|
631
|
|
|
$
|
6,748
|
|
|
$
|
979
|
|
Greater than or equal to 620
|
|
|
99,626
|
|
|
|
7,528
|
|
|
|
48,209
|
|
|
|
961
|
|
Other internal credit metrics
(2, 3, 4)
|
|
|
|
|
|
|
19,306
|
|
|
|
35,351
|
|
|
|
890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total credit card and other
consumer
|
|
$
|
113,785
|
|
|
$
|
27,465
|
|
|
$
|
90,308
|
|
|
$
|
2,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
96 percent of the other
consumer portfolio was associated with portfolios from certain
consumer finance businesses that have been previously exited by
the Corporation.
|
(2) |
|
Other internal credit metrics may
include delinquency status, geography or other factors.
|
(3) |
|
Direct/indirect consumer includes
$24.0 billion of securities-based lending which is
overcollateralized and therefore offers minimal credit risk and
$7.4 billion of loans the Corporation no longer originates.
|
(4) |
|
Non-U.S.
credit card represents the select European countries
credit card portfolio and a portion of the Canadian credit card
portfolio which is evaluated using internal credit metrics,
including delinquency status. At December 31, 2010,
95 percent of this portfolio was current or less than
30 days past due, three percent was
30-89 days
past due and two percent was 90 days or more past due.
|
Commercial
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
U.S. Small
|
|
|
|
U.S.
|
|
|
Commercial
|
|
|
Lease
|
|
|
Non-U.S.
|
|
|
Business
|
|
(Dollars in millions)
|
|
Commercial
|
|
|
Real Estate
|
|
|
Financing
|
|
|
Commercial
|
|
|
Commercial
|
|
Risk Ratings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass rated
|
|
$
|
160,154
|
|
|
$
|
29,757
|
|
|
$
|
20,754
|
|
|
$
|
30,180
|
|
|
$
|
3,139
|
|
Reservable criticized
|
|
|
15,432
|
|
|
|
19,636
|
|
|
|
1,188
|
|
|
|
1,849
|
|
|
|
988
|
|
Refreshed FICO score
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 620
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
888
|
|
Greater than or equal to 620
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
5,083
|
|
Other internal credit metrics
(2, 3)
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
4,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
credit
|
|
$
|
175,586
|
|
|
$
|
49,393
|
|
|
$
|
21,942
|
|
|
$
|
32,029
|
|
|
$
|
14,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes $204 million of PCI
loans related to the commercial portfolio segment and excludes
$3.3 billion of loans accounted for under the fair value
option.
|
(2) |
|
Other internal credit metrics may
include delinquency status, application scores, geography or
other factors.
|
(3) |
|
U.S. small business commercial
includes business card and small business loans which are
evaluated using internal credit metrics, including delinquency
status. At December 31, 2010, 95 percent was current
or less than 30 days past due.
|
n/a = not applicable
Impaired Loans
and Troubled Debt Restructurings
A loan is considered impaired when, based on current information
and events, it is probable that the Corporation will be unable
to collect all amounts due from the borrower in accordance with
the contractual terms of the loan. Impaired loans include
nonperforming commercial loans, all TDRs, including
both commercial and consumer TDRs, and the renegotiated credit
card, consumer lending and small business loan portfolios (the
renegotiated portfolio). Impaired loans exclude nonperforming
consumer loans unless they are classified as TDRs, all
commercial leases and all loans accounted for under the fair
value option. PCI loans are reported separately on page 171.
168 Bank
of America 2010
The following tables present impaired loans related to the
Corporations home loans and commercial loan portfolio
segments at December 31, 2010. Certain impaired home loans
and commercial loans do not have a related allowance as the
valuation of these impaired loans, determined under current
accounting guidance, exceeded the carrying value.
Impaired Loans
Home Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
2010
|
|
|
|
Unpaid
|
|
|
|
|
|
|
|
|
Average
|
|
|
Interest
|
|
|
|
Principal
|
|
|
Carrying
|
|
|
Related
|
|
|
Carrying
|
|
|
Income
|
|
(Dollars in millions)
|
|
Balance
|
|
|
Value
|
|
|
Allowance
|
|
|
Value
|
|
|
Recognized
(1)
|
|
With no recorded
allowance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
$
|
5,493
|
|
|
$
|
4,382
|
|
|
|
n/a
|
|
|
$
|
4,429
|
|
|
$
|
184
|
|
Home equity
|
|
|
1,411
|
|
|
|
437
|
|
|
|
n/a
|
|
|
|
493
|
|
|
|
21
|
|
Discontinued real estate
|
|
|
361
|
|
|
|
218
|
|
|
|
n/a
|
|
|
|
219
|
|
|
|
8
|
|
With an allowance
recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
$
|
8,593
|
|
|
$
|
7,406
|
|
|
$
|
1,154
|
|
|
$
|
5,226
|
|
|
$
|
196
|
|
Home equity
|
|
|
1,521
|
|
|
|
1,284
|
|
|
|
676
|
|
|
|
1,509
|
|
|
|
23
|
|
Discontinued real estate
|
|
|
247
|
|
|
|
177
|
|
|
|
41
|
|
|
|
170
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
$
|
14,086
|
|
|
$
|
11,788
|
|
|
$
|
1,154
|
|
|
$
|
9,655
|
|
|
$
|
380
|
|
Home equity
|
|
|
2,932
|
|
|
|
1,721
|
|
|
|
676
|
|
|
|
2,002
|
|
|
|
44
|
|
Discontinued real
estate
|
|
|
608
|
|
|
|
395
|
|
|
|
41
|
|
|
|
389
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Interest income recognized includes
interest accrued and collected on the outstanding balances of
accruing impaired loans as well as interest cash collections on
nonaccruing impaired loans for which the ultimate collectability
of principal is not uncertain. See Note 1
Summary of Significant Accounting Principles for additional
information.
|
n/a = not applicable
Impaired Loans
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
2010
|
|
|
|
Unpaid
|
|
|
|
|
|
|
|
|
Average
|
|
|
Interest
|
|
|
|
Principal
|
|
|
Carrying
|
|
|
Related
|
|
|
Carrying
|
|
|
Income
|
|
(Dollars in millions)
|
|
Balance
|
|
|
Value
|
|
|
Allowance
|
|
|
Value
|
|
|
Recognized
(1)
|
|
With no recorded
allowance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. commercial
|
|
$
|
968
|
|
|
$
|
441
|
|
|
|
n/a
|
|
|
$
|
547
|
|
|
$
|
3
|
|
Commercial real estate
|
|
|
2,655
|
|
|
|
1,771
|
|
|
|
n/a
|
|
|
|
1,736
|
|
|
|
8
|
|
Non-U.S.
commercial
|
|
|
46
|
|
|
|
28
|
|
|
|
n/a
|
|
|
|
9
|
|
|
|
|
|
U.S. small business
commercial (2)
|
|
|
|
|
|
|
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
With an allowance
recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. commercial
|
|
$
|
3,891
|
|
|
$
|
3,193
|
|
|
$
|
336
|
|
|
$
|
3,389
|
|
|
$
|
36
|
|
Commercial real estate
|
|
|
5,682
|
|
|
|
4,103
|
|
|
|
208
|
|
|
|
4,813
|
|
|
|
29
|
|
Non-U.S.
commercial
|
|
|
572
|
|
|
|
217
|
|
|
|
91
|
|
|
|
190
|
|
|
|
|
|
U.S. small business
commercial (2)
|
|
|
935
|
|
|
|
892
|
|
|
|
445
|
|
|
|
1,028
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. commercial
|
|
$
|
4,859
|
|
|
$
|
3,634
|
|
|
$
|
336
|
|
|
$
|
3,936
|
|
|
$
|
39
|
|
Commercial real estate
|
|
|
8,337
|
|
|
|
5,874
|
|
|
|
208
|
|
|
|
6,549
|
|
|
|
37
|
|
Non-U.S.
commercial
|
|
|
618
|
|
|
|
245
|
|
|
|
91
|
|
|
|
199
|
|
|
|
|
|
U.S. small business
commercial (2)
|
|
|
935
|
|
|
|
892
|
|
|
|
445
|
|
|
|
1,028
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Interest income recognized includes
interest accrued and collected on the outstanding balances of
accruing impaired loans as well as interest cash collections on
nonaccruing impaired loans for which the ultimate collectability
of principal is not uncertain. See Note 1
Summary of Significant Accounting Principles for additional
information.
|
(2) |
|
Includes U.S. small business
commercial renegotiated TDR loans and related allowance.
|
n/a = not applicable
At December 31, 2010 and 2009, remaining commitments to
lend additional funds to debtors whose terms have been modified
in a commercial or consumer TDR were immaterial.
The Corporation seeks to assist customers that are experiencing
financial difficulty by renegotiating loans within the
renegotiated portfolio while ensuring compliance with Federal
Financial Institutions Examination Council (FFIEC) guidelines.
Substantially all modifications in the renegotiated portfolio
are considered to be both TDRs and impaired loans. The
renegotiated portfolio may include modifications, both short-
and long-term, of interest rates or payment amounts or a
combination thereof. The Corporation makes loan
modifications, primarily utilizing internal renegotiation
programs via direct customer contact, that manage
customers debt exposures held only by the Corporation.
Additionally, the Corporation makes loan modifications with
consumers who have elected to work with external renegotiation
agencies and these modifications provide solutions to
customers entire unsecured debt structures. Under both
internal and external programs, customers receive reduced annual
percentage rates with fixed payments that amortize loan balances
over a
60-month
period. Under both programs, for credit card loans, a
customers charging privileges are revoked.
Bank of America
2010 169
The following tables provide detailed information on the
Corporations primary modification programs for the
renegotiated portfolio. At December 31, 2010, all
renegotiated credit card and other consumer loans were
considered impaired and have a related allowance as shown in the
table below. The allowance for credit
card loans is based on the present value of projected cash
flows discounted using the interest rate in effect prior to
restructuring and prior to any risk-based or penalty-based
increase in rate.
Impaired
Loans Credit Card and Other Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
2010
|
|
|
|
|
Unpaid
|
|
|
|
|
|
|
|
|
Average
|
|
|
Interest
|
|
|
|
|
Principal
|
|
|
Carrying
|
|
|
Related
|
|
|
Carrying
|
|
|
Income
|
|
(Dollars in millions)
|
|
|
Balance
|
|
|
Value
(1)
|
|
|
Allowance
|
|
|
Value
|
|
|
Recognized
(2)
|
|
With an allowance
recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. credit card
|
|
|
$
|
8,680
|
|
|
$
|
8,766
|
|
|
$
|
3,458
|
|
|
$
|
10,549
|
|
|
$
|
621
|
|
Non-U.S.
credit card
|
|
|
|
778
|
|
|
|
797
|
|
|
|
506
|
|
|
|
973
|
|
|
|
21
|
|
Direct/Indirect consumer
|
|
|
|
1,846
|
|
|
|
1,858
|
|
|
|
822
|
|
|
|
2,126
|
|
|
|
111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes accrued interest and fees.
|
(2)
|
|
Interest income recognized
includes interest accrued and collected on the outstanding
balances of accruing impaired loans as well as interest cash
collections on nonaccruing impaired loans for which the ultimate
collectability of principal is not uncertain. See
Note 1 Summary of Significant Accounting
Principles for additional information.
|
Renegotiated
TDR Portfolio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal Programs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of Balances Current or
|
|
|
|
December 31
|
|
|
External Programs
|
|
|
Other
|
|
|
Total
|
|
|
Less Than 30 Days Past Due
|
|
|
|
|
|
|
December 31
|
|
|
December 31
|
|
|
December 31
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Credit card and other
consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. credit card
|
|
$
|
6,592
|
|
|
$
|
3,159
|
|
|
$
|
1,927
|
|
|
$
|
758
|
|
|
$
|
247
|
|
|
$
|
283
|
|
|
$
|
8,766
|
|
|
$
|
4,200
|
|
|
|
77.66
|
%
|
|
|
75.43
|
%
|
Non-U.S.
credit card
|
|
|
282
|
|
|
|
252
|
|
|
|
176
|
|
|
|
168
|
|
|
|
339
|
|
|
|
435
|
|
|
|
797
|
|
|
|
855
|
|
|
|
58.86
|
|
|
|
53.02
|
|
Direct/Indirect consumer
|
|
|
1,222
|
|
|
|
1,414
|
|
|
|
531
|
|
|
|
539
|
|
|
|
105
|
|
|
|
89
|
|
|
|
1,858
|
|
|
|
2,042
|
|
|
|
78.81
|
|
|
|
75.44
|
|
Other consumer
|
|
|
|
|
|
|
54
|
|
|
|
|
|
|
|
69
|
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
140
|
|
|
|
n/a
|
|
|
|
68.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer
|
|
|
8,096
|
|
|
|
4,879
|
|
|
|
2,634
|
|
|
|
1,534
|
|
|
|
691
|
|
|
|
824
|
|
|
|
11,421
|
|
|
|
7,237
|
|
|
|
76.51
|
|
|
|
72.66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. small business commercial
|
|
|
624
|
|
|
|
776
|
|
|
|
58
|
|
|
|
57
|
|
|
|
6
|
|
|
|
11
|
|
|
|
688
|
|
|
|
844
|
|
|
|
65.37
|
|
|
|
64.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
624
|
|
|
|
776
|
|
|
|
58
|
|
|
|
57
|
|
|
|
6
|
|
|
|
11
|
|
|
|
688
|
|
|
|
844
|
|
|
|
65.37
|
|
|
|
64.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total renegotiated TDR
loans
|
|
$
|
8,720
|
|
|
$
|
5,655
|
|
|
$
|
2,692
|
|
|
$
|
1,591
|
|
|
$
|
697
|
|
|
$
|
835
|
|
|
$
|
12,109
|
|
|
$
|
8,081
|
|
|
|
75.90
|
%
|
|
|
72.96
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
n/a = not applicable
At December 31, 2010 and 2009, the Corporation had a
renegotiated TDR portfolio of $12.1 billion and
$8.1 billion of which $9.2 billion was current or less
than 30 days past due under the modified terms at
December 31, 2010. The renegotiated TDR portfolio is
excluded from nonperforming loans as the Corporation generally
does not classify consumer loans not secured by real
estate as nonperforming as these loans are generally charged off
no later than the end of the month in which the loan becomes
180 days past due. Current period amounts include the
impact of new consolidation guidance which resulted in the
consolidation of credit card and certain other securitization
trusts.
170 Bank
of America 2010
Purchased
Credit-impaired Loans
PCI loans are acquired loans with evidence of credit quality
deterioration since origination for which it is probable at
purchase date that the Corporation will be unable to collect all
contractually required payments. In connection with the
Countrywide acquisition in 2008, the Corporation acquired PCI
loans, substantially all of which were residential mortgage,
home equity and discontinued real estate loans. In connection
with the Merrill Lynch acquisition in 2009, the Corporation
acquired PCI loans, substantially all of which were residential
mortgage and commercial loans.
The table below presents the remaining unpaid principal balance
and carrying amount, excluding the valuation reserve, for PCI
loans at December 31, 2010 and 2009. See
Note 7 Allowance for Credit Losses for
additional information.
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
Consumer
|
|
|
|
|
|
|
|
|
Countrywide
|
|
|
|
|
|
|
|
|
Unpaid principal balance
|
|
$
|
41,446
|
|
|
$
|
47,701
|
|
Carrying value excluding valuation reserve
|
|
|
34,834
|
|
|
|
37,541
|
|
Merrill Lynch
|
|
|
|
|
|
|
|
|
Unpaid principal balance
|
|
|
1,698
|
|
|
|
2,388
|
|
Carrying value excluding valuation reserve
|
|
|
1,559
|
|
|
|
2,112
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
Merrill Lynch
|
|
|
|
|
|
|
|
|
Unpaid principal balance
|
|
$
|
870
|
|
|
$
|
1,971
|
|
Carrying value excluding valuation reserve
|
|
|
204
|
|
|
|
692
|
|
|
|
|
|
|
|
|
|
|
As a result of the adoption of new accounting guidance on PCI
loans, beginning January 1, 2010, pooled loans that are
modified subsequent to acquisition are not removed from the PCI
loan pools and are not considered TDRs. Prior to January 1,
2010, pooled loans that were modified subsequent to acquisition
were reviewed to compare modified contractual cash flows to
the PCI carrying value. If the present value of the modified
cash flows was less than the carrying value, the loan was
removed from the PCI loan pool at its carrying value, as well as
any related allowance for loan and lease losses, and was
classified as a TDR. The carrying value of PCI loan TDRs that
were removed from the PCI pool prior to January 1, 2010
totaled $2.1 billion. At December 31, 2010,
$1.6 billion of those classified as TDRs were on accrual
status. The carrying value of these modified loans, net of
allowance, was approximately 65 percent of the unpaid
principal balance.
The table below shows activity for the accretable yield on PCI
loans. The $14 million and $1.4 billion
reclassifications to nonaccretable difference during 2010 and
2009 reflect a reduction in estimated interest cash flows during
the year.
|
|
|
|
|
(Dollars in millions)
|
|
|
|
Accretable yield,
January 1, 2009
|
|
$
|
12,860
|
|
Merrill Lynch balance
|
|
|
627
|
|
Accretion
|
|
|
(2,859
|
)
|
Disposals/transfers
|
|
|
(1,482
|
)
|
Reclassifications to nonaccretable difference
|
|
|
(1,431
|
)
|
|
|
|
|
|
Accretable yield,
December 31, 2009
|
|
|
7,715
|
|
|
|
|
|
|
Accretion
|
|
|
(1,766
|
)
|
Disposals/transfers
|
|
|
(213
|
)
|
Reclassifications to nonaccretable difference
|
|
|
(14
|
)
|
|
|
|
|
|
Accretable yield,
December 31, 2010
|
|
$
|
5,722
|
|
|
|
|
|
|
Loans
Held-for-Sale
The Corporation had LHFS of $35.1 billion and
$43.9 billion at December 31, 2010 and 2009. Proceeds
from sales, securitizations and paydowns of LHFS were
$281.7 billion, $365.1 billion and $142.1 billion
for 2010, 2009 and 2008. Proceeds used for originations and
purchases of LHFS were $263.0 billion, $369.4 billion
and $127.5 billion for 2010, 2009 and 2008.
Bank of America
2010 171
NOTE 7 Allowance
for Credit Losses
The table below summarizes the changes in the allowance for
credit losses for 2010, 2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Card
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home
|
|
|
and Other
|
|
|
|
|
|
Total Allowance
|
|
(Dollars in millions)
|
|
Loans
|
|
|
Consumer
|
|
|
Commercial
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Allowance for loan and lease
losses, January 1, before effect of the January 1 adoption
of new consolidation guidance
|
|
$
|
15,756
|
|
|
$
|
12,029
|
|
|
$
|
9,415
|
|
|
$
|
37,200
|
|
|
$
|
23,071
|
|
|
$
|
11,588
|
|
Allowance related to adoption of new consolidation guidance
|
|
|
573
|
|
|
|
10,214
|
|
|
|
1
|
|
|
|
10,788
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease
losses, January 1
|
|
|
16,329
|
|
|
|
22,243
|
|
|
|
9,416
|
|
|
|
47,988
|
|
|
|
23,071
|
|
|
|
11,588
|
|
Loans and leases charged off
|
|
|
(10,915
|
)
|
|
|
(20,865
|
)
|
|
|
(5,610
|
)
|
|
|
(37,390
|
)
|
|
|
(35,483
|
)
|
|
|
(17,666
|
)
|
Recoveries of loans and leases previously charged off
|
|
|
396
|
|
|
|
2,034
|
|
|
|
626
|
|
|
|
3,056
|
|
|
|
1,795
|
|
|
|
1,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs
|
|
|
(10,519
|
)
|
|
|
(18,831
|
)
|
|
|
(4,984
|
)
|
|
|
(34,334
|
)
|
|
|
(33,688
|
)
|
|
|
(16,231
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan and lease losses
|
|
|
13,335
|
|
|
|
12,115
|
|
|
|
2,745
|
|
|
|
28,195
|
|
|
|
48,366
|
|
|
|
26,922
|
|
Other
|
|
|
107
|
|
|
|
(64
|
)
|
|
|
(7
|
)
|
|
|
36
|
|
|
|
(549
|
)
|
|
|
792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease
losses, December 31
|
|
|
19,252
|
|
|
|
15,463
|
|
|
|
7,170
|
|
|
|
41,885
|
|
|
|
37,200
|
|
|
|
23,071
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve for unfunded lending
commitments, January 1
|
|
|
|
|
|
|
|
|
|
|
1,487
|
|
|
|
1,487
|
|
|
|
421
|
|
|
|
518
|
|
Provision for unfunded lending commitments
|
|
|
|
|
|
|
|
|
|
|
240
|
|
|
|
240
|
|
|
|
204
|
|
|
|
(97
|
)
|
Other
|
|
|
|
|
|
|
|
|
|
|
(539
|
)
|
|
|
(539
|
)
|
|
|
862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve for unfunded lending
commitments, December 31
|
|
|
|
|
|
|
|
|
|
|
1,188
|
|
|
|
1,188
|
|
|
|
1,487
|
|
|
|
421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses,
December 31
|
|
$
|
19,252
|
|
|
$
|
15,463
|
|
|
$
|
8,358
|
|
|
$
|
43,073
|
|
|
$
|
38,687
|
|
|
$
|
23,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
n/a = not applicable
In 2010, the Corporation recorded $2.2 billion in provision
for credit losses with a corresponding increase in the valuation
reserve included as part of the allowance for loan and lease
losses specifically for the PCI loan portfolio. This compared to
$3.5 billion in 2009 and $750 million in 2008. The
amount of the allowance for loan and lease losses associated
with the PCI loan portfolio was $6.4 billion,
$3.9 billion and $750 million at December 31,
2010, 2009 and 2008, respectively.
The other amount under allowance for loan and lease
losses for 2009 includes a $750 million reduction in the
allowance for loan and lease losses related to $8.5 billion
of credit card loans that were exchanged for a $7.8 billion
HTM debt security partially offset by a $340 million
increase associated with the reclassification to other assets of
the amount reimbursable under residential mortgage cash
collateralized synthetic securitizations. The 2008
other amount under allowance for loan and lease
losses includes the $1.2 billion addition of the
Countrywide allowance for loan losses as of July 1, 2008.
The other amount under the reserve for unfunded
lending commitments for 2009 includes the remaining balance of
the acquired Merrill Lynch reserve excluding those commitments
accounted for under the fair value option, net of accretion, and
the impact of funding previously unfunded positions. This amount
in 2010 represents primarily accretion of the Merrill Lynch
purchase accounting adjustment and the impact of funding
previously unfunded positions.
The table below represents the allowance and the carrying value
of outstanding loans and leases by portfolio segment at
December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Card
|
|
|
|
|
|
|
|
|
|
|
|
|
and Other
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Home Loans
|
|
|
Consumer
|
|
|
Commercial
|
|
|
Total
|
|
Impaired loans and troubled debt
restructurings
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease
losses (2)
|
|
$
|
1,871
|
|
|
$
|
4,786
|
|
|
$
|
1,080
|
|
|
$
|
7,737
|
|
Carrying value
|
|
|
13,904
|
|
|
|
11,421
|
|
|
|
10,645
|
|
|
|
35,970
|
|
Allowance as a percentage of outstandings
|
|
|
13.46
|
%
|
|
|
41.91
|
%
|
|
|
10.15
|
%
|
|
|
21.51
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated for
impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses
|
|
$
|
10,964
|
|
|
$
|
10,677
|
|
|
$
|
6,078
|
|
|
$
|
27,719
|
|
Carrying
value (3)
|
|
|
358,765
|
|
|
|
222,967
|
|
|
|
282,820
|
|
|
|
864,552
|
|
Allowance as a percentage of
outstandings (3)
|
|
|
3.06
|
%
|
|
|
4.79
|
%
|
|
|
2.15
|
%
|
|
|
3.21
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased credit-impaired
loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses
|
|
$
|
6,417
|
|
|
|
n/a
|
|
|
$
|
12
|
|
|
$
|
6,429
|
|
Carrying value
|
|
|
36,393
|
|
|
|
n/a
|
|
|
|
204
|
|
|
|
36,597
|
|
Allowance as a percentage of outstandings
|
|
|
17.63
|
%
|
|
|
n/a
|
|
|
|
5.76
|
%
|
|
|
17.57
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease
losses
|
|
$
|
19,252
|
|
|
$
|
15,463
|
|
|
$
|
7,170
|
|
|
$
|
41,885
|
|
Carrying
value (3)
|
|
|
409,062
|
|
|
|
234,388
|
|
|
|
293,669
|
|
|
|
937,119
|
|
Allowance as a percentage of
outstandings (3)
|
|
|
4.71
|
%
|
|
|
6.60
|
%
|
|
|
2.44
|
%
|
|
|
4.47
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Impaired loans include
nonperforming commercial loans and all TDRs, including both
commercial and consumer TDRs. Impaired loans exclude
nonperforming consumer loans unless they are classified as TDRs,
and all commercial loans and leases which are accounted for
under the fair value option.
|
(2) |
|
Commercial impaired allowance for
loan and lease losses includes $445 million related to U.S.
small business commercial renegotiated TDR loans.
|
(3) |
|
Outstanding loan and lease balances
and ratios do not include loans accounted for under the fair
value option. Loans accounted for under the fair value option
were $3.3 billion at December 31, 2010.
|
n/a = not applicable
172 Bank
of America 2010
NOTE 8 Securitizations
and Other Variable Interest Entities
The Corporation utilizes VIEs in the ordinary course of business
to support its own and its customers financing and
investing needs. The Corporation routinely securitizes loans and
debt securities using VIEs as a source of funding for the
Corporation and as a means of transferring the economic risk of
the loans or debt securities to third parties. The Corporation
also administers structures or invests in other VIEs including
CDOs, investment vehicles and other entities.
A VIE is an entity that lacks equity investors or whose equity
investors do not have a controlling financial interest in the
entity through their equity investments. The entity that has a
controlling financial interest in a VIE is referred to as the
primary beneficiary and consolidates the VIE. In accordance with
the new consolidation guidance effective January 1, 2010,
the Corporation is deemed to have a controlling financial
interest and is the primary beneficiary of a VIE if it has both
the power to direct the activities of the VIE
that most significantly impact the VIEs economic
performance and an obligation to absorb losses or the right to
receive benefits that could potentially be significant to the
VIE. As a result of this change in accounting, the Corporation
consolidated certain VIEs and former QSPEs that were previously
unconsolidated. Incremental assets of newly consolidated VIEs on
January 1, 2010, after elimination of intercompany balances
and net of deferred taxes, included $69.7 billion in credit
card securitizations, $15.6 billion in commercial paper
conduits, $4.7 billion in home equity securitizations,
$4.7 billion in municipal bond trusts and $5.7 billion
in other VIEs. The net incremental impact of this accounting
change on the Corporations Consolidated Balance Sheet is
set forth in the table below. The net effect of the accounting
change on January 1, 2010 shareholders equity
was a $6.2 billion charge to retained earnings,
net-of-tax,
primarily from the increase in the allowance for loan and lease
losses, as well as a $116 million charge to accumulated
OCI,
net-of-tax,
for the net unrealized losses on AFS debt securities in newly
consolidated VIEs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
|
|
|
|
|
|
Beginning
|
|
|
|
Balance Sheet
|
|
|
Net Increase
|
|
|
Balance Sheet
|
|
(Dollars in millions)
|
|
December 31, 2009
|
|
|
(Decrease)
|
|
|
January 1, 2010
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
121,339
|
|
|
$
|
2,807
|
|
|
$
|
124,146
|
|
Trading account assets
|
|
|
182,206
|
|
|
|
6,937
|
|
|
|
189,143
|
|
Derivative assets
|
|
|
87,622
|
|
|
|
556
|
|
|
|
88,178
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
|
301,601
|
|
|
|
(2,320
|
)
|
|
|
299,281
|
|
Held-to-maturity
|
|
|
9,840
|
|
|
|
(6,572
|
)
|
|
|
3,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
311,441
|
|
|
|
(8,892
|
)
|
|
|
302,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases
|
|
|
900,128
|
|
|
|
102,595
|
|
|
|
1,002,723
|
|
Allowance for loan and lease losses
|
|
|
(37,200
|
)
|
|
|
(10,788
|
)
|
|
|
(47,988
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases, net of allowance
|
|
|
862,928
|
|
|
|
91,807
|
|
|
|
954,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
held-for-sale
|
|
|
43,874
|
|
|
|
3,025
|
|
|
|
46,899
|
|
Deferred tax asset
|
|
|
27,279
|
|
|
|
3,498
|
|
|
|
30,777
|
|
All other assets
|
|
|
593,543
|
|
|
|
701
|
|
|
|
594,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,230,232
|
|
|
$
|
100,439
|
|
|
$
|
2,330,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper and other short-term borrowings
|
|
$
|
69,524
|
|
|
$
|
22,136
|
|
|
$
|
91,660
|
|
Long-term debt
|
|
|
438,521
|
|
|
|
84,356
|
|
|
|
522,877
|
|
All other liabilities
|
|
|
1,490,743
|
|
|
|
217
|
|
|
|
1,490,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,998,788
|
|
|
|
106,709
|
|
|
|
2,105,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings
|
|
|
71,233
|
|
|
|
(6,154
|
)
|
|
|
65,079
|
|
Accumulated other comprehensive income (loss)
|
|
|
(5,619
|
)
|
|
|
(116
|
)
|
|
|
(5,735
|
)
|
All other shareholders equity
|
|
|
165,830
|
|
|
|
|
|
|
|
165,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders
equity
|
|
|
231,444
|
|
|
|
(6,270
|
)
|
|
|
225,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity
|
|
$
|
2,230,232
|
|
|
$
|
100,439
|
|
|
$
|
2,330,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank of America
2010 173
The following tables present the assets and liabilities of
consolidated and unconsolidated VIEs at December 31, 2010
and 2009, in situations where the Corporation has continuing
involvement with transferred assets or if the Corporation
otherwise has a variable interest in the VIE. The tables also
present the Corporations maximum exposure to loss at
December 31, 2010 and 2009 resulting from its involvement
with consolidated VIEs and unconsolidated VIEs in which the
Corporation holds a variable interest. The Corporations
maximum exposure to loss is based on the unlikely event that all
of the assets in the VIEs become worthless and incorporates not
only potential losses associated with assets recorded on the
Corporations Consolidated Balance Sheet but also potential
losses associated with off-balance sheet commitments such as
unfunded liquidity commitments and other contractual
arrangements. The Corporations maximum exposure to loss
does not include losses previously recognized through
write-downs of assets on the Corporations Consolidated
Balance Sheet.
The Corporation invests in asset-backed securities issued by
third-party VIEs with which it has no other form of involvement.
These securities are included in Note 3
Trading Account Assets and Liabilities and
Note 5 Securities. In addition, the
Corporation uses VIEs such as trust preferred securities trusts
in connection with its funding activities as described in
Note 13 Long-term Debt. The Corporation
also uses VIEs in the form of synthetic securitization vehicles
to mitigate a portion of the credit risk on its residential
mortgage loan portfolio, as described in
Note 6 Outstanding Loans and Leases. The
Corporation uses VIEs, such as cash funds managed within
GWIM, to provide investment opportunities for clients.
Prior to 2010, the Corporation provided support to certain of
these cash funds in the form of capital commitments in the event
the net asset value per unit of a fund declined below certain
thresholds. The Corporation recorded a loss of
$195 million in 2009 as the result of these commitments,
which were terminated in 2009. These VIEs, which are not
consolidated by the Corporation, are not included in the tables
within this Note.
Except as described below and with regard to the cash funds, as
of December 31, 2010, the Corporation has not provided
financial support to consolidated or unconsolidated VIEs that it
was not previously contractually required to provide, nor does
it intend to do so.
Mortgage-related
Securitizations
First-lien
Mortgages
As part of its mortgage banking activities, the Corporation
securitizes a portion of the first-lien residential mortgage
loans it originates or purchases from third parties, generally
in the form of MBS guaranteed by GSEs, or GNMA in the case of
FHA-insured and U.S. Department of Veteran Affairs
(VA)-guaranteed mortgage loans. Securitization occurs in
conjunction with or shortly after loan closing or purchase. In
addition, the Corporation may, from time to time, securitize
commercial mortgages it originates or purchases from other
entities. The Corporation typically services the loans it
securitizes. Further, the Corporation may retain beneficial
interests in the securitization trusts including senior and
subordinate securities and equity tranches issued by the trusts.
Except as described below and in Note 9
Representations and Warranties Obligations and Corporate
Guarantees, the Corporation does not provide guarantees or
recourse to the securitization trusts other than standard
representations and warranties.
The table below summarizes select information related to
first-lien mortgage securitizations for 2010 and 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Mortgage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Agency
|
|
|
Commercial
|
|
|
|
Agency
|
|
|
Prime
|
|
|
Subprime
|
|
|
Alt-A
|
|
|
Mortgage
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Cash proceeds from new
securitizations (1)
|
|
$
|
243,901
|
|
|
$
|
346,448
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
7
|
|
|
$
|
|
|
|
$
|
4,227
|
|
|
$
|
313
|
|
Gain (loss) on securitizations, net of
hedges (2)
|
|
|
(473
|
)
|
|
|
73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows received on residual interests
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
25
|
|
|
|
58
|
|
|
|
71
|
|
|
|
2
|
|
|
|
5
|
|
|
|
20
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Corporation sells residential
mortgage loans to GSEs in the normal course of business and
receives MBS in exchange which may then be sold into the market
to third-party investors for cash proceeds.
|
(2) |
|
Substantially all of the first-lien
residential mortgage loans securitized are initially classified
as LHFS and accounted for under the fair value option. As such,
gains are recognized on these LHFS prior to securitization.
During 2010 and 2009, the Corporation recognized
$5.1 billion and $5.5 billion of gains on these LHFS,
net of hedges.
|
In addition to cash proceeds as reported in the table above, the
Corporation received securities with an initial fair value of
$23.7 billion in connection with agency first-lien
residential mortgage securitizations in 2010. All of these
securities were initially classified as Level 2 assets
within the fair value hierarchy. During 2010, there were no
changes to the initial classification.
The Corporation recognizes consumer MSRs from the sale or
securitization of first-lien mortgage loans. Servicing fee and
ancillary fee income on consumer mortgage loans serviced,
including securitizations where the Corporation has continuing
involvement, were $6.4 billion and $6.2 billion in
2010 and 2009. Servicing advances on consumer mortgage loans,
including securitizations where the Corporation has continuing
involvement, were $24.3 billion and $19.3 billion at
December 31, 2010 and 2009. The Corporation may have the
option to repurchase delinquent loans out of
securitization trusts, which reduces the amount of servicing
advances it is required to make. During 2010 and 2009,
$14.5 billion and $13.1 billion of loans were
repurchased from first-lien securitization trusts as a result of
loan delinquencies or in order to perform modifications. The
majority of these loans repurchased were FHA insured mortgages
collateralizing GNMA securities. In addition, the Corporation
has retained commercial MSRs from the sale or securitization of
commercial mortgage loans. Servicing fee and ancillary fee
income on commercial mortgage loans serviced, including
securitizations where the Corporation has continuing
involvement, were $21 million and $49 million in 2010
and 2009. Servicing advances on commercial mortgage loans,
including securitizations where the Corporation has continuing
involvement, were $156 million and $109 million at
December 31, 2010 and 2009.
174 Bank
of America 2010
The table below summarizes select information related to
first-lien mortgage securitization trusts in which the
Corporation held a variable interest at December 31, 2010
and 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Mortgage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Agency
|
|
|
|
|
|
|
|
|
|
Agency
|
|
|
Prime
|
|
|
Subprime
|
|
|
Alt-A
|
|
|
Commercial Mortgage
|
|
|
|
December 31
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
|
|
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Unconsolidated VIEs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum loss
exposure (1)
|
|
$
|
44,988
|
|
|
$
|
14,398
|
|
|
$
|
2,794
|
|
|
$
|
4,068
|
|
|
$
|
416
|
|
|
$
|
224
|
|
|
$
|
651
|
|
|
$
|
996
|
|
|
$
|
1,199
|
|
|
$
|
1,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On-balance sheet assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior securities held
(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading account assets
|
|
$
|
9,526
|
|
|
$
|
2,295
|
|
|
$
|
147
|
|
|
$
|
201
|
|
|
$
|
126
|
|
|
$
|
12
|
|
|
$
|
645
|
|
|
$
|
431
|
|
|
$
|
146
|
|
|
$
|
469
|
|
AFS debt securities
|
|
|
35,400
|
|
|
|
12,103
|
|
|
|
2,593
|
|
|
|
3,845
|
|
|
|
234
|
|
|
|
188
|
|
|
|
|
|
|
|
561
|
|
|
|
984
|
|
|
|
1,215
|
|
Subordinate securities held
(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading account assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
|
|
122
|
|
AFS debt securities
|
|
|
|
|
|
|
|
|
|
|
39
|
|
|
|
13
|
|
|
|
35
|
|
|
|
22
|
|
|
|
6
|
|
|
|
4
|
|
|
|
|
|
|
|
23
|
|
Residual interests held
|
|
|
62
|
|
|
|
|
|
|
|
6
|
|
|
|
9
|
|
|
|
9
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
61
|
|
|
|
48
|
|
All other assets
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total retained
positions
|
|
$
|
44,988
|
|
|
$
|
14,398
|
|
|
$
|
2,794
|
|
|
$
|
4,068
|
|
|
$
|
416
|
|
|
$
|
224
|
|
|
$
|
651
|
|
|
$
|
996
|
|
|
$
|
1,199
|
|
|
$
|
1,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal balance outstanding
(3)
|
|
$
|
1,297,159
|
|
|
$
|
1,255,650
|
|
|
$
|
75,762
|
|
|
$
|
81,012
|
|
|
$
|
92,710
|
|
|
$
|
83,065
|
|
|
$
|
116,233
|
|
|
$
|
147,072
|
|
|
$
|
73,597
|
|
|
$
|
65,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated VIEs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum loss
exposure (1)
|
|
$
|
32,746
|
|
|
$
|
1,683
|
|
|
$
|
46
|
|
|
$
|
472
|
|
|
$
|
42
|
|
|
$
|
1,261
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On-balance sheet assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases
|
|
$
|
32,563
|
|
|
$
|
1,689
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
450
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Allowance for loan and lease losses
|
|
|
(37
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
held-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
436
|
|
|
|
732
|
|
|
|
2,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All other assets
|
|
|
220
|
|
|
|
|
|
|
|
46
|
|
|
|
86
|
|
|
|
16
|
|
|
|
271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
32,746
|
|
|
$
|
1,683
|
|
|
$
|
46
|
|
|
$
|
522
|
|
|
$
|
748
|
|
|
$
|
2,751
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On-balance sheet liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
48
|
|
|
$
|
|
|
|
$
|
1,737
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
All other liabilities
|
|
|
3
|
|
|
|
|
|
|
|
9
|
|
|
|
3
|
|
|
|
768
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
3
|
|
|
$
|
|
|
|
$
|
9
|
|
|
$
|
51
|
|
|
$
|
768
|
|
|
$
|
1,740
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Maximum loss exposure excludes the
liability for representations and warranties obligations and
corporate guarantees and also excludes servicing advances. For
more information, see Note 9 Representations
and Warranties Obligations and Corporate Guarantees.
|
(2) |
|
As a holder of these securities,
the Corporation receives scheduled principal and interest
payments. During 2010 and 2009, there were no OTTI losses
recorded on those securities classified as AFS debt securities.
|
(3) |
|
Principal balance outstanding
includes loans the Corporation transferred with which the
Corporation has continuing involvement, which may include
servicing the loans.
|
Bank of America
2010 175
Home Equity
Mortgages
The Corporation maintains interests in home equity
securitization trusts to which the Corporation transferred home
equity loans. These retained interests include senior and
subordinate securities and residual interests. In addition, the
Corporation may be obligated to provide subordinate funding to
the trusts during a rapid amortization event. The Corporation
also services the loans in the trusts. Except as described below
and in Note 9 Representations and Warranties
Obligations and Corporate Guarantees, the Corporation does
not provide guarantees or recourse to the securitization trusts
other
than standard representations and warranties. There were no
securitizations of home equity loans during 2010 and 2009.
Collections reinvested in revolving period securitizations were
$21 million and $177 million during 2010 and 2009.
Cash flows received on residual interests were $12 million
and $35 million in 2010 and 2009.
The table below summarizes select information related to home
equity loan securitization trusts in which the Corporation held
a variable interest at December 31, 2010 and 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
Retained
|
|
|
|
|
|
Retained
|
|
|
|
|
|
|
Interests in
|
|
|
|
|
|
Interests in
|
|
|
|
Consolidated
|
|
|
Unconsolidated
|
|
|
|
|
|
Unconsolidated
|
|
(Dollars in millions)
|
|
VIEs
|
|
|
VIEs
|
|
|
Total
|
|
|
VIEs
|
|
Maximum loss exposure
(1)
|
|
$
|
3,192
|
|
|
$
|
9,132
|
|
|
$
|
12,324
|
|
|
$
|
13,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On-balance sheet assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading account assets
(2, 3)
|
|
$
|
|
|
|
$
|
209
|
|
|
$
|
209
|
|
|
$
|
16
|
|
Available-for-sale
debt securities
(3, 4)
|
|
|
|
|
|
|
35
|
|
|
|
35
|
|
|
|
147
|
|
Loans and leases
|
|
|
3,529
|
|
|
|
|
|
|
|
3,529
|
|
|
|
|
|
Allowance for loan and lease losses
|
|
|
(337
|
)
|
|
|
|
|
|
|
(337
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,192
|
|
|
$
|
244
|
|
|
$
|
3,436
|
|
|
$
|
163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On-balance sheet liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
3,635
|
|
|
$
|
|
|
|
$
|
3,635
|
|
|
$
|
|
|
All other liabilities
|
|
|
23
|
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,658
|
|
|
$
|
|
|
|
$
|
3,658
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal balance outstanding
|
|
$
|
3,529
|
|
|
$
|
20,095
|
|
|
$
|
23,624
|
|
|
$
|
31,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
For unconsolidated VIEs, the
maximum loss exposure includes outstanding trust certificates
issued by trusts in rapid amortization, net of recorded
reserves, and excludes the liability for representations and
warranties and corporate guarantees.
|
(2) |
|
At December 31, 2010 and 2009,
$204 million and $15 million of the debt securities
classified as trading account assets were senior securities and
$5 million and $1 million were subordinate securities.
|
(3) |
|
As a holder of these securities,
the Corporation receives scheduled principal and interest
payments. During 2010 and 2009, there were no OTTI losses
recorded on those securities classified as AFS debt securities.
|
(4) |
|
At December 31, 2010 and 2009,
$35 million and $47 million represent subordinate debt
securities held. At December 31, 2009, $100 million
are residual interests classified as AFS debt securities.
|
Under the terms of the Corporations home equity loan
securitizations, advances are made to borrowers when they draw
on their lines of credit and the Corporation is reimbursed for
those advances from the cash flows in the securitization. During
the revolving period of the securitization, this reimbursement
normally occurs within a short period after the advance.
However, when certain securitization transactions have begun a
rapid amortization period, reimbursement of the
Corporations advance occurs only after other parties in
the securitization have received all of the cash flows to which
they are entitled. This has the effect of extending the time
period for which the Corporations advances are
outstanding. In addition, if loan losses requiring draws on
monoline insurers policies, which protect the bondholders
in the securitization, exceed a specified threshold or duration,
the Corporation may not receive reimbursement for all of the
funds advanced to borrowers, as the senior bondholders and the
monoline insurers have priority for repayment.
Substantially all of the home equity loan securitizations for
which the Corporation has an obligation to provide subordinate
advances have entered rapid amortization. The Corporation
evaluates each of these securitizations for potential losses due
to non-recoverable advances by estimating the amount and timing
of future losses on the underlying loans, the excess spread
available to cover such losses and potential cash flow
shortfalls during rapid amortization. A maximum funding
obligation attributable to rapid
amortization cannot be calculated as a home equity borrower has
the ability to pay down and re-draw balances. At
December 31, 2010 and 2009, home equity loan securitization
transactions in rapid amortization, including both consolidated
and unconsolidated trusts, had $12.5 billion and
$14.1 billion of trust certificates outstanding. This
amount is significantly greater than the amount the Corporation
expects to fund. At December 31, 2010, the remaining
$93 million of trust certificates outstanding related to
these types of securitization transactions are expected to enter
rapid amortization during the next 12 months. The charges
that will ultimately be recorded as a result of the rapid
amortization events depend on the performance of the loans, the
amount of subsequent draws and the timing of related cash flows.
At December 31, 2010 and 2009, the reserve for losses on
expected future draw obligations on the home equity loan
securitizations in or expected to be in rapid amortization was
$131 million and $178 million.
The Corporation has consumer MSRs from the sale or
securitization of home equity loans. The Corporation recorded
$79 million and $128 million of servicing fee income
related to home equity securitizations during 2010 and 2009. The
Corporation repurchased $17 million and $31 million of
loans from home equity securitization trusts in order to perform
modifications or pursuant to clean up calls during 2010 and 2009.
176 Bank
of America 2010
Credit Card
Securitizations
The Corporation securitizes originated and purchased credit card
loans. The Corporations continuing involvement with the
securitization trusts includes servicing the receivables,
retaining an undivided interest (sellers interest) in the
receivables, and holding certain retained interests including
senior and subordinate securities, discount receivables,
subordinate interests in accrued interest and fees on the
securitized receivables, and cash reserve accounts. The
Corporation consolidated all credit card securitization trusts
on
January 1, 2010 in accordance with new consolidation
guidance. Certain retained interests, including senior and
subordinate securities, were eliminated in consolidation. The
sellers interest in the trusts, which is pari passu to the
investors interest, and the discount receivables continue
to be classified in loans and leases.
The table below summarizes select information related to credit
card securitization trusts in which the Corporation held a
variable interest at December 31, 2010 and 2009.
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2010
|
|
|
2009
|
|
|
|
Consolidated
|
|
|
Retained Interests in
|
|
(Dollars in millions)
|
|
VIEs
|
|
|
Unconsolidated VIEs
|
|
Maximum loss exposure
(1)
|
|
$
|
36,596
|
|
|
$
|
32,167
|
|
|
|
|
|
|
|
|
|
|
On-balance sheet assets
|
|
|
|
|
|
|
|
|
Trading account assets
|
|
$
|
|
|
|
$
|
80
|
|
Available-for-sale
debt
securities (2)
|
|
|
|
|
|
|
8,501
|
|
Held-to-maturity
securities (2)
|
|
|
|
|
|
|
6,573
|
|
Loans and
leases (3)
|
|
|
92,104
|
|
|
|
14,905
|
|
Allowance for loan and lease losses
|
|
|
(8,505
|
)
|
|
|
(1,727
|
)
|
Derivative assets
|
|
|
1,778
|
|
|
|
|
|
All other
assets (4)
|
|
|
4,259
|
|
|
|
1,547
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
89,636
|
|
|
$
|
29,879
|
|
|
|
|
|
|
|
|
|
|
On-balance sheet liabilities
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
52,781
|
|
|
$
|
|
|
All other liabilities
|
|
|
259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
53,040
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Trust loans
|
|
$
|
92,104
|
|
|
$
|
103,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
At December 31, 2009, maximum
loss exposure represents the total retained interests held by
the Corporation and also includes $2.3 billion related to a
liquidity support commitment the Corporation provided to one of
the U.S. Credit Card Securitization Trusts commercial
paper program. This commercial paper program was terminated in
2010.
|
(2) |
|
As a holder of these securities,
the Corporation receives scheduled principal and interest
payments. During 2009, there were no OTTI losses recorded on
those securities classified as AFS or HTM debt securities.
|
(3) |
|
At December 31, 2010 and 2009,
loans and leases includes $20.4 billion and
$10.8 billion of sellers interest and
$3.8 billion and $4.1 billion of discount receivables.
|
(4) |
|
At December 31, 2010, all
other assets includes restricted cash accounts and unbilled
accrued interest and fees. At December 31, 2009, all other
assets includes discount subordinate interests in accrued
interest and fees on the securitized receivables, cash reserve
accounts and interest-only strips which are carried at fair
value.
|
During 2010, $2.9 billion of new senior debt securities
were issued to external investors from the credit card
securitization trusts. There were no new debt securities issued
to external investors from the credit card securitization trusts
during 2009. Collections reinvested in revolving period
securitizations were $133.8 billion and cash flows received
on residual interests were $5.5 billion during 2009.
At December 31, 2009, there were no recognized servicing
assets or liabilities associated with any of the credit card
securitization transactions. The Corporation recorded
$2.0 billion in servicing fees related to credit card
securitizations during 2009.
During 2010 and 2009, subordinate securities with a notional
principal amount of $11.5 billion and $7.8 billion and
a stated interest rate of zero percent were issued by certain
credit card securitization trusts to the Corporation. In
addition, the Corporation has elected to designate a specified
percentage of new receivables transferred to the trusts as
discount
receivables such that principal collections thereon are
added to finance charges which increases the yield in the trust.
Through the designation of newly transferred receivables as
discount receivables, the Corporation has subordinated a portion
of its sellers interest to the investors interest.
These actions, which were specifically permitted by the terms of
the trust documents, were taken in an effort to address the
decline in the excess spread of the U.S. and U.K. Credit
Card Securitization Trusts. As these trusts were consolidated on
January 1, 2010, the issuance of subordinate securities and
the discount receivables election had no impact on the
Corporations consolidated results during 2010 or 2009. At
December 31, 2009, the carrying amount and fair value of
the retained subordinate securities were $6.6 billion and
$6.4 billion. These balances were eliminated on
January 1, 2010 with the consolidation of the trusts. The
outstanding principal balance of discount receivables, which are
classified in loans and leases, was $3.8 billion and
$4.1 billion at December 31, 2010 and 2009.
Bank of America
2010 177
Other
Asset-backed Securitizations
Other asset-backed securitizations include resecuritization
trusts, municipal bond trusts, and automobile and other
securitization trusts. The table below summarizes select
information related to other asset-backed securitizations in
which the Corporation held a variable interest at
December 31, 2010 and 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile and Other
|
|
|
|
Resecuritization Trusts
|
|
|
Municipal Bond Trusts
|
|
|
Securitization Trusts
|
|
|
|
December 31
|
|
|
December 31
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Unconsolidated VIEs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum loss exposure
|
|
$
|
21,425
|
|
|
$
|
543
|
|
|
$
|
4,261
|
|
|
$
|
10,143
|
|
|
$
|
141
|
|
|
$
|
2,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On-balance sheet assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior securities held
(1, 2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading account assets
|
|
$
|
2,324
|
|
|
$
|
543
|
|
|
$
|
255
|
|
|
$
|
155
|
|
|
$
|
|
|
|
$
|
|
|
AFS debt securities
|
|
|
17,989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109
|
|
|
|
2,212
|
|
Subordinate securities held
(1, 2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading account assets
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AFS debt securities
|
|
|
1,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
195
|
|
Residual interests
held (3)
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
|
203
|
|
|
|
|
|
|
|
83
|
|
All other assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total retained
positions
|
|
$
|
21,425
|
|
|
$
|
543
|
|
|
$
|
255
|
|
|
$
|
358
|
|
|
$
|
126
|
|
|
$
|
2,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets of VIEs
|
|
$
|
55,006
|
|
|
$
|
7,443
|
|
|
$
|
6,108
|
|
|
$
|
12,247
|
|
|
$
|
774
|
|
|
$
|
3,636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated VIEs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum loss exposure
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4,716
|
|
|
$
|
241
|
|
|
$
|
2,061
|
|
|
$
|
908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On-balance sheet assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading account assets
|
|
$
|
68
|
|
|
$
|
|
|
|
$
|
4,716
|
|
|
$
|
241
|
|
|
$
|
|
|
|
$
|
|
|
Loans and leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,583
|
|
|
|
8,292
|
|
Allowance for loan and lease losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(29
|
)
|
|
|
(101
|
)
|
All other assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
196
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
68
|
|
|
$
|
|
|
|
$
|
4,716
|
|
|
$
|
241
|
|
|
$
|
9,750
|
|
|
$
|
8,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On-balance sheet liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper and other short-term borrowings
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4,921
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Long-term debt
|
|
|
68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,681
|
|
|
|
7,308
|
|
All other liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
68
|
|
|
$
|
|
|
|
$
|
4,921
|
|
|
$
|
2
|
|
|
$
|
7,782
|
|
|
$
|
7,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
As a holder of these securities,
the Corporation receives scheduled principal and interest
payments. During 2010 and 2009, there were no significant OTTI
losses recorded on those securities classified as AFS debt
securities.
|
(2) |
|
The retained senior and subordinate
securities were valued using quoted market prices or observable
market inputs (Level 2 of the fair value hierarchy).
|
(3) |
|
The retained residual interests are
carried at fair value which was derived using model valuations
(Level 3 of the fair value hierarchy).
|
Resecuritization
Trusts
The Corporation transfers existing securities, typically MBS,
into resecuritization vehicles at the request of customers
seeking securities with specific characteristics. The
Corporation may also enter into resecuritizations of securities
within its investment portfolio for purposes of improving
liquidity and capital, and managing credit or interest rate
risk. Generally, there are no significant ongoing activities
performed in a resecuritization trust and no single investor has
the unilateral ability to liquidate the trust.
During 2010, the Corporation resecuritized $97.7 billion of
MBS, including $71.3 billion of securities purchased from
third parties compared to $49.2 billion in 2009. Net losses
upon sale totaled $144 million during 2010 compared to net
gains of $213 million in 2009. The Corporation consolidates
a resecuritization trust if it has sole discretion over the
design of the trust, including the identification of securities
to be transferred in and the structure of securities to be
issued, and also retains a variable interest that could
potentially be significant to the trust. If one or a limited
number of third-party investors share responsibility for the
design of the trust and purchase a significant portion of
subordinate securities, the Corporation does not consolidate the
trust. Prior to 2010, these resecuritization trusts were
typically QSPEs and as such were not subject to consolidation by
the Corporation.
Municipal Bond
Trusts
The Corporation administers municipal bond trusts that hold
highly rated, long-term, fixed-rate municipal bonds. The vast
majority of the bonds are rated AAA or AA and some of the bonds
benefit from insurance provided by monolines. The trusts obtain
financing by issuing floating-rate trust certificates that
reprice on a weekly or other basis to third-party investors. The
Corporation may serve as remarketing agent
and/or
liquidity provider for the trusts. The floating-rate investors
have the right to tender the certificates at specified dates,
often with as little as seven days notice. Should the
Corporation be unable to remarket the tendered certificates, it
is generally obligated to purchase them at par under standby
liquidity facilities unless the bonds credit rating has
declined below investment-grade or there has been an event of
default or bankruptcy of the issuer and insurer.
178 Bank
of America 2010
The Corporation also provides credit enhancement to investors in
certain municipal bond trusts whereby the Corporation guarantees
the payment of interest and principal on floating-rate
certificates issued by these trusts in the event of default by
the issuer of the underlying municipal bond. If a customer holds
the residual interest in a trust, that customer typically has
the unilateral ability to liquidate the trust at any time, while
the Corporation typically has the ability to trigger the
liquidation of that trust if the market value of the bonds held
in the trust declines below a specified threshold. This
arrangement is designed to limit market losses to an amount that
is less than the customers residual interest, effectively
preventing the Corporation from absorbing losses incurred on
assets held within that trust. The weighted-average remaining
life of bonds held in the trusts at December 31, 2010 was
13.3 years. There were no material write-downs or
downgrades of assets or issuers during 2010.
During 2010 and 2009, the Corporation was the transferor of
assets into unconsolidated municipal bond trusts and received
cash proceeds from new securitizations of $1.2 billion and
$664 million. At December 31, 2010 and 2009, the
principal balance outstanding for unconsolidated municipal bond
securitization trusts for which the Corporation was transferor
was $2.2 billion and $6.9 billion.
The Corporations liquidity commitments to unconsolidated
municipal bond trusts, including those for which the Corporation
was transferor, totaled $4.0 billion and $9.8 billion
at December 31, 2010 and 2009.
Automobile and
Other Securitization Trusts
The Corporation transfers automobile and other loans into
securitization trusts, typically to improve liquidity or manage
credit risk. At December 31, 2010, the Corporation serviced
assets or otherwise had continuing
involvement with automobile and other securitization trusts with
outstanding balances of $10.5 billion, including trusts
collateralized by automobile loans of $8.4 billion, student
loans of $1.3 billion, and other loans and receivables of
$774 million. At December 31, 2009, the Corporation
serviced assets or otherwise had continuing involvement with
automobile and other securitization trusts with outstanding
balances of $11.9 billion, including trusts collateralized
by automobile loans of $11.0 billion and other loans of
$905 million. The Corporation transferred $3.0 billion
of automobile loans, $1.3 billion of student loans and
$303 million of other receivables to the trusts during 2010
and $9.0 billion of automobile loans during 2009.
Multi-seller
Conduits
The Corporation previously administered four multi-seller
conduits which provided a low-cost funding alternative to the
conduits customers by facilitating access to the
commercial paper market. These customers sold or otherwise
transferred assets to the conduits, which in turn issued
short-term commercial paper that was rated high-grade and was
collateralized by the underlying assets. The Corporation
provided combinations of liquidity and SBLCs to the conduits for
the benefit of third-party investors. These commitments had an
aggregate notional amount outstanding of $34.5 billion at
December 31, 2009. The Corporation liquidated the four
conduits and terminated all liquidity and other commitments
during 2010. Liquidation of the conduits did not impact the
Corporations consolidated results of operations.
The table below summarizes select information related to
multi-seller conduits in which the Corporation held a variable
interest at December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
(Dollars in millions)
|
|
Consolidated
|
|
|
Unconsolidated
|
|
|
Total
|
|
Maximum loss exposure
|
|
$
|
9,388
|
|
|
$
|
25,135
|
|
|
$
|
34,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On-balance sheet assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
debt securities
|
|
$
|
3,492
|
|
|
$
|
|
|
|
$
|
3,492
|
|
Held-to-maturity
debt securities
|
|
|
2,899
|
|
|
|
|
|
|
|
2,899
|
|
Loans and leases
|
|
|
318
|
|
|
|
318
|
|
|
|
636
|
|
All other assets
|
|
|
4
|
|
|
|
60
|
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,713
|
|
|
$
|
378
|
|
|
$
|
7,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On-balance sheet liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper and other short-term borrowings
|
|
$
|
6,748
|
|
|
$
|
|
|
|
$
|
6,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,748
|
|
|
$
|
|
|
|
$
|
6,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets of VIEs
|
|
$
|
6,713
|
|
|
$
|
13,893
|
|
|
$
|
20,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank of America
2010 179
Collateralized
Debt Obligation Vehicles
CDO vehicles hold diversified pools of fixed-income securities,
typically corporate debt or asset-backed securities, which they
fund by issuing multiple tranches of debt and equity securities.
Synthetic CDOs enter into a portfolio of credit default swaps to
synthetically create exposure to fixed-income securities. CLOs
are a subset of CDOs which hold pools of loans, typically
corporate loans or commercial mortgages. CDOs are typically
managed by third-party portfolio managers. The Corporation
transfers assets to these CDOs, holds securities issued by the
CDOs and may be a derivative counterparty to the CDOs, including
a credit default swap counterparty for synthetic CDOs. The
Corporation has also entered into total return swaps with
certain CDOs whereby the Corporation absorbs the economic
returns generated by specified assets held by the CDO. The
Corporation receives fees for structuring CDOs and providing
liquidity support for super senior tranches of securities issued
by certain CDOs. No third parties provide a significant amount
of similar commitments to these CDOs.
The table below summarizes select information related to CDO
vehicles in which the Corporation held a variable interest at
December 31, 2010 and 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2010
|
|
|
2009
|
|
(Dollars in millions)
|
|
Consolidated
|
|
|
Unconsolidated
|
|
|
Total
|
|
|
Consolidated
|
|
|
Unconsolidated
|
|
|
Total
|
|
Maximum loss exposure
(1)
|
|
$
|
2,971
|
|
|
$
|
3,828
|
|
|
$
|
6,799
|
|
|
$
|
3,863
|
|
|
$
|
6,987
|
|
|
$
|
10,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On-balance sheet assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading account assets
|
|
$
|
2,485
|
|
|
$
|
884
|
|
|
$
|
3,369
|
|
|
$
|
2,785
|
|
|
$
|
1,253
|
|
|
$
|
4,038
|
|
Derivative assets
|
|
|
207
|
|
|
|
890
|
|
|
|
1,097
|
|
|
|
|
|
|
|
2,085
|
|
|
|
2,085
|
|
Available-for-sale
debt securities
|
|
|
769
|
|
|
|
338
|
|
|
|
1,107
|
|
|
|
1,414
|
|
|
|
368
|
|
|
|
1,782
|
|
All other assets
|
|
|
24
|
|
|
|
123
|
|
|
|
147
|
|
|
|
|
|
|
|
166
|
|
|
|
166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,485
|
|
|
$
|
2,235
|
|
|
$
|
5,720
|
|
|
$
|
4,199
|
|
|
$
|
3,872
|
|
|
$
|
8,071
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On-balance sheet liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
$
|
|
|
|
$
|
58
|
|
|
$
|
58
|
|
|
$
|
|
|
|
$
|
781
|
|
|
$
|
781
|
|
Long-term debt
|
|
|
3,162
|
|
|
|
|
|
|
|
3,162
|
|
|
|
2,753
|
|
|
|
|
|
|
|
2,753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,162
|
|
|
$
|
58
|
|
|
$
|
3,220
|
|
|
$
|
2,753
|
|
|
$
|
781
|
|
|
$
|
3,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets of VIEs
|
|
$
|
3,485
|
|
|
$
|
43,476
|
|
|
$
|
46,961
|
|
|
$
|
4,199
|
|
|
$
|
56,590
|
|
|
$
|
60,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Maximum loss exposure is net of
credit protection purchased from the CDO with which the
Corporation has involvement but has not been reduced to reflect
the benefit of insurance purchased from other third parties.
|
The Corporations maximum loss exposure of
$6.8 billion at December 31, 2010 includes
$1.8 billion of super senior CDO exposure,
$2.2 billion of exposure to CDO financing facilities and
$2.8 billion of other non-super senior exposure. This
exposure is calculated on a gross basis and does not reflect any
benefit from insurance purchased from third parties other than
the CDO itself. Net of purchased insurance but including
securities retained from liquidations of CDOs, the
Corporations net exposure to super senior CDO-related
positions was $1.2 billion at December 31, 2010. The
CDO financing facilities, which are consolidated, obtain funding
from third parties for CDO positions which are principally
classified in trading account assets on the Corporations
Consolidated Balance Sheet. The CDO financing facilities
long-term debt at December 31, 2010 totaled
$2.6 billion, all of which has recourse to the general
credit of the Corporation.
At December 31, 2010, the Corporation had $951 million
notional amount of super senior CDO liquidity exposure,
including derivatives and other exposures with third parties
that hold super senior cash positions on the Corporations
behalf and to certain synthetic CDOs through which the
Corporation is obligated to purchase super senior CDO securities
at par value if the CDOs
need cash to make payments due under credit default swaps
written by the CDO vehicles. Liquidity-related commitments also
include $1.7 billion notional amount of derivative
contracts with unconsolidated special purpose entities (SPEs),
principally CDO vehicles, which hold non-super senior CDO debt
securities or other debt securities on the Corporations
behalf. These derivatives comprise substantially all of the
$1.7 billion notional amount of derivative contracts
through which the Corporation obtains funding from third-party
SPEs, as described in Note 14 Commitments
and Contingencies. The Corporations $2.7 billion
of aggregate liquidity exposure to CDOs at December 31,
2010 is included in the table above to the extent that the
Corporation sponsored the CDO vehicle or the liquidity exposure
is more than insignificant compared to total assets of the CDO
vehicle. Liquidity exposure included in the table is reported
net of previously recorded losses.
The Corporations maximum exposure to loss is significantly
less than the total assets of the CDO vehicles in the table
above because the Corporation typically has exposure to only a
portion of the total assets. The Corporation has also purchased
credit protection from some of the same CDO vehicles in which it
invested, thus reducing the Corporations maximum exposure
to loss.
180 Bank
of America 2010
Customer
Vehicles
Customer vehicles include credit-linked and equity-linked note
vehicles, repackaging vehicles and asset acquisition vehicles,
which are typically created on behalf of customers who wish to
obtain market or credit exposure to a specific company or
financial instrument.
The table below summarizes select information related to
customer vehicles in which the Corporation held a variable
interest at December 31, 2010 and 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2010
|
|
|
2009
|
|
(Dollars in millions)
|
|
Consolidated
|
|
|
Unconsolidated
|
|
|
Total
|
|
|
Consolidated
|
|
|
Unconsolidated
|
|
|
Total
|
|
Maximum loss exposure
|
|
$
|
4,449
|
|
|
$
|
2,735
|
|
|
$
|
7,184
|
|
|
$
|
277
|
|
|
$
|
10,229
|
|
|
$
|
10,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On-balance sheet assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading account assets
|
|
$
|
3,458
|
|
|
$
|
876
|
|
|
$
|
4,334
|
|
|
$
|
183
|
|
|
$
|
1,334
|
|
|
$
|
1,517
|
|
Derivative assets
|
|
|
1
|
|
|
|
722
|
|
|
|
723
|
|
|
|
78
|
|
|
|
4,815
|
|
|
|
4,893
|
|
Loans and leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65
|
|
|
|
65
|
|
Loans
held-for-sale
|
|
|
959
|
|
|
|
|
|
|
|
959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All other assets
|
|
|
1,429
|
|
|
|
|
|
|
|
1,429
|
|
|
|
16
|
|
|
|
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,847
|
|
|
$
|
1,598
|
|
|
$
|
7,445
|
|
|
$
|
277
|
|
|
$
|
6,214
|
|
|
$
|
6,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On-balance sheet liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
$
|
1
|
|
|
$
|
23
|
|
|
$
|
24
|
|
|
$
|
|
|
|
$
|
267
|
|
|
$
|
267
|
|
Commercial paper and other short-term borrowings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
22
|
|
Long-term debt
|
|
|
3,457
|
|
|
|
|
|
|
|
3,457
|
|
|
|
50
|
|
|
|
74
|
|
|
|
124
|
|
All other liabilities
|
|
|
|
|
|
|
140
|
|
|
|
140
|
|
|
|
|
|
|
|
1,357
|
|
|
|
1,357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,458
|
|
|
$
|
163
|
|
|
$
|
3,621
|
|
|
$
|
72
|
|
|
$
|
1,698
|
|
|
$
|
1,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets of VIEs
|
|
$
|
5,847
|
|
|
$
|
6,090
|
|
|
$
|
11,937
|
|
|
$
|
277
|
|
|
$
|
16,487
|
|
|
$
|
16,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit-linked and equity-linked note vehicles issue notes which
pay a return that is linked to the credit or equity risk of a
specified company or debt instrument. The vehicles purchase
high-grade assets as collateral and enter into credit default
swaps or equity derivatives to synthetically create the credit
or equity risk to pay the specified return on the notes. The
Corporation is typically the counterparty for some or all of the
credit and equity derivatives and, to a lesser extent, it may
invest in securities issued by the vehicles. The Corporation may
also enter into interest rate or foreign currency derivatives
with the vehicles. The Corporation also had approximately
$338 million of other liquidity commitments, including
written put options and collateral value guarantees, with
unconsolidated credit-linked and equity-linked note vehicles at
December 31, 2010.
Repackaging vehicles issue notes that are designed to
incorporate risk characteristics desired by customers. The
vehicles hold debt instruments such as corporate bonds,
convertible bonds or asset-backed securities with the desired
credit risk profile. The Corporation enters into derivatives
with the vehicles to change the interest rate or foreign
currency profile of the debt instruments. If a vehicle holds
convertible bonds and the Corporation retains
the conversion option, the Corporation is deemed to have
controlling financial interest and consolidates the vehicle.
Asset acquisition vehicles acquire financial instruments,
typically loans, at the direction of a single customer and
obtain funding through the issuance of structured notes to the
Corporation. At the time the vehicle acquires an asset, the
Corporation enters into total return swaps with the customer
such that the economic returns of the asset are passed through
to the customer. The Corporation is exposed to counterparty
credit risk if the asset declines in value and the customer
defaults on its obligation to the Corporation under the total
return swaps. The Corporations risk may be mitigated by
collateral or other arrangements. The Corporation consolidates
these vehicles because it has the power to manage the assets in
the vehicles and owns all of the structured notes issued by the
vehicles.
The Corporations maximum exposure to loss from customer
vehicles includes the notional amount of the credit or equity
derivatives to which the Corporation is a counterparty, net of
losses previously recorded, and the Corporations
investment, if any, in securities issued by the vehicles. It has
not been reduced to reflect the benefit of offsetting swaps with
the customers or collateral arrangements.
Bank of America
2010 181
Other Variable
Interest Entities
Other consolidated VIEs primarily include investment vehicles, a
collective investment fund, leveraged lease trusts and asset
acquisition conduits. Other unconsolidated VIEs primarily
include investment vehicles and real estate vehicles.
The table below summarizes select information related to other
VIEs in which the Corporation held a variable interest at
December 31, 2010 and 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2010
|
|
|
2009
|
|
(Dollars in millions)
|
|
Consolidated
|
|
|
Unconsolidated
|
|
|
Total
|
|
|
Consolidated
|
|
|
Unconsolidated
|
|
|
Total
|
|
Maximum loss exposure
|
|
$
|
19,248
|
|
|
$
|
8,796
|
|
|
$
|
28,044
|
|
|
$
|
12,073
|
|
|
$
|
11,290
|
|
|
$
|
23,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On-balance sheet assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading account assets
|
|
$
|
8,900
|
|
|
$
|
|
|
|
$
|
8,900
|
|
|
$
|
269
|
|
|
$
|
|
|
|
$
|
269
|
|
Derivative assets
|
|
|
|
|
|
|
228
|
|
|
|
228
|
|
|
|
1,096
|
|
|
|
83
|
|
|
|
1,179
|
|
Available-for-sale
debt securities
|
|
|
1,832
|
|
|
|
73
|
|
|
|
1,905
|
|
|
|
1,822
|
|
|
|
|
|
|
|
1,822
|
|
Loans and leases
|
|
|
7,690
|
|
|
|
1,122
|
|
|
|
8,812
|
|
|
|
7,820
|
|
|
|
1,200
|
|
|
|
9,020
|
|
Allowance for loan and lease losses
|
|
|
(27
|
)
|
|
|
(22
|
)
|
|
|
(49
|
)
|
|
|
(29
|
)
|
|
|
(10
|
)
|
|
|
(39
|
)
|
Loans
held-for-sale
|
|
|
262
|
|
|
|
949
|
|
|
|
1,211
|
|
|
|
197
|
|
|
|
|
|
|
|
197
|
|
All other assets
|
|
|
937
|
|
|
|
6,440
|
|
|
|
7,377
|
|
|
|
1,285
|
|
|
|
8,777
|
|
|
|
10,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
19,594
|
|
|
$
|
8,790
|
|
|
$
|
28,384
|
|
|
$
|
12,460
|
|
|
$
|
10,050
|
|
|
$
|
22,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On-balance sheet liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
$
|
|
|
|
$
|
9
|
|
|
$
|
9
|
|
|
$
|
|
|
|
$
|
80
|
|
|
$
|
80
|
|
Commercial paper and other short-term borrowings
|
|
|
1,115
|
|
|
|
|
|
|
|
1,115
|
|
|
|
965
|
|
|
|
|
|
|
|
965
|
|
Long-term debt
|
|
|
229
|
|
|
|
|
|
|
|
229
|
|
|
|
33
|
|
|
|
|
|
|
|
33
|
|
All other liabilities
|
|
|
8,683
|
|
|
|
1,657
|
|
|
|
10,340
|
|
|
|
3,123
|
|
|
|
1,466
|
|
|
|
4,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,027
|
|
|
$
|
1,666
|
|
|
$
|
11,693
|
|
|
$
|
4,121
|
|
|
$
|
1,546
|
|
|
$
|
5,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets of VIEs
|
|
$
|
19,594
|
|
|
$
|
13,416
|
|
|
$
|
33,010
|
|
|
$
|
12,460
|
|
|
$
|
14,819
|
|
|
$
|
27,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
Vehicles
The Corporation sponsors, invests in or provides financing to a
variety of investment vehicles that hold loans, real estate,
debt securities or other financial instruments and are designed
to provide the desired investment profile to investors. At
December 31, 2010 and 2009, the Corporations
consolidated investment vehicles had total assets of
$5.6 billion and $5.7 billion. The Corporation also
held investments in unconsolidated vehicles with total assets of
$7.9 billion and $8.8 billion at December 31,
2010 and 2009. The Corporations maximum exposure to loss
associated with both consolidated and unconsolidated investment
vehicles totaled $8.7 billion and $10.7 billion at
December 31, 2010 and 2009.
On January 1, 2010, the Corporation consolidated
$2.5 billion of investment vehicles. This amount included a
real estate investment fund with assets of $1.5 billion
which is designed to provide returns to clients through limited
partnership holdings. At that time, the Corporation was the
general partner and also had a limited partnership interest in
the fund. The Corporation provided support to the fund and
therefore considers the fund to be a VIE. In late 2010, the
Corporation transferred its general partnership interest to a
third party, conveying all ongoing management responsibilities
to that third party. As a result, the Corporation deconsolidated
the fund because it no longer has a controlling financial
interest. The Corporation continues to retain a limited
partnership interest, which is included in the table above.
Collective
Investment Funds
The Corporation is trustee for certain common and collective
investment funds that provide investment opportunities for
eligible clients of GWIM. These funds, which had total
assets of $21.2 billion at December 31, 2010, hold a
variety of cash, debt and equity investments. The Corporation
does not have a variable interest in these funds, except as
described below.
In 2010, the governing documents of a stable value collective
investment fund with total assets of $8.1 billion at
December 31, 2010 were modified to facilitate the planned
liquidation of the fund. The modifications resulted in the
termination of third-party insurance contracts which were
replaced by a guarantee from the Corporation of the net asset
value of the fund, which principally holds short-term
U.S. Treasury and agency securities. In addition, the
Corporation acquired the unilateral ability to replace the
funds asset manager. As a result of these changes, the
Corporation acquired a controlling financial interest in and
consolidated the fund. Consolidation did not have a significant
impact on the Corporations 2010 results of operations.
This fund was not previously consolidated because the
Corporation did not have the unilateral power to replace the
asset manager, nor did it have a variable interest in the fund
that was more than insignificant. Liquidation of the fund will
be finalized in 2011.
182 Bank
of America 2010
Leveraged Lease
Trusts
The Corporations net investment in consolidated leveraged
lease trusts totaled $5.2 billion and $5.6 billion at
December 31, 2010 and 2009. The trusts hold long-lived
equipment such as rail cars, power generation and distribution
equipment, and commercial aircraft. The Corporation structures
the trusts and holds a significant residual interest. The net
investment represents the Corporations maximum loss
exposure to the trusts in the unlikely event that the leveraged
lease investments become worthless. Debt issued by the leveraged
lease trusts is nonrecourse to the Corporation. The Corporation
has no liquidity exposure to these leveraged lease trusts.
Asset Acquisition
Conduits
The Corporation currently administers two asset acquisition
conduits which acquire assets on behalf of the Corporation or
its customers. The Corporation liquidated a third conduit during
2010. Liquidation of the conduit did not impact the
Corporations consolidated results of operations.
These conduits had total assets of $640 million and
$2.2 billion at December 31, 2010 and 2009. One of the
conduits acquires assets at the request of customers who wish to
benefit from the economic returns of the specified assets on a
leveraged basis, which consist principally of liquid
exchange-traded equity securities. The second conduit holds
subordinate AFS debt securities for the Corporations
benefit. The conduits obtain funding by issuing commercial paper
and subordinate certificates to third-party investors. Repayment
of the commercial paper and certificates is assured by total
return swaps between the Corporation and the conduits. When a
conduit acquires assets for the benefit of the
Corporations customers, the Corporation enters into
back-to-back
total return swaps with the conduit and the customer such that
the economic returns of the assets are passed through to the
customer. The Corporations exposure to the counterparty
credit risk of its customers is mitigated by the ability to
liquidate an asset held in the conduit if the customer defaults
on its obligation. The Corporation receives fees for serving as
commercial paper placement agent and for providing
administrative services to the conduits. At December 31,
2010 and 2009, the Corporation did not hold any commercial paper
issued by the asset acquisition conduits other than incidentally
and in its role as a commercial paper dealer.
Real Estate
Vehicles
The Corporation held investments in unconsolidated real estate
vehicles of $5.4 billion and $4.8 billion at
December 31, 2010 and 2009, which consisted of limited
partnership investments in unconsolidated limited partnerships
that finance the construction and rehabilitation of affordable
rental housing. An unrelated third party is typically the
general partner and has control over the significant activities
of the partnership. The Corporation earns a return primarily
through the receipt of tax credits allocated to the affordable
housing projects. The Corporations risk of loss is
mitigated by policies requiring that the project qualify for the
expected tax credits prior to making its investment. The
Corporation may from time to time be asked to invest additional
amounts to support a troubled project. Such additional
investments have not been and are not expected to be significant.
Other
Transactions
In 2010 and prior years, the Corporation transferred pools of
securities to certain independent third parties and provided
financing for approximately 75 percent of the purchase
price under asset-backed financing arrangements. At
December 31, 2010 and 2009, the Corporations maximum
loss exposure under these financing arrangements was
$6.5 billion and $6.8 billion, substantially all of
which was classified as loans on the Corporations
Consolidated Balance Sheet. All principal and interest payments
have been received when due in accordance with their contractual
terms. These arrangements are not included in the table on
page 182 because the purchasers are not VIEs.
NOTE 9 Representations
and Warranties Obligations and Corporate
Guarantees
Background
The Corporation securitizes first-lien residential mortgage
loans, generally in the form of MBS guaranteed by GSEs or GNMA
in the case of FHA-insured and VA-guaranteed mortgage loans. In
addition, in prior years, legacy companies and certain
subsidiaries have sold pools of first-lien residential mortgage
loans, home equity loans and other second-lien loans as
private-label securitizations or in the form of whole loans. In
connection with these transactions, the Corporation or certain
subsidiaries or legacy companies made various representations
and warranties. These representations and warranties, as
governed by the agreements, related to, among other things, the
ownership of the loan, the validity of the lien securing the
loan, the absence of delinquent taxes or liens against the
property securing the loan, the process used to select the loan
for inclusion in a transaction, the loans compliance with
any applicable loan criteria, including underwriting standards,
and the loans compliance with applicable federal, state
and local laws. Breaches of these representations and warranties
may result in a requirement to repurchase mortgage loans, or to
otherwise make whole or provide other remedy to a whole-loan
buyer or securitization trust. In such cases, the Corporation
would be exposed to any subsequent credit loss on the mortgage
loans. The Corporations credit loss would be reduced by
any recourse to sellers of loans (i.e., correspondents) for
representations and warranties previously provided. When a loan
was originated by a third-party correspondent, the Corporation
typically has the right to seek a recovery of related repurchase
losses from the correspondent originator. At December 31,
2010, loans purchased from correspondents comprised
approximately 25 percent of loans underlying outstanding
repurchase demands. During 2010, the Corporation experienced a
decrease in recoveries from correspondents, however, the actual
recovery rate may vary from period to period based upon the
underlying mix of correspondents (e.g., active, inactive,
out-of-business
originators) from which recoveries are sought.
Subject to the requirements and limitations of the applicable
agreements, these representations and warranties can be enforced
by the securitization trustee or the whole-loan buyer as
governed by the applicable agreement or, in certain first-lien
and home equity securitizations where monolines have insured all
or some of the related bonds issued, by the monoline insurer at
any time over the life of the loan. Importantly, in the case of
non-GSE loans, the contractual liability to repurchase arises if
there is a breach of the representations and warranties that
materially and adversely affects the interest of all investors,
or if there is a breach of other standards established by the
terms of the related sale agreement. The Corporation believes
that the longer a loan performs prior to default, the less
likely it is that an alleged underwriting breach of
representations and warranties had a material impact on the
loans performance. Historically, most demands for
repurchase have occurred within the first few years after
origination, generally after a loan has defaulted. However, in
recent periods the time horizon has lengthened due to increased
repurchase request activity across all vintages.
The Corporations current operations are structured to
limit the risk of repurchase and accompanying credit exposure by
seeking to ensure consistent production of mortgages in
accordance with its underwriting procedures and by servicing
those mortgages consistent with its contractual obligations. In
addition, certain securitizations include guarantees written to
protect certain purchasers of the loans from credit losses up to
a specified amount. The fair value of the probable losses to be
absorbed under the representations and warranties obligations
and the guarantees is recorded as an accrued liability when the
loans are sold. The liability for probable losses is updated by
accruing a representations and warranties provision in mortgage
banking income throughout the life of the loan as necessary when
additional relevant information becomes available. The
methodology used to estimate
Bank of America
2010 183
the liability for representations and warranties is a function
of the representations and warranties given and considers a
variety of factors, which include, depending on the
counterparty, actual defaults, estimated future defaults,
historical loss experience, estimated home prices, probability
that a repurchase request will be received, number of payments
made by the borrower prior to default and probability that a
loan will be required to be repurchased. Historical experience
also considers recent events such as the agreements with the
GSEs on December 31, 2010, as discussed below. Changes to
any one of these factors could significantly impact the estimate
of the Corporations liability.
Although the timing and volume has varied, repurchase and
similar requests have increased in recent periods from buyers
and insurers, including monolines. The Corporation expects that
efforts to attempt to assert repurchase requests by monolines,
whole-loan investors and private-label securitization investors
may increase in the future. A
loan-by-loan
review of all properly presented repurchase requests is
performed and demands have been and will continue to be
contested to the extent not considered valid. In addition, the
Corporation may reach a bulk settlement with a counterparty (in
lieu of the
loan-by-loan
review process), on terms determined to be advantageous to the
Corporation.
On December 31, 2010, the Corporation reached agreements
with the GSEs under which the Corporation paid $2.8 billion
to resolve repurchase claims involving certain residential
mortgage loans sold directly to the GSEs by entities related to
legacy Countrywide. The agreements with FHLMC for
$1.28 billion extinguishes all outstanding and potential
mortgage repurchase and make-whole claims arising out of any
alleged breaches of selling representations and warranties
related to loans sold directly by legacy Countrywide to FHLMC
through 2008, subject to certain exceptions the Corporation does
not believe to be material. The agreement with FNMA for
$1.52 billion substantially resolves the existing pipeline
of repurchase and make-whole claims outstanding as of
September 20, 2010 arising out of alleged breaches of
selling representations and warranties related to loans sold
directly by legacy Countrywide to FNMA. These agreements with
the GSEs do not cover legacy Bank of America first-lien
residential mortgage loans sold directly to the GSEs, other
loans sold to the GSEs other than described above, loan
servicing obligations, other contractual obligations or loans
contained in private-label securitizations.
Overall, repurchase requests and disputes with buyers and
insurers regarding representations and warranties have increased
in recent periods which has resulted in an increase in
unresolved repurchase requests for monolines and other non-GSE
counterparties. Generally the volume of unresolved repurchase
requests from the FHA and VA for loans in GNMA-guaranteed
securities is not significant because the requests are limited
in number and are typically resolved quickly. The volume of
repurchase claims as a percentage of the volume of loans
purchased arising from loans sourced from brokers or purchased
from third-party sellers is relatively consistent with the
volume of repurchase claims as a percentage of the volume of
loans originated by the Corporation or its subsidiaries or
legacy companies.
The table below presents outstanding claims by counterparty and
product type at December 31, 2010 and 2009. The information
for 2010 reflects the impact of the recent agreements with the
GSEs.
Outstanding
Claims by Counterparty and Product
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
By counterparty
|
|
|
|
|
|
|
|
|
GSEs
|
|
$
|
2,821
|
|
|
$
|
3,284
|
|
Monolines
|
|
|
4,799
|
|
|
|
2,944
|
|
Whole loan and private-label securitization investors and
other (1)
|
|
|
3,067
|
|
|
|
1,372
|
|
|
|
|
|
|
|
|
|
|
Total outstanding claims by
counterparty
|
|
$
|
10,687
|
|
|
$
|
7,600
|
|
|
|
|
|
|
|
|
|
|
By product type
|
|
|
|
|
|
|
|
|
Prime loans
|
|
$
|
2,040
|
|
|
$
|
1,778
|
|
Alt-A
|
|
|
1,190
|
|
|
|
1,629
|
|
Home equity
|
|
|
3,658
|
|
|
|
2,223
|
|
Pay option
|
|
|
2,889
|
|
|
|
1,122
|
|
Subprime
|
|
|
734
|
|
|
|
540
|
|
Other
|
|
|
176
|
|
|
|
308
|
|
|
|
|
|
|
|
|
|
|
Total outstanding claims by
product type
|
|
$
|
10,687
|
|
|
$
|
7,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
December 31, 2010 includes
$1.7 billion in claims contained in correspondence from
private-label securitizations investors that do not have the
right to demand repurchase of loans directly or the right to
access loan files. The inclusion of these claims in the amounts
noted does not mean that the Corporation believes these claims
have satisfied the contractual thresholds to direct the
securitization trustee to take action or are otherwise
procedurally or substantively valid.
|
As presented in the table on page 185, during 2010 and 2009, the
Corporation paid $5.2 billion and $2.6 billion to
resolve $6.6 billion and $3.0 billion of repurchase
claims through repurchase or reimbursement to the investor or
securitization trust for losses they incurred, resulting in a
loss on the related loans at the time of repurchase or
reimbursement of $3.5 billion and $1.6 billion. The
amount of loss for loan repurchases is reduced by the fair value
of the underlying loan collateral. The repurchase of loans and
indemnification payments related to first-lien and home equity
repurchase claims generally resulted from material breaches of
representations and warranties related to the loans
material compliance with the applicable underwriting standards,
including borrower misrepresentation, credit exceptions without
sufficient compensating factors and non-compliance with
underwriting procedures, although the actual representations
made in a sales transaction and the resulting repurchase and
indemnification activity can vary by transaction or investor. A
direct relationship between the type of defect that causes the
breach of representations and warranties and the severity of the
realized loss has not been observed. Transactions to repurchase
or indemnification payments related to first-lien residential
mortgages primarily involved the GSEs while transactions to
repurchase or indemnification payments for home equity loans
primarily involved the monolines.
184 Bank
of America 2010
The table below presents first-lien and home equity loan
repurchases and indemnification payments for 2010 and 2009.
These amounts include the agreement that was reached with FNMA
as discussed on page 184. These amounts do not include
$1.3 billion paid related to the agreement with FHLMC due
to the global nature of the agreement and, specifically, the
absence of a formal apportionment of the agreement amount
between current and future claims.
Loan
Repurchases and Indemnification Payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2010
|
|
|
2009
|
|
|
|
Unpaid
|
|
|
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
|
|
|
|
Principal
|
|
|
|
|
|
|
|
|
Principal
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Balance
|
|
|
Cash
|
|
|
Loss
|
|
|
Balance
|
|
|
Cash
|
|
|
Loss
|
|
First-lien
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchases
|
|
$
|
2,557
|
|
|
$
|
2,799
|
|
|
$
|
1,142
|
|
|
$
|
1,461
|
|
|
$
|
1,588
|
|
|
$
|
583
|
|
Indemnification payments
|
|
|
3,785
|
|
|
|
2,173
|
|
|
|
2,173
|
|
|
|
1,267
|
|
|
|
730
|
|
|
|
730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total first-lien
|
|
|
6,342
|
|
|
|
4,972
|
|
|
|
3,315
|
|
|
|
2,728
|
|
|
|
2,318
|
|
|
|
1,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchases
|
|
|
78
|
|
|
|
86
|
|
|
|
44
|
|
|
|
116
|
|
|
|
128
|
|
|
|
110
|
|
Indemnification payments
|
|
|
149
|
|
|
|
146
|
|
|
|
146
|
|
|
|
142
|
|
|
|
141
|
|
|
|
141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total home equity
|
|
|
227
|
|
|
|
232
|
|
|
|
190
|
|
|
|
258
|
|
|
|
269
|
|
|
|
251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total first-lien and home
equity
|
|
$
|
6,569
|
|
|
$
|
5,204
|
|
|
$
|
3,505
|
|
|
$
|
2,986
|
|
|
$
|
2,587
|
|
|
$
|
1,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government-sponsored
Enterprises
The Corporation and its subsidiaries have an established history
of working with the GSEs on repurchase requests. Generally, the
Corporation first becomes aware that a GSE is evaluating a
particular loan for repurchase when the Corporation receives a
request from a GSE to review the underlying loan file (file
request). Upon completing its review, the GSE may submit a
repurchase claim to the Corporation. Historically, most file
requests have not resulted in a repurchase claim. As soon as
practicable after receiving a repurchase request from either of
the GSEs, the Corporation evaluates the request and takes
appropriate action. Claim disputes are generally handled through
loan-level negotiations with the GSEs and the Corporation seeks
to resolve the repurchase request within 90 to 120 days of
the receipt of the request although tolerances exist for claims
that remain open beyond this timeframe. Experience with the GSEs
continues to evolve and any disputes are generally related to
areas including reasonableness of stated income, occupancy and
undisclosed liabilities in the vintages with the highest default
rates.
Monoline
Insurers
Unlike the repurchase protocols and experience established with
GSEs, experience with the monolines has been varied and the
protocols and experience with these counterparties has not been
as predictable as with the GSEs. The timetable for the loan file
request, the repurchase request, if any, response and resolution
varies by monoline. Where a breach of representations and
warranties given by the Corporation or subsidiaries or legacy
companies is confirmed on a given loan, settlement is generally
reached as to that loan within 60 to 90 days.
Properly presented repurchase requests for the monolines are
reviewed on a
loan-by-loan
basis. As part of an ongoing claims process, if the Corporation
does not believe a claim is valid, it will deny the claim and
generally indicate the reason for the denial to facilitate
meaningful dialogue with the counterparty although it is not
contractually obligated to do so. When there is disagreement as
to the resolution of a claim, meaningful dialogue and
negotiation is generally necessary between the parties to reach
conclusion on an individual claim. Certain monolines have
instituted litigation against legacy Countrywide and the
Corporation. When claims from these counterparties are denied,
the Corporation does not indicate its reason for denial as it is
not contractually obligated to do so. In the Corporations
experience, the monolines have been generally unwilling to
withdraw repurchase claims, regardless of whether and what
evidence was offered to refute a claim.
The pipeline of unresolved monoline claims where the Corporation
believes a valid defect has not been identified which would
constitute an actionable breach of representations and
warranties continued to grow in 2010. Through December 31,
2010, approximately 11 percent of monoline claims that the
Corporation initially denied have subsequently been resolved
through repurchase or make-whole payments and two percent have
been resolved through rescission. When a claim has been denied
and there has not been communication with the counterparty for
six months, the Corporation views these claims as inactive;
however, they remain in the outstanding claims balance until
resolution.
A liability for representations and warranties has been
established with respect to all monolines for monoline
repurchase requests based on valid identified loan defects and
for repurchase requests that are in the process of review based
on historical repurchase experience with a specific monoline to
the extent such experience provides a reasonable basis on which
to estimate incurred losses from repurchase activity. With
respect to certain monolines where the Corporation believes a
more consistent purchase experience has been established, a
liability has also been established related to repurchase
requests subject to negotiation and unasserted requests to
repurchase current and future defaulted loans. The Corporation
has had limited experience with most of the monoline insurers in
the repurchase process, including limited experience resolving
disputed claims. Also, certain monoline insurers have instituted
litigation against legacy Countrywide and Bank of America, which
limits the Corporations relationship and ability to enter
into constructive dialogue with these monolines to resolve the
open claims. For such monolines and other monolines with whom
the Corporation has limited repurchase experience, in view of
the inherent difficulty of predicting the outcome of those
repurchase requests where a valid defect has not been identified
or in predicting future claim requests and the related outcome
in the case of unasserted requests to repurchase loans from the
securitization trusts in which these monolines have insured all
or some of the related bonds, the Corporation cannot reasonably
estimate the eventual outcome. In addition, the timing of the
ultimate resolution or the eventual loss, if any, related to
those repurchase requests cannot be reasonably estimated. Thus,
with respect to these monolines, a liability for representations
and warranties has not been established related to repurchase
requests where a valid defect has not been identified, or in the
case of any unasserted requests to repurchase loans from the
securitization trusts in which such monolines have insured all
or some of the related bonds. However, certain monoline insurers
have engaged with the Corporation and legacy Countrywide in a
consistent
Bank of America
2010 185
repurchase process and the Corporation has used that experience
to record a liability related to existing and future claims from
such counterparties.
At December 31, 2010, the unpaid principal balance of loans
related to unresolved repurchase requests previously received
from monolines was $4.8 billion, including
$3.0 billion in repurchase requests that have been reviewed
where it is believed a valid defect has not been identified
which would constitute an actionable breach of representations
and warranties and $1.8 billion in repurchase requests that
are in the process of review. As discussed on the previous page,
a portion of the repurchase requests that are initially denied
are ultimately resolved through repurchase or make-whole
payments, after additional dialogue and negotiation with the
monoline insurer. At December 31, 2010, the unpaid
principal balance of loans for which the monolines had requested
loan files for review but for which no repurchase request had
been received was $10.2 billion, excluding loans that had
been paid in full. There will likely be additional requests for
loan files in the future leading to repurchase requests. Such
requests may relate to loans that are currently in
securitization trusts or loans that have defaulted and are no
longer included in the unpaid principal balance of the loans in
the trusts. However, it is unlikely that a repurchase request
will be received for every loan in a securitization or every
file requested or that a valid defect exists for every loan
repurchase request. In addition, any claims paid related to
repurchase requests from a monoline are paid to the
securitization trust and may be used by the securitization trust
to repay any outstanding monoline advances or reduce future
advances from the monolines. To the extent that a monoline has
not advanced funds or does not anticipate that it will be
required to advance funds to the securitization trust, the
likelihood of receiving a repurchase request from a monoline may
be reduced as the monoline would receive limited or no benefit
from the payment of repurchase claims. Moreover, some monolines
are not currently performing their obligations under the
financial guaranty policies they issued which may, in certain
circumstances, impact their ability to present repurchase claims.
Whole Loan Sales
and Private-label Securitizations
The Corporation and its subsidiaries have limited experience
with private-label securitization repurchases as the number of
recent repurchase requests received has been limited as shown in
the outstanding claims table on page 184. The
representations and warranties, as governed by the private-label
securitizations, generally require that counterparties have the
ability to both assert a claim and actually prove that a loan
has an actionable defect under the applicable contracts. While a
securitization trustee may always investigate or demand
repurchase on its own action, in order for investors to direct
the securitization trustee to investigate loan files or demand
the repurchase of loans, the securitization agreements generally
require the security holders to hold a specified percentage,
such as 25 percent, of the voting rights of the outstanding
securities. In addition, the Corporation believes the agreements
for private-label securitizations generally contain less
rigorous representations and warranties and higher burdens on
investors seeking repurchases than the comparable agreements
with the GSEs.
The majority of repurchase requests that the Corporation has
received relate to whole loan sales. Most of the loans sold in
the form of whole loans were subsequently pooled with other
mortgages into private-label securitizations issued by
third-party buyers of the loans. The buyers of the whole loans
received representations and warranties in the sales transaction
and may retain those rights even when the loans are aggregated
with other collateral into private-label securitizations.
Properly presented repurchase requests for these whole loans are
reviewed on a
loan-by-loan
basis. If, after the Corporations review, it does not
believe a claim is valid, it will deny the claim and generally
indicate a reason for the denial. When the counterparty agrees
with the Corporations denial of the claim, the
counterparty may rescind the claim. When there is disagreement
as to the resolution of the claim, meaningful
dialogue and negotiation between the parties is generally
necessary to reach conclusion on an individual claim. Generally,
a whole loan sale claimant is engaged in the repurchase process
and the Corporation and the claimant reach resolution, either
through
loan-by-loan
negotiation or at times, through a bulk settlement. Through
December 31, 2010, approximately 17 percent of the
whole loan claims that the Corporation initially denied have
subsequently been resolved through repurchase or make-whole
payments and 53 percent have been resolved through
rescission or repayment in full by the borrower. Although the
timeline for resolution varies, once an actionable breach is
identified on a given loan, settlement is generally reached as
to that loan within 60 to 90 days. When a claim has been
denied and the Corporation does not have communication with the
counterparty for six months, the Corporation views these claims
as inactive; however, they remain in the outstanding claims
balance until resolution.
On October 18, 2010, Countrywide Home Loans Servicing, LP
(which changed its name to BAC Home Loans Servicing, LP), a
wholly-owned subsidiary of the Corporation, in its capacity as
servicer on 115 private-label securitizations, which was
subsequently extended to 225 securitizations, received a letter
that asserts breaches of certain servicing obligations,
including an alleged failure to provide notice of breaches of
representations and warranties with respect to mortgage loans
included in the transactions. Additionally, the Corporation
received new claim demands totaling $1.7 billion in
correspondence from private-label securitization investors.
Private-label securitization investors generally do not have the
contractual right to demand repurchase of loans directly or the
right to access loan files. The inclusion of the
$1.7 billion in outstanding claims does not mean that the
Corporation believes these claims have satisfied the contractual
thresholds required for the private-label securitization
investors to direct the securitization trustee to take action or
are otherwise procedurally or substantively valid.
Liability for
Representations and Warranties and Corporate
Guarantees
The liability for representations and warranties and corporate
guarantees is included in accrued expenses and other liabilities
and the related provision is included in mortgage banking income.
The table below presents a rollforward of the liability for
representations and warranties and corporate guarantees.
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
Liability for representations
and warranties and corporate guarantees, beginning of
year
|
|
$
|
3,507
|
|
|
$
|
2,271
|
|
Merrill Lynch acquisition
|
|
|
|
|
|
|
580
|
|
Additions for new sales
|
|
|
30
|
|
|
|
41
|
|
Charge-offs
|
|
|
(4,803
|
)
|
|
|
(1,312
|
)
|
Provision
|
|
|
6,786
|
|
|
|
1,851
|
|
Other
|
|
|
(82
|
)
|
|
|
76
|
|
|
|
|
|
|
|
|
|
|
Liability for representations
and warranties and corporate guarantees, December 31
|
|
$
|
5,438
|
|
|
$
|
3,507
|
|
|
|
|
|
|
|
|
|
|
The liability for representations and warranties has been
established when those obligations are both probable and
reasonably estimable. As previously discussed, the Corporation
reached agreements with the GSEs resolving repurchase claims
involving certain residential mortgage loans sold to them by
entities related to legacy Countrywide. The Corporations
liability for obligations under representations and warranties
given to the GSEs considers the recent agreements and their
impact on the repurchase rates on future claims that may be
received on loans that have defaulted or that are estimated to
default. The Corporation believes that its remaining exposure to
repurchase obligations for first-lien residential mortgage loans
sold directly to the GSEs has been accounted for as a result of
these agreements and the associated adjustments to the recorded
liability for representations and
186 Bank
of America 2010
warranties for first-lien residential mortgage loans sold
directly to the GSEs in 2010 and 2009, and for other loans sold
directly to the GSEs and not covered by these agreements. The
Corporation believes its predictive repurchase models, utilizing
its historical repurchase experience with the GSEs while
considering current developments, including the recent
agreements, projections of future defaults, as well as certain
assumptions regarding economic conditions, home prices and other
matters, allows it to reasonably estimate the liability for
representations and warranties on loans sold to the GSEs.
However, future provisions for representations and warranties
liability to the GSEs may be affected if actual experience is
different from the Corporations historical experience with
the GSEs or the Corporations projections of future
defaults and assumptions regarding economic conditions, home
prices and other matters that are incorporated in the provision
calculation. Although experience with non-GSE claims remains
limited, the Corporation expects additional activity in this
area going forward and the volume of repurchase claims from
monolines, whole-loan investors and investors in private-label
securitizations could increase in the future. It is reasonably
possible that future losses may occur and the Corporations
estimate is that the upper range of possible loss related to
non-GSE sales could be $7 billion to $10 billion over
existing accruals. This estimate does not represent a probable
loss, is based on currently available information, significant
judgment, and a number of assumptions that are subject to
change. A significant portion of this estimate relates to loans
originated through legacy Countrywide, and the repurchase
liability is generally limited to the original seller of the
loan. Future provisions and possible loss or range of loss may
be impacted if actual results are different from the
Corporations assumptions regarding economic conditions,
home prices and other matters and may vary by counterparty. The
resolution of the repurchase claims process with the non-GSE
counterparties will likely be a protracted process, and the
Corporation will vigorously contest any request for repurchase
if it concludes that a valid basis for repurchase claim does not
exist.
NOTE 10 Goodwill
and Intangible Assets
Goodwill
The table below presents goodwill balances by business segment
at December 31, 2010 and 2009. As discussed in more detail
in Note 26 Business Segment Information,
on January 1, 2010, the Corporation realigned the
former Global Banking and Global Markets business
segments. There was no impact on the reporting units used in
goodwill impairment testing. The reporting units utilized for
goodwill impairment tests are the business segments or one level
below the business segments as outlined in the following table.
Substantially all of the decline in goodwill in 2010 is the
result of $12.4 billion of goodwill impairment charges, as
described below. No goodwill impairment was recognized in 2009.
The decline in GWIM was attributable to the sale of
Columbia Managements long-term asset management business.
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
Deposits
|
|
$
|
17,875
|
|
|
$
|
17,875
|
|
Global Card Services
|
|
|
11,889
|
|
|
|
22,292
|
|
Home Loans & Insurance
|
|
|
2,796
|
|
|
|
4,797
|
|
Global Commercial Banking
|
|
|
20,656
|
|
|
|
20,656
|
|
Global Banking & Markets
|
|
|
10,682
|
|
|
|
10,252
|
|
Global Wealth & Investment Management
|
|
|
9,928
|
|
|
|
10,411
|
|
All Other
|
|
|
35
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
Total goodwill
|
|
$
|
73,861
|
|
|
$
|
86,314
|
|
|
|
|
|
|
|
|
|
|
Global Card
Services Impairment
On July 21, 2010, the Financial Reform Act was signed into
law. Under the Financial Reform Act and its amendment to the
Electronic Fund Transfer Act, the Federal Reserve must
adopt rules within nine months of enactment of the Financial
Reform Act regarding the interchange fees that may be charged
with respect to electronic debit transactions. Those rules will
take effect one year after enactment of the Financial Reform
Act. The Financial Reform Act and the applicable rules are
expected to materially reduce the future revenues generated by
the debit card business of the Corporation. The
Corporations consumer and small business card products,
including the debit card business, are part of an integrated
platform within Global Card Services. During the three
months ended September 30, 2010, the Corporations
estimate of revenue loss due to the Financial Reform Act was
approximately $2.0 billion annually based on current
volumes. Accordingly, the Corporation performed an impairment
test for Global Card Services during the three months
ended September 30, 2010.
In step one of the impairment test, the fair value of Global
Card Services was estimated under the income approach where
the significant assumptions included the discount rate, terminal
value, expected loss rates and expected new account growth. The
Corporation also updated its estimated cash flows to reflect the
current strategic plan forecast and other portfolio assumptions.
Based on the results of step one of the impairment test, the
Corporation determined that the carrying amount of Global
Card Services, including goodwill, exceeded the fair value.
The carrying amount, fair value and goodwill for the Global
Card Services reporting unit were $39.2 billion,
$25.9 billion and $22.3 billion, respectively.
Accordingly, the Corporation performed step two of the goodwill
impairment test for this reporting unit. In step two, the
Corporation compared the implied fair value of the reporting
units goodwill with the carrying amount of that goodwill.
Under step two of the impairment test, significant assumptions
in measuring the fair value of the assets and liabilities
including discount rates, loss rates and interest rates were
updated to reflect the current economic conditions. Based on the
results of this goodwill impairment test for Global Card
Services, the carrying value of the goodwill assigned to the
reporting unit exceeded the implied fair value by
$10.4 billion. Accordingly, the Corporation recorded a
non-cash, non-tax deductible goodwill impairment charge of
$10.4 billion to reduce the carrying value of goodwill in
Global Card Services from $22.3 billion to
$11.9 billion. The goodwill impairment test included
limited mitigation actions in Global Card Services to
recapture lost revenue. Although the Corporation has identified
other potential mitigation actions, the impact of these actions
going forward did not reduce the goodwill impairment charge
because these actions are in the early stages of development
and, additionally, certain of them may impact segments other
than Global Card Services (e.g., Deposits).
Due to the continued stress on Global Card Services as a
result of the Financial Reform Act, the Corporation concluded
that an additional impairment test should be performed for this
reporting unit during the three months ended December 31,
2010. In step one of the goodwill impairment test, the fair
value of Global Card Services was estimated under the
income approach. The significant assumptions under the income
approach included the discount rate, terminal value, expected
loss rates and expected new account growth. The carrying amount,
fair value and goodwill for the Global Card Services
reporting unit were $27.5 billion, $27.6 billion
and $11.9 billion, respectively. The estimated fair value
as a percent of the carrying amount at December 31, 2010
was 100 percent. Although the fair value exceeded the
carrying amount in step one of the Global Card Services
goodwill impairment test, to further substantiate the value
of goodwill, the Corporation also performed the step two test
for this reporting unit. Under step two of the goodwill
impairment test for this reporting unit, significant assumptions
in measuring the fair value of the assets and liabilities of the
reporting unit including discount rates, loss rates and interest
rates were updated to reflect the current economic conditions.
The results of step two of the goodwill impairment test
indicated that the remaining balance of goodwill of
$11.9 billion was not impaired as of December 31, 2010.
Bank of America
2010 187
On December 16, 2010, the Federal Reserve released proposed
regulations to implement the Durbin Amendment of the Financial
Reform Act, which are scheduled to be effective July 21,
2011. The proposed regulations included two alternative
interchange fee standards that would apply to all covered
issuers: one based on each issuers costs, with a safe
harbor initially set at $0.07 per transaction and a cap
initially set at $0.12 per transaction, and the other a
stand-alone cap initially set at $0.12 per transaction. Although
the range of estimated revenue loss based on the proposed
regulations was slightly higher than the Corporations
original estimate of $2.0 billion, given the uncertainty
around the potential outcome, the Corporation did not change the
revenue loss estimate used in the goodwill impairment test
during the three months ended December 31, 2010. If the
final Federal Reserve rule sets interchange fee standards that
are significantly lower than the interchange fee assumptions the
Corporation used in this goodwill impairment test, the
Corporation will be required to perform an additional goodwill
impairment test. If the final interchange fee standards are at
the lowest proposed fee alternative, the Corporations
current estimate of the revenue loss could result in an
additional goodwill impairment charge for Global Card
Services. In view of the uncertainty with model inputs
including the final ruling, changes in the economic outlook and
the corresponding impact to revenues and asset quality, and the
impacts of mitigation actions, it is not possible to estimate
the amount or range of amounts of additional goodwill
impairment, if any.
Home
Loans & Insurance Impairment
During the three months ended December 31, 2010, the
Corporation performed an impairment test for the Home
Loans & Insurance reporting unit as it was likely
that there was a decline in its fair value as a result of
increased
uncertainties, including existing and potential litigation
exposure and other potential risks, higher current servicing
costs including loss mitigation efforts, foreclosure related
issues and the redeployment of centralized sales resources to
address servicing needs. In step one of the goodwill impairment
test, the fair value of Home Loans & Insurance
was estimated based on a combination of the market approach
and the income approach. Under the market approach valuation,
significant assumptions included market multiples and a control
premium. The significant assumptions for the valuation of
Home Loans & Insurance under the income
approach included cash flow estimates, the discount rate and the
terminal value. These assumptions were updated to reflect the
current strategic plan forecast and to address the increased
uncertainties referenced above. Based on the results of step one
of the impairment test, the Corporation determined that
the carrying amount of Home Loans & Insurance,
including goodwill, exceeded the fair value. The carrying
amount, fair value and goodwill for the Home
Loans & Insurance reporting unit were
$24.7 billion, $15.1 billion and $4.8 billion,
respectively. Accordingly, the Corporation performed step two of
the goodwill impairment test for this reporting unit. In step
two, the Corporation compared the implied fair value of the
reporting units goodwill with the carrying amount of that
goodwill. Under step two of the goodwill impairment test,
significant assumptions in measuring the fair value of the
assets and liabilities of the reporting unit including discount
rates, loss rates and interest rates were updated to reflect the
current economic conditions. Based on the results of step two of
the impairment test, the carrying value of the goodwill assigned
to Home Loans & Insurance exceeded the implied
fair value by $2.0 billion. Accordingly, the Corporation
recorded a non-cash, non-tax deductible goodwill impairment
charge of $2.0 billion as of December 31, 2010 to
reduce the carrying value of goodwill in the Home
Loans & Insurance reporting unit.
Intangible
Assets
The table below presents the gross carrying amounts and
accumulated amortization related to intangible assets at
December 31, 2010 and 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2010
|
|
|
2009
|
|
|
|
Gross
|
|
|
Accumulated
|
|
|
Gross
|
|
|
Accumulated
|
|
(Dollars in millions)
|
|
Carrying Value
|
|
|
Amortization
|
|
|
Carrying Value
|
|
|
Amortization
|
|
Purchased credit card relationships
|
|
$
|
7,162
|
|
|
$
|
4,085
|
|
|
$
|
7,179
|
|
|
$
|
3,452
|
|
Core deposit intangibles
|
|
|
5,394
|
|
|
|
4,094
|
|
|
|
5,394
|
|
|
|
3,722
|
|
Customer relationships
|
|
|
4,232
|
|
|
|
1,222
|
|
|
|
4,232
|
|
|
|
760
|
|
Affinity relationships
|
|
|
1,647
|
|
|
|
902
|
|
|
|
1,651
|
|
|
|
751
|
|
Other intangibles
|
|
|
3,087
|
|
|
|
1,296
|
|
|
|
3,438
|
|
|
|
1,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible
assets
|
|
$
|
21,522
|
|
|
$
|
11,599
|
|
|
$
|
21,894
|
|
|
$
|
9,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
None of the intangible assets were impaired at December 31,
2010 or 2009. Amortization of intangibles expense was
$1.7 billion, $2.0 billion and $1.8 billion in
2010, 2009 and 2008. The Corporation estimates aggregate
amortization expense will be approximately $1.5 billion,
$1.3 billion, $1.2 billion, $1.0 billion and
$900 million for 2011 through 2015, respectively.
188 Bank
of America 2010
NOTE 11 Deposits
The Corporation had U.S. certificates of deposit and other
U.S. time deposits of $100 thousand or more totaling
$60.5 billion and $99.4 billion at December 31,
2010 and 2009.
Non-U.S. certificates
of deposit and other
non-U.S. time
deposits of $100 thousand or more totaled $64.9 billion and
$67.2 billion at December 31, 2010 and 2009. The table
below presents the contractual maturities for time deposits of
$100 thousand or more at December 31, 2010.
Time deposits
of $100 thousand or more
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over Three
|
|
|
|
|
|
|
|
|
|
Three months
|
|
|
Months to
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
or Less
|
|
|
Twelve Months
|
|
|
Thereafter
|
|
|
Total
|
|
U.S. certificates of deposit and other time deposits
|
|
$
|
21,486
|
|
|
$
|
29,097
|
|
|
$
|
9,954
|
|
|
$
|
60,537
|
|
Non-U.S.
certificates of deposit and other time deposits
|
|
|
61,717
|
|
|
|
2,559
|
|
|
|
660
|
|
|
|
64,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The scheduled contractual maturities for total time deposits at
December 31, 2010 are presented in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
Total
|
|
Due in 2011
|
|
$
|
110,176
|
|
|
$
|
71,104
|
|
|
$
|
181,280
|
|
Due in 2012
|
|
|
12,853
|
|
|
|
150
|
|
|
|
13,003
|
|
Due in 2013
|
|
|
4,426
|
|
|
|
119
|
|
|
|
4,545
|
|
Due in 2014
|
|
|
2,944
|
|
|
|
14
|
|
|
|
2,958
|
|
Due in 2015
|
|
|
1,793
|
|
|
|
1
|
|
|
|
1,794
|
|
Thereafter
|
|
|
4,091
|
|
|
|
87
|
|
|
|
4,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total time deposits
|
|
$
|
136,283
|
|
|
$
|
71,475
|
|
|
$
|
207,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 12 Federal
Funds Sold, Securities Borrowed or Purchased Under Agreements to
Resell and Short-term Borrowings
The following table presents federal funds sold or purchased,
securities borrowed or purchased and loaned or sold under
agreements to resell or repurchase, and other short-term
borrowings.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
(Dollars in millions)
|
|
Amount
|
|
|
Rate
|
|
|
Amount
|
|
|
Rate
|
|
|
Amount
|
|
|
Rate
|
|
Federal funds sold and
securities borrowed or purchased under agreements to
resell
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31
|
|
$
|
209,616
|
|
|
|
0.85
|
%
|
|
$
|
189,933
|
|
|
|
0.78
|
%
|
|
$
|
82,478
|
|
|
|
0.95
|
%
|
Average during the year
|
|
|
256,943
|
|
|
|
0.71
|
|
|
|
235,764
|
|
|
|
1.23
|
|
|
|
128,053
|
|
|
|
2.59
|
|
Maximum month-end balance during year
|
|
|
314,932
|
|
|
|
n/a
|
|
|
|
271,321
|
|
|
|
n/a
|
|
|
|
152,436
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds
purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31
|
|
|
1,458
|
|
|
|
0.14
|
|
|
|
4,814
|
|
|
|
0.09
|
|
|
|
14,432
|
|
|
|
0.11
|
|
Average during year
|
|
|
4,718
|
|
|
|
0.15
|
|
|
|
4,239
|
|
|
|
0.05
|
|
|
|
8,969
|
|
|
|
1.67
|
|
Maximum month-end balance during year
|
|
|
8,320
|
|
|
|
n/a
|
|
|
|
4,814
|
|
|
|
n/a
|
|
|
|
18,788
|
|
|
|
n/a
|
|
Securities loaned or sold under
agreements to repurchase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31
|
|
|
243,901
|
|
|
|
1.15
|
|
|
|
250,371
|
|
|
|
0.39
|
|
|
|
192,166
|
|
|
|
0.84
|
|
Average during year
|
|
|
348,936
|
|
|
|
0.74
|
|
|
|
365,624
|
|
|
|
0.96
|
|
|
|
264,012
|
|
|
|
2.54
|
|
Maximum month-end balance during year
|
|
|
458,532
|
|
|
|
n/a
|
|
|
|
407,967
|
|
|
|
n/a
|
|
|
|
295,537
|
|
|
|
n/a
|
|
Commercial paper
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31
|
|
|
15,093
|
|
|
|
0.65
|
|
|
|
13,131
|
|
|
|
0.65
|
|
|
|
37,986
|
|
|
|
1.80
|
|
Average during year
|
|
|
25,923
|
|
|
|
0.56
|
|
|
|
26,697
|
|
|
|
1.03
|
|
|
|
57,337
|
|
|
|
3.09
|
|
Maximum month-end balance during year
|
|
|
36,236
|
|
|
|
n/a
|
|
|
|
37,025
|
|
|
|
n/a
|
|
|
|
65,399
|
|
|
|
n/a
|
|
Other short-term
borrowings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31
|
|
|
44,869
|
|
|
|
2.02
|
|
|
|
56,393
|
|
|
|
1.72
|
|
|
|
120,070
|
|
|
|
2.07
|
|
Average during year
|
|
|
50,752
|
|
|
|
1.88
|
|
|
|
92,084
|
|
|
|
1.87
|
|
|
|
125,385
|
|
|
|
2.99
|
|
Maximum month-end balance during year
|
|
|
63,081
|
|
|
|
n/a
|
|
|
|
169,602
|
|
|
|
n/a
|
|
|
|
160,150
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
n/a = not applicable
Bank of America, N.A. maintains a global program to offer up to
a maximum of $75.0 billion outstanding at any one time, of
bank notes with fixed or floating rates and maturities of at
least seven days from the date of issue. Short-term bank notes
outstanding under this program totaled $14.6 billion and
$20.6 billion at December 31, 2010 and 2009. These
short-term bank notes, along with Federal Home Loan Bank (FHLB)
advances, U.S. Treasury
tax and loan notes, and term federal funds purchased, are
included in commercial paper and other short-term borrowings on
the Consolidated Balance Sheet. See Note 13
Long-term Debt for information regarding the long-term notes
that may be issued under the $75.0 billion bank note
program.
Bank of America
2010 189
NOTE 13 Long-term
Debt
Long-term debt consists of borrowings having an original
maturity of one year or more. The table below presents the
balance of long-term debt at December 31, 2010 and 2009,
and the related contractual rates and maturity dates at
December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
Notes issued by Bank of America
Corporation
|
|
|
|
|
|
|
|
|
Senior notes:
|
|
|
|
|
|
|
|
|
Fixed, with a weighted-average rate of 4.82%, ranging from 0.25%
to 9.00%, due 2011 to 2043
|
|
$
|
85,157
|
|
|
$
|
78,282
|
|
Floating, with a weighted-average rate of 1.26%, ranging from
0.19% to 7.18%, due 2011 to 2041
|
|
|
36,162
|
|
|
|
47,731
|
|
Senior structured notes
|
|
|
18,796
|
|
|
|
8,897
|
|
Subordinated notes:
|
|
|
|
|
|
|
|
|
Fixed, with a weighted-average rate of 5.69%, ranging from 2.40%
to 10.20%, due 2011 to 2038
|
|
|
26,553
|
|
|
|
28,017
|
|
Floating, with a weighted-average rate of 2.00%, ranging from
0.04% to 5.43%, due 2016 to 2019
|
|
|
705
|
|
|
|
681
|
|
Junior subordinated notes (related to trust preferred
securities):
|
|
|
|
|
|
|
|
|
Fixed, with a weighted-average rate of 6.72%, ranging from 5.25%
to 11.45%, due 2026 to 2055
|
|
|
15,709
|
|
|
|
15,763
|
|
Floating, with a weighted-average rate of 0.91%, ranging from
0.55% to 3.64%, due 2027 to 2056
|
|
|
3,514
|
|
|
|
3,517
|
|
|
|
|
|
|
|
|
|
|
Total notes issued by Bank of
America Corporation
|
|
|
186,596
|
|
|
|
182,888
|
|
|
|
|
|
|
|
|
|
|
Notes issued by Merrill
Lynch & Co., Inc. and subsidiaries
|
|
|
|
|
|
|
|
|
Senior notes:
|
|
|
|
|
|
|
|
|
Fixed, with a weighted-average rate of 5.44%, ranging from 0.05%
to 8.83%, due 2011 to 2037
|
|
|
43,495
|
|
|
|
52,506
|
|
Floating, with a weighted-average rate of 1.21%, ranging from
0.02% to 5.21%, due 2011 to 2037
|
|
|
27,447
|
|
|
|
36,624
|
|
Senior structured notes
|
|
|
38,891
|
|
|
|
48,518
|
|
Subordinated notes:
|
|
|
|
|
|
|
|
|
Fixed, with a weighted-average rate of 6.05%, ranging from 2.61%
to 8.125%, due 2016 to 2038
|
|
|
9,423
|
|
|
|
9,258
|
|
Floating, with a weighted-average rate of 2.09%, ranging from
0.89% to 5.29%, due 2017 to 2026
|
|
|
1,935
|
|
|
|
1,857
|
|
Junior subordinated notes (related to trust preferred
securities):
|
|
|
|
|
|
|
|
|
Fixed, with a weighted-average rate of 6.91%, ranging from 6.45%
to 7.38%, due 2062 to perpetual
|
|
|
3,576
|
|
|
|
3,552
|
|
Other long-term debt
|
|
|
986
|
|
|
|
2,636
|
|
|
|
|
|
|
|
|
|
|
Total notes issued by Merrill
Lynch & Co., Inc. and subsidiaries
|
|
|
125,753
|
|
|
|
154,951
|
|
|
|
|
|
|
|
|
|
|
Notes issued by Bank of America,
N.A. and other subsidiaries
|
|
|
|
|
|
|
|
|
Senior notes:
|
|
|
|
|
|
|
|
|
Fixed, with a weighted-average rate of 1.13%, ranging from 0.25%
to 7.00%, due 2011 to 2027
|
|
|
169
|
|
|
|
12,461
|
|
Floating, with a weighted-average rate of 0.30%, ranging from
0.20% to 0.85%, due 2011 to 2051
|
|
|
12,562
|
|
|
|
24,846
|
|
Senior structured notes
|
|
|
1,319
|
|
|
|
|
|
Subordinated notes:
|
|
|
|
|
|
|
|
|
Fixed, with a weighted-average rate of 5.91%, ranging from 5.30%
to 7.13%, due 2012 to 2036
|
|
|
5,194
|
|
|
|
5,193
|
|
Floating, with a weighted-average rate of 0.59%, ranging from
0.29% to 0.60%, due 2016 to 2019
|
|
|
2,023
|
|
|
|
2,272
|
|
|
|
|
|
|
|
|
|
|
Total notes issued by Bank of
America, N.A. and other subsidiaries
|
|
|
21,267
|
|
|
|
44,772
|
|
|
|
|
|
|
|
|
|
|
Other debt
|
|
|
|
|
|
|
|
|
Advances from Federal Home Loan Banks:
|
|
|
|
|
|
|
|
|
Fixed, with a weighted-average rate of 3.43%, ranging from 0.38%
to 8.29%, due 2011 to 2034
|
|
|
41,001
|
|
|
|
53,032
|
|
Floating, with a weighted-average rate of 0.16%, ranging from
0.16% to 0.18%, due 2011 to 2013
|
|
|
750
|
|
|
|
750
|
|
Other
|
|
|
2,051
|
|
|
|
2,128
|
|
|
|
|
|
|
|
|
|
|
Total other debt
|
|
|
43,802
|
|
|
|
55,910
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt excluding
consolidated VIEs
|
|
|
377,418
|
|
|
|
438,521
|
|
Long-term debt of consolidated VIEs under new consolidation
guidance
|
|
|
71,013
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
448,431
|
|
|
$
|
438,521
|
|
|
|
|
|
|
|
|
|
|
n/a = not applicable
At December 31, 2010, long-term debt of consolidated VIEs
included credit card, automobile, home equity and other VIEs of
$52.8 billion, $6.5 billion, $3.6 billion and
$8.1 billion, respectively. Long-term debt of VIEs is
collateralized by the assets of the VIEs. For more information,
see Note 8 Securitizations and Other
Variable Interest Entities.
The majority of the floating rates are based on three- and
six-month London Interbank Offered Rate (LIBOR).
Bank of America Corporation, Merrill Lynch & Co., Inc.
and subsidiaries, and Bank of America, N.A. maintain various
U.S. and
non-U.S. debt
programs to offer both senior and subordinated notes. The notes
may be denominated in U.S. dollars or foreign currencies.
At December 31, 2010 and 2009, the amount of foreign
currency-denominated debt translated into U.S. dollars
included in total long-term debt was $145.9 billion and
$156.8 billion. Foreign currency contracts are used to
convert certain foreign currency-denominated debt into
U.S. dollars.
At December 31, 2010 and 2009, Bank of America Corporation
had approximately $88.4 billion and $119.1 billion of
authorized, but unissued, corporate debt and other securities
under its existing U.S. shelf registration statements. At
December 31, 2010 and 2009, Bank of America, N.A. had
approximately $53.3 billion and $35.3 billion of
authorized, but unissued, bank notes under its existing
$75.0 billion bank note program. Long-term bank notes
issued and outstanding under Bank of America, N.A.s
$75.0 billion bank note program totaled $7.1 billion
and $19.1 billion at December 31, 2010 and 2009. At
both December 31, 2010 and 2009, Bank of America, N.A. had
approximately $20.6 billion of authorized, but unissued,
mortgage notes under its $30.0 billion mortgage bond
program.
The weighted-average effective interest rates for total
long-term debt, excluding senior structured notes, total
fixed-rate debt and total floating-rate debt, based on the rates
in effect at December 31, 2010, were 3.96 percent,
5.02 percent and 1.09 percent, respectively, at
December 31, 2010 and,
190 Bank
of America 2010
based on the rates in effect at December 31, 2009, were
3.62 percent, 4.93 percent and 0.80 percent,
respectively, at December 31, 2009. The Corporations
ALM activities maintain an overall interest rate risk management
strategy that incorporates the use of interest rate contracts to
manage fluctuations in earnings that are caused by interest rate
volatility. The Corporations goal is to manage interest
rate sensitivity so that movements in interest rates do not
significantly adversely affect net interest income. The above
weighted-average rates are the contractual interest rates on the
debt, and do not reflect the impacts of derivative transactions.
The weighted-average interest rate for debt, excluding senior
structured notes, issued by Merrill Lynch & Co., Inc.
and subsidiaries was 4.11 percent and 3.73 percent at
December 31, 2010 and 2009. At December 31, 2010, the
Corporation has not assumed or guaranteed the
$120.9 billion of long-term debt that was issued or
guaranteed by Merrill Lynch & Co., Inc. or its
subsidiaries prior to the acquisition of Merrill Lynch by the
Corporation.
Beginning late in the third quarter of 2009, in connection with
the update or renewal of certain Merrill Lynch
non-U.S. securities
offering programs, the Corporation agreed to guarantee debt
securities, warrants
and/or
certificates issued by certain subsidiaries of Merrill
Lynch & Co., Inc. on a going-forward basis. All
existing Merrill Lynch & Co., Inc. guarantees of
securities issued by those same Merrill Lynch subsidiaries under
various
non-U.S. securities
offering programs will remain in full force and effect as long
as those securities are outstanding, and the Corporation has not
assumed any of those prior Merrill Lynch & Co., Inc.
guarantees or otherwise guaranteed such securities.
Certain senior structured notes issued by Merrill Lynch are
accounted for under the fair value option. For more information
on these senior structured notes, see
Note 23 Fair Value Option.
The table below represents the book value for aggregate annual
maturities of long-term debt at December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
Thereafter
|
|
|
Total
|
|
Bank of America Corporation
|
|
$
|
16,419
|
|
|
$
|
40,432
|
|
|
$
|
8,731
|
|
|
$
|
21,890
|
|
|
$
|
13,236
|
|
|
$
|
85,888
|
|
|
$
|
186,596
|
|
Merrill Lynch & Co., Inc. and subsidiaries
|
|
|
26,554
|
|
|
|
18,611
|
|
|
|
18,053
|
|
|
|
16,650
|
|
|
|
4,515
|
|
|
|
41,370
|
|
|
|
125,753
|
|
Bank of America, N.A. and other subsidiaries
|
|
|
4,382
|
|
|
|
5,796
|
|
|
|
86
|
|
|
|
503
|
|
|
|
1,015
|
|
|
|
9,485
|
|
|
|
21,267
|
|
Other debt
|
|
|
22,760
|
|
|
|
12,549
|
|
|
|
5,031
|
|
|
|
1,293
|
|
|
|
105
|
|
|
|
2,064
|
|
|
|
43,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt excluding
consolidated VIEs
|
|
|
70,115
|
|
|
|
77,388
|
|
|
|
31,901
|
|
|
|
40,336
|
|
|
|
18,871
|
|
|
|
138,807
|
|
|
|
377,418
|
|
Long-term debt of consolidated VIEs under new consolidation
guidance
|
|
|
19,136
|
|
|
|
11,800
|
|
|
|
17,514
|
|
|
|
9,103
|
|
|
|
1,229
|
|
|
|
12,231
|
|
|
|
71,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
89,251
|
|
|
$
|
89,188
|
|
|
$
|
49,415
|
|
|
$
|
49,439
|
|
|
$
|
20,100
|
|
|
$
|
151,038
|
|
|
$
|
448,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in the above table are certain structured notes that
contain provisions whereby the borrowings are redeemable at the
option of the holder (put options) at specified dates prior to
maturity. Other structured notes have coupon or repayment terms
linked to the performance of debt or equity securities, indices,
currencies or commodities and the maturity may be accelerated
based on the value of a referenced index or security. In both
cases, the Corporation or a subsidiary may be required to settle
the obligation for cash or other securities prior to the
contractual maturity date. These borrowings are reflected in the
above table as maturing at their earliest put or redemption date.
Trust Preferred
and Hybrid Securities
Trust preferred securities (Trust Securities) are issued by
trust companies (the Trusts) that are not consolidated. These
Trust Securities are mandatorily redeemable preferred
security obligations of the Trusts. The sole assets of the
Trusts generally are junior subordinated deferrable interest
notes of the Corporation or its subsidiaries (the Notes). The
Trusts generally are 100 percent owned finance subsidiaries
of the Corporation. Obligations associated with the Notes are
included in the long-term debt table on page 190.
Certain of the Trust Securities were issued at a discount
and may be redeemed prior to maturity at the option of the
Corporation. The Trusts generally have invested the proceeds of
such Trust Securities in the Notes. Each issue of the Notes
has an interest rate equal to the corresponding
Trust Securities distribution rate. The Corporation has the
right to defer payment of interest on the Notes at any time or
from time to time for a period not exceeding five years provided
that no extension period may extend beyond the stated maturity
of the relevant Notes. During any such extension period,
distributions on the Trust Securities will also be deferred
and the Corporations ability to pay dividends on its
common and preferred stock will be restricted.
The Trust Securities generally are subject to mandatory
redemption upon repayment of the related Notes at their stated
maturity dates or their earlier redemption at a redemption price
equal to their liquidation amount plus accrued distributions to
the date fixed for redemption and the premium, if any, paid by
the Corporation upon concurrent repayment of the related Notes.
Periodic cash payments and payments upon liquidation or
redemption with respect to Trust Securities are guaranteed
by the Corporation or its subsidiaries to the extent of funds
held by the Trusts (the Preferred Securities Guarantee). The
Preferred Securities Guarantee, when taken together with the
Corporations other obligations including its obligations
under the Notes, generally will constitute a full and
unconditional guarantee, on a subordinated basis, by the
Corporation of payments due on the Trust Securities.
Hybrid Income Term Securities (HITS) totaling $1.6 billion
were also issued by the Trusts to institutional investors in
2007. The BAC Capital Trust XIII Floating-Rate Preferred
HITS have a distribution rate of three-month LIBOR plus
40 bps and the BAC Capital Trust XIV
Fixed-to-Floating-Rate
Preferred HITS have an initial distribution rate of
5.63 percent. Both series of HITS represent beneficial
interests in the assets of the respective capital trust, which
consist of a series of the Corporations junior
subordinated notes and a stock purchase contract for a specified
series of the Corporations preferred stock. The
Corporation will remarket the junior subordinated notes
underlying each series of HITS on or about the five-year
anniversary of the issuance to obtain sufficient funds for the
capital trusts to buy the Corporations preferred stock
under the stock purchase contracts.
In connection with the HITS, the Corporation entered into two
replacement capital covenants for the benefit of investors in
certain series of the Corporations long-term indebtedness
(Covered Debt). As of December 31, 2010, the
Corporations 6.625% Junior Subordinated Notes due 2036
constitute the Covered Debt under the covenant corresponding to
the Floating-Rate Preferred HITS and the Corporations
5.625% Junior Subordinated Notes due 2035 constitute the Covered
Debt under the covenant corresponding to the
Fixed-to-Floating-Rate
Preferred HITS. These covenants generally restrict the ability
of the Corporation and its subsidiaries to redeem or purchase
the HITS and related securities unless the Corporation has
obtained the prior approval of the Federal Reserve if required
under the Federal Reserves capital guidelines, the
redemption or purchase price of the HITS does not exceed the
amount received by the Corporation from the sale of certain
qualifying securities, and such replacement securities qualify
as Tier 1 Capital and are not restricted core capital
elements under the Federal Reserves guidelines.
Bank of America
2010 191
The table below is a summary of the outstanding Trust and Hybrid
Securities and the related Notes at December 31, 2010 as
originated by Bank of America Corporation and its predecessor
companies and subsidiaries. For additional information on
Trust Securities for regulatory capital purposes, see
Note 18 Regulatory Requirements and
Restrictions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
|
|
|
Principal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
|
|
|
of Trust
|
|
|
of the
|
|
|
Stated Maturity
|
|
|
Per Annum Interest
|
|
|
Interest Payment
|
|
|
|
|
Issuer
|
|
Issuance Date
|
|
|
Securities
|
|
|
Notes
|
|
|
of the Notes
|
|
|
Rate of the Notes
|
|
|
Dates
|
|
|
Redemption Period
|
|
Bank of America
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Trust I
|
|
|
December 2001
|
|
|
$
|
575
|
|
|
$
|
593
|
|
|
|
December 2031
|
|
|
|
7.00
|
%
|
|
|
3/15,6/15,9/15,12/15
|
|
|
|
On or after 12/15/06
|
|
Capital Trust II
|
|
|
January 2002
|
|
|
|
900
|
|
|
|
928
|
|
|
|
February 2032
|
|
|
|
7.00
|
|
|
|
2/1,5/1,8/1,11/1
|
|
|
|
On or after 2/01/07
|
|
Capital Trust III
|
|
|
August 2002
|
|
|
|
500
|
|
|
|
516
|
|
|
|
August 2032
|
|
|
|
7.00
|
|
|
|
2/15,5/15,8/15,11/15
|
|
|
|
On or after 8/15/07
|
|
Capital Trust IV
|
|
|
April 2003
|
|
|
|
375
|
|
|
|
387
|
|
|
|
May 2033
|
|
|
|
5.88
|
|
|
|
2/1,5/1,8/1,11/1
|
|
|
|
On or after 5/01/08
|
|
Capital Trust V
|
|
|
November 2004
|
|
|
|
518
|
|
|
|
534
|
|
|
|
November 2034
|
|
|
|
6.00
|
|
|
|
2/3,5/3,8/3,11/3
|
|
|
|
On or after 11/03/09
|
|
Capital Trust VI
|
|
|
March 2005
|
|
|
|
1,000
|
|
|
|
1,031
|
|
|
|
March 2035
|
|
|
|
5.63
|
|
|
|
3/8,9/8
|
|
|
|
Any time
|
|
Capital
Trust VII (1)
|
|
|
August 2005
|
|
|
|
1,320
|
|
|
|
1,361
|
|
|
|
August 2035
|
|
|
|
5.25
|
|
|
|
2/10,8/10
|
|
|
|
Any time
|
|
Capital Trust VIII
|
|
|
August 2005
|
|
|
|
530
|
|
|
|
546
|
|
|
|
August 2035
|
|
|
|
6.00
|
|
|
|
2/25,5/25,8/25,11/25
|
|
|
|
On or after 8/25/10
|
|
Capital Trust X
|
|
|
March 2006
|
|
|
|
900
|
|
|
|
928
|
|
|
|
March 2055
|
|
|
|
6.25
|
|
|
|
3/29,6/29,9/29,12/29
|
|
|
|
On or after 3/29/11
|
|
Capital Trust XI
|
|
|
May 2006
|
|
|
|
1,000
|
|
|
|
1,031
|
|
|
|
May 2036
|
|
|
|
6.63
|
|
|
|
5/23,11/23
|
|
|
|
Any time
|
|
Capital Trust XII
|
|
|
August 2006
|
|
|
|
863
|
|
|
|
890
|
|
|
|
August 2055
|
|
|
|
6.88
|
|
|
|
2/2,5/2,8/2,11/2
|
|
|
|
On or after 8/02/11
|
|
Capital Trust XIII
|
|
|
February 2007
|
|
|
|
700
|
|
|
|
700
|
|
|
|
March 2043
|
|
|
|
3-mo. LIBOR +40 bps
|
|
|
|
3/15,6/15,9/15,12/15
|
|
|
|
On or after 3/15/17
|
|
Capital Trust XIV
|
|
|
February 2007
|
|
|
|
850
|
|
|
|
850
|
|
|
|
March 2043
|
|
|
|
5.63
|
|
|
|
3/15,9/15
|
|
|
|
On or after 3/15/17
|
|
Capital Trust XV
|
|
|
May 2007
|
|
|
|
500
|
|
|
|
500
|
|
|
|
June 2056
|
|
|
|
3-mo. LIBOR +80 bps
|
|
|
|
3/1,6/1,9/1,12/1
|
|
|
|
On or after 6/01/37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NationsBank
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Trust II
|
|
|
December 1996
|
|
|
|
365
|
|
|
|
376
|
|
|
|
December 2026
|
|
|
|
7.83
|
|
|
|
6/15,12/15
|
|
|
|
On or after 12/15/06
|
|
Capital Trust III
|
|
|
February 1997
|
|
|
|
500
|
|
|
|
515
|
|
|
|
January 2027
|
|
|
|
3-mo. LIBOR +55 bps
|
|
|
|
1/15,4/15,7/15,10/15
|
|
|
|
On or after 1/15/07
|
|
Capital Trust IV
|
|
|
April 1997
|
|
|
|
500
|
|
|
|
515
|
|
|
|
April 2027
|
|
|
|
8.25
|
|
|
|
4/15,10/15
|
|
|
|
On or after 4/15/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BankAmerica
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Institutional Capital A
|
|
|
November 1996
|
|
|
|
450
|
|
|
|
464
|
|
|
|
December 2026
|
|
|
|
8.07
|
|
|
|
6/30,12/31
|
|
|
|
On or after 12/31/06
|
|
Institutional Capital B
|
|
|
November 1996
|
|
|
|
300
|
|
|
|
309
|
|
|
|
December 2026
|
|
|
|
7.70
|
|
|
|
6/30,12/31
|
|
|
|
On or after 12/31/06
|
|
Capital II
|
|
|
December 1996
|
|
|
|
450
|
|
|
|
464
|
|
|
|
December 2026
|
|
|
|
8.00
|
|
|
|
6/15,12/15
|
|
|
|
On or after 12/15/06
|
|
Capital III
|
|
|
January 1997
|
|
|
|
400
|
|
|
|
412
|
|
|
|
January 2027
|
|
|
|
3-mo. LIBOR +57 bps
|
|
|
|
1/15,4/15,7/15,10/15
|
|
|
|
On or after 1/15/02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barnett
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital III
|
|
|
January 1997
|
|
|
|
250
|
|
|
|
258
|
|
|
|
February 2027
|
|
|
|
3-mo. LIBOR +62.5 bps
|
|
|
|
2/1,5/1,8/1,11/1
|
|
|
|
On or after 2/01/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fleet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Trust II
|
|
|
December 1996
|
|
|
|
250
|
|
|
|
258
|
|
|
|
December 2026
|
|
|
|
7.92
|
|
|
|
6/15,12/15
|
|
|
|
On or after 12/15/06
|
|
Capital Trust V
|
|
|
December 1998
|
|
|
|
250
|
|
|
|
258
|
|
|
|
December 2028
|
|
|
|
3-mo. LIBOR +100 bps
|
|
|
|
3/18,6/18,9/18,12/18
|
|
|
|
On or after 12/18/03
|
|
Capital Trust VIII
|
|
|
March 2002
|
|
|
|
534
|
|
|
|
550
|
|
|
|
March 2032
|
|
|
|
7.20
|
|
|
|
3/15,6/15,9/15,12/15
|
|
|
|
On or after 3/08/07
|
|
Capital Trust IX
|
|
|
July 2003
|
|
|
|
175
|
|
|
|
180
|
|
|
|
August 2033
|
|
|
|
6.00
|
|
|
|
2/1,5/1,8/1,11/1
|
|
|
|
On or after 7/31/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BankBoston
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Trust III
|
|
|
June 1997
|
|
|
|
250
|
|
|
|
258
|
|
|
|
June 2027
|
|
|
|
3-mo. LIBOR +75 bps
|
|
|
|
3/15,6/15,9/15,12/15
|
|
|
|
On or after 6/15/07
|
|
Capital Trust IV
|
|
|
June 1998
|
|
|
|
250
|
|
|
|
258
|
|
|
|
June 2028
|
|
|
|
3-mo. LIBOR +60 bps
|
|
|
|
3/8,6/8,9/8,12/8
|
|
|
|
On or after 6/08/03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Progress
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Trust I
|
|
|
June 1997
|
|
|
|
9
|
|
|
|
9
|
|
|
|
June 2027
|
|
|
|
10.50
|
|
|
|
6/1,12/1
|
|
|
|
On or after 6/01/07
|
|
Capital Trust II
|
|
|
July 2000
|
|
|
|
6
|
|
|
|
6
|
|
|
|
July 2030
|
|
|
|
11.45
|
|
|
|
1/19,7/19
|
|
|
|
On or after 7/19/10
|
|
Capital Trust III
|
|
|
November 2002
|
|
|
|
10
|
|
|
|
10
|
|
|
|
November 2032
|
|
|
|
3-mo. LIBOR +335 bps
|
|
|
|
2/15,5/15,8/15,11/15
|
|
|
|
On or after 11/15/07
|
|
Capital Trust IV
|
|
|
December 2002
|
|
|
|
5
|
|
|
|
5
|
|
|
|
January 2033
|
|
|
|
3-mo. LIBOR +335 bps
|
|
|
|
1/7,4/7,7/7,10/7
|
|
|
|
On or after 1/07/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MBNA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Trust A
|
|
|
December 1996
|
|
|
|
250
|
|
|
|
258
|
|
|
|
December 2026
|
|
|
|
8.28
|
|
|
|
6/1,12/1
|
|
|
|
On or after 12/01/06
|
|
Capital Trust B
|
|
|
January 1997
|
|
|
|
280
|
|
|
|
289
|
|
|
|
February 2027
|
|
|
|
3-mo. LIBOR +80 bps
|
|
|
|
2/1,5/1,8/1,11/1
|
|
|
|
On or after 2/01/07
|
|
Capital Trust D
|
|
|
June 2002
|
|
|
|
300
|
|
|
|
309
|
|
|
|
October 2032
|
|
|
|
8.13
|
|
|
|
1/1,4/1,7/1,10/1
|
|
|
|
On or after 10/01/07
|
|
Capital Trust E
|
|
|
November 2002
|
|
|
|
200
|
|
|
|
206
|
|
|
|
February 2033
|
|
|
|
8.10
|
|
|
|
2/15,5/15,8/15,11/15
|
|
|
|
On or after 2/15/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ABN AMRO North America
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series I
|
|
|
May 2001
|
|
|
|
77
|
|
|
|
77
|
|
|
|
Perpetual
|
|
|
|
3-mo. LIBOR +175 bps
|
|
|
|
2/15,5/15,8/15,11/15
|
|
|
|
On or after 11/08/12
|
|
Series II
|
|
|
May 2001
|
|
|
|
77
|
|
|
|
77
|
|
|
|
Perpetual
|
|
|
|
3-mo. LIBOR +175 bps
|
|
|
|
3/15,6/15,9/15,12/15
|
|
|
|
On or after 11/08/12
|
|
Series III
|
|
|
May 2001
|
|
|
|
77
|
|
|
|
77
|
|
|
|
Perpetual
|
|
|
|
3-mo. LIBOR +175 bps
|
|
|
|
1/15,4/15,7/15,10/15
|
|
|
|
On or after 11/08/12
|
|
Series IV
|
|
|
May 2001
|
|
|
|
77
|
|
|
|
77
|
|
|
|
Perpetual
|
|
|
|
3-mo. LIBOR +175 bps
|
|
|
|
2/28,5/30,8/30,11/30
|
|
|
|
On or after 11/08/12
|
|
Series V
|
|
|
May 2001
|
|
|
|
77
|
|
|
|
77
|
|
|
|
Perpetual
|
|
|
|
3-mo. LIBOR +175 bps
|
|
|
|
3/30,6/30,9/30,12/30
|
|
|
|
On or after 11/08/12
|
|
Series VI
|
|
|
May 2001
|
|
|
|
77
|
|
|
|
77
|
|
|
|
Perpetual
|
|
|
|
3-mo. LIBOR +175 bps
|
|
|
|
1/30,4/30,7/30,10/30
|
|
|
|
On or after 11/08/12
|
|
Series VII
|
|
|
May 2001
|
|
|
|
88
|
|
|
|
88
|
|
|
|
Perpetual
|
|
|
|
3-mo. LIBOR +175 bps
|
|
|
|
3/15,6/15,9/15,12/15
|
|
|
|
On or after 11/08/12
|
|
Series IX
|
|
|
June 2001
|
|
|
|
70
|
|
|
|
70
|
|
|
|
Perpetual
|
|
|
|
3-mo. LIBOR +175 bps
|
|
|
|
3/5,6/5,9/5,12/5
|
|
|
|
On or after 11/08/12
|
|
Series X
|
|
|
June 2001
|
|
|
|
53
|
|
|
|
53
|
|
|
|
Perpetual
|
|
|
|
3-mo. LIBOR +175 bps
|
|
|
|
3/12,6/12,9/12,12/12
|
|
|
|
On or after 11/08/12
|
|
Series XI
|
|
|
June 2001
|
|
|
|
27
|
|
|
|
27
|
|
|
|
Perpetual
|
|
|
|
3-mo. LIBOR +175 bps
|
|
|
|
3/26,6/26,9/26,12/26
|
|
|
|
On or after 11/08/12
|
|
Series XII
|
|
|
June 2001
|
|
|
|
80
|
|
|
|
80
|
|
|
|
Perpetual
|
|
|
|
3-mo. LIBOR +175 bps
|
|
|
|
1/10,4/10,7/10,10/10
|
|
|
|
On or after 11/08/12
|
|
Series XIII
|
|
|
June 2001
|
|
|
|
70
|
|
|
|
70
|
|
|
|
Perpetual
|
|
|
|
3-mo. LIBOR +175 bps
|
|
|
|
1/24,4/24,7/24,10/24
|
|
|
|
On or after 11/08/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LaSalle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series I
|
|
|
August 2000
|
|
|
|
491
|
|
|
|
491
|
|
|
|
Perpetual
|
|
|
|
6.97% through 9/15/2010;
3-mo. LIBOR +105.5 bps
thereafter
|
|
|
|
3/15,6/15,9/15,12/15
|
|
|
|
On or after 9/15/10
|
|
Series J
|
|
|
September 2000
|
|
|
|
95
|
|
|
|
95
|
|
|
|
Perpetual
|
|
|
|
3-mo. LIBOR +5.5 bps
through 9/15/2010; 3-mo.
LIBOR +105.5 bps
thereafter
|
|
|
|
3/15,6/15,9/15,12/15
|
|
|
|
On or after 9/15/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Countrywide
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital III
|
|
|
June 1997
|
|
|
|
200
|
|
|
|
206
|
|
|
|
June 2027
|
|
|
|
8.05
|
|
|
|
6/15,12/15
|
|
|
|
Only under special event
|
|
Capital IV
|
|
|
April 2003
|
|
|
|
500
|
|
|
|
515
|
|
|
|
April 2033
|
|
|
|
6.75
|
|
|
|
1/1,4/1,7/1,10/1
|
|
|
|
On or after 4/11/08
|
|
Capital V
|
|
|
November 2006
|
|
|
|
1,495
|
|
|
|
1,496
|
|
|
|
November 2036
|
|
|
|
7.00
|
|
|
|
2/1,5/1,8/1,11/1
|
|
|
|
On or after 11/01/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merrill Lynch
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Capital Trust III
|
|
|
January 1998
|
|
|
|
750
|
|
|
|
900
|
|
|
|
Perpetual
|
|
|
|
7.00
|
|
|
|
3/30,6/30,9/30,12/30
|
|
|
|
On or after 3/08
|
|
Preferred Capital Trust IV
|
|
|
June 1998
|
|
|
|
400
|
|
|
|
480
|
|
|
|
Perpetual
|
|
|
|
7.12
|
|
|
|
3/30,6/30,9/30,12/30
|
|
|
|
On or after 6/08
|
|
Preferred Capital Trust V
|
|
|
November 1998
|
|
|
|
850
|
|
|
|
1,021
|
|
|
|
Perpetual
|
|
|
|
7.28
|
|
|
|
3/30,6/30,9/30,12/30
|
|
|
|
On or after 9/08
|
|
Capital Trust I
|
|
|
December 2006
|
|
|
|
1,050
|
|
|
|
1,051
|
|
|
|
December 2066
|
|
|
|
6.45
|
|
|
|
3/15,6/15,9/15,12/15
|
|
|
|
On or after 12/11
|
|
Capital Trust II
|
|
|
May 2007
|
|
|
|
950
|
|
|
|
951
|
|
|
|
June 2062
|
|
|
|
6.45
|
|
|
|
3/15,6/15,9/15,12/15
|
|
|
|
On or after 6/12
|
|
Capital Trust III
|
|
|
August 2007
|
|
|
|
750
|
|
|
|
751
|
|
|
|
September 2062
|
|
|
|
7.375
|
|
|
|
3/15,6/15,9/15,12/15
|
|
|
|
On or after 9/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
24,896
|
|
|
$
|
25,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Notes were issued in British Pound.
Presentation currency is U.S. Dollar.
|
192 Bank
of America 2010
NOTE 14 Commitments
and Contingencies
In the normal course of business, the Corporation enters into a
number of off-balance sheet commitments. These commitments
expose the Corporation to varying degrees of credit and market
risk and are subject to the same credit and market risk
limitation reviews as those instruments recorded on the
Corporations Consolidated Balance Sheet.
Credit Extension
Commitments
The Corporation enters into commitments to extend credit such as
loan commitments, SBLCs and commercial letters of credit to meet
the financing needs of its customers. The table below shows the
notional amount of unfunded legally binding lending commitments
net of amounts distributed (e.g., syndicated) to other financial
institutions of $23.3 billion and $30.9 billion at
December 31, 2010 and 2009. At December 31, 2010, the
carrying
amount of these commitments, excluding commitments accounted for
under the fair value option, was $1.2 billion, including
deferred revenue of $29 million and a reserve for unfunded
lending commitments of $1.2 billion. At December 31,
2009, the comparable amounts were $1.5 billion,
$34 million and $1.5 billion, respectively. The
carrying amount of these commitments is classified in accrued
expenses and other liabilities.
The table below also includes the notional amount of commitments
of $27.3 billion and $27.0 billion at
December 31, 2010 and 2009, that are accounted for under
the fair value option. However, the table below excludes fair
value adjustments of $866 million and $950 million on
these commitments, which are classified in accrued expenses and
other liabilities. For information regarding the
Corporations loan commitments accounted for under the fair
value option, see Note 23 Fair Value
Option.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
Expire after 1
|
|
|
Expire after 3
|
|
|
|
|
|
|
|
|
|
Expire in 1
|
|
|
Year through
|
|
|
Years through
|
|
|
Expire after 5
|
|
|
|
|
(Dollars in millions)
|
|
Year or Less
|
|
|
3 Years
|
|
|
5 Years
|
|
|
Years
|
|
|
Total
|
|
Notional amount of credit
extension commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan commitments
|
|
$
|
152,926
|
|
|
$
|
144,461
|
|
|
$
|
43,465
|
|
|
$
|
16,172
|
|
|
$
|
357,024
|
|
Home equity lines of credit
|
|
|
1,722
|
|
|
|
4,290
|
|
|
|
18,207
|
|
|
|
55,886
|
|
|
|
80,105
|
|
Standby letters of credit and financial
guarantees (1)
|
|
|
35,275
|
|
|
|
18,940
|
|
|
|
4,144
|
|
|
|
5,897
|
|
|
|
64,256
|
|
Letters of credit
|
|
|
3,698
|
|
|
|
110
|
|
|
|
|
|
|
|
874
|
|
|
|
4,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legally binding commitments
|
|
|
193,621
|
|
|
|
167,801
|
|
|
|
65,816
|
|
|
|
78,829
|
|
|
|
506,067
|
|
Credit card
lines (2)
|
|
|
497,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
497,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total credit extension
commitments
|
|
$
|
690,689
|
|
|
$
|
167,801
|
|
|
$
|
65,816
|
|
|
$
|
78,829
|
|
|
$
|
1,003,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
Notional amount of credit
extension commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan commitments
|
|
$
|
149,248
|
|
|
$
|
187,585
|
|
|
$
|
30,897
|
|
|
$
|
28,488
|
|
|
$
|
396,218
|
|
Home equity lines of credit
|
|
|
1,810
|
|
|
|
3,272
|
|
|
|
10,667
|
|
|
|
76,923
|
|
|
|
92,672
|
|
Standby letters of credit and financial
guarantees (1)
|
|
|
29,794
|
|
|
|
21,285
|
|
|
|
4,923
|
|
|
|
13,740
|
|
|
|
69,742
|
|
Letters of credit
|
|
|
2,020
|
|
|
|
40
|
|
|
|
|
|
|
|
1,467
|
|
|
|
3,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legally binding commitments
|
|
|
182,872
|
|
|
|
212,182
|
|
|
|
46,487
|
|
|
|
120,618
|
|
|
|
562,159
|
|
Credit card
lines (2)
|
|
|
541,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
541,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total credit extension
commitments
|
|
$
|
724,791
|
|
|
$
|
212,182
|
|
|
$
|
46,487
|
|
|
$
|
120,618
|
|
|
$
|
1,104,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The notional amounts of SBLCs and
financial guarantees classified as investment grade and
non-investment grade based on the credit quality of the
underlying reference name within the instrument were
$41.1 billion and $22.4 billion at December 31,
2010 and $39.7 billion and $30.0 billion at
December 31, 2009.
|
(2) |
|
Includes business card unused lines
of credit.
|
Legally binding commitments to extend credit generally have
specified rates and maturities. Certain of these commitments
have adverse change clauses that help to protect the Corporation
against deterioration in the borrowers ability to pay.
Other
Commitments
Global Principal
Investments and Other Equity Investments
At December 31, 2010 and 2009, the Corporation had unfunded
equity investment commitments of approximately $1.5 billion
and $2.8 billion. In light of proposed Basel regulatory
capital changes related to unfunded
commitments, the Corporation has actively reduced these
commitments in a series of transactions involving its private
equity fund investments. For more information on these Basel
regulatory capital changes, see
Note 18 Regulatory Requirements and
Restrictions. In 2010, the Corporation completed the sale of
its exposure to certain private equity funds. For more
information on these transactions, see
Note 5 Securities. These
commitments generally relate to the Corporations Global
Principal Investments business which is comprised of a
diversified portfolio of investments in private equity, real
estate and other alternative investments. These investments are
made either directly in a company or held through a fund.
Bank of America
2010 193
Loan
Purchases
In 2005, the Corporation entered into an agreement for the
committed purchase of retail automotive loans over a five-year
period that ended on June 22, 2010. Under this agreement,
the Corporation purchased $6.6 billion of such loans during
the six months ended June 30, 2010 and also the year ended
December 31, 2009. All loans purchased under this agreement
were subject to a comprehensive set of credit criteria. This
agreement was accounted for as a derivative liability with a
fair value of $189 million at December 31, 2009. As of
December 31, 2010, the Corporation was no longer committed
for any additional purchases. As part of this agreement, the
Corporation recorded a liability which may increase or decrease
based on credit performance of the purchased loans over a period
extending through 2016.
At December 31, 2010 and 2009, the Corporation had other
commitments to purchase loans (e.g., residential mortgage and
commercial real estate) of $2.6 billion and
$2.2 billion, which upon settlement will be included in
loans or LHFS.
Operating
Leases
The Corporation is a party to operating leases for certain of
its premises and equipment. Commitments under these leases are
approximately $3.0 billion, $2.6 billion,
$2.1 billion, $1.6 billion and $1.3 billion for
2011 through 2015, respectively, and $6.6 billion in the
aggregate for all years thereafter.
Other
Commitments
At December 31, 2010 and 2009, the Corporation had
commitments to enter into forward-dated resale and securities
borrowing agreements of $39.4 billion and
$51.8 billion. In addition, the Corporation had commitments
to enter into forward-dated repurchase and securities lending
agreements of $33.5 billion and $58.3 billion. All of
these commitments expire within the next 12 months.
The Corporation has entered into agreements with providers of
market data, communications, systems consulting and other
office-related services. At December 31, 2010 and 2009, the
minimum fee commitments over the remaining terms of these
agreements totaled $2.1 billion and $2.3 billion.
Other
Guarantees
Bank-owned Life
Insurance Book Value Protection
The Corporation sells products that offer book value protection
to insurance carriers who offer group life insurance policies to
corporations, primarily banks. The book value protection is
provided on portfolios of intermediate investment-grade
fixed-income securities and is intended to cover any shortfall
in the event that policyholders surrender their policies and
market value is
below book value. To manage its exposure, the Corporation
imposes significant restrictions on surrenders and the manner in
which the portfolio is liquidated and the funds are accessed. In
addition, investment parameters of the underlying portfolio are
restricted. These constraints, combined with structural
protections, including a cap on the amount of risk assumed on
each policy, are designed to provide adequate buffers and guard
against payments even under extreme stress scenarios. These
guarantees are recorded as derivatives and carried at fair value
in the trading portfolio. At December 31, 2010 and 2009,
the notional amount of these guarantees totaled
$15.8 billion and $15.6 billion and the
Corporations maximum exposure related to these guarantees
totaled $5.0 billion and $4.9 billion with estimated
maturity dates between 2030 and 2040. As of December 31,
2010, the Corporation has not made a payment under these
products. The probability of surrender has increased due to the
deteriorating financial health of policyholders, but remains a
small percentage of total notional.
Employee
Retirement Protection
The Corporation sells products that offer book value protection
primarily to plan sponsors of Employee Retirement Income
Security Act of 1974 (ERISA) governed pension plans, such as
401(k) plans and 457 plans. The book value protection is
provided on portfolios of intermediate/short-term
investment-grade fixed-income securities and is intended to
cover any shortfall in the event that plan participants continue
to withdraw funds after all securities have been liquidated and
there is remaining book value. The Corporation retains the
option to exit the contract at any time. If the Corporation
exercises its option, the purchaser can require the Corporation
to purchase high quality fixed-income securities, typically
government or government-backed agency securities, with the
proceeds of the liquidated assets to assure the return of
principal. To manage its exposure, the Corporation imposes
significant restrictions and constraints on the timing of the
withdrawals, the manner in which the portfolio is liquidated and
the funds are accessed, and the investment parameters of the
underlying portfolio. These constraints, combined with
structural protections, are designed to provide adequate buffers
and guard against payments even under extreme stress scenarios.
These guarantees are recorded as derivatives and carried at fair
value in the trading portfolio. At December 31, 2010 and
2009, the notional amount of these guarantees totaled
$33.8 billion and $36.8 billion with estimated
maturity dates up to 2014 if the exit option is exercised on all
deals. As of December 31, 2010, the Corporation has not
made a payment under these products and has assessed the
probability of payments under these guarantees as remote.
194 Bank
of America 2010
Indemnifications
In the ordinary course of business, the Corporation enters into
various agreements that contain indemnifications, such as tax
indemnifications, whereupon payment may become due if certain
external events occur, such as a change in tax law. The
indemnification clauses are often standard contractual terms and
were entered into in the normal course of business based on an
assessment that the risk of loss would be remote. These
agreements typically contain an early termination clause that
permits the Corporation to exit the agreement upon these events.
The maximum potential future payment under indemnification
agreements is difficult to assess for several reasons, including
the occurrence of an external event, the inability to predict
future changes in tax and other laws, the difficulty in
determining how such laws would apply to parties in contracts,
the absence of exposure limits contained in standard contract
language and the timing of the early termination clause.
Historically, any payments made under these guarantees have been
de minimis. The Corporation has assessed the probability of
making such payments in the future as remote.
Merchant
Services
On June 26, 2009, the Corporation contributed its merchant
processing business to a joint venture in exchange for a
46.5 percent ownership interest in the joint venture.
During the second quarter of 2010, the joint venture purchased
the interest held by one of the three initial investors bringing
the Corporations ownership interest up to 49 percent.
For additional information on the joint venture agreement, see
Note 5 Securities.
The Corporation, on behalf of the joint venture, provides credit
and debit card processing services to various merchants by
processing credit and debit card transactions on the
merchants behalf. In connection with these services, a
liability may arise in the event of a billing dispute between
the merchant and a cardholder that is ultimately resolved in the
cardholders favor and the merchant defaults on its
obligation to reimburse the cardholder. A cardholder, through
its issuing bank, generally has until the later of up to six
months after the date a transaction is processed or the delivery
of the product or service to present a chargeback to the joint
venture as the merchant processor. If the joint venture is
unable to collect this amount from the merchant, it bears the
loss for the amount paid to the cardholder. The joint venture is
primarily liable for any losses on transactions from the
contributed portfolio that occur after June 26, 2009.
However, if the joint venture fails to meet its obligation to
reimburse the cardholder for disputed transactions, then the
Corporation could be held liable for the disputed amount. In
2010 and 2009, the joint venture processed and settled
$265.5 billion and $250.0 billion of transactions and
it recorded losses of $17 million and $26 million.
At December 31, 2010 and 2009, the Corporation, on behalf
of the joint venture, held as collateral $25 million and
$26 million of merchant escrow deposits which may be used
to offset amounts due from the individual merchants. The joint
venture also has the right to offset any payments with cash
flows otherwise due to the merchant. Accordingly, the
Corporation believes that the maximum potential exposure is not
representative of the actual potential loss exposure. The
Corporation believes the maximum potential exposure for
chargebacks would not exceed the total amount of merchant
transactions processed through Visa and MasterCard for the last
six months, which represents the claim period for the
cardholder, plus any outstanding delayed-delivery transactions.
As of December 31, 2010 and 2009, the maximum potential
exposure totaled approximately $139.5 billion
and $131.0 billion. The Corporation does not expect to make
material payments in connection with these guarantees. The
maximum potential exposure disclosed does not include volumes
processed by First Data contributed portfolios.
Other Derivative
Contracts
The Corporation funds selected assets, including securities
issued by CDOs and CLOs, through derivative contracts, typically
total return swaps, with third parties and SPEs that are not
consolidated on the Corporations Consolidated Balance
Sheet. At December 31, 2010 and 2009, the total notional
amount of these derivative contracts was approximately
$4.3 billion and $4.9 billion with commercial banks
and $1.7 billion and $2.8 billion with SPEs. The
underlying securities are senior securities and substantially
all of the Corporations exposures are insured.
Accordingly, the Corporations exposure to loss consists
principally of counterparty risk to the insurers. In certain
circumstances, generally as a result of ratings downgrades, the
Corporation may be required to purchase the underlying assets,
which would not result in additional gain or loss to the
Corporation as such exposure is already reflected in the fair
value of the derivative contracts.
Other
Guarantees
The Corporation sells products that guarantee the return of
principal to investors at a preset future date. These guarantees
cover a broad range of underlying asset classes and are designed
to cover the shortfall between the market value of the
underlying portfolio and the principal amount on the preset
future date. To manage its exposure, the Corporation requires
that these guarantees be backed by structural and investment
constraints and certain pre-defined triggers that would require
the underlying assets or portfolio to be liquidated and invested
in zero-coupon bonds that mature at the preset future date. The
Corporation is required to fund any shortfall between the
proceeds of the liquidated assets and the purchase price of the
zero-coupon bonds at the preset future date. These guarantees
are recorded as derivatives and carried at fair value in the
trading portfolio. At December 31, 2010 and 2009, the
notional amount of these guarantees totaled $666 million
and $2.1 billion. These guarantees have various maturities
ranging from two to five years. As of December 31, 2010 and
2009, the Corporation had not made a payment under these
products and has assessed the probability of payments under
these guarantees as remote.
The Corporation has entered into additional guarantee agreements
and commitments, including lease-end obligation agreements,
partial credit guarantees on certain leases, real estate joint
venture guarantees, sold risk participation swaps, divested
business commitments and sold put options that require gross
settlement. The maximum potential future payment under these
agreements was approximately $3.4 billion and
$3.6 billion at December 31, 2010 and 2009. The
estimated maturity dates of these obligations extend up to 2033.
The Corporation has made no material payments under these
guarantees.
In addition, the Corporation has guaranteed the payment
obligations of certain subsidiaries of Merrill Lynch on certain
derivative transactions. The aggregate notional amount of such
derivative liabilities was approximately $2.1 billion and
$2.5 billion at December 31, 2010 and 2009. In the
normal course of business, the Corporation periodically
guarantees the obligations of its affiliates in a variety of
transactions including ISDA-related transactions and non
ISDA-related transactions such as commodities trading,
repurchase agreements, prime brokerage agreements and other
transactions.
Bank of America
2010 195
Payment
Protection Insurance Claims Matter
In the U.K., the Corporation sells payment protection insurance
(PPI) through its Global Card Services business to credit
card customers and has previously sold this insurance to
consumer loan customers. PPI covers a consumers loan or
debt repayment if certain events occur such as loss of job or
illness. In response to an elevated level of customer complaints
of misleading sales tactics across the industry, heightened
media coverage and pressure from consumer advocacy groups, the
U.K. Financial Services Authority (FSA) has investigated and
raised concerns about the way some companies have handled
complaints relating to the sale of these insurance policies. In
August 2010, the FSA issued a policy statement on the assessment
and remediation of PPI claims which is applicable to the
Corporations U.K. consumer businesses and is intended to
address concerns among consumers and regulators regarding the
handling of PPI complaints across the industry. The policy
statement sets standards for the sale of PPI that apply to
current and prior sales, and in the event a company does not or
did not comply with the standards, it is alleged that the
insurance was incorrectly sold, giving the customer rights to
remedies. The FSA gave companies until December 1, 2010 to
comply with the new regulations, but the judicial review to
assess compliance is still underway. Given the new regulatory
guidance, as of December 31, 2010, the Corporation has a
liability of $630 million based on its current claims
history and an estimate of future claims that have yet to be
asserted against the Corporation. The liability is included in
accrued expenses and other liabilities and the related expense
is included in insurance income. The policy statement also
requires companies to review their sales practices and to
proactively remediate non-complaining customers if evidence of a
systematic breach of the newly articulated sales standards is
discovered, which could include refunding premiums paid. Subject
to the outcome of the Corporations review and the new
regulatory guidance, it is possible that an additional liability
may be required. Industry groups have challenged the policy
statement through a judicial review process. The judicial review
is not expected to be completed until the end of the first
quarter of 2011. Therefore, the Corporation is unable to
reasonably estimate the total amount of additional possible loss
or a range of loss as of December 31, 2010.
Litigation and
Regulatory Matters
In the ordinary course of business, the Corporation and its
subsidiaries are routinely defendants in or parties to many
pending and threatened legal actions and proceedings, including
actions brought on behalf of various classes of claimants. These
actions and proceedings are generally based on alleged
violations of consumer protection, securities, environmental,
banking, employment and other laws. In some of these actions and
proceedings, claims for substantial monetary damages are
asserted against the Corporation and its subsidiaries.
In the ordinary course of business, the Corporation and its
subsidiaries are also subject to regulatory examinations,
information gathering requests, inquiries and investigations.
Certain subsidiaries of the Corporation are registered
broker/dealers or investment advisors and are subject to
regulation by the SEC, the Financial Industry Regulatory
Authority (FINRA), the New York Stock Exchange, the FSA and
other domestic, international and state securities regulators.
In connection with formal and informal inquiries by those
agencies, such subsidiaries receive numerous requests, subpoenas
and orders for documents, testimony and information in
connection with various aspects of their regulated activities.
In view of the inherent difficulty of predicting the outcome of
such litigation and regulatory matters, particularly where the
claimants seek very large or indeterminate damages or where the
matters present novel legal theories or involve a large number
of parties, the Corporation generally cannot predict what the
eventual outcome of the pending matters will be, what the timing
of
the ultimate resolution of these matters will be, or what the
eventual loss, fines or penalties related to each pending matter
may be.
In accordance with applicable accounting guidance, the
Corporation establishes an accrued liability for litigation and
regulatory matters when those matters present loss contingencies
that are both probable and estimable. In such cases, there may
be an exposure to loss in excess of any amounts accrued. When a
loss contingency is not both probable and estimable, the
Corporation does not establish an accrued liability. As a
litigation or regulatory matter develops, the Corporation, in
conjunction with any outside counsel handling the matter,
evaluates on an ongoing basis whether such matter presents a
loss contingency that is probable and estimable. If, at the time
of evaluation, the loss contingency related to a litigation or
regulatory matter is not both probable and estimable, the matter
will continue to be monitored for further developments that
would make such loss contingency both probable and estimable.
Once the loss contingency related to a litigation or regulatory
matter is deemed to be both probable and estimable, the
Corporation will establish an accrued liability with respect to
such loss contingency and record a corresponding amount of
litigation-related expense. The Corporation continues to monitor
the matter for further developments that could affect the amount
of the accrued liability that has been previously established.
Excluding fees paid to external legal service providers,
litigation-related expense of $2.6 billion was recognized
in 2010 compared to $1.0 billion for 2009.
For a limited number of the matters disclosed in this Note for
which a loss is probable or reasonably possible in future
periods, whether in excess of a related accrued liability or
where there is no accrued liability, the Corporation is able to
estimate a range of possible loss. In determining whether it is
possible to provide an estimate of loss or range of possible
loss, the Corporation reviews and evaluates its material
litigation and regulatory matters on an ongoing basis, in
conjunction with any outside counsel handling the matter, in
light of potentially relevant factual and legal developments.
These may include information learned through the discovery
process, rulings on dispositive motions, settlement discussions,
and other rulings by courts, arbitrators or others. In cases in
which the Corporation possesses sufficient appropriate
information to develop an estimate of loss or range of possible
loss, that estimate is aggregated and disclosed below. There may
be other disclosed matters for which a loss is probable or
reasonably possible but such an estimate may not be possible.
For those matters where an estimate is possible, management
currently estimates the aggregate range of possible loss is
$145 million to $1.5 billion in excess of the accrued
liability (if any) related to those matters. This estimated
range of possible loss is based upon currently available
information and is subject to significant judgment and a variety
of assumptions, and known and unknown uncertainties. The matters
underlying the estimated range will change from time to time,
and actual results may vary significantly from the current
estimate. Those matters for which an estimate is not possible
are not included within this estimated range. Therefore, this
estimated range of possible loss represents what the Corporation
believes to be an estimate of possible loss only for certain
matters meeting these criteria. It does not represent the
Corporations maximum loss exposure. Information is
provided below regarding the nature of all of these
contingencies and, where specified, the amount of the claim
associated with these loss contingencies. Based on current
knowledge, management does not believe that loss contingencies
arising from pending matters, including the matters described
herein, will have a material adverse effect on the consolidated
financial position or liquidity of the Corporation. However, in
light of the inherent uncertainties involved in these matters,
some of which are beyond the Corporations control, and the
very large or indeterminate damages sought in some of these
matters, an adverse outcome in one or more of these matters
could be material to the Corporations results of
operations or cash flows for any particular reporting period.
196 Bank
of America 2010
Auction Rate
Securities Litigation
Since October 2007, the Corporation, Merrill Lynch and certain
affiliates have been named as defendants in a variety of
lawsuits and other proceedings brought by customers and both
individual and institutional investors regarding ARS. These
actions generally allege that the defendants: (i) misled
the plaintiffs into believing that there was a deeply liquid
market for ARS, and (ii) failed to adequately disclose
their or their affiliates practice of placing their own
bids to support ARS auctions. Plaintiffs assert that ARS
auctions started failing from August 2007 through February 2008
when the defendants and other broker-dealers stopped placing
those support bids. In addition to the matters
described in more detail below, numerous arbitrations and
individual lawsuits have been filed against the Corporation,
Merrill Lynch and certain affiliates by parties who purchased
ARS and are seeking relief that includes compensatory and
punitive damages totaling in excess of $1.8 billion, as
well as rescission, among other relief.
Securities
Actions
The Corporation and Merrill Lynch face a number of civil actions
relating to the sales of ARS and management of ARS auctions,
including two putative class action lawsuits in which the
plaintiffs seek to recover the alleged losses in market value of
ARS securities purportedly caused by the defendants
actions. Plaintiffs also seek unspecified damages, including
rescission, other compensatory and consequential damages, costs,
fees and interest. The first action, In Re Merrill Lynch
Auction Rate Securities Litigation, is the result of the
consolidation of two separate class action suits in the
U.S. District Court for the Southern District of New York.
These suits were brought by two customers of Merrill Lynch, on
behalf of all persons who purchased ARS in auctions managed by
Merrill Lynch, against Merrill Lynch and its subsidiary Merrill
Lynch, Pierce, Fenner & Smith Incorporated (MLPFS). On
March 31, 2010, the U.S. District Court for the
Southern District of New York granted Merrill Lynchs
motion to dismiss. On April 22, 2010, a lead plaintiff
filed a notice of appeal to the U.S. Court of Appeals for
the Second Circuit, which is currently pending. The second
action, Bondar v. Bank of America Corporation, was
brought by a putative class of ARS purchasers against the
Corporation and Banc of America Securities, LLC (BAS) and is
currently pending in the U.S. District Court for the
Northern District of California. The Corporation and BAS have
filed a motion to dismiss the amended complaint, which remains
pending.
Antitrust
Actions
The Corporation, Merrill Lynch and other financial institutions
were also named in two putative antitrust class actions in the
U.S. District Court for the Southern District of New York.
Plaintiffs in both actions assert federal antitrust claims under
Section 1 of the Sherman Act based on allegations that
defendants conspired to restrain trade in ARS by placing support
bids in ARS auctions, only to collectively withdraw those bids
in February 2008, which allegedly caused ARS auctions to fail.
The plaintiff in the first action, Mayor and City Council of
Baltimore, Maryland v. Citigroup, Inc., et al., seeks
to represent a class of issuers of ARS that the defendants
underwrote between May 12, 2003 and February 13, 2008.
This issuer action seeks to recover, among other relief, the
alleged above-market interest payments that ARS issuers
allegedly have had to make after the defendants allegedly
stopped placing support bids in ARS auctions. The
plaintiff in the second action, Mayfield, et al. v.
Citigroup, Inc., et al., seeks to represent a class of
investors that purchased ARS from the defendants and held those
securities when ARS auctions failed on February 13, 2008.
Plaintiff seeks to recover, among other relief, unspecified
damages for losses in the ARS market value, and rescission
of the investors ARS purchases. Both actions also seek
treble damages and attorneys fees under the Sherman
Acts private civil remedy. On January 25, 2010, the
court dismissed both actions with prejudice and the
plaintiffs respective appeals are currently pending in the
U.S. Court of Appeals for the Second Circuit.
Checking Account
Overdraft Litigation
Bank of America, N.A. (BANA) is currently a defendant in several
consumer suits challenging certain deposit account-related
business practices. Three of the suits are presently part of a
multi-district litigation (MDL) proceeding involving
approximately 65 individual cases against 30 financial
institutions assigned by the Judicial Panel on Multi-district
Litigation to the U.S. District Court for the Southern
District of Florida. The three cases, Tornes v. Bank of
America, N.A., Yourke, et al. v. Bank of America, N.A., et
al. and Knighten v. Bank of America, N.A.,
allege that BANA improperly and unfairly increased the number of
overdraft fees it assessed on consumer deposit accounts by
various means. The cases challenge the practice of reordering
debit card transactions to post
high-to-low
and BANAs failure to notify customers at the point of sale
that the transaction may result in an overdraft charge. The
cases also allege that BANAs disclosures and advertising
regarding the posting of debit card transactions are false,
deceptive and misleading. These cases assert claims including
breach of the implied covenant of good faith and fair dealing,
conversion, unjust enrichment and violation of the unfair and
deceptive practices statutes of various states. Plaintiffs
generally seek restitution of all overdraft fees paid to BANA as
a result of BANAs allegedly wrongful business practices,
as well as disgorgement, punitive damages, injunctive relief,
pre-judgment interest and attorneys fees. Omnibus motions
to dismiss many of the complaints involved in the MDL, including
Tornes, Yourke and Knighten, were denied on
March 12, 2010. Trial is currently scheduled for
March 26, 2012. A fourth putative class action,
Phillips, et al. v. Bank of America, N.A., which
includes similar allegations, will shortly become part of the
MDL proceedings.
In December 2004, BANA was also named as the defendant in
Closson, et al. v. Bank of America, et al., a
putative class action currently pending in the California Court
of Appeal, First District, Division 1, which also
challenges BANAs practice of reordering debit card
transactions to post deposits in
high-to-low
order. Closson asserts claims for violations of
California state law, and seeks restitution, disgorgement,
actual and punitive damages, a corrective advertising campaign
and injunctive relief. BANA entered into a settlement in
Closson, which received final approval by the Superior
Court of the State of California for the County of
San Francisco on August 3, 2009. The settlement
provides for a $35 million payment by BANA in exchange for
a release of the claims against BANA by the members of the
nationwide settlement class. Several settlement class members
who objected to the final approval of the settlement have
appealed. If the Closson settlement is affirmed, it will
likely bar the claims of many of the putative class members in
Tornes, Yourke and Knighten, as many of those
class members are covered by the putative class in
Closson.
On January 27, 2011, the Corporation reached a settlement
in principle with the lead plaintiffs in the MDL, subject to
complete final documentation and court approvals. The settlement
will provide for a payment by the Corporation of
$410 million (which amount was fully accrued by the
Corporation as of December 31, 2010) in exchange for a
complete release of claims asserted against the Corporation in
the MDL. The settlement also contemplates that a stay will be
requested in the Closson appeal and that, when this
settlement becomes effective, the appeal in Closson will
be withdrawn and the settlement in Closson will be
effectuated according to its terms.
Countrywide Bond
Insurance Litigation
The Corporation, Countrywide Financial Corporation (CFC) and
various other Countrywide entities are subject to claims from
several monoline bond insurance companies. These claims
generally relate to bond insurance policies provided by the
insurers on certain securitized pools of home equity lines
Bank of America
2010 197
of credit and fixed-rate second-lien mortgage loans. Plaintiffs
in these cases generally allege that they have paid claims as a
result of defaults in the underlying loans and assert that these
defaults are the result of improper underwriting by the
defendants.
MBIA
The Corporation, CFC and various other Countrywide entities are
named as defendants in two actions filed by MBIA Insurance
Corporation (MBIA). The first action, MBIA Insurance
Corporation, Inc. v. Countrywide Home Loans, et al., is
pending in New York Supreme Court, New York County. In
April 2010, the court granted in part and denied in part the
Countrywide defendants motion to dismiss and denied the
Corporations motion to dismiss. The parties have filed
cross-appeals from this order. On December 22, 2010, the
court issued an order on MBIAs motion for use of sampling
at trial, in which the court held that MBIA may attempt to prove
its breach of contract and fraudulent inducement claims through
examination of statistically significant samples of the
securitizations at issue. In its order, the court did not
endorse any of MBIAs specific sampling proposals and
stated that defendants have significant valid
challenges to MBIAs methodology that they may
present at trial, together with defendants own views and
evidence.
The second MBIA action, MBIA Insurance Corporation,
Inc. v. Bank of America Corporation, Countrywide Financial
Corporation, Countrywide Home Loans, Inc., Countrywide
Securities Corporation, et al., is pending in the Superior
Court of the State of California, County of Los Angeles. MBIA
purports to bring this action as subrogee to the note holders
for certain securitized pools of home equity lines of credit and
fixed-rate second-lien mortgage loans and seeks unspecified
damages and declaratory relief. On May 17, 2010, the court
dismissed the claims against the Countrywide defendants with
leave to amend, but denied the request to dismiss MBIAs
successor liability claims against the Corporation. On
June 21, 2010, MBIA filed an amended complaint re-asserting
its previously dismissed claims against the Countrywide
defendants, re-asserting the successor liability claim against
the Corporation and adding Countrywide Capital Markets, LLC as a
defendant. The Countrywide defendants filed a demurrer to the
amended complaint, but the court declined to rule on the
demurrer and instead entered an order which stays this case
until August 1, 2011.
Syncora
The Corporation, CFC and various other Countrywide entities are
named as defendants in an action filed by Syncora Guarantee Inc.
(Syncora) entitled Syncora Guarantee Inc. v. Countrywide
Home Loans, Inc., et al. This action, currently pending in
New York Supreme Court, New York County, relates to bond
insurance policies provided by Syncora on certain securitized
pools of home equity lines of credit. In March 2010, the court
issued an order that granted in part and denied in part the
Countrywide defendants motion to dismiss. Syncora and the
Countrywide defendants have filed cross-appeals from this order.
In May 2010, Syncora amended its complaint. Defendants filed an
answer to Syncoras amended complaint on July 9, 2010,
as well as a counterclaim for breach of contract and declaratory
judgment. The parties have agreed to stay the counterclaim until
August 15, 2011.
FGIC
The Corporation, CFC and various other Countrywide entities are
named as defendants in an action filed by Financial Guaranty
Insurance Company (FGIC) entitled Financial Guaranty
Insurance Co. v. Countrywide Home Loans, Inc. This
action, currently pending in New York Supreme Court, New York
County, relates to bond insurance policies provided by FGIC on
certain securitized pools of home equity lines of credit and
fixed-rate second-lien mortgage loans. In June 2010, the court
entered an order that granted in part and denied in part the
Countrywide defendants motion to dismiss. FGIC and the
Countrywide defendants have filed cross-appeals from this order.
Defendants filed an answer to FGICs amended complaint on
July 19, 2010. On March 24, 2010, CFC and certain
other Countrywide entities filed a separate but related action
against FGIC in New York Supreme Court seeking monetary damages
of at least $100 million against FGIC in connection with
FGICs failure to pay claims under certain bond insurance
policies.
Ambac
The Corporation, CFC and various other Countrywide entities are
named as defendants in an action filed by Ambac Assurance
Corporation (Ambac) entitled Ambac Assurance Corporation and
The Segregated Account of Ambac Assurance Corporation v.
Countrywide Home Loans, Inc., et al. This action, currently
pending in New York Supreme Court, New York County, relates to
bond insurance policies provided by Ambac on certain securitized
pools of home equity lines of credit and fixed-rate second-lien
mortgage loans. On December 10, 2010, defendants filed
answers to the complaint.
Countrywide
Equity and Debt Securities Matters
Certain New York state and municipal pension funds have
commenced litigation in the U.S. District Court for the
Central District of California, entitled In re Countrywide
Financial Corporation Securities Litigation, against CFC,
certain other Countrywide entities and several former CFC
officers and directors. This action alleges violations of the
antifraud provisions of the Securities Exchange Act of 1934 and
Sections 11 and 12 of the Securities Act of 1933.
Plaintiffs claim losses in excess of $25.0 billion that
plaintiffs allegedly experienced on certain CFC equity and debt
securities. Plaintiffs also assert additional claims against
BAS, MLPFS and other underwriter defendants under
Sections 11 and 12 of the Securities Act of 1933.
Plaintiffs allege that CFC made false and misleading
statements in certain SEC filings and elsewhere concerning the
nature and quality of its loan underwriting practices and its
financial results. On April 2, 2010, the parties reached an
agreement in principle to settle this action for
$624 million in exchange for a dismissal of all claims with
prejudice. On August 2, 2010, the court preliminarily
approved the settlement. On December 1, 2010, CFC and the
plaintiffs agreed to amend the settlement to allow CFC to use up
to $22.5 million of the settlement funds for a two-year
period following final approval of the settlement to resolve any
claims asserted by investors who chose to exclude themselves
from the class. On January 7, 2011, the court preliminarily
approved this amendment. The settlement remains subject to final
court approval.
Interchange and
Related Litigation
A group of merchants have filed a series of putative class
actions and individual actions with regard to interchange fees
associated with Visa and MasterCard payment card transactions.
These actions, which have been consolidated in the
U.S. District Court for the Eastern District of New York
under the caption In Re Payment Card Interchange Fee and
Merchant Discount Anti-Trust Litigation
(Interchange), name Visa, MasterCard and several
banks and bank holding companies, including the Corporation, as
defendants. Plaintiffs allege that the defendants conspired to
fix the level of default interchange rates, which represent the
fee an issuing bank charges an acquiring bank on every
transaction. Plaintiffs also challenge as unreasonable
restraints of trade under Section 1 of the Sherman Act
certain rules of Visa and MasterCard related to merchant
acceptance of payment cards at the point of sale. Plaintiffs
seek unspecified damages and injunctive relief based on their
assertion that interchange would be lower or eliminated absent
the alleged conduct. On January 8, 2008, the court granted
defendants motion to dismiss all claims for pre-2004
damages. Motions to dismiss the remainder of the complaint and
plaintiffs motion for class certification are pending.
In addition, plaintiffs filed supplemental complaints against
certain defendants, including the Corporation, relating to
initial public offerings (the
198 Bank
of America 2010
IPOs) of MasterCard and Visa. Plaintiffs allege that the
MasterCard and Visa IPOs violated Section 7 of the Clayton
Act and Section 1 of the Sherman Act. Plaintiffs also
assert that the MasterCard IPO was a fraudulent conveyance.
Plaintiffs seek unspecified damages and to undo the IPOs.
Motions to dismiss both supplemental complaints remain pending.
The Corporation and certain of its affiliates previously entered
into loss-sharing agreements with Visa and other financial
institutions in connection with certain antitrust litigation
against Visa, including Interchange. The Corporation and
these same affiliates have now entered into additional
loss-sharing agreements for Interchange that cover all
defendants, including MasterCard. Collectively, the loss-sharing
agreements require the Corporation
and/or
certain affiliates to pay 11.6 percent of the monetary
portion of any comprehensive Interchange settlement. In
the event of an adverse judgment, the agreements require the
Corporation
and/or
certain affiliates to pay 12.8 percent of any damages
associated with Visa-related claims (Visa-related damages),
9.1 percent of any damages associated with
MasterCard-related claims, and 11.6 percent of any damages
associated with internetwork claims (internetwork damages) or
not associated specifically with Visa or MasterCard-related
claims (unassigned damages).
Pursuant to Visas publicly-disclosed Retrospective
Responsibility Plan (the RRP), Visa placed certain proceeds from
its IPO into an escrow fund (the Escrow). Under the RRP, funds
in the Escrow may be accessed by Visa and its members, including
Bank of America, to pay for a comprehensive settlement or
damages in Interchange, with the Corporations
payments from the Escrow capped at 12.81 percent of the
funds that Visa places therein. Subject to that cap, the
Corporation may use Escrow funds to cover: 66.7 percent of
its monetary payment towards a comprehensive Interchange
settlement, 100 percent of its payment for any
Visa-related damages and 66.7 percent of its payment for
any internetwork and unassigned damages.
In re Initial
Public Offering Securities Litigation
BAS, Merrill Lynch, MLPFS, and certain of their subsidiaries,
along with other underwriters, and various issuers and others,
were named as defendants in a number of putative class action
lawsuits that have been consolidated in the U.S. District
Court for the Southern District of New York as In re Initial
Public Offering Securities Litigation. Plaintiffs contend,
among other things, that defendants failed to make certain
required disclosures in the registration statements and
prospectuses for applicable offerings regarding alleged
agreements with institutional investors that tied allocations in
certain offerings to the purchase orders by those investors in
the aftermarket. Plaintiffs allege that such agreements allowed
defendants to manipulate the price of the securities sold in
these offerings in violation of Section 11 of the
Securities Act of 1933 and Section 10(b) of the Securities
Exchange Act of 1934, and SEC rules promulgated thereunder. The
parties agreed to settle the matter, for which the court granted
final approval. Some putative class members have filed an
appeal, which remains pending, in the U.S. Court of Appeals
for the Second Circuit seeking reversal of the final approval.
Lehman Brothers
Holdings, Inc. Litigation
Beginning in September 2008, BAS, MLPFS, Countrywide Securities
Corporation (CSC) and LaSalle Financial Services Inc., along
with other underwriters and individuals, were named as
defendants in several putative class action lawsuits filed in
federal and state courts. All of these cases have since been
transferred or conditionally transferred to the
U.S. District Court for the Southern District of New York
under the caption In re Lehman Brothers Securities and ERISA
Litigation. Plaintiffs allege that the underwriter
defendants violated Section 11 of the Securities Act of
1933, as well as various state laws, by making false or
misleading disclosures about the real estate-related investments
and mortgage lending practices of Lehman Brothers Holdings, Inc.
(LBHI) in connection with various debt and convertible stock
offerings of LBHI. Plaintiffs seek unspecified damages. On
June 4, 2010, defendants filed a motion to dismiss the
complaint, which remains pending.
Lehman Setoff
Litigation
In 2008, following the bankruptcy filing of LBHI, Lehman
Brothers Special Financing Inc. (LBSF) owed money to BANA as a
result of various terminated derivatives transactions entered
into pursuant to one or more ISDA Master Agreements between the
parties. The net termination values of these derivative
transactions resulted in estimated claims by BANA against LBSF
in excess of $1.0 billion. LBHI had guaranteed this
exposure and, as part of an arrangement through which various
LBHI subsidiaries and affiliates would retain an ability to
overdraw their accounts during working hours, had
$500 million in cash (plus $1.8 million in accrued
interest) on deposit with BANA in a deposit account (the Deposit
Account).
On November 10, 2008, BANA exercised its right of setoff
against the Deposit Account to partially satisfy claims that
BANA had asserted against LBSF and LBHI pursuant to the ISDA
agreements and the LBHI guarantee. At the same time, BANA
exercised its right of set off against five other LBHI accounts
holding an additional $7.5 million (one of which, in the
amount of approximately $500,000, was later reversed). On
November 26, 2008, BANA commenced an adversary proceeding
against LBSF and LBHI in their Chapter 11 bankruptcy
proceedings in the U.S. Bankruptcy Court for the Southern
District of New York. BANA sought a declaration that its setoff
of LBHIs funds was proper and not in violation of the
automatic stay imposed under the Bankruptcy Code. In response,
LBHI filed counterclaims against BANA alleging that BANA had no
right to set off against the $502 million held in the
Deposit Account, and that the entire setoff was in violation of
the automatic stay. LBHI sought the return of the set-off funds
plus prejudgment interest and unspecified damages for violation
of the automatic stay, including attorneys fees and
interest. LBSF and LBHI also argued in their summary judgment
papers that the entire setoff was in violation of the automatic
stay, although they did not plead turnover of the funds held in
the other accounts.
On December 3, 2010, the Bankruptcy Court entered summary
judgment against BANA with respect to setoff of the Deposit
Account and directed BANA to pay to LBSF and LBHI
$502 million, plus interest at nine percent per annum from
November 10, 2008 through the date of the judgment. The
court conducted a status conference on January 19, 2011 and
directed the parties to discuss and present a further order
regarding LBHIs request for sanctions pertaining to
BANAs alleged violation of the automatic stay. LBSF and
LBHI publicly indicated that they would request turnover of the
$7 million that was set off from the other accounts plus an
additional amount to account for changes in foreign exchange
rates. The parties have since agreed in principle to settle both
the sanctions issue and the question of turnover of the
additional $7 million for an irrevocable payment of
$1.5 million by BANA. The settlement, which has still to be
finally documented and is subject to approval of the Bankruptcy
Court, would express that BANA admits no liability or wrongdoing
with respect to sanctions, and that LBHI and LBSF reserve no
rights to seek recovery of the $7 million, on appeal or
otherwise. BANA will oppose that request. BANA has preserved its
appellate rights as to the December 3 order and intends to file
an appeal upon entry of a final order approving the settlement.
MBIA Insurance
Corporation CDO Litigation
On April 30, 2009, MBIA and LaCrosse Financial Products,
LLC filed a complaint in New York State Supreme Court, New York
County, against MLPFS and Merrill Lynch International
(MLI) under the caption MBIA Insurance Corporation and
LaCrosse Financial Products, LLC v. Merrill Lynch Pierce
Fenner and Smith Inc., and Merrill Lynch International.
The complaint relates to certain credit default swap and
insurance agreements by which plaintiffs provided credit
protection to MLPFS and MLI and other parties on CDO
Bank of America
2010 199
securities. Plaintiffs claim that MLPFS and MLI did not
adequately disclose the credit quality and other risks of the
CDO securities and underlying collateral. The complaint alleges
claims for fraud, negligent misrepresentation, breach of the
implied covenant of good faith and fair dealing and breach of
contract and seeks rescission and unspecified compensatory and
punitive damages, among other relief. On April 9, 2010, the
court granted defendants motion to dismiss as to the
fraud, negligent misrepresentation, breach of the implied
covenant of good faith and fair dealing and rescission claims,
as well as a portion of the breach of contract claim. Plaintiffs
have appealed the dismissal of their claims and MLI has
cross-appealed the denial of its motion to dismiss the breach of
contract claim in its entirety. On February 1, 2011, the
appellate court dismissed the case against MLI in its entirety.
MBIA has filed a request to appeal the appellate courts
decision to the New York State Court of Appeals and has
requested permission from the trial court to file an amended
complaint.
Merrill Lynch
Acquisition-related Matters
Since January 2009, the Corporation and certain of its current
and former officers and directors, among others, have been named
as defendants in a variety of actions filed in state and federal
courts relating to the Corporations acquisition of Merrill
Lynch (the Acquisition). These acquisition-related cases consist
of securities actions, derivative actions and actions under
ERISA. The claims in these actions generally concern
(i) the Acquisition; (ii) the financial condition and
2008 fourth-quarter losses experienced by the Corporation and
Merrill Lynch; (iii) due diligence conducted in connection
with the Acquisition; (iv) the Corporations agreement
that Merrill Lynch could pay up to $5.8 billion in bonus
payments to Merrill Lynch employees; (v) the
Corporations discussions with government officials in
December 2008 regarding the Corporations consideration of
invoking the material adverse change clause in the Acquisition
agreement and the possibility of obtaining government assistance
in completing the Acquisition;
and/or
(vi) alleged material misrepresentations
and/or
material omissions in the proxy statement and related materials
for the Acquisition.
Securities
Actions
Plaintiffs in the putative securities class actions in the In
re Bank of America Securities, Derivative and Employment
Retirement Income Security Act (ERISA) Litigation
(Securities Plaintiffs) represent all (i) purchasers of
the Corporations common and preferred securities between
September 15, 2008 and January 21, 2009;
(ii) holders of the Corporations common stock or
Series B Preferred Stock as of October 10, 2008; and
(iii) purchasers of the Corporations common stock
issued in the offering that occurred on or about October 7,
2008. During the purported class period, the Corporation had
between 4,560,112,687 and 5,017,579,321 common shares
outstanding and the price of those securities declined from
$33.74 on September 12, 2008 to $6.68 on January 21,
2009. Securities Plaintiffs claim violations of
Sections 10(b), 14(a) and 20(a) of the Securities Exchange
Act of 1934, and SEC rules promulgated thereunder. Securities
Plaintiffs amended complaint also alleges violations of
Sections 11, 12(a)(2) and 15 of the Securities Act of 1933
related to an offering of the Corporations common stock
that occurred on or about October 7, 2008, and names BAS
and MLPFS, among others, as defendants on the Section 11
and 12(a)(2) claims. The Corporation and its co-defendants filed
motions to dismiss, which the court granted in part by
dismissing certain of the Securities Plaintiffs claims
under Section 10(b) of the Securities Exchange Act of 1934.
Securities Plaintiffs have filed a second amended complaint
which seeks to replead some of the dismissed claims as well as
add claims under Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 on behalf of holders of certain debt,
preferred securities and option securities. The Corporation and
its co-defendants have filed a motion to dismiss the second
amended complaints new and amended
allegations, which remains pending. Securities Plaintiffs seek
unspecified monetary damages, legal costs and attorneys
fees.
Several individual plaintiffs have opted to pursue claims apart
from the In re Bank of America Securities, Derivative, and
Employment Retirement Income Security Act (ERISA) Litigation
and, accordingly, have initiated individual actions relying on
substantially the same facts and claims as the Securities
Plaintiffs in the U.S. District Court for the Southern
District of New York.
On January 13, 2010, the Corporation, Merrill Lynch and
certain of the Corporations current and former officers
and directors were named in a purported class action filed in
the U.S. District Court for the Southern District of New
York entitled Dornfest v. Bank of America Corp., et
al. The action is purportedly brought on behalf of investors
in Corporation option contracts between September 15, 2008
and January 22, 2009 and alleges that during the class
period approximately 9.5 million Corporation call option
contracts and approximately eight million Corporation put option
contracts were already traded on seven of the Options Clearing
Corporation exchanges. The complaint alleges that defendants
violated Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 and SEC rules promulgated thereunder. On
April 9, 2010, the court consolidated this action with the
consolidated securities action in the In re Bank of America
Securities, Derivative and Employment Retirement Income Security
Act (ERISA) Litigation, and ruled that the plaintiffs may
pursue the action as an individual action. Plaintiffs seek
unspecified monetary damages, legal costs and attorneys
fees.
Derivative
Actions
Several of the derivative actions related to the Acquisition
that were pending in the Delaware Court of Chancery were
consolidated under the caption In re Bank of America
Corporation Stockholder Derivative Litigation. In addition,
the MDL ordered the transfer of actions related to the
Acquisition that had been pending in various federal courts to
the U.S. District Court for the Southern District of New
York for coordinated or consolidated pretrial proceedings. These
actions have been separately consolidated and are now pending
under the caption In re Bank of America Securities,
Derivative, and Employment Retirement Income Security Act
(ERISA) Litigation.
On October 9, 2009, plaintiffs in the derivative actions in
the In re Bank of America Securities, Derivative and
Employment Retirement Income Security Act (ERISA) Litigation
(the Derivative Plaintiffs) filed a consolidated amended
derivative and class action complaint. The amended complaint
names as defendants certain of the Corporations current
and former directors, officers and financial advisors, and
certain of Merrill Lynchs current and former directors and
officers. The Corporation is named as a nominal defendant with
respect to the derivative claims. The amended complaint asserts
claims for, among other things: (i) violation of federal
securities laws; (ii) breach of fiduciary duties;
(iii) the return of incentive compensation that is alleged
to be inappropriate in view of the work performed and the
results achieved by certain of the defendants; and
(iv) contribution in connection with the Corporations
exposure to significant liability under state and federal law.
The amended complaint seeks unspecified monetary damages,
equitable remedies and other relief. On February 8, 2010,
the Derivative Plaintiffs voluntarily dismissed their claims
against each of the former Merrill Lynch officers and directors
without prejudice. The Corporation and its co-defendants filed
motions to dismiss, which were granted in part on
August 27, 2010. On October 18, 2010, the Corporation
and its co-defendants answered the remaining allegations
asserted by the Derivative Plaintiffs.
On February 17, 2010, an alleged shareholder of the
Corporation filed a purported derivative action, entitled
Bahnmaier v. Lewis, et al., in the
U.S. District Court for the Southern District of New York.
The complaint names as defendants certain of the
Corporations current and former directors and officers,
and one of Merrill Lynchs former officers. The complaint
alleges, among other things, that the individual defendants
breached their fiduciary
200 Bank
of America 2010
duties by failing to provide accurate and complete information
to shareholders regarding: (i) certain Acquisition-related
events; (ii) the potential for litigation resulting from
Countrywides lending practices; and (iii) the risk
posed to the Corporations capital levels as a result of
Countrywides loan losses. The complaint also asserts
claims against the individual defendants for breach of fiduciary
duty by failing to maintain adequate internal controls, unjust
enrichment, abuse of control and gross mismanagement in
connection with the supervision and management of the
operations, business and disclosure controls of the Corporation.
The Corporation is named as a nominal defendant only and no
monetary relief is sought against it. The complaint seeks, among
other things, unspecified monetary damages, equitable remedies
and other relief. On December 14, 2010, the court entered
an order dismissing the complaint without prejudice.
The Corporation and certain of its current and former directors
are also named as defendants in several putative class and
derivative actions in the Delaware Court of Chancery, including
Rothbaum v. Lewis; Southeastern Pennsylvania
Transportation Authority v. Lewis; Tremont Partners
LLC v. Lewis; Kovacs v. Lewis; Stern v.
Lewis; and Houx v. Lewis, brought by
shareholders alleging breaches of fiduciary duties and waste of
corporate assets in connection with the Acquisition. On
April 27, 2009, the Delaware Court of Chancery consolidated
the derivative actions under the caption In re Bank of
America Corporation Stockholder Derivative Litigation. The
complaint seeks, among other things, unspecified monetary
damages, equitable remedies and other relief. On April 30,
2009, the putative class claims in the Stern v. Lewis
and Houx v. Lewis actions were voluntarily
dismissed without prejudice. Trial is scheduled for October 2012.
ERISA
Actions
On October 9, 2009, plaintiffs in the ERISA actions in the
In re Bank of America Securities, Derivative and Employment
Retirement Income Security Act (ERISA) Litigation (the ERISA
Plaintiffs) filed a consolidated amended complaint for breaches
of duty under ERISA. The amended complaint is brought on behalf
of a purported class that consists of participants in the
Corporations 401(k) Plan, the Corporations 401(k)
Plan for Legacy Companies, the CFC 401(k) Plan (collectively,
the 401(k) Plans) and the Corporations Pension Plan. The
amended complaint alleges violations of ERISA, based on, among
other things: (i) an alleged failure to prudently and
loyally manage the 401(k) Plans and Pension Plan by continuing
to offer the Corporations common stock as an investment
option or measure for participant contributions; (ii) an
alleged failure to monitor the fiduciaries of the 401(k) Plans
and Pension Plan; (iii) an alleged failure to provide
complete and accurate information to the 401(k) Plans and
Pension Plan participants with respect to the Merrill Lynch and
Countrywide acquisitions and related matters; and
(iv) alleged co-fiduciary liability for these purported
fiduciary breaches. The amended complaint seeks unspecified
monetary damages, equitable remedies and other relief. On
August 27, 2010, the court dismissed the complaint brought
by plaintiffs in the consolidated ERISA action in its entirety.
The ERISA Plaintiffs filed a notice of appeal of the
courts dismissal of their actions. The parties then
stipulated to the dismissal of the appeal with the agreement
that the ERISA Plaintiffs can reinstate their appeal at any time
up until July 27, 2011.
NYAG
Action
On February 4, 2010, the New York Attorney General (NYAG)
filed a civil complaint in the Supreme Court of New York State,
entitled People of the State of New York v. Bank of
America, et al. The complaint names as defendants the
Corporation and the Corporations former CEO and CFO, and
alleges violations of Sections 352, 352-c(1)(a),
352-c(1)(c), and 353 of the New York General Business Law,
commonly known as the Martin Act, and Section 63(12) of the
New York Executive Law. The complaint seeks an
unspecified amount in disgorgement, penalties, restitution, and
damages and other equitable relief. The court has ordered fact
discovery to be complete by September 30, 2011.
Montgomery
The Corporation, several of its current and former officers and
directors, BAS, MLPFS and other unaffiliated underwriters have
been named as defendants in a putative class action filed in the
U.S. District Court for the Southern District of New York
entitled Montgomery v. Bank of America, et al.
Plaintiff filed an amended complaint on January 14, 2011.
Plaintiff seeks to sue on behalf of all persons who acquired
certain series of preferred stock offered by the Corporation
pursuant to a shelf registration statement dated May 5,
2006. Plaintiffs claims arise from three offerings dated
January 24, 2008, January 28, 2008 and May 20,
2008, from which the Corporation allegedly received proceeds of
$15.8 billion. The amended complaint asserts claims under
Sections 11, 12(a)(2) and 15 of the Securities Act of 1933,
and alleges that the prospectus supplements associated with the
offerings: (i) failed to disclose that the
Corporations loans, leases, CDOs and commercial MBS were
impaired to a greater extent than disclosed;
(ii) misrepresented the extent of the impaired assets by
failing to establish adequate reserves or properly record losses
for its impaired assets; (iii) misrepresented the adequacy
of the Corporations internal controls in light of the
alleged impairment of its assets; (iv) misrepresented the
Corporations capital base and Tier 1 leverage ratio
for risk-based capital in light of the allegedly impaired
assets; and (v) misrepresented the thoroughness and
adequacy of the Corporations due diligence in connection
with its acquisition of Countrywide. The amended complaint seeks
rescission, compensatory and other damages.
Mortgage-backed
Securities Litigation
The Corporation and its affiliates, Countrywide entities and
their affiliates, and Merrill Lynch entities and their
affiliates have been named as defendants in several cases
relating to their various roles as issuer, originator, seller,
depositor, sponsor, underwriter
and/or
controlling entity in MBS offerings, pursuant to which the MBS
investors were entitled to a portion of the cash flow from the
underlying pools of mortgages. These cases generally include
purported class action suits and actions by individual MBS
purchasers. Although the allegations vary by lawsuit, these
cases generally allege that the registration statements,
prospectuses and prospectus supplements for securities issued by
securitization trusts contained material misrepresentations and
omissions, in violation of Sections 11 and 12 of the
Securities Act of 1933
and/or state
securities laws and other state statutory and common laws.
These cases generally involve allegations of false and
misleading statements regarding: (i) the process by which
the properties that served as collateral for the mortgage loans
underlying the MBS were appraised; (ii) the percentage of
equity that mortgage borrowers had in their homes;
(iii) the borrowers ability to repay their mortgage
loans; and (iv) the underwriting practices by which those
mortgage loans were originated (collectively, the MBS Claims).
In addition, several of the cases discussed below assert claims
related to the ratings given to the different tranches of MBS by
rating agencies. Plaintiffs in these cases generally seek
unspecified compensatory damages, unspecified costs and legal
fees and, in some instances, seek rescission.
Luther
Litigation and Related Actions
David H. Luther and various pension funds (collectively, Luther
Plaintiffs) commenced a putative class action against CFC,
several of its affiliates, BAS, MLPFS and other entities and
individuals in California Superior Court for Los Angeles County
entitled Luther v. Countrywide Financial Corporation,
et al (the Luther Action). The Luther Plaintiffs claim
that they and other unspecified investors purchased MBS issued
by subsidiaries of CFC in 429 offerings
Bank of America
2010 201
between January 2005 and December 2007. The Luther Plaintiffs
certified that they collectively purchased securities in 61 of
the 429 offerings for approximately $216 million. On
January 6, 2010, the court granted CFCs motion to
dismiss, with prejudice, due to lack of subject matter
jurisdiction. The Luther Plaintiffs appeal to the
California Court of Appeal is currently pending.
Following the dismissal of the Luther Action, the Maine State
Retirement System filed a putative class action in the
U.S. District Court for the Central District of California,
entitled Maine State Retirement System v. Countrywide
Financial Corporation, et al. (the Maine Action). The Maine
Action names the same defendants as the Luther Action, as well
as the Corporation and NB Holdings Corporation, and asserts
substantially the same allegations regarding 427 of the MBS
offerings that were at issue in the Luther Action. On
May 14, 2010, the court appointed the Iowa Public
Employees Retirement System (IPERS) as Lead Plaintiff. On
July 13, 2010, IPERS filed an amended complaint, which
added additional pension fund plaintiffs (collectively, the
Maine Plaintiffs). The Maine Plaintiffs certified that they
purchased securities in 81 of those 427 offerings, for
approximately $538 million. On November 4, 2010, the
court granted CFCs motion to dismiss the amended complaint
in its entirety, and ordered the Maine Plaintiffs to file a
second amended complaint within 30 days. In so doing, the
court held that the Maine Plaintiffs only have standing to sue
over the 81 offerings in which they actually purchased MBS. The
court also held that the applicable statute of limitations could
be tolled by the filing of the Luther Action only with respect
to the offerings in which the Luther Plaintiffs actually
purchased MBS. On December 6, 2010, the Maine Plaintiffs
filed a second amended complaint that relates to 14 MBS
offerings.
Western Conference of Teamsters Pension Trust Fund (Western
Teamsters) filed suit against the same defendants named in the
Maine Action on November 17, 2010 in the Superior Court of
California, Los Angeles County, entitled Western Conference
of Teamsters Pension Trust Fund v. Countrywide
Financial Corporation, et al. Western Teamsters claims that
it and other unspecified investors purchased MBS issued in the
428 offerings that were also at issue in the Luther Action. The
Western Teamsters action has been stayed by the Superior Court
pending resolution of the appeal of the Luther Action.
The New Mexico State Investment Council, New Mexico Educational
Retirement Board and New Mexico Public Employees Retirement
Association (the New Mexico Plaintiffs) have also brought an
action against CFC and several of its affiliates, current and
former officers, as well as third-party underwriters in New
Mexico District Court for the County of Santa Fe, entitled
New Mexico State Investment Council, et al. v.
Countrywide Financial Corporation, et al. A related action
was later filed against the individual defendants in California
Superior Court, entitled New Mexico State Investment Council,
et al. v. Stanford L. Kurland, et al. On
November 15, 2010, the parties agreed to resolve and
dismiss these two cases in their entirety with prejudice for an
amount that is not material to the Corporations results of
operations.
Putnam Bank filed a putative class action lawsuit on
January 27, 2011 against CFC, the Corporation, certain of
their subsidiaries, and certain individuals in the
U.S. District Court for the District of Connecticut,
entitled Putnam Bank v. Countrywide Financial
Corporation, et al. Putnam Bank alleges that it purchased
approximately $33 million in eight MBS offerings issued by
subsidiaries of CFC between August 2005 and September 2007. All
eight offerings were also included in the Luther Action and the
Maine Action. In addition to certain MBS Claims, Putnam Bank
contends among other things that defendants made false and
misleading statements regarding: (i) the number of mortgage
loans in each offering that were originated under reduced
documentation programs; (ii) the method by which mortgages
were selected for inclusion in the collateral pools underlying
the offerings; and (iii) the analysis conducted by ratings
agencies prior to assigning ratings to the MBS.
Countrywide may also be subject to contractual indemnification
obligations for the benefit of certain defendants involved in
the MBS matters discussed above.
IndyMac
Litigation
In 2006 and 2007, MLPFS, CSC and other financial institutions
participated as underwriters in MBS offerings in which IndyMac
MBS, Inc. securitized residential mortgage loans originated or
acquired by IndyMac Bank, F.S.B. (IndyMac Bank) and created
trusts that issued MBS. In 2009, the Corporation was named as an
underwriter defendant, along with several other financial
institutions, in its alleged capacity as
successor-in-interest
to MLPFS and CSC in a consolidated class action in the
U.S. District Court for the Southern District of New York,
entitled In re IndyMac Mortgage-Backed Securities
Litigation. In their complaint, plaintiffs assert MBS Claims
relating to 106 offerings of IndyMac-related MBS. On
June 21, 2010, the court dismissed the Corporation from the
action because the plaintiffs failed to plead sufficient facts
to support their allegation that the Corporation is the
successor-in-interest
to MLPFS and CSC. On August 3, 2010, plaintiffs filed a
motion to add MLPFS and CSC as defendants, which MLPFS and CSC
have opposed.
Merrill Lynch
MBS Litigation
Merrill Lynch, MLPFS, Merrill Lynch Mortgage Investors, Inc.
(MLMI) and certain current and former directors of MLMI are
named as defendants in a putative consolidated class action in
the U.S. District Court in the Southern District of New
York, entitled Public Employees Ret. System of
Mississippi v. Merrill Lynch & Co. Inc. In
addition to MBS Claims, plaintiffs also allege that the offering
documents for the MBS misrepresented or omitted material facts
regarding the credit ratings assigned to the securities. In
March 2010, the court dismissed claims related to 65 of 84
offerings with prejudice due to lack of standing as no named
plaintiff purchased securities in those offerings. On
November 8, 2010, the court dismissed claims related to 1
of 19 remaining offerings on separate grounds. MLPFS was the
sole underwriter of these 18 offerings. On December 1,
2010, the defendants filed an answer to the consolidated amended
complaint.
Cambridge
Place Investment Management Litigation
Cambridge Place Investment Management Inc. (CPIM), as the
alleged exclusive assignee of certain entities that allegedly
purchased MBS offered or sold by BAS, MLPFS and CSC, brought an
action against BAS, MLPFS, CSC and several of their affiliates
in Massachusetts Superior Court, Suffolk County, entitled
Cambridge Place Investment Management Inc. v. Morgan
Stanley & Co., Inc., et al. CPIM also brought
claims against more than 50 other defendants in this action. In
addition to MBS Claims, CPIM contends that BAS, MLPFS, CSC and
their affiliates made false and misleading statements in
violation of the Massachusetts Uniform Securities Act regarding:
(i) due diligence performed by the underwriters on the
mortgage loans and the mortgage originators underwriting
practices; and (ii) the credit enhancements applicable to
certain tranches of the MBS. On August 13, 2010, certain
defendants removed the case to the U.S. District Court for
the District of Massachusetts. On September 13, 2010, CPIM
filed a motion to remand the case back to state court. On
October 12, 2010, the court referred the motion to remand
to a Magistrate Judge for consideration. On December 28,
2010, the Magistrate Judge issued a report and recommendation
that the action be remanded to state court. On January 18,
2011, the defendants filed an objection to that recommendation,
which CPIM opposed on February 1, 2011. The objection to
the Magistrate Judges recommendation remains pending.
On February 11, 2011, CPIM commenced a separate civil
action in Massachusetts Superior Court, Suffolk County,
captioned Cambridge Place Investment Management Inc. v.
Morgan Stanley & Co., Inc., et al., in
202 Bank
of America 2010
connection with the offering or sale of certain additional
mortgage-backed securities by BAS, MLPFS, CSC, several of their
affiliates and more than 40 other defendants. CPIM alleges that
it is the assignee of the claims of certain entities that
allegedly purchased mortgage-backed securities issued or sold by
BAS, MLPFS and CSC in various offerings. In addition to MBS
Claims, CPIM contends that BAS, MLPFS, CSC and their affiliates
made false and misleading statements in violation of the
Massachusetts Uniform Securities Act in connection with these
offerings regarding: (i) due diligence performed by the
underwriters on the mortgage loans and the mortgage
originators underwriting practices; (ii) the credit
enhancements applicable to certain tranches of the MBS; and
(iii) the validity of each issuing trusts title to
the mortgage loans comprising the pool for that securitization.
Federal Home
Loan Bank Litigation
The Federal Home Loan Bank of Atlanta (FHLB Atlanta) filed a
complaint on January 18, 2011 against the Corporation, CFC,
CSC and Countrywide Home Loans (CHL) in the State Court of
Georgia, Fulton County, entitled Federal Home Loan Bank of
Atlanta v. Countrywide Financial Corporation, et al. In
addition to certain MBS Claims, FHLB Atlanta contends that
defendants made false and misleading statements regarding:
(i) the credit ratings of the securities; and (ii) the
transfer and assignment of the loans to the trusts.
The Federal Home Loan Bank of Chicago (FHLB Chicago) filed a
complaint against the Corporation, BAS, MLPFS and CSC in the
Illinois Circuit Court, Cook County, entitled Federal Home
Loan Bank of Chicago v. Banc of America Funding Corp.,
et al. (the Illinois Action). FHLB Chicago also filed a
complaint against BAS, CFC and subsidiaries of CFC in the
Superior Court of California, Los Angeles County, entitled
Federal Home Loan Bank of Chicago v. Banc of America
Securities LLC, et al. (the California Action). In addition
to certain MBS Claims, FHLB Chicago contends that defendants
made false and misleading statements regarding among other
things, the guidelines for extending mortgages to borrowers and
the due diligence performed on repurchased and pooled loans.
Both actions have been removed to federal court.
The Federal Home Loan Bank of Pittsburgh (FHLB Pittsburgh)
commenced an action against CFC, CSC and certain other
Countrywide affiliates, as well as several ratings agencies, in
the Court of Common Pleas of Allegheny County Pennsylvania,
entitled Federal Home Loan Bank of Pittsburgh v.
Countrywide Securities Corporation et al. FHLB Pittsburgh
claims to have purchased MBS issued by subsidiaries of CFC in
five offerings for approximately $366 million. In addition
to certain MBS Claims, FHLB Pittsburgh contends that defendants
made false and misleading statements regarding the risk
associated with the MBS based on their credit ratings.
Countrywides motion to dismiss was denied on
November 29, 2010.
The Federal Home Loan Bank of Seattle (FHLB Seattle) filed four
separate complaints, each against different defendants,
including the Corporation and several of its subsidiaries,
Countrywide and Merrill Lynch, as well as certain other
defendants, in the Superior Court of Washington for King County
concerning four separate issuances entitled Federal Home Loan
Bank of Seattle v. UBS Securities LLC, et al.;
Federal Home Loan Bank of Seattle v. Countrywide
Securities Corp., et al.; Federal Home Loan Bank of
Seattle v. Banc of America Securities LLC, et al.
and Federal Home Loan Bank of Seattle v. Merrill
Lynch, Pierce, Fenner & Smith, Inc., et al. In
addition to certain MBS Claims, FHLB Seattle contends that
defendants made false and misleading statements regarding the
number of borrowers who actually lived in the houses that
secured the mortgage loans and the business practices of the
lending institutions that made the mortgage loans. FHLB Seattle
claims that the sales violated the Securities Act of Washington.
On October 18, 2010, the Corporation entities and
Countrywide entities named as defendants in three of the cases
filed a consolidated motion to dismiss the amended complaints,
which is currently pending. On the same date, the
Merrill Lynch entities named as defendants in the fourth case
filed a motion to dismiss the amended complaint, which is
currently pending.
The Federal Home Loan Bank of San Francisco (FHLB
San Francisco) filed two actions against various affiliates
of the Corporation, as well as various Countrywide and Merrill
Lynch entities in the Superior Court of California, County of
San Francisco, entitled: (i) Federal Home Loan Bank
of San Francisco v. Credit Suisse Securities (USA)
LLC, et al., which asserts claims against CFC, CSC, BAS and
several of their affiliates; and (ii) Federal Home Loan
Bank of San Francisco v. Deutsche Bank Securities
Inc., et al., which asserts claims against CSC and MLPFS. In
addition to certain MBS Claims, FHLB San Francisco contends
that defendants made false and misleading statements regarding
the original mortgage lenders guidelines for extending the
loans to borrowers. FHLB San Francisco also claims that
defendants failed to disclose that third-party ratings
services credit ratings of the MBS did not take into
account defendants false and misleading statements about
the mortgage loans underlying the MBS. On November 5, 2010,
FHLB San Francisco sought permission from the court to
amend its complaint in the first action to include the
Corporation as a defendant and, among other things, to assert
control person liability claims against the Corporation under
state and federal securities laws and to assert that the
Corporation succeeded to CFCs interests. Defendants had
removed the state court actions to federal court, but on
December 20, 2010, the U.S. District Court, Northern
District of California remanded the cases to state court and
denied a motion to amend the complaint as moot when it granted
remand. On November 5, 2010, FHLB San Francisco also
filed a declaratory action in the Superior Court of California,
County of San Francisco, entitled Federal Home Loan Bank
of San Francisco v. Bank of America Corporation and
Does 1-10, seeking a determination that the Corporation is a
successor to the liabilities of CFC including the liabilities at
issue in Federal Home Loan Bank of San Francisco v.
Credit Suisse Securities (USA) LLC, et al.
Charles Schwab
Litigation
The Charles Schwab Corporation (Schwab) has filed an action
against the Corporation, BAS, Countrywide, and several of their
affiliates, in the Superior Court of California, County of
San Francisco, on July 15, 2010 entitled The
Charles Schwab Corp. v. BNP Paribas Securities Corp., et
al. This action is in connection with the purchase by Schwab
of approximately $577 million of MBS, $166 million of
which relates to claims with respect to the Corporation and BAS
and $411 million of which relates to claims with respect to
Countrywide. In addition to MBS Claims, Schwab contends that the
Corporation, BAS and Countrywide are liable for false and
misleading statements regarding among other things, the business
practices of the lending institution that made the original loan
and MBS credit ratings. In September 2010, the Corporation, BAS
and Countrywide joined in or consented to the removal of this
action to the U.S. District Court for the Northern District
of California. Schwab has filed a motion to remand the action to
California state court, which remains pending.
Allstate
Litigation
Allstate Insurance Company, Allstate Life Insurance Company,
Allstate Life Insurance Company of New York and American
Heritage Life Insurance Company (collectively, the Allstate
Plaintiffs) filed an action on December 27, 2010 against
CFC, the Corporation, several of their affiliates and several
individuals in the U.S. District Court for the Southern
District of New York, entitled Allstate Insurance Company, et
al., v. Countrywide Financial Corporation, et al. (the
Allstate Action). The Allstate Plaintiffs allege that they
purchased MBS issued by CFC related entities in 25 offerings
between March 2005 and June 2007. All but three of the 25
offerings in the Allstate Action are also at issue in the Luther
and Western Teamsters Actions. Two of the 25 offerings in the
Allstate Action are also at issue in the second amended
complaint filed by plaintiffs in
Bank of America
2010 203
the Maine Action on December 6, 2010. In addition to
certain MBS Claims, the Allstate Plaintiffs contend that
defendants made false and misleading statements regarding:
(i) the number of borrowers who used the properties
securing the mortgage loans as their primary residence;
(ii) the number of mortgage loans in each offering that
were originated under reduced documentation programs; and
(iii) the standards by which the mortgage loans were
serviced after origination.
Regulatory
Investigations
In addition to the MBS litigation discussed beginning on
page 201, the Corporation has also received a number of
subpoenas and other informal requests for information from
federal regulators regarding MBS matters, including inquiries
related to the Corporations underwriting and issuance of
MBS and its participation in certain CDO offerings.
Municipal
Derivatives Matters
The SEC, the Department of Justice (DOJ), the Internal Revenue
Service (IRS), the Office of Comptroller of the Currency (OCC),
the Federal Reserve and a Working Group of State Attorneys
General (the Working Group) have investigated the Corporation,
BANA and BAS concerning possible anticompetitive practices in
the municipal derivatives industry dating back to the early
1990s. These investigations have focused on the bidding
practices for guaranteed investment contracts, the investment
vehicles in which the proceeds of municipal bond offerings are
deposited, as well as other types of derivative transactions
related to municipal bonds. On January 11, 2007, the
Corporation entered a Corporate Conditional Leniency Letter with
the DOJ, under which the DOJ agreed not to prosecute the
Corporation for criminal antitrust violations in connection with
matters the Corporation has reported to the DOJ, subject to the
Corporations continued cooperation. On December 7,
2010, the Corporation and its affiliates settled inquiries with
the SEC, OCC, IRS and the Working Group for an aggregate amount
that is not material to the Corporations results of
operations. In addition, the Corporation entered into an
agreement with the Federal Reserve providing for additional
oversight and compliance risk management.
BANA and Merrill Lynch, along with other financial institutions,
are named as defendants in several substantially similar class
actions and individual actions, filed in various state and
federal courts by several municipalities that issued municipal
bonds, as well as purchasers of municipal derivatives. These
actions generally allege that defendants conspired to violate
federal and state antitrust laws by allocating customers, and
fixing or stabilizing rates of return on certain municipal
derivatives from 1992 to the present. These actions seek
unspecified damages, including treble damages. However, as a
result of the Corporations receipt of the Corporate
Leniency Letter from the DOJ referenced above, the Corporation
is eligible to seek a ruling that certain civil plaintiffs are
limited to single, rather than treble, damages and relief from
joint and several liability with co-defendants in the civil
suits discussed below. All of the actions have been transferred
to the U.S. District Court for the Southern District of New
York and consolidated in a single proceeding, entitled In re
Municipal Derivatives Antitrust Litigation. Defendants other
than BANA and Merrill Lynch filed motions to dismiss
plaintiffs complaints, which the court denied in large
part in April 2010. The action has otherwise been largely stayed
while the DOJ completes its criminal trials concerning other
parties.
Ocala
Litigation
BNP Paribas Mortgage Corporation and Deutsche Bank AG each filed
claims (the 2009 Actions) against BANA in the U.S. District
Court for the Southern District of New York entitled BNP
Paribas Mortgage Corporation v. Bank of America, N.A.
and Deutsche Bank AG v. Bank of America, N.A.
Plaintiffs allege that BANA failed to properly perform its
duties as indenture trustee, collateral agent, custodian and
depositary for Ocala Funding, LLC (Ocala), a home
mortgage warehousing facility, resulting in the loss of
plaintiffs investment in Ocala. Ocala was a wholly-owned
subsidiary of Taylor, Bean & Whitaker Mortgage Corp.
(TBW), a home mortgage originator and servicer which is alleged
to have committed fraud that led to its eventual bankruptcy.
Ocala provided funding for TBWs mortgage origination
activities by issuing notes, the proceeds of which were to be
used by TBW to originate home mortgages. Such mortgages and
other Ocala assets in turn were pledged to BANA, as collateral
agent, to secure the notes. Plaintiffs lost most or all of their
investment in Ocala when, as the result of the alleged fraud
committed by TBW, Ocala was unable to repay the notes purchased
by plaintiffs and there was insufficient collateral to satisfy
Ocalas debt obligations. Plaintiffs allege that BANA
breached its contractual, fiduciary and other duties to Ocala,
thereby permitting TBWs alleged fraud to go undetected.
Plaintiffs seek compensatory damages and other relief from BANA,
including interest and attorneys fees, in an unspecified
amount, but which plaintiffs allege exceeds $1.6 billion.
BANAs motions to dismiss these actions are currently
pending.
On August 30, 2010, plaintiffs each filed a new lawsuit
(the 2010 Actions) against BANA in the U.S. District Court
for the Southern District of Florida entitled BNP Paribas
Mortgage Corporation v. Bank of America, N.A. and
Deutsche Bank AG v. Bank of America, N.A., which the
parties agreed to transfer to the U.S. District Court for
the Southern District of New York as related to the 2009
Actions. The 2010 Actions assert an alternative theory for
plaintiffs to recover a portion of their Ocala losses from BANA.
Plaintiffs allege that BANAs commercial division purchased
from TBW participation interests in pools of mortgage loans that
allegedly included loans that were already pledged as collateral
for plaintiffs Ocala notes. Plaintiffs allege that the
purchase of these participation interests constituted conversion
of the underlying mortgage loans and that BANA is thus required
to reimburse plaintiffs for the value of these loans. Plaintiffs
seek compensatory and other damages, interest and
attorneys fees in amounts that are unspecified but which
plaintiffs allege exceed approximately $665 million,
representing a portion of the same losses alleged in the 2009
Actions. BANAs motion to dismiss the 2010 Actions was
argued in the U.S. District Court for the Southern District
of New York on January 26, 2011.
On October 1, 2010, BANA, on behalf of Ocalas
investors, filed suit in the U.S. District Court for the
District of Columbia against the Federal Deposit Insurance
Corporation (FDIC) as receiver of Colonial Bank (TBWs
primary bank) and Platinum Community Bank (a wholly-owned
subsidiary of TBW) entitled Bank of America, National
Association as indenture trustee, custodian and collateral agent
for Ocala Funding, LLC v. Federal Deposit Insurance
Corporation. The suit seeks judicial review of the
FDICs denial of the administrative claims brought by BANA,
on behalf of Ocala, in the FDICs Colonial and Platinum
receivership proceedings. BANAs claims allege that
Ocalas losses were in whole or in part the result of
Colonials and Platinums participation in TBWs
alleged fraud. BANA seeks a court order requiring the FDIC to
allow BANAs claims in an amount equal to Ocalas
losses and, accordingly, to permit BANA, as trustee, collateral
agent, custodian and depositary for Ocala, to share
appropriately in distributions of any receivership assets that
the FDIC makes to creditors of the two failed banks.
Parmalat
On November 23, 2005, the Official Liquidators of Food
Holdings Limited and Dairy Holdings Limited, two entities in
liquidation proceedings in the Cayman Islands, filed a complaint
in the U.S. District Court for the Southern District of New
York, entitled Food Holdings Ltd, et al. v. Bank of
America Corp., et al., against the Corporation and several
related entities. Plaintiffs allege that the Corporation and
other defendants conspired with Parmalat, which was admitted to
insolvency proceedings in Italy in December 2003, in carrying
out transactions involving the plaintiffs in connection with the
funding of Parmalats Brazilian entities. Plaintiffs assert
claims for fraud, negligent misrepresentation, breach of
fiduciary duty and other related claims. The complaint
204 Bank
of America 2010
seeks in excess of $400 million in compensatory damages and
interest, among other relief. On February 17, 2010, the
court dismissed all of plaintiffs claims. On
March 18, 2010, plaintiffs filed a notice of appeal to the
U.S. Court of Appeals for the Second Circuit and on
April 1, 2010, the Corporation filed a cross-appeal.
Briefing was completed in December 2010.
NOTE 15 Shareholders
Equity
Common
Stock
In October 2010, July 2010, April 2010 and January 2010, the
Board declared the fourth, third, second and first
quarters cash dividends of $0.01 per common share, which
were paid on December 24, 2010, September 24, 2010,
June 25, 2010 and March 26, 2010 to common
shareholders of record on December 3, 2010,
September 3, 2010, June 4, 2010 and March 5,
2010, respectively. In addition, in January 2011, the Board
declared a first quarter cash dividend of $0.01 per common share
payable on March 25, 2011 to common shareholders of record
on March 4, 2011.
On February 23, 2010, the Corporation held a special
meeting of stockholders at which it obtained shareholder
approval of an amendment to the Corporations amended and
restated certificate of incorporation to increase the number of
authorized shares of common stock from 10.0 billion to
11.3 billion. On April 28, 2010, at the
Corporations 2010 Annual Meeting of Stockholders, the
Corporation obtained shareholder approval of an amendment to the
Corporations amended and restated certificate of
incorporation to increase the number of authorized shares of
common stock from 11.3 billion to 12.8 billion.
In January 2009, the Corporation issued 1.4 billion shares
of common stock in connection with its acquisition of Merrill
Lynch. For additional information regarding the Merrill Lynch
acquisition, see Note 2 Merger and
Restructuring Activity. During 2009 and 2008, in connection
with preferred stock issuances to the U.S. government under
the Troubled Asset Relief Program (TARP), the Corporation issued
warrants to purchase 121.8 million shares of common stock
at an exercise price of $30.79 per share and 150.4 million
shares of common stock at an exercise price of $13.30 per share.
The U.S. Treasury auctioned these warrants in March 2010.
In May 2009, the Corporation issued 1.3 billion shares of
its common stock at an average price of $10.77 per share through
an
at-the-market
issuance program resulting in gross proceeds of approximately
$13.5 billion.
Through a 2008 authorized share repurchase program, the
Corporation had the ability to repurchase shares of its common
stock, subject to certain restrictions, from time to time, in
the open market or in private transactions. The 2008 authorized
repurchase program expired on January 23, 2010. There is no
existing Board authorized share repurchase program. In 2010, the
Corporation did not repurchase any shares of common stock and
issued approximately 98.6 million shares under employee
stock plans. At December 31, 2010, the Corporation had
reserved 1.5 billion unissued shares of common stock for
future issuances under employee stock plans, common stock
warrants, convertible notes and preferred stock.
Preferred
Stock
During 2010, 2009 and 2008, the aggregate dividends declared on
preferred stock were $1.4 billion, $4.5 billion and
$1.3 billion, respectively. This included $474 million
and $536 million in 2010 and 2009 related to preferred
stock issued or remaining outstanding as a part of the Merrill
Lynch acquisition.
In connection with the Merrill Lynch acquisition, Merrill Lynch
non-convertible preferred shareholders received Bank of America
Corporation preferred stock having substantially identical
terms. On October 15, 2010, all of the outstanding shares
of the mandatory convertible preferred stock of Merrill Lynch
automatically converted into an aggregate of 50 million
shares of the Corporations Common Stock in accordance with
the terms of these preferred securities.
In October 2008, in connection with TARP, the Corporation issued
to the U.S. Treasury non-voting perpetual preferred stock
and warrants for $15.0 billion. In addition, in January
2009, in connection with TARP and the Merrill Lynch acquisition,
the Corporation issued additional preferred stock for
$30.0 billion.
In December 2009, the Corporation repurchased the non-voting
perpetual preferred stock previously issued to the
U.S. Treasury (TARP Preferred Stock) through the use of
$25.7 billion in excess liquidity and $19.3 billion in
proceeds from the sale of 1.3 billion Common Equivalent
Securities (CES) valued at $15.00 per unit. The CES consisted of
depositary shares representing interests in shares of Common
Equivalent Junior Preferred Stock, Series S (Common
Equivalent Stock) and contingent warrants to purchase an
aggregate of 60 million shares of the Corporations
common stock. On February 23, 2010, the Corporation held a
special meeting of stockholders at which it obtained shareholder
approval of an amendment to the Corporations amended and
restated certificate of incorporation to increase the number of
authorized shares of common stock. Accordingly, the Common
Equivalent Stock automatically converted in full into
1.286 billion shares of common stock on February 24,
2010. In addition, as a result, the contingent warrants expired
without having become exercisable and the CES ceased to exist.
During 2009, the Corporation entered into agreements with
certain holders of non-government perpetual preferred stock to
exchange their holdings of approximately $7.3 billion
aggregate liquidation preference, before third-party issuance
costs, of approximately 323 million shares of perpetual
preferred stock for approximately 545 million shares of
common stock with a fair value of stock issued of
$6.1 billion. In addition, the Corporation exchanged
approximately $3.9 billion aggregate liquidation
preference, before third-party issuance costs, of approximately
144 million shares of non-government preferred stock for
approximately 200 million shares of common stock in an
exchange offer with a fair value of stock issued of
$2.5 billion. In total, these exchanges resulted in the
exchange of approximately $11.3 billion aggregate
liquidation preference, before third-party issuance costs, of
approximately 467 million shares of preferred stock into
approximately 745 million shares of common stock with a
fair value of stock issued of $8.6 billion.
In addition, during 2009, the Corporation exchanged
3.6 million shares, or $3.6 billion aggregate
liquidation preference of Series L 7.25% Non-Cumulative
Perpetual Convertible Preferred Stock into 255 million
shares of common stock valued at $2.8 billion, which was
accounted for as an induced conversion of preferred stock.
As a result of these exchanges, the Corporation recorded an
increase to retained earnings and net income (loss) applicable
to common shareholders of $576 million. This represents the
net of a $2.62 billion benefit due to the excess of the
carrying value of the Corporations non-convertible
preferred stock over the fair value of the common stock
exchanged. This was partially offset by a $2.04 billion
inducement representing the excess of the fair value of the
common stock exchanged over the fair value of the common stock
that would have been issued under the original conversion terms.
Bank of America
2010 205
The table below presents a summary of perpetual preferred stock
previously issued by the Corporation and remaining outstanding,
including the series of preferred stock issued and remaining
outstanding in connection with the acquisition of Merrill Lynch,
after consideration of the exchanges discussed on the previous
page.
Preferred
Stock Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial
|
|
Total
|
|
|
Preference
|
|
|
|
|
|
|
|
|
|
(Dollars in millions, except as
noted)
|
|
Issuance
|
|
Shares
|
|
|
per Share
|
|
|
Carrying
|
|
|
Per Annum
|
|
|
|
Series
|
|
Description
|
|
Date
|
|
Outstanding
|
|
|
(in dollars)
|
|
|
Value (1)
|
|
|
Dividend Rate
|
|
|
Redemption Period
|
Series B (2)
|
|
7% Cumulative Redeemable
|
|
June
1997
|
|
|
7,571
|
|
|
$
|
100
|
|
|
$
|
1
|
|
|
|
7.00
|
%
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series D
(3, 8)
|
|
6.204% Non-Cumulative
|
|
September
2006
|
|
|
26,434
|
|
|
|
25,000
|
|
|
|
661
|
|
|
|
6.20
|
%
|
|
On or after
September 14, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series E
(3, 8)
|
|
Floating Rate Non-Cumulative
|
|
November
2006
|
|
|
19,491
|
|
|
|
25,000
|
|
|
|
487
|
|
|
|
Annual rate equal to the greater of (a)
3-mo. LIBOR
+ 35 bps and (b) 4.00
|
%
|
|
On or after
November 15, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series H
(3, 8)
|
|
8.20% Non-Cumulative
|
|
May
2008
|
|
|
114,483
|
|
|
|
25,000
|
|
|
|
2,862
|
|
|
|
8.20
|
%
|
|
On or after
May 1, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series I
(3, 8)
|
|
6.625% Non-Cumulative
|
|
September
2007
|
|
|
14,584
|
|
|
|
25,000
|
|
|
|
365
|
|
|
|
6.625
|
%
|
|
On or after
October 1, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series J
(3, 8)
|
|
7.25% Non-Cumulative
|
|
November
2007
|
|
|
39,111
|
|
|
|
25,000
|
|
|
|
978
|
|
|
|
7.25
|
%
|
|
On or after
November 1, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series K
(3, 9)
|
|
Fixed-to-Floating Rate Non-Cumulative
|
|
January
2008
|
|
|
66,702
|
|
|
|
25,000
|
|
|
|
1,668
|
|
|
|
8.00% through 1/29/18;
3-mo. LIBOR
+ 363 bps thereafter
|
|
|
On or after
January 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series L
|
|
7.25% Non-Cumulative Perpetual Convertible
|
|
January
2008
|
|
|
3,349,321
|
|
|
|
1,000
|
|
|
|
3,349
|
|
|
|
7.25%
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series M
(3, 9)
|
|
Fixed-to-Floating Rate Non-Cumulative
|
|
April
2008
|
|
|
57,357
|
|
|
|
25,000
|
|
|
|
1,434
|
|
|
|
8.125% through 5/14/18;
3-mo. LIBOR + 364 bps thereafter
|
|
|
On or after
May 15, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 1
(3, 4)
|
|
Floating Rate Non-Cumulative
|
|
November
2004
|
|
|
4,861
|
|
|
|
30,000
|
|
|
|
146
|
|
|
|
3-mo. LIBOR + 75 bps
|
(5)
|
|
On or after
November 28, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2
(3, 4)
|
|
Floating Rate Non-Cumulative
|
|
March
2005
|
|
|
17,547
|
|
|
|
30,000
|
|
|
|
526
|
|
|
|
3-mo. LIBOR + 65 bps
|
(5)
|
|
On or after
November 28, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 3
(3, 4)
|
|
6.375% Non-Cumulative
|
|
November
2005
|
|
|
22,336
|
|
|
|
30,000
|
|
|
|
670
|
|
|
|
6.375
|
%
|
|
On or after
November 28, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 4
(3, 4)
|
|
Floating Rate Non-Cumulative
|
|
November
2005
|
|
|
12,976
|
|
|
|
30,000
|
|
|
|
389
|
|
|
|
3-mo. LIBOR + 75 bps
|
(6)
|
|
On or after
November 28, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 5
(3, 4)
|
|
Floating Rate Non-Cumulative
|
|
March
2007
|
|
|
20,190
|
|
|
|
30,000
|
|
|
|
606
|
|
|
|
3-mo. LIBOR + 50 bps
|
(6)
|
|
On or after
May 21, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 6
(3, 7)
|
|
6.70% Non-Cumulative Perpetual
|
|
September
2007
|
|
|
65,000
|
|
|
|
1,000
|
|
|
|
65
|
|
|
|
6.70
|
%
|
|
On or after
February 3, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 7
(3, 7)
|
|
6.25% Non-Cumulative Perpetual
|
|
September
2007
|
|
|
16,596
|
|
|
|
1,000
|
|
|
|
17
|
|
|
|
6.25
|
%
|
|
On or after
March 18, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 8
(3, 4)
|
|
8.625% Non-Cumulative
|
|
April
2008
|
|
|
89,100
|
|
|
|
30,000
|
|
|
|
2,673
|
|
|
|
8.625
|
%
|
|
On or after
May 28, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
3,943,660
|
|
|
|
|
|
|
$
|
16,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts shown are before
third-party issuance costs and other Merrill Lynch purchase
accounting related adjustments of $335 million.
|
(2) |
|
Series B Preferred Stock does
not have early redemption/call rights.
|
(3) |
|
The Corporation may redeem series
of preferred stock on or after the redemption date, in whole or
in part, at its option, at the liquidation preference plus
declared and unpaid dividends.
|
(4) |
|
Ownership is held in the form of
depositary shares, each representing a 1/1200th interest in a
share of preferred stock, paying a quarterly cash dividend, if
and when declared.
|
(5) |
|
Subject to 3.00% minimum rate per
annum.
|
(6) |
|
Subject to 4.00% minimum rate per
annum.
|
(7) |
|
Ownership is held in the form of
depositary shares, each representing a 1/40th interest in a
share of preferred stock, paying a quarterly cash dividend, if
and when declared.
|
(8) |
|
Ownership is held in the form of
depositary shares, each representing a 1/1000th interest in a
share of preferred stock, paying a quarterly cash dividend, if
and when declared.
|
(9) |
|
Ownership is held in the form of
depositary shares, each representing a 1/25th interest in a
share of preferred stock, paying a semi-annual cash dividend, if
and when declared, until the redemption date adjusts to a
quarterly cash dividend, if and when declared, thereafter.
|
n/a = not applicable
206 Bank
of America 2010
Series L Preferred Stock does not have early
redemption/call rights. Each share of the Series L
Preferred Stock may be converted at any time, at the option of
the holder, into 20 shares of the Corporations common
stock plus cash in lieu of fractional shares. On or after
January 30, 2013, the Corporation may cause some or all of
the Series L Preferred Stock, at its option, at any time or
from time to time, to be converted into shares of common stock
at the then-applicable conversion rate if, for 20 trading days
during any period of 30 consecutive trading days, the closing
price of common stock exceeds 130 percent of the
then-applicable conversion price of the Series L Preferred
Stock. If the Corporation exercises its rights to cause the
automatic conversion of Series L Preferred Stock on
January 30, 2013, it will still pay any accrued dividends
payable on January 30, 2013 to the applicable holders of
record.
All series of preferred stock on the previous page have a par
value of $0.01 per share, are not subject to the operation of a
sinking fund, have no participation rights, and with the
exception of the Series L Preferred Stock, are
not convertible. The holders of the Series B Preferred
Stock and
Series 1-8
Preferred Stock have general voting rights, and the holders of
the other series included on the previous page have no general
voting rights. All preferred stock of the Corporation
outstanding has preference over the Corporations common
stock with respect to the payment of dividends and distribution
of the Corporations assets in the event of a liquidation
or dissolution. If any dividend payable on these series is in
arrears for three or more semi-annual or six or more quarterly
dividend periods, as applicable (whether consecutive or not),
the holders of these series and any other class or series of
preferred stock ranking equally as to payment of dividends and
upon which equivalent voting rights have been conferred and are
exercisable (voting as a single class) will be entitled to vote
for the election of two additional directors. These voting
rights terminate when the Corporation has paid in full dividends
on these series for at least two semi-annual or four quarterly
dividend periods, as applicable, following the dividend
arrearage.
NOTE 16 Accumulated
Other Comprehensive Income
The table below presents the changes in accumulated OCI in 2008,
2009 and 2010,
net-of-tax.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-
|
|
|
Available-for-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale Debt
|
|
|
Sale Marketable
|
|
|
|
|
|
Employee
|
|
|
Foreign
|
|
|
|
|
(Dollars in millions)
|
|
Securities
|
|
|
Equity Securities
|
|
|
Derivatives
|
|
|
Benefit
Plans (1)
|
|
|
Currency (2)
|
|
|
Total
|
|
Balance, December 31,
2007
|
|
$
|
(1,880
|
)
|
|
$
|
8,416
|
|
|
$
|
(4,402
|
)
|
|
$
|
(1,301
|
)
|
|
$
|
296
|
|
|
$
|
1,129
|
|
Net change in fair value recorded in accumulated
OCI (3)
|
|
|
(5,496
|
)
|
|
|
(4,858
|
)
|
|
|
147
|
|
|
|
(3,387
|
)
|
|
|
(1,000
|
)
|
|
|
(14,594
|
)
|
Net realized losses reclassified into earnings
|
|
|
1,420
|
|
|
|
377
|
|
|
|
797
|
|
|
|
46
|
|
|
|
|
|
|
|
2,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2008
|
|
$
|
(5,956
|
)
|
|
$
|
3,935
|
|
|
$
|
(3,458
|
)
|
|
$
|
(4,642
|
)
|
|
$
|
(704
|
)
|
|
$
|
(10,825
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative adjustment for accounting change
OTTI (4)
|
|
|
(71
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(71
|
)
|
Net change in fair value recorded in accumulated OCI
|
|
|
6,364
|
|
|
|
2,651
|
|
|
|
153
|
|
|
|
318
|
|
|
|
211
|
|
|
|
9,697
|
|
Net realized (gains) losses reclassified into earnings
|
|
|
(965
|
)
|
|
|
(4,457
|
)
|
|
|
770
|
|
|
|
232
|
|
|
|
|
|
|
|
(4,420
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2009
|
|
$
|
(628
|
)
|
|
$
|
2,129
|
|
|
$
|
(2,535
|
)
|
|
$
|
(4,092
|
)
|
|
$
|
(493
|
)
|
|
$
|
(5,619
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative adjustments for accounting changes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidation of certain variable interest entities
|
|
|
(116
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(116
|
)
|
Credit-related notes
|
|
|
229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
229
|
|
Net change in fair value recorded in accumulated OCI
|
|
|
2,210
|
|
|
|
5,657
|
|
|
|
(1,108
|
)
|
|
|
(104
|
)
|
|
|
(44
|
)
|
|
|
6,611
|
|
Net realized (gains) losses reclassified into earnings
|
|
|
(981
|
)
|
|
|
(1,127
|
)
|
|
|
407
|
|
|
|
249
|
|
|
|
281
|
|
|
|
(1,171
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2010
|
|
$
|
714
|
|
|
$
|
6,659
|
|
|
$
|
(3,236
|
)
|
|
$
|
(3,947
|
)
|
|
$
|
(256
|
)
|
|
$
|
(66
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Net change in fair value represents
after-tax adjustments based on the final year-end actuarial
valuations.
|
(2) |
|
Net change in fair value represents
only the impact of changes in spot foreign exchange rates on the
Corporations net investment in non-U.S. operations and
related hedges.
|
(3)
|
|
For more information on employee
benefit plans, see Note 19 Employee
Benefit Plans.
|
(4)
|
|
Effective January 1, 2009,
the Corporation adopted new accounting guidance on the
recognition of OTTI losses on debt securities. For additional
information on the adoption of this accounting guidance, see
Note 1 Summary of Significant
Accounting Principles and Note
5 Securities.
|
Bank of America
2010 207
NOTE 17 Earnings
Per Common Share
The calculation of EPS and diluted EPS for 2010, 2009 and 2008
is presented below. See Note 1 Summary of
Significant Accounting Principles for additional information
on the calculation of EPS.
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions, except per
share information; shares in thousands)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Earnings (loss) per common
share
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(2,238
|
)
|
|
$
|
6,276
|
|
|
$
|
4,008
|
|
Preferred stock dividends
|
|
|
(1,357
|
)
|
|
|
(4,494
|
)
|
|
|
(1,452
|
)
|
Accelerated accretion from redemption of preferred stock issued
to the U.S. Treasury
|
|
|
|
|
|
|
(3,986
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) applicable to common shareholders
|
|
|
(3,595
|
)
|
|
|
(2,204
|
)
|
|
|
2,556
|
|
Dividends and undistributed earnings allocated to participating
securities
|
|
|
(4
|
)
|
|
|
(6
|
)
|
|
|
(69
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) allocated to common shareholders
|
|
$
|
(3,599
|
)
|
|
$
|
(2,210
|
)
|
|
$
|
2,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares issued and outstanding
|
|
|
9,790,472
|
|
|
|
7,728,570
|
|
|
|
4,592,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common
share
|
|
$
|
(0.37
|
)
|
|
$
|
(0.29
|
)
|
|
$
|
0.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per
common share
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) applicable to common shareholders
|
|
$
|
(3,595
|
)
|
|
$
|
(2,204
|
)
|
|
$
|
2,556
|
|
Dividends and undistributed earnings allocated to participating
securities
|
|
|
(4
|
)
|
|
|
(6
|
)
|
|
|
(69
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) allocated to common shareholders
|
|
$
|
(3,599
|
)
|
|
$
|
(2,210
|
)
|
|
$
|
2,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares issued and outstanding
|
|
|
9,790,472
|
|
|
|
7,728,570
|
|
|
|
4,592,085
|
|
Dilutive potential common
shares (1)
|
|
|
|
|
|
|
|
|
|
|
4,343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total diluted average common shares issued and outstanding
|
|
|
9,790,472
|
|
|
|
7,728,570
|
|
|
|
4,596,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per
common share
|
|
$
|
(0.37
|
)
|
|
$
|
(0.29
|
)
|
|
$
|
0.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes incremental shares from
RSUs, restricted stock shares, stock options and warrants.
|
Due to the net loss applicable to common shareholders for 2010
and 2009, no dilutive potential common shares were included in
the calculation of diluted EPS because they would have been
antidilutive.
For 2010, 2009 and 2008, average options to purchase
271 million, 315 million and 181 million shares,
respectively, of common stock were outstanding but not included
in the computation of EPS because they were antidilutive under
the treasury stock method. For 2010 and 2009, average warrants
to purchase 272 million and 265 million shares of
common stock were outstanding but not included in the
computation of EPS because they were antidilutive under the
treasury stock method. For 2010 and 2009, 107 million and
147 million average dilutive potential common shares
associated with the convertible Series L Preferred Stock,
and the mandatory convertible Preferred Stock Series 2 and
Series 3 of Merrill Lynch were excluded from the diluted
share count because the result would have been antidilutive
under the if-converted method. For 2009,
81 million average dilutive potential common shares
associated with the CES were also excluded from the diluted
share count because the result would have been antidilutive
under the if-converted method. For 2008,
128 million average dilutive potential common shares
associated with the convertible Series L Preferred Stock
were excluded from the diluted share count because the result
would have been antidilutive under the if-converted
method.
For purposes of computing basic EPS, CES were considered to be
participating securities prior to February 24, 2010,
however, due to a net loss for 2010, CES were not allocated
earnings. The two-class method prohibits the allocation of an
undistributed loss to participating securities. For purposes of
computing diluted EPS, there was no dilutive effect of the CES,
which were outstanding prior to February 24, 2010, due to a
net loss for 2010.
For 2009, as a result of repurchasing the TARP Preferred Stock,
the Corporation accelerated the remaining accretion of the
issuance discount on the TARP Preferred Stock of
$4.0 billion and recorded a corresponding charge to
retained earnings and income (loss) applicable to common
shareholders in the calculation of diluted earnings per common
share. In addition, in 2009, the Corporation recorded an
increase to retained earnings and net income (loss) available to
common shareholders of $576 million related to the
Corporations preferred stock exchange for common stock.
NOTE 18 Regulatory
Requirements and Restrictions
The Federal Reserve requires the Corporations banking
subsidiaries to maintain reserve balances based on a percentage
of certain deposits. Average daily reserve balances required by
the Federal Reserve were $12.9 billion and
$10.9 billion for 2010 and 2009. Currency and coin residing
in branches and cash vaults (vault cash) are used to partially
satisfy the reserve requirement. The average daily reserve
balances, in excess of vault cash, held with the Federal Reserve
amounted to $5.5 billion and $3.4 billion for 2010 and
2009.
The primary sources of funds for cash distributions by the
Corporation to its shareholders are dividends received from its
banking subsidiaries, Bank of America, N.A. and FIA Card
Services, N.A. In 2010, the Corporation received
$4.6 billion in dividends from Bank of America, N.A. In
2011, Bank of America, N.A. and FIA Card Services, N.A. can
declare and pay dividends to the Corporation of
$5.8 billion and $0 plus an additional amount equal to
their net profits for 2011, as defined by statute, up to the
date of any such dividend declaration. The other subsidiary
national banks can pay dividends in aggregate in 2011 of
$53 million plus an additional amount equal to their net
profits for 2011, as defined by statute, up to the date of any
such dividend declaration. The amount of dividends that each
subsidiary bank may declare in a calendar year without approval
by the OCC is the subsidiary banks net profits for that
year combined with its net retained profits, as defined, for the
preceding two years.
The Federal Reserve, OCC, FDIC and Office of Thrift Supervision
(collectively, joint agencies) have in place regulatory capital
guidelines for U.S. banking organizations. Failure to meet
the capital requirements can initiate certain mandatory and
discretionary actions by regulators that could have a material
effect on the Corporations financial position. The
regulatory capital guidelines measure capital in relation to the
credit and market risks of both on- and off-balance sheet items
using various risk weights. Under the regulatory capital
guidelines, Total capital consists of three tiers of capital.
Tier 1 capital includes qualifying common
shareholders equity, CES, qualifying noncumulative
perpetual preferred stock, qualifying Trust Securities,
hybrid securities and qualifying non-controlling interests, less
goodwill and other adjustments. Tier 2 capital consists of
qualifying subordinated debt, a limited portion of the
208 Bank
of America 2010
allowance for loan and lease losses, a portion of net unrealized
gains on AFS marketable equity securities and other adjustments.
Tier 3 capital includes subordinated debt that is
unsecured, fully paid, has an original maturity of at least two
years, is not redeemable before maturity without prior approval
by the Federal Reserve and includes a lock-in clause precluding
payment of either interest or principal if the payment would
cause the issuing banks risk-based capital ratio to fall
or remain below the required minimum. Tier 3 capital can
only be used to satisfy the Corporations market risk
capital requirement and may not be used to support its credit
risk requirement. At December 31, 2010 and 2009, the
Corporation had no subordinated debt that qualified as
Tier 3 capital.
Certain corporate-sponsored trust companies which issue
Trust Securities are not consolidated. In accordance with
Federal Reserve guidance, Trust Securities continue to qualify
as Tier 1 capital with revised quantitative limits that
will be effective on March 31, 2011. As a result, the
Corporation includes Trust Securities in Tier 1
capital. The Financial Reform Act includes a provision under
which the Corporations previously issued and outstanding
Trust Securities in the aggregate amount of
$19.9 billion (approximately 137 bps of Tier 1
capital) at December 31, 2010, will no longer qualify as
Tier 1 capital effective January 1, 2013. This amount
excludes $1.6 billion of hybrid Trust Securities that
are expected to be converted to preferred stock prior to the
date of implementation. The exclusion of Trust Securities
from Tier 1 capital will be phased in incrementally over a
three-year phase-in period. The treatment of
Trust Securities during the phase-in period remains unclear
and is subject to future rulemaking.
Current limits restrict core capital elements to 15 percent
of total core capital elements for internationally active bank
holding companies. Internationally active bank holding companies
are those that have significant activities in
non-U.S. markets
with consolidated assets greater than $250 billion or
on-balance sheet
non-U.S. exposure
greater than $10 billion. In addition, the Federal Reserve
revised the qualitative standards for capital instruments
included in regulatory capital. At December 31, 2010, the
Corporations restricted core capital elements comprised
11.4 percent of total core capital elements. The
Corporation is and expects to remain fully compliant with the
revised limits.
To meet minimum, adequately capitalized regulatory requirements,
an institution must maintain a Tier 1 capital ratio of four
percent and a Total capital ratio of eight percent. A
well-capitalized institution must generally maintain
capital ratios 200 bps higher than the minimum guidelines.
The risk-based capital rules have been further supplemented by a
Tier 1 leverage ratio, defined as Tier 1 capital
divided by quarterly average total assets, after certain
adjustments. Well-capitalized bank holding companies
must have a minimum Tier 1 leverage ratio of four percent.
National banks must maintain a Tier 1 leverage ratio of at
least five percent to be classified as
well-capitalized. At December 31, 2010, the
Corporations Tier 1 capital, Total capital and
Tier 1 leverage ratios were 11.24 percent,
15.77 percent and 7.21 percent, respectively. This
classifies the Corporation as well-capitalized for
regulatory purposes, the highest classification.
Net unrealized gains or losses on AFS debt securities and
marketable equity securities, net unrealized gains and losses on
derivatives, and employee benefit plan adjustments in
shareholders equity are excluded from the calculations of
Tier 1 common capital as discussed below, Tier 1
capital and leverage ratios. The Total capital ratio excludes
all of the above with the exception of up to 45 percent of
the pre-tax net unrealized gains on AFS marketable equity
securities.
The Corporation calculates Tier 1 common capital as
Tier 1 capital including any CES less preferred stock,
qualifying Trust Securities, hybrid securities and
qualifying noncontrolling interest in subsidiaries. CES was
included in Tier 1 common capital based upon applicable
regulatory guidance and the expectation at December 31,
2009 that the underlying Common Equivalent Junior Preferred
Stock, Series S would convert into common stock following
shareholder approval of additional authorized shares.
Shareholders approved the increase in the number of authorized
shares of common stock and the Common Equivalent Stock converted
into common stock on February 24, 2010. Tier 1 common
capital was $125.1 billion and $120.4 billion and the
Tier 1 common capital ratio was 8.60 percent and
7.81 percent at December 31, 2010 and 2009.
The table below presents actual and minimum required regulatory
capital amounts for 2010 and 2009.
Regulatory
Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2010
|
|
|
2009
|
|
|
|
Actual
|
|
|
|
|
|
Actual
|
|
|
|
|
|
|
|
|
|
Minimum
|
|
|
|
|
|
Minimum
|
|
(Dollars in millions)
|
|
Ratio
|
|
|
Amount
|
|
|
Required (1)
|
|
|
Ratio
|
|
|
Amount
|
|
|
Required
(1)
|
|
Risk-based capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank of America Corporation
|
|
|
8.60
|
%
|
|
$
|
125,139
|
|
|
|
n/a
|
|
|
|
7.81
|
%
|
|
$
|
120,394
|
|
|
|
n/a
|
|
Tier 1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank of America Corporation
|
|
|
11.24
|
|
|
|
163,626
|
|
|
$
|
58,238
|
|
|
|
10.40
|
|
|
|
160,388
|
|
|
$
|
61,676
|
|
Bank of America, N.A.
|
|
|
10.78
|
|
|
|
114,345
|
|
|
|
42,416
|
|
|
|
10.30
|
|
|
|
111,916
|
|
|
|
43,472
|
|
FIA Card Services, N.A.
|
|
|
15.30
|
|
|
|
25,589
|
|
|
|
6,691
|
|
|
|
15.21
|
|
|
|
28,831
|
|
|
|
7,584
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank of America Corporation
|
|
|
15.77
|
|
|
|
229,594
|
|
|
|
116,476
|
|
|
|
14.66
|
|
|
|
226,070
|
|
|
|
123,401
|
|
Bank of America, N.A.
|
|
|
14.26
|
|
|
|
151,255
|
|
|
|
84,831
|
|
|
|
13.76
|
|
|
|
149,528
|
|
|
|
86,944
|
|
FIA Card Services, N.A.
|
|
|
16.94
|
|
|
|
28,343
|
|
|
|
13,383
|
|
|
|
17.01
|
|
|
|
32,244
|
|
|
|
15,168
|
|
Tier 1 leverage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank of America Corporation
|
|
|
7.21
|
|
|
|
163,626
|
|
|
|
90,811
|
|
|
|
6.88
|
|
|
|
160,388
|
|
|
|
93,267
|
|
Bank of America, N.A.
|
|
|
7.83
|
|
|
|
114,345
|
|
|
|
58,391
|
|
|
|
7.38
|
|
|
|
111,916
|
|
|
|
60,626
|
|
FIA Card Services, N.A.
|
|
|
13.21
|
|
|
|
25,589
|
|
|
|
7,748
|
|
|
|
23.09
|
|
|
|
28,831
|
|
|
|
4,994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Dollar amount required to meet
guidelines for adequately capitalized institutions.
|
n/a = not applicable
Bank of America
2010 209
Regulatory
Capital Developments
In June 2004, the Basel II Accord was published with the
intent of more closely aligning regulatory capital requirements
with underlying risks, similar to economic capital. While
economic capital is measured to cover unexpected losses, the
Corporation also manages regulatory capital to adhere to
regulatory standards of capital adequacy.
The Basel II Final Rule (Basel II Rules), which was
published on December 7, 2007, established requirements for
the U.S. implementation and provided detailed requirements
for a new regulatory capital framework related to credit and
operational risk (Pillar 1), supervisory requirements (Pillar
2) and disclosure requirements (Pillar 3). The Corporation
began Basel II parallel implementation on April 1,
2010.
Subsequently, amended rules issued by the Basel Committee on
Bank Supervision known as Basel III were published in
December 2010 along with final Market Risk Rules issued by the
Federal Reserve. The Basel III rules and the Financial
Reform Act seek to disqualify trust preferred securities and
other hybrid capital securities from Tier 1 capital
treatment with the Financial Reform Act proposing it to be
phased in over a period from 2013 to 2015. Basel III also
proposes the deduction of certain assets from capital (deferred
tax assets, MSRs, investments in financial firms and pension
assets, among others, within prescribed limitations certain of
which may be significant), increased capital for counterparty
credit risk, and three capital buffers to strengthen capital
levels which would be also phased in over time. The three
capital buffers include a capital conservation buffer, a
countercyclical buffer and a systematically important financial
institution buffer, which would result in a minimum Total
capital ratio of at least eight percent by 2013. Market Risk
Rules include additional VaR based measurements, among others,
that are meant to further strengthen capital levels. The
Corporation continues to monitor the development and potential
impact of these rules, and has determined that given current
initiatives and continued focus on all of these rules by the
date of full implementation in 2018, the Corporation must have a
Tier 1 common capital ratio of seven percent which it
anticipates it will meet. The Corporation does not expect the
need to issue any common stock to meet the new Basel proposals.
There remains significant uncertainty on the final impacts as
the U.S. has issued final rules only for Basel II and
a Notice of Proposed Rulemaking for the Market Risk Rules at
this time. Impacts may change as the U.S. finalizes rules
for Basel III and the regulatory agencies interpret the final
rules during the implementation process.
NOTE 19 Employee
Benefit Plans
Pension and
Postretirement Plans
The Corporation sponsors noncontributory trusteed pension plans
that cover substantially all officers and employees, a number of
noncontributory nonqualified pension plans, and postretirement
health and life plans. The plans provide defined benefits based
on an employees compensation and years of service. The
Bank of America Pension Plan (the Pension Plan) provides
participants with compensation credits, generally based on years
of service. For account balances based on compensation credits
prior to January 1, 2008, the Pension Plan allows
participants to select from various earnings measures, which are
based on the returns of certain funds or common stock of the
Corporation. The participant-selected earnings measures
determine the earnings rate on the individual participant
account balances in the Pension Plan. Participants may elect to
modify earnings measure allocations on a periodic basis subject
to the provisions of the Pension Plan. For account balances
based on compensation credits subsequent to December 31,
2007, the account balance earnings rate is based on a benchmark
rate. For eligible employees in the Pension Plan on or after
January 1, 2008, the benefits become vested upon completion
of three years of service. It is the
policy of the Corporation to fund not less than the minimum
funding amount required by ERISA.
The Pension Plan has a balance guarantee feature for account
balances with participant-selected earnings, applied at the time
a benefit payment is made from the plan that effectively
provides principal protection for participant balances
transferred and certain compensation credits. The Corporation is
responsible for funding any shortfall on the guarantee feature.
In May 2008, the Corporation and the IRS entered into a closing
agreement resolving all matters relating to an audit by the IRS
of the Pension Plan and the Bank of America 401(k) Plan. The
audit included a review of voluntary transfers by participants
of 401(k) Plan accounts to the Pension Plan. In connection with
the agreement, during 2009 the Pension Plan transferred
approximately $1.2 billion of assets and liabilities
associated with the transferred accounts to a newly established
defined contribution plan.
As a result of acquisitions, the Corporation assumed the
obligations related to the pension plans of FleetBoston, MBNA,
U.S. Trust Corporation, LaSalle and Countrywide. These
five acquired pension plans have been merged into a separate
defined benefit pension plan, which, together with the Pension
Plan, are referred to as the Qualified Pension Plans. The
benefit structures under these acquired plans have not changed
and remain intact in the merged plan. Certain benefit structures
are substantially similar to the Pension Plan discussed above;
however, certain of these structures do not allow participants
to select various earnings measures; rather the earnings rate is
based on a benchmark rate. In addition, these benefit structures
include participants with benefits determined under formulas
based on average or career compensation and years of service
rather than by reference to a pension account. Certain of the
other benefit structures provide participants retirement
benefits based on the number of years of benefit service and a
percentage of the participants average annual compensation
during the five highest paid consecutive years of the last ten
years of employment.
As a result of the Merrill Lynch acquisition, the Corporation
assumed the obligations related to the plans of Merrill Lynch.
These plans include a terminated U.S. pension plan,
non-U.S. pension
plans, nonqualified pension plans and postretirement plans. The
non-U.S.
pension plans vary based on the country and local practices. The
terminated U.S. pension plan is referred to as the Other
Pension Plan.
In 1988, Merrill Lynch purchased a group annuity contract that
guarantees the payment of benefits vested under the terminated
U.S. pension plan. The Corporation, under a supplemental
agreement, may be responsible for, or benefit from actual
experience and investment performance of the annuity assets. The
Corporation made no contribution in 2010 and contributed
$120 million during 2009 under this agreement. Additional
contributions may be required in the future under this agreement.
The Corporation sponsors a number of noncontributory,
nonqualified pension plans (the Nonqualified Pension Plans). As
a result of acquisitions, the Corporation assumed the
obligations related to the noncontributory, nonqualified pension
plans of certain legacy companies including Merrill Lynch. These
plans, which are unfunded, provide defined pension benefits to
certain employees.
In addition to retirement pension benefits, full-time, salaried
employees and certain part-time employees may become eligible to
continue participation as retirees in health care
and/or life
insurance plans sponsored by the Corporation. Based on the other
provisions of the individual plans, certain retirees may also
have the cost of these benefits partially paid by the
Corporation. The obligations assumed as a result of acquisitions
are substantially similar to the Corporations
postretirement health and life plans, except for Countrywide
which did not have a postretirement health and life plan.
Collectively, these plans are referred to as the Postretirement
Health and Life Plans.
210 Bank
of America 2010
The table below summarizes the changes in the fair value of plan
assets, changes in the projected benefit obligation (PBO), the
funded status of both the accumulated benefit obligation (ABO)
and the PBO, and the weighted-average assumptions used to
determine benefit obligations for the pension plans and
postretirement plans at December 31, 2010 and 2009. Amounts
recognized at December 31, 2010 and 2009 are reflected in
other assets, and accrued expenses and other liabilities on the
Consolidated Balance Sheet. The discount rate assumption is
based on a cash flow matching
technique and is subject to change each year. This technique
utilizes yield curves that are based on Aa-rated corporate bonds
with cash flows that match estimated benefit payments of each of
the plans to produce the discount rate assumptions. The asset
valuation method for the Qualified Pension Plans recognizes
60 percent of the prior years market gains or losses
at the next measurement date with the remaining 40 percent
spread equally over the subsequent four years.
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|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
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|
|
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|
Nonqualified
|
|
|
|
|
|
|
|
|
|
Qualified
|
|
|
Non-U.S.
|
|
|
and Other
|
|
|
Postretirement
|
|
|
|
Pension Plans
(1)
|
|
|
Pension Plans
(1)
|
|
|
Pension Plans
(1)
|
|
|
Health and Life
Plans (1)
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Change in fair value of plan
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Fair value, January 1
|
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$
|
14,527
|
|
|
$
|
14,254
|
|
|
$
|
1,312
|
|
|
$
|
|
|
|
$
|
2,535
|
|
|
$
|
2
|
|
|
$
|
113
|
|
|
$
|
110
|
|
Merrill Lynch balance, January 1, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,025
|
|
|
|
|
|
|
|
2,763
|
|
|
|
|
|
|
|
|
|
Actual return on plan assets
|
|
|
1,835
|
|
|
|
2,238
|
|
|
|
157
|
|
|
|
177
|
|
|
|
272
|
|
|
|
(235
|
)
|
|
|
13
|
|
|
|
21
|
|
Company
contributions (2)
|
|
|
|
|
|
|
|
|
|
|
82
|
|
|
|
61
|
|
|
|
196
|
|
|
|
261
|
|
|
|
100
|
|
|
|
92
|
|
Plan participant contributions
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
139
|
|
|
|
141
|
|
Benefits paid
|
|
|
(714
|
)
|
|
|
(791
|
)
|
|
|
(55
|
)
|
|
|
(53
|
)
|
|
|
(314
|
)
|
|
|
(256
|
)
|
|
|
(275
|
)
|
|
|
(272
|
)
|
Plan transfer
|
|
|
|
|
|
|
(1,174
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal subsidy on benefits paid
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
18
|
|
|
|
21
|
|
Foreign currency exchange rate changes
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
(26
|
)
|
|
|
100
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value, December
31
|
|
$
|
15,648
|
|
|
$
|
14,527
|
|
|
$
|
1,472
|
|
|
$
|
1,312
|
|
|
$
|
2,689
|
|
|
$
|
2,535
|
|
|
$
|
108
|
|
|
$
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in projected benefit
obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation,
January 1
|
|
$
|
13,048
|
|
|
$
|
13,724
|
|
|
$
|
1,518
|
|
|
$
|
|
|
|
$
|
2,918
|
|
|
$
|
1,258
|
|
|
$
|
1,620
|
|
|
$
|
1,404
|
|
Merrill Lynch balance, January 1, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,280
|
|
|
|
|
|
|
|
1,683
|
|
|
|
|
|
|
|
226
|
|
Service cost
|
|
|
397
|
|
|
|
387
|
|
|
|
30
|
|
|
|
30
|
|
|
|
3
|
|
|
|
4
|
|
|
|
14
|
|
|
|
16
|
|
Interest cost
|
|
|
748
|
|
|
|
740
|
|
|
|
79
|
|
|
|
76
|
|
|
|
163
|
|
|
|
167
|
|
|
|
92
|
|
|
|
93
|
|
Plan participant contributions
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
139
|
|
|
|
141
|
|
Plan amendments
|
|
|
|
|
|
|
37
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64
|
|
|
|
|
|
Actuarial loss (gain)
|
|
|
459
|
|
|
|
89
|
|
|
|
78
|
|
|
|
75
|
|
|
|
308
|
|
|
|
62
|
|
|
|
32
|
|
|
|
(11
|
)
|
Benefits paid
|
|
|
(714
|
)
|
|
|
(791
|
)
|
|
|
(55
|
)
|
|
|
(53
|
)
|
|
|
(314
|
)
|
|
|
(256
|
)
|
|
|
(275
|
)
|
|
|
(272
|
)
|
Plan transfer
|
|
|
|
|
|
|
(1,174
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination benefits
|
|
|
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Curtailments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal subsidy on benefits paid
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
18
|
|
|
|
21
|
|
Foreign currency exchange rate changes
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
(30
|
)
|
|
|
111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation,
December 31
|
|
$
|
13,938
|
|
|
$
|
13,048
|
|
|
$
|
1,624
|
|
|
$
|
1,518
|
|
|
$
|
3,078
|
|
|
$
|
2,918
|
|
|
$
|
1,704
|
|
|
$
|
1,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount recognized, December
31
|
|
$
|
1,710
|
|
|
$
|
1,479
|
|
|
$
|
(152
|
)
|
|
$
|
(206
|
)
|
|
$
|
(389
|
)
|
|
$
|
(383
|
)
|
|
$
|
(1,596
|
)
|
|
$
|
(1,507
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status, December
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation
|
|
$
|
13,192
|
|
|
$
|
12,198
|
|
|
$
|
1,504
|
|
|
$
|
1,401
|
|
|
$
|
3,077
|
|
|
$
|
2,916
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Overfunded (unfunded) status of ABO
|
|
|
2,456
|
|
|
|
2,329
|
|
|
|
(32
|
)
|
|
|
(89
|
)
|
|
|
(388
|
)
|
|
|
(381
|
)
|
|
|
n/a
|
|
|
|
n/a
|
|
Provision for future salaries
|
|
|
746
|
|
|
|
850
|
|
|
|
120
|
|
|
|
117
|
|
|
|
1
|
|
|
|
2
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Projected benefit obligation
|
|
|
13,938
|
|
|
|
13,048
|
|
|
|
1,624
|
|
|
|
1,518
|
|
|
|
3,078
|
|
|
|
2,918
|
|
|
$
|
1,704
|
|
|
$
|
1,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average assumptions,
December 31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.45
|
%
|
|
|
5.75
|
%
|
|
|
5.29
|
%
|
|
|
5.40
|
%
|
|
|
5.20
|
%
|
|
|
5.75
|
%
|
|
|
5.10
|
%
|
|
|
5.75
|
%
|
Rate of compensation increase
|
|
|
4.00
|
|
|
|
4.00
|
|
|
|
4.88
|
|
|
|
4.69
|
|
|
|
4.00
|
|
|
|
4.00
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The measurement date for the
Qualified Pension Plans,
Non-U.S.
Pension Plans, Nonqualified and Other Pension Plans, and
Postretirement Health and Life Plans was December 31 of each
year reported.
|
(2) |
|
The Corporations best
estimate of its contributions to be made to the Qualified
Pension Plans,
Non-U.S.
Pension Plans, Nonqualified and Other Pension Plans, and
Postretirement Health and Life Plans in 2011 is $0,
$82 million, $103 million and $121 million,
respectively.
|
n/a = not applicable
Amounts recognized in the Corporations Consolidated
Balance Sheet at December 31, 2010 and 2009 are presented
in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
Postretirement
|
|
|
|
Qualified
|
|
|
Non-U.S.
|
|
|
and Other
|
|
|
Health and Life
|
|
|
|
Pension Plans
|
|
|
Pension Plans
|
|
|
Pension Plans
|
|
|
Plans
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Other assets
|
|
$
|
1,710
|
|
|
$
|
1,479
|
|
|
$
|
32
|
|
|
$
|
1
|
|
|
$
|
809
|
|
|
$
|
830
|
|
|
$
|
|
|
|
$
|
|
|
Accrued expenses and other liabilities
|
|
|
|
|
|
|
|
|
|
|
(184
|
)
|
|
|
(207
|
)
|
|
|
(1,198
|
)
|
|
|
(1,213
|
)
|
|
|
(1,596
|
)
|
|
|
(1,507
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized at
December 31
|
|
$
|
1,710
|
|
|
$
|
1,479
|
|
|
$
|
(152
|
)
|
|
$
|
(206
|
)
|
|
$
|
(389
|
)
|
|
$
|
(383
|
)
|
|
$
|
(1,596
|
)
|
|
$
|
(1,507
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank of America
2010 211
Pension Plans with ABO and PBO in excess of plan assets as of
December 31, 2010 and 2009 are presented in the table
below. These plans primarily represent non-qualified plans not
subject to ERISA or
non-U.S. pension
plans where funding strategies vary due to legal requirements
and local practices.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
Non-U.S.
|
|
|
and Other
|
|
|
|
Pension Plans
|
|
|
Pension Plans
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Plans with ABO in excess of plan
assets
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PBO
|
|
$
|
249
|
|
|
$
|
221
|
|
|
$
|
1,200
|
|
|
$
|
1,216
|
|
ABO
|
|
|
242
|
|
|
|
214
|
|
|
|
1,199
|
|
|
|
1,214
|
|
Fair value of plan assets
|
|
|
106
|
|
|
|
72
|
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plans with PBO in excess of plan
assets (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PBO
|
|
$
|
414
|
|
|
$
|
1,473
|
|
|
$
|
1,200
|
|
|
$
|
1,216
|
|
Fair value of plan assets
|
|
|
230
|
|
|
|
1,266
|
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
There were no Qualified Pension
Plans with ABO or PBO in excess of plan assets at
December 31, 2010 and 2009.
|
Net periodic benefit cost (income) for 2010, 2009 and 2008
included the following components.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualified Pension Plans
|
|
|
Non-U.S. Pension Plans
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Components of net periodic
benefit cost (income)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
397
|
|
|
$
|
387
|
|
|
$
|
343
|
|
|
$
|
30
|
|
|
$
|
30
|
|
|
$
|
|
|
Interest cost
|
|
|
748
|
|
|
|
740
|
|
|
|
837
|
|
|
|
79
|
|
|
|
76
|
|
|
|
|
|
Expected return on plan assets
|
|
|
(1,263
|
)
|
|
|
(1,231
|
)
|
|
|
(1,444
|
)
|
|
|
(88
|
)
|
|
|
(74
|
)
|
|
|
|
|
Amortization of prior service cost (credits)
|
|
|
28
|
|
|
|
39
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of net actuarial loss
|
|
|
362
|
|
|
|
377
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized loss (gain) due to settlements and curtailments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
Recognized termination benefit costs
|
|
|
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
(income)
|
|
$
|
272
|
|
|
$
|
348
|
|
|
$
|
(148
|
)
|
|
$
|
21
|
|
|
$
|
30
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average assumptions
used to determine net cost for years ended December 31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.75
|
%
|
|
|
6.00
|
%
|
|
|
6.00
|
%
|
|
|
5.40
|
%
|
|
|
5.55
|
%
|
|
|
n/a
|
|
Expected return on plan assets
|
|
|
8.00
|
|
|
|
8.00
|
|
|
|
8.00
|
|
|
|
6.82
|
|
|
|
6.78
|
|
|
|
n/a
|
|
Rate of compensation increase
|
|
|
4.00
|
|
|
|
4.00
|
|
|
|
4.00
|
|
|
|
4.69
|
|
|
|
4.61
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified and
|
|
|
Postretirement Health
|
|
|
|
Other Pension Plans
|
|
|
and Life Plans
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Components of net periodic
benefit cost (income)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
3
|
|
|
$
|
4
|
|
|
$
|
7
|
|
|
$
|
14
|
|
|
$
|
16
|
|
|
$
|
16
|
|
Interest cost
|
|
|
163
|
|
|
|
167
|
|
|
|
77
|
|
|
|
92
|
|
|
|
93
|
|
|
|
87
|
|
Expected return on plan assets
|
|
|
(138
|
)
|
|
|
(148
|
)
|
|
|
|
|
|
|
(9
|
)
|
|
|
(8
|
)
|
|
|
(13
|
)
|
Amortization of transition obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
|
|
|
|
31
|
|
|
|
31
|
|
Amortization of prior service cost (credits)
|
|
|
(8
|
)
|
|
|
(8
|
)
|
|
|
(8
|
)
|
|
|
6
|
|
|
|
|
|
|
|
|
|
Amortization of net actuarial loss (gain)
|
|
|
10
|
|
|
|
5
|
|
|
|
14
|
|
|
|
(49
|
)
|
|
|
(77
|
)
|
|
|
(81
|
)
|
Recognized loss (gain) due to settlements and curtailments
|
|
|
17
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
(income)
|
|
$
|
47
|
|
|
$
|
22
|
|
|
$
|
90
|
|
|
$
|
85
|
|
|
$
|
55
|
|
|
$
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average assumptions
used to determine net cost for years ended
December 31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.75
|
%
|
|
|
6.00
|
%
|
|
|
6.00
|
%
|
|
|
5.75
|
%
|
|
|
6.00
|
%
|
|
|
6.00
|
%
|
Expected return on plan assets
|
|
|
5.25
|
|
|
|
5.25
|
|
|
|
n/a
|
|
|
|
8.00
|
|
|
|
8.00
|
|
|
|
8.00
|
|
Rate of compensation increase
|
|
|
4.00
|
|
|
|
4.00
|
|
|
|
4.00
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
n/a = not applicable
The net periodic benefit cost (income) for each of the plans in
2010 and 2009 includes Merrill Lynch. The net periodic benefit
cost (income) of the Merrill Lynch Nonqualified and Other
Pension Plans, and Postretirement Health and Life Plans was
$(20) million and $18 million in 2009 using a blended
discount rate of 5.59 percent at January 1, 2009.
Net periodic postretirement health and life expense was
determined using the projected unit credit actuarial
method. Gains and losses for all benefits except postretirement
health care are recognized in accordance with the standard
amortization provisions of the applicable accounting guidance.
For the Postretirement Health Care Plans, 50 percent of the
unrecognized gain or
loss at the beginning of the fiscal year (or at subsequent
remeasurement) is recognized on a level basis during the year.
The discount rate and expected return on plan assets impact the
net periodic benefit cost (income) recorded for the plans. With
all other assumptions held constant, a 25-basis point decline in
the discount rate and expected return on plan assets would
result in an increase of approximately $50 million and
$41 million, respectively, for the Qualified Pension Plans.
For the
Non-U.S. Pension
Plans, the Nonqualified and Other Pension Plans, and
Postretirement Health and Life Plans, the 25-basis point decline
in rates would not have a significant impact.
212 Bank
of America 2010
Assumed health care cost trend rates affect the postretirement
benefit obligation and benefit cost reported for the
Postretirement Health and Life Plans. The assumed health care
cost trend rate used to measure the expected cost of benefits
covered by the Postretirement Health and Life Plans was
7.50 percent for 2011, reducing in steps to
5.00 percent in 2017 and later years. A
one-percentage-point increase in assumed health care cost trend
rates would have increased the service and interest costs and
the
benefit obligation by $4 million and $62 million in
2010. A one-percentage-point decrease in assumed health care
cost trend rates would have lowered the service and interest
costs and the benefit obligation by $4 million and
$58 million in 2010.
Pre-tax amounts included in accumulated OCI for employee benefit
plans at December 31, 2010 and 2009 are presented in the
table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
Postretirement
|
|
|
|
|
|
|
|
|
|
Qualified
|
|
|
Non-U.S.
|
|
|
and Other
|
|
|
Health and
|
|
|
|
|
|
|
|
|
|
Pension Plans
|
|
|
Pension Plans
|
|
|
Pension Plans
|
|
|
Life Plans
|
|
|
Total
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Net actuarial (gain) loss
|
|
$
|
5,461
|
|
|
$
|
5,937
|
|
|
$
|
(20
|
)
|
|
$
|
(30
|
)
|
|
$
|
656
|
|
|
$
|
509
|
|
|
$
|
(27
|
)
|
|
$
|
(106
|
)
|
|
$
|
6,070
|
|
|
$
|
6,310
|
|
Transition obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63
|
|
|
|
95
|
|
|
|
63
|
|
|
|
95
|
|
Prior service cost (credits)
|
|
|
98
|
|
|
|
126
|
|
|
|
1
|
|
|
|
|
|
|
|
(15
|
)
|
|
|
(22
|
)
|
|
|
58
|
|
|
|
|
|
|
|
142
|
|
|
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in
accumulated OCI
|
|
$
|
5,559
|
|
|
$
|
6,063
|
|
|
$
|
(19
|
)
|
|
$
|
(30
|
)
|
|
$
|
641
|
|
|
$
|
487
|
|
|
$
|
94
|
|
|
$
|
(11
|
)
|
|
$
|
6,275
|
|
|
$
|
6,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax amounts recognized in OCI for employee benefit plans in
2010 included the following components.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
Postretirement
|
|
|
|
|
|
|
Qualified
|
|
|
Non-U.S.
|
|
|
and Other
|
|
|
Health and
|
|
|
|
|
(Dollars in millions)
|
|
Pension Plans
|
|
|
Pension Plans
|
|
|
Pension Plans
|
|
|
Life Plans
|
|
|
Total
|
|
Other changes in plan assets and
benefit obligations recognized in OCI
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current year actuarial (gain) loss
|
|
$
|
(114
|
)
|
|
$
|
9
|
|
|
$
|
173
|
|
|
$
|
29
|
|
|
$
|
97
|
|
Amortization of actuarial gain (loss)
|
|
|
(362
|
)
|
|
|
|
|
|
|
(27
|
)
|
|
|
49
|
|
|
|
(340
|
)
|
Current year prior service cost
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
64
|
|
|
|
66
|
|
Amortization of prior service credit (cost)
|
|
|
(28
|
)
|
|
|
|
|
|
|
8
|
|
|
|
(6
|
)
|
|
|
(26
|
)
|
Amortization of transition obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(31
|
)
|
|
|
(31
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized in
OCI
|
|
$
|
(504
|
)
|
|
$
|
11
|
|
|
$
|
154
|
|
|
$
|
105
|
|
|
$
|
(234
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The estimated pre-tax amounts that will be amortized from
accumulated OCI into period cost in 2011 are presented in the
table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
Postretirement
|
|
|
|
|
|
|
Qualified
|
|
|
Non-U.S.
|
|
|
and Other
|
|
|
Health and
|
|
|
|
|
(Dollars in millions)
|
|
Pension Plans
|
|
|
Pension Plans
|
|
|
Pension Plans
|
|
|
Life Plans
|
|
|
Total
|
|
Net actuarial loss
|
|
$
|
395
|
|
|
$
|
|
|
|
$
|
15
|
|
|
$
|
|
|
|
$
|
410
|
|
Prior service cost (credit)
|
|
|
22
|
|
|
|
|
|
|
|
(8
|
)
|
|
|
6
|
|
|
|
20
|
|
Transition obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amortized from accumulated
OCI
|
|
$
|
417
|
|
|
$
|
|
|
|
$
|
7
|
|
|
$
|
37
|
|
|
$
|
461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
Assets
The Qualified Pension Plans have been established as retirement
vehicles for participants, and trusts have been established to
secure benefits promised under the Qualified Pension Plans. The
Corporations policy is to invest the trust assets in a
prudent manner for the exclusive purpose of providing benefits
to participants and defraying reasonable expenses of
administration. The Corporations investment strategy is
designed to provide a total return that, over the long term,
increases the ratio of assets to liabilities. The strategy
attempts to maximize the investment return on assets at a level
of risk deemed appropriate by the Corporation while complying
with ERISA and any applicable regulations and laws. The
investment strategy utilizes asset allocation as a principal
determinant for establishing the risk/return profile of the
assets. Asset allocation ranges are established, periodically
reviewed and adjusted as funding levels and liability
characteristics change. Active and passive investment managers
are employed to help enhance the risk/return profile of the
assets. An additional aspect of the investment strategy used to
minimize risk (part of the asset allocation plan) includes
matching the equity exposure of participant-selected earnings
measures. For example, the common stock of the Corporation held
in the trust is maintained as an offset to the exposure related
to participants who elected to receive an earnings measure
based on the return performance of common stock of the
Corporation. No plan assets are expected to be returned to the
Corporation during 2011.
The assets of the
Non-U.S. Pension
Plans are primarily attributable to the U.K. pension plan. The
U.K. pension plans assets are invested prudently so that
the benefits promised to members are provided with consideration
given to the nature and the duration of the plans
liabilities. The current planned investment strategy was set
following an asset-liability study and advice from the
trustees investment advisors. The selected asset
allocation strategy is designed to achieve a higher return than
the lowest risk strategy while maintaining a prudent approach to
meeting the plans liabilities.
The Expected Return on Asset assumption (EROA assumption) was
developed through analysis of historical market returns,
historical asset class volatility and correlations, current
market conditions, anticipated future asset allocations, the
funds past experience, and expectations on potential
future market returns. The EROA assumption is determined using
the calculated market-related value for the Qualified Pension
Plans and the Other Pension Plan and the fair value for the
Non-U.S. Pension
Plans and Postretirement Health and Life Plans. The EROA
assumption represents a long-term average view of the
performance of the assets in the Qualified Pension Plans, the
Non-U.S. Pension
Plans, the Other Pension Plan, and Postretirement Health and
Life Plans, a return that may or may not be achieved during any
one
Bank of America
2010 213
calendar year. Some of the building blocks used to arrive at the
long-term return assumption include an implied return from
equity securities of 8.75 percent, debt securities of
5.75 percent and real estate of 7.00 percent for the
Qualified Pension Plans, the
Non-U.S. Pension
Plans, the Other Pension Plan, and Postretirement Health and
Life Plans. The terminated U.S. pension plan is solely
invested in a group annuity contract which primarily invested in
fixed-
income securities structured such that asset maturities match
the duration of the plans obligations.
The target allocations for 2011 by asset category for the
Qualified Pension Plans,
Non-U.S. Pension
Plans, Nonqualified and Other Pension Plans, and Postretirement
Health and Life Plans are presented in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 Target Allocation
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
Postretirement
|
|
|
|
Qualified
|
|
|
Non-U.S.
|
|
|
and Other
|
|
|
Health and Life
|
|
Asset Category
|
|
Pension Plans
|
|
|
Pension Plans
|
|
|
Pension Plans
|
|
|
Plans
|
|
Equity securities
|
|
|
60 80
|
%
|
|
|
25 75
|
%
|
|
|
0 5
|
%
|
|
|
50 75
|
%
|
Debt securities
|
|
|
20 40
|
|
|
|
10 60
|
|
|
|
95 100
|
|
|
|
25 45
|
|
Real estate
|
|
|
0 5
|
|
|
|
0 15
|
|
|
|
0 5
|
|
|
|
0 5
|
|
Other
|
|
|
0 10
|
|
|
|
5 40
|
|
|
|
0 5
|
|
|
|
0 5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities for the Qualified Pension Plans include common
stock of the Corporation in the amounts of $189 million
(1.21 percent of total plan assets) and $224 million
(1.54 percent of total plan assets) at December 31,
2010 and 2009.
214 Bank
of America 2010
Fair Value
Measurements
For information on fair value measurements, including
descriptions of Level 1, 2 and 3 of the fair value
hierarchy and the valuation methods employed by the Corporation,
see Note 1 Summary of Significant Accounting
Principles and Note 22 Fair Value
Measurements.
Plan investment assets measured at fair value by level and in
total at December 31, 2010 and 2009 are summarized in the
table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
Fair Value Measurements
|
|
|
|
|
(Dollars in millions)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Cash and short-term
investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market and interest-bearing cash
|
|
$
|
1,469
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,469
|
|
Cash and cash equivalent commingled/mutual funds
|
|
|
|
|
|
|
45
|
|
|
|
|
|
|
|
45
|
|
Fixed income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and government agency securities
|
|
|
701
|
|
|
|
2,604
|
|
|
|
14
|
|
|
|
3,319
|
|
Corporate debt securities
|
|
|
|
|
|
|
1,106
|
|
|
|
|
|
|
|
1,106
|
|
Asset-backed securities
|
|
|
|
|
|
|
796
|
|
|
|
|
|
|
|
796
|
|
Non-U.S.
debt securities
|
|
|
36
|
|
|
|
397
|
|
|
|
9
|
|
|
|
442
|
|
Fixed income commingled/mutual funds
|
|
|
240
|
|
|
|
1,359
|
|
|
|
|
|
|
|
1,599
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common and preferred equity securities
|
|
|
6,980
|
|
|
|
1
|
|
|
|
|
|
|
|
6,981
|
|
Equity commingled/mutual funds
|
|
|
637
|
|
|
|
2,307
|
|
|
|
|
|
|
|
2,944
|
|
Public real estate investment trusts
|
|
|
|
|
|
|
168
|
|
|
|
|
|
|
|
168
|
|
Real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private real estate
|
|
|
|
|
|
|
|
|
|
|
110
|
|
|
|
110
|
|
Real estate commingled/mutual funds
|
|
|
30
|
|
|
|
2
|
|
|
|
215
|
|
|
|
247
|
|
Limited partnerships
|
|
|
|
|
|
|
101
|
|
|
|
230
|
|
|
|
331
|
|
Other
investments (1)
|
|
|
19
|
|
|
|
258
|
|
|
|
83
|
|
|
|
360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total plan investment assets, at
fair value
|
|
$
|
10,112
|
|
|
$
|
9,144
|
|
|
$
|
661
|
|
|
$
|
19,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
Cash and short-term
investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market and interest-bearing cash
|
|
$
|
1,311
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,311
|
|
Cash and cash equivalent commingled/mutual funds
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
18
|
|
Fixed income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and government agency securities
|
|
|
1,460
|
|
|
|
1,422
|
|
|
|
|
|
|
|
2,882
|
|
Corporate debt securities
|
|
|
22
|
|
|
|
1,279
|
|
|
|
|
|
|
|
1,301
|
|
Asset-backed securities
|
|
|
|
|
|
|
1,116
|
|
|
|
|
|
|
|
1,116
|
|
Non-U.S.
debt securities
|
|
|
278
|
|
|
|
601
|
|
|
|
6
|
|
|
|
885
|
|
Fixed income commingled/mutual funds
|
|
|
57
|
|
|
|
1,202
|
|
|
|
|
|
|
|
1,259
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common and preferred equity securities
|
|
|
6,077
|
|
|
|
|
|
|
|
|
|
|
|
6,077
|
|
Equity commingled/mutual funds
|
|
|
697
|
|
|
|
2,026
|
|
|
|
|
|
|
|
2,723
|
|
Public real estate investment trusts
|
|
|
|
|
|
|
116
|
|
|
|
|
|
|
|
116
|
|
Real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private real estate
|
|
|
|
|
|
|
|
|
|
|
119
|
|
|
|
119
|
|
Real estate commingled/mutual funds
|
|
|
23
|
|
|
|
|
|
|
|
195
|
|
|
|
218
|
|
Limited partnerships
|
|
|
|
|
|
|
91
|
|
|
|
162
|
|
|
|
253
|
|
Other
investments (1)
|
|
|
1
|
|
|
|
20
|
|
|
|
188
|
|
|
|
209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total plan investment assets, at
fair value
|
|
$
|
9,926
|
|
|
$
|
7,891
|
|
|
$
|
670
|
|
|
$
|
18,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Other investments represent
interest rate swaps of $198 million and $110 million,
participant loans of $79 million and $74 million,
commodity and balanced funds of $44 million and
$14 million and other various investments of
$39 million and $11 million at December 31, 2010
and 2009.
|
Bank of America
2010 215
The table below presents a reconciliation of all plan investment
assets measured at fair value using significant unobservable
inputs (Level 3) during 2010 and 2009.
Level 3
Fair Value Measurements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
|
|
Actual Return on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Assets Still
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
Held at the
|
|
|
Purchases, Sales
|
|
|
Transfers into/
|
|
|
Balance
|
|
(Dollars in millions)
|
|
January 1
|
|
|
Reporting Date
(1)
|
|
|
and Settlements
|
|
|
(out of) Level 3
|
|
|
December 31
|
|
Fixed income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and government agency securities
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
14
|
|
|
$
|
14
|
|
Non-U.S.
debt securities
|
|
|
6
|
|
|
|
1
|
|
|
|
|
|
|
|
2
|
|
|
|
9
|
|
Real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private real estate
|
|
|
119
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
110
|
|
Real estate commingled/mutual funds
|
|
|
195
|
|
|
|
(4
|
)
|
|
|
24
|
|
|
|
|
|
|
|
215
|
|
Limited partnerships
|
|
|
162
|
|
|
|
13
|
|
|
|
2
|
|
|
|
53
|
|
|
|
230
|
|
Other investments
|
|
|
188
|
|
|
|
|
|
|
|
6
|
|
|
|
(111
|
)
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
670
|
|
|
$
|
1
|
|
|
$
|
32
|
|
|
$
|
(42
|
)
|
|
$
|
661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
Fixed income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
$
|
1
|
|
|
$
|
(1
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Non-U.S.
debt securities
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
Real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private real estate
|
|
|
149
|
|
|
|
(29
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
119
|
|
Real estate commingled/mutual funds
|
|
|
281
|
|
|
|
(92
|
)
|
|
|
6
|
|
|
|
|
|
|
|
195
|
|
Limited partnerships
|
|
|
91
|
|
|
|
14
|
|
|
|
37
|
|
|
|
20
|
|
|
|
162
|
|
Other investments
|
|
|
293
|
|
|
|
(106
|
)
|
|
|
1
|
|
|
|
|
|
|
|
188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
821
|
|
|
$
|
(214
|
)
|
|
$
|
43
|
|
|
$
|
20
|
|
|
$
|
670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
During 2009, the Corporation did
not sell any Level 3 plan assets during the period.
|
Projected Benefit
Payments
Benefit payments projected to be made from the Qualified Pension
Plans,
Non-U.S. Pension
Plans, Nonqualified and Other Pension Plans, and Postretirement
Health and Life Plans are presented in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Postretirement Health and Life Plans
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
Qualified
|
|
|
Non-U.S.
|
|
|
and Other
|
|
|
|
|
|
Medicare
|
|
(Dollars in millions)
|
|
Pension Plans
(1)
|
|
|
Pension Plans
(2)
|
|
|
Pension Plans
(2)
|
|
|
Net Payments
(3)
|
|
|
Subsidy
|
|
2011
|
|
$
|
1,016
|
|
|
$
|
60
|
|
|
$
|
231
|
|
|
$
|
167
|
|
|
$
|
19
|
|
2012
|
|
|
1,031
|
|
|
|
62
|
|
|
|
250
|
|
|
|
168
|
|
|
|
19
|
|
2013
|
|
|
1,038
|
|
|
|
63
|
|
|
|
242
|
|
|
|
168
|
|
|
|
19
|
|
2014
|
|
|
1,037
|
|
|
|
65
|
|
|
|
232
|
|
|
|
168
|
|
|
|
19
|
|
2015
|
|
|
1,041
|
|
|
|
66
|
|
|
|
235
|
|
|
|
166
|
|
|
|
18
|
|
2016 2020
|
|
|
5,231
|
|
|
|
350
|
|
|
|
1,147
|
|
|
|
757
|
|
|
|
87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Benefit payments expected to be
made from the plans assets.
|
(2)
|
|
Benefit payments expected to be
made from a combination of the plans and the
Corporations assets.
|
(3)
|
|
Benefit payments (net of retiree
contributions) expected to be made from a combination of the
plans and the Corporations assets.
|
Defined
Contribution Plans
The Corporation maintains qualified defined contribution
retirement plans and nonqualified defined contribution
retirement plans. As a result of the Merrill Lynch acquisition,
the Corporation also maintains the defined contribution plans of
Merrill Lynch which include the 401(k) Savings &
Investment Plan, the Retirement and Accumulation Plan (RAP) and
the Employee Stock Ownership Plan (ESOP). The Corporation
contributed approximately $670 million, $605 million
and $454 million in 2010, 2009 and 2008, respectively, in
cash, to the qualified defined contribution plans. At
December 31, 2010 and 2009, 208 million shares and
203 million shares of the Corporations common stock
were held by plans. Payments to the plans for dividends on
common stock were $8 million, $8 million and
$214 million in 2010, 2009 and 2008, respectively.
In addition, certain
non-U.S. employees
within the Corporation are covered under defined contribution
pension plans that are separately administered in accordance
with local laws.
216 Bank
of America 2010
NOTE 20 Stock-based
Compensation Plans
The Corporation administers a number of equity compensation
plans, including the Key Employee Stock Plan, the Key Associate
Stock Plan and the Merrill Lynch Employee Stock Compensation
Plan. Descriptions of the material features of the equity
compensation plans are below. Under these plans, the Corporation
grants long-term stock-based awards, including stock options,
restricted stock shares and RSUs. For 2010, restricted stock
awards generally vest in three equal annual installments
beginning one year from the grant date, with the exception of
certain awards to financial advisors that vest eight years from
the grant date, and an award of restricted stock shares that was
vested on the grant date but released from restrictions over
18 months.
For most awards, expense is generally recognized ratably over
the vesting period net of estimated forfeitures, unless the
associate meets certain retirement eligibility criteria. For
associate awards that meet retirement eligibility criteria, the
Corporation records the expense upon grant. For associates that
become retirement eligible during the vesting period, the
Corporation recognizes expense from the grant date to the date
on which the associate becomes retirement eligible, net of
estimated forfeitures. The compensation cost for the following
stock-based plans was $2.0 billion, $2.4 billion and
$885 million in 2010, 2009 and 2008, respectively. The
related income tax benefit was $727 million,
$892 million and $328 million for 2010, 2009 and 2008,
respectively.
Key Employee
Stock Plan
The Key Employee Stock Plan, as amended and restated, provided
for different types of awards including stock options,
restricted stock shares and RSUs. Under the plan,
10-year
options to purchase approximately 260 million shares of
common stock were granted through December 31, 2002 to
certain employees at the closing market price on the respective
grant dates. At December 31, 2010, approximately
36 million fully vested options were outstanding under this
plan. No further awards may be granted.
Key Associate
Stock Plan
The Key Associate Stock Plan became effective January 1,
2003. It provides for different types of long-term awards,
including stock options, restricted stock shares and RSUs. As of
December 31, 2010, the shareholders had authorized
approximately 1.1 billion shares for grant under this plan.
Additionally, any shares covered by awards under the Key
Employee Stock Plan or certain legacy company plans that cancel,
terminate, expire, lapse or settle in cash after a specified
date may be re-granted under the Key Associate Stock Plan.
In February 2010, the Corporation issued approximately
191 million RSUs to certain employees under the Key
Associate Stock Plan. These awards generally vest in three equal
annual installments beginning one year from the grant date.
Vested RSUs will be settled in cash unless the Corporation
authorizes settlement in common shares. Certain awards contain
clawback provisions which permit the Corporation to cancel all
or a portion of the award under specified circumstances. The
compensation cost for cash-settled awards and awards subject to
certain clawback provisions is accrued over the vesting period
and adjusted to fair value based upon changes in the share price
of the Corporations common stock. The compensation cost
for the remaining awards is fixed and based on the share price
of the common stock on the date of grant, or the date upon which
settlement in common stock has been authorized. The Corporation
hedges a portion of its exposure to variability in the expected
cash flows for unvested awards using a combination of economic
and cash flow hedges as described in Note 4
Derivatives. During 2010, the Corporation authorized
approximately 100 million RSUs to be settled in common
shares and terminated a portion of the corresponding economic
and cash flow hedges. As a result of the decision to
share-settle these RSUs, these share-settled RSUs are no longer
adjusted to fair value based upon changes in the share price of
the Corporations common stock.
At December 31, 2010, approximately 140 million
options were outstanding under this plan. There were no options
granted under this plan during 2010 or 2009.
Merrill Lynch
Employee Stock Compensation Plan
The Corporation assumed the Merrill Lynch Employee Stock
Compensation Plan. Shares can be granted under this plan in the
future. Approximately 34 million shares of RSUs were
granted in 2009 which generally vest in three equal annual
installments beginning one year from the grant date. Awards
granted prior to 2009 generally vest in four equal annual
installments beginning one year from the grant date. There were
no shares granted under this plan during 2010. At
December 31, 2010, there were approximately 28 million
shares outstanding.
Other Stock
Plans
As a result of the Merrill Lynch acquisition, the Corporation
assumed the obligations of outstanding awards granted under the
Merrill Lynch Financial Advisor Capital Accumulation Award Plans
(FACAAP) and the Merrill Lynch Employee Stock Purchase Plan
(ESPP). The FACAAP is no longer an active plan and no awards
were granted in 2010 or 2009. Awards granted in 2003 and
thereafter are generally payable eight years from the grant date
in a fixed number of the Corporations common stock. For
outstanding awards granted prior to 2003, payment is generally
made ten years from the grant date in a fixed number of the
Corporations common shares unless the fair value of such
shares is less than a specified minimum value, in which case the
minimum value is paid in cash. At December 31, 2010, there
were 18 million shares outstanding under this plan.
The ESPP allows eligible associates to invest from one percent
to 10 percent of eligible compensation to purchase the
Corporations common stock, subject to legal limits.
Purchases were made at a discount of up to five percent of the
average high and low market price on the relevant purchase date
and the maximum annual contribution per employee was $23,750 in
2010. Up to 107 million shares have been authorized for
issuance under the ESPP in 2010. There were 12 million
shares available at January 1, 2010 and 3 million
shares purchased during the year. There were 9 million
shares available at December 31, 2010.
The weighted-average fair value of the ESPP stock purchase
rights (i.e., the five percent discount on the
Corporations common stock purchases) exercised by
employees in 2010 is $0.80 per stock purchase right.
Restricted
Stock/Unit Details
The following table presents the status of the share-settled
restricted stock/unit awards at December 31, 2010 and
changes during 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
average
|
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
Outstanding at January 1, 2010
|
|
|
|
175,028,022
|
|
|
$
|
14.30
|
|
Granted
|
|
|
|
216,874,053
|
|
|
|
14.40
|
|
Vested
|
|
|
|
(164,904,893
|
)
|
|
|
15.66
|
|
Cancelled
|
|
|
|
(14,924,513
|
)
|
|
|
13.81
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31,
2010
|
|
|
|
212,072,669
|
|
|
|
13.37
|
|
|
At December 31, 2010, there was $944 million of total
unrecognized compensation cost related to share-based
compensation arrangements for all awards and it is expected to
be recognized over a period up to seven years, with a
weighted-average period of 1.07 years. The total fair value
of restricted stock vested in 2010 was $2.4 billion. In
2010, the amount of cash used to settle equity instruments was
$186 million.
Bank of America
2010 217
Stock Options
Details
The following table presents the status of all option plans at
December 31, 2010 and changes during 2010. Outstanding
options at December 31, 2010 include 36 million
options under the Key Employee Stock Plan, 140 million
options under the Key Associate Stock Plan and 85 million
options to employees of predecessor companies assumed in mergers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
Exercise
|
|
|
|
Options
|
|
|
Price
|
Outstanding at January 1, 2010
|
|
|
|
303,722,748
|
|
|
$
|
49.71
|
Exercised
|
|
|
|
(4,959
|
)
|
|
|
14.82
|
Forfeited
|
|
|
|
(42,594,970
|
)
|
|
|
44.16
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31,
2010
|
|
|
|
261,122,819
|
|
|
|
50.61
|
|
|
|
|
|
|
|
|
|
Options exercisable at December 31, 2010
|
|
|
|
255,615,840
|
|
|
|
50.77
|
Options vested and expected to
vest (1)
|
|
|
|
261,113,002
|
|
|
|
50.61
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes vested shares and
nonvested shares after a forfeiture rate is applied.
|
At December 31, 2010, there was no aggregate intrinsic
value of options outstanding, exercisable, and vested and
expected to vest. The weighted-average remaining contractual
term of options outstanding was 3.0 years, options
exercisable was 3.0 years, and options vested and expected
to vest was 3.1 years at December 31, 2010. These
remaining contractual terms are similar because options have not
been granted since 2008 and they generally vest in three years.
The weighted-average grant-date fair value of options granted in
2008 was $8.92. No options were granted in 2010 or 2009.
The table below presents the assumptions used to estimate the
fair value of stock options granted on the date of grant using
the lattice option-pricing model for 2008. No stock options were
granted in 2010 or 2009. Lattice option-pricing models
incorporate ranges of assumptions for inputs and those ranges
are disclosed in the table below. The risk-free interest rate
for periods within the contractual life of the stock option is
based on the U.S. Treasury yield curve in effect at the
time of grant. Expected volatilities are based on implied
volatilities from traded stock options on the Corporations
common stock, historical volatility of the Corporations
common stock, and other factors. The Corporation uses historical
data to estimate stock option exercise and employee termination
within the model. The expected term of stock options granted is
derived from the output of the model and represents the period
of time that stock options granted are expected to be
outstanding. The estimates of fair value from these models are
theoretical values for stock options and changes in the
assumptions used in the models could result in materially
different fair value estimates. The actual value of the stock
options will depend on the market value of the
Corporations common stock when the stock options are
exercised.
|
|
|
|
|
|
|
2008
|
|
Risk-free interest rate
|
|
|
2.05 3.85
|
%
|
Dividend yield
|
|
|
5.3
|
|
Expected volatility
|
|
|
26.00 36.00
|
|
Weighted-average volatility
|
|
|
32.8
|
|
Expected lives (years)
|
|
|
6.6
|
|
|
|
|
|
|
Excluded from the previous table are assumptions used to
estimate the fair value of 108 million stock options
assumed in connection with the Merrill Lynch acquisition with an
aggregate fair value of $1.1 billion. The fair value of
these awards was estimated using a Black-Scholes option pricing
model. Similar to options valued using the lattice
option-pricing model described above, key assumptions used
include the implied volatility based on the Corporations
common stock of 75 percent, the risk-free interest rate
based on the U.S. Treasury yield curve in effect at
December 31, 2008, an expected dividend yield of
4.2 percent and the expected life of the options based on
their actual remaining term.
NOTE 21 Income
Taxes
The components of income tax expense (benefit) for 2010, 2009
and 2008 were as presented in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Current income tax expense
(benefit)
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
$
|
(666
|
)
|
|
$
|
(3,576
|
)
|
|
$
|
5,075
|
|
U.S. state and local
|
|
|
158
|
|
|
|
555
|
|
|
|
561
|
|
Non-U.S.
|
|
|
815
|
|
|
|
735
|
|
|
|
585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current expense (benefit)
|
|
|
307
|
|
|
|
(2,286
|
)
|
|
|
6,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax expense
(benefit)
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
|
(287
|
)
|
|
|
792
|
|
|
|
(5,269
|
)
|
U.S. state and local
|
|
|
201
|
|
|
|
(620
|
)
|
|
|
(520
|
)
|
Non-U.S.
|
|
|
694
|
|
|
|
198
|
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred expense (benefit)
|
|
|
608
|
|
|
|
370
|
|
|
|
(5,801
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense
(benefit)
|
|
$
|
915
|
|
|
$
|
(1,916
|
)
|
|
$
|
420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense (benefit) does not reflect the deferred
tax effects of unrealized gains and losses on AFS debt and
marketable equity securities, foreign currency translation
adjustments, derivatives and employee benefit plan adjustments
that are included in accumulated OCI. As a result of these tax
effects, accumulated OCI decreased $3.2 billion and
$1.6 billion in 2010 and 2009, and increased
$5.9 billion in 2008. In addition, total income tax expense
(benefit) does not reflect tax effects associated with the
Corporations employee stock plans which decreased common
stock and additional paid-in capital $98 million,
$295 million and $9 million in 2010, 2009 and 2008,
respectively.
218 Bank
of America 2010
Income tax expense (benefit) for 2010, 2009 and 2008 varied from
the amount computed by applying the statutory income tax rate to
income (loss) before income taxes. A reconciliation between the
expected U.S. federal
income tax expense using the federal statutory tax rate of
35 percent to the Corporations actual income tax
expense (benefit) and resulting effective tax rate for 2010,
2009 and 2008 is presented in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
(Dollars in millions)
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
Expected U.S. federal income tax expense (benefit)
|
|
$
|
(463
|
)
|
|
|
35.0
|
%
|
|
$
|
1,526
|
|
|
|
35.0
|
%
|
|
$
|
1,550
|
|
|
|
35.0
|
%
|
Increase (decrease) in taxes resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State tax expense (benefit), net of federal effect
|
|
|
233
|
|
|
|
(17.6
|
)
|
|
|
(42
|
)
|
|
|
(1.0
|
)
|
|
|
27
|
|
|
|
0.6
|
|
Goodwill impairment and other
|
|
|
4,508
|
|
|
|
(341.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.K. corporate tax rate reduction
|
|
|
392
|
|
|
|
(29.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nondeductible expenses
|
|
|
99
|
|
|
|
(7.5
|
)
|
|
|
69
|
|
|
|
1.6
|
|
|
|
79
|
|
|
|
1.8
|
|
Leveraged lease tax differential
|
|
|
98
|
|
|
|
(7.4
|
)
|
|
|
59
|
|
|
|
1.4
|
|
|
|
216
|
|
|
|
4.9
|
|
Change in federal deferred tax asset valuation allowance
|
|
|
(1,657
|
)
|
|
|
125.4
|
|
|
|
(650
|
)
|
|
|
(14.9
|
)
|
|
|
|
|
|
|
|
|
Tax-exempt income, including dividends
|
|
|
(981
|
)
|
|
|
74.2
|
|
|
|
(863
|
)
|
|
|
(19.8
|
)
|
|
|
(631
|
)
|
|
|
(14.3
|
)
|
Low income housing credits/other credits
|
|
|
(732
|
)
|
|
|
55.4
|
|
|
|
(668
|
)
|
|
|
(15.3
|
)
|
|
|
(722
|
)
|
|
|
(16.3
|
)
|
Non-U.S. tax
differential
|
|
|
(190
|
)
|
|
|
14.4
|
|
|
|
(709
|
)
|
|
|
(16.3
|
)
|
|
|
(192
|
)
|
|
|
(4.3
|
)
|
Changes in prior period UTBs (including interest)
|
|
|
(349
|
)
|
|
|
26.4
|
|
|
|
87
|
|
|
|
2.0
|
|
|
|
169
|
|
|
|
3.8
|
|
Loss on certain
non-U.S.
subsidiary stock
|
|
|
|
|
|
|
|
|
|
|
(595
|
)
|
|
|
(13.7
|
)
|
|
|
|
|
|
|
|
|
Other
|
|
|
(43
|
)
|
|
|
3.2
|
|
|
|
(130
|
)
|
|
|
(3.0
|
)
|
|
|
(76
|
)
|
|
|
(1.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense
(benefit)
|
|
$
|
915
|
|
|
|
(69.2
|
)%
|
|
$
|
(1,916
|
)
|
|
|
(44.0
|
)%
|
|
$
|
420
|
|
|
|
9.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The reconciliation of the beginning unrecognized tax benefits
(UTB) balance to the ending balance is presented in the table
below.
Reconciliation
of the Change in Unrecognized Tax Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Beginning balance
|
|
$
|
5,253
|
|
|
$
|
3,541
|
|
|
$
|
3,095
|
|
Increases related to positions taken during prior years
|
|
|
755
|
|
|
|
791
|
|
|
|
688
|
|
Increases related to positions taken during the current year
|
|
|
172
|
|
|
|
181
|
|
|
|
241
|
|
Positions acquired or assumed in business combinations
|
|
|
|
|
|
|
1,924
|
|
|
|
169
|
|
Decreases related to positions taken during prior years
|
|
|
(657
|
)
|
|
|
(554
|
)
|
|
|
(371
|
)
|
Settlements
|
|
|
(305
|
)
|
|
|
(615
|
)
|
|
|
(209
|
)
|
Expiration of statute of limitations
|
|
|
(49
|
)
|
|
|
(15
|
)
|
|
|
(72
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
5,169
|
|
|
$
|
5,253
|
|
|
$
|
3,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2010, 2009 and 2008, the balance of the
Corporations UTBs which would, if recognized, affect the
Corporations effective tax rate was $3.4 billion,
$4.0 billion and $2.6 billion, respectively. Included
in the UTB balance are some items the recognition of which would
not affect the effective tax rate, such as the tax effect of
certain temporary differences, the portion of gross state UTBs
that would be offset by the tax benefit of the associated
federal deduction and the portion of gross
non-U.S. UTBs
that would be offset by tax reductions in other jurisdictions.
The Corporation is under examination by the IRS and other tax
authorities in countries and states in which it has significant
business operations. The table below summarizes the status of
significant examinations for the Corporation and various
acquired subsidiaries as of December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
Status at
|
|
|
Years under
|
|
|
December 31,
|
|
|
examination
(1)
|
|
|
2010
|
Bank of America
Corporation U.S. (2)
|
|
|
2001 2004
|
|
|
In Appeals process
|
Bank of America Corporation U.S.
|
|
|
2005 2009
|
|
|
Field examination
|
Bank of America Corporation New York
|
|
|
1999 2004
|
|
|
Field examination
|
Merrill Lynch U.S.
|
|
|
2004
|
|
|
In Appeals process
|
Merrill Lynch U.S.
|
|
|
2005 2008
|
|
|
Field examination
|
Merrill Lynch U.K.
|
|
|
2008
|
|
|
Field examination
|
Merrill Lynch Japan
|
|
|
2007 2009
|
|
|
Field examination
|
Merrill Lynch New York
|
|
|
2007 2008
|
|
|
Field examination
|
FleetBoston U.S.
|
|
|
1997 2004
|
|
|
In Appeals process
|
LaSalle U.S.
|
|
|
2006 2007
|
|
|
Field examination
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
All tax years subsequent to the
years shown remain open to examination.
|
(2) |
|
The
2001-2002 years
in Appeals process relate to the separate returns of a
subsidiary.
|
In addition to the above examinations, the Corporation is in the
process of appealing an adverse decision by the U.S. Tax
Court with respect to a 1987 Merrill Lynch transaction. The
income tax associated with this matter has been remitted and is
included in the UTB balance above.
The IRS proposed adjustments for two issues in the audit of
Merrill Lynch for the tax year 2004 which have been protested to
the Appeals Office. The issues involve eligibility for the
dividends received deduction and foreign tax credits with
respect to a structured investment transaction. The Corporation
also intends to protest any adjustments the IRS proposes for
these same issues in tax years 2005 through 2007. The IRS has
proposed similar adjustments in the Bank of America Corporation
audit cycles currently in the Appeals process and is expected to
propose further adjustments disallowing foreign tax credits
related to certain structured investment transactions. The
Corporation intends to protest these adjustments in all relevant
tax years.
The Corporation files income tax returns in more than
100 state and
non-U.S. jurisdictions
each year and is under continuous examination by various state
and
non-U.S. taxing
authorities. While many of these examinations are resolved every
year, the Corporation does not anticipate that resolutions
occurring within the next twelve months will result in a
material change to the Corporations financial position.
Considering all U.S. federal and
non-U.S. examinations,
it is reasonably possible that the UTB balance will decrease by
as much as $1.0 billion during the next twelve months,
since resolved items will be removed from the balance whether
their resolution resulted in payment or recognition.
Bank of America
2010 219
During 2010 and 2009, the Corporation recognized in income tax
expense $99 million and $184 million of interest and
penalties,
net-of-tax.
At both December 31, 2010 and 2009, the Corporations
accrual for interest and penalties that related to income taxes,
net of taxes and remittances, was $1.1 billion.
Significant components of the Corporations net deferred
tax assets and liabilities at December 31, 2010 and 2009
are presented in the table below.
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards (NOL)
|
|
$
|
18,732
|
|
|
$
|
17,236
|
|
Allowance for credit losses
|
|
|
14,659
|
|
|
|
13,011
|
|
Credit carryforwards
|
|
|
4,183
|
|
|
|
2,263
|
|
Employee compensation and retirement benefits
|
|
|
3,868
|
|
|
|
4,021
|
|
Accrued expenses
|
|
|
3,550
|
|
|
|
2,134
|
|
State income taxes
|
|
|
1,791
|
|
|
|
1,636
|
|
Capital loss carryforwards
|
|
|
1,530
|
|
|
|
3,187
|
|
Security and loan valuations
|
|
|
427
|
|
|
|
4,590
|
|
Other
|
|
|
1,960
|
|
|
|
2,308
|
|
|
|
|
|
|
|
|
|
|
Gross deferred tax assets
|
|
|
50,700
|
|
|
|
50,386
|
|
Valuation allowance
|
|
|
(2,976
|
)
|
|
|
(4,315
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets, net of valuation allowance
|
|
|
47,724
|
|
|
|
46,071
|
|
|
|
|
|
|
|
|
|
|
Deferred tax
liabilities
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
|
4,330
|
|
|
|
878
|
|
Mortgage servicing rights
|
|
|
4,280
|
|
|
|
5,663
|
|
Long-term borrowings
|
|
|
3,328
|
|
|
|
3,320
|
|
Equipment lease financing
|
|
|
2,957
|
|
|
|
2,411
|
|
Intangibles
|
|
|
2,146
|
|
|
|
2,497
|
|
Fee income
|
|
|
1,235
|
|
|
|
1,382
|
|
Other
|
|
|
2,375
|
|
|
|
2,641
|
|
|
|
|
|
|
|
|
|
|
Gross deferred liabilities
|
|
|
20,651
|
|
|
|
18,792
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax
assets
|
|
$
|
27,073
|
|
|
$
|
27,279
|
|
|
|
|
|
|
|
|
|
|
On January 1, 2010, the Corporation adopted new
consolidation guidance and the transition adjustment included an
increase of $3.5 billion in retained earnings which was
offset against net deferred tax assets. On July 1, 2010,
the Corporation adopted new accounting guidance on embedded
credit derivatives and the related fair value option election
and the transition adjustment included an increase of
$128 million in retained earnings which is offset against
net deferred tax assets.
The U.S. federal deferred tax asset excludes
$56 million related to certain employee stock plan
deductions that will be recognized and will increase additional
paid-in capital when realized.
The table below summarizes the deferred tax assets and related
valuation allowances recognized for the net operating and
capital loss carryforwards and tax credit carryforwards at
December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
|
|
|
Deferred
|
|
|
Valuation
|
|
|
Deferred
|
|
|
First Year
|
|
(Dollars in millions)
|
|
Tax Asset
|
|
|
Allowance
|
|
|
Tax Asset
|
|
|
Expiring
|
|
Net operating losses U.S.
|
|
$
|
9,037
|
|
|
$
|
|
|
|
$
|
9,037
|
|
|
|
After 2027
|
|
Net operating losses U.K.
|
|
|
9,432
|
|
|
|
|
|
|
|
9,432
|
|
|
|
None
|
(1)
|
Net operating losses other
non-U.S.
|
|
|
263
|
|
|
|
(36
|
)
|
|
|
227
|
|
|
|
Various
|
|
Net operating losses U.S.
states (2)
|
|
|
2,221
|
|
|
|
(847
|
)
|
|
|
1,374
|
|
|
|
Various
|
|
Capital losses
|
|
|
1,530
|
|
|
|
(1,530
|
)
|
|
|
|
|
|
|
After 2013
|
|
General business credits
|
|
|
2,442
|
|
|
|
|
|
|
|
2,442
|
|
|
|
After 2027
|
|
Alternative minimum and other tax credits
|
|
|
214
|
|
|
|
|
|
|
|
214
|
|
|
|
None
|
|
Foreign tax credits
|
|
|
1,527
|
|
|
|
(306
|
)
|
|
|
1,221
|
|
|
|
After 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The U.K. NOL may be carried
forward indefinitely. Due to
change-in-control
limitations in the three years prior to and following the change
in ownership, this unlimited carryforward period may be
jeopardized by certain major changes in the nature or conduct of
the U.K. businesses.
|
(2)
|
|
The NOL and related valuation
allowance for U.S. states before considering the benefit of
federal deductions were $3.4 billion and $1.3 billion.
|
The Corporation concluded that no valuation allowance is
necessary to reduce the U.K. NOL, U.S. NOL and general
business credit carryforwards since estimated future taxable
income will be sufficient to utilize these assets prior to their
expiration. With the acquisition of Merrill Lynch on
January 1, 2009, the Corporation established a valuation
allowance to reduce certain other deferred tax assets to the
amount more-likely-than-not to be realized before their
expiration. During 2010 and 2009, the Corporation released
$1.7 billion and $650 million of the valuation
allowance attributable to Merrill Lynchs capital loss
carryforward due to utilization against net capital gains
realized in 2010 and 2009. The valuation allowance also
increased due primarily to increases in operating loss
carryforwards generated in certain state jurisdictions for which
management believes it is more-likely-than-not that realization
of these assets will not occur.
At December 31, 2010 and 2009, U.S. federal income
taxes had not been provided on $17.9 billion and
$16.7 billion of undistributed earnings of
non-U.S. subsidiaries
earned prior to 1987 and after 1997 that have been reinvested
for an indefinite period of time. If the earnings were
distributed, an additional $2.6 billion and
$2.5 billion of tax expense, net of credits for
non-U.S. taxes
paid on such earnings and for the related
non-U.S. withholding
taxes, would have resulted as of December 31, 2010 and 2009.
NOTE 22 Fair
Value Measurements
Under applicable accounting guidance, fair value is defined as
the exchange price that would be received for an asset or paid
to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date.
The Corporation determines the fair values of its financial
instruments based on the fair value hierarchy established under
applicable accounting guidance which requires an entity to
maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. There are three
levels of inputs that may be used to measure fair value. For
more information regarding the fair value hierarchy and how the
Corporation measures fair value, see Note 1
Summary of Significant Accounting Principles. The
Corporation accounts for certain corporate loans and loan
commitments, LHFS, structured reverse repurchase agreements,
long-term deposits and long-term debt under the fair value
option. For more informations, see Note 23
Fair Value Option.
Level 1, 2
and 3 Valuation Techniques
Financial instruments are considered Level 1 when the
valuation is based on quoted prices in active markets for
identical assets or liabilities. Level 2 financial
instruments are valued using quoted prices for similar assets or
liabilities, quoted prices in markets that are not active, or
models using inputs that are observable or can be corroborated
by observable market data for substantially the full term of the
assets or liabilities. Financial instruments are considered
Level 3 when their values are determined using pricing
models, discounted cash flow methodologies or similar
techniques, and at least one significant model assumption or
input is unobservable and when determination of the fair value
requires significant management judgment or estimation.
The Corporation uses market indices for direct inputs to certain
models where the cash settlement is directly linked to
appreciation or depreciation of that particular index (primarily
in the context of structured credit products). In those cases,
no material adjustments are made to the index-based values. In
other cases, the use of market indices is inherently limited
because the fair value of an individual position being valued
may not move in tandem with changes in fair value of a specific
market index. Accordingly, market indices are used as inputs to
the valuation, but are adjusted for trade specific factors such
as rating, credit quality, vintage and other factors.
220 Bank
of America 2010
Trading Account
Assets and Liabilities and
Available-for-Sale
Debt Securities
The fair values of trading account assets and liabilities are
primarily based on actively traded markets where prices are
based on either direct market quotes or observed transactions.
The fair values of AFS debt securities are generally based on
quoted market prices or market prices for similar assets.
Liquidity is a significant factor in the determination of the
fair values of trading account assets and liabilities and AFS
debt securities. Market price quotes may not be readily
available for some positions, or positions within a market
sector where trading activity has slowed significantly or
ceased. Some of these instruments are valued using a discounted
cash flow model, which estimates the fair value of the
securities using internal credit risk, interest rate and
prepayment risk models that incorporate managements best
estimate of current key assumptions such as default rates, loss
severity and prepayment rates. Principal and interest cash flows
are discounted using an observable discount rate for similar
instruments with adjustments that management believes a market
participant would consider in determining fair value for the
specific security. Others are valued using a net asset value
approach which considers the value of the underlying securities.
Underlying assets are valued using external pricing services,
where available, or matrix pricing based on the vintages and
ratings. Situations of illiquidity generally are triggered by
the markets perception of credit uncertainty regarding a
single company or a specific market sector. In these instances,
fair value is determined based on limited available market
information and other factors, principally from reviewing the
issuers financial statements and changes in credit ratings
made by one or more ratings agencies.
Derivative Assets
and Liabilities
The fair values of derivative assets and liabilities traded in
the
over-the-counter
(OTC) market are determined using quantitative models that
utilize multiple market inputs including interest rates, prices
and indices to generate continuous yield or pricing curves and
volatility factors to value the position. The majority of market
inputs are actively quoted and can be validated through external
sources, including brokers, market transactions and third-party
pricing services. Estimation risk is greater for derivative
asset and liability positions that are either option-based or
have longer maturity dates where observable market inputs are
less readily available or are unobservable, in which case,
quantitative-based extrapolations of rate, price or index
scenarios are used in determining fair values. The fair values
of derivative assets and liabilities include adjustments for
market liquidity, counterparty credit quality and other deal
specific factors, where appropriate. The Corporation
incorporates within its fair value measurements of OTC
derivatives the net credit differential between the counterparty
credit risk and the Corporations own credit risk. An
estimate of severity of loss is also used in the determination
of fair value, primarily based on market data.
Corporate Loans
and Loan Commitments
The fair values of loans and loan commitments are based on
market prices, where available, or discounted cash flow analyses
using market-based credit spreads of comparable debt instruments
or credit derivatives of the specific borrower or comparable
borrowers. Results of discounted cash flow calculations may be
adjusted, as appropriate, to reflect other market conditions or
the perceived credit risk of the borrower.
Mortgage
Servicing Rights
The fair values of MSRs are determined using models that rely on
estimates of prepayment rates, the resultant weighted-average
lives of the MSRs and
the OAS levels. For more information on MSRs, see
Note 25 Mortgage Servicing Rights.
Loans
Held-for-Sale
The fair values of LHFS are based on quoted market prices, where
available, or are determined by discounting estimated cash flows
using interest rates approximating the Corporations
current origination rates for similar loans adjusted to reflect
the inherent credit risk.
Other
Assets
The fair values of AFS marketable equity securities are
generally based on quoted market prices or market prices for
similar assets. However, non-public investments are initially
valued at the transaction price and subsequently adjusted when
evidence is available to support such adjustments.
Securities
Financing Agreements
The fair values of certain reverse repurchase agreements,
repurchase agreements and securities borrowed transactions are
determined using quantitative models, including discounted cash
flow models that require the use of multiple market inputs
including interest rates and spreads to generate continuous
yield or pricing curves, and volatility factors. The majority of
market inputs are actively quoted and can be validated through
external sources, including brokers, market transactions and
third-party pricing services.
Deposits,
Commercial Paper and Other Short-term Borrowings
The fair values of deposits, commercial paper and other
short-term borrowings are determined using quantitative models,
including discounted cash flow models that require the use of
multiple market inputs including interest rates and spreads to
generate continuous yield or pricing curves, and volatility
factors. The majority of market inputs are actively quoted and
can be validated through external sources, including brokers,
market transactions and third-party pricing services. The
Corporation considers the impact of its own credit spreads in
the valuation of these liabilities. The credit risk is
determined by reference to observable credit spreads in the
secondary cash market.
Long-term
Borrowings
The Corporation issues structured notes that have coupons or
repayment terms linked to the performance of debt or equity
securities, indices, currencies or commodities. The fair value
of structured notes is estimated using valuation models for the
combined derivative and debt portions of the notes accounted for
under the fair value option. These models incorporate observable
and, in some instances, unobservable inputs including security
prices, interest rate yield curves, option volatility, currency,
commodity or equity rates and correlations between these inputs.
The impact of the Corporations own credit spreads is also
included based on the Corporations observed secondary bond
market spreads.
Asset-backed
Secured Financings
The fair values of asset-backed secured financings are based on
external broker bids, where available, or are determined by
discounting estimated cash flows using interest rates
approximating the Corporations current origination rates
for similar loans adjusted to reflect the inherent credit risk.
Bank of America
2010 221
Recurring Fair
Value
Assets and liabilities carried at fair value on a recurring
basis at December 31, 2010 and 2009, including financial
instruments which the Corporation accounts for under the fair
value option, are summarized in the following tables.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
Fair Value Measurements
|
|
|
Netting
|
|
|
Assets/Liabilities
|
|
(Dollars in millions)
|
|
Level 1
(1)
|
|
|
Level 2
(1)
|
|
|
Level 3
|
|
|
Adjustments
(2)
|
|
|
at Fair Value
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds sold and securities borrowed or purchased under
agreements to resell
|
|
$
|
|
|
|
$
|
78,599
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
78,599
|
|
Trading account assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and agency securities
|
|
|
17,647
|
|
|
|
43,164
|
|
|
|
|
|
|
|
|
|
|
|
60,811
|
|
Corporate securities, trading loans and other
|
|
|
732
|
|
|
|
40,869
|
|
|
|
7,751
|
|
|
|
|
|
|
|
49,352
|
|
Equity securities
|
|
|
23,249
|
|
|
|
8,257
|
|
|
|
623
|
|
|
|
|
|
|
|
32,129
|
|
Non-U.S.
sovereign debt
|
|
|
24,934
|
|
|
|
8,346
|
|
|
|
243
|
|
|
|
|
|
|
|
33,523
|
|
Mortgage trading loans and asset-backed securities
|
|
|
|
|
|
|
11,948
|
|
|
|
6,908
|
|
|
|
|
|
|
|
18,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trading account assets
|
|
|
66,562
|
|
|
|
112,584
|
|
|
|
15,525
|
|
|
|
|
|
|
|
194,671
|
|
Derivative
assets (3)
|
|
|
2,627
|
|
|
|
1,516,244
|
|
|
|
18,773
|
|
|
|
(1,464,644
|
)
|
|
|
73,000
|
|
Available-for-sale
debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities and agency securities
|
|
|
46,003
|
|
|
|
3,102
|
|
|
|
|
|
|
|
|
|
|
|
49,105
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
|
|
|
|
|
191,213
|
|
|
|
4
|
|
|
|
|
|
|
|
191,217
|
|
Agency-collateralized mortgage obligations
|
|
|
|
|
|
|
37,017
|
|
|
|
|
|
|
|
|
|
|
|
37,017
|
|
Non-agency residential
|
|
|
|
|
|
|
21,649
|
|
|
|
1,468
|
|
|
|
|
|
|
|
23,117
|
|
Non-agency commercial
|
|
|
|
|
|
|
6,833
|
|
|
|
19
|
|
|
|
|
|
|
|
6,852
|
|
Non-U.S.
securities
|
|
|
1,440
|
|
|
|
2,696
|
|
|
|
3
|
|
|
|
|
|
|
|
4,139
|
|
Corporate/Agency bonds
|
|
|
|
|
|
|
5,154
|
|
|
|
137
|
|
|
|
|
|
|
|
5,291
|
|
Other taxable securities
|
|
|
20
|
|
|
|
2,354
|
|
|
|
13,018
|
|
|
|
|
|
|
|
15,392
|
|
Tax-exempt securities
|
|
|
|
|
|
|
4,273
|
|
|
|
1,224
|
|
|
|
|
|
|
|
5,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
debt securities
|
|
|
47,463
|
|
|
|
274,291
|
|
|
|
15,873
|
|
|
|
|
|
|
|
337,627
|
|
Loans and leases
|
|
|
|
|
|
|
|
|
|
|
3,321
|
|
|
|
|
|
|
|
3,321
|
|
Mortgage servicing rights
|
|
|
|
|
|
|
|
|
|
|
14,900
|
|
|
|
|
|
|
|
14,900
|
|
Loans
held-for-sale
|
|
|
|
|
|
|
21,802
|
|
|
|
4,140
|
|
|
|
|
|
|
|
25,942
|
|
Other assets
|
|
|
32,624
|
|
|
|
31,051
|
|
|
|
6,856
|
|
|
|
|
|
|
|
70,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
149,276
|
|
|
$
|
2,034,571
|
|
|
$
|
79,388
|
|
|
$
|
(1,464,644
|
)
|
|
$
|
798,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits in U.S. offices
|
|
$
|
|
|
|
$
|
2,732
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,732
|
|
Federal funds purchased and securities loaned or sold under
agreements to repurchase
|
|
|
|
|
|
|
37,424
|
|
|
|
|
|
|
|
|
|
|
|
37,424
|
|
Trading account liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and agency securities
|
|
|
23,357
|
|
|
|
5,983
|
|
|
|
|
|
|
|
|
|
|
|
29,340
|
|
Equity securities
|
|
|
14,568
|
|
|
|
914
|
|
|
|
|
|
|
|
|
|
|
|
15,482
|
|
Non-U.S.
sovereign debt
|
|
|
14,748
|
|
|
|
1,065
|
|
|
|
|
|
|
|
|
|
|
|
15,813
|
|
Corporate securities and other
|
|
|
224
|
|
|
|
11,119
|
|
|
|
7
|
|
|
|
|
|
|
|
11,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trading account liabilities
|
|
|
52,897
|
|
|
|
19,081
|
|
|
|
7
|
|
|
|
|
|
|
|
71,985
|
|
Derivative
liabilities (3)
|
|
|
1,799
|
|
|
|
1,492,963
|
|
|
|
11,028
|
|
|
|
(1,449,876
|
)
|
|
|
55,914
|
|
Commercial paper and other short-term borrowings
|
|
|
|
|
|
|
6,472
|
|
|
|
706
|
|
|
|
|
|
|
|
7,178
|
|
Accrued expenses and other liabilities
|
|
|
31,470
|
|
|
|
931
|
|
|
|
828
|
|
|
|
|
|
|
|
33,229
|
|
Long-term debt
|
|
|
|
|
|
|
47,998
|
|
|
|
2,986
|
|
|
|
|
|
|
|
50,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
86,166
|
|
|
$
|
1,607,601
|
|
|
$
|
15,555
|
|
|
$
|
(1,449,876
|
)
|
|
$
|
259,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Gross transfers between
Level 1 and Level 2 were approximately
$1.3 billion during the year ended December 31, 2010.
|
(2) |
|
Amounts represent the impact of
legally enforceable master netting agreements and also cash
collateral held or placed with the same counterparties.
|
(3) |
|
For further disaggregation of
derivative assets and liabilities, see
Note 4 Derivatives.
|
222 Bank
of America 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
Fair Value Measurements
|
|
|
|
|
|
|
|
|
|
|
|
|
Netting
|
|
|
Assets/Liabilities
|
|
(Dollars in millions)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Adjustments
(1)
|
|
|
at Fair Value
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds sold and securities borrowed or purchased under
agreements to resell
|
|
$
|
|
|
|
$
|
57,775
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
57,775
|
|
Trading account assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and agency securities
|
|
|
17,140
|
|
|
|
27,445
|
|
|
|
|
|
|
|
|
|
|
|
44,585
|
|
Corporate securities, trading loans and other
|
|
|
4,772
|
|
|
|
41,157
|
|
|
|
11,080
|
|
|
|
|
|
|
|
57,009
|
|
Equity securities
|
|
|
25,274
|
|
|
|
7,204
|
|
|
|
1,084
|
|
|
|
|
|
|
|
33,562
|
|
Non-U.S.
sovereign debt
|
|
|
19,827
|
|
|
|
7,173
|
|
|
|
1,143
|
|
|
|
|
|
|
|
28,143
|
|
Mortgage trading loans and asset-backed securities
|
|
|
|
|
|
|
11,137
|
|
|
|
7,770
|
|
|
|
|
|
|
|
18,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trading account assets
|
|
|
67,013
|
|
|
|
94,116
|
|
|
|
21,077
|
|
|
|
|
|
|
|
182,206
|
|
Derivative assets
|
|
|
3,326
|
|
|
|
1,467,855
|
|
|
|
23,048
|
|
|
|
(1,406,607
|
)
|
|
|
87,622
|
|
Available-for-sale
debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities and agency securities
|
|
|
19,571
|
|
|
|
3,454
|
|
|
|
|
|
|
|
|
|
|
|
23,025
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
|
|
|
|
|
166,246
|
|
|
|
|
|
|
|
|
|
|
|
166,246
|
|
Agency-collateralized mortgage obligations
|
|
|
|
|
|
|
25,781
|
|
|
|
|
|
|
|
|
|
|
|
25,781
|
|
Non-agency residential
|
|
|
|
|
|
|
27,887
|
|
|
|
7,216
|
|
|
|
|
|
|
|
35,103
|
|
Non-agency commercial
|
|
|
|
|
|
|
6,651
|
|
|
|
258
|
|
|
|
|
|
|
|
6,909
|
|
Non-U.S.
securities
|
|
|
660
|
|
|
|
2,769
|
|
|
|
468
|
|
|
|
|
|
|
|
3,897
|
|
Corporate/Agency bonds
|
|
|
|
|
|
|
5,265
|
|
|
|
927
|
|
|
|
|
|
|
|
6,192
|
|
Other taxable securities
|
|
|
676
|
|
|
|
14,721
|
|
|
|
9,854
|
|
|
|
|
|
|
|
25,251
|
|
Tax-exempt securities
|
|
|
|
|
|
|
7,574
|
|
|
|
1,623
|
|
|
|
|
|
|
|
9,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
debt securities
|
|
|
20,907
|
|
|
|
260,348
|
|
|
|
20,346
|
|
|
|
|
|
|
|
301,601
|
|
Loans and leases
|
|
|
|
|
|
|
|
|
|
|
4,936
|
|
|
|
|
|
|
|
4,936
|
|
Mortgage servicing rights
|
|
|
|
|
|
|
|
|
|
|
19,465
|
|
|
|
|
|
|
|
19,465
|
|
Loans
held-for-sale
|
|
|
|
|
|
|
25,853
|
|
|
|
6,942
|
|
|
|
|
|
|
|
32,795
|
|
Other assets
|
|
|
35,411
|
|
|
|
12,677
|
|
|
|
7,821
|
|
|
|
|
|
|
|
55,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
126,657
|
|
|
$
|
1,918,624
|
|
|
$
|
103,635
|
|
|
$
|
(1,406,607
|
)
|
|
$
|
742,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits in U.S. offices
|
|
$
|
|
|
|
$
|
1,663
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,663
|
|
Federal funds purchased and securities loaned or sold under
agreements to repurchase
|
|
|
|
|
|
|
37,325
|
|
|
|
|
|
|
|
|
|
|
|
37,325
|
|
Trading account liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and agency securities
|
|
|
22,339
|
|
|
|
4,180
|
|
|
|
|
|
|
|
|
|
|
|
26,519
|
|
Equity securities
|
|
|
17,300
|
|
|
|
1,107
|
|
|
|
|
|
|
|
|
|
|
|
18,407
|
|
Non-U.S.
sovereign debt
|
|
|
12,028
|
|
|
|
483
|
|
|
|
386
|
|
|
|
|
|
|
|
12,897
|
|
Corporate securities and other
|
|
|
282
|
|
|
|
7,317
|
|
|
|
10
|
|
|
|
|
|
|
|
7,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trading account liabilities
|
|
|
51,949
|
|
|
|
13,087
|
|
|
|
396
|
|
|
|
|
|
|
|
65,432
|
|
Derivative liabilities
|
|
|
2,925
|
|
|
|
1,443,494
|
|
|
|
15,185
|
|
|
|
(1,410,943
|
)
|
|
|
50,661
|
|
Commercial paper and other short-term borrowings
|
|
|
|
|
|
|
813
|
|
|
|
707
|
|
|
|
|
|
|
|
1,520
|
|
Accrued expenses and other liabilities
|
|
|
16,797
|
|
|
|
620
|
|
|
|
891
|
|
|
|
|
|
|
|
18,308
|
|
Long-term debt
|
|
|
|
|
|
|
40,791
|
|
|
|
4,660
|
|
|
|
|
|
|
|
45,451
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
71,671
|
|
|
$
|
1,537,793
|
|
|
$
|
21,839
|
|
|
$
|
(1,410,943
|
)
|
|
$
|
220,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts represent the impact of
legally enforceable master netting agreements and also cash
collateral held or placed with the same counterparties.
|
Bank of America
2010 223
The following tables present a reconciliation of all assets and
liabilities measured at fair value on a recurring basis using
significant unobservable inputs (Level 3) during 2010,
2009 and 2008, including net realized and unrealized gains
(losses) included in earnings and accumulated OCI.
Level 3
Fair Value Measurements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
Gains
|
|
|
Gains
|
|
|
Purchases,
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Balance
|
|
|
|
|
|
(Losses)
|
|
|
(Losses)
|
|
|
Issuances
|
|
|
Transfers
|
|
|
Transfers
|
|
|
Balance
|
|
|
|
January 1
|
|
|
Consolidation
|
|
|
Included in
|
|
|
Included in
|
|
|
and
|
|
|
into
|
|
|
out of
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2010 (1)
|
|
|
of VIEs
|
|
|
Earnings
|
|
|
OCI
|
|
|
Settlements
|
|
|
Level
3 (1)
|
|
|
Level
3 (1)
|
|
|
2010
(1)
|
|
Trading account assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate securities, trading loans and other
|
|
$
|
11,080
|
|
|
$
|
117
|
|
|
$
|
848
|
|
|
$
|
|
|
|
$
|
(4,852
|
)
|
|
$
|
2,599
|
|
|
$
|
(2,041
|
)
|
|
$
|
7,751
|
|
Equity securities
|
|
|
1,084
|
|
|
|
|
|
|
|
(81
|
)
|
|
|
|
|
|
|
(342
|
)
|
|
|
131
|
|
|
|
(169
|
)
|
|
|
623
|
|
Non-U.S.
sovereign debt
|
|
|
1,143
|
|
|
|
|
|
|
|
(138
|
)
|
|
|
|
|
|
|
(157
|
)
|
|
|
115
|
|
|
|
(720
|
)
|
|
|
243
|
|
Mortgage trading loans and asset-backed securities
|
|
|
7,770
|
|
|
|
175
|
|
|
|
653
|
|
|
|
|
|
|
|
(1,659
|
)
|
|
|
396
|
|
|
|
(427
|
)
|
|
|
6,908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trading account assets
|
|
|
21,077
|
|
|
|
292
|
|
|
|
1,282
|
|
|
|
|
|
|
|
(7,010
|
)
|
|
|
3,241
|
|
|
|
(3,357
|
)
|
|
|
15,525
|
|
Net derivative
assets (2)
|
|
|
7,863
|
|
|
|
|
|
|
|
8,118
|
|
|
|
|
|
|
|
(8,778
|
)
|
|
|
1,067
|
|
|
|
(525
|
)
|
|
|
7,745
|
|
Available-for-sale
debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
Non-agency MBS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
7,216
|
|
|
|
113
|
|
|
|
(646
|
)
|
|
|
(169
|
)
|
|
|
(6,767
|
)
|
|
|
1,909
|
|
|
|
(188
|
)
|
|
|
1,468
|
|
Commercial
|
|
|
258
|
|
|
|
|
|
|
|
(13
|
)
|
|
|
(31
|
)
|
|
|
(178
|
)
|
|
|
71
|
|
|
|
(88
|
)
|
|
|
19
|
|
Non-U.S.
securities
|
|
|
468
|
|
|
|
|
|
|
|
(125
|
)
|
|
|
(75
|
)
|
|
|
(321
|
)
|
|
|
56
|
|
|
|
|
|
|
|
3
|
|
Corporate/Agency bonds
|
|
|
927
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
47
|
|
|
|
(847
|
)
|
|
|
32
|
|
|
|
(19
|
)
|
|
|
137
|
|
Other taxable securities
|
|
|
9,854
|
|
|
|
5,603
|
|
|
|
(296
|
)
|
|
|
44
|
|
|
|
(3,263
|
)
|
|
|
1,119
|
|
|
|
(43
|
)
|
|
|
13,018
|
|
Tax-exempt securities
|
|
|
1,623
|
|
|
|
|
|
|
|
(25
|
)
|
|
|
(9
|
)
|
|
|
(574
|
)
|
|
|
316
|
|
|
|
(107
|
)
|
|
|
1,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
debt securities
|
|
|
20,346
|
|
|
|
5,716
|
|
|
|
(1,108
|
)
|
|
|
(193
|
)
|
|
|
(11,946
|
)
|
|
|
3,503
|
|
|
|
(445
|
)
|
|
|
15,873
|
|
Loans and
leases (3)
|
|
|
4,936
|
|
|
|
|
|
|
|
(89
|
)
|
|
|
|
|
|
|
(1,526
|
)
|
|
|
|
|
|
|
|
|
|
|
3,321
|
|
Mortgage servicing rights
|
|
|
19,465
|
|
|
|
|
|
|
|
(4,321
|
)
|
|
|
|
|
|
|
(244
|
)
|
|
|
|
|
|
|
|
|
|
|
14,900
|
|
Loans
held-for-sale (3)
|
|
|
6,942
|
|
|
|
|
|
|
|
482
|
|
|
|
|
|
|
|
(3,714
|
)
|
|
|
624
|
|
|
|
(194
|
)
|
|
|
4,140
|
|
Other
assets (4)
|
|
|
7,821
|
|
|
|
|
|
|
|
1,946
|
|
|
|
|
|
|
|
(2,612
|
)
|
|
|
|
|
|
|
(299
|
)
|
|
|
6,856
|
|
Trading account liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S.
sovereign debt
|
|
|
(386
|
)
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
(17
|
)
|
|
|
|
|
|
|
380
|
|
|
|
|
|
Corporate securities and other
|
|
|
(10
|
)
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
11
|
|
|
|
(52
|
)
|
|
|
49
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trading account liabilities
|
|
|
(396
|
)
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
(52
|
)
|
|
|
429
|
|
|
|
(7
|
)
|
Commercial paper and other short-term
borrowings (3)
|
|
|
(707
|
)
|
|
|
|
|
|
|
(95
|
)
|
|
|
|
|
|
|
96
|
|
|
|
|
|
|
|
|
|
|
|
(706
|
)
|
Accrued expenses and other
liabilities (3)
|
|
|
(891
|
)
|
|
|
|
|
|
|
146
|
|
|
|
|
|
|
|
(83
|
)
|
|
|
|
|
|
|
|
|
|
|
(828
|
)
|
Long-term
debt (3)
|
|
|
(4,660
|
)
|
|
|
|
|
|
|
697
|
|
|
|
|
|
|
|
1,074
|
|
|
|
(1,881
|
)
|
|
|
1,784
|
|
|
|
(2,986
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Assets (liabilities). For assets,
increase / (decrease) to Level 3 and for liabilities,
(increase) / decrease to Level 3.
|
(2) |
|
Net derivatives at
December 31, 2010 include derivative assets of
$18.8 billion and derivative liabilities of
$11.0 billion.
|
(3) |
|
Amounts represent items which are
accounted for under the fair value option.
|
(4) |
|
Other assets is primarily comprised
of AFS marketable equity securities.
|
During 2010, the more significant transfers into Level 3
included $3.2 billion of trading account assets,
$3.5 billion of AFS debt securities, $1.1 billion of
net derivative contracts and $1.9 billion of long-term
debt. Transfers into Level 3 for trading account assets
were driven by reduced price transparency as a result of lower
levels of trading activity for certain municipal auction rate
securities and corporate debt securities as well as a change in
valuation methodology for certain ABS to a discounted cash flow
model. Transfers into Level 3 for AFS debt securities were
due to an increase in the number of non-agency RMBS and other
taxable securities priced using a discounted cash flow model.
Transfers into Level 3 for net derivative contracts were
primarily related to a lack of price observability for certain
credit default and total return
swaps. Transfers in and transfers out of Level 3 for
long-term debt are primarily due to changes in the impact of
unobservable inputs on the value of certain equity-linked
structured notes.
During 2010, the more significant transfers out of Level 3
were $3.4 billion of trading account assets and
$1.8 billion of long-term debt. Transfers out of
Level 3 for trading account assets were driven by increased
price verification of certain mortgage-backed securities,
corporate debt and
non-U.S. government
and agency securities. Transfers out of Level 3 for
long-term debt were the result of a decrease in the significance
of unobservable pricing inputs for certain equity-linked
structured notes.
224 Bank
of America 2010
Level 3
Fair Value Measurements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
Gains
|
|
|
Gains
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
Merrill
|
|
|
(Losses)
|
|
|
(Losses)
|
|
|
Purchases,
|
|
|
Transfers
|
|
|
Balance
|
|
|
|
January 1
|
|
|
Lynch
|
|
|
Included in
|
|
|
Included in
|
|
|
Issuances and
|
|
|
into/(out of)
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2009 (1)
|
|
|
Acquisition
|
|
|
Earnings
|
|
|
OCI
|
|
|
Settlements
|
|
|
Level
3 (1)
|
|
|
2009 (1)
|
|
Trading account assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate securities, trading loans and other
|
|
$
|
4,540
|
|
|
$
|
7,012
|
|
|
$
|
370
|
|
|
$
|
|
|
|
$
|
(2,015
|
)
|
|
$
|
1,173
|
|
|
$
|
11,080
|
|
Equity securities
|
|
|
546
|
|
|
|
3,848
|
|
|
|
(396
|
)
|
|
|
|
|
|
|
(2,425
|
)
|
|
|
(489
|
)
|
|
|
1,084
|
|
Non-U.S.
sovereign debt
|
|
|
|
|
|
|
30
|
|
|
|
136
|
|
|
|
|
|
|
|
167
|
|
|
|
810
|
|
|
|
1,143
|
|
Mortgage trading loans and asset-backed securities
|
|
|
1,647
|
|
|
|
7,294
|
|
|
|
(262
|
)
|
|
|
|
|
|
|
933
|
|
|
|
(1,842
|
)
|
|
|
7,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trading account assets
|
|
|
6,733
|
|
|
|
18,184
|
|
|
|
(152
|
)
|
|
|
|
|
|
|
(3,340
|
)
|
|
|
(348
|
)
|
|
|
21,077
|
|
Net derivative
assets (2)
|
|
|
2,270
|
|
|
|
2,307
|
|
|
|
5,526
|
|
|
|
|
|
|
|
(7,906
|
)
|
|
|
5,666
|
|
|
|
7,863
|
|
Available-for-sale
debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-agency MBS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
5,439
|
|
|
|
2,509
|
|
|
|
(1,159
|
)
|
|
|
2,738
|
|
|
|
(4,187
|
)
|
|
|
1,876
|
|
|
|
7,216
|
|
Commercial
|
|
|
657
|
|
|
|
|
|
|
|
(185
|
)
|
|
|
(7
|
)
|
|
|
(155
|
)
|
|
|
(52
|
)
|
|
|
258
|
|
Non-U.S.
securities
|
|
|
1,247
|
|
|
|
|
|
|
|
(79
|
)
|
|
|
(226
|
)
|
|
|
(73
|
)
|
|
|
(401
|
)
|
|
|
468
|
|
Corporate/Agency bonds
|
|
|
1,598
|
|
|
|
|
|
|
|
(22
|
)
|
|
|
127
|
|
|
|
324
|
|
|
|
(1,100
|
)
|
|
|
927
|
|
Other taxable securities
|
|
|
9,599
|
|
|
|
|
|
|
|
(75
|
)
|
|
|
669
|
|
|
|
815
|
|
|
|
(1,154
|
)
|
|
|
9,854
|
|
Tax-exempt securities
|
|
|
162
|
|
|
|
|
|
|
|
2
|
|
|
|
26
|
|
|
|
788
|
|
|
|
645
|
|
|
|
1,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
debt securities
|
|
|
18,702
|
|
|
|
2,509
|
|
|
|
(1,518
|
)
|
|
|
3,327
|
|
|
|
(2,488
|
)
|
|
|
(186
|
)
|
|
|
20,346
|
|
Loans and
leases (3)
|
|
|
5,413
|
|
|
|
2,452
|
|
|
|
515
|
|
|
|
|
|
|
|
(3,718
|
)
|
|
|
274
|
|
|
|
4,936
|
|
Mortgage servicing rights
|
|
|
12,733
|
|
|
|
209
|
|
|
|
5,286
|
|
|
|
|
|
|
|
1,237
|
|
|
|
|
|
|
|
19,465
|
|
Loans
held-for-sale (3)
|
|
|
3,382
|
|
|
|
3,872
|
|
|
|
678
|
|
|
|
|
|
|
|
(1,048
|
)
|
|
|
58
|
|
|
|
6,942
|
|
Other
assets (4)
|
|
|
4,157
|
|
|
|
2,696
|
|
|
|
1,273
|
|
|
|
|
|
|
|
(308
|
)
|
|
|
3
|
|
|
|
7,821
|
|
Trading account liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S.
sovereign debt
|
|
|
|
|
|
|
|
|
|
|
(38
|
)
|
|
|
|
|
|
|
|
|
|
|
(348
|
)
|
|
|
(386
|
)
|
Corporate securities and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
(14
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trading account liabilities
|
|
|
|
|
|
|
|
|
|
|
(38
|
)
|
|
|
|
|
|
|
4
|
|
|
|
(362
|
)
|
|
|
(396
|
)
|
Commercial paper and other short-term
borrowings (3)
|
|
|
(816
|
)
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
120
|
|
|
|
|
|
|
|
(707
|
)
|
Accrued expenses and other
liabilities (3)
|
|
|
(1,124
|
)
|
|
|
(1,337
|
)
|
|
|
1,396
|
|
|
|
|
|
|
|
174
|
|
|
|
|
|
|
|
(891
|
)
|
Long-term
debt (3)
|
|
|
|
|
|
|
(7,481
|
)
|
|
|
(2,310
|
)
|
|
|
|
|
|
|
830
|
|
|
|
4,301
|
|
|
|
(4,660
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Assets (liabilities). For assets,
increase / (decrease) to Level 3 and for liabilities,
(increase) / decrease to Level 3.
|
(2) |
|
Net derivatives at
December 31, 2009 include derivative assets of
$23.0 billion and derivative liabilities of
$15.2 billion.
|
(3) |
|
Amounts represent items which are
accounted for under the fair value option.
|
(4) |
|
Other assets is primarily comprised
of AFS marketable equity securities.
|
Level 3
Fair Value Measurements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
Gains
|
|
|
Gains
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
|
|
|
(Losses)
|
|
|
(Losses)
|
|
|
Purchases,
|
|
|
Transfers
|
|
|
Balance
|
|
|
|
January 1
|
|
|
Countrywide
|
|
|
Included in
|
|
|
Included in
|
|
|
Issuances and
|
|
|
into/(out of)
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2008 (1)
|
|
|
Acquisition
|
|
|
Earnings
|
|
|
OCI
|
|
|
Settlements
|
|
|
Level
3 (1)
|
|
|
2008 (1)
|
|
Trading account assets
|
|
$
|
4,027
|
|
|
$
|
|
|
|
$
|
(3,222
|
)
|
|
$
|
|
|
|
$
|
(1,233
|
)
|
|
$
|
7,161
|
|
|
$
|
6,733
|
|
Net derivative
assets (2)
|
|
|
(1,203
|
)
|
|
|
(185
|
)
|
|
|
2,531
|
|
|
|
|
|
|
|
1,380
|
|
|
|
(253
|
)
|
|
|
2,270
|
|
Available-for-sale
debt securities
|
|
|
5,507
|
|
|
|
528
|
|
|
|
(2,509
|
)
|
|
|
(1,688
|
)
|
|
|
2,754
|
|
|
|
14,110
|
|
|
|
18,702
|
|
Loans and
leases (3)
|
|
|
4,590
|
|
|
|
|
|
|
|
(780
|
)
|
|
|
|
|
|
|
1,603
|
|
|
|
|
|
|
|
5,413
|
|
Mortgage servicing rights
|
|
|
3,053
|
|
|
|
17,188
|
|
|
|
(7,115
|
)
|
|
|
|
|
|
|
(393
|
)
|
|
|
|
|
|
|
12,733
|
|
Loans
held-for-sale (3)
|
|
|
1,334
|
|
|
|
1,425
|
|
|
|
(1,047
|
)
|
|
|
|
|
|
|
(542
|
)
|
|
|
2,212
|
|
|
|
3,382
|
|
Other
assets (4)
|
|
|
3,987
|
|
|
|
1,407
|
|
|
|
175
|
|
|
|
|
|
|
|
(1,372
|
)
|
|
|
(40
|
)
|
|
|
4,157
|
|
Accrued expenses and other
liabilities (3)
|
|
|
(660
|
)
|
|
|
(1,212
|
)
|
|
|
(169
|
)
|
|
|
|
|
|
|
101
|
|
|
|
|
|
|
|
(1,940
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Assets (liabilities). For assets,
increase / (decrease) to Level 3 and for liabilities,
(increase) / decrease to Level 3.
|
(2) |
|
Net derivatives at
December 31, 2008 include derivative assets of
$8.3 billion and derivative liabilities of
$6.0 billion.
|
(3) |
|
Amounts represent items which are
accounted for under the fair value option.
|
(4) |
|
Other assets is primarily comprised
of AFS marketable equity securities.
|
Bank of America
2010 225
The following tables summarize gains and losses due to changes
in fair value, including both realized and unrealized gains
(losses), recorded in earnings for Level 3 assets and
liabilities during 2010, 2009 and 2008. These amounts include
gains (losses) on loans, LHFS, loan commitments and structured
notes which are accounted for under the fair value option.
Level 3
Total Realized and Unrealized Gains (Losses) Included in
Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
Equity
|
|
|
Trading
|
|
|
Mortgage
|
|
|
|
|
|
|
|
|
|
Investment
|
|
|
Account
|
|
|
Banking
|
|
|
Other
|
|
|
|
|
|
|
Income
|
|
|
Profits
|
|
|
Income
|
|
|
Income
|
|
|
|
|
(Dollars in millions)
|
|
(Loss)
|
|
|
(Losses)
|
|
|
(Loss)(1)
|
|
|
(Loss)
|
|
|
Total
|
|
Trading account assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate securities, trading loans and other
|
|
$
|
|
|
|
$
|
848
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
848
|
|
Equity securities
|
|
|
|
|
|
|
(81
|
)
|
|
|
|
|
|
|
|
|
|
|
(81
|
)
|
Non-U.S.
sovereign debt
|
|
|
|
|
|
|
(138
|
)
|
|
|
|
|
|
|
|
|
|
|
(138
|
)
|
Mortgage trading loans and asset-backed securities
|
|
|
|
|
|
|
653
|
|
|
|
|
|
|
|
|
|
|
|
653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trading account assets
|
|
|
|
|
|
|
1,282
|
|
|
|
|
|
|
|
|
|
|
|
1,282
|
|
Net derivative assets
|
|
|
|
|
|
|
(1,257
|
)
|
|
|
9,375
|
|
|
|
|
|
|
|
8,118
|
|
Available-for-sale
debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-agency MBS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
(16
|
)
|
|
|
(630
|
)
|
|
|
(646
|
)
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13
|
)
|
|
|
(13
|
)
|
Non-U.S.
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(125
|
)
|
|
|
(125
|
)
|
Corporate/Agency bonds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
(3
|
)
|
Other taxable securities
|
|
|
|
|
|
|
(295
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
(296
|
)
|
Tax-exempt securities
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
(48
|
)
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
debt securities
|
|
|
|
|
|
|
(272
|
)
|
|
|
(16
|
)
|
|
|
(820
|
)
|
|
|
(1,108
|
)
|
Loans and
leases (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(89
|
)
|
|
|
(89
|
)
|
Mortgage servicing rights
|
|
|
|
|
|
|
|
|
|
|
(4,321
|
)
|
|
|
|
|
|
|
(4,321
|
)
|
Loans
held-for-sale (2)
|
|
|
|
|
|
|
|
|
|
|
72
|
|
|
|
410
|
|
|
|
482
|
|
Other assets
|
|
|
1,967
|
|
|
|
|
|
|
|
(21
|
)
|
|
|
|
|
|
|
1,946
|
|
Trading account liabilities
Non-U.S.
sovereign debt
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
Commercial paper and other short-term
borrowings (2)
|
|
|
|
|
|
|
|
|
|
|
(95
|
)
|
|
|
|
|
|
|
(95
|
)
|
Accrued expenses and other
liabilities (2)
|
|
|
|
|
|
|
(26
|
)
|
|
|
|
|
|
|
172
|
|
|
|
146
|
|
Long-term
debt (2)
|
|
|
|
|
|
|
677
|
|
|
|
|
|
|
|
20
|
|
|
|
697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,967
|
|
|
$
|
422
|
|
|
$
|
4,994
|
|
|
$
|
(307
|
)
|
|
$
|
7,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Mortgage banking income does not
reflect the impact of Level 1 and Level 2 hedges on
MSRs.
|
(2) |
|
Amounts represent items which are
accounted for under the fair value option.
|
226 Bank
of America 2010
Level 3
Total Realized and Unrealized Gains (Losses) Included in
Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
Equity
|
|
|
Trading
|
|
|
Mortgage
|
|
|
|
|
|
|
|
|
|
Investment
|
|
|
Account
|
|
|
Banking
|
|
|
Other
|
|
|
|
|
|
|
Income
|
|
|
Profits
|
|
|
Income
|
|
|
Income
|
|
|
|
|
(Dollars in millions)
|
|
(Loss)
|
|
|
(Losses)
|
|
|
(Loss) (1)
|
|
|
(Loss)
|
|
|
Total
|
|
Trading account assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate securities, trading loans and other
|
|
$
|
|
|
|
$
|
370
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
370
|
|
Equity securities
|
|
|
|
|
|
|
(396
|
)
|
|
|
|
|
|
|
|
|
|
|
(396
|
)
|
Non-U.S.
sovereign debt
|
|
|
|
|
|
|
136
|
|
|
|
|
|
|
|
|
|
|
|
136
|
|
Mortgage trading loans and asset-backed securities
|
|
|
|
|
|
|
(262
|
)
|
|
|
|
|
|
|
|
|
|
|
(262
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trading account assets
|
|
|
|
|
|
|
(152
|
)
|
|
|
|
|
|
|
|
|
|
|
(152
|
)
|
Net derivative assets
|
|
|
|
|
|
|
(2,526
|
)
|
|
|
8,052
|
|
|
|
|
|
|
|
5,526
|
|
Available-for-sale
debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-agency MBS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
(20
|
)
|
|
|
(1,139
|
)
|
|
|
(1,159
|
)
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(185
|
)
|
|
|
(185
|
)
|
Non-U.S.
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(79
|
)
|
|
|
(79
|
)
|
Corporate/Agency bonds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22
|
)
|
|
|
(22
|
)
|
Other taxable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(73
|
)
|
|
|
(73
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
debt securities
|
|
|
|
|
|
|
|
|
|
|
(20
|
)
|
|
|
(1,498
|
)
|
|
|
(1,518
|
)
|
Loans and
leases (2)
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
526
|
|
|
|
515
|
|
Mortgage servicing rights
|
|
|
|
|
|
|
|
|
|
|
5,286
|
|
|
|
|
|
|
|
5,286
|
|
Loans
held-for-sale (2)
|
|
|
|
|
|
|
(216
|
)
|
|
|
306
|
|
|
|
588
|
|
|
|
678
|
|
Other assets
|
|
|
968
|
|
|
|
|
|
|
|
244
|
|
|
|
61
|
|
|
|
1,273
|
|
Trading account liabilities
Non-U.S.
sovereign debt
|
|
|
|
|
|
|
(38
|
)
|
|
|
|
|
|
|
|
|
|
|
(38
|
)
|
Commercial paper and other short-term
borrowings (2)
|
|
|
|
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
(11
|
)
|
Accrued expenses and other
liabilities (2)
|
|
|
|
|
|
|
36
|
|
|
|
|
|
|
|
1,360
|
|
|
|
1,396
|
|
Long-term
debt (2)
|
|
|
|
|
|
|
(2,083
|
)
|
|
|
|
|
|
|
(227
|
)
|
|
|
(2,310
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
968
|
|
|
$
|
(4,990
|
)
|
|
$
|
13,857
|
|
|
$
|
810
|
|
|
$
|
10,645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
Trading account assets
|
|
$
|
|
|
|
$
|
(3,044
|
)
|
|
$
|
(178
|
)
|
|
$
|
|
|
|
$
|
(3,222
|
)
|
Net derivative assets
|
|
|
|
|
|
|
103
|
|
|
|
2,428
|
|
|
|
|
|
|
|
2,531
|
|
Available-for-sale
debt securities
|
|
|
|
|
|
|
|
|
|
|
(74
|
)
|
|
|
(2,435
|
)
|
|
|
(2,509
|
)
|
Loans and
leases (2)
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
(775
|
)
|
|
|
(780
|
)
|
Mortgage servicing rights
|
|
|
|
|
|
|
|
|
|
|
(7,115
|
)
|
|
|
|
|
|
|
(7,115
|
)
|
Loans
held-for-sale (2)
|
|
|
|
|
|
|
(195
|
)
|
|
|
(848
|
)
|
|
|
(4
|
)
|
|
|
(1,047
|
)
|
Other assets
|
|
|
165
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
175
|
|
Accrued expenses and other
liabilities (2)
|
|
|
|
|
|
|
9
|
|
|
|
295
|
|
|
|
(473
|
)
|
|
|
(169
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
165
|
|
|
$
|
(3,132
|
)
|
|
$
|
(5,492
|
)
|
|
$
|
(3,677
|
)
|
|
$
|
(12,136
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Mortgage banking income does not
reflect the impact of Level 1 and Level 2 hedges on
MSRs.
|
(2) |
|
Amounts represent items which are
accounted for under the fair value option.
|
Bank of America
2010 227
The following tables summarize changes in unrealized gains
(losses) recorded in earnings during 2010, 2009 and 2008 for
Level 3 assets and liabilities that were still held at
December 31, 2010, 2009 and 2008. These amounts include
changes in fair value on loans, LHFS, loan commitments and
structured notes which are accounted for under the fair value
option.
Level 3
Changes in Unrealized Gains (Losses) Relating to Assets and
Liabilities Still Held at Reporting Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
Equity
|
|
|
Trading
|
|
|
Mortgage
|
|
|
|
|
|
|
|
|
|
Investment
|
|
|
Account
|
|
|
Banking
|
|
|
Other
|
|
|
|
|
|
|
Income
|
|
|
Profits
|
|
|
Income
|
|
|
Income
|
|
|
|
|
(Dollars in millions)
|
|
(Loss)
|
|
|
(Losses)
|
|
|
(Loss) (1)
|
|
|
(Loss)
|
|
|
Total
|
|
Trading account assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate securities, trading loans and other
|
|
$
|
|
|
|
$
|
289
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
289
|
|
Equity securities
|
|
|
|
|
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
|
(50
|
)
|
Non-U.S.
sovereign debt
|
|
|
|
|
|
|
(144
|
)
|
|
|
|
|
|
|
|
|
|
|
(144
|
)
|
Mortgage trading loans and asset-backed securities
|
|
|
|
|
|
|
227
|
|
|
|
|
|
|
|
|
|
|
|
227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trading account assets
|
|
|
|
|
|
|
322
|
|
|
|
|
|
|
|
|
|
|
|
322
|
|
Net derivative assets
|
|
|
|
|
|
|
(945
|
)
|
|
|
676
|
|
|
|
|
|
|
|
(269
|
)
|
Available-for-sale
debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-agency MBS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
(162
|
)
|
|
|
(164
|
)
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S.
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other taxable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
debt securities
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
(162
|
)
|
|
|
(164
|
)
|
Loans and
leases (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(142
|
)
|
|
|
(142
|
)
|
Mortgage servicing rights
|
|
|
|
|
|
|
|
|
|
|
(5,740
|
)
|
|
|
|
|
|
|
(5,740
|
)
|
Loans
held-for-sale (2)
|
|
|
|
|
|
|
10
|
|
|
|
(9
|
)
|
|
|
258
|
|
|
|
259
|
|
Other assets
|
|
|
50
|
|
|
|
|
|
|
|
(22
|
)
|
|
|
|
|
|
|
28
|
|
Trading account liabilities
Non-U.S.
sovereign debt
|
|
|
|
|
|
|
52
|
|
|
|
|
|
|
|
|
|
|
|
52
|
|
Commercial paper and other short-term
borrowings (2)
|
|
|
|
|
|
|
|
|
|
|
(46
|
)
|
|
|
|
|
|
|
(46
|
)
|
Accrued expenses and other
liabilities (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(182
|
)
|
|
|
(182
|
)
|
Long-term
debt (2)
|
|
|
|
|
|
|
585
|
|
|
|
|
|
|
|
43
|
|
|
|
628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
50
|
|
|
$
|
24
|
|
|
$
|
(5,143
|
)
|
|
$
|
(185
|
)
|
|
$
|
(5,254
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Mortgage banking income does not
reflect the impact of Level 1 and Level 2 hedges on
MSRs.
|
(2) |
|
Amounts represent items which are
accounted for under the fair value option.
|
228 Bank
of America 2010
Level 3
Changes in Unrealized Gains (Losses) Relating to Assets and
Liabilities Still Held at Reporting Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
Equity
|
|
|
Trading
|
|
|
Mortgage
|
|
|
|
|
|
|
|
|
|
Investment
|
|
|
Account
|
|
|
Banking
|
|
|
Other
|
|
|
|
|
|
|
Income
|
|
|
Profits
|
|
|
Income
|
|
|
Income
|
|
|
|
|
(Dollars in millions)
|
|
(Loss)
|
|
|
(Losses)
|
|
|
(Loss) (1)
|
|
|
(Loss)
|
|
|
Total
|
|
Trading account assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate securities, trading loans and other
|
|
$
|
|
|
|
$
|
89
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
89
|
|
Equity securities
|
|
|
|
|
|
|
(328
|
)
|
|
|
|
|
|
|
|
|
|
|
(328
|
)
|
Non-U.S.
sovereign debt
|
|
|
|
|
|
|
137
|
|
|
|
|
|
|
|
|
|
|
|
137
|
|
Mortgage trading loans and asset-backed securities
|
|
|
|
|
|
|
(332
|
)
|
|
|
|
|
|
|
|
|
|
|
(332
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trading account assets
|
|
|
|
|
|
|
(434
|
)
|
|
|
|
|
|
|
|
|
|
|
(434
|
)
|
Net derivative assets
|
|
|
|
|
|
|
(2,761
|
)
|
|
|
348
|
|
|
|
|
|
|
|
(2,413
|
)
|
Available-for-sale
debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-agency MBS Residential
|
|
|
|
|
|
|
|
|
|
|
(20
|
)
|
|
|
(659
|
)
|
|
|
(679
|
)
|
Other taxable securities
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
(3
|
)
|
|
|
(14
|
)
|
Tax-exempt securities
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
(8
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
debt securities
|
|
|
|
|
|
|
(13
|
)
|
|
|
(20
|
)
|
|
|
(670
|
)
|
|
|
(703
|
)
|
Loans and
leases (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
210
|
|
|
|
210
|
|
Mortgage servicing rights
|
|
|
|
|
|
|
|
|
|
|
4,100
|
|
|
|
|
|
|
|
4,100
|
|
Loans
held-for-sale (2)
|
|
|
|
|
|
|
(195
|
)
|
|
|
164
|
|
|
|
695
|
|
|
|
664
|
|
Other assets
|
|
|
(177
|
)
|
|
|
|
|
|
|
6
|
|
|
|
1,061
|
|
|
|
890
|
|
Trading account liabilities
Non-U.S.
sovereign debt
|
|
|
|
|
|
|
(38
|
)
|
|
|
|
|
|
|
|
|
|
|
(38
|
)
|
Commercial paper and other short-term
borrowings (2)
|
|
|
|
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
(11
|
)
|
Accrued expenses and other
liabilities (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,740
|
|
|
|
1,740
|
|
Long-term
debt (2)
|
|
|
|
|
|
|
(2,303
|
)
|
|
|
|
|
|
|
(225
|
)
|
|
|
(2,528
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(177
|
)
|
|
$
|
(5,744
|
)
|
|
$
|
4,587
|
|
|
$
|
2,811
|
|
|
$
|
1,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
Trading account assets
|
|
$
|
|
|
|
$
|
(2,144
|
)
|
|
$
|
(178
|
)
|
|
$
|
|
|
|
$
|
(2,322
|
)
|
Net derivative assets
|
|
|
|
|
|
|
2,095
|
|
|
|
1,154
|
|
|
|
|
|
|
|
3,249
|
|
Available-for-sale
debt securities
|
|
|
|
|
|
|
|
|
|
|
(74
|
)
|
|
|
(1,840
|
)
|
|
|
(1,914
|
)
|
Loans and
leases (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,003
|
)
|
|
|
(1,003
|
)
|
Mortgage servicing rights
|
|
|
|
|
|
|
|
|
|
|
(7,378
|
)
|
|
|
|
|
|
|
(7,378
|
)
|
Loans
held-for-sale (2)
|
|
|
|
|
|
|
(154
|
)
|
|
|
(423
|
)
|
|
|
(4
|
)
|
|
|
(581
|
)
|
Other assets
|
|
|
(524
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(524
|
)
|
Accrued expenses and other
liabilities (2)
|
|
|
|
|
|
|
|
|
|
|
292
|
|
|
|
(880
|
)
|
|
|
(588
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(524
|
)
|
|
$
|
(203
|
)
|
|
$
|
(6,607
|
)
|
|
$
|
(3,727
|
)
|
|
$
|
(11,061
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Mortgage banking income does not
reflect the impact of Level 1 and Level 2 hedges on
MSRs.
|
(2) |
|
Amounts represent items which are
accounted for under the fair value option.
|
Bank of America
2010 229
Nonrecurring Fair
Value
Certain assets and liabilities are measured at fair value on a
nonrecurring basis and are not included in the previous tables
in this Note. These assets and liabilities primarily include
LHFS, unfunded loan commitments
held-for-sale,
goodwill and foreclosed properties. During 2010, the Corporation
recorded goodwill impairment charges associated with the
Global Card Services and Home Loans &
Insurance business segments of $10.4 billion and
$2.0 billion. The fair value of the goodwill balance for
Global Card Services and Home Loans &
Insurance was $11.9 billion and $2.8 billion at
December 31, 2010. See Note 10 Goodwill
and Intangible Assets for additional information on the
goodwill impairment charges. The amounts below represent only
balances measured at fair value during the year and still held
as of the reporting date.
Assets and
Liabilities Measured at Fair Value on a Nonrecurring
Basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
Gains (Losses)
|
|
(Dollars in millions)
|
|
Level 2
|
|
|
Level 3
|
|
|
in 2010
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
held-for-sale
|
|
$
|
931
|
|
|
$
|
6,408
|
|
|
$
|
174
|
|
Loans and
leases (1)
|
|
|
23
|
|
|
|
11,917
|
|
|
|
(6,074
|
)
|
Foreclosed
properties (2)
|
|
|
10
|
|
|
|
2,125
|
|
|
|
(240
|
)
|
Other assets
|
|
|
8
|
|
|
|
95
|
|
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
Gains (Losses)
|
|
(Dollars in millions)
|
|
Level 2
|
|
|
Level 3
|
|
|
in 2009
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
held-for-sale
|
|
$
|
2,320
|
|
|
$
|
7,248
|
|
|
$
|
(1,288
|
)
|
Loans and
leases (1)
|
|
|
|
|
|
|
8,602
|
|
|
|
(5,596
|
)
|
Foreclosed
properties (2)
|
|
|
|
|
|
|
644
|
|
|
|
(322
|
)
|
Other assets
|
|
|
31
|
|
|
|
322
|
|
|
|
(268
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Gains (losses) represent
charge-offs associated with real estate-secured loans that
exceed 180 days past due.
|
(2) |
|
Amounts are included in other
assets on the Consolidated Balance Sheet and represent fair
value and related losses on foreclosed properties that were
written down subsequent to their initial classification as
foreclosed properties.
|
NOTE 23 Fair
Value Option
Corporate Loans
and Loan Commitments
The Corporation elected to account for certain large corporate
loans and loan commitments which exceeded the Corporations
single name credit risk concentration guidelines under the fair
value option. Lending commitments, both funded and unfunded, are
actively managed and monitored and, as appropriate, credit risk
for these lending relationships may be mitigated through the use
of credit derivatives, with the Corporations public side
credit view and market perspectives determining the size and
timing of the hedging activity. These credit derivatives do not
meet the requirements for derivatives designated as accounting
hedges and therefore are carried at fair value with changes in
fair value recorded in other income (loss). Electing the fair
value option allows the Corporation to carry these loans and
loan commitments at fair value, which is more consistent with
managements view of the underlying economics and the
manner in which they are managed. In addition, accounting for
these loans and loan commitments at fair value reduces the
accounting asymmetry that would otherwise result from carrying
the loans at historical cost and the credit derivatives at fair
value.
Loans
Held-for-Sale
The Corporation elected to account for certain LHFS at fair
value. Electing the fair value option allows a better offset of
the changes in fair values of the
loans and the derivative instruments used to economically hedge
them. The Corporation has not elected to account for other LHFS
under the fair value option primarily because these loans are
floating-rate loans that are not economically hedged using
derivative instruments. Residential mortgage LHFS, commercial
mortgage LHFS and other LHFS are accounted for under the fair
value option with interest income on these LHFS recorded in
other interest income. The changes in fair value are largely
offset by hedging activities. An immaterial portion of these
amounts was attributable to changes in instrument-specific
credit risk.
Other
Assets
The Corporation elected to account for certain other assets
under the fair value option including private equity investments.
Securities
Financing Agreements
The Corporation elected to account for certain securities
financing agreements, including resale and repurchase
agreements, under the fair value option based on the tenor of
the agreements, which reflects the magnitude of the interest
rate risk. The majority of securities financing agreements
collateralized by U.S. government securities were excluded
from the fair value option election as these contracts are
generally short-dated and therefore the interest rate risk is
not significant.
Long-term
Deposits
The Corporation elected to account for certain long-term
fixed-rate and rate-linked deposits, which are economically
hedged with derivatives, under the fair value option. Election
of the fair value option allows the Corporation to reduce the
accounting volatility that would otherwise result from the
accounting asymmetry created by accounting for the financial
instruments at historical cost and the economic hedges at fair
value. The Corporation did not elect to carry other long-term
deposits at fair value because they were not economically hedged
using derivatives.
Commercial Paper
and Other Short-term Borrowings
The Corporation elected to account for certain commercial paper
and other short-term borrowings under the fair value option.
This debt is risk-managed on a fair value basis.
Long-term
Debt
The Corporation elected to account for certain long-term debt,
primarily structured notes that were acquired as part of the
Merrill Lynch acquisition, under the fair value option. This
long-term debt is risk-managed on a fair value basis. Election
of the fair value option allows the Corporation to reduce the
accounting volatility that would otherwise result from the
accounting asymmetry created by accounting for these financial
instruments at historical cost and the related economic hedges
at fair value.
Asset-backed
Secured Financings
The Corporation elected to account for certain asset-backed
secured financings that were acquired as part of the Countrywide
acquisition, which are classified in commercial paper and other
short-term borrowings, under the fair value option. Election of
the fair value option allows the Corporation to reduce the
accounting volatility that would otherwise result from the
accounting asymmetry created by accounting for the asset-backed
secured financings at historical cost and the corresponding
mortgage LHFS securing these financings at fair value.
230 Bank
of America 2010
The table below provides information about the fair value
carrying amount and the contractual principal outstanding of
assets or liabilities accounted for under the fair value option
at December 31, 2010 and 2009.
Fair Value
Option Elections
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
|
Fair Value
|
|
|
Contractual
|
|
|
Amount
|
|
|
Fair Value
|
|
|
Contractual
|
|
|
Amount
|
|
|
|
Carrying
|
|
|
Principal
|
|
|
Less Unpaid
|
|
|
Carrying
|
|
|
Principal
|
|
|
Less Unpaid
|
|
(Dollars in millions)
|
|
Amount
|
|
|
Outstanding
|
|
|
Principal
|
|
|
Amount
|
|
|
Outstanding
|
|
|
Principal
|
|
Corporate loans and loan
commitments (1)
|
|
$
|
4,135
|
|
|
$
|
3,638
|
|
|
$
|
497
|
|
|
$
|
5,865
|
|
|
$
|
5,460
|
|
|
$
|
405
|
|
Loans
held-for-sale
|
|
|
25,942
|
|
|
|
28,370
|
|
|
|
(2,428
|
)
|
|
|
32,795
|
|
|
|
36,522
|
|
|
|
(3,727
|
)
|
Securities financing agreements
|
|
|
116,023
|
|
|
|
115,053
|
|
|
|
970
|
|
|
|
95,100
|
|
|
|
94,641
|
|
|
|
459
|
|
Other assets
|
|
|
310
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
253
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Long-term deposits
|
|
|
2,732
|
|
|
|
2,692
|
|
|
|
40
|
|
|
|
1,663
|
|
|
|
1,605
|
|
|
|
58
|
|
Asset-backed secured financings
|
|
|
706
|
|
|
|
1,356
|
|
|
|
(650
|
)
|
|
|
707
|
|
|
|
1,451
|
|
|
|
(744
|
)
|
Commercial paper and other short-term borrowings
|
|
|
6,472
|
|
|
|
6,472
|
|
|
|
|
|
|
|
813
|
|
|
|
813
|
|
|
|
|
|
Long-term debt
|
|
|
50,984
|
|
|
|
54,656
|
|
|
|
(3,672
|
)
|
|
|
45,451
|
|
|
|
48,560
|
|
|
|
(3,109
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes unfunded loan commitments
with an aggregate fair value of $866 million and
$950 million and aggregated committed exposure of
$27.3 billion and $27.0 billion at December 31,
2010 and 2009, respectively.
|
n/a = not applicable
The tables below provide information about where changes in the
fair value of assets or liabilities accounted for under the fair
value option are included in the Consolidated Statement of
Income for 2010, 2009 and 2008.
Gains (Losses)
Relating to Assets and Liabilities Accounted for Under the Fair
Value Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
Trading
|
|
|
Mortgage
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Account
|
|
|
Banking
|
|
|
Investment
|
|
|
Other
|
|
|
|
|
|
|
Profits
|
|
|
Income
|
|
|
Income
|
|
|
Income
|
|
|
|
|
(Dollars in millions)
|
|
(Losses)
|
|
|
(Loss)
|
|
|
(Loss)
|
|
|
(Loss)
|
|
|
Total
|
|
Corporate loans and loan commitments
|
|
$
|
2
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
105
|
|
|
$
|
107
|
|
Loans
held-for-sale
|
|
|
|
|
|
|
9,091
|
|
|
|
|
|
|
|
493
|
|
|
|
9,584
|
|
Securities financing agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52
|
|
|
|
52
|
|
Other assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
107
|
|
|
|
107
|
|
Long-term deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(48
|
)
|
|
|
(48
|
)
|
Asset-backed secured financings
|
|
|
|
|
|
|
(95
|
)
|
|
|
|
|
|
|
|
|
|
|
(95
|
)
|
Commercial paper and other short-term borrowings
|
|
|
(192
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(192
|
)
|
Long-term debt
|
|
|
(625
|
)
|
|
|
|
|
|
|
|
|
|
|
22
|
|
|
|
(603
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(815
|
)
|
|
$
|
8,996
|
|
|
$
|
|
|
|
$
|
731
|
|
|
$
|
8,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
Corporate loans and loan commitments
|
|
$
|
25
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,886
|
|
|
$
|
1,911
|
|
Loans
held-for-sale
|
|
|
(211
|
)
|
|
|
8,251
|
|
|
|
|
|
|
|
588
|
|
|
|
8,628
|
|
Securities financing agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(292
|
)
|
|
|
(292
|
)
|
Other assets
|
|
|
379
|
|
|
|
|
|
|
|
(177
|
)
|
|
|
|
|
|
|
202
|
|
Long-term deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
|
|
|
|
35
|
|
Asset-backed secured financings
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
(11
|
)
|
Commercial paper and other short-term borrowings
|
|
|
(236
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(236
|
)
|
Long-term debt
|
|
|
(3,938
|
)
|
|
|
|
|
|
|
|
|
|
|
(4,900
|
)
|
|
|
(8,838
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(3,981
|
)
|
|
$
|
8,240
|
|
|
$
|
(177
|
)
|
|
$
|
(2,683
|
)
|
|
$
|
1,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
Corporate loans and loan commitments
|
|
$
|
4
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(1,248
|
)
|
|
$
|
(1,244
|
)
|
Loans
held-for-sale
|
|
|
(680
|
)
|
|
|
281
|
|
|
|
|
|
|
|
(215
|
)
|
|
|
(614
|
)
|
Securities financing agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18
|
)
|
|
|
(18
|
)
|
Long-term deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
(10
|
)
|
Asset-backed secured financings
|
|
|
|
|
|
|
295
|
|
|
|
|
|
|
|
|
|
|
|
295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(676
|
)
|
|
$
|
576
|
|
|
$
|
|
|
|
$
|
(1,491
|
)
|
|
$
|
(1,591
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank of America
2010 231
NOTE 24 Fair
Value of Financial Instruments
The fair values of financial instruments have been derived using
methodologies described in Note 22 Fair
Value Measurements. The following disclosures include
financial instruments where only a portion of the ending
balances at December 31, 2010 and 2009 is carried at fair
value on the Corporations Consolidated Balance Sheet.
Short-term
Financial Instruments
The carrying value of short-term financial instruments,
including cash and cash equivalents, time deposits placed,
federal funds sold and purchased, resale and certain repurchase
agreements, commercial paper and other short-term investments
and borrowings approximates the fair value of these instruments.
These financial instruments generally expose the Corporation to
limited credit risk and have no stated maturities or have
short-term maturities and carry interest rates that approximate
market. The Corporation elected to account for certain
structured reverse repurchase agreements under the fair value
option.
Loans
Fair values were generally determined by discounting both
principal and interest cash flows expected to be collected using
an observable discount rate for similar instruments with
adjustments that the Corporation believes a market participant
would consider in determining fair value. The Corporation
estimates the cash flows expected to be collected using internal
credit risk, interest rate and prepayment risk models that
incorporate the Corporations best estimate of current key
assumptions, such as default rates, loss severity and prepayment
speeds for the life of the loan. The carrying value of loans is
presented net of the applicable allowance for loan and lease
losses and excludes leases. The Corporation elected to account
for certain large corporate loans which exceeded the
Corporations single name credit risk concentration
guidelines under the fair value option.
Deposits
The fair value for certain deposits with stated maturities was
determined by discounting contractual cash flows using current
market rates for instruments with similar maturities. The
carrying value of
non-U.S. time
deposits approximates fair value. For deposits with no stated
maturities, the carrying amount was considered to approximate
fair value and does not take into account the significant value
of the cost advantage and stability of the Corporations
long-term relationships with depositors. The Corporation
accounts for certain long-term fixed-rate deposits which are
economically hedged with derivatives under the fair value option.
Long-term
Debt
The Corporation uses quoted market prices, when available, to
estimate fair value for its long-term debt. When quoted market
prices are not available, fair value is estimated based on
current market interest rates and credit spreads for debt with
similar terms and maturities. The Corporation accounts for
certain structured notes under the fair value option.
Fair Value of
Financial Instruments
The carrying values and fair values of certain financial
instruments that are not carried at fair value at
December 31, 2010 and 2009 are presented in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2010
|
|
|
2009
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
Carrying
|
|
|
Fair
|
|
(Dollars in millions)
|
|
Value
|
|
|
Value
|
|
|
Value
|
|
|
Value
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
876,739
|
|
|
$
|
861,695
|
|
|
$
|
841,020
|
|
|
$
|
811,831
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
1,010,430
|
|
|
|
1,010,460
|
|
|
|
991,611
|
|
|
|
991,768
|
|
Long-term debt
|
|
|
448,431
|
|
|
|
433,107
|
|
|
|
438,521
|
|
|
|
440,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 25 Mortgage
Servicing Rights
The Corporation accounts for consumer MSRs at fair value with
changes in fair value recorded in the Consolidated Statement of
Income in mortgage banking income. The Corporation economically
hedges these MSRs with certain derivatives and securities
including MBS and U.S. Treasuries. The securities that
economically hedge the MSRs are classified in other assets with
changes in the fair value of the securities and the related
interest income recorded in mortgage banking income.
The table below presents activity for residential first mortgage
MSRs for 2010 and 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
|
|
|
2009
|
|
Balance, January 1
|
|
$
|
19,465
|
|
|
|
|
|
|
$
|
12,733
|
|
Merrill Lynch balance, January 1, 2009
|
|
|
|
|
|
|
|
|
|
|
209
|
|
Net additions
|
|
|
3,516
|
|
|
|
|
|
|
|
5,728
|
|
Impact of customer payments
|
|
|
(3,760
|
)
|
|
|
|
|
|
|
(4,491
|
)
|
Other changes in MSR fair
value (1)
|
|
|
(4,321
|
)
|
|
|
|
|
|
|
5,286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31
|
|
$
|
14,900
|
|
|
|
|
|
|
$
|
19,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans serviced for
investors (in billions)
|
|
$
|
1,628
|
|
|
|
|
|
|
$
|
1,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
These amounts reflect the change in
discount rates and prepayment speed assumptions, mostly due to
changes in interest rates, as well as the effect of changes in
other assumptions.
|
The Corporation uses an OAS valuation approach to determine the
fair value of MSRs which factors in prepayment risk. This
approach consists of projecting servicing cash flows under
multiple interest rate scenarios and discounting these cash
flows using risk-adjusted discount rates. The key economic
assumptions used in determining the fair value of MSRs at
December 31, 2010 and 2009 are presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2010
|
|
|
2009
|
|
(Dollars in millions)
|
|
Fixed
|
|
|
Adjustable
|
|
|
Fixed
|
|
|
Adjustable
|
|
Weighted-average option adjusted spread
|
|
|
2.21
|
%
|
|
|
3.25
|
%
|
|
|
1.67
|
%
|
|
|
4.64
|
%
|
Weighted-average life, in years
|
|
|
4.85
|
|
|
|
2.29
|
|
|
|
5.62
|
|
|
|
3.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
232 Bank
of America 2010
The table below presents the sensitivity of the weighted-average
lives and fair value of MSRs to changes in modeled assumptions.
These sensitivities are hypothetical and should be used with
caution. As the amounts indicate, changes in fair value based on
variations in assumptions generally cannot be extrapolated
because the relationship of the change in assumption to the
change in fair value may not be linear. Also, the effect of a
variation in a particular assumption on the fair value of MSRs
that continue to be held by the Corporation is calculated
without changing any other assumption. In reality, changes in
one factor may result in changes in another, which might magnify
or counteract the sensitivities. The below sensitivities do not
reflect any hedge strategies that may be undertaken to mitigate
such risk.
Commercial and residential reverse mortgage MSRs, which are
carried at the lower of cost or market value and accounted for
using the amortization method, totaled $278 million and
$309 million at December 31, 2010 and 2009, and are
not included in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
Change in
|
|
|
|
|
|
|
Weighted-average Lives
|
|
|
|
|
|
|
|
|
|
Change in
|
|
(Dollars in millions)
|
|
Fixed
|
|
|
Adjustable
|
|
|
Fair Value
|
|
Prepayment rates
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of 10% decrease
|
|
|
0.33 years
|
|
|
|
0.16 years
|
|
|
$
|
907
|
|
Impact of 20% decrease
|
|
|
0.70
|
|
|
|
0.34
|
|
|
|
1,925
|
|
Impact of 10% increase
|
|
|
(0.29
|
)
|
|
|
(0.14
|
)
|
|
|
(814
|
)
|
Impact of 20% increase
|
|
|
(0.55
|
)
|
|
|
(0.26
|
)
|
|
|
(1,551
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OAS level
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of 100 bps decrease
|
|
|
n/a
|
|
|
|
n/a
|
|
|
$
|
796
|
|
Impact of 200 bps decrease
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
1,668
|
|
Impact of 100 bps increase
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
(729
|
)
|
Impact of 200 bps increase
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
(1,398
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 26 Business
Segment Information
The Corporation reports the results of its operations through
six business segments: Deposits, Global Card Services, Home
Loans & Insurance, Global Commercial Banking, Global
Banking & Markets (GBAM) and Global
Wealth & Investment Management (GWIM), with the
remaining operations recorded in All Other. Effective
January 1, 2010, the Corporation realigned the Global
Corporate and Investment Banking portion of the former Global
Banking business segment with the former Global Markets
business segment to form GBAM and to reflect
Global Commercial Banking as a standalone segment. In
addition, the Corporation may periodically reclassify business
segment results based on modifications to its management
reporting methodologies and changes in organizational alignment.
Prior period amounts have been reclassified to conform to
current period presentation.
Deposits
Deposits includes the results of consumer deposits
activities which consist of a comprehensive range of products
provided to consumers and small businesses. In addition,
Deposits includes an allocation of ALM activities.
Deposit products include traditional savings accounts, money
market savings accounts, CDs and IRAs, and noninterest- and
interest-bearing checking accounts. These products provide a
relatively stable source of funding and liquidity. The
Corporation earns net interest spread revenue from investing
this liquidity in earning assets through client-facing lending
and ALM activities. The revenue is allocated to the deposit
products using a funds transfer pricing
process which takes into account the interest rates and maturity
characteristics of the deposits. Deposits also generates
fees such as account service fees, non-sufficient funds fees,
overdraft charges and ATM fees. In addition, Deposits
includes the net impact of migrating customers and their
related deposit balances between GWIM and
Deposits. Subsequent to the date of migration, the
associated net interest income, service charges and noninterest
expense are recorded in the business to which deposits were
transferred.
Global Card
Services
Global Card Services provides a broad offering of
products including U.S. consumer and business card,
consumer lending, international card and debit card to consumers
and small businesses. The Corporation reports its Global Card
Services current period results in accordance with new
consolidation guidance that was effective on January 1,
2010. Under this new consolidation guidance, the Corporation
consolidated all previously unconsolidated credit card trusts.
Accordingly, current year results are comparable to prior year
results that were presented on a managed basis, which was
consistent with the way that management evaluated the results of
the business. Managed basis assumed that securitized loans were
not sold and presented earnings on these loans in a manner
similar to the way loans that have not been sold (i.e., held
loans) are presented. Loan securitization is an alternative
funding process that is used by the Corporation to diversify
funding sources. Global Card Services managed income
statement line items differ from a held basis as follows:
managed net interest income includes Global Card Services
net interest income on held loans and interest income on the
securitized loans less the internal funds transfer pricing
allocation related to securitized loans; managed noninterest
income includes Global Card Services noninterest income
on a held basis less the reclassification of certain components
of card income (e.g., excess servicing income) to record
securitized net interest income and provision for credit losses;
and provision for credit losses represents the provision for
credit losses on held loans combined with realized credit losses
associated with the securitized loan portfolio.
Home
Loans & Insurance
Home Loans & Insurance provides an extensive
line of consumer real estate products and services to customers
nationwide. Home Loans & Insurance products
include fixed and adjustable-rate first-lien mortgage loans for
home purchase and refinancing needs, reverse mortgages, home
equity lines of credit and home equity loans. First mortgage
products are either sold into the secondary mortgage market to
investors while retaining MSRs and the Bank of America customer
relationships, or are held on the Corporations
Consolidated Balance Sheet for ALM purposes and reported in
All Other. Home Loans & Insurance is not
impacted by the Corporations first mortgage production
retention decisions as Home Loans & Insurance
is compensated for the decision on a management accounting
basis with a corresponding offset recorded in All Other.
Funded home equity lines of credit and home equity loans are
held on the Corporations Consolidated Balance Sheet. In
addition, Home Loans & Insurance offers
property, casualty, life, disability and credit insurance.
Home Loans & Insurance also includes the impact
of migrating customers and their related loan balances between
GWIM and Home Loans & Insurance based on
client segmentation thresholds. Subsequent to the date of
migration, the associated net interest income and noninterest
expense are recorded in the business segment to which loans were
transferred.
Bank of America
2010 233
Global Commercial
Banking
Global Commercial Banking provides a wide range of
lending-related products and services, integrated working
capital management and treasury solutions to clients through the
Corporations network of offices and client relationship
teams along with various product partners. Clients include
business banking and middle-market companies, commercial real
estate firms and governments, and are generally defined as
companies with sales up to $2 billion. Lending products and
services include commercial loans and commitment facilities,
real estate lending, asset-based lending and indirect consumer
loans. Capital management and treasury solutions include
treasury management, foreign exchange and short-term investing
options.
Global
Banking & Markets
GBAM provides financial products, advisory services,
financing, securities clearing, settlement and custody services
globally to institutional investor clients in support of their
investing and trading activities. GBAM also works with
commercial and corporate clients to provide debt and equity
underwriting and distribution capabilities, merger-related and
other advisory services, and risk management products using
interest rate, equity, credit, currency and commodity
derivatives, foreign exchange, fixed-income and mortgage-related
products. As a result of the Corporations market-making
activities in these products, it may be required to manage
positions in government securities, equity and equity-linked
securities, high-grade and high-yield corporate debt securities,
commercial paper, MBS and ABS. Corporate banking services
provide a wide range of lending-related products and services,
integrated working capital management and treasury solutions to
clients through the Corporations network of offices and
client relationship teams along with various product partners.
Corporate clients are generally defined as companies with sales
greater than $2 billion. In addition, GBAM also
includes the results related to the merchant services joint
venture.
Global
Wealth & Investment Management
GWIM provides comprehensive wealth management
capabilities to a broad base of clients from emerging affluent
to the ultra-high-net-worth. These services include investment
and brokerage services, estate and financial planning, fiduciary
portfolio management, cash and liability management and
specialty asset management. GWIM also provides retirement
and benefit plan services, philanthropic management and asset
management to individual and institutional clients. In addition,
GWIM includes the results of BofA Capital Management, the
cash and liquidity asset management business that the
Corporation retained following the sale of the Columbia
long-term asset management business, and other miscellaneous
items. GWIM also reflects the impact of migrating clients
and their related deposit and loan balances to or from GWIM
and Deposits, Home Loans & Insurance and
the Corporations ALM activities. Subsequent to the date of
migration, the associated net interest income, noninterest
income and noninterest expense are recorded in the business to
which the clients migrated.
All
Other
All Other consists of equity investment activities
including Global Principal Investments, Strategic Investments,
the residential mortgage portfolio associated with ALM
activities, the impact of the cost allocation processes, merger
and restructuring charges, intersegment eliminations, and the
results of certain businesses that are expected to be or have
been sold or are in the process of being liquidated. All
Other also includes certain amounts associated with ALM
activities, amounts associated with the change in the value of
derivatives used as economic hedges of interest rate and foreign
exchange rate fluctuations, the impact of foreign exchange rate
fluctuations related to revaluation of foreign
currency-denominated debt, fair value adjustments related to
certain structured notes, certain gains (losses) on sales of
whole mortgage loans, gains (losses) on sales of debt
securities, OTTI write-downs on certain AFS securities and for
periods prior to January 1, 2010, a securitization offset
which removed the securitization impact of sold loans in
Global Card Services in order to present the consolidated
results of the Corporation on a GAAP basis (i.e., held basis).
Basis of
Presentation
The management accounting and reporting process derives segment
and business results by utilizing allocation methodologies for
revenue and expense. The net income derived for the businesses
is dependent upon revenue and cost allocations using an
activity-based costing model, funds transfer pricing, and other
methodologies and assumptions management believes are
appropriate to reflect the results of the business.
Total revenue, net of interest expense, includes net interest
income on a fully taxable-equivalent (FTE) basis and noninterest
income. The adjustment of net interest income to a FTE basis
results in a corresponding increase in income tax expense. The
segment results also reflect certain revenue and expense
methodologies that are utilized to determine net income. The net
interest income of the businesses includes the results of a
funds transfer pricing process that matches assets and
liabilities with similar interest rate sensitivity and maturity
characteristics. For presentation purposes, in segments where
the total of liabilities and equity exceeds assets, which are
generally deposit-taking segments, the Corporation allocates
assets to match liabilities. Net interest income of the business
segments also includes an allocation of net interest income
generated by the Corporations ALM activities.
The Corporations ALM activities include an overall
interest rate risk management strategy that incorporates the use
of interest rate contracts to manage fluctuations in earnings
that are caused by interest rate volatility. The
Corporations goal is to manage interest rate sensitivity
so that movements in interest rates do not significantly
adversely affect net interest income. The Corporations ALM
activities are allocated to the business segments and fluctuate
based on performance. ALM activities include external product
pricing decisions including deposit pricing strategies, the
effects of the Corporations internal funds transfer
pricing process and the net effects of other ALM activities.
Certain expenses not directly attributable to a specific
business segment are allocated to the segments. The most
significant of these expenses include data and item processing
costs and certain centralized or shared functions. Data
processing costs are allocated to the segments based on
equipment usage. Item processing costs are allocated to the
segments based on the volume of items processed for each
segment. The costs of certain centralized or shared functions
are allocated based on methodologies that reflect utilization.
234 Bank
of America 2010
The following tables present total revenue, net of interest
expense, on a FTE basis and net income (loss) for 2010, 2009 and
2008, and total assets at December 31, 2010 and 2009 for
each business segment, as well as All Other.
Business
Segments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Corporation (1)
|
|
|
Deposits
|
|
|
Global Card
Services (2)
|
|
At and for the Year Ended December 31
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Net interest
income (3)
|
|
$
|
52,693
|
|
|
$
|
48,410
|
|
|
$
|
46,554
|
|
|
$
|
8,128
|
|
|
$
|
7,089
|
|
|
$
|
10,910
|
|
|
$
|
17,821
|
|
|
$
|
19,972
|
|
|
$
|
19,305
|
|
Noninterest income
|
|
|
58,697
|
|
|
|
72,534
|
|
|
|
27,422
|
|
|
|
5,053
|
|
|
|
6,801
|
|
|
|
6,854
|
|
|
|
7,800
|
|
|
|
9,074
|
|
|
|
11,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue, net of interest expense
|
|
|
111,390
|
|
|
|
120,944
|
|
|
|
73,976
|
|
|
|
13,181
|
|
|
|
13,890
|
|
|
|
17,764
|
|
|
|
25,621
|
|
|
|
29,046
|
|
|
|
30,933
|
|
Provision for credit losses
|
|
|
28,435
|
|
|
|
48,570
|
|
|
|
26,825
|
|
|
|
201
|
|
|
|
343
|
|
|
|
390
|
|
|
|
12,648
|
|
|
|
29,553
|
|
|
|
19,575
|
|
Amortization of intangibles
|
|
|
1,731
|
|
|
|
1,977
|
|
|
|
1,834
|
|
|
|
195
|
|
|
|
238
|
|
|
|
297
|
|
|
|
813
|
|
|
|
911
|
|
|
|
1,048
|
|
Goodwill impairment
|
|
|
12,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,400
|
|
|
|
|
|
|
|
|
|
Other noninterest expense
|
|
|
68,977
|
|
|
|
64,736
|
|
|
|
39,695
|
|
|
|
10,636
|
|
|
|
9,263
|
|
|
|
8,296
|
|
|
|
6,140
|
|
|
|
6,815
|
|
|
|
7,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(153
|
)
|
|
|
5,661
|
|
|
|
5,622
|
|
|
|
2,149
|
|
|
|
4,046
|
|
|
|
8,781
|
|
|
|
(4,380
|
)
|
|
|
(8,233
|
)
|
|
|
2,405
|
|
Income tax expense
(benefit) (3)
|
|
|
2,085
|
|
|
|
(615
|
)
|
|
|
1,614
|
|
|
|
797
|
|
|
|
1,470
|
|
|
|
3,192
|
|
|
|
2,223
|
|
|
|
(2,972
|
)
|
|
|
850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(2,238
|
)
|
|
$
|
6,276
|
|
|
$
|
4,008
|
|
|
$
|
1,352
|
|
|
$
|
2,576
|
|
|
$
|
5,589
|
|
|
$
|
(6,603
|
)
|
|
$
|
(5,261
|
)
|
|
$
|
1,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year end total assets
|
|
$
|
2,264,909
|
|
|
$
|
2,230,232
|
|
|
|
|
|
|
$
|
432,334
|
|
|
$
|
444,612
|
|
|
|
|
|
|
$
|
169,762
|
|
|
$
|
212,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Loans & Insurance
|
|
|
Global Commercial Banking
|
|
|
Global Banking & Markets
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Net interest
income (3)
|
|
$
|
4,690
|
|
|
$
|
4,975
|
|
|
$
|
3,311
|
|
|
$
|
8,086
|
|
|
$
|
8,054
|
|
|
$
|
8,142
|
|
|
$
|
7,989
|
|
|
$
|
9,553
|
|
|
$
|
8,297
|
|
Noninterest income
|
|
|
5,957
|
|
|
|
11,928
|
|
|
|
6,001
|
|
|
|
2,817
|
|
|
|
3,087
|
|
|
|
2,535
|
|
|
|
20,509
|
|
|
|
23,070
|
|
|
|
(5,506
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue, net of interest expense
|
|
|
10,647
|
|
|
|
16,903
|
|
|
|
9,312
|
|
|
|
10,903
|
|
|
|
11,141
|
|
|
|
10,677
|
|
|
|
28,498
|
|
|
|
32,623
|
|
|
|
2,791
|
|
Provision for credit losses
|
|
|
8,490
|
|
|
|
11,244
|
|
|
|
6,287
|
|
|
|
1,971
|
|
|
|
7,768
|
|
|
|
3,316
|
|
|
|
(155
|
)
|
|
|
1,998
|
|
|
|
424
|
|
Amortization of intangibles
|
|
|
38
|
|
|
|
63
|
|
|
|
39
|
|
|
|
72
|
|
|
|
87
|
|
|
|
127
|
|
|
|
144
|
|
|
|
165
|
|
|
|
91
|
|
Goodwill impairment
|
|
|
2,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other noninterest expense
|
|
|
13,125
|
|
|
|
11,642
|
|
|
|
6,977
|
|
|
|
3,802
|
|
|
|
3,746
|
|
|
|
3,205
|
|
|
|
17,894
|
|
|
|
15,756
|
|
|
|
7,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(13,006
|
)
|
|
|
(6,046
|
)
|
|
|
(3,991
|
)
|
|
|
5,058
|
|
|
|
(460
|
)
|
|
|
4,029
|
|
|
|
10,615
|
|
|
|
14,704
|
|
|
|
(4,945
|
)
|
Income tax expense
(benefit) (3)
|
|
|
(4,085
|
)
|
|
|
(2,195
|
)
|
|
|
(1,477
|
)
|
|
|
1,877
|
|
|
|
(170
|
)
|
|
|
1,418
|
|
|
|
4,296
|
|
|
|
4,646
|
|
|
|
(1,756
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(8,921
|
)
|
|
$
|
(3,851
|
)
|
|
$
|
(2,514
|
)
|
|
$
|
3,181
|
|
|
$
|
(290
|
)
|
|
$
|
2,611
|
|
|
$
|
6,319
|
|
|
$
|
10,058
|
|
|
$
|
(3,189
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year end total assets
|
|
$
|
213,455
|
|
|
$
|
232,588
|
|
|
|
|
|
|
$
|
310,131
|
|
|
$
|
295,947
|
|
|
|
|
|
|
$
|
655,535
|
|
|
$
|
649,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Wealth &
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Management
|
|
|
All Other
(2)
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Net interest
income (3)
|
|
$
|
5,831
|
|
|
$
|
5,988
|
|
|
$
|
4,780
|
|
|
$
|
148
|
|
|
$
|
(7,221
|
)
|
|
$
|
(8,191
|
)
|
Noninterest income
|
|
|
10,840
|
|
|
|
10,149
|
|
|
|
1,527
|
|
|
|
5,721
|
|
|
|
8,425
|
|
|
|
4,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue, net of interest expense
|
|
|
16,671
|
|
|
|
16,137
|
|
|
|
6,307
|
|
|
|
5,869
|
|
|
|
1,204
|
|
|
|
(3,808
|
)
|
Provision for credit losses
|
|
|
646
|
|
|
|
1,061
|
|
|
|
664
|
|
|
|
4,634
|
|
|
|
(3,397
|
)
|
|
|
(3,831
|
)
|
Amortization of intangibles
|
|
|
458
|
|
|
|
480
|
|
|
|
192
|
|
|
|
11
|
|
|
|
33
|
|
|
|
40
|
|
Other noninterest expense
|
|
|
13,140
|
|
|
|
11,917
|
|
|
|
3,872
|
|
|
|
4,240
|
|
|
|
5,597
|
|
|
|
2,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
2,427
|
|
|
|
2,679
|
|
|
|
1,579
|
|
|
|
(3,016
|
)
|
|
|
(1,029
|
)
|
|
|
(2,236
|
)
|
Income tax expense
(benefit) (3)
|
|
|
1,080
|
|
|
|
963
|
|
|
|
565
|
|
|
|
(4,103
|
)
|
|
|
(2,357
|
)
|
|
|
(1,178
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
1,347
|
|
|
$
|
1,716
|
|
|
$
|
1,014
|
|
|
$
|
1,087
|
|
|
$
|
1,328
|
|
|
$
|
(1,058
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year end total assets
|
|
$
|
297,301
|
|
|
$
|
250,963
|
|
|
|
|
|
|
$
|
186,391
|
|
|
$
|
143,578
|
|
|
|
|
|
|
|
|
(1) |
|
There were no material intersegment
revenues.
|
(2) |
|
2010 is presented in accordance
with new consolidation guidance. 2009 and 2008 Global Card
Services results are presented on a managed basis with a
corresponding offset recorded in All Other.
|
(3) |
|
FTE basis
|
Bank of America
2010 235
The table below reconciles Global Card Services and
All Other for 2009 and 2008 to a held basis by
reclassifying net interest income, all other income and realized
credit losses associated with the securitized loans to card
income. New consolidation guidance effective January 1,
2010 does not require reconciliation of Global Card Services
and All Other to a held basis after 2009.
Global Card
Services Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Managed
|
|
|
Securitization
|
|
|
Held
|
|
|
Managed
|
|
|
Securitization
|
|
|
Held
|
|
(Dollars in millions)
|
|
Basis (1)
|
|
|
Impact (2)
|
|
|
Basis
|
|
|
Basis (1)
|
|
|
Impact (2)
|
|
|
Basis
|
|
Net interest
income (3)
|
|
$
|
19,972
|
|
|
$
|
(9,250
|
)
|
|
$
|
10,722
|
|
|
$
|
19,305
|
|
|
$
|
(8,701
|
)
|
|
$
|
10,604
|
|
Noninterest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Card income
|
|
|
8,553
|
|
|
|
(2,034
|
)
|
|
|
6,519
|
|
|
|
10,032
|
|
|
|
2,250
|
|
|
|
12,282
|
|
All other income
|
|
|
521
|
|
|
|
(115
|
)
|
|
|
406
|
|
|
|
1,596
|
|
|
|
(219
|
)
|
|
|
1,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
9,074
|
|
|
|
(2,149
|
)
|
|
|
6,925
|
|
|
|
11,628
|
|
|
|
2,031
|
|
|
|
13,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue, net of interest expense
|
|
|
29,046
|
|
|
|
(11,399
|
)
|
|
|
17,647
|
|
|
|
30,933
|
|
|
|
(6,670
|
)
|
|
|
24,263
|
|
Provision for credit losses
|
|
|
29,553
|
|
|
|
(11,399
|
)
|
|
|
18,154
|
|
|
|
19,575
|
|
|
|
(6,670
|
)
|
|
|
12,905
|
|
Noninterest expense
|
|
|
7,726
|
|
|
|
|
|
|
|
7,726
|
|
|
|
8,953
|
|
|
|
|
|
|
|
8,953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(8,233
|
)
|
|
|
|
|
|
|
(8,233
|
)
|
|
|
2,405
|
|
|
|
|
|
|
|
2,405
|
|
Income tax expense
(benefit) (3)
|
|
|
(2,972
|
)
|
|
|
|
|
|
|
(2,972
|
)
|
|
|
850
|
|
|
|
|
|
|
|
850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(5,261
|
)
|
|
$
|
|
|
|
$
|
(5,261
|
)
|
|
$
|
1,555
|
|
|
$
|
|
|
|
$
|
1,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Other Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Reported
|
|
|
Securitization
|
|
|
As
|
|
|
Reported
|
|
|
Securitization
|
|
|
As
|
|
(Dollars in millions)
|
|
Basis (1)
|
|
|
Offset (2)
|
|
|
Adjusted
|
|
|
Basis (1)
|
|
|
Offset (2)
|
|
|
Adjusted
|
|
Net interest
income (3)
|
|
$
|
(7,221
|
)
|
|
$
|
9,250
|
|
|
$
|
2,029
|
|
|
$
|
(8,191
|
)
|
|
$
|
8,701
|
|
|
$
|
510
|
|
Noninterest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Card income (loss)
|
|
|
(896
|
)
|
|
|
2,034
|
|
|
|
1,138
|
|
|
|
2,164
|
|
|
|
(2,250
|
)
|
|
|
(86
|
)
|
Equity investment income
|
|
|
10,589
|
|
|
|
|
|
|
|
10,589
|
|
|
|
265
|
|
|
|
|
|
|
|
265
|
|
Gains on sales of debt securities
|
|
|
4,437
|
|
|
|
|
|
|
|
4,437
|
|
|
|
1,133
|
|
|
|
|
|
|
|
1,133
|
|
All other income (loss)
|
|
|
(5,705
|
)
|
|
|
115
|
|
|
|
(5,590
|
)
|
|
|
821
|
|
|
|
219
|
|
|
|
1,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
8,425
|
|
|
|
2,149
|
|
|
|
10,574
|
|
|
|
4,383
|
|
|
|
(2,031
|
)
|
|
|
2,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue, net of interest expense
|
|
|
1,204
|
|
|
|
11,399
|
|
|
|
12,603
|
|
|
|
(3,808
|
)
|
|
|
6,670
|
|
|
|
2,862
|
|
Provision for credit losses
|
|
|
(3,397
|
)
|
|
|
11,399
|
|
|
|
8,002
|
|
|
|
(3,831
|
)
|
|
|
6,670
|
|
|
|
2,839
|
|
Merger and restructuring charges
|
|
|
2,721
|
|
|
|
|
|
|
|
2,721
|
|
|
|
935
|
|
|
|
|
|
|
|
935
|
|
All other noninterest expense
|
|
|
2,909
|
|
|
|
|
|
|
|
2,909
|
|
|
|
1,324
|
|
|
|
|
|
|
|
1,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(1,029
|
)
|
|
|
|
|
|
|
(1,029
|
)
|
|
|
(2,236
|
)
|
|
|
|
|
|
|
(2,236
|
)
|
Income tax
benefit (3)
|
|
|
(2,357
|
)
|
|
|
|
|
|
|
(2,357
|
)
|
|
|
(1,178
|
)
|
|
|
|
|
|
|
(1,178
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
1,328
|
|
|
$
|
|
|
|
$
|
1,328
|
|
|
$
|
(1,058
|
)
|
|
$
|
|
|
|
$
|
(1,058
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Provision for credit losses in
Global Card Services is presented on a managed basis with
the securitization offset in All Other.
|
(2) |
|
The securitization impact/offset to
net interest income is on a funds transfer pricing methodology
consistent with the way funding costs are allocated to the
businesses.
|
(3) |
|
FTE basis
|
236 Bank
of America 2010
The tables below present a reconciliation of the six business
segments total revenue, net of interest expense, on a FTE
basis, and net income (loss) to the Consolidated Statement of
Income, and total assets to the Consolidated Balance Sheet. The
adjustments presented in the tables below include consolidated
income, expense and asset amounts not specifically allocated to
individual business segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Segments total revenue, net of interest expense
(1)
|
|
$
|
105,521
|
|
|
$
|
119,740
|
|
|
$
|
77,784
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
ALM activities
|
|
|
1,924
|
|
|
|
(766
|
)
|
|
|
2,390
|
|
Equity investment income
|
|
|
4,532
|
|
|
|
10,589
|
|
|
|
265
|
|
Liquidating businesses
|
|
|
1,336
|
|
|
|
2,268
|
|
|
|
1,819
|
|
FTE basis adjustment
|
|
|
(1,170
|
)
|
|
|
(1,301
|
)
|
|
|
(1,194
|
)
|
Managed securitization impact to total revenue, net of interest
expense
|
|
|
n/a
|
|
|
|
(11,399
|
)
|
|
|
(6,670
|
)
|
Other
|
|
|
(1,923
|
)
|
|
|
512
|
|
|
|
(1,612
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated revenue, net of
interest expense
|
|
$
|
110,220
|
|
|
$
|
119,643
|
|
|
$
|
72,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segments net income (loss)
|
|
$
|
(3,325
|
)
|
|
$
|
4,948
|
|
|
$
|
5,066
|
|
Adjustments, net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
ALM activities
|
|
|
(1,966
|
)
|
|
|
(6,597
|
)
|
|
|
(641
|
)
|
Equity investment income
|
|
|
2,855
|
|
|
|
6,671
|
|
|
|
167
|
|
Liquidating businesses
|
|
|
318
|
|
|
|
477
|
|
|
|
378
|
|
Merger and restructuring charges
|
|
|
(1,146
|
)
|
|
|
(1,714
|
)
|
|
|
(630
|
)
|
Other
|
|
|
1,026
|
|
|
|
2,491
|
|
|
|
(332
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income
(loss)
|
|
$
|
(2,238
|
)
|
|
$
|
6,276
|
|
|
$
|
4,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
n/a = not applicable
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
Segment total assets
|
|
$
|
2,078,518
|
|
|
$
|
2,086,654
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
ALM activities, including securities portfolio
|
|
|
637,439
|
|
|
|
573,525
|
|
Equity investments
|
|
|
34,201
|
|
|
|
44,640
|
|
Liquidating businesses
|
|
|
10,928
|
|
|
|
34,761
|
|
Elimination of segment excess asset allocations to match
liabilities
|
|
|
(645,846
|
)
|
|
|
(585,994
|
)
|
Elimination of managed securitized
loans (1)
|
|
|
n/a
|
|
|
|
(89,716
|
)
|
Other
|
|
|
149,669
|
|
|
|
166,362
|
|
|
|
|
|
|
|
|
|
|
Consolidated total
assets
|
|
$
|
2,264,909
|
|
|
$
|
2,230,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents Global Card Services
securitized loans. 2010 is presented in accordance with new
consolidation guidance effective January 1, 2010. 2009 is
presented on a managed basis.
|
n/a = not applicable
Bank of America
2010 237
NOTE 27 Parent
Company Information
The following tables present the Parent Company only financial
information.
Condensed
Statement of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from subsidiaries:
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank holding companies and related subsidiaries
|
|
$
|
7,263
|
|
|
$
|
4,100
|
|
|
$
|
18,178
|
|
Nonbank companies and related subsidiaries
|
|
|
226
|
|
|
|
27
|
|
|
|
1,026
|
|
Interest from subsidiaries
|
|
|
999
|
|
|
|
1,179
|
|
|
|
3,433
|
|
Other income
|
|
|
2,781
|
|
|
|
7,784
|
|
|
|
940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income
|
|
|
11,269
|
|
|
|
13,090
|
|
|
|
23,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on borrowed funds
|
|
|
4,484
|
|
|
|
4,737
|
|
|
|
6,818
|
|
Noninterest expense
|
|
|
8,030
|
|
|
|
4,238
|
|
|
|
1,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expense
|
|
|
12,514
|
|
|
|
8,975
|
|
|
|
8,647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income
taxes and equity in undistributed earnings of
subsidiaries
|
|
|
(1,245
|
)
|
|
|
4,115
|
|
|
|
14,930
|
|
Income tax benefit
|
|
|
(3,709
|
)
|
|
|
(85
|
)
|
|
|
(1,793
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before equity in undistributed earnings of subsidiaries
|
|
|
2,464
|
|
|
|
4,200
|
|
|
|
16,723
|
|
Equity in undistributed earnings (losses) of subsidiaries:
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank holding companies and related subsidiaries
|
|
|
7,647
|
|
|
|
(21,614
|
)
|
|
|
(10,559
|
)
|
Nonbank companies and related subsidiaries
|
|
|
(12,349
|
)
|
|
|
23,690
|
|
|
|
(2,156
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity in undistributed
earnings (losses) of subsidiaries
|
|
|
(4,702
|
)
|
|
|
2,076
|
|
|
|
(12,715
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(2,238
|
)
|
|
$
|
6,276
|
|
|
$
|
4,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) applicable to
common shareholders
|
|
$
|
(3,595
|
)
|
|
$
|
(2,204
|
)
|
|
$
|
2,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed
Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash held at bank subsidiaries
|
|
$
|
117,124
|
|
|
$
|
91,892
|
|
Debt securities
|
|
|
19,518
|
|
|
|
8,788
|
|
Receivables from subsidiaries:
|
|
|
|
|
|
|
|
|
Bank holding companies and related subsidiaries
|
|
|
50,589
|
|
|
|
54,442
|
|
Nonbank companies and related subsidiaries
|
|
|
8,320
|
|
|
|
13,043
|
|
Investments in subsidiaries:
|
|
|
|
|
|
|
|
|
Bank holding companies and related subsidiaries
|
|
|
188,538
|
|
|
|
186,673
|
|
Nonbank companies and related subsidiaries
|
|
|
61,374
|
|
|
|
67,399
|
|
Other assets
|
|
|
10,837
|
|
|
|
18,262
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
456,300
|
|
|
$
|
440,499
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
shareholders equity
|
|
|
|
|
|
|
|
|
Commercial paper and other short-term borrowings
|
|
$
|
13,899
|
|
|
$
|
5,968
|
|
Accrued expenses and other liabilities
|
|
|
22,803
|
|
|
|
19,204
|
|
Payables to subsidiaries:
|
|
|
|
|
|
|
|
|
Bank holding companies and related subsidiaries
|
|
|
4,241
|
|
|
|
363
|
|
Nonbank companies and related subsidiaries
|
|
|
513
|
|
|
|
632
|
|
Long-term debt
|
|
|
186,596
|
|
|
|
182,888
|
|
Shareholders equity
|
|
|
228,248
|
|
|
|
231,444
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity
|
|
$
|
456,300
|
|
|
$
|
440,499
|
|
|
|
|
|
|
|
|
|
|
238 Bank
of America 2010
Condensed
Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(2,238
|
)
|
|
$
|
6,276
|
|
|
$
|
4,008
|
|
Reconciliation of net income (loss) to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in undistributed (earnings) losses of subsidiaries
|
|
|
4,702
|
|
|
|
(2,076
|
)
|
|
|
12,715
|
|
Other operating activities, net
|
|
|
(996
|
)
|
|
|
4,400
|
|
|
|
(598
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
1,468
|
|
|
|
8,600
|
|
|
|
16,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (purchases) sales of securities
|
|
|
5,972
|
|
|
|
3,729
|
|
|
|
(12,142
|
)
|
Net payments from (to) subsidiaries
|
|
|
3,531
|
|
|
|
(25,437
|
)
|
|
|
2,490
|
|
Other investing activities, net
|
|
|
2,592
|
|
|
|
(17
|
)
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
12,095
|
|
|
|
(21,725
|
)
|
|
|
(9,609
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in commercial paper and other short-term
borrowings
|
|
|
8,052
|
|
|
|
(20,673
|
)
|
|
|
(14,131
|
)
|
Proceeds from issuance of long-term debt
|
|
|
29,275
|
|
|
|
30,347
|
|
|
|
28,994
|
|
Retirement of long-term debt
|
|
|
(27,176
|
)
|
|
|
(20,180
|
)
|
|
|
(13,178
|
)
|
Proceeds from issuance of preferred stock
|
|
|
|
|
|
|
49,244
|
|
|
|
34,742
|
|
Repayment of preferred stock
|
|
|
|
|
|
|
(45,000
|
)
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
|
|
|
|
13,468
|
|
|
|
10,127
|
|
Cash dividends paid
|
|
|
(1,762
|
)
|
|
|
(4,863
|
)
|
|
|
(11,528
|
)
|
Other financing activities, net
|
|
|
3,280
|
|
|
|
4,149
|
|
|
|
5,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
11,669
|
|
|
|
6,492
|
|
|
|
40,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash held at bank subsidiaries
|
|
|
25,232
|
|
|
|
(6,633
|
)
|
|
|
46,572
|
|
Cash held at bank subsidiaries at January 1
|
|
|
91,892
|
|
|
|
98,525
|
|
|
|
51,953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash held at bank subsidiaries
at December 31
|
|
$
|
117,124
|
|
|
$
|
91,892
|
|
|
$
|
98,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank of America
2010 239
NOTE 28 Performance
by Geographical Area
Since the Corporations operations are highly integrated,
certain asset, liability, income and expense amounts must be
allocated to arrive at total assets, total revenue, net of
interest expense, income (loss) before income taxes and net
income (loss) by geographic area. The Corporation identifies its
geographic performance based on the business unit structure used
to manage the capital or expense deployed in the region as
applicable. This requires certain judgments related to the
allocation of revenue so that revenue can be appropriately
matched with the related expense or capital deployed in the
region.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
Year Ended December 31
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue, Net
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
of Interest
|
|
|
(Loss) Before
|
|
|
Net Income
|
|
(Dollars in millions)
|
|
Year
|
|
|
Total Assets
(1)
|
|
|
Expense
(2)
|
|
|
Income Taxes
|
|
|
(Loss)
|
|
U.S. (3)
|
|
|
2010
|
|
|
$
|
1,954,517
|
|
|
$
|
88,679
|
|
|
$
|
(5,370
|
)
|
|
$
|
(4,511
|
)
|
|
|
|
2009
|
|
|
|
1,847,165
|
|
|
|
98,278
|
|
|
|
(6,901
|
)
|
|
|
(1,025
|
)
|
|
|
|
2008
|
|
|
|
|
|
|
|
67,549
|
|
|
|
3,289
|
|
|
|
3,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia (4)
|
|
|
2010
|
|
|
|
106,186
|
|
|
|
6,115
|
|
|
|
1,380
|
|
|
|
869
|
|
|
|
|
2009
|
|
|
|
118,921
|
|
|
|
10,685
|
|
|
|
8,096
|
|
|
|
5,101
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
1,770
|
|
|
|
1,207
|
|
|
|
761
|
|
Europe, Middle East and Africa
|
|
|
2010
|
|
|
|
186,045
|
|
|
|
12,369
|
|
|
|
1,273
|
|
|
|
525
|
|
|
|
|
2009
|
|
|
|
239,374
|
|
|
|
9,085
|
|
|
|
2,295
|
|
|
|
1,652
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
3,020
|
|
|
|
(456
|
)
|
|
|
(252
|
)
|
Latin America and the Caribbean
|
|
|
2010
|
|
|
|
18,161
|
|
|
|
3,057
|
|
|
|
1,394
|
|
|
|
879
|
|
|
|
|
2009
|
|
|
|
24,772
|
|
|
|
1,595
|
|
|
|
870
|
|
|
|
548
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
443
|
|
|
|
388
|
|
|
|
245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Non-U.S.
|
|
|
2010
|
|
|
|
310,392
|
|
|
|
21,541
|
|
|
|
4,047
|
|
|
|
2,273
|
|
|
|
|
2009
|
|
|
|
383,067
|
|
|
|
21,365
|
|
|
|
11,261
|
|
|
|
7,301
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
5,233
|
|
|
|
1,139
|
|
|
|
754
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consolidated
|
|
|
2010
|
|
|
$
|
2,264,909
|
|
|
$
|
110,220
|
|
|
$
|
(1,323
|
)
|
|
$
|
(2,238
|
)
|
|
|
|
2009
|
|
|
|
2,230,232
|
|
|
|
119,643
|
|
|
|
4,360
|
|
|
|
6,276
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
72,782
|
|
|
|
4,428
|
|
|
|
4,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Total assets include long-lived
assets, which are primarily located in the U.S.
|
(2) |
|
There were no material intercompany
revenues between geographic regions for any of the periods
presented.
|
(3) |
|
Includes the Corporations
Canadian operations, which had total assets of
$16.1 billion and $31.1 billion at December 31,
2010 and 2009; total revenue, net of interest expense of
$1.5 billion, $2.5 billion and $1.2 billion;
income before income taxes of $459 million,
$723 million and $552 million; and net income of
$328 million, $488 million and $404 million for
2010, 2009 and 2008, respectively.
|
(4) |
|
The year ended December 31,
2009 amount includes pre-tax gains of $7.3 billion
($4.6 billion
net-of-tax)
on the sale of common shares of the Corporations initial
investment in CCB.
|
240 Bank
of America 2010
management, including the Chief Executive Officer and Chief
Financial Officer, conducted an evaluation of the effectiveness
and design of our disclosure controls and procedures (as that
term is defined in
Rule 13a-15(e)
of the Exchange Act). Based upon that evaluation, Bank of
Americas Chief Executive Officer and Chief Financial
Officer concluded that Bank of Americas disclosure
controls and procedures were effective, as of the end of the
period covered by this report, in recording, processing,
summarizing and reporting information required to be disclosed,
within the time periods specified in the SECs rules and
forms.
Bank of America
2010 241
Report
of Independent Registered Public Accounting Firm
To the Board of
Directors of Bank of America Corporation:
We have examined, based on criteria established in Internal
Control Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission, Bank of
America Corporations (the Corporation)
assertion, included under Item 9A, that the
Corporations disclosure controls and procedures were
effective as of December 31, 2010 (Managements
Assertion). Disclosure controls and procedures mean
controls and other procedures of an issuer that are designed to
ensure that information required to be disclosed by an issuer in
reports that it files or submits under the Securities Exchange
Act of 1934 is recorded, processed, summarized, and reported
within the time periods specified in the Securities and Exchange
Commissions rules and forms, and that information required
to be disclosed by an issuer in reports that it files or submits
under the Securities Exchange Act of 1934 is accumulated and
communicated to the issuers management, including its
principal executive and principal financial officer, or persons
performing similar functions, as appropriate, to allow timely
decisions regarding required disclosure. The Corporations
management is responsible for maintaining effective disclosure
controls and procedures and for Managements Assertion of
the effectiveness of its disclosure controls and procedures. Our
responsibility is to express an opinion on Managements
Assertion based on our examination.
There are inherent limitations to disclosure controls and
procedures. Because of these inherent limitations, effective
disclosure controls and procedures can only provide reasonable
assurance of achieving the intended objectives. Disclosure
controls and procedures may not prevent, or detect and correct,
material misstatements, and they may not identify all
information relating to the Corporation to be accumulated and
communicated to the Corporations management to allow
timely decisions regarding required disclosures. Also,
projections of any evaluation of effectiveness to future periods
are subject to the risk that disclosure controls and procedures
may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may
deteriorate.
We conducted our examination in accordance with attestation
standards established by the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and
perform the examination to obtain reasonable assurance about
whether effective disclosure controls and procedures were
maintained in all material respects. Our examination included
obtaining an understanding of the Corporations disclosure
controls and procedures and testing and evaluating the design
and operating effectiveness of the Corporations disclosure
controls and procedures based on the assessed risk. Our
examination also included performing such other procedures as we
considered necessary in the circumstances. We believe that our
examination provides a reasonable basis for our opinion. Our
examination was not conducted for the purpose of expressing an
opinion, and accordingly we express no opinion, on the accuracy
or completeness of the Corporations disclosures in its
reports, or whether such disclosures comply with the rules and
regulations adopted by the Securities and Exchange Commission.
In our opinion, Managements Assertion that the
Corporations disclosure controls and procedures were
effective as of December 31, 2010 is fairly stated, in all
material respects, based on criteria established in Internal
Control Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission.
Charlotte, North Carolina
February 25, 2011
242 Bank
of America 2010
Report
of Management on Internal Control Over Financial Reporting
The Report of Management on Internal Control over Financial
Reporting is set forth on page 135 and incorporated herein
by reference. The Report of our Independent Registered Public
Accounting Firm with respect to the Corporations internal
control over financial reporting is set forth on page 136
and incorporated herein by reference.
Changes in
Internal Control Over Financial Reporting
There have been no changes in our internal control over
financial reporting (as defined in
Rule 13a-15(f)
of the Exchange Act) during the quarter ended December 31,
2010, that materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
|
|
Item 9B.
|
Other
Information
|
On February 24, 2011, the Board approved amendments to the
Corporations Bylaws that provide for the number of
directors to be established by resolution of the Board as well
as other non-substantive changes, such as updating the names of
the Board committees. The prior Bylaw provision stated that the
number of directors would be no less than five nor more than 30
with the minimum and maximum to be established by the Board. The
description of the
Amended and Restated Bylaws does not purport to be complete and
is qualified in its entirety by reference to the Amended and
Restated Bylaws, which are attached as Exhibit 3(b) to this
report.
On February 24, 2011, the company and Brian T. Moynihan,
President and Chief Executive Officer, entered into a
non-exclusive aircraft time sharing agreement (the
Agreement), which will permit Mr. Moynihan to
lease the companys aircraft for his use. Mr. Moynihan
will pay the company for such use of the aircraft pursuant to
the terms of the Agreement, provided such payment does not
exceed the maximum amount allowed under Federal Aviation
Administration regulations. The Agreement automatically renews
each year and each party shall have the right to terminate the
Agreement at anytime with 30 days written notice to
the other party. The Agreement also shall terminate immediately
if Mr. Moynihan no longer serves as the companys
Chief Executive Officer. The company and Pilot In Command retain
the authority to determine what flights may be scheduled under
the Agreement and when a flight may be cancelled or changed for
safety reasons. The description of the Agreement does not
purport to be complete and is qualified in its entirety by
reference to the Agreement, which is attached as
Exhibit 10(jjj) to this report.
Bank of America
2010 243
Part III
Bank of America
Corporation and Subsidiaries
Item 10. Directors,
Executive Officers and Corporate Governance
Information included under the following captions in the
Corporations proxy statement relating to its 2011 annual
meeting of stockholders, scheduled to be held on May 11, 2011
(the 2011 Proxy Statement), is incorporated herein by reference:
|
|
|
Proposal 1: Election of Directors The
Nominees;
|
|
Section 16(a) Beneficial Ownership Reporting
Compliance;
|
|
Corporate Governance Additional Corporate
Governance Information, Committee Charters and Code of
Ethics; and
|
|
Corporate Governance Code of Ethics.
|
Additional information required by Item 10 with respect to
executive officers is set forth under Executive Officers
of The Registrant in Part I of this report.
Information regarding the Corporations directors is set
forth in the 2011 Proxy Statement under the caption
Proposal 1: Election of Directors The
Nominees.
|
|
Item 11.
|
Executive
Compensation
|
Incorporated by reference to:
|
|
|
Compensation Discussion and Analysis;
|
|
Executive Compensation;
|
|
Director Compensation;
|
|
Compensation and Benefits Committee Report; and
|
|
Compensation and Benefits Committee Interlocks and Insider
Participation in the 2011 Proxy Statement.
|
Item 12. Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
Incorporated by reference to:
|
|
|
Stock Ownership of Directors and Executive Officers
in the 2011 Proxy Statement.
|
The following table presents information on equity compensation
plans at December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
|
|
|
Remaining for
|
|
|
|
Number of Shares to
|
|
|
Weighted-Average
|
|
|
Future Issuance
|
|
|
|
be Issued Under
|
|
|
Exercise Price of
|
|
|
Under Equity
|
|
|
|
Outstanding Options
|
|
|
Outstanding
|
|
|
Compensation
|
|
Plan
Category (1,
2)
|
|
and
Rights (3)
|
|
|
Options (4)
|
|
|
Plans
|
|
Plans approved by the Corporations shareholders
|
|
|
336,787,693
|
|
|
$
|
41.09
|
|
|
|
522,759,571
|
(5)
|
Plans not approved by the Corporations
shareholders (6)
|
|
|
94,581,419
|
|
|
$
|
69.91
|
|
|
|
69,633,770
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
431,369,112
|
|
|
$
|
48.95
|
|
|
|
592,393,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
This table does not include
outstanding options to purchase 9,365,888 shares of the
Corporations common stock that were assumed by the
Corporation in connection with prior acquisitions, under whose
plans the options were originally granted. The weighted-average
option price of these assumed options was $87.21 at
December 31, 2010. Also, at December 31, 2010 there
were 216,956 vested deferred restricted stock units associated
with these plans. No additional awards were granted under these
plans following the respective dates of acquisition.
|
(2) |
|
This table does not include
outstanding options to purchase 9,560,763 shares of the
Corporations common stock that were assumed by the
Corporation in connection with the Merrill Lynch acquisition,
which were originally issued under certain Merrill Lynch plans.
The weighted-average option price of these assumed options was
$56.85 at December 31, 2010. Also, at December 31,
2010 there were 18,985,432 outstanding restricted stock units
and 1,760,307 vested deferred restricted stock units and stock
option gain deferrals associated with such plans. These Merrill
Lynch plans were frozen at the time of the acquisition and no
additional awards may be granted under these plans. However, as
previously approved by the Corporations shareholders, if
any of the outstanding awards under these frozen plans
subsequently are cancelled, forfeited or settled in cash, the
shares relating to such awards thereafter will be available for
future awards issued under the Corporations Key Associate
Stock Plan (KASP).
|
(3) |
|
Includes 160,534,411 outstanding
restricted stock units and 117,363 vested deferred restricted
stock units under plans approved by the Corporations
shareholders and 28,521,170 outstanding restricted stock units
under plans not approved by the Corporations shareholders.
|
(4) |
|
Does not reflect restricted stock
units included in the first column, which do not have an
exercise price.
|
(5) |
|
Includes 522,081,106 shares of
common stock available for future issuance under the KASP
(including 20,875,047 shares originally subject to awards
outstanding under frozen Merrill Lynch plans at the time of the
acquisition which subsequently have been cancelled, forfeited or
settled in cash and become available for issuance under the
KASP, as described in note (2) above) and
678,465 shares of common stock which are available for
future issuance under the Corporations Directors
Stock Plan.
|
(6) |
|
In connection with the Merrill
Lynch acquisition, the Corporation assumed and has continued to
issue awards in accordance with applicable NYSE listing
standards under the following plans, which were not approved by
the Corporations shareholders: the Merrill Lynch Employee
Stock Compensation Plan (ESCP) and the Merrill Lynch Employee
Stock Purchase Plan (ESPP), both of which were approved by
Merrill Lynchs shareholders prior to the acquisition. The
material features of these plans are described below under the
heading Description of Plans Not Approved by the
Corporations Shareholders.
|
(7) |
|
This amount includes
60,189,074 shares of common stock available for future
issuance under the ESCP and 9,444,696 shares of common
stock available for future issuance under the ESPP.
|
Description of
Plans Not Approved by the Corporations
Shareholders
Merrill Lynch Employee Stock Compensation Plan
(ESCP). The ESCP covers associates who were
salaried key employees of Merrill Lynch or its subsidiaries
immediately prior to the effective date of the Merrill Lynch
acquisition, other than executive officers. Under the ESCP, the
Corporation may award restricted shares, restricted units,
incentive stock options, nonqualified stock options and stock
appreciation rights. Awards of restricted shares and restricted
units are subject to a vesting schedule specified in the grant
documentation. Restricted shares and restricted units under the
ESCP may generally be cancelled prior to the vesting date in the
event of (i) violation of covenants specified in the grant
documentation (including, but not limited to, non-competition,
non-solicitation, nondisparagement and confidentiality
covenants) or (ii) termination of employment prior to the
end of the vesting period (except in certain limited
circumstances, such as death, disability and retirement).
Options have an exercise price equal to the fair market value of
the stock on the date of grant. Options granted under the ESCP
expire not more than 10 years from the date of grant, and
the applicable grant documentation specifies the extent to which
options may be exercised during their respective terms,
including in the event of an associates death, disability
or termination of employment. Shares that are cancelled,
forfeited or settled in cash from an additional frozen Merrill
Lynch plan also will become available for grant under the ESCP.
Merrill Lynch Employee Stock Purchase Plan
(ESPP). The purpose of the ESPP is to give
associates employed by Merrill Lynch or an eligible subsidiary
an opportunity to purchase the Corporations common stock
through payroll
244 Bank
of America 2010
deductions (an employee can elect either payroll deductions of
one percent to 10 percent of current compensation or an
annual dollar amount equal to a maximum of 10 percent of
current eligible compensation). Shares are purchased quarterly
at 95 percent of the fair market value (average of the
highest and lowest share prices) on the date of the purchase and
the maximum annual contribution is $23,750. An associate is
eligible to participate if he or she was employed by Merrill
Lynch or any participating subsidiary for at least
12 months prior to the start of the new plan year.
For additional information on our equity compensation plans see
Note 20 Stock-based Compensation Plans to the
Consolidated Financial Statements which is incorporated herein
by reference.
Item 13. Certain
Relationships and Related Transactions, and Director
Independence
Incorporated by reference to:
|
|
|
Review of Related Person Transactions and Certain
Transactions; and
|
|
Corporate Governance Director Independence in
the 2011 Proxy Statement.
|
|
|
Item 14.
|
Principal
Accounting Fees and Services
|
Incorporated by reference to:
|
|
|
Proposal 4: Ratification of the Registered Independent
Public Accounting Firm for 2011 PwCs 2010 and 2009
Fees and Pre-Approval Policies and
Procedures in the 2011 Proxy Statement.
|
Bank of America
2010 245
Part IV
Bank of America
Corporation and Subsidiaries
|
|
Item 15.
|
Exhibits,
Financial Statement Schedules
|
|
|
|
|
|
The following documents are filed as part of this report:
|
(1)
|
|
Financial Statements:
|
|
|
Report of Independent Registered Public Accounting Firm
|
|
|
Consolidated Statement of Income for the years ended December
31, 2010, 2009 and 2008
|
|
|
Consolidated Balance Sheet at December 31, 2010 and 2009
|
|
|
Consolidated Statement of Changes in Shareholders Equity
for the years ended December 31, 2010, 2009 and 2008
|
|
|
Consolidated Statement of Cash Flows for the years ended
December 31, 2010, 2009 and 2008
|
|
|
Notes to Consolidated Financial Statements
|
(2)
|
|
Schedules:
|
|
|
None
|
(3)
|
|
The exhibits filed as part of this report and exhibits
incorporated herein by reference to other documents are listed
in the Index to Exhibits to this Annual Report on Form 10-K
(pages E-1 through E-6, including executive compensation plans
and arrangements which are listed under Exhibit Nos. 10 (a)
through 10(III)).
|
With the exception of the information expressly incorporated
herein by reference, the 2011 Proxy Statement shall not be
deemed filed as part of this Annual Report on
Form 10-K.
246 Bank
of America 2010
Signatures
Pursuant to the requirements of Section 13 of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: February 25, 2011
Bank of America Corporation
|
|
|
|
By:
|
* /s/ Brian
T. Moynihan
|
Brian T. Moynihan
Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
*/s/ Brian T. Moynihan
Brian
T. Moynihan
|
|
Chief Executive Officer, President and Director
(Principal Executive Officer)
|
|
February 25, 2011
|
|
|
|
|
|
*/s/ Charles H. Noski
Charles
H. Noski
|
|
Chief Financial Officer and Executive Vice President
(Principal Financial Officer)
|
|
February 25, 2011
|
|
|
|
|
|
*/s/ Neil A. Cotty
Neil
A. Cotty
|
|
Chief Accounting Officer
(Principal Accounting Officer)
|
|
February 25, 2011
|
|
|
|
|
|
*/s/ Susan S. Bies
Susan
S. Bies
|
|
Director
|
|
February 25, 2011
|
|
|
|
|
|
*/s/ William P. Boardman
William
P. Boardman
|
|
Director
|
|
February 25, 2011
|
|
|
|
|
|
*/s/ Frank P. Bramble, Sr.
Frank
P. Bramble, Sr.
|
|
Director
|
|
February 25, 2011
|
|
|
|
|
|
*/s/ Virgis W. Colbert
Virgis
W. Colbert
|
|
Director
|
|
February 25, 2011
|
|
|
|
|
|
*/s/ Charles K. Gifford
Charles
K. Gifford
|
|
Director
|
|
February 25, 2011
|
|
|
|
|
|
*/s/ Charles O. Holliday, Jr.
Charles
O. Holliday, Jr.
|
|
Director
|
|
February 25, 2011
|
|
|
|
|
|
*/s/ D. Paul Jones
D.
Paul Jones
|
|
Director
|
|
February 25, 2011
|
|
|
|
|
|
*/s/ Monica C. Lozano
Monica
C. Lozano
|
|
Director
|
|
February 25, 2011
|
|
|
|
|
|
*/s/ Thomas J. May
Thomas
J. May
|
|
Director
|
|
February 25, 2011
|
|
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|
*/s/ Donald E. Powell
Donald
E. Powell
|
|
Director
|
|
February 25, 2011
|
Bank of America
2010 247
|
|
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Signature
|
|
Title
|
|
Date
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*/s/ Charles O. Rossotti
Charles
O. Rossotti
|
|
Director
|
|
February 25, 2011
|
|
|
|
|
|
*/s/ Robert W. Scully
Robert
W. Scully
|
|
Director
|
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February 25, 2011
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*By: /s/ Craig
T. Beazer
Craig
T. Beazer
Attorney-in-Fact
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248 Bank
of America 2010
Index
to Exhibits
|
|
|
Exhibit No.
|
|
Description
|
2(a)
|
|
Agreement and Plan of Merger dated as of September 15, 2008
by and between Merrill Lynch & Co., Inc. and the
registrant, incorporated by reference to Exhibit 2.1 of
registrants Current Report on
Form 8-K
(File
No. 1-6523)
filed September 18, 2008.
|
3(a)
|
|
Amended and Restated Certificate of Incorporation of registrant,
as in effect on the date hereof, incorporated by reference to
Exhibit 3(a) of the registrants Quarterly Report on
Form 10-Q
(File
No. 1-6523)
for the quarter ended March 31, 2010.
|
(b)
|
|
Amended and Restated Bylaws of registrant as of
February 24, 2011, filed herewith.
|
4(a)
|
|
Indenture dated as of January 1, 1995 between registrant
(successor to NationsBank Corporation) and BankAmerica National
Trust Company incorporated by reference to Exhibit 4.1
of registrants Registration Statement on
Form S-3
(Registration
No. 33-57533)
filed on February 1, 1995; First Supplemental Indenture
thereto dated as of September 18, 1998, between registrant
and U.S. Bank Trust National Association (successor to
BankAmerica National Trust Company), incorporated by
reference to Exhibit 4.3 of registrants Current
Report on
Form 8-K
(File
No. 1-6523)
filed November 18, 1998; Second Supplemental Indenture
thereto dated as of May 7, 2001 between registrant, U.S.
Bank Trust National Association, as Prior Trustee, and The
Bank of New York, as Successor Trustee, incorporated by
reference to Exhibit 4.4 of registrants Current
Report on
Form 8-K
(File
No. 1-6523)
filed June 14, 2001; Third Supplemental Indenture thereto
dated as of July 28, 2004, between registrant and The Bank
of New York, incorporated by reference to Exhibit 4.2 of
registrants Current Report on
Form 8-K
(File
No. 1-6523)
filed August 27, 2004; Fourth Supplemental Indenture
thereto dated as of April 28, 2006 between the registrant
and The Bank of New York, incorporated by reference to
Exhibit 4.6 of registrants Registration Statement on
Form S-3
(Registration
No. 333-133852)
filed on May 5, 2006; and Fifth Supplemental Indenture
dated as of December 1, 2008 between the registrant and The
Bank of New York Mellon Trust Company, N.A. (successor to
The Bank of New York), incorporated by reference to
Exhibit 4.1 of registrants Current Report on
Form 8-K
(File
No. 1-6523)
filed December 5, 2008.
|
(b)
|
|
Form of Senior Registered Note, incorporated by reference to
Exhibit 4.7 of registrants Registration Statement on
Form S-3
(Registration
No. 333-133852)
filed on May 5, 2006.
|
(c)
|
|
Form of Global Senior Medium-Term Note, Series L,
incorporated by reference to Exhibit 4.12 of
registrants Registration Statement on
Form S-3
(Registration
No. 333-158663)
filed on April 20, 2009.
|
(d)
|
|
Indenture dated as of January 1, 1995 between registrant
(successor to NationsBank Corporation) and The Bank of New York,
incorporated by reference to Exhibit 4.5 of
registrants Registration Statement on
Form S-3
(Registration
No. 33-57533)
filed on February 1, 1995; First Supplemental Indenture
thereto dated as of August 28, 1998, between registrant and
The Bank of New York, incorporated by reference to
Exhibit 4.8 of registrants Current Report on
Form 8-K
(File
No. 1-6523)
filed November 18, 1998; and Second Supplemental Indenture
thereto dated as of January 25, 2007, between registrant
and The Bank of New York Trust Company, N.A. (successor to
The Bank of New York), incorporated by reference to
Exhibit 4.3 of registrants Registration Statement on
Form S-4
(Registration
No. 333-141361)
filed on March 16, 2007.
|
(e)
|
|
Form of Subordinated Registered Note, incorporated by reference
to Exhibit 4.10 of registrants Registration Statement
on
Form S-3
(Registration
No. 333-133852)
filed on May 5, 2006.
|
(f)
|
|
Form of Global Subordinated Medium-Term Note, Series L,
incorporated by reference to Exhibit 4.17 of
registrants Registration Statement on
Form S-3
(Registration
No. 333-158663)
filed on April 20, 2009.
|
(g)
|
|
Amended and Restated Agency Agreement dated as of July 22,
2010, among the registrant, Bank of America, N.A., London
Branch, as Principal Agent, and Merrill Lynch International Bank
Limited, as Registrar and Transfer Agent, incorporated by
reference to Exhibit 4.1 of the registrants Current
Report on
Form 8-K
(File
No. 1-6523)
filed July 27, 2010.
|
(h)
|
|
Amended and Restated Senior Indenture dated as of July 1,
2001 between registrant and The Bank of New York, pursuant to
which registrant issued its Senior
InterNotessm,
incorporated by reference to Exhibit 4.1 of
registrants Registration Statement on
Form S-3
(Registration
No. 333-65750)
filed on July 24, 2001.
|
(i)
|
|
Amended and Restated Subordinated Indenture dated as of
July 1, 2001 between registrant and The Bank of New York,
pursuant to which registrant issued its Subordinated
InterNotessm,
incorporated by reference to Exhibit 4.2 of
registrants Registration Statement on
Form S-3
(Registration
No. 333-65750)
filed on July 24, 2001.
|
(j)
|
|
Restated Indenture dated as of November 1, 2001 between
registrant and The Bank of New York, incorporated by reference
to Exhibit 4.10 of amendment No. 1 to
registrants Registration Statement on
Form S-3
(Registration
No. 333-70984)
filed on November 15, 2001.
|
(k)
|
|
First Supplemental Indenture dated as of December 14, 2001
to the Restated Indenture dated as of November 1, 2001
between registrant and The Bank of New York pursuant to which
registrant issued its 7% Junior Subordinated Notes due 2031,
incorporated by reference to Exhibit 4.3 of
registrants Current Report on
Form 8-K
(File
No. 1-6523)
filed December 14, 2001.
|
(l)
|
|
Second Supplemental Indenture dated as of January 31, 2002
to the Restated Indenture dated as of November 1, 2001
between registrant and The Bank of New York pursuant to which
registrant issued its 7% Junior Subordinated Notes due 2032,
incorporated by reference to Exhibit 4.3 of
registrants Current Report on
Form 8-K
(File
No. 1-6523)
filed January 31, 2002.
|
(m)
|
|
Third Supplemental Indenture dated as of August 9, 2002 to
the Restated Indenture dated as of November 1, 2001 between
registrant and The Bank of New York pursuant to which registrant
issued its 7% Junior Subordinated Notes due 2032, incorporated
by reference to Exhibit 4.3 of registrants Current
Report on
Form 8-K
(File
No. 1-6523)
filed August 9, 2002.
|
(n)
|
|
Fourth Supplemental Indenture dated as of April 30, 2003 to
the Restated Indenture dated as of November 1, 2001 between
registrant and The Bank of New York pursuant to which registrant
issued its
57/8%
Junior Subordinated Notes due 2033, incorporated by reference to
Exhibit 4.3 of registrants Current Report on
Form 8-K
(File
No. 1-6523)
filed April 30, 2003.
|
E-1
|
|
|
Exhibit No.
|
|
Description
|
(o)
|
|
Fifth Supplemental Indenture dated as of November 3, 2004
to the Restated Indenture dated as of November 1, 2001
between registrant and The Bank of New York pursuant to which
registrant issued its 6% Junior Subordinated Notes due 2034,
incorporated by reference to Exhibit 4.3 of
registrants Current Report on
Form 8-K
(File
No. 1-6523)
filed November 3, 2004.
|
(p)
|
|
Sixth Supplemental Indenture dated as of March 8, 2005 to
the Restated Indenture dated as of November 1, 2001 between
the registrant and The Bank of New York pursuant to which
registrant issued its
55/8%
Junior Subordinated Notes due 2035, incorporated by reference to
Exhibit 4.3 of registrants Current Report on
Form 8-K
(File
No. 1-6523)
filed March 9, 2005.
|
(q)
|
|
Seventh Supplemental Indenture dated as of August 10, 2005
to the Restated Indenture dated as of November 1, 2001
between the registrant and The Bank of New York pursuant to
which registrant issued its
51/4%
Junior Subordinated Notes due 2035, incorporated by reference to
Exhibit 4.3 of registrants Current Report on
Form 8-K
(File
No. 1-6523)
filed August 11, 2005.
|
(r)
|
|
Eighth Supplemental Indenture dated as of August 25, 2005
to the Restated Indenture dated as of November 1, 2001
between the registrant and The Bank of New York pursuant to
which registrant issued its 6% Junior Subordinated Notes due
2035, incorporated by reference to Exhibit 4.3 of the
Current Report on
Form 8-K
(File
No. 1-6523)
filed August 26, 2005.
|
(s)
|
|
Tenth Supplemental Indenture dated as of March 28, 2006 to
the Restated Indenture dated as of November 1, 2001 between
the registrant and The Bank of New York pursuant to which
registrant issued its
61/4%
Junior Subordinated Notes due 2055, incorporated by reference to
Exhibit 4(bb) of registrants 2006 Annual Report on
Form 10-K
(File
No. 1-6523)
(the 2006
10-K).
|
(t)
|
|
Eleventh Supplemental Indenture dated as of May 23, 2006 to
the Restated Indenture dated as of November 1, 2001 between
the registrant and The Bank of New York pursuant to which
registrant issued its
65/8%
Junior Subordinated Notes due 2036, incorporated by reference to
Exhibit 4(cc) of the 2006
10-K.
|
(u)
|
|
Twelfth Supplemental Indenture dated as of August 2, 2006
to the Restated Indenture dated as of November 1, 2001
between the registrant and The Bank of New York pursuant to
which registrant issued its
67/8%
Junior Subordinated Notes due 2055, incorporated by reference to
Exhibit 4(dd) of the 2006
10-K.
|
(v)
|
|
Thirteenth Supplemental Indenture dated as of February 16,
2007 to the Restated Indenture dated as of November 1, 2001
between the registrant and The Bank of New York
Trust Company, N.A. (successor to The Bank of New York)
pursuant to which registrant issued its Remarketable Floating
Rate Junior Subordinated Notes due 2043, incorporated by
reference to Exhibit 4.6 of registrants Current
Report on
Form 8-K
(File
No. 1-6523)
filed February 16, 2007.
|
(w)
|
|
Fourteenth Supplemental Indenture dated as of February 16,
2007 to the Restated Indenture dated as of November 1, 2001
between the registrant and The Bank of New York
Trust Company, N.A. (successor to The Bank of New York)
pursuant to which registrant issued its Remarketable Fixed Rate
Junior Subordinated Notes due 2043, incorporated by reference to
Exhibit 4.7 of registrants Current Report on
Form 8-K
(File
No. 1-6523)
filed February 16, 2007.
|
(x)
|
|
Fifteenth Supplemental Indenture dated as of May 31, 2007
to the Restated Indenture dated as of November 1, 2001
between the registrant and The Bank of New York
Trust Company, N.A. (successor to The Bank of New York)
pursuant to which registrant issued its Floating Rate Junior
Subordinated Notes due 2056, incorporated by reference to
Exhibit 4.4 of registrants Current Report on
Form 8-K
(File
No. 1-6523)
filed June 1, 2007.
|
(y)
|
|
Form of Supplemental Indenture to be used in connection with the
issuance of registrants junior subordinated notes,
including form of Junior Subordinated Note, incorporated by
reference to Exhibit 4.44 of registrants Registration
Statement on
Form S-3
(Registration
No. 333-133852)
filed on May 5, 2006.
|
(z)
|
|
Form of Guarantee with respect to capital securities to be
issued by various capital trusts, incorporated by reference to
Exhibit 4.47 of registrants Registration Statement on
Form S-3
(Registration
No. 333-133852)
filed on May 5, 2006.
|
(aa)
|
|
Agreement of Appointment and Acceptance dated as of
December 29, 2006 between registrant and The Bank of New
York Trust Company, N.A., incorporated by reference to
Exhibit 4(aaa) of the 2006
10-K.
|
(bb)
|
|
Global Agency Agreement dated as of July 25, 2007 among
Bank of America, N.A., Deutsche Bank Trust Company
Americas, Deutsche Bank AG, London Branch, and Deutsche Bank
Luxembourg S.A, incorporated by reference to Exhibit 4(x)
of registrants 2008 Annual Report on
Form 10-K
(File
No. 1-6523)
(the 2008
10-K).
|
(cc)
|
|
Supplement to Global Agency Agreement dated as of
December 19, 2008 among Bank of America, N.A., Deutsche
Bank Trust Company Americas, Deutsche Bank AG, London
Branch and Deutsche Bank Luxembourg S.A, incorporated by
reference to Exhibit 4(y) of the 2008
10-K.
|
(dd)
|
|
Supplement to Global Agency Agreement dated as of April 30,
2010 among Bank of America, N.A., Deutsche Bank
Trust Company Americas, Deutsche Bank AG, London Branch and
Deutsche Bank Luxembourg, S.A., incorporated by reference to
Exhibit 4(a) of the registrants Quarterly Report on
Form 10-Q
(File
No. 1-6523)
for the quarter ended June 30, 2010.
|
(ee)
|
|
Sixth Supplemental Indenture dated as of February 23, 2011
to the Indenture dated as of January 1, 1995 between the
registrant and The Bank of New York Mellon Trust Company,
N.A., filed herewith.
|
(ff)
|
|
Third Supplemental Indenture dated as of February 23, 2011
to the Indenture dated as of January 1, 1995 between the
registrant and The Bank of New York Mellon Trust Company,
N.A., filed herewith.
|
(gg)
|
|
First Supplemental Indenture dated as of February 23, 2011
to the Amended and Restated Senior Indenture dated as of
July 1, 2001 between the registrant and The Bank of
New York Mellon Trust Company, N.A. (successor to The
Bank of New York ), filed herewith.
|
(hh)
|
|
First Supplemental Indenture dated as of February 23, 2011
to the Amended and Restated Subordinated Indenture dated as of
July 1, 2001 between the registrant and The Bank of New
York Mellon Trust Company, N.A. (successor to The Bank of
New York), filed herewith.
|
E-2
|
|
|
Exhibit No.
|
|
Description
|
|
|
The registrant and its subsidiaries have other long-term debt
agreements, but these are omitted pursuant
Item 601(b)(4)(iii) of
Regulation S-K.
Copies of these agreements will be furnished to the Commission
on request.
|
10(a)
|
|
NationsBank Corporation and Designated Subsidiaries Supplemental
Executive Retirement Plan, incorporated by reference to
Exhibit 10(j) of registrants 1994 Annual Report on
Form 10-K
(File
No. 1-6523)
(the 1994
10-K);
Amendment thereto dated as of June 28, 1989, incorporated
by reference to Exhibit 10(g) of registrants 1989
Annual Report on
Form 10-K
(File
No. 1-6523)
(the 1989
10-K);
Amendment thereto dated as of June 27, 1990, incorporated
by reference to Exhibit 10(g) of registrants 1990
Annual Report on
Form 10-K
(File
No. 1-6523)
(the 1990
10-K);
Amendment thereto dated as of July 21, 1991, incorporated
by reference to Exhibit 10(bb) of registrants 1991
Annual Report on
Form 10-K
(File
No. 1-6523)
(the 1991
10-K);
Amendments thereto dated as of December 3, 1992 and
December 15, 1992, incorporated by reference to
Exhibit 10(l) of registrants 1992 Annual Report on
Form 10-K
(File
No. 1-6523)
(the 1992
10-K);
Amendment thereto dated as of September 28, 1994,
incorporated by reference to Exhibit 10(j) of
registrants 1994
10-K;
Amendments thereto dated March 27, 1996 and June 25,
1997, incorporated by reference to Exhibit 10(c) of
registrants 1997 Annual Report on
Form 10-K;
Amendments thereto dated April 10, 1998, June 24, 1998
and October 1, 1998, incorporated by reference to
Exhibit 10(b) of registrants 1998 Annual Report on
Form 10-K
(File
No. 1-6523)
(the 1998
10-K);
Amendment thereto dated December 14, 1999, incorporated by
reference to Exhibit 10(b) of registrants 1999 Annual
Report on
Form 10-K;
Amendment thereto dated as of March 28, 2001, incorporated
by reference to Exhibit 10(b) of registrants 2001
Annual Report on
Form 10-K
(File
No. 1-6523)
(the 2001
10-K);
and Amendment thereto dated December 10, 2002, incorporated
by reference to Exhibit 10(b) of registrants 2002
Annual Report on
Form 10-K
(File
No. 1-6523)
(the 2002
10-K).*
|
(b)
|
|
NationsBank Corporation and Designated Subsidiaries Deferred
Compensation Plan for Key Employees, incorporated by reference
to Exhibit 10(k) of the 1994
10-K;
Amendment thereto dated as of June 28, 1989, incorporated
by reference to Exhibit 10(h) of the 1989
10-K;
Amendment thereto dated as of June 27, 1990, incorporated
by reference to Exhibit 10(h) of the 1990
10-K;
Amendment thereto dated as of July 21, 1991, incorporated
by reference to Exhibit 10(bb) of the 1991
10-K;
Amendment thereto dated as of December 3, 1992,
incorporated by reference to Exhibit 10(m) of the 1992
10-K; and
Amendments thereto dated April 10, 1998 and October 1,
1998, incorporated by reference to Exhibit 10(b) of the
1998 10-K.*
|
(c)
|
|
Bank of America Pension Restoration Plan, as amended and
restated effective January 1, 2009, incorporated by
reference to Exhibit 10(c) of registrants 2008
10-K;
Amendment thereto dated December 18, 2009, incorporated by
reference to Exhibit 10(c) of the registrants 2009
Annual Report on
Form 10-K
(File
No. 1-6523)
(the 2009
10-K);
and Amendment thereto dated December 16, 2010, filed
herewith.*
|
(d)
|
|
NationsBank Corporation Benefit Security Trust dated as of
June 27, 1990, incorporated by reference to
Exhibit 10(t) of the 1990
10-K; First
Supplement thereto dated as of November 30, 1992,
incorporated by reference to Exhibit 10(v) of the 1992
10-K; and
Trustee Removal/Appointment Agreement dated as of
December 19, 1995, incorporated by reference to
Exhibit 10(o) of registrants 1995 Annual Report on
Form 10-K
(File
No. 1-6523).*
|
(e)
|
|
Bank of America 401(k) Restoration Plan, as amended and restated
effective January 1, 2009, incorporated by reference to
Exhibit 10(a) of registrants Quarterly Report on
Form 10-Q
(File
No. 1-6523)
for the quarter ended September 30, 2009; Amendment thereto
dated December 18, 2009, incorporated by reference to
Exhibit 10(e) of the 2009
10-K; and
Amendment thereto dated December 16, 2010, filed herewith
in Exhibit 10(c).*
|
(f)
|
|
Bank of America Executive Incentive Compensation Plan, as
amended and restated effective December 10, 2002,
incorporated by reference to Exhibit 10(g) of the 2002
10-K.*
|
(g)
|
|
Bank of America Director Deferral Plan, as amended and restated
effective January 1, 2005, incorporated by reference to
Exhibit 10(g) of the registrants 2006
10-K.*
|
(h)
|
|
Bank of America Corporation Directors Stock Plan as
amended and restated effective April 26, 2006, incorporated
by reference to Exhibit 10.2 to the registrants
Current Report on
Form 8-K
filed December 14, 2005; form of Restricted Stock Award
Agreement incorporated by reference to Exhibit 10(h) of
registrants 2004 Annual Report on
Form 10-K
(File
No. 1-6523)
(the 2004
10-K);
and Form of Directors Stock Plan Restricted Stock Award
Agreement for Nonemployee Chairman, incorporated by reference to
Exhibit 10(b) of registrants Quarterly Report on
Form 10-Q
(File
No. 1-6523)
for the quarter ended September 30, 2009.
|
E-3
|
|
|
Exhibit No.
|
|
Description
|
(i)
|
|
Bank of America Corporation Key Associate Stock Plan, as amended and restated effective April 28, 2010, incorporated by reference to Exhibit 10.2 of registrants Current Report on Form 8-K (File No. 1-6523) filed May 3, 2010*; and the following forms of award agreement under the plan:
Form of Restricted Stock Units Award Agreement (February 2007 grant), incorporated by reference to Exhibit 10(i) of the registrants 2007 Annual Report on Form 10-K (File No. 1-6523) (the 2007 10-K)*;
Form of Stock Option Award Agreement (February 2007 grant), incorporated by reference to Exhibit 10(i) of the 2007 10-K*;
|
|
|
Form of Restricted Stock Units Award
Agreement for non-executives (February 2008 grant), incorporated
by reference to Exhibit 10(i) of the 2009
10-K*;
|
|
|
Form of Stock Option Award Agreement for
non-executives (February 2008 grant), incorporated by reference
to Exhibit 10(i) of the 2009
10-K*;
|
|
|
Restricted Stock Units Award Agreement
for Sallie L. Krawcheck dated January 15, 2010, filed
herewith*;
|
|
|
Form of Restricted Stock Units Award
Agreement for executives (February 2010 grant), filed herewith*;
|
|
|
Form of Restricted Stock Award Agreement
(February 2010 grant), filed herewith*;
|
|
|
Form of Performance Contingent
Restricted Stock Units Award Agreement, incorporated by
reference to Exhibit 10.3 of registrants Current
Report on
Form 8-K
(File
No. 1-6523)
filed January 31, 2011*;
|
|
|
Form of Performance Contingent
Restricted Stock Units Award Agreement (February 2011 grant),
filed herewith*; and
|
|
|
Form of Restricted Stock Units Award
Agreement for non-executives (February 2011 grant), filed
herewith*.
|
(j)
|
|
Amendment to various plans in connection with FleetBoston
Financial Corporation merger, incorporated by reference to
Exhibit 10(v) of registrants 2003 Annual Report on
Form 10-K.*
|
(k)
|
|
FleetBoston Supplemental Executive Retirement Plan, as amended
by Amendment One thereto effective January 1, 1997,
Amendment Two thereto effective October 15, 1997, Amendment
Three thereto effective July 1, 1998, Amendment Four
thereto effective August 15, 1999, Amendment Five thereto
effective January 1, 2000, Amendment Six thereto effective
October 10, 2001, Amendment Seven thereto effective
February 19, 2002, Amendment Eight thereto effective
October 15, 2002, Amendment Nine thereto effective
January 1, 2003, Amendment Ten thereto effective
October 21, 2003, and Amendment Eleven thereto effective
December 31, 2004, incorporated by reference to
Exhibit 10(r) of the 2004
10-K.*
|
(l)
|
|
FleetBoston Amended and Restated 1992 Stock Option and
Restricted Stock Plan, incorporated by reference to
Exhibit 10(s) of the 2004
10-K.*
|
(m)
|
|
FleetBoston Executive Deferred Compensation Plan No. 2, as
amended by Amendment One thereto effective February 1,
1999, Amendment Two thereto effective January 1, 2000,
Amendment Three thereto effective January 1, 2002,
Amendment Four thereto effective October 15, 2002,
Amendment Five thereto effective January 1, 2003, and
Amendment Six thereto effective December 16, 2003,
incorporated by reference to Exhibit 10(u) of the 2004
10-K.*
|
(n)
|
|
FleetBoston Executive Supplemental Plan, as amended by Amendment
One thereto effective January 1, 2000, Amendment Two
thereto effective January 1, 2002, Amendment Three thereto
effective January 1, 2003, Amendment Four thereto effective
January 1, 2003, and Amendment Five thereto effective
December 31, 2004, incorporated by reference to
Exhibit 10(v) of the 2004
10-K.*
|
(o)
|
|
Retirement Income Assurance Plan for Legacy Fleet, as amended
and restated effective January 1, 2009, incorporated by
reference to Exhibit 10(p) of the 2009
10-K; and
Amendment thereto dated December 16, 2010, filed herewith
in Exhibit 10(c).*
|
(p)
|
|
Trust Agreement for the FleetBoston Executive Deferred
Compensation Plans No. 1 and 2, incorporated by reference
to Exhibit 10(x) of the 2004
10-K.
|
(q)
|
|
Trust Agreement for the FleetBoston Executive Supplemental
Plan, incorporated by reference to Exhibit 10(y) of the
2004 10-K.*
|
(r)
|
|
Trust Agreement for the FleetBoston Retirement Income
Assurance Plan and the FleetBoston Supplemental Executive
Retirement Plan, incorporated by reference to Exhibit 10(z)
of the 2004
10-K.*
|
(s)
|
|
FleetBoston Directors Deferred Compensation and Stock Unit Plan,
as amended by an amendment thereto effective as of July 1,
2000, a Second Amendment thereto effective as of January 1,
2003, a Third Amendment thereto dated April 14, 2003, and a
Fourth Amendment thereto effective January 1, 2004,
incorporated by reference to Exhibit 10(aa) of the 2004
10-K.*
|
(t)
|
|
FleetBoston 1996 Long-Term Incentive Plan, incorporated by
reference to Exhibit 10(bb) of the 2004
10-K.*
|
(u)
|
|
BankBoston Corporation and its Subsidiaries Deferred
Compensation Plan, as amended by a First Amendment thereto, a
Second Amendment thereto, a Third Amendment thereto, an
Instrument thereto (providing for the cessation of accruals
effective December 31, 2000) and an Amendment thereto
dated December 24, 2001, incorporated by reference to
Exhibit 10(cc) of the 2004
10-K.*
|
(v)
|
|
BankBoston, N.A. Bonus Supplemental Employee Retirement Plan, as
amended by a First Amendment, a Second Amendment, a Third
Amendment and a Fourth Amendment thereto, incorporated by
reference to Exhibit 10(dd) of the 2004
10-K.*
|
(w)
|
|
Description of BankBoston Supplemental Life Insurance Plan,
incorporated by reference to Exhibit 10(ee) of the 2004
10-K.*
|
(x)
|
|
BankBoston, N.A. Excess Benefit Supplemental Employee Retirement
Plan, as amended by a First Amendment, a Second Amendment, a
Third Amendment thereto (assumed by FleetBoston on
October 1, 1999) and an Instrument thereto,
incorporated by reference to Exhibit 10(ff) of the 2004
10-K.*
|
(y)
|
|
Description of BankBoston Supplemental Long-Term Disability
Plan, incorporated by reference to Exhibit 10(gg) of the
2004 10-K.*
|
(z)
|
|
BankBoston Director Stock Award Plan, incorporated by reference
to Exhibit 10(hh) of the 2004
10-K.*
|
E-4
|
|
|
Exhibit No.
|
|
Description
|
(aa)
|
|
BankBoston Directors Deferred Compensation Plan, as amended by a
First Amendment and a Second Amendment thereto, incorporated by
reference to Exhibit 10(ii) of the 2004
10-K.*
|
(bb)
|
|
BankBoston, N.A. Directors Deferred Compensation Plan, as
amended by a First Amendment and a Second Amendment thereto,
incorporated by reference to Exhibit 10(jj) of the 2004
10-K.*
|
(cc)
|
|
BankBoston 1997 Stock Option Plan for Non-Employee Directors, as
amended by an amendment thereto dated as of October 16,
2001, incorporated by reference to Exhibit 10(kk) of the
2004 10-K.*
|
(dd)
|
|
Description of BankBoston Director Retirement Benefits Exchange
Program, incorporated by reference to Exhibit 10(ll) of the
2004 10-K.*
|
(ee)
|
|
Employment Agreement, dated as of March 14, 1999, between
FleetBoston and Charles K. Gifford, as amended by an amendment
thereto effective as of February 7, 2000, a Second
Amendment thereto effective as of April 22, 2002, and a
Third Amendment thereto effective as of October 1, 2002,
incorporated by reference to Exhibit 10(mm) of the 2004
10-K.*
|
(ff)
|
|
Form of Change in Control Agreement entered into with Charles K.
Gifford, incorporated by reference to Exhibit 10(nn) of the
2004 10-K.*
|
(gg)
|
|
Global amendment to definition of change in control
or change of control, together with a list of plans
affected by such amendment, incorporated by reference to
Exhibit 10(oo) of the 2004
10-K.*
|
(hh)
|
|
Retirement Agreement dated January 26, 2005 between Bank of
America Corporation and Charles K. Gifford, incorporated by
reference to Exhibit 10.1 to the registrants Current
Report on
Form 8-K
(File
No. 1-6523)
filed January 26, 2005.*
|
(ii)
|
|
Amendment to various FleetBoston stock option awards, dated
March 25, 2004, incorporated by reference to
Exhibit 10(ss) of the 2004
10-K.*
|
(jj)
|
|
Merrill Lynch & Co., Inc. Employee Stock Compensation
Plan, incorporated by reference to Exhibit 10(rr) of the
2008 10-K,
and 2009 Restricted Stock Unit Award Agreement for Thomas K.
Montag, incorporated by reference to Exhibit 10(qq) of the
2009 10-K.*
|
(kk)
|
|
Employment Agreement dated October 27, 2003 between Bank of
America Corporation and Brian T. Moynihan, incorporated by
reference to Exhibit 10(d) of registrants
Registration Statement on
Form S-4
(Registration
No. 333-110924)
filed on December 4, 2003.*
|
(ll)
|
|
Cancellation Agreement dated October 26, 2005 between Bank
of America Corporation and Brian T. Moynihan, incorporated by
reference to Exhibit 10.1 of registrants Current
Report on
Form 8-K
(File
No. 1-6523)
filed October 26, 2005.*
|
(mm)
|
|
Agreement Regarding Participation in the Fleet Boston
Supplemental Executive Retirement Plan dated October 26,
2005 between Bank of America Corporation and Brian T. Moynihan,
incorporated by reference to Exhibit 10.2 of
registrants Current Report on
Form 8-K
(File
No. 1-6523)
filed October 26, 2005.*
|
(nn)
|
|
Forms of Stock Unit Agreements for salary stock units awarded to
certain executive officers in connection with registrants
participation in the U.S. Department of Treasurys Troubled
Asset Relief Program, incorporated by reference to
Exhibit 10(uu) of the 2009
10-K.*
|
(oo)
|
|
Boatmens Supplemental Retirement Plan, effective as of
August 8, 1989, incorporated by reference to
Exhibit 10(vv) of the 2009
10-K.*
|
(pp)
|
|
Employment Agreement dated January 30, 1996 between
Boatmens Bancshares, Inc. and Gregory L. Curl,
incorporated by reference to Exhibit 10(ww) of the 2009
10-K.*
|
(qq)
|
|
Employment Agreement dated September 26, 1996 between
NationsBank Corporation and Gregory L. Curl, incorporated by
reference to Exhibit 10(xx) of the 2009
10-K.*
|
(rr)
|
|
Employment Letter dated May 7, 2001 between Bank of America
Corporation and Gregory L. Curl, incorporated by reference to
Exhibit 10(yy) of the 2009
10-K.*
|
(ss)
|
|
Bank of America Corporation Equity Incentive Plan amended and
restated effective as of January 1, 2008, incorporated by
reference to Exhibit 10(zz) of the 2009
10-K.*
|
(tt)
|
|
Merrill Lynch & Co., Inc. Long-Term Incentive
Compensation Plan amended as of January 1, 2009 and 2008
Restricted Units/Stock Option Grant Document for Thomas K.
Montag, incorporated by reference to Exhibit 10(aaa) of the
2009 10-K.*
|
(uu)
|
|
Employment Letter dated May 1, 2008 between Merrill
Lynch & Co., Inc. and Thomas K. Montag and Summary of
Agreement with respect to Post-Employment Medical Coverage,
incorporated by reference to Exhibit 10(bbb) of the 2009
10-K.*
|
(vv)
|
|
Amendment to various plans as required to the extent necessary
to comply with Section III of the Emergency Economic
Stabilization Act of 2008 (EESA) and form of waiver for any
changes to compensation or benefits required to comply with the
EESA, all in connection with the registrants
October 26, 2008 participation in the U.S. Department of
Treasurys Troubled Assets Relief Program, incorporated by
reference to Exhibit 10(ss) of the 2008
10-K.*
|
(ww)
|
|
Further amendment to various plans and further form of waiver
for any changes to compensation or benefits in connection with
the registrants January 15, 2009 participation in the
U.S. Department of Treasurys Troubled Assets Relief
Program, incorporated by reference to Exhibit 10(tt) of the
2008 10-K.*
|
(xx)
|
|
Letter Agreement, dated October 26, 2008, between the
registrant and U.S. Department of the Treasury, with respect to
the issuance and sale of registrants Fixed Rate Cumulative
Perpetual Preferred Stock, Series N and a warrant to
purchase common stock, incorporated by reference to
Exhibit 10.1 of registrants Current Report on
Form 8-K
(File
No. 1-6523)
filed October 30, 2008.
|
E-5
|
|
|
Exhibit No.
|
|
Description
|
(yy)
|
|
Letter Agreement, dated January 9, 2009, between the
registrant and U.S. Department of the Treasury, with respect to
the issuance and sale of registrants Fixed Rate Cumulative
Perpetual Preferred Stock, Series Q and a warrant to
purchase common stock, incorporated by reference to
Exhibit 10.1 of registrants Current Report on
Form 8-K
(File
No. 1-6523)
filed January 13, 2009.
|
(zz)
|
|
Securities Purchase Agreement, dated January 15, 2009,
between the registrant and U.S. Department of the Treasury, with
respect to the issuance and sale of registrants Fixed Rate
Cumulative Perpetual Preferred Stock, Series R and a
warrant to purchase common stock, incorporated by reference to
Exhibit 10.1 of registrants Current Report on
Form 8-K
(File
No. 1-6523)
filed January 22, 2009.
|
(aaa)
|
|
Summary of Terms, dated January 15, 2009, incorporated by
reference to Exhibit 10.2 of registrants Current
Report on
Form 8-K
(File
No. 1-6523)
filed January 22, 2009.
|
(bbb)
|
|
Letter Agreement dated December 9, 2009 between the
registrant and the U.S. Department of the Treasury, amending the
Securities Purchase Agreement dated January 9, 2009,
incorporated by reference to Exhibit 10(iii) of the 2009
10-K.
|
(ccc)
|
|
Letter Agreement dated December 9, 2009 between the
registrant and the U.S. Department of the Treasury, amending the
Securities Purchase Agreement dated January 15, 2009,
incorporated by reference to Exhibit 10(jjj) of the 2009
10-K.
|
(ddd)
|
|
Retention Award Letter Agreement with Bruce R. Thompson dated
January 26, 2009, filed herewith.*
|
(eee)
|
|
Offer letter between Bank of America Corporation and Sallie L.
Krawcheck dated August 3, 2009, filed herewith.*
|
(fff)
|
|
Letter Agreement dated February 22, 2010 between the
registrant and Gregory L. Curl, incorporated by reference to
Exhibit 10(c) of registrants Quarterly Report on
Form 10-Q
(File No. 1-6523) for the quarter ended March 31, 2010.
|
(ggg)
|
|
Offer letter between Bank of America Corporation and Charles H.
Noski dated April 13, 2010, incorporated by reference to
Exhibit 10.1 of registrants Current Report on
Form 8-K
(File
No. 1-6523)
filed April 16, 2010.*
|
(hhh)
|
|
Form of Cash Settled Stock Unit Award Agreement, incorporated by
reference to Exhibit 10.2 of registrants Current
Report on
Form 8-K
(File
No. 1-6523)
filed January 31, 2011.*
|
(iii)
|
|
Form of Cash Settled Stock Unit Award Agreement (February 2011
grant), filed herewith.*
|
(jjj)
|
|
Aircraft Time Sharing Agreement (Multiple Aircraft) dated
February 24, 2011 between Bank of America, N. A. and Brian
T. Moynihan, filed herewith.*
|
(kkk)
|
|
Form of Bank of America Corporation Long-Term Cash Award
Agreement for non-executives (February 2009 EIP award), filed
herewith.*
|
(lll)
|
|
Form of Bank of America Corporation Long-Term Cash Award
Agreement for non-executives (February 2009 APP award), filed
herewith.*
|
12
|
|
Ratio of Earnings to Fixed Charges, filed herewith.
|
|
|
Ratio of Earnings to Fixed Charges and Preferred Dividends,
filed herewith.
|
21
|
|
List of Subsidiaries, filed herewith.
|
23
|
|
Consent of PricewaterhouseCoopers LLP, filed herewith.
|
24(a)
|
|
Power of Attorney, filed herewith.
|
(b)
|
|
Corporate Resolution, filed herewith.
|
31(a)
|
|
Certification of the Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002, filed
herewith.
|
(b)
|
|
Certification of the Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002, filed
herewith.
|
32(a)
|
|
Certification of the Chief Executive Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, filed
herewith.
|
(b)
|
|
Certification of the Chief Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, filed
herewith.
|
Exhibit 101.INS
|
|
XBRL Instance Document, filed herewith
(1)
|
Exhibit 101.SCH
|
|
XBRL Taxonomy Extension Schema Document, filed herewith
(1)
|
Exhibit 101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document, filed
herewith
(1)
|
Exhibit 101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document, filed herewith
(1)
|
Exhibit 101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document, filed
herewith
(1)
|
Exhibit 101.DEF
|
|
XBRL Taxonomy Extension Definitions Linkbase Document, filed
herewith
(1)
|
|
|
|
*
|
|
Exhibit is a management contract or
a compensatory plan or arrangement.
|
(1) |
|
These interactive data files shall
not be deemed filed for purposes of Section 11 or 12 of the
Securities Act of 1933, as amended, or Section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise be
subject to liability under those sections.
|
E-6