Bank of America 2002 Annual Report Download - page 109

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BANK OF AMERICA 2002 107
The book and fair values of certain financial instruments at December 31, 2002 and 2001 were as follows:
2002 2001
Book Fair Book Fair
(Dollars in millions)
Value Value Value Value
Financial assets
Loans $ 321,572 $ 329,813 $ 303,552 $309,348
Financial liabilities
Deposits 386,458 387,166 373,495 374,231
Long-term debt 61,145 64,935 62,496 64,531
Trust preferred securities 6,031 6,263 5,530 5,612
Loans
Fair values were estimated for groups of similar loans based upon type
of loan and maturity. The fair value of loans was determined by dis-
counting estimated cash flows using interest rates approximating the
Corporation’s current origination rates for similar loans and adjusted to
reflect the inherent credit risk. Where quoted market prices were avail-
able, primarily for certain residential mortgage loans and commercial
loans, such market prices were utilized as estimates for fair values.
Substantially all of the foreign loans reprice within relatively
short timeframes. Accordingly, for foreign loans, the net carrying
values were assumed to approximate their fair values.
Mortgage Banking Assets
The Certificates are carried at estimated fair value which is based on an
option-adjusted spread model which requires several key components
including, but not limited to, proprietary prepayment models and term
structure modeling via Monte Carlo simulation.
Deposits
The fair value for deposits with stated maturities was calculated by
discounting contractual cash flows using current market rates for
instruments with similar maturities. The carrying value of foreign time
deposits approximates fair value. For deposits with no stated matu-
rities, 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 Corporation’s long-term relationships
with depositors.
NOTE 20 Business Segment Information
The Corporation reports the results of its operations through four busi-
ness segments: Consumer and Commercial Banking, Asset
Management, Global Corporate and Investment Banking and Equity
Investments. Certain operating segments have been aggregated into a
single business segment.
Consumer and Commercial Banking provides a diversified range
of products and services to individuals and small businesses through
multiple delivery channels and commercial lending and treasury man-
agement services primarily to middle market companies with annual
revenue between $10 million and $500 million. Asset Management
offers investment, fiduciary and comprehensive banking and credit
expertise; asset management services to institutional clients, high-
net-worth individuals and retail customers; and investment, securities
and financial planning services to affluent and high-net-worth indi-
viduals. Global Corporate and Investment Banking provides capital
raising solutions, advisory services, derivatives capabilities, equity
and debt sales and trading as well as traditional bank deposit and
loan products, cash management and payment services to large
corporations and institutional clients. Equity Investments includes
Principal Investing, which is comprised of a diversified portfolio of
investments in privately held and publicly traded companies at all
stages, from start-up to buyout.
Corporate Other consists primarily of certain amounts associated
with managing the balance sheet of the Corporation, certain consumer
finance and commercial lending businesses being liquidated and certain
residential mortgages originated by the mortgage group or otherwise
acquired and held for asset/liability management purposes.