Bank of America 2005 Annual Report Download - page 152

BANK OF AMERICA CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)
Note 8—Allowance for Credit Losses
The following table summarizes the changes in the allowance for credit losses for 2005, 2004 and 2003:
(Dollars in millions) 2005 2004 2003
Allowance for loan and lease losses, January 1 ............................................. $ 8,626 $ 6,163 $ 6,358
FleetBoston balance, April 1, 2004 ............................................................ —2,763 —
Loans and leases charged off ................................................................. (5,794) (4,092) (3,867)
Recoveries of loans and leases previously charged off ............................................ 1,232 979 761
Netcharge-offs ......................................................................... (4,562) (3,113) (3,106)
Provision for loan and lease losses ............................................................ 4,021 2,868 2,916
Transfers .................................................................................. (40) (55) (5)
Allowance for loan and lease losses, December 31 ...................................... 8,045 8,626 6,163
Reserve for unfunded lending commitments, January 1 .................................... 402 416 493
FleetBoston balance, April 1, 2004 ............................................................ —85 —
Provision for unfunded lending commitments .................................................. (7) (99) (77)
Reserve for unfunded lending commitments, December 31 ............................. 395 402 416
Total Allowance for Credit Losses ................................................. $ 8,440 $ 9,028 $ 6,579
Note 9—Special Purpose Financing Entities
The Corporation securitizes assets and may retain a portion or all of the securities, subordinated tranches, interest-
only strips and, in some cases, a cash reserve account, all of which are considered retained interests in the securitized
assets. Those assets may be serviced by the Corporation or by third parties. The Corporation also uses other special
purpose financing entities to access the commercial paper market and for other lending, leasing and real estate
activities.
Mortgage-related Securitizations
The Corporation securitizes the majority of its residential mortgage loan originations in conjunction with or shortly
after loan closing. In addition, the Corporation may, from time to time, securitize commercial mortgages and first
residential mortgages that it originates or purchases from other entities. In 2005 and 2004, the Corporation converted a
total of $102.6 billion (including $23.3 billion originated by other entities) and $96.9 billion (including $18.0 billion
originated by other entities), of residential first mortgages and commercial mortgages into mortgage-backed securities
issued through Fannie Mae, Freddie Mac, Government National Mortgage Association, Bank of America, N.A. and Banc
of America Mortgage Securities. At December 31, 2005 and 2004, the Corporation retained $7.2 billion (including $2.4
billion issued prior to 2005) and $9.2 billion (including $1.2 billion issued prior to 2004) of securities. At December 31,
2005, these retained interests were valued using quoted market prices.
In 2005, the Corporation reported $577 million in gains on loans converted into securities and sold, of which gains of
$592 million were from loans originated by the Corporation and losses of $15 million were from loans originated by other
entities. In 2004, the Corporation reported $952 million in gains on loans converted into securities and sold, of which
gains of $886 million were from loans originated by the Corporation and gains of $66 million were from loans originated
by other entities. At December 31, 2005, the Corporation had recourse obligations of $471 million with varying terms up
to seven years on loans that had been securitized and sold.
In 2005 and 2004, the Corporation purchased $19.6 billion and $31.1 billion of mortgage-backed securities from
third parties and resecuritized them. Net gains, which include net interest income earned during the holding period,
totaled $13 million and $55 million. The Corporation did not retain any of the securities issued in these transactions.
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