Bank of America 2006 Annual Report Download - page 123

The sensitivities in the preceding table 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 an interest that continues 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. Additionally, the Corporation
has the ability to hedge interest rate risk associated with retained residual
positions. The above sensitivities do not reflect any hedge strategies that
may be undertaken to mitigate such risk.
Static pool net credit losses are considered in determining the value
of the retained interests of the consumer finance securitization. Static
pool net credit losses include actual losses incurred plus projected credit
losses divided by the original balance of each securitization pool. For
consumer finance securitizations entered into in 2006, weighted average
static pool net credit losses were 5.00 percent for the year ended
December 31, 2006. For consumer finance securitizations entered into in
2001, weighted average static pool net credit losses were 5.29 percent
for the year ended December 31, 2006, and 5.50 percent for the year
ended December 31, 2005.
Principal proceeds from collections reinvested in revolving credit card
securitizations were $163.4 billion and $4.5 billion in 2006 and 2005.
Contractual credit card servicing fee income totaled $1.9 billion and $97
million in 2006 and 2005. Other cash flows received on retained inter-
ests, such as cash flow from interest-only strips, were $6.7 billion and
$183 million in 2006 and 2005, for credit card securitizations. Proceeds
from collections reinvested in revolving commercial loan securitizations
were $4.6 billion and $8.7 billion in 2006 and 2005. Servicing fees and
other cash flows received on retained interests, such as cash flows from
interest-only strips, were $2 million and $15 million in 2006, and $3 mil-
lion and $34 million in 2005 for commercial loan securitizations.
The Corporation also reviews its loans and leases portfolio on a
managed basis. Managed loans and leases are defined as on-balance
sheet Loans and Leases as well as those loans in revolving securitizations
and other securitizations where servicing is retained that are undertaken
for corporate management purposes, which include credit card, commer-
cial loans, automobile and certain mortgage securitizations. Managed
loans and leases exclude originate-to-distribute loans and other loans in
securitizations where the Corporation has not retained servicing. New
advances on accounts for which previous loan balances were sold to the
securitization trusts will be recorded on the Corporation’s Consolidated
Balance Sheet after the revolving period of the securitization, which has
the effect of increasing Loans and Leases on the Corporation’s Con-
solidated Balance Sheet and increasing Net Interest Income and charge-
offs, with a related reduction in Noninterest Income.
Portfolio balances, delinquency and historical loss amounts of the
managed loans and leases portfolio for 2006 and 2005 are presented in
the following table.
Bank of America 2006 121