Bank of America 2007 Annual Report Download - page 166

Assets and liabilities measured at fair value on a recurring basis, including financial instruments for which the Corporation has elected the fair value
option, are summarized below:
December 31, 2007
Fair Value Measurements Using
(Dollars in millions) Level 1 Level 2 Level 3
Netting
Adjustments
(1)
Assets/Liabilities
at Fair Value
Assets
Federal funds sold and securities purchased under agreements to resell
(2)
$ – $ 2,578 $ – $ – $ 2,578
Trading account assets 42,986 115,051 4,027 – 162,064
Derivative assets 516 442,471 8,972 (417,297) 34,662
Available-for-sale debt securities 2,089 205,734 5,507 – 213,330
Loans and leases
(2, 3)
– – 4,590 – 4,590
Mortgage servicing rights – – 3,053 – 3,053
Other assets
(4)
19,796 15,971 5,321 – 41,088
Total assets $65,387 $781,805 $31,470 $(417,297) $461,365
Liabilities
Interest-bearing deposits in domestic offices
(2)
$ – $ 2,000 $ – $ – $ 2,000
Trading account liabilities 57,331 20,011 – – 77,342
Derivative liabilities 534 426,223 10,175 (414,509) 22,423
Accrued expenses and other liabilities
(2)
– – 660 – 660
Total liabilities $57,865 $448,234 $10,835 $(414,509) $102,425
(1) Amounts represent the impact of legally enforceable master netting agreements that allow the Corporation to settle positive and negative positions and also cash collateral held or placed with the same counterparties.
(2) Amounts represent items for which the Corporation has elected the fair value option under SFAS 159.
(3) Loans and leases at December 31, 2007 included $22.6 billion of leases that were not eligible for the fair value option as they were specifically excluded from fair value option election in accordance with SFAS 159.
(4) Other assets include equity investments held by Principal Investing, AFS equity investments and certain retained interests in securitization vehicles, including interest-only strips, all of which were carried at fair value prior to
the adoption of SFAS 159; and loans held-for-sale for which the Corporation has elected the fair value option under SFAS 159. Substantially all of other assets are eligible for fair value accounting at December 31, 2007.
The table below presents a reconciliation for all assets and liabilities
measured at fair value on a recurring basis using significant unobservable
inputs (Level 3) during 2007. Level 3 loans and loan commitments are
carried at fair value due to adoption of the fair value option, as described
on page 162. Other Level 3 instruments presented in the table, including
net derivatives, trading account assets, AFS debt securities, MSRs, certain
equity investments and retained interests in securitizations, were carried
at fair value prior to the adoption of SFAS 159. During 2007 certain finan-
cial instruments, including certain ABS issued by CDOs and portfolios of
loans held-for-sale, were transferred from Level 2 to Level 3 due to the
lack of current observable market activity. These instruments were valued
using pricing models and discounted cash flow methodologies incorporat-
ing assumptions that, in management’s judgment, reflect the assumptions
a marketplace participant would use at December 31, 2007.
Level 3 Instruments Only
Total Fair Value Measurements
(Dollars in millions)
Net
Derivatives
(1)
Trading
Account
Assets
(2)
Available-for-
Sale Debt
Securities
(2, 3)
Loans
and
Leases
(4)
Mortgage
Servicing
Rights
(2)
Other
Assets
(5)
Accrued
Expenses
and Other
Liabilities
(4)
Balance, December 31, 2006 $ 766 $ 303 $1,133 $3,968 $2,869 $ 6,605 $ (28)
Impact of SFAS 157 and SFAS 159
adoption 22 – – (21) – – (321)
Balance, January 1, 2007
$ 788 $ 303 $1,133 $3,947 $2,869 $ 6,605 $(349)
Total gains or losses (realized/
unrealized):
Included in earnings (341) (2,959) (398) (140) 231 2,059 (279)
Included in other comprehensive
income – – (206) – – (79) –
Purchases, issuances, and settlements (333) 708 4,588 783 (47) (5,897) (32)
Transfers in to/out of Level 3 (1,317) 5,975 390 – – 2,633 –
Balance, December 31, 2007
$(1,203) $ 4,027 $5,507 $4,590 $3,053 $ 5,321 $(660)
(1) Net derivatives at December 31, 2007 included derivative assets of $8.97 billion and derivative liabilities of $10.18 billion. Amounts at January 1, 2007 were carried at fair value prior to the adoption of SFAS 159.
(2) Amounts represented items which were carried at fair value prior to the adoption of SFAS 159.
(3) Certain securities valued using internally developed pricing inputs had been classified as Level 2 measurements at January 1, 2007. The Corporation subsequently determined that these securities are more appropriately
classified as Level 3 measurements which has been reflected as such in the beginning balance. This change in classification did not impact the recorded fair value of the securities.
(4) Amounts represented items for which the Corporation had elected the fair value option under SFAS 159 including commercial loan commitments recorded in accrued expenses and other liabilities.
(5) Other assets included equity investments held by Principal Investing and certain retained interests in securitization vehicles, including interest-only strips, all of which were carried at fair value prior to the adoption of SFAS
159, and certain portfolios of loans held-for-sale, principally reverse mortgages, for which the Corporation had elected the fair value option under SFAS 159.
164 Bank of America 2007