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Retirement Planning Checking Commercial Banking IPO
2010 Annual Report
Opportunities
are everywhere

Table of contents

  • Page 1
    Checking Retirement Planning Commercial Banking Opportunities are everywhere IPO 2010 Annual Report

  • Page 2
    ... investors; to attract the best employees to serve our customers and clients; to support the communities where we do business; and to create long-term value for our shareholders. Today's Bank of America is a financial services leader serving customers and clients worldwide. We help them...

  • Page 3
    ... to help guide our work as we pursue our goals. These are important to understanding how we intend to operate the company, serve customers and clients, and return value to shareholders. Our Vision and Strategy Our vision is for Bank of America to be the world's finest financial services company. We...

  • Page 4
    ...companies of all sizes grow by helping them transact, manage their cash, access the debt and equity markets, and manage the risk of currency and interest rate fluctuations. We provide strategic advice for transactions such as public offerings, and mergers and acquisitions. Our institutional investor...

  • Page 5
    .... We offer deposit-image ATMs, and online and mobile banking technologies to provide customers with more detailed and timely information. Our new Merrill Edge® account enables customers to manage their banking and investing activities through an integrated platform. And we have developed employee...

  • Page 6
    ... of 2008 to help customers remain in their homes. We reached agreements at the end of last year with Freddie Mac and Fannie Mae to resolve many of their repurchase claims on mortgages originated by Countrywide before we acquired $882,997 $991,611 08 09 10 Total Loans and Leases In millions...

  • Page 7
    ...mortgage repurchase claims and management of default servicing. This change will clear the way for leaders in our Home Loans business to focus on building the leading mortgage origination business in the country. In addition to mitigating mortgage issues, we also reduced certain capital markets risk...

  • Page 8
    ... Operations Executive David Darnell President, Global Commercial Banking Barbara Desoer President, Bank of America Home Loans and Insurance Anne Finucane Global Strategy and Marketing Officer Sallie Krawcheck President, Global Wealth and Investment Management Terrence Laughlin Legacy Asset Servicing...

  • Page 9
    ... competitor can match our ability to deliver our suite of products, services and solutions. For our company and our shareholders, focusing on what our customers need - and building our teams and capabilities around them - is the key to long-term growth. The promise is compelling, and the results are...

  • Page 10
    ..., including debit cards, checking account and savings account options, access to simple and affordable unsecured debt and credit card financing, and a full range of responsible home financing options. Our solutions include products and services for customers wherever they are in their financial life...

  • Page 11
    ... timesaving tips - Bank of America's award-winning online banking website. Jenn chooses to bank from home, and loves the convenience of accessing her accounts online to check balances, pay bills and transfer funds whenever she wants. With 24/7 account access, and debits and deposits that show up...

  • Page 12
    ... paying for his twin sons' college tuition and living comfortably in retirement. With the help of a Merrill Edge Financial Solutions Advisor, Dennis established two 529-college savings plans and an individual retirement account, which he can access, along with Bank of America checking and savings...

  • Page 13
    ..., our advisors are well- positioned to deliver the widest range of capabilities to clients. Our wealth management services include banking, investing, retirement, philanthropy and trusts, and international offerings - with access to a number of global equity exchanges - backed by award-winning...

  • Page 14
    Business Advantage Checking Business Card Easy Online Payroll® From business checking and business loans, to employee retirement planning, to access to capital markets worldwide, there's nothing growing companies can't find through Bank of America. This gives us a significant opportunity to ...

  • Page 15
    ... to help. In 2010, Virgo President Ahmed Hassan (above) approached his dedicated Bank of America client manager in our Client Development Group for new financing to support their growth. The funding was essential to help them execute a new multimillion dollar contract with the Department of Veterans...

  • Page 16
    Business Expansion Financing Credit Liquidity Solutions Treasury Management Good Move Bradford Hill's family has worked at the base of one of America's greatest icons since 1931, operating the concessions at the Statue of Liberty. When the National Park Service announced that it was combining ...

  • Page 17
    ... our commercial client teams partner with product experts from across the bank to seamlessly deliver integrated solutions ranging from credit, treasury and liquidity to capital markets and investment banking, as well as wealth management and retirement services. As we put this coverage model to work...

  • Page 18
    ...and raising debt and equity capital, to providing comprehensive treasury solutions - we help businesses through each growth phase. But we know that truly valuable banking relationships go beyond supporting major deals. At Bank of America Merrill Lynch, we understand that it's the day-to-day, ongoing...

  • Page 19
    ... Corporate Finance & Restructuring Equity & Debt Capital Raising Derivatives & Foreign Exchange Big Deal To support the continued global expansion of the Volkswagen Group, Chief Financial Officer Hans Dieter Pötsch (above) worked with the capital markets experts at Bank of America Merrill Lynch...

  • Page 20
    ...research, helping him and other investment professionals at MFS package their best ideas into client portfolios. As MFS continues to grow its global platform, Bank of America Merrill Lynch stands ready as a steadfast partner to provide it with innovative liquidity solutions and advisory services. 18

  • Page 21
    ...help fund future benefits; a mutual fund manager is seeking to outperform a benchmark and deliver solid returns for investors; or a hedge fund wants the most efficient financing and services - our institutional clients turn to us for guidance in navigating today's complex and rapidly changing global...

  • Page 22
    ...of how NEI helps set opportunity in motion in local communities include the service and leadership of a Los Angeles local hero who advocates for academic and cultural enrichment opportunities for at-risk children, a New York nonprofit that provides access to fresh food while supporting local produce...

  • Page 23
    ... we serve - supporting individuals, families and businesses during challenging economic times. We're advancing growth and development through innovative partnerships and initiatives, and helping set opportunity in motion by acting as a catalyst for economic and social success. At Bank of America, we...

  • Page 24
    ... Deposits, Global Card Services, Home Loans & Insurance, Global Commercial Banking, Global Banking & Markets and Global Wealth & Investment Management. Bank of America is a member of the Dow Jones Industrial Average. Financial Highlights For the year (in millions, except per share information) 2010...

  • Page 25
    ...40,000฀Middle฀Market฀Clients •฀10,000฀Corporate฀Clients Deposits Global Card Services Home Loans & Insurance Global Commercial Banking Global Global Wealth & Investment Banking & Management Markets All Other 2 2010 Net Income (Loss) Per Line of Business (dollars in billions...

  • Page 26
    ... our customers through our banking centers, mortgage loan officers in 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 channel. 24 Global Commercial Banking provides...

  • Page 27
    Bank of America 2010 Financial Review

  • Page 28
    ... Review Contents Page Executive Summary Financial Highlights Balance Sheet Overview Recent Events Supplemental Financial Data Business Segment Operations Deposits Global Card Services Home Loans & Insurance Global Commercial Banking Global Banking & Markets Global Wealth & Investment Management...

  • Page 29
    ... the benefits and cost savings from and limit any unexpected liabilities acquired as a result of the Merrill Lynch and Countrywide acquisitions; the Corporation's reputation, including the effects of continuing intense public and regulatory scrutiny of the Corporation and the financial services...

  • Page 30
    ... average loans and leases outstanding (3, 4) Ratio of the allowance for loan and lease losses at December 31 to net charge-offs (3, 5) Balance sheet at year end Total loans and leases Total assets Total deposits Total common shareholders' equity Total shareholders' equity Capital ratios at year end...

  • Page 31
    ... 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 98 and Note 28 - Performance by Geographical Area to the Consolidated Financial Statements. United...

  • Page 32
    ...Segment Information to the Consolidated Financial Statements. Table 2 Business Segment Results Total Revenue (1) (Dollars in millions) Net Income (Loss) 2009 2010 2010 2009 Deposits Global Card Services (2) Home Loans & Insurance Global Commercial Banking Global Banking & Markets Global Wealth...

  • Page 33
    ... 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...

  • Page 34
    ...Noninterest Income (Dollars in millions) 2010 2009 Card income Service charges Investment and brokerage services Investment banking income Equity investment income Trading account profits Mortgage banking income Insurance income Gains on sales of debt securities Other income (loss) Net impairment...

  • Page 35
    ... 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...

  • Page 36
    ... offset by maturities outpacing new issuances and the Corporation's 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. Allowance for Loan and Lease Losses Year-end and average allowance for loan...

  • Page 37
    ... 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...

  • Page 38
    ... book value (2) Market price per share of common stock Closing High closing Low closing Market capitalization Average balance sheet Total loans and leases Total assets Total deposits Long-term debt Common shareholders' equity Total shareholders' equity Asset quality (3) Allowance for credit losses...

  • Page 39
    ... 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...

  • Page 40
    ... 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...

  • Page 41
    ...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...

  • Page 42
    ... 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...

  • Page 43
    ...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 41

  • Page 44
    ... 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. 42 Bank of America 2010

  • Page 45
    ...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...

  • Page 46
    ... 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...

  • Page 47
    ... 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...

  • Page 48
    ... banking loss (3) Total consolidated mortgage banking income (1) (2) (3) Represents the change in the market value of the MSR asset due to the impact of customer payments received during the year. Includes sale of MSRs. Includes the effect of transfers of mortgage loans from Home Loans & Insurance...

  • Page 49
    ... as noted) 2010 2009 Loan production Home Loans & Insurance: First mortgage Home equity Total Corporation (1): First mortgage Home equity $287,236 7,626 298,038 8,437 $ 2,057 1,628 14,900 92bps $354,506 10,488 378,105 13,214 $ 2,151 1,716 19,465 113bps Year end Mortgage servicing portfolio...

  • Page 50
    ...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...

  • Page 51
    ... 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...

  • Page 52
    ... reported in GWIM and Global Commercial Banking. 2010 2009 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...

  • Page 53
    ... 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...

  • Page 54
    ...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...

  • Page 55
    ... in MLGWM's non-fee based brokerage assets and outflows in BACM's 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 53

  • Page 56
    All Other (Dollars in millions) 2010 (1) 2009 (2) % Change Net interest income Noninterest income: Card income Equity investment income Gains on sales of debt securities All other loss Total noninterest income Total revenue, net of interest expense Provision for credit losses Merger and ...

  • Page 57
    .... 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...

  • Page 58
    ... 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...

  • Page 59
    ... 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...

  • Page 60
    ...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...

  • Page 61
    ..., 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...

  • Page 62
    ... 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...

  • Page 63
    ... 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...

  • Page 64
    ... 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. Payment Protection Insurance In the U.K., the Corporation sells PPI through its Global Card Services business to credit card customers...

  • Page 65
    ...important option for homeowners who are facing financial difficulty and do not have a viable option to remain in the home. HAFA's short sale guidelines are designed to streamline and standardize the process and will be compatible with Bank of America's new cooperative short sale program. During 2010...

  • Page 66
    .... 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...

  • Page 67
    ... Financial Officer group, Global 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...

  • Page 68
    ... of the independent registered public accounting firm, including such firm's assessment of management's assertion of the effectiveness of the Corporation's disclosure controls and procedures and 66 Bank of America 2010 the Corporation's internal control over financial reporting; and oversight of...

  • Page 69
    ... 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. impacts and monitor...

  • Page 70
    ... 31 (Dollars in millions) 2010 2009 Total common shareholders' equity Goodwill Nonqualifying intangible assets (includes core deposit intangibles, affinity relationships, customer relationships and other intangibles) Net unrealized gains or losses on AFS debt and marketable equity securities and...

  • Page 71
    ...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...

  • Page 72
    ... 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 America's primary market risk exposures are in its trading portfolio, equity...

  • Page 73
    ... 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 Corporation's Common Stock in accordance with the terms of these preferred securities. For more...

  • Page 74
    ... 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...

  • Page 75
    ...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...

  • Page 76
    ... 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 FDIC's Temporary Liquidity Guarantee Program (TLGP...

  • Page 77
    ..., 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...

  • Page 78
    ... 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...

  • Page 79
    ... (managed basis for 2009). Table 20 Consumer Net Charge-offs, Net Losses and Related Ratios Net Charge-offs (Dollars in millions) Net Charge-offs (1, 2) 2010 2009 2010 2009 Held basis Residential mortgage Home equity Discontinued real estate U.S. credit card Non-U.S. credit card Direct/Indirect...

  • Page 80
    ... 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...

  • Page 81
    ... 2010. For information on representations and warranties related to our residential mortgage portfolio, see Representations and Warranties beginning on page 56 and Note 9 - Representations and Warranties Obligations and Corporate Guarantees to the Consolidated Financial Statements. Home Equity...

  • Page 82
    ... is more representative of the credit risk in this portfolio. Table 23 Home Equity - Key Credit Statistics December 31 Excluding Countrywide Purchased Creditimpaired Loans 2010 2009 Reported Basis (Dollars in millions) 2010 2009 Outstandings Nonperforming loans Percent of portfolio with...

  • Page 83
    ... Representations and Warranties Obligations and Corporate Guarantees to the Consolidated Financial Statements. Table 24 Home Equity State Concentrations December 31 Outstandings (Dollars in millions) Year Ended December 31 Nonperforming Net Charge-offs 2010 2009 2010 2009 2010 2009 California...

  • Page 84
    ...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...

  • Page 85
    ... of new consolidation guidance. n/a = not applicable Table 28 Outstanding Countrywide Purchased Credit-impaired Loan Portfolio - Discontinued Real Estate State Concentrations December 31 (Dollars in millions) 2010 2009 The consumer U.S. credit card portfolio is managed in Global Card Services...

  • Page 86
    ... 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...

  • Page 87
    ...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...

  • Page 88
    ... 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...

  • Page 89
    ...-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...

  • Page 90
    ...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...

  • Page 91
    ... 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...

  • Page 92
    ...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...

  • Page 93
    ...-off ratios are calculated as net charge-offs divided by average outstanding loans excluding loans accounted for under the fair value option. 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...

  • Page 94
    ... 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 92 Bank of America 2010

  • Page 95
    ... 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. Outstanding commercial loans and leases exclude loans accounted for under the fair value option. At December 31, 2010...

  • Page 96
    ... 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...

  • Page 97
    ...Diversified financials Real estate (2) Government and public education Healthcare equipment and services Capital goods Retailing Consumer services Materials Commercial services and supplies Banks Food, beverage and tobacco Energy Insurance, including monolines Utilities Individuals and trusts Media...

  • Page 98
    ... 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...

  • Page 99
    ... 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...

  • Page 100
    ...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...

  • Page 101
    ... 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...

  • Page 102
    ...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...

  • Page 103
    ...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...

  • Page 104
    ... Corporation's 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...

  • Page 105
    ...for loan and lease losses (3) Residential mortgage Home equity Discontinued real estate U.S. credit card Non-U.S. credit card Direct/Indirect consumer Other consumer Total consumer U.S. commercial (4) Commercial real estate Commercial lease financing Non-U.S. commercial Total commercial (5) $ 4,648...

  • Page 106
    ..., 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...

  • Page 107
    ... Months Ended December 31, 2010 Twelve Months Ended December 31, 2009 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...

  • Page 108
    ...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...

  • Page 109
    ... 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...

  • Page 110
    ... 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...

  • Page 111
    ... billion, and the forward starting pay-fixed swap positions were $34.5 billion and $76.8 billion. 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...

  • Page 112
    ... 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 45. Operational Risk Management The Corporation defines operational risk as the risk of loss...

  • Page 113
    ... 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...

  • Page 114
    ... 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...

  • Page 115
    ... 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...

  • Page 116
    ...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 Corporation's common stock price, consistent with common stock prices in the financial services industry, remains...

  • Page 117
    ... 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...

  • Page 118
    ... 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...

  • Page 119
    ... 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...

  • Page 120
    ... 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...

  • Page 121
    ...Time deposits placed and other short-term investments (1) Federal funds sold and securities borrowed or purchased under agreements to resell Trading account assets Debt securities (2) Loans and leases (3): Residential mortgage (4) Home equity Discontinued real estate U.S. credit card Non-U.S. credit...

  • Page 122
    ...Rate Increase (decrease) in interest income Time deposits placed and other short-term investments (2) Federal funds sold and securities borrowed or purchased under agreements to resell Trading account assets Debt securities Loans and leases: Residential mortgage Home equity Discontinued real estate...

  • Page 123
    ...2011) Outstanding Notional Amount (in millions) Preferred Stock Declaration Date Record Date Payment Date Per Annum Dividend Rate Dividend Per Share Series B (1) $ 1 January 26, 2011 October 25, 2010 July 28, 2010 April 28, 2010 January 27, 2010 January 4, 2011 October 4, 2010 July 2, 2010...

  • Page 124
    ...of the preferred stock of Merrill Lynch & Co., Inc. converted into 31 million shares of common stock on October 15, 2010. 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. 122 Bank of America 2010

  • Page 125
    ...Outstanding Loans and Leases December 31 (Dollars in millions) 2010 (1) 2009 2008 2007 2006 Consumer Residential mortgage (2) Home equity Discontinued real estate (3) U.S. credit card Non-U.S. credit card Direct/Indirect consumer (4) Other consumer (5) Total consumer Commercial U.S. commercial...

  • Page 126
    ... Loans and Leases Past Due 90 Days or More (Dollars in millions) (1) December 31 2010 2009 2008 2007 2006 Consumer Residential mortgage (2) U.S. credit card Non-U.S. credit card Direct/Indirect consumer Other consumer Total consumer Commercial U.S. commercial (3) Commercial real estate Commercial...

  • Page 127
    ...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...

  • Page 128
    ... lease losses at December 31 to net charge-offs (5) (6) 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...

  • Page 129
    ... rates Total (1) (2) (3) $111,106 $50,877 Loan maturities are based on the remaining maturities under contractual terms. Includes loans accounted for under the fair value option. Loan maturities include other consumer, commercial real estate and non-U.S. commercial loans. Bank of America 2010...

  • Page 130
    ... (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 (Dollars in millions) Asset Positions Liability Positions Less than one year Greater than or equal to one year and less than three...

  • Page 131
    ...15.06 $ 18.59 14.58 Market price per share of common stock Closing High closing Low closing $ $ $ $ Market capitalization Average balance sheet Total loans and leases Total assets Total deposits Long-term debt Common shareholders' equity Total shareholders' equity 134,536 $ 131,442 $ $ 130,273...

  • Page 132
    ...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 40. On February 24, 2010, the common equivalent shares...

  • Page 133
    ... on these performance measures and ratios, see Supplemental Financial Data beginning on page 40 and for corresponding reconciliations to GAAP financial measures, see Table XV. Calculation includes fees earned on overnight deposits placed with the Federal Reserve of $63 million, $107 million...

  • Page 134
    ...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 40. On February 24, 2010, the common equivalent shares...

  • Page 135
    ... shareholders' equity Reconciliation of period end assets to period end tangible assets Assets Goodwill Intangible assets (excluding MSRs) Related deferred tax liabilities Tangible assets Reconciliation of ending common shares outstanding to ending tangible common shares outstanding Common shares...

  • Page 136
    ... Rate (Dollars in millions) Earning assets Time deposits placed and other short-term investments (1) Federal funds sold and securities borrowed or purchased under agreements to resell Trading account assets Debt securities (2) Loans and leases (3): Residential mortgage (4) Home equity Discontinued...

  • Page 137
    ... Rate (Dollars in millions) Earning assets Time deposits placed and other short-term investments (1) Federal funds sold and securities borrowed or purchased under agreements to resell Trading account assets Debt securities (2) Loans and leases (3): Residential mortgage (4) Home equity Discontinued...

  • Page 138
    ... debt restructurings or TDRs). Loans accounted for under the fair value option, purchased creditimpaired 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...

  • Page 139
    ...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...

  • Page 140
    ... Global Markets Risk Committee Government-sponsored enterprise Home Affordable Foreclosure Alternatives Initial public offering Loans held-for-sale London InterBank Offered Rate Mortgage-backed securities Management's Discussion and Analysis of Financial Condition and Results of Operations...

  • Page 141
    ... 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 Corporation's internal control over financial reporting as of December 31, 2010 based on...

  • Page 142
    ... 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...

  • Page 143
    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 Debt securities Federal funds sold and securities borrowed or purchased under agreements to ...

  • Page 144
    Bank of America Corporation and Subsidiaries Consolidated Balance Sheet December 31 (Dollars in millions) 2010 2009 Assets Cash and cash equivalents Time deposits placed and other short-term investments Federal funds sold and securities borrowed or purchased under agreements to resell (includes ...

  • Page 145
    ...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 Common stock and additional paid-in capital...

  • Page 146
    ... 31, 2009 Cumulative adjustments for accounting changes: Consolidation of certain variable interest entities Credit-related notes Net loss Net change in available-for-sale debt and marketable equity securities Net change in derivatives Employee benefit plan adjustments Net change in foreign currency...

  • Page 147
    ...by (used in) investing activities Financing activities Net increase in deposits Net decrease in federal funds purchased and securities loaned or sold under agreements to repurchase Net decrease in commercial paper and other short-term borrowings Proceeds from issuance of long-term debt Retirement of...

  • Page 148
    ... 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...

  • Page 149
    .... 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...

  • Page 150
    ... 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 aftertax basis. In addition, credit-related notes, which include investments in securities issued by CDOs, collateralized...

  • Page 151
    .... 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. Leases The Corporation provides equipment financing to its customers through...

  • Page 152
    ... 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 obligor's liquidity and other financial...

  • Page 153
    ...not reported as nonperforming loans and leases. In accordance with the Corporation's 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...

  • Page 154
    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 ...

  • Page 155
    ...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...

  • Page 156
    ... value of the common stock that would have been issued under the original conversion terms. 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...

  • Page 157
    ...5.2 The value of the shares of common stock exchanged with Merrill Lynch shareholders was based upon the closing price of the Corporation's common stock at December 31, 2008, the last trading day prior to the date of acquisition. Consists of trade name of $1.5 billion and customer relationship and...

  • Page 158
    .... For further information, see Note 14 - Commitments and Contingencies. 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...

  • Page 159
    ... (Dollars in millions) 2010 2009 $ 44,585 57,009 33,562 28,143 18,907 $182,206 $ 26,519 18,407 12,897 7,609 $ 65,432 Trading account assets U.S. government and agency securities (1) Corporate securities, trading loans and other Equity securities Non-U.S. sovereign debt Mortgage trading loans and...

  • Page 160
    ... 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...

  • Page 161
    ... certain information related to the Corporation's derivatives designated as fair value hedges for 2010, 2009 and 2008. 2010 (Dollars in millions) Derivative Hedged Item Hedge Ineffectiveness Derivatives designated as fair value hedges Interest rate risk on long-term debt (1) Interest rate and...

  • Page 162
    ... 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...

  • Page 163
    ...hedged item. 2010 2009 2008 (Dollars in millions) Price risk on mortgage banking production income (1, 2) Interest rate risk on mortgage banking servicing income (1) Credit risk on loans (3) Interest rate and foreign currency risk on long-term debt and other foreign exchange transactions (4) Other...

  • Page 164
    ... line items attributable to the Corporation's sales and trading revenue categorized by primary risk for 2010, 2009 and 2008. 2010 Trading Account Profits (Losses) (Dollars in millions) Other Revenues (1) Net Interest Income Total Interest rate risk Foreign exchange risk Equity risk Credit risk...

  • Page 165
    .... The Corporation considers ratings of BBB- or higher as investmentgrade. Non-investment grade includes non-rated credit derivative instruments. December 31, 2010 Carrying Value Less than One Year One to Three Years Three to Five Years Over Five Years (Dollars in millions) Total Credit default...

  • Page 166
    ...-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...

  • Page 167
    ...were eliminated in consolidation and the related consumer credit card loans were included in loans and leases on the Corporation's 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...

  • Page 168
    ...OCI. OTTI losses related to these securities are excluded from these amounts. 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...

  • Page 169
    ...Months or Longer Gross Unrealized Losses Total Gross Unrealized Losses (Dollars in millions) Fair Value Fair Value Fair Value Temporarily-impaired available-for-sale debt securities at December 31, 2010 U.S. Treasury and agency securities Mortgage-backed securities: Agency Agency collateralized...

  • Page 170
    ... and fair value of the Corporation's 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...

  • Page 171
    ... 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...

  • Page 172
    ... 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...

  • Page 173
    ... FHA. Nonperforming Loans and Leases December 31 (Dollars in millions) Accruing Past Due 90 Days or More December 31 2010 2009 2010 2009 Home loans Residential mortgage (1) Home equity Discontinued real estate Credit card and other consumer U.S. credit card Non-U.S. credit card Direct/Indirect...

  • Page 174
    ...456 $11,652 Excludes Countrywide PCI loans. Excludes PCI home loans related to the Merrill Lynch acquisition. 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...

  • Page 175
    ... 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 customer's charging privileges are revoked. Bank of America 2010...

  • Page 176
    ... 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. 174 Bank of America 2010

  • Page 177
    ... 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...

  • Page 178
    ... 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. (Dollars in millions) Home Loans Credit Card and...

  • Page 179
    ... change on the Corporation's 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...

  • Page 180
    ...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...

  • Page 181
    ...During 2010 and 2009, there were no OTTI losses recorded on those securities classified as AFS debt securities. 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...

  • Page 182
    ... 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. 180 Bank of America 2010

  • Page 183
    ... 31 2010 (Dollars in millions) 2009 Retained Interests in Unconsolidated VIEs Consolidated VIEs Maximum loss exposure (1) On-balance sheet assets Trading account assets Available-for-sale debt securities (2) Held-to-maturity securities (2) Loans and leases (3) Allowance for loan and lease losses...

  • Page 184
    ...241 241 - - - 241 - - 2 2 Consolidated VIEs Maximum loss exposure On-balance sheet assets Trading account assets Loans and leases Allowance for loan and lease losses All other assets Total assets On-balance sheet liabilities Commercial paper and other short-term borrowings Long-term debt All other...

  • Page 185
    ...manage credit risk. At December 31, 2010, the Corporation serviced assets or otherwise had continuing December 31, 2009 (Dollars in millions) Consolidated Unconsolidated Total Maximum loss exposure On-balance sheet assets Available-for-sale debt securities Held-to-maturity debt securities Loans...

  • Page 186
    ... at December 31, 2010 and 2009. December 31 2010 (Dollars in millions) 2009 Consolidated Unconsolidated Total Consolidated Unconsolidated Total Maximum loss exposure (1) On-balance sheet assets Trading account assets Derivative assets Available-for-sale debt securities All other assets...

  • Page 187
    ... 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 (Dollars in millions) 2009 Consolidated...

  • Page 188
    ... 31 2010 (Dollars in millions) 2009 Consolidated Unconsolidated Total Consolidated Unconsolidated Total Maximum loss exposure On-balance sheet assets Trading account assets Derivative assets Available-for-sale debt securities Loans and leases Allowance for loan and lease losses Loans held...

  • Page 189
    ...significant activities of the partnership. The Corporation earns a return primarily through the receipt of tax credits allocated to the affordable housing projects. The Corporation's risk of loss is mitigated by policies requiring that the project qualify for the expected tax credits prior to making...

  • Page 190
    ... 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...

  • Page 191
    ..., 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 189

  • Page 192
    ... of the claim, meaningful (Dollars in millions) Liability for representations and warranties and corporate guarantees, beginning of year Merrill Lynch acquisition Additions for new sales Charge-offs Provision Other Liability for representations and warranties and corporate guarantees, December 31...

  • Page 193
    ... was attributable to the sale of Columbia Management's long-term asset management business. December 31 (Dollars in millions) 2010 2009 Deposits Global Card Services Home Loans & Insurance Global Commercial Banking Global Banking & Markets Global Wealth & Investment Management All Other $17,875...

  • Page 194
    ... Corporation's 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...

  • Page 195
    ...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...

  • Page 196
    ... 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...

  • Page 197
    ... 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...

  • Page 198
    ...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...

  • Page 199
    ... relate to the Corporation's 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...

  • Page 200
    ... 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...

  • Page 201
    .... 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...

  • Page 202
    ... 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 consumer's loan or debt repayment if certain events occur such as loss of job or...

  • Page 203
    ... 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...

  • Page 204
    ..., 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...

  • Page 205
    ...about the real estaterelated investments and mortgage lending practices of Lehman Brothers Holdings, Inc. (LBHI) in connection with various debt and convertible stock MBIA Insurance Corporation CDO Litigation On April 30, 2009, MBIA and LaCrosse Financial Products, LLC filed a complaint in New York...

  • Page 206
    ... 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...

  • Page 207
    ... 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. Plaintiff's claims arise...

  • Page 208
    ... 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...

  • Page 209
    ...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...

  • Page 210
    ... the SEC, OCC, IRS and the Working Group for an aggregate amount that is not material to the Corporation's 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...

  • Page 211
    ...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...

  • Page 212
    ... before third-party issuance costs and other Merrill Lynch purchase accounting related adjustments of $335 million. Series B Preferred Stock does not have early redemption/call rights. The Corporation may redeem series of preferred stock on or after the redemption date, in whole or in part, at its...

  • Page 213
    ...-tax adjustments based on the final year-end actuarial valuations. Net change in fair value represents only the impact of changes in spot foreign exchange rates on the Corporation's net investment in non-U.S. operations and related hedges. For more information on employee benefit plans, see Note...

  • Page 214
    ... 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 Corporation's preferred stock exchange for common stock. NOTE 18 Regulatory Requirements and Restrictions The Federal...

  • Page 215
    ... 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...

  • Page 216
    ... 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...

  • Page 217
    ...2009 2010 2009 Change in fair value of plan assets Fair value, January 1 Merrill Lynch balance, January 1, 2009 Actual return on plan assets Company contributions (2) Plan participant contributions Benefits paid Plan transfer Federal subsidy on benefits paid Foreign currency exchange rate changes...

  • Page 218
    ... prior service cost (credits) Amortization of net actuarial loss (gain) Recognized loss (gain) due to settlements and curtailments Net periodic benefit cost (income) Weighted-average assumptions used to determine net cost for years ended December 31 Discount rate Expected return on plan assets Rate...

  • Page 219
    ... 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...

  • Page 220
    ... 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...

  • Page 221
    ... short-term investments Money market and interest-bearing cash Cash and cash equivalent commingled/mutual funds Fixed income U.S. government and government agency securities Corporate debt securities Asset-backed securities Non-U.S. debt securities Fixed income commingled/mutual funds Equity Common...

  • Page 222
    ... Plan Assets Still Held at the Reporting Date (1) (Dollars in millions) Balance January 1 Purchases, Sales and Settlements Transfers into/ (out of) Level 3 Balance December 31 Fixed income U.S. government and government agency securities Non-U.S. debt securities Real estate Private real estate...

  • Page 223
    ...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...

  • Page 224
    ..., total income tax expense (benefit) does not reflect tax effects associated with the Corporation's 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. Risk-free interest rate Dividend yield...

  • Page 225
    ... Change in Unrecognized Tax Benefits (Dollars in millions) 2010 2009 2008 Beginning balance Increases related to positions taken during prior years Increases related to positions taken during the current year Positions acquired or assumed in business combinations Decreases related to positions...

  • Page 226
    ... agreements, long-term deposits and long-term debt under the fair value option. For more informations, see Note 23 - Fair Value Option. Deferred tax liabilities Available-for-sale securities Mortgage servicing rights Long-term borrowings Equipment lease financing Intangibles Fee income Other Gross...

  • Page 227
    ... Corporation's own credit risk. An estimate of severity of loss is also used in the determination of fair value, primarily based on market data. Long-term Borrowings The Corporation issues structured notes that have coupons or repayment terms linked to the performance of debt or equity securities...

  • Page 228
    ... Value Assets Federal funds sold and securities borrowed or purchased under agreements to resell Trading account assets: U.S. government and agency securities Corporate securities, trading loans and other Equity securities Non-U.S. sovereign debt Mortgage trading loans and asset-backed securities...

  • Page 229
    ... Value Assets Federal funds sold and securities borrowed or purchased under agreements to resell Trading account assets: U.S. government and agency securities Corporate securities, trading loans and other Equity securities Non-U.S. sovereign debt Mortgage trading loans and asset-backed securities...

  • Page 230
    ... securities Total available-for-sale debt securities Loans and leases (3) Mortgage servicing rights Loans held-for-sale (3) Other assets (4) Trading account liabilities: Non-U.S. sovereign debt Corporate securities and other Total trading account liabilities Commercial paper and other short-term...

  • Page 231
    ... (Losses) Included in OCI Purchases, Issuances and Settlements Transfers into/(out of) Level 3 (1) Balance December 31 2008 (1) (Dollars in millions) Countrywide Acquisition Trading account assets Net derivative assets (2) Available-for-sale debt securities Loans and leases (3) Mortgage servicing...

  • Page 232
    ... Earnings 2010 Equity Investment Income (Loss) Trading Account Profits (Losses) Mortgage Banking Income (Loss)(1) Other Income (Loss) (Dollars in millions) Total Trading account assets: Corporate securities, trading loans and other Equity securities Non-U.S. sovereign debt Mortgage trading loans...

  • Page 233
    ... Commercial Non-U.S. securities Corporate/Agency bonds Other taxable securities Total available-for-sale debt securities Loans and leases (2) Mortgage servicing rights Loans held-for-sale (2) Other assets Trading account liabilities - Non-U.S. sovereign debt Commercial paper and other short-term...

  • Page 234
    ..., 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 Investment Income (Loss) Trading Account Profits (Losses) Mortgage Banking Income...

  • Page 235
    ... Reporting Date 2009 Equity Investment Income (Loss) Trading Account Profits (Losses) Mortgage Banking Income (Loss) (1) Other Income (Loss) (Dollars in millions) Total Trading account assets: Corporate securities, trading loans and other Equity securities Non-U.S. sovereign debt Mortgage trading...

  • Page 236
    ... loans at historical cost and the credit derivatives at fair value. 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...

  • Page 237
    ...the Fair Value Option 2010 Trading Account Profits (Losses) Mortgage Banking Income (Loss) Equity Investment Income (Loss) Other Income (Loss) (Dollars in millions) Total Corporate loans and loan commitments Loans held-for-sale Securities financing agreements Other assets Long-term deposits Asset...

  • Page 238
    ...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. Financial assets Loans Financial liabilities Deposits...

  • Page 239
    ... 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 Corporation's Consolidated Balance Sheet. In addition, Home Loans & Insurance offers...

  • Page 240
    ... 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...

  • Page 241
    ...Other. Business Segments At and for the Year Ended December 31 (Dollars in millions) Total Corporation (1) 2010 2009 2008 Deposits 2010 2009 2008 Global Card Services (2) 2010 2009 2008 Net interest income (3) Noninterest income Total revenue, net of interest expense Provision for credit losses...

  • Page 242
    ... Reported Basis (1) Securitization Offset (2) Net interest income (3) Noninterest income: Card income (loss) Equity investment income Gains on sales of debt securities All other income (loss) Total noninterest income Total revenue, net of interest expense Provision for credit losses Merger...

  • Page 243
    ...761 (585,994) (89,716) 166,362 $2,230,232 Consolidated total assets 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 (1) Bank of America 2010 241

  • Page 244
    ...income (loss) Net income (loss) applicable to common shareholders Condensed Balance Sheet December 31 (Dollars in millions) 2010 2009 Assets Cash held at bank subsidiaries Debt securities Receivables from subsidiaries: Bank holding companies and related subsidiaries Nonbank companies and related...

  • Page 245
    ...purchases) sales of securities Net payments from (to) subsidiaries Other investing activities, net Net cash provided by (used in) investing activities Financing activities Net increase (decrease) in commercial paper and other short-term borrowings Proceeds from issuance of long-term debt Retirement...

  • Page 246
    ... of $328 million, $488 million and $404 million for 2010, 2009 and 2008, respectively. 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 Corporation's initial investment in CCB. 244 Bank of America 2010

  • Page 247
    ... Bank of America's 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 SEC's rules and forms. Bank of America 2010...

  • Page 248
    ... 2010 ("Management's 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...

  • Page 249
    ...* President, Bank of America Home Loans and Insurance Anne M. Finucane Global Strategy and Marketing Officer Sallie L. Krawcheck* President, Global Wealth and Investment Management Terrence P. Laughlin* Legacy Asset Servicing Executive Thomas K. Montag* President, Global Banking and Markets Charles...

  • Page 250
    ... Analysts, portfolio managers and other investors seeking additional information about Bank of America stock should contact our Equity Investor Relations group at 1.704.386.5681. For additional information about Bank of America from a credit perspective, including debt and preferred securities...

  • Page 251
    ... Edgeâ„¢ is the marketing name for two businesses: Merrill Edge Advisory Center, which offers team-based advice and guidance brokerage services; and a self-directed online investing platform. U.S. Trust, Bank of America Private Wealth Management operates through Bank of America, N.A., and other...

  • Page 252
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