Bank of America 2010 Annual Report Download - page 104

estimate of probable losses must also consider utilization. To estimate the
portion of these undrawn commitments that is likely to be drawn by a borrower
at the time of estimated default, analyses of the Corporation’s historical
experience are applied to the unfunded commitments to estimate the funded
exposure at default (EAD). The expected loss for unfunded lending commit-
ments is the product of the PD, the LGD and the EAD, adjusted for any
qualitative factors including economic uncertainty and inherent uncertainty in
models.
The reserve for unfunded lending commitments at December 31, 2010
was $1.2 billion, $299 million lower than December 31, 2009 primarily driven
by accretion of purchase accounting adjustments on acquired Merrill Lynch
unfunded positions and customer utilizations of previously unfunded
positions.
Table 50 presents a rollforward of the allowance for credit losses for 2010
and 2009.
Table 50 Allowance for Credit Losses
(Dollars in millions) 2010 2009
Allowance for loan and lease losses, beginning of period, before effect of the January 1 adoption of new consolidation guidance $37,200 $23,071
Allowance related to adoption of new consolidation guidance
10,788 n/a
Allowance for loan and lease losses, January 1 47,988 23,071
Loans and leases charged off
Residential mortgage (3,779) (4,436)
Home equity
(7,059) (7,205)
Discontinued real estate
(77) (104)
U.S. credit card
(13,818) (6,753)
Non-U.S. credit card
(2,424) (1,332)
Direct/Indirect consumer
(4,303) (6,406)
Other consumer
(320) (491)
Total consumer charge-offs
(31,780) (26,727)
U.S. commercial
(1)
(3,190) (5,237)
Commercial real estate
(2,185) (2,744)
Commercial lease financing
(96) (217)
Non-U.S. commercial
(139) (558)
Total commercial charge-offs
(5,610) (8,756)
Total loans and leases charged off
(37,390) (35,483)
Recoveries of loans and leases previously charged off
Residential mortgage 109 86
Home equity
278 155
Discontinued real estate
9 3
U.S. credit card
791 206
Non-U.S. credit card
217 93
Direct/Indirect consumer
967 943
Other consumer
59 63
Total consumer recoveries
2,430 1,549
U.S. commercial
(2)
391 161
Commercial real estate
168 42
Commercial lease financing
39 22
Non-U.S. commercial
28 21
Total commercial recoveries
626 246
Total recoveries of loans and leases previously charged off
3,056 1,795
Net charge-offs
(34,334) (33,688)
Provision for loan and lease losses
28,195 48,366
Other
(3)
36 (549)
Allowance for loan and lease losses, December 31
41,885 37,200
Reserve for unfunded lending commitments, January 1 1,487 421
Provision for unfunded lending commitments
240 204
Other
(4)
(539) 862
Reserve for unfunded lending commitments, December 31
1,188 1,487
Allowance for credit losses, December 31 $43,073 $38,687
(1)
Includes U.S. small business commercial charge-offs of $2.0 billion and $3.0 billion in 2010 and 2009.
(2)
Includes U.S. small business commercial recoveries of $107 million and $65 million in 2010 and 2009.
(3)
The 2009 amount includesa $750 million reduction in the allowance for loan and lease losses related to credit card loans of $8.5 billion which were exchanged for $7.8 billion in held-to-maturity debt securities that were issued by the
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 unfunded
positions. All other amounts represent primarily accretion of the Merrill Lynch purchase accounting adjustment and the impact of funding previously unfunded positions.
n/a = not applicable
102 Bank of America 2010