Bank of America 2010 Annual Report Download - page 177

Purchased Credit-impaired Loans
PCI loans are acquired loans with evidence of credit quality deterioration since
origination for which it is probable at purchase date that the Corporation will
be unable to collect all contractually required payments. In connection with the
Countrywide acquisition in 2008, the Corporation acquired PCI loans, sub-
stantially all of which were residential mortgage, home equity and discontin-
ued real estate loans. In connection with the Merrill Lynch acquisition in 2009,
the Corporation acquired PCI loans, substantially all of which were residential
mortgage and commercial loans.
The table below presents the remaining unpaid principal balance and
carrying amount, excluding the valuation reserve, for PCI loans at Decem-
ber 31, 2010 and 2009. See Note 7 – Allowance for Credit Losses for
additional information.
(Dollars in millions) 2010 2009
December 31
Consumer
Countrywide
Unpaid principal balance $41,446 $47,701
Carrying value excluding valuation reserve
34,834 37,541
Merrill Lynch
Unpaid principal balance 1,698 2,388
Carrying value excluding valuation reserve
1,559 2,112
Commercial
Merrill Lynch
Unpaid principal balance $870 $1,971
Carrying value excluding valuation reserve
204 692
As a result of the adoption of new accounting guidance on PCI loans,
beginning January 1, 2010, pooled loans that are modified subsequent to
acquisition are not removed from the PCI loan pools and are not considered
TDRs. Prior to January 1, 2010, pooled loans that were modified subsequent
to acquisition were reviewed to compare modified contractual cash flows to
the PCI carrying value. If the present value of the modified cash flows was less
than the carrying value, the loan was removed from the PCI loan pool at its
carrying value, as well as any related allowance for loan and lease losses, and
was classified as a TDR. The carrying value of PCI loan TDRs that were
removed from the PCI pool prior to January 1, 2010 totaled $2.1 billion. At
December 31, 2010, $1.6 billion of those classified as TDRs were on accrual
status. The carrying value of these modified loans, net of allowance, was
approximately 65 percent of the unpaid principal balance.
The table below shows activity for the accretable yield on PCI loans. The
$14 million and $1.4 billion reclassifications to nonaccretable difference
during 2010 and 2009 reflect a reduction in estimated interest cash flows
during the year.
(Dollars in millions)
Accretable yield, January 1, 2009 $12,860
Merrill Lynch balance 627
Accretion (2,859)
Disposals/transfers (1,482)
Reclassifications to nonaccretable difference (1,431)
Accretable yield, December 31, 2009 7,715
Accretion (1,766)
Disposals/transfers (213)
Reclassifications to nonaccretable difference (14)
Accretable yield, December 31, 2010 $ 5,722
Loans Held-for-Sale
The Corporation had LHFS of $35.1 billion and $43.9 billion at December 31,
2010 and 2009. Proceeds from sales, securitizations and paydowns of LHFS
were $281.7 billion, $365.1 billion and $142.1 billion for 2010, 2009 and
2008. Proceeds used for originations and purchases of LHFS were $263.0 bil-
lion, $369.4 billion and $127.5 billion for 2010, 2009 and 2008.
Bank of America 2010 175