Bank of America 2010 Annual Report Download - page 183

Credit Card Securitizations
The Corporation securitizes originated and purchased credit card loans. The
Corporation’s continuing involvement with the securitization trusts includes
servicing the receivables, retaining an undivided interest (seller’s interest) in
the receivables, and holding certain retained interests including senior and
subordinate securities, discount receivables, subordinate interests in ac-
crued interest and fees on the securitized receivables, and cash reserve
accounts. The Corporation consolidated all credit card securitization trusts on
January 1, 2010 in accordance with new consolidation guidance. Certain
retained interests, including senior and subordinate securities, were elimi-
nated in consolidation. The seller’s interest in the trusts, which is pari passu
to the investors’ interest, and the discount receivables continue to be clas-
sified in loans and leases.
The table below summarizes select information related to credit card
securitization trusts in which the Corporation held a variable interest at
December 31, 2010 and 2009.
(Dollars in millions)
Consolidated
VIEs
Retained Interests in
Unconsolidated VIEs
2010 2009
December 31
Maximum loss exposure
(1)
$36,596 $32,167
On-balance sheet assets
Trading account assets
$– $80
Available-for-sale debt securities
(2)
– 8,501
Held-to-maturity securities
(2)
– 6,573
Loans and leases
(3)
92,104 14,905
Allowance for loan and lease losses
(8,505) (1,727)
Derivative assets
1,778 –
All other assets
(4)
4,259 1,547
Total $89,636 $29,879
On-balance sheet liabilities
Long-term debt
$52,781 $–
All other liabilities
259 –
Total $53,040 $–
Trust loans
$92,104 $103,309
(1)
At December 31, 2009, maximum loss exposure represents the total retained interests held by the Corporation and also includes $2.3 billion related to a liquidity support commitment the Corporation provided to one ofthe U.S. Credit
Card Securitization Trust’s commercial paper program. This commercial paper program was terminated in 2010.
(2)
As a holder of these securities, the Corporation receives scheduled principal and interest payments. During 2009, there were no OTTI losses recorded on those securities classified as AFS or HTM debt securities.
(3)
At December 31, 2010 and 2009, loans and leases includes $20.4 billion and $10.8 billion of seller’s interest and $3.8 billion and $4.1 billion of discount receivables.
(4)
At December 31, 2010, all other assets includes restricted cash accounts and unbilled accrued interest and fees. At December 31, 2009, all other assets includes discount subordinate interests in accrued interest and fees on the
securitized receivables, cash reserve accounts and interest-only strips which are carried at fair value.
During 2010, $2.9 billion of new senior debt securities were issued to
external investors from the credit card securitization trusts. There were no
new debt securities issued to external investors from the credit card secu-
ritization trusts during 2009. Collections reinvested in revolving period se-
curitizations were $133.8 billion and cash flows received on residual interests
were $5.5 billion during 2009.
At December 31, 2009, there were no recognized servicing assets or
liabilities associated with any of the credit card securitization transactions.
The Corporation recorded $2.0 billion in servicing fees related to credit card
securitizations during 2009.
During 2010 and 2009, subordinate securities with a notional principal
amount of $11.5 billion and $7.8 billion and a stated interest rate of zero
percent were issued by certain credit card securitization trusts to the Corpo-
ration. In addition, the Corporation has elected to designate a specified
percentage of new receivables transferred to the trusts as “discount
receivables” such that principal collections thereon are added to finance
charges which increases the yield in the trust. Through the designation of
newly transferred receivables as discount receivables, the Corporation has
subordinated a portion of its seller’s interest to the investors’ interest. These
actions, which were specifically permitted by the terms of the trust docu-
ments, were taken in an effort to address the decline in the excess spread of
the U.S. and U.K. Credit Card Securitization Trusts. As these trusts were
consolidated on January 1, 2010, the issuance of subordinate securities and
the discount receivables election had no impact on the Corporation’s con-
solidated results during 2010 or 2009. At December 31, 2009, the carrying
amount and fair value of the retained subordinate securities were $6.6 billion
and $6.4 billion. These balances were eliminated on January 1, 2010 with the
consolidation of the trusts. The outstanding principal balance of discount
receivables, which are classified in loans and leases, was $3.8 billion and
$4.1 billion at December 31, 2010 and 2009.
Bank of America 2010 181