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What’s next for
Bank of America?
We are transforming our company —
making Bank of America simpler, more transparent,
easier to do business with and focused on
serving the needs of our customers and clients.
Bank of America Corporation 2011 Annual Report

Table of contents

  • Page 1
    What's next for Bank of America? We are transforming our company - making Bank of America simpler, more transparent, easier to do business with and focused on serving the needs of our customers and clients. Bank of America Corporation 2011 Annual Report

  • Page 2
    ...made great strides in transforming our company. We streamlined our businesses, built capital and liquidity and, most important, maintained or built on market-leading capabilities to serve our customers' and clients' core financial services needs. Our company has reduced risk and is less complex. As...

  • Page 3
    ... reserves for mortgage-related matters. Obviously, our stock price does not yet reï¬,ect the work we are doing to strengthen capital, reduce risk and attract more business from our customers. There are many issues weighing not only on us, but on the entire financial services industry. These...

  • Page 4
    ... Sheet In 2011, Bank of America made significant progress to streamline its balance sheet by selling non-core assets, building capital and reducing debt. At the end of 2011, the company's Tier 1 common capital ratio was 9.86 percent, up 126 basis points from the previous year, long-term debt was...

  • Page 5
    ... global clients. The credit we extended and the capital we raised helped our customers and clients meet their goals, such as buying a new home, paying for college, adding another assembly line or expanding into new markets. to do on these exposures and other mortgage-related matters, we ended 2011...

  • Page 6
    ...is Bank of America doing to help get the housing market going again?" "We have modified more mortgage loans than any other servicer: More than 1 million homeowners have been helped. We are making one in three modifications in the entire country. Helping our customers who are at risk of foreclosure...

  • Page 7
    ... to focus intently on what we can control: providing our customers and clients with the best service and most comprehensive financial services solutions in the market; managing our costs; and doing our part to keep the economy moving forward. Our long-term value will come through when we do that...

  • Page 8
    ... year ended December 31, 2011. Including the representations and warranties provision, revenue was a negative $3.2 billion on an as-reported basis. For additional information, see Consumer Real Estate Services on page 37 in the 2011 Financial Review section. Excluding representations and warranties...

  • Page 9
    ... presence in emerging global markets in regions like Latin America and the Middle East. The key is to continue building our capabilities with a balanced approach, with risk management and other functions to support the client-facing teams, so that we can not only win new business, but execute every...

  • Page 10
    ... I bank with Bank of America?" "We offer the best in banking convenience, clarity and choice, through solutions that meet consumers™ needs at every stage of their financial lives." I started with the bank as a part-time teller in August 2001, learning about our customers and the company and...

  • Page 11
    ... spend more time working with customers to make sure we are up to date on what they need and how their goals may have changed, so I can be sure they have the best products and services for them. Customers understand we can do more than provide them with banking, credit card and savings products. We...

  • Page 12
    ... the assets of all three generations by providing financial guidance to each family member, including access to credit solutions. In this instance, we help with all aspects of the client's finances, including online bill pay and banking needs, trust and foundation services and portfolio strategies...

  • Page 13
    ... Lynch's greatest strength is our ability to offer solutions to our clients in a variety of positions on the wealth spectrum. I've been in this business for more than 27 years and it's gratifying to be able to work with the children and grandchildren of clients I helped early in my career. 11

  • Page 14
    ......denominated senior notes offerings. In addition, we used both foreign exchange and interest rate derivatives to help manage the risks associated with the financings. We executed this transaction in record time, and the strength of our distribution capabilities with our investor clients enabled...

  • Page 15
    ... expertise and strong execution skills, so we can strengthen our client relationships and help them grow. We are pleased and proud that this transaction's offerings represented the second-largest combined simultaneous common stock and convertible offering in the world in 2011. Pictured left to...

  • Page 16
    ... credit Modified more than 1 million mortgages since 2008 Originated $152 billion in first mortgages, including $35 billion for low- and moderate-income customers Increased new loans and commitments to small businesses by 20 percent Financed $3.6 billion globally to address climate change Provided...

  • Page 17
    ...needs, we made nearly $6 million in emergency safety net grants and extended customer donations through our Gift for Opportunityâ„¢ fund, helping to provide 26 million meals to the hungry. And in 2011, our employees donated 1.5 million volunteer hours globally, building affordable housing, providing...

  • Page 18
    ... a diversified range of banking and non-banking financial services and products through six business segments: Deposits, Card Services, Consumer Real Estate Services, Global Commercial Banking, Global Banking & Markets and Global Wealth & Investment Management. Bank of America is a member of the Dow...

  • Page 19
    Bank of America 2011 Financial Review

  • Page 20
    Financial Review Contents Executive Summary Financial Highlights Balance Sheet Overview Supplemental Financial Data Business Segment Operations Deposits Card Services Consumer Real Estate Services Global Commercial Banking Global Banking & Markets Global Wealth & Investment Management All Other Off-...

  • Page 21
    ...-core asset sales in our capital strategy; investment banking fees; sales and trading revenue; consumer and commercial service charges, including the impact of changes in the Corporation's overdraft policy and the Corporation's ability to mitigate a decline in revenues; the effects of new accounting...

  • Page 22
    ... made to pension plans; our expectations regarding probable losses related to unfunded lending commitments; our funding strategies including contingency plans; our trading risk management processes; our interest rate and mortgage banking risk management strategies and models; our expressed intention...

  • Page 23
    ... (loss) per common share, return on average assets, return on average tangible shareholders' equity and the efficiency ratio have been calculated excluding the impact of goodwill impairment charges of $3.2 billion and $12.4 billion in 2011 and 2010, and accordingly, these are non-GAAP financial...

  • Page 24
    ...in equity markets, low consumer expectations and heightened worries about recession, the Federal Reserve adopted another financial support program in September 2011 aimed at lowering bond yields. The program involved sales of $400 billion of shorter-term (less than three years) government securities...

  • Page 25
    ...page 57 and Note 9 - Representations and Warranties Obligations and Corporate Guarantees to the Consolidated Financial Statements. For more information about the risks associated with the BNY Mellon Settlement, see Item 1A. Risk Factors of this Annual Report on Form 10-K. Capital Related Matters We...

  • Page 26
    ...or agreements or provide other remedies. For information regarding the risks associated with adverse changes in our credit ratings, see Liquidity Risk - Credit Ratings on page 73, Note 4 - Derivatives to the Consolidated Financial Statements and Item 1A. Risk Factors of this Annual Report on Form 10...

  • Page 27
    ... in trading account profits. These declines were partially offset by the gains on the sale of CCB shares and higher positive fair value adjustments related to our own credit on structured liabilities in 2011. In addition, in connection with separate agreements with certain trust preferred security...

  • Page 28
    ... (Dollars in millions) Deposits Card Services Consumer Real Estate Services Global Commercial Banking Global Banking & Markets Global Wealth & Investment Management All Other Total FTE basis FTE adjustment Total Consolidated (1) Total Revenue (1) Net Income (Loss) 2011 2011 2010 2010 $ 12,689 $ 13...

  • Page 29
    ... provision for credit losses, see Provision for Credit Losses on page 102. Card income Service charges Investment and brokerage services Investment banking income Equity investment income Trading account profits Mortgage banking income (loss) Insurance income Gains on sales of debt securities Other...

  • Page 30
    ...resell Trading account assets Debt securities Loans and leases Allowance for loan and lease losses All other assets Total assets Liabilities Deposits Federal funds purchased and securities loaned or sold under agreements to repurchase Trading account liabilities Commercial paper and other short-term...

  • Page 31
    ...sale (AFS) debt securities, see Note 5 - Securities to the Consolidated Financial Statements. Trading Account Liabilities Trading account liabilities consist primarily of short positions in fixed-income securities including government and corporate debt, equity and convertible instruments. Year-end...

  • Page 32
    ...other short-term investments. Our financing activities reflect cash flows primarily related to increased customer deposits and net long-term debt repayments. Cash and cash equivalents increased $11.7 billion during 2011 due to sales of non-core assets and net sales of AFS securities partially offset...

  • Page 33
    ...common share data Earnings (loss) Diluted earnings (loss) (2) Dividends paid Book value Tangible book value (3) 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...

  • Page 34
    ...provides additional clarity in assessing the results of the Corporation and our segments. Other companies may define or calculate these measures and ratios differently. Table 8 Five Year Supplemental Financial Data (Dollars in millions, except per share information) 2011 $ 2010 $ 2009 48,410 120...

  • Page 35
    ... segment. 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. Bank of America 2011 33

  • Page 36
    ... services, a self-directed online investing platform and key banking capabilities including access to the Corporation's network of banking centers and ATMs. Deposits includes the net impact of migrating customers and their related deposit balances between Deposits and other client-managed businesses...

  • Page 37
    ...allocated equity Return on average economic capital (1) Efficiency ratio (FTE basis) Efficiency ratio, excluding goodwill impairment charge (FTE basis) Balance Sheet Average Total loans and leases Total earning assets Total assets Allocated equity Economic capital (1) Year end Total loans and leases...

  • Page 38
    ... reasons as the decrease in economic capital. For more information regarding economic capital and allocated equity, see Supplemental Financial Data on page 32. Average loans decreased $19.0 billion, or 13 percent, in 2011 compared to 2010 driven by higher payments, charge-offs, continued run-off of...

  • Page 39
    ... 5,700 banking centers, mortgage loan officers in approximately 500 locations and a sales force offering our customers direct telephone and online access to our products. These products were also offered through our correspondent lending channel; however, we exited this channel in late 2011. In 2011...

  • Page 40
    ...effect of changes in other assumptions, including the cost to service. These amounts are not allocated between Home Loans and Legacy Asset Servicing since the MSRs are managed as a single asset. For additional information on MSRs, see Note 25 - Mortgage Servicing Rights to the Consolidated Financial...

  • Page 41
    ... 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 CRES to the ALM portfolio in All Other. Core production revenue of $2.8 billion in 2011 decreased...

  • Page 42
    ...equity lines of credit, home equity loans and discontinued real estate mortgage loans. The total Corporation mortgage servicing portfolio included $1,029 billion in Home Loans and $734 billion in Legacy Asset Servicing at December 31, 2011. The total Corporation mortgage loans serviced for investors...

  • Page 43
    ... Our lending products 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. Effective in 2011...

  • Page 44
    ...415 2010 4,741 6,485 $ 11,226 $ $ 148,638 203,824 Treasury services revenue increased $113 million to $4.9 billion, driven by increased net interest income from the funding benefit of increased deposits, partially offset by lower treasury service charges. As clients manage through current economic...

  • Page 45
    ..., foreign exchange, fixed-income and mortgage-related products. As a result of our market-making activities in these products, we may be required to manage positions in government securities, equity and equity-linked securities, high-grade and high-yield corporate debt securities, commercial paper...

  • Page 46
    ... market conditions partially offset by higher advisory fees. Global Corporate Banking Client relationship teams along with product partners work with our customers to provide a wide range of lending-related products and services, integrated working capital management and treasury solutions...

  • Page 47
    ... the Consolidated Financial Statements. Super senior exposure represents the most senior class of notes that are issued by the CDO vehicles and benefits from the subordination of all other securities issued by the CDO vehicles. In 2011, we recorded losses of $86 million from our CDO-related exposure...

  • Page 48
    ...equity Return on average economic capital (1) Efficiency ratio (FTE basis) Balance Sheet Average Total loans and leases Total earning assets Total assets Total deposits Allocated equity Economic capital (1) Year end Total loans and leases Total earning assets Total assets Total deposits (1) $ 2011...

  • Page 49
    ... brokerage assets, assets in custody, client deposits, and loans and leases. Migration Summary (Dollars in millions) 2011 $ (2,032) (174) (2,918) (299) $ 2010 2,486 (1,405) 4,317 (1,625) Average Total deposits - GWIM from / (to) Deposits Total loans - GWIM to CRES and the ALM portfolio Year end...

  • Page 50
    ... estate Other Total loans and leases Total assets (1) Total deposits Allocated equity (2) Year end Loans and leases: Residential Mortgage Credit Card Discontinued real estate Other Total loans and leases Total assets (1) Total deposits (1) $ 2011 1,780 465 7,037 3,098 2,821 13,421 15,201 $ 2010...

  • Page 51
    ...-term financial performance. Because of the recent transfer of the joint venture investment from GBAM to Global Commercial Banking, the impairment charges were recorded in All Other. For additional information, see Note 5 - Securities to the Consolidated Financial Statements. Bank of America 2011...

  • Page 52
    ... Consolidated Financial Statements and Item 1A. Risk Factors of this Annual Report on Form 10-K. Representations and Warranties Bulk Settlement Actions Beginning in the fourth quarter of 2010, we have settled, or entered into agreements to settle, certain bulk representations and warranties claims...

  • Page 53
    .... For a summary of the larger bulk settlement actions we have taken beginning in 2010 and the related impact on the representations and warranties provision and liability, see Note 9 - Representations and Warranties Obligations and Corporate Guarantees to the Consolidated Financial Statements. As...

  • Page 54
    ...depending on the governing sale contracts. In those cases where the governing contracts contain a MI-related representation and warranty which upon rescission requires us to repurchase the affected loan or indemnify the investor for the related loss, we realize the loss without the benefit of MI. If...

  • Page 55
    ... the methodology used to estimate the non-GSE representations and warranties liability and the corresponding range of possible loss, see Note 9 - Representations and Warranties Obligations and Corporate Guarantees to the Consolidated Financial Statements. Future provisions and/or ranges of possible...

  • Page 56
    ...-GSE representations and warranties exposures do not include any losses related to litigation matters disclosed in Note 14 - Commitments and Contingencies to the Consolidated Financial Statements, nor do they include any separate foreclosure costs and related costs, assessments and compensatory fees...

  • Page 57
    ... the terms of the new FNMA policy, our representations and warranties liability will likely increase. Experience with Investors Other than Governmentsponsored Enterprises In prior years, legacy companies and certain subsidiaries have sold pools of first-lien mortgage loans and home equity loans as...

  • Page 58
    ... investor or paid in full. The majority of these resolved claims related to home equity mortgages. Experience with most of the monoline insurers has varied in terms of process, and experience with these counterparties has not been predictable. 56 Bank of America 2011 At December 31, 2011, for loans...

  • Page 59
    of possible loss related to non-GSE representations and warranties exposure as of December 31, 2011 included possible losses related to these monoline insurers. Whole Loans and Private-label Securitizations Legacy entities, and to a lesser extent Bank of America, sold loans to investors as whole ...

  • Page 60
    ...certain origination, servicing and foreclosure practices (the Global AIP), (2) the Federal Housing Administration (the FHA) to resolve certain claims relating to the origination of FHA-insured mortgage loans, primarily by Countrywide prior to and for a period following our acquisition of that lender...

  • Page 61
    ... the longer term. Finally, the time to complete foreclosure sales may continue to be protracted, which may result in a greater number of nonperforming loans and increased servicing advances and may impact the collectability of such advances and the value of our MSR asset, MBS and real estate owned...

  • Page 62
    ... of our mortgage servicing obligations, including the completion of foreclosures. Limitations on Proprietary Trading On October 11, 2011, the Federal Reserve, OCC, FDIC and Securities and Exchange Commission (SEC), representing four of the five regulatory agencies charged with promulgating...

  • Page 63
    ..., certain federal consumer financial laws to which the Corporation is subject, including, but not limited to, the Equal Credit Opportunity Act, Home Mortgage Disclosure Act, Electronic Fund Transfers Act, Fair Credit Reporting Act, Truth in Lending and Truth in Savings Acts will be enforced...

  • Page 64
    ... activities. Executive management assesses, and the Board oversees, the risk-adjusted returns of each business segment. Management reviews and approves strategic and financial operating plans, and recommends to the Board for approval a financial plan annually. By allocating economic capital to and...

  • Page 65
    ...Legal report to the Chief Legal, Compliance and Regulatory Relations Executive. Enterprise control functions consist of the Chief Financial Officer Group, Global Technology and Operations, Global Human Resources, Global Marketing and Corporate Affairs. Global Risk Management is led by the Chief Risk...

  • Page 66
    ... Corporate Governance Committee Compensation and Benefits Committee Executive Committee Credit Risk Committee Insider Oversight and Monitoring Committee Asset Liability and Market Risk Committee CFO Risk Committee Enterprise Model Risk Control Committee Enterprise Mortgage Risk Committee Global...

  • Page 67
    ... the Corporation's Risk Framework, Risk Appetite Statement, and financial operating plans. Management monitors, and the Board oversees, through the Credit, Enterprise Risk and Audit Committees, financial performance, execution of the strategic and financial operating plans, compliance with the risk...

  • Page 68
    ... include financial guarantees, unfunded lending commitments, letters of credit and derivatives. Market risk riskweighted assets are calculated using risk models for the trading account positions, including all foreign exchange and commodity positions regardless of the applicable accounting guidance...

  • Page 69
    ...made by Berkshire, see Note 13 - Long-term Debt and Note 15 - Shareholders' Equity to the Consolidated Financial Statements. Risk-weighted assets decreased $172 billion to $1,284 billion at December 31, 2011 compared to 2010. The decrease was driven in part by our sale of CCB shares and our Canadian...

  • Page 70
    ...risk-based capital and leverage requirements, liquidity standards, requirements for overall risk management, single-counterparty credit limits, stress test requirements and a debt-to-equity limit for certain companies determined to pose a threat to financial stability. Comments on the proposed rules...

  • Page 71
    ... potential loss in market value due to credit deterioration over the one-year capital time horizon. Credit risk is assessed and modeled for all on- and off-balance sheet credit exposures within sub-categories for commercial, retail, counterparty and investment securities. The economic capital...

  • Page 72
    ... the value of financial instruments or portfolios due to movements in interest and currency exchange rates, equity and futures prices, the implied volatility of interest rates, credit spreads and other economic and business factors. Bank of America's primary market risk exposures are in its trading...

  • Page 73
    ... of unsecured debt and reductions 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 commitment and liquidity facilities, including Variable Rate Demand Notes...

  • Page 74
    ... unsecured short-term borrowings at the parent company and broker/dealer subsidiaries, including commercial paper and master notes, to relatively insignificant amounts in 2011. These short-term borrowings were used to support customer activities, short-term financing requirements 72 Bank of America...

  • Page 75
    ...U.S. government support it incorporates into ratings. On February 15, 2012, Moody's placed the Corporation's long-term debt ratings and BANA's long-term and short-term debt ratings on review for possible downgrade as part of its review of financial institutions with global capital markets operations...

  • Page 76
    ... contracts and other trading agreements as a result of such a credit ratings downgrade, see Note 4 - Derivatives to the Consolidated Financial Statements and Item 1A. Risk Factors of this Annual Report on Form 10-K. During the third quarter of 2011, Moody's and S&P placed the sovereign rating of the...

  • Page 77
    ... 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 78
    ... real estate loans of $1.3 billion at December 31, 2011. There were no consumer loans accounted for under the fair value option at December 31, 2010. See Consumer Credit Risk - Consumer Loans Accounted for Under the Fair Value Option on page 86 and Note 23 - Fair Value Option to the Consolidated...

  • Page 79
    ... by the Countrywide PCI and fully-insured loan portfolios for 2011 and 2010. Legacy Asset Servicing within CRES manages our exposures to certain residential mortgage, home equity and discontinued real estate products. Legacy Asset Servicing manages both our owned loans, as well as loans serviced for...

  • Page 80
    ... mortgage net charge-off ratio, excluding the Countrywide PCI and fully-insured loan portfolios, for 2011 would have been reduced by 13 bps and eight bps for 2010. Synthetic securitizations and the long-term stand-by agreements with FNMA and FHLMC together reduce our regulatory risk-weighted assets...

  • Page 81
    ... accounted for under the fair value option at December 31, 2010. See Note 23 - Fair Value Option to the Consolidated Financial Statements for additional information on the fair value option. Amount excludes the Countrywide PCI residential mortgage and fully-insured loan portfolios. Bank of America...

  • Page 82
    ... page 50 and Note 9 - Representations and Warranties Obligations and Corporate Guarantees to the Consolidated Financial Statements. Home Equity The home equity portfolio makes up 20 percent of the consumer portfolio and is comprised of HELOCs, home equity loans and reverse mortgages. As of December...

  • Page 83
    ... share of losses in the portfolio. Outstanding balances in the home equity portfolio with all of these higher risk characteristics comprised 10 percent of the total home equity portfolio at both December 31, 2011 and 2010, but have accounted for 28 percent of the home equity net charge-offs in 2011...

  • Page 84
    ... Contractual Obligations - Representations and Warranties on page 50 and Note 9 - Representations and Warranties Obligations and Corporate Guarantees to the Consolidated Financial Statements. Table 27 Home Equity State Concentrations December 31 Outstandings Nonperforming 2011 2011 2010 2010 $ 32...

  • Page 85
    ... in 2010. Provision expense in 2011 was driven primarily by a more negative home price outlook versus previous expectations. For further information on the Countrywide PCI loan portfolio, see Note 6 - Outstanding Loans and Leases to the Consolidated Financial Statements. Additional information...

  • Page 86
    ...card portfolio. California Florida Arizona Virginia Colorado Other U.S./Non-U.S. Total Countrywide purchased credit-impaired home equity portfolio December 31 2011 2010 $ 3,999 $ 4,178 734 750 501 520 496 532 337 375 5,911 6,235 $ 11,978 $ 12,590 Purchased Credit-impaired Discontinued Real Estate...

  • Page 87
    ... in Global Commercial Banking (dealer financial services - automotive, marine, aircraft and recreational vehicle loans), 36 percent was included in GWIM (principally other non-real estate-secured, unsecured personal loans and securities-based lending margin loans), nine percent was included in Card...

  • Page 88
    ... real estate loans and $906 million of residential mortgage loans as a result of the consolidation of VIEs. During 2011, we recorded losses of $837 million resulting from changes in the fair value of the loan portfolio. These losses were offset by gains recorded on the related long-term debt...

  • Page 89
    ... in or had been offered a trial modification. These home loans had an aggregate allowance for credit losses of $154 million at December 31, 2011. For additional information, see Note 1 - Summary of Significant Accounting Principles to the Consolidated Financial Statements. Bank of America 2011 87

  • Page 90
    ...assigned economic capital and the allowance for credit losses. For information on our accounting policies regarding delinquencies, nonperforming status and net charge-offs for the commercial portfolio, see Note 1 - Summary of Significant Accounting Principles to the Consolidated Financial Statements...

  • Page 91
    ...card-related products. Commercial loans accounted for under the fair value option include U.S. commercial loans of $2.2 billion and $1.6 billion, non-U.S. commercial loans of $4.4 billion and $1.7 billion, and commercial real estate loans of $0 and $79 million at December 31, 2011 and 2010. See Note...

  • Page 92
    ...3,833 3,729 731 $ 740,095 Loans and leases Derivative assets (4) Standby letters of credit and financial guarantees Debt securities and other investments (5) Loans held-for-sale Commercial letters of credit Bankers' acceptances Foreclosed properties and other (6) Total (1) 2011 $ 316,816 73,023 55...

  • Page 93
    ... types and geographic regions. California represented the largest state concentration of commercial real estate loans and leases at 20 percent and 18 percent at December 31, 2011 and 2010. For more information on geographic and property concentrations, see Table 42. Credit quality for commercial...

  • Page 94
    ... and $725 million at December 31, 2011 and 2010. Includes loans, excluding those accounted for under the fair value option, SBLCs and bankers' acceptances. Table 44 Commercial Real Estate Net Charge-offs and Related Ratios (Dollars in millions) Net Charge-offs 2011 2010 $ 126 36 184 88 61 23...

  • Page 95
    ... commercial net charge-offs, 74 percent were credit card-related products for 2011 compared to 79 percent for 2010. Commercial Loans Carried at Fair Value The portfolio of commercial loans accounted for under the fair value option is managed primarily in GBAM. Outstanding commercial loans accounted...

  • Page 96
    ...during 2011 and 2010. Nonperforming commercial loans and leases decreased $3.5 billion during 2011 to $6.3 billion at December 31, 2011 driven by paydowns, charge-offs, returns to performing status and sales, partially offset by new nonaccrual loans in the commercial real estate and U.S. commercial...

  • Page 97
    ... exposure to representations and warranties, see Off-Balance Sheet Arrangements and Contractual Obligations - Representations and Warranties on page 50 and Note 9 - Representations and Warranties Obligations and Corporate Guarantees to the Consolidated Financial Statements. Bank of America 2011 95

  • Page 98
    ... financials Real estate (2) Government and public education Healthcare equipment and services Capital goods Retailing Banks Consumer services Materials Energy Commercial services and supplies Food, beverage and tobacco Utilities Media Transportation Individuals and trusts Insurance, including...

  • Page 99
    ... in 2010. See Trading Risk Management on page 107 for a description of our VaR calculation for the market-based trading portfolio. Tables 48 and 49 present the maturity profiles and the credit exposure debt ratings of the net credit default protection portfolio at December 31, 2011 and 2010. The...

  • Page 100
    ...and trading portfolios are subject to country risk. We define country risk as the risk of loss from unfavorable economic and political conditions, currency fluctuations, social instability and changes in government policies. A risk management framework is in place to measure, monitor and manage nonU...

  • Page 101
    ... claims by our non-U.S. offices including loans, acceptances, time deposits placed, trading account assets, securities, derivative assets, other interestearning investments and other monetary assets. Amounts also include unused commitments, SBLCs, commercial letters of credit and formal guarantees...

  • Page 102
    ... At December 31, 2011 and 2010, there was $1.7 billion and $460 million in emerging market exposure accounted for under the fair value option. Includes acceptances, due froms, SBLCs, commercial letters of credit and formal guarantees. Derivative assets are carried at fair value and have been reduced...

  • Page 103
    ... financial services industry, a slowdown in global economic activity and other adverse developments. For additional information on the debt crisis in Europe, see Item 1A. Risk Factors of this Annual Report on Form 10-K. Losses could still result even if there is credit default protection purchased...

  • Page 104
    ...for 2011, resulting in a reduction in the allowance for credit losses driven primarily by lower delinquencies, improved collection rates and fewer bankruptcy filings across the Card Services portfolio, and improvement in overall credit quality in the commercial real estate portfolio partially offset...

  • Page 105
    ... and global economic uncertainty, large single name defaults, significant events which could disrupt financial markets and model imprecision. We monitor differences between estimated and actual incurred loan and lease losses. This monitoring process includes periodic assessments by senior management...

  • Page 106
    ... allowance for loan and lease losses related to Canadian consumer card loans that were transferred to LHFS. The 2011 and 2010 amounts primarily represent accretion of the Merrill Lynch purchase accounting adjustment and the impact of funding previously unfunded positions. 104 Bank of America 2011

  • Page 107
    ... Consumer loans accounted for under the fair value option included residential mortgage loans of $906 million and discontinued real estate of $1.3 billion at December 31, 2011. There were no consumer loans accounted for under the fair value option at December 31, 2010. Commercial loans accounted for...

  • Page 108
    ..., foreign currency-denominated debt and deposits. Mortgage Risk Mortgage risk represents exposures to changes in the value of mortgage-related instruments. The values of these instruments are sensitive to prepayment rates, mortgage rates, agency debt ratings, default, market liquidity, government...

  • Page 109
    ...of price and rate movements at any given time within the ever-changing market environment. The Global Markets Risk Committee (GRC), chaired by the Global Markets Risk Executive, has been designated by ALMRC as the primary governance authority for global markets risk management including trading risk...

  • Page 110
    ... 31, 2011 Year Ended December 31, 2010 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, VaR is subject to trading limits...

  • Page 111
    ... Revenue VaR 3/31/2011 6/30/2011 9/30/2011 12/31/2011 Table 57 presents average, high and low daily trading VaR for 2011 and 2010. Table 57 Market Risk VaR for Trading Activities (Dollars in millions) Foreign exchange Interest rate Credit Real estate/mortgage Equities Commodities Portfolio...

  • Page 112
    ... are designed to represent 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...

  • Page 113
    ... currency-denominated assets and liabilities. Changes to the composition of our derivatives portfolio during 2011 reflect actions taken for interest rate and foreign exchange rate risk management. The decisions to reposition our derivatives portfolio are based upon the current assessment of economic...

  • Page 114
    ... $1.4 billion. The decrease was partially offset by a gain from the changes in the value of U.S. dollar-denominated receive-fixed interest rate swaps of $6.6 billion. Table 60 Asset and Liability Management Interest Rate and Foreign Exchange Contracts December 31, 2011 Expected Maturity (Dollars in...

  • Page 115
    ... change in fair value of these economic hedges compared to $5.0 billion for 2010. For additional information on MSRs, see Note 25 - Mortgage Servicing Rights to the Consolidated Financial Statements and for more information on mortgage banking income, see CRES on page 37. Compliance Risk Management...

  • Page 116
    ...they support. These groups also work with business and risk executives to develop and guide appropriate strategies, policies, practices, controls and monitoring tools for each business and enterprise control function relative to these programs. Additionally, where appropriate, insurance policies are...

  • Page 117
    ... when a mortgage loan is sold and we retain the right to service the loan. We account for consumer MSRs at fair value with changes in fair value recorded in the Consolidated Statement of Income in mortgage banking income. Commercial-related and residential reverse mortgage Bank of America 2011 115

  • Page 118
    ... management judgment in determining the fair value of assets and liabilities, we have in place various processes and controls that include: a model validation policy that requires review and approval of quantitative models used for deal pricing, financial statement fair value determination and risk...

  • Page 119
    ...31, 2011, this portfolio totaled $5.6 billion including $4.3 billion of non-public investments. Certain equity investments in the portfolio are subject to investment company accounting under applicable accounting guidance, and accordingly, are carried at fair value with changes Bank of America 2011...

  • Page 120
    ...during 2011 and 2010 primarily due to the continued uncertainty in the economy and in the financial services industry, as well as adverse developments related to our mortgage business and increased regulation. During these periods, our market capitalization remained below our recorded book value. We...

  • Page 121
    ... liability as discussed in Note 9 - Representations and Warranties Obligations and Corporate Guarantees to the Consolidated Financial Statements, an assumed simultaneous increase or decrease of 10 percent in estimated future defaults, loss severity and the net repurchase rate would result in an...

  • Page 122
    ... page 50, as well as Note 9 - Representations and Warranties Obligations and Corporate Guarantees and Note 14 - Commitments and Contingencies to the Consolidated Financial Statements. in Note 14 - Commitments and Contingencies to the Consolidated Financial Statements regarding the nature of all of...

  • Page 123
    ... of deposit pricing and the adoption of new consolidation guidance which contributed $10.5 billion to net interest income in 2010. The increase was partially offset by lower commercial and consumer loan levels, the sale of First Republic in 2010 and lower rates on core assets and trading assets and...

  • Page 124
    ... the carrying value of deferred tax assets. Global Wealth & Investment Management Net income decreased $329 million to $1.3 billion in 2010 driven by higher noninterest expense and the tax-related effect of the sale of the Columbia Management long-term asset management business partially offset by...

  • Page 125
    ...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 real estate U.S. credit card...

  • Page 126
    ...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 U.S. credit card Non-U.S. credit card...

  • Page 127
    ... (1) Dividends are cumulative. Dividends per depositary share, each representing a 1/1,000th interest in a share of preferred stock. Initially pays dividends semi-annually. Dividends per depositary share, each representing a 1/25th interest in a share of preferred stock. Bank of America 2011 125

  • Page 128
    ...$ 60 $ Series 7 (6) $ 17 $ Series 8 (5) $ 2,673 $ (5) (6) Dividends per depositary share, each representing a 1/1,200th interest in a share of preferred stock. Dividends per depositary share, each representing a 1/40th interest in a share of preferred stock. 126 Bank of America 2011

  • Page 129
    ... 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 loans Consumer loans accounted for under the fair value option (6) Total consumer Commercial U.S. commercial (7) Commercial real estate...

  • Page 130
    ... Our policy is to classify consumer real estate-secured loans as nonperforming at 90 days past due, except the Countrywide PCI loan portfolio, the fully-insured loan portfolio and loans accounted for under the fair value option as referenced in footnote 3. Balances are fully-insured loans. Balances...

  • Page 131
    ... commercial (2) Commercial real estate Commercial lease financing Non-U.S. commercial Total commercial charge-offs Total loans and leases charged off Recoveries of loans and leases previously charged off Residential mortgage Home equity Discontinued real estate U.S. credit card Non-U.S. credit card...

  • Page 132
    ... 2010, 2009, 2008 and 2007, respectively. (8) For more information on our definition of nonperforming loans, see pages 86 and 94. (9) Primarily includes amounts allocated to Card Services portfolios, PCI loans and the non-U.S. credit portfolio in All Other. n/a = not applicable 130 Bank of America...

  • Page 133
    ... interest rates Total (1) (2) (3) $ $ $ $ $ $ $ $ Loan maturities are based on the remaining maturities under contractual terms. Includes loans accounted for under the fair value option. Includes other consumer, commercial real estate and non-U.S. commercial loans. Bank of America 2011 131

  • Page 134
    ...contracts outstanding, December 31, 2011 Effects of legally enforceable master netting agreements Net fair value of contracts outstanding, December 31, 2011 $ Table XI Non-exchange Traded Commodity Contract Maturities December 31, 2011 (Dollars in millions) Asset Positions $ 9,052 2,624 861 1,370...

  • Page 135
    ... (loss) Dividends paid Book value Tangible book value (4) 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...

  • Page 136
    ...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 real estate U.S. credit card...

  • Page 137
    ...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 real estate U.S. credit card...

  • Page 138
    ... expense Net interest yield (2) Efficiency ratio Performance ratios, excluding goodwill impairment charges (3) Per common share information Earnings (loss) Diluted earnings (loss) Efficiency ratio Return on average assets Four quarter trailing return on average assets (4) Return on average common...

  • Page 139
    ...-GAAP financial measures differently. For more information on non-GAAP financial measures and ratios we use in assessing the results of the Corporation, see Supplemental Financial Data on page 32. On February 24, 2010, the common equivalent shares converted into common shares. Bank of America 2011...

  • Page 140
    ... measures differently. For more information on non-GAAP financial measures and ratios we use in assessing the results of the Corporation, see Supplemental Financial Data on page 32. Represents cost of funds, earnings credit and certain expenses related to intangibles. 138 Bank of America 2011

  • Page 141
    ... the results of the Corporation. Other companies may define or calculate non-GAAP financial measures differently. For more information on non-GAAP financial measures and ratios we use in assessing the results of the Corporation, see Supplemental Financial Data on page 32. Bank of America 2011 139

  • Page 142
    ... per share information) Reconciliation of average shareholders' equity to average tangible shareholders' equity Shareholders' equity Goodwill Intangible assets (excluding MSRs) Related deferred tax liabilities Tangible shareholders' equity Reconciliation of period-end common shareholders' equity to...

  • Page 143
    ...market-based activities. Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) - Legislation signed into law on May 22, 2009 that changes credit card industry practices including significantly restricting credit card issuers' ability to change interest rates and assess fees...

  • Page 144
    ... secured by real estate, which include loans insured by the FHA and individually insured long-term credit protection agreements with FNMA and FHLMC (fully-insured loan portfolio), are not placed on nonaccrual status and are, therefore, not reported as nonperforming loans and leases. Purchased Credit...

  • Page 145
    ... of America Government National Mortgage Association Global Markets Risk Committee Government-sponsored enterprise Held-for-investment Home Price Index U.S. Department of Housing and Urban Development Initial public offering Liquidity Coverage Ratio Loss given default Loans held-for-sale London...

  • Page 146
    ...Variable Interest Entities 9 - Representations and Warranties Obligations and Corporate Guarantees 10 - Goodwill and Intangible Assets 11 - Deposits 12 - Federal Funds Sold, Securities Borrowed or Purchased Under Agreements to Resell and Short-term Borrowings 13 - Long-term Debt 14 - Commitments and...

  • Page 147
    ... 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, 2011 based on...

  • Page 148
    ...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, 2011 and 2010, and...

  • Page 149
    ... Short-term borrowings Trading account liabilities Long-term debt Total interest expense Net interest income Noninterest income Card income Service charges Investment and brokerage services Investment banking income Equity investment income Trading account profits Mortgage banking income (loss...

  • Page 150
    ...209,616 194,671 73,000 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 $87,453 and $78,599 measured at fair value) Trading account assets (includes $80,130 and $89,165...

  • Page 151
    ...-bearing Interest-bearing Total deposits Federal funds purchased and securities loaned or sold under agreements to repurchase (includes $34,235 and $37,424 measured at fair value) Trading account liabilities Derivative liabilities Commercial paper and other short-term borrowings (includes $6,558 and...

  • Page 152
    ... 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 translation...

  • Page 153
    ...in time deposits placed and other short-term investments Net (increase) decrease in federal funds sold and securities borrowed or purchased under agreements to resell Proceeds from sales of available-for-sale debt securities Proceeds from paydowns and maturities of available-for-sale debt securities...

  • Page 154
    Bank of America Corporation and Subsidiaries Notes to Consolidated Financial Statements NOTE 1 Summary of Significant Accounting Principles Bank of America Corporation (collectively with its subsidiaries, the Corporation), a financial holding company, provides a diverse range of financial services ...

  • Page 155
    ...based on dealer quotes, pricing models, discounted cash flow methodologies, or similar techniques where the determination of fair value may require significant management judgment or estimation. Realized and unrealized gains and losses are recognized in trading account profits (losses). Derivatives...

  • Page 156
    ... effects of legally enforceable master netting agreements that allow the Corporation to settle positive and negative positions and offset cash collateral held with the same counterparty on a net basis. For exchangetraded contracts, fair value is based on quoted market prices. For non-exchange traded...

  • Page 157
    ... date. Debt securities bought principally with the intent to buy and sell in the short term as part of the Corporation's trading activities are reported at fair value in trading account assets with unrealized gains and losses included in trading account profits (losses). Debt securities purchased...

  • Page 158
    ... Countrywide Financial Corporation (Countrywide) residential mortgage purchased creditimpaired (PCI), core portfolio home equity, Legacy Asset Servicing home equity, Countrywide home equity PCI, Legacy Asset Servicing discontinued real estate and Countrywide discontinued real estate PCI. The classes...

  • Page 159
    ... with the Corporation's policies, credit card loans where the borrower is not deceased or in bankruptcy 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 loans that is...

  • Page 160
    ... the end of the month in which the account becomes 60 days past due. Consumer credit card loans, consumer loans secured by personal property and unsecured consumer loans are not placed on nonaccrual status prior to charge-off and therefore are not reported as nonperforming loans. Real estate-secured...

  • Page 161
    ...designated as accounting hedges. These economic hedges are carried at fair value with changes in fair value recognized in mortgage banking income. The Corporation estimates the fair value of the consumer MSRs using a valuation model that calculates the present value of estimated future net servicing...

  • Page 162
    ... fair value option, including certain corporate loans and loan commitments, LHFS, 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...

  • Page 163
    ... the customer card receivables balances with an amount recorded in the allowance for loan and lease losses for estimated uncollectible card receivables. Uncollected fees are written off when a card receivable reaches 180 days past due. Service charges include fees for insufficient funds, overdrafts...

  • Page 164
    ...'s loan and deposit products and provide the Corporation with their mailing lists and marketing activities. These agreements generally have terms that range from two to five years. The Corporation typically pays royalties in exchange for the endorsement. Compensation costs related to the credit card...

  • Page 165
    ... U.S. government and agency securities Equity securities Non-U.S. sovereign debt Corporate securities and other Total trading account liabilities (1) $ $ Includes $27.3 billion and $29.7 billion of government-sponsored enterprise obligations at December 31, 2011 and 2010. Bank of America 2011...

  • Page 166
    ... 0.7 1,846.5 - - - - 14.8 13.8 0.3 90.5 0.7 $ 1,861.3 (1,749.9) (51.9) $ 59.5 $ $ $ Represents the total contract/notional amount of derivative assets and liabilities outstanding. Excludes $191 million of long-term debt designated as a hedge of foreign currency risk. 164 Bank of America 2011

  • Page 167
    ... rate options, interest rate swaps, forward settlement contracts and Eurodollar 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 168
    ...057) 10,490 (16) 4,448 $ 2010 Derivatives designated as fair value hedges Interest rate risk on long-term debt (1) Interest rate and foreign currency risk on long-term debt Interest rate risk on available-for-sale securities (2) Commodity price risk on commodity inventory (3) Total $ (1) $ 2,952...

  • Page 169
    ... in equity investment income with the underlying hedged item. Amounts related to foreign exchange risk recognized in accumulated OCI on derivatives exclude gains (losses) of $82 million, $192 million and $(387) million related to long-term debt designated as a net investment hedge for 2011, 2010 and...

  • Page 170
    ...the trading desk can execute the trade in the dealer market. For equity securities, commissions related to purchases and sales are recorded in other income (loss) on the Consolidated Statement of Income. Changes in the fair value of these securities are included in trading account profits. For debt...

  • Page 171
    ... income statement line items attributable to the Corporation's sales and trading revenue in GBAM, categorized by primary risk, for 2011, 2010 and 2009. The difference between total trading account profits in the table below and in the Consolidated Statement of Income relates to trading activities...

  • Page 172
    ... same as carrying value. For December 31, 2010, total credit-related note amounts have been revised from $3.6 billion (as previously reported) to $6.3 billion to reflect collateralized debt obligations and collateralized loan obligations held by certain consolidated VIEs. 170 Bank of America 2011

  • Page 173
    ... loan obligation (CLO) and credit-linked note vehicles. These instruments are primarily classified as trading securities. The carrying value of these instruments equals the Corporation's maximum exposure to loss. The Corporation is not obligated to make any payments to the entities under the terms...

  • Page 174
    ...interest rate and foreign exchange hedges) in trading account profits for changes in the Corporation's or its subsidiaries' credit risk. At December 31, 2011 and 2010, the Corporation's cumulative DVA reduced the derivative liabilities balance by $2.4 billion and $1.1 billion. NOTE 5 Securities The...

  • Page 175
    ...fall. The Corporation estimates the portion of loss attributable to credit using a discounted cash flow model and estimates the expected cash flows of the underlying collateral using internal credit, interest rate and prepayment risk models that incorporate management's best estimate of current key...

  • Page 176
    ...) Includes other-than-temporarily impaired AFS debt securities on which a portion of the OTTI loss remains in OCI. At December 31, 2011 and 2010, the amortized cost of approximately 3,800 and 8,500 AFS securities exceeded their fair value by $1.7 billion and $4.5 billion. 174 Bank of America 2011

  • Page 177
    ... end of the period, weighted based on the amortized cost of each security. The effective yield considers the contractual coupon, amortization of premiums and accretion of discounts and excludes the effect of related hedging derivatives. Substantially all U.S. agency securities. Bank of America 2011...

  • Page 178
    ...value was $1.4 billion and $20.8 billion. This investment is recorded in other assets. Dividend income on this investment is recorded in equity investment income and during 2011 and 2010, the Corporation recorded dividends of $836 million and $535 million from CCB. The strategic assistance agreement...

  • Page 179
    ... (5) Home equity Legacy Asset Servicing portfolio Residential mortgage Home equity Discontinued real estate (6) Credit card and other consumer U.S. credit card Non-U.S. credit card Direct/Indirect consumer (7) Other consumer (8) Total consumer loans Consumer loans accounted for under the fair value...

  • Page 180
    ... equity Legacy Asset Servicing portfolio Residential mortgage Home equity Discontinued real estate (6) Credit card and other consumer U.S. credit card Non-U.S. credit card Direct/Indirect consumer (7) Other consumer (8) Total consumer Commercial U.S. commercial Commercial real estate (9) Commercial...

  • Page 181
    ... 2010 Home loans Core portfolio Residential mortgage (1) Home equity Legacy Asset Servicing portfolio Residential mortgage (1) Home equity Discontinued real estate Credit card and other consumer U.S. credit card Non-U.S. credit card Direct/Indirect consumer Other consumer Total consumer Commercial...

  • Page 182
    ...,978 Legacy Asset Servicing Discontinued Real Estate (2) $ 895 122 221 - $ $ 1,238 548 690 - $ 1,238 Countrywide Discontinued Real Estate PCI $ 5,953 1,191 2,713 - $ $ 9,857 5,968 3,889 - $ 9,857 Total home loans Refreshed FICO score Less than 620 Greater than or equal to 620 Fully-insured loans...

  • Page 183
    ... Legacy Asset Servicing Discontinued Real Estate (1) $ 1,033 155 268 - $ $ 1,456 663 793 - $ 1,456 Countrywide Discontinued Real Estate PCI $ 6,713 1,319 3,620 - $ $ 11,652 7,168 4,484 - $ 11,652 Total home loans Refreshed FICO score Less than 620 Greater than or equal to 620 Fully-insured loans...

  • Page 184
    ... makes monthly payments under the anticipated modified payment terms. Upon successful completion of the trial period, the Corporation and the borrower enter into a permanent modification. In accordance with new accounting guidance effective in 2011, a loan is classified as a TDR when a binding offer...

  • Page 185
    ...- and post-modification interest rates of home loans that were modified in TDRs during 2011, along with net charge-offs that were recorded during 2011. The table below consists primarily of TDRs managed by Legacy Asset Servicing. Home Loans - TDRs Entered into During 2011 December 31, 2011 Unpaid...

  • Page 186
    ..., the Corporation makes loan modifications for borrowers working with third-party renegotiation agencies which provide solutions to customers' entire unsecured debt structures (external programs). All credit card and other consumer loans not secured by real estate, including modified loans, remain...

  • Page 187
    ... collectability of principal is not uncertain. The table below provides information on the Corporation's primary modification programs for the renegotiated TDR portfolio at December 31, 2011 and 2010. Credit Card and Other Consumer - Renegotiated TDR Portfolio by Program Type Internal Programs...

  • Page 188
    ...charge-off may have already been recorded in a previous period such that no charge-off is required at the time of modification. At December 31, 2011 and 2010, remaining commitments to lend additional funds to debtors whose terms have been modified in a commercial loan TDR were immaterial. Commercial...

  • Page 189
    ... loans in the Corporation's commercial loan portfolio at December 31, 2011 and 2010. Certain impaired commercial loans do not have a related allowance as the valuation of these impaired loans exceeded the carrying value, which is net of previously recorded charge-offs. Impaired Loans - Commercial...

  • Page 190
    ... risk models. The key assumptions used in the models include the Corporation's estimate of default rates, loss severity and prepayment speeds. The carrying value and valuation allowance for Countrywide consumer PCI loans are presented together with the allowance for loan and lease losses. See Note...

  • Page 191
    ... lease losses related to Canadian consumer card loans that were transferred to LHFS. The 2009 "other" amount includes a $750 million reduction in the allowance for loan and lease losses related to $8.5 billion of credit card loans that were exchanged for a $7.8 billion HTM debt security partially...

  • Page 192
    ... December 31, 2011 and 2010 related to U.S. small business commercial renegotiated TDR loans. (3) Amounts are presented gross of the allowance for loan and lease losses. (4) Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option of $8.8 billion...

  • Page 193
    ...Level 2 assets within the fair value hierarchy. During 2011 and 2010, there were no changes to the initial classification. The Corporation recognizes consumer MSRs from the sale or securitization of first-lien mortgage loans. Servicing fee and ancillary fee income on consumer mortgage loans serviced...

  • Page 194
    ...Trading account assets AFS debt securities Residual interests held All other assets Total retained positions Principal balance outstanding (3) Consolidated VIEs Maximum loss exposure (1) On-balance sheet assets Loans and leases Allowance for loan and lease losses Loans held-for-sale All other assets...

  • Page 195
    ...funding obligation was $69 million and $131 million. The Corporation has consumer MSRs from the sale or securitization of home equity loans. The Corporation recorded $62 million and $79 million of servicing fee income related to home equity securitizations during 2011 and 2010. Bank of America 2011...

  • Page 196
    ...$3.8 billion of discount receivables. At December 31, 2011 and 2010, all other assets included restricted cash accounts and unbilled accrued interest and fees. During 2010, $2.9 billion of new senior debt securities were issued to third-party investors from the credit card securitization trusts and...

  • Page 197
    ... positions Total assets of VIEs 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...

  • Page 198
    ... in trading account assets on the Corporation's Consolidated Balance Sheet. The CDO financing facilities' long-term debt at December 31, 2011 totaled $2.6 billion, all of which has recourse to the general credit of the 196 Bank of America 2011 Corporation. The Corporation's maximum exposure to loss...

  • Page 199
    ... 31, 2011 and 2010. Customer Vehicle VIEs December 31 (Dollars in millions) Maximum loss exposure On-balance sheet assets Trading account assets Derivative assets Loans held-for-sale All other assets Total On-balance sheet liabilities Derivative liabilities Commercial paper and other short-term...

  • Page 200
    ... On-balance sheet assets Trading account assets Derivative assets AFS debt securities Loans and leases Allowance for loan and lease losses Loans held-for-sale All other assets Total On-balance sheet liabilities Commercial paper and other short-term borrowings Long-term debt All other liabilities...

  • Page 201
    ... or financial guarantee providers insured all or some of the securities), or in the form of whole loans. In connection with these transactions, the Corporation or certain subsidiaries or legacy companies make or have made various representations and warranties. These representations and warranties...

  • Page 202
    ...'s representations and warranties liability, including claims status. Settlement with the Bank of New York Mellon, as Trustee On June 28, 2011, the Corporation, BAC Home Loans Servicing, LP (BAC HLS, which was subsequently merged with and into BANA in July 2011), and its legacy Countrywide...

  • Page 203
    ...and potential repurchase claims related to alleged representations and warranties breaches involving 29 first- and second-lien RMBS trusts where Assured Guaranty provided financial guarantee insurance (the Assured Guaranty Settlement). The agreement also resolves historical loan servicing issues and...

  • Page 204
    ... sales contracts. In those cases where the governing contract contains a MI-related representation and warranty which upon rescission requires the Corporation to repurchase the affected loan or indemnify the investor for the related loss, the Corporation realizes the loss without the benefit...

  • Page 205
    ... table, during 2011 and 2010, the Corporation paid $5.2 billion and $5.2 billion to resolve $6.2 billion and $6.6 billion of repurchase claims through repurchase or reimbursement to the investor or securitization trust for losses they incurred, resulting in a loss on the related loans at the time of...

  • Page 206
    ... whole-loan and other private-label securitization exposures. The Corporation currently estimates that the range of possible loss related to nonGSE representations and warranties exposure as of December 31, 2011, could be up to $5 billion over existing accruals. This 204 Bank of America 2011...

  • Page 207
    ... representations and warranties given by the Corporation or subsidiaries or legacy companies is confirmed on a given loan, settlement is generally reached as to that loan within 60 to 90 days. The Corporation generally reviews properly presented repurchase claims from the monolines on a loan-by-loan...

  • Page 208
    ... loss sharing reinsurance arrangement being recorded in other accrued liabilities. With respect to the other monoline insurers, the Corporation has had limited experience in the repurchase process as these monoline insurers have instituted litigation against legacy Countrywide and Bank of America...

  • Page 209
    ... to reduce the carrying value of the goodwill in Card Services. Goodwill (Dollars in millions) Deposits Card Services Consumer Real Estate Services Global Commercial Banking Global Banking & Markets Global Wealth & Investment Management All Other Total goodwill December 31 2011 2010 $ 17,875 $ 17...

  • Page 210
    ... of the consumer credit card portfolio sales that occurred during the year. None of the intangible assets were impaired at December 31, 2011 or 2010. Amortization of intangibles expense was $1.5 billion, $1.7 billion and $2.0 billion in 2011, 2010 and 2009, respectively. The Corporation estimates...

  • Page 211
    ...31, 2011 and 2010. 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, are included in commercial paper and other short-term borrowings on the Consolidated Balance Sheet. See Note 13 - Long-term Debt for...

  • Page 212
    ...431 Bank of America Corporation, Merrill Lynch & Co., Inc. and subsidiaries, and Bank of America, N.A. maintain various U.S. and non-U.S. debt programs to offer both senior and subordinated notes. The notes may be denominated in U.S. dollars or foreign currencies. At December 31, 2011 and 2010, the...

  • Page 213
    ... 31, 2011 and 2010, Bank of America, N.A. had approximately $20.6 billion of authorized, but unissued mortgage notes under its $30.0 billion mortgage bond program. The weighted-average effective interest rates for total long-term debt (excluding senior structured notes), total fixed-rate debt and...

  • Page 214
    ... into two replacement capital covenants for the benefit of investors in certain series of the Corporation's long-term indebtedness (Covered Debt). As of December 31, 2011, the Corporation's 6.625% Junior Subordinated Notes due 2036 constitute the Covered Debt under the covenant corresponding to the...

  • Page 215
    ...IV 850 1,021 November 1998 Preferred Capital Trust V 1,050 1,051 December 2006 Capital Trust I 950 951 May 2007 Capital Trust II 750 751 August 2007 Capital Trust III $ 20,194 $ 21,024 Total (1) Notes were denominated in British Pound. Presentation currency is U.S. Dollar. Bank of America 2011 213

  • Page 216
    ... help to protect the Corporation against deterioration in the borrower's ability to pay. Other Commitments At December 31, 2011 and 2010, the Corporation had commitments to purchase loans (e.g., residential mortgage and commercial real estate) of $2.5 billion and $2.6 billion which upon settlement...

  • Page 217
    ... assessed the probability of making such payments in the future as remote. Other Guarantees Bank-owned Life Insurance Book Value Protection The Corporation sells products that offer book value protection to insurance carriers who offer group life insurance policies to corporations, primarily banks...

  • Page 218
    ... heightened media coverage and pressure from consumer advocacy groups, the U.K. Financial Services Authority (FSA) investigated and raised concerns about the way some companies have handled complaints relating to the sale of these insurance policies. In August 2010, the FSA issued a policy statement...

  • Page 219
    ... Lynch Auction Rate Securities Litigation, is the result of the consolidation of two class action suits in the U.S. District Court for the Southern District of New York. These suits were brought by two Merrill Lynch customers on behalf of all persons who purchased ARS in auctions managed by Merrill...

  • Page 220
    ...This action, currently pending in New York Supreme Court, New York County, relates to bond insurance policies provided by Ambac on certain securitized pools of HELOC and fixed-rate second-lien mortgage loans. On September 8, 2011, plaintiffs filed an amended complaint, which asserts claims involving...

  • Page 221
    ... Insurance Corporation, Inc. v. Bank of America Corporation, Countrywide Financial Corporation, Countrywide Home Loans, Inc., Countrywide Securities Corporation, et al., is pending in California Superior Court, Los Angeles County. MBIA purports to bring this action as subrogee to the note holders...

  • Page 222
    ... agent under a separate agreement governing the disbursement of loaned funds to FBLV. The Term Lenders seek unspecified money damages on their claims. On May 28, 2010, 220 Bank of America 2011 Interchange and Related Litigation A group of merchants have filed a series of putative class actions...

  • Page 223
    ...., filed on May 16, 2011 in Ontario Superior Court, were filed by purported nationwide classes of merchants that accept Visa and/or MasterCard credit cards in Canada. The actions name as defendants Visa, MasterCard, and a number of other banks and bank holding companies, including the Corporation...

  • Page 224
    ...9, 2010, the court consolidated this action with the consolidated securities action in the In re Bank of America Securities, Derivative and Employment Retirement Income Security Act (ERISA) Litigation, and ruled that plaintiffs may pursue the action as an individual action. In August 2011, plaintiff...

  • Page 225
    ... 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 226
    ..., the Federal Home Loan Bank of San Francisco (FHLB San Francisco) filed an action in California Superior Court, San Francisco County, entitled, Federal Home Loan Bank of San Francisco v. Credit Suisse Securities (USA) LLC, et al. FHLB San Francisco's complaint asserts certain MBS Claims against BAS...

  • Page 227
    ...On September 29, 2011, Sealink Funding Limited filed a complaint against the Corporation and related entities, Countrywide entities, NB Holdings Corporation and certain former officers of Countrywide. The action is entitled Sealink Funding Limited v. Countrywide Financial Corp., and was filed in New...

  • Page 228
    ... into certain origination, servicing and foreclosure practices (the Global AIP), (ii) the Federal Housing Administration (the FHA) to resolve certain claims relating to the origination of FHA-insured mortgage loans, primarily by Countrywide prior to and for a period following the acquisition of that...

  • Page 229
    ... the terms of the Global AIP,the federal and participating state governments would release the Corporation from further liability for certain alleged residential mortgage origination, servicing and foreclosure deficiencies. In settling origination issues related to FHA guaranteed loans originated...

  • Page 230
    of TBW) entitled Bank of America, National Association as indenture trustee, custodian and collateral agent for Ocala Funding, LLC v. Federal Deposit Insurance Corporation. The suit seeks judicial review of the FDIC's denial of the administrative claims brought by BANA in the FDIC's Colonial and ...

  • Page 231
    ... the fair value of the common stock exchanged, partially offset by a $2.04 billion inducement representing the excess of the fair value of the common stock exchanged over the fair value of the common stock that would have been issued under the original conversion terms. Bank of America 2011 229

  • Page 232
    ... form of depositary shares, each representing a 1/25th interest in a share of preferred stock, paying a semi-annual cash dividend, if and when declared, until the redemption date adjusts to a quarterly cash dividend, if and when declared, thereafter. n/a = not applicable 230 Bank of America 2011

  • Page 233
    ... the final year-end actuarial valuations. For more information on employee benefit plans, see Note 19 - Employee Benefit Plans. 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...

  • Page 234
    ...Services, N.A., returned capital of $7.0 billion to the Corporation. In 2012, Bank of America, N.A. and FIA Card Services, N.A. can declare and pay dividends to the Corporation of $4.5 billion and $0 plus an additional amount equal to their net profits for 2012, as defined by statute, up to the date...

  • Page 235
    ...'s market risk capital requirement and may not be used to support its credit risk requirement. At December 31, 2011 and 2010, the Corporation had no subordinated debt that qualified as Tier 3 capital. Certain corporate-sponsored trust companies which issue Trust Securities are not consolidated...

  • Page 236
    ...2011 Actual (Dollars in millions) 2010 Actual Minimum Required (1) Minimum Required (1) Ratio Amount Ratio Amount Risk-based capital Tier 1 common Bank of America Corporation Tier 1 Bank of America Corporation Bank of America, N.A. FIA Card Services, N.A. Total Bank of America Corporation Bank...

  • Page 237
    ... overall risk management, single-counterparty credit limits, stress test requirements and a debt-to-equity limit for certain companies determined to pose a threat to financial stability. Comments on the proposed rules are due by March 31, 2012. The final rules are likely to influence the Corporation...

  • Page 238
    ...,938 5.45% 4.00 Change in fair value of plan assets Fair value, January 1 Actual return on plan assets Company contributions Plan participant contributions Benefits paid Plan transfer Federal subsidy on benefits paid Foreign currency exchange rate changes Fair value, December 31 Change in projected...

  • Page 239
    ... Other Pension Plans 2011 1,174 1,173 2 1,174 2 $ 2010 1,200 1,199 2 1,200 2 2011 $ - - - 6,624 6,557 $ 2010 Plans with ABO in excess of plan assets PBO ABO Fair value of plan assets Plans with PBO in excess of plan assets PBO Fair value of plan assets $ $ $ $ $ $ Bank of America 2011 237

  • Page 240
    ... of prior service cost (credits) Amortization of net actuarial loss (gain) Recognized loss due to settlements and curtailments Net periodic benefit cost Weighted-average assumptions used to determine net cost for years ended December 31 Discount rate Expected return on plan assets Rate of...

  • Page 241
    ... Plans. The Corporation's policy is to invest the trust assets in a prudent manner for the exclusive purpose of providing benefits to participants and defraying reasonable expenses of administration. The Corporation's investment strategy is designed to provide a total return that, over the long term...

  • Page 242
    ... securities Debt securities Real estate Other Equity securities for the Qualified Pension Plans include common stock of the Corporation in the amounts of $82 million (0.55 percent of total plan assets) and $189 million (1.21 percent of total plan assets) at December 31, 2011 and 2010. Fair Value...

  • Page 243
    ... equity securities Equity commingled/mutual funds Public real estate investment trusts Real estate Private real estate Real estate commingled/mutual funds Limited partnerships Other investments (1) Total plan investment assets, at fair value $ $ $ $ December 31, 2010 Cash and short-term...

  • Page 244
    ... $ Sales and Settlements - (2) - (1) (5) - (8) Transfers into/ (out of) Level 3 1 1 Balance December 31 $ 13 10 113 249 232 122 739 Fixed income U.S. government and government agency securities Non-U.S. debt securities Real estate Private real estate Real estate commingled/mutual funds Limited...

  • Page 245
    ... were outstanding under this plan. There were no options granted under this plan during 2011 or 2010. NOTE 20 Stock-based Compensation Plans The Corporation administers a number of equity compensation plans, including the Key Employee Stock Plan, the Key Associate Stock Plan and the Merrill Lynch...

  • Page 246
    ...the Corporation's common stock, subject to legal limits. Purchases were made at a discount of five percent of the average high and low market price on the relevant purchase date and the maximum annual contribution per employee was $23,750 in 2011. Approximately 107 million shares were authorized for...

  • Page 247
    ...and marketable equity securities, foreign currency translation adjustments, derivatives and employee benefit plan adjustments that are included in accumulated OCI. As a result of these tax effects, accumulated OCI increased $3.0 billion in 2011 and decreased $3.2 billion and $1.6 billion in 2010 and...

  • Page 248
    ... Long-term borrowings Equipment lease financing Mortgage servicing rights Intangibles Available-for-sale securities Fee income Other Gross deferred tax liabilities Net deferred tax assets Status at December 31, 2011 See below Field examination See below Field examination In Appeals process 2001...

  • Page 249
    ... Corporation accounts for certain financial instruments under the fair value option. For more information, see Note 23 - Fair Value Option. and liabilities and AFS debt securities. Market price quotes may not be readily available for some positions, or positions within a market sector where trading...

  • Page 250
    ...market. Loans Held-for-Sale The fair values of LHFS are based on quoted market prices, where available, or are determined by discounting estimated cash flows using interest rates approximating the Corporation's current origination rates for similar loans adjusted to reflect the inherent credit risk...

  • Page 251
    ... debt securities Loans and leases Mortgage servicing rights Loans held-for-sale Other assets Total assets Liabilities Interest-bearing deposits in U.S. offices Federal funds purchased and securities loaned or sold under agreements to repurchase Trading account liabilities: U.S. government and agency...

  • Page 252
    ... debt securities Loans and leases Mortgage servicing rights Loans held-for-sale Other assets Total assets Liabilities Interest-bearing deposits in U.S. offices Federal funds purchased and securities loaned or sold under agreements to repurchase Trading account liabilities: U.S. government and agency...

  • Page 253
    ... commercial Non-U.S. securities Corporate/Agency bonds Other taxable securities Tax-exempt securities Total AFS debt securities Loans and leases (2, 4) Mortgage servicing rights (4) Loans held-for-sale (2) Other assets (5) Trading account liabilities - Corporate securities and other Other short-term...

  • Page 254
    .... Transfers out of Level 3 for trading account assets were driven by increased price verification of certain MBS, corporate debt and non-U.S. government and agency securities. Transfers out of Level 3 for long-term debt were primarily due to changes in the impact of unobservable inputs on the value...

  • Page 255
    ...taxable securities Tax-exempt securities Total AFS 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 Other short-term borrowings...

  • Page 256
    ... securities: Non-agency residential MBS Corporate/Agency bonds Other taxable securities Tax-exempt securities Total AFS debt securities Loans and leases (2) Mortgage servicing rights Loans held-for-sale (2) Other assets Trading account liabilities - Corporate securities and other Other short-term...

  • Page 257
    ... Commercial Non-U.S. securities Corporate/Agency bonds Other taxable securities Tax-exempt securities Total AFS debt securities Loans and leases (2) Mortgage servicing rights Loans held-for-sale (2) Other assets Trading account liabilities - Non-U.S. sovereign debt Other short-term borrowings...

  • Page 258
    ...under the fair value option. Level 3 - Changes in Unrealized Gains (Losses) Relating to Assets and Liabilities Still Held at Reporting Date 2011 Equity Investment Income (Loss 309) - - (309) $ Trading Account Profits (Losses) (86) (60) 101 30 (15) 1,430 3 (107) 1,311 Mortgage Banking Income (Loss...

  • Page 259
    ... assets AFS debt securities: Non-agency residential MBS Other taxable securities Tax-exempt securities Total AFS debt securities Loans and leases (2) Mortgage servicing rights Loans held-for-sale (2) Other assets Trading account liabilities - Non-U.S. sovereign debt Other short-term borrowings...

  • Page 260
    ... as Trading Account Assets The Corporation elected to account for certain loans that are riskmanaged on a fair value basis under the fair value option. An immaterial portion of the changes in fair value for these loans was attributable to changes in borrower-specific credit risk. Long-term Debt The...

  • Page 261
    ...trading account assets Consumer and commercial loans Loans held-for-sale Securities financing agreements Other assets Long-term deposits Asset-backed secured financings Unfunded loan commitments Other short-term borrowings Long-term debt (1) (1) The majority of the difference between the fair value...

  • Page 262
    ... placed, federal funds sold and purchased, resale and certain repurchase agreements, and other short-term investments and borrowings approximates the fair value of these instruments. These financial instruments generally expose the Corporation to limited credit risk and have 260 Bank of America 2011

  • Page 263
    ...the valuation model as well as changes in certain cash flow assumptions such as costs to service and ancillary income per loan. 2010 Fair Value Carrying Value Fair Value Carrying Value Financial assets Held-to-maturity debt securities Loans Financial liabilities Deposits Long-term debt $ 35,265...

  • Page 264
    ...were transferred. n/a = not applicable NOTE 26 Business Segment Information The Corporation reports the results of its operations through six business segments: Deposits, Card Services, Consumer Real Estate Services (CRES), formerly Home Loans & Insurance, Global Commercial Banking, Global Banking...

  • Page 265
    ... lending, asset-based lending and indirect consumer loans. Capital management and treasury solutions include treasury management, foreign exchange and short-term investing options. In 2011, management responsibility for the merchant services joint venture was moved from GBAM to Global Commercial...

  • Page 266
    ... Global Commercial Banking 2009 2011 2010 8,007 $ 8,022 $ 7,176 $ 3,219 7,438 3,377 11,226 15,460 10,553 1,979 7,782 (634) 72 100 57 - - - 4,058 4,120 4,177 5,117 3,458 6,953 1,899 1,279 2,551 3,218 $ 2,179 $ 4,402 $ $ 289,985 $ 312,807 Global Wealth & Investment Management Card Services (2) 2011...

  • Page 267
    ...$ $ $ $ Segments' total assets Adjustments: ALM activities, including securities portfolio Equity investments Liquidating businesses Elimination of segment excess asset allocations to match liabilities Other Consolidated total assets n/a = not applicable December 31 2011 2010 $ 1,948,611 $ 2,054...

  • Page 268
    ... assets Total assets Liabilities and shareholders' equity Commercial paper and other short-term borrowings Accrued expenses and other liabilities Payables to subsidiaries: Bank holding companies and related subsidiaries Nonbank companies and related subsidiaries Long-term debt Shareholders' equity...

  • Page 269
    ... Net 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 of...

  • Page 270
    ...million, $328 million and $488 million for 2011, 2010 and 2009, respectively. Amounts include pre-tax gains of $6.5 billion and $7.3 billion ($4.1 billion and $4.6 billion net-of-tax) on the sale of common shares of the Corporation's investment in CCB during 2011 and 2009. 268 Bank of America 2011

  • Page 271
    ... 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 2011...

  • Page 272
    ... risk that disclosure controls and procedures may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We conducted our examination in accordance with attestation standards established by the Public Company Accounting...

  • Page 273
    ... Donald E. Powell Former Chairman Federal Deposit Insurance Corporation Charles O. Rossotti Senior Advisor The Carlyle Group Robert W. Scully Former Member Office of the Chairman Morgan Stanley *Executive Officer **Not standing for reelection at the 2012 Annual Meeting Bank of America 2011 271

  • Page 274
    ... principal executive offices of Bank of America Corporation (the Corporation) are located in the Bank of America Corporate Center, 100 North Tryon Street, Charlotte, NC 28255. Annual Report on Form 10-K The Corporation's 2011 Annual Report on Form 10-K is available at http://investor.bankofamerica...

  • Page 275
    ... online investing platform. U.S. Trust, Bank of America Private Wealth Management operates through Bank of America, N.A., and other subsidiaries of BAC. Bank of America Merrill Lynch is a marketing name for the Retirement & Philanthropic Services businesses of BAC. BofA' Global Capital Management...

  • Page 276
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