Bank of America 2011 Annual Report Download - page 209

Bank of America 2011 207
need to be met in order for any repurchase claim to be asserted
by investors. In 2011, there was an increase in repurchase claims
from private-label securitization trustees that meet the required
standards. During 2011, the Corporation received $2.1 billion of
such repurchase claims. In addition, there has been an increase
in requests for loan files from private-label securitization trustees,
as well as requests for tolling agreements to toll the applicable
statutes of limitation relating to representations and warranties
claims, and the Corporation believes it is likely that these requests
will lead to an increase in repurchase claims from private-label
securitization trustees that meet required standards. The
representations and warranties, as governed by the private-label
securitization agreements, generally require that counterparties
have the ability to both assert a claim and actually prove that a
loan has an actionable defect under the applicable contracts. While
the Corporation believes the agreements for private-label
securitizations generally contain less rigorous representations and
warranties and place higher burdens on investors seeking
repurchases than the express provisions of comparable
agreements with the GSEs without regard to any variations that
may have arisen as a result of dealings with the GSEs, the
agreements generally include a representation that underwriting
practices were prudent and customary.
During 2010, the Corporation received claim demands totaling
$1.7 billion from private-label securitization investors in the
Covered Trusts. Non-GSE investors generally do not have the
contractual right to demand repurchase of the loans directly or the
right to access loan files. The inclusion of the $1.7 billion in
outstanding claims, as reflected in the table on page 202, does
not mean that the Corporation believes these claims have satisfied
the contractual thresholds required for the private-label
securitization investors to direct the securitization trustee to take
action or that these claims are otherwise procedurally or
substantively valid. One of these claimants has filed litigation
against the Corporation relating to certain of these claims; the
claims in this litigation would be extinguished if there is final court
approval of the BNY Mellon Settlement.
NOTE 10 Goodwill and Intangible Assets
Goodwill
The Goodwill table presents goodwill balances by business
segment at December 31, 2011 and 2010. The reporting units
utilized for goodwill impairment tests are the business segments
or one level below. The majority of the decline in goodwill during
2011 was due to goodwill impairment charges as described in this
Note.
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
$ 17,875
10,014
—
20,668
10,672
9,928
810
$ 69,967
2010
$ 17,875
10,014
2,796
20,668
10,672
9,928
1,908
$ 73,861
International Consumer Card Businesses
In connection with the Corporation’s announcement on August 15,
2011 of its intention to exit the international consumer card
businesses, goodwill of approximately $1.9 billion was allocated,
on a relative fair value basis, from Card Services to All Other as of
September 30, 2011. Of the $1.9 billion of goodwill allocated to
the international consumer card businesses, $526 million of
goodwill was allocated, on a relative fair value basis, to the
Canadian consumer card business which was sold on December
1, 2011.
During the three months ended December 31, 2011, a goodwill
impairment test was performed for the European consumer card
businesses reporting unit as it was likely that the carrying amount
of the businesses exceeded the fair value due to a decrease in
estimated future growth projections. The Corporation concluded
that goodwill was impaired, and accordingly, recorded a non-cash,
non-tax deductible goodwill impairment charge of $581 million for
the European consumer card businesses.
Consumer Real Estate Services
In connection with the sale of Balboa Insurance Company’s lender-
placed insurance business on June 1, 2011, the Corporation
allocated, on a relative fair value basis, $193 million of CRES
goodwill to the business in determining the gain on the sale.
During the three months ended June 30, 2011, as a
consequence of the BNY Mellon Settlement entered into by the
Corporation on June 28, 2011, the adverse impact of the
incremental mortgage-related charges, and the continued
economic slowdown in the mortgage business, the Corporation
performed a goodwill impairment test for the CRES reporting unit.
The Corporation concluded that the remaining balance of goodwill
of $2.6 billion was impaired, and accordingly, recorded a non-cash,
non-tax deductible goodwill impairment charge to reduce the
carrying value of the goodwill in CRES to zero.
2011 Annual Impairment Test
During the three months ended September 30, 2011, the
Corporation completed its annual goodwill impairment test as of
June 30, 2011 for all reporting units. Based on the results of step
one of the annual goodwill impairment test, the Corporation
determined that step two was not required for any of the reporting
units as their fair value exceeded their carrying value indicating
there was no impairment.
2010 Impairment Tests
In 2010, the Corporation performed a goodwill impairment test for
Card Services due to the continued stress on the business and
the uncertain debit card interchange provisions under the Dodd-
Frank Wall Street Reform and Consumer Protection Act (Financial
Reform Act). The Corporation concluded that goodwill was
impaired, and accordingly, recorded a non-cash, non-tax deductible
goodwill impairment charge of $10.4 billion to reduce the carrying
value of the goodwill in Card Services.