Bank of America 2011 Annual Report Download - page 216

214 Bank of America 2011
NOTE 14 Commitments and Contingencies
In the normal course of business, the Corporation enters into a
number of off-balance sheet commitments. These commitments
expose the Corporation to varying degrees of credit and market
risk and are subject to the same credit and market risk limitation
reviews as those instruments recorded on the Corporation’s
Consolidated Balance Sheet.
Credit Extension Commitments
The Corporation enters into commitments to extend credit such
as loan commitments, SBLC and commercial letters of credit to
meet the financing needs of its customers. The table below
includes the notional amount of unfunded legally binding lending
commitments net of amounts distributed (e.g., syndicated) to other
financial institutions of $27.1 billion and $23.3 billion at
December 31, 2011 and 2010. At December 31, 2011, the
carrying amount of these commitments, excluding commitments
accounted for under the fair value option, was $741 million,
including deferred revenue of $27 million and a reserve for
unfunded lending commitments of $714 million. At December 31,
2010, the comparable amounts were $1.2 billion, $29 million and
$1.2 billion, respectively. The carrying amount of these
commitments is classified in accrued expenses and other
liabilities on the Consolidated Balance Sheet.
The table below also includes the notional amount of
commitments of $25.7 billion and $27.3 billion at December 31,
2011 and 2010 that are accounted for under the fair value option.
However, the table below excludes fair value adjustments of $1.2
billion and $866 million on these commitments, which are
classified in accrued expenses and other liabilities. For information
regarding the Corporation’s loan commitments accounted for
under the fair value option, see Note 23 – Fair Value Option.
Credit Extension Commitments
(Dollars in millions)
Notional amount of credit extension commitments
Loan commitments
Home equity lines of credit
Standby letters of credit and financial guarantees (1)
Letters of credit
Legally binding commitments
Credit card lines (2)
Total credit extension commitments
Notional amount of credit extension commitments
Loan commitments
Home equity lines of credit
Standby letters of credit and financial guarantees (1)
Letters of credit (3)
Legally binding commitments
Credit card lines (2)
Total credit extension commitments
December 31, 2011
Expire in One
Year or Less
$ 96,291
1,679
26,965
2,828
127,763
449,097
$ 576,860
December 31, 2010
$ 152,926
1,722
35,275
3,698
193,621
497,068
$ 690,689
Expire After
One
Year Through
Three Years
$ 85,413
7,765
18,932
27
112,137
—
$ 112,137
$ 144,461
4,290
18,940
110
167,801
—
$ 167,801
Expire After
Three
Years Through
Five Years
$ 120,770
20,963
6,433
5
148,171
—
$ 148,171
$ 43,465
18,207
4,144
—
65,816
—
$ 65,816
Expire After
Five
Years
$15,009
37,066
5,505
383
57,963
—
$57,963
$ 16,172
55,886
5,897
874
78,829
—
$ 78,829
Total
$ 317,483
67,473
57,835
3,243
446,034
449,097
$ 895,131
$ 357,024
80,105
64,256
4,682
506,067
497,068
$ 1,003,135
(1) The notional amounts of SBLCs and financial guarantees classified as investment grade and non-investment grade based on the credit quality of the underlying reference name within the instrument
were $39.2 billion and $17.8 billion at December 31, 2011 and $41.1 billion and $22.4 billion at December 31, 2010. Amount includes consumer SBLCs of $859 million at December 31, 2011.
(2) Includes business card unused lines of credit.
(3) Amount includes $849 million of consumer letters of credit and $3.8 billion of commercial letters of credit at December 31, 2010.
Legally binding commitments to extend credit generally have
specified rates and maturities. Certain of these commitments have
adverse change clauses that help to protect the Corporation
against deterioration in the borrower’s ability to pay.
Other Commitments
Global Principal Investments and Other Equity
Investments
At December 31, 2011 and 2010, the Corporation had unfunded
equity investment commitments of $772 million and $1.5 billion.
In light of proposed Basel regulatory capital changes related to
unfunded commitments over the past two years, the Corporation
has actively reduced these commitments in a series of sale
transactions involving its private equity fund investments.
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 will be included in loans or LHFS.
At December 31, 2011 and 2010, the Corporation had
commitments to enter into forward-dated resale and securities
borrowing agreements of $67.0 billion and $39.4 billion. In
addition, the Corporation had commitments to enter into forward-
dated repurchase and securities lending agreements of $42.0
billion and $33.5 billion. All of these commitments expire within
the next 12 months.
The Corporation is a party to operating leases for certain of its
premises and equipment. Commitments under these leases are
approximately $3.0 billion, $2.6 billion, $2.0 billion, $1.6 billion
and $1.3 billion for 2012 through 2016, respectively, and $6.1
billion in the aggregate for all years thereafter.