Bank of America 2012 Annual Report Download - page 52

50 Bank of America 2012
Off-Balance Sheet Arrangements and
Contractual Obligations
We have contractual obligations to make future payments on debt
and lease agreements. Additionally, in the normal course of
business, we enter into contractual arrangements whereby we
commit to future purchases of products or services from
unaffiliated parties. Obligations that are legally binding
agreements whereby we agree to purchase products or services
with a specific minimum quantity at a fixed, minimum or variable
price over a specified period of time are defined as purchase
obligations. Included in purchase obligations are commitments to
purchase loans of $1.3 billion and vendor contracts of $23.2
billion. The most significant vendor contracts include
communication services, processing services and software
contracts. Other long-term liabilities include our contractual
funding obligations related to the Qualified Pension Plans, Non-
U.S. Pension Plans, Nonqualified and Other Pension Plans, and
Postretirement Health and Life Plans (collectively, the Plans).
Obligations to the Plans are based on the current and projected
obligations of the Plans, performance of the Plans’ assets and
any participant contributions, if applicable. During 2012 and 2011,
we contributed $381 million and $287 million to the Plans, and
we expect to make at least $319 million of contributions during
2013.
Debt, lease, equity and other obligations are more fully
discussed in Note 12 – Long-term Debt and Note 13 – Commitments
and Contingencies to the Consolidated Financial Statements. The
Plans are more fully discussed in Note 18 – Employee Benefit Plans
to the Consolidated Financial Statements.
We enter into commitments to extend credit such as loan
commitments, standby letters of credit (SBLCs) and commercial
letters of credit to meet the financing needs of our customers. For
a summary of the total unfunded, or off-balance sheet, credit
extension commitment amounts by expiration date, see the table
in Note 13 – Commitments and Contingencies to the Consolidated
Financial Statements.
Table 10 includes certain contractual obligations at
December 31, 2012.
Table 10 Contractual Obligations
December 31, 2012
(Dollars in millions)
Due in One
Year or Less
Due After
One Year
Through
Three Years
Due After
Three Years
Through
Five Years
Due After
Five Years Total
Long-term debt and capital leases $ 55,197 $ 73,009 $ 63,909 $ 83,470 $ 275,585
Operating lease obligations 2,984 4,573 3,202 6,237 16,996
Purchase obligations 6,719 8,420 5,834 4,208 25,181
Time deposits 110,157 11,598 2,554 2,671 126,980
Other long-term liabilities 898 1,037 795 1,133 3,863
Estimated interest expense on long-term debt and time deposits (1) 5,703 9,260 7,894 11,647 34,504
Total contractual obligations $181,658 $107,897 $ 84,188 $ 109,366 $ 483,109
(1) Represents estimated, forecasted net interest expense on long-term debt and time deposits. Forecasts are based on the contractual maturity dates of each liability, and are net of derivative hedges.
Representations and Warranties
We securitize first-lien residential mortgage loans generally in the
form of MBS guaranteed by the GSEs or by GNMA in the case of
the Federal Housing Administration (FHA)-insured, U.S.
Department of Veterans Affairs (VA)-guaranteed and Rural Housing
Service-guaranteed mortgage loans. In addition, in prior years,
legacy companies and certain subsidiaries sold pools of first-lien
residential mortgage loans and home equity loans as private-label
securitizations (in certain of these securitizations, monolines or
financial guarantee providers insured all or some of the securities)
or in the form of whole loans. In connection with these transactions,
we or certain of our subsidiaries or legacy companies make or
have made various representations and warranties. Breaches of
these representations and warranties may result in the
requirement to repurchase mortgage loans or to otherwise make
whole or provide other remedies to the GSEs, U.S. Department of
Housing and Urban Development (HUD) with respect to FHA-
insured loans, VA, whole-loan investors, securitization trusts,
monoline insurers or other financial guarantors (collectively,
repurchases). In all such cases, we would be exposed to any credit
loss on the repurchased mortgage loans after accounting for any
mortgage insurance (MI) or mortgage guarantee payments that we
may receive.
Subject to the requirements and limitations of the applicable
sales and securitization agreements, these representations and
warranties can be enforced by the GSEs, HUD, VA, the whole-loan
investor, the securitization trustee or others as governed by the
applicable agreement or, in certain first-lien and home equity
securitizations where monoline insurers or other financial
guarantee providers have insured all or some of the securities
issued, by the monoline insurer or other financial guarantor, where
the contract so provides. In the case of loans sold to parties other
than the GSEs or GNMA, the contractual liability to repurchase
typically arises only if there is a breach of the representations and
warranties that materially and adversely affects the interest of the
investor, or investors, or of the monoline insurer or other financial
guarantor (as applicable) in the loan. Contracts with the GSEs do
not contain equivalent language, while GNMA generally limits
repurchases to loans that are not insured or guaranteed as
required.
For additional information about accounting for representations
and warranties and our representations and warranties repurchase
claims and exposures, see Note 8 – Representations and
Warranties Obligations and Corporate Guarantees and Note 13 –
Commitments and Contingencies to the Consolidated Financial
Statements and Item 1A. Risk Factors of this Annual Report on
Form 10-K.