Bank of America 2013 Annual Report Download - page 221

Bank of America 2013 219
NOTE 12 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 Consolidated
Balance Sheet.
Credit Extension Commitments
The Corporation enters 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 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
$21.9 billion and $23.9 billion at December 31, 2013 and 2012.
At December 31, 2013, the carrying value of these commitments,
excluding commitments accounted for under the fair value option,
was $503 million, including deferred revenue of $19 million and
a reserve for unfunded lending commitments of $484 million. At
December 31, 2012, the comparable amounts were $534 million,
$21 million and $513 million, respectively. The carrying value 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 $13.0 billion and $18.3 billion at December 31,
2013 and 2012 that are accounted for under the fair value option.
However, the table below excludes cumulative net fair value
adjustments of $354 million and $528 million on these
commitments, which are classified in accrued expenses and other
liabilities. For more information regarding the Corporation’s loan
commitments accounted for under the fair value option, see Note
21 – Fair Value Option.
Credit Extension Commitments
December 31, 2013
(Dollars in millions)
Expire in One
Year or Less
Expire After
One
Year Through
Three Years
Expire After
Three
Years Through
Five Years
Expire After
Five
Years Total
Notional amount of credit extension commitments
Loan commitments $ 80,799 $ 105,175 $ 133,290 $ 21,864 $ 341,128
Home equity lines of credit 4,580 16,855 21,074 14,301 56,810
Standby letters of credit and financial guarantees (1) 21,994 8,843 2,876 3,967 37,680
Letters of credit 1,263 899 4403 2,569
Legally binding commitments 108,636 131,772 157,244 40,535 438,187
Credit card lines (2) 377,846 — — —377,846
Total credit extension commitments $ 486,482 $ 131,772 $ 157,244 $ 40,535 $ 816,033
December 31, 2012
Notional amount of credit extension commitments
Loan commitments $ 103,791 $ 83,885 $ 130,805 $ 19,942 $ 338,423
Home equity lines of credit 2,134 13,584 23,344 21,856 60,918
Standby letters of credit and financial guarantees (1) 24,593 11,387 3,094 4,751 43,825
Letters of credit 2,003 70 10 546 2,629
Legally binding commitments 132,521 108,926 157,253 47,095 445,795
Credit card lines (2) 397,862 — — — 397,862
Total credit extension commitments $ 530,383 $ 108,926 $ 157,253 $ 47,095 $ 843,657
(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 $27.6 billion and $9.6 billion at December 31, 2013, and $31.5 billion and $11.6 billion at December 31, 2012. Amounts include consumer SBLCs of $453 million and $669 million at
December 31, 2013 and 2012.
(2) Includes business card unused lines of credit.
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
At December 31, 2013 and 2012, the Corporation had unfunded
equity investment commitments of $195 million and $307 million.
At December 31, 2013, the Corporation had a commitment to
purchase $1.4 billion of equity securities and, in the event the
commitment is funded, intends to sell the underlying securities
purchased under this commitment.
At December 31, 2013 and 2012, the Corporation had
commitments to purchase loans (e.g., residential mortgage and
commercial real estate) of $1.5 billion and $1.3 billion, which upon
settlement will be included in loans or LHFS.
At December 31, 2013 and 2012, the Corporation had
commitments to enter into forward-dated resale and securities
borrowing agreements of $75.5 billion and $67.3 billion, and
commitments to enter into forward-dated repurchase and
securities lending agreements of $38.3 billion and $42.3 billion.
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 $2.8 billion, $2.4 billion, $2.1 billion, $1.7 billion
and $1.3 billion for 2014 through 2018, respectively, and $5.7
billion in the aggregate for all years thereafter.