Bank of America 2013 Annual Report Download - page 50

48 Bank of America 2013
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 $1.5 billion and vendor contracts of $18.4
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 2013 and 2012,
we contributed $290 million and $381 million to the Plans, and
we expect to make $292 million of contributions during 2014.
Debt, lease, equity and other obligations are more fully
discussed in Note 11 – Long-term Debt and Note 12 – Commitments
and Contingencies to the Consolidated Financial Statements. The
Plans are more fully discussed in Note 17 – 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 Credit
Extension Commitments in Note 12 – Commitments and
Contingencies to the Consolidated Financial Statements.
Table 11 includes certain contractual obligations at
December 31, 2013.
Table 11 Contractual Obligations
December 31, 2013
(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 $ 46,076 $ 63,241 $ 62,830 $ 77,527 $ 249,674
Operating lease obligations 2,841 4,531 3,003 5,672 16,047
Purchase obligations 6,205 6,859 3,873 3,838 20,775
Time deposits 98,201 8,784 1,972 2,278 111,235
Other long-term liabilities 1,289 915 720 1,132 4,056
Estimated interest expense on long-term debt and time deposits (1) 5,189 10,045 9,081 13,247 37,562
Total contractual obligations $159,801 $ 94,375 $ 81,479 $ 103,694 $ 439,349
(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 government-sponsored enterprises
(GSEs) or by the Government National Mortgage Association
(GNMA) in the case of 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
have resulted in and may continue to 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 or
mortgage guarantee payments that we may receive.
For more information on accounting for representations and
warranties and our representations and warranties repurchase
claims and exposures, see Note 7 – Representations and
Warranties Obligations and Corporate Guarantees and Note 12 –
Commitments and Contingencies to the Consolidated Financial
Statements and Item 1A. Risk Factors of this Annual Report on
Form 10-K.
We have vigorously contested any request for repurchase when
we conclude that a valid basis for repurchase does not exist and
will continue to do so in the future. However, in an effort to resolve
these legacy mortgage-related issues, we have reached bulk
settlements, or agreements for bulk settlements, certain of which
have been for significant amounts, in lieu of a loan-by-loan review
process, including with the GSEs, with three monoline insurers
and with the Bank of New York Mellon (the BNY Mellon Settlement),
as trustee (the Trustee) for certain Countrywide private-label
securitization trusts in 2011. As a result of various settlements
with the GSEs, we have resolved substantially all outstanding and
potential representations and warranties repurchase claims on
whole loans sold by legacy Bank of America and Countrywide to
FNMA and FHLMC through 2008 and 2009, respectively.