Bank of America 2014 Annual Report Download - page 49

Bank of America 2014 47
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. Purchase obligations are defined as
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. Included in purchase obligations are vendor contracts, the
most significant of which 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 2014 and 2013, we contributed $234 million and $290
million to the Plans, and we expect to make $244 million of
contributions during 2015. The Plans are more fully discussed in
Note 17 – Employee Benefit Plans to the Consolidated Financial
Statements.
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.
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, 2014.
Table 11 Contractual Obligations
December 31, 2014
(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 $ 30,724 $ 80,753 $ 49,136 $ 82,526 $ 243,139
Operating lease obligations 2,553 4,157 2,725 4,971 14,406
Purchase obligations 2,077 2,864 361 242 5,544
Time deposits 75,604 5,865 1,640 1,734 84,843
Other long-term liabilities 1,470 928 698 1,136 4,232
Estimated interest expense on long-term debt and time deposits (1) 5,036 10,511 7,665 12,323 35,535
Total contractual obligations $117,464 $105,078 $ 62,225 $ 102,932 $ 387,699
(1) Represents 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, where
applicable.
Representations and Warranties
We securitize first-lien residential mortgage loans generally in the
form of RMBS 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, and sell pools of first-lien residential mortgage loans in the
form of whole 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, monoline
insurers or other 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, subsequent to repurchasing the loan, 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.
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
settlements, certain of which have been for significant amounts,
in lieu of a loan-by-loan review process, including with the GSEs,
four monoline insurers and Bank of New York Mellon (BNY Mellon),
as trustee. The settlement with BNY Mellon (BNY Mellon
Settlement) remains subject to final court approval and certain
other conditions. It is not currently possible to predict the ultimate
outcome or timing of the court approval process, which includes
appeals and could take a substantial period of time. If final court
approval is not obtained, or if we and Countrywide Financial
Corporation (Countrywide) withdraw from the BNY Mellon
Settlement in accordance with its terms, our future
representations and warranties losses could be substantially
different from existing accruals and the estimated range of
possible loss over existing accruals.
For more information on accounting for representations and
warranties, repurchase claims and exposures, including a
summary of the larger bulk settlements, see Note 7 –
Representations and Warranties Obligations and Corporate
Guarantees and Note 12 – Commitments and Contingencies to the