Bank of America 2015 Annual Report Download - page 46

44 Bank of America 2015
The benefit in the provision for credit losses decreased $636
million to a benefit of $342 million in 2015 primarily driven by
lower recoveries, including those recorded in connection with
residential mortgage loan sales.
Noninterest expense decreased $718 million to $2.2 billion
reflecting a decrease in litigation expense and lower personnel,
infrastructure and support costs, partially offset by higher
professional fees related in part to our CCAR resubmission.
The income tax benefit was $2.0 billion on a pretax loss of
$2.5 billion in 2015 compared to a benefit of $2.6 billion on a
pretax loss of $2.5 billion in 2014, as 2014 included tax benefits
attributable to the resolution of several tax examinations, and
2015 included the charge of approximately $290 million related
to the U.K tax law change. In addition, both periods include income
tax benefit adjustments to eliminate the FTE treatment of certain
tax credits recorded in Global Banking.
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 2015 and 2014, we contributed $234 million each year to
the Plans, and we expect to make $261 million of contributions
during 2016. 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, 2015 and 2014.
Table 11 Contractual Obligations
December 31, 2015
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 Total
Long-term debt $ 43,334 $ 75,377 $ 36,513 $ 81,540 $ 236,764 $ 243,139
Operating lease obligations 2,456 3,846 2,798 4,581 13,681 14,406
Purchase obligations 2,007 1,905 629 809 5,350 5,544
Time deposits 65,567 5,207 2,517 683 73,974 84,843
Other long-term liabilities 1,663 870 668 1,110 4,311 4,232
Estimated interest expense on long-term debt and time
deposits (1) 4,753 7,124 5,064 26,957 43,898 45,462
Total contractual obligations $ 119,780 $ 94,329 $ 48,189 $ 115,680 $ 377,978 $ 397,626
(1) Represents forecasted net interest expense on long-term debt and time deposits based on interest rates at December 31, 2015. 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), which include FHLMC and FNMA, 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 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 with respect to FHA-insured loans, VA, whole-
loan investors, securitization trusts, monoline insurers or other
financial guarantors as applicable (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 where
we have concluded that a valid basis for repurchase does not exist
and will continue to do so in the future. However, in an effort to