Bank of America 2009 Annual Report Download

Download and view the complete annual report

Please find the complete 2009 Bank of America annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 220

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172
  • 173
  • 174
  • 175
  • 176
  • 177
  • 178
  • 179
  • 180
  • 181
  • 182
  • 183
  • 184
  • 185
  • 186
  • 187
  • 188
  • 189
  • 190
  • 191
  • 192
  • 193
  • 194
  • 195
  • 196
  • 197
  • 198
  • 199
  • 200
  • 201
  • 202
  • 203
  • 204
  • 205
  • 206
  • 207
  • 208
  • 209
  • 210
  • 211
  • 212
  • 213
  • 214
  • 215
  • 216
  • 217
  • 218
  • 219
  • 220

2009 Annual Report
December 31
,
200
9
Bank o
f
Am
er
ic
a
100 North Tryon
S
tre
et
C
harlotte, N
C
2825
5
Dear Bank o
America
,
I
have a stake in this company too
.
Wh
at
a
re you
d
o
i
ng to move t
h
e
b
an
k
and the ec
on
o
omy forwar
d?

Table of contents

  • Page 1
    December 31, 2009 Bank of America 100 North Tryon Street Charlotte, NC 28255 Dear Bank of America, I have a stake in this company too. What are you doing to move the bank and the econ o omy forward? 2009 Annual Report

  • Page 2
    ...the acquisitions of Countrywide and Merrill Lynch change your business? Can you help me better manage my bills and monthly payments? When will Bank of America increase its dividend? What steps are you taking to make sure my financial information is secure? I'm a small-business owner with plans to...

  • Page 3
    We're listening. We know your financial needs are changing. That's why we're changing too...

  • Page 4
    Letter from the President and CEO To Our Shareholders: Bank of America serves one in two U.S. households, virtually the entire U.S. Fortune 1000 and clients around the world. We built this company to serve customers and clients wherever and however they choose, and to return value to shareholders. ...

  • Page 5
    ...of actions that increased Tier 1 common capital by $57 billion. And we Bank of America is a global leader in client assets, retail deposits, commercial banking, credit cards, home loans and lending. Bank of America has relationships with 98 % of U.S. Fortune 1000 companies. Bank of America 2009...

  • Page 6
    ... home loans and credit card businesses that explain in plain English the terms of each product or service; with limited and simplified fee structures in our deposits business; and with other changes that make it easier for our customers to manage their finances. In our capital markets businesses...

  • Page 7
    ...'ve worked to help customers, clients and communities ride out the economic storm. Clearly, the most urgent need has been loan modifications, to help families and businesses manage their monthly cash ï¬,ow to get through the crisis. We've reported regularly on our efforts to ease the crisis in home...

  • Page 8
    .... It's shareholders investing in our stock because they can see our bright future. It's associates choosing to build their careers here because they believe this is the best place to work. It's community leaders acknowledging that Bank of America is the most important business partner helping to...

  • Page 9
    ... chairman, Federal Deposit Insurance Corporation • Robert W. Scully, former member, Office of the Chairman, Morgan Stanley Our newly constituted board immediately set about the work of reassessing the current state of the company's governance processes and controls, and began taking action to...

  • Page 10
    ... improved, Lewis began expanding the company's markets and capabilities with acquisitions of Fleet (2004), MBNA (2006), U.S. Trust (2007), LaSalle (2007), Countrywide (2008) and Merrill Lynch (2009). Lewis also took every opportunity to extend the bank's national leadership in community development...

  • Page 11
    How are we making banking better?

  • Page 12
    ...policies. Clarity Commitment® In 2009, we introduced Clarity Commitment documents for home mortgages, home equity loans and credit card agreements. A Clarity Commitment document is a simple, easy-toread, one-page loan summary that includes important information on payments, interest rates and fees...

  • Page 13

  • Page 14
    ... of America modified 1.4 million unsecured loans, including credit card loans, for customers struggling to meet their financial obligations. Efforts included lowering interest rates, reducing payments and fees or referring customers to debt management programs. Deposits Customer Assistance In 2009...

  • Page 15

  • Page 16
    ... business day. Consumers Bank of America is one of the largest providers of consumer credit in the world, extending more than $430 billion in consumer loans in 2009. These loans, which range from first mortgage and home equity loans to credit card and other consumer unsecured loans, help customers...

  • Page 17
    in loans every single business day

  • Page 18
    ..., we'll help their employees save for retirement. Leaving a Legacy We understand that providing wealth for future generations and developing creative strategies for more effective giving are critical to clients. Through highly specialized credit, asset management, and trust and estate planning, we...

  • Page 19

  • Page 20
    By delivering customized solutions wherever our clients need us. Whether it's raising capital in Mumbai or hedging currencies in Oslo, the powerful combination of Bank of America Merrill Lynch means we can do more for our clients wherever they do business. We understand the challenges our clients ...

  • Page 21
    ...bonds to rights issuances, we work with clients to provide strategic advice and access to capital wherever they are located. Sales, Trading and Risk Management Our global sales and trading professionals are at the center of the world's debt, equity, commodity and foreign exchange markets, providing...

  • Page 22
    ... through strategic community development programs, lending and investing initiatives, support of the arts, philanthropy, volunteerism and environmental commitments. Our deep history of community involvement also supports our long-term business goals. Community In 2009, we embarked on our 10-year...

  • Page 23

  • Page 24
    ...business segments: Deposits, Global Card Services, Home Loans & Insurance, Global Banking, Global Markets and Global Wealth & Investment Management. Bank of America is a member of the Dow Jones Industrial Average. Financial Highlights (dollars in millions, except per share information) For the year...

  • Page 25
    ... card products. Home Loans & Insurance provides an extensive line of consumer real estate products and services including fixed and adjustable rate first-lien mortgage loans for home purchase and refinancing, reverse mortgages, home equity lines of credit and home equity loans. HL&I also offers...

  • Page 26
    ... in credit. Financial Literacy In 2009, we enhanced our online tools to provide consumers with guidance on managing their credit, including launching our Facts About Fees Web site; our interactive Home Loan Guide to help customers make informed decisions; our Bankofamerica.com/solutions SM portal...

  • Page 27
    Bank of America 2009 Financial Review

  • Page 28
    ...Balance Sheet Analysis Supplemental Financial Data Business Segment Operations Deposits Global Card Services Home Loans & Insurance Global Banking Global Markets Global Wealth & Investment Management All Other Obligations and Commitments Regulatory Initiatives Managing Risk Strategic Risk Management...

  • Page 29
    ...service charges, the closing of the sales of Columbia Management (Columbia) and First Republic Bank, effective tax rate, noninterest expense, impact of changes in fair value of Merrill Lynch structured notes, impact of new accounting guidance regarding consolidation on capital and reserves, mortgage...

  • Page 30
    ... six business segments: Deposits, Global Card Services, Home Loans & Insurance, Global Banking, Global Markets and Global Wealth & Investment Management (GWIM), with the remaining operations recorded in All Other. At December 31, 2009, the Corporation had $2.2 trillion in assets and approximately...

  • Page 31
    ...-term debt of government-sponsored enterprises (GSEs). This program contributed to lower mortgage rates generating an increase in consumer mortgage refinancing which helped homeowners, and along with lower home prices, stimulated activity in the housing market. In early 2009, the short-term funding...

  • Page 32
    .... Higher trading account profits, equity investment income, investment and brokerage services fees and investment banking income reflected the addition of Merrill Lynch while higher mortgage banking and insurance income reflected the full-year impact of Countrywide. Gains on sales of debt securities...

  • Page 33
    ...on legacy assets compared with the prior year. GWIM net income increased driven by the addition of Merrill Lynch partially offset by a lower net interest income allocation from ALM activities, the migration of client balances to Deposits and Home Loans & Insurance, lower average equity market levels...

  • Page 34
    ... partially offset by higher impairment losses on non-agency CMOs. Card income Service charges Investment and brokerage services Investment banking income Equity investment income Trading account profits (losses) Mortgage banking income Insurance income Gains on sales of debt securities Other income...

  • Page 35
    ...time. Additionally, noninterest expense increased due to higher litigation costs compared to the prior year, a $425 million pre-tax charge to pay the U.S. government to terminate its asset guarantee term sheet and higher FDIC insurance costs including a $724 million special assessment in 2009. Bank...

  • Page 36
    ... rate environment. Partially offsetting these increases was a decrease in commercial paper and other short-term borrowings due in part to lower Federal Home Loan Bank (FHLB) borrowings. Trading Account Assets Trading account assets consist primarily of fixed income securities (including government...

  • Page 37
    ...in 2009 compared to 2008. The increases were attributable to issuances and the addition of longterm debt associated with the Merrill Lynch acquisition. For additional information on long-term debt, see Note 13 - Long-term Debt to the Consolidated Financial Statements. All Other Liabilities Year-end...

  • Page 38
    ... Average balance sheet Total loans and leases Total assets Total deposits Long-term debt Common shareholders' equity Total shareholders' equity $ 910,878 1,843,979 831,144 231,235 141,638 164,831 $ 23,492 18,212 2.49% $ 141 16,231 1.79% 1.77 1.96 1.42 Asset quality (2) Allowance for credit losses...

  • Page 39
    ... and intangible assets (excluding MSRs), net of related deferred tax liabilities divided by ending common shares outstanding plus the number of common shares issued upon conversion of CES. These measures are used to evaluate our use of equity (i.e., capital). In addition, profitability, relationship...

  • Page 40
    ... 51,996 $ Reconciliation of year end common shareholders' equity to year end tangible common shareholders' equity Common shareholders' equity Common Equivalent Securities Goodwill Intangible assets (excluding MSRs) Related deferred tax liabilities Tangible common shareholders' equity $ 194,236 19...

  • Page 41
    ... assets increased $130.1 billion to $1.4 trillion for 2009 compared to 2008 primarily due to the acquisitions of Merrill Lynch and Countrywide partially offset by lower loan levels and earlier deleveraging of the AFS debt securities portfolio. Core net interest yield on a managed basis decreased...

  • Page 42
    ...Noninterest income was flat at $6.8 billion as service charges domestic-branded ATMs, telephone, online and mobile banking channels. remained unchanged for the year. The positive impacts of revenue iniOur deposit products include traditional savings accounts, money tiatives were offset by changes in...

  • Page 43
    ... loans combined with realized credit losses associated resulted from lower cash advances primarily related to balance transfers, with the securitized loan portfolio. n/m = not meaningful and lower credit card interchange and fee income primarily due to changes in consumer retail purchase and payment...

  • Page 44
    ...,486 72,033 160,824 71,109 19,185 11.25% Represents net charge-offs on held loans combined with realized credit losses associated with the securitized loan portfolio. Ratios are calculated as managed net losses divided by average outstanding managed loans during the year. 42 Bank of America 2009

  • Page 45
    ... ongoing operations are recorded in Home lines of credit and accounting for and remitting principal and interest Loans & Insurance. Countrywide's acquired first mortgage and dis- payments to investors and escrow payments to third parties. Our home continued real estate portfolios are recorded in All...

  • Page 46
    ...: Balance Capitalized mortgage servicing rights (% of loans serviced for investors) (1) (2) Total Home Loans & Insurance mortgage banking income Other business segments' mortgage banking income (loss) (1) Total consolidated mortgage banking income (1) Includes the effect of transfers of mortgage...

  • Page 47
    ... in loans. Our capital management and treasury solutions include treasury management, foreign exchange and short-term investing options. Our 2009 compared to 2008 primarily driven by higher net charge-offs and investment banking services provide our commercial and corporate issuer reserve additions...

  • Page 48
    ...reduced demand offset the impact of the Merrill Lynch acquisition. Treasury services-related revenue within global corporate and investment banking decreased $438 million to $2.5 billion in 2009 driven by lower net interest income, service fees and card income. Average deposit balances increased $11...

  • Page 49
    ... in support of their investing and trading activities. We also work with our commercial and corporate clients to provide debt and equity underwriting and distribution capabilities and risk management products using interest rate, equity, credit, currency and commodity derivatives, foreign exchange...

  • Page 50
    ...-related financings to major, well-known operating companies. CMBS exposure decreased as $4.1 billion of funded CMBS debt acquired in the Merrill Lynch acquisition was partially offset by a transfer of $3.8 billion of CMBS funded debt to commercial loans held for investment as we plan to hold...

  • Page 51
    ... our net mark-to-market exposure to $4.1 billion. We do not hold collateral against these derivative exposures. Also, during 2009 we recognized gains of $113 million for counterparty credit risk related to these positions. With the Merrill Lynch acquisition, we acquired a loan with a carrying value...

  • Page 52
    ...average equity (3) Efficiency ratio (2) Year end - total assets (4) (1) $ $ 1,210 2.97% 12.20 62.87 $189,073 2.60% 36.66 41.88 $137,282 3.05% 14.20 61.26 $57,167 Effective January 1, 2009, as a result of the Merrill Lynch acquisition, we combined Merrill Lynch's wealth management business and...

  • Page 53
    ... client balances during 2009 to Deposits and Home Loans & Insurance. GWIM's average loan and deposit growth benefited from the acquisition of Merrill Lynch and the shift of client assets from off-balance sheet (e.g., money market funds) to on-balance sheet products (e.g., deposits) partially offset...

  • Page 54
    ... funds managed within Columbia. The funds for which we provided support typically invested in high quality, short-term securities with a portfolio weighted-average maturity of 90 days or less, including securities issued by SIVs and senior debt holdings of financial services companies. Due to market...

  • Page 55
    ... For more information on merger and restructuring charges, see Note 2 - Merger and Restructuring Activity to the Consolidated Financial Statements. (Dollars in millions) 2009 2008 Balance Sheet Average Total loans and leases (1) Total assets (1, 2) Total deposits Allocated equity (3) $155,561...

  • Page 56
    ... Merger and Restructuring Activity to the Consolidated Financial Statements. All other noninterest expense increased $1.8 billion to $2.0 billion due to higher personnel costs and a $425 million charge to pay the U.S. government to terminate its asset guarantee term sheet. Income tax benefit in 2009...

  • Page 57
    ..., the Federal Reserve issued the final rule related to changes to Regulation E and on May 22, 2009, the CARD Act was signed into law. For more information on the impact of these new regulations, see Regulatory Overview on page 29. In December 2009, the Basel Committee on Banking Supervision released...

  • Page 58
    ...for common shares and a $2.2 billion reduction in the deferred tax asset disallowance for Tier 1 common capital from the preceding items. On March 4, 2009, the U.S. Treasury provided details related to the $75 billion Making Home Affordable program (MHA). The MHA is focused on reducing the number of...

  • Page 59
    ...The Governance and Control functions are accountable for setting policies, standards and limits according to the Risk Appetite Statement, providing risk reporting and monitoring, and ensuring compliance. For example, in Global Risk Management, a senior risk executive is assigned to each of the lines...

  • Page 60
    ... about our management of strategic, credit, market, liquidity, compliance, operational and reputational risks. Starting in 2009, the Board formalized its process of approving the Corporation's articulation of its risk appetite, which is used internally to help the directors and management understand...

  • Page 61
    ... regulatory environment, business strategy execution, and/or other inherent risks of the business including reputational risk. In the financial services industry, strategic risk is high due to changing customer and regulatory environments. The Corporation's appetite for strategic risk is continually...

  • Page 62
    ... of mortgage, credit card, auto loans, home equity loans and lines of credit. If securitization markets are not available to us on favorable terms, we typically finance these loans with deposits or with wholesale borrowings. For additional information on securitizations see Note 8 - Securitizations...

  • Page 63
    ...Table 12 Credit Ratings Bank of America Corporation Outlook Stable Negative Stable Long-term Senior Debt A2 A A+ Subordinated Debt Trust Preferred Preferred Stock Short-term Debt Bank of America, N.A. Long-term Senior Debt Long-term Deposits Short-term Debt Moody's Investors Service Standard & Poor...

  • Page 64
    ... from the common stock that was issued in connection with the 62 Bank of America 2009 Merrill Lynch acquisition partially offset by an increase in risk-weighted assets due to the acquisition. Enterprise-wide Stress Testing As a part of our core risk management practices, the Corporation conducts...

  • Page 65
    ... entities (SPEs), typically in the form of corporations, limited liability companies, or trusts, which raise funds by issuing short-term commercial paper or other debt or equity instruments to third party investors. These SPEs typically hold various types of financial assets whose cash flows are the...

  • Page 66
    ...) Type of VIE/QSPE Credit card securitization trusts (1) Asset-backed commercial paper conduits (2) Municipal bond trusts Home equity lines of credit Other Total (1) (2) $ 70 15 5 5 5 $100 $25 The Corporation undertook certain actions during 2009 related to its off-balance sheet credit card...

  • Page 67
    ... to certain of the Corporation's associates as part of their 2009 year-end incentive payments. For more information regarding our common share issuances, see Note 15 - Shareholders' Equity and Earnings Per Common Share to the Consolidated Financial Statements. Common Stock Dividends The following...

  • Page 68
    ... markets, we use a real-time counterparty event management process to monitor key counterparties. Additionally, we account for certain large corporate loans and loan commitments (including issued but unfunded letters of credit which are considered utilized for credit risk management purposes...

  • Page 69
    ...credit card, consumer loans secured by personal property or unsecured consumer loans that are past due as these loans are generally charged off no later than the end of the month in which the account becomes 180 days past due. Real estate-secured past due loans, repurchased pursuant to our servicing...

  • Page 70
    ... and leases and net losses and related ratios for our managed credit card portfolio for 2009 and 2008. The reported net charge-off ratios for residential mortgage, home equity and discontinued real estate benefit from the addition of the Countrywide purchased impaired loan portfolio as the initial...

  • Page 71
    ... significantly increase our losses and thereby affect our future earnings. For further information regarding representations and warranties, see Note 8 - Securitizations to the Consolidated Financial Statements, and Item 1A., Risk Factors of this Annual Report on Form 10-K. Bank of America 2009 69

  • Page 72
    .... Outstanding balances in the home equity portfolio decreased $3.4 billion at December 31, 2009 compared to December 31, 2008 due to charge-offs and management of credit lines in the legacy portfolio partially offset by the acquisition of Merrill Lynch. Of the loans in the home equity portfolio at...

  • Page 73
    ... the Consolidated Financial Statements. The following discussion provides additional information on the Countrywide purchased impaired residential mortgage, home equity and discontinued real estate loan portfolios. Since these loans were written down to fair value upon acquisition, we are reporting...

  • Page 74
    ... are added to the loan balance until the loan balance increases to a specified limit, which is no more than 115 percent of the original loan amount, at which time a new monthly payment amount adequate to repay the loan over its remaining contractual life is established. 72 Bank of America 2009

  • Page 75
    ...credit card loans into held-to-maturity debt securities and charge-offs partially offset by lower payment rates and new draws on previously securitized accounts. For more information on this conversion, see Note 8 - Securitizations to the Consolidated Financial Statements. Net charge-offs increased...

  • Page 76
    ... credit card, consumer loans secured by personal property or unsecured consumer loans that are past due as these loans are generally charged off no later than the end of the month in which the account becomes 180 days past due. Real estate-secured past due loans repurchased pursuant to our servicing...

  • Page 77
    ... six months. Our policy is not to classify consumer credit card and consumer loans not secured by real estate as nonperforming; therefore, the charge-offs on these loans have no impact on nonperforming activity. Approximately half of the 2009 and 2008 nonperforming loans are greater than 180 days...

  • Page 78
    ... for credit losses. For information on our accounting policies regarding delinquencies, nonperforming status and charge-offs for the commercial portfolio, see Note 1 - Summary of Significant Accounting Principles to the Consolidated Financial Statements. monitored, and as appropriate, credit risk...

  • Page 79
    .... Included above are net charge-offs related to the Merrill Lynch purchased impaired portfolio in 2009 of $55 million for commercial - domestic, $88 million for commercial real estate and $90 million for commercial - foreign. Excludes small business commercial - domestic. Bank of America 2009 77

  • Page 80
    ... increase in derivative assets was driven by the acquisition of Merrill Lynch substantially offset during 2009 by maturing transactions, mark-to-market adjustments from changing interest and foreign exchange rates, as well as narrower credit spreads. The loans and leases funded utilization rate was...

  • Page 81
    ... and commercial real estate firms. Outstanding loans and leases, excluding loans accounted for under the fair value option, increased $4.7 billion at December 31, 2009 compared to December 31, 2008, primarily due to the acquisition of Merrill Lynch partially offset by portfolio attrition and losses...

  • Page 82
    ... increased $524 million in 2009 from 2008. Commercial - Foreign The commercial - foreign loan portfolio is managed primarily in Global Banking. Outstanding loans, excluding loans accounted for under the fair value option, decreased due to repayments as borrowers accessed the capital markets...

  • Page 83
    ... commercial loans accounted for under the fair value option is managed in Global Markets. The $477 million decrease in the fair value loan portfolio in 2009 was driven primarily by reduced corporate borrowings under bank credit facilities. We recorded net gains of $515 million resulting from changes...

  • Page 84
    ...31, 2009. For more information on the commercial real estate and related portfolios, refer to the commercial real estate discussion beginning on page 79. The insurance and utilities committed exposure increased primarily due to the acquisition of Merrill Lynch. Refer to the Global Markets discussion...

  • Page 85
    ...) 2008 2009 2008 Diversified financials Real estate (4) Government and public education Capital goods Healthcare equipment and services Consumer services Retailing Commercial services and supplies Individuals and trusts Materials Insurance Food, beverage and tobacco Utilities Energy Banks Media...

  • Page 86
    ... on the ultimate rating level) or a breach of credit covenants would typically require an increase in the amount of collateral required of the counterparty (where applicable), and/or allow us to take additional protective measures such as early termination of all trades. 84 Bank of America 2009

  • Page 87
    ... in trading account profits (losses) related to counterparty credit risk on derivative assets. For additional information on gains or losses related to the counterparty credit risk on derivative assets, refer to Note 4 - Derivatives to the Consolidated Financial Statements. For information on...

  • Page 88
    ... by our foreign offices including loans, acceptances, time deposits placed, trading account assets, securities, derivative assets, other interest-earning investments and other monetary assets. Amounts also include unused commitments, SBLCs, commercial letters of credit and formal guarantees. Sector...

  • Page 89
    ... or counterparties in emerging markets increased $4.7 billion to $50.6 billion at December 31, 2009, compared to $45.8 billion at December 31, 2008. The increase was due to the acquisition of Merrill Lynch partially offset by the sale of CCB common shares in 2009. Foreign exposure to borrowers or...

  • Page 90
    ... in the purchased impaired and residential mortgage portfolios, new draws on previously securitized accounts as well as an approximate $800 million addition to increase the reserve coverage to approximately 12 months of charge-offs in consumer credit card. These increases were partially offset by...

  • Page 91
    ... to the Countrywide and Merrill Lynch consumer purchased impaired portfolios, updating of our expected principal cash flows resulted in an increase in reserves of $3.5 billion in the home equity, discontinued real estate, and residential mortgage portfolios. The allowance for commercial loan and...

  • Page 92
    ... related to credit card loans of $8.5 billion which were exchanged for a $7.8 billion held-to-maturity debt security that was issued by the Corporation's U.S. Credit Card Securitization Trust and retained by the Corporation. This reduction was partially offset by a $340 million increase associated...

  • Page 93
    ... to the Consolidated Financial Statements. Our trading positions are reported at fair value with changes currently reflected in income. Trading positions are subject to various risk factors, which include exposures to interest rates and foreign exchange rates, as well as mortgage, equity, commodity...

  • Page 94
    ...Trading account assets and liabilities and derivative positions are reported at fair value. For more information on fair value, see Note 20 - Fair Value Measurements to the Consolidated Financial Statements. Trading-related revenues can be volatile and are largely driven by general market conditions...

  • Page 95
    ... greater than $25 million and the largest loss was $173 million. The increase in daily trading gains of over $25 million in 2009 compared to 2008 was driven by more favorable market conditions. Histogram of Daily Trading-related Revenue 70 60 50 Number of Days 40 30 20 10 0 < -125 -125 to...

  • Page 96
    ... days, or two to three times each year. Table 43 presents average, high and low daily trading VAR for 2009 and 2008. Table 43 Trading Activities Market Risk VAR 2009 VAR (Dollars in millions) 2008 VAR Foreign exchange Interest rate Credit Real estate/mortgage Equities Commodities Portfolio...

  • Page 97
    ... income - managed basis on short-term financial instruments, debt securities, loans, deposits, borrowings and derivative instruments. In addition, these simulations incorporate assumptions about balance sheet dynamics such as loan and deposit growth and pricing, changes in funding mix, and asset...

  • Page 98
    ...foreign exchange risk. We use derivatives to hedge the variability in cash flows or changes in fair value on our balance sheet due to interest rate and foreign exchange components. For additional information on our hedging activities, see Note 4 - Derivatives to the Consolidated Financial Statements...

  • Page 99
    ...million and same-currency basis swaps of $107 million. The increase was partially offset by a loss from changes in the value of futures and forward rate contracts of $66 million. Table 46 Asset and Liability Management Interest Rate and Foreign Exchange Contracts December 31, 2009 Expected Maturity...

  • Page 100
    ... Servicing Rights to the Consolidated Financial Statements and for more information on mortgage banking income, see the Home Loans & Insurance discussion beginning on page 43. Compliance Risk Management Compliance risk is the risk posed by the failure to manage regulatory, legal and ethical issues...

  • Page 101
    ... new product introduction processes. In addition, the lines of business are responsible for monitoring adherence to corporate practices. Line of business management uses a self-assessment process, which helps to identify and evaluate the status of risk and control issues, including mitigation plans...

  • Page 102
    ... assets that are created when a mortgage loan is sold and we retain the right to service the loan. We account for consumer MSRs at fair value with changes in fair value recorded in the Consolidated Statement of Income in mortgage banking income. Commercial-related and residential reverse mortgage...

  • Page 103
    ... on limited available market information and other factors, principally from reviewing the issuer's financial statements and changes in credit ratings made by one or more of the ratings agencies. Trading account profits (losses), which represent the net amount earned from our trading positions, can...

  • Page 104
    ...-for-sale mortgage loans and by positive valuation adjustments on our IRLCs. The increase in the consumer MSR balance benefited from changes in the forward interest rate curve. Losses of $2.3 billion on long-term debt were driven by the impact of market movements and from improved credit spreads on...

  • Page 105
    ... Global Card Services valuation under the income approach, the significant assumptions included the discount rate, terminal value, expected loss rates and expected new account growth. Consistent with the June 30, 2009 annual impairment test, the carrying amount exceeded the fair value for Home Loans...

  • Page 106
    ... credit card loans and the related unfavorable change in value of the interest-only strip as well as decreases in interchange income and late fees. Partially offsetting these decreases was higher debit card income. • Service charges grew $1.4 billion resulting from growth in new deposit accounts...

  • Page 107
    ... fees. These decreases were partially offset by higher debit card income due to new account and card growth, increased usage and the addition of LaSalle. Provision for credit losses increased $8.5 billion, or 73 percent, to $20.2 billion compared to 2007 primarily driven by portfolio deterioration...

  • Page 108
    ... funds transfer pricing for Global Card Services' securitizations. Noninterest income declined $3.3 billion to $820 million driven by decreases in equity investment income of $3.5 billion and all other income (loss) of $1.2 billion partially offset by increases in gains on sales of debt securities...

  • Page 109
    ...assets Time deposits placed and other short-term investments Federal funds sold and securities borrowed or purchased under agreements to resell Trading account assets Debt securities (1) Loans and leases (2): Residential mortgage (3) Home equity Discontinued real estate Credit card - domestic Credit...

  • Page 110
    ... Rate Increase (decrease) in interest income Time deposits placed and other short-term investments Federal funds sold and securities borrowed or purchased under agreements to resell Trading account assets Debt securities Loans and leases: Residential mortgage Home equity Discontinued real estate...

  • Page 111
    ... Rate Dividend Per Share Preferred Stock Declaration Date Record Date Payment Date Series B (1) $ 1 January 27, 2010 October 28, 2009 July 21, 2009 April 29, 2009 January 16, 2009 January 4, 2010 October 2, 2009 July 2, 2009 April 3, 2009 January 5, 2009 January 4, 2010 October 2, 2009...

  • Page 112
    ... stock. Dividends per depositary share, each representing 1/40th interest in a share of preferred stock. Represents preferred stock of Merrill Lynch & Co., Inc. which is mandatorily convertible (MC) on October 15, 2010, but optionally convertible prior to that date. 110 Bank of America 2009

  • Page 113
    Table IV Outstanding Loans and Leases December 31 (Dollars in millions) 2009 2008 2007 2006 2005 Consumer Residential mortgage (1) Home equity Discontinued real estate (2) Credit card - domestic Credit card - foreign Direct/Indirect consumer (3) Other consumer (4) Total consumer $242,129 149,...

  • Page 114
    ...31, 2009, there were $15 million of nonperforming loans accounted for under the fair value option. At December 31, 2009, there were $87 million of loans or leases past due 90 days or more and still accruing interest accounted for under the fair value option. n/a = not applicable 112 Bank of America...

  • Page 115
    ...Excludes small business commercial - domestic loans. Balances do not include loans accounted for under the fair value option. At December 31, 2009 there were $87 million of loans past due 90 days or more and still accruing interest accounted for under the fair value option. Bank of America 2009 113

  • Page 116
    ... related to credit card loans of $8.5 billion which were exchanged for a $7.8 billion held-to-maturity debt security that was issued by the Corporation's U.S. Credit Card Securitization Trust and retained by the Corporation. This reduction was partially offset by a $340 million increase associated...

  • Page 117
    ... interest rates Total (1) (2) (3) Loan maturities are based on the remaining maturities under contractual terms. Includes loans accounted for under the fair value option. Loan maturities include other consumer, commercial real estate and commercial - foreign loans. Bank of America 2009 115

  • Page 118
    ... XI Non-exchange Traded Commodity Contract Maturities December 31, 2009 (Dollars in millions) Asset Positions $ 16,161 4,603 774 1,283 22,821 (17,785) Liability Positions $ 15,431 4,295 542 1,275 21,543 (17,785) Maturity of less than 1 year Maturity of 1-3 years Maturity of 4-5 years Maturity in...

  • Page 119
    ...common share data Earnings (loss) Diluted earnings (loss) Dividends paid Book value Tangible book value (1) Market price per share of common stock Closing High closing Low closing Market capitalization Average balance sheet Total loans and leases Total assets Total deposits Long-term debt Common...

  • Page 120
    ... Yield/ Rate Average Balance Third Quarter 2009 Interest Income/ Expense Yield/ Rate (Dollars in millions) Earning assets Time deposits placed and other short-term investments Federal funds sold and securities borrowed or purchased under agreements to resell Trading account assets Debt securities...

  • Page 121
    ...assets Time deposits placed and other short-term investments Federal funds sold and securities borrowed or purchased under agreements to resell Trading account assets Debt securities (1) Loans and leases (2): Residential mortgage (3) Home equity Discontinued real estate Credit card - domestic Credit...

  • Page 122
    ... to assist money market funds that hold such paper in meeting demands for redemptions by investors and to foster liquidity in the asset-backed commercial paper market and money markets more generally. Financial institutions generally bear no credit risk associated with commercial paper purchased...

  • Page 123
    ...loans secured by real estate where repayments are insured by the Federal Housing Administration and business card loans are not placed on nonaccrual status and are, therefore, not reported as nonperforming loans and leases. Option-adjusted Spread (OAS) - The spread that is added to the discount rate...

  • Page 124
    ... Open Market Account (SOMA) for loan over a one-month term against other program-eligible general collateral. Loans are awarded to primary dealers based on competitive bidding, subject to a minimum fee requirement. The Open Market Trading Desk of the Federal Reserve Bank of New York auctions general...

  • Page 125
    ...United States of America Government National Mortgage Association Global Markets Risk Committee Government-sponsored enterprise Initial public offering Loans held-for-sale London InterBank Offered Rate Mortgage-backed securities Management's Discussion and Analysis of Financial Condition and Results...

  • Page 126
    ... expresses an unqualified opinion on the effectiveness of the Corporation's internal control over financial reporting as of December 31, 2009. Brian T. Moynihan Chief Executive Officer and President Neil A. Cotty Interim Chief Financial Officer Chief Accounting Officer 124 Bank of America 2009

  • Page 127
    ...Balance Sheet and the related Consolidated Statement of Income, Consolidated Statement of Changes in Shareholders' Equity and Consolidated Statement of Cash Flows present fairly, in all material respects, the financial position of Bank of America Corporation and its subsidiaries at December 31, 2009...

  • Page 128
    ... expense Net interest income Noninterest income Card income Service charges Investment and brokerage services Investment banking income Equity investment income Trading account profits (losses) Mortgage banking income Insurance income Gains on sales of debt securities Other income (loss) Other-than...

  • Page 129
    Bank of America Corporation and Subsidiaries Consolidated Balance Sheet December 31 (Dollars in millions) 2009 2008 Assets Cash and cash equivalents Time deposits placed and other short-term investments Federal funds sold and securities borrowed or purchased under agreements to resell (includes ...

  • Page 130
    ...stock issued under employee plans and related tax effects Other Balance, December 31, 2008 Cumulative adjustment for accounting change: Other-than-temporary impairment on debt securities Net income Net change in available-for-sale debt and marketable equity securities Net change in foreign currency...

  • Page 131
    ... in time deposits placed and other short-term investments Net decrease in federal funds sold and securities borrowed or purchased under agreements to resell Proceeds from sales of available-for-sale debt securities Proceeds from paydowns and maturities of available-for-sale debt securities Purchases...

  • Page 132
    ... have been merged into Bank of America, N.A. with no impact on the Consolidated Financial Statements of the Corporation. On January 1, 2009, the Corporation acquired Merrill Lynch through its merger with a subsidiary of the Corporation in exchange for common and preferred stock with a value of $29...

  • Page 133
    ...condition or results of operations. The expanded disclosures are included in Note 4 - Derivatives. On January 1, 2009, the Corporation adopted new FASB guidance requiring all entities to report noncontrolling interests in subsidiaries as equity in the Consolidated Financial Statements and to account...

  • Page 134
    ... hedges of mortgage servicing rights (MSRs), interest rate lock commitments (IRLCs) and first mortgage loans held-for-sale (LHFS) that are originated by the Corporation are recorded in mortgage banking income. Changes in the fair value of derivatives that serve as asset and liability management (ALM...

  • Page 135
    ...The changes in the fair value of these derivatives are recorded in mortgage banking income. Securities Debt securities are classified based on management's intention on the date of purchase and recorded on the Consolidated Balance Sheet as debt securities as of the trade date. Debt securities which...

  • Page 136
    ... other credit-related information as it becomes available. Interest income on purchased non-impaired loans is recognized using a level yield methodology based on the contractually required payments receivable. For purchased impaired loans, applicable accounting guidance addresses the accounting for...

  • Page 137
    ...not reported as nonperforming loans and leases. In accordance with the Corporation's policies, non-bankrupt credit card loans and unsecured consumer loans are charged off no later than the end of the month in which the account becomes 180 days past due. The outstanding balance of real estate-secured...

  • Page 138
    ...meet its balance sheet management, funding, liquidity, and market or credit risk management needs. These financing entities may be in the form of corporations, partnerships, limited liability companies or trusts, and are generally not consolidated on the Corporation's Consolidated Balance Sheet. The...

  • Page 139
    ... to account for certain assets and liabilities under the fair value option, including certain corporate loans and loan commitments, LHFS, commercial paper and other short-term borrowings, securities financing agreements, assetbacked secured financings, long-term deposits and long-term debt. The...

  • Page 140
    ... Income The Corporation records unrealized gains and losses on AFS debt and marketable equity securities, gains and losses on cash flow accounting hedges, unrecognized actuarial gains and losses, transition obligation and prior service costs on pension and postretirement plans, foreign currency...

  • Page 141
    ... financial services franchise with significantly enhanced wealth management, investment banking and international capabilities. Under the terms of the merger agreement, Merrill Lynch common shareholders received 0.8595 of a share of Bank of America Corporation common stock in exchange for each share...

  • Page 142
    ....2 $ 24.0 Purchase price (1) Allocation of the purchase price Countrywide stockholders' equity (2) Pre-tax adjustments to reflect assets acquired and liabilities assumed at fair value: Loans Investments in other financial instruments Mortgage servicing rights Other assets Deposits Notes payable and...

  • Page 143
    ... for Countrywide. Payments under exit cost and restructuring reserves associated with the U.S. Trust Corporation acquisition were completed in 2009 while payments associated with the LaSalle, Countrywide and Merrill Lynch acquisitions will continue into 2010. NOTE 3 - Trading Account Assets and...

  • Page 144
    ....7 Total derivative assets/ liabilities (1) (2) Represents the total contract/notional amount of the derivatives outstanding and includes both written and purchased credit derivatives. Excludes $4.4 billion of long-term debt designated as a hedge of foreign currency risk. 142 Bank of America 2009

  • Page 145
    ... assets or revenues will be adversely affected by changes in market conditions such as interest rate movements. To hedge interest rate risk in mortgage banking production income, the Corporation utilizes forward loan sale commitments and other derivative instruments including purchased options...

  • Page 146
    ...Item Hedge Ineffectiveness Derivatives designated as fair value hedges Interest rate risk on long-term debt (1) Interest rate and foreign currency risk on long-term debt (1) Interest rate risk on available-for-sale securities (2, 3) Commodity price risk on commodity inventory (4) $(4,858) 932 791...

  • Page 147
    ... item. 2009 2008 (Dollars in millions) Price risk on mortgage banking production income (1, 2) Interest rate risk on mortgage banking servicing income (1) Credit risk on loans and leases (3) Interest rate and foreign currency risk on long-term debt and other foreign exchange transactions (3) Other...

  • Page 148
    ... limits to help ensure that certain credit risk-related losses occur within acceptable, predefined limits. 146 Bank of America 2009 The Corporation economically hedges its market risk exposure to credit derivatives by entering into a variety of offsetting derivative contracts and security positions...

  • Page 149
    ...trading account profits (losses) for changes in the Corporation's or its subsidiaries' credit risk. At December 31, 2009 and 2008, the Corporation's cumulative credit risk valuation adjustment that was included in the derivative liabilities balance was $608 million and $573 million. Bank of America...

  • Page 150
    .... Recorded in other assets on the Corporation's Consolidated Balance Sheet. At December 31, 2009, the amortized cost and fair value of HTM debt securities was $9.8 billion and $9.7 billion, which includes ABS that were issued by the Corporation's credit card securitization trust and retained by the...

  • Page 151
    ... residential Mortgage-backed Securities (MBS). The Corporation estimates the portion of loss attributable to credit using a discounted cash flow model. The Corporation estimates the expected cash flows of the underlying collateral using internal credit risk, interest rate and prepayment risk models...

  • Page 152
    ... Months or Longer Fair Value Gross Unrealized Losses Total Gross Unrealized Losses (Dollars in millions) Fair Value Temporarily-impaired available-for-sale debt securities at December 31, 2009 U.S. Treasury and agency securities Mortgage-backed securities: Agency Agency-collateralized mortgage...

  • Page 153
    ... debt securities from the Federal National Mortgage Association (FNMA), Government National Mortgage Association (GNMA) and the Federal Home Loan Mortgage Corporation (FHLMC) that exceeded 10 percent of consolidated shareholders' equity at December 31, 2009 and 2008 were: December 31 2009 2008 Fair...

  • Page 154
    ...in other assets and is accounted for under the equity method of accounting with income being recorded in equity investment income. As part of the acquisition of Merrill Lynch, the Corporation acquired an economic ownership in BlackRock, a publicly traded investment company. At December 31, 2009, the...

  • Page 155
    ... funds to debtors whose terms have been modified in a commercial or consumer TDR were immaterial. The Corporation seeks to assist customers that are experiencing financial difficulty through renegotiating credit card and consumer lending loans while ensuring compliance with Federal Financial...

  • Page 156
    ... includes a $750 million reduction in the allowance for loan and lease losses related to $8.5 billion of credit card loans that were exchanged for a $7.8 billion HTM debt security that was issued by the Corporation's U.S. Credit Card Securitization Trust and retained by the 154 Bank of America 2009

  • Page 157
    ... HTM debt securities and carried at amortized cost. Changes in the fair value of credit card related interest- only strips are recorded in card income. In addition, the Corporation may enter into derivatives with the securitization trust to mitigate the trust's interest rate or foreign currency risk...

  • Page 158
    ... securities issued in these transactions which were valued using quoted market prices and recorded in trading account assets. The Corporation has consumer MSRs from the sale or securitization of mortgage loans. Servicing fee and ancillary fee income on consumer mortgage loans serviced, including...

  • Page 159
    ...the Corporation's Consolidated Balance Sheet. At December 31, 2009 and 2008, held senior securities issued by credit card securitization trusts were valued using quoted market prices and substantially all were classified as AFS debt securities and there were no other-than-temporary impairment losses...

  • Page 160
    ... with its funding activities, as described in more detail in Note 13 - Long-term Debt. The Corporation also uses VIEs in the form of synthetic securitization vehicles to mitigate a portion of the credit risk on its residential mortgage loan portfolio as described in 158 Bank of America 2009

  • Page 161
    ...) Real Estate Investment Vehicles Municipal Bond Trusts CDOs Customer Vehicles Other Vehicles Total Unconsolidated VIEs, December 31, 2009 Maximum loss exposure Total assets of VIEs On-balance sheet assets Trading account assets Derivative assets Available-for-sale debt securities Loans and...

  • Page 162
    .... These customers sell or otherwise transfer assets to the conduits, which in turn issue short-term commercial paper that is rated high-grade and is collateralized by the underlying assets. The Corporation receives fees for providing combinations of liquidity and SBLCs or similar loss protection...

  • Page 163
    ... write-downs or downgrades of assets or issuers during 2009. In addition to standby liquidity facilities, the Corporation also provides default protection or credit enhancement to investors in securities issued by certain municipal bond trusts. Interest and principal payments on floating-rate...

  • Page 164
    ... Lynch acquisition. At December 31, 2009 and 2008, the Corporation held $155 million and $688 million of floating-rate certificates issued by the municipal bond trusts in trading account assets. Collateralized Debt Obligation Vehicles CDO vehicles hold diversified pools of fixed income securities...

  • Page 165
    ... Corporation absorbs the market risk of the assets, it consolidates the conduit. Derivatives related to unconsolidated conduits are carried at fair value with changes in fair value recorded in trading account profits (losses). Other corporate conduits at December 31, 2008 included several commercial...

  • Page 166
    ...with the Merrill Lynch acquisition. The reporting units utilized for goodwill impairment tests are the business segments or one level below the business segments. December 31 (Dollars in millions) 2009 2008 Deposits Global Card Services Home Loans & Insurance Global Banking Global Markets Global...

  • Page 167
    ... Treasury tax and loan notes, and term federal funds purchased, are reflected in commercial paper and other short-term borrowings on the Consolidated Balance Sheet. See Note 13 - Long-term Debt for information regarding the long-term notes that may be issued under the $75.0 billion bank note program...

  • Page 168
    ...subordinated notes (related to trust preferred securities): Fixed, 6.97%, perpetual Floating, with a weighted-average rate of 1.54%, ranging from 0.31% to 2.03%, perpetual Total notes issued by BAC North America Holding Company and subsidiaries Other debt Advances from Federal Home Loan Banks: Fixed...

  • Page 169
    ...otherwise guaranteed such securities. In addition, certain structured notes acquired in the acquisition of Merrill Lynch are accounted for under the fair value option. For more information on these structured notes, see Note 20 - Fair Value Measurements. Aggregate annual maturities of long-term debt...

  • Page 170
    ... Preferred Securities at a redemption price equal to their liquidation amount plus accrued and unpaid distributions for up to one quarter. For additional information on Trust Securities for regulatory capital purposes, see Note 16 - Regulatory Requirements and Restrictions. 168 Bank of America 2009

  • Page 171
    The following table is a summary of the outstanding Trust and Hybrid Securities and the related Notes at December 31, 2009 as originated by Bank of America Corporation and its predecessor companies and subsidiaries. Aggregate Principal Amount of Trust Securities $ 575 900 500 375 518 1,000 1,415 530...

  • Page 172
    ... same credit and market risk limitation reviews as those instruments recorded on the Corporation's Consolidated Balance Sheet. Credit Extension Commitments The Corporation enters into commitments to extend credit such as loan commitments, SBLCs and commercial letters of credit to meet the financing...

  • Page 173
    ... cash funds managed within GWIM. The funds for which the Corporation provided support typically invested in high quality, short-term securities with a portfolio weighted-average maturity of 90 days or less, including securities issued by SIVs and senior debt holdings of financial service companies...

  • Page 174
    ... of payments under these guarantees as remote. The Corporation has entered into additional guarantee agreements, including lease end obligation agreements, partial credit guarantees on certain leases, real estate joint venture guarantees, sold risk participation swaps and sold put options that...

  • Page 175
    ... Corporation, Inc. v. Countrywide Home Loans, et al., in New York Supreme Court, New York County. The action relates to bond insurance policies provided by MBIA with regard to certain securitized pools of home equity lines of credit and fixed-rate second lien mortgage loans. MBIA allegedly has paid...

  • Page 176
    ...Home Loans, Inc., in New York Supreme Court, New York County, against Countrywide Home Loans, Inc. The action relates to bond insurance policies provided by FGIC with regard to certain securitized pools of home equity lines of credit and fixed-rate second lien mortgage loans. FGIC allegedly has paid...

  • Page 177
    ... Inc., BAS, Banc of America Funding Corporation, and the Corporation. The case, entitled Federal Home Loan Bank of Seattle v. Countrywide Securities Corporation, et al., was filed against CFC, CSC, CWALT, Inc., Merrill Lynch Mortgage Investors, Inc., and Merrill Lynch Mortgage Capital, Inc. The case...

  • Page 178
    ... Corporation, BANA, BA Merchant Services LLC (f/k/a National Processing, Inc.) and MBNA America Bank, N.A. are defendants in putative class actions filed on behalf of retail merchants that accept Visa and MasterCard payment cards. Additional defendants include Visa, MasterCard, and other financial...

  • Page 179
    ...Rome. Merrill Lynch Acquisition-related Matters Since January 2009, the Corporation and certain of its current and former officers and directors, among others, have been named as defendants in putative class actions, referred to as the securities actions, brought by shareholders alleging violations...

  • Page 180
    ...In Re Bank of America Securities, Derivative & ERISA Litigation On June 10, 2009, the MDL Panel issued an order transferring the actions related to the Acquisition pending in federal courts outside the U.S. District Court for the Southern District of New York for coordinated or consolidated pretrial...

  • Page 181
    ... District of New York, entitled Iron Workers of Western Pennsylvania Pension Plan v. Bank of America Corp., et al. The action is purportedly brought on behalf of all persons who purchased or acquired certain Corporation debt securities between September 15, 2008 and January 21, 2009 and alleges...

  • Page 182
    ... government assistance; (iii) the disclosure of the payment and timing of year-end incentive compensation to Merrill Lynch employees; and (iv) public statements regarding the due diligence conducted in connection with the Acquisition and positive statements regarding the Acquisition. The complaint...

  • Page 183
    ...., was filed in the U.S. District Court for the Southern District of New York against the Corporation, BAS, MLPF&S and a number of its current and former officers and directors on behalf of all persons who acquired certain preferred stock offered pursuant to a shelf registration statement dated May...

  • Page 184
    ... Court for the Southern District of New York for coordinated pre-trial purposes under the caption In re Securities Litigation Parmalat. Since December 2003, certain purchasers of Parmalat-related private placement offerings have filed complaints against the Corporation and 182 Bank of America 2009

  • Page 185
    ... Merrill Lynch acquisition, see Note 2 - Merger and Restructuring Activity. During 2009 and 2008, in connection with preferred stock issuances to the U.S. government under TARP, the Corporation issued warrants to purchase 121.8 million shares of common stock at an exercise price of $30.79 per share...

  • Page 186
    ... third party issuance costs and other Merrill Lynch purchase accounting related adjustments of $679 million. (2) Series B Preferred Stock does not have early redemption/call rights. (3) The Corporation may redeem series of preferred stock on or after the redemption date, in whole or in part, at...

  • Page 187
    ... of the Series L Preferred Stock, at its option, at any time or from time to time, to be converted into shares of common stock at the then-applicable conversion rate if, for 20 trading days during any period of 30 consecutive trading days, the closing price of common stock exceeds 130 percent of the...

  • Page 188
    ...2009, 2008 and 2007, net-of-tax. Available-forSale Debt Securities Available-forSale Marketable Equity Securities (Dollars in millions) Derivatives Employee Benefit Plans (1) Foreign Currency (2) Total Balance, December 31, 2008 Cumulative adjustment for accounting change - OTTI (3) Net change...

  • Page 189
    ... debt, limited amounts of subordinated debt, other qualifying term debt, the allowance for credit losses up to 1.25 percent of risk-weighted assets and other adjustments. Tier 3 capital includes subordinated debt that is unsecured, fully paid, has an original maturity of at least two years...

  • Page 190
    ... preferred shares associated with shares exchanged for common stock and related deferred tax disallowances. NOTE 17 - Employee Benefit Plans Pension and Postretirement Plans The Corporation sponsors noncontributory trusteed pension plans that cover substantially all officers and employees, a number...

  • Page 191
    ...on average or career compensation and years of service rather than by reference to a pension account. The Bank of America Pension Plan for Legacy MBNA (the MBNA Pension Plan), the Bank of America Pension Plan for Legacy LaSalle (the LaSalle Pension Plan) and the Countrywide Financial Corporation Inc...

  • Page 192
    ...of plan assets Fair value, January 1 Countrywide balance, July 1, 2008 Merrill Lynch balance, January 1, 2009 Actual return on plan assets Company contributions (2) Plan participant contributions Benefits paid Plan transfer Federal subsidy on benefits paid Foreign currency exchange rate changes $14...

  • Page 193
    ...) for each of the Plans in 2009 includes the results of Merrill Lynch. The net periodic benefit cost (income) of the Merrill Lynch Nonqualified and Other Pension Plans, and Postretirement Health and Life Plans was $(20) million and $18 million in 2009 using a blended discount rate of 5.59 percent at...

  • Page 194
    ... Real estate Other 60 - 80% 20 - 40 0-5 0 - 10 Equity securities for the Qualified Pension Plans include common stock of the Corporation in the amounts of $224 million (1.54 percent of total plan assets) and $269 million (1.88 percent of total plan assets) at December 31, 2009 and 2008. Fair...

  • Page 195
    ...) Balance January 1, 2009 Actual Return on Plan Assets Still Held at the Reporting Date (1) Purchases, Sales and Settlements Transfers into / (out of) Level 3 Balance December 31, 2009 Common and Collective Trusts Foreign debt securities Foreign other Real estate Participant loans Other...

  • Page 196
    ... 2009. These shares of restricted stock generally vest in three equal annual installments beginning one year from the grant date with the exception of financial advisor awards that vest eight years from grant date. Employee Stock Compensation Plan The Corporation assumed the Merrill Lynch Employee...

  • Page 197
    ... Award Plans (FACAAP) and the Merrill The weighted-average fair value of the ESPP stock purchase rights (i.e. the five percent discount on the Corporation's common stock purchases) exercised by employees in 2009 is $0.57 per stock purchase right. NOTE 19 - Income Taxes The components of income tax...

  • Page 198
    ... Change in Unrecognized Tax Benefits (Dollars in millions) 2009 2008 2007 Beginning balance Increases related to positions taken during prior years Increases related to positions taken during the current year Positions acquired or assumed in business combinations Decreases related to positions...

  • Page 199
    ...696 Deferred tax liabilities Mortgage servicing rights Long-term borrowings Intangibles Equipment lease financing Fee income Available-for-sale securities Other Gross deferred liabilities Net deferred tax assets (1) (1) The Corporation's net deferred tax assets were adjusted during 2009 and 2008...

  • Page 200
    ... of prepayment rates, the resultant weighted-average lives of the MSRs and the OAS levels. For more information on MSRs, see Note 22 - Mortgage Servicing Rights. Trading Account Assets and Liabilities and Available-for-Sale Debt Securities The fair values of trading account assets and liabilities...

  • Page 201
    ... at Fair Value Assets Federal funds sold and securities borrowed or purchased under agreements to resell Trading account assets: U.S. government and agency securities Corporate securities, trading loans and other Equity securities Foreign sovereign debt Mortgage trading loans and asset-backed...

  • Page 202
    ... (1) Assets/Liabilities at Fair Value Assets Federal funds sold and securities borrowed or purchased under agreements to resell Trading account assets Derivative assets Available-for-sale debt securities Loans and leases Mortgage servicing rights Loans held-for-sale Other assets $ - 44...

  • Page 203
    ...Losses) Included in OCI Purchases, Issuances and Settlements Transfers into / (out of) Level 3 (1) Balance December 31, 2008 (1) Trading account assets Net derivative assets (2) Available-for-sale debt securities Loans and leases (3) Mortgage servicing rights Loans held-for-sale (3) Other assets...

  • Page 204
    ... (Losses) Included in OCI Purchases, Issuances, and Settlements Transfers into / (out of) Level 3 (1) Balance December 31, 2007 (1) (Dollars in millions) Trading account assets (2) Net derivative assets (3) Available-for-sale debt securities (2) Loans and leases Mortgage servicing rights (2) Loans...

  • Page 205
    ... 2009 Equity Investment Income Trading Account Profits (Losses) Mortgage Banking Income (Loss) (1) Other Income (Loss) (Dollars in millions) Card Income (Loss) Total Trading account assets: Corporate securities, trading loans and other Equity securities Foreign sovereign debt Mortgage trading...

  • Page 206
    ... at Reporting Date 2009 Equity Investment Income Trading Account Profits (Losses) Mortgage Banking Income (Loss) (1) Other Income (Loss) (Dollars in millions) Card Income (Loss) Total Trading account assets: Corporate securities, trading loans and other Equity securities Foreign sovereign debt...

  • Page 207
    ...171) - Gains (losses) represent charge-offs associated with real estate-secured loans that exceed 180 days past due which are netted against the allowance for loan and lease losses. Amounts are included in other assets on the Consolidated Balance Sheet and represent fair value and related losses of...

  • Page 208
    ..., time deposits placed, federal funds sold and purchased, resale and certain repurchase agreements, commercial paper and other short-term investments and borrowings, approximates the fair value of these instruments. These financial instruments generally expose the Corporation to limited credit risk...

  • Page 209
    .... NOTE 22 - Mortgage Servicing Rights The Corporation accounts for consumer MSRs at fair value with changes in fair value recorded in the Consolidated Statement of Income in mortgage banking income. The Corporation economically hedges these MSRs with certain derivatives and securities including...

  • Page 210
    ... rate first-lien mortgage loans for home purchase and refinancing needs, reverse mortgages, home equity lines of credit and home equity loans. First mortgage products are either sold into the secondary mortgage market to investors, while retaining MSRs and the Bank of America customer relationships...

  • Page 211
    ..., trade finance, short-term credit facilities, asset-based lending and indirect consumer loans. Capital management and treasury solutions include treasury management, foreign exchange and short-term investing options. Investment banking services provide the Corporation's commercial and corporate...

  • Page 212
    ...net income (loss) for 2009, 2008 and 2007, and total assets at December 31, 2009 and 2008 for each business segment, as well as All Other. Business Segments At and for the Year Ended December 31 (Dollars in millions) Total Corporation (1) Deposits (2) 2007 Global Card Services (3) 2007 2009 2008...

  • Page 213
    ... - Provision for credit losses combined with the Global Card Services securitization offset. The securitization impact/offset on net interest income is on a funds transfer pricing methodology consistent with the way funding costs are allocated to the businesses. FTE basis Bank of America 2009 211

  • Page 214
    ... of the six business segments' (Deposits, Global Card Services, Home Loans & Insurance, Global Banking, Global Markets and GWIM) total revenue, net of interest expense, on a FTE basis, and net income to the Consolidated Statement of Income, and total assets to the Consolidated Balance Sheet. The...

  • Page 215
    ...: Bank holding companies and related subsidiaries Nonbank companies and related subsidiaries Total equity in undistributed earnings (losses) of subsidiaries Net income Net income (loss) applicable to common shareholders Condensed Balance Sheet December 31 (Dollars in millions) 2009 $ 91...

  • Page 216
    ...(purchases) sales of securities Net payments from (to) subsidiaries Other investing activities, net Net cash used in investing activities Financing activities Net increase (decrease) in commercial paper and other short-term borrowings Proceeds from issuance of long-term debt Retirement of long-term...

  • Page 217
    ...and Chief Accounting Officer David C. Darnell* President, Global Commercial Banking Barbara J. Desoer* President, Bank of America Home Loans and Insurance Anne M. Finucane Global Strategy and Marketing Officer Sallie L. Krawcheck* President, Global Wealth and Investment Management Thomas K. Montag...

  • Page 218
    ... dividend checks, electronic deposit of dividends, dividend reinvestment, tax statements, electronic delivery, transferring ownership, address changes or lost or stolen stock certificates, contact Bank of America Shareholder Services at Computershare Trust Company, N.A. via Internet access at...

  • Page 219
    Board of Directors Bank of America Corporation Board of Directors from left to right: bottom row seated: Brian T. Moynihan, Walter E. Massey, Monica C. Lozano, Charles O. Rossotti; Top row standing: Charles O. Holliday, Jr., Frank P. Bramble, Sr., Susan S. Bies, William P. Boardman, Charles K. ...

  • Page 220
    Please recycle. © 2010 Bank of America Corporation 00-04-1365B 3/2010