Bank of America 2009 Annual Report Download - page 153

The amortized cost and fair value of the Corporation’s investment in
AFS 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
(Dollars in millions)
Amortized
Cost Fair Value
Amortized
Cost Fair Value
Federal National Mortgage Association $100,321 $101,096 $102,908 $104,126
Government National Mortgage Association 60,610 61,121 43,713 44,627
Federal Home Loan Mortgage Corporation 29,076 29,810 46,114 46,859
Securities are pledged or assigned to secure borrowed funds, govern-
ment and trust deposits and for other purposes. The carrying value of
pledged securities was $122.7 billion and $158.9 billion at
December 31, 2009 and 2008.
The expected maturity distribution of the Corporation’s MBS and the
contractual maturity distribution of the Corporation’s other debt secu-
rities, and the yields of the Corporation’s AFS debt securities portfolio at
December 31, 2009 are summarized in the following table. Actual matur-
ities may differ from the contractual or expected maturities since bor-
rowers may have the right to prepay obligations with or without
prepayment penalties.
December 31, 2009
Due in One
Year or Less
Due after One Year
through Five Years
Due after Five Years
through Ten Years Due after Ten Years Total
(Dollars in millions) Amount Yield
(1)
Amount Yield
(1)
Amount Yield
(1)
Amount Yield
(1)
Amount Yield
(1)
Fair value of available-for-sale debt securities
U.S. Treasury and agency securities $ 231 1.94% $ 1,888 3.31% $ 2,774 4.78% $18,132 4.73% $ 23,025 4.59%
Mortgage-backed securities:
Agency 28 5.48 78,579 4.81 33,351 4.66 54,288 4.52 166,246 4.69
Agency-collateralized mortgage
obligations 495 3.83 12,360 2.39 12,778 2.53 148 0.98 25,781 2.48
Non-agency residential 757 8.58 18,068 9.34 4,790 7.61 11,488 4.09 35,103 7.38
Non-agency commercial 132 4.22 3,729 5.91 2,779 10.89 269 6.17 6,909 7.63
Foreign securities 105 3.03 1,828 6.33 96 5.60 1,868 3.21 3,897 4.53
Corporate bonds 592 1.22 3,311 3.68 1,662 7.47 627 2.59 6,192 4.31
Other taxable securities 12,297 1.17 5,921 3.92 203 7.19 821 4.00 19,242 2.24
Total taxable securities 14,637 1.82 125,684 5.24 58,433 4.81 87,641 4.45 286,395 4.73
Tax-exempt securities
(2)
6,413 0.28 1,772 6.38 3,450 6.39 3,571 5.29 15,206 3.56
Total available-for-sale debt securities $21,050 1.35 $127,456 5.25 $61,883 4.89 $91,212 4.48 $301,601 4.67
Amortized cost of available-for-sale debt
securities $21,271 $127,395 $61,103 $92,857 $302,626
(1) Yields are calculated based on the amortized cost of the securities.
(2) Yields of tax-exempt securities are calculated on a fully taxable-equivalent (FTE) basis.
The components of realized gains and losses on sales of debt secu-
rities for 2009, 2008 and 2007 were:
(Dollars in millions) 2009 2008 2007
Gross gains $5,047 $1,367 $197
Gross losses (324) (243) (17)
Net gains on sales of debt securities $4,723 $1,124 $180
The income tax expense attributable to realized net gains on sales of
debt securities was $1.7 billion, $416 million and $67 million in 2009,
2008 and 2007, respectively.
Certain Corporate and Strategic Investments
At December 31, 2009 and 2008, the Corporation owned approximately
11 percent, or 25.6 billion common shares and 19 percent, or 44.7 bil-
lion common shares of China Construction Bank (CCB). During 2009, the
Corporation sold its initial investment of 19.1 billion common shares in
CCB for a pre-tax gain of $7.3 billion. These shares were accounted for at
fair value and recorded as AFS marketable equity securities in other
assets with an offset, net-of-tax, in accumulated OCI. The remaining
investment of 25.6 billion common shares is accounted for at cost, is
recorded in other assets and is non-transferable until August 2011. At
December 31, 2009 and 2008, the cost of the CCB investment was $9.2
billion and $12.0 billion, the carrying value was $9.2 billion and $19.7
billion, and the fair value was $22.0 billion and $24.5 billion. Dividend
income on this investment is recorded in equity investment income. The
Corporation remains a significant shareholder in CCB and intends to con-
tinue the important long-term strategic alliance with CCB originally
entered into in 2005. As part of this alliance, the Corporation expects to
continue to provide advice and assistance to CCB.
At December 31, 2009 and 2008, the Corporation owned approx-
imately 188.4 million and 171.3 million preferred shares and 56.5 million
and 51.3 million common shares of Itaú Unibanco Holding S.A. (Itaú
Unibanco). During 2009, the Corporation received a dividend of
17.1 million preferred shares and 5.2 million common shares. The Itaú
Unibanco investment is accounted for at fair value and recorded as AFS
marketable equity securities in other assets with an offset, net-of-tax, in
accumulated OCI. Dividend income on this investment is recorded in
Bank of America 2009 151