Bank of America Annual Report 2006

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FY2006 Annual Report · Bank of America

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Recycled Paper

Building
OpportunitiesTM

2006 Annual Report

About Bank of America Corporation

Bank of America Corporation (NYSE: BAC) is a publicly traded company headquartered in Charlotte, NC, that operates throughout the United
States and 44 foreign countries. The corporation provides a diversified range of banking and nonbanking financial services and products
domestically and internationally through three business segments: Global Consumer & Small Business Banking, Global Corporate & Investment
Banking and Global Wealth & Investment Management.

Financial Highlights

(Dollars in millions, except per share information)

For the year
Revenue*
Net income
Shareholder value added
Earnings per common share
Diluted earnings per common share
Dividends paid per common share
Return on average assets
Return on average common
shareholders’ equity
Efficiency ratio*
Average common shares issued
and outstanding (in millions)

At year end
Total assets
Total loans and leases
Total deposits
Total shareholders’ equity
Book value per common share
Market price per share
of common stock
Common shares issued and
outstanding (in millions)

2006

Year Ended Dec. 31
2005
$74,247 $56,923
16,465
6,594
4.10
4.04
1.90
1.30 %

21,133
9,121
4.66
4.59
2.12

1.44 %

16.27 %
47.94 %

16.51 %
50.38 %

4,527

4,009

2006
$1,459,737

2005
$1,291,803

706,490
693,497
135,272
29.70

573,791
634,670
101,533

25.32

53.39

46.15

4,458

4,000

2006 Revenue*
(in millions)

Global Wealth &
Investment Management
$7,779
10%

All Other**
$2,086
3%

Global Corporate &
Investment Banking
$22,691
31%

Global Consumer &
Small Business Banking
$41,691
56%

2006 Net Income
(in millions)

Global Wealth &
Investment Management
$2,403
11%

All Other**
$767
4%

Global Corporate &
Investment Banking
$6,792
32%

Global Consumer &
Small Business Banking
$11,171
53%

*Fully taxable-equivalent basis
**All Other consists primarily of Equity Investments and Other. For more information, refer to All Other section in the Management’s Discussion and Analysis.

Total Cumulative Shareholder Return***

5-Year Stock Performance

$250

$200

$150

$100

$60

$50

$40

$30

$20

2001

2002

2003

2004

2005

2006

2002

2003

2004

2005

2006

Bank of America Corporation

S & P 500 CM BANK INDUSTRY

S & P 500 COMP-LTD

High $38.45 $41.77 $47.44 $47.08 $54.90

Low 27.08 32.82 38.96 41.57 43.09

Close 34.79 40.22 46.99 46.15 53.39

***The graph compares the yearly change in the corporation’s cumulative total stockholders’ return on its common stock with (i) Standard & Poor’s 500 Index and (ii) Standard & Poor’s 500
Commercial Banks Index for the years ended 2002 to 2006. The graph assumes an initial investment of $100 at the end of 2001 and the reinvestment of all dividends during the periods indicated.

Our Lines of Business
GLOBAL CONSUMER & SMALL BUSINESS BANKING

BUSINESSES
Deposits
Card Services
Mortgage
Home Equity

Global Consumer & Small
Business Banking serves
approximately 53 million
consumer households through
checking, savings, credit and
debit cards, home equity
lending and mortgages. We
also serve mass-market small
businesses with capital, credit,
deposit and payment services.

Revenue*

Net Income**

Mortgage
3%

Home Equity
4% ALM†/Other
1%

Mortgage
3%

Home Equity
5%

ALM†/Other
−2%

Card Services
51%

Card Services
50%

Deposits
41%

Deposits
44%

GLOBAL CORPORATE & INVESTMENT BANKING

Global Corporate & Investment
Banking provides comprehensive
financial solutions to clients
ranging from companies with
$2.5 million in revenues to large
multinational corporations,
governments, insti tutional
investors and hedge funds.

BUSINESSES
Business Lending
Capital Markets & Advisory
Services
Treasury Services

Revenue*

Net Income

Treasury
Services
29%

ALM†/Other
9%

Treasury
Services
32%

ALM†/Other
10%

Business
Lending
25%

Business
Lending
33%

Capital Markets &
Advisory Services
37%

Capital Markets &
Advisory Services
25%

GLOBAL WEALTH & INVESTMENT MANAGEMENT

Global Wealth & Investment
Management provides a wide
offering of customized
banking and investment
services for individual and
institutional clients.

BUSINESSES
The Private Bank
Columbia Management
Premier Banking & Investments™

Revenue*

Premier
Banking &
Investments
37%

Net Income

ALM†/Other
16%

Premier
Banking &
Investments
39%

ALM†/Other
24%

*Fully taxable-equivalent basis **Reflects net loss in ALM/Other †ALM=Asset and Liability Management

Columbia
Management
20%

The Private Bank
27%

Columbia
Management
14%

The Private Bank
23%

Contents
Letter to Shareholders ......................................................... 2
Building Opportunities ...................................................... 10
How We’re Growing .............................................................16
Helping More People Own Homes ................................... 18
Winning Over Small Businesses .....................................20
Managing Monster Cash Flows ...................................... 22
Serving the Needs of Big Investors ................................24

Banking and Investing With a Personal Touch........... 26
Revitalizing Sweet Auburn...................................................28
Helping Our Customers in Many Ways ......................... 30
Join Us Online ...................................................................... 32
Financial Review ................................................................. 33
Executive Ofﬁ cers and Directors ...................................151
Corporate Information ..................................................... 152

We understand that only by creating
opportunities for our customers and clients
do we create opportunities for ourselves.
Bank of America customers and clients
know they can count on us to anticipate
their needs, and create the opportunities
that enable them to achieve their goals.

—KENNETH D. LEWIS, CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT

2 Bank of America 2006

To Our
Shareholders

2006 was another demonstration of the many paths to growth
available to your company, and our proven ability to drive
growth through the competitive advantages Bank of America
brings to the marketplace.

Our ability to innovate, integrate and execute to serve cus-
tomers’ needs enabled us to grow our customer relationships
last year. At the same time, our associates again demonstrated
that few of our peers are as efficient, effective or profitable at
integrating acquisitions to enhance shareholder value.

Our efforts were recognized by investors, as our shares
appreciated 16 percent during the year, exceeding the perfor-
mance of the S&P 500 Index.

Bank of America today is one of the largest companies
in the world; we were the fifth most profitable company in
2006 with a net profit of more than $21 billion. But while we
have built leading positions in many customer segments and
product lines in banking, our market penetration is actually
small, given our potential, in a number of areas, such as first
mortgage lending, small business lending, capital markets and
wealth management.

These and other areas of opportunity are discussed in
this annual report. Our new marketing platform, Bank of
Opportunity TM, reflects our vision for Bank of America as a cat-
alyst to create opportunities for all of our constituencies, from
customers and associates to communities and shareholders.

We are building a financial services company that offers
the most convenient banking network for our retail customers
coast-to-coast and a global capital markets platform to serve
our corporate and institutional clients.

We are building a company that consistently leverages
information and market knowledge to innovate for customers
and clients; that knows how to integrate its operations and
businesses to create greater value for customers and share-
holders alike; and that delivers the highest standard of service

Revenue

(in billions, fully
taxable-equivalent basis)

’04

’05

’06

$49 . 7
$56 . 9
$74 . 2

quality to consumers, businesses and institutions of all sizes.

In sum, we are building a financial services company that
people and organizations throughout the United States and
around the world instinctively seek out to help them create,
build, preserve and grow the wealth they need to seize their
opportunities, achieve their goals and realize their dreams.

In this letter, I will discuss some of our strategies for ful-
filling this vision, and I encourage you to review the articles
that follow, in which we connect opportunities created for
customers to value created for shareholders. First, though, I’d
like to review some of our financial results from 2006.

Strong financial performance yet again. In 2006 Bank of
America earned a record $21 billion. While earnings were up
28 percent on a 30 percent rise in revenue, much of that
increase was driven by the addition of MBNA. A better mea-
sure of the year’s success was the 14 percent increase in diluted
earnings per share. Adding MBNA’s results back into our 2005
financial results to create an apples-to-apples comparison,
revenue was up 10 percent in 2006 while we controlled expenses
and achieved merger-related savings.

Bank of America 2006 3

We have consistently
demonstrated our ability to manage
expenses and produce

positive operating leverage.

This strong financial performance has enabled us to
continue our record of returning capital to shareholders.
2006 was our 29th consecutive year of raising our quarterly
dividend, which increased by 12 percent to $0.56. Over that
time, our dividend has increased at a compound annual growth
rate of 13 percent. We also returned $9.5 billion to shareholders
in 2006 by repurchasing shares.

Last year’s financial results were gratifying, given external
headwinds our industry faced in 2006 in the form of a flat-to-
inverted yield curve and rising credit costs, which we will most
likely continue to face in 2007.

The yield curve continues to be flat to inverted. The curve
represents the spread between short- and long-term interest
rates and is an indicator of the opportunity that banks have to
generate net interest income.

We believe we are better positioned than many of our com-
petitors in this environment. Our revenue mix is now more
than 50 percent fee income, and this change in mix has allowed
us to continue to operate within our long-term target of 6 to
9 percent annual revenue growth even as net interest income
growth has been reduced to low single digits.

The normalization of credit costs has long been anticipated.
Credit costs have remained historically low across most seg-
ments of the economy during the recent years of economic
expansion. As net charge-offs and provision expense normalize,
bank earnings will be pressured.

We believe we are in a good position to weather any cred-
it issues we currently see on the horizon. The breadth of our
franchise across geographies, market segments, industries
and asset classes makes our credit portfolio inherently diverse
and granular. Our ability to distribute credit risk through the
securitization of various asset classes adds further stabil-
ity. And as our risk managers analyze information about our
customers in ever more sophisticated ways, we can grow our
portfolio without significantly increasing our risk profile. In
fact, in some parts of our business we are actually saying
“yes” to more customers while at the same time improving the
average quality of our loans.

Operating leverage is perhaps our most important answer
to both the yield curve and credit costs. We have consistently
demonstrated our ability to manage expenses and produce
positive operating leverage — the difference between the rate
of revenue growth and the rate of expense growth. This per-
formance enables us to invest in our businesses even when
revenue is under pressure.

The company we’re building. At the beginning of this letter
I described our vision for Bank of America. Investors tend to
ask tough questions about our strategy that deserve answers:

First: Is Bank of America too big to grow at attractive
rates? Our answer: Absolutely not.

While Bank of America is large in the aggregate, we com-
pete in markets — defined by geography, product or market
segment — in which our current share of the market is much

4 Bank of America 2006

Net
Income

(in billions)

’04 $13 . 9
$16 . 5
’05
$21 . 1

’06

Second: Is Bank of America’s growth to be fueled primarily
by acquisitions or by winning and expanding customer
relationships? Our answer: Wrong question.

A better question would be whether Bank of America is
capable of generating revenue and earnings growth organically
and through acquisition. And our answer is an emphatic “yes.”
The strongest companies are those that have the
resources, knowledge, judgment and skills to pursue multiple
paths to growth. For the past nine years, we have focused
primarily on generating organic growth through process
improvement, increasing customer satisfaction and product
innovation. At the same time, we have taken advantage of
select opportunities presented to us to enter new markets.
These acquisitions — Fleet, National Processing Inc., MBNA
and U.S. Trust, scheduled to close in 2007 — add customers,
capabilities and great new opportunities to grow the business.
Today, there is nothing more important than executing well
on our current organic growth strategy. Every other opportu-
nity pales in comparison to the opportunity we have with our
customers and prospects in our current markets. And yet, our
ability to pursue multiple paths to growth is a great strength

Bank of America 2006 5

CREATING
SHAREHOLDER
VALUE

Total annualized
shareholder return
of 20% since
December 31,
2000

smaller than the “natural share” we
should expect given the size of our
company. In the retail markets, that
natural share is defined somewhat
by our deposit share in a given geo-
graphic market. Examples of product
markets in which we have plenty of
room to run include mortgage, home
equity and small business lending.

I would add that the geographic
markets in which we have chosen to compete are the fastest
growing in the country, providing more opportunity for us to
grow our business.

While our wealth management business is large and grow-
ing, we have a huge opportunity embedded in our current client
base: clients who qualify for high service levels such as Premier
or Private Banking but who have not yet chosen to take their
relationship with us to that level. Outside our existing client
base, the opportunity is even larger.

One of the most important moves we made in 2006 to
pursue growth in the wealth management business was our
agreement to acquire U.S. Trust for $3.3 billion, a transaction
we expect to close in the third quarter of 2007. As one of the
oldest, largest and most respected private banks in the coun-
try, U.S. Trust will combine with The Private Bank of Bank
of America to create the leading private bank in the country.
Clients of both our organizations will benefit from a more
comprehensive set of products and services, and access to the
broadest financial services distribution network in America.
U.S. Trust brings to this partnership one of the strongest brands
in the industry, which we are looking very hard at retaining.

By focusing on these and other opportunities, we aim
to generate strong, consistent organic growth across all
our businesses.

Earnings
Per Share

(diluted)

’04 $3 . 64
$4 . 04
’05
$4 . 59

’06

of your company, and will continue to be. Acquisition — when
the likely returns to shareholders are attractive, the addition
increases our potential growth and the risks are in line with the
potential rewards — will always be on the table as a potential
path to growth for our company.

Third: Does Bank of America want to be a U.S. banking
company or a global financial services company?
Our answer: Both.

We view wholesale financial services as global. Our com-
mercial, corporate and institutional clients are doing business
around the world. We cannot serve these clients if we can’t
provide the global reach they require, which is why we have
corporate banking offices in 44 countries around the world,
and why we are expanding our ability to provide more products
in more places.

Retail banking markets are largely local or regional.
This is why we have invested in building market share within
the U.S. markets where we have chosen to compete, even as
we have divested foreign retail franchises where we felt our
presence was too small.

6 Bank of America 2006

Our preference

THE NO. 1
ONLINE
BANK

in fast-growing
foreign retail banking markets has
been to invest in the best-run large
bank in the local market, as we did
in Mexico, China and Brazil. This
strategy enables us to participate
in the growth of the market with a
local bank that brings appropriate
size and scale to the table; reduces
the operational risks that come with managing a foreign
banking franchise; and provides the opportunity for us to
develop relationships, learn from our partners in the market
and explore alliances that can benefit customers and share-
holders of both companies.

21 million active
online banking
customers, up
44% from 2005

Our acquisition of MBNA has created something of a
corollary to this policy, in that we now own a foreign card opera-
tion that is No. 1 in the United Kingdom. This business pre-
sents prospects for growth in existing and new markets and
offers additional insight into international retail financial
services markets.

Finally: What unique advantages does Bank of America
bring to the marketplace? Our answer: Many.

In addition to our people and our culture, which, taken
together, represent our greatest advantage, we believe there
are four additional key attributes that give us a unique advan-
tage in the marketplace:

The knowledge, insight and understanding we gain from
working with the largest customer and client base in the
industry drive our ability to innovate across all our businesses.
We were named Outstanding Corporate Innovator of the Year by
the Product Development & Management Association in recog-
nition of our development of products like Keep the ChangeTM,
free SafeSend®, Business 24/7 TM and Affinity Banking.

The knowledge, insight and understanding
we gain from working with the
largest customer and client base in the

industry drive our ability to innovate.

More than anything, it was client knowledge and innovation
that led to our $0 Online Equity TradesTM, which we launched
in October 2006. This product enables brokerage clients with
a deposit balance of $25,000 or more to execute online equity
trades with no fee.

The size and scale of our franchise in the United States
gives us a tremendous advantage, as evidenced by our sales
growth across products and channels last year. Active online
banking customers grew to 21 million, and active online bill
payers grew to 11 million — representing 65 percent of the
market of online bill payers with demand deposit accounts
at financial institutions in the United States. First mortgage
applications increased by 7 percent and home equity applica-
tions increased by 14 percent over 2005. Customers opened
2.4 million net new checking accounts, which contributed to a
net new account gain of 3.7 million.

A key differential for Bank of America is integration. Our
focus on integrating across the company enables us to create
value that others miss. We are working to serve customers’
needs in ways that draw on the power of all our capabilities. Our
associates pursued many cross-line-of-business initiatives
last year, but none was more successful than the partnership
between Global Wealth & Investment Management (GWIM) and
Global Corporate & Investment Banking (GCIB). By working
together to integrate the delivery of financial services to clients
with “core” relationships originated in either business, associates
in these groups generated more than a hundred million dollars in
incremental net income, proving that we can create value by work-
ing together on behalf of our clients.

Execution is a core strength. Our history and culture of
superior execution enables us to get things done right — on
schedule, on budget and in ways that enhance the customer
experience. In 2006, we again executed a large, complex merg-
er transition on time, under budget and virtually flawlessly

for our customers. This year it was MBNA and our Card Ser-
vices business. And our Capital Markets & Advisory Services
business proved itself a major player in the leveraged buyout
(LBO) market, participating in seven of the 15 largest
LBOs last year, including the two largest LBOs in history:
Hospital Corporation of America (HCA) and Equity Office
Properties (EOP).

It is the combination of these attributes that is enabling us
to fulfill our vision for Bank of America — and that enables us
to create opportunity and value uniquely for our customers and
shareholders in all we do, every day.

What’s on tap for 2007. The work we are doing in 2007 will
include hundreds of important initiatives. I want to mention
four broad categories of activity that cover most of them.

First, we are continuing our intense pursuit of growth
within all our businesses. These efforts include cross-line-of-
business initiatives that create value for customers by com-
bining capabilities across the enterprise, such as a universal
decision engine that will bring efficiency and consistency
to the credit decision process across a number of our large

Bank of America 2006 7

We are working harder than ever
to help strengthen the many communities
across the country and around

the world in which we do business.

retail businesses. It includes investments we’ll make in our
businesses, such as those highlighted in the articles that fol-
low this letter. It includes executing our U.S. Trust merger
transition flawlessly.

The second item on this list is the most important thing
we’ll do this year to drive growth: get customer satisfaction
scores moving north again. Regular readers of this letter will
recall that in the first three years after adopting Six Sigma
process improvement tools and methodologies across Bank of
America, the percentage of customers rating themselves highly
satisfied (9 or 10 on a 10-point scale) rose on average across the
company by 11 percentage points, from 41 to 52 percent.

Two years later, those scores have hit a plateau. In
response, associates throughout the company worked with
customers throughout 2006 to better understand key driv-
ers of satisfaction, and to reassess our efforts to drive satis-
faction up. This year, every business has a refreshed plan to
further improve customer satisfaction. The plans focus on

value perception, service quality, operational excellence and
problem resolution, and are tailored to the specific needs of
customers served by each business.

Each of our major lines of business has established a goal
of leading its industry in customer satisfaction within the next
two to three years.

Third, Bank of America has long been a leader in devel-
oping environmentally sustainable business practices, from
energy conservation and recycling programs to the financing
of green building initiatives to our hybrid vehicle purchase
assistance program for associates.

As one of the largest financial service providers in the
country, the opportunity we see in the future is to finance and
encourage the new products, services and technologies that
will help meet future global energy needs. Our goal is to help
our customers and clients take the lead in reducing green-
house gas emissions, and to protect the physical environment
on which economic activity depends. We will launch several
programs in 2007.

Finally, we are working harder than ever to help strength-
en the many communities across the country and around the
world in which we do business.

In the first two years of our 10-year, $750 billion commu-
nity development goal, we have loaned and invested more than
$160 billion in low- and moderate-income communities across
the nation. We are focusing loans and investments in key mar-
kets in need of revitalization, and targeting grant support to
strengthen local nonprofit organizations and to encourage
asset building and financial literacy for consumers living and
working in these markets.

The Bank of America Charitable Foundation, one of the
most generous corporate foundations in the world, donated
more than $200 million in our communities in 2006, and is
on track to exceed our 10-year, $1.5 billion goal for giving.

8 Bank of America 2006

Dividends
Paid Per
Share
’04 $1 . 70
$1 . 90
’05
$2 . 12

’06

incredible work ethic. I am confident he will serve the company
well in his new role.

We have one departure from our board of directors this
year: Paul Fulton, chairman of Bassett Furniture Industries in
Winston-Salem, North Carolina, who is retiring after 14 years
of dedicated service. Paul brought tremendous experience and
insight to the leadership of our company over the years, and
I appreciate all his counsel and guidance to me and to
former leaders of our company. We wish Paul all the best in his
future endeavors.

As we begin 2007 with a fresh commitment to creating
opportunity in all we do, I want to again thank our customers,
our shareholders and the communities for their partnership
and their trust. And I’d like to thank all our associates and
directors for the hard work and leadership that enables
us to achieve our goals. I look forward to all we’ll achieve
working together in 2007 and, as always, I welcome your
thoughts and suggestions.

KENNETH D. LEWIS

CHAIRMAN, CHIEF EXECUTIVE OFFICER

AND PRESIDENT

MARCH 17, 2007

Bank of America 2006 9

SUPPORTING
COMMUNITIES

Through the Foundation’s
flagship
program, the Neighborhood Excellence
InitiativeTM, we have donated nearly
$50 million over the past three years
and are pioneering a new approach
to corporate giving — marked by
a focus on local priorities, funding
flexibility and
leadership develop -
ment — through which we not only give
more, but we also give more effectively.
All these programs and resources are
managed in cooperation by leaders at the corporate and local
levels, to ensure we are maximizing the impact of our work in
all the neighborhoods we serve.

On track to
exceed 10-year
goal of $1.5 billion
in giving through
the Bank of
America Charitable
Foundation

For more information on all our programs supporting the
environment and our communities, I encourage you to visit our
Web site, www.bankofamerica.com.

Opportunity and leadership. All we do to create opportunity
for customers, shareholders and communities is made possible
through the hard work and leadership of our associates.

One of our longtime leaders is leaving our company early
this year — Al de Molina, who served as our chief financial
officer through the end of 2006. Al served our company well
for 17 years in a variety of leadership roles, and as CFO made
great strides in bringing more transparency to our earnings
and operations for investors.

Stepping into the CFO role is Joe Price, a 14-year asso-
ciate of the company. We are extremely fortunate to have
had someone like Joe in the wings to take on this new
challenge. Joe’s broad experience in the company includes
service as our general auditor, leadership of the Consumer
Finance business, key roles in Finance, and service as Risk
executive for GCIB. Joe is straightforward, smart and has an

Building Opportunities Through Knowledge

Bank of America serves more customers
than any other U.S. financial services
company. We are passionate about listening
to our customers. One way we do that
is by analyzing the massive volume of
transactions we execute every day. That
helps us understand and anticipate the
needs of our clients — from individuals to
global corporations. We use our knowledge
to create new products, improve service
and operate more effectively. The result?
Growing value for shareholders.

10 Bank of America 2006

— AMY WOODS BRINKLEY, CHIEF RISK

OFFICER, AND LIAM E. MCGEE,
PRESIDENT, GLOBAL CONSUMER &
SMALL BUSINESS BANKING

Bank of America 2006 11

Building Opportunities Through Integrated Delivery

— BRIAN T. MOYNIHAN, PRESIDENT, GLOBAL
WEALTH & INVESTMENT MANAGEMENT,
AND BARBARA J. DESOER, CHIEF
TECHNOLOGY & OPERATIONS OFFICER

12 Bank of America 2006

We have built an unmatched coast-to-coast
network of banking offices in the United
States, and we have made significant
strategic investments overseas. We are
working together to bring the entire scale,
scope and resources of Bank of America to
each client. Through integrated delivery of
new products and services, we can provide
better solutions at a lower cost than any other
competitor and say “yes” more often.

Bank of America 2006 13

Building Opportunities Through Execution

Our history, culture and passion are
rooted in successful execution. We have
the discipline to reduce errors continually,
improve our processes and focus on
what really matters to our customers.
We are unrivaled in our ability to integrate
acquisitions. That is why, with our diverse
mix of businesses, we are the most
efficient bank in the world and we are
growing shareholder value.

14 Bank of America 2006

— R. EUGENE TAYLOR, VICE CHAIRMAN

AND PRESIDENT, GLOBAL CORPORATE &
INVESTMENT BANKING, AND JOE L. PRICE,
CHIEF FINANCIAL OFFICER

Bank of America 2006 15

Building Opportunities for Shareholders

How We’re Growing

SENIOR EXECUTIVES DISCUSS HOW BANK OF AMERICA CAN GROW
THROUGH BRANDING, STRATEGIC INVESTMENTS AND PRODUCT INNOVATION.

FROM LEFT: BRUCE L. HAMMONDS,
PRESIDENT, BANK OF AMERICA CARD
SERVICES; GREGORY L. CURL, VICE
CHAIRMAN OF CORPORATE DEVELOPMENT;
AND J. STEELE ALPHIN, CHIEF
ADMINISTRATIVE OFFICER

16 Bank of America 2006

How will the bank’s new
brand positioning support
your growth strategies?

J. Steele Alphin: Any investment we make in brand market-
ing has one purpose — to drive the growth of our company.

The Bank of America brand is one of our most valued
resources, and a promise we must keep to those who do busi-
ness with us.

In 2003, we introduced Higher StandardsTM as a way of telling
people about how we operate. We made it clear that we hold our-
selves to higher standards of service, performance and integrity
in all we do every day. That commitment will never change.

It’s time, however, to move beyond the phrase Higher
Standards — which tells people how we do our work — to a
message of opportunity, which tells people what we can do for
them. Opportunity reflects the power that our knowledge, scale
and diversity of products and services allows us to bring to
each relationship, and it communicates the unique strengths
and capabilities of our businesses.

The new platform will be prominent in all we do: from mar-
keting products and services, to our voice in the community
and public policy, to our relationships with the investment com-
munity and our own associates. Strongly aligned with specific
business objectives, our new brand messaging clearly conveys
the opportunity Bank of America brings to each individual and
community we touch.

Are there opportunities for
the bank in afﬁ nity marketing
beyond credit cards?

Bruce L. Hammonds: Yes, we believe there are terrific
opportunities to grow by offering more products and services
to our credit card partners and customers.

Affinity marketing made Bank of America’s Card Services
division a worldwide leader in the credit card industry. Now
Bank of America has become the first financial services
company to apply the affinity concept to a broad range of
banking products.

In fact, we’ve already extended affinity marketing to
Bank of America deposit and home equity products. Members
of organizations who share a strong common interest or pas-
sion — such as the college or university they attended, their
favorite cause or professional affiliation — can further support
their groups through lines of credit and everyday checking and
debit card transactions.

We plan to offer affinity deposit and loan products through
our more than 5,700 banking centers and the Bank of America
Web site, as well as through direct marketing.

We expect the new offerings to strengthen the loyalty of our

customers while helping them achieve their dreams.

How is the strategic
partnership with China
Construction Bank progressing?

Gregory L. Curl: Bank of America and China Construction
Bank (CCB) have partnered on many projects since we jointly
announced in 2005 the definitive agreement to buy approxi-
mately 9 percent of CCB stock. We’re extremely pleased with
the progress of this long-term strategic alliance.

In 2006, we rolled out several products for the customers of
both companies, including free ATM use and free remittance,
which lets customers send money without charge to loved ones
overseas. We’re using our expertise to help CCB build its re-
tail business and an efficient operating model. We’re taking
the same approach to advise and assist CCB in information
technology, corporate governance, finance, risk management,
human resources, corporate business and treasury services.
Together with CCB, we’ve sponsored a number of community
programs, including Asia’s first Special Olympics Games.

China is one of the world’s fastest-growing economies. By
partnering with the best-positioned bank there, we’re investing
in strategies that will benefit both of our companies.

Bank of America 2006 17

Building Opportunities in the Mortgage Market

Helping More
People Own Homes

WITH GROWING PROSPECTS IN THE MORTGAGE FIELD,
BANK OF AMERICA IS EXPANDING ITS OFFERINGS.

18 Bank of America 2006

DIANA SOTO MAKES
CUPCAKES WITH HER
CHILDREN FOR THE FIRST
TIME IN THE KITCHEN OF HER
NEW HOME IN PHOENIX.

Our
Innovations

■ Mortgage Rewards™ saves a typical customer up to $2,000 in fees.
■ Community Commitment™ helps those with limited income or credit.
■ We guarantee the best value to our customers, or we pay them $250.

Opportunities in the
Mortgage Market

The mortgage business is one of Bank of

America’s clearest organic growth opportunities.

In 2006, only 9.7 percent of our deposit

customers who got a mortgage got it with us.

By expanding products and eligibility,

eliminating fees and simplifying the mortgage

process, we are building understanding among

For years, 25-year-old Diana Soto of Phoenix yearned to get off the rental
treadmill. And then she had a reason to do so quickly: She and her two
young children outgrew their one-bedroom apartment. But she
calculated that she would not be able to afford her own home for years.
“I had to stop renting,” Soto recalled. “I thought that maybe, just maybe,
I could qualify to buy my place, but all people would tell me is, ‘No, you
can’t do that.’ ”

our 53 million customers that there are clear

advantages to getting a mortgage with us.

In 2006, Bank of America expanded

Mortgage RewardsTM to save home buyers on

average $2,000 in closing costs. With

Community CommitmentTM, we help more

low- and moderate-income customers achieve

home ownership. Through the innovative Best

Value Guarantee, if we approve a customer for

Then Soto met Bank of America Mortgage Loan Officer Herlinda Lopez,

a mortgage and the customer chooses another

who moved Soto off the home-ownership sidelines and into the game.

“My first thought was, ‘I’ve got to help make her dream come true,’ ”

said Lopez.

Lopez knew that help — the Community CommitmentTM mortgage —
was available to Soto and thousands of others looking to buy their first
homes, even people with low or moderate incomes and limited credit his-
tory. Besides having a reduced application fee, a Community Commitment
mortgage requires no traditional credit history, and owners can put down
as little as 1 percent of the purchase price for a down payment.

These loans have leveled the playing field in the real estate market, help-

ing lower-income customers afford homes. And by removing the hurdles to
home ownership for first-time buyers, Community Commitment mortgages
have created greater stability for the community as a whole.

To Soto, what mattered most was not only finding a loan program that

suited her financial circumstances, but also meeting a mortgage loan
officer who could help her learn the ropes in the mortgage market. “All the
time that I’m with Herlinda, I’m relaxed,” said Soto. “She kept telling me,
‘We can get this done.’ ” And they did.

Soto remembers walking into her new home for the first time. “I’m
thinking, I can’t believe I’m in my new house and that it’s mine,” she said.
“I worked hard all my life, and now I have my house. It’s incredible.”

lender — for any reason — we pay the customer

$250. We are this confident in the quality of our

mortgage products and services.

“Home ownership is central to the Ameri-

can dream. Mortgage financing must be a key

strength for Bank of America to effectively serve

all the financial needs of our customers,” said

Floyd Robinson, president of Consumer Real

Estate. “We will take advantage of the strengths

we have across the bank to bring the best mort-

gage solutions to our customers.”

Over time, we will be able to distribute these

mortgages to the fixed-income market, too.

“It’s important for the balance sheet to have

self-originated assets,” said Chief Invest-

ment Officer Ian Banwell. “It takes maximum

advantage of our company’s significant ability

to gather deposits, and it facilitates greater

financial innovation for customers.”

The
Opportunity

■ $2.8 trillion in U.S. mortgages to be originated

in 2007 industrywide

■ 10,000 associates in our banking centers

coast-to-coast are enabled to originate mortgages

■ $1.2 trillion domestic market for structured

mortgage products

FLOYD S. ROBINSON,
LEFT, PRESIDENT,
CONSUMER REAL ESTATE;
IAN BANWELL, CHIEF
INVESTMENT OFFICER

Bank of America 2006 19

Building Opportunities for Entrepreneurs

Winning
Over Small
Businesses

BUSINESS 24/7™ OFFERS ENTREPRENEURS THE
TOOLS AND ATTENTION THEY NEED TO THRIVE.

Like most small business owners, Linda Dorn-Carter and LaToya Creighton
knew that every minute buried in paperwork was time lost with customers —
and that could kill a dream. So the Torrance, Calif., entrepreneurs were

quick to see the value when Bank of America introduced Business 24/7TM,
a suite of easy online tools.

“With free Online Banking service with BillPay TM, I don’t touch the same
piece of paper two, three or four times,” said Dorn-Carter. “You can’t believe
how much time that saves us.” Online Invoicing is a similar time-saver.

Dorn-Carter and Creighton own The Business Coach, a five-employee

firm that nurtures the growth of other fledgling companies.

Easy Online PayrollTM was another welcome solution for them. “Payroll
can be daunting,” said Creighton. “With Bank of America, we don’t have the
extra fees, and the bank makes it really easy to do.” There was an added
bonus: The Business Coach employees who chose direct deposit got free
MyAccess Checking® with Bank of America.

Business 24/7 also provided them with easy access to credit through

Business Credit ExpressTM, a new service that enabled Bank of America
to double the number of loans and lines of credit to small business
owners in 2006.

In addition, Dorn-Carter and Creighton benefited from a professional

relationship with Bank of America Small Business Specialist LaJonda
Harris, who is a regular visitor to their offices. Harris feels accountable for
being as knowledgeable about key facets of the business as the owners are.
“Smaller companies don’t have the infrastructure that large firms do,” she
said. “It’s my job to help them think about what it’s going to take to get where
they need to be in, say, five years.”

Dorn-Carter recalled a conversation with Harris about tactics The
Business Coach was considering. “It helped us in the long run by her being
blunt because we were spinning our wheels. If she hadn’t stepped in, we’d
still be headed down the same road,” said Dorn-Carter.

20 Bank of America 2006

Our
Innovations

■ Free online banking for small businesses with BillPay™
■ Integrated payroll, credit, payment and insurance
services with Business 24/7™
■ Fast access to credit with Business Credit Express™

CEO LINDA DORN-CARTER
AND TREASURER LATOYA S.
CREIGHTON OF THE BUSINESS
COACH VISIT ONE OF THEIR
CLIENTS, TRILLIONAIRE, A LOS
ANGELES SPECIALIST IN
HIP-HOP-STYLE SHOES
AND ACCESSORIES.

The
Opportunity

■ Small businesses are growing three times

faster than the U.S. population.

■ 58 million people work for small firms.
■ 22.4 percent of small businesses in our

footprint are our customers.

Serving Small Businesses
Brings Big Opportunities

Even as our economy becomes more global,

it is increasingly driven by neighborhood enter-

prises — shops, home-based businesses and

local wholesalers and manufacturers with

$2.5 million or less in annual revenue. These

“mass-market” small businesses are growing

three times faster than the number of U.S. house-

holds and generating three out of four new jobs.

With 75 percent of these enterprises in our

footprint — nearly 23 million in all — the bank

has brought the same integrated operating

model and focus on innovation to this market

that it has to its consumer business.

“We are No. 1 in deposit market share,”

said Small Business Banking President Mark

Hogan. “Our big growth opportunity lies in

providing business owners with easier access

to capital and credit and helping them simplify

management processes.”

In 2006, we introduced Business 24/7TM,

a suite of small business services, including

Business Credit ExpressTM, a card-based service

that helps qualified customers get credit easily,

as they need it. We also offer an online payroll

program, automated invoicing and bill payment,

and access to health-insurance providers

specializing in plans for small employers. And in

many markets, our small business specialists

bring the opportunities to the entrepreneurs.

MARK J. HOGAN,
PRESIDENT, SMALL
BUSINESS BANKING

Bank of America 2006 21

Building Opportunities in Treasury Services

Our
Innovations

■ Launched new capability to expedite billing and claims
processing for major health care providers
■ Introduced vendor financing solutions to expand global sourcing
opportunities for U.S. companies
■ Created the Emergency Relief™ card program for government emergency
responders and corporate business continuity teams

Managing Monster
Cash Flows

WITH EPAYABLES, COMPANIES SAVE MONEY BY
PAYING THEIR BILLS ELECTRONICALLY.

Monster Worldwide Inc., the leading global online careers and recruiting
company, wanted to eliminate its cumbersome paper-based accounts-payable
process and consolidate its many card programs.

Monster turned to ePayables, a Bank of America electronic payments service

that lets the company pay vendors through secure card payments, eliminating
the cost and administrative burden of cutting paper checks.

Joe Schmidt, director of Billing and Disbursement for Monster Worldwide,
said that the prospect of greater efficiency and lower costs is what attracted the
company to ePayables. “ePayables is a great system and the ideal solution to the
challenges we were facing,” he said. “We can pay vendors more quickly by
charging the ePayables card account, then select a settlement cycle that best
meets our needs, retaining the cash in the interim. We’ve eliminated traditional
payment transaction fees, and we benefit from cash payout incentives.”

Automating Monster’s accounts payable not only saved the company signifi-
cant costs associated with paper processing, but also increased annual cash flow
by more than $7 million. “ePayables is an innovative, cost-saving solution for our
clients,” said Rebecca Vogel, Bank of America client manager. “When we respond
to our clients’ needs with market-leading products like this one, we can grow in
importance to our customers while we build earnings for our shareholders, too.”
The bank’s vendor-enrollment system helps clients use the program easily
and efficiently. Clients simply provide account numbers and contact information
for their suppliers, and the bank takes care of the enrollment. When it set up the
service at Monster, Bank of America enrolled more than 300 of the company’s
vendors within the first three months.

ePayables is just one of the products that is making Bank of America’s
treasury services increasingly popular with companies of all sizes. “We know
what it’s like to reinvent an industry, and ePayables is doing just that in the
payments space,” said Schmidt. “The accounts-payable unit is now a profit
center at Monster Worldwide.”

The
Opportunity

■ Clients are consolidating payments

providers.

■ Growth in electronic transaction

volumes and international payment
flows is dramatic.

■ Investment in treasury capabilities will
protect existing dominant share and
produce long-term revenue growth.

Opportunities in Global
Treasury Services

Bank of America dominates the treasury

With a 19 percent share of U.S. revenue,

opportunities requires investment, and

position of strength, there remain excellent

services business in the United States and is

opportunities to grow revenue. Realizing these

the No. 1 global provider. Notwithstanding this

Bank of America intends to deploy capital

over a multiyear period to accomplish three

objectives: expand sales and distribution

capability, enhance technology and platforms

and expand internationally.

“The treasury management needs of our

clients are becoming more complex,” said

Cathy Bessant, president of Global Treasury

Services. “At the same time, clients desire to

simplify their treasury processes. Our strategic

investment will give us the technology and

capabilities we require to stay ahead of the

market and grow in importance to clients.”

Over time, we have demonstrated the

capability to grow market share across all of

our client segments. By leveraging our banking

center distribution and sales force capacity, we

will continue to deepen our share of wallet with

existing clients and expand our client base.

Across our industry, the shift to electronic

payment mechanisms is accelerating. Our

investment strategy is specifically designed to

drive our capabilities and market share in elec-

tronic channels consistent with our dominant

share in traditional cash management products.

With a non-U.S. market share that is

one-sixth that of U.S. share, we must invest

in enhancing our international treasury

capabilities. Fully 92 percent of our planned

investment has international relevance and

will enable rapid growth.

CATHERINE P. BESSANT,
PRESIDENT, GLOBAL
TREASURY SERVICES

Bank of America 2006 23

AT MONSTER HEADQUARTERS
IN MILWAUKEE, DAVE GRIEBL,
VICE PRESIDENT OF NORTH
AMERICA SHARED SERVICES,
LEFT, KIMBERLY HOLLIE,
ACCOUNTS PAYABLE
COORDINATOR, AND JOSEPH T.
SCHMIDT, DIRECTOR OF
BILLING AND DISBURSEMENT,
DISCUSS EPAYABLES.

Building Opportunities in Capital Markets

Our
Innovations

■ Established business to originate and securitize
middle-market leveraged loans
■ Designed industry-leading electronic trading algorithms
to optimize investment performance
■ Redesigned client coverage model to optimize opportunities
across the entire Bank of America franchise

Serving the Needs
of Big Investors

WITH AN ENHANCED CAPITAL MARKETS PLATFORM,
BANK OF AMERICA IS HELPING AIGGIG MEET ITS GOALS.

IMPROVING QUALITY,
BUILDING MARKET SHARE

Quality Index
Rank

2004

2005

2006

9th

5th

3rd

Market Share

11th

9th

6th

Source: Greenwich Associates; results for ﬁ xed income

The
Opportunity

■ Estimated industry revenue

from sales and trading has grown
15 percent a year since 2003.
■ Industry revenue is expected to
grow approximately 10 percent
a year through 2008.

■ Our goal is to become one of

the top three broker-dealers in
the United States.

AIG Global Investment Group (AIGGIG) is a worldwide leader in asset manage-
ment, with extensive capabilities across a wide range of asset classes. From its
44 offices around the world, AIGGIG manages more than $635 billion in assets
and, through its member companies, provides clients with investment advice and
asset management products and services. The member companies of AIGGIG
are subsidiaries of American International Group Inc.

Given its substantial portfolio size, AIGGIG has complex needs for both

investment strategy and execution. Until recently, AIGGIG executed only a modest
volume of business through Bank of America. Then the bank enhanced and ex-
panded its trading platform and initiated a disciplined sales approach to provide
clients like AIGGIG with the entire range of services the bank could offer.

“Our entire team worked together to develop solutions for AIGGIG,” said Ferdy

Masucci, client manager for Global Markets. “They now receive seamless access
to services across the entire bank, including sales and trading, issuance, leasing
opportunities and wealth management for key executives.”

Today, AIGGIG engages the bank for a broad range of investor services:

research intelligence, transaction execution for stocks and bonds, and structured
and liquid products. “In just a few short years, AIGGIG has greatly expanded its
business with us,” Masucci added, “and we’re pleased that they now regard us as
a key advisor and resource for all their needs.”

The bank has helped AIGGIG achieve its business development goals, too, such

as increasing assets under management. “Bank of America has a deep under-
standing of our business and anticipates our needs,” said Richard Scott, chief
investment officer for AIG Insurance Companies. “They consistently provide us
with great investment strategy ideas, superior execution, the liquidity we need to
manage our portfolios and easy access to all the resources of the company.”

The result has been growth for both the bank and AIGGIG. This momentum is

projected to increase as the bank invests in further upgrades of its trading and
sales platform. “Our relationship with the bank is much broader and deeper than
it used to be,” Scott concluded. “They are now a top-tier counterparty.”

Certain activities and services are provided by Banc of America Securities LLC and other affiliates of
Bank of America Corporation.

Institutional Investors

TOpportunities in Serving

one. Investors are diverse and include mutual

funds, hedge funds, asset managers, foreign

Since 2003, industrywide revenue from this

business has grown by about 15 percent per

The business of serving the sales and trading

reserve managers and cash-rich corporations.

needs of institutional investors is an enormous

year, and it’s projected to grow by 10 percent

per year through 2008, according to indepen-

dent research companies.

Bank of America has a competitive position

in investment banking. At the end of 2006, we

ranked third in investment grade debt under-

writing (Thomson Financial). We are building

greater trading capabilities focused on what

clients most value. Our goal is to increase our

market share and revenue growth until we rank

among the top three firms in the United States.

Since 2004, our market share ranking of fixed-

income products has risen from 11th to 6th,

according to Greenwich Associates.

We’re expanding the size of our sales and

trading teams in the United States and inter-

nationally. We’re also devoting more capital to

better act as a counterparty in support of our

clients’ trading. Along with efficient execution

and greater liquidity, we’re offering clients more

choices across the risk spectrum.

“We’re building stronger client relation-

ships,” said Mark Werner, head of Global

Markets. “Our success is reflected in the

improvement we’ve seen in the quality scores

our clients give us, as compiled by various

consultants, and by our growth over the past

18 months. This momentum will help us

become our clients’ most sought after provider

of financial solutions.”

MARK WERNER, HEAD
OF GLOBAL MARKETS

RICHARD SCOTT, RIGHT,
CHIEF INVESTMENT
OFFICER FOR AIG
INSURANCE COMPANIES,
IN HONG KONG WITH
JOHN CHU, CHAIRMAN OF
AIG GLOBAL INVESTMENT
GROUP-ASIA.

Bank of America 2006 25

Building Opportunities in Premier Banking & Investments

Banking and
Investing With a
Personal Touch

A TEAM APPROACH PROVIDES CLIENTS WITH A FULL RANGE OF
TAILORED SOLUTIONS FOR THEIR FINANCIAL NEEDS.

CLIENTS TED AND CAROLYN
TYLER RELAX AT THE BEACH.
THEY MANAGE INVESTMENTS
WITH THEIR FINANCIAL ADVISOR
AND PERSONAL BANKER FROM
PREMIER BANKING & INVESTMENTS.

26 Bank of America 2006

Our
Innovations

■ Tailored solutions and investment services
for affluent households
■ Trust services for families with assets of $1 million
■ Integrated online brokerage and banking capabilities

Affluent Customers

AOpportunities in Serving

investable U.S. assets. With 8 million of

households and own three-quarters of all

these affluent households as customers,

Americans who have between $100,000 and

$3 million make up about one-quarter of U.S.

Bank of America has the relationships to build

upon. In 2006, the number of Premier Banking

Like many affluent Americans, Ted Tyler, an architect and business owner in
California, needed more personalized financial services. “When I first started
my business 40 years ago, I was dealing with small banks, primarily because
I had the impression that only they could really give you personal service,”
said Tyler. “That was true in some cases, but not always.” Then Tyler tried
Bank of America’s Premier Banking & Investments™. “It’s personal service
backed by the resources of a very large bank,” explained Tyler.

A dedicated team of professionals serves Tyler’s financial needs in
one combined and convenient relationship. His financial advisor, Michael
Wedemeyer, handles his investment accounts. His personal banker, Bill
Kinsey, helps him structure real estate loans, including one that he needed
on a moment’s notice to purchase an investment property. Together, this
local team provides Tyler with the integrated service and financial guidance
that would be hard to get if he had to manage his banking and investments
at separate institutions.

For Tyler, having everything in one place makes complicated transac-
tions run smoothly and gives him peace of mind. “The ability to transfer
funds back and forth is a big plus,” he said. “I can phone up Michael and say,
‘Transfer this amount from that account to Bill for the loan,’ and so forth.”

clients who have investment accounts with us

grew by 10 percent.

Managing the wealth of these customers

is more complex than it is for the average

consumer, yet few providers serve them

effectively, said Pat Phillips, president of

Premier Banking & InvestmentsTM. To serve

them better, Bank of America created Premier

Banking & Investments as an alternative to

consumer banking and traditional private

financial services for the very wealthy.

Phillips explained that customers appreci-

ate having one team manage their complex

needs. “When affluent customers move from

consumer banking into Premier Banking

& Investments, our research shows that on

average their deposit balances improve by

8 percent, their loan balances improve by

60 percent and their investment balances

improve by 159 percent.”

Bank of America invested in the expansion

But the greatest advantage for Tyler is that he’s now free to focus on his

of Premier Banking & Investments by adding

profession. “My passion is my business, which is architecture,” Tyler said.
“I’m not one of those people who wants to be involved in every financial
issue. Michael and Bill handle things for me in a way that I trust, and it
just makes my life a lot easier.”

As a result of Tyler’s great experience at Bank of America, his daughter

is now a client of Premier Banking & Investments, too. The Tyler family
shows how Bank of America grows: When we earn the confidence of our
customers, they choose us for other products and services, and they pass
along the good word to the people they care about.

10 percent more client managers in 2006.

“That investment will allow us to provide an

even better client experience to more affluent

Americans,” Phillips said.

The
Opportunity

■ Affluent households are growing four times faster

than the U.S. population.

■ About three-quarters of U.S. personal investable

assets are owned by affluent households.
■ The affluent market segment is underserved

by traditional financial services models.

G. PATRICK PHILLIPS,
PRESIDENT,
PREMIER BANKING
& INVESTMENTS

Bank of America 2006 27

Building Opportunities in the Community

Revitalizing
Sweet Auburn

RENAISSANCE WALK IS THE LATEST STEP IN THE RENEWAL
OF A CULTURALLY IMPORTANT NEIGHBORHOOD.

SITE MANAGER BILLY K. GLAZE,
LEFT, AND DEVELOPER EGBERT
L.J. PERRY OF THE INTEGRAL
GROUP INSPECT PROGRESS
AT THE RENAISSANCE WALK
PROJECT IN ATLANTA’S HISTORIC
SWEET AUBURN DISTRICT.

28 Bank of America 2006

Our
Innovations

■ Operate the ﬁ rst, largest and most productive bank-owned
community-development corporation in the nation
■ Committed $400 million in Program Related Investments locally to
create affordable housing, small businesses and jobs
■ Invested $48 million in 44 markets through the Neighborhood
Excellence Initiative during the past three years

When it opens in the fall of 2007, Renaissance Walk will mark the latest
step in the rejuvenation of Atlanta’s Sweet Auburn historic district. Bank of
America has worked with this community since the early 1990s, initially
investing more than $20 million and using its direct development capabilities
to build 125 residential units — a catalyst for the rebirth of the neighborhood.

Designated a National Historic Landmark in 1976, Auburn Avenue
is home to the Martin Luther King Jr. historic site and birthplace. The
area was dubbed Sweet Auburn because it was one of the few places that
provided opportunities to blacks. African-Americans concentrated many
new businesses, social organizations and churches in Sweet Auburn, con-
tributing to Atlanta’s rise as a major metropolitan center of the New South.
Eventually, the area fell victim to urban sprawl and a cycle of aban-
donment. Yet Atlanta demanded urban living in a revitalized downtown.
Another recent effort was the 2004 Dynamic Metals Lofts project, created
with the Historic District Development Corporation. With $9.3 million in
investment and financing from Bank of America, and its direct development
services, the project built 48 residential units and retail condominiums in
the district. The award-winning project was also the first environmental
cleanup done under Georgia’s new Brownfields law.

The $48 million Renaissance Walk development will create 159 resi-
dential and retail units, secure parking and an Interpretive Center for the
history of Sweet Auburn and Atlanta’s African-American community. Bank
of America provided $34 million in financing through its client The Integral
Group, which leads a financial syndicate and public-private partnership.
The bank’s Neighborhood Excellence Initiative also gave a $200,000

grant to Samaritan House of Atlanta Inc., which helps the district’s
homeless. Philanthropy, sponsorships and Team Bank of America volunteer
programs round out the bank’s commitment to Sweet Auburn and the
communities the bank serves around the country.

Our
Commitment

■ Lend and invest $750 billion in community development over 10 years
■ Devote $1.5 billion to philanthropy over 10 years
■ Provide $200 million in grants during 2007 to build healthy neighborhoods

Opportunities in
Community Development

BBank of America is dedicated to nurturing

developers and nonprofit community groups —

to create economic growth. Renaissance Walk

ones. We work with our partners — both private

in Atlanta’s Sweet Auburn district is the latest of

endangered communities and sustaining vibrant

the bank’s many projects that bring together

business and community interests.

“Our focus is on neighborhoods and work-

ing with other members of our communities to

identify needs, establish priorities and create

opportunities for growth,” said Chief Marketing

Officer Anne Finucane. “This is the formula that

is successful time and again, neighborhood

by neighborhood.”

As the Renaissance Walk project vividly

illustrates, a bank can support its community

as a part of its everyday affairs. “The bank’s

remarkable results in the Auburn Avenue

district show how our business objectives can

meld with our goals for philanthropy, sponsor-

ships and volunteerism,” Finucane said. “These

are the drivers of our 10-year goal to lend and

invest $750 billion in community development,

and our national goal of $1.5 billion over 10

years in philanthropic giving. Indeed, the bank’s

$200 million corporate philanthropy goal for

2007 is one of the largest in the world.”

Bank of America touches communities like

Sweet Auburn in many ways. We bring together

innovative products, the financial resources

of one of the world’s largest banks and the

talents and enthusiasm of our associates. We

work with communities to achieve clean and

safe neighborhoods to live and work in. And

we create opportunities that help communities

achieve sustainable growth and prosperity.

ANNE M. FINUCANE,
CHIEF MARKETING
OFFICER

Bank of America 2006 29

Building Opportunities for Growth

Helping Our
Customers in
Many Ways

OUR DIVERSE MIX OF BUSINESSES LETS US GROW SHAREHOLDER
VALUE IN A CHANGING ECONOMIC ENVIRONMENT.

GLOBAL CONSUMER & SMALL BUSINESS BANKING
Global Consumer & Small Business Banking (GCSBB) serves approximately
53 million consumer households in addition to mass-market small businesses
in cities and towns across America. Seventy-six percent of U.S. residents live in
Bank of America’s retail franchise, which covers 30 states and the District of
Columbia. In addition, three-quarters of the nation’s mass-market small bus-
inesses — home-based enterprises, sole proprietorships and smaller manufacturing
and distribution firms — operate in the communities served by Bank of America.
These consumers, entrepreneurs and businesses can easily access all of our ser-
vices through more than 5,700 banking centers, 17,000-plus ATMs and the nation’s
leading online banking and bill-pay service, supported by a world-class telephone
banking team.

Bank of America is the leading provider of checking, savings, credit and debit cards
and home equity lending, with a leading Merchant Services business and a mortgage
business with growing market share. Since our businesses are tightly integrated, we
can adapt all of our services to meet the needs of consumers and businesses of any size
and complexity. The Small Business Banking organization, for example, is responsible
for all products, distribution and marketing related to our innovative capital, credit,
deposit and payment services. A leading credit card operation allows ready access to
capital and credit; Online Banking is responsible for Easy Online Payroll, as well as
our payment and invoicing services; banking centers provide cash, night drops,
merchant tellers and, in many locations, small business specialists.

Revenue

(in billions, fully taxable-
equivalent basis)

’04

’05

’06

$24 . 7
$28 . 3
$41 . 7

Net
Income

(in billions)

’04

’05

’06

$ 5 . 8
$ 6 . 9
$11 . 2

30 Bank of America 2006

GLOBAL CORPORATE & INVESTMENT BANKING
Global Corporate & Investment Banking (GCIB) provides comprehensive finan-
cial solutions to clients ranging from companies with $2.5 million in revenues to
large multinational corporations, governments, insti tutional investors and hedge
funds. Services include bank deposit and credit products; risk management, cash
management and payment services; equity and debt capital raising; and advisory
services based on industry expertise and deep knowledge of client strategies and
needs. Investors benefit from highly rated debt and equity research, leading-edge
sales and trading platforms, and risk management expertise across asset classes.

GCIB serves clients around the world, providing integrated delivery of our full
range of financial products and services through client managers and product
partners who understand each client’s unique needs.

Clients include 98 percent of the U.S. Fortune 500, 80 percent of the Fortune
Global 500 and one in three midsize companies in the United States. In 2006,
Bank of America was the fifth-largest underwriter of U.S. debt, equity and
equity-related securities. It ranks No. 1 in share of both U.S. and global treasury
revenues. GCIB businesses also include the leading bank-owned asset-based lender
and the No. 1 provider of financial services to commercial real estate businesses.

GLOBAL WEALTH & INVESTMENT MANAGEMENT
Global Wealth & Investment Management (GWIM) provides comprehensive banking
and investment services tailored to meet the changing wealth-management goals of
more than 3 million individual and institutional customers. Clients have access to ser-

vices offered through three primary businesses: Premier Banking & InvestmentsTM,
The Private Bank of Bank of America and Columbia Management.

Premier Banking & Investments delivers integrated banking and investment
solutions through a network of approximately 4,400 client advisors serving affluent
clients with $100,000 in investable assets or $500,000 in investable assets includ-
ing a first mortgage. These clients can receive tailored services including financial
planning, customized products and relationship pricing through two key areas,
Premier Banking and Banc of America Investment Services, Inc.® (BAI), a full-service
and online brokerage.

The Private Bank provides integrated wealth-management solutions to high-
net-worth individuals, middle-market institutions and charitable organizations
with investable assets of greater than $3 million. The Family Wealth Advisors divi-
sion of The Private Bank serves ultra-high-net-worth individuals and families with
$50 million or more in investable assets. Clients of The Private Bank access wealth
strategy, credit, deposit, investment, trust and specialty asset management services
through relationship teams based in 32 states. More wealthy individuals and families
choose The Private Bank to provide personal trust and wealth-management solutions
than any other institution (VIP Forum, 2006).

Columbia Management, Bank of America’s asset management organization, pro-
vides investment management solutions to institutional clients and individual inves-
tors. These include separately managed accounts, liquidity strategies, and mutual
funds across a variety of investment disciplines within equities, fixed income and
cash. As of December 31, 2006, Columbia Management and its affiliates managed
assets of $542.9 billion.

Revenue

(in billions, fully taxable-
equivalent basis)

’04

’05

’06

$18 . 7
$20 . 6
$22 . 7

Net
Income

(in billions)

’04

’05

’06

$5 . 9
$6 . 4
$6 . 8

Revenue

(in billions, fully taxable-
equivalent basis)

’04

’05

’06

$6 . 0
$7 . 3
$7 . 8

Net
Income

(in billions)

’04

’05

’06

$1 . 6
$2 . 3
$2 . 4

Bank of America 2006 31

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32 Bank of America 2006

Bank of America
2006 Financial Review

Bank of America 2006 33

Financial Review Contents

Recent Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

MBNA Merger Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Economic Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Performance Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance Sheet Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Supplemental Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Business Segment Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Global Consumer and Small Business Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Global Corporate and Investment Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Global Wealth and Investment Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

All Other

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Off- and On-Balance Sheet Financing Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Obligations and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Managing Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Strategic Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Liquidity Risk and Capital Management

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Credit Risk Management

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consumer Portfolio Credit Risk Management

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial Portfolio Credit Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Foreign Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Provision for Credit Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Allowance for Credit Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Market Risk Management

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Trading Risk Management

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interest Rate Risk Management for Nontrading Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Mortgage Banking Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operational Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recent Accounting and Reporting Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Complex Accounting Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2005 Compared to 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Business Segment Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statistical Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Report of Management on Internal Control Over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

Consolidated Statement of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

Consolidated Balance Sheet

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

Consolidated Statement of Changes in Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

34 Bank of America 2006

Management’s Discussion and Analysis of Financial
Condition and Results of Operations
Bank of America Corporation and Subsidiaries

This report contains certain statements that are forward-looking within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements are not guarantees of future performance and involve certain
risks, uncertainties and assumptions that are difficult to predict. Actual
outcomes and results may differ materially from those expressed in, or
implied by, our forward-looking statements. Words such as “expects,”
“anticipates,” “believes,” “estimates” and other similar expressions or
future or conditional verbs such as “will,” “should,” “would” and “could”
are intended to identify such forward-looking statements. Readers of the
Annual Report of Bank of America Corporation and its subsidiaries (the
Corporation) should not rely solely on the forward-looking statements and
should consider all uncertainties and risks throughout this report as well
as those discussed under Item 1A. “Risk Factors” of this Annual Report
on Form 10-K. The statements are representative only as of the date they
are made, and the Corporation undertakes no obligation to update any
forward-looking statement.

Possible events or factors that could cause results or performance to
differ materially from those expressed in our forward-looking statements
include the following: changes in general economic conditions and
economic conditions in the geographic regions and industries in which the
Corporation operates which may affect, among other things, the level of
nonperforming assets, charge-offs and provision expense; changes in the
interest rate environment which may reduce interest margins and impact
funding sources; changes in foreign exchange rates; adverse movements
and volatility in debt and equity capital markets; changes in market rates
and prices which may adversely impact the value of financial products
including securities, loans, deposits, debt and derivative financial instru-
instruments; political conditions and
ments, and other similar financial
related actions by the United States abroad which may adversely affect the
Corporation’s businesses and economic conditions as a whole; liabilities
resulting from litigation and regulatory investigations,
including costs,
expenses, settlements and judgments; changes in domestic or foreign tax
laws, rules and regulations as well as court, Internal Revenue Service or
other governmental agencies’
interpretations thereof; various monetary
and fiscal policies and regulations, including those determined by the
Board of Governors of the Federal Reserve System (FRB), the Office of the
Comptroller of the Currency (OCC), the Federal Deposit Insurance Corpo-
ration (FDIC), state regulators and the Financial Services Authority (FSA);
changes in accounting standards, rules and interpretations; competition
with other local, regional and international banks, thrifts, credit unions and
other nonbank financial institutions; ability to grow core businesses; ability
to develop and introduce new banking-related products, services and
enhancements, and gain market acceptance of such products; mergers
and acquisitions and their integration into the Corporation; decisions to
downsize, sell or close units or otherwise change the business mix of the
Corporation; and management’s ability to manage these and other risks.

The Corporation, headquartered in Charlotte, North Carolina, oper-
ates in 30 states, the District of Columbia and 44 foreign countries. The
Corporation provides a diversified range of banking and nonbanking finan-
cial services and products domestically and internationally through three

business segments: Global Consumer and Small Business Banking,
Global Corporate and Investment Banking, and Global Wealth and Invest-
ment Management.

At December 31, 2006, the Corporation had $1.5 trillion in assets
and approximately 203,000 full-time equivalent employees. Notes to
Consolidated Financial Statements referred to in Management’s Dis-
cussion and Analysis of Financial Condition and Results of Operations are
incorporated by reference into Management’s Discussion and Analysis of
Financial Condition and Results of Operations. Certain prior period
amounts have been reclassified to conform to current period presentation.

Recent Events
In January 2007, the Board of Directors (the Board) authorized a stock
repurchase program of up to 200 million shares of the Corporation’s
common stock at an aggregate cost not to exceed $14.0 billion to be
completed within a period of 12 to 18 months. In April 2006, the Board
authorized a stock repurchase program of up to 200 million shares of the
Corporation’s common stock at an aggregate cost not to exceed $12.0
billion to be completed within a period of 12 to 18 months, of which the
lesser of approximately $4.9 billion, or 63.1 million shares, remains avail-
able for repurchase under the program at December 31, 2006.

In January 2007, the Board declared a regular quarterly cash divi-
dend on common stock of $0.56 per share, payable on March 23, 2007
to common shareholders of record on March 2, 2007. In October 2006,
the Board declared a regular quarterly cash dividend on common stock of
$0.56 per share which was paid on December 22, 2006 to common
shareholders of record on December 1, 2006. In July 2006, the Board
increased the quarterly cash dividend on common stock 12 percent from
$0.50 to $0.56 per share.

In December 2006, the Corporation completed the sale of its retail
and commercial business in Hong Kong and Macau (Asia Commercial
Banking business) to China Construction Bank (CCB) for $1.25 billion. The
sale resulted in a $165 million gain (pre-tax) that was recorded in Other
Income.

In November 2006, the Corporation announced a definitive agree-
ment to acquire U.S. Trust Corporation (U.S. Trust) for $3.3 billion in cash.
U.S. Trust is one of the largest and most respected U.S. firms which
focuses exclusively on managing wealth for high net-worth and ultra high
net-worth individuals and families. The acquisition will significantly
increase the size and capabilities of the Corporation’s wealth business
and position it as one of the largest financial services companies manag-
ing private wealth in the U.S. The transaction is expected to close in the
third quarter of 2007.

In November 2006, the Corporation issued 81,000 shares of Bank of
America Corporation Floating Rate Non-Cumulative Preferred Stock, Series
E with a par value of $0.01 per share for $2.0 billion. In September 2006,
the Corporation issued 33,000 shares of Bank of America Corporation
6.204% Non-Cumulative Preferred Stock, Series D with a par value of
$0.01 per share for $825 million. In July 2006, the Corporation redeemed
its 700,000 shares, or $175 million, of Fixed/Adjustable Rate Cumulative

Bank of America 2006

Preferred Stock and redeemed its 382,450 shares, or $96 million, of
6.75% Perpetual Preferred Stock. Both classes were redeemed at their
stated value of $250 per share, plus accrued and unpaid dividends.

In September 2006, the Corporation completed the sale of its Brazil-
ian operations in exchange for approximately $1.9 billion in equity of
Banco Itaú Holding Financeira S.A. (Banco Itaú), Brazil’s second largest
nongovernment-owned banking company. The sale resulted in a $720 mil-
lion gain (pre-tax) that was recorded in Other Income. In August 2006, we
announced a definitive agreement to sell our operations in Chile and
Uruguay
for stock in Banco Itaú and other consideration totaling
approximately $615 million. These transactions, as well as the previously
announced sale of our operations in Argentina, are expected to close in
early 2007.

MBNA Merger Overview
The Corporation acquired 100 percent of the outstanding stock of MBNA
Corporation (MBNA) on January 1, 2006, for $34.6 billion. In connection
therewith 1,260 million shares of MBNA common stock were exchanged
for 631 million shares of the Corporation’s common stock. Prior to the
MBNA merger, this represented approximately 16 percent of the Corpo-
ration’s outstanding common stock. MBNA shareholders also received
cash of $5.2 billion. The MBNA merger was a tax-free merger for the
Corporation. The acquisition expands the Corporation’s customer base
relationships across the full
and its opportunity to deepen customer
breadth of the Corporation by delivering innovative deposit, lending and
investment products and services to MBNA’s customer base. Additionally,
the acquisition allows the Corporation to significantly increase its affinity
relationships through MBNA’s credit card operations and sell these credit
cards through our delivery channels (including the retail branch network).
MBNA’s results of operations were included in the Corporation’s results
beginning January 1, 2006. The purchase price has been allocated to the
assets acquired and the liabilities assumed based on their fair values at
the MBNA merger date. For more information related to the MBNA merger,
the Corporation’s Consolidated Financial Statements.
see Note 2 of

Economic Overview
In 2006,
the U.S. economic performance was healthy as real Gross
Domestic Product grew an estimated annualized 3.4 percent. Consumer
spending remained resilient despite significant declines in housing and
mortgage refinancing activities. Global economies recorded another solid
year of growth, led by robust expansion in Asia. Importantly, Germany and
Japan maintained their economic momentum as the U.S. weathered a soft
patch in growth. The FRB concluded two consecutive years of rate hikes in
June, raising its rate to 5.25 percent, as increases remained on hold in
the second half of the year. The yield curve remained inverted for much of
the second half of the year, reflecting the FRB’s rate increases,
its
inflation-fighting credibility, and rising foreign capital inflows. In response
to the rate hikes and removal of monetary accommodation, housing sales
and construction fell sharply, median house prices flattened after surging
for a half decade, and mortgage refinancing activity fell sharply. However,
remained strong, and solid increases in non-
business investment
residential construction partially offset the declines in housing. Consumer
spending, buoyed by rising personal incomes, relative low interest rates
and record-breaking wealth, continued to grow, ending the year on a strong
note. Dramatic declines in oil and energy prices in August through October
sharply reduced inflation, while core measures of inflation, excluding the
volatile energy and food components,
rose through September. Core
inflation drifted modestly lower through year end, but remained above the
two percent upper bound of the FRB’s comfort range. With the exception of
housing, automobiles and related industries sustained healthy product
demand and modest pricing power provided businesses record profits. In
this environment, businesses continued to hire, and the unemployment
rate receded to 4.5 percent, well below its historic average.

Performance Overview
Net Income reached $21.1 billion, or $4.59 per diluted common share in 2006, increases of 28 percent and 14 percent from $16.5 billion, or $4.04 per
diluted common share in 2005.

Table 1 Business Segment Total Revenue and Net Income

(Dollars in millions)

Global Consumer and Small Business Banking
Global Corporate and Investment Banking
Global Wealth and Investment Management
All Other

Total FTE basis (1)

FTE adjustment (1)

Total Consolidated

Total Revenue

Net Income

2006

$41,691
22,691
7,779
2,086

74,247
(1,224)

2005

$28,323
20,600
7,316
684

56,923
(832)

$73,023

$56,091

2006

$11,171
6,792
2,403
767

21,133
–

$21,133

2005

$ 7,021
6,384
2,316
744

16,465
–

$16,465

(1) Total revenue for the business segments and All Other is on a fully taxable-equivalent (FTE) basis. For more information on a FTE basis, see Supplemental Financial Data beginning on page 41.

Global Consumer and Small Business Banking
Net Income increased $4.2 billion, or 59 percent, to $11.2 billion and
Total Revenue increased $13.4 billion, or 47 percent, to $41.7 billion in
2006 compared to 2005. These increases were driven by higher Net Inter-
est Income and Noninterest Income. Net Interest Income increased primar-
ily due to the MBNA merger and organic growth which increased Average
Loans and Leases. Noninterest Income increased primarily due to the

MBNA merger which resulted in an increase in Card Income driven by
increases in excess servicing income, cash advance fees, interchange
income and late fees. These increases were partially offset by higher
Noninterest Expense and Provision for Credit Losses, primarily driven by
the addition of MBNA. For more information on Global Consumer and
Small Business Banking, see page 45.

36 Bank of America 2006

Global Corporate and Investment Banking
Net Income increased $408 million, or six percent, to $6.8 billion in 2006
compared to 2005. Total Revenue increased $2.1 billion, or 10 percent,
to $22.7 billion in 2006 compared to 2005, driven primarily by higher
Trading Account Profits and Investment Banking Income, and gains on the
sales of our Brazilian operations and Asia Commercial Banking business.
Offsetting these increases was spread compression in the loan portfolios
which adversely impacted Net Interest Income. In addition, Net Income in
2006 was impacted by increases in Noninterest Expense and Provision for
Credit Losses, and a decrease in Gains on Sales of Debt Securities. For
more information on Global Corporate and Investment Banking, see
page 50.

Global Wealth and Investment Management
Net Income increased $87 million, or four percent, to $2.4 billion in 2006
compared to 2005. The increase was due to higher Total Revenue of
$463 million, or six percent, primarily as a result of an increase in Invest-
ment and Brokerage Services partially offset by an increase in Noninterest
Expense of $295 million, or eight percent, driven by higher personnel-
related costs.

Total assets under management increased $60.6 billion to $542.9
billion at December 31, 2006 compared to December 31, 2005. For more
information on Global Wealth and Investment Management, see page 53.

All Other
Net Income increased $23 million to $767 million in 2006 compared to
2005. This increase was primarily a result of higher Equity Investment
Gains of $902 million and Net Interest Income of $446 million offset by
lower Gains (Losses) on Sales of Debt Securities of $(495) million in
2006 compared to $823 million in 2005. For more information on All
Other, see page 55.

Financial Highlights

Net Interest Income
Net Interest Income on a FTE basis increased $4.2 billion to $35.8 billion
in 2006 compared to 2005. The primary drivers of the increase were the
impact of the MBNA merger (volumes and spreads), consumer and com-
mercial loan growth, and increases in the benefits from asset and liability
management (ALM) activities including higher portfolio balances (primarily
residential mortgages) and the impact of changes in spreads across all
product categories. These increases were partially offset by a lower con-
tribution from market-based earning assets and the higher costs asso-
ciated with higher levels of wholesale funding. The net interest yield on a
FTE basis decreased two basis points (bps) to 2.82 percent in 2006 due
primarily to an increase in lower yielding market-based earning assets and
loan spreads that continued to tighten due to the flat to inverted yield
curve. These decreases were partially offset by widening of spreads on
core deposits. For more information on Net Interest Income on a FTE
basis, see Tables I and II beginning on page 86.

Noninterest Income

Table 2 Noninterest Income

(Dollars in millions)

Card income
Service charges
Investment and brokerage services
Investment banking income
Equity investment gains
Trading account profits
Mortgage banking income
Other income

Total noninterest income

2006

$14,293
8,224
4,456
2,317
3,189
3,166
541
2,246

$38,432

2005

$ 5,753
7,704
4,184
1,856
2,212
1,763
805
1,077

$25,354

Income increased $13.1 billion to $38.4 billion in 2006

Noninterest
compared to 2005, due primarily to the following:
Š Card Income increased $8.5 billion primarily due to the addition of
MBNA resulting in higher excess servicing income, cash advance fees,
interchange income and late fees.

Š Service Charges grew $520 million due to increased non-sufficient
funds fees and overdraft charges, account service charges, and ATM
fees resulting from new account growth and increased account usage.
Š Investment and Brokerage Services increased $272 million primarily

reflecting higher levels of assets under management.

Š Investment Banking Income increased $461 million due to higher mar-

ket activity and continued strength in debt underwriting.

Š Equity Investment Gains increased $977 million primarily due to favor-
able market conditions driven by liquidity in the capital markets as well
as a $341 million gain recorded on the liquidation of a strategic Euro-
pean investment.

Š Trading Account Profits increased $1.4 billion due to a favorable market
environment, and benefits from previous investments in personnel and
trading infrastructure.

Š Mortgage Banking Income decreased $264 million primarily due to
weaker production income driven by margin compression, which neg-
atively impacted the pricing of loans, and a decision to retain a larger
portion of mortgage production.

Š Other Income increased $1.2 billion primarily related to the $720 mil-
lion (pre-tax) gain on the sale of our Brazilian operations and the $165
million (pre-tax) gain on the sale of our Asia Commercial Banking busi-
ness.

Provision for Credit Losses
The Provision for Credit Losses increased $996 million to $5.0 billion in
2006 compared to 2005. Provision expense rose due to increases from
the addition of MBNA, reduced benefits from releases of commercial
reserves and lower commercial recoveries. These increases were partially
offset by lower bankruptcy-related credit costs on the domestic consumer
credit card portfolio.

For more information on credit quality, see Credit Risk Management

beginning on page 62.

Gains (Losses) on Sales of Debt Securities
Gains (Losses) on Sales of Debt Securities were $(443) million in 2006
compared to $1.1 billion in 2005. The decrease was primarily due to a
loss on the sale of mortgage-backed securities in 2006 compared to gains
recorded in 2005. For more information on Gains (Losses) on Sales of
Debt Securities, see “Interest Rate Risk Management – Securities” begin-
ning on page 78.

Bank of America 2006

Noninterest Expense

Table 3 Noninterest Expense

(Dollars in millions)

Personnel
Occupancy
Equipment
Marketing
Professional fees
Amortization of intangibles
Data processing
Telecommunications
Other general operating
Merger and restructuring charges

Total noninterest expense

2006

$18,211
2,826
1,329
2,336
1,078
1,755
1,732
945
4,580
805

$35,597

2005

$15,054
2,588
1,199
1,255
930
809
1,487
827
4,120
412

$28,681

Noninterest Expense increased $6.9 billion to $35.6 billion in 2006
compared to 2005, primarily due to the MBNA merger, increased Person-
nel expense related to higher performance-based compensation and higher
Marketing expense related to consumer banking initiatives. Amortization of
Intangibles expense was higher due to increases in purchased credit card
relationships, affinity relationships, core deposit intangibles and other
intangibles, including trademarks.

Balance Sheet Analysis

Table 4 Selected Balance Sheet Data

(Dollars in millions)

Assets
Federal funds sold and securities purchased under agreements to resell
Trading account assets
Debt securities
Loans and leases, net of allowance for loan and lease losses
All other assets

Total assets

Liabilities
Deposits
Federal funds purchased and securities sold under agreements to repurchase
Trading account liabilities
Commercial paper and other short-term borrowings
Long-term debt
All other liabilities

Total liabilities
Shareholders’ equity

Income Tax Expense
Income Tax Expense was $10.8 billion in 2006 compared to $8.0 billion
in 2005, resulting in an effective tax rate of 33.9 percent in 2006 and
32.7 percent in 2005. The increase in the effective tax rate was primarily
due to the charge to Income Tax Expense arising from the change in tax
legislation discussed below, the one-time benefit recorded during 2005
related to the repatriation of certain foreign earnings and the January 1,
2006 addition of MBNA. For more information on Income Tax Expense,
see Note 18 of the Consolidated Financial Statements.

During the second quarter of 2006, the President signed into law the
Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA). Among
other things, TIPRA repealed certain provisions of prior law relating to
transactions entered into under the extraterritorial
income and foreign
sales corporation regimes. The TIPRA repeal results in an increase in the
U.S. taxes expected to be paid on certain portions of the income earned
from such transactions after December 31, 2006. Accounting for the
change in law resulted in the recognition of a $175 million charge to
Income Tax Expense in 2006.

December 31

Average Balance

2006

2005

2006

2005

$ 135,478
153,052
192,846
697,474
280,887

$1,459,737

$ 693,497
217,527
67,670
141,300
146,000
58,471

1,324,465
135,272

$ 149,785
131,707
221,603
565,746
222,962

$1,291,803

$ 634,670
240,655
50,890
116,269
100,848
46,938

1,190,270
101,533

$ 175,334
145,321
225,219
643,259
277,548

$1,466,681

$ 672,995
286,903
64,689
124,229
130,124
57,278

1,336,218
130,463

$ 169,132
133,502
219,843
528,793
218,622

$1,269,892

$ 632,432
230,751
57,689
95,657
97,709
55,793

1,170,031
99,861

Total liabilities and shareholders’ equity

$1,459,737

$1,291,803

$1,466,681

$1,269,892

At December 31, 2006, Total Assets were $1.5 trillion, an increase of
$167.9 billion, or 13 percent, from December 31, 2005. Average Total
Assets in 2006 increased $196.8 billion, or 15 percent, from 2005.
Growth in period end and average Total Assets was primarily attributable
to the MBNA merger, which had $83.3 billion of Total Assets on January 1,
2006. The increase in Loans and Leases was also attributable to organic
growth. In addition, market-based earning assets increased $42.2 billion
and $46.9 billion on a period end and average basis due to continued
growth and build out in the Capital Markets and Advisory Services busi-
ness within Global Corporate and Investment Banking.

At December 31, 2006, Total Liabilities were $1.3 trillion, an
increase of $134.2 billion, or 11 percent, from December 31, 2005. Aver-
age Total Liabilities in 2006 increased $166.2 billion, or 14 percent, from
2005. Growth in period end and average Total Liabilities was primarily
attributable to increases in Deposits and Long-term Debt, due to the
assumption of liabilities in connection with the MBNA merger and the net
issuances of Long-term Debt. Funding requirements related to the support
of growth in assets, including the financing needs of our trading business,
resulted in increases in certain other funding categories.

Period end and average Shareholders’ Equity increased primarily from

the issuance of stock related to the MBNA merger.

38 Bank of America 2006

Federal Funds Sold and Securities Purchased under
Agreements to Resell
The Federal Funds Sold and Securities Purchased under Agreements to
Resell average balance increased $6.2 billion, or four percent, in 2006
compared to the prior year. The increase was from activities in the trading
businesses, primarily in interest rate and equity products, as a result of
expanded activities related to a variety of client needs.

Trading Account Assets
Trading Account Assets consist primarily of
fixed income securities
(including government and corporate debt), equity and convertible instru-
ments. The average balance increased $11.8 billion to $145.3 billion in
2006, which was due to growth in client-driven market-making activities in
interest rate, credit and equity products. For additional information, see
Market Risk Management beginning on page 75.

Debt Securities
Available-for-sale (AFS) Debt Securities include fixed income securities
such as mortgage-backed securities,
foreign debt, asset-backed secu-
rities, municipal debt, U.S. Government agencies and corporate debt. We
use the AFS portfolio primarily to manage interest rate risk and liquidity
risk and to take advantage of market conditions that create more econom-
ically attractive returns on these investments. The average balance in the
securities portfolio increased $5.4 billion from 2005 primarily due to the
increase in the AFS portfolio in the first half of the year partially offset by
the sale of mortgage-backed securities of $43.7 billion in the third quarter
of 2006. For additional information, see Market Risk Management begin-
ning on page 75.

Loans and Leases, Net of Allowance for Loan and
Lease Losses
Average Loans and Leases, net of Allowance for Loan and Lease Losses,
was $643.3 billion in 2006, an increase of 22 percent from 2005. The
consumer loan and lease portfolio increased $83.9 billion primarily due to
higher retained mortgage production and the MBNA merger. The commer-
cial loan and lease portfolio increased $31.3 billion due to organic growth
and the MBNA merger, including the business card portfolio. For a more
detailed discussion of the loan portfolio and the allowance for credit loss-
es, see Credit Risk Management beginning on page 62, and Notes 6 and
7 of the Consolidated Financial Statements.

Deposits
Average Deposits increased $40.6 billion to $673.0 billion in 2006 com-
pared to 2005 due to a $24.2 billion increase in average foreign interest-
bearing deposits and a $14.0 billion increase in average domestic
interest-bearing deposits primarily due to the assumption of liabilities in
connection with the MBNA merger. We categorize our deposits as core or
market-based deposits. Core deposits are generally customer-based and
represent a stable, low-cost funding source that usually react more slowly
rate changes than market-based deposits. Core deposits
to interest
include savings, NOW and money market accounts, consumer CDs and

IRAs, and noninterest-bearing deposits. Core deposits exclude negotiable
CDs, public funds, other domestic time deposits and foreign interest-
bearing deposits. Average core deposits increased $11.0 billion to $574.6
billion in 2006, a two percent increase from the prior year. The increase
was distributed between consumer CDs and noninterest-bearing deposits
partially offset by decreases in NOW and money market deposits, and
savings. The increase in consumer CDs was impacted by the shift of
deposit balances from NOW and money market deposits and savings to
consumer CDs as a result of the favorable rates offered on consumer
CDs. Average market-based deposit funding increased $29.6 billion to
$98.4 billion in 2006 compared to 2005 due to increases of $24.2 billion
in foreign interest-bearing deposits and $5.3 billion in negotiable CDs,
public funds and other time deposits related to funding of growth in core
and market-based assets.

Federal Funds Purchased and Securities Sold under
Agreements to Repurchase
The Federal Funds Purchased and Securities Sold under Agreements to
Repurchase average balance increased $56.2 billion to $286.9 billion in
2006 as a result of expanded trading activities within interest rate and
equity products related to client activities.

Trading Account Liabilities
Trading Account Liabilities consist primarily of short positions in fixed
income securities (including government and corporate debt), equity and
convertible instruments. The average balance increased $7.0 billion to
$64.7 billion in 2006, which was due to growth in client-driven market-
making activities in equity products, partially offset by a reduction in inter-
information, see Market Risk
est
Management beginning on page 75.

rate products.

For additional

Commercial Paper and Other Short-term Borrowings
Commercial Paper and Other Short-term Borrowings provide a funding
source to supplement Deposits in our ALM strategy. The average balance
increased $28.6 billion to $124.2 billion in 2006, mainly due to the
increase in Federal Home Loan Bank advances to fund core asset growth,
primarily in the ALM portfolio.

Long-term Debt
Period end and average Long-term Debt increased $45.2 billion and $32.4
billion. The increase resulted from the funding of core asset growth, the
addition of MBNA and the issuance of subordinated debt to support Tier 2
capital. For additional information, see Note 12 of the Consolidated Finan-
cial Statements.

Shareholders’ Equity
Period end and average Shareholders’ Equity increased $33.7 billion and
$30.6 billion primarily due to the issuance of stock related to the MBNA
merger. This increase along with Net Income and issuances of Preferred
Stock, was partially offset by cash dividends, net share repurchases of
Common Stock and redemption of Preferred Stock.

Bank of America 2006

Table 5 Five Year Summary of Selected Financial Data

(Dollars in millions, except per share information)

Income statement
Net interest income
Noninterest income
Total revenue
Provision for credit losses
Gains (losses) on sales of debt securities
Noninterest expense
Income before income taxes
Income tax expense
Net income
Average common shares issued and outstanding (in thousands)
Average diluted common shares issued and outstanding

(in thousands)

Performance ratios
Return on average assets
Return on average common shareholders’ equity
Total ending equity to total ending assets
Total average equity to total average assets
Dividend payout

Per common share data
Earnings
Diluted earnings
Dividends paid
Book value

Average balance sheet
Total loans and leases
Total assets
Total deposits
Long-term debt
Common shareholders’ equity
Total shareholders’ equity

Asset quality
Allowance for credit losses
Nonperforming assets
Allowance for loan and lease losses as a percentage of total loans and

leases outstanding

Allowance for loan and lease losses as a percentage of total nonperforming

loans and leases

Net charge-offs
Net charge-offs as a percentage of average loans and leases
Nonperforming loans and leases as a percentage of total loans and

leases outstanding

Nonperforming assets as a percentage of total loans, leases, and foreclosed

properties

Ratio of the allowance for loan and lease losses at December 31 to net

charge-offs

Capital ratios (period end)
Risk-based capital:

Tier 1
Total

Tier 1 Leverage

Market capitalization

Market price per share of common stock
Closing
High closing
Low closing

2006

2005

2004

2003

2002

34,591
38,432
73,023
5,010
(443)
35,597
31,973
10,840
21,133
4,526,637

30,737
25,354
56,091
4,014
1,084
28,681
24,480
8,015
16,465
4,008,688

27,960
21,005
48,965
2,769
1,724
27,012
20,908
6,961
13,947
3,758,507

20,505
17,329
37,834
2,839
941
20,155
15,781
5,019
10,762
2,973,407

20,117
14,874
34,991
3,697
630
18,445
13,479
3,926
9,553
3,040,085

4,595,896

4,068,140

3,823,943

3,030,356

3,130,935

1.44%

16.27
9.27
8.90
45.66

4.66
4.59
2.12
29.70

1.30%

16.51
7.86
7.86
46.61

4.10
4.04
1.90
25.32

1.34%

16.47
9.03
8.12
46.31

3.71
3.64
1.70
24.70

1.44%

21.50
6.76
6.69
39.76

3.62
3.55
1.44
16.86

1.46%

19.96
7.92
7.33
38.79

3.14
3.05
1.22
17.04

$ 652,417
1,466,681
672,995
130,124
129,773
130,463

$ 537,218
1,269,892
632,432
97,709
99,590
99,861

$ 472,617
1,044,631
551,559
92,303
84,584
84,815

$ 356,220
749,104
406,233
67,077
50,035
50,091

$ 336,820
653,732
371,479
65,550
47,837
47,898

9,413
1,856

1.28%

505
4,539

0.70%

0.25

0.26

1.99

8.64%

11.88
6.36

8,440
1,603

1.40%

532
4,562

0.85%

0.26

0.28

1.76

8.25%

11.08
5.91

9,028
2,455

1.65%

390
3,113

0.66%

0.42

0.47

2.77

8.20%

11.73
5.89

6,579
3,021

1.66%

215
3,106

0.87%

0.77

0.81

1.98

8.02%

12.05
5.86

6,851
5,262

1.85%

126
3,697

1.10%

1.47

1.53

1.72

8.41%

12.63
6.44

$ 238,021

$ 184,586

$ 190,147

$ 115,926

$ 104,418

53.39
54.90
43.09

46.15
47.08
41.57

46.99
47.44
38.96

40.22
41.77
32.82

34.79
38.45
27.08

40 Bank of America 2006

Return on Average Common Shareholders’ Equity,
Return on Average Tangible Shareholders’ Equity
and Shareholder Value Added
We also evaluate our business based upon return on average common
shareholders’ equity (ROE),
return on average tangible shareholders’
equity (ROTE), and shareholder value added (SVA) measures. ROE, ROTE
and SVA utilize non-GAAP allocation methodologies. ROE measures the
earnings contribution of a unit as a percentage of the Shareholders’ Equity
allocated to that unit. ROTE measures the earnings contribution of the
Corporation as a percentage of Shareholders’ Equity reduced by Goodwill.
SVA is defined as cash basis earnings on an operating basis less a charge
for the use of capital. These measures are used to evaluate our use of
equity (i.e., capital) at the individual unit level and are integral components
resource allocation. We believe using SVA as a
in the analytics for
performance measure places specific focus on whether
incremental
investments generate returns in excess of the costs of capital associated
with those investments. In addition, profitability, relationship, and invest-
ment models all use ROE and SVA as key measures to support our overall
growth goal.

Supplemental Financial Data
Table 6 provides a reconciliation of the supplemental financial data men-
tioned below with financial measures defined by accounting principles
generally accepted in the United States (GAAP). Other companies may
define or calculate supplemental financial data differently.

Operating Basis Presentation
In managing our business, we may at times look at performance excluding
certain nonrecurring items. For example, as an alternative to Net Income,
we view results on an operating basis, which represents Net Income
excluding Merger and Restructuring Charges. The operating basis of pre-
sentation is not defined by GAAP. We believe that the exclusion of Merger
and Restructuring Charges, which represent events outside our normal
operations, provides a meaningful year-to-year comparison and is more
reflective of normalized operations.

Net Interest Income – FTE Basis
In addition, we view Net Interest Income and related ratios and analysis
(i.e., efficiency ratio, net interest yield and operating leverage) on a FTE
basis. Although this is a non-GAAP measure, we believe managing the
business with Net Interest Income on a FTE basis provides a more accu-
rate picture of the interest margin for comparative purposes. To derive the
FTE basis, Net Interest Income is adjusted to reflect tax-exempt income on
an equivalent before-tax basis with a corresponding increase in Income
Tax Expense. For purposes of this calculation, we use the federal statutory
tax rate of 35 percent. This measure ensures comparability of Net Interest
Income arising from taxable and tax-exempt sources.

Performance Measures
As mentioned above, certain performance measures including the effi-
ciency ratio, net interest yield and operating leverage utilize Net Interest
Income (and thus Total Revenue) on a FTE basis. The efficiency ratio
measures the costs expended to generate a dollar of revenue, and net
interest yield evaluates how many basis points we are earning over the
cost of funds. Operating leverage measures the total percentage revenue
growth minus the total percentage expense growth for the corresponding
period. During our annual integrated planning process, we set operating
leverage and efficiency targets for the Corporation and each line of busi-
ness. We believe the use of these non-GAAP measures provides additional
clarity in assessing the results of the Corporation. Targets vary by year and
by business, and are based on a variety of factors including maturity of the
business, investment appetite, competitive environment, market factors,
and other items (e.g., risk appetite). The aforementioned performance
measures and ratios, earnings per common share (EPS), return on average
assets, and dividend payout ratio, as well as those measures discussed
more fully in the following paragraph, are presented in Table 6.

Bank of America 2006

Table 6 Supplemental Financial Data and Reconciliations to GAAP Financial Measures

(Dollars in millions, except per share information)
Operating basis (1)
Operating earnings
Operating earnings per common share
Diluted operating earnings per common share
Shareholder value added
Return on average assets
Return on average common shareholders’ equity
Return on average tangible shareholders’ equity
Operating efficiency ratio (FTE basis)
Dividend payout ratio
Operating leverage

FTE basis data
Net interest income
Total revenue
Net interest yield
Efficiency ratio

Reconciliation of net income to operating earnings
Net income
Merger and restructuring charges
Related income tax benefit

Operating earnings

Reconciliation of average shareholders’ equity to average tangible shareholders’ equity
Average shareholders’ equity
Average goodwill

Average tangible shareholders’ equity

Reconciliation of EPS to operating EPS
Earnings per common share
Effect of merger and restructuring charges, net of tax benefit

Operating earnings per common share

Reconciliation of diluted EPS to diluted operating EPS
Diluted earnings per common share
Effect of merger and restructuring charges, net of tax benefit

Diluted operating earnings per common share

Reconciliation of net income to shareholder value added
Net income
Amortization of intangibles
Merger and restructuring charges, net of tax benefit

Cash basis earnings on an operating basis
Capital charge

Shareholder value added

Reconciliation of return on average assets to operating return on average assets
Return on average assets
Effect of merger and restructuring charges, net of tax benefit

Operating return on average assets

Reconciliation of return on average common shareholders’ equity to operating return on

average common shareholders’ equity
Return on average common shareholders’ equity
Effect of merger and restructuring charges, net of tax benefit

Operating return on average common shareholders’ equity

Reconciliation of return on average tangible shareholders’ equity to operating return on

average tangible shareholders’ equity
Return on average tangible shareholders’ equity
Effect of merger and restructuring charges, net of tax benefit

Operating return on average tangible shareholders’ equity

Reconciliation of efficiency ratio to operating efficiency ratio (FTE basis)
Efficiency ratio
Effect of merger and restructuring charges

Operating efficiency ratio

Reconciliation of dividend payout ratio to operating dividend payout ratio
Dividend payout ratio
Effect of merger and restructuring charges, net of tax benefit

Operating dividend payout ratio

Reconciliation of operating leverage to operating basis operating leverage
Operating leverage
Effect of merger and restructuring charges

Operating leverage

2006

2005

2004

2003

2002

$ 21,640
4.78
4.70
9,121

1.48%

16.66
33.59
46.86
44.59
7.25

$ 16,740
4.17
4.11
6,594

1.32%

16.79
30.70
49.66
45.84
7.48

$ 14,358
3.82
3.75
5,718

1.37%

16.96
29.79
53.13
44.98
(1.85)

$ 10,762
3.62
3.55
5,475

1.44%

21.50
27.84
52.38
39.76
(1.12)

$ 9,553
3.14
3.05
4,509

1.46%

19.96
26.01
51.84
38.79
n/a

$ 35,815
74,247

2.82%

47.94

$ 31,569
56,923

2.84%

50.38

$ 28,677
49,682

3.17%

54.37

$ 21,149
38,478

3.26%

52.38

$ 20,705
35,579

3.63%

51.84

$ 21,133
805
(298)
$ 21,640

$130,463
(66,040)
$ 64,423

4.66
0.12
4.78

4.59
0.11
4.70

$ 21,133
1,755
507
23,395
(14,274)
$ 9,121

1.44%
0.04
1.48%

16.27%
0.39
16.66%

32.80%
0.79
33.59%

47.94%
(1.08)
46.86%

45.66%
(1.07)
44.59%

6.32%
0.93
7.25%

$ 16,465
412
(137)

$ 16,740

$ 99,861
(45,331)

$ 54,530

4.10
0.07

4.17

4.04
0.07

4.11

$ 16,465
809
275

17,549
(10,955)

$ 13,947
618
(207)

$ 14,358

$ 84,815
(36,612)

$ 48,203

3.71
0.11

3.82

3.64
0.11

3.75

$ 13,947
664
411

15,022
(9,304)

$ 10,762
–
–

$ 10,762

$ 50,091
(11,440)

$ 38,651

3.62
–

3.62

3.55
–

3.55

$ 10,762
217
–

10,979
(5,504)

$ 9,553
–
–

$ 9,553

$ 47,898
(11,171)

$ 36,727

3.14
–

3.14

3.05
–

3.05

$ 9,553
218
–

9,771
(5,262)

$ 6,594

$ 5,718

$ 5,475

$ 4,509

1.30%
0.02

1.32%

16.51%
0.28

16.79%

30.19%
0.51

30.70%

50.38%
(0.72)

49.66%

46.61%
(0.77)
45.84%

8.40%
(0.92)

7.48%

1.34%
0.03

1.37%

16.47%
0.49

16.96%

28.93%
0.86

29.79%

54.37%
(1.24)

53.13%

46.31%
(1.33)
44.98%

(4.91)%
3.06

(1.85)%

1.44%
–

1.44%

21.50%

–

21.50%

27.84%

–

27.84%

52.38%

–

52.38%

39.76%

–

39.76%

(1.12)%
–

(1.12)%

1.46%
–

1.46%

19.96%

–

19.96%

26.01%

–

26.01%

51.84%

–

51.84%

38.79%

–

38.79%

n/a
n/a

n/a

(1) Operating basis excludes Merger and Restructuring Charges which were $805 million, $412 million, and $618 million in 2006, 2005, and 2004.
n/a = not available

42 Bank of America 2006

Core Net Interest Income – Managed Basis
In managing our business, we review core net interest income – managed
basis, which adjusts reported Net Interest Income on a FTE basis for the
impact of market-based activities and certain securitizations, net of
retained securities. As discussed in the Global Corporate and Investment
Banking business segment section beginning on page 50, we evaluate our
market-based results and strategies on a total market-based revenue
approach by combining Net Interest Income and Noninterest Income for
the Capital Markets and Advisory Services business. We also adjust for
loans that we originated and sold into certain securitizations. These
securitizations include off-balance sheet Loans and Leases, specifically
those loans in revolving securitizations and other securitizations where

Table 7 Core Net Interest Income – Managed Basis

servicing is retained by the Corporation (e.g., credit card and home equity
lines). Noninterest Income, rather than Net Interest Income and Provision
for Credit Losses, is recorded for assets that have been securitized as we
are compensated for servicing the securitized assets and record servicing
income and gains or losses on securitizations, where appropriate. We
believe the use of this non-GAAP presentation provides additional clarity in
assessing the results of the Corporation. An analysis of core net interest
income – managed basis, core average earning assets – managed basis
and core net interest yield on earning assets – managed basis, which
adjusts for the impact of these two non-core items from reported Net
Interest Income on a FTE basis, is shown below.

(Dollars in millions)

Net interest income
As reported (FTE basis)
Impact of market-based net interest income (1)

Core net interest income

Impact of securitizations

Core net interest income – managed basis

Average earning assets
As reported
Impact of market-based earning assets (1)

Core average earning assets

Impact of securitizations

Core average earning assets – managed basis

Net interest yield contribution
As reported (FTE basis)
Impact of market-based activities

Core net interest yield on earning assets

Impact of securitizations

Core net interest yield on earning assets – managed basis

(1) Represents amounts from the Capital Markets and Advisory Services business within Global Corporate and Investment Banking.

2006

2005

2004

35,815
(1,651)

34,164
7,045

31,569
(1,938)

29,631
323

$ 28,677
(2,606)

26,071
1,040

41,209

29,954

$ 27,111

$1,269,144
(369,164)

899,980
98,152

$1,111,994
(322,236)

789,758
9,033

$905,273
(246,704)

658,569
13,591

$ 998,132

$ 798,791

$672,160

2.82%
0.98

3.80
0.33

4.13%

2.84%
0.91

3.75
–

3.75%

3.17%
0.79

3.96
0.07

4.03%

Core net interest income on a managed basis increased $11.3 bil-
lion. This increase was primarily driven by the impact of the MBNA merger
(volumes and spreads), consumer (primarily home equity) and commercial
loan growth, and increases in the benefits from ALM activities, including
increased portfolio balances (primarily residential mortgages) and the
impact of changes in spreads across all product categories. Partially off-
setting these increases was the higher costs associated with higher levels
of wholesale funding.

On a managed basis, core average earning assets increased $199.3
billion primarily due to the impact of the MBNA merger, higher levels of
consumer and commercial loans from organic growth and higher ALM lev-
els (primarily residential mortgages).

Core net interest yield on a managed basis increased 38 bps as a
result of the impact of the MBNA merger (volumes and spreads) and core
deposit spread widening, partially offset by loan spread compression due
to the flat to inverted yield curve and increased costs associated with
higher levels of wholesale funding.

Business Segment Operations

Segment Description
The Corporation reports the results of its operations through three busi-
ness segments: Global Consumer and Small Business Banking, Global
Corporate and Investment Banking, and Global Wealth and Investment
Management. All Other consists of equity investment activities including

Principal Investing, Corporate Investments and Strategic Investments, the
residual impact of the allowance for credit losses and the cost allocation
processes, Merger and Restructuring Charges, intersegment eliminations,
and the results of certain consumer finance and commercial lending busi-
nesses that are being liquidated. All Other also includes certain amounts
associated with ALM activities, including the residual
impact of funds
transfer pricing allocation methodologies, amounts associated with the
change in the value of derivatives used as economic hedges of interest
rate and foreign exchange rate fluctuations that do not qualify for State-
ment of Financial Accounting Standards (SFAS) No. 133 “Accounting for
Derivative Instruments and Hedging Activities, as amended” (SFAS 133)
hedge accounting treatment, certain gains or losses on sales of whole
mortgage loans, and Gains (Losses) on Sales of Debt Securities.

Basis of Presentation
We prepare and evaluate segment results using certain non-GAAP method-
ologies and performance measures, many of which are discussed in Sup-
plemental Financial Data beginning on page 41. We begin by evaluating
the operating results of the businesses which by definition excludes
Merger and Restructuring Charges. The segment results also reflect cer-
tain revenue and expense methodologies which are utilized to determine
operating income. The Net Interest Income of the businesses includes the
results of a funds transfer pricing process that matches assets and
liabilities with similar interest rate sensitivity and maturity characteristics.

Bank of America 2006

The management accounting reporting process derives segment and
business results by utilizing allocation methodologies for
revenue,
expense and capital. The Net Income derived for the businesses are
dependent upon revenue and cost allocations using an activity-based cost-
ing model, funds transfer pricing, other methodologies, and assumptions
management believes are appropriate to reflect the results of the busi-
ness.

The Corporation’s ALM activities maintain an overall interest rate risk
management strategy that incorporates the use of interest rate contracts
to minimize significant fluctuations in earnings that are caused by interest
rate volatility. The Corporation’s goal is to manage interest rate sensitivity
so that movements in interest rates do not significantly adversely affect
Net Interest Income. The results of the business segments will fluctuate
based on the performance of corporate ALM activities. Some ALM activ-
ities are recorded in the businesses (i.e., Deposits) such as external
product pricing decisions, including deposit pricing strategies, as well as
the effects of our internal funds transfer pricing process and other ALM
actions such as portfolio positioning. The net effects of other ALM activ-
ities are reported in each of the Corporation’s segments under ALM/Other.
In addition, any residual effect of the funds transfer pricing process is
retained in All Other.

usage. Item processing costs are allocated to the segments based on the
volume of items processed for each segment. The costs of certain central-
ized or shared functions are allocated based on methodologies which
reflect utilization.

Equity is allocated to business segments and related businesses
using a risk-adjusted methodology incorporating each unit’s credit, market,
interest rate and operational risk components. The nature of these risks is
discussed further beginning on page 62. ROE is calculated by dividing Net
Income by average allocated equity. SVA is defined as cash basis earnings
on an operating basis less a charge for the use of capital (i.e., equity).
Cash basis earnings on an operating basis is defined as Net Income
adjusted to exclude Merger and Restructuring Charges and Amortization of
Intangibles. The charge for capital is calculated by multiplying 11 percent
(management’s estimate of the shareholders’ minimum required rate of
return on capital invested) by average total common shareholders’ equity
at the corporate level and by average allocated equity at the business
segment level. Average equity is allocated to the business level using a
methodology identical to that used in the ROE calculation. Management
reviews the estimate of the rate used to calculate the capital charge
annually. The Capital Asset Pricing Model is used to estimate our cost of
capital.

See Note 20 of the Consolidated Financial Statements for additional
business segment information, selected financial information for the busi-
ness segments and reconciliations to consolidated Total Revenue and Net
Income amounts.

44 Bank of America 2006

Global Consumer and Small Business Banking

(Dollars in millions)
Net interest income (2)
Noninterest income
Card income
Service charges
Mortgage banking income
All other income

Total noninterest income

Total revenue (2)

Provision for credit losses
Gains (losses) on sales of debt securities
Noninterest expense

Income before income taxes (2)
Income tax expense (benefit)

Net income

Shareholder value added
Net interest yield (2)
Return on average equity
Efficiency ratio (2)
Period end – total assets (3)

(Dollars in millions)
Net interest income (2)
Noninterest income
Card income
Service charges
Mortgage banking income
All other income

Total noninterest income

Total revenue (2)

Provision for credit losses
Gains (losses) on sales of debt securities
Noninterest expense

Income before income taxes (2)
Income tax expense

Net income

Shareholder value added
Net interest yield (2)
Return on average equity
Efficiency ratio (2)
Period end – total assets (3)

(1) Card Services presented on a held view.
(2) Fully taxable-equivalent basis
(3) Total Assets include asset allocations to match liabilities (i.e., deposits).
n/m = not meaningful

Total

$ 21,100

Deposits

9,767

2006

Card
Services (1)

$ 8,805

Mortgage

599

Home
Equity

$ 1,406

ALM/Other

$ 523

13,504
5,343
877
867

20,591

41,691

5,172
(1)
18,830

17,688
6,517

$ 11,171

5,738

6.42%

17.70
45.17
$382,392

1,911
5,343
–
–

7,254

17,021

165
–
9,053

7,803
2,875

4,928

3,610

2.94%

32.53
53.19
$342,443

Total

$ 16,898

Deposits

$ 8,537

5,084
4,996
1,012
333

11,425

28,323

4,243
(2)
13,124

10,954
3,933

1,560
4,996
–
–

6,556

15,093

98
–
8,079

6,916
2,484

11,593
–
–
1,087

12,680

21,485

4,727
–
7,827

8,931
3,291

$ 5,640

$ 1,908

8.93%

12.67
36.43
$143,179

2005

Card
Services (1)

$ 5,009

3,524
–
–
57

3,581

8,590

3,999
–
2,968

1,623
582

$ 7,021

$ 4,432

$ 1,041

4,318

5.65%

23.73
46.34
$331,259

3,118

2.77%

29.56
53.52
$321,030

21
8.90%
9.28
34.55
$ 66,338

–
–
793
44

837

–
–
84
–

1,436

1,490

17
–
972

447
165

282

75
1.77%

47
–
641

802
295

507

343
2.47%

14.95
67.71
$37,282

33.96
43.01
$63,742

–
–
–
(264)

(264)

259

216
(1)
337

(295)
(109)

$ (186)

$ (198)
n/m
n/m
n/m
n/m

Mortgage

745

Home
Equity

$ 1,291

ALM/Other

$1,316

–
–
935
21

956

1,701

21
–
1,059

621
223

398

212
1.99%

–
–
77
–

–
–
–
255

255

1,368

1,571

38
–
646

684
246

438

315
2.71%

87
(2)
372

1,110
398

$ 712

$ 652
n/m
n/m
n/m
n/m

23.12
62.26
$42,183

39.20
47.24
$51,401

Bank of America 2006 45

Balance Sheet

(Dollars in millions)

Total loans and leases
Total earning assets (1)
Total assets (1)
Total deposits
Allocated equity

Average Balance

2006

$192,072
328,528
390,257
330,072
63,121

2005

$144,027
298,904
326,243
306,098
29,581

December 31

2006

$206,040
319,552
382,392
327,236
60,373

2005

$151,657
302,619
331,259
306,101
36,861

(1) Total earning assets and Total Assets include asset allocations to match liabilities (i.e., deposits).

The strategy of Global Consumer and Small Business Banking is to attract,
retain and deepen customer
relationships. We achieve this strategy
through our ability to offer a wide range of products and services through a
franchise that stretches coast to coast through 30 states and the District
of Columbia. With the recent merger with MBNA, we also provide credit
card products to customers in Canada, Ireland, Spain and the United
Kingdom. In the U.S., we serve more than 55 million consumer and small
business relationships utilizing our network of 5,747 banking centers,
17,079 domestic branded ATMs, and telephone and Internet channels.
Within Global Consumer and Small Business Banking, there are four pri-
mary businesses: Deposits, Card Services, Mortgage and Home Equity. In
addition, ALM/Other
includes the results of ALM activities and other
consumer-related businesses (e.g., insurance).

Net Income increased $4.2 billion, or 59 percent, to $11.2 billion
and Net Interest Income increased $4.2 billion, or 25 percent in 2006
compared to 2005. These increases were primarily due to the MBNA
merger and organic growth which increased Average Loans and Leases.

Noninterest Income increased $9.2 billion, or 80 percent, mainly due
to increases of $8.4 billion in Card Income, $534 million in all other
income and $347 million in Service Charges. Card Income was higher
mainly due to increases in excess servicing income, cash advance fees,
interchange income and late fees due primarily to the impact of the MBNA
merger. All other income increased primarily as a result of the MBNA
merger. Service Charges increased due to new account growth and
increased usage.

The Provision for Credit Losses increased $929 million, or 22 per-
cent, to $5.2 billion in 2006 compared to 2005 primarily resulting from a
$728 million increase in Card Services mainly driven by the MBNA merger.
For further discussion of this increase in the Provision for Credit Losses
related to Card Services, see the Card Services discussion.

Noninterest Expense increased $5.7 billion, or 43 percent, in 2006
compared to 2005. The primary driver of the increase was the MBNA
merger, which increased most expense items including Personnel, Market-
ing and Amortization of Intangibles. Amortization of Intangibles expense
was higher due to increases in purchased credit card relationships, affinity
relationships, core deposit intangibles and other intangibles,
including
trademarks related to the MBNA merger.

Deposits
Deposits provides a comprehensive range of products to consumers and
small businesses. Our products include traditional savings accounts,
money market savings accounts, CDs and IRAs, and regular and interest-
checking accounts. Debit card results are also included in Deposits.

46 Bank of America 2006

Deposit products provide a relatively stable source of funding and
liquidity. We earn net interest spread revenues from investing this liquidity
in earning assets through client facing lending activity and our ALM activ-
ities. The revenue is attributed to the deposit products using our funds
transfer pricing process which takes into account the interest rates and
maturity characteristics of the deposits. Deposits also generate various
account fees such as non-sufficient fund fees, overdraft charges and
account service fees while debit cards generate interchange fees. Inter-
change fees are volume based and paid by merchants to have the debit
transactions processed.

We added approximately 2.4 million net new retail checking accounts
and 1.2 million net new retail savings accounts during 2006. These addi-
tions resulted from continued improvement in sales and service results in
the Banking Center Channel, the introduction of products such as Keep
the ChangeTM as well as eCommerce accessibility and customer referrals.
The Corporation migrates qualifying affluent customers, and their
related deposit balances and associated Net Interest Income from the
Global Consumer and Small Business Banking segment to Global Wealth
and Investment Management.

Net Income increased $496 million, or 11 percent, in 2006 com-
pared to 2005. The increase in Net Income was driven by an increase in
Total Revenue of $1.9 billion, or 13 percent compared to 2005. Driving
this growth was an increase of $1.2 billion, or 14 percent, in Net Interest
Income resulting from higher average deposit levels and an increase in
deposit spreads. Average deposits increased $24.0 billion, or eight per-
cent, compared to 2005, primarily due to the MBNA merger. Deposit
spreads increased 17 bps to 3.00 percent, compared to 2005 as we
effectively managed pricing in a rising interest rate environment. The
increase in deposits was partially offset by the migration of deposit balan-
ces to Global Wealth and Investment Management. Noninterest Income
increased $698 million, or 11 percent, driven by higher debit card inter-
change income and higher Service Charges. The increase in debit card
interchange income was primarily due to a higher number of active debit
cards, increased usage, and continued improvements in penetration and
activation rates. Service Charges were higher due to increased
non-sufficient funds fees and overdraft charges, account service charges
and ATM fees resulting from new account growth and increased usage.

Total Noninterest Expense increased $974 million, or 12 percent, in
2006 compared to 2005, primarily driven by costs associated with
increased account volume.

Card Services
Card Services, which excludes the results of debit cards (included in
Deposits), provides a broad offering of products, including U.S. Consumer
and Business Card, Unsecured Lending, Merchant Services and Interna-
tional Card Businesses. As a result of the MBNA merger, we offer a variety
of co-branded and affinity credit card products and have become the lead-
ing issuer of credit cards through endorsed marketing. Prior to the merger
with MBNA, Card Services included U.S. Consumer Card, U.S. Business
Card, and Merchant Services.

We present our Card Services business on both a held and managed
basis (a non-GAAP measure). The performance of the managed portfolio is
important to understanding Card Services’ results as it demonstrates the
results of the entire portfolio serviced by the business, as the receivables
that have been securitized are subject to the same underwriting standards
and ongoing monitoring as the held loans. For assets that have been
fee revenue and recoveries in excess of
securitized,
interest paid to the investors, gross credit
trust
expenses related to the securitized receivables are all reclassified into

losses and other

interest income,

excess servicing income, which is a component of Card Income. Managed
noninterest income includes the impact of gains recognized on securitized
loan principal receivables in accordance with SFAS No. 140 “Accounting
for Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities – a replacement of FASB Statement No. 125” (SFAS 140).

Managed credit impact represents the held Provision for Credit Losses
combined with credit losses associated with the securitized loan portfolio.
The following tables reconcile the Card Services portfolio and certain credit
card data on a held basis to managed basis to reflect the impact of securi-
tizations.

Card Services Data (1)

(Dollars in millions)

Income Statement Data

Held net interest income
Securitizations impact

Managed net interest income

Held total noninterest income
Securitizations impact

Managed total noninterest income

Held total revenue
Securitizations impact

Managed total revenue

Held provision for credit losses
Securitizations impact (2)

Managed credit impact

Balance Sheet Data

Average held Card Services outstandings
Securitizations impact

Average managed Card Services outstandings

Ending held Card Services outstandings
Securitizations impact

Ending managed Card Services outstandings

Credit Quality Statistics (3)

Held net charge-offs
Securitizations impact (2)

Managed Card Services net losses

Held net charge-offs
Securitizations impact (2)

Managed Card Services net losses

Credit Card Data (4)

(Dollars in millions)

Balance Sheet Data

Average held credit card outstandings
Securitizations impact

Average managed credit card outstandings

Ending held credit card outstandings
Securitizations impact

Ending managed credit card outstandings

Credit Quality Statistics (3)

Held net charge-offs
Securitizations impact (2)

Managed credit card net losses

Held net charge-offs
Securitizations impact (2)

Managed credit card net losses

2006

2005

$ 8,805
7,584

$ 16,389

$ 12,680
(4,221)

$ 8,459

$ 21,485
3,363

$ 24,848

$ 4,727
3,363

$ 8,090

$ 95,256
96,238

$191,494

$101,532
101,865

$203,397

$ 3,871
3,363

$ 7,234

$ 5,009
503

$ 5,512

$ 3,581
(69)

$ 3,512

$ 8,590
434

$ 9,024

$ 3,999
434

$ 4,433

$56,072
5,051

$61,123

$61,397
2,237

$63,634

$ 3,759
434

$ 4,193

4.06%
(0.28)

3.78%

6.70%
0.16

6.86%

2006

2005

$ 72,979
90,430

$163,409

$ 72,194
98,295

$170,489

$ 3,319
3,056

$ 6,375

$53,997
5,051

$59,048

$58,548
2,237

$60,785

$ 3,652
434

$ 4,086

4.55%
(0.65)

3.90%

6.76%
0.16

6.92%

(1) Beginning with the first quarter of 2006, Card Services includes U.S. Consumer and Business Card, Unsecured Lending, Merchant Services and International Card Businesses. Prior to January 1, 2006, Card Services included

U.S. Consumer Card, U.S. Business Card, and Merchant Services.
(2) Represents credit losses associated with the securitized loan portfolio.
(3) Pursuant to American Institute of Certified Public Accountants (AICPA) Statement of Position No. 03-3 “Accounting for Certain Loans or Debt Securities Acquired in a Transfer” (SOP 03-3) the Corporation decreased held net
charge-offs for Card Services and credit card $288 million or 30 bps and $152 million or 21 bps in 2006. Managed net losses for Card Services and credit card decreased $288 million or 15 bps and $152 million or 9 bps.
For more information, refer to the discussion of SOP 03-3 in the Consumer Portfolio Credit Risk Management section beginning on page 63.
Includes U.S. Consumer Card and Foreign Credit Card. Does not include Business Card.

(4)

Bank of America 2006

Managed Basis
Managed Card Services Net Interest Income increased $10.9 billion to
$16.4 billion in 2006 compared to 2005. This increase was driven by the
addition of MBNA and organic growth which contributed to an increase in
total average managed outstandings.

Managed Card Services Noninterest Income increased $4.9 billion to
$8.5 billion in 2006 compared to 2005, largely resulting from the MBNA
merger and organic growth including increases in interchange income,
cash advance fees and late fees.

Managed Card Services net losses increased $3.0 billion to $7.2 bil-
lion or 3.78 percent of average Managed Card Services outstandings in
2006 compared to $4.2 billion, or 6.86 percent in 2005, primarily driven
by the addition of the MBNA portfolio and portfolio seasoning, partially
offset by lower bankruptcy-related losses. The 308 bps decrease in the
net loss ratio for Managed Card Services was driven by lower net losses
resulting from bankruptcy reform and the beneficial impact of the higher
credit quality of the MBNA portfolio compared to the legacy Bank of Amer-
ica portfolio. We expect managed net losses to trend towards more
normalized levels in 2007.

Managed Card Services total average outstandings increased $130.4
billion to $191.5 billion in 2006 compared to 2005. This increase was
driven by the addition of MBNA and organic growth.

Held Basis
Net Income increased $4.6 billion to $5.6 billion in 2006 compared to
2005 due to revenue growth, partially offset by increases in Noninterest
Expense and Provision for Credit Losses.

Held Total Revenue increased $12.9 billion to $21.5 billion in 2006
compared to 2005 primarily due to the addition of MBNA and organic
growth. The MBNA merger
increased excess servicing income, cash
advance fees, late fees, interchange income and all other income. Excess
servicing income benefited from lower net losses on the securitized loan
portfolio resulting from bankruptcy reform.

Held Provision for Credit Losses increased $728 million to $4.7 bil-
lion. This increase was primarily driven by the addition of the MBNA portfo-
lio and seasoning of the business card portfolio, partially offset by reduced
credit-related costs on the domestic consumer credit card portfolio. On the
domestic consumer credit card portfolio lower bankruptcy charge-offs
resulting from bankruptcy reform and the absence of the $210 million
provision recorded in 2005 to establish reserves for changes in credit card
minimum payment
requirements were partially offset by portfolio
seasoning.

Card Services held net charge-offs were $3.9 billion, $112 million
higher than 2005, driven by the addition of the MBNA portfolio partially
offset by lower bankruptcy-related credit card net charge-offs. Credit card
held net charge-offs were $3.3 billion, or 4.55 percent of total average
held credit card loans, compared to $3.7 billion, or 6.76 percent, for
2005. This decrease was primarily driven by lower bankruptcy-related
charge-offs as 2005 included accelerated charge-offs resulting from bank-
ruptcy reform. The decrease was partially offset by the addition of the
MBNA portfolio, new advances on accounts for which previous loan balan-
ces were sold to the securitization trusts and portfolio seasoning.

Held total Noninterest Expense increased $4.9 billion to $7.8 billion
compared to the same period in 2005 primarily driven by the MBNA
merger which increased most expense items including Personnel, Market-
ing, and Amortization of Intangibles.

the Corporation’s previous investment

In connection with MasterCard’s initial public offering on May 24,
2006,
in MasterCard was
exchanged for new restricted shares. The Corporation recognized a net
pre-tax gain of approximately $36 million in all other income relating to the
shares that were required to be redeemed by MasterCard for cash and no
gain was recorded associated with the unredeemed shares. For shares
acquired as part of the MBNA merger, a purchase accounting adjustment
of $71 million was recorded as a reduction of Goodwill to record the fair
value of both the redeemed and unredeemed MasterCard shares. At
December 31, 2006,
the Corporation had approximately 3.5 million
restricted shares of MasterCard that are accounted for at cost.

Mortgage
Mortgage generates revenue by providing an extensive line of mortgage
products and services to customers nationwide. Mortgage products are
available to our customers through a retail network of personal bankers
located in 5,747 banking centers, sales account executives in nearly 200
locations and through a sales force offering our customers direct tele-
phone and online access to our products. Additionally, we serve our cus-
tomers through a partnership with more than 6,500 mortgage brokers in
all 50 states. The mortgage product offerings for home purchase and
refinancing needs include fixed and adjustable rate loans. To manage this
portfolio, these products are either sold into the secondary mortgage
market
to investors, while retaining the Bank of America customer
relationships, or are held on our balance sheet for ALM purposes.

The mortgage business includes the origination, fulfillment, sale and
servicing of
first mortgage loan products. Servicing activities primarily
include collecting cash for principal, interest and escrow payments from
borrowers, and accounting for and remitting principal and interest pay-
ments to investors and escrow payments to third parties. Servicing income
includes ancillary income derived in connection with these activities such
as late fees.

Mortgage production within Global Consumer and Small Business

Banking was $76.7 billion in 2006 compared to $74.7 billion in 2005.

Net Income for Mortgage declined $116 million, or 29 percent, due
to a decrease in Total Revenue of $265 million to $1.4 billion, partially
offset by an $87 million decrease in Noninterest Expense. The decline in
Total Revenue was due to a decrease of $146 million in Net Interest
Income and a decrease of $142 million in Mortgage Banking Income. The
reduction in Net Interest Income was primarily driven by the impact of
spread compression. The decline in Mortgage Banking Income was primar-
ily due to margin compression which negatively impacted the pricing of
loans. This was partially offset by the favorable performance of the Mort-
gage Servicing Rights (MSRs) net of the derivatives used to economically
hedge changes in the fair values of the MSRs. Mortgage was not impacted
by the Corporation’s decision to retain a larger share of mortgage pro-
duction on the Corporation’s Balance Sheet, as Mortgage was compen-
sated for
the decision on a management accounting basis with a
corresponding offset in All Other.

The Mortgage servicing portfolio includes loans serviced for others
and originated and retained residential mortgages. The servicing portfolio
at December 31, 2006 was $333.0 billion, $36.2 billion higher than
December 31, 2005, primarily driven by production and lower prepayment
rates. Included in this amount was $229.9 billion of loans serviced for
others.

48 Bank of America 2006

At December 31, 2006, the consumer MSR balance was $2.9 billion,
an increase of $211 million, or eight percent, from December 31, 2005.
This value represented 125 bps of the related unpaid principal balance, a
3 bps increase from December 31, 2005. For additional information, see
Note 8 of the Consolidated Financial Statements.

The Home Equity servicing portfolio at December 31, 2006 was
$86.5 billion, $14.9 billion higher than December 31, 2005, driven primar-
increased production. Home Equity production within Global
ily by
Consumer and Small Business Banking increased $9.5 billion to $65.4
billion in 2006 compared to 2005.

Home Equity
Home Equity generates revenue by providing an extensive line of home
equity products and services to customers nationwide. Home Equity prod-
ucts include lines of credit and home equity loans and are also available
to our customers through our retail network and our partnership with mort-
gage brokers.

Net Income for Home Equity increased $69 million, or 16 percent, in
2006 compared to 2005. Driving this increase in Net Income was Net
Interest Income, which increased $115 million to $1.4 billion in 2006
compared to 2005, primarily attributable to account growth and larger line
sizes resulting from enhanced product offerings and the expanding home
equity market.

ALM/Other
ALM/Other is comprised primarily of the allocation of a portion of the
Corporation’s Net Interest Income from ALM activities, the residual of the
funds transfer pricing allocation process associated with recording Card
Services securitizations and the results of other consumer-related busi-
nesses (e.g., insurance).

Net Income decreased $898 million for 2006 compared to 2005.
The decrease was primarily a result of a lower contribution from ALM activ-
ities and the impact of the residual of the funds transfer pricing allocation
process associated with Card Services securitizations.

Bank of America 2006 49

Total

$ 10,693

2,777
1,027
2,477
3,028
2,689

11,998

22,691

(6)
53
11,998

10,752
3,960

6,792

2,349

1.71%

Business
Lending

4,605

501
15
–
54
507

1,077

5,682

3
13
2,153

3,539
1,310

2,229

623
2.00%

16.21
52.87
$689,248

14.23
37.89
$246,414

Total

$ 11,156

Business
Lending

4,825

2,618
1,046
1,892
1,770
2,118

9,444

20,600

(291)
263
11,133

10,021
3,637

$ 6,384

$ 1,966

2.03%

15.28
54.04
$633,362

474
17
–
(28)
769

1,232

6,057

67
62
2,010

4,042
1,448

2,594

1,031

2.36%

16.92
33.18
$227,523

2006

Capital
Markets and
Advisory
Services

Treasury
Services

ALM/
Other

1,651

3,880

$ 557

120
867
2,476
2,748
338

6,549

8,200

14
22
5,524

2,684
993

1,691

517
n/m
15.76%
67.36
$384,151

2005

Capital
Markets and
Advisory
Services

1,995
33
–
48
734

2,810

6,690

(2)
–
3,248

3,444
1,274

2,170

1,431

2.85%

30.76
48.55
$166,503

161
112
1
178
1,110

1,562

2,119

(21)
18
1,073

1,085
383

$ 702

$ (222)
n/m
n/m
n/m
n/m

Treasury
Services

ALM/
Other

$ 1,938

3,375

$1,018

111
876
1,891
1,618
329

4,825

6,763

(27)
55
4,754

2,091
745

1,866
28
–
63
676

2,633

6,008

(4)
–
3,149

2,863
1,030

167
125
1
117
344

754

1,772

(327)
146
1,220

1,025
414

$ 1,346

1,833

$ 611

265
n/m
13.61%
70.30
$338,190

$ 1,128

2.37%

27.06
52.41
$170,601

$ (458)
n/m
n/m
n/m
n/m

Global Corporate and Investment Banking

(Dollars in millions)
Net interest income (1)
Noninterest income
Service charges
Investment and brokerage services
Investment banking income
Trading account profits
All other income

Total noninterest income

Total revenue (1)

Provision for credit losses
Gains on sales of debt securities
Noninterest expense

Income before income taxes (1)
Income tax expense

Net income

Shareholder value added
Net interest yield (1)
Return on average equity
Efficiency ratio (1)
Period end – total assets (2)

(Dollars in millions)
Net interest income (1)
Noninterest income
Service charges
Investment and brokerage services
Investment banking income
Trading account profits
All other income

Total noninterest income

Total revenue (1)

Provision for credit losses
Gains on sales of debt securities
Noninterest expense

Income before income taxes (1)
Income tax expense

Net income

Shareholder value added
Net interest yield (1)
Return on average equity
Efficiency ratio (1)
Period end – total assets (2)

(1) Fully taxable-equivalent basis
(2) Total Assets include asset allocations to match liabilities (i.e., deposits).
n/m = not meaningful

50 Bank of America 2006

Balance Sheet

(Dollars in millions)

Total loans and leases
Total trading-related assets
Total market-based earning assets (1)
Total earning assets (2)
Total assets (2)
Total deposits
Allocated equity

Average Balance

2006

$243,282
338,364
369,164
625,212
706,906
205,652
41,892

2005

$214,818
314,568
322,236
550,620
633,253
189,860
41,773

December 31

2006

$246,490
309,321
347,572
605,153
689,248
216,875
40,025

2005

$232,631
291,267
305,374
553,390
633,362
198,352
43,985

(1) Total market-based earning assets represents earning assets from the Capital Markets and Advisory

Services business.

(2) Total earning assets and Total Assets include asset allocations to match liabilities (i.e., deposits).

Global Corporate and Investment Banking provides a wide range of finan-
cial services to both our issuer and investor clients that range from busi-
ness banking clients to large international corporate and institutional
investor clients using a strategy to deliver value-added financial products
and advisory solutions. Global Corporate and Investment Banking’s prod-
ucts and services are delivered from three primary businesses: Business
Lending, Capital Markets and Advisory Services, and Treasury Services,
and are provided to our clients through a global team of client relationship
includes the
managers and product partners.
results of ALM activities and our Latin America and Hong Kong based retail
and commercial banking businesses, parts of which were sold in 2006.
Our clients are supported through offices in 26 countries that are divided
into four distinct geographic regions: U.S. and Canada; Asia; Europe, Mid-
dle East, and Africa; and Latin America. For more information on our for-
eign operations, see Foreign Portfolio beginning on page 71.

In addition, ALM/Other

Net Income increased $408 million, or six percent, in 2006. Driving
the increase were Trading Account Profits, Investment Banking Income,
and gains from the sale of our Brazilian operations and Asia Commercial
Banking business. These increases were partially offset by declines in Net
Interest Income and Gains on Sales of Debt Securities and increases in
Provision for Credit Losses and Noninterest Expense.

Although Global Corporate and Investment Banking experienced over-
all growth in Average Loans and Leases of $28.5 billion, or 13 percent,
and an increase in Average Deposits of $15.8 billion, or eight percent, Net
Interest Income declined primarily due to the impact of ALM activities,
spread compression in the loan portfolio and the impact of the sale of our
Brazilian operations in the third quarter of 2006. This decline was partially
offset by wider spreads in our Treasury Services deposit base as we effec-
tively managed pricing in a rising interest rate environment.

Noninterest Income increased $2.6 billion, or 27 percent, in 2006.
The increase in Noninterest Income was driven largely by the increase in
Trading Account Profits, Investment Banking Income, and the gain on the
sale of our Brazilian operations and Asia Commercial Banking business.
The increases in Trading Account Profits and Investment Banking Income
were driven by continued strength in debt underwriting, sales and trading,
and a favorable market environment. The sale of our Brazilian operations
and Asia Commercial Banking business generated $720 million and $165
million gains (pre-tax), respectively, and were reflected in all other income.
Provision for Credit Losses was negative $6 million in 2006 com-
pared to negative $291 million in 2005. The change in the Provision for

Credit Losses was primarily due to the absence in 2006 of benefits from
the release of reserves in 2005 related to an improved risk profile in Latin
America and reduced uncertainties associated with the FleetBoston Finan-
cial Corporation (FleetBoston) credit integration as well as lower commer-
cial recoveries in 2006. This increase was partially offset by benefits in
2006 from reductions in commercial reserves as a stable economic envi-
ronment throughout 2006 drove sustained favorable commercial credit
market conditions.

Noninterest Expense increased $865 million, or eight percent, mainly
due to higher Personnel expense, including performance-based incentive
compensation primarily in Capital Markets and Advisory Services and
Other General Operating costs.

Business Lending
Business Lending provides a wide range of lending-related products and
services to our clients through client relationship teams along with various
product partners. Products include commercial and corporate bank loans
and commitment facilities which cover our business banking clients, mid-
dle market commercial clients and our large multinational corporate cli-
ents. Real estate lending products are issued primarily to public and
private developers, homebuilders and commercial real estate firms. Leas-
ing and asset-based lending products offer our clients innovative financing
solutions. Products also include indirect consumer loans which allow us to
offer financing through automotive, marine, motorcycle and recreational
vehicle dealerships across the U.S. Business Lending also contains the
results for the economic hedging of our risk to certain credit counter-
parties utilizing various risk mitigation tools such as Credit Default Swaps
(CDS) and may also include the results of other products to help reduce
hedging costs.

Net Income decreased $365 million, or 14 percent, primarily due to
decreases in Net Interest Income and Noninterest Income, combined with
an increase in Noninterest Expense. These items were partially offset by a
decrease in the Provision for Credit Losses. The decrease in Net Interest
Income of $220 million or five percent, was driven by the impact of lower
spreads on all
loan products which was partially offset by loan growth.
Average Loans and Leases increased 12 percent primarily due to growth in
the commercial and indirect consumer loan portfolio. The decrease in
Noninterest Income was due to an increase in credit mitigation costs as
spreads continued to tighten and lower equity gains in all other income.
Provision for Credit Losses was $3 million in 2006 compared to $67 mil-
lion in 2005. The low level of Provision for Credit Losses in 2006 was
driven by benefits in 2006 from reductions in commercial reserves as a
stable economic environment throughout 2006 drove sustained favorable
commercial credit market conditions. These benefits were in part offset by
lower commercial
recoveries in 2006. Benefits from the release of
reserves related to reduced uncertainties associated with the FleetBoston
credit integration contributed to the low level of Provision for Credit Losses
in 2005. The increase in Noninterest Expense was primarily driven by
increased expenses associated with Personnel,
technology, and Pro-
fessional Fees.

Capital Markets and Advisory Services
Capital Markets and Advisory Services provides products, advisory serv-
ices and financing globally to our institutional investor clients in support of
their investing and trading activities. We also work with our commercial
and corporate issuer clients to provide debt and equity underwriting and
distribution capabilities, merger-related advisory services and risk
management solutions using interest rate, equity, credit and commodity
derivatives, foreign exchange, fixed income and mortgage-related products.

Bank of America 2006

In support of these activities, the business may take positions in these
products and participate in market-making activities dealing in government
securities, equity and equity-linked securities, high-grade and high-yield
corporate debt securities, commercial paper, and mortgage-backed and
asset-backed securities. Underwriting debt and equity, securities research
and certain market-based activities are executed through Banc of America
Securities, LLC which is a primary dealer in the U.S. and several other
countries.

Interest

Income,

Income, Noninterest

Capital Markets and Advisory Services market-based revenue
includes Net
including equity
income, and Gains (Losses) on Sales of Debt Securities. We evaluate our
trading results and strategies based on market-based revenue. The follow-
ing table presents further detail regarding market-based revenue. Sales
and trading revenue is segregated into fixed income from liquid products
(primarily interest rate and commodity derivatives, foreign exchange con-
tracts and public finance), credit products (primarily investment and non-
investment grade corporate debt obligations and credit derivatives), and
structured products (primarily commercial mortgage-backed securities,
residential mortgage-backed
debt
obligations), and equity income from equity-linked derivatives and cash
equity activity.

collateralized

securities,

and

(Dollars in millions)

Investment banking income
Advisory fees
Debt underwriting
Equity underwriting

Total investment banking income

Sales and trading
Fixed income:

Liquid products
Credit products
Structured products

Total fixed income

Equity income

Total sales and trading (1)

Total Capital Markets and Advisory

Services market-based revenue (1)

2006

2005

$ 338
1,822
316

2,476

2,021
825
1,449

4,295
1,451

5,746

$ 295
1,323
273

1,891

1,890
634
1,033

3,557
1,370

4,927

$8,222

$6,818

(1)

Includes Gains on Sales of Debt Securities of $22 million and $55 million for 2006 and 2005.

Net Income increased $345 million, or 26 percent, market-based
revenue increased $1.4 billion, or 21 percent, driven primarily by
increased sales and trading fixed income activity of $738 million, or 21
percent, due to a favorable market environment as well as benefits from
previous investments in personnel and trading infrastructure. Market-
based revenue also benefited from an increase in Investment Banking
Income of $585 million, or 31 percent, primarily driven by increased mar-
ket activity and continued strength in debt underwriting. Noninterest
Expense increased $770 million, or 16 percent, due to higher Personnel
expense, including performance-based incentive compensation, and Other
General Operating costs.

Treasury Services
Treasury Services provides integrated working capital management and
treasury solutions to clients worldwide through our network of proprietary
offices and special clearing arrangements. Our clients include multina-
tionals, middle-market companies, correspondent banks, commercial real
estate firms and governments. Our products and services include treasury
management, trade finance, foreign exchange, short-term credit facilities
and short-term investing options. Net Interest Income is derived from
interest and noninterest-bearing deposits, sweep investments, and other

52 Bank of America 2006

liability management products. Deposit products provide a relatively stable
source of funding and liquidity. We earn net interest spread revenues from
investing this liquidity in earning assets through client facing lending activ-
ity and our ALM activities. The revenue is attributed to the deposit prod-
ucts using our funds transfer pricing process which takes into account the
interest rates and maturity characteristics of the deposits. Noninterest
Income is generated from payment and receipt products, merchant serv-
ices, wholesale card products, and trade services and is comprised primar-
ily of service charges which are net of market-based earnings credit rates
applied against noninterest-bearing deposits.

Net Income increased $337 million, or 18 percent, primarily due to
an increase in Net Interest Income, higher Service Charges and all other
income, partially offset by increased Noninterest Expense. Net Interest
Income from Treasury Services increased $505 million, or 15 percent,
driven primarily by wider spreads associated with higher short-term interest
rates as we effectively managed pricing in a rising interest rate environ-
ment. This was partially offset by the impact of a four percent decrease in
Treasury Services average deposit balances driven primarily by the slow-
down in the mortgage and title business reducing real estate escrow and
demand deposit balances. Service Charges and wholesale card products
increased seven percent and 14 percent benefiting from increased client
penetration and both market and product expansion. Noninterest Expense
increased $99 million, or three percent, due to higher Personnel expense
and Other General Operating costs.

ALM/Other
ALM/Other is comprised primarily of our Latin American operations in Bra-
zil, Chile, Argentina and Uruguay, and our commercial operations in Mex-
ico, as well as our Asia Commercial Banking business. These operations
primarily service indigenous and multinational corporations, small busi-
nesses and affluent consumers. Brazilian operations were included
through September 1, 2006, and the Asia Commercial Banking business
was included through December 29, 2006, the effective dates of the sales
of these operations. ALM/Other also includes an allocation of a portion of
the Corporation’s Net
Income from ALM activities. For more
information on our Latin American and Asian operations, see Foreign Port-
folio beginning on page 71.

Interest

equity

second

of Banco

Itaú, Brazil’s

Net Income increased $91 million, or 15 percent, which included the
$720 million gain (pre-tax) recorded on the sale of our Brazilian oper-
ations. The Corporation sold its operations in exchange for approximately
$1.9 billion
largest
nongovernment-owned banking company. The $1.9 billion equity invest-
ment in Banco Itaú is recorded in Other Assets in Strategic Investments.
For more information on our Strategic Investments, see All Other beginning
on page 55. The Corporation also completed the sale of its Asia Commer-
cial Banking business to CCB for cash resulting in a $165 million gain
(pre-tax) that was recorded in all other income. Partially offsetting these
increases was a decrease in Net Interest Income of $461 million driven by
the impact of ALM activities and the impact of the sale of our Brazilian
operations in the third quarter of 2006. The Provision for Credit losses
was negative $21 million, compared to negative $327 million in 2005.
The change in the Provision for Credit Losses was driven by the benefits
from the release of reserves in 2005 related to an improved risk profile in
Latin America. Gains on Sales of Debt Securities decreased $128 million
to $18 million in 2006. Noninterest expense decreased $147 million, or
12 percent, primarily driven by lower expenses after the sale of our Brazil-
ian operations in the third quarter of 2006.

In December 2005, we entered into a definitive agreement with a
consortium led by Johannesburg-based Standard Bank Group Limited for
the sale of our assets and the assumption of liabilities in Argentina. This
transaction is expected to close in early 2007.

In August 2006, we announced a definitive agreement to sell our
operations in Chile and Uruguay for equity in Banco Itaú and other consid-
eration totaling approximately $615 million. These transactions are
expected to close in early 2007.

Global Wealth and Investment Management

(Dollars in millions)
Net interest income (1)
Noninterest income
Investment and brokerage services
All other income

Total noninterest income

Total revenue (1)

Provision for credit losses
Noninterest expense

Income before income taxes (1)
Income tax expense

Net income

Shareholder value added
Net interest yield (1)
Return on average equity
Efficiency ratio (1)
Period end – total assets (2)

(Dollars in millions)
Net interest income (1)
Noninterest income
Investment and brokerage services
All other income

Total noninterest income

Total revenue (1)

Provision for credit losses
Noninterest expense

Income before income taxes (1)
Income tax expense

Net income

Shareholder value added
Net interest yield (1)
Return on average equity
Efficiency ratio (1)
Period end – total assets (2)

(1) Fully taxable-equivalent basis
(2) Total Assets include asset allocations to match liabilities (i.e., deposits).
n/m = not meaningful

Total

3,881

3,449
449

3,898

7,779

(40)
4,005

3,814
1,411

2,403

1,340

3.29%

Private
Bank

$ 1,000

1,014
84

1,098

2,098

(52)
1,273

877
324

553

302
3.20%

23.20
51.48
$137,739

22.46
60.69
$34,047

Total

$ 3,820

3,140
356

3,496

7,316

(7)
3,710

3,613
1,297

$ 2,316

1,263

3.19%

22.52
50.72
$129,232

Private
Bank

$ 1,008

1,014
65

1,079

2,087

(23)
1,237

873
314

559

337
3.37%

25.28
59.27
$31,736

2006

Columbia
Management

Premier
Banking and
Investments

ALM/
Other

$ (37)

2,000

$ 918

1,532
43

1,575

1,538

—
1,007

531
196

$ 335

$ 196
n/m
20.66%
65.49
$3,082

752
126

878

2,878

13
1,361

1,504
556

948

574
2.93%

26.89
47.29
$105,460

151
196

347

1,265

(1)
364

902
335

$ 567

$ 268
n/m
n/m
n/m
n/m

2005

Columbia
Management

Premier
Banking and
Investments

ALM/
Other

1,732

$1,074

1,321
32

1,353

1,359

–
902

457
165

$ 292

$ 142
n/m
16.95%
66.37
$2,686

670
148

818

2,550

18
1,266

1,266
456

810

461
2.53%

24.52
49.65
$102,090

135
111

246

1,320

(2)
305

1,017
362

$ 655

$ 323
n/m
n/m
n/m
n/m

Bank of America 2006

Client Assets

Average Balance

2006

$ 61,497
117,916
125,663
115,071
10,358

2005

(Dollars in millions)

$ 54,102
119,607
127,394
117,338
10,284

Assets under management
Client brokerage assets (1)
Assets in custody
Less: Client brokerage assets and Assets in custody

included in Assets under management

December 31

Total net client assets

December 31

2006

$542,977
203,799
100,982

2005

$482,394
176,822
94,184

(57,446)

(44,931)

$790,312

$708,469

(1) Client brokerage assets include non-discretionary brokerage and fee-based assets. Previously,
the Corporation reported Client brokerage assets excluding fee-based assets. The 2005 amounts
have been reclassified to reflect this adjustment.

Assets under management increased $60.6 billion, or 13 percent,
and was driven by net inflows in both money market and equity products
as well as market appreciation. Client brokerage assets increased by
$27.0 billion, or 15 percent, reflecting growth in full service assets from
higher broker productivity, as well as growth in self directed assets which
benefited from new pricing strategies including $0 Online Equity Trades
which were offered beginning in the fourth quarter of 2006. Assets in
custody increased $6.7 billion, or seven percent, due to market apprecia-
tion partially offset by net outflows.

The Private Bank
The Private Bank provides integrated wealth management solutions to high
institutions and charitable orga-
net-worth individuals, middle-market
nizations with investable assets greater than $3 million. The Private Bank
provides investment, trust and banking services as well as specialty asset
management services (oil and gas, real estate, farm and ranch, timber-
land, private businesses and tax advisory). The Private Bank also provides
integrated wealth management solutions to ultra high-net-worth individuals
and families with investable assets greater than $50 million through its
Family Wealth Advisors unit. Family Wealth Advisors provides a higher level
of contact, tailored service and wealth management solutions addressing
the complex needs of their clients.

Net Income decreased $6 million, or one percent, primarily due to
increased Noninterest Expense and a decrease in Net Interest Income,
partially offset by higher Noninterest Income and a credit loss recovery.
The decrease in Net Interest Income of $8 million, or one percent, was
primarily attributable to lower average deposit balances as client money
flowed to equities, partially offset by wider deposit spreads. The increase
in Noninterest Income of $19 million, or two percent, was a result of non-
recurring items. The Provision for Credit Losses decreased $29 million as
a result of a credit loss recovery in 2006. The increase in Noninterest
Expense of $36 million, or three percent, was driven by higher personnel
and other operating costs.

respected U.S.

In November 2006, the Corporation announced a definitive agree-
ment to acquire U.S. Trust for $3.3 billion in cash. U.S. Trust is one of the
largest and most
firms which focuses exclusively on
managing wealth for high net-worth and ultra high net-worth individuals and
families. The acquisition will significantly increase the size and capabilities
of the Corporation’s wealth business and position it as one of the largest
financial services companies managing private wealth in the U.S. The
transaction is expected to close in the third quarter of 2007.

Balance Sheet

(Dollars in millions)

Total loans and leases
Total earning assets (1)
Total assets (1)
Total deposits
Allocated equity

2006

$ 66,034
129,589
137,739
125,622
11,007

2005

$ 58,380
121,269
129,232
115,454
12,813

(1) Total earning assets and Total Assets include asset allocations to match liabilities (i.e., deposits).

Global Wealth and Investment Management provides a wide offering of
customized banking and investment services tailored to meet the changing
wealth management goals of our individual and institutional customer
base. Our clients have access to a range of services offered through three
primary businesses: The Private Bank, Columbia Management (Columbia),
and Premier Banking and Investments (PB&I).
In addition, ALM/Other
includes the impact of Banc of America Specialist, the results of ALM
activities and the impact of migrating qualifying affluent customers from
Global Consumer and Small Business Banking to our PB&I customer serv-
ice model.

Net Income increased $87 million, or four percent, due to higher

Total Revenue partially offset by higher Noninterest Expense.

Net Interest Income increased $61 million, or two percent, due to
increases in deposit spreads and higher Average Loans and Leases,
largely offset by a decline in ALM activities and loan spread compression.
Global Wealth and Investment Management also benefited from the migra-
tion of deposits from Global Consumer and Small Business Banking.

Noninterest Income increased $402 million, or 11 percent, due to
increases in Investment and Brokerage Services driven by higher levels of
assets under management. Noninterest Income also benefited from non-
recurring items in 2006.

Provision for Credit Losses decreased $33 million due to a credit

loss recovery in 2006.

Noninterest expense increased $295 million, or eight percent, primar-
ily due to increases in Personnel expense driven by the addition of sales
associates and revenue generating expenses.

Client Assets
Client Assets consist of Assets under management, Client brokerage
assets, and Assets in Custody. Assets under management generate fees
based on a percentage of their market value. They consist largely of
mutual funds and separate accounts, which are comprised of taxable and
nontaxable money market products, equities, and taxable and nontaxable
fixed income securities. Client brokerage assets represent a source of
commission revenue and fees for the Corporation. Assets in custody
represent trust assets administered for customers. Trust assets encom-
pass a broad range of asset types including real estate, private company
ownership interest, personal property and investments.

54 Bank of America 2006

compared to $39.3 billion for 2005. Noninterest Income increased $101
million primarily reflecting nonrecurring items in 2006.

including mutual

Columbia Management
Columbia is an asset management business serving the needs of both
institutional clients and individual customers. Columbia provides asset
management services,
liquidity strategies and
separate accounts. Columbia mutual fund offerings provide a broad array
of investment strategies and products including equities, fixed income
(taxable and non-taxable) and money market (taxable and non-taxable)
funds. Columbia distributes its products and services directly to institu-
tional clients, and distributes to individuals through The Private Bank,
Family Wealth Advisors, Premier Banking and Investments, and non-
proprietary channels including other brokerage firms.

funds,

All Other

(Dollars in millions)
Net interest income (1)
Noninterest income
Equity investment gains
All other income

Total noninterest income

Total revenue (1)

Net Income increased $43 million, or 15 percent, primarily as a
result of an increase in Investment and Brokerage Services of $211 mil-
lion, or 16 percent, in 2006. This increase is due to higher assets under
management driven by net inflows in money market and equity funds, and
market appreciation. Noninterest Expense increased $105 million, or 12
percent, primarily due to higher Personnel costs including revenue-based
compensation and other operating costs.

Provision for credit losses
Gains (losses) on sales of debt securities
Merger and restructuring charges (2)
All other noninterest expense

Income before income taxes (1)
Income tax expense (benefit)

Net income

Shareholder value added

2006

$ 141

2,866
(921)

1,945

2,086

(116)
(495)
805
(41)

943
176

2005

$ (305)

1,964
(975)

989

684

69
823
412
302

724
(20)

$ 767

$ (306)

$ 744

$ (953)

Premier Banking and Investments
Premier Banking and Investments includes Banc of America Investments,
our full-service retail brokerage business and our Premier Banking channel.
PB&I brings personalized banking and investment expertise through priority
service with client-dedicated teams. PB&I provides a high-touch client
experience through a network of approximately 4,400 client advisors to
our affluent customers with a personal wealth profile that includes invest-
able assets plus a mortgage that exceeds $500,000 or at
least
$100,000 of investable assets.

Net Income increased $138 million, or 17 percent, primarily due to
an increase in Net Interest Income. The increase in Net Interest Income of
$268 million, or 15 percent, was primarily driven by higher deposit
spreads partially offset by lower average deposit balances. Deposit
spreads increased 40 bps to 2.34 percent. Net Interest Income also bene-
fited from higher Average Loans and Leases, mainly residential mortgages
and home equity.

Noninterest Income increased $60 million, or seven percent, primar-
ily driven by higher
Investment and Brokerage Services. Noninterest
Expense increased $95 million, or eight percent, primarily due to
increases in Personnel expense driven by the PB&I expansion of Client
Managers
performance-based
compensation.

Financial

Advisors

higher

and

ALM/Other
We migrate qualifying affluent customers, and their related deposit balan-
ces and associated Net Interest Income from the Global Consumer and
Small Business Banking segment to our PB&I customer service model. In
order to provide a view of organic growth in PB&I, we allocate the original
migrated deposit balances, including attrition, as well as the correspond-
ing Net Interest Income at original spreads from PB&I to ALM/Other.

Net Income decreased $88 million, or 13 percent, primarily due to a
decrease in Net Interest Income partially offset by an increase in Non-
interest Income. Net Interest Income decreased $156 million driven by a
significant reduction from ALM activities, partially offset by higher Net
Interest Income on deposits due to migration of certain banking relation-
ships from Global Consumer and Small Business Banking. During 2006
and 2005, $10.7 billion and $16.9 billion of average deposit balances
were migrated from the Global Consumer and Small Business Banking
segment to Global Wealth and Investment Management. The total cumu-
lative average impact of migrated balances was $48.5 billion in 2006

(1) Fully taxable-equivalent basis
(2) For more information on Merger and Restructuring Charges, see Note 2 of the Consolidated Financial

Statements.

Included in All Other are our Equity Investments businesses and Other.

Equity Investments includes Principal
Investing, Corporate Invest-
Investing is comprised of a
ments and Strategic Investments. Principal
diversified portfolio of
investments in privately-held and publicly-traded
companies at all stages of their life cycle from start-up to buyout. These
investments are made either directly in a company or held through a fund
and are accounted for at fair value. See Note 1 of the Consolidated Finan-
cial Statements for more information on the accounting for the Principal
Investing portfolio. Corporate Investments primarily includes investments
in publicly-traded equity securities and funds and are accounted for as AFS
marketable equity securities. Strategic Investments includes the Corpo-
ration’s strategic investments such as CCB, Grupo Financiero Santander
Serfin (Santander), Banco Itaú and other
investments. The restricted
shares of CCB and Banco Itaú are currently carried at cost but, as required
by GAAP, will be accounted for as AFS marketable equity securities and
carried at fair value with an offset to Accumulated Other Comprehensive
Income (OCI) starting one year prior to the lapse of their restrictions. See
Note 5 of the Consolidated Financial Statements for more information on
our strategic investments. Our investment in Santander is accounted for
under the equity method of accounting. Income associated with Equity
Investments is recorded in Equity Investment Gains and includes gains
(losses) on sales of these equity investments, dividends, and valuations
that primarily relate to the Principal Investing portfolio.

The following table presents the components of All Other’s Equity
Investment Gains and a reconciliation to the total consolidated Equity
Investment Gains for 2006 and 2005.

Components of Equity Investment Gains

(Dollars in millions)

Principal Investing
Corporate and Strategic Investments

Total equity investment gains included in All Other

Total equity investment gains included in the business

segments

Total consolidated equity investment gains

2006

$1,894
972

2,866

323

$3,189

2005

$1,500
464

1,964

248

$2,212

The Other component of All Other includes the residual impact of the
allowance for credit losses and the cost allocation processes, Merger and

Bank of America 2006

interest

Restructuring Charges, intersegment eliminations, and the results of cer-
tain consumer finance and commercial lending businesses that are being
liquidated. Other also includes certain amounts associated with ALM activ-
ities, including the residual
impact of funds transfer pricing allocation
methodologies, amounts associated with the change in the value of
derivatives used as economic hedges of
rate and foreign
exchange rate fluctuations that do not qualify for SFAS 133 hedge account-
ing treatment, certain gains or losses on sales of whole mortgage loans,
and Gains (Losses) on Sales of Debt Securities. The objective of the funds
transfer pricing allocation methodology is to neutralize the businesses
from changes in interest rate and foreign exchange fluctuations. Accord-
ingly, for segment reporting purposes, the businesses received in 2005
the neutralizing benefit to Net Interest Income related to certain of the
economic hedges previously mentioned, with the offset recorded in Other.
Other also includes adjustments in Noninterest Income and Income Tax
Expense to remove the FTE impact of items (primarily low-income housing
tax credits) that have been grossed up within Noninterest Income to a fully
taxable equivalent amount in the other segments.

Net Income increased $23 million, or three percent, primarily due to
increases in Equity Investment Gains, Net Interest Income, decreases in
Provision for Credit Losses, and all other noninterest expense. These
changes were largely offset by a decrease in Gains (Losses) on Sales of
Debt Securities and an increase in Merger and Restructuring Charges. The
increase in Net Interest Income of $446 million is due primarily to the
$419 million negative impact to 2005 results retained in All Other relating
to funds transfer pricing that was not allocated to the businesses. Equity
Investment Gains increased $902 million due to favorable market con-
ditions driving liquidity in the Principal Investing portfolio as well as a $341
million gain recorded on the liquidation of a strategic European
investment.

Provision for Credit Losses decreased $185 million to a negative
$116 million. In 2005 a $50 million reserve for estimated losses asso-
ciated with Hurricane Katrina was established. We did not incur significant
losses from Hurricane Katrina and, therefore, released the previously
established reserve in 2006.

The decrease in Gains (Losses) on Sales of Debt Securities of $1.3
billion resulted from a loss on the sale of mortgage-backed securities,
which was driven by a decision to hold a lower level of investments in
securities relative to loans (see “Interest Rate Risk Management – Secu-
rities” on page 78 for further discussion), compared with gains recorded
on the sales of mortgage-backed securities in 2005.

Merger and Restructuring Charges were $805 million in 2006 com-
pared to $412 million in 2005. The charge in 2006 was due to the MBNA
merger whereas the 2005 charge was primarily related to the FleetBoston
merger. See Note 2 of the Consolidated Financial Statements for further
information associated with the MBNA merger. The decline in all other
noninterest expense of $343 million is due to decreases in unallocated
residual general operating expenses.

Income Tax Expense (Benefit) was $176 million in 2006 compared to
$(20) million in 2005. This change was driven by both a $175 million
cumulative tax charge in 2006 resulting from the change in tax legislation
relating to the extraterritorial
income and foreign sales corporation
regimes and by higher pre-tax income.

Off- and On-Balance Sheet Financing Entities

receivables or

markets provide an attractive, lower-cost financing alternative for our cus-
tomers. Our customers sell or otherwise transfer assets, such as high-
to a commercial paper
grade trade or other
financing entity, which in turn issues high-grade short-term commercial
paper that is collateralized by the underlying assets. We facilitate these
transactions and collect fees from the financing entity for the services it
provides including administration, trust services and marketing the com-
mercial paper.

leases,

We receive fees for providing combinations of liquidity and standby
letters of credit (SBLCs) or similar loss protection commitments to the
commercial paper financing entities. These forms of asset support are
senior to the first layer of asset support provided by customers through
over-collateralization or by support provided by third parties. The rating
agencies require that a certain percentage of the commercial paper enti-
ty’s assets be supported by the seller’s over-collateralization and our
SBLC in order to receive their respective investment rating. The SBLC
would be drawn on only when the over-collateralization provided by the
seller is not sufficient to cover losses of the related asset. Liquidity com-
mitments made to the commercial paper entity are designed to fund
scheduled redemptions of commercial paper if there is a market disruption
or the new commercial paper cannot be issued to fund the redemption of
the maturing commercial paper. The liquidity facility has the same legal
priority as the commercial paper. We do not enter into any other form of
guarantee with these entities.

We manage our credit risk on these commitments by subjecting them
to our normal underwriting and risk management processes. At
December 31, 2006 and 2005, we had off-balance sheet
liquidity
commitments and SBLCs to these entities of $36.7 billion and $25.9 bil-
lion. Substantially all of these liquidity commitments and SBLCs mature
within one year. These amounts are included in Table 9. Net revenues
earned from fees associated with these off-balance sheet financing enti-
ties were $91 million and $72 million in 2006 and 2005.

From time to time, we may purchase some of the commercial paper
issued by certain of these entities for our own account or acting as a
dealer on behalf of third parties. SBLCs are initially recorded at fair value
in accordance with Financial Accounting Standards Board (FASB) Inter-
pretation No. 45, “Guarantor’s Accounting and Disclosure Requirements
for Guarantees” (FIN 45). Liquidity commitments and SBLCs subsequent
to inception are accounted for pursuant to SFAS No. 5, “Accounting for
Contingencies” (SFAS 5), and are discussed further in Note 13 of the
Consolidated Financial Statements.

The commercial paper conduits are variable interest entities (VIEs) as
defined in FASB Interpretation No. 46 (Revised December 2003),
“Consolidation of Variable Interest Entities, an interpretation of ARB
No. 51” (FIN 46R), which provides a framework for identifying VIEs and
liabilities,
determining when a company should include the assets,
non-controlling interests and results of activities of a VIE in its con-
solidated financial statements. In accordance with FIN 46R, the primary
beneficiary is the party that consolidates a VIE based on its assessment
that it will absorb a majority of the expected losses or expected residual
returns of the entity, or both. We have determined that we are not the
primary beneficiary of the commercial paper conduits described above
and, therefore, have not included the assets and liabilities or results of
operations of these conduits in the Consolidated Financial Statements of
the Corporation.

Off-Balance Sheet Commercial Paper Conduits
In addition to traditional lending, we also support our customers’ financing
needs by facilitating their access to the commercial paper markets. These

On-Balance Sheet Commercial Paper Conduits
In addition to the off-balance sheet financing entities previously described,
we also utilize commercial paper conduits that have been consolidated

56 Bank of America 2006

based on our determination that we are the primary beneficiary of the enti-
ties in accordance with FIN 46R. At December 31, 2006 and 2005, the
consolidated assets and liabilities of these conduits were reflected in AFS
Securities, Other Assets, and Commercial Paper and Other Short-term
Borrowings in Global Corporate and Investment Banking. At December 31,
2006 and 2005, we held $10.5 billion and $6.6 billion of assets of these
entities while our maximum loss exposure associated with these entities,
including unfunded lending commitments, was approximately $12.9 billion
and $8.3 billion. We manage our credit risk on the on-balance sheet
commitments by subjecting them to the same processes as the
off-balance sheet commitments.

Income. SBLCs are initially recorded at fair value in accordance with FIN
45. Liquidity commitments and SBLCs subsequent
to inception are
accounted for pursuant to SFAS 5 and are discussed further in Note 13 of
the Consolidated Financial Statements.

In addition, as a result of the MBNA merger on January 1, 2006, the
Corporation acquired interests in off-balance sheet credit card securitiza-
tion vehicles which issue both commercial paper and medium-term notes.
We hold subordinated interests issued by these entities, which are QSPEs,
but do not otherwise provide liquidity or other forms of loss protection to
these vehicles. For additional
information on credit card securitizations,
see Note 9 of the Consolidated Financial Statements.

Commercial Paper Qualified Special Purpose
Entities
To manage our capital position and diversify funding sources, we will, from
time to time, sell assets to off-balance sheet entities that obtain financing
by issuing commercial paper or notes with similar repricing characteristics
to investors. These entities are Qualified Special Purpose Entities (QSPEs)
that have been isolated beyond our reach or that of our creditors, even in
the event of bankruptcy or other receivership. The accounting for these
entities is governed by SFAS 140, which provides that QSPEs are not
included in the consolidated financial statements of the seller. Assets
sold to the entities consist of high-grade corporate or municipal bonds,
collateralized debt obligations and asset-backed securities. These entities
issue collateralized commercial paper or notes with similar repricing char-
acteristics to third party market participants and enter
into passive
derivative instruments with us. Assets sold to these entities typically have
an investment rating ranging from Aaa/AAA to Aa/AA. We may provide liq-
uidity, SBLCs or similar loss protection commitments to these entities, or
we may enter into derivatives with these entities in which we assume cer-
tain risks. The liquidity facility and derivatives have the same legal stand-
ing with the commercial paper.

The derivatives provide interest rate, currency and a pre-specified
amount of credit protection to the entity in exchange for the commercial
paper rate. These derivatives are provided for in the legal documents and
help to alleviate any cash flow mismatches. In some cases, if an asset’s
rating declines below a certain investment quality as evidenced by its
investment rating or defaults, we are no longer exposed to the risk of loss.
At that time, the commercial paper holders assume the risk of loss. In
other cases, we agree to assume all of the credit exposure related to the
referenced asset. Legal documents for each entity specify asset quality
levels that require the entity to automatically dispose of the asset once
the asset falls below the specified quality rating. At the time the asset is
disposed, we are required to reimburse the entity for any credit-related
losses depending on the pre-specified level of protection provided.

We manage any credit or market risk on commitments or derivatives
through normal underwriting and risk management processes. At
December 31, 2006 and 2005, we had off-balance sheet
liquidity
commitments, SBLCs and other financial guarantees to these entities of
$7.6 billion and $7.1 billion, for which we received fees of $9 million and
$10 million for 2006 and 2005. Substantially all of these commitments
mature within one year and are included in Table 9. Derivative activity
related to these entities is included in Note 4 of the Consolidated Finan-
cial Statements.

We generally do not purchase any of the commercial paper issued by
these types of financing entities other than during the underwriting proc-
ess when we act as issuing agent nor do we purchase any of the commer-
cial paper for our own account. Derivative instruments related to these
entities are marked to market through the Consolidated Statement of

Credit and Liquidity Risks
Because we provide liquidity and credit support to the commercial paper
conduits and QSPEs described above, our credit ratings and changes
thereto will affect the borrowing cost and liquidity of these entities. In
addition, significant changes in counterparty asset valuation and credit
standing may also affect the liquidity of the commercial paper issuance.
Disruption in the commercial paper markets may result in the Corporation
having to fund under these commitments and SBLCs discussed above. We
seek to manage these risks, along with all other credit and liquidity risks,
within our policies and practices. See Notes 1 and 9 of the Consolidated
Financial Statements for additional discussion of off-balance sheet financ-
ing entities.

Other Off-Balance Sheet Financing Entities
To improve our capital position and diversify funding sources, we also sell
assets, primarily loans, to other off-balance sheet QSPEs that obtain
financing primarily by issuing term notes. We may retain a portion of the
investment grade notes issued by these entities, and we may also retain
subordinated interests in the entities which reduce the credit risk of the
senior investors. We may provide liquidity support in the form of foreign
exchange or interest rate swaps. We generally do not provide other forms
of credit support to these entities, which are described more fully in Note
9 of the Consolidated Financial Statements. In addition to the above, we
had significant involvement with VIEs other than the commercial paper
conduits. These VIEs were not consolidated because we will not absorb a
majority of the expected losses or expected residual returns and are there-
fore not the primary beneficiary of the VIEs. These entities are described
more fully in Note 9 of the Consolidated Financial Statements.

Obligations and Commitments
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 defined at a fixed, minimum or variable
price over a specified period of time are defined as purchase obligations.
Included in purchase obligations are vendor contracts of $6.3 billion,
commitments to purchase securities of $9.1 billion and commitments to
purchase loans of $43.3 billion. The most significant of our vendor con-
tracts include communication services, processing services and software
contracts. Other long-term liabilities include our obligations related to the
Qualified Pension Plans, Nonqualified Pension Plans and Postretirement
Health and Life Plans (the Plans) as well as amounts accrued for
cardholder reward agreements. 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 2006 and

Bank of America 2006

2005, we contributed $2.6 billion and $1.1 billion to the Plans, and we
expect to make at least $192 million of contributions during 2007. Debt,

lease and other obligations are more fully discussed in Notes 12 and 13
of the Consolidated Financial Statements.

Table 8 presents total long-term debt and other obligations at December 31, 2006.

Table 8 Long-term Debt and Other Obligations (1)

(Dollars in millions)

Long-term debt and capital leases
Purchase obligations (2)
Operating lease obligations
Other long-term liabilities

Total

Due in 1 year
or less
$17,194
23,918
1,375
464
$42,951

Due after 1 year
through 3 years
$44,962
22,578
2,410
676
$70,626

December 31, 2006

Due after
3 years through
5 years
$20,799
11,234
1,732
290
$34,055

Due after
5 years
$63,045
1,005
5,951
835
$70,836

Total
$146,000
58,735
11,468
2,265
$218,468

(1) This table does not include the obligations associated with the Corporation’s Deposits. For more information on Deposits, see Note 11 of the Consolidated Financial Statements.
(2) Obligations that are legally binding agreements whereby we agree to purchase products or services with a specific minimum quantity defined at a fixed, minimum or variable price over a specified period of time are defined as

purchase obligations.

Many of our

lending relationships contain funded and unfunded
elements. The funded portion is reflected on our balance sheet. The
unfunded component of these commitments is not recorded on our bal-
ance sheet until a draw is made under the credit facility; however, a
reserve is established for probable losses. These commitments, as well
as guarantees, are more fully discussed in Note 13 of the Consolidated
Financial Statements.

Table 9 Credit Extension Commitments

The following table summarizes the total unfunded, or off-balance
sheet, credit extension commitment amounts by expiration date. At
December 31, 2006, charge cards (nonrevolving card lines) to individuals
and government entities guaranteed by the U.S. government in the amount
of $9.6 billion (related outstandings of $193 million) were not included in
credit card line commitments in the table below.

(Dollars in millions)
Loan commitments (1)
Home equity lines of credit
Standby letters of credit and financial guarantees
Commercial letters of credit

Legally binding commitments

Credit card lines (2)
Total

Expires in 1 year
or less
$ 151,604
1,738
29,213
3,880
186,435
840,215
$1,026,650

Expires after
1 year through
3 years
$60,660
1,801
10,712
180
73,353
13,377
$86,730

December 31, 2006

Expires after
3 years through
5 years
$ 90,988
2,742
6,744
27
100,501
—
$100,501

Expires after
5 years
$ 34,953
91,919
6,337
395
133,604
—
$133,604

Total
$ 338,205
98,200
53,006
4,482
493,893
853,592
$1,347,485

Included at December 31, 2006, are equity commitments of $2.8 billion related to obligations to further fund equity investments.

(1)
(2) As part of the MBNA merger, on January 1, 2006, the Corporation acquired $588.4 billion of unused credit card lines.

Managing Risk
Overview
Our management governance structure enables us to manage all major
aspects of our business through an integrated planning and review proc-
ess that includes strategic, financial, associate, customer and risk plan-
ning. We derive much of our revenue from managing risk from customer
transactions for profit. In addition to qualitative factors, we utilize quantita-
tive measures to optimize risk and reward trade offs in order to achieve
growth targets and financial objectives while reducing the variability of
earnings and minimizing unexpected losses. Risk metrics that allow us to
measure performance include economic capital targets, SVA targets and
corporate risk limits. By allocating economic capital to a business unit, we
effectively define that unit’s ability to take on risk. Review and approval of
business plans incorporates approval of economic capital allocation, and
economic capital usage is monitored through financial and risk reporting.
Country, trading, asset allocation and other limits supplement the alloca-
tion of economic capital. These limits are based on an analysis of risk and
reward in each business unit and management is responsible for tracking
and reporting performance measurements as well as any exceptions to
guidelines or limits. Our risk management process continually evaluates
risk and appropriate metrics needed to measure it.

58 Bank of America 2006

Our business exposes us to the following major risks: strategic, liquid-
ity, credit, market and operational. Strategic Risk is the risk that adverse
business decisions, ineffective or inappropriate business plans or failure
to respond to changes in the competitive environment, business cycles,
customer preferences, product obsolescence, execution and/or other
intrinsic risks of business will impact our ability to meet our objectives.
Liquidity risk is the inability to accommodate liability maturities and
deposit withdrawals, fund asset growth and meet contractual obligations
through unconstrained access to funding at reasonable market rates.
Credit risk is the risk of loss arising from a borrower’s or counterparty’s
inability to meet its obligations. Market risk is the risk that values of
assets and liabilities or revenues will be adversely affected by changes in
market conditions, such as interest rate movements. Operational risk is
the risk of loss resulting from inadequate or failed internal processes,
people and systems or external events. The following sections, Strategic
Risk Management, Liquidity Risk and Capital Management, Credit Risk
Management beginning on page 59, Market Risk Management beginning
on page 75 and Operational Risk Management beginning on page 81,
address in more detail the specific procedures, measures and analyses of
the major categories of risk that we manage.

Risk Management Processes and Methods
We have established control processes and use various methods to align
risk-taking and risk management throughout our organization. These con-
trol processes and methods are designed around “three lines of defense”:
lines of business; enterprise functions (including Risk Management,
Compliance, Finance, Human Resources and Legal); and Corporate Audit.

The lines of business are the first line of defense and are respon-
sible for identifying, quantifying, mitigating and managing all risks within
their lines of business, while certain enterprise-wide risks are managed
centrally. For example, except for trading-related business activities, inter-
est rate risk associated with our business activities is managed in the
Corporate Treasury and Corporate Investment functions. Line of business
management makes and executes the business plan and is closest to the
changing nature of risks and, therefore, we believe is best able to take
actions to manage and mitigate those risks. Our lines of business prepare
periodic self-assessment reports to identify the status of risk issues,
including mitigation plans, if appropriate. These reports roll up to executive
management to ensure appropriate risk management and oversight, and
to identify enterprise-wide issues. Our management processes, structures
and policies aid us in complying with laws and regulations and provide
clear lines for decision-making and accountability. Wherever practical, we
attempt to house decision-making authority as close to the transaction as
possible while retaining supervisory control functions from both in and
outside of the lines of business.

The key elements of the second line of defense are Risk Manage-
ment, Compliance, Finance, Global Technology and Operations, Human
Resources, and Legal functions. These groups are independent of the
lines of businesses and are organized on both a line of business and
enterprise-wide basis. For example, for Risk Management, a senior risk
executive is assigned to each of the lines of business and is responsible
for the oversight of all the risks associated with that line of business.
Enterprise-level risk executives have responsibility to develop and imple-
ment polices and practices to assess and manage enterprise-wide credit,
market and operational risks.

Corporate Audit, the third line of defense, provides an independent
assessment of our management and internal control systems. Corporate
Audit activities are designed to provide reasonable assurance that
resources are adequately protected; significant financial, managerial and
operating information is materially complete, accurate and reliable; and
employees’ actions are in compliance with corporate policies, standards,
procedures, and applicable laws and regulations.

treasury, compliance,

We use various methods to manage risks at the line of business
levels and corporate-wide. Examples of these methods include planning
and forecasting, risk committees and forums, limits, models, and hedging
strategies. Planning and forecasting facilitates analysis of actual versus
planned results and provides an indication of unanticipated risk levels.
Generally, risk committees and forums are composed of lines of business,
legal and finance personnel,
risk management,
among others, who actively monitor performance against plan,
limits,
potential issues, and introduction of new products. Limits, the amount of
exposure that may be taken in a product, relationship, region or industry,
seek to align corporate-wide risk goals with those of each line of business
and are part of our overall risk management process to help reduce the
volatility of market, credit and operational
losses. Models are used to
estimate market value and Net Interest Income sensitivity, and to estimate
expected and unexpected losses for each product and line of business,
where appropriate. Hedging strategies are used to manage the risk of
borrower or counterparty concentration risk and to manage market risk in
the portfolio.

The formal processes used to manage risk represent only one portion
of our overall risk management process. Corporate culture and the actions
of our associates are also critical to effective risk management. Through
our Code of Ethics, we set a high standard for our associates. The Code of
Ethics provides a framework for all of our associates to conduct them-
selves with the highest integrity in the delivery of our products or services
to our customers. We instill a risk-conscious culture through communica-
tions,
roles and
responsibilities. Additionally, we continue to strengthen the linkage
between the associate performance management process and individual
compensation to encourage associates to work toward corporate-wide risk
goals.

training, policies, procedures, and organizational

Oversight
The Board oversees the risk management of the Corporation through its
committees, management committees and the Chief Executive Officer. The
Board’s Audit Committee monitors (1) the effectiveness of our internal
controls, (2) the integrity of our Consolidated Financial Statements and (3)
compliance with legal and regulatory requirements. In addition, the Audit
Committee oversees the internal audit function and the independent regis-
tered public accountant. The Board’s Asset Quality Committee oversees
credit risks and related topics that may impact our assets and earnings.
The Finance Committee, a management committee, oversees the
development and performance of the policies and strategies for managing
the strategic, credit, market, and operational risks to our earnings and
capital. The Asset Liability Committee (ALCO), a subcommittee of the
Finance Committee, oversees our policies and processes designed to
assure sound market risk and balance sheet management. The Com-
pliance and Operational Risk Committee, a subcommittee of the Finance
Committee, oversees our policies and processes designed to assure
sound operational and compliance risk management. The Credit Risk
Committee (CRC), a subcommittee of the Finance Committee, oversees
and approves our adherence to sound credit risk management policies and
practices. Certain CRC approvals are subject
to the oversight of the
Board’s Asset Quality Committee. The Risk and Capital Committee, a
management committee, reviews our corporate strategies and objectives,
evaluates business performance, and reviews business plans including
economic capital allocations to the Corporation and business lines. Man-
agement continues to direct corporate-wide efforts to address the Basel
Committee on Banking Supervision’s new risk-based capital standards
(Basel II). The Audit Committee and Finance Committee oversee manage-
ment’s plans to comply with Basel II. For additional information, see Basel
II on page 62 and Note 15 of the Consolidated Financial Statements.

Strategic Risk Management
We use an integrated planning process to help manage strategic risk. A
key component of the planning process aligns strategies, goals, tactics
and resources throughout the enterprise. The process begins with the
creation of a corporate-wide business plan which incorporates an assess-
ment of the strategic risks. This business plan establishes the corporate
strategic direction. The planning process then cascades through the busi-
ness units, creating business unit plans that are aligned with the Corpo-
ration’s strategic direction. At each level, tactics and metrics are identified
to measure success in achieving goals and assure adherence to the
plans. As part of this process, the business units continuously evaluate
the impact of changing market and business conditions, and the overall
risk in meeting objectives. See the Operational Risk Management section
on page 81 for a further description of this process. Corporate Audit in

Bank of America 2006

turn monitors, and independently reviews and evaluates, the plans and
measurement processes.

One of the key tools we use to manage strategic risk is economic
capital allocation. Through the economic capital allocation process, we
effectively manage each business unit’s ability to take on risk. Review and
approval of business plans incorporates approval of economic capital allo-
cation, and economic capital usage is monitored through financial and risk
reporting. Economic capital allocation plans for the business units are
incorporated into the Corporation’s operating plan that is approved by the
Board on an annual basis.

Liquidity Risk and Capital Management

Liquidity Risk
Liquidity is the ongoing ability to accommodate liability maturities and
deposit withdrawals,
fund asset growth and business operations, and
meet contractual obligations through unconstrained access to funding at
reasonable market rates. Liquidity management involves forecasting fund-
ing requirements and maintaining sufficient capacity to meet the needs
and accommodate fluctuations in asset and liability levels due to changes
in our business operations or unanticipated events. Sources of liquidity
include deposits and other customer-based funding, and wholesale
market-based funding.

We manage liquidity at two levels. The first is the liquidity of the
parent company, which is the holding company that owns the banking and
nonbanking subsidiaries. The second is the liquidity of the banking sub-
sidiaries. The management of liquidity at both levels is essential because
the parent company and banking subsidiaries each have different funding
needs and sources, and each are subject to certain regulatory guidelines
and requirements. Through ALCO, the Finance Committee is responsible
for establishing our liquidity policy as well as approving operating and con-
tingency procedures, and monitoring liquidity on an ongoing basis. Corpo-
funding
rate Treasury is responsible for planning and executing our
activities and strategy.

In order to ensure adequate liquidity through the full range of poten-
tial operating environments and market conditions, we conduct our liquid-
ity management and business activities in a manner that will preserve and
enhance funding stability, flexibility, and diversity. Key components of this
operating strategy include a strong focus on customer-based funding,
maintaining direct relationships with wholesale market funding providers,
and maintaining the ability to liquefy certain assets when, and if, require-
ments warrant.

We develop and maintain contingency funding plans for both the
parent company and bank liquidity positions. These plans evaluate our
liquidity position under various operating circumstances and allow us to
ensure that we would be able to operate through a period of stress when
access to normal sources of funding is constrained. The plans project
funding requirements during a potential period of stress, specify and quan-

Table 10 Credit Ratings

Moody’s
Standard & Poor’s (1)
Fitch, Inc. (2)

tify sources of
managing
responsibilities. They are reviewed and approved annually by ALCO.

liquidity, outline actions and procedures for effectively
and

problem period,

through

define

roles

and

the

Our borrowing costs and ability to raise funds are directly impacted by
our credit ratings. The credit ratings of Bank of America Corporation and
Bank of America, N.A. are reflected in the table below.

Under normal business conditions, primary sources of funding for the
parent company include dividends received from its banking and non-
banking subsidiaries, and proceeds from the issuance of senior and sub-
ordinated debt, as well as commercial paper and equity. Primary uses of
funds for the parent company include repayment of maturing debt and
commercial paper, share repurchases, dividends paid to shareholders,
and subsidiary funding through capital or debt.

The parent company maintains a cushion of excess liquidity that
would be sufficient to fully fund holding company and nonbank affiliate
operations for an extended period during which funding from normal sour-
ces is disrupted. The primary measure used to assess the parent compa-
ny’s liquidity is the “Time to Required Funding” during such a period of
liquidity disruption. This measure assumes that the parent company is
unable to generate funds from debt or equity issuance, receives no divi-
dend income from subsidiaries, and no longer pays dividends to share-
holders while continuing to meet nondiscretionary uses needed to
maintain bank operations and repayment of contractual principal and
interest payments owed by the parent company and affiliated companies.
Under this scenario, the amount of time the parent company and its non-
bank subsidiaries can operate and meet all obligations before the current
liquid assets are exhausted is considered the “Time to Required Funding.”
ALCO approves the target range set for this metric, in months, and mon-
itors adherence to the target. Maintaining excess parent company cash
ensures that “Time to Required Funding” remains in the target range of 21
to 27 months and is the primary driver of the timing and amount of the
Corporation’s debt
issuances. As of December 31, 2006 “Time to
Required Funding” was 24 months compared to 29 months at
December 31, 2005. The reduction reflects the funding in 2005 in antici-
pation of the $5.2 billion cash payment related to the MBNA merger that
was paid on January 1, 2006 combined with an increase in share
repurchases.

The primary sources of funding for our banking subsidiaries include
customer deposits and wholesale market–based funding. Primary uses of
funds for the banking subsidiaries include growth in the core asset portfo-
lios, including loan demand, and in the ALM portfolio. We use the ALM
portfolio primarily to manage interest rate risk and liquidity risk.

One ratio that can be used to monitor the stability of funding composi-
tion is the “loan to domestic deposit” ratio. This ratio reflects the percent
of Loans and Leases that are funded by domestic core deposits, a rela-
tively stable funding source. A ratio below 100 percent indicates that our
loan portfolio is completely funded by domestic core deposits. The ratio
was 118 percent at December 31, 2006 compared to 102 percent at

December 31, 2006

Bank of America Corporation

Bank of America, N.A.

Subordinated
Debt

Commercial
Paper

Short-term
Borrowings

Long-term
Debt

Aa3
A+
A+

P-1
A-1+
F1+

Aa1
AA
AA-

Senior
Debt

Aa2
AA-
AA-

(1) On February 14, 2007, Standard & Poor’s Rating Services raised their ratings on Bank of America Corporation’s Senior Debt to AA and Subordinated Debt to AA- while Bank of America, N. A.’s Long-term Debt rating was raised

to AA+.

(2) On February 15, 2007, Fitch, Inc. raised their ratings on Bank of America Corporation’s Senior Debt to AA and Subordinated Debt to AA- while Bank of America, N. A.’s Long-term Debt rating was raised to AA.

60 Bank of America 2006

December 31, 2005. The increase was primarily attributable to the addi-
tion of MBNA, organic growth in the loan and lease portfolio, and a deci-
sion to retain a larger share of mortgage production on the Corporation’s
balance sheet.

The strength of our balance sheet is a result of rigorous financial and
risk discipline. Our core deposit base, which is a low cost funding source,
is often used to fund the purchase of incremental assets (primarily loans
and securities), the composition of which impacts our loan to deposit
ratio. Mortgage-backed securities and mortgage loans have prepayment
risk which must be managed. Repricing of deposits is a key variable in this
process. The capital generated in excess of capital adequacy targets and
to support business growth, is available for the payment of dividends and
share repurchases.

ALCO determines prudent parameters for wholesale market-based
borrowing and regularly reviews the funding plan for the bank subsidiaries
to ensure compliance with these parameters. The contingency funding
plan for the banking subsidiaries evaluates liquidity over a 12-month
period in a variety of business environment scenarios assuming different
levels of earnings performance and credit ratings as well as public and
investor relations factors. Funding exposure related to our role as liquidity
provider to certain off-balance sheet financing entities is also measured
under a stress scenario. In this analysis, ratings are downgraded such that
the off-balance sheet financing entities are not able to issue commercial
paper and backup facilities that we provide are drawn upon. In addition,
potential draws on credit facilities to issuers with ratings below a certain
level are analyzed to assess potential funding exposure.

We originate loans for retention on our balance sheet and for dis-
tribution. As part of our “originate to distribute” strategy, commercial loan
originations are distributed through syndication structures, and residential
mortgages originated by Mortgage and Home Equity are frequently dis-
tributed in the secondary market. In connection with our balance sheet
management activities, we may retain mortgage loans originated as well
loans based on our assessment of market
as purchase and sell
conditions.

Table 11 Reconciliation of Tier 1 and Total Capital

certain regulatory

Regulatory Capital
At December 31, 2006, the Corporation operated its banking activities
primarily under two charters: Bank of America, N.A. and FIA Card Services,
N.A. (the surviving entity of the MBNA America Bank N.A. and the Bank of
America, N.A. (USA) merger). As a regulated financial services company,
we are governed by
requirements. At
December 31, 2006, the Corporation, Bank of America, N.A. and FIA Card
Services, N.A. were classified as “well-capitalized” for regulatory purposes,
the highest classification. At December 31, 2005, the Corporation, Bank
of America, N.A. and Bank of America, N.A. (USA) were also classified as
“well-capitalized” for regulatory purposes. There have been no conditions
or events since December 31, 2006 that management believes have
changed the Corporation’s, Bank of America, N.A.’s and FIA Card Services,
N.A.’s capital classifications.

capital

Certain corporate sponsored trust companies which issue trust pre-
ferred securities (Trust Securities) are deconsolidated under FIN 46R. As a
result, the Trust Securities are not included on our Consolidated Balance
Sheets. On March 1, 2005, the FRB issued Risk-Based Capital Standards:
Trust Preferred Securities and the Definition of Capital (the Final Rule)
which allows Trust Securities to continue to qualify as Tier 1 Capital with
revised quantitative limits that would be effective after a five-year tran-
sition period. As a result, we continue to include Trust Securities in Tier 1
Capital.

The Final Rule limits restricted core capital elements to 15 percent
for internationally active bank holding companies. In addition, the FRB
revised the qualitative standards for capital instruments included in regu-
latory capital. Internationally active bank holding companies are those with
consolidated assets greater
than $250 billion or on-balance sheet
exposure greater than $10 billion. At December 31, 2006, our restricted
core capital elements comprised 17.3 percent of total core capital ele-
ments. We expect to be fully compliant with the revised limits prior to the
implementation date of March 31, 2009.

Table 11 reconciles the Corporation’s Total Shareholders’ Equity to
Tier 1 and Total Capital as defined by the regulations issued by the FRB,
the FDIC, and the OCC at December 31, 2006 and 2005.

(Dollars in millions)

Tier 1 Capital
Total Shareholders’ equity
Goodwill
Nonqualifying intangible assets (1)
Effect of net unrealized losses on AFS debt and marketable equity securities and net losses on derivatives recorded in

Accumulated OCI, net of tax

Accounting change for implementation of FASB Statement No. 158
Trust securities (2)
Other

Tier 1 Capital

Long-term debt qualifying as Tier 2 Capital
Allowance for loan and lease losses
Reserve for unfunded lending commitments
Other

Total Capital

(1) Nonqualifying intangible assets of the Corporation are comprised of certain core deposit intangibles, affinity relationships, and other intangibles.
(2) Trust Securities are net of unamortized discounts.

December 31

2006

2005

$135,272
(65,662)
(3,782)

$101,533
(45,354)
(2,642)

6,430
1,428
15,942
1,436

91,064

24,546
9,016
397
203

7,316
–
12,446
1,076

74,375

16,848
8,045
395
238

$125,226

$ 99,901

Bank of America 2006

See Note 15 of the Consolidated Financial Statements for more
information on the Corporation’s regulatory requirements and restrictions.
The Corporation anticipates that the implementation, of FASB Staff
Position No. FAS 13-2, “Accounting for a Change or Projected Change in
the Timing of Cash Flows Relating to Income Taxes Generated by a Lever-
aged Lease Transaction,” will reduce Retained Earnings and associated
regulatory capital by approximately $1.4 billion after-tax as of January 1,
2007. The amount of the charge initially recorded will be recognized as
income over the remaining terms, generally 15 to 30 years, of the affected
leases. Further, this change in accounting will also result in an adverse
impact on earnings in the first two years subsequent to the change. The
Corporation expects that Net Income will be negatively impacted by approx-
imately $105 million in 2007. The Corporation anticipates that its Tier 1
and Total Capital Ratios will be negatively impacted by approximately 13
bps and its Tier 1 Leverage Ratio will be negatively impacted by approx-
imately 10 bps as a result of the initial adoption.

In November 2006, the Corporation announced a definitive agree-
ment to acquire U.S. Trust for $3.3 billion in cash. The transaction is
expected to close in the third quarter of 2007. The Corporation anticipates
that its Tier 1 and Total Capital Ratios will be negatively impacted by
approximately 35 bps and its Tier 1 Leverage Ratio will be negatively
impacted by approximately 25 bps upon the acquisition of U.S. Trust.

Basel II
In June 2004, Basel II was published with the intent of more closely align-
ing regulatory capital requirements with underlying risks. Similar to eco-
nomic capital measures, Basel II seeks to address credit risk, market risk,
and operational risk.

While economic capital is measured to cover unexpected losses, the
Corporation also maintains a certain threshold in terms of regulatory capi-
tal to adhere to legal standards of capital adequacy. These thresholds or
leverage ratios will continue to be utilized for the foreseeable future.

U.S. banks are required to implement Basel II within three years of
the date the final rules are published. Banks must successfully complete
four consecutive quarters of parallel calculations to be considered com-
pliant and to enter a three-year implementation period. The three-year
implementation period is subject to capital relief floors (limits) that are set
levels
to help mitigate substantial decreases in an institution’s capital
when compared to current regulatory capital rules.

On September 25, 2006, the Agencies officially published several
documents providing updates to the Basel II Risk-Based Capital Standards
for the U.S. as well as new regulatory reporting requirements related to
these Risk-Based Capital Standards for review and comment by U.S.-
based banks and trade associations. These publications included pre-
viously published regulations and guidance as well as revised market risk
rules and a proposal including several new regulatory reporting templates.
These Capital Standards are expected to be finalized in 2007.

The Corporation continues its execution efforts to ensure prepared-
ness with Basel II requirements. The goal is to achieve full compliance
within the three-year
the Corporation
international reporting requirements that
anticipates being ready for all
occur before that time.

implementation period. Further,

Dividends
Effective for the third quarter 2006 dividend, the Board increased the
quarterly cash dividend 12 percent from $0.50 to $0.56 per share. In
October 2006, the Board declared a fourth quarter cash dividend of $0.56
which was paid on December 22, 2006 to common shareholders of record
on December 1, 2006. In January 2007, the Board declared a quarterly

cash dividend of $0.56 per common share payable on March 23, 2007 to
shareholders of record on March 2, 2007.

In January 2007, the Board also declared three dividends in regards
to preferred stock. The first was a $1.75 regular cash dividend on the
Cumulative Redeemable Preferred Stock, Series B, payable April 25, 2007
to shareholders of record on April 11, 2007. The second was a regular
quarterly cash dividend of $0.38775 per depositary share on the Series D
Preferred Stock, payable March 14, 2007 to shareholders of record on
February 28, 2007. The third declared dividend was a regular quarterly
cash dividend of $0.40106 per depositary share of the Floating Rate
Non-Cumulative Preferred Stock, Series E, payable February 15, 2007 to
shareholders of record on January 31, 2007.

Common Share Repurchases
We will continue to repurchase shares, from time to time, in the open
market or in private transactions through our approved repurchase pro-
grams. We repurchased approximately 291.1 million shares of common
stock in 2006 which more than offset the 118.4 million shares issued
under employee stock plans.

In April 2006, the Board authorized a stock repurchase program of up
to 200 million shares of the Corporation’s common stock at an aggregate
cost not to exceed $12.0 billion to be completed within a period of 12 to
18 months of which the lesser of approximately $4.9 billion, or
63.1 million shares, remains available for repurchase under the program
at December 31, 2006.

In January 2007, the Board authorized a stock repurchase program of
an additional 200 million shares of the Corporation’s common stock at an
aggregate cost not to exceed $14.0 billion to be completed within a period
information on common share
of 12 to 18 months. For additional
repurchases, see Note 14 of the Consolidated Financial Statements.

In September 2006, the Corporation authorized 34,500 shares and
issued 33,000 shares, or $825 million, of Series D Preferred Stock with a
par value of $0.01 per share.

During July 2006, the Corporation redeemed its 6.75% Perpetual
Preferred Stock with a stated value of $250 per share and its Fixed/
Adjustable Rate Cumulative Preferred Stock with a stated value of $250
per share.

For additional

information on the issuance and redemption of pre-

ferred stock, see Note 14 of the Consolidated Financial Statements.

Credit Risk Management
Credit risk is the risk of loss arising from the inability of a borrower or
counterparty to meet its obligations. Credit risk can also arise from opera-
tional failures that result in an advance, commitment or investment of
funds. We define the credit exposure to a borrower or counterparty as the
loss potential arising from all product classifications including loans and
leases, derivatives,
trading account assets, assets held-for-sale, and
unfunded lending commitments that include loan commitments, letters of
credit and financial guarantees. For derivative positions, our credit risk is
measured as the net replacement cost in the event the counterparties with
contracts in a gain position to us fail to perform under the terms of those
contracts. We use the current mark-to-market value to represent credit
exposure without giving consideration to future mark-to-market changes.

62 Bank of America 2006

For information on our accounting policies regarding delinquencies,
nonperforming status and charge-offs for the consumer portfolio, see
Note 1 of the Consolidated Financial Statements.

Management of Consumer Credit Risk
Concentrations
Consumer credit risk exposure is managed geographically and through our
various product offerings with a goal that concentrations of credit exposure
do not result in undesirable levels of risk. We purchase credit protection
on certain portions of our portfolio that is designed to enhance our overall
risk management strategy. At December 31, 2006 and 2005, we had
mitigated a portion of our credit risk on approximately $131.0 billion and
$110.4 billion of consumer loans, including both residential mortgage and
indirect automotive loans, through the purchase of credit protection. Our
regulatory risk-weighted assets were reduced as a result of these trans-
actions because we transferred a portion of our credit risk to unaffiliated
parties. At December 31, 2006 and 2005, these transactions had the
cumulative effect of reducing our risk-weighted assets by $36.4 billion and
$30.6 billion, and resulted in increases of 30 bps and 28 bps in our Tier 1
Capital ratio at December 31, 2006 and 2005.

Consumer Credit Portfolio
Table 12 presents our held and managed consumer loans and leases and
related asset quality information for 2006 and 2005. Overall, consumer
credit quality remained sound in 2006 as performance was favorably
impacted by lower bankruptcy-related charge-offs.

The credit risk amounts take into consideration the effects of legally
enforceable master netting agreements and cash collateral. Our consumer
and commercial credit extension and review procedures take into account
funded and unfunded credit exposures. For additional
information on
derivatives and credit extension commitments, see Notes 4 and 13 of the
Consolidated Financial Statements.

For credit risk purposes, we evaluate our consumer businesses on
both a held and managed basis (a non-GAAP measure). Managed basis
treats securitized loan receivables as if they were still on the balance
sheet. We evaluate credit performance on a managed basis as the receiv-
ables that have been securitized are subject to the same underwriting
standards and ongoing monitoring as the held loans. In addition to the
discussion of credit quality statistics of both held and managed loans
included in this section, refer to the Card Services discussion beginning on
page 46. For additional information on our managed portfolio and securiti-
zations, refer to Note 9 of the Consolidated Financial Statements.

We manage credit risk based on the risk profile of the borrower or
counterparty, repayment sources, the nature of underlying collateral, and
other support given current events, conditions and expectations. We
classify our portfolios as either consumer or commercial and monitor
credit risk separately as discussed below.

Consumer Portfolio Credit Risk Management
Credit risk management for the consumer portfolio begins with initial under-
writing and continues throughout a borrower’s credit cycle. Statistical
techniques in conjunction with experiential
judgment are used in all
aspects of portfolio management including product pricing, risk appetite,
setting credit limits, operating processes and metrics to quantify and
balance risks and returns. In addition, credit decisions are statistically
based with tolerances set to decrease the percentage of approvals as the
risk profile increases. Statistical models are built using detailed behavioral
information from external sources such as credit bureaus and/or internal
historical experience. These models are a critical component of our con-
sumer credit risk management process and are used in the determination
of both new and existing credit decisions, portfolio management strategies
including authorizations and line management, collection practices and
strategies, determination of the allowance for credit losses, and economic
capital allocations for credit risk.

Bank of America 2006

Table 12 Consumer Loans and Leases

(Dollars in millions)

Held basis
Residential mortgage
Credit card – domestic
Credit card – foreign
Home equity lines
Direct/Indirect consumer (4)
Other consumer (5)

Total consumer loans and leases – held

Securitizations impact (6)

December 31

Year Ended December 31

Outstandings

Nonperforming (1)

Accruing Past Due 90
Days or More (2)

Net Charge-offs /
Losses

Net Charge-off /
Loss Ratios (3)

2006

2005

2006

2005

2006

2005

2006

2005

2006

2005

$241,181
61,195
10,999
74,888
68,224
9,218

465,705
110,151

$182,596
58,548
–
62,098
45,490
6,725

355,457
12,523

$ 660
n/a
n/a
249
44
77

1,030
2

$570
n/a
n/a
117
37
61

785
–

$ 118
1,991
184
–
347
38

2,678
2,407

–
1,197
–
–
75
15

1,287
23

39
3,094
225
51
524
303

4,236
3,371

27
3,652
–
31
248
275

4,233
434

0.02% 0.02%
4.85
2.46
0.07
0.88
2.83

6.76
–
0.05
0.55
3.99

1.01
3.22

1.26
3.34

Total consumer loans and leases – managed

$575,856

$367,980

$1,032

$785

$5,085

$1,310

$7,607

$4,667

1.45% 1.34%

Managed basis
Residential mortgage
Credit card – domestic
Credit card – foreign
Home equity lines
Direct/Indirect consumer
Other consumer

$245,840
142,599
27,890
75,197
75,112
9,218

$188,380
60,785
–
62,546
49,544
6,725

Total consumer loans and leases – managed

$575,856

$367,980

$ 660
n/a
n/a
251
44
77

$1,032

$570
n/a
n/a
117
37
61

$785

$ 118
3,828
608
–
493
38

$5,085

–
1,217
–
3
75
15

39
5,395
980
51
839
303

27
4,086
–
31
248
275

0.02% 0.02%
3.89
3.95
0.07
1.23
2.83

6.92
–
0.05
0.53
3.99

$1,310

$7,607

$4,667

1.45% 1.34%

(1) The definition of nonperforming does not include consumer credit card and consumer non-real estate loans and leases.
(2) Accruing past due 90 days or more as a percentage of outstanding held and managed consumer loans and leases was 0.58 percent and 0.88 percent at December 31, 2006 and 0.36 percent and 0.36 percent at

December 31, 2005.

(3) Net charge-off/loss ratios are calculated as held net charge-offs or managed net losses divided by average outstanding held or managed loans and leases during the year for each loan and lease category.
(4) Outstandings include home equity loans of $12.8 billion and $8.1 billion at December 31, 2006 and 2005.
(5) Outstandings include foreign consumer loans of $6.2 billion and $3.8 billion and consumer finance loans of $2.8 billion and $2.8 billion at December 31, 2006 and 2005.
(6) For additional information on our managed portfolio and securitizations, refer to Note 9 of the Consolidated Financial Statements.
n/a = not applicable

Residential Mortgage
The residential mortgage portfolio makes up the largest percentage of our
consumer loan portfolio at 52 percent of held consumer loans and leases
and 43 percent of managed consumer loans and leases at December 31,
2006. Residential mortgages are originated for the home purchase and
refinancing needs of our customers in Global Consumer and Small Busi-
ness Banking and Global Wealth and Investment Management and repre-
sent 22 percent of the managed residential portfolio. The remaining 78
percent of the managed portfolio is in All Other, which includes Corporate
Treasury and Corporate Investments, and is comprised of purchased or
originated residential mortgage loans used to manage our overall ALM
activities.

On a held basis, outstanding loans and leases increased $58.6 bil-
lion in 2006 compared to 2005 driven by retained mortgage production
and bulk purchases. Nonperforming balances increased $90 million due to
portfolio seasoning. Loans past due 90 days or more and still accruing
interest of $118 million is related to repurchases pursuant to our servicing
agreements with Government National Mortgage Association (GNMA)
mortgage pools whose repayments are insured by the Federal Housing
Administration or guaranteed by the Department of Veterans Affairs. This
past due GNMA portfolio of $161 million was included in loans
held-for-sale at December 31, 2005 and was not reclassified to conform
to current presentation.

Credit Card – Domestic and Foreign
The consumer credit card portfolio is managed in Card Services within
Global Consumer and Small Business Banking. Outstandings in the held
domestic loan portfolio increased $2.6 billion in 2006 compared to 2005
due to the MBNA merger and organic growth partially offset by an increase
in net securitization activity. The $794 million increase in held domestic
loans past due 90 days or more and still accruing interest was driven by

portfolio seasoning, the trend toward more normalized delinquency levels
following bankruptcy reform and the addition of the MBNA portfolio, includ-
ing the adoption of MBNA collection practices and policies that have
historically led to higher delinquencies but lower losses. Net charge-offs
for the held domestic portfolio decreased $558 million to $3.1 billion, or
4.85 percent (5.00 percent excluding the impact of SOP 03-3) of total
average held credit card – domestic loans compared to 6.76 percent in
2005 primarily due to bankruptcy reform which accelerated charge-offs
into 2005. This decrease in net charge-offs was partially offset by new
advances on accounts for which previous loan balances were sold to the
securitization trusts, portfolio seasoning and the addition of the MBNA
portfolio. See the following discussion of the impact of SOP 03-3 on the
MBNA portfolio.

Managed domestic credit card outstandings increased $81.8 billion
to $142.6 billion at December 31, 2006, primarily due to the MBNA
merger. Managed net losses increased $1.3 billion to $5.4 billion, or 3.89
percent of total average managed domestic loans compared to 6.92 per-
cent in 2005. Managed net losses were higher primarily due to the addi-
tion of the MBNA portfolio and portfolio seasoning, partially offset by lower
bankruptcy-related losses as a result of bankruptcy reform. The 303 bps
decrease in the managed net loss ratio was driven by lower bankruptcy-
related losses and the beneficial impact of the higher credit quality of the
MBNA portfolio compared to the legacy Bank of America portfolio.

Held and managed outstandings in the foreign credit card portfolio of
$11.0 billion and $27.9 billion at December 31, 2006, as well as delin-
quencies, held net charge-offs and managed net losses, are related to the
addition of the MBNA portfolio. Net charge-offs for the held foreign portfo-
lio were $225 million, or 2.46 percent (3.05 percent excluding the impact
of SOP 03-3) of total average held credit card – foreign loans in 2006. Net
losses for the managed foreign portfolio were $980 million, or 3.95 per-
cent, of total average managed credit card – foreign loans. The foreign

64 Bank of America 2006

credit card portfolio experienced increasing net charge-off and managed
net loss trends throughout the year resulting from seasoning of the Euro-
insolvencies in the United Kingdom.
pean portfolio and higher personal
See below for a discussion of the impact of SOP 03-3 on the MBNA
portfolio.

Home Equity Lines
At December 31, 2006, approximately 73 percent of the managed home
equity portfolio was included in Global Consumer and Small Business
Banking, while the remainder of the portfolio is in Global Wealth and
Investment Management. This portfolio consists of revolving first and
second lien residential mortgage lines of credit. On a held basis, out-
standing home equity lines increased $12.8 billion, or 21 percent, in
2006 compared to 2005 due to enhanced product offerings and the
expanding home equity market. Nonperforming home equity
lines
increased $132 million in 2006 due to portfolio seasoning.

Direct/Indirect Consumer
At December 31, 2006, approximately 49 percent of the managed direct/
indirect portfolio was included in Business Lending within Global Corporate
and Investment Banking (automotive, marine, motorcycle and recreational
vehicle loans); 41 percent was included in Global Consumer and Small
Business Banking (home equity loans, student and other non-real estate
secured and unsecured personal loans) and the remainder was included in
Global Wealth and Investment Management (home equity loans and other
loans) and All Other
non-real estate secured and unsecured personal
(home equity loans).

On a held basis, outstanding loans and leases increased $22.7 bil-
lion in 2006 compared to 2005 due to the addition of the MBNA portfolio,
purchases of retail automotive loans and reduced securitization activity.
Loans past due 90 days or more and still accruing interest increased
$272 million due to the addition of MBNA and growth in the portfolio. Net
charge-offs increased $276 million to 0.88 percent (1.01 percent exclud-
ing the impact of SOP 03-3) of total average held direct/indirect loans,
driven by the addition of
the MBNA unsecured lending portfolio and
seasoning of the automotive loan portfolio. Card Services unsecured lend-
ing portfolio charge-offs increased throughout 2006 as charge-offs trended
toward more normalized loss levels post bankruptcy reform. Portfolio
seasoning and reduced securitization activity also contributed to the
increasing charge-off trend.

Net losses for the managed loan portfolio increased $591 million to
1.23 percent of total average managed direct/indirect loans compared to

0.53 percent in 2005, primarily due to the addition of MBNA. See below
for a discussion of the impact of SOP 03-3 on the MBNA portfolio.

the foreign consumer

Other Consumer
At December 31, 2006, approximately 67 percent of the other consumer
portfolio consists of
loan portfolio which was
included in Card Services within Global Consumer and Small Business
Banking and in ALM/Other within Global Corporate and Investment Bank-
ing. The remainder of the portfolio was associated with our previously
exited consumer finance businesses and was included in All Other. Other
consumer outstanding loans and leases increased $2.5 billion at
December 31, 2006 compared to December 31, 2005 driven primarily by
the addition of the MBNA portfolio. Net charge-offs as a percentage of
total average other consumer loans declined by 116 bps due primarily to
growth in the foreign portfolio from the MBNA acquisition. See below for a
discussion of the impact of SOP 03-3 on the MBNA portfolio.

SOP 03-3
SOP 03-3 addresses accounting for differences between contractual cash
flows and cash flows expected to be collected from an investor’s initial
investment in loans acquired in a transfer if those differences are attribut-
able, at least in part, to credit quality. SOP 03-3 requires impaired loans
be recorded at fair value and prohibits “carrying over” or the creation of
valuation allowances in the initial accounting of loans acquired in a trans-
fer that are within the scope of this SOP (categories of loans for which it is
probable, at the time of acquisition, that all amounts due according to the
contractual terms of the loan agreement will not be collected). The prohib-
ition of the valuation allowance carryover applies to the purchase of an
individual loan, a pool of loans, a group of loans, and loans acquired in a
purchase business combination.

In accordance with SOP 03-3, certain acquired loans of MBNA that
were considered impaired were written down to fair value at the acquisition
date. Therefore, reported net charge-offs and managed net losses were
lower since these impaired loans that would have been charged off during
the period were reduced to fair value as of the acquisition date. SOP 03-3
does not apply to the acquired loans that have been securitized as they
are not held on the Corporation’s Balance Sheet.
Consumer net charge-offs, managed net

losses, and associated
ratios as reported and excluding the impact of SOP 03-3 for 2006 are
presented in Table 13. Management believes that excluding the impact of
SOP 03-3 provides a more accurate reflection of portfolio credit quality.

Table 13 Consumer Net Charge-offs and Managed Net Losses (Excluding the Impact of SOP 03-3)

(Dollars in millions)

Residential mortgage
Credit card – domestic
Credit card – foreign
Home equity lines
Direct/Indirect consumer
Other consumer

Total consumer

2006

As Reported

Excluding Impact (1)

Held

Managed

Held

Managed

Amount

Percent

$
39
3,094
225
51
524
303

$4,236

0.02%
4.85
2.46
0.07
0.88
2.83

1.01%

Amount

$
39
5,395
980
51
839
303

$7,607

Percent

0.02%
3.89
3.95
0.07
1.23
2.83

1.45%

Amount

$
39
3,193
278
51
602
344

$4,507

Percent

0.02%
5.00
3.05
0.07
1.01
3.21

1.07%

Amount

$
39
5,494
1,033
51
917
344

$7,878

Percent

0.02%
3.96
4.17
0.07
1.35
3.21

1.50%

(1) Excluding the impact of SOP 03-3 is a non-GAAP financial measure. Net charge-offs and managed net losses exclude the impact of SOP 03-3 which decreased net charge-offs and managed net losses on credit card – domestic
$99 million, credit card – foreign $53 million, direct/indirect consumer $78 million, and other consumer $41 million for 2006. The impact of SOP 03-3 on average outstanding held and managed consumer loans and leases
for 2006 was not material.

Bank of America 2006

Nonperforming Consumer Assets Activity
Table 14 presents the additions and reductions to nonperforming assets
in the held consumer portfolio during 2006 and 2005. Net additions to
nonperforming loans and leases in 2006 were $245 million compared to
$47 million in 2005. The increase in 2006 was driven by seasoning of the

Table 14 Nonperforming Consumer Assets Activity

residential mortgage and home equity portfolios. The nonperforming con-
sumer loans and leases ratio was unchanged compared to 2005 as the
addition of the MBNA portfolio and broad-based loan growth offset the
impact of the increase in nonperforming consumer loan levels.

(Dollars in millions)

Nonperforming loans and leases
Balance, January 1

Additions to nonperforming loans and leases:

New nonaccrual loans and leases

Reductions in nonperforming loans and leases:

Paydowns and payoffs
Sales
Returns to performing status (1)
Charge-offs (2)
Transfers to foreclosed properties
Transfers to loans held-for-sale

Total net additions to nonperforming loans and leases

Total nonperforming loans and leases, December 31 (3)

Foreclosed properties
Balance, January 1

Additions to foreclosed properties:
New foreclosed properties
Reductions in foreclosed properties:

Sales
Writedowns

Total net reductions in foreclosed properties

Total foreclosed properties, December 31

Nonperforming consumer assets, December 31 (4)

Nonperforming consumer loans and leases as a percentage of outstanding consumer loans and leases
Nonperforming consumer assets as a percentage of outstanding consumer loans, leases and foreclosed properties

2006

2005

$ 785

$ 738

1,432

1,108

(157)
(117)
(698)
(150)
(65)
—

245

1,030

159

(76)
(85)

(2)

(223)
(112)
(531)
(121)
(69)
(5)

785

125

(108)
(25)

(8)

$1,089

$ 846

0.22%
0.23%

0.22%
0.24%

(1) Consumer loans and leases are generally returned to performing status when principal or interest is less than 90 days past due.
(2) Our policy is not to classify consumer credit card and consumer non-real estate loans and leases as nonperforming; therefore, the charge-offs on these loans have no impact on nonperforming activity.
(3)

In 2006, $69 million in Interest Income was estimated to be contractually due on nonperforming consumer loans and leases classified as nonperforming at December 31, 2006 of which $17 million was received and included
in Net Income for 2006.

(4) Balances do not include nonperforming loans held for sale included in Other Assets of $30 million and $24 million at December 31, 2006 and 2005.

for

risk management

Commercial Portfolio Credit Risk Management
the commercial portfolio begins with an
Credit
assessment of the credit risk profile of the borrower or counterparty based
on an analysis of the financial position of a borrower or counterparty. As
part of the overall credit risk assessment of a borrower or counterparty,
most of our commercial credit exposure or transactions are assigned a
risk rating and are subject to approval based on defined credit approval
standards. Subsequent to loan origination, risk ratings are monitored on
an ongoing basis. If necessary, risk ratings are adjusted to reflect changes
in the financial condition, cash flow or financial situation of a borrower or
counterparty. We use risk rating aggregations to measure and evaluate
concentrations within portfolios. Risk ratings are a factor in determining
the level of assigned economic capital and the allowance for credit losses.
In making credit decisions, we consider risk rating, collateral, country,
industry and single name concentration limits while also balancing the
total borrower or counterparty relationship and SVA. Our lines of business
and Risk Management personnel use a variety of tools to continuously
monitor the ability of a borrower or counterparty to perform under its
obligations.

For information on our accounting policies regarding delinquencies,
nonperforming status and charge-offs for the commercial portfolio, see
Note 1 of the Consolidated Financial Statements.

66 Bank of America 2006

Management of Commercial Credit Risk
Concentrations
Portfolio credit risk is evaluated and managed with a goal that concen-
trations of credit exposure do not result in undesirable levels of risk. We
review, measure, and manage concentrations of credit exposure by
industry, product, geography and customer relationship. Distribution of
loans and leases by loan size is an additional measure of the portfolio risk
diversification. We also review, measure, and manage commercial real
estate loans by geographic location and property type. In addition, within
our international portfolio, we evaluate borrowings by region and by coun-
try. Tables 18 and 20 and Tables 23 through 25 summarize these concen-
trations. Additionally, we utilize syndication of exposure to third parties,
loan sales and other risk mitigation techniques to manage the size and
risk profile of the loan portfolio.

From the perspective of portfolio risk management, customer concen-
tration management is most relevant in Global Corporate and Investment
Banking. Within that segment’s Business Lending and Capital Markets and
Advisory Services businesses, we facilitate bridge financing to fund acquis-
itions and other short-term needs as well as provide syndicated financing
for our clients. These concentrations are managed in part through our
established “originate to distribute” strategy. These client transactions are
sometimes large and leveraged. They can also have a higher degree of risk

as we are providing offers or commitments for various components of the
clients’ capital structures,
rated unsecured and sub-
including lower
ordinated debt tranches. In many cases, these offers to finance will not be
accepted. If accepted, these highly conditioned commitments are often
retired prior to or shortly following funding via the placement of securities,
syndication or the client’s decision to terminate. Where we have a binding
commitment and there is a market disruption or other unexpected event,
there may be heightened exposure in the portfolios, an increase in criti-
cized assets and higher potential for loss, unless an orderly disposition of
the exposure can be made.

In Global Corporate and Investment Banking, concentrations are
actively managed through the underwriting and ongoing monitoring proc-
esses, the “originate to distribute” strategy and through the utilization of
various risk mitigation tools, such as credit derivatives, to economically
hedge our risk to certain credit counterparties. Credit derivatives are finan-

cial instruments that we purchase for protection against the deterioration
of credit quality. Earnings volatility increases due to accounting asymmetry
as we mark-to-market the credit derivatives, as required by SFAS 133,
whereas the exposures being hedged, including the funding commitments,
are accounted for on an accrual basis. Once funded, these exposures are
accounted for at historical cost less an allowance for credit losses or, if
held-for-sale, at the lower of cost or market.

credit quality

Commercial Credit Portfolio
Commercial
continued to be stable in 2006. At
December 31, 2006, the loans and leases net charge-off ratio declined to
0.13 percent
from 0.16 percent at December 31, 2005. The non-
performing loan ratio declined to 0.31 percent from 0.33 percent.

Table 15 presents our commercial
asset quality information for 2006 and 2005.

loans and leases and related

Table 15 Commercial Loans and Leases

(Dollars in millions)

Commercial loans and leases
Commercial – domestic
Commercial real estate (4)
Commercial lease financing
Commercial – foreign

Total commercial loans and leases

December 31

Year Ended December 31

Outstandings

Nonperforming

Accruing Past
Due 90 Days or
More (1)

Net Charge-offs (2)

Net Charge-off
Ratios (3)

2006

2005

2006

2005

2006

2005

2006

2005

2006

2005

$161,982
36,258
21,864
20,681

$140,533
35,766
20,705
21,330

$240,785

$218,334

$584
118
42
13

$757

$581
49
62
34

$726

$265
78
26
9

$378

$117
4
15
32

$168

$336
3
(28)
(8)

$303

$170
–
231
(72)

$329

0.22%
0.01
(0.14)
(0.04)

0.13%
–
1.13
(0.39)

0.13%

0.16%

(1) Accruing past due 90 days or more as a percentage of outstanding commercial loans and leases was 0.16 percent and 0.08 percent at December 31, 2006 and 2005.
(2)

Includes a reduction in net charge-offs on commercial – domestic of $17 million as a result of the impact of SOP 03-3 for 2006. The impact of SOP 03-3 on average outstanding commercial – domestic loans and leases for
2006 was not material. See discussion of SOP 03-3 in the Consumer Credit Portfolio section.

(3) Net charge-off ratios are calculated as net charge-offs divided by average outstanding loans and leases during the year for each loan and lease category.
(4)

Includes domestic commercial real estate loans of $35.7 billion and $35.2 billion at December 31, 2006 and 2005, and foreign commercial real estate loans of $578 million and $585 million at December 31, 2006 and
2005.

Table 16 presents commercial credit exposure by type for utilized, unfunded and total committed credit exposure.

Table 16 Commercial Credit Exposure by Type

(Dollars in millions)

Loans and leases
Standby letters of credit and financial guarantees
Derivative assets (3)
Assets held-for-sale
Commercial letters of credit
Bankers’ acceptances
Securitized assets
Foreclosed properties

Total

December 31

Commercial Utilized (1)

Commercial Unfunded (2)

Total Commercial Committed

2006

$240,785
46,772
23,439
21,936
4,258
1,885
1,292
10

$340,377

2005

$218,334
43,096
23,712
16,867
5,154
1,643
1,914
31

$310,751

2006

$269,937
6,234
—
1,136
224
1
—
—

$277,532

2005

$246,629
5,033
—
848
818
1
—
—

$253,329

2006

$510,722
53,006
23,439
23,072
4,482
1,886
1,292
10

$617,909

2005

$464,963
48,129
23,712
17,715
5,972
1,644
1,914
31

$564,080

(1) Exposure includes standby letters of credit, financial guarantees, commercial letters of credit and bankers’ acceptances for which the bank is legally bound to advance funds under prescribed conditions, during a specified

period. Although funds have not been advanced, most of these exposure types are considered utilized for credit risk management purposes.

(2) Excludes unused business card lines which are not legally binding.
(3) Derivative Assets are reported on a mark-to-market basis, reflect the effects of legally enforceable master netting agreements, and have been reduced by cash collateral of $7.3 billion and $9.3 billion at December 31, 2006
and 2005. Commercial utilized credit exposure at December 31, 2005 has been reclassified to reflect cash collateral applied to Derivative Assets. In addition to cash collateral, Derivative Assets are also collateralized by $7.6
billion and $7.8 billion of other marketable securities at December 31, 2006 and 2005 for which the credit risk has not been reduced.

Table 17 presents commercial utilized criticized exposure by product
type and as a percentage of total commercial utilized exposure for each
category presented. Bridge exposure of $550 million as of December 31,
2006 and $442 million as of December 31, 2005, are excluded from the
following table. These exposures are carried at the lower of cost or market

and are managed in part through our “originate to distribute” strategy (see
page 66 for more information on bridge financing). Had this exposure been
included,
the ratio of commercial utilized criticized exposure to total
commercial utilized exposure would have been 2.25 percent and 2.42
percent as of December 31, 2006 and December 31, 2005, respectively.

Bank of America 2006

Table 17 Commercial Utilized Criticized Exposure (1,2)

(Dollars in millions)

Commercial – domestic
Commercial real estate
Commercial lease financing
Commercial – foreign

Total commercial utilized criticized exposure

December 31, 2006

December 31, 2005

Amount

$5,210
815
504
582

$7,111

Percent (3)

2.41%
1.78
2.31
1.05

2.09%

Amount

$4,954
723
611
797

$7,085

Percent (3,4)

2.59%
1.63
2.95
1.48

2.28%

(1) Criticized exposure corresponds to the Special Mention, Substandard and Doubtful asset categories defined by regulatory authorities.
(2) Exposure includes standby letters of credit, financial guarantees, commercial letters of credit and bankers’ acceptances for which the bank is legally bound to advance funds under prescribed conditions, during a specified

period. Although funds have not been advanced, most of these exposure types are considered utilized for credit risk management purposes.

(3) Ratios are calculated as commercial utilized criticized exposure divided by total commercial utilized exposure for each exposure category.
(4) Commercial – domestic and Total commercial criticized exposure ratios for December 31, 2005 have been reclassified to reflect cash collateral applied to Derivative Assets that are in total commercial utilized credit exposure.

Commercial – Domestic
At December 31, 2006, approximately 80 percent of the commercial—
domestic portfolio was included in Business Lending (business banking,
middle market and large multinational corporate loans and leases) and
Capital Markets and Advisory Services (acquisition and bridge financing),
both within Global Corporate and Investment Banking. Outstanding loans
and leases in Global Corporate and Investment Banking increased $11.6
billion to $130.0 billion at December 31, 2006 compared to
December 31, 2005 driven by organic growth. Nonperforming loans and
leases declined by $45 million to $460 million driven by overall improve-
ments in the portfolio. Net charge-offs were up $72 million from 2005 due
to a lower level of recoveries. Criticized utilized exposure, excluding bridge
exposure, remained essentially flat at $4.6 billion.

The remaining 20 percent of the commercial—domestic portfolio is in
Global Wealth and Investment Management (business-purpose loans for
wealthy individuals) and Global Consumer and Small Business Banking
(business card and small business loans). Outstanding loans and leases
increased $9.8 billion to $32.0 billion at December 31, 2006 compared
to December 31, 2005 driven primarily by growth in Global Consumer and
Small Business Banking. Growth was centered in the business card portfo-
lio, including the addition of MBNA, and the small business portfolio.
Nonperforming loans and leases increased $48 million to $124 million
due to seasoning of the small business portfolio and the addition of
MBNA, both within Global Consumer and Small Business Banking. Loans
past due 90 days or more and still accruing interest increased $153 mil-
lion to $215 million primarily attributable to the business card portfolio.
The increase was driven by the adoption of MBNA collection practices that
have historically led to higher delinquencies but lower losses, the addition
of the MBNA business card portfolio and portfolio seasoning. Net charge-
offs were up $94 million from 2005 due to a $134 million increase in
Global Consumer and Small Business Banking, partially offset by a 2006
credit loss recovery in Global Wealth and Investment Management. The
increase in net charge-offs in Global Consumer and Small Business Bank-
ing was due to the addition of MBNA and seasoning of the small business
and business card portfolios. Criticized utilized exposure increased $265
million to $561 million driven by an increase in the business card portfolio
resulting primarily from the addition of MBNA.

Commercial Real Estate
The commercial real estate portfolio is managed in Business Lending
within Global Corporate and Investment Banking and consists of loans
issued primarily to public and private developers, homebuilders and
commercial real estate firms. Outstanding loans and leases increased
$492 million in 2006 compared to 2005. The increase was driven
by business generated predominantly with existing clients across multiple
property types. Utilized criticized exposure increased $92 million to $815

68 Bank of America 2006

million driven by a $147 million increase in the utilized criticized loan and
lease portfolio, attributable to the deterioration of a number of relatively
small credits in a variety of property types, the largest of which is resi-
dential. The increase was partially offset by improvements centered in
hotels/motels and multiple use commercial properties.

Table 18 presents outstanding commercial real estate loans by geo-
graphic region and property type diversification, excluding those commer-
cial loans and leases secured by owner-occupied real estate. Commercial
loans and leases secured by owner-occupied real estate are made on the
general creditworthiness of the borrower where real estate is obtained as
additional security and the ultimate repayment of the credit is not depend-
ent on the sale, lease and rental, or refinancing of the real estate. For
purposes of this table, commercial real estate reflects loans dependent on
the sale of the real estate as the primary source of repayment. The
increase in residential property type loans was driven by higher utilizations
in the for-sale housing sector due to increased construction and land cost.

Table 18 Outstanding Commercial Real Estate Loans

(Dollars in millions)
By Geographic Region (1)
California
Northeast
Southeast
Florida
Southwest
Midwest
Northwest
Midsouth
Other
Geographically diversified (2)
Non-U.S.

Total

By Property Type
Residential
Office buildings
Apartments
Land and land development
Shopping centers/retail
Industrial/warehouse
Multiple use
Hotels/motels
Resorts
Other (3)

Total

December 31

2006

2005

$ 7,781
6,368
5,097
3,898
3,787
2,271
2,053
2,006
870
1,549
578

$36,258

$ 8,151
4,823
4,277
3,956
3,955
3,247
1,257
1,185
180
5,227

$36,258

$ 7,615
6,337
4,370
4,507
3,658
2,595
2,048
1,485
873
1,693
585

$35,766

$ 7,601
4,984
4,461
3,715
4,165
3,031
996
790
183
5,840

$35,766

(1) Distribution is based on geographic location of collateral. Geographic regions are in the U.S. unless

otherwise noted.

(2) The geographically diversified category is comprised primarily of unsecured outstandings to real estate
investment trusts and national homebuilders whose portfolios of properties span multiple geographic
regions.

(3) Represents loans to borrowers whose primary business is commercial real estate, but the exposure is

not secured by the listed property types.

Commercial Lease Financing
The commercial lease financing portfolio is managed in Business Lending
within Global Corporate and Investment Banking. Outstanding loans and
leases increased $1.2 billion in 2006 compared to 2005 due to organic
growth. Net charge-offs decreased $259 million compared to the prior year
as 2005 included a higher level of airline industry charge-offs.

Commercial – Foreign
The commercial – foreign portfolio is managed primarily in Business Lend-
ing and Capital Markets and Advisory Services, both within Global Corpo-
rate and Investment Banking. Outstanding loans and leases declined by
$649 million at December 31, 2006 compared to December 31, 2005
driven by the sale of our Brazilian operations and Asia Commercial Bank-

Table 19 Nonperforming Commercial Assets Activity (1)

ing business, partially offset by increases due to organic growth, princi-
pally in Western Europe. Nonperforming loans and criticized utilized
exposure, excluding bridge exposure, decreased $21 million and $215
million, respectively, primarily attributable to the sale of our Brazilian oper-
ations. Commercial—foreign net charge-offs were in a net recovery posi-
tion in both 2006 and 2005. The lower net recovery position in 2006 was
driven by higher net charge-offs in Brazil as well as lower recoveries in
Asia. For additional information on the commercial—foreign portfolio, refer
to Foreign Portfolio discussion beginning on page 71.

Nonperforming Commercial Assets Activity
Table 19 presents the additions and reductions to nonperforming assets
in the commercial portfolio during 2006 and 2005.

(Dollars in millions)

Nonperforming loans and leases
Balance, January 1

Additions to nonperforming loans and leases:

New nonaccrual loans and leases
Advances

Reductions in nonperforming loans and leases:

Paydowns and payoffs
Sales
Returns to performing status (2)
Charge-offs (3)
Transfers to foreclosed properties
Transfers to loans held-for-sale

Total net additions to (reductions in) nonperforming loans and leases

Total nonperforming loans and leases, December 31 (4)

Foreclosed properties
Balance, January 1

Additions to foreclosed properties:
New foreclosed properties
Reductions in foreclosed properties:

Sales
Writedowns
Charge-offs

Total net reductions in foreclosed properties

Total foreclosed properties, December 31

Nonperforming commercial assets, December 31 (5)

Nonperforming commercial loans and leases as a percentage of outstanding commercial loans and leases
Nonperforming commercial assets as a percentage of outstanding commercial loans, leases and foreclosed properties

2006

2005

$ 726

$1,475

980
32

(403)
(152)
(80)
(331)
(3)
(12)

757

(18)
(9)
–

(21)

892
37

(686)
(108)
(152)
(669)
(19)
(44)

(749)

726

(24)
(8)
(2)

(2)

$ 767

$ 757

0.31%
0.32%

0.33%
0.35%

(1) During 2005, nonperforming securities were reduced by $140 million primarily through exchanges resulting in a zero balance at December 31, 2005.
(2) Commercial loans and leases may be restored to performing status when all principal and interest is current and full repayment of the remaining contractual principal and interest is expected, or when the loan otherwise

becomes well-secured and is in the process of collection.

(3) Certain loan and lease products, including business card, are not classified as nonperforming; therefore, the charge-offs on these loans have no impact on nonperforming activity.
(4)

In 2006, $85 million in Interest Income was estimated to be contractually due on nonperforming commercial loans and leases classified as nonperforming at December 31, 2006, including troubled debt restructured loans of
which $2 million were performing at December 31, 2006 and not included in the table above. Approximately $38 million of the estimated $85 million in contractual interest was received and included in Net Income for 2006.

(5) Balances do not include nonperforming loans held-for-sale included in Other Assets of $50 million and $45 million at December 31, 2006 and 2005.

Industry Concentrations
Table 20 presents commercial committed credit exposure and the net
credit default protection portfolio by industry. Our commercial credit
exposure is diversified across a broad range of industries. Total commer-
cial credit exposure increased by $53.8 billion, or 10 percent, in 2006
compared to 2005. Banks increased by $5.9 billion, or 19 percent due to
increased activity in Capital Markets and Advisory Services within Global
Corporate and Investment Banking, primarily in Australia and the United
Kingdom. Government and public education increased $5.9 billion, or 18
percent, due primarily to growth concentrated in U.S. state and local enti-
ties, including both government and public education, consistent with our
growth strategy for this sector. Healthcare equipment and services, and
media increased $5.6 billion, or 22 percent, and $3.8 billion, or 25 per-
cent, respectively, of which $2.3 billion and $2.5 billion was attributable to

bridge and/or syndicated loan commitments, most of which are expected
to be distributed in the normal course of executing our “originate to
distribute” strategy. MBNA also contributed to growth in a number of
industries, including healthcare equipment and services, and individuals
and trusts.

Credit protection is purchased to cover the funded portion as well as
the unfunded portion of certain credit exposure. To lessen the cost of
obtaining our desired credit protection levels, credit exposure may be
added within an industry, borrower or counterparty group by selling pro-
tection. Since December 31, 2005, our net credit default protection pur-
chased has been reduced by $6.4 billion reflecting our view of
the
underlying risk in our credit portfolio and our near term outlook on the
credit environment.

Bank of America 2006

At December 31, 2006 and 2005, we had net notional credit default
protection purchased in our credit derivatives portfolio of $8.3 billion and
including
$14.7 billion. The net cost of credit default protection,
mark-to-market impacts, resulted in net losses of $241 million in 2006
compared to net gains of $49 million in 2005. Losses in 2006 primarily
reflected the impact of credit spreads tightening across most of our hedge
these credit derivative
positions. The average Value-at-Risk (VAR)

for

hedges was $54 million and $69 million for the twelve months ended
December 31, 2006 and 2005. The decrease in VAR was driven by a
decrease in the average amount of credit protection outstanding during the
period. There is a diversification effect between the credit derivative
hedges and the market-based trading portfolio such that their combined
average VAR was $57 million and $62 million for the twelve months ended
December 31, 2006 and 2005. Refer to the discussion on page 76 for a
description of our VAR calculation for the market-based trading portfolio.

Table 20 Commercial Credit Exposure and Net Credit Default Protection by Industry (1)

(Dollars in millions)

Real estate (3)
Diversified financials
Retailing
Government and public education
Capital goods
Banks
Consumer services
Healthcare equipment and services
Individuals and trusts
Materials
Commercial services and supplies
Food, beverage and tobacco
Media
Energy
Utilities
Transportation
Insurance
Religious and social organizations
Consumer durables and apparel
Technology hardware and equipment
Telecommunication services
Pharmaceuticals and biotechnology
Software and services
Automobiles and components
Food and staples retailing
Household and personal products
Semiconductors and semiconductor equipment
Other

Total

Commercial Utilized

December 31

Total Commercial
Committed

Net Credit Default
Protection (2)

2006

2005

2006

2005

2006

2005

$ 49,208
24,802
27,226
22,495
16,804
26,405
19,108
15,787
18,792
15,882
15,204
11,341
8,659
9,350
4,951
11,451
6,573
7,840
4,820
3,279
3,513
2,530
2,757
1,529
2,153
720
802
6,396

$ 47,580
24,975
25,189
19,041
15,337
21,755
17,481
13,455
16,754
16,754
13,038
11,194
6,701
9,061
5,507
11,297
4,745
7,426
5,142
3,116
3,520
1,675
2,573
1,602
2,258
536
536
2,503

$ 73,493
67,027
44,064
39,254
37,337
36,735
32,651
31,095
29,167
28,693
23,512
21,081
19,056
18,405
17,221
17,189
14,121
10,507
9,117
8,046
7,929
6,289
6,206
5,098
4,222
2,205
1,364
6,825

$ 70,373
64,073
41,967
33,350
33,004
30,811
29,495
25,494
24,348
28,893
21,152
20,590
15,250
17,099
15,182
16,980
13,868
10,022
9,318
7,171
9,193
4,906
5,708
5,878
4,241
1,669
1,119
2,926

$ (704)
(121)
(581)
(25)
(402)
(409)
(433)
(249)
3
(630)
(372)
(319)
(871)
(236)
(362)
(219)
(446)
–
(170)
(38)
(1,104)
(181)
(126)
(483)
(116)
50
(18)
302 (4)

$ (1,305)
(250)
(1,134)
–
(741)
(315)
(788)
(709)
(30)
(1,119)
(472)
(580)
(1,790)
(589)
(899)
(323)
(1,493)
–
(475)
(402)
(1,205)
(470)
(299)
(679)
(324)
75
(54)
1,677 (4)

$340,377

$310,751

$617,909

$564,080

$(8,260)

$(14,693)

(1) December 31, 2005 industry balances have been reclassified to reflect the realignment of industry codes utilizing Standard & Poor’s industry classifications and internal industry management.
(2) Net notional credit default protection purchased is shown as negative amounts and the net notional credit protection sold is shown as positive amounts.
(3)

Industries are viewed from a variety of perspectives to best isolate the perceived risks. For purposes of this table, the real estate industry is defined based upon the borrowers’ or counterparties’ primary business activity using
operating cash flow and primary source of repayment as key factors.

(4) Represents net credit default swaps index positions, including tranched index exposure, which were principally investment grade. Indices are comprised of corporate credit derivatives that trade as an aggregate index value.
Generally, they are grouped into portfolios based on specific ratings of credit quality or global geographic location. As of December 31, 2006 and 2005, credit default swap index positions were sold to reflect our view of the
credit markets.

Tables 21 and 22 present

the maturity profiles and the credit
exposure debt ratings of the net credit default protection portfolio at
December 31, 2006 and 2005.

Table 21 Net Credit Default Protection by Maturity
Profile

Less than or equal to one year
Greater than one year and less than or equal to five years
Greater than five years

Total

December 31

2006

2005

46
47

–%

65
35

100%

Table 22 Net Credit Default Protection by Credit
Exposure Debt Rating (1)

(Dollars in millions)

Ratings

AAA
AA
A
BBB
BB
B
CCC and below
NR (2)

Total

December 31, 2006

December 31, 2005

Net Notional

Percent

Net Notional

Percent

(23)
(237)
(2,598)
(3,968)
(1,341)
(334)
(50)
291

0.3%
2.9
31.5
48.0
16.2
4.0
0.6
(3.5)

(22)
(523)
(4,861)
(8,572)
(1,792)
(424)
(149)
1,650

0.2%
3.6
33.1
58.2
12.2
2.9
1.0
(11.2)

$(8,260)

100.0%

$(14,693)

100.0%

(1)

(2)

In order to mitigate the cost of purchasing credit protection, credit exposure can be added by selling
credit protection. The distribution of debt rating for net notional credit default protection purchased is
shown as negative amounts and the net notional credit protection sold is shown as positive amounts.
In addition to unrated names, “NR” includes $302 million and $1.7 billion in net credit default swaps
index positions at December 31, 2006 and 2005. While index positions are principally investment grade,
credit default swaps indices include names in and across each of the ratings categories.

70 Bank of America 2006

Foreign Portfolio
Our foreign credit and trading portfolio is subject to country risk. We define
country risk as the risk of loss from unfavorable economic and political
developments, currency fluctuations, social
instability and changes in
government policies. A risk management framework is in place to meas-
ure, monitor and manage foreign risk and exposures. Management over-
sight of country risk including cross-border risk is provided by the Country
Risk Committee.

Table 23 presents total foreign exposure broken out by region at
December 31, 2006 and 2005. Total foreign exposure includes credit
exposure net of local liabilities, securities, and other investments domi-
ciled in countries other than the United States. Credit card exposure is
reported on a funded basis. Total foreign exposure can be adjusted for
externally guaranteed outstandings and certain collateral
types. Out-
standings which are assigned external guarantees are reported under the
country of the guarantor. Outstandings with tangible collateral are reflected
in the country where the collateral is held. For securities received, other
than cross-border resale agreements, outstandings are assigned to the
domicile of the issuer of the securities. In regulatory reports under Federal
Financial Institutions Examination Council (FFIEC) guidelines, cross-border
resale agreements are presented based on the domicile of the issuer of
the securities that are held as collateral. However, for the purpose of the
following tables, resale agreements are generally presented based on the
domicile of the counterparty because the counterparty has the legal obliga-
tion for repayment.

Table 23 Regional Foreign Exposure (1,2)

(Dollars in millions)

Europe
Asia Pacific (3)
Latin America (4)
Middle East
Africa
Other (5)

Total

December 31

2006

$ 85,279
27,403
8,998
811
317
7,131

$129,939

2005

$55,068
13,938
10,551
616
86
4,550

$84,809

(1) Generally, cross-border resale agreements are presented based on the domicile of the counterparty
because the counterparty has the legal obligation for repayment except where the underlying securities
are U.S. Treasuries, in which case the domicile is the U.S., and are therefore excluded from this
resale agreements are
presentation. For
presented based on the domicile of the issuer of the securities that are held as collateral.

regulatory reporting under FFIEC guidelines, cross-border

(2) Derivative assets are reported on a mark-to-market basis and have been reduced by the amount of cash

Our total

foreign exposure was $129.9 billion at December 31,
2006, an increase of $45.1 billion from December 31, 2005. The growth
in our foreign exposure during 2006 was concentrated in Europe, which
accounted for $85.3 billion, or 66 percent, of total foreign exposure. The
European exposure was mostly in Western Europe and was distributed
across a variety of industries with the largest concentration in the private
sector which accounted for approximately 67 percent of the total exposure
in Europe. The growth in Western Europe was due to the organic growth of
$20.1 billion primarily driven by our Global Corporate and Investment
Banking business, as well as the $10.0 billion addition of MBNA
exposures in the United Kingdom, Ireland and Spain.

Asia Pacific was our second largest foreign exposure at $27.4 billion,
or 21 percent, of total foreign exposure at December 31, 2006. The
growth in Asia Pacific was driven by higher securities trading exposure
primarily in Japan, South Korea and Australia. Loans and Leases, loan
commitments, and other financing in Australia also contributed to the
increase in Asia Pacific.

Latin America accounted for $9.0 billion, or seven percent of total
foreign exposure at December 31, 2006, a decline of $1.6 billion, or 15
percent, from December 31, 2005. The decline in exposure in Latin Amer-
ica was primarily due to the sale of our Brazilian operations, partially offset
by the equity in Banco Itaú received in exchange for the sale, and a
decline in local country exposure in Chile. These decreases were partially
offset by an increase in cross-border exposure in Mexico.

For more information on our Asia Pacific and Latin America exposure,
see discussion on foreign exposure to selected countries defined as
emerging markets on page 72.

As presented in Table 24, at December 31, 2006 and 2005, the
United Kingdom had total cross-border exposure of $17.3 billion and
$21.2 billion, representing 1.18 percent and 1.64 percent of Total Assets.
At December 31, 2006 and 2005, the United Kingdom was the only coun-
try whose total cross-border outstandings exceeded one percent of our
total assets. At December 31, 2006, the largest concentration of the
cross-border exposure to the United Kingdom was in the banking sector. At
December 31, 2006 and 2005, Germany was the only country whose total
cross-border outstandings of $12.6 billion and $10.0 billion were between
0.75 percent and one percent of total assets.

(3)

collateral applied of $4.3 billion and $7.4 billion at December 31, 2006 and 2005.
Includes Australia and New Zealand.
Includes Bermuda and Cayman Islands.

(4)
(5) Other includes Canada and supranational entities.

Table 24 Total Cross-border Exposure Exceeding One Percent of Total Assets (1,2)

(Dollars in millions)

United Kingdom

December 31

Public Sector

Banks

Private Sector

2006
2005
2004

$ 53
298
74

$9,172
7,272
1,585

$ 8,059
13,616
8,481

Exposure as a
Percentage
of Total
Assets

1.18%
1.64
0.91

Cross-border
Exposure

$17,284
21,186
10,140

(1) Exposure includes cross-border claims by our foreign offices as follows: loans, accrued interest receivable, 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 definitions are based on the FFIEC instructions for preparing the
Country Exposure Report.

(2) Derivative assets are reported on a mark-to-market basis and have been reduced by the amount of cash collateral applied of $1.2 billion, $1.8 billion, and $1.8 billion at December 31, 2006, 2005, and 2004, respectively.

Bank of America 2006

As presented in Table 25, foreign exposure to borrowers or counter-
parties in emerging markets increased $3.0 billion to $20.9 billion at
December 31, 2006, compared to $17.9 billion at December 31, 2005.
The increase was primarily due to higher sovereign and corporate secu-

rities trading exposures in Asia Pacific. Foreign exposure to borrowers or
counterparties in emerging markets represented 16 percent and 21 per-
cent of total foreign exposure at December 31, 2006 and 2005.

Table 25 Selected Emerging Markets (1)

(Dollars in millions)

Region/Country
Asia Pacific
China
South Korea
India
Singapore
Hong Kong
Taiwan
Other Asia Pacific

Total Asia Pacific

Latin America
Mexico
Brazil
Chile
Argentina
Other Latin America

Total Latin America

Middle East and Africa

Central and Eastern Europe

Total

Loans and
Leases,
and Loan
Commitments

Other
Financing (2)

Derivative
Assets (3)

Securities/
Other
Investments (4)

Total
Cross-
border
Exposure (5)

Local
Country
Exposure
Net of Local
Liabilities (6)

Total Foreign
Exposure
December 31
2006

Increase/
(Decrease)
From
December 31
2005

$ 236
254
560
226
345
305
77

2,003

924
153
221
32
108

1,438

484

–

48
546
423
9
36
52
22

1,136

195
84
13
17
131

440

261

88
84
313
116
56
52
10

719

204
26
–
–
10

240

140

$ 3,193
2,493
739
521
427
40
482

7,895

2,608
1,986
9
76
18

4,697

231

126

$ 3,565
3,377
2,035
872
864
449
591

11,753

3,931
2,249
243
125
267

6,815

1,116

215

$ 49
–
–
–
–
293
–

342

–
402
83
127
15

627

–

$ 3,614
3,377
2,035
872
864
742
591

12,095

3,931
2,651
326
252
282

7,442

1,116

215

$ 210
2,222
444
402
305
(176)
(4)

3,403

607
(820)
(654)
58
(77)

(886)

414

$3,925

$1,905

$1,120

$12,949

$19,899

$969

$20,868

$3,004

(1) There is no generally accepted definition of emerging markets. The definition that we use includes all countries in Latin America excluding Cayman Islands and Bermuda; all countries in Asia Pacific excluding Japan, Australia

and New Zealand; all countries in Middle East and Africa; and all countries in Central and Eastern Europe excluding Greece.
Includes acceptances, standby letters of credit, commercial letters of credit and formal guarantees.

(2)
(3) Derivative Assets are reported on a mark-to-market basis and have been reduced by the amount of cash collateral applied of $9 million and $80 million at December 31, 2006 and 2005. There are less than $1 million of

other marketable securities collateralizing derivative assets as of December 31, 2006. Derivative Assets were collateralized by $4 million of other marketable securities at December 31, 2005.

(4) Generally, cross-border resale agreements are presented based on the domicile of the counterparty because the counterparty has the legal obligation for repayment except where the underlying securities are U.S. Treasuries,
in which case the domicile is the U.S., and are therefore excluded from this presentation. For regulatory reporting under FFIEC guidelines, cross-border resale agreements are presented based on the domicile of the issuer of
the securities that are held as collateral.

(5) Cross-border exposure includes amounts payable to us by borrowers or counterparties with a country of residence other than the one in which the credit is booked, regardless of the currency in which the claim is denominated,

consistent with FFIEC reporting rules.

(6) Local country exposure includes amounts payable to us by borrowers with a country of residence in which the credit is booked, regardless of the currency in which the claim is denominated. Local funding or liabilities are
subtracted from local exposures as allowed by the FFIEC. Total amount of available local liabilities funding local country exposure at December 31, 2006 was $20.7 billion compared to $24.2 billion at December 31, 2005.
Local liabilities at December 31, 2006 in Asia Pacific and Latin America were $14.1 billion and $6.6 billion of which $6.6 billion were in Singapore, $3.6 billion in Hong Kong, $2.5 billion in Chile, $1.9 billion in Argentina, $1.4
billion in Mexico, $1.2 billion in South Korea, $829 million in India, $784 million in Uruguay, and $669 million in China. There were no other countries with available local liabilities funding local country exposure greater than
$500 million.

At December 31, 2006, 58 percent of

the emerging markets
exposure was in Asia Pacific, compared to 49 percent at December 31,
2005. Asia Pacific emerging markets exposure increased by $3.4 billion.
Growth was driven by higher cross-border sovereign and corporate secu-
rities trading exposure, primarily in South Korea, India and Singapore, as
well as higher other financing exposure in India. Our exposure in China
was primarily related to our investment in CCB at both December 31,
2006 and 2005.

In December 2006, the Corporation completed the sale of its Asia
Commercial Banking business to CCB. Our corporate banking and whole-
sale franchises are not impacted by this sale.

At December 31, 2006, 36 percent of

the emerging markets
exposure was in Latin America compared to 47 percent at December 31,
2005. Lower exposures in Brazil and Chile were partially offset by an
increase in Mexico. The decline in Brazil was related to the sale of our
Brazilian operations in September 2006 in exchange principally for equity
in Banco Itaú. As of December 31, 2006, our investment in Banco Itaú
accounted for $1.9 billion of exposure in Brazil. The decline in Chile was
due to higher local liabilities which reduced our local exposure.

In August 2006, we announced a definitive agreement to sell our
operations in Chile and Uruguay for equity in Banco Itaú. These trans-

actions are expected to close in early 2007. Subsequent to the sale of our
Brazilian operations and the closing of the Chile and Uruguay transactions,
the Corporation will hold approximately seven percent of the equity of
Banco Itaú through voting and non-voting shares.

The increased exposures in Mexico were attributable to higher cross-
border corporate securities trading exposure. Our 24.9 percent investment
in Santander accounted for $2.3 billion and $2.1 billion of exposure in
Mexico at December 31, 2006 and 2005.

In December 2005, we announced a definitive agreement with a
consortium led by Johannesburg-based Standard Bank Group Limited for
the sale of our assets and the assumption of our liabilities in Argentina.
This transaction is expected to close in early 2007.

Provision for Credit Losses
The Provision for Credit Losses was $5.0 billion, a $996 million, or 25
percent, increase over 2005.

The consumer portion of the Provision for Credit Losses increased
$367 million to $4.8 billion compared to 2005. This increase was primar-
ily driven by the addition of MBNA, partially offset by lower bankruptcy-
related costs on the domestic consumer credit card portfolio. On the
lower bankruptcy charge-offs
domestic consumer credit card portfolio,

72 Bank of America 2006

resulting from bankruptcy reform and the absence of the $210 million
provision recorded in 2005 to establish reserves for changes in credit card
minimum payment requirements were partially offset by portfolio season-
ing. Consumer provision expense increased throughout the year as most
products trended toward more normalized credit cost levels due to portfo-
lio seasoning and an upward trend in bankruptcy-related charge-offs from
the unusually low levels experienced post bankruptcy reform. Credit costs
in Europe increased throughout the year due to seasoning of the credit
card portfolio and higher personal insolvencies in the United Kingdom. For
discussions of the impact of SOP 03-3, see Consumer Portfolio Credit Risk
Management beginning on page 63.

The commercial portion of the Provision for Credit Losses for 2006
was $243 million compared to negative $370 million in 2005. The
increase was driven by the absence in 2006 in Global Corporate and
Investment Banking of benefits from the release of reserves in 2005
related to an improved risk profile in Latin America and reduced
uncertainties associated with the FleetBoston credit integration. Also con-
tributing to the increase were both the addition of MBNA and seasoning of
the business card and small business portfolios in Global Consumer and
Small Business Banking, as well as lower recoveries in 2006 in Global
Corporate and Investment Banking. Partially offsetting these increases
were reductions in Global Corporate and Investment Banking commercial
reserves in 2006 as a stable economic environment throughout 2006
drove sustained favorable commercial credit market conditions.

The Provision for Credit Losses related to unfunded lending commit-

ments was $9 million in 2006 compared to negative $7 million in 2005.

Allowance for Credit Losses

Allowance for Loan and Lease Losses
The Allowance for Loan and Lease Losses is allocated based on two
components. We evaluate the adequacy of the Allowance for Loan and
Lease Losses based on the combined total of these two components.

The first component of the Allowance for Loan and Lease Losses
covers those commercial loans that are either nonperforming or impaired.
An allowance is allocated when the discounted cash flows (or collateral
value or observable market price) are lower than the carrying value of that
loan. For purposes of computing the specific loss component of the allow-
ance, larger impaired loans are evaluated individually and smaller impaired
loans are evaluated as a pool using historical
loss experience for the
respective product type and risk rating of the loans.

The second component of the Allowance for Loan and Lease Losses
covers performing commercial loans and leases, and consumer loans. The
allowance for commercial loan and lease losses is established by product
type after analyzing historical loss experience by internal risk rating, cur-
rent economic conditions, industry performance trends, geographic or obli-
gor concentrations within each portfolio segment, and any other pertinent
information. The commercial historical
loss experience is updated quar-
terly to incorporate the most recent data reflective of the current economic
environment. As of December 31, 2006, quarterly updating of historical
loss experience did not have a material impact on the Allowance for Loan
and Lease Losses. The allowance for consumer and certain homogeneous
commercial
loan and lease products is based on aggregated portfolio
segment evaluations, generally by product type. Loss forecast models are
utilized that consider a variety of factors including, but not limited to, his-
torical
foreclosures based on
portfolio trends, delinquencies, economic trends and credit scores. These
loss forecast models are updated on a quarterly basis in order
to
incorporate information reflective of the current economic environment. As

loss experience, estimated defaults or

of December 31, 2006, quarterly updating of the loss forecast models
increased the Allowance for Loan and Lease Losses due to portfolio sea-
soning and the trend toward more normalized loss levels. Included within
this second component of the Allowance for Loan and Lease Losses and
determined separately from the procedures outlined above are reserves
which are maintained to cover uncertainties that affect our estimate of
in the forecasting
probable losses including the imprecision inherent
methodologies, as well as domestic and global economic uncertainty,
large single name defaults and event risk. During 2006, commercial
reserves were released as a stable economic environment throughout
2006 drove sustained favorable commercial credit market conditions.

We monitor differences between estimated and actual incurred loan
and lease losses. This monitoring process includes periodic assessments
by senior management of loan and lease portfolios and the models used
to estimate incurred losses in those portfolios.

Additions to the Allowance for Loan and Lease Losses are made by
charges to the Provision for Credit Losses. Credit exposures deemed to be
uncollectible are charged against the Allowance for Loan and Lease Loss-
es. Recoveries of previously charged off amounts are credited to the
Allowance for Loan and Lease Losses.

The Allowance for Loan and Lease Losses for the consumer portfolio
as presented in Table 27 was $5.6 billion at December 31, 2006, an
increase of $1.0 billion from December 31, 2005. This increase was
primarily attributable to the addition of MBNA.

The allowance for commercial loan and lease losses was $3.5 billion
at December 31, 2006, a $74 million decrease from December 31, 2005.
Commercial – foreign allowance levels decreased due to the sale of our
Brazilian operations. The increase in commercial – domestic allowance
levels was primarily attributable to the addition of MBNA partially offset by
the above mentioned reductions in commercial reserves in 2006.

Within the individual consumer and commercial product categories,
credit card – domestic allowance levels include reductions throughout
2006 from new securitizations and reductions as reserves established in
2005 for changes in minimum payment requirements were utilized to
absorb associated net charge-offs. Direct/indirect consumer allowance
levels increased as the Corporation discontinued new sales of receivables
into the Card Services unsecured lending securitization trusts. Commercial
– domestic allowance levels also increased as reserves were established
for new advances on business card accounts for which previous loan
balances were sold to the securitization trusts.

Reserve for Unfunded Lending Commitments
In addition to the Allowance for Loan and Lease Losses, we also estimate
probable losses related to unfunded lending commitments, such as letters
of credit and financial guarantees, and binding unfunded loan commit-
ments. Unfunded lending commitments are subject to individual reviews
and are analyzed and segregated by risk according to our internal risk rat-
ing scale. These risk classifications, in conjunction with an analysis of
historical loss experience, utilization assumptions, current economic con-
ditions and performance trends within specific portfolio segments, and any
other pertinent information result in the estimation of the reserve for
unfunded lending commitments. The reserve for unfunded lending
commitments is included in Accrued Expenses and Other Liabilities on the
Consolidated Balance Sheet.

We monitor differences between estimated and actual incurred credit
losses upon draws of the commitments. This monitoring process includes
periodic assessments by senior management of credit portfolios and the
models used to estimate incurred losses in those portfolios.

Bank of America 2006

Changes to the reserve for unfunded lending commitments are made
through the Provision for Credit Losses. The reserve for unfunded lending

commitments at December 31, 2006 was $397 million, relatively flat with
December 31, 2005.

Table 26 presents a rollforward of the allowance for credit losses for 2006 and 2005.

Table 26 Allowance for Credit Losses

(Dollars in millions)

Allowance for loan and lease losses, January 1
MBNA balance, January 1, 2006
Loans and leases charged off
Residential mortgage
Credit card – domestic
Credit card – foreign
Home equity lines
Direct/Indirect consumer
Other consumer

Total consumer

Commercial – domestic
Commercial real estate
Commercial lease financing
Commercial – foreign

Total commercial

Total loans and leases charged off

Recoveries of loans and leases previously charged off
Residential mortgage
Credit card – domestic
Credit card – foreign
Home equity lines
Direct/Indirect consumer
Other consumer

Total consumer

Commercial – domestic
Commercial real estate
Commercial lease financing
Commercial – foreign

Total commercial

Total recoveries of loans and leases previously charged off

Net charge-offs

Provision for loan and lease losses
Other

Allowance for loan and lease losses, December 31

Reserve for unfunded lending commitments, January 1
Provision for unfunded lending commitments
Other

Reserve for unfunded lending commitments, December 31

Total

Loans and leases outstanding at December 31
Allowance for loan and lease losses as a percentage of loans and leases outstanding at

December 31

Consumer allowance for loan and lease losses as a percentage of consumer loans and

leases outstanding at December 31

Commercial allowance for loan and lease losses as a percentage of commercial loans and

leases outstanding at December 31

Average loans and leases outstanding during the year
Net charge-offs as a percentage of average loans and leases outstanding during the year (1)
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases at

December 31

Ratio of the allowance for loan and lease losses at December 31 to net charge-offs (1)

2006

$ 8,045
577

2005

8,626
–

(74)
(3,546)
(292)
(67)
(748)
(436)

(5,163)

(597)
(7)
(28)
(86)

(718)

(58)
(4,018)
–
(46)
(380)
(376)

(4,878)

(535)
(5)
(315)
(61)

(916)

(5,881)

(5,794)

35
452
67
16
224
133

927

261
4
56
94

415

1,342

(4,539)

5,001
(68)

9,016

395
9
(7)

397

31
366
–
15
132
101

645

365
5
84
133

587

1,232

(4,562)

4,021
(40)

8,045

402
(7)
–

395

$ 9,413

$706,490

8,440

$573,791

1.28%

1.19

1.40%

1.27

1.44
$652,417

0.70%

1.62
$537,218

0.85%

505
1.99

532
1.76

(1) For 2006, the impact of SOP 03-3 decreased net charge-offs by $288 million. Excluding the impact of SOP 03-3, net charge-offs as a percentage of average loans and leases outstanding for 2006 was 0.74 percent, and the

ratio of the Allowance for Loan and Lease Losses to net charge-offs was 1.87 at December 31, 2006.

74 Bank of America 2006

For reporting purposes, we allocate the allowance for credit losses across products. However, the allowance is available to absorb any credit losses

without restriction. Table 27 presents our allocation by product type.

Table 27 Allocation of the Allowance for Credit Losses by Product Type

(Dollars in millions)

Allowance for loan and lease losses
Residential mortgage
Credit card – domestic
Credit card – foreign
Home equity lines
Direct/Indirect consumer
Other consumer

Total consumer

Commercial – domestic
Commercial real estate
Commercial lease financing
Commercial – foreign

Total commercial (1)

Allowance for loan and lease losses

Reserve for unfunded lending commitments

Total

December 31

2006

2005

Amount

Percent

Amount

Percent

$ 248
3,176
336
133
1,200
467

5,560

2,162
588
217
489

3,456

9,016

397

$9,413

2.8%

35.2
3.7
1.5
13.3
5.2

61.7

24.0
6.5
2.4
5.4

38.3

100.0%

$ 277
3,301
–
136
421
380

4,515

2,100
609
232
589

3,530

8,045

395

$8,440

3.4%

41.0
–
1.7
5.2
4.8

56.1

26.1
7.6
2.9
7.3

43.9

100.0%

(1)

Includes allowance for loan and lease losses of commercial impaired loans of $43 million and $55 million at December 31, 2006 and 2005.

Market Risk Management
Market risk is the risk that values of assets and liabilities or revenues will
be adversely affected by changes in market conditions such as market
movements. This risk is inherent in the financial instruments associated
with our operations and/or activities including loans, deposits, securities,
short-term borrowings,
trading account assets and
liabilities, and derivatives. Market-sensitive assets and liabilities are gen-
erated through loans and deposits associated with our traditional banking
business, customer and proprietary trading operations, ALM process,
credit risk mitigation activities and mortgage banking activities.

long-term debt,

Our traditional banking loan and deposit products are nontrading
positions and are reported at amortized cost for assets or the amount
owed for liabilities (historical cost). The accounting rules require a histor-
ical cost view of traditional banking assets and liabilities. However, these
positions are still subject to changes in economic value based on varying
market conditions, primarily changes in the levels of interest rates. The
risk of adverse changes in the economic value of our nontrading positions
is managed through our ALM activities.

Trading positions are reported at estimated market value with
changes reflected in income. Trading positions are subject to various risk
factors, which include exposures to interest rates and foreign exchange
rates, as well as equity, mortgage, commodity and issuer risk factors. We
seek to mitigate these risk exposures by using techniques that encom-
pass a variety of financial
instruments in both the cash and derivatives
markets. The following discusses the key risk components along with
respective risk mitigation techniques.

Interest Rate Risk
Interest rate risk represents exposures to instruments whose values vary
with the level or volatility of interest rates. These instruments include, but
are not limited to, loans, debt securities, certain trading-related assets
and liabilities, deposits, borrowings and derivative instruments. Hedging
instruments used to mitigate these risks include related derivatives such
as options, futures, forwards and swaps.

Foreign Exchange Risk
Foreign exchange risk represents exposures to changes in the values of
current holdings and future cash flows denominated in other currencies.
The types of instruments exposed to this risk include investments in for-
eign subsidiaries, foreign currency-denominated loans, foreign currency-
denominated securities, future cash flows in foreign currencies arising
from foreign exchange transactions, foreign-currency denominated debt
and various foreign exchange derivative instruments whose values fluc-
tuate with changes in the level or volatility of currency exchange rates or
foreign interest rates. Hedging instruments used to mitigate this risk
include foreign exchange options, currency swaps, futures, forwards and
deposits.

Mortgage Risk
Mortgage risk represents exposures to changes in the value of mortgage-
related instruments. The values of these instruments are sensitive to
prepayment rates, mortgage rates, default, other interest rates and inter-
est rate volatility. Our exposure to these instruments takes several forms.
First, we trade and engage in market-making activities in a variety of mort-
gage securities including whole loans, pass-through certificates, commer-
cial mortgages, and collateralized mortgage obligations. Second, we
originate a variety of mortgage-backed securities which involves the accu-
mulation of mortgage-related loans in anticipation of eventual securitiza-
tion. Third, we may hold positions in mortgage securities and residential
mortgage loans as part of the ALM portfolio. Fourth, we create MSRs as
part of our mortgage activities. See Notes 1 and 8 of the Consolidated
Financial Statements for additional information on MSRs. Hedging instru-
ments used to mitigate this risk include options, futures, forwards, swaps,
swaptions and securities.

Bank of America 2006

Equity Market Risk
Equity market risk represents exposures to securities that represent an
ownership interest in a corporation in the form of domestic and foreign
common stock or other equity-linked instruments. Instruments that would
lead to this exposure include, but are not limited to, the following: com-
mon stock, exchange traded funds, American Depositary Receipts (ADRs),
convertible bonds, listed equity options (puts and calls), over-the-counter
equity options, equity total return swaps, equity index futures and other
equity derivative products. Hedging instruments used to mitigate this risk
include options, futures, swaps, convertible bonds and cash positions.

Commodity Risk
Commodity risk represents exposures to instruments traded in the petro-
leum, natural gas, power, and metals markets. These instruments consist
primarily of futures, forwards, swaps and options. Hedging instruments
used to mitigate this risk include options, futures and swaps in the same
or similar commodity product, as well as cash positions.

Issuer Credit Risk
Issuer credit risk represents exposures to changes in the creditworthiness
of individual
issuers or groups of issuers. Our portfolio is exposed to
issuer credit risk where the value of an asset may be adversely impacted
by changes in the levels of credit spreads, by credit migration, or by
defaults. Hedging instruments used to mitigate this risk include bonds,
credit default swaps and other credit fixed income instruments.

Trading Risk Management
Trading-related revenues represent the amount earned from trading posi-
instruments and
tions which are taken in a diverse range of financial
markets. Trading account assets and liabilities and derivative positions
are reported at fair value. For more information on fair value, see Complex
Accounting Estimates beginning on page 81. Trading Account Profits
represent the net amount earned from our trading positions and, as
reported in the Consolidated Statement of Income, do not include the Net
Interest Income recognized on trading positions, or the related funding
charge or benefit. Trading Account Profits can be volatile and are largely
driven by general market conditions and customer demand. Trading

Account Profits are dependent on the volume and type of transactions, the
level of risk assumed, and the volatility of price and rate movements at
any given time within the ever-changing market environment.

The histogram of daily revenue or loss below is a graphic depiction of
trading volatility and illustrates the daily level of trading-related revenue for
2006. Trading-related revenue encompasses proprietary trading and
customer-related activities. During 2006, positive trading-related revenue
was recorded for 96 percent of the trading days. Furthermore, there were
no trading days with losses greater than $10 million and the largest loss
was $10 million. This can be compared to 2005, where positive trading-
related revenue was recorded for 86 percent of the trading days and only
four percent of the total trading days had losses greater than $10 million
and the largest loss was $55 million.

To evaluate risk in our trading activities, we focus on the actual and
potential volatility of individual positions as well as portfolios. At a portfolio
and corporate level, we use VAR modeling and stress testing. VAR is a key
statistic used to measure market risk. In order to manage day-to-day risks,
VAR is subject to trading limits both for our overall trading portfolio and
within individual businesses. Senior management reviews and evaluates
the results of these limit excesses.

A VAR model simulates the value of a portfolio under a range of hypo-
thetical scenarios in order to generate a distribution of potential gains and
losses. The VAR represents the worst loss the portfolio is expected to
experience with a given level of confidence. VAR depends on the volatility
of the positions in the portfolio and on how strongly their risks are corre-
lated. Within any VAR model, there are significant and numerous assump-
tions that will differ from company to company. Our VAR model uses a
historical simulation approach based on three years of historical data and
assumes a 99 percent confidence level. Statistically, this means that
losses will exceed VAR, on average, one out of 100 trading days, or two to
three times each year. Actual
losses did not exceed VAR in 2006 and
exceeded VAR twice in 2005.

In addition, the predictive accuracy of the model

The assumptions and data underlying our VAR model are updated on
is
a regular basis.
periodically tested by comparing actual
losses for individual businesses
with the losses predicted by the VAR model. Senior management reviews
and evaluates the results of these tests.

Histogram of Daily Trading-related Revenue
Twelve Months Ended December 31, 2006

s
y
a
D

f
o
r
e
b
m
u
N

76 Bank of America 2006

< -50

-50 to -40

-40 to -30

-30 to -20

-20 to -10

-10 to 0

0 to 10

10 to 20

20 to 30

30 to 40

40 to 50

> 50

Revenue (dollars in millions)

The following graph shows daily trading-related revenue and VAR for 2006.

Trading Risk and Return
Daily Trading-related Revenue and VAR

)
s
n
o
i
l
l
i

M
n
i

s
r
a
l
l
o
D

(

100

-20

-40

-60

-80

Daily
Trading-
related
Revenue

VA R

-100

12/31/05

3/31/06

6/30/06

9/30/06

12/31/06

Table 28 presents average, high and low daily VAR for the twelve months ended December 31, 2006 and 2005.

Table 28 Trading Activities Market Risk

(Dollars in millions)

Foreign exchange
Interest rate
Credit
Real estate/mortgage
Equities
Commodities
Portfolio diversification

Total market-based trading portfolio (2)

Twelve Months Ended December 31

2006

VAR
High (1)

$22.9
50.0
36.7
12.7
39.6
9.9
–

$59.8

Low (1)

$ 3.1
7.3
18.4
4.7
9.9
3.4
–

$26.0

Average

$ 8.2
18.5
26.8
8.4
18.8
6.1
(45.5)

$ 41.3

2005

VAR
High (1)

$12.1
58.2
33.4
20.7
35.1
10.6
–

$67.0

Average

$ 5.6
24.7
22.7
11.4
18.1
6.6
(47.3)

$ 41.8

Low (1)

$ 2.6
10.8
14.4
6.5
9.6
3.5
–

$26.8

(1) The high and low for the total portfolio may not equal the sum of the individual components as the highs or lows of the individual portfolios may have occurred on different trading days.
(2) See Commercial Portfolio Credit Risk Management on page 66 for a discussion of the VAR related to the credit derivatives that economically hedge the loan portfolio.

Stress Testing
Because the very nature of a VAR model suggests results can exceed our
estimates, we also “stress test” our portfolio. Stress testing estimates
the value change in our trading portfolio that may result from abnormal
market movements. Various types of stress tests are run regularly against
the overall trading portfolio and individual businesses. Historical scenarios
simulate the impact of price changes which occurred during a set of
extended historical market events. The results of these scenarios are
reported daily to senior management. During 2006, the largest losses
among these scenarios ranged from $7 million to $591 million. Hypo-
thetical scenarios evaluate the potential impact of extreme but plausible
events. These scenarios are developed to address perceived vulner-
abilities in the market and in our portfolios, and are periodically updated.
Senior management reviews and evaluates results of these scenarios
monthly. During 2006, the largest losses among these scenarios ranged
from $441 million to $734 million. Worst-case losses, which represent the
most extreme losses in our daily VAR calculation, are reported daily.
Finally, desk-level stress tests are performed daily for individual busi-

nesses. These stress tests evaluate the potential adverse impact of large
moves in the market risk factors to which those businesses are most
sensitive.

Interest Rate Risk Management for Nontrading
Activities
Interest rate risk represents the most significant market risk exposure to
our nontrading exposures. Our overall goal is to manage interest rate risk
so that movements in interest rates do not adversely affect core net inter-
est income – managed basis. Interest rate risk is measured as the poten-
tial volatility in our core net interest income – managed basis caused by
changes in market interest rates. Client facing activities, primarily lending
and deposit-taking, create interest rate sensitive positions on our balance
sheet. Interest rate risk from these activities, as well as the impact of
changing market conditions, is managed through our ALM activities.

Simulations are used to estimate the impact on core net interest
income – managed basis using numerous interest rate scenarios, balance
sheet trends and strategies. These simulations evaluate how the above

Bank of America 2006

mentioned scenarios impact core net interest income – managed basis on
short-term financial instruments, debt securities, loans, deposits, borrow-
ings 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 and liability repric-
ing and maturity characteristics.

The Balance Sheet Management group analyzes core net interest
income – managed basis forecasts utilizing different rate scenarios, with
the base case utilizing forward interest
rates. The Balance Sheet
Management group frequently updates the core net interest income –
managed basis forecast for changing assumptions and differing outlooks
based on economic trends and market conditions. Thus, we continually

Table 29 Forward Rates

Spot rates
12-month forward average rates

The following table reflects the pre-tax dollar impact to forecasted
core net interest income – managed basis over the next twelve months
from December 31, 2006 and 2005, resulting from a 100 bp gradual
parallel increase, a 100 bp gradual parallel decrease, a 100 bp gradual
curve flattening (increase in short-term rates or decrease in long-term
rates) and a 100 bp gradual curve steepening (decrease in short-term
rates or increase in long-term rates) from the forward market curve. For
further discussion of core net interest income – managed basis see
page 43.

The following sensitivity analysis assumes that we take no action in
response to these rate shifts over the indicated years. The estimated
exposure is reported on a managed basis and reflects impacts that may
be realized primarily in Net Interest Income and Card Income. This sensi-
tivity analysis excludes any impact that could occur in the valuation of
retained interests in the Corporation’s securitizations due to changes in
interest rate levels. See Note 9 of the Consolidated Financial Statements
for additional information on Securitizations.

Beyond what is already implied in the forward market curve, the inter-
est rate risk position has become modestly more exposed to rising rates
since December 31, 2005. This exposure is primarily driven by the addi-
tion of MBNA. Conversely, over a 12-month horizon, we would benefit from
falling rates or a steepening of the yield curve beyond what is already
implied in the forward market curve.

monitor our balance sheet position in an effort to maintain an acceptable
level of exposure to interest rate changes.

We prepare forward-looking forecasts of core net interest income –
managed basis. These baseline forecasts take into consideration
expected future business growth, ALM positioning, and the direction of
interest rate movements as implied by forward interest rates. We then
measure and evaluate the impact that alternative interest rate scenarios
have to these baseline forecasts in order to assess interest rate sensi-
tivity under varied conditions. The spot and 12-month forward monthly
average rates used in our respective baseline forecasts at December 31,
2006 and 2005 were as follows:

December 31

2006

2005

Federal
Funds

5.25%
4.85

Ten-Year
Swap

5.18%
5.19

Federal
Funds

4.25%
4.75

Ten-Year
Swap

4.94%
4.97

As part of our ALM activities, we use securities, residential mort-
gages, and interest rate and foreign exchange derivatives in managing
interest rate sensitivity.

Securities
The securities portfolio is an integral part of our ALM position. During the
third quarter of 2006, we made a strategic shift in our balance sheet
composition strategy to reduce the level of mortgage-backed securities
and thereby reduce the level of investments in debt securities relative to
loans. Accordingly, management targeted a reduction of mortgage-backed
debt securities of approximately $100 billion over the next couple of years
in order to achieve a balance sheet composition that would be consistent
with management’s revised risk-reward profile. Management expects the
total targeted reduction will result from the third quarter sale of $43.7 bil-
lion in mortgage-backed securities combined with expected maturities and
paydowns of mortgage-backed securities over the next couple of years. For
those securities that are in an unrealized loss position we have the intent
and ability to hold these securities to recovery.

The securities portfolio also includes investments to a lesser extent
in corporate, municipal and other investment grade debt securities. The
strategic shift in the balance sheet composition strategy did not impact
these holdings. For those securities that are in an unrealized loss position
we have the intent and ability to hold these securities to recovery.

Table 30 Estimated Core Net Interest Income – Managed Basis at Risk

(Dollars in millions)

Curve Change

+100 Parallel shift
-100 Parallel shift

Flatteners

Short end
Long end

Steepeners

Short end
Long end

78 Bank of America 2006

Short Rate

Long Rate

+100
-100

+100
–

-100
–

+100
-100

–
-100

–
+100

December 31

2006

$(557)
770

(687)
(192)

971
138

2005

$(357)
244

(523)
(298)

536
168

During 2006 and 2005, we purchased AFS debt securities of $40.9
billion and $204.5 billion, sold $55.1 billion and $133.4 billion, and had
maturities and received paydowns of $22.4 billion and $39.5 billion. We
realized $(443) million and $1.1 billion in Gains (Losses) on Sales of Debt
Securities during 2006 and 2005. The value of our Accumulated OCI
related to AFS debt securities increased (improved) by $131 million (pre-
tax) during 2006 which was driven by the realized loss on the securities
sale partially offset by an increase in interest rates.

Accumulated OCI

includes $2.9 billion in after-tax losses at
December 31, 2006, related to after-tax unrealized losses associated with
our AFS securities portfolio, including $3.1 billion of after-tax unrealized
losses related to AFS debt securities and $249 million of after-tax unreal-
ized gains related to AFS equity securities. Total market value of the AFS
debt securities was $192.8 billion at December 31, 2006, with a
weighted average duration of 4.1 years and primarily relates to our
mortgage-backed securities portfolio.

Changes to the Accumulated OCI amounts for the AFS securities
portfolio going forward will be driven by further interest rate or price
fluctuations,
the collection of cash flows including prepayment and
maturity activity, and the passage of time.

Residential Mortgage Portfolio
During 2006 and 2005, we purchased $42.3 billion and $32.0 billion of
residential mortgages related to ALM activities and sold $11.0 billion and
$10.1 billion. We added $51.9 billion and $18.3 billion of originated resi-
dential mortgages to the balance sheet for 2006 and 2005. Additionally,
we received paydowns of $24.7 billion and $35.8 billion for 2006 and
2005. The ending balance at December 31, 2006 was $241.2 billion,
compared to $182.6 billion at December 31, 2005.

Interest Rate and Foreign Exchange Derivative
Contracts
Interest rate and foreign exchange derivative contracts are utilized in our
ALM activities and serve as an efficient tool to mitigate our interest rate
and foreign exchange risk. We use derivatives to hedge the changes in
cash flows or changes in market values on our balance sheet due to inter-
est rate and foreign exchange components. See Note 4 of the Con-
solidated Financial Statements for additional information on our hedging
activities.

Our interest rate contracts are generally non-leveraged generic inter-
est rate and foreign exchange basis swaps, options, futures and forwards.
In addition, we use foreign exchange contracts, including cross-currency
interest rate swaps and foreign currency forward contracts, to mitigate the
foreign exchange risk associated with foreign currency-denominated
assets and liabilities, as well as certain equity investments in foreign
subsidiaries. Table 31 reflects the notional amounts, fair value, weighted
average receive fixed and pay fixed rates, expected maturity, and esti-
mated duration of our open ALM derivatives at December 31, 2006 and
2005.

The changes in our derivatives portfolio reflect actions taken for inter-
est rate and foreign exchange rate risk management. The decisions to
reposition our derivative portfolio are based upon the current assessment
of economic and financial conditions including the interest rate environ-
ment, balance sheet composition and trends, and the relative mix of our
cash and derivative positions. The notional amount of our net receive fixed
swap position (including foreign exchange contracts) decreased $10.5 bil-
lion to $12.3 billion at December 31, 2006 compared to $22.8 billion at
December 31, 2005. The decrease in the net receive fixed position is
primarily due to terminations and maturities within the portfolio during the
year. The notional amount of our foreign exchange basis swaps increased
$14.1 billion to $31.9 billion at December 31, 2006 compared to $17.8
billion at December 31, 2005. The notional amount of our option position
increased $186.0 billion to $243.3 billion at December 31, 2006, com-
pared to December 31, 2005. The increase in the notional amount of
options was due to the addition of caps used to reduce the sensitivity of
Net Interest Income to changes in market interest rates. Futures and for-
ward rate contracts are comprised primarily of $8.5 billion of forward pur-
chase contracts of mortgage loans at December 31, 2006 and $35.0
billion of forward purchase contracts of mortgage-backed securities and
mortgage loans at December 31, 2005. The forward purchase contracts
outstanding at December 31, 2006, settled in January 2007 with an aver-
age yield of 5.67 percent. The forward purchase contracts outstanding at
December 31, 2005, settled from January 2006 to April 2006, with an
average yield of 5.46 percent.

The following table includes derivatives utilized in our ALM activities,
including those designated as SFAS 133 accounting hedges and those
used as economic hedges. The fair value of net ALM contracts increased
from a loss of $386 million at December 31, 2005 to a gain of $1.5 bil-
lion at December 31, 2006. The increase was primarily attributable to
gains from changes in the value of foreign exchange basis swaps of $2.6
billion and receive fixed and pay fixed interest rate swaps of $1.3 billion,
partially offset by losses from changes in the values of foreign exchange
contracts of $1.2 billion, and option products of $1.0 billion. The increase
in the value of foreign exchange basis swaps was due to the strengthening
of most foreign currencies against the dollar during 2006. The increases
in the value of receive fixed interest rate swaps was due to terminations
partially offset by losses as a result of increases in market interest rates.
The increase in the value of pay fixed interest rate swaps was due to gains
from increases in market interest rates partially offset by terminations.
The decrease in the value of foreign exchange contracts was due primarily
to increases in foreign interest rates during 2006. The decrease in the
value of option products was primarily due to changes in the composition
of the option portfolio.

Bank of America 2006

Table 31 Asset and Liability Management Interest Rate and Foreign Exchange Contracts

(Dollars in millions, average estimated
duration in years)

Receive fixed interest rate swaps (1)

Notional amount
Weighted average fixed rate
Pay fixed interest rate swaps (1)

Notional amount
Weighted average fixed rate

Foreign exchange basis swaps (2)

Notional amount

Option products (3)

Notional amount

Foreign exchange contracts (4)

Notional amount (5)

Futures and forward rate contracts (6)

Notional amount (5)

Net ALM contracts

(Dollars in millions, average estimated
duration in years)

Receive fixed interest rate swaps (1)

Notional amount
Weighted average fixed rate
Pay fixed interest rate swaps (1)

Notional amount
Weighted average fixed rate

Foreign exchange basis swaps (2)

Notional amount

Option products (3)

Notional amount

Foreign exchange contracts (4)

Notional amount (5)

Futures and forward rate contracts

Notional amount (5)

Net ALM contracts

December 31, 2006

Expected Maturity

Fair Value

$ (748)

261

1,992

317

(319)

(46)

$ 1,457

Fair Value

$(1,390)

(408)

(644)

1,349

909

(202)

$ (386)

Total

2007

2008

2009

2010

2011

Thereafter

$ 91,502

$ 2,795

$ 7,844

$48,900

$ 3,252

$ 1,630

$27,081

4.90%

4.80%

4.41%

4.90%

4.35%

4.50%

5.14%

$100,217

$ 15,000

$ 2,500

$44,000

4.98%

5.12%

5.11%

4.86%

–
–%

250
5.43%

$38,467

5.06%

$ 31,916

174

$ 2,292

$ 3,012

$ 5,351

$ 3,962

$17,125

243,280

200,000

43,176

–

20,319

(753)

1,588

1,901

3,850

1,104

12,629

8,480

–

December 31, 2005

Expected Maturity

Total

2006

2007

2008

2009

2010

Thereafter

$108,985

$ 4,337

$13,080

$ 6,144

$39,107

$10,387

$35,930

4.62%

4.75%

4.66%

4.02%

4.51%

4.43%

4.77%

$102,281

$ 5,100

$55,925

$10,152

4.61%

3.23%

4.46%

4.24%

–
–%

$31,104

5.21%

$ 17,806

514

174

884

$ 2,839

$ 3,094

$10,301

57,246

–

16,061

1,335

34,716

–

57,246

–

1,436

1,826

3,485

7,928

–

Average
Estimated
Duration

4.42

2.93

Average
Estimated
Duration

4.17

3.85

(1) At December 31, 2006, $4.2 billion of the receive fixed and $52.5 billion of the pay fixed swap notional represented forward starting swaps that will not be effective until their respective contractual start dates. At
December 31, 2005, $46.6 billion of the receive fixed swap notional and $41.9 billion of the pay fixed swap notional represented forward starting swaps that will not be effective until their respective contractual start dates.

(2) Foreign exchange basis swaps consist of cross-currency variable interest rate swaps used separately or in conjunction with receive fixed interest rate swaps.
(3) Option products include $225.1 billion in caps and $18.2 billion in swaptions at December 31, 2006. Amounts at December 31, 2005 totaled $5.0 billion in caps and $52.2 billion in swaptions.
(4) Foreign exchange contracts include foreign-denominated receive fixed interest rate swaps, cross-currency receive fixed interest rate swaps and foreign currency forward rate contracts. Total notional at December 31, 2006 was
comprised of $21.0 billion in foreign-denominated and cross-currency receive fixed swaps and $697 million in foreign currency forward rate contracts. At December 31, 2005, the notional balance consisted entirely of $16.1
billion in foreign-denominated and cross-currency fixed swaps.

(5) Reflects the net of long and short positions.
(6) At December 31, 2006, the position was comprised of $8.5 billion in forward purchase contracts that settled in January 2007.

80 Bank of America 2006

The Corporation uses interest rate derivative instruments to hedge
the variability in the cash flows of its assets and liabilities, and other fore-
casted transactions (cash flow hedges). The net losses on both open and
closed derivative instruments recorded in Accumulated OCI net-of-tax at
December 31, 2006 was $3.7 billion. These net losses are expected to
be reclassified into earnings in the same period when the hedged cash
flows affect earnings and will decrease income or increase expense on the
respective hedged cash flows. Assuming no change in open cash flow
derivative hedge positions and no changes to interest rates beyond what
is implied in forward yield curves at December 31, 2006, the net losses
are expected to be reclassified into earnings as follows: $1.0 billion (pre-
tax), or 18 percent, within the next year, 58 percent within five years, 83
percent within 10 years, with the remaining 17 percent thereafter. For
more information on derivatives designated as cash flow hedges, see Note
4 of the Consolidated Financial Statements.

The amount included in Accumulated OCI for terminated derivative
contracts were losses of $3.2 billion and $2.5 billion, net-of-tax, at
December 31, 2006 and 2005. The increase in losses can be attributable
primarily to losses in the value of interest rate derivatives that were termi-
nated during the year. Losses on these terminated derivative contracts are
reclassified into earnings in the same period or periods during which the
hedged forecasted transaction affects earnings.

Mortgage Banking Risk Management
Interest rate lock commitments (IRLCs) on loans intended to be sold are
subject to interest rate risk between the date of the IRLC and the date the
loan is funded. Residential first mortgage loans held-for-sale are subject to
interest rate risk from the date of funding until the loans are sold to the
secondary market. To hedge interest rate risk, we utilize forward loan sale
commitments and other derivative instruments including purchased
options. These instruments are used either as an economic hedge of
IRLCs and residential first mortgage loans held-for-sale, or designated as a
cash flow hedge of residential first mortgage loans held-for-sale, in which
case their net-of-tax unrealized gains and losses are included in Accumu-
lated OCI. At December 31, 2006, the notional amount of derivatives
economically hedging the IRLCs and residential
first mortgage loans
held-for-sale was $15.0 billion.

We manage changes in the value of MSRs by entering into derivative
financial
instruments. MSRs are a nonfinancial asset created when the
underlying mortgage loan is sold to investors and we retain the right to
service the loan. We use certain derivatives such as options and interest
rate swaps as economic hedges of MSRs. At December 31, 2006, the
amount of MSRs identified as being hedged by derivatives was approx-
imately $2.9 billion. The notional amount of the derivative contracts des-
ignated as economic hedges of MSRs at December 31, 2006 was $44.9
billion. The changes in the fair values of the derivative contracts are sub-
stantially offset by changes in the values of the MSRs that are hedged by
these derivative contracts. During 2006, the increase in value attributed to
economically hedged MSRs was $414 million offset by derivative hedge
losses of $200 million.

The Corporation adopted SFAS No. 156 “Accounting for Servicing of
Financial Assets” and accounts for consumer-related MSRs using the fair
value measurement method on January 1, 2006. See Note 1 of the Con-
solidated Financial Statements for additional information as it relates to
this accounting standard. See Note 8 of the Consolidated Financial State-
ments for additional information on MSRs.

Operational Risk Management
Operational risk is the risk of loss resulting from inadequate or failed
internal processes, people and systems, including system conversions
and integration, and external events. Successful operational risk manage-
ment is particularly important to diversified financial services companies
because of the nature, volume and complexity of the financial services
business.

We approach operational risk from two perspectives: enterprise-wide
and line of business-specific. The Compliance and Operational Risk
Committee provides oversight of significant company-wide operational and
compliance issues. Within Global Risk Management, Enterprise Com-
pliance and Operational Risk Management develops policies, practices,
controls and monitoring tools for assessing and managing operational
risks across the Corporation. We also mitigate operational risk through a
broad-based approach to process management and process improvement.
Improvement efforts are focused on reduction of variation in outputs. We
have a dedicated Quality and Productivity team to manage and certify the
process management and improvement efforts. For selected risks, we use
specialized support groups, such as Information Security and Supply Chain
Management, to develop corporate-wide risk management practices, such
as an information security program and a supplier program to ensure that
suppliers adopt appropriate policies and procedures when performing work
on behalf of the Corporation. These specialized groups also assist the
lines of business in the development and implementation of risk manage-
ment practices specific to the needs of the individual businesses. These
groups also work with line of business executives and risk executives to
develop appropriate policies, practices, controls and monitoring tools for
each line of business. Through training and communication efforts, com-
pliance and operational risk awareness is driven across the Corporation.

The lines of business are responsible for all the risks within the
business line, including operational risks. Operational and Compliance
Risk executives, working in conjunction with senior line of business execu-
tives, have developed key tools to help manage, monitor and report opera-
tional risk in each business line. Examples of these include personnel
management practices, data reconciliation processes, fraud management
units, transaction processing monitoring and analysis, business recovery
planning, and new product introduction processes. In addition, the lines of
business are responsible for monitoring adherence to corporate practices.
Management uses a self-assessment process, which helps to identify and
evaluate the status of risk issues, including mitigation plans, as appro-
priate. The goal of the self-assessment process is to periodically assess
changing market and business conditions and to evaluate key operational
risks impacting each line of business. In addition to information gathered
from the self-assessment process, key operational risk indicators have
been developed and are used to help identify trends and issues on both a
corporate and a business line level.

Recent Accounting and Reporting
Developments
See Note 1 of the Consolidated Financial Statements for a discussion of
recently issued or proposed accounting pronouncements.

Complex Accounting Estimates
Our significant accounting principles, as described in Note 1 of the Con-
in understanding Manage-
solidated Financial Statements, are essential
ment’s Discussion and Analysis of Financial Condition and Results of
Operations. Many of our significant accounting principles require complex
judgments to estimate values of assets and liabilities. We have proce-
dures and processes to facilitate making these judgments.

Bank of America 2006

The more judgmental estimates are summarized below. We have
identified and described the development of the variables most important
in the estimation process that, with the exception of accrued taxes,
involve mathematical models to derive the estimates. In many cases,
there are numerous alternative judgments that could be used in the proc-
ess of determining the inputs to the model. Where alternatives exist, we
have used the factors that we believe represent the most reasonable
value in developing the inputs. Actual performance that differs from our
estimates of the key variables could impact Net Income. Separate from
the possible future impact to Net Income from input and model variables,
the value of our
lending portfolio and market sensitive assets and
liabilities may change subsequent to the balance sheet measurement,
often significantly, due to the nature and magnitude of future credit and
market conditions. Such credit and market conditions may change quickly
and in unforeseen ways and the resulting volatility could have a significant,
negative effect on future operating results. These fluctuations would not
be indicative of deficiencies in our models or inputs.

Allowance for Credit Losses
The allowance for credit losses is our estimate of probable losses in the
loans and leases portfolio and within our unfunded lending commitments.
Changes to the allowance for credit losses are reported in the Con-
solidated Statement of Income in the Provision for Credit Losses. Our
process for determining the allowance for credit losses is discussed in the
Credit Risk Management section beginning on page 62 and Note 1 of the
Consolidated Financial Statements. Due to the variability in the drivers of
the assumptions made in this process, estimates of
the portfolio’s
inherent risks and overall collectibility change with changes in the econo-
industries, countries and individual borrowers’ or counter-
my, individual
parties’ ability and willingness to repay their obligations. The degree to
which any particular assumption affects the allowance for credit losses
depends on the severity of the change and its relationship to the other
assumptions.

(i)

risk ratings for pools of commercial

Key judgments used in determining the allowance for credit losses
include:
loans and leases,
(ii) market and collateral values and discount rates for individually eval-
uated loans, (iii) product type classifications for consumer and commercial
loans and leases, (iv) loss rates used for consumer and commercial loans
and leases, (v) adjustments made to assess current events and con-
ditions,
(vi) considerations regarding domestic and global economic
uncertainty, and (vii) overall credit conditions.

in the internal risk rating for commercial

Our Allowance for Loan and Lease Losses is sensitive to the risk
rating assigned to commercial loans and leases. Assuming a downgrade
of one level
loans and leases
rated under the internal risk rating scale, except loans and leases already
risk rated Doubtful as defined by regulatory authorities, the Allowance for
Loan and Lease Losses would increase by approximately $830 million at
December 31, 2006. The Allowance for Loan and Lease Losses as a
percentage of loan and lease outstandings at December 31, 2006 was
1.28 percent and this hypothetical increase in the allowance would raise
the ratio to approximately 1.39 percent. Our Allowance for Loan and Lease
Losses is also sensitive to the loss rates used for the consumer and
commercial portfolios. A 10 percent increase in the loss rates used on the
consumer and commercial
loan and lease portfolios would increase the
Allowance for Loan and Lease Losses at December 31, 2006 by approx-
imately $610 million, of which $515 million would relate to consumer and
$95 million to commercial.

These sensitivity analyses do not represent management’s expect-
ations of the deterioration in risk ratings or the increases in loss rates but

82 Bank of America 2006

are provided as hypothetical scenarios to assess the sensitivity of the
Allowance for Loan and Lease Losses to changes in key inputs. We
believe the risk ratings and loss severities currently in use are appropriate
and that the probability of a downgrade of one level of the internal risk
ratings for commercial loans and leases within a short period of time is
remote.

The process of determining the level of the allowance for credit
losses requires a high degree of judgment. It is possible that others, given
the same information, may at any point in time reach different reasonable
conclusions.

Fair Value of Financial Instruments
Trading Account Assets and Liabilities are recorded at fair value, which is
primarily based on actively traded markets where prices are based on
either direct market quotes or observed transactions. Liquidity is a sig-
nificant factor in the determination of the fair value of Trading Account
Assets or Liabilities. Market price quotes may not be readily available for
some positions, or positions within a market sector where trading activity
has slowed significantly or ceased. Situations of illiquidity generally are
triggered by the market’s perception of credit uncertainty regarding a sin-
gle company or a specific market sector. In these instances, fair value is
determined based on limited available market information and other fac-
tors, principally from reviewing the issuer’s financial statements and
changes in credit
ratings made by one or more rating agencies. At
December 31, 2006, $8.4 billion, or six percent, of Trading Account
Assets were fair valued using these alternative approaches. An immaterial
amount of Trading Account Liabilities were fair valued using these alter-
native approaches at December 31, 2006.

The fair values of Derivative Assets and Liabilities include adjust-
ments for market liquidity, counterparty credit quality,
future servicing
costs and other deal specific factors, where appropriate. To ensure the
prudent application of estimates and management judgment in determin-
ing the fair value of Derivative Assets and Liabilities, various processes
and controls have been adopted, which include: a Model Validation Policy
that requires a review and approval of quantitative models used for deal
pricing, financial statement fair value determination and risk quantifica-
tion; a Trading Product Valuation Policy that requires verification of all
traded product valuations; and a periodic review and substantiation of
daily profit and loss reporting for all traded products. These processes and
controls are performed independently of the business segments.

The fair values of Derivative Assets and Liabilities traded in the
over-the-counter market are determined using quantitative models that
require the use of multiple market inputs including interest rates, prices,
and indices to generate continuous yield or pricing curves and volatility
factors, which are used to value the position. The predominance of market
inputs are actively quoted and can be validated through external sources,
including brokers, market transactions and third- party pricing services.
Estimation risk is greater for derivative asset and liability positions that
are either option-based or have longer maturity dates where observable
market inputs are less readily available or are unobservable, in which case
quantitative based extrapolations of rate, price or index scenarios are
used in determining fair values. At December 31, 2006, the fair values of
Derivative Assets and Liabilities determined by these quantitative models
were $29.0 billion and $27.7 billion. These amounts reflect the full fair
value of the derivatives and do not isolate the discrete value associated
with the subjective valuation variable. Further, they represent 12.3 percent
and 12.2 percent of Derivative Assets and Liabilities, before the impact of
legally enforceable master netting agreements. For
the year ended
December 31, 2006, there were no changes to the quantitative models, or

uses of such models, that resulted in a material adjustment to the Con-
solidated Statement of Income.

Trading Account Profits, which represent the net amount earned from
our trading positions, can be volatile and are largely driven by general
market conditions and customer demand. Trading Account Profits are
dependent on the volume and type of transactions, the level of risk
assumed, and the volatility of price and rate movements at any given time
within the ever-changing market environment. To evaluate risk in our trad-
ing activities, we focus on the actual and potential volatility of individual
positions as well as portfolios. At a portfolio and corporate level, we use
trading limits, stress testing and tools such as VAR modeling, which esti-
mates a potential daily loss which is not expected to be exceeded with a
specified confidence level,
risk. At
December 31, 2006, the amount of our VAR was $48 million based on a
99 percent confidence level. For more information on VAR, see Trading
Risk Management beginning on page 76.

to measure and manage market

The Corporation recognizes gains and losses at

inception of a
derivative contract only if the fair value of the contract is evidenced by a
quoted market price in an active market, an observable price or other
market transaction, or other observable data supporting a valuation model
in accordance with Emerging Issues Task Force (EITF) Issue No. 02-3,
“Issues Involved in Accounting for Derivative Contracts Held for Trading
Purposes and Contracts Involved in Energy Trading and Risk Management
Activities” (EITF 02-3). For those gains and losses not evidenced by the
above mentioned market data, the transaction price is used as the fair
value of the derivative contract. Any difference between the transaction
price and the model fair value is considered an unrecognized gain or loss
at inception of the contract. These unrecognized gains and losses are
recorded in income using the straight line method of amortization over the
contractual
life of the derivative contract. Earlier recognition of the full
unrecognized gain or loss is permitted if the trade is terminated early,
subsequent market activity is observed which supports the model fair
value of the contract, or significant inputs used in the valuation model
become observable in the market. As of December 31, 2006, the balance
of the above unrecognized gains and losses was not material. SFAS
No. 157, “Fair Value Measurements” which defines fair value, establishes
a framework for measuring fair value under GAAP and enhances dis-
closures about fair value measurements, will nullify certain guidance in
EITF 02-3 when adopted and as a result, a portion of the above unrecog-
nized gains and losses will be accounted for as a cumulative-effect
adjustment to the opening balance of Retained Earnings.

AFS Securities are recorded at fair value, which is generally based on

direct market quotes from actively traded markets.

Principal Investing
Investing is included within Equity Investments included in All
Principal
Other and is discussed in more detail beginning on page 55. Principal
Investing is comprised of a diversified portfolio of investments in privately-
held and publicly-traded companies at all stages of their life cycle, from
start-up to buyout. These investments are made either directly in a com-
pany or held through a fund. Some of these companies may need access
to additional cash to support their long-term business models. Market
conditions and company performance may impact whether funding is avail-
able from private investors or the capital markets.

Investments with active market quotes are carried at estimated fair
value; however, the majority of our investments do not have publicly avail-
able price quotations. At December 31, 2006, we had nonpublic invest-
ments of $5.1 billion, or approximately 95 percent of the total portfolio.
Valuation of these investments requires significant management judg-

ment. Management determines values of
the underlying investments
based on multiple methodologies including in-depth semi-annual reviews of
the investee’s financial statements and financial condition, discounted
cash flows, the prospects of the investee’s industry and current overall
market conditions for similar investments. In addition, on a quarterly basis
as events occur or information comes to the attention of management that
indicates a change in the value of an investment is warranted, invest-
ments are adjusted from their original invested amount to estimated fair
values at the balance sheet date with changes being recorded in Equity
Investment Gains in the Consolidated Statement of Income. Investments
are not adjusted above the original amount invested unless there is clear
evidence of a fair value in excess of the original invested amount. As part
of the valuation process, senior management reviews the portfolio and
determines when an impairment needs to be recorded. The Principal Inves-
ting portfolio is not material to our Consolidated Balance Sheet, but the
impact of the valuation adjustments may be material to our operating
results for any particular quarter.

for

Accrued Income Taxes
As more fully described in Notes 1 and 18 of the Consolidated Financial
Statements, we account
income taxes in accordance with SFAS
No. 109, “Accounting for Income Taxes” (SFAS 109). Accrued income
taxes, reported as a component of Accrued Expenses and Other Liabilities
on our Consolidated Balance Sheet, represents the net amount of current
income taxes we expect to pay to or receive from various taxing juris-
dictions attributable to our operations to date. We currently file income tax
returns in more than 100 jurisdictions and consider many factors – includ-
ing statutory, judicial and regulatory guidance – in estimating the appro-
priate accrued income taxes for each jurisdiction.

In applying the principles of SFAS 109, we monitor relevant tax
authorities and change our estimate of accrued income taxes due to
changes in income tax laws and their interpretation by the courts and regu-
latory authorities. These revisions of our estimate of accrued income tax-
es, which also may result from our own income tax planning and from the
resolution of income tax controversies, may be material to our operating
results for any given quarter.

Goodwill and Intangibles Assets
The nature of and accounting for Goodwill and Intangible Assets is dis-
cussed in detail in Notes 1 and 10 of the Consolidated Financial State-
ments. Goodwill is reviewed for potential impairment at the reporting unit
level on an annual basis, or in interim periods if events or circumstances
indicate a potential impairment. The reporting units utilized for this test
were those that are one level below the business segments identified on
page 43. The impairment test is performed in two steps. The first step of
the Goodwill impairment test compares the fair value of the reporting unit
with its carrying amount, including Goodwill. If the fair value of the report-
ing unit exceeds its carrying amount, Goodwill of the reporting unit is con-
sidered not impaired; however, if the carrying amount of the reporting unit
exceeds its fair value, the second step must be performed. The second
step compares the implied fair value of the reporting unit’s Goodwill, as
defined in SFAS No. 142, “Goodwill and Other Intangible Assets”, with the
carrying amount of that Goodwill. An impairment loss is recorded to the
extent that the carrying amount of Goodwill exceeds its implied fair value.

For Intangible Assets subject to amortization, impairment exists when
the carrying amount of the Intangible Asset exceeds its fair value. An
impairment loss will be recognized only if the carrying amount of the
Intangible Asset is not recoverable and exceeds its fair value. The carrying
amount of the Intangible Asset is not recoverable if it exceeds the sum of

Bank of America 2006

the undiscounted cash flows expected to result from it. An Intangible
Asset subject to amortization shall be tested for recoverability whenever
events or changes in circumstances, such as a significant or adverse
change in the business climate that could affect the value of the Intangible
Asset,
its carrying amount may not be recoverable. An
impairment loss is recorded to the extent the carrying amount of the
Intangible Asset exceeds its fair value.

indicate that

The fair values of the reporting units were determined using a combi-
nation of valuation techniques consistent with the income approach and
the market approach and the fair values of the Intangible Assets were
determined using the income approach. For purposes of
the income
approach, discounted cash flows were calculated by taking the net present
value of estimated cash flows using a combination of historical results,
estimated future cash flows and an appropriate price to earnings multiple.
We use our internal forecasts to estimate future cash flows and actual
results may differ from forecasted results. However, these differences
have not been material and we believe that this methodology provides a
reasonable means to determine fair values. Cash flows were discounted
using a discount rate based on expected equity return rates, which was 11
percent for 2006. Expected rates of equity returns were estimated based
on historical market returns and risk/return rates for similar industries of
the reporting unit. For purposes of the market approach, valuations of
reporting units were based on actual comparable market transactions and
market earnings multiples for similar industries of the reporting unit.

Our evaluations for the year ended December 31, 2006 indicated

there was no impairment of Goodwill or Intangible Assets.

2005 Compared to 2004
The following discussion and analysis provides a comparison of our results
of operations for 2005 and 2004. This discussion should be read in con-
junction with the Consolidated Financial Statements and related Notes.
Tables 5 and 6 contain financial data to supplement this discussion.

Overview

Net Income
Net Income totaled $16.5 billion, or $4.04 per diluted common share, in
2005 compared to $13.9 billion, or $3.64 per diluted common share, in
2004. The return on average common shareholders’ equity was 16.51
percent in 2005 compared to 16.47 percent in 2004. These earnings
provided sufficient cash flow to allow us to return $10.6 billion and $9.0
billion in 2005 and 2004, in capital to shareholders in the form of divi-
dends and share repurchases, net of employee stock options exercised.

Net Interest Income
Net Interest Income on a FTE basis increased $2.9 billion to $31.6 billion
in 2005 compared to 2004. The primary drivers of the increase were the
impact of FleetBoston, organic growth in consumer (primarily credit card
and home equity) and commercial loans, higher domestic deposit levels
and a larger ALM portfolio (primarily securities). Partially offsetting these
increases was the adverse impact of spread compression due to the flat-
tening of the yield curve, which contributed to lower Net Interest Income.
The net interest yield on a FTE basis declined 33 bps to 2.84 percent in
2005, primarily due to the adverse impact of an increase in lower-yielding,
trading-related balances and spread compression, which was partially
offset by growth in core deposit and consumer loans.

Noninterest Income
Noninterest Income increased $4.3 billion to $25.4 billion in 2005, due
primarily to increases in Card Income of $1.2 billion, Equity Investment

84 Bank of America 2006

Gains of $1.2 billion, Trading Account Profits of $750 million, Service
Charges of $715 million, Investment and Brokerage Services of $570 mil-
lion and Mortgage Banking Income of $391 million. Card Income
increased due to increased interchange income and merchant discount
fees driven by growth in debit and credit purchase volumes and the acquis-
ition of National Processing, Inc. (NPC). Equity Investment Gains increased
as liquidity in the private equity markets increased. Trading Account Profits
increased due to increased customer activity and the absence of a write-
down of the Excess Spread Certificates that occurred in 2004. Service
Charges grew driven by organic account growth. Investment and Brokerage
Services increased due to higher asset management fees and mutual fund
fees. Mortgage Banking Income grew due to lower MSR impairment charg-
es, partially offset by lower production income. Offsetting these increases
was lower Other Income of $396 million primarily related to losses on
derivative instruments designated as economic hedges in ALM activities
that did not qualify for SFAS 133 hedge accounting treatment.

Provision for Credit Losses
The Provision for Credit Losses increased $1.2 billion to $4.0 billion in
2005. Domestic consumer credit card drove the increase, the result of
higher bankruptcy related credit costs resulting from bankruptcy reform,
portfolio seasoning,
the impact of the FleetBoston portfolio and new
advances on accounts for which previous loan balances were sold to the
securitization trusts. The provision also increased as the rate of credit
quality improvement slowed in the commercial portfolio and a reserve was
established for estimated losses associated with Hurricane Katrina. Parti-
ally offsetting these increases were reductions in the reserves due to an
improved risk profile in Latin America as well as reduced uncertainties
associated with the FleetBoston credit integration.

Gains on Sales of Debt Securities
Gains on Sales of Debt Securities in 2005 and 2004, were $1.1 billion
and $1.7 billion. The decrease was primarily due to lower gains realized on
mortgage-backed securities and corporate bonds.

Noninterest Expense
Noninterest Expense increased $1.7 billion in 2005 from 2004, primarily
due to the impact of FleetBoston and increases in personnel-related costs.

Income Tax Expense
Income Tax Expense was $8.0 billion in 2005 compared to $7.0 billion in
2004, resulting in an effective tax rate of 32.7 percent in 2005 and 33.3
percent in 2004. The difference in the effective tax rate between years
resulted primarily from a tax benefit of $70 million related to the special
one-time deduction associated with the repatriation of certain foreign earn-
ings under the American Jobs Creation Act of 2004.

Business Segment Operations

Global Consumer and Small Business Banking
Net Income increased $1.3 billion, or 22 percent, to $7.0 billion in 2005
compared to 2004. Total Revenue rose $3.6 billion, or 15 percent, in
2005 compared to 2004, driven by increases in Net Interest Income and
Noninterest Income. Growth in Average Deposits and Average Loans and
Leases contributed to the $1.1 billion, or seven percent, increase in Net
Interest Income. Increases in Card Income of $1.0 billion, Service Charges
of $665 million and Mortgage Banking Income of $423 million drove the
$2.5 billion, or 28 percent,
Income. These
increases were offset by increases in the Provision for Credit Losses and

increase in Noninterest

Noninterest Expense. The Provision for Credit Losses increased $912 mil-
lion to $4.2 billion in 2005 mainly due to higher credit card net charge-offs
driven by an increase in bankruptcy-related net charge-offs. In addition, the
provision was impacted by new advances on accounts for which previous
loan balances were sold to the securitization trusts. Noninterest Expense
increased $680 million, or five percent, primarily due to the impact of
FleetBoston and NPC.

Global Corporate and Investment Banking
Net Income increased $468 million, or eight percent, to $6.4 billion in
2005 compared to 2004. Total Revenue increased $1.9 billion, or 10
percent, in 2005 compared to 2004, driven by increases in Net Interest
Income and Noninterest Income. Net Interest Income rose $486 million, or
five percent, due to growth in Average Loans and Leases and Average
Deposits, wider spreads on the deposit portfolio due to higher short-term
interest rates, and the impact of FleetBoston earning assets offset by
spread compression and a flattening yield curve in 2005. Noninterest
Income increased $1.5 billion, or 18 percent, resulting from higher other
noninterest income, Trading Account Profits and Investment and Brokerage
Services. Net Income was also impacted by higher Gains on Sales of Debt
Securities. These increases were partially offset by an increase in Non-
interest Expense and a reduced benefit from Provision for Credit Losses.
The Provision for Credit Losses increased $595 million to negative $291
million in 2005. The negative provision reflected continued improvement in
commercial credit quality although at a slower pace than experienced in
2004. An improved risk profile in Latin America and reduced uncertainties
resulting from the completion of credit-related integration activities for
FleetBoston also contributed to the negative provision. Noninterest
Expense increased by $832 million, or eight percent, driven by higher
performance-based incentive compensation, processing costs and the
impact of FleetBoston, partially offset by nonrecurring charges recognized
in 2004 for the segment’s share of the mutual fund settlement and other
litigation expenses.

Global Wealth and Investment Management
Net Income increased $684 million, or 42 percent, to $2.3 billion in 2005
compared to 2004. Total Revenue increased $1.3 billion, or 22 percent, in

2005. Net Interest Income increased $899 million, or 31 percent, driven
by the addition of the FleetBoston portfolio and organic growth in deposits
and loans in PB&I and The Private Bank. Global Wealth and Investment
Management also benefited from the migration of deposits from Global
Consumer and Small Business Banking. The total cumulative average
impact of migrated balances was $39.3 billion in 2005 compared to
$11.1 billion in 2004. Noninterest Income increased $417 million, or 14
percent, driven by increased Investment and Brokerage Services revenue
primarily due to the impact of FleetBoston. These increases were offset by
higher Noninterest Expense. Noninterest Expense increased $252 million,
or seven percent, related to higher Personnel expense driven by PB&I
growth in the Northeast and the impact of FleetBoston, partially offset by
nonrecurring charges recognized in 2004 for the segment’s share of the
mutual fund settlement and other litigation expenses.

All Other
Net Income increased $112 million, or 18 percent, to $744 million in
2005 compared to 2004. In 2005 compared to 2004, Total Revenue rose
$379 million to $684 million, primarily driven by an increase in Equity
Investment Gains in 2005. Offsetting this increase was a decline in the
fair value of derivative instruments which were used as economic hedges
of interest and foreign exchange rates as part of our ALM activities. Provi-
sion for Credit Losses decreased $277 million to $69 million in 2005,
resulting from changes to components of the formula and other factors
effective in 2004, and reduced credit costs in 2005 associated with pre-
viously exited businesses. These decreases were offset in part by the
establishment of a $50 million reserve for estimated losses associated
with Hurricane Katrina. Gains on Sales of Debt Securities decreased $794
million to $823 million primarily due to lower gains realized in 2005 on
mortgage-backed securities and corporate bonds than in 2004. Merger
and Restructuring Charges decreased $206 million as the FleetBoston
integration was nearing completion and the infrastructure initiative was
completed in the first quarter of 2005. Income Tax Expense decreased
$155 million in 2005, driven by an increase in tax benefits for low-income
housing credits.

Bank of America 2006

Statistical Tables

Table I Year-to-date Average Balances and Interest Rates – FTE Basis

(Dollars in millions)

Earning assets
Time deposits placed and other short-term investments
Federal funds sold and securities purchased under agreements to resell
Trading account assets
Debt securities (1)
Loans and leases (2):

Residential mortgage
Credit card – domestic
Credit card – foreign
Home equity lines
Direct/Indirect consumer (3)
Other consumer (4)

Total consumer

Commercial – domestic
Commercial real estate (5)
Commercial lease financing
Commercial – foreign

Total commercial

Total loans and leases

Other earning assets

Total earning assets (6)

Cash and cash equivalents
Other assets, less allowance for loan and lease losses

Total assets

Interest-bearing liabilities
Domestic interest-bearing deposits:

Savings
NOW and money market deposit accounts
Consumer CDs and IRAs
Negotiable CDs, public funds and other time deposits

Total domestic interest-bearing deposits

Foreign interest-bearing deposits:

Banks located in foreign countries
Governments and official institutions
Time, savings and other

Total foreign interest-bearing deposits

Total interest-bearing deposits

Federal funds purchased, securities sold under agreements to repurchase

and other short-term borrowings

Trading account liabilities
Long-term debt

Total interest-bearing liabilities (6)

Noninterest-bearing sources:

Noninterest-bearing deposits
Other liabilities
Shareholders’ equity

Total liabilities and shareholders’ equity

Net interest spread
Impact of noninterest-bearing sources

2006

2005

2004

Average
Balance

Interest
Income/
Expense

Yield/
Rate

Average
Balance

Interest
Income/
Expense

Yield/
Rate

Average
Balance

Interest
Income/
Expense

Yield/
Rate

14,286 $

15,611 $

175,334
145,321
225,219

207,879
63,838
9,141
68,696
59,597
10,713

646
7,823
7,552
11,845

4.14% $
4.46
5.20
5.26

11,608

5.58
8,638 13.53
1,147 12.55
7.43
5,105
7.64
4,552
1,089 10.17

169,132
133,502
219,843

173,773
53,997
–
56,289
44,981
6,908

472
5,012
5,883
11,047

3.30% $
2.96
4.41
5.03

9,424
5.42
6,253 11.58
–
6.06
5.75
9.67

–
3,412
2,589
667

419,864

32,139

151,231
36,939
20,862
23,521

10,897
2,740
995
1,674

232,553

16,306

652,417

48,445

55,242

3,498

1,269,144

79,809

7.65

7.21
7.42
4.77
7.12

7.01

7.43

6.33

6.29

335,948

22,345

128,034
34,304
20,441
18,491

8,266
2,046
992
1,292

201,270

12,596

537,218

34,941

38,013

2,103

1,111,994

59,458

6.65

6.46
5.97
4.85
6.99

6.26

6.50

5.53

5.35

14,254 $

128,981
104,616
150,171

167,270
43,435
–
39,400
38,078
7,717

362
1,940
4,092
7,320

2.54%
1.50
3.91
4.88

9,056
5.42
4,653 10.71
–
4.66
5.50
7.70

–
1,835
2,093
594

295,900

18,231

114,644
28,085
17,483
16,505

176,717

6,978
1,263
819
850

9,910

472,617

28,141

34,634

1,815

905,273

43,670

6.16

6.09
4.50
4.68
5.15

5.61

5.95

5.24

4.82

34,052
163,485

$1,466,681

33,199
124,699

$1,269,892

28,511
110,847

$1,044,631

34,608 $

218,077
144,738
12,195

269
3,923
6,022
483

0.78% $
1.80
4.16
3.97

409,618

10,697

2.61

34,985
12,674
38,544

86,203

1,982
586
1,215

3,783

495,821

14,480

411,132
64,689
130,124

19,840
2,640
7,034

1,101,766

43,994

5.67
4.63
3.15

4.39

2.92

4.83
4.08
5.41

3.99

36,602 $

227,722
124,385
6,865

395,574

22,945
7,418
31,603

61,966

457,540

211
2,839
4,091
250

7,391

1,202
238
661

2,101

9,492

326,408
57,689
97,709

11,615
2,364
4,418

939,346

27,889

177,174
57,278
130,463

$1,466,681

174,892
55,793
99,861

$1,269,892

2.30%
0.52

2.82%

33,959 $

214,542
94,770
5,977

349,248

18,426
5,327
27,739

51,492

400,740

227,565
35,326
92,303

119
1,921
2,540
290

4,870

679
97
275

1,051

5,921

4,072
1,317
3,683

755,934

14,993

150,819
53,063
84,815

$1,044,631

0.58% $
1.25
3.29
3.65

1.87

5.24
3.21
2.09

3.39

2.08

3.56
4.10
4.52

2.97

2.38%
0.46

0.35%
0.90
2.68
4.85

1.39

3.68
1.82
0.99

2.04

1.48

1.79
3.73
3.99

1.98

2.84%
0.33

Net interest income/yield on earning assets (7)

$35,815

$31,569

2.84%

$28,677

3.17%

(1) Yields on AFS debt securities are calculated based on fair value rather than historical cost balances. The use of fair value does not have a material impact on net interest yield.
(2) Nonperforming loans are included in the respective average loan balances. Income on these nonperforming loans is recognized on a cash basis.
(3)

Includes home equity loans of $9.6 billion, $7.6 billion and $5.6 billion in 2006, 2005 and 2004, respectively.
Includes consumer finance loans of $2.9 billion, $3.1 billion and $3.7 billion in 2006, 2005 and 2004, respectively; and foreign consumer loans of $7.8 billion, $3.6 billion and $3.0 billion in 2006, 2005 and
2004, respectively.
Includes domestic commercial real estate loans of $36.2 billion, $33.8 billion and $27.7 billion in 2006, 2005 and 2004, respectively.
Interest income includes the impact of interest rate risk management contracts, which increased (decreased) interest income on the underlying assets $(372) million, $704 million and $2.1 billion in 2006,
2005 and 2004, respectively. Interest expense includes the impact of interest rate risk management contracts, which increased interest expense on the underlying liabilities $106 million, $1.3 billion and $1.5
billion in 2006, 2005 and 2004, respectively. For further information on interest rate contracts, see “Interest Rate Risk Management for Nontrading Activities” beginning on page 77.
Interest income (FTE basis) in 2006 does not include the cumulative tax charge resulting from a change in tax legislation relating to extraterritorial tax income and foreign sales corporation regimes. The FTE impact
to Net Interest Income and net interest yield on earning assets of this retroactive tax adjustment was a reduction of $270 million and 2 bps, respectively, in 2006. Management has excluded this one-time impact to
provide a more comparative basis of presentation for Net Interest Income and net interest yield on earning assets on a FTE basis. The impact on any given future period is not expected to be material.

(4)

(5)

(6)

(7)

86 Bank of America 2006

Table II Analysis of Changes in Net Interest Income – FTE Basis

(Dollars in millions)

Increase (decrease) in interest income
Time deposits placed and other short-term investments
Federal funds sold and securities purchased under agreements to resell
Trading account assets
Debt securities
Loans and leases:

Residential mortgage
Credit card – domestic
Credit card – foreign
Home equity lines
Direct/Indirect consumer
Other consumer

Total consumer

Commercial – domestic
Commercial real estate
Commercial lease financing
Commercial – foreign

Total commercial

Total loans and leases

Other earning assets

Total interest income

Increase (decrease) in interest expense
Domestic interest-bearing deposits:

Savings
NOW and money market deposit accounts
Consumer CDs and IRAs
Negotiable CDs, public funds and other time deposits

Total domestic interest-bearing deposits

Foreign interest-bearing deposits:

Banks located in foreign countries
Governments and official institutions
Time, savings and other

Total foreign interest-bearing deposits

Total interest-bearing deposits

From 2005 to 2006

From 2004 to 2005

Due to Change in (1)

Volume

Rate

Net
Change

Due to Change in (1)

Volume

Rate

Net
Change

43
178
526
282

$ 131
2,633
1,143
516

1,843
1,139
1,147
751
838
369

1,504
159
20
352

341
1,246
–
942
1,125
53

1,127
535
(17)
30

174
2,811
1,669
798

2,184
2,385
1,147
1,693
1,963
422

9,794

2,631
694
3
382

3,710

1
597
1,128
3,408

$ 109
2,475
663
319

362
1,130
–
788
381
(62)

819
281
138
102

6
470
–
789
115
135

469
502
35
340

952

443

13,504

1,395

$20,351

177

111

110
3,072
1,791
3,727

368
1,600
–
1,577
496
73

4,114

1,288
783
173
442

2,686

6,800

288

$ (10)
(113)
671
195

68
1,197
1,260
38

631
169
145

149
179
409

58
1,084
1,931
233

3,306

780
348
554

1,682

4,988

8,225
276
2,616

9
128
781
43

165
38
38

83
790
770
(83)

358
103
348

1,771
835
216

5,772
212
519

$15,788

92
918
1,551
(40)

2,521

523
141
386

1,050

3,571

7,543
1,047
735

12,896

$ 2,892

Federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings
Trading account liabilities
Long-term debt

3,021
288
1,464

5,204
(12)
1,152

Total interest expense

Net increase in net interest income (2)

16,105

$ 4,246

(1) The changes for each category of interest income and expense are divided between the portion of change attributable to the variance in volume and the portion of change attributable to the variance in rate for that category.

(2)

The unallocated change in rate or volume variance has been allocated between the rate and volume variances.
Interest income (FTE basis) in 2006 does not include the cumulative tax charge resulting from a change in tax legislation relating to extraterritorial tax income and foreign sales corporation regimes. The FTE impact to Net
Interest Income of this retroactive tax adjustment is a reduction of $270 million from 2005 to 2006. Management has excluded this one-time impact to provide a more comparative basis of presentation for Net Interest
Income and net interest yield on earning assets on a FTE basis. The impact on any given future period is not expected to be material.

Bank of America 2006

Table III Outstanding Loans and Leases

(Dollars in millions)

Consumer
Residential mortgage
Credit card – domestic
Credit card – foreign
Home equity lines
Direct/Indirect consumer (1)
Other consumer (2)

Total consumer

Commercial
Commercial – domestic
Commercial real estate (3)
Commercial lease financing
Commercial – foreign

Total commercial

2006

2005

2004

2003

2002

December 31

$241,181
61,195
10,999
74,888
68,224
9,218

465,705

161,982
36,258
21,864
20,681

240,785

$182,596
58,548
–
62,098
45,490
6,725

355,457

140,533
35,766
20,705
21,330

218,334

$178,079
51,726
–
50,126
40,513
7,439

327,883

122,095
32,319
21,115
18,401

193,930

$140,483
34,814
–
23,859
33,415
7,558

240,129

91,491
19,367
9,692
10,754

131,304

$371,433

$108,332
24,729
–
23,236
31,068
10,355

197,720

99,151
20,205
10,386
15,428

145,170

$342,890

Total loans and leases

$706,490

$573,791

$521,813

(1)

(2)

(3)

Includes home equity loans of $12.8 billion, $8.1 billion, $7.3 billion, $7.3 billion, and $3.6 billion at December 31, 2006, 2005, 2004, 2003, and 2002, respectively.
Includes foreign consumer loans of $6.2 billion, $3.8 billion, $3.6 billion, $2.0 billion, and $2.0 billion at December 31, 2006, 2005, 2004, 2003, and 2002, respectively; consumer finance loans of $2.8 billion, $2.8 billion,
$3.4 billion, $3.9 billion, and $4.4 billion at December 31, 2006, 2005, 2004, 2003, and 2002, respectively; and consumer lease financing of $481 million, $1.7 billion, and $3.9 billion at December 31, 2004, 2003, and
2002, respectively.
Includes domestic commercial real estate loans of $35.7 billion, $35.2 billion, $31.9 billion, $19.0 billion, and $19.9 billion at December 31, 2006, 2005, 2004, 2003, and 2002, respectively; and foreign commercial real
estate loans of $578 million, $585 million, $440 million, $324 million, and $295 million at December 31, 2006, 2005, 2004, 2003, and 2002, respectively.

Table IV Nonperforming Assets

(Dollars in millions)

Consumer
Residential mortgage
Home equity lines
Direct/Indirect consumer
Other consumer

Total consumer (1)

Commercial
Commercial – domestic
Commercial real estate
Commercial lease financing
Commercial – foreign

Total commercial (2)

Total nonperforming loans and leases

Foreclosed properties
Nonperforming securities (3)

Total nonperforming assets (4)

2006

2005

2004

2003

2002

December 31

$ 660
249
44
77

1,030

584
118
42
13

757

1,787
69
–

$1,856

$ 570
117
37
61

785

581
49
62
34

726

1,511
92
–

$ 554
66
33
85

738

855
87
266
267

1,475

2,213
102
140

$ 531
43
28
36

638

1,388
142
127
578

2,235

2,873
148
–

$ 612
66
30
25

733

2,621
164
160
1,359

4,304

5,037
225
–

$1,603

$2,455

$3,021

$5,262

(1)

(2)

In 2006, $69 million in Interest Income was estimated to be contractually due on nonperforming consumer loans and leases classified as nonperforming at December 31, 2006 provided that these loans and leases had been
paid according to their terms and conditions. Of this amount, approximately $17 million was received and included in Net Income for 2006.
In 2006, $85 million in Interest Income was estimated to be contractually due on nonperforming commercial loans and leases classified as nonperforming at December 31, 2006, including troubled debt restructured loans of
which $2 million were performing at December 31, 2006 and not included in the table above. Approximately $38 million of the estimated $85 million in contractual interest was received and included in Net Income for 2006.

(3) Primarily related to international securities held in the AFS portfolio.
(4) Balances do not include $30 million, $24 million, $28 million, $16 million, and $41 million of nonperforming consumer loans held-for-sale, included in Other Assets at December 31, 2006, 2005, 2004, 2003, and 2002,
respectively; and $50 million, $45 million, $123 million, $186 million, and $73 million of nonperforming commercial loans held-for-sale, included in Other Assets at December 31, 2006, 2005, 2004, 2003, and 2002,
respectively.

88 Bank of America 2006

Table V Accruing Loans and Leases Past Due 90 Days or More

(Dollars in millions)

Consumer
Residential mortgage (1)
Credit card – domestic
Credit card – foreign
Direct/Indirect consumer
Other consumer

Total consumer

Commercial
Commercial – domestic
Commercial real estate
Commercial lease financing
Commercial – foreign

Total commercial

December 31

2006

2005

2004

2003

2002

$ 118
1,991
184
347
38

2,678

265
78
26
9

378

–
1,197
–
75
15

1,287

117
4
15
32

168

–
1,075
–
58
23

1,156

121
1
14
2

138

–
616
–
47
35

698

110
23
n/a
29

162

–
424
–
56
61

541

132
91
n/a
–

223

Total accruing loans and leases past due 90 days or more

$3,056

$1,455

$1,294

$860

$764

(1) Balance at December 31, 2006 is related to repurchases pursuant to our servicing agreements with GNMA mortgage pools, which were included in loans held-for-sale in previous years.
n/a = not available

Bank of America 2006

Table VI Allowance for Credit Losses

(Dollars in millions)

Allowance for loan and lease losses, January 1
FleetBoston balance, April 1, 2004
MBNA balance, January 1, 2006
Loans and leases charged off
Residential mortgage
Credit card – domestic
Credit card – foreign
Home equity lines
Direct/Indirect consumer
Other consumer

Total consumer

Commercial – domestic
Commercial real estate
Commercial lease financing
Commercial – foreign

Total commercial

Total loans and leases charged off

Recoveries of loans and leases previously charged off
Residential mortgage
Credit card – domestic
Credit card – foreign
Home equity lines
Direct/Indirect consumer
Other consumer

Total consumer

Commercial – domestic
Commercial real estate
Commercial lease financing
Commercial – foreign

Total commercial

Total recoveries of loans and leases previously charged off

Net charge-offs

Provision for loan and lease losses
Other

Allowance for loan and lease losses, December 31

Reserve for unfunded lending commitments, January 1
FleetBoston balance, April 1, 2004
Provision for unfunded lending commitments
Other

Reserve for unfunded lending commitments, December 31

Total

Loans and leases outstanding at December 31
Allowance for loan and lease losses as a percentage of loans and leases outstanding at

December 31

Consumer allowance for loan and lease losses as a percentage of consumer loans and

leases outstanding at December 31

Commercial allowance for loan and lease losses as a percentage of commercial loans and

leases outstanding at December 31

Average loans and leases outstanding during the year
Net charge-offs as a percentage of average loans and leases outstanding during

the year (1)

Allowance for loan and lease losses as a percentage of total nonperforming loans and

leases at December 31

Ratio of the allowance for loan and lease losses at December 31 to net charge-offs (1)

2003

6,358
–
–

(64)
(1,657)

–
(38)
(322)
(343)

(4,878)

(3,275)

(2,424)

2006

$ 8,045
–
577

2005

$ 8,626
–
–

2004

$ 6,163
2,763
–

(74)
(3,546)
(292)
(67)
(748)
(436)

(5,163)

(597)
(7)
(28)
(86)

(718)

(58)
(4,018)

–
(46)
(380)
(376)

(62)
(2,536)

–
(38)
(344)
(295)

(535)
(5)
(315)
(61)

(916)

(504)
(12)
(39)
(262)

(817)

(5,881)

(5,794)

(4,092)

35
452
67
16
224
133

927

261
4
56
94

415

1,342

(4,539)

5,001
(68)

9,016

395
–
9
(7)

397

31
366
–
15
132
101

645

365
5
84
133

587

1,232

(4,562)

4,021
(40)

8,045

402
–
(7)
–

395

26
231
–
23
136
102

518

327
15
30
89

461

979

(3,113)

2,868
(55)

8,626

416
85
(99)
–

402

(857)
(46)
(132)
(408)

(1,443)

(3,867)

24
143
–
26
141
88

422

224
5
8
102

339

761

(3,106)

2,916
(5)

6,163

493
–
(77)
–

416

2002

6,278
–
–

(56)
(1,210)

–
(40)
(355)
(395)

(2,056)

(1,625)
(45)
(168)
(566)

(2,404)

(4,460)

14
116
–
14
145
99

388

314
7
9
45

375

763

(3,697)

3,801
(24)

6,358

597
–
(104)
–

493

$ 9,413

$706,490

$ 8,440

$573,791

$ 9,028

$521,813

6,579

$371,433

6,851

$342,890

1.28%

1.19

1.40%

1.27

1.65%

1.34

1.66%

1.25

1.85%

0.95

1.44
$652,417

1.62
$537,218

2.19
$472,617

2.40
$356,220

2.43
$336,820

0.70%

505
1.99

0.85%

0.66%

0.87%

1.10%

532
1.76

390
2.77

215
1.98

126
1.72

ratio of the Allowance for Loan and Lease Losses to net charge-offs was 1.87 at December 31, 2006.

90 Bank of America 2006

Table VII Allocation of the Allowance for Credit Losses by Product Type

(Dollars in millions)

Allowance for loan and lease losses
Residential mortgage
Credit card – domestic
Credit card – foreign
Home equity lines
Direct/Indirect consumer
Other consumer

Total consumer

Commercial – domestic
Commercial real estate
Commercial lease financing
Commercial – foreign

Total commercial (1)

General (2)

Allowance for loan and lease losses

Reserve for unfunded lending commitments

Total

2006

2005

December 31

2004

2003

2002

Amount

Percent

Amount

Percent

Amount

Percent

Amount

Percent

Amount

Percent

$ 248
3,176
336
133
1,200
467

5,560

2,162
588
217
489

3,456

–

9,016

397

$9,413

2.8% $ 277
3,301
–
136
421
380

35.2
3.7
1.5
13.3
5.2

61.7

24.0
6.5
2.4
5.4

38.3

–

4,515

2,100
609
232
589

3,530

–

3.4%

41.0
–
1.7
5.2
4.8

56.1

26.1
7.6
2.9
7.3

43.9

–

$ 240
3,148
–
115
375
500

4,378

2,101
644
442
1,061

4,248

–

2.8%

36.5
–
1.3
4.3
5.9

50.8

24.3
7.5
5.1
12.3

49.2

–

$ 185
1,947
–
72
347
456

3,007

1,756
484
235
681

3,156

–

3.0%

31.6
–
1.2
5.6
7.4

48.8

28.5
7.9
3.8
11.0

51.2

–

$ 108
1,031
–
49
361
332

1,881

2,231
439
n/a
855

3,525

952

1.7%

16.2
–
0.8
5.7
5.2

29.6

35.1
6.9
n/a
13.4

55.4

15.0

100.0%

8,045

100.0%

8,626

100.0%

6,163

100.0%

6,358

100.0%

395

$8,440

402

$9,028

416

$6,579

493

$6,851

(1)
Includes allowance for loan and lease losses of commercial impaired loans of $43 million, $55 million, $202 million, $391 million, and $919 million at December 31, 2006, 2005, 2004, 2003, and 2002, respectively.
(2) At December 31, 2005, general reserves were assigned to individual product types to better reflect our view of risk in these portfolios. Information was not available to assign general reserves by product types prior to 2003.
n/a= Not available; included in commercial – domestic at December 31, 2002.

Table VIII Selected Loan Maturity Data (1)

(Dollars in millions)

Commercial – domestic
Commercial real estate – domestic
Foreign and other (2)

Total selected loans

Percent of total

Sensitivity of selected loans to changes in interest rates for loans due after one year:

Fixed interest rates
Floating or adjustable interest rates

Total

(1) Loan maturities are based on the remaining maturities under contractual terms.
(2) Loan maturities include other consumer, commercial – foreign and commercial real estate loans.

December 31, 2006

Due in One
Year or Less

$57,067
14,562
22,509

$94,138

Due After
One Year
Through
Five Years

$66,351
17,774
4,432

$88,557

Due After
Five Years

$38,564
3,344
496

$42,404

Total

$161,982
35,680
27,437

$225,099

41.8%

39.3%

18.9%

100.0%

$ 8,588
79,969

$88,557

$19,793
22,611

$42,404

Bank of America 2006

Table IX Short-term Borrowings

(Dollars in millions)

Federal funds purchased
At December 31
Average during year
Maximum month-end balance during year

Securities sold under agreements to repurchase
At December 31
Average during year
Maximum month-end balance during year

Commercial paper
At December 31
Average during year
Maximum month-end balance during year

Other short-term borrowings
At December 31
Average during year
Maximum month-end balance during year

2006

2005

2004

Amount

Rate

Amount

Rate

Amount

Rate

$ 12,232
5,292
12,232

5.35%
5.11
–

$ 2,715
3,670
5,964

4.06%
3.09
–

3,108
3,724
7,852

2.23%
1.31
–

205,295
281,611
312,955

41,223
33,942
42,511

100,077
90,287
104,555

4.94
4.66
–

5.34
5.15
–

5.43
5.21
–

237,940
227,081
273,544

24,968
26,335
31,380

91,301
69,322
91,301

4.26
3.62
–

4.21
3.22
–

4.58
3.51
–

116,633
161,494
191,899

25,379
21,178
26,486

53,219
41,169
53,756

2.23
1.86
–

2.09
1.45
–

2.48
1.73
–

Table X Non-exchange Traded Commodity Contracts

(Dollars in millions)

Net fair value of contracts outstanding, January 1, 2006
Effects of legally enforceable master netting agreements

Gross fair value of contracts outstanding, January 1, 2006
Contracts realized or otherwise settled
Fair value of new contracts
Other changes in fair value

Gross fair value of contracts outstanding, December 31, 2006
Effects of legally enforceable master netting agreements

Net fair value of contracts outstanding, December 31, 2006

Table XI Non-exchange Traded Commodity Contract Maturities

(Dollars in millions)

Maturity of less than 1 year
Maturity of 1-3 years
Maturity of 4-5 years
Maturity in excess of 5 years

Gross fair value of contracts
Effects of legally enforceable master netting agreements

Net fair value of contracts outstanding

Asset
Positions

$ 3,021
5,636

8,657
(2,797)
1,182
(3,431)

3,611
(2,339)

Liability
Positions

$ 2,279
5,636

7,915
(2,792)
1,127
(2,781)

3,469
(2,339)

$ 1,272

$ 1,130

December 31, 2006

Asset
Positions

$ 1,244
1,963
321
83

3,611
(2,339)

Liability
Positions

$ 1,165
1,878
346
80

3,469
(2,339)

$ 1,272

$ 1,130

92 Bank of America 2006

Table XII Selected Quarterly Financial Data

(Dollars in millions, except per share information)

Income statement
Net interest income
Noninterest income
Total revenue
Provision for credit losses
Gains (losses) on sales of debt

securities

Noninterest expense
Income before income taxes
Income tax expense
Net income
Average common shares issued and
outstanding (in thousands)

Average diluted common shares issued
and outstanding (in thousands)

Performance ratios
Return on average assets
Return on average common
shareholders’ equity

Total ending equity to total ending

assets

Total average equity to total average

assets
Dividend payout

Per common share data
Earnings
Diluted earnings
Dividends paid
Book value

Average balance sheet
Total loans and leases
Total assets
Total deposits
Long-term debt
Common shareholders’ equity
Total shareholders’ equity

Asset Quality
Allowance for credit losses
Nonperforming assets
Allowance for loan and lease losses as
a percentage of total loans and
leases outstanding

Allowance for loan and lease losses as
a percentage of total nonperforming
loans and leases

Net charge-offs
Annualized net charge-offs as a

percentage of average loans and
leases

Nonperforming loans and leases as a
percentage of total loans and
leases outstanding

Nonperforming assets as a percentage

of total loans, leases, and
foreclosed properties

Ratio of the allowance for loan and
lease losses at period end to
annualized net charge-offs

Capital ratios (period end)
Risk-based capital:

Tier 1
Total
Tier 1 Leverage

Market capitalization
Market price per share of

common stock

Closing
High closing
Low closing

Fourth

8,599
9,866
18,465
1,570

21
9,093
7,823
2,567
5,256

2006 Quarters

2005 Quarters

Third

Second

First

Fourth

Third

Second

First

8,586
10,067
18,653
1,165

8,630
9,598
18,228
1,005

(469)
8,863
8,156
2,740
5,416

(9)
8,717
8,497
3,022
5,475

8,776
8,901
17,677
1,270

14
8,924
7,497
2,511
4,986

7,859
5,951
13,810
1,400

71
7,320
5,161
1,587
3,574

7,735
6,416
14,151
1,159

29
7,285
5,736
1,895
3,841

7,637
6,955
14,592
875

325
7,019
7,023
2,366
4,657

7,506
6,032
13,538
580

659
7,057
6,560
2,167
4,393

4,464,110

4,499,704

4,534,627

4,609,481

3,996,024

4,000,573

4,005,356

4,032,550

4,536,696

4,570,558

4,601,169

4,666,405

4,053,859

4,054,659

4,065,355

4,099,062

1.39%

1.43%

1.51%

1.43%

1.09%

1.18%

1.46%

1.49%

15.76

9.27

8.97
47.49

1.17
1.16
0.56
29.70

16.64

9.22

8.63
46.82

1.20
1.18
0.56
29.52

17.26

8.85

8.75
41.76

1.21
1.19
0.50
28.17

15.44

9.41

9.26
46.75

1.08
1.07
0.50
28.19

14.21

7.86

7.66
56.24

0.89
0.88
0.50
25.32

15.09

8.12

7.82
52.60

0.96
0.95
0.50
25.28

18.93

8.13

7.74
38.90

1.16
1.14
0.45
25.16

17.97

8.16

8.28
41.71

1.09
1.07
0.45
24.45

$ 683,598
1,495,150
680,245
140,756
132,004
134,047

$ 673,477
1,497,987
676,851
136,769
129,098
129,262

$ 635,649
1,456,004
674,796
125,620
127,102
127,373

$ 615,968
1,416,373
659,821
117,018
130,881
131,153

$ 563,589
1,305,057
628,922
99,601
99,677
99,948

$ 539,497
1,294,754
632,771
98,326
100,974
101,246

$ 520,415
1,277,478
640,593
96,697
98,558
98,829

$ 524,921
1,200,859
627,420
96,167
99,130
99,401

9,413
1,856

1.28%

505
1,417

9,260
1,656

9,475
1,641

9,462
1,680

8,440
1,603

8,716
1,597

8,702
1,895

8,707
2,338

1.33%

1.36%

1.46%

1.40%

1.50%

1.57%

562
1,277

579
1,023

572
822

532
1,648

556
1,145

470
880

401
889

0.82%

0.75%

0.65%

0.54%

1.16%

0.84%

0.68%

0.69%

0.25

0.26

1.60

0.24

0.25

1.75

0.23

0.25

2.21

0.26

0.27

2.72

0.26

0.28

1.23

0.27

0.29

1.83

0.33

0.36

2.36

0.39

0.44

2.30

8.64%

11.88
6.36

8.48%

11.46
6.16

8.33%

11.25
6.13

8.45%

11.32
6.18

8.25%

11.08
5.91

8.27%

11.19
5.90

8.16%

11.23
5.66

8.26%

11.52
5.86

$ 238,021

$ 240,966

$ 217,794

$ 208,633

$ 184,586

$ 168,950

$ 183,202

$ 177,958

53.39
54.90
51.66

53.57
53.57
47.98

48.10
50.47
45.48

45.54
47.08
43.09

46.15
46.99
41.57

42.10
45.98
41.60

45.61
47.08
44.01

44.10
47.08
43.66

Bank of America 2006

Table XIII Quarterly Average Balances and Interest Rates – FTE Basis

Fourth Quarter 2006

Third Quarter 2006

(Dollars in millions)

Residential mortgage
Credit card – domestic
Credit card – foreign
Home equity lines
Direct/Indirect consumer (3)
Other consumer (4)

Total consumer

Commercial – domestic
Commercial real estate (5)
Commercial lease financing
Commercial – foreign

Total commercial

Total loans and leases

Other earning assets

Total earning assets (6)

Cash and cash equivalents
Other assets, less allowance for loan and lease losses

Total assets

Interest-bearing liabilities
Domestic interest-bearing deposits:

Savings
NOW and money market deposit accounts
Consumer CDs and IRAs
Negotiable CDs, public funds and other time deposits

Total domestic interest-bearing deposits

Foreign interest-bearing deposits:

Banks located in foreign countries
Governments and official institutions
Time, savings and other

Total foreign interest-bearing deposits

Total interest-bearing deposits

Federal funds purchased, securities sold under agreements to repurchase

and other short-term borrowings

Trading account liabilities
Long-term debt

Total interest-bearing liabilities (6)

Noninterest-bearing sources:

Noninterest-bearing deposits
Other liabilities
Shareholders’ equity

Total liabilities and shareholders’ equity

Net interest spread
Impact of noninterest-bearing sources

Interest
Income/
Expense

166
2,068
2,289
2,504

3,202
2,101
305
1,411
1,316
225

8,560

2,907
704
254
337

4,202

12,762

1,058

20,847

48
966
1,794
140

2,948

507
168
366

1,041

3,989

5,222
800
1,881

11,892

Average
Balance

15,760
174,167
167,163
193,601

225,985
59,802
10,375
73,218
65,158
10,606

445,144

158,604
36,851
21,159
21,840

238,454

683,598

65,172

1,299,461

32,816
162,873

$1,495,150

32,965
211,055
154,621
13,052

411,693

38,648
14,220
41,328

94,196

505,889

405,748
75,261
140,756

1,127,654

174,356
59,093
134,047

$1,495,150

Net interest income/yield on earning assets (7)

$ 8,955

Average
Balance

15,629
173,381
146,817
236,033

222,889
62,508
9,455
70,075
61,361
11,075

437,363

153,007
37,471
20,875
24,761

236,114

673,477

57,029

1,302,366

33,495
162,126

$1,497,987

34,268
212,690
147,607
14,105

408,670

38,588
12,801
40,444

91,833

500,503

429,882
69,462
136,769

1,136,616

176,348
55,761
129,262

$1,497,987

Yield/
Rate

4.19%
4.73
5.46
5.17

5.66
13.94
11.66
7.65
8.00
8.47

7.65

7.27
7.58
4.80
6.12

7.00

7.42

6.46

6.39

0.58%
1.81
4.60
4.30

2.84

5.21
4.70
3.50

4.38

3.13

5.11
4.21
5.34

4.19

2.20%
0.55

2.75%

Interest
Income/
Expense

173
2,146
1,928
3,136

3,151
2,189
286
1,351
1,193
298

8,468

2,805
724
232
454

4,215

12,683

914

20,980

69
1,053
1,658
150

2,930

562
156
328

1,046

3,976

5,467
727
1,916

12,086

$ 8,894

Yield/
Rate

4.39%
4.94
5.24
5.31

5.65
13.90
12.02
7.65
7.74
10.66

7.71

7.28
7.67
4.46
7.27

7.09

7.49

6.38

6.41

0.81%
1.96
4.46
4.19

2.84

5.78
4.83
3.22

4.52

3.15

5.05
4.15
5.60

4.23

2.18%
0.55

2.73%

(4)

(5)

(6)

(7)

Includes home equity loans of $11.7 billion, $9.9 billion, $8.7 billion and $8.2 billion in the fourth, third, second and first quarters of 2006, respectively, and $8.0 billion in the fourth quarter of 2005.
Includes consumer finance loans of $2.8 billion, $2.9 billion, $3.0 billion and $3.0 billion in the fourth, third, second and first quarters of 2006, respectively, and $2.9 billion in the fourth quarter of 2005; and foreign
consumer loans of $7.8 billion, $8.1 billion, $7.8 billion and $7.3 billion in the fourth, third, second and first quarters of 2006, respectively, and $3.7 billion in the fourth quarter of 2005.
Includes domestic commercial real estate loans of $36.1 billion, $36.7 billion, $36.0 billion and $36.0 billion in the fourth, third, second and first quarters of 2006, respectively, and $35.4 billion in the fourth quarter of
2005.
Interest income includes the impact of interest rate risk management contracts, which increased (decreased) interest income on the underlying assets $(198) million, $(128) million, $(54) million and $8 million in the fourth,
third, second and first quarters of 2006, respectively, and $29 million in the fourth quarter of 2005. Interest expense includes the impact of interest rate risk management contracts, which increased (decreased) interest
expense on the underlying liabilities $(69) million, $(48) million, $87 million and $136 million in the fourth, third, second and first quarters of 2006, respectively, and $254 million in the fourth quarter of 2005. For further
information on interest rate contracts, see “Interest Rate Risk Management for Nontrading Activities” beginning on page 77.
Interest income (FTE basis) for the three months ended June 30, 2006, does not include the cumulative tax charge resulting from a change in tax legislation relating to extraterritorial tax income and foreign sales corporation
regimes. The FTE impact to Net Interest Income and net interest yield on earning assets of this retroactive tax adjustment was a reduction of $270 million and 9 bps, respectively, for the three months ended June 30, 2006.
Management has excluded this one-time impact to provide a more comparative basis of presentation for Net Interest Income and net interest yield on earning assets on a FTE basis. The impact on any given future period is
not expected to be material.

94 Bank of America 2006

(Dollars in millions)

Earning assets
Time deposits placed and other short-term investments
Federal funds sold and securities purchased under

agreements to resell

Trading account assets
Debt securities (1)
Loans and leases (2):

Residential mortgage
Credit card – domestic
Credit card – foreign
Home equity lines
Direct/Indirect consumer (3)
Other consumer (4)

Total consumer

Commercial – domestic
Commercial real estate (5)
Commercial lease financing
Commercial – foreign

Total commercial

Total loans and leases

Other earning assets

Second Quarter 2006

First Quarter 2006

Fourth Quarter 2005

Average
Balance

Interest
Income/
Expense

Yield/
Rate

Average
Balance

Interest
Income/
Expense

Yield/
Rate

Average
Balance

Interest
Income/
Expense

Yield/
Rate

16,691

168

4.05%

14,347

139

3.92%

14,619

133

3.59%

179,104
133,556
236,967

197,228
64,980
8,305
67,182
56,715
10,804

405,214

148,445
36,749
20,896
24,345

230,435

635,649

51,928

1,900
1,712
3,162

2,731
2,168
269
1,231
1,057
294

7,750

2,695
680
262
456

4,093

11,843

808

4.25
5.13
5.34

5.54
13.38
12.97
7.35
7.46
10.95

7.66

7.28
7.41
5.01
7.52

7.12

7.47

6.24

6.26

3.94
4.89
5.19

5.48
12.97
13.86
7.02
7.24
10.59

7.60

6.97
6.99
4.82
7.48

6.83

7.32

6.22

6.08

174,711
133,361
234,606

184,796
68,169
8,403
64,198
55,025
10,357

390,948

144,693
36,676
20,512
23,139

225,020

615,968

46,618

1,709
1,623
3,043

2,524
2,180
287
1,112
986
272

7,361

2,490
632
247
427

3,796

11,157

718

1,219,611

18,389

34,857
161,905

$1,416,373

165,908
139,441
221,411

178,764
56,858
–
60,571
47,181
6,653

350,027

137,224
36,017
20,178
20,143

213,562

563,589

40,582

1,477
1,648
2,842

2,427
1,748
–
1,011
703
182

6,071

2,279
597
241
379

3,496

9,567

594

1,145,550

16,261

33,693
125,814

$1,305,057

Total earning assets (6)

1,253,895

19,593

Cash and cash equivalents
Other assets, less allowance for loan and lease losses

Total assets

Interest-bearing liabilities
Domestic interest-bearing deposits:

35,070
167,039

$1,456,004

Savings
NOW and money market deposit accounts
Consumer CDs and IRAs
Negotiable CDs, public funds and other time deposits

Total domestic interest-bearing deposits

35,681
221,198
141,408
13,005

411,292

76
996
1,393
123

2,588

0.84%
1.81
3.95
3.80

2.52

35,550
227,606
135,068
8,551

406,775

76
908
1,177
70

2,231

0.87%
1.62
3.53
3.30

2.22

35,535
224,122
120,321
5,085

385,063

68
721
1,028
27

1,844

Foreign interest-bearing deposits:

Banks located in foreign countries
Governments and official institutions
Time, savings and other

Total foreign interest-bearing deposits

32,456
13,428
37,178

83,062

489
155
276

920

Total interest-bearing deposits

494,354

3,508

Federal funds purchased, securities sold under

agreements to repurchase and other short-term borrowings

Trading account liabilities
Long-term debt

408,734
61,263
125,620

4,842
596
1,721

Total interest-bearing liabilities (6)

1,089,971

10,667

Noninterest-bearing sources:

Noninterest-bearing deposits
Other liabilities
Shareholders’ equity

180,442
58,218
127,373

Total liabilities and shareholders’ equity

$1,456,004

Net interest spread
Impact of noninterest-bearing sources

Net interest income/yield on earning assets (7)

$ 8,926

6.05
4.63
2.98

4.44

2.85

4.75
3.90
5.48

3.92

2.34%
0.51

2.85%

5.71
4.25
2.83

4.17

2.53

4.37
3.99
5.18

3.60

30,116
10,200
35,136

75,452

424
107
245

776

482,227

3,007

4,309
517
1,516

9,349

399,896
52,466
117,018

1,051,607

177,594
56,019
131,153

$1,416,373

24,451
7,579
32,624

64,654

356
74
202

632

449,717

2,476

3,855
619
1,209

8,159

364,140
56,880
99,601

970,338

179,205
55,566
99,948

$1,305,057

3.55
4.72
5.13

5.42
12.19
–
6.63
5.91
11.01

6.90

6.59
6.58
4.79
7.45

6.50

6.75

5.83

5.65

0.76%
1.28
3.39
2.13

1.90

5.77
3.84
2.46

3.87

2.18

4.20
4.32
4.85

3.34

2.48%
0.50

2.98%

$ 9,040

2.31%
0.51

2.82%

$ 8,102

Bank of America 2006

Glossary

Assets in Custody – Consist largely of custodial and non-discretionary trust assets administered for customers excluding brokerage assets. Trust assets
encompass a broad range of asset types including real estate, private company ownership interest, personal property and investments.

Assets Under Management (AUM) – The total market value of assets under the investment advisory and discretion of Global Wealth and Investment
Management which generate asset management fees based on a percentage of the assets’ market value. AUM reflects assets that are generally managed
for institutional, high net-worth and retail clients and are distributed through various investment products including mutual funds, other commingled vehicles
and separate accounts.

Bridge Loan – A short-term loan or security which is expected to be replaced by permanent financing (debt or equity securities, loan syndication or asset
sales) prior to the maturity date of the loan. Bridge loans may include an unfunded commitment, as well as funded amounts, and are generally expected to
be retired in one year or less.

Client Brokerage Assets – Include client assets which are held in brokerage accounts. This includes non-discretionary brokerage and fee-based assets which
generate brokerage income and asset management fee revenue.

Co-branding Affinity Agreements – Contracts with our endorsing partners outlining specific marketing rights, compensation and other terms and conditions
mutually agreed to by the Corporation and its partners.

Committed Credit Exposure – Committed credit exposure includes any funded portion of a facility plus the unfunded portion of a facility on which the Corpo-
ration is legally bound to advance funds during a specified period under prescribed conditions.

Core Net Interest Income – Managed Basis – Net Interest Income on a fully taxable-equivalent basis excluding the impact of market-based activities and cer-
tain securitizations.

Credit Derivatives / Credit Default Swaps (CDS) – A derivative contract that provides protection against the deterioration of credit quality and would allow one
party to receive payment in the event of default by a third party under a borrowing arrangement.

Derivative – A contract or agreement whose value is derived from changes in an underlying index such as interest rates, foreign exchange rates or prices of
securities. Derivatives utilized by the Corporation include swaps, financial futures and forward settlement contracts, and option contracts.

Excess Servicing Income – For certain assets that have been securitized, interest income, fee revenue and recoveries in excess of interest paid to the
investors, gross credit losses and other trust expenses related to the securitized receivables are all reclassified into excess servicing income, which is a
component of Card Income. Excess servicing income also includes the fair market value adjustments related to the Corporation’s interest-only strips as a
result of changes in the estimated future net cash flows expected to be earned in future periods and changes in projected loan payment rates.

Interest-only (IO) Strip – A residual interest in a securitization trust representing the right to receive future net cash flows from securitized assets after pay-
ments to third party investors and net credit losses. These arise when assets are transferred to a special purpose entity as part of an asset securitization
transaction qualifying for sale treatment under GAAP.

Letter of Credit – A document issued by the Corporation on behalf of a customer to a third party promising to pay that third party upon presentation of speci-
fied documents. A letter of credit effectively substitutes the Corporation’s credit for that of the Corporation’s customer.

Managed Basis – Managed basis presentation includes results from both on-balance sheet loans and off-balance sheet loans, and excludes the impact of
securitization activity, with the exception of the mark-to-market adjustment on residual interests from securitization and the impact of the gains recognized
on securitized loan principal receivables. Managed basis disclosures assume that securitized loans have not been sold and present the results of the
securitized loans in the same manner as the Corporation’s held loans. Managed credit impact represents the Corporation’s held Provision for Credit Losses
combined with credit losses associated with the securitized loan portfolio.

Mortgage Servicing Right (MSR) – The right to service a mortgage loan retained when the underlying loan is sold or securitized. Servicing includes collections
for principal, interest and escrow payments from borrowers and accounting for and remitting principal and interest payments to investors.

Net Interest Yield – Net Interest Income divided by average total interest-earning assets.

Operating Basis – A basis of presentation not defined by GAAP that excludes Merger and Restructuring Charges.

Return on Common Equity (ROE) – Measures the earnings contribution of a unit as a percentage of the Shareholders’ Equity allocated to that unit.

96 Bank of America 2006

Securitize / Securitization – A process by which financial assets are sold to a special purpose entity, which then issues securities collateralized by those
underlying assets, and the return on the securities issued is based on the principal and interest cash flow of the underlying assets.

Shareholder Value Added (SVA) – Cash basis earnings on an operating basis less a charge for the use of capital.

Value-at-Risk (VAR) – A VAR model estimates a range of hypothetical scenarios to calculate a potential loss which is not expected to be exceeded with a
specified confidence level. VAR is a key statistic used to measure and manage market risk.

Variable Interest Entities (VIE) – An entity whose equity investors do not have a controlling financial interest. The entity may not have sufficient equity at risk
to finance its activities without additional subordinated financial support from third parties. The equity investors may lack the ability to make significant
decisions about the entity’s activities, or they may not absorb the losses or receive the residual returns generated by the assets and other contractual
arrangements of the VIE. A VIE must be consolidated by its primary beneficiary, if any, which is the party that will absorb the majority of the expected losses
or expected residual returns of the VIE or both.

Acronyms

AFS

AICPA

ALCO

ALM

EPS

FASB

FDIC

FFIEC

FRB

FSP

FTE

GAAP

OCC

OCI

QSPE

RCC

SBLCs

SEC

SPE

Available-for-sale

American Institute of Certified Public Accountants

Asset and Liability Committee

Asset and liability management

Earnings per share

Financial Accounting Standards Board

Federal Deposit and Insurance Corporation

Federal Financial Institutions Examination Council

Board of Governors of the Federal Reserve System

Financial Accounting Standards Board Staff Position

Fully taxable-equivalent

Generally accepted accounting principles in the United States

Office of the Comptroller of the Currency

Other Comprehensive Income

Qualified Special Purpose Entity

Risk and Capital Committee

Standby letters of credit

Securities and Exchange Commission

Special Purpose Entity

Bank of America 2006

Report of Management on Internal Control Over Financial
Reporting
Bank of America Corporation and Subsidiaries

The management of Bank of America Corporation is responsible for estab-
lishing and maintaining adequate internal control over financial reporting.

The Corporation’s internal control over financial reporting is a proc-
ess designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally accepted in
the United States of America. The Corporation’s internal control over
financial reporting includes those policies and procedures that (i) pertain
to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the com-
pany; (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America,
and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the com-
pany; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may dete-
riorate.

Management assessed the effectiveness of

the Corporation’s
internal control over financial reporting as of December 31, 2006, based
on the framework set forth by the Committee of Sponsoring Organizations
of the Treadway Commission in Internal Control – Integrated Framework.
Based on that assessment, management concluded that, as of
the Corporation’s internal control over financial
December 31, 2006,
reporting is effective based on the criteria established in Internal Control –
Integrated Framework.

Management’s assessment of the effectiveness of the Corporation’s
internal control over financial reporting as of December 31, 2006, has
been audited by PricewaterhouseCoopers, LLP, an independent registered
public accounting firm.

Kenneth D. Lewis
Chairman, Chief Executive Officer and President

Joe L. Price
Chief Financial Officer

98 Bank of America 2006

Report of Independent Registered Public Accounting Firm
Bank of America Corporation and Subsidiaries

To the Board of Directors and Shareholders
of Bank of America Corporation:

We have completed integrated audits of Bank of America Corporation’s
Consolidated Financial Statements and of its internal control over financial
reporting as of December 31, 2006, in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Our opin-
ions, based on our audits, are presented below.

Consolidated Financial Statements
In our opinion, the accompanying Consolidated 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, 2006 and
2005, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2006 in conformity with
accounting principles generally accepted in the United States of America.
These Consolidated Financial Statements are the responsibility of the
Corporation’s management. Our responsibility is to express an opinion on
these Consolidated Financial Statements based on our audits. We con-
ducted our audits of these Consolidated Financial Statements in accord-
ance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit of financial state-
ments includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by manage-
ment, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

Internal control over financial reporting
Also, in our opinion, management’s assessment, included in the Report of
Management on Internal Control Over Financial Reporting, that the Corpo-
ration maintained effective internal control over financial reporting as of
December 31, 2006 based on criteria established in Internal Control –
Integrated Framework issued by the Committee of Sponsoring Orga-
nizations of the Treadway Commission (COSO), is fairly stated, in all mate-
rial respects, based on those criteria. Furthermore, in our opinion, the
Corporation maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2006, based on criteria estab-
lished in Internal Control – Integrated Framework issued by the COSO. The
Corporation’s management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness

of internal control over financial reporting. Our responsibility is to express
opinions on management’s assessment and on the effectiveness of the
Corporation’s internal control over financial reporting based on our audit.
We conducted our audit of
internal control over financial reporting in
accordance with the standards of the Public Company Accounting Over-
sight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. An audit of internal control over financial reporting includes
obtaining an understanding of internal control over financial reporting,
evaluating management’s assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing such other
procedures as we consider necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. A
company’s internal control over financial reporting includes those policies
and procedures that (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dis-
positions of the assets of the company; (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors
of the company; and (iii) provide reasonable assurance regarding pre-
vention or timely detection of unauthorized acquisition, use, or disposition
of the company’s assets that could have a material effect on the financial
statements.

Charlotte, North Carolina
February 22, 2007

Bank of America 2006

Consolidated Statement of Income
Bank of America Corporation and Subsidiaries

(Dollars in millions, except per share information)

Interest income
Interest and fees on loans and leases
Interest and dividends on securities
Federal funds sold and securities purchased under agreements to resell
Trading account assets
Other interest income

Total interest income

Interest expense
Deposits
Short-term borrowings
Trading account liabilities
Long-term debt

Total interest expense

Net interest income
Noninterest income
Card income
Service charges
Investment and brokerage services
Investment banking income
Equity investment gains
Trading account profits
Mortgage banking income
Other income

Total noninterest income

Total revenue

Provision for credit losses

Gains (losses) on sales of debt securities

Noninterest expense
Personnel
Occupancy
Equipment
Marketing
Professional fees
Amortization of intangibles
Data processing
Telecommunications
Other general operating
Merger and restructuring charges

Total noninterest expense

Income before income taxes
Income tax expense

Net income

Net income available to common shareholders

Per common share information
Earnings

Diluted earnings

Dividends paid

2006

48,274
11,655
7,823
7,232
3,601

78,585

14,480
19,840
2,640
7,034

43,994

34,591

14,293
8,224
4,456
2,317
3,189
3,166
541
2,246

38,432

73,023

5,010

(443)

18,211
2,826
1,329
2,336
1,078
1,755
1,732
945
4,580
805

35,597

31,973
10,840

21,133

21,111

4.66

4.59

2.12

Year Ended December 31

2005

2004

34,843
10,937
5,012
5,743
2,091

58,626

9,492
11,615
2,364
4,418

27,889

30,737

5,753
7,704
4,184
1,856
2,212
1,763
805
1,077

25,354

56,091

4,014

1,084

15,054
2,588
1,199
1,255
930
809
1,487
827
4,120
412

28,681

24,480
8,015

16,465

16,447

4.10

4.04

1.90

28,051
7,256
1,940
4,016
1,690

42,953

5,921
4,072
1,317
3,683

14,993

27,960

4,592
6,989
3,614
1,886
1,024
1,013
414
1,473

21,005

48,965

2,769

1,724

13,435
2,379
1,214
1,349
836
664
1,330
730
4,457
618

27,012

20,908
6,961

13,947

13,931

3.71

3.64

1.70

Average common shares issued and outstanding (in thousands)

Average diluted common shares issued and outstanding (in thousands)

4,526,637

4,595,896

4,008,688

4,068,140

3,758,507

3,823,943

100 Bank of America 2006

See accompanying Notes to Consolidated Financial Statements.

Consolidated Balance Sheet
Bank of America Corporation and Subsidiaries

(Dollars in millions)

Assets
Cash and cash equivalents
Time deposits placed and other short-term investments
Federal funds sold and securities purchased under agreements to resell (includes $135,409 and $148,299 pledged as collateral)
Trading account assets (includes $92,274 and $68,223 pledged as collateral)
Derivative assets
Debt Securities:

Available-for-sale (includes $83,785 and $116,659 pledged as collateral)
Held-to-maturity, at cost (market value – $40 and $47)

Total debt securities

Loans and leases
Allowance for loan and lease losses

Loans and leases, net of allowance

Premises and equipment, net
Mortgage servicing rights (includes $2,869 measured at fair value at December 31, 2006)
Goodwill
Intangible assets
Other assets

Total assets

Liabilities
Deposits in domestic offices:
Noninterest-bearing
Interest-bearing

Deposits in foreign offices:
Noninterest-bearing
Interest-bearing

Total deposits

Federal funds purchased and securities sold under agreements to repurchase
Trading account liabilities
Derivative liabilities
Commercial paper and other short-term borrowings
Accrued expenses and other liabilities (includes $397 and $395 of reserve for unfunded lending commitments)
Long-term debt

Total liabilities

Commitments and contingencies (Notes 9 and 13)

Shareholders’ equity
Preferred stock, $0.01 par value; authorized—100,000,000 shares; issued and outstanding – 121,739 and 1,090,189 shares
Common stock and additional paid-in capital, $0.01 par value; authorized—7,500,000,000 shares; issued and outstanding – 4,458,151,391 and

3,999,688,491 shares

Retained earnings
Accumulated other comprehensive income (loss)
Other

Total shareholders’ equity

Total liabilities and shareholders’ equity

December 31

2006

2005

36,429
13,952
135,478
153,052
23,439

192,806
40

192,846

706,490
(9,016)

697,474

9,255
3,045
65,662
9,422
119,683

36,999
12,800
149,785
131,707
23,712

221,556
47

221,603

573,791
(8,045)

565,746

7,786
2,806
45,354
3,194
90,311

$1,459,737

$1,291,803

$ 180,231
418,100

$ 179,571
384,155

4,577
90,589

693,497

217,527
67,670
16,339
141,300
42,132
146,000

7,165
63,779

634,670

240,655
50,890
15,000
116,269
31,938
100,848

1,324,465

1,190,270

2,851

61,574
79,024
(7,711)
(466)

271

41,693
67,552
(7,556)
(427)

135,272

101,533

$1,459,737

$1,291,803

See accompanying Notes to Consolidated Financial Statements.

Bank of America 2006

101

Consolidated Statement of Changes in
Shareholders’ Equity
Bank of America Corporation and Subsidiaries

(Dollars in millions, shares in thousands)

Balance, December 31, 2003
Net income
Net unrealized losses on available-for-sale debt and marketable equity

securities

Net unrealized gains on foreign currency translation adjustments
Net losses on derivatives
Cash dividends paid:

Common
Preferred

Preferred
Stock

Common Stock and
Additional Paid-in Capital

Amount

Retained
Earnings

Accumulated
Other
Comprehensive
Income
(Loss) (1)

Other

2,882,288 $

29 $51,162
13,947

$(2,434)

$(154)

Total
Shareholders’
Equity

$ 48,657
13,947

(127)
13
(185)

(6,452)
(16)
3,939
46,751
(6,286)

(6)

(127)
13
(185)

(31)

(6,452)
(16)

(127)

Common stock issued under employee plans and related tax benefits
Stock issued in acquisition (2)
Common stock repurchased
Conversion of preferred stock
Other

121,149
1,186,728
(147,859)
4,240

271

(54)

4,066
46,480
(6,375)
54
(18)

Balance, December 31, 2004

271

4,046,546

44,236

58,773

(2,764)

(281)

100,235

Net income
Net unrealized losses on available-for-sale debt and marketable equity

securities

Net unrealized gains on foreign currency translation adjustments
Net losses on derivatives
Cash dividends paid:

Common
Preferred

16,465

(7,665)
(18)

(2,781)
32
(2,059)

Common stock issued under employee plans and related tax benefits
Common stock repurchased
Other

79,579
(126,437)

3,222
(5,765)

(145)

(3)

(1)

16,465

(2,781)
32
(2,059)

(7,665)
(18)
3,077
(5,765)
12

Balance, December 31, 2005

271

3,999,688

41,693

67,552

(7,556)

(427)

101,533

Net income
Net unrealized gains on available-for-sale debt and marketable equity

securities

Net unrealized gains on foreign currency translation adjustments
Net gains on derivatives
Adjustment to initially apply FASB Statement No. 158 (3)
Cash dividends paid:

Common
Preferred

21,133

(9,639)
(22)

245
269
641
(1,308)

Issuance of preferred stock
Redemption of preferred stock
Common stock issued under employee plans and related tax benefits
Stock issued in acquisition (4)
Common stock repurchased
Other

2,850
(270)

118,418
631,145
(291,100)

4,863
29,377
(14,359)

(39)

(2)

21,133

245
269
641
(1,308)

(9,639)
(22)
2,850
(270)
4,824
29,377
(14,359)
(2)

Comprehensive
Income

$13,947

(127)
13
(185)

(31)

13,617

16,465

(2,781)
32
(2,059)

11,673

21,133

245
269
641

(2)

Balance, December 31, 2006

$2,851

4,458,151 $ 61,574 $79,024

$(7,711)

$(466)

$135,272

$22,286

(1) At December 31, 2006, Accumulated Other Comprehensive Income (Loss) (OCI), net of tax, includes Net Gains (Losses) on Derivatives of $(3,697) million, Net Unrealized Gains (Losses) on Available-for-sale (AFS) Debt and
Marketable Equity Securities of $(2,733) million, the accumulated adjustment to apply FASB Statement No. 158 of $(1,428) million, and Net Unrealized Gains (Losses) on Foreign Currency Translation Adjustments of $147
million. For additional information on Accumulated OCI, see Note 14 of the Consolidated Financial Statements.
Includes adjustment for the fair value of outstanding FleetBoston Financial Corporation (FleetBoston) stock options of $862 million.
Includes accumulated adjustment to apply FASB Statement No. 158 of $(1,428) million, net of tax, and the reversal of the additional minimum liability adjustment of $120 million, net of tax.
Includes adjustment for the fair value of outstanding MBNA Corporation (MBNA) stock options of $435 million.

(2)

(3)

(4)

102 Bank of America 2006

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statement of Cash Flows
Bank of America Corporation and Subsidiaries

(Dollars in millions)

Operating activities
Net income
Reconciliation of net income to net cash provided by (used in) operating activities:

Provision for credit losses
(Gains) losses on sales of debt securities
Depreciation and premises improvements amortization
Amortization of intangibles
Deferred income tax expense (benefit)
Net increase in trading and derivative instruments
Net increase in other assets
Net increase (decrease) in accrued expenses and other liabilities
Other operating activities, net

Net cash provided by (used in) operating activities

Investing activities
Net increase in time deposits placed and other short-term investments
Net (increase) decrease in federal funds sold and securities purchased under agreements to resell
Proceeds from sales of available-for-sale securities
Proceeds from paydowns and maturities of available-for-sale securities
Purchases of available-for-sale securities
Proceeds from maturities of held-to-maturity securities
Proceeds from sales of loans and leases
Other changes in loans and leases, net
Net purchases of premises and equipment
Proceeds from sales of foreclosed properties
Investment in China Construction Bank
(Acquisition) divestiture of business activities, net
Other investing activities, net

Net cash used in investing activities

Financing activities
Net increase in deposits
Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase
Net increase in commercial paper and other short-term borrowings
Proceeds from issuance of long-term debt
Retirement of long-term debt
Proceeds from issuance of preferred stock
Redemption of preferred stock
Proceeds from issuance of common stock
Common stock repurchased
Cash dividends paid
Excess tax benefits of share-based payments
Other financing activities, net

Net cash provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at January 1

Cash and cash equivalents at December 31

Supplemental cash flow disclosures
Cash paid for interest
Cash paid for income taxes

Year Ended December 31

2006

2005

2004

$ 21,133

$ 16,465

$ 13,947

5,010
443
1,114
1,755
1,850
(3,870)
(17,070)
4,517
(373)

14,509

(3,053)
13,020
53,446
22,417
(40,905)
7
37,812
(145,779)
(748)
93
–
(2,388)
(2,226)

(68,304)

38,340
(22,454)
23,709
49,464
(17,768)
2,850
(270)
3,117
(14,359)
(9,661)
477
(312)

53,133

(570)
36,999

4,014
(1,084)
959
809
1,695
(18,911)
(104)
(8,205)
(7,861)

(12,223)

(439)
(58,425)
134,490
39,519
(204,476)
283
14,458
(71,078)
(1,228)
132
(3,000)
(49)
(632)

(150,445)

16,100
120,914
37,671
21,958
(15,107)
–
–
2,846
(5,765)
(7,683)
–
(117)

170,817

(86)

8,063
28,936

2,769
(1,724)
972
664
(519)
(13,944)
(11,928)
4,594
1,647

(3,522)

(1,147)
(3,880)
117,672
26,973
(243,573)
153
4,416
(32,350)
(863)
198
–
4,936
(89)

(127,554)

64,423
35,752
37,437
21,289
(16,904)
–
–
3,712
(6,286)
(6,468)
–
(91)

132,864

1,852
27,084

$ 36,429

$ 36,999

$ 28,936

$ 42,355
7,210

$ 26,239
7,049

$ 13,765
6,088

The fair values of noncash assets acquired and liabilities assumed in the MBNA merger were $83.3 billion and $50.4 billion.
Approximately 631 million shares of common stock, valued at approximately $28.9 billion were issued in connection with the MBNA merger.
Net transfers of Loans and Leases to loans held-for-sale (included in Other Assets) from the loan portfolio for Asset and Liability Management purposes amounted to $73 million in 2005.
Net transfers of Loans and Leases from loans held-for-sale to the loan portfolio for Asset and Liability Management purposes amounted to $1.1 billion in 2004.
In 2004, the fair values of noncash assets acquired and liabilities assumed in the merger with FleetBoston were $224.5 billion and $182.9 billion.
In 2004, approximately 1.2 billion shares of common stock, valued at approximately $45.6 billion, were issued in connection with the merger with FleetBoston.

See accompanying Notes to Consolidated Financial Statements.

Bank of America 2006

103

Notes to Consolidated Financial Statements
Bank of America Corporation and Subsidiaries

On January 1, 2006, Bank of America Corporation and its subsidiaries (the
Corporation) acquired 100 percent of the outstanding stock of MBNA
Corporation (MBNA). On April 1, 2004, the Corporation acquired all of the
outstanding stock of FleetBoston Financial Corporation (FleetBoston). Both
mergers were accounted for under the purchase method of accounting.
Consequently, both MBNA and FleetBoston’s results of operations were
included in the Corporation’s results from their dates of acquisition.

The Corporation, through its banking and nonbanking subsidiaries,
provides a diverse range of financial services and products throughout the
U.S. and in selected international markets. At December 31, 2006, the
Corporation operated its banking activities primarily under two charters:
Bank of America, National Association (Bank of America, N.A.) and FIA
Card Services, N.A. Bank of America, N.A. was the surviving entity after the
merger of Fleet National Bank on June 13, 2005. Effective June 10, 2006,
MBNA America Bank N.A. was renamed FIA Card Services, N.A., and on
October 20, 2006, Bank of America, N.A. (USA) merged into FIA Card Serv-
ices, N.A. These mergers had no impact on the Consolidated Financial
Statements of the Corporation.

Note 1 – Summary of Significant Accounting
Principles

Principles of Consolidation and Basis of Presentation
The Consolidated Financial Statements include the accounts of the Corpo-
ration and its majority-owned subsidiaries, and those variable interest enti-
ties (VIEs) where the Corporation is the primary beneficiary. All significant
intercompany accounts and transactions have been eliminated. Results of
operations of companies purchased are included from the dates of acquis-
ition. Assets held in an agency or fiduciary capacity are not included in the
Consolidated Financial Statements. The Corporation accounts for invest-
ments in companies in which it owns a voting interest of 20 percent to 50
percent and for which it has the ability to exercise significant influence
over operating and financing decisions using the equity method of account-
ing. These investments are included in Other Assets and the Corporation’s
proportionate share of income or loss is included in Equity Investment
Gains.

The preparation of the Consolidated Financial Statements in con-
formity with accounting principles generally accepted in the United States
(GAAP) requires management to make estimates and assumptions that
affect reported amounts and disclosures. Actual results could differ from
those estimates and assumptions. Certain prior period amounts have
been reclassified to conform to current period presentation.

Recently Issued or Proposed Accounting
Pronouncements
On February 15, 2007, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 159, “The
Fair Value Option for Financial Assets and Financial Liabilities” (SFAS
159), which allows an entity the irrevocable option to elect fair value for

the initial and subsequent measurement for certain financial assets and
liabilities on a contract-by-contract basis. Subsequent changes in fair value
of these financial assets and liabilities would be recognized in earnings
when they occur. SFAS 159 further establishes certain additional dis-
closure requirements. SFAS 159 is effective for the Corporation’s financial
statements for the year beginning on January 1, 2008, with earlier adop-
tion permitted. Management is currently evaluating the impact and timing
of the adoption of SFAS 159 on the Corporation’s financial condition and
results of operations.

On September 29, 2006,

the FASB issued SFAS No. 158,
“Employers’ Accounting for Defined Benefit Pension and Other Postretire-
ment Plans, an amendment of FASB Statements No. 87, 88, 106, and
132(R)” (SFAS 158), which requires the recognition of a plan’s over-
funded or under-funded status as an asset or liability with an offsetting
adjustment to Accumulated Other Comprehensive Income (OCI). SFAS 158
further requires the determination of the fair values of a plan’s assets at a
company’s year-end and recognition of actuarial gains and losses, prior
service costs or credits, and transition assets or obligations as a compo-
nent of Accumulated OCI.
This statement was effective as of
December 31, 2006. The adoption of SFAS 158 reduced Accumulated OCI
by approximately $1.3 billion after tax in 2006.

On September 15, 2006, the FASB issued SFAS No. 157, “Fair Value
Measurements” (SFAS 157). SFAS 157 defines fair value, establishes a
framework for measuring fair value under GAAP and enhances disclosures
about fair value measurements. SFAS 157 defines fair value as the
exchange price that would be received for an asset or paid to transfer a
liability (an exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants on
the measurement date. SFAS 157 is effective for the Corporation’s finan-
cial statements issued for the year beginning on January 1, 2008, with
earlier adoption permitted. Management is currently evaluating the impact
and timing of the adoption of SFAS 157 on the Corporation’s financial
condition and results of operations.

On September 13, 2006, the Securities and Exchange Commission
(SEC) issued Staff Accounting Bulletin (SAB) No. 108 “Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in
Current Year Financial Statements” (SAB 108). SAB 108 expresses the
SEC Staff’s views regarding the process of quantifying financial statement
misstatements. SAB 108 states that in evaluating the materiality of finan-
cial statement misstatements, a corporation must quantify the impact of
including both the carryover and reversing
correcting misstatements,
effects of prior year misstatements, on the current year financial state-
ments. SAB 108 is effective for the year ended December 31, 2006. The
application of SAB 108 did not have an impact on the Corporation’s finan-
cial condition and results of operations.

On July 13, 2006, the FASB issued FASB Staff Position (FSP) No. FAS
13-2, “Accounting for a Change or Projected Change in the Timing of Cash
Flows Relating to Income Taxes Generated by a Leveraged Lease Trans-
action” (FSP 13-2). The principal provision of FSP 13-2 is the requirement
that a lessor recalculate the recognition of lease income when there is a

104 Bank of America 2006

change in the estimated timing of the cash flows relating to income taxes
generated by such leveraged lease. FSP 13-2 is effective as of January 1,
2007 and requires that the cumulative effect of adoption be reflected as
an adjustment to the beginning balance of Retained Earnings with a corre-
sponding offset decreasing the net investment in leveraged leases. The
adoption of FSP 13-2 is expected to reduce Retained Earnings by approx-
imately $1.4 billion after-tax in the first quarter of 2007. This estimate
reflects new information that changed management’s previously disclosed
assumption of the projected timing and classification of future income tax
cash flows related to certain leveraged leases.

On July 13, 2006, the FASB released FASB Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes, an interpretation of FASB
Statement No. 109” (FIN 48). FIN 48 clarifies the accounting and reporting
for income taxes where interpretation of the tax law may be uncertain. FIN
48 prescribes a comprehensive model for the financial statement recog-
income tax
nition, measurement, presentation and disclosure of
uncertainties with respect to positions taken or expected to be taken in
income tax returns. The Corporation will adopt FIN 48 in the first quarter of
2007. The adoption of FIN 48 is not expected to have a material impact
on the Corporation’s financial condition and results of operations.

On March 17, 2006, the FASB issued SFAS No. 156, “Accounting for
Servicing of Financial Assets, an amendment of FASB Statement No. 140”
(SFAS 156), which permits, but does not require, an entity to account for
one or more classes of servicing rights (i.e., mortgage servicing rights, or
MSRs) at fair value, with the changes in fair value recorded in the Con-
solidated Statement of Income. The Corporation elected to early adopt the
standard and to account for consumer-related MSRs using the fair value
measurement method on January 1, 2006. Commercial-related MSRs
continue to be accounted for using the amortization method (i.e., lower of
cost or market). The adoption of this standard did not have a material
impact on the Corporation’s financial condition and results of operations.
For additional information on MSRs, see Note 8 of the Consolidated Finan-
cial Statements.

On February 16, 2006, the FASB issued SFAS No. 155, “Accounting
for Certain Hybrid Instruments, an amendment of FASB Statements
No. 133 and 140” (SFAS 155), which permits, but does not require, fair
value accounting for any hybrid financial
instrument that contains an
embedded derivative that would otherwise require bifurcation in accord-
ance with SFAS No. 133 “Accounting for Derivative Instruments and Hedg-
ing Activities, as amended” (SFAS 133). The statement also subjects
beneficial interests issued by securitization vehicles to the requirements
of SFAS 133. The Corporation will adopt SFAS 155 in the first quarter of
2007. The adoption of SFAS 155 is not expected to have a material
impact on the Corporation’s financial condition and results of operations.

On January 1, 2006, the Corporation adopted SFAS No. 123 (revised
2004), “Share-based Payment” (SFAS 123R). Prior to January 1, 2006,
the Corporation accounted for its stock-based compensation plans under a
fair value-based method of accounting. The adoption of SFAS 123R
impacted the recognition of stock compensation for any awards granted to
retirement-eligible employees and the presentation of cash flows resulting
from the tax benefits due to tax deductions in excess of the compensation
cost recognized for those options (excess tax benefits) in the Consolidated
Statement of Cash Flows. For additional information, see Note 17 of the
Consolidated Financial Statements.

Cash and Cash Equivalents
Cash on hand, cash items in the process of collection, and amounts due
from correspondent banks and the Federal Reserve Bank are included in
Cash and Cash Equivalents.

Securities Purchased under Agreements to Resell
and Securities Sold under Agreements to Repurchase
Securities Purchased under Agreements to Resell and Securities Sold
under Agreements to Repurchase are treated as collateralized financing
transactions and are recorded at the amounts at which the securities were
acquired or sold plus accrued interest. The Corporation’s policy is to
obtain the use of Securities Purchased under Agreements to Resell. The
market value of the underlying securities, which collateralize the related
receivable on agreements to resell, is monitored, including accrued inter-
est. The Corporation may require counterparties to deposit additional col-
lateral or return collateral pledged, when appropriate.

Collateral
The Corporation has accepted collateral that it is permitted by contract or
custom to sell or repledge. At December 31, 2006, the fair value of this
collateral was approximately $186.6 billion of which $113.0 billion was
sold or repledged. At December 31, 2005, the fair value of this collateral
was approximately $179.1 billion of which $112.5 billion was sold or
is reverse repurchase
repledged. The primary source of this collateral
in
agreements. The Corporation also pledges securities as collateral
transactions that consist of repurchase agreements, public and trust
deposits, Treasury tax and loan notes, and other short-term borrowings.
This collateral can be sold or repledged by the counterparties to the trans-
actions.

In addition, the Corporation obtains collateral in connection with its
derivative activities. Required collateral levels vary depending on the credit
risk rating and the type of counterparty. Generally, the Corporation accepts
collateral in the form of cash, U.S. Treasury securities and other market-
able securities. Based on provisions contained in legal netting agree-
ments, the Corporation has netted cash collateral against the applicable
derivative mark-to-market exposures. Accordingly, the Corporation offsets
its obligation to return or its right to reclaim cash collateral against the fair
value of the derivatives being collateralized. The Corporation also pledges
collateral on its own derivative positions which can be applied against
Derivative Liabilities.

Trading Instruments
Financial instruments utilized in trading activities are stated at fair value.
Fair value is generally based on quoted market prices. If quoted market
prices are not available, fair values are estimated based on dealer quotes,
pricing models or quoted prices for instruments with similar character-
istics. Realized and unrealized gains and losses are recognized in Trading
Account Profits.

Derivatives and Hedging Activities
The Corporation designates a derivative as held for trading, an economic
hedge not designated as a SFAS 133 hedge, or a qualifying SFAS 133
hedge when it enters into the derivative contract. The designation may
change based upon management’s reassessment or changing circum-
stances. Derivatives utilized by the Corporation include swaps, financial
futures and forward settlement contracts, and option contracts. A swap
agreement is a contract between two parties to exchange cash flows
based on specified underlying notional amounts, assets and/or indices.
Financial futures and forward settlement contracts are agreements to buy
or sell a quantity of a financial instrument, index, currency or commodity at
a predetermined future date, and rate or price. An option contract is an
agreement that conveys to the purchaser the right, but not the obligation,
to buy or sell a quantity of a financial
instrument (including another
instrument), index, currency or commodity at a pre-
derivative financial

Bank of America 2006

105

determined rate or price during a period or at a time in the future. Option
agreements can be transacted on organized exchanges or directly between
parties. The Corporation also provides credit derivatives to customers who
wish to increase or decrease credit exposures. In addition, the Corporation
utilizes credit derivatives to manage the credit risk associated with the
loan portfolio.

All derivatives are recognized on the Consolidated Balance Sheet at
fair value, taking into consideration the effects of
legally enforceable
master netting agreements that allow the Corporation to settle positive
and negative positions and offset cash collateral held with the same coun-
terparty on a net basis. For exchange-traded contracts, fair value is based
on quoted market prices. For non-exchange traded contracts, fair value is
based on dealer quotes, pricing models or quoted prices for instruments
with similar characteristics.

The Corporation recognizes gains and losses at

inception of a
derivative contract only if the fair value of the contract is evidenced by a
quoted market price in an active market, an observable price or other
market transaction, or other observable data supporting a valuation model
in accordance with Emerging Issues Task Force (EITF) Issue No. 02-3,
“Issues Involved in Accounting for Derivative Contracts Held for Trading
Purposes and Contracts Involved in Energy Trading and Risk Management
Activities” (EITF 02-3). For those gains and losses not evidenced by the
above mentioned market data, the transaction price is used as the fair
value of the derivative contract. Any difference between the transaction
price and the model fair value is considered an unrecognized gain or loss
at inception of the contract. These unrecognized gains and losses are
recorded in income using the straight line method of amortization over the
contractual
life of the derivative contract. Earlier recognition of the full
unrecognized gain or loss is permitted if the trade is terminated early,
subsequent market activity is observed which supports the model fair
value of the contract, or significant inputs used in the valuation model
become observable in the market. As of December 31, 2006, the balance
of the above unrecognized gains and losses was not material. SFAS 157,
when adopted, will nullify certain guidance in EITF 02-3 and, as a result, a
portion of the above unrecognized gains and losses will be accounted for
as a cumulative-effect adjustment to the opening balance of Retained
Earnings.

Trading Derivatives and Economic Hedges
The Corporation designates at inception whether the derivative contract is
considered hedging or non-hedging for SFAS 133 accounting purposes.
Derivatives held for trading purposes are included in Derivative Assets or
Derivative Liabilities with changes in fair value reflected in Trading Account
Profits.

Derivatives used as economic hedges but not designated in a hedg-
ing relationship for accounting purposes are also included in Derivative
Assets or Derivative Liabilities. Changes in the fair value of derivatives that
serve as economic hedges of MSRs are recorded in Mortgage Banking
Income. Changes in the fair value of derivatives that serve as asset and
liability management (ALM) economic hedges, which do not qualify or were
not designated as accounting hedges, are recorded in Other Income.
Credit derivatives used by the Corporation do not qualify for hedge
accounting under SFAS 133 despite being effective economic hedges with
changes in the fair value of these derivatives included in Other Income.

Derivatives Used For SFAS 133 Hedge Accounting Purposes
For SFAS 133 hedges, the Corporation formally documents at inception all
relationships between hedging instruments and hedged items, as well as

its risk management objectives and strategies for undertaking various
accounting hedges. Additionally, the Corporation uses dollar offset or
regression analysis at the hedge’s inception and for each reporting period
thereafter to assess whether the derivative used in its hedging transaction
is expected to be and has been highly effective in offsetting changes in
the fair value or cash flows of the hedged items. The Corporation dis-
continues hedge accounting when it is determined that a derivative is not
expected to be or has ceased to be highly effective as a hedge, and then
reflects changes in fair value in earnings after termination of the hedge
relationship.

The Corporation uses its derivatives designated as hedging for
accounting purposes as either fair value hedges, cash flow hedges or
hedges of net investments in foreign operations. The Corporation manages
interest rate and foreign currency exchange rate sensitivity predominantly
through the use of derivatives. Fair value hedges are used to protect
against changes in the fair value of the Corporation’s assets and liabilities
that are due to interest rate or foreign exchange volatility. Cash flow
hedges are used to minimize the variability in cash flows of assets or
liabilities, or forecasted transactions caused by interest rate or foreign
exchange fluctuation. For cash flow hedges, the maximum length of time
over which forecasted transactions are hedged is 29 years, with a sub-
stantial portion of the hedged transactions being less than 10 years.
Changes in the fair value of derivatives designated as fair value hedges
are recorded in earnings, together with changes in the fair value of the
related hedged item. Changes in the fair value of derivatives designated
as cash flow hedges are recorded in Accumulated OCI and are reclassified
into the line item in the Consolidated Statement of Income in which the
hedged item is recorded in the same period the hedged item affects earn-
ings. Hedge ineffectiveness and gains and losses on the excluded compo-
nent of a derivative in assessing hedge effectiveness are recorded in
earnings in the same income statement caption that is used to record
hedge effectiveness. SFAS 133 retains certain concepts under SFAS
No. 52, “Foreign Currency Translation,” (SFAS 52) for foreign currency
exchange hedging. Consistent with SFAS 52, the Corporation records
changes in the fair value of derivatives used as hedges of the net invest-
ment in foreign operations, to the extent effective, as a component of
Accumulated OCI.

If a derivative instrument in a fair value hedge is terminated or the
hedge designation removed, the previous adjustments to the carrying
amount of the hedged asset or liability are subsequently accounted for in
the same manner as other components of the carrying amount of that
asset or liability. For interest-earning assets and interest-bearing liabilities,
such adjustments are amortized to earnings over the remaining life of the
respective asset or liability. If a derivative instrument in a cash flow hedge
is terminated or the hedge designation is removed, related amounts in
Accumulated OCI are reclassified into earnings in the same period or peri-
ods during which the hedged forecasted transaction affects earnings. If it
is probable that a forecasted transaction will not occur, any related
amounts in Accumulated OCI are reclassified into earnings in that period.

Interest Rate Lock Commitments
The Corporation enters into interest rate lock commitments (IRLCs) in
connection with its mortgage banking activities to fund residential mort-
gage loans at specified times in the future. IRLCs that relate to the origi-
nation of mortgage loans that will be held for sale are considered
derivative instruments under SFAS No. 149, “Amendment of Statement
133 on Derivative Instruments and Hedging Activities.” As such, these
IRLCs are recorded at fair value with changes in fair value recorded in
Mortgage Banking Income.

106 Bank of America 2006

Consistent with SEC SAB No. 105, “Application of Accounting Princi-
ples to Loan Commitments,” the Corporation does not record any unreal-
ized gain or loss at the inception of the loan commitment, which is the
time the commitment is issued to the borrower. The Corporation records
unrealized gains or losses based upon subsequent changes in the value
from the inception of the loan commitment. In estimating the fair value of
an IRLC, the Corporation assigns a probability to the loan commitment
based on an expectation that it will be exercised and the loan will be fund-
ed. The fair value of the commitments is derived from the fair value of
related mortgage loans which is based on observable market data.
Changes to the fair value of IRLCs are recognized based on interest rate
changes, changes in the probability that the commitment will be exercised
and the passage of time. Changes from the expected future cash flows
related to the customer relationship or loan servicing are excluded from
the valuation of the IRLCs.

Outstanding IRLCs expose the Corporation to the risk that the price
of the loans underlying the commitments might decline from inception of
the rate lock to funding of the loan. To protect against this risk, the Corpo-
ration utilizes forward loan sales commitments and other derivative
instruments, including interest rate swaps and options, to economically
hedge the risk of potential changes in the value of the loans that would
result from the commitments. 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 management
to hold to maturity are classified as
has the intent and ability
held-to-maturity and reported at amortized cost. Debt Securities that are
bought and held principally for the purpose of resale in the near term are
classified as Trading Account Assets and are stated at fair value with
unrealized gains and losses included in Trading Account Profits. All other
Debt Securities that management has the intent and ability to hold to
recovery unless there is a significant deterioration in credit quality in any
individual security are classified as available-for-sale (AFS) and carried at
fair value with net unrealized gains and losses included in Accumulated
OCI on an after-tax basis.

Interest on Debt Securities, including amortization of premiums and
accretion of discounts, is included in Interest Income. Realized gains and
losses from the sales of Debt Securities, which are included in Gains
(Losses) on Sales of Debt Securities, are determined using the specific
identification method.

Marketable equity securities are classified based on management’s
intention on the date of purchase and recorded on the Consolidated Bal-
ance Sheet as of the trade date. Marketable equity securities that are
bought and held principally for the purpose of resale in the near term are
classified as Trading Account Assets and are stated at fair value with
unrealized gains and losses included in Trading Account Profits. Other
marketable equity securities are accounted for as AFS and classified in
Other Assets. All AFS marketable equity securities in which management
has the intent and ability to hold to recovery are carried at fair value with
net unrealized gains and losses included in Accumulated OCI on an
after-tax basis. Dividend income on all AFS marketable equity securities is
included in Equity Investment Gains. Realized gains and losses on the
sale of all AFS marketable equity securities, which are recorded in Equity
Investment Gains, are determined using the specific identification method.

Investments in equity securities without readily determinable market
values are recorded in Other Assets, are accounted for using the cost
method and are subject to impairment testing as applicable.

Equity investments held by Principal

Investing, a diversified equity
investor in companies at all stages of their life cycle from startup to buy-
out, are reported at fair value pursuant to American Institute of Certified
Public Accountants (AICPA) Investment Company Audit Guide and recorded
in Other Assets. These investments are made either directly in a company
or held through a fund. Equity investments for which there are active
market quotes are carried at estimated fair value based on market prices.
Nonpublic and other equity investments for which representative market
quotes are not readily available are initially valued at cost. Subsequently,
these investments are reviewed semi-annually or on a quarterly basis,
where appropriate, and adjusted to reflect changes in value as a result of
initial public offerings, market liquidity, the investees’ financial results,
sales restrictions, or other than temporary declines in value. Gains and
losses on these equity investments, both unrealized and realized, are
recorded in Equity Investment Gains.

Loans and Leases
Loans are reported at their outstanding principal balances net of any
unearned income, charge-offs, unamortized deferred fees and costs on
originated loans, and premiums or discounts on purchased loans. Loan
origination fees and certain direct origination costs are deferred and
recognized as adjustments to income over the lives of the related loans.
Unearned income, discounts and premiums are amortized to income using
methods that approximate the interest method.

The Corporation purchases loans with and without evidence of credit
quality deterioration since origination. Those loans with evidence of credit
quality deterioration for which it is probable at purchase that we will be
unable to collect all contractually required payments are accounted for
under AICPA Statement of Position 03-3, “Accounting for Certain Loans or
Debt Securities Acquired in a Transfer” (SOP 03-3). SOP 03-3 addresses
accounting for differences between contractual cash flows and cash flows
expected to be collected from an investor’s initial
investment in loans
acquired in a transfer if those differences are attributable, at least in part,
to credit quality. SOP 03-3 requires impaired loans be recorded at fair
value and prohibits “carrying over” or the creation of valuation allowances
in the initial accounting of loans acquired in a transfer that are within the
scope of this SOP (categories of loans for which it is probable, at the time
of acquisition, that all amounts due according to the contractual terms of
the loan agreement will not be collected). The prohibition of the valuation
allowance carryover applies to the purchase of an individual loan, a pool of
loans, a group of loans, and loans acquired in a purchase business
combination. Under SOP 03-3, the excess of cash flows expected at pur-
chase over the purchase price is recorded as interest income over the life
of the loan. For those loans not within the scope of SOP 03-3 any differ-
ence between the purchase price and the par value of the loan is reflected
in interest income over the life of the loan.

The Corporation provides equipment

financing to its customers
through a variety of lease arrangements. Direct financing leases are car-
ried at the aggregate of lease payments receivable plus estimated residual
value of the leased property less unearned income. Leveraged leases,
which are a form of financing leases, are carried net of nonrecourse debt.
Unearned income on leveraged and direct financing leases is accreted to
earnings over the lease terms by methods that approximate the interest
method.

Bank of America 2006

107

Allowance for Credit Losses
The allowance for credit losses which includes the Allowance for Loan and
Lease Losses and the reserve for unfunded lending commitments, repre-
sents management’s estimate of probable losses inherent in the Corpo-
ration’s lending activities. The Allowance for Loan and Lease Losses
represents the estimated probable credit losses in funded consumer and
loans and leases while the reserve for unfunded lending
commercial
commitments,
including standby letters of credit (SBLCs) and binding
unfunded loan commitments, represents estimated probable credit losses
on these unfunded credit instruments based on utilization assumptions.
Credit exposures, excluding Derivative Assets and Trading Account Assets,
deemed to be uncollectible are charged against these accounts. Cash
recovered on previously charged off amounts are recorded as recoveries to
these accounts.

The Corporation performs periodic and systematic detailed reviews of
its lending portfolios to identify credit risks and to assess the overall col-
lectibility of those portfolios. The allowance on certain homogeneous loan
portfolios, which generally consist of consumer and certain commercial
loans such as the business card and small business portfolio, is based on
aggregated portfolio segment evaluations generally by product type. Loss
forecast models are utilized for these segments which consider a variety
of factors including, but not limited to, historical
loss experience, esti-
mated defaults or foreclosures based on portfolio trends, delinquencies,
economic conditions and credit scores. These models are updated on a
quarterly basis in order to incorporate information reflective of the current
economic environment. The remaining commercial portfolios are reviewed
on an individual loan basis. Loans subject to individual reviews are ana-
lyzed and segregated by risk according to the Corporation’s internal risk
rating scale. These risk classifications, in conjunction with an analysis of
historical loss experience, current economic conditions, industry perform-
ance trends, geographic or obligor concentrations within each portfolio
segment, and any other pertinent information (including individual valu-
ations on nonperforming loans in accordance with SFAS No. 114,
“Accounting by Creditors for Impairment of a Loan,” (SFAS 114)) result in
loss
the estimation of the allowance for credit losses. The historical
experience is updated quarterly to incorporate the most
recent data
reflective of the current economic environment.

If necessary, a specific Allowance for Loan and Lease Losses is
established for individual impaired commercial loans. A loan is considered
impaired when, based on current information and events, it is probable
that the Corporation will be unable to collect all amounts due, including
principal and interest, according to the contractual terms of the agree-
ment. Once a loan has been identified as individually impaired, manage-
ment measures impairment in accordance with SFAS 114. Individually
impaired loans are measured based on the present value of payments
expected to be received, observable market prices, or for loans that are
solely dependent on the collateral for repayment, the estimated fair value
of the collateral. If the recorded investment in impaired loans exceeds the
present value of payments expected to be received, a specific allowance is
established as a component of the Allowance for Loan and Lease Losses.
The Allowance for Loan and Lease Losses includes two components
which are allocated to cover the estimated probable losses in each loan
and lease category based on the results of the Corporation’s detailed
review process described above. The first component covers those com-
loans that are either nonperforming or impaired. The second
mercial
component covers consumer loans and leases, and performing commer-
cial
Included within this second component of the
Allowance for Loan and Lease Losses and determined separately from the
procedures outlined above are reserves which are maintained to cover

loans and leases.

108 Bank of America 2006

uncertainties that affect the Corporation’s estimate of probable losses
including the imprecision inherent in the forecasting methodologies, as
well as domestic and global economic uncertainty and large single name
defaults or event risk. Management evaluates the adequacy of the Allow-
ance for Loan and Lease Losses based on the combined total of these
two components.

In addition to the Allowance for Loan and Lease Losses, the Corpo-
ration also estimates probable losses related to unfunded lending
commitments, such as letters of credit and financial guarantees, and bind-
ing unfunded loan commitments. Unfunded lending commitments are
subject to individual reviews and are analyzed and segregated by risk
according to the Corporation’s internal risk rating scale. These risk classi-
fications, in conjunction with an analysis of historical loss experience, uti-
lization assumptions, current economic conditions, performance trends
within specific portfolio segments and any other pertinent information,
result in the estimation of the reserve for unfunded lending commitments.
The allowance for credit losses related to the loan and lease portfolio
is reported on the Consolidated Balance Sheet in the Allowance for Loan
and Lease Losses. The allowance for credit losses related to the reserve
for unfunded lending commitments is reported on the Consolidated Bal-
ance Sheet in Accrued Expenses and Other Liabilities. Provision for Credit
Losses related to the loan and lease portfolio and unfunded lending
commitments is reported in the Consolidated Statement of Income in the
Provision for Credit Losses.

Nonperforming Loans and Leases, Charge-offs, and
Delinquencies
In accordance with the Corporation’s policies, non-bankrupt credit card
loans, and real estate secured
loans, open-end unsecured consumer
loans are charged off no later than the end of the month in which the
account becomes 180 days past due. Personal property secured loans are
charged off no later than the end of the month in which the account
becomes 120 days past due. Accounts in bankruptcy are written down to
collateral value either 60 days after bankruptcy notification (credit card
and certain open-end unsecured accounts) or no later than the end of the
month in which the account becomes 60 days past due. Only real estate
secured accounts are generally placed into nonaccrual status and classi-
fied as nonperforming at 90 days past due. These loans can be returned
to performing status when principal or interest is less than 90 days past
due.

Commercial

loans and leases, excluding business card loans, that
are past due 90 days or more as to principal or interest, or where reason-
able doubt exists as to timely collection,
including loans that are
individually identified as being impaired, are generally classified as non-
performing unless well-secured and in the process of collection. Loans
whose contractual terms have been restructured in a manner which grants
a concession to a borrower experiencing financial difficulties, without
compensation on restructured loans, are classified as nonperforming until
the loan is performing for an adequate period of
the
restructured agreement.
In situations where the Corporation does not
receive adequate compensation, the restructuring is considered a troubled
debt restructuring. Interest accrued but not collected is reversed when a
commercial
loan is classified as nonperforming. Interest collections on
commercial nonperforming loans and leases for which the ultimate
collectibility of principal is uncertain are applied as principal reductions;
otherwise, such collections are credited to income when received. Com-
mercial loans and leases may be restored to performing status when all
principal and interest is current and full repayment of the remaining con-
tractual principal and interest is expected, or when the loan otherwise

time under

becomes well-secured and is in the process of collection. Business card
loans are charged off no later than the end of the month in which the
account becomes 180 days past due or in which 60 days has elapsed
since receipt of notification of bankruptcy filing, whichever comes first, and
are not classified as nonperforming.

The entire balance of an account is contractually delinquent if the
minimum payment is not received by the specified due date on the
customer’s billing statement. Interest and fees continue to accrue on past
due loans until the date the loan goes into nonaccrual status, if appli-
cable. Delinquency is reported on accruing loans that are 30 days or more
past due.

Loans Held-for-Sale
Loans held-for-sale include residential mortgage, loan syndications, and to
a lesser degree, commercial real estate, consumer finance and other
loans, and are carried at the lower of aggregate cost or market value.
Loans held-for-sale are included in Other Assets.

Premises and Equipment
Premises and Equipment are stated at cost less accumulated depreciation
and amortization. Depreciation and amortization are recognized using the
straight-line method over the estimated useful
lives of the assets. Esti-
mated lives range up to 40 years for buildings, up to 12 years for furniture
and equipment, and the shorter of lease term or estimated useful life for
leasehold improvements.

Mortgage Servicing Rights
Effective January 1, 2006, the Corporation early adopted SFAS 156 and
began accounting for consumer-related MSRs at fair value with changes in
fair value recorded in Mortgage Banking Income, while commercial-related
MSRs continue to be accounted for using the amortization method (i.e.,
lower of cost or market) with impairment recognized as a reduction to
Mortgage Banking Income. Certain derivatives are used as economic
hedges of the MSRs, but are not designated as hedges under SFAS 133.
These derivatives are marked to market and recognized through Mortgage
Banking Income.

interest

rate and prepayment

Prior to January 1, 2006, the Corporation applied SFAS 133 hedge
accounting for derivative financial instruments that had been designated to
hedge MSRs. The loans underlying the MSRs being hedged were stratified
into pools that possessed similar
risk
exposures. The Corporation had designated the hedged risk as the change
in the overall fair value of these stratified pools within a daily hedge peri-
od. The Corporation performed both prospective and retrospective hedge
effectiveness evaluations, using regression analyses. A prospective test
was performed to determine whether the hedge was expected to be highly
effective at the inception of the hedge. A retrospective test was performed
at the end of the daily hedge period to determine whether the hedge was
actually effective. Debt Securities were also used as economic hedges of
MSRs and were accounted for as AFS Securities with realized gains
recorded in Gains (Losses) on Sales of Debt Securities and unrealized
gains or losses recorded in Accumulated OCI in Shareholders’ Equity. For
additional information on MSRs, see Note 8 of the Consolidated Financial
Statements.

Goodwill and Intangible Assets
Net assets of companies acquired in purchase transactions are recorded
at fair value at the date of acquisition. Identified intangibles are amortized
on an accelerated or straight-line basis over the estimated period of bene-
fit. Goodwill is not amortized but is reviewed for potential impairment on
an annual basis, or when events or circumstances indicate a potential

impairment, at the reporting unit level. The impairment test is performed in
two phases. The first step of the Goodwill impairment test compares the
fair value of the reporting unit with its carrying amount, including Goodwill.
If the fair value of the reporting unit exceeds its carrying amount, Goodwill
of the reporting unit is considered not impaired; however, if the carrying
amount of the reporting unit exceeds its fair value, an additional step has
to be performed. This additional step compares the implied fair value of
the reporting unit’s Goodwill (as defined in SFAS No. 142, “Goodwill and
Other Intangible Assets”) with the carrying amount of that Goodwill. An
impairment loss is recorded to the extent that the carrying amount of
Goodwill exceeds its implied fair value. In 2006, 2005, and 2004, Good-
will was tested for impairment and it was determined that Goodwill was
not impaired at any of these dates.

Intangible Assets subject to amortization are evaluated for impair-
ment in accordance with SFAS No. 144 “Accounting for the Impairment or
Disposal of Long-Lived Assets.” An impairment loss will be recognized if
the carrying amount of the Intangible Asset is not recoverable and exceeds
fair value. The carrying amount of the intangible is considered not recover-
able if it exceeds the sum of the undiscounted cash flows expected to
result from the use of the asset. At December 31, 2006, Intangible Assets
included on the Consolidated Balance Sheet consist of purchased credit
card relationship intangibles, core deposit intangibles, affinity relation-
ships, and other intangibles that are amortized on an accelerated or
straight-line basis over anticipated periods of benefit of up to 15 years.
There were no events or changes in circumstances in 2006, 2005, and
2004 that indicated the carrying amounts of our intangibles may not be
recoverable.

Special Purpose Financing Entities
In the ordinary course of business, the Corporation supports its custom-
ers’ financing needs by facilitating the customers’ access to different fund-
ing sources, assets and risks. In addition, the Corporation utilizes certain
financing arrangements to 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 Corpo-
ration’s Consolidated Balance Sheet. The majority of these activities are
basic term or revolving securitization vehicles for mortgages, credit cards
or other types of loans which are generally funded through term-amortizing
debt structures. Other special purpose entities finance their activities by
issuing short-term commercial paper. The securities issued from both
types of vehicles are designed to be paid off from the underlying cash
flows of the vehicles’ assets or the reissuance of commercial paper.

Securitizations
The Corporation securitizes, sells and services interests in residential
mortgage loans and credit card loans, and from time to time, automobile,
consumer finance and commercial loans. The accounting for these activ-
ities is governed by SFAS No. 140, “Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities—a replacement of
FASB Statement No. 125” (SFAS 140). The securitization vehicles are
Qualified Special Purpose Entities (QSPEs) which, in accordance with SFAS
140, are legally isolated, bankruptcy remote and beyond the control of the
seller. QSPEs are not included in the consolidated financial statements of
the seller. When the Corporation securitizes assets, it may retain interest-
only strips, one or more subordinated tranches, subordinated interests in
accrued interest and fees on the securitized receivables and, in some
cases, cash reserve accounts which are generally considered residual
interests in the securitized assets. The Corporation may also retain senior
tranches in these securitizations. Gains and losses upon sale of the

Bank of America 2006

109

assets are based on an allocation of the previous carrying amount of the
assets to the retained interests. Carrying amounts of assets transferred
are allocated in proportion to the relative fair values of the assets sold and
interests retained.

Quoted market prices are used to obtain fair values of senior
retained interests. Generally, quoted market prices for retained residual
interests are not available; therefore, the Corporation estimates fair values
based upon the present value of the associated expected future cash
flows. This may require management to estimate credit losses, prepay-
ment speeds, forward interest yield curves, discount rates and other fac-
tors that impact
the value of retained interests. See Note 9 of the
Consolidated Financial Statements for further discussion.

Interest-only strips retained in connection with credit card securitiza-
tions are classified in Other Assets and carried at fair value, with changes
in fair value recorded in Card Income. Other retained interests are primarily
classified in Other Assets or AFS Securities and carried at fair value or
amounts that approximate fair value with changes in fair value recorded in
Accumulated OCI. The excess cash flows expected to be received over the
amortized cost of
these retained interests is recognized as Interest
Income using the effective yield method. If the fair value of such retained
interests has declined below its carrying amount and there has been an
adverse change in estimated contractual cash flows of the underlying
assets, then such decline is determined to be other-than-temporary and
the retained interest is written down to fair value with a corresponding
adjustment to earnings.

Other Special Purpose Financing Entities
Other special purpose financing entities are generally funded with short-
term commercial paper. These financing entities are usually contractually
limited to a narrow range of activities that facilitate the transfer of or
access to various types of assets or financial instruments and provide the
investors in the transaction protection from creditors of the Corporation in
the event of bankruptcy or receivership of the Corporation. In certain sit-
uations, the Corporation provides liquidity commitments and/or loss pro-
tection agreements.

The Corporation determines whether these entities should be con-
solidated by evaluating the degree to which it maintains control over the
financing entity and will receive the risks and rewards of the assets in the
financing entity. In making this determination, the Corporation considers
whether the entity is a QSPE, which is generally not required to be con-
solidated by the seller or investors in the entity. For non-QSPE structures
or VIEs, the Corporation assesses whether it is the primary beneficiary of
the entity.
In accordance with FASB Interpretation No. 46 (Revised
December 2003), “Consolidation of Variable Interest Entities, an inter-
pretation of ARB No. 51” (FIN 46R), the primary beneficiary is the party
that consolidates a VIE based on its assessment that it will absorb a
majority of the expected losses or expected residual returns of the entity,
or both. For additional information on other special purpose financing enti-
ties, see Note 9 of the Consolidated Financial Statements.

Income Taxes
The Corporation accounts for income taxes in accordance with SFAS
No. 109, “Accounting for Income Taxes” (SFAS 109), resulting in two
components of Income Tax Expense: current and deferred. Current income
tax expense approximates taxes to be paid or refunded for the current
period. Deferred income tax expense results from changes in deferred tax
assets and liabilities between periods. These gross deferred tax assets
and liabilities represent decreases or increases in taxes expected to be
paid in the future because of future reversals of temporary differences in
the bases of assets and liabilities as measured by tax laws and their

bases as reported in the financial statements. Deferred tax assets have
also been recognized for net operating loss carryforwards and tax credit
carryforwards. Valuation allowances are then recorded to reduce deferred
tax assets to the amounts management concludes are more likely than
not to be realized. For additional information on income taxes, see Note
18 of the Consolidated Financial Statements.

Retirement Benefits
The Corporation has established qualified retirement plans covering sub-
stantially all full-time and certain part-time employees. Pension expense
under these plans is charged to current operations and consists of several
components of net pension cost based on various actuarial assumptions
regarding future experience under the plans.

In addition, the Corporation has established unfunded supplemental
benefit plans and supplemental executive retirement plans for selected
officers of the Corporation and its subsidiaries (SERPS) that provide bene-
fits that cannot be paid from a qualified retirement plan due to Internal
Revenue Code restrictions. The SERPS are frozen and the executive offi-
cers do not accrue any additional benefits. These plans are nonqualified
under the Internal Revenue Code and assets used to fund benefit pay-
ments are not segregated from other assets of the Corporation; therefore,
in general, a participant’s or beneficiary’s claim to benefits under these
plans is as a general creditor. In addition, the Corporation has established
several postretirement healthcare and life insurance benefit plans.

The Corporation accounts for its retirement benefit plans in accord-
ance with SFAS No. 87, “Employers’ Accounting for Pensions” (SFAS 87),
SFAS No. 88, “Employers’ Accounting for Settlements and Curtailment of
Defined Benefit Pension Plans and for Termination Benefits,” and SFAS
No. 106, “Employers Accounting for Postretirement Benefits Other Than
Pensions,” as applicable.

On December 31, 2006, the Corporation adopted SFAS 158 which
requires the recognition of a plan’s over-funded or under-funded status as
an asset or liability with an offsetting adjustment to Accumulated OCI.
SFAS 158 requires the determination of the fair values of a plan’s assets
at a company’s year-end and recognition of actuarial gains and losses,
prior service costs or credits, and transition assets or obligations as a
component of Accumulated OCI. These amounts were previously netted
against the plans’ funded status in the Corporation’s Consolidated Bal-
ance Sheet. These amounts will be subsequently recognized as compo-
nents of net periodic benefit costs. Further, actuarial gains and losses
that arise in subsequent periods that are not initially recognized as a
component of net periodic benefit cost will be recognized as a component
of Accumulated OCI. Those amounts will subsequently be recorded as a
component of net periodic benefit cost as they are amortized during future
periods.

Accumulated Other Comprehensive Income
The Corporation records gains and losses on cash flow hedges, unrealized
gains and losses on AFS Securities, unrecognized actuarial gains and
losses, transition obligation and prior service costs on Pension and Post-
retirement plans, foreign currency translation adjustments, and related
hedges of net investments in foreign operations in Accumulated OCI, net
of tax. Accumulated OCI also includes fair value adjustments on certain
retained interests in the Corporation’s securitization transactions. Gains or
losses on derivatives accounted for as cash flow hedges are reclassified
to Net Income when the hedged transaction affects earnings. Gains and
losses on AFS Securities are reclassified to Net Income as the gains or
losses are realized upon sale of
the securities. Other-than-temporary
impairment charges are reclassified to Net Income at the time of the
charge. Translation gains or losses on foreign currency translation adjust-

110 Bank of America 2006

ments are reclassified to Net Income upon the substantial sale or liqui-
dation of investments in foreign operations.

Earnings Per Common Share
Earnings per Common Share is computed by dividing Net Income Available
to Common Shareholders by the weighted average common shares issued
and outstanding. For Diluted Earnings per Common Share, Net Income
Available to Common Shareholders can be affected by the conversion of
the registrant’s convertible preferred stock. Where the effect of this con-
version would have been dilutive, Net Income Available to Common Share-
holders is adjusted by the associated preferred dividends. This adjusted
Net Income is divided by the weighted average number of common shares
issued and outstanding for each period plus amounts representing the
dilutive effect of stock options outstanding, restricted stock, restricted
stock units and the dilution resulting from the conversion of the regis-
trant’s convertible preferred stock, if applicable. The effects of convertible
preferred stock, restricted stock, restricted stock units and stock options
are excluded from the computation of diluted earnings per common share
in periods in which the effect would be antidilutive. Dilutive potential
common shares are calculated using the treasury stock method.

Foreign Currency Translation
Assets, liabilities and operations of foreign branches and subsidiaries are
recorded based on the functional currency of each entity. For certain of the
foreign operations, the functional currency is the local currency, in which
case the assets, liabilities and operations are translated, for consolidation
purposes, at period-end rates from the local currency to the reporting cur-
rency,
losses are
reported as a component of Accumulated OCI on an after-tax basis. When
the foreign entity’s functional currency is determined to be the U.S. dollar,
the resulting remeasurement currency gains or losses on foreign denomi-
nated assets or liabilities are included in Net Income.

the U.S. dollar. The resulting unrealized gains or

Credit Card Arrangements

Endorsing organization agreements
The Corporation contracts with other organizations to obtain their endorse-
ment of the Corporation’s loan products. This endorsement may provide
the Corporation exclusive rights to market to the organization’s members
or to customers on behalf of the Corporation. These organizations endorse
the Corporation’s loan products and provide the Corporation with their
mailing lists and marketing activities. These agreements generally have
terms that range from five to seven years. The Corporation typically pays
royalties in exchange for their endorsement. These compensation costs to
the Corporation are recorded as contra-revenue against Card Income.

Cardholder reward agreements
The Corporation offers reward programs that allow its cardholders to earn
points that can be redeemed for a broad range of rewards including cash,
travel and discounted products. The Corporation establishes a rewards
liability based upon the points earned which are expected to be redeemed
and the average cost per point redemption. The points to be redeemed are
estimated based on past redemption behavior, card product type, account
transaction activity and other historical card performance. The liability is
reduced as the points are redeemed. The estimated cost of the rewards
programs is recorded as contra-revenue against Card Income.

Stock-based Compensation
On January 1, 2006, the Corporation adopted SFAS 123R under the
modified-prospective application. The Corporation had previously adopted
the fair value-based method of accounting for stock-based employee
compensation under SFAS No. 148, “Accounting for Stock-Based Compen-
sation – Transition and Disclosure – an amendment of FASB Statement
No. 123,” (SFAS 148) prospectively, on January 1, 2003. Had the Corpo-
ration adopted SFAS 148 retrospectively, the impact in 2005 and 2004
would not have been material. For additional information on stock-based
employee compensation, see Note 17 of
the Consolidated Financial
Statements.

Note 2 – MBNA Merger and Restructuring
Activity
The Corporation acquired 100 percent of the outstanding stock of MBNA
on January 1, 2006,
In connection therewith
for $34.6 billion.
1,260 million shares of MBNA common stock were exchanged for
631 million shares of the Corporation’s common stock. Prior to the MBNA
merger, this represented approximately 16 percent of the Corporation’s
outstanding common stock. MBNA shareholders also received cash of
$5.2 billion. The MBNA merger was a tax-free merger for the Corporation.
The acquisition expands the Corporation’s customer base and its oppor-
tunity to deepen customer relationships across the full breadth of the
Corporation by delivering innovative deposit, lending and investment prod-
ucts and services to MBNA’s customer base. Additionally, the acquisition
allows the Corporation to significantly increase its affinity relationships
through MBNA’s credit card operations and sell these credit cards through
our delivery channels (including the retail branch network). MBNA’s results
of operations were included in the Corporation’s results beginning Jan-
uary 1, 2006.

Bank of America 2006

111

The MBNA merger was accounted for under the purchase method of
accounting in accordance with SFAS No. 141, “Business Combinations.”
The purchase price has been allocated to the assets acquired and the

liabilities assumed based on their fair values at the MBNA merger date as
summarized in the following table.

MBNA Purchase Price Allocation
(In millions, except per share amounts)

Purchase price
Purchase price per share of the Corporation’s common stock (1)
Exchange ratio

Purchase price per share of the Corporation’s common stock exchanged
Cash portion of the MBNA merger consideration

Implied value of one share of MBNA common stock
MBNA common stock exchanged

Total value of the Corporation’s common stock and cash exchanged

Fair value of outstanding stock options and direct acquisition costs

Total purchase price

Allocation of the purchase price
MBNA stockholders’ equity
MBNA goodwill and other intangible assets
Adjustments to reflect assets acquired and liabilities assumed at fair value:

Loans and leases
Premises and equipment
Identified intangibles (2)
Other assets
Deposits
Exit and termination liabilities
Other personnel-related liabilities
Other liabilities and deferred income taxes
Long-term debt

Fair value of net assets acquired

Goodwill resulting from the MBNA merger (3)

$45.856
0.5009

$22.969
4.125

27.094
1,260

$34,139
467

$34,606

$13,410
(3,564)

(292)
(563)
7,881
(683)
(97)
(269)
(634)
(564)
(409)

14,216

$ 20,390

(1) The value of the shares of common stock exchanged with MBNA shareholders was based upon the average of the closing prices of the Corporation’s common stock for the period commencing two trading days before, and

(2)

ending two trading days after, June 30, 2005, the date of the MBNA merger announcement.
Includes purchased credit card relationships of $5,698 million, affinity relationships of $1,641 million, core deposit intangibles of $214 million, and other intangibles, including trademarks, of $328 million. The amortization
life for core deposit intangibles is 10 years, purchased credit card relationships and affinity relationships are 15 years, and other intangibles over periods not exceeding 10 years. These intangibles are primarily amortized on
an accelerated basis.

(3) No Goodwill is expected to be deductible for tax purposes. Substantially all Goodwill was allocated to Global Consumer and Small Business Banking.

As a result of the MBNA merger, the Corporation acquired certain
loans for which there was, at the time of the merger, evidence of deterio-
ration of credit quality since origination and for which it was probable that
all contractually required payments would not be collected. These loans
were accounted for in accordance with SOP 03-3 which requires that pur-
chased impaired loans be recorded at fair value as of the merger date.
The purchase accounting adjustment to reduce impaired loans to fair value
resulted in an increase in Goodwill. In addition, an adjustment was made
to the Allowance for Loan and Lease Losses for those impaired loans
resulting in a decrease in Goodwill. The outstanding balance and fair value
of such loans was approximately $1.3 billion and $940 million as of the
merger date. At December 31, 2006, there were no outstanding balances
for such loans.

Unaudited Pro Forma Condensed Combined
Financial Information
The following unaudited pro forma condensed combined financial
information presents the results of operations of the Corporation had the
MBNA merger taken place at January 1, 2005 and 2004. Included in the
2004 pro forma amounts are FleetBoston results for the three months
ended March 31, 2004.

(Dollars in millions)

Net interest income
Noninterest income
Total revenue
Provision for credit losses
Gains on sales of debt securities
Merger and restructuring charges
Other noninterest expense
Income before income taxes
Net income

Pro Forma

2005

$34,029
32,647
66,676
5,082
1,084
1,179
34,411
27,088
18,157

2004

$32,831
30,523
63,354
3,983
1,775
624
34,373
26,149
17,300

Merger and Restructuring Charges in the above table include a non-
recurring restructuring charge related to legacy MBNA of $767 million for
2005. Pro forma Earnings per Common Share and Diluted Earnings per
Common Share were $3.90 and $3.86 for 2005, and $3.68 and $3.62
for 2004.

112 Bank of America 2006

Merger and Restructuring Charges
Merger and Restructuring Charges are recorded in the Consolidated State-
ment of Income and include incremental costs to integrate the operations
of the Corporation and MBNA. These charges represent costs associated
with these one-time activities and do not represent ongoing costs of the
fully integrated combined organization. The following table presents sev-
erance and employee-related charges, systems integrations and related
charges, and other merger-related charges. Merger and Restructuring
Charges for 2005 and 2004 were $412 million and $618 million and
primarily related to the FleetBoston merger.

(Dollars in millions)

Severance and employee-related charges
Systems integrations and related charges
Other

Total merger and restructuring charges

2006

$ 85
552
168

$805

Exit Costs and Restructuring Reserves
On January 1, 2006, the Corporation initially recorded liabilities of $468
million for MBNA’s exit and termination costs as purchase accounting
adjustments resulting in an increase in Goodwill. Included in the $468
million were $409 million for severance, relocation and other employee-
related expenses and $59 million for contract terminations. During 2006,
the Corporation revised certain of its initial estimates due to lower sev-
erance costs and updated integration plans including site consolidations
that resulted in the reduction of exit cost reserves of $199 million. This
reduction in reserves consisted of $177 million related to severance,
relocation and other employee-related expenses and $22 million related to
contract termination estimates. Cash payments of $144 million in 2006
consisted of $111 million of severance, relocation and other employee-
related costs, and $33 million of contract terminations. The impact of
these items reduced the balance in the liability to $125 million at
December 31, 2006.

Restructuring reserves were also established for legacy Bank of
America associate severance, other employee-related expenses and con-
tract
terminations. During 2006, $160 million was recorded to the
restructuring reserves. Of these amounts, $80 million was related to
associate severance and other employee-related expenses, and another
$80 million to contract terminations. During 2006, cash payments of $22
million for severance and other employee-related costs and $71 million for
contract termination have reduced this liability. The net impact of these
items resulted in a balance of $67 million at December 31, 2006.

Payments under exit costs and restructuring reserves associated with
the MBNA merger are expected to be substantially completed in 2007.
The following table presents the changes in Exit Costs and Restructuring
Reserves for the year ended December 31, 2006.

(Dollars in millions)

Balance, January 1, 2006
MBNA exit costs
Restructuring charges
Cash payments

Balance, December 31, 2006

Exit Cost
Reserves (1)

Restructuring
Reserves (2)

$ —
269
—
(144)

$ 125

$ —
—
160
(93)

$ 67

(1) Exit costs reserves were established in purchase accounting resulting in an increase in Goodwill.
(2) Restructuring reserves were established by a charge to Merger and Restructuring Charges.

Note 3 – Trading Account Assets and
Liabilities
The following table presents the fair values of the components of Trading
Account Assets and Liabilities at December 31, 2006 and 2005.

(Dollars in millions)

Trading account assets
Corporate securities, trading loans and other
U.S. government and agency securities (1)
Equity securities
Mortgage trading loans and asset-backed securities
Foreign sovereign debt

Total

Trading account liabilities
U.S. government and agency securities (2)
Equity securities
Foreign sovereign debt
Corporate securities and other

Total

December 31

2006

2005

$ 53,923
36,656
27,103
15,449
19,921

$153,052

$ 26,760
23,908
9,261
7,741

$ 67,670

$ 46,554
31,091
31,029
12,290
10,743

$131,707

$ 23,179
11,371
8,915
7,425

$ 50,890

(1)

(2)

Includes $22.7 billion and $20.9 billion at December 31, 2006 and 2005 of government-sponsored
enterprise obligations that are not backed by the full faith and credit of the U.S. government.
Includes $2.2 billion and $1.4 billion at December 31, 2006 and 2005 of government-sponsored
enterprise obligations that are not backed by the full faith and credit of the U.S. government.

Note 4 – Derivatives
The Corporation designates derivatives as trading derivatives, economic
hedges, or as derivatives used for SFAS 133 accounting purposes. For
additional information on our derivatives and hedging activities, see Note
1 of the Consolidated Financial Statements.

Credit Risk Associated with Derivative Activities
Credit risk associated with derivatives is measured as the net replacement
cost in the event the counterparties with contracts in a gain position to the
Corporation completely fail to perform under the terms of those contracts.
In managing derivative credit risk, both the current exposure, which is the
replacement cost of contracts on the measurement date, as well as an
estimate of the potential change in value of contracts over their remaining
lives are considered. The Corporation’s derivative activities are primarily
institutions and corporations. To minimize credit risk, the
with financial
Corporation enters into legally enforceable master netting agreements
which reduce risk by permitting the closeout and netting of transactions
with the same counterparty upon occurrence of certain events. In addition,
the Corporation reduces credit risk by obtaining collateral from counter-
parties. The determination of the need for and the levels of collateral will
vary based on an assessment of the credit risk of the counterparty. Gen-
erally, the Corporation accepts collateral in the form of cash, U.S. Treasury
securities and other marketable securities. The Corporation held $24.2
billion of collateral on derivative positions, of which $14.9 billion could be
applied against credit risk at December 31, 2006.

A portion of the derivative activity involves exchange-traded instru-
ments. Exchange-traded instruments conform to standard terms and are
subject to policies set by the exchange involved, including margin and
security deposit requirements. Management believes the credit risk asso-
ciated with these types of instruments is minimal. The average fair value
of Derivative Assets, less cash collateral, for 2006 and 2005 was $24.2
billion and $25.9 billion. The average fair value of Derivative Liabilities for
2006 and 2005 was $16.6 billion and $16.8 billion.

Bank of America 2006

113

The following table presents the contract/notional amounts and
credit risk amounts at December 31, 2006 and 2005 of all the Corpo-
ration’s derivative positions. These derivative positions are primarily exe-
cuted in the over-the-counter market. The credit risk amounts take into
consideration the effects of
legally enforceable master netting agree-
ments, and on an aggregate basis have been reduced by the cash

collateral applied against Derivative Assets. At December 31, 2006 and
2005, the cash collateral applied against Derivative Assets on the Con-
solidated Balance Sheet was $7.3 billion and $9.3 billion. In addition, at
December 31, 2006 and 2005,
the cash collateral placed against
Derivative Liabilities was $6.5 billion and $7.6 billion.

(Dollars in millions)

Interest rate contracts

Swaps
Futures and forwards
Written options
Purchased options
Foreign exchange contracts

Swaps
Spot, futures and forwards
Written options
Purchased options

Equity contracts
Swaps
Futures and forwards
Written options
Purchased options
Commodity contracts

Swaps
Futures and forwards
Written options
Purchased options

Credit derivatives (1)

Credit risk before cash collateral
Less: Cash collateral applied

Total derivative assets

December 31, 2006

December 31, 2005

Contract/
Notional

$18,185,655
2,283,579
1,043,933
1,308,888

451,462
1,234,009
464,420
414,004

32,247
19,947
102,902
104,958

4,868
13,513
9,947
6,796
1,497,869

Credit
Risk

$ 9,601
103
–
2,212

4,241
2,995
–
1,391

577
24
–
7,513

1,129
2
–
184
756

30,728
7,289

$23,439

Contract/
Notional

$14,401,577
2,113,717
900,036
869,471

333,487
944,321
214,668
229,049

28,287
6,479
69,048
57,693

8,809
5,533
7,854
3,673
722,190

Credit
Risk

$11,085
–
–
3,345

3,735
2,481
–
1,214

548
44
–
6,729

2,475
–
–
546
766

32,968
9,256

$23,712

(1) The December 31, 2005 notional amount has been reclassified to conform with new regulatory guidance, which defined the notional as the contractual loss protection for structured basket transactions.

ALM Activities
Interest rate contracts and foreign exchange contracts are utilized in the
Corporation’s ALM activities. The Corporation maintains an overall interest
rate risk management strategy that incorporates the use of interest rate
contracts to minimize significant fluctuations in earnings that are caused
by interest rate volatility. The Corporation’s goal is to manage interest rate
sensitivity so that movements in interest
rates do not significantly
adversely affect Net Interest Income. As a result of interest rate fluctua-
tions, hedged fixed-rate assets and liabilities appreciate or depreciate in
market value. Gains or losses on the derivative instruments that are linked
to the hedged fixed-rate assets and liabilities are expected to substantially
offset this unrealized appreciation or depreciation. Interest Income and
Interest Expense on hedged variable-rate assets and liabilities increase or
decrease as a result of interest rate fluctuations. Gains and losses on the
derivative instruments that are linked to these hedged assets and
liabilities are expected to substantially offset this variability in earnings.

Interest rate contracts, which are generally non-leveraged generic
interest rate and basis swaps, options and futures, allow the Corporation

to manage its interest rate risk position. Non-leveraged generic interest
rate swaps involve the exchange of fixed-rate and variable-rate interest
payments based on the contractual underlying notional amount. Basis
swaps involve the exchange of interest payments based on the contractual
underlying notional amounts, where both the pay rate and the receive rate
are floating rates based on different indices. Option products primarily
consist of caps, floors and swaptions. Futures contracts used for the
Corporation’s ALM activities are primarily index futures providing for cash
payments based upon the movements of an underlying rate index.

The Corporation uses foreign currency contracts to manage the for-
eign exchange risk associated with certain foreign currency-denominated
assets and liabilities, as well as the Corporation’s equity investments in
foreign subsidiaries. Foreign exchange contracts, which include spot and
forward contracts, represent agreements to exchange the currency of one
country for the currency of another country at an agreed-upon price on an
agreed-upon settlement date. Exposure to loss on these contracts will
increase or decrease over their respective lives as currency exchange and
interest rates fluctuate.

114 Bank of America 2006

Fair Value and Cash Flow Hedges
The Corporation uses various types of interest rate and foreign currency
exchange rate derivative contracts to protect against changes in the fair
value of its assets and liabilities due to fluctuations in interest rates and
exchange rates (fair value hedges). The Corporation also uses these types
of contracts to protect against changes in the cash flows of its assets and
liabilities, and other forecasted transactions (cash flow hedges).

For cash flow hedges, gains and losses on derivative contracts
reclassified from Accumulated OCI to current period earnings are included
in the line item in the Consolidated Statement of Income in which the
hedged item is recorded and in the same period the hedged item affects
earnings. During the next 12 months, net losses on derivative instruments
included in Accumulated OCI of approximately $1.0 billion ($658 million
after-tax) are expected to be reclassified into earnings. These net losses
reclassified into earnings are expected to decrease income or increase
expense on the respective hedged items.

The following table summarizes certain information related to the
Corporation’s derivative hedges accounted for under SFAS 133 for 2006
and 2005:

(Dollars in millions)

Fair value hedges

Hedge ineffectiveness recognized in earnings (1)
Net gain (loss) excluded from assessment of

effectiveness (2)

Cash flow hedges

Hedge ineffectiveness recognized in earnings (3)

Net investment hedges

Gains (losses) included in foreign currency translation

2006

2005

$ 23

$166

—

(13)

(31)

adjustments within Accumulated OCI (4)

(475)

(1) Hedge ineffectiveness was recognized primarily within Net Interest Income and Mortgage Banking Income

in the Consolidated Statement of Income for 2006 and 2005, respectively.

(2) Net gain (loss) excluded from assessment of effectiveness was recorded primarily within Mortgage

Banking Income in the Consolidated Statement of Income for 2005.

(3) Hedge ineffectiveness was recognized primarily within Net Interest Income in the Consolidated Statement

of Income for 2006 and 2005.

(4) Amount for 2006 primarily represents net investment hedges of certain foreign subsidiaries acquired in

connection with the MBNA merger.

Note 5 – Securities
The amortized cost, gross unrealized gains and losses, and fair value of AFS debt and marketable equity securities at December 31, 2006 and 2005 were:

Available-for-sale securities

(Dollars in millions)

2006
U.S. Treasury securities and agency debentures
Mortgage-backed securities
Foreign securities
Other taxable securities (1)

Total taxable securities

Tax-exempt securities

Total available-for-sale debt securities

Available-for-sale marketable equity securities (2)
2005
U.S. Treasury securities and agency debentures
Mortgage-backed securities
Foreign securities
Other taxable securities (1)

Total taxable securities

Tax-exempt securities

Total available-for-sale debt securities

Available-for-sale marketable equity securities (2)

Amortized
Cost

697
161,693
12,126
16,776

191,292
6,493

$197,785

2,799

730
197,101
10,944
13,198

221,973
4,693

$226,666

575

Gross
Unrealized
Gains

Gross
Unrealized
Losses

–
4
2
10

16
64

$ 80

$408

–
198
1
126

325
31

$356

$305

(9)
(4,804)
(78)
(134)

(5,025)
(34)

$(5,059)

(10)

(13)
(5,268)
(54)
(99)

(5,434)
(32)

$(5,466)

(18)

Fair Value

688
156,893
12,050
16,652

186,283
6,523

$192,806

3,197

717
192,031
10,891
13,225

216,864
4,692

$221,556

862

Includes corporate debt and asset-backed securities.

(1)
(2) Represents those AFS marketable equity securities that are recorded in Other Assets on the Consolidated Balance Sheet.

At December 31, 2006, the amortized cost and fair value of both
taxable and tax-exempt Held-to-maturity Securities was $40 million. At
December 31, 2005, the amortized cost and fair value of both taxable and
tax-exempt Held-to-maturity Securities was $47 million.

At December 31, 2006, accumulated net unrealized losses on AFS
debt and marketable equity securities included in Accumulated OCI were
$2.9 billion, net of the related income tax benefit of $1.7 billion. At
December 31, 2005, accumulated net unrealized losses on these secu-
rities were $3.0 billion, net of the related income tax benefit of $1.8 bil-
lion.

Bank of America 2006

115

The following table presents the current fair value and the associated
gross unrealized losses only on investments in securities with gross unre-
alized losses at December 31, 2006 and 2005. The table also discloses

whether these securities have had gross unrealized losses for less than
twelve months, or for twelve months or longer.

(Dollars in millions)
Available-for-sale securities
U.S. Treasury securities and agency debentures
Mortgage-backed securities
Foreign securities
Other taxable securities

Total taxable securities

Tax-exempt securities

Total temporarily-impaired available-for-sale debt securities

Temporarily-impaired marketable equity securities

Total temporarily-impaired securities

(Dollars in millions)
Available-for-sale securities
U.S. Treasury securities and agency debentures
Mortgage-backed securities
Foreign securities
Other taxable securities

Total taxable securities

Tax-exempt securities

Total temporarily-impaired available-for-sale debt securities

Temporarily-impaired marketable equity securities
Total temporarily-impaired securities

December 31, 2006

Less than twelve months

Twelve months or longer

Total

Gross
Unrealized
Losses

$ (9)
(128)
(1)
(125)

(263)
(4)

(267)
(10)

Fair Value

–
151,092
6,908
287

158,287
1,271

159,558
–

Gross
Unrealized
Losses

–
(4,676)
(77)
(9)

(4,762)
(30)

(4,792)
–

Fair Value

387
4,684
45
5,452

10,568
811

11,379
244

Fair Value

387
155,776
6,953
5,739

168,855
2,082

170,937
244

Gross
Unrealized
Losses

(9)
(4,804)
(78)
(134)

(5,025)
(34)

(5,059)
(10)

$11,623

$(277)

$159,558

$(4,792)

$171,181

$(5,069)

December 31, 2005

Less than twelve months

Twelve months or longer

Total

Gross
Unrealized
Losses

(9)
(3,766)
(41)
(79)

(3,895)
(27)

(3,922)
(18)

Fair Value

163
40,236
852
469

41,720
156

41,876
–

Gross
Unrealized
Losses

(4)
(1,502)
(13)
(20)

(1,539)
(5)

(1,544)
–

Fair Value

414
190,215
4,307
4,351

199,287
2,464

201,751
146

Gross
Unrealized
Losses

(13)
(5,268)
(54)
(99)

(5,434)
(32)

(5,466)
(18)

$(3,940)

$41,876

$(1,544)

$201,897

$(5,484)

Fair Value

251
149,979
3,455
3,882
157,567
2,308
159,875
146
$160,021

Management evaluates securities for other-than-temporary impair-
ment on a quarterly basis, and more frequently when conditions warrant
such evaluation. Factors considered in determining whether an impairment
is other-than-temporary include (1) the length of time and the extent to
which the fair value has been less than cost, (2) the financial condition
and near-term prospects of the issuer, and (3) the intent and ability of the
Corporation to hold the investment for a period of time sufficient to allow
for any anticipated recovery in fair value.

At December 31, 2006, the amortized cost of approximately 5,000
securities in AFS securities exceeded their fair value by $5.1 billion.
Included in the $5.1 billion of gross unrealized losses on AFS securities at
December 31, 2006, was $277 million of gross unrealized losses that
have existed for less than twelve months and $4.8 billion of gross unreal-
ized losses that have existed for a period of twelve months or longer. Of
the gross unrealized losses existing for twelve months or more, $4.7 bil-
lion, or 98 percent, of the gross unrealized loss is related to approximately
1,500 mortgage-backed securities. These securities are predominately all
investment grade, with more than 90 percent rated AAA. The gross unreal-
ized losses on these mortgage-backed securities are due to overall

increases in market interest rates. The Corporation has the ability and
intent to hold these securities for a period of time sufficient to recover all
gross unrealized losses. Accordingly, the Corporation has not recognized
any other-than-temporary impairment for these securities.

The Corporation had investments in securities from the Federal
National Mortgage Association (Fannie Mae) and Federal Home Loan
Mortgage Corporation (Freddie Mac) that exceeded 10 percent of con-
solidated Shareholders’ Equity as of December 31, 2006 and 2005.
Those investments had market values of $109.9 billion and $42.0 billion
at December 31, 2006, and $144.1 billion and $46.9 billion at
December 31, 2005. In addition, these investments had total amortized
costs of $113.5 billion and $43.3 billion at December 31, 2006, and
$148.0 billion and $48.3 billion at December 31, 2005. As disclosed in
the preceding paragraph, the Corporation has not recognized any other-
than-temporary impairment for these securities.

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 $83.8 billion and $116.7 billion at December 31,
2006 and 2005.

116 Bank of America 2006

The expected maturity distribution of the Corporation’s mortgage-backed
securities and the contractual maturity distribution of the Corporation’s other
debt securities, and the yields of the Corporation’s AFS debt securities portfo-
lio at December 31, 2006 are summarized in the following table.

Actual maturities may differ from the contractual or expected maturities
shown below since borrowers may have the right to prepay obligations with or
without prepayment penalties.

(Dollars in millions)

Fair value of available-for-sale debt securities
U.S. Treasury securities and agency debentures
Mortgage-backed securities
Foreign securities
Other taxable securities

Total taxable

Tax-exempt securities (3)

Total available-for-sale debt securities

Amortized cost of available-for-sale debt securities

Due in one year
or less

Due after one year
through five years

Due after five years
through ten years

Due after
ten years (1)

Total

Amount

Yield (2)

Amount

Yield (2)

Amount

Yield (2)

Amount

Yield (2)

Amount

Yield (2)

78
17
819
3,581

4,495
1,000

$ 5,495

4.08% $
5.59
4.88
4.70

524
11,456
6,177
10,435

4.73
5.82

28,592
1,169

3.96%
4.40
5.27
5.19

4.87
5.90

$
80
143,370
4,949
2,237

150,636
3,226

4.31%
5.04
5.37
5.33

5.06
5.82

$
6
2,050
105
399

2,560
1,128

5.73%
8.62
6.27
6.40

8.17
6.44

$
688
156,893
12,050
16,652

186,283
6,523

4.03%
5.04
5.29
5.13

5.06
5.94

4.93% $29,761

4.91%

$153,862

5.07%

$3,688

7.64%

$192,806

5.09%

$30,293

$158,301

$3,696

$197,785

Includes securities with no stated maturity.

(1)
(2) Yields are calculated based on the amortized cost of the securities.
(3) Yield of tax-exempt securities calculated on a fully taxable-equivalent (FTE) basis.

The components of realized gains and losses on sales of debt securities for 2006, 2005 and 2004 were:

(Dollars in millions)

Gross gains
Gross losses

Net gains (losses) on sales of debt securities

The Income Tax Expense (Benefit) attributable to realized net gains
(losses) on debt securities sales was $(163) million, $400 million, and
$640 million in 2006, 2005 and 2004, respectively.

Pursuant to an agreement dated June 17, 2005, the Corporation
agreed to purchase approximately nine percent, or 19.1 billion shares, of
the stock of China Construction Bank (CCB). These shares are accounted
for at cost as they are non-transferable until the third anniversary of the
initial public offering in October 2008. The Corporation also holds an
option to increase its ownership interest in CCB to 19.9 percent. This
option expires in February 2011. At December 31, 2006, the investment
in the CCB shares was included in Other Assets.

Additionally, the Corporation sold its Brazilian operations to Banco
Itaú Holding Financeira S.A. (Banco Itaú) for approximately $1.9 billion in

2006

$ 87
(530)

$(443)

2005

$1,154
(70)

$1,084

2004

$2,270
(546)

$1,724

preferred stock. These shares are non-transferable for three years from
the date of the agreement dated May 1, 2006 and are accounted for at
cost. The sale closed in September 2006. At December 31, 2006, this
$1.9 billion of preferred stock was included in Other Assets.

The shares of CCB and Banco Itaú are currently carried at cost but,
as required by GAAP, will be accounted for as AFS marketable equity secu-
rities and carried at fair value with an offset to Accumulated OCI beginning
in the fourth quarter of 2007 and second quarter of 2008, respectively.
The fair values of the CCB shares and Banco Itaú shares were approx-
imately $12.2 billion and $2.5 billion at December 31, 2006.

Bank of America 2006

117

Note 6 – Outstanding Loans and Leases
Outstanding loans and leases at December 31, 2006 and 2005 were:

(Dollars in millions)

Consumer
Residential mortgage
Credit card – domestic
Credit card – foreign
Home equity lines
Direct/Indirect consumer (1)
Other consumer (2)

Total consumer

Commercial
Commercial – domestic
Commercial real estate (3)
Commercial lease financing
Commercial – foreign

Total commercial

Total

December 31

2006

2005

$241,181
61,195
10,999
74,888
68,224
9,218

465,705

161,982
36,258
21,864
20,681

240,785

$182,596
58,548
–
62,098
45,490
6,725

355,457

140,533
35,766
20,705
21,330

218,334

$706,490

$573,791

(1)

(2)

(3)

Includes home equity loans of $12.8 billion and $8.1 billion at December 31, 2006 and 2005.
Includes foreign consumer loans of $6.2 billion and $3.8 billion at December 31, 2006 and 2005 and consumer finance loans of $2.8 billion for both December 31, 2006 and 2005.
Includes domestic commercial real estate loans of $35.7 billion and $35.2 billion, and foreign commercial real estate loans of $578 million and $585 million at December 31, 2006 and 2005.

The following table presents the recorded loan amounts, without
consideration for the specific component of the Allowance for Loan and
Lease Losses, that were considered individually impaired in accordance
with SFAS 114 at December 31, 2006 and 2005. SFAS 114 impairment
includes performing troubled debt restructurings and excludes all commer-
cial leases.

(Dollars in millions)

Commercial – domestic
Commercial real estate
Commercial – foreign

Total impaired loans

December 31

2006

$586
118
13

$717

2005

$613
49
34

$696

The average recorded investment in certain impaired loans for 2006,
2005 and 2004 was approximately $722 million, $852 million and $1.6
the recorded
billion,
investment in impaired loans requiring an Allowance for Loan and Lease
Losses based on individual analysis per SFAS 114 guidelines was $567

respectively. At December 31, 2006 and 2005,

million and $517 million, and the related Allowance for Loan and Lease
Losses was $43 million and $55 million. For 2006, 2005 and 2004,
Interest Income recognized on impaired loans totaled $36 million, $17
million and $21 million, respectively, all of which was recognized on a
cash basis.

At December 31, 2006 and 2005, nonperforming loans and leases,
including impaired loans and nonaccrual consumer loans, totaled $1.8 bil-
lion and $1.5 billion. In addition, included in Other Assets were non-
performing loans held-for-sale of $80 million and $69 million at
December 31, 2006 and 2005.

The Corporation has loan products with varying terms (e.g., interest-
only mortgages, option adjustable rate mortgages, etc.) and loans with
high loan-to-value ratios. Exposure to any of these loan products does not
result in a significant concentration of credit risk. Terms of loan products,
collateral coverage, the borrower’s credit history, and the amount of these
loans that are retained on our balance sheet are included in the Corpo-
ration’s assessment when establishing its Allowance for Loan and Lease
Losses.

Note 7 – Allowance for Credit Losses
The following table summarizes the changes in the allowance for credit losses for 2006, 2005 and 2004:

(Dollars in millions)

Allowance for loan and lease losses, January 1
FleetBoston balance, April 1, 2004
MBNA balance, January 1, 2006
Loans and leases charged off
Recoveries of loans and leases previously charged off

Net charge-offs

Provision for loan and lease losses
Other

Allowance for loan and lease losses, December 31

Reserve for unfunded lending commitments, January 1
FleetBoston balance, April 1, 2004
Provision for unfunded lending commitments
Other

Reserve for unfunded lending commitments, December 31

Total allowance for credit losses

118 Bank of America 2006

2006

$ 8,045
–
577
(5,881)
1,342

(4,539)

5,001
(68)

9,016

395
–
9
(7)

397

2005

$ 8,626
–
–
(5,794)
1,232

(4,562)

4,021
(40)

8,045

402
–
(7)
–

395

2004

$ 6,163
2,763
–
(4,092)
979

(3,113)

2,868
(55)

8,626

416
85
(99)
–

402

$ 9,413

$ 8,440

$ 9,028

Note 8 – Mortgage Servicing Rights
Effective January 1, 2006,
the Corporation adopted SFAS 156 and
accounts for consumer-related 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 such as options and interest rate swaps. Prior to Jan-

uary 1, 2006, consumer-related MSRs were accounted for on a lower of
cost or market basis and hedged with derivatives that qualified for SFAS
133 hedge accounting.

The following table presents activity for consumer-related MSRs for

2006 and 2005.

(Dollars in millions)

Balance, January 1
MBNA balance, January 1, 2006
Additions
Sales of MSRs
Impact of customer payments
Amortization
Other changes in MSR market value (1)

Balance, December 31 (2)

2006

$2,658
9
572
(71)
(713)
–
414

$2,869

2005

$2,358
–
860
(176)
–
(612)
228

$2,658

(1) For 2006, amount reflects changes in discount rates and prepayment speed assumptions, mostly due to changes in interest rates. For 2005, amount reflects $291 million related to change in value attributed to SFAS 133

hedged MSRs, and $63 million of impairments.

(2) Before the adoption of SFAS 156, there was an impairment allowance of $257 million at December 31, 2005.

Commercial-related MSRs are accounted for using the amortization
method (i.e., lower of cost or market). Commercial-related MSRs were
$176 million and $148 million at December 31, 2006 and 2005 and are
not included in the table above.

The key economic assumptions used in valuations of MSRs included
modeled prepayment rates and resultant weighted-average lives of the
MSRs and the option adjusted spread (OAS) levels. An OAS model runs
multiple interest rate scenarios and projects prepayments specific to each
one of those interest rate scenarios.

As of December 31, 2006, the fair value of consumer-related MSRs
was $2.9 billion, and the modeled weighted-average lives of MSRs related
to fixed and adjustable rate loans (including hybrid Adjustable Rate Mort-
gages) were 4.98 years and 3.19 years. The following table presents the
sensitivity of the weighted-average lives and fair value of MSRs to changes
in modeled assumptions.

(Dollars in millions)

Prepayment rates

Impact of 10% decrease
Impact of 20% decrease

Impact of 10% increase
Impact of 20% increase

OAS level

Impact of 100 bps decrease
Impact of 200 bps decrease

Impact of 100 bps increase
Impact of 200 bps increase

n/a = not applicable

December 31, 2006

Change in
Weighted-average lives

Fixed

Adjustable

0.33 years
0.70

0.26 years
0.58

(0.29)
(0.55)

n/a
n/a

(0.23)
(0.42)

n/a
n/a

Change in
Fair value

$ 135
289

(120)
(227)

109
227

(101)
(195)

the securities, subordinated tranches,

Note 9 – Securitizations
The Corporation securitizes assets and may continue to hold a portion or
all of
interest-only strips, sub-
ordinated interests in accrued interest and fees on the securitized receiv-
ables, and, in some cases, cash reserve accounts, all of which are known
as retained interests, which are carried at fair value or amounts that
approximate fair value. Those assets may be serviced by the Corporation
or by third parties.

Mortgage-related Securitizations
The Corporation securitizes a portion of its residential mortgage loan origi-
nations in conjunction with or shortly after loan closing. In addition, the
Corporation may, from time to time, securitize commercial mortgages and
first residential mortgages that it originates or purchases from other enti-
ties. In 2006 and 2005, the Corporation converted a total of $65.5 billion
(including $15.5 billion originated by other entities) and $95.1 billion
(including $15.9 billion originated by other entities), of commercial mort-
gages and first residential mortgages into mortgage-backed securities

issued through Fannie Mae, Freddie Mac, Government National Mortgage
Association, Bank of America, N.A. and Banc of America Mortgage Secu-
rities. At December 31, 2006 and 2005, the Corporation retained $5.5
to 2006) and $7.2 billion
billion (including $4.2 billion issued prior
(including $2.4 billion issued prior
these securities. At
December 31, 2006, these retained interests were valued using quoted
market prices.

to 2005) of

In 2006, the Corporation reported $341 million in gains on loans
converted into securities and sold, of which gains of $329 million were
from loans originated by the Corporation and $12 million were from loans
originated by other entities. In 2005, the Corporation reported $575 mil-
lion in gains on loans converted into securities and sold, of which gains of
$592 million were from loans originated by the Corporation and losses of
$17 million were from loans originated by other entities. At December 31,
2006 and 2005, the Corporation had recourse obligations of $412 million
and $471 million with varying terms up to seven years on loans that had
been securitized and sold.

Bank of America 2006

119

In 2006 and 2005, the Corporation purchased $17.4 billion and
$19.6 billion of mortgage-backed securities from third parties and
resecuritized them. Net gains, which include Net Interest Income earned
during the holding period, totaled $25 million and $13 million. The Corpo-
ration did not retain any of the securities issued in these transactions.

In 2006 and 2005, the Corporation also purchased an additional
$4.9 billion and $7.2 billion of mortgage loans from third parties and
securitized them. In 2006, the Corporation retained residual interests in
these transactions which totaled $224 million at December 31, 2006 and
are classified in Trading Account Assets, with changes in fair value
recorded in earnings. These residual interests are included in the sensi-
tivity table below which sets forth the sensitivity of the fair value of
residual
interests to changes in key assumptions. In 2005, the Corpo-
ration resecuritized the residual interests and did not retain a significant
interest in the securitization trusts. The Corporation reported $16 million
and $4 million in gains on these transactions in 2006 and 2005.

The Corporation has retained MSRs from the sale or securitization of
mortgage loans. Servicing fee and ancillary fee income on all mortgage
loans serviced, including securitizations, was $775 million and $789 mil-
lion in 2006 and 2005. For more information on MSRs, see Note 8 of the
Consolidated Financial Statements.

Credit Card and Other Securitizations
As a result of the MBNA merger, the Corporation acquired interests in
credit card, other consumer, and commercial loan securitization vehicles.
These acquired interests include interest-only strips, subordinated tranch-
es, cash reserve accounts, and subordinated interests in accrued interest
and fees on the securitized receivables. During 2006, the Corporation
securitized $23.7 billion of credit card receivables resulting in $104 mil-
lion in gains (net of securitization transaction costs of $28 million) which
was recorded in Card Income. Aggregate debt securities outstanding for

(Dollars in millions)
Carrying amount of residual interests (2)
Balance of unamortized securitized loans
Weighted average life to call or maturity (in years)
Revolving structures – monthly payment rate
Amortizing structures – annual constant prepayment rate:

Fixed rate loans
Adjustable rate loans

Impact on fair value of 10% favorable change
Impact on fair value of 25% favorable change
Impact on fair value of 10% adverse change
Impact on fair value of 25% adverse change

Expected credit losses (3)

Impact on fair value of 10% favorable change
Impact on fair value of 25% favorable change
Impact on fair value of 10% adverse change
Impact on fair value of 25% adverse change

Residual cash flows discount rate (annual rate)

Impact on fair value of 100 bps favorable change
Impact on fair value of 200 bps favorable change
Impact on fair value of 100 bps adverse change
Impact on fair value of 200 bps adverse change

the MBNA credit card securitization trusts as of December 31, 2006 and
January 1, 2006, were $96.0 billion and $81.6 billion. As of
December 31, 2006 and January 1, 2006, the aggregate debt securities
outstanding for the Corporation’s credit card securitization trusts, including
MBNA, were $96.8 billion and $83.8 billion. The other consumer and
commercial
loan securitization vehicles acquired with MBNA were not
material to the Corporation.

The Corporation also securitized $3.3 billion and $3.8 billion of
automobile loans and recorded losses of $6 million and $17 million in
2006 and 2005. At December 31, 2006 and 2005, aggregate debt secu-
rities outstanding for the Corporation’s automobile securitization vehicles
were $5.2 billion and $4.0 billion, and the Corporation held residual inter-
ests which totaled $130 million and $93 million.

At December 31, 2006 and 2005, the Corporation held investment
grade securities issued by its securitization vehicles of $3.5 billion (none
of which were issued in 2006) and $4.4 billion (including $2.6 billion
issued in 2005), which are valued using quoted market prices, in the AFS
securities portfolio. At December 31, 2006 and 2005, there were no
recognized servicing assets or liabilities associated with any of these
securitization transactions.

The Corporation has provided protection on a subset of one
consumer finance securitization in the form of a guarantee with a max-
imum payment of $220 million that will only be paid if over-collateralization
is not sufficient to absorb losses and certain other conditions are met.
The Corporation projects no payments will be due over the remaining life of
the contract, which is less than one year.

Key economic assumptions used in measuring the fair value of cer-
tain residual
interests that continue to be held by the Corporation
(included in Other Assets) in securitizations and the sensitivity of the cur-
rent fair value of residual cash flows to changes in those assumptions are
disclosed in the following table.

Credit Card

2006

2,929
98,295
0.3

11.2 - 19.8%

2005

203
2,237
0.5
12.1%

Consumer Finance (1)

2006

811
6,153
0.3-2.7

2005

290
2,667
0.8

43
133
(38)
(82)
3.8 - 5.8%

2
3
(2)
(3)
4.0 - 4.3%

86
218
(85)
(211)
12.5%
12
17
(14)
(27)

3
8
(3)
(8)
12.0%
–
–
–
–

20.0 - 25.9% 26.3 - 28.9%
32.8 - 37.1
7
12
(15)
(23)
4.4 - 5.9%

37.6
8
17
(16)
(39)
3.9 - 5.6%

16
42
(15)
(36)
16.0 - 30.0%

5
11
(5)
(10)

7
18
(7)
(18)
30.0%
5
11
(5)
(10)

(1) Consumer finance includes mortgage loans purchased and securitized in 2006 and originated consumer finance loans that were securitized in 2001, all of which are serviced by third parties.
(2) Residual interests include interest-only strips, subordinated tranches, subordinated interests in accrued interest and fees on the securitized receivables and cash reserve accounts which are carried at fair value or amounts

that approximate fair value. Residual interests in purchased mortgage loans totaling $224 million at December 31, 2006 are classified in Trading Account Assets. Other residual interests are classified in Other Assets.

(3) Annual rates of expected credit losses are presented for credit card securitizations. Cumulative lifetime rates of expected credit losses (incurred plus projected) are presented for consumer finance securitizations.

120 Bank of America 2006

The sensitivities in the preceding table are hypothetical and should
be used with caution. As the amounts indicate, changes in fair value
based on variations in assumptions generally cannot be extrapolated
because the relationship of the change in assumption to the change in fair
value may not be linear. Also, the effect of a variation in a particular
assumption on the fair value of an interest that continues to be held by
the Corporation is calculated without changing any other assumption. In
reality, changes in one factor may result in changes in another, which
might magnify or counteract the sensitivities. Additionally, the Corporation
has the ability to hedge interest rate risk associated with retained residual
positions. The above sensitivities do not reflect any hedge strategies that
may be undertaken to mitigate such risk.

Static pool net credit losses are considered in determining the value
of the retained interests of the consumer finance securitization. Static
pool net credit losses include actual losses incurred plus projected credit
losses divided by the original balance of each securitization pool. For
consumer finance securitizations entered into in 2006, weighted average
static pool net credit
the year ended
losses were 5.00 percent
December 31, 2006. For consumer finance securitizations entered into in
2001, weighted average static pool net credit losses were 5.29 percent
for the year ended December 31, 2006, and 5.50 percent for the year
ended December 31, 2005.

for

Principal proceeds from collections reinvested in revolving credit card
securitizations were $163.4 billion and $4.5 billion in 2006 and 2005.
Contractual credit card servicing fee income totaled $1.9 billion and $97

million in 2006 and 2005. Other cash flows received on retained inter-
ests, such as cash flow from interest-only strips, were $6.7 billion and
$183 million in 2006 and 2005, for credit card securitizations. Proceeds
from collections reinvested in revolving commercial
loan securitizations
were $4.6 billion and $8.7 billion in 2006 and 2005. Servicing fees and
other cash flows received on retained interests, such as cash flows from
interest-only strips, were $2 million and $15 million in 2006, and $3 mil-
lion and $34 million in 2005 for commercial loan securitizations.

The Corporation also reviews its loans and leases portfolio on a
managed basis. Managed loans and leases are defined as on-balance
sheet Loans and Leases as well as those loans in revolving securitizations
and other securitizations where servicing is retained that are undertaken
for corporate management purposes, which include credit card, commer-
cial
loans, automobile and certain mortgage securitizations. Managed
loans and leases exclude originate-to-distribute loans and other loans in
securitizations where the Corporation has not retained servicing. New
advances on accounts for which previous loan balances were sold to the
securitization trusts will be recorded on the Corporation’s Consolidated
Balance Sheet after the revolving period of the securitization, which has
the effect of increasing Loans and Leases on the Corporation’s Con-
solidated Balance Sheet and increasing Net Interest Income and charge-
offs, with a related reduction in Noninterest Income.
Portfolio balances, delinquency and historical

loss amounts of the
managed loans and leases portfolio for 2006 and 2005 are presented in
the following table.

Bank of America 2006

121

(Dollars in millions)

Residential mortgage (2)
Credit card – domestic
Credit card – foreign
Home equity lines
Direct/Indirect consumer
Other consumer

Total consumer

Commercial – domestic
Commercial real estate
Commercial lease financing
Commercial – foreign

Total commercial

Total managed loans and leases

Managed loans in securitizations

Total held loans and leases

(Dollars in millions)

Residential mortgage
Credit card – domestic
Credit card – foreign
Home equity lines
Direct/Indirect consumer
Other consumer

Total consumer

Commercial – domestic
Commercial real estate
Commercial lease financing
Commercial – foreign

Total commercial

Total managed loans and leases

Managed loans in securitizations

Total held loans and leases

December 31, 2006

December 31, 2005 (1)

Accruing
Loans and
Leases Past
Due 90 Days
or More

Nonperforming
Loans and Leases

$ 118
3,828
608
–
493
38

5,085

265
78
26
9

378

5,463

(2,407)

$ 3,056

$ 660
n/a
n/a
251
44
77

1,032

598
118
42
13

771

1,803

(16)

$1,787

Accruing
Loans and
Leases Past
Due 90 Days
or More

–
1,217
–
3
75
15

1,310

117
4
15
32

168

1,478

(23)

$1,455

Total Loans
and Leases

$188,380
60,785
–
62,546
49,544
6,725

367,980

142,447
35,766
20,705
21,330

220,248

588,228

(14,437)

$573,791

Nonperforming
Loans and Leases

$ 570
n/a
n/a
117
37
61

785

581
49
62
34

726

1,511

–

$1,511

Total Loans
and Leases

$ 245,840
142,599
27,890
75,197
75,112
9,218

575,856

163,274
36,258
21,864
20,681

242,077

817,933

(111,443)

$ 706,490

Year Ended December 31, 2006

Year Ended December 31, 2005 (1)

Average Loans
and Leases
Outstanding

$213,097
138,592
24,817
69,071
68,227
10,713

524,517

153,796
36,939
20,862
23,521

235,118

759,635

(107,218)

$652,417

Net
Losses
39
$
5,395
980
51
839
303

7,607

367
3
(28)
(8)

334

7,941

(3,402)

$4,539

Net Loss
Ratio (3)
0.02%
3.89
3.95
0.07
1.23
2.83

1.45

0.24
0.01
(0.14)
(0.04)

0.14

1.05

3.17

0.70%

Average Loans
and Leases
Outstanding

$179,474
59,048
–
56,821
46,719
6,908

348,970

130,882
34,304
20,441
18,491

204,118

553,088

(15,870)

$537,218

Net
Losses

27
4,086
–
31
248
275

4,667

170
–
231
(72)

329

4,996

(434)

$4,562

Net Loss
Ratio (3)

0.02%
6.92
–
0.05
0.53
3.99

1.34

0.13
–
1.13
(0.39)

0.16

0.90

2.73

0.85%

(1) The amounts at and for the year ended December 31, 2005 have been adjusted to include certain mortgage and auto securitizations as these are now included in the Corporation’s definition of managed loans and leases.
(2) Accruing loans and leases past due 90 days or more represent residential mortgage loans related to repurchases pursuant to our servicing agreements with Government National Mortgage Association mortgage pools whose

repayments are insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. In 2005, these loans were recorded in loans held-for-sale and amounted to $161 million.

(3) The net loss ratio is calculated by dividing managed loans and leases net losses by average managed loans and leases outstanding for each loan and lease category.
n/a = not applicable

Variable Interest Entities
At December 31, 2006 and 2005, the assets and liabilities of the Corpo-
ration’s multi-seller asset-backed commercial paper conduits that have
been consolidated in accordance with FIN 46R were reflected in AFS Secu-
rities, Other Assets, and Commercial Paper and Other Short-term Borrow-
ings. As of December 31, 2006 and 2005, the Corporation held $10.5
billion and $6.6 billion of assets in these entities, and in the unlikely
event that all of the assets in the VIEs become worthless, the Corpo-
ration’s maximum loss exposure associated with these entities including
unfunded lending commitments would be approximately $12.9 billion and
$8.3 billion. In addition, the Corporation had net investments in leveraged
lease trusts totaling $8.6 billion and $8.2 billion at December 31, 2006

and 2005. These amounts, which were reflected in Loans and Leases,
represent the Corporation’s maximum loss exposure to these entities in
the unlikely event that the leveraged lease investments become worthless.
Debt issued by the leveraged lease trusts is nonrecourse to the Corpo-
ration. The Corporation also had contractual relationships with other con-
solidated VIEs that engage in leasing or lending activities or real estate
joint ventures. As of December 31, 2006 and 2005, the amount of assets
of these entities was $3.3 billion and $750 million, and in the unlikely
event that all of the assets in the VIEs become worthless, the Corpo-
ration’s maximum possible loss exposure would be $1.6 billion and $212
million.

122 Bank of America 2006

Additionally, the Corporation had significant variable interests in other
VIEs that it did not consolidate because it was not deemed to be the
primary beneficiary. In such cases, the Corporation does not absorb the
majority of the entities’ expected losses nor does it receive a majority of
the entities’ expected residual returns. These entities typically support the
financing needs of the Corporation’s customers by facilitating their access
to the commercial paper markets. The Corporation functions as admin-
istrator and provides either liquidity and letters of credit, or derivatives to
the VIE. The Corporation also provides asset management and related
services to or invests in other special purpose vehicles that engage in
lending, investing, or real estate activities. Total assets of these entities
at December 31, 2006 and 2005 were approximately $51.9 billion and
$36.1 billion. Revenues associated with administration, liquidity, letters of
credit and other services were approximately $136 million and $122 mil-
lion for the year ended December 31, 2006 and 2005. At December 31,
2006 and 2005, in the unlikely event that all of the assets in the VIEs
become worthless, the Corporation’s maximum loss exposure associated
with these VIEs would be approximately $46.0 billion and $30.4 billion,
which is net of amounts syndicated.

Management does not believe losses resulting from the Corpo-
ration’s involvement with the entities discussed above will be material.
See Note 1 of the Consolidated Financial Statements for additional dis-
cussion of special purpose financing entities.

Note 10 – Goodwill and Intangible Assets
The following table presents allocated Goodwill at December 31, 2006
and 2005 for each business segment and All Other.

(Dollars in millions)

Global Consumer and Small Business Banking
Global Corporate and Investment Banking
Global Wealth and Investment Management
All Other

Total

December 31

2006

$38,760
21,331
5,333
238

$65,662

2005

$18,491
21,292
5,333
238

$45,354

The gross carrying values and accumulated amortization related to

Intangible Assets at December 31, 2006 and 2005 are presented below:

December 31

2006

2005

Gross
Carrying
Value

$ 6,790
3,850
1,650
1,525

$13,815

Accumulated
Amortization

$1,159
2,396
205
633

$4,393

Gross
Carrying
Value

$ 977
3,661
–
1,376

$6,014

Accumulated
Amortization

$ 450
1,881
–
489

$2,820

(Dollars in millions)

Purchased credit card
relationships

Core deposit intangibles
Affinity relationships
Other intangibles

Total

For information on the impact of the MBNA merger, see Note 2 of the

Consolidated Financial Statements.

Amortization of Intangibles expense was $1.8 billion, $809 million
and $664 million in 2006, 2005 and 2004, respectively. The increase for
the year ended December 31, 2006 was primarily due to the MBNA merg-
er. The Corporation estimates the aggregate amortization expense will be
approximately $1.5 billion, $1.3 billion, $1.2 billion, $1.0 billion and $900
million for 2007, 2008, 2009, 2010 and 2011, respectively.

Note 11 – Deposits
The Corporation had domestic certificates of deposit of $100 thousand or more totaling $72.5 billion and $47.0 billion at December 31, 2006 and 2005.
The Corporation had other domestic time deposits of $100 thousand or more totaling $1.9 billion and $1.4 billion at December 31, 2006 and 2005. For-
eign certificates of deposit and other foreign time deposits of $100 thousand or more totaled $62.1 billion and $38.8 billion at December 31, 2006 and
2005.

Time deposits of $100 thousand or more

(Dollars in millions)

Domestic certificates of deposit
Domestic other time deposits
Foreign certificates of deposit and other time deposits

Three
months or
less

$33,540
300
55,649

Over three
months to six
months

$14,205
364
4,569

Over six
months to
twelve months

$20,794
399
906

Thereafter

$4,006
885
971

Total

$72,545
1,948
62,095

At December 31, 2006, the scheduled maturities for total time deposits were as follows:

(Dollars in millions)

Due in 2007
Due in 2008
Due in 2009
Due in 2010
Due in 2011
Thereafter

Total

Domestic

Foreign

Total

$154,509
7,283
4,590
2,179
807
959

$88,396
218
–
1
2
1,187

$242,905
7,501
4,590
2,180
809
2,146

$ 170,327

$ 89,804

$ 260,131

Bank of America 2006

123

Note 12 – Short-term Borrowings and Long-
term Debt

Short-term Borrowings
Bank of America Corporation and certain other subsidiaries issue commer-
cial paper in order to meet short-term funding needs. Commercial paper
outstanding at December 31, 2006 was $41.2 billion compared to $25.0
billion at December 31, 2005.

Bank of America, N.A. maintains a domestic program to offer up to a
maximum of $50.0 billion, at any one time, of bank notes with fixed or

floating rates and maturities of at least seven days from the date of issue.
Short-term bank notes outstanding under this program totaled $24.5 bil-
lion at December 31, 2006, compared to $22.5 billion at December 31,
2005. These short-term bank notes, along with Treasury tax and loan
notes, term federal funds purchased and commercial paper, are reflected
in Commercial Paper and Other Short-term Borrowings on the Consolidated
Balance Sheet.

Long-term Debt
The following table presents the balance of Long-term Debt at December 31, 2006 and 2005 and the related rates and maturity dates at December 31,
2006:

December 31

2006

2005

$ 38,587
26,695

$ 36,357
19,050

23,896
510

13,665
2,203

105,556

6,450
22,219

4,294
918

33,881

515
258

773

500

285

125
3,200

146
1,500
34

5,790

20,596
10

10,337
1,922

88,272

1,096
4,985

1,871
8

7,960

515
258

773

2,750

296

578
–

178
–
41

3,843

$146,000

$100,848

(Dollars in millions)

Notes issued by Bank of America Corporation
Senior notes:

Fixed, with a weighted average rate of 4.51%, ranging from 0.84% to 7.50%, due 2007 to 2043
Floating, with a weighted average rate of 4.93%, ranging from 0.72% to 6.78%, due 2007 to 2041

Subordinated notes:

Fixed, with a weighted average rate of 6.08%, ranging from 2.94% to 10.20%, due 2007 to 2037
Floating, with a weighted average rate of 5.69%, ranging from 5.11% to 5.70%, due 2016 to 2019

Junior subordinated notes (related to trust preferred securities):

Fixed, with a weighted average rate of 6.77%, ranging from 5.25% to 11.45%, due 2026 to 2055
Floating, with a weighted average rate of 6.07%, ranging from 5.92% to 8.72%, due 2027 to 2033

Total notes issued by Bank of America Corporation

Notes issued by Bank of America, N.A. and other subsidiaries
Senior notes:

Fixed, with a weighted average rate of 5.03%, ranging from 0.93% to 11.30%, due 2007 to 2033
Floating, with a weighted average rate of 5.28%, ranging from 3.69% to 6.78%, due 2007 to 2051

Subordinated notes:

Fixed, with a weighted average rate of 6.36%, ranging from 5.75% to 7.13%, due 2007 to 2036
Floating, with a weighted average rate of 5.63%, ranging from 5.36% to 5.64%, due 2016 to 2019

Total notes issued by Bank of America, N.A. and other subsidiaries

Notes issued by NB Holdings Corporation
Junior subordinated notes (related to trust preferred securities):

Fixed, with a weighted average rate of 8.02%, ranging from 7.95% to 8.06%, due 2026
Floating, 6.00%, due 2027

Total notes issued by NB Holdings Corporation

Other debt
Advances from the Federal Home Loan Bank of Atlanta

Floating, 5.49%, due 2007

Advances from the Federal Home Loan Bank of New York

Fixed, with a weighted average rate of 6.07%, ranging from 4.00% to 8.29%, due 2007 to 2016

Advances from the Federal Home Loan Bank of Seattle

Fixed, with a weighted average rate of 6.34%, ranging from 5.40% to 7.42%, due 2007 to 2031
Floating, with a weighted average rate of 5.33%, ranging from 5.30% to 5.35%, due 2007 to 2008

Advances from the Federal Home Loan Bank of Boston

Fixed, with a weighted average rate of 5.83%, ranging from 1.00% to 7.72%, due 2007 to 2026
Floating, with a weighted average rate of 5.43%, ranging from 5.30% to 5.50%, due 2008 to 2009

Other

Total other debt

Total long-term debt

124 Bank of America 2006

The majority of the floating rates are based on three- and six-month
London InterBank Offered Rates (LIBOR). Bank of America Corporation and
Bank of America, N.A. maintain various domestic and international debt
programs to offer both senior and subordinated notes. The notes may be
denominated in U.S. dollars or foreign currencies. At December 31, 2006
and 2005, the amount of foreign currency denominated debt translated
long-term debt was $37.8 billion and
into U.S. dollars included in total
$23.1 billion. Foreign currency contracts are used to convert certain for-
eign currency denominated debt into U.S. dollars.

At December 31, 2006 and 2005, Bank of America Corporation was
authorized to issue approximately $58.1 billion and $27.0 billion of addi-
tional corporate debt and other securities under its existing shelf registra-

tion statements. At December 31, 2006 and 2005, Bank of America, N.A.
was authorized to issue approximately $30.8 billion and $9.5 billion of
bank notes and Euro medium-term notes.

The weighted average effective interest rates for total long-term debt,
total fixed-rate debt and total floating-rate debt (based on the rates in
effect at December 31, 2006) were 5.32 percent, 5.41 percent and 5.18
percent, respectively, at December 31, 2006 and (based on the rates in
effect at December 31, 2005) were 5.22 percent, 5.53 percent and 4.31
percent, respectively, at December 31, 2005. These obligations were
denominated primarily in U.S. dollars.

Aggregate annual maturities of long-term debt obligations (based on

final maturity dates) at December 31, 2006 are as follows:

(Dollars in millions)

Bank of America Corporation
Bank of America, N.A. and other subsidiaries
NB Holdings Corporation
Other

Total

Trust Preferred Securities
Trust preferred securities (Trust Securities) are issued by the trust compa-
nies (the Trusts), which are not consolidated. These Trust Securities are
mandatorily redeemable preferred security obligations of the Trusts. The
sole assets of the Trusts are Junior Subordinated Deferrable Interest
Notes of the Corporation (the Notes). The Trusts are 100 percent owned
finance subsidiaries of the Corporation. Obligations associated with the
Notes are included in the Long-term Debt table on the previous page. See
Note 15 of the Consolidated Financial Statements for a discussion regard-
ing the treatment for regulatory capital purposes of the Trust Securities.

At December 31, 2006, the Corporation had 38 Trusts which have
issued Trust Securities to the public. Certain of the Trust Securities were
issued at a discount and may be redeemed prior to maturity at the option
of the Corporation. The Trusts have invested the proceeds of such Trust
Securities in the Notes. Each issue of the Notes has an interest rate equal
to the corresponding Trust Securities distribution rate. The Corporation
has the right to defer payment of interest on the Notes at any time or from
time to time for a period not exceeding five years provided that no

2007

2008

2009

2010

2011

Thereafter

Total

$ 4,377
11,158
–
1,659

$11,031
13,279
–
2,668

$15,260
1,705
–
1,019

$11,585
871
–
234

$7,943
162
–
4

$55,360
6,706
773
206

$105,556
33,881
773
5,790

$ 17,194

$ 26,978

$ 17,984

$ 12,690

$ 8,109

$ 63,045

$ 146,000

extension period may extend beyond the stated maturity of the relevant
Notes. During any such extension period, distributions on the Trust Secu-
rities will also be deferred, and the Corporation’s ability to pay dividends
on its common and preferred stock will be restricted.

The Trust Securities are subject

to mandatory redemption upon
repayment of the related Notes at their stated maturity dates or their ear-
lier redemption at a redemption price equal to their liquidation amount
plus accrued distributions to the date fixed for redemption and the pre-
mium, if any, paid by the Corporation upon concurrent repayment of the
related Notes.
Periodic

cash payments and payments upon liquidation or
redemption with respect to Trust Securities are guaranteed by the Corpo-
ration to the extent of funds held by the Trusts (the Preferred Securities
Guarantee). The Preferred Securities Guarantee, when taken together with
the Corporation’s other obligations, including its obligations under the
Notes, will constitute a full and unconditional guarantee, on a sub-
ordinated basis, by the Corporation of payments due on the Trust
Securities.

Bank of America 2006

125

The following table is a summary of the outstanding Trust Securities and the Notes at December 31, 2006 as originated by Bank of America Corpo-

ration and the predecessor banks.

(Dollars in millions)

Issuer

Bank of America
Capital Trust I
Capital Trust II
Capital Trust III
Capital Trust IV
Capital Trust V
Capital Trust VI
Capital Trust VII
Capital Trust VIII
Capital Trust X
Capital Trust XI
Capital Trust XII

NationsBank
Capital Trust II
Capital Trust III
Capital Trust IV

BankAmerica
Institutional Capital A
Institutional Capital B
Capital II
Capital III

Barnett
Capital I
Capital II
Capital III

Fleet
Capital Trust II
Capital Trust V
Capital Trust VIII
Capital Trust IX

BankBoston
Capital Trust I
Capital Trust II
Capital Trust III
Capital Trust IV

Summit
Capital Trust I

Progress
Capital Trust I
Capital Trust II
Capital Trust III
Capital Trust IV

MBNA
Capital Trust A
Capital Trust B
Capital Trust D
Capital Trust E

Total

Aggregate
Principal
Amount of
Trust
Securities

Aggregate
Principal
Amount
of the
Notes

Stated Maturity
of the Notes

Per Annum Interest
Rate of the Notes

Interest Payment
Dates

575
900
500
375
518
1,000
1,665
530
900
1,000
863

593
928
516
387
534
1,031
1,717
546
928
1,031
890

December 2031
February 2032
August 2032
May 2033
November 2034
March 2035
August 2035
August 2035
March 2055
May 2036
August 2055

7.00%
7.00
7.00
5.88
6.00
5.63
5.25
6.00
6.25
6.63
6.88

3/15,6/15,9/15,12/15
2/1, 5/1,8/1,11/1
2/15, 5/15,8/15,11/15
2/1, 5/1,8/1,11/1
2/3, 5/3,8/3,11/3
3/8,9/8
2/10,8/10
2/25,5/25,8/25,11/25
3/29,6/29,9/29,12/29
5/23,11/23
2/2,5/2,8/2,11/2

Redemption Period

On or after 12/15/06
On or after 2/01/07
On or after 8/15/07
On or after 5/01/08
On or after 11/03/09
Any time
Any time
On or after 8/25/10
On or after 3/29/11
Any time
On or after 8/02/11

365
500
500

450
300
450
400

300
200
250

250
250
534
175

250
250
250
250

150

9
6
10
5

250
280
300
200

376
515
515

464
309
464
412

309
206
258

258
258
550
180

258
258
258
258

155

9
6
10
5

258
289
309
206

December 2026
January 2027
April 2027

7.83
3-mo. LIBOR +55 bps
8.25

6/15,12/15
1/15,4/15,7/15,10/15
4/15,10/15

On or after 12/15/06
On or after 1/15/07
On or after 4/15/07

December 2026
December 2026
December 2026
January 2027

8.07
7.70
8.00
3-mo. LIBOR +57 bps

6/30,12/31
6/30,12/31
6/15,12/15
1/15,4/15, 7/15,10/15

On or after 12/31/06
On or after 12/31/06
On or after 12/15/06
On or after 1/15/02

December 2026
December 2026
February 2027

8.06
7.95
3-mo. LIBOR +62.5 bps

6/1,12/1
6/1,12/1
2/1,5/1,8/1,11/1

On or after 12/01/06
On or after 12/01/06
On or after 2/01/07

December 2026
December 2028
March 2032
August 2033

7.92
3-mo. LIBOR +100 bps
7.20
6.00

6/15,12/15
3/18, 6/18,9/18,12/18
3/15, 6/15,9/15,12/15
2/1, 5/1,8/1,11/1

On or after 12/15/06
On or after 12/18/03
On or after 3/08/07
On or after 7/31/08

December 2026
December 2026
June 2027
June 2028

8.25
7.75
3-mo. LIBOR +75 bps
3-mo. LIBOR +60 bps

6/15,12/15
6/15,12/15
3/15, 6/15,9/15,12/15
3/8, 6/8,9/8,12/8

On or after 12/15/06
On or after 12/15/06
On or after 6/15/07
On or after 6/08/03

March 2027

8.40

3/15,9/15

On or after 3/15/07

June 2027
July 2030
November 2032
January 2033

10.50
11.45
3-mo. LIBOR +335 bps
3-mo. LIBOR +335 bps

6/1,12/1
1/19,7/19
2/15,5/15,8/15,11/15
1/7, 4/7,7/7,10/7

On or after 6/01/07
On or after 7/19/10
On or after 11/15/07
On or after 1/07/08

December 2026
February 2027
October 2032
February 2033

8.28
3-mo. LIBOR +80 bps
8.13
8.10

6/1,12/1
2/1,5/1,8/1,11/1
1/1,4/1,7/1,10/1
2/15,5/15,8/15,11/15

On or after 12/01/06
On or after 2/01/07
On or after 10/01/07
On or after 2/15/08

$15,960

$16,454

Issuance Date

December 2001
January 2002
August 2002
April 2003
November 2004
March 2005
August 2005
August 2005
March 2006
May 2006
August 2006

December 1996
February 1997
April 1997

November 1996
November 1996
December 1996
January 1997

November 1996
December 1996
January 1997

December 1996
December 1998
March 2002
July 2003

November 1996
December 1996
June 1997
June 1998

March 1997

June 1997
July 2000
November 2002
December 2002

December 1996
January 1997
June 2002
November 2002

126 Bank of America 2006

Note 13 – Commitments and Contingencies
In the normal course of business, the Corporation enters into a number of
off-balance sheet commitments. These commitments expose the Corpo-
ration to varying degrees of credit and market risk and are subject to the
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 financ-
ing needs of its customers. The outstanding unfunded lending commit-
ments shown in the following table have been reduced by amounts
participated to other financial institutions of $30.5 billion and $30.4 bil-
lion at December 31, 2006 and 2005. The carrying amount for these
commitments, which represents the liability recorded related to these
instruments, at December 31, 2006 and 2005 was $444 million and
$458 million. At December 31, 2006,
included
deferred revenue of $47 million and a reserve for unfunded lending com-
mitments of $397 million. At December 31, 2005, the carrying amount
included deferred revenue of $63 million and a reserve for unfunded lend-
ing commitments of $395 million.

the carrying amount

(Dollars in millions)

Loan commitments (1)
Home equity lines of credit
Standby letters of credit and financial guarantees
Commercial letters of credit

Legally binding commitments

Credit card lines (2)

Total

December 31

2006

2005

$ 338,205
98,200
53,006
4,482

493,893
853,592

$271,906
78,626
48,129
5,972

404,633
192,967

$1,347,485

$597,600

(1)

Included at December 31, 2006 and 2005, were equity commitments of $2.8 billion and $1.5 billion,
related to obligations to further fund equity investments.

(2) As part of the MBNA merger on January 1, 2006, the Corporation acquired $588.4 billion of unused credit

card lines.

Legally binding commitments to extend credit generally have speci-
fied rates and maturities. Certain of these commitments have adverse
change clauses that help to protect the Corporation against deterioration
in the borrowers’ ability to pay.

The Corporation issues SBLCs and financial guarantees to support
the obligations of its customers to beneficiaries. Additionally, in many
cases, the Corporation holds collateral
in various forms against these
SBLCs. As part of its risk management activities, the Corporation con-
tinuously monitors the creditworthiness of the customer as well as SBLC
exposure; however, if the customer fails to perform the specified obliga-
tion to the beneficiary, the beneficiary may draw upon the SBLC by present-
ing documents that are in compliance with the letter of credit terms. In
that event, the Corporation either repays the money borrowed or advanced,
makes payment on account of the indebtedness of the customer or makes
payment on account of the default by the customer in the performance of
an obligation to the beneficiary up to the full notional amount of the SBLC.
The customer is obligated to reimburse the Corporation for any such
payment. If the customer fails to pay, the Corporation would, as con-
tractually permitted, liquidate collateral and/or offset accounts.

Commercial

letters of credit, issued primarily to facilitate customer
trade finance activities, are usually collateralized by the underlying goods
being shipped to the customer and are generally short-term. Credit card
lines are unsecured commitments that are not legally binding. Manage-
ment reviews credit card lines at least annually, and upon evaluation of
the customers’ creditworthiness, the Corporation has the right to termi-
nate or change certain terms of the credit card lines.

The Corporation uses various techniques to manage risk associated
with these types of instruments that include obtaining collateral and/or
adjusting commitment amounts based on the borrower’s financial con-
dition;
the total commitment amount does not necessarily
represent the actual risk of loss or future cash requirements. For each of
these types of instruments, the Corporation’s maximum exposure to credit
loss is represented by the contractual amount of these instruments.

therefore,

Other Commitments
At December 31, 2006 and 2005, charge cards (nonrevolving card lines)
to individuals and government entities guaranteed by the U.S. government
in the amount of $9.6 billion and $9.4 billion were not included in credit
card line commitments in the previous table. The outstanding balances
related to these charge cards were $193 million and $171 million at
December 31, 2006 and 2005.

At December 31, 2006, the Corporation had whole mortgage loan
purchase commitments of $8.5 billion, all of which will settle in the first
quarter of 2007. At December 31, 2005, the Corporation had whole mort-
gage loan purchase commitments of $4.0 billion, all of which settled in
the first quarter of 2006.

The Corporation has entered into operating leases for certain of its
premises and equipment. Commitments under these leases approximate
$1.4 billion in 2007, $1.3 billion in 2008, $1.1 billion in 2009, $931 mil-
lion in 2010, $801 million in 2011, and $6.0 billion for all years there-
after.

In 2005, the Corporation entered into an agreement for the commit-
ted purchase of retail automotive loans over a five-year period ending
June 30, 2010. In 2005, the Corporation purchased $5.0 billion of such
loans. In 2006, the Corporation purchased $7.5 billion of such loans.
Under the agreement, the Corporation is committed to purchase up to
$5.0 billion of such loans for the period July 1, 2006 through June 30,
2007 and up to $10.0 billion in each of the agreement’s next three fiscal
years. As of December 31, 2006, the remaining commitment amount was
$32.5 billion.

Other Guarantees
The Corporation sells products that offer book value protection primarily to
Income Security Act of 1974
plan sponsors of Employee Retirement
(ERISA) governed pension plans, such as 401(k) plans and 457 plans. The
book value protection is provided on portfolios of intermediate/short-term
investment grade fixed income securities and is intended to cover any
shortfall in the event that plan participants withdraw funds when market
value is below book value. The Corporation retains the option to exit the
contract at any time. If the Corporation exercises its option, the purchaser
can require the Corporation to purchase zero coupon bonds with the pro-
ceeds of the liquidated assets to assure the return of principal. To man-
age its exposure, the Corporation imposes significant restrictions and
constraints on the timing of the withdrawals, the manner in which the port-
folio is liquidated and the funds are accessed, and the investment
parameters of the underlying portfolio. These constraints, combined with
structural protections, are designed to provide adequate buffers and guard
against payments even under extreme stress scenarios. These guarantees
are booked as derivatives and marked to market in the trading portfolio. At
December 31, 2006 and 2005, the notional amount of these guarantees
totaled $33.2 billion and $34.0 billion with estimated maturity dates
between 2007 and 2036. As of December 31, 2006 and 2005, the
Corporation has not made a payment under these products, and manage-
ment believes that the probability of payments under these guarantees is
remote.

Bank of America 2006

127

The Corporation also sells products that guarantee the return of prin-
cipal to investors at a preset future date. These guarantees cover a broad
range of underlying asset classes and are designed to cover the shortfall
between the market value of the underlying portfolio and the principal
amount on the preset future date. To manage its exposure, the Corpo-
ration requires that these guarantees be backed by structural and invest-
ment constraints and certain pre-defined triggers that would require the
underlying assets or portfolio to be liquidated and invested in zero-coupon
bonds that mature at the preset future date. The Corporation is required to
fund any shortfall at the preset future date between the proceeds of the
liquidated assets and the purchase price of the zero-coupon bonds. These
guarantees are booked as derivatives and marked to market in the trading
portfolio. At December 31, 2006 and 2005, the notional amount of these
guarantees totaled $4.0 billion and $6.5 billion. These guarantees have
various maturities ranging from 2007 to 2013. At December 31, 2006
and 2005, the Corporation had not made a payment under these prod-
ucts, and management believes that the probability of payments under
these guarantees is remote.

The Corporation also has written put options on highly rated fixed
income securities. Its obligation under these agreements is to buy back
the assets at predetermined contractual yields in the event of a severe
market disruption in the short-term funding market. These agreements
have various maturities ranging from two to five years, and the
pre-determined yields are based on the quality of the assets and the struc-
tural elements pertaining to the market disruption. The notional amount of
these put options was $2.1 billion and $803 million at December 31,
2006 and 2005. Due to the high quality of the assets and various struc-
tural protections, management believes that the probability of incurring a
loss under these agreements is remote.

that

such

contain

agreements

indemnifications,

In the ordinary course of business, the Corporation enters into vari-
ous
tax
indemnifications, whereupon payment may become due if certain external
events occur, such as a change in tax law. These agreements typically
contain an early termination clause that permits the Corporation to exit the
agreement upon these events. The maximum potential future payment
under indemnification agreements is difficult to assess for several rea-
sons, including the inability to predict future changes in tax and other
laws, the difficulty in determining how such laws would apply to parties in
contracts, the absence of exposure limits contained in standard contract
language and the timing of the early termination clause. Historically, any
payments made under these guarantees have been de minimis. Manage-
ment has assessed the probability of making such payments in the future
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 require gross settlement. The maximum
potential future payment under these agreements was approximately $2.0
billion and $1.8 billion at December 31, 2006 and 2005. The estimated
maturity dates of these obligations are between 2007 and 2033. The
Corporation has made no material payments under these guarantees.

The Corporation provides credit and debit card processing services to
various merchants, processing credit and debit card transactions on their
behalf. In connection with these services, a liability may arise in the event
of a billing dispute between the merchant and a cardholder that is ulti-
mately resolved in the cardholder’s favor and the merchant defaults upon
its obligation to reimburse the cardholder. A cardholder, through its issuing
bank, generally has until the later of up to four months after the date a
transaction is processed or the delivery of the product or service to pres-

128 Bank of America 2006

ent a chargeback to the Corporation as the merchant processor. If the
Corporation is unable to collect this amount from the merchant, it bears
the loss for the amount paid to the cardholder. In 2006 and 2005, the
Corporation processed $377.8 billion and $352.9 billion of transactions
and recorded losses as a result of these chargebacks of $20 million and
$13 million.

At December 31, 2006 and 2005, the Corporation held as collateral
approximately $32 million and $248 million of merchant escrow deposits
which the Corporation has the right to offset against amounts due from
the individual merchants. The Corporation also has the right to offset any
payments with cash flows otherwise due to the merchant. Accordingly, the
Corporation believes that the maximum potential exposure is not repre-
sentative of the actual potential loss exposure. The Corporation believes
the maximum potential exposure for chargebacks would not exceed the
total amount of merchant
transactions processed through Visa and
MasterCard for the last four months, which represents the claim period for
the cardholder, plus any outstanding delayed-delivery transactions. As of
December 31, 2006 and 2005, the maximum potential exposure totaled
approximately $114.5 billion and $118.2 billion.

Within the Corporation’s brokerage business, the Corporation has
contracted with a third party to provide clearing services that include
underwriting margin loans to the Corporation’s clients. This contract stip-
ulates that the Corporation will
indemnify the third party for any margin
loan losses that occur in their issuing margin to the Corporation’s clients.
The maximum potential future payment under this indemnification was
$938 million and $1.1 billion at December 31, 2006 and 2005. Histor-
ically, any payments made under this indemnification have been immate-
rial. As these margin loans are highly collateralized by the securities held
by the brokerage clients, the Corporation has assessed the probability of
making such payments in the future as remote. This indemnification would
end with the termination of the clearing contract.

For additional

information on recourse obligations related to resi-
dential mortgage loans sold and other guarantees related to securitiza-
tions, see Note 9 of the Consolidated Financial Statements.

Litigation and Regulatory Matters
In the ordinary course of business, the Corporation and its subsidiaries
are routinely defendants in or parties to many pending and threatened
legal actions and proceedings, including actions brought on behalf of vari-
ous classes of claimants. Certain of these actions and proceedings are
based on alleged violations of consumer protection, securities, environ-
mental, banking, employment and other laws. In certain of these actions
and proceedings, claims for substantial monetary damages are asserted
against the Corporation and its subsidiaries.

In the ordinary course of business, the Corporation and its sub-
sidiaries are also subject to regulatory examinations, information gathering
requests, inquiries and investigations. Certain subsidiaries of the Corpo-
ration are registered broker/dealers or investment advisors and are sub-
ject
to regulation by the SEC, the National Association of Securities
Dealers, the New York Stock Exchange and state securities regulators. In
inquiries by those agencies, such
connection with formal and informal
subsidiaries receive numerous requests, subpoenas and orders for docu-
ments, testimony and information in connection with various aspects of
their regulated activities.

In view of the inherent difficulty of predicting the outcome of such liti-
gation and regulatory matters, particularly where the claimants seek very
large or indeterminate damages or where the matters present novel legal
theories or involve a large number of parties, the Corporation cannot state
with confidence what the eventual outcome of the pending matters will be,

what the timing of the ultimate resolution of these matters will be, or what
the eventual loss, fines or penalties related to each pending matter may
be.

In accordance with SFAS No. 5, “Accounting for Contingencies”, the
Corporation establishes reserves for litigation and regulatory matters when
those matters present loss contingencies that are both probable and
estimable. When loss contingencies are not both probable and estimable,
the Corporation does not establish reserves. In some of the matters
described below, including but not limited to a substantial portion of the
Parmalat Finanziaria S.p.A. matters, loss contingencies are not both prob-
able and estimable in the view of management, and, accordingly, reserves
have not been established for those matters. Based on current knowledge,
management does not believe that loss contingencies, if any, arising from
pending litigation and regulatory matters, including the litigation and regu-
latory matters described below, will have a material adverse effect on the
consolidated financial position or liquidity of the Corporation, but may be
material to the Corporation’s operating results for any particular reporting
period.

Adelphia Communications Corporation
Bank of America, N.A. (BANA), Banc of America Securities (BAS), Fleet
National Bank and Fleet Securities, Inc. (FSI) are defendants in an adver-
sary proceeding brought by the Official Committee of Unsecured Creditors
(the Creditors’ Committee) on behalf of Adelphia and Adelphia as
co-plaintiffs that had been pending in the U.S. Bankruptcy Court for the
Southern District of New York (the Bankruptcy Court). The lawsuit names
over 400 defendants and asserts over 50 claims under federal statutes,
including the Bank Holding Company Act, state common law, and various
provisions of the Bankruptcy Code. The plaintiffs seek avoidance and
recovery of payments, equitable subordination, disallowance and
re-characterization of claims, and recovery of damages in an unspecified
amount. The Official Committee of Equity Security Holders of Adelphia
intervened in this proceeding and filed its own complaint, which is similar
to the unsecured creditors’ committee complaint and also asserts claims
under RICO and additional state law theories. BANA, BAS and FSI have
filed motions to dismiss both complaints. On February 9, 2006, the U.S.
District Court for the Southern District of New York overseeing the Adel-
phia securities litigation granted the motions of the adversary defendants
to withdraw the adversary proceeding from the Bankruptcy Court, except
with respect to the pending motions to dismiss. On January 5, 2007, the
Bankruptcy Court entered an order confirming a plan of reorganization of
Adelphia and its subsidiaries, which provides that, effective on Febru-
ary 13, 2007, the adversary proceeding will be transferred to a liquidating
trust created under the plan.

Inc.

In re Initial Public Offering Securities
Beginning in 2001, Robertson Stephens,
(an investment banking
subsidiary of FleetBoston that ceased operations during 2002), BAS, other
underwriters, and various issuers and others, were named as defendants
in certain of the 309 purported class actions that have been consolidated
in the U.S. District Court for the Southern District of New York as In re Ini-
tial Public Offering Securities Litigation. The plaintiffs contend that the
defendants failed to make certain required disclosures and manipulated
prices of IPO securities through, among other things, alleged agreements
investors receiving allocations to purchase additional
with institutional
shares in the aftermarket and seek unspecified damages. On October 13,
2004, the district court granted in part and denied in part plaintiffs’
motions to certify as class actions six of the 309 cases. On December 5,
2006, the U.S. Court of Appeals for the Second Circuit (the Second Cir-

cuit) reversed the district court’s class certification order. The plaintiffs
have petitioned the Second Circuit to reconsider its ruling. That petition is
pending. The district court stayed all proceedings pending a decision on
the petition.

On February 15, 2005, the district court conditionally approved a
settlement between the plaintiffs and many of the issuer defendants, in
which the issuer defendants guaranteed that the plaintiffs will receive at
least $1 billion in the settled actions. The district court has deferred a
final ruling on this settlement until the Second Circuit decides whether it
will reconsider its December 5, 2006 class certification ruling.

Robertson Stephens, Inc. and other underwriters also have been
named as defendants in putative class action lawsuits filed in the U.S.
District Court for the Southern District of New York under the federal anti-
trust laws alleging that the underwriters conspired to manipulate the
aftermarkets for IPO securities and to extract anticompetitive fees in
relief and
connection with IPOs. The complaints seek declaratory
unspecified treble damages. On September 28, 2005, the Second Circuit
reversed the district court’s dismissal of these cases, remanding them to
the district court for further proceedings. On December 7, 2006, the U.S.
Supreme Court granted the underwriters’ petition seeking review of the
Second Circuit’s decision.

Interchange Antitrust Litigation
The Corporation and certain of its subsidiaries are defendants in actions
filed on behalf of a putative class of retail merchants that accept Visa and
MasterCard payment cards. The first of these actions was filed in June
2005. On April 24, 2006, putative class plaintiffs filed a First Con-
solidated and Amended Class Action Complaint. Plaintiffs therein allege
that the defendants conspired to fix the level of interchange and merchant
discount fees and that certain other practices, including various Visa and
MasterCard rules, violate federal and California antitrust laws. On May 22,
2006, the putative class plaintiffs filed a supplemental complaint against
many of the same defendants, including the Corporation and certain of its
subsidiaries, alleging additional federal antitrust claims and a fraudulent
conveyance claim under New York Debtor and Creditor Law, all arising out
of MasterCard’s 2006 initial public offering. The putative class plaintiffs
seek unspecified treble damages and injunctive relief. Additional defend-
ants in the putative class actions include Visa, MasterCard, and other
financial institutions.

The putative class actions are coordinated for pre-trial proceedings in
the U.S. District Court for the Eastern District of New York, together with
additional, individual actions brought only against Visa and MasterCard,
under the caption In Re Payment Card Interchange Fee and Merchant
Discount Anti-Trust Litigation. Motions to dismiss portions of the First
Consolidated and Amended Class Action Complaint and the supplemental
complaint are pending.

Miller
On August 13, 1998, a predecessor of BANA was named as a defendant
in a class action filed in Superior Court of California, County of San
Francisco, entitled Paul J. Miller v. Bank of America, N.A., challenging its
practice of debiting accounts that
received, by direct deposit, gov-
ernmental benefits to repay fees incurred in those accounts. The action
alleges, among other claims, fraud, negligent misrepresentation and other
violations of California law. On October 16, 2001, a class was certified
consisting of more than one million California residents who have, had or
will have, at any time after August 13, 1994, a deposit account with BANA
into which payments of public benefits are or have been directly deposited
by the government. The case proceeded to trial on January 20, 2004.

Bank of America 2006

129

On March 4, 2005, the trial court entered a judgment that purported
to award the plaintiff class restitution in the amount of $284 million, plus
attorneys’ fees, and provided that class members whose accounts were
assessed an insufficient funds fee in violation of law suffered substantial
emotional or economic harm and, therefore, are entitled to an additional
$1,000 statutory penalty. The judgment also purported to enjoin BANA,
among other things, from engaging in the account balancing practices at
issue. On November 22, 2005, the California Court of Appeal granted
BANA’s request to stay the judgment, including the injunction, pending
appeal.

On November 20, 2006, the California Court of Appeal reversed the
judgment in its entirety, holding that BANA’s practice did not constitute a
violation of California law. On December 14, 2006, the California Court of
Appeal denied plaintiff’s petition for rehearing. Plaintiff has petitioned for
review in the California Supreme Court.

Municipal Derivatives Matters
The Antitrust Division of the U.S. Department of Justice (DOJ), the SEC,
and the Internal Revenue Service (IRS) are investigating possible anti-
competitive bidding practices in the municipal derivatives industry involving
various parties, including BANA, from the early 1990s to date. The activ-
ities at issue in these industry-wide government investigations concern the
bidding process for municipal derivatives that are offered to states,
municipalities and other issuers of tax-exempt bonds. The Corporation has
cooperated, and continues to cooperate, with the DOJ, the SEC and the
IRS.

On January 11, 2007, the Corporation entered into a Corporate Condi-
tional Leniency Letter (the Letter) with DOJ. Under the Letter and subject
to the Corporation’s continuing cooperation, DOJ will not bring any criminal
antitrust prosecution against the Corporation in connection with the mat-
ters that the Corporation reported to DOJ. Subject to satisfying DOJ and
the court presiding over any civil litigation of the Corporation’s coopera-
tion, the Corporation is eligible for (i) a limit on liability to single, rather
than treble, damages in any related civil antitrust actions, and (ii) relief
from joint and several antitrust liability with other civil defendants. No such
civil actions have been filed to date, but no assurances can be given that
such actions will not be filed.

Parmalat Finanziaria S.p.A.
On December 24, 2003, Parmalat Finanziaria S.p.A. was admitted into
insolvency proceedings in Italy, known as “extraordinary administration.”
The Corporation, through certain of its subsidiaries, including BANA, pro-
vided financial services and extended credit to Parmalat and its related
entities. On June 21, 2004, Extraordinary Commissioner Dr. Enrico Bondi
filed with the Italian Ministry of Production Activities a plan of reorganiza-
tion for the restructuring of the companies of the Parmalat group that are
included in the Italian extraordinary administration proceeding.

In July 2004, the Italian Ministry of Production Activities approved the
Extraordinary Commissioner’s restructuring plan, as amended,
for the
Parmalat group companies that are included in the Italian extraordinary
administration proceeding. This plan was approved by the voting creditors
and the Court of Parma, Italy in October of 2005.

Litigation and investigations relating to Parmalat are pending in both
Italy and the United States, and the Corporation is responding to inquiries
concerning Parmalat from regulatory and law enforcement authorities in
Italy and the United States.

Proceedings in Italy
On May 26, 2004, The Public Prosecutor’s Office for the Court of Milan,
Italy filed criminal charges against Luca Sala, Luis Moncada, and Antonio

Luzi, three former employees, alleging the crime of market manipulation in
connection with a press release issued by Parmalat. The Public Prose-
cutor’s Office also filed a related charge against the Corporation asserting
administrative liability based on an alleged failure to maintain an organiza-
tional model sufficient to prevent the alleged criminal activities of its for-
mer employees. Preliminary hearings have begun on this administrative
charge and trial is expected to begin in the first quarter of 2007.

The main trial of the market manipulation charges against Messrs.
Luzi, Moncada, and Sala began in the Court of Milan,
Italy on Sep-
tember 28, 2005. Hearing dates in this trial are currently set through July
2007. The Corporation is participating in this trial as a party that has been
damaged by the alleged actions of defendants other than its former
employees, including former Parmalat officials. Additionally, pursuant to a
December 19, 2005 court ruling, other third parties are participating in the
trial who claim damages against BANA as a result of the alleged criminal
violations of the Corporation’s former employees and other defendants.

Separately, The Public Prosecutor’s Office for the Court of Parma,
Italy is conducting an investigation into the collapse of Parmalat. The
Corporation has cooperated, and continues to cooperate, with The Public
Prosecutor’s Office with respect to this investigation. The Public Prose-
cutor’s Office has given notice of its intention to file charges, including a
charge of the crime of fraudulent bankruptcy under Italian criminal law, in
connection with this investigation against the same three former employ-
ees of the Corporation who are named in the Milan criminal proceedings,
Messrs. Luzi, Moncada and Sala.

Proceedings in the United States
On March 5, 2004, a First Amended Complaint was filed in a securities
action pending in the U.S. District Court for the Southern District of New
York entitled Southern Alaska Carpenters Pension Fund et al. v. Bonlat
Financing Corporation et al., which names the Corporation as a defendant.
The action is brought on behalf of a putative class of purchasers of Parma-
lat securities and alleges violations of the federal securities laws against
the Corporation and certain affiliates. After the court dismissed the initial
complaint as to the Corporation, BANA and Banc of America Securities
Limited (BASL), plaintiff filed a Second Amended Complaint, which seeks
unspecified damages. Following the Corporation’s motion to dismiss the
Second Amended Complaint, the court granted the Corporation’s motion to
dismiss in part, allowing the plaintiff to proceed on claims with respect to
two transactions entered into between the Corporation and Parmalat. The
Corporation has filed an answer to the Second Amended Complaint. The
putative class plaintiffs filed a motion for class certification on Sep-
tember 21, 2006, which remains pending. The Corporation also filed on
October 10, 2006 a motion to dismiss the claims of foreign purchaser
plaintiffs for lack of subject matter jurisdiction.

On October 7, 2004, Enrico Bondi filed an action in the U.S. District
Court for the Western District of North Carolina on behalf of Parmalat and
its shareholders and creditors against the Corporation and various related
entities, entitled Dr. Enrico Bondi, Extraordinary Commissioner of Parmalat
Finanziaria, S.p.A., et al. v. Bank of America Corporation, et al. (the Bondi
Action). The complaint alleged federal and state RICO claims and various
state law claims,
including fraud. The complaint sought damages in
excess of $10 billion. The Bondi Action was transferred to the U.S. District
Court for the Southern District of New York for coordinated pre-trial pur-
poses with the putative class actions and other related cases against
non-Bank of America defendants under the caption In re Parmalat Secu-
rities Litigation.

On August 5, 2005, the U.S. District Court for the Southern District
of New York granted the Corporation’s motion to dismiss the Bondi Action

130 Bank of America 2006

in part, dismissing ten of the twelve counts. After the plaintiff’s filing of a
First Amended Complaint and the Corporation’s motion to dismiss such
complaint, the court granted the Corporation’s motion to dismiss in part,
allowing the plaintiff to proceed on the previously dismissed federal and
state RICO claims with respect to three transactions entered into between
the Corporation and Parmalat. The Corporation has filed an answer and
counterclaims (the Bank of America Counterclaims) seeking damages
against Parmalat and a number of its subsidiaries and affiliates as com-
pensation for financial losses and other damages suffered. Parmalat filed
a motion to dismiss certain of the Bank of America Counterclaims, and
that motion is pending. On November 21, 2006, Parmalat filed a motion to
amend the First Amended Complaint to add a claim of breach of fiduciary
duty by the Corporation to Parmalat. That motion is pending.

On November 23, 2005, the Official Liquidators of Food Holdings Ltd.
and Dairy Holdings Ltd., two entities in liquidation proceedings in the
Cayman Islands, filed a complaint against the Corporation and several
related entities in the U.S. District Court for the Southern District of New
York, entitled Food Holdings Ltd., et al. v. Bank of America Corp., et al,
(the Food Holdings Action). Also on November 23, 2005, the Provisional
Liquidators of Parmalat Capital Finance Ltd. (who are also the liquidators
in the Food Holdings Action), filed a complaint against the Corporation and
several related entities in North Carolina state court for Mecklenburg
County, entitled Parmalat Capital Finance Limited v. Bank of America
Corp., et al. (the PCFL Action). Both actions have been consolidated for
pretrial purposes with the other pending actions in the In Re Parmalat
Securities Litigation matter. The Food Holdings Action alleges that the
Corporation and other defendants conspired with Parmalat in carrying out
transactions involving the plaintiffs in connection with the funding of
Parmalat’s Brazilian entities, and it asserts claims for fraud, breach of
fiduciary duty, civil conspiracy and other related claims. The complaint
seeks damages in excess of $400 million. The PCFL Action alleges that
the Corporation and other defendants conspired with Parmalat insiders to
loot and divert monies from PCFL, and it asserts claims for breach of fidu-
ciary duty, civil conspiracy and other related claims. PCFL seeks “hundreds
of millions of dollars” in damages. The Corporation has moved to dismiss
both actions. The motions are pending.

Certain purchasers of Parmalat-related private placement offerings
have filed complaints against the Corporation and various related entities
in the following actions: Principal Global Investors, LLC, et al. v. Bank of
America Corporation, et al. in the U.S. District Court for the Southern Dis-
trict of Iowa; Monumental Life Insurance Company, et al. v. Bank of Amer-
ica Corporation, et al. in the U.S. District Court for the Northern District of
Iowa; Prudential
Insurance Company of America and Hartford Life
Insurance Company v. Bank of America Corporation, et al. in the U.S. Dis-
Illinois; Allstate Life Insurance
trict Court for the Northern District of
Company v. Bank of America Corporation, et al. in the U.S. District Court
for the Northern District of Illinois; Hartford Life Insurance v. Bank of Amer-
ica Corporation, et al. in the U.S. District Court for the Southern District of
New York; and John Hancock Life Insurance Company, et al. v. Bank of
America Corporation et al. in the U.S. District Court for the District of
Massachusetts. The actions variously allege violations of federal and state
securities law and state common law, and seek rescission and
unspecified damages based upon the Corporation’s and related entities’
alleged roles in certain private placement offerings issued by Parmalat-
related companies. Except for the John Hancock Life Insurance case, the
most recently filed matter, the cases have been transferred to the U.S.
District Court for the Southern District of New York for coordinated pre-trial
purposes with the In re Parmalat Securities Litigation matter. The plaintiffs
seek rescission and unspecified damages resulting from alleged pur-

chases of approximately $305 million in private placement instruments. In
addition to claims relating to private placement transactions, the John
Hancock Life Insurance case also claims damages relating to a separate
Eurobond investment alleged in the amount of $25 million.

On January 18, 2006, Gerald K. Smith, in his capacity as Trustee of
Farmland Dairies LLC Litigation Trust, filed a complaint against the Corpo-
ration, BANA, BAS, BASL, Bank of America National Trust & Savings Asso-
ciation and BankAmerica International Limited, as well as other financial
institutions and accounting firms, in the U.S. District Court for the South-
ern District of New York, entitled Gerald K. Smith, Litigation Trustee v.
Bank of America Corporation, et al. (the Farmland Action). Prior to bank-
ruptcy restructuring, Farmland Dairies LLC was a wholly-owned subsidiary
of Parmalat USA Corporation, which was a wholly-owned subsidiary of
Parmalat SpA. The Farmland Action asserts claims of aiding and abetting,
breach of fiduciary duty, civil conspiracy and related claims against the
Bank of America defendants and other defendants. The plaintiff seeks
unspecified damages. On February 23, 2006, the plaintiff filed its First
Amended Complaint, which was dismissed on August 16, 2006, with leave
to file a Second Amended Complaint, which plaintiff filed on September 8,
2006. The Corporation has moved to dismiss the Second Amended Com-
plaint.

On April 21, 2006, the Plan Administrator of the Plan of Liquidation
of Parmalat-USA Corporation filed a complaint in the U.S. District Court for
the Southern District of New York against the Corporation and certain of
institutions and accounting
its subsidiaries, as well as other financial
firms entitled G. Peter Pappas in his capacity as the Plan Administrator of
the Plan of Liquidation of Parmalat-USA Corporation v. Bank of America
Corporation, et al. (the Parmalat USA Action). The Parmalat USA Action
asserts claims of aiding and abetting, breach of fiduciary duty, civil con-
spiracy and related claims against the Bank of America defendants and
other defendants. The plaintiff seeks unspecified damages. The Corpo-
ration has moved to dismiss the Parmalat USA Action. The motion is pend-
ing.

Pension Plan Matters
The Corporation is a defendant in a putative class action entitled William
L. Pender, et al. v. Bank of America Corporation, et al. (formerly captioned
Anita Pothier, et al. v. Bank of America Corporation, et al.), which was ini-
tially filed June 2004 in the U.S. District Court for the Southern District of
Illinois and subsequently transferred to the U.S. District Court for the
Western District of North Carolina. The action is brought on behalf of
participants in or beneficiaries of The Bank of America Pension Plan
(formerly known as the NationsBank Cash Balance Plan) and The Bank of
America 401(k) Plan (formerly known as the NationsBank 401(k) Plan).
The Third Amended Complaint names as defendants the Corporation,
BANA, The Bank of America Pension Plan, The Bank of America 401(k)
Plan, the Bank of America Corporation Corporate Benefits Committee and
various members thereof, and PricewaterhouseCoopers LLP. The two
named plaintiffs are alleged to be a current and a former participant in The
Bank of America Pension Plan and 401(k) Plan.

The complaint alleges the defendants violated various provisions of
ERISA, including that the design of The Bank of America Pension Plan vio-
lated ERISA’s defined benefit pension plan standards and that such plan’s
definition of normal retirement age is invalid. In addition, the complaint
alleges age discrimination in the design and operation of The Bank of
America Pension Plan, unlawful lump sum benefit calculation, violation of
ERISA’s “anti-backloading” rule, that certain voluntary transfers of assets
by participants in The Bank of America 401(k) Plan to The Bank of America
Pension Plan violated ERISA, and other related claims. The complaint

Bank of America 2006

131

alleges that current and former participants in these plans are entitled to
greater benefits and seeks declaratory relief, monetary relief
in an
unspecified amount, equitable relief, including an order reforming The
Bank of America Pension Plan, attorneys’ fees and interest.

On September 25, 2005, defendants moved to dismiss the com-
plaint. On December 1, 2005,
the named plaintiffs moved to certify
classes consisting of, among others, (i) all persons who accrued or who
are currently accruing benefits under The Bank of America Pension Plan
and (ii) all persons who elected to have amounts representing their
account balances under The Bank of America 401(k) Plan transferred to
The Bank of America Pension Plan. The motion to dismiss and the motion
for class certification are pending.

The IRS is conducting an audit of the 1998 and 1999 tax returns of
The Bank of America Pension Plan and The Bank of America 401(k) Plan.
This audit includes a review of voluntary transfers by participants of 401(k)
Plan assets to The Bank of America Pension Plan and whether such trans-
fers were in accordance with applicable law.
In December 2005, the
Corporation received a Technical Advice Memorandum from the National
Office of the IRS that concluded that the amendments made to The Bank
of America 401(k) Plan in 1998 to permit the voluntary transfers to The
Bank of America Pension Plan violated the anti-cutback rule of Sec-
tion 411(d)(6) of the Internal Revenue Code. In November 2006, the
Corporation received another Technical Advice Memorandum denying the
Corporation’s request that the conclusion reached in the first Technical
Advice Memorandum be applied prospectively only. The Corporation con-
tinues to participate in administrative proceedings with the IRS regarding
issues raised in the audit.

On September 29, 2004, a separate putative class action, entitled
Donna C. Richards v. FleetBoston Financial Corp. and the FleetBoston
Financial Pension Plan (Fleet Pension Plan), was filed in the U.S. District
Court for the District of Connecticut on behalf of all former and current
Fleet employees who on December 31, 1996, were not at least age 50
with 15 years of vesting service and who participated in the Fleet Pension
Plan before January 1, 1997, and who have participated in the Fleet Pen-
sion Plan at any time since January 1, 1997. The complaint alleged that
FleetBoston or its predecessor violated ERISA by amending the Fleet
Financial Group, Inc. Pension Plan (a predecessor to the Fleet Pension
Plan) to add a cash balance benefit formula without notifying participants
that the amendment
reduced their plan benefits, by conditioning the
amount of benefits payable under the Fleet Pension Plan upon the form of
benefit elected, by reducing the rate of benefit accruals on account of age,
and by failing to inform participants of the correct amount of their pen-
sions and related claims. The complaint also alleged violation of the “anti-

backloading” rule of ERISA. The complaint sought equitable and remedial
relief, including a declaration that the amendment was ineffective, addi-
tional unspecified benefit payments, attorneys’ fees and interest.

On March 31, 2006, the court certified a class with respect to plain-
tiff’s claims that (i) the cash balance benefit formula reduces the rate of
benefit accrual on account of age, (ii) the participants did not receive
proper notice of the alleged reduction of future benefit accrual, and (iii) the
summary plan description was not adequate. Plaintiff filed an amended
complaint realleging the three claims as to which a class was certified and
amending two claims the court had dismissed, and defendants moved to
dismiss plaintiff’s amended claims. The court dismissed plaintiff’s
amended anti-backloading claim and a portion of the plaintiff’s amended
breach of fiduciary duty claim. The court subsequently certified a class as
to the portions of plaintiff’s breach of fiduciary duty claim that were not
dismissed. On December 12, 2006, plaintiff filed a second amended
complaint adding new allegations to the breach of fiduciary duty and
summary plan description claims, and a new claim alleging that the Fleet
Pension Plan violated ERISA in calculating lump-sum distributions. On
December 22, 2006, plaintiff filed a motion to extend class certification to
the new allegations and claim in the second amended complaint.

Refco
Beginning in October 2005, BAS was named as a defendant in several
putative class action lawsuits filed in the U.S. District Court for the South-
ern District of New York relating to Refco Inc. (Refco). The lawsuits, which
have been consolidated and seek unspecified damages, name as other
defendants Refco’s outside auditors, certain officers and directors of
Refco, other
individuals and
companies. The lawsuits allege violations of the disclosure requirements
of the federal securities laws in connection with Refco’s senior sub-
ordinated notes offering in August 2004 and Refco’s initial public offering
in August 2005. BAS and certain other underwriter defendants have
moved to dismiss the claims relating to the notes offering. BAS is also
responding to various regulatory inquiries relating to Refco.

financial services companies, and other

Trading and Research Activities
The SEC has been conducting a formal investigation with respect to cer-
tain trading and research-related activities of BAS. These matters primarily
arose during the period 1999-2001 in BAS’ San Francisco operations. In
September 2005, the SEC staff advised BAS that it intends to recommend
to the SEC an enforcement action against BAS in connection with these
matters. This matter remains pending.

132 Bank of America 2006

Note 14 – Shareholders’ Equity and Earnings Per Common Share

Common Stock
The following table presents share repurchase activity for the three months and years ended December 31, 2006, 2005 and 2004, including total common
shares repurchased under announced programs, weighted average per share price and the remaining buyback authority under announced programs.

Share Repurchase Activity

(Dollars in millions, except per share information; shares in thousands)

Three months ended March 31, 2006
Three months ended June 30, 2006
Three months ended September 30, 2006

October 1-31, 2006
November 1-30, 2006
December 1-31, 2006

Three months ended December 31, 2006

Year ended December 31, 2006

(Dollars in millions, except per share information; shares in thousands)

Three months ended March 31, 2005
Three months ended June 30, 2005
Three months ended September 30, 2005

October 1-31, 2005
November 1-30, 2005
December 1-31, 2005

Three months ended December 31, 2005

Year ended December 31, 2005

(Dollars in millions, except per share information; shares in thousands)

Three months ended March 31, 2004
Three months ended June 30, 2004
Three months ended September 30, 2004

October 1-31, 2004
November 1-30, 2004
December 1-31, 2004

Three months ended December 31, 2004

Year ended December 31, 2004

Number of Common
Shares Repurchased
under Announced
Programs (1)

88,450
83,050
59,500

16,000
22,100
22,000

60,100

291,100

Number of Common
Shares Repurchased
under Announced
Programs (3)

43,214
40,300
10,673

–
11,550
20,700

32,250

126,437

Number of Common
Shares Repurchased
under Announced
Programs (4)

24,306
49,060
40,430

16,102
11,673
6,288

34,063

147,859

Weighted
Average
Per Share
Price

$ 46.02
48.16
51.51

53.82
54.33
53.16

53.77

49.35

Weighted
Average
Per Share
Price

$46.05
45.38
43.32

–
45.38
46.42

46.05

45.61

Weighted
Average
Per Share
Price

$40.03
41.07
43.56

44.24
45.84
46.32

45.17

42.52

Remaining Buyback Authority
under Announced Programs (2)

Amounts

$ 5,847
11,169
8,104

7,243
6,042
4,873

65,738
182,688
123,188

107,188
85,088
63,088

Remaining Buyback Authority
under Announced Programs (2)

Amounts

$14,688
11,865
11,403

11,403
10,879
9,918

237,411
197,111
186,438

186,438
174,888
154,188

Remaining Buyback Authority
under Announced Programs (2)

Amounts

$12,378
7,978
6,217

5,505
4,969
4,678

204,178
155,118
114,688

98,586
86,913
80,625

(1) Reduced Shareholders’ Equity by $14.4 billion and increased diluted earnings per common share by $0.10 in 2006. These repurchases were partially offset by the issuance of approximately 118.4 million shares of common
stock under employee plans, which increased Shareholders’ Equity by $4.8 billion, net of $39 million of deferred compensation related to restricted stock awards, and decreased diluted earnings per common share by $0.05
in 2006.

(2) On April 26, 2006, our Board of Directors (the Board) authorized a stock repurchase program of up to 200 million shares of the Corporation’s common stock at an aggregate cost not to exceed $12.0 billion and to be
completed within a period of 12 to 18 months. On March 22, 2005, the Board authorized a stock repurchase program of up to 200 million shares of the Corporation’s common stock at an aggregate cost not to exceed $12.0
billion and to be completed within a period of 18 months. This repurchase plan was completed during the second quarter of 2006. On January 28, 2004, the Board authorized a stock repurchase program of up to 180 million
shares of the Corporation’s common stock at an aggregate cost not to exceed $9.0 billion. This repurchase plan was completed during the second quarter of 2005. On January 22, 2003, the Board authorized a stock
repurchase program of up to 260 million shares of the Corporation’s common stock at an aggregate cost of $12.5 billion. This repurchase plan was completed during the second quarter of 2004.

(3) Reduced Shareholders’ Equity by $5.8 billion and increased diluted earnings per common share by $0.05 in 2005. These repurchases were partially offset by the issuance of approximately 79.6 million shares of common
stock under employee plans, which increased Shareholders’ Equity by $3.1 billion, net of $145 million of deferred compensation related to restricted stock awards, and decreased diluted earnings per common share by $0.04
in 2005.

(4) Reduced Shareholders’ Equity by $6.3 billion and increased diluted earnings per common share by $0.06 in 2004. These repurchases were partially offset by the issuance of approximately 121.1 million shares of common
stock under employee plans, which increased Shareholders’ Equity by $3.9 billion, net of $127 million of deferred compensation related to restricted stock awards, and decreased diluted earnings per common share by $0.06
in 2004.

The Corporation will continue to repurchase shares, from time to
time, in the open market or in private transactions through the Corpo-
ration’s approved repurchase program. The Corporation expects to con-
tinue to repurchase a number of shares of common stock at least equal to
any shares issued under the Corporation’s employee stock plans.

Effective for the third quarter dividend, the Board increased the quar-
terly cash dividend on common stock from $0.50 to $0.56. In October
2006, the Board declared a fourth quarter cash dividend, which was paid
on December 22, 2006 to common shareholders of
record on
December 1, 2006.

Bank of America 2006

133

Preferred Stock
In November 2006, the Corporation authorized 85,100 shares and issued
81,000 shares, or $2.0 billion, of Bank of America Corporation Floating
Rate Non-Cumulative Preferred Stock, Series E (Series E Preferred Stock)
with a par value of $0.01 per share. Ownership is held in the form of
depositary shares, each representing a 1/1,000th interest in a share of
Series E Preferred Stock, paying a quarterly cash dividend on the liqui-
dation preference of $25,000 per share of Series E Preferred Stock at an
annual rate equal to the greater of (a) three-month LIBOR plus 0.35 per-
cent and (b) 4.00 percent, payable quarterly in arrears. On any dividend
date on or after November 15, 2011, the Corporation may redeem Series
E Preferred Stock, in whole or in part, at its option, at $25,000 per share,
plus accrued and unpaid dividends.

In September 2006, the Corporation authorized 34,500 shares and
issued 33,000 shares, or $825 million, of Bank of America Corporation
6.204% Non-Cumulative Preferred Stock, Series D (Series D Preferred
Stock) with a par value of $0.01 per share. Ownership is held in the form
of depositary shares, each representing a 1/1,000th interest in a share of
Series D Preferred Stock, paying a quarterly cash dividend on the liqui-
dation preference of $25,000 per share of Series D Preferred Stock at an
annual rate of 6.204 percent. On any dividend date on or after Sep-
tember 14, 2011, the Corporation may redeem Series D Preferred Stock,
in whole or in part, at its option, at $25,000 per share, plus accrued and
unpaid dividends.

Series E Preferred Stock and Series D Preferred Stock (these Series)
shares are not subject to the operations of a sinking fund, have no partic-
ipation rights and are not convertible. The holders of these Series have no
general voting rights. If any quarterly dividend payable on these Series is

in arrears for six or more quarterly dividend periods (whether consecutive
or not), the holders of these Series and any other class or series of pre-
ferred stock ranking equally as to payment of dividends and upon which
equivalent voting rights have been conferred and are exercisable (voting as
a single class) will be entitled to vote for the election of two additional
directors. These voting rights terminate when the Corporation has paid in
full dividends on these Series for at least four quarterly dividend periods
following the dividend arrearage.

During October 2006, the Board declared a $0.38775 regular cash
dividend on the Series D Preferred Stock. The dividend was payable
December 14, 2006, to shareholders of record on November 30, 2006.

On July 14, 2006, the Corporation redeemed its 6.75% Perpetual
Preferred Stock with a stated value of $250 per share. The 382,450
shares, or $96 million, outstanding of preferred stock were redeemed at
the stated value of $250 per share, plus accrued and unpaid dividends.

On July 3, 2006, the Corporation redeemed its Fixed/Adjustable Rate
Cumulative Preferred Stock with a stated value of $250 per share. The
700,000 shares, or $175 million, outstanding of preferred stock were
redeemed at the stated value of $250 per share, plus accrued and unpaid
dividends.

In addition to the preferred stock described above, the Corporation
had 35,045 shares authorized and 7,739 shares, or $1 million, out-
standing of the Series B Preferred Stock with a stated value of $100 per
share paying dividends quarterly at an annual rate of 7.00 percent.

All preferred stock outstanding has preference over our common
stock with respect to the payment of dividends and distribution of our
assets in the event of a liquidation or dissolution. Except in certain
circumstances, the holders of preferred stock have no voting rights.

134 Bank of America 2006

Accumulated OCI
The following table presents the changes in Accumulated OCI for 2006, 2005, and 2004, net of tax.

(Dollars in millions)

Balance, December 31, 2003
Net change in fair value recorded in Accumulated OCI
Net realized (gains) losses reclassified into earnings (5)

Balance, December 31, 2004

Net change in fair value recorded in Accumulated OCI
Net realized (gains) losses reclassified into earnings (5)

Balance, December 31, 2005

Net change in fair value recorded in Accumulated OCI
Net realized (gains) losses reclassified into earnings (5)

Balance, December 31, 2006

Securities (1,2)

Derivatives (3)

Other (4)

Total

(70)
1,088
(1,215)

(197)

(1,907)
(874)

(2,978)

465
(220)

$ (2,094)
(294)
109

(2,279)

(2,225)
166

(4,338)

$ (270) $ (2,434)
776
(1,106)

(18)
–

(288)

(2,764)

48
–

(4,084)
(708)

(240)

(7,556)

534
107

(1,091)
50

(92)
(63)

$ (2,733)

$ (3,697)

$(1,281) $ (7,711)

(1)

In 2006, 2005, and 2004, the Corporation reclassified net realized (gains) losses into earnings on the sales of AFS debt securities of $279 million, $(683) million, and $(1.1) billion, respectively, and (gains) losses on the
sales of AFS marketable equity securities of $(499) million, $(191) million, and $(129) million, respectively.

(2) Accumulated OCI includes fair value gain of $135 million on certain retained interests in the Corporation’s securitization transactions at December 31, 2006.
(3) The amount included in Accumulated OCI for terminated derivative contracts were losses of $3.2 billion and $2.5 billion, net-of-tax, at December 31, 2006 and 2005, and gains of $143 million, net-of-tax, at December 31,

2004.

(4) At December 31, 2006, Accumulated OCI includes the accumulated adjustment to initially apply FASB Statement No. 158 of $(1,428) million.
(5)

Included in this line item are amounts related to derivatives used in cash flow hedge relationships. These amounts are reclassified into earnings in the same year or years during which the hedged forecasted transactions
affect earnings. This line item also includes gains (losses) on AFS securities. These amounts are reclassified into earnings upon sale of the related security.

Earnings per Common Share
The calculation of earnings per common share and diluted earnings per common share for 2006, 2005, and 2004 is presented below. See Note 1 of the
Consolidated Financial Statements for a discussion on the calculation of earnings per common share.

(Dollars in millions, except per share information; shares in thousands)

Earnings per common share
Net income
Preferred stock dividends

Net income available to common shareholders

Average common shares issued and outstanding

Earnings per common share

Diluted earnings per common share
Net income available to common shareholders
Convertible preferred stock dividends

Net income available to common shareholders and assumed conversions

Average common shares issued and outstanding
Dilutive potential common shares (1, 2)

Total diluted average common shares issued and outstanding

Diluted earnings per common share

2006

2005

2004

21,133
(22)

21,111

4,526,637

4.66

21,111
–

21,111

16,465
(18)

16,447

4,008,688

4.10

16,447
–

16,447

13,947
(16)

13,931

3,758,507

3.71

13,931
2

13,933

4,526,637
69,259

4,008,688
59,452

3,758,507
65,436

4,595,896

4,068,140

3,823,943

4.59

4.04

3.64

(1) For 2006, 2005 and 2004, average options to purchase 355 thousand, 39 million and 62 million shares, respectively, were outstanding but not included in the computation of earnings per common share because they were

antidilutive.
Includes incremental shares from restricted stock units, restricted stock shares and stock options.

(2)

Bank of America 2006

135

that

includes subordinated debt

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
is
other adjustments. Tier 3 Capital
unsecured, fully paid, has an original maturity of at least two years, is not
redeemable before maturity without prior approval by the FRB and includes
a lock-in clause precluding payment of either interest or principal
if the
payment would cause the issuing bank’s risk-based capital ratio to fall or
remain below the required minimum. Tier 3 Capital can only be used to
satisfy the Corporation’s market risk capital requirement and may not be
used to support its credit risk requirement. At December 31, 2006 and
2005, the Corporation had no subordinated debt that qualified as Tier 3
Capital.

Certain corporate sponsored trust companies which issue Trust
Securities are not consolidated under FIN 46R. As a result, the Trust
Securities are not
included on our Consolidated Balance Sheet. On
March 1, 2005, the FRB issued Risk-Based Capital Standards: Trust Pre-
ferred Securities and the Definition of Capital (the Final Rule) which allows
Trust Securities to continue to qualify as Tier 1 Capital with revised quanti-
tative limits that would be effective after a five-year transition period. As a
result, Trust Securities are included in Tier 1 Capital.

The FRB’s Final Rule limits restricted core capital elements to 15
percent for internationally active bank holding companies. Internationally
active bank holding companies are those with consolidated assets greater
than $250 billion or on-balance sheet exposure greater than $10 billion. In
addition, the FRB revised the qualitative standards for capital instruments
included in regulatory capital. At December 31, 2006, our restricted core
capital elements comprised 17.3 percent of total core capital elements.
We expect
to the
implementation date of March 31, 2009.

to be fully compliant with the revised limits prior

To meet minimum, adequately-capitalized regulatory requirements, an
institution must maintain a Tier 1 Capital ratio of four percent and a Total
Capital ratio of eight percent. A well-capitalized institution must generally
maintain capital ratios 200 bps higher than the minimum guidelines. The
risk-based capital rules have been further supplemented by a leverage
ratio, defined as Tier 1 Capital divided by adjusted quarterly average Total
Assets, after certain adjustments. The leverage ratio guidelines establish
a minimum of three percent. Banking organizations must maintain a lever-
to be classified as “well-
age capital
capitalized.” As of December 31, 2006, the Corporation was classified as
“well-capitalized” for regulatory purposes, the highest classification.

five percent

ratio of at

least

Net Unrealized Gains (Losses) on AFS Debt Securities, Net Unreal-
ized Gains on AFS Marketable Equity Securities, Net Unrealized Gains
(Losses) on Derivatives, and the impact of SFAS 158 included in Share-
holders’ Equity at December 31, 2006 and 2005, are excluded from the
calculations of Tier 1 Capital and leverage ratios. The Total Capital ratio
excludes all of the above with the exception of up to 45 percent of Net
Unrealized Gains on AFS Marketable Equity Securities.

Note 15 – Regulatory Requirements and
Restrictions
The Board of Governors of the Federal Reserve System (FRB) requires the
Corporation’s banking subsidiaries to maintain reserve balances based on
a percentage of certain deposits. Average daily reserve balances required
by the FRB were $5.6 billion and $6.4 billion for 2006 and 2005. Currency
and coin residing in branches and cash vaults (vault cash) are used to
partially satisfy the reserve requirement. The average daily reserve balan-
ces, in excess of vault cash, held with the FRB amounted to $27 million
and $361 million for 2006 and 2005.

The primary source of funds for cash distributions by the Corporation
to its shareholders is dividends received from its banking subsidiaries
Bank of America, N.A. and FIA Card Services, N.A. Effective June 10,
2006, MBNA America Bank, N.A. was renamed FIA Card Services, N.A.
Additionally, on October 20, 2006, Bank of America, N.A. (USA) merged
In 2006, Bank of America Corporation
into FIA Card Services, N.A.
received $16.0 billion in dividends from its banking subsidiaries. In 2007,
Bank of America, N.A. and FIA Card Services, N.A. can declare and pay
dividends to Bank of America Corporation of $11.4 billion and $356 mil-
lion plus an additional amount equal to their net profits for 2007, as
defined by statute, up to the date of any such dividend declaration. The
other subsidiary national banks can initiate aggregate dividend payments
in 2007 of $68 million plus an additional amount equal to their net profits
for 2007, as defined by statute, up to the date of any such dividend decla-
ration. The amount of dividends that each subsidiary bank may declare in
a calendar year without approval by the Office of the Comptroller of the
Currency (OCC) is the subsidiary bank’s net profits for that year combined
with its net retained profits, as defined, for the preceding two years.

The FRB, the OCC and the Federal Deposit Insurance Corporation
(collectively, the Agencies) have issued regulatory capital guidelines for
U.S. banking organizations. Failure to meet the capital requirements can
initiate certain mandatory and discretionary actions by regulators that
could have a material effect on the Corporation’s financial statements. At
December 31, 2006, the Corporation, Bank of America, N.A. and FIA Card
Services, N.A. were classified as “well-capitalized” under this regulatory
framework. At December 31, 2005, the Corporation, Bank of America N.A.
and Bank of America, N.A. (USA) were also classified as “well-capitalized.”
There have been no conditions or events since December 31, 2006 that
management believes have changed the Corporation’s, Bank of America,
N.A.’s and FIA Card Services, N.A.’s capital classifications.
The regulatory capital guidelines measure capital

in relation to the
credit and market risks of both on and off-balance sheet items using vari-
ous risk weights. Under the regulatory capital guidelines, Total Capital
consists of three tiers of capital. Tier 1 Capital includes Common Share-
holders’ Equity, Trust Securities, minority interests and qualifying Preferred
Stock, less Goodwill and other adjustments. Tier 2 Capital consists of
Preferred Stock not qualifying as Tier 1 Capital, mandatory convertible

136 Bank of America 2006

Regulatory Capital Developments
On September 25, 2006,
the Agencies officially published updates
specific to U.S. market implementation of the risk-based capital rules
originally published by the Basel Committee of Banking Supervision in
June 2004. These updates provided clarification and additional guidance
related to the rules and their implementation, as well as started an official
comment period, which was subsequently extended in December 2006 for
an additional 90 days.
Several of our

international units have begun local parallel
II ratios to their host countries during

implementation reporting Basel

Regulatory Capital

(Dollars in millions)

Risk-based capital
Tier 1

Bank of America Corporation
Bank of America, N.A.
FIA Card Services, N.A. (2)
Bank of America, N.A. (USA) (3)

Total

Bank of America Corporation
Bank of America, N.A.
FIA Card Services, N.A. (2)
Bank of America, N.A. (USA) (3)

Tier 1 Leverage

Bank of America Corporation
Bank of America, N.A.
FIA Card Services, N.A. (2)
Bank of America, N.A. (USA) (3)

(1) Dollar amount required to meet guidelines for adequately capitalized institutions.
(2) FIA Card Services, N.A. is presented for periods subsequent to December 31, 2005.
(3) Bank of America, N.A. (USA) merged into FIA Card Services, N.A. on October 20, 2006.

Note 16 – Employee Benefit Plans

Pension and Postretirement Plans
The Corporation sponsors noncontributory trusteed qualified pension plans
that cover substantially all officers and employees. The plans provide
defined benefits based on an employee’s compensation, age and years of
service. The Bank of America Pension Plan (the Pension Plan) provides
participants with compensation credits, based on age and years of serv-
ice. The Pension Plan allows participants to select from various earnings
measures, which are based on the returns of certain funds or common
stock of
the Corporation. The participant-selected earnings measures
determine the earnings rate on the individual participant account balances
in the Pension Plan. Participants may elect to modify earnings measure
allocations on a periodic basis subject to the provisions of the Pension
Plan. The benefits become vested upon completion of five years of serv-
ice. It is the policy of the Corporation to fund not less than the minimum
funding amount required by ERISA.

The Pension Plan has a balance guarantee feature, applied at the
time a benefit payment is made from the plan, that protects participant
balances transferred and certain compensation credits from future market
downturns. The Corporation is responsible for funding any shortfall on the
guarantee feature.

As a result of recent mergers, the Corporation assumed the obliga-
tions related to the pension plans of former FleetBoston and MBNA. The
Bank of America Pension Plan for Legacy Fleet (the Fleet Pension Plan) is
substantially similar to the Bank of America Plan discussed above; how-

2006, with full implementation expected during 2007. With the recently
published updates, revised market risk rules are scheduled to be fully
implemented in 2008, while credit and operational risk rules are subject
to a parallel
test period, supervisory approval and subsequent
implementation. During the parallel testing environment, current regulatory
capital measures will be utilized simultaneously with the new rules. During
the three-year implementation period, the U.S. will impose floors (limits)
on capital reductions when compared to current measures.

December 31

2006

Actual

Ratio

Amount

Minimum
Required (1)

2005

Actual

Ratio

Amount

Minimum
Required (1)

8.64%
8.89
14.08
–

11.88
11.19
17.02
–

6.36
6.63
16.88
–

$91,064
76,174
19,562
–

125,226
95,867
23,648
–

91,064
76,174
19,562
–

$42,181
34,264
5,558
–

84,363
68,529
11,117
–

42,935
34,487
3,478
–

8.25%
8.70
–
8.66

$74,375
69,547
–
5,567

11.08
10.73
–
11.46

5.91
6.69
–
9.37

99,901
85,773
–
7,361

74,375
69,547
–
5,567

$36,059
31,987
–
2,570

72,118
63,973
–
5,140

37,732
31,192
–
1,783

ever, the Fleet Pension Plan does not allow participants to select various
earnings measures; rather the earnings rate is based on a benchmark
rate. The Bank of America Pension Plan for Legacy MBNA (the MBNA Pen-
sion Plan) retirement benefits are based on the number of years of benefit
service and a percentage of the participant’s average annual compensa-
tion during the five highest paid consecutive years of their last ten years of
employment.

The Corporation sponsors a number of noncontributory, nonqualified
pension plans. As a result of mergers, the Corporation assumed the
obligations related to the noncontributory, nonqualified pension plans of
former FleetBoston and MBNA. These plans, which are unfunded, provide
defined pension benefits to certain employees.

In addition to retirement pension benefits, full-time, salaried employ-
ees and certain part-time employees may become eligible to continue par-
ticipation as retirees in health care and/or life insurance plans sponsored
by the Corporation. Based on the other provisions of the individual plans,
certain retirees may also have the cost of these benefits partially paid by
the Corporation. The obligations assumed as a result of the merger with
FleetBoston are substantially similar to the Corporation’s Postretirement
Health and Life Plans. The MBNA Postretirement Health and Life Plan pro-
vides certain health care and life insurance benefits for a closed group
upon early retirement.

The tables within this Note include the information related to the
MBNA plans described above beginning January 1, 2006 and the Fleet-
Boston plans beginning April 1, 2004.

Bank of America 2006

137

On December 31, 2006, the Corporation adopted SFAS 158 which
requires the recognition of a plan’s over-funded or under-funded status as
an asset or liability with an offsetting adjustment to Accumulated OCI.
SFAS 158 requires the determination of the fair values of a plan’s assets
at a company’s year-end and recognition of actuarial gains and losses,
prior service costs or credits, and transition assets or obligations as a
component of Accumulated OCI. These amounts were previously netted
against the plans’ funded status in the Corporation’s Consolidated Bal-
ance Sheet pursuant to the provisions of SFAS 87. These amounts will be
subsequently recognized as components of net periodic benefit costs.

Further, actuarial gains and losses that arise in subsequent periods that
are not initially recognized as a component of net periodic benefit cost will
be recognized as a component of Accumulated OCI. Those amounts will
subsequently be recognized as a component of net periodic benefit cost
as they are amortized during future periods.

The incremental effects of adopting the provisions of SFAS 158 on
the Corporation’s Consolidated Balance Sheet at December 31, 2006 are
presented in the following table. The adoption of SFAS 158 had no effect
on the Corporation’s Consolidated Statement of Income for the year ended
December 31, 2006, or for any year presented.

(Dollars in millions)

Other assets (1)
Total assets
Accrued expenses and other liabilities (2)
Total liabilities
Accumulated OCI (3)
Total shareholders’ equity
Total liabilities and shareholders’ equity

Before
Application of
Statement 158

$ 121,649
1,461,703
42,790
1,325,123
(6,403)
136,580
1,461,703

Adjustments

$(1,966)
(1,966)
(658)
(658)
(1,308)
(1,308)
(1,966)

After
Application of
Statement 158

$ 119,683
1,459,737
42,132
1,324,465
(7,711)
135,272
1,459,737

(1) Represents adjustments to plans in an asset position of $(1,966) million.
(2) Represents adjustments to plans in a liability position of $301 million, the reversal of the additional minimum liability adjustment of $(190) million and an adjustment to deferred tax liabilities of $(769) million.
(3)

Includes employee benefit plan adjustments of $(1,428) million, net of tax, and the reversal of the additional minimum liability adjustment of $120 million, net of tax.

Amounts included in Accumulated OCI (pre-tax) at December 31, 2006 were as follows:

(Dollars in millions)

Net actuarial loss
Transition obligation
Prior service cost
Amount recognized in Accumulated OCI (1)

(1) Amount recognized in Accumulated OCI net of tax is $1,428 million.

Qualified
Pension Plans

Nonqualified
Pension Plans

$1,765
–
201

$ 1,966

$224
–
(44)

$180

Postretirement
Health and Life
Plans

$ (68)
189
–

$121

Total

$1,921
189
157

$ 2,267

The estimated net actuarial loss and prior service cost for the Quali-
fied Pension Plans that will be amortized from Accumulated OCI, (pre-tax),
into net periodic benefit cost during 2007 are $130 million and $46 mil-
lion. The estimated net actuarial loss and prior service cost for the Non-
qualified Pension Plans that will be amortized from Accumulated OCI, (pre-

tax), into net periodic benefit cost during 2007 are $19 million and $(8)
million. The estimated net actuarial loss and transition obligation for the
Postretirement Health and Life Plans that will be amortized from Accumu-
lated OCI, (pre-tax), into net periodic benefit cost during 2007 is $(22)
million and $31 million.

138 Bank of America 2006

The following table summarizes the changes in the fair value of plan
assets, changes in the projected benefit obligation (PBO), the funded sta-
tus of both the accumulated benefit obligation (ABO) and the PBO, and the
weighted average assumptions used to determine benefit obligations for
the pension plans and postretirement plans at December 31, 2006 and
2005. Amounts recognized at December 31, 2006 and 2005 are reflected
in Other Assets, and Accrued Expenses and Other Liabilities on the Con-
solidated Balance Sheet. The discount rate assumption is based on a
cash flow matching technique and is subject to change each year. This
technique utilizes a yield curve based upon Aa rated corporate bonds with
cash flows that match estimated benefit payments to produce the dis-
count rate assumption. For the Pension Plan, the FleetBoston Pension

Plan, and the MBNA Pension Plan, (the Qualified Pension Plans), the
Nonqualified Pension Plans, and the Postretirement Health and Life Plans,
the discount rate at December 31, 2006, was 5.75 percent. For both the
Qualified Pension Plans and the Postretirement Health and Life Plans, the
expected long-term return on plan assets is 8.00 percent for 2007. The
expected return on plan assets is determined using the calculated market-
related value for the Qualified Pension Plans and the fair value for the
Postretirement Health and Life Plans. The asset valuation method for the
Qualified Pension Plans recognizes 60 percent of the market gains or
losses in the first year, with the remaining 40 percent spread equally over
the next four years.

(Dollars in millions)

Change in fair value of plan assets
(Primarily listed stocks, fixed income and real estate)
Fair value, January 1
MBNA balance, January 1, 2006
Actual return on plan assets
Company contributions (2)
Plan participant contributions
Benefits paid
Federal subsidy on benefits paid

Fair value, December 31

Change in projected benefit obligation
Projected benefit obligation, January 1
MBNA balance, January 1, 2006
Service cost
Interest cost
Plan participant contributions
Plan amendments
Actuarial (gains) losses
Benefits paid
Federal subsidy on benefits paid

Projected benefit obligation, December 31

Funded status, December 31
Accumulated benefit obligation
Overfunded (unfunded) status of ABO
Provision for future salaries
Projected benefit obligation

Overfunded (unfunded) status of PBO
Unrecognized net actuarial loss (3)
Unrecognized transition obligation (3)
Unrecognized prior service cost (3)

Amount recognized, December 31

Weighted average assumptions, December 31
Discount rate
Expected return on plan assets
Rate of compensation increase

Qualified
Pension Plans (1)

Nonqualified
Pension Plans (1)

Postretirement
Health and Life Plans (1)

2006

2005

2006

2005

2006

2005

$13,097
555
1,829
2,200
–
(888)
n/a

$16,793

$11,690
695
306
676
–
33
168
(888)
n/a

$12,680

$12,151
4,642
529
12,680

$ 4,113
n/a
n/a
n/a

$ 4,113

$12,153
–
803
1,000
–
(859)
n/a

$13,097

$11,461
–
261
643
–
(77)
261
(859)
n/a

$11,690

$11,383
1,714
307
11,690

$ 1,407
2,621
–
209

$ 4,237

1
–
–
321
–
(322)
n/a

1
–
–
118
–
(118)
n/a

–

$ 1,108
486
13
78
–
–
(18)
(322)
n/a

$ 1,345

$ 1,345
(1,345)
–
1,345

$(1,345)
n/a
n/a
n/a

$(1,345)

$ 1,094
–
11
61
–
(1)
61
(118)
n/a

$ 1,108

$ 1,085
(1,084)
23
1,108

$(1,107)
262
–
(52)

$ (897)

$ 126
–
15
52
98
(213)
12

$ 1,420
278
13
86
98
–
(145)
(213)
12

$ 1,549

n/a
n/a
n/a
1,549

$(1,459)
n/a
n/a
n/a

$(1,459)

166
–
11
27
98
(176)
n/a

126

$ 1,352
–
11
78
98
–
57
(176)
n/a

$ 1,420

n/a
n/a
n/a
1,420

$(1,294)
92
221
–

$ (981)

5.75%
8.00
4.00

5.50%
8.50
4.00

5.75%
n/a
4.00

5.50%
n/a
4.00

5.75%
8.00
n/a

5.50%
8.50
n/a

(1) The measurement date for the Qualified Pension Plans, Nonqualified Pension Plans, and Postretirement Health and Life Plans was December 31 of each year reported.
(2) The Corporation’s best estimate of its contributions to be made to the Qualified Pension Plans, Nonqualified Pension Plans, and Postretirement Health and Life Plans in 2007 is $0, $97 million and $95 million.
(3) Upon the adoption of SFAS 158 on December 31, 2006, unrecognized net actuarial losses, unrecognized transition obligations, and unrecognized prior service costs are now recorded as an adjustment to Accumulated OCI.
n/a = not applicable

Bank of America 2006

139

Amounts recognized in the Consolidated Financial Statements at December 31, 2006 and 2005 were as follows:

(Dollars in millions)

Other assets
Accrued expenses and other liabilities

Net amount recognized at December 31

(Dollars in millions)

Prepaid benefit cost
Accrued benefit cost
Additional minimum liability
SFAS 87 Accumulated OCI adjustment (1)

Net amount recognized at December 31

(1) Amount recognized in Accumulated OCI net of tax is $118 million.

December 31, 2006

Qualified
Pension Plans

Nonqualified
Pension Plans

$ 4,113
–

$ 4,113

–
(1,345)

$(1,345)

Postretirement
Health and Life
Plans

–
(1,459)

$(1,459)

December 31, 2005

Qualified
Pension Plans

Nonqualified
Pension Plans

Postretirement
Health and Life
Plans

$4,237
—
—
—

$ 4,237

$ —
(897)
(187)
187

$ (897)

$ —
(981)
—
—

$ (981)

Net periodic benefit cost for 2006, 2005 and 2004 included the following components:

(Dollars in millions)

Components of net periodic benefit cost
Service cost
Interest cost
Expected return on plan assets
Amortization of transition obligation
Amortization of prior service cost (credits)
Recognized net actuarial loss
Recognized loss due to settlements and curtailments

Net periodic benefit cost

Weighted average assumptions used to determine net cost for

years ended December 31

Discount rate (1)
Expected return on plan assets
Rate of compensation increase

Qualified
Pension Plans

Nonqualified
Pension Plans

Postretirement
Health and Life Plans

2006

2005

2004

2006

2005

2004

2006

2005

2004

$ 306
676
(1,034)
–
41
229
–

$ 218

$ 261
643
(983)
–
44
182
–

$ 147

$ 257
623
(915)
–
55
92
–

$ 112

$ 13
78
–
–
(8)
20
–

$ 103

$ 11
61
–
–
(8)
24
9

$ 97

$ 27
62
–
–
3
14
–

$ 106

$ 13
86
(10)
31
–
12
–

$ 132

$ 11
78
(14)
31
–
80
–

$ 186

9
76
(16)
32
1
74
–

$ 176

5.50%
8.00
4.00

5.75%
8.50
4.00

6.25%
8.50
4.00

5.50%
n/a
4.00

5.75%
n/a
4.00

6.25%
n/a
4.00

5.50%
8.00
n/a

5.75%
8.50
n/a

6.25%
8.50
n/a

(1)

In connection with the FleetBoston merger, their plans were remeasured on April 1, 2004, using a discount rate of 6.00 percent.

n/a = not applicable

Net periodic postretirement health and life expense was determined
using the “projected unit credit” actuarial method. Gains and losses for all
benefits except postretirement health care are recognized in accordance
with the standard amortization provisions of the applicable accounting
standards. For the Postretirement Health Care Plans, 50 percent of the
unrecognized gain or loss at the beginning of the fiscal year (or at sub-
sequent remeasurement) is recognized on a level basis during the year.

Assumed health care cost trend rates affect the postretirement bene-
fit obligation and benefit cost reported for the Postretirement Health Care
Plans. The assumed health care cost trend rate used to measure the
expected cost of benefits covered by the Postretirement Health Care Plans
was 9.0 percent for 2007, reducing in steps to 5.0 percent in 2012 and
later years. A one-percentage-point increase in assumed health care cost
trend rates would have increased the service and interest costs and the
benefit obligation by $3 million and $51 million in 2006, $3 million and
$51 million in 2005, and $4 million and $56 million in 2004. A
one-percentage-point decrease in assumed health care cost trend rates
would have lowered the service and interest costs and the benefit obliga-
tion by $3 million and $44 million in 2006, $3 million and $43 million in
2005, and $3 million and $48 million in 2004.

Plan Assets
The Qualified Pension Plans have been established as retirement vehicles
for participants, and trusts have been established to secure benefits
promised under the Qualified Pension Plans. The Corporation’s policy is to
invest the trust assets in a prudent manner for the exclusive purpose of
providing benefits to participants and defraying reasonable expenses of
administration. The Corporation’s investment strategy is designed to pro-
vide a total return that, over the long-term, increases the ratio of assets to
liabilities. The strategy attempts to maximize the investment return on
assets at a level of risk deemed appropriate by the Corporation while
complying with ERISA and any applicable regulations and laws. The
investment strategy utilizes asset allocation as a principal determinant for
establishing the risk/reward profile of the assets. Asset allocation ranges
are established, periodically reviewed, and adjusted as funding levels and
liability characteristics change. Active and passive investment managers
are employed to help enhance the risk/return profile of the assets. An
additional aspect of the investment strategy used to minimize risk (part of
the asset allocation plan)
includes matching the equity exposure of
participant-selected earnings measures. For example, the common stock
of the Corporation held in the trust is maintained as an offset to the

140 Bank of America 2006

exposure related to participants who selected to receive an earnings
measure based on the return performance of common stock of the Corpo-
ration. No plan assets are expected to be returned to the Corporation
during 2007.

The Expected Return on Asset Assumption (EROA assumption) was
developed through analysis of historical market returns, historical asset
class volatility and correlations, current market conditions, anticipated
future asset allocations, the funds’ past experience, and expectations on
potential future market returns. The EROA assumption represents a long-
term average view of the performance of the Qualified Pension Plans and
Postretirement Health and Life Plan assets, a return that may or may not
be achieved during any one calendar year. In a simplistic analysis of the
EROA assumption, the building blocks used to arrive at the long-term
return assumption would include an implied return from equity securities
of 8.75 percent, debt securities of 5.75 percent, and real estate of 7.00
percent for all pension plans and postretirement health and life plans.

The Qualified Pension Plans’ and Postretirement Health and Life
Plans’ asset allocations at December 31, 2006 and 2005 and target allo-
cations for 2007 by asset category are presented in the following table.

Equity securities for the Qualified Pension Plans include common
stock of the Corporation in the amounts of $882 million (5.25 percent of
total plan assets) and $798 million (6.10 percent of total plan assets) at
December 31, 2006 and 2005.

The Bank of America and MBNA Postretirement Health and Life Plans
had no investment
the Corporation at
in the common stock of
December 31, 2006 or 2005. The FleetBoston Postretirement Health and
Life Plans included common stock of the Corporation in the amount of
$0.4 million (0.46 percent of total plan assets) and $0.3 million (0.27
percent of total plan assets) at December 31, 2006 and December 31,
2005, respectively.

Asset Category

Equity securities
Debt securities
Real estate

Total

Qualified
Pension Plans

Postretirement
Health and Life Plans

2007
Target
Allocation

65 – 80%
20 – 35
0 – 5

Percentage of
Plan Assets at
December 31

2006

2005

68%
30
2

100%

71%
27
2

100%

2007
Target
Allocation

50 – 70%
30 – 50
0 – 5

Percentage of
Plan Assets at
December 31

2006

2005

61%
36
3

100%

57%
41
2

100%

Projected Benefit Payments
Benefit payments projected to be made from the Qualified Pension Plans, the Nonqualified Pension Plans and the Postretirement Health and Life Plans are
as follows:

(Dollars in millions)

2007
2008
2009
2010
2011
2012 – 2016

Qualified
Pension Plans (1)

Nonqualified
Pension Plans (2)

Postretirement Health and Life Plans

Net Payments (3)

Medicare Subsidy

$1,007
1,022
1,026
1,035
1,051
5,262

$ 97
101
104
103
105
518

$135
135
137
138
138
656

$(12)
(12)
(12)
(12)
(12)
(58)

(1) Benefit payments expected to be made from the plans’ assets.
(2) Benefit payments expected to be made from the Corporation’s assets.
(3) Benefit payments (net of retiree contributions) expected to be made from a combination of the plans’ and the Corporation’s assets.

Defined Contribution Plans
The Corporation maintains qualified defined contribution retirement plans
and nonqualified defined contribution retirement plans. As a result of the
FleetBoston merger, beginning on April 1, 2004, the Corporation maintains
the defined contribution plans of former FleetBoston. As a result of the
MBNA merger on January 1, 2006, the Corporation also maintains the
defined contribution plans of former MBNA.

The Corporation contributed approximately $328 million, $274 mil-
lion and $267 million for 2006, 2005 and 2004, in cash and stock,
respectively. At December 31, 2006 and 2005, an aggregate of 99 million
shares and 106 million shares of the Corporation’s common stock were
held by the 401(k) Plans. During 2004, the Corporation converted the

ESOP Preferred Stock held by the Bank of America 401(k) Plan to common
stock so that there were no outstanding shares of preferred stock at
December 31, 2004 in the 401(k) Plans.

Under the terms of the Employee Stock Ownership Plan (ESOP) Pre-
ferred Stock provision for the Bank of America 401(k) Plan, payments to
the plan for dividends on the ESOP Preferred Stock were $4 million for
2004. Payments to the Bank of America 401(k) Plan and legacy Fleet-
Boston 401(k) Plan for dividends on Common Stock were $208 million,
$207 million and $181 million during 2006, 2005 and 2004, respectively.
Payments to the MBNA 401(k) Plan for dividends on the Corporation’s
common stock were $8 million in 2006.

Bank of America 2006

141

In addition, certain non-U.S. employees within the Corporation are
covered under defined contribution pension plans that are separately
administered in accordance with local laws.

different fair value estimates. The actual value of the stock options will
depend on the market value of the Corporation’s common stock when the
stock options are exercised.

Rewarding Success Plan
In 2005, the Corporation introduced a broad-based cash incentive plan for
associates that meet certain eligibility criteria and are below certain
compensation levels. The amount of the cash award is determined based
on the Corporation’s operating net income and common stock price per-
formance for
the Corporation
recorded an expense of $237 million and $145 million for this Plan.

the full year. During 2006 and 2005,

Note 17 – Stock-Based Compensation Plans
On January 1, 2006, the Corporation adopted SFAS 123R under the
modified-prospective application.

The compensation cost recognized in income for the plans described
below was $1.0 billion, $805 million and $536 million in 2006, 2005 and
2004, respectively. The related income tax benefit recognized in income
was $382 million, $294 million and $188 million for 2006, 2005 and
2004, respectively.

Prior to the adoption of SFAS 123R, awards granted to retirement-
eligible employees were expensed over the stated vesting period. SFAS
123R requires that the Corporation recognize stock compensation cost
immediately for any awards granted to retirement-eligible employees, or
over the vesting period or the period from the grant date to the date
retirement eligibility is achieved, whichever is shorter. Upon the grant of
awards in the first quarter of 2006, the Corporation recognized approx-
imately $320 million in equity-based compensation due to awards being
granted to retirement-eligible employees.

Prior to the adoption of SFAS 123R, the Corporation presented tax
benefits of deductions resulting from the exercise of stock options as
operating cash flows in the Consolidated Statement of Cash Flows. SFAS
123R requires the cash flows resulting from the tax benefits due to tax
deductions in excess of the compensation cost recognized for those
options (excess tax benefits) to be classified as financing cash flows. The
Corporation classified $477 million in excess tax benefits as a financing
cash inflow for 2006.

for 2006.

Prior to January 1, 2006, the Corporation estimated the fair value of
stock options granted on the date of grant using the Black-Scholes option-
pricing model. On January 1, 2006, the Corporation began using a lattice
option-pricing model to estimate the grant date fair value of stock options
granted. The following table presents the assumptions used to estimate
the fair value of stock options granted on the date of grant using the lat-
tice option-pricing model
Lattice option-pricing models
incorporate ranges of assumptions for inputs and those ranges are dis-
closed in the following table. The risk-free rate for periods within the con-
tractual life of the stock option is based on the U.S. Treasury yield curve in
effect at the time of grant. Expected volatilities are based on implied vola-
tilities from traded stock options on the Corporation’s common stock,
historical volatility of the Corporation’s common stock, and other factors.
The Corporation uses historical data to estimate stock option exercise and
employee termination within the model. The expected term of stock
options granted is derived from the output of the model and represents
the period of time that stock options granted are expected to be out-
standing. The following table also includes the assumptions used to esti-
mate the fair value of stock options granted on the date of grant using the
Black-Scholes option-pricing model for 2005 and 2004. The estimates of
fair value from these models are theoretical values for stock options and
changes in the assumptions used in the models could result in materially

Risk-free interest rate
Dividend yield
Expected volatility
Weighted-average volatility
Expected lives (years)

n/a = not applicable

2006

4.59 – 4.70%

4.50
17.00 – 27.00
20.30
6.5

2005

3.94%
4.60
20.53
n/a
6

2004

3.36%
4.56
22.12
n/a
5

The Corporation has equity compensation plans that were approved
by its shareholders. These plans are the Key Employee Stock Plan and the
Key Associate Stock Plan. Additionally one equity compensation plan
(2002 Associates Stock Option Plan) was not approved by the Corpo-
ration’s shareholders. Descriptions of the material features of these plans
follow.

Key Employee Stock Plan
The Key Employee Stock Plan, as amended and restated, provided for dif-
ferent types of awards. These include stock options, restricted stock
shares and restricted stock units. Under the plan, ten-year options to
purchase approximately 260 million shares of common stock were granted
through December 31, 2002, to certain employees at the closing market
price on the respective grant dates. Options granted under the plan gen-
erally vest in three or four equal annual
installments. At December 31,
2006, approximately 66 million options were outstanding under this plan.
No further awards may be granted.

Key Associate Stock Plan
On April 24, 2002, the shareholders approved the Key Associate Stock
Plan to be effective January 1, 2003. This approval authorized and
reserved 200 million shares for grant in addition to the remaining amount
under the Key Employee Stock Plan as of December 31, 2002, which was
approximately 34 million shares plus any shares covered by awards under
the Key Employee Stock Plan that terminate, expire, lapse or are cancelled
after December 31, 2002. Upon the FleetBoston merger, the shareholders
authorized an additional 102 million shares and on April 26, 2006, the
shareholders authorized an additional 180 million shares for grant under
the Key Associate Stock Plan. At December 31, 2006, approximately
135 million options were outstanding under
this plan. Approximately
18 million shares of restricted stock and restricted stock units were
granted in 2006. These shares of restricted stock generally vest in three
equal annual
installments beginning one year from the grant date. The
Corporation incurred restricted stock expense of $778 million, $486 mil-
lion, and $288 million in 2006, 2005 and 2004.

2002 Associates Stock Option Plan
The Bank of America Corporation 2002 Associates Stock Option Plan was
a broad-based plan that covered all employees below a specified executive
grade level and was not approved by the Corporation’s shareholders.
Under the plan, eligible employees received a one-time award of a pre-
determined number of options entitling them to purchase shares of the
Corporation’s common stock. All options are nonqualified and have an
exercise price equal to the fair market value on the date of grant. Approx-
imately 108 million options were granted on February 1, 2002. The award
included two performance-based vesting triggers, which were subsequently
achieved. At December 31, 2006, approximately 5 million options were
outstanding under this plan. The options expire on January 31, 2007. No
further awards may be granted.

142 Bank of America 2006

The following table presents information on equity compensation

plans at December 31, 2006:

Number of
Shares to be
Issued (1, 3)

Weighted Average
Exercise Price of
Outstanding
Options (2)

Number of Shares
Remaining for
Future Issuance
Under Equity
Compensation
Plans

215,115,189

$37.59

304,107,699

5,148,042

220,263,231

30.68

37.42

–

304,107,699

Plans approved by
shareholders
Plan not approved by
shareholders (4)

Total

(1)
Includes 13,871,207 unvested restricted stock units.
(2) Does not take into account unvested restricted stock units.
(3)

In addition to the securities presented in the table above, there were outstanding options to purchase
38,681,146 shares of the Corporation’s common stock and 502,760 unvested restricted stock units
granted to employees of predecessor companies assumed in mergers. The weighted average option price
of the assumed options was $34.07 at December 31, 2006.

(4) Shareholder approval of these broad-based stock option plans was not required by applicable law or New

York Stock Exchange rules.

The following table presents the status of all option plans at

December 31, 2006, and changes during 2006:

Employee stock options

Outstanding at January 1, 2006
Options assumed through acquisition
Granted
Exercised
Forfeited

Outstanding at December 31, 2006

Options exercisable at December 31, 2006
Options vested and expected to vest (1)

December 31, 2006

Weighted
Average
Exercise
Price

$35.13
32.70
44.42
32.93
41.48

36.89

34.17
36.87

298,132,802
31,506,268
31,534,150
(111,615,059)
(4,484,991)

245,073,170

178,277,236
244,223,346

The weighted average remaining contractual

term and aggregate
intrinsic value of options outstanding was 5.7 years and $4.0 billion,
options exercisable was 4.7 years and $3.4 billion, and options vested
and expected to vest was 5.7 years and $4.0 billion at December 31,
2006.

The weighted average grant-date fair value of options granted in
2006, 2005 and 2004 was $6.90, $6.48 and $5.59. The total intrinsic
value of options exercised in 2006 was $2.0 billion.

The following table presents the status of the nonvested shares at

December 31, 2006, and changes during 2006:

December 31, 2006

Restricted stock/unit awards

Outstanding at January 1, 2006
Share obligations assumed through acquisition
Granted
Vested
Cancelled

Outstanding at December 31, 2006

27,278,106
754,740
18,128,115
(12,319,864)
(2,251,755)

31,589,342

Weighted
Average
Grant Date
Fair Value

$42.79
30.40
44.43
41.41
44.52

43.85

At December 31, 2006, there was $766 million of total unrecognized
compensation cost related to share-based compensation arrangements for
all awards that is expected to be recognized over a weighted average
period of .86 years. The total fair value of restricted stock vested in 2006
was $559 million.

(1)

Includes vested shares and nonvested shares after a forfeiture rate is applied.

Note 18 – Income Taxes
The components of Income Tax Expense for 2006, 2005 and 2004 were as follows:

(Dollars in millions)

Current income tax expense
Federal
State
Foreign

Total current expense

Deferred income tax expense (benefit)
Federal
State
Foreign

Total deferred expense (benefit)
Total income tax expense (1)

2006

2005

2004

$ 7,398
796
796

8,990

1,807
45
(2)

1,850

$5,229
676
415

6,320

1,577
85
33

1,695

$6,392
683
405

7,480

(512)
(23)
16

(519)

$10,840

$8,015

$6,961

(1) Does not reflect the deferred tax effects of Unrealized Gains and Losses on AFS Debt and Marketable Equity Securities, Foreign Currency Translation Adjustments, Derivatives, and the accumulated adjustment to apply SFAS
No. 158 that are included in Accumulated OCI. As a result of these tax effects, Accumulated OCI increased $378 million, $2,863 million and $303 million in 2006, 2005 and 2004. Also, does not reflect tax benefits
associated with the Corporation’s employee stock plans which increased Common Stock and Additional Paid-in Capital $674 million, $416 million and $401 million in 2006, 2005 and 2004. Goodwill was reduced $195
million, $22 million and $101 million in 2006, 2005 and 2004, reflecting the tax benefits attributable to exercises of employee stock options issued by MBNA and FleetBoston which had vested prior to the merger dates.

Bank of America 2006

143

Income Tax Expense for 2006, 2005 and 2004 varied from the
amount computed by applying the statutory income tax rate to Income
before Income Taxes. A reconciliation between the expected federal
income tax expense using the federal statutory tax rate of 35 percent to
the Corporation’s actual Income Tax Expense and resulting effective tax
rate for 2006, 2005 and 2004 are presented in the following table.

The IRS is currently examining the Corporation’s federal income tax
returns for the years 2000 through 2002. In addition, the federal income

tax returns of FleetBoston and certain other subsidiaries are currently
under examination for years ranging from 1997 through 2004 as well as
income tax returns of MBNA for years ranging from 2001
the federal
through 2004. The Corporation’s current estimate of the resolution of
these various examinations is reflected in accrued income taxes; however,
final settlement of the examinations or changes in the Corporation’s esti-
mate may result in future income tax expense or benefit.

(Dollars in millions)

Expected federal income tax expense
Increase (decrease) in taxes resulting from:
Tax-exempt income, including dividends
State tax expense, net of federal benefit
Low income housing credits/other credits
Foreign tax differential
TIPRA – FSC/ETI
Other

Total income tax expense

2006

2005

2004

Amount

$11,191

Percent

35.0%

Amount

$8,568

Percent

35.0%

Amount

$7,318

Percent

35.0%

(630)
547
(537)
(291)
175
385

(2.0)
1.7
(1.7)
(0.9)
0.5
1.3

(605)
495
(423)
(99)
–
79

(2.5)
2.0
(1.7)
(0.4)
–
0.3

(526)
429
(352)
(78)
–
170

(2.5)
2.1
(1.7)
(0.4)
–
0.8

$10,840

33.9%

$8,015

32.7%

$6,961

33.3%

Significant components of the Corporation’s net deferred tax liability at December 31, 2006 and 2005 are presented in the following table.

(Dollars in millions)

Deferred tax liabilities
Equipment lease financing
Intangibles
Fee income
Mortgage servicing rights
Foreign currency
State income taxes
Fixed assets
Loan fees and expenses
Other

Gross deferred tax liabilities

Deferred tax assets
Allowance for credit losses
Security valuations
Available-for-sale securities
Accrued expenses
Employee compensation and retirement benefits
Foreign tax credit carryforward
Other

Gross deferred tax assets

Valuation allowance (1)

Total deferred tax assets, net of valuation allowance
Net deferred tax liabilities (2)

December 31

2006

2005

$ 6,895
1,198
1,065
787
659
353
–
–
1,232

12,189

3,054
2,703
1,632
1,283
1,273
117
198

10,260

(122)

10,138

$ 2,051

$ 6,455
506
386
632
251
168
152
142
1,137

9,829

2,623
3,208
1,845
1,235
559
169
429

10,068

(253)

9,815

(1) At December 31, 2006 and 2005, $43 million and $53 million of the valuation allowance related to gross deferred tax assets was attributable to the MBNA and FleetBoston mergers. Future recognition of the tax attributes

associated with these gross deferred tax assets would result in tax benefits being allocated to reduce Goodwill.

(2) The Corporation’s net deferred tax liabilities were adjusted during 2006 and 2005 to include $565 million and $279 million of net deferred tax liabilities related to business combinations accounted for under the purchase

method.

The valuation allowance at December 31, 2006 and 2005 is attribut-
able to deferred tax assets generated in certain state and foreign juris-
dictions for which management believes it is more likely than not that
realization of these assets will not occur. The decrease in the valuation
allowance primarily resulted from a remeasurement of certain state tempo-
rary differences against which valuation allowances had been recorded
and the conclusion of state tax examinations.

The foreign tax credit carryforward reflected in the table above repre-
sents foreign income taxes paid that are creditable against future U.S.
income taxes. If not used, these credits begin to expire after 2013 and
could fully expire after 2016.

The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA)
was signed into law in 2006. Among other things, TIPRA repealed certain
provisions of prior law relating to transactions entered into under the extra-
territorial income and foreign sales corporation regimes. The TIPRA repeal
results in an increase in the U.S. taxes expected to be paid on certain
portions of the income earned from such transactions after December 31,
2006. Accounting for the change in law resulted in the recognition of a
$175 million charge to Income Tax Expense during 2006.

The American Jobs Creation Act of 2004 (the Act) provides U.S.
companies with the ability to elect
to apply a special one-time tax
deduction equal to 85 percent of certain earnings remitted from foreign

144 Bank of America 2006

subsidiaries, provided certain criteria are met. Management elected to
apply the Act for 2005 and recorded a one-time tax benefit of $70 million
for the year ended December 31, 2005.

At December 31, 2006 and 2005, federal

income taxes had not
been provided on $4.4 billion and $1.4 billion of undistributed earnings of
foreign subsidiaries, earned prior to 1987 and after 1997 that have been
reinvested for an indefinite period of time. If the earnings were distributed,
an additional $573 million and $249 million of tax expense, net of credits
for foreign taxes paid on such earnings and for the related foreign with-
holding taxes, would have resulted in 2006 and 2005.

Note 19 – Fair Value of Financial Instruments
SFAS No. 107, “Disclosures About Fair Value of Financial Instruments”
(SFAS 107), requires the disclosure of the estimated fair value of financial
instruments. The fair value of a financial
instrument is the amount at
which the instrument could be exchanged in a current transaction between
willing parties, other than in a forced or liquidation sale. Quoted market
prices, if available, are utilized as estimates of the fair values of financial
instruments. Since no quoted market prices exist for certain of the Corpo-
instruments, the fair values of such instruments have
ration’s financial
been derived based on management’s assumptions,
the estimated
amount and timing of future cash flows and estimated discount rates. The
estimation methods for individual classifications of financial instruments
are described more fully below. Different assumptions could significantly
affect these estimates. Accordingly, the net realizable values could be
materially different from the estimates presented below. In addition, the
estimates are only indicative of the value of individual financial
instru-
ments and should not be considered an indication of the fair value of the
combined Corporation.

The provisions of SFAS 107 do not require the disclosure of the fair
value of
instruments,
including Goodwill and Intangible Assets such as purchased credit card,
affinity, and trust relationships.

lease financing arrangements and nonfinancial

Short-term Financial Instruments
The carrying value of short-term financial instruments, including cash and
cash equivalents, time deposits placed, federal funds sold and purchased,
resale and 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 and have no stated maturities or have short-term
maturities and carry interest rates that approximate market.

Financial Instruments Traded in the Secondary
Market and Strategic Investments
Held-to-maturity securities, AFS debt and marketable equity securities,
trading account instruments, long-term debt traded actively in the secon-
dary market and strategic investments have been valued using quoted
market prices. The fair values of trading account instruments, securities
and strategic investments are reported in Notes 3 and 5 of the Con-
solidated Financial Statements.

Derivative Financial Instruments
All derivatives are recognized on the Consolidated Balance Sheet at fair
value, net of cash collateral held and taking into consideration the effects
of legally enforceable master netting agreements that allow the Corpo-
ration to settle positive and negative positions with the same counterparty
on a net basis. For exchange-traded contracts, fair value is based on
quoted market prices. For non-exchange traded contracts, fair value is
based on dealer quotes, pricing models or quoted prices for instruments

with similar characteristics. The fair value of the Corporation’s derivative
assets and liabilities is presented in Note 4 of the Consolidated Financial
Statements.

Loans
Fair values were estimated for groups of similar loans based upon type of
loan and maturity. The fair value of loans was determined by discounting
estimated cash flows using interest rates approximating the Corporation’s
current origination rates for similar loans and adjusted to reflect the
inherent credit risk. Where quoted market prices were available, primarily
for certain residential mortgage loans and commercial loans, such market
prices were utilized as estimates for fair values.

Substantially all of the foreign loans reprice within relatively short
timeframes. Accordingly, for foreign loans, the net carrying values were
assumed to approximate their fair values.

Deposits
The fair value for deposits with stated maturities was calculated by dis-
counting contractual cash flows using current market rates for instruments
with similar maturities. The carrying value of foreign time deposits approx-
imates fair value. For deposits with no stated maturities, the carrying
amount was considered to approximate fair value and does not take into
account the significant value of the cost advantage and stability of the
Corporation’s long-term relationships with depositors.

The book and fair values of certain financial

instruments at

December 31, 2006 and 2005 were as follows:

(Dollars in millions)

Financial assets
Loans (1)
Financial liabilities
Deposits
Long-term debt

December 31

2006

2005

Book Value

Fair Value

Book Value

Fair Value

$675,544

$679,738

$545,238

$542,626

693,497
146,000

693,041
148,120

634,670
100,848

633,928
101,446

(1) Presented net of the Allowance for Loan and Lease Losses.

Note 20 – Business Segment Information
The Corporation reports the results of its operations through three busi-
ness segments: Global Consumer and Small Business Banking, Global
Corporate and Investment Banking, and Global Wealth and Investment
Management. The Corporation may periodically reclassify business seg-
ment results based on modifications to its management reporting method-
ologies and changes in organizational alignment.

Global Consumer and Small Business Banking provides a diversified
range of products and services to individuals and small businesses
through its primary businesses: Deposits, Card Services, Mortgage and
Home Equity. Global Corporate and Investment Banking serves domestic
and international issuer and investor clients, providing financial services,
specialized industry expertise and local delivery through its primary busi-
nesses: Business Lending, Capital Markets and Advisory Services, and
Treasury Services. These businesses provide traditional bank deposit and
loan products to large corporations and institutional clients, capital-raising
solutions, advisory services, derivatives capabilities, equity and debt sales
and trading for clients, as well as treasury management and payment serv-
ices. Global Wealth and Investment Management offers investment serv-
fiduciary
financial
ices,
management, credit and banking expertise, and diversified asset
management products to institutional clients, as well as affluent and high-
net-worth individuals through its primary businesses: The Private Bank,
Columbia Management and Premier Banking and Investments.

estate management,

services,

planning

Bank of America 2006

145

All Other consists of equity investment activities including Principal
Investing, Corporate Investments and Strategic Investments, the residual
impact of the allowance for credit losses and the cost allocation proc-
esses, Merger and Restructuring Charges, intersegment eliminations, and
the results of certain consumer finance and commercial
lending busi-
nesses that are being liquidated. All Other also includes certain amounts
impact of funds
associated with ALM activities, including the residual
transfer pricing allocation methodologies, amounts associated with the
change in the value of derivatives used as economic hedges of interest
rate and foreign exchange rate fluctuations that do not qualify for SFAS
133 hedge accounting treatment, certain gains or losses on sales of
whole mortgage loans, and Gains (Losses) on Sales of Debt Securities.

Total Revenue includes Net Interest Income on a FTE basis and
Noninterest Income. The adjustment of Net Interest Income to a FTE basis
results in a corresponding increase in Income Tax Expense. The Net Inter-
est Income of the businesses includes the results of a funds transfer pric-

ing process that matches assets and liabilities with similar interest rate
sensitivity and maturity characteristics. Net Interest Income of the busi-
ness segments also includes an allocation of Net Interest Income gen-
erated by the Corporation’s ALM activities.

Certain expenses not directly attributable to a specific business
segment are allocated to the segments based on pre-determined means.
The most significant of these expenses include data processing costs,
item processing costs and certain centralized or shared functions. Data
processing costs are allocated to the segments based on equipment
usage. Item processing costs are allocated to the segments based on the
volume of items processed for each segment. The costs of certain central-
ized or shared functions are allocated based on methodologies which
reflect utilization.

The following table presents Total Revenue on a FTE basis and Net
Income in 2006, 2005 and 2004, and Total Assets at December 31,
2006 and 2005 for each business segment, as well as All Other.

Business Segments
At and for the Year Ended December 31

(Dollars in millions)

Net interest income (FTE basis)
Noninterest income

Total revenue (FTE basis)

Provision for credit losses
Gains (losses) on sales of debt securities
Amortization of intangibles
Other noninterest expense

Income before income taxes

Income tax expense

Net income

Period-end total assets

(Dollars in millions)

Net interest income (FTE basis)
Noninterest income

Total revenue (FTE basis)

Provision for credit losses
Gains (losses) on sales of debt securities
Amortization of intangibles
Other noninterest expense

Income before income taxes

Income tax expense

Net income

Period-end total assets

(Dollars in millions)

Net interest income (FTE basis)
Noninterest income

Total revenue (FTE basis)

Provision for credit losses
Gains (losses) on sales of debt securities
Amortization of intangibles
Other noninterest expense

Income before income taxes

Income tax expense (benefit)

Net income

Period-end total assets

(1) There were no material intersegment revenues among the segments.
(2) Total Assets include asset allocations to match liabilities (i.e., deposits).

146 Bank of America 2006

2006

35,815
38,432

74,247
5,010
(443)
1,755
33,842

33,197
12,064

Total Corporation

2005

31,569
25,354

56,923
4,014
1,084
809
27,872

25,312
8,847

Global Consumer and
Small Business Banking (1, 2)

2004

$28,677
21,005

49,682
2,769
1,724
664
26,348

21,625
7,678

2006

$ 21,100
20,591

2005

$ 16,898
11,425

41,691
5,172
(1)
1,511
17,319

17,688
6,517

28,323
4,243
(2)
551
12,573

10,954
3,933

2004

$15,767
8,958

24,725
3,331
117
441
12,003

9,067
3,300

$ 5,767

21,133

$1,459,737

16,465

$13,947

$1,291,803

$ 11,171

$382,392

$ 7,021

$331,259

Global Corporate
and Investment Banking (1)

Global Wealth and
Investment Management (1, 2)

2006

$ 3,881
3,898

2005

$ 3,820
3,496

7,779
(40)
—
76
3,929

3,814
1,411

7,316
(7)
—
79
3,631

3,613
1,297

$ 2,403

$137,739

$ 2,316

$129,232

2004

$ 2,921
3,079

6,000
(22)
—
66
3,392

2,564
932

$ 1,632

2006

10,693
11,998

22,691
(6)
53
164
11,834

10,752
3,960

6,792

$ 689,248

2006

141
1,945

2,086
(116)
(495)
4
760

943
176

767

2005

11,156
9,444

20,600
(291)
263
174
10,959

10,021
3,637

2004

$10,670
7,982

18,652
(886)
(10)
152
10,149

9,227
3,311

6,384

$ 5,916

$ 633,362

All Other

2005

(305)
989

684
69
823
5
709

724
(20)

744

2004

$ (681)
986

305
346
1,617
5
804

767
135

632

$ 250,358

$ 197,950

The following tables present reconciliations of the three business segments’ Total Revenue on a FTE basis and Net Income to the Consolidated State-
ment of Income, and Total Assets to the Consolidated Balance Sheet. The adjustments presented in the table below include consolidated income and
expense amounts not specifically allocated to individual business segments.

(Dollars in millions)

Segments’ total revenue (FTE basis)
Adjustments:

ALM activities (1)
Equity investment gains
Liquidating businesses
FTE basis adjustment
Other

Consolidated revenue

Segments’ net income
Adjustments, net of taxes:
ALM activities (1, 2, 3)
Equity investment gains
Liquidating businesses
Merger and restructuring charges
Other

Consolidated net income

Year Ended December 31

2006

$72,161

2005

2004

$56,239

$49,377

(441)
2,866
267
(1,224)
(606)

(501)
1,964
214
(832)
(993)

20
911
282
(717)
(908)

$73,023

$56,091

$48,965

$20,366

$15,721

$13,315

(816)
1,806
139
(507)
145

52
1,257
109
(275)
(399)

869
583
78
(411)
(487)

$21,133

$16,465

$13,947

(1)

(2)

(3)

Includes Revenue associated with derivative instruments which did not qualify for SFAS 133 hedge accounting treatment of $(675) million and $86 million in 2005 and 2004.
Includes Net Income associated with derivative instruments which did not qualify for SFAS 133 hedge accounting treatment of $(421) million and $(196) million in 2005 and 2004.
Includes pre-tax Gains (Losses) on Sales of Debt Securities of $(494) million, $820 million and $1,613 million in 2006, 2005 and 2004, respectively.

(Dollars in millions)

Segments’ total assets
Adjustments:

ALM activities, including securities portfolio
Equity investments
Liquidating businesses
Elimination of segment excess asset allocations to match liabilities
Other

Consolidated total assets

December 31

2006

2005

$1,209,379

$1,093,853

378,211
15,639
3,280
(166,618)
19,846

365,060
13,960
3,399
(204,788)
20,319

$1,459,737

$1,291,803

Bank of America 2006

147

Note 21 – Parent Company Information
The following tables present the Parent Company Only financial information:

Condensed Statement of Income

(Dollars in millions)

Income
Dividends from subsidiaries:
Bank subsidiaries
Other subsidiaries
Interest from subsidiaries
Other income

Total income

Expense
Interest on borrowed funds
Noninterest expense

Total expense

Income before income taxes and equity in undistributed earnings of subsidiaries
Income tax benefit

Income before equity in undistributed earnings of subsidiaries
Equity in undistributed earnings of subsidiaries:

Bank subsidiaries
Other subsidiaries

Total equity in undistributed earnings of subsidiaries

Net income

Net income available to common shareholders

Condensed Balance Sheet

(Dollars in millions)

Assets
Cash held at bank subsidiaries
Securities
Receivables from subsidiaries:

Bank subsidiaries
Other subsidiaries
Investments in subsidiaries:
Bank subsidiaries
Other subsidiaries

Other assets

Total assets

Liabilities and shareholders’ equity
Commercial paper and other short-term borrowings
Accrued expenses and other liabilities
Payables to subsidiaries:
Bank subsidiaries
Other subsidiaries

Long-term debt
Shareholders’ equity

Total liabilities and shareholders’ equity

148 Bank of America 2006

Year Ended December 31

2006

2005

2004

$15,950
111
3,944
2,346

22,351

5,799
3,019

8,818

13,533
1,002

14,535

5,613
985

6,598

$10,400
63
2,581
1,719

14,763

$ 8,100
133
1,085
2,463

11,781

3,843
2,636

6,479

8,284
791

9,075

6,518
872

7,390

2,876
2,057

4,933

6,848
360

7,208

6,165
574

6,739

$21,133

$21,111

$16,465

$16,447

$13,947

$13,931

December 31

2006

2005

$ 54,989
2,932

$ 49,670
2,285

17,063
20,661

162,291
6,488
19,118

14,581
18,766

119,210
2,472
13,685

$283,542

$220,669

$ 31,852
9,929

$ 19,333
7,228

857
76
105,556
135,272

1,824
2,479
88,272
101,533

$283,542

$220,669

Condensed Statement of Cash Flows

(Dollars in millions)

Operating activities
Net income
Reconciliation of net income to net cash provided by operating activities:

Equity in undistributed earnings of subsidiaries
Other operating activities, net

Net cash provided by operating activities

Investing activities
Net (purchases) sales of securities
Net payments from (to) subsidiaries
Other investing activities, net

Net cash provided by (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 debt
Proceeds from issuance of preferred stock
Redemption of preferred stock
Proceeds from issuance of common stock
Common stock repurchased
Cash dividends paid
Other financing activities, net

Net cash provided by financing activities

Net increase in cash held at bank subsidiaries
Cash held at bank subsidiaries at January 1

Cash held at bank subsidiaries at December 31

Year Ended December 31

2006

2005

2004

$ 21,133

$ 16,465

$13,947

(6,598)
2,159

16,694

(705)
(13,673)
(1,300)

(15,678)

12,519
28,412
(15,506)
2,850
(270)
3,117
(14,359)
(9,661)
(2,799)

4,303

5,319
49,670

(7,390)
(1,035)

8,040

403
(3,145)
(3,001)

(5,743)

(292)
20,477
(11,053)
—
—
2,846
(5,765)
(7,683)
1,705

235

2,532
47,138

(6,739)
(1,487)

5,721

(1,348)
821
3,348

2,821

15,937
19,965
(9,220)
—
—
3,712
(6,286)
(6,468)
520

18,160

26,702
20,436

$ 54,989

$ 49,670

$47,138

Bank of America 2006

149

Note 22 – Performance by Geographical Area
Since the Corporation’s operations are highly integrated, certain asset,
liability, income and expense amounts must be allocated to arrive at Total
Assets, Total Revenue, Income Before Income Taxes and Net Income by
geographic area. The Corporation identifies its geographic performance

based upon the business unit structure used to manage the capital or
expense deployed in the region as applicable. This requires certain judg-
revenue can be
ments related to the allocation of
appropriately matched with the related expense or capital deployed in the
region.

revenue so that

(Dollars in millions)

Domestic (3)

Asia

Europe, Middle East and Africa

Latin America and the Caribbean

Total Foreign

Total Consolidated

At December 31

Year Ended December 31

Total Assets (1)

Total Revenue (2)

$1,300,711
1,183,953

$64,189
51,860
45,767

Income
Before
Income Taxes

$28,041
21,880
19,369

Net
Income

$18,605
14,778
12,943

32,886
32,272

113,129
57,226

13,011
18,352

159,026
107,850

1,117
909
718

5,470
1,783
1,420

2,247
1,539
1,060

8,834
4,231
3,198

637
521
286

1,843
920
605

1,452
1,159
648

3,932
2,600
1,539

420
344
204

1,193
603
395

915
740
405

2,528
1,687
1,004

$1,459,737
1,291,803

$73,023
56,091
48,965

$31,973
24,480
20,908

$21,133
16,465
13,947

Year

2006
2005
2004

(1) Total Assets includes long-lived assets, which are primarily located in the U.S.
(2) There were no material intercompany revenues between geographic regions for any of the periods presented.
(3)

Includes the Corporation’s Canadian operations, which had Total Assets of $7.9 billion and $4.3 billion at December 31, 2006 and 2005; Total Revenue of $641 million, $115 million and $90 million; Income Before Income
Taxes of $244 million, $67 million and $49 million; and Net Income of $159 million, $56 million and $41 million for the years ended December 31, 2006, 2005 and 2004, respectively.

150 Bank of America 2006

Executive Ofﬁ cers and Directors
Bank of America Corporation and Subsidiaries

Executive Ofﬁ cers

Kenneth D. Lewis
Chairman, Chief Executive Ofﬁ cer
and President

Amy Woods Brinkley
Chief Risk Ofﬁ cer

Barbara J. Desoer
Chief Technology & Operations Ofﬁ cer

Liam E. McGee
President, Global Consumer &
Small Business Banking

Brian T. Moynihan
President, Global Wealth &
Investment Management

Joe L. Price
Chief Financial Ofﬁ cer

R. Eugene Taylor
Vice Chairman and President, Global
Corporate & Investment Banking

Board of Directors

William Barnet III
Chairman, President
and Chief Executive Ofﬁ cer
The Barnet Company
Spartanburg, SC

Frank P. Bramble Sr.
Former Executive Ofﬁ cer
MBNA Corporation
Wilmington, DE

John T. Collins
Chief Executive Ofﬁ cer
The Collins Group Inc.
Boston, MA

Gary L. Countryman
Chairman Emeritus
Liberty Mutual Group
Boston, MA

Tommy R. Franks
Retired General
United States Army
Roosevelt, OK

Paul Fulton
Chairman
Bassett Furniture Industries Inc.
Winston-Salem, NC

Charles K. Gifford
Former Chairman
Bank of America Corporation
Charlotte, NC

W. Steven Jones
Dean
Kenan-Flagler Business School
University of North Carolina
at Chapel Hill
Chapel Hill, NC

Kenneth D. Lewis
Chairman, Chief Executive
Ofﬁ cer and President
Bank of America Corporation
Charlotte, NC

Monica C. Lozano
Publisher and
Chief Executive Ofﬁ cer
La Opinión
Los Angeles, CA

Walter E. Massey
President
Morehouse College
Atlanta, GA

Thomas J. May
Chairman, President and
Chief Executive Ofﬁ cer
NSTAR
Boston, MA

Patricia E. Mitchell
President and Chief
Executive Ofﬁ cer
The Museum of Television & Radio
New York, NY

Thomas M. Ryan
Chairman, President and
Chief Executive Ofﬁ cer
CVS Corporation
Woonsocket, RI

O. Temple Sloan Jr.
Chairman
General Parts International Inc.
Raleigh, NC

Meredith R. Spangler
Trustee and Board Member
C.D. Spangler Construction Company
Charlotte, NC

Robert L. Tillman
Chairman and CEO Emeritus
Lowe’s Companies Inc.
Mooresville, NC

Jackie M. Ward
Retired Chairman/CEO
Computer Generation Inc.
Atlanta, GA

Bank of America 2006 151

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Corporate Information
Bank of America Corporation and Subsidiaries

Headquarters
The principal executive ofﬁ ces of Bank of America Corporation
(the Corporation) are located in the Bank of America Corporate
Center, Charlotte, NC 28255.

Shareholders
The Corporation’s common stock is listed on the New York
Stock Exchange (NYSE) under the symbol BAC. The Cor-
poration’s common stock is also listed on the London Stock
Exchange, and certain shares are listed on the Tokyo Stock
Exchange. The stock is typically listed as BankAm in news-
papers. As of February 21, 2007, there were 272,824 registered
shareholders of the Corporation’s common stock.

The Corporation’s annual meeting of shareholders will be held
at 10 a.m. local time on April 25, 2007, in the Belk Theater of the
North Carolina Blumenthal Performing Arts Center, 130 North
Tryon Street, Charlotte, NC.

For general shareholder information, call Jane Smith, share-
holder relations manager, at 1.800.521.3984. For inquiries con-
cerning dividend checks, dividend reinvestment plan, electronic
deposit of dividends, tax information, transferring ownership,
address changes or lost or stolen stock certiﬁ cates, contact
Bank of America Shareholder Services at Computershare Trust
Company, N.A., via our Internet access at www.computershare.
com/bac; call 1.800.642.9855; or write to P.O. Box 43078, Provi-
dence, RI 02940-3078.

Analysts, portfolio managers and other investors seeking addi-
tional information should contact Kevin Stitt, Investor Relations
executive, at 1.704.386.5667, or Lee McEntire, senior manager,
Investor Relations, at 1.704.388.6780.

Visit the Investor Relations area of the Bank of America Web
site, http://investor.bankofamerica.com, for stock and dividend
information, ﬁ nancial news releases, links to Bank of America
SEC ﬁ lings, electronic versions of our annual reports and other
material of interest to the Corporation’s shareholders.

Annual Report on Form 10-K
The Corporation’s 2006 Annual Report on Form 10-K is available
at http://investor.bankofamerica.com. The Corporation also will
provide a copy of the 2006 Annual Report on Form 10-K (without
exhibits) upon written request addressed to:

Bank of America Corporation
Shareholder Relations Department
NC1-002-29-01
101 South Tryon Street
Charlotte, NC 28255

Customers
For assistance with Bank of America products and services,
call 1.800.900.9000, or visit the Bank of America Web site at
www.bankofamerica.com.

News Media
News media seeking information should visit the Newsroom
area of the Bank of America Web site for news releases,
speeches and other material relating to the Corporation, includ-
ing a complete list of the Corporation’s media-relations special-
ists grouped by business specialty or geography. To do so, go to
www.bankofamerica.com/newsroom.

NYSE and SEC Certiﬁ cations
The Corporation ﬁ led with the New York Stock Exchange (NYSE)
on May 4, 2006, the Annual CEO Certiﬁ cation as required by the
NYSE corporate governance listing standards. The Corporation
has also ﬁ led, as exhibits to its 2006 Annual Report on Form
10-K, the CEO and CFO certiﬁ cations as required by Section 302
and Section 906 of the Sarbanes-Oxley Act.

152 Bank of America 2006

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2006 Annual Report