Bank of America Annual Report 2010

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FY2010 Annual Report · Bank of America

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Retirement Planning

Commercial Banking

Opportunities
are everywhere

IPO

2010 Annual Report

We built Bank of America to meet the full range of
financial needs for people, businesses and institutional
investors; to attract the best employees to serve our
customers and clients; to support the communities
where we do business; and to create long-term value
for our shareholders.

Today’s Bank of America is a financial services leader
serving customers and clients worldwide. We help
them to see and act on opportunities to achieve
their goals by delivering value, convenience, expertise
and innovation.

Opportunity Seized:
Opportunity Seized:

Bank of America has the best franchise in the industry
Bank of America has the best franchise in the industry

with number one or two positions in the business segments
with number one or two positions in the business segments
in which we compete and the largest customer and client
in which we compete and the largest customer and client
base in our industry.
base in our industry.

Dear
Dear
Shareholders,
Shareholders,

Our work in 2010 was focused on two key goals: first, rebalancing and realigning our company so
we can serve our customers and clients with the broadest and best financial services in the industry;
and second, strengthening our balance sheet and capital position to create the right conditions for
growth in long-term shareholder value.

This work is well underway, and we are making significant progress. As a result, we are a much
stronger company today than we were a year ago. We have a vision for our company, a strategy to
achieve that vision and well-defined operating principles to help guide our work as we pursue our goals.
These are important to understanding how we intend to operate the company, serve customers and
clients, and return value to shareholders.

Our Vision and Strategy
Our vision is for Bank of America to be the world’s finest financial services company. We think that
this is an appropriate and achievable goal. I firmly believe that we have all the businesses and
capabilities in place to meet the core financial needs of customers and clients more effectively than
any other company.

Our success in realizing this vision will be measured by our customers, by our own employees and
by you, the shareholder. We’ll know we are succeeding when our customers choose to bring us more
of their business, and make us their primary financial institution; when employees choose to build
their careers here, because they can achieve anything they set out to do; and when shareholders
realize the long-term value this franchise can deliver. That means solid returns on equity and assets,
steady growth in tangible book value per share, attractive total shareholder returns, and consistent
performance through economic cycles.

By attracting new customers and more business from

Customers have many valuable choices for how to bank

existing customers, our deposit balances continue to grow,
topping $1 trillion at the end of 2010.

with us — a great base for building any relationship.

To pursue our vision, we have laid out a clear strategy.

We emerged from the economic downturn as a global
financial services company with leading positions in all our
major businesses. We serve one in two households in the
U.S. and operate in more than 40 countries, with nearly
300,000 employees around the world. Despite our global
scale and reach, our strategy is relatively straightforward.

We serve three customer groups: people, businesses of all
sizes, and institutional investors. For each of these groups,
we provide core financial services.

We serve people with a range of financial services, from
secured and unsecured lending, to deposit, checking and
savings accounts. We serve parents who want to help their
children open their first savings accounts, young people
graduating from school and setting up checking and retire-
ment accounts, and the wealthiest families in the world with
complex multigenerational wealth management needs.

We help companies of all sizes grow by helping them
transact, manage their cash, access the debt and equity
markets, and manage the risk of currency and interest rate
fluctuations. We provide strategic advice for transactions
such as public offerings, and mergers and acquisitions.

Our institutional investor clients rely on our research to
identify opportunities to invest wisely and confidently.
We help them execute their transactions and connect them
with the global financial markets through our sales and
trading technology.

No other financial services company has assembled
this breadth of capabilities for all of the customer groups
we serve. And, our capabilities are at or near the top
of the industry in every core financial product and service
we offer.

We provide the full range of these financial services for all
three customer groups in the United States. Outside the
U.S., we deliver corporate and investment banking, global
markets and wealth management services to business
clients, institutional investors and wealthy individuals. Our
Card Services business also serves customers in Canada,
Ireland, the U.K. and Spain.

We run the franchise for every customer in full, delivering all
of the services they may have traditionally sought separately
from a retail bank, a commercial bank, an investment bank,

Brian T. Moynihan, Chief Executive Officer

Bank of America Operating Principles

• We are customer-driven

• We are building and will maintain a fortress

balance sheet

• We are pursuing operational excellence in

both efficiency and risk management

• We will deliver on our shareholder return model

• We will continue to clean up our legacy issues

• We will be the best place for people to work

Synergies provide big opportunities. In the past year,
Synergies provide big opportunities. In the past year,

With the launch of Merrill Edge, we can help turn millions of
With the launch of Merrill Edge, we can help turn millions of

our wealth managers referred thousands of clients to our
our wealth managers referred thousands of clients to our
commercial and global bankers — and vice versa.
commercial and global bankers — and vice versa.

bank customers into early wealth management clients.
bank customers into early wealth management clients.

a wealth management firm, a brokerage or a private bank. We serve them on an integrated,
customer-focused basis.

That’s our strategy. Deliver leading core financial products and services to these three
groups of customers. Do that repeatedly, leave nothing to chance, develop broad, deep, long-
term, profitable relationships, and deliver long-term value to you.

6
7
9
3
7
$

4
4
9
0
2
1
$

0
9
3
,
1
1
1
$

Total Net Revenue
In millions, full-year ended,
FTE basis

Operating Principles to Move Us Forward
So, we have a vision and a strategy. To execute our strategy we have outlined six operating
principles that will help guide our activities and focus our resources.

Be a customer-driven company What does it mean to be a “customer-driven company”?
It simply means this: We are making business decisions by listening to our customers and
responding to their needs and preferences.

Retail customers have told us that they want, and will pay for, value they can see and
understand. They value clarity, choice and a healthy sense of security and control in their
banking services.

We have taken a number of important steps to help customers take control. We eliminated
overdraft fees for debit cards at the point of sale. We created Clarity Commitment® state-
ments that spell out in plain English key benefits and obligations of certain products. We offer
deposit-image ATMs, and online and mobile banking technologies to provide customers with
more detailed and timely information. Our new Merrill Edge® account enables customers to
manage their banking and investing activities through an integrated platform. And we have
developed employee incentive, reward and recognition programs that align with our customer
experience goals.

These are important steps as we build a consumer business driven by profitable relation-
ships. Some of these actions have cost us revenue in the short term. But we also are working
to mitigate revenue losses, whether due to our own decisions or regulatory and legislative
changes. And, we are seeing immediate improvements in customer satisfaction, problem
resolution and willingness to broaden and deepen relationships.

In serving businesses — from our millions of small business customers to our largest
corporate clients — the idea is the same: We believe we can create more value by pursuing
broad, deep and long-lasting relationships. One very promising area involves our work to
integrate the way we deliver wealth management products and services with the work we
do for commercial, corporate and investment banking clients. Many of our business clients
need employee benefits management, for example, or access to global capital markets and
wealth management solutions.

These efforts are paying off. Clients consistently tell me how much more they know we can do
for them than our competitors. As a result, they are giving us more opportunities, and we are
seeing a steady increase in successful customer referrals across our major lines of business.

In focusing on expanding relationships, we exited several businesses that were not driven
by the core financial needs of our customers and clients. Overall, we divested assets valued
at more than $20 billion, strengthening our capital and liquidity position and allowing us to
sharpen our focus on serving customers.

Total Shareholders’
Equity
In millions, at year end

4
4
4

1
3
2
$

8
4
2
,
8
2
2
$

2
5
0
7
7
1
$

Tier 1 Common
Equity Ratio
At year end

%
0
6
.
8

%
1
8
7

%
0
8
4

In 2010, approximately 281,000 loan and deposit products
were sold to customers who had an investment relationship
with Merrill Lynch.

Bank of America provided $92 billion in credit to small- and
medium-sized businesses in 2010, exceeding our previously
announced goal by more than 6 percent.

Total Assets
In millions, at year end

2
3
2
0
3
2

2
$

9
0
9
,
4
6
2
,
2
$

3
4
9
7
1
8

1
$

Total Deposits
In millions, at year end

1
1
6
1
9
9
$

0
3
4
,
0
1
0
,
1
$

7
9
9
2
8
8
$

Total Loans and Leases
In millions, at year end

6
4
4

1
3
9
$

8
2
1
0
0
9
$

0
4
4
,
0
4
9
$

Assets Under
Management
In millions, at year end

1
5
8
9
4
7
$

5
5
9

3
4
6
$

9
5
1
3
2
5
$

Build a fortress balance sheet Maintaining a fortress balance sheet through economic
cycles entails strong liquidity and credit reserve positions, good asset quality, sufficient
capital and a diverse mix of core businesses. We have been improving in all these areas.
Although we held assets relatively flat last year, we significantly reduced risk-weighted assets
while also taking down long-term debt, growing deposits and strengthening global excess
liquidity to more than $336 billion. Most important, we improved tangible common equity
by more than 10 percent to more than $130 billion, and also significantly improved our loan
loss coverage ratios.

A key goal is to strengthen our capital base to meet new regulatory requirements without
having to issue additional shares through the next economic cycle. Basel III rules as currently
proposed will require a common equity Tier 1 ratio of at least 7 percent by 2019, a threshold
we are confident we will exceed.

Pursue operational excellence and manage risk well An important element in our strategy
is achieving operational excellence throughout the organization. This is where the oppor-
tunity to build deeper relationships begins. Getting it right for customers every time is how
we build customer loyalty. With merger transition work largely completed, we now are free
to focus resources on driving operational excellence for our customers by upgrading tech-
nology, increasing training and improving effectiveness and efficiency in all the company’s
core functions.

Operational excellence in risk management is especially important, as we continue to build
on our work to institute new, rigorous risk management controls and procedures through-
out the organization. In combination with the improving economy, this work is contributing
to our improving credit quality results.

Deliver on our shareholder return model Our shareholder return model is not complicated —
but it requires consistent and disciplined execution. It begins with the fortress balance sheet.
The next steps are achieving reasonable and sustainable revenue growth from our core
consumer businesses in the U.S.; faster growth in our corporate and investment banking and
wealth management businesses in the U.S. and internationally; and tight expense control.

We believe that consistently executing these steps will lead to less volatile earnings per share
growth and steady capital generation. The end result, we believe, will be attractive growth in
tangible book value per share and support for a higher multiple for the stock.

We also believe that the implementation of this model will enable us to put in place a prudent
capital management strategy in the near future that, pending regulatory approvals, includes
a higher dividend and stock repurchases.

Clean up legacy issues related to the economic downturn, primarily in the mortgage
business The recession took a great toll on millions of families. While growth has returned,
we continue to work through issues related to the downturn — primarily delinquent mortgages.

We are making progress. Bank of America (including Countrywide prior to the acquisition) has
completed nearly 775,000 mortgage modifications since January of 2008 to help customers
remain in their homes.

We reached agreements at the end of last year with Freddie Mac and Fannie Mae to resolve
many of their repurchase claims on mortgages originated by Countrywide before we acquired

In 2010, Bank of America Merrill Lynch achieved the No. 1

Bank of America Merrill Lynch participated in eight of the

position in the United States for investment banking revenues
and maintained its No. 2 global ranking (source: Dealogic).

top 10 investment banking deals of the year by fees.

that company. We continue to work toward an appropriate resolution of repurchase claims
held by private investors and monoline insurers.

It is important to the economic recovery that the housing market stabilizes. That will require
moving through the modification and foreclosure process quickly but carefully. We took
an important step in this direction in creating a new Legacy Asset Servicing group, which
includes responsibility for residential mortgage repurchase claims and management of
default servicing. This change will clear the way for leaders in our Home Loans business to
focus on building the leading mortgage origination business in the country.

In addition to mitigating mortgage issues, we also reduced certain capital markets risk expo-
sures that were originated prior to the downturn to $23 billion in 2010.

Be the best place for people to work We want to be the best place for our teammates to
achieve their professional goals, while helping build the world’s finest financial services
company for our customers and shareholders.

To meet this goal, we are aligning our training, reward and recognition programs to our
customer strategy. We made changes to our benefits programs to make health care cover-
age more affordable for most of our employees; and, we continued to strengthen our leading
diversity and inclusion programs to ensure that every member of our team can achieve his
or her potential. We also conducted a company-wide employee survey (95 percent of our
employees participated) that led to valuable feedback about what we can do to build an even
more engaging workplace.

Focused on the Future
Our 2010 results show that, while we have made progress in strengthening the balance
sheet and focusing our capital to support core capabilities for customers, the overhang of
issues related to recent acquisitions and regulatory changes remained significant. Excluding
two non-cash, non-tax deductible goodwill impairment charges, we earned $10.2 billion for
the full year. Including these charges, we posted a net loss of $2.2 billion.

Even so, the underlying results show the strength and promise of the company. Credit
costs fell, resulting in a reduction of provision expense to $28.4 billion from $48.6 billion
in 2009. Deposit balances reached a record $1 trillion at the end of the year, showing that
customers continue to see our company as a trusted and stable partner. And referrals
among our businesses are increasing, demonstrating the power of our relationship-based,
customer-centered strategy.

As I wrote above, our company is much stronger today than it was a year ago, as we made
tough decisions in 2010 aimed at putting issues related to the recession behind us. We have
the number one or number two market position in almost every business in which we choose
to compete. We serve millions of consumers, businesses and institutional investors, each
of which provides an opportunity for us to expand our relationship with them. We are leaving
nothing to chance in our efforts to pursue these opportunities.

For your additional information, we have posted presentations from a recent all-day investor
conference in New York at which members of our management team and I discussed in detail
the items I’ve outlined here. I encourage you to view the presentations in the investor section
of our public website at http://investor.bankofamerica.com.

Investment Banking
Income
In millions, full-year ended

1
1
5
5
5
5
5
5
$
$

,
,

0
0
2
2
5
5
,
,
5
5
$
$

3
3
6
6
2
2

,
,

2
2
$
$

08
08

09
09

10
10

Sales and Trading
Revenue*
In millions, full-year ended

5
5
5
5
2
2
2
2
6
6
6
6
7
7
7
7
1
1
1
1
$
$
$
$

,
,
,
,

3
3
3
3
0
0
0
0
3
3
3
3
,
,
,
,
7
7
7
7
1
1
1
1
$
$
$
$

)
)
2
2
8
8
8
8
6
6
(
(
$
$

,
,

08
08

09
09

10
10

* Fully taxable-equivalent basis
* Fully taxable-equivalent basis

Tangible Common
Equity Ratio
At year end

%
%
9
9
9
9
.
.
5
5

%
%
6
6
5
5
5
5

.
.

%
%
3
3
9
9
2
2

.
.

08
08

09
09

10
10

We’re working to keep families in their homes. Since the

In 2010, Bank of America extended nearly $685 billion

start of 2008, Bank of America and previously Countrywide
have completed nearly 775,000 loan modifications
with customers.

in credit to businesses around the world, helping fuel the
economic recovery.

Executive Management Team

Brian Moynihan
Chief Executive Officer

Catherine Bessant
Global Technology and Operations
Executive

David Darnell
President, Global Commercial Banking

Barbara Desoer
President, Bank of America Home Loans
and Insurance

Anne Finucane
Global Strategy and Marketing Officer

Sallie Krawcheck
President, Global Wealth and
Investment Management

Terrence Laughlin
Legacy Asset Servicing Executive

Thomas Montag
President, Global Banking and Markets

Charles Noski
Executive Vice President and
Chief Financial Officer

Edward O’Keefe
General Counsel

Joe Price
President, Consumer and
Small Business Banking

Andrea Smith
Global Head of Human Resources

Bruce Thompson
Chief Risk Officer

As we build on the foundation we have laid, I want to thank our employees for
their tremendous focus and effort over the past year; our customers and clients
for giving us the opportunity to serve their needs; and our shareholders for your
continued faith in the bright future of our company.

We are guided by our vision, have a strategy to pursue it, and operating principles to
keep us focused and to guide our growth. I welcome your feedback as we proceed.

Brian T. Moynihan
Chief Executive Officer
March 15, 2011

To Our Shareholders,

2010 was a rebuilding year for our company. Brian
Moynihan and our management team accomplished
a great deal, from implementing a new customer-
focused business strategy, to strengthening our capital
position, to working through issues related to the
economic downturn.

The board worked closely with Brian and the team on a range of issues, including
the implementation of the company’s new risk management process and manage-
ment’s thoughtful and aggressive plans to put matters resulting from the mortgage
crisis behind us. Together, we also focused on ensuring productive interactions
with regulators and elected officials.

I would like to note the retirement from our board of my predecessor as chairman,
Walter Massey. Walter retired last spring after 17 years on the board, and one year
as chairman. He guided the board with a steady hand during a challenging period
for the company. Walter has our best wishes for the future, and my personal appre-
ciation for the skill with which he discharged his responsibilities.

With leading positions in the major markets in which we compete, I see boundless
opportunities for Bank of America to grow and prosper. I believe we are on the right
path, and that we have a CEO and management team with a vision and strategy
that is appropriate and achievable.

Charles O. Holliday
Chairman of the Board of Directors
March 15, 2011

Opportunities
are everywhere.

At Bank of America, our strength comes
from the relationships we have — and
building on them to create opportunities
for our customers at every point in their
financial lives. We are confident that no
competitor can match our ability to deliver
our suite of products, services and solutions.
For our company and our shareholders,
focusing on what our customers need —
and building our teams and capabilities
around them — is the key to long-term
growth. The promise is compelling, and
the results are real.

Text Banking

MyAccess Checking®

Home Equity Credit Line

Personal Loan

Auto Loan

At Bank of America, we’re leading the industry
toward a better way of banking and wealth
management. To help our customers and clients
meet their financial goals, we’re responding to
their needs and building deeper relationships.
We do this by offering clear and straight forward
banking that provides greater choice and control,
services and products they value, personalized
advice, a quality service experience, unmatched
accessibility, and world-class technology that is
reliable and secure.

Today, we serve one out of every two U.S. households. We’re doing more than ever to listen to our
customers and clients to understand their needs and enable them to do business with us wherever,
whenever and however they choose.

It all starts with being the best at what we do. We offer an industry-leading range of banking products,
including debit cards, checking account and savings account options, access to simple and affordable
unsecured debt and credit card financing, and a full range of responsible home financing options. Our
solutions include products and services for customers wherever they are in their financial life cycle. From
customers just beginning a banking relationship to those with more sophisticated banking needs, we can
bring the full capability of Bank of America to their doorstep. Our customers benefit from access to the
largest ATM network in the country, including more deposit-image ATMs than any other bank, and more
than 5,800 banking centers with friendly, knowledgeable employees who are active in their communities.
We’ve created many of the most advanced features in banking, including our award-winning online and
mobile banking capabilities, and top-ranking online security and account fraud protection guarantees.

At Bank of America, our goal is to deliver the right solutions as customers need them, provide quality service
at a fair price, and reward customers with increasing value as they expand their relationships with us.

Home Mortgage

Keep the Change®

Online
and Mobile
Banking

BankAmericard®

CDs

Right Start College senior Patrick Brescia (above) is balancing a major in communications, volunteering with the campus police department,
and a new internship. He wants a bank that works as hard as he does and helps make meeting his financial goals easy, including staying on
budget and building a strong credit history. He relies on tools from Bank of America, including Keep the Change®, online bill pay and mobile
banking to manage his accounts with confidence and help him save for his future. Technology and convenience are also important for busy
mom Jenn Wylie (above), who has her hands full with a growing home business and three kids growing just as fast. One of her favorite time-
saving tips — Bank of America’s award-winning online banking website. Jenn chooses to bank from home, and loves the convenience of
accessing her accounts online to check balances, pay bills and transfer funds whenever she wants. With 24/7 account access, and debits
and deposits that show up immediately, Jenn feels in control of her family’s finances with time to spare.

Preparing for Retirement

Merrill Edge®

Cash Management

College Savings

Account

Growth Track For more than a decade, Dennis Dayman (above) has trusted Bank of America with his banking needs. When he was ready
to take the next step in securing his family’s financial future, he looked to Merrill Edge to help him move closer to reaching his family’s
goals, which include paying for his twin sons’ college tuition and living comfortably in retirement. With the help of a Merrill Edge Financial
Solutions Advisor, Dennis established two 529-college savings plans and an individual retirement account, which he can access, along with
Bank of America checking and savings accounts, through a single online view. Easy access to their comprehensive portfolio — and financial
guidance — help give Dennis and his family the control they need to feel confident about their financial future.

Investment Management &

Wealth Structuring

Estate Planning &

Advice

Philanthropy

Wealth
Management

For individuals with more complex wealth
management needs, we believe there are no
better partners than Merrill Lynch and U.S. Trust.
That’s because our client relationships are built
one at a time — and each begins with listening.
We separate ourselves from our competitors
through the quality of our relationships, the skills
and advice of our people, and the strength of our
wealth management capabilities and solutions.
We define our success by enabling our clients to
realize their personal aspirations. Our products,
services and advice are designed to provide a
path to their wealth management goals. Whether
it’s investing in the post-recession market, man-
aging risk within a portfolio, transferring wealth
to the next generation, or planning an exciting life
after retirement, our advisors are well- positioned
to deliver the widest range of capabilities
to clients.

Our wealth management services include
banking, investing, retirement, philanthropy and
trusts, and international offerings — with access
to a number of global equity exchanges — backed
by award-winning research, innovative thought
leadership and a comprehensive, solutions-
based investment platform. We draw upon
the strengths of our 20,000-plus client- facing
professionals at Merrill Lynch and U.S. Trust to
serve the needs of our clients and their fami-
lies — from recent college graduates learning
about the importance of saving, to clients
reaching their peak earning years, to ultra high
net worth families with complex private banking
needs. We provide our services in the way they
want to receive them. For example, our newest
offering, Merrill Edge, is suited for self-directed
investors or individuals who want team-based
financial guidance — including the vast number
of our traditional banking customers. And when
wealth management needs become more com-
plex, our Merrill Lynch and U.S. Trust advisors are
among the best in the business — ready to offer
their advice and expertise.

Long View When he needed help developing a wealth strategy after the sale of
his business, David Bessey (above) looked to his Merrill Lynch Financial Advisor
for guidance. Understanding that David had complex wealth preservation and
estate planning needs, the Financial Advisor tapped U.S. Trust’s considerable
resources and expertise. Together, the Financial Advisor and U.S. Trust Private
Client Advisor worked with David to create a strategy to help secure his family’s
future. The Merrill Lynch-U.S. Trust partnership, supported by a dedicated port-
folio manager, wealth strategist and trust officer, is key to helping David move
closer to his wealth management goals.

Business Advantage Checking

Business Card

Easy Online Payroll®

From business checking and business
loans, to employee retirement planning,
to access to capital markets worldwide,
there’s nothing growing companies can’t
find through Bank of America. This gives
us a significant opportunity to deepen
relationships among the hundreds of
thousands of companies we already serve,
including small businesses, mid-sized
companies, and some of the largest multi-
national corporations in the world.

Even small businesses want big ideas, and no one can deliver like Bank of America.
We serve nearly four million small-business customers — 12 percent of U.S. small
businesses — more than any other bank. By supporting the unique needs of small
businesses, the backbone of the U.S. economy, we’re helping fuel economic stability
and job growth across our communities. Our commitment to small- and medium-sized
businesses is strong. In 2010, we extended $92 billion of credit to companies with
less than $50 million in revenues. We’ve also pledged to increase our own spending
with small- and medium-sized companies by $10 billion over the next five years, because
many small businesses told us their biggest challenge is not access to credit, but lack
of demand for their products and services. And we’ve funded grants and launched
partnerships with nonprofit lenders to help them deploy capital in underserved com-
munities. In the coming years, we intend to take our commitment even further, including
hiring more than 1,000 small business bankers. Based in communities across the
United States, these bankers will consult with small- business owners, spend time at
their offices and assess their companies’ deposit, credit and cash management needs.

Online Banking with

Quickbooks®

Small
Business
Lending

Remote Deposit

Business Advice

Giant Step For 13 years, Virgo Medical Services has been providing safe and convenient medical transportation across Northern New Jersey,
and Bank of America is proud to help. In 2010, Virgo President Ahmed Hassan (above) approached his dedicated Bank of America client
manager in our Client Development Group for new financing to support their growth. The funding was essential to help them execute a new
multimillion dollar contract with the Department of Veterans’ Affairs to transport veterans to medical and physical therapy appointments.
We responded with financing solutions to meet all of their needs, including new lines of credit to provide liquidity and vehicle financing, a
commercial Visa® to improve management of daily expenses, and group banking for Virgo’s employees. With the new liquidity, Virgo added
a registered nurse and medical director to their staff and dozens of new EMT-certified drivers and ambulances to their fleet, including their
first critical care ambulance for emergency services.

Business
Expansion
Financing

Credit

Liquidity Solutions

Treasury Management

Good Move Bradford Hill’s family has worked at the base of one of America’s greatest icons since 1931, operating the concessions
at the Statue of Liberty. When the National Park Service announced that it was combining the concession contracts for Liberty Island
and Ellis Island, Brad (above) found himself competing with the nation’s largest food-service companies for the contract. Brad reached
out to his longtime Merrill Lynch Financial Advisor for advice, who quickly assembled a team of Bank of America commercial bank-
ers to develop a plan that would keep the Hill family business alive. With guidance from his Financial Advisor and a construction loan
and line of credit from Bank of America Merrill Lynch, Brad’s ambitious proposal to replace two cramped Liberty Island shops with a
6,400-square-foot retail pavilion became a reality.

Wealth Management

Foreign Exchange

Capital Markets

When small businesses become larger and need
more sophisticated products, services and advice,
our commercial banking team delivers tailored
solutions that meet those changing needs. A robust
referral partnership between our small business
bankers and our commercial banking experts
ensures that smaller businesses experiencing
more complex credit and treasury needs can
get the advice and more sophisticated solutions
they require.

Our more than 7,000 commercial banking professionals serve 198,000
companies with revenues generally between $1 million and $2 billion.

As part of our unique client coverage model, our commercial client teams
partner with product experts from across the bank to seamlessly deliver
integrated solutions ranging from credit, treasury and liquidity to capital
markets and investment banking, as well as wealth management and
retirement services.

As we put this coverage model to work for our clients, we’re finding ample
opportunities to deepen our relationships with them and better serve their
needs. For example, last year our commercial banking team received more
than 6,400 referrals from our wealth management advisors, and in turn
they referred more than 5,100 opportunities with commercial clients to our
wealth management experts. Our commercial bankers have an equally robust
partnership with professionals in our Global Banking & Markets organization,
which enables our commercial clients to take advantage of our expertise
in investment banking, capital markets, municipal finance, derivatives and
foreign exchange, among many other products and services. Our No. 1 goal
is to deepen relationships with our clients. The best way to do that is to
leverage every resource that our company has to offer.

Corporate Banking

Treasury Solutions

Leasing

Investment Banking

M&A Advisory

For large corporate clients, we’re a leader in supporting growth and
executing critical transactions globally. From M&A advice, launching
IPOs and raising debt and equity capital, to providing comprehensive
treasury solutions — we help businesses through each growth phase.
But we know that truly valuable banking relationships go beyond
supporting major deals. At Bank of America Merrill Lynch, we under-
stand that it’s the day-to-day, ongoing partnerships with our clients
that lead to mutual success and a better future.

Clients value our commitment to building long-standing relationships focused on understanding their
strategic needs and creating opportunities and solutions. We deepen our client relationships by deliver-
ing a full suite of solutions when and how they need them, in more than 150 countries. As a result, our
clients view us as more than their “big deal banker” — we’re also their “everyday banker.”

At Bank of America Merrill Lynch our work knows no borders, as we are able to leverage our global
footprint across products, sectors and geographies to help large corporations succeed wherever they
do business, in ways that few of our competitors can.

Our Global Capital Markets and Global Corporate & Investment Banking professionals work in close
coordination to advise on, structure and underwrite capital-raising transactions in the equity and debt
capital markets on behalf of issuer clients globally. In 2010, we helped thousands of companies raise
more than $684 billion of capital around the world, enabling them to grow their businesses and achieve
their goals.

Increasingly, we’re helping companies in places like Brazil, Russia, India and China — emerging markets
that are transforming into growth markets. We share our clients’ vision in that these areas represent
some of the greatest opportunities now and in years to come. As more of our clients expand their inter-
national presence, we’re right there with them, utilizing a measured, strategic approach to ensuring we
have the right infrastructure and systems in place to help them navigate often complex market conditions.
Our commitment is for the long term — whether it’s in Indianapolis or Istanbul, we’ll be there to meet all
of our clients’ needs.

Financial Sponsors

Corporate Finance &

Restructuring

Equity & Debt
Capital Raising

Derivatives & Foreign

Exchange

Big Deal To support the continued global expansion of the Volkswagen Group, Chief Financial Officer Hans Dieter Pötsch (above) worked
with the capital markets experts at Bank of America Merrill Lynch. With the team’s knowledge and guidance, the world’s No. 3 car-maker
raised 4.1 billion in one of the industry’s biggest capital increases ever. The transaction enhanced Volkswagen’s balance sheet and secured
funding for the planned creation of an integrated automotive group with Porsche — two key initiatives to becoming the most successful auto-
motive company globally by 2018. Despite the challenging economy, Volkswagen has continued to invest in growth — including the creation
of 2,000 direct and about 10,000 indirect jobs in the U.S. via a new plant in Chattanooga, Tennessee to support its expansion in the region.
The Volkswagen Group has emerged from the global economic downturn stronger than ever before: in 2010, it delivered 7.2 million vehicles
to its customers, a new company record.

Futures & Options

Commodities

Global
Research

Prime Brokerage

Street Smart MFS Investment Management® invented the open-end mutual fund in 1924. Today, MFS is a global investment firm
managing more than $224 billion across all major asset classes, and serving millions of individuals and hundreds of institutions in
more than 70 countries. One thing that has not changed in MFS’ 86-year history is its emphasis on rigorous research. Chief Investment
Officer Michael Roberge (above) relies on BofA Merrill Lynch Global Research to play a part in providing MFS with insightful, objective
and decisive research, helping him and other investment professionals at MFS package their best ideas into client portfolios. As MFS
continues to grow its global platform, Bank of America Merrill Lynch stands ready as a steadfast partner to provide it with innovative
liquidity solutions and advisory services.

Execution Services

Risk Management

Cross Asset Solutions

For the world’s leading institutions and asset
managers, the overriding goal is performance —
and few partners are as able to help them as
Bank of America Merrill Lynch. We’ve created
one of the world’s best research and strategic
advisory platforms as well as one of the premier
sales and trading organizations, bringing global
intelligence, insight and ideas to our clients.
We believe this makes us a vital partner for
institutional investors, for whom driving returns
and managing risk are more challenging than ever.

Whether a pension plan is looking to help fund future benefits; a mutual fund manager is seeking to out-
perform a benchmark and deliver solid returns for investors; or a hedge fund wants the most efficient
financing and services — our institutional clients turn to us for guidance in navigating today’s complex and
rapidly changing global markets.

BofA Merrill Lynch Global Research has more than 800 research analysts who cover more than 4,000
securities working alongside our global network of sales and trading professionals to identify opportunities
and provide the perspective to turn those insights into trade ideas. The depth and breadth of our platform
mean we can offer clients thousands of products across the globe to invest in, ranging from equities, fixed
income and securitized assets to commodities and currencies, helping individual investors and institutions
of all kinds meet their investment and risk management objectives.

Building on our strong global platform, we will continue to focus on deepening our relationships with
clients and leveraging our position as a global thought leader to provide customized, innovative solutions
across products, sectors and geographies. Continuing to expand our businesses outside the United States
represents one of our greatest opportunities, and we are taking a strategic and measured approach to our
international development. Importantly, we continue to attract some of the best talent in the industry, and
are well-positioned to meet the needs of our clients anywhere in the world.

Responsible Business Practices

Environmental Initiatives

Philanthropy

Community Strong As part of our ongoing efforts to stimulate economic strength in communities, we recognize nonprofit organizations and
individuals through our signature philanthropic program, the Neighborhood Excellence Initiative® (NEI), which operates in 44 U.S. communi-
ties and London. Since 2004, Bank of America has invested $130 million in communities through the Neighborhood Excellence Initiative,
recognizing nearly 600 nonprofit organizations and nearly 3,000 community leaders and high school students. Just some of the examples of
how NEI helps set opportunity in motion in local communities include the service and leadership of a Los Angeles local hero who advocates
for academic and cultural enrichment opportunities for at-risk children, a New York nonprofit that provides access to fresh food while sup-
porting local produce providers, and a Boston high school senior who leads homework assistance efforts for underserved youth. Tony Brown,
Just Food, and Sandy Liang, represented above, were all selected as 2010 awardees based on their outstanding community contributions.

Volunteerism

Supporting the Arts

Commitment to Diversity

Community Development

We’re working hard to strengthen the
communities we serve — supporting
individuals, families and businesses
during challenging economic times.
We’re advancing growth and development
through innovative partnerships and
initiatives, and helping set opportunity
in motion by acting as a catalyst for
economic and social success.

At Bank of America, we know that our growth depends on the economic vitality of
communities worldwide. That’s why we’ve made corporate social responsibility a
fundamental way we do business. From providing clear and transparent products
and services that meet the needs of our customers to investing in our communities
through innovative grants and programs, we are strengthening the neighborhoods
we serve through a unique combination of assets. We help generate economic and
social opportunities through responsible business practices, community-development
lending and investing, philanthropy, diversity and inclusion, volunteerism, support of
arts and culture and environmental initiatives.

Through $200 million in charitable giving in 2010, part of our 10-year, $2 billion
philanthropic goal, we continued to address the most pressing challenges facing
our communities during difficult economic times, including immediate needs such
as hunger relief, as well as longer-term issues including education and workforce
development to help individuals and families move ahead. We also contributed
an additional $1.6 billion toward our 10-year, $20 billion environmental business
initiative (more than $11 billion since 2007), to address global climate change.
We know our involvement in the community is important to our customers, clients,
shareholders and teammates. Please visit bankofamerica.com/opportunity for more
detail on our commitment.

Bank of America Corporation — Financial Highlights

Bank of America Corporation (NYSE: BAC) is headquartered in Charlotte, N.C. As of December 31, 2010, we operated in all 50 states, the
District of Columbia and more than 40 countries. Through our banking and various nonbanking subsidiaries throughout the United States
and in selected international markets, we provide a diversified range of banking and nonbanking financial services and products through
six business segments: Deposits, Global Card Services, Home Loans & Insurance, Global Commercial Banking, Global Banking & Markets
and Global Wealth & Investment Management. Bank of America is a member of the Dow Jones Industrial Average.

Financial Highlights (in millions, except per share information)
For the year

Revenue net of interest expense1
Net income (loss)
Net income excluding goodwill impairment charges2
Earnings (loss) per common share
Diluted earnings (loss) per common share
Diluted earnings (loss) per common share excluding goodwill impairment charges2
Dividends paid per common share
Return on average assets
Return on average tangible shareholders’ equity
Efficiency ratio1
Average diluted common shares issued and outstanding

At year end

2010

$ 111,390
(2,238)
10,162
(0.37)
(0.37)
0.86
0.04
n/m
n/m
74.61
9,790

2010

2009

$ 120,944
6,276
n/a
(0.29)
(0.29)
n/a
0.04
0.26%
4.18
55.16
7,729

2009

Total loans and leases
Total assets
Total deposits
Total shareholders’ equity
Book value per common share
Tangible book value per common share2
Market price per common share
Common shares issued and outstanding
Tier 1 common equity ratio
Tangible common equity ratio2
1 Fully taxable-equivalent (FTE) basis
2 Measures reported above using FTE basis, excluding goodwill impairment charges, tangible book value per common share and tangible equity are non-GAAP measures.
Other companies may define or calculate these measures differently. For additional information on the goodwill impairment charges, refer to Note 10 — Goodwill and Intangible
Assets and for reconciliations to GAAP measures, refer to Table XIII in the 2010 Financial Review section.

$ 940,440
2,264,909
1,010,430
228,248
20.99
12.98
13.34
10,085

8.60%
5.99%

$ 900,128
2,230,232
991,611
231,444
21.48
11.94
15.06
8,650

7.81%
5.56%

n/a = not applicable

n/m = not meaningful

Total Cumulative Shareholder Return3

BAC 5-Year Stock Performance

$120

$100

$80

$60

$40

$20

$60

$50

$40

$30

$20

$10

2005

2006

2007

2008

2009

2010

2006

2007

2008

2009

2010

December 31

2005

2006

2007

2008

2009

2010

HIGH $54.90

$54.05

$45.03

$18.59

$19.48

BAC

BANK OF AMERICA CORPORATION

$100

$121

$98

$100

$116

$122

$100

$117

$92

$115

$36

$77

$39

$97

$47

$35

$112

$59

LOW

43.09

CLOSE 53.39

41.10

41.26

11.25

14.08

3.14

15.06

10.95

13.34

SPX

S&P 500 INDEX

BKX

KBW BANK INDEX

3 This graph compares the yearly change in the Corporation’s total cumulative shareholder return on
its common stock with (i) the Standard & Poor’s 500 Index and (ii) the KBW Bank Index for the years
ended December 31, 2006 through 2010. The graph assumes an initial investment of $100 at the
end of 2005 and the reinvestment of all dividends during the years indicated.

2010 Total Net Revenue Per Line of Business1 (dollars in billions)

$30

$25

$20

$15

$10

5
2
$

8
2
$

3
1
$

6
0
1
$

0
1
$

7
.
6
1
$

9
.
5
$

Deposits

Global
Card
Services

Home
Loans &
Insurance

Global
Commercial
Banking

Global
Banking &
Markets

Global Wealth &
Investment
Management

All
Other2

2010 Net Income (Loss) Per Line of Business (dollars in billions)

3
.
6
$

2
.
3
$

3
.
1
$

1
.
1
$

4
.
1
$

$7.5

$5.0

$2.5

$0.0

$(2.5)

$(5.0)

$(7.5)

$(10.0)

)
6
.
6
(
$

)
9
.
8
(
$

Deposits

Global
Card
Services

Home
Loans &
Insurance

Global
Commercial
Banking

Global
Banking &
Markets

Global Wealth &
Investment
Management

All
Other2

Our customers
provide the foundation
for opportunity:

Consumers

• 57 Million Consumer and Small

Business Relationships

• 5,856 Retail Branches

• 19,700 Wealth Advisors

• $2.2 Trillion in Client Balances

• $643 Billion in Loans

• $699 Billion in Deposits

Companies

• 158,000 Business Banking Clients

• 40,000 Middle Market Clients

• 10,000 Corporate Clients

• $297 Billion in Funded Loans

and Leases

• $311 Billion in Deposits

Institutional Investors

• 12,000 Institutional Clients

• 3,200 Companies Researched

in 60 Countries

• Primary Dealer in 15 Countries

• $414 Billion in Trading-Related Assets

44%

59%

Revenue Contribution by Client View

Deposits

Global Card Services
Home Loans and Insurance
Revenue: $49.4 Billion

35%

Companies and Institutional Investors

Revenue: $39.4 Billion

All Other 2

Revenue: $5.9 Billion

15%

Global Wealth & Investment Management

Revenue: $16.7 Billion

Consumers

Total Revenue1: $111.4 Billion

1 FTE basis
2 All Other consists primarily of equity investments,
the residential mortgage portfolio associated with asset
and liability management (ALM) activities, the residual
impact of the cost allocation process, allowance for
credit losses and the cost allocation processes, Merger
and Restructuring Charges, intersegment eliminations,
fair value adjustments related to structured liabilities
and the results of certain consumer finance, investment
management and commercial lending businesses that
are being liquidated.

Our Business Segments

Opportunities are Everywhere — Our
market-leading positions, products and
capabilities allow us to offer a full range
of financial products and services to the
entire spectrum of customers to help
them meet their financial goals.

Deposits includes a comprehensive range of products
provided to consumers and small businesses, including
traditional savings accounts, money market savings
accounts, CDs and IRAs, and noninterest- and interest-
bearing checking accounts. Deposit products provide
a relatively stable source of funding and liquidity. In the
U.S., we serve approximately 57 million consumer and
small business relationships through a franchise that
stretches coast to coast through 32 states and the
District of Columbia utilizing our network of more than
5,800 banking centers, 18,000 ATMs, nationwide call
centers and leading online and mobile banking platforms.

Global Card Services is one of the leading issuers of
credit cards in the United States and Europe. We provide
a broad offering of products including U.S. consumer and
business cards, consumer lending, international cards
and debit cards to consumers and small businesses.
We provide credit card products to customers in the U.S.,
Canada, Ireland, Spain and the U.K. We offer a variety
of co-branded and affinity credit and debit card products
and are one of the leading issuers of credit cards through
endorsed marketing in the U.S. and Europe.

Home Loans & Insurance provides an extensive line of
consumer real estate products and services including
fixed and adjustable rate first-lien mortgage loans for
home purchase and refinancing needs, home equity lines
of credit and home equity loans to customers nationwide.
Home Loans & Insurance products are available to our
customers through our banking centers, mortgage loan
officers in 750 locations and a sales force offering our
customers direct telephone and online access to our
products. These products are also offered through our
correspondent loan acquisition channel.

Global Commercial Banking provides a wide range
of lending-related products and services, integrated
working capital management and treasury solutions
to clients through our network of offices and client
relationship teams along with various product partners.
Our clients include business banking and middle-market
companies, commercial real estate firms and governments.
Our lending products and services include commercial
loans and commitment facilities, real estate lending,
asset-based lending and indirect consumer loans. Our
capital management and treasury solutions include
treasury management, foreign exchange and short-term
investing options.

Global Banking & Markets (GBAM) provides financial
products, advisory services, financing, securities clearing,
settle ment and custody services globally to our institutional
investor clients in support of their investing and trading
activities. We also work with our commercial and corpo-
rate clients to provide debt and equity underwriting and
distribution capabilities, merger-related and other advisory
services, and risk management products using interest
rate, equity, credit, currency and commodity derivatives,
foreign exchange, fixed-income and mortgage-related
products. GBAM is a leader in the global distribution of
fixed income, currency and energy commodity products
and derivatives, has one of the largest equity trading
operations in the world and is a leader in the origination
and distribution of equity and equity-related products.
Our corporate banking services provide a wide range of
lending-related products and services, integrated working
capital management and treasury solutions to clients.

Global Wealth & Investment Management (GWIM) pro-
vides comprehensive wealth management capabilities to
a broad base of clients from the emerging affluent to the
ultra high net worth. These services include investment
and brokerage services, estate and financial planning,
fiduciary portfolio management, cash and liability manage-
ment and specialty asset management. GWIM also provides
retirement and benefit plan services, philanthropic man-
agement, asset management and lending and banking to
individuals and institutions. Our primary wealth and invest-
ment management businesses are Merrill Lynch Global
Wealth Management, U.S. Trust, Bank of America Private
Wealth Management and Retirement Services.

Bank of America
2010 Financial Review

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Financial Review Contents

Executive Summary
Financial Highlights
Balance Sheet Overview
Recent Events
Supplemental Financial Data
Business Segment Operations

Deposits
Global Card Services
Home Loans & Insurance
Global Commercial Banking
Global Banking & Markets
Global Wealth & Investment Management
All Other

Off-Balance Sheet Arrangements and Contractual Obligations
Regulatory Matters
Managing Risk
Strategic Risk Management
Capital Management
Liquidity Risk
Credit Risk Management

Consumer Portfolio Credit Risk Management
Commercial Portfolio Credit Risk Management
Non-U.S. 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

Compliance Risk Management
Operational Risk Management
Complex Accounting Estimates
2009 Compared to 2008

Overview
Business Segment Operations

Statistical Tables
Glossary

Throughout the MD&A, we use certain acronyms and
abbreviations which are defined in the Glossary.

Bank of America 2010

Management’s Discussion and Analysis of Financial Condition and Results of
Operations

This report, the documents that it incorporates by reference and the docu-
ments into which it may be incorporated by reference may contain, and from
time to time Bank of America Corporation (collectively with its subsidiaries, the
Corporation) and its management may make, certain statements that con-
stitute forward-looking statements within the meaning of the Private Securi-
ties Litigation Reform Act of 1995. These statements can be identified by the
fact that they do not relate strictly to historical or current facts. Forward-
looking statements often use words such as “expects,” “anticipates,” “be-
lieves,” “estimates,” “targets,” “intends,” “plans,” “goal” and other similar
expressions or future or conditional verbs such as “will,” “may,” “might,”
“should,” “would” and “could.” The forward-looking statements made repre-
sent the current expectations, plans or forecasts of the Corporation regarding
the Corporation’s future results and revenues, and future business and
economic conditions more generally, including statements concerning: the
adequacy of the liability for the remaining representations and warranties
exposure to the government-sponsored enterprises (GSEs) and the future
impact to earnings; the potential assertion and impact of additional claims
not addressed by the GSE agreements; the expected repurchase claims on
the 2004-2008 loan vintages; representations and warranties liabilities (also
commonly referred to as reserves), and range of possible loss estimates,
expenses and repurchase claims and resolution of those claims; the proposal
to modestly increase dividends in the second half of 2011; the charge to
income tax expense resulting from a reduction in the United Kingdom (U.K.)
corporate income tax rate; future payment protection insurance claims in the
U.K.; future risk-weighted assets and any mitigation efforts to reduce risk-
weighted assets; net interest income; credit trends and conditions, including
credit losses, credit reserves, charge-offs, delinquency trends and nonper-
forming asset levels; consumer and commercial service charges, including
the impact of changes in the Corporation’s overdraft policy as well as from the
Electronic Fund Transfer Act and the Corporation’s ability to mitigate a decline
in revenues; liquidity; capital levels determined by or established in accor-
dance with accounting principles generally accepted in the United States of
America (GAAP) and with the requirements of various regulatory agencies,
including our ability to comply with any Basel capital requirements endorsed by
U.S. regulators without raising additional capital; the revenue impact of the
Credit Card Accountability Responsibility and Disclosure Act of 2009 (the
CARD Act); the revenue impact resulting from, and any mitigation actions
taken in response to, the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the Financial Reform Act) including the impact of the Volcker
Rule and derivatives regulations; mortgage production levels; long-term debt
levels; run-off of loan portfolios; the impact of various legal proceedings
discussed in “Litigation and Regulatory Matters” in Note 14 – Commitments
and Contingencies to the Consolidated Financial Statements; the number of
delayed foreclosure sales and the resulting financial impact and other similar
matters; and other matters relating to the Corporation and the securities that
we may offer from time to time. The foregoing is not an exclusive list of all
forward-looking statements the Corporation makes. These statements are
not guarantees of future results or performance and involve certain risks,
uncertainties and assumptions that are difficult to predict and often are
beyond the Corporation’s control. Actual outcomes and results may differ
materially from those expressed in, or implied by, the Corporation’s forward-
looking statements.

You should not place undue reliance on any forward-looking statement and
should consider the following uncertainties and risks, as well as the risks and
uncertainties more fully discussed elsewhere in this report, including Item 1A.
“Risk Factors” of this Annual Report on Form 10-K, and in any of the
Corporation’s subsequent Securities and Exchange Commission (SEC) filings:
the Corporation’s resolution of certain representations and warranties

obligations with the GSEs and our ability to resolve any remaining claims;
the Corporation’s ability to resolve any representations and warranties obli-
gations with monolines and private investors; failure to satisfy our obligations
as servicer in the residential mortgage securitization process; the adequacy
of the liability and/or range of possible loss estimates for the representations
and warranties exposures to the GSEs, monolines and private-label and other
investors; the potential assertion and impact of additional claims not ad-
dressed by the GSE agreements; the foreclosure review and assessment
process, the effectiveness of the Corporation’s response and any govern-
mental or private third-party claims asserted in connection with these fore-
closure matters; the adequacy of the reserve for future payment protection
insurance claims in the U.K.; negative economic conditions generally including
continued weakness in the U.S. housing market, high unemployment in the
U.S., as well as economic challenges in many non-U.S. countries in which we
operate and sovereign debt challenges; the Corporation’s mortgage modifi-
cation policies and related results; the level and volatility of the capital
markets, interest rates, currency values and other market indices; changes
in consumer, investor and counterparty confidence in, and the related impact
on, financial markets and institutions, including the Corporation as well as its
business partners; the Corporation’s credit ratings and the credit ratings of its
securitizations; estimates of the fair value of certain of the Corporation’s
assets and liabilities; legislative and regulatory actions in the U.S. (including
the impact of the Financial Reform Act, the Electronic Fund Transfer Act, the
CARD Act and related regulations and interpretations) and internationally; the
identification and effectiveness of any initiatives to mitigate the negative
impact of the Financial Reform Act; the impact of litigation and regulatory
investigations, including costs, expenses, settlements and judgments as well
as any collateral effects on our ability to do business and access the capital
markets; various monetary, tax and fiscal policies and regulations of the
U.S. and non-U.S. governments; changes in accounting standards, rules and
interpretations (including new consolidation guidance), inaccurate estimates
or assumptions in the application of accounting policies, including in deter-
mining reserves, applicable guidance regarding goodwill accounting and the
impact on the Corporation’s financial statements; increased globalization of
the financial services industry and competition with other U.S. and interna-
tional financial institutions; adequacy of the Corporation’s risk management
framework; the Corporation’s ability to attract new employees and retain and
motivate existing employees; technology changes instituted by the Corpora-
tion, its counterparties or competitors; mergers and acquisitions and their
integration into the Corporation, including the Corporation’s ability to realize
the benefits and cost savings from and limit any unexpected liabilities ac-
quired as a result of the Merrill Lynch and Countrywide acquisitions; the
Corporation’s reputation, including the effects of continuing intense public
and regulatory scrutiny of the Corporation and the financial services industry;
the effects of any unauthorized disclosures of our or our customers’ private or
confidential information and any negative publicity directed toward the Cor-
poration; and decisions to downsize, sell or close units or otherwise change
the business mix of the Corporation.

Forward-looking statements speak only as of the date they are made, and
the Corporation undertakes no obligation to update any forward-looking
statement to reflect the impact of circumstances or events that arise after
the date the forward-looking statement was made.

Notes to the Consolidated Financial Statements referred to in the Man-
agement’s Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) are incorporated by reference into the MD&A. Certain prior
period amounts have been reclassified to conform to current period
presentation.

Bank of America 2010

Executive Summary

Business Overview
The Corporation is a Delaware corporation, a bank holding company and a
financial holding company. When used in this report, “the Corporation” may
refer to the Corporation individually, the Corporation and its subsidiaries, or
certain of the Corporation’s subsidiaries or affiliates. Our principal executive
offices are located in the Bank of America Corporate Center in Charlotte,
North Carolina. Through our banking and various nonbanking subsidiaries
throughout the United States and in certain international markets, we provide
a diversified range of banking and nonbanking financial services and products
through six business segments: Deposits, Global Card Services, Home
Loans & Insurance, Global Commercial Banking, Global Banking & Markets
(GBAM) and Global Wealth & Investment Management (GWIM), with the
remaining operations recorded in All Other. Effective January 1, 2010, we
realigned the Global Corporate and Investment Banking portion of the former
Global Banking business segment with the former Global Markets business
segment to form GBAM and to reflect Global Commercial Banking as a
standalone segment. At December 31, 2010, the Corporation had $2.3
trillion in assets and approximately 288,000 full-time equivalent employees.

On January 1, 2009, we acquired Merrill Lynch & Co., Inc. (Merrill Lynch) and,
as a result, we now have one of the largest wealth management businesses in
the world with nearly 17,000 wealth advisors, an additional 3,000 client-
facing professionals and more than $2.2 trillion in client assets. Additionally,
we are a global leader in corporate and investment banking and trading across
a broad range of asset classes serving corporations, governments, institu-
tions and individuals around the world.

As of December 31, 2010, we operate in all 50 states, the District of
Columbia and more than 40 non-U.S. countries. Our retail banking footprint
covers approximately 80 percent of the U.S. population and in the U.S., we
serve approximately 57 million consumer and small business relationships
with 5,900 banking centers, 18,000 ATMs, nationwide call centers, and
leading online and mobile banking platforms. We have banking centers in
13 of the 15 fastest growing states and have leadership positions in market
share for deposits in seven of those states. We offer industry-leading support
to approximately four million small business owners.

For information on recent and proposed legislative and regulatory initia-
tives that may affect our business, see Regulatory Matters beginning on
page 60.

The table below provides selected consolidated financial data for 2010

and 2009.

Table 1 Selected Financial Data

(Dollars in millions, except per share information)

Income statement

Revenue, net of interest expense (FTE basis) (1)
Net income (loss)
Net income, excluding goodwill impairment charges (2)
Diluted earnings (loss) per common share
Diluted earnings (loss) per common share, excluding goodwill impairment charges (2)
Dividends paid per common share

Performance ratios

Return on average assets
Return on average assets, excluding goodwill impairment charges (2)
Return on average tangible shareholders’ equity (1)
Return on average tangible shareholders’ equity, excluding goodwill impairment charges (1, 2)
Efficiency ratio (FTE basis) (1)
Efficiency ratio (FTE basis), excluding goodwill impairment charges (1, 2)

Asset quality

Allowance for loan and lease losses at December 31
Allowance for loan and lease losses as a percentage of total loans and leases outstanding at December 31 (3)
Nonperforming loans, leases and foreclosed properties at December 31 (3)
Net charge-offs
Net charge-offs as a percentage of average loans and leases outstanding (3, 4)
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs (3, 5)

Balance sheet at year end
Total loans and leases
Total assets
Total deposits
Total common shareholders’ equity
Total shareholders’ equity

Capital ratios at year end
Tier 1 common equity
Tier 1 capital
Total capital
Tier 1 leverage

2010

2009

$ 111,390
(2,238)
10,162
(0.37)
0.86
0.04

$ 120,944
6,276
6,276
(0.29)
(0.29)
0.04

n/m
0.42%
n/m
7.11
74.61
63.48

41,885

4.47%

32,664
34,334

3.60%
1.22

0.26%
0.26
4.18
4.18
55.16
55.16

37,200

4.16%

35,747
33,688

3.58%
1.10

$ 940,440
2,264,909
1,010,430
211,686
228,248

$ 900,128
2,230,232
991,611
194,236
231,444

8.60%

11.24
15.77
7.21

7.81%

10.40
14.66
6.88

(1) Fully taxable-equivalent (FTE) basis, return on average tangible shareholders’ equity (ROTE) and the efficiency ratio are non-GAAP measures. Other companies may define or calculate these measures differently. For additional

information on these measures and ratios, see Supplemental Financial Data beginning on page 40, and for a corresponding reconciliation to GAAP financial measures, see Table XIII.

(2) Net income (loss), diluted earnings (loss) per common share, return on average assets, ROTE and the efficiency ratio have been calculated excluding the impact of goodwill impairment charges of $12.4 billion in 2010 and accordingly,
these are non-GAAP measures. For additional information on these measures and ratios, see Supplemental Financial Data beginning on page 40, and for a corresponding reconciliation to GAAP financial measures, see Table XIII.
(3) Balances and ratios do not include loans accounted for under the fair value option. For additional exclusions on nonperforming loans, leases and foreclosed properties, see Nonperforming Consumer Loans and Foreclosed Properties

Activity beginning on page 85 and corresponding Table 33, and Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity and corresponding Table 41 on page 93.

(4) Net charge-offs as a percentage of average loans and leases outstanding excluding purchased credit-impaired (PCI) loans were 3.73 percent and 3.71 percent for 2010 and 2009.
(5) Ratio of the allowance for loan and lease losses to net charge-offs excluding (PCI) loans was 1.04 percent and 1.00 percent for 2010 and 2009.
n/m = not meaningful

Bank of America 2010

2010 Economic and Business Environment
The banking environment and markets in which we conduct our businesses
will continue to be strongly influenced by developments in the U.S. and global
economies, as well as the continued implementation and rulemaking from
recent financial reforms. The global economy continued to recover in 2010,
but growth was very uneven across countries and regions. Emerging nations,
led by China, India and Brazil, expanded rapidly, while the U.S., U.K., Europe
and Japan continued to grow modestly.

growth in response to the financial crisis and the implementation of fiscal
austerity programs. Additionally, Spain and Ireland’s economies declined as a
result of material deterioration in their housing sectors. Uncertainty over the
outcome of the EU governments’ financial support programs and worries
about sovereign finances continued through year end. For information on our
exposure in Europe, see Non-U.S. Portfolio beginning on page 98 and
Note 28 – Performance by Geographical Area to the Consolidated Financial
Statements.

United States
In the U.S., the economy began to recover early in 2010, fueled by moderate
growth in consumption and inventory rebuilding, but slowed in late spring,
coincident with the intensification of Europe’s financial crisis. A slowdown in
consumption and domestic demand growth contributed to weak employment
gains and an unemployment
rate that drifted close to 10 percent.
Year-over-year inflation measures receded below one percent and stock
market indices declined. Concerns about high unemployment and fears that
the U.S. might incur deflation led the Federal Reserve to adopt a second round
of quantitative easing that involved purchases of $600 billion of U.S. Treasury
securities scheduled to occur through June 2011. The announcement of this
policy led to lower interest rates. Bond yields rebounded in the second half of
2010 as the U.S. economy reaccelerated, driven by stronger consumer
spending, rapid growth of exports and business investment in equipment
and software. The strong holiday retail season provided healthy economic
momentum toward year end. Despite only moderate economic growth in
2010, corporate profits rose sharply, benefiting from strong productivity gains
and constraints on hiring and operating costs. Cautious business financial
practices resulted in a record-breaking $1.5 trillion in free cash flows at non-
financial businesses.

The housing market remained weak throughout 2010. Home sales were
soft, despite lower home prices and low interest rates. There were delays in
the foreclosure process on the large number of distressed mortgages and the
supply of unsold homes remained high. Based on available Home Price Index
(HPI) information, the mild improvement in home prices that occurred in the
second half of 2009 continued into early 2010. However, housing prices
renewed a downward trend in the second half of 2010, due in part to the
expiration of tax incentives for home buyers.

Credit quality of bank loans to businesses and households improved
significantly in 2010 and the continued economic recovery improved the
environment for bank lending. Bank commercial and industrial loans to busi-
nesses increased in the last few months of 2010, following their steep
recession-related declines, reflecting increasing loan demand relating to
stronger production, inventory building and capital spending. Rising dispos-
able personal
income, household deleveraging and improving household
finances contributed to improving consumer credit quality.

Europe
In Europe, a financial crisis emerged in mid-2010, triggered by high budget
deficits and rising direct and contingent sovereign debt in Greece, Ireland,
Italy, Portugal and Spain that created concerns about the ability of these
European Union (EU) “peripheral nations” to continue to service their debt
obligations. These conditions impacted financial markets and resulted in high
and volatile bond yields on the sovereign debt of many EU nations. The
financial crisis and efforts by the European Commission, European Central
Bank (ECB) and International Monetary Fund (IMF) to negotiate a financial
support package to financially challenged EU nations unsettled global finan-
cial markets and contributed to Euro exchange rate and interest rate volatility.
Economic performance of certain EU “core nations,” led by Germany, re-
mained healthy throughout 2010, while the economies of Greece, Ireland,
Italy, Portugal and Spain experienced recessionary conditions and slowing

Asia
Asia, excluding Japan, continued to outperform all other regions in 2010 with
strong growth across most countries. China and India continued to lead the
region in terms of growth and China became the second largest economy in
the world after the U.S., eclipsing Japan. Growth across the region became
broader based with consumer demand, investment activity and exports all
performing well. Asia remained well positioned to withstand global shocks
because of record international reserves, current account surpluses and
reduced external leverage. Many Asian nations, including China, Taiwan,
South Korea, Thailand and Malaysia, are net external creditors, with China
and Japan among the largest holders of U.S. Treasury bonds. Bank balance
sheets have improved across most of the region and asset quality issues have
remained manageable. Among the key challenges faced by the region were
large capital inflows that placed appreciation pressures on most currencies
against the U.S. Dollar (USD), complicating monetary policy and adding to
excess liquidity pressures. Most countries in the region, including China,
India, South Korea, Thailand and Indonesia, began to withdraw fiscal stimulus
and tighten monetary policy with hikes in interest rates as growth gathered
momentum and as food and broader price inflation pressures began to
increase. Japan performed well early in the year, but the economy weakened
at the end of the year due to weakening consumer demand, and appreciation
of the yen that hurt export competitiveness. For information on our exposure
in Asia, see Non-U.S. Portfolio beginning on page 98 and Note 28 – Perfor-
mance by Geographical Area to the Consolidated Financial Statements.

Emerging Nations
In the emerging nations, inflation pressures began to mount and their central
banks raised interest rates or took steps to tighten monetary policy and slow
bank lending. Strong growth in emerging nations and their favorable economic
outlooks attracted capital from the industrialized nations. The excess global
liquidity generated by the accommodative monetary policies of the Federal
Reserve, Bank of Japan and other central banks also flowed into emerging
nations. These capital inflows put upward pressure on many emerging nation
currencies. As a result, some emerging nations, such as Brazil, experienced
strong currency appreciation. However, in other nations, that peg their cur-
rencies to the U.S. dollar, currency appreciation was muted causing inflation-
ary pressures and rapid real estate price appreciation. Global economic
momentum, along with the generally weak U.S. dollar and easing monetary
policies in several
industrialized nations, contributed to rising prices for
industrial commodities in these emerging nations. Through year end, inflation
pressures in key emerging nations continued to mount. For more information
on our emerging nations exposure, see Table 48 on page 99.

Performance Overview
In 2010, we reported a net loss of $2.2 billion compared to net income of
$6.3 billion in 2009. After preferred stock dividends and accretion of $1.4 bil-
lion in 2010 compared with $8.5 billion in 2009, net loss applicable to common
shareholders was $3.6 billion, or $0.37 per diluted common share, compared
to $2.2 billion, or $0.29 per diluted common share in 2009. Our 2010 results
reflected, among other things, $12.4 billion in goodwill impairment charges,
impairment charges of
including non-cash, non-tax deductible goodwill

Bank of America 2010

$10.4 billion in Global Card Services and $2.0 billion in Home Loans &
Insurance. For more information about the goodwill impairment charges in
2010, see Complex Accounting Estimates beginning on page 111 and
Note 10 – Goodwill and Intangible Assets to the Consolidated Financial
Statements.

Excluding the $12.4 billion of goodwill impairment charges, net income
was $10.2 billion for 2010. After preferred stock dividends and accretion, net
income applicable to common shareholders, excluding the goodwill impair-
ment charges was $8.8 billion, or $0.86 per diluted common share, for 2010.
Revenue, net of interest expense on a FTE basis decreased $9.6 billion or
eight percent to $111.4 billion in 2010.

Net interest income on a FTE basis increased $4.3 billion to $52.7 billion
for 2010 compared to 2009. The increase was due to the impact of deposit
pricing and the adoption of new consolidation guidance. The increase was
partially offset by lower commercial and consumer loan levels and lower rates
on the core assets and trading assets and liabilities.

Noninterest income decreased $13.8 billion to $58.7 billion in 2010
compared to $72.5 billion in 2009. Contributing to the decline was lower
mortgage banking income, down $6.1 billion, largely due to $6.8 billion in
representations and warranties provision, and decreases in equity investment
income of $4.8 billion, gains on sales of debt securities of $2.2 billion, trading
account profits of $2.2 billion, service charges of $1.6 billion and insurance
income of $694 million, compared to 2009. These declines were partially
offset by an increase in other income of $2.4 billion and a decrease in
impairment losses of $1.9 billion.

Representations and warranties expense increased $4.9 billion to $6.8 bil-
lion in 2010 compared to $1.9 billion in 2009. The increase was primarily driven
by a $4.1 billion provision for representations and warranties in the fourth
quarter of 2010. The fourth quarter provision includes $3.0 billion related to
the impact of the agreements reached with the GSEs on December 31, 2010,
pursuant to which we paid $2.8 billion to resolve repurchase claims involving
certain residential mortgage loans sold directly to the GSEs by entities related
to legacy Countrywide Financial Corporation (Countrywide) as well as adjust-
ments made to the representations and warranties liability for other loans sold

directly to the GSEs and not covered by these agreements. For more
information about the GSE agreements, see Recent Events beginning on
page 37 and Note 9 – Representations and Warranties Obligations and Cor-
porate Guarantees to the Consolidated Financial Statements.

The provision for credit losses decreased $20.1 billion to $28.4 billion in
2010 compared to 2009. The provision for credit losses was $5.9 billion
lower than net charge-offs in 2010, resulting in a reduction in reserves,
compared with the 2009 provision for credit losses that was $14.9 billion
higher than net charge-offs, reflecting reserve additions throughout the year.
The reserve reduction in 2010 was due to improving portfolio trends across
most of the consumer and commercial businesses, particularly the U.S. credit
card, consumer lending and small business products, as well as core com-
mercial loan portfolios.

Noninterest expense increased $16.4 billion to $83.1 billion in 2010
compared to 2009. The increase was driven by the $12.4 billion of goodwill
impairment charges recognized in 2010. Excluding the goodwill impairment
charges, noninterest expense increased $4.0 billion in 2010 compared to
2009, driven by a $3.6 billion increase in personnel costs reflecting the build-
out of several businesses and a $1.6 billion increase in litigation expense,
partially offset by lower merger and restructuring charges.

FTE basis, net income excluding the goodwill impairment charges, non-
interest expense excluding goodwill impairment charges and net income
impairment
applicable to common shareholders excluding the goodwill
charges are non-GAAP measures. For corresponding reconciliations to GAAP
financial measures, see Table XIII.

Segment Results
Effective January 1, 2010, management realigned the former Global Banking
and Global Markets business segments into Global Commercial Banking and
GBAM. Prior year amounts have been reclassified to conform to the current
period presentation. These changes did not have an impact on the previously
reported consolidated results of the Corporation. For additional information
related to the business segments, see Note 26 – Business Segment Infor-
mation to the Consolidated Financial Statements.

Table 2 Business Segment Results

(Dollars in millions)

Deposits
Global Card Services (2)
Home Loans & Insurance
Global Commercial Banking
Global Banking & Markets
Global Wealth & Investment Management
All Other (2)

Total FTE basis

FTE adjustment

Total Consolidated

Total Revenue (1)

Net Income (Loss)

2010

$ 13,181
25,621
10,647
10,903
28,498
16,671
5,869

111,390
(1,170)

2009

$ 13,890
29,046
16,903
11,141
32,623
16,137
1,204

120,944
(1,301)

2010

$ 1,352
(6,603)
(8,921)
3,181
6,319
1,347
1,087

(2,238)
–

2009

$ 2,576
(5,261)
(3,851)
(290)
10,058
1,716
1,328

6,276
–

$110,220

$119,643

$(2,238)

$ 6,276

(1) Total revenue is net of interest expense and is on a FTE basis which is a non-GAAP measure. For more information on this measure, see Supplemental Financial Data beginning on page 40, and for a corresponding reconciliation to a

(2)

GAAP financial measure, see Table XIII.
In 2010, Global Card Services and All Other are presented in accordance with new consolidation guidance. Accordingly, current year Global Card Services results are comparable to prior year results which are presented on a managed
basis. For more information on the reconciliation of Global Card Services and All Other, see Note 26 – Business Segment Information to the Consolidated Financial Statements.

Deposits net income decreased from the prior year due to a decline in
revenue and higher noninterest expense. Net interest income increased as a
result of a customer shift to more liquid products and continued pricing disci-
pline, partially offset by a lower net interest income allocation related to asset
and liability management (ALM) activities. The noninterest income decline was
driven by the impact of Regulation E, which was effective in the third quarter of
2010 and our overdraft policy changes implemented in late 2009. Noninterest
expense increased as a higher proportion of banking center sales and service

costs was aligned to Deposits from the other segments, and increased litigation
expenses. The increase was partially offset by the absence of a special Federal
Deposit Insurance Corporation (FDIC) assessment in 2009.

Global Card Services net loss increased compared to the prior year due
primarily to a $10.4 billion goodwill impairment charge. Revenue decreased
compared to the prior year driven by lower average loans, reduced interest and
fee income primarily resulting from the implementation of the CARD Act and
the impact of recording a reserve related to future payment protection

Bank of America 2010

insurance claims in the U.K. that have not yet been asserted. Provision for
credit losses improved due to lower delinquencies and bankruptcies as a
result of the improved economic environment, which resulted in reserve
reductions in 2010 compared to reserve increases in the prior year. Non-
interest expense increased primarily due to the goodwill impairment charge.
Home Loans & Insurance net loss increased in 2010 compared to the
prior year primarily due to an increase in representations and warranties
provision and a $2.0 billion goodwill impairment charge, partially offset by a
decline in provision for credit losses driven by improving portfolio trends.
Mortgage banking income declined driven by increased representations and
warranties provision and lower production volume reflecting a drop in the
overall size of the mortgage market. Noninterest expense increased primarily
due to the goodwill impairment charge, higher litigation expense and an
increase in default-related servicing expense, partially offset by lower pro-
duction expense and insurance losses.

Global Commercial Banking net income increased due to lower credit
costs. Revenue was negatively impacted by additional costs related to our
agreement to purchase certain retail automotive loans. Net interest income
increased due to a growth in average deposits, partially offset by a lower net
interest income allocation related to ALM activities. Credit pricing discipline
offset the impact of the decline in average loan balances. The provision for
credit losses decreased driven by improvements from stabilizing values in the
commercial real estate portfolio.

GBAM net income decreased driven by the absence of the gain in the prior
year related to the contribution of our merchant processing business to a joint
venture. Additionally, the decrease was driven by lower sales and trading
revenue due to more favorable market conditions in the prior year, partially

offset by credit valuation gains on derivative liabilities and gains on legacy
assets compared to losses in the prior year. Provision for credit losses
declined driven by lower net charge-offs and reserve levels, as well as a
reduction in reservable criticized balances. Noninterest expense increased
driven by higher compensation costs as a result of the recognition of expense
on a proportionately larger amount of prior year incentive deferrals and
investments in infrastructure and personnel associated with further devel-
opment of the business. Income tax expense was adversely affected by a
charge related to the U.K. tax rate reduction impacting the carrying value of
deferred tax assets.

GWIM net income decreased driven by higher noninterest expense and the
tax-related effect of the sale of the Columbia Management long-term asset
management business partially offset by higher noninterest income and lower
credit costs. Revenue increased driven by higher asset management fees and
transactional revenue. Provision for credit losses decreased driven by stabi-
lization of the portfolios and the recognition of a single large commercial
charge-off in 2009. Noninterest expense increased due primarily to higher
revenue-related expenses, support costs and personnel costs associated
with further investment in the business.

All Other net income decreased compared to the prior year driven primarily
by decreases in net interest income and noninterest income, partially offset
by a lower provision for credit losses. Revenue decreased due primarily to
lower equity investment gains as the prior year included a gain resulting from
the sale of a portion of our investment in China Construction Bank (CCB)
combined with reduced gains on the sale of debt securities. The decrease in
the provision for credit losses was due to improving portfolio trends in the
residential mortgage portfolio.

Bank of America 2010

Financial Highlights

Net Interest Income
Net interest income on a FTE basis increased $4.3 billion to $52.7 billion for
2010 compared to 2009. The increase was due to the impact of deposit
pricing and the adoption of new consolidation guidance which contributed
$10.5 billion to net interest income in 2010. The increase was partially offset
by lower commercial and consumer loan levels, the sale of First Republic in
2010 and lower rates on the core assets and trading assets and liabilities,
including derivatives exposure. The net interest yield on a FTE basis increased
13 basis points (bps) to 2.78 percent for 2010 compared to 2009 due to
these same factors.

Noninterest Income

Table 3 Noninterest Income

(Dollars in millions)

Card income
Service charges
Investment and brokerage services
Investment banking income
Equity investment income
Trading account profits
Mortgage banking income
Insurance income
Gains on sales of debt securities
Other income (loss)
Net impairment losses recognized in earnings on

available-for-sale debt securities

Total noninterest income

2010

$ 8,108
9,390
11,622
5,520
5,260
10,054
2,734
2,066
2,526
2,384

(967)

$58,697

2009

$ 8,353
11,038
11,919
5,551
10,014
12,235
8,791
2,760
4,723
(14)

(2,836)

$72,534

Noninterest income decreased $13.8 billion to $58.7 billion for 2010

compared to 2009. The following items highlight the significant changes.
• Card income decreased $245 million due to the implementation of the
CARD Act partially offset by the impact of the new consolidation guidance
and higher interchange income.

• Service charges decreased $1.6 billion largely due to the impact of Reg-
ulation E, which became effective in the third quarter of 2010 and the
impact of our overdraft policy changes implemented in late 2009.

• Equity investment income decreased by $4.8 billion, as net gains on the
sales of certain strategic investments during 2010, including Itaú Uni-
banco, MasterCard, Santander and a portion of our investment in Black-
Rock, Inc. (BlackRock) were less than gains in 2009 that included a
$7.3 billion gain related to the sale of a portion of our investment in
CCB and the $1.1 billion gain related to our BlackRock investment.

• Trading account profits decreased $2.2 billion due to more favorable
market conditions in the prior year and investor concerns regarding sov-
ereign debt fears and regulatory uncertainty. Net credit valuation gains on
derivative liabilities of $262 million for 2010 compared to losses of
$662 million for 2009.

• Mortgage banking income decreased $6.1 billion due to an increase of
$4.9 billion in representations and warranties provision and lower volume
and margins.

• Insurance income decreased $694 million due to a liability recorded for
future claims related to payment protection insurance (PPI) sold in the U.K.
• Gains on sales of debt securities decreased $2.2 billion driven by a lower
volume of sales of debt securities. The decrease also included the impact
of losses in 2010 related to portfolio restructuring activities.

• Other income (loss) improved by $2.4 billion. The prior year included a net
negative fair value adjustment of $4.9 billion on structured liabilities com-
pared to a net positive adjustment of $18 million in 2010, and the prior year

Bank of America 2010

also included a $3.8 billion gain on the contribution of our merchant pro-
cessing business to a joint venture. Legacy asset write-downs included in
other income (loss) were $1.7 billion in 2009 compared to net gains of
$256 million in 2010.

• Impairment losses recognized in earnings on available-for-sale (AFS) debt
securities decreased $1.9 billion reflecting lower impairment write-downs
on non-agency residential mortgage-backed securities (RMBS) and collat-
eralized debt obligations (CDOs).

Provision for Credit Losses
The provision for credit losses decreased $20.1 billion to $28.4 billion in
2010 compared to 2009. The provision for credit losses was $5.9 billion
lower than net charge-offs for 2010, resulting in a reduction in reserves
primarily due to improving portfolio trends throughout the year across the
consumer and commercial businesses.

The provision for credit losses related to our consumer portfolio de-
creased $11.4 billion to $25.4 billion for 2010 compared to 2009. The
provision for credit losses related to our commercial portfolio including the
provision for unfunded lending commitments decreased $8.7 billion to
$3.0 billion for 2010 compared to 2009.

Net charge-offs totaled $34.3 billion, or 3.60 percent of average loans and
leases for 2010 compared with $33.7 billion, or 3.58 percent for 2009. For
more information on the provision for credit losses, see Provision for Credit
Losses on page 100.

Noninterest Expense

Table 4 Noninterest Expense

(Dollars in millions)

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

Total noninterest expense

2010

$35,149
4,716
2,452
1,963
2,695
1,731
2,544
1,416
16,222
12,400
1,820

$83,108

2009

$31,528
4,906
2,455
1,933
2,281
1,978
2,500
1,420
14,991
–
2,721

$66,713

Excluding the goodwill impairment charges of $12.4 billion, noninterest
expense increased $4.0 billion for 2010 compared to 2009. The increase
was driven by a $3.6 billion increase in personnel costs reflecting the build out
of several businesses, the recognition of expense on proportionally larger
prior year incentive deferrals and the U.K. payroll tax on certain year-end
incentive payments, as well as a $1.6 billion increase in litigation costs. These
increases were partially offset by a $901 million decline in pre-tax merger and
restructuring charges compared to the prior year. The prior year included a
special FDIC assessment of $724 million.

Income Tax Expense
Income tax expense was $915 million for 2010 compared to a benefit of
$1.9 billion for 2009. The effective tax rate for 2010 was not meaningful due
to the impact of non-deductible goodwill impairment charges of $12.4 billion.
The effective tax rate for 2010 excluding goodwill impairment charges
from pre-tax income was 8.3 percent compared to (44.0) percent for 2009,
primarily driven by an increase in pre-tax income excluding the non-deductible
goodwill impairment charges. Also impacting the 2010 effective tax rate was a

$392 million charge from a U.K. law change referred to below and a $1.7 bil-
lion tax benefit from the release of a portion of the deferred tax asset
valuation allowance related to acquired capital loss carryforward tax benefits
compared to $650 million in 2009. For more information, see Note 21
— Income Taxes to the Consolidated Financial Statements.

During 2010, the U.K. government enacted a tax law change reducing the
corporate income tax rate by one percent effective for the 2011 U.K. tax
financial year beginning on April 1, 2011. This reduction favorably affects

income tax expense on future U.K. earnings, but also required us to re-
measure our U.K. net deferred tax assets using the lower tax rate. The U.K.
corporate tax rate reduction resulted in an income tax charge of $392 million
in 2010. If future rate reductions were to be enacted as suggested in U.K.
Treasury announcements and assuming no change in the deferred tax asset
balance, a similar charge to income tax expense for each one percent
reduction in the rate would result during each period of enactment. For more
information, see Regulatory Matters beginning on page 60.

Balance Sheet Overview

Table 5 Selected Balance Sheet Data

(Dollars in millions)

Assets

Federal funds sold and securities borrowed or purchased under agreements to resell
Trading account assets
Debt securities
Loans and leases
Allowance for loan and lease losses
All other assets

Total assets

Liabilities

Deposits
Federal funds purchased and securities loaned or 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

December 31

Average Balance

2010

2009

2010

2009

$ 209,616
194,671
338,054
940,440
(41,885)
624,013

$2,264,909

$1,010,430
245,359
71,985
59,962
448,431
200,494

2,036,661
228,248

$ 189,933
182,206
311,441
900,128
(37,200)
683,724

$2,230,232

$ 991,611
255,185
65,432
69,524
438,521
178,515

1,998,788
231,444

$ 256,943
213,745
323,946
958,331
(45,619)
732,256

$2,439,602

$ 988,586
353,653
91,669
76,676
490,497
205,290

2,206,371
233,231

$ 235,764
217,048
271,048
948,805
(33,315)
803,718

$2,443,068

$ 980,966
369,863
72,207
118,781
446,634
209,972

2,198,423
244,645

Total liabilities and shareholders’ equity

$2,264,909

$2,230,232

$2,439,602

$2,443,068

At December 31, 2010, total assets were $2.3 trillion, an increase of
$34.7 billion, or two percent, from December 31, 2009. Average total assets
in 2010 decreased $3.5 billion from 2009. At December 31, 2010, total
liabilities were $2.0 trillion, an increase of $37.9 billion, or two percent, from
December 31, 2009. Average total liabilities for 2010 increased $7.9 billion
from 2009.

Period-end balance sheet amounts may vary from average balance sheet
amounts due to liquidity and balance sheet management functions, primarily
involving our portfolios of highly liquid assets, that are designed to ensure the
adequacy of capital while enhancing our ability to manage liquidity require-
ments for the Corporation and for our customers, and to position the balance
sheet in accordance with the Corporation’s risk appetite. The execution of
these functions requires the use of balance sheet and capital-related limits
including spot, average and risk-weighted asset limits, particularly in our
trading businesses. One of our key metrics, Tier 1 leverage ratio, is calculated
based on adjusted quarterly average total assets.

Impact of Adopting New Consolidation Guidance
On January 1, 2010, the Corporation adopted new consolidation guidance
resulting in the consolidation of certain former qualifying special purpose
entities and VIEs that were not recorded on the Corporation’s Consolidated
Balance Sheet prior to that date. The adoption of this new consolidation
guidance resulted in a net incremental increase in assets of $100.4 billion,
including $69.7 billion resulting from consolidation of credit card trusts and
$30.7 billion from consolidation of other special purpose entities including
multi-seller conduits, and a net increase of $106.7 billion in total liabilities,
including $84.4 billion of long-term debt. These amounts are net of retained
interests in securitizations held on the Consolidated Balance Sheet at De-
cember 31, 2009 and a $10.8 billion increase in the allowance for loan and
lease losses, the majority of which relates to credit card receivables. The
Corporation recorded a $6.2 billion charge, net-of-tax, to retained earnings on
January 1, 2010 for the cumulative effect of the adoption of this new
consolidation guidance due primarily to the increase in the allowance for loan
and lease losses, and a $116 million charge to accumulated other compre-
hensive income (OCI). The initial recording of these assets, related allowance
for loan and lease losses and liabilities on the Corporation’s Consolidated
Balance Sheet had no impact at the date of adoption on consolidated results
of operations. For additional detail on the impact of adopting this new con-
solidation guidance, refer to Note 8 – Securitizations and Other Variable
Interest Entities to the Consolidated Financial Statements.

Bank of America 2010

Assets

Liabilities

Federal Funds Sold and Securities Borrowed or Purchased
Under Agreements to Resell
Federal funds transactions involve lending reserve balances on a short-term
basis. Securities borrowed and securities purchased under agreements to
resell are utilized to accommodate customer transactions, earn interest rate
spreads and obtain securities for settlement. Year-end federal funds sold and
securities borrowed or purchased under agreements to resell
increased
$19.7 billion and average amounts increased $21.2 billion in 2010 compared
to 2009, attributable primarily to a favorable rate environment and increased
customer activity.

Trading Account Assets
Trading account assets consist primarily of fixed-income securities (including
government and corporate debt), and equity and convertible instruments.
Year-end trading account assets increased $12.5 billion in 2010 compared to
2009 primarily due to the adoption of new consolidation guidance as well as
the consolidation of a VIE late in 2010. Average trading account assets
decreased slightly in 2010 as compared to 2009.

Debt Securities
Debt securities include U.S. Treasury and agency securities, mortgage-
backed securities (MBS), principally agency MBS, foreign bonds, corporate
bonds and municipal debt. We use the debt securities portfolio primarily to
manage interest rate and liquidity risk and to take advantage of market
conditions that create more economically attractive returns on these invest-
ments. Year-end and average balances of debt securities increased $26.6 bil-
lion and $52.9 billion in 2010 compared to 2009 due to agency MBS
purchases. For additional information on AFS debt securities, see Market
Risk Management – Securities beginning on page 107 and Note 5 – Securi-
ties to the Consolidated Financial Statements.

Loans and Leases
Year-end and average loans and leases increased $40.3 billion to $940.4 bil-
lion and $9.5 billion to $958.3 billion in 2010 compared to 2009. The
increase was primarily due to the impact of adopting new consolidation
guidance partially offset by continued deleveraging by consumers, tighter
underwriting and the elevated levels of liquidity of commercial clients. For a
more detailed discussion of the loan portfolio, see Credit Risk Management
beginning on page 75 and Note 6 – Outstanding Loans and Leases to the
Consolidated Financial Statements.

Allowance for Loan and Lease Losses
Year-end and average allowance for loan lease losses increased $4.7 billion
and $12.3 billion in 2010 compared to 2009 primarily due to the $10.8 billion
of reserves recorded on January 1, 2010 in connection with the adoption of
new consolidation guidance and reserve additions in the PCI portfolio through-
out 2010. These were partially offset by reserve reductions during 2010 due
to the impacts of the improving economy. For a more detailed discussion of
the Allowance for Loan and Lease Losses, see Allowance for Loan and Lease
Losses beginning on page 101.

All Other Assets
Year-end and average other assets decreased $59.7 billion and $71.5 billion
in 2010 compared to 2009 driven primarily by the sale of strategic invest-
ments and goodwill impairment charges.

Deposits
Year-end and average deposits increased $18.8 billion to $1.0 trillion and
$7.6 billion to $988.6 billion in 2010 compared to 2009. The increase was
attributable to growth in our noninterest-bearing deposits, NOW and money
market accounts primarily driven by affluent, and commercial and corporate
clients, partially offset by a decrease in time deposits as a result of customer
shift to more liquid products.

Federal Funds Purchased and Securities Loaned or Sold Un-
der Agreements to Repurchase
Federal funds transactions involve borrowing reserve balances on a short-
term basis. Securities loaned and securities sold under agreements to
repurchase are collateralized borrowing transactions utilized to accommodate
customer transactions, earn interest rate spreads and finance assets on the
balance sheet. Year-end and average federal funds purchased and securities
loaned or sold under agreements to repurchase decreased $9.8 billion and
$16.2 billion in 2010 compared to 2009 primarily due to lower funding
requirements.

Trading Account Liabilities
Trading account liabilities consist primarily of short positions in fixed-income
securities (including government and corporate debt), equity and convertible
instruments. Year-end and average trading account liabilities increased
$6.5 billion and $19.5 billion in 2010 compared to 2009 due to trading
activity in fixed-income securities.

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. Year-end and average commer-
cial paper and other short-term borrowings decreased $9.6 billion to $60.0 bil-
lion and decreased $42.1 billion to $76.7 billion in 2010 compared to 2009
as a result of our strengthened liquidity position.

Long-term Debt
Year-end and average long-term debt increased by $9.9 billion to $448.4 bil-
lion and $43.9 billion to $490.5 billion in 2010 compared to 2009. The
increases were attributable to the $84.4 billion impact of new consolidation
guidance as discussed on page 33 offset by maturities outpacing new
issuances and the Corporation’s strategy to reduce our long-term debt. For
additional information on long-term debt, see Note 13 – Long-term Debt to the
Consolidated Financial Statements.

All Other Liabilities
Year-end all other liabilities increased $22.0 billion in 2010 compared to
2009 driven primarily by adoption of new consolidation guidance.

Shareholders’ Equity
Year-end and average shareholders’ equity decreased $3.2 billion and
$11.4 billion in 2010 compared to 2009. The decrease was driven primarily
by the goodwill impairment charges of $12.4 billion and the impact of adopting
new consolidation guidance as we recorded a $6.2 billion charge to retained
earnings for newly consolidated loans partially offset by changes in accumu-
lated OCI.

Bank of America 2010

Cash Flows Overview
The Corporation’s operating assets and liabilities support our global markets
and lending activities. We believe that cash flows from operations, available
cash balances and our ability to generate cash through short- and long-term
debt are sufficient to fund our operating liquidity needs. Our investing activ-
ities primarily include the AFS securities portfolio and other short-term in-
vestments. In addition, our financing activities reflect cash flows related to
raising customer deposits and issuing long-term debt as well as preferred and
common stock.

Cash and cash equivalents decreased $12.9 billion during 2010 due to
repayment and maturities of certain long-term debt and net purchases of AFS
securities partially offset by deposit growth. Cash and cash equivalents
increased $88.5 billion during 2009 which reflected our strengthened liquid-
ity. The following discussion outlines the significant activities that impacted
our cash flows during 2010 and 2009.

During 2010, net cash provided by operating activities was $82.6 billion
compared to $129.7 billion in 2009. The more significant adjustments to net

income (loss) to arrive at cash provided by operating activities included the
decreases in the provision for credit losses, decreases in trading and deriv-
ative assets, and in 2010, the goodwill impairment charges.

During 2010, net cash of $30.3 billion was used in investing activities
primarily for net purchases of AFS debt securities. During 2009, net cash
provided by investing activities was $157.9 billion, in part, from net sales, pay
downs and maturities of AFS securities associated with our management of
interest rate risk, and net cash received from the acquisition of Merrill Lynch.
During 2010, the net cash used in financing activities of $65.4 billion
primarily reflected the net decreases in long-term debt as maturities outpaced
new issuances. During 2009, net cash used in financing activities was
$199.6 billion reflecting the declines in commercial paper and other short-
term borrowings due, in part to lower Federal Home Loan Bank (FHLB)
balances as a result of our strong liquidity position and a decrease in long-
term debt as maturities outpaced new issuances.

Bank of America 2010

Table 6 Five Year Summary of Selected Financial Data

(Dollars in millions, except per share information)

Income statement

Net interest income
Noninterest income
Total revenue, net of interest expense
Provision for credit losses
Goodwill impairment
Merger and restructuring charges
All other noninterest expense (1)
Income (loss) before income taxes
Income tax expense (benefit)
Net income (loss)
Net income (loss) applicable to common shareholders
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
Return on average tangible common shareholders’ equity (2)
Return on average tangible shareholders’ equity (2)
Total ending equity to total ending assets
Total average equity to total average assets
Dividend payout

Per common share data
Earnings (loss)
Diluted earnings (loss)
Dividends paid
Book value
Tangible book value (2)

Market price per share of common stock

Closing
High closing
Low closing

Market capitalization

Average balance sheet

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

Asset quality (3)

Allowance for credit losses (4)
Nonperforming loans, leases and foreclosed properties (5)
Allowance for loan and lease losses as a percentage of total loans and leases outstanding (5)
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases (5, 6)
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases excluding

the purchased credit-impaired loan portfolio (5, 6)

Net charge-offs
Net charge-offs as a percentage of average loans and leases outstanding (5)
Nonperforming loans and leases as a percentage of total loans and leases outstanding (5)
Nonperforming loans, leases and foreclosed properties as a percentage of total loans, leases and

foreclosed properties (5)

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

Capital ratios (year end)
Risk-based capital:
Tier 1 common
Tier 1
Total
Tier 1 leverage
Tangible equity (2)
Tangible common equity (2)

2010

2009

2008

2007

2006

51,523 $
58,697
110,220
28,435
12,400
1,820
68,888
(1,323)
915
(2,238)
(3,595)
9,790,472
9,790,472

47,109 $
72,534
119,643
48,570
–
2,721
63,992
4,360
(1,916)
6,276
(2,204)
7,728,570
7,728,570

45,360 $
27,422
72,782
26,825
–
935
40,594
4,428
420
4,008
2,556
4,592,085
4,596,428

34,441 $
32,392
66,833
8,385
–
410
37,114
20,924
5,942
14,982
14,800
4,423,579
4,463,213

34,594
38,182
72,776
5,010
–
805
34,988
31,973
10,840
21,133
21,111
4,526,637
4,580,558

0.94%

1.44%

n/m
n/m
n/m
n/m
10.08%
9.56
n/m

(0.37) $
(0.37)
0.04
20.99
12.98

13.34 $
19.48
10.95

0.26%
n/m
n/m
4.18
10.38
10.01
n/m

0.22%
1.80
4.72
5.19
9.74
8.94
n/m

11.08
26.19
25.13
8.56
8.53
72.26

(0.29) $
(0.29)
0.04
21.48
11.94

0.54 $
0.54
2.24
27.77
10.11

3.32 $
3.29
2.40
32.09
12.71

15.06 $
18.59
3.14

14.08 $
45.03
11.25

41.26 $
54.05
41.10

16.27
38.23
37.80
9.27
8.90
45.66

4.63
4.58
2.12
29.70
13.26

53.39
54.90
43.09

$ 134,536 $ 130,273 $

70,645 $ 183,107 $ 238,021

$ 958,331 $ 948,805 $ 910,871 $ 776,154 $ 652,417
1,466,681
1,843,985
672,995
831,157
130,124
231,235
129,773
141,638
130,463
164,831

2,443,068
980,966
446,634
182,288
244,645

1,602,073
717,182
169,855
133,555
136,662

2,439,602
988,586
490,497
212,681
233,231

43,073 $
32,664

38,687 $
35,747

23,492 $
18,212

12,106 $
5,948

4.47%
136

4.16%
111

2.49%
141

1.33%
207

116
34,334 $
3.60%
3.27

99
33,688 $
3.58%
3.75

136
16,231 $
1.79%
1.77

n/a
6,480 $
0.84%
0.64

3.48
1.22

3.98
1.10

1.96
1.42

0.68
1.79

8.60%

7.81%

11.24
15.77
7.21
6.75
5.99

10.40
14.66
6.88
6.40
5.56

4.80%
9.15
13.00
6.44
5.11
2.93

4.93%
6.87
11.02
5.04
3.73
3.46

9,413
1,856

1.28%
505

n/a
4,539

0.70%
0.25

0.26
1.99

6.82%
8.64
11.88
6.36
4.47
4.27

(1) Excludes merger and restructuring charges and goodwill impairment charges.
(2) Tangible equity ratios and tangible book value per share of common stock are non-GAAP measures. Other companies may define or calculate these measures differently. For additional information on these ratios, see Supplemental

Financial Data beginning on page 40 and for corresponding reconciliations to GAAP financial measures, see Table XIII.

(3) For more information on the impact of the PCI loan portfolio on asset quality, see Consumer Portfolio Credit Risk Management beginning on page 76 and Commercial Portfolio Credit Risk Management beginning on page 87.
(4)

Includes the allowance for loan and lease losses and the reserve for unfunded lending commitments.

(5) Balances and ratios do not include loans accounted for under the fair value option. For additional exclusions on nonperforming loans, leases and foreclosed properties, see Nonperforming Consumer Loans and Foreclosed Properties

Activity beginning on page 85 and corresponding Table 33 and Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity and corresponding Table 41 on page 93.

(6) Allowance for loan and lease losses includes $22.9 billion, $17.7 billion, $11.7 billion, $6.5 billion and $5.4 billion allocated to products that are excluded from nonperforming loans, leases and foreclosed properties at December 31,

2010, 2009, 2008, 2007 and 2006, respectively.

n/m = not meaningful
n/a = not applicable

Bank of America 2010

Recent Events

Representations and Warranties Liability
On December 31, 2010, we reached agreements with Freddie Mac (FHLMC)
and Fannie Mae (FNMA), collectively the GSEs, where the Corporation paid
$2.8 billion to resolve repurchase claims involving first-lien residential mort-
gage loans sold directly to the GSEs by entities related to legacy Countrywide
(Countrywide). The agreement with FHLMC extinguishes all outstanding and
potential mortgage repurchase and make-whole claims arising out of any
alleged breaches of selling representations and warranties related to loans
sold directly by legacy Countrywide to FHLMC through 2008, subject to certain
exceptions we do not believe will be material. The agreement with FNMA
substantially resolves the existing pipeline of repurchase and make-whole
claims outstanding as of September 20, 2010 arising out of alleged breaches
of selling representations and warranties related to loans sold directly by
legacy Countrywide to FNMA. These agreements with the GSEs do not cover
outstanding and potential mortgage repurchase and make-whole claims
arising out of any alleged breaches of selling representations and warranties
to legacy Bank of America first-lien residential mortgage loans sold directly to
the GSEs or other loans sold directly to the GSEs other than described above,
loan servicing obligations, other contractual obligations or loans contained in
private-label securitizations.

As a result of these agreements and associated adjustments made to the
representations and warranties liability for other loans sold directly to the GSEs
and not covered by the agreements, the Corporation recorded a provision of
$3.0 billion during the fourth quarter of 2010. We believe that our remaining
exposure to representations and warranties for first-lien residential mortgage
loans sold directly to the GSEs has been accounted for as a result of these
agreements and the associated adjustments to our recorded liability for rep-
resentations and warranties for first-lien residential mortgage for loans sold
directly to the GSEs and not covered by the agreements as discussed above. We
believe our predictive repurchase models, utilizing our historical repurchase
experience with the GSEs while considering current developments, including the
recent agreements, projections of future defaults as well as certain assump-
tions regarding economic conditions, home prices and other matters, allows us
to reasonably estimate the liability for obligations under representations and
warranties on loans sold to the GSEs. However, future provisions for represen-
tations and warranties liability to the GSEs may be affected if actual experience
is different from our historical experience with the GSEs or our projections of
future defaults, and assumptions regarding economic conditions, home prices
and other matters, that are incorporated in the provision calculation.

Although our experience with non-GSE claims remains limited, we expect
additional activity in this area going forward and that the volume of repurchase
claims from monolines, whole-loan investors and investors in private-label
securitizations could increase in the future. It is reasonably possible that future
losses may occur, and our estimate is that the upper range of possible loss
related to non-GSE sales could be $7 billion to $10 billion over existing accruals.
This estimate does not represent a probable loss, is based on currently
available information, significant judgment, and a number of assumptions that
are subject to change. A significant portion of this estimate relates to loans
originated through legacy Countrywide, and the repurchase liability is generally
limited to the original seller of the loan. Future provisions and possible loss or
range of loss may be impacted if actual results are different from our assump-
tions regarding economic conditions, home prices and other matters and may
vary by counterparty. The resolution of the repurchase claims process with the
non-GSE counterparties will likely be a protracted process, and we will vigorously
contest any request for repurchase if we conclude that a valid basis for the
repurchase claim does not exist. For additional information about representa-
tions and warranties, see Note 9 – Representations and Warranties Obligations
and Corporate Guarantees to the Consolidated Financial Statements and
Representations and Warranties beginning on page 56.

Goodwill
In 2010, we recorded a $10.4 billion goodwill impairment charge in Global
Card Services and a $2.0 billion goodwill impairment charge in Home Loans &
Insurance. These goodwill impairment charges are non-cash, non-tax deduct-
ible and have no impact on our reported Tier 1 and tangible equity ratios. Our
consumer and small business card products, including the debit card busi-
ness, are part of an integrated platform within Global Card Services. Based on
the provisions of the Financial Reform Act which limit the interchange fees that
may be charged with respect to electronic debit interchange, we estimate a
revenue loss, beginning in the third quarter of 2011, of approximately
$2.0 billion annually based on current volumes and assuming limited miti-
gation within this segment. Accordingly, we performed a goodwill impairment
analysis during the three months ended September 30, 2010. This analysis
indicated that the implied fair value of the goodwill in Global Card Services
was less than the carrying value, and accordingly, we recorded a $10.4 billion
charge to reduce the carrying value to fair value.

During the three months ended December 31, 2010, we performed a
goodwill impairment analysis for Home Loans & Insurance as it was likely that
there had been a decline in its fair value as a result of increased uncertainties,
including existing and potential litigation exposure and other related risks,
higher servicing costs including loss mitigation efforts, foreclosure related
issues and the redeployment of centralized sales resources to address
servicing needs. This analysis indicated that the implied fair value of the
goodwill in Home Loans & Insurance was less than the carrying value, and
accordingly, we recorded a $2 billion charge to reduce the carrying value of
goodwill in Home Loans & Insurance.

For additional information on the goodwill impairment charges, see Com-
plex Accounting Estimates — Goodwill and Intangible Assets beginning on
page 114 and Note 10 — Goodwill and Intangible Assets to the Consolidated
Financial Statements.

Review of Foreclosure Processes
On October 1, 2010, we voluntarily stopped taking residential mortgage
foreclosure proceedings to judgment in states where foreclosure requires
a court order following a legal proceeding (judicial states). On October 8,
2010, we stopped foreclosure sales in all states in order to complete an
assessment of the related business processes. These actions generally did
not affect the initiation and processing of foreclosures prior to judgment, or
sale of vacant real estate owned properties. We took these precautionary
steps in order to ensure our processes for handling foreclosures include the
appropriate controls and quality assurance. Our review has involved an
assessment of the foreclosure process, including a review of completed
foreclosure affidavits in pending proceedings.

As a result of that review, we identified and implemented process and
control enhancements, and we intend to monitor ongoing quality results of
each process. The process and control enhancements implemented as a
result of our review are intended to strengthen the controls related to prep-
aration, execution and notarization of affidavits in judicial states and
strengthen our oversight of lawyers in the attorney network who conduct
foreclosure proceedings on our behalf, both in judicial states and in states
where foreclosures are handled without judicial supervision (non-judicial
states). This oversight includes a periodic review of a sample of foreclosure
files maintained by these attorneys, and on-site reviews of law firms in the
attorney network. In addition, our process and control enhancements for both
judicial and non-judicial states include strengthening the controls related to the
preparation and execution of other foreclosure loan documentation, including
notices of default and pre-foreclosure loss mitigation affidavits, as well as
enhanced associate training. After these enhancements were put in place, we
resumed foreclosure sales in most non-judicial states during the fourth quarter
of 2010, and expect sales to resume in the remaining non-judicial states in the

Bank of America 2010

first quarter of 2011. We also commenced a rolling process of preparing, as
necessary, affidavits of indebtedness in pending foreclosure proceedings in
order to resume the process of taking these foreclosure proceedings to
judgment in judicial states, beginning with properties believed to be vacant,
and with properties for which the mortgage was originated on a non-owner-
occupied basis. The process of preparing affidavits in pending proceedings is
expected to continue in the first quarter of 2011, and could result in prolonged
adversary proceedings that delay certain foreclosure sales.

Law enforcement authorities in all 50 states and the U.S. Department of
Justice (DOJ) and other federal agencies, including certain bank supervisory
authorities, continue to investigate alleged irregularities in the foreclosure
practices of residential mortgage servicers. Authorities have publicly stated
that the scope of the investigations extends beyond foreclosure documenta-
tion practices to include mortgage loan modification and loss mitigation
practices. The Corporation is cooperating with these investigations and is
dedicating significant resources to address these issues. The current envi-
ronment of heightened regulatory scrutiny has the potential to subject the
Corporation to inquiries or investigations that could significantly adversely
affect its reputation. Such investigations by state and federal authorities, as
well as any other governmental or regulatory scrutiny of our foreclosure
processes, could result in material fines, penalties, equitable remedies
(including requiring default servicing or other process changes), or other
enforcement actions, and result in significant legal costs in responding to
governmental investigations and additional litigation.

While we cannot predict the ultimate impact of the temporary delay in
foreclosure sales, or any issues that may arise as a result of alleged irregularities
with respect to previously completed foreclosure activities, we may be subject to
additional borrower and non-borrower litigation and governmental and regulatory
scrutiny related to our past and current foreclosure activities. This scrutiny may
extend beyond our pending foreclosure matters to issues arising out of alleged
irregularities with respect to previously completed foreclosure activities. Our
costs increased in the fourth quarter of 2010 and we expect that additional
costs incurred in connection with our foreclosure process assessment will
continue into 2011 due to the additional resources necessary to perform the
foreclosure process assessment, to revise affidavit filings and to implement
other operational changes. This will likely result in higher noninterest expense,
including higher servicing costs and legal expenses, in Home Loans & Insurance.
It is also possible that the temporary suspension in foreclosure sales may result
in additional costs and expenses, including costs associated with the mainte-
nance of properties or possible home price declines while foreclosures are
delayed. In addition, required process changes could increase our default
servicing costs over the longer term. Finally, the time to complete foreclosure
sales may increase temporarily, which may result in an increase in nonperform-
ing loans and servicing advances and may impact the collectability of such
advances and the value of our mortgage servicing rights (MSR) asset, MBS and
real estate owned properties. An increase in the time to complete foreclosure
sales also may inflate the amount of highly delinquent loans in the Corporation’s
mortgage statistics, result in increasing levels of consumer nonperforming
loans, and could have a dampening effect on net interest margin as non-
performing assets increase. Accordingly, delays in foreclosure sales, including
any delays beyond those currently anticipated, our continued process enhance-
ments and any issues that may arise out of alleged irregularities in our foreclo-
sure process could increase the costs associated with our mortgage operations.
Loan sales have not been materially impacted by the temporary delay in
foreclosure sales or the review of our foreclosure process. However, delays in
foreclosure sales could negatively impact the valuation of our real estate
owned properties and MBS that are serviced by us. With respect to agency
MBS, while there would be no credit impairment to security holders due to the
guarantee provided by the agencies, the valuation of certain MBS could be
negatively affected under certain scenarios due to changes in the timing of
cash flows. The impact on agency MBS depends on, among other factors, how

Bank of America 2010

long the underlying loans are affected by foreclosure delays and would vary
among securities. With respect to non-agency MBS, under certain scenarios
the timing and amount of cash flows could be negatively affected. The ultimate
impact on the non-agency MBS depends on the same factors that impact
agency MBS, as well as the level of credit enhancement, including subordi-
nation. In addition, as a result of our foreclosure process assessment and
related control enhancements that we have implemented, there may continue
to be delays in foreclosure sales, including a continued backlog of foreclosure
proceedings, and evictions from real estate owned properties.

Certain Servicing-related Issues
The Corporation and its legacy companies have securitized, and continue to
securitize, a significant portion of the residential mortgage loans that we have
originated or acquired. The Corporation services a large portion of the loans it
or its subsidiaries have securitized and also services loans on behalf of third-
party securitization vehicles. In addition to identifying specific servicing cri-
teria, pooling and servicing arrangements entered into in connection with a
securitization or whole loan sale typically impose standards of care on the
servicer, with respect to its activities, that may include the obligation to
adhere to the accepted servicing practices of prudent mortgage lenders
and/or to exercise the degree of care and skill that the servicer employs
when servicing loans for its own account. Many non-agency residential mort-
gage-backed securitizations and whole loan servicing agreements also re-
quire the servicer to indemnify the trustee or other investor for or against
failures by the servicer to perform its servicing obligations or acts or omis-
sions that involve willful malfeasance, bad faith or gross negligence in the
performance of, or reckless disregard of, the servicer’s duties.

Servicing agreements with the GSEs generally provide the GSEs with
broader rights relative to the servicer than are found in servicing agreements
with private investors. For example, each GSE typically has the right to demand
that the servicer repurchase loans that breach the seller’s representations and
warranties made in connection with the initial sale of the loans even if the
servicer was not the seller. The GSEs also reserve the contractual right to
demand indemnification or loan repurchase for certain servicing breaches
although we believe that repurchase or indemnification demands solely for
servicing breaches are rare. In addition, our agreements with the GSEs and their
first mortgage seller/servicer guides provide for timelines to resolve delinquent
loans through workout efforts or liquidation, if necessary. In the fourth quarter
of 2010, we recorded an expense of $230 million for compensatory fees that
we expect to be assessed by the GSEs as a result of foreclosure delays.

With regard to alleged irregularities in foreclosure process-related activ-
ities, a servicer may incur costs or losses if the servicer elects or is required to
re-execute or re-file documents or take other action in its capacity as a
servicer in connection with pending or completed foreclosures. The servicer
also may incur costs or losses if the validity of a foreclosure action is
challenged by a borrower. If a court were to overturn a foreclosure because
of errors or deficiencies in the foreclosure process, the servicer may have
liability to a title insurer of the property sold in foreclosure. These costs and
liabilities may not be reimbursable to the servicer. A servicer may also incur
costs or losses associated with private-label securitizations or other loan
investors relating to delays or alleged deficiencies in processing documents
necessary to comply with state law governing foreclosures.

The servicer may be subject to deductions by insurers for mortgage
insurance or guarantee benefits relating to delays or alleged deficiencies.
Additionally, if the servicer commits a material breach of its servicing obliga-
tions that is not cured within specified timeframes, including those related to
default servicing and foreclosure, it could be terminated as servicer under
servicing agreements under certain circumstances. Any of these actions may
harm the servicer’s reputation, increase its servicing costs or otherwise
adversely affect its financial condition and results of operations.

Mortgage notes, assignments or other documents are often required to be
maintained and are often necessary to enforce mortgage loans. We have
processes in place to satisfy document delivery and maintenance require-
ments in accordance with securitization transaction standards. Additionally,
there has been significant public commentary regarding the common industry
practice of recording mortgages in the name of Mortgage Electronic Regis-
tration Systems, Inc. (MERS), as nominee on behalf of the note holder, and
whether securitization trusts own the loans purported to be conveyed to them
and have valid liens securing those loans. We believe that the process for
mortgage loan transfers into securitization trusts is based on a well-estab-
lished body of law that establishes ownership of mortgage loans by the
securitization trusts and we believe that we have substantially executed this
process. We currently use the MERS system for a substantial portion of the
residential mortgage loans that we originate, including loans that have been
sold to investors or securitization trusts. Although the GSEs do not require the
use of MERS, the GSEs permit standard forms of mortgages and deeds of
trust that use MERS and we believe that loans that employ these forms are
considered to be properly documented for the GSEs’ purposes. We believe
that the use of MERS is a widespread practice in the industry. Certain legal
challenges have been made to the process for transferring mortgage loans to
securitization trusts asserting that having a mortgagee of record that is
different than the holder of the mortgage note could “break the chain of
title” and cloud the ownership of the loan. Under the Uniform Commercial
Code, a securitization trust or other investor should have good title to a
mortgage loan if, among other means, either the note is endorsed in blank or
to the named transferee and delivered to the holder or its designee, which may
be a document custodian. In order to foreclose on a mortgage loan, in certain
cases it may be necessary or prudent for an assignment of the mortgage to be
made to the holder of the note, which in the case of a mortgage held in the
name of MERS as nominee would need to be completed by MERS. As such,
our practice is to obtain assignments of mortgages from MERS prior to
instituting foreclosure. If certain required documents are missing or defective,
or if the use of MERS is found not to be effective, we could be obligated to cure

certain defects or in some circumstances otherwise be subject to additional
costs and expenses, which could have a material adverse effect on our results
of operations, cash flows and financial condition.

Private-label Residential Mortgage-backed Securities
Matters
On October 18, 2010, Countrywide Home Loans Servicing, LP (which changed
its name to BAC Home Loans Servicing, LP), a wholly-owned subsidiary of the
Corporation, received a letter, in its capacity as servicer under certain pooling
and servicing agreements for 115 private-label residential MBS securitiza-
tions (subsequently increased to 225 securitizations) from investors purport-
edly owning interests in RMBS issued in the securitizations. The letter
asserted breaches of certain loan servicing obligations, including an alleged
failure to provide notice to the trustee and other parties to the pooling and
servicing agreements of breaches of representations and warranties with
respect to mortgage loans included in the securitization transactions. On
November 4, 2010, the servicer responded in writing to the letter, stating
among other things that the letter had identified no facts indicating that the
servicer had breached any of its obligations, and asking that the signatories of
the letter provide evidence that they met the minimum voting interest require-
ments for investor action contained in the relevant contracts. BAC Home
Loans Servicing, LP and Gibbs & Bruns LLP on behalf of certain investors
including those who signed the letter, as well as The Bank of New York Mellon,
as trustee, have agreed to a short extension of any time periods commenced
by the letter to permit the parties to explore dialogue around the issues
raised. There are a number of questions about the validity of the assertions
set forth in the letter, including whether these purported investors have
standing to bring these claims. The servicer intends to challenge the asser-
tions in the letter and to fully enforce its rights under the relevant contracts.
For additional information about representations and warranties, see
Note 9 – Representations and Warranties Obligations and Corporate Guaran-
tees to the Consolidated Financial Statements, Representations and War-
ranties beginning on page 56 and Item 1A. Risk Factors of this Annual Report
on Form 10-K.

Bank of America 2010

Supplemental Financial Data
We view net interest income and related ratios and analyses (i.e., efficiency
ratio and net interest yield) on a FTE basis. Although these are non-GAAP
measures, we believe managing the business with net interest income on a
FTE basis provides a more accurate picture of the interest margin for com-
parative purposes. To derive the FTE basis, net interest income is adjusted to
reflect tax-exempt income on an equivalent before-tax basis with a corre-
sponding 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.

As mentioned above, certain performance measures including the effi-
ciency ratio and net interest yield 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. During our annual planning
process, we set efficiency targets for the Corporation and each line of
business. We believe the use of these non-GAAP measures provides addi-
tional clarity in assessing our results. Targets vary by year and by business
and are based on a variety of factors including maturity of the business,
competitive environment, market factors and other items including our risk
appetite.

We also evaluate our business based on the following ratios that utilize
tangible equity, a non-GAAP measure. Return on average tangible common
shareholders’ equity measures our earnings contribution as a percentage of
common shareholders’ equity plus any Common Equivalent Securities (CES)
less goodwill and intangible assets, (excluding MSRs), net of related deferred
tax liabilities. ROTE measures our earnings contribution as a percentage of

average shareholders’ equity less goodwill and intangible assets (excluding
MSRs), net of related deferred tax liabilities. The tangible common equity ratio
represents common shareholders’ equity plus any CES less goodwill and
intangible assets (excluding MSRs), net of related deferred tax liabilities
divided by total assets less goodwill and intangible assets (excluding MSRs),
net of related deferred tax liabilities. The tangible equity ratio represents total
shareholders’ equity less goodwill and intangible assets (excluding MSRs),
net of related deferred tax liabilities divided by total assets less goodwill and
intangible assets (excluding MSRs), net of related deferred tax liabilities.
Tangible book value per common share represents ending common share-
holders’ equity less goodwill and intangible assets (excluding MSRs), net of
related deferred tax liabilities divided by ending common shares outstanding
plus the number of common shares issued upon conversion of common
equivalent shares. These measures are used to evaluate our use of equity
(i.e., capital). In addition, profitability, relationship and investment models all
use ROTE as key measures to support our overall growth goals.

The aforementioned supplemental data and performance measures are
presented in Tables 6 and 7 and Statistical Tables XII and XIV. In addition, in
Table 7 and Statistical Table XIV, we have excluded the impact of goodwill
impairment charges of $12.4 billion recorded in 2010 when presenting
earnings and diluted earnings per common share, the efficiency ratio, return
on average assets, return on average common shareholders’ equity, return on
average tangible common shareholders’ equity and ROTE. Accordingly, these
are non-GAAP measures. Statistical Tables XIII and XV provide reconciliations
of these non-GAAP measures with financial measures defined by GAAP. We
believe the use of these non-GAAP measures provides additional clarity in
assessing the results of the Corporation. Other companies may define or
calculate these measures and ratios differently.

Table 7 Five Year Supplemental Financial Data

(Dollars in millions, except per share information)

Fully taxable-equivalent basis data

Net interest income
Total revenue, net of interest expense
Net interest yield (1)
Efficiency ratio

Performance ratios, excluding goodwill impairment charges (2)

Per common share information

Earnings
Diluted earnings

Efficiency ratio
Return on average assets
Return on average common shareholders’ equity
Return on average tangible common shareholders’ equity
Return on average tangible shareholders’ equity

2010

2009

2008

2007

2006

$ 52,693
111,390

$ 48,410
120,944

$46,554
73,976

$36,190
68,582

$35,818
74,000

2.78%

74.61

2.65%

55.16

2.98%

56.14

2.60%

54.71

2.82%

48.37

0.87
0.86
63.48%
0.42
4.14
7.03
7.11

(1) Calculation includes fees earned on overnight deposits placed with the Federal Reserve of $368 million and $379 million for 2010 and 2009. The Corporation did not have fees earned on overnight deposits during 2008, 2007 and

2006.

(2) Performance ratios are calculated excluding the impact of goodwill impairment charges of $12.4 billion recorded during 2010.

Bank of America 2010

Core Net Interest Income
We manage core net interest income which is reported net interest income on
a FTE basis adjusted for the impact of market-based activities. As discussed
in the GBAM business segment section beginning on page 49, we evaluate
our market-based results and strategies on a total market-based revenue
approach by combining net interest income and noninterest income for GBAM.
In addition, 2009 is presented on a managed basis which is adjusted for loans
that we originated and subsequently sold into credit card securitizations.
Noninterest income, rather than net interest income and provision for credit

losses, was recorded for securitized assets as we are compensated for
servicing the securitized assets and we recorded servicing income and gains
or losses on securitizations, where appropriate. 2010 is presented in accor-
dance with new consolidation guidance. An analysis of core net interest
income, core average earning assets and core net interest yield on earning
assets, all of which adjust for the impact of these two non-core items from
reported net interest income on a FTE basis, is shown below. We believe the
use of this non-GAAP presentation provides additional clarity in assessing our
results.

Table 8 Core Net Interest Income

(Dollars in millions)
Net interest income (1)
As reported (2)
Impact of market-based net interest income (3)

Core net interest income

Impact of securitizations (4)

Core net interest income

Average earning assets
As reported
Impact of market-based earning assets (3)

Core average earning assets

Impact of securitizations (5)

Core average earning assets
Net interest yield contribution (1)
As reported (2)
Impact of market-based activities (3)

Core net interest yield on earning assets

Impact of securitizations

Core net interest yield on earning assets

2010

2009

52,693 $
(4,430)

48,263
n/a

48,263

48,410
(6,117)

42,293
10,524

52,817

1,897,573
(504,360)

1,830,193
(481,376)

1,393,213
n/a

1,348,817
83,640

1,393,213

1,432,457

2.78%
0.68

3.46
n/a

3.46%

2.65%
0.49

3.14
0.55

3.69%

(1) FTE basis
(2) Balance and calculation include fees earned on overnight deposits placed with the Federal Reserve of $368 million and $379 million for 2010 and 2009.
(3) Represents the impact of market-based amounts included in GBAM.
(4) Represents the impact of securitizations utilizing actual bond costs which is different from the business segment view which utilizes funds transfer pricing methodologies.
(5) Represents average securitized loans less accrued interest receivable and certain securitized bonds retained.
n/a = not applicable

Core net interest income decreased $4.6 billion to $48.3 billion for 2010
compared to 2009. The decrease was driven by lower loan levels compared to
managed loan levels in 2009, and lower yields for the discretionary and credit
card portfolios. These impacts were partially offset by lower rates on
deposits.

Core average earning assets decreased $39.2 billion to $1.4 trillion for
2010 compared to 2009. The decrease was primarily due to lower

commercial loan levels and lower consumer loan levels compared to managed
consumer loan levels in 2009. The impact was partially offset by increased
securities levels in 2010.

Core net interest yield decreased 23 bps to 3.46 percent for 2010

compared to 2009 due to the factors noted above.

Bank of America 2010

Business Segment Operations

Segment Description and Basis of Presentation
We report the results of our operations through six business segments:
Deposits, Global Card Services, Home Loans & Insurance, Global Commercial
Banking, GBAM and GWIM, with the remaining operations recorded in All
Other. Effective January 1, 2010, we realigned the Global Corporate and
Investment Banking portion of the former Global Banking segment with the
former Global Markets business segment to form GBAM and to reflect Global
Commercial Banking as a standalone segment. Prior period amounts have
been reclassified to conform to current period presentation.

We prepare and evaluate segment results using certain non-GAAP meth-
odologies and performance measures, many of which are discussed in
Supplemental Financial Data beginning on page 40. In addition, return on
average tangible shareholders’ equity for the segments is calculated as net
income, excluding goodwill impairment charges, divided by average allocated
equity less goodwill and a percentage of intangible assets (excluding MSRs).
We begin by evaluating the operating results of the segments which by
definition exclude merger and restructuring charges.

The management accounting and reporting process derives segment and
business results by utilizing allocation methodologies for revenue and ex-
pense. The net income derived for the businesses is dependent upon revenue
and cost allocations using an activity-based costing model, funds transfer
pricing, and other methodologies and assumptions management believes are
appropriate to reflect the results of the business.

Total revenue, net of interest expense, 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
segment results also reflect certain revenue and expense methodologies that
are utilized to determine net income. For presentation purposes, in segments
where the total of liabilities and equity exceeds assets, which are generally
deposit-taking segments, we allocate assets to match liabilities. The net inter-
est income of the businesses includes the results of a funds transfer pricing

process that matches assets and liabilities with similar interest rate sensi-
tivity and maturity characteristics. Net interest income of the business seg-
ments also includes an allocation of net interest income generated by our ALM
activities.

Our ALM activities include an overall

interest rate risk management
strategy that incorporates the use of interest rate contracts to manage
fluctuations in earnings that are caused by interest rate volatility. Our goal
is to manage interest rate sensitivity so that movements in interest rates do
not significantly adversely affect net interest income. Our ALM activities are
allocated to the business segments and fluctuate based on performance.
ALM activities include external product pricing decisions including deposit
pricing strategies, the effects of our internal funds transfer pricing process
and the net effects of other ALM activities.

Certain expenses not directly attributable to a specific business segment
are allocated to the segments. The most significant of these expenses include
data and 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 centralized
or shared functions are allocated based on methodologies that reflect
utilization.

Equity is allocated to business segments and related businesses using a
risk-adjusted methodology incorporating each segment’s credit, market, in-
terest rate, strategic and operational risk components. The nature of these
risks is discussed further beginning on page 63. We benefit from the diver-
sification of risk across these components which is reflected as a reduction to
allocated equity for each segment. The total amount of average equity reflects
both risk-based capital and the portion of goodwill and intangibles specifically
assigned to the business segments.

For more information on selected financial information for the business
segments and reconciliations to consolidated total revenue, net income (loss)
and year-end total assets, see Note 26 – Business Segment Information to
the Consolidated Financial Statements.

Bank of America 2010

Deposits

(Dollars in millions)
Net interest income (1)
Noninterest income:
Service charges
All other income (loss)

Total noninterest income

Total revenue, net of interest expense

Provision for credit losses
Noninterest expense

Income before income taxes

Income tax expense (1)

Net income

Net interest yield (1)
Return on average equity
Return on average tangible shareholders’ equity
Efficiency ratio (1)

Balance Sheet

Average
Total earning assets
Total assets
Total deposits
Allocated equity

Year end
Total earning assets
Total assets
Total deposits
Allocated equity
(1) FTE basis
n/m = not meaningful

2010

2009

% Change

$ 8,128

$ 7,089

15%

5,058
(5)

5,053

6,796
5

6,801

13,181

13,890

201
10,831

2,149
797

343
9,501

4,046
1,470

$ 1,352

$ 2,576

1.99%
5.58
21.70
82.17

1.75%

10.92
46.00
68.40

$409,359
435,994
411,001
24,204

$405,104
431,564
406,823
23,594

$403,926
432,334
406,856
24,273

$417,713
444,612
419,583
24,186

(26)
n/m

(26)

(5)

(41)
14

(47)
(46)

(48)

1%
1
1
3

(3)%
(3)
(3)
–

Deposits includes the results of consumer deposit activities which consist
of a comprehensive range of products provided to consumers and small
businesses. In addition, Deposits includes an allocation of ALM activities. In
the U.S., we serve approximately 57 million consumer and small business
relationships through a franchise that stretches coast to coast through
32 states and the District of Columbia utilizing our network of approximately
5,900 banking centers, 18,000 ATMs, nationwide call centers and leading
online and mobile banking platforms.

At December 31, 2010, our active online banking customer base was
29.3 million subscribers compared to 29.6 million at December 31, 2009,
and our active bill pay users paid $304.3 billion of bills online during 2010
compared to $302.4 billion in 2009.

Our deposit products include traditional savings accounts, money market
savings accounts, CDs and IRAs, and noninterest- and interest-bearing check-
ing accounts. Deposit products provide a relatively stable source of funding
and liquidity. We earn net interest spread revenue from investing this liquidity
in earning assets through client-facing lending and ALM activities. The revenue
is allocated 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 generates fees such as account service fees, non-
sufficient funds fees, overdraft charges and ATM fees.

Deposits includes the net impact of migrating customers and their related
deposit balances between GWIM and Deposits. For more information on the
migration of customer balances, see GWIM beginning on page 52.

Regulation E became effective July 1, 2010 for new customers and
August 16, 2010 for existing customers. These rules partially impacted
the third quarter of 2010 and fully impacted the fourth quarter of 2010. In
late 2009, we implemented changes in our overdraft policies which negatively

impacted revenue. These changes were intended to help customers limit
overdraft fees. For more information on Regulation E, see Regulatory Matters
beginning on page 60.

Net income fell $1.2 billion, or 48 percent, to $1.4 billion due to lower
revenue and higher noninterest expense. Net interest income increased
$1.0 billion, or 15 percent, to $8.1 billion as a result of a customer shift
to more liquid products and continued pricing discipline, partially offset by a
lower net interest income allocation related to ALM activities. Average de-
posits increased $4.2 billion from a year ago due to the transfer of certain
deposits from other client managed businesses and organic growth, partially
offset by the expected run-off of higher-cost legacy Countrywide deposits.

Noninterest income fell $1.7 billion, or 26 percent, to $5.1 billion, pri-
marily driven by the decline in service charges due to the implementation of
Regulation E and the impact of our overdraft policy changes. The impact of
Regulation E, which was in effect beginning in the third quarter and fully in
effect in the fourth quarter of 2010, and overdraft policy changes, which were
in effect for the full year of 2010, was a reduction in service charges during
2010 of approximately $1.7 billion. In 2011, the incremental reduction to
service charges related to Regulation E and overdraft policy changes is
expected to be approximately $1.1 billion, or a full-year impact of approxi-
mately $2.8 billion, net of identified mitigation actions.

Noninterest expense increased $1.3 billion, or 14 percent, to $10.8 billion
as a result of a higher proportion of costs associated with banking center
sales and service efforts being aligned to Deposits from the other consumer
segments and increased litigation expenses in 2010. Noninterest expense
includes FDIC charges of $896 million compared to $1.2 billion during 2009
which included a special FDIC assessment.

Bank of America 2010

Global Card Services

(Dollars in millions)
Net interest income (2)
Noninterest income:
Card income
All other income

Total noninterest income

Total revenue, net of interest expense

Provision for credit losses
Goodwill impairment
All other noninterest expense

Loss before income taxes

Income tax expense (benefit) (2)

Net loss

Net interest yield (2)
Return on average tangible shareholders’ equity
Efficiency ratio (2)
Efficiency ratio, excluding goodwill impairment charge (2)

Balance Sheet

Average
Total loans and leases
Total earning assets
Total assets
Allocated equity

2010
$ 17,821

2009 (1)
$ 19,972

% Change

(11)%

(10)
(73)
(14)

(12)

(57)
n/m
(10)
47
175

(26)

7,658
142
7,800
25,621
12,648
10,400
6,953
(4,380)
2,223

8,553
521
9,074

29,046

29,553
–
7,726
(8,233)
(2,972)

$ (6,603)

$ (5,261)

10.10%
22.50
67.73
27.14

9.43%
n/m
26.60
26.60

$176,232
176,525
181,766
36,567

$211,981
211,737
228,438
41,031

(17)%
(17)
(20)
(11)

Year end
(15)%
Total loans and leases
(14)
Total earning assets
(20)
Total assets
(36)
Allocated equity
(1) Prior year amounts are presented on a managed basis for comparative purposes. For information on managed basis, refer to Note 26 – Business Segment Information to the Consolidated Financial Statements beginning on page 237.
(2) FTE basis
n/m = not meaningful

$167,367
168,224
169,762
27,490

$196,289
196,046
212,668
42,842

Global Card Services provides a broad offering of products including U.S. con-
sumer and business card, consumer lending, international card and debit card to
consumers and small businesses. We provide credit card products to customers
in the U.S., Canada, Ireland, Spain and the U.K. We offer a variety of co-branded
and affinity credit and debit card products and are one of the leading issuers of
credit cards through endorsed marketing in the U.S. and Europe.

On February 22, 2010, the majority of the provisions of the CARD Act
became effective and negatively impacted net interest income during 2010
due to restrictions on our ability to reprice credit cards based on risk and on
card income due to restrictions imposed on certain fees. The 2010 full-year
impact on revenue was approximately $1.5 billion. For more information on
the CARD Act, see Regulatory Matters beginning on page 60.

The Corporation reports its Global Card Services results in accordance
with new consolidation guidance. Under this new consolidation guidance, we
consolidated all credit card trusts on January 1, 2010. Accordingly, current
year results are comparable to prior year results that are presented on a
managed basis. For more information on managed basis, refer to Note 26 –
Business Segment Information to the Consolidated Financial Statements and
for more information on the new consolidation guidance, refer to Balance
Sheet Overview – Impact of Adopting New Consolidation Guidance beginning
on page 33 and Note 8 – Securitizations and Other Variable Interest Entities to
the Consolidated Financial Statements.

As a result of the Financial Reform Act, which was signed into law on
July 21, 2010, we believe that our debit card revenue in Global Card Services
will be adversely impacted beginning in the third quarter of 2011. Based on
2010 volumes, our estimate of revenue loss due to the debit card interchange
fee standards to be adopted under the Financial Reform Act was approxi-
mately $2.0 billion annually. This estimate resulted in a $10.4 billion goodwill
impairment charge for Global Card Services. Depending on the final rule-
making under the Durbin Amendment, additional goodwill impairment may
occur in Global Card Services. For additional information, refer to Regulatory

Matters – Debit Interchange Fees on page 61 and Complex Accounting Esti-
mates beginning on page 111.

Global Card Services recorded a net loss of $6.6 billion primarily due to
the $10.4 billion goodwill impairment charge in 2010. Excluding this charge,
Global Card Services would have reported net income of $3.8 billion com-
pared to a net loss of $5.3 billion in the prior year, primarily due to a decrease
in provision for credit losses. Revenue decreased $3.4 billion, or 12 percent,
to $25.6 billion, driven by lower average loans, reduced interest and fee
income primarily resulting from the implementation of the CARD Act and the
impact of recording an incremental reserve of $592 million for future payment
protection insurance claims in the U.K. that have not yet been asserted. For
more information on payment protection insurance, refer to Note 14 – Com-
mitments and Contingencies to the Consolidated Financial Statements.

Net interest income decreased $2.2 billion, or 11 percent, to $17.8 billion
as average loans decreased $35.7 billion partially offset by lower funding
costs. The decline in average loans was due to the elevated level of net
charge-offs and risk mitigation strategies that were implemented throughout
the recent economic cycle.

Noninterest income decreased $1.3 billion, or 14 percent, to $7.8 billion
driven by lower card income primarily due to the implementation of the CARD Act
and the impact of recording a reserve related to future payment protection
insurance claims. The decrease was partially offset by higher interchange
income during 2010 and the gain on the sale of our MasterCard equity holdings.
Provision for credit losses improved $16.9 billion due to lower delinquencies
and bankruptcies as a result of the improved economic environment. This resulted
in reserve reductions of $7.0 billion in 2010 compared to reserve increases of
$3.4 billion in 2009. The prior year included a reserve addition due to maturing
securitizations which had an unfavorable impact on the 2009 provision expense.
In addition, net charge-offs declined $6.5 billion in 2010 compared to 2009.

Excluding the goodwill impairment charge of $10.4 billion, noninterest
expense decreased $773 million primarily driven by a higher proportion of
costs associated with banking center sales and service efforts being aligned
to Deposits from Global Card Services.

Bank of America 2010

Home Loans & Insurance

(Dollars in millions)
Net interest income (1)
Noninterest income:

Mortgage banking income
Insurance income
All other income

Total noninterest income

Total revenue, net of interest expense

Provision for credit losses
Goodwill impairment
All other noninterest expense

Loss before income taxes

Income tax benefit (1)

Net loss

Net interest yield (1)
Efficiency ratio (1)
Efficiency ratio, excluding goodwill impairment charge (1)

Balance Sheet

Average
Total loans and leases
Total earning assets
Total assets
Allocated equity

Year end
Total loans and leases
Total earning assets
Total assets
Allocated equity
(1) FTE basis
n/m = not meaningful

2010

2009

% Change

$ 4,690

$ 4,975

(6)%

3,079
2,257
621

5,957

10,647

8,490
2,000
13,163

(13,006)
(4,085)

9,321
2,346
261

11,928

16,903

11,244
–
11,705

(6,046)
(2,195)

$ (8,921)

$ (3,851)

2.52%

142.42
123.63

2.58%

69.25
69.25

$129,236
186,455
226,352
26,170

$130,519
193,152
230,123
20,530

$122,935
173,033
213,455
23,542

$131,302
188,349
232,588
27,148

(67)
(4)
138

(50)

(37)

(24)
n/m
12

(115)
(86)

(132)

(1)%
(3)
(2)
27

(6)%
(8)
(8)
(13)

Home Loans & Insurance generates revenue by providing an extensive line
of consumer real estate products and services to customers nationwide.
Home Loans & Insurance products are available to our customers through a
retail network of 5,900 banking centers, mortgage loan officers in approxi-
mately 750 locations and a sales force offering our customers direct tele-
phone and online access to our products. These products are also offered
through our correspondent loan acquisition channels. On February 4, 2011,
we announced that we are exiting the reverse mortgage origination business.
In October 2010, we exited the first mortgage wholesale acquisition channel.
These strategic changes were made to allow greater focus on our retail and
correspondent channels.

Home Loans & Insurance products include fixed and adjustable-rate first-
lien mortgage loans for home purchase and refinancing needs, reverse mort-
gages, home equity lines of credit and home equity loans. First mortgage
products are either sold into the secondary mortgage market to investors, while
retaining MSRs and the Bank of America customer relationships, or are held on
our balance sheet in All Other for ALM purposes. Home Loans & Insurance is
not impacted by the Corporation’s first mortgage production retention deci-
sions as Home Loans & Insurance is compensated for the decision on a
management accounting basis with a corresponding offset recorded in All
Other. Funded home equity lines of credit and home equity loans are held on the
Home Loans & Insurance balance sheet. In addition, Home Loans & Insurance
offers property, casualty, life, disability and credit insurance.

On February 3, 2011, we announced that we had entered into an agree-
ment to sell the lender-placed and voluntary property and casualty insurance
assets and liabilities of Balboa Insurance Company (Balboa) and affiliated

entities for an upfront cash payment of approximately $700 million, subject to
certain closing and other adjustments, as well as additional future payments.
Balboa is a wholly-owned subsidiary and part of Home Loans & Insurance.
Home Loans & Insurance includes the impact of transferring customers
and their related loan balances between GWIM and Home Loans & Insurance
based on client segmentation thresholds. For more information on the mi-
gration of customer balances, see GWIM beginning on page 52.

Home Loans & Insurance recorded a net loss of $8.9 billion compared to a
net loss of $3.9 billion in 2009 primarily due to an increase of $4.9 billion in
representations and warranties provision and the $2.0 billion goodwill im-
pairment charge recorded in 2010, partially offset by a decline in provision for
credit losses of $2.8 billion. For additional information on representations and
warranties, see Note 9 – Representations and Warranties Obligations and
Corporate Guarantees to the Consolidated Financial Statements and Repre-
sentations and Warranties on page 56.

Provision for credit losses decreased $2.8 billion to $8.5 billion driven by
improving portfolio trends which led to lower reserve additions, including
those associated with the Countrywide PCI home equity portfolio.

Noninterest expense increased $3.5 billion primarily due to the goodwill
impairment charge, higher litigation expense and default-related and other
loss mitigation expenses, partially offset by lower production expense and
insurance losses.

See Complex Accounting Estimates – Goodwill and Intangible Assets be-
ginning on page 114 and Note 10 – Goodwill and Intangible Assets to the
Consolidated Financial Statements for a discussion of the goodwill impair-
ment charge for Home Loans & Insurance.

Bank of America 2010

Mortgage Banking Income
Home Loans & Insurance mortgage banking income is categorized into
production and servicing income. Production income is comprised of revenue
from the fair value gains and losses recognized on our interest rate lock
commitments (IRLCs) and loans held-for-sale (LHFS), the related secondary
market execution, and costs related to representations and warranties in the
sales transactions along with other obligations incurred in the sales of
mortgage loans. In addition, production income includes revenue, which is
eliminated in All Other, for transfers of mortgage loans from Home Loans &
Insurance to the ALM portfolio related to the Corporation’s mortgage pro-
duction retention decisions.

Servicing income includes income earned in connection with servicing
activities and MSR valuation adjustments, net of economic hedge activities.
The costs associated with our servicing activities are included in noninterest
expense.

Servicing activities include collecting cash for principal, interest and
escrow payments from borrowers, disbursing customer draws for lines of
credit and accounting for and remitting principal and interest payments to
investors and escrow payments to third parties. Our home retention efforts
are also part of our servicing activities, along with responding to customer
inquiries and supervising foreclosures and property dispositions. In an effort
to avoid foreclosure, Bank of America evaluates various workout options prior
to foreclosure sale which has resulted in elongated default timelines. Our
servicing agreements with certain loan investors require us to comply with
usual and customary standards in the liquidation of delinquent mortgage
loans. Our agreements with the GSEs provide timelines to complete the
liquidation of delinquent loans. In instances where we fail to meet these
timelines, our agreements provide the GSEs with the option to assess
compensatory fees. In 2010, the Corporation recorded an expense of ap-
proximately $230 million for estimated compensatory fees that it expects to
be assessed by the GSEs as a result of foreclosure delays. Additionally, we
may face demands and claims from private-label securitization investors
concerning alleged breaches of customary servicing standards. For additional
information on our servicing activities, see Recent Events – Certain Servicing-
related Issues beginning on page 38.

On October 18, 2010, Countrywide Home Loans Servicing, LP (which
changed its name to BAC Home Loans Servicing, LP), a wholly-owned sub-
sidiary of the Corporation, received a letter, in its capacity as servicer under
certain pooling and servicing agreements for 115 private-label residential
MBS securitizations (subsequently increased to 225 securitizations). The
letter asserted breaches of certain servicing obligations. For additional
information, see Recent Events – Private-label Residential Mortgage-backed
Securities Matters on page 39.

The table below summarizes the components of mortgage banking

income.

Mortgage Banking Income

(Dollars in millions)

Production income:

Core production revenue
Representations and warranties provision

Total production income (loss)

2010

2009

$ 6,098
(6,786)

(688)

$ 7,352
(1,851)

5,501

Servicing income:
Servicing fees
Impact of customer payments (1)
Fair value changes of MSRs, net of economic hedge

results (2)

Other servicing-related revenue

Total net servicing income

Total Home Loans & Insurance mortgage banking

income

Other business segments’ mortgage banking loss (3)

6,475
(3,760)

376
676

3,767

3,079
(345)

6,219
(4,491)

1,539
553

3,820

9,321
(530)

Total consolidated mortgage banking income

$ 2,734

$ 8,791

(1) Represents the change in the market value of the MSR asset due to the impact of customer payments received

(2)

(3)

during the year.
Includes sale of MSRs.
Includes the effect of transfers of mortgage loans from Home Loans & Insurance to the ALM portfolio in All
Other.

The production loss of $688 million represented a decrease of $6.2 billion
as representations and warranties provision increased $4.9 billion to
$6.8 billion which includes provision of $3.0 billion related to the GSE
agreements as well as adjustments to the representations and warranties
liability for other loans sold directly to the GSEs and not covered by those
agreements. Also contributing to the representations and warranties provi-
sion for the year was our continued evaluation of non-GSE exposure to
repurchases and similar claims, which led to the determination that we have
developed sufficient repurchase experience with certain non-GSE counter-
parties to record a liability related to existing and future projected claims from
such counterparties. For additional information on representations and war-
ranties, see Note 9 – Representations and Warranties Obligations and Cor-
porate Guarantees to the Consolidated Financial Statements, Recent
Events – Representations and Warranties Liability on page 37 and Represen-
tations and Warranties beginning on page 56. In addition, core production
revenue, which excludes representations and warranties provision, declined
$1.3 billion due to a decline in volume driven by a drop in the overall size of the
mortgage market and a decline in market share.

Net servicing income remained relatively flat as lower MSR results, net of
hedges, were offset by a lower impact of customer payments and higher fee
income. For additional information on MSRs and the related hedge instru-
ments, see Mortgage Banking Risk Management on page 110.

Bank of America 2010

Home Loans & Insurance Key Statistics

(Dollars in millions, except as noted)

Loan production
Home Loans & Insurance:

First mortgage
Home equity
Total Corporation (1):
First mortgage
Home equity

Year end
Mortgage servicing portfolio (in billions) (2)
Mortgage loans serviced for investors (in billions)
Mortgage servicing rights:

Balance
Capitalized mortgage servicing rights (% of

loans serviced for investors)

2010

2009

$287,236
7,626

298,038
8,437

$354,506
10,488

378,105
13,214

$ 2,057
1,628

$ 2,151
1,716

14,900

19,465

92bps

113bps

(1)

In addition to loan production in Home Loans & Insurance, the remaining first mortgage and home equity loan
production is primarily in GWIM.

(2) Servicing of residential mortgage loans, home equity lines of credit, home equity loans and discontinued real

estate mortgage loans.

First mortgage production in Home Loans & Insurance was $287.2 billion
in 2010 compared to $354.5 billion in 2009. The decrease of $67.3 billion
was primarily due to a drop in the overall size of the mortgage market driven by
weaker market demand for both refinance and purchase transactions com-
bined with a decrease in market share. Home equity production was $7.6 bil-
lion in 2010 compared to $10.5 billion in 2009. The decrease of $2.9 billion
was primarily due to more stringent underwriting guidelines for home equity
lines of credit and loans as well as lower consumer demand.

At December 31, 2010, the consumer MSR balance was $14.9 billion,
which represented 92 bps of the related unpaid principal balance compared to
$19.5 billion, or 113 bps of the related unpaid principal balance at Decem-
ber 31, 2009. The decrease in the consumer MSR balance was driven by the
impact of declining mortgage rates partially offset by the addition of new
MSRs recorded in connection with sales of loans. In addition, elevated
servicing costs, due to higher personnel expenses associated with default-
related servicing activities, reduced expected cash flows. These factors
together resulted in the 21 bps decrease in capitalized MSRs as a percentage
of loans serviced.

Bank of America 2010

Global Commercial Banking

(Dollars in millions)
Net interest income (1)
Noninterest income:
Service charges
All other income

Total noninterest income
Total revenue, net of interest expense

Provision for credit losses
Noninterest expense

Income (loss) before income taxes

Income tax expense (benefit) (1)
Net income (loss)

Net interest yield (1)
Return on average tangible shareholders’ equity
Return on average equity
Efficiency ratio (1)

Balance Sheet

Average
Total loans and leases
Total earning assets
Total assets
Total deposits
Allocated equity

Year end
Total loans and leases
Total earning assets
Total assets
Total deposits
Allocated equity
(1) FTE basis
n/m = not meaningful

2010

2009

% Change

$ 8,086

$ 8,054

–%

2,105
712

2,817
10,903

1,971
3,874

5,058
1,877

$ 3,181

2.94%

15.20
7.64
35.52

2,078
1,009

3,087
11,141

7,768
3,833

(460)
(170)

(290)

3.19%
n/m
n/m
34.40

$203,339
275,356
306,302
148,565
41,624

$229,102
252,309
283,936
129,832
41,931

$193,573
277,551
310,131
161,260
40,607

$215,237
264,855
295,947
147,023
42,975

1
(29)

(9)
(2)

(75)
1

n/m
n/m

n/m

(11)%
9
8
14
(1)

(10)%
5
5
10
(6)

Global Commercial Banking provides a wide range of lending-related
products and services, integrated working capital management and treasury
solutions to clients through our network of offices and client relationship
teams along with various product partners. Our clients include business
banking and middle-market companies, commercial real estate firms and
governments, and are generally defined as companies with annual sales up to
$2 billion. Our lending products and services include commercial loans and
commitment facilities, real estate lending, asset-based lending and indirect
consumer loans. Our capital management and treasury solutions include
treasury management, foreign exchange and short-term investing options.
Global Commercial Banking recorded 2010 net income of $3.2 billion
compared to a 2009 net loss of $290 million, with the improvement driven by
lower credit costs.

Net interest income remained relatively flat as growth in average deposits
from our existing clients of $18.7 billion, or 14 percent, was offset by a lower
net interest income allocation related to ALM activities. In addition, net
interest income benefited from credit pricing discipline, which negated the
impact of the $25.8 billion, or 11 percent, decline in average loan balances.
Noninterest income decreased $270 million, or nine percent, largely due
to additional costs related to our agreement to purchase certain retail auto-
motive loans. For further information, see Note 14 – Commitments and
Contingencies to the Consolidated Financial Statements.

The provision for credit losses decreased $5.8 billion to $2.0 billion for
2010 compared to 2009. The decrease was driven by improvements primarily
in the commercial real estate portfolios reflecting stabilizing values and in the

U.S. commercial portfolio resulting from improved borrower credit profiles.
Additionally, all other portfolios experienced lower net charge-offs attributable
to more stable economic conditions.

Global Commercial Banking Revenue
Global Commercial Banking revenues can also be categorized as treasury
services revenue primarily from capital and treasury management, and busi-
ness lending revenue derived from credit related products and services.
Treasury services revenue for 2010 was $4.3 billion, an increase of $62 mil-
lion compared to 2009. Revenue growth was driven by net interest income
from increased deposits, partially offset by lower treasury service charges. As
clients manage through current economic conditions, we have seen usage of
certain treasury services decline and increased conversion of paper to
electronic services. These actions combined with our clients leveraging
compensating balances to offset fees have decreased treasury service
charges. Business lending revenue for 2010 was $6.6 billion, a decrease
of $299 million compared to 2009, largely due to additional costs related to
our agreement to purchase certain retail automotive loans. Despite client
deleveraging in the first half of 2010 and continued low loan demand,
commercial and industrial loan balances began to stabilize and show mod-
erate growth during the latter part of 2010. Commercial real estate loan
balances declined due to continued client deleveraging and our management
of nonperforming loans. Credit pricing discipline negated the impact of the
decline in average loan balances on net interest income.

Bank of America 2010

Global Banking & Markets

(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, net of interest expense

Provision for credit losses
Noninterest expense

Income before income taxes

Income tax expense (1)

Net income

Return on average equity
Return on average tangible shareholders’ equity
Efficiency ratio (1)

Balance Sheet

Average
Total trading-related assets
Total loans and leases
Total market-based earning assets
Total earning assets
Total assets
Total deposits
Allocated equity

Year end
Total trading-related assets
Total loans and leases
Total market-based earning assets
Total earning assets
Total assets
Total deposits
Allocated equity
(1) FTE basis

2010

2009

% Change

$ 7,989

$ 9,553

(16)%

2,126
2,441
5,408
9,689
845

20,509

28,498

(155)
18,038

10,615
4,296

2,044
2,662
5,927
11,803
634

23,070

32,623

1,998
15,921

14,704
4,646

$ 6,319

$ 10,058

12.01%
15.05
63.30

20.32%
25.82
48.80

$499,433
98,604
504,360
598,613
758,958
109,792
52,604

$413,563
100,010
416,174
509,269
655,535
111,447
49,054

$508,163
110,811
481,376
588,252
778,870
104,868
49,502

$410,755
95,930
404,315
498,765
649,876
102,093
53,260

4
(8)
(9)
(18)
33

(11)

(13)

(108)
13

(28)
(8)

(37)

(2)%

(11)
5
2
(3)
5
6

1%
4
3
2
1
9
(8)

GBAM provides financial products, advisory services, financing, securities
clearing, settlement and custody services globally to our institutional investor
clients in support of their investing and trading activities. We also work with
our commercial and corporate clients to provide debt and equity underwriting
and distribution capabilities, merger-related and other advisory services, and
risk management products using interest rate, equity, credit, currency and
commodity derivatives, foreign exchange, fixed-income and mortgage-related
products. As a result of our market-making activities in these products, we
may be required to manage positions in government securities, equity and
equity-linked securities, high-grade and high-yield corporate debt securities,
commercial paper, MBS and asset-backed securities (ABS). Underwriting debt
and equity issuances, securities research and certain market-based activities
are executed through our global broker/dealer affiliates which are our primary
dealers in several countries. GBAM is a leader in the global distribution of
fixed-income, currency and energy commodity products and derivatives.
GBAM also has one of the largest equity trading operations in the world
and is a leader in the origination and distribution of equity and equity-related
products. Our corporate banking services provide a wide range of lending-
related products and services, integrated working capital management and
treasury solutions to clients through our network of offices and client rela-
tionship teams along with various product partners. Our corporate clients are
generally defined as companies with annual sales greater than $2 billion.

GBAM also includes the results of our merchant processing joint venture,
Banc of America Merchant Services, LLC.

In 2009, we entered into a joint venture agreement with First Data
Corporation (First Data) to form Banc of America Merchant Services, LLC.
The joint venture provides payment solutions, including credit, debit and
prepaid cards, and check and e-commerce payments to merchants ranging
from small businesses to corporate and commercial clients worldwide. In
addition to Bank of America and First Data, the remaining stake was initially
held by a third party. During 2010, the third party sold its interest to the joint
venture, thus increasing the Corporation’s ownership interest in the joint
venture to 49 percent. For additional information on the joint venture agree-
ment, see Note 5 – Securities to the Consolidated Financial Statements.

Net income decreased $3.7 billion to $6.3 billion due to a $4.1 billion
decline in revenues and an increase in noninterest expenses of $2.1 billion.
This was partially offset by lower provision expense reflecting improvement in
borrower credit profiles. Additionally, income tax expense was negatively
affected from a change in the U.K. corporate income tax rate that impacted
the carrying value of the deferred tax asset by approximately $390 million.
Net interest income decreased $1.6 billion to $8.0 billion due to tighter
spreads on trading related assets and lower average loan and lease balances,
partially offset by higher earned spreads on deposits. The $12.2 billion, or
11 percent, decline in average loans and leases was driven by reduced client
demand. Net interest income is comprised of both markets-based revenue

Bank of America 2010

from our trading activities and banking-based revenue which is related to our
credit and treasury service products.

Noninterest income decreased $2.6 billion due in part to the prior year
gain of $3.8 billion related to the contribution of the merchant processing
business to the joint venture. While overall sales and trading revenue were flat
year-over-year, the market in 2009 was more favorable but results were muted
by losses on legacy positions. Noninterest expense increased $2.1 billion
driven mainly by higher compensation costs from investments in infrastruc-
ture, professional fees and litigations expense.

Components of Global Banking & Markets

Sales and Trading Revenue
Sales and trading revenue is segregated into fixed-income including invest-
ment and non-investment grade corporate debt obligations, commercial mort-
gage-backed securities (CMBS), RMBS and CDOs; currencies including inter-
est rate and foreign exchange contracts; commodities including primarily
futures, forwards, swaps and options; and equity income from equity-linked
derivatives and cash equity activity.

(Dollars in millions)
Sales and trading revenue (1, 2)

2010

2009

Fixed income, currencies and commodities (FICC)
Equity income

Total sales and trading revenue

$13,158
4,145

$17,303

$12,723
4,902

$17,625

(1)

(2)

Includes $274 million and $353 million of net interest income on a FTE basis for 2010 and 2009.
Includes $2.4 billion and $2.6 billion of investment and brokerage services revenue for 2010 and 2009.

Sales and trading revenue decreased $322 million, or two percent, to
$17.3 billion in 2010 compared to 2009 due to increased investor risk
aversion and more favorable market conditions in the prior year. We recorded
net credit spread gains on derivative liabilities during 2010 of $242 million
compared to losses of $801 million in 2009.

FICC revenue increased $435 million to $13.2 billion due to significantly
lower market disruption charges, partially offset by lower revenue in our rates
and currencies, commodities and credit products due to diminished client
activity and European debt deterioration. Gains on legacy assets, primarily in
trading account profits (losses) and other income (loss), were $321 million for
2010 compared to write-downs of $3.8 billion in 2009. Legacy losses in the
prior year were primarily driven by our CMBS, CDO and leveraged finance
exposure.

Equity income was $4.1 billion in 2010 compared to $4.9 billion in 2009
driven by a decline in client flows and market conditions in the derivatives
business.

Investment Banking Income
Product specialists within GBAM underwrite and distribute debt and equity
issuances and certain other loan products, and provide advisory services. To
provide a complete discussion of our consolidated investment banking in-
come, the table below presents total investment banking income for the
Corporation of which, 93 percent in 2010 and 94 percent in 2009 is recorded
in GBAM with the remainder reported in GWIM and Global Commercial
Banking.

(Dollars in millions)

Investment banking income

Advisory (1)
Debt issuance
Equity issuance

Offset for intercompany fees (2)

Total investment banking income

2010

2009

$1,019
3,267
1,499

5,785
(265)

$5,520

$1,167
3,124
1,964

6,255
(704)

$5,551

(1) Advisory includes fees on debt and equity advisory services and mergers and acquisitions.
(2) Represents the offset to fees paid on the Corporation’s transactions.

Equity issuance fees decreased $465 million in 2010 primarily reflecting
lower levels of industry-wide activity and a decline in market-based revenue
pools. Debt issuance fees increased $143 million consistent with a five
percent increase in global fee pools in 2010. Strong performance within debt
issuance was mainly driven by higher revenues within leveraged finance.
Advisory fees decreased $148 million during 2010.

Global Corporate Banking
Client relationship teams along with product partners work with our customers
to provide them with a wide range of lending-related products and services,
integrated working capital management and treasury solutions through the
Corporation’s global network of offices. Global Corporate Banking lending
revenues of $3.4 billion for 2010 increased $567 million compared to 2009.
The increase in 2010 is primarily due to higher fees and the negative impact of
hedge results in 2009. Treasury services revenue of $2.8 billion for 2010
decreased $3.9 billion primarily due to a $3.8 billion pre-tax gain in the prior
year related to the contribution of the merchant processing business to a joint
venture. Equity investment income from the joint venture was $133 million for
2010. During 2010, we sold our trust administration business and in con-
nection with the sale provided certain commitments to the acquirer. See
Note 14 — Commitments and Contingencies to the Consolidated Financial
Statements for additional information.

Bank of America 2010

Collateralized Debt Obligation Exposure
CDO vehicles hold diversified pools of fixed-income securities and issue
multiple tranches of debt securities including commercial paper, mezzanine
and equity securities. Our CDO-related exposure can be divided into funded
and unfunded super senior liquidity commitment exposure, other super senior
exposure (i.e., cash positions and derivative contracts), warehouse, and sales
and trading positions. For more information on our CDO positions, see
Note 8 – Securitizations and Other Variable Interest Entities to the Consoli-
dated Financial Statements. Super senior exposure represents the most
senior class of commercial paper or notes that are issued by the CDO
vehicles. These financial instruments benefit from the subordination of all
other securities issued by the CDO vehicles.

Super Senior Collateralized Debt Obligation Exposure

In 2010, we incurred $573 million of losses resulting from our CDO-
related exposure compared to $2.2 billion in CDO-related losses in 2009. This
included $357 million in 2010 related to counterparty risk on our CDO-related
exposure compared to $910 million in 2009. Also included in these losses
were other-than-temporary impairment (OTTI) write-downs of $251 million in
2010 compared to losses of $1.2 billion in 2009 related to CDOs and
retained positions classified as AFS debt securities.

As presented in the table below, at December 31, 2010, our hedged and
unhedged super senior CDO exposure before consideration of insurance, net
of write-downs, was $2.0 billion compared to $3.6 billion at December 31,
2009.

(Dollars in millions)

Unhedged
Hedged (3)
Total

December 31, 2010

Subprime (1)

$ 721
583

$1,304

Retained
Positions

$156
–

$156

Total
Subprime

$ 877
583

$1,460

Non-Subprime (2)

$338
189

$527

Total

$1,215
772

$1,987

(1) Classified as subprime when subprime consumer real estate loans make up at least 35 percent of the original net exposure value of the underlying collateral.
(2)
Includes highly-rated collateralized loan obligations and CMBS super senior exposure.
(3) Hedged amounts are presented at carrying value before consideration of the insurance.

We value our CDO structures using market-standard models to model the
specific collateral composition and cash flow structure of each deal. Key
inputs to the models are prepayment rates, default rates and severities for
each collateral type, and other relevant contractual features. Unrealized
losses recorded in accumulated OCI on super senior cash positions and
retained positions from liquidated CDOs in aggregate decreased $382 million
during 2010 to $466 million at December 31, 2010.

At December 31, 2010, total super senior exposure of $2.0 billion was
marked at 18 percent, including $156 million of retained positions from

liquidated CDOs marked at 42 percent, $527 million of non-subprime expo-
sure marked at 39 percent and the remaining $1.3 billion of subprime
exposure marked at 14 percent of the original exposure amounts.

The table below presents our original total notional, mark-to-market re-
ceivable and credit valuation adjustment for credit default swaps and other
positions with monolines. The receivable for super senior CDOs reflects hedge
gains recorded from inception of the contracts in connection with write-downs
on the super senior CDOs in the table above.

Credit Default Swaps with Monoline Financial Guarantors

(Dollars in millions)

Notional

Mark-to-market or guarantor receivable
Credit valuation adjustment

Total

Credit valuation adjustment %
(Write-downs) gains

December 31, 2010

December 31, 2009

Super Senior
CDOs

Other
Guaranteed
Positions

Total

Super Senior
CDOs

Other
Guaranteed
Positions

Total

$ 3,241

$35,183

$38,424

$ 3,757

$38,834

$42,591

$ 2,834
(2,168)

$ 666

77%
$ (386)

$ 6,367
(3,107)

$ 3,260

$ 9,201
(5,275)

$ 3,926

49%

362

57%
(24)

$ 2,833
(1,873)

$ 8,256
(4,132)

$11,089
(6,005)

$ 960

$ 4,124

$ 5,084

66%
$ (961)

50%
98

54%
$ (863)

Total monoline exposure, net of credit valuation adjustments, decreased
$1.2 billion during 2010. This decrease was driven by positive valuation
adjustments on legacy assets and terminated monoline contracts.

Other CDO Exposure
With the Merrill Lynch acquisition, we acquired a loan with a carrying value of
$4.2 billion as of December 31, 2010 that is collateralized by U.S. super
senior ABS CDOs. Merrill Lynch originally provided financing to the borrower

for an amount equal to approximately 75 percent of the fair value of the
collateral. The loan, which is recorded in All Other, has full recourse to the
borrower and all scheduled payments on the loan have been received. Events
of default under the loan are customary events of default, including failure to
pay interest when due and failure to pay principal at maturity. Collateral for the
loan is excluded from our CDO exposure discussions and the applicable
tables.

Bank of America 2010

Global Wealth & Investment Management

(Dollars in millions)
Net interest income (1)
Noninterest income:

Investment and brokerage services
All other income

Total noninterest income

Total revenue, net of interest expense

Provision for credit losses
Noninterest expense

Income before income taxes

Income tax expense (1)

Net income

Net interest yield (1)
Return on average tangible shareholders’ equity
Return on average equity
Efficiency ratio (1)

Balance Sheet

Average
Total loans and leases
Total earning assets
Total assets
Total deposits
Allocated equity

Year end
Total loans and leases
Total earning assets
Total assets
Total deposits
Allocated equity
(1) FTE basis

2010

2009

% Change

$ 5,831

$ 5,988

(3)%

8,832
2,008

10,840

16,671

646
13,598

2,427
1,080

8,425
1,724

10,149

16,137

1,061
12,397

2,679
963

$ 1,347

$ 1,716

2.37%

2.64%

18.40
7.44
81.57

27.63
10.35
76.82

$ 99,491
245,812
266,638
236,350
18,098

$103,384
226,856
249,887
225,979
16,582

$101,020
275,598
297,301
266,444
18,349

$ 99,571
227,796
250,963
224,839
17,730

5
16

(39)
10

(9)
12

(22)

(4)%
8
7
5
9

21
18
19
3

GWIM consists of three primary businesses: Merrill Lynch Global Wealth
Management (MLGWM), U.S. Trust, Bank of America Private Wealth Manage-
ment (U.S. Trust) and Retirement Services.

MLGWM’s advisory business provides a high-touch client experience
through a network of approximately 15,500 financial advisors focused on
clients with more than $250,000 in total investable assets. MLGWM also
includes Merrill Edge, a new integrated investing and banking service which is
targeted at clients with less than $250,000 in total assets. Merrill Edge
provides team-based investment advice and guidance, brokerage services, a
self-directed online investing platform and key banking capabilities including
access to the Corporation’s branch network and ATMs. In addition, MLGWM
includes the Private Banking & Investments Group.

U.S. Trust, together with MLGWM’s Private Banking & Investments Group,
provides comprehensive wealth management solutions targeted at wealthy
and ultra-wealthy clients with investable assets of more than $5 million, as
well as customized solutions to meet clients’ wealth structuring, investment
management, trust and banking needs, including specialty asset manage-
ment services.

Retirement Services partners with financial advisors to provide institu-
tional and personal retirement solutions including investment management,

administration, recordkeeping and custodial services for 401(k), pension,
profit-sharing, equity award and non-qualified deferred compensation plans.
Retirement Services also provides comprehensive investment advisory ser-
vices to individuals, small to large corporations and pension plans. Included in
Retirement Services’ results is the consolidation of a collective investment
fund that did not have a significant impact on our consolidated results. For
additional information, see Note 8 – Securitizations and Other Variable Inter-
est Entities to the Consolidated Financial Statements.

GWIM results also include the BofA Global Capital Management (BACM)
business, which is comprised primarily of the cash and liquidity asset man-
agement business that Bank of America retained following the sale of the
Columbia Management long-term asset management business on May 1,
2010. The historical results of Columbia Management’s long-term asset
management business were transferred to All Other along with the Corpo-
ration’s economic ownership interest in BlackRock.

Revenue from MLGWM was $13.1 billion, up four percent in 2010 com-
pared to 2009. Revenue from U.S. Trust was $2.7 billion, up five percent in
2010 compared to 2009. Revenue from Retirement Services was $950 mil-
lion, up four percent compared to 2009.

Bank of America 2010

GWIM results include the impact of migrating clients and their related
deposit and loan balances to or from Deposits, Home Loans & Insurance and
the ALM portfolio as presented in the table below. The directional shift of total
deposits migrated was mainly due to client segmentation threshold changes.
Subsequent to the date of migration, the associated net interest income,
noninterest income and noninterest expense are recorded in the business to
which the clients migrated.

commercial charge-off in 2009. Noninterest expense increased $1.2 billion,
or 10 percent, to $13.6 billion driven by increases in revenue-related ex-
penses, higher support costs and personnel costs associated with further
investment in the business.

Client Balances
The table below presents client balances which consist of assets under
management, client brokerage assets, assets in custody, client deposits,
and loans and leases.

Migration Summary

(Dollars in millions)

2010

2009

Client Balances by Type

Average
Total deposits – GWIM from (to) Deposits
Total loans – GWIM to Home Loans & Insurance and the

ALM portfolio

Year end
Total deposits – GWIM from (to) Deposits
Total loans – GWIM to Home Loans & Insurance and the

ALM portfolio

$ 3,086

$(30,638)

(1,405)

(12,033)

$ 7,232

$(42,521)

(1,625)

(17,241)

Net income decreased $369 million, or 22 percent, to $1.3 billion driven
in part by higher noninterest expense, the tax-related effect of the sale of the
Columbia Management long-term asset management business and lower net
interest income, partially offset by higher noninterest income and lower credit
costs. Net interest income decreased $157 million, or three percent, to
$5.8 billion as the positive impact of higher deposit levels was more than
offset by lower revenue from corporate ALM activity. Noninterest income
increased $691 million, or seven percent, to $10.8 billion primarily due to
higher asset management fees driven by stronger markets, continued long-
term assets under management flows and higher transactional activity. Pro-
vision for credit losses decreased $415 million, or 39 percent, to $646 million
driven by stabilization of the portfolios and the recognition of a single large

(Dollars in millions)

Assets under management
Client brokerage assets (1)
Assets in custody
Client deposits
Loans and leases
Less: Client brokerage assets, assets in custody
and deposits included in assets under
management
Total client balances (2)

December 31

2010

$ 643,955
1,480,231
126,203
266,444
101,020

2009

$ 749,851
1,402,977
144,012
224,839
99,571

(379,310)

(348,738)

$2,238,543

$2,272,512

(1) Client brokerage assets include non-discretionary brokerage and fee-based assets.
(2) 2009 balance includes the Columbia Management long-term asset management business representing

$114.6 billion, net of eliminations, which was sold on May 1, 2010.

The decrease in client balances was due to the sale of the Columbia
Management long-term asset management business, outflows in MLGWM’s
non-fee based brokerage assets and outflows in BACM’s money market
assets due to the continued low rate environment, partially offset by higher
market levels and inflows in client deposits, long-term assets under man-
agement (AUM) and fee-based brokerage assets.

Bank of America 2010

All Other

(Dollars in millions)
Net interest income (1)
Noninterest income:
Card income
Equity investment income
Gains on sales of debt securities
All other loss

Total noninterest income

Total revenue, net of interest expense

Provision for credit losses
Merger and restructuring charges
All other noninterest expense

Loss before income taxes

Income tax benefit (1)
Net income

Balance Sheet

Average
Total loans and leases
Total assets (3)
Total deposits
Allocated equity

Year end
Total loans and leases
Total assets (3)
Total deposits
Allocated equity

2010

148

2009 (2)

$ 2,029

% Change

(93)%

2
4,532
2,314
(1,127)

5,721

5,869

4,634
1,820
2,431

(3,016)
(4,103)

1,138
10,589
4,437
(5,590)

10,574

12,603

8,002
2,721
2,909

(1,029)
(2,357)

$ 1,087

$ 1,328

$250,956
263,592
55,769
33,964

$255,155
186,391
38,162
44,933

$260,755
338,703
88,736
51,475

$250,868
233,293
65,434
23,303

(100)
(57)
(48)
80

(46)

(53)

(42)
(33)
(16)

(193)
(74)

(18)

(4)%

(22)
(37)
(34)

2%
(20)
(42)
92

(1) FTE basis
(2) 2009 is presented on an as adjusted basis for comparative purposes, which excludes the securitization offset. For more information on All Other, including the securitization offset, see Note 26 – Business Segment Information to the

Consolidated Financial Statements.
Includes elimination of segments’ excess asset allocations to match liabilities (i.e., deposits) of $621.3 billion and $537.1 billion for 2010 and 2009, and $645.8 billion and $586.0 billion at December 31, 2010 and 2009.

(3)

The 2009 presentation above of All Other excludes the securitization
offset to make it comparable with the 2010 presentation. In 2009, Global
Card Services was presented on a managed basis with the difference be-
tween managed and held reported as the securitization offset. With the
adoption of new consolidation guidance on January 1, 2010, we consolidated
all credit card securitizations that were previously unconsolidated, such that
All Other no longer includes the securitization offset. For additional informa-
tion on the securitization offset included in All Other, see Note 26 – Business
Segment Information to the Consolidated Financial Statements.

All Other, as presented above, consists of two broad groupings, Equity
Investments and Other. Equity Investments includes Corporate Invest-
ments, Global Principal Investments and Strategic Investments. Other can
be segregated into the following categories: liquidating businesses, merger
and restructuring charges, ALM functions (i.e., residential mortgage portfolio
and investment securities) and related activities (i.e., economic hedges, fair
value option on structured liabilities), and the impact of certain allocation
methodologies. For additional information on the other activities included in
All Other, see Note 26 – Business Segment Information to the Consolidated
Financial Statements.

The tables below present the components of All Other’s equity invest-
ments at December 31, 2010 and 2009, and also a reconciliation of All
Other’s equity investment income to the total consolidated equity investment
income for 2010 and 2009.

Equity Investments

(Dollars in millions)

Corporate Investments
Global Principal Investments
Strategic and other investments

Total equity investments included in All Other

Equity Investment Income

(Dollars in millions)

Corporate Investments
Global Principal Investments
Strategic and other investments

Total equity investment income included in All Other
Total equity investment income included in the business

segments

Total consolidated equity investment income

December 31

2010

–
11,656
22,545

$34,201

2010

$ (293)
2,304
2,521

4,532

728

$5,260

2009

$ 2,731
14,071
27,838

$44,640

2009

(88)
1,222
9,455

10,589

(575)

$10,014

Bank of America 2010

In 2010, the $2.7 billion Corporate Investments equity securities portfo-
lio, which consisted of highly liquid publicly-traded equity securities, was sold
as a result of a change in our investment portfolio objectives shifting more to
interest earnings and reducing our exposure to equity market risk, which
contributed to the $293 million loss in 2010.

Global Principal Investments (GPI) is comprised of a diversified portfolio of
investments in private equity, real estate and other alternative investments.
These investments are made either directly in a company or held through a
fund with related income recorded in equity investment income. GPI had
unfunded equity commitments of $1.4 billion and $2.5 billion at December 31,
2010 and 2009, related to certain of these investments. During 2010, we
sold our exposure of $2.9 billion in certain private equity funds, comprised of
$1.5 billion in funded exposure and $1.4 billion in unfunded commitments in
these funds as we continue to reduce our equity exposure.

Affiliates of the Corporation may, from time to time, act as general partner,
fund manager and/or investment advisor to certain Corporation-sponsored
real estate private equity funds. In this capacity, these affiliates manage
and/or provide investment advisory services to such real estate private equity
funds primarily for the benefit of third-party institutional and private clients.
These activities, which are recorded in GPI, inherently involve risk to us and to
the fund investors, and in certain situations may result in losses. In 2010, we
recorded a loss of $163 million related to a consolidated real estate private
equity fund for which we were the general partner and investment advisor. In
late 2010, the general partner and investment advisor responsibilities were
transferred to an independent third-party asset manager.

Strategic Investments includes primarily our investment

in CCB of
$19.7 billion as well as our $2.6 billion remaining investment in BlackRock.
At December 31, 2010, we owned approximately 10 percent, or 25.6 billion
common shares of CCB. During 2010, we sold certain rights related to our
investment in CCB resulting in a gain of $432 million. Also during 2010, we
sold our Itaú Unibanco and Santander equity investments resulting in a net
gain of approximately $800 million and a portion of our interest in BlackRock
resulting in a gain of $91 million.

All Other reported net income of $1.1 billion in 2010 compared to
$1.3 billion in 2009 with the decline due to decreases in net interest income
and noninterest income compared to the prior year. The decrease in net
interest income was driven by a $1.4 billion lower funding differential on
certain securitizations and the impact of capital raises occurring throughout
2009 that were not allocated to the businesses. Noninterest income de-
creased $4.9 billion, as the prior year included a $7.3 billion gain resulting
from sales of shares of CCB and an increase of $1.4 billion on net gains on the
sale of debt securities. This was offset by net negative fair value adjustments
of $4.9 billion on structured liabilities in 2009 compared to a net positive
adjustment of $18 million in 2010 and higher valuation adjustments and
gains on sales of select investments in GPI. Also in 2010, we sold our
investments in Itaú Unibanco and Santander resulting in a net gain of

Table 9 Long-term Debt and Other Obligations

approximately $800 million, as well as the gains on CCB and BlackRock.
For more information on the sales of these investments, see Note 5 – Secu-
rities to the Consolidated Financial Statements.

Provision for credit losses decreased $3.4 billion to $4.6 billion due to
improving portfolio trends in the residential mortgage portfolio partially offset
by further deterioration in the Countrywide purchased credit-impaired discon-
tinued real estate portfolio.

The income tax benefit in 2010 was $4.1 billion compared to $2.4 billion
in 2009, driven by an increase in the pre-tax loss as well as the release of a
higher portion of a deferred tax asset valuation allowance.

During 2010, we completed the sale of First Republic at book value and as
a result, we removed $17.4 billion of loans and $17.8 billion of deposits from
the Corporation’s Consolidated Balance Sheet.

Off-Balance Sheet Arrangements and Contractual
Obligations
We have contractual obligations to make future payments on debt and lease
agreements. Additionally, in the normal course of business, we enter into
contractual arrangements whereby we commit to future purchases of prod-
ucts 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 commitments to purchase loans of $2.6 billion and
vendor contracts of $7.1 billion. The most significant vendor contracts include
communication services, processing services and software contracts. Other
long-term liabilities include our contractual funding obligations related to the
Qualified Pension Plans, Non-U.S. Pension Plans, Nonqualified Pension Plans,
and Postretirement Health and Life Plans (the Plans). Obligations to the Plans
are based on the current and projected obligations of the Plans, performance
of the Plans’ assets and any participant contributions, if applicable. During
2010 and 2009, we contributed $378 million and $414 million to the Plans,
and we expect to make at least $306 million of contributions during 2011.
Debt, lease, equity and other obligations are more fully discussed in
Note 13 – Long-term Debt and Note 14 – Commitments and Contingencies to
the Consolidated Financial Statements. The Plans are more fully discussed in
Note 19 – Employee Benefit Plans to the Consolidated Financial Statements.
We enter into commitments to extend credit such as loan commitments,
standby letters of credit (SBLCs) and commercial letters of credit to meet the
financing needs of our customers. For a summary of the total unfunded, or off-
balance sheet, credit extension commitment amounts by expiration date, see
the table in Note 14 – Commitments and Contingencies to the Consolidated
Financial Statements.

Table 9 presents total long-term debt and other obligations at December 31,

2010.

(Dollars in millions)

Long-term debt and capital leases
Operating lease obligations
Purchase obligations
Time deposits
Other long-term liabilities

Total long-term debt and other obligations

Due in
1 Year or Less

$ 89,251
3,016
5,257
181,280
696

$279,500

December 31, 2010

Due after
1 Year through
3 Years

Due after
3 Years through
5 Years

$138,603
4,716
2,490
17,548
1,047

$164,404

$69,539
2,894
1,603
4,752
770

$79,558

Due after
5 Years

$151,038
6,624
1,077
4,178
1,150

$164,067

Total

$448,431
17,250
10,427
207,758
3,663

$687,529

Bank of America 2010

Representations and Warranties
We securitize first-lien residential mortgage loans generally in the form of MBS
guaranteed by GSEs or the Government National Mortgage Association
(GNMA) in the case of the Federal Housing Administration (FHA) insured
and U.S. Department of Veterans Affairs (VA) guaranteed mortgage loans. In
addition, in prior years, legacy companies and certain subsidiaries have sold
pools of first-lien residential mortgage loans and home equity loans as private-
label securitizations or in the form of whole loans. In connection with these
transactions, we or our subsidiaries or legacy companies make or have made
various representations and warranties. Breaches of these representations
and warranties may result in the requirement to repurchase mortgage loans or
to otherwise make whole or provide other remedy to a whole-loan buyer or
securitization trust (collectively, repurchase claims). Our operations are cur-
rently structured to attempt to limit the risk of repurchase and accompanying
credit exposure by seeking to ensure consistent production of mortgages in
accordance with our underwriting procedures and by servicing those mort-
gages consistent with our contractual obligations.

The fair value of probable losses to be absorbed under the representations
and warranties obligations and the guarantees is recorded as an accrued
liability when the loans are sold. The liability for probable losses is updated
by accruing a representations and warranties provision in mortgage banking
income. This is done throughout the life of the loan as necessary when
additional relevant information becomes available. The methodology used to
estimate the liability for representations and warranties is a function of the
representations and warranties given and considers a variety of factors, which
include, depending on the counterparty, actual defaults, estimated future de-
faults, historical loss experience, estimated home prices, estimated probability
that a repurchase request will be received, number of payments made by the
borrower prior to default and estimated probability that a loan will be required to
be repurchased. Historical experience also considers recent events such as the
agreements with the GSEs on December 31, 2010 as discussed in the following
section. Changes to any one of these factors could significantly impact the
estimate of our liability. Given that these factors vary by counterparty, we analyze
our representations and warranties obligations based on the specific counter-
party with whom the sale was made. Although the timing and volume has varied,
we have experienced in recent periods increasing repurchase and similar
requests from buyers and insurers, including monolines. Generally the volume
of unresolved repurchase claims from the FHA and VA for loans in GNMA-
guaranteed securities is not significant because the requests are limited in
number and are typically resolved quickly. We expect that efforts to attempt to
assert repurchase requests by monolines, whole-loan investors and private-
label securitization investors may increase in the future. See Recent Events –
Private-label Residential Mortgage-backed Securities Matters, on page 39 for
additional information. We perform a loan-by-loan review of all properly pre-
sented repurchase claims and have and will continue to contest such demands
that we do not believe are valid. In addition, we may reach a bulk settlement with
a counterparty (in lieu of the loan-by-loan review process), on terms determined
to be advantageous to the Corporation. Overall, disputes with respect to
repurchase claims have increased with monoline insurers, whole-loan buyers
and private-label securitization investors. For additional
information, see
Note 9 – Representations and Warranties Obligations and Corporate Guaran-
tees to the Consolidated Financial Statements.

At December 31, 2010, our total unresolved repurchase claims totaled
approximately $10.7 billion compared to $7.6 billion at the end of 2009. The
liability for representations and warranties and corporate guarantees, is
included in accrued expenses and other liabilities and the related provision
is included in mortgage banking income. At December 31, 2010 and 2009,
the liability was $5.4 billion and $3.5 billion. For 2010 and 2009, the
provision for representations and warranties and corporate guarantees
was $6.8 billion and $1.9 billion. The representations and warranties provi-
sion of $6.8 billion, includes a provision of $3.0 billion in the fourth quarter of
2010 related to the GSE agreements as well as adjustments to the repre-
sentations and warranties liability for other loans sold directly to the GSEs and
not covered by those agreements. Also contributing to the increase in rep-
resentations and warranties provision for the year was our continued eval-
uation of exposure to non-GSE repurchases and similar claims, which led to
the determination that we have developed sufficient repurchase experience
with certain non-GSE counterparties to record a liability related to existing and
future projected claims from such counterparties. Representations and war-
ranties provision may vary significantly each period as the methodology used
to estimate the expense continues to be refined based on the level and type of
repurchase claims presented, defects identified, the latest experience gained
on repurchase claims and other relevant facts and circumstances, which
could have a material adverse impact on our earnings for any particular
period.

Government-sponsored Enterprises
During the last ten years, Bank of America and our subsidiaries have sold over
$2.0 trillion of loans to the GSEs and we have an established history of
working with them on repurchase claims. Our experience with them continues
to evolve and any disputes are generally related to areas such as the
reasonableness of stated income, occupancy and undisclosed liabilities,
and are typically focused on the 2004 through 2008 vintages. On Decem-
ber 31, 2010, we reached agreements with the GSEs and paid $2.8 billion to
the GSEs pursuant to such agreements, resolving repurchase claims involving
certain residential mortgage loans sold directly to them by entities related to
legacy Countrywide. As a result of these agreements, as well as adjustments
to the representations and warranties liability for other loans sold directly to
the GSEs and not covered by those agreements, we adjusted our liability for
representations and warranties. For additional information regarding these
agreements, see Note 9 – Representations and Warranties Obligations and
Corporate Guarantees to the Consolidated Financial Statements.

Our current repurchase claims experience with the GSEs is predominantly
concentrated in the 2004 through 2008 origination vintages where we believe
that our exposure to representations and warranties liability is most signif-
icant. Our repurchase claims experience related to loans originated prior to
2004 has not been significant and we believe that the changes made to our
operations and underwriting policies have reduced our exposure after 2008.
The cumulative repurchase claims for 2007 exceed all other vintages. The
volume of loans originated in 2007 was significantly higher than any other
vintage which, together with the high delinquency level in this vintage, helps to
explain the high level of repurchase claims compared to the other vintages.

Bank of America 2010

Cumulative GSE Repurchase Claims by Vintage

)
s
n
o

i
l
l
i

m
n

s
r
a

l
l

o
D
(

$12,000

$10,000

$8,000

$6,000

$4,000

$2,000

)
1
(
)
D
A
E
(

d
e
v
i
e
c
e
r

s
m
a
C

19 20+

2004

2005

2006

2007

2008

2009+

Loan age (in quarters)

(1) Exposure at default (EAD) represents the unpaid principal balance at the time of default or the unpaid principal balance as of December 31, 2010.

Bank of America and legacy Countrywide sold approximately $1.1 trillion of
loans originated from 2004 through 2008 to the GSEs. As of December 31,
2010, slightly less than 10 percent of the loans in these vintages have
defaulted or are 180 days or more past due (severely delinquent). At least 25
payments have been made on approximately 55 percent of severely delin-
quent or defaulted loans. Through December 31, 2010, we have received
approximately $21.6 billion in repurchase claims associated with these
vintages, representing approximately two percent of the loans sold to the
GSEs in these vintages. Including the agreement reached with FNMA on
December 31, 2010, we have resolved $18.2 billion of these claims with a net
loss experience of approximately 27 percent. The claims resolved and the
loss rate do not include $839 million in claims extinguished as a result of the

agreement with FHLMC due to the global nature of the agreement and,
specifically, the absence of a formal apportionment of the agreement amount
between current and future claims. Our collateral loss severity rate on ap-
proved repurchases has averaged approximately 45 to 55 percent. Although
the level of repurchase claims from the GSEs has been elevated for the last
few quarters, the agreements with the GSEs have resulted in a decrease in
the total number of outstanding repurchase claims at December 31, 2010
compared to December 31, 2009. Based on the information derived from the
historical GSE experience, including the GSE agreements discussed on the
previous page, we believe we are 70 percent to 75 percent through the receipt
of the GSE repurchase claims that we ultimately expect to receive.

Bank of America 2010

The table below highlights our experience with the GSEs related to loans originated from 2004 through 2008.

Table 10 Overview of GSE Balances – 2004–2008 Originations

Legacy Orginator

(Dollars in billions)

Original funded balance
Principal payments
Defaults

Total outstanding balance at December 31, 2010

Outstanding principal balance 180 days or more past due (severely delinquent)
Defaults plus severely delinquent (principal at risk)

Payments made by borrower:

Less than 13
13-24
25-36
Greater than 36

Total payments made by borrower

Outstanding GSE pipeline of representations and warranties claims (all vintages)

As of December 31, 2009
As of December 31, 2010

Cumulative representations and warranties losses 2004-2008 vintages

Our liability for obligations under representations and warranties given to
the GSEs considers the recent agreements and their impact on the repur-
chase rates on future repurchase claims we might receive on loans that have
defaulted or that we estimate will default. We believe that our remaining
exposure to representations and warranties for loans sold directly to the GSEs
has been accounted for as a result of these agreements and the associated
adjustments to our recorded liability for representations and warranties for
other loans sold directly to the GSEs and not covered by the agreements. We
believe our predictive repurchase models, utilizing our historical repurchase
experience with the GSEs while considering current developments, including
the recent agreements, projections of future defaults as well as certain
assumptions regarding economic conditions, home prices and other matters,
allows us to reasonably estimate the liability for obligations under represen-
tations and warranties on loans sold to the GSEs. However, future provisions
and possible loss or range of loss associated with representations and
warranties made to the GSEs may be impacted if actual results are different
from our assumptions regarding economic conditions, home prices and other
matters.

Transactions with Investors Other than Government-spon-
sored Entities
In prior years, legacy companies and certain subsidiaries have sold pools of
first-lien mortgage loans and home equity loans as private-label securitiza-
tions or in the form of whole loans. The loans sold include prime loans,
including loans with a loan balance in excess of the conforming loan limit, Alt-
A, pay-option, home equity and subprime loans. Many of the loans sold in the
form of whole loans were subsequently pooled with other mortgages into
private-label securitizations issued or sponsored by the third-party buyer of the
whole loans. In some of the private-label securitizations, monolines have
insured all or some of the issued bonds or certificates. In connection with
these securitizations and whole loan sales, we or our subsidiaries or our
legacy companies made various representations and warranties. Breaches of
these representations and warranties may result in the requirement to
repurchase mortgage loans from or to otherwise make whole or provide
other remedy to a whole-loan buyer or securitization trust.

As detailed in Table 11, legacy companies and certain subsidiaries sold
loans originated from 2004 through 2008 with a principal balance of $963 bil-
lion to investors other than GSEs, of which approximately $478 billion in

Bank of America 2010

Countrywide

$ 846
(406)
(31)

$ 409

$ 59
90

Other

$ 272
(133)
(3)

$ 136

$ 14
17

Percent of
Total

15%
30
31
24

100%

Total

$1,118
(539)
(34)

$ 545

73
107

16
32
33
26

$ 107

$ 3.3
2.8
$ 6.3

principal has been paid and $216 billion have defaulted, or are severely
delinquent (i.e., 180 days or more past due) and are considered principal at-
risk at December 31, 2010. As of December 31, 2010, we had received
$13.7 billion of repurchase claims on these 2004-2008 loan vintages, of
which $6.0 billion have been resolved and $7.7 billion remain outstanding. Of
the $7.7 billion of repurchase claims that remain outstanding, we have
reviewed $4.1 billion that we have declined to repurchase. We have recog-
nized losses of $1.7 billion on the resolved repurchase claims, $631 million
of which relates to monolines and $1.1 billion of which relates to whole loan
and private-label investors, as described in more detail below.

As it relates to private investors, including those who have invested in
private-label securitizations, a contractual liability to repurchase mortgage loans
generally arises only if counterparties prove there is a breach of the represen-
tations and warranties that materially and adversely affects the interest of the
investor or all investors in a securitization trust, or that there is a breach of other
standards established by the terms of the related sale agreement. We believe
that the longer a loan performs, the less likely an underwriting representations
and warranties breach would have had a material impact on the loan’s perfor-
mance or that a breach even exists. Because the majority of the borrowers in
this population would have made a significant amount of payments if they are
not yet 180 days or more delinquent, we believe that the principal balance at the
greatest risk for repurchase requests in this population of private-label investors
is a combination of loans that have already defaulted and those that are
currently 180 days or more past due. Additionally, the obligation to repurchase
mortgage loans also requires that counterparties have the contractual right to
demand repurchase of the loans. Based on a recent court ruling that dismissed
a case against legacy Countrywide, we believe private-label securitization in-
vestors must generally aggregate 25 percent of the voting interests in each of
the tranches of a particular securitization to instruct the securitization trustee to
investigate potential repurchase claims. While a securitization trustee may elect
to investigate or demand repurchase of loans on its own, individual investors
typically have limited rights under the contracts to present repurchase claims
directly. Also, the motivation of some private-label securitization investors to
assert repurchase claims may be diminished by the fact that their investment is
not materially impacted by the losses due to the credit enhancement coverage
provided by cash flows from the tranches rated below AAA, for example.

Any amounts paid related to repurchase claims from a monoline are paid
to the securitization trust and are applied in accordance with the terms of the

governing securitization documents, which may include use by the securiti-
zation trust to repay any outstanding monoline advances or reduce future
advances from the monolines. To the extent that a monoline has not advanced
funds or does not anticipate that it will be required to advance funds to the
securitization trust, the likelihood of receiving a repurchase request from a
monoline may be reduced as the monoline would receive limited or no benefit
from the payment of repurchase claims. Moreover, some monolines are not

currently performing their obligations under the financial guaranty policies
they issued which may, in certain circumstances, impact their ability to
present repurchase claims.

Table 11 details the population of loans sold as whole-loans or in non-
agency securitizations by entity and product together with the principal at-risk
stratified by the number of payments the borrower made prior to default or
becoming severely delinquent.

Table 11 Overview of Non-Agency Securitization and Whole Loan Balances – 2004-2008 Originations

(Dollars in billions)

By Entity

Bank of America
Countrywide
Merrill Lynch
First Franklin

Total (1, 2, 3)

By Product

Prime
Alt-A
Pay option
Subprime
Home Equity
Other

Total

Principal Balance

Original
Principal
Balance

Outstanding
Principal
Balance
12/31/2010

Outstanding
Principal Balance
180 Days or More
Past Due

Defaulted
Principal
Balance

Principal at
Risk

$ 100
716
65
82

$963

$ 302
172
150
245
88
6

$963

$ 34
293
22
23

$372

$ 124
82
65
82
18
1

$372

4
86
7
7

3
80
10
19

$104

$112

$ 16
22
30
36
–
–

$104

$ 11
21
20
43
16
1

$112

7
166
17
26

$216

$ 27
43
50
79
16
1

$216

Principal at Risk

Borrower
Made
13 to 24
Payments

Borrower
Made
25 to 36
Payments

Borrower
Made
H 36
Payments

$ 2
46
4
6

$58

$ 6
12
15
19
5
1

$58

$ 2
49
3
4

$58

$ 8
12
16
17
5
–

$58

$ 2
47
7
12

$68

$11
12
14
27
4
–

$68

Borrower Made
G 13 Payments
$ 1
24
3
4

$32

$ 2
7
5
16
2
–

$32

Includes $186 billion of original principal balance related to transactions with monoline participation.

(1)
(2) Excludes transactions sponsored by Bank of America and Merrill Lynch where no representations or warranties were assumed.
(3)

Includes exposures on third-party sponsored transactions related to legacy entity originations.

As of December 31, 2010, approximately 22 percent of the loans sold to
non-GSEs that were originated from 2004 to 2008 have defaulted or are
severely delinquent. As shown in Table 11, at least 25 payments have been
made on approximately 58 percent of the loans included in principal at-risk.
We believe many of the defaults observed in these securitizations have been,
and continue to be, driven by external factors like the substantial depreciation
in home prices, persistently high unemployment and other negative economic
trends, diminishing the likelihood that any loan defect (assuming one exists at
all) was the cause of the loan’s default.

We believe the agreements for private-label securitizations generally con-
tain less rigorous representations and warranties and generally impose higher
burdens on investors seeking loan repurchases than the comparable agree-
ments with the GSEs. For example, borrower fraud representations and
warranties were generally not given in private-label securitizations. The fol-
lowing represent some of the typical private-label securitization transaction
terms (which differ substantially from those provided in GSE transactions):
• Representation of material compliance with underwriting guidelines (which

often explicitly permit exceptions).

• Few transactions contain a representation that there has been no fraud or

material misrepresentation by a borrower or third party.

• Many representations include materiality qualifiers.
• Breach of representation must materially and adversely affect certificate

holders’ interest in the loan.

• No representation that the mortgage is of investment quality.
• Offering documents included extensive disclosures, including detailed risk
factors, description of underwriting practices and guidelines, and loan
attributes.

• Only parties to a pooling and servicing agreement (e.g., the trustee) can
bring repurchase claims. Certificate holders cannot bring claims directly
and do not have access to loan files. At least 25 percent of each tranche of
certificate holders is generally required in order to direct a trustee to review

loan files for potential claims. In addition, certificate holders must bear
costs of a trustee’s loan file review.

• Repurchase liability is generally limited to the seller.

These factors lead us to believe that only a portion of the principal at-risk
with respect to loans included in private-label securitizations will be the
subject of a repurchase request and only a portion of those requests would
ultimately result in a repurchase. Although our experience with non-GSE
claims remains limited, we expect additional activity in this area going forward
and that the volume of repurchase claims from monolines, whole-loan inves-
tors and investors in private-label securitizations could increase in the future.
It is reasonably possible that future losses may occur, and our estimate is that
the upper range of possible loss related to non-GSE sales could be $7 billion
to $10 billion over existing accruals. This estimate does not represent a
probable loss, is based on currently available information, significant judg-
ment, and a number of assumptions that are subject to change. A significant
portion of this estimate relates to loans originated through legacy Country-
wide, and the repurchase liability is generally limited to the original seller of
the loan. Future provisions and possible loss or range of loss may be impacted
if actual results are different from our assumptions regarding economic
conditions, home prices and other matters and may vary by counterparty.
The resolution of the repurchase claims process with the non-GSE counter-
parties will likely be a protracted process, and we will vigorously contest any
request for repurchase if we conclude that a valid basis for the repurchase
claim does not exist.

The following discussion provides more detailed information related to

non-GSE counterparties.

Monoline Insurers
Legacy companies have sold $185.6 billion of loans originated from 2004
through 2008 into monoline-insured securitizations, which are included in
Table 11, including $106.2 billion of first-lien mortgages and $79.4 billion of

Bank of America 2010

second-lien mortgages. Of these balances, $45.8 billion of the first-lien
mortgages and $48.5 billion of the second-lien mortgages have paid off
and $32.9 billion of the first-lien mortgages and $14.5 billion of the second-
lien mortgages have defaulted or are severely delinquent and are considered
principal at-risk at December 31, 2010. At least 25 payments have been
made on approximately 52 percent of the loans included in principal at-risk. Of
the first-lien mortgages sold, $41.0 billion, or 39 percent, were sold as whole
loans to other institutions which subsequently included these loans with
those of other originators in private-label securitization transactions in which
the monolines typically insured one or more securities. Through December 31,
2010, we have received $5.6 billion of representations and warranties claims
related to the monoline-insured transactions. Of these repurchase claims,
$799 million have been resolved, with losses of $631 million. The majority of
these resolved claims related to second-lien mortgages and $678 million of
these claims were resolved through repurchase or indemnification while
$121 million were rescinded by the investor or paid in full. At December 31,
2010, the unpaid principal balance of loans related to unresolved monoline
repurchase requests was $4.8 billion, including $3.0 billion that have been
reviewed where it is believed a valid defect has not been identified which would
constitute an actionable breach of representations and warranties and
$1.8 billion that are in the process of review. We have had limited experience
with most of the monoline insurers in the repurchase process, which has
constrained our ability to resolve the open claims with such counterparties.
Also, certain monoline insurers have instituted litigation against legacy Coun-
trywide and Bank of America, which limits our relationship with such monoline
insurers and ability to enter into constructive dialogue to resolve the open
claims. It is not possible at this time to reasonably estimate future repurchase
obligations with respect to those monolines with whom we have limited
repurchase experience and, therefore, no liability has been recorded in
connection with these monolines, other than a liability for repurchase re-
quests that are in the process of review and repurchase requests where we
have determined that there are valid loan defects. However, certain other
monoline insurers have engaged with us in a consistent repurchase process
and we have used that experience to record a liability related to existing and
projected future claims from such counterparties.

Whole Loan Sales and Private-label Securitizations
Legacy entities, and to a lesser extent Bank of America, sold loans in whole loan
sales or via private-label securitizations with a total principal balance of
$777.1 billion originated from 2004 through 2008, which are included in Table
11, of which $384.0 billion have been paid off and $169.0 billion have defaulted
or are severely delinquent and are considered principal at-risk at December 31,
2010. At least 25 payments have been made on approximately 60 percent of
the loans included in principal at-risk. We have received approximately $8.1 bil-
lion of representations and warranties claims from whole loan investors and
private-label securitization investors related to these vintages, including $5.6 bil-
lion from whole loan investors, $800 million from one private-label securitization
counterparty which were submitted prior to 2008 and $1.7 billion in recent
demands from private-label securitization investors. Private-label securitization
investors generally do not have the contractual right to demand repurchase of
loans directly. The inclusion of the $1.7 billion in recent demands from private-
label securitization investors does not mean that we believe these claims have
satisfied the contractual thresholds required for these investors to direct the
securitization trustee to take action or are otherwise procedurally or substan-
tively valid. Additionally, certain private-label securitizations are insured by the
monolines, which are not reflected in these figures regarding whole loan sales
and private-label securitizations.

We have resolved $5.2 billion of the claims received from whole loan
investors and private-label securitization investors with losses of $1.1 billion.
Approximately $2.1 billion of these claims were resolved through repurchase

Bank of America 2010

or indemnification and $3.1 billion were rescinded by the investor. Claims
outstanding related to these vintages totaled $2.9 billion at December 31,
2010, $1.1 billion of which we have reviewed and declined to repurchase
based on an assessment of whether a material breach exists, $91 million of
which are in the process of review and $1.7 billion of which are demands from
private-label securitization investors received in the fourth quarter of 2010.
The majority of the claims that we have received so far are from whole loan
investors and until we have meaningful repurchase experiences with counter-
parties other than whole loan investors, it is not possible to determine
whether a loss related to our private-label securitizations has occurred or
is probable. However, certain whole loan investors have engaged with us in a
consistent repurchase process and we have used that experience to record a
liability related to existing and future claims from such counterparties.

On October 18, 2010, Countrywide Home Loans Servicing, LP (which
changed its name to BAC Home Loans Servicing, LP), a wholly-owned sub-
sidiary of the Corporation, received a letter, in its capacity as servicer on 115
private-label securitizations which was subsequently extended to 225 securi-
tizations. The letter asserted breaches of certain servicing obligations, in-
cluding an alleged failure to provide notice of breaches of representations and
warranties with respect to mortgage loans included in the transactions. See
Recent Events – Private-label Residential Mortgage-backed Securities Mat-
ters on page 39 for additional information.

See Complex Accounting Estimates – Representations and Warranties on
page 116 for information related to our estimated liability for representations
and warranties and corporate guarantees related to mortgage-related securi-
tizations. For additional information regarding representations and warranties
and disputes involving monolines, whole loan sales and private-label securi-
tizations, see Note 9 – Representations and Warranties Obligations and
Corporate Guarantees and Note 14 – Commitments and Contingencies to
the Consolidated Financial Statements.

Regulatory Matters
Refer to Item 1A. Risk Factors of this Annual Report on Form 10-K for
additional information on recent or proposed legislative and regulatory initi-
atives as well as other risks to which we are exposed, including among others,
enhanced regulatory scrutiny or potential legal liability as a result of the recent
financial crisis.

Financial Reform Act
On July 21, 2010, the Financial Reform Act was signed into law. The Financial
Reform Act enacts sweeping financial regulatory reform and will alter the way
in which we conduct certain businesses, increase our costs and reduce our
revenues.

Background
The Financial Reform Act mandates that the Federal Reserve limit debit card
interchange fees. Provisions in the legislation also ban banking organizations
from engaging in proprietary trading and restrict their sponsorship of, or
investing in, hedge funds and private equity funds, subject to limited excep-
tions. The Financial Reform Act increases regulation of the derivative markets
through measures that broaden the derivative instruments subject to regu-
lation and requires clearing and exchange trading as well as imposing addi-
tional capital and margin requirements for derivative market participants. The
Financial Reform Act also changes the methodology for calculating deposit
insurance assessments from the amount of an insured depository institu-
tion’s domestic deposits to its total assets minus tangible capital; provides
for resolution authority to establish a process to unwind large systemically
important financial companies; creates a new regulatory body to set require-
ments regarding the terms and conditions of consumer financial products and
expands the role of state regulators in enforcing consumer protection

requirements over banks; includes new minimum leverage and risk-based
capital requirements for large financial institutions; disqualifies trust pre-
ferred securities and other hybrid capital securities from Tier 1 capital; and
requires securitizers to retain a portion of the risk that would otherwise be
transferred into certain securitization transactions. Many of these provisions
have begun to be phased-in or will be phased-in over the next several months
or years and will be subject both to further rulemaking and the discretion of
applicable regulatory bodies.

The Financial Reform Act will continue to have a significant and negative
impact on our earnings through fee reductions, higher costs and new restrictions,
as well as reduce available capital. The Financial Reform Act may also continue to
have a material adverse impact on the value of certain assets and liabilities held
on our balance sheet. The ultimate impact of the Financial Reform Act on our
businesses and results of operations will depend on regulatory interpretation and
rulemaking, as well as the success of any of our actions to mitigate the negative
earnings impact of certain provisions. For information on the impact of the
Financial Reform Act on our credit ratings, see Liquidity Risk beginning on page 71.
The Financial Reform Act and other proposed regulatory initiatives may
also have an adverse impact on capital. During 2010, the Basel Committee on
Banking Supervision finalized rules on certain capital and liquidity measure-
ments. For additional information on these rules, see Regulatory Capital –
Regulatory Capital Changes beginning on page 68.

Debit Interchange Fees
The limits that the Financial Reform Act places on debit interchange fees will
significantly reduce our debit card interchange revenues. Interchange fees, or
“swipe” fees, are charges that merchants pay to us and other credit card
companies and card-issuing banks for processing electronic payment trans-
actions. The legislation, which provides the Federal Reserve with authority
over interchange fees received or charged by a card issuer, requires that fees
must be “reasonable and proportional” to the costs of processing such
transactions. The Federal Reserve considered the functional similarity be-
tween debit card transactions and traditional checking transactions and the
incremental costs incurred by a card issuer in processing a particular debit
card transaction. In addition, the legislation prohibits card issuers and net-
works from entering into exclusive arrangements requiring that debit card
transactions be processed on a single network or only two affiliated networks,
and allows merchants to determine transaction routing.

On December 16, 2010, the Federal Reserve issued a proposed rule that
would establish debit card interchange fee standards and prohibit network
exclusivity arrangements and routing restrictions. The Federal Reserve re-
quested comments on two alternative interchange fee standards that would
apply to all covered issuers: one based on each issuer’s costs, with a safe
harbor initially set at $0.07 per transaction and a cap initially set at $0.12 per
transaction; and the other a stand-alone cap initially set at $0.12 per trans-
action. The Federal Reserve also requested comment on possible frameworks
for an adjustment to the interchange fees to reflect certain issuer costs
associated with fraud prevention. If the Federal Reserve adopts either of
these proposed standards in the final rule, the maximum allowable inter-
change fee received by covered issuers for debit card transactions would be
more than 70 percent lower than the 2009 average once the new rule takes
effect on July 21, 2011. The proposed rule would also prohibit issuers and
networks from restricting the number of networks over which debit card
transactions may be processed. The Federal Reserve requested comment
on two alternative approaches: one alternative would require at least two
unaffiliated networks per debit card, and the other would require at least two
unaffiliated networks per debit card for each type of cardholder authorization
method (such as signature or PIN). Under both alternatives, the issuers and
networks would be prohibited from inhibiting a merchant’s ability to direct the

routing of debit card transactions over any network that the issuer enabled to
process them.

As previously announced on July 16, 2010, as a result of the Financial
Reform Act and its related rules and subject to final rulemaking over the next
year, we believe that our debit card revenue will be adversely impacted beginning
in the third quarter of 2011. Our consumer and small business card products,
including the debit card business, are part of an integrated platform within the
Global Card Services business segment. In 2010, our estimate of revenue loss
due to the debit card interchange fee standards to be adopted under the
Financial Reform Act was approximately $2.0 billion annually based on 2010
volumes. As a result, we recorded a non-tax deductible goodwill impairment
charge for Global Card Services of $10.4 billion in 2010. We have identified
other potential mitigation actions within Global Card Services, but they are in the
early stages of development and some of them may impact other segments. The
impairment charge, which is a non-cash item, had no impact on our reported
Tier 1 and tangible equity ratios. If the Federal Reserve sets the final interchange
fee standards at the lowest proposed fee alternative, as described above (i.e.,
$0.07 per transaction) the lower interchange revenue may result in additional
impairment of goodwill in Global Card Services. In view of the uncertainty with
model inputs including the final ruling, changes in the economic outlook and the
corresponding impact to revenues and asset quality, and the impacts of mit-
igation actions, it is not possible to estimate the amount or range of amounts of
additional goodwill impairment, if any, associated with changes to interchange
fee standards. For more information on goodwill and the impairment charge,
refer to Note 10 – Goodwill and Intangible Assets to the Consolidated Financial
Statements and Complex Accounting Estimates beginning on page 111.

Limitations on Certain Activities
We anticipate that the final regulations associated with the Financial Reform
Act will include limitations on certain activities, including limitations on the use
of a bank’s own capital for proprietary trading and sponsorship or investment
in hedge funds and private equity funds (Volcker Rule). Regulations imple-
menting the Volcker Rule are required to be in place by October 21, 2011, and
the Volcker Rule becomes effective twelve months after such rules are final or
on July 21, 2012, whichever is earlier. The Volcker Rule then gives banking
entities two years from the effective date (with opportunities for additional
extensions) to bring activities and investments into conformance. In antici-
pation of the adoption of the final regulations, we have begun winding down
our proprietary trading line of business. The ultimate impact of the Volcker
Rule or the winding down of this business, and the time it will take to comply or
complete, continues to remain uncertain. The final regulations issued may
impose additional operational and compliance costs on us.

Derivatives
The Financial Reform Act includes measures to broaden the scope of deriv-
ative instruments subject to regulation by requiring clearing and exchange
trading of certain derivatives, imposing new capital and margin requirements
for certain market participants and imposing position limits on certain
over-the-counter (OTC) derivatives. The Financial Reform Act grants the
U.S. Commodity Futures Trading Commission (CFTC) and the SEC substantial
new authority and requires numerous rulemakings by these agencies. Gen-
erally, the CFTC and SEC have until July 16, 2011 to promulgate the rule-
makings necessary to implement these regulations. The ultimate impact of
these derivatives regulations, and the time it will take to comply, continues to
remain uncertain. The final regulations will impose additional operational and
compliance costs on us and may require us to restructure certain businesses
and negatively impact our revenues and results of operations.

Bank of America 2010

FDIC Deposit Insurance Assessments
Since the financial crisis began several years ago, an increasing number of bank
failures has imposed significant costs on the FDIC in resolving those failures,
and the regulator’s deposit insurance fund has been depleted. In order to
maintain a strong funding position and restore reserve ratios of the deposit
insurance fund, the FDIC has increased, and may increase in the future,
assessment rates of insured institutions, including Bank of America.

Deposits placed at the U.S. Banks are insured by the FDIC, subject to
limits and conditions of applicable law and the FDIC’s regulations. Pursuant to
the Financial Reform Act, FDIC insurance coverage limits were permanently
increased to $250,000 per customer. The Financial Reform Act also provides
for unlimited FDIC insurance coverage for non-interest bearing demand de-
posit accounts for a two-year period beginning on December 31, 2010 and
ending on January 1, 2013. The FDIC administers the Deposit Insurance
Fund, and all insured depository institutions are required to pay assessments
to the FDIC that fund the Deposit Insurance Fund. The Financial Reform Act
changed the methodology for calculating deposit insurance assessments
from the amount of an insured depository institution’s domestic deposits to
its total assets minus tangible capital. On February 7, 2011 the FDIC issued a
new regulation implementing revisions to the assessment system mandated
by the Financial Reform Act. The new regulation will be effective April 1, 2011
and will be reflected in the June 30, 2011 FDIC fund balance and the invoices
for assessments due September 30, 2011. As a result of the new regula-
tions, we expect to incur higher annual deposit insurance assessments. We
have identified potential mitigation actions, but they are in the early stages of
development and we are not able to directly control the basis or the amount of
premiums that we are required to pay for FDIC insurance or for other fees or
institutions. Any future in-
assessment obligations imposed on financial
creases in required deposit insurance premiums or other bank industry fees
could have a significant adverse impact on our financial condition and results
of operations.

CARD Act
On May 22, 2009, the CARD Act was signed into law. The majority of the CARD
Act provisions became effective in February 2010. The CARD Act legislation
contains comprehensive credit card reform related to credit card industry
practices including significantly restricting banks’ ability to change interest
rates and assess fees to reflect individual consumer risk, changing the way
payments are applied and requiring changes to consumer credit card disclo-
sures. The provisions of the CARD Act negatively impacted net interest income
and card income during 2010, and are expected to negatively impact future
net interest income due to the restrictions on our ability to reprice credit cards
based on risk, and card income due to restrictions imposed on certain fees.
The 2010 full-year decrease in revenue was approximately $1.5 billion.

Regulation E
On November 12, 2009, the Federal Reserve issued amendments to Regula-
tion E which implements the Electronic Fund Transfer Act. The rules became
effective on July 1, 2010 for new customers and August 16, 2010 for existing
customers. These amendments limit the way we and other banks charge an
overdraft fee for non-recurring debit card transactions that overdraw a consum-
er’s account unless the consumer affirmatively consents to the bank’s payment
of overdrafts for those transactions. Under previously announced plans, we do
not offer customers the opportunity to opt-in to overdraft services related to non-
recurring debit card transactions. However, customers are able to opt-in on a
withdrawal-by-withdrawal basis to access cash through the Bank of America ATM
network where the bank is able to alert customers that the transaction may
overdraw their account and result in a fee if they choose to proceed. The impact
of Regulation E, which was in effect beginning in the third quarter and fully in
effect in the fourth quarter of 2010, and our overdraft policy changes, which

Bank of America 2010

were in effect for the full year of 2010, was a reduction in service charges during
2010 of approximately $1.7 billion. In 2011, the incremental reduction to
service charges related to Regulation E and overdraft policy changes is expected
to be approximately $1.1 billion, or a full-year impact of approximately $2.8 bil-
lion, net of identified mitigation action.

U.K. Corporate Income Tax Rate
On July 27, 2010, the U.K. government enacted a law change reducing the
corporate income tax rate by one percent effective for the 2011 U.K. tax
financial year beginning on April 1, 2011. While this rate reduction favorably
affects income tax expense on future U.K. earnings, it also required us to
remeasure our U.K. net deferred tax assets using the lower tax rate, which
resulted in a charge to income tax expense of $392 million in 2010. A future
rate reduction of one percent per year is generally expected to be enacted in
each of 2011, 2012 and 2013, which would result in a similar charge to
income tax expense of nearly $400 million during each of the three years. The
U.K. Treasury has asked for taxpayer views on whether the U.K. government
should alternatively enact the full remaining three-percent reduction entirely
during 2011, which would accelerate the possible charges into 2011 for a
total of approximately $1.1 billion.

Final Regulatory Guidance on Consolidation
On January 21, 2010, the Federal Reserve, Office of the Comptroller of the
Currency, FDIC and Office of Thrift Supervision (collectively, joint agencies)
issued a final rule regarding risk-based capital requirements related to the
impact of the adoption of new consolidation guidance. The impact on the
Corporation on January 1, 2010 due to the new consolidation guidance and
the final rule was an increase in risk-weighted assets of $21.3 billion and a
reduction in capital of $9.7 billion. The overall impact of the new consolidation
guidance and the final rule was a decrease in Tier 1 capital and Tier 1 common
ratios of 76 bps and 73 bps. For more information, see Balance Sheet
Overview – Impact of Adopting New Consolidation Guidance on page 33,
Capital Management beginning on page 67 and Liquidity Risk beginning on
page 71.

Payment Protection Insurance
In the U.K., the Corporation sells PPI through its Global Card Services busi-
ness to credit card customers and has previously sold this insurance to
consumer loan customers. In response to an elevated level of customer
complaints of misleading sales tactics across the industry, heightened media
coverage and pressure from consumer advocacy groups, the U.K. Financial
Services Authority (FSA) has investigated and raised concerns about the way
some companies have handled complaints relating to the sale of these
insurance policies. In August 2010, the FSA issued a policy statement on
the assessment and remediation of PPI claims which is applicable to the
Corporation’s U.K. consumer businesses and is intended to address con-
cerns among consumers and regulators regarding the handling of PPI com-
plaints across the industry. The policy statement sets standards for the sale
of PPI that apply to current and prior sales, and in the event a company does
not or did not comply with the standards, it is alleged that the insurance was
incorrectly sold, giving the customer rights to remedies. Given the new
regulatory guidance, in 2010, the Corporation had a liability of $630 million
based on its current claims history and an estimate of future claims that have
yet to be asserted against the Corporation. For additional information on PPI,
see Note 14 – Commitments and Contingencies to the Consolidated Financial
Statements – Payment Protection Insurance Claims Matter on page 200.

U.K. Bank Levy
On June 22, 2010, the U.K. government announced that it intended to
introduce an annual bank levy. Beginning in 2011, the bank levy will be payable

on the consolidated liabilities, subject to certain exclusions and offsets, of U.K.
group companies and U.K. branches of foreign banking groups as of each year-
end balance sheet date. As currently proposed, the bank levy rate for 2011 and
future years will be 0.075 percent per annum for certain short-term liabilities
with a rate of 0.0375 percent per annum for longer maturity liabilities and
certain deposits. The legislation is expected to be enacted in the third quarter
of 2011. We currently estimate that the cost of the U.K. bank levy will be
approximately $125 million annually beginning in 2011.

Regulatory Guidance on Collateral Dependent Loans
On February 23, 2010, regulators issued clarifying guidance, effective in the
first quarter of 2010, on modified consumer real estate loans that specifies
criteria required to demonstrate a borrower’s capacity to repay the modified
loan. In connection with this guidance, we reviewed our modified consumer
real estate loans and determined that a portion of these loans did not meet
the criteria and, therefore, were deemed collateral dependent. The guidance
requires that a modified loan deemed to be collateral dependent be written
down to its estimated collateral value even if that loan is performing. The
application of this guidance resulted in $1.0 billion of net charge-offs in 2010,
of which $822 million were home equity, $207 million were residential
mortgage and $9 million were discontinued real estate.

Making Home Affordable Program
On March 4, 2009, the U.S. Treasury provided details related to the $75 billion
Making Home Affordable program (MHA) which is focused on reducing the
number of foreclosures and making it easier for customers to refinance loans.
The MHA consists of the Home Affordable Modification Program (HAMP) which
provides guidelines on first-lien loan modifications, and the Home Affordable
Refinance Program (HARP) which provides guidelines for loan refinancing.

As part of the MHA program, on April 28, 2009, the U.S. government
announced intentions to create the second-lien modification program (2MP)
that is designed to reduce the monthly payments on qualifying home equity
loans and lines of credit under certain conditions, including completion of a
HAMP modification on the first mortgage on the property. This program
provides incentives to lenders to modify all eligible loans that fall under
the guidelines of this program. Additional clarification on government guide-
lines for the program was announced early in 2010. On April 8, 2010, we
began early implementation of the 2MP with the mailing of trial modification
offers to eligible home equity customers. We will modify eligible second liens
under this initiative regardless of whether the MHA modified “first lien” is
serviced by the Corporation or another participating servicer.

On April 5, 2010, we implemented the Home Affordable Foreclosure
Alternatives (HAFA) program, which is another addition to the HAMP that
assists borrowers with non-retention options, such as short sale or dee-
d-in-lieu options, instead of foreclosure. The HAFA program provides incen-
tives to lenders to assist all eligible borrowers that fall under the guidelines of
this program. Our first goal is to work with the borrower to determine if a loan
modification or other homeownership retention solution is available before
pursuing non-retention options such as short sales. Short sales are an
important option for homeowners who are facing financial difficulty and do
not have a viable option to remain in the home. HAFA’s short sale guidelines
are designed to streamline and standardize the process and will be compat-
ible with Bank of America’s new cooperative short sale program.

During 2010, 285,000 loan modifications were completed with a total
unpaid principal balance of $65.7 billion, including 109,000 loans with a total
unpaid principal amount of $25.5 billion that were converted from trial-period to
permanent modifications under the MHA, which include HAMP first-lien mod-
ifications and 2MP second-lien modifications. In addition, on March 26, 2010,
the U.S. government announced new changes to the MHA program guidelines
that include principal forgiveness options to the HAMP for a sub-segment of

qualified HAMP borrowers. The details around eligibility, forgiveness arrange-
ments and the incentive structures are still being finalized. However, we
implemented a forgiveness program on a subset of HAMP eligible products
under the National Home Retention Program (NHRP) in 2010.

In addition to the programs described above, we have implemented
several programs designed to help our customers. For information on these
programs, refer to Credit Risk Management beginning on page 75. We will
continue to help our customers address financial challenges through these
government programs and our own home retention programs.

Stress Tests
The Corporation has established management routines to periodically con-
duct stress tests to evaluate potential impacts to the Corporation under
hypothetical economic scenarios. These stress tests will facilitate our con-
tingency planning and management of capital and liquidity. These processes
were also used to conduct the recent secondary stress testing imposed by the
Federal Reserve and were incorporated into the Capital Plan that was sub-
mitted as part of this request, which included a proposed modest increase in
our common dividend in the second half of 2011. The results of these stress
tests may influence bank regulatory supervisory requirements concerning the
Corporation and may impact the amount or timing of dividends or distributions
to the Corporation’s stockholders. For additional information, see Capital
Management beginning on page 67 and Liquidity Risk beginning on page 71.

Other Matters
The Corporation has established guidelines and policies for managing capital
across its subsidiaries. The guidance for the Corporation’s subsidiaries with
regulatory capital requirements, including branch operations of banking sub-
sidiaries, requires each entity to maintain satisfactory capital levels. This
includes setting internal capital targets for the U.S. bank subsidiaries to
exceed “well capitalized” levels.

The U.K. has adopted increased capital and liquidity requirements for local
financial institutions, including regulated U.K. subsidiaries of non-U.K. bank
holding companies and other financial institutions as well as branches of non-
U.K. banks located in the U.K. In addition, the U.K. has proposed the creation
and production of recovery and resolution plans (commonly referred to as
living wills) by such entities. We are currently monitoring the impact of these
initiatives.

Managing Risk

Overview
Risk is inherent in every activity that we undertake. Our business exposes us
to strategic, credit, market, liquidity, compliance, operational and reputational
risk. We must manage these risks to maximize our long-term results by
ensuring the integrity of our assets and the quality of our earnings.

Strategic risk is the risk that results from adverse business decisions,
ineffective or inappropriate business plans, or failure to respond to changes
in the competitive environment, business cycles, customer preferences,
product obsolescence, regulatory environment, business strategy execution,
and/or other inherent risks of the business including reputational risk. 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. Liquidity risk is the inability to meet contractual
and contingent financial obligations, on- or off-balance sheet, as they come
due. Compliance risk is the risk that arises from the failure to adhere to laws,
rules, regulations, or internal policies and procedures. Operational risk is the
risk of loss resulting from inadequate or failed internal processes, people and
systems, or external events. Reputational risk is the potential that negative

Bank of America 2010

publicity regarding an organization’s conduct or business practices will ad-
versely affect its profitability, operations or customer base, or require costly
litigation or other measures. Reputational risk is evaluated within all of the risk
categories and throughout the risk management process, and as such is not
discussed separately herein. The following sections, Strategic Risk Manage-
ment beginning on page 66, Capital Management beginning on page 67,
Liquidity Risk beginning on page 71, Credit Risk Management beginning on
page 75, Market Risk Management beginning on page 104, Compliance Risk
Management on page 110 and Operational Risk Management beginning on
page 110, address in more detail the specific procedures, measures and
analyses of the major categories of risk that we manage.

In choosing when and how to take risks, we evaluate our capacity for risk
and seek to protect our brand and reputation, our financial flexibility, the value
of our assets and the strategic potential of our Corporation. We intend to
maintain a strong and flexible financial position that will allow us to success-
fully weather challenging economic times and take advantage of opportunities
to grow. We also intend to focus on maintaining our relevance and value to
customers, associates and shareholders. To achieve these objectives, we
have built a comprehensive risk management culture and have implemented
governance and control measures to maintain that culture.

Our risk management infrastructure is continually evolving to meet the
heightened challenges posed by the increased complexity of the financial
services industry and markets, by our increased size and global footprint, and
by the financial crisis. We have a defined risk framework and clearly articu-
lated risk appetite which is approved annually by the Corporation’s Board of
Directors (the Board).

We take a comprehensive approach to risk management. Risk manage-
ment planning is fully integrated with strategic, financial and customer/client
planning so that goals and responsibilities are aligned across the organiza-
tion. Risk is managed in a systematic manner by focusing on the Corporation
as a whole as well as managing risk across the enterprise and within individual
business units, products, services and transactions, and across all geo-
graphic locations. We maintain a governance structure that delineates the
responsibilities for risk management activities, as well as governance and
oversight of those activities, by executive management and the Board.

Executive management assesses, and the Board oversees, the risk-ad-
justed returns of each business segment through review and approval of
strategic and financial operating plans. By allocating economic capital to and
establishing a risk appetite for a business segment, we seek to effectively
manage the ability to take on risk. Economic capital is assigned to each
business segment using a risk-adjusted methodology incorporating each seg-
ment’s stand-alone credit, market, interest rate and operational risk compo-
nents, and is used to measure risk-adjusted returns. Businesses operate within
their credit, market, compliance and operational risk standards and limits in
order to adhere to the risk appetite. These limits are based on analyses of risk
and reward in each line of business, and executive management is responsible
for tracking and reporting performance measurements as well as any excep-
tions to guidelines or limits. The Board monitors financial performance, exe-
cution of the strategic and financial operating plans, compliance with the risk
appetite and the adequacy of internal controls through its committees.

On December 14, 2010, the Board completed its annual review and
approval of the Risk Framework and the Risk Appetite Statement for the
Corporation. The Risk Framework defines the accountability of the Corporation
and its associates and the Risk Appetite Statement defines the parameters
under which we will take risk. Both documents are intended to enable us to
maximize our long-term results and ensure the integrity of our assets and the
quality of our earnings. The Risk Framework is designed to be used by our
associates to understand risk management activities, including their individ-
ual roles and accountabilities. It also defines how risk management is inte-
grated into our core business processes, and it defines the risk management
including management’s involvement. The risk
governance structure,

Bank of America 2010

management responsibilities of the lines of business, governance and control
functions, and Corporate Audit are also clearly defined, and reflects how the
Board-approved risk appetite influences business and risk strategy. The risk
management process contains four elements: identify and measure risk,
mitigate and control risk, monitor and test risk, and report and review risk, and
is applied across all business activities to enable an integrated and compre-
hensive review of risk consistent with the Board’s Risk Appetite Statement.

Risk Management Processes and Methods
To support our corporate goals and objectives, risk appetite, and business and
risk strategies, we maintain a governance structure that delineates the respon-
sibilities for risk management activities, as well as governance and oversight of
those activities, by management and the Board. All associates have account-
ability for risk management. Each associate’s risk management responsibilities
falls into one of three major categories: lines of business, governance and control
(Global Risk Management and enterprise control functions) and Corporate Audit.
Line of business managers and associates are accountable for identifying,
managing and escalating attention, as appropriate, to all risks in their busi-
ness units, including existing and emerging risks. Line of business managers
must ensure that their business activities are conducted within the risk
appetite defined by management and approved by the Board. The limits
and controls for each business must be consistent with the Risk Appetite
Statement. Line of business associates in client and customer facing busi-
nesses are responsible for day-to-day business activities, including develop-
ing and delivering profitable products and services, fulfilling customer re-
quests and maintaining desirable customer relationships. These associates
are accountable for conducting their daily work in accordance with policies and
procedures. It is the responsibility of each associate to protect the Corpora-
tion and defend the interests of the shareholders.

Governance and control functions are comprised of Global Risk Manage-
ment and the enterprise control functions. Global Risk Management is led by
the Chief Risk Officer (CRO). The CRO leads senior management in managing
risk, is independent from the Corporation’s lines of business and enterprise
control functions, and maintains sufficient autonomy to develop and imple-
ment meaningful risk management measures. This position serves to protect
the Corporation and its shareholders. The CRO reports to the Chief Executive
Officer (CEO) and is the management team lead or a participant in Board-level
risk governance committees. The CRO has the mandate to ensure that
appropriate risk management practices are in place, effective and consistent
with our overall business strategy and risk appetite. Global Risk Management
is comprised of two types of risk teams, Enterprise Risk Teams and inde-
pendent line of business risk teams, which report to the CRO and are
independent from the lines of business and enterprise control functions.

Enterprise Risk Teams are responsible for setting and establishing enter-
prise policies, programs and standards, assessing program adherence, pro-
viding enterprise-level risk oversight, and reporting and monitoring for sys-
temic and emerging risk issues. In addition, the Enterprise Risk Teams are
responsible for monitoring and ensuring that risk limits are reasonable and
consistent with the risk appetite. These risk teams also carry out risk-based
oversight of the enterprise control functions.

Independent line of business risk teams are responsible for establishing
policies, limits, standards, controls, metrics and thresholds within the defined
corporate standards for the lines of business to which they are aligned. The
independent line of business risk teams are responsible for ensuring that risk
limits and standards are reasonable and consistent with the risk appetite.
Enterprise control functions are independent of the lines of business and
have risk governance and control responsibilities for enterprise programs. In
this role, they are responsible for setting policies, standards and limits;
providing risk reporting; monitoring for systemic risk issues including existing,
emerging and reputational; and implementing procedures and controls at the

enterprise and line of business levels for their respective control functions.
Enterprise control functions consist of the Chief Financial Officer group, Global
Technology and Operations, Global Human Resources, Global Marketing and
Corporate Affairs, and Legal.

The Corporate Audit function and the Corporate General Auditor maintain
independence from the lines of business and governance and control func-
tions by reporting directly to the Audit Committee of the Board. Corporate
Audit provides independent assessment and validation through testing of key
processes and controls across the Corporation. Corporate Audit provides an
independent assessment of the Corporation’s management and internal
control systems. Corporate Audit activities are designed to provide reason-
able 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 the Corporation’s
policies, standards, procedures, and applicable laws and regulations.

To ensure that the Corporation’s goals and objectives, risk appetite, and
business and risk strategies are achieved, we utilize a risk management
process that is applied across the execution of all business activities. This risk
management process, which is an integral part of our Risk Framework,
enables the Corporation to review risk in an integrated and comprehensive
manner across all risk categories and make strategic and business decisions
based on that comprehensive view. Corporate goals and objectives and our
risk appetite are established by management, approved by the Board, and are
key drivers to setting business and risk strategy.

One of the key tools of the risk management process is the use of Risk and
Control Self Assessments (RCSAs). RCSAs are the primary method for facili-
tating the management of Business Environment and Internal Control Factor
(BEICF) data. The end-to-end RCSA process incorporates risk identification and
assessment of the control environment; monitoring, reporting and escalating
risk; quality assurance and data validation; and integration with the risk appe-
tite. The RCSA process also incorporates documentation by either the line of
business or enterprise control function of the business environment, risks,
controls, and monitoring and reporting. This results in a comprehensive risk
management view that enables understanding of and action on operational
risks and controls for all of our processes, products, activities and systems.

The formal processes used to manage risk represent a part 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 themselves with the highest integrity in the
delivery of our products or services to our customers. We instill a strong and
comprehensive risk management culture through communications, training,
policies, procedures, and organizational roles and responsibilities. Additionally,
we continue to strengthen the link between the associate performance man-
agement process and individual compensation to encourage associates to work
toward enterprise-wide risk goals.

Board Oversight of Risk
We maintain a governance structure that delineates the responsibilities for
risk management activities, as well as governance and oversight of those
activities, by management and the Board. The majority of our directors,
including the Chairman of the Board, are considered independent and meet
the requirements of our Director Independence Categorical Standards and the
criteria for independence in the listing standards of the New York Stock
Exchange. Also, all members of the Audit and Enterprise Risk Committees
are independent and all members of the Credit Committee are non-manage-
ment directors.

The Board is responsible for the oversight of the management of the
Corporation. As part of its oversight, the Board oversees the management of
the various types of risk faced by the Corporation. Our corporate risk man-
agement governance structure is designed to align the interests of the Board
and management with those of our stockholders and to foster integrity
throughout the Corporation.

The Board, under the leadership of its independent Chairman, oversees
the management of the Corporation through the governance structure, which
includes Board committees and management committees. The Board main-
tains standing committees to oversee risk. The committees with the majority
of risk oversight responsibilities include the Credit, Enterprise Risk and Audit
Committees.

Bank of America 2010

The figure below illustrates the inter-relationship between the Board, Board level committees and management level committees with the majority of risk

oversight responsibilities for the Corporation.

Board of Directors

Board Level
Committees

Credit Committee

Enterprise Risk
Committee

Audit Committee

Management
Level
Committees

Credit Risk
Committee

Asset Liability and
Market Risk Committee

Operational Risk
Committee (1)

Allowance for Credit
Losses Committee

Risk Oversight
Committee

Risk Rating Executive
Oversight Committee

Global Markets Risk
Committee

Ethics Oversight
Committee

Operational and
Compliance Risk
Committee

Regional Risk
Committee

Equity Risk Governance
Committee

International Governance
and Control Committee

Enterprise Credit Risk
Policy Committee

Enterprise Portfolio
Strategies Steering
Committee

Disclosure Committee (2)

(1) Compliance Risk activities, including Ethics Oversight, are required to be reviewed by the Audit Committee and Operational Risk activities are required to be reviewed by the Enterprise Risk Committee.
(2) The Disclosure Committee assists the CEO and CFO in fulfilling their responsibility for the accuracy and timeliness of the Corporation’s disclosures and reports the results of the process to the Audit Committee.

The Credit Committee is responsible for oversight of senior manage-
ment’s identification and management of the Corporation’s credit exposures
on an enterprise-wide basis, as well as the Corporation’s responses to trends
affecting those exposures. The Credit Committee is also responsible for
oversight of senior management’s actions relating to the adequacy of the
allowance for credit losses and the Corporation’s credit-related policies.

The Enterprise Risk Committee is responsible for exercising oversight of
senior management’s responsibility to identify the material risks facing the
Corporation and oversight of senior management’s planning for and manage-
ment of the Corporation’s material risks, including market risk, interest rate risk,
liquidity risk, operational risk and reputational risk. The Enterprise Risk Com-
mittee also oversees senior management’s establishment of policies and
guidelines articulating the Corporation’s risk tolerances for material categories
of risk, the performance and functioning of the Corporation’s overall risk
management function, and senior management’s establishment of appropriate
systems that support control of market risk, interest rate risk and liquidity risk.
The Audit Committee is responsible for assisting the Board in overseeing
the integrity of the Corporation’s Consolidated Financial Statements and the
effectiveness of the Corporation’s system of internal controls and policies
and procedures for managing and assessing risk, including compliance with
legal and regulatory requirements. The Audit Committee also provides ap-
proval and direct oversight of the independent registered public accounting
firm, including such firm’s assessment of management’s assertion of the
effectiveness of the Corporation’s disclosure controls and procedures and

the Corporation’s internal control over financial reporting; and oversight of
such accountant’s appointment, compensation, qualifications and indepen-
dence. The Audit Committee also oversees the corporate audit function.

The Credit, Enterprise Risk and Audit Committees provide enterprise-wide
oversight of the Corporation’s management and handling of risk. Each of
these three committees reports regularly to the Board on risk-related matters
within its responsibilities and together they provide the Board with integrated,
thorough insight about our management of strategic, credit, market, liquidity,
compliance, legal, operational and reputational risks. At meetings of each
Board committee and our Board, directors receive updates from management
regarding all aspects of enterprise risk management, including our perfor-
mance against our identified risk appetite.

Executive management develops for Board approval the Corporation’s
Risk Framework, Risk Appetite Statement, and strategic and financial oper-
ating plans. Management and the Board, through the Credit, Enterprise Risk
and Audit Committees, monitor financial performance, execution of the
strategic and financial operating plans, compliance with the risk appetite,
and the adequacy of internal controls.

Strategic Risk Management
Strategic risk is embedded in every line of business and is one of the major risk
categories along with credit, market, liquidity, compliance, operational and
reputational risks. It is the risk that results from adverse business decisions,

Bank of America 2010

ineffective or inappropriate business plans, or failure to respond to changes in
the competitive environment, business cycles, customer preferences, product
obsolescence, regulatory environment, business strategy execution and/or
other inherent risks of the business including reputational risk. In the financial
services industry, strategic risk is high due to changing customer, competitive
and regulatory environments. Our appetite for strategic risk is assessed within
the context of the strategic plan, with strategic risks selectively and carefully
considered in the context of the evolving marketplace. Strategic risk is man-
aged in the context of our overall financial condition and assessed, managed
and acted on by the Chief Executive Officer and executive management team.
Significant strategic actions, such as material acquisitions or capital actions,
are reviewed and approved by the Board.

Executive management and the Board approve a strategic plan every two
to three years. Annually, executive management develops a financial operat-
ing plan and the Board reviews and approves the plan. With oversight by the
Board, executive management ensures that the plans are consistent with the
Corporation’s strategic plan, core operating tenets and risk appetite. The
following are assessed in their reviews: forecasted earnings and returns on
capital, the current risk profile, current capital and liquidity requirements,
staffing levels and changes required to support the plan, stress testing
results, and other qualitative factors such as market growth rates and peer
analysis. With oversight by the Board, executive management performs
similar analyses throughout the year, and defines changes to the financial
forecast or the risk, capital or liquidity positions as deemed appropriate to
balance and optimize between achieving the targeted risk appetite and
shareholder returns and maintaining the targeted financial strength.

We use proprietary models to measure the capital requirements for credit,
country, market, operational and strategic risks. The economic capital as-
signed to each line of business is based on its unique risk exposures. With
oversight by the Board, executive management assesses the risk-adjusted
returns of each business in approving strategic and financial operating plans.
The businesses use economic capital to define business strategies, price
products and transactions, and evaluate client profitability.

Capital Management
Bank of America manages its capital position to maintain a strong and flexible
financial position in order to perform through economic cycles, take advan-
tage of organic growth opportunities, maintain ready access to financial
markets, remain a source of financial strength for its subsidiaries, and return
capital to its shareholders as appropriate.

To determine the appropriate level of capital, we assess the results of our
Internal Capital Adequacy Assessment Process (ICAAP), the current economic
and market environment, and feedback from investors, ratings agencies and
regulators. Based upon this analysis we set capital guidelines for Tier 1
common capital and Tier 1 capital to ensure we can maintain an adequate
capital position in a severe adverse economic scenario. We also target to
maintain capital in excess of the capital required per our economic capital
measurement process (see Economic Capital on page 70). Management and
the Board annually approve a comprehensive Capital Plan which documents
the ICAAP and related results, analysis and support for the capital guidelines,
and planned capital actions and capital adequacy assessment.

The ICAAP incorporates capital forecasts, stress test results, economic
capital, qualitative risk assessments and assessment of regulatory changes.
We generate monthly regulatory capital and economic capital forecasts that are
aligned to the most recent earnings, balance sheet and risk forecasts. We utilize
quarterly stress tests to assess the potential impacts to earnings, capital and
liquidity for a variety of economic stress scenarios. We perform qualitative risk
assessments to identify and assess material risks not fully captured in the
forecasts, stress tests or economic capital. Given the significant proposed
regulatory capital changes, we also regularly assess the potential capital

impacts and monitor associated mitigation actions. Management continuously
assesses ICAAP results and provides documented quarterly assessments of
the adequacy of the capital guidelines and capital position to the Board.

Capital management is integrated into the risk and governance pro-
cesses, as capital is a key consideration in development of the strategic
plan, risk appetite and risk limits. Economic capital is allocated to each
business unit and used to perform risk-adjusted return analysis at the busi-
ness unit, client relationship and transaction level.

Regulatory Capital
As a financial services holding company, we are subject to the risk-based capital
guidelines (Basel I) issued by the Federal Reserve. At December 31, 2010, we
operated banking activities primarily under two charters: Bank of America, N.A.
and FIA Card Services, N.A. which are subject to the risk-based capital guide-
lines issued by the Office of the Comptroller of the Currency (OCC). Under these
guidelines, the Corporation and its affiliated banking entities measure capital
adequacy based on Tier 1 common capital, Tier 1 capital and Total capital (Tier 1
plus Tier 2 capital). Capital ratios are calculated by dividing each capital amount
is divided by adjusted
by risk-weighted assets. Additionally, Tier 1 capital
quarterly average total assets to derive the Tier 1 leverage ratio.

Tier 1 capital is calculated as the sum of “core capital elements.” The
predominate components of core capital elements are qualifying common
stockholders’ equity, any CES and qualifying noncumulative perpetual preferred
stock. Also included in Tier 1 capital are qualifying trust preferred capital debt
securities (Trust Securities), hybrid securities and qualifying non-controlling
interest in subsidiaries which are subject to the rules governing “restricted
core capital elements.” Goodwill, other disallowed intangible assets, disallowed
deferred tax assets and the cumulative changes in fair value of all financial
liabilities accounted for under a fair value option that are included in retained
earnings and are attributable to changes in the company’s own creditworthiness
are deducted from the sum of the core capital elements. Total capital is Tier 1
plus supplementary Tier 2 capital elements such as qualifying subordinated
debt, a limited portion of the allowance for loan and lease losses, and a portion
of net unrealized gains on AFS marketable equity securities. Tier 1 common
capital is not an official regulatory ratio, but was introduced by the Federal
Reserve during the Supervisory Capital Assessment Program in 2009. Tier 1
common capital is Tier 1 capital less preferred stock, Trust Securities, hybrid
securities and qualifying non-controlling interest in subsidiaries.

Risk-weighted assets are calculated for credit risk for all on- and off-balance
sheet credit exposures and for market risk on trading assets and liabilities,
including derivative exposures. Credit risk risk-weighted assets are calculated by
assigning a prescribed risk-weight to all on-balance sheet assets and to the
credit equivalent amount of certain off-balance sheet exposures. The risk-weight
is defined in the regulatory rules based upon the obligor or guarantor type and
collateral if applicable. Off-balance sheet exposures include financial guaran-
tees, unfunded lending commitments, letters of credit and derivatives. Market
risk risk-weighted assets are calculated using risk models for the trading
account positions, including all foreign exchange and commodity positions
regardless of the applicable accounting guidance. Under Basel I there are no
risk-weighted assets calculated for operational risk. Any assets that are a direct
deduction from the computation of capital are excluded from risk-weighted
assets and adjusted average total assets consistent with regulatory guidance.
For additional information on these and other regulatory requirements,
see Note 18 – Regulatory Requirements and Restrictions to the Consolidated
Financial Statements.

Capital Composition and Ratios
On January 21, 2010, the joint agencies issued a final rule regarding the
impact of the new consolidation guidance on risk-based capital. The incre-
mental impact on January 1, 2010 was an increase in assets of $100.4 billion
and risk-weighted assets of $21.3 billion and a reduction in Tier 1 common

Bank of America 2010

capital and Tier 1 capital of $9.7 billion. The overall effect of the new
consolidation guidance and the final rule was a decrease in Tier 1 capital
and Tier 1 common capital ratios of 76 bps and 73 bps on January 1, 2010.
We continued to strengthen capital in 2010 as evidenced by the $4.7 billion
growth in Tier 1 common capital or $14.4 billion before the impact of the new
consolidation guidance. The increase was driven by the $10.2 billion in earnings
generated in 2010, excluding the goodwill impairment charges of $12.4 billion.
Tier 1 capital and Total capital grew by $3.2 billion and $3.5 billion in 2010 or by
$13.0 billion and $12.9 billion when adjusted for the impact of the new
consolidation guidance.

Risk-weighted assets declined by $87 billion in 2010 including the impact
of the new consolidation guidance. The risk-weighted asset reduction is
consistent with our continued efforts to reduce non-core assets and legacy
loan portfolios.

As a result of the increased capital position and reduced risk-weighted
assets, the Tier 1 common capital ratio increased 79 bps to 8.60 percent, the
Tier 1 capital ratio increased 84 bps to 11.24 percent and Total capital
increased 111 bps to 15.77 percent in 2010. When adjusted for the impacts
of the new consolidation guidance, the growth in the ratios was more
significant.

The Tier 1 leverage ratio increased 33 bps to 7.21 percent, reflecting both
the strengthening of the capital position previously mentioned and a $62 bil-
lion reduction in adjusted quarterly average total assets including the impact
of the new consolidation guidance.

The $12.4 billion goodwill impairment charges recognized during 2010 did

not impact the regulatory capital ratios.

The table below presents the Corporation’s capital ratios and related

information at December 31, 2010 and 2009.

Table 12 Regulatory Capital

December 31

(Dollars in billions)

2010

Tier 1 common equity ratio
Tier 1 capital ratio
Total capital ratio
Tier 1 leverage ratio
Risk-weighted assets
Adjusted quarterly average total assets (1)
(1) Reflects adjusted average total assets for the three months ended December 31, 2010 and 2009.

11.24
15.77
7.21
$1,456
2,270

8.60%

10.40
14.66
6.88
$1,543
2,332

2009

7.81%

The table below presents the capital composition at December 31, 2010 and 2009.

Table 13 Capital Composition

(Dollars in millions)

Total common shareholders’ equity
Goodwill
Nonqualifying intangible assets (includes core deposit intangibles, affinity relationships, customer relationships and other intangibles)
Net unrealized gains or losses on AFS debt and marketable equity securities and net losses on derivatives recorded in accumulated OCI, net-of-tax
Unamortized net periodic benefit costs recorded in accumulated OCI, net-of-tax
Exclusion of fair value adjustment related to structured notes (1)
Common Equivalent Securities
Disallowed deferred tax asset
Other

Total Tier 1 common capital

Preferred stock
Trust preferred securities
Noncontrolling interest

Total Tier 1 capital

Long-term debt qualifying as Tier 2 capital
Allowance for loan and lease losses
Reserve for unfunded lending commitments
Allowance for loan and lease losses exceeding 1.25 percent of risk-weighted assets
45 percent of the pre-tax net unrealized gains on AFS marketable equity securities
Other

Total capital

December 31

2010

$211,686
(73,861)
(6,846)
(4,137)
3,947
2,984
–
(8,663)
29

125,139

16,562
21,451
474

163,626

41,270
41,885
1,188
(24,690)
4,777
1,538

2009

$194,236
(86,314)
(8,299)
1,034
4,092
2,981
19,290
(7,080)
454

120,394

17,964
21,448
582

160,388

43,284
37,200
1,487
(18,721)
1,525
907

$229,594

$226,070

(1) Represents loss on structured notes, net-of-tax, that is excluded from Tier 1 common capital, Tier 1 capital and Total capital for regulatory purposes.

Regulatory Capital Changes
In June 2004, the Basel II Accord was published by the Basel Committee on
Banking Supervision (the Basel Committee) with the intent of more closely
aligning regulatory capital requirements with underlying risks, similar to
economic capital. While economic capital is measured to cover unexpected
losses, we also manage regulatory capital to adhere to regulatory standards
of capital adequacy.

The Basel II Final Rule (Basel II) which was published in December 2007
established requirements for U.S. implementation of the Basel Committee’s
Basel II Accord and provides detailed requirements for a new regulatory
capital framework. This regulatory capital framework includes requirements
related to credit and operational risk (Pillar 1), supervisory requirements

(Pillar 2) and disclosure requirements (Pillar 3). We began the Basel II parallel
qualification period on April 1, 2010.

Designated U.S. financial institutions are required to complete a minimum
parallel qualification period under Basel II of four consecutive successful
quarters before receiving regulatory approval to report regulatory capital
using the Basel II methodology and exiting the parallel period. During the
parallel period, the resulting capital calculations under both the current risk-
based capital rules (Basel I) and Basel II will be reported to the financial
institutions’ regulatory supervisors. Once the parallel period is successfully
completed and we have received approval to exit parallel, we will transition to
Basel II as the methodology for calculating regulatory capital. Basel II provides
for a three-year transitional floor subsequent to exiting parallel, after which
Basel I may be discontinued. The Collins Amendment within the Financial

Bank of America 2010

Reform Act and the U.S. banking regulators’ subsequent Notice of Proposed
Rulemaking published by the Federal Reserve on December 14, 2010 pro-
pose however that the current three-year transitional floors under Basel II be
replaced with a permanent risk based capital floor as defined under Basel I.
On December 16, 2010, U.S. regulators issued a Notice of Proposed
Rulemaking on the Risk-Based Capital Guidelines for Market Risk (Market
Risk Rules), reflecting partial adoption of the Basel Committee’s July 2009
consultative document on the topic. We anticipate U.S. regulators will adopt
the Market Risk Rules in mid-2011. This change is expected to significantly
increase the capital requirements for our trading assets and liabilities,
including derivatives exposures which meet the definition established by
the regulatory agencies. We continue to evaluate the capital impact of the
proposed rules and currently anticipate being fully compliant with any final
rules by the projected implementation date of year-end 2011.

On December 16, 2010, the Basel Committee issued “Basel III: A global
regulatory framework for more resilient banks and banking systems” (Basel
III), proposing a January 2013 implementation date for Basel III. If imple-
mented by U.S. regulators as proposed, Basel III could significantly increase
our capital requirements. Basel III and the Financial Reform Act propose the
disqualification of trust preferred securities from Tier 1 capital, with the
Financial Reform Act proposing the disqualification be phased in from
2013 to 2015. Basel III also proposes the deduction of certain assets from
capital (deferred tax assets, MSRs, investments in financial firms and pen-
sion assets, among others, within prescribed limitations), the inclusion of
other comprehensive income in capital, increased capital for counterparty
credit risk, and new minimum capital and buffer requirements. The phase-in
period for the capital deductions is proposed to occur in 20 percent incre-
ments from 2014 through 2018 with full implementation by December 31,
2018. The increase in capital requirements for counterparty credit risk is
proposed to be effective January 2013. The phase-in period for the new
minimum capital requirements and related buffers is proposed to occur
between 2013 and 2019. U.S. regulators are expected to begin the final
rulemaking processes for Basel III in early 2011 and have indicated a goal to
adopt final rules by year-end 2011 or early 2012. For additional information on
our MSRs, refer to Note 25 – Mortgage Servicing Rights to the Consolidated
Financial Statements. For additional information on deferred tax assets, refer
to Note 21 – Income Taxes to the Consolidated Financial Statements.

If Basel III is implemented in the U.S. consistent with Basel Committee
rules, beginning in January 2013, we would be required to maintain minimum
capital ratio requirements of 6.0 percent for Tier 1 capital and 8.0 percent for
Total capital. Basel III also includes a proposed minimum requirement for
common equity Tier 1 capital of 3.5 percent beginning in 2013 which would

increase to 4.5 percent in 2015. Basel III also includes three capital buffers
which would be phased in over time and impact all three capital ratios. These
buffers include a capital conservation buffer that would start at 0.63 percent
in 2016 and increase to 2.5 percent in 2019. Thus, the minimum capital ratio
requirements including the capital conservation buffer in 2019 would be
7.0 percent for common equity Tier 1 capital, 8.5 percent for Tier 1 capital and
10.5 percent for Total capital. If ratios fall below the minimum requirement
plus the capital conservation buffer, such as 10.5 percent for Total capital, an
institution would be required to restrict dividends, share repurchases and
discretionary bonuses. Additionally, Basel III also includes a countercyclical
buffer of up to 2.5 percent that regulators could require in periods of excess
credit growth. The countercyclical buffer is to be comprised of loss-absorbing
capital, such as common equity, and is meant to retain additional capital
during periods of excess credit growth providing incremental protection in the
event of a material market downturn. The ratios presented above do not
include the third buffer requirement for systemically important financial
institutions, which the Basel Committee continues to assess and has not
yet quantified. The countercyclical and systemic buffers are scheduled to be
phased in from 2013 through 2019. U.S. regulators are expected to begin the
rulemaking processes for Basel III in early 2011 and have indicated a goal to
adopt final rules by the end of 2011 or early 2012.

These regulatory changes also require approval by the agencies of ana-
lytical models used as part of our capital measurement and assessment,
especially in the case of more complex models. If these more complex models
are not approved, it could require financial institutions to hold additional
capital, which in some cases could be significant.

We expect to maintain a Tier 1 common capital ratio in excess of eight per-
cent as the regulatory rule changes are implemented without needing to raise
new equity capital. We have made the implementation and mitigation of these
regulatory changes a strategic priority. We also note there remains significant
uncertainty on the final impacts as the U.S. has issued final rules only for
Basel II and a Notice of Proposal Rulemaking for the Market Risk Rules at this
time. Impacts may change as the U.S. finalizes rules and the regulatory
agencies interpret the final rules for Basel III during the implementation
process.

Bank of America, N.A. and FIA Card Services, N.A.
Regulatory Capital
The table below presents regulatory capital information for Bank of America
N.A. and FIA Card Services, N.A. at December 31, 2010 and 2009. The
goodwill impairment charges recognized in 2010 did not impact the regulatory
capital ratios.

Table 14 Bank of America, N.A. and FIA Card Services, N.A. Regulatory Capital

(Dollars in millions)

Tier 1

Bank of America, N.A.
FIA Card Services, N.A.

Total

Bank of America, N.A.
FIA Card Services, N.A.

Tier 1 leverage

Bank of America, N.A.
FIA Card Services, N.A.

December 31

2010

2009

Ratio

Amount

Ratio

Amount

10.78%
15.30

$114,345
25,589

10.30%
15.21

$111,916
28,831

14.26
16.94

7.83
13.21

151,255
28,343

114,345
25,589

13.76
17.01

7.38
23.09

149,528
32,244

111,916
28,831

The Bank of America, N.A. Tier 1 and Total capital ratio increased 48 bps to
10.78 percent and 50 bps to 14.26 percent at December 31, 2010 compared
to December 31, 2009. The increase in the ratios was driven by $11.1 billion

in earnings generated in 2010 combined with a $26.4 billion decline in risk-
weighted assets. The Tier 1 leverage ratio increased 45 bps to 7.83 percent
benefiting from the improvement in Tier 1 capital combined with a $56.0 billion

Bank of America 2010

decrease in adjusted quarterly average total assets. The reduction in risk-
weighted assets and adjusted quarterly average total assets is consistent
with our continued efforts to reduce non-core assets and legacy loan
portfolios.

The FIA Card Services, N.A. Tier 1 capital ratio increased 9 bps to
15.30 percent and Total capital ratio decreased 7 bps to 16.94 percent
compared to December 31, 2009. The increase in Tier 1 capital ratio was due
to a decrease in risk-weighted assets of $22.3 billion. The decrease in the
Total capital ratio was due to a reduction in Tier 2 capital resulting from a
$390 million decrease in qualifying term subordinated debt combined with a
net increase in the allowance for credit losses limitation of $269 million. The
Tier 1 leverage ratio decreased to 13.21 percent at December 31, 2010 from
23.09 percent at December 31, 2009 due to a $68.9 billion increase in
adjusted quarterly average total assets. The increase in adjusted quarterly
average total assets was the result of the adoption of new consolidation
guidance.

Broker/Dealer Regulatory Capital
Bank of America’s principal U.S. broker/dealer subsidiaries are Merrill Lynch,
Pierce, Fenner & Smith (MLPF&S) and Merrill Lynch Professional Clearing Corp
(MLPCC). MLPCC is a subsidiary of MLPF&S and provides clearing and
settlement services. Both entities are subject to the net capital requirements
of SEC Rule 15c3-1. Both entities are also registered as futures commission
merchants and subject to the Commodity Futures Trading Commission (CFTC)
Regulation 1.17.

MLPF&S has elected to compute the minimum capital requirement in
accordance with the “Alternative Net Capital Requirement” as permitted by
SEC Rule 15c3-1. At December 31, 2010, MLPF&S’s regulatory net capital as
defined by Rule 15c3-1 was $9.8 billion and exceeded the minimum require-
ment of $736 million by $9.1 billion. MLPCC’s net capital of $2.3 billion
exceeded the minimum requirement by $2.1 billion.

In accordance with the Alternative Net Capital Requirements, MLPF&S is
required to maintain tentative net capital in excess of $1 billion and notify the
SEC in the event its tentative net capital is less than $5 billion. At Decem-
ber 31, 2010, MLPF&S had tentative net capital in excess of the minimum and
notification requirements.

Economic Capital
Our economic capital measurement process provides a risk-based measure-
ment of the capital required for unexpected credit, market and operational
losses over a one-year time horizon at a 99.97 percent confidence level,
consistent with a “AA” credit rating. Economic capital is allocated to each
business unit based upon its risk positions and contribution to enterprise risk,
and is used for capital adequacy, performance measurement and risk man-
agement purposes. The strategic planning process utilizes economic capital
with the goal of allocating risk appropriately and measuring returns consis-
tently across all businesses and activities.

Credit Risk Capital
Economic capital for credit risk captures two types of risks: default risk, which
represents the loss of principal due to outright default or the borrower’s
inability to repay an obligation in full, and migration risk, which represents
potential loss in market value due to credit deterioration over the one-year
capital time horizon. Credit risk is assessed and modeled for all on- and off-
balance sheet credit exposures within sub-categories for commercial, retail,
counterparty and investment securities. The economic capital methodology
captures dimensions such as concentration and country risk and originated
securitizations. The economic capital methodology is based on the probability

of default, loss given default, exposure at default and maturity for each credit
exposure, and the portfolio correlations across exposures. See page 75 for
more information on Credit Risk Management.

Market Risk Capital
Market risk reflects the potential loss in the value of financial instruments or
portfolios due to movements in foreign exchange and interest rates, credit
spreads, and security and commodity prices. Bank of America’s primary
market risk exposures are in its trading portfolio, equity investments, MSRs
and the interest rate exposure of its core balance sheet. Economic capital is
determined by utilizing the same models the Corporation used to manage
these risks including, for example, Value-at-Risk, simulation, stress testing
and scenario analysis. See page 104 for additional information on Market
Risk Management.

Operational Risk Capital
We calculate operational risk capital at the business unit level using actuarial-
based models and historical loss data. We supplement the calculations with
scenario analysis and risk control assessments. See Operational Risk Man-
agement beginning on page 110 for more information.

Capital Actions
The Corporation held a special meeting of stockholders on February 23, 2010
at which we obtained stockholder approval of an amendment to our amended
and restated certificate of incorporation to increase the number of authorized
shares of our common stock from 10.0 billion to 11.3 billion. On February 24,
2010, approximately 1.3 billion shares of common stock were issued through
the conversion of CES into common stock. For more information regarding this
conversion, see Preferred Stock Issuances and Exchanges on page 71.

In January 2009, we issued approximately 1.4 billion shares of common
stock in connection with the acquisition of Merrill Lynch. For additional
information regarding the Merrill Lynch acquisition, see Note 2 – Merger
and Restructuring Activity to the Consolidated Financial Statements. In addi-
tion, in 2009, we issued warrants to purchase approximately 199.1 million
shares of common stock in connection with preferred stock issuances to the
U.S. government. For more information, see Preferred Stock Issuances and
Exchanges on page 71. In 2009, we issued 1.3 billion shares of common
stock at an average price of $10.77 per share through an at-the-market
issuance program resulting in gross proceeds of approximately $13.5 billion.
In addition, during 2010 and 2009, we issued approximately 98.6 million and
7.4 million shares under employee stock plans.

Troubled Asset Relief Program – Related Asset Sales
We received notification from the Federal Reserve confirming that we fulfilled
our commitment to increase equity by $3.0 billion through asset sales to be
completed by December 31, 2010. The commitment was made in connection
with the approval we received in December 2009 to repurchase the preferred
stock that we issued as a result of our participation in the Troubled Asset
Relief Program (TARP).

There were no common shares repurchased in 2010 except for shares
acquired under equity incentive plans, as discussed in Item 5. Market for
Registrant’s Common Equity, Related Stockholder Matters and Issuer Pur-
chases of Equity Securities of this Annual Report on Form 10-K. Currently,
there is no existing Board authorized share repurchase program. For more
information regarding our common share issuances, see Note 15 – Share-
holders’ Equity to the Consolidated Financial Statements.

We currently intend to modestly increase the common stock dividends in

the second half of 2011 subject to approval by the Federal Reserve.

Bank of America 2010

Common Stock Dividends
The table below is a summary of our declared quarterly cash dividends on
common stock during 2010 and through February 25, 2011.

Table 15 Common Stock Cash Dividend Summary

Declaration Date

January 26, 2011
October 25, 2010
July 28, 2010
April 28, 2010
January 27, 2010

Record Date

Payment Date

March 4, 2011
December 3, 2010
September 3, 2010
June 4, 2010
March 5, 2010

March 25, 2011
December 24, 2010
September 24, 2010
June 25, 2010
March 26, 2010

Dividend
Per Share

$0.01
0.01
0.01
0.01
0.01

Preferred Stock Issuances and Exchanges
In 2009, we completed an offer to exchange outstanding depositary shares of
portions of certain series of preferred stock up to approximately 200 million
shares of common stock at an average price of $12.70 per share. In addition,
we also entered into agreements with certain holders of other non-govern-
ment perpetual preferred shares to exchange their holdings of approximately
$10.9 billion aggregate liquidation preference of perpetual preferred stock
into approximately 800 million shares of common stock. In total, the ex-
change offer and these privately negotiated exchanges covered the exchange
of $14.8 billion aggregate liquidation preference of perpetual preferred stock
into 1.0 billion shares of common stock. In 2009, we recorded an increase to
retained earnings and net income applicable to common shareholders of
$576 million related to these exchanges. This represents the net of a
$2.6 billion benefit due to the excess of the carrying value of our non-
convertible preferred stock over the fair value of the common stock ex-
changed. This was partially offset by a $2.0 billion inducement to convertible
preferred shareholders representing the excess of the fair value of the
common stock exchanged, which was accounted for as an induced conversion
of convertible preferred stock, over the fair value of the common stock that
would have been issued under the original conversion terms.

On December 2, 2009, we received approval from the U.S. Treasury and
Federal Reserve to repay the U.S. government’s $45.0 billion preferred stock
investment provided under TARP. In accordance with the approval, on Decem-
ber 9, 2009, we repurchased all outstanding shares of Cumulative Perpetual
Preferred Stock Series N, Series Q and Series R issued to the U.S. Treasury as
part of the TARP. While participating in the TARP we recorded $7.4 billion in
dividends and accretion on the TARP Preferred Stock and repayment saved us
approximately $3.6 billion in annual dividends and accretion. We did not
repurchase the related common stock warrants issued to the U.S. Treasury in
connection with its TARP investment. The U.S. Treasury auctioned these
warrants in March 2010. For more detail on the TARP Preferred Stock, refer to
Note 15 – Shareholders’ Equity to the Consolidated Financial Statements.

We repurchased the TARP Preferred Stock through the use of $25.7 billion in
excess liquidity and $19.3 billion in proceeds from the sale of 1.3 billion units of
CES valued at $15.00 per unit. The CES consisted of depositary shares
representing interests in shares of Common Equivalent Junior Preferred Stock
Series S (Common Equivalent Stock) and warrants (Contingent Warrants) to
purchase an aggregate 60 million shares of the Corporation’s common stock.
Each depositary share represented a 1/1,000th interest in a share of Common
Equivalent Stock and each Contingent Warrant granted the holder the right to
purchase 0.0467 of a share of a common stock for $0.01 per share. Each
depositary share entitled the holder, through the depository, to a proportional
fractional interest in all rights and preferences of the Common Equivalent Stock,
including conversion, dividend, liquidation and voting rights.

The Corporation held a special meeting of stockholders on February 23,
2010 at which we obtained stockholder approval of an amendment to our
amended and restated certificate of incorporation to increase the number of

authorized shares of our common stock. Following effectiveness of the
amendment, on February 24, 2010, the Common Equivalent Stock converted
in full into our common stock and the Contingent Warrants automatically
expired without becoming exercisable, and the CES ceased to exist.

On October 15, 2010, all of the outstanding shares of the mandatory
convertible Preferred Stock, Series 2 and Series 3, of Merrill Lynch automat-
ically converted into an aggregate of 50 million shares of the Corporation’s
Common Stock in accordance with the terms of these preferred securities.
For more information on cash dividends declared on preferred stock, see

Table III.

Enterprise-wide Stress Testing
As a part of our core risk management practices, we conduct enterprise-wide
stress tests on a periodic basis to better understand earnings, capital and
liquidity sensitivities to certain economic and business scenarios, including
economic and market conditions that are more severe than anticipated.
These enterprise-wide stress tests provide an understanding of the potential
impacts from our risk profile to earnings, capital and liquidity, and serve as a
key component of our capital management practices. Scenarios are selected
by a group comprised of senior line of business, risk and finance executives.
Impacts to each line of business from each scenario are then determined and
analyzed, primarily leveraging the models and processes utilized in everyday
management routines. Impacts are assessed along with potential mitigating
actions that may be taken. Analysis from such stress scenarios is compiled
for and reviewed through our Risk Oversight Committee (ROC), Asset Liability
Market Risk Committee (ALMRC) and the Board’s Enterprise Risk Committee,
and serves to inform and be incorporated, along with other core business
processes, into decision-making by management and the Board. We have
made substantial investments to establish stress testing capabilities as a
core business process.

Liquidity Risk

Funding and Liquidity Risk Management
We define liquidity risk as the potential inability to meet our contractual and
contingent financial obligations, on- or off-balance sheet, as they come due.
Our primary liquidity objective is to ensure adequate funding for our busi-
nesses throughout market cycles, including periods of financial stress. To
achieve that objective, we analyze and monitor our liquidity risk, maintain
excess liquidity and access diverse funding sources including our stable
deposit base. We define excess liquidity as readily available assets, limited
to cash and high-quality, liquid, unencumbered securities that we can use to
meet our funding requirements as those obligations arise.

Global funding and liquidity risk management activities are centralized
within Corporate Treasury. We believe that a centralized approach to funding
and liquidity risk management enhances our ability to monitor liquidity re-
quirements, maximizes access to funding sources, minimizes borrowing
costs and facilitates timely responses to liquidity events.

The Enterprise Risk Committee approves the Corporation’s liquidity policy
and contingency funding plan, including establishing liquidity risk tolerance
levels. The ALMRC, in conjunction with the Board and its committees, monitors
our liquidity position and reviews the impact of strategic decisions on our
liquidity. ALMRC is responsible for managing liquidity risks and ensuring expo-
sures remain within the established tolerance levels. ALMRC delegates addi-
tional oversight responsibilities to the ROC, which reports to ALMRC. The ROC
reviews and monitors our liquidity position, cash flow forecasts, stress testing
scenarios and results, and implements our liquidity limits and guidelines. For
more information, refer to Board Oversight of Risk beginning on page 65.

Under this governance framework, we have developed certain funding and
liquidity risk management practices which include: maintaining excess

Bank of America 2010

liquidity at the parent company and selected subsidiaries, including our bank
and broker/dealer subsidiaries; determining what amounts of excess liquidity
are appropriate for these entities based on analysis of debt maturities and
other potential cash outflows, including those that we may experience during
stressed market conditions; diversifying funding sources, considering our
asset profile and legal entity structure; and performing contingency planning.

significant amounts of other unencumbered securities we believe could also
be used to generate additional liquidity, including investment-grade corporate
securities and equities. Liquidity held in a broker/dealer subsidiary is only
available to meet the obligations of that entity and cannot be transferred to
the parent company or to any other subsidiary, often due to regulatory
restrictions and minimum requirements.

Global Excess Liquidity Sources and Other Unencumbered
Assets
We maintain excess liquidity available to the parent company and selected
subsidiaries in the form of cash and high-quality, liquid, unencumbered secu-
rities. These assets serve as our primary means of liquidity risk mitigation and
we call these assets our “Global Excess Liquidity Sources.” Our cash is primarily
on deposit with central banks, such as the Federal Reserve. We limit the
composition of high-quality, liquid, unencumbered securities to U.S. government
securities, U.S. agency securities, U.S. agency MBS and a select group of
non-U.S. government securities. We believe we can quickly obtain cash for these
securities, even in stressed market conditions, through repurchase agreements
or outright sales. We hold our Global Excess Liquidity Sources in entities that
allow us to meet the liquidity requirements of our global businesses and we
consider the impact of potential regulatory, tax, legal and other restrictions that
could limit the transferability of funds among entities.

Our global excess liquidity sources increased $122 billion to $336 billion
at December 31, 2010 compared to $214 billion at December 31, 2009 and
were maintained as presented in the table below. This increase was due
primarily to liquidity generated by our bank subsidiaries through deposit
growth, loan repayments combined with lower loan demand and other factors.

Table 16 Global Excess Liquidity Sources

(Dollars in billions)

Parent company
Bank subsidiaries
Broker/dealers

Total global excess liquidity sources

December 31

2010

$121
180
35

$336

2009

$ 99
89
26

$214

As noted above, the excess liquidity available to the parent company is
held in cash and high-quality, liquid, unencumbered securities and totaled
$121 billion and $99 billion at December 31, 2010 and 2009. Typically,
parent company cash is deposited overnight with Bank of America, N.A.

Our bank subsidiaries’ excess liquidity sources at December 31, 2010
and 2009 were $180 billion and $89 billion. These amounts are distinct from
the cash deposited by the parent company, as described above. In addition to
their excess liquidity sources, our bank subsidiaries hold significant amounts
of other unencumbered securities that we believe could also be used to
generate liquidity, such as investment-grade ABS, MBS and municipal bonds.
Another way our bank subsidiaries can generate incremental liquidity is by
pledging a range of other unencumbered loans and securities to certain
Federal Home Loan Banks and the Federal Reserve Discount Window. The
cash we could have obtained by borrowing against this pool of specifically
identified eligible assets was approximately $170 billion and $187 billion at
December 31, 2010 and 2009. We have established operational procedures
to enable us to borrow against these assets, including regularly monitoring our
total pool of eligible loans and securities collateral. Due to regulatory restric-
tions, liquidity generated by the bank subsidiaries can only be used to fund
obligations within the bank subsidiaries and cannot be transferred to the
parent company or nonbank subsidiaries.

Our broker/dealer subsidiaries’ excess liquidity sources at December 31,
2010 and 2009 consisted of $35 billion and $26 billion in cash and high-
liquid, unencumbered securities. Our broker/dealers also held
quality,

Bank of America 2010

Time to Required Funding and Stress Modeling
We use a variety of metrics to determine the appropriate amounts of excess
liquidity to maintain at the parent company and our bank and broker/dealer
subsidiaries. One metric we use to evaluate the appropriate level of excess
liquidity at the parent company is “Time to Required Funding.” This debt
coverage measure indicates the number of months that the parent company
can continue to meet its unsecured contractual obligations as they come due
using only its Global Excess Liquidity Sources without issuing any new debt or
accessing any additional liquidity sources. We define unsecured contractual
obligations for purposes of this metric as maturities of senior or subordinated
debt issued or guaranteed by Bank of America Corporation or Merrill Lynch &
Co., Inc., including certain unsecured debt instruments, primarily structured
notes, which we may be required to settle for cash prior to maturity. The
ALMRC has established a target for Time to Required Funding of 21 months.
Time to Required Funding was 24 months at December 31, 2010 compared to
25 months at December 31, 2009.

We utilize liquidity stress models to assist us in determining the appro-
priate amounts of excess liquidity to maintain at the parent company and our
bank and broker/dealer subsidiaries. These risk sensitive models have be-
come increasingly important in analyzing our potential contractual and con-
tingent cash outflows beyond those outflows considered in the Time to
Required Funding analysis.

We evaluate the liquidity requirements under a range of scenarios with
varying levels of severity and time horizons. These scenarios incorporate
market-wide and Corporation-specific events, including potential credit ratings
downgrades for the parent company and our subsidiaries. We consider and
utilize scenarios based on historical experience, regulatory guidance, and
both expected and unexpected future events.

The types of contractual and contingent cash outflows we consider in our
scenarios may include, but are not limited to: upcoming contractual maturities
of unsecured debt and reductions in new debt issuance; diminished access to
secured financing markets; potential deposit withdrawals and reduced roll-
over of maturing term deposits by customers; increased draws on loan
commitments and liquidity facilities; additional collateral that counterparties
could call if our credit ratings were downgraded; collateral, margin and sub-
sidiary capital requirements arising from losses; and potential liquidity re-
quired to maintain businesses and finance customer activities.

We consider all sources of funds that we could access during each stress
scenario and focus particularly on matching available sources with corre-
sponding liquidity requirements by legal entity. We also use the stress mod-
eling results to manage our asset-liability profile and establish limits and
guidelines on certain funding sources and businesses.

Basel III Liquidity Standards
In December 2010, the Basel Committee on Bank Supervision issued “In-
ternational framework for liquidity risk measurement, standards and moni-
toring,” which includes two measures of liquidity risk. These two minimum
liquidity measures were initially introduced in guidance in December 2009 and
are considered part of Basel III.

The first liquidity measure is the Liquidity Coverage Ratio (LCR) which
identifies the amount of unencumbered, high quality liquid assets a financial
institution holds that can be used to offset the net cash outflows the insti-
tution would encounter under an acute 30-day stress scenario. The second

liquidity measure is the Net Stable Funding Ratio (NSFR) which measures the
amount of longer-term, stable sources of funding employed by a financial
institution relative to the liquidity profiles of the assets funded and the
potential for contingent calls on funding liquidity arising from off-balance
sheet commitments and obligations over a one-year period. The Basel Com-
mittee expects the LCR to be implemented in January 2015 and the NSFR in
January 2018, following observation periods beginning in 2012. We continue
to monitor the development and the potential
impact of these evolving
proposals and expect to be able to meet the final requirements.

Diversified Funding Sources
We fund our assets primarily with a mix of deposits and secured and unse-
cured liabilities through a globally coordinated funding strategy. We diversify
our funding globally across products, programs, markets, currencies and
investor bases.

We fund a substantial portion of our lending activities through our deposit
base which was $1.0 trillion and $992 billion at December 31, 2010 and
2009. Deposits are primarily generated by our Deposits, Global Commercial
Banking, GWIM and GBAM segments. These deposits are diversified by
clients, product type and geography. Certain of our U.S. deposits are insured
by the FDIC. We consider a substantial portion of our deposits to be a stable,
low-cost and consistent source of funding. We believe this deposit funding is
generally less sensitive to interest rate changes, market volatility or changes
in our credit ratings than wholesale funding sources.

Certain consumer lending activities, primarily in our banking subsidiaries,
may be funded through securitizations. Included in these consumer lending
activities are the extension of mortgage, credit card, auto loans, home equity
loans and lines of credit. If securitization markets are not available to us on
favorable terms, we typically finance these loans with deposits or with
wholesale borrowings. For additional
information on securitizations, see
Note 8 – Securitizations and Other Variable Interest Entities to the Consoli-
dated Financial Statements.

Our trading activities are primarily funded on a secured basis through
securities lending and repurchase agreements; these amounts will vary
based on customer activity and market conditions. We believe funding these
activities in the secured financing markets is more cost-efficient and less
sensitive to changes in our credit ratings than unsecured financing. Repur-
chase agreements are generally short-term and often overnight. Disruptions
in secured financing markets for financial institutions have occurred in prior
market cycles which resulted in adverse changes in terms or significant
reductions in the availability of such financing. We manage the liquidity risks
arising from secured funding by sourcing funding globally from a diverse group
of counterparties, providing a range of securities collateral and pursuing
longer durations, when appropriate.

Unsecured debt, both short- and long-term, is also an important source of
funding. We may issue unsecured debt through syndicated U.S. registered
offerings, U.S. registered and unregistered medium-term note programs,
non-U.S. medium-term note programs, non-U.S. private placements, U.S. and
non-U.S. commercial paper and through other methods. We distribute a
significant portion of our debt offerings through our retail and institutional
sales forces to a large, diversified global investor base. Maintaining relation-
ships with our investors is an important aspect of our funding strategy. We
may, from time to time, purchase outstanding Bank of America Corporation
debt securities in various transactions, depending upon prevailing market
conditions, liquidity and other factors. In addition, we may also make markets
in our debt instruments to provide liquidity for investors.

In addition, our parent company, bank and broker-dealer subsidiaries
regularly access short-term secured and unsecured markets through federal
funds purchased, commercial paper and other short-term borrowings to

support customer activities, short-term financing requirements and cash
management.

At December 31, 2010, commercial paper and other short-term borrow-
ings included $6.7 billion of VIEs that were consolidated in accordance with
new consolidation guidance effective January 1, 2010. For average and year-
end balance discussions, see Balance Sheet Overview beginning on page 33.
For more information, see Note 12 – Federal Funds Sold, Securities Borrowed
or Purchased Under Agreements to Resell and Short-term Borrowings to the
Consolidated Financial Statements.

We issue the majority of our long-term unsecured debt at the parent
company and Bank of America, N.A. During 2010, the parent company and
Bank of America, N.A. issued $28.8 billion and $3.5 billion of long-term senior
unsecured debt.

We issue long-term unsecured debt in a variety of maturities and curren-
cies to achieve cost-efficient funding and to maintain an appropriate maturity
profile. While the cost and availability of unsecured funding may be negatively
impacted by general market conditions or by matters specific to the financial
services industry or the Corporation, we seek to mitigate refinancing risk by
actively managing the amount of our borrowings that we anticipate will mature
within any month or quarter.

The primary benefits of our centralized funding strategy include greater
control, reduced funding costs, wider name recognition by investors and
greater flexibility to meet the variable funding requirements of subsidiaries.
Where regulations, time zone differences or other business considerations
make parent company funding impractical, certain other subsidiaries may
issue their own debt.

At December 31, 2010 and 2009, our long-term debt was in the curren-

cies presented in the table below.

Table 17 Long-term Debt By Major Currency

(Dollars in millions)

U.S. Dollar
Euros
Japanese Yen
British Pound
Australian Dollar
Canadian Dollar
Swiss Franc
Other

Total long-term debt

December 31

2010

$302,487
87,482
19,901
16,505
6,924
6,628
3,069
5,435

$448,431

2009

$281,692
99,917
19,903
16,460
7,973
4,894
2,666
5,016

$438,521

At December 31, 2010, the above table includes $71.0 billion of primarily
U.S. Dollar long-term debt of VIEs that were consolidated in accordance with
new consolidation guidance effective January 1, 2010.

We use derivative transactions to manage the duration, interest rate and
currency risks of our borrowings, considering the characteristics of the assets
they are funding. For further details on our ALM activities, refer to Interest
Rate Risk Management for Nontrading Activities beginning on page 107.

We also diversify our funding sources by issuing various types of debt
instruments including structured notes, which are debt obligations that pay
investors with returns linked to other debt or equity securities, indices,
currencies or commodities. We typically hedge the returns we are obligated
to pay on these notes with derivative positions and/or in the underlying
instruments so that from a funding perspective, the cost is similar to our
other unsecured long-term debt. We could be required to immediately settle
certain structured note obligations for cash or other securities under certain
circumstances, which we consider for liquidity planning purposes. We believe,
however, that a portion of such borrowings will remain outstanding beyond the

Bank of America 2010

earliest put or redemption date. We had outstanding structured notes of
$61.1 billion and $57.0 billion at December 31, 2010 and 2009.

Substantially all of our senior and subordinated debt obligations contain
no provisions that could trigger a requirement for an early repayment, require
additional collateral support, result in changes to terms, accelerate maturity
or create additional financial obligations upon an adverse change in our credit
ratings, financial ratios, earnings, cash flows or stock price.

We participated in the FDIC’s Temporary Liquidity Guarantee Program (TLGP)
which allowed us to issue senior unsecured debt that the FDIC guaranteed in
return for a fee based on the amount and maturity of the debt. At December 31,
2010, we had $27.5 billion outstanding under the program. We no longer issue
debt under this program and all of our debt issued under TLGP will mature by
June 30, 2012. Under this program, our debt received the highest long-term
ratings from the major credit ratings agencies which resulted in a lower total cost
of issuance than if we had issued non-FDIC guaranteed long-term debt. The
associated FDIC fee for the 2009 issuances was $554 million and is being
amortized into expense over the stated term of the debt.

For additional information on debt funding, see Note 13 – Long-term Debt

to the Consolidated Financial Statements.

Contingency Planning
We maintain contingency funding plans that outline our potential responses to
liquidity stress events at various levels of severity. These policies and plans
are based on stress scenarios and include potential funding strategies, and
communication and notification procedures that we would implement in the
event we experienced stressed liquidity conditions. We periodically review and
test the contingency funding plans to validate efficacy and assess readiness.
Our U.S. bank subsidiaries can access contingency funding through the
Federal Reserve Discount Window. Certain non-U.S. subsidiaries have access
to central bank facilities in the jurisdictions in which they operate. While we do
not rely on these sources in our liquidity modeling, we maintain the policies,
procedures and governance processes that would enable us to access these
sources if necessary.

Credit Ratings
Our borrowing costs and ability to raise funds are directly impacted by our
credit ratings. In addition, credit ratings may be important to customers or
counterparties when we compete in certain markets and when we seek to
engage in certain transactions including OTC derivatives. Thus, it is our
objective to maintain high-quality credit ratings.

Credit ratings and outlooks are opinions on our creditworthiness and that
of our obligations or securities, including long-term debt, short-term borrow-
ings, preferred stock and other securities, including asset securitizations. Our
credit ratings are subject to ongoing review by the ratings agencies and thus
may change from time to time based on a number of factors, including our own
financial strength, performance, prospects and operations as well as factors
not under our control, such as ratings agency-specific criteria or frameworks
for our industry or certain security types, which are subject to revision from
time to time, and conditions affecting the financial services industry generally.
In light of the recent difficulties in the financial services industry and financial
markets, there can be no assurance that we will maintain our current ratings.
During 2009 and 2010, the ratings agencies took numerous actions,
many of which were negative, to adjust our credit ratings and the outlooks for
those ratings. Currently, Bank of America Corporation’s long-term senior debt

and outlook expressed by the ratings agencies are as follows: A2 (negative) by
Moody’s Investors Services, Inc. (Moody’s), A (negative) by Standard and
Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. (S&P),
and A+ (Rating Watch Negative) by Fitch, Inc. (Fitch). Bank of America, N.A.’s
long-term debt and outlook currently are as follows: A+ (negative), Aa3
(negative) and A+ (Rating Watch Negative) by those same three credit ratings
agencies, respectively. The ratings agencies have indicated that, as a sys-
temically important financial institution, our credit ratings currently reflect
their expectation that, if necessary, we would receive significant support from
the U.S. government. All three ratings agencies, however, have indicated they
will reevaluate, and could reduce the uplift they include in our ratings for
government support for reasons arising from financial services regulatory
reform proposals or legislation. In February 2010, S&P affirmed our current
credit ratings but revised the outlook to negative from stable based on its
belief that it is less certain whether the U.S. government would be willing to
provide extraordinary support. On July 27, 2010, Moody’s affirmed our
current ratings but revised the outlook to negative from stable due to its
expectation for lower levels of government support over time as a result of the
passage of the Financial Reform Act. Also, on October 22, 2010, Fitch placed
our credit ratings on Rating Watch Negative from stable outlook due to
proposed rulemaking that could negatively impact its assessment of future
systemic government support. Other factors that influence our credit ratings
include changes to the ratings agencies’ methodologies, the ratings agencies’
assessment of the general operating environment, our relative positions in
the markets in which we compete, reputation, liquidity position, diversity of
funding sources, the level and volatility of earnings, corporate governance and
risk management policies, capital position, capital management practices
and current or future regulatory and legislative initiatives.

A reduction in certain of our credit ratings or the ratings of certain asset-
backed securitizations would likely have a material adverse effect on our
liquidity, access to credit markets, the related cost of funds, our businesses
and on certain trading revenues, particularly in those businesses where
counterparty creditworthiness is critical. Under the terms of certain OTC
derivatives contracts and other trading agreements, in the event of a credit
ratings downgrade, the counterparties to those agreements may require us to
provide additional collateral or to terminate these contracts or agreements.
Such collateral calls or terminations could cause us to sustain losses, impair
our liquidity, or both, by requiring us to provide the counterparties with
additional collateral in the form of cash or highly liquid securities. If Bank
of America Corporation’s or Bank of America, N.A.’s commercial paper or
short-term credit ratings (which currently have the following ratings: P-1 by
Moody’s, A-1 by S&P and F1+ by Fitch) were downgraded by one or more
levels, the potential loss of short-term funding sources such as commercial
paper or repo financing and effect on our incremental cost of funds would be
material. For information regarding the additional collateral and termination
payments that would be required in connection with certain OTC derivative
contracts and other trading agreements as a result of such a credit ratings
downgrade, see Note 4 – Derivatives to the Consolidated Financial State-
ments and Item 1A. Risk Factors of this Annual Report on Form 10-K.

The credit ratings of Merrill Lynch & Co., Inc. from the three major credit
ratings agencies are the same as those of Bank of America Corporation. The
major credit ratings agencies have indicated that the primary drivers of Merrill
Lynch’s credit ratings are Bank of America Corporation’s credit ratings.

Bank of America 2010

Credit Risk Management
Credit quality continued to show improvement during 2010; although, net
charge-offs, and nonperforming loans, leases and foreclosed properties re-
mained elevated. Signs of economic stability and our proactive credit risk
management initiatives positively impacted the credit portfolio as charge-offs
and delinquencies continued to improve across almost all portfolios along with
risk rating improvements in the commercial portfolio. Global and national
economic uncertainty, regulatory initiatives and reform, however, continued
to weigh on the credit portfolios through December 31, 2010. For more
information, see 2010 Economic and Business Environment on page 29. Credit
metrics were also impacted by loans added to the balance sheet on January 1,
2010 in connection with the adoption of new consolidation guidance.

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 erroneous 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, deposit overdrafts, derivatives, assets held-for-sale and unfunded
lending commitments which include loan commitments, letters of credit and
financial guarantees. Derivative positions are recorded at fair value and
assets held-for-sale are recorded at fair value or the lower of cost or fair
value. Certain loans and unfunded commitments are accounted for under the
fair value option. Credit risk for these categories of assets is not accounted
for as part of the allowance for credit losses but as part of the fair value
adjustments recorded in earnings. For derivative positions, our credit risk is
measured as the net replacement cost in the event the counterparties with
contracts in which we are in a gain position 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. The
credit risk amounts take into consideration the effects of legally enforceable
master netting agreements and cash collateral. Our consumer and commer-
cial credit extension and review procedures take into account funded and
unfunded credit exposures. For additional information on derivative and credit
extension commitments, see Note 4 – Derivatives and Note 14 – Commit-
ments and Contingencies to 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 in
each as discussed below.

We proactively refine our underwriting and credit management practices,
as well as credit standards, to meet the changing economic environment. To
actively mitigate losses and enhance customer support in our consumer
businesses, we have expanded collections, loan modification and customer
assistance infrastructures. We also have implemented a number of actions to
mitigate losses in the commercial businesses including increasing the fre-
quency and intensity of portfolio monitoring, hedging activity and our practice
of transferring management of deteriorating commercial exposures to inde-
pendent special asset officers as credits approach criticized levels.

Since January 2008, and through 2010, Bank of America and Countrywide
have completed nearly 775,000 loan modifications with customers. During
2010, we completed nearly 285,000 customer loan modifications with a total
unpaid principal balance of approximately $65.7 billion, which included
109,000 customers who converted from trial period to permanent modifica-
tions under the government’s MHA program. Of the loan modifications

completed in 2010, in terms of both the volume of modifications and the
unpaid principal balance associated with the underlying loans, most were in
the portfolio serviced for investors and were not on our balance sheet. The
most common types of modifications during the year include a combination of
rate reduction and capitalization of past due amounts which represent 68 per-
cent of the volume of modifications completed in 2010, while principal
forbearance represented 15 percent and capitalization of past due amounts
represented nine percent. We also provide rate reductions, rate and payment
extensions, principal forgiveness and other actions. These modification types
are generally considered troubled debt restructurings (TDRs). For more infor-
mation on TDRs and portfolio impacts, see Nonperforming Consumer Loans
and Foreclosed Properties Activity beginning on page 85 and Note 6 – Out-
standing Loans and Leases to the Consolidated Financial Statements.

On October 1, 2010, we voluntarily stopped taking residential mortgage
foreclosure proceedings to judgment in judicial states. On October 8, 2010,
we stopped foreclosure sales in all states in order to complete an assess-
ment of the related business processes. As a result of that assessment, we
identified and began implementing process and control enhancements and
we intend to monitor ongoing quality results of each process. After these
enhancements were put in place, we resumed foreclosure sales in most non-
judicial states during the fourth quarter of 2010, and expect sales to resume
in the remaining non-judicial states in the first quarter of 2011. The process of
preparing affidavits in pending proceedings in judicial states is expected to
continue into the first quarter of 2011 and could result in prolonged adversary
proceedings that delay certain foreclosure sales. We took these precaution-
ary steps in order to ensure our processes for handling foreclosures include
the appropriate controls and quality assurance. These initiatives further
support our credit risk management and mitigation efforts. For more infor-
mation, see Recent Events beginning on page 37.

Certain European countries, including Greece, Ireland, Italy, Portugal and
Spain, continue to experience varying degrees of financial stress. Risks and
ongoing concerns about the debt crisis in Europe could result in a disruption of
the financial markets which could have a detrimental impact on the global
economic recovery, including the impact of non-sovereign debt in these
countries. For more information on our direct sovereign and non-sovereign
exposures in these countries, see Non-U.S. Portfolio beginning on page 98.
The Financial Accounting Standards Board (FASB) issued new disclosure
guidance, effective on a prospective basis for the Corporation’s 2010 year-
end reporting, that addresses disclosure of loans and other financing receiv-
ables and the related allowance. The new disclosure guidance defines a
portfolio segment as the level at which an entity develops and documents a
systematic methodology to determine the allowance for credit losses, and a
class of financing receivables as the level of disaggregation of portfolio
segments based on the initial measurement attribute, risk characteristics
and methods for assessing risk. The Corporation’s portfolio segments are
home loans, credit card and other consumer, and commercial. The classes
within the home loans portfolio segment are residential mortgage, home
equity and discontinued real estate. The classes within the credit card and
other consumer portfolio segment are U.S. credit card, non-U.S. credit card,
direct/indirect consumer and other consumer. The classes within the com-
mercial portfolio segment are U.S. commercial, commercial real estate,
commercial lease financing, non-U.S. commercial and U.S. small business
commercial. Under this new disclosure guidance, the allowance is presented
by portfolio segment.

Bank of America 2010

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 tech-
niques in conjunction with experiential judgment are used in all aspects of
portfolio management including underwriting, product pricing, risk appetite,
setting credit limits and establishing operating processes and metrics to
quantify and balance risks and returns. Statistical models are built using
detailed behavioral information from external sources such as credit bureaus
and/or internal historical experience. These models are a component of our
consumer credit risk management process and are used, in part, to help
determine both new and existing credit decisions, portfolio management
strategies including authorizations and line management, collection practices
and strategies, determination of the allowance for loan and lease losses, and
economic capital allocations for credit risk.

For information on our accounting policies regarding delinquencies, non-
performing status, charge-offs and TDRs for the consumer portfolio, see
Note 1 – Summary of Significant Accounting Principles to the Consolidated
Financial Statements.

Consumer Credit Portfolio
Although unemployment rates remained at elevated levels, improvement in
the U.S. economy and stabilization in the labor markets during 2010 resulted
in lower losses and lower delinquencies in almost all consumer portfolios
during 2010 when compared to 2009 on a managed basis. However, eco-
nomic deterioration throughout 2009 and weakness in the economic recovery
in 2010 drove continued stress in the housing markets and tighter availability
of credit in the market place resulting in elevated net charge-offs in most
portfolios. In addition, during 2010, our consumer real estate portfolios were
impacted by net charge-offs on certain modified loans deemed to be collateral
regulatory guidance. For more
dependent pursuant

to clarification of

information on regulatory guidance on collateral dependent modified loans,
see Regulatory Matters beginning on page 60.

Under the new consolidation guidance, we consolidated all previously off-
balance sheet securitized credit card receivables along with certain home
equity and auto loan securitization trusts. The 2010 consumer credit card
credit quality statistics include the impact of consolidation of VIEs. The
following tables include the December 31, 2009 balances as well as the
January 1, 2010 balances to show the impact of the adoption of the new
consolidation guidance. Accordingly, the December 31, 2010 credit quality
statistics under the new consolidation guidance should be compared to the
amounts presented in the January 1, 2010 column.

The table below presents our outstanding consumer loans and the Coun-
trywide PCI loan portfolio. Loans that were acquired from Countrywide and
considered credit-impaired were written down to fair value upon acquisition. In
addition to being included in the “Outstandings” columns in the table below,
these loans are also shown separately, net of purchase accounting adjust-
ments, in the “Countrywide Purchased Credit-impaired Loan Portfolio” col-
umn. Loans that were acquired from Merrill Lynch were recorded at fair value
including those that were considered credit-impaired upon acquisition. The
Merrill Lynch consumer PCI loan portfolio did not materially alter the reported
credit quality statistics of the consumer portfolios and is, therefore, excluded
from the “Countrywide Purchased Credit-impaired Loan Portfolio” column and
the following discussion. For additional information, see Note 6 – Outstanding
Loans and Leases to the Consolidated Financial Statements. The impact of
the Countrywide PCI loan portfolio on certain credit statistics is reported
where appropriate. See Countrywide Purchased Credit-impaired Loan Portfo-
lio beginning on page 82 for more information. Under certain circumstances,
loans that were originally classified as discontinued real estate loans upon
acquisition have been subsequently modified from pay option or subprime
loans into loans with more conventional terms and are now included in the
residential mortgage portfolio shown below.

Table 18 Consumer Loans

(Dollars in millions)
Residential mortgage (2)
Home equity
Discontinued real estate (3)
U.S. credit card
Non-U.S. credit card
Direct/Indirect consumer (4)
Other consumer (5)

Total

December 31
2010 (1)

$257,973
137,981
13,108
113,785
27,465
90,308
2,830

Outstandings

January 1
2010 (1)

$242,129
154,202
14,854
129,642
31,182
99,812
3,110

$643,450

$674,931

December 31
2009

$242,129
149,126
14,854
49,453
21,656
97,236
3,110

$577,564

Countrywide
Purchased
Credit-impaired Loan
Portfolio

December 31

2010 (1)

$10,592
12,590
11,652
n/a
n/a
n/a
n/a

2009

$11,077
13,214
13,250
n/a
n/a
n/a
n/a

$34,834

$37,541

(1) Balances reflect the impact of new consolidation guidance. Adoption of the new consolidation guidance did not impact the Countrywide PCI loan portfolio.
(2) Outstandings include non-U.S. residential mortgages of $90 million and $552 million at December 31, 2010 and 2009.
(3) Outstandings include $11.8 billion and $13.4 billion of pay option loans and $1.3 billion and $1.5 billion of subprime loans at December 31, 2010 and 2009. We no longer originate these products.
(4) Outstandings include dealer financial services loans of $42.9 billion and $41.6 billion, consumer lending loans of $12.9 billion and $19.7 billion, U.S. securities-based lending margin loans of $16.6 billion and $12.9 billion, student

loans of $6.8 billion and $10.8 billion, non-U.S. consumer loans of $8.0 billion and $8.0 billion and other consumer loans of $3.1 billion and $4.2 billion at December 31, 2010 and 2009, respectively.

(5) Outstandings include consumer finance loans of $1.9 billion and $2.3 billion, other non-U.S. consumer loans of $803 million and $709 million and consumer overdrafts of $88 million and $144 million at December 31, 2010 and

2009.

n/a = not applicable

Bank of America 2010

The table below presents our accruing consumer loans past due 90 days
or more and our consumer nonperforming loans. Nonperforming loans do not
include past due consumer credit card loans, consumer non-real estate-
secured loans or unsecured consumer loans as these loans are generally
charged off no later than the end of the month in which the loan becomes
180 days past due. Real estate-secured past due consumer loans insured by
the FHA are reported as accruing as opposed to nonperforming since the

principal repayment is insured by the FHA. FHA insured loans accruing past
due 90 days or more are primarily related to our purchases of delinquent loans
pursuant to our servicing agreements with GNMA. Additionally, nonperforming
loans and accruing balances past due 90 days or more do not include the
Countrywide PCI loans even though the customer may be contractually past
due.

Table 19 Consumer Credit Quality

(Dollars in millions)

Residential mortgage (2, 3)
Home equity (2)
Discontinued real estate (2)
U.S. credit card
Non-U.S. credit card
Direct/Indirect consumer
Other consumer

Total

Accruing Past Due 90 Days or More

Nonperforming

December 31
2010 (1)

January 1
2010 (1)

December 31
2009

December 31
2010 (1)

January 1
2010 (1)

December 31
2009

$16,768
–
–
3,320
599
1,058
2

$21,747

$11,680
–
–
5,408
814
1,492
3

$19,397

$11,680
–
–
2,158
515
1,488
3

$15,844

$17,691
2,694
331
n/a
n/a
90
48

$16,596
4,252
249
n/a
n/a
86
104

$20,854

$21,287

$16,596
3,804
249
n/a
n/a
86
104

$20,839

(1) Balances reflect the impact of new consolidation guidance.
(2) Our policy is to classify consumer real estate-secured loans as nonperforming at 90 days past due, except Countrywide PCI loans and FHA loans as referenced in footnote (3).
(3) At December 31, 2010 and 2009, balances accruing past due 90 days or more represent loans insured by the FHA. These balances include $8.3 billion and $2.2 billion of loans that are no longer accruing interest or interest has been
curtailed by the FHA although principal is still insured and $8.5 billion and $9.5 billion of loans that were still accruing interest. Our policy is to classify delinquent consumer loans secured by real estate and insured by the FHA as
accruing past due 90 days or more.

n/a = not applicable

Accruing consumer loans and leases past due 90 days or more as a
percentage of outstanding consumer loans and leases were 3.38 percent
(0.90 percent excluding the Countrywide PCI and FHA insured loan portfolios)
and 2.74 percent (0.79 percent excluding the Countrywide PCI and FHA
insured loan portfolios) at December 31, 2010 and 2009. Nonperforming
consumer loans as a percentage of outstanding consumer loans were

3.24 percent (3.76 percent excluding the Countrywide PCI and FHA insured
loan portfolios) and 3.61 percent (3.95 percent excluding the Countrywide PCI
and FHA insured loan portfolios) at December 31, 2010 and 2009.

The table below presents net charge-offs and related ratios for our con-

sumer loans and leases for 2010 and 2009 (managed basis for 2009).

Table 20 Consumer Net Charge-offs, Net Losses and Related Ratios

(Dollars in millions)

Held basis

Residential mortgage
Home equity
Discontinued real estate
U.S. credit card
Non-U.S. credit card
Direct/Indirect consumer
Other consumer

Total held

Supplemental managed basis data

U.S. credit card
Non-U.S. credit card

Total credit card – managed

Net Charge-offs

Net Charge-offs (1, 2)

2010

2009

2010

2009

$ 3,670
6,781
68
13,027
2,207
3,336
261

$ 4,350
7,050
101
6,547
1,239
5,463
428

1.49%
4.65
0.49
11.04
7.88
3.45
8.89

1.74%
4.56
0.58
12.50
6.30
5.46
12.94

$29,350

$25,178

4.51

4.22

Net Losses

Net Losses (1)

n/a
n/a

n/a

$16,962
2,223

$19,185

n/a
n/a

n/a

12.07
7.43

11.25

(1) Net charge-off and net loss ratios are calculated as held net charge-offs or managed net losses divided by average outstanding held or managed loans and leases.
(2) Net charge-off ratios excluding the Countrywide PCI and FHA insured loan portfolio were 1.79 percent and 1.83 percent for residential mortgage, 5.10 percent and 5.00 percent for home equity, 4.20 percent and 5.57 percent for
discontinued real estate and 5.02 percent and 4.53 percent for the total held portfolio for 2010 and 2009. These are the only product classifications materially impacted by the Countrywide PCI loan portfolio for 2010 and 2009. For
all loan and lease categories, the net charge-offs were unchanged.

n/a = not applicable

We believe that the presentation of information adjusted to exclude the
impact of the Countrywide PCI and FHA insured loan portfolios is more
representative of the ongoing operations and credit quality of the business.
As a result, in the following discussions of the residential mortgage, home

equity and discontinued real estate portfolios, we provide information that is
adjusted to exclude the impact of the Countrywide PCI and FHA insured loan
portfolios. In addition, beginning on page 82, we separately disclose infor-
mation on the Countrywide PCI loan portfolio.

Bank of America 2010

Residential Mortgage
The residential mortgage portfolio, which excludes the discontinued real
estate portfolio acquired with Countrywide, makes up the largest percentage
of our consumer loan portfolio at 40 percent of consumer loans at Decem-
ber 31, 2010. Approximately 14 percent of the residential mortgage portfolio
is in GWIM and represents residential mortgages that are originated for the
home purchase and refinancing needs of our affluent clients. The remaining
portion of the portfolio is mostly in All Other and is comprised of both
residential loans originated for our customers and used in our overall ALM
activities as well as purchased loans.

Outstanding balances in the residential mortgage portfolio increased
$15.8 billion at December 31, 2010 compared to December 31, 2009 as
new FHA insured origination volume was partially offset by paydowns, the sale

of First Republic, transfers to foreclosed properties and charge-offs. In ad-
dition, FHA repurchases of delinquent loans pursuant to our servicing agree-
ments with GNMA also increased the residential mortgage portfolio during
2010. At December 31, 2010 and 2009, the residential mortgage portfolio
included $53.9 billion and $12.9 billion of outstanding loans that were
insured by the FHA. On this portion of the residential mortgage portfolio,
we are protected against principal loss as a result of FHA insurance. The table
below presents certain residential mortgage key credit statistics on both a
reported basis and excluding the Countrywide PCI and FHA insured loan
portfolios. We believe the presentation of information adjusted to exclude the
impacts of the Countrywide PCI and FHA insured loan portfolios is more
representative of the credit risk in this portfolio. For more information on the
Countrywide PCI loan portfolio, see the discussion beginning on page 82.

Table 21 Residential Mortgage – Key Credit Statistics

December 31

Reported Basis

2010

2009

$257,973
16,768
17,691

$242,129
11,680
16,596

15%
32
20
32
1.49

12%
27
17
42
1.74

Excluding Countrywide
Purchased Credit-impaired
and
FHA Insured Loans

2010

$193,435
n/a
17,691

10%
23
14
38
1.79

2009

$218,147
n/a
16,596

11%
23
12
42
1.83

Nonperforming residential mortgage loans increased $1.1 billion com-
pared to December 31, 2009 as new inflows, which continued to slow in 2010
due to favorable delinquency trends, continued to outpace nonperforming
loans returning to performing status, charge-offs, and paydowns and payoffs.
At December 31, 2010, $12.7 billion, or 72 percent, of the nonperforming
residential mortgage loans were 180 days or more past due and had been
written down to the fair value of the underlying collateral. Net charge-offs
decreased $680 million to $3.7 billion in 2010, or 1.79 percent of total
average residential mortgage loans compared to 1.83 percent for 2009
driven primarily by favorable delinquency trends which were due in part to
improvement in the U.S. economy. Net charge-off ratios were further impacted
by lower loan balances primarily due to paydowns, the sale of First Republic
and charge-offs.

Certain risk characteristics of the residential mortgage portfolio continued
to contribute to higher losses. These characteristics include loans with a high
refreshed loan-to-value (LTV), loans originated at the peak of home prices in
2006 and 2007, loans to borrowers located in California and Florida where we
have concentrations and where significant declines in home prices have been
experienced, as well as interest-only loans. Although the following disclosures
address each of these risk characteristics separately, there is significant
overlap in loans with these characteristics, which contributed to a dispropor-
tionate share of the losses in the portfolio. The residential mortgage loans
with all of these higher risk characteristics comprised five percent and seven
percent of the residential mortgage portfolio at December 31, 2010 and
2009, but accounted for 26 percent of the residential mortgage net charge-
offs in 2010 compared to 31 percent in 2009.

(Dollars in millions)

Outstandings
Accruing past due 90 days or more
Nonperforming loans
Percent of portfolio with refreshed LTVs greater than 90 but less than 100
Percent of portfolio with refreshed LTVs greater than 100
Percent of portfolio with refreshed FICOs below 620
Percent of portfolio in the 2006 and 2007 vintages
Net charge-off ratio

n/a = not applicable

The following discussion presents the residential mortgage portfolio ex-

cluding the Countrywide PCI and FHA insured loan portfolios.

We have mitigated a portion of our credit risk on the residential mortgage
portfolio through the use of synthetic securitization vehicles and long-term
standby agreements with FNMA and FHLMC as described in Note 6 – Out-
standing Loans and Leases to the Consolidated Financial Statements. At
December 31, 2010 and 2009, the synthetic securitization vehicles refer-
enced $53.9 billion and $70.7 billion of residential mortgage loans and
provided loss protection up to $1.1 billion and $1.4 billion. At December 31,
2010 and 2009, the Corporation had a receivable of $722 million and
$1.0 billion from these vehicles for reimbursement of losses. The Corporation
records an allowance for credit losses on loans referenced by the synthetic
securitization vehicles. The reported net charge-offs for the residential mort-
gage portfolio do not include the benefit of amounts reimbursable from these
vehicles. Adjusting for the benefit of the credit protection from the synthetic
securitizations, the residential mortgage net charge-off ratio for 2010 would
have been reduced by seven bps compared to 27 bps for 2009. Synthetic
securitizations and the protection provided by FNMA and FHLMC together
mitigated risk on 35 percent of our residential mortgage portfolio at both
December 31, 2010 and 2009. These credit protection agreements reduce
our regulatory risk-weighted assets due to the transfer of a portion of our
credit risk to unaffiliated parties. At December 31, 2010 and 2009, these
transactions had the cumulative effect of reducing our risk-weighted assets by
$8.6 billion and $16.8 billion, and increased our Tier 1 capital ratio by seven
bps and 11 bps and our Tier 1 common capital ratio by five bps and eight bps.
At December 31, 2010 and 2009, $14.3 billion and $6.6 billion in loans were
protected by long-term standby agreements. The Corporation does not record
an allowance for credit losses on loans protected by these long-term standby
agreements.

Bank of America 2010

Residential mortgage loans with a greater than 90 percent but less than
100 percent refreshed LTV represented 10 percent and 11 percent of the
residential mortgage portfolio at December 31, 2010 and 2009. Loans with a
refreshed LTV greater than 100 percent represented 23 percent of the
residential mortgage loan portfolio at both December 31, 2010 and 2009.
Of the loans with a refreshed LTV greater than 100 percent, 88 percent were
performing at both December 31, 2010 and 2009. Loans with a refreshed LTV
greater than 100 percent reflect loans where the outstanding carrying value of
the loan is greater than the most recent valuation of the property securing the
loan. The majority of these loans have a refreshed LTV greater than 100 per-
cent due primarily to home price deterioration from the weakened economy.
Loans to borrowers with refreshed FICO scores below 620 represented
14 percent and 12 percent of the residential mortgage portfolio at Decem-
ber 31, 2010 and 2009.

The 2006 and 2007 vintage loans, which represented 38 percent and
42 percent of our residential mortgage portfolio at December 31, 2010 and
2009, have higher refreshed LTVs and accounted for 67 percent and 69 per-
cent of nonperforming residential mortgage loans at December 31, 2010 and
2009. These vintages of loans accounted for 77 percent of residential
mortgage net charge-offs during 2010 and 75 percent during 2009.

The table below presents outstandings, nonperforming loans and net
charge-offs by certain state concentrations for the residential mortgage
portfolio. California and Florida combined represented 42 percent of out-
standings and 48 percent of nonperforming loans at December 31, 2010.
These states accounted for 54 percent of the net charge-offs for 2010
compared to 58 percent for 2009. The Los Angeles-Long Beach-Santa Ana
Metropolitan Statistical Area (MSA) within California represented 13 percent
of outstandings at both December 31, 2010 and 2009, but comprised only
seven percent of net charge-offs for both 2010 and 2009.

Table 22 Residential Mortgage State Concentrations

(Dollars in millions)

California
Florida
New York
Texas
Virginia
Other U.S./Non-U.S.

Total residential mortgage loans (1)

Total FHA insured loans
Total Countrywide purchased credit-impaired residential mortgage portfolio

Total residential mortgage loan portfolio

(1) Amount excludes the Countrywide PCI residential mortgage and FHA insured loan portfolios.

Of the residential mortgage loans, $62.5 billion, or 32 percent, at De-
cember 31, 2010 are interest-only loans of which 87 percent were perform-
ing. Nonperforming balances on interest-only residential mortgage loans were
$8.0 billion, or 45 percent of total nonperforming residential mortgages.
Additionally, net charge-offs on the interest-only portion of the portfolio rep-
resented 53 percent of the total residential mortgage net charge-offs during
2010.

The Community Reinvestment Act (CRA) encourages banks to meet the
credit needs of their communities for housing and other purposes, particularly
in neighborhoods with low or moderate incomes. At December 31, 2010, our
CRA portfolio was eight percent of the residential mortgage loan balances but
comprised 17 percent of nonperforming residential mortgage loans. This
portfolio also represented 23 percent of residential mortgage net charge-offs
during 2010.

For information on representations and warranties related to our residen-
tial mortgage portfolio, see Representations and Warranties beginning on
page 56 and Note 9 – Representations and Warranties Obligations and
Corporate Guarantees to the Consolidated Financial Statements.

December 31

Year Ended
December 31

Outstandings

Nonperforming

Net Charge-offs

2010

2009

2010

2009

2010

2009

$ 68,341
13,616
12,545
9,077
6,960
82,896

$ 81,508
15,088
15,752
9,865
7,496
88,438

$ 6,389
2,054
772
492
450
7,534

$ 5,967
1,912
632
534
450
7,101

$193,435

$218,147

$17,691

$16,596

$1,392
604
44
52
72
1,506

$3,670

$1,726
796
66
59
89
1,614

$4,350

53,946
10,592

12,905
11,077

$257,973

$242,129

Home Equity
The home equity portfolio makes up 21 percent of the consumer portfolio and
is comprised of home equity lines of credit, home equity loans and reverse
mortgages. At December 31, 2010, approximately 88 percent of the home
equity portfolio was included in Home Loans & Insurance, while the remainder
of the portfolio was primarily in GWIM. Outstanding balances in the home
equity portfolio decreased $11.1 billion at December 31, 2010 compared to
December 31, 2009 due to charge-offs, paydowns and the sale of First
Republic, partially offset by the adoption of new consolidation guidance, which
resulted in the consolidation of $5.1 billion of home equity loans on January 1,
2010. Of the loans in the home equity portfolio at December 31, 2010 and
2009, $24.8 billion and $26.0 billion, or 18 percent for both periods, were in
first-lien positions (20 percent and 19 percent excluding the Countrywide PCI
home equity loan portfolio). For more information on the Countrywide PCI
home equity loan portfolio, see the discussion beginning on page 82.

Home equity unused lines of credit totaled $80.1 billion at December 31,
2010 compared to $92.7 billion at December 31, 2009. This decrease was
due primarily to account attrition as well as line management initiatives on
deteriorating accounts and the sale of First Republic, which more than offset
new production. The home equity line of credit utilization rate was 59 percent
at December 31, 2010 compared to 57 percent at December 31, 2009.

Bank of America 2010

The table below presents certain home equity key credit statistics on both a reported basis as well as excluding the Countrywide PCI loan portfolio. We
believe the presentation of information adjusted to exclude the impacts of the Countrywide PCI loan portfolio is more representative of the credit risk in this
portfolio.

Table 23 Home Equity – Key Credit Statistics

(Dollars in millions)

Outstandings
Nonperforming loans
Percent of portfolio with refreshed CLTVs greater than 90 but less than 100
Percent of portfolio with refreshed CLTVs greater than 100
Percent of portfolio with refreshed FICOs below 620
Percent of portfolio in the 2006 and 2007 vintages
Net charge-off ratio

The following discussion presents the home equity portfolio excluding the

Countrywide PCI loan portfolio.

Nonperforming home equity loans decreased $1.1 billion to $2.7 billion
compared to December 31, 2009 driven primarily by charge-offs, including
those recorded in connection with regulatory guidance clarifying the timing of
charge-offs on collateral dependent modified loans, and nonperforming loans
returning to performing status which together outpaced delinquency inflows
and the impact of the adoption of new consolidation guidance. At Decem-
ber 31, 2010, $916 million, or 34 percent, of the nonperforming home equity
loans were 180 days or more past due and had been written down to their fair
values. Net charge-offs decreased $269 million to $6.8 billion, or 5.10 per-
cent, of total average home equity loans for 2010 compared to $7.1 billion, or
5.00 percent, for 2009. The decrease was primarily driven by favorable
portfolio trends due in part to improvement in the U.S. economy. This was
partially offset by $822 million of net charge-offs related to the implemen-
tation of regulatory guidance on collateral dependent modified loans and
$463 million of net charge-offs related to home equity loans that were
consolidated on January 1, 2010 under new consolidation guidance. Net
charge-off ratios were further impacted by lower loan balances primarily as a
result of charge-offs, paydowns and the sale of First Republic.

There are certain risk characteristics of the home equity portfolio which
have contributed to higher losses including loans with a high refreshed
combined loan-to-value (CLTV), loans originated at the peak of home prices
in 2006 and 2007 and loans in geographic areas that have experienced the
most significant declines in home prices. Home price declines coupled with
the fact that most home equity loans are secured by second-lien positions
have significantly reduced and, in some cases, eliminated all collateral value
after consideration of the first-lien position. Although the following disclosures
address each of these risk characteristics separately, there is significant
overlap in loans with these characteristics, which has contributed to a

December 31

Reported Basis

Excluding Countrywide
Purchased Credit-
impaired Loans

2010

2009

2010

2009

$137,981
2,694

$149,126
3,804

$125,391
2,694

$135,912
3,804

11%
34
14
50
4.65

12%
35
13
52
4.56

11%
30
12
47
5.10

12%
31
13
49
5.00

disproportionate share of losses in the portfolio. Home equity loans with
all of these higher risk characteristics comprised 10 percent and 11 percent
of the total home equity portfolio at December 31, 2010 and 2009, but have
accounted for 29 percent of the home equity net charge-offs in 2010 com-
pared to 38 percent in 2009.

Home equity loans with greater than 90 percent but less than 100 percent
refreshed CLTVs comprised 11 percent and 12 percent of the home equity
portfolio at December 31, 2010 and 2009. Loans with refreshed CLTVs
greater than 100 percent comprised 30 percent and 31 percent of the home
equity portfolio at December 31, 2010 and 2009. Of those loans with a
refreshed CLTV greater than 100 percent, 97 percent were performing at
December 31, 2010 while 95 percent were performing at December 31,
2009. Home equity loans and lines of credit with a refreshed CLTV greater
than 100 percent reflect loans where the carrying value and available line of
credit of the combined loans are equal to or greater than the most recent
valuation of the property securing the loan. Depending on the LTV of the first
lien, there may be collateral in excess of the first lien that is available to
reduce the severity of loss on the second lien. The majority of these high
refreshed CLTV ratios are due to home price declines. In addition, loans to
borrowers with a refreshed FICO score below 620 represented 12 percent and
13 percent of the home equity loans at December 31, 2010 and 2009. Of the
total home equity portfolio, 75 percent and 72 percent at December 31, 2010
and 2009 were interest-only loans.

The 2006 and 2007 vintage loans, which represent 47 percent and
49 percent of our home equity portfolio at December 31, 2010 and 2009,
have higher refreshed CLTVs and accounted for 57 percent of nonperforming
home equity loans at December 31, 2010 compared to 62 percent at
December 31, 2009. These vintages of loans accounted for 66 percent of
net charge-offs in 2010 compared to 72 percent in 2009.

Bank of America 2010

The table below presents outstandings, nonperforming loans and net
charge-offs by certain state concentrations for the home equity loan portfolio.
California and Florida combined represented 40 percent of the total home
equity portfolio and 44 percent of nonperforming home equity loans at
December 31, 2010. These states accounted for 55 percent of the home
equity net charge-offs for 2010 compared to 60 percent of the home equity
net charge-offs for 2009. In the New York area, the New York-Northern New
Jersey-Long Island MSA made up 11 percent of outstanding home equity loans
at both December 31, 2010 and 2009. This MSA comprised only six percent

of net charge-offs for both 2010 and 2009. The Los Angeles-Long Beach-
Santa Ana MSA within California made up 11 percent of outstanding home
equity loans at both December 31, 2010 and 2009 and comprised 11 percent
of net charge-offs for 2010 compared to 13 percent for 2009.

For information on representations and warranties related to our home
equity portfolio, see Representations and Warranties beginning on page 56
and Note 9 – Representations and Warranties Obligations and Corporate
Guarantees to the Consolidated Financial Statements.

Table 24 Home Equity State Concentrations

(Dollars in millions)

California
Florida
New Jersey
New York
Massachusetts
Other U.S./Non-U.S.

Total home equity loans (1)

Total Countrywide purchased credit-impaired home

equity loan portfolio

Total home equity loan portfolio

(1) Amount excludes the Countrywide PCI home equity loan portfolio.

December 31

Year Ended
December 31

Outstandings

Nonperforming

Net Charge-offs

2010

2009

2010

2009

2010

2009

$ 708
482
169
246
71
1,018

$2,694

$1,178
731
192
274
90
1,339

$3,804

$2,341
1,420
219
273
102
2,426

$6,781

$2,669
1,583
225
262
93
2,218

$7,050

$ 35,426
15,028
8,153
8,061
5,657
53,066

$ 38,573
16,735
8,732
8,752
6,155
56,965

$125,391

$135,912

12,590

13,214

$137,981

$149,126

Discontinued Real Estate
The discontinued real estate portfolio, totaling $13.1 billion at December 31,
2010, consisted of pay option and subprime loans acquired in the Country-
wide acquisition. Upon acquisition, the majority of the discontinued real
estate portfolio was considered credit-impaired and written down to fair value.
At December 31, 2010, the Countrywide PCI
loan portfolio comprised
$11.7 billion, or 89 percent, of the total discontinued real estate portfolio.
This portfolio is included in All Other and is managed as part of our overall ALM
activities. See Countrywide Purchased Credit-impaired Loan Portfolio begin-
ning on page 82 for more information on the discontinued real estate
portfolio.

At December 31, 2010, the purchased discontinued real estate portfolio
that was not credit-impaired was $1.4 billion. Loans with greater than 90 per-
cent refreshed LTVs and CLTVs comprised 29 percent of the portfolio and
those with refreshed FICO scores below 620 represented 46 percent of the
portfolio. California represented 37 percent of the portfolio and 34 percent of
the nonperforming loans while Florida represented 10 percent of the portfolio
and 15 percent of the nonperforming loans at December 31, 2010. The Los
Angeles-Long Beach-Santa Ana MSA within California made up 16 percent of
outstanding discontinued real estate loans at December 31, 2010.

Pay option adjustable-rate mortgages (ARMs), which are included in the
discontinued real estate portfolio, have interest rates that adjust monthly and
minimum required payments that adjust annually, subject to resetting of the
loan if minimum payments are made and deferred interest limits are reached.
Annual payment adjustments are subject to a 7.5 percent maximum change.
To ensure that contractual loan payments are adequate to repay a loan, the
fully amortizing loan payment amount is re-established after the initial five or
10-year period and again every five years thereafter. These payment adjust-
ments are not subject to the 7.5 percent limit and may be substantial due to
changes in interest rates and the addition of unpaid interest to the loan

balance. Payment advantage ARMs have interest rates that are fixed for an
initial period of five years. Payments are subject to reset if the minimum
payments are made and deferred interest limits are reached. If interest
deferrals cause a loan’s principal balance to reach a certain level within
the first 10 years of the life of the loan, the payment is reset to the interest-
only payment; then at the 10-year point, the fully amortizing payment is
required.

The difference between the frequency of changes in the loans’ interest
rates and payments along with a limitation on changes in the minimum
monthly payments of 7.5 percent per year can result in payments that are
not sufficient to pay all of the monthly interest charges (i.e., negative amor-
tization). Unpaid interest charges are added to the loan balance until the loan
balance increases to a specified limit, which can be no more than 115 percent
of the original loan amount, at which time a new monthly payment amount
adequate to repay the loan over its remaining contractual life is established.
At December 31, 2010, the unpaid principal balance of pay option loans
was $14.6 billion, with a carrying amount of $11.8 billion, including $11.0 bil-
lion of loans that were credit-impaired upon acquisition. The total unpaid
principal balance of pay option loans with accumulated negative amortization
was $12.5 billion including $858 million of negative amortization. The per-
centage of borrowers electing to make only the minimum payment on option
ARMs was 69 percent at December 31, 2010. We continue to evaluate our
exposure to payment resets on the acquired negative-amortizing loans in-
cluding the Countrywide PCI pay option loan portfolio and have taken into
consideration several assumptions regarding this evaluation (e.g., prepay-
ment rates). Based on our expectations, 11 percent and three percent of the
pay option loan portfolio are expected to reset in 2011 and 2012. Approx-
imately four percent are expected to reset thereafter and approximately
82 percent are expected to default or repay prior to being reset.

Bank of America 2010

Countrywide Purchased Credit-impaired Loan Portfolio
Loans acquired with evidence of credit quality deterioration since origination
and for which it is probable at purchase that we will be unable to collect all
contractually required payments are accounted for under the accounting
guidance for PCI loans, which addresses accounting for differences between
contractual and expected cash flows to be collected from the purchaser’s
initial investment in loans if those differences are attributable, at least in part,
to credit quality. Evidence of credit quality deterioration as of the acquisition
date may include statistics such as past due status, refreshed FICO scores
and refreshed LTVs. PCI loans are recorded at fair value upon acquisition and

the applicable accounting guidance prohibits carrying over or recording val-
uation allowances in the initial accounting. The Merrill Lynch PCI consumer
loan portfolio did not materially alter the reported credit quality statistics of
the consumer portfolios. As such, the Merrill Lynch consumer PCI loans are
excluded from the following discussion and credit statistics.

Acquired loans from Countrywide that were considered credit-impaired
were written down to fair value at the acquisition date. The following table
presents the unpaid principal balance, carrying value, allowance for loan and
lease losses and the net carrying value as a percentage of the unpaid principal
balance for the Countrywide PCI loan portfolio at December 31, 2010.

Table 25 Countrywide Purchased Credit-impaired Loan Portfolio

(Dollars in millions)

Residential mortgage
Home equity
Discontinued real estate

Total Countrywide purchased credit-impaired loan portfolio

Of the unpaid principal balance at December 31, 2010, $15.5 billion was
180 days or more past due, including $10.9 billion of first-lien and $4.6 billion
of home equity. Of the $25.9 billion that is less than 180 days past due,
$21.5 billion, or 83 percent of the total unpaid principal balance, was current
based on the contractual terms while $2.2 billion, or eight percent, was in
early stage delinquency. During 2010, we recorded $2.3 billion of provision for
credit losses on PCI loans which was comprised mainly of $1.4 billion for
home equity and $689 million for discontinued real estate loans compared to
a total provision for PCI loans of $3.3 billion in 2009. Provision expense in
2010 was driven primarily by a slower pace of expected recovery in home
prices, the result of a deteriorating view on defaults on more seasoned loans
in the portfolio and a reassessment of modification and short sale benefits as
we gain more experience with troubled borrowers. The Countrywide PCI
allowance for loan losses increased $2.5 billion from December 31, 2009
to $6.3 billion at December 31, 2010 as a result of the increase in the
provision for credit losses and the reclassification of a portion of nonaccret-
able difference to the allowance. For further information on the PCI loan
portfolio, see Note 6 – Outstanding Loans and Leases to the Consolidated
Financial Statements.

Additional information on the Countrywide PCI residential mortgage, home

equity and discontinued real estate loan portfolios follows.

December 31, 2010

Unpaid
Principal
Balance

$11,481
15,072
14,893

$41,446

Carrying
Value

$10,592
12,590
11,652

$34,834

Related
Allowance

$ 229
4,514
1,591

$6,334

Carrying
Value Net of
Allowance

% of
Unpaid Principal
Balance

$10,363
8,076
10,061

$28,500

90.26%
53.58
67.56

68.76%

Purchased Credit-impaired Residential Mortgage Loan Portfolio
The Countrywide PCI residential mortgage loan portfolio outstandings were
$10.6 billion at December 31, 2010 and comprised 30 percent of the total
Countrywide PCI loan portfolio. Those loans to borrowers with a refreshed FICO
score below 620 represented 38 percent of the Countrywide PCI residential
mortgage loan portfolio at December 31, 2010. Refreshed LTVs greater than
90 percent represented 68 percent of the PCI residential mortgage loan
portfolio after consideration of purchase accounting adjustments and 82 per-
cent based on the unpaid principal balance at December 31, 2010. Those
loans that were originally classified as discontinued real estate loans upon
acquisition and have been subsequently modified are now included in the
residential mortgage outstandings. The table below presents outstandings net
of purchase accounting adjustments, by certain state concentrations.

Table 26 Outstanding Countrywide Purchased
Credit-impaired Loan Portfolio – Residential Mortgage State
Concentrations

(Dollars in millions)

California
Florida
Virginia
Maryland
Texas
Other U.S./Non-U.S.

December 31

2010

$ 5,882
779
579
271
164
2,917

2009

$ 6,142
843
617
278
166
3,031

Total Countrywide purchased credit-impaired residential

mortgage loan portfolio

$10,592

$11,077

Bank of America 2010

Purchased Credit-impaired Home Equity Loan Portfolio
The Countrywide PCI home equity loan portfolio outstandings were $12.6 bil-
lion at December 31, 2010 and comprised 36 percent of the total Country-
wide PCI loan portfolio. Those loans with a refreshed FICO score below 620
represented 26 percent of the Countrywide PCI home equity loan portfolio at
December 31, 2010. Refreshed CLTVs greater than 90 percent represented
85 percent of the PCI home equity loan portfolio after consideration of
purchase accounting adjustments and 85 percent based on the unpaid
principal balance at December 31, 2010. The table below presents out-
standings net of purchase accounting adjustments, by certain state
concentrations.

Table 27 Outstanding Countrywide Purchased
Credit-impaired Loan Portfolio – Home Equity State
Concentrations

(Dollars in millions)

California
Florida
Virginia
Arizona
Colorado
Other U.S./Non-U.S.

December 31

2010

$ 4,178
750
532
520
375
6,235

2009

$ 4,311
765
550
542
416
6,630

Total Countrywide purchased credit-impaired home

equity loan portfolio

$12,590

$13,214

Purchased Credit-impaired Discontinued Real Estate Loan
Portfolio
The Countrywide PCI discontinued real estate loan portfolio outstandings
were $11.7 billion at December 31, 2010 and comprised 34 percent of the
total Countrywide PCI loan portfolio. Those loans to borrowers with a re-
freshed FICO score below 620 represented 62 percent of the Countrywide PCI
discontinued real estate loan portfolio at December 31, 2010. Refreshed
LTVs and CLTVs greater than 90 percent represented 55 percent of the PCI
discontinued real estate loan portfolio after consideration of purchase ac-
counting adjustments and 83 percent based on the unpaid principal balance
at December 31, 2010. Those loans that were originally classified as dis-
continued real estate loans upon acquisition and have been subsequently
modified are now excluded from this portfolio and included in the Countrywide
PCI residential mortgage loan portfolio, but remain in the PCI loan pool. The
table below presents outstandings net of purchase accounting adjustments,
by certain state concentrations.

Table 28 Outstanding Countrywide Purchased Credit-im-
paired Loan Portfolio – Discontinued Real Estate State
Concentrations

(Dollars in millions)

California
Florida
Washington
Virginia
Arizona
Other U.S./Non-U.S.

Total Countrywide purchased credit-impaired
discontinued real estate loan portfolio

December 31

2010

$ 6,322
1,121
368
344
339
3,158

2009

$ 7,148
1,315
421
399
430
3,537

$11,652

$13,250

U.S. Credit Card
Prior to the adoption of new consolidation guidance, the U.S. credit card
portfolio was reported on both a held and managed basis. Managed basis
assumed that securitized loans were not sold into credit card securitizations
and presented credit quality information as if the loans had not been sold.
Under the new consolidation guidance effective January 1, 2010, we con-
solidated the credit card securitization trusts and the new held basis is
comparable to the previously reported managed basis. For more information
on the adoption of the new consolidation guidance, see Note 8 – Securitiza-
tions and Other Variable Interest Entities to the Consolidated Financial
Statements.

The table below presents certain U.S. credit card key credit statistics on a

held basis for 2010 and managed basis for December 31, 2009.

Table 29 U.S. Credit Card – Key Credit Statistics

(Dollars in millions)

Outstandings
Accruing past due 30 days or more
Accruing past due 90 days or more

December 31
2010 (1)

$113,785
5,913
3,320

January 1
2010 (1)

$129,642
9,866
5,408

December 31
2009

$49,453
3,907
2,158

Net charge-offs
Amount
Ratios

Supplemental managed basis data

Amount
Ratios

(1) Balances reflect the impact of new consolidation guidance.
n/a = not applicable

2010

2009

$13,027

11.04%

$ 6,547

12.50%

n/a
n/a

$16,962

12.07%

The consumer U.S. credit card portfolio is managed in Global Card Ser-
vices. Outstandings in the U.S. credit card loan portfolio increased $64.3 bil-
lion compared to December 31, 2009 due to the adoption of the new
consolidation guidance. Compared to 2009, net charge-offs increased
$6.5 billion to $13.0 billion also due to the adoption of the new consolidation
guidance. U.S. credit card loans 30 days or more past due and still accruing
interest increased $2.0 billion while loans 90 days or more past due and still
accruing interest increased $1.2 billion compared to December 31, 2009 due
to the adoption of new consolidation guidance.

Compared to December 31, 2009 on a managed basis, outstandings
decreased $15.9 billion primarily as a result of charge-offs and lower origi-
nation volume. Net losses decreased $3.9 billion due to lower levels of
delinquencies and bankruptcies as a result of improvement in the U.S. econ-
omy compared to 2009 on a managed basis. The net charge-off ratio was
11.04 percent of total average U.S. credit card loans in 2010 compared to
12.07 percent in 2009 on a managed basis. U.S. credit card loans 30 days or
more past due and still accruing interest decreased $4.0 billion and loans
90 days or more past due and still accruing interest decreased $2.1 billion
compared to December 31, 2009 on a managed basis. These declines were
due to improvement in the U.S. economy including stabilization in the levels of
unemployment.

Bank of America 2010

The table below presents certain state concentrations for the U.S. credit card portfolio on a held basis for 2010 and managed basis for December 31, 2009.

Table 30 U.S. Credit Card State Concentrations

(Dollars in millions)

California
Florida
Texas
New York
New Jersey
Other U.S.

Total U.S. credit card portfolio

December 31

Outstandings

Accruing Past Due
90 Days or More

Year Ended
December 31

Net Charge-offs

2010

2009

2010

2009

2010

2009

$ 17,028
9,121
7,581
6,862
4,579
68,614

$ 20,048
10,858
8,653
7,839
5,168
77,076

$113,785

$129,642

$ 612
376
207
192
132
1,801

$3,320

$1,097
676
345
295
189
2,806

$5,408

$ 2,752
1,611
784
694
452
6,734

$ 3,558
2,178
960
855
559
8,852

$13,027

$16,962

Unused lines of credit for U.S. credit card totaled $399.7 billion at
December 31, 2010 compared to $438.5 billion at December 31, 2009
on a managed basis. The $38.8 billion decrease was driven by a combination
of account management initiatives on higher risk or inactive accounts and
tighter underwriting standards for new originations.

Non-U.S. Credit Card
Prior to the adoption of new consolidation guidance, the non-U.S. credit card
portfolio was reported on both a held and managed basis. Under the new
consolidation guidance effective January 1, 2010, we consolidated the credit
card securitization trusts and the new held basis is comparable to the
previously reported managed basis. For more information on the adoption
of the new consolidation guidance, see Note 8 – Securitizations and Other
Variable Interest Entities to the Consolidated Financial Statements.

The table below presents certain non-U.S. credit card key credit statistics

on a held basis for 2010 and managed basis for December 31, 2009.

Table 31 Non-U.S. Credit Card – Key Credit Statistics

(Dollars in millions)

Outstandings
Accruing past due 30 days or more
Accruing past due 90 days or more

December 31
2010 (1)

$27,465
1,354
599

January 1
2010 (1)

$31,182
1,744
814

December 31
2009

$21,656
1,104
515

Net charge-offs
Amount
Ratio

Supplemental managed basis data

Amount
Ratio

(1) Balances reflect the impact of new consolidation guidance.
n/a = not applicable

2010

2009

$ 2,207

7.88%

n/a
n/a

$ 1,239

6.30%

$ 2,223

7.43%

The consumer non-U.S. credit card portfolio is managed in Global Card
Services. Outstandings in the non-U.S. credit card portfolio increased $5.8 bil-
lion compared to December 31, 2009 due to the adoption of the new
consolidation guidance. Additionally, net charge-off levels and ratios for
2010, when compared to 2009, were impacted by the adoption of the new
consolidation guidance. Net charge-offs increased $1.0 billion to $2.2 billion
in 2010.

Outstandings declined $3.7 billion compared to December 31, 2009 on a
managed basis primarily due to charge-offs, lower origination volume and the
strengthening of the U.S. dollar against certain foreign currencies. Net losses

were substantially flat for 2010, decreasing $16 million from managed losses
in 2009. The net loss ratio increased to 7.88 percent of total average
non-U.S. credit card compared to 7.43 percent in 2009, due to the decrease
in outstandings.

Unused lines of credit for non-U.S. credit card totaled $60.3 billion at
December 31, 2010 compared to $69.6 billion at December 31, 2009 on a
managed basis. The $9.3 billion decrease was driven by the combination of
account management initiatives on inactive accounts, tighter underwriting
standards for new originations and the strengthening of the U.S. dollar against
certain foreign currencies, particularly the British Pound and the Euro.

Direct/Indirect Consumer
At December 31, 2010, approximately 48 percent of the direct/indirect
portfolio was included in Global Commercial Banking (dealer financial serv-
ices – automotive, marine and recreational vehicle loans), 29 percent was
included in GWIM (principally other non-real estate-secured, unsecured per-
sonal loans and securities-based lending margin loans), 15 percent was
included in Global Card Services (consumer personal loans and other non-real
estate-secured loans) and the remainder was in All Other (student loans).

Outstanding loans and leases decreased $6.9 billion to $90.3 billion at
December 31, 2010 compared to December 31, 2009 as lower outstandings
in the Global Card Services unsecured consumer lending portfolio and the
sale of a portion of the student loan portfolio were partially offset by the
adoption of new consolidation guidance, growth in securities-based lending
and the purchase of auto receivables within the dealer financial services
portfolio. Direct/indirect loans that were past due 30 days or more and still
accruing interest declined $1.1 billion compared to December 31, 2009, to
$2.6 billion due to a combination of reduced outstandings and improvement
in the unsecured consumer lending portfolio. Net charge-offs decreased
$2.1 billion to $3.3 billion in 2010, or 3.45 percent of total average di-
rect/indirect loans compared to 5.46 percent in 2009. This decrease was
primarily driven by reduced outstandings from changes in underwriting criteria
and lower levels of delinquencies and bankruptcies in the unsecured con-
sumer lending portfolio as a result of improvement in the U.S. economy
including stabilization in the levels of unemployment. An additional driver was
lower net charge-offs in the dealer financial services portfolio due to the
impact of higher credit quality originations and higher resale values. Net
charge-offs for the unsecured consumer lending portfolio decreased $1.6 bil-
lion to $2.7 billion and the net charge-off ratio decreased to 16.74 percent in
2010 compared to 17.75 percent in 2009. Net charge-offs for the dealer
financial services portfolio decreased $404 million to $487 million and the
loss rate decreased to 1.08 percent in 2010 compared to 2.16 percent in
2009.

Bank of America 2010

The table below presents certain state concentrations for the direct/indirect consumer loan portfolio.

Table 32 Direct/Indirect State Concentrations

(Dollars in millions)

California
Texas
Florida
New York
Georgia
Other U.S./Non-U.S.

Total direct/indirect loans

December 31

Outstandings

Accruing Past Due
90 Days or More

Year Ended
December 31

Net Charge-offs

2010

2009

2010

2009

2010

2009

$10,558
7,885
6,725
4,770
2,814
57,556

$11,664
8,743
7,559
5,111
3,165
60,994

$90,308

$97,236

$ 132
78
80
56
44
668

$1,058

$ 228
105
130
73
52
900

$1,488

$ 591
262
343
183
126
1,831

$1,055
382
597
272
205
2,952

$3,336

$5,463

Other Consumer
At December 31, 2010, approximately 69 percent of the $2.8 billion other
consumer portfolio was associated with portfolios from certain consumer
finance businesses that we previously exited and is included in All Other. The
remainder consisted of the non-U.S. consumer loan portfolio, of which the
vast majority we previously exited and is largely in Global Card Services and
deposit overdrafts which are recorded in Deposits.

Nonperforming Consumer Loans and Foreclosed Properties
Activity
Table 33 presents nonperforming consumer loans and foreclosed properties
activity during 2010 and 2009. Nonperforming LHFS are excluded from
nonperforming loans as they are recorded at either fair value or the lower
of cost or fair value. Nonperforming loans do not include past due consumer
credit card loans and in general, past due consumer loans not secured by real
estate as these loans are generally charged off no later than the end of the
month in which the loan becomes 180 days past due. Real estate-secured
past due consumer loans insured by the FHA are not reported as nonperform-
ing as principal repayment is insured by the FHA. Additionally, nonperforming
loans do not include the Countrywide PCI loan portfolio. For further informa-
tion regarding nonperforming loans, see Note 1 – Summary of Significant
Accounting Principles to the Consolidated Financial Statements. Nonperform-
ing loans remained relatively flat at $20.9 billion at December 31, 2010
compared to $20.8 billion at December 31, 2009 as delinquency inflows to
nonaccrual loans slowed driven by favorable portfolio trends due in part to the
improving U.S. economy. These inflows were offset by charge-offs, nonper-
forming loans returning to performing status, and paydowns and payoffs.

The outstanding balance of a real estate-secured loan that is in excess of
the estimated property value, after reducing the property value for costs to
sell, is charged off no later than the end of the month in which the account
becomes 180 days past due unless repayment of the loan is insured by the
FHA. At December 31, 2010, $15.1 billion, or 69 percent, of the nonperform-
ing consumer real estate loans and foreclosed properties had been written
down to their fair values. This was comprised of $13.9 billion of nonperform-
ing loans 180 days or more past due and $1.2 billion of foreclosed properties.
Foreclosed properties decreased $179 million in 2010. PCI loans are
excluded from nonperforming loans as these loans were written down to fair
value at the acquisition date. However, once the underlying real estate is
acquired by the Corporation upon foreclosure of the delinquent PCI loan, it is
included in foreclosed properties. Net changes to foreclosed properties
related to PCI loans were an increase of $100 million in 2010. Not included
in foreclosed properties at December 31, 2010 was $1.4 billion of real estate
that was acquired by the Corporation upon foreclosure of delinquent FHA
insured loans. We hold this real estate on our balance sheet until we convey

these properties to the FHA. We exclude these amounts from our nonperform-
ing loans and foreclosed properties activity as we will be reimbursed once the
property is conveyed to the FHA for principal and up to certain limits, costs
incurred during the foreclosure process and interest incurred during the
holding period.

Restructured Loans
Nonperforming loans also include certain loans that have been modified in
TDRs where economic concessions have been granted to borrowers experi-
encing financial difficulties. These concessions typically result from the
Corporation’s loss mitigation activities and could include reductions in the
interest rate, payment extensions, forgiveness of principal, forbearance or
other actions. Certain TDRs are classified as nonperforming at the time of
restructuring and may only be returned to performing status after considering
the borrower’s sustained repayment performance under revised payment
terms for a reasonable period, generally six months. Nonperforming TDRs,
excluding those modified loans in the Countrywide PCI loan portfolio, are
included in Table 33.

Residential mortgage TDRs totaled $11.8 billion at December 31, 2010,
an increase of $4.6 billion compared to December 31, 2009. Of these loans,
$3.3 billion were nonperforming representing an increase of $130 million in
2010, and $8.5 billion were performing representing an increase of $4.5 bil-
lion in 2010 driven by TDRs returning to performing status and new additions.
These performing TDRs are excluded from nonperforming loans in Table 33.
Residential mortgage TDRs deemed collateral dependent totaled $3.2 billion
at December 31, 2010 and included $921 million of loans classified as
nonperforming and $2.3 billion classified as performing. At December 31,
2010, performing residential mortgage TDRs included $2.5 billion that were
FHA insured.

Home equity TDRs totaled $1.7 billion at December 31, 2010, a decrease
of $673 million compared to December 31, 2009. Of these loans, $541 mil-
lion were nonperforming representing a decrease of $1.2 billion in 2010
driven primarily by nonperforming TDRs returning to performing status and
charge-offs taken to comply with regulatory guidance clarifying the timing of
charge-offs on collateral dependent modified loans. Home equity TDRs that
were performing in accordance with their modified terms were $1.2 billion
representing an increase of $514 million in 2010. These performing TDRs are
excluded from nonperforming loans in Table 33. Home equity TDRs deemed
collateral dependent totaled $796 million at December 31, 2010 and in-
cluded $245 million of loans classified as nonperforming and $551 million
classified as performing.

Discontinued real estate TDRs totaled $395 million at December 31,
2010, an increase of $13 million in 2010. Of these loans, $206 million were
nonperforming while the remaining $189 million were classified as

Bank of America 2010

performing at December 31, 2010. Discontinued real estate TDRs deemed
collateral dependent totaled $213 million at December 31, 2010 and in-
cluded $97 million of loans classified as nonperforming and $116 million
classified as performing.

TDR portfolio, on a managed basis, was $15.8 billion of which $11.5 billion
was current or less than 30 days past due under the modified terms. For more
information on the renegotiated TDR portfolio, see Note 6 – Outstanding
Loans and Leases to the Consolidated Financial Statements.

We also work with customers that are experiencing financial difficulty by
renegotiating credit card, consumer lending and small business loans (the
renegotiated TDR portfolio), while complying with Federal Financial Institutions
Examination Council (FFIEC) guidelines. Substantially all renegotiated portfo-
lio modifications are considered to be TDRs. The renegotiated TDR portfolio
may include modifications, both short- and long-term, of interest rates or
payment amounts or a combination of interest rates and payment amounts.
We make modifications primarily through internal renegotiation programs
utilizing direct customer contact, but may also utilize external renegotiation
programs. The renegotiated TDR portfolio is excluded from Table 33 as we do
not generally classify consumer non-real estate loans as nonperforming. At
December 31, 2010, our renegotiated TDR portfolio was $12.1 billion of
which $9.2 billion was current or less than 30 days past due under the
modified terms, compared to an $8.1 billion portfolio, on a held basis at
December 31, 2009, of which $5.9 billion was current or less than 30 days
past due under the modified terms. At December 31, 2009, our renegotiated

As a result of new accounting guidance on PCI loans, beginning January 1,
2010, modifications of loans in the PCI loan portfolio do not result in removal
of the loan from the PCI loan pool. TDRs in the consumer real estate portfolio
that were removed from the PCI loan portfolio prior to the adoption of new
accounting guidance were $2.1 billion and $2.3 billion at December 31, 2010
and 2009, of which $426 million and $395 million were nonperforming.
These nonperforming loans are excluded from the table below.

Nonperforming consumer real estate TDRs, included in the table below, as
a percentage of total nonperforming consumer loans and foreclosed proper-
ties, declined to 16 percent at December 31, 2010 from 21 percent at
December 31, 2009. This was due to nonperforming TDRs returning to
performing status and charge-offs, including those charged off to comply
with regulatory guidance clarifying the timing of charge-offs on collateral
dependent modified loans, both of which outpaced new additions of non-
performing TDRs.

Table 33 Nonperforming Consumer Loans and Foreclosed Properties Activity (1)

(Dollars in millions)

Nonperforming loans
Balance, January 1

Additions to nonperforming loans:

Consolidation of VIEs
New nonaccrual loans (2)
Reductions in nonperforming loans:

Paydowns and payoffs
Returns to performing status (3)
Charge-offs (4)
Transfers to foreclosed properties

Total net additions to nonperforming loans
Total nonperforming loans, December 31 (5)

Foreclosed properties
Balance, January 1

Additions to foreclosed properties:
New foreclosed properties (6, 7)
Reductions in foreclosed properties:

Sales
Write-downs

Total net reductions to foreclosed properties

Total foreclosed properties, December 31

Nonperforming consumer loans and foreclosed properties, December 31

Nonperforming consumer loans as a percentage of outstanding consumer loans
Nonperforming consumer loans and foreclosed properties as a percentage of outstanding consumer loans and

foreclosed properties

2010

2009

$20,839

$ 9,888

448
21,136

(2,809)
(7,647)
(9,772)
(1,341)

20,854

1,428

2,337

(2,327)
(189)

(179)

1,249

n/a
29,271

(1,459)
(4,540)
(10,702)
(1,619)

10,951

20,839

1,506

1,976

(1,687)
(367)

(78)

1,428

$22,103

$ 22,267

3.24%

3.43

3.61%

3.85

(1) Balances do not include nonperforming LHFS of $1.0 billion and $1.6 billion at December 31, 2010 and 2009. For more information on our definition of nonperforming loans, see the discussion beginning on page 85.
(2) 2009 includes $465 million of nonperforming loans acquired from Merrill Lynch.
(3) Consumer loans may be returned 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. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a
reasonable period, generally six months.

(4) Our policy is not to classify consumer credit card and consumer loans not secured by real estate as nonperforming; therefore, the charge-offs on these loans have no impact on nonperforming activity and accordingly are excluded from

this table.

(5) At December 31, 2010, 67 percent of nonperforming loans are 180 days or more past due and have been written down through charge-offs to 69 percent of the unpaid principal balance.
(6) Our policy is to record any losses in the value of foreclosed properties as a reduction in the allowance for loan and lease losses during the first 90 days after transfer of a loan into foreclosed properties. Thereafter, all gains and losses

in value are recorded in noninterest expense. New foreclosed properties in the table above are net of $575 million and $818 million of charge-offs during 2010 and 2009, taken during the first 90 days after transfer.

(7) 2009 includes $21 million of foreclosed properties acquired from Merrill Lynch.
n/a = not applicable

Bank of America 2010

Commercial Portfolio Credit Risk Management
Credit risk management for the commercial portfolio begins with an assess-
ment of the credit risk profile of the borrower or counterparty based on an
analysis of its financial position. As part of the overall credit risk assessment,
our commercial credit exposures 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, and if necessary,
adjusted to reflect changes in the financial condition, cash flow, risk profile, or
outlook of a borrower or counterparty. 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. Our lines
of business and risk management personnel use a variety of tools to contin-
uously monitor the ability of a borrower or counterparty to perform under its
obligations. We use risk rating aggregations to measure and evaluate con-
centrations within portfolios. In addition, risk ratings are a factor in determin-
ing the level of assigned economic capital and the allowance for credit losses.
For information on our accounting policies regarding delinquencies, non-
performing status and net charge-offs for the commercial portfolio, refer to
Note 1 – Summary of Significant Accounting Principles to the Consolidated
Financial Statements.

Management of Commercial Credit Risk Concentrations
Commercial credit risk is evaluated and managed with the 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, customer relationship and loan size. We also review,
measure and manage commercial real estate loans by geographic location
and property type. In addition, within our international portfolio, we evaluate
exposures by region and by country. Tables 38, 42, 48 and 49 summarize our
concentrations. We also utilize syndication of exposure to third parties, loan
sales, hedging and other risk mitigation techniques to manage the size and
risk profile of the commercial credit portfolio.

As part of our ongoing risk mitigation initiatives, we attempt to work with
clients to modify their loans to terms that better align with their current ability
to pay. In situations where an economic concession has been granted to a
borrower experiencing financial difficulty, we identify these loans as TDRs.

We account for certain large corporate loans and loan commitments,
including issued but unfunded letters of credit which are considered utilized
for credit risk management purposes, that exceed our single name credit risk
concentration guidelines under the fair value option. Lending commitments,

both funded and unfunded, are actively managed and monitored, and as
appropriate, credit risk for these lending relationships may be mitigated
through the use of credit derivatives, with the Corporation’s credit view and
market perspectives determining the size and timing of the hedging activity. In
addition, we purchase credit protection to cover the funded portion as well as
the unfunded portion of certain other credit exposures. 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 protection. These
credit derivatives do not meet the requirements for treatment as accounting
hedges. They are carried at fair value with changes in fair value recorded in
other income (loss).

Commercial Credit Portfolio
U.S.-based loan balances continued to decline on weak loan demand as
businesses aggressively managed their working capital and production ca-
pacity by maintaining lean inventories, staff levels, physical locations and
capital expenditures. Additionally, many borrowers continued to access the
capital markets for financing while reducing their use of bank credit facilities.
Risk mitigation strategies and net charge-offs further contributed to the
decline in loan balances. Fourth-quarter balances showed stabilization rela-
tive to prior quarters. Non-U.S. commercial loans showed strong growth from
client demand, driven by regional economic conditions and the positive impact
of our initiatives in Asia and other emerging markets.

Reservable criticized balances, net charge-offs and nonperforming loans,
leases and foreclosed property balances in the commercial credit portfolio
declined in 2010. These reductions were driven primarily by the U.S. com-
mercial and commercial real estate portfolios. U.S. commercial was driven by
broad-based improvements in terms of clients, industries and lines of busi-
ness. Commercial real estate also continued to show signs of stabilization
during 2010; however, levels of stressed commercial real estate loans
remained elevated. Most other credit indicators across the remaining com-
mercial portfolio have also improved.

Table 34 presents our commercial loans and leases, and related credit

quality information at December 31, 2010 and 2009.

Loans that were acquired from Merrill Lynch that were considered pur-
chased credit-impaired were written down to fair value upon acquisition and
amounted to $204 million and $692 million at December 31, 2010 and
2009. These loans are excluded from the nonperforming loans and accruing
balances 90 days or more past due even though the customer may be
contractually past due.

Table 34 Commercial Loans and Leases

(Dollars in millions)

U.S. commercial (2)
Commercial real estate (3)
Commercial lease financing
Non-U.S. commercial

U.S. small business commercial (4)

Total commercial loans excluding loans measured at fair value

Total measured at fair value (5)

Outstandings

Nonperforming

Accruing Past Due
90 Days or More

December 31
2010 (1)

January 1
2010 (1)

December 31
2009

December 31
2010

December 31
2009

December 31
2010

December 31
2009

$175,586
49,393
21,942
32,029

278,950
14,719

293,669
3,321

$186,675
69,377
22,199
27,079

305,330
17,526

322,856
4,936

$181,377
69,447
22,199
27,079

300,102
17,526

317,628
4,936

$3,453
5,829
117
233

9,632
204

9,836
30

$ 4,925
7,286
115
177

12,503
200

12,703
138

$236
47
18
6

307
325

632
–

$ 213
80
32
67

392
624

1,016
87

Total commercial loans and leases

$296,990

$327,792

$322,564

$9,866

$12,841

$632

$1,103

(1) Balance reflects impact of new consolidation guidance.
(2) Excludes U.S. small business commercial loans.
(3)

Includes U.S. commercial real estate loans of $46.9 billion and $66.5 billion and non-U.S. commercial real estate loans of $2.5 billion and $3.0 billion at December 31, 2010 and 2009.
Includes card-related products.

(4)

(5) Commercial loans accounted for under the fair value option include U.S. commercial loans of $1.6 billion and $3.0 billion, non-U.S. commercial loans of $1.7 billion and $1.9 billion and commercial real estate loans of $79 million and

$90 million at December 31, 2010 and 2009. See Note 23 – Fair Value Option to the Consolidated Financial Statements for additional information on the fair value option.

Bank of America 2010

Nonperforming commercial loans and leases as a percentage of out-
standing commercial loans and leases were 3.32 percent (3.35 percent
excluding loans accounted for under the fair value option) and 3.98 percent
(4.00 percent excluding loans accounted for under the fair value option) at
December 31, 2010 and 2009. Accruing commercial loans and leases past
due 90 days or more as a percentage of outstanding commercial loans and
leases were 0.21 percent (0.22 percent excluding loans accounted for under

the fair value option) and 0.34 percent (0.32 percent excluding loans ac-
counted for under the fair value option) at December 31, 2010 and 2009.
Table 35 presents net charge-offs and related ratios for our commercial
loans and leases for 2010 and 2009. Commercial real estate net charge-offs
for 2010 declined in the homebuilder portfolio and in certain segments of the
non-homebuilder portfolio.

Table 35 Commercial Net Charge-offs and Related Ratios

(Dollars in millions)

U.S. commercial (2)
Commercial real estate
Commercial lease financing
Non-U.S. commercial

U.S. small business commercial

Total commercial

Net Charge-offs

Net Charge-off
Ratios (1)

2010

2009

2010

2009

$ 881
2,017
57
111

3,066
1,918

$2,190
2,702
195
537

5,624
2,886

$4,984

$8,510

0.50% 1.09%
3.37
0.27
0.39

3.69
0.89
1.76

1.07
12.00

1.64

1.72
15.68

2.47

(1) Net charge-off ratios are calculated as net charge-offs divided by average outstanding loans and leases excluding loans accounted for under the fair value option.
(2) Excludes U.S. small business commercial loans.

Table 36 presents commercial credit exposure by type for utilized, un-
funded and total binding committed credit exposure. Commercial utilized
credit exposure includes SBLCs, financial guarantees, bankers’ acceptances
and commercial letters of credit for which the Corporation is legally bound to
advance funds under prescribed conditions, during a specified period. Al-
though funds have not yet been advanced, these exposure types are consid-
ered utilized for credit risk management purposes. Total commercial commit-
ted credit exposure decreased $68.1 billion, or eight percent, at
December 31, 2010 compared to December 31, 2009 driven primarily by
reductions in both funded and unfunded loan and lease exposure.

Total commercial utilized credit exposure decreased $45.1 billion, or nine
percent, at December 31, 2010 compared to December 31, 2009. Utilized

Table 36 Commercial Credit Exposure by Type

loans and leases declined as businesses continued to aggressively manage
working capital and production capacity, maintain low inventories and defer
capital expenditures as the economic outlook remained uncertain. Clients
also continued to access the capital markets for their funding needs to reduce
reliance on bank credit facilities. The decline in utilized loans and leases was
also due to the sale of First Republic effective July 1, 2010 and the transfer of
certain exposures into LHFS partially offset by the increase in conduit bal-
ances related to the adoption of new consolidation guidance. The utilization
rate for loans and leases, letters of credit and financial guarantees, and
bankers’ acceptances was 57 percent at both December 31, 2010 and 2009.

(Dollars in millions)

Loans and leases
Derivative assets (4)
Standby letters of credit and financial guarantees
Debt securities and other investments (5)
Loans held-for-sale
Commercial letters of credit
Bankers’ acceptances
Foreclosed properties and other

Total commercial credit exposure

December 31

Commercial Utilized (1)

Commercial Unfunded (2, 3)

Total Commercial
Committed

2010

2009

2010

2009

2010

2009

$296,990
73,000
62,027
10,216
10,380
3,372
3,706
731

$322,564
87,622
67,975
11,754
8,169
2,958
3,658
797

$272,172
–
1,511
4,546
242
1,179
23
–

$298,048
–
1,767
1,508
781
569
16
–

$569,162
73,000
63,538
14,762
10,622
4,551
3,729
731

$620,612
87,622
69,742
13,262
8,950
3,527
3,674
797

$460,422

$505,497

$279,673

$302,689

$740,095

$808,186

(1) Total commercial utilized exposure at December 31, 2010 and 2009 includes loans and issued letters of credit accounted for under the fair value option including loans outstanding of $3.3 billion and $4.9 billion and letters of credit

with a notional value of $1.4 billion and $1.7 billion.

(2) Total commercial unfunded exposure at December 31, 2010 and 2009 includes loan commitments accounted for under the fair value option with a notional value of $25.9 billion and $25.3 billion.
(3) Excludes unused business card lines which are not legally binding.
(4) Derivative assets are carried at fair value, reflect the effects of legally enforceable master netting agreements and have been reduced by cash collateral of $58.3 billion and $51.5 billion at December 31, 2010 and 2009. Not reflected

in utilized and committed exposure is additional derivative collateral held of $17.7 billion and $16.2 billion which consists primarily of other marketable securities.

(5) Total commercial committed exposure consists of $14.2 billion and $9.8 billion of debt securities and $590 million and $3.5 billion of other investments at December 31, 2010 and 2009.

Bank of America 2010

Table 37 presents commercial utilized reservable criticized exposure by
product type. Criticized exposure corresponds to the Special Mention, Sub-
standard and Doubtful asset categories as defined by regulatory authorities.
In addition to reservable loans and leases, excluding those accounted for
under the fair value option, exposure includes SBLCs, financial guarantees,
bankers’ acceptances and commercial letters of credit for which we are legally
bound to advance funds under prescribed conditions, during a specified time
period. Although funds have not been advanced, these exposure types are
considered utilized for credit risk management purposes. Total commercial

utilized reservable criticized exposure decreased $16.1 billion at Decem-
ber 31, 2010 compared to December 31, 2009, due to decreases across all
portfolios, primarily U.S. commercial and commercial real estate driven
largely by continued paydowns, payoffs and,
to a diminishing extent,
charge-offs. Despite the improvements, utilized reservable criticized levels
remain elevated in commercial real estate. At December 31, 2010, approx-
imately 88 percent of the loans within commercial utilized reservable criticized
exposure were secured.

Table 37 Commercial Utilized Reservable Criticized Exposure

(Dollars in millions)
U.S. commercial (2)
Commercial real estate
Commercial lease financing
Non-U.S. commercial

U.S. small business commercial

Total commercial utilized reservable criticized exposure

December 31

2010

2009

Amount

Percent(1)

Amount

Percent (1)

$17,195
20,518
1,188
2,043

40,944
1,677

$42,621

7.44%

38.88
5.41
5.01

11.81
11.37

11.80

$28,259
23,804
2,229
2,605

56,897
1,789

$58,686

11.77%
32.13
10.04
7.12

15.26
10.18

15.03

(1) Percentages are calculated as commercial utilized reservable criticized exposure divided by total commercial utilized reservable exposure for each exposure category.
(2) Excludes U.S. small business commercial exposure.

U.S. Commercial
At December 31, 2010, 57 percent and 25 percent of the U.S. commercial
loan portfolio, excluding small business, were included in Global Commercial
Banking and GBAM. The remaining 18 percent was mostly included in GWIM
(business-purpose loans for wealthy clients). Outstanding U.S. commercial
loans, excluding loans accounted for under the fair value option, decreased
$5.8 billion primarily due to reduced customer demand and continued client
utilization of the capital markets, partially offset by the adoption of new
consolidation guidance which increased loans by $5.3 billion on January 1,
2010. Compared to December 31, 2009, reservable criticized balances and
nonperforming loans and leases declined $11.1 billion and $1.5 billion. The
declines were broad-based in terms of borrowers and industries and were
driven by improved client credit profiles and liquidity. Net charge-offs de-
creased $1.3 billion in 2010 compared to 2009.

Commercial Real Estate
The commercial real estate portfolio is predominantly managed in Global
Commercial Banking and consists of loans made primarily to public and
private developers, homebuilders and commercial real estate firms. Out-
standing loans decreased $20.1 billion at December 31, 2010 compared

to December 31, 2009 due to portfolio attrition, the sale of First Republic,
transfer of certain assets to LHFS and net charge-offs. The portfolio remains
diversified across property types and geographic regions. California repre-
sents the largest state concentration at 18 percent of commercial real estate
loans and leases at December 31, 2010. For more information on geographic
and property concentrations, refer to Table 38.

Credit quality for commercial real estate is showing signs of stabilization;
however, we expect that elevated unemployment and ongoing pressure on
vacancy and rental rates will continue to affect primarily the non-homebuilder
portfolio. Compared to December 31, 2009, nonperforming commercial real
estate loans and foreclosed properties decreased in the homebuilder, retail
and land development property types, partially offset by an increase in office
and multi-use property types. Reservable criticized balances declined by
$3.3 billion primarily due to stabilization in the homebuilder portfolio and
retail and unsecured segments in the non-homebuilder portfolio, partially
offset by continued deterioration in the multi-family rental and office property
types within the non-homebuilder portfolio. Net charge-offs decreased
$685 million in 2010 compared to 2009 due to declines in the homebuilder
portfolio resulting from a slower rate of declining appraisal values.

Bank of America 2010

The table below presents outstanding commercial real estate loans by geographic region and property type. Commercial real estate primarily includes
commercial loans and leases secured by non owner-occupied real estate which are dependent on the sale or lease of the real estate as the primary source of
repayment. The decline in California is due primarily to the sale of First Republic.

Table 38 Outstanding Commercial Real Estate Loans

(Dollars in millions)
By Geographic Region (1)

California
Northeast
Southwest
Southeast
Midwest
Florida
Illinois
Midsouth
Northwest
Non-U.S.
Other (2)

Total outstanding commercial real estate loans (3)

By Property Type

Office
Multi-family rental
Shopping centers/retail
Industrial/warehouse
Homebuilder (4)
Multi-use
Hotels/motels
Land and land development
Other (5)

Total outstanding commercial real estate loans (3)

December 31

2010

2009

$ 9,012
7,639
6,169
5,806
5,301
3,649
2,811
2,627
2,243
2,515
1,701

$49,473

$ 9,688
7,721
7,484
5,039
4,299
4,266
2,650
2,376
5,950

$49,473

$14,554
12,089
8,641
7,019
6,662
4,589
4,527
3,459
3,097
2,994
1,906

$69,537

$12,511
11,169
9,519
5,852
7,250
5,924
6,946
3,215
7,151

$69,537

(1) Distribution is based on geographic location of collateral.
(2)

Includes unsecured outstandings to real estate investment trusts and national home builders whose portfolios of properties span multiple geographic regions and properties in the states of Colorado, Utah, Hawaii, Wyoming and
Montana.
Includes commercial real estate loans accounted for under the fair value option of $79 million and $90 million at December 31, 2010 and 2009.

(3)
(4) Homebuilder includes condominiums and residential land.
(5) Represents loans to borrowers whose primary business is commercial real estate, but the exposure is not secured by the listed property types or is unsecured.

During 2010, we continued to see stabilization in the homebuilder portfolio. Certain portions of the non-homebuilder portfolio remain most at-risk as
occupancy rates, rental rates and commercial property prices remain under pressure. We have adopted a number of proactive risk mitigation initiatives to
reduce utilized and potential exposure in the commercial real estate portfolios.

Bank of America 2010

The tables below present commercial real estate credit quality data by non-homebuilder and homebuilder property types. The homebuilder portfolio includes

condominiums and other residential real estate.

Table 39 Commercial Real Estate Credit Quality Data

(Dollars in millions)

Commercial real estate – non-homebuilder

Office
Multi-family rental
Shopping centers/retail
Industrial/warehouse
Multi-use
Hotels/motels
Land and land development
Other (3)

Total non-homebuilder
Commercial real estate – homebuilder

Total commercial real estate

Nonperforming
Loans and
Foreclosed
Properties (1)

December 31

Utilized Reservable
Criticized Exposure (2)

2010

2009

2010

2009

$1,061
500
1,000
420
483
139
820
168

4,591
1,963

$ 729
546
1,157
442
416
160
968
417

4,835
3,228

$ 3,956
2,940
2,837
1,878
1,316
1,191
1,420
1,604

17,142
3,376

$ 3,822
2,496
3,469
1,757
1,578
1,140
1,657
2,210

18,129
5,675

$6,554

$8,063

$20,518

$23,804

(1)

Includes commercial foreclosed properties of $725 million and $777 million at December 31, 2010 and 2009.

(2) Utilized reservable criticized exposure corresponds to the Special Mention, Substandard and Doubtful asset categories defined by regulatory authorities. This includes loans, excluding those accounted for under the fair value option,

SBLCs and bankers’ acceptances.

(3) Represents loans to borrowers whose primary business is commercial real estate, but the exposure is not secured by the listed property types or is unsecured.

Table 40 Commercial Real Estate Net Charge-offs and Related Ratios

(Dollars in millions)

Commercial real estate – non-homebuilder

Office
Multi-family rental
Shopping centers/retail
Industrial/warehouse
Multi-use
Hotels/motels
Land and land development
Other (2)

Total non-homebuilder
Commercial real estate – homebuilder

Total commercial real estate

Net Charge-offs

Net Charge-off
Ratios (1)

2010

2009

2010

2009

$ 273
116
318
59
143
45
377
220

1,551
466

$ 249
217
239
82
146
5
286
140

1,364
1,338

$2,017

$2,702

2.49%
1.21
3.56
1.07
2.92
1.02
13.04
3.14

2.86
8.26

3.37

2.01%
1.96
2.30
1.34
2.58
0.08
8.00
1.72

2.13
14.41

3.69

(1) Net charge-off ratios are calculated as net charge-offs divided by average outstanding loans excluding loans accounted for under the fair value option.
(2) Represents loans to borrowers whose primary business is commercial real estate, but the exposure is not secured by the listed property types or is unsecured.

At December 31, 2010, we had total committed non-homebuilder expo-
sure of $64.2 billion compared to $84.4 billion at December 31, 2009, with
the decrease due to the sale of First Republic, repayments and net charge-
offs. Non-homebuilder nonperforming loans and foreclosed properties were
$4.6 billion, or 10.08 percent of total non-homebuilder loans and foreclosed
properties at December 31, 2010 compared to $4.8 billion, or 7.73 percent,
at December 31, 2009. Non-homebuilder utilized reservable criticized expo-
sure decreased to $17.1 billion, or 35.55 percent, at December 31, 2010
compared to $18.1 billion, or 27.27 percent, at December 31, 2009. The
decrease in criticized exposure was primarily in the retail and unsecured
segments, with the ratio increasing due to declining loan balances. For the
non-homebuilder portfolio, net charge-offs increased $187 million for 2010
compared to 2009. The changes were concentrated in land development and
retail.

At December 31, 2010, we had committed homebuilder exposure of
$6.0 billion compared to $10.4 billion at December 31, 2009 of which
$4.3 billion and $7.3 billion were funded secured loans. The decline in
homebuilder committed exposure was due to repayments, net charge-offs,

reductions in new home construction and continued risk mitigation initiatives.
At December 31, 2010, homebuilder nonperforming loans and foreclosed
properties declined $1.3 billion due to repayments, net charge-offs, fewer risk
rating downgrades and a slowdown in the rate of home price declines com-
pared to December 31, 2009. Homebuilder utilized reservable criticized
exposure decreased by $2.3 billion to $3.4 billion due to repayments and
net charge-offs. The nonperforming loans, leases and foreclosed properties
and the utilized reservable criticized ratios for the homebuilder portfolio were
42.80 percent and 74.27 percent at December 31, 2010 compared to
42.16 percent and 74.44 percent at December 31, 2009. Net charge-offs
for the homebuilder portfolio decreased $872 million in 2010 compared to
2009.

At December 31, 2010 and 2009, the commercial real estate loan
portfolio included $19.1 billion and $27.4 billion of funded construction
and land development loans that were originated to fund the construction
and/or rehabilitation of commercial properties. This portfolio is mostly se-
cured and diversified across property types and geographies but faces sig-
nificant challenges in the current housing and rental markets. Weak rental

Bank of America 2010

demand and cash flows, along with declining property valuations have re-
sulted in elevated levels of reservable criticized exposure, nonperforming
loans and foreclosed properties, and net charge-offs. Reservable criticized
construction and land development loans totaled $10.5 billion and $13.9 bil-
lion at December 31, 2010 and 2009. Nonperforming construction and land
development loans and foreclosed properties totaled $4.0 billion and $5.2 bil-
lion at December 31, 2010 and 2009. During a property’s construction
phase, interest income is typically paid from interest reserves that are
established at the inception of the loan. As construction is completed and
the property is put into service, these interest reserves are depleted and
interest begins to be paid from operating cash flows. Loans continue to be
classified as construction loans until they are refinanced. We do not recognize
interest income on nonperforming loans regardless of the existence of an
interest reserve.

Non-U.S. Commercial
The non-U.S. commercial loan portfolio is managed primarily in GBAM. Out-
standing loans, excluding loans accounted for under the fair value option,
showed growth from client demand driven by regional economic conditions
and the positive impact of our initiatives in Asia and other emerging markets.
Net charge-offs decreased $426 million in 2010 compared to 2009 due to
stabilization in the portfolio. For additional information on the non-U.S. com-
mercial portfolio, refer to Non-U.S. Portfolio beginning on page 98.

U.S. Small Business Commercial
The U.S. small business commercial loan portfolio is comprised of business
card and small business loans managed in Global Card Services and Global
Commercial Banking. U.S. small business commercial net charge-offs de-
creased $968 million in 2010 compared to 2009. Although losses remain

elevated, the reduction in net charge-offs was driven by lower levels of
delinquencies and bankruptcies resulting from U.S. economic improvement
as well as the reduction of higher risk vintages and the impact of higher quality
originations. Of the U.S. small business commercial net charge-offs for 2010,
79 percent were credit card-related products compared to 81 percent during
2009.

Commercial Loans Carried at Fair Value
The portfolio of commercial loans accounted for under the fair value option is
managed primarily in GBAM. Outstanding commercial loans accounted for
under the fair value option decreased $1.6 billion to an aggregate fair value of
$3.3 billion at December 31, 2010 compared to December 31, 2009 due
primarily to reduced corporate borrowings under bank credit facilities. We
recorded net losses of $89 million resulting from new originations, loans
being paid off at par value and changes in the fair value of the loan portfolio
during 2010 compared to net gains of $515 million during 2009. These
amounts were primarily attributable to changes in instrument-specific credit
risk and were largely offset by gains or losses from hedging activities.

In addition, unfunded lending commitments and letters of credit had an
aggregate fair value of $866 million and $950 million at December 31, 2010
and 2009 and were recorded in accrued expenses and other liabilities. The
associated aggregate notional amount of unfunded lending commitments and
letters of credit accounted for under the fair value option were $27.3 billion
and $27.0 billion at December 31, 2010 and 2009. Net gains resulting from
new originations, terminations and changes in the fair value of commitments
and letters of credit of $172 million were recorded during 2010 compared to
net gains of $1.4 billion for 2009. These gains were primarily attributable to
changes in instrument-specific credit risk.

Bank of America 2010

Nonperforming Commercial Loans, Leases and Foreclosed
Properties Activity
The table below presents the nonperforming commercial loans, leases and
foreclosed properties activity during 2010 and 2009. The $2.9 billion
decrease at December 31, 2010 compared to December 31, 2009 was
driven by paydowns, payoffs and charge-offs in the commercial real estate and
U.S. commercial portfolios. Approximately 95 percent of commercial

nonperforming loans, leases and foreclosed properties are secured and
approximately 40 percent are contractually current. In addition, commercial
nonperforming loans are carried at approximately 68 percent of their unpaid
principal balance before consideration of the allowance for loan and lease
losses as the carrying value of these loans has been reduced to the estimated
net realizable value.

Table 41 Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity (1, 2)

(Dollars in millions)

Nonperforming loans and leases, January 1

Additions to nonperforming loans and leases:
Merrill Lynch balance, January 1, 2009
New nonaccrual loans and leases
Advances

Reductions in nonperforming loans and leases:

Paydowns and payoffs
Sales
Returns to performing status (3)
Charge-offs (4)
Transfers to foreclosed properties
Transfers to loans held-for-sale

Total net additions (reductions) to nonperforming loans and leases

Total nonperforming loans and leases, December 31

Foreclosed properties, January 1

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

Sales
Write-downs

Total net additions (reductions) to foreclosed properties

Total foreclosed properties, December 31

2010

$12,703

2009

$ 6,497

–
7,809
330

(3,938)
(841)
(1,607)
(3,221)
(1,045)
(354)

(2,867)

9,836

777

818

(780)
(90)

(52)

725

402
16,190
339

(3,075)
(630)
(461)
(5,626)
(857)
(76)

6,206

12,703

321

857

(310)
(91)

456

777

Nonperforming commercial loans, leases and foreclosed properties, December 31

Nonperforming commercial loans and leases as a percentage of outstanding commercial loans and leases (5)
Nonperforming commercial loans, leases and foreclosed properties as a percentage of outstanding commercial loans,

leases and foreclosed properties (5)

$10,561

$13,480

3.35%

3.59

4.00%

4.23

(1) Balances do not include nonperforming LHFS of $1.5 billion and $4.5 billion at December 31, 2010 and 2009.
(2)
(3) 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-

Includes U.S. small business commercial activity.

secured and is in the process of collection. TDRs are generally classified as performing after a sustained period of demonstrated payment performance.

(4) Business card loans are not classified as nonperforming; therefore, the charge-offs on these loans have no impact on nonperforming activity and accordingly are excluded from this table.
(5) Outstanding commercial loans and leases exclude loans accounted for under the fair value option.

At December 31, 2010, the total commercial TDR balance was $1.2 bil-
lion. Nonperforming TDRs were $952 million and are included in Table 41.
Nonperforming TDRs increased $466 million while performing TDRs in-
creased $147 million during 2010.

U.S. commercial TDRs were $356 million, an increase of $60 million for
the year ended December 31, 2010. Nonperforming U.S. commercial TDRs
decreased $52 million during 2010, while performing TDRs excluded from
nonperforming loans in Table 41 increased $112 million.

At December 31, 2010, the commercial real estate TDR balance was
$815 million, an increase of $547 million during 2010. Nonperforming TDRs
increased $524 million during the year, while performing TDRs increased
$23 million.

At December 31, 2010 the non-U.S. commercial TDR balance was $19 mil-
lion, an increase of $6 million. Nonperforming TDRs decreased $6 million
during the year, while performing TDRs increased $12 million.

Industry Concentrations
Table 42 presents commercial committed and utilized credit exposure by
industry and the total net credit default protection purchased to cover the
funded and unfunded portions of certain credit exposures. Our commercial

credit exposure is diversified across a broad range of industries. The decline
in commercial committed exposure of $68.1 billion from December 31, 2009
to December 31, 2010 was broad-based across most industries.

Industry limits are used internally to manage industry concentrations and
are based on committed exposures and capital usage that are allocated on an
industry-by-industry basis. A risk management framework is in place to set and
approve industry limits, as well as to provide ongoing monitoring. Manage-
ment’s Credit Risk Committee (CRC) oversees industry limit governance.

Diversified financials, our largest industry concentration, experienced a
decrease in committed exposure of $25.8 billion, or 24 percent, at Decem-
ber 31, 2010 compared to December 31, 2009. This decrease was driven
primarily by a reduction in exposure to conduits tied to the consumer finance
industry.

Real estate, our second largest industry concentration, experienced a
decrease in committed exposure of $21.1 billion, or 23 percent, at Decem-
ber 31, 2010 compared to December 31, 2009 due primarily to portfolio
attrition. Real estate construction and land development exposure repre-
sented 27 percent of the total real estate industry committed exposure at
December 31, 2010. For more information on the commercial real estate and
related portfolios, refer to Commercial Real Estate beginning on page 89.

Bank of America 2010

The $11.8 billion, or 34 percent, decline in individuals and trusts com-
mitted exposure was largely due to the unwinding of two derivative transac-
tions. Committed exposure in the banking industry increased $6.3 billion, or
27 percent, at December 31, 2010 compared to December 31, 2009
primarily due to increases in both traded products and loan exposure as a
result of momentum from growth initiatives. The decline of $4.5 billion, or
10 percent, in consumer services was concentrated in gaming and restau-
rants. Committed exposure for the commercial services and supplies industry
declined $4.1 billion, or 12 percent, primarily due to reduced loan demand
and the sale of First Republic.

The recent economic downturn has had a residual effect on debt issued by
state and local municipalities and certain exposures to these municipalities.
While historically default rates were low, stress on the municipalities’ finan-
cials due to the economic downturn has increased the potential for defaults in
the near term. As part of our overall and ongoing risk management processes,
we continually monitor these exposures through a rigorous review process.
Additionally, internal communications surrounding certain at-risk counterpar-
ties and/or sectors are regularly circulated ensuring exposure levels are
compliant with established concentration guidelines.

Monoline and Related Exposure
Monoline exposure is reported in the insurance industry and managed under
insurance portfolio industry limits. Direct loan exposure to monolines con-
sisted of revolvers in the amount of $51 million and $41 million at Decem-
ber 31, 2010 and 2009.

We have indirect exposure to monolines primarily in the form of guaran-
tees supporting our loans, investment portfolios, securitizations and credit-
enhanced securities as part of our public finance business and other selected
products. Such indirect exposure exists when we purchase credit protection

from monolines to hedge all or a portion of the credit risk on certain credit
exposures including loans and CDOs. We underwrite our public finance
exposure by evaluating the underlying securities.

We also have indirect exposure to monolines, primarily in the form of
guarantees supporting our mortgage and other loan sales. Indirect exposure
may exist when credit protection was purchased from monolines to hedge all
or a portion of the credit risk on certain mortgage and other loan exposures. A
loss may occur when we are required to repurchase a loan and the market
value of the loan has declined or we are required to indemnify or provide
recourse for a guarantor’s loss. For additional information regarding our
exposure to representations and warranties, see Note 9 – Representations
and Warranties Obligations and Corporate Guarantees to the Consolidated
Financial Statements and Representations and Warranties beginning on
page 56. For additional information regarding monolines, see Note 14 –
Commitments and Contingencies to the Consolidated Financial Statements.
Monoline derivative credit exposure at December 31, 2010 had a notional
value of $38.4 billion compared to $42.6 billion at December 31, 2009.
Mark-to-market monoline derivative credit exposure was $9.2 billion at De-
cember 31, 2010 compared to $11.1 billion at December 31, 2009 with the
decrease driven by positive valuation adjustments on legacy assets and
terminated monoline contracts. At December 31, 2010, the counterparty
credit valuation adjustment related to monoline derivative exposure was
$5.3 billion compared to $6.0 billion at December 31, 2009. This reduced
our net mark-to-market exposure to $3.9 billion at December 31, 2010
compared to $5.1 billion at December 31, 2009. At December 31, 2010,
approximately 62 percent of this exposure was related to one monoline
compared to approximately 54 percent at December 31, 2009. We do not
hold collateral against these derivative exposures. For more information on
our monoline exposure, see GBAM beginning on page 49.

Bank of America 2010

We also have indirect exposure to monolines as we invest in securities
where the issuers have purchased wraps (i.e., insurance). For example,
municipalities and corporations purchase insurance in order to reduce their
cost of borrowing. If the ratings agencies downgrade the monolines, the credit
rating of the bond may fall and may have an adverse impact on the market
value of the security. In the case of default, we first look to the underlying

securities and then to recovery on the purchased insurance. Investments in
securities issued by municipalities and corporations with purchased wraps at
December 31, 2010 and 2009 had a notional value of $2.4 billion and
$5.0 billion. Mark-to-market investment exposure was $2.2 billion at Decem-
ber 31, 2010 compared to $4.9 billion at December 31, 2009.

Table 42 Commercial Credit Exposure by Industry (1)

(Dollars in millions)

Diversified financials
Real estate (2)
Government and public education
Healthcare equipment and services
Capital goods
Retailing
Consumer services
Materials
Commercial services and supplies
Banks
Food, beverage and tobacco
Energy
Insurance, including monolines
Utilities
Individuals and trusts
Media
Transportation
Pharmaceuticals and biotechnology
Technology hardware and equipment
Religious and social organizations
Software and services
Telecommunication services
Consumer durables and apparel
Food and staples retailing
Automobiles and components
Other

December 31

Commercial Utilized

Total Commercial
Committed

2010

2009

2010

2009

$ 55,196
58,531
44,131
30,420
21,940
24,660
24,759
15,873
20,056
26,831
14,777
9,765
17,263
6,990
18,278
11,611
12,070
3,859
4,373
8,409
3,837
3,823
4,297
3,222
2,090
13,361

$ 69,259
75,049
44,151
29,584
23,911
23,671
28,704
16,373
23,892
20,299
14,812
9,605
20,613
9,217
25,941
14,020
13,724
2,875
3,416
8,920
3,216
3,558
4,409
3,680
2,379
10,219

$ 83,248
72,004
59,594
47,569
46,087
43,950
39,694
33,046
30,517
29,667
28,126
26,328
24,417
24,207
22,899
20,619
18,436
11,009
10,932
10,823
9,531
9,321
8,836
6,161
5,941
17,133

$109,079
93,147
61,998
46,870
48,184
42,414
44,214
33,233
34,646
23,384
28,079
23,619
28,033
25,316
34,698
22,886
20,101
10,626
10,516
11,374
9,359
9,478
9,998
6,562
6,359
14,013

Total commercial credit exposure by industry
Net credit default protection purchased on total commitments (3)

$460,422

$505,497

$740,095
$ (20,118)

$808,186
$ (19,025)

(1)

(2)

Includes U.S. small business commercial exposure.
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 on the borrowers’ or counterparties’ primary business activity using operating
cash flows and primary source of repayment as key factors.

(3) Represents net notional credit protection purchased. See Risk Mitigation below for additional information.

Risk Mitigation
We purchase credit protection to cover the funded portion as well as the
unfunded portion of certain credit exposures. To lower the cost of obtaining
our desired credit protection levels, credit exposure may be added within an
industry, borrower or counterparty group by selling protection.

At December 31, 2010 and 2009, net notional credit default protection
purchased in our credit derivatives portfolio to hedge our funded and un-
funded exposures for which we elected the fair value option, as well as certain
other credit exposures, was $20.1 billion and $19.0 billion. The mark-to-mar-
ket effects, including the cost of net credit default protection hedging our

credit exposure, resulted in net losses of $546 million during 2010 compared
to net losses of $2.9 billion in 2009. The average Value-at-Risk (VaR) for these
credit derivative hedges was $53 million for 2010 compared to $76 million for
2009. The average VaR for the related credit exposure was $65 million in
2010 compared to $130 million in 2009. There is a diversification effect
between the net credit default protection hedging our credit exposure and the
related credit exposure such that the combined average VaR was $41 million
for 2010, compared to $89 million for 2009. Refer to Trading Risk Manage-
ment beginning on page 104 for a description of our VaR calculation for the
market-based trading portfolio.

Bank of America 2010

Tables 43 and 44 present the maturity profiles and the credit exposure debt ratings of the net credit default protection portfolio at December 31, 2010 and
2009. The distribution of debt ratings for net notional credit default protection purchased is shown as a negative amount and the net notional credit protection
sold is shown as a positive amount.

Table 43 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 net credit default protection

Table 44 Net Credit Default Protection by Credit Exposure Debt Rating (1)

(Dollars in millions)
Ratings (2)
AAA
AA
A
BBB
BB
B
CCC and below
NR (3)

Total net credit default protection

December 31

2010

2009

14%
80
6

16%
81
3

100%

December 31

2010

2009

Net
Notional

Percent of
Total

Net
Notional

Percent of
Total

–
(188)
(6,485)
(7,731)
(2,106)
(1,260)
(762)
(1,586)

0.0%
0.9
32.2
38.4
10.5
6.3
3.8
7.9

15
(344)
(6,092)
(9,573)
(2,725)
(835)
(1,691)
2,220

(0.1)%
1.8
32.0
50.4
14.3
4.4
8.9
(11.7)

$(20,118)

100.0%

$(19,025)

100.0%

(1) Ratings are refreshed on a quarterly basis.
(2) The Corporation considers ratings of BBB- or higher to meet the definition of investment grade.
(3)

In addition to names which have not been rated, “NR” includes $(1.5) billion and $2.3 billion in net credit default swaps index positions at December 31, 2010 and 2009. While index positions are principally investment grade, credit
default swaps indices include names in and across each of the ratings categories.

In addition to our net notional credit default protection purchased to cover
the funded and unfunded portion of certain credit exposures, credit deriva-
tives are used for market-making activities for clients and establishing posi-
tions intended to profit from directional or relative value changes. We execute
the majority of our credit derivative trades in the OTC market with large,
multinational financial institutions, including broker/dealers and, to a lesser
degree, with a variety of other investors. Because these transactions are
executed in the OTC market, we are subject to settlement risk. We are also

subject to credit risk in the event that these counterparties fail to perform
under the terms of these contracts. In most cases, credit derivative trans-
actions are executed on a daily margin basis. Therefore, events such as a
credit downgrade, depending on the ultimate rating level, or a breach of credit
covenants would typically require an increase in the amount of collateral
required of the counterparty, where applicable, and/or allow us to take
additional protective measures such as early termination of all trades.

Bank of America 2010

The notional amounts presented in Table 45 represent the total contract/
notional amount of credit derivatives outstanding and include both purchased
and written credit derivatives. The credit risk amounts are 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. For infor-
mation on the performance risk of our written credit derivatives, see Note 4 –
Derivatives to the Consolidated Financial Statements.

The credit risk amounts discussed on page 96 and noted in the table
below take into consideration the effects of legally enforceable master netting
agreements while amounts disclosed in Note 4 – Derivatives to the Consol-
idated Financial Statements are shown on a gross basis. Credit risk reflects
the potential benefit from offsetting exposure to non-credit derivative products
with the same counterparties that may be netted upon the occurrence of
certain events, thereby reducing the Corporation’s overall exposure.

Table 45 Credit Derivatives

(Dollars in millions)

Purchased credit derivatives:
Credit default swaps
Total return swaps/other

Total purchased credit derivatives

Written credit derivatives:
Credit default swaps
Total return swaps/other

Total written credit derivatives

Total credit derivatives

n/a = not applicable

December 31

2010

2009

Contract/
Notional

Credit Risk

Contract/
Notional

Credit Risk

$2,184,703
26,038

2,210,741

$18,150
1,013

19,163

$2,800,539
21,685

$25,964
1,740

2,822,224

27,704

2,133,488
22,474

2,155,962

n/a
n/a

n/a

2,788,760
33,109

2,821,869

n/a
n/a

n/a

$4,366,703

$19,163

$5,644,093

$27,704

Counterparty Credit Risk Valuation Adjustments
We record a counterparty credit risk valuation adjustment on certain derivative
assets, including our credit default protection purchased, in order to properly
reflect the credit quality of the counterparty. These adjustments are neces-
sary as the market quotes on derivatives do not fully reflect the credit risk of
the counterparties to the derivative assets. We consider collateral and legally
enforceable master netting agreements that mitigate our credit exposure to
each counterparty in determining the counterparty credit risk valuation ad-
justment. All or a portion of these counterparty credit risk valuation adjust-
ments are reversed or otherwise adjusted in future periods due to changes in
the value of the derivative contract, collateral and creditworthiness of the
counterparty.

During 2010 and 2009, credit valuation gains (losses) of $731 million and
$3.1 billion ($(8) million and $1.7 billion, net of hedges) were recognized in
trading account profits (losses) for counterparty credit risk related to deriv-
ative assets. For additional information on gains or losses related to the
counterparty credit risk on derivative assets, refer to Note 4 – Derivatives to
the Consolidated Financial Statements. For information on our monoline
counterparty credit risk, see the discussions beginning on pages 51 and
90, and for information on our CDO-related counterparty credit risk, see GBAM
beginning on page 49.

Bank of America 2010

Non-U.S. Portfolio
Our non-U.S. credit and trading portfolios are subject to country risk. We
define country risk as the risk of loss from unfavorable economic and political
conditions, currency fluctuations, social instability and changes in govern-
ment policies. A risk management framework is in place to measure, monitor
and manage non-U.S. risk and exposures. Management oversight of country
risk, including cross-border risk, is provided by the Regional Risk Committee, a
subcommittee of the CRC.

The following table sets forth total non-U.S. exposure broken out by region
at December 31, 2010 and 2009. Non-U.S. exposure includes credit

exposure net of local liabilities, securities and other investments issued by
or domiciled in countries other than the U.S. Total non-U.S. exposure can be
adjusted for externally guaranteed loans outstanding and certain collateral
types. Exposures which are subject to external guarantees are reported under
the country of the guarantor. Exposures 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. Resale agreements are generally presented
based on the domicile of the counterparty consistent with FFIEC reporting
requirements.

Table 46 Regional Non-U.S. Exposure (1, 2, 3)

(Dollars in millions)

Europe
Asia Pacific
Latin America
Middle East and Africa
Other

Total

December 31

2010

$148,078
73,255
14,848
3,688
22,188

$262,057

2009

$170,796
47,645
19,516
3,906
15,799

$257,662

(1) Local funding or liabilities are subtracted from local exposures consistent with FFIEC reporting requirements.
(2) Derivative assets included in the exposure amounts have been reduced by the amount of cash collateral applied of $44.2 billion and $34.3 billion at December 31, 2010 and 2009.
(3) Generally, resale agreements are presented based on the domicile of the counterparty, consistent with FFIEC reporting requirements. Cross-border resale agreements where the underlying securities are U.S. Treasury securities, in

which case the domicile is the U.S., are excluded from this presentation.

Our total non-U.S. exposure was $262.1 billion at December 31, 2010, an
increase of $4.4 billion from December 31, 2009. Our non-U.S. exposure
remained concentrated in Europe which accounted for $148.1 billion, or
57 percent, of total non-U.S. exposure. The European exposure was mostly
in Western Europe and was distributed across a variety of industries. The
decrease of $22.7 billion in Europe was primarily driven by our efforts to
reduce exposure in the peripheral Eurozone countries and sale or maturity of
securities in the U.K. Select European countries are further detailed in Table
49. Asia Pacific was our second largest non-U.S. exposure at $73.3 billion, or
28 percent. The $25.6 billion increase in Asia Pacific was predominantly
driven by a required change in accounting for our CCB investment, increased
securities exposure in Japan, and increased securities and loan exposure in
other Asia Pacific emerging markets. For more information on the required
change in accounting for our CCB investment, refer to Note 5 – Securities to
the Consolidated Financial Statements. Latin America accounted for $14.8 bil-
lion, or six percent, of total non-U.S. exposure. The $4.7 billion decrease in
Latin America was primarily driven by the sale of our equity investments in Itaú
Unibanco and Santander. Other non-U.S. exposure was $22.2 billion at

December 31, 2010, an increase of $6.4 billion from the prior year resulting
from an increase in Canadian cross-border loans. For more information on our
Asia Pacific and Latin America exposure, see non-U.S. exposure to selected
countries defined as emerging markets on page 99.

As shown in Table 47, the United Kingdom, France and China had total
cross-border exposure greater than one percent of our total assets and were
the only countries where total cross-border exposure exceeded one percent of
our total assets at December 31, 2010. At December 31, 2010, Canada and
Japan had total cross-border exposure of $17.9 billion and $17.0 billion
representing 0.79 percent and 0.75 percent of total assets. Canada and
Japan were the only other countries that had total cross-border exposure that
exceeded 0.75 percent of our total assets at December 31, 2010.

Exposure includes cross-border claims by our non-U.S. offices including
loans, acceptances, time deposits placed, trading account assets, securities,
derivative assets, other interest-earning investments and other monetary
assets. Amounts also include unused commitments, SBLCs, commercial
letters of credit and formal guarantees. Sector definitions are consistent with
FFIEC reporting requirements for preparing the Country Exposure Report.

Table 47 Total Cross-border Exposure Exceeding One Percent of Total Assets (1)

(Dollars in millions)

December 31

Public Sector

Banks

Private Sector

Cross-border
Exposure

Exposure as a
Percentage of
Total Assets

United Kingdom

1.68%
2.73
France (2)
1.09
China (2)
1.06
(1) At December 31, 2010, total cross-border exposure for the United Kingdom, France and China included derivatives exposure of $2.3 billion, $1.7 billion and $870 million, respectively, which has been reduced by the amount of cash
collateral applied of $13.0 billion, $6.9 billion and $130 million, respectively. Derivative assets were collateralized by other marketable securities of $96 million, $26 million and $71 million, respectively, at December 31, 2010.

$37,999
60,715
24,773
23,928

$32,354
52,080
15,685
1,534

$ 5,544
8,478
8,110
21,617

$101
157
978
777

2010
2009
2010
2010

(2) At December 31, 2009, total cross-border exposure for France and China was $17.4 billion and $12.1 billion, representing 0.78 percent and 0.54 percent of total assets.

Bank of America 2010

As presented in Table 48, non-U.S. exposure to borrowers or counterparties
in emerging markets increased $14.5 billion to $65.1 billion at December 31,
2010 compared to $50.6 billion at December 31, 2009. The increase was
due to an increase in the Asia Pacific region which was partially offset by a

decrease in Latin America. Non-U.S. exposure to borrowers or counterparties in
emerging markets represented 25 percent and 20 percent of total non-U.S. ex-
posure at December 31, 2010 and 2009.

Table 48 Selected Emerging Markets (1)

(Dollars in millions)

Region/Country
Asia Pacific
China
India
South Korea
Singapore
Hong Kong
Taiwan
Thailand
Other Asia Pacific (7)
Total Asia Pacific

Latin America
Brazil
Mexico
Chile
Colombia
Peru
Other Latin America (7)

Total Latin America

Middle East and Africa

United Arab Emirates
Bahrain
South Africa
Other Middle East and Africa (7)

Total Middle East and Africa

Central and Eastern Europe
Russian Federation
Turkey
Other Central and Eastern Europe (7)
Total Central and Eastern Europe

Total emerging market exposure

Loans and
Leases, and
Loan
Commitments

Other
Financing (2)

Derivative
Assets (3)

Securities/
Other
Investments (4)

Total Cross-
border
Exposure (5)

Total
Emerging
Market
Exposure at
December 31,
2010

Increase
(Decrease)
From
December 31,
2009

Local Country
Exposure Net
of Local
Liabilities (6)

$ 1,064
3,292
621
560
349
283
20
298

$1,237
1,590
1,156
75
516
64
17
32

$ 870
607
585
442
242
84
39
145

$20,757
2,013
2,009
1,469
935
692
569
239

$23,928
7,502
4,371
2,546
2,042
1,123
645
714

–
766
908
–
–
732
24
–

6,487

4,687

3,014

28,683

42,871

2,430

1,033
1,917
954
132
231
74

4,341

967
78
406
441

1,892

264
269
148

681

293
305
132
460
150
167

560
303
401
10
16
10

1,507

1,300

6
–
7
55

133
165
210

508

154
3
56
132

345

35
14
277

326

2,355
1,860
38
75
121
456

4,905

49
1,079
102
153

1,383

104
52
618

774

4,241
4,385
1,525
677
518
707

12,053

1,176
1,160
571
781

3,688

536
500
1,253

2,289

1,565
–
1
–
–
153

1,719

–
–
–
–

–

–
–
–

–

$23,928
8,268
5,279
2,546
2,042
1,855
669
714

45,301

5,806
4,385
1,526
677
518
860

13,772

1,176
1,160
571
781

3,688

536
500
1,253

2,289

$11,865
2,108
268
1,678
940
1,126
482
(130)

18,337

(3,648)
(1,086)
365
481
248
(154)

(3,794)

456
27
(577)
13

(81)

(133)
112
35

$13,401

$6,770

$4,985

$35,745

$60,901

$4,149

$65,050

$14,476

(1) There is no generally accepted definition of emerging markets. The definition that we use includes all countries in Asia Pacific excluding Japan, Australia and New Zealand; all countries in Latin America excluding Cayman Islands and
Bermuda; all countries in Middle East and Africa; and all countries in Central and Eastern Europe. At December 31, 2010, there was $460 million in emerging market exposure accounted for under the fair value option, none at
December 31, 2009.
Includes acceptances, due froms, SBLCs, commercial letters of credit and formal guarantees.

(2)
(3) Derivative assets are carried at fair value and have been reduced by the amount of cash collateral applied of $1.2 billion and $557 million at December 31, 2010 and 2009. At December 31, 2010 and 2009, there were $408 million

and $616 million of other marketable securities collateralizing derivative assets.

(4) Generally, cross-border resale agreements are presented based on the domicile of the counterparty, consistent with FFIEC reporting requirements. Cross-border resale agreements where the underlying securities are U.S. Treasury

securities, in which case the domicile is the U.S., are excluded from this presentation.

(5) Cross-border exposure includes amounts payable to the Corporation 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 requirements.

(6) Local country exposure includes amounts payable to the Corporation 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 consistent with FFIEC reporting requirements. Total amount of available local liabilities funding local country exposure at December 31, 2010 was $15.7 billion compared to $17.6 billion at
December 31, 2009. Local liabilities at December 31, 2010 in Asia Pacific, Latin America, and Middle East and Africa were $15.1 billion, $451 million and $193 million, respectively, of which $7.9 billion was in Singapore, $1.8 billion
in both China and Hong Kong, $1.2 billion in India, $802 million in South Korea and $573 million in Taiwan. There were no other countries with available local liabilities funding local country exposure greater than $500 million.

(7) No country included in Other Asia Pacific, Other Latin America, Other Middle East and Africa, and Other Central and Eastern Europe had total non-U.S. exposure of more than $500 million.

At December 31, 2010 and 2009, 70 percent and 53 percent of the
emerging markets exposure was in Asia Pacific. Emerging markets exposure
in Asia Pacific increased by $18.3 billion primarily driven by our equity
investment in CCB, which accounted for $10.6 billion, or 58 percent, of
the increase in Asia, and increases in loans in India and securities in
Singapore. The increase in our equity investment in CCB was driven by a
required change in accounting. For more information on our CCB investment,
refer to Note 5 – Securities to the Consolidated Financial Statements.

At December 31, 2010 and 2009, 21 percent and 35 percent of the
emerging markets exposure was in Latin America. Latin America emerging
markets exposure decreased $3.8 billion driven by the sale of our equity
investments in Itaú Unibanco and Santander, which accounted for $5.4 billion
and $2.5 billion at December 31, 2009, partially offset by increased loans
across the region. For more information on these sales, refer to Note 5 –
Securities to the Consolidated Financial Statements.

At December 31, 2010 and 2009, six percent and seven percent of the
emerging markets exposure was in Middle East and Africa, with a decrease of

Bank of America 2010

$81 million primarily driven by a decrease in securities in South Africa, offset by
increases in loans in the United Arab Emirates and South Africa, and securities
in Bahrain. At December 31, 2010 and 2009, three percent and five percent of
the emerging markets exposure was in Central and Eastern Europe.

Certain European countries, including Greece, Ireland, Italy, Portugal and
Spain, are currently experiencing varying degrees of financial stress. These
countries have had certain credit ratings lowered by ratings services during
2010. Risks from the debt crisis in Europe could result in a disruption of the

financial markets which could have a detrimental impact on the global eco-
nomic recovery and sovereign and non-sovereign debt in these countries. The
table below shows our direct sovereign and non-sovereign exposures, exclud-
ing consumer credit card exposure, in these countries at December 31, 2010.
The total exposure to these countries was $15.8 billion at December 31,
2010 compared to $25.5 billion at December 31, 2009. The $9.7 billion
decrease since December 31, 2009 was driven primarily by the sale or
maturity of sovereign and non-sovereign securities in all countries.

Table 49 Selected European Countries

(Dollars in millions)

Greece

Sovereign
Non-sovereign

Total Greece

Ireland

Sovereign
Non-sovereign

Total Ireland

Italy

Sovereign
Non-sovereign

Total Italy

Portugal

Sovereign
Non-sovereign

Total Portugal

Spain

Sovereign
Non-sovereign

Total Spain

Total

Sovereign
Non-sovereign

Total selected European exposure

Loans and
Leases, and
Loan
Commitments

Other
Financing (1)

Derivative
Assets (2)

Securities/
Other
Investments (3)

Total Cross-
border
Exposure (4)

Local
Country
Exposure Net
of Local
Liabilities (5)

Total Non-
U.S.
Exposure at
December 31,
2010

Credit Default
Protection (6)

–
260

$ 260

7
1,641

$1,648

–
967

$ 967

–
65

25
1,028

$1,053

32
3,961

$3,993

–
2

$ 326
524

–
43

22
152

$ 103
69

$ 172

52
267

103
374

477

407
2,584

$ 850

$ 174

$ 319

$ 2,991

–
639

$1,247
560

$ 639

$1,807

–
55

–
40

36
26

36
382

$ 418

$ 326
1,260

$1,341
1,163

$1,586

$2,504

21
1,310

$1,331

–
344

$ 344

–
1,872

$1,872

$ 176
3,862

$4,038

$ 1,268
3,476

$ 4,744

36
490

526

61
3,322

$ 3,383

$ 1,875
10,246

$12,121

–
–

–

–
–

–

1
1,792

$1,793

–
–

–

40
1,835

$1,875

41
3,627

$3,668

103
374

477

407
2,584

$ 2,991

$ 1,269
5,268

$ 6,537

36
490

526

101
5,157

$ 5,258

$ 1,916
13,873

$15,789

(23)
–

(23)

–
(15)

(15)

$(1,136)
(67)

$(1,203)

(19)
–

(19)

(57)
(7)

(64)

$(1,235)
(89)

$(1,324)

Includes acceptances, due froms, SBLCs, commercial letters of credit and formal guarantees.

(1)
(2) Derivative assets are carried at fair value and have been reduced by the amount of cash collateral applied of $2.9 billion at December 31, 2010. At December 31, 2010, there was $41 million of other marketable securities

collateralizing derivative assets.

(3) Generally, cross-border resale agreements are presented based on the domicile of the counterparty, consistent with FFIEC reporting requirements. Cross-border resale agreements where the underlying securities are U.S. Treasury

securities, in which case the domicile is the U.S., are excluded from this presentation.

(4) Cross-border exposure includes amounts payable to the Corporation 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 requirements.

(5) Local country exposure includes amounts payable to the Corporation 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 consistent with FFIEC reporting requirements. Of the $838 million applied for exposure reduction, $459 million was in Italy, $208 million in Ireland, $137 million in Spain and $34 million in Greece.

(6) Represents net notional credit default protection purchased to hedge counterparty risk.

Provision for Credit Losses
The provision for credit losses decreased $20.1 billion to $28.4 billion for 2010
compared to 2009. The provision for credit losses for the consumer portfolio
decreased $11.4 billion to $25.4 billion for 2010 compared to 2009 reflecting
lower delinquencies and decreasing bankruptcies in the consumer credit card
and unsecured consumer lending portfolios resulting from an improving eco-
nomic outlook. Also contributing to the improvement were lower reserve ad-
ditions in consumer real estate due to improving portfolio trends. The addition
to reserves in the consumer PCI loan portfolios reflected further reductions in
expected principal cash flows of $2.2 billion for 2010 compared to $3.5 billion
a year earlier. Consumer net charge-offs of $29.4 billion for 2010 were
$4.2 billion higher than the prior year due to the impact of the adoption of new

consolidation guidance resulting in the consolidation of certain securitized
loan balances in our consumer credit card and home equity portfolios, offset
by benefits from economic improvement during the year which impacted all
consumer portfolios.

The provision for credit losses for the commercial portfolio, including the
provision for unfunded lending commitments, decreased $8.7 billion to
$3.0 billion for 2010 compared to 2009 due to improved borrower credit
profiles, stabilization of appraisal values in the commercial real estate port-
folio and lower delinquencies and bankruptcies in the small business port-
folio. These same factors resulted in a decrease in commercial net charge-
offs of $3.5 billion to $5.0 billion in 2010 compared to 2009.

100

Bank of America 2010

Allowance for Credit Losses

Allowance for Loan and Lease Losses
The allowance for loan and lease losses is allocated based on two compo-
nents, described below, based on whether a loan or lease is performing or
whether it has been individually identified as being impaired or has been
modified as a TDR. We evaluate the adequacy of the allowance for loan and
lease losses based on the total of these two components. The allowance for
loan and lease losses excludes loans held-for-sale and loans accounted for
under the fair value option, as fair value adjustments related to loans
measured at fair value include a credit risk component.

The first component of the allowance for loan and lease losses covers
nonperforming commercial loans, consumer real estate loans that have been
modified in a TDR, renegotiated credit card, unsecured consumer and small
business loans. These loans are subject to impairment measurement prima-
rily at the loan level based either on the present value of expected future cash
flows discounted at the loan’s original effective interest rate, or discounted at
the portfolio average contractual annual percentage rate, excluding renego-
tiated and promotionally priced loans for the renegotiated TDR portfolio.
Impairment measurement may also be based upon the collateral value or the
loan’s observable market price. When the determined or measured values are
lower than the carrying value of the loan, impairment is recognized. For
purposes of computing this specific loss component of the allowance, larger
impaired loans are evaluated individually and smaller impaired loans are
evaluated as a pool using historical loss experience for the respective product
types and risk ratings of the loans.

The second component of the allowance for loan and lease losses covers
performing consumer and commercial loans and leases which have incurred
losses that are not yet individually identifiable. The allowance for consumer
and certain homogeneous commercial loan and lease products is based on
aggregated portfolio evaluations, generally by product type. Loss forecast
models are utilized that consider a variety of factors including, but not limited
to, historical loss experience, estimated defaults or foreclosures based on
portfolio trends, delinquencies, economic trends and credit scores. Our
consumer real estate loss forecast model estimates the portion of our
homogeneous loans that will default based on individual loan attributes,
the most significant of which are refreshed LTV or CLTV, borrower credit score
as well as vintage and geography, all of which are further broken down into
current delinquency status. Incorporating refreshed LTV and CLTV into our
probability of default allows us to factor the impact of changes in home prices
into our allowance for loan and lease losses. These loss forecast models are
updated on a quarterly basis to incorporate information reflecting the current
economic environment. Included within this second component of the allow-
ance for loan and lease losses and determined separately from the proce-
dures outlined above are reserves which are maintained to cover uncertain-
ties that affect our estimate of probable losses including domestic and global
economic uncertainty and large single name defaults. We evaluate the ad-
equacy of the allowance for loan and lease losses based on the combined
total of these two components. As of December 31, 2010, inputs to the loss
forecast process resulted in reductions in the allowance for most consumer
portfolios.

The allowance for commercial loan and lease losses is established by
product type after analyzing historical loss experience by internal risk rating,
current economic conditions, industry performance trends, geographic or
obligor concentrations within each portfolio segment, and any other pertinent
information. The statistical models for commercial loans are generally up-
dated annually and utilize the Corporation’s historical database of actual
defaults and other data. The loan risk ratings and composition of the com-
mercial portfolios are updated at least quarterly to incorporate the most
recent data reflecting the current economic environment. For risk-rated com-
mercial loans, we estimate the probability of default (PD) and the loss given

default (LGD) based on the Corporation’s historical experience of defaults and
credit losses. Factors considered when assessing the internal risk rating
include the value of the underlying collateral, if applicable; the industry in
which the obligor operates; the obligor’s liquidity and other financial indica-
tors; and other quantitative and qualitative factors relevant to the obligor’s
credit risk. When estimating the allowance for loan and lease losses, man-
agement relies not only on models derived from historical experience but also
on its judgment in considering the effect on probable losses inherent in the
portfolios due to the current macroeconomic environment and trends, inher-
ent uncertainty in models, and other qualitative factors. As of December 31,
2010, updates to the loan risk ratings and composition resulted in reductions
in the allowance for all commercial portfolios.

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, or reductions of, the allowance for loan and lease losses
generally are recorded through charges or credits to the provision for credit
losses. Credit exposures deemed to be uncollectible are charged against the
allowance for loan and lease losses. 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 51 was $34.7 billion at December 31, 2010, an increase
of $6.9 billion from December 31, 2009. This increase was primarily related
to $10.8 billion of reserves recorded on January 1, 2010 in connection with
the adoption of new consolidation guidance, and higher reserve additions in
the non-impaired consumer real estate portfolios during the first half of 2010
amid continued stress in the housing market. These items were partially
offset by reserve reductions primarily due to improving credit quality in the
Global Card Services consumer portfolios. With respect to the consumer PCI
loan portfolios, updates to our expected principal cash flows resulted in an
increase in reserves through provision of $2.2 billion for 2010, primarily in the
home equity and discontinued real estate portfolios compared to $3.5 billion
in 2009.

The allowance for commercial loan and lease losses was $7.2 billion at
December 31, 2010, a $2.2 billion decrease from December 31, 2009. The
decrease was primarily due to improvements in the U.S. small business
commercial portfolio within Global Card Services due to improved delinquen-
cies and bankruptcies, as well as in the U.S. commercial portfolios primarily in
Global Commercial Banking and GBAM, and the commercial real estate
portfolio primarily within Global Commercial Banking reflecting improved bor-
rower credit profiles as a result of improving economic conditions.

The allowance for loan and lease losses as a percentage of total loans and
leases outstanding was 4.47 percent at December 31, 2010 compared to
4.16 percent at December 31, 2009. The increase in the ratio was mostly due
to consumer reserve increases for securitized loans consolidated under the
new consolidation guidance, which were primarily credit card loans. The
December 31, 2010 and 2009 ratios above include the impact of the PCI
loan portfolio. Excluding the PCI loan portfolio, the allowance for loan and
lease losses as a percentage of total loans and leases outstanding was
3.94 percent at December 31, 2010 compared to 3.88 percent at Decem-
ber 31, 2009.

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, financial guarantees and binding loan commitments, excluding com-
mitments accounted for under the fair value option. Unfunded lending com-
mitments are subject to the same assessment as funded loans, including
estimates of PD and LGD. Due to the nature of unfunded commitments, the

Bank of America 2010

101

estimate of probable losses must also consider utilization. To estimate the
portion of these undrawn commitments that is likely to be drawn by a borrower
at the time of estimated default, analyses of the Corporation’s historical
experience are applied to the unfunded commitments to estimate the funded
exposure at default (EAD). The expected loss for unfunded lending commit-
ments is the product of the PD, the LGD and the EAD, adjusted for any
qualitative factors including economic uncertainty and inherent uncertainty in
models.

The reserve for unfunded lending commitments at December 31, 2010
was $1.2 billion, $299 million lower than December 31, 2009 primarily driven
by accretion of purchase accounting adjustments on acquired Merrill Lynch
unfunded positions and customer utilizations of previously unfunded
positions.

Table 50 presents a rollforward of the allowance for credit losses for 2010

and 2009.

Table 50 Allowance for Credit Losses

(Dollars in millions)

Allowance for loan and lease losses, beginning of period, before effect of the January 1 adoption of new consolidation guidance
Allowance related to adoption of new consolidation guidance

Allowance for loan and lease losses, January 1

Loans and leases charged off
Residential mortgage
Home equity
Discontinued real estate
U.S. credit card
Non-U.S. credit card
Direct/Indirect consumer
Other consumer

Total consumer charge-offs

U.S. commercial (1)
Commercial real estate
Commercial lease financing
Non-U.S. commercial

Total commercial charge-offs

Total loans and leases charged off

Recoveries of loans and leases previously charged off

Residential mortgage
Home equity
Discontinued real estate
U.S. credit card
Non-U.S. credit card
Direct/Indirect consumer
Other consumer

Total consumer recoveries

U.S. commercial (2)
Commercial real estate
Commercial lease financing
Non-U.S. commercial

Total commercial recoveries

Total recoveries of loans and leases previously charged off

Net charge-offs

Provision for loan and lease losses
Other (3)

Allowance for loan and lease losses, December 31

Reserve for unfunded lending commitments, January 1

Provision for unfunded lending commitments
Other (4)

Reserve for unfunded lending commitments, December 31

Allowance for credit losses, December 31

2010

$ 37,200
10,788

47,988

2009

$ 23,071
n/a

23,071

(3,779)
(7,059)
(77)
(13,818)
(2,424)
(4,303)
(320)

(31,780)

(3,190)
(2,185)
(96)
(139)

(5,610)

(4,436)
(7,205)
(104)
(6,753)
(1,332)
(6,406)
(491)

(26,727)

(5,237)
(2,744)
(217)
(558)

(8,756)

(37,390)

(35,483)

109
278
9
791
217
967
59

86
155
3
206
93
943
63

2,430

1,549

391
168
39
28

626

3,056

(34,334)

28,195
36

41,885

1,487
240
(539)

1,188

161
42
22
21

246

1,795

(33,688)

48,366
(549)

37,200

421
204
862

1,487

$ 43,073

$ 38,687

(1)

Includes U.S. small business commercial charge-offs of $2.0 billion and $3.0 billion in 2010 and 2009.
Includes U.S. small business commercial recoveries of $107 million and $65 million in 2010 and 2009.

Corporation’s U.S. Credit Card Securitization Trust and retained by the Corporation.

(4) The 2010 amount includes the remaining balance of the acquired Merrill Lynch reserve excluding those commitments accounted for under the fair value option, net of accretion, and the impact of funding previously unfunded

positions. All other amounts represent primarily accretion of the Merrill Lynch purchase accounting adjustment and the impact of funding previously unfunded positions.

n/a = not applicable

102

Bank of America 2010

Table 50 Allowance for Credit Losses (continued)

(Dollars in millions)

Loans and leases outstanding at December 31 (5)
Allowance for loan and lease losses as a percentage of total loans and leases and outstanding at December 31 (5)
Consumer allowance for loan and lease losses as a percentage of total consumer loans and leases outstanding at December 31
Commercial allowance for loan and lease losses as a percentage of total commercial loans and leases outstanding at December 31 (5)
Average loans and leases outstanding (5)
Net charge-offs as a percentage of average loans and leases outstanding (5)
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases at December 31 (5, 6, 7)
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs
(8)

Allowance for loan and lease losses as a percentage of total loans and leases outstanding at December 31 (5)
Consumer allowance for loan and lease losses as a percentage of total consumer loans and leases outstanding at December 31
Commercial allowance for loan and lease losses as a percentage of total commercial loans and leases outstanding at December 31 (5)
Net charge-offs as a percentage of average loans and leases outstanding (5)
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases at December 31 (5, 6, 7)
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs

Excluding purchased credit-impaired loans:

2010
$937,119

4.47%
5.40
2.44
$954,278

2009

$895,192

4.16%
4.81
2.96
$941,862

3.60%
136
1.22

3.94%
4.66
2.44
3.73
116
1.04

3.58%
111
1.10

3.88%
4.43
2.96
3.71
99
1.00

Average loans accounted for under the fair value option were $4.1 billion and $6.9 billion in 2010 and 2009.

(6) Allowance for loan and lease losses includes $22.9 billion and $17.7 billion allocated to products that were excluded from nonperforming loans, leases and foreclosed properties at December 31, 2010 and 2009.
(7) For more information on our definition of nonperforming loans, see the discussion beginning on page 85.
(8) Metrics exclude the impact of Countrywide consumer PCI loans and Merrill Lynch commercial PCI loans.

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 51 presents our allocation by product type.

Table 51 Allocation of the Allowance for Credit Losses by Product Type

(Dollars in millions)
Allowance for loan and lease losses (3)

Residential mortgage
Home equity
Discontinued real estate
U.S. credit card
Non-U.S. credit card
Direct/Indirect consumer
Other consumer

Total consumer
U.S. commercial (4)
Commercial real estate
Commercial lease financing
Non-U.S. commercial

Total commercial (5)

Allowance for loan and lease losses

December 31, 2010

January 1, 2010 (1)

December 31, 2009

Percent of
Loans and
Leases
Outstanding (2)

Amount

Percent
of Total

$ 4,648
12,934
1,670
10,876
2,045
2,381
161
34,715
3,576
3,137
126
331
7,170

11.10%
30.88
3.99
25.97
4.88
5.68
0.38
82.88
8.54
7.49
0.30
0.79
17.12

41,885 100.00%

1.80%
9.37
12.74
9.56
7.45
2.64
5.67
5.40
1.88
6.35
0.57
1.03
2.44

4.47

Amount

Percent of
Total

$ 4,607
10,733
989
15,102
2,686
4,251
204
38,572
5,153
3,567
291
405
9,416

$ 4,607
10,160
989
6,017
1,581
4,227
204
27,785
5,152
3,567
291
405
9,415

12.38%
27.31
2.66
16.18
4.25
11.36
0.55
74.69
13.85
9.59
0.78
1.09
25.31

47,988

37,200

100.00%

Percent of
Loans and
Leases
Outstanding (2)

1.90%
6.81
6.66
12.17
7.30
4.35
6.53
4.81
2.59
5.14
1.31
1.50
2.96

4.16

Reserve for unfunded lending commitments
Allowance for credit losses (6)
(1) Balances reflect impact of new consolidation guidance.
(2) Ratios are calculated as allowance for loan and lease losses as a percentage of loans and leases outstanding excluding loans accounted for under the fair value option for each loan and lease category. Loans accounted for under the
fair value option include U.S. commercial loans of $1.6 billion and $3.0 billion, non-U.S. commercial loans of $1.7 billion and $1.9 billion and commercial real estate loans of $79 million and $90 million at December 31, 2010 and
2009.

$43,073

$38,687

$49,475

1,188

1,487

(5)

(3) December 31, 2010 is presented in accordance with new consolidation guidance. December 31, 2009 has not been restated.
(4)
Includes allowance for U.S. small business commercial loans of $1.5 billion and $2.4 billion at December 31, 2010 and 2009.
Includes allowance for loan and lease losses for impaired commercial loans of $1.1 billion and $1.2 billion at December 31, 2010 and 2009. Included in the $1.1 billion at December 31, 2010 is $445 million related to U.S. small
business commercial renegotiated TDR loans.
Includes $6.4 billion and $3.9 billion of allowance for credit losses related to purchased credit-impaired loans at December 31, 2010 and 2009.

(6)

Bank of America 2010

103

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 move-
ments. This risk is inherent in the financial instruments associated with our
operations and/or activities including loans, deposits, securities, short-term
borrowings, long-term debt, trading account assets and liabilities, and deriv-
atives. Market-sensitive assets and liabilities are generated through loans
and deposits associated with our traditional banking business, customer and
other trading operations, the ALM process, credit risk mitigation activities and
mortgage banking activities. In the event of market volatility, factors such as
underlying market movements and liquidity have an impact on the results of
the Corporation.

Our traditional banking loan and deposit products are nontrading positions
and are generally reported at amortized cost for assets or the amount owed
for liabilities (historical cost). 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. We have elected to account for certain assets and liabilities under
the fair value option. For further information on the fair value of certain
financial assets and liabilities, see Note 22 – Fair Value Measurements to the
Consolidated Financial Statements.

Our trading positions are reported at fair value with changes currently
reflected in income. Trading positions are subject to various risk factors, which
include exposures to interest rates and foreign exchange rates, as well as
mortgage, equity, commodity, issuer and market liquidity risk factors. We seek
to mitigate these risk exposures by using techniques that encompass 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 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 non-U.S. sub-
sidiaries, foreign currency-denominated loans and securities, future cash
flows in foreign currencies arising from foreign exchange transactions, foreign
currency-denominated debt and various foreign exchange derivative instru-
ments whose values fluctuate with changes in the level or volatility of currency
exchange rates or non-U.S. interest rates. Hedging instruments used to
mitigate this risk include foreign exchange options, currency swaps, futures,
forwards, foreign currency-denominated debt 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 pre-
payment rates, mortgage rates, agency debt ratings, default, market liquidity,
other interest rates, government participation and interest rate volatility. Our
exposure to these instruments takes several forms. First, we trade and
engage in market-making activities in a variety of mortgage securities includ-
ing whole loans, pass-through certificates, commercial mortgages, and col-
lateralized mortgage obligations (CMOs) including CDOs using mortgages as

104

Bank of America 2010

underlying collateral. Second, we originate a variety of MBS which involves the
accumulation of mortgage-related loans in anticipation of eventual securiti-
zation. 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 origination activities. See Note 1 – Summary of Significant
Accounting Principles and Note 25 – Mortgage Servicing Rights to the Con-
solidated Financial Statements for additional information on MSRs. Hedging
instruments used to mitigate this risk include foreign exchange options,
currency swaps, futures, forwards and foreign currency-denominated debt.

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: common
stock, exchange-traded funds, American Depositary Receipts, 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 petroleum,
natural gas, power and metals markets. These instruments consist primarily
of futures, forwards, swaps and options. Hedging instruments used to mit-
igate 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.

Market Liquidity Risk
Market liquidity risk represents the risk that the level of expected market
activity changes dramatically and, in certain cases, may even cease to exist.
This exposes us to the risk that we will not be able to transact business and
execute trades in an orderly manner which may impact our results. This
impact could further be exacerbated if expected hedging or pricing correla-
tions are compromised by the disproportionate demand or lack of demand for
certain instruments. We utilize various risk mitigating techniques as dis-
cussed in more detail below.

Trading Risk Management
Trading-related revenues represent the amount earned from trading positions,
including market-based net interest income, in a diverse range of financial
instruments and markets. Trading account assets and liabilities and deriva-
tive positions are reported at fair value. For more information on fair value,
see Note 22 – Fair Value Measurements to the Consolidated Financial State-
ments. Trading-related revenues can be volatile and are largely driven by
general market conditions and customer demand. Trading-related revenues
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 Global Markets Risk Committee (GRC), chaired by the Global Markets
Risk Executive, has been designated by ALMRC as the primary governance

authority for Global Markets Risk Management including trading risk manage-
ment. The GRC’s focus is to take a forward-looking view of the primary credit
and market risks impacting GBAM and prioritize those that need a proactive
risk mitigation strategy. Market risks that impact lines of business outside of
GBAM are monitored and governed by their respective governance authorities.
The GRC monitors significant daily revenues and losses by business and
the primary drivers of the revenues or losses. Thresholds are in place for each
of our businesses in order to determine if the revenue or loss is considered to
be significant for that business. If any of the thresholds are exceeded, an
explanation of the variance is provided to the GRC. The thresholds are
developed in coordination with the respective risk managers to highlight
those revenues or losses that exceed what is considered to be normal daily
income statement volatility.

The histogram below is a graphic depiction of trading volatility and illus-
trates the daily level of trading-related revenue for the twelve months ended
December 31, 2010, as compared with the twelve months ended Decem-
ber 31, 2009. During the twelve months ended December 31, 2010, positive
trading-related revenue was recorded for 90 percent of the trading days of
which 75 percent were daily trading gains of over $25 million, four percent of
the trading days had losses greater than $25 million and the largest loss was
$102 million. This can be compared to the twelve months ended Decem-
ber 31, 2009, where positive trading-related revenue was recorded for 88 per-
cent of the trading days of which 72 percent were daily trading gains of over
$25 million, six percent of the trading days had losses greater than $25 mil-
lion and the largest loss was $100 million.

Histogram of Daily Trading-related Revenue

s
y
a
D

f
o

r
e
b
m
u
N

< -100

-100 to -75

-75 to -50

-50 to -25

-25 to 0

0 to 25

25 to 50

50 to 75

75 to 100

> 100

Revenue (dollars in millions)

Twelve Months Ended December 31, 2010

Twelve Months Ended December 31, 2009

To evaluate risk in our trading activities, we focus on the actual and
potential volatility of individual positions as well as portfolios. 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. All limit excesses are communicated to management
for review.

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. VaR represents the worst loss the portfolio is expected to experience
based on historical trends with a given level of confidence and depends on the
volatility of the positions in the portfolio and on how strongly their risks are
correlated. Within any VaR model, there are significant and numerous as-
sumptions that will differ from company to company. In addition, the accuracy
of a VaR model depends on the availability and quality of historical data for
each of the positions in the portfolio. A VaR model may require additional
modeling assumptions for new products that do not have extensive historical
price data or for illiquid positions for which accurate daily prices are not
consistently available.

A VaR model is an effective tool in estimating ranges of potential gains and
losses on our trading portfolios. There are however many limitations inherent
in a VaR model as it utilizes historical results over a defined time period to
estimate future performance. Historical results may not always be indicative

of future results and changes in market conditions or in the composition of the
underlying portfolio could have a material impact on the accuracy of the VaR
model. In order for the VaR model to reflect current market conditions, we
update the historical data underlying our VaR model on a bi-weekly basis and
regularly review the assumptions underlying the model.

We continually review, evaluate and enhance our VaR model so that it
reflects the material risks in our trading portfolio. Nevertheless, due to the
limitations mentioned above, we have historically used the VaR model as only
one of the components in managing our trading risk and also use other
techniques such as stress testing and desk level limits. Periods of extreme
market stress influence the reliability of these techniques to varying degrees.
The accuracy of the VaR methodology is reviewed by backtesting (i.e.,
comparing actual results against expectations derived from historical data)
the VaR results against the daily profit and loss. Graphic representation of the
backtesting results with additional explanation of backtesting excesses are
reported to the GRC. Backtesting excesses occur when trading losses exceed
VaR. Senior management reviews and evaluates the results of these tests. In
periods of market stress, the GRC members communicate daily to discuss
losses and VaR limit excesses. As a result of this process, the lines of
business may selectively reduce risk. Where economically feasible, positions
are sold or macroeconomic hedges are executed to reduce the exposure.

Bank of America 2010

105

The graph below shows daily trading-related revenue and VaR for the twelve
months ended December 31, 2010. Actual losses did not exceed daily trading
VaR in the twelve months ended December 31, 2010 and 2009. Our VaR model
uses a historical simulation approach based on three years of historical data

and an expected shortfall methodology equivalent to 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.

Trading Risk and Return
Daily Trading-related Revenue and VaR

)
s
n
o
i
l
l
i

m
n

s
r
a
l
l
o
D

(

400

300

200

100

-100

-200

-300

-400

Daily
Trading-
related
Revenue

VaR

12/31/2009

3/31/2010

6/30/2010

9/30/2010

12/31/2010

Table 52 presents average, high and low daily trading VaR for 2010 and 2009.

Table 52 Trading Activities Market Risk VaR

(Dollars in millions)

Foreign exchange
Interest rate
Credit
Real estate/mortgage
Equities
Commodities
Portfolio diversification

Total market-based trading portfolio

2010

Average High (1)

Low (1)

$ 23.8 $ 73.1 $ 4.9
33.2
128.3
122.9
287.2
42.9
138.5
20.8
90.9
12.8
31.7
–
–

64.1
171.5
83.1
39.4
19.9
(200.5)

2009
High (1)

$ 55.4
136.7
338.7
81.3
87.6
29.1
–

Average

$ 20.3
73.7
183.3
51.1
44.6
20.2
(187.0)

Low (1)

$ 6.1
43.6
123.9
32.4
23.6
16.0
–

$ 201.3 $375.2 $123.0

$ 206.2

$325.2

$117.9

(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.

The decrease in average VaR during 2010 resulted from reduced expo-
sures in several businesses. In addition, portfolio diversification increased
relative to average VaR, as exposure changes resulted in reduced correlations
across businesses.

Counterparty credit risk is an adjustment to the mark-to-market value of
our derivative exposures reflecting the impact of the credit quality of counter-
parties on our derivative assets. Since counterparty credit exposure is not
included in the VaR component of the regulatory capital allocation, we do not
include it in our trading VaR, and it is therefore not included in the daily trading-
related revenue illustrated in our histogram or used for backtesting.

Trading 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 scenarios, categorized as either historical or hypothet-
ical, are regularly run and reported for the overall trading portfolio and
individual businesses. Historical scenarios simulate the impact of price
changes that occurred during a set of extended historical market events.
Generally, a 10-business-day window or longer, representing the most severe

point during a crisis, is selected for each historical scenario. Hypothetical
scenarios provide simulations of anticipated shocks from predefined market
stress events. These stress events include shocks to underlying market risk
variables which may be well beyond the shocks found in the historical data
used to calculate VaR. As with the historical scenarios, the hypothetical
scenarios are designed to represent a short-term market disruption. Scenar-
ios are reviewed and updated as necessary in light of changing positions and
new economic or political information. In addition to the value afforded by the
results themselves, this information provides senior management with a clear
picture of the trend of risk being taken given the relatively static nature of the
shocks applied. Stress testing for the trading portfolio is also integrated with
enterprise-wide stress testing and incorporated into the limits framework. A
process has been established to promote consistency between the scenarios
used for the trading portfolio and those used for enterprise-wide stress
testing. The scenarios used for enterprise-wide stress testing purposes differ
from the typical trading portfolio scenarios in that they have a longer time
horizon and the results are forecasted over multiple periods for use in
consolidated capital and liquidity planning. For additional
information on
enterprise-wide stress testing, see page 72.

106

Bank of America 2010

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 interest income.
Interest rate risk is measured as the potential volatility in our core net interest
income 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
of numerous interest rate scenarios, balance sheet trends and strategies.
These simulations evaluate how changes in short-term financial instruments,
debt securities, loans, deposits, borrowings and derivative instruments im-
pact core net interest income. 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 repricing and

maturity characteristics. These simulations do not include the impact of
hedge ineffectiveness.

Management analyzes core net interest income forecasts utilizing differ-
ent rate scenarios with the baseline utilizing market-based forward interest
rates. Management frequently updates the core net interest income forecast
for changing assumptions and differing outlooks based on economic trends
and market conditions. Thus, we continually 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. The
baseline forecast takes into consideration expected future business growth,
ALM positioning and the direction of interest rate movements as implied by
the market-based forward curve. We then measure and evaluate the impact
that alternative interest rate scenarios have on the static baseline forecast in
order to assess interest rate sensitivity under varied conditions. The spot and
12-month forward monthly rates used in our respective baseline forecast at
December 31, 2010 and 2009 are presented in the table below.

Table 53 Forward Rates

Spot rates
12-month forward rates

December 31

2010

2009

Federal
Funds

Three-Month
LIBOR

10-Year
Swap

Federal
Funds

Three-Month
LIBOR

10-Year
Swap

0.25%
0.25

0.30% 3.39%
0.72

3.86

0.25%
1.14

0.25%
1.53

3.97%
4.47

Table 54 shows the pre-tax dollar impact to forecasted core net interest
income over the next twelve months from December 31, 2010 and 2009,
resulting from a 100 bps gradual parallel increase, a 100 bps gradual parallel
decrease, a 100 bps gradual curve flattening (increase in short-term rates or

decrease in long-term rates) and a 100 bps gradual curve steepening (de-
crease in short-term rates or increase in long-term rates) from the forward
market curve. For
further discussion of core net interest income, see
page 41.

Table 54 Estimated Core Net Interest Income (1)

(Dollars in millions)

Curve Change

+100 bps Parallel shift
-100 bps Parallel shift
Flatteners

Short end
Long end

Steepeners

Short end
Long end

Short Rate (bps)

Long Rate (bps)

2010

2009

December 31

+100
–100

+100
–

–100
–

+100 $ 601
(834)
–100

$ 598
(1,084)

–
–100

136
(637)

–
+100

(170)
493

127
(616)

(444)
476

(1) Prior periods are reported on a managed basis.

The sensitivity analysis above assumes that we take no action in response
to these rate shifts over the indicated periods. At December 31, 2010, the
exposure as reported reflects impacts that may be realized in net interest
income. At December 31, 2009, the estimated exposure as reported reflects
impacts that would have been realized primarily in net interest income and
card income.

Our core net interest income was asset sensitive to a parallel move in
interest rates at both December 31, 2010 and 2009. The change in the
interest rate risk position relative to December 31, 2009 is primarily due to
lower short-term interest rates. As part of our ALM activities, we use secu-
rities, residential mortgages, and interest rate and foreign exchange deriva-
tives in managing interest rate sensitivity.

Securities
The securities portfolio is an integral part of our ALM position and is primarily
comprised of debt securities including MBS and to a lesser extent U.S. Trea-
sury, corporate, municipal and other debt securities. At December 31, 2010
and 2009, AFS debt securities were $337.6 billion and $301.6 billion. During
2010 and 2009, we purchased AFS debt securities of $199.2 billion and
$185.1 billion, sold $97.5 billion and $159.4 billion, and had maturities and
received paydowns of $70.9 billion and $59.9 billion. We realized $2.5 billion
and $4.7 billion in net gains on sales of debt securities during 2010 and
2009. In addition, we securitized $2.4 billion and $14.0 billion of residential
mortgage loans into MBS during 2010 and 2009, which we retained.

Bank of America 2010

107

During 2010, we entered into a series of transactions in our AFS debt
securities portfolio that involved securitizations as well as sales of non-agency
RMBS. These transactions were initiated following a review of corporate risk
objectives in light of proposed Basel regulatory capital changes and liquidity
targets. For more information on the proposed regulatory capital changes,
see Capital Management – Regulatory Capital Changes beginning on page 68.
During 2010, the carrying value of the non-agency RMBS portfolio was
reduced $14.5 billion primarily as a result of the aforementioned sales
and securitizations as well as paydowns. We recognized net losses of
$922 million on the series of transactions in the AFS debt securities portfolio,
and improved the overall credit quality of the remaining portfolio such that the
percentage of the non-agency RMBS portfolio that is below investment-grade
was reduced significantly.

Accumulated OCI includes after-tax net unrealized gains of $7.4 billion and
$1.5 billion at December 31, 2010 and 2009, comprised primarily of after-tax
net unrealized gains of $714 million and after-tax net unrealized losses of
$628 million related to AFS debt securities and after-tax net unrealized gains
of $6.7 billion and $2.1 billion related to AFS equity securities. The 2010
unrealized gain on marketable equity securities was related to our investment
in CCB. See Note 5 – Securities to the Consolidated Financial Statements for
further discussion on marketable equity securities. Total market value of the
AFS debt securities was $337.6 billion and $301.6 billion at December 31,
2010 and 2009 with a weighted-average duration of 4.9 and 4.5 years, and
primarily relates to our MBS and U.S. Treasury portfolio. The amount of pre-tax
accumulated OCI related to AFS debt securities increased by $2.2 billion
during 2010 to $1.1 billion, primarily due to sales of non-agency CMO
positions.

We recognized $967 million of OTTI losses through earnings on AFS debt
securities in 2010 compared to $2.8 billion in 2009. We also recognized
$3 million of OTTI losses on AFS marketable equity securities during 2010
compared to $326 million in 2009.

The recognition of impairment losses on AFS debt and marketable equity
securities is based on a variety of factors, including the length of time and
extent to which the market value has been less than cost, the financial
condition of the issuer of the security including credit ratings and the specific
events affecting the operations of the issuer, underlying assets that collat-
eralize the debt security, other industry and macroeconomic conditions, and
our intent and ability to hold the security to recovery. We do not intend to sell
securities with unrealized losses and it is not more-likely-than-not that we will
be required to sell those securities before recovery of amortized cost. Based
on our evaluation of these and other relevant factors, and after consideration
of the losses described in the paragraph above, we do not believe that the AFS
debt and marketable equity securities that are in an unrealized loss position at
December 31, 2010 are other-than-temporarily impaired.

Residential Mortgage Portfolio
At December 31, 2010 and 2009, residential mortgages were $258.0 billion
and $242.1 billion. During 2010 and 2009, we retained $63.8 billion and
$26.6 billion in first mortgages originated by Home Loans & Insurance.
Outstanding residential mortgage loans increased $15.8 billion in 2010
compared to 2009 as new FHA insured origination volume was partially offset
by paydowns, the sale of $10.8 billion of residential mortgages related to First
Republic Bank, transfers to foreclosed properties and charge-offs. In addition,
FHA repurchases of delinquent loans pursuant to our servicing agreements
with GNMA also increased the residential mortgage portfolio during 2010.

During 2010 and 2009, we securitized $2.4 billion and $14.0 billion of
residential mortgage loans into MBS which we retained. We recognized gains
of $68 million on securitizations completed during 2010. For more informa-
tion on these securitizations, see Note 8 – Securitizations and Other Variable
Interest Entities to the Consolidated Financial Statements. During 2010 and
2009, we had no purchases of residential mortgages related to ALM activ-
ities. We sold $443 million of residential mortgages during 2010, of which
$432 million were originated residential mortgages and $11 million were
previously purchased from third parties. Net gains on these transactions were
$21 million. This compares to sales of $5.9 billion of residential mortgages
during 2009 of which $5.1 billion were originated residential mortgages and
$771 million were previously purchased from third parties. These sales
resulted in gains of $47 million. We received paydowns of $38.2 billion
and $42.3 billion in 2010 and 2009.

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

Our interest rate contracts are generally non-leveraged generic interest
rate and foreign exchange basis swaps, options, futures and forwards. In
addition, we use foreign exchange contracts, including cross-currency interest
rate swaps, foreign currency forward contracts and options to mitigate the
foreign exchange risk associated with foreign currency-denominated assets
and liabilities. Table 55 shows the notional amounts, fair value, weighted-
average receive-fixed and pay-fixed rates, expected maturity and estimated
duration of our open ALM derivatives at December 31, 2010 and 2009. These
amounts do not include derivative hedges on our MSRs.

Changes to the composition of our derivatives portfolio during 2010
reflect actions taken for interest rate and foreign exchange rate risk manage-
ment. The decisions to reposition our derivatives portfolio are based upon the
current assessment of economic and financial conditions including the inter-
est rate and foreign currency environments, balance sheet composition and
trends, and the relative mix of our cash and derivative positions. The notional
amount of our option positions increased to $6.6 billion at December 31,
2010 from $6.5 billion at December 31, 2009. Our interest rate swap
positions, including foreign exchange contracts, were a net receive-fixed
position of $6.4 billion and $52.2 billion at December 31, 2010 and
2009. The decrease in the net notional levels of our interest rate swap
position was driven by the net addition of $51.6 billion in pay-fixed swaps and
$11.5 billion in foreign currency-denominated receive-fixed swaps, offset by a
reduction of $5.6 billion in U.S. dollar-denominated receive-fixed swaps. The
notional amount of our foreign exchange basis swaps was $235.2 billion and
$122.8 billion at December 31, 2010 and 2009. The $112.4 billion notional
change was primarily due to new trade activity during 2010 to mitigate cross-
currency basis risk on our economic hedge portfolio. The increase in pay-fixed
swaps resulted from hedging newly purchased U.S. Treasury Bonds with
swaps and entering into additional pay-fixed swaps to hedge variable rate
short-term liabilities. Our futures and forwards net notional position, which
reflects the net of long and short positions, was a short position of $280 mil-
lion at December 31, 2010 compared to a long position of $10.6 billion at
December 31, 2009.

108

Bank of America 2010

The table below includes derivatives utilized in our ALM activities including
those designated as accounting and economic hedging instruments. The fair
value of net ALM contracts increased $329 million to a gain of $12.6 billion at
December 31, 2010 compared to $12.3 billion at December 31, 2009. The
increase was primarily attributable to changes in the value of U.S. dollar-

denominated receive-fixed interest rate swaps of $3.3 billion, foreign ex-
change contracts of $2.1 billion and foreign exchange basis swaps of
$197 million. The increase was partially offset by a loss from the changes
in the value of pay-fixed interest rate swaps of $5.0 billion and option products
of $294 million.

Table 55 Asset and Liability Management Interest Rate and Foreign Exchange Contracts

(Dollars in millions, average estimated duration in years)
Receive fixed interest rate swaps (1, 2)

Notional amount
Weighted-average fixed-rate
Pay fixed interest rate swaps (1, 2)

Notional amount
Weighted-average fixed-rate
Same-currency basis swaps (3)

Notional amount

Foreign exchange basis swaps (2, 4, 5)

Notional amount

Option products (6)

Notional amount (8)

Foreign exchange contracts (2, 5, 7)

Notional amount (8)

Futures and forward rate contracts

Notional amount (8)

Net ALM contracts

(Dollars in millions, average estimated duration in years)
Receive fixed interest rate swaps (1, 2)

Notional amount
Weighted-average fixed-rate
Pay fixed interest rate swaps (1, 2)

Notional amount
Weighted-average fixed-rate
Same-currency basis swaps (3)

Notional amount

Foreign exchange basis swaps (2, 4, 5)

Notional amount

Option products (6)

Notional amount (8)

Foreign exchange contracts (2, 5, 7)

Notional amount (8)

Futures and forward rate contracts

Notional amount (8)

Net ALM contracts

Average
Estimated
Duration

4.45

6.03

Average
Estimated
Duration
4.34

4.18

December 31, 2010

Expected Maturity

Total

2011

2012

2013

2014

2015 Thereafter

$104,949 $

8 $36,201 $ 7,909 $ 7,270 $ 8,094 $45,467

3.94%

1.00%

2.49%

3.90%

3.66%

3.71%

5.19%

$156,067 $50,810 $16,205 $ 1,207 $ 4,712 $10,933 $72,200

3.02%

2.37%

2.15%

2.88%

2.40%

2.75%

3.76%

$152,849 $13,449 $49,509 $31,503 $21,085 $11,431 $25,872

235,164

21,936

39,365

46,380

41,003

23,430

63,050

6,572

(1,180)

2,092

2,390

603

311

2,356

109,544

59,508

5,427

10,048

13,035

2,372

19,154

(280)

–

December 31, 2009

Expected Maturity

Total

2010

2011

2012

2013

2014 Thereafter

$110,597 $15,212 $

3.65%

1.61%

8 $35,454 $ 7,333 $ 8,247 $44,343
4.06%

2.42%

3.48%

5.29%

1.00%

$104,445 $ 2,500 $50,810 $14,688 $

2.83%

1.82%

2.37%

2.24%

806 $ 3,729 $31,912
2.61%
3.77%

3.92%

$ 42,881 $ 4,549 $ 8,593 $11,934 $ 5,591 $ 5,546 $ 6,668

122,807

7,958

10,968

19,862

18,322

31,853

33,844

6,540

656

2,031

1,742

244

603

1,264

103,726

63,158

3,491

3,977

6,795

10,585

15,720

10,559

–

Fair
Value

$ 7,364

(3,827)

103

4,830

(120)

4,272

(21)

$12,601

Fair
Value
$ 4,047

1,175

107

4,633

174

2,144

(8)

$12,272

(1) At December 31, 2010 and 2009, the receive-fixed interest rate swap notional amounts that represented forward starting swaps and will not be effective until their respective contractual start dates were $1.7 billion and $2.5 billion,

and the forward starting pay-fixed swap positions were $34.5 billion and $76.8 billion.

(2) Does not include basis adjustments on either fixed-rate debt issued by the Corporation or AFS debt securities which are hedged in fair value hedge relationships using derivatives designated as hedging instruments that substantially

offset the fair values of these derivatives.

(3) At December 31, 2010 and 2009, same-currency basis swaps consist of $152.8 billion and $42.9 billion in both foreign currency and U.S. dollar-denominated basis swaps in which both sides of the swap are in the same currency.
(4) Foreign exchange basis swaps consisted of cross-currency variable interest rate swaps used separately or in conjunction with receive-fixed interest rate swaps.
(5) Does not include foreign currency translation adjustments on certain non-U.S. debt issued by the Corporation which substantially offset the fair values of these derivatives.
(6) Option products of $6.6 billion at December 31, 2010 are comprised of $160 million in purchased caps/floors, $8.2 billion in swaptions and $(1.8) billion in foreign exchange options. Option products of $6.5 billion at December 31,

2009 are comprised of $177 million in purchased caps/floors and $6.3 billion in swaptions.

(7) Foreign exchange contracts include foreign currency-denominated and cross-currency receive-fixed interest rate swaps as well as foreign currency forward rate contracts. Total notional amount was comprised of $57.6 billion in foreign
currency-denominated and cross-currency receive-fixed swaps and $52.0 billion in foreign currency forward rate contracts at December 31, 2010, and $46.0 billion in foreign currency-denominated and cross-currency receive-fixed
swaps and $57.7 billion in foreign currency forward rate contracts at December 31, 2009.

(8) Reflects the net of long and short positions.

We use interest rate derivative instruments to hedge the variability in the
cash flows of our assets and liabilities, including certain compensation costs
and other forecasted transactions (collectively referred to as cash flow
hedges). The net losses on both open and terminated derivative instruments
recorded in accumulated OCI, net-of-tax, were $3.2 billion and $2.5 billion at
December 31, 2010 and 2009. These net losses are expected to be reclas-
sified into earnings in the same period as 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 prices or interest rates beyond what is implied in
forward yield curves at December 31, 2010 the pre-tax net losses are
expected to be reclassified into earnings as follows: $1.8 billion, or 35 percent
within the next year, 80 percent within five years, and 92 percent within
10 years, with the remaining eight percent thereafter. For more information on
derivatives designated as cash flow hedges, see Note 4 – Derivatives to the
Consolidated Financial Statements.

Bank of America 2010

109

We hedge our net investment in non-U.S. operations determined to have
functional currencies other than the U.S. dollar using forward foreign ex-
change contracts that typically settle in less than 180 days, cross-currency
basis swaps, foreign exchange options and foreign currency-denominated
debt. We recorded after-tax losses on derivatives and foreign currency-de-
nominated debt in accumulated OCI associated with net investment hedges
which were offset by gains on our net investments in consolidated non-U.S. en-
tities at December 31, 2010.

Compliance Risk Management develops and implements the strategies,
policies and practices for assessing and managing compliance risks across
the organization. Through education and communication efforts, a culture of
compliance is emphasized across the organization.

The lines of business are responsible for all the risks within the business
line, including compliance risks. Compliance risk executives monitor and test
business processes for compliance and escalate risks and issues needing
resolution.

Mortgage Banking Risk Management
We originate, fund and service mortgage loans, which subject us to credit,
liquidity and interest rate risks, among others. We determine whether loans
will be held for investment or held-for-sale at the time of commitment and
manage credit and liquidity risks by selling or securitizing a portion of the loans
we originate.

Interest rate risk and market risk can be substantial in the mortgage
business. Fluctuations in interest rates drive consumer demand for new
mortgages and the level of refinancing activity, which in turn, affects total
origination and service fee income. Typically, a decline in mortgage interest
rates will
lead to an increase in mortgage originations and fees and a
decrease in the value of the MSRs driven by higher prepayment expectations.
Hedging the various sources of interest rate risk in mortgage banking is a
complex process that requires complex modeling and ongoing monitoring.
IRLCs and the related residential first mortgage LHFS are subject to interest
rate risk between the date of the IRLC and the date 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 as economic hedges of IRLCs and residential
first mortgage LHFS. At December 31, 2010 and 2009, the notional amount
of derivatives economically hedging the IRLCs and residential first mortgage
LHFS was $129.0 billion and $161.4 billion.

MSRs are nonfinancial assets 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 interest rate options, interest rate swaps, forward set-
tlement contracts, Eurodollar
futures, as well as mortgage-backed and
U.S. Treasury securities as economic hedges of MSRs. The notional amounts
of the derivative contracts and other securities designated as economic
hedges of MSRs at December 31, 2010 were $1.6 trillion and $60.3 billion.
At December 31, 2009, the notional amounts of the derivative contracts and
other securities designated as economic hedges of MSRs were $1.3 trillion
and $67.6 billion. In 2010, we recorded gains in mortgage banking income of
$5.0 billion related to the change in fair value of these economic hedges
compared to losses of $3.8 billion for 2009. For additional information on
MSRs, see Note 25 – Mortgage Servicing Rights to the Consolidated Financial
Statements and for more information on mortgage banking income, see
Home Loans & Insurance beginning on page 45.

Compliance Risk Management
Compliance risk is the risk posed by the failure to manage regulatory, legal
and ethical issues that could result in monetary damages, losses or harm to
our reputation or image. The Seven Elements of a Compliance Program»
provides the framework for the compliance programs that are consistently
applied across the Corporation to manage compliance risk. This framework
includes a common approach to commitment and accountability, policies and
procedures, controls and supervision, monitoring and testing, regulatory
change management, education and awareness, and reporting.

We approach compliance risk management on an enterprise and line of
business level. The Operational and Compliance Risk Committee, which is a
sub-committee of the Operational Risk Committee, provides oversight of
significant compliance risk issues. Within Global Risk Management, Global

110

Bank of America 2010

Operational Risk Management
The Corporation defines operational risk as the risk of loss resulting from
inadequate or failed internal processes, people and systems or from external
events. Operational risk may occur anywhere in the Corporation, not solely in
operations functions, and its effects may extend beyond financial losses.
Operational risk includes legal risk. Successful operational risk management
is particularly important to diversified financial services companies because
of the nature, volume and complexity of the financial services business.
Global banking guidelines and country-specific requirements for managing
operational risk were established in a set of rules known as Basel II. Basel II
requires banks have internal operational risk management processes to
assess and measure operational risk exposure and to set aside appropriate
capital to address those exposures.

Under the Basel II Rules, an operational loss event is an event that results
in a loss and is associated with any of the following seven operational loss
event categories: internal fraud; external fraud; employment practices and
workplace safety; clients, products and business practices; damage to phys-
ical assets; business disruption and system failures; and execution, delivery
and process management. Specific examples of loss events include robber-
ies, credit card fraud, processing errors and physical losses from natural
disasters.

We approach operational risk management from two perspectives: (1) at
the enterprise level and (2) at the line of business and enterprise control
function levels. The enterprise level refers to risk across all of the Corporation.
The line of business level
includes risk in all of the revenue producing
businesses. Enterprise control functions refer to the business units that
support the Corporation’s business operations.

The Operational Risk Committee oversees and approves the Corporation’s
policies and processes to assure sound operational and compliance risk
management and serves as an escalation point for critical operational risk
and compliance matters within the Corporation. The Operational Risk Com-
mittee reports to the Enterprise Risk Committee of the Board regarding
operational risk activities. Within the Global Risk Management organization,
the Corporate Operational Risk team develops and guides the strategies,
policies, practices, controls and monitoring tools for assessing and managing
operational risks across the organization as well reporting results to gover-
nance committees and the Board.

The lines of business and enterprise control functions are responsible for
all the risks within the business line, including operational risks. In addition to
enterprise risk management tools like loss reporting, scenario analysis and
risk and control self-assessments, operational risk executives, working in
conjunction with senior line of business executives, have developed key tools
to help identify, measure, mitigate and monitor risk in each line of business
and enterprise control function. Examples of these include personnel man-
agement practices, data reconciliation processes, fraud management units,
transaction processing monitoring and analysis, business recovery planning
and new product introduction processes. The lines of business and enterprise
control functions are also responsible for consistently implementing and
monitoring adherence to corporate practices. Line of business and enterprise
control function management uses the enterprise risk and control self-as-
sessment process to identify and evaluate the status of risk and control

issues, including mitigation plans, as appropriate. The goal of this process is
to assess changing market and business conditions, to evaluate key risks
impacting each line of business and enterprise control function and assess
the controls in place to mitigate the risks. The risk and control self assess-
ment process is documented at periodic intervals. Key operational risk
indicators for these risks have been developed and are used to help identify
trends and issues on an enterprise, line of business and enterprise control
function level.

The enterprise control functions participate in two ways to the operational
risk management process. First, these organizations manage risk in their
functional department. Second, they provide specialized risk management
services within their area of expertise to the enterprise and the lines of
business and other enterprise control functions they support. For example,
the Enterprise Information Management and Supply Chain Management
organizations in the Technology and Operations enterprise control function,
develop risk management practices, such as information security and supplier
management programs. These groups also work with business and risk
executives to develop and guide appropriate strategies, policies, practices,
controls and monitoring tools for each line of business and enterprise control
function relative to these programs.

Additionally, where appropriate, insurance policies are purchased to mit-
igate the impact of operational losses when and if they occur. These insurance
policies are explicitly incorporated in the structural features of operational risk
evaluation. As insurance recoveries, especially given recent market events,
are subject to legal and financial uncertainty, the inclusion of these insurance
policies are subject to reductions in their expected mitigating benefits.

Complex Accounting Estimates
Our significant accounting principles, as described in Note 1 – Summary of
Significant Accounting Principles to the Consolidated Financial Statements
are essential in understanding the MD&A. Many of our significant accounting
principles require complex judgments to estimate the values of assets and
liabilities. We have procedures and processes in place to facilitate making
these judgments.

The more judgmental estimates are summarized in the following discus-
sion. We have identified and described the development of the variables most
important in the estimation processes 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 process
of determining the inputs to the models. 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 date, 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.

We evaluate our allowance at the portfolio segment level and our portfolio
segments are home loans, credit card and other consumer, and commercial.
Due to the variability in the drivers of the assumptions used in this process,
estimates of the portfolio’s inherent risks and overall collectability change
with changes in the economy, individual industries, countries, and borrowers’
or counterparties’ 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.

Key judgments used in determining the allowance for credit losses include
risk ratings for pools of commercial loans and leases, market and collateral
values and discount rates for individually evaluated loans, product type
classifications for consumer and commercial loans and leases, loss rates
used for consumer and commercial loans and leases, adjustments made to
address current events and conditions, considerations regarding domestic
and global economic uncertainty, and overall credit conditions.

Our estimate for the allowance for loan and lease losses is sensitive to the
loss rates and expected cash flows from our home loans, and credit card and
other consumer portfolio segments. For each one percent increase in the loss
rates on loans collectively evaluated for impairment in our home loans
portfolio segment excluding PCI loans, coupled with a one percent decrease
in the discounted cash flows on those loans individually evaluated for impair-
ment within this portfolio segment, the allowance for loan and lease losses at
December 31, 2010 would have increased by $141 million. PCI loans within
our home loans portfolio segment are initially recorded at fair value. Appli-
cable accounting guidance prohibits carry-over or creation of valuation allow-
ances in the initial accounting. However, subsequent decreases in the ex-
pected principal cash flows from the date of acquisition result in a charge to
the provision for credit losses and a corresponding increase to the allowance
for loan and lease losses. We subject our PCI portfolio to stress scenarios to
evaluate the potential impact given certain events. A one percent decrease in
the expected principal cash flows could result in a $297 million impairment of
the portfolio, of which $138 million would be related to our discontinued real
estate portfolio. For each one percent increase in the loss rates on loans
collectively evaluated for impairment within our credit card and other con-
sumer portfolio segment coupled with a one percent decrease in the expected
cash flows on those loans individually evaluated for impairment within this
portfolio segment, the allowance for loan and lease losses at December 31,
2010 would have increased by $152 million.

Our allowance for loan and lease losses is sensitive to the risk ratings
assigned to loans and leases within our Commercial portfolio segment.
Assuming a downgrade of one level in the internal risk ratings for commercial
loans and leases, except loans and leases already risk-rated Doubtful as
defined by regulatory authorities, the allowance for loan and lease losses
would have increased by $6.7 billion at December 31, 2010. The allowance
for loan and lease losses as a percentage of total loans and leases at
December 31, 2010 was 4.47 percent and this hypothetical increase in the
allowance would raise the ratio to 5.19 percent.

These sensitivity analyses do not represent management’s expectations
of the deterioration in risk ratings or the increases in loss rates but 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
the alternative scenarios outlined above occurring 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.

Bank of America 2010

111

Mortgage Servicing Rights
MSRs are nonfinancial assets that are created when a mortgage loan is sold
and we retain the right to service the loan. We account for consumer MSRs at
fair value with changes in fair value recorded in the Consolidated Statement of
Income in mortgage banking income. Commercial-related and residential
reverse mortgage MSRs are accounted for using the amortization method
(i.e., lower of cost or market) with impairment recognized as a reduction of
mortgage banking income. At December 31, 2010, our total MSR balance
was $15.2 billion.

We determine the fair value of our consumer MSRs using a valuation
model that calculates the present value of estimated future net servicing
income. The model incorporates key economic assumptions including esti-
mates of prepayment rates and resultant weighted-average lives of the MSRs,
and the option-adjusted spread (OAS) levels. These variables can, and gen-
erally do change from quarter to quarter as market conditions and projected
interest rates change. These assumptions are subjective in nature and
changes in these assumptions could materially affect our operating results.
For example, decreasing the prepayment rate assumption used in the valu-
ation of our consumer MSRs by 10 percent while keeping all other assump-
tions unchanged could have resulted in an estimated increase of $907 million
in mortgage banking income at December 31, 2010. This impact provided
above does not reflect any hedge strategies that may be undertaken to
mitigate such risk.

We manage potential changes in the fair value of MSRs through a com-
prehensive risk management program. The intent is to mitigate the effects of
changes in the fair value of MSRs through the use of risk management
instruments. To reduce the sensitivity of earnings to interest rate and market
value fluctuations, securities as well as certain derivatives such as options
and interest rate swaps may be used as economic hedges of the MSRs, but
are not designated as accounting hedges. These instruments are carried at
fair value with changes in fair value recognized in mortgage banking income.
For more information, see Mortgage Banking Risk Management on page 110.
For additional information on MSRs, including the sensitivity of weighted-
average lives and the fair value of MSRs to changes in modeled assumptions,
see Note 25 – Mortgage Servicing Rights to the Consolidated Financial
Statements. Also, for information on the impact of the time to complete
foreclosure sales on the value of MSRs, see Recent Events — Certain Ser-
vicing-related Issues beginning on page 38.

Fair Value of Financial Instruments
We determine the fair values of financial instruments based on the fair value
hierarchy under applicable accounting guidance which requires an entity to
maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. Applicable accounting guidance estab-
lishes three levels of inputs used to measure fair value. We carry trading
account assets and liabilities, derivative assets and liabilities, AFS debt and
marketable equity securities, certain MSRs and certain other assets at fair
value. Also, we account for certain corporate loans and loan commitments,
LHFS, commercial paper and other short-term borrowings, securities financ-
ing agreements, asset-backed secured financings, long-term deposits and
long-term debt under the fair value option. For more information, see Note 22
– Fair Value Measurements and Note 23 – Fair Value Option to the Consol-
idated Financial Statements.

The fair values of assets and liabilities include adjustments for market
liquidity, credit quality and other deal specific factors, where appropriate.
Valuations of products using models or other techniques are sensitive to
assumptions used for the significant inputs. Where market data is available,
the inputs used for valuation reflect that information as of our valuation date.
Inputs to valuation models are considered unobservable if they are supported
by little or no market activity. In periods of extreme volatility, lessened liquidity

112

Bank of America 2010

or in illiquid markets, there may be more variability in market pricing or a lack of
market data to use in the valuation process. In keeping with the prudent
application of estimates and management judgment in determining the fair
value of assets and liabilities, we have in place various processes and
controls that include: a model validation policy that requires review and
approval of quantitative models used for deal pricing, financial statement
fair value determination and risk quantification; 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. Primarily through validation controls, we utilize both broker and
pricing service inputs which can and do include both market-observable and
internally-modeled values and/or valuation inputs. Our reliance on this infor-
mation is tempered by the knowledge of how the broker and/or pricing service
develops its data with a higher degree of reliance applied to those that are
more directly observable and lesser reliance applied to those developed
through their own internal modeling. Similarly, broker quotes that are execut-
able are given a higher level of reliance than indicative broker quotes, which
are not executable. These processes and controls are performed indepen-
dently of the business.

Trading account assets and liabilities are carried at fair value based
primarily on actively traded markets where prices are from either direct market
quotes or observed transactions. Liquidity is a significant factor in the
determination of the fair value of trading account assets and 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 market perception
of credit uncertainty regarding a single company or a specific market sector. In
these instances, fair value is determined based on limited available market
information and other factors, principally from reviewing the issuer’s financial
statements and changes in credit ratings made by one or more of the ratings
agencies.

Trading account profits (losses), which represent the net amount earned
from our trading positions, can be volatile and are largely driven by general
market conditions and customer demand. Trading account profits (losses) 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 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 trading limits, stress
testing and tools such as VaR modeling, which estimates a potential daily loss
that we do not expect to exceed with a specified confidence level, to measure
and manage market risk. For more information on VaR, see Trading Risk
Management beginning on page 104.

The fair values of derivative assets and liabilities traded in the OTC market
are determined using quantitative models that require the use of multiple
market inputs including interest rates, prices and indices to generate con-
tinuous yield or pricing curves and volatility factors, which are used to value
the positions. The majority 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. The Corporation
incorporates within its fair value measurements of OTC derivatives the net
credit differential between the counterparty credit risk and our own credit risk.
The value of the credit differential is determined by reference to existing direct
market reference costs of credit, or where direct references are not available,
a proxy is applied consistent with direct references for other counterparties
that are similar in credit risk. An estimate of severity of loss is also used in the

determination of fair value, primarily based on historical experience adjusted
for any more recent name specific expectations.

Level 3 Assets and Liabilities
Financial assets and liabilities whose values are based on prices or valuation
techniques that require inputs that are both unobservable and are significant
to the overall fair value measurement are classified as Level 3 under the fair
value hierarchy established in applicable accounting guidance. The Level 3
financial assets and liabilities include private equity investments, consumer
MSRs, ABS, highly structured, complex or long-dated derivative contracts,
structured notes and certain CDOs, for which there is not an active market for

identical assets from which to determine fair value or where sufficient,
current market information about similar assets to use as observable, cor-
roborated data for all significant inputs into a valuation model is not available.
In these cases, the fair values of these Level 3 financial assets and liabilities
are determined using pricing models, discounted cash flow methodologies, a
net asset value approach for certain structured securities, or similar tech-
niques for which the determination of fair value requires significant manage-
ment judgment or estimation. In 2010, there were no changes to the quan-
titative models, or uses of such models, that resulted in a material
adjustment to the Consolidated Statement of Income.

Table 56 Level 3 Asset and Liability Summary

(Dollars in millions)

Trading account assets
Derivative assets
Available-for-sale securities
All other Level 3 assets at fair value

Total Level 3 assets at fair value (1)

Trading account liabilities
Derivative liabilities
Long-term debt
All other Level 3 liabilities at fair value

Total Level 3 liabilities at fair value (1)

December 31, 2010

December 31, 2009

As a %
of Total
Level 3
Assets

19.56%
23.65
19.99
36.80

100.00%

As a %
of Total
Level 3
Liabilities

0.05%

70.90
19.20
9.85

100.00%

As a %
of Total
Assets

0.69%
0.83
0.70
1.29

3.51%

As a %
of Total
Liabilities

–
0.54%
0.15
0.07

0.76%

As a %
of Total
Level 3
Assets

20.34%
22.24
19.63
37.79

100.00%

As a %
of Total
Level 3
Liabilities

1.81%

69.53
21.34
7.32

Level 3
Fair Value

$ 21,077
23,048
20,346
39,164

$103,635

Level 3
Fair Value

396
15,185
4,660
1,598

$ 21,839

100.00%

As a %
of Total
Assets

0.95%
1.03
0.91
1.76

4.65%

As a %
of Total
Liabilities

0.02%
0.76
0.23
0.08

1.09%

Level 3
Fair Value

$15,525
18,773
15,873
29,217

$79,388

Level 3
Fair Value

7
11,028
2,986
1,534

$15,555

(1) Level 3 total assets and liabilities are shown before the impact of counterparty netting related to our derivative positions.

During 2010, we recognized net gains of $7.1 billion on Level 3 assets and
liabilities which were primarily gains on net derivatives driven by income
earned on IRLCs, which are considered derivative instruments related to
the origination of mortgage loans that are held-for-sale. These gains were
partially offset by changes in the value of MSRs as a result of a decline in
interest rates and OTTI losses on non-agency RMBS. We also recorded pre-tax
net unrealized losses of $193 million in accumulated OCI on Level 3 assets
and liabilities during 2010, primarily related to non-agency RMBS.

Level 3 financial instruments, such as our consumer MSRs, may be
economically hedged with derivatives not classified as Level 3; therefore,
gains or losses associated with Level 3 financial instruments may be offset by
gains or losses associated with financial instruments classified in other levels
of the fair value hierarchy. The gains and losses recorded in earnings did not
have a significant impact on our liquidity or capital resources.

We conduct a review of our fair value hierarchy classifications on a
quarterly basis. Transfers into or out of Level 3 are made if the significant
inputs used in the financial models measuring the fair values of the assets
and liabilities became unobservable or observable, respectively, in the cur-
rent marketplace. These transfers are effective as of the beginning of the
quarter.

methodology for certain ABS to a discounted cash flow model. Transfers into
Level 3 for AFS debt securities were due to an increase in the number of non-
agency RMBS and other taxable securities priced using a discounted cash
flow model. Transfers into Level 3 for net derivative contracts were primarily
related to a lack of price observability for certain credit default and total return
swaps. Transfers in and transfers out of Level 3 for long-term debt are
primarily due to changes in the impact of unobservable inputs on the value
of certain equity-linked structured notes.

During 2010, the more significant transfers out of Level 3 were $3.4 billion
of trading account assets and $1.8 billion of long-term debt. Transfers out of
Level 3 for trading account assets were driven by increased price verification
of certain mortgage-backed securities, corporate debt and non-U.S. govern-
ment and agency securities. Transfers out of Level 3 for long-term debt are the
result of a decrease in the significance of unobservable pricing inputs for
certain equity-linked structured notes.

Global Principal Investments
Global Principal Investments is included within Equity Investments in All Other
on page 55. Global Principal Investments is comprised of a diversified port-
folio of private equity, real estate and other alternative investments in both
privately held and publicly traded companies. These investments are made
either directly in a company or held through a fund. At December 31, 2010,
this portfolio totaled $11.7 billion including $9.7 billion of non-public
investments.

Certain equity investments in the portfolio are subject to investment-
company accounting under applicable accounting guidance, and accordingly,

Bank of America 2010

113

are carried at fair value with changes in fair value reported in equity invest-
ment income. Initially the transaction price of the investment is generally
considered to be the best indicator of fair value. Thereafter, valuation of direct
investments is based on an assessment of each individual investment using
methodologies that include publicly traded comparables derived by multiplying
a key performance metric (e.g., earnings before interest, taxes, depreciation
and amortization) of the portfolio company by the relevant valuation multiple
observed for comparable companies, acquisition comparables, entry-level
multiples and discounted cash flows, and are subject to appropriate dis-
counts for lack of liquidity or marketability. Certain factors that may influence
changes in fair value include but are not limited to, recapitalizations, subse-
quent rounds of financing and offerings in the equity or debt capital markets.
For fund investments, we generally record the fair value of our proportionate
interest in the fund’s capital as reported by the fund’s respective managers.

Accrued Income Taxes
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 jurisdictions attributable to our operations to date. We currently file
income tax returns in more than 100 jurisdictions and consider many factors,
including statutory, judicial and regulatory guidance, in estimating the appro-
priate accrued income taxes for each jurisdiction.

In applying the applicable accounting guidance, 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 regulatory authorities.
These revisions of our estimate of accrued income taxes, which also may result
from our income tax planning and from the resolution of income tax controver-
sies, may be material to our operating results for any given period.

Goodwill and Intangible Assets

Background
The nature of and accounting for goodwill and intangible assets are discussed
in Note 1 – Summary of Significant Accounting Principles and Note 10 –
Goodwill and Intangible Assets to the Consolidated Financial Statements.
Goodwill is reviewed for potential impairment at the reporting unit level on an
annual basis, which for the Corporation is performed as of June 30 and in
interim periods if events or circumstances indicate a potential impairment.
See discussion about the annual impairment test as of June 30, 2010 on
page 115. A reporting unit is a business segment or one level below. As
reporting units are determined after an acquisition or evolve with changes in
business strategy, goodwill is assigned to reporting units and it no longer
retains its association with a particular acquisition. All of the revenue streams
and related activities of a reporting unit, whether acquired or organic, are
available to support the value of the goodwill.

The Corporation’s common stock price, consistent with common stock
prices in the financial services industry, remains volatile primarily due to the
continued uncertainty in the financial markets as well as recent financial
reforms including the Financial Reform Act. Our market capitalization has
remained below our recorded book value during 2010. The fair value of all
reporting units in aggregate as of the June 30, 2010 annual impairment test
was estimated to be $264.4 billion and the common stock market capital-
ization of the Corporation as of that date was $144.2 billion ($134.5 billion at
December 31, 2010). The implied control premium, which is the amount a
buyer would be willing to pay over the current market price of a publicly traded
stock to obtain control, was 63 percent after taking into consideration the
outstanding preferred stock of $18.0 billion as of June 30, 2010. As none of
our reporting units are publicly traded, individual reporting unit fair value
determinations are not directly correlated to the Corporation’s stock price.
Although we believe it is reasonable to conclude that market capitalization

114

Bank of America 2010

could be an indicator of fair value over time, we do not believe that recent
fluctuations in our market capitalization as a result of the current economic
conditions are reflective of actual cash flows and the fair value of our
individual reporting units.

Estimating the fair value of reporting units and the assets, liabilities and
intangible assets of a reporting unit is a subjective process that involves the
use of estimates and judgments, particularly related to cash flows, the
appropriate discount rates and an applicable control premium. The fair values
of the reporting units were determined using a combination of valuation
techniques consistent with the market approach and the income approach
and included the use of independent valuation specialists. Measurement of
the fair values of the assets, liabilities and intangibles of a reporting unit was
consistent with the requirements of the fair value measurements accounting
guidance and includes the use of estimates and judgments. The fair values of
the intangible assets were determined using the income approach.

The market approach we used estimates the fair value of the individual
reporting units by incorporating any combination of the tangible capital, book
capital and earnings multiples from comparable publicly traded companies in
industries similar to that of the reporting unit. The relative weight assigned to
these multiples varies among the reporting units based upon qualitative and
quantitative characteristics, primarily the size and relative profitability of the
respective reporting unit compared to the comparable publicly traded com-
panies. Since the fair values determined under the market approach are
representative of a noncontrolling interest, a control premium was added to
arrive at the reporting units’ estimated fair values on a controlling basis.

For purposes of the income approach, we calculated discounted cash flows
using estimated future cash flows and an appropriate terminal value. Our
discounted cash flow analysis employs a capital asset pricing model in esti-
mating the discount rate (i.e., cost of equity financing) for each reporting unit.
The inputs to this model include the risk-free rate of return, beta, which is a
measure of the level of non-diversifiable risk associated with comparable
companies for each specific reporting unit, market equity risk premium and
in certain cases an unsystematic (company-specific) risk factor. The unsys-
tematic risk factor is the input that specifically addresses uncertainty related to
our projections of earnings and growth, including the uncertainty related to loss
expectations. We utilized discount rates that we believe adequately reflect the
risk and uncertainty in the financial markets generally and specifically in our
internally developed forecasts. Expected rates of equity returns were estimated
based on historical market returns and risk/return rates for similar industries
of the reporting unit. We use our internal forecasts to estimate future cash
flows and actual results may differ from forecasted results.

Our consumer and small business card products, including the debit card
business, are part of an integrated platform within Global Card Services.
During the three months ended September 30, 2010, our estimate of revenue
loss due to the debit card interchange fee standards to be adopted under the
Financial Reform Act was approximately $2.0 billion annually based on current
volumes. Accordingly, we performed an impairment test for Global Card
Services during the three months ended September 30, 2010. In step one
of the impairment test, the fair value of Global Card Services was estimated
under the income approach where the significant assumptions included the

discount rate, terminal value, expected loss rates and expected new account
growth. We also updated our estimated cash flow valuation to reflect the
current strategic plan and other portfolio assumptions. Based on the results
of step one of the impairment test, we determined that the carrying amount of
Global Card Services, including goodwill, exceeded the fair value. The carrying
amount, fair value and goodwill of the reporting unit were $39.2 billion,
$25.9 billion and $22.3 billion, respectively. Accordingly, we performed step
two of the goodwill impairment test for this reporting unit. In step two, we
compared the implied fair value of the reporting unit’s goodwill with the
carrying amount of that goodwill. Under step two of the impairment test,
significant assumptions in measuring the fair value of the assets and liabil-
ities including discount rates, loss rates and interest rates were updated to
reflect the current economic conditions. Based on the results of this third-
quarter goodwill impairment test for Global Card Services, the carrying value
of the goodwill assigned to the reporting unit exceeded the implied fair value
by $10.4 billion. Accordingly, we recorded a non-cash, non-tax deductible
goodwill impairment charge of $10.4 billion to reduce the carrying value of
goodwill in Global Card Services from $22.3 billion to $11.9 billion. The
goodwill impairment test included limited mitigation actions to recapture lost
revenue. Although we have identified other potential mitigation actions within
Global Card Services, the impact of these actions going forward did not
reduce the goodwill impairment charge because these actions are in the early
stages of development and, additionally, certain of them may impact seg-
ments other than Global Card Services (e.g., Deposits). The impairment
charge had no impact on the Corporation’s reported Tier 1 and tangible equity
ratios.

Due to the continued stress on Global Card Services as a result of the
Financial Reform Act, we concluded that an additional impairment analysis
should be performed for this reporting unit during the three months ended
December 31, 2010. In step one of the goodwill impairment test, the fair
value of Global Card Services was estimated under the income approach. The
significant assumptions under the income approach included the discount
rate, terminal value, expected loss rates and expected new account growth.
The carrying amount, fair value and goodwill for the Global Card Services
reporting unit were $27.5 billion, $27.6 billion and $11.9 billion, respectively.
The estimated fair value as a percent of the carrying amount at December 31,
2010 was 100 percent. Although fair value exceeded the carrying amount in
step one of the Global Card Services goodwill impairment test, to further
substantiate the value of goodwill, we also performed the step two test for
this reporting unit. Under step two of the goodwill impairment test for this
reporting unit, significant assumptions in measuring the fair value of the
assets and liabilities of the reporting unit including discount rates, loss rates
and interest rates were updated to reflect the current economic conditions.
The results of step two of the goodwill impairment test indicated that remain-
ing balance of goodwill of $11.9 billion was not impaired as of December 31,
2010.

test which may result in additional impairment of goodwill in Global Card
Services. In view of the uncertainty with model inputs including the final ruling,
changes in the economic outlook and the corresponding impact to revenues
and asset quality, and the impacts of mitigation actions, it is not possible to
estimate the amount or range of amounts of additional goodwill impairment, if
any.

Home Loans & Insurance Impairment
During the three months ended December 31, 2010, we performed an
impairment test for the Home Loans & Insurance reporting unit as it was
likely that there was a decline in its fair value as a result of increased
uncertainties, including existing and potential litigation exposure and other
related risks, higher current servicing costs including loss mitigation efforts,
foreclosure related issues and the redeployment of centralized sales re-
sources to address servicing needs. In step one of the goodwill impairment
test, the fair value of Home Loans & Insurance was estimated based on a
combination of the market approach and the income approach. Under the
market approach valuation, significant assumptions included market multi-
ples and a control premium. The significant assumptions for the valuation of
Home Loans & Insurance under the income approach included cash flow
estimates, the discount rate and the terminal value. These assumptions were
updated to reflect the current strategic plan forecast and to address the
increased uncertainties referenced above. Based on the results of step one of
the impairment test, we determined that the carrying amount of Home
Loans & Insurance, including goodwill, exceeded the fair value. The carrying
amount, fair value and goodwill for the Home Loans & Insurance reporting unit
were $24.7 billion, $15.1 billion and $4.8 billion, respectively. Accordingly, we
performed step two of the goodwill impairment test for this reporting unit. In
step two, we compared the implied fair value of the reporting unit’s goodwill
with the carrying amount of that goodwill. Under step two of the goodwill
impairment test, significant assumptions in measuring the fair value of the
assets and liabilities of the reporting unit including discount rates, loss rates
and interest rates were updated to reflect the current economic conditions.
Based on the results of step two of the impairment test, the carrying value of
the goodwill assigned to Home Loans & Insurance exceeded the implied fair
value by $2.0 billion. Accordingly, we recorded a non-cash, non-tax deductible
goodwill impairment charge of $2.0 billion as of December 31, 2010 to
reduce the carrying value of goodwill in the Home Loans & Insurance reporting
unit. The impairment charge had no impact on the Corporation’s Tier 1 and
tangible equity ratios.

As we obtain additional information relative to our litigation exposure,
representations and warranties repurchase obligations, servicing costs and
foreclosure related issues, it is possible that such information, if significantly
different than the assumptions used in this goodwill impairment test, may
result in additional impairment in the Home Loans & Insurance reporting unit.

Annual Impairment Test for 2010
We perform our annual goodwill impairment test for all reporting units as of
June 30 each year. In performing the first step of the June 30, 2010 annual
impairment test, we compared the fair value of each reporting unit to its
current carrying amount, including goodwill. To determine fair value, we
utilized a combination of a market approach and an income approach. Under
the market approach, we compared earnings and equity multiples of the
individual reporting units to multiples of publicly traded companies compa-
rable to the individual reporting units. The control premiums used in the
June 30, 2010 annual impairment test ranged from 25 to 35 percent. Under
the income approach, we updated our assumptions to reflect the current
market environment. The discount rates used in the June 30, 2010 annual
impairment test ranged from 11 to 15 percent depending on the relative risk
of a reporting unit. Because growth rates developed by management for

Bank of America 2010

115

Litigation Reserve
In accordance with applicable accounting guidance, the Corporation estab-
lishes an accrued liability for litigation and regulatory matters when those
matters present loss contingencies that are both probable and estimable. In
such cases, there may be an exposure to loss in excess of any amounts
accrued. When a loss contingency is not both probable and estimable, the
Corporation does not establish an accrued liability. As a litigation or regulatory
matter develops, the Corporation, in conjunction with any outside counsel
handling the matter, evaluates on an ongoing basis whether such matter
presents a loss contingency that is both probable and estimable. If, at the
time of evaluation, the loss contingency related to a litigation or regulatory
matter is not both probable and estimable, the matter will continue to be
monitored for further developments that would make such loss contingency
both probable and estimable. Once the loss contingency related to a litigation
or regulatory matter is deemed to be both probable and estimable, the
Corporation will establish an accrued liability with respect to such loss
contingency and record a corresponding amount of litigation-related expense.
The Corporation will continue to monitor the matter for further developments
that could affect the amount of the accrued liability that has been previously
established.

For a limited number of the matters disclosed in Note 14 – Commitments
and Contingencies to the Consolidated Financial Statements for which a loss
is probable or reasonably possible in future periods, whether in excess of a
related accrued liability or where there is no accrued liability, we are able to
estimate a range of possible loss. In determining whether it is possible to
provide an estimate of loss or range of possible loss, the Corporation reviews
and evaluates its material litigation and regulatory matters on an ongoing
basis, in conjunction with any outside counsel handling the matter, in light of
potentially relevant factual and legal developments. These may include infor-
mation learned through the discovery process, rulings on dispositive motions,
settlement discussions, and other rulings by courts, arbitrators or others. In
cases in which the Corporation possesses sufficient information to develop
an estimate of loss or range of possible loss, that estimate is aggregated and
disclosed in Note 14 – Commitments and Contingencies to the Consolidated
Financial Statements. For other disclosed matters for which a loss is probable
or reasonably possible, such an estimate is not possible. Those matters for
which an estimate is not possible are not included within this estimated range.
Therefore, the estimated range of possible loss represents what we believe to
be an estimate of possible loss only for certain matters meeting these criteria.
It does not represent the Corporation’s maximum loss exposure. Information
is provided in Note 14 – Commitments and Contingencies to the Consolidated
Financial Statements regarding the nature of all of these contingencies and,
where specified, the amount of the claim associated with these loss
contingencies.

Consolidation and Accounting for Variable Interest
Entities
The entity that has a controlling financial interest in a VIE is referred to as the
primary beneficiary and consolidates the VIE. In accordance with the new
consolidation guidance effective January 1, 2010, the Corporation is deemed
to have a controlling financial interest and is the primary beneficiary of a VIE if
it has both the power to direct the activities of the VIE that most significantly
impact the VIE’s economic performance and an obligation to absorb losses or
the right to receive benefits that could potentially be significant to the VIE.

individual revenue and expense items have been significantly affected by the
current economic environment and financial reform, management developed
separate long-term forecasts. The fair value of Global Card Services was
estimated under the income approach which did not include the impact of any
potential future changes that would result from the Financial Reform Act
because it was not signed into law until the third quarter 2010.

Based on the results of step one of the annual impairment test, we
determined that the carrying amount of the Home Loans & Insurance and
Global Card Services reporting units, including goodwill, exceeded their fair
value. The carrying amount, fair value and goodwill for the Home Loans &
Insurance reporting unit were $27.1 billion, $22.5 billion and $4.8 billion,
respectively, and for Global Card Services were $40.1 billion, $40.1 billion
and $22.3 billion, respectively. Because the carrying amount exceeded the
fair value, we performed step two of the goodwill impairment test for these
reporting units as of June 30, 2010. For all other reporting units, step two was
not required as their fair value exceeded their carrying amount indicating
there was no impairment.

In step two for both reporting units, we compared the implied fair value of
each reporting unit’s goodwill with the carrying amount of that goodwill. We
determined the implied fair value of goodwill for a reporting unit by assigning
the fair value of the reporting unit to all of the assets and liabilities of that unit,
including any unrecognized intangible assets, as if the reporting unit had been
acquired in a business combination. The excess of the fair value of the
reporting unit over the amounts assigned to its assets and liabilities is the
implied fair value of goodwill. Significant assumptions in measuring the fair
value of the assets and liabilities of both reporting units including discount
rates, loss rates and interest rates were updated to reflect the current
economic conditions. Based on the results of step two of the impairment
test as of June 30, 2010, we determined that goodwill was not impaired in
either Home Loans & Insurance or Global Card Services.

Representations and Warranties
The methodology used to estimate the liability for representations and war-
ranties is a function of the representations and warranties given and consid-
ers a variety of factors, which include depending upon the counterparty, actual
defaults, estimated future defaults, historical loss experience, estimated
home prices, estimated probability that we will receive a repurchase request,
number of payments made by the borrower prior to default and estimated
probability that we will be required to repurchase a loan. Changes to any one of
these factors could significantly impact the estimate of our liability. Repre-
sentations and warranties provision may vary significantly each period as the
methodology used to estimate the expense continues to be refined based on
the level and type of repurchase requests presented, defects identified, the
latest experience gained on repurchase requests and other relevant facts and
circumstances. For those claims where we have established a representa-
tions and warranties liability as discussed in Note 9 — Representations and
Warranties Obligations and Corporate Guarantees to the Consolidated Finan-
cial Statements, an assumed simultaneous increase or decrease of 10 per-
cent in estimated future defaults, loss severity and the net repurchase rate
would result in an increase of approximately $850 million or decrease of
approximately $950 million in the representations and warranties liability as
of December 31, 2010. These sensitivities are hypothetical and are intended
to provide an indication of the impact of a significant change in these key
assumptions on the representations and warranties liability.
In reality,
changes in one assumption may result in changes in other assumptions,
which may or may not counteract the sensitivity.

For additional information on representations and warranties, see Rep-
resentations and Warranties on page 56, Note 9 – Representations and
Warranties Obligations and Corporate Guarantees and Note 14 – Commit-
ments and Contingencies to the Consolidated Financial Statements.

116

Bank of America 2010

Determining whether an entity has a controlling financial interest in a VIE
requires significant judgment. An entity must assess the purpose and design
of the VIE, including explicit and implicit contractual arrangements, and the
entity’s involvement in both the design of the VIE and its ongoing activities.
The entity must then determine which activities have the most significant
impact on the economic performance of the VIE and whether the entity has
the power to direct such activities. For VIEs that hold financial assets, the
party that services the assets or makes investment management decisions
may have the power to direct the most significant activities of a VIE. Alter-
natively, a third party that has the unilateral right to replace the servicer or
investment manager or to liquidate the VIE may be deemed to be the party
with power. If there are no significant ongoing activities, the party that was
responsible for the design of the VIE may be deemed to have power. If the
entity determines that it has the power to direct the most significant activities
of the VIE, then the entity must determine if it has either an obligation to
absorb losses or the right to receive benefits that could potentially be
significant to the VIE. Such economic interests may include investments in
debt or equity instruments issued by the VIE, liquidity commitments, and
explicit and implicit guarantees.

On a quarterly basis, we reassess whether we have a controlling financial
interest and are the primary beneficiary of a VIE. The quarterly reassessment
process considers whether we have acquired or divested the power to direct
the activities of the VIE through changes in governing documents or other
circumstances. The reassessment also considers whether we have acquired
or disposed of a financial interest that could be significant to the VIE, or
whether an interest in the VIE has become significant or is no longer signif-
icant. The consolidation status of the VIEs with which we are involved may
change as a result of such reassessments. Changes in consolidation status
are applied prospectively, with assets and liabilities of a newly consolidated
VIE initially recorded at fair value. A gain or loss may be recognized upon
deconsolidation of a VIE depending on the carrying amounts of deconsoli-
dated assets and liabilities compared to the fair value of retained interests
and ongoing contractual arrangements.

2009 Compared to 2008
The following discussion and analysis provides a comparison of our results of
operations for 2009 and 2008. This discussion should be read in conjunction
with the Consolidated Financial Statements and related Notes. Tables 6 and 7
contain financial data to supplement this discussion.

Overview

Net Income
Net income totaled $6.3 billion in 2009 compared to $4.0 billion in 2008.
Including preferred stock dividends, net loss applicable to common share-
holders was $2.2 billion, or $(0.29) per diluted share. Those results com-
pared with 2008 net income available to common shareholders of $2.6 billion,
or $0.54 per diluted share.

Net Interest Income
Net interest income on a FTE basis increased $1.9 billion to $48.4 billion for
2009 compared to 2008. The increase was driven by the improved rate
environment, the acquisitions of Countrywide and Merrill Lynch, the impact of
new draws on previously securitized accounts and the contribution from
market-based net interest income which benefited from the Merrill Lynch
acquisition. These items were partially offset by the impact of deleveraging
the ALM portfolio earlier in 2009, lower consumer loan levels and the adverse
impact of nonperforming loans. The net interest yield on a FTE basis de-
creased 33 bps to 2.65 percent for 2009 compared to 2008 due to the
factors related to the core businesses as described above.

Noninterest Income
Noninterest income increased $45.1 billion to $72.5 billion in 2009 com-
pared to 2008. Card income on a held basis decreased $5.0 billion primarily
due to higher credit losses on securitized credit card loans and lower fee
income driven by changes in consumer retail purchase and payment behavior
in the stressed economic environment. Investment and brokerage services
increased $6.9 billion primarily due to the acquisition of Merrill Lynch partially
offset by the impact of lower valuations in the equity markets driven by the
market downturn in late 2008, which improved modestly in 2009, and net
outflows in the cash funds. Investment banking income increased $3.3 billion
due to higher debt, equity and advisory fees reflecting the increased size of
the investment banking platform from the acquisition of Merrill Lynch. Equity
investment income increased $9.5 billion driven by $7.3 billion in gains on
sales of portions of our CCB investment and a $1.1 billion gain related to our
BlackRock investment. Trading account profits (losses) increased $18.1 bil-
lion primarily driven by favorable core trading results and reduced write-downs
on legacy assets partially offset by negative credit valuation adjustments on
derivative liabilities of $662 million due to improvement in the Corporation’s
credit spreads. Mortgage banking income increased $4.7 billion driven by
higher production and servicing income of $3.2 billion and $1.5 billion. These
increases were primarily due to increased volume as a result of the full-year
impact of Countrywide and higher refinance activity partially offset by lower
MSR results, net of hedges. Gains on sales of debt securities increased
$3.6 billion due to the favorable interest rate environment and improved credit
spreads. Gains were primarily driven by sales of agency MBS and CMOs. The
net loss in other decreased $1.6 billion primarily due to the $3.8 billion gain
from the contribution of our merchant processing business to a joint venture,
reduced support provided to cash funds and lower write-downs on legacy
assets offset by negative credit valuation adjustments recorded on Merrill
Lynch structured notes of $4.9 billion.

Provision for Credit Losses
The provision for credit losses increased $21.7 billion to $48.6 billion for
2009 compared to 2008 reflecting further deterioration in the economy and
housing markets across a broad range of property types, industries and
borrowers. Net charge-offs totaled $33.7 billion, or 3.58 percent of average
loans and leases for 2009 compared with $16.2 billion, or 1.79 percent for
2008. The increased level of net charge-offs is a result of the same factors
noted above.

Noninterest Expense
Noninterest expense increased $25.2 billion to $66.7 billion for 2009 com-
pared to 2008. Personnel costs and other general operating expenses rose
due to the addition of Merrill Lynch and the full-year impact of Countrywide.
Additionally, noninterest expense increased due to higher litigation costs
compared to the prior year, a $425 million pre-tax charge to pay the U.S. gov-
ernment to terminate its asset guarantee term sheet and higher FDIC insur-
ance costs including a $724 million special assessment in 2009.

Income Tax Expense
Income tax benefit was $1.9 billion for 2009 compared to expense of
$420 million for 2008 and resulted in an effective tax rate of (44.0) percent
compared to 9.5 percent in the prior year. The change in the effective tax rate
from the prior year was due to increased permanent tax preference items as
well as a shift in the geographic mix of our earnings driven by the addition of
Merrill Lynch.

Bank of America 2010

117

Business Segment Operations

Deposits
Net income decreased $3.0 billion to $2.6 billion driven by lower net revenue
partially offset by an increase in noninterest expense. Net interest income
decreased $3.8 billion driven by lower net interest income allocation from
ALM activities and spread compression as interest rates declined. Noninter-
est income was essentially flat at $6.8 billion. Noninterest expense increased
$908 million to $9.5 billion primarily due to higher FDIC insurance including a
special FDIC assessment, partially offset by lower operating costs related to
lower transaction volume due to the economy and productivity initiatives.

Global Card Services
Net income decreased $6.8 billion to a net loss of $5.3 billion due to higher
provision for credit losses. Net interest income grew $667 million to $20.0 bil-
lion driven by increased loan spreads. Noninterest income decreased $2.6 bil-
lion to $9.1 billion driven by decreases in card income and all other income.
The decrease in card income resulted from lower cash advances, credit card
interchange and fee income. All other income in 2008 included the gain
associated with the Visa initial public offering (IPO). Provision for credit losses
increased $10.0 billion to $29.6 billion primarily driven by higher losses in the
consumer card and consumer lending portfolios from impact of the economic
conditions. Noninterest expense decreased $1.2 billion to $7.7 billion pri-
marily due to lower operating and marketing costs, and the impact of certain
benefits associated with the Visa IPO transactions.

Home Loans & Insurance
Home Loans & Insurance net loss increased $1.3 billion to a net loss of
$3.9 billion as growth in noninterest income and net interest income was
more than offset by higher provision for credit losses and an increase in
noninterest expense. Net interest income grew $1.7 billion driven primarily by
an increase in average LHFS and home equity loans. The growth in average
LHFS was a result of higher mortgage loan volume driven by the lower interest
rate environment. The growth in average home equity loans was attributable to
the migration of certain loans from GWIM to Home Loans & Insurance as well
as the Countrywide acquisition. Noninterest income increased $5.9 billion to
$11.9 billion driven by higher mortgage banking income which benefited from
the Countrywide acquisition and higher production income, partially offset by
higher representations and warranties provision. Provision for credit losses
increased $5.0 billion to $11.2 billion driven primarily by higher losses in the
home equity portfolio and reserve increases in the Countrywide home equity
PCI portfolio. Noninterest expense increased $4.7 billion to $11.7 billion
primarily driven by the Countrywide acquisition as well as increased costs
related to higher production volume.

Global Commercial Banking
Net income decreased $2.9 billion to a net loss of $290 million in 2009 as an
increase in revenue was more than offset by increased credit costs. Net
interest income was essentially flat at $8.1 billion. Noninterest income
increased $552 million to $3.1 billion largely driven by our agreement to

purchase certain retail automotive loans. The provision for credit losses
increased $4.5 billion to $7.8 billion, driven by reserve additions primarily
in the commercial real estate portfolio and higher net charge-offs across all
portfolios. Noninterest expense increased $501 million primarily attributable
to higher FDIC insurance, including a special FDIC assessment.

Global Banking & Markets
Global Banking & Markets recognized net income of $10.1 billion in 2009
compared to a net loss of $3.2 billion in 2008 as increased noninterest
income driven by trading account profits was partially offset by higher non-
interest expense. Sales and trading revenue was $17.6 billion in 2009
compared to a loss of $6.9 billion in 2008 primarily due to the addition of
Merrill Lynch. Noninterest income also included a $3.8 billion pre-tax gain
related to the contribution of the merchant processing business into a joint
venture. Noninterest expense increased $8.6 billion, largely attributable to
the Merrill Lynch acquisition.

Global Wealth & Investment Management
Net income increased $702 million to $1.7 billion in 2009 as higher total
revenue was partially offset by increases in noninterest expense and provi-
sion for credit losses. Net interest income increased $1.2 billion to $6.0 billion
primarily due to the acquisition of Merrill Lynch. Noninterest income increased
$8.6 billion to $10.1 billion primarily due to higher investment and brokerage
services income and the lower level of support provided to certain cash funds,
partially offset by the impact of lower average equity market levels and net
outflows primarily in the cash complex. Provision for credit losses increased
$397 million to $1.1 billion, reflecting the weak economy during 2009 which
drove higher net charge-offs in the consumer real estate and commercial
portfolios. Noninterest expense increased $8.3 billion to $12.4 billion driven
by the addition of Merrill Lynch and higher FDIC insurance, including a special
FDIC assessment, partially offset by lower revenue-related expenses.

All Other
Net income in All Other was $1.3 billion in 2009 compared to a net loss of
$1.1 billion in 2008 as higher total revenue driven by increases in noninterest
income, net interest income and an income tax benefit were partially offset by
increased provision for credit losses, merger and restructuring charges and all
other noninterest expense. Net interest income increased $1.5 billion prima-
rily due to unallocated net interest income related to increased liquidity driven
in part by capital raises during 2009. Noninterest income increased $8.2 bil-
lion to $10.6 billion driven by higher equity investment income including a
$7.3 billion gain on the sale of a portion of our CCB investment and gains on
sales of debt securities. These were partially offset by a $4.9 billion negative
valuation adjustment on certain structured liabilities. Provision for credit
losses was $8.0 billion in 2009 compared to $2.8 billion in 2008 primarily
due to higher credit costs related to our ALM residential mortgage portfolio.
Merger and restructuring charges increased $1.8 billion to $2.7 billion due to
the integration costs associated with the Merrill Lynch and Countrywide
acquisitions.

118

Bank of America 2010

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 (1)
Federal funds sold and securities borrowed or purchased under

agreements to resell

Trading account assets
Debt securities (2)
Loans and leases (3):

Residential mortgage (4)
Home equity
Discontinued real estate
U.S. credit card
Non-U.S. credit card
Direct/Indirect consumer (5)
Other consumer (6)
Total consumer

U.S. commercial
Commercial real estate (7)
Commercial lease financing
Non-U.S. commercial

Total commercial

Total loans and leases

Other earning assets

Total earning assets (8)

Cash and cash equivalents (1)
Other assets, less allowance for loan and lease losses

Total assets

Interest-bearing liabilities
U.S. interest-bearing deposits:

Savings
NOW and money market deposit accounts
Consumer CDs and IRAs
Negotiable CDs, public funds and other time deposits

Total U.S. interest-bearing deposits

Non-U.S. interest-bearing deposits:

Banks located in non-U.S. countries
Governments and official institutions
Time, savings and other

Total non-U.S. interest-bearing deposits

Total interest-bearing deposits

Federal funds purchased, securities loaned or sold under agreements

to repurchase and other short-term borrowings

Trading account liabilities
Long-term debt

Total interest-bearing liabilities (8)

Noninterest-bearing sources:

Noninterest-bearing deposits
Other liabilities
Shareholders’ equity

Total liabilities and shareholders’ equity

Net interest spread
Impact of noninterest-bearing sources

2010

Interest
Income/
Expense

Average
Balance

Yield/
Rate

Average
Balance

2009

Interest
Income/
Expense

Yield/
Rate

Average
Balance

2008

Interest
Income/
Expense

Yield/
Rate

27,419

292

1.06%

27,465

334

1.22%

10,696

367

3.43%

256,943
213,745
323,946

245,727
145,860
13,830
117,962
28,011
96,649
2,927
650,966
195,895
59,947
21,427
30,096
307,365
958,331
117,189

1,897,573
174,621
367,408

$2,439,602

36,649
441,589
142,648
17,683
638,569

18,102
3,349
55,059
76,510
715,079

1,832
7,050
11,850

11,736
5,990
527
12,644
3,450
4,753
186
39,286
7,909
2,000
1,070
1,091
12,070
51,356
3,919

76,299
368

157
1,405
1,723
226
3,511

144
10
332
486
3,997

430,329
91,669
490,497

1,727,574

3,699
2,571
13,707

23,974

273,507
205,290
233,231

$2,439,602

0.71
3.30
3.66

4.78
4.11
3.81
10.72
12.32
4.92
6.34
6.04
4.04
3.34
4.99
3.62
3.93
5.36
3.34

4.02

235,764
217,048
271,048

249,335
154,761
17,340
52,378
19,655
99,993
3,303

596,765
223,813
73,349
21,979
32,899

352,040

948,805

130,063

2,894
8,236
13,224

13,535
6,736
1,082
5,666
2,122
6,016
237

35,394
8,883
2,372
990
1,406

13,651

49,045

5,105

1,830,193

78,838

379

196,237
416,638

$2,443,068

0.43%
0.32
1.21
1.28
0.55

33,671
358,712
218,041
37,796

648,220

215
1,557
5,054
473

7,299

18,688
6,270
57,045

82,003

145
16
347

508

730,223

7,807

488,644
72,207
446,634

5,512
2,075
15,413

1,737,708

30,807

250,743
209,972
244,645

$2,443,068

0.80
0.28
0.60
0.64
0.56

0.86
2.80
2.79

1.39

2.63%
0.13

2.76%

1.23
3.79
4.88

5.43
4.35
6.24
10.82
10.80
6.02
7.17

5.93
3.97
3.23
4.51
4.27

3.88

5.17

3.92

4.31

0.64%
0.43
2.32
1.25

1.13

0.78
0.26
0.61

0.62

1.07

1.13
2.87
3.45

1.77

2.59
4.96
5.34

5.63
5.63
7.87
10.81
12.36
8.40
8.41

6.86
5.31
4.84
3.58
4.63

5.04

6.18

5.48

5.55

0.71%
1.41
3.63
3.33

2.33

2.83
2.54
2.65

2.70

2.39

2.71
3.80
4.30

2.88

128,053
186,579
250,551

260,244
135,060
10,898
63,318
16,527
82,516
3,816

572,379
220,554
63,208
22,290
32,440

338,492

910,871

75,972

3,313
9,259
13,383

14,657
7,606
858
6,843
2,042
6,934
321

39,261
11,702
3,057
799
1,503

17,061

56,322

4,161

1,562,722

86,805

45,367
235,896

$1,843,985

32,204
267,831
203,887
32,264

536,186

37,354
10,975
53,695

102,024

638,210

455,703
72,915
231,235

230
3,781
7,404
1,076

12,491

1,056
279
1,424

2,759

15,250

12,362
2,774
9,938

1,398,063

40,324

192,947
88,144
164,831

$1,843,985

2.54%
0.08

2.62%

$48,031

2.67%
0.30

2.97%

$46,481

Net interest income/yield on earning assets (1)

$52,325

(1) Fees earned on overnight deposits placed with the Federal Reserve, which were included in time deposits placed and other short-term investments in prior periods, have been reclassified to cash and cash equivalents, consistent with

the Corporation’s Consolidated Balance Sheet presentation of these deposits. Net interest income and net interest yield are calculated excluding these fees.

(2) Yields on AFS debt securities are calculated based on fair value rather than the cost basis. The use of fair value does not have a material impact on net interest yield.
(3) Nonperforming loans are included in the respective average loan balances. Income on these nonperforming loans is recognized on a cash basis. Purchased credit-impaired loans were written down to fair value upon acquisition and

(4)

(5)

(6)

(7)

(8)

accrete interest income over the remaining life of the loan.
Includes non-U.S. residential mortgage loans of $410 million and $622 million in 2010 and 2009. There were no material non-U.S. residential mortgage loans prior to January 1, 2009.
Includes non-U.S. consumer loans of $7.9 billion, $8.0 billion and $2.7 billion in 2010, 2009 and 2008, respectively.
Includes consumer finance loans of $2.1 billion, $2.4 billion and $2.8 billion; other non-U.S. consumer loans of $731 million, $657 million and $774 million; and consumer overdrafts of $111 million, $217 million and $247 million in
2010, 2009 and 2008, respectively.
Includes U.S. commercial real estate loans of $57.3 billion, $70.7 billion and $62.1 billion; and non-U.S. commercial real estate loans of $2.7 billion, $2.7 billion and $1.1 billion in 2010, 2009 and 2008, respectively.
Interest income includes the impact of interest rate risk management contracts, which decreased interest income on the underlying assets $1.4 billion, $456 million and $260 million in 2010, 2009 and 2008, respectively. Interest
expense includes the impact of interest rate risk management contracts, which increased (decreased) interest expense on the underlying liabilities $(3.5) billion, $(3.0) billion and $409 million in 2010, 2009 and 2008, respectively.
For further information on interest rate contracts, see Interest Rate Risk Management for Nontrading Activities beginning on page 107.

Bank of America 2010

119

Table II Analysis of Changes in Net Interest Income – FTE Basis

From 2009 to 2010

From 2008 to 2009

(Dollars in millions)

Increase (decrease) in interest income
Time deposits placed and other short-term investments (2)
Federal funds sold and securities borrowed or purchased under agreements to resell
Trading account assets
Debt securities
Loans and leases:

Residential mortgage
Home equity
Discontinued real estate
U.S. credit card
Non-U.S. credit card
Direct/Indirect consumer
Other consumer

Total consumer

U.S. commercial
Commercial real estate
Commercial lease financing
Non-U.S. commercial

Total commercial

Total loans and leases

Other earning assets

Total interest income

Increase (decrease) in interest expense
U.S. interest-bearing deposits:

Savings
NOW and money market deposit accounts
Consumer CDs and IRAs
Negotiable CDs, public funds and other time deposits

Total U.S. interest-bearing deposits

Non-U.S. interest-bearing deposits:

Banks located in non-U.S. countries
Governments and official institutions
Time, savings and other

Total non-U.S. interest-bearing deposits

Total interest-bearing deposits

Federal funds purchased, securities loaned or sold under agreements to repurchase and

other short-term borrowings

Trading account liabilities
Long-term debt

Total interest expense
Net increase in interest income (2)

Due to Change in (1)

Volume

Rate

1
266
(135)
2,585

(192)
(391)
(219)
7,097
903
(198)
(27)

(1,106)
(436)
(24)
(121)

(43)
(1,328)
(1,051)
(3,959)

(1,607)
(355)
(336)
(119)
425
(1,065)
(24)

132
64
104
(194)

(511)

(675)

20
342
(1,745)
(252)

(78)
(494)
(1,586)
5

(4)
(7)
(11)

3
1
(4)

(649)
556
1,509

(1,164)
(60)
(3,215)

Net
Change

(42)
(1,062)
(1,186)
(1,374)

(1,799)
(746)
(555)
6,978
1,328
(1,263)
(51)

3,892

(974)
(372)
80
(315)

(1,581)

2,311

(1,186)

$(2,539)

(58)
(152)
(3,331)
(247)

(3,788)

(1)
(6)
(15)

(22)

(3,810)

(1,813)
496
(1,706)

(6,833)

$ 4,294

Due to Change in (1)

Volume

Rate

$ 575
2,793
1,507
1,091

(619)
1,107
507
(1,181)
387
1,465
(43)

182
493
(12)
20

$ (608)
(3,212)
(2,530)
(1,250)

(503)
(1,977)
(283)
4
(307)
(2,383)
(41)

(3,001)
(1,178)
203
(117)

2,966

(2,022)

9
1,277
511
183

(24)
(3,501)
(2,861)
(786)

(527)
(120)
88

(384)
(143)
(1,165)

880
(30)
9,267

(7,730)
(669)
(3,792)

Net
Change

(33)
(419)
(1,023)
(159)

(1,122)
(870)
224
(1,177)
80
(918)
(84)

(3,867)

(2,819)
(685)
191
(97)

(3,410)

(7,277)

944

$(7,967)

(15)
(2,224)
(2,350)
(603)

(5,192)

(911)
(263)
(1,077)

(2,251)

(7,443)

(6,850)
(699)
5,475

(9,517)

$ 1,550

(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. The

unallocated change in rate or volume variance is allocated between the rate and volume variances.

(2) Fees earned on overnight deposits placed with the Federal Reserve, which were included in the time deposits placed and other short-term investments line in prior periods, have been reclassified to cash and cash equivalents,

consistent with the balance sheet presentation of these deposits. Net interest income is calculated excluding these fees.

120

Bank of America 2010

Table III Preferred Stock Cash Dividend Summary (as of February 25, 2011)

Preferred Stock
Series B (1)

Series D (2)

Series E (2)

Series H (2)

Series I (2)

Series J (2)

Series K (3, 4)

Series L

Series M (3, 4)

Outstanding
Notional
Amount
(in millions)

$ 661

$ 487

$2,862

$ 365

$ 978

$1,668

$3,349

Declaration Date

Record Date

Payment Date

Per Annum
Dividend Rate

Dividend Per
Share

January 26, 2011
October 25, 2010
July 28, 2010
April 28, 2010
January 27, 2010

January 4, 2011
October 4, 2010
July 2, 2010
April 2, 2010
January 4, 2010

January 4, 2011
July 2, 2010
January 4, 2010

December 17, 2010
September 17, 2010
June 17, 2010
March 17, 2010

April 11, 2011
January 11, 2011
October 11, 2010
July 9, 2010
April 9, 2010

February 28, 2011
November 30, 2010
August 31, 2010
May 28, 2010
February 26, 2010

January 31, 2011
October 29, 2010
July 30, 2010
April 30, 2010
January 29, 2010

January 15, 2011
October 15, 2010
July 15, 2010
April 15, 2010
January 15, 2010

March 15, 2011
December 15, 2010
September 15, 2010
June 15, 2010
March 15, 2010

January 15, 2011
October 15, 2010
July 15, 2010
April 15, 2010
January 15, 2010

January 15, 2011
July 15, 2010
January 15, 2010

January 3, 2011
October 1, 2010
July 1, 2010
April 1, 2010

April 25, 2011
January 25, 2011
October 25, 2010
July 23, 2010
April 23, 2010

March 14, 2011
December 14, 2010
September 14, 2010
June 14, 2010
March 15, 2010

February 15, 2011
November 15, 2010
August 16, 2010
May 17, 2010
February 16, 2010

February 1, 2011
November 1, 2010
August 2, 2010
May 3, 2010
February 1, 2010

April 1, 2011
January 3, 2011
October 1, 2010
July 1, 2010
April 1, 2010

February 1, 2011
November 1, 2010
August 2, 2010
May 3, 2010
February 1, 2010

7.00%
7.00
7.00
7.00
7.00

6.204%
6.204
6.204
6.204
6.204

Floating
Floating
Floating
Floating
Floating

8.20%
8.20
8.20
8.20
8.20

6.625%
6.625
6.625
6.625
6.625

7.25%
7.25
7.25
7.25
7.25

January 31, 2011
July 30, 2010
February 1, 2010

Fixed-to-Floating
Fixed-to-Floating
Fixed-to-Floating

January 31, 2011
November 1, 2010
July 30, 2010
April 30, 2010

7.25%
7.25
7.25
7.25

1.75
1.75
1.75
1.75
1.75

$0.38775
0.38775
0.38775
0.38775
0.38775

$0.25556
0.25556
0.25556
0.24722
0.25556

$0.51250
0.51250
0.51250
0.51250
0.51250

$0.41406
0.41406
0.41406
0.41406
0.41406

$0.45312
0.45312
0.45312
0.45312
0.45312

$ 40.00
40.00
40.00

$ 18.125
18.125
18.125
18.125

$ 40.625
40.625

$1,434

October 4, 2010
April 2, 2010

October 31, 2010
April 30, 2010

November 15, 2010
May 17, 2010

Fixed-to-Floating
Fixed-to-Floating

(1) Dividends are cumulative.
(2) Dividends per depositary share, each representing a 1/1000th interest in a share of preferred stock.
(3)
(4) Dividends per depositary share, each representing a 1/25th interest in a share of preferred stock.

Initially pays dividends semi-annually.

Bank of America 2010

121

Table III Preferred Stock Cash Dividend Summary (as of February 25, 2011) (continued)

Preferred Stock
Series 1 (5)

Series 2 (5)

Series 3 (5)

Series 4 (5)

Series 5 (5)

Series 6 (6)

Series 7 (6)

Series 8 (5)

Series 2 (MC) (7)

Series 3 (MC) (8)

Outstanding
Notional
Amount
(in millions)

$ 146

$ 526

$ 670

$ 389

$ 606

$2,673

–

Declaration Date

January 4, 2011
October 4, 2010
July 2, 2010
April 2, 2010
January 4, 2010

October 4, 2010
July 2, 2010
April 2, 2010
January 4, 2010

Record Date

Payment Date

Per Annum
Dividend Rate

Dividend Per
Share

February 15, 2011
November 15, 2010
August 15, 2010
May 15, 2010
February 15, 2010

February 1, 2011
November 1, 2010
August 1, 2010
May 1, 2010
February 1, 2010

March 15, 2011
December 15, 2010
September 15, 2010
June 15, 2010
March 15, 2010

February 15, 2011
November 15, 2010
August 15, 2010
May 15, 2010
February 15, 2010

October 5, 2010
August 15, 2010
May 15, 2010
February 15, 2010

February 28, 2011
November 29, 2010
August 31, 2010
May 28, 2010
February 26, 2010

February 28, 2011
November 29, 2010
August 30, 2010
May 28, 2010
March 1, 2010

February 28, 2011
November 29, 2010
August 31, 2010
May 28, 2010
February 26, 2010

February 22, 2011
November 22, 2010
August 23, 2010
May 21, 2010
February 22, 2010

March 30, 2011
December 30, 2010
September 30, 2010
June 30, 2010
March 30, 2010

February 28, 2011
November 29, 2010
August 31, 2010
May 28, 2010
March 1, 2010

October 15, 2010
August 30, 2010
May 28, 2010
March 1, 2010

Floating
Floating
Floating
Floating
Floating

$ 0.19167
0.19167
0.19167
0.18542
0.19167

6.375% $ 0.39843
0.39843
6.375
0.39843
6.375
0.39843
6.375
0.39843
6.375

Floating
Floating
Floating
Floating
Floating

$ 0.25556
0.25556
0.25556
0.24722
0.25556

6.70% $ 0.41875
0.41875
6.70
0.41875
6.70
0.41875
6.70
0.41875
6.70

6.25% $ 0.39062
0.39062
6.25
0.39062
6.25
0.39062
6.25
0.39062
6.25

8.625% $ 0.53906
0.53906
8.625
0.53906
8.625
0.53906
8.625
0.53906
8.625

9.00% $1,150.00
2,250.00
9.00
2,250.00
9.00
2,250.00
9.00

(5) Dividends per depositary share, each representing a 1/1200th interest in a share of preferred stock.
(6) Dividends per depositary share, each representing a 1/40th interest in a share of preferred stock.
(7) All of the outstanding shares of the preferred stock of Merrill Lynch & Co., Inc. converted into 31 million shares of common stock on October 15, 2010.
(8) All of the outstanding shares of the preferred stock of Merrill Lynch & Co., Inc. converted into 19 million shares of common stock on October 15, 2010.

122

Bank of America 2010

Table IV Outstanding Loans and Leases

(Dollars in millions)

Consumer

Residential mortgage (2)
Home equity
Discontinued real estate (3)
U.S. credit card
Non-U.S. credit card
Direct/Indirect consumer (4)
Other consumer (5)
Total consumer

Commercial

U.S. commercial (6)
Commercial real estate (7)
Commercial lease financing
Non-U.S. commercial

Total commercial loans

Commercial loans measured at fair value (8)

Total commercial

Total loans and leases

2010 (1)

$257,973
137,981
13,108
113,785
27,465
90,308
2,830

643,450

190,305
49,393
21,942
32,029

293,669
3,321

296,990

December 31

2009

2008

2007

2006

$242,129
149,126
14,854
49,453
21,656
97,236
3,110

577,564

198,903
69,447
22,199
27,079

317,628
4,936

322,564

$248,063
152,483
19,981
64,128
17,146
83,436
3,442

588,679

219,233
64,701
22,400
31,020

337,354
5,413

342,767

$274,949
114,820
n/a
65,774
14,950
76,538
4,170

551,201

208,297
61,298
22,582
28,376

320,553
4,590

325,143

$241,181
87,893
n/a
61,195
10,999
59,206
5,231

465,705

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

240,785
n/a

240,785

$940,440

$900,128

$931,446

$876,344

$706,490

(1) 2010 period is presented in accordance with new consolidation guidance.
(2)

(3)

(4)

(5)

(6)

(7)

Includes non-U.S. residential mortgages of $90 million and $552 million at December 31, 2010 and 2009. There were no material non-U.S. residential mortgage loans prior to January 1, 2009.
Includes $11.8 billion, $13.4 billion and $18.2 billion of pay option loans, and $1.3 billion, $1.5 billion and $1.8 billion of subprime loans at December 31, 2010, 2009 and 2008, respectively. We no longer originate these products.
Includes dealer financial services loans of $42.9 billion, $41.6 billion, $40.1 billion, $37.2 billion and $33.4 billion; consumer lending loans of $12.9 billion, $19.7 billion, $28.2 billion, $24.4 billion and $16.3 billion; U.S. securities-
based lending margin loans of $16.6 billion, $12.9 billion, $0, $0 and $0; student loans of $6.8 billion, $10.8 billion, $8.3 billion, $4.7 billion and $4.3 billion; non-U.S. consumer loans of $8.0 billion, $8.0 billion, $1.8 billion,
$3.4 billion and $3.9 billion; and other consumer loans of $3.1 billion, $4.2 billion, $5.0 billion, $6.8 billion and $1.3 billion at December 31, 2010, 2009, 2008, 2007 and 2006, respectively.
Includes consumer finance loans of $1.9 billion, $2.3 billion, $2.6 billion, $3.0 billion and $2.8 billion, other non-U.S. consumer loans of $803 million, $709 million, $618 million, $829 million and $2.3 billion, and consumer
overdrafts of $88 million, $144 million, $211 million, $320 million and $172 million at December 31, 2010, 2009, 2008, 2007 and 2006, respectively.
Includes U.S. small business commercial loans, including card-related products, of $14.7 billion, $17.5 billion, $19.1 billion, $19.3 billion and $15.2 billion at December 31, 2010, 2009, 2008, 2007 and 2006, respectively.
Includes U.S. commercial real estate loans of $46.9 billion, $66.5 billion, $63.7 billion, $60.2 billion and $35.7 billion and non-U.S. commercial real estate loans of $2.5 billion, $3.0 billion, $979 million, $1.1 billion and $578 million
at December 31, 2010, 2009, 2008, 2007 and 2006, respectively.

(8) Certain commercial loans are accounted for under the fair value option and include U.S. commercial loans of $1.6 billion, $3.0 billion, $3.5 billion and $3.5 billion, non-U.S. commercial loans of $1.7 billion, $1.9 billion, $1.7 billion

and $790 million, and commercial real estate loans of $79 million, $90 million, $203 million and $304 million at December 31, 2010, 2009, 2008 and 2007, respectively.

n/a = not applicable

Table V Nonperforming Loans, Leases and Foreclosed Properties (1)

(Dollars in millions)

Consumer

Residential mortgage
Home equity
Discontinued real estate
Direct/Indirect consumer
Other consumer

Total consumer (2)

Commercial

U.S. commercial (3)
Commercial real estate
Commercial lease financing
Non-U.S. commercial

U.S. small business commercial

Total commercial (4)
Total nonperforming loans and leases

Foreclosed properties

December 31

2010

2009

2008

2007

2006

$17,691
2,694
331
90
48

20,854

3,453
5,829
117
233

9,632
204

9,836

30,690
1,974

$16,596
3,804
249
86
104

20,839

4,925
7,286
115
177

12,503
200

12,703

33,542
2,205

$ 7,057
2,637
77
26
91

9,888

2,040
3,906
56
290

6,292
205

6,497

16,385
1,827

$1,999
1,340
n/a
8
95

3,442

852
1,099
33
19

2,003
152

2,155

5,597
351

$ 660
289
n/a
4
77

1,030

494
118
42
13

667
90

757

1,787
69

Total nonperforming loans, leases and foreclosed properties (5)

$32,664

$35,747

$18,212

$5,948

$1,856

(1) Balances do not include PCI loans even though the customer may be contractually past due. Loans accounted for as PCI loans were written down to fair value upon acquisition and accrete interest income over the remaining life of the

(2)

loan. In addition, FHA loans are excluded from nonperforming loans and foreclosed properties since the principal payments are insured by the FHA.
In 2010, $2.0 billion in interest income was estimated to be contractually due on consumer loans and leases classified as nonperforming at December 31, 2010 provided that these loans and leases had been paying according to
their terms and conditions, including TDRs of which $9.9 billion were performing at December 31, 2010 and not included in the table above. Approximately $514 million of the estimated $2.0 billion in contractual interest was received
and included in earnings for 2010.

(3) Excludes U.S. small business commercial loans.
(4)

In 2010, $429 million in interest income was estimated to be contractually due on commercial loans and leases classified as nonperforming at December 31, 2010, including TDRs of which $238 million were performing at
December 31, 2010 and not included in the table above. Approximately $76 million of the estimated $429 million in contractual interest was received and included in earnings for 2010.

(5) Balances do not include loans accounted for under the fair value option. At December 31, 2010, there were $30 million of nonperforming loans accounted for under the fair value option. At December 31, 2010, there were $0 of loans

or leases past due 90 days or more and still accruing interest accounted for under the fair value option.

n/a = not applicable

Bank of America 2010

123

Table VI Accruing Loans and Leases Past Due 90 Days or More (1)

(Dollars in millions)

Consumer

Residential mortgage (2)
U.S. credit card
Non-U.S. credit card
Direct/Indirect consumer
Other consumer

Total consumer

Commercial

U.S. commercial (3)
Commercial real estate
Commercial lease financing
Non-U.S. commercial

U.S. small business commercial

Total commercial
Total accruing loans and leases past due 90 days or more (4)

December 31

2010

2009

2008

2007

2006

$16,768
3,320
599
1,058
2

21,747

$11,680
2,158
515
1,488
3

15,844

236
47
18
6

307
325

632

213
80
32
67

392
624

$ 372
2,197
368
1,370
4

4,311

381
52
23
7

463
640

$ 237
1,855
272
745
4

3,113

$ 118
1,991
184
378
7

2,678

119
36
25
16

196
427

623

66
78
26
9

179
199

378

1,016

1,103

$22,379

$16,860

$5,414

$3,736

$3,056

(1) Accruing loans past due 90 days or more do not include PCI loan portfolios of Countrywide and Merrill Lynch that were considered impaired and written down to fair value upon acquisition and accrete interest income over the remaining

life of the loan.

(2) Balances represent loans insured by the FHA.
(3) Excludes U.S. small business commercial loans.
(4) Balances do not include loans accounted for under the fair value option. At December 31, 2010, there were no loans past due 90 days or more and still accruing interest accounted for under the fair value option. At December 31,

2009, there was $87 million of loans past due 90 days or more and still accruing interest accounted for under the fair value option.

124

Bank of America 2010

Table VII Allowance for Credit Losses

(Dollars in millions)

Allowance for loan and lease losses, beginning of period, before effect of the January 1 adoption of new

consolidation guidance

Allowance related to adoption of new consolidation guidance

Allowance for loan and lease losses, January 1
Loans and leases charged off
Residential mortgage
Home equity
Discontinued real estate
U.S. credit card
Non-U.S. credit card
Direct/Indirect consumer
Other consumer

Total consumer charge-offs

U.S. commercial (1)
Commercial real estate
Commercial lease financing
Non-U.S. commercial

Total commercial charge-offs

Total loans and leases charged off

Recoveries of loans and leases previously charged off

Residential mortgage
Home equity
Discontinued real estate
U.S. credit card
Non-U.S. credit card
Direct/Indirect consumer
Other consumer

Total consumer recoveries

U.S. commercial (2)
Commercial real estate
Commercial lease financing
Non-U.S. commercial

Total commercial recoveries

Total recoveries of loans and leases previously charged off

Net charge-offs

Provision for loan and lease losses
Other (3)

Allowance for loan and lease losses, December 31

Reserve for unfunded lending commitments, January 1

Provision for unfunded lending commitments
Other (4)

Reserve for unfunded lending commitments, December 31

Allowance for credit losses, December 31

2010

2009

2008

2007

2006

$ 37,200
10,788

$ 23,071
n/a

$ 11,588
n/a

$ 9,016
n/a

$ 8,045
n/a

47,988

23,071

11,588

9,016

8,045

(3,779)
(7,059)
(77)
(13,818)
(2,424)
(4,303)
(320)

(31,780)

(3,190)
(2,185)
(96)
(139)

(5,610)

(4,436)
(7,205)
(104)
(6,753)
(1,332)
(6,406)
(491)

(964)
(3,597)
(19)
(4,469)
(639)
(3,777)
(461)

(78)
(286)
n/a
(3,410)
(453)
(1,885)
(346)

(74)
(67)
n/a
(3,546)
(292)
(857)
(327)

(26,727)

(13,926)

(6,458)

(5,163)

(5,237)
(2,744)
(217)
(558)

(8,756)

(2,567)
(895)
(79)
(199)

(3,740)

(1,135)
(54)
(55)
(28)

(1,272)

(597)
(7)
(28)
(86)

(718)

(37,390)

(35,483)

(17,666)

(7,730)

(5,881)

109
278
9
791
217
967
59

86
155
3
206
93
943
63

39
101
3
308
88
663
62

22
12
n/a
347
74
512
68

2,430

1,549

1,264

1,035

391
168
39
28

626

161
42
22
21

246

118
8
19
26

171

128
7
53
27

215

35
16
n/a
452
67
247
110

927

261
4
56
94

415

3,056

1,795

1,435

1,250

1,342

(34,334)

(33,688)

(16,231)

(6,480)

(4,539)

28,195
36

41,885

1,487
240
(539)

1,188

48,366
(549)

37,200

421
204
862

1,487

26,922
792

23,071

8,357
695

11,588

518
(97)
–

421

397
28
93

518

5,001
509

9,016

395
9
(7)

397

$ 43,073

$ 38,687

$ 23,492

$12,106

$ 9,413

(1)

Includes U.S. small business commercial charge-offs of $2.0 billion, $3.0 billion, $2.0 billion, $931 million and $424 million in 2010, 2009, 2008, 2007 and 2006, respectively.
Includes U.S. small business commercial recoveries of $107 million, $65 million, $39 million, $51 million and $54 million in 2010, 2009, 2008, 2007 and 2006, respectively.

(2)
(3) The 2009 amount includes a $750 million reduction in the allowance for loan and lease losses related to credit card loans of $8.5 billion which were exchanged for $7.8 billion in held-to-maturity debt securities that were issued by the
Corporation’s U.S. Credit Card Securitization Trust and retained by the Corporation. The 2008 amount includes the $1.2 billion addition of the Countrywide allowance for loan losses as of July 1, 2008. The 2007 and 2006 amounts
include $750 million and $577 million of additions to allowance for loan losses for certain acquisitions.

(4) The 2010 amount includes the remaining balance of the acquired Merrill Lynch liability excluding those commitments accounted for under the fair value option, net of accretion, and the impact of funding previously unfunded positions.
The 2009 amount represents primarily accretion of the Merrill Lynch purchase accounting adjustment and the impact of funding previously unfunded positions. The 2007 amount includes a $124 million addition for reserve for
unfunded lending commitments for a prior acquisition.

n/a = not applicable

Bank of America 2010

125

Table VII Allowance for Credit Losses (continued)

(Dollars in millions)
Loans and leases outstanding at December 31 (5)
Allowance for loan and lease losses as a percentage of total loans and leases

outstanding at December 31 (5)

Consumer allowance for loan and lease losses as a percentage of total consumer loans and leases

outstanding at December 31

Commercial allowance for loan and lease losses as a percentage of total

commercial loans and leases outstanding at December 31 (5)

Average loans and leases outstanding (5)
Net charge-offs as a percentage of average loans and leases outstanding (5)
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases

at December 31 (5, 6, 7)

Ratio of the allowance for loan and lease losses at December 31 to net charge-offs
Excluding purchased credit-impaired loans: (8)
Allowance for loan and lease losses as a percentage of total loans and leases outstanding at December 31 (5)
Consumer allowance for loan and lease losses as a percentage of total consumer loans and leases

outstanding at December 31

Commercial allowance for loan and lease losses as a percentage of total commercial loans and leases

outstanding at December 31 (5)

Net charge-offs as a percentage of average loans and leases outstanding (5)
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases

at December 31 (5, 6, 7)

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

2010

2009

2008

2007

2006

$937,119

$895,192

$926,033

$871,754

$706,490

4.47%

4.16%

2.49%

1.33%

1.28%

5.40

4.81

2.83

1.23

1.19

2.44
$954,278

2.96
$941,862

1.90
$905,944

1.51
$773,142

1.44
$652,417

3.60%

3.58%

1.79%

0.84%

0.70%

136
1.22

111
1.10

141
1.42

207
1.79

505
1.99

3.94%

3.88%

2.53%

4.66

2.44
3.73

116
1.04

4.43

2.96
3.71

99
1.00

2.91

1.90
1.83

136
1.38

n/a

n/a
n/a

n/a

n/a
n/a

(5) Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option. Loans accounted for under the fair value option were $3.3 billion, $4.9 billion, $5.4 billion and $4.6 billion at
December 31, 2010, 2009, 2008 and 2007, respectively. Average loans accounted for under the fair value option were $4.1 billion, $6.9 billion, $4.9 billion and $3.0 billion for 2010, 2009, 2008 and 2007, respectively.
(6) Allowance for loan and lease losses includes $22.9 billion, $17.7 billion, $11.7 billion, $6.5 billion and $5.4 billion allocated to products that were excluded from nonperforming loans, leases and foreclosed properties at

December 31, 2010, 2009, 2008, 2007 and 2006, respectively.

(7) For more information on our definition of nonperforming loans, see the discussion beginning on page 85.
(8) Metrics exclude the impact of Countrywide consumer PCI loans and Merrill Lynch commercial PCI loans.
n/a = not applicable

126

Bank of America 2010

Table VIII Allocation of the Allowance for Credit Losses by Product Type

(Dollars in millions)
Allowance for loan and lease losses (1)

Residential mortgage
Home equity
Discontinued real estate
U.S. credit card
Non-U.S. credit card
Direct/Indirect consumer
Other consumer

Total consumer
U.S. commercial (2)
Commercial real estate
Commercial lease financing
Non-U.S. commercial

Total commercial (3)

Allowance for loan and lease losses
Reserve for unfunded lending commitments (4)
Allowance for credit losses (5)

2010

2009

December 31

2008

2007

2006

Amount

Percent
of Total

Amount

Percent
of Total

Amount

Percent
of Total

Amount

Percent
of Total

Amount

Percent
of Total

$ 4,648
12,934
1,670
10,876
2,045
2,381
161

11.10% $ 4,607
30.88
10,160
3.99
989
25.97
6,017
4.88
1,581
5.68
4,227
0.38
204

12.38% $ 1,382
5,385
27.31
658
2.66
3,947
16.18
742
4.25
4,341
11.36
203
0.55

5.99% $

23.34
2.85
17.11
3.22
18.81
0.88

34,715

82.88

27,785

74.69

16,658

72.20

3,576
3,137
126
331

7,170

8.54
7.49
0.30
0.79

5,152
3,567
291
405

13.85
9.59
0.78
1.09

4,339
1,465
223
386

18.81
6.35
0.97
1.67

17.12

9,415

25.31

6,413

27.80

207
963
n/a
2,919
441
2,077
151

6,758

3,194
1,083
218
335

4,830

1.79% $ 248
133
8.31
n/a
n/a
3,176
25.19
336
3.81
1,378
17.92
289
1.30

2.75%
1.48
n/a
35.23
3.73
15.28
3.20

58.32

27.56
9.35
1.88
2.89

41.68

5,560

61.67

2,162
588
217
489

23.98
6.52
2.41
5.42

3,456

38.33

41,885 100.00% 37,200 100.00%

23,071 100.00% 11,588 100.00%

9,016 100.00%

1,188

$43,073

1,487

$38,687

421

$23,492

518

$12,106

397

$9,413

(1) December 31, 2010 is presented in accordance with new consolidation guidance. Prior periods have not been restated.
(2)

(3)

Includes allowance for U.S. small business commercial loans of $1.5 billion, $2.4 billion, $2.4 billion, $1.4 billion and $578 million at December 31, 2010, 2009, 2008, 2007 and 2006, respectively.
Includes allowance for loan and lease losses for impaired commercial loans of $1.1 billion, $1.2 billion, $691 million, $123 million and $43 million at December 31, 2010, 2009, 2008, 2007 and 2006, respectively. Included in the
$1.1 billion at December 31, 2010 is $445 million related to U.S. small business commercial renegotiated TDR loans.

(4) Amounts for 2010 and 2009 include the Merrill Lynch acquisition. The majority of the increase from December 31, 2008 relates to the fair value of the acquired Merrill Lynch unfunded lending commitments, excluding commitments

accounted for under the fair value option.
Includes $6.4 billion, $3.9 billion and $750 million related to PCI loans at December 31, 2010, 2009 and 2008, respectively.

(5)

n/a = not applicable

Table IX Selected Loan Maturity Data (1, 2)

(Dollars in millions)

U.S. commercial
U.S. commercial real estate
Non-U.S. and other (3)

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)
(3) Loan maturities include other consumer, commercial real estate and non-U.S. commercial loans.

Includes loans accounted for under the fair value option.

December 31, 2010

Due in One
Year or Less

$ 62,325
21,097
31,012

$114,434

Due After
One Year
Through
Five Years

$ 84,412
21,084
5,610

$111,106

Due After
Five Years

$45,141
4,777
959

$50,877

Total

$191,878
46,958
37,581

$276,417

41.4%

40.2%

18.4%

100%

$ 12,164
98,942

$111,106

$25,619
25,258

$50,877

Bank of America 2010

127

Table X Non-exchange Traded Commodity Contracts

(Dollars in millions)

Net fair value of contracts outstanding, January 1, 2010
Effects of legally enforceable master netting agreements

Gross fair value of contracts outstanding, January 1, 2010

Contracts realized or otherwise settled
Fair value of new contracts
Other changes in fair value

Gross fair value of contracts outstanding, December 31, 2010

Effects of legally enforceable master netting agreements

Net fair value of contracts outstanding, December 31, 2010

Table XI Non-exchange Traded Commodity Contract Maturities

(Dollars in millions)

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

Gross fair value of contracts outstanding

Effects of legally enforceable master netting agreements

Net fair value of contracts outstanding

December 31, 2010

Asset
Positions

$ 5,036
17,785

22,821
(15,531)
6,240
1,999

15,529
(10,756)

Liability
Positions

$ 3,758
17,785

21,543
(14,899)
6,734
2,055

15,433
(10,756)

$ 4,773

$ 4,677

December 31, 2010

Asset
Positions

$ 9,262
4,631
659
977

15,529
(10,756)

Liability
Positions

$ 9,453
4,395
682
903

15,433
(10,756)

$ 4,773

$ 4,677

128

Bank of America 2010

Table XII Selected Quarterly Financial Data

(Dollars in millions, except per share information)

Fourth

Third

Second

First

Fourth

Third

Second

First

2010 Quarters

2009 Quarters

Income statement

thousands)

Performance ratios

Return on average assets
Four quarter trailing return on average assets (2)
Return on average common shareholders’ equity
Return on average tangible common shareholders’ equity (3)
Return on average tangible shareholders’ equity (3)
Total ending equity to total ending assets
Total average equity to total average assets
Dividend payout

Per common share data

Earnings (loss)
Diluted earnings (loss)
Dividends paid
Book value
Tangible book value (3)

Market price per share of common stock

Closing
High closing
Low closing

Market capitalization

Average balance sheet

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

Asset quality (4)

Allowance for credit losses (5)
Nonperforming loans, leases and foreclosed properties (6)
Allowance for loan and lease losses as a percentage of total loans

and leases outstanding (6)

Allowance for loan and lease losses as a percentage of total

nonperforming loans and leases (6, 7)

Allowance for loan and lease losses as a percentage of total

nonperforming loans and leases excluding the purchased credit-
impaired loan portfolio (6, 7)

Net charge-offs
Annualized net charge-offs as a percentage of average loans and

leases outstanding (6)

Nonperforming loans and leases as a percentage of total loans and

leases outstanding (6)

Nonperforming loans, leases and foreclosed properties as a

percentage of total loans, leases and foreclosed properties (6)
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 common
Tier 1
Total
Tier 1 leverage
Tangible equity (3)
Tangible common equity (3)

12,439 $
9,959
22,398
5,129
2,000
370
18,494
(3,595)
(2,351)
(1,244)
(1,565)
10,036,575

12,435 $
14,265
26,700
5,396
10,400
421
16,395
(5,912)
1,387
(7,299)
(7,647)
9,976,351

12,900 $
16,253
29,153
8,105
–
508
16,745
3,795
672
3,123
2,783
9,956,773

13,749
18,220
31,969
9,805
–
521
17,254
4,389
1,207
3,182
2,834
9,177,468

11,559 $
13,517
25,076
10,110
–
533
15,852
(1,419)
(1,225)
(194)
(5,196)

12,497
23,261
35,758
13,380
–
765
16,237
5,376
1,129
4,247
2,814
8,634,565 8,633,834 7,241,515 6,370,815

11,423 $
14,612
26,035
11,705
–
594
15,712
(1,976)
(975)
(1,001)
(2,241)

11,630 $
21,144
32,774
13,375
–
829
16,191
2,379
(845)
3,224
2,419

10,036,575

9,976,351

10,029,776

10,005,254

8,634,565 8,633,834 7,269,518 6,431,027

n/m
n/m
n/m
n/m
n/m
10.08%
9.94
n/m

n/m
n/m
n/m
n/m
n/m
9.85%
9.83
n/m

(0.16) $
(0.16)
0.01
20.99
12.98

(0.77) $
(0.77)
0.01
21.17
12.91

13.34 $
13.56
10.95

13.10 $
15.67
12.32

0.50%
0.20
5.18
9.19
8.98
9.85
9.36
3.63

0.28 $
0.27
0.01
21.45
12.14

14.37 $
19.48
14.37

0.51%
0.21
5.73
9.79
9.55
9.80
9.14
3.57

0.28
0.28
0.01
21.12
11.70

17.85
18.04
14.45

n/m
0.26%
n/m
n/m
n/m
10.38
10.31
n/m

(0.60) $
(0.60)
0.01
21.48
11.94

n/m
0.20%
n/m
n/m
n/m
11.40
10.67
n/m

(0.26) $
(0.26)
0.01
22.99
12.00

0.53%
0.28
5.59
12.68
8.86
11.29
10.01
3.56

0.33 $
0.33
0.01
22.71
11.66

15.06 $
18.59
14.58

16.92 $
17.98
11.84

13.20 $
14.17
7.05

0.68%
0.28
7.10
16.15
12.42
10.32
9.08
2.28

0.44
0.44
0.01
25.98
10.88

6.82
14.33
3.14

134,536 $ 131,442 $

144,174 $

179,071

$ 130,273 $ 146,363 $ 114,199 $

43,654

940,614 $ 934,860 $

2,370,258
1,007,738
465,875
218,728
235,525

2,379,397
973,846
485,588
215,911
233,978

967,054 $

2,494,432
991,615
497,469
215,468
233,461

991,615
2,516,590
981,015
513,634
200,380
229,891

$ 905,913 $ 930,255 $ 966,105 $ 994,121
2,431,024 2,398,201 2,425,377 2,519,134
964,081
446,975
160,739
228,766

995,160
445,440
197,123
250,599

974,892
444,131
173,497
242,867

989,295
449,974
197,230
255,983

43,073 $
32,664

44,875 $
34,556

46,668 $
35,598

48,356
35,925

38,687 $
35,747

37,399 $
33,825

35,777 $
30,982

31,150
25,632

4.47%

136

4.69%

135

4.75%

137

4.82%

139

4.16%

3.95%

3.61%

3.00%

111

112

116

122

116
6,783 $

118
7,197 $

121
9,557 $

124
10,797

99
8,421 $

101
9,624 $

108
8,701 $

115
6,942

2.87%

3.07%

3.98%

4.44%

3.71%

4.13%

3.64%

2.85%

3.27

3.48

1.56

8.60%

11.24
15.77
7.21
6.75
5.99

3.47

3.71

1.53

8.45%

11.16
15.65
7.21
6.54
5.74

3.48

3.73

1.18

8.01%

10.67
14.77
6.68
6.14
5.35

3.46

3.69

1.07

7.60%

10.23
14.47
6.44
6.02
5.22

3.75

3.98

1.11

3.51

3.72

0.94

3.12

3.31

0.97

2.47

2.64

1.03

7.81%

10.40
14.66
6.88
6.40
5.56

7.25%

12.46
16.69
8.36
7.51
4.80

6.90%

11.93
15.99
8.17
7.37
4.66

4.49%

10.09
14.03
7.07
6.42
3.13

(1) Excludes merger and restructuring charges and goodwill impairment charges.
(2) Calculated as total net income for four consecutive quarters divided by average assets for the period.
(3) Tangible equity ratios and tangible book value per share of common stock are non-GAAP measures. Other companies may define or calculate these measures differently. For additional information on these ratios, see Supplemental

Financial Data beginning on page 40 and for corresponding reconciliations to GAAP financial measures, see Table XV.

(4) For more information on the impact of the PCI loan portfolio on asset quality, see Consumer Portfolio Credit Risk Management beginning on page 76 and Commercial Portfolio Credit Risk Management beginning on page 87.
(5)
(6) Balances and ratios do not include loans accounted for under the fair value option. For additional exclusions on nonperforming loans, leases and foreclosed properties, see Nonperforming Consumer Loans and Foreclosed Properties

Includes the allowance for loan and lease losses and the reserve for unfunded lending commitments.

Activity beginning on page 85 and corresponding Table 33 and Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity and corresponding Table 41 on page 93.

(7) Allowance for loan and lease losses includes $22.9 billion, $23.7 billion, $24.3 billion, $26.2 billion, $17.7 billion, $17.2 billion, $16.5 billion and $14.9 billion allocated to products that are excluded from nonperforming loans,

leases and foreclosed properties at December 31, 2010, September 30, 2010, June 30, 2010, March 31, 2010, December 31, 2009, September 30, 2009, June 30, 2009, and March 31, 2009, respectively.

n/m = not meaningful

Bank of America 2010

129

Table XIII Five Year Reconciliations to GAAP Financial Measures (1)

(Dollars in millions, except per share information)

2010

2009

2008

2007

2006

Reconciliation of net interest income to net interest income on a fully taxable-equivalent basis

Net interest income
Fully taxable-equivalent adjustment

Net interest income on a fully taxable-equivalent basis

Reconciliation of total revenue, net of interest expense to total revenue, net of interest expense on a fully

taxable-equivalent basis
Total revenue, net of interest expense
Fully taxable-equivalent adjustment

Total revenue, net of interest expense on a fully taxable-equivalent basis

Reconciliation of total noninterest expense to total noninterest expense, excluding goodwill impairment

charges
Total noninterest expense
Goodwill impairment charges

Total noninterest expense, excluding goodwill impairment charges

Reconciliation of income tax expense (benefit) to income tax expense (benefit) on a fully taxable-

equivalent basis
Income tax expense (benefit)
Fully taxable-equivalent adjustment

Income tax expense (benefit) on a fully taxable-equivalent basis

Reconciliation of net income (loss) to net income, excluding goodwill impairment charges

Net income (loss)
Goodwill impairment charges

Net income, excluding goodwill impairment charges

Reconciliation of net income (loss) applicable to common shareholders to net income (loss) applicable to

common shareholders, excluding goodwill impairment charges
Net income (loss) applicable to common shareholders
Goodwill impairment charges

Net income (loss) applicable to common shareholders, excluding goodwill impairment charges

Reconciliation of average common shareholders’ equity to average tangible common shareholders’ equity

Common shareholders’ equity
Common Equivalent Securities
Goodwill
Intangible assets (excluding MSRs)
Related deferred tax liabilities

Tangible common shareholders’ equity

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

Shareholders’ equity
Goodwill
Intangible assets (excluding MSRs)
Related deferred tax liabilities

51,523 $
1,170

52,693 $

47,109 $
1,301

45,360 $
1,194

34,441 $
1,749

34,594
1,224

48,410 $

46,554 $

36,190 $

35,818

110,220 $ 119,643 $

1,170

1,301

72,782 $
1,194

66,833 $
1,749

72,776
1,224

111,390 $ 120,944 $

73,976 $

68,582 $

74,000

83,108 $
(12,400)

70,708 $

66,713 $

–

41,529 $

–

37,524 $

–

35,793
–

66,713 $

41,529 $

37,524 $

35,793

915 $

1,170

2,085 $

(2,238) $
12,400

10,162 $

(3,595) $
12,400

8,805 $

(1,916) $
1,301

420 $

1,194

5,942 $
1,749

10,840
1,224

(615) $

1,614 $

7,691 $

12,064

6,276 $
–

4,008 $
–

14,982 $

–

21,133
–

6,276 $

4,008 $

14,982 $

21,133

(2,204) $
–

2,556 $
–

14,800 $

–

21,111
–

(2,204) $

2,556 $

14,800 $

21,111

212,681 $ 182,288 $ 141,638 $ 133,555 $ 129,773
–
(66,040)
(10,324)
1,809

2,900
(82,596)
(10,985)
3,306

1,213
(86,034)
(12,220)
3,831

–
(79,827)
(9,502)
1,782

–
(69,333)
(9,566)
1,845

125,306 $

89,078 $

54,091 $

56,501 $

55,218

233,231 $ 244,645 $ 164,831 $ 136,662 $ 130,463
(82,596)
(66,040)
(79,827)
(10,985)
(10,324)
(9,502)
3,306
1,809
1,782

(86,034)
(12,220)
3,831

(69,333)
(9,566)
1,845

Tangible shareholders’ equity

142,956 $ 150,222 $

77,284 $

59,608 $

55,908

Reconciliation of year end common shareholders’ equity to year end tangible common shareholders’

equity
Common shareholders’ equity
Common Equivalent Securities
Goodwill
Intangible assets (excluding MSRs)
Related deferred tax liabilities

Tangible common shareholders’ equity

Reconciliation of year end shareholders’ equity to year end tangible shareholders’ equity

Shareholders’ equity
Goodwill
Intangible assets (excluding MSRs)
Related deferred tax liabilities

211,686 $ 194,236 $ 139,351 $ 142,394 $ 132,421
–
(65,662)
(9,422)
1,799

–
(73,861)
(9,923)
3,036

19,244
(86,314)
(12,026)
3,498

–
(81,934)
(8,535)
1,854

–
(77,530)
(10,296)
1,855

130,938 $ 118,638 $

50,736 $

56,423 $

59,136

228,248 $ 231,444 $ 177,052 $ 146,803 $ 135,272
(73,861)
(65,662)
(81,934)
(9,923)
(9,422)
(8,535)
3,036
1,799
1,854

(86,314)
(12,026)
3,498

(77,530)
(10,296)
1,855

Tangible shareholders’ equity

147,500 $ 136,602 $

88,437 $

60,832 $

61,987

Reconciliation of year end assets to year end tangible assets

Assets
Goodwill
Intangible assets (excluding MSRs)
Related deferred tax liabilities

$ 2,264,909 $2,230,232 $1,817,943 $1,715,746 $1,459,737
(65,662)
(9,422)
1,799

(73,861)
(9,923)
3,036

(86,314)
(12,026)
3,498

(81,934)
(8,535)
1,854

(77,530)
(10,296)
1,855

Tangible assets

$ 2,184,161 $2,135,390 $1,729,328 $1,629,775 $1,386,452

Reconciliation of year end common shares outstanding to year end tangible common shares outstanding

Common shares outstanding
Assumed conversion of common equivalent shares (2)

Tangible common shares outstanding

10,085,155
–

10,085,155

8,650,244
1,286,000

5,017,436
–

4,437,885
–

4,458,151
–

9,936,244

5,017,436

4,437,885

4,458,151

(1) Presents reconciliations of non-GAAP measures to GAAP financial measures. We believe the use of these non-GAAP measures provides additional clarity in assessing the results of the Corporation. Other companies may define or

calculate non-GAAP measures differently. For more information on non-GAAP measures and ratios we use in assessing the results of the Corporation, see Supplemental Financial Data beginning on page 40.

(2) On February 24, 2010, the common equivalent shares converted into common shares.

130

Bank of America 2010

Table XIV Quarterly Supplemental Financial Data (1)

(Dollars in millions, except per share information)

Fully taxable-equivalent basis data

Net interest income
Total revenue, net of interest expense
Net interest yield (2)
Efficiency ratio

Performance ratios, excluding goodwill impairment charges (3)

Per common share information

Earnings
Diluted earnings

Efficiency ratio
Return on average assets
Four quarter trailing return on average assets (4)
Return on average common shareholders’ equity
Return on average tangible common shareholders’ equity
Return on average tangible shareholders’ equity

2010 Quarters

2009 Quarters

Fourth

Third

Second

First

Fourth

Third

Second

First

$12,709
22,668

$12,717
26,982

$13,197
29,450

$14,070
32,290

$11,896
25,413

$11,753
26,365

$11,942
33,086

$12,819
36,080

2.69%

92.04

2.72%

100.87

2.77%

58.58

2.93%

55.05

2.62%

64.47

2.61%

61.84

2.64%

51.44

2.70%

47.12

$ 0.04
0.04
83.22%
0.13
0.43
0.79
1.27
1.96

$ 0.27
0.27
62.33%
0.52
0.39
5.06
8.67
8.54

(1) Supplemental financial data on a FTE basis and performance measures and ratios excluding the impact of goodwill impairment charges are non-GAAP measures. Other companies may define or calculate these measures differently.

For additional information on these performance measures and ratios, see Supplemental Financial Data beginning on page 40 and for corresponding reconciliations to GAAP financial measures, see Table XV.

(2) Calculation includes fees earned on overnight deposits placed with the Federal Reserve of $63 million, $107 million, $106 million and $92 million for the fourth, third, second and first quarters of 2010, and $130 million,

$107 million, $92 million and $50 million for the fourth, third, second and first quarters of 2009, respectively.

(3) Performance ratios are calculated excluding the impact of the goodwill impairment charges of $10.4 billion recorded during the third quarter of 2010 and $2.0 billion recorded during the fourth quarter of 2010.
(4) Calculated as total net income for four consecutive quarters divided by average assets for the period.

Bank of America 2010

131

Table XV Quarterly Reconciliations to GAAP Financial Measures (1)

(Dollars in millions, except per share information)
Reconciliation of net interest income to net interest income on a fully taxable-

equivalent basis
Net interest income
Fully taxable-equivalent adjustment

2010 Quarters

2009 Quarters

Fourth

Third

Second

First

Fourth

Third

Second

First

$ 12,439 $ 12,435 $ 12,900 $ 13,749
321

282

297

270

$ 11,559 $ 11,423 $ 11,630 $ 12,497
322

330

337

312

Net interest income on a fully taxable-equivalent basis

$ 12,709 $ 12,717 $ 13,197 $ 14,070

$ 11,896 $ 11,753 $ 11,942 $ 12,819

Reconciliation of total revenue, net of interest expense to total revenue, net of

interest expense on a fully taxable-equivalent basis
Total revenue, net of interest expense
Fully taxable-equivalent adjustment

$ 22,398 $ 26,700 $ 29,153 $ 31,969
321

282

297

270

$ 25,076 $ 26,035 $ 32,774 $ 35,758
322

330

337

312

Total revenue, net of interest expense on a fully taxable-equivalent basis

$ 22,668 $ 26,982 $ 29,450 $ 32,290

$ 25,413 $ 26,365 $ 33,086 $ 36,080

Reconciliation of total noninterest expense to total noninterest expense,

excluding goodwill impairment charges
Total noninterest expense
Goodwill impairment charges

$ 20,864 $ 27,216 $ 17,253 $ 17,775
–

(10,400)

(2,000)

–

$ 16,385 $ 16,306 $ 17,020 $ 17,002
–
–

–

Total noninterest expense, excluding goodwill impairment charges

$ 18,864 $ 16,816 $ 17,253 $ 17,775

$ 16,385 $ 16,306 $ 17,020 $ 17,002

Reconciliation of income tax expense (benefit) to income tax expense (benefit)

on a fully taxable-equivalent basis
Income tax expense (benefit)
Fully taxable-equivalent adjustment

$ (2,351) $ 1,387 $

270

282

672 $ 1,207
321
297

$ (1,225) $

337

(975) $
330

(845) $ 1,129
322
312

Income tax expense (benefit) on a fully taxable-equivalent basis

$ (2,081) $ 1,669 $

969 $ 1,528

Reconciliation of net income (loss) to net income (loss), excluding goodwill

impairment charges
Net income (loss)
Goodwill impairment charges

$ (1,244) $ (7,299) $ 3,123 $ 3,182
–

10,400

2,000

–

Net income (loss), excluding goodwill impairment charges

756 $ 3,101 $ 3,123 $ 3,182

(888) $

(645) $

(533) $ 1,451

(194) $ (1,001) $ 3,224 $ 4,247
–

–

(194) $ (1,001) $ 3,224 $ 4,247

Reconciliation of net income (loss) applicable to common shareholders to net
income (loss) applicable to common shareholders, excluding goodwill
impairment charges
Net income (loss) applicable to common shareholders
Goodwill impairment charges

Net income (loss) applicable to common shareholders, excluding

$ (1,565) $ (7,647) $ 2,783 $ 2,834
–

10,400

2,000

–

$ (5,196) $ (2,241) $ 2,419 $ 2,814
–
–

–

goodwill impairment charges

435 $ 2,753 $ 2,783 $ 2,834

$ (5,196) $ (2,241) $ 2,419 $ 2,814

Reconciliation of average common shareholders’ equity to average tangible

common shareholders’ equity
Common shareholders’ equity
Common Equivalent Securities
Goodwill
Intangible assets (excluding MSRs)
Related deferred tax liabilities

$218,728 $215,911 $215,468 $200,380
11,760
–
(86,334)
(82,484)
(11,906)
(10,629)
3,497
3,214

–
(75,584)
(10,211)
3,121

–
(86,099)
(11,216)
3,395

$197,123 $197,230 $173,497 $160,739
–
–
(84,584)
(86,170)
(9,461)
(13,223)
3,977
3,725

–
(87,314)
(13,595)
3,916

4,811
(86,053)
(12,556)
3,712

Tangible common shareholders’ equity

$136,054 $126,012 $121,548 $117,397

$107,037 $101,562 $ 76,504 $ 70,671

calculate non-GAAP measures differently. For more information on non-GAAP measures and ratios we use in assessing the results of the Corporation, see Supplemental Financial Data beginning on page 40.

(2) On February 24, 2010, the common equivalent shares converted into common shares.

132

Bank of America 2010

Table XV Quarterly Reconciliations to GAAP Financial Measures (1) (continued)

(Dollars in millions, except per share information)
Reconciliation of average shareholders’ equity to average tangible

shareholders’ equity
Shareholders’ equity
Goodwill
Intangible assets (excluding MSRs)
Related deferred tax liabilities

2010 Quarters

2009 Quarters

Fourth

Third

Second

First

Fourth

Third

Second

First

$ 235,525 $ 233,978 $ 233,461 $ 229,891
(86,334)
(11,906)
3,497

(86,099)
(11,216)
3,395

(82,484)
(10,629)
3,214

(75,584)
(10,211)
3,121

$ 250,599 $ 255,983 $ 242,867 $ 228,766
(84,584)
(9,461)
3,977

(86,170)
(13,223)
3,725

(87,314)
(13,595)
3,916

(86,053)
(12,556)
3,712

Tangible shareholders’ equity

$ 152,851 $ 144,079 $ 139,541 $ 135,148

$ 155,702 $ 160,315 $ 145,874 $ 138,698

Reconciliation of period end common shareholders’ equity to

period end tangible common shareholders’ equity
Common shareholders’ equity
Common Equivalent Securities
Goodwill
Intangible assets (excluding MSRs)
Related deferred tax liabilities

$ 211,686 $ 212,391 $ 215,181 $ 211,859
–
–
(86,305)
(75,602)
(11,548)
(10,402)
3,396
3,123

–
(73,861)
(9,923)
3,036

–
(85,801)
(10,796)
3,215

$ 194,236 $ 198,843 $ 196,492 $ 166,272
–
–
(86,910)
(86,009)
(13,703)
(12,715)
3,958
3,714

–
(86,246)
(13,245)
3,843

19,244
(86,314)
(12,026)
3,498

Tangible common shareholders’ equity

$ 130,938 $ 129,510 $ 121,799 $ 117,402

$ 118,638 $ 103,833 $ 100,844 $

69,617

Reconciliation of period end shareholders’ equity to period end

tangible shareholders’ equity
Shareholders’ equity
Goodwill
Intangible assets (excluding MSRs)
Related deferred tax liabilities

$ 228,248 $ 230,495 $ 233,174 $ 229,823
(86,305)
(11,548)
3,396

(73,861)
(9,923)
3,036

(85,801)
(10,796)
3,215

(75,602)
(10,402)
3,123

$ 231,444 $ 257,683 $ 255,152 $ 239,549
(86,910)
(13,703)
3,958

(86,009)
(12,715)
3,714

(86,246)
(13,245)
3,843

(86,314)
(12,026)
3,498

Tangible shareholders’ equity

$ 147,500 $ 147,614 $ 139,792 $ 135,366

$ 136,602 $ 162,673 $ 159,504 $ 142,894

Reconciliation of period end assets to period end tangible assets

Assets
Goodwill
Intangible assets (excluding MSRs)
Related deferred tax liabilities

Tangible assets

Reconciliation of ending common shares outstanding to ending

tangible common shares outstanding
Common shares outstanding
Assumed conversion of common equivalent shares (2)

$2,264,909 $2,339,660 $2,368,384 $2,344,634
(86,305)
(11,548)
3,396

(73,861)
(9,923)
3,036

(85,801)
(10,796)
3,215

(75,602)
(10,402)
3,123

$2,230,232 $2,259,891 $2,260,853 $2,321,961
(86,910)
(13,703)
3,958

(86,009)
(12,715)
3,714

(86,246)
(13,245)
3,843

(86,314)
(12,026)
3,498

$2,184,161 $2,256,779 $2,275,002 $2,250,177

$2,135,390 $2,164,881 $2,165,205 $2,225,306

10,085,155 10,033,705 10,033,017 10,032,001
–
–

–

8,650,244 8,650,314 8,651,459 6,400,950
–
1,286,000

–

Tangible common shares outstanding

10,085,155 10,033,705 10,033,017 10,032,001

9,936,244 8,650,314 8,651,459 6,400,950

For footnotes see page 132.

Bank of America 2010

133

Table XVI Quarterly Average Balances and Interest Rates – FTE Basis

Fourth Quarter 2010

Third Quarter 2010

(Dollars in millions)

Earning assets
Time deposits placed and other short-term investments (1)
Federal funds sold and securities borrowed or purchased under agreements to resell
Trading account assets
Debt securities (2)
Loans and leases (3):

Residential mortgage (4)
Home equity
Discontinued real estate
U.S. credit card
Non-U.S. credit card
Direct/Indirect consumer (5)
Other consumer (6)
Total consumer

U.S. commercial
Commercial real estate (7)
Commercial lease financing
Non-U.S. commercial
Total commercial
Total loans and leases

Other earning assets

Total earning assets (8)

Cash and cash equivalents (1)
Other assets, less allowance for loan and lease losses

Total assets

Interest-bearing liabilities
U.S. interest-bearing deposits:

Savings
NOW and money market deposit accounts
Consumer CDs and IRAs
Negotiable CDs, public funds and other time deposits

Total U.S. interest-bearing deposits

Non-U.S. interest-bearing deposits:

Banks located in non-U.S. countries
Governments and official institutions
Time, savings and other

Total non-U.S. interest-bearing deposits
Total interest-bearing deposits

Federal funds purchased, securities loaned or sold under agreements to repurchase

and other short-term borrowings

Trading account liabilities
Long-term debt

Total interest-bearing liabilities (8)

Noninterest-bearing sources:

Noninterest-bearing deposits
Other liabilities
Shareholders’ equity

Total liabilities and shareholders’ equity

Net interest spread
Impact of noninterest-bearing sources

Net interest income/yield on earning assets (1)

Average
Balance

28,141
243,589
216,003
341,867

254,051
139,772
13,297
112,673
27,457
91,549
2,796
641,595
193,608
51,617
21,363
32,431
299,019
940,614
113,325

1,883,539
136,967
349,752

$2,370,258

37,145
464,531
124,855
16,334
642,865

16,827
1,560
58,746
77,133
719,998

369,738
81,313
465,875

1,636,924

287,740
210,069
235,525

$2,370,258

Interest
Income/
Expense

75
486
1,710
3,065

2,857
1,410
118
3,040
815
1,088
45
9,373
1,894
432
250
289
2,865
12,238
923

18,497
63

35
333
338
47
753

38
2
101
141
894

1,142
561
3,254

5,851

$12,646

Yield/
Rate

1.07%
0.79
3.15
3.58

4.50
4.01
3.57
10.70
11.77
4.72
6.32
5.81
3.88
3.32
4.69
3.53
3.81
5.18
3.23

3.90

0.36%
0.28
1.07
1.16
0.46

0.91
0.42
0.69
0.73
0.49

1.23
2.74
2.78

1.42

2.48%
0.18

2.66%

Average
Balance

23,233
254,820
210,529
328,097

237,292
143,083
13,632
115,251
27,047
95,692
2,955
634,952
192,306
55,660
21,402
30,540
299,908
934,860
112,280

1,863,819
155,784
359,794

$2,379,397

37,008
442,906
132,687
17,326
629,927

17,431
2,055
54,373
73,859
703,786

391,148
95,265
485,588

1,675,787

270,060
199,572
233,978

$2,379,397

Interest
Income/
Expense

86
441
1,692
2,646

2,797
1,457
122
3,113
875
1,130
47
9,541
2,040
452
255
282
3,029
12,570
949

18,384
107

36
359
377
57
829

38
2
81
121
950

848
635
3,341

5,774

$12,610

Yield/
Rate

1.45%
0.69
3.20
3.22

4.71
4.05
3.56
10.72
12.84
4.68
6.35
5.98
4.21
3.22
4.78
3.67
4.01
5.35
3.36

3.93

0.39%
0.32
1.13
1.30
0.52

0.86
0.36
0.59
0.65
0.54

0.86
2.65
2.74

1.37

2.56%
0.13

2.69%

the Corporation’s Consolidated Balance Sheet presentation of these deposits. Net interest income and net interest yield in the table are calculated excluding these fees.

(4)

(5)

(6)

(7)

(8)

accrete interest income over the remaining life of the loan.
Includes non-U.S. residential mortgage loans of $96 million, $502 million, $506 million and $538 million in the fourth, third, second and first quarters of 2010, and $550 million in the fourth quarter of 2009, respectively.
Includes non-U.S. consumer loans of $7.9 billion, $7.7 billion, $7.7 billion and $8.1 billion in the fourth, third, second and first quarters of 2010, and $8.6 billion in the fourth quarter of 2009, respectively.
Includes consumer finance loans of $2.0 billion, $2.0 billion, $2.1 billion and $2.2 billion in the fourth, third, second and first quarters of 2010, and $2.3 billion in the fourth quarter of 2009, respectively; other non-U.S. consumer
loans of $791 million, $788 million, $679 million and $664 million in the fourth, third, second and first quarters of 2010, and $689 million in the fourth quarter of 2009, respectively; and consumer overdrafts of $34 million,
$123 million, $155 million and $132 million in the fourth, third, second and first quarters of 2010, and $192 million in the fourth quarter of 2009, respectively.
Includes U.S. commercial real estate loans of $49.0 billion, $53.1 billion, $61.6 billion and $65.6 billion in the fourth, third, second and first quarters of 2010, and $68.2 billion in the fourth quarter of 2009, respectively; and non-U.S.
commercial real estate loans of $2.6 billion, $2.5 billion, $2.6 billion and $3.0 billion in the fourth, third, second and first quarters of 2010, and $3.1 billion in the fourth quarter of 2009, respectively.
Interest income includes the impact of interest rate risk management contracts, which decreased interest income on the underlying assets by $29 million, $639 million, $479 million and $272 million in the fourth, third, second and
first quarters of 2010 and $248 million in the fourth quarter of 2009, respectively. Interest expense includes the impact of interest rate risk management contracts, which decreased interest expense on the underlying liabilities by
$672 million, $1.0 billion, $829 million and $970 million in the fourth, third, second and first quarters of 2010, and $1.1 billion in the fourth quarter of 2009, respectively. For further information on interest rate contracts, see Interest
Rate Risk Management for Nontrading Activities beginning on page 107.

134

Bank of America 2010

Table XVI Quarterly Average Balances and Interest Rates – FTE Basis (continued)

(Dollars in millions)

Earning assets
Time deposits placed and other short-term investments (1)
Federal funds sold and securities borrowed or purchased under

agreements to resell

Trading account assets
Debt securities (2)
Loans and leases (3):

Residential mortgage (4)
Home equity
Discontinued real estate
U.S. credit card
Non-U.S. credit card
Direct/Indirect consumer (5)
Other consumer (6)
Total consumer

U.S. commercial
Commercial real estate (7)
Commercial lease financing
Non-U.S. commercial
Total commercial
Total loans and leases

Other earning assets

Total earning assets (8)

Cash and cash equivalents (1)
Other assets, less allowance for loan and lease losses

Total assets

Interest-bearing liabilities
U.S. interest-bearing deposits:

Savings
NOW and money market deposit accounts
Consumer CDs and IRAs
Negotiable CDs, public funds and other time deposits

Total U.S. interest-bearing deposits

Non-U.S. interest-bearing deposits:

Banks located in non-U.S. countries
Governments and official institutions
Time, savings and other

Total non-U.S. interest-bearing deposits
Total interest-bearing deposits

Federal funds purchased, securities loaned or sold under agreements to

repurchase and other short-term borrowings

Trading account liabilities
Long-term debt

Total interest-bearing liabilities (8)

Noninterest-bearing sources:

Noninterest-bearing deposits
Other liabilities
Shareholders’ equity

Total liabilities and shareholders’ equity

Net interest spread
Impact of noninterest-bearing sources

Net interest income/yield on earning assets (1)

For footnotes, see page 134.

Second Quarter 2010

First Quarter 2010

Fourth Quarter 2009

Average
Balance

Interest
Income/
Expense

Yield/
Rate

Average
Balance

Interest
Income/
Expense

Yield/
Rate

Average
Balance

Interest
Income/
Expense

Yield/
Rate

30,741 $

0.93% $

27,600 $

0.89% $

28,566 $

1.25%

263,564
213,927
314,299

247,715
148,219
13,972
118,738
27,706
98,549
2,958
657,857
195,144
64,218
21,271
28,564
309,197
967,054
121,205

457
1,853
2,966

0.70
3.47
3.78

2,982
1,537
134

4.82
4.15
3.84
3,121 10.54
854 12.37
5.02
6.32
6.03
4.12
3.38
4.90
3.59
3.97
5.38
3.29

1,233
46
9,907
2,005
541
261
256
3,063
12,970
994

266,070
214,542
311,136

243,833
152,536
14,433
125,353
29,872
100,920
3,002
669,949
202,662
68,526
21,675
28,803
321,666
991,615
122,097

448
1,795
3,173

0.68
3.37
4.09

3,100
1,586
153

5.09
4.20
4.24
3,370 10.90
906 12.30
5.23
6.35
6.30
3.94
3.40
5.60
3.72
3.92
5.53
3.50

1,302
48
10,465
1,970
575
304
264
3,113
13,578
1,053

244,914
218,787
279,231

236,883
150,704
15,152
49,213
21,680
98,938
3,177
575,747
207,050
71,352
21,769
29,995
330,166
905,913
130,487

327
1,800
2,921

0.53
3.28
4.18

3,108
1,613
174

5.24
4.26
4.58
1,336 10.77
605 11.08
5.46
6.33
5.70
4.01
3.31
5.04
3.78
3.90
5.05
3.72

1,361
50
8,247
2,090
595
273
287
3,245
11,492
1,222

4.05

19,310
106

1,910,790
209,686
373,956

$2,494,432

1,933,060
196,911
386,619

$2,516,590

4.19

20,108
92

1,807,898
230,618
392,508

$2,431,024

3.93

17,852
130

37,290 $

442,262
147,425
17,355
644,332

19,751
4,214
52,195
76,160
720,492

454,051
100,021
497,469

1,772,033

271,123
217,815
233,461

$2,494,432

43
372
441
59
915

0.46% $
0.34
1.20
1.36
0.57

36
3
77
116
1,031

891
715
3,582

6,219

0.72
0.28
0.60
0.61
0.57

0.79
2.87
2.88

1.41

35,126 $

416,110
166,189
19,763
637,188

18,424
5,626
54,885
78,935
716,123

43
341
567
63
1,014

32
3
73
108
1,122

818
660
3,530

6,130

0.50% $
0.33
1.38
1.31
0.65

0.71
0.22
0.53
0.55
0.64

0.65
2.97
2.77

1.35

508,332
90,134
513,634

1,828,223

264,892
193,584
229,891

$2,516,590

33,749 $

392,212
192,779
31,758
650,498

16,132
5,779
55,685
77,596
728,094

450,538
83,118
445,440

1,707,190

267,066
206,169
250,599

$2,431,024

54
388
835
82
1,359

30
4
79
113
1,472

658
591
3,365

6,086

0.63%
0.39
1.72
1.04
0.83

0.75
0.26
0.56
0.58
0.80

0.58
2.82
3.01

1.42

2.51%
0.08

2.64%
0.10

2.84%
0.08

$13,091

2.74%

$13,978

2.92%

$11,766

2.59%

Bank of America 2010

135

Glossary
Alt-A Mortgage – Alternative-A mortgage, a type of U.S. mortgage that, for
various reasons, is considered riskier than A-paper, or “prime,” and less risky
than “subprime,” the riskiest category. Alt-A interest rates, which are deter-
mined by credit risk, therefore tend to be between those of prime and subprime
home loans. Typically, Alt-A mortgages are characterized by borrowers with less
than full documentation, lower credit scores and higher LTVs.
Assets in Custody – Consist largely of custodial and non-discretionary trust
assets excluding brokerage assets administered for clients. Trust assets
encompass a broad range of asset types including real estate, private com-
pany ownership interest, personal property and investments.
Assets Under Management (AUM) – The total market value of assets under
the investment advisory and discretion of GWIM which generate asset man-
agement fees based on a percentage of the assets’ market values. 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 Financing – A loan or security that 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 ex-
pected 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.
Client Deposits – Includes GWIM client deposit accounts representing both
consumer and commercial demand, regular savings, time, money market,
sweep and non-U.S. accounts.
Committed Credit Exposure – Includes any funded portion of a facility plus
the unfunded portion of a facility on which the lender is legally bound to
advance funds during a specified period under prescribed conditions.
Core Net Interest Income – Net interest income on a fully taxable-equivalent
basis excluding the impact of market-based activities.
Credit Card Accountability Responsibility and Disclosure Act of 2009
(CARD Act) – Legislation signed into law on May 22, 2009 to provide changes
to credit card industry practices including significantly restricting credit card
issuers’ ability to change interest rates and assess fees to reflect individual
consumer risk, change the way payments are applied and requiring changes
to consumer credit card disclosures. The majority of the provisions became
effective in February 2010.
Credit Default Swap (CDS) – A derivative contract that provides protection
against the deterioration of credit quality and allows one party to receive
payment in the event of default by a third party under a borrowing arrangement.
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 secu-
ritized receivables are all classified as excess servicing income, which is a
component of card income. Excess servicing income also includes the
changes in fair value of the Corporation’s card-related retained interests.
Interest-only Strip – A residual interest in a securitization trust representing
the right to receive future net cash flows from securitized assets after
payments to third-party investors and net credit losses. These arise when
assets are transferred to a SPE as part of an asset securitization transaction
qualifying for sale treatment under GAAP.
Interest Rate Lock Commitment (IRLC) – Commitment with a loan applicant
in which the loan terms, including interest rate and price, are guaranteed for a
designated period of time subject to credit approval.
Letter of Credit – A document issued on behalf of a customer to a third party
promising to pay the third party upon presentation of specified documents. A

136

Bank of America 2010

letter of credit effectively substitutes the issuer’s credit for that of the
customer.
Loan-to-value (LTV) – A commonly used credit quality metric that is reported in
terms of ending and average LTV. Ending LTV is calculated as the outstanding
carrying value of the loan at the end of the period divided by the estimated
value of the property securing the loan. Estimated property values are
primarily determined by utilizing the Case-Schiller Home Index, a widely used
index based on data from repeat sales of single family homes. Case-Schiller
indices are updated quarterly and are reported on a three-month or one-
quarter lag. An additional metric related to LTV is combined loan-to-value
(CLTV) which is similar to the LTV metric, yet combines the outstanding
balance on the residential mortgage loan and the outstanding carrying value
on the home equity loan or available line of credit, both of which are secured by
the same property, divided by the estimated value of the property. A LTV of
100 percent reflects a loan that is currently secured by a property valued at an
amount exactly equal to the carrying value or available line of the loan. Under
certain circumstances, estimated values can also be determined by utilizing
an automated valuation method (AVM) or Mortgage Risk Assessment Corpo-
ration (MRAC) index. An AVM is a tool that estimates the value of a property by
reference to large volumes of market data including sales of comparable
properties and price trends specific to the MSA in which the property being
valued is located. The MRAC index is similar to the Case-Schiller Home Index
in that it is an index that is based on data from repeat sales of single family
homes and is reported on a lag.
Making Home Affordable Program (MHA) – A U.S. Treasury program to
reduce the number of foreclosures and make it easier for homeowners to
refinance loans. The program is comprised of the Home Affordable Modifi-
cation Program (HAMP) which provides guidelines on loan modifications and is
designed to help at-risk homeowners avoid foreclosure by reducing monthly
mortgage payments and provides incentives to lenders to modify all eligible
loans that fall under the program guidelines and the Home Affordable Refi-
nance Program (HARP) which is available to homeowners who have a proven
payment history on an existing mortgage owned by FNMA or FHLMC and is
designed to help eligible homeowners refinance their mortgage loans to take
advantage of current lower mortgage rates or to refinance ARMs into more
stable fixed-rate mortgages. In addition, the Second Lien Program is a part of
the MHA. For more information on this program, see the separate definition
for the Second Lien Program.
Mortgage Servicing Right (MSR) – The right to service a mortgage loan 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.
Nonperforming Loans and Leases – Includes loans and leases that have been
placed on nonaccrual status, including nonaccruing loans whose contractual
terms have been restructured in a manner that grants a concession to a
borrower experiencing financial difficulties (troubled debt restructurings or
TDRs). Loans accounted for under the fair value option, purchased credit-
impaired loans and loans held-for-sale are not reported as nonperforming
loans and leases. Consumer credit card loans, business card loans, con-
sumer loans not secured by real estate, and consumer loans secured by real
estate where repayments are insured by the Federal Housing Administration
are not placed on nonaccrual status and are, therefore, not reported as
nonperforming loans and leases.
Purchased Credit-impaired (PCI) Loan – A loan purchased as an individual
loan, in a portfolio of loans or in a business combination with evidence of
deterioration in credit quality since origination for which it is probable, upon

acquisition, that the investor will be unable to collect all contractually required
payments. These loans are written down to fair value at the acquisition date.
Second Lien Program (2MP) – A MHA program announced on April 28, 2009
by the U.S. Treasury that focuses on creating a comprehensive affordability
solution for homeowners. By focusing on shared efforts with lenders to reduce
second mortgage payments, pay-for-success incentives for servicers, inves-
tors and borrowers, and a payment schedule for extinguishing second mort-
gages, the 2MP is designed to help up to 1.5 million homeowners. The
program is designed to ensure that first and second lien holders are treated
fairly and consistently with priority of liens, and offers automatic modification
of a second lien when a first lien is modified.
Subprime Loans – Although a standard industry definition for subprime loans
(including subprime mortgage loans) does not exist, the Corporation defines
subprime loans as specific product offerings for higher risk borrowers, in-
cluding individuals with one or a combination of high credit risk factors, such
as low FICO scores, high debt to income ratios and inferior payment history.
Super Senior CDO Exposure – Represents the most senior class of commer-
cial paper or notes that are issued by CDO vehicles. These financial instru-
ments benefit from the subordination of all other securities, including AAA-
rated securities, issued by CDO vehicles.
Tier 1 Common Capital – Tier 1 capital including CES, less preferred stock,
qualifying trust preferred securities, hybrid securities and qualifying noncon-
trolling interest in subsidiaries.

Troubled Asset Relief Program (TARP) – A program established under the
Emergency Economic Stabilization Act of 2008 by the U.S. Treasury to, among
other things, invest in financial institutions through capital infusions and
purchase mortgages, MBS and certain other financial
instruments from
financial institutions, in an aggregate amount up to $700 billion, for the
purpose of stabilizing and providing liquidity to the U.S. financial markets.
Troubled Debt Restructurings (TDRs) – Loans whose contractual terms have
been restructured in a manner that grants a concession to a borrower
experiencing financial difficulties. Concessions could include a reduction in
the interest rate on the loan, payment extensions, forgiveness of principal,
forbearance or other actions intended to maximize collection. TDRs are
generally reported as nonperforming loans and leases while on nonaccrual
status. TDRs that are on accrual status are reported as performing TDRs
through the end of the calendar year in which the restructuring occurred or the
year in which they are returned to accrual status. In addition, if accruing TDRs
bear less than a market rate of interest at the time of modification, they are
reported as performing TDRs throughout their remaining lives.
Value-at-Risk (VaR) – A VaR model estimates a range of hypothetical scenar-
ios 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.

Bank of America 2010

137

Acronyms

ABS

AFS

ALM

Asset-backed securities

Available-for-sale

Asset and liability management

ALMRC

Asset Liability Market Risk Committee

ARM

ARS

BPS

CDO

CES

Adjustable-rate mortgage

Auction rate securities

Basis points

Collateralized debt obligation

Common Equivalent Securities

CMBS

Commercial mortgage-backed securities

CMO

CRA

CRC

FASB

FDIC

FFIEC

FHA

Collateralized mortgage obligation

Community Reinvestment Act

Credit Risk Committee

Financial Accounting Standards Board

Federal Deposit Insurance Corporation

Federal Financial Institutions Examination Council

Federal Housing Administration

FHLMC

Freddie Mac

FICC

FICO

Fixed income, currencies and commodities

Fair Isaac Corporation (credit score)

FNMA

Fannie Mae

FSA

FTE

GAAP

GNMA

GRC

GSE

HAFA

IPO

LHFS

Financial Services Authority

Fully taxable-equivalent

Generally accepted accounting principles in the United States of America

Government National Mortgage Association

Global Markets Risk Committee

Government-sponsored enterprise

Home Affordable Foreclosure Alternatives

Initial public offering

Loans held-for-sale

LIBOR

London InterBank Offered Rate

MBS

Mortgage-backed securities

MD&A

Management’s Discussion and Analysis of Financial Condition and Results of Operations

MSA

OCI

OTC

OTTI

PCI

PPI

QSPE

RMBS

ROC

ROTE

Metropolitan statistical area

Other comprehensive income

Over-the-counter

Other-than-temporary impairment

Purchased credit-impaired

Payment protection insurance

Qualifying special purpose entity

Residential mortgage-backed securities

Risk Oversight Committee

Return on average tangible shareholders’ equity

SBLCs

Standby letters of credit

SEC

SPE

VIE

Securities and Exchange Commission

Special purpose entity

Veterans Affairs

Variable interest entity

138

Bank of America 2010

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 process
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 in-
cludes 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 Corporation; (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 Corporation are being made only in accordance with authorizations of
management and directors of the Corporation; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisi-
tion, use, or disposition of the Corporation’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 deteriorate.

Management assessed the effectiveness of the Corporation’s internal

control over financial reporting as of December 31, 2010 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 December 31, 2010,
the Corporation’s internal control over financial reporting is effective based
on the criteria established in Internal Control – Integrated Framework.

The Corporation’s internal control over financial reporting as of Decem-
ber 31, 2010 has been audited by PricewaterhouseCoopers, LLP, an inde-
pendent registered public accounting firm, as stated in their accompanying
report which expresses an unqualified opinion on the effectiveness of the
Corporation’s internal control over financial reporting as of December 31,
2010.

Brian T. Moynihan
Chief Executive Officer and President

Charles H. Noski
Chief Financial Officer and Executive Vice President

Bank of America 2010

139

Report of Independent Registered Public Accounting Firm
Bank of America Corporation and Subisdiaries

To the Board of Directors and Shareholders of Bank of
America Corporation:
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, 2010 and 2009, and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2010 in conformity with accounting
principles generally accepted in the United States of America. Also in our
opinion, the Corporation maintained, in all material respects, effective inter-
nal control over financial reporting as of December 31, 2010, based on
criteria established in Internal Control – Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).
The Corporation’s management is responsible for these financial statements,
for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Report of Management on Internal Control Over
Financial Reporting. Our responsibility is to express opinions on these finan-
cial statements and on the Corporation’s internal control over financial
reporting based on our integrated audits. We conducted our audits in accor-
dance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are
free of material misstatement and whether effective internal control over
financial reporting was maintained in all material respects. Our audits of the
financial statements included 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 management,
and evaluating the overall financial statement presentation. Our audit of
internal control over financial reporting included obtaining an understanding
of internal control over financial reporting, assessing the risk that a material

weakness exists, and testing and evaluating the design and operating effec-
tiveness of internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered necessary in
the circumstances. We believe that our audits provide a reasonable basis for
our opinions.

A company’s internal control over financial reporting is a process de-
signed 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 in-
ternal 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 company; (ii) provide reasonable assurance that transactions are re-
corded as necessary to permit preparation of financial statements in accor-
dance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with autho-
rizations of management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unautho-
rized acquisition, use, or disposition of the company’s assets that could have
a material effect on the financial statements.

Charlotte, North Carolina
February 25, 2011

140

Bank of America 2010

Bank of America Corporation and Subsidiaries

Consolidated Statement of Income

(Dollars in millions, except per share information)

Interest income

Loans and leases
Debt securities
Federal funds sold and securities borrowed or 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 income
Trading account profits (losses)
Mortgage banking income
Insurance income
Gains on sales of debt securities
Other income (loss)
Other-than-temporary impairment losses on available-for-sale debt securities:

Total other-than-temporary impairment losses
Less: Portion of other-than-temporary impairment losses recognized in other comprehensive income

Net impairment losses recognized in earnings on available-for-sale debt securities

Total noninterest income

Total revenue, net of interest expense

Provision for credit losses

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

Total noninterest expense

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

Preferred stock dividends and accretion

Net income (loss) applicable to common shareholders

Per common share information

Earnings (loss)
Diluted earnings (loss)
Dividends paid

Year Ended December 31

2010

2009

2008

50,996
11,667
1,832
6,841
4,161

75,497

3,997
3,699
2,571
13,707

23,974

51,523

8,108
9,390
11,622
5,520
5,260
10,054
2,734
2,066
2,526
2,384

(2,174)
1,207

(967)

58,697

110,220

48,703
12,947
2,894
7,944
5,428

77,916

7,807
5,512
2,075
15,413

30,807

47,109

8,353
11,038
11,919
5,551
10,014
12,235
8,791
2,760
4,723
(14)

(3,508)
672

(2,836)

72,534

119,643

28,435

48,570

35,149
4,716
2,452
1,963
2,695
1,731
2,544
1,416
16,222
12,400
1,820

83,108

(1,323)
915

(2,238)

1,357

(3,595)

(0.37)
(0.37)
0.04

31,528
4,906
2,455
1,933
2,281
1,978
2,500
1,420
14,991
–
2,721

66,713

4,360
(1,916)

6,276

8,480

(2,204)

(0.29)
(0.29)
0.04

56,017
13,146
3,313
9,057
4,151

85,684

15,250
12,362
2,774
9,938

40,324

45,360

13,314
10,316
4,972
2,263
539
(5,911)
4,087
1,833
1,124
(1,654)

(3,461)
–

(3,461)

27,422

72,782

26,825

18,371
3,626
1,655
2,368
1,592
1,834
2,546
1,106
7,496
–
935

41,529

4,428
420

4,008

1,452

2,556

0.54
0.54
2.24

Average common shares issued and outstanding (in thousands)

Average diluted common shares issued and outstanding (in thousands)

9,790,472

7,728,570

4,592,085

9,790,472

7,728,570

4,596,428

See accompanying Notes to Consolidated Financial Statements.

Bank of America 2010

141

Bank of America Corporation and Subsidiaries

Consolidated Balance Sheet

(Dollars in millions)

Assets
Cash and cash equivalents
Time deposits placed and other short-term investments
Federal funds sold and securities borrowed or purchased under agreements to resell (includes $78,599 and $57,775 measured at fair value

and $209,249 and $189,844 pledged as collateral)

Trading account assets (includes $28,093 and $30,921 pledged as collateral)
Derivative assets
Debt securities:

Available-for-sale (includes $99,925 and $122,708 pledged as collateral)
Held-to-maturity, at cost (fair value – $427 and $9,684)

Total debt securities

Loans and leases (includes $3,321 and $4,936 measured at fair value and $91,730 and $118,113 pledged as collateral)
Allowance for loan and lease losses

Loans and leases, net of allowance

Premises and equipment, net
Mortgage servicing rights (includes $14,900 and $19,465 measured at fair value)
Goodwill
Intangible assets
Loans held-for-sale (includes $25,942 and $32,795 measured at fair value)
Customer and other receivables
Other assets (includes $70,531 and $55,909 measured at fair value)

Total assets

Assets of consolidated VIEs included in total assets above (substantially all pledged as collateral)

Trading account assets
Derivative assets
Available-for-sale debt securities
Loans and leases
Allowance for loan and lease losses

Loans and leases, net of allowance

Loans held-for-sale
All other assets

Total assets of consolidated VIEs

December 31

2010

2009

$ 108,427
26,433

$ 121,339
24,202

209,616
194,671
73,000

337,627
427

338,054

940,440
(41,885)

898,555

14,306
15,177
73,861
9,923
35,058
85,704
182,124

189,933
182,206
87,622

301,601
9,840

311,441

900,128
(37,200)

862,928

15,500
19,774
86,314
12,026
43,874
81,996
191,077

$2,264,909

$2,230,232

19,627
2,027
2,601
145,469
(8,935)

136,534

1,953
7,086

$ 169,828

142

Bank of America 2010

See accompanying Notes to Consolidated Financial Statements.

Bank of America Corporation and Subsidiaries

Consolidated Balance Sheet (continued)

(Dollars in millions)

Liabilities
Deposits in U.S. offices:
Noninterest-bearing
Interest-bearing (includes $2,732 and $1,663 measured at fair value)

Deposits in non-U.S. offices:
Noninterest-bearing
Interest-bearing

Total deposits

Federal funds purchased and securities loaned or sold under agreements to repurchase (includes $37,424 and $37,325 measured

at fair value)

Trading account liabilities
Derivative liabilities
Commercial paper and other short-term borrowings (includes $7,178 and $1,520 measured at fair value)
Accrued expenses and other liabilities (includes $33,229 and $18,308 measured at fair value and $1,188 and $1,487 of reserve for

unfunded lending commitments)

Long-term debt (includes $50,984 and $45,451 measured at fair value)

Total liabilities

Commitments and contingencies (Note 8 – Securitizations and Other Variable Interest Entities, Note 9 – Representations and Warranties

Obligations and Corporate Guarantees and Note 14 – Commitments and Contingencies)

Shareholders’ equity
Preferred stock, $0.01 par value; authorized – 100,000,000 shares; issued and outstanding – 3,943,660 and 5,246,660 shares
Common stock and additional paid-in capital, $0.01 par value; authorized – 12,800,000,000 and 10,000,000,000 shares; issued and

outstanding – 10,085,154,806 and 8,650,243,926 shares

Retained earnings
Accumulated other comprehensive income (loss)
Other

Total shareholders’ equity

Total liabilities and shareholders’ equity

Liabilities of consolidated VIEs included in total liabilities above

Commercial paper and other short-term borrowings (includes $706 of non-recourse liabilities)
Long-term debt (includes $66,309 of non-recourse debt)
All other liabilities (includes $382 of non-recourse liabilities)

Total liabilities of consolidated VIEs

December 31

2010

2009

$ 285,200
645,713

$ 269,615
640,789

6,101
73,416

1,010,430

245,359
71,985
55,914
59,962

144,580
448,431

5,489
75,718

991,611

255,185
65,432
50,661
69,524

127,854
438,521

2,036,661

1,998,788

16,562

37,208

150,905
60,849
(66)
(2)

228,248

128,734
71,233
(5,619)
(112)

231,444

$2,264,909

$2,230,232

6,742
71,013
9,141

86,896

See accompanying Notes to Consolidated Financial Statements.

Bank of America 2010

143

Bank of America Corporation and Subsidiaries

Consolidated Statement of Changes in Shareholders’ Equity

(Dollars in millions, shares in thousands)

Balance, December 31, 2007
Net income
Net change in available-for-sale debt and marketable equity securities
Net change in derivatives
Employee benefit plan adjustments
Net change in foreign currency translation adjustments
Dividends paid:
Common
Preferred

Issuance of preferred stock and stock warrants
Stock issued in acquisition
Issuance of common stock
Common stock issued under employee plans and related tax effects
Other

Preferred
Stock

$ 4,409

Common Stock and
Additional Paid-in
Capital

Amount

Retained
Earnings

4,437,885 $ 60,328 $ 81,393
4,008

Accumulated
Other
Comprehensive

Income (Loss) Other

$ 1,129 $(456)

(8,557)
944
(3,341)
(1,000)

33,242

106,776
455,000
17,775

1,500
4,201
9,883
854

(10,256)
(1,272)

(50)

Total
Shareholders’
Equity

Comprehensive
Income (Loss)

$ 4,008
(8,557)
944
(3,341)
(1,000)

$146,803
4,008
(8,557)
944
(3,341)
(1,000)

(10,256)
(1,272)
34,742
4,201
9,883
897
–

Balance, December 31, 2008

37,701

5,017,436

76,766

73,823

(10,825)

(413)

177,052

(7,946)

Cumulative adjustment for accounting change – Other-than-temporary

impairments on debt securities

Net income
Net change in available-for-sale debt and marketable equity securities
Net change in derivatives
Employee benefit plan adjustments
Net change in foreign currency translation adjustments
Dividends paid:
Common
Preferred

Issuance of preferred stock and stock warrants
Repayment of preferred stock
Issuance of Common Equivalent Securities
Stock issued in acquisition
Issuance of common stock
Exchange of preferred stock
Common stock issued under employee plans and related tax effects
Other

(71)
6,276
3,593
923
550
211

71
6,276

(326)
(4,537)

(3,986)

576

(664)

(71)

3,593
923
550
211

–
6,276
3,593
923
550
211

(326)
(4,537)
30,000
(45,000)
19,244
29,109
13,468
–
883
(2)

308
(7)

26,800
(41,014)
19,244
8,605

(14,797)

669

3,200

1,375,476
1,250,000
999,935
7,397

20,504
13,468
14,221
575

Balance, December 31, 2009

37,208

8,650,244

128,734

71,233

(5,619)

(112)

231,444

11,482

Cumulative adjustments for accounting changes:

Consolidation of certain variable interest entities
Credit-related notes

Net loss
Net change in available-for-sale debt and marketable equity securities
Net change in derivatives
Employee benefit plan adjustments
Net change in foreign currency translation adjustments
Dividends paid:
Common
Preferred

Common stock issued under employee plans and related tax effects
Mandatory convertible preferred stock conversion
Common Equivalent Securities conversion
Other

(116)
229
(2,238)
5,759
(701)
145
237

(6,154)
(229)
(2,238)

(405)
(1,357)

(1)

(116)
229

5,759
(701)
145
237

103

(6,270)
–
(2,238)
5,759
(701)
145
237

(405)
(1,357)
1,488
–
–
146

98,557
50,354
(19,244) 1,286,000

(1,542)

1,385
1,542
19,244

140

Balance, December 31, 2010

$ 16,562 10,085,155 $150,905 $ 60,849

(66) $ (2)

$228,248

$ 3,315

144

Bank of America 2010

See accompanying Notes to Consolidated Financial Statements.

Bank of America Corporation and Subsidiaries

Consolidated Statement of Cash Flows

(Dollars in millions)

Operating activities
Net income (loss)
Reconciliation of net income (loss) to net cash provided by operating activities:

Provision for credit losses
Goodwill impairment charges
Gains on sales of debt securities
Depreciation and premises improvements amortization
Amortization of intangibles
Deferred income tax expense (benefit)
Net (increase) decrease in trading and derivative instruments
Net (increase) decrease in other assets
Net increase (decrease) in accrued expenses and other liabilities
Other operating activities, net

Net cash provided by operating activities

Investing activities
Net (increase) decrease in time deposits placed and other short-term investments
Net (increase) decrease in federal funds sold and securities borrowed or purchased under agreements to resell
Proceeds from sales of available-for-sale debt securities
Proceeds from paydowns and maturities of available-for-sale debt securities
Purchases of available-for-sale debt securities
Proceeds from maturities of held-to-maturity debt securities
Purchases of held-to-maturity debt 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
Cash received upon acquisition, net
Cash received due to impact of adoption of new consolidation guidance
Other investing activities, net

Net cash provided by (used in) investing activities

Financing activities
Net increase in deposits
Net decrease in federal funds purchased and securities loaned or sold under agreements to repurchase
Net 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
Repayment of preferred stock
Proceeds from issuance of common stock
Cash dividends paid
Excess tax benefits on share-based payments
Other financing activities, net

Net cash used in 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
Interest paid
Income taxes paid
Income taxes refunded

Year Ended December 31

2010

2009

2008

$ (2,238)

6,276

4,008

28,435
12,400
(2,526)
2,181
1,731
608
20,775
5,213
14,069
1,946
82,594

(2,154)
(19,683)
100,047
70,868
(199,159)
11
(100)
8,046
(2,550)
(987)
3,107
–
2,807
9,400
(30,347)

36,598
(9,826)
(31,698)
52,215
(110,919)
–
–
–
(1,762)
–
5
(65,387)
228
(12,912)
121,339

48,570
–
(4,723)
2,336
1,978
370
59,822
28,553
(16,601)
3,150

129,731

19,081
31,369
164,155
59,949
(185,145)
2,771
(3,914)
7,592
21,257
(2,240)
1,997
31,804
–
9,249

157,925

10,507
(62,993)
(126,426)
67,744
(101,207)
49,244
(45,000)
13,468
(4,863)
–
(42)

(199,568)

394

88,482
32,857

26,825
–
(1,124)
1,485
1,834
(5,801)
(16,973)
(6,391)
(8,885)
9,056

4,034

2,203
53,723
120,972
26,068
(184,232)
741
(840)
52,455
(69,574)
(2,098)
1,187
6,650
–
(10,185)

(2,930)

14,830
(34,529)
(33,033)
43,782
(35,072)
34,742
–
10,127
(11,528)
42
(56)

(10,695)

(83)

(9,674)
42,531

$ 108,427

$ 121,339

$ 32,857

$ 21,166
1,465
(7,783)

$ 37,602
2,964
(31)

$ 36,387
4,816
(116)

During 2010, the Corporation sold First Republic Bank in a non-cash transaction that reduced assets and liabilities by $19.5 billion and $18.1 billion.
The Corporation securitized $2.4 billion, $14.0 billion and $26.1 billion of residential mortgage loans into mortgage-backed securities which were retained by the Corporation during 2010,
2009 and 2008, respectively.
During 2009, the Corporation exchanged $14.8 billion of preferred stock by issuing approximately 1.0 billion shares of common stock valued at $11.5 billion.
During 2009, the Corporation exchanged credit card loans of $8.5 billion and the related allowance for loan and lease losses of $750 million for a $7.8 billion held-to-maturity debt security
that was issued by the Corporation’s U.S. credit card securitization trust and retained by the Corporation.
The acquisition-date fair values of non-cash assets acquired and liabilities assumed in the Merrill Lynch & Co., Inc. (Merrill Lynch) acquisition were $619.1 billion and $626.8 billion.
Approximately 1.4 billion shares of common stock valued at approximately $20.5 billion and 376 thousand shares of preferred stock valued at approximately $8.6 billion were issued in
connection with the Merrill Lynch acquisition.
The acquisition-date fair values of non-cash assets acquired and liabilities assumed in the Countrywide Financial Corporation (Countrywide) acquisition were $157.4 billion and
$157.8 billion.
Approximately 107 million shares of common stock, valued at approximately $4.2 billion were issued in connection with the Countrywide acquisition.

See accompanying Notes to Consolidated Financial Statements.

Bank of America 2010

145

Bank of America Corporation and Subsidiaries
Notes to Consolidated Financial Statements

NOTE 1 Summary of Significant Accounting
Principles
Bank of America Corporation (collectively with its subsidiaries, the Corpora-
tion), a financial holding company, provides a diverse range of financial
services and products throughout the U.S. and in certain international mar-
kets. The term “the Corporation” as used herein may refer to the Corporation
individually, the Corporation and its subsidiaries, or certain of the Corpora-
tion’s subsidiaries or affiliates.

The Corporation conducts its activities through banking and nonbanking
subsidiaries. On January 1, 2009, the Corporation acquired Merrill Lynch &
Co., Inc. (Merrill Lynch) in exchange for common and preferred stock with a
value of $29.1 billion. The Corporation operates its banking activities primarily
under two charters: Bank of America, National Association (Bank of America,
N.A.) and FIA Card Services, N.A. In connection with certain acquisitions
including Merrill Lynch, the Corporation acquired banking subsidiaries that
have been merged into Bank of America, N.A. with no impact on the Consol-
idated Financial Statements of the Corporation.

Principles of Consolidation and Basis of Presentation
The Consolidated Financial Statements include the accounts of the Corpora-
tion and its majority-owned subsidiaries, and those variable interest entities
(VIEs) where the Corporation is the primary beneficiary. Intercompany ac-
counts and transactions have been eliminated. Results of operations of
acquired companies are included from the dates of acquisition and for VIEs,
from the dates that the Corporation became the primary beneficiary. Assets
held in an agency or fiduciary capacity are not included in the Consolidated
Financial Statements. The Corporation accounts for investments in compa-
nies for 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 accounting or at fair value
under the fair value option. These investments are included in other assets.
Equity method investments are subject to impairment testing and the Cor-
poration’s proportionate share of income or loss is included in equity invest-
ment income.

The preparation of the Consolidated Financial Statements in conformity
with accounting principles generally accepted in the United States of America
(GAAP) requires management to make estimates and assumptions that affect
reported amounts and disclosures. Realized results could differ from those
estimates and assumptions.

The Corporation evaluates subsequent events through the date of filing
with the Securities and Exchange Commission (SEC). Certain prior period
amounts have been reclassified to conform to current period presentation.

New Accounting Pronouncements
In March 2010, the Financial Accounting Standards Board (FASB) issued new
accounting guidance on embedded credit derivatives. This new accounting
guidance clarifies the scope exception for embedded credit derivatives and
defines which embedded credit derivatives are required to be evaluated for
bifurcation and separate accounting. In addition, the guidance extends the
current disclosure requirements for credit derivatives to all securities with
potential embedded derivative features regardless of the accounting treat-
ment. This new accounting guidance was effective on July 1, 2010. Upon
adoption, companies may elect the fair value option for any beneficial inter-
ests, including those that would otherwise require bifurcation under the new

146

Bank of America 2010

guidance. In connection with the adoption of the guidance on July 1, 2010, the
Corporation elected the fair value option for $629 million of AFS debt secu-
rities, principally collateralized debt obligations (CDOs), that otherwise may be
subject to bifurcation under the new guidance. In connection with this elec-
tion, the Corporation recorded a $229 million charge to retained earnings on
July 1, 2010 as an after-tax adjustment to reclassify the net unrealized loss on
these AFS debt securities from accumulated other comprehensive income
(OCI) to retained earnings and they were reclassified to trading account
assets. The Corporation did not bifurcate any securities as a result of adopting
the new accounting guidance. The additional disclosures required by this new
guidance are included in Note 4 – Derivatives.

On January 1, 2010, the Corporation adopted new FASB accounting
guidance on transfers of financial assets and consolidation of VIEs. This
new accounting guidance revised sale accounting criteria for transfers of
financial assets, eliminated the concept of and accounting for qualifying
special purpose entities (QSPEs) and significantly changed the criteria for
consolidation of a VIE. The adoption of this new accounting guidance resulted
in the consolidation of certain VIEs that previously were QSPEs and VIEs that
were not recorded on the Corporation’s Consolidated Balance Sheet prior to
January 1, 2010. The adoption of this new accounting guidance resulted in a
net incremental increase in assets of $100.4 billion and a net increase in
liabilities of $106.7 billion. These amounts are net of retained interests in
securitizations held on the Consolidated Balance Sheet at December 31,
2009 and net of a $10.8 billion increase in the allowance for loan and lease
losses. The Corporation recorded a $6.2 billion charge, net-of-tax, to retained
earnings on January 1, 2010 for the cumulative effect of the adoption of this
new accounting guidance, which resulted principally from an increase in the
allowance for loan and lease losses related to the newly consolidated loans,
and a $116 million charge to accumulated OCI. Initial recording of these
assets, related allowance and liabilities on the Corporation’s Consolidated
Balance Sheet had no impact at the date of adoption on the consolidated
results of operations.

On January 1, 2010, the Corporation adopted, on a prospective basis,
new FASB accounting guidance stating that troubled debt restructuring (TDR)
accounting cannot be applied to individual loans within purchased credit-
impaired (PCI) loan pools. The adoption of this guidance did not have a
material
impact on the Corporation’s consolidated financial condition or
results of operations.

Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash items in the process of
collection, and amounts due from correspondent banks and the Federal
Reserve Bank.

Securities Financing Agreements
Securities borrowed or purchased under agreements to resell and securities
loaned or sold under agreements to repurchase (securities financing agree-
ments) are treated as collateralized financing transactions. These agree-
ments are recorded at the amounts at which the securities were acquired
or sold plus accrued interest, except for certain securities financing agree-
ments that the Corporation accounts for under the fair value option. Changes
in the fair value of securities financing agreements that are accounted for
under the fair value option are recorded in other income (loss). For more

information on securities financing agreements that the Corporation accounts
for under the fair value option, see Note 23 – Fair Value Option.

The Corporation’s policy is to obtain possession of collateral with a market
value equal to or in excess of the principal amount loaned under resale
agreements. To ensure that the market value of the underlying collateral
remains sufficient, collateral is generally valued daily and the Corporation may
require counterparties to deposit additional collateral or may return collateral
pledged when appropriate. Securities financing agreements give rise to neg-
ligible credit risk as a result of these collateral provisions, and accordingly, no
allowance for loan losses is considered necessary.

Substantially all repurchase and resale activities are transacted under
master repurchase agreements which give the Corporation, in the event of
default by the counterparty, the right to liquidate securities held and to offset
receivables and payables with the same counterparty. The Corporation offsets
repurchase and resale transactions with the same counterparty on the Con-
solidated Balance Sheet where it has such a master agreement and the
transactions have the same maturity date.

In transactions where the Corporation acts as the lender in a securities
lending agreement and receives securities that can be pledged or sold as
collateral, it recognizes an asset on the Consolidated Balance Sheet at fair
value, representing the securities received, and a liability for the same
amount, representing the obligation to return those securities.

At the end of certain quarterly periods during the three years ended
December 31, 2009, the Corporation had recorded certain sales of agency
mortgage-backed securities (MBS) which, based on an ongoing internal review
and interpretation, should have been recorded as secured borrowings. These
periods and amounts were as follows: March 31, 2009 – $573 million;
September 30, 2008 – $10.7 billion; December 31, 2007 – $2.1 billion; and
March 31, 2007 – $4.5 billion. As the transferred securities were recorded at
fair value in trading account assets, the change would have had no impact on
consolidated results of operations. Had the sales been recorded as secured
borrowings, trading account assets and federal funds purchased and secu-
rities loaned or sold under agreements to repurchase would have increased by
the amount of the transactions, however, the increase in all cases was less
than 0.7 percent of total assets or total liabilities. Accordingly, the Corporation
believes that these transactions did not have a material
impact on the
Corporation’s Consolidated Financial Statements.

In repurchase transactions, typically, the termination date for a repur-
chase agreement is before the maturity date of the underlying security.
However, in certain situations, the Corporation may enter into repurchase
agreements where the termination date of the repurchase transaction is the
same as the maturity date of the underlying security and these transactions
are referred to as “repo-to-maturity” (RTM) transactions. The Corporation
enters into RTM transactions only for high quality, very liquid securities such
as U.S. Department of the Treasury (U.S. Treasury) securities or securities
issued by government-sponsored enterprises (GSE). The Corporation ac-
counts for RTM transactions as sales in accordance with applicable account-
ing guidance, and accordingly, removes the securities from the Consolidated
Balance Sheet and recognizes a gain or loss in the Consolidated Statement of
Income. At December 31, 2010, the Corporation had no outstanding RTM
transactions compared to $6.5 billion at December 31, 2009, that had been
accounted for as sales.

and loans as collateral in transactions that include repurchase agreements,
securities loaned, public and trust deposits, U.S. Treasury tax and loan notes,
and other short-term borrowings. This collateral can be sold or repledged by
the counterparties to the transactions.

In addition, the Corporation obtains collateral in connection with its de-
rivative contracts. Required collateral levels vary depending on the credit risk
rating and the type of counterparty. Generally, the Corporation accepts col-
lateral in the form of cash, U.S. Treasury securities and other marketable
securities. Based on provisions contained in legal netting agreements, the
Corporation nets cash collateral against the applicable derivative fair value.
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 carried at fair value. Fair
value is generally based on quoted market prices or quoted market prices for
similar assets and liabilities. If these market prices are not available, fair
values are estimated based on dealer quotes, pricing models, discounted
cash flow methodologies, or similar techniques where the determination of
fair value may require significant management judgment or estimation. Re-
alized and unrealized gains and losses are recognized in trading account
profits (losses).

Derivatives and Hedging Activities
Derivatives are entered into on behalf of customers, for trading, as economic
hedges or as qualifying accounting hedges. Derivatives utilized by the Corpo-
ration 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 agree-
ments 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 derivative financial instrument), index, currency or commodity at a
predetermined rate or price during a period or at a date in the future. Option
agreements can be transacted on organized exchanges or directly between
parties.

All derivatives are recorded 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 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, discounted cash flow methodologies or similar tech-
niques for which the determination of fair value may require significant
management judgment or estimation.

Valuations of derivative assets and liabilities reflect the value of the
instrument including counterparty credit risk. These values also take into
account the Corporation’s own credit standing, thus including in the valuation
of the derivative instrument the value of the net credit differential between the
counterparties to the derivative contract.

Collateral
The Corporation accepts collateral that it is permitted by contract or custom to
sell or repledge and such collateral is recorded on the Consolidated Balance
Sheet. At December 31, 2010 and 2009, the fair value of this collateral was
$401.7 billion and $418.2 billion of which $257.6 billion and $310.2 billion
were sold or repledged. The primary sources of this collateral are repurchase
agreements and securities borrowed. The Corporation also pledges securities

Trading Derivatives and Economic Hedges
Derivatives held for trading purposes are included in derivative assets or
derivative liabilities with changes in fair value included in trading account
profits (losses).

Derivatives used as economic hedges, because either they did not qualify
for or were not designated as an accounting hedge, are also included in
derivative assets or derivative liabilities. Changes in the fair value of

Bank of America 2010

147

derivatives that serve as economic hedges of mortgage servicing rights
(MSRs), interest rate lock commitments (IRLCs) and first mortgage loans
held-for-sale (LHFS) that are originated by the Corporation are recorded in
mortgage banking income. Changes in the fair value of derivatives that serve
as asset and liability management (ALM) economic hedges are recorded in
other income (loss). Credit derivatives used by the Corporation as economic
hedges do not qualify as accounting hedges despite being effective economic
hedges, and changes in the fair value of these derivatives are included in
other income (loss).

Derivatives Used For Hedge Accounting Purposes
(Accounting Hedges)
For accounting hedges, the Corporation formally documents at inception all
relationships between hedging instruments and hedged items, as well as the
risk management objectives and strategies for undertaking various account-
ing hedges. Additionally, the Corporation primarily uses regression analysis at
the inception of a hedge and for each reporting period thereafter to assess
whether the derivative used in a hedging transaction is expected to be and has
been highly effective in offsetting changes in the fair value or cash flows of a
hedged item. The Corporation discontinues 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 of the derivative in
earnings after termination of the hedge relationship.

The Corporation uses its accounting hedges 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 sen-
sitivity 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 attributable to interest rate or foreign exchange vola-
tility. Cash flow hedges are used primarily to minimize the variability in cash
flows of assets or liabilities, or forecasted transactions caused by interest
rate or foreign exchange fluctuations. For terminated cash flow hedges, the
maximum length of time over which forecasted transactions are hedged is
26 years, with a substantial portion of the hedged transactions being less
than 10 years. For open or future cash flow hedges, the maximum length of
time over which forecasted transactions are or will be hedged is less than
seven years.

Changes in the fair value of derivatives designated as fair value hedges
are recorded in earnings, together and in the same income statement line
item 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 income state-
ment in which the hedged item is recorded and in the same period the hedged
item affects earnings. Hedge ineffectiveness and gains and losses on the
excluded component of a derivative in assessing hedge effectiveness are
recorded in earnings in the same income statement line item. The Corporation
records changes in the fair value of derivatives used as hedges of the net
investment 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 periods during which the
hedged forecasted transaction affects earnings. If it is probable that a

148

Bank of America 2010

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 IRLCs in connection with its mortgage banking
activities to fund residential mortgage loans at specified times in the future.
IRLCs that relate to the origination of mortgage loans that will be held for sale
are considered derivative instruments under applicable accounting guidance.
As such, these IRLCs are recorded at fair value with changes in fair value
recorded in mortgage banking income.

In estimating the fair value of an IRLC, the Corporation assigns a prob-
ability to the loan commitment based on an expectation that it will be exer-
cised and the loan will be funded. The fair value of the commitments is derived
from the fair value of related mortgage loans which is based on observable
market data and includes the expected net future cash flows related to
servicing of the loans. Changes to the fair value of IRLCs are recognized
based on interest rate changes, changes in the probability that the commit-
ment will be exercised and the passage of time. Changes from the expected
future cash flows related to the customer relationship are excluded from the
valuation of 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 Corporation 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 recorded on the Consolidated Balance Sheet as of the
trade date and classified based on management’s intention on the date of
purchase. Debt securities which management has the intent and ability to
hold to maturity are classified as held-to-maturity (HTM) 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 and are carried at
fair value with unrealized gains and losses included in trading account profits
(losses). Other debt securities are classified as AFS and carried at fair value
with net unrealized gains and losses included in accumulated OCI on an after-
tax basis. In addition, credit-related notes, which include investments in
securities issued by CDOs, collateralized loan obligations (CLOs) and
credit-linked note vehicles, are classified as trading securities.

The Corporation regularly evaluates each AFS and HTM debt security
where the value has declined below amortized cost to assess whether the
decline in fair value is other-than-temporary. In determining whether an im-
pairment is other-than-temporary, the Corporation considers the severity and
duration of the decline in fair value, the length of time expected for recovery,
the financial condition of the issuer, and other qualitative factors, as well as
whether the Corporation either plans to sell the security or it is more-likely-
than-not that it will be required to sell the security before recovery of its
amortized cost. Beginning in 2009, under new accounting guidance for
impairments of debt securities that are deemed to be other-than-temporary,
the credit component of an other-than-temporary impairment (OTTI) loss is
recognized in earnings and the non-credit component is recognized in accu-
mulated OCI in situations where the Corporation does not intend to sell the
security and it is not more-likely-than-not that the Corporation will be required
to sell the security prior to recovery. Prior to January 1, 2009, unrealized
losses, both the credit and non-credit components, on AFS debt securities
that were deemed to be other-than-temporary were included in current-period
earnings. If there is an OTTI on any individual security classified as HTM, the

Corporation writes down the security to fair value with a corresponding charge
to other income (loss).

Interest on debt securities, including amortization of premiums and ac-
cretion 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 Balance
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 and are carried at fair value with unrealized gains and losses included
in trading account profits (losses). Other marketable equity securities are
accounted for as AFS and classified in other assets. All AFS marketable equity
securities are carried at fair value with net unrealized gains and losses
included in accumulated OCI on an after-tax basis. If there is an oth-
er-than-temporary decline in the fair value of any individual AFS marketable
equity security, the Corporation reclassifies the associated net unrealized loss
out of accumulated OCI with a corresponding charge to equity investment
income. Dividend income on AFS marketable equity securities is included in
equity investment income. Realized gains and losses on the sale of all AFS
marketable equity securities, which are recorded in equity investment income,
are determined using the specific identification method.

Equity investments without readily determinable fair values are recorded
in other assets. Impairment testing is based on applicable accounting guid-
ance and the cost basis is reduced when impairment is deemed to be
other-than-temporary.

Certain equity investments held by Global Principal Investments, the
Corporation’s diversified equity investor in private equity, real estate and
other alternative investments, are subject to investment company accounting
under applicable accounting guidance, and accordingly, are carried at fair
value with changes in fair value reported in equity investment income. These
investments are included in other assets. Initially, the transaction price of the
investment is generally considered to be the best indicator of fair value.
Thereafter, valuation of direct investments is based on an assessment of
each individual investment using methodologies that include publicly traded
comparables derived by multiplying a key performance metric (e.g., earnings
before interest, taxes, depreciation and amortization) of the portfolio com-
pany by the relevant valuation multiple observed for comparable companies,
acquisition comparables, entry level multiples and discounted cash flows,
and are subject to appropriate discounts for lack of liquidity or marketability.
Certain factors that may influence changes in fair value include but are not
limited to recapitalizations, subsequent rounds of financing and offerings in
the equity or debt capital markets. For fund investments, the Corporation
generally records the fair value of its proportionate interest in the fund’s
capital as reported by the funds’ respective managers.

Other investments held by Global Principal Investments are accounted for
under either the equity method or at cost, depending on the Corporation’s
ownership interest, and are reported in other assets.

Loans and Leases
Loans measured at historical cost are reported at their outstanding principal
balances net of any unearned income, charge-offs, unamortized deferred fees
and costs on originated loans, and for purchased loans, net of any unamor-
tized premiums or discounts. Loan origination fees and certain direct origi-
nation costs are deferred and recognized as adjustments to interest income
over the lives of the related loans. Unearned income, discounts and premi-
ums are amortized to interest income using a level yield methodology. The
Corporation elects to account for certain loans under the fair value option with
changes in fair value reported in mortgage banking income for residential
mortgage loans and other income for commercial loans.

The FASB issued new disclosure guidance, effective on a prospective
basis for the Corporation’s 2010 year-end reporting, that addresses disclo-
sure of loans and other financing receivables and the related allowance. The
new accounting guidance defines a portfolio segment as the level at which an
entity develops and documents a systematic methodology to determine the
allowance for credit losses, and a class of financing receivables as the level of
disaggregation of portfolio segments based on the initial measurement
attribute, risk characteristics and methods for assessing risk. The Corpora-
tion’s portfolio segments are home loans, credit card and other consumer,
and commercial. The classes within the home loans portfolio segment are
residential mortgage, home equity and discontinued real estate. The classes
within the credit card and other consumer portfolio segment are U.S. credit
card, non-U.S. credit card, direct/indirect consumer and other consumer. The
classes within the commercial portfolio segment are U.S. commercial, com-
mercial real estate, commercial lease financing, non-U.S. commercial and
U.S. small business commercial. Under this new accounting guidance, the
allowance is presented by portfolio segment.

Purchased Credit-impaired Loans
The Corporation purchases loans with and without evidence of credit quality
deterioration since origination. Evidence of credit quality deterioration as of
the purchase date may include statistics such as past due status, refreshed
borrower credit scores and refreshed loan-to-value (LTV) ratios, some of which
are not immediately available as of the purchase date. The Corporation
continues to evaluate this information and other credit-related information
as it becomes available. Purchased loans are considered to be impaired if the
Corporation does not expect to receive all contractually required cash flows
due to concerns about credit quality. The excess of the cash flows expected to
be collected measured as of the acquisition date, over the estimated fair
value is referred to as the accretable yield and is recognized in interest income
over the remaining life of the loan using a level yield methodology. The
difference between contractually required payments as of the acquisition
date and the cash flows expected to be collected is referred to as the
nonaccretable difference.

The initial fair values for PCI loans are determined by discounting both
principal and interest cash flows expected to be collected using an observable
discount rate for similar instruments with adjustments that management
believes a market participant would consider in determining fair value. The
Corporation estimates the cash flows expected to be collected upon acqui-
sition using internal credit risk, interest rate and prepayment risk models that
incorporate management’s best estimate of current key assumptions such as
default rates, loss severity and payment speeds.

Subsequent decreases to expected principal cash flows result in a charge
to provision for credit losses and a corresponding increase to a valuation
allowance included in the allowance for loan and lease losses. Subsequent
increases in expected principal cash flows result in a recovery of any previ-
ously recorded allowance for loan and lease losses, to the extent applicable,
and a reclassification from nonaccretable difference to accretable yield for
any remaining increase. Changes in expected interest cash flows may result in
reclassifications to/from the nonaccretable difference. Loan disposals, which
may include sales of loans, receipt of payments in full from the borrower or
foreclosure, result in removal of the loan from the PCI loan pool at its allocated
carrying amount. Beginning on January 1, 2010, loans modified in a TDR
remain within the PCI loan pools. Prior to January 1, 2010, TDRs were
removed from the PCI loan pools.

Leases
The Corporation provides equipment financing to its customers through a
variety of lease arrangements. Direct financing leases are carried at the
aggregate of lease payments receivable plus estimated residual value of the

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149

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 interest income over the
lease terms using methods that approximate the interest method.

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, represents
management’s estimate of probable losses inherent in the Corporation’s
lending activities. The allowance for loan and lease losses and the reserve for
unfunded lending commitments exclude amounts for loans and unfunded
lending commitments accounted for under the fair value option as the fair
values of these instruments reflect a credit component. The allowance for
loan and lease losses does not include amounts related to accrued interest
receivable other than billed interest and fees on credit card receivables as
accrued interest receivable is reversed when a loan is placed on nonaccrual
status. The allowance for loan and lease losses represents the estimated
probable credit losses in funded consumer and commercial loans and leases
while the reserve for unfunded lending 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 deemed to be uncollect-
ible, excluding derivative assets, trading account assets and loans carried at
fair value, are charged against these accounts. Cash recovered on previously
charged off amounts is recorded as a recovery to these accounts. Manage-
ment evaluates the adequacy of the allowance for loan and lease losses
based on the combined total of these two components.

The Corporation performs periodic and systematic detailed reviews of its
lending portfolios to identify credit risks and to assess the overall collectability
of those portfolios. The allowance on certain homogeneous consumer loan
portfolios, which generally consist of consumer real estate within the home
loans portfolio segment and credit card loans within the credit card and other
consumer portfolio segment, is based on aggregated portfolio segment
evaluations generally by product type. Loss forecast models are utilized for
these portfolios which consider a variety of factors including, but not limited
to, historical loss experience, estimated defaults or foreclosures based on
portfolio trends, delinquencies, bankruptcies, economic conditions and credit
scores.

The Corporation’s home loans portfolio segment is comprised primarily of
large groups of homogeneous consumer loans secured by residential real
estate. The amount of losses incurred in the homogeneous loan pools is
estimated based upon how many of the loans will default and the loss in the
event of default. Using statistically valid modeling methodologies, the Corpo-
ration estimates how many of the homogeneous loans will default based on
the individual loans’ attributes aggregated into pools of homogeneous loans
with similar attributes. The attributes that are most significant to the prob-
ability of default and are used to estimate default include refreshed LTV or in
the case of a subordinated lien, refreshed combined loan-to-value (CLTV),
borrower credit score, months since origination (i.e., vintage) and geography,
all of which are further broken down by present collection status (whether the
loan is current, delinquent, in default or in bankruptcy). This estimate is based
on the Corporation’s historical experience with the loan portfolio. The esti-
mate is adjusted to reflect an assessment of environmental factors not yet
reflected in the historical data underlying the loss estimates, such as changes
in real estate values, local and national economies, underwriting standards
and the regulatory environment. The probability of default of a loan is based on
an analysis of the movement of loans with the measured attributes from either
current or each of the delinquency categories to default over a twelve-month
period. Loans 90 or more days past due or those expected to migrate to 90 or
more days past due within the twelve-month period are assigned a rate of

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Bank of America 2010

default that measures the percentage of such loans that will default over their
lives given the assumption that the condition causing the ultimate default
presently exists as of the measurement date. On home equity loans where the
Corporation holds only a second-lien position and foreclosure is not the best
alternative, the loss severity is estimated at 100 percent.

The allowance on certain commercial loans (except business card and
certain small business loans) is calculated using loss rates delineated by risk
rating and product type. Factors considered when assessing loss rates
include: the value of the underlying collateral, if applicable, the industry of
the obligor, and the obligor’s liquidity and other financial indicators along with
certain qualitative factors. These statistical models are updated regularly for
changes in economic and business conditions. Included in the analysis of
consumer and commercial loan portfolios are reserves which are maintained
to cover uncertainties that affect the Corporation’s estimate of probable
losses including domestic and global economic uncertainty and large single
name defaults.

The remaining commercial portfolios, including nonperforming commer-
cial loans, as well as consumer real estate loans modified in a TDR, rene-
gotiated credit card, unsecured consumer and small business loans are
reviewed in accordance with applicable accounting guidance on impaired
loans and TDRs. If necessary, a specific allowance is established for these
loans if they are deemed to be impaired. 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/or interest,
according to the contractual terms of the agreement, and once a loan has
been identified as impaired, management measures impairment. Impaired
loans and TDRs are primarily measured based on the present value of
payments expected to be received, discounted at the loans’ original effective
contractual interest rates, or discounted at the portfolio average contractual
annual percentage rate, excluding renegotiated and promotionally priced
loans for the renegotiated TDR portfolio. Impaired loans and TDRs may also
be measured based on observable market prices, or for loans that are solely
dependent on the collateral for repayment, the estimated fair value of the
collateral less estimated costs to sell. If the recorded investment in impaired
loans exceeds this amount, a specific allowance is established as a compo-
nent of the allowance for loan and lease losses unless these are consumer
real estate loans that are solely dependent on the collateral for repayment, in
which case the initial amount that exceeds the fair value of the collateral is
charged off.

Generally, prior to performing a detailed property valuation including a
walk-through of a property, the Corporation initially estimates the fair value of
the collateral securing consumer loans that are solely dependent on the
collateral for repayment using an automated valuation method (AVM). An AVM
is a tool that estimates the value of a property by reference to market data
including sales of comparable properties and price trends specific to the
Metropolitan Statistical Area in which the property being valued is located. In
the event that an AVM value is not available, the Corporation utilizes publicized
indices or if these methods provide less reliable valuations, the Corporation
uses appraisals or broker price opinions to estimate the fair value of the
collateral. While there is inherent imprecision in these valuations, the Cor-
poration believes that they are representative of the portfolio in the aggregate.
In addition to the allowance for loan and lease losses, the Corporation also
estimates probable losses related to unfunded lending commitments, such
as letters of credit and financial guarantees, and binding unfunded loan
commitments. The reserve for unfunded lending commitments excludes
commitments accounted for under the fair value option. Unfunded lending
commitments are subject to individual reviews and are analyzed and segre-
gated by risk according to the Corporation’s internal risk rating scale. These
risk classifications, in conjunction with an analysis of historical loss experi-
ence, utilization assumptions, current economic conditions, performance

trends within the portfolio 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 separately on the Consolidated Balance Sheet whereas the reserve
for unfunded lending commitments is reported on the Consolidated Balance
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.

Nonperforming Loans and Leases, Charge-offs and
Delinquencies
Nonperforming loans and leases generally include loans and leases that have
been placed on nonaccrual status including nonaccruing loans whose contrac-
tual terms have been restructured in a manner that grants a concession to a
borrower experiencing financial difficulties. Loans accounted for under the fair
value option, PCI loans and LHFS are not reported as nonperforming loans and
leases.

In accordance with the Corporation’s policies, non-bankrupt credit card
loans and unsecured consumer loans are charged off no later than the end
of the month in which the account becomes 180 days past due. The outstanding
balance of real estate-secured loans that is in excess of the estimated property
value, less estimated costs to sell, is charged off no later than the end of the
month in which the account becomes 180 days past due unless repayment of
the loan is insured by the Federal Housing Administration (FHA). The estimated
property value, less estimated costs to sell, is determined using the same
process as described for impaired loans in the Allowance for Credit Losses
section beginning on page 150. Personal property-secured loans are charged
off no later than the end of the month in which the account becomes 120 days
past due. Unsecured accounts in bankruptcy, including credit cards, are charged
off 60 days after bankruptcy notification. For secured products, accounts in
bankruptcy are written down to the collateral value, less cost to sell, by the end
of the month in which the account becomes 60 days past due. Consumer credit
card loans, consumer loans secured by personal property and unsecured
consumer loans are not placed on nonaccrual status prior to charge-off and
therefore are not reported as nonperforming loans. Real estate-secured loans
are generally placed on nonaccrual status and classified as nonperforming at
90 days past due. However, consumer loans secured by real estate where
repayments are insured by the FHA are not placed on nonaccrual status, and
therefore, are not reported as nonperforming loans. Accrued interest receivable
is reversed when a consumer loan is placed on nonaccrual status. Interest
collections on nonaccruing consumer loans for which the ultimate collectability
of principal is uncertain are applied as principal reductions; otherwise, such
collections are credited to interest income when received. These loans may be
restored to accrual 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. Consumer loans whose contractual terms have been modified in
a TDR and are current at the time of restructuring remain on accrual status if
there is demonstrated performance prior to the restructuring and payment in full
under the restructured terms is expected. Otherwise, the loans are placed on
nonaccrual status and reported as nonperforming until there is sustained
repayment performance for a reasonable period, generally six months. Con-
sumer TDRs that are on accrual status are reported as performing TDRs
through the end of the calendar year in which the restructuring occurred or
the year in which the loans are returned to accrual status. In addition, if accruing
consumer TDRs bear less than a market rate of interest at the time of mod-
ification, they are reported as performing TDRs throughout the remaining lives
of the loans.

Commercial loans and leases, excluding business card loans, that are
past due 90 days or more as to principal or interest, or where reasonable

doubt exists as to timely collection, including loans that are individually
identified as being impaired, are generally placed on nonaccrual status
and classified as nonperforming unless well-secured and in the process of
collection. Commercial loans and leases whose contractual terms have been
modified in a TDR are placed on nonaccrual status and reported as non-
performing until the loans have performed for an adequate period of time
under the restructured agreement, generally six months. Accruing commercial
TDRs are reported as performing TDRs through the end of the calendar year in
which the loans are returned to accrual status. In addition, if accruing com-
mercial TDRs bear less than a market rate of interest at the time of modi-
fication, they are reported as performing TDRs throughout the remaining lives
of the loans. Accrued interest receivable is reversed when a commercial loan
is placed on nonaccrual status. Interest collections on nonaccruing commer-
cial loans and leases for which the ultimate collectability of principal is
uncertain are applied as principal reductions; otherwise, such collections
are credited to income when received. Commercial loans and leases may be
restored to accrual 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. Business card loans are charged off no later than the end of the
month in which the account becomes 180 days past due or where 60 days
have elapsed since receipt of notification of bankruptcy filing, whichever
comes first. These loans are not placed on nonaccrual status prior to
charge-off and therefore are not reported as nonperforming loans. Other
commercial loans are generally charged off when all or a portion of the
principal amount is determined to be uncollectible.

The entire balance of a consumer and commercial loan 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
applicable.

PCI loans are recorded at fair value at the acquisition date. Although the
PCI loans may be contractually delinquent, the Corporation does not classify
these loans as nonperforming as the loans were written down to fair value at
the acquisition date and the accretable yield is recognized in interest income
over the remaining life of the loan. In addition, reported net charge-offs
exclude write-downs on PCI loan pools as the fair value already considers the
estimated credit losses.

Loans Held-for-sale
Loans that are intended to be sold in the foreseeable future, including
residential mortgages, loan syndications, and to a lesser degree, commercial
real estate, consumer finance and other loans, are reported as LHFS and are
carried at the lower of aggregate cost or fair value. The Corporation accounts
for certain LHFS, including first mortgage LHFS, under the fair value option.
Mortgage loan origination costs related to LHFS which the Corporation ac-
counts for under the fair value option are recognized in noninterest expense
when incurred. Mortgage loan origination costs for LHFS carried at the lower of
cost or fair value are capitalized as part of the carrying amount of the loans
and recognized as a reduction of mortgage banking income upon the sale of
such loans. LHFS that are on nonaccrual status and are reported as non-
performing, as defined in the policy above, are reported separately from
nonperforming loans and leases.

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. Estimated
lives range up to 40 years for buildings, up to 12 years for furniture and

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151

equipment, and the shorter of lease term or estimated useful life for lease-
hold improvements.

Mortgage Servicing Rights
The Corporation accounts for consumer-related MSRs at fair value with
changes in fair value recorded in mortgage banking income, while commer-
cial-related and residential reverse mortgage MSRs are accounted for using
the amortization method (i.e., lower of cost or market) with impairment
recognized as a reduction in mortgage banking income. To reduce the volatility
of earnings related to interest rate and market value fluctuations, certain
securities and derivatives such as options and interest rate swaps may be
used as economic hedges of the MSRs, but are not designated as accounting
hedges. These economic hedges are carried at fair value with changes in fair
value recognized in mortgage banking income.

The Corporation estimates the fair value of the consumer-related MSRs
using a valuation model that calculates the present value of estimated future
net servicing income. This is accomplished through an option-adjusted spread
(OAS) valuation approach that factors in prepayment risk. This approach
consists of projecting servicing cash flows under multiple interest rate sce-
narios and discounting these cash flows using risk-adjusted discount rates.
The key economic assumptions used in valuations of MSRs include weighted-
average lives of the MSRs and the OAS levels. The OAS represents the spread
that is added to the discount rate so that the sum of the discounted cash flows
equals the market price, therefore it is a measure of the extra yield over the
reference discount factor (i.e., the forward swap curve) that the Corporation
expects to earn by holding the asset. These variables can, and generally do,
change from quarter to quarter as market conditions and projected interest
rates change, and could have an adverse impact on the value of the MSRs and
could result in a corresponding reduction in mortgage banking income.

Goodwill and Intangible Assets
Goodwill is calculated as the purchase premium after adjusting for the fair
value of net assets acquired. 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. A reporting unit, as
defined under applicable accounting guidance, is a business segment or one
level below a business segment. The goodwill impairment analysis is a two-
step test. The first step of the goodwill impairment test involves comparing the
fair value of each 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, the second step must be performed
to measure potential impairment.

The second step involves calculating an implied fair value of goodwill for
each reporting unit for which the first step indicated possible impairment. The
implied fair value of goodwill is determined in the same manner as the amount
of goodwill recognized in a business combination, which is the excess of the
fair value of the reporting unit, as determined in the first step, over the
aggregate fair values of the assets, liabilities and identifiable intangibles as if
the reporting unit was being acquired in a business combination. Measure-
ment of the fair values of the assets and liabilities of a reporting unit is
consistent with the requirements of the fair value measurements accounting
guidance, which defines fair value as an exit price, meaning the price that
would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The
adjustments to measure the assets, liabilities and intangibles at fair value
are for the purpose of measuring the implied fair value of goodwill and such
adjustments are not reflected in the Consolidated Balance Sheet. If the
implied fair value of goodwill exceeds the goodwill assigned to the reporting
unit, there is no impairment. If the goodwill assigned to a reporting unit

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exceeds the implied fair value of goodwill, an impairment charge is recorded
for the excess. An impairment loss recognized cannot exceed the amount of
goodwill assigned to a reporting unit. An impairment loss establishes a new
basis in the goodwill and subsequent reversals of goodwill impairment losses
are not permitted under applicable accounting guidance.

For intangible assets subject to amortization, an impairment loss is
recognized if the carrying amount of the intangible asset is not recoverable
and exceeds fair value. The carrying amount of the intangible asset is
considered not recoverable if it exceeds the sum of the undiscounted cash
flows expected to result from the use of the asset.

Variable Interest Entities
A VIE is an entity that lacks equity investors or whose equity investors do not
have a controlling financial interest in the entity through their equity invest-
ments. The entity that has a controlling financial interest in a VIE is referred to
as the primary beneficiary and consolidates the VIE. Prior to January 1, 2010,
the primary beneficiary was the entity that would absorb a majority of the
economic risks and rewards of the VIE based on an analysis of projected
probability-weighted cash flows. In accordance with the new accounting guid-
ance on consolidation of VIEs and transfers of financial assets effective
January 1, 2010, the Corporation is deemed to have a controlling financial
interest and is the primary beneficiary of a VIE if it has both the power to direct
the activities of the VIE that most significantly impact the VIE’s economic
performance and an obligation to absorb losses or the right to receive
benefits that could potentially be significant to the VIE. On a quarterly basis,
the Corporation reassesses whether it has a controlling financial interest in
and is the primary beneficiary of a VIE. The quarterly reassessment process
considers whether the Corporation has acquired or divested the power to
direct the activities of the VIE through changes in governing documents or
other circumstances. The reassessment also considers whether the Corpo-
ration has acquired or disposed of a financial interest that could be significant
to the VIE, or whether an interest in the VIE has become significant or is no
longer significant. The consolidation status of the VIEs with which the Cor-
poration is involved may change as a result of such reassessments. Changes
in consolidation status are applied prospectively, with assets and liabilities of
a newly consolidated VIE initially recorded at fair value. A gain or loss may be
recognized upon deconsolidation of a VIE depending on the carrying amounts
of deconsolidated assets and liabilities compared to the fair value of retained
interests and ongoing contractual arrangements.

The Corporation primarily uses VIEs for its securitization activities, in which
the Corporation transfers whole loans or debt securities into a trust or other
vehicle such that the assets are legally isolated from the creditors of the
Corporation. Assets held in a trust can only be used to settle obligations of the
trust. The creditors of these trusts typically have no recourse to the Corpo-
ration except in accordance with the Corporation’s obligations under standard
representations and warranties. Prior to 2010, securitization trusts typically
met the definition of a QSPE and as such were not subject to consolidation.
When the Corporation is the servicer of whole loans held in a securitization
trust, including non-agency residential mortgages, home equity loans, credit
cards, automobile loans and student loans, the Corporation has the power to
direct the most significant activities of the trust. The Corporation does not
have the power to direct the most significant activities of a residential
mortgage agency trust unless the Corporation holds substantially all of the
issued securities and has the unilateral right to liquidate the trust. The power
to direct the most significant activities of a commercial mortgage securitiza-
tion trust is typically held by the special servicer or by the party holding specific
subordinate securities which embody certain controlling rights. In accordance
with the new accounting guidance, the Corporation consolidates a whole loan
securitization trust if it has the power to direct the most significant activities
and also holds securities issued by the trust or has other contractual

arrangements, other than standard representations and warranties, that
could potentially be significant to the trust.

The Corporation may also transfer trading account securities and AFS
securities into municipal bond or resecuritization trusts. The Corporation
consolidates a municipal bond or resecuritization trust if it has control over
the ongoing activities of the trust such as the remarketing of the trust’s
liabilities or, if there are no ongoing activities, sole discretion over the design
of the trust, including the identification of securities to be transferred in and
the structure of securities to be issued, and also retains securities or has
liquidity or other commitments that could potentially be significant to the trust.
The Corporation does not consolidate a municipal bond or resecuritization
trust if one or a limited number of third-party investors share responsibility for
the design of the trust or have control over the significant activities of the trust
through liquidation or other substantive rights.

Other VIEs used by the Corporation include commercial paper conduits,
CDOs, investment vehicles created on behalf of customers and other invest-
ment vehicles. The Corporation consolidated all previously unconsolidated
commercial paper conduits in accordance with the new accounting guidance
on January 1, 2010. In its role as administrator, the Corporation has the
power to determine which assets are held in the conduits and the Corporation
manages the issuance of commercial paper. Through liquidity facilities, loss
protection commitments and other arrangements, the Corporation has an
obligation to absorb losses that could potentially be significant to the VIE.

The Corporation does not routinely serve as collateral manager for CDOs
and, therefore, does not typically have the power to direct the activities that
most significantly impact the economic performance of a CDO. However,
following an event of default, if the Corporation is a majority holder of senior
securities issued by a CDO and acquires the power to manage the assets of
the CDO, the Corporation consolidates the CDO.

The Corporation consolidates a customer or other investment vehicle if it
has control over the initial design of the vehicle or manages the assets in the
vehicle and also absorbs potentially significant gains or losses through an
investment in the vehicle, derivative contracts or other arrangements. The
Corporation does not consolidate an investment vehicle if a single investor
controlled the initial design of the vehicle or manages the assets in the
vehicles or if the Corporation does not have a variable interest that could
potentially be significant to the vehicle.

Retained interests in securitized assets are initially recorded at fair value.
Prior to 2010, retained interests were initially recorded at an allocated cost
basis in proportion to the relative fair values of the assets sold and interests
retained. In addition, the Corporation may invest in debt securities issued by
unconsolidated VIEs. Quoted market prices are primarily used to obtain fair
values of these debt securities, which are AFS debt securities or trading
account assets. Generally, quoted market prices for retained residual inter-
ests are not available, therefore, the Corporation estimates fair values based
on the present value of the associated expected future cash flows. This may
require management to estimate credit losses, prepayment speeds, forward
interest yield curves, discount rates and other factors that impact the value of
retained interests. Retained residual interests in unconsolidated securitiza-
tion trusts are classified in trading account assets or other assets with
changes in fair value recorded in income. The Corporation may also enter
into derivatives with unconsolidated VIEs, which are carried at fair value with
changes in fair value recorded in income.

Fair Value
The Corporation measures the fair values of its financial instruments in
accordance with accounting guidance that requires an entity to base fair
value on exit price and maximize the use of observable inputs and minimize
the use of unobservable inputs to determine the exit price. The Corporation
categorizes its financial instruments, based on the priority of inputs to the
valuation technique, into a three-level hierarchy, as described below. Trading
account assets and liabilities, derivative assets and liabilities, AFS debt and
marketable equity securities, MSRs and certain other assets are carried at
fair value in accordance with applicable accounting guidance. The Corporation
has also elected to account for certain assets and liabilities under the fair
value option, including certain corporate loans and loan commitments, LHFS,
commercial paper and other short-term borrowings, securities financing
long-term deposits and
agreements, asset-backed secured financings,
long-term debt. The following describes the three-level hierarchy.

Level 1 Unadjusted quoted prices in active markets for identical assets or
liabilities. Level 1 assets and liabilities include debt and equity
securities and derivative contracts that are traded in an active
exchange market, as well as certain U.S. Treasury securities that
are highly liquid and are actively traded in over-the-counter markets.

Level 2 Observable inputs other than Level 1 prices, such as quoted prices
for similar assets or liabilities, quoted prices in markets that are not
active, or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the assets
or liabilities. Level 2 assets and liabilities include debt securities
with quoted prices that are traded less frequently than exchange-
traded instruments and derivative contracts where value is deter-
mined using a pricing model with inputs that are observable in the
market or can be derived principally from or corroborated by ob-
servable market data. This category generally includes U.S. govern-
ment and agency mortgage-backed debt securities, corporate debt
securities, derivative contracts, residential mortgage loans and
certain LHFS.

Level 3 Unobservable inputs that are supported by little or no market activity
and that are significant to the overall fair value of the assets or
liabilities. Level 3 assets and liabilities include financial instruments
for which the determination of fair value requires significant man-
agement judgment or estimation. The fair value for such assets and
liabilities is generally determined using pricing models, discounted
cash flow methodologies or similar techniques that incorporate the
assumptions a market participant would use in pricing the asset or
liability. This category generally includes certain private equity in-
vestments and other principal investments, retained residual inter-
ests in securitizations, residential MSRs, asset-backed securities
(ABS), highly structured, complex or long-dated derivative contracts,
certain LHFS, IRLCs and certain CDOs where independent pricing
information cannot be obtained for a significant portion of the
underlying assets.

Bank of America 2010

153

Income Taxes
There are 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 are also recognized
for tax attributes such as net operating loss carryforwards and tax credit
carryforwards. Valuation allowances are recorded to reduce deferred tax
assets to the amounts management concludes are more-likely-than-not to
be realized.

Income tax benefits are recognized and measured based upon a two-step
model: 1) a tax position must be more-likely-than-not to be sustained based
solely on its technical merits in order to be recognized, and 2) the benefit is
measured as the largest dollar amount of that position that is more-likely-than-
not to be sustained upon settlement. The difference between the benefit
recognized and the tax benefit claimed on a tax return is referred to as an
unrecognized tax benefit (UTB). The Corporation records income tax-related
interest and penalties, if applicable, within income tax expense.

Retirement Benefits
The Corporation has established retirement plans covering substantially 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 (SERPs) for se-
lected officers of the Corporation and its subsidiaries that provide benefits
that cannot be paid from a qualified retirement plan due to Internal Revenue
Code restrictions. The Corporation’s current executive officers do not earn
additional retirement income under SERPs. These plans are nonqualified
under the Internal Revenue Code and assets used to fund benefit payments
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 postre-
tirement healthcare and life insurance benefit plans.

Accumulated Other Comprehensive Income
The Corporation records unrealized gains and losses on AFS debt and mar-
ketable equity securities, gains and losses on cash flow accounting hedges,
unrecognized actuarial gains and losses, transition obligation and prior ser-
vice costs on pension and postretirement plans, foreign currency translation
adjustments and related hedges of net investments in foreign operations in
accumulated OCI, net-of-tax. Unrealized gains and losses on AFS debt and
marketable equity securities are reclassified to earnings as the gains or
losses are realized upon sale of the securities. Unrealized losses on AFS
securities deemed to represent OTTI are reclassified to earnings at the time of
the impairment charge. Beginning in 2009, for AFS debt securities that the
Corporation does not intend to sell or it is not more-likely-than-not that it will be
required to sell, only the credit component of an unrealized loss is reclassified
to earnings. Gains or losses on derivatives accounted for as cash flow hedges
are reclassified to earnings when the hedged transaction affects earnings.
Translation gains or losses on foreign currency translation adjustments are
reclassified to earnings upon the substantial sale or liquidation of invest-
ments in foreign operations.

154

Bank of America 2010

Earnings Per Common Share
Earnings per share (EPS) is computed by dividing net income (loss) allocated
to common shareholders by the weighted-average common shares outstand-
ing. Net income (loss) allocated to common shareholders represents net
income (loss) applicable to common shareholders which is net income (loss)
adjusted for preferred stock dividends including dividends declared, accretion
of discounts on preferred stock including accelerated accretion when pre-
ferred stock is repaid early, and cumulative dividends related to the current
dividend period that have not been declared as of period end, less income
allocated to participating securities (see below for additional information).
Diluted earnings (loss) per common share is computed by dividing income
(loss) allocated to common shareholders by the weighted-average common
shares outstanding plus amounts representing the dilutive effect of stock
options outstanding, restricted stock, restricted stock units, outstanding
warrants and the dilution resulting from the conversion of convertible pre-
ferred stock, if applicable.

On January 1, 2009, the Corporation adopted new accounting guidance on
earnings per share that defines unvested share-based payment awards that
contain nonforfeitable rights to dividends as participating securities that are
included in computing EPS using the two-class method. The two-class method
is an earnings allocation formula under which EPS is calculated for common
stock and participating securities according to dividends declared and par-
ticipating rights in undistributed earnings. Under this method, all earnings,
distributed and undistributed, are allocated to participating securities and
common shares based on their respective rights to receive dividends.

In an exchange of non-convertible preferred stock, income allocated to
common shareholders is adjusted for the difference between the carrying
value of the preferred stock and the fair value of the common stock ex-
changed. In an induced conversion of convertible preferred stock, income
allocated to common shareholders is reduced by the excess of the fair value
of the common stock exchanged over the fair value of the common stock that
would have been issued under the original conversion terms.

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 pur-
poses, from the local currency to the U.S. dollar reporting currency at period-
end rates for assets and liabilities and generally at average rates for results of
operations. The resulting unrealized gains or losses as well as gains and
losses from certain hedges, are reported as a component of accumulated OCI
on an after-tax basis. When the foreign entity’s functional currency is deter-
mined to be the U.S. dollar, the resulting remeasurement currency gains or
losses on foreign currency-denominated assets or liabilities are included in
earnings.

Credit Card and Deposit Arrangements

Endorsing Organization Agreements
The Corporation contracts with other organizations to obtain their endorse-
ment of the Corporation’s loan and deposit products. This endorsement may
provide to 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 and deposit products and provide the Corpo-
ration with their mailing lists and marketing activities. These agreements
generally have terms that range from two to five years. The Corporation
typically pays royalties in exchange for the endorsement. Compensation
costs related to the credit card agreements are recorded as contra-revenue
in 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 lia-
bility based upon the points earned that are expected to be redeemed and the
average cost per point redeemed. 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 in card income.

Insurance Income and Insurance Expense
Property and casualty and credit life and disability premiums are generally
recognized over the term of the policies on a pro-rata basis for all policies
except for certain of the lender-placed auto insurance and the guaranteed
auto protection (GAP) policies. For lender-placed auto insurance, premiums
are recognized when collections become probable due to high cancellation
rates experienced early in the life of the policy. For GAP insurance, revenue
recognition is correlated to the exposure and accelerated over the life of the
contract. Mortgage reinsurance premiums are recognized as earned. Insur-
ance expense includes insurance claims, commissions and premium taxes,
all of which are recorded in other general operating expense.

NOTE 2 Merger and Restructuring Activity

Merrill Lynch
On January 1, 2009, the Corporation acquired Merrill Lynch through its merger
with a subsidiary of the Corporation in exchange for common and preferred
stock with a value of $29.1 billion. Under the terms of the merger agreement,
Merrill Lynch common shareholders received 0.8595 of a share of Bank of
America Corporation common stock in exchange for each share of Merrill
Lynch common stock. In addition, Merrill Lynch non-convertible preferred
shareholders received Bank of America Corporation preferred stock having
substantially identical terms. On October 15, 2010, the outstanding Merrill
Lynch convertible preferred stock automatically converted into Bank of Amer-
ica Corporation common stock in accordance with its terms.

The purchase price was allocated to the acquired assets and liabilities
based on their estimated fair values at the Merrill Lynch acquisition date as
summarized in the table below. Goodwill of $5.2 billion was calculated as the
purchase premium after adjusting for the fair value of net assets acquired. No
goodwill is deductible for federal income tax purposes. The goodwill was
allocated principally to the Global Wealth & Investment Management (GWIM)
and Global Banking & Markets (GBAM) business segments.

Merrill Lynch Purchase Price Allocation

(Dollars in billions, except per share amounts)

Purchase price
Merrill Lynch common shares exchanged (in millions)
Exchange ratio

The Corporation’s common shares issued (in millions)
Purchase price per share of the Corporation’s common stock (1)

Total value of the Corporation’s common stock and cash exchanged for fractional shares

Merrill Lynch preferred stock
Fair value of outstanding employee stock awards

Total purchase price

Allocation of the purchase price
Merrill Lynch stockholders’ equity
Merrill Lynch goodwill and intangible assets
Pre-tax adjustments to reflect acquired assets and liabilities at fair value:

Derivatives and securities
Loans
Intangible assets (2)
Other assets/liabilities
Long-term debt

Pre-tax total adjustments

Deferred income taxes

After-tax total adjustments

Fair value of net assets acquired

Goodwill resulting from the Merrill Lynch acquisition

1,600
0.8595

1,375
$ 14.08

$ 19.4
8.6
1.1

29.1

19.9
(2.6)

(2.1)
(6.1)
5.4
(0.7)
16.0

12.5
(5.9)

6.6

23.9

5.2

(1) The value of the shares of common stock exchanged with Merrill Lynch shareholders was based upon the closing price of the Corporation’s common stock at December 31, 2008, the last trading day prior to the date of acquisition.
(2) Consists of trade name of $1.5 billion and customer relationship and core deposit intangibles of $3.9 billion. The amortization life is 10 years for the customer relationship and core deposit intangibles which are primarily amortized on

a straight-line basis.

Bank of America 2010

155

Condensed Statement of Net Assets Acquired
The following condensed statement of net assets acquired reflects the values
assigned to Merrill Lynch’s net assets as of the acquisition date.

The table below presents severance and employee-related charges, sys-

tems integrations and related charges, and other merger-related charges.

(Dollars in billions)

Assets

Federal funds sold and securities borrowed or purchased under

January 1, 2009

agreements to resell
Trading account assets
Derivative assets
Investment securities
Loans and leases
Intangible assets
Other assets

Total assets

Liabilities

Deposits
Federal funds purchased and securities loaned or sold under

agreements to repurchase

Trading account liabilities
Derivative liabilities
Commercial paper and other short-term borrowings
Accrued expenses and other liabilities
Long-term debt

Total liabilities

Fair value of net assets acquired

$138.8
87.7
96.4
70.5
55.9
5.4
195.3

$650.0

$ 98.1

111.6
18.1
72.0
37.9
99.5
188.9

626.1

$ 23.9

Contingencies
The fair value of net assets acquired includes certain contingent liabilities that
were recorded as of the acquisition date. Merrill Lynch has been named as a
defendant in various pending legal actions and proceedings arising in con-
nection with its activities as a global diversified financial services institution.
Some of these legal actions and proceedings include claims for substantial
compensatory and/or punitive damages or claims for indeterminate amounts
of damages. Merrill Lynch is also involved in investigations and/or proceed-
ings by governmental and self-regulatory agencies. Due to the number of
variables and assumptions involved in assessing the possible outcome of
these legal actions, sufficient information did not exist as of the acquisition
date to reasonably estimate the fair value of these contingent liabilities. As
such, these contingences have been measured in accordance with applicable
accounting guidance which states that a loss is recognized when it is probable
of occurring and the loss amount can be reasonably estimated. For further
information, see Note 14 – Commitments and Contingencies.

Merger and Restructuring Charges and Reserves
Merger and restructuring charges are recorded in the Consolidated Statement
of Income and include incremental costs to integrate the operations of the
Corporation and its recent acquisitions. These charges represent costs
associated with these one-time activities and do not represent ongoing costs
of the fully integrated combined organization. On January 1, 2009, the
Corporation adopted new accounting guidance on business combinations,
on a prospective basis, that requires that acquisition-related transaction and
restructuring costs be charged to expense as incurred. Previously, these
expenses were recorded as an adjustment to goodwill.

(Dollars in millions)

Severance and employee-related charges
Systems integrations and related charges
Other

Total merger and restructuring charges

2010

2009

2008

$ 455
1,137
228

$1,351
1,155
215

$1,820

$2,721

$138
640
157

$935

Included for 2010 are merger-related charges of $1.6 billion related to the
Merrill Lynch acquisition and $202 million related to the July 1, 2008 acqui-
sition of Countrywide Financial Corporation (Countrywide). Included for 2009
are merger-related charges of $1.8 billion related to the Merrill Lynch acqui-
sition, $843 million related to the Countrywide acquisition and $97 million
related to earlier acquisitions. Included for 2008 are merger-related charges
of $205 million related to the Countrywide acquisition and $730 million
related to earlier acquisitions.

During 2010, $1.6 billion in merger-related charges for the Merrill Lynch
acquisition included $426 million for severance and other employee-related
costs, $975 million for systems integration costs and $217 million in other
merger-related costs. In 2009, the $1.8 billion in merger-related charges for
the Merrill Lynch acquisition included $1.2 billion for severance and other
employee-related costs, $480 million for systems integration costs and
$129 million in other merger-related costs.

The table below presents the changes in exit cost and restructuring
reserves for 2010 and 2009. Exit cost reserves were established in purchase
accounting resulting in an increase in goodwill. Restructuring reserves are
established by a charge to merger and restructuring charges, and the re-
structuring charges are included in the total merger and restructuring charges
in the table above. Exit costs were not recorded in purchase accounting for the
Merrill Lynch acquisition in accordance with new accounting guidance on
business combinations which was effective January 1, 2009.

(Dollars in millions)

Balance, January 1
Exit costs and restructuring charges:

Merrill Lynch
Countrywide
Other

Cash payments and other

Exit Cost
Reserves

Restructuring
Reserves

2010

2009

2010

2009

$112 $ 523 $ 403 $ 86

n/a
(18)
(9)
(70)

n/a
–
(24)
(387)

375
54
–
(496)

949
191
(6)
(817)

Balance, December 31

$ 15 $ 112 $ 336 $ 403

n/a = not applicable

At December 31, 2009, there were $403 million of restructuring reserves
related to the Merrill Lynch and Countrywide acquisitions for severance and
other employee-related costs. During 2010, $429 million was added to the
restructuring reserves related to severance and other employee-related costs
primarily associated with the Merrill Lynch acquisition. Cash payments and
other of $496 million during 2010 were related to severance and other
employee-related costs primarily associated with the Merrill Lynch acquisition.
Payments associated with the Countrywide acquisition are expected to con-
tinue into 2011, while Merrill Lynch related payments are anticipated to
continue into 2012. At December 31, 2010, restructuring reserves of
$336 million related principally to Merrill Lynch.

156

Bank of America 2010

NOTE 3 Trading Account Assets and Liabilities
The table below presents the components of trading account assets and liabilities at December 31, 2010 and 2009.

(Dollars in millions)

Trading account assets

U.S. government and agency securities (1)
Corporate securities, trading loans and other
Equity securities
Non-U.S. sovereign debt
Mortgage trading loans and asset-backed securities

Total trading account assets

Trading account liabilities

U.S. government and agency securities
Equity securities
Non-U.S. sovereign debt
Corporate securities and other

Total trading account liabilities

December 31

2010

2009

$ 60,811
49,352
32,129
33,523
18,856

$194,671

$ 29,340
15,482
15,813
11,350

$ 71,985

$ 44,585
57,009
33,562
28,143
18,907

$182,206

$ 26,519
18,407
12,897
7,609

$ 65,432

(1)

Includes $29.7 billion and $23.5 billion at December 31, 2010 and 2009 of GSE obligations.

NOTE 4 Derivatives
Derivative Balances
Derivatives are entered into on behalf of customers, for trading, as economic
hedges or as qualifying accounting hedges. The Corporation enters into
derivatives to facilitate client transactions, for principal trading purposes
and to manage risk exposures. For additional information on the Corporation’s
derivatives and hedging activities, see Note 1 – Summary of Significant

Accounting Principles. The table below identifies derivative instruments in-
cluded on the Corporation’s Consolidated Balance Sheet in derivative assets
and liabilities at December 31, 2010 and 2009. Balances are presented on a
gross basis, prior to the application of counterparty and collateral netting.
Total derivative assets and liabilities are adjusted on an aggregate basis to
take into consideration the effects of legally enforceable master netting
agreements and have been reduced by the cash collateral applied.

(Dollars in billions)

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

Purchased credit derivatives:
Credit default swaps
Total return swaps/other

Written credit derivatives:
Credit default swaps
Total return swaps/other

Gross derivative assets/liabilities

Less: Legally enforceable master netting agreements
Less: Cash collateral applied

Total derivative assets/liabilities

(1) Represents the total contract/notional amount of derivative assets and liabilities outstanding.
(2) Excludes $4.1 billion of long-term debt designated as a hedge of foreign currency risk.

Contract/
Notional (1)

$42,719.2
9.939.2
2,887.7
3,026.2

630.1
2,652.9
439.6
417.1

42.4
78.8
242.7
193.5

90.2
413.7
86.3
84.6

2,184.7
26.0

2,133.5
22.5

December 31, 2010

Gross Derivative Assets

Gross Derivative Liabilities

Trading
Derivatives
and
Economic
Hedges

$1,193.9
6.0
–
88.0

Qualifying
Accounting
Hedges (2)

Total

$14.9
–
–
–

$ 1,208.8
6.0
–
88.0

Trading
Derivatives
and
Economic
Hedges

$1,187.9
4.7
82.8
–

26.5
41.3
–
13.0

1.7
2.9
–
21.5

8.8
4.1
–
6.6

69.8
0.9

3.7
–
–
–

–
–
–
–

0.2
–
–
–

–
–

30.2
41.3
–
13.0

1.7
2.9
–
21.5

9.0
4.1
–
6.6

69.8
0.9

28.5
44.2
13.2
–

2.0
2.1
19.4
–

9.3
2.8
6.7
–

34.0
0.2

Qualifying
Accounting
Hedges (2)

$2.2
–
–
–

2.1
–
–
–

–
–
–
–

–
–

33.3
0.5
$1,518.8

–
–
$18.8

33.3
0.5
$ 1,537.6
(1,406.3)
(58.3)

73.0

63.2
0.5
$1,501.5

–
–
$4.3

Total

$ 1,190.1
4.7
82.8
–

30.6
44.2
13.2
–

2.0
2.1
19.4
–

9.3
2.8
6.7
–

34.0
0.2

63.2
0.5
$ 1,505.8
(1,406.3)
(43.6)

55.9

Bank of America 2010

157

December 31, 2009

Gross Derivative Assets

Gross Derivative Liabilities

Trading
Derivatives
and
Economic
Hedges

Contract/
Notional (1)

Qualifying
Accounting
Hedges (2)

Total

$45,261.5
11,842.1
2,865.5
2,626.7

$1,121.3
7.1
–
84.1

$ 5.6
–
–
–

$ 1,126.9
7.1
–
84.1

Trading
Derivatives
and
Economic
Hedges

$1,105.0
6.1
84.1
–

Qualifying
Accounting
Hedges (2)

Total

$0.8
–
–
–

$ 1,105.8
6.1
84.1
–

661.9
1,750.8
383.6
355.3

58.5
79.0
283.4
273.7

65.3
387.8
54.9
50.9

2,800.5
21.7

2,788.8
33.1

23.7
24.6
–
12.7

2.0
3.0
–
27.3

6.9
10.4
–
7.6

105.5
1.5

44.1
1.8

4.6
0.3
–
–

–
–
–
–

0.1
–
–
–

–
–

$1,483.6

$10.6

28.3
24.9
–
12.7

2.0
3.0
–
27.3

7.0
10.4
–
7.6

105.5
1.5

44.1
1.8

$ 1,494.2
(1,355.1)
(51.5)

87.6

27.3
25.6
13.0
–

2.0
2.2
25.1
–

6.8
9.6
7.9
–

45.2
0.4

98.4
1.1

0.5
0.1
–
–

–
–
0.4
–

–
–
–
–

–
–

27.8
25.7
13.0
–

2.0
2.2
25.5
–

6.8
9.6
7.9
–

45.2
0.4

98.4
1.1

$1,459.8

$1.8

$ 1,461.6
(1,355.1)
(55.8)

50.7

settlement contracts and euro-dollar futures as economic hedges of the fair
value of MSRs. For additional information on MSRs, see Note 25 – Mortgage
Servicing Rights.

The Corporation uses foreign currency contracts to manage the foreign
exchange risk associated with certain foreign currency-denominated assets
and liabilities, as well as the Corporation’s investments in non-U.S. subsid-
iaries. 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 de-
crease over their respective lives as currency exchange and interest rates
fluctuate.

The Corporation enters into derivative commodity contracts such as
futures, swaps, options and forwards as well as non-derivative commodity
contracts to provide price risk management services to customers or to
manage price risk associated with its physical and financial commodity
positions. The non-derivative commodity contracts and physical inventories
of commodities expose the Corporation to earnings volatility. Cash flow and
fair value accounting hedges provide a method to mitigate a portion of this
earnings volatility.

The Corporation purchases credit derivatives to manage credit risk related
to certain funded and unfunded credit exposures. Credit derivatives include
credit default swaps, total return swaps and swaptions. These derivatives are

(Dollars in billions)

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

Purchased credit derivatives:
Credit default swaps
Total return swaps/other

Written credit derivatives:
Credit default swaps
Total return swaps/other

Gross derivative assets/liabilities
Less: Legally enforceable master netting agreements
Less: Cash collateral applied

Total derivative assets/liabilities

(1) Represents the total contract/notional amount of derivative assets and liabilities outstanding.
(2) Excludes $4.4 billion of long-term debt designated as a hedge of foreign currency risk.

ALM and Risk Management Derivatives
The Corporation’s ALM and risk management activities include the use of
derivatives to mitigate risk to the Corporation including both derivatives that
are designated as hedging instruments and economic hedges. Interest rate,
commodity, credit and foreign exchange contracts are utilized in the Corpo-
ration’s ALM and risk management activities.
The Corporation maintains an overall

interest rate risk management
strategy that incorporates the use of interest rate contracts, which are
generally non-leveraged generic interest rate and basis swaps, options,
futures, and forwards, 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 signifi-
cantly adversely affect earnings. As a result of interest rate fluctuations,
hedged fixed-rate assets and liabilities appreciate or depreciate in fair 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 rate and market risk can be substantial in the mortgage business.
Market risk is the risk that values of mortgage assets or revenues will be
adversely affected by changes in market conditions such as interest rate
movements. To hedge interest rate risk in mortgage banking production
income, the Corporation utilizes forward loan sale commitments and other
derivative instruments including purchased options. The Corporation also
utilizes derivatives such as interest rate options, interest rate swaps, forward

158

Bank of America 2010

accounted for as economic hedges and changes in fair value are recorded in
other income (loss).

Derivatives Designated as Accounting Hedges
The Corporation uses various types of interest rate, commodity and foreign
exchange derivative contracts to protect against changes in the fair value of
its assets and liabilities due to fluctuations in interest rates, exchange rates
and commodity prices (fair value hedges). The Corporation also uses these

types of contracts and equity derivatives to protect against changes in the
cash flows of its assets and liabilities, and other forecasted transactions
(cash flow hedges). The Corporation hedges its net investment in consoli-
dated non-U.S. operations determined to have functional currencies other
than the U.S. dollar using forward exchange contracts, cross-currency basis
swaps, and by issuing foreign currency-denominated debt (net investment
hedges).

Fair Value Hedges
The table below summarizes certain information related to the Corporation’s derivatives designated as fair value hedges for 2010, 2009 and 2008.

(Dollars in millions)

Derivatives designated as fair value hedges
Interest rate risk on long-term debt (1)
Interest rate and foreign currency risk on long-term debt (1)
Interest rate risk on available-for-sale securities (2, 3)
Commodity price risk on commodity inventory (4)

Total

2010

Derivative

Hedged
Item

Hedge
Ineffectiveness

$ 2,952
(463)
(2,577)
19

$(3,496)
130
2,667
(19)

(69)

$ (718)

2009

$(4,858)
932
791
(51)

$ 4,082
(858)
(1,141)
51

$(3,186)

$ 2,134

2008

$ 4,340
294
32

$(4,143)
(444)
(51)

$ 4,666

$(4,638)

$ (544)
(333)
90
–

$ (787)

$ (776)
74
(350)
–

$(1,052)

$ 197
(150)
(19)

(1) Amounts are recorded in interest expense on long-term debt.
(2) Amounts are recorded in interest income on AFS securities.
(3) Measurement of ineffectiveness in 2010 includes $7 million compared to $354 million in 2009 of interest costs on short forward contracts. The Corporation considers this as part of the cost of hedging and it is offset by the fixed

coupon receipt on the AFS security that is recognized in interest income on securities.

(4) Amounts are recorded in trading account profits.

Bank of America 2010

159

Cash Flow Hedges
The table below summarizes certain information related to the Corporation’s
derivatives designated as cash flow hedges and net investment hedges for
2010, 2009 and 2008. During the next 12 months, net losses in accumu-
lated OCI of approximately $1.8 billion ($1.1 billion after-tax) on derivative
instruments that qualify as cash flow hedges are expected to be reclassified
into earnings. These net losses reclassified into earnings are expected to
primarily reduce net interest income related to the respective hedged items.
Amounts related to interest rate risk on variable rate portfolios reclassi-
fied from accumulated OCI increased interest income on assets by $144 mil-
lion in 2010, reduced interest income on assets by $189 million and
$156 million in 2009 and 2008 and increased interest expense on liabilities
by $554 million, $1.1 billion and $1.1 billion in 2010, 2009 and 2008,
respectively. Amounts reclassified from accumulated OCI exclude amounts
related to derivative interest accruals which increased interest expense by
$88 million and increased interest income by $160 million for 2010 and

2009, and increased interest expense by $73 million for 2008. Hedge
ineffectiveness of $(14) million, $73 million and $(11) million was recorded
in interest income, and $(16) million, $(2) million and $4 million was recorded
in interest expense in 2010, 2009 and 2008.

Amounts related to commodity price risk reclassified from accumulated
OCI are recorded in trading account profits (losses) with the underlying hedged
item. Amounts related to price risk on restricted stock awards reclassified
from accumulated OCI are recorded in personnel expense. Amounts related to
price risk on equity investments included in AFS securities reclassified from
accumulated OCI are recorded in equity investment income with the underlying
hedged item.

Amounts related to foreign exchange risk recognized in accumulated OCI
on derivatives exclude gains of $192 million related to long-term debt des-
ignated as a net investment hedge for 2010 compared to losses of $387 mil-
lion for 2009 and $0 for 2008.

(Dollars in millions, amounts pre-tax)

Derivatives designated as cash flow hedges
Interest rate risk on variable rate portfolios
Commodity price risk on forecasted purchases and sales
Price risk on restricted stock awards
Price risk on equity investments included in available-for-sale securities

Total

Net investment hedges
Foreign exchange risk

Derivatives designated as cash flow hedges
Interest rate risk on variable rate portfolios
Commodity price risk on forecasted purchases and sales
Price risk on equity investments included in available-for-sale securities

Total

Net investment hedges
Foreign exchange risk

Derivatives designated as cash flow hedges
Interest rate risk on variable rate portfolios
Price risk on equity investments included in available-for-sale securities

Total

Net investment hedges
Foreign exchange risk

2010

Gains (losses)
Recognized in
Accumulated OCI
on Derivatives

Gains (losses)
in Income
Reclassified from
Accumulated OCI

Hedge
Ineffectiveness and
Amounts Excluded
from Effectiveness
Testing (1, 2)

$(1,876)
32
(97)
186

$(1,755)

$ (410)
25
(33)
(226)

$ (644)

$ (482)

–

2009

$(1,293)
70
–

$(1,223)

$ 502
72
(332)

$ 242

$(2,997)

–

2008

$(1,266)
–

$(1,266)

(13)
243

$ 230

$ 2,814

–

$ (30)
11
–
–

$ (19)

$(315)

$ 71
(2)
–

$ 69

$(142)

$ (7)
–

$ (7)

$(192)

(1) Gains (losses).
(2) Amounts related to derivatives designated as cash flow hedges represent hedge ineffectiveness and amounts related to net investment hedges represent amounts excluded from effectiveness testing.

160

Bank of America 2010

The Corporation entered into equity total return swaps to hedge a portion
of cash-settled restricted stock units (RSUs) granted to certain employees in
February 2010 as part of their 2009 compensation. These cash-settled RSUs
are accrued as liabilities over the vesting period and adjusted to fair value
based on changes in the share price of the Corporation’s common stock. From
time to time, the Corporation may enter into equity derivatives to minimize the
change in the expense to the Corporation driven by fluctuations in the share
price of the Corporation’s common stock during the vesting period of any
RSUs that may be granted from time to time, if any, subject to similar or other
terms and conditions. Certain of these derivatives are designated as cash
flow hedges of unrecognized non-vested awards with the changes in fair value
of the hedge recorded in accumulated OCI and reclassified into earnings in the

same period as the RSUs affect earnings. The remaining derivatives are
accounted for as economic hedges and changes in fair value are recorded in
personnel expense. For more information on restricted stock units and related
hedges, see Note 20 – Stock-Based Compensation Plans.

Economic Hedges
Derivatives designated as economic hedges, because either they did not
qualify for or were not designated as accounting hedges, are used by the
Corporation to reduce certain risk exposures. The table below presents gains
(losses) on these derivatives for 2010, 2009 and 2008. These gains (losses)
are largely offset by the income or expense that is recorded on the econom-
ically hedged item.

(Dollars in millions)
Price risk on mortgage banking production income (1, 2)
Interest rate risk on mortgage banking servicing income (1)
Credit risk on loans (3)
Interest rate and foreign currency risk on long-term debt and other foreign exchange transactions (4)
Other (5)
Total

2010

2009

2008

$ 9,109
3,878
(119)
(2,080)
(109)

$ 8,898
(4,264)
(698)
1,572
16

$ 892
8,052
309
(1,316)
34

$10,679

$ 5,524

$ 7,971

(1) Gains (losses) on these derivatives are recorded in mortgage banking income.
(2)

Includes gains on interest rate lock commitments related to the origination of mortgage loans that are held-for-sale, which are considered derivative instruments, of $8.7 billion, $8.4 billion and $1.6 billion for 2010, 2009 and 2008,
respectively.

(3) Gains (losses) on these derivatives are recorded in other income (loss).
(4) The majority of the balance is related to the revaluation of economic hedges on foreign currency-denominated debt which is recorded in other income (loss).
(5) Gains (losses) on these derivatives are recorded in other income (loss), and for 2010, also in personnel expense for hedges of certain RSUs.

Bank of America 2010

161

Sales and Trading Revenue
The Corporation enters into trading derivatives to facilitate client transactions,
for principal trading purposes, and to manage risk exposures arising from
trading account assets and liabilities. It is the Corporation’s policy to include
these derivative instruments in its trading activities which include derivatives
and non-derivative cash instruments. The resulting risk from these derivatives
is managed on a portfolio basis as part of the Corporation’s GBAM business
segment. The related sales and trading revenue generated within GBAM is

recorded on various income statement line items including trading account
profits (losses) and net interest income as well as other revenue categories.
However, the vast majority of income related to derivative instruments is
recorded in trading account profits (losses). The table below identifies the
amounts in the respective income statement line items attributable to the
Corporation’s sales and trading revenue categorized by primary risk for 2010,
2009 and 2008.

(Dollars in millions)

Interest rate risk
Foreign exchange risk
Equity risk
Credit risk
Other risk

Total sales and trading revenue

Interest rate risk
Foreign exchange risk
Equity risk
Credit risk
Other risk

Total sales and trading revenue

Interest rate risk
Foreign exchange risk
Equity risk
Credit risk
Other risk

Total sales and trading revenue

Trading
Account
Profits
(Losses)

$ 2,004
903
1,670
4,791
228

$ 9,596

$ 3,145
972
2,041
4,433
1,084

$11,675

$ 1,083
1,320
(66)
(8,276)
130

$ (5,809)

2010

Other
Revenues (1)

Net Interest
Income

$ 113
3
2,506
617
39

$ 3,278

2009

33
6
2,613
(2,576)
13

2008

47
6
686
(6,881)
58

Total

$ 2,741
906
4,197
9,060
125

$ 624
–
21
3,652
(142)

$4,155

$ 17,029

$1,068
26
246
4,637
(469)

$ 4,246
1,004
4,900
6,494
628

$5,508

$ 17,272

$ 276
13
99
4,380
(14)

$ 1,406
1,339
719
(10,777)
174

$(6,084)

$4,754

$ (7,139)

(1) Represents investment and brokerage services and other income recorded in GBAM that the Corporation includes in its definition of sales and trading revenue.

Credit Derivatives
The Corporation enters into credit derivatives primarily to facilitate client
transactions and to manage credit risk exposures. Credit derivatives derive
value based on an underlying third party-referenced obligation or a portfolio of
referenced obligations and generally require the Corporation as the seller of
credit protection to make payments to a buyer upon the occurrence of a
predefined credit event. Such credit events generally include bankruptcy of the

referenced credit entity and failure to pay under the obligation, as well as
acceleration of indebtedness and payment repudiation or moratorium. For
credit derivatives based on a portfolio of referenced credits or credit indices,
the Corporation may not be required to make payment until a specified
amount of loss has occurred and/or may only be required to make payment
up to a specified amount.

162

Bank of America 2010

Credit derivative instruments in which the Corporation is the seller of credit
protection and their expiration at December 31, 2010 and 2009 are sum-
marized below. These instruments are classified as investment and non-

investment grade based on the credit quality of the underlying reference
obligation. The Corporation considers ratings of BBB- or higher as investment-
grade. Non-investment grade includes non-rated credit derivative instruments.

(Dollars in millions)

Credit default swaps:
Investment grade
Non-investment grade

Total

Total return swaps/other:
Investment grade
Non-investment grade

Total

Total credit derivatives

Credit-related notes: (1)
Investment grade
Non-investment grade

Total credit-related notes

Credit default swaps:
Investment grade
Non-investment grade

Total

Total return swaps/other:
Investment grade
Non-investment grade

Total

Total credit derivatives

(Dollars in millions)

Credit default swaps:
Investment grade
Non-investment grade

Total

Total return swaps/other:
Investment grade
Non-investment grade

Total

Total credit derivatives

Credit default swaps:
Investment grade
Non-investment grade

Total

Total return swaps/other:
Investment grade
Non-investment grade

Total

Total credit derivatives

(1) Maximum payout/notional for credit-related notes is the same as these amounts.

December 31, 2010

Carrying Value

Less than
One Year

One to
Three Years

Three to
Five Years

Over Five
Years

158
598

756

–
1

$ 2,607
6,630

$ 7,331
7,854

$ 14,880
23,106

9,237

15,185

37,986

–
2

38
2

60
415

475

Total

24,976
38,188

63,164

98
420

518

757

$ 9,239

$ 15,225

$ 38,461

63,682

–
9

136
33

169

–
174

174

949
2,315

$ 3,264

1,085
2,531

3,616

Maximum Payout/Notional

$133,691
84,851

$466,565
314,422

$475,715
178,880

$275,434
203,930

$1,351,405
782,083

218,542

780,987

654,595

479,364

2,133,488

–
113

113

10
78

15,413
951

16,364

4,012
1,897

5,909

19,435
3,039

22,474

$218,655

$781,075

$670,959

$485,273

$2,155,962

December 31, 2009

Carrying Value

Less than
One Year

One to
Three Years

Three to
Five Years

Over Five
Years

454
1,342

1,796

$ 5,795
14,012

$ 5,831
16,081

$ 24,586
30,274

19,807

21,912

54,860

1
–

20
194

214

5
3

540
291

831

Total

36,666
61,709

98,375

566
488

1,054

$ 1,797

$ 20,021

$ 21,920

$ 55,691

99,429

Maximum Payout/Notional

$147,501
123,907

$411,258
417,834

$596,103
399,896

$335,526
356,735

$1,490,388
1,298,372

271,408

829,092

995,999

692,261

2,788,760

31
2,035

2,066

60
1,280

1,340

1,081
2,183

3,264

8,087
18,352

26,439

9,259
23,850

33,109

$273,474

$830,432

$999,263

$718,700

$2,821,869

Bank of America 2010

163

The notional amount represents the maximum amount payable by the
Corporation for most credit derivatives. However, the Corporation does not
solely monitor its exposure to credit derivatives based on notional amount
because this measure does not take into consideration the probability of
occurrence. As such, the notional amount is not a reliable indicator of the
Corporation’s exposure to these contracts. Instead, a risk framework is used
to define risk tolerances and establish limits to help ensure that certain credit
risk-related losses occur within acceptable, predefined limits.

The Corporation economically hedges its market risk exposure to credit
derivatives by entering into a variety of offsetting derivative contracts and
security positions. For example, in certain instances, the Corporation may
purchase credit protection with identical underlying referenced names to
offset its exposure. The carrying amount and notional amount of written
credit derivatives for which the Corporation held purchased credit derivatives
with identical underlying referenced names and terms at December 31, 2010
was $43.7 billion and $1.4 trillion compared to $79.4 billion and $2.3 trillion
at December 31, 2009.

Credit-related notes in the table on page 163 include investments in
securities issued by CDOs, CLOs and credit-linked note vehicles. These
instruments are classified as trading securities. The carrying value of these
instruments equals the Corporation’s maximum exposure to loss. The Cor-
poration is not obligated to make any payments to the entities under the
terms of the securities owned. The Corporation discloses internal categori-
zations (i.e., investment-grade, non-investment grade) consistent with how
risk is managed for these instruments.

Credit Risk Management of Derivatives and
Credit-related Contingent Features
The Corporation executes the majority of its derivative contracts in the
over-the-counter market with large, international financial institutions, includ-
ing broker/dealers and, to a lesser degree, with a variety of non-financial
companies. Substantially all of the derivative transactions are executed on a
daily margin basis. Therefore, events such as a credit ratings downgrade
(depending on the ultimate rating level) or a breach of credit covenants would
typically require an increase in the amount of collateral required of the
counterparty, where applicable, and/or allow the Corporation to take addi-
tional protective measures such as early termination of all trades. Further, as
previously described on page 157, the Corporation enters into legally en-
forceable master netting agreements which reduce risk by permitting the
closeout and netting of transactions with the same counterparty upon the
occurrence of certain events.

Substantially all of the Corporation’s derivative contracts contain credit
risk-related contingent features, primarily in the form of International Swaps
and Derivatives Association, Inc. (ISDA) master agreements that enhance the
creditworthiness of these instruments compared to other obligations of the

respective counterparty with whom the Corporation has transacted (e.g.,
other debt or equity). These contingent features may be for the benefit of
the Corporation as well as its counterparties with respect to changes in the
Corporation’s creditworthiness. At December 31, 2010 and 2009, the Cor-
poration held cash and securities collateral of $76.0 billion and $67.7 billion,
and posted cash and securities collateral of $61.2 billion and $62.2 billion in
the normal course of business under derivative agreements.

In connection with certain over-the-counter derivative contracts and other
trading agreements, the Corporation could be required to provide additional
collateral or to terminate transactions with certain counterparties in the event
of a downgrade of the senior debt ratings of Bank of America Corporation and
its subsidiaries. The amount of additional collateral required depends on the
contract and is usually a fixed incremental amount and/or the market value of
the exposure. At December 31, 2010 and 2009, the amount of additional
collateral and termination payments that would have been required for such
derivatives and trading agreements was approximately $1.2 billion and
$2.1 billion if the long-term credit rating of the Corporation was incrementally
downgraded by one level by all ratings agencies. At December 31, 2010 and
2009, a second incremental one level downgrade by the ratings agencies
would have required approximately $1.1 billion and $1.2 billion in additional
collateral and termination payments.

The Corporation records counterparty credit risk valuation adjustments on
derivative assets in order to properly reflect the credit quality of the counter-
party. These adjustments are necessary as the market quotes on derivatives
do not fully reflect the credit risk of the counterparties to the derivative assets.
The Corporation considers collateral and legally enforceable master netting
agreements that mitigate its credit exposure to each counterparty in deter-
mining the counterparty credit risk valuation adjustment. All or a portion of
these counterparty credit risk valuation adjustments can be reversed or
otherwise adjusted in future periods due to changes in the value of the
derivative contract, collateral and creditworthiness of the counterparty. During
2010 and 2009, credit valuation gains (losses) of $731 million and $3.1 bil-
lion ($(8) million and $1.7 billion, net of hedges) for counterparty credit risk
related to derivative assets were recognized in trading account profits
(losses). At December 31, 2010 and 2009, the cumulative counterparty
credit risk valuation adjustment reduced the derivative assets balance by
$6.8 billion and $7.9 billion.

In addition, the fair value of the Corporation’s or its subsidiaries’ derivative
liabilities is adjusted to reflect the impact of the Corporation’s credit quality.
During 2010 and 2009, credit valuation gains (losses) of $331 million and
$(662) million ($262 million and $(662) million, net of hedges) were recog-
nized in trading account profits (losses) for changes in the Corporation’s or its
subsidiaries’ credit risk. At December 31, 2010 and 2009, the Corporation’s
cumulative credit risk valuation adjustment reduced the derivative liabilities
balance by $1.1 billion and $732 million.

164

Bank of America 2010

NOTE 5 Securities
The table below presents the amortized cost, gross unrealized gains and losses in accumulated OCI, and fair value of AFS debt and marketable equity securities
at December 31, 2010 and 2009.

(Dollars in millions)

Available-for-sale debt securities, December 31, 2010

U.S. Treasury and agency securities
Mortgage-backed securities:

Agency
Agency collateralized mortgage obligations
Non-agency residential (1)
Non-agency commercial

Non-U.S. securities
Corporate bonds
Other taxable securities, substantially all ABS

Total taxable securities

Tax-exempt securities

Total available-for-sale debt securities

Held-to-maturity debt securities

Total debt securities

Available-for-sale marketable equity securities (2)

Available-for-sale debt securities, December 31, 2009

U.S. Treasury and agency securities
Mortgage-backed securities:

Agency
Agency collateralized mortgage obligations
Non-agency residential (1)
Non-agency commercial

Non-U.S. securities
Corporate bonds
Other taxable securities, substantially all ABS

Total taxable securities

Tax-exempt securities

Total available-for-sale debt securities

Held-to-maturity debt securities

Total debt securities

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair Value

$ 49,413

604

$ (912) $ 49,105

190,409
36,639
23,458
6,167
4,054
5,157
15,514

330,811
5,687

3,048
401
588
686
92
144
39

5,602
32

(2,240)
(23)
(929)
(1)
(7)
(10)
(161)

(4,283)
(222)

191,217
37,017
23,117
6,852
4,139
5,291
15,392

332,130
5,497

$336,498

$ 5,634

$(4,505) $337,627

427

–

427

$336,925

$ 5,634

$(4,505) $338,054

8,650

$10,628

$ 22,648

414

(13) $ 19,265

(37) $ 23,025

164,677
25,330
37,940
6,354
4,732
6,136
25,469

293,286
9,340

2,415
464
1,191
671
61
182
260

5,658
100

(846)
(13)
(4,028)
(116)
(896)
(126)
(478)

(6,540)
(243)

166,246
25,781
35,103
6,909
3,897
6,192
25,251

292,404
9,197

$302,626

$ 5,758

$(6,783) $301,601

9,800

–

(100)

9,700

$312,426

$ 5,758

$(6,883) $311,301

Available-for-sale marketable equity securities (2)
(1) At December 31, 2010, includes approximately 90 percent prime bonds, eight percent Alt-A bonds and two percent subprime bonds. At December 31, 2009, includes approximately 85 percent prime bonds, 10 percent Alt-A bonds and

$ (507) $ 9,408

$ 6,020

$ 3,895

five percent subprime bonds.

(2) Classified in other assets on the Corporation’s Consolidated Balance Sheet.

At December 31, 2010, the accumulated net unrealized gains on AFS debt
securities included in accumulated OCI were $714 million, net of the related
income tax expense of $415 million. At December 31, 2010 and 2009, the
Corporation had nonperforming AFS debt securities of $44 million and
$467 million.

At December 31, 2010, both the amortized cost and fair value of HTM
debt securities were $427 million. At December 31, 2009, the amortized cost
and fair value of HTM debt securities were $9.8 billion and $9.7 billion, which
included ABS that were issued by the Corporation’s credit card securitization
trust and retained by the Corporation with an amortized cost of $6.6 billion

and a fair value of $6.4 billion. As a result of the adoption of new consolidation
guidance, the Corporation consolidated the credit card securitization trusts on
January 1, 2010 and the ABS were eliminated in consolidation and the related
consumer credit card loans were included in loans and leases on the
Corporation’s Consolidated Balance Sheet. Additionally, during the three
months ended June 30, 2010, $2.9 billion of debt securities held in consol-
idated commercial paper conduits was reclassified from HTM to AFS as a
result of new regulatory capital requirements related to asset-backed com-
mercial paper conduits.

Bank of America 2010

165

The Corporation recorded OTTI losses on AFS debt securities as presented
in the table below in 2010 and 2009. Upon initial impairment of a security,
total OTTI losses represent the excess of the amortized cost over the fair
value. For subsequent impairments of the same security, total OTTI losses
represent additional declines in fair value subsequent to the previously
recorded OTTI loss(es), if applicable. Unrealized OTTI losses recognized in
accumulated OCI represent the non-credit component of OTTI losses on AFS

debt securities. Net impairment losses recognized in earnings represent the
credit component of OTTI losses on AFS debt securities. In 2010, for certain
securities, the Corporation recognized credit losses in excess of unrealized
losses in accumulated OCI. In these instances, a portion of the credit losses
recognized in earnings has been offset by an unrealized gain. Balances in the
table exclude $51 million and $582 million of gross gains recorded in
accumulated OCI related to these securities for 2010 and 2009.

(Dollars in millions)

Total OTTI losses (unrealized and realized)
Unrealized OTTI losses recognized in accumulated OCI

Net impairment losses recognized in earnings

Total OTTI losses (unrealized and realized)
Unrealized OTTI losses recognized in accumulated OCI

Net impairment losses recognized in earnings

2010

Non-agency
Residential
MBS

Non-agency
Commercial
MBS

Non-U.S.
Securities

Corporate
Bonds

$(1,305)
817

$ (488)

$(2,240)
672

$(1,568)

$(19)
15

$ (4)

$ (6)
–

$ (6)

$(276)
16

$(260)

2009

$(360)
–

$(360)

$ (6)
2

$ (4)

$(87)
–

$(87)

Other
Taxable
Securities

Total

$(568) $(2,174)
1,207

357

$(211) $ (967)

$(815) $(3,508)
672

–

$(815) $(2,836)

The table below presents activity for 2010 and 2009 related to the credit
component recognized in earnings on debt securities held by the Corporation
for which a portion of the OTTI loss remains in accumulated OCI. At Decem-
ber 31, 2010, those debt securities with OTTI for which a portion of the OTTI
loss remains in accumulated OCI primarily consisted of non-agency residential
mortgage-backed securities (RMBS) and CDOs.

(Dollars in millions)

Balance, January 1
Credit component of other-than-temporary impairment not

2010

$ 442

2009

–

reclassified to accumulated OCI in connection with the cumulative
effect transition adjustment (1)

–

Additions for the credit component on debt securities on which
other-than-temporary impairment losses were not previously
recognized (2)

Additions for the credit component on debt securities on which
other-than-temporary impairment losses were previously
recognized (2)

Balance, December 31

207

420

406

–

$1,055

$442

(1) On January 1, 2009, the Corporation had securities with $134 million of OTTI previously recognized in earnings
of which $22 million represented the credit component and $112 million represented the non-credit component
which was reclassified to accumulated OCI through a cumulative effect transition adjustment.
In 2010 and 2009, the Corporation recognized $354 million and $2.4 billion of OTTI losses on debt securities
on which no portion of OTTI loss remained in accumulated OCI. OTTI losses related to these securities are
excluded from these amounts.

(2)

The Corporation estimates the portion of loss attributable to credit using a
discounted cash flow model and estimates the expected cash flows of the
underlying collateral using internal credit, interest rate and prepayment risk
models that incorporate management’s best estimate of current key assump-
tions such as default rates, loss severity and prepayment rates. Assumptions

used can vary widely from loan to loan and are influenced by such factors as
loan interest rate, geographical location of the borrower, borrower character-
istics and collateral type. The Corporation then uses a third-party vendor to
determine how the underlying collateral cash flows will be distributed to each
security issued from the structure. Expected principal and interest cash flows
on an impaired debt security are discounted using the book yield of each
individual impaired debt security.

Based on the expected cash flows derived from the applicable model, the
Corporation expects to recover the unrealized losses in accumulated OCI on
non-agency RMBS. Annual constant prepayment speed and loss severity rates
are projected considering collateral characteristics such as LTV, creditworthi-
ness of borrowers (FICO) and geographic concentrations. The weighted-aver-
age severity by collateral type was 41 percent for prime bonds, 48 percent for
Alt-A bonds and 53 percent for subprime bonds. Additionally, default rates are
projected by considering collateral characteristics including, but not limited to
LTV, FICO and geographic concentration. Weighted-average life default rates by
collateral type were 38 percent for prime bonds, 58 percent for Alt-A bonds
and 62 percent for subprime bonds.

Significant assumptions used in the valuation of non-agency RMBS at

December 31, 2010 are presented in the table below.

Prepayment speed
Loss severity
Life default rate

Range (1)

Weighted-average

10th Percentile (2)

90th Percentile (2)

12.6%
46.2
49.1

3.0%

17.7
2.2

27.1%
57.9
99.1

(1) Represents the range of inputs/assumptions based upon the underlying collateral.
(2) The value of a variable below which the indicated percentile of observations will fall.

166

Bank of America 2010

The table below presents the current fair value and the associated gross unrealized losses on investments in securities with gross unrealized losses at
December 31, 2010 and 2009, and whether these securities have had gross unrealized losses for less than twelve months or for twelve months or longer.

(Dollars in millions)

Temporarily-impaired available-for-sale debt securities at December 31, 2010

U.S. Treasury and agency securities
Mortgage-backed securities:

Agency
Agency collateralized mortgage obligations
Non-agency residential
Non-agency commercial

Non-U.S. securities
Corporate bonds
Other taxable securities

Total taxable securities

Tax-exempt securities

Total temporarily-impaired available-for-sale debt securities
Temporarily-impaired available-for-sale marketable equity securities

Total temporarily-impaired available-for-sale securities
Other-than-temporarily impaired available-for-sale debt securities (1)

Mortgage-backed securities:
Non-agency residential

Other taxable securities
Tax-exempt securities

Total temporarily-impaired and other-than-temporarily impaired available-for-sale

securities (2)

Temporarily-impaired available-for-sale debt securities at December 31, 2009

U.S. Treasury and agency securities
Mortgage-backed securities:

Agency
Agency collateralized mortgage obligations
Non-agency residential
Non-agency commercial

Non-U.S. securities
Corporate bonds
Other taxable securities

Total taxable securities

Tax-exempt securities

Total temporarily-impaired available-for-sale debt securities
Temporarily-impaired available-for-sale marketable equity securities

Total temporarily-impaired available-for-sale securities
Other-than-temporarily impaired available-for-sale debt securities (1)

Mortgage-backed securities:
Non-agency residential

Less than Twelve Months

Twelve Months or Longer

Gross
Unrealized
Losses

Fair Value

Gross
Unrealized
Losses

Fair Value

Total

Gross
Unrealized
Losses

Fair Value

$ 27,384

$ (763)

$ 2,382

$ (149) $ 29,766

$ (912)

85,517
3,220
6,385
47
–
465
3,414

126,432
2,325

128,757
7

128,764

(2,240)
(23)
(205)
(1)
–
(9)
(38)

(3,279)
(95)

(3,374)
(2)

(3,376)

128
–
68

(11)
–
(8)

–
–
2,245
–
70
22
46

4,765
568

5,333
19

5,352

530
223
–

–
–
(274)
–
(7)
(1)
(7)

(438)
(119)

(557)
(11)

(568)

(439)
(116)
–

85,517
3,220
8,630
47
70
487
3,460

131,197
2,893

134,090
26

134,116

(2,240)
(23)
(479)
(1)
(7)
(10)
(45)

(3,717)
(214)

(3,931)
(13)

(3,944)

658
223
68

(450)
(116)
(8)

$128,960

$(3,395)

$ 6,105

$(1,123) $135,065

$(4,518)

$ 4,655

(37)

–

$ 4,655

(37)

53,979
965
6,907
1,263
169
1,157
3,779

72,874
4,716

77,590
338

77,928

(817)
(10)
(557)
(35)
(27)
(71)
(70)

(1,624)
(93)

(1,717)
(113)

740
747
13,613
1,711
3,355
294
932

21,392
1,989

23,381
1,554

(29)
(3)
(3,370)
(81)
(869)
(55)
(408)

(4,815)
(150)

(4,965)
(394)

54,719
1,712
20,520
2,974
3,524
1,451
4,711

94,266
6,705

100,971
1,892

(1,830)

24,935

(5,359)

102,863

(846)
(13)
(3,927)
(116)
(896)
(126)
(478)

(6,439)
(243)

(6,682)
(507)

(7,189)

(17)

1,076

(84)

1,127

(101)

Total temporarily-impaired and other-than-temporarily impaired available-for-sale

securities (2)

$ 77,979

$(1,847)

$26,011

$(5,443) $103,990

$(7,290)

Includes other-than-temporarily impaired AFS debt securities on which a portion of the OTTI loss remains in OCI.

(1)
(2) At December 31, 2010, the amortized cost of approximately 8,500 AFS securities exceeded their fair value by $4.5 billion. At December 31, 2009, the amortized cost of approximately 12,000 AFS securities exceeded their fair value

by $7.3 billion.

The Corporation considers the length of time and extent to which the fair
value of AFS debt securities has been less than cost to conclude that such
securities were not other-than-temporarily impaired. The Corporation also
considers other factors such as the financial condition of the issuer of the
security including credit ratings and specific events affecting the operations of
the issuer, underlying assets that collateralize the debt security, and other

industry and macroeconomic conditions. As the Corporation has no intent to
sell securities with unrealized losses and it is not more-likely-than-not that the
Corporation will be required to sell these securities before recovery of am-
ortized cost, the Corporation has concluded that the securities are not
impaired on an other-than-temporary basis.

Bank of America 2010

167

The amortized cost and fair value of the Corporation’s investment in AFS debt securities from Fannie Mae (FNMA), the Government National Mortgage
Association (GNMA), Freddie Mac (FHLMC) and U.S. Treasury securities where the investment exceeded 10 percent of consolidated shareholders’ equity at
December 31, 2010 and 2009 are presented in the table below.

(Dollars in millions)

Fannie Mae
Government National Mortgage Association
Freddie Mac
U.S. Treasury securities (1)

December 31

2010

2009

Amortized
Cost

$123,662
72,863
30,523
46,576

Fair Value

$123,107
74,305
30,822
46,081

Amortized
Cost

$100,321
60,610
29,076
19,315

Fair Value

$101,096
61,121
29,810
19,516

(1)

Investments in U.S. Treasury securities did not exceed 10 percent of consolidated shareholders’ equity at December 31, 2009.

The expected maturity distribution of the Corporation’s MBS and the
contractual maturity distribution of the Corporation’s other AFS debt securi-
ties, and the yields on the Corporation’s AFS debt securities portfolio at

December 31, 2010 are summarized in the table below. Actual maturities may
differ from the contractual or expected maturities since borrowers may have
the right to prepay obligations with or without prepayment penalties.

(Dollars in millions)

Amortized cost of AFS debt securities

U.S. Treasury and agency securities
Mortgage-backed securities:

Agency
Agency-collateralized mortgage obligations
Non-agency residential
Non-agency commercial

Non-U.S. securities
Corporate bonds
Other taxable securities

Total taxable securities

Tax-exempt securities

Total amortized cost of AFS debt securities

Fair value of AFS debt securities

U.S. Treasury and agency securities
Mortgage-backed securities:

Agency
Agency-collateralized mortgage obligations
Non-agency residential
Non-agency commercial

Non-U.S. securities
Corporate bonds
Other taxable securities

Total taxable securities

Tax-exempt securities

Total fair value of AFS debt securities

(1) Yields are calculated based on the amortized cost of the securities.

Due in One
Year or Less
Amount Yield (1)

Due after One Year
through Five Years
Amount Yield (1)

December 31, 2010

Due after Five Years
through Ten Years
Amount Yield (1)

Due after Ten Years
Amount Yield (1)

Total
Amount Yield (1)

$ 643

5.00% $ 1,731

2.30% $ 12,318

3.50% $ 34,721

4.20% $ 49,413

4.00%

34
29
178
439
1,852
133
6,129

9,437
193

$9,630

$ 646

36
22
158
448
1,868
136
6,132

9,446
193

$9,639

4.80
0.80
12.50
5.20
0.80
1.20
0.90

1.62
4.10

1.72

88,913
13,279
4,241
4,960
2,076
3,847
3,875

122,922
912

$123,834

4.30
2.80
7.40
6.30
5.40
2.30
1.20

4.16
4.30

4.16

70,789
13,738
1,746
441
126
1,114
118

100,390
1,408

$101,798

3.80
0.20
5.60
9.80
3.50
3.70
11.20

3.35
3.80

3.36

30,673
9,593
17,293
327
–
63
5,392

98,062
3,174

$101,236

3.90
2.30
4.20
6.70

2.20
3.80

3.91
4.60

3.93

190,409
36,639
23,458
6,167
4,054
5,157
15,514

330,811
5,687

$336,498

4.10
3.20
4.90
6.50
5.30
2.60
2.09

3.98
4.35

3.99

$ 1,769

$ 12,605

$ 34,085

$ 49,105

90,967
13,402
4,149
5,498
2,140
3,929
3,863

125,717
923

$126,640

70,031
13,920
1,739
543
131
1,162
118

100,249
1,408

$101,657

30,183
9,673
17,071
363
–
64
5,279

96,718
2,973

191,217
37,017
23,117
6,852
4,139
5,291
15,392

332,130
5,497

$ 99,691

$337,627

The components of realized gains and losses on sales of debt securities

for 2010, 2009 and 2008 are presented in the table below.

(Dollars in millions)

Gross gains
Gross losses

2010

2009

2008

$ 3,995
(1,469)

$5,047
(324)

$1,367
(243)

Net gains on sales of debt securities

$ 2,526

$4,723

$1,124

Income tax expense attributable to realized net gains

on sales of debt securities

$ 935

$1,748

$ 416

During 2010, the Corporation entered into a series of transactions in its
AFS debt securities portfolio that involved securitizations as well as sales of
non-agency RMBS. These transactions were initiated following a review of
corporate risk objectives in light of proposed Basel regulatory capital changes
and liquidity targets. During 2010, the carrying value of the non-agency RMBS
portfolio was reduced $14.5 billion primarily as a result of the aforementioned
sales and securitizations as well as paydowns. The Corporation recognized
net losses of $922 million on the series of transactions in the AFS debt
securities portfolio, and improved the overall credit quality of the remaining
portfolio such that the percentage of the non-agency RMBS portfolio that is
below investment-grade was reduced significantly.

168

Bank of America 2010

Certain Corporate and Strategic Investments
At December 31, 2010 and 2009, the Corporation owned 25.6 billion shares
representing approximately 10 and 11 percent of China Construction Bank
(CCB). During 2010, the Corporation sold its rights to participate in CCB’s
secondary offering resulting in a pre-tax gain of $432 million recorded in
equity investment income. During 2009, the Corporation sold its initial in-
vestment of 19.1 billion common shares in CCB for a pre-tax gain of $7.3 bil-
lion. During 2010, the Corporation recorded in accumulated OCI a $6.7 billion
after-tax unrealized gain on 23.6 billion shares of the Corporation’s invest-
ment in CCB, which previously had been carried at cost. These shares were
reclassified to AFS during 2010 because the sales restrictions on these
shares expire within one year (August 2011), and therefore, in accordance
with applicable accounting guidance, the Corporation recorded the unrealized
gain in accumulated OCI, net of a 10 percent restriction discount. Sales
restrictions on the remaining two billion CCB shares continue until August
2013, and these shares continue to be carried at cost. At December 31,
2010, the cost basis of all remaining CCB shares was $9.2 billion, the
carrying value was $19.7 billion and the fair value was $20.8 billion. At
December 31, 2009, both the cost basis and the carrying value were
$9.2 billion and the fair value was $22.0 billion. Dividend income on this
investment is recorded in equity investment income and during 2010, the
Corporation recorded dividend income of $535 million from CCB. The invest-
ment is recorded in other assets. The Corporation remains a significant
shareholder in CCB and intends to continue the important long-term strategic
alliance with CCB originally entered into in 2005. As part of this alliance, the
Corporation expects to continue to provide advice and assistance to CCB.

During 2010, the Corporation sold various strategic investments which
included the Corporation’s investment of 188.4 million preferred shares and
56.5 million common shares in Itaú Unibanco Holding S.A. (Itaú Unibanco) at a
price of $3.9 billion. The Itaú Unibanco investment was accounted for at fair
value and recorded as AFS marketable equity securities in other assets with
unrealized gains recorded, net-of-tax, in accumulated OCI. The cost basis of
this investment was $2.6 billion and, after transaction costs, the pre-tax gain
was $1.2 billion which was recorded in equity investment income. In addition,
the Corporation sold its 24.9 percent ownership interest in Grupo Financiero
Santander, S.A.B. de C.V. to an affiliate of its parent company, Banco
Santander, S.A., the majority interest holder. The investment was accounted
for under the equity method of accounting and recorded in other assets. This
sale resulted in a pre-tax loss of $428 million which was recorded in equity
investment income. The Corporation also sold all of its Class B units in

MasterCard Worldwide, Inc. (MasterCard), which were acquired primarily upon
MasterCard’s initial public offering and recorded in other assets. This sale
resulted in a pre-tax gain of $440 million which was recorded in equity
investment income. Also during the year, the Corporation sold its exposure
of $2.9 billion in certain private equity funds recorded in other assets,
comprised of $1.5 billion in capital and $1.4 billion in unfunded commitments
resulting in a loss of $163 million which was recorded in equity investment
income.

As part of the acquisition of Merrill Lynch, the Corporation acquired an
economic ownership in BlackRock Inc. (BlackRock), a publicly traded invest-
ment company. During 2010, the Corporation sold 51.2 million shares con-
sisting of 48.9 million preferred and 2.3 million common shares for net
proceeds of $8.3 billion resulting in a pre-tax gain of $91 million, lowering its
ownership to 13.6 million preferred shares, or 7 percent. The carrying value of
this investment at December 31, 2010 and 2009 was $2.2 billion and
$10.0 billion and the fair value was $2.6 billion and $15.0 billion. Following
the sale, the Corporation’s remaining interest is held at cost due to restric-
tions that affect the marketability of the preferred shares. The investment is
recorded in other assets. During 2009, BlackRock completed its purchase of
Barclays Global Investors, an asset management business, from Barclays
PLC which had the effect of diluting the Corporation’s ownership interest in
BlackRock from approximately 50 percent to approximately 34 percent and,
for accounting purposes, was treated as a sale of a portion of the Corpo-
ration’s ownership interest. As a result, upon closing of this transaction, the
Corporation recorded an adjustment to its investment in BlackRock resulting
in a pre-tax gain of $1.1 billion which was recorded in equity investment
income.

In 2010, a third-party investor in a joint venture in which the Corporation
held a 46.5 percent ownership interest sold its interest to the joint venture,
resulting in an increase in the Corporation’s ownership interest to 49 percent.
The joint venture was formed in 2009 with First Data Corporation (First Data)
creating Banc of America Merchant Services, LLC. Under the terms of the
agreement, the Corporation contributed its merchant processing business to
the joint venture and First Data contributed certain merchant processing
contracts and personnel resources. In 2009, the Corporation recorded in
other income a pre-tax gain of $3.8 billion related to this transaction. The
investment in the joint venture, which was initially recorded at a fair value of
$4.7 billion, is accounted for under the equity method of accounting with
income recorded in equity investment income. The carrying value at both
December 31, 2010 and 2009 was $4.7 billion.

Bank of America 2010

169

NOTE 6 Outstanding Loans and Leases
The table below presents total outstanding loans and leases at December 31, 2010 and 2009 and an age analysis at December 31, 2010.

December 31, 2010

December 31, 2009

(Dollars in millions)

Home loans

Residential mortgage (6)
Home equity
Discontinued real estate (7)
Credit card and other consumer

U.S. credit card
Non-U.S. credit card
Direct/Indirect consumer (8)
Other consumer (9)

Total consumer

Commercial

U.S. commercial
Commercial real estate (10)
Commercial lease financing
Non-U.S. commercial
U.S. small business commercial

Total commercial loans

Commercial loans measured at fair value (11)

Total commercial

Total loans and leases

30-89 Days
Past Due (1)

90 Days or
More
Past Due (2)

Total Past
Due 30 Days
or More

Total Current
or Less Than 30
Days Past Due (3)

Purchased
Credit -
Impaired (4)

Loans
Measured at
Fair Value

Total
Outstandings (5)

$ 8,274
2,086
107

$33,240
2,291
419

$41,514
4,377
526

$205,867
121,014
930

$10,592
12,590
11,652

2,593
755
1,608
90

3,320
599
1,104
50

5,913
1,354
2,712
140

15,513

41,023

56,536

946
721
118
27
360

2,172
–

2,172

1,453
3,554
31
6
438

5,482
–

5,482

2,399
4,275
149
33
798

7,654
–

7,654

107,872
26,111
87,596
2,690

552,080

173,185
44,957
21,793
31,955
13,921

285,811
–

285,811

–
–
–
–

34,834

2
161
–
41
–

204
–

204

$17,685

$46,505

$64,190

$837,891

$35,038

$3,321

3,321

$3,321

$257,973
137,981
13,108

113,785
27,465
90,308
2,830

643,450

175,586
49,393
21,942
32,029
14,719

293,669
3,321

296,990

Total
Outstandings

$242,129
149,126
14,854

49,453
21,656
97,236
3,110

577,564

181,377
69,447
22,199
27,079
17,526

317,628
4,936

322,564

$940,440

$900,128

Percentage of outstandings

1.88%

4.95%

6.83%

89.10%

3.72%

0.35%

(1) Home loans includes $2.3 billion of FHA insured loans, $818 million of nonperforming loans and $156 million of TDRs that were removed from the Countrywide PCI loan portfolio prior to the adoption of new accounting guidance

effective January 1, 2010.

(2) Home loans includes $16.8 billion of FHA insured loans and $372 million of TDRs that were removed from the Countrywide PCI loan portfolio prior to the adoption of new accounting guidance effective January 1, 2010.
(3) Home loans includes $1.1 billion of nonperforming loans as all principal and interest are not current or are TDRs that have not demonstrated sustained repayment performance.
(4)

PCI loan amounts are shown gross of the valuation allowance and exclude $1.6 billion of PCI home loans from the Merrill Lynch acquisition which are included in their appropriate aging categories.
Periods subsequent to January 1, 2010 are presented in accordance with new consolidation guidance.
Total outstandings include non-U.S. residential mortgages of $90 million and $552 million at December 31, 2010 and 2009.
Total outstandings include $11.8 billion and $13.4 billion of pay option loans and $1.3 billion and $1.5 billion of subprime loans at December 31, 2010 and 2009. The Corporation no longer originates these products.
Total outstandings include dealer financial services loans of $42.9 billion and $41.6 billion, consumer lending of $12.9 billion and $19.7 billion, U.S. securities-based lending margin loans of $16.6 billion and $12.9 billion, student
loans of $6.8 billion and $10.8 billion, non-U.S. consumer loans of $8.0 billion and $8.0 billion, and other consumer loans of $3.1 billion and $4.2 billion at December 31, 2010 and 2009.
Total outstandings include consumer finance loans of $1.9 billion and $2.3 billion, other non-U.S. consumer loans of $803 million and $709 million, and consumer overdrafts of $88 million and $144 million at December 31, 2010
and 2009.

(5)

(6)

(7)

(8)

(9)

(10) Total outstandings include U.S. commercial real estate loans of $46.9 billion and $66.5 billion, and non-U.S. commercial real estate loans of $2.5 billion and $3.0 billion at December 31, 2010 and 2009.
(11) Certain commercial loans are accounted for under the fair value option and include U.S. commercial loans of $1.6 billion and $3.0 billion, non-U.S. commercial loans of $1.7 billion and $1.9 billion, and commercial real estate loans

of $79 million and $90 million at December 31, 2010 and 2009. See Note 22 – Fair Value Measurements and Note 23 – Fair Value Option for additional information.

The Corporation mitigates a portion of its credit risk on the residential
mortgage portfolio through the use of synthetic securitization vehicles. These
vehicles issue long-term notes to investors, the proceeds of which are held as
cash collateral. The Corporation pays a premium to the vehicles to purchase
mezzanine loss protection on a portfolio of residential mortgages owned by
the Corporation. Cash held in the vehicles is used to reimburse the Corpo-
ration in the event that losses on the mortgage portfolio exceed 10 basis
points (bps) of the original pool balance, up to the remaining amount of
purchased loss protection of $1.1 billion and $1.4 billion at December 31,
2010 and 2009. The vehicles are variable interest entities from which the
Corporation purchases credit protection and in which the Corporation does not
have a variable interest; accordingly, these vehicles are not consolidated by
the Corporation. Amounts due from the vehicles are recorded in other income
(loss) when the Corporation recognizes a reimbursable loss, as described
above. Amounts are collected when reimbursable losses are realized through

the sale of the underlying collateral. At December 31, 2010 and 2009, the
Corporation had a receivable of $722 million and $1.0 billion from these
vehicles for reimbursement of losses. At December 31, 2010 and 2009,
$53.9 billion and $70.7 billion of residential mortgage loans were referenced
under these agreements. The Corporation records an allowance for credit
losses on these loans without regard to the existence of the purchased loss
protection as the protection does not represent a guarantee of individual
loans.

In addition, the Corporation has entered into long-term standby agree-
ments with FNMA and FHLMC on loans totaling $14.3 billion and $6.6 billion
at December 31, 2010 and 2009, providing full protection on residential
mortgage loans that become severely delinquent. The Corporation does not
record an allowance for credit losses on these loans as the loans are
individually insured.

170

Bank of America 2010

Nonperforming Loans and Leases
The table below includes the Corporation’s nonperforming loans and leases,
including nonperforming TDRs, and loans accruing past due 90 days or more
at December 31, 2010 and 2009. Nonperforming loans and leases exclude
performing TDRs and loans accounted for under the fair value option. Non-
performing LHFS are excluded from nonperforming loans and leases as they
are recorded at either fair value or the lower of cost or fair value. In addition,
PCI, consumer credit card, business card loans and in general, consumer

loans not secured by real estate, including renegotiated loans, are not
considered nonperforming and are therefore excluded from nonperforming
loans and leases in the table. See Note 1 – Summary of Significant Account-
ing Principles for further information on the criteria to determine if a loan is
classified as nonperforming. Real estate-secured past due consumer loans
insured by the FHA are reported as performing since the principal repayment
is insured by the FHA.

(Dollars in millions)

Home loans

Residential mortgage (1)
Home equity
Discontinued real estate
Credit card and other consumer

U.S. credit card
Non-U.S. credit card
Direct/Indirect consumer
Other consumer

Total consumer

Commercial

U.S. commercial
Commercial real estate
Commercial lease financing
Non-U.S. commercial
U.S. small business commercial

Total commercial

Total consumer and commercial

Nonperforming Loans
and Leases

Accruing Past Due
90 Days or More

December 31

2010

2009

2010

2009

$17,691
2,694
331

$16,596
3,804
249

$16,768
–
–

$11,680
–
–

n/a
n/a
90
48

n/a
n/a
86
104

3,320
599
1,058
2

2,158
515
1,488
3

20,854

20,839

21,747

15,844

3,453
5,829
117
233
204

9,836

4,925
7,286
115
177
200

12,703

236
47
18
6
325

632

213
80
32
67
624

1,016

$30,690

$33,542

$22,379

$16,860

(1) Residential mortgage loans accruing past due 90 days or more represent loans insured by the FHA. At December 31, 2010 and 2009, residential mortgage includes $8.3 billion and $2.2 billion of loans that are no longer accruing

interest as interest has been curtailed by the FHA although principal is still insured.

n/a = not applicable

Included in certain loan categories in nonperforming loans and leases in
the table above are TDRs that were classified as nonperforming. At Decem-
ber 31, 2010 and 2009, the Corporation had $3.0 billion and $2.9 billion of
residential mortgages, $535 million and $1.7 billion of home equity, $75 mil-
lion and $43 million of discontinued real estate, $175 million and $227 million
of U.S. commercial, $770 million and $246 million of commercial real estate
and $7 million and $13 million of non-U.S. commercial loans that were TDRs
and classified as nonperforming.

As a result of new accounting guidance on PCI loans, beginning January 1,
2010, modification of a PCI loan no longer results in removal of the loan from
the PCI loan pool. TDRs in the consumer real estate portfolio that were
removed from the PCI loan portfolio prior to the adoption of the new account-
ing guidance were $2.1 billion and $2.3 billion at December 31, 2010 and
2009, of which $426 million and $395 million were nonperforming. These
nonperforming loans are excluded from the table above.

Credit Quality Indicators
The Corporation monitors credit quality within its three portfolio segments
based on primary credit quality indicators. Within the home loans portfolio
segment, the primary credit quality indicators used are refreshed LTV and
refreshed FICO score. Refreshed LTV measures the carrying value of the loan

as a percentage of the value of property securing the loan, refreshed quar-
terly. Home equity loans are measured using combined LTV which measures
the carrying value of the combined loans that have liens against the property
and the available line of credit as a percentage of the appraised value of the
property securing the loan, refreshed quarterly. Refreshed FICO score mea-
sures the creditworthiness of the borrower based on the financial obligations
of the borrower and the borrower’s credit history. At a minimum, FICO scores
are refreshed quarterly, and in many cases, more frequently. Refreshed FICO
score is also a primary credit quality indicator for the credit card and other
consumer portfolio segment and the business card portfolio within U.S. small
business commercial. The Corporation’s commercial loans are evaluated
using pass rated or reservable criticized as the primary credit quality indicator.
The term reservable criticized refers to those commercial loans that are
internally classified or listed by the Corporation as special mention, substan-
dard or doubtful. These assets pose an elevated risk and may have a high
probability of default or total loss. Pass rated refers to all loans not considered
criticized. In addition to these primary credit quality indicators, the Corporation
loans.
indicators for
uses other
See Note 1 – Summary of Significant Accounting Principles for additional
information.

certain types of

credit quality

Bank of America 2010

171

The tables below present certain credit quality indicators related to the Corporation’s home loans, credit card and other consumer loans, and commercial

loan portfolio segments at December 31, 2010.

Home Loans

(Dollars in millions)

Refreshed LTV

Less than 90 percent
Greater than 90 percent but less than 100 percent
Greater than 100 percent
FHA Loans (4)

Total home loans

Refreshed FICO score
Less than 620
Greater than or equal to 620
FHA Loans (4)

Total home loans

December 31, 2010

Residential
Mortgage (1)

Countrywide
Residential
Mortgage PCI (2)

Home
Equity (1, 3)

Countrywide
Home Equity
PCI (2, 3)

Discontinued
Real Estate (1)

$130,260
19,907
43,268
53,946

$247,381

$ 27,483
165,952
53,946

$247,381

$ 3,390
1,654
5,548
–

$ 73,680
14,038
37,673
–

$10,592

$125,391

$ 4,016
6,576
–

$ 15,494
109,897
–

$10,592

$125,391

$ 1,883
1,186
9,521
–

$12,590

$ 3,206
9,384
–

$12,590

$1,033
155
268
–

$1,456

$ 663
793
–

$1,456

Countrywide
Discontinued
Real Estate
PCI (2)

$ 5,248
1,578
4,826
–

$11,652

$ 7,168
4,484
–

$11,652

(1) Excludes Countrywide PCI loans.
(2) Excludes PCI home loans related to the Merrill Lynch acquisition.
(3) Refreshed LTV is reported using a combined LTV, which measures the carrying value of the combined loans with liens against the property and the available line of credit as a percentage of the appraised value securing the loan.
(4) Credit quality indicators are not reported for FHA insured loans as principal repayment is insured by the FHA.

Credit Card and Other Consumer

(Dollars in millions)

Refreshed FICO score
Less than 620
Greater than or equal to 620
Other internal credit metrics (2, 3, 4)

Total credit card and other consumer

December 31, 2010

U.S. Credit
Card

Non-U.S.
Credit Card

Direct/Indirect
Consumer

Other
Consumer (1)

$ 14,159
99,626
–

631
7,528
19,306

$113,785

$27,465

$ 6,748
48,209
35,351

$90,308

$ 979
961
890

$2,830

(1) 96 percent of the other consumer portfolio was associated with portfolios from certain consumer finance businesses that have been previously exited by the Corporation.
(2) Other internal credit metrics may include delinquency status, geography or other factors.
(3) Direct/indirect consumer includes $24.0 billion of securities-based lending which is overcollateralized and therefore offers minimal credit risk and $7.4 billion of loans the Corporation no longer originates.
(4) Non-U.S. credit card represents the select European countries’ credit card portfolio and a portion of the Canadian credit card portfolio which is evaluated using internal credit metrics, including delinquency status. At December 31,

2010, 95 percent of this portfolio was current or less than 30 days past due, three percent was 30-89 days past due and two percent was 90 days or more past due.

Commercial (1)

(Dollars in millions)

Risk Ratings

Pass rated
Reservable criticized

Refreshed FICO score
Less than 620
Greater than or equal to 620
Other internal credit metrics (2, 3)
Total commercial credit

December 31, 2010

U.S.
Commercial

Commercial
Real Estate

Commercial
Lease
Financing

Non-U.S.
Commercial

U.S. Small
Business
Commercial

$160,154
15,432

$29,757
19,636

$20,754
1,188

$30,180
1,849

$ 3,139
988

n/a
n/a
n/a

888
5,083
4,621

$175,586

$49,393

$21,942

$32,029

$14,719

(1)

Includes $204 million of PCI loans related to the commercial portfolio segment and excludes $3.3 billion of loans accounted for under the fair value option.

(2) Other internal credit metrics may include delinquency status, application scores, geography or other factors.
(3) U.S. small business commercial includes business card and small business loans which are evaluated using internal credit metrics, including delinquency status. At December 31, 2010, 95 percent was current or less than 30 days

past due.

n/a = not applicable

Impaired Loans and Troubled Debt Restructurings
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
from the borrower in accordance with the contractual terms of the loan.
Impaired loans include nonperforming commercial loans, all TDRs, including

both commercial and consumer TDRs, and the renegotiated credit card,
consumer lending and small business loan portfolios (the renegotiated port-
folio). Impaired loans exclude nonperforming consumer loans unless they are
classified as TDRs, all commercial leases and all loans accounted for under
the fair value option. PCI loans are reported separately on page 175.

172

Bank of America 2010

The following tables present impaired loans related to the Corporation’s home loans and commercial loan portfolio segments at December 31, 2010.
Certain impaired home loans and commercial loans do not have a related allowance as the valuation of these impaired loans, determined under current
accounting guidance, exceeded the carrying value.

Impaired Loans – Home Loans

(Dollars in millions)

With no recorded allowance
Residential mortgage
Home equity
Discontinued real estate
With an allowance recorded
Residential mortgage
Home equity
Discontinued real estate

Total

Residential mortgage
Home equity
Discontinued real estate

December 31, 2010

2010

Unpaid
Principal
Balance

Carrying
Value

Related
Allowance

Average
Carrying
Value

Interest
Income
Recognized (1)

$ 5,493
1,411
361

$ 4,382
437
218

$ 8,593
1,521
247

$ 7,406
1,284
177

$14,086
2,932
608

$11,788
1,721
395

n/a
n/a
n/a

$1,154
676
41

$4,429
493
219

$5,226
1,509
170

$9,655
2,002
389

$184
21
8

$196
23
7

$380
44
15

(1)

Interest income recognized includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on nonaccruing impaired loans for which the ultimate collectability of
principal is not uncertain. See Note 1 – Summary of Significant Accounting Principles for additional information.

n/a = not applicable

Impaired Loans – Commercial

(Dollars in millions)

With no recorded allowance

U.S. commercial
Commercial real estate
Non-U.S. commercial
U.S. small business commercial (2)

With an allowance recorded

U.S. commercial
Commercial real estate
Non-U.S. commercial
U.S. small business commercial (2)

Total

U.S. commercial
Commercial real estate
Non-U.S. commercial
U.S. small business commercial (2)

December 31, 2010

2010

Unpaid
Principal
Balance

$ 968
2,655
46
–

$3,891
5,682
572
935

$4,859
8,337
618
935

Carrying
Value

Related
Allowance

Average
Carrying
Value

Interest
Income
Recognized (1)

$ 441
1,771
28
–

$3,193
4,103
217
892

$3,634
5,874
245
892

n/a
n/a
n/a
n/a

$336
208
91
445

$ 547
1,736
9
–

$3,389
4,813
190
1,028

$3,936
6,549
199
1,028

$ 3
8
–
–

$36
29
–
34

$39
37
–
34

(1)

(2)

n/a = not applicable

At December 31, 2010 and 2009, remaining commitments to lend ad-
ditional funds to debtors whose terms have been modified in a commercial or
consumer TDR were immaterial.

The Corporation seeks to assist customers that are experiencing financial
difficulty by renegotiating loans within the renegotiated portfolio while ensur-
ing compliance with Federal Financial Institutions Examination Council (FFIEC)
guidelines. Substantially all modifications in the renegotiated portfolio are
considered to be both TDRs and impaired loans. The renegotiated portfolio
may include modifications, both short- and long-term, of interest rates or
payment amounts or a combination thereof. The Corporation makes loan

modifications, primarily utilizing internal renegotiation programs via direct
customer contact, that manage customers’ debt exposures held only by the
Corporation. Additionally, the Corporation makes loan modifications with
consumers who have elected to work with external renegotiation agencies
and these modifications provide solutions to customers’ entire unsecured
debt structures. Under both internal and external programs, customers
receive reduced annual percentage rates with fixed payments that amortize
loan balances over a 60-month period. Under both programs, for credit card
loans, a customer’s charging privileges are revoked.

Bank of America 2010

173

The following tables provide detailed information on the Corporation’s primary
modification programs for the renegotiated portfolio. At December 31, 2010, all
renegotiated credit card and other consumer loans were considered impaired and
have a related allowance as shown in the table below. The allowance for credit

card loans is based on the present value of projected cash flows discounted
using the interest rate in effect prior to restructuring and prior to any risk-
based or penalty-based increase in rate.

Impaired Loans – Credit Card and Other Consumer

(Dollars in millions)

With an allowance recorded

U.S. credit card
Non-U.S. credit card
Direct/Indirect consumer

December 31, 2010

2010

Unpaid
Principal
Balance

Carrying
Value (1)

Related
Allowance

Average
Carrying
Value

Interest
Income
Recognized (2)

$8,680
778
1,846

$8,766
797
1,858

$3,458
506
822

$10,549
973
2,126

$621
21
111

(1)

(2)

Includes accrued interest and fees.
Interest income recognized includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on nonaccruing impaired loans for which the ultimate collectability of
principal is not uncertain. See Note 1 – Summary of Significant Accounting Principles for additional information.

Renegotiated TDR Portfolio

(Dollars in millions)

Credit card and other consumer

U.S. credit card
Non-U.S. credit card
Direct/Indirect consumer
Other consumer

Total consumer

Commercial

U.S. small business commercial

Total commercial

Total renegotiated TDR loans

n/a = not applicable

Internal Programs

External Programs

Other

Total

Percent of Balances
Current or
Less Than 30 Days
Past Due

December 31

2010

2009

2010

2009

2010

2009

2010

2009

2010

2009

$6,592 $3,159
252
1,414
54

282
1,222
–

$1,927 $ 758
168
539
69

176
531
–

$247 $283
435
89
17

339
105
–

$ 8,766 $4,200
855
2,042
140

797
1,858
–

8,096

4,879

2,634

1,534

691

824

11,421

7,237

77.66%
58.86
78.81
n/a

76.51

75.43%
53.02
75.44
68.94

72.66

624

776

688

844

65.37

64.90

$8,720 $5,655

$2,692 $1,591

$697 $835

$12,109 $8,081

75.90%

72.96%

At December 31, 2010 and 2009, the Corporation had a renegotiated TDR
portfolio of $12.1 billion and $8.1 billion of which $9.2 billion was current or
less than 30 days past due under the modified terms at December 31, 2010.
The renegotiated TDR portfolio is excluded from nonperforming loans as the
Corporation generally does not classify consumer loans not secured by real

estate as nonperforming as these loans are generally charged off no later than
the end of the month in which the loan becomes 180 days past due. Current
period amounts include the impact of new consolidation guidance which re-
sulted in the consolidation of credit card and certain other securitization trusts.

174

Bank of America 2010

Purchased Credit-impaired Loans
PCI loans are acquired loans with evidence of credit quality deterioration since
origination for which it is probable at purchase date that the Corporation will
be unable to collect all contractually required payments. In connection with the
Countrywide acquisition in 2008, the Corporation acquired PCI loans, sub-
stantially all of which were residential mortgage, home equity and discontin-
ued real estate loans. In connection with the Merrill Lynch acquisition in 2009,
the Corporation acquired PCI loans, substantially all of which were residential
mortgage and commercial loans.

The table below presents the remaining unpaid principal balance and
carrying amount, excluding the valuation reserve, for PCI loans at Decem-
ber 31, 2010 and 2009. See Note 7 – Allowance for Credit Losses for
additional information.

the PCI carrying value. If the present value of the modified cash flows was less
than the carrying value, the loan was removed from the PCI loan pool at its
carrying value, as well as any related allowance for loan and lease losses, and
was classified as a TDR. The carrying value of PCI loan TDRs that were
removed from the PCI pool prior to January 1, 2010 totaled $2.1 billion. At
December 31, 2010, $1.6 billion of those classified as TDRs were on accrual
status. The carrying value of these modified loans, net of allowance, was
approximately 65 percent of the unpaid principal balance.

The table below shows activity for the accretable yield on PCI loans. The
$14 million and $1.4 billion reclassifications to nonaccretable difference
during 2010 and 2009 reflect a reduction in estimated interest cash flows
during the year.

(Dollars in millions)

Consumer

Countrywide

December 31

2010

2009

Unpaid principal balance
Carrying value excluding valuation reserve

Merrill Lynch

Unpaid principal balance
Carrying value excluding valuation reserve

$41,446
34,834

1,698
1,559

$47,701
37,541

2,388
2,112

Commercial

Merrill Lynch

Unpaid principal balance
Carrying value excluding valuation reserve

870
204

$ 1,971
692

As a result of the adoption of new accounting guidance on PCI loans,
beginning January 1, 2010, pooled loans that are modified subsequent to
acquisition are not removed from the PCI loan pools and are not considered
TDRs. Prior to January 1, 2010, pooled loans that were modified subsequent
to acquisition were reviewed to compare modified contractual cash flows to

(Dollars in millions)

Accretable yield, January 1, 2009

Merrill Lynch balance
Accretion
Disposals/transfers
Reclassifications to nonaccretable difference

Accretable yield, December 31, 2009

Accretion
Disposals/transfers
Reclassifications to nonaccretable difference

Accretable yield, December 31, 2010

$12,860
627
(2,859)
(1,482)
(1,431)

7,715

(1,766)
(213)
(14)

$ 5,722

Loans Held-for-Sale
The Corporation had LHFS of $35.1 billion and $43.9 billion at December 31,
2010 and 2009. Proceeds from sales, securitizations and paydowns of LHFS
were $281.7 billion, $365.1 billion and $142.1 billion for 2010, 2009 and
2008. Proceeds used for originations and purchases of LHFS were $263.0 bil-
lion, $369.4 billion and $127.5 billion for 2010, 2009 and 2008.

Bank of America 2010

175

NOTE 7 Allowance for Credit Losses
The table below summarizes the changes in the allowance for credit losses for 2010, 2009 and 2008.

(Dollars in millions)

Allowance for loan and lease losses, January 1, before effect of the January 1 adoption of new

consolidation guidance

Allowance related to adoption of new consolidation guidance

Allowance for loan and lease losses, January 1

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

Provision for unfunded lending commitments
Other

Reserve for unfunded lending commitments, December 31

Allowance for credit losses, December 31

n/a = not applicable

Credit Card
and Other
Consumer

Home
Loans

Total Allowance

Commercial

2010

2009

2008

$ 15,756
573

$ 12,029
10,214

$ 9,415
1

$ 37,200
10,788

$ 23,071
n/a

$ 11,588
n/a

16,329
(10,915)
396

22,243
(20,865)
2,034

9,416
(5,610)
626

47,988
(37,390)
3,056

23,071
(35,483)
1,795

11,588
(17,666)
1,435

(10,519)

(18,831)

(4,984)

(34,334)

(33,688)

(16,231)

13,335
107

19,252

12,115
(64)

15,463

–
–
–

–

–
–
–

–

2,745
(7)

7,170

1,487
240
(539)

1,188

28,195
36

41,885

1,487
240
(539)

1,188

48,366
(549)

37,200

421
204
862

1,487

26,922
792

23,071

518
(97)
–

421

$ 19,252

$ 15,463

$ 8,358

$ 43,073

$ 38,687

$ 23,492

In 2010, the Corporation recorded $2.2 billion in provision for credit
losses with a corresponding increase in the valuation reserve included as part
of the allowance for loan and lease losses specifically for the PCI loan
portfolio. This compared to $3.5 billion in 2009 and $750 million in 2008.
The amount of the allowance for loan and lease losses associated with the PCI
loan portfolio was $6.4 billion, $3.9 billion and $750 million at December 31,
2010, 2009 and 2008, respectively.

The “other” amount under allowance for loan and lease losses for 2009
includes a $750 million reduction in the allowance for loan and lease losses
related to $8.5 billion of credit card loans that were exchanged for a $7.8 bil-
lion HTM debt security partially offset by a $340 million increase associated
with the reclassification to other assets of the amount reimbursable under
residential mortgage cash collateralized synthetic securitizations. The 2008

“other” amount under allowance for loan and lease losses includes the
$1.2 billion addition of the Countrywide allowance for loan losses as of July 1,
2008.

The “other” amount under the reserve for unfunded lending commitments
for 2009 includes the remaining balance of the acquired Merrill Lynch reserve
excluding those commitments accounted for under the fair value option, net
of accretion, and the impact of funding previously unfunded positions. This
amount in 2010 represents primarily accretion of the Merrill Lynch purchase
accounting adjustment and the impact of
funding previously unfunded
positions.

The table below represents the allowance and the carrying value of
outstanding loans and leases by portfolio segment at December 31, 2010.

(Dollars in millions)
Impaired loans and troubled debt restructurings (1)

Allowance for loan and lease losses (2)
Carrying value
Allowance as a percentage of outstandings

Collectively evaluated for impairment

Allowance for loan and lease losses
Carrying value (3)
Allowance as a percentage of outstandings (3)

Purchased credit-impaired loans

Allowance for loan and lease losses
Carrying value
Allowance as a percentage of outstandings

Total

Allowance for loan and lease losses
Carrying value (3)
Allowance as a percentage of outstandings (3)

Credit Card
and Other
Consumer

Home Loans

Commercial

Total

$ 1,871
13,904

$ 4,786
11,421

$ 1,080
10,645

$ 7,737
35,970

13.46%

41.91%

10.15%

21.51%

$ 10,964
358,765

$ 10,677
222,967

$ 6,078
282,820

$ 27,719
864,552

3.06%

4.79%

2.15%

3.21%

$ 6,417
36,393

17.63%

n/a
n/a
n/a

12
204
5.76%

$ 6,429
36,597

17.57%

$ 19,252
409,062

$ 15,463
234,388

7,170
293,669

$ 41,885
937,119

4.71%

6.60%

2.44%

4.47%

(1)

Impaired loans include nonperforming commercial loans and all TDRs, including both commercial and consumer TDRs. Impaired loans exclude nonperforming consumer loans unless they are classified as TDRs, and all commercial
loans and leases which are accounted for under the fair value option.

(2) Commercial impaired allowance for loan and lease losses includes $445 million related to U.S. small business commercial renegotiated TDR loans.
(3) Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option. Loans accounted for under the fair value option were $3.3 billion at December 31, 2010.
n/a = not applicable

176

Bank of America 2010

NOTE 8 Securitizations and Other Variable
Interest Entities
The Corporation utilizes VIEs in the ordinary course of business to support its
own and its customers’ financing and investing needs. The Corporation
routinely securitizes loans and debt securities using VIEs as a source of
funding for the Corporation and as a means of transferring the economic risk
of the loans or debt securities to third parties. The Corporation also admin-
isters structures or invests in other VIEs including CDOs, investment vehicles
and other entities.

A VIE is an entity that lacks equity investors or whose equity investors do
not have a controlling financial interest in the entity through their equity
investments. The entity that has a controlling financial interest in a VIE is
referred to as the primary beneficiary and consolidates the VIE. In accordance
with the new consolidation guidance effective January 1, 2010, the Corpo-
ration is deemed to have a controlling financial interest and is the primary
beneficiary of a VIE if it has both the power to direct the activities of the VIE

that most significantly impact the VIE’s economic performance and an obli-
gation to absorb losses or the right to receive benefits that could potentially
be significant to the VIE. As a result of this change in accounting, the
Corporation consolidated certain VIEs and former QSPEs that were previously
unconsolidated. Incremental assets of newly consolidated VIEs on January 1,
2010, after elimination of intercompany balances and net of deferred taxes,
included $69.7 billion in credit card securitizations, $15.6 billion in commer-
cial paper conduits, $4.7 billion in home equity securitizations, $4.7 billion in
municipal bond trusts and $5.7 billion in other VIEs. The net incremental
impact of this accounting change on the Corporation’s Consolidated Balance
Sheet is set forth in the table below. The net effect of the accounting change
on January 1, 2010 shareholders’ equity was a $6.2 billion charge to retained
earnings, net-of-tax, primarily from the increase in the allowance for loan and
lease losses, as well as a $116 million charge to accumulated OCI, net-of-tax,
for the net unrealized losses on AFS debt securities in newly consolidated
VIEs.

(Dollars in millions)

Assets
Cash and cash equivalents
Trading account assets
Derivative assets
Debt securities:

Available-for-sale
Held-to-maturity

Total debt securities

Loans and leases
Allowance for loan and lease losses

Loans and leases, net of allowance

Loans held-for-sale
Deferred tax asset
All other assets

Total assets

Liabilities
Commercial paper and other short-term borrowings
Long-term debt
All other liabilities

Total liabilities

Shareholders’ equity
Retained earnings
Accumulated other comprehensive income (loss)
All other shareholders’ equity

Total shareholders’ equity

Total liabilities and shareholders’ equity

Ending
Balance Sheet
December 31, 2009

Net Increase
(Decrease)

Beginning
Balance Sheet
January 1, 2010

$ 121,339
182,206
87,622

$ 2,807
6,937
556

$ 124,146
189,143
88,178

301,601
9,840

311,441

900,128
(37,200)

862,928

43,874
27,279
593,543

(2,320)
(6,572)

(8,892)

102,595
(10,788)

91,807

3,025
3,498
701

299,281
3,268

302,549

1,002,723
(47,988)

954,735

46,899
30,777
594,244

$2,230,232

$100,439

$2,330,671

69,524
438,521
1,490,743

$ 22,136
84,356
217

91,660
522,877
1,490,960

1,998,788

106,709

2,105,497

71,233
(5,619)
165,830

231,444

(6,154)
(116)
–

(6,270)

65,079
(5,735)
165,830

225,174

$2,230,232

$100,439

$2,330,671

Bank of America 2010

177

The following tables present the assets and liabilities of consolidated and
unconsolidated VIEs at December 31, 2010 and 2009, in situations where
the Corporation has continuing involvement with transferred assets or if the
Corporation otherwise has a variable interest in the VIE. The tables also
present the Corporation’s maximum exposure to loss at December 31, 2010
and 2009 resulting from its involvement with consolidated VIEs and uncon-
solidated VIEs in which the Corporation holds a variable interest. The Corpo-
ration’s maximum exposure to loss is based on the unlikely event that all of
the assets in the VIEs become worthless and incorporates not only potential
losses associated with assets recorded on the Corporation’s Consolidated
Balance Sheet but also potential losses associated with off-balance sheet
commitments such as unfunded liquidity commitments and other contractual
arrangements. The Corporation’s maximum exposure to loss does not include
losses previously recognized through write-downs of assets on the Corpora-
tion’s Consolidated Balance Sheet.

The Corporation invests in asset-backed securities issued by third-party
VIEs with which it has no other form of involvement. These securities are
included in Note 3 – Trading Account Assets and Liabilities and Note 5 –
Securities. In addition, the Corporation uses VIEs such as trust preferred
securities trusts in connection with its funding activities as described in
Note 13 – Long-term Debt. The Corporation also uses VIEs in the form of
synthetic securitization vehicles to mitigate a portion of the credit risk on its
residential mortgage loan portfolio, as described in Note 6 – Outstanding
Loans and Leases. The Corporation uses VIEs, such as cash funds managed
within GWIM, to provide investment opportunities for clients. Prior to 2010,
the Corporation provided support to certain of these cash funds in the form of
capital commitments in the event the net asset value per unit of a fund
declined below certain thresholds. The Corporation recorded a loss of

$195 million in 2009 as the result of these commitments, which were
terminated in 2009. These VIEs, which are not consolidated by the Corpo-
ration, are not included in the tables within this Note.

Except as described below and with regard to the cash funds, as of
December 31, 2010, the Corporation has not provided financial support to
consolidated or unconsolidated VIEs that it was not previously contractually
required to provide, nor does it intend to do so.

Mortgage-related Securitizations

First-lien Mortgages
As part of its mortgage banking activities, the Corporation securitizes a
portion of the first-lien residential mortgage loans it originates or purchases
from third parties, generally in the form of MBS guaranteed by GSEs, or GNMA
in the case of FHA-insured and U.S. Department of Veteran Affairs (VA)-
guaranteed mortgage loans. Securitization occurs in conjunction with or
shortly after loan closing or purchase. In addition, the Corporation may, from
time to time, securitize commercial mortgages it originates or purchases from
other entities. The Corporation typically services the loans it securitizes.
Further, the Corporation may retain beneficial interests in the securitization
trusts including senior and subordinate securities and equity tranches issued
by the trusts. Except as described below and in Note 9 – Representations and
Warranties Obligations and Corporate Guarantees, the Corporation does not
provide guarantees or recourse to the securitization trusts other than stan-
dard representations and warranties.

The table below summarizes select information related to first-lien mort-

gage securitizations for 2010 and 2009.

(Dollars in millions)
Cash proceeds from new securitizations (1)
Gain (loss) on securitizations, net of hedges (2)
Cash flows received on residual interests

Residential Mortgage

Agency

Prime

Non-Agency

Subprime

Alt-A

Commercial
Mortgage

2010

2009

2010

2009

2010

2009

2010

2009

2010

2009

$243,901
(473)
–

$346,448
73
–

$ –
–
18

$ –
–
25

$ –
–
58

$ –
–
71

$7
–
2

$ –
–
5

$4,227
–
20

$313
–
23

(1) The Corporation sells residential mortgage loans to GSEs in the normal course of business and receives MBS in exchange which may then be sold into the market to third-party investors for cash proceeds.
(2) Substantially all of the first-lien residential mortgage loans securitized are initially classified as LHFS and accounted for under the fair value option. As such, gains are recognized on these LHFS prior to securitization. During 2010 and

2009, the Corporation recognized $5.1 billion and $5.5 billion of gains on these LHFS, net of hedges.

In addition to cash proceeds as reported in the table above, the Corpo-
ration received securities with an initial fair value of $23.7 billion in connec-
tion with agency first-lien residential mortgage securitizations in 2010. All of
these securities were initially classified as Level 2 assets within the fair value
hierarchy. During 2010, there were no changes to the initial classification.
The Corporation recognizes consumer MSRs from the sale or securitiza-
tion of first-lien mortgage loans. Servicing fee and ancillary fee income on
consumer mortgage loans serviced, including securitizations where the Cor-
poration has continuing involvement, were $6.4 billion and $6.2 billion in
2010 and 2009. Servicing advances on consumer mortgage loans, including
securitizations where the Corporation has continuing involvement, were
$24.3 billion and $19.3 billion at December 31, 2010 and 2009. The
Corporation may have the option to repurchase delinquent loans out of

securitization trusts, which reduces the amount of servicing advances it is
required to make. During 2010 and 2009, $14.5 billion and $13.1 billion of
loans were repurchased from first-lien securitization trusts as a result of loan
delinquencies or in order to perform modifications. The majority of these
loans repurchased were FHA insured mortgages collateralizing GNMA secu-
rities. In addition, the Corporation has retained commercial MSRs from the
sale or securitization of commercial mortgage loans. Servicing fee and an-
cillary fee income on commercial mortgage loans serviced, including securi-
tizations where the Corporation has continuing involvement, were $21 million
and $49 million in 2010 and 2009. Servicing advances on commercial
mortgage loans, including securitizations where the Corporation has continu-
ing involvement, were $156 million and $109 million at December 31, 2010
and 2009.

178

Bank of America 2010

The table below summarizes select information related to first-lien mortgage securitization trusts in which the Corporation held a variable interest at

December 31, 2010 and 2009.

Residential Mortgage

Agency

December 31

Prime

Non-Agency

Subprime

December 31

Alt-A

Commercial Mortgage

December 31

2010

2009

2010

2009

2010

2009

2010

2009

2010

2009

44,988

14,398

$ 2,794

$ 4,068

416

224

651

996

$ 1,199

$ 1,877

9,526
35,400

2,295
12,103

147
2,593

201
3,845

126
234

12
188

645
–

431
561

146
984

469
1,215

–
–
62
–

–
–
–
–

–
39
6
9

–
13
9
–

12
35
9
–

–
22
2
–

–
6
–
–

–
4
–
–

61
–

122
23
48
–

44,988

14,398

$ 2,794

$ 4,068

416

224

651

996

$ 1,199

$ 1,877

$1,297,159

$1,255,650

$75,762

$81,012

$92,710

$83,065

$116,233

$147,072

$73,597

$65,397

32,746

32,563
(37)
–
220

32,746

–
3

1,683

1,689
(6)
–
–

1,683

–
–

–

–
–
–
46

–
9

472

–
–
436
86

522

48
3

$ 1,261

–
–
732
16

748

–
768

768

450
–
2,030
271

$ 2,751

$ 1,737
3

$ 1,740

–

–
–
–
–

–

–
–

–

–
–
–
–

–

–
–

–

–
–
–
–

–

–
–

–

–
–
–
–

–

–
–

–

(Dollars in millions)

Unconsolidated VIEs
Maximum loss exposure (1)
On-balance sheet assets

Senior securities held (2):

Trading account assets
AFS debt securities

Subordinate securities held (2):
Trading account assets
AFS debt securities
Residual interests held
All other assets

Total retained positions
Principal balance outstanding (3)
Consolidated VIEs
Maximum loss exposure (1)
On-balance sheet assets
Loans and leases
Allowance for loan and lease losses
Loans held-for-sale
All other assets

Total assets

On-balance sheet liabilities

Long-term debt
All other liabilities

Total liabilities

(1) Maximum loss exposure excludes the liability for representations and warranties obligations and corporate guarantees and also excludes servicing advances. For more information, see Note 9 – Representations and Warranties

Obligations and Corporate Guarantees.

(2) As a holder of these securities, the Corporation receives scheduled principal and interest payments. During 2010 and 2009, there were no OTTI losses recorded on those securities classified as AFS debt securities.
(3) Principal balance outstanding includes loans the Corporation transferred with which the Corporation has continuing involvement, which may include servicing the loans.

Bank of America 2010

179

Home Equity Mortgages

The Corporation maintains interests in home equity securitization trusts to
which the Corporation transferred home equity loans. These retained inter-
ests include senior and subordinate securities and residual interests. In
addition, the Corporation may be obligated to provide subordinate funding to
the trusts during a rapid amortization event. The Corporation also services the
loans in the trusts. Except as described below and in Note 9 – Representa-
tions and Warranties Obligations and Corporate Guarantees, the Corporation
does not provide guarantees or recourse to the securitization trusts other

than standard representations and warranties. There were no securitizations
of home equity loans during 2010 and 2009. Collections reinvested in
revolving period securitizations were $21 million and $177 million during
2010 and 2009. Cash flows received on residual interests were $12 million
and $35 million in 2010 and 2009.

The table below summarizes select information related to home equity
loan securitization trusts in which the Corporation held a variable interest at
December 31, 2010 and 2009.

(Dollars in millions)
Maximum loss exposure (1)
On-balance sheet assets

Trading account assets (2, 3)
Available-for-sale debt securities (3, 4)
Loans and leases
Allowance for loan and lease losses

Total

On-balance sheet liabilities

Long-term debt
All other liabilities

Total

Principal balance outstanding

December 31

2010

Retained
Interests in
Unconsolidated
VIEs

2009

Retained
Interests in
Unconsolidated
VIEs

Total

Consolidated
VIEs

$3,192

$ 9,132

$12,324

$13,947

–
–
3,529
(337)

$3,192

$3,635
23

$3,658

$3,529

209
35
–
–

244

209
35
3,529
(337)

$ 3,436

–
–

–

$ 3,635
23

$ 3,658

16
147
–
–

163

–
–

–

$20,095

$23,624

$31,869

(1) For unconsolidated VIEs, the maximum loss exposure includes outstanding trust certificates issued by trusts in rapid amortization, net of recorded reserves, and excludes the liability for representations and warranties and corporate

guarantees.

(2) At December 31, 2010 and 2009, $204 million and $15 million of the debt securities classified as trading account assets were senior securities and $5 million and $1 million were subordinate securities.
(3) As a holder of these securities, the Corporation receives scheduled principal and interest payments. During 2010 and 2009, there were no OTTI losses recorded on those securities classified as AFS debt securities.
(4) At December 31, 2010 and 2009, $35 million and $47 million represent subordinate debt securities held. At December 31, 2009, $100 million are residual interests classified as AFS debt securities.

Under the terms of the Corporation’s home equity loan securitizations,
advances are made to borrowers when they draw on their lines of credit and
the Corporation is reimbursed for those advances from the cash flows in the
securitization. During the revolving period of the securitization, this reimburse-
ment normally occurs within a short period after the advance. However, when
certain securitization transactions have begun a rapid amortization period,
reimbursement of the Corporation’s advance occurs only after other parties in
the securitization have received all of the cash flows to which they are entitled.
This has the effect of extending the time period for which the Corporation’s
advances are outstanding. In addition, if loan losses requiring draws on
monoline insurers’ policies, which protect the bondholders in the securitiza-
tion, exceed a specified threshold or duration, the Corporation may not receive
reimbursement for all of the funds advanced to borrowers, as the senior
bondholders and the monoline insurers have priority for repayment.

Substantially all of the home equity loan securitizations for which the
Corporation has an obligation to provide subordinate advances have entered
rapid amortization. The Corporation evaluates each of these securitizations
for potential
losses due to non-recoverable advances by estimating the
amount and timing of future losses on the underlying loans, the excess
spread available to cover such losses and potential cash flow shortfalls during
rapid amortization. A maximum funding obligation attributable to rapid

amortization cannot be calculated as a home equity borrower has the ability
to pay down and re-draw balances. At December 31, 2010 and 2009, home
equity loan securitization transactions in rapid amortization, including both
consolidated and unconsolidated trusts, had $12.5 billion and $14.1 billion
of trust certificates outstanding. This amount is significantly greater than the
amount the Corporation expects to fund. At December 31, 2010, the remain-
ing $93 million of trust certificates outstanding related to these types of
securitization transactions are expected to enter rapid amortization during the
next 12 months. The charges that will ultimately be recorded as a result of the
rapid amortization events depend on the performance of the loans, the
amount of subsequent draws and the timing of related cash flows. At De-
cember 31, 2010 and 2009, the reserve for losses on expected future draw
obligations on the home equity loan securitizations in or expected to be in
rapid amortization was $131 million and $178 million.

The Corporation has consumer MSRs from the sale or securitization of
home equity loans. The Corporation recorded $79 million and $128 million of
servicing fee income related to home equity securitizations during 2010 and
2009. The Corporation repurchased $17 million and $31 million of loans from
home equity securitization trusts in order to perform modifications or pursu-
ant to clean up calls during 2010 and 2009.

180

Bank of America 2010

Credit Card Securitizations
The Corporation securitizes originated and purchased credit card loans. The
Corporation’s continuing involvement with the securitization trusts includes
servicing the receivables, retaining an undivided interest (seller’s interest) in
the receivables, and holding certain retained interests including senior and
subordinate securities, discount receivables, subordinate interests in ac-
crued interest and fees on the securitized receivables, and cash reserve
accounts. The Corporation consolidated all credit card securitization trusts on

January 1, 2010 in accordance with new consolidation guidance. Certain
retained interests, including senior and subordinate securities, were elimi-
nated in consolidation. The seller’s interest in the trusts, which is pari passu
to the investors’ interest, and the discount receivables continue to be clas-
sified in loans and leases.

The table below summarizes select information related to credit card
securitization trusts in which the Corporation held a variable interest at
December 31, 2010 and 2009.

(Dollars in millions)
Maximum loss exposure (1)
On-balance sheet assets

Trading account assets
Available-for-sale debt securities (2)
Held-to-maturity securities (2)
Loans and leases (3)
Allowance for loan and lease losses
Derivative assets
All other assets (4)

Total

On-balance sheet liabilities

Long-term debt
All other liabilities

Total

Trust loans

December 31

2010

2009

Consolidated
VIEs

Retained Interests in
Unconsolidated VIEs

$36,596

$ 32,167

–
–
–
92,104
(8,505)
1,778
4,259

$89,636

$52,781
259

$53,040

$92,104

80
8,501
6,573
14,905
(1,727)
–
1,547

$ 29,879

–
–

–

$103,309

(1) At December 31, 2009, maximum loss exposure represents the total retained interests held by the Corporation and also includes $2.3 billion related to a liquidity support commitment the Corporation provided to one of the U.S. Credit

Card Securitization Trust’s commercial paper program. This commercial paper program was terminated in 2010.

(2) As a holder of these securities, the Corporation receives scheduled principal and interest payments. During 2009, there were no OTTI losses recorded on those securities classified as AFS or HTM debt securities.
(3) At December 31, 2010 and 2009, loans and leases includes $20.4 billion and $10.8 billion of seller’s interest and $3.8 billion and $4.1 billion of discount receivables.
(4) At December 31, 2010, all other assets includes restricted cash accounts and unbilled accrued interest and fees. At December 31, 2009, all other assets includes discount subordinate interests in accrued interest and fees on the

securitized receivables, cash reserve accounts and interest-only strips which are carried at fair value.

During 2010, $2.9 billion of new senior debt securities were issued to
external investors from the credit card securitization trusts. There were no
new debt securities issued to external investors from the credit card secu-
ritization trusts during 2009. Collections reinvested in revolving period se-
curitizations were $133.8 billion and cash flows received on residual interests
were $5.5 billion during 2009.

At December 31, 2009, there were no recognized servicing assets or
liabilities associated with any of the credit card securitization transactions.
The Corporation recorded $2.0 billion in servicing fees related to credit card
securitizations during 2009.

During 2010 and 2009, subordinate securities with a notional principal
amount of $11.5 billion and $7.8 billion and a stated interest rate of zero
percent were issued by certain credit card securitization trusts to the Corpo-
ration. In addition, the Corporation has elected to designate a specified
percentage of new receivables transferred to the trusts as “discount

receivables” such that principal collections thereon are added to finance
charges which increases the yield in the trust. Through the designation of
newly transferred receivables as discount receivables, the Corporation has
subordinated a portion of its seller’s interest to the investors’ interest. These
actions, which were specifically permitted by the terms of the trust docu-
ments, were taken in an effort to address the decline in the excess spread of
the U.S. and U.K. Credit Card Securitization Trusts. As these trusts were
consolidated on January 1, 2010, the issuance of subordinate securities and
the discount receivables election had no impact on the Corporation’s con-
solidated results during 2010 or 2009. At December 31, 2009, the carrying
amount and fair value of the retained subordinate securities were $6.6 billion
and $6.4 billion. These balances were eliminated on January 1, 2010 with the
consolidation of the trusts. The outstanding principal balance of discount
receivables, which are classified in loans and leases, was $3.8 billion and
$4.1 billion at December 31, 2010 and 2009.

Bank of America 2010

181

Other Asset-backed Securitizations
Other asset-backed securitizations include resecuritization trusts, municipal bond trusts, and automobile and other securitization trusts. The table below
summarizes select information related to other asset-backed securitizations in which the Corporation held a variable interest at December 31, 2010 and 2009.

(Dollars in millions)

Unconsolidated VIEs
Maximum loss exposure

On-balance sheet assets

Senior securities held (1, 2):
Trading account assets
AFS debt securities

Subordinate securities held (1, 2):
Trading account assets
AFS debt securities
Residual interests held (3)
All other assets

Total retained positions

Total assets of VIEs

Consolidated VIEs
Maximum loss exposure

On-balance sheet assets

Trading account assets
Loans and leases
Allowance for loan and lease losses
All other assets

Total assets

On-balance sheet liabilities

Commercial paper and other short-term borrowings
Long-term debt
All other liabilities

Total liabilities

Resecuritization
Trusts

December 31

Municipal Bond
Trusts

December 31

Automobile and
Other
Securitization Trusts

December 31

2010

2009

2010

2009

2010

2009

$21,425

$ 543

$4,261

$10,143

$ 141

$2,511

$ 2,324
17,989

$ 543
–

$ 255
–

2
1,036
74
–

–
–
–
–

$21,425

$ 543

$ 255

155
–

–
–
203
–

358

$55,006

$7,443

$6,108

$12,247

–

68
–
–
–

–
68
–

–

–
–
–
–

–

–
–
–

–

$4,716

$4,716
–
–
–

$4,716

$4,921
–
–

$4,921

241

241
–
–
–

241

–
–
2

–
109

–
2,212

–
–
–
17

–
195
83
5

$ 126

$ 774

$2,495

$3,636

$2,061

$ 908

–
9,583
(29)
196

–
8,292
(101)
25

$9,750

$8,216

–
7,681
101

$7,782

–
7,308
–

$7,308

(1) As a holder of these securities, the Corporation receives scheduled principal and interest payments. During 2010 and 2009, there were no significant OTTI losses recorded on those securities classified as AFS debt securities.
(2) The retained senior and subordinate securities were valued using quoted market prices or observable market inputs (Level 2 of the fair value hierarchy).
(3) The retained residual interests are carried at fair value which was derived using model valuations (Level 3 of the fair value hierarchy).

Municipal Bond Trusts
The Corporation administers municipal bond trusts that hold highly rated,
long-term, fixed-rate municipal bonds. The vast majority of the bonds are rated
AAA or AA and some of the bonds benefit from insurance provided by mono-
lines. The trusts obtain financing by issuing floating-rate trust certificates that
reprice on a weekly or other basis to third-party investors. The Corporation may
serve as remarketing agent and/or liquidity provider for the trusts. The
floating-rate investors have the right to tender the certificates at specified
dates, often with as little as seven days’ notice. Should the Corporation be
unable to remarket the tendered certificates, it is generally obligated to
purchase them at par under standby liquidity facilities unless the bond’s
credit rating has declined below investment-grade or there has been an event
of default or bankruptcy of the issuer and insurer.

Resecuritization Trusts
The Corporation transfers existing securities, typically MBS, into resecuritiza-
tion vehicles at the request of customers seeking securities with specific
characteristics. The Corporation may also enter into resecuritizations of
securities within its investment portfolio for purposes of improving liquidity
and capital, and managing credit or interest rate risk. Generally, there are no
significant ongoing activities performed in a resecuritization trust and no
single investor has the unilateral ability to liquidate the trust.

During 2010, the Corporation resecuritized $97.7 billion of MBS, including
$71.3 billion of securities purchased from third parties compared to $49.2 bil-
lion in 2009. Net losses upon sale totaled $144 million during 2010 com-
pared to net gains of $213 million in 2009. The Corporation consolidates a
resecuritization trust if it has sole discretion over the design of the trust,
including the identification of securities to be transferred in and the structure
of securities to be issued, and also retains a variable interest that could
potentially be significant to the trust. If one or a limited number of third-party
investors share responsibility for the design of the trust and purchase a
significant portion of subordinate securities, the Corporation does not con-
solidate the trust. Prior to 2010, these resecuritization trusts were typically
QSPEs and as such were not subject to consolidation by the Corporation.

182

Bank of America 2010

The Corporation also provides credit enhancement to investors in certain
municipal bond trusts whereby the Corporation guarantees the payment of
interest and principal on floating-rate certificates issued by these trusts in the
event of default by the issuer of the underlying municipal bond. If a customer
holds the residual interest in a trust, that customer typically has the unilateral
ability to liquidate the trust at any time, while the Corporation typically has the
ability to trigger the liquidation of that trust if the market value of the bonds
held in the trust declines below a specified threshold. This arrangement is
designed to limit market losses to an amount that is less than the customer’s
residual interest, effectively preventing the Corporation from absorbing losses
incurred on assets held within that trust. The weighted-average remaining life
of bonds held in the trusts at December 31, 2010 was 13.3 years. There were
no material write-downs or downgrades of assets or issuers during 2010.

During 2010 and 2009, the Corporation was the transferor of assets into
unconsolidated municipal bond trusts and received cash proceeds from new
securitizations of $1.2 billion and $664 million. At December 31, 2010 and
2009, the principal balance outstanding for unconsolidated municipal bond
securitization trusts for which the Corporation was transferor was $2.2 billion
and $6.9 billion.

The Corporation’s liquidity commitments to unconsolidated municipal
bond trusts, including those for which the Corporation was transferor, totaled
$4.0 billion and $9.8 billion at December 31, 2010 and 2009.

Automobile and Other Securitization Trusts
The Corporation transfers automobile and other loans into securitization
trusts, typically to improve liquidity or manage credit risk. At December 31,
the Corporation serviced assets or otherwise had continuing
2010,

involvement with automobile and other securitization trusts with outstanding
balances of $10.5 billion, including trusts collateralized by automobile loans
of $8.4 billion, student loans of $1.3 billion, and other loans and receivables
of $774 million. At December 31, 2009, the Corporation serviced assets or
otherwise had continuing involvement with automobile and other securitiza-
tion trusts with outstanding balances of $11.9 billion, including trusts col-
lateralized by automobile loans of $11.0 billion and other loans of $905 mil-
lion. The Corporation transferred $3.0 billion of automobile loans, $1.3 billion
of student loans and $303 million of other receivables to the trusts during
2010 and $9.0 billion of automobile loans during 2009.

Multi-seller Conduits
The Corporation previously administered four multi-seller conduits which
provided a low-cost funding alternative to the conduits’ customers by facili-
tating access to the commercial paper market. These customers sold or
otherwise transferred assets to the conduits, which in turn issued short-term
commercial paper that was rated high-grade and was collateralized by the
underlying assets. The Corporation provided combinations of liquidity and
SBLCs to the conduits for the benefit of third-party investors. These commit-
ments had an aggregate notional amount outstanding of $34.5 billion at
December 31, 2009. The Corporation liquidated the four conduits and ter-
minated all liquidity and other commitments during 2010. Liquidation of the
conduits did not impact the Corporation’s consolidated results of operations.
The table below summarizes select information related to multi-seller
conduits in which the Corporation held a variable interest at December 31,
2009.

(Dollars in millions)

Maximum loss exposure

On-balance sheet assets

Available-for-sale debt securities
Held-to-maturity debt securities
Loans and leases
All other assets

Total

On-balance sheet liabilities

Commercial paper and other short-term borrowings

Total

Total assets of VIEs

December 31, 2009

Consolidated

Unconsolidated

Total

$9,388

$25,135

$34,523

$3,492
2,899
318
4

$6,713

$6,748

$6,713

–
–
318
60

378

$ 3,492
2,899
636
64

$ 7,091

–

$ 6,748

$13,893

$20,606

Bank of America 2010

183

Collateralized Debt Obligation Vehicles
CDO vehicles hold diversified pools of fixed-income securities, typically cor-
porate debt or asset-backed securities, which they fund by issuing multiple
tranches of debt and equity securities. Synthetic CDOs enter into a portfolio of
credit default swaps to synthetically create exposure to fixed-income securi-
ties. CLOs are a subset of CDOs which hold pools of loans, typically corporate
loans or commercial mortgages. CDOs are typically managed by third-party
portfolio managers. The Corporation transfers assets to these CDOs, holds
securities issued by the CDOs and may be a derivative counterparty to the
CDOs, including a credit default swap counterparty for synthetic CDOs. The

Corporation has also entered into total return swaps with certain CDOs
whereby the Corporation absorbs the economic returns generated by spec-
ified assets held by the CDO. The Corporation receives fees for structuring
CDOs and providing liquidity support for super senior tranches of securities
issued by certain CDOs. No third parties provide a significant amount of
similar commitments to these CDOs.

The table below summarizes select information related to CDO vehicles in
which the Corporation held a variable interest at December 31, 2010 and
2009.

(Dollars in millions)
Maximum loss exposure (1)
On-balance sheet assets

Trading account assets
Derivative assets
Available-for-sale debt securities
All other assets

Total

On-balance sheet liabilities
Derivative liabilities
Long-term debt

Total

Total assets of VIEs

December 31

2010

2009

Consolidated

Unconsolidated

Total

Consolidated

Unconsolidated

Total

$2,971

$ 3,828

$ 6,799

$3,863

$ 6,987

$10,850

$2,485
207
769
24

$3,485

–
3,162

$3,162

$3,485

884
890
338
123

$ 3,369
1,097
1,107
147

$ 2,235

$ 5,720

58
–

58
3,162

$ 3,220

$43,476

$46,961

$2,785
–
1,414
–

$4,199

–
2,753

$2,753

$4,199

$ 1,253
2,085
368
166

$ 4,038
2,085
1,782
166

$ 3,872

$ 8,071

781
–

781

781
2,753

$ 3,534

$56,590

$60,789

(1) Maximum loss exposure is net of credit protection purchased from the CDO with which the Corporation has involvement but has not been reduced to reflect the benefit of insurance purchased from other third parties.

The Corporation’s maximum loss exposure of $6.8 billion at December 31,
2010 includes $1.8 billion of super senior CDO exposure, $2.2 billion of
exposure to CDO financing facilities and $2.8 billion of other non-super senior
exposure. This exposure is calculated on a gross basis and does not reflect
any benefit from insurance purchased from third parties other than the CDO
itself. Net of purchased insurance but including securities retained from
liquidations of CDOs, the Corporation’s net exposure to super senior CDO-
related positions was $1.2 billion at December 31, 2010. The CDO financing
facilities, which are consolidated, obtain funding from third parties for CDO
positions which are principally classified in trading account assets on the
Corporation’s Consolidated Balance Sheet. The CDO financing facilities’ long-
term debt at December 31, 2010 totaled $2.6 billion, all of which has
recourse to the general credit of the Corporation.

At December 31, 2010, the Corporation had $951 million notional amount
of super senior CDO liquidity exposure, including derivatives and other expo-
sures with third parties that hold super senior cash positions on the Corpo-
ration’s behalf and to certain synthetic CDOs through which the Corporation is
obligated to purchase super senior CDO securities at par value if the CDOs

need cash to make payments due under credit default swaps written by the
CDO vehicles. Liquidity-related commitments also include $1.7 billion notional
amount of derivative contracts with unconsolidated special purpose entities
(SPEs), principally CDO vehicles, which hold non-super senior CDO debt
securities or other debt securities on the Corporation’s behalf. These deriv-
atives comprise substantially all of the $1.7 billion notional amount of deriv-
ative contracts through which the Corporation obtains funding from third-party
SPEs, as described in Note 14 – Commitments and Contingencies. The
Corporation’s $2.7 billion of aggregate liquidity exposure to CDOs at Decem-
ber 31, 2010 is included in the table above to the extent that the Corporation
sponsored the CDO vehicle or the liquidity exposure is more than insignificant
compared to total assets of the CDO vehicle. Liquidity exposure included in
the table is reported net of previously recorded losses.

The Corporation’s maximum exposure to loss is significantly less than the
total assets of the CDO vehicles in the table above because the Corporation
typically has exposure to only a portion of the total assets. The Corporation
has also purchased credit protection from some of the same CDO vehicles in
which it invested, thus reducing the Corporation’s maximum exposure to loss.

184

Bank of America 2010

Customer Vehicles
Customer vehicles include credit-linked and equity-linked note vehicles, repackaging vehicles and asset acquisition vehicles, which are typically created on
behalf of customers who wish to obtain market or credit exposure to a specific company or financial instrument.

The table below summarizes select information related to customer vehicles in which the Corporation held a variable interest at December 31, 2010 and

2009.

(Dollars in millions)

Maximum loss exposure

On-balance sheet assets

Trading account assets
Derivative assets
Loans and leases
Loans held-for-sale
All other assets

Total

On-balance sheet liabilities
Derivative liabilities
Commercial paper and other short-term borrowings
Long-term debt
All other liabilities

Total

Total assets of VIEs

Credit-linked and equity-linked note vehicles issue notes which pay a
return that is linked to the credit or equity risk of a specified company or
debt instrument. The vehicles purchase high-grade assets as collateral and
enter into credit default swaps or equity derivatives to synthetically create the
credit or equity risk to pay the specified return on the notes. The Corporation is
typically the counterparty for some or all of the credit and equity derivatives
and, to a lesser extent, it may invest in securities issued by the vehicles. The
Corporation may also enter into interest rate or foreign currency derivatives
with the vehicles. The Corporation also had approximately $338 million of
other liquidity commitments, including written put options and collateral value
guarantees, with unconsolidated credit-linked and equity-linked note vehicles
at December 31, 2010.

Repackaging vehicles issue notes that are designed to incorporate risk
characteristics desired by customers. The vehicles hold debt instruments
such as corporate bonds, convertible bonds or asset-backed securities with
the desired credit risk profile. The Corporation enters into derivatives with the
vehicles to change the interest rate or foreign currency profile of the debt
instruments. If a vehicle holds convertible bonds and the Corporation retains

December 31

2010

2009

Consolidated

Unconsolidated

Total

Consolidated

Unconsolidated

Total

$4,449

$2,735

$ 7,184

$277

$10,229

$10,506

$3,458
1
–
959
1,429

$5,847

1
–
3,457
–

$3,458

$5,847

$ 876
722
–
–
–

$ 4,334
723
–
959
1,429

$1,598

$ 7,445

23
–
–
140

24
–
3,457
140

$ 163

$ 3,621

$6,090

$11,937

$183
78
–
–
16

$277

–
22
50
–

$ 72

$277

$ 1,334
4,815
65
–
–

$ 1,517
4,893
65
–
16

$ 6,214

$ 6,491

267
–
74
1,357

267
22
124
1,357

$ 1,698

$ 1,770

$16,487

$16,764

the conversion option, the Corporation is deemed to have controlling financial
interest and consolidates the vehicle.

Asset acquisition vehicles acquire financial instruments, typically loans, at
the direction of a single customer and obtain funding through the issuance of
structured notes to the Corporation. At the time the vehicle acquires an asset,
the Corporation enters into total return swaps with the customer such that the
economic returns of the asset are passed through to the customer. The
Corporation is exposed to counterparty credit risk if the asset declines in value
and the customer defaults on its obligation to the Corporation under the total
return swaps. The Corporation’s risk may be mitigated by collateral or other
arrangements. The Corporation consolidates these vehicles because it has
the power to manage the assets in the vehicles and owns all of the structured
notes issued by the vehicles.

The Corporation’s maximum exposure to loss from customer vehicles
includes the notional amount of the credit or equity derivatives to which the
Corporation is a counterparty, net of losses previously recorded, and the
Corporation’s investment, if any, in securities issued by the vehicles. It has not
been reduced to reflect the benefit of offsetting swaps with the customers or
collateral arrangements.

Bank of America 2010

185

Other Variable Interest Entities
Other consolidated VIEs primarily include investment vehicles, a collective investment fund, leveraged lease trusts and asset acquisition conduits. Other
unconsolidated VIEs primarily include investment vehicles and real estate vehicles.

The table below summarizes select information related to other VIEs in which the Corporation held a variable interest at December 31, 2010 and 2009.

(Dollars in millions)

Maximum loss exposure

On-balance sheet assets

Trading account assets
Derivative assets
Available-for-sale debt securities
Loans and leases
Allowance for loan and lease losses
Loans held-for-sale
All other assets

Total

On-balance sheet liabilities
Derivative liabilities
Commercial paper and other short-term borrowings
Long-term debt
All other liabilities

Total

Total assets of VIEs

Investment Vehicles
The Corporation sponsors, invests in or provides financing to a variety of
investment vehicles that hold loans, real estate, debt securities or other
financial instruments and are designed to provide the desired investment
profile to investors. At December 31, 2010 and 2009, the Corporation’s
consolidated investment vehicles had total assets of $5.6 billion and $5.7 bil-
lion. The Corporation also held investments in unconsolidated vehicles with
total assets of $7.9 billion and $8.8 billion at December 31, 2010 and 2009.
The Corporation’s maximum exposure to loss associated with both consol-
idated and unconsolidated investment vehicles totaled $8.7 billion and
$10.7 billion at December 31, 2010 and 2009.

On January 1, 2010, the Corporation consolidated $2.5 billion of invest-
ment vehicles. This amount included a real estate investment fund with
assets of $1.5 billion which is designed to provide returns to clients through
limited partnership holdings. At that time, the Corporation was the general
partner and also had a limited partnership interest in the fund. The Corpo-
ration provided support to the fund and therefore considers the fund to be a
VIE. In late 2010, the Corporation transferred its general partnership interest
to a third party, conveying all ongoing management responsibilities to that
third party. As a result, the Corporation deconsolidated the fund because it no
longer has a controlling financial interest. The Corporation continues to retain
a limited partnership interest, which is included in the table above.

December 31

2010

2009

Consolidated

Unconsolidated

Total

Consolidated

Unconsolidated

Total

$19,248

$ 8,796

$28,044

$12,073

$11,290

$23,363

$ 8,900
–
1,832
7,690
(27)
262
937

$19,594

–
1,115
229
8,683

$10,027

$19,594

–
228
73
1,122
(22)
949
6,440

$ 8,900
228
1,905
8,812
(49)
1,211
7,377

269
1,096
1,822
7,820
(29)
197
1,285

–
83
–
1,200
(10)
–
8,777

269
1,179
1,822
9,020
(39)
197
10,062

$ 8,790

$28,384

$12,460

$10,050

$22,510

9
–
–
1,657

9
1,115
229
10,340

$ 1,666

$11,693

$13,416

$33,010

–
965
33
3,123

$ 4,121

$12,460

80
–
–
1,466

80
965
33
4,589

$ 1,546

$ 5,667

$14,819

$27,279

Collective Investment Funds
The Corporation is trustee for certain common and collective investment
funds that provide investment opportunities for eligible clients of GWIM.
These funds, which had total assets of $21.2 billion at December 31,
2010, hold a variety of cash, debt and equity investments. The Corporation
does not have a variable interest in these funds, except as described below.
In 2010, the governing documents of a stable value collective investment
fund with total assets of $8.1 billion at December 31, 2010 were modified to
facilitate the planned liquidation of the fund. The modifications resulted in the
termination of third-party insurance contracts which were replaced by a
guarantee from the Corporation of the net asset value of the fund, which
principally holds short-term U.S. Treasury and agency securities. In addition,
the Corporation acquired the unilateral ability to replace the fund’s asset
manager. As a result of these changes, the Corporation acquired a controlling
financial interest in and consolidated the fund. Consolidation did not have a
significant impact on the Corporation’s 2010 results of operations. This fund
was not previously consolidated because the Corporation did not have the
unilateral power to replace the asset manager, nor did it have a variable
interest in the fund that was more than insignificant. Liquidation of the fund
will be finalized in 2011.

186

Bank of America 2010

Leveraged Lease Trusts
The Corporation’s net investment in consolidated leveraged lease trusts
totaled $5.2 billion and $5.6 billion at December 31, 2010 and 2009. The
trusts hold long-lived equipment such as rail cars, power generation and
distribution equipment, and commercial aircraft. The Corporation structures
the trusts and holds a significant residual
interest. The net investment
represents the Corporation’s maximum loss exposure to the trusts in the
unlikely event that the leveraged lease investments become worthless. Debt
issued by the leveraged lease trusts is nonrecourse to the Corporation. The
Corporation has no liquidity exposure to these leveraged lease trusts.

Asset Acquisition Conduits
The Corporation currently administers two asset acquisition conduits which
acquire assets on behalf of the Corporation or its customers. The Corporation
liquidated a third conduit during 2010. Liquidation of the conduit did not
impact the Corporation’s consolidated results of operations. These conduits
had total assets of $640 million and $2.2 billion at December 31, 2010 and
2009. One of the conduits acquires assets at the request of customers who
wish to benefit from the economic returns of the specified assets on a
leveraged basis, which consist principally of liquid exchange-traded equity
securities. The second conduit holds subordinate AFS debt securities for the
Corporation’s benefit. The conduits obtain funding by issuing commercial
paper and subordinate certificates to third-party investors. Repayment of the
commercial paper and certificates is assured by total return swaps between
the Corporation and the conduits. When a conduit acquires assets for the
benefit of
the Corporation enters into
back-to-back total return swaps with the conduit and the customer such that
the economic returns of the assets are passed through to the customer. The
Corporation’s exposure to the counterparty credit risk of its customers is
mitigated by the ability to liquidate an asset held in the conduit if the customer
defaults on its obligation. The Corporation receives fees for serving as
commercial paper placement agent and for providing administrative services
to the conduits. At December 31, 2010 and 2009, the Corporation did not
hold any commercial paper issued by the asset acquisition conduits other
than incidentally and in its role as a commercial paper dealer.

the Corporation’s customers,

Real Estate Vehicles
The Corporation held investments in unconsolidated real estate vehicles of
$5.4 billion and $4.8 billion at December 31, 2010 and 2009, which con-
sisted of limited partnership investments in unconsolidated limited partner-
ships that finance the construction and rehabilitation of affordable rental
housing. An unrelated third party is typically the general partner and has
control over the significant activities of the partnership. The Corporation earns
a return primarily through the receipt of tax credits allocated to the affordable
housing projects. The Corporation’s risk of loss is mitigated by policies
requiring that the project qualify for the expected tax credits prior to making
its investment. The Corporation may from time to time be asked to invest
additional amounts to support a troubled project. Such additional invest-
ments have not been and are not expected to be significant.

Other Transactions
In 2010 and prior years, the Corporation transferred pools of securities to
certain independent third parties and provided financing for approximately
75 percent of the purchase price under asset-backed financing arrangements.
At December 31, 2010 and 2009, the Corporation’s maximum loss exposure
under these financing arrangements was $6.5 billion and $6.8 billion, sub-
stantially all of which was classified as loans on the Corporation’s Consol-
idated Balance Sheet. All principal and interest payments have been received
when due in accordance with their contractual terms. These arrangements are
not included in the table on page 186 because the purchasers are not VIEs.

NOTE 9 Representations and Warranties
Obligations and Corporate Guarantees

Background
The Corporation securitizes first-lien residential mortgage loans, generally in the
form of MBS guaranteed by GSEs or GNMA in the case of FHA-insured and VA-
guaranteed mortgage loans. In addition, in prior years, legacy companies and
certain subsidiaries have sold pools of first-lien residential mortgage loans,
home equity loans and other second-lien loans as private-label securitizations
or in the form of whole loans. In connection with these transactions, the
Corporation or certain subsidiaries or legacy companies made various repre-
sentations and warranties. These representations and warranties, as governed
by the agreements, related to, among other things, the ownership of the loan,
the validity of the lien securing the loan, the absence of delinquent taxes or liens
against the property securing the loan, the process used to select the loan for
inclusion in a transaction, the loan’s compliance with any applicable loan
criteria, including underwriting standards, and the loan’s compliance with
applicable federal, state and local laws. Breaches of these representations
and warranties may result in a requirement to repurchase mortgage loans, or to
otherwise make whole or provide other remedy to a whole-loan buyer or
securitization trust. In such cases, the Corporation would be exposed to any
subsequent credit loss on the mortgage loans. The Corporation’s credit loss
would be reduced by any recourse to sellers of loans (i.e., correspondents) for
representations and warranties previously provided. When a loan was origi-
nated by a third-party correspondent, the Corporation typically has the right to
seek a recovery of related repurchase losses from the correspondent origina-
tor. At December 31, 2010, loans purchased from correspondents comprised
approximately 25 percent of loans underlying outstanding repurchase de-
mands. During 2010, the Corporation experienced a decrease in recoveries
from correspondents, however, the actual recovery rate may vary from period to
period based upon the underlying mix of correspondents (e.g., active, inactive,
out-of-business originators) from which recoveries are sought.

Subject to the requirements and limitations of the applicable agreements,
these representations and warranties can be enforced by the securitization
trustee or the whole-loan buyer as governed by the applicable agreement or, in
certain first-lien and home equity securitizations where monolines have
insured all or some of the related bonds issued, by the monoline insurer
at any time over the life of the loan. Importantly, in the case of non-GSE loans,
the contractual liability to repurchase arises if there is a breach of the
representations and warranties that materially and adversely affects the
interest of all investors, or if there is a breach of other standards established
by the terms of the related sale agreement. The Corporation believes that the
longer a loan performs prior to default, the less likely it is that an alleged
underwriting breach of representations and warranties had a material impact
on the loan’s performance. Historically, most demands for repurchase have
occurred within the first few years after origination, generally after a loan has
defaulted. However, in recent periods the time horizon has lengthened due to
increased repurchase request activity across all vintages.

The Corporation’s current operations are structured to limit the risk of
repurchase and accompanying credit exposure by seeking to ensure consis-
tent production of mortgages in accordance with its underwriting procedures
and by servicing those mortgages consistent with its contractual obligations.
In addition, certain securitizations include guarantees written to protect
certain purchasers of the loans from credit losses up to a specified amount.
The fair value of the probable losses to be absorbed under the representa-
tions and warranties obligations and the guarantees is recorded as an
accrued liability when the loans are sold. The liability for probable losses is
updated by accruing a representations and warranties provision in mortgage
banking income throughout the life of the loan as necessary when additional
relevant information becomes available. The methodology used to estimate

Bank of America 2010

187

volume of repurchase claims as a percentage of the volume of loans origi-
nated by the Corporation or its subsidiaries or legacy companies.

The table below presents outstanding claims by counterparty and product
type at December 31, 2010 and 2009. The information for 2010 reflects the
impact of the recent agreements with the GSEs.

Outstanding Claims by Counterparty and Product

(Dollars in millions)

By counterparty
GSEs
Monolines
Whole loan and private-label securitization investors and

other (1)

Total outstanding claims by counterparty

By product type
Prime loans
Alt-A
Home equity
Pay option
Subprime
Other

December 31

2010

2009

$ 2,821
4,799

$3,284
2,944

3,067

1,372

$10,687

$7,600

$ 2,040
1,190
3,658
2,889
734
176

$1,778
1,629
2,223
1,122
540
308

Total outstanding claims by product type

$10,687

$7,600

(1) December 31, 2010 includes $1.7 billion in claims contained in correspondence from private-label securitiza-
tions investors that do not have the right to demand repurchase of loans directly or the right to access loan files.
The inclusion of these claims in the amounts noted does not mean that the Corporation believes these claims
have satisfied the contractual thresholds to direct the securitization trustee to take action or are otherwise
procedurally or substantively valid.

As presented in the table on page 189, during 2010 and 2009, the
Corporation paid $5.2 billion and $2.6 billion to resolve $6.6 billion and
$3.0 billion of repurchase claims through repurchase or reimbursement to the
investor or securitization trust for losses they incurred, resulting in a loss on
the related loans at the time of repurchase or reimbursement of $3.5 billion
and $1.6 billion. The amount of loss for loan repurchases is reduced by the
fair value of the underlying loan collateral. The repurchase of loans and
indemnification payments related to first-lien and home equity repurchase
claims generally resulted from material breaches of representations and
warranties related to the loans’ material compliance with the applicable
underwriting standards, including borrower misrepresentation, credit excep-
tions without sufficient compensating factors and non-compliance with un-
derwriting procedures, although the actual representations made in a sales
transaction and the resulting repurchase and indemnification activity can vary
by transaction or investor. A direct relationship between the type of defect that
causes the breach of representations and warranties and the severity of the
realized loss has not been observed. Transactions to repurchase or indem-
nification payments related to first-lien residential mortgages primarily in-
volved the GSEs while transactions to repurchase or indemnification pay-
ments for home equity loans primarily involved the monolines.

the liability for representations and warranties is a function of the represen-
tations and warranties given and considers a variety of factors, which include,
depending on the counterparty, actual defaults, estimated future defaults,
historical loss experience, estimated home prices, probability that a repur-
chase request will be received, number of payments made by the borrower
prior to default and probability that a loan will be required to be repurchased.
Historical experience also considers recent events such as the agreements
with the GSEs on December 31, 2010, as discussed below. Changes to any
one of
the
Corporation’s liability.

these factors could significantly impact

the estimate of

Although the timing and volume has varied, repurchase and similar re-
quests have increased in recent periods from buyers and insurers, including
monolines. The Corporation expects that efforts to attempt to assert repur-
chase requests by monolines, whole-loan investors and private-label securi-
tization investors may increase in the future. A loan-by-loan review of all
properly presented repurchase requests is performed and demands have
been and will continue to be contested to the extent not considered valid. In
addition, the Corporation may reach a bulk settlement with a counterparty (in
lieu of the loan-by-loan review process), on terms determined to be advanta-
geous to the Corporation.

On December 31, 2010, the Corporation reached agreements with the
GSEs under which the Corporation paid $2.8 billion to resolve repurchase
claims involving certain residential mortgage loans sold directly to the GSEs
by entities related to legacy Countrywide. The agreements with FHLMC for
$1.28 billion extinguishes all outstanding and potential mortgage repurchase
and make-whole claims arising out of any alleged breaches of selling repre-
sentations and warranties related to loans sold directly by legacy Countrywide
to FHLMC through 2008, subject to certain exceptions the Corporation does
not believe to be material. The agreement with FNMA for $1.52 billion sub-
stantially resolves the existing pipeline of repurchase and make-whole claims
outstanding as of September 20, 2010 arising out of alleged breaches of
selling representations and warranties related to loans sold directly by legacy
Countrywide to FNMA. These agreements with the GSEs do not cover legacy
Bank of America first-lien residential mortgage loans sold directly to the GSEs,
other loans sold to the GSEs other than described above, loan servicing
obligations, other contractual obligations or loans contained in private-label
securitizations.

Overall, repurchase requests and disputes with buyers and insurers
regarding representations and warranties have increased in recent periods
which has resulted in an increase in unresolved repurchase requests for
monolines and other non-GSE counterparties. Generally the volume of unre-
solved repurchase requests from the FHA and VA for loans in GNMA-guaran-
teed securities is not significant because the requests are limited in number
and are typically resolved quickly. The volume of repurchase claims as a
percentage of the volume of loans purchased arising from loans sourced from
brokers or purchased from third-party sellers is relatively consistent with the

188

Bank of America 2010

The table below presents first-lien and home equity loan repurchases and indemnification payments for 2010 and 2009. These amounts include the
agreement that was reached with FNMA as discussed on page 188. These amounts do not include $1.3 billion paid related to the agreement with FHLMC due to
the global nature of the agreement and, specifically, the absence of a formal apportionment of the agreement amount between current and future claims.

Loan Repurchases and Indemnification Payments

(Dollars in millions)

First-lien

Repurchases
Indemnification payments

Total first-lien

Home equity

Repurchases
Indemnification payments

Total home equity

December 31

2010

2009

Unpaid
Principal
Balance

$2,557
3,785

6,342

78
149

227

Cash

Loss

$2,799
2,173

4,972

86
146

232

$1,142
2,173

3,315

44
146

190

Unpaid
Principal
Balance

$1,461
1,267

2,728

116
142

258

Cash

Loss

$1,588
730

2,318

128
141

269

$ 583
730

1,313

110
141

251

Total first-lien and home equity

$6,569

$5,204

$3,505

$2,986

$2,587

$1,564

Government-sponsored Enterprises
The Corporation and its subsidiaries have an established history of working
with the GSEs on repurchase requests. Generally, the Corporation first be-
comes aware that a GSE is evaluating a particular loan for repurchase when
the Corporation receives a request from a GSE to review the underlying loan
file (file request). Upon completing its review, the GSE may submit a repur-
chase claim to the Corporation. Historically, most file requests have not
resulted in a repurchase claim. As soon as practicable after receiving a
repurchase request from either of the GSEs, the Corporation evaluates the
request and takes appropriate action. Claim disputes are generally handled
through loan-level negotiations with the GSEs and the Corporation seeks to
resolve the repurchase request within 90 to 120 days of the receipt of the
request although tolerances exist for claims that remain open beyond this
timeframe. Experience with the GSEs continues to evolve and any disputes
are generally related to areas including reasonableness of stated income,
occupancy and undisclosed liabilities in the vintages with the highest default
rates.

Monoline Insurers
Unlike the repurchase protocols and experience established with GSEs,
experience with the monolines has been varied and the protocols and expe-
rience with these counterparties has not been as predictable as with the
GSEs. The timetable for the loan file request, the repurchase request, if any,
response and resolution varies by monoline. Where a breach of representa-
tions and warranties given by the Corporation or subsidiaries or legacy
companies is confirmed on a given loan, settlement is generally reached
as to that loan within 60 to 90 days.

Properly presented repurchase requests for the monolines are reviewed
on a loan-by-loan basis. As part of an ongoing claims process, if the Corpo-
ration does not believe a claim is valid, it will deny the claim and generally
indicate the reason for the denial to facilitate meaningful dialogue with the
counterparty although it is not contractually obligated to do so. When there is
disagreement as to the resolution of a claim, meaningful dialogue and
negotiation is generally necessary between the parties to reach conclusion
on an individual claim. Certain monolines have instituted litigation against
legacy Countrywide and the Corporation. When claims from these counter-
parties are denied, the Corporation does not indicate its reason for denial as it
is not contractually obligated to do so. In the Corporation’s experience, the
monolines have been generally unwilling to withdraw repurchase claims,
regardless of whether and what evidence was offered to refute a claim.

The pipeline of unresolved monoline claims where the Corporation be-
lieves a valid defect has not been identified which would constitute an
actionable breach of representations and warranties continued to grow in
2010. Through December 31, 2010, approximately 11 percent of monoline
claims that the Corporation initially denied have subsequently been resolved
through repurchase or make-whole payments and two percent have been
resolved through rescission. When a claim has been denied and there has not
been communication with the counterparty for six months, the Corporation
views these claims as inactive; however, they remain in the outstanding
claims balance until resolution.

A liability for representations and warranties has been established with
respect to all monolines for monoline repurchase requests based on valid
identified loan defects and for repurchase requests that are in the process of
review based on historical repurchase experience with a specific monoline to
the extent such experience provides a reasonable basis on which to estimate
incurred losses from repurchase activity. With respect to certain monolines
where the Corporation believes a more consistent purchase experience has
been established, a liability has also been established related to repurchase
requests subject to negotiation and unasserted requests to repurchase
current and future defaulted loans. The Corporation has had limited experi-
ence with most of the monoline insurers in the repurchase process, including
limited experience resolving disputed claims. Also, certain monoline insurers
have instituted litigation against legacy Countrywide and Bank of America,
which limits the Corporation’s relationship and ability to enter into construc-
tive dialogue with these monolines to resolve the open claims. For such
monolines and other monolines with whom the Corporation has limited
repurchase experience, in view of the inherent difficulty of predicting the
outcome of those repurchase requests where a valid defect has not been
identified or in predicting future claim requests and the related outcome in the
case of unasserted requests to repurchase loans from the securitization
trusts in which these monolines have insured all or some of the related bonds,
the Corporation cannot reasonably estimate the eventual outcome. In addi-
tion, the timing of the ultimate resolution or the eventual loss, if any, related to
those repurchase requests cannot be reasonably estimated. Thus, with
respect to these monolines, a liability for representations and warranties
has not been established related to repurchase requests where a valid defect
has not been identified, or in the case of any unasserted requests to repur-
chase loans from the securitization trusts in which such monolines have
insured all or some of the related bonds. However, certain monoline insurers
have engaged with the Corporation and legacy Countrywide in a consistent

Bank of America 2010

189

repurchase process and the Corporation has used that experience to record a
liability related to existing and future claims from such counterparties.

At December 31, 2010, the unpaid principal balance of loans related to
unresolved repurchase requests previously received from monolines was
$4.8 billion, including $3.0 billion in repurchase requests that have been
reviewed where it is believed a valid defect has not been identified which would
constitute an actionable breach of representations and warranties and
$1.8 billion in repurchase requests that are in the process of review. As
discussed on the previous page, a portion of the repurchase requests that are
initially denied are ultimately resolved through repurchase or make-whole
payments, after additional dialogue and negotiation with the monoline insurer.
At December 31, 2010, the unpaid principal balance of loans for which the
monolines had requested loan files for review but for which no repurchase
request had been received was $10.2 billion, excluding loans that had been
paid in full. There will likely be additional requests for loan files in the future
leading to repurchase requests. Such requests may relate to loans that are
currently in securitization trusts or loans that have defaulted and are no longer
included in the unpaid principal balance of the loans in the trusts. However, it
is unlikely that a repurchase request will be received for every loan in a
securitization or every file requested or that a valid defect exists for every loan
repurchase request. In addition, any claims paid related to repurchase
requests from a monoline are paid to the securitization trust and may be
used by the securitization trust to repay any outstanding monoline advances
or reduce future advances from the monolines. To the extent that a monoline
has not advanced funds or does not anticipate that it will be required to
advance funds to the securitization trust, the likelihood of receiving a repur-
chase request from a monoline may be reduced as the monoline would
receive limited or no benefit from the payment of repurchase claims. More-
over, some monolines are not currently performing their obligations under the
financial guaranty policies they issued which may, in certain circumstances,
impact their ability to present repurchase claims.

Whole Loan Sales and Private-label Securitizations
The Corporation and its subsidiaries have limited experience with private-label
securitization repurchases as the number of recent repurchase requests
received has been limited as shown in the outstanding claims table on
page 188. The representations and warranties, as governed by the private-
label securitizations, generally require that counterparties have the ability to
both assert a claim and actually prove that a loan has an actionable defect
under the applicable contracts. While a securitization trustee may always
investigate or demand repurchase on its own action, in order for investors to
direct the securitization trustee to investigate loan files or demand the
repurchase of loans, the securitization agreements generally require the
security holders to hold a specified percentage, such as 25 percent, of the
voting rights of the outstanding securities. In addition, the Corporation be-
lieves the agreements for private-label securitizations generally contain less
rigorous representations and warranties and higher burdens on investors
seeking repurchases than the comparable agreements with the GSEs.

The majority of repurchase requests that the Corporation has received
relate to whole loan sales. Most of the loans sold in the form of whole loans
were subsequently pooled with other mortgages into private-label securitiza-
tions issued by third-party buyers of the loans. The buyers of the whole loans
received representations and warranties in the sales transaction and may
retain those rights even when the loans are aggregated with other collateral
into private-label securitizations. Properly presented repurchase requests for
these whole loans are reviewed on a loan-by-loan basis. If, after the Corpo-
ration’s review, it does not believe a claim is valid, it will deny the claim and
generally indicate a reason for the denial. When the counterparty agrees with
the Corporation’s denial of the claim, the counterparty may rescind the claim.
When there is disagreement as to the resolution of the claim, meaningful

190

Bank of America 2010

dialogue and negotiation between the parties is generally necessary to reach
conclusion on an individual claim. Generally, a whole loan sale claimant is
engaged in the repurchase process and the Corporation and the claimant
reach resolution, either through loan-by-loan negotiation or at times, through a
bulk settlement. Through December 31, 2010, approximately 17 percent of
the whole loan claims that the Corporation initially denied have subsequently
been resolved through repurchase or make-whole payments and 53 percent
have been resolved through rescission or repayment in full by the borrower.
Although the timeline for resolution varies, once an actionable breach is
identified on a given loan, settlement is generally reached as to that loan
within 60 to 90 days. When a claim has been denied and the Corporation does
not have communication with the counterparty for six months, the Corporation
views these claims as inactive; however, they remain in the outstanding
claims balance until resolution.

On October 18, 2010, Countrywide Home Loans Servicing, LP (which
changed its name to BAC Home Loans Servicing, LP), a wholly-owned sub-
sidiary of the Corporation, in its capacity as servicer on 115 private-label
securitizations, which was subsequently extended to 225 securitizations,
received a letter that asserts breaches of certain servicing obligations,
including an alleged failure to provide notice of breaches of representations
and warranties with respect to mortgage loans included in the transactions.
Additionally, the Corporation received new claim demands totaling $1.7 billion
in correspondence from private-label securitization investors. Private-label
securitization investors generally do not have the contractual right to demand
repurchase of loans directly or the right to access loan files. The inclusion of
the $1.7 billion in outstanding claims does not mean that the Corporation
believes these claims have satisfied the contractual thresholds required for
the private-label securitization investors to direct the securitization trustee to
take action or are otherwise procedurally or substantively valid.

Liability for Representations and Warranties and
Corporate Guarantees
The liability for representations and warranties and corporate guarantees is
included in accrued expenses and other liabilities and the related provision is
included in mortgage banking income.

The table below presents a rollforward of the liability for representations

and warranties and corporate guarantees.

(Dollars in millions)

Liability for representations and warranties and

corporate guarantees, beginning of year

Merrill Lynch acquisition
Additions for new sales
Charge-offs
Provision
Other

Liability for representations and warranties
and corporate guarantees, December 31

2010

2009

$ 3,507
–
30
(4,803)
6,786
(82)

$ 2,271
580
41
(1,312)
1,851
76

$ 5,438

$ 3,507

The liability for representations and warranties has been established
when those obligations are both probable and reasonably estimable. As
previously discussed, the Corporation reached agreements with the GSEs
resolving repurchase claims involving certain residential mortgage loans sold
to them by entities related to legacy Countrywide. The Corporation’s liability
for obligations under representations and warranties given to the GSEs
considers the recent agreements and their impact on the repurchase rates
on future claims that may be received on loans that have defaulted or that are
estimated to default. The Corporation believes that its remaining exposure to
repurchase obligations for first-lien residential mortgage loans sold directly to
the GSEs has been accounted for as a result of these agreements and the
associated adjustments to the recorded liability for representations and

warranties for first-lien residential mortgage loans sold directly to the GSEs in
2010 and 2009, and for other loans sold directly to the GSEs and not covered
by these agreements. The Corporation believes its predictive repurchase
models, utilizing its historical repurchase experience with the GSEs while
considering current developments, including the recent agreements, projec-
tions of future defaults, as well as certain assumptions regarding economic
conditions, home prices and other matters, allows it to reasonably estimate
the liability for representations and warranties on loans sold to the GSEs.
However, future provisions for representations and warranties liability to the
GSEs may be affected if actual experience is different from the Corporation’s
historical experience with the GSEs or the Corporation’s projections of future
defaults and assumptions regarding economic conditions, home prices and
other matters that are incorporated in the provision calculation. Although
experience with non-GSE claims remains limited, the Corporation expects
additional activity in this area going forward and the volume of repurchase
claims from monolines, whole-loan investors and investors in private-label
securitizations could increase in the future. It is reasonably possible that
future losses may occur and the Corporation’s estimate is that the upper
range of possible loss related to non-GSE sales could be $7 billion to
$10 billion over existing accruals. This estimate does not represent a prob-
able loss, is based on currently available information, significant judgment,
and a number of assumptions that are subject to change. A significant portion
of this estimate relates to loans originated through legacy Countrywide, and
the repurchase liability is generally limited to the original seller of the loan.
Future provisions and possible loss or range of loss may be impacted if actual
results are different from the Corporation’s assumptions regarding economic
conditions, home prices and other matters and may vary by counterparty. The
resolution of the repurchase claims process with the non-GSE counterparties
will likely be a protracted process, and the Corporation will vigorously contest
any request for repurchase if it concludes that a valid basis for repurchase
claim does not exist.

NOTE 10 Goodwill and Intangible Assets

Goodwill
The table below presents goodwill balances by business segment at Decem-
ber 31, 2010 and 2009. As discussed in more detail in Note 26 — Business
Segment Information, on January 1, 2010, the Corporation realigned the
former Global Banking and Global Markets business segments. There was no
impact on the reporting units used in goodwill
impairment testing. The
reporting units utilized for goodwill impairment tests are the business seg-
ments or one level below the business segments as outlined in the following
table. Substantially all of the decline in goodwill in 2010 is the result of
$12.4 billion of goodwill impairment charges, as described below. No goodwill
impairment was recognized in 2009. The decline in GWIM was attributable to
the sale of Columbia Management’s long-term asset management business.

(Dollars in millions)

Deposits
Global Card Services
Home Loans & Insurance
Global Commercial Banking
Global Banking & Markets
Global Wealth & Investment Management
All Other

Total goodwill

December 31

2010

$17,875
11,889
2,796
20,656
10,682
9,928
35

$73,861

2009

$17,875
22,292
4,797
20,656
10,252
10,411
31

$86,314

Global Card Services Impairment
On July 21, 2010, the Financial Reform Act was signed into law. Under the
Financial Reform Act and its amendment to the Electronic Fund Transfer Act, the
Federal Reserve must adopt rules within nine months of enactment of the
Financial Reform Act regarding the interchange fees that may be charged with
respect to electronic debit transactions. Those rules will take effect one year
after enactment of the Financial Reform Act. The Financial Reform Act and the
applicable rules are expected to materially reduce the future revenues gener-
ated by the debit card business of the Corporation. The Corporation’s consumer
and small business card products, including the debit card business, are part of
an integrated platform within Global Card Services. During the three months
ended September 30, 2010, the Corporation’s estimate of revenue loss due to
the Financial Reform Act was approximately $2.0 billion annually based on
current volumes. Accordingly, the Corporation performed an impairment test for
Global Card Services during the three months ended September 30, 2010.

In step one of the impairment test, the fair value of Global Card Services was
estimated under the income approach where the significant assumptions in-
cluded the discount rate, terminal value, expected loss rates and expected new
account growth. The Corporation also updated its estimated cash flows to reflect
the current strategic plan forecast and other portfolio assumptions. Based on
the results of step one of the impairment test, the Corporation determined that
the carrying amount of Global Card Services, including goodwill, exceeded the
fair value. The carrying amount, fair value and goodwill for the Global Card
Services reporting unit were $39.2 billion, $25.9 billion and $22.3 billion,
respectively. Accordingly, the Corporation performed step two of the goodwill
impairment test for this reporting unit. In step two, the Corporation compared the
implied fair value of the reporting unit’s goodwill with the carrying amount of that
goodwill. Under step two of the impairment test, significant assumptions in
measuring the fair value of the assets and liabilities including discount rates,
loss rates and interest rates were updated to reflect the current economic
conditions. Based on the results of this goodwill impairment test for Global Card
Services, the carrying value of the goodwill assigned to the reporting unit
exceeded the implied fair value by $10.4 billion. Accordingly, the Corporation
recorded a non-cash, non-tax deductible goodwill impairment charge of $10.4 bil-
lion to reduce the carrying value of goodwill in Global Card Services from
$22.3 billion to $11.9 billion. The goodwill impairment test included limited
mitigation actions in Global Card Services to recapture lost revenue. Although the
Corporation has identified other potential mitigation actions, the impact of these
actions going forward did not reduce the goodwill impairment charge because
these actions are in the early stages of development and, additionally, certain of
them may impact segments other than Global Card Services (e.g., Deposits).
Due to the continued stress on Global Card Services as a result of the
Financial Reform Act, the Corporation concluded that an additional impairment
test should be performed for this reporting unit during the three months ended
December 31, 2010. In step one of the goodwill impairment test, the fair value
of Global Card Services was estimated under the income approach. The
significant assumptions under the income approach included the discount rate,
terminal value, expected loss rates and expected new account growth. The
carrying amount, fair value and goodwill for the Global Card Services reporting
unit were $27.5 billion, $27.6 billion and $11.9 billion, respectively. The
estimated fair value as a percent of the carrying amount at December 31,
2010 was 100 percent. Although the fair value exceeded the carrying amount in
step one of the Global Card Services goodwill impairment test, to further
substantiate the value of goodwill, the Corporation also performed the step
two test for this reporting unit. Under step two of the goodwill impairment test
for this reporting unit, significant assumptions in measuring the fair value of the
assets and liabilities of the reporting unit including discount rates, loss rates
and interest rates were updated to reflect the current economic conditions. The
results of step two of the goodwill impairment test indicated that the remaining
balance of goodwill of $11.9 billion was not impaired as of December 31, 2010.

Bank of America 2010

191

On December 16, 2010, the Federal Reserve released proposed regula-
tions to implement the Durbin Amendment of the Financial Reform Act, which
are scheduled to be effective July 21, 2011. The proposed regulations
included two alternative interchange fee standards that would apply to all
covered issuers: one based on each issuer’s costs, with a safe harbor initially
set at $0.07 per transaction and a cap initially set at $0.12 per transaction,
and the other a stand-alone cap initially set at $0.12 per transaction. Although
the range of estimated revenue loss based on the proposed regulations was
slightly higher than the Corporation’s original estimate of $2.0 billion, given
the uncertainty around the potential outcome, the Corporation did not change
the revenue loss estimate used in the goodwill impairment test during the
three months ended December 31, 2010. If the final Federal Reserve rule
sets interchange fee standards that are significantly lower than the inter-
change fee assumptions the Corporation used in this goodwill impairment
test, the Corporation will be required to perform an additional goodwill
impairment test. If the final interchange fee standards are at the lowest
proposed fee alternative, the Corporation’s current estimate of the revenue
loss could result in an additional goodwill impairment charge for Global Card
Services. In view of the uncertainty with model inputs including the final ruling,
changes in the economic outlook and the corresponding impact to revenues
and asset quality, and the impacts of mitigation actions, it is not possible to
estimate the amount or range of amounts of additional goodwill impairment, if
any.

Home Loans & Insurance Impairment
During the three months ended December 31, 2010, the Corporation per-
formed an impairment test for the Home Loans & Insurance reporting unit as
it was likely that there was a decline in its fair value as a result of increased

uncertainties, including existing and potential litigation exposure and other
potential risks, higher current servicing costs including loss mitigation efforts,
foreclosure related issues and the redeployment of centralized sales re-
sources to address servicing needs. In step one of the goodwill impairment
test, the fair value of Home Loans & Insurance was estimated based on a
combination of the market approach and the income approach. Under the
market approach valuation, significant assumptions included market multi-
ples and a control premium. The significant assumptions for the valuation of
Home Loans & Insurance under the income approach included cash flow
estimates, the discount rate and the terminal value. These assumptions were
updated to reflect the current strategic plan forecast and to address the
increased uncertainties referenced above. Based on the results of step one of
the impairment test, the Corporation determined that the carrying amount of
Home Loans & Insurance, including goodwill, exceeded the fair value. The
carrying amount, fair value and goodwill for the Home Loans & Insurance
reporting unit were $24.7 billion, $15.1 billion and $4.8 billion, respectively.
Accordingly, the Corporation performed step two of the goodwill impairment
test for this reporting unit. In step two, the Corporation compared the implied
fair value of the reporting unit’s goodwill with the carrying amount of that
goodwill. Under step two of the goodwill impairment test, significant assump-
tions in measuring the fair value of the assets and liabilities of the reporting
unit including discount rates, loss rates and interest rates were updated to
reflect the current economic conditions. Based on the results of step two of
the impairment test, the carrying value of the goodwill assigned to Home
Loans & Insurance exceeded the implied fair value by $2.0 billion. Accordingly,
the Corporation recorded a non-cash, non-tax deductible goodwill impairment
charge of $2.0 billion as of December 31, 2010 to reduce the carrying value of
goodwill in the Home Loans & Insurance reporting unit.

Intangible Assets
The table below presents the gross carrying amounts and accumulated amortization related to intangible assets at December 31, 2010 and 2009.

(Dollars in millions)

Purchased credit card relationships
Core deposit intangibles
Customer relationships
Affinity relationships
Other intangibles

Total intangible assets

December 31

2010

2009

Gross
Carrying Value

Accumulated
Amortization

Gross
Carrying Value

Accumulated
Amortization

$ 7,162
5,394
4,232
1,647
3,087

$21,522

$ 4,085
4,094
1,222
902
1,296

$11,599

$ 7,179
5,394
4,232
1,651
3,438

$21,894

$3,452
3,722
760
751
1,183

$9,868

None of the intangible assets were impaired at December 31, 2010 or 2009. Amortization of intangibles expense was $1.7 billion, $2.0 billion and
$1.8 billion in 2010, 2009 and 2008. The Corporation estimates aggregate amortization expense will be approximately $1.5 billion, $1.3 billion, $1.2 billion,
$1.0 billion and $900 million for 2011 through 2015, respectively.

192

Bank of America 2010

NOTE 11 Deposits
The Corporation had U.S. certificates of deposit and other U.S. time deposits of $100 thousand or more totaling $60.5 billion and $99.4 billion at December 31,
2010 and 2009. Non-U.S. certificates of deposit and other non-U.S. time deposits of $100 thousand or more totaled $64.9 billion and $67.2 billion at
December 31, 2010 and 2009. The table below presents the contractual maturities for time deposits of $100 thousand or more at December 31, 2010.

Time deposits of $100 thousand or more

(Dollars in millions)

U.S. certificates of deposit and other time deposits
Non-U.S. certificates of deposit and other time deposits

Three months
or Less

$21,486
61,717

Over Three
Months to
Twelve Months

$29,097
2,559

Thereafter

$9,954
660

Total

$60,537
64,936

The scheduled contractual maturities for total time deposits at December 31, 2010 are presented in the table below.

(Dollars in millions)

Due in 2011
Due in 2012
Due in 2013
Due in 2014
Due in 2015
Thereafter

Total time deposits

U.S.

$110,176
12,853
4,426
2,944
1,793
4,091

$136,283

Non-U.S.

$71,104
150
119
14
1
87

$71,475

Total

$181,280
13,003
4,545
2,958
1,794
4,178

$207,758

NOTE 12 Federal Funds Sold, Securities Borrowed or Purchased Under Agreements to Resell and
Short-term Borrowings
The following table presents federal funds sold or purchased, securities borrowed or purchased and loaned or sold under agreements to resell or repurchase,
and other short-term borrowings.

(Dollars in millions)

Federal funds sold and securities borrowed or purchased under agreements to resell

At December 31
Average during the year
Maximum month-end balance during year

Federal funds purchased
At December 31
Average during year
Maximum month-end balance during year

Securities loaned or 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

n/a = not applicable

2010

2009

2008

Amount

Rate

Amount

Rate

Amount

Rate

$209,616
256,943
314,932

0.85%
0.71
n/a

$189,933
235,764
271,321

0.78%
1.23
n/a

$ 82,478
128,053
152,436

0.95%
2.59
n/a

1,458
4,718
8,320

243,901
348,936
458,532

15,093
25,923
36,236

44,869
50,752
63,081

0.14
0.15
n/a

1.15
0.74
n/a

0.65
0.56
n/a

2.02
1.88
n/a

4,814
4,239
4,814

250,371
365,624
407,967

13,131
26,697
37,025

56,393
92,084
169,602

0.09
0.05
n/a

0.39
0.96
n/a

0.65
1.03
n/a

1.72
1.87
n/a

14,432
8,969
18,788

192,166
264,012
295,537

37,986
57,337
65,399

120,070
125,385
160,150

0.11
1.67
n/a

0.84
2.54
n/a

1.80
3.09
n/a

2.07
2.99
n/a

Bank of America, N.A. maintains a global program to offer up to a max-
imum of $75.0 billion outstanding 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 $14.6 billion
and $20.6 billion at December 31, 2010 and 2009. These short-term bank
notes, along with Federal Home Loan Bank (FHLB) advances, U.S. Treasury

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

Bank of America 2010

193

NOTE 13 Long-term Debt
Long-term debt consists of borrowings having an original maturity of one year or more. The table below presents the balance of long-term debt at December 31,
2010 and 2009, and the related contractual rates and maturity dates at December 31, 2010.

(Dollars in millions)

Notes issued by Bank of America Corporation
Senior notes:

Fixed, with a weighted-average rate of 4.82%, ranging from 0.25% to 9.00%, due 2011 to 2043
Floating, with a weighted-average rate of 1.26%, ranging from 0.19% to 7.18%, due 2011 to 2041

Senior structured notes
Subordinated notes:

Fixed, with a weighted-average rate of 5.69%, ranging from 2.40% to 10.20%, due 2011 to 2038
Floating, with a weighted-average rate of 2.00%, ranging from 0.04% to 5.43%, due 2016 to 2019

Junior subordinated notes (related to trust preferred securities):

Fixed, with a weighted-average rate of 6.72%, ranging from 5.25% to 11.45%, due 2026 to 2055
Floating, with a weighted-average rate of 0.91%, ranging from 0.55% to 3.64%, due 2027 to 2056

Total notes issued by Bank of America Corporation

Notes issued by Merrill Lynch & Co., Inc. and subsidiaries
Senior notes:

Fixed, with a weighted-average rate of 5.44%, ranging from 0.05% to 8.83%, due 2011 to 2037
Floating, with a weighted-average rate of 1.21%, ranging from 0.02% to 5.21%, due 2011 to 2037

Senior structured notes
Subordinated notes:

Fixed, with a weighted-average rate of 6.05%, ranging from 2.61% to 8.125%, due 2016 to 2038
Floating, with a weighted-average rate of 2.09%, ranging from 0.89% to 5.29%, due 2017 to 2026

Junior subordinated notes (related to trust preferred securities):

Fixed, with a weighted-average rate of 6.91%, ranging from 6.45% to 7.38%, due 2062 to perpetual

Other long-term debt

Total notes issued by Merrill Lynch & Co., Inc. and subsidiaries

Notes issued by Bank of America, N.A. and other subsidiaries
Senior notes:

Fixed, with a weighted-average rate of 1.13%, ranging from 0.25% to 7.00%, due 2011 to 2027
Floating, with a weighted-average rate of 0.30%, ranging from 0.20% to 0.85%, due 2011 to 2051

Senior structured notes
Subordinated notes:

Fixed, with a weighted-average rate of 5.91%, ranging from 5.30% to 7.13%, due 2012 to 2036
Floating, with a weighted-average rate of 0.59%, ranging from 0.29% to 0.60%, due 2016 to 2019

Total notes issued by Bank of America, N.A. and other subsidiaries

Other debt
Advances from Federal Home Loan Banks:

Fixed, with a weighted-average rate of 3.43%, ranging from 0.38% to 8.29%, due 2011 to 2034
Floating, with a weighted-average rate of 0.16%, ranging from 0.16% to 0.18%, due 2011 to 2013

Other

Total other debt

Total long-term debt excluding consolidated VIEs

Long-term debt of consolidated VIEs under new consolidation guidance

Total long-term debt

n/a = not applicable

December 31

2010

2009

$ 85,157
36,162
18,796

26,553
705

15,709
3,514

186,596

43,495
27,447
38,891

9,423
1,935

3,576
986

$ 78,282
47,731
8,897

28,017
681

15,763
3,517

182,888

52,506
36,624
48,518

9,258
1,857

3,552
2,636

125,753

154,951

169
12,562
1,319

5,194
2,023

21,267

41,001
750
2,051

43,802

377,418
71,013

12,461
24,846
–

5,193
2,272

44,772

53,032
750
2,128

55,910

438,521
n/a

$448,431

$438,521

At December 31, 2010, long-term debt of consolidated VIEs included
credit card, automobile, home equity and other VIEs of $52.8 billion, $6.5 bil-
lion, $3.6 billion and $8.1 billion, respectively. Long-term debt of VIEs is
collateralized by the assets of the VIEs. For more information, see Note 8 – Se-
curitizations and Other Variable Interest Entities.

The majority of the floating rates are based on three- and six-month London

Interbank Offered Rate (LIBOR).

Bank of America Corporation, Merrill Lynch & Co., Inc. and subsidiaries,
and Bank of America, N.A. maintain various U.S. and non-U.S. debt programs
to offer both senior and subordinated notes. The notes may be denominated
in U.S. dollars or foreign currencies. At December 31, 2010 and 2009, the
amount of foreign currency-denominated debt translated into U.S. dollars
included in total long-term debt was $145.9 billion and $156.8 billion. Foreign
currency contracts are used to convert certain foreign currency-denominated
debt into U.S. dollars.

At December 31, 2010 and 2009, Bank of America Corporation had
approximately $88.4 billion and $119.1 billion of authorized, but unissued,
corporate debt and other securities under its existing U.S. shelf registration
statements. At December 31, 2010 and 2009, Bank of America, N.A. had
approximately $53.3 billion and $35.3 billion of authorized, but unissued,
bank notes under its existing $75.0 billion bank note program. Long-term
bank notes issued and outstanding under Bank of America, N.A.’s $75.0 bil-
lion bank note program totaled $7.1 billion and $19.1 billion at December 31,
2010 and 2009. At both December 31, 2010 and 2009, Bank of America,
N.A. had approximately $20.6 billion of authorized, but unissued, mortgage
notes under its $30.0 billion mortgage bond program.

The weighted-average effective interest rates for total long-term debt,
excluding senior structured notes, total fixed-rate debt and total floating-rate
debt, based on the rates in effect at December 31, 2010, were 3.96 percent,
5.02 percent and 1.09 percent, respectively, at December 31, 2010 and,

194

Bank of America 2010

based on the rates in effect at December 31, 2009, were 3.62 percent,
4.93 percent and 0.80 percent, respectively, at December 31, 2009. The
Corporation’s ALM activities maintain an overall interest rate risk manage-
ment strategy that incorporates the use of interest rate contracts to manage
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
above weighted-average rates are the contractual interest rates on the debt,
and do not reflect the impacts of derivative transactions.

The weighted-average interest rate for debt, excluding senior structured
notes, issued by Merrill Lynch & Co., Inc. and subsidiaries was 4.11 percent
and 3.73 percent at December 31, 2010 and 2009. At December 31, 2010,
the Corporation has not assumed or guaranteed the $120.9 billion of long-
term debt that was issued or guaranteed by Merrill Lynch & Co., Inc. or its
subsidiaries prior to the acquisition of Merrill Lynch by the Corporation.

Beginning late in the third quarter of 2009, in connection with the update
or renewal of certain Merrill Lynch non-U.S. securities offering programs, the
Corporation agreed to guarantee debt securities, warrants and/or certificates
issued by certain subsidiaries of Merrill Lynch & Co., Inc. on a going-forward
basis. All existing Merrill Lynch & Co., Inc. guarantees of securities issued by
those same Merrill Lynch subsidiaries under various non-U.S. securities
offering programs will remain in full force and effect as long as those secu-
rities are outstanding, and the Corporation has not assumed any of those prior
Merrill Lynch & Co., Inc. guarantees or otherwise guaranteed such securities.
Certain senior structured notes issued by Merrill Lynch are accounted for
under the fair value option. For more information on these senior structured
notes, see Note 23 – Fair Value Option.

The table below represents the book value for aggregate annual maturities

of long-term debt at December 31, 2010.

(Dollars in millions)

Bank of America Corporation
Merrill Lynch & Co., Inc. and subsidiaries
Bank of America, N.A. and other subsidiaries
Other debt

Total long-term debt excluding consolidated VIEs

Long-term debt of consolidated VIEs under new consolidation guidance

Total long-term debt

Included in the above table are certain structured notes that contain
provisions whereby the borrowings are redeemable at the option of the holder
(put options) at specified dates prior to maturity. Other structured notes have
coupon or repayment terms linked to the performance of debt or equity
securities, indices, currencies or commodities and the maturity may be
accelerated based on the value of a referenced index or security. In both
cases, the Corporation or a subsidiary may be required to settle the obligation
for cash or other securities prior to the contractual maturity date. These
borrowings are reflected in the above table as maturing at their earliest put or
redemption date.

Trust Preferred and Hybrid Securities
Trust preferred securities (Trust Securities) are issued by trust companies
(the Trusts) that are not consolidated. These Trust Securities are mandatorily
redeemable preferred security obligations of the Trusts. The sole assets of
the Trusts generally are junior subordinated deferrable interest notes of the
Corporation or its subsidiaries (the Notes). The Trusts generally are 100 per-
cent owned finance subsidiaries of the Corporation. Obligations associated
with the Notes are included in the long-term debt table on page 194.

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
generally 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 extension period may extend
beyond the stated maturity of the relevant Notes. During any such extension
period, distributions on the Trust Securities will also be deferred and the
Corporation’s ability to pay dividends on its common and preferred stock will
be restricted.

The Trust Securities generally are subject to mandatory redemption upon
repayment of the related Notes at their stated maturity dates or their earlier
redemption at a redemption price equal to their liquidation amount plus
accrued distributions to the date fixed for redemption and the premium, if
any, paid by the Corporation upon concurrent repayment of the related Notes.

2011

2012

2013

2014

2015

Thereafter

Total

$16,419
26,554
4,382
22,760

70,115
19,136

$40,432
18,611
5,796
12,549

77,388
11,800

$ 8,731
18,053
86
5,031

31,901
17,514

$21,890
16,650
503
1,293

40,336
9,103

$13,236
4,515
1,015
105

18,871
1,229

$ 85,888
41,370
9,485
2,064

138,807
12,231

$186,596
125,753
21,267
43,802

377,418
71,013

$89,251

$89,188

$49,415

$49,439

$20,100

$151,038

$448,431

Periodic cash payments and payments upon liquidation or redemption with
respect to Trust Securities are guaranteed by the Corporation or its subsid-
iaries 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,
generally will constitute a full and unconditional guarantee, on a subordinated
basis, by the Corporation of payments due on the Trust Securities.

Hybrid Income Term Securities (HITS) totaling $1.6 billion were also issued
by the Trusts to institutional investors in 2007. The BAC Capital Trust XIII
Floating-Rate Preferred HITS have a distribution rate of three-month LIBOR
plus 40 bps and the BAC Capital Trust XIV Fixed-to-Floating-Rate Preferred
HITS have an initial distribution rate of 5.63 percent. Both series of HITS
represent beneficial interests in the assets of the respective capital trust,
which consist of a series of the Corporation’s junior subordinated notes and a
stock purchase contract for a specified series of the Corporation’s preferred
stock. The Corporation will remarket the junior subordinated notes underlying
each series of HITS on or about the five-year anniversary of the issuance to
obtain sufficient funds for the capital trusts to buy the Corporation’s preferred
stock under the stock purchase contracts.

In connection with the HITS, the Corporation entered into two replacement
capital covenants for the benefit of investors in certain series of the Corpo-
ration’s long-term indebtedness (Covered Debt). As of December 31, 2010,
the Corporation’s 6.625% Junior Subordinated Notes due 2036 constitute
the Covered Debt under the covenant corresponding to the Floating-Rate
Preferred HITS and the Corporation’s 5.625% Junior Subordinated Notes due
2035 constitute the Covered Debt under the covenant corresponding to the
Fixed-to-Floating-Rate Preferred HITS. These covenants generally restrict the
ability of the Corporation and its subsidiaries to redeem or purchase the HITS
and related securities unless the Corporation has obtained the prior approval
of the Federal Reserve if required under the Federal Reserve’s capital
guidelines, the redemption or purchase price of the HITS does not exceed
the amount received by the Corporation from the sale of certain qualifying
securities, and such replacement securities qualify as Tier 1 Capital and are
not “restricted core capital elements” under
the Federal Reserve’s
guidelines.

Bank of America 2010

195

The table below is a summary of the outstanding Trust and Hybrid Securities and the related Notes at December 31, 2010 as originated by Bank of America
Corporation and its predecessor companies and subsidiaries. For additional information on Trust Securities for regulatory capital purposes, see Note 18 – Reg-
ulatory Requirements and Restrictions.

(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 (1)
Capital Trust VIII
Capital Trust X
Capital Trust XI
Capital Trust XII
Capital Trust XIII
Capital Trust XIV
Capital Trust XV

NationsBank
Capital Trust II
Capital Trust III
Capital Trust IV

BankAmerica
Institutional Capital A
Institutional Capital B
Capital II
Capital III

Barnett
Capital III

Fleet
Capital Trust II
Capital Trust V
Capital Trust VIII
Capital Trust IX

BankBoston
Capital Trust III
Capital Trust IV

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

ABN AMRO North America
Series I
Series II
Series III
Series IV
Series V
Series VI
Series VII
Series IX
Series X
Series XI
Series XII
Series XIII

LaSalle
Series I

Series J

Countrywide
Capital III
Capital IV
Capital V

Merrill Lynch
Preferred Capital Trust III
Preferred Capital Trust IV
Preferred Capital Trust V
Capital Trust I
Capital Trust II
Capital Trust III

Total

Aggregate
Principal
Amount
of Trust
Securities

Aggregate
Principal
Amount
of the
Notes

Issuance Date

Stated Maturity
of the Notes

Per Annum Interest
Rate of the Notes

Interest Payment
Dates

Redemption Period

December 2001 $
January 2002
August 2002
April 2003
November 2004
March 2005
August 2005
August 2005
March 2006
May 2006
August 2006
February 2007
February 2007
May 2007

575 $
900
500
375
518
1,000
1,320
530
900
1,000
863
700
850
500

593 December 2031
928
February 2032
516
August 2032
387
May 2033
534 November 2034
March 2035
August 2035
August 2035
March 2055
May 2036
August 2055
March 2043
March 2043
June 2056

1,031
1,361
546
928
1,031
890
700
850
500

7.00% 3/15,6/15,9/15,12/15
2/1,5/1,8/1,11/1
7.00
2/15,5/15,8/15,11/15
7.00
2/1,5/1,8/1,11/1
5.88
2/3,5/3,8/3,11/3
6.00
5.63
3/8,9/8
2/10,8/10
5.25
2/25,5/25,8/25,11/25
6.00
3/29,6/29,9/29,12/29
6.25
5/23,11/23
6.63
2/2,5/2,8/2,11/2
6.88
3/15,6/15,9/15,12/15
3-mo. LIBOR +40 bps
3/15,9/15
5.63
3/1,6/1,9/1,12/1
3-mo. LIBOR +80 bps

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
On or after 3/15/17
On or after 3/15/17
On or after 6/01/37

December 1996
February 1997
April 1997

November 1996
November 1996
December 1996
January 1997

365
500
500

450
300
450
400

376 December 2026
515
January 2027
515
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

464 December 2026
309 December 2026
464 December 2026
412
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

January 1997

250

258

February 2027

3-mo. LIBOR +62.5 bps

2/1,5/1,8/1,11/1

On or after 2/01/07

December 1996
December 1998
March 2002
July 2003

June 1997
June 1998

June 1997
July 2000
November 2002
December 2002

December 1996
January 1997
June 2002
November 2002

May 2001
May 2001
May 2001
May 2001
May 2001
May 2001
May 2001
June 2001
June 2001
June 2001
June 2001
June 2001

250
250
534
175

250
250

9
6
10
5

250
280
300
200

77
77
77
77
77
77
88
70
53
27
80
70

258 December 2026
258 December 2028
550
March 2032
180
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

258
258

June 2027
June 2028

3-mo. LIBOR +75 bps
3-mo. LIBOR +60 bps

3/15,6/15,9/15,12/15
3/8,6/8,9/8,12/8

On or after 6/15/07
On or after 6/08/03

9
6

June 2027
July 2030
10 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

258 December 2026
289
February 2027
309
October 2032
206
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

77
77
77
77
77
77
88
70
53
27
80
70

Perpetual
Perpetual
Perpetual
Perpetual
Perpetual
Perpetual
Perpetual
Perpetual
Perpetual
Perpetual
Perpetual
Perpetual

3-mo. LIBOR +175 bps
3-mo. LIBOR +175 bps
3-mo. LIBOR +175 bps
3-mo. LIBOR +175 bps
3-mo. LIBOR +175 bps
3-mo. LIBOR +175 bps
3-mo. LIBOR +175 bps
3-mo. LIBOR +175 bps
3-mo. LIBOR +175 bps
3-mo. LIBOR +175 bps
3-mo. LIBOR +175 bps
3-mo. LIBOR +175 bps

2/15,5/15,8/15,11/15
3/15,6/15,9/15,12/15
1/15,4/15,7/15,10/15
2/28,5/30,8/30,11/30
3/30,6/30,9/30,12/30
1/30,4/30,7/30,10/30
3/15,6/15,9/15,12/15
3/5,6/5,9/5,12/5
3/12,6/12,9/12,12/12
3/26,6/26,9/26,12/26
1/10,4/10,7/10,10/10
1/24,4/24,7/24,10/24

On or after 11/08/12
On or after 11/08/12
On or after 11/08/12
On or after 11/08/12
On or after 11/08/12
On or after 11/08/12
On or after 11/08/12
On or after 11/08/12
On or after 11/08/12
On or after 11/08/12
On or after 11/08/12
On or after 11/08/12

August 2000

491

Perpetual

September 2000

Perpetual

June 1997
April 2003
November 2006

January 1998
June 1998
November 1998
December 2006
May 2007
August 2007

200
500
1,495

750
400
850
1,050
950
750

206
515

June 2027
April 2033
1,496 November 2036

900
Perpetual
480
Perpetual
1,021
Perpetual
1,051 December 2066
951
June 2062
751 September 2062

$24,896 $25,769

6.97% through 9/15/2010;
3-mo. LIBOR +105.5 bps
thereafter
3-mo. LIBOR +5.5 bps
through 9/15/2010; 3-mo.
LIBOR +105.5 bps
thereafter

8.05
6.75
7.00

7.00
7.12
7.28
6.45
6.45
7.375

3/15,6/15,9/15,12/15

On or after 9/15/10

3/15,6/15,9/15,12/15

On or after 9/15/10

6/15,12/15 Only under special event
On or after 4/11/08
On or after 11/01/11

1/1,4/1,7/1,10/1
2/1,5/1,8/1,11/1

3/30,6/30,9/30,12/30
3/30,6/30,9/30,12/30
3/30,6/30,9/30,12/30
3/15,6/15,9/15,12/15
3/15,6/15,9/15,12/15
3/15,6/15,9/15,12/15

On or after 3/08
On or after 6/08
On or after 9/08
On or after 12/11
On or after 6/12
On or after 9/12

(1) Notes were issued in British Pound. Presentation currency is U.S. Dollar.

196

Bank of America 2010

NOTE 14 Commitments and Contingencies
In the normal course of business, the Corporation enters into a number of off-
balance sheet commitments. These commitments expose the Corporation 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 financing
needs of its customers. The table below shows the notional amount of
unfunded legally binding lending commitments net of amounts distributed
(e.g., syndicated) to other financial institutions of $23.3 billion and $30.9 bil-
lion at December 31, 2010 and 2009. At December 31, 2010, the carrying

amount of these commitments, excluding commitments accounted for under
the fair value option, was $1.2 billion, including deferred revenue of $29 mil-
lion and a reserve for unfunded lending commitments of $1.2 billion. At
December 31, 2009, the comparable amounts were $1.5 billion, $34 million
and $1.5 billion, respectively. The carrying amount of these commitments is
classified in accrued expenses and other liabilities.

The table below also includes the notional amount of commitments of
$27.3 billion and $27.0 billion at December 31, 2010 and 2009, that are
accounted for under the fair value option. However, the table below excludes
fair value adjustments of $866 million and $950 million on these commit-
ments, which are classified in accrued expenses and other liabilities. For
information regarding the Corporation’s loan commitments accounted for
under the fair value option, see Note 23 – Fair Value Option.

(Dollars in millions)

Notional amount of credit extension commitments
Loan commitments
Home equity lines of credit
Standby letters of credit and financial guarantees (1)
Letters of credit

Legally binding commitments

Credit card lines (2)

Total credit extension commitments

Notional amount of credit extension commitments
Loan commitments
Home equity lines of credit
Standby letters of credit and financial guarantees (1)
Letters of credit

Legally binding commitments

Credit card lines (2)

Total credit extension commitments

December 31, 2010

Expire in 1
Year or Less

Expire after 1
Year through
3 Years

Expire after 3
Years through
5 Years

Expire after 5
Years

Total

$152,926
1,722
35,275
3,698

193,621
497,068

$144,461
4,290
18,940
110

167,801
–

$43,465
18,207
4,144
–

65,816
–

$ 16,172
55,886
5,897
874

78,829
–

$ 357,024
80,105
64,256
4,682

506,067
497,068

$690,689

$167,801

$65,816

$ 78,829

$1,003,135

December 31, 2009

$149,248
1,810
29,794
2,020

182,872
541,919

$187,585
3,272
21,285
40

212,182
–

$30,897
10,667
4,923
–

46,487
–

$ 28,488
76,923
13,740
1,467

120,618
–

$ 396,218
92,672
69,742
3,527

562,159
541,919

$724,791

$212,182

$46,487

$120,618

$1,104,078

(1) The notional amounts of SBLCs and financial guarantees classified as investment grade and non-investment grade based on the credit quality of the underlying reference name within the instrument were $41.1 billion and $22.4 billion

at December 31, 2010 and $39.7 billion and $30.0 billion at December 31, 2009.
Includes business card unused lines of credit.

(2)

Legally binding commitments to extend credit generally have specified
rates and maturities. Certain of these commitments have adverse change
clauses that help to protect the Corporation against deterioration in the
borrower’s ability to pay.

Other Commitments

Global Principal Investments and Other Equity Investments
At December 31, 2010 and 2009, the Corporation had unfunded equity
investment commitments of approximately $1.5 billion and $2.8 billion. In
light of proposed Basel regulatory capital changes related to unfunded

commitments, the Corporation has actively reduced these commitments in
a series of transactions involving its private equity fund investments. For more
information on these Basel regulatory capital changes, see Note 18 – Regula-
tory Requirements and Restrictions. In 2010, the Corporation completed the
sale of its exposure to certain private equity funds. For more information on
these transactions, see Note 5 – Securities. These commitments generally
relate to the Corporation’s Global Principal Investments business which is
comprised of a diversified portfolio of investments in private equity, real
estate and other alternative investments. These investments are made either
directly in a company or held through a fund.

Bank of America 2010

197

Loan Purchases
In 2005, the Corporation entered into an agreement for the committed pur-
chase of retail automotive loans over a five-year period that ended on June 22,
2010. Under this agreement, the Corporation purchased $6.6 billion of such
loans during the six months ended June 30, 2010 and also the year ended
December 31, 2009. All loans purchased under this agreement were subject
to a comprehensive set of credit criteria. This agreement was accounted for as
a derivative liability with a fair value of $189 million at December 31, 2009. As
of December 31, 2010, the Corporation was no longer committed for any
additional purchases. As part of this agreement, the Corporation recorded a
liability which may increase or decrease based on credit performance of the
purchased loans over a period extending through 2016.

At December 31, 2010 and 2009, the Corporation had other commit-
ments to purchase loans (e.g., residential mortgage and commercial real
estate) of $2.6 billion and $2.2 billion, which upon settlement will be included
in loans or LHFS.

Operating Leases
The Corporation is a party to operating leases for certain of its premises and
equipment. Commitments under these leases are approximately $3.0 billion,
$2.6 billion, $2.1 billion, $1.6 billion and $1.3 billion for 2011 through 2015,
respectively, and $6.6 billion in the aggregate for all years thereafter.

Other Commitments
At December 31, 2010 and 2009, the Corporation had commitments to enter
into forward-dated resale and securities borrowing agreements of $39.4 billion
and $51.8 billion. In addition, the Corporation had commitments to enter into
forward-dated repurchase and securities lending agreements of $33.5 billion
and $58.3 billion. All of these commitments expire within the next 12 months.
The Corporation has entered into agreements with providers of market
data, communications, systems consulting and other office-related services.
At December 31, 2010 and 2009, the minimum fee commitments over the
remaining terms of these agreements totaled $2.1 billion and $2.3 billion.

Other Guarantees

Bank-owned Life Insurance Book Value Protection
The Corporation sells products that offer book value protection to insurance
carriers who offer group life insurance policies to corporations, primarily
banks. The book value protection is provided on portfolios of intermediate
investment-grade fixed-income securities and is intended to cover any short-
fall in the event that policyholders surrender their policies and market value is

below book value. To manage its exposure, the Corporation imposes signif-
icant restrictions on surrenders and the manner in which the portfolio is
liquidated and the funds are accessed. In addition, investment parameters of
the underlying portfolio are restricted. These constraints, combined with
structural protections, including a cap on the amount of risk assumed on
each policy, are designed to provide adequate buffers and guard against
payments even under extreme stress scenarios. These guarantees are re-
corded as derivatives and carried at fair value in the trading portfolio. At
December 31, 2010 and 2009, the notional amount of these guarantees
totaled $15.8 billion and $15.6 billion and the Corporation’s maximum
exposure related to these guarantees totaled $5.0 billion and $4.9 billion
with estimated maturity dates between 2030 and 2040. As of December 31,
2010, the Corporation has not made a payment under these products. The
probability of surrender has increased due to the deteriorating financial health
of policyholders, but remains a small percentage of total notional.

Employee Retirement Protection
The Corporation sells products that offer book value protection primarily to
plan sponsors of Employee Retirement Income Security Act of 1974 (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 continue to withdraw funds after all securities
have been liquidated and there is remaining 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 high quality
fixed-income securities, typically government or government-backed agency
securities, with the proceeds of the liquidated assets to assure the return of
principal. To manage its exposure, the Corporation imposes significant re-
strictions and constraints on the timing of the withdrawals, the manner in
which the portfolio is liquidated and the funds are accessed, and the invest-
ment 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 guar-
antees are recorded as derivatives and carried at fair value in the trading
portfolio. At December 31, 2010 and 2009, the notional amount of these
guarantees totaled $33.8 billion and $36.8 billion with estimated maturity
dates up to 2014 if the exit option is exercised on all deals. As of Decem-
ber 31, 2010, the Corporation has not made a payment under these products
and has assessed the probability of payments under these guarantees as
remote.

198

Bank of America 2010

Indemnifications
In the ordinary course of business, the Corporation enters into various
agreements that contain indemnifications, such as tax indemnifications,
whereupon payment may become due if certain external events occur, such
as a change in tax law. The indemnification clauses are often standard
contractual terms and were entered into in the normal course of business
based on an assessment that the risk of loss would be remote. 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 reasons, including the occurrence of an external event, 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 termina-
tion clause. Historically, any payments made under these guarantees have
been de minimis. The Corporation has assessed the probability of making
such payments in the future as remote.

Merchant Services
On June 26, 2009, the Corporation contributed its merchant processing
business to a joint venture in exchange for a 46.5 percent ownership interest
in the joint venture. During the second quarter of 2010, the joint venture
purchased the interest held by one of the three initial investors bringing the
Corporation’s ownership interest up to 49 percent. For additional information
on the joint venture agreement, see Note 5 – Securities.

The Corporation, on behalf of the joint venture, provides credit and debit
card processing services to various merchants by processing credit and debit
card transactions on the merchants’ behalf. In connection with these ser-
vices, a liability may arise in the event of a billing dispute between the
merchant and a cardholder that is ultimately resolved in the cardholder’s
favor and the merchant defaults on its obligation to reimburse the cardholder.
A cardholder, through its issuing bank, generally has until the later of up to six
months after the date a transaction is processed or the delivery of the product
or service to present a chargeback to the joint venture as the merchant
processor. If the joint venture is unable to collect this amount from the
merchant, it bears the loss for the amount paid to the cardholder. The joint
venture is primarily liable for any losses on transactions from the contributed
portfolio that occur after June 26, 2009. However, if the joint venture fails to
meet its obligation to reimburse the cardholder for disputed transactions,
then the Corporation could be held liable for the disputed amount. In 2010
and 2009, the joint venture processed and settled $265.5 billion and
$250.0 billion of transactions and it recorded losses of $17 million and
$26 million.

At December 31, 2010 and 2009, the Corporation, on behalf of the joint
venture, held as collateral $25 million and $26 million of merchant escrow
deposits which may be used to offset amounts due from the individual
merchants. The joint venture 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 representative of the
actual potential loss exposure. The Corporation believes the maximum po-
tential exposure for chargebacks would not exceed the total amount of
merchant transactions processed through Visa and MasterCard for the last
six months, which represents the claim period for the cardholder, plus any
outstanding delayed-delivery transactions. As of December 31, 2010 and
2009, the maximum potential exposure totaled approximately $139.5 billion

and $131.0 billion. The Corporation does not expect to make material pay-
ments in connection with these guarantees. The maximum potential exposure
disclosed does not include volumes processed by First Data contributed
portfolios.

Other Derivative Contracts
The Corporation funds selected assets, including securities issued by CDOs
and CLOs, through derivative contracts, typically total return swaps, with third
parties and SPEs that are not consolidated on the Corporation’s Consolidated
Balance Sheet. At December 31, 2010 and 2009, the total notional amount
of these derivative contracts was approximately $4.3 billion and $4.9 billion
with commercial banks and $1.7 billion and $2.8 billion with SPEs. The
underlying securities are senior securities and substantially all of the Corpo-
ration’s exposures are insured. Accordingly, the Corporation’s exposure to
loss consists principally of counterparty risk to the insurers. In certain
circumstances, generally as a result of ratings downgrades, the Corporation
may be required to purchase the underlying assets, which would not result in
additional gain or loss to the Corporation as such exposure is already reflected
in the fair value of the derivative contracts.

Other Guarantees
The Corporation sells products that guarantee the return of principal 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 Corporation requires that these
guarantees be backed by structural and investment 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 between the proceeds
of the liquidated assets and the purchase price of the zero-coupon bonds at
the preset future date. These guarantees are recorded as derivatives and
carried at fair value in the trading portfolio. At December 31, 2010 and 2009,
the notional amount of these guarantees totaled $666 million and $2.1 billion.
These guarantees have various maturities ranging from two to five years. As of
December 31, 2010 and 2009, the Corporation had not made a payment
under these products and has assessed the probability of payments under
these guarantees as remote.

The Corporation has entered into additional guarantee agreements and
commitments, including lease-end obligation agreements, partial credit guar-
antees on certain leases, real estate joint venture guarantees, sold risk
participation swaps, divested business commitments and sold put options
that require gross settlement. The maximum potential future payment under
these agreements was approximately $3.4 billion and $3.6 billion at Decem-
ber 31, 2010 and 2009. The estimated maturity dates of these obligations
extend up to 2033. The Corporation has made no material payments under
these guarantees.

In addition, the Corporation has guaranteed the payment obligations of
certain subsidiaries of Merrill Lynch on certain derivative transactions. The
aggregate notional amount of such derivative liabilities was approximately
$2.1 billion and $2.5 billion at December 31, 2010 and 2009. In the normal
course of business, the Corporation periodically guarantees the obligations of
its affiliates in a variety of transactions including ISDA-related transactions
and non ISDA-related transactions such as commodities trading, repurchase
agreements, prime brokerage agreements and other transactions.

Bank of America 2010

199

Payment Protection Insurance Claims Matter
In the U.K., the Corporation sells payment protection insurance (PPI) through
its Global Card Services business to credit card customers and has previously
sold this insurance to consumer loan customers. PPI covers a consumer’s
loan or debt repayment if certain events occur such as loss of job or illness. In
response to an elevated level of customer complaints of misleading sales
tactics across the industry, heightened media coverage and pressure from
consumer advocacy groups, the U.K. Financial Services Authority (FSA) has
investigated and raised concerns about the way some companies have
handled complaints relating to the sale of these insurance policies. In August
2010, the FSA issued a policy statement on the assessment and remediation
of PPI claims which is applicable to the Corporation’s U.K. consumer busi-
nesses and is intended to address concerns among consumers and regula-
tors regarding the handling of PPI complaints across the industry. The policy
statement sets standards for the sale of PPI that apply to current and prior
sales, and in the event a company does not or did not comply with the
standards, it is alleged that the insurance was incorrectly sold, giving the
customer rights to remedies. The FSA gave companies until December 1,
2010 to comply with the new regulations, but the judicial review to assess
compliance is still underway. Given the new regulatory guidance, as of De-
cember 31, 2010, the Corporation has a liability of $630 million based on its
current claims history and an estimate of future claims that have yet to be
asserted against the Corporation. The liability is included in accrued expenses
and other liabilities and the related expense is included in insurance income.
The policy statement also requires companies to review their sales practices
and to proactively remediate non-complaining customers if evidence of a
systematic breach of the newly articulated sales standards is discovered,
which could include refunding premiums paid. Subject to the outcome of the
Corporation’s review and the new regulatory guidance, it is possible that an
additional liability may be required. Industry groups have challenged the policy
statement through a judicial review process. The judicial review is not ex-
pected to be completed until the end of the first quarter of 2011. Therefore,
the Corporation is unable to reasonably estimate the total amount of addi-
tional possible loss or a range of loss as of December 31, 2010.

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 various
classes of claimants. These actions and proceedings are generally based
on alleged violations of consumer protection, securities, environmental,
banking, employment and other laws. In some of these actions and proceed-
ings, claims for substantial monetary damages are asserted against the
Corporation and its subsidiaries.

In the ordinary course of business, the Corporation and its subsidiaries
are also subject to regulatory examinations, information gathering requests,
inquiries and investigations. Certain subsidiaries of the Corporation are
registered broker/dealers or investment advisors and are subject to regula-
tion by the SEC, the Financial Industry Regulatory Authority (FINRA), the New
York Stock Exchange, the FSA and other domestic, international and state
securities regulators. In connection with formal and informal inquiries by
those agencies, such subsidiaries receive numerous requests, subpoenas
and orders for documents, testimony and information in connection with
various aspects of their regulated activities.

In view of the inherent difficulty of predicting the outcome of such litigation
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 generally cannot predict
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 applicable accounting guidance, the Corporation es-
tablishes an accrued liability for litigation and regulatory matters when those
matters present loss contingencies that are both probable and estimable. In
such cases, there may be an exposure to loss in excess of any amounts
accrued. When a loss contingency is not both probable and estimable, the
Corporation does not establish an accrued liability. As a litigation or regulatory
matter develops, the Corporation, in conjunction with any outside counsel
handling the matter, evaluates on an ongoing basis whether such matter
presents a loss contingency that is probable and estimable. If, at the time of
evaluation, the loss contingency related to a litigation or regulatory matter is
not both probable and estimable, the matter will continue to be monitored for
further developments that would make such loss contingency both probable
and estimable. Once the loss contingency related to a litigation or regulatory
matter is deemed to be both probable and estimable, the Corporation will
establish an accrued liability with respect to such loss contingency and record
a corresponding amount of litigation-related expense. The Corporation con-
tinues to monitor the matter for further developments that could affect the
amount of the accrued liability that has been previously established. Excluding
fees paid to external legal service providers, litigation-related expense of
$2.6 billion was recognized in 2010 compared to $1.0 billion for 2009.

For a limited number of the matters disclosed in this Note for which a loss
is probable or reasonably possible in future periods, whether in excess of a
related accrued liability or where there is no accrued liability, the Corporation
is able to estimate a range of possible loss. In determining whether it is
possible to provide an estimate of loss or range of possible loss, the Cor-
poration reviews and evaluates its material litigation and regulatory matters
on an ongoing basis, in conjunction with any outside counsel handling the
matter, in light of potentially relevant factual and legal developments. These
may include information learned through the discovery process, rulings on
dispositive motions, settlement discussions, and other rulings by courts,
arbitrators or others. In cases in which the Corporation possesses sufficient
appropriate information to develop an estimate of loss or range of possible
loss, that estimate is aggregated and disclosed below. There may be other
disclosed matters for which a loss is probable or reasonably possible but
such an estimate may not be possible. For those matters where an estimate
is possible, management currently estimates the aggregate range of possible
loss is $145 million to $1.5 billion in excess of the accrued liability (if any)
related to those matters. This estimated range of possible loss is based upon
currently available information and is subject to significant judgment and a
variety of assumptions, and known and unknown uncertainties. The matters
underlying the estimated range will change from time to time, and actual
results may vary significantly from the current estimate. Those matters for
which an estimate is not possible are not included within this estimated range.
Therefore, this estimated range of possible loss represents what the Corpo-
ration believes to be an estimate of possible loss only for certain matters
meeting these criteria. It does not represent the Corporation’s maximum loss
exposure. Information is provided below regarding the nature of all of these
contingencies and, where specified, the amount of the claim associated with
these loss contingencies. Based on current knowledge, management does
not believe that loss contingencies arising from pending matters, including the
matters described herein, will have a material adverse effect on the consol-
idated financial position or liquidity of the Corporation. However, in light of the
inherent uncertainties involved in these matters, some of which are beyond
the Corporation’s control, and the very large or indeterminate damages
sought in some of these matters, an adverse outcome in one or more of
these matters could be material to the Corporation’s results of operations or
cash flows for any particular reporting period.

200

Bank of America 2010

Auction Rate Securities Litigation
Since October 2007, the Corporation, Merrill Lynch and certain affiliates have
been named as defendants in a variety of lawsuits and other proceedings
brought by customers and both individual and institutional investors regarding
ARS. These actions generally allege that the defendants: (i) misled the
plaintiffs into believing that there was a deeply liquid market for ARS, and
(ii) failed to adequately disclose their or their affiliates’ practice of placing
their own bids to support ARS auctions. Plaintiffs assert that ARS auctions
started failing from August 2007 through February 2008 when the defen-
dants and other broker-dealers stopped placing those “support bids.” In
addition to the matters described in more detail below, numerous arbitrations
and individual lawsuits have been filed against the Corporation, Merrill Lynch
and certain affiliates by parties who purchased ARS and are seeking relief
that includes compensatory and punitive damages totaling in excess of
$1.8 billion, as well as rescission, among other relief.

Securities Actions
The Corporation and Merrill Lynch face a number of civil actions relating to the
sales of ARS and management of ARS auctions, including two putative class
action lawsuits in which the plaintiffs seek to recover the alleged losses in
market value of ARS securities purportedly caused by the defendants’ ac-
tions. Plaintiffs also seek unspecified damages, including rescission, other
compensatory and consequential damages, costs, fees and interest. The first
action, In Re Merrill Lynch Auction Rate Securities Litigation, is the result of
the consolidation of two separate class action suits in the U.S. District Court
for the Southern District of New York. These suits were brought by two
customers of Merrill Lynch, on behalf of all persons who purchased ARS in
auctions managed by Merrill Lynch, against Merrill Lynch and its subsidiary
Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPFS). On March 31,
2010, the U.S. District Court for the Southern District of New York granted
Merrill Lynch’s motion to dismiss. On April 22, 2010, a lead plaintiff filed a
notice of appeal to the U.S. Court of Appeals for the Second Circuit, which is
currently pending. The second action, Bondar v. Bank of America Corporation,
was brought by a putative class of ARS purchasers against the Corporation
and Banc of America Securities, LLC (BAS) and is currently pending in the
U.S. District Court for the Northern District of California. The Corporation and
BAS have filed a motion to dismiss the amended complaint, which remains
pending.

Antitrust Actions
The Corporation, Merrill Lynch and other financial institutions were also
named in two putative antitrust class actions in the U.S. District Court for
the Southern District of New York. Plaintiffs in both actions assert federal
antitrust claims under Section 1 of the Sherman Act based on allegations that
defendants conspired to restrain trade in ARS by placing support bids in ARS
auctions, only to collectively withdraw those bids in February 2008, which
allegedly caused ARS auctions to fail. The plaintiff in the first action, Mayor
and City Council of Baltimore, Maryland v. Citigroup, Inc., et al., seeks to
represent a class of issuers of ARS that the defendants underwrote between
May 12, 2003 and February 13, 2008. This issuer action seeks to recover,
among other relief, the alleged above-market interest payments that ARS
issuers allegedly have had to make after the defendants allegedly stopped
placing “support bids” in ARS auctions. The plaintiff in the second action,
Mayfield, et al. v. Citigroup, Inc., et al., seeks to represent a class of investors
that purchased ARS from the defendants and held those securities when ARS
auctions failed on February 13, 2008. Plaintiff seeks to recover, among other
relief, unspecified damages for losses in the ARS’ market value, and rescis-
sion of the investors’ ARS purchases. Both actions also seek treble damages
and attorneys’ fees under the Sherman Act’s private civil remedy. On Janu-
ary 25, 2010, the court dismissed both actions with prejudice and the

plaintiffs’ respective appeals are currently pending in the U.S. Court of
Appeals for the Second Circuit.

Checking Account Overdraft Litigation
Bank of America, N.A. (BANA) is currently a defendant in several consumer
suits challenging certain deposit account-related business practices. Three of
the suits are presently part of a multi-district litigation (MDL) proceeding
involving approximately 65 individual cases against 30 financial institutions
assigned by the Judicial Panel on Multi-district Litigation to the U.S. District
Court for the Southern District of Florida. The three cases, Tornes v. Bank of
America, N.A., Yourke, et al. v. Bank of America, N.A., et al. and Knighten v.
Bank of America, N.A., allege that BANA improperly and unfairly increased the
number of overdraft fees it assessed on consumer deposit accounts by
various means. The cases challenge the practice of reordering debit card
transactions to post high-to-low and BANA’s failure to notify customers at the
point of sale that the transaction may result in an overdraft charge. The cases
also allege that BANA’s disclosures and advertising regarding the posting of
debit card transactions are false, deceptive and misleading. These cases
assert claims including breach of the implied covenant of good faith and fair
dealing, conversion, unjust enrichment and violation of the unfair and decep-
tive practices statutes of various states. Plaintiffs generally seek restitution of
all overdraft fees paid to BANA as a result of BANA’s allegedly wrongful
business practices, as well as disgorgement, punitive damages, injunctive
relief, pre-judgment interest and attorneys’ fees. Omnibus motions to dismiss
many of the complaints involved in the MDL, including Tornes, Yourke and
Knighten, were denied on March 12, 2010. Trial is currently scheduled for
March 26, 2012. A fourth putative class action, Phillips, et al. v. Bank of
America, N.A., which includes similar allegations, will shortly become part of
the MDL proceedings.

In December 2004, BANA was also named as the defendant in Closson, et
al. v. Bank of America, et al., a putative class action currently pending in the
California Court of Appeal, First District, Division 1, which also challenges
BANA’s practice of reordering debit card transactions to post deposits in
high-to-low order. Closson asserts claims for violations of California state law,
and seeks restitution, disgorgement, actual and punitive damages, a correc-
tive advertising campaign and injunctive relief. BANA entered into a settle-
ment in Closson, which received final approval by the Superior Court of the
State of California for the County of San Francisco on August 3, 2009. The
settlement provides for a $35 million payment by BANA in exchange for a
release of the claims against BANA by the members of the nationwide
settlement class. Several settlement class members who objected to the
final approval of the settlement have appealed. If the Closson settlement is
affirmed, it will likely bar the claims of many of the putative class members in
Tornes, Yourke and Knighten, as many of those class members are covered by
the putative class in Closson.

On January 27, 2011, the Corporation reached a settlement in principle
with the lead plaintiffs in the MDL, subject to complete final documentation
and court approvals. The settlement will provide for a payment by the Cor-
poration of $410 million (which amount was fully accrued by the Corporation
as of December 31, 2010) in exchange for a complete release of claims
asserted against the Corporation in the MDL. The settlement also contem-
plates that a stay will be requested in the Closson appeal and that, when this
settlement becomes effective, the appeal in Closson will be withdrawn and
the settlement in Closson will be effectuated according to its terms.

Countrywide Bond Insurance Litigation
The Corporation, Countrywide Financial Corporation (CFC) and various other
Countrywide entities are subject to claims from several monoline bond
insurance companies. These claims generally relate to bond insurance pol-
icies provided by the insurers on certain securitized pools of home equity lines

Bank of America 2010

201

of credit and fixed-rate second-lien mortgage loans. Plaintiffs in these cases
generally allege that they have paid claims as a result of defaults in the
underlying loans and assert that these defaults are the result of improper
underwriting by the defendants.

MBIA
The Corporation, CFC and various other Countrywide entities are named as
defendants in two actions filed by MBIA Insurance Corporation (MBIA). The
first action, MBIA Insurance Corporation, Inc. v. Countrywide Home Loans, et
al., is pending in New York Supreme Court, New York County. In April 2010, the
court granted in part and denied in part the Countrywide defendants’ motion
to dismiss and denied the Corporation’s motion to dismiss. The parties have
filed cross-appeals from this order. On December 22, 2010, the court issued
an order on MBIA’s motion for use of sampling at trial, in which the court held
that MBIA may attempt to prove its breach of contract and fraudulent induce-
ment claims through examination of statistically significant samples of the
securitizations at issue. In its order, the court did not endorse any of MBIA’s
specific sampling proposals and stated that defendants have “significant
valid challenges” to MBIA’s methodology that they may present at trial,
together with defendants’ own views and evidence.

The second MBIA action, MBIA Insurance Corporation, Inc. v. Bank of
America Corporation, Countrywide Financial Corporation, Countrywide Home
Loans, Inc., Countrywide Securities Corporation, et al., is pending in the
Superior Court of the State of California, County of Los Angeles. MBIA
purports to bring this action as subrogee to the note holders for certain
securitized pools of home equity lines of credit and fixed-rate second-lien
mortgage loans and seeks unspecified damages and declaratory relief. On
May 17, 2010, the court dismissed the claims against the Countrywide
defendants with leave to amend, but denied the request to dismiss MBIA’s
successor liability claims against the Corporation. On June 21, 2010, MBIA
filed an amended complaint re-asserting its previously dismissed claims
against the Countrywide defendants, re-asserting the successor liability claim
against the Corporation and adding Countrywide Capital Markets, LLC as a
defendant. The Countrywide defendants filed a demurrer to the amended
complaint, but the court declined to rule on the demurrer and instead entered
an order which stays this case until August 1, 2011.

Syncora
The Corporation, CFC and various other Countrywide entities are named as
defendants in an action filed by Syncora Guarantee Inc. (Syncora) entitled
Syncora Guarantee Inc. v. Countrywide Home Loans, Inc., et al. This action,
currently pending in New York Supreme Court, New York County, relates to
bond insurance policies provided by Syncora on certain securitized pools of
home equity lines of credit. In March 2010, the court issued an order that
granted in part and denied in part the Countrywide defendants’ motion to
dismiss. Syncora and the Countrywide defendants have filed cross-appeals
from this order. In May 2010, Syncora amended its complaint. Defendants
filed an answer to Syncora’s amended complaint on July 9, 2010, as well as a
counterclaim for breach of contract and declaratory judgment. The parties
have agreed to stay the counterclaim until August 15, 2011.

FGIC
The Corporation, CFC and various other Countrywide entities are named as
defendants in an action filed by Financial Guaranty Insurance Company (FGIC)
entitled Financial Guaranty Insurance Co. v. Countrywide Home Loans, Inc.
This action, currently pending in New York Supreme Court, New York County,
relates to bond insurance policies provided by FGIC on certain securitized
pools of home equity lines of credit and fixed-rate second-lien mortgage loans.
In June 2010, the court entered an order that granted in part and denied in
the Countrywide defendants’ motion to dismiss. FGIC and the
part

Countrywide defendants have filed cross-appeals from this order. Defendants
filed an answer to FGIC’s amended complaint on July 19, 2010. On March 24,
2010, CFC and certain other Countrywide entities filed a separate but related
action against FGIC in New York Supreme Court seeking monetary damages of
at least $100 million against FGIC in connection with FGIC’s failure to pay
claims under certain bond insurance policies.

Ambac
The Corporation, CFC and various other Countrywide entities are named as
defendants in an action filed by Ambac Assurance Corporation (Ambac)
entitled Ambac Assurance Corporation and The Segregated Account of Ambac
Assurance Corporation v. Countrywide Home Loans, Inc., et al. This action,
currently pending in New York Supreme Court, New York County, relates to
bond insurance policies provided by Ambac on certain securitized pools of
home equity lines of credit and fixed-rate second-lien mortgage loans. On
December 10, 2010, defendants filed answers to the complaint.

Countrywide Equity and Debt Securities Matters
Certain New York state and municipal pension funds have commenced liti-
gation in the U.S. District Court for the Central District of California, entitled In
re Countrywide Financial Corporation Securities Litigation, against CFC, cer-
tain other Countrywide entities and several former CFC officers and directors.
This action alleges violations of the antifraud provisions of the Securities
Exchange Act of 1934 and Sections 11 and 12 of the Securities Act of 1933.
Plaintiffs claim losses in excess of $25.0 billion that plaintiffs allegedly
experienced on certain CFC equity and debt securities. Plaintiffs also assert
additional claims against BAS, MLPFS and other underwriter defendants
under Sections 11 and 12 of the Securities Act of 1933. Plaintiffs’ allege
that CFC made false and misleading statements in certain SEC filings and
elsewhere concerning the nature and quality of its loan underwriting practices
and its financial results. On April 2, 2010, the parties reached an agreement
in principle to settle this action for $624 million in exchange for a dismissal of
all claims with prejudice. On August 2, 2010, the court preliminarily approved
the settlement. On December 1, 2010, CFC and the plaintiffs agreed to
amend the settlement to allow CFC to use up to $22.5 million of the settle-
ment funds for a two-year period following final approval of the settlement to
resolve any claims asserted by investors who chose to exclude themselves
from the class. On January 7, 2011, the court preliminarily approved this
amendment. The settlement remains subject to final court approval.

Interchange and Related Litigation
A group of merchants have filed a series of putative class actions and
individual actions with regard to interchange fees associated with Visa and
MasterCard payment card transactions. These actions, which have been
consolidated in the U.S. District Court for the Eastern District of New York
under the caption In Re Payment Card Interchange Fee and Merchant Dis-
count Anti-Trust Litigation (Interchange), name Visa, MasterCard and several
banks and bank holding companies, including the Corporation, as defendants.
Plaintiffs allege that the defendants conspired to fix the level of default
interchange rates, which represent the fee an issuing bank charges an
acquiring bank on every transaction. Plaintiffs also challenge as unreason-
able restraints of trade under Section 1 of the Sherman Act certain rules of
Visa and MasterCard related to merchant acceptance of payment cards at the
point of sale. Plaintiffs seek unspecified damages and injunctive relief based
on their assertion that interchange would be lower or eliminated absent the
alleged conduct. On January 8, 2008, the court granted defendants’ motion
to dismiss all claims for pre-2004 damages. Motions to dismiss the remain-
der of the complaint and plaintiffs’ motion for class certification are pending.
In addition, plaintiffs filed supplemental complaints against certain de-
fendants, including the Corporation, relating to initial public offerings (the

202

Bank of America 2010

IPOs) of MasterCard and Visa. Plaintiffs allege that the MasterCard and Visa
IPOs violated Section 7 of the Clayton Act and Section 1 of the Sherman Act.
Plaintiffs also assert that the MasterCard IPO was a fraudulent conveyance.
Plaintiffs seek unspecified damages and to undo the IPOs. Motions to dismiss
both supplemental complaints remain pending.

The Corporation and certain of its affiliates previously entered into loss-
sharing agreements with Visa and other financial institutions in connection
with certain antitrust litigation against Visa, including Interchange. The Cor-
poration and these same affiliates have now entered into additional loss-
sharing agreements for Interchange that cover all defendants, including
MasterCard. Collectively, the loss-sharing agreements require the Corporation
and/or certain affiliates to pay 11.6 percent of the monetary portion of any
comprehensive Interchange settlement. In the event of an adverse judgment,
the agreements require the Corporation and/or certain affiliates to pay
12.8 percent of any damages associated with Visa-related claims (Visa-
related damages), 9.1 percent of any damages associated with Master-
Card-related claims, and 11.6 percent of any damages associated with
internetwork claims (internetwork damages) or not associated specifically
with Visa or MasterCard-related claims (unassigned damages).

Pursuant to Visa’s publicly-disclosed Retrospective Responsibility Plan
(the RRP), Visa placed certain proceeds from its IPO into an escrow fund (the
Escrow). Under the RRP, funds in the Escrow may be accessed by Visa and its
members, including Bank of America, to pay for a comprehensive settlement
or damages in Interchange, with the Corporation’s payments from the Escrow
capped at 12.81 percent of the funds that Visa places therein. Subject to that
cap, the Corporation may use Escrow funds to cover: 66.7 percent of its
towards a comprehensive Interchange settlement,
monetary payment
100 percent of its payment for any Visa-related damages and 66.7 percent
of its payment for any internetwork and unassigned damages.

In re Initial Public Offering Securities Litigation
BAS, Merrill Lynch, MLPFS, and certain of their subsidiaries, along with other
underwriters, and various issuers and others, were named as defendants in a
number of putative class action lawsuits that have been consolidated in the
U.S. District Court for the Southern District of New York as In re Initial Public
Offering Securities Litigation. Plaintiffs contend, among other things, that
defendants failed to make certain required disclosures in the registration
statements and prospectuses for applicable offerings regarding alleged
agreements with institutional investors that tied allocations in certain offer-
ings to the purchase orders by those investors in the aftermarket. Plaintiffs
allege that such agreements allowed defendants to manipulate the price of
the securities sold in these offerings in violation of Section 11 of the Secu-
rities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934,
and SEC rules promulgated thereunder. The parties agreed to settle the
matter, for which the court granted final approval. Some putative class
members have filed an appeal, which remains pending, in the U.S. Court
of Appeals for the Second Circuit seeking reversal of the final approval.

Lehman Brothers Holdings, Inc. Litigation
Beginning in September 2008, BAS, MLPFS, Countrywide Securities Corpo-
ration (CSC) and LaSalle Financial Services Inc., along with other underwriters
and individuals, were named as defendants in several putative class action
lawsuits filed in federal and state courts. All of these cases have since been
transferred or conditionally transferred to the U.S. District Court for the
Southern District of New York under the caption In re Lehman Brothers
Securities and ERISA Litigation. Plaintiffs allege that the underwriter defen-
dants violated Section 11 of the Securities Act of 1933, as well as various
state laws, by making false or misleading disclosures about the real estate-
related investments and mortgage lending practices of Lehman Brothers
Holdings, Inc. (LBHI) in connection with various debt and convertible stock

offerings of LBHI. Plaintiffs seek unspecified damages. On June 4, 2010,
defendants filed a motion to dismiss the complaint, which remains pending.

Lehman Setoff Litigation
In 2008, following the bankruptcy filing of LBHI, Lehman Brothers Special
Financing Inc. (LBSF) owed money to BANA as a result of various terminated
derivatives transactions entered into pursuant to one or more ISDA Master
Agreements between the parties. The net termination values of these deriv-
ative transactions resulted in estimated claims by BANA against LBSF in
excess of $1.0 billion. LBHI had guaranteed this exposure and, as part of an
arrangement through which various LBHI subsidiaries and affiliates would
retain an ability to overdraw their accounts during working hours, had $500 mil-
lion in cash (plus $1.8 million in accrued interest) on deposit with BANA in a
deposit account (the Deposit Account).

On November 10, 2008, BANA exercised its right of setoff against the
Deposit Account to partially satisfy claims that BANA had asserted against
LBSF and LBHI pursuant to the ISDA agreements and the LBHI guarantee. At
the same time, BANA exercised its right of set off against five other LBHI
accounts holding an additional $7.5 million (one of which, in the amount of
approximately $500,000, was later reversed). On November 26, 2008, BANA
commenced an adversary proceeding against LBSF and LBHI in their Chap-
ter 11 bankruptcy proceedings in the U.S. Bankruptcy Court for the Southern
District of New York. BANA sought a declaration that its setoff of LBHI’s funds
was proper and not in violation of the automatic stay imposed under the
Bankruptcy Code. In response, LBHI filed counterclaims against BANA alleg-
ing that BANA had no right to set off against the $502 million held in the
Deposit Account, and that the entire setoff was in violation of the automatic
stay. LBHI sought the return of the set-off funds plus prejudgment interest and
unspecified damages for violation of the automatic stay, including attorneys’
fees and interest. LBSF and LBHI also argued in their summary judgment
papers that the entire setoff was in violation of the automatic stay, although
they did not plead turnover of the funds held in the other accounts.

On December 3, 2010, the Bankruptcy Court entered summary judgment
against BANA with respect to setoff of the Deposit Account and directed BANA
to pay to LBSF and LBHI $502 million, plus interest at nine percent per annum
from November 10, 2008 through the date of the judgment. The court
conducted a status conference on January 19, 2011 and directed the parties
to discuss and present a further order regarding LBHI’s request for sanctions
pertaining to BANA’s alleged violation of the automatic stay. LBSF and LBHI
publicly indicated that they would request turnover of the $7 million that was
set off from the other accounts plus an additional amount to account for
changes in foreign exchange rates. The parties have since agreed in principle
to settle both the sanctions issue and the question of turnover of the
additional $7 million for an irrevocable payment of $1.5 million by BANA.
The settlement, which has still to be finally documented and is subject to
approval of the Bankruptcy Court, would express that BANA admits no liability
or wrongdoing with respect to sanctions, and that LBHI and LBSF reserve no
rights to seek recovery of the $7 million, on appeal or otherwise. BANA will
oppose that request. BANA has preserved its appellate rights as to the
December 3 order and intends to file an appeal upon entry of a final order
approving the settlement.

MBIA Insurance Corporation CDO Litigation
On April 30, 2009, MBIA and LaCrosse Financial Products, LLC filed a
complaint in New York State Supreme Court, New York County, against MLPFS
and Merrill Lynch International (MLI) under the caption MBIA Insurance Cor-
poration and LaCrosse Financial Products, LLC v. Merrill Lynch Pierce Fenner
and Smith Inc., and Merrill Lynch International. The complaint relates to
certain credit default swap and insurance agreements by which plaintiffs
provided credit protection to MLPFS and MLI and other parties on CDO

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203

securities. Plaintiffs claim that MLPFS and MLI did not adequately disclose the
credit quality and other risks of the CDO securities and underlying collateral.
The complaint alleges claims for fraud, negligent misrepresentation, breach
of the implied covenant of good faith and fair dealing and breach of contract
and seeks rescission and unspecified compensatory and punitive damages,
among other relief. On April 9, 2010, the court granted defendants’ motion to
dismiss as to the fraud, negligent misrepresentation, breach of the implied
covenant of good faith and fair dealing and rescission claims, as well as a
portion of the breach of contract claim. Plaintiffs have appealed the dismissal
of their claims and MLI has cross-appealed the denial of its motion to dismiss
the breach of contract claim in its entirety. On February 1, 2011, the appellate
court dismissed the case against MLI in its entirety. MBIA has filed a request
to appeal the appellate court’s decision to the New York State Court of
Appeals and has requested permission from the trial court to file an amended
complaint.

Merrill Lynch Acquisition-related Matters
Since January 2009, the Corporation and certain of its current and former
officers and directors, among others, have been named as defendants in a
variety of actions filed in state and federal courts relating to the Corporation’s
acquisition of Merrill Lynch (the Acquisition). These acquisition-related cases
consist of securities actions, derivative actions and actions under ERISA. The
claims in these actions generally concern (i) the Acquisition; (ii) the financial
condition and 2008 fourth-quarter losses experienced by the Corporation and
Merrill Lynch; (iii) due diligence conducted in connection with the Acquisition;
(iv) the Corporation’s agreement that Merrill Lynch could pay up to $5.8 billion
in bonus payments to Merrill Lynch employees; (v) the Corporation’s discus-
sions with government officials in December 2008 regarding the Corpora-
tion’s consideration of invoking the material adverse change clause in the
Acquisition agreement and the possibility of obtaining government assistance
in completing the Acquisition; and/or (vi) alleged material misrepresentations
and/or material omissions in the proxy statement and related materials for
the Acquisition.

Securities Actions
Plaintiffs in the putative securities class actions in the In re Bank of America
Securities, Derivative and Employment Retirement Income Security Act
(ERISA) Litigation (Securities Plaintiffs) represent all (i) purchasers of the
Corporation’s common and preferred securities between September 15,
2008 and January 21, 2009; (ii) holders of the Corporation’s common stock
or Series B Preferred Stock as of October 10, 2008; and (iii) purchasers of the
Corporation’s common stock issued in the offering that occurred on or about
October 7, 2008. During the purported class period, the Corporation had
between 4,560,112,687 and 5,017,579,321 common shares outstanding
and the price of those securities declined from $33.74 on September 12,
2008 to $6.68 on January 21, 2009. Securities Plaintiffs claim violations of
Sections 10(b), 14(a) and 20(a) of the Securities Exchange Act of 1934, and
SEC rules promulgated thereunder. Securities Plaintiffs’ amended complaint
also alleges violations of Sections 11, 12(a)(2) and 15 of the Securities Act of
1933 related to an offering of the Corporation’s common stock that occurred
on or about October 7, 2008, and names BAS and MLPFS, among others, as
defendants on the Section 11 and 12(a)(2) claims. The Corporation and its co-
defendants filed motions to dismiss, which the court granted in part by
dismissing certain of the Securities Plaintiffs’ claims under Section 10(b)
of the Securities Exchange Act of 1934. Securities Plaintiffs have filed a
second amended complaint which seeks to replead some of the dismissed
claims as well as add claims under Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 on behalf of holders of certain debt, preferred secu-
rities and option securities. The Corporation and its co-defendants have filed a
motion to dismiss the second amended complaint’s new and amended

allegations, which remains pending. Securities Plaintiffs seek unspecified
monetary damages, legal costs and attorneys’ fees.

Several individual plaintiffs have opted to pursue claims apart from the In
re Bank of America Securities, Derivative, and Employment Retirement In-
come Security Act (ERISA) Litigation and, accordingly, have initiated individual
actions relying on substantially the same facts and claims as the Securities
Plaintiffs in the U.S. District Court for the Southern District of New York.

On January 13, 2010, the Corporation, Merrill Lynch and certain of the
Corporation’s current and former officers and directors were named in a
purported class action filed in the U.S. District Court for the Southern District
of New York entitled Dornfest v. Bank of America Corp., et al. The action is
purportedly brought on behalf of investors in Corporation option contracts
between September 15, 2008 and January 22, 2009 and alleges that during
the class period approximately 9.5 million Corporation call option contracts
and approximately eight million Corporation put option contracts were already
traded on seven of the Options Clearing Corporation exchanges. The com-
plaint alleges that defendants violated Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 and SEC rules promulgated thereunder.
On April 9, 2010, the court consolidated this action with the consolidated
securities action in the In re Bank of America Securities, Derivative and
Employment Retirement Income Security Act (ERISA) Litigation, and ruled
that the plaintiffs may pursue the action as an individual action. Plaintiffs seek
unspecified monetary damages, legal costs and attorneys’ fees.

Derivative Actions
Several of the derivative actions related to the Acquisition that were pending in
the Delaware Court of Chancery were consolidated under the caption In re
Bank of America Corporation Stockholder Derivative Litigation. In addition, the
MDL ordered the transfer of actions related to the Acquisition that had been
pending in various federal courts to the U.S. District Court for the Southern
District of New York for coordinated or consolidated pretrial proceedings.
These actions have been separately consolidated and are now pending under
the caption In re Bank of America Securities, Derivative, and Employment
Retirement Income Security Act (ERISA) Litigation.

On October 9, 2009, plaintiffs in the derivative actions in the In re Bank of
America Securities, Derivative and Employment Retirement Income Security
Act (ERISA) Litigation (the Derivative Plaintiffs) filed a consolidated amended
derivative and class action complaint. The amended complaint names as
defendants certain of the Corporation’s current and former directors, officers
and financial advisors, and certain of Merrill Lynch’s current and former
directors and officers. The Corporation is named as a nominal defendant with
respect to the derivative claims. The amended complaint asserts claims for,
among other things: (i) violation of federal securities laws; (ii) breach of
fiduciary duties; (iii) the return of incentive compensation that is alleged to be
inappropriate in view of the work performed and the results achieved by
certain of the defendants; and (iv) contribution in connection with the Corpo-
ration’s exposure to significant liability under state and federal law. The
amended complaint seeks unspecified monetary damages, equitable reme-
dies and other relief. On February 8, 2010, the Derivative Plaintiffs voluntarily
dismissed their claims against each of the former Merrill Lynch officers and
directors without prejudice. The Corporation and its co-defendants filed mo-
tions to dismiss, which were granted in part on August 27, 2010. On Octo-
ber 18, 2010, the Corporation and its co-defendants answered the remaining
allegations asserted by the Derivative Plaintiffs.

On February 17, 2010, an alleged shareholder of the Corporation filed a
purported derivative action, entitled Bahnmaier v. Lewis, et al., in the U.S. Dis-
trict Court for the Southern District of New York. The complaint names as
defendants certain of the Corporation’s current and former directors and
officers, and one of Merrill Lynch’s former officers. The complaint alleges,
among other things, that the individual defendants breached their fiduciary

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duties by failing to provide accurate and complete information to shareholders
regarding: (i) certain Acquisition-related events; (ii) the potential for litigation
resulting from Countrywide’s lending practices; and (iii) the risk posed to the
Corporation’s capital levels as a result of Countrywide’s loan losses. The
complaint also asserts claims against the individual defendants for breach of
fiduciary duty by failing to maintain adequate internal controls, unjust enrich-
ment, abuse of control and gross mismanagement in connection with the
supervision and management of the operations, business and disclosure
controls of the Corporation. The Corporation is named as a nominal defendant
only and no monetary relief is sought against it. The complaint seeks, among
other things, unspecified monetary damages, equitable remedies and other
relief. On December 14, 2010, the court entered an order dismissing the
complaint without prejudice.

The Corporation and certain of its current and former directors are also
named as defendants in several putative class and derivative actions in the
Delaware Court of Chancery, including Rothbaum v. Lewis; Southeastern
Pennsylvania Transportation Authority v. Lewis; Tremont Partners LLC v.
Lewis; Kovacs v. Lewis; Stern v. Lewis; and Houx v. Lewis, brought by share-
holders alleging breaches of fiduciary duties and waste of corporate assets in
connection with the Acquisition. On April 27, 2009, the Delaware Court of
Chancery consolidated the derivative actions under the caption In re Bank of
America Corporation Stockholder Derivative Litigation. The complaint seeks,
among other things, unspecified monetary damages, equitable remedies and
other relief. On April 30, 2009, the putative class claims in the Stern v. Lewis
and Houx v. Lewis actions were voluntarily dismissed without prejudice. Trial is
scheduled for October 2012.

ERISA Actions
On October 9, 2009, plaintiffs in the ERISA actions in the In re Bank of
America Securities, Derivative and Employment Retirement Income Security
Act (ERISA) Litigation (the ERISA Plaintiffs) filed a consolidated amended
complaint for breaches of duty under ERISA. The amended complaint is
brought on behalf of a purported class that consists of participants in the
Corporation’s 401(k) Plan, the Corporation’s 401(k) Plan for Legacy Compa-
nies, the CFC 401(k) Plan (collectively, the 401(k) Plans) and the Corpora-
tion’s Pension Plan. The amended complaint alleges violations of ERISA,
based on, among other things: (i) an alleged failure to prudently and loyally
manage the 401(k) Plans and Pension Plan by continuing to offer the
Corporation’s common stock as an investment option or measure for partic-
ipant contributions; (ii) an alleged failure to monitor the fiduciaries of the
401(k) Plans and Pension Plan; (iii) an alleged failure to provide complete and
accurate information to the 401(k) Plans and Pension Plan participants with
respect to the Merrill Lynch and Countrywide acquisitions and related mat-
ters; and (iv) alleged co-fiduciary liability for
these purported fiduciary
breaches. The amended complaint seeks unspecified monetary damages,
equitable remedies and other relief. On August 27, 2010, the court dismissed
the complaint brought by plaintiffs in the consolidated ERISA action in its
entirety. The ERISA Plaintiffs filed a notice of appeal of the court’s dismissal of
their actions. The parties then stipulated to the dismissal of the appeal with
the agreement that the ERISA Plaintiffs can reinstate their appeal at any time
up until July 27, 2011.

NYAG Action
On February 4, 2010, the New York Attorney General (NYAG) filed a civil
complaint in the Supreme Court of New York State, entitled People of the
State of New York v. Bank of America, et al. The complaint names as
defendants the Corporation and the Corporation’s former CEO and CFO,
and alleges violations of Sections 352, 352-c(1)(a), 352-c(1)(c), and 353
of the New York General Business Law, commonly known as the Martin Act,
and Section 63(12) of the New York Executive Law. The complaint seeks an

unspecified amount in disgorgement, penalties, restitution, and damages and
other equitable relief. The court has ordered fact discovery to be complete by
September 30, 2011.

Montgomery
The Corporation, several of its current and former officers and directors, BAS,
MLPFS and other unaffiliated underwriters have been named as defendants in
a putative class action filed in the U.S. District Court for the Southern District
of New York entitled Montgomery v. Bank of America, et al. Plaintiff filed an
amended complaint on January 14, 2011. Plaintiff seeks to sue on behalf of
all persons who acquired certain series of preferred stock offered by the
Corporation pursuant to a shelf registration statement dated May 5, 2006.
Plaintiff’s claims arise from three offerings dated January 24, 2008, Janu-
ary 28, 2008 and May 20, 2008, from which the Corporation allegedly
received proceeds of $15.8 billion. The amended complaint asserts claims
under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, and alleges
that the prospectus supplements associated with the offerings: (i) failed to
disclose that the Corporation’s loans, leases, CDOs and commercial MBS
were impaired to a greater extent than disclosed; (ii) misrepresented the
extent of the impaired assets by failing to establish adequate reserves or
properly record losses for its impaired assets; (iii) misrepresented the ade-
quacy of the Corporation’s internal controls in light of the alleged impairment
of its assets; (iv) misrepresented the Corporation’s capital base and Tier 1
leverage ratio for risk-based capital in light of the allegedly impaired assets;
and (v) misrepresented the thoroughness and adequacy of the Corporation’s
due diligence in connection with its acquisition of Countrywide. The amended
complaint seeks rescission, compensatory and other damages.

Mortgage-backed Securities Litigation
The Corporation and its affiliates, Countrywide entities and their affiliates,
and Merrill Lynch entities and their affiliates have been named as defendants
in several cases relating to their various roles as issuer, originator, seller,
depositor, sponsor, underwriter and/or controlling entity in MBS offerings,
pursuant to which the MBS investors were entitled to a portion of the cash flow
from the underlying pools of mortgages. These cases generally include pur-
ported class action suits and actions by individual MBS purchasers. Although
the allegations vary by lawsuit, these cases generally allege that the regis-
tration statements, prospectuses and prospectus supplements for securities
issued by securitization trusts contained material misrepresentations and
omissions, in violation of Sections 11 and 12 of the Securities Act of 1933
and/or state securities laws and other state statutory and common laws.

These cases generally involve allegations of false and misleading state-
ments regarding: (i) the process by which the properties that served as
collateral for the mortgage loans underlying the MBS were appraised; (ii) the
percentage of equity that mortgage borrowers had in their homes; (iii) the
borrowers’ ability to repay their mortgage loans; and (iv) the underwriting
practices by which those mortgage loans were originated (collectively, the
MBS Claims). In addition, several of the cases discussed below assert claims
related to the ratings given to the different tranches of MBS by rating agen-
cies. Plaintiffs in these cases generally seek unspecified compensatory
damages, unspecified costs and legal fees and, in some instances, seek
rescission.

Luther Litigation and Related Actions
David H. Luther and various pension funds (collectively, Luther Plaintiffs)
commenced a putative class action against CFC, several of its affiliates, BAS,
MLPFS and other entities and individuals in California Superior Court for Los
Angeles County entitled Luther v. Countrywide Financial Corporation, et al (the
Luther Action). The Luther Plaintiffs claim that they and other unspecified
investors purchased MBS issued by subsidiaries of CFC in 429 offerings

Bank of America 2010

205

between January 2005 and December 2007. The Luther Plaintiffs certified
that they collectively purchased securities in 61 of the 429 offerings for
approximately $216 million. On January 6, 2010, the court granted CFC’s
motion to dismiss, with prejudice, due to lack of subject matter jurisdiction.
The Luther Plaintiffs’ appeal to the California Court of Appeal is currently
pending.

Following the dismissal of the Luther Action, the Maine State Retirement
System filed a putative class action in the U.S. District Court for the Central
District of California, entitled Maine State Retirement System v. Countrywide
Financial Corporation, et al. (the Maine Action). The Maine Action names the
same defendants as the Luther Action, as well as the Corporation and NB
Holdings Corporation, and asserts substantially the same allegations regard-
ing 427 of the MBS offerings that were at issue in the Luther Action. On
May 14, 2010, the court appointed the Iowa Public Employees’ Retirement
System (IPERS) as Lead Plaintiff. On July 13, 2010, IPERS filed an amended
complaint, which added additional pension fund plaintiffs (collectively, the
Maine Plaintiffs). The Maine Plaintiffs certified that they purchased securities
in 81 of those 427 offerings, for approximately $538 million. On November 4,
2010, the court granted CFC’s motion to dismiss the amended complaint in
its entirety, and ordered the Maine Plaintiffs to file a second amended
complaint within 30 days. In so doing, the court held that the Maine Plaintiffs
only have standing to sue over the 81 offerings in which they actually
purchased MBS. The court also held that the applicable statute of limitations
could be tolled by the filing of the Luther Action only with respect to the
offerings in which the Luther Plaintiffs actually purchased MBS. On Decem-
ber 6, 2010, the Maine Plaintiffs filed a second amended complaint that
relates to 14 MBS offerings.

Western Conference of Teamsters Pension Trust Fund (Western Team-
sters) filed suit against the same defendants named in the Maine Action on
November 17, 2010 in the Superior Court of California, Los Angeles County,
entitled Western Conference of Teamsters Pension Trust Fund v. Countrywide
Financial Corporation, et al. Western Teamsters claims that it and other
unspecified investors purchased MBS issued in the 428 offerings that were
also at issue in the Luther Action. The Western Teamsters action has been
stayed by the Superior Court pending resolution of the appeal of the Luther
Action.

The New Mexico State Investment Council, New Mexico Educational Re-
tirement Board and New Mexico Public Employees Retirement Association
(the New Mexico Plaintiffs) have also brought an action against CFC and
several of its affiliates, current and former officers, as well as third-party
underwriters in New Mexico District Court for the County of Santa Fe, entitled
New Mexico State Investment Council, et al. v. Countrywide Financial Corpo-
ration, et al. A related action was later filed against the individual defendants
in California Superior Court, entitled New Mexico State Investment Council, et
al. v. Stanford L. Kurland, et al. On November 15, 2010, the parties agreed to
resolve and dismiss these two cases in their entirety with prejudice for an
amount that is not material to the Corporation’s results of operations.

Putnam Bank filed a putative class action lawsuit on January 27, 2011
against CFC, the Corporation, certain of their subsidiaries, and certain indi-
viduals in the U.S. District Court for the District of Connecticut, entitled
Putnam Bank v. Countrywide Financial Corporation, et al. Putnam Bank
alleges that it purchased approximately $33 million in eight MBS offerings
issued by subsidiaries of CFC between August 2005 and September 2007. All
eight offerings were also included in the Luther Action and the Maine Action. In
addition to certain MBS Claims, Putnam Bank contends among other things
that defendants made false and misleading statements regarding: (i) the
number of mortgage loans in each offering that were originated under reduced
documentation programs; (ii) the method by which mortgages were selected
for inclusion in the collateral pools underlying the offerings; and (iii) the
analysis conducted by ratings agencies prior to assigning ratings to the MBS.

Countrywide may also be subject to contractual indemnification obliga-
tions for the benefit of certain defendants involved in the MBS matters
discussed above.

IndyMac Litigation
In 2006 and 2007, MLPFS, CSC and other financial institutions participated
as underwriters in MBS offerings in which IndyMac MBS, Inc. securitized
residential mortgage loans originated or acquired by IndyMac Bank, F.S.B.
(IndyMac Bank) and created trusts that issued MBS. In 2009, the Corporation
was named as an underwriter defendant, along with several other financial
institutions, in its alleged capacity as “successor-in-interest” to MLPFS and
CSC in a consolidated class action in the U.S. District Court for the Southern
District of New York, entitled In re IndyMac Mortgage-Backed Securities
Litigation. In their complaint, plaintiffs assert MBS Claims relating to 106
offerings of IndyMac-related MBS. On June 21, 2010, the court dismissed the
Corporation from the action because the plaintiffs failed to plead sufficient
facts to support their allegation that the Corporation is the “successor-in-in-
terest” to MLPFS and CSC. On August 3, 2010, plaintiffs filed a motion to add
MLPFS and CSC as defendants, which MLPFS and CSC have opposed.

Merrill Lynch MBS Litigation
Merrill Lynch, MLPFS, Merrill Lynch Mortgage Investors, Inc. (MLMI) and
certain current and former directors of MLMI are named as defendants in
a putative consolidated class action in the U.S. District Court in the Southern
District of New York, entitled Public Employees’ Ret. System of Mississippi v.
Merrill Lynch & Co. Inc. In addition to MBS Claims, plaintiffs also allege that
the offering documents for the MBS misrepresented or omitted material facts
regarding the credit ratings assigned to the securities. In March 2010, the
court dismissed claims related to 65 of 84 offerings with prejudice due to lack
of standing as no named plaintiff purchased securities in those offerings. On
November 8, 2010, the court dismissed claims related to 1 of 19 remaining
offerings on separate grounds. MLPFS was the sole underwriter of these 18
offerings. On December 1, 2010, the defendants filed an answer to the
consolidated amended complaint.

Cambridge Place Investment Management Litigation
Cambridge Place Investment Management Inc. (CPIM), as the alleged exclu-
sive assignee of certain entities that allegedly purchased MBS offered or sold
by BAS, MLPFS and CSC, brought an action against BAS, MLPFS, CSC and
several of their affiliates in Massachusetts Superior Court, Suffolk County,
entitled Cambridge Place Investment Management Inc. v. Morgan Stanley &
Co., Inc., et al. CPIM also brought claims against more than 50 other defen-
dants in this action. In addition to MBS Claims, CPIM contends that BAS,
MLPFS, CSC and their affiliates made false and misleading statements in
violation of the Massachusetts Uniform Securities Act regarding: (i) due
diligence performed by the underwriters on the mortgage loans and the
mortgage originators’ underwriting practices; and (ii) the credit enhance-
ments applicable to certain tranches of the MBS. On August 13, 2010,
certain defendants removed the case to the U.S. District Court for the District
of Massachusetts. On September 13, 2010, CPIM filed a motion to remand
the case back to state court. On October 12, 2010, the court referred the
motion to remand to a Magistrate Judge for consideration. On December 28,
2010, the Magistrate Judge issued a report and recommendation that the
action be remanded to state court. On January 18, 2011, the defendants filed
an objection to that recommendation, which CPIM opposed on February 1,
2011. The objection to the Magistrate Judge’s recommendation remains
pending.

On February 11, 2011, CPIM commenced a separate civil action in
Massachusetts Superior Court, Suffolk County, captioned Cambridge Place
Investment Management Inc. v. Morgan Stanley & Co., Inc., et al., in

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Bank of America 2010

connection with the offering or sale of certain additional mortgage-backed
securities by BAS, MLPFS, CSC, several of their affiliates and more than 40
other defendants. CPIM alleges that it is the assignee of the claims of certain
entities that allegedly purchased mortgage-backed securities issued or sold
by BAS, MLPFS and CSC in various offerings. In addition to MBS Claims, CPIM
contends that BAS, MLPFS, CSC and their affiliates made false and mislead-
ing statements in violation of the Massachusetts Uniform Securities Act in
connection with these offerings regarding: (i) due diligence performed by the
underwriters on the mortgage loans and the mortgage originators’ underwrit-
ing practices; (ii) the credit enhancements applicable to certain tranches of
the MBS; and (iii) the validity of each issuing trust’s title to the mortgage loans
comprising the pool for that securitization.

Federal Home Loan Bank Litigation
The Federal Home Loan Bank of Atlanta (FHLB Atlanta) filed a complaint on
January 18, 2011 against the Corporation, CFC, CSC and Countrywide Home
Loans (CHL) in the State Court of Georgia, Fulton County, entitled Federal
Home Loan Bank of Atlanta v. Countrywide Financial Corporation, et al. In
addition to certain MBS Claims, FHLB Atlanta contends that defendants made
false and misleading statements regarding: (i) the credit ratings of the secu-
rities; and (ii) the transfer and assignment of the loans to the trusts.

The Federal Home Loan Bank of Chicago (FHLB Chicago) filed a complaint
against the Corporation, BAS, MLPFS and CSC in the Illinois Circuit Court,
Cook County, entitled Federal Home Loan Bank of Chicago v. Banc of America
Funding Corp., et al. (the Illinois Action). FHLB Chicago also filed a complaint
against BAS, CFC and subsidiaries of CFC in the Superior Court of California,
Los Angeles County, entitled Federal Home Loan Bank of Chicago v. Banc of
America Securities LLC, et al. (the California Action). In addition to certain
MBS Claims, FHLB Chicago contends that defendants made false and mis-
leading statements regarding among other things, the guidelines for extend-
ing mortgages to borrowers and the due diligence performed on repurchased
and pooled loans. Both actions have been removed to federal court.

The Federal Home Loan Bank of Pittsburgh (FHLB Pittsburgh) commenced
an action against CFC, CSC and certain other Countrywide affiliates, as well
as several ratings agencies, in the Court of Common Pleas of Allegheny
County Pennsylvania, entitled Federal Home Loan Bank of Pittsburgh v. Coun-
trywide Securities Corporation et al. FHLB Pittsburgh claims to have pur-
chased MBS issued by subsidiaries of CFC in five offerings for approximately
$366 million. In addition to certain MBS Claims, FHLB Pittsburgh contends
that defendants made false and misleading statements regarding the risk
associated with the MBS based on their credit ratings. Countrywide’s motion
to dismiss was denied on November 29, 2010.

The Federal Home Loan Bank of Seattle (FHLB Seattle) filed four separate
complaints, each against different defendants, including the Corporation and
several of its subsidiaries, Countrywide and Merrill Lynch, as well as certain
other defendants, in the Superior Court of Washington for King County
concerning four separate issuances entitled Federal Home Loan Bank of
Seattle v. UBS Securities LLC, et al.; Federal Home Loan Bank of Seattle v.
Countrywide Securities Corp., et al.; Federal Home Loan Bank of Seattle v.
Banc of America Securities LLC, et al. and Federal Home Loan Bank of
Seattle v. Merrill Lynch, Pierce, Fenner & Smith, Inc., et al. In addition to
certain MBS Claims, FHLB Seattle contends that defendants made false and
misleading statements regarding the number of borrowers who actually lived
in the houses that secured the mortgage loans and the business practices of
the lending institutions that made the mortgage loans. FHLB Seattle claims
that the sales violated the Securities Act of Washington. On October 18,
2010, the Corporation entities and Countrywide entities named as defen-
dants in three of the cases filed a consolidated motion to dismiss the
amended complaints, which is currently pending. On the same date, the

Merrill Lynch entities named as defendants in the fourth case filed a motion to
dismiss the amended complaint, which is currently pending.

The Federal Home Loan Bank of San Francisco (FHLB San Francisco) filed
two actions against various affiliates of the Corporation, as well as various
Countrywide and Merrill Lynch entities in the Superior Court of California,
County of San Francisco, entitled: (i) Federal Home Loan Bank of San Fran-
cisco v. Credit Suisse Securities (USA) LLC, et al., which asserts claims
against CFC, CSC, BAS and several of their affiliates; and (ii) Federal Home
Loan Bank of San Francisco v. Deutsche Bank Securities Inc., et al., which
asserts claims against CSC and MLPFS. In addition to certain MBS Claims,
FHLB San Francisco contends that defendants made false and misleading
statements regarding the original mortgage lenders’ guidelines for extending
the loans to borrowers. FHLB San Francisco also claims that defendants failed
to disclose that third-party ratings services’ credit ratings of the MBS did not
take into account defendants’ false and misleading statements about the
mortgage loans underlying the MBS. On November 5, 2010, FHLB San Fran-
cisco sought permission from the court to amend its complaint in the first
action to include the Corporation as a defendant and, among other things, to
assert control person liability claims against the Corporation under state and
federal securities laws and to assert that the Corporation succeeded to CFC’s
interests. Defendants had removed the state court actions to federal court,
but on December 20, 2010, the U.S. District Court, Northern District of
California remanded the cases to state court and denied a motion to amend
the complaint as moot when it granted remand. On November 5, 2010, FHLB
San Francisco also filed a declaratory action in the Superior Court of Califor-
nia, County of San Francisco, entitled Federal Home Loan Bank of San Fran-
cisco v. Bank of America Corporation and Does 1-10, seeking a determination
that the Corporation is a successor to the liabilities of CFC including the
liabilities at issue in Federal Home Loan Bank of San Francisco v. Credit
Suisse Securities (USA) LLC, et al.

Charles Schwab Litigation
The Charles Schwab Corporation (Schwab) has filed an action against the
Corporation, BAS, Countrywide, and several of their affiliates, in the Superior
Court of California, County of San Francisco, on July 15, 2010 entitled The
Charles Schwab Corp. v. BNP Paribas Securities Corp., et al. This action is in
connection with the purchase by Schwab of approximately $577 million of
MBS, $166 million of which relates to claims with respect to the Corporation
and BAS and $411 million of which relates to claims with respect to Coun-
trywide. In addition to MBS Claims, Schwab contends that the Corporation,
BAS and Countrywide are liable for false and misleading statements regarding
among other things, the business practices of the lending institution that
made the original loan and MBS credit ratings. In September 2010, the
Corporation, BAS and Countrywide joined in or consented to the removal of
this action to the U.S. District Court for the Northern District of California.
Schwab has filed a motion to remand the action to California state court,
which remains pending.

Allstate Litigation
Allstate Insurance Company, Allstate Life Insurance Company, Allstate Life
Insurance Company of New York and American Heritage Life Insurance Com-
pany (collectively, the Allstate Plaintiffs) filed an action on December 27, 2010
against CFC, the Corporation, several of their affiliates and several individuals
in the U.S. District Court for the Southern District of New York, entitled Allstate
Insurance Company, et al., v. Countrywide Financial Corporation, et al. (the
Allstate Action). The Allstate Plaintiffs allege that they purchased MBS issued
by CFC related entities in 25 offerings between March 2005 and June 2007.
All but three of the 25 offerings in the Allstate Action are also at issue in the
Luther and Western Teamsters Actions. Two of the 25 offerings in the Allstate
Action are also at issue in the second amended complaint filed by plaintiffs in

Bank of America 2010

207

the Maine Action on December 6, 2010. In addition to certain MBS Claims,
the Allstate Plaintiffs contend that defendants made false and misleading
statements regarding: (i) the number of borrowers who used the properties
securing the mortgage loans as their primary residence; (ii) the number of
mortgage loans in each offering that were originated under reduced docu-
mentation programs; and (iii) the standards by which the mortgage loans were
serviced after origination.

Regulatory Investigations
In addition to the MBS litigation discussed beginning on page 205, the
Corporation has also received a number of subpoenas and other informal
requests for information from federal regulators regarding MBS matters,
including inquiries related to the Corporation’s underwriting and issuance
of MBS and its participation in certain CDO offerings.

Municipal Derivatives Matters
The SEC, the Department of Justice (DOJ), the Internal Revenue Service (IRS),
the Office of Comptroller of the Currency (OCC), the Federal Reserve and a
Working Group of State Attorneys General (the Working Group) have investi-
gated the Corporation, BANA and BAS concerning possible anticompetitive
practices in the municipal derivatives industry dating back to the early 1990s.
These investigations have focused on the bidding practices for guaranteed
investment contracts, the investment vehicles in which the proceeds of
municipal bond offerings are deposited, as well as other types of derivative
transactions related to municipal bonds. On January 11, 2007, the Corpo-
ration entered a Corporate Conditional Leniency Letter with the DOJ, under
which the DOJ agreed not to prosecute the Corporation for criminal antitrust
violations in connection with matters the Corporation has reported to the DOJ,
subject to the Corporation’s continued cooperation. On December 7, 2010,
the Corporation and its affiliates settled inquiries with the SEC, OCC, IRS and
the Working Group for an aggregate amount that is not material to the
Corporation’s results of operations. In addition, the Corporation entered into
an agreement with the Federal Reserve providing for additional oversight and
compliance risk management.

BANA and Merrill Lynch, along with other financial institutions, are named
as defendants in several substantially similar class actions and individual
actions, filed in various state and federal courts by several municipalities that
issued municipal bonds, as well as purchasers of municipal derivatives.
These actions generally allege that defendants conspired to violate federal
and state antitrust laws by allocating customers, and fixing or stabilizing rates
of return on certain municipal derivatives from 1992 to the present. These
actions seek unspecified damages, including treble damages. However, as a
result of the Corporation’s receipt of the Corporate Leniency Letter from the
DOJ referenced above, the Corporation is eligible to seek a ruling that certain
civil plaintiffs are limited to single, rather than treble, damages and relief from
joint and several liability with co-defendants in the civil suits discussed below.
All of the actions have been transferred to the U.S. District Court for the
Southern District of New York and consolidated in a single proceeding, entitled
In re Municipal Derivatives Antitrust Litigation. Defendants other than BANA
and Merrill Lynch filed motions to dismiss plaintiffs’ complaints, which the
court denied in large part in April 2010. The action has otherwise been largely
stayed while the DOJ completes its criminal trials concerning other parties.

Ocala Litigation
BNP Paribas Mortgage Corporation and Deutsche Bank AG each filed claims
(the 2009 Actions) against BANA in the U.S. District Court for the Southern
District of New York entitled BNP Paribas Mortgage Corporation v. Bank of
America, N.A. and Deutsche Bank AG v. Bank of America, N.A. Plaintiffs allege
that BANA failed to properly perform its duties as indenture trustee, collateral
agent, custodian and depositary for Ocala Funding, LLC (Ocala), a home

208

Bank of America 2010

mortgage warehousing facility, resulting in the loss of plaintiffs’ investment in
Ocala. Ocala was a wholly-owned subsidiary of Taylor, Bean & Whitaker
Mortgage Corp. (TBW), a home mortgage originator and servicer which is
alleged to have committed fraud that led to its eventual bankruptcy. Ocala
provided funding for TBW’s mortgage origination activities by issuing notes,
the proceeds of which were to be used by TBW to originate home mortgages.
Such mortgages and other Ocala assets in turn were pledged to BANA, as
collateral agent, to secure the notes. Plaintiffs lost most or all of their
investment in Ocala when, as the result of the alleged fraud committed by
TBW, Ocala was unable to repay the notes purchased by plaintiffs and there
was insufficient collateral to satisfy Ocala’s debt obligations. Plaintiffs allege
that BANA breached its contractual, fiduciary and other duties to Ocala,
thereby permitting TBW’s alleged fraud to go undetected. Plaintiffs seek
compensatory damages and other relief from BANA, including interest and
attorneys’ fees, in an unspecified amount, but which plaintiffs allege exceeds
$1.6 billion. BANA’s motions to dismiss these actions are currently pending.
On August 30, 2010, plaintiffs each filed a new lawsuit (the 2010 Actions)
against BANA in the U.S. District Court for the Southern District of Florida
entitled BNP Paribas Mortgage Corporation v. Bank of America, N.A. and
Deutsche Bank AG v. Bank of America, N.A., which the parties agreed to
transfer to the U.S. District Court for the Southern District of New York as
related to the 2009 Actions. The 2010 Actions assert an alternative theory for
plaintiffs to recover a portion of their Ocala losses from BANA. Plaintiffs allege
that BANA’s commercial division purchased from TBW participation interests
in pools of mortgage loans that allegedly included loans that were already
pledged as collateral for plaintiffs’ Ocala notes. Plaintiffs allege that the
purchase of these participation interests constituted conversion of the un-
derlying mortgage loans and that BANA is thus required to reimburse plaintiffs
for the value of these loans. Plaintiffs seek compensatory and other dam-
ages, interest and attorneys’ fees in amounts that are unspecified but which
plaintiffs allege exceed approximately $665 million, representing a portion of
the same losses alleged in the 2009 Actions. BANA’s motion to dismiss the
2010 Actions was argued in the U.S. District Court for the Southern District of
New York on January 26, 2011.

On October 1, 2010, BANA, on behalf of Ocala’s investors, filed suit in the
U.S. District Court for the District of Columbia against the Federal Deposit
Insurance Corporation (FDIC) as receiver of Colonial Bank (TBW’s primary
bank) and Platinum Community Bank (a wholly-owned subsidiary of TBW)
entitled Bank of America, National Association as indenture trustee, custo-
dian and collateral agent for Ocala Funding, LLC v. Federal Deposit Insurance
Corporation. The suit seeks judicial review of the FDIC’s denial of the admin-
istrative claims brought by BANA, on behalf of Ocala, in the FDIC’s Colonial
and Platinum receivership proceedings. BANA’s claims allege that Ocala’s
losses were in whole or in part the result of Colonial’s and Platinum’s
participation in TBW’s alleged fraud. BANA seeks a court order requiring
the FDIC to allow BANA’s claims in an amount equal to Ocala’s losses and,
accordingly, to permit BANA, as trustee, collateral agent, custodian and
depositary for Ocala, to share appropriately in distributions of any receivership
assets that the FDIC makes to creditors of the two failed banks.

Parmalat
On November 23, 2005, the Official Liquidators of Food Holdings Limited and
Dairy Holdings Limited, two entities in liquidation proceedings in the Cayman
Islands, filed a complaint 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.,
against the Corporation and several related entities. Plaintiffs allege that the
Corporation and other defendants conspired with Parmalat, which was ad-
mitted to insolvency proceedings in Italy in December 2003, in carrying out
transactions involving the plaintiffs in connection with the funding of Parma-
lat’s Brazilian entities. Plaintiffs assert claims for fraud, negligent misrepre-
sentation, breach of fiduciary duty and other related claims. The complaint

seeks in excess of $400 million in compensatory damages and interest,
among other relief. On February 17, 2010, the court dismissed all of plain-
tiffs’ claims. On March 18, 2010, plaintiffs filed a notice of appeal to the
U.S. Court of Appeals for the Second Circuit and on April 1, 2010, the
Corporation filed a cross-appeal. Briefing was completed in December 2010.

NOTE 15 Shareholders’ Equity

Common Stock
In October 2010, July 2010, April 2010 and January 2010, the Board
declared the fourth, third, second and first quarters’ cash dividends of
$0.01 per common share, which were paid on December 24, 2010, Sep-
tember 24, 2010, June 25, 2010 and March 26, 2010 to common share-
holders of record on December 3, 2010, September 3, 2010, June 4, 2010
and March 5, 2010, respectively. In addition, in January 2011, the Board
declared a first quarter cash dividend of $0.01 per common share payable on
March 25, 2011 to common shareholders of record on March 4, 2011.

On February 23, 2010, the Corporation held a special meeting of stock-
holders at which it obtained shareholder approval of an amendment to the
Corporation’s amended and restated certificate of incorporation to increase
the number of authorized shares of common stock from 10.0 billion to
11.3 billion. On April 28, 2010, at the Corporation’s 2010 Annual Meeting
of Stockholders, the Corporation obtained shareholder approval of an amend-
ment to the Corporation’s amended and restated certificate of incorporation
to increase the number of authorized shares of common stock from 11.3 bil-
lion to 12.8 billion.

In January 2009, the Corporation issued 1.4 billion shares of common
stock in connection with its acquisition of Merrill Lynch. For additional infor-
mation regarding the Merrill Lynch acquisition, see Note 2 – Merger and
Restructuring Activity. During 2009 and 2008, in connection with preferred
stock issuances to the U.S. government under the Troubled Asset Relief
Program (TARP), the Corporation issued warrants to purchase 121.8 million
shares of common stock at an exercise price of $30.79 per share and
150.4 million shares of common stock at an exercise price of $13.30 per
share. The U.S. Treasury auctioned these warrants in March 2010.

In May 2009, the Corporation issued 1.3 billion shares of its common
stock at an average price of $10.77 per share through an at-the-market
issuance program resulting in gross proceeds of approximately $13.5 billion.
Through a 2008 authorized share repurchase program, the Corporation
had the ability to repurchase shares of its common stock, subject to certain
restrictions, from time to time, in the open market or in private transactions.
The 2008 authorized repurchase program expired on January 23, 2010.
There is no existing Board authorized share repurchase program. In 2010, the
Corporation did not repurchase any shares of common stock and issued
approximately 98.6 million shares under employee stock plans. At Decem-
ber 31, 2010, the Corporation had reserved 1.5 billion unissued shares of
common stock for future issuances under employee stock plans, common
stock warrants, convertible notes and preferred stock.

Preferred Stock
During 2010, 2009 and 2008, the aggregate dividends declared on preferred
stock were $1.4 billion, $4.5 billion and $1.3 billion, respectively. This
included $474 million and $536 million in 2010 and 2009 related to pre-
ferred stock issued or remaining outstanding as a part of the Merrill Lynch
acquisition.

In connection with the Merrill Lynch acquisition, Merrill Lynch non-con-
vertible preferred shareholders received Bank of America Corporation pre-
ferred stock having substantially identical terms. On October 15, 2010, all of
the outstanding shares of the mandatory convertible preferred stock of Merrill
Lynch automatically converted into an aggregate of 50 million shares of the
Corporation’s Common Stock in accordance with the terms of these preferred
securities.

In October 2008, in connection with TARP, the Corporation issued to the
U.S. Treasury non-voting perpetual preferred stock and warrants for $15.0 bil-
lion. In addition, in January 2009, in connection with TARP and the Merrill
Lynch acquisition, the Corporation issued additional preferred stock for
$30.0 billion.

In December 2009, the Corporation repurchased the non-voting perpetual
preferred stock previously issued to the U.S. Treasury (TARP Preferred Stock)
through the use of $25.7 billion in excess liquidity and $19.3 billion in
proceeds from the sale of 1.3 billion Common Equivalent Securities (CES)
valued at $15.00 per unit. The CES consisted of depositary shares repre-
senting interests in shares of Common Equivalent Junior Preferred Stock,
Series S (Common Equivalent Stock) and contingent warrants to purchase an
aggregate of 60 million shares of the Corporation’s common stock. On Feb-
ruary 23, 2010, the Corporation held a special meeting of stockholders at
which it obtained shareholder approval of an amendment to the Corporation’s
amended and restated certificate of incorporation to increase the number of
authorized shares of common stock. Accordingly, the Common Equivalent
Stock automatically converted in full into 1.286 billion shares of common
stock on February 24, 2010. In addition, as a result, the contingent warrants
expired without having become exercisable and the CES ceased to exist.

During 2009, the Corporation entered into agreements with certain hold-
ers of non-government perpetual preferred stock to exchange their holdings of
approximately $7.3 billion aggregate liquidation preference, before third-party
issuance costs, of approximately 323 million shares of perpetual preferred
stock for approximately 545 million shares of common stock with a fair value
of stock issued of $6.1 billion. In addition, the Corporation exchanged
approximately $3.9 billion aggregate liquidation preference, before third-party
issuance costs, of approximately 144 million shares of non-government
preferred stock for approximately 200 million shares of common stock in
an exchange offer with a fair value of stock issued of $2.5 billion. In total,
these exchanges resulted in the exchange of approximately $11.3 billion
aggregate liquidation preference, before third-party issuance costs, of ap-
proximately 467 million shares of preferred stock into approximately 745 mil-
lion shares of common stock with a fair value of stock issued of $8.6 billion.
In addition, during 2009, the Corporation exchanged 3.6 million shares, or
$3.6 billion aggregate liquidation preference of Series L 7.25% Non-Cumula-
tive Perpetual Convertible Preferred Stock into 255 million shares of common
stock valued at $2.8 billion, which was accounted for as an induced conver-
sion of preferred stock.

As a result of these exchanges, the Corporation recorded an increase to
retained earnings and net income (loss) applicable to common shareholders
of $576 million. This represents the net of a $2.62 billion benefit due to the
excess of the carrying value of the Corporation’s non-convertible preferred
stock over the fair value of the common stock exchanged. This was partially
offset by a $2.04 billion inducement representing the excess of the fair value
of the common stock exchanged over the fair value of the common stock that
would have been issued under the original conversion terms.

Bank of America 2010

209

The table below presents a summary of perpetual preferred stock previously issued by the Corporation and remaining outstanding, including the series of
preferred stock issued and remaining outstanding in connection with the acquisition of Merrill Lynch, after consideration of the exchanges discussed on the
previous page.

Preferred Stock Summary

(Dollars in millions, except as noted)
Series
Series B (2)

Series D (3, 8)

Series E (3, 8)

Series H (3, 8)

Series I (3, 8)

Series J (3, 8)

Series K (3, 9)

Series L

Series M (3, 9)

Series 1 (3, 4)

Series 2 (3, 4)

Series 3 (3, 4)

Series 4 (3, 4)

Series 5 (3, 4)

Series 6 (3, 7)

Series 7 (3, 7)

Series 8 (3, 4)

Total

Description
7% Cumulative
Redeemable
6.204% Non-
Cumulative

Floating Rate Non-
Cumulative
8.20% Non-
Cumulative
6.625% Non-
Cumulative
7.25% Non-
Cumulative
Fixed-to-Floating
Rate Non-
Cumulative
7.25% Non-
Cumulative
Perpetual
Convertible
Fixed-to-Floating
Rate Non-
Cumulative
Floating Rate Non-
Cumulative
Floating Rate Non-
Cumulative
6.375% Non-
Cumulative
Floating Rate Non-
Cumulative
Floating Rate Non-
Cumulative
6.70% Non-
Cumulative
Perpetual
6.25% Non-
Cumulative
Perpetual
8.625% Non-
Cumulative

Initial
Issuance
Date
June
1997
September
2006

November
2006
May
2008
September
2007
November
2007

January
2008

April
2008
November
2004
March
2005
November
2005
November
2005
March
2007

September
2007

September
2007
April
2008

Total
Shares
Outstanding

Liquidation
Preference
per Share
(in dollars)

Carrying
Value (1)

7,571

100

26,434

25,000

661

19,491

25,000

487

114,483

25,000

2,862

14,584

25,000

39,111

25,000

365

978

66,702

25,000

1,668

3,349,321

1,000

3,349

57,357

25,000

1,434

4,861

30,000

17,547

30,000

22,336

30,000

12,976

30,000

20,190

30,000

65,000

1,000

16,596

1,000

146

526

670

389

606

89,100

30,000

2,673

3,943,660

$16,897

Per Annum
Dividend Rate

7.00%

6.20%

Annual rate equal to the
greater of (a) 3-mo. LIBOR +

35 bps and (b) 4.00%

8.20%

6.625%

7.25%

8.00% through 1/29/18;
3-mo. LIBOR + 363 bps
thereafter

7.25%
8.125% through 5/14/18;
3-mo. LIBOR + 364 bps
thereafter

3-mo. LIBOR + 75 bps (5)

3-mo. LIBOR + 65 bps (5)

6.375%

3-mo. LIBOR + 75 bps (6)

3-mo. LIBOR + 50 bps (6)

6.70%

6.25%

8.625%

Redemption Period

n/a
On or after
September 14, 2011

On or after
November 15, 2011
On or after
May 1, 2013
On or after
October 1, 2017
On or after
November 1, 2012

On or after
January 30, 2018

n/a

On or after
May 15, 2018
On or after
November 28, 2009
On or after
November 28, 2009
On or after
November 28, 2010
On or after
November 28, 2010
On or after
May 21, 2012

On or after
February 3, 2009

On or after
March 18, 2010
On or after
May 28, 2013

(1) Amounts shown are before third-party issuance costs and other Merrill Lynch purchase accounting related adjustments of $335 million.
(2) Series B Preferred Stock does not have early redemption/call rights.
(3) The Corporation may redeem series of preferred stock on or after the redemption date, in whole or in part, at its option, at the liquidation preference plus declared and unpaid dividends.
(4) Ownership is held in the form of depositary shares, each representing a 1/1200th interest in a share of preferred stock, paying a quarterly cash dividend, if and when declared.
(5) Subject to 3.00% minimum rate per annum.
(6) Subject to 4.00% minimum rate per annum.
(7) Ownership is held in the form of depositary shares, each representing a 1/40th interest in a share of preferred stock, paying a quarterly cash dividend, if and when declared.
(8) Ownership is held in the form of depositary shares, each representing a 1/1000th interest in a share of preferred stock, paying a quarterly cash dividend, if and when declared.
(9) Ownership is held in the form of depositary shares, each representing a 1/25th interest in a share of preferred stock, paying a semi-annual cash dividend, if and when declared, until the redemption date adjusts to a quarterly cash

dividend, if and when declared, thereafter.

n/a = not applicable

210

Bank of America 2010

Series L Preferred Stock does not have early redemption/call rights. Each
share of the Series L Preferred Stock may be converted at any time, at the
option of the holder, into 20 shares of the Corporation’s common stock plus
cash in lieu of fractional shares. On or after January 30, 2013, the Corpo-
ration may cause some or all of the Series L Preferred Stock, at its option, at
any time or from time to time, to be converted into shares of common stock at
the then-applicable conversion rate if, for 20 trading days during any period of
30 consecutive trading days, the closing price of common stock exceeds
130 percent of the then-applicable conversion price of the Series L Preferred
Stock. If the Corporation exercises its rights to cause the automatic conver-
sion of Series L Preferred Stock on January 30, 2013, it will still pay any
accrued dividends payable on January 30, 2013 to the applicable holders of
record.

All series of preferred stock on the previous page have a par value of
$0.01 per share, are not subject to the operation of a sinking fund, have no
participation rights, and with the exception of the Series L Preferred Stock, are

not convertible. The holders of the Series B Preferred Stock and Series 1-8
Preferred Stock have general voting rights, and the holders of the other series
included on the previous page have no general voting rights. All preferred
stock of the Corporation outstanding has preference over the Corporation’s
common stock with respect to the payment of dividends and distribution of the
Corporation’s assets in the event of a liquidation or dissolution. If any dividend
payable on these series is in arrears for three or more semi-annual or six or
more quarterly dividend periods, as applicable (whether consecutive or not),
the holders of these series and any other class or series of preferred 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 two semi-annual or four quarterly dividend periods, as
applicable, following the dividend arrearage.

NOTE 16 Accumulated Other Comprehensive Income

The table below presents the changes in accumulated OCI in 2008, 2009 and 2010, net-of-tax.

(Dollars in millions)

Balance, December 31, 2007
Net change in fair value recorded in accumulated OCI (3)
Net realized losses reclassified into earnings

Balance, December 31, 2008

Cumulative adjustment for accounting change – OTTI (4)
Net change in fair value recorded in accumulated OCI
Net realized (gains) losses reclassified into earnings

Balance, December 31, 2009

Cumulative adjustments for accounting changes:

Consolidation of certain variable interest entities
Credit-related notes

Net change in fair value recorded in accumulated OCI
Net realized (gains) losses reclassified into earnings

Balance, December 31, 2010

Available-for-
Sale Debt
Securities

Available-for-
Sale Marketable
Equity Securities

$(1,880)
(5,496)
1,420

$(5,956)

(71)
6,364
(965)

$ 8,416
(4,858)
377

$ 3,935

–
2,651
(4,457)

Derivatives

$(4,402)
147
797

$(3,458)

–
153
770

Employee
Benefit Plans (1)

Foreign
Currency (2)

Total

$(1,301)
(3,387)
46

$ 296
(1,000)
–

$ 1,129
(14,594)
2,640

$(4,642)

$ (704) $(10,825)

–
318
232

–
211
–

(71)
9,697
(4,420)

$ (628)

$ 2,129

$(2,535)

$(4,092)

$ (493) $ (5,619)

(116)
229
2,210
(981)

–
–
5,657
(1,127)

–
–
(1,108)
407

–
–
(104)
249

–
–
(44)
281

(116)
229
6,611
(1,171)

$ 714

$ 6,659

$(3,236)

$(3,947)

$ (256) $

(66)

(1) Net change in fair value represents after-tax adjustments based on the final year-end actuarial valuations.
(2) Net change in fair value represents only the impact of changes in spot foreign exchange rates on the Corporation’s net investment in non-U.S. operations and related hedges.
(3) For more information on employee benefit plans, see Note 19 – Employee Benefit Plans.
(4) Effective January 1, 2009, the Corporation adopted new accounting guidance on the recognition of OTTI losses on debt securities. For additional information on the adoption of this accounting guidance, see Note 1 – Summary of

Significant Accounting Principles and Note 5 – Securities.

Bank of America 2010

211

NOTE 17 Earnings Per Common Share
The calculation of EPS and diluted EPS for 2010, 2009 and 2008 is presented below. See Note 1 — Summary of Significant Accounting Principles for additional
information on the calculation of EPS.

(Dollars in millions, except per share information; shares in thousands)

Earnings (loss) per common share
Net income (loss)
Preferred stock dividends
Accelerated accretion from redemption of preferred stock issued to the U.S. Treasury

Net income (loss) applicable to common shareholders

Dividends and undistributed earnings allocated to participating securities

Net income (loss) allocated to common shareholders

Average common shares issued and outstanding

Earnings (loss) per common share

Diluted earnings (loss) per common share
Net income (loss) applicable to common shareholders
Dividends and undistributed earnings allocated to participating securities

Net income (loss) allocated to common shareholders

Average common shares issued and outstanding
Dilutive potential common shares (1)

Total diluted average common shares issued and outstanding

Diluted earnings (loss) per common share

(1)

Includes incremental shares from RSUs, restricted stock shares, stock options and warrants.

Due to the net loss applicable to common shareholders for 2010 and
2009, no dilutive potential common shares were included in the calculation of
diluted EPS because they would have been antidilutive.

For 2010, 2009 and 2008, average options to purchase 271 million,
315 million and 181 million shares, respectively, of common stock were
outstanding but not included in the computation of EPS because they were
antidilutive under the treasury stock method. For 2010 and 2009, average
warrants to purchase 272 million and 265 million shares of common stock
were outstanding but not included in the computation of EPS because they
were antidilutive under the treasury stock method. For 2010 and 2009,
107 million and 147 million average dilutive potential common shares as-
sociated with the convertible Series L Preferred Stock, and the mandatory
convertible Preferred Stock Series 2 and Series 3 of Merrill Lynch were
excluded from the diluted share count because the result would have been
antidilutive under the “if-converted” method. For 2009, 81 million average
dilutive potential common shares associated with the CES were also excluded
from the diluted share count because the result would have been antidilutive
under the “if-converted” method. For 2008, 128 million average dilutive
potential common shares associated with the convertible Series L Preferred
Stock were excluded from the diluted share count because the result would
have been antidilutive under the “if-converted” method.

For purposes of computing basic EPS, CES were considered to be par-
ticipating securities prior to February 24, 2010, however, due to a net loss for
2010, CES were not allocated earnings. The two-class method prohibits the
allocation of an undistributed loss to participating securities. For purposes of
computing diluted EPS, there was no dilutive effect of the CES, which were
outstanding prior to February 24, 2010, due to a net loss for 2010.

For 2009, as a result of repurchasing the TARP Preferred Stock, the
Corporation accelerated the remaining accretion of the issuance discount on
the TARP Preferred Stock of $4.0 billion and recorded a corresponding charge
to retained earnings and income (loss) applicable to common shareholders in
the calculation of diluted earnings per common share. In addition, in 2009,
the Corporation recorded an increase to retained earnings and net income
(loss) available to common shareholders of $576 million related to the
Corporation’s preferred stock exchange for common stock.

212

Bank of America 2010

2009

2008

2010

(2,238)
(1,357)
–

(3,595)
(4)

6,276
(4,494)
(3,986)

(2,204)
(6)

(3,599)

(2,210)

9,790,472

7,728,570

(0.37)

(3,595)
(4)

(3,599)

9,790,472
–

9,790,472

(0.29)

(2,204)
(6)

(2,210)

7,728,570
–

7,728,570

4,008
(1,452)
–

2,556
(69)

2,487

4,592,085

0.54

2,556
(69)

2,487

4,592,085
4,343

4,596,428

(0.37)

(0.29)

0.54

NOTE 18 Regulatory Requirements and
Restrictions
The Federal Reserve requires the Corporation’s banking subsidiaries to
maintain reserve balances based on a percentage of certain deposits. Aver-
age daily reserve balances required by the Federal Reserve were $12.9 billion
and $10.9 billion for 2010 and 2009. Currency and coin residing in branches
and cash vaults (vault cash) are used to partially satisfy the reserve require-
ment. The average daily reserve balances, in excess of vault cash, held with
the Federal Reserve amounted to $5.5 billion and $3.4 billion for 2010 and
2009.

The primary sources of funds for cash distributions by the Corporation to
its shareholders are dividends received from its banking subsidiaries, Bank of
America, N.A. and FIA Card Services, N.A. In 2010, the Corporation received
$4.6 billion in dividends from Bank of America, N.A. In 2011, Bank of America,
N.A. and FIA Card Services, N.A. can declare and pay dividends to the
Corporation of $5.8 billion and $0 plus an additional amount equal to their
net profits for 2011, as defined by statute, up to the date of any such dividend
declaration. The other subsidiary national banks can pay dividends in aggre-
gate in 2011 of $53 million plus an additional amount equal to their net profits
for 2011, 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 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 Federal Reserve, OCC, FDIC and Office of Thrift Supervision (collec-
tively, joint agencies) have in place regulatory capital guidelines for U.S. bank-
ing 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 position. The regulatory capital guide-
lines measure capital in relation to the credit and market risks of both on- and
off-balance sheet items using various risk weights. Under the regulatory
capital guidelines, Total capital consists of three tiers of capital. Tier 1 capital
includes qualifying common shareholders’ equity, CES, qualifying noncumu-
lative perpetual preferred stock, qualifying Trust Securities, hybrid securities
and qualifying non-controlling interests, less goodwill and other adjustments.
Tier 2 capital consists of qualifying subordinated debt, a limited portion of the

allowance for loan and lease losses, a portion of net unrealized gains on AFS
marketable equity securities and other adjustments. Tier 3 capital includes
subordinated debt that is unsecured, fully paid, has an original maturity of at
least two years, is not redeemable before maturity without prior approval by
the Federal Reserve 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,
2010 and 2009, the Corporation had no subordinated debt that qualified as
Tier 3 capital.

Certain corporate-sponsored trust companies which issue Trust Securities
are not consolidated. In accordance with Federal Reserve guidance, Trust
Securities continue to qualify as Tier 1 capital with revised quantitative limits
that will be effective on March 31, 2011. As a result, the Corporation includes
Trust Securities in Tier 1 capital. The Financial Reform Act includes a provision
under which the Corporation’s previously issued and outstanding Trust Secu-
rities in the aggregate amount of $19.9 billion (approximately 137 bps of
Tier 1 capital) at December 31, 2010, will no longer qualify as Tier 1 capital
effective January 1, 2013. This amount excludes $1.6 billion of hybrid
Trust Securities that are expected to be converted to preferred stock prior
to the date of implementation. The exclusion of Trust Securities from Tier 1
capital will be phased in incrementally over a three-year phase-in period. The
treatment of Trust Securities during the phase-in period remains unclear and
is subject to future rulemaking.

Current limits restrict core capital elements to 15 percent of total core
capital elements for internationally active bank holding companies. Interna-
tionally active bank holding companies are those that have significant activ-
ities in non-U.S. markets with consolidated assets greater than $250 billion
or on-balance sheet non-U.S. exposure greater than $10 billion. In addition,
the Federal Reserve revised the qualitative standards for capital instruments
included in regulatory capital. At December 31, 2010, the Corporation’s
restricted core capital elements comprised 11.4 percent of total core capital
elements. The Corporation is and expects to remain fully compliant with the
revised limits.

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 Tier 1 leverage ratio,
defined as Tier 1 capital divided by quarterly average total assets, after
certain adjustments. “Well-capitalized” bank holding companies must have a
minimum Tier 1 leverage ratio of four percent. National banks must maintain a
Tier 1 leverage ratio of at least five percent to be classified as “well-capital-
ized.” At December 31, 2010, the Corporation’s Tier 1 capital, Total capital
and Tier 1 leverage ratios were 11.24 percent, 15.77 percent and 7.21 per-
cent, respectively. This classifies the Corporation as “well-capitalized” for
regulatory purposes, the highest classification.

Net unrealized gains or losses on AFS debt securities and marketable
equity securities, net unrealized gains and losses on derivatives, and em-
ployee benefit plan adjustments in shareholders’ equity are excluded from the
calculations of Tier 1 common capital as discussed below, Tier 1 capital and
leverage ratios. The Total capital ratio excludes all of the above with the
exception of up to 45 percent of the pre-tax net unrealized gains on AFS
marketable equity securities.

The Corporation calculates Tier 1 common capital as Tier 1 capital
including any CES less preferred stock, qualifying Trust Securities, hybrid
securities and qualifying noncontrolling interest in subsidiaries. CES was
included in Tier 1 common capital based upon applicable regulatory guidance
and the expectation at December 31, 2009 that the underlying Common
Equivalent Junior Preferred Stock, Series S would convert into common stock
following shareholder approval of additional authorized shares. Shareholders
approved the increase in the number of authorized shares of common stock
and the Common Equivalent Stock converted into common stock on Febru-
ary 24, 2010. Tier 1 common capital was $125.1 billion and $120.4 billion
and the Tier 1 common capital ratio was 8.60 percent and 7.81 percent at
December 31, 2010 and 2009.

The table below presents actual and minimum required regulatory capital

amounts for 2010 and 2009.

Regulatory Capital

(Dollars in millions)

Risk-based capital
Tier 1 common

Bank of America Corporation

Tier 1

Bank of America Corporation
Bank of America, N.A.
FIA Card Services, N.A.

Total

Bank of America Corporation
Bank of America, N.A.
FIA Card Services, N.A.

Tier 1 leverage

Bank of America Corporation
Bank of America, N.A.
FIA Card Services, N.A.

(1) Dollar amount required to meet guidelines for adequately capitalized institutions.
n/a = not applicable

December 31

2010

Actual

Ratio

Amount

Minimum
Required (1)

2009

Actual

Ratio

Amount

Minimum
Required (1)

8.60% $125,139

n/a

7.81% $120,394

n/a

11.24
10.78
15.30

15.77
14.26
16.94

7.21
7.83
13.21

163,626
114,345
25,589

229,594
151,255
28,343

163,626
114,345
25,589

$ 58,238
42,416
6,691

116,476
84,831
13,383

90,811
58,391
7,748

10.40
10.30
15.21

14.66
13.76
17.01

6.88
7.38
23.09

160,388
111,916
28,831

226,070
149,528
32,244

160,388
111,916
28,831

$ 61,676
43,472
7,584

123,401
86,944
15,168

93,267
60,626
4,994

Bank of America 2010

213

Regulatory Capital Developments
In June 2004, the Basel II Accord was published with the intent of more closely
aligning regulatory capital requirements with underlying risks, similar to
economic capital. While economic capital is measured to cover unexpected
losses, the Corporation also manages regulatory capital to adhere to regu-
latory standards of capital adequacy.

The Basel II Final Rule (Basel II Rules), which was published on Decem-
ber 7, 2007, established requirements for the U.S. implementation and
provided detailed requirements for a new regulatory capital framework related
to credit and operational risk (Pillar 1), supervisory requirements (Pillar 2) and
disclosure requirements (Pillar 3). The Corporation began Basel II parallel
implementation on April 1, 2010.

Subsequently, amended rules issued by the Basel Committee on Bank
Supervision known as Basel III were published in December 2010 along with
final Market Risk Rules issued by the Federal Reserve. The Basel III rules and
the Financial Reform Act seek to disqualify trust preferred securities and other
hybrid capital securities from Tier 1 capital treatment with the Financial
Reform Act proposing it to be phased in over a period from 2013 to 2015.
Basel III also proposes the deduction of certain assets from capital (deferred
tax assets, MSRs, investments in financial firms and pension assets, among
others, within prescribed limitations certain of which may be significant),
increased capital for counterparty credit risk, and three capital buffers to
strengthen capital levels which would be also phased in over time. The three
capital buffers include a capital conservation buffer, a countercyclical buffer
and a systematically important financial institution buffer, which would result
in a minimum Total capital ratio of at least eight percent by 2013. Market Risk
Rules include additional VaR based measurements, among others, that are
meant to further strengthen capital levels. The Corporation continues to
monitor the development and potential
impact of these rules, and has
determined that given current initiatives and continued focus on all of these
rules by the date of full implementation in 2018, the Corporation must have a
Tier 1 common capital ratio of seven percent which it anticipates it will meet.
The Corporation does not expect the need to issue any common stock to meet
the new Basel proposals.

There remains significant uncertainty on the final impacts as the U.S. has
issued final rules only for Basel II and a Notice of Proposed Rulemaking for the
Market Risk Rules at this time. Impacts may change as the U.S. finalizes rules
for Basel III and the regulatory agencies interpret the final rules during the
implementation process.

NOTE 19 Employee Benefit Plans

Pension and Postretirement Plans
The Corporation sponsors noncontributory trusteed pension plans that cover
substantially all officers and employees, a number of noncontributory non-
qualified pension plans, and postretirement health and life plans. The plans
provide defined benefits based on an employee’s compensation and years of
service. The Bank of America Pension Plan (the Pension Plan) provides
participants with compensation credits, generally based on years of service.
For account balances based on compensation credits prior to January 1,
2008, 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 Pen-
sion Plan. Participants may elect to modify earnings measure allocations on a
periodic basis subject to the provisions of the Pension Plan. For account
balances based on compensation credits subsequent to December 31,
2007, the account balance earnings rate is based on a benchmark rate.
For eligible employees in the Pension Plan on or after January 1, 2008, the
benefits become vested upon completion of three years of service. It is the

214

Bank of America 2010

policy of the Corporation to fund not less than the minimum funding amount
required by ERISA.

The Pension Plan has a balance guarantee feature for account balances
with participant-selected earnings, applied at the time a benefit payment is
made from the plan that effectively provides principal protection for partic-
ipant balances transferred and certain compensation credits. The Corpora-
tion is responsible for funding any shortfall on the guarantee feature.

In May 2008, the Corporation and the IRS entered into a closing agree-
ment resolving all matters relating to an audit by the IRS of the Pension Plan
and the Bank of America 401(k) Plan. The audit included a review of voluntary
transfers by participants of 401(k) Plan accounts to the Pension Plan. In
connection with the agreement, during 2009 the Pension Plan transferred
approximately $1.2 billion of assets and liabilities associated with the trans-
ferred accounts to a newly established defined contribution plan.

As a result of acquisitions, the Corporation assumed the obligations
related to the pension plans of FleetBoston, MBNA, U.S. Trust Corporation,
LaSalle and Countrywide. These five acquired pension plans have been
merged into a separate defined benefit pension plan, which, together with
the Pension Plan, are referred to as the Qualified Pension Plans. The benefit
structures under these acquired plans have not changed and remain intact in
the merged plan. Certain benefit structures are substantially similar to the
Pension Plan discussed above; however, certain of these structures do not
allow participants to select various earnings measures; rather the earnings
rate is based on a benchmark rate. In addition, these benefit structures
include participants with benefits determined under formulas based on
average or career compensation and years of service rather than by reference
to a pension account. Certain of the other benefit structures provide partic-
ipant’s retirement benefits based on the number of years of benefit service
and a percentage of the participant’s average annual compensation during
the five highest paid consecutive years of the last ten years of employment.
As a result of the Merrill Lynch acquisition, the Corporation assumed the
obligations related to the plans of Merrill Lynch. These plans include a
terminated U.S. pension plan, non-U.S. pension plans, nonqualified pension
plans and postretirement plans. The non-U.S. pension plans vary based on
the country and local practices. The terminated U.S. pension plan is referred
to as the Other Pension Plan.

In 1988, Merrill Lynch purchased a group annuity contract that guarantees
the payment of benefits vested under the terminated U.S. pension plan. The
Corporation, under a supplemental agreement, may be responsible for, or
benefit from actual experience and investment performance of the annuity
assets. The Corporation made no contribution in 2010 and contributed
$120 million during 2009 under this agreement. Additional contributions
may be required in the future under this agreement.

The Corporation sponsors a number of noncontributory, nonqualified
pension plans (the Nonqualified Pension Plans). As a result of acquisitions,
the Corporation assumed the obligations related to the noncontributory,
nonqualified pension plans of certain legacy companies including Merrill
Lynch. These plans, which are unfunded, provide defined pension benefits
to certain employees.

In addition to retirement pension benefits, full-time, salaried employees
and certain part-time employees may become eligible to continue participa-
tion 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 acquisitions are sub-
stantially similar to the Corporation’s postretirement health and life plans,
except for Countrywide which did not have a postretirement health and life
plan. Collectively, these plans are referred to as the Postretirement Health
and Life Plans.

The table below summarizes the changes in the fair value of plan assets,
changes in the projected benefit obligation (PBO), the funded status 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, 2010 and 2009. Amounts
recognized at December 31, 2010 and 2009 are reflected in other assets,
and accrued expenses and other liabilities on the Consolidated Balance
Sheet. The discount rate assumption is based on a cash flow matching

technique and is subject to change each year. This technique utilizes yield
curves that are based on Aa-rated corporate bonds with cash flows that match
estimated benefit payments of each of the plans to produce the discount rate
assumptions. The asset valuation method for the Qualified Pension Plans
recognizes 60 percent of the prior year’s market gains or losses at the next
measurement date with the remaining 40 percent spread equally over the
subsequent four years.

(Dollars in millions)

Change in fair value of plan assets
Fair value, January 1
Merrill Lynch balance, January 1, 2009
Actual return on plan assets
Company contributions (2)
Plan participant contributions
Benefits paid
Plan transfer
Federal subsidy on benefits paid
Foreign currency exchange rate changes

Fair value, December 31

Change in projected benefit obligation
Projected benefit obligation, January 1
Merrill Lynch balance, January 1, 2009
Service cost
Interest cost
Plan participant contributions
Plan amendments
Actuarial loss (gain)
Benefits paid
Plan transfer
Termination benefits
Curtailments
Federal subsidy on benefits paid
Foreign currency exchange rate changes

Projected benefit obligation, December 31

Amount recognized, December 31

Funded status, December 31
Accumulated benefit obligation
Overfunded (unfunded) status of ABO
Provision for future salaries
Projected benefit obligation

Qualified
Pension Plans (1)

Non-U.S.
Pension Plans (1)

Nonqualified
and Other
Pension Plans (1)

Postretirement
Health and Life Plans (1)

2010

2009

2010

2009

2010

2009

2010

2009

$14,527
–
1,835
–
–
(714)
–
n/a
n/a

$14,254
–
2,238
–
–
(791)
(1,174)
n/a
n/a

$15,648

$14,527

$13,048
–
397
748
–
–
459
(714)
–
–
–
n/a
n/a

$13,724
–
387
740
–
37
89
(791)
(1,174)
36
–
n/a
n/a

$13,938

$13,048

$1,312
–
157
82
2
(55)
–
n/a
(26)

$1,472

$1,518
–
30
79
2
2
78
(55)
–
–
–
n/a
(30)

$1,624

–
1,025
177
61
2
(53)
–
n/a
100

$ 2,535
–
272
196
–
(314)
–
n/a
n/a

2
2,763
(235)
261
–
(256)
–
n/a
n/a

$ 113
–
13
100
139
(275)
–
18
–

$ 110
–
21
92
141
(272)
–
21
–

$1,312

$ 2,689

$2,535

$ 108

$ 113

–
1,280
30
76
2
–
75
(53)
–
–
(3)
n/a
111

$ 2,918
–
3
163
–
–
308
(314)
–
–
–
n/a
–

$1,258
1,683
4
167
–
–
62
(256)
–
–
–
n/a
–

$ 1,620
–
14
92
139
64
32
(275)
–
–
–
18
–

$ 1,404
226
16
93
141
–
(11)
(272)
–
–
–
21
2

$1,518

$ 3,078

$2,918

$ 1,704

$ 1,620

$ 1,710

$ 1,479

$ (152)

$ (206)

$ (389)

$ (383)

$(1,596)

$(1,507)

$13,192
2,456
746
13,938

$12,198
2,329
850
13,048

$1,504
(32)
120
1,624

$1,401
(89)
117
1,518

$ 3,077
(388)
1
3,078

$2,916
(381)
2
2,918

n/a
n/a
n/a
$ 1,704

n/a
n/a
n/a
$ 1,620

Weighted-average assumptions, December 31
Discount rate
Rate of compensation increase
(1) The measurement date for the Qualified Pension Plans, Non-U.S. Pension Plans, Nonqualified and Other 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, Non-U.S. Pension Plans, Nonqualified and Other Pension Plans, and Postretirement Health and Life Plans in 2011 is $0, $82 million,

5.10%
n/a

5.20%
4.00

5.29%
4.88

5.45%
4.00

5.40%
4.69

5.75%
4.00

5.75%
n/a

$103 million and $121 million, respectively.

n/a = not applicable

Amounts recognized in the Corporation’s Consolidated Balance Sheet at December 31, 2010 and 2009 are presented in the table below.

(Dollars in millions)

Other assets
Accrued expenses and other liabilities

Net amount recognized at December 31

Qualified
Pension Plans

Non-U.S.
Pension Plans

Nonqualified
and Other
Pension Plans

Postretirement
Health and Life
Plans

2010

2009

$ 1,710
–

$ 1,479
–

$ 1,710

$ 1,479

2010

32
(184)

$ (152)

2009

1
(207)

$(206)

2010

2009

2010

2009

$ 809
(1,198)

$ 830
(1,213)

–
(1,596)

–
(1,507)

$ (389)

$ (383)

$(1,596)

$(1,507)

Bank of America 2010

215

Pension Plans with ABO and PBO in excess of plan assets as of December 31, 2010 and 2009 are presented in the table below. These plans primarily
represent non-qualified plans not subject to ERISA or non-U.S. pension plans where funding strategies vary due to legal requirements and local practices.

(Dollars in millions)
Plans with ABO in excess of plan assets (1)

PBO
ABO
Fair value of plan assets

Plans with PBO in excess of plan assets (1)

PBO
Fair value of plan assets

(1) There were no Qualified Pension Plans with ABO or PBO in excess of plan assets at December 31, 2010 and 2009.

Net periodic benefit cost (income) for 2010, 2009 and 2008 included the following components.

Non-U.S.
Pension Plans

Nonqualified
and Other
Pension Plans

2010

2009

2010

2009

$249
242
106

$ 221
214
72

$1,200
1,199
2

$1,216
1,214
2

$414
230

$1,473
1,266

$1,200
2

$1,216
2

(Dollars in millions)

Components of net periodic benefit cost (income)

Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost (credits)
Amortization of net actuarial loss
Recognized loss (gain) due to settlements and curtailments
Recognized termination benefit costs

Net periodic benefit cost (income)

Weighted-average assumptions used to determine net cost for years ended December 31

Discount rate
Expected return on plan assets
Rate of compensation increase

(Dollars in millions)

Components of net periodic benefit cost (income)

Service cost
Interest cost
Expected return on plan assets
Amortization of transition obligation
Amortization of prior service cost (credits)
Amortization of net actuarial loss (gain)
Recognized loss (gain) due to settlements and curtailments

Qualified Pension Plans

Non-U.S. Pension Plans

2010

2009

2008

2010

2009

2008

$ 397
748
(1,263)
28
362
–
–

$ 272

$ 387
740
(1,231)
39
377
–
36

$ 348

$ 343
837
(1,444)
33
83
–
–

$ (148)

$ 30
79
(88)
–
–
–
–

$ 21

$ 30
76
(74)
–
–
(2)
–

$ 30

–
–
–
–
–
–
–

–

5.75%
8.00
4.00

6.00%
8.00
4.00

5.40%
6.82
4.69

5.55%
6.78
4.61

n/a
n/a
n/a

Nonqualified and
Other Pension Plans

Postretirement Health
and Life Plans

2010

2009

2008

2010

2009

2008

3
163
(138)
–
(8)
10
17

4
167
(148)
–
(8)
5
2

7
77
–
–
(8)
14
–

$ 14
92
(9)
31
6
(49)
–

$ 85

$ 16
93
(8)
31
–
(77)
–

$ 55

$ 16
87
(13)
31
–
(81)
–

$ 40

Net periodic benefit cost (income)

Weighted-average assumptions used to determine net cost for years ended December 31

Discount rate
Expected return on plan assets
Rate of compensation increase

n/a = not applicable

5.75%
5.25
4.00

6.00%
5.25
4.00

6.00%
n/a
4.00

5.75%
8.00
n/a

6.00%
8.00
n/a

The net periodic benefit cost (income) for each of the plans in 2010 and
2009 includes Merrill Lynch. The net periodic benefit cost (income) of the
Merrill Lynch Nonqualified and Other Pension Plans, and Postretirement
Health and Life Plans was $(20) million and $18 million in 2009 using a
blended discount rate of 5.59 percent at January 1, 2009.

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 guidance. For
the Postretirement Health Care Plans, 50 percent of the unrecognized gain or

loss at the beginning of the fiscal year (or at subsequent remeasurement) is
recognized on a level basis during the year.

The discount rate and expected return on plan assets impact the net
periodic benefit cost (income) recorded for the plans. With all other assump-
tions held constant, a 25-basis point decline in the discount rate and expected
return on plan assets would result in an increase of approximately $50 million
and $41 million, respectively, for the Qualified Pension Plans. For the
Non-U.S. Pension Plans, the Nonqualified and Other Pension Plans, and
Postretirement Health and Life Plans, the 25-basis point decline in rates
would not have a significant impact.

216

Bank of America 2010

Assumed health care cost trend rates affect the postretirement benefit
obligation and benefit cost reported for the Postretirement Health and Life
Plans. The assumed health care cost trend rate used to measure the ex-
pected cost of benefits covered by the Postretirement Health and Life Plans
was 7.50 percent for 2011, reducing in steps to 5.00 percent in 2017 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 $4 million and $62 million in 2010. A one-percentage-
point decrease in assumed health care cost trend rates would have lowered
the service and interest costs and the benefit obligation by $4 million and
$58 million in 2010.

Pre-tax amounts included in accumulated OCI for employee benefit plans

at December 31, 2010 and 2009 are presented in the table below.

(Dollars in millions)

Net actuarial (gain) loss
Transition obligation
Prior service cost (credits)

Amounts recognized in accumulated OCI

Qualified
Pension Plans

Non-U.S.
Pension Plans

Nonqualified
and Other
Pension Plans

Postretirement
Health and
Life Plans

Total

2010

2009

2010

2009

2010

2009

2010

2009

2010

2009

$5,461
–
98

$5,937
–
126

$5,559

$6,063

$(20)
–
1

$(19)

$(30)
–
–

$(30)

$656
–
(15)

$509
–
(22)

$(27)
63
58

$(106)
95
–

$6,070
63
142

$6,310
95
104

$641

$487

$ 94

$ (11)

$6,275

$6,509

Pre-tax amounts recognized in OCI for employee benefit plans in 2010 included the following components.

(Dollars in millions)

Other changes in plan assets and benefit obligations recognized in OCI

Current year actuarial (gain) loss
Amortization of actuarial gain (loss)
Current year prior service cost
Amortization of prior service credit (cost)
Amortization of transition obligation

Total recognized in OCI

Qualified
Pension Plans

Non-U.S.
Pension Plans

Nonqualified
and Other
Pension Plans

Postretirement
Health and
Life Plans

$(114)
(362)
–
(28)
–

$(504)

$ 9
–
2
–
–

$11

$173
(27)
–
8
–

$154

Total

$ 97
(340)
66
(26)
(31)

$ 29
49
64
(6)
(31)

$105

$(234)

The estimated pre-tax amounts that will be amortized from accumulated OCI into period cost in 2011 are presented in the table below.

(Dollars in millions)

Net actuarial loss
Prior service cost (credit)
Transition obligation

Total amortized from accumulated OCI

Qualified
Pension Plans

Non-U.S.
Pension Plans

Nonqualified
and Other
Pension Plans

Postretirement
Health and
Life Plans

$395
22
–

$417

$–
–
–

$–

$15
(8)
–

$ 7

$ –
6
31

$ 37

Total

$ 410
20
31

$ 461

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 provide 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/return 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 com-
mon stock of the Corporation held in the trust is maintained as an offset to the
exposure related to participants who elected to receive an earnings measure

based on the return performance of common stock of the Corporation. No
plan assets are expected to be returned to the Corporation during 2011.

The assets of the Non-U.S. Pension Plans are primarily attributable to the
U.K. pension plan. The U.K. pension plan’s assets are invested prudently so
that the benefits promised to members are provided with consideration given
to the nature and the duration of the plan’s liabilities. The current planned
investment strategy was set following an asset-liability study and advice from
the trustee’s investment advisors. The selected asset allocation strategy is
designed to achieve a higher return than the lowest risk strategy while
maintaining a prudent approach to meeting the plan’s liabilities.

The Expected Return on Asset assumption (EROA assumption) was de-
veloped 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 is determined using the calculated
market-related value for the Qualified Pension Plans and the Other Pension
Plan and the fair value for the Non-U.S. Pension Plans and Postretirement
Health and Life Plans. The EROA assumption represents a long-term average
view of the performance of the assets in the Qualified Pension Plans, the
Non-U.S. Pension Plans, the Other Pension Plan, and Postretirement Health
and Life Plans, a return that may or may not be achieved during any one

Bank of America 2010

217

calendar year. Some of the building blocks used to arrive at the long-term
return assumption include an implied return from equity securities of 8.75 per-
cent, debt securities of 5.75 percent and real estate of 7.00 percent for the
Qualified Pension Plans, the Non-U.S. Pension Plans, the Other Pension Plan,
and Postretirement Health and Life Plans. The terminated U.S. pension plan is
solely invested in a group annuity contract which primarily invested in fixed-

income securities structured such that asset maturities match the duration of
the plan’s obligations.

The target allocations for 2011 by asset category for the Qualified Pension
Plans, Non-U.S. Pension Plans, Nonqualified and Other Pension Plans, and
Postretirement Health and Life Plans are presented in the following table.

Asset Category

Equity securities
Debt securities
Real estate
Other

2011 Target Allocation

Qualified
Pension Plans

Non-U.S.
Pension Plans

Nonqualified
and Other
Pension Plans

Postretirement
Health and Life
Plans

60 – 80%
20 – 40
0 – 5
0 – 10

25 – 75%
10 – 60
0 – 15
5 – 40

0 – 5%

95 – 100
0 – 5
0 – 5

50 – 75%
25 – 45
0 – 5
0 – 5

Equity securities for the Qualified Pension Plans include common stock of the Corporation in the amounts of $189 million (1.21 percent of total plan assets)

and $224 million (1.54 percent of total plan assets) at December 31, 2010 and 2009.

218

Bank of America 2010

Fair Value Measurements
For information on fair value measurements, including descriptions of Level 1, 2 and 3 of the fair value hierarchy and the valuation methods employed by the
Corporation, see Note 1 – Summary of Significant Accounting Principles and Note 22 – Fair Value Measurements.

Plan investment assets measured at fair value by level and in total at December 31, 2010 and 2009 are summarized in the table below.

(Dollars in millions)

Cash and short-term investments

Money market and interest-bearing cash
Cash and cash equivalent commingled/mutual funds

Fixed income

U.S. government and government agency securities
Corporate debt securities
Asset-backed securities
Non-U.S. debt securities
Fixed income commingled/mutual funds

Equity

Common and preferred equity securities
Equity commingled/mutual funds
Public real estate investment trusts

Real estate

Private real estate
Real estate commingled/mutual funds

Limited partnerships
Other investments (1)

December 31, 2010

Fair Value Measurements

Level 1

Level 2

Level 3

Total

$ 1,469
–

–
45

701
–
–
36
240

6,980
637
–

–
30
–
19

2,604
1,106
796
397
1,359

1
2,307
168

–
2
101
258

–
–

14
–
–
9
–

–
–
–

110
215
230
83

$ 1,469
45

3,319
1,106
796
442
1,599

6,981
2,944
168

110
247
331
360

Total plan investment assets, at fair value

$10,112

$9,144

$661

$19,917

Cash and short-term investments

Money market and interest-bearing cash
Cash and cash equivalent commingled/mutual funds

Fixed income

U.S. government and government agency securities
Corporate debt securities
Asset-backed securities
Non-U.S. debt securities
Fixed income commingled/mutual funds

Equity

Common and preferred equity securities
Equity commingled/mutual funds
Public real estate investment trusts

Real estate

Private real estate
Real estate commingled/mutual funds

Limited partnerships
Other investments (1)

December 31, 2009

$ 1,311
–

–
18

1,460
22
–
278
57

6,077
697
–

–
23
–
1

1,422
1,279
1,116
601
1,202

–
2,026
116

–
–
91
20

–
–

–
–
–
6
–

–
–
–

119
195
162
188

$ 1,311
18

2,882
1,301
1,116
885
1,259

6,077
2,723
116

119
218
253
209

Total plan investment assets, at fair value

$ 9,926

$7,891

$670

$18,487

(1) Other investments represent interest rate swaps of $198 million and $110 million, participant loans of $79 million and $74 million, commodity and balanced funds of $44 million and $14 million and other various investments of

$39 million and $11 million at December 31, 2010 and 2009.

Bank of America 2010

219

The table below presents a reconciliation of all plan investment assets measured at fair value using significant unobservable inputs (Level 3) during 2010

and 2009.

Level 3 – Fair Value Measurements

(Dollars in millions)

Fixed income

U.S. government and government agency securities
Non-U.S. debt securities

Real estate

Private real estate
Real estate commingled/mutual funds

Limited partnerships
Other investments

Total

Fixed income

Corporate debt securities
Non-U.S. debt securities

Real estate

Private real estate
Real estate commingled/mutual funds

Limited partnerships
Other investments

Total

2010

Actual Return on
Plan Assets Still
Held at the
Reporting Date (1)

Balance
January 1

Purchases, Sales
and Settlements

Transfers into/
(out of) Level 3

Balance
December 31

–
6

119
195
162
188

$670

$ 1
6

149
281
91
293

$821

–
1

(9)
(4)
13
–

$ (1)
–

(29)
(92)
14
(106)

$(214)

2009

$ –
–

–
24
2
6

$32

$ –
–

(1)
6
37
1

$43

$ 14
2

–
–
53
(111)

$ (42)

–
–

–
–
20
–

$ 20

$ 14
9

110
215
230
83

$661

–
6

119
195
162
188

$670

(1) During 2009, the Corporation did not sell any Level 3 plan assets during the period.

Projected Benefit Payments
Benefit payments projected to be made from the Qualified Pension Plans, Non-U.S. Pension Plans, Nonqualified and Other Pension Plans, and Postretirement
Health and Life Plans are presented in the following table.

(Dollars in millions)

2011
2012
2013
2014
2015
2016 – 2020

Qualified
Pension Plans (1)

Non-U.S.
Pension Plans (2)

Nonqualified
and Other
Pension Plans (2)

Postretirement Health and
Life Plans

Net Payments (3)

Medicare
Subsidy

$1,016
1,031
1,038
1,037
1,041
5,231

$ 60
62
63
65
66
350

$ 231
250
242
232
235
1,147

$167
168
168
168
166
757

$19
19
19
19
18
87

(1) Benefit payments expected to be made from the plans’ assets.
(2) Benefit payments expected to be made from a combination of the plans’ and 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 Merrill
Lynch acquisition, the Corporation also maintains the defined contribution
plans of Merrill Lynch which include the 401(k) Savings & Investment Plan, the
Retirement and Accumulation Plan (RAP) and the Employee Stock Ownership
Plan (ESOP). The Corporation contributed approximately $670 million,
$605 million and $454 million in 2010, 2009 and 2008, respectively, in

cash, to the qualified defined contribution plans. At December 31, 2010 and
2009, 208 million shares and 203 million shares of the Corporation’s
common stock were held by plans. Payments to the plans for dividends on
common stock were $8 million, $8 million and $214 million in 2010, 2009
and 2008, respectively.

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.

220

Bank of America 2010

NOTE 20 Stock-based Compensation Plans
The Corporation administers a number of equity compensation plans, includ-
ing the Key Employee Stock Plan, the Key Associate Stock Plan and the Merrill
Lynch Employee Stock Compensation Plan. Descriptions of the material
features of the equity compensation plans are below. Under these plans,
the Corporation grants long-term stock-based awards, including stock options,
restricted stock shares and RSUs. For 2010, restricted stock awards gener-
ally vest in three equal annual installments beginning one year from the grant
date, with the exception of certain awards to financial advisors that vest eight
years from the grant date, and an award of restricted stock shares that was
vested on the grant date but released from restrictions over 18 months.

For most awards, expense is generally recognized ratably over the vesting
period net of estimated forfeitures, unless the associate meets certain
retirement eligibility criteria. For associate awards that meet retirement eli-
gibility criteria, the Corporation records the expense upon grant. For associ-
ates that become retirement eligible during the vesting period, the Corpora-
tion recognizes expense from the grant date to the date on which the
associate becomes retirement eligible, net of estimated forfeitures. The
compensation cost for the following stock-based plans was $2.0 billion,
$2.4 billion and $885 million in 2010, 2009 and 2008, respectively. The
related income tax benefit was $727 million, $892 million and $328 million
for 2010, 2009 and 2008, respectively.

Key Employee Stock Plan
The Key Employee Stock Plan, as amended and restated, provided for
different types of awards including stock options, restricted stock shares
and RSUs. Under the plan, 10-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. At December 31, 2010, approximately 36 million fully vested options
were outstanding under this plan. No further awards may be granted.

Key Associate Stock Plan
The Key Associate Stock Plan became effective January 1, 2003. It provides
for different types of long-term awards, including stock options, restricted stock
shares and RSUs. As of December 31, 2010, the shareholders had authorized
approximately 1.1 billion shares for grant under this plan. Additionally, any
shares covered by awards under the Key Employee Stock Plan or certain legacy
company plans that cancel, terminate, expire, lapse or settle in cash after a
specified date may be re-granted under the Key Associate Stock Plan.

In February 2010, the Corporation issued approximately 191 million RSUs
to certain employees under the Key Associate Stock Plan. These awards
generally vest in three equal annual installments beginning one year from the
grant date. Vested RSUs will be settled in cash unless the Corporation
authorizes settlement in common shares. Certain awards contain clawback
provisions which permit the Corporation to cancel all or a portion of the award
under specified circumstances. The compensation cost for cash-settled
awards and awards subject to certain clawback provisions is accrued over
the vesting period and adjusted to fair value based upon changes in the share
price of the Corporation’s common stock. The compensation cost for the
remaining awards is fixed and based on the share price of the common stock
on the date of grant, or the date upon which settlement in common stock has
been authorized. The Corporation hedges a portion of its exposure to vari-
ability in the expected cash flows for unvested awards using a combination of
economic and cash flow hedges as described in Note 4 – Derivatives. During
2010, the Corporation authorized approximately 100 million RSUs to be
settled in common shares and terminated a portion of the corresponding
economic and cash flow hedges. As a result of the decision to share-settle
these RSUs, these share-settled RSUs are no longer adjusted to fair value
based upon changes in the share price of the Corporation’s common stock.

At December 31, 2010, approximately 140 million options were outstand-
ing under this plan. There were no options granted under this plan during
2010 or 2009.

Merrill Lynch Employee Stock Compensation Plan
The Corporation assumed the Merrill Lynch Employee Stock Compensation
Plan. Shares can be granted under this plan in the future. Approximately
34 million shares of RSUs were granted in 2009 which generally vest in three
equal annual installments beginning one year from the grant date. Awards
granted prior to 2009 generally vest in four equal annual installments begin-
ning one year from the grant date. There were no shares granted under this
plan during 2010. At December 31, 2010, there were approximately 28 million
shares outstanding.

Other Stock Plans
As a result of the Merrill Lynch acquisition, the Corporation assumed the
obligations of outstanding awards granted under the Merrill Lynch Financial
Advisor Capital Accumulation Award Plans (FACAAP) and the Merrill Lynch
Employee Stock Purchase Plan (ESPP). The FACAAP is no longer an active plan
and no awards were granted in 2010 or 2009. Awards granted in 2003 and
thereafter are generally payable eight years from the grant date in a fixed
number of the Corporation’s common stock. For outstanding awards granted
prior to 2003, payment is generally made ten years from the grant date in a
fixed number of the Corporation’s common shares unless the fair value of
such shares is less than a specified minimum value, in which case the
minimum value is paid in cash. At December 31, 2010, there were 18 million
shares outstanding under this plan.

The ESPP allows eligible associates to invest from one percent to 10 per-
cent of eligible compensation to purchase the Corporation’s common stock,
subject to legal limits. Purchases were made at a discount of up to five percent
of the average high and low market price on the relevant purchase date and
the maximum annual contribution per employee was $23,750 in 2010. Up to
107 million shares have been authorized for issuance under the ESPP in
2010. There were 12 million shares available at January 1, 2010 and 3 million
shares purchased during the year. There were 9 million shares available at
December 31, 2010.

The weighted-average fair value of the ESPP stock purchase rights (i.e.,
the five percent discount on the Corporation’s common stock purchases)
exercised by employees in 2010 is $0.80 per stock purchase right.

Restricted Stock/Unit Details
The following table presents the status of the share-settled restricted stock/
unit awards at December 31, 2010 and changes during 2010.

Outstanding at January 1, 2010
Granted
Vested
Cancelled

Outstanding at December 31, 2010

Weighted-
average
Exercise Price

$14.30
14.40
15.66
13.81

13.37

175,028,022
216,874,053
(164,904,893)
(14,924,513)

212,072,669

At December 31, 2010, there was $944 million of total unrecognized
compensation cost related to share-based compensation arrangements for
all awards and it is expected to be recognized over a period up to seven years,
with a weighted-average period of 1.07 years. The total fair value of restricted
stock vested in 2010 was $2.4 billion. In 2010, the amount of cash used to
settle equity instruments was $186 million.

Bank of America 2010

221

Excluded from the previous table are assumptions used to estimate the
fair value of 108 million stock options assumed in connection with the Merrill
Lynch acquisition with an aggregate fair value of $1.1 billion. The fair value of
these awards was estimated using a Black-Scholes option pricing model.
Similar to options valued using the lattice option-pricing model described
above, key assumptions used include the implied volatility based on the
Corporation’s common stock of 75 percent, the risk-free interest rate based
on the U.S. Treasury yield curve in effect at December 31, 2008, an expected
dividend yield of 4.2 percent and the expected life of the options based on
their actual remaining term.

NOTE 21 Income Taxes
The components of income tax expense (benefit) for 2010, 2009 and 2008
were as presented in the table below.

(Dollars in millions)

Current income tax expense (benefit)

U.S. federal
U.S. state and local
Non-U.S.

Total current expense (benefit)

Deferred income tax expense (benefit)

U.S. federal
U.S. state and local
Non-U.S.

Total deferred expense (benefit)

2010

2009

2008

$(666) $(3,576) $ 5,075
561
555
585
735

158
815

307

(2,286)

6,221

(287)
201
694

608

792
(620)
198

(5,269)
(520)
(12)

370

(5,801)

Total income tax expense (benefit)

$ 915

$(1,916) $ 420

Total income tax expense (benefit) 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 employee benefit
plan adjustments that are included in accumulated OCI. As a result of these
tax effects, accumulated OCI decreased $3.2 billion and $1.6 billion in 2010
and 2009, and increased $5.9 billion in 2008. In addition, total income tax
expense (benefit) does not reflect tax effects associated with the Corpora-
tion’s employee stock plans which decreased common stock and additional
paid-in capital $98 million, $295 million and $9 million in 2010, 2009 and
2008, respectively.

Stock Options Details
The following table presents the status of all option plans at December 31,
2010 and changes during 2010. Outstanding options at December 31, 2010
include 36 million options under the Key Employee Stock Plan, 140 million
options under the Key Associate Stock Plan and 85 million options to em-
ployees of predecessor companies assumed in mergers.

Outstanding at January 1, 2010
Exercised
Forfeited

Outstanding at December 31, 2010

Options exercisable at December 31, 2010
Options vested and expected to vest (1)

Weighted-
average
Exercise
Price

$49.71
14.82
44.16

50.61

50.77
50.61

Options

303,722,748
(4,959)
(42,594,970)

261,122,819

255,615,840
261,113,002

(1)

Includes vested shares and nonvested shares after a forfeiture rate is applied.

At December 31, 2010, there was no aggregate intrinsic value of options
outstanding, exercisable, and vested and expected to vest. The weighted-
average remaining contractual term of options outstanding was 3.0 years,
options exercisable was 3.0 years, and options vested and expected to vest
was 3.1 years at December 31, 2010. These remaining contractual terms are
similar because options have not been granted since 2008 and they generally
vest in three years.

The weighted-average grant-date fair value of options granted in 2008 was

$8.92. No options were granted in 2010 or 2009.

The table below presents the assumptions used to estimate the fair value
of stock options granted on the date of grant using the lattice option-pricing
model for 2008. No stock options were granted in 2010 or 2009. Lattice
option-pricing models incorporate ranges of assumptions for inputs and those
ranges are disclosed in the table below. The risk-free interest rate for periods
within the contractual 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 volatilities 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 exer-
cise 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 outstanding. 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 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.

Risk-free interest rate
Dividend yield
Expected volatility
Weighted-average volatility
Expected lives (years)

2008

2.05 – 3.85%

5.3
26.00 – 36.00
32.8
6.6

222

Bank of America 2010

Income tax expense (benefit) for 2010, 2009 and 2008 varied from the
amount computed by applying the statutory income tax rate to income (loss)
before income taxes. A reconciliation between the expected U.S. federal

income tax expense using the federal statutory tax rate of 35 percent to the
Corporation’s actual income tax expense (benefit) and resulting effective tax
rate for 2010, 2009 and 2008 is presented in the table below.

(Dollars in millions)

Expected U.S. federal income tax expense (benefit)
Increase (decrease) in taxes resulting from:

State tax expense (benefit), net of federal effect
Goodwill impairment and other
U.K. corporate tax rate reduction
Nondeductible expenses
Leveraged lease tax differential
Change in federal deferred tax asset valuation allowance
Tax-exempt income, including dividends
Low income housing credits/other credits
Non-U.S. tax differential
Changes in prior period UTBs (including interest)
Loss on certain non-U.S. subsidiary stock
Other

Total income tax expense (benefit)

2010

2009

2008

Amount

Percent

Amount

Percent

Amount

Percent

$ (463)

35.0%

$ 1,526

35.0%

$1,550

35.0%

233
4,508
392
99
98
(1,657)
(981)
(732)
(190)
(349)
–
(43)

(17.6)
(341.0)
(29.7)
(7.5)
(7.4)
125.4
74.2
55.4
14.4
26.4
–
3.2

(42)
–
–
69
59
(650)
(863)
(668)
(709)
87
(595)
(130)

(1.0)
–
–
1.6
1.4
(14.9)
(19.8)
(15.3)
(16.3)
2.0
(13.7)
(3.0)

27
–
–
79
216
–
(631)
(722)
(192)
169
–
(76)

0.6
–
–
1.8
4.9
–
(14.3)
(16.3)
(4.3)
3.8
–
(1.7)

$ 915

(69.2)% $(1,916)

(44.0)%

$ 420

9.5%

The reconciliation of the beginning unrecognized tax benefits (UTB) balance to the ending balance is presented in the table below.

Reconciliation of the Change in Unrecognized Tax Benefits

(Dollars in millions)

Beginning balance

Increases related to positions taken during prior years
Increases related to positions taken during the current year
Positions acquired or assumed in business combinations
Decreases related to positions taken during prior years
Settlements
Expiration of statute of limitations

Ending balance

At December 31, 2010, 2009 and 2008, the balance of the Corporation’s
UTBs which would, if recognized, affect the Corporation’s effective tax rate
was $3.4 billion, $4.0 billion and $2.6 billion, respectively. Included in the UTB
balance are some items the recognition of which would not affect the effective
tax rate, such as the tax effect of certain temporary differences, the portion of
gross state UTBs that would be offset by the tax benefit of the associated
federal deduction and the portion of gross non-U.S. UTBs that would be offset
by tax reductions in other jurisdictions.

The Corporation is under examination by the IRS and other tax authorities
in countries and states in which it has significant business operations. The
table below summarizes the status of significant examinations for the Cor-
poration and various acquired subsidiaries as of December 31, 2010.

Bank of America Corporation – U.S. (2)
Bank of America Corporation – U.S.
Bank of America Corporation – New York
Merrill Lynch – U.S.
Merrill Lynch – U.S.
Merrill Lynch – U.K.
Merrill Lynch – Japan
Merrill Lynch – New York
FleetBoston – U.S.
LaSalle – U.S.

Years under
examination (1)

2001 – 2004
2005 – 2009
1999 – 2004
2004
2005 – 2008
2008
2007 – 2009
2007 – 2008
1997 – 2004
2006 – 2007

Status at
December 31,
2010

In Appeals process
Field examination
Field examination
In Appeals process
Field examination
Field examination
Field examination
Field examination
In Appeals process
Field examination

(1) All tax years subsequent to the years shown remain open to examination.
(2) The 2001-2002 years in Appeals process relate to the separate returns of a subsidiary.

2010

2009

2008

$5,253
755
172
–
(657)
(305)
(49)

$3,541
791
181
1,924
(554)
(615)
(15)

$3,095
688
241
169
(371)
(209)
(72)

$5,169

$5,253

$3,541

In addition to the above examinations, the Corporation is in the process of
appealing an adverse decision by the U.S. Tax Court with respect to a 1987
Merrill Lynch transaction. The income tax associated with this matter has
been remitted and is included in the UTB balance above.

The IRS proposed adjustments for two issues in the audit of Merrill Lynch
for the tax year 2004 which have been protested to the Appeals Office. The
issues involve eligibility for the dividends received deduction and foreign tax
credits with respect to a structured investment transaction. The Corporation
also intends to protest any adjustments the IRS proposes for these same
issues in tax years 2005 through 2007. The IRS has proposed similar
adjustments in the Bank of America Corporation audit cycles currently in
the Appeals process and is expected to propose further adjustments disal-
lowing foreign tax credits related to certain structured investment transac-
tions. The Corporation intends to protest these adjustments in all relevant tax
years.

The Corporation files income tax returns in more than 100 state and
non-U.S. jurisdictions each year and is under continuous examination by
various state and non-U.S. taxing authorities. While many of these examina-
tions are resolved every year, the Corporation does not anticipate that res-
olutions occurring within the next twelve months will result in a material
change to the Corporation’s financial position.

Considering all U.S. federal and non-U.S. examinations, it is reasonably
possible that the UTB balance will decrease by as much as $1.0 billion during
the next twelve months, since resolved items will be removed from the
balance whether their resolution resulted in payment or recognition.

Bank of America 2010

223

During 2010 and 2009, the Corporation recognized in income tax expense
$99 million and $184 million of interest and penalties, net-of-tax. At both
December 31, 2010 and 2009, the Corporation’s accrual for interest and
penalties that related to income taxes, net of taxes and remittances, was
$1.1 billion.

Significant components of the Corporation’s net deferred tax assets and
liabilities at December 31, 2010 and 2009 are presented in the table below.

(Dollars in millions)

Deferred tax assets

Net operating loss carryforwards (NOL)
Allowance for credit losses
Credit carryforwards
Employee compensation and retirement benefits
Accrued expenses
State income taxes
Capital loss carryforwards
Security and loan valuations
Other

Gross deferred tax assets

Valuation allowance

December 31

2010

2009

$18,732
14,659
4,183
3,868
3,550
1,791
1,530
427
1,960

$17,236
13,011
2,263
4,021
2,134
1,636
3,187
4,590
2,308

50,700
(2,976)

50,386
(4,315)

Total deferred tax assets, net of valuation allowance

47,724

46,071

Deferred tax liabilities

Available-for-sale securities
Mortgage servicing rights
Long-term borrowings
Equipment lease financing
Intangibles
Fee income
Other

Gross deferred liabilities

Net deferred tax assets

4,330
4,280
3,328
2,957
2,146
1,235
2,375

878
5,663
3,320
2,411
2,497
1,382
2,641

20,651

18,792

$27,073

$27,279

On January 1, 2010, the Corporation adopted new consolidation guidance
and the transition adjustment included an increase of $3.5 billion in retained
earnings which was offset against net deferred tax assets. On July 1, 2010,
the Corporation adopted new accounting guidance on embedded credit de-
rivatives and the related fair value option election and the transition adjust-
ment included an increase of $128 million in retained earnings which is offset
against net deferred tax assets.

The U.S. federal deferred tax asset excludes $56 million related to certain
employee stock plan deductions that will be recognized and will increase
additional paid-in capital when realized.

The table below summarizes the deferred tax assets and related valuation
allowances recognized for the net operating and capital loss carryforwards
and tax credit carryforwards at December 31, 2010.

(Dollars in millions)

Net operating losses – U.S.
Net operating losses – U.K.
Net operating losses – other non-U.S.
Net operating losses – U.S. states (2)
Capital losses
General business credits
Alternative minimum and other tax

credits

Foreign tax credits

$9,037
9,432
263
2,221
1,530
2,442

214
1,527

Deferred
Tax Asset

Valuation
Allowance

Net
Deferred
Tax Asset

First Year
Expiring

$9,037 After 2027

None (1)

9,432
227
1,374
–

Various
Various
After 2013
2,442 After 2027

–
–
(36)
(847)
(1,530)
–

–
(306)

214

None
1,221 After 2017

(1) The U.K. NOL may be carried forward indefinitely. Due to change-in-control limitations in the three years prior to
and following the change in ownership, this unlimited carryforward period may be jeopardized by certain major
changes in the nature or conduct of the U.K. businesses.

(2) The NOL and related valuation allowance for U.S. states before considering the benefit of federal deductions

were $3.4 billion and $1.3 billion.

224

Bank of America 2010

The Corporation concluded that no valuation allowance is necessary to
reduce the U.K. NOL, U.S. NOL and general business credit carryforwards
since estimated future taxable income will be sufficient to utilize these assets
prior to their expiration. With the acquisition of Merrill Lynch on January 1,
2009, the Corporation established a valuation allowance to reduce certain
other deferred tax assets to the amount more-likely-than-not to be realized
before their expiration. During 2010 and 2009, the Corporation released
$1.7 billion and $650 million of the valuation allowance attributable to Merrill
Lynch’s capital loss carryforward due to utilization against net capital gains
realized in 2010 and 2009. The valuation allowance also increased due
primarily to increases in operating loss carryforwards generated in certain
state jurisdictions for which management believes it is more-likely-than-not
that realization of these assets will not occur.

At December 31, 2010 and 2009, U.S. federal income taxes had not been
provided on $17.9 billion and $16.7 billion of undistributed earnings of
non-U.S. 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 $2.6 billion and $2.5 billion of tax expense, net of credits for
non-U.S. taxes paid on such earnings and for the related non-U.S. withholding
taxes, would have resulted as of December 31, 2010 and 2009.

NOTE 22 Fair Value Measurements
Under applicable accounting guidance, fair value is defined 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. The Corporation determines the fair values of its financial instruments
based on the fair value hierarchy established under applicable accounting
guidance which requires an entity to maximize the use of observable inputs
and minimize the use of unobservable inputs when measuring fair value.
There are three levels of inputs that may be used to measure fair value. For
more information regarding the fair value hierarchy and how the Corporation
measures fair value, see Note 1 – Summary of Significant Accounting Prin-
ciples. The Corporation accounts for certain corporate loans and loan com-
mitments, LHFS, structured reverse repurchase agreements, long-term de-
posits and long-term debt under the fair value option. For more informations,
see Note 23 – Fair Value Option.

Level 1, 2 and 3 Valuation Techniques
Financial instruments are considered Level 1 when the valuation is based on
quoted prices in active markets for identical assets or liabilities. Level 2
financial instruments are valued using quoted prices for similar assets or
liabilities, quoted prices in markets that are not active, or models using inputs
that are observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilities. Financial instruments are
considered Level 3 when their values are determined using pricing models,
discounted cash flow methodologies or similar techniques, and at least one
significant model assumption or input is unobservable and when determina-
tion of the fair value requires significant management judgment or estimation.
The Corporation uses market indices for direct inputs to certain models
where the cash settlement is directly linked to appreciation or depreciation of
that particular index (primarily in the context of structured credit products). In
those cases, no material adjustments are made to the index-based values. In
other cases, the use of market indices is inherently limited because the fair
value of an individual position being valued may not move in tandem with
changes in fair value of a specific market index. Accordingly, market indices
are used as inputs to the valuation, but are adjusted for trade specific factors
such as rating, credit quality, vintage and other factors.

Trading Account Assets and Liabilities and Available-for-Sale
Debt Securities
The fair values of trading account assets and liabilities are primarily based on
actively traded markets where prices are based on either direct market quotes
or observed transactions. The fair values of AFS debt securities are generally
based on quoted market prices or market prices for similar assets. Liquidity is
a significant factor in the determination of the fair values of trading account
assets and liabilities and AFS debt securities. 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. Some of these instruments
are valued using a discounted cash flow model, which estimates the fair value
of the securities using internal credit risk, interest rate and prepayment risk
models that incorporate management’s best estimate of current key assump-
tions such as default rates, loss severity and prepayment rates. Principal and
interest cash flows are discounted using an observable discount rate for
similar instruments with adjustments that management believes a market
participant would consider in determining fair value for the specific security.
Others are valued using a net asset value approach which considers the value
of the underlying securities. Underlying assets are valued using external
pricing services, where available, or matrix pricing based on the vintages
and ratings. Situations of illiquidity generally are triggered by the market’s
perception of credit uncertainty regarding a single company or a specific
market sector. In these instances, fair value is determined based on limited
available market information and other factors, principally from reviewing the
issuer’s financial statements and changes in credit ratings made by one or
more ratings agencies.

Derivative Assets and Liabilities
The fair
values of derivative assets and liabilities traded in the
over-the-counter (OTC) market are determined using quantitative models that
utilize multiple market inputs including interest rates, prices and indices to
generate continuous yield or pricing curves and volatility factors to value the
position. The majority 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. The fair values of
derivative assets and liabilities include adjustments for market liquidity,
counterparty credit quality and other deal specific factors, where appropriate.
The Corporation incorporates within its fair value measurements of OTC
derivatives the net credit differential between the counterparty credit risk
and the Corporation’s own credit risk. An estimate of severity of loss is also
used in the determination of fair value, primarily based on market data.

Corporate Loans and Loan Commitments
The fair values of loans and loan commitments are based on market prices,
where available, or discounted cash flow analyses using market-based credit
spreads of comparable debt instruments or credit derivatives of the specific
borrower or comparable borrowers. Results of discounted cash flow calcula-
tions may be adjusted, as appropriate, to reflect other market conditions or
the perceived credit risk of the borrower.

Mortgage Servicing Rights
The fair values of MSRs are determined using models that rely on estimates
of prepayment rates, the resultant weighted-average lives of the MSRs and

the OAS levels. For more information on MSRs, see Note 25 – Mortgage
Servicing Rights.

Loans Held-for-Sale
The fair values of LHFS are based on quoted market prices, where available,
or are determined by discounting estimated cash flows using interest rates
approximating the Corporation’s current origination rates for similar loans
adjusted to reflect the inherent credit risk.

Other Assets
The fair values of AFS marketable equity securities are generally based on
quoted market prices or market prices for similar assets. However, non-public
investments are initially valued at the transaction price and subsequently
adjusted when evidence is available to support such adjustments.

Securities Financing Agreements
The fair values of certain reverse repurchase agreements, repurchase agree-
ments and securities borrowed transactions are determined using quantita-
tive models, including discounted cash flow models that require the use of
multiple market inputs including interest rates and spreads to generate
continuous yield or pricing curves, and volatility factors. The majority of market
inputs are actively quoted and can be validated through external sources,
including brokers, market transactions and third-party pricing services.

Deposits, Commercial Paper and Other Short-term
Borrowings
The fair values of deposits, commercial paper and other short-term borrow-
ings are determined using quantitative models, including discounted cash
flow models that require the use of multiple market inputs including interest
rates and spreads to generate continuous yield or pricing curves, and volatility
factors. The majority of market inputs are actively quoted and can be validated
through external sources, including brokers, market transactions and third-
party pricing services. The Corporation considers the impact of its own credit
spreads in the valuation of these liabilities. The credit risk is determined by
reference to observable credit spreads in the secondary cash market.

Long-term Borrowings
The Corporation issues structured notes that have coupons or repayment
terms linked to the performance of debt or equity securities, indices, curren-
cies or commodities. The fair value of structured notes is estimated using
valuation models for the combined derivative and debt portions of the notes
accounted for under the fair value option. These models incorporate observ-
able and, in some instances, unobservable inputs including security prices,
interest rate yield curves, option volatility, currency, commodity or equity rates
and correlations between these inputs. The impact of the Corporation’s own
credit spreads is also included based on the Corporation’s observed sec-
ondary bond market spreads.

Asset-backed Secured Financings
The fair values of asset-backed secured financings are based on external
broker bids, where available, or are determined by discounting estimated cash
flows using interest rates approximating the Corporation’s current origination
rates for similar loans adjusted to reflect the inherent credit risk.

Bank of America 2010

225

Recurring Fair Value
Assets and liabilities carried at fair value on a recurring basis at December 31, 2010 and 2009, including financial instruments which the Corporation accounts
for under the fair value option, are summarized in the following tables.

(Dollars in millions)

Assets

Federal funds sold and securities borrowed or purchased under agreements

to resell

Trading account assets:

U.S. government and agency securities
Corporate securities, trading loans and other
Equity securities
Non-U.S. sovereign debt
Mortgage trading loans and asset-backed securities

Total trading account assets
Derivative assets (3)
Available-for-sale debt securities:

U.S. Treasury securities and agency securities
Mortgage-backed securities:

Agency
Agency-collateralized mortgage obligations
Non-agency residential
Non-agency commercial

Non-U.S. securities
Corporate/Agency bonds
Other taxable securities
Tax-exempt securities

Total available-for-sale debt securities
Loans and leases
Mortgage servicing rights
Loans held-for-sale
Other assets

Total assets

Liabilities

December 31, 2010

Fair Value Measurements

Level 1 (1)

Level 2 (1)

Level 3

Netting
Adjustments (2)

Assets/Liabilities
at Fair Value

–

78,599

–

17,647
732
23,249
24,934
–

66,562
2,627

46,003

–
–
–
–
1,440
–
20
–

47,463
–
–
–
32,624

43,164
40,869
8,257
8,346
11,948

112,584
1,516,244

3,102

191,213
37,017
21,649
6,833
2,696
5,154
2,354
4,273

274,291
–
–
21,802
31,051

–
7,751
623
243
6,908

15,525
18,773

–

4
–
1,468
19
3
137
13,018
1,224

15,873
3,321
14,900
4,140
6,856

–

–
–
–
–
–

–
(1,464,644)

–

–
–
–
–
–
–
–
–

–
–
–
–
–

$ 78,599

60,811
49,352
32,129
33,523
18,856

194,671
73,000

49,105

191,217
37,017
23,117
6,852
4,139
5,291
15,392
5,497

337,627
3,321
14,900
25,942
70,531

$149,276

$2,034,571

$79,388

$(1,464,644)

$798,591

Interest-bearing deposits in U.S. offices
Federal funds purchased and securities loaned or sold under agreements to

repurchase

Trading account liabilities:

U.S. government and agency securities
Equity securities
Non-U.S. sovereign debt
Corporate securities and other

Total trading account liabilities
Derivative liabilities (3)
Commercial paper and other short-term borrowings
Accrued expenses and other liabilities
Long-term debt

–

23,357
14,568
14,748
224

52,897
1,799
–
31,470
–

2,732

37,424

5,983
914
1,065
11,119

19,081
1,492,963
6,472
931
47,998

–

–
–
–
7

7
11,028
706
828
2,986

–

–
–
–
–

–
(1,449,876)
–
–
–

$ 2,732

37,424

29,340
15,482
15,813
11,350

71,985
55,914
7,178
33,229
50,984

Total liabilities

$ 86,166

$1,607,601

$15,555

$(1,449,876)

$259,446

(1) Gross transfers between Level 1 and Level 2 were approximately $1.3 billion during the year ended December 31, 2010.
(2) Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.
(3) For further disaggregation of derivative assets and liabilities, see Note 4 – Derivatives.

226

Bank of America 2010

(Dollars in millions)

Assets

Federal funds sold and securities borrowed or purchased under

agreements to resell
Trading account assets:

U.S. government and agency securities
Corporate securities, trading loans and other
Equity securities
Non-U.S. sovereign debt
Mortgage trading loans and asset-backed securities

Total trading account assets
Derivative assets
Available-for-sale debt securities:

U.S. Treasury securities and agency securities
Mortgage-backed securities:

Agency
Agency-collateralized mortgage obligations
Non-agency residential
Non-agency commercial

Non-U.S. securities
Corporate/Agency bonds
Other taxable securities
Tax-exempt securities

Total available-for-sale debt securities
Loans and leases
Mortgage servicing rights
Loans held-for-sale
Other assets

Total assets

Liabilities

Interest-bearing deposits in U.S. offices
Federal funds purchased and securities loaned or sold under

agreements to repurchase

Trading account liabilities:

U.S. government and agency securities
Equity securities
Non-U.S. sovereign debt
Corporate securities and other

Total trading account liabilities
Derivative liabilities
Commercial paper and other short-term borrowings
Accrued expenses and other liabilities
Long-term debt

December 31, 2009

Fair Value Measurements

Level 1

Level 2

Level 3

Netting
Adjustments (1)

Assets/Liabilities
at Fair Value

–

57,775

–

17,140
4,772
25,274
19,827
–

67,013
3,326

19,571

–
–
–
–
660
–
676
–

20,907
–
–
–
35,411

27,445
41,157
7,204
7,173
11,137

94,116
1,467,855

3,454

166,246
25,781
27,887
6,651
2,769
5,265
14,721
7,574

260,348
–
–
25,853
12,677

–
11,080
1,084
1,143
7,770

21,077
23,048

–

–
–
7,216
258
468
927
9,854
1,623

20,346
4,936
19,465
6,942
7,821

–

–
–
–
–
–

–
(1,406,607)

–

–
–
–
–
–
–
–
–

–
–
–
–
–

$ 57,775

44,585
57,009
33,562
28,143
18,907

182,206
87,622

23,025

166,246
25,781
35,103
6,909
3,897
6,192
25,251
9,197

301,601
4,936
19,465
32,795
55,909

$126,657

$1,918,624

$103,635

$(1,406,607)

$742,309

–

22,339
17,300
12,028
282

51,949
2,925
–
16,797
–

1,663

37,325

4,180
1,107
483
7,317

13,087
1,443,494
813
620
40,791

–

–
–
386
10

396
15,185
707
891
4,660

–

–
–
–
–

–
(1,410,943)
–
–
–

$ 1,663

37,325

26,519
18,407
12,897
7,609

65,432
50,661
1,520
18,308
45,451

Total liabilities

$ 71,671

$1,537,793

$ 21,839

$(1,410,943)

$220,360

(1) Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.

Bank of America 2010

227

The following tables present a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs

(Level 3) during 2010, 2009 and 2008, including net realized and unrealized gains (losses) included in earnings and accumulated OCI.

Level 3 – Fair Value Measurements

(Dollars in millions)

Trading account assets:

Corporate securities, trading loans and other
Equity securities
Non-U.S. sovereign debt
Mortgage trading loans and asset-backed securities

Total trading account assets
Net derivative assets (2)
Available-for-sale debt securities:

Agency
Non-agency MBS:
Residential
Commercial
Non-U.S. securities
Corporate/Agency bonds
Other taxable securities
Tax-exempt securities

Total available-for-sale debt securities
Loans and leases (3)
Mortgage servicing rights
Loans held-for-sale (3)
Other assets (4)
Trading account liabilities:

Non-U.S. sovereign debt
Corporate securities and other

Balance
January 1
2010 (1)

$11,080
1,084
1,143
7,770

21,077
7,863

–

7,216
258
468
927
9,854
1,623

20,346
4,936
19,465
6,942
7,821

(386)
(10)

2010

Gains
(Losses)
Included in
Earnings

Gains
(Losses)
Included in
OCI

Purchases,
Issuances
and
Settlements

Gross
Transfers
into
Level 3 (1)

Gross
Transfers
out of
Level 3 (1)

Balance
December 31
2010 (1)

Consolidation
of VIEs

$ 117
–
–
175

292
–

–

113
–
–
–
5,603
–

5,716
–
–
–
–

–
–

$ 848
(81)
(138)
653

1,282
8,118

–

(646)
(13)
(125)
(3)
(296)
(25)

(1,108)
(89)
(4,321)
482
1,946

23
(5)

18
(95)
146
697

–
–
–
–

–
–

–

(169)
(31)
(75)
47
44
(9)

(193)
–
–
–
–

–
–

–
–
–
–

$ (4,852)
(342)
(157)
(1,659)

(7,010)
(8,778)

$ 2,599
131
115
396

3,241
1,067

$(2,041)
(169)
(720)
(427)

(3,357)
(525)

$ 7,751
623
243
6,908

15,525
7,745

–

(6,767)
(178)
(321)
(847)
(3,263)
(574)

(11,946)
(1,526)
(244)
(3,714)
(2,612)

(17)
11

(6)
96
(83)
1,074

1,909
71
56
32
1,119
316

3,503
–
–
624
–

–
(52)

(52)
–
–
(1,881)

–

(188)
(88)
–
(19)
(43)
(107)

(445)
–
–
(194)
(299)

380
49

429
–
–
1,784

1,468
19
3
137
13,018
1,224

15,873
3,321
14,900
4,140
6,856

–
(7)

(7)
(706)
(828)
(2,986)

Total trading account liabilities
Commercial paper and other short-term borrowings (3)
Accrued expenses and other liabilities (3)
Long-term debt (3)
(1) Assets (liabilities). For assets, increase / (decrease) to Level 3 and for liabilities, (increase) / decrease to Level 3.
(2) Net derivatives at December 31, 2010 include derivative assets of $18.8 billion and derivative liabilities of $11.0 billion.
(3) Amounts represent items which are accounted for under the fair value option.
(4) Other assets is primarily comprised of AFS marketable equity securities.

(396)
(707)
(891)
(4,660)

–
–
–
–

During 2010, the more significant transfers into Level 3 included $3.2 bil-
lion of trading account assets, $3.5 billion of AFS debt securities, $1.1 billion
of net derivative contracts and $1.9 billion of long-term debt. Transfers into
Level 3 for trading account assets were driven by reduced price transparency
as a result of lower levels of trading activity for certain municipal auction rate
securities and corporate debt securities as well as a change in valuation
methodology for certain ABS to a discounted cash flow model. Transfers into
Level 3 for AFS debt securities were due to an increase in the number of non-
agency RMBS and other taxable securities priced using a discounted cash
flow model. Transfers into Level 3 for net derivative contracts were primarily
related to a lack of price observability for certain credit default and total return

swaps. Transfers in and transfers out of Level 3 for long-term debt are
primarily due to changes in the impact of unobservable inputs on the value
of certain equity-linked structured notes.

During 2010, the more significant transfers out of Level 3 were $3.4 billion
of trading account assets and $1.8 billion of long-term debt. Transfers out of
Level 3 for trading account assets were driven by increased price verification
of certain mortgage-backed securities, corporate debt and non-U.S. govern-
ment and agency securities. Transfers out of Level 3 for long-term debt were
the result of a decrease in the significance of unobservable pricing inputs for
certain equity-linked structured notes.

228

Bank of America 2010

Level 3 – Fair Value Measurements

(Dollars in millions)

Trading account assets:

Corporate securities, trading loans and other
Equity securities
Non-U.S. sovereign debt
Mortgage trading loans and asset-backed securities

Total trading account assets
Net derivative assets (2)
Available-for-sale debt securities:

Non-agency MBS:
Residential
Commercial
Non-U.S. securities
Corporate/Agency bonds
Other taxable securities
Tax-exempt securities

Total available-for-sale debt securities
Loans and leases (3)
Mortgage servicing rights
Loans held-for-sale (3)
Other assets (4)
Trading account liabilities:

Non-U.S. sovereign debt
Corporate securities and other

Total trading account liabilities
Commercial paper and other short-term borrowings (3)
Accrued expenses and other liabilities (3)
Long-term debt (3)
(1) Assets (liabilities). For assets, increase / (decrease) to Level 3 and for liabilities, (increase) / decrease to Level 3.
(2) Net derivatives at December 31, 2009 include derivative assets of $23.0 billion and derivative liabilities of $15.2 billion.
(3) Amounts represent items which are accounted for under the fair value option.
(4) Other assets is primarily comprised of AFS marketable equity securities.

–
(816)
(1,124)
–

–
–
(1,337)
(7,481)

Level 3 – Fair Value Measurements

(Dollars in millions)

Balance
January 1
2008 (1)

Countrywide
Acquisition

Trading account assets
Net derivative assets (2)
Available-for-sale debt securities
Loans and leases (3)
Mortgage servicing rights
Loans held-for-sale (3)
Other assets (4)
Accrued expenses and other liabilities (3)
(1) Assets (liabilities). For assets, increase / (decrease) to Level 3 and for liabilities, (increase) / decrease to Level 3.
(2) Net derivatives at December 31, 2008 include derivative assets of $8.3 billion and derivative liabilities of $6.0 billion.
(3) Amounts represent items which are accounted for under the fair value option.
(4) Other assets is primarily comprised of AFS marketable equity securities.

$ 4,027
(1,203)
5,507
4,590
3,053
1,334
3,987
(660)

–
(185)
528
–
17,188
1,425
1,407
(1,212)

2009

Balance
January 1
2009 (1)

Merrill
Lynch
Acquisition

Gains
(Losses)
Included in
Earnings

Gains
(Losses)
Included in
OCI

Purchases,
Issuances and
Settlements

Transfers
into/(out of)
Level 3 (1)

Balance
December 31
2009 (1)

$ 4,540
546
–
1,647

6,733
2,270

$ 7,012
3,848
30
7,294

18,184
2,307

$ 370
(396)
136
(262)

(152)
5,526

–
–
–
–

–
–

$(2,015)
(2,425)
167
933

(3,340)
(7,906)

$ 1,173
(489)
810
(1,842)

(348)
5,666

$11,080
1,084
1,143
7,770

21,077
7,863

5,439
657
1,247
1,598
9,599
162

18,702
5,413
12,733
3,382
4,157

–
–

2,509
–
–
–
–
–

2,509
2,452
209
3,872
2,696

–
–

(1,159)
(185)
(79)
(22)
(75)
2

(1,518)
515
5,286
678
1,273

(38)
–

(38)
(11)
1,396
(2,310)

2,738
(7)
(226)
127
669
26

3,327
–
–
–
–

–
–

–
–
–
–

(4,187)
(155)
(73)
324
815
788

(2,488)
(3,718)
1,237
(1,048)
(308)

–
4

4
120
174
830

1,876
(52)
(401)
(1,100)
(1,154)
645

(186)
274
–
58
3

(348)
(14)

(362)
–
–
4,301

7,216
258
468
927
9,854
1,623

20,346
4,936
19,465
6,942
7,821

(386)
(10)

(396)
(707)
(891)
(4,660)

2008

Gains
(Losses)
Included in
Earnings

Gains
(Losses)
Included in
OCI

$(3,222)
2,531
(2,509)
(780)
(7,115)
(1,047)
175
(169)

–
–
(1,688)
–
–
–
–
–

Purchases,
Issuances and
Settlements

Transfers
into/(out of)
Level 3 (1)

Balance
December 31
2008 (1)

$(1,233)
1,380
2,754
1,603
(393)
(542)
(1,372)
101

$ 7,161
(253)
14,110
–
–
2,212
(40)
–

$ 6,733
2,270
18,702
5,413
12,733
3,382
4,157
(1,940)

Bank of America 2010

229

The following tables summarize gains and losses due to changes in fair value, including both realized and unrealized gains (losses), recorded in earnings for
Level 3 assets and liabilities during 2010, 2009 and 2008. These amounts include gains (losses) on loans, LHFS, loan commitments and structured notes
which are accounted for under the fair value option.

Level 3 – Total Realized and Unrealized Gains (Losses) Included in Earnings

Equity
Investment
Income
(Loss)

Trading
Account
Profits
(Losses)

2010

Mortgage
Banking
Income
(Loss)(1)

Other
Income
(Loss)

–
–
–
–

–
–

–
–
–
–
–
–

–
–
–
–
1,967
–
–
–
–

$ 848
(81)
(138)
653

1,282
(1,257)

–
–
–
–
(295)
23

(272)
–
–
–
–
18
–
(26)
677

Total

$ 848
(81)
(138)
653

1,282
8,118

(646)
(13)
(125)
(3)
(296)
(25)

(1,108)
(89)
(4,321)
482
1,946
18
(95)
146
697

–
–
–
–

–
–

(630)
(13)
(125)
(3)
(1)
(48)

(820)
(89)
–
410
–
–
–
172
20

–
–
–
–

–
9,375

(16)
–
–
–
–
–

(16)
–
(4,321)
72
(21)
–
(95)
–
–

$1,967

$ 422

$ 4,994

$(307)

$ 7,076

(Dollars in millions)

Trading account assets:

Corporate securities, trading loans and other
Equity securities
Non-U.S. sovereign debt
Mortgage trading loans and asset-backed securities

Total trading account assets
Net derivative assets
Available-for-sale debt securities:

Non-agency MBS:
Residential
Commercial
Non-U.S. securities
Corporate/Agency bonds
Other taxable securities
Tax-exempt securities

Total available-for-sale debt securities
Loans and leases (2)
Mortgage servicing rights
Loans held-for-sale (2)
Other assets
Trading account liabilities – Non-U.S. sovereign debt
Commercial paper and other short-term borrowings (2)
Accrued expenses and other liabilities (2)
Long-term debt (2)

Total

(1) Mortgage banking income does not reflect the impact of Level 1 and Level 2 hedges on MSRs.
(2) Amounts represent items which are accounted for under the fair value option.

230

Bank of America 2010

Level 3 – Total Realized and Unrealized Gains (Losses) Included in Earnings

(Dollars in millions)

Trading account assets:

Corporate securities, trading loans and other
Equity securities
Non-U.S. sovereign debt
Mortgage trading loans and asset-backed securities

Total trading account assets
Net derivative assets
Available-for-sale debt securities:

Non-agency MBS:
Residential
Commercial
Non-U.S. securities
Corporate/Agency bonds
Other taxable securities

Total

Trading account assets
Net derivative assets
Available-for-sale debt securities
Loans and leases (2)
Mortgage servicing rights
Loans held-for-sale (2)
Other assets
Accrued expenses and other liabilities (2)

Total

(1) Mortgage banking income does not reflect the impact of Level 1 and Level 2 hedges on MSRs.
(2) Amounts represent items which are accounted for under the fair value option.

Equity
Investment
Income
(Loss)

Trading
Account
Profits
(Losses)

2009

Mortgage
Banking
Income
(Loss) (1)

Other
Income
(Loss)

–
–
–
–

–
–

–
–
–
–
–

–
–
–
–
968
–
–
–
–

$ 370
(396)
136
(262)

(152)
(2,526)

–
–
–
–
–

–
(11)
–
(216)
–
(38)
–
36
(2,083)

–
–
–
–

–
8,052

(20)
–
–
–
–

(20)
–
5,286
306
244
–
(11)
–
–

–
–
–
–

–
–

(1,139)
(185)
(79)
(22)
(73)

(1,498)
526
–
588
61
–
–
1,360
(227)

Total

370
(396)
136
(262)

(152)
5,526

(1,159)
(185)
(79)
(22)
(73)

(1,518)
515
5,286
678
1,273
(38)
(11)
1,396
(2,310)

$968

$(4,990) $13,857

$ 810

$ 10,645

2008

$(3,044) $ (178) $

103
–
(5)
–
(195)
–
9

2,428
(74)
–
(7,115)
(848)
–
295

–
–
(2,435)
(775)
–
(4)
10
(473)

$ (3,222)
2,531
(2,509)
(780)
(7,115)
(1,047)
175
(169)

–
–
–
–
–
–
165
–

$165

$(3,132) $ (5,492) $(3,677) $(12,136)

Bank of America 2010

231

The following tables summarize changes in unrealized gains (losses) recorded in earnings during 2010, 2009 and 2008 for Level 3 assets and liabilities that
were still held at December 31, 2010, 2009 and 2008. These amounts include changes in fair value on loans, LHFS, loan commitments and structured notes
which are accounted for under the fair value option.

Level 3 – Changes in Unrealized Gains (Losses) Relating to Assets and Liabilities Still Held at Reporting Date

(Dollars in millions)

Trading account assets:

Corporate securities, trading loans and other
Equity securities
Non-U.S. sovereign debt
Mortgage trading loans and asset-backed securities

Total trading account assets
Net derivative assets
Available-for-sale debt securities:

Non-agency MBS:
Residential
Commercial
Non-U.S. securities
Other taxable securities

Total

(1) Mortgage banking income does not reflect the impact of Level 1 and Level 2 hedges on MSRs.
(2) Amounts represent items which are accounted for under the fair value option.

Equity
Investment
Income
(Loss)

Trading
Account
Profits
(Losses)

$ –
–
–
–

–
–

–
–
–
–

–
–
–
–
50
–
–
–
–

$ 289
(50)
(144)
227

322
(945)

–
–
–
–

–
–
–
10
–
52
–
–
585

2010

Mortgage
Banking
Income
(Loss) (1)

–
–
–
–

–
676

(2)
–
–
–

(2)
–
(5,740)
(9)
(22)
–
(46)
–
–

Other
Income
(Loss)

–
–
–
–

–
–

(162)
–
–
–

(162)
(142)
–
258
–
–
–
(182)
43

Total

$ 289
(50)
(144)
227

322
(269)

(164)
–
–
–

(164)
(142)
(5,740)
259
28
52
(46)
(182)
628

$50

$ 24

$(5,143)

$(185)

$(5,254)

232

Bank of America 2010

Level 3 – Changes in Unrealized Gains (Losses) Relating to Assets and Liabilities Still Held at Reporting Date

(Dollars in millions)

Trading account assets:

Corporate securities, trading loans and other
Equity securities
Non-U.S. sovereign debt
Mortgage trading loans and asset-backed securities

Total trading account assets
Net derivative assets
Available-for-sale debt securities:

Non-agency MBS – Residential
Other taxable securities
Tax-exempt securities

Total

(1) Mortgage banking income does not reflect the impact of Level 1 and Level 2 hedges on MSRs.
(2) Amounts represent items which are accounted for under the fair value option.

Equity
Investment
Income
(Loss)

Trading
Account
Profits
(Losses)

2009

Mortgage
Banking
Income
(Loss) (1)

Other
Income
(Loss)

–
–
–
–

–
–

–
–
–

–
–
–
–
(177)
–
–
–
–

89
(328)
137
(332)

(434)
(2,761)

–
(11)
(2)

(13)
–
–
(195)
–
(38)
–
–
(2,303)

–
–
–
–

–
348

(20)
–
–

(20)
–
4,100
164
6
–
(11)
–
–

–
–
–
–

–
–

(659)
(3)
(8)

(670)
210
–
695
1,061
–
–
1,740
(225)

Total

89
(328)
137
(332)

(434)
(2,413)

(679)
(14)
(10)

(703)
210
4,100
664
890
(38)
(11)
1,740
(2,528)

$(177) $(5,744)

$ 4,587

$ 2,811

$ 1,477

–
–
–
–
–
–
(524)
–

$(2,144)
2,095
–
–
–
(154)
–
–

2008

$ (178)
1,154
(74)
–
(7,378)
(423)
–
292

–
–
(1,840)
(1,003)
–
(4)
–
(880)

$ (2,322)
3,249
(1,914)
(1,003)
(7,378)
(581)
(524)
(588)

$(524) $ (203)

$(6,607)

$(3,727) $(11,061)

Bank of America 2010

233

Nonrecurring Fair Value
Certain assets and liabilities are measured at fair value on a nonrecurring
basis and are not included in the previous tables in this Note. These assets
and liabilities primarily
include LHFS, unfunded loan commitments
held-for-sale, goodwill and foreclosed properties. During 2010, the Corpora-
tion recorded goodwill impairment charges associated with the Global Card
Services and Home Loans & Insurance business segments of $10.4 billion
and $2.0 billion. The fair value of the goodwill balance for Global Card
Services and Home Loans & Insurance was $11.9 billion and $2.8 billion
at December 31, 2010. See Note 10 – Goodwill and Intangible Assets for
additional information on the goodwill impairment charges. The amounts
below represent only balances measured at fair value during the year and still
held as of the reporting date.

loans and the derivative instruments used to economically hedge them. The
Corporation has not elected to account for other LHFS under the fair value
option primarily because these loans are floating-rate loans that are not
economically hedged using derivative instruments. Residential mortgage
LHFS, commercial mortgage LHFS and other LHFS are accounted for under
the fair value option with interest income on these LHFS recorded in other
interest income. The changes in fair value are largely offset by hedging
activities. An immaterial portion of these amounts was attributable to
changes in instrument-specific credit risk.

Other Assets
The Corporation elected to account for certain other assets under the fair
value option including private equity investments.

Assets and Liabilities Measured at Fair Value on a Nonrecur-
ring Basis

(Dollars in millions)

Assets

December 31, 2010

Level 2

Level 3

Gains (Losses)
in 2010

Loans held-for-sale
Loans and leases (1)
Foreclosed properties (2)
Other assets

$931
23
10
8

$ 6,408
11,917
2,125
95

$ 174
(6,074)
(240)
(50)

(Dollars in millions)

Assets

December 31, 2009

Level 2

Level 3

Gains (Losses)
in 2009

Loans held-for-sale
Loans and leases (1)
Foreclosed properties (2)
Other assets

$(1,288)
$2,320
(5,596)
–
(322)
–
(268)
31
(1) Gains (losses) represent charge-offs associated with real estate-secured loans that exceed 180 days past due.
(2) Amounts are included in other assets on the Consolidated Balance Sheet and represent fair value and related
losses on foreclosed properties that were written down subsequent to their initial classification as foreclosed
properties.

$7,248
8,602
644
322

NOTE 23 Fair Value Option

Corporate Loans and Loan Commitments
The Corporation elected to account for certain large corporate loans and loan
commitments which exceeded the Corporation’s single name credit risk
concentration guidelines under the fair value option. Lending commitments,
both funded and unfunded, are actively managed and monitored and, as
appropriate, credit risk for these lending relationships may be mitigated
through the use of credit derivatives, with the Corporation’s public side credit
view and market perspectives determining the size and timing of the hedging
activity. These credit derivatives do not meet the requirements for derivatives
designated as accounting hedges and therefore are carried at fair value with
changes in fair value recorded in other income (loss). Electing the fair value
option allows the Corporation to carry these loans and loan commitments at
fair value, which is more consistent with management’s view of the underlying
economics and the manner in which they are managed. In addition, account-
ing for these loans and loan commitments at fair value reduces the account-
ing asymmetry that would otherwise result from carrying the loans at histor-
ical cost and the credit derivatives at fair value.

Loans Held-for-Sale
The Corporation elected to account for certain LHFS at fair value. Electing the
fair value option allows a better offset of the changes in fair values of the

234

Bank of America 2010

Securities Financing Agreements
The Corporation elected to account for certain securities financing agree-
ments, including resale and repurchase agreements, under the fair value
option based on the tenor of the agreements, which reflects the magnitude of
the interest rate risk. The majority of securities financing agreements collat-
eralized by U.S. government securities were excluded from the fair value
option election as these contracts are generally short-dated and therefore the
interest rate risk is not significant.

Long-term Deposits
The Corporation elected to account for certain long-term fixed-rate and rate-
linked deposits, which are economically hedged with derivatives, under the
fair value option. Election of the fair value option allows the Corporation to
reduce the accounting volatility that would otherwise result from the account-
ing asymmetry created by accounting for the financial instruments at histor-
ical cost and the economic hedges at fair value. The Corporation did not elect
to carry other long-term deposits at fair value because they were not eco-
nomically hedged using derivatives.

Commercial Paper and Other Short-term Borrowings
The Corporation elected to account for certain commercial paper and other
short-term borrowings under the fair value option. This debt is risk-managed
on a fair value basis.

Long-term Debt
The Corporation elected to account for certain long-term debt, primarily
structured notes that were acquired as part of the Merrill Lynch acquisition,
under the fair value option. This long-term debt is risk-managed on a fair value
basis. Election of the fair value option allows the Corporation to reduce the
accounting volatility that would otherwise result from the accounting asym-
metry created by accounting for these financial instruments at historical cost
and the related economic hedges at fair value.

Asset-backed Secured Financings
The Corporation elected to account for certain asset-backed secured financ-
ings that were acquired as part of the Countrywide acquisition, which are
classified in commercial paper and other short-term borrowings, under the fair
value option. Election of the fair value option allows the Corporation to reduce
the accounting volatility that would otherwise result from the accounting
asymmetry created by accounting for the asset-backed secured financings
at historical cost and the corresponding mortgage LHFS securing these
financings at fair value.

The table below provides information about the fair value carrying amount and the contractual principal outstanding of assets or liabilities accounted for

under the fair value option at December 31, 2010 and 2009.

Fair Value Option Elections

(Dollars in millions)
Corporate loans and loan commitments (1)
Loans held-for-sale
Securities financing agreements
Other assets
Long-term deposits
Asset-backed secured financings
Commercial paper and other short-term borrowings
Long-term debt
(1)

December 31

2010

2009

Fair Value
Carrying
Amount

$ 4,135
25,942
116,023
310
2,732
706
6,472
50,984

Contractual
Principal
Outstanding

$ 3,638
28,370
115,053
n/a
2,692
1,356
6,472
54,656

Fair Value
Carrying
Amount
Less Unpaid
Principal

$ 497
(2,428)
970
n/a
40
(650)
–
(3,672)

Fair Value
Carrying
Amount

$ 5,865
32,795
95,100
253
1,663
707
813
45,451

Contractual
Principal
Outstanding

$ 5,460
36,522
94,641
n/a
1,605
1,451
813
48,560

Fair Value
Carrying
Amount
Less Unpaid
Principal

$ 405
(3,727)
459
n/a
58
(744)
–
(3,109)

Includes unfunded loan commitments with an aggregate fair value of $866 million and $950 million and aggregated committed exposure of $27.3 billion and $27.0 billion at December 31, 2010 and 2009, respectively.

n/a = not applicable

The tables below provide information about where changes in the fair value of assets or liabilities accounted for under the fair value option are included in

the Consolidated Statement of Income for 2010, 2009 and 2008.

Gains (Losses) Relating to Assets and Liabilities Accounted for Under the Fair Value Option

(Dollars in millions)

Corporate loans and loan commitments
Loans held-for-sale
Securities financing agreements
Other assets
Long-term deposits
Asset-backed secured financings
Commercial paper and other short-term borrowings
Long-term debt

Total

Corporate loans and loan commitments
Loans held-for-sale
Securities financing agreements
Long-term deposits
Asset-backed secured financings

Total

Trading
Account
Profits
(Losses)

2
–
–
–
–
–
(192)
(625)

$ (815)

25
(211)
–
379
–
–
(236)
(3,938)

$(3,981)

4
(680)
–
–
–

Mortgage
Banking
Income
(Loss)

–
9,091
–
–
–
(95)
–
–

$8,996

–
8,251
–
–
–
(11)
–
–

$8,240

–
281
–
–
295

$ (676)

$ 576

2010

Equity
Investment
Income
(Loss)

–
–
–
–
–
–
–
–

–

2009

–
–
–
(177)
–
–
–
–

$(177)

2008

–
–
–
–
–

–

Other
Income
(Loss)

$ 105
493
52
107
(48)
–
–
22

$ 731

$ 1,886
588
(292)
–
35
–
–
(4,900)

$(2,683)

$(1,248)
(215)
(18)
(10)
–

$(1,491)

Total

$ 107
9,584
52
107
(48)
(95)
(192)
(603)

$ 8,912

$ 1,911
8,628
(292)
202
35
(11)
(236)
(8,838)

$ 1,399

$(1,244)
(614)
(18)
(10)
295

$(1,591)

Bank of America 2010

235

NOTE 24 Fair Value of Financial Instruments
The fair values of financial instruments have been derived using methodol-
ogies described in Note 22 – Fair Value Measurements. The following disclo-
sures include financial instruments where only a portion of the ending bal-
ances at December 31, 2010 and 2009 is carried at fair value on the
Corporation’s Consolidated Balance Sheet.

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 certain repurchase agreements, commercial paper and other
short-term investments and borrowings approximates the fair value of these
instruments. These financial instruments generally expose the Corporation to
limited credit risk and have no stated maturities or have short-term maturities
and carry interest rates that approximate market. The Corporation elected to
account for certain structured reverse repurchase agreements under the fair
value option.

Loans
Fair values were generally determined by discounting both principal and
interest cash flows expected to be collected using an observable discount
rate for similar instruments with adjustments that the Corporation believes a
market participant would consider in determining fair value. The Corporation
estimates the cash flows expected to be collected using internal credit risk,
interest rate and prepayment risk models that incorporate the Corporation’s
best estimate of current key assumptions, such as default rates, loss severity
and prepayment speeds for the life of the loan. The carrying value of loans is
presented net of the applicable allowance for loan and lease losses and
excludes leases. The Corporation elected to account for certain large corpo-
rate loans which exceeded the Corporation’s single name credit risk concen-
tration guidelines under the fair value option.

Deposits
The fair value for certain deposits with stated maturities was determined by
discounting contractual cash flows using current market rates for instruments
with similar maturities. The carrying value of non-U.S. 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 Corporation accounts for certain long-
term fixed-rate deposits which are economically hedged with derivatives under
the fair value option.

Long-term Debt
The Corporation uses quoted market prices, when available, to estimate fair
value for its long-term debt. When quoted market prices are not available, fair
value is estimated based on current market interest rates and credit spreads
for debt with similar terms and maturities. The Corporation accounts for
certain structured notes under the fair value option.

Fair Value of Financial Instruments
The carrying values and fair values of certain financial instruments that are
not carried at fair value at December 31, 2010 and 2009 are presented in the
table below.

December 31

2010

2009

Carrying
Value

Fair
Value

Carrying
Value

Fair
Value

$ 876,739 $ 861,695

$841,020 $811,831

1,010,430
448,431

1,010,460
433,107

991,611
438,521

991,768
440,246

(Dollars in millions)

Financial assets
Loans

Financial liabilities
Deposits
Long-term debt

NOTE 25 Mortgage Servicing Rights
The Corporation accounts for consumer MSRs at fair value with changes in fair
value recorded in the Consolidated Statement of Income in mortgage banking
income. The Corporation economically hedges these MSRs with certain
derivatives and securities including MBS and U.S. Treasuries. The securities
that economically hedge the MSRs are classified in other assets with changes
in the fair value of the securities and the related interest income recorded in
mortgage banking income.

The table below presents activity for residential first mortgage MSRs for

2010 and 2009.

(Dollars in millions)

Balance, January 1

Merrill Lynch balance, January 1, 2009
Net additions
Impact of customer payments
Other changes in MSR fair value (1)

Balance, December 31

2010

2009

$19,465
–
3,516
(3,760)
(4,321)

$12,733
209
5,728
(4,491)
5,286

$14,900

$19,465

Mortgage loans serviced for investors (in billions)
$ 1,716
(1) These amounts reflect the change in discount rates and prepayment speed assumptions, mostly due to

$ 1,628

changes in interest rates, as well as the effect of changes in other assumptions.

The Corporation uses an OAS valuation approach to determine the fair
value of MSRs which factors in prepayment risk. This approach consists of
projecting servicing cash flows under multiple interest rate scenarios and
discounting these cash flows using risk-adjusted discount rates. The key
economic assumptions used in determining the fair value of MSRs at De-
cember 31, 2010 and 2009 are presented below.

December 31

2010

2009

(Dollars in millions)

Fixed

Adjustable

Fixed

Adjustable

Weighted-average option adjusted spread
Weighted-average life, in years

2.21%
4.85

3.25% 1.67%
2.29

5.62

4.64%
3.26

236

Bank of America 2010

The table below presents the sensitivity of the weighted-average lives and
fair value of MSRs to changes in modeled assumptions. These sensitivities
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 MSRs that continue 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. The below sensitivities do not reflect
any hedge strategies that may be undertaken to mitigate such risk.

Commercial and residential reverse mortgage MSRs, which are carried at
the lower of cost or market value and accounted for using the amortization
method, totaled $278 million and $309 million at December 31, 2010 and
2009, and are not included in the table below.

(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, 2010

Change in
Weighted-average Lives

Fixed

Adjustable

Change in
Fair Value

0.33 years
0.70
(0.29)
(0.55)

0.16 years
0.34
(0.14)
(0.26)

n/a
n/a
n/a
n/a

$ 907
1,925
(814)
(1,551)

$ 796
1,668
(729)
(1,398)

NOTE 26 Business Segment Information
The Corporation reports the results of its operations through six business
segments: Deposits, Global Card Services, Home Loans & Insurance, Global
Commercial Banking, Global Banking & Markets (GBAM) and Global Wealth &
Investment Management (GWIM), with the remaining operations recorded in
All Other. Effective January 1, 2010, the Corporation realigned the Global
Corporate and Investment Banking portion of the former Global Banking
business segment with the former Global Markets business segment to
form GBAM and to reflect Global Commercial Banking as a standalone
segment. In addition, the Corporation may periodically reclassify business
segment results based on modifications to its management reporting meth-
odologies and changes in organizational alignment. Prior period amounts have
been reclassified to conform to current period presentation.

Deposits
Deposits includes the results of consumer deposits activities which consist of
a comprehensive range of products provided to consumers and small busi-
nesses. In addition, Deposits includes an allocation of ALM activities. Deposit
products include traditional savings accounts, money market savings ac-
counts, CDs and IRAs, and noninterest- and interest-bearing checking ac-
counts. These products provide a relatively stable source of funding and
liquidity. The Corporation earns net interest spread revenue from investing
this liquidity in earning assets through client-facing lending and ALM activities.
The revenue is allocated to the deposit products using a funds transfer pricing

process which takes into account the interest rates and maturity character-
istics of the deposits. Deposits also generates fees such as account service
fees, non-sufficient funds fees, overdraft charges and ATM fees. In addition,
Deposits includes the net impact of migrating customers and their related
deposit balances between GWIM and Deposits. Subsequent to the date of
migration, the associated net interest income, service charges and non-
interest expense are recorded in the business to which deposits were
transferred.

Global Card Services
Global Card Services provides a broad offering of products including U.S. con-
sumer and business card, consumer lending, international card and debit
card to consumers and small businesses. The Corporation reports its Global
Card Services current period results in accordance with new consolidation
guidance that was effective on January 1, 2010. Under this new consolidation
guidance, the Corporation consolidated all previously unconsolidated credit
card trusts. Accordingly, current year results are comparable to prior year
results that were presented on a managed basis, which was consistent with
the way that management evaluated the results of the business. Managed
basis assumed that securitized loans were not sold and presented earnings
on these loans in a manner similar to the way loans that have not been sold
(i.e., held loans) are presented. Loan securitization is an alternative funding
process that is used by the Corporation to diversify funding sources. Global
Card Services managed income statement line items differ from a held basis
as follows: managed net interest income includes Global Card Services net
interest income on held loans and interest income on the securitized loans
less the internal funds transfer pricing allocation related to securitized loans;
managed noninterest income includes Global Card Services noninterest
income on a held basis less the reclassification of certain components of
card income (e.g., excess servicing income) to record securitized net interest
income and provision for credit losses; and provision for credit losses rep-
resents the provision for credit losses on held loans combined with realized
credit losses associated with the securitized loan portfolio.

Home Loans & Insurance
Home Loans & Insurance provides an extensive line of consumer real estate
products and services to customers nationwide. Home Loans & Insurance
products include fixed and adjustable-rate first-lien mortgage loans for home
purchase and refinancing needs, reverse mortgages, home equity lines of
credit and home equity loans. First mortgage products are either sold into the
secondary mortgage market to investors while retaining MSRs and the Bank
of America customer relationships, or are held on the Corporation’s Consol-
idated Balance Sheet for ALM purposes and reported in All Other. Home
Loans & Insurance is not impacted by the Corporation’s first mortgage
production retention decisions as Home Loans & Insurance is compensated
for the decision on a management accounting basis with a corresponding
offset recorded in All Other. Funded home equity lines of credit and home
equity loans are held on the Corporation’s Consolidated Balance Sheet. In
addition, Home Loans & Insurance offers property, casualty, life, disability and
credit insurance. Home Loans & Insurance also includes the impact of
migrating customers and their related loan balances between GWIM and
Home Loans & Insurance based on client segmentation thresholds. Subse-
quent to the date of migration, the associated net interest income and
noninterest expense are recorded in the business segment to which loans
were transferred.

Bank of America 2010

237

Global Commercial Banking
Global Commercial Banking provides a wide range of lending-related products
and services, integrated working capital management and treasury solutions
to clients through the Corporation’s network of offices and client relationship
teams along with various product partners. Clients include business banking
and middle-market companies, commercial real estate firms and govern-
ments, and are generally defined as companies with sales up to $2 billion.
Lending products and services include commercial loans and commitment
facilities, real estate lending, asset-based lending and indirect consumer
loans. Capital management and treasury solutions include treasury manage-
ment, foreign exchange and short-term investing options.

Global Banking & Markets
GBAM provides financial products, advisory services, financing, securities
clearing, settlement and custody services globally to institutional investor
clients in support of their investing and trading activities. GBAM also works
with commercial and corporate clients to provide debt and equity underwriting
and distribution capabilities, merger-related and other advisory services, and
risk management products using interest rate, equity, credit, currency and
commodity derivatives, foreign exchange, fixed-income and mortgage-related
products. As a result of the Corporation’s market-making activities in these
products, it may be required to manage positions in government securities,
equity and equity-linked securities, high-grade and high-yield corporate debt
securities, commercial paper, MBS and ABS. Corporate banking services
provide a wide range of lending-related products and services, integrated
working capital management and treasury solutions to clients through the
Corporation’s network of offices and client relationship teams along with
various product partners. Corporate clients are generally defined as compa-
nies with sales greater than $2 billion. In addition, GBAM also includes the
results related to the merchant services joint venture.

Global Wealth & Investment Management
GWIM provides comprehensive wealth management capabilities to a broad
base of clients from emerging affluent to the ultra-high-net-worth. These
services include investment and brokerage services, estate and financial
planning, fiduciary portfolio management, cash and liability management and
specialty asset management. GWIM also provides retirement and benefit plan
services, philanthropic management and asset management to individual and
institutional clients. In addition, GWIM includes the results of BofA Capital
Management, the cash and liquidity asset management business that the
Corporation retained following the sale of the Columbia long-term asset
management business, and other miscellaneous items. GWIM also reflects
the impact of migrating clients and their related deposit and loan balances to
or from GWIM and Deposits, Home Loans & Insurance and the Corporation’s
ALM activities. Subsequent to the date of migration, the associated net
interest income, noninterest income and noninterest expense are recorded
in the business to which the clients migrated.

All Other
All Other consists of equity investment activities including Global Principal
Investments, Strategic Investments, the residential mortgage portfolio asso-
ciated with ALM activities, the impact of the cost allocation processes, merger

and restructuring charges, intersegment eliminations, and the results of
certain businesses that are expected to be or have been sold or are in the
process of being liquidated. All Other also includes certain amounts associ-
ated with ALM activities, amounts associated with the change in the value of
derivatives used as economic hedges of interest rate and foreign exchange
rate fluctuations, the impact of foreign exchange rate fluctuations related to
revaluation of foreign currency-denominated debt, fair value adjustments
related to certain structured notes, certain gains (losses) on sales of whole
mortgage loans, gains (losses) on sales of debt securities, OTTI write-downs
on certain AFS securities and for periods prior to January 1, 2010, a secu-
ritization offset which removed the securitization impact of sold loans in
Global Card Services in order to present the consolidated results of the
Corporation on a GAAP basis (i.e., held basis).

Basis of Presentation
The management accounting and reporting process derives segment and
business results by utilizing allocation methodologies for revenue and ex-
pense. The net income derived for the businesses is dependent upon revenue
and cost allocations using an activity-based costing model, funds transfer
pricing, and other methodologies and assumptions management believes are
appropriate to reflect the results of the business.

Total revenue, net of interest expense, includes net interest income on a
fully taxable-equivalent (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 segment results also reflect certain revenue and
expense methodologies that are utilized to determine net 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. For presentation purposes, in seg-
ments where the total of liabilities and equity exceeds assets, which are
generally deposit-taking segments, the Corporation allocates assets to match
liabilities. Net interest income of the business segments also includes an
allocation of net interest income generated by the Corporation’s ALM
activities.

The Corporation’s ALM activities include an overall

interest rate risk
management strategy that incorporates the use of interest rate contracts
to manage fluctuations in earnings that are caused by interest rate volatility.
The Corporation’s goal is to manage interest rate sensitivity so that move-
ments in interest rates do not significantly adversely affect net interest
income. The Corporation’s ALM activities are allocated to the business
segments and fluctuate based on performance. ALM activities include exter-
nal product pricing decisions including deposit pricing strategies, the effects
of the Corporation’s internal funds transfer pricing process and the net effects
of other ALM activities.

238

Bank of America 2010

The following tables present total revenue, net of interest expense, on a FTE basis and net income (loss) for 2010, 2009 and 2008, and total assets at

December 31, 2010 and 2009 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 (3)
Noninterest income

Total revenue, net of interest expense

Provision for credit losses
Amortization of intangibles
Goodwill impairment
Other noninterest expense

Income (loss) before income taxes

Income tax expense (benefit) (3)

Net income (loss)

Year end total assets

Net interest income (3)
Noninterest income

Total revenue, net of interest expense

Provision for credit losses
Amortization of intangibles
Goodwill impairment
Other noninterest expense

Income (loss) before income taxes

Income tax expense (benefit) (3)

Net income (loss)

Year end total assets

Net interest income (3)
Noninterest income

Total revenue, net of interest expense

Provision for credit losses
Amortization of intangibles
Other noninterest expense

Income (loss) before income taxes

Income tax expense (benefit) (3)

Net income (loss)

Total Corporation (1)

Deposits

Global Card Services (2)

2010

52,693
58,697

111,390
28,435
1,731
12,400
68,977

(153)
2,085

2009

2008

2010

2009

2008

2010

2009

2008

48,410
72,534

$46,554
27,422

$ 8,128
5,053

$ 7,089
6,801

$10,910
6,854

$ 17,821
7,800

$ 19,972
9,074

$19,305
11,628

120,944
48,570
1,977
–
64,736

5,661
(615)

73,976
26,825
1,834
–
39,695

5,622
1,614

13,181
201
195
–
10,636

2,149
797

13,890
343
238
–
9,263

4,046
1,470

17,764
390
297
–
8,296

8,781
3,192

25,621
12,648
813
10,400
6,140

(4,380)
2,223

29,046
29,553
911
–
6,815

(8,233)
(2,972)

30,933
19,575
1,048
–
7,905

2,405
850

(2,238)

6,276

$ 4,008

$ 1,352

$ 2,576

$ 5,589

$ (6,603)

$ (5,261)

$ 1,555

$2,264,909

$2,230,232

$432,334

$444,612

$169,762

$212,668

Home Loans & Insurance

Global Commercial Banking

Global Banking & Markets

2010

2009

2008

2010

2009

2008

2010

2009

2008

$ 4,690
5,957

$ 4,975
11,928

$ 3,311
6,001

$ 8,086
2,817

$ 8,054
3,087

$ 8,142
2,535

$ 7,989
20,509

$ 9,553
23,070

$ 8,297
(5,506)

10,647
8,490
38
2,000
13,125

(13,006)
(4,085)

16,903
11,244
63
–
11,642

(6,046)
(2,195)

9,312
6,287
39
–
6,977

(3,991)
(1,477)

10,903
1,971
72
–
3,802

5,058
1,877

11,141
7,768
87
–
3,746

(460)
(170)

10,677
3,316
127
–
3,205

4,029
1,418

28,498
(155)
144
–
17,894

10,615
4,296

32,623
1,998
165
–
15,756

14,704
4,646

2,791
424
91
–
7,221

(4,945)
(1,756)

$ (8,921)

$ (3,851)

$(2,514)

$ 3,181

(290)

$ 2,611

$ 6,319

$ 10,058

$(3,189)

$213,455

$232,588

$310,131

$295,947

$655,535

$649,876

Global Wealth &
Investment Management

2010

2009

2008

$ 5,831
10,840

$ 5,988
10,149

$4,780
1,527

16,671
646
458
13,140

2,427
1,080

16,137
1,061
480
11,917

2,679
963

6,307
664
192
3,872

1,579
565

All Other (2)

2009

2008

$ (7,221)
8,425

$(8,191)
4,383

1,204
(3,397)
33
5,597

(1,029)
(2,357)

(3,808)
(3,831)
40
2,219

(2,236)
(1,178)

2010

148
5,721

5,869
4,634
11
4,240

(3,016)
(4,103)

$ 1,347

$ 1,716

$1,014

$ 1,087

$ 1,328

$(1,058)

Year end total assets
(1) There were no material intersegment revenues.
(2) 2010 is presented in accordance with new consolidation guidance. 2009 and 2008 Global Card Services results are presented on a managed basis with a corresponding offset recorded in All Other.
(3) FTE basis

$186,391

$297,301

$250,963

$143,578

Bank of America 2010

239

The table below reconciles Global Card Services and All Other for 2009 and 2008 to a held basis by reclassifying net interest income, all other income and
realized credit losses associated with the securitized loans to card income. New consolidation guidance effective January 1, 2010 does not require
reconciliation of Global Card Services and All Other to a held basis after 2009.

Global Card Services – Reconciliation

(Dollars in millions)
Net interest income (3)
Noninterest income:
Card income

All other income

Total noninterest income

Total revenue, net of interest expense

Provision for credit losses
Noninterest expense

Income (loss) before income taxes

Income tax expense (benefit) (3)

Net income (loss)

All Other – Reconciliation

(Dollars in millions)
Net interest income (3)
Noninterest income:

Card income (loss)
Equity investment income
Gains on sales of debt securities
All other income (loss)

Total noninterest income

Total revenue, net of interest expense

Provision for credit losses
Merger and restructuring charges
All other noninterest expense

Loss before income taxes

Income tax benefit (3)

Net income (loss)

2009

2008

Managed
Basis (1)

Securitization
Impact (2)

Held
Basis

Managed
Basis (1)

Securitization
Impact (2)

Held
Basis

$19,972

$ (9,250)

$10,722

$19,305

$(8,701)

$10,604

8,553
521

9,074

29,046
29,553
7,726

(8,233)
(2,972)

$ (5,261)

(2,034)
(115)

(2,149)

(11,399)
(11,399)
–

–
–

–

6,519
406

6,925

17,647
18,154
7,726

(8,233)
(2,972)

10,032
1,596

11,628

30,933
19,575
8,953

2,405
850

$ (5,261)

$ 1,555

2,250
(219)

2,031

(6,670)
(6,670)
–

–
–

–

12,282
1,377

13,659

24,263
12,905
8,953

2,405
850

$ 1,555

2009

2008

Reported
Basis (1)
$ (7,221)

Securitization
Offset (2)
$ 9,250

As
Adjusted

$ 2,029

Reported
Basis (1)
$(8,191)

Securitization
Offset (2)
$ 8,701

As
Adjusted

$ 510

(896)
10,589
4,437
(5,705)

8,425

1,204
(3,397)
2,721
2,909

(1,029)
(2,357)

$ 1,328

2,034
–
–
115

2,149

11,399
11,399
–
–

–
–

–

1,138
10,589
4,437
(5,590)

10,574

12,603
8,002
2,721
2,909

(1,029)
(2,357)

2,164
265
1,133
821

4,383

(3,808)
(3,831)
935
1,324

(2,236)
(1,178)

$ 1,328

$(1,058)

(2,250)
–
–
219

(2,031)

6,670
6,670
–
–

(86)
265
1,133
1,040

2,352

2,862
2,839
935
1,324

–
–

–

(2,236)
(1,178)

$(1,058)

(1) Provision for credit losses in Global Card Services is presented on a managed basis with the securitization offset in All Other.
(2) The securitization impact/offset to net interest income is on a funds transfer pricing methodology consistent with the way funding costs are allocated to the businesses.
(3) FTE basis

240

Bank of America 2010

The tables below present a reconciliation of the six business segments’ total revenue, net of interest expense, on a FTE basis, and net income (loss) to the
Consolidated Statement of Income, and total assets to the Consolidated Balance Sheet. The adjustments presented in the tables below include consolidated
income, expense and asset amounts not specifically allocated to individual business segments.

(Dollars in millions)
Segments’ total revenue, net of interest expense (1)
Adjustments:

ALM activities
Equity investment income
Liquidating businesses
FTE basis adjustment
Managed securitization impact to total revenue, net of interest expense
Other

Consolidated revenue, net of interest expense

Segments’ net income (loss)
Adjustments, net of taxes:

ALM activities
Equity investment income
Liquidating businesses
Merger and restructuring charges
Other

Consolidated net income (loss)

(1) FTE basis
n/a = not applicable

(Dollars in millions)

Segment total assets
Adjustments:

ALM activities, including securities portfolio
Equity investments
Liquidating businesses
Elimination of segment excess asset allocations to match liabilities
Elimination of managed securitized loans (1)
Other

Consolidated total assets

2010

2009

2008

$105,521

$119,740

$77,784

1,924
4,532
1,336
(1,170)
n/a
(1,923)

(766)
10,589
2,268
(1,301)
(11,399)
512

2,390
265
1,819
(1,194)
(6,670)
(1,612)

$110,220

$119,643

$72,782

$ (3,325)

$ 4,948

$ 5,066

(1,966)
2,855
318
(1,146)
1,026

(6,597)
6,671
477
(1,714)
2,491

(641)
167
378
(630)
(332)

$ (2,238)

$ 6,276

$ 4,008

December 31

2010

2009

$2,078,518

$2,086,654

637,439
34,201
10,928
(645,846)
n/a
149,669

573,525
44,640
34,761
(585,994)
(89,716)
166,362

$2,264,909

$2,230,232

(1) Represents Global Card Services securitized loans. 2010 is presented in accordance with new consolidation guidance effective January 1, 2010. 2009 is presented on a managed basis.
n/a = not applicable

Bank of America 2010

241

NOTE 27 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 holding companies and related subsidiaries
Nonbank companies and related subsidiaries

Interest from subsidiaries
Other income

Total income

Expense
Interest on borrowed funds
Noninterest expense

Total expense

Income (loss) 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 (losses) of subsidiaries:
Bank holding companies and related subsidiaries
Nonbank companies and related subsidiaries

Total equity in undistributed earnings (losses) of subsidiaries

Net income (loss)

Net income (loss) applicable to common shareholders

Condensed Balance Sheet

(Dollars in millions)

Assets
Cash held at bank subsidiaries
Debt securities
Receivables from subsidiaries:

Bank holding companies and related subsidiaries
Nonbank companies and related subsidiaries

Investments in subsidiaries:

Bank holding companies and related subsidiaries
Nonbank companies and related 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 holding companies and related subsidiaries
Nonbank companies and related subsidiaries

Long-term debt
Shareholders’ equity

Total liabilities and shareholders’ equity

242

Bank of America 2010

2010

2009

2008

$ 7,263
226
999
2,781

$ 4,100
27
1,179
7,784

$ 18,178
1,026
3,433
940

11,269

13,090

23,577

4,484
8,030

12,514

(1,245)
(3,709)

2,464

4,737
4,238

8,975

4,115
(85)

4,200

6,818
1,829

8,647

14,930
(1,793)

16,723

7,647
(12,349)

(4,702)

(21,614)
23,690

(10,559)
(2,156)

2,076

(12,715)

$ (2,238)

$ 6,276

$ 4,008

$ (3,595)

$ (2,204)

$ 2,556

December 31

2010

2009

$117,124
19,518

$ 91,892
8,788

50,589
8,320

54,442
13,043

188,538
61,374
10,837

186,673
67,399
18,262

$456,300

$440,499

$ 13,899
22,803

$ 5,968
19,204

4,241
513
186,596
228,248

363
632
182,888
231,444

$456,300

$440,499

Condensed Statement of Cash Flows

(Dollars in millions)

Operating activities
Net income (loss)
Reconciliation of net income (loss) to net cash provided by operating activities:

Equity in undistributed (earnings) losses 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
Repayment of preferred stock
Proceeds from issuance of common stock
Cash dividends paid
Other financing activities, net

Net cash provided by financing activities

Net increase (decrease) in cash held at bank subsidiaries
Cash held at bank subsidiaries at January 1

Cash held at bank subsidiaries at December 31

2010

2009

2008

$ (2,238)

$ 6,276

$ 4,008

4,702
(996)

1,468

5,972
3,531
2,592

12,095

8,052
29,275
(27,176)
–
–
–
(1,762)
3,280

11,669

25,232
91,892

(2,076)
4,400

8,600

3,729
(25,437)
(17)

(21,725)

(20,673)
30,347
(20,180)
49,244
(45,000)
13,468
(4,863)
4,149

6,492

(6,633)
98,525

12,715
(598)

16,125

(12,142)
2,490
43

(9,609)

(14,131)
28,994
(13,178)
34,742
–
10,127
(11,528)
5,030

40,056

46,572
51,953

$117,124

$ 91,892

$ 98,525

Bank of America 2010

243

NOTE 28 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, net of interest expense, income (loss) before income taxes and net income (loss) by geographic area. The Corporation identifies its geographic
performance based on the business unit structure used to manage the capital or expense deployed in the region as applicable. This requires certain judgments
related to the allocation of revenue so that revenue can be appropriately matched with the related expense or capital deployed in the region.

December 31

Year Ended December 31

(Dollars in millions)
U.S. (3)

Asia (4)

Europe, Middle East and Africa

Latin America and the Caribbean

Total Non-U.S.

Total Consolidated

Year

Total Assets (1)

$1,954,517
1,847,165

106,186
118,921

186,045
239,374

18,161
24,772

310,392
383,067

2010
2009
2008

2010
2009
2008
2010
2009
2008
2010
2009
2008

2010
2009
2008

Total
Revenue, Net
of Interest
Expense (2)

$ 88,679
98,278
67,549

Income
(Loss) Before
Income Taxes

$ (5,370)
(6,901)
3,289

Net Income
(Loss)

$(4,511)
(1,025)
3,254

6,115
10,685
1,770
12,369
9,085
3,020
3,057
1,595
443

21,541
21,365
5,233

1,380
8,096
1,207
1,273
2,295
(456)
1,394
870
388

4,047
11,261
1,139

$ (1,323)
4,360
4,428

869
5,101
761
525
1,652
(252)
879
548
245

2,273
7,301
754

$(2,238)
6,276
4,008

$2,264,909
2,230,232

$110,220
119,643
72,782

(1) Total assets include 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 $16.1 billion and $31.1 billion at December 31, 2010 and 2009; total revenue, net of interest expense of $1.5 billion, $2.5 billion and $1.2 billion; income
before income taxes of $459 million, $723 million and $552 million; and net income of $328 million, $488 million and $404 million for 2010, 2009 and 2008, respectively.

(4) The year ended December 31, 2009 amount includes pre-tax gains of $7.3 billion ($4.6 billion net-of-tax) on the sale of common shares of the Corporation’s initial investment in CCB.

244

Bank of America 2010

Disclosure Controls and Procedures
Bank of America Corporation and Subsidiaries

As of the end of the period covered by this report and pursuant to Rule 13a-15
of the Securities Exchange Act of 1934 (Exchange Act), Bank of America’s
management, including the Chief Executive Officer and Chief Financial Officer,
conducted an evaluation of the effectiveness and design of our disclosure
controls and procedures (as that term is defined in Rule 13a-15(e) of the
Exchange Act). Based upon that evaluation, Bank of America’s Chief Executive

Officer and Chief Financial Officer concluded that Bank of America’s disclo-
sure controls and procedures were effective, as of the end of the period
covered by this report, in recording, processing, summarizing and reporting
information required to be disclosed, within the time periods specified in the
SEC’s rules and forms.

Bank of America 2010

245

Report of Independent Registered Public Accounting Firm
Bank of America Corporation and Subsidiaries

To the Board of Directors of Bank of America
Corporation:
We have examined, based on criteria established in Internal Control – Inte-
grated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission, Bank of America Corporation’s (the “Corporation”)
assertion, included under Item 9A of this Annual Report on Form 10-K, that
the Corporation’s disclosure controls and procedures were effective as of
December 31, 2010 (“Management’s Assertion”). Disclosure controls and
procedures mean controls and other procedures of an issuer that are de-
signed to ensure that information required to be disclosed by an issuer in
reports that it files or submits under the Securities Exchange Act of 1934 is
recorded, processed, summarized, and reported within the time periods
specified in the Securities and Exchange Commission’s rules and forms,
and that information required to be disclosed by an issuer in reports that it
files or submits under the Securities Exchange Act of 1934 is accumulated
and communicated to the issuer’s management, including its principal exec-
utive and principal financial officer, or persons performing similar functions,
as appropriate, to allow timely decisions regarding required disclosure. The
Corporation’s management is responsible for maintaining effective disclo-
sure controls and procedures and for Management’s Assertion of the effec-
tiveness of its disclosure controls and procedures. Our responsibility is to
express an opinion on Management’s Assertion based on our examination.
There are inherent limitations to disclosure controls and procedures.
Because of these inherent limitations, effective disclosure controls and
procedures can only provide reasonable assurance of achieving the intended
objectives. Disclosure controls and procedures may not prevent, or detect and
correct, material misstatements, and they may not identify all information
relating to the Corporation to be accumulated and communicated to the
Corporation’s management to allow timely decisions regarding required dis-
closures. Also, projections of any evaluation of effectiveness to future periods

are subject to the risk that disclosure controls and procedures may become
inadequate because of changes in conditions, or that the degree of compli-
ance with the policies or procedures may deteriorate.

We conducted our examination in accordance with attestation standards
established by the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the examination
to obtain reasonable assurance about whether effective disclosure controls
and procedures were maintained in all material respects. Our examination
included obtaining an understanding of the Corporation’s disclosure controls
and procedures and testing and evaluating the design and operating effec-
tiveness of the Corporation’s disclosure controls and procedures based on
the assessed risk. Our examination also included performing such other
procedures as we considered necessary in the circumstances. We believe
that our examination provides a reasonable basis for our opinion. Our exam-
ination was not conducted for the purpose of expressing an opinion, and
accordingly we express no opinion, on the accuracy or completeness of the
Corporation’s disclosures in its reports, or whether such disclosures comply
with the rules and regulations adopted by the Securities and Exchange
Commission.

In our opinion, Management’s Assertion that the Corporation’s disclosure
controls and procedures were effective as of December 31, 2010 is fairly
stated, in all material respects, based on criteria established in Internal
Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.

Charlotte, North Carolina
February 25, 2011

246

Bank of America 2010

Executive Management Team and Board of Directors
Bank of America Corporation

Board of Directors
Charles O. Holliday, Jr.
Chairman of the Board
Bank of America Corporation

Susan S. Bies
Former Member
Board of Governors of the
Federal Reserve System

William P. Boardman**
Retired Vice Chairman
Banc One Corporation
Retired Chairman of the Board
Visa International

Frank P. Bramble, Sr.
Former Executive Officer
MBNA Corporation

Virgis W. Colbert
Senior Advisor
MillerCoors Company

Charles K. Gifford
Former Chairman
Bank of America Corporation

D. Paul Jones, Jr.
Former Chairman,
Chief Executive Officer
and President
Compass Bancshares, Inc.

Monica C. Lozano
Chief Executive Officer
ImpreMedia, LLC

Thomas J. May
Chairman, President and
Chief Executive Officer
NSTAR

Brian T. Moynihan
Chief Executive Officer
Bank of America Corporation

Donald E. Powell
Former Chairman
Federal Deposit Insurance
Corporation

Charles O. Rossotti
Senior Advisor
The Carlyle Group

Robert W. Scully
Former Member
Office of the Chairman
Morgan Stanley

Executive Management Team
Brian T. Moynihan*
Chief Executive Officer

Catherine P. Bessant
Global Technology and
Operations Executive

David C. Darnell*
President, Global Commercial
Banking

Barbara J. Desoer*
President, Bank of America Home
Loans and Insurance

Anne M. Finucane
Global Strategy and
Marketing Officer

Sallie L. Krawcheck*
President, Global Wealth and
Investment Management

Terrence P. Laughlin*
Legacy Asset Servicing Executive

Thomas K. Montag*
President, Global Banking and
Markets

Charles H. Noski*
Executive Vice President and
Chief Financial Officer

Edward P. O’Keefe*
General Counsel

Joe L. Price*
President, Consumer and Small
Business Banking

Andrea B. Smith
Global Head of Human Resources

Bruce R. Thompson*
Chief Risk Officer

*Executive Officer

**Not standing for reelection at the 2011 Annual Meeting

Bank of America 2010 247

Corporate Information
Bank of America Corporation

Headquarters
The principal executive offices of Bank of America Corporation
(the Corporation) are located in the Bank of America Corporate
Center, 100 North Tryon Street, Charlotte, NC 28255.

2011 Annual Meeting
The Corporation’s 2011 annual meeting of shareholders
will be held at 10 a.m. local time on May 11, 2011, in the
auditorium of 1 Bank of America Center, 150 North College
Street, Charlotte, NC.

Stock Listing
The Corporation’s common stock is listed on the New
York Stock Exchange (NYSE) under the symbol BAC. The
Corporation’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
newspapers. As of February 15, 2011, there were 247,064
registered holders of the Corporation’s common stock.

Investor Relations
Analysts, portfolio managers and other investors seek-
ing additional information about Bank of America stock
should contact our Equity Investor Relations group at
1.704.386.5681. For additional information about Bank of
America from a credit perspective, including debt and preferred
securities, contact our Fixed Income Investor Relations group
at 1.866.607.1234 or Fixedincomeir@bankofamerica.com.
Visit the Investor Relations area of the Bank of America website,
http://investor.bankofamerica.com, for stock and dividend
information, financial news releases, links to Bank of America
SEC filings, electronic versions of our annual reports and other
items of interest to the Corporation’s shareholders.

Customers
For assistance with Bank of America products and services,
call 1.800.432.1000, or visit the Bank of America website
at www.bankofamerica.com. Additional toll-free numbers for
specific products and services are listed on our website at
www.bankofamerica.com/contact.

News Media
News media seeking information should visit our online
newsroom at www.bankofamerica.com/newsroom for
news releases, speeches and other items relating to the
Corporation, including a complete list of the Corporation’s
media relations specialists grouped by business specialty
or geography.

Annual Report on Form 10-K
The Corporation’s 2010 Annual Report on Form 10-K
is available at http://investor.bankofamerica.com. The
Corporation also will provide a copy of the 2010 Annual
Report on Form 10-K (without exhibits) upon written request
addressed to:

Bank of America Corporation
Shareholder Relations Department
NC1-027-20-05
Hearst Tower, 214 North Tryon Street
Charlotte, NC 28255

Shareholder Inquiries
For inquiries concerning dividend checks, electronic deposit
of dividends, dividend reinvestment, tax statements, elec-
tronic delivery, transferring ownership, address changes or
lost or stolen stock certificates, contact Bank of America
Shareholder Services at Computershare Trust Company, N.A.
via Internet access at www.computershare.com/bac; call
1.800.642.9855; or write to P.O. Box 43078, Providence, RI
02940-3078. For general inquiries regarding your shareholder
account, contact Shareholder Relations at 1.800.521.3984.
Shareholders outside of the United States and Canada may
call 1.781.575.2621.

Electronic Delivery
As part of our commitment to the environment, Bank of
America is working to reduce paper consumption. In 2010,
Bank of America delivered more than 285 million digital
correspondences through Online Banking and other chan-
nels. We also eliminated approximately three million pounds
of envelopes through the successful implementation of
Deposit Image ATMs. Customers can sign up to receive online
statements through their Bank of America or Merrill Lynch
account website. Shareholders can join our efforts by elect-
ing to receive an electronic copy of the Annual Report and
Proxy materials. If you have an account maintained in your
name at Computershare Investor Services, you may sign
up for this service at www.computershare.com/bac. If your
shares are held by a broker, bank or other nominee you may
elect to receive an electronic copy of the annual report and
proxy materials online at www.proxyvote.com, or contact
your broker.

248 Bank of America 2010

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Bank of America Corporation (“Bank of America”) is a financial holding company that, through its subsidiaries and affiliated companies, provides banking
and nonbanking financial services. Global Wealth & Investment Management is a division of Bank of America Corporation (“BAC”). Merrill Lynch Wealth
Management, Merrill Edge™, U.S. Trust, Bank of America Merrill Lynch and BofA™ Global Capital Management are affiliated sub-divisions within Global
Wealth & Investment Management. Merrill Lynch Wealth Management makes available products and services offered by Merrill Lynch, Pierce, Fenner &
Smith Incorporated (“MLPF&S”) and other subsidiaries of BAC. Merrill Edge™ is the marketing name for two businesses: Merrill Edge Advisory Center,
which offers team-based advice and guidance brokerage services; and a self-directed online investing platform. U.S. Trust, Bank of America Private
Wealth Management operates through Bank of America, N.A., and other subsidiaries of BAC. Bank of America Merrill Lynch is a marketing name for the
Retirement & Philanthropic Services businesses of BAC. BofA™ Global Capital Management Group, LLC (“BofA Global Capital Management”), is an asset
management division of BAC. BofA Global Capital Management entities furnish investment management services and products for institutional and
individual investors.

Banking products are provided by Bank of America, N.A., and affiliated banks, Members FDIC and wholly owned subsidiaries of BAC.

Investment Products: Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value

MLPF&S is a registered broker-dealer, member SIPC and a wholly owned subsidiary of BAC.

Case studies presented herein are intended to illustrate brokerage and banking products and services available at Merrill Lynch, U.S. Trust, and
Bank of America, N.A. You should not consider these as an endorsement of Merrill Lynch as an investment adviser or as a testimonial about a client’s
experiences with Merrill Lynch as an investment adviser. Case Studies do not necessarily represent the experiences of other clients, nor do they indicate
future performance. Investment results may vary. The investment strategies discussed are not appropriate for every investor and should be considered
given a person’s investment objectives, financial situation and particular needs.

Please recycle. The annual report is printed on 30% post-consumer waste (PCW) recycled paper.

Please recycle.