|12 Months Ended|
Dec. 31, 2017
|Debt Disclosure [Abstract]|
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, 2017 and 2016, and the related contractual rates and maturity dates as of December 31, 2017.
Bank of America Corporation 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, 2017 and 2016, the amount of foreign currency-denominated debt translated into U.S. dollars included in total long-term debt was $51.8 billion and $44.7 billion. Foreign currency contracts may be used to convert certain foreign currency-denominated debt into U.S. dollars.
At December 31, 2017, long-term debt of consolidated VIEs in the table above included debt from credit card, home equity and all other VIEs of $8.6 billion, $76 million and $1.2 billion, respectively. Long-term debt of VIEs is collateralized by the assets of the VIEs. For more information, see Note 6 – Securitizations and Other Variable Interest Entities.
The weighted-average effective interest rates for total long-term debt (excluding senior structured notes), total fixed-rate debt and total floating-rate debt were 3.44 percent, 3.87 percent and 1.49 percent, respectively, at December 31, 2017, and 3.80 percent, 4.36 percent and 1.52 percent, respectively, at December 31, 2016. The Corporation’s ALM activities maintain 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 movements in interest rates do not significantly adversely affect earnings and capital. The weighted-average rates are the contractual interest rates on the debt and do not reflect the impacts of derivative transactions.
Certain senior structured notes and structured liabilities are accounted for under the fair value option. For more information on these notes, see Note 21 – Fair Value Option. Debt outstanding of $2.7 billion at December 31, 2017 was issued by a 100 percent owned finance subsidiary of the parent company and is unconditionally guaranteed by the parent company.
The following table shows the carrying value for aggregate annual contractual maturities of long-term debt as of December 31, 2017. Included in the table are certain structured notes issued by the Corporation 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 table as maturing at their contractual maturity date.
During 2017, the Corporation had total long-term debt maturities and redemptions in the aggregate of $48.8 billion consisting of $29.1 billion for Bank of America Corporation, $13.3 billion for Bank of America, N.A. and $6.4 billion of other debt. During 2016, the Corporation had total long-term debt maturities and redemptions in the aggregate of $51.6 billion consisting of $30.6 billion for Bank of America Corporation, $11.6 billion for Bank of America, N.A. and $9.4 billion of other debt.
In December 2017, pursuant to a private offering, the Corporation exchanged $11.0 billion of outstanding long-term debt for new fixed/floating-rate senior notes, subject to certain terms and conditions. Based on the attributes of the exchange transactions, the newly issued securities are not considered substantially different, for accounting purposes, from the exchanged securities. Therefore, there was no impact to the Corporation’s results of operations as any amounts paid to debt holders were capitalized, and the premiums or discounts on the outstanding long-term debt were carried over to the new securities and will be amortized over their contractual lives using a revised effective interest rate.
Trust Preferred and Hybrid Securities
Trust preferred securities (Trust Securities) are primarily 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 percent-owned finance subsidiaries of the Corporation. Obligations associated with the Notes are included in the long-term debt table on page 150.
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.
Periodic cash payments and payments upon liquidation or redemption with respect to Trust Securities are guaranteed by the Corporation or its subsidiaries 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.
The Trust Securities Summary table details the outstanding Trust Securities and the related Notes previously issued which remained outstanding at December 31, 2017.
The entire disclosure for long-term debt.
Reference 1: http://www.xbrl.org/2003/role/presentationRef