Bank of America Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Fair Value Option

Fair Value Option

9 Months Ended

Sep. 30, 2012

NOTE 16 – Fair Value Option

The Corporation elects to account for certain financial instruments under the fair value option. For additional information on the primary financial instruments for which the fair value option elections have been made, see Note 23 – Fair Value Option to the Consolidated Financial Statements of the Corporation's 2011 Annual Report on Form 10-K.

The table below provides information about the fair value carrying amount and the contractual principal outstanding of assets and liabilities accounted for under the fair value option at September 30, 2012 and December 31, 2011.



Fair Value Option Elections
	September 30, 2012							December 31, 2011
(Dollars in millions)	Fair Value Carrying Amount		Contractual Principal Outstanding		Fair Value Carrying Amount Less Unpaid Principal			Fair Value Carrying Amount		Contractual Principal Outstanding		Fair Value Carrying Amount Less Unpaid Principal
Loans reported as trading account assets	$	1,395	$	2,345	$	(950	)	$	1,151	$	2,371	$	(1,220	)
Trading inventory - other	1,071		n/a		n/a			1,173		n/a		n/a
Consumer and commercial loans	7,638		8,287		(649		)	8,804		10,823		(2,019		)
Loans held-for-sale	11,077		12,194		(1,117		)	7,630		9,673		(2,043		)
Securities financing agreements	158,129		157,757		372			121,688		121,092		596
Other assets	159		n/a		n/a			251		n/a		n/a
Long-term deposits	2,449		2,202		247			3,297		3,035		262
Asset-backed secured financings	687		1,199		(512		)	650		1,271		(621		)
Unfunded loan commitments	635		n/a		n/a			1,249		n/a		n/a
Other short-term borrowings	3,591		3,591		—			5,908		5,909		(1		)
Long-term debt ⁽¹⁾	49,912		52,841		(2,929		)	46,239		55,854		(9,615		)


⁽¹⁾	The majority of the difference between the fair value carrying amount and contractual principal outstanding at September 30, 2012 and December 31, 2011 relates to the impact of the Corporation's credit spreads as well as the fair value of the embedded derivative, where applicable.

n/a = not applicable

The table below provides information about where changes in the fair value of assets and liabilities accounted for under the fair value option are included in the Corporation's Consolidated Statement of Income for the three and nine months ended September 30, 2012 and 2011.



Gains (Losses) Relating to Assets and Liabilities Accounted for Under the Fair Value Option
	Three Months Ended September 30, 2012
(Dollars in millions)	Trading Account Profits (Losses)			Mortgage Banking Income (Loss)			Other Income (Loss)			Total
Loans reported as trading account assets	$	64		$	—		$	—		$	64
Consumer and commercial loans	3			—			185			188
Loans held-for-sale	20			680			87			787
Securities financing agreements	13			—			(4		)	9
Other assets	—			—			1			1
Long-term deposits	—			—			(20		)	(20		)
Asset-backed secured financings	—			(54		)	—			(54		)
Unfunded loan commitments	—			—			313			313
Other short-term borrowings	(1		)	—			—			(1		)
Long-term debt ⁽¹⁾	(1,113		)	—			(1,289		)	(2,402		)
Total	$	(1,014	)	$	626		$	(727	)	$	(1,115	)

	Three Months Ended September 30, 2011
Loans reported as trading account assets	$	(29	)	$	—		$	—		$	(29	)
Consumer and commercial loans	—			—			(448		)	(448		)
Loans held-for-sale	(9		)	1,349			(104		)	1,236
Securities financing agreements	—			—			206			206
Other assets	—			—			132			132
Long-term deposits	—			—			(48		)	(48		)
Asset-backed secured financings	—			58			—			58
Unfunded loan commitments	—			—			(559		)	(559		)
Other short-term borrowings	214			—			—			214
Long-term debt ⁽¹⁾	2,404			—			4,506			6,910
Total	$	2,580		$	1,407		$	3,685		$	7,672


⁽¹⁾	The majority of the net gains (losses) in trading account profits (losses) relate to the embedded derivative in structured liabilities and are offset by gains (losses) on derivatives and securities that economically hedge these liabilities. The net gains (losses) in other income (loss) relate to the impact of structured liabilities for changes in the Corporation's credit spread.



Gains (Losses) Relating to Assets and Liabilities Accounted for Under the Fair Value Option
	Nine Months Ended September 30, 2012
(Dollars in millions)	Trading Account Profits (Losses)			Mortgage Banking Income (Loss)			Other Income (Loss)			Total
Loans reported as trading account assets	$	198		$	—		$	—		$	198
Consumer and commercial loans	8			—			430			438
Loans held-for-sale	69			1,629			167			1,865
Securities financing agreements	36			—			(94		)	(58		)
Other assets	—			—			8			8
Asset-backed secured financings	—			(109		)	—			(109		)
Unfunded loan commitments	—			—			605			605
Other short-term borrowings	18			—			—			18
Long-term debt⁽¹⁾	(1,086		)	—			(4,665		)	(5,751		)
Total	$	(757	)	$	1,520		$	(3,549	)	$	(2,786	)

	Nine Months Ended September 30, 2011
Loans reported as trading account assets	$	44		$	—		$	—		$	44
Consumer and commercial loans	—			—			(320		)	(320		)
Loans held-for-sale	(7		)	3,732			148			3,873
Securities financing agreements	—			—			193			193
Other assets	—			—			162			162
Long-term deposits	—			—			(83		)	(83		)
Asset-backed secured financings	—			(24		)	—			(24		)
Unfunded loan commitments	—			—			(503		)	(503		)
Other short-term borrowings	307			—			—			307
Long-term debt ⁽¹⁾	2,291			—			4,134			6,425
Total	$	2,635		$	3,708		$	3,731		$	10,074


⁽¹⁾	The majority of the net gains (losses) in trading account profits (losses) relate to the embedded derivative in structured liabilities and are offset by gains (losses) on derivatives and securities that economically hedge these liabilities. The net gains (losses) in other income (loss) relate to the impact of structured liabilities for changes in the Corporation's credit spread.

- Definition

The entire disclosure for a company's election to apply the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) the reasons for electing a fair value option for each eligible item or group of similar eligible items; (b) if the fair value option is elected for some but not all eligible items within a group of similar eligible items: (i) a description of those similar items and the reasons for partial election and (ii) information of how the group of similar items relates to individual balance sheet line items; (c) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected: (i) information of how each line item in the statement of financial position relates to major categories of assets and liabilities presented in accordance with other fair value disclosures and (ii) the aggregate carrying amount of ineligible items included in each line item in the balance sheet, if any; (d) the difference between the aggregate fair value and the aggregate unpaid principal balance (assuming contractual principal amounts and fair value option elected) of: (i) loans and long-term receivables (other than securities otherwise reported at fair value) and (ii) long-term debt instruments; (e) for loans held as assets for which the fair value option has been elected: (i) the aggregate fair value of loans that are 90 days or more past due, (ii) if the policy is to recognize interest income separately from other changes in fair value, the aggregate fair value of loans in nonaccrual status, and (iii) the difference between the aggregate fair value and the aggregate unpaid principal balance for loans that are 90 days or more past due, in nonaccrual status, or both; (f) for investments that would have been accounted for under the equity method if the entity had not chosen to apply the fair value option, the information required for such investments, if material either individually or in the aggregate; (2) for items included in the income statement: (a) the amounts of gains and losses from fair value changes included in earnings and in which line in the income statement those gains and losses are reported whether or not combined with gains and losses from items required to be accounted for at fair value; (b) a description of how interest and dividends are measured and where they are reported in the income statement; (c) for loans and other receivables held as assets: (i) the estimated amount of gains or losses included in earnings attributable to changes in instrument-specific credit risk and (ii) how the gains or losses attributable to changes in instrument-specific credit risk were determined; (d) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk: (i) the estimated amount of gains and losses from fair value changes included in earnings that are attributable to changes in the instrument-specific credit risk, (ii) qualitative information about the reasons for those changes, and (iii) how the gains and losses attributable to changes in instrument-specific credit risk were determined; and (3) certain other disclosures as required or determined to be provided.

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