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

Quarterly report pursuant to Section 13 or 15(d)

Securitizations and Other Variable Interest Entities

Securitizations and Other Variable Interest Entities

9 Months Ended

Sep. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Securitizations and Other Variable Interest Entities

Securitizations and Other Variable Interest EntitiesThe Corporation utilizes VIEs in the ordinary course of business to support its own and its customers’ financing and investing needs. The tables in this Note present the assets and liabilities of consolidated and unconsolidated VIEs at September 30, 2023 and December 31, 2022 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 loss

exposure at September 30, 2023 and December 31, 2022 resulting from its involvement with consolidated VIEs and unconsolidated VIEs in which the Corporation holds a variable interest. For more information on the Corporation’s use of VIEs and related maximum loss exposure, see Note 1 – Summary of Significant Accounting Principles and Note 6 – Securitizations and Other Variable Interest Entities to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K.

The Corporation invests in ABS issued by third-party VIEs with which it has no other form of involvement and enters into

certain commercial lending arrangements that may also incorporate the use of VIEs, for example to hold collateral.

These securities and loans are included in Note 4 – Securities or Note 5 – Outstanding Loans and Leases and Allowance for Credit Losses. In addition, the Corporation has used VIEs in connection with its funding activities.

The Corporation did not provide financial support to consolidated or unconsolidated VIEs during the three and nine months ended September 30, 2023 or the year ended December 31, 2022 that it was not previously contractually required to provide, nor does it intend to do so.

The Corporation had liquidity commitments, including written put options and collateral value guarantees, with certain

unconsolidated VIEs of $950 million and $978 million at September 30, 2023 and December 31, 2022.

First-lien Mortgage Securitizations

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. Except as described in Note 10 – Commitments and Contingencies, the Corporation does not provide guarantees or recourse to the securitization trusts other than standard representations and warranties.

The table below summarizes select information related to first-lien mortgage securitizations for the three and nine months ended September 30, 2023 and 2022.



First-lien Mortgage Securitizations

	Residential Mortgage - Agency								Commercial Mortgage

	Three Months Ended September 30				Nine Months Ended September 30				Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)	2023		2022		2023		2022		2023		2022		2023		2022
Proceeds from loan sales (1)	$	1,220	$	3,259	$	3,475	$	7,000	$	1,167	$	779	$	1,764	$	5,194
Gains on securitizations (2)	(2)		—		(6)		8		33		13		35		39
Repurchases from securitization trusts (3)	10		21		24		46		—		—		—		—

(1)The Corporation transfers residential mortgage loans to securitizations sponsored primarily by the government-sponsored enterprises or Government National Mortgage Association (GNMA) in the normal course of business and primarily receives residential mortgage-backed securities in exchange. Substantially all of these securities are classified as Level 2 within the fair value hierarchy and are typically sold shortly after receipt.

(2)A majority of the first-lien residential mortgage loans securitized are initially classified as LHFS and accounted for under the fair value option. Gains recognized on these LHFS prior to securitization, which totaled $17 million and $34 million net of hedges, during the three and nine months ended September 30, 2023 compared to $5 million and $35 million for the same periods in 2022, are not included in the table above.

(3)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. The Corporation may also repurchase loans from securitization trusts to perform modifications. Repurchased loans include FHA-insured mortgages collateralizing GNMA securities.

The Corporation recognizes consumer MSRs from the sale or securitization of consumer real estate loans. The unpaid principal balance of loans serviced for investors, including residential mortgage and home equity loans, totaled $93.5 billion and $102.6 billion at September 30, 2023 and 2022. Servicing fee and ancillary fee income on serviced loans was $55 million and $187 million during the three and nine months ended September 30, 2023 compared to $71 million and $215 million for the same periods in 2022. Servicing advances on serviced loans, including loans serviced for others and loans held for investment, were $1.3 billion and $1.6 billion at

September 30, 2023 and December 31, 2022. For more information on MSRs, see Note 14 – Fair Value Measurements.

During the three and nine months ended September 30, 2023, the Corporation deconsolidated agency residential mortgage securitization trusts with total assets of $35 million and $659 million compared to $22 million and $585 million for the same periods in 2022.

The following table summarizes select information related to first-lien mortgage securitization trusts in which the Corporation held a variable interest at September 30, 2023 and December 31, 2022.



First-lien Mortgage VIEs

	Residential Mortgage
					Non-agency
	Agency				Prime				Subprime				Alt-A				Commercial Mortgage

(Dollars in millions)	Sep 30 2023		Dec 31 2022		Sep 30 2023		Dec 31 2022		Sep 30 2023		Dec 31 2022		Sep 30 2023		Dec 31 2022		Sep 30 2023		Dec 31 2022
Unconsolidated VIEs
Maximum loss exposure (1)	$	8,280	$	9,112	$	83	$	91	$	655	$	735	$	9	$	28	$	1,461	$	1,594
On-balance sheet assets
Senior securities:
Trading account assets	$	284	$	232	$	4	$	3	$	20	$	25	$	7	$	26	$	17	$	91
Debt securities carried at fair value	2,482		3,027		—		—		342		410		—		—		—		—
Held-to-maturity securities	5,514		5,853		—		—		—		—		—		—		1,293		1,268
All other assets	—		—		2		3		22		25		2		2		45		101
Total retained positions	$	8,280	$	9,112	$	6	$	6	$	384	$	460	$	9	$	28	$	1,355	$	1,460
Principal balance outstanding (2)	$	76,572	$	81,644	$	3,589	$	3,973	$	4,600	$	5,034	$	10,650	$	11,568	$	81,080	$	85,101

Consolidated VIEs
Maximum loss exposure (1)	$	1,914	$	1,735	$	—	$	—	$	—	$	78	$	—	$	—	$	—	$	—
On-balance sheet assets
Trading account assets	$	1,914	$	1,735	$	—	$	—	$	—	$	78	$	—	$	—	$	—	$	—
Loans and leases, net	—		—		—		—		—		—		—		—		—		—



Total assets	$	1,914	$	1,735	$	—	$	—	$	—	$	78	$	—	$	—	$	—	$	—




Total liabilities	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

(1)Maximum loss exposure includes obligations under loss-sharing reinsurance and other arrangements for non-agency residential mortgage and commercial mortgage securitizations, but excludes the reserve for representations and warranties obligations and corporate guarantees and also excludes servicing advances and other servicing rights and obligations. For more information, see Note 10 – Commitments and Contingencies and Note 14 – Fair Value Measurements.

(2)Principal balance outstanding includes loans where the Corporation was the transferor to securitization VIEs with which it has continuing involvement, which may include servicing the loans.

Other Asset-backed Securitizations

The table below summarizes select information related to home equity, credit card and other asset-backed VIEs in which the Corporation held a variable interest at September 30, 2023 and December 31, 2022.



Home Equity Loan, Credit Card and Other Asset-backed VIEs

	Home Equity (1)				Credit Card and Automobile (2)				Resecuritization Trusts				Municipal Bond Trusts


(Dollars in millions)	Sep 30 2023		Dec 31 2022		Sep 30 2023		Dec 31 2022		Sep 30 2023		Dec 31 2022		Sep 30 2023		Dec 31 2022
Unconsolidated VIEs
Maximum loss exposure	$	—	$	119	$	—	$	—	$	4,683	$	4,243	$	2,030	$	2,537
On-balance sheet assets
Securities (3):
Trading account assets	$	—	$	—	$	—	$	—	$	1,465	$	456	$	—	$	—
Debt securities carried at fair value	—		1		—		—		916		1,259		—		—
Held-to-maturity securities	—		—		—		—		2,302		2,528		—		—


Total retained positions	$	—	$	1	$	—	$	—	$	4,683	$	4,243	$	—	$	—
Total assets of VIEs	$	264	$	326	$	—	$	—	$	18,187	$	12,255	$	2,486	$	3,016

Consolidated VIEs
Maximum loss exposure	$	13	$	32	$	8,361	$	9,555	$	119	$	551	$	2,121	$	—
On-balance sheet assets
Trading account assets	$	—	$	—	$	—	$	—	$	291	$	650	$	2,071	$	—
Debt securities carried at fair value	—		—		—		—		—		—		50		—
Loans and leases	34		97		15,233		14,555		—		—		—		—
Allowance for loan and lease losses	7		12		(815)		(808)		—		—		—		—

All other assets	1		2		111		68		—		—		—		—
Total assets	$	42	$	111	$	14,529	$	13,815	$	291	$	650	$	2,121	$	—
On-balance sheet liabilities
Short-term borrowings	$	—	$	—	$	—	$	—	$	—	$	—	$	2,036	$	—
Long-term debt	29		79		6,156		4,247		172		99		—		—
All other liabilities	—		—		12		13		—		—		—		—
Total liabilities	$	29	$	79	$	6,168	$	4,260	$	172	$	99	$	2,036	$	—

(1)For unconsolidated home equity loan VIEs, the maximum loss exposure includes outstanding trust certificates issued by trusts in rapid amortization, net of recorded reserves. For both consolidated and unconsolidated home equity loan VIEs, the maximum loss exposure excludes the reserve for representations and warranties obligations and corporate guarantees. For more information, see Note 10 – Commitments and Contingencies.

(2)At September 30, 2023 and December 31, 2022, loans and leases in the consolidated credit card trust included $3.6 billion and $3.3 billion of seller’s interest.

(3)The retained senior securities were valued using quoted market prices or observable market inputs (Level 2 of the fair value hierarchy).

Home Equity Loans

The Corporation retains interests, primarily senior securities, in home equity securitization trusts to which it transferred home equity loans. In addition, the Corporation may be obligated to provide subordinate funding to the trusts during a rapid amortization event. This obligation is included in the maximum

loss exposure in the preceding table. The charges that will ultimately be recorded as a result of the rapid amortization events depend on the undrawn portion of the home equity lines of credit, performance of the loans, the amount of subsequent draws and the timing of related cash flows.

Credit Card and Automobile Loan Securitizations

The Corporation securitizes originated and purchased credit card and automobile loans as a source of financing. The loans are sold on a non-recourse basis to consolidated trusts. The securitizations are ongoing, whereas additional receivables will be funded into the trusts by either loan repayments or proceeds from securities issued to third parties, depending on the securitization structure. The Corporation’s continuing involvement with the securitization trusts includes servicing the receivables and holding various subordinated interests, including an undivided seller’s interest in the credit card receivables and owning certain retained interests.

At September 30, 2023 and 2022, the carrying values of the receivables in the trusts totaled $15.2 billion and $14.0 billion, which are included in loans and leases, and the carrying values of senior debt securities that were issued to third-party investors from the trusts totaled $6.2 billion and $3.0 billion, which are included in long-term debt.

Resecuritization Trusts

The Corporation transfers securities, typically MBS, into resecuritization VIEs generally at the request of customers seeking securities with specific characteristics. Generally, there are no significant ongoing activities performed in a resecuritization trust, and no single investor has the unilateral ability to liquidate the trust.

The Corporation resecuritized $1.8 billion and $7.6 billion of securities during the three and nine months ended September 30, 2023 compared to $5.3 billion and $19.5 billion for the same periods in 2022. Securities transferred into resecuritization VIEs were measured at fair value with changes

in fair value recorded in market making and similar activities prior to the resecuritization and, accordingly, no gain or loss on sale was recorded. During the three and nine months ended September 30, 2023 and 2022, resecuritization proceeds included securities with an initial fair value of $1.1 billion and $2.1 billion compared to $670 million and $2.4 billion, of which substantially all of the securities were classified as trading account assets for both periods. Substantially all of the trading account securities carried at fair value were categorized as Level 2 within the fair value hierarchy.

Municipal Bond Trusts

The Corporation administers municipal bond trusts that hold highly-rated, long-term, fixed-rate municipal bonds. The trusts obtain financing by issuing floating-rate trust certificates that reprice on a weekly or other short-term basis to third-party investors.

The Corporation’s liquidity commitments to unconsolidated municipal bond trusts, including those for which the Corporation was transferor, totaled $2.0 billion and $2.5 billion at September 30, 2023 and December 31, 2022. The weighted-average remaining life of bonds held in the trusts at September 30, 2023 was 12.3 years. There were no significant write-downs or downgrades of assets or issuers during the nine months ended September 30, 2023 and 2022.

Other Variable Interest Entities

The table below summarizes select information related to other VIEs in which the Corporation held a variable interest at September 30, 2023 and December 31, 2022.



Other VIEs


	Consolidated		Unconsolidated		Total		Consolidated		Unconsolidated (1)		Total (1)

(Dollars in millions)	September 30, 2023						December 31, 2022
Maximum loss exposure	$	1,840	$	47,375	$	49,215	$	2,286	$	47,477	$	49,763
On-balance sheet assets
Trading account assets	$	378	$	2,183	$	2,561	$	353	$	2,187	$	2,540
Debt securities carried at fair value	—		125		125		—		473		473
Loans and leases	1,635		14,447		16,082		2,086		14,243		16,329
Allowance for loan and lease losses	(1)		(71)		(72)		(1)		(99)		(100)


All other assets	60		30,164		30,224		46		30,221		30,267
Total	$	2,072	$	46,848	$	48,920	$	2,484	$	47,025	$	49,509
On-balance sheet liabilities

Short-term borrowings	$	23	$	—	$	23	$	42	$	—	$	42
Long-term debt	209		—		209		156		—		156
All other liabilities	—		7,104		7,104		—		7,318		7,318
Total	$	232	$	7,104	$	7,336	$	198	$	7,318	$	7,516

(1)Prior period has been revised to include unconsolidated CLOs.

Customer VIEs

Customer VIEs include credit-linked, equity-linked and commodity-linked note VIEs, repackaging VIEs and asset acquisition VIEs, which are typically created on behalf of customers who wish to obtain market or credit exposure to a specific company, index, commodity or financial instrument.

The Corporation’s involvement in the VIE is limited to its loss exposure. The Corporation’s maximum loss exposure to consolidated and unconsolidated customer VIEs totaled $832 million and $914 million at September 30, 2023 and December 31, 2022, including the notional amount of 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 VIEs. Total assets of the consolidated and unconsolidated VIEs were $1.5 billion at both September 30, 2023 and December 31, 2022.

CDO and CLO VIEs

The Corporation holds investments in unconsolidated CDO and CLO VIEs, that hold diversified pools of fixed-income securities, typically corporate debt, ABS or non-investment grade corporate loans, which are funded by multiple tranches of debt instruments and equity securities issued by the VIEs. The VIEs are managed by third-party portfolio managers. The Corporation held $16.2 billion and $16.3 billion of loans and securities issued by CDO and CLO VIEs at September 30, 2023 and December 31, 2022. The Corporation’s loss exposure is limited to its loan and debt security holdings and the notional amount of any derivatives to which the Corporation is a counterparty. The Corporation’s maximum loss exposure to consolidated and unconsolidated CDOs and CLOs totaled $16.3 billion at both September 30, 2023 and December 31, 2022, which is insignificant to the total assets of the VIEs.

Investment VIEs

The Corporation sponsors, invests in or provides financing, which may be in connection with the sale of assets, to a variety of investment VIEs that hold loans, real estate, debt securities or other financial instruments and are designed to provide the desired investment profile to investors or the Corporation. At September 30, 2023 and December 31, 2022, the Corporation’s consolidated investment VIEs had total assets of $471 million and $854 million. The Corporation also held investments in unconsolidated VIEs with total assets of $15.4 billion and $12.2 billion at September 30, 2023 and December 31, 2022. The Corporation’s maximum loss exposure associated with both consolidated and unconsolidated investment VIEs totaled $1.8 billion and $2.4 billion at September 30, 2023 and December 31, 2022 comprised primarily of on-balance sheet assets less non-recourse liabilities.

Leveraged Lease Trusts

The Corporation’s net investment in consolidated leveraged lease trusts totaled $1.2 billion at both September 30, 2023 and December 31, 2022. 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 non-recourse to the Corporation.

Tax Credit VIEs

The Corporation holds equity investments in unconsolidated limited partnerships and similar entities that construct, own and operate affordable housing, renewable energy and certain other projects. The total assets of these unconsolidated tax credit VIEs were $81.7 billion and $74.8 billion as of September 30, 2023 and December 31, 2022. An unrelated third party is typically the general partner or managing member and has control over the significant activities of the VIE. As an investor, tax credits associated with the investments in these entities are allocated to the Corporation, as provided by the U.S. Internal Revenue Code and related regulations, and are recognized as income tax benefits in the Corporation’s Consolidated Statement of Income in the year they are earned, which varies based on the type of investments. Tax credits from

environmental, social and governance investments in affordable housing are recognized ratably over a term of up to 10 years, and tax credits from renewable energy investments are recognized either at inception for transactions electing Investment Tax Credits (ITCs) or as energy is produced for transactions electing Production Tax Credits (PTCs), which is generally up to a 10-year time period. The volume and types of investments held by the Corporation will influence the amount of tax credits recognized each period.

The Corporation’s equity investments in affordable housing and other projects totaled $14.9 billion and $14.7 billion at September 30, 2023 and December 31, 2022, which included unfunded capital contributions of $6.8 billion and $6.9 billion and are probable to be paid over the next five years. The Corporation may be asked to invest additional amounts to support a troubled affordable housing project. Such additional investments have not been and are not expected to be significant. During the three and nine months ended September 30, 2023, the Corporation recognized tax credits and other tax benefits related to affordable housing and other tax credit equity investments of $526 million and $1.6 billion compared to $457 million and $1.3 billion for the same periods in 2022, and reported pretax losses in other income of $379 million and $1.1 billion compared to $350 million and $1.0 billion for the same periods in 2022. The Corporation’s equity investments in renewable energy totaled $13.9 billion at both September 30, 2023 and December 31, 2022. In addition, the Corporation had unfunded capital contributions for renewable energy investments of $6.5 billion and $1.9 billion at September 30, 2023 and December 31, 2022, which are contingent on various conditions precedent to funding over the next two years. The Corporation’s risk of loss is generally mitigated by policies requiring the project to qualify for the expected tax credits prior to making its investment. During the three and nine months ended September 30, 2023, the Corporation recognized tax credits and other tax benefits related to renewable energy equity investments of $1.3 billion and $3.4 billion compared to $527 million and $2.0 billion for the same periods in 2022 and reported pretax losses in other income of $849 million and $2.0 billion compared to $337 million and $1.4 billion for the same periods in 2022. The Corporation may also enter into power purchase agreements with renewable energy tax credit entities. The maximum loss exposure for tax credit VIEs was $28.8 billion at both September 30, 2023 and December 31, 2022.