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

Quarterly report pursuant to Section 13 or 15(d)

Derivatives (Tables)

Derivatives (Tables)

3 Months Ended

Mar. 31, 2013

Derivative [Line Items]

Schedule of Fair Value Hedging Instruments, Statements of Financial Performance and Financial Position, Location

Hedge accounting activity for the three months ended March 31, 2013 and March 31, 2012 included the following:

Fair value hedges

The table below summarizes certain information related to fair value hedges for the three months ended March 31, 2013 and March 31, 2012, including hedges of interest rate risk on long-term borrowings that were adjusted and redesignated as part of Bank of America's acquisition of Merrill Lynch. At redesignation, the fair value of the derivatives was negative. As the derivatives mature, their fair value will approach zero. As a result, ineffectiveness may occur and the fair value changes in the derivatives and the long-term borrowings being hedged may be directionally the same in certain scenarios. Based on a regression analysis, the derivatives continue to be highly effective at offsetting changes in the fair value of the long-term borrowings attributable to interest rate risk.



(dollars in millions)
	2013								2012
	Derivative⁽¹⁾			Hedged Item ⁽¹⁾⁽²⁾		Hedge Ineffectiveness ⁽¹⁾			Derivative ⁽¹⁾			Hedged Item ⁽¹⁾⁽²⁾			Hedge Ineffectiveness ⁽¹⁾
For the three months ended March 31:
Interest rate risk on USD denominated long-term borrowings	$	(349	)	$	247	$	(102	)	$	(411	)	$	274		$	(137	)
Interest rate risk on foreign currency denominated long-term borrowings	(521		)	472		(49		)	88			(115		)	(27		)
Commodity price risk on commodity inventory	(3		)	3		—			23			(23		)	—

	2013								2012
	Trading Assets			Trading Liabilities					Trading Assets			Trading Liabilities

As of March 31, 2013 and December 31, 2012:
Carrying value of hedging derivatives:
Long-term borrowings	$	5,133		$	934				$	5,706		$	664
Commodity inventory	24			—					48			2
Notional amount of hedging derivatives:
Long-term borrowings	32,369			10,429					36,932			9,676
Commodity inventory	74			—					124			3


⁽¹⁾	Amounts are recorded in interest expense and other revenues for long-term borrowings and principal transactions for commodity inventory.


⁽²⁾	Excludes the impact of the accretion of purchase accounting adjustments made to certain long-term borrowings in connection with the acquisition of Merrill Lynch by Bank of America.

Schedule of Net Investment Hedges, Statements of Financial Performance and Financial Position, Location

Net investment hedges of foreign operations



(dollars in millions)
			2013									2012
	Gains (losses) Recognized in Accumulated OCI		Gains (losses) in Income Reclassified from Accumulated OCI ⁽¹⁾			Hedge Ineffectiveness and Amounts Excluded from Effectiveness Testing ⁽¹⁾			Gains (losses) Recognized in Accumulated OCI			Gains (losses) in Income Reclassified from Accumulated OCI ⁽¹⁾		Hedge Ineffectiveness and Amounts Excluded from Effectiveness Testing ⁽¹⁾
For the three months ended March 31:
Foreign exchange risk	$	1,045	$	(94	)	$	(24	)	$	(445	)	$	41	$	2

			2013									2012
As of March 31, 2013 and December 31, 2012:
Carrying value of hedging derivatives:
Trading assets			$	631								$	425
Trading liabilities			372									618
Notional amount of hedging derivatives:
in an asset position			20,467									5,140
in a liability position			5,740									19,391


⁽¹⁾	Amounts are recorded in other revenues and are attributable to certain legal entity liquidations.

Schedule of Economic Hedges

Net gains (losses) on other risk management derivatives



(dollars in millions)
	2013⁽¹⁾			2012⁽¹⁾
For the three months ended March 31:
Interest rate risk	$	(8	)	$	(6	)
Foreign currency risk	(514		)	199
Credit risk	9			(49		)


⁽¹⁾	Amounts are recorded in other revenues and interest expense.

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

The following tables identify the primary risk for derivative instruments, which includes trading, non-trading and bifurcated embedded derivatives, at March 31, 2013 and December 31, 2012. The primary risk is provided on a gross basis, prior to the application of the impact of counterparty and cash collateral netting.



(dollars in millions)
	As of March 31, 2013
	Contract/ Notional		Trading Assets- Derivative Contracts			Contract/ Notional		Trading Liabilities- Derivative Contracts
Interest rate contracts
Swaps	$	7,300,451	$	446,255		$	7,239,251	$	439,315
Futures and forwards	2,190,035		1,354			2,323,181		1,298
Written options	—		—			1,247,628		58,144
Purchased options	1,454,874		60,989			—		—
Foreign exchange contracts
Swaps	734,919		24,508			770,498		29,670
Spot, futures and forwards	108,514		2,356			110,104		3,242
Written options	—		—			307,291		6,159
Purchased options	277,719		5,981			—		—
Equity contracts
Swaps	28,549		1,033			31,589		1,300
Futures and forwards	26,453		1,243			40,548		1,199
Written options	—		—			301,035		18,016
Purchased options	297,783		15,677			—		—
Commodity contracts
Swaps	56,534		2,863			9,931		4,174
Futures and forwards	288,858		5,498			265,975		3,502
Written options	—		—			199,932		7,143
Purchased options	206,594		7,069			—		—
Credit derivatives
Purchased protection:
Credit default swaps	104,203		9,075			102,459		2,032
Total return swaps	10,395		561			4,426		1,278
Other credit derivatives	443		—			13		—
Written protection:
Credit default swaps	99,975		2,572			108,841		8,494
Total return swaps	5,210		297			18,028		327
Other credit derivatives	—		—			687		3
Gross derivative assets/liabilities	$	13,191,509	$	587,331		$	13,081,417	$	585,296
Less: Legally enforceable master netting			(532,279		)			(532,279		)
Less: Cash collateral received/paid			(27,545		)			(29,110		)
Total derivative assets and liabilities			$	27,507				$	23,907



(dollars in millions)
	As of December 31, 2012
	Contract/ Notional		Trading Assets- Derivative Contracts			Contract/ Notional		Trading Liabilities- Derivative Contracts
Interest rate contracts
Swaps	$	7,887,346	$	519,123		$	7,963,410	$	514,689
Futures and forwards	2,245,535		1,661			2,257,693		1,423
Written options	—		—			1,333,460		64,295
Purchased options	1,271,613		67,251			—		—
Foreign exchange contracts
Swaps	752,596		26,797			793,944		32,918
Spot, futures and forwards	124,702		2,740			131,334		3,272
Written options	—		—			211,069		5,154
Purchased options	194,435		4,770			—		—
Equity contracts
Swaps	29,719		1,077			25,139		1,274
Futures and forwards	24,113		966			33,532		1,015
Written options	—		—			257,345		15,402
Purchased options	246,517		14,216			—		—
Commodity contracts
Swaps	28,057		2,477			26,140		3,990
Futures and forwards	258,703		4,759			240,179		2,663
Written options	—		—			163,516		7,256
Purchased options	164,633		7,042			—		—
Credit derivatives
Purchased protection:
Credit default swaps	103,042		9,644			103,839		2,120
Total return swaps	7,807		691			5,003		1,226
Other credit derivatives	215		1			13		—
Written protection:
Credit default swaps	102,888		2,640			103,988		8,947
Total return swaps	7,204		133			13,761		207
Other credit derivatives	—		1			212		2
Gross derivative assets/liabilities	$	13,449,125	$	665,989		$	13,663,577	$	665,853
Less: Legally enforceable master netting			(613,145		)			(613,145		)
Less: Cash collateral received/paid			(27,993		)			(32,140		)
Total derivative assets and liabilities			$	24,851				$	20,568

Offsetting Assets/Liabilities



Offsetting of Derivatives
	March 31, 2013						December 31, 2012
(Dollars in millions)	Trading Assets -Derivative Contracts			Trading Liabilities- Derivative Contracts			Trading Assets -Derivative Contracts			Trading Liabilities- Derivative Contracts
Interest rate contracts
Over the counter	$	311,725		$	298,940		$	343,399		$	331,403
Over the counter cleared	194,868			197,788			244,464			247,894
Foreign exchange contracts
Over the counter	31,904			37,578			33,348			39,803
Equity contracts
Over the counter	10,450			11,407			9,782			10,521
Exchange traded	5,535			6,191			4,776			4,682
Commodity contracts
Over the counter	7,918			8,503			6,798			7,684
Exchange traded	3,272			3,179			3,421			3,192
Credit contracts
Over the counter	10,777			11,154			11,560			11,802
Over the counter cleared	380			336			294			226
Total gross derivative assets/liabilities, before netting	576,829			575,076			657,842			657,207
Less: Legally enforceable master netting	(532,279		)	(532,279		)	(613,145		)	(613,145		)
Less: Cash collateral received/paid	(27,545		)	(29,110		)	(27,993		)	(32,140		)
Derivative assets/liabilities, after netting	17,005			13,687			16,704			11,922
Other gross derivative assets/liabilities	10,502			10,220			8,147			8,646
Total derivative assets/liabilities	27,507			23,907			24,851			20,568
Less: Financial instruments collateral ⁽¹⁾	(2,837		)	(1,578		)	(2,832		)	(1,549		)
Total net derivative assets/liabilities	$	24,670		$	22,329		$	22,019		$	19,019


⁽¹⁾	These amounts are limited to the derivative asset/liability balance and, accordingly, do not include excess collateral received/pledged.

Schedule of Derivative Instruments Included in Trading Activities

The following tables identify the amounts in the income statement line items attributable to trading and non-trading activities, including both derivatives and non-derivative cash instruments categorized by primary risk for the three months ended March 31, 2013 and March 31, 2012.

Non-trading related amounts include activities in connection with principal investment, wealth management, and certain lending activities; economic hedging activity discussed in the Non-trading derivatives section above; and the impact of changes in Merrill Lynch's own creditworthiness on borrowings accounted for at fair value.

For The Three Months Ended March 31, 2013



(dollars in millions)
	Principal Transactions		Commissions		Other Revenues			Net Interest (Expense) Income			Total
Interest rate risk	$	405	$	21	$	—		$	216		$	642
Foreign exchange risk	109		—		25			—			134
Equity risk	661		732		27			(24		)	1,396
Commodity risk	162		—		2			(22		)	142
Credit risk	804		—		(483		)	509			830
Total trading related	2,141		753		(429		)	679			3,144
Non-trading related	3		626		47			(508		)	168
Total	$	2,144	$	1,379	$	(382	)	$	171		$	3,312

For The Three Months Ended March 31, 2012



(dollars in millions)
	Principal Transactions			Commissions		Other Revenues⁽¹⁾		Net Interest (Expense) Income			Total
Interest rate risk	$	169		$	18	$	—	$	207		$	394
Foreign exchange risk	25			—		—		—			25
Equity risk	420			719		20		50			1,209
Commodity risk	260			—		—		(28		)	232
Credit risk	1,150			—		77		532			1,759
Total trading related	2,024			737		97		761			3,619
Non-trading related	(2,190		)	618		680		(777		)	(1,669		)
Total	$	(166	)	$	1,355	$	777	$	(16	)	$	1,950


⁽¹⁾	Includes other income and other-than-temporary impairment losses on available-for-sale debt securities.



Valuation Adjustments on Derivatives
	Three Months Ended March 31
	2013						2012
(dollars in millions)	Gross			Net			Gross			Net
Derivative assets (CVA) ⁽¹⁾	$	(76	)	$	(102	)	$	245		$	221
Derivative liabilities (DVA) ⁽²⁾	124			129			(624		)	(696		)


⁽¹⁾	At March 31, 2013 and December 31, 2012, the cumulative counterparty credit risk valuation adjustment reduced the derivative assets balance by $1.2 billion and $1.1 billion.


⁽²⁾	At March 31, 2013 and December 31, 2012, Merrill Lynch's cumulative DVA reduced the derivative liabilities balance by $0.5 billion and $0.4 billion.

Guarantees

Derivative [Line Items]

Disclosure of Credit Derivatives

Credit derivatives where Merrill Lynch is the seller of credit protection are summarized below:



(dollars in millions)
	Maximum Payout/ Notional		Less than 1 year		1 − 3 years		3 − 5 years		Over 5 years		Carrying Value⁽¹⁾
At March 31, 2013:
Derivative contracts:
Credit derivatives:
Investment grade⁽²⁾	$	162,488	$	32,689	$	41,548	$	73,589	$	14,662	$	1,823
Non-investment grade⁽²⁾	70,253		18,625		16,819		14,632		20,177		7,001
Total credit derivatives	232,741		51,314		58,367		88,221		34,839		8,824
Credit related notes:
Investment grade⁽²⁾	3,368		4		17		30		3,317		3,368
Non-investment grade⁽²⁾	1,493		103		155		262		973		1,493
Total credit related notes	4,861		107		172		292		4,290		4,861
Total derivative contracts	$	237,602	$	51,421	$	58,539	$	88,513	$	39,129	$	13,685
At December 31, 2012:
Derivative contracts:
Credit derivatives:
Investment grade⁽²⁾	$	160,390	$	34,454	$	42,871	$	70,645	$	12,420	$	1,855
Non-investment grade⁽²⁾	67,663		10,753		19,962		17,911		19,037		7,301
Total credit derivatives	228,053		45,207		62,833		88,556		31,457		9,156
Credit related notes:
Investment grade⁽²⁾	3,201		4		7		163		3,027		3,201
Non-investment grade⁽²⁾	1,445		115		141		271		918		1,445
Total credit related notes	4,646		119		148		434		3,945		4,646
Total derivative contracts	$	232,699	$	45,326	$	62,981	$	88,990	$	35,402	$	13,802


⁽¹⁾	Derivative contracts are shown on a gross basis prior to counterparty or cash collateral netting.


⁽²⁾	Refers to the creditworthiness of the underlying reference obligations.

Credit Protection

Derivative [Line Items]

Disclosure of Credit Derivatives

At March 31, 2013 and December 31, 2012, the notional value and carrying value of credit protection purchased and credit protection sold by Merrill Lynch with identical underlying referenced names was:



(dollars in millions)
	Maximum Payout/ Notional		Less than 1 year		1 − 3 years		3 − 5 years		Over 5 years		Carrying Value⁽¹⁾
At March 31, 2013:
Credit derivatives purchased	$	135,341	$	29,583	$	40,389	$	45,546	$	19,823	$	4,392
Credit derivatives sold	141,434		27,203		40,528		47,068		26,635		5,197
At December 31, 2012:
Credit derivatives purchased	131,643		31,576		38,844		41,800		19,423		4,208
Credit derivatives sold	138,479		29,881		41,986		43,399		23,213		5,235


⁽¹⁾	Derivative contracts are shown on a gross basis prior to counterparty or cash collateral netting.

- Definition

Tabular disclosure of credit derivatives which includes information by sellers of credit derivatives, about each credit derivative, or each group of similar credit derivatives, including (a) the nature of the credit derivative - its term, how it arose, the events or circumstances that would require the seller to perform under the credit derivative, and the current status of the payment/performance risk of the credit derivative; (b) the maximum potential amount of future payments (undiscounted) the seller could be required to make under the credit derivative; (c) the current fair value of the credit derivative; and (d) the nature of any recourse provisions under the credit derivative, and any assets held either as collateral or by third parties. A credit derivative is a derivative instrument (1) in which one or more of its underlyings are related to the credit risk of a specified entity (or a group of entities) or an index based on the credit risk of a group of entities and (2) that exposes the seller to potential loss from credit-risk-related events specified in the contract. Examples of credit derivatives within the scope of this paragraph include, but are not limited to, credit default swaps, credit spread options, and credit index products; also includes a hybrid instrument that has an embedded credit derivative (for example, but not limited to, a credit-linked note).

+ References + Details

- Definition

Tabular disclosure of gains and losses on derivative instruments included in an entity's trading activities.

+ References + Details

- Definition

Tabular disclosure of the location and fair value amounts of derivative instruments (and nonderivative instruments that are designated and qualify as hedging instruments) reported in the statement of financial position.

+ References + Details