Quarterly report pursuant to Section 13 or 15(d)

Commitments and Contingencies

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Commitments and Contingencies
 3 Months Ended
Mar. 31, 2013
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Disclosure
NOTE 11 – 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 Consolidated Balance Sheet. For additional information on commitments and contingencies, see Note 13 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation's 2012 Annual Report on Form 10-K.

Credit Extension Commitments

The Corporation enters into commitments to extend credit such as loan commitments, standby letters of credit and commercial letters of credit to meet the financing needs of its customers. The Credit Extension Commitments table includes the notional amount of unfunded legally binding lending commitments net of amounts distributed (e.g., syndicated) to other financial institutions of $23.1 billion and $23.9 billion at March 31, 2013 and December 31, 2012. At March 31, 2013, the carrying amount of these commitments, excluding commitments accounted for under the fair value option, was $507 million, including deferred revenue of $21 million and a reserve for unfunded lending commitments of $486 million. At December 31, 2012, the comparable amounts were $534 million, $21 million and $513 million, respectively. The carrying amount of these commitments is classified in accrued expenses and other liabilities on the Consolidated Balance Sheet.

The table below also includes the notional amount of commitments of $15.7 billion and $18.3 billion at March 31, 2013 and December 31, 2012 that are accounted for under the fair value option. However, the table below excludes cumulative net fair value adjustments of $468 million and $528 million on these commitments, 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 17 – Fair Value Option.

Credit Extension Commitments
 
 
 
March 31, 2013
(Dollars in millions)
Expire in
One Year
or Less
 
Expire After
One Year Through
Three Years
 
Expire After Three Years Through
Five Years
 
Expire After Five Years
 
Total
Notional amount of credit extension commitments
 
 
 
 
 
 
 
 
 
Loan commitments
$
93,870

 
$
83,884

 
$
129,988

 
$
20,187

 
$
327,929

Home equity lines of credit
2,164

 
14,949

 
23,904

 
18,978

 
59,995

Standby letters of credit and financial guarantees (1)
23,756

 
10,857

 
3,079

 
4,248

 
41,940

Letters of credit
1,911

 
78

 
2

 
717

 
2,708

Legally binding commitments
121,701

 
109,768

 
156,973

 
44,130

 
432,572

Credit card lines (2)
403,687

 
—

 
—

 
—

 
403,687

Total credit extension commitments
$
525,388

 
$
109,768

 
$
156,973

 
$
44,130

 
$
836,259

 
 
 
 
 
 
 
 
 
 
 
December 31, 2012
Notional amount of credit extension commitments
 
 
 
 
 
 
 
 
 
Loan commitments
$
103,791

 
$
83,885

 
$
130,805

 
$
19,942

 
$
338,423

Home equity lines of credit
2,134

 
13,584

 
23,344

 
21,856

 
60,918

Standby letters of credit and financial guarantees (1)
24,593

 
11,387

 
3,094

 
4,751

 
43,825

Letters of credit
2,003

 
70

 
10

 
546

 
2,629

Legally binding commitments
132,521

 
108,926

 
157,253

 
47,095

 
445,795

Credit card lines (2)
414,044

 
—

 
—

 
—

 
414,044

Total credit extension commitments
$
546,565

 
$
108,926

 
$
157,253

 
$
47,095

 
$
859,839

(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 $30.2 billion and $11.2 billion at March 31, 2013, and $31.5 billion and $11.6 billion at December 31, 2012. Amounts include consumer SBLCs of $562 million and $669 million at March 31, 2013 and December 31, 2012.
(2) 
Includes business card unused lines of credit.

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 March 31, 2013 and December 31, 2012, the Corporation had unfunded equity investment commitments of $275 million and $307 million. In light of proposed Basel Committee on Banking Supervision regulatory capital changes related to unfunded commitments, over the past three years, the Corporation has actively reduced these commitments in a series of sale transactions involving its private equity fund investments.

Other Commitments

At March 31, 2013 and December 31, 2012, the Corporation had commitments to purchase loans (e.g., residential mortgage and commercial real estate) of $1.7 billion and $1.3 billion, which upon settlement will be included in loans or LHFS.

At March 31, 2013 and December 31, 2012, the Corporation had commitments to enter into forward-dated resale and securities borrowing agreements of $86.9 billion and $67.3 billion and commitments to enter into forward-dated repurchase and securities lending agreements of $56.9 billion and $42.3 billion. All of these commitments expire within the next 12 months.

The Corporation is a party to operating leases for certain of its premises and equipment. Commitments under these leases are approximately $2.3 billion, $2.6 billion, $2.3 billion, $1.9 billion and $1.5 billion for the remainder of 2013 and the years through 2017, respectively, and $6.7 billion in the aggregate for all years thereafter.

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 shortfall in the event that policyholders surrender their policies and market value is below book value. These guarantees are recorded as derivatives and carried at fair value in the trading portfolio. At March 31, 2013 and December 31, 2012, the notional amount of these guarantees totaled $13.2 billion and $13.4 billion and the Corporation's maximum exposure related to these guarantees for both periods totaled $3.0 billion with estimated maturity dates between 2030 and 2040. The net fair value including the fee receivable associated with these guarantees was $49 million and $52 million at March 31, 2013 and December 31, 2012 and reflects the probability of surrender as well as the multiple structural protection features in the contracts.

Employee Retirement Protection

The Corporation sells products that offer book value protection primarily to plan sponsors of the 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 make qualified withdrawals 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 investment manager will either terminate the contract or convert the portfolio into a high-quality fixed-income portfolio, typically all 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 restrictions and constraints on the timing of the withdrawals, the manner in which the portfolio is liquidated and the funds are accessed, and the investment parameters of the underlying portfolio. These constraints, combined with significant structural protections, are designed to provide adequate buffers and guard against payments even under extreme stress scenarios. These guarantees are recorded as derivatives and carried at fair value in the trading portfolio. At March 31, 2013 and December 31, 2012, the notional amount of these guarantees totaled $15.7 billion and $18.4 billion with estimated maturity dates up to 2015 if the exit option is exercised on all deals. As of March 31, 2013, the Corporation had not made a payment under these products.

Merchant Services

In accordance with credit and debit card association rules, the Corporation sponsors merchant processing servicers that process credit and debit card transactions on behalf of various merchants. In connection with these services, 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. If the merchant defaults on its obligation to reimburse the cardholder, the cardholder, through its issuing bank, generally has until six months after the date of the transaction to present a chargeback to the merchant processor, which is primarily liable for any losses on covered transactions. However, if the merchant processor fails to meet its obligation to reimburse the cardholder for disputed transactions, then the Corporation, as the sponsor, could be held liable for the disputed amount. For the three months ended March 31, 2013 and 2012, the sponsored entities processed and settled $148.3 billion and $133.2 billion of transactions and recorded losses of $4 million and $2 million. A significant portion of this activity was processed by a joint venture in which the Corporation holds a 49 percent ownership. At March 31, 2013 and December 31, 2012, the sponsored merchant processing servicers held as collateral $226 million and $202 million of merchant escrow deposits which may be used to offset amounts due from the individual merchants.

The Corporation believes the maximum potential exposure for chargebacks would not exceed the total amount of merchant transactions processed through Visa, MasterCard and Discover for the last six months, which represents the claim period for the cardholder, plus any outstanding delayed-delivery transactions. As of March 31, 2013 and December 31, 2012, the maximum potential exposure for sponsored transactions totaled $259.1 billion and $263.9 billion. However, the Corporation believes that the maximum potential exposure is not representative of the actual potential loss exposure and does not expect to make material payments in connection with these guarantees.

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 VIEs that are not consolidated on the Consolidated Balance Sheet. At March 31, 2013 and December 31, 2012, the total notional amount of these derivative contracts was $2.6 billion and $2.9 billion with commercial banks and $1.4 billion with VIEs for both periods. The underlying securities are senior securities and substantially all of the Corporation'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 has entered into additional guarantee agreements and commitments, including lease-end obligation agreements, partial credit guarantees 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 $3.3 billion and $3.1 billion at March 31, 2013 and December 31, 2012. The estimated maturity dates of these obligations extend up to 2033. The Corporation has made no material payments under these guarantees.

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.

Payment Protection Insurance Claims Matter

In the U.K., the Corporation previously sold payment protection insurance (PPI) through its international card services business to credit card customers and 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 across the industry, heightened media coverage and pressure from consumer advocacy groups, the U.K. Financial Services Authority investigated and raised concerns about the way some companies have handled complaints related to the sale of these insurance policies. In connection with this matter, the Corporation established a reserve for PPI. The reserve was $391 million and $510 million at March 31, 2013 and December 31, 2012. The Corporation recorded no expense for the three months ended March 31, 2013 compared to $200 million for the same period in 2012. It is reasonably possible that the Corporation will incur additional expense related to PPI claims; however, the amount of such additional expense cannot be reasonably estimated.

Identity Theft Protection

The Corporation has received inquiries from and has been in discussions with regulatory authorities concerning activities related to identity theft protection services, including customers who may have paid for but did not receive certain of such services from third-party vendors of the Corporation, and whether appropriate oversight existed.

Litigation and Regulatory Matters

The following supplements the disclosure in Note 13 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation's 2012 Annual Report on Form 10-K (the prior commitments and contingencies disclosure).

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, contract and other laws. In some of these actions and proceedings, 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, investigations, and threatened legal actions and proceedings. Certain subsidiaries of the Corporation are registered broker/dealers or investment advisors and are subject to regulation by the SEC, the Financial Industry Regulatory Authority, the Prudential Regulatory Authority, the Financial Conduct Authority and other international, federal 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 establishes 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 continues to monitor the matter for further developments that could affect the amount of the accrued liability that has been previously established. Excluding expenses of internal or external legal service providers, litigation-related expense of $2.2 billion was recognized for the three months ended March 31, 2013 compared to $793 million for the same period in 2012.

For a limited number of the matters disclosed in this Note, and in the prior commitments and contingencies disclosure, 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 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 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 $0 to $2.6 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 Corporation 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, or in the prior commitments and contingencies disclosure, 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, and in the prior commitments and contingencies disclosure, will have a material adverse effect on the consolidated 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.

Auction Rate Securities Litigation

Antitrust Actions

On March 5, 2013, the U.S. Court of Appeals for the Second Circuit affirmed the January 25, 2010 dismissal of the antitrust actions.

Countrywide Bond Insurance Litigation

MBIA

On April 2, 2013, the New York Supreme Court, Appellate Division, First Department, modified the lower court's January 3, 2012 decision regarding MBIA's motion for partial summary judgment. The First Department reversed the lower court's ruling that MBIA could recover rescissory damages, holding that rescission is legally unavailable to MBIA. The First Department also reversed the lower court's ruling with respect to the interpretation of the “materially and adversely affects” language of the transactional documents, holding that MBIA was entitled to a finding that a loan need not be in default in order to trigger Countrywide's obligation to repurchase that loan. The Court held that “to the extent plaintiff can prove that a loan which continues to perform 'materially and adversely affect[ed]' its interest, it is entitled to have defendants repurchase that loan.” The First Department affirmed the lower court's ruling that, under the New York Insurance Law, in order to prove its fraud and breach of contract claims, MBIA does not need to establish a direct causal link between Countrywide's alleged misrepresentations or warranty breaches and MBIA's claimed damages. On May 3, 2013, Countrywide filed a motion for leave to appeal the First Department's decision to the New York Court of Appeals.

On April 29, 2013, the New York Supreme Court, New York County, issued rulings granting in part and denying in part Countrywide's motion for summary judgment and MBIA's motion for summary judgment. With respect to Countrywide's motion for summary judgment, the court granted summary judgment dismissing MBIA's claim for indemnification and claim for rescissory damages (consistent with the April 2, 2013 decision of the Appellate Division, First Department), but otherwise denied summary judgment regarding MBIA's claims for fraud, breach of the Insurance Agreements, breach of Countrywide's servicing obligations and punitive damages. With respect to MBIA's motion for summary judgment, the court found that MBIA had established breaches of representations and warranties with respect to certain of the loans in its sample and had not done so with respect to other loans in the sample but denied summary judgment to MBIA on any loan on the ground that whether the material and adverse effect requirement had been satisfied was not susceptible to resolution on summary judgment. On May 3, 2013, Countrywide filed a notice of appeal from the court's rulings.

The same day, the court also denied the Corporation's and MBIA's motions for summary judgment regarding MBIA's successor liability claims. The court ruled that New York law governs MBIA's contentions that the Corporation is liable for Countrywide's debts, but that factual disputes with respect to the application of New York law of de facto merger rendered summary judgment inappropriate. The court also ruled that, due to material factual disputes, summary judgment was not appropriate with respect to MBIA's claim that the Corporation impliedly assumed Countrywide's liabilities. On May 3, 2013, the Corporation filed a notice of appeal from the portion of the court's ruling that denied the Corporation's motion for summary judgment.

On May 7, 2013, the Corporation entered into the MBIA Settlement which resolved all outstanding litigation between the parties, as well as other claims between the parties, including outstanding and potential claims by MBIA related to alleged representations and warranties breaches and other claims involving certain first- and second-lien RMBS trusts for which MBIA provided financial guarantee insurance. Certain of these claims were the subject of the litigation in the New York Supreme Court, New York County (MBIA Insurance Corporation, Inc. v. Countrywide Home Loans, et al., filed on September 30, 2008) described above and also litigation in the California Superior Court, Los Angeles County (MBIA Insurance Corporation, Inc. v. Bank of America Corporation, Countrywide Financial Corporation, Countrywide Home Loans, Inc., Countrywide Securities Corporation, et al., filed on July 10, 2009). Under the MBIA Settlement, all pending litigation between the parties will be dismissed and each party will receive a global release of those claims. For additional information, see Note 8 – Representations and Warranties Obligations and Corporate Guarantees.

In re Bank of America Securities, Derivative and Employee Retirement Income Security Act (ERISA) Litigation

Consolidated Securities Class Action

On April 5, 2013, the U.S. District Court for the Southern District of New York granted final approval to the settlement of the Consolidated Securities Class Action.

LIBOR and Other Reference Rate Inquiries and Litigation

Defendants moved to dismiss the initially filed actions which had been coordinated in the U.S. District Court for the Southern District of New York. On March 29, 2013, the court dismissed the antitrust, RICO and related state law claims and, based on the statute of limitations, substantially limited the manipulation claims under the Commodities Exchange Act that are allowed to proceed. The court's rulings will be applicable to later filed actions to the extent they assert similar claims.

Mortgage-backed Securities Litigation

The Corporation and its affiliates, Countrywide entities and their affiliates, and/or Merrill Lynch entities and their affiliates have been named as defendants in a number of 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 purported class action suits and actions by individual MBS purchasers. Although the allegations vary by lawsuit, these cases generally allege that the registration statements, prospectuses and prospectus supplements for securities issued by securitization trusts contained material misrepresentations and omissions, in violation of Sections 11, 12 and/or 15 of the Securities Act of 1933, Sections 10(b) and/or 20 of the Securities Exchange Act of 1934 and/or state securities laws, and other state statutory and common laws.

These cases generally involve allegations of false and misleading statements 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; (iv) the underwriting practices by which those mortgage loans were originated; (v) the ratings given to the different tranches of MBS by rating agencies; and (vi) the validity of each issuing trust's title to the mortgage loans comprising the pool for that securitization (collectively, MBS Claims). Plaintiffs in these cases generally seek unspecified compensatory damages, unspecified costs and legal fees and, in some instances, seek rescission. A number of other entities have threatened legal actions against the Corporation and its affiliates, Countrywide entities and their affiliates, and/or Merrill Lynch entities and their affiliates concerning MBS offerings. On March 29, 2013, the Corporation and the National Credit Union Administration (NCUA) agreed to resolve claims concerning certain MBS offerings that the NCUA had threatened to bring against the Corporation, Merrill Lynch, Countrywide and certain of their affiliates. The settlement amount will be covered by existing reserves.

On August 15, 2011, the U.S. Judicial Panel on Multidistrict Litigation ordered multiple federal court cases involving Countrywide MBS consolidated for pretrial purposes in the U.S. District Court for the Central District of California in a multi-district litigation entitled In re Countrywide Financial Corp. Mortgage-Backed Securities Litigation (the Countrywide RMBS MDL).

AIG Litigation

On April 19, 2013, the U.S. Court of Appeals for the Second Circuit issued a decision vacating the order of the U.S. District Court for the Southern District of New York denying AIG's motion to remand, and remanded the case to the district court for further proceedings concerning whether the court will exercise its jurisdiction on other grounds.

On May 6, 2013, the U.S. District Court for the Central District of California granted in part and denied in part defendants' motion to dismiss. The court dismissed claims concerning certain types of misrepresentations as well as successor liability claims. Other claims with respect to the securities at issue remain pending.

FHFA Litigation

On February 6, 2013, in Federal Housing Finance Agency v. Countrywide Financial Corporation, et al., FHFA agreed to voluntarily dismiss certain of its Virginia blue sky claims. On March 15, 2013, the court dismissed the negligent misrepresentation and aiding and abetting claims as to all defendants, and the Securities Act of 1933 and Washington D.C. blue sky claims as to certain defendants. The court also dismissed FHFA's successor liability claims but permitted FHFA leave to amend its fraudulent conveyance claims. The court otherwise denied defendants' motions to dismiss.

On April 5, 2013, the U.S. Court of Appeals for the Second Circuit affirmed the district court's ruling in the UBS Action pertaining to the statute of repose on the federal and state securities law claims and the statute of limitations on the federal securities law claims. FHFA had asserted similar claims in Federal Housing Finance Agency v. Bank of America Corporation, et al. and Federal Housing Finance Agency v. Merrill Lynch & Co., Inc., et al.

Luther Litigation and Related Actions

On April 16, 2013, a settlement in principle was reached to resolve three putative and certified class action lawsuits involving Countrywide-issued RMBS: Maine State Retirement System v. Countrywide Financial Corp., David H. Luther v. Countrywide Financial Corp. and Western Conference of Teamsters Pension Trust Fund v. Countrywide Financial Corp. The first of these suits was filed in November 2007, and they collectively concern the disclosures that were made in connection with 429 Countrywide RMBS offerings issued from 2005 through 2007. Under the settlement in principle, the lawsuits will be dismissed in their entirety, and defendants will receive a global release in exchange for a settlement payment of $500 million. The settlement is subject to court approval. The settlement amount is covered by a combination of pre-existing litigation reserves and additional litigation reserves recorded in the three months ended March 31, 2013.

Ocala Litigation

FDIC Action

On February 5, 2013, BANA filed a motion for clarification of the court's December 10, 2012 ruling on BANA's motion to dismiss the FDIC's counterclaims. On March 6, 2013, the court ruled that certain language in the custodial agreement between BANA and Colonial Bank purporting to limit BANA's liability is unenforceable due to ambiguity, and that BANA is foreclosed from introducing extrinsic evidence to resolve the ambiguity. On March 27, 2013, BANA filed a motion seeking certification for interlocutory appeal of the court's December 10, 2012 ruling as so clarified.

Mortgage Repurchase Litigation

TMST, Inc. Litigation

On March 27, 2013, the settlement agreement was approved by the bankruptcy court overseeing the Thornburg bankruptcy; consequently, on April 29, 2013, the case against Countrywide Home Loans, Inc. and the Corporation was dismissed with prejudice.

Pennsylvania Public School Employees' Retirement System

The Corporation and several current and former officers were named as defendants in a putative class action filed in the U.S. District Court for the Southern District of New York entitled Pennsylvania Public School Employees' Retirement System v. Bank of America, et al.

Following the filing of a complaint on February 2, 2011, plaintiff subsequently filed an amended complaint on September 23, 2011 in which plaintiff sought to sue on behalf of all persons who acquired the Corporation's common stock between February 27, 2009 and October 19, 2010 and “Common Equivalent Securities” sold in a December 2009 offering. The amended complaint asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (Exchange Act) and Sections 11 and 15 of the Securities Act of 1933 (Securities Act), and alleged that the Corporation's public statements: (i) concealed problems in the Corporation's mortgage servicing business resulting from the widespread use of the Mortgage Electronic Recording System; (ii) failed to disclose the Corporation's exposure to mortgage repurchase claims; (iii) misrepresented the adequacy of internal controls; and (iv) violated certain Generally Accepted Accounting Principles. The amended complaint sought unspecified damages.

On July 11, 2012, the court granted in part and denied in part defendants' motions to dismiss the amended complaint. All claims under the Securities Act were dismissed against all defendants, with prejudice. The motion to dismiss the claim against the Corporation under Section 10(b) of the Exchange Act was denied. All claims under the Exchange Act against the officers were dismissed, with leave to replead. Defendants moved to dismiss a second amended complaint in which plaintiff sought to re-plead claims against certain current and former officers under Sections 10(b) and 20(a). On April 17, 2013, the court granted in part and denied in part the motion to dismiss. Certain claims against the current and former officers under Sections 10(b) and 20(a) were sustained.