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)

6 Months Ended

Jun. 30, 2013

Derivative [Line Items]

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

Hedge accounting activity for the three and six months ended June 30, 2013 and June 30, 2012 included the following:

Fair value hedges

The table below summarizes certain information related to fair value hedges for the three and six months ended June 30, 2013 and June 30, 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 June 30:
Interest rate risk on USD denominated long-term borrowings	$	(732	)	$	658		$	(74	)	$	471		$	(645	)	$	(174	)
Interest rate risk on foreign currency denominated long-term borrowings	(94		)	61			(33		)	(412		)	345			(67		)
Commodity price risk on commodity inventory	3			(4		)	(1		)	(9		)	9			—

For the six months ended June 30:
Interest rate risk on USD denominated long-term borrowings	(1,081		)	905			(176		)	60			(371		)	(311		)
Interest rate risk on foreign currency denominated long-term borrowings	(615		)	533			(82		)	(324		)	230			(94		)
Commodity price risk on commodity inventory	—			(1		)	(1		)	14			(14		)	—

	2013									2012
	Trading Assets			Trading Liabilities						Trading Assets			Trading Liabilities

As of June 30, 2013 and December 31, 2012:
Carrying value of hedging derivatives:
Long-term borrowings	$	4,006		$	732					$	5,706		$	664
Commodity inventory	36			—						48			2
Notional amount of hedging derivatives:
Long-term borrowings	29,352			8,747						36,932			9,676
Commodity inventory	99			4						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 June 30:
Foreign exchange risk	$	563	$	3		$	(54	)	$	555	$	4		$	(100	)

For the six months ended June 30:
Foreign exchange risk	1,608		(91		)	(78		)	110		(37		)	(98		)

			2013								2012
As of June 30, 2013 and December 31, 2012:
Carrying value of hedging derivatives:
Trading assets			$	622							$	425
Trading liabilities			375								618
Notional amount of hedging derivatives:
in an asset position			23,655								5,140
in a liability position			5,603								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 June 30:
Interest rate risk	$	(33	)	$	17
Foreign currency risk	47			(703		)
Credit risk	(8		)	18

For the six months ended June 30:
Interest rate risk	(41		)	11
Foreign currency risk	(468		)	(504		)
Credit risk	1			(31		)


⁽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 June 30, 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 June 30, 2013
	Contract/ Notional		Trading Assets- Derivative Contracts			Contract/ Notional		Trading Liabilities- Derivative Contracts
Interest rate contracts
Swaps	$	7,255,357	$	358,097		$	7,023,069	$	353,628
Futures and forwards	1,959,751		3,823			1,975,339		3,776
Written options	—		—			1,290,002		48,153
Purchased options	1,250,956		49,973			—		—
Foreign exchange contracts
Swaps	724,881		22,234			734,131		24,889
Spot, futures and forwards	145,484		3,136			150,434		3,883
Written options	—		—			278,187		6,455
Purchased options	276,029		6,693			—		—
Equity contracts
Swaps	30,181		1,798			33,217		2,127
Futures and forwards	29,454		1,370			34,649		1,111
Written options	—		—			316,774		20,268
Purchased options	307,234		18,106			—		—
Commodity contracts
Swaps	53,766		4,180			11,810		4,947
Futures and forwards	308,763		5,700			271,649		3,949
Written options	—		—			216,616		7,986
Purchased options	222,445		8,005			—		—
Credit derivatives
Purchased protection:
Credit default swaps	111,975		8,446			90,255		1,784
Total return swaps	6,611		690			4,169		1,173
Other credit derivatives	4,022		20			13		—
Written protection:
Credit default swaps	90,486		2,281			109,232		7,878
Total return swaps	3,800		120			13,750		235
Other credit derivatives	—		—			3,805		16
Gross derivative assets/liabilities	$	12,781,195	$	494,672		$	12,557,101	$	492,258
Less: Legally enforceable master netting			(440,896		)			(440,896		)
Less: Cash collateral received/paid			(26,143		)			(26,189		)
Total derivative assets and liabilities			$	27,633				$	25,173



(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
	June 30, 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	$	254,047		$	244,853		$	343,399		$	331,403
Over-the-counter-cleared	156,459			159,313			244,464			247,894
Foreign exchange contracts
Over-the-counter	31,080			33,682			33,348			39,803
Equity contracts
Over-the-counter	12,162			12,193			9,782			10,521
Exchange-traded	6,757			7,501			4,776			4,682
Commodity contracts
Over-the-counter	9,402			9,936			6,798			7,684
Exchange-traded	3,348			3,115			3,421			3,192
Credit contracts
Over-the-counter	9,967			10,322			11,560			11,802
Over-the-counter-cleared	342			343			294			226
Total gross derivative assets/liabilities, before netting
Over-the-counter	$	316,658		$	310,986		$	404,887		$	401,213
Exchange-traded	$	10,105		$	10,616		$	8,197		$	7,874
Over-the-counter-cleared	$	156,801		$	159,656		$	244,758		$	248,120
Less: Legally enforceable master netting and cash collateral received/paid
Over-the-counter	(303,128		)	(300,331		)	(390,608		)	(394,755		)
Exchange-traded	(7,110		)	(7,110		)	(5,880		)	(5,880		)
Over-the-counter-cleared	(156,801		)	(159,644		)	(244,650		)	(244,650		)
Derivative assets/liabilities, after netting	16,525			14,173			16,704			11,922
Other gross derivative assets/liabilities	11,108			11,000			8,147			8,646
Total derivative assets/liabilities	27,633			25,173			24,851			20,568
Less: Financial instruments collateral ⁽¹⁾	(2,729		)	(968		)	(2,832		)	(1,549		)
Total net derivative assets/liabilities	$	24,904		$	24,205		$	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



Valuation Adjustments on Derivatives
	Three Months Ended June 30										Six Months Ended June 30
	2013				2012						2013						2012
(dollars in millions)	Gross		Net		Gross			Net			Gross			Net			Gross			Net
Derivative assets (CVA) ⁽¹⁾	$	53	$	91	$	(100	)	$	(52	)	$	(23	)	$	(11	)	$	149		$	173
Derivative liabilities (DVA) ⁽²⁾	101		80		19			(73		)	225			209			(606		)	(770		)


⁽¹⁾	At June 30, 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, respectively.


⁽²⁾	At June 30, 2013 and December 31, 2012, Merrill Lynch's cumulative DVA reduced the derivative liabilities balance by $0.6 billion and $0.4 billion

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 and six months ended June 30, 2013 and June 30, 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 June 30, 2013



(dollars in millions)
	Principal Transactions		Commissions		Other Revenues		Net Interest (Expense) Income			Total
Interest rate risk	$	322	$	24	$	6	$	198		$	550
Foreign exchange risk	73		—		10		—			83
Equity risk	1,118		758		16		(426		)	1,466
Commodity risk	118		—		2		(23		)	97
Credit risk	240		—		63		446			749
Total trading related	1,871		782		97		195			2,945
Non-trading related	33		628		11		(464		)	208
Total	$	1,904	$	1,410	$	108	$	(269	)	$	3,153

For The Six Months Ended June 30, 2013



(dollars in millions)
	Principal Transactions		Commissions		Other Revenues			Net Interest (Expense) Income			Total
Interest rate risk	$	727	$	45	$	6		$	414		$	1,192
Foreign exchange risk	182		—		35			—			217
Equity risk	1,779		1,490		43			(450		)	2,862
Commodity risk	280		—		4			(45		)	239
Credit risk	1,044		—		(420		)	955			1,579
Total trading related	4,012		1,535		(332		)	874			6,089
Non-trading related	36		1,254		58			(972		)	376
Total	$	4,048	$	2,789	$	(274	)	$	(98	)	$	6,465

For The Three Months Ended June 30, 2012



(dollars in millions)
	Principal Transactions		Commissions		Other Revenues⁽¹⁾			Net Interest (Expense) Income			Total
Interest rate risk	$	209	$	19	$	4		$	165		$	397
Foreign exchange risk	35		—		—			—			35
Equity risk	1,356		613		22			(1,019		)	972
Commodity risk	95		—		1			(30		)	66
Credit risk	249		—		(11		)	545			783
Total trading related	1,944		632		16			(339		)	2,253
Non-trading related	4		608		236			(614		)	234
Total	$	1,948	$	1,240	$	252		$	(953	)	$	2,487


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

For The Six Months Ended June 30, 2012



(dollars in millions)
	Principal Transactions			Commissions		Other Revenues⁽¹⁾		Net Interest (Expense) Income			Total
Interest rate risk	$	378		$	37	$	4	$	372		$	791
Foreign exchange risk	60			—		—		—			60
Equity risk	1,776			1,332		42		(969		)	2,181
Commodity risk	355			—		1		(58		)	298
Credit risk	1,399			—		66		1,077			2,542
Total trading related	3,968			1,369		113		422			5,872
Non-trading related	(2,186		)	1,226		916		(1,391		)	(1,435		)
Total	$	1,782		$	2,595	$	1,029	$	(969	)	$	4,437


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

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 June 30, 2013:
Derivative contracts:
Credit derivatives:
Investment grade⁽²⁾	$	153,899	$	27,179	$	39,905	$	80,247	$	6,568	$	1,874
Non-investment grade⁽²⁾	67,174		13,924		13,046		19,298		20,906		6,255
Total credit derivatives	221,073		41,103		52,951		99,545		27,474		8,129
Credit related notes:
Investment grade⁽²⁾	3,450		32		14		28		3,376		3,450
Non-investment grade⁽²⁾	1,547		45		160		207		1,135		1,547
Total credit related notes	4,997		77		174		235		4,511		4,997
Total derivative contracts	$	226,070	$	41,180	$	53,125	$	99,780	$	31,985	$	13,126
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 June 30, 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 June 30, 2013:
Credit derivatives purchased	$	129,273	$	25,347	$	36,754	$	50,195	$	16,977	$	3,826
Credit derivatives sold	132,516		20,451		38,077		52,605		21,383		4,943
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