Edgar Filing: BANK OF AMERICA CORP /DE/

e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[ü] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2011
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to

Commission file number:

1-6523

Exact Name of Registrant as Specified in its Charter:
Bank of America Corporation

State or Other Jurisdiction of Incorporation or Organization:
Delaware

IRS Employer Identification Number:
56-0906609

Address of Principal Executive Offices:
Bank of America Corporate Center
100 N. Tryon Street
Charlotte, North Carolina 28255

Registrant’s telephone number, including area code:
(704) 386-5681

Former name, former address and former fiscal year, if changed since last report:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ü No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ü No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one).


Large accelerated filer ü		Accelerated filer		Non-accelerated filer (do not check if a smaller reporting company)		Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).

Yes No ü

On April 30, 2011, there were 10,132,963,189 shares of Bank of America Corporation Common Stock outstanding.

Bank of America Corporation

March 31, 2011 Form 10-Q

INDEX


			Page
Part I. Financial Information	Item 1.	Financial Statements:
Part I. Financial Information		Consolidated Statement of Income for the Three Months Ended March 31, 2011 and 2010	119

		Consolidated Balance Sheet at March 31, 2011 and December 31, 2010	120

		Consolidated Statement of Changes in Shareholders' Equity for the Three Months Ended March 31, 2011 and 2010	122

		Consolidated Statement of Cash Flows for the Three Months Ended March 31, 2011 and 2010	123

		Notes to Consolidated Financial Statements	124

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
		Executive Summary	4
		Financial Highlights	8
		Balance Sheet Overview	11
		Recent Events	14
		Supplemental Financial Data	16
		Business Segment Operations	24
		Deposits	25
		Global Card Services	27
		Consumer Real Estate Services	29
		Global Commercial Banking	34
		Global Banking & Markets	36
		Global Wealth & Investment Management	40
		All Other	42
		Off-Balance Sheet Arrangements and Contractual Obligations	44
		Regulatory Matters	51
		Managing Risk	53
		Strategic Risk Management	54
		Capital Management	54
		Liquidity Risk	60
		Credit Risk Management	65
		Consumer Portfolio Credit Risk Management	66
		Commercial Portfolio Credit Risk Management	82
		Non-U.S. Portfolio	94
		Provision for Credit Losses	98
		Allowance for Credit Losses	98
		Market Risk Management	102
		Trading Risk Management	102
		Interest Rate Risk Management for Nontrading Activities	106
		Mortgage Banking Risk Management	110
		Compliance Risk Management	110
		Operational Risk Management	110
		Complex Accounting Estimates	111
		Glossary	115

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	118

	Item 4.	Controls and Procedures	118



Part II. Other Information			198

	Item 1.	Legal Proceedings	198

	Item 1A.	Risk Factors	198

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	198

	Item 6.	Exhibits	199

	Signature		200

	Index to Exhibits		201
EX-10.A
EX-12
EX-31.A
EX-31.B
EX-32.A
EX-32.B
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report on Form 10-Q, the documents that it incorporates by reference and the documents into which it may be incorporated by reference may contain, and from time to time Bank of America Corporation (collectively with its subsidiaries, the Corporation) and its management may make, certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “expects,” “anticipates,” “believes,” “estimates,” “targets,” “intends,” “plans,” “goal” and other similar expressions or future or conditional verbs such as “will,” “may,” “might,” “should,” “would” and “could.” The forward-looking statements made represent the current expectations, plans or forecasts of the Corporation regarding the Corporation’s future results and revenues, and future business and economic conditions more generally, including statements concerning: 2011 expense levels; higher revenue and expense reductions in 2012; improving performance in retail businesses; home price assumptions; the impact of the agreement with Assured Guaranty Ltd. and its subsidiaries (Assured Guaranty) and its cost, including the expected value of the loss-sharing reinsurance arrangement; the adequacy of the liability for the remaining representations and warranties exposure to the government-sponsored enterprises (GSEs) and the future impact to earnings; the potential assertion and impact of additional claims not addressed by the GSE agreements; the expected repurchase claims on the 2004-2008 loan vintages; representations and warranties liabilities (also commonly referred to as reserves), and range of possible loss estimates, expenses and repurchase claims and resolution of those claims, and any related servicing, securities, indemnity or other claims; future impact of complying with the terms of the recent consent orders with federal bank regulators regarding the foreclosure process and potential civil monetary penalties that may be levied in connection therewith; the impact of delays in connection with the recent foreclosure moratorium; Home Price Index (HPI) expectations; the sale of certain assets and liabilities of Balboa Insurance Company and affiliated entities (Balboa); charges to income tax expense resulting from reductions in the United Kingdom (U.K.) corporate income tax rate; future payment protection insurance claims in the U.K.; future risk-weighted assets and any mitigation efforts to reduce risk-weighted assets; net interest income; credit trends and conditions, including credit losses, credit reserves, charge-offs, delinquency trends and nonperforming asset levels; consumer and commercial service charges, including the impact of changes in the Corporation’s overdraft policy as well as from the Electronic Fund Transfer Act and the Corporation’s ability to mitigate a decline in revenues; liquidity; capital levels determined by or established in accordance with accounting principles generally accepted in the United States of America (GAAP) and with the requirements of various regulatory agencies, including our ability to comply with any Basel capital requirements endorsed by U.S. regulators without raising additional capital; the revenue impact of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (the CARD Act); the revenue impact resulting from, and any mitigation actions taken in response to, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Financial Reform Act), including the impact of the Durbin Amendment, the Volcker Rule, the risk retention rules and derivatives regulations; mortgage production levels; long-term debt levels; run-off of loan portfolios; the range of possible loss estimates and the impact of various legal proceedings discussed in “Litigation and Regulatory Matters” in Note 11 — Commitments and Contingencies to the Consolidated Financial Statements; the number of delayed foreclosure sales and the resulting financial impact and other similar matters; and other matters relating to the Corporation and the securities that we may offer from time to time. The foregoing is not an exclusive list of all forward-looking statements the Corporation makes. These statements are not guarantees of future results or performance and involve certain risks, uncertainties and assumptions that are difficult to predict and often are beyond the Corporation’s control. Actual outcomes and results may differ materially from those expressed in, or implied by, the Corporation’s forward-looking statements.

You should not place undue reliance on any forward-looking statement and should consider the following uncertainties and risks, as well as the risks and uncertainties more fully discussed elsewhere in this report, under Item 1A. “Risk Factors” of the Corporation’s 2010 Annual Report on Form 10-K, and in any of the Corporation’s subsequent Securities and Exchange Commission (SEC) filings: the Federal Reserve’s timing and determinations regarding the Corporation’s anticipated revised comprehensive capital plan submission; the potential assertion and impact of additional claims not addressed by the agreement with Assured Guaranty and the accuracy and variability of estimates and assumptions in determining the expected value of the loss-sharing reinsurance arrangement and the total cost of the agreement to the Corporation; the Corporation’s resolution of certain representations and warranties obligations with the GSEs and our ability to resolve any remaining claims; the Corporation’s ability to resolve any representations and warranties obligations, and any related servicing, securities, indemnity or other claims with monolines and private investors; failure to satisfy our obligations as servicer in the residential mortgage securitization process; the adequacy of the liability and/or range of possible loss estimates for the representations and warranties exposures to the GSEs, monolines and private-label and other investors; the potential assertion and impact of additional claims not addressed by the GSE agreements; the foreclosure review and assessment

process, the effectiveness of the Corporation’s response and any governmental findings or penalties or private third-party claims asserted in connection with these foreclosure matters; the adequacy of the reserve for future payment protection insurance claims in the U.K.; negative economic conditions generally including continued weakness in the U.S. housing market, high unemployment in the U.S., as well as economic challenges in many non-U.S. countries in which we operate and sovereign debt challenges; the Corporation’s mortgage modification policies and related results; the level and volatility of the capital markets, interest rates, currency values and other market indices; changes in consumer, investor and counterparty confidence in, and the related impact on, financial markets and institutions, including the Corporation as well as its business partners; the Corporation’s credit ratings and the credit ratings of its securitizations; the impact resulting from international and domestic sovereign credit uncertainties; the timing of any potential dividend increase; estimates of the fair value of certain of the Corporation’s assets and liabilities; legislative and regulatory actions in the U.S. (including the impact of the Financial Reform Act, the Electronic Fund Transfer Act, the CARD Act and related regulations and interpretations) and internationally; the identification and effectiveness of any initiatives to mitigate the negative impact of the Financial Reform Act; the impact of litigation and regulatory investigations, including costs, expenses, settlements and judgments as well as any collateral effects on our ability to do business and access the capital markets; various monetary, tax and fiscal policies and regulations of the U.S. and non-U.S. governments; changes in accounting standards, rules and interpretations (including new consolidation guidance), inaccurate estimates or assumptions in the application of accounting policies, including in determining reserves, applicable guidance regarding goodwill accounting and the impact on the Corporation’s financial statements; increased globalization of the financial services industry and competition with other U.S. and international financial institutions; adequacy of the Corporation’s risk management framework; the Corporation’s ability to attract new employees and retain and motivate existing employees; technology changes instituted by the Corporation, its counterparties or competitors; mergers and acquisitions and their integration into the Corporation, including the Corporation’s ability to realize the benefits and cost savings from and limit any unexpected liabilities acquired as a result of the Merrill Lynch and Countrywide acquisitions; the Corporation’s reputation, including the effects of continuing intense public and regulatory scrutiny of the Corporation and the financial services industry; the effects of any unauthorized disclosures of our or our customers’ private or confidential information and any negative publicity directed toward the Corporation; and decisions to downsize, sell or close units or otherwise change the business mix of the Corporation.

Forward-looking statements speak only as of the date they are made, and the Corporation undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made.

Notes to the Consolidated Financial Statements referred to in the Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) are incorporated by reference into the MD&A. Certain prior period amounts have been reclassified to conform to current period presentation. Throughout the MD&A, we use certain acronyms and abbreviations which are defined in the Glossary.

Executive Summary

Business Overview

The Corporation is a Delaware corporation, a bank holding company and a financial holding company. When used in this report, “the Corporation” may refer to the Corporation individually, the Corporation and its subsidiaries, or certain of the Corporation’s subsidiaries or affiliates. Our principal executive offices are located in the Bank of America Corporate Center in Charlotte, North Carolina. Through our banking and various nonbanking subsidiaries throughout the United States and in certain international markets, we provide a diversified range of banking and nonbanking financial services and products through six business segments: Deposits, Global Card Services, Consumer Real Estate Services (formerly Home Loans & Insurance), Global Commercial Banking, Global Banking & Markets (GBAM) and Global Wealth & Investment Management (GWIM), with the remaining operations recorded in All Other. At March 31, 2011, the Corporation had $2.3 trillion in assets and approximately 288,000 full-time equivalent employees.

As of March 31, 2011, we operated in all 50 states, the District of Columbia and more than 40 non-U.S. countries. Our retail banking footprint covers approximately 80 percent of the U.S. population and in the U.S., we serve approximately 58 million consumer and small business relationships, with approximately 5,800 banking centers, 18,000 ATMs, nationwide call centers, and leading online and mobile banking platforms. We have banking centers in 13 of the 15 fastest growing states and have leadership positions in market share for deposits in seven of those states. We offer industry-leading support to approximately four million small business owners. We are a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world.

Table 1 provides selected consolidated financial data for the three months ended March 31, 2011 and 2010 and at March 31, 2011 and December 31, 2010.


*Table 1*
*Selected Financial Data*
	Three Months Ended March 31
(Dollars in millions, except per share information)	2011			2010

Income statement
Revenue, net of interest expense (FTE basis) ⁽¹⁾	$	27,095		$	32,290
Net income		2,049			3,182
Diluted earnings per common share		0.17			0.28
Dividends paid per common share	$	0.01		$	0.01

Performance ratios
Return on average assets		0.36	%		0.51	%
Return on average tangible shareholders’ equity ⁽¹⁾		5.54			9.55
Efficiency ratio (FTE basis) ⁽¹⁾		74.86			55.05

Asset quality
Allowance for loan and lease losses at period end	$	39,843		$	46,835
Allowance for loan and lease losses as a percentage of total loans and leases outstanding at period end ⁽²⁾		4.29	%		4.82	%
Nonperforming loans, leases and foreclosed properties at period end ⁽²⁾	$	31,643		$	35,925
Net charge-offs		6,028			10,797
Annualized net charge-offs as a percentage of average loans and leases outstanding ^{(2, 3)}		2.61	%		4.44	%
Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs ^{(2, 4)}		1.63			1.07


	March 31			December 31
	2011			2010
Balance sheet
Total loans and leases	$	932,425		$	940,440
Total assets		2,274,532			2,264,909
Total deposits		1,020,175			1,010,430
Total common shareholders’ equity		214,314			211,686
Total shareholders’ equity		230,876			228,248

Capital ratios
Tier 1 common equity		8.64	%		8.60	%
Tier 1 capital		11.32			11.24
Total capital		15.98			15.77
Tier 1 leverage		7.25			7.21


⁽¹⁾		Fully taxable-equivalent (FTE) basis, return on average tangible shareholders’ equity (ROTE) and the efficiency ratio are non-GAAP measures. Other companies may define or calculate these measures differently. For additional information on these measures and ratios, and for a corresponding reconciliation to GAAP financial measures, see Supplemental Financial Data beginning on page 16.

⁽²⁾		Balances and ratios do not include loans accounted for under the fair value option. For additional exclusions on nonperforming loans, leases and foreclosed properties, see Nonperforming Consumer Loans and Foreclosed Properties Activity beginning on page 79 and corresponding Table 37, and Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity and corresponding Table 45 on page 89.

⁽³⁾		Annualized net charge-offs as a percentage of average loans and leases outstanding excluding purchased credit-impaired (PCI) loans were 2.71 percent and 4.61 percent for the three months ended March 31, 2011 and 2010.

⁽⁴⁾		Ratio of the allowance for loan and lease losses to annualized net charge-offs excluding PCI loans was 1.31 percent and 0.96 percent for the three months ended March 31, 2011 and 2010.

First Quarter 2011 Economic and Business Environment

The banking environment and markets in which we conduct our businesses will continue to be strongly influenced by developments in the U.S. and global economies, as well as the continued implementation and rulemaking from recent financial reforms. The global economy continued to recover in the first quarter of 2011, but the sharp rise in oil prices slowed the growth momentum in the U.S. and contributed to higher inflation, while Europe continued to deal with its banking issues and economic and financial difficulties in its troubled “peripheral” nations. Emerging nations, especially

China, continued to grow rapidly, but rising inflation led their central banks to raise rates and tighten monetary policy. For information on our exposure in Europe, Asia, Latin America and Japan, see Non-U.S. Portfolio on page 94.

In the U.S., the economy continued to move forward slowly during the first quarter of 2011. Higher oil prices cut into consumer spending and lowered consumer confidence. Business production remained healthy, but higher commodity and energy prices increased uncertainty and slowed some investment spending plans. Employment gains improved during the quarter contributing to a decline in the unemployment rate to 8.9 percent in March, a full percentage point decline from November 2010.

The housing market remained depressed, with weak sales and continued declines in the HPI. New construction remained very low, despite low inventories of new homes. Declines in home prices added uncertainty about future home prices, dampening home sales. The level of distressed mortgages remained very high, and there were ongoing delays in foreclosure processes. These conditions contributed to the weaknesses in housing and mortgage financing.

During the quarter, reflecting fairly stable inflationary expectations and softer economic conditions in the financial markets, U.S. Treasury bond yields were relatively unchanged, thus maintaining a very steep yield curve, while the U.S. dollar exchange rate fell significantly and the stock market rose materially. Uncertainties regarding domestic and international sovereign credit attracted increasing attention. In the banking sector, credit quality of bank loans to businesses and households continued to improve. Loans to businesses rose modestly, while loans outstanding to households remained weak.

Performance Overview

Net income was $2.0 billion for the three months ended March 31, 2011 compared to $3.2 billion for the same period in 2010. After preferred stock dividends and accretion, net income applicable to common shareholders was $1.7 billion, or $0.17 per diluted common share for the three months ended March 31, 2011 compared to $2.8 billion, or $0.28 per diluted common share for the same period in 2010. Results for the most recent quarter were positively affected by lower credit costs, gains from equity investments, higher asset management fees and investment banking fees. These factors were offset by higher legacy mortgage-related costs, higher litigation expenses and lower sales and trading revenues from the record levels reported in the first three months of 2010.

Net interest income on a FTE basis decreased $1.7 billion to $12.4 billion for the three months ended March 31, 2011 compared to the same period in 2010. The decrease was mainly due to lower consumer loan balances and yields, partially offset by the benefits of reductions in long-term debt.

Noninterest income decreased $3.5 billion to $14.7 billion for the three months ended March 31, 2011 compared to the same period in 2010. Contributing to the decline were reduced trading account profits, down $2.5 billion compared to the first quarter of 2010, lower mortgage banking income, down $870 million (due to a $487 million increase in representations and warranties provision and lower mortgage production income), and a decrease in service charge income of $534 million due to the impact of overdraft policy changes last year. Additionally other income declined $943 million primarily due to negative fair value adjustments related to structured liabilities of $586 million compared to positive fair value adjustments of $224 million in the year-ago quarter. These declines were partially offset by improvements in equity investment income, which included a $1.1 billion gain related to an initial public offering (IPO) of an equity investment in the first quarter of 2011, and a $513 million decrease in other-than-temporary impairment (OTTI) losses on available-for-sale (AFS) debt securities.

Representations and warranties provision was $1.0 billion in the first quarter of 2011, compared to $526 million in the first quarter of 2010 and $4.1 billion in the fourth quarter of 2010. More than half of the $1.0 billion provision is attributable to the GSEs and the balance is primarily related to additional experience with a monoline. The additional provision with respect to the GSEs is due to higher estimated repurchase rates based on higher than expected claims from the GSEs during the first quarter of 2011 as well as HPI deterioration

experienced during the period. Our provision with respect to the GSEs is dependent on, and limited by, our historical claims experience with the GSEs which changed in the first quarter of 2011 and may change in the future based on factors outside of our control. Future provisions and possible loss or range of loss associated with representations and warranties made to the GSEs may be impacted if actual results are different from our assumptions regarding economic conditions, home prices and other matters, including estimated repurchase rates. For additional information about representations and warranties, see Representations and Warranties and Other Mortgage-related Matters on page 44.

The provision for credit losses decreased $6.0 billion to $3.8 billion for the three months ended March 31, 2011 compared to the same period in 2010. The provision for credit losses was $2.2 billion lower than net charge-offs for the three months ended March 31, 2011 compared with $992 million lower than net charge-offs in the same period in 2010. The reserve reduction for the three months ended March 31, 2011 was due to improving portfolio trends across most of the consumer and commercial businesses, particularly the U.S. credit card, consumer lending and small business products, as well as core commercial loan portfolios. The improvement was offset in part by the addition of $1.6 billion to consumer PCI portfolio reserves during the three months ended March 31, 2011 compared to $846 million during the same period in 2010.

Noninterest expense increased $2.5 billion to $20.3 billion for the three months ended March 31, 2011 compared to the same period in 2010. The increase was driven by higher general operating expense of $1.6 billion including mortgage-related assessments and waivers costs of $874 million. Additionally, higher personnel costs of $1.0 billion contributed to the increase in noninterest expense as we continue the build-out of several businesses such as GWIM and expand our international capabilities in GBAM, and increase default-related staffing levels in the mortgage-servicing business. In addition, litigation expenses were up $352 million from the first quarter of 2010.

Segment Results

Effective January 1, 2011, we realigned Consumer Real Estate Services (formerly Home Loans & Insurance) among its ongoing operations, which are now referred to as Home Loans & Insurance, a separately managed legacy mortgage portfolio, including owned loans and loans serviced for others, which is referred to as Legacy Asset Servicing, and the results of certain mortgage servicing rights (MSR) activities which are included in Other. For more information on Consumer Real Estate Services see page 29.


*Table 2*
*Business Segment Results*
	Three Months Ended March 31
	Total Revenue ⁽¹⁾						Net Income (Loss)
(Dollars in millions)	2011			2010			2011			2010

Deposits	$	3,189		$	3,718		$	355		$	701
Global Card Services		5,571			6,803			1,712			963
Consumer Real Estate Services		2,182			3,623			(2,392	)		(2,072	)
Global Commercial Banking		2,648			3,088			923			703
Global Banking & Markets		7,887			9,693			2,132			3,238
Global Wealth & Investment Management		4,490			4,038			531			434
All Other		1,128			1,327			(1,212	)		(785	)

Total FTE basis		27,095			32,290			2,049			3,182
FTE adjustment		(218	)		(321	)		-			-

Total Consolidated	$	26,877		$	31,969		$	2,049		$	3,182


⁽¹⁾		Total revenue is net of interest expense and is on a FTE basis which is a non-GAAP measure. For more information on this measure and for a corresponding reconciliation to a GAAP financial measure, see Supplemental Financial Data on page 16.

Deposits net income decreased due to a decline in revenue, driven by lower noninterest income due to the impact of overdraft policy changes. Net interest income was flat as impacts from a customer shift to more liquid products and continued pricing discipline were offset by a lower net interest income allocation related to asset and liability management (ALM) activities. Noninterest expense was flat from a year ago.

Global Card Services net income increased due primarily to lower credit costs. Revenue decreased driven by a decline in net interest income from lower average loans and yields as well as a decline in noninterest income due to the impact of the CARD Act as the provisions became effective throughout 2010. Provision for credit losses improved due to lower

delinquencies and bankruptcies, which drove lower net charge-offs, as a result of the improved economic environment. Noninterest expense increased primarily due to higher litigation expenses.

Consumer Real Estate Services net loss increased due to a decline in revenue and increased noninterest expense. This was partially offset by a decline in provision for credit losses. The decline in revenue was driven in part by an increase in representations and warranties provision, and a decline in core production income. Noninterest expense increased primarily due to mortgage-related assessments and waivers costs related to foreclosure delays, higher litigation expenses and default-related and other loss mitigation expenses.

Global Commercial Banking net income increased as lower revenue was more than offset by improved credit costs. Net interest income decreased due to a lower net interest income allocation related to ALM activities and lower loan balances. Noninterest income decreased largely because the prior year period included a gain on an expired loan purchase agreement. The provision for credit losses decreased driven by improvements primarily in the commercial real estate portfolios reflecting stabilizing values and improved borrower credit profiles in the U.S. commercial portfolio.

GBAM net income decreased reflecting a less favorable trading environment than last year’s record quarter and higher noninterest expense driven by investments in infrastructure and technology. This was partially offset by higher investment banking fees and lower provision for credit losses. Provision for credit losses declined due to stabilization in borrower credit profiles leading to lower reservable criticized levels and net charge-offs. Sales and trading revenue was down reflecting a weaker trading environment. Investment banking fees for the quarter were higher reflecting strong performance in mergers and acquisitions as well as debt and equity issuances, particularly within leveraged finance.

GWIM net income increased driven by higher revenue as well as lower credit costs, partially offset by higher expenses. Revenue increased driven by record asset management fees and brokerage income as well as higher net interest income due to strong deposit balance growth. The provision for credit losses decreased driven by improving portfolio trends and fewer charge-offs. Noninterest expense increased due to higher revenue-related expenses, support costs and personnel costs associated with continued build-out of the business.

All Other net loss increased driven by lower revenue and higher provision for credit losses. Revenue decreased due primarily to negative fair value adjustments on structured liabilities combined with lower gains on sales of debt securities. These were partially offset by an increase in net interest income, higher equity investment income, which included a gain related to an IPO of an equity investment in the first quarter of 2011, and lower merger and restructuring charges. The increase in the provision for credit losses was due to reserve additions in the Countrywide PCI discontinued real estate and residential mortgage portfolios.

Financial Highlights

Net Interest Income

Net interest income on a FTE basis decreased $1.7 billion to $12.4 billion for the three months ended March 31, 2011 compared to the same period in 2010. The decrease was primarily due to lower consumer loan balances and a decrease in consumer loan and ALM portfolio yields, partially offset by the benefits associated with ongoing reductions in long-term debt and lower rates paid on deposits. The net interest yield on a FTE basis decreased 26 basis points (bps) to 2.67 percent for the three months ended March 31, 2011 compared to the same period in 2010 due to these same factors.

Noninterest Income


*Table 3*
*Noninterest Income*
	Three Months Ended
	March 31
(Dollars in millions)	2011			2010

Card income	$	1,828		$	1,976
Service charges		2,032			2,566
Investment and brokerage services		3,101			3,025
Investment banking income		1,578			1,240
Equity investment income		1,475			625
Trading account profits		2,722			5,236
Mortgage banking income		630			1,500
Insurance income		613			715
Gains on sales of debt securities		546			734
Other income		261			1,204
Net impairment losses recognized in earnings on available-for-sale debt securities		(88	)		(601	)

Total noninterest income	$	14,698		$	18,220

Noninterest income decreased $3.5 billion to $14.7 billion for the three months ended March 31, 2011 compared to the same period in 2010. The following highlights the significant changes.

	•		Service charges decreased $534 million largely due to the impact of overdraft policy changes in 2010.

	•		Investment banking income increased $338 million reflecting strong performance in advisory services as well as debt and equity issuances, particularly within leveraged finance.

	•		Equity investment income increased $850 million which included a $1.1 billion gain related to an IPO of an equity investment during the first quarter of 2011. The first quarter of 2010 included a $331 million loss from the sale of our discretionary equity securities portfolio.

	•		Trading account profits decreased $2.5 billion reflecting a less favorable trading environment than last year’s record quarter. Results included DVA losses of $357 million for the three months ended March 31, 2011 compared to gains of $169 million for the same period in 2010.

	•		Mortgage banking income decreased $870 million due to an increase of $487 million in representations and warranties provision and lower mortgage production income.

	•		Other income decreased $943 million primarily due to negative fair value adjustments related to structured liabilities of $586 million, reflecting a tightening of credit spreads, compared to positive adjustments of $224 million for the same period in 2010.

	•		Net impairment losses recognized in earnings on AFS debt securities decreased $513 million reflecting lower impairment write-downs on collateralized mortgage obligations and collateralized debt obligations (CDOs).

Provision for Credit Losses

The provision for credit losses decreased $6.0 billion to $3.8 billion for the three months ended March 31, 2011 compared to the same period in 2010. The provision for credit losses was lower than net charge-offs for the three months ended March 31, 2011, resulting in a reduction in the allowance for loan and lease losses due to improved credit quality and economic conditions.

The provision for credit losses related to our consumer portfolio decreased $4.4 billion to $3.9 billion for the three months ended March 31, 2011 compared to the same period in 2010. The provision for credit losses related to our

commercial portfolio including the provision for unfunded lending commitments decreased $1.6 billion to a benefit of $113 million for the three months ended March 31, 2011.

Net charge-offs totaled $6.0 billion, or 2.61 percent of average loans and leases for the three months ended March 31, 2011 compared with $10.8 billion, or 4.44 percent for the three months ended March 31, 2010. For more information on the provision for credit losses, see Provision for Credit Losses on page 98.

Noninterest Expense


*Table 4*
*Noninterest Expense*
	Three Months Ended
	March 31
(Dollars in millions)	2011		2010

Personnel	$	10,168	$	9,158
Occupancy		1,189		1,172
Equipment		606		613
Marketing		564		487
Professional fees		646		517
Amortization of intangibles		385		446
Data processing		695		648
Telecommunications		371		330
Other general operating		5,457		3,883
Merger and restructuring charges		202		521

Total noninterest expense	$	20,283	$	17,775

Noninterest expense increased $2.5 billion for the three months ended March 31, 2011 compared to the same period in 2010. The increase was driven in part by $874 million of mortgage-related assessments and waivers costs. Also contributing to the increase were litigation costs, which were $940 million for the three months ended March 31, 2011 (excluding fees paid to external legal service providers), principally associated with mortgage-related matters, an increase of $352 million compared to the same period in 2010. Additionally, personnel costs were higher by $1.0 billion compared to the first quarter in 2010 as we continue to build out businesses. These increases were partially offset by a $319 million decline in merger and restructuring charges compared to the same period in 2010.

Income Tax Expense

Income tax expense was $731 million for the three months ended March 31, 2011 compared to $1.2 billion for the same period in 2010 and resulted in an effective tax rate of 26.3 percent compared to 27.5 percent in the prior year. Items such as the U.K. corporate income tax rate change referred to below, possible valuation allowance release and recognition of certain previously unrecognized non-U.S. tax benefits may affect the income tax rate later this year.

On March 29, 2011, the U.K. House of Commons approved a budget resolution to reduce the corporate income tax rate to 26 percent beginning on April 1, 2011. For additional information, see Recent Events – U.K. Corporate Income Tax Rate Change on page 15.

Balance Sheet Overview


*Table 5*
*Selected Balance Sheet Data*
							Average Balance
	March 31			December 31			Three Months Ended March 31
(Dollars in millions)	2011			2010			2011			2010

Assets
Federal funds sold and securities borrowed or purchased under agreements to resell	$	234,056		$	209,616		$	227,379		$	266,070
Trading account assets		208,761			194,671			221,041			214,542
Debt securities		330,776			338,054			335,847			311,136
Loans and leases		932,425			940,440			938,966			991,615
Allowance for loan and lease losses		(39,843	)		(41,885	)		(40,760	)		(48,093	)
All other assets		608,357			624,013			656,065			781,339

Total assets	$	2,274,532		$	2,264,909		$	2,338,538		$	2,516,609

Liabilities
Deposits	$	1,020,175		$	1,010,430		$	1,023,140		$	981,015
Federal funds purchased and securities loaned or sold under agreements to repurchase		260,521			245,359			306,415			416,078
Trading account liabilities		88,478			71,985			83,914			90,134
Commercial paper and other short-term borrowings		58,324			59,962			65,158			92,254
Long-term debt		434,436			448,431			440,511			513,634
All other liabilities		181,722			200,494			188,631			193,584

Total liabilities		2,043,656			2,036,661			2,107,769			2,286,699
Shareholders’ equity		230,876			228,248			230,769			229,910

Total liabilities and shareholders’ equity	$	2,274,532		$	2,264,909		$	2,338,538		$	2,516,609

Period-end balance sheet amounts may vary from average balance sheet amounts due to liquidity and balance sheet management functions, primarily involving our portfolios of highly liquid assets, that are designed to ensure the adequacy of capital while enhancing our ability to manage liquidity requirements for the Corporation and for our customers, and to position the balance sheet in accordance with the Corporation’s risk appetite. The execution of these functions requires the use of balance sheet and capital-related limits including spot, average and risk-weighted asset limits, particularly in our trading businesses. One of our key metrics, Tier 1 leverage ratio, is calculated based on adjusted quarterly average total assets.

Assets

At March 31, 2011, total assets were $2.3 trillion, an increase of $9.6 billion from December 31, 2010.

Average total assets for the three months ended March 31, 2011 decreased $178.1 billion as compared to the same period in 2010. The decrease is due to lower cash and cash equivalents, derivative assets, loans and leases, federal funds sold and securities purchased for resale, the sale of certain strategic investments, and reduction of our goodwill balance as a result of impairment charges recorded in 2010. This decrease was partially offset by growth in the ALM portfolio.

Liabilities and Shareholders’ Equity

At March 31, 2011, total liabilities were $2.0 trillion, an increase of $7.0 billion from December 31, 2010.

Average total liabilities for the three months ended March 31, 2011 decreased $178.9 billion as compared to the same period in 2010. The decrease was primarily driven by reduced federal funds purchased, securities sold, and other short-term borrowings, reduced long-term debt, and the sale of First Republic Bank. The decrease was partially offset by deposit growth.

As of March 31, 2011, shareholders’ equity was $230.9 billion, an increase of $2.6 billion compared to December 31, 2010 driven by retained earnings net of dividends, employee restricted stock vestings and an increase in accumulated other comprehensive income (OCI).

For the three months ended March 31, 2011, average shareholders’ equity increased $859 million compared to the same period in 2010. The increase was due to unrealized gains in accumulated OCI.


*Table 6*
*Selected Quarterly Financial Data*
	2011 Quarter			2010 Quarters
(In millions, except per share information)	First			Fourth			Third			Second			First

Income statement
Net interest income	$	12,179		$	12,439		$	12,435		$	12,900		$	13,749
Noninterest income		14,698			9,959			14,265			16,253			18,220
Total revenue, net of interest expense		26,877			22,398			26,700			29,153			31,969
Provision for credit losses		3,814			5,129			5,396			8,105			9,805
Goodwill impairment		-			2,000			10,400			-			-
Merger and restructuring charges		202			370			421			508			521
All other noninterest expense ⁽¹⁾		20,081			18,494			16,395			16,745			17,254
Income (loss) before income taxes		2,780			(3,595	)		(5,912	)		3,795			4,389
Income tax expense (benefit)		731			(2,351	)		1,387			672			1,207
Net income (loss)		2,049			(1,244	)		(7,299	)		3,123			3,182
Net income (loss) applicable to common shareholders		1,739			(1,565	)		(7,647	)		2,783			2,834
Average common shares issued and outstanding		10,076			10,037			9,976			9,957			9,177
Average diluted common shares issued and outstanding		10,181			10,037			9,976			10,030			10,005

Performance ratios
Return on average assets		0.36	%		n/m			n/m			0.50	%		0.51	%
Four quarter trailing return on average assets ⁽²⁾		n/m			n/m			n/m			0.20			0.21
Return on average common shareholders’ equity		3.29			n/m			n/m			5.18			5.73
Return on average tangible common shareholders’ equity ⁽³⁾		5.28			n/m			n/m			9.19			9.79
Return on average tangible shareholders’ equity ⁽³⁾		5.54			n/m			n/m			8.98			9.55
Total ending equity to total ending assets		10.15			10.08	%		9.85	%		9.85			9.80
Total average equity to total average assets		9.87			9.94			9.83			9.36			9.14
Dividend payout		6.06			n/m			n/m			3.63			3.57

Per common share data
Earnings (loss)	$	0.17		$	(0.16	)	$	(0.77	)	$	0.28		$	0.28
Diluted earnings (loss)		0.17			(0.16	)		(0.77	)		0.27			0.28
Dividends paid		0.01			0.01			0.01			0.01			0.01
Book value		21.15			20.99			21.17			21.45			21.12
Tangible book value ⁽³⁾		13.21			12.98			12.91			12.14			11.70

Market price per share of common stock
Closing	$	13.33		$	13.34		$	13.10		$	14.37		$	17.85
High closing		15.25			13.56			15.67			19.48			18.04
Low closing		13.33			10.95			12.32			14.37			14.45

Market capitalization	$	135,057		$	134,536		$	131,442		$	144,174		$	179,071

Average balance sheet
Total loans and leases	$	938,966		$	940,614		$	934,860		$	967,054		$	991,615
Total assets		2,338,538			2,370,258			2,379,397			2,494,432			2,516,609
Total deposits		1,023,140			1,007,738			973,846			991,615			981,015
Long-term debt		440,511			465,875			485,588			497,469			513,634
Common shareholders’ equity		214,206			218,728			215,911			215,468			200,399
Total shareholders’ equity		230,769			235,525			233,978			233,461			229,910

Asset quality ⁽⁴⁾
Allowance for credit losses ⁽⁵⁾	$	40,804		$	43,073		$	44,875		$	46,668		$	48,356
Nonperforming loans, leases and foreclosed properties ⁽⁶⁾		31,643			32,664			34,556			35,598			35,925
Allowance for loan and lease losses as a percentage of total loans and leases outstanding ⁽⁶⁾		4.29	%		4.47	%		4.69	%		4.75	%		4.82	%
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases ^{(6, 7)}		135			136			135			137			139
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases excluding the PCI loan portfolio ^{(6, 7)}		108			116			118			121			124
Net charge-offs	$	6,028		$	6,783		$	7,197		$	9,557		$	10,797
Annualized net charge-offs as a percentage of average loans and leases outstanding ⁽⁶⁾		2.61	%		2.87	%		3.07	%		3.98	%		4.44	%
Nonperforming loans and leases as a percentage of total loans and leases outstanding ⁽⁶⁾		3.19			3.27			3.47			3.48			3.46
Nonperforming loans, leases and foreclosed properties as a percentage of total loans, leases and foreclosed properties ⁽⁶⁾		3.40			3.48			3.71			3.73			3.69
Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs		1.63			1.56			1.53			1.18			1.07

Capital ratios (period end)
Risk-based capital:
Tier 1 common		8.64	%		8.60	%		8.45	%		8.01	%		7.60	%
Tier 1		11.32			11.24			11.16			10.67			10.23
Total		15.98			15.77			15.65			14.77			14.47
Tier 1 leverage		7.25			7.21			7.21			6.68			6.44
Tangible equity ⁽³⁾		6.85			6.75			6.54			6.14			6.02
Tangible common equity ⁽³⁾		6.10			5.99			5.74			5.35			5.22


⁽¹⁾		Excludes merger and restructuring charges and goodwill impairment charges.

⁽²⁾		Calculated as total net income for four consecutive quarters divided by average assets for the period.

⁽³⁾		Tangible equity ratios and tangible book value per share of common stock are non-GAAP measures. Other companies may define or calculate these measures differently. For additional information on these ratios and corresponding reconciliations to GAAP financial measures, see Supplemental Financial Data beginning on page 16.

⁽⁴⁾		For more information on the impact of the PCI loan portfolio on asset quality, see Consumer Portfolio Credit Risk Management beginning on page 66 and Commercial Portfolio Credit Risk Management beginning on page 82.

⁽⁵⁾		Includes the allowance for loan and lease losses and the reserve for unfunded lending commitments.

⁽⁶⁾		Balances and ratios do not include loans accounted for under the fair value option. For additional exclusions from nonperforming loans, leases and foreclosed properties, see Nonperforming Consumer Loans and Foreclosed Properties Activity beginning on page 79 and corresponding Table 37, and Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity and corresponding Table 45 beginning on page 89.

⁽⁷⁾		Allowance for loan and lease losses includes $22.1 billion, $22.9 billion, $23.7 billion, $24.3 billion and $26.2 billion allocated to products that are excluded from nonperforming loans, leases and foreclosed properties at March 31, 2011, December 31, 2010, September 30, 2010, June 30, 2010 and March 31, 2010, respectively.

n/m = not meaningful

Recent Events

Federal Reserve and OCC Review of Mortgage Servicers

On April 13, 2011, the Corporation entered into a consent order with the Federal Reserve and Bank of America, National Association (Bank of America, N.A.), a banking subsidiary of the Corporation, entered into a consent order with the Office of the Comptroller of the Currency (OCC) to address the federal bank regulators’ concerns about residential mortgage servicing practices and foreclosure processes. Also on April 13, 2011, the other 13 largest mortgage servicers separately entered into consent orders with their respective federal bank regulators related to residential mortgage servicing practices and foreclosure processes. The orders resulted from an interagency horizontal review conducted by federal bank regulators of major residential mortgage servicers. While federal bank regulators found that loans foreclosed upon had been generally considered for other alternatives (such as loan modifications) and were seriously delinquent, and that servicers could support their standing to foreclose, several areas for process improvement requiring timely and comprehensive remediation across the industry were also identified. We identified most of these areas for process improvement after our own review in late 2010 and have been making significant progress in these areas in the last several months. The federal bank regulator consent orders with the 14 mortgage servicers do not assess civil monetary penalties. However, the consent orders do not preclude the assertion of civil monetary penalties and a federal bank regulator has stated publicly that it believes monetary penalties are appropriate.

The consent order with the OCC requires servicers to make several enhancements to their servicing operations, including implementation of a single point of contact model for borrowers throughout the loss mitigation and foreclosure processes; adoption of measures designed to ensure that foreclosure activity is halted once a borrower has been approved for a modification unless the borrower fails to make payments under the modified loan; and implementation of enhanced controls over third-party vendors that provide default servicing support services. In addition, the consent order requires that servicers retain an independent consultant, approved by the OCC, to conduct a review of all foreclosure actions pending, or foreclosure sales that occurred, between January 1, 2009 and December 31, 2010 and that servicers submit a plan to the OCC to remediate all financial injury to borrowers caused by any deficiencies identified through the review. For additional information on the review of foreclosure processes, see Off-Balance Sheet Arrangements and Contractual Obligations – Other Mortgage-related Matters on page 50.

Monoline Settlement Agreement

On April 14, 2011, the Corporation, including its legacy Countrywide Financial Corporation affiliates, entered into an agreement with Assured Guaranty to resolve all of the monoline insurer’s outstanding and potential repurchase claims related to alleged representations and warranties breaches involving 29 first- and second-lien residential mortgage-backed securitization trusts where Assured Guaranty provided financial guarantee insurance. The total cost of the agreement is currently estimated to be approximately $1.6 billion, which we have provided for in our liability for representations and warranties and corporate guarantees as of March 31, 2011. For additional information about the agreement, see Representations and Warranties and Other Mortgage-related Matters on page 44.

Capital Plan

On January 7, 2011, the Corporation submitted a comprehensive capital plan (the Capital Plan) to the Federal Reserve as part of the Federal Reserve’s Comprehensive Capital Analysis and Review (the CCAR) supervisory exercise. The CCAR supervisory exercise has a stated purpose of assessing the capital planning process of major U.S. bank holding companies, including any planned capital actions such as the payment of dividends on common stock. The Capital Plan addressed many matters including, without limitation, maintaining the Corporation’s current dividend on our common stock in the first and second quarters of 2011, and proposing a modest increase in our dividend on the common stock starting in the second half of 2011.

On March 18, 2011, the Federal Reserve indicated that it objected to the proposed increase in capital distributions for the second half of 2011. Additionally, the Federal Reserve informed the Corporation that it could resubmit a revised Capital Plan. For additional information on capital related matters, see Capital Management on page 54.

Foreclosure Delays and Related Costs and Assessments

We have resumed foreclosure sales in non-judicial states but remain in the early stages of our resumption of foreclosure sales in judicial states. We have not yet resumed foreclosure proceedings in either judicial or non-judicial states for certain types of customers, including those in bankruptcy and those with Federal Housing Administration (FHA)-insured loans. In the first quarter of 2011, we recorded a charge of $874 million for mortgage-related assessments and waivers costs compared to $230 million in the fourth quarter of 2010. The $874 million charge included $548 million for compensatory fees that we expect to be assessed by the GSEs as a result of foreclosure delays with the remainder being

out-of-pocket costs that we do not expect to recover. We expect such costs will continue as additional loans are delayed in the foreclosure process and as the GSEs continue to evaluate their claims process. For additional information about costs related to foreclosure delays, see Representations and Warranties and Other Mortgage-related Matters on page 44.

U.K. Corporate Income Tax Rate Change

On March 29, 2011, the U.K. House of Commons approved a budget resolution to reduce the corporate income tax rate to 26 percent beginning on April 1, 2011, which would be incremental to the one percent rate decrease enacted in July 2010. The proposal, along with an additional reduction of the corporate income tax rate to 25 percent to take effect beginning April 1, 2012, is expected to be enacted in July 2011. These reductions would favorably affect income tax expense on future U.K. earnings but also would require us to remeasure our U.K. net deferred tax assets using the lower tax rates. Upon enactment we would record a charge to income tax expense of approximately $800 million for this revaluation. If rates were to be reduced to 23 percent by 2014 as suggested in U.K. Treasury announcements and assuming no change in the deferred tax asset balance, a charge to income tax expense of approximately $400 million for each one percent reduction in the rate would result in each period of enactment.

Earthquake in Japan

On March 11, 2011, Japan experienced a major earthquake and tsunami resulting in a humanitarian and economic disaster. The operations for many companies located in Japan were negatively impacted as a result of this disaster. We have a broker/dealer subsidiary headquartered in Tokyo, Japan. Its operations were not affected by the disaster; however, we continue to evaluate potential disruptions in global supply chains and related economic impacts. For information on our cross-border exposure with Japan, see Non-U.S. Portfolio on page 94.

Supplemental Financial Data

We view net interest income and related ratios and analyses (i.e., efficiency ratio and net interest yield) on a FTE basis. Although these are non-GAAP measures, we believe managing the business with net interest income on a FTE basis provides a more accurate picture of the interest margin for comparative purposes. To derive the FTE basis, net interest income is adjusted to reflect tax-exempt income on an equivalent before-tax basis with a corresponding increase in income tax expense. For purposes of this calculation, we use the federal statutory tax rate of 35 percent. This measure ensures comparability of net interest income arising from taxable and tax-exempt sources.

As mentioned above, certain performance measures including the efficiency ratio and net interest yield utilize net interest income (and thus total revenue) on a FTE basis. The efficiency ratio measures the costs expended to generate a dollar of revenue, and net interest yield evaluates the basis points we earn over the cost of funds. During our annual planning process, we set efficiency targets for the Corporation and each line of business. We believe the use of these non-GAAP measures provides additional clarity in assessing our results. Targets vary by year and by business and are based on a variety of factors including maturity of the business, competitive environment, market factors and other items including our risk appetite.

We also evaluate our business based on the following ratios that utilize tangible equity, a non-GAAP measure. Return on average tangible common shareholders’ equity measures our earnings contribution as a percentage of common shareholders’ equity plus any Common Equivalent Securities (CES) less goodwill and intangible assets (excluding MSRs), net of related deferred tax liabilities. ROTE measures our earnings contribution as a percentage of average shareholders’ equity less goodwill and intangible assets (excluding MSRs), net of related deferred tax liabilities. The tangible common equity ratio represents common shareholders’ equity plus any CES less goodwill and intangible assets (excluding MSRs), net of related deferred tax liabilities divided by total assets less goodwill and intangible assets (excluding MSRs), net of related deferred tax liabilities. The tangible equity ratio represents total shareholders’ equity less goodwill and intangible assets (excluding MSRs), net of related deferred tax liabilities divided by total assets less goodwill and intangible assets (excluding MSRs), net of related deferred tax liabilities. Tangible book value per common share represents ending common shareholders’ equity less goodwill and intangible assets (excluding MSRs), net of related deferred tax liabilities divided by ending common shares outstanding. These measures are used to evaluate our use of equity (i.e., capital). In addition, profitability, relationship and investment models all use ROTE as key measures to support our overall growth goals.

The aforementioned supplemental data and performance measures are presented in Tables 6 and 7. In addition, in Table 7 we excluded the impact of goodwill impairment charges of $10.4 billion and $2.0 billion recorded in the third and fourth quarters of 2010 when presenting earnings and diluted earnings per common share, the efficiency ratio, return on average assets, four quarter trailing return on average assets, return on average common shareholders’ equity, return on average tangible common shareholders’ equity and ROTE. Accordingly, these are non-GAAP measures. Table 7 provides reconciliations of these non-GAAP measures with financial measures defined by GAAP. We believe the use of these non-GAAP measures provides additional clarity in assessing the results of the Corporation. Other companies may define or calculate these measures and ratios differently.


*Table 7*
*Quarterly Supplemental Financial Data and Reconciliations to GAAP Financial Measures*
	2011
	Quarter			2010 Quarters
(Dollars in millions, except per share information)	First			Fourth			Third			Second			First

Fully taxable-equivalent basis data
Net interest income	$	12,397		$	12,709		$	12,717		$	13,197		$	14,070
Total revenue, net of interest expense		27,095			22,668			26,982			29,450			32,290
Net interest yield		2.67	%		2.69	%		2.72	%		2.77	%		2.93	%
Efficiency ratio		74.86			92.04			100.87			58.58			55.05

Performance ratios, excluding goodwill impairment charges ⁽¹⁾
Per common share information
Earnings				$	0.04		$	0.27
Diluted earnings					0.04			0.27
Efficiency ratio					83.22	%		62.33	%
Return on average assets					0.13			0.52
Four quarter trailing return on average assets ⁽²⁾					0.43			0.39
Return on average common shareholders’ equity					0.79			5.06
Return on average tangible common shareholders’ equity					1.27			8.67
Return on average tangible shareholders’ equity					1.96			8.54


⁽¹⁾		Performance ratios have been calculated excluding the impact of the goodwill impairment charges of $2.0 billion and $10.4 billion recorded during the fourth and third quarters of 2010.

⁽²⁾		Calculated as total net income for four consecutive quarters divided by average assets for the period.


*Table 7*
*Quarterly Supplemental Financial Data and Reconciliations to GAAP Financial Measures (continued)*
	2011
	Quarter			2010 Quarters
(Dollars in millions)	First			Fourth			Third			Second			First

Reconciliation of net interest income to net interest income on a fully taxable-equivalent basis
Net interest income	$	12,179		$	12,439		$	12,435		$	12,900		$	13,749
Fully taxable-equivalent adjustment		218			270			282			297			321

Net interest income on a fully taxable-equivalent basis	$	12,397		$	12,709		$	12,717		$	13,197		$	14,070

Reconciliation of total revenue, net of interest expense to total revenue, net of interest expense on a fully taxable-equivalent basis
Total revenue, net of interest expense	$	26,877		$	22,398		$	26,700		$	29,153		$	31,969
Fully taxable-equivalent adjustment		218			270			282			297			321

Total revenue, net of interest expense on a fully taxable-equivalent basis	$	27,095		$	22,668		$	26,982		$	29,450		$	32,290

Reconciliation of total noninterest expense to total noninterest expense, excluding goodwill impairment charges
Total noninterest expense	$	20,283		$	20,864		$	27,216		$	17,253		$	17,775
Goodwill impairment charges		-			(2,000	)		(10,400	)		-			-

Total noninterest expense, excluding goodwill impairment charges	$	20,283		$	18,864		$	16,816		$	17,253		$	17,775

Reconciliation of income tax expense (benefit) to income tax expense (benefit) on a fully taxable-equivalent basis
Income tax expense (benefit)	$	731		$	(2,351	)	$	1,387		$	672		$	1,207
Fully taxable-equivalent adjustment		218			270			282			297			321

Income tax expense (benefit) on a fully taxable-equivalent basis	$	949		$	(2,081	)	$	1,669		$	969		$	1,528

Reconciliation of net income (loss) to net income, excluding goodwill impairment charges
Net income (loss)	$	2,049		$	(1,244	)	$	(7,299	)	$	3,123		$	3,182
Goodwill impairment charges		-			2,000			10,400			-			-

Net income, excluding goodwill impairment charges	$	2,049		$	756		$	3,101		$	3,123		$	3,182

Reconciliation of net income (loss) applicable to common shareholders to net income applicable to common shareholders, excluding goodwill impairment charges
Net income (loss) applicable to common shareholders	$	1,739		$	(1,565	)	$	(7,647	)	$	2,783		$	2,834
Goodwill impairment charges		-			2,000			10,400			-			-

Net income applicable to common shareholders, excluding goodwill impairment charges	$	1,739		$	435		$	2,753		$	2,783		$	2,834

Reconciliation of average common shareholders’ equity to average tangible common shareholders’ equity
Common shareholders’ equity	$	214,206		$	218,728		$	215,911		$	215,468		$	200,399
Common Equivalent Securities		-			-			-			-			11,760
Goodwill		(73,922	)		(75,584	)		(82,484	)		(86,099	)		(86,353	)
Intangible assets (excluding MSRs)		(9,769	)		(10,211	)		(10,629	)		(11,216	)		(11,906	)
Related deferred tax liabilities		3,035			3,121			3,214			3,395			3,497

Tangible common shareholders’ equity	$	133,550		$	136,054		$	126,012		$	121,548		$	117,397

Reconciliation of average shareholders’ equity to average tangible shareholders’ equity
Shareholders’ equity	$	230,769		$	235,525		$	233,978		$	233,461		$	229,910
Goodwill		(73,922	)		(75,584	)		(82,484	)		(86,099	)		(86,353	)
Intangible assets (excluding MSRs)		(9,769	)		(10,211	)		(10,629	)		(11,216	)		(11,906	)
Related deferred tax liabilities		3,035			3,121			3,214			3,395			3,497

Tangible shareholders’ equity	$	150,113		$	152,851		$	144,079		$	139,541		$	135,148

Reconciliation of period end common shareholders’ equity to period end tangible common shareholders’ equity
Common shareholders’ equity	$	214,314		$	211,686		$	212,391		$	215,181		$	211,859
Goodwill		(73,869	)		(73,861	)		(75,602	)		(85,801	)		(86,305	)
Intangible assets (excluding MSRs)		(9,560	)		(9,923	)		(10,402	)		(10,796	)		(11,548	)
Related deferred tax liabilities		2,933			3,036			3,123			3,215			3,396

Tangible common shareholders’ equity	$	133,818		$	130,938		$	129,510		$	121,799		$	117,402

Reconciliation of period end shareholders’ equity to period end tangible shareholders’ equity
Shareholders’ equity	$	230,876		$	228,248		$	230,495		$	233,174		$	229,823
Goodwill		(73,869	)		(73,861	)		(75,602	)		(85,801	)		(86,305	)
Intangible assets (excluding MSRs)		(9,560	)		(9,923	)		(10,402	)		(10,796	)		(11,548	)
Related deferred tax liabilities		2,933			3,036			3,123			3,215			3,396

Tangible shareholders’ equity	$	150,380		$	147,500		$	147,614		$	139,792		$	135,366

Reconciliation of period end assets to period end tangible assets
Assets	$	2,274,532		$	2,264,909		$	2,339,660		$	2,368,384		$	2,344,634
Goodwill		(73,869	)		(73,861	)		(75,602	)		(85,801	)		(86,305	)
Intangible assets (excluding MSRs)		(9,560	)		(9,923	)		(10,402	)		(10,796	)		(11,548	)
Related deferred tax liabilities		2,933			3,036			3,123			3,215			3,396

Tangible assets	$	2,194,036		$	2,184,161		$	2,256,779		$	2,275,002		$	2,250,177

Core Net Interest Income

We manage core net interest income which is reported net interest income on a FTE basis adjusted for the impact of market-based activities. As discussed in the GBAM business segment section beginning on page 36, we evaluate our market-based results and strategies on a total market-based revenue approach by combining net interest income and noninterest income for GBAM. An analysis of core net interest income, core average earning assets and core net interest yield on earning assets, all of which adjust for the impact of market-based activities from reported net interest income on a FTE basis, is shown below. We believe the use of this non-GAAP presentation provides additional clarity in assessing our results.


*Table 8*
*Core Net Interest Income*
	Three Months Ended March 31
(Dollars in millions)	2011			2010

Net interest income ⁽¹⁾
As reported	$	12,397		$	14,070
Impact of market-based net interest income ⁽²⁾		(1,051	)		(1,186	)

Core net interest income	$	11,346		$	12,884

Average earning assets
As reported	$	1,869,863		$	1,933,060
Impact of market-based earning assets ⁽²⁾		(467,042	)		(527,316	)

Core average earning assets	$	1,402,821		$	1,405,744

Net interest yield contribution ^{(1, 3)}
As reported		2.67	%		2.93	%
Impact of market-based activities ⁽²⁾		0.59			0.76

Core net interest yield on earning assets		3.26	%		3.69	%


⁽¹⁾		FTE basis

⁽²⁾		Represents the impact of market-based amounts included in GBAM.

⁽³⁾		Calculated on an annualized basis.

Core net interest income decreased $1.5 billion to $11.3 billion for the three months ended March 31, 2011 compared to the same period in 2010. The decrease was primarily due to lower consumer loan balances and a decrease in consumer loan and ALM portfolio yields partially offset by the benefit associated with ongoing reductions in long-term debt and lower rates paid on deposits.

Core average earning assets decreased $2.9 billion to $1.4 trillion for the three months ended March 31, 2011 compared to the same period in 2010. The decrease was primarily due to lower consumer and commercial loan levels partially offset by increased ALM portfolio levels.

Core net interest yield decreased 43 bps to 3.26 percent for the three months ended March 31, 2011 compared to the same period in 2010 due to the factors noted above.


*Table 9*
Quarterly Average Balances and Interest Rates – *FTE Basis*
	First Quarter 2011							Fourth Quarter 2010
			Interest							Interest
	Average		Income/		Yield/			Average		Income/		Yield/
(Dollars in millions)	Balance		Expense		Rate			Balance		Expense		Rate

Earning assets
Time deposits placed and other short-term investments ⁽¹⁾	$	31,294	$	88		1.14	%	$	28,141	$	75		1.07	%
Federal funds sold and securities borrowed or purchased under agreements to resell		227,379		517		0.92			243,589		486		0.79
Trading account assets		221,041		1,669		3.05			216,003		1,710		3.15
Debt securities ⁽²⁾		335,847		2,917		3.49			341,867		3,065		3.58
Loans and leases ⁽³⁾:
Residential mortgage ⁽⁴⁾		262,049		2,881		4.40			254,051		2,857		4.50
Home equity		136,089		1,335		3.96			139,772		1,410		4.01
Discontinued real estate		12,899		110		3.42			13,297		118		3.57
U.S. credit card		109,941		2,837		10.47			112,673		3,040		10.70
Non-U.S. credit card		27,633		779		11.43			27,457		815		11.77
Direct/Indirect consumer ⁽⁵⁾		90,097		993		4.47			91,549		1,088		4.72
Other consumer ⁽⁶⁾		2,753		45		6.58			2,796		45		6.32

Total consumer		641,461		8,980		5.65			641,595		9,373		5.81

U.S. commercial		191,353		1,926		4.08			193,608		1,894		3.88
Commercial real estate ⁽⁷⁾		48,359		437		3.66			51,617		432		3.32
Commercial lease financing		21,634		322		5.95			21,363		250		4.69
Non-U.S. commercial		36,159		299		3.35			32,431		289		3.53

Total commercial		297,505		2,984		4.06			299,019		2,865		3.81

Total loans and leases		938,966		11,964		5.14			940,614		12,238		5.18

Other earning assets		115,336		922		3.24			113,325		923		3.23

Total earning assets ⁽⁸⁾		1,869,863		18,077		3.92			1,883,539		18,497		3.90

Cash and cash equivalents ⁽¹⁾		138,241		63					136,967		63
Other assets, less allowance for loan and lease losses		330,434							349,752

Total assets	$	2,338,538						$	2,370,258


⁽¹⁾		For this presentation, fees earned on overnight deposits placed with the Federal Reserve are included in the cash and cash equivalents line, consistent with the Corporation’s Consolidated Balance Sheet presentation of these deposits. Net interest income and net interest yield are calculated excluding these fees.

⁽²⁾		Yields on AFS debt securities are calculated based on fair value rather than the cost basis. The use of fair value does not have a material impact on net interest yield.

⁽³⁾		Nonperforming loans are included in the respective average loan balances. Income on these nonperforming loans is recognized on a cash basis. PCI loans were written down to fair value upon acquisition and accrete interest income over the remaining life of the loan.

⁽⁴⁾		Includes non-U.S. residential mortgage loans of $92 million in the first quarter of 2011, and $96 million, $502 million, $506 million and $538 million in the fourth, third, second and first quarters of 2010, respectively.

⁽⁵⁾		Includes non-U.S. consumer loans of $8.2 billion in the first quarter of 2011, and $7.9 billion, $7.7 billion, $7.7 billion and $8.1 billion in the fourth, third, second and first quarters of 2010, respectively.

⁽⁶⁾		Includes consumer finance loans of $1.9 billion in the first quarter of 2011, and $2.0 billion, $2.0 billion, $2.1 billion and $2.2 billion in the fourth, third, second and first quarters of 2010, respectively; other non-U.S. consumer loans of $777 million in the first quarter of 2011, and $791 million, $788 million, $679 million and $664 million in the fourth, third, second and first quarters of 2010, respectively; and consumer overdrafts of $76 million in the first quarter of 2011, and $34 million, $123 million, $155 million and $132 million in the fourth, third, second and first quarters of 2010, respectively.

⁽⁷⁾		Includes U.S. commercial real estate loans of $45.7 billion in the first quarter of 2011, and $49.0 billion, $53.1 billion, $61.6 billion and $65.6 billion in the fourth, third, second and first quarters of 2010, respectively; and non-U.S. commercial real estate loans of $2.7 billion in the first quarter of 2011, and $2.6 billion, $2.5 billion, $2.6 billion and $3.0 billion in the fourth, third, second and first quarters of 2010, respectively.

⁽⁸⁾		Interest income includes the impact of interest rate risk management contracts, which decreased interest income on the underlying assets by $388 million in the first quarter of 2011, and $29 million, $639 million, $479 million and $272 million in the fourth, third, second and first quarters of 2010, respectively. Interest expense includes the impact of interest rate risk management contracts, which decreased interest expense on the underlying liabilities by $621 million in the first quarter of 2011, and $672 million, $1.0 billion, $829 million and $970 million in the fourth, third, second and first quarters of 2010, respectively. For further information on interest rate contracts, see Interest Rate Risk Management for Nontrading Activities beginning on page 106.


*Quarterly Average Balances and Interest Rates*	– *FTE Basis (continued)*
		Third Quarter 2010							Second Quarter 2010							First Quarter 2010
				Interest							Interest							Interest
		Average		Income/		Yield/			Average		Income/		Yield/			Average		Income/		Yield/
(Dollars in millions)		Balance		Expense		Rate			Balance		Expense		Rate			Balance		Expense		Rate

Earning assets
Time deposits placed and other short-term investments ⁽¹⁾		$	23,233	$	86		1.45	%	$	30,741	$	70		0.93	%	$	27,600	$	61		0.89	%
Federal funds sold and securities borrowed or purchased under agreements to resell			254,820		441		0.69			263,564		457		0.70			266,070		448		0.68
Trading account assets			210,529		1,692		3.20			213,927		1,853		3.47			214,542		1,795		3.37
Debt securities ⁽²⁾			328,097		2,646		3.22			314,299		2,966		3.78			311,136		3,173		4.09
Loans and leases ⁽³⁾
Residential mortgage ⁽⁴⁾			237,292		2,797		4.71			247,715		2,982		4.82			243,833		3,100		5.09
Home equity			143,083		1,457		4.05			148,219		1,537		4.15			152,536		1,586		4.20
Discontinued real estate			13,632		122		3.56			13,972		134		3.84			14,433		153		4.24
U.S. credit card			115,251		3,113		10.72			118,738		3,121		10.54			125,353		3,370		10.90
Non-U.S. credit card			27,047		875		12.84			27,706		854		12.37			29,872		906		12.30
Direct/Indirect consumer ⁽⁵⁾			95,692		1,130		4.68			98,549		1,233		5.02			100,920		1,302		5.23
Other consumer ⁽⁶⁾			2,955		47		6.35			2,958		46		6.32			3,002		48		6.35

Total consumer			634,952		9,541		5.98			657,857		9,907		6.03			669,949		10,465		6.30

U.S. commercial			192,306		2,040		4.21			195,144		2,005		4.12			202,662		1,970		3.94
Commercial real estate ⁽⁷⁾			55,660		452		3.22			64,218		541		3.38			68,526		575		3.40
Commercial lease financing			21,402		255		4.78			21,271		261		4.90			21,675		304		5.60
Non-U.S. commercial			30,540		282		3.67			28,564		256		3.59			28,803		264		3.72

Total commercial			299,908		3,029		4.01			309,197		3,063		3.97			321,666		3,113		3.92

Total loans and leases			934,860		12,570		5.35			967,054		12,970		5.38			991,615		13,578		5.53

Other earning assets			112,280		949		3.36			121,205		994		3.29			122,097		1,053		3.50

Total earning assets ⁽⁸⁾			1,863,819		18,384		3.93			1,910,790		19,310		4.05			1,933,060		20,108		4.19

Cash and cash equivalents ⁽¹⁾			155,784		107					209,686		106					196,911		92
Other assets, less allowance for loan and lease losses			359,794							373,956							386,638

Total assets		$	2,379,397						$	2,494,432						$	2,516,609

For footnotes see page 20.


*Quarterly Average Balances and Interest Rates* – *FTE Basis (continued)*
	First Quarter 2011							Fourth Quarter 2010
			Interest							Interest
	Average		Income/		Yield/			Average		Income/		Yield/
(Dollars in millions)	Balance		Expense		Rate			Balance		Expense		Rate

Interest-bearing liabilities
U.S. interest-bearing deposits:
Savings	$	38,905	$	32		0.34	%	$	37,145	$	35		0.36	%
NOW and money market deposit accounts		475,954		316		0.27			464,531		333		0.28
Consumer CDs and IRAs		118,306		300		1.03			124,855		338		1.07
Negotiable CDs, public funds and other time deposits		13,995		39		1.11			16,334		47		1.16

Total U.S. interest-bearing deposits		647,160		687		0.43			642,865		753		0.46

Non-U.S. interest-bearing deposits:
Banks located in non-U.S. countries		21,534		38		0.72			16,827		38		0.91
Governments and official institutions		2,307		2		0.35			1,560		2		0.42
Time, savings and other		60,432		112		0.76			58,746		101		0.69

Total non-U.S. interest-bearing deposits		84,273		152		0.73			77,133		141		0.73

Total interest-bearing deposits		731,433		839		0.46			719,998		894		0.49

Federal funds purchased, securities loaned or sold under agreements to repurchase and other short-term borrowings		371,573		1,184		1.29			369,738		1,142		1.23
Trading account liabilities		83,914		627		3.03			81,313		561		2.74
Long-term debt		440,511		3,093		2.84			465,875		3,254		2.78

Total interest-bearing liabilities ⁽⁸⁾		1,627,431		5,743		1.43			1,636,924		5,851		1.42

Noninterest-bearing sources:
Noninterest-bearing deposits		291,707							287,740
Other liabilities		188,631							210,069
Shareholders’ equity		230,769							235,525

Total liabilities and shareholders’ equity	$	2,338,538						$	2,370,258

Net interest spread						2.49	%						2.48	%
Impact of noninterest-bearing sources						0.17							0.18

Net interest income/yield on earning assets ⁽¹⁾			$	12,334		2.66	%			$	12,646		2.66	%

For footnotes see page 20.


*Quarterly Average Balances and Interest Rates* – *FTE Basis (continued)*
	Third Quarter 2010							Second Quarter 2010							First Quarter 2010
			Interest							Interest							Interest
	Average		Income/		Yield/			Average		Income/		Yield/			Average		Income/		Yield/
(Dollars in millions)	Balance		Expense		Rate			Balance		Expense		Rate			Balance		Expense		Rate

Interest-bearing liabilities
U.S. interest-bearing deposits:
Savings	$	37,008	$	36		0.39	%	$	37,290	$	43		0.46	%	$	35,126	$	43		0.50	%
NOW and money market deposit accounts		442,906		359		0.32			442,262		372		0.34			416,110		341		0.33
Consumer CDs and IRAs		132,687		377		1.13			147,425		441		1.20			166,189		567		1.38
Negotiable CDs, public funds and other time deposits		17,326		57		1.30			17,355		59		1.36			19,763		63		1.31

Total U.S. interest-bearing deposits		629,927		829		0.52			644,332		915		0.57			637,188		1,014		0.65

Non-U.S. interest-bearing deposits:
Banks located in non-U.S. countries		17,431		38		0.86			19,751		36		0.72			18,424		32		0.71
Governments and official institutions		2,055		2		0.36			4,214		3		0.28			5,626		3		0.22
Time, savings and other		54,373		81		0.59			52,195		77		0.60			54,885		73		0.53

Total non-U.S. interest-bearing deposits		73,859		121		0.65			76,160		116		0.61			78,935		108		0.55

Total interest-bearing deposits		703,786		950		0.54			720,492		1,031		0.57			716,123		1,122		0.64

Federal funds purchased, securities loaned or sold under agreements to repurchase and other short-term borrowings		391,148		848		0.86			454,051		891		0.79			508,332		818		0.65
Trading account liabilities		95,265		635		2.65			100,021		715		2.87			90,134		660		2.97
Long-term debt		485,588		3,341		2.74			497,469		3,582		2.88			513,634		3,530		2.77

Total interest-bearing liabilities ⁽⁸⁾		1,675,787		5,774		1.37			1,772,033		6,219		1.41			1,828,223		6,130		1.35

Noninterest-bearing sources:
Noninterest-bearing deposits		270,060							271,123							264,892
Other liabilities		199,572							217,815							193,584
Shareholders’ equity		233,978							233,461							229,910

Total liabilities and shareholders’ equity	$	2,379,397						$	2,494,432						$	2,516,609

Net interest spread						2.56	%						2.64	%						2.84	%
Impact of noninterest-bearing sources						0.13							0.10							0.08

Net interest income/yield on earning assets ⁽¹⁾			$	12,610		2.69	%			$	13,091		2.74	%			$	13,978		2.92	%

For footnotes see page 20.

Business Segment Operations

Segment Description and Basis of Presentation

We report the results of our operations through six business segments: Deposits, Global Card Services, Consumer Real Estate Services (formerly Home Loans & Insurance, see page 29 for more detailed information), Global Commercial Banking, GBAM and GWIM, with the remaining operations recorded in All Other. Prior period amounts have been reclassified to conform to current period presentation.

We prepare and evaluate segment results using certain non-GAAP methodologies and performance measures, many of which are discussed in Supplemental Financial Data beginning on page 16. In addition, return on average economic capital for the segments is calculated as net income, excluding cost of funds and earnings credit on intangibles, divided by average economic capital. Economic capital represents allocated equity less goodwill and a percentage of intangible assets (excluding MSRs). We begin by evaluating the operating results of the segments which by definition exclude merger and restructuring charges.

The management accounting and reporting process derives segment and business results by utilizing allocation methodologies for revenue and expense. The net income derived for the businesses is dependent upon revenue and cost allocations using an activity-based costing model, funds transfer pricing, and other methodologies and assumptions management believes are appropriate to reflect the results of the business.

Total revenue, net of interest expense, includes net interest income on a FTE basis and noninterest income. The adjustment of net interest income to a FTE basis results in a corresponding increase in income tax expense. The segment results also reflect certain revenue and expense methodologies that are utilized to determine net income. The net interest income of the businesses includes the results of a funds transfer pricing process that matches assets and liabilities with similar interest rate sensitivity and maturity characteristics. For presentation purposes, in segments where the total of liabilities and equity exceeds assets, which are generally deposit-taking segments, we allocate assets to match liabilities. Net interest income of the business segments also includes an allocation of net interest income generated by our ALM activities.

Our ALM activities include an overall interest rate risk management strategy that incorporates the use of interest rate contracts to manage fluctuations in earnings that are caused by interest rate volatility. Our goal is to manage interest rate sensitivity so that movements in interest rates do not significantly adversely affect net interest income. Our ALM activities are allocated to the business segments and fluctuate based on performance. ALM activities include external product pricing decisions including deposit pricing strategies, the effects of our internal funds transfer pricing process and the net effects of other ALM activities.

Certain expenses not directly attributable to a specific business segment are allocated to the segments. The most significant of these expenses include data and item processing costs and certain centralized or shared functions. Data processing costs are allocated to the segments based on equipment usage. Item processing costs are allocated to the segments based on the volume of items processed for each segment. The costs of certain centralized or shared functions are allocated based on methodologies that reflect utilization.

Equity is allocated to business segments and related businesses using a risk-adjusted methodology incorporating each segment’s credit, market, interest rate, strategic and operational risk components. The nature of these risks is discussed further beginning on page 53. We benefit from the diversification of risk across these components which is reflected as a reduction to allocated equity for each segment. The total amount of average equity reflects both risk-based capital and the portion of goodwill and intangibles specifically assigned to the business segments. The risk-adjusted methodology is periodically refined and such refinements are reflected as changes to allocated equity in each segment.

For more information on selected financial information for the business segments and reconciliations to consolidated total revenue, net income (loss) and period-end total assets, see Note 20 – Business Segment Information to the Consolidated Financial Statements.

Deposits


	Three Months Ended March 31
(Dollars in millions)	2011			2010			% Change

Net interest income ⁽¹⁾	$	2,205		$	2,175			1	%
Noninterest income:
Service charges		923			1,479			(38	)
All other income		61			64			(5	)

Total noninterest income		984			1,543			(36	)

Total revenue, net of interest expense		3,189			3,718			(14	)

Provision for credit losses		33			38			(13	)
Noninterest expense		2,592			2,562			1

Income before income taxes		564			1,118			(50	)
Income tax expense ⁽¹⁾		209			417			(50	)

Net income	$	355		$	701			(49	)


Net interest yield ⁽¹⁾		2.14	%		2.12	%
Return on average equity ⁽²⁾		6.09			11.78
Return on average economic capital ^{(2, 3)}		25.43			46.33
Efficiency ratio ⁽¹⁾		81.28			68.92

Balance Sheet

Average
Total earning assets	$	417,218		$	415,228			-	%
Total assets		443,461			441,854			-
Total deposits		418,298			416,842			-
Allocated equity		23,641			24,132			(2	)
Economic capital ⁽⁴⁾		5,683			6,164			(8	)


	March 31			December 31
	2011			2010

Period end
Total earning assets	$	429,956		$	414,215			4	%
Total assets		456,248			440,954			3
Total deposits		431,022			415,189			4
Client brokerage assets		66,703			63,597			5


⁽¹⁾		FTE basis

⁽²⁾		Decreases in the ratios resulted from lower net income partially offset by a slight decrease in economic capital.

⁽³⁾		Return on average economic capital is calculated as net income, excluding cost of funds and earnings credit on intangibles, divided by average economic capital.

⁽⁴⁾		Economic capital represents allocated equity less goodwill and a percentage of intangible assets.

Deposits includes the results of consumer deposit activities which consist of a comprehensive range of products provided to consumers and small businesses. Effective in the first quarter of 2011, the Merrill Edge^® business was moved from GWIM to Deposits and prior periods have been restated. Merrill Edge is an integrated investing and banking service targeted at clients with less than $250,000 in total assets. Merrill Edge provides team-based investment advice and guidance, brokerage services, a self-directed online investing platform and key banking capabilities including access to the Corporation’s network of banking centers and ATMs.

In the U.S., we serve approximately 58 million consumer and small business relationships through a franchise that stretches coast to coast through 32 states and the District of Columbia utilizing our network of approximately 5,800 banking centers, 18,000 ATMs, nationwide call centers and leading online and mobile banking platforms. At March 31, 2011, our active online banking customer base was 30.1 million subscribers compared to 29.9 million as of March 31,

2010, and our active bill pay users paid $78.9 billion of bills online during the three months ended March 31, 2011 compared to $75.5 billion in the same period a year ago.

Our deposit products include traditional savings accounts, money market savings accounts, CDs and IRAs, and noninterest- and interest-bearing checking accounts. Deposit products provide a relatively stable source of funding and liquidity for the Corporation. We earn net interest spread revenue from investing this liquidity in earning assets through client-facing lending and ALM activities. The revenue is allocated to the deposit products using our funds transfer pricing process which takes into account the interest rates and maturity characteristics of the deposits. Deposits also generates fees such as account service fees, non-sufficient funds fees, overdraft charges and ATM fees, as well as investment and brokerage fees from Merrill Edge accounts. Deposits includes the net impact of migrating customers and their related deposit balances between Deposits and other client-managed businesses.

Net income decreased $346 million, or 49 percent, to $355 million due to a decline in revenue driven by lower noninterest income. Noninterest income decreased $559 million, or 36 percent, to $984 million due to the impact of overdraft policy changes in conjunction with Regulation E, which became effective in the third quarter of 2010. Net interest income was flat as impacts from a customer shift to more liquid products and continued pricing discipline resulted in a 29 bps increase in deposit spreads from a year ago, offset by a lower net interest income allocation related to ALM activities. For more information on Regulation E, see Regulatory Matters of the Corporation’s 2010 Annual Report on Form 10-K beginning on page 56. Noninterest expense was flat compared to the same period in 2010.

Average deposits increased $1.5 billion from a year ago driven by organic growth in liquid products, including Merrill Edge, partially offset by the net transfer of certain deposits to other client-managed businesses.

Global Card Services


	Three Months Ended March 31
(Dollars in millions)	2011			2010			% Change

Net interest income ⁽¹⁾	$	3,743		$	4,818			(22	)%
Noninterest income:
Card income		1,728			1,881			(8	)
All other income		100			104			(4	)

Total noninterest income		1,828			1,985			(8	)

Total revenue, net of interest expense		5,571			6,803			(18	)

Provision for credit losses		964			3,535			(73	)
Noninterest expense		1,887			1,732			9

Income before income taxes		2,720			1,536			77
Income tax expense ⁽¹⁾		1,008			573			76

Net income	$	1,712		$	963			78


Net interest yield ⁽¹⁾		9.28	%		10.32	%
Return on average equity ⁽²⁾		26.63			9.05
Return on average economic capital ^{(2, 3)}		51.95			20.08
Efficiency ratio ⁽¹⁾		33.89			25.47

Balance Sheet

Average
Total loans and leases	$	162,885		$	189,307			(14	)%
Total earning assets		163,577			189,353			(14	)
Total assets		165,170			195,809			(16	)
Allocated equity		26,073			43,170			(40	)
Economic capital ⁽⁴⁾		13,407			19,901			(33	)


	March 31			December 31
	2011			2010

Period end
Total loans and leases	$	158,900		$	167,367			(5	)%
Total earning assets		159,971			168,224			(5	)
Total assets		163,435			169,745			(4	)


⁽¹⁾		FTE basis

⁽²⁾		Increases in the ratios resulted from higher net income and a decrease in equity. Allocated equity decreased as a result of the $10.4 billion goodwill impairment charge recorded during the third quarter of 2010. Additional reductions in equity resulted from periodic refinements in the risk-based allocation process, lower interest rate risk and improved credit quality.

⁽³⁾		Return on average economic capital is calculated as net income, excluding cost of funds and earnings credit on intangibles, divided by average economic capital.

⁽⁴⁾		Economic capital represents allocated equity less goodwill and a percentage of intangible assets.

Global Card Services provides a broad offering of products including U.S. consumer and business credit card, consumer lending, international credit card and debit card to consumers and small businesses. We provide credit card products to customers in the U.S., U.K., Canada, Ireland and Spain. We offer a variety of co-branded and affinity credit and debit card products and are one of the leading issuers of credit cards through endorsed marketing in the U.S. and Europe. For an update on the payment protection insurance claims matter, see Note 11 — Commitments and Contingencies to the Consolidated Financial Statements.

The majority of the provisions of the CARD Act became effective on February 22, 2010, while certain provisions became effective in the third quarter of 2010. The CARD Act has negatively impacted net interest income due to restrictions on our ability to reprice credit cards based on risk and on card income due to restrictions imposed on certain fees. For more information on the CARD Act, see Regulatory Matters of the Corporation’s 2010 Annual Report on Form 10-K beginning on page 56.

As a result of the Financial Reform Act, which was signed into law on July 21, 2010, we believe that our debit card revenue in Global Card Services will be adversely impacted beginning in the third quarter of 2011. Based on 2010 volumes, our estimate of revenue loss due to the debit card interchange fee standards to be adopted under the Financial Reform Act was approximately $2.0 billion annually. On March 29, 2011, the Federal Reserve indicated that it had

concluded it will be unable to meet the April 21, 2011 deadline for publication of the final debit card interchange and networking routing rules, but that it is committed to meeting the final July 21, 2011 deadline under the Financial Reform Act. We continue to monitor the progress of the rulemaking and will refine our estimate of the impact to our business as information becomes available.

For the three months ended March 31, 2011, Global Card Services net income increased $749 million, to $1.7 billion compared to the same period in 2010, primarily due to a $2.6 billion decrease in the provision for credit losses as a result of continued improvements in credit quality. This was partially offset by a decrease in revenue of $1.2 billion, or 18 percent, to $5.6 billion, primarily due to a decline in net interest income from lower average loans and yields.

Net interest income decreased $1.1 billion, or 22 percent, to $3.7 billion as average loans decreased $26.4 billion in the three months ended March 31, 2011 compared to the same period in 2010. Net interest yield decreased 104 bps to 9.28 percent for the three months ended March 31, 2011 due to increased net charge-offs on higher interest rate products.

Noninterest income decreased $157 million, or eight percent, to $1.8 billion compared to $2.0 billion in the same period in 2010, driven by the impact of the CARD Act.

The provision for credit losses improved by $2.6 billion for the three months ended March 31, 2011, to $964 million compared to the year ago period due to lower delinquencies and bankruptcies, which resulted in $2.7 billion lower net charge-offs as a result of the improved economic environment.

Noninterest expense increased $155 million, or nine percent, to $1.9 billion for the three months ended March 31, 2011 primarily driven by higher litigation expenses.

Consumer Real Estate Services


	Three Months Ended March 31, 2011
										Total
										Consumer
	Home Loans			Legacy Asset						Real Estate			Three Months Ended
(Dollars in millions)	& Insurance			Servicing			Other			Services			March 31, 2010			% Change

Net interest income ⁽¹⁾	$	571		$	342		$	(9	)	$	904		$	1,213			(25	)%
Noninterest income:
Mortgage banking income (loss)		711			(19	)		2			694			1,641			(58	)
Insurance income		499			-			-			499			590			(15	)
All other income		79			6			-			85			179			(53	)

Total noninterest income (loss)		1,289			(13	)		2			1,278			2,410			(47	)

Total revenue, net of interest expense		1,860			329			(7	)		2,182			3,623			(40	)

Provision for credit losses		-			1,098			-			1,098			3,600			(70	)
Noninterest expense		1,654			3,230			-			4,884			3,328			47

Income (loss) before income taxes		206			(3,999	)		(7	)		(3,800	)		(3,305	)		(15	)
Income tax expense (benefit) ⁽¹⁾		76			(1,482	)		(2	)		(1,408	)		(1,233	)		(14	)

Net income (loss)	$	130		$	(2,517	)	$	(5	)	$	(2,392	)	$	(2,072	)		(15	)


Net interest yield ⁽¹⁾		2.87	%		2.08	%		n/m			2.11	%		2.58	%
Efficiency ratio ⁽¹⁾		88.92			n/m			n/m			n/m			91.84

Balance Sheet

Average
Total loans and leases	$	56,282		$	64,278		$	-		$	120,560		$	133,744			(10	)%
Total earning assets		80,582			66,625			26,108			173,315			190,804			(9	)
Total assets		88,679			78,293			43,330			210,302			234,010			(10	)
Allocated equity ⁽²⁾		n/a			n/a			n/a			18,846			27,280			(31	)
Economic capital ^{(2, 3)}		n/a			n/a			n/a			16,095			22,466			(28	)


Period End	March 31, 2011												December 31, 2010

Total loans and leases	$	55,694		$	63,056		$	-		$	118,750		$	122,934			(3	)%
Total earning assets		75,038			65,251			26,991			167,280			173,032			(3	)
Total assets		82,301			76,600			46,603			205,504			213,363			(4	)


⁽¹⁾		FTE basis

⁽²⁾		Economic capital decreased as a result of declining portfolio balances, improved credit quality and periodic refinements to the risk-based allocation process. Allocated equity was impacted by the $2.0 billion goodwill impairment charge recorded during the fourth quarter of 2010.

⁽³⁾		Economic capital represents allocated equity less goodwill and a percentage of intangible assets (excluding MSRs).

n/m = not meaningful

n/a = not applicable

Consumer Real Estate Services was realigned effective January 1, 2011 into its ongoing operations which are now referred to as Home Loans & Insurance, a separately managed legacy mortgage portfolio which is referred to as Legacy Asset Servicing, and Other which primarily includes the results of certain MSR activities. Legacy Asset Servicing is responsible for servicing delinquent loans and managing the runoff and exposures related to selected residential mortgage, home equity and discontinued real estate loan portfolios. The loans serviced include owned loans and loans serviced for others, including loans held in other business segments and All Other (collectively, the Legacy Asset Servicing portfolio). Home Loans & Insurance includes the ongoing loan production activities, certain servicing activities that are discussed below, insurance operations and the Consumer Real Estate Services home equity portfolio not selected for inclusion in the Legacy Asset Servicing portfolio. Due to this realignment, the composition of the Home Loans & Insurance loan portfolio does not currently reflect a normalized level of credit losses and noninterest expense which we expect will develop over time. This realignment allows Consumer Real Estate Services management to lead the ongoing home loan business while also providing greater focus and transparency on resolving legacy mortgage issues.

In addition, the Legacy Asset Servicing portfolio includes residential mortgage loans, home equity loans and discontinued real estate loans that would not have been originated under our underwriting standards at December 31, 2010. The Countrywide PCI portfolios as well as certain loans that met a predefined delinquency status or probability of default threshold as of January 1, 2011 are also included in the Legacy Asset Servicing portfolio. The criteria for inclusion of certain assets and liabilities in Legacy Asset Servicing may continue to be evaluated over time. For more information on the Legacy Asset Servicing portfolio criteria, see Consumer Credit Portfolio beginning on page 67.

The Legacy Asset Servicing balance sheet consists of loans held within Consumer Real Estate Services that met the criteria for inclusion in the Legacy Asset Servicing portfolio as of January 1, 2011. The total owned loans in the Legacy Asset Servicing portfolio were $169.1 billion at March 31, 2011, of which $63.1 billion are reflected on the balance sheet of Legacy Asset Servicing within Consumer Real Estate Services, and the remainder is held in other business segments and All Other.

Legacy Asset Servicing results represent the net cost of legacy exposures that is included in the results of Consumer Real Estate Services, including representations and warranties provision, litigation costs and financial results of the Consumer Real Estate Services home equity portfolio selected as part of the Legacy Asset Servicing portfolio. In addition, certain revenue and expenses on loans serviced for others, including loans serviced for other business segments and All Other are included in Legacy Asset Servicing results. The results of the Legacy Asset Servicing residential mortgage and discontinued real estate portfolios are recorded primarily in All Other or the respective business segment in which the loans reside.

Other includes the results of certain MSR activites, including net hedge results, together with any related assets or liabilities used as economic hedges. The change in the value of the MSRs reflects the change in discount rates and prepayment speed assumptions, largely due to changes in interest rates, as well as the effect of changes in other assumptions, including the cost to service. These amounts are not allocated between Home Loans & Insurance and Legacy Asset Servicing since the MSRs are managed as a single asset.

Consumer Real Estate Services generates revenue by providing an extensive line of consumer real estate products and services to customers nationwide. Consumer Real Estate Services products are available to our customers through a retail network of approximately 5,800 banking centers, mortgage loan officers in approximately 750 locations and a sales force offering our customers direct telephone and online access to our products. These products are also offered through our correspondent loan acquisition channels. On February 4, 2011, we announced that we are exiting the reverse mortgage origination business. In October 2010, we exited the first mortgage wholesale acquisition channel. These strategic changes were made to allow greater focus on our retail and correspondent channels.

Consumer Real Estate Services products include fixed and adjustable-rate first-lien mortgage loans for home purchase and refinancing needs, home equity lines of credit and home equity loans. First mortgage products are either sold into the secondary mortgage market to investors, while retaining MSRs and the Bank of America customer relationships, or are held on our balance sheet in All Other for ALM purposes. Home equity lines of credit and home equity loans are retained on Consumer Real Estate Services balance sheet. Consumer Real Estate Services services mortgage loans, including those loans it owns, loans owned by other business segments and All Other, and loans owned by outside investors. The financial results of the on-balance sheet loans are reported in the business segment that owns the loans or All Other. Consumer Real Estate Services is not impacted by the Corporation’s first mortgage production retention decisions as Consumer Real Estate Services is compensated for loans held for ALM purposes on a management accounting basis, with a corresponding offset recorded in All Other, and for servicing loans owned by other business segments. Funded home equity lines of credit and home equity loans are held on the Consumer Real Estate Services balance sheet. In addition, Consumer Real Estate Services offers property, casualty, life, disability and credit insurance.

Servicing activities include collecting cash for principal, interest and escrow payments from borrowers, and disbursing customer draws for lines of credit and accounting for and remitting principal and interest payments to investors and escrow payments to third parties along with responding to customer inquiries. These activities are performed by Home Loans & Insurance. Our home retention efforts are also part of our servicing activities, along with supervising foreclosures and property dispositions. These default-related activities are performed by Legacy Asset Servicing. In an effort to help our customers avoid foreclosure, Legacy Asset Servicing evaluates various workout options prior to foreclosure sale which, combined with our temporary halt of foreclosures announced in October 2010, has resulted in elongated default timelines. For additional information on our servicing activities, see Other Mortgage-related Matters – Review of Foreclosure Processes and Certain Servicing-related Items beginning on page 50.

On February 3, 2011, we announced that we had entered into an agreement to sell the lender-placed and certain property and casualty insurance assets and liabilities of Balboa. In connection with the sale, we expect to recognize a pre-tax gain of approximately $750 million when the sale is completed. Balboa is a wholly-owned subsidiary and part of Consumer Real Estate Services. The closing of the sale of Balboa is expected to occur in mid 2011. The sale will reduce ongoing operating results of Consumer Real Estate Services, but the impact on the consolidated net income of the Corporation is not expected to be significant.

Consumer Real Estate Services includes the impact of transferring customers and their related loan balances between GWIM and Consumer Real Estate Services based on client segmentation thresholds. For more information on the migration of customer balances, see GWIM beginning on page 40.

Consumer Real Estate Services recorded a net loss of $2.4 billion for the three months ended March 31, 2011 compared to a net loss of $2.1 billion for the same period in 2010. Revenue declined $1.4 billion to $2.2 billion for the three months ended March 31, 2011 due in part to a decrease in mortgage banking income driven by an increase in representations and warranties provision and a decline in core production income. The decline in core production income was primarily due to lower production volume driven by a reallocation of resources and competitive pressure resulting in a drop in market share. Net interest income also contributed to the decline in revenue driven primarily by lower average loan balances. For additional information on representations and warranties, see Note 9 — Representations and Warranties Obligations and Corporate Guarantees to the Consolidated Financial Statements and Representations and Warranties and Other Mortgage-related Matters on page 44.

Provision for credit losses decreased $2.5 billion to $1.1 billion for the three months ended March 31, 2011 driven by improving home equity delinquencies. In addition, the provision for credit losses related to the Countrywide PCI home equity portfolio was $475 million for the three months ended March 31, 2011 compared to $764 million for the same period in 2010, which included the impact related to certain modified loans that were written down to the underlying collateral value.

Noninterest expense increased $1.6 billion to $4.9 billion for the three months ended March 31, 2011. Our agreements with the GSEs provide timelines to complete the liquidation of delinquent loans. In instances where we fail to meet these timelines, our agreements provide the GSEs with the option to assess compensatory fees. As a result of the default timelines, our costs have increased driven in part by $874 million of mortgage-related assessments and waivers costs which included $548 million for compensatory fees that we expect to be assessed by the GSEs as a result of foreclosure delays compared to $230 million in the three months ended December 31, 2010 and none in the three months ended March 31, 2010, with the remainder being out-of-pocket costs that we do not expect to recover. We expect such costs will continue as additional loans are delayed in the foreclosure process and as the GSEs assert a more aggressive criteria. In addition, higher litigation expense and default-related and other loss mitigation expenses also contributed to the increase in expenses. These increases were partially offset by lower production expenses due to lower origination volumes and insurance expenses.

Mortgage Banking Income

Consumer Real Estate Services mortgage banking income is categorized into production and servicing income. Core production income is comprised of revenue from the fair value gains and losses recognized on our interest rate lock commitments (IRLCs) and loans held-for-sale (LHFS), the related secondary market execution, and costs related to representations and warranties in the sales transactions along with other obligations incurred in the sales of mortgage loans. In addition, production income includes revenue, which is offset in All Other, for transfers of mortgage loans from Consumer Real Estate Services to the ALM portfolio related to the Corporation’s mortgage production retention decisions. Ongoing costs related to representations and warranties and other obligations that were incurred in the sales of mortgage loans in prior periods are also included in production income.

Servicing income includes income earned in connection with servicing activities and MSR valuation adjustments, net of economic hedge activities. The costs associated with our servicing activities are included in noninterest expense.

The table below summarizes the components of mortgage banking income.


*Mortgage Banking Income*
	Three Months Ended March 31
(Dollars in millions)	2011			2010

Production income (loss):
Core production revenue	$	668		$	1,283
Representations and warranties provision		(1,013	)		(526	)

Total production income (loss)		(345	)		757

Servicing income:
Servicing fees		1,606			1,569
Impact of customer payments ⁽¹⁾		(706	)		(1,056	)
Fair value changes of MSRs, net of economic hedge results ⁽²⁾		2			197
Other servicing-related revenue		137			174

Total net servicing income		1,039			884

Total Consumer Real Estate Services mortgage banking income		694			1,641
Eliminations ⁽³⁾		(64	)		(141	)

Total consolidated mortgage banking income	$	630		$	1,500


⁽¹⁾		Represents the change in the market value of the MSR asset due to the impact of customer payments received during the period.

⁽²⁾		Includes sale of MSRs.

⁽³⁾		Includes the effect of transfers of mortgage loans from Consumer Real Estate Services to the ALM portfolio in All Other .

Core production revenue of $668 million represented a decrease of $615 million for the three months ended March 31, 2011 compared to the same period in 2010 due to lower volumes driven by a reallocation of resources and competitive pressure resulting in a decline in market share. Representations and warranties provision increased $487 million to $1.0 billion for the three months ended March 31, 2011 compared to the same period in 2010. More than half of the $1.0 billion provision was attributable to the GSEs due to higher estimated repurchase rates related to the GSEs and HPI deterioration. The balance of the provision was primarily attributable to additional experience with a monoline. For additional information on representations, and more specifically certain alleged matters on page 168, and warranties, see Note 9 — Representations and Warranties Obligations and Corporate Guarantees to the Consolidated Financial Statements and Representations and Warranties and Other Mortgage-related Matters on page 44.

Net servicing income increased $155 million as the lower impact of customer payments and higher fee income was partially offset by less favorable MSR results, net of hedges, compared to the three months ended March 31, 2010. For additional information on MSRs and the related hedge instruments, see Mortgage Banking Risk Management on page 110.


*Consumer Real Estate Services Key Statistics*
	Three Months Ended March 31
(Dollars in millions, except as noted)	2011			2010

Loan production
Consumer Real Estate Services:
First mortgage	$	52,519		$	66,965
Home equity		1,575			1,771
Total Corporation ⁽¹⁾:
First mortgage		56,734			69,502
Home equity		1,728			2,027


	March 31			December 31
Period end	2011			2010

Mortgage servicing portfolio (in billions) ^{(2, 3)}	$	2,028		$	2,057
Mortgage loans serviced for investors (in billions) ⁽³⁾		1,610			1,628
Mortgage servicing rights:
Balance		15,282			14,900
Capitalized mortgage servicing rights (% of loans serviced for investors)		95	bps		92	bps


⁽¹⁾		In addition to loan production in Consumer Real Estate Services, the remaining first mortgage and home equity loan production is primarily in GWIM.

⁽²⁾		Servicing of residential mortgage loans, home equity lines of credit, home equity loans and discontinued real estate mortgage loans.

⁽³⁾		The total Consumer Real Estate Services mortgage servicing portfolio consists of $1,061 billion in Home Loans & Insurance and $967 billion in Legacy Asset Servicing at March 31, 2011. The total Consumer Real Estate Services mortgage loans serviced for investors consist of $799 billion in Home Loans & Insurance and $811 billion in Legacy Asset Servicing at March 31, 2011.

First mortgage production was $56.7 billion for the three months ended March 31, 2011 compared to $69.5 billion for the same period in 2010. The decrease of $12.8 billion was primarily due to a decline in market share caused primarily by our exit from the wholesale origination channel in the fall of 2010, the redeployment of centralized retail sales and fulfillment associates to the servicing division and a reduction in correspondent market share due to competitive pricing and tightening of our underwriting guidelines compared to our competitors.

Home equity production was $1.7 billion for the three months ended March 31, 2011 compared to $2.0 billion for the same period in 2010 primarily due to a decline in reverse mortgage originations based on our decision to exit this business in February 2011.

At March 31, 2011, the consumer MSR balance was $15.3 billion, which represented 95 bps of the related unpaid principal balance compared to $14.9 billion or 92 bps of the related unpaid principal balance at December 31, 2010. The increase in the consumer MSR balance was primarily driven by the addition of new MSRs recorded in connection with sales of loans and the impact of higher mortgage rates. These increases were partially offset by the impact of elevated servicing costs, including certain items outlined in the federal bank regulators’ consent order which reduced expected cash flows and the value of the MSRs. These factors together resulted in the 3 bps increase in capitalized MSRs as a percentage of loans serviced. In the fourth quarter of 2010, the costs to service used in our MSR valuation were impacted by our review of the foreclosure process. For addition information on our servicing activities, see Other Mortgage-related Matters — Review of Foreclosure Processes and Certain Servicing-related Items beginning on page 50.

Global Commercial Banking


	Three Months Ended March 31
(Dollars in millions)	2011			2010			% Change

Net interest income ⁽¹⁾	$	1,846		$	2,189			(16	)%
Noninterest income:
Service charges		606			599			1
All other income		196			300			(35	)

Total noninterest income		802			899			(11	)

Total revenue, net of interest expense		2,648			3,088			(14	)

Provision for credit losses		76			936			(92	)
Noninterest expense		1,106			1,030			7

Income before income taxes		1,466			1,122			31
Income tax expense ⁽¹⁾		543			419			30

Net income	$	923		$	703			31


Net interest yield ⁽¹⁾		2.73	%		3.39	%
Return on average equity ⁽²⁾		9.02			6.40
Return on average economic capital ^{(2, 3)}		17.97			11.94
Efficiency ratio ⁽¹⁾		41.74			33.35

Balance Sheet

Average
Total loans and leases	$	191,977		$	213,838			(10	)%
Total earning assets		274,648			261,640			5
Total assets		312,557			298,007			5
Total deposits		160,217			143,635			12
Allocated equity		41,493			44,566			(7	)
Economic capital ⁽⁴⁾		20,793			23,950			(13	)



	March 31		December 31
Period end	2011		2010

Total loans and leases	$	190,293	$	193,568	(2	)%
Total earning assets		272,410		274,622	(1	)
Total assets		309,917		312,787	(1	)
Total deposits		161,584		161,278	-


⁽¹⁾		FTE basis

⁽²⁾		Increases in the ratios resulted from higher net income and a lower economic capital due to improved credit quality, declining loan balances and periodic refinements in the risk-based allocation process.

⁽³⁾		Return on average economic capital is calculated as net income, excluding cost of funds and earnings credit on intangibles, divided by average economic capital.

⁽⁴⁾		Economic capital represents allocated equity less goodwill and a percentage of intangible assets.

Global Commercial Banking provides a wide range of lending-related products and services, integrated working capital management and treasury solutions to clients through our network of offices and client relationship teams along with various product partners. Our clients include business banking and middle-market companies, commercial real estate firms and governments, and are generally defined as companies with annual sales up to $2 billion. Our lending products and services include commercial loans and commitment facilities, real estate lending, asset-based lending and indirect consumer loans. Our capital management and treasury solutions include treasury management, foreign exchange and short-term investing options. Effective with the first quarter of 2011, management responsibility for the merchant processing joint venture, Banc of America Merchant Services, LLC, was moved from GBAM to Global Commercial Banking where it more closely aligns with the business model. Prior periods have been restated to reflect this change.

Global Commercial Banking recorded net income of $923 million in the three months ended March 31, 2011 compared to $703 million for the same period in 2010, with the improvement driven by lower credit costs partially offset by lower revenue.

Net interest income decreased $343 million due to a decline in average loans as well as a lower net interest income allocation related to ALM activities. Offsetting the decrease was the impact of an increase in average deposits of $16.6 billion, or 12 percent.

Noninterest income decreased $97 million, or 11 percent, largely because the prior-year period included a gain on an expired loan purchase agreement. For further information, see Note 11 — Commitments and Contingencies to the Consolidated Financial Statements.

The provision for credit losses decreased $860 million to $76 million for the three months ended March 31, 2011 compared to the year ago period. The decrease was driven by improvements primarily in the commercial real estate portfolio reflecting stabilizing property values, and improved borrower credit profiles in the U.S. commercial portfolio. Most portfolios experienced lower net charge-offs attributable to more stable economic conditions.

Noninterest expense increased $76 million to $1.1 billion driven by higher personnel expense and an increase in other support costs.

Global Commercial Banking Revenue

Global Commercial Banking revenue can also be categorized as treasury services revenue primarily from capital and treasury management, and business lending revenue derived from credit related products and services. Treasury services revenue for the three months ended March 31, 2011 was $1.2 billion, a decrease of $45 million compared to the same period for 2010. The decline was driven by a lower net interest income allocation related to ALM activities and lower treasury service charges, partially offset by the impact of higher deposit balances. As clients manage through current economic conditions, we have seen usage of certain treasury services decline and increased conversion of paper to electronic services. These actions, combined with our clients leveraging compensating balances to offset fees, have negatively impacted treasury services revenue. Business lending revenue for the three months ended March 31, 2011 was $1.5 billion, a decrease of $395 million compared to the same period in 2010, due to a lower net interest income allocation related to ALM activities, lower loan balances and because the prior year period included a gain on an expired loan purchase agreement. Average loan and lease balances decreased $21.9 billion compared to the same period in 2010 due to client deleveraging and reductions in the run-off portfolios.

Global Banking & Markets


	Three Months Ended March 31
(Dollars in millions)		2011			2010			% Change

Net interest income ⁽¹⁾		$	2,038		$	2,170			(6	)%
Noninterest income:
Service charges			475			463			3
Investment and brokerage services			677			623			9
Investment banking fees			1,511			1,216			24
Trading account profits			2,620			5,072			(48	)
All other income			566			149			n/m

Total noninterest income			5,849			7,523			(22	)

Total revenue, net of interest expense			7,887			9,693			(19	)

Provision for credit losses			(202	)		236			(186	)
Noninterest expense			4,726			4,292			10

Income before income taxes			3,363			5,165			(35	)
Income tax expense ⁽¹⁾			1,231			1,927			(36	)

Net income		$	2,132		$	3,238			(34	)


Return on average equity ⁽²⁾			20.57	%		24.72	%
Return on average economic capital ^{(2, 3)}			28.00			31.14
Efficiency ratio ⁽¹⁾			59.92			44.28

Balance Sheet

Average
Total trading-related assets		$	455,932		$	508,914			(10	)%
Total loans and leases			103,704			99,034			5
Total market-based earning assets			467,042			527,316			(11	)
Total earning assets			573,505			625,339			(8	)
Total assets			708,231			776,584			(9	)
Total deposits			112,028			103,634			8
Allocated equity			42,029			53,131			(21	)
Economic capital ⁽⁴⁾			31,197			42,470			(27	)



	March 31		December 31
Period End	2011		2010

Total trading-related assets	$	455,889	$	413,567	10	%
Total loans and leases		105,651		99,964	6
Total market-based earning assets		465,609		416,174	12
Total earning assets		563,921		510,358	10
Total assets		698,399		651,638	7
Total deposits		115,212		110,971	4


⁽¹⁾		FTE basis

⁽²⁾		Decreases in the ratios resulted from lower net income partially offset by a decrease in economic capital due to improved credit quality and periodic refinements in the risk-based allocation process.

⁽³⁾		Return on average economic capital is calculated as net income, excluding cost of funds and earnings credit on intangibles, divided by average economic capital.

⁽⁴⁾		Economic capital represents allocated equity less goodwill and a percentage of intangible assets.

GBAM provides financial products, advisory services, financing, securities clearing, settlement and custody services globally to our institutional investor clients in support of their investing and trading activities. We also work with our commercial and corporate clients to provide debt and equity underwriting and distribution capabilities, merger-related and other advisory services, and risk management products using interest rate, equity, credit, currency and commodity derivatives, foreign exchange, fixed-income and mortgage-related products. As a result of our market-making activities in these products, we may be required to manage positions in government securities, equity and equity-linked securities, high-grade and high-yield corporate debt securities, commercial paper, mortgage-backed securities (MBS) and asset-backed securities (ABS). Underwriting debt and equity issuances, securities research and certain market-based activities

are executed through our global broker/dealer affiliates which are our primary dealers in several countries. GBAM is a leader in the global distribution of fixed-income, currency and energy commodity products and derivatives. GBAM also has one of the largest equity trading operations in the world and is a leader in the origination and distribution of equity and equity-related products. Our corporate banking services provide a wide range of lending-related products and services, integrated working capital management and treasury solutions to clients through our network of offices and client relationship teams along with various product partners. Our corporate clients are generally defined as companies with annual sales greater than $2 billion. Effective with the first quarter of 2011, the merchant processing joint venture, Banc of America Merchant Services, LLC, was moved from GBAM to Global Commercial Banking, and prior periods have been restated.

Net income decreased $1.1 billion to $2.1 billion for the three months ended March 31, 2011 compared to the same period in 2010 due to a less favorable trading environment than last year’s record quarter and higher noninterest expense driven by increased costs related to investments in infrastructure and technology. This was partially offset by a lower provision for credit losses which decreased $438 million compared to the year ago period driven by stabilization in borrower credit profiles leading to lower reservable criticized levels and net charge-offs which included a legal settlement recovery.

Components of Global Banking & Markets

Sales and Trading Revenue

Sales and trading revenue is segregated into fixed-income including investment and non-investment grade corporate debt obligations, commercial mortgage-backed securities (CMBS), residential mortgage-backed securities (RMBS) and CDOs; currencies including interest rate and foreign exchange contracts; commodities including primarily futures, forwards, swaps and options; and equity income from equity-linked derivatives and cash equity activity.


	Three Months Ended March 31
(Dollars in millions)		2011		2010

Sales and trading revenue ⁽¹⁾
Fixed income, currencies and commodities (FICC)		$	3,646	$	5,487
Equity income			1,249		1,514

Total sales and trading revenue		$	4,895	$	7,001


⁽¹⁾		Includes $56 million and $73 million of net interest income on a FTE basis and $677 million and $623 million of investment and brokerage services revenue for the three months ended March 31, 2011 and 2010.

Sales and trading revenue decreased $2.1 billion, or 30 percent, to $4.9 billion for the three months ended March 31, 2011 compared to the same period in 2010 due to a less favorable trading environment than last year’s record quarter as noted above. We recorded DVA losses during the three months ended March 31, 2011 of $357 million compared to gains of $169 million in the same period in 2010.

FICC revenue decreased $1.8 billion to $3.6 billion for the three months ended March 31, 2011 due to a weaker trading environment, specifically in rates and currencies, and the wind down of our proprietary trading business. In conjunction with regulatory reform measures, we are in the process of winding down our proprietary trading business with completion expected later this year. Proprietary trading revenue was $208 million for the three months ended March 31, 2011 compared to $456 million for the same period in 2010.

Equity income was $1.2 billion for the three months ended March 31, 2011 compared to $1.5 billion for the same period in 2010 with the decrease driven primarily by lower equity derivative trading volumes partially offset by an increase in commission revenue in the cash business.

Investment Banking Fees

Product specialists within GBAM provide advisory services, underwrite and distribute debt and equity issuances and certain other loan products. The table below presents total investment banking fees for GBAM which represents 96 and 98 percent of the Corporation’s total investment banking income for the three months ended March 31, 2011 and 2010 with the remainder comprised of investment banking income as reported in GWIM and Global Commercial Banking.


	Three Months Ended March 31
(Dollars in millions)		2011		2010

Investment banking fees
Advisory ⁽¹⁾		$	319	$	167
Debt issuance			799		735
Equity issuance			393		314

Total investment banking fees		$	1,511	$	1,216


⁽¹⁾		Advisory includes fees on debt and equity advisory services and mergers and acquisitions.

Investment banking income increased $295 million for the three months ended March 31, 2011 compared to the same period a year ago reflecting strong performance in mergers and acquisitions as well as debt and equity issuances, particularly within leveraged finance.

Global Corporate Banking

Client relationship teams along with product partners work with our customers to provide a wide range of lending-related products and services, integrated working capital management and treasury solutions through the Corporation’s global network of offices. Global Corporate Banking revenue of $1.5 billion for the three months ended March 31, 2011 was in line with the same period in 2010 as growth in deposit balances from client retention of excess cash and increases in loan and trade finance, particularly internationally, continue to offset weak domestic loan demand.

Collateralized Debt Obligation Exposure

CDO vehicles hold diversified pools of fixed-income securities and issue multiple tranches of debt securities including commercial paper, mezzanine and equity securities. Our CDO-related exposure can be divided into funded and unfunded super senior liquidity commitment exposure, other super senior exposure (i.e., cash positions and derivative contracts), warehouse, and sales and trading positions. For more information on our CDO positions, see Note 8 – Securitizations and Other Variable Interest Entities to the Consolidated Financial Statements. Super senior exposure represents the most senior class of commercial paper or notes that are issued by the CDO vehicles. These financial instruments benefit from the subordination of all other securities issued by the CDO vehicles. In the three months ended March 31, 2011, we recorded $5 million of losses from our CDO-related exposure compared to $292 million of losses for the same period in 2010.

At March 31, 2011, our hedged and unhedged super senior CDO exposure before consideration of insurance, net of write-downs, was $1.9 billion compared to $2.0 billion at December 31, 2010. The total super senior exposure of $1.9 billion was marked at 20 percent of original exposure, including $101 million of retained positions from liquidated CDOs marked at 47 percent, $712 million of non-subprime exposure marked at 50 percent and the remaining $1.1 billion of subprime exposure marked at 15 percent of the original exposure amounts. Unrealized losses recorded in accumulated OCI on super senior cash positions and retained positions from liquidated CDOs in aggregate decreased $351 million during the three months ended March 31, 2011 to $115 million primarily due to tightening of RMBS and CMBS spreads and the subsequent sales of two ABS CDOs.

The table below presents our original total notional, mark-to-market receivable and credit valuation adjustment for credit default swaps and other positions with monolines. The receivable for super senior CDOs reflects hedge gains recorded from inception of the contracts in connection with write-downs on super senior CDOs.


*Credit Default Swaps with Monoline Financial Guarantors*
	March 31, 2011									December 31, 2010
				Other									Other
	Super			Guaranteed						Super			Guaranteed
(Dollars in millions)	Senior CDOs			Positions			Total			Senior CDOs			Positions			Total

Notional	$	3,225		$	35,273		$	38,498		$	3,241		$	35,183		$	38,424

Mark-to-market or guarantor receivable	$	2,693		$	5,623		$	8,316		$	2,834		$	6,367		$	9,201
Credit valuation adjustment		(2,444	)		(2,838	)		(5,282	)		(2,168	)		(3,107	)		(5,275	)

Total	$	249		$	2,785		$	3,034		$	666		$	3,260		$	3,926

Credit valuation adjustment %		91	%		50	%		64	%		77	%		49	%		57	%
(Write-downs) gains	$	(276	)	$	(131	)	$	(407	)	$	(386	)	$	362		$	(24	)

Total monoline exposure, net of credit valuation adjustments, decreased $892 million during the three months ended March 31, 2011. This decrease was driven by lower positive valuation adjustments related to spread tightening on most legacy asset classes and terminated monoline contracts when compared to the prior period. Additionally, the increase in the credit valuation adjustment as a percent of total super senior CDO exposure was driven by reductions in recovery expectations for a monoline counterparty. Total write-downs for the quarter were $407 million which consisted of changes in credit valuation adjustments as well as hedge losses due to a breakdown in correlations during the three months ended March 31, 2011.

With the Merrill Lynch acquisition, we acquired a loan with a carrying value of $4.1 billion as of March 31, 2011 that is collateralized by U.S. super senior ABS CDOs. Merrill Lynch originally provided financing to the borrower for an amount equal to approximately 75 percent of the fair value of the collateral. The loan is recorded in All Other and all scheduled payments on the loan have been received. Events of default under the loan are customary events of default, including failure to pay interest when due and failure to pay principal at maturity. Collateral for the loan is excluded from our CDO exposure.

Global Wealth & Investment Management


	Three Months Ended March 31
(Dollars in millions)		2011			2010			% Change

Net interest income ⁽¹⁾		$	1,569		$	1,464			7	%
Noninterest income:
Investment and brokerage services			2,377			2,106			13
All other income			544			468			16

Total noninterest income			2,921			2,574			13

Total revenue, net of interest expense			4,490			4,038			11

Provision for credit losses			46			242			(81	)
Noninterest expense			3,600			3,103			16

Income before income taxes			844			693			22
Income tax expense ⁽¹⁾			313			259			21

Net income		$	531		$	434			22


Net interest yield ⁽¹⁾			2.34	%		2.60	%
Return on average equity ⁽²⁾			12.01			9.87
Return on average economic capital ^{(2, 3)}			30.34			26.35
Efficiency ratio ⁽¹⁾			80.18			76.86

Balance Sheet

Average
Total loans and leases		$	100,851		$	98,841			2	%
Total earning assets			271,564			227,956			19
Total assets			291,907			249,799			17
Total deposits			258,518			221,613			17
Allocated equity			17,938			17,825			1
Economic capital ⁽⁴⁾			7,210			7,037			2



	March 31		December 31
Period end	2011		2010

Total loans and leases	$	101,286	$	100,724	1	%
Total earning assets		259,805		268,963	(3	)
Total assets		280,524		289,954	(3	)
Total deposits		256,526		257,983	(1	)


⁽¹⁾		FTE basis

⁽²⁾		Increases in equity ratios resulted from higher net income partially offset by a slight increase in economic capital.

⁽³⁾		Return on average economic capital is calculated as net income, excluding cost of funds and earnings credit on intangibles, divided by average economic capital.

⁽⁴⁾		Economic capital represents allocated equity less goodwill and a percentage of intangible assets.

GWIM consists of three primary businesses: Merrill Lynch Global Wealth Management (MLGWM); U.S. Trust, Bank of America Private Wealth Management (U.S. Trust); and Retirement Services.

MLGWM’s advisory business provides a high-touch client experience through a network of approximately 15,700 financial advisors focused on clients with more than $250,000 in total investable assets. MLGWM provides tailored solutions to meet our client’s needs through a full set of brokerage, banking and retirement products in both domestic and international locations. Effective January 1, 2011, the Merrill Edge business was moved from MLGWM to Deposits and prior periods have been restated; however, the Merrill Edge advisor count is reported in GWIM.

U.S. Trust, together with MLGWM’s Private Banking & Investments Group, provides comprehensive wealth management solutions targeted at wealthy and ultra-wealthy clients with investable assets of more than $5 million, as well as customized solutions to meet clients’ wealth structuring, investment management, trust and banking needs, including specialty asset management services.

Retirement Services partners with financial advisors to provide institutional and personal retirement solutions including investment management, administration, recordkeeping and custodial services for 401(k), pension, profit-sharing, equity award and non-qualified deferred compensation plans. Retirement Services also provides comprehensive investment advisory services to individuals, small to large corporations and pension plans.

GWIM results also include the BofA Global Capital Management (BACM) business, which is comprised primarily of the cash and liquidity asset management business that was retained following the sale of the Columbia Management long-term asset management business on May 1, 2010.

Compared to the same period in 2010, revenue from MLGWM was $3.5 billion, up 18 percent for the three months ended March 31, 2011. Revenue from U.S. Trust was $696 million, up nine percent. Revenue from Retirement Services was $272 million, up 14 percent.

GWIM results include the impact of migrating clients and their related deposit and loan balances to or from Deposits, Consumer Real Estate Services and the ALM portfolio, as presented in the table below. This quarter’s migration includes the additional movement of balances to Merrill Edge, now in Deposits. Subsequent to the date of the migration, the associated net interest income, noninterest income and noninterest expense are recorded in the business to which the clients migrated.


*Migration Summary*
	Three Months Ended March 31
(Dollars in millions)	2011			2010

Average
Total deposits — GWIM from / (to) Deposits	$	(1,317	)	$	922
Total loans — GWIM to Consumer Real Estate Services and the ALM portfolio		-			(1,070	)

Period end
Total deposits — GWIM from / (to) Deposits	$	(3,362	)	$	2,683
Total loans — GWIM to Consumer Real Estate Services and the ALM portfolio		-			(1,355	)

Net income increased $97 million, or 22 percent, to $531 million for the three months ended March 31, 2011 compared to the same period in 2010 driven by higher net interest income and noninterest income as well as lower credit costs, partially offset by higher expenses. Net interest income increased $105 million, or seven percent, to $1.6 billion driven by the $36.9 billion increase in average deposits partially offset by a lower allocation of income related to ALM activities. Noninterest income increased $347 million, or 13 percent, to $2.9 billion primarily due to higher asset management fees from improved equity market levels and flows into long-term assets under management (AUM), and higher brokerage income due to higher transactional activity. Provision for credit losses decreased $196 million to $46 million driven by improving portfolio trends. Noninterest expense increased $497 million, or 16 percent, to $3.6 billion driven by higher revenue-related expenses, support costs and personnel costs associated with the continued build-out of the business.

Client Balances

The table below presents client balances which consist of assets under management, client brokerage assets, assets in custody, client deposits, and loans and leases. The increase in client balances was driven by higher market levels and inflows into long-term AUM and fee-based brokerage assets which more than offset liquidity outflows from BACM.


*Client Balances by Type*
	March 31		December 31
(Dollars in millions)	2011		2010

Assets under management	$	664,466	$	630,498
Brokerage assets ⁽¹⁾		1,087,097		1,077,049
Assets in custody		116,816		115,033
Deposits		256,526		257,983
Loans and leases		101,286		100,724

Total client balances	$	2,226,191	$	2,181,287


⁽¹⁾		Client brokerage assets include non-discretionary brokerage and fee-based assets.

All Other


	Three Months Ended March 31
(Dollars in millions)		2011			2010			% Change

Net interest income ⁽¹⁾		$	92		$	41			124	%
Noninterest income:
Equity investment income			1,409			512			175
Gains on sales of debt securities			468			648			(28	)
All other income (loss)			(841	)		126			n/m

Total noninterest income			1,036			1,286			(19	)

Total revenue, net of interest expense			1,128			1,327			(15	)

Provision for credit losses			1,799			1,218			48
Merger and restructuring charges			202			521			(61	)
All other noninterest expense			1,286			1,207			7

Loss before income taxes			(2,159	)		(1,619	)		(33	)
Income tax benefit ⁽¹⁾			(947	)		(834	)		(14	)

Net loss		$	(1,212	)	$	(785	)		(54	)


Balance Sheet

Average
Total loans and leases		$	258,350		$	256,156			1	%
Total assets ⁽²⁾			206,910			320,546			(35	)
Total deposits			48,608			70,858			(31	)
Allocated equity ⁽³⁾			60,749			19,807			n/m



	March 31		December 31
Period end	2011		2010

Total loans and leases	$	256,930	$	255,213	1	%
Total assets ⁽²⁾		160,505		186,468	(14	)
Total deposits		34,817		38,748	(10	)


⁽¹⁾		FTE basis

⁽²⁾		Includes elimination of segments’ excess asset allocations to match liabilities (i.e., deposits) of $668.4 billion and $589.4 billion for the three months ended March 31, 2011 and 2010, and $661.6 billion and $647.8 billion at March 31, 2011 and December 31, 2010.

⁽³⁾		Represents both the risk-based capital and the portion of goodwill and intangibles assigned to All Other as well as the remaining portion of equity not specifically allocated to the segments.

All Other consists of two broad groupings, Equity Investments and Other. Equity Investments includes Global Principal Investments, Strategic and other investments, and Corporate Investments. Substantially all of the equity investments in Corporate Investments were sold during 2010. Other includes liquidating businesses, merger and restructuring charges, ALM functions (i.e., residential mortgage portfolio and investment securities) and related activities (i.e., economic hedges, fair value option on structured liabilities), and the impact of certain allocation methodologies. Other also includes certain residential mortgage and discontinued real estate products that are managed by Legacy Asset Servicing within Consumer Real Estate Services. For additional information on the other activities included in All Other, see Note 26 – Business Segment Information to the Consolidated Financial Statements of the Corporation’s 2010 Annual Report on Form 10-K.

All Other reported a net loss of $1.2 billion in the three months ended March 31, 2011 compared to a net loss of $785 million for the same period in 2010 with the increased loss due to lower revenue and higher provision for credit losses. The decrease in revenue was driven by negative fair value adjustments of $586 million on structured liabilities, reflecting a tightening of credit spreads, in the three months ended March 31, 2011 compared to positive fair value adjustments of $224 million for the same period in 2010 and a $180 million decrease in gains on sales of debt securities. These were partially offset by an $897 million increase in equity investment income (see the Equity Investment Activity discussion beginning on page 43) primarily due to a $1.1 billion gain related to an IPO of an equity investment in 2011. The prior year period included $269 million of income from certain strategic investments, some of which were sold, that did not occur during the three months ended March 31, 2011. Also contributing to the offset was a $319 million decrease in merger and restructuring charges.

Provision for credit losses increased $581 million to $1.8 billion for the three months ended March 31, 2011 compared to the same period in 2010 driven by reserve additions related to the Countrywide PCI discontinued real estate and residential mortgage portfolios. These increases were partially offset by lower provision for credit losses related to the non-PCI residential mortgage portfolio due to improving portfolio trends.

The income tax benefit for the three months ended March 31, 2011 was $947 million compared to $834 million for the same period in 2010, driven by an increase in the pre-tax loss.

Equity Investments Activity

The tables below present the components of All Other’s equity investments at March 31, 2011 and December 31, 2010, and also a reconciliation of All Other’s equity investment income to the total consolidated equity investment income for the three months ended March 31, 2011 and 2010.


*Equity Investments*
	March 31		December 31
(Dollars in millions)	2011		2010

Global Principal Investments	$	11,221	$	11,656
Strategic and other investments		23,873		22,545

Total equity investments included in *All Other*	$	35,094	$	34,201


*Equity Investment Income*
	Three Months Ended March 31
(Dollars in millions)		2011		2010

Global Principal Investments		$	1,365	$	577
Strategic and other investments			44		246
Corporate Investments			-		(311	)

Total equity investment income included in All Other			1,409		512
Total equity investment income included in the business segments			66		113

Total consolidated equity investment income		$	1,475	$	625

Global Principal Investments (GPI) is comprised of a diversified portfolio of investments in private equity, real estate and other alternative investments. These investments are made either directly in a company or held through a fund with related income recorded in equity investment income. GPI had unfunded equity commitments of $1.3 billion and $1.4 billion at March 31, 2011 and December 31, 2010, related to certain of these investments. During 2010, we sold our exposure of $2.9 billion in certain private equity funds, comprised of $1.5 billion in funded exposure and $1.4 billion in unfunded commitments.

Affiliates of the Corporation may, from time to time, act as general partner, fund manager and/or investment advisor to certain Corporation-sponsored real estate private equity funds. In this capacity, these affiliates manage and/or provide investment advisory services to such real estate private equity funds primarily for the benefit of third-party institutional and private clients. These activities, which are recorded in GPI, inherently involve risk to us and to the fund investors, and in certain situations may result in losses. In late 2010, the general partner and investment advisor responsibilities were transferred to an independent third-party asset manager for these real estate private equity funds.

Strategic and other investments includes primarily our investment in China Construction Bank (CCB) of $21.0 billion, which increased by $1.3 billion from December 31, 2010 due to appreciation in the CCB share price, as well as our $2.2 billion investment in BlackRock, Inc. (BlackRock). At March 31, 2011, we owned approximately 10 percent, or 25.6 billion common shares of CCB and seven percent, or 13.6 million preferred shares of BlackRock. For additional information on certain Corporate and Strategic Investments, see Note 5 – Securities to the Consolidated Financial Statements.

In the first quarter of 2010, the $2.7 billion Corporate Investments equity securities portfolio, which consisted of highly liquid publicly-traded equity securities, was sold as a result of a change in our investment portfolio objectives shifting more to interest earnings and reducing our exposure to equity market risk, which contributed to the loss in Corporate Investments in the three months ended March 31, 2010.

Off-Balance Sheet Arrangements and Contractual Obligations

We have contractual obligations to make future payments on debt and lease agreements. Additionally, in the normal course of business, we enter into a number of off-balance sheet commitments including commitments to extend credit such as loan commitments, standby letters of credit (SBLCs) and commercial letters of credit to meet the financing needs of our customers. For additional information on our obligations and commitments, see Note 11 – Commitments and Contingencies to the Consolidated Financial Statements, page 51 of the MD&A of the Corporation’s 2010 Annual Report on Form 10-K, as well as Note 13 – Long-term Debt and Note 14 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation’s 2010 Annual Report on Form 10-K.

Representations and Warranties and Other Mortgage-related Matters

Representations and Warranties

We securitize first-lien residential mortgage loans generally in the form of MBS guaranteed by GSEs or the Government National Mortgage Association (GNMA) in the case of the FHA insured and U.S. Department of Veterans Affairs (VA) guaranteed mortgage loans. In addition, in prior years, legacy companies and certain subsidiaries sold pools of first-lien residential mortgage loans and home equity loans as private-label securitizations or in the form of whole loans. In connection with these transactions, we or our subsidiaries or legacy companies make or have made various representations and warranties. Breaches of these representations and warranties may result in the requirement to repurchase mortgage loans or to otherwise make whole or provide other remedies to a whole-loan buyer or securitization trust (collectively, repurchase claims). In such cases, we would be exposed to any subsequent credit loss on the repurchased mortgage loans. Our credit loss would be reduced by any recourse we may have to organizations (e.g., correspondents) that, in turn, had sold such loans to us. When a loan is originated by a correspondent or other third party, we typically have the right to seek a recovery of related repurchase losses from that originator. In the event a loan is originated and underwritten by a correspondent who obtains FHA insurance, any breach of FHA guidelines is the direct obligation of the correspondent, not the Corporation. At March 31, 2011, loans purchased from correspondents or other parties comprised approximately 27 percent of the loans’ underlying outstanding repurchase demands compared to approximately 25 percent at December 31, 2010. During the three months ended March 31, 2011, we experienced a decline in recoveries from correspondents and other parties, however, the actual recovery rate may vary from period-to-period based upon the underlying mix of correspondents and other parties (e.g., active, inactive, out-of-business originators) from which recoveries are sought.

For additional information about representations and warranties, see Note 9 – Representations and Warranties Obligations and Corporate Guarantees and Note 11 – Commitments and Contingencies to the Consolidated Financial Statements and Item 1A. Risk Factors of the Corporation’s 2010 Annual Report on Form 10-K. See Complex Accounting Estimates – Representations and Warranties on page 114 for information related to our estimated liability for representations and warranties and corporate guarantees related to mortgage-related securitizations.

The fair value of the obligations to be absorbed under the representations and warranties and the guarantees provided is recorded as an accrued liability when the loans are sold. The liability is updated for probable losses by accruing a representations and warranties provision in mortgage banking income. This is done throughout the life of the loan as necessary when additional relevant information becomes available. The methodology used to estimate the liability for representations and warranties is a function of the representations and warranties given and considers a variety of factors, which include, depending on the counterparty, actual defaults, estimated future defaults, historical loss experience, estimated home prices, other economic conditions, estimated probability that a repurchase request will be received, including consideration of whether presentation thresholds will be met, number of payments made by the borrower prior to default and estimated probability that a loan will be required to be repurchased. Changes to any one of these factors could significantly impact the estimate of our liability. Given that these factors vary by counterparty, we analyze our representations and warranties obligations based on the specific counterparty, or type of counterparty, with whom the sale was made. Generally the volume of unresolved repurchase claims from the FHA and VA for loans in GNMA-guaranteed securities is not significant because the requests are limited in number and are typically resolved quickly. Repurchase claims by GSEs, monoline insurers, whole-loan investors and private-label securitization investors have increased and we expect such efforts to continue to increase in the future. We vigorously contest any repurchase requests when we conclude that a valid basis for a repurchase claim did not exist and will continue to do so in the future. In addition, we may reach bulk settlements including settlement amounts which could be material with counterparties (in lieu of the loan-by-loan review process) if opportunities arise on terms determined to be advantageous to us. For additional information, see Note 9 – Representations and Warranties Obligations and Corporate Guarantees to the Consolidated Financial Statements.

At March 31, 2011, our total unresolved repurchase claims totaled approximately $13.6 billion compared to $10.7 billion at December 31, 2010. The increase in unresolved claims is primarily attributable to an increase in new claims submitted by the GSEs for both legacy Countrywide originations not covered by the GSE agreements and on Bank of America originations, combined with an increase in the volume of claims appealed by us and awaiting review and response from one GSE. The liability for representations and warranties and corporate guarantees, is included in accrued expenses and other liabilities and the related provision is included in mortgage banking income. At March 31, 2011 and December 31, 2010, the liability was $6.2 billion and $5.4 billion. For the three months ended March 31, 2011 and 2010, the provision for representations and warranties and corporate guarantees was $1.0 billion and $526 million. More than half of the $1.0 billion provision recorded in the three months ended March 31, 2011 was attributable to the GSEs due to higher estimated repurchase rates based on higher than expected claims from the GSEs and HPI deterioration experienced during the period. The balance of the provision is primarily attributable to additional experience with a monoline. A significant factor in the estimate of the liability for future losses is the performance of HPI, which declined in the three months ended March 31, 2011 and impacts the severity of losses in our representations and warranties liability. Representations and warranties provision may vary significantly each period as the methodology used to estimate the provision continues to be refined based on the level and type of repurchase claims presented, defects identified, the latest experience gained on repurchase claims and other relevant facts and circumstances, which could have a material adverse impact on our earnings for any particular period.

Government-sponsored Enterprises

During the last ten years, Bank of America and our subsidiaries have sold over $2 trillion of loans to the GSEs and we have an established history of working with them on repurchase claims. Our current repurchase claims experience with the GSEs is predominantly concentrated in the 2004 through 2008 origination vintages where we believe that our exposure to representations and warranties liability is most significant. Our repurchase claims experience related to loans originated prior to 2004 has not been significant and we believe that the changes made to our operations and underwriting policies have reduced our exposure after 2008. The cumulative repurchase claims for 2007 exceed all other vintages. The volume of loans originated in 2007 was significantly higher than any other vintage which, together with the high delinquency level in this vintage, helps to explain the high level of repurchase claims compared to the other vintages. On December 31, 2010, we reached agreements with the GSEs under which we paid $2.8 billion to resolve repurchase claims involving certain first-lien residential mortgage loans sold to the GSEs by entities related to legacy Countrywide.

Cumulative GSE Repurchase Requests by Vintage


⁽¹⁾		Exposure at default (EAD) represents the unpaid principal balance at the time of default or the unpaid principal balance as of March 31, 2011.

Bank of America and legacy Countrywide sold approximately $1.1 trillion of loans originated from 2004 through 2008 to the GSEs. As of March 31, 2011, 10 percent of the loans in these vintages have defaulted or are 180 days or more past

due (severely delinquent). At least 25 payments have been made on approximately 58 percent of severely delinquent or defaulted loans. Through March 31, 2011, we have received $25.3 billion in repurchase claims associated with these vintages, representing approximately two percent of the loans sold to the GSEs in these vintages. Including the agreement reached with Fannie Mae (FNMA) on December 31, 2010, we have resolved $19.3 billion of these claims with a net loss experience of approximately 29 percent. The claims resolved and the loss rate do not include $839 million in claims extinguished as a result of the agreement with Freddie Mac (FHLMC) due to the global nature of the agreement and, specifically, the absence of a formal apportionment of the agreement amount between current and future claims. Our collateral loss severity rate on approved repurchases has averaged approximately 45 to 55 percent. Based on the information derived from the historical GSE experience, including the December 31, 2010 GSE agreements, we believe we are approximately three quarters of the way through the receipt of the GSE repurchase claims that we expect to ultimately receive.

Table 10 highlights our experience with the GSEs related to loans originated from 2004 through 2008.



Table 10 Overview of GSE Balances
	Legacy Originator
											Percent of
(Dollars in billions)		Countrywide			Other			Total			total


Original funded balance		$	846		$	272		$	1,118
Principal payments			(420	)		(139	)		(559	)
Defaults			(40	)		(5	)		(45	)

Total outstanding balance at March 31, 2011		$	386		$	128		$	514


Outstanding principal balance 180 days or more past due (severely delinquent)		$	54		$	13		$	67

Defaults plus severely delinquent (principal at-risk)			94			18			112

Payments made by borrower:
Less than 13								$	16			14	%
13-24									31			28
25-36									34			30
More than 36									31			28

Total payments made by borrower								$	112			100	%

Outstanding GSE pipeline of representations and warranties claims (all vintages)
As of December 31, 2010								$	2.8
As of March 31, 2011									5.4
Cumulative representations and warranties losses (2004-2008 vintages)								$	6.8

Our liability as of March 31, 2011 for obligations under representations and warranties given to the GSEs considers, among other things, higher estimated repurchase rates based on higher than expected claims from the GSEs and HPI deterioration during the three months ended March 31, 2011. It also considers the December 31, 2010 agreements with the GSEs and their expected impact on the repurchase rates on future repurchase claims we might receive on loans that have defaulted or that we estimate will default. We currently believe that our remaining exposure to repurchase obligations for first-lien residential mortgage loans sold directly to the GSEs has been accounted for as a result of the recent adjustments to our recorded liability for representations and warranties for these loans sold directly to the GSEs. Our provision with respect to the GSEs is necessarily dependent on, and limited by, our historical claims experience with the GSEs which increased during the three months ended March 31, 2011 and may materially change in the future based on factors outside our control. We believe our predictive repurchase models, utilizing our historical repurchase experience with the GSEs while considering current developments, including the December 31, 2010 agreements with GSEs, projections of future defaults as well as certain other assumptions regarding economic conditions, home prices and other matters, allow us to reasonably estimate the liability for obligations under representations and warranties on loans sold to the GSEs. However, future provisions associated with representations and warranties made to the GSEs may be materially impacted if actual results are different from our assumptions regarding economic conditions, home prices and other matters, including the repurchase behavior of the GSEs and the estimated repurchase rates.

Transactions with Investors Other than Government-sponsored Enterprises

In prior years, legacy companies and certain subsidiaries have sold pools of first-lien mortgage loans and home equity loans as private-label securitizations or in the form of whole loans. As detailed in Table 11, legacy companies and certain subsidiaries sold loans originated from 2004 through 2008 with a principal balance of $963 billion to investors other than GSEs, of which approximately $486 billion in principal has been paid and $222 billion have defaulted, or are severely delinquent (i.e., 180 days or more past due) and are considered principal at-risk at March 31, 2011.

As it relates to private-label securitizations, a contractual liability to repurchase mortgage loans generally arises only if counterparties prove there is a breach of the representations and warranties that materially and adversely affects the interest of the investor or all investors in a securitization trust. We believe that the longer a loan performs, the less likely it is that an alleged underwriting representations and warranties breach had a material impact on the loan’s performance or that a breach even exists. Because the majority of the borrowers in this population would have made a significant number of payments if they are not yet 180 days or more past due, we believe that the principal balance at the greatest risk for repurchase claims in this population of private-label investors is a combination of loans that have already defaulted and those that are currently 180 days or more past due. Additionally, the obligation to repurchase mortgage loans also requires that counterparties have the contractual right to demand repurchase of the loans. A securitization trustee may investigate or demand repurchase on its own action, and most agreements contain a threshold, for example 25 percent of the voting rights per trust, that allows investors to declare a servicing event of default under certain circumstances or to request certain action, such as requesting loan files, that the trustee may choose to accept and follow, exempt from liability, provided the trustee is acting in good faith. If there is an uncured servicing event of default, and the trustee fails to bring suit during a 60-day period, then, under most agreements, investors may file suit. In addition to this, most agreements also allow investors to direct the securitization trustee to investigate loan files or demand the repurchase of loans, if security holders hold a specified percentage, for example, 25 percent, of the voting rights of each tranche of the outstanding securities. While we believe the agreements for private-label securitizations generally contain less rigorous representations and warranties and place higher burdens on investors seeking repurchases than the comparable agreements with the GSEs, the agreements generally include a representation that underwriting practices were prudent and customary.

Any amounts paid related to repurchase claims from a monoline insurer are paid to the securitization trust and are applied in accordance with the terms of the governing securitization documents, which may include use by the securitization trust to repay any outstanding monoline advances or reduce future advances from the monolines. To the extent that a monoline has not advanced funds or does not anticipate that it will be required to advance funds to the securitization trust, the likelihood of receiving a repurchase claim from a monoline may be reduced as the monoline would receive limited or no benefit from the payment of repurchase claims. Moreover, some monolines are not currently performing their obligations under the financial guaranty policies they issued which may, in certain circumstances, impact their ability to present repurchase claims.

Table 11 details the population of loans originated between 2004 and 2008 and the population of loans sold as whole-loans or in non-agency securitizations by entity and product together with the principal at-risk stratified by the number of payments the borrower made prior to default or becoming severely delinquent at March 31, 2011. As shown in Table 11, at least 25 payments have been made on approximately 60 percent of the loans included in principal at-risk. We believe many of the defaults observed in these securitizations have been, and continue to be, driven by external factors like the substantial depreciation in home prices, persistently high unemployment and other negative economic trends, diminishing the likelihood that any loan defect (assuming one exists at all) was the cause of the loan’s default. As of March 31, 2011, approximately 23 percent of the loans sold to non-GSEs that were originated between 2004 and 2008 have defaulted or are severely delinquent.



Table 11 Overview of Non-Agency Securitization and Whole Loan Balances
(Dollars in billions)	Principal Balance										Principal At-risk
					Outstanding
			Outstanding		Principal						Borrower Made		Borrower Made		Borrower Made		Borrower Made
	Original		Principal Balance		Balance 180 Days		Defaulted		Principal		less than 13		13 to 24		25 to 36		more than 36
By Entity	Principal Balance		March 31, 2011		or More Past Due		Principal Balance		At-risk		Payments		Payments		Payments		Payments

Bank of America	$	100	$	33	$	5	$	3	$	8	$	1	$	2	$	2	$	3
Countrywide		716		281		85		86		171		24		45		49		53
Merrill Lynch		65		22		7		10		17		3		4		3		7
First Franklin		82		23		7		19		26		4		6		4		12

Total ^{(1, 2, 3)}	$	963	$	359	$	104	$	118	$	222	$	32	$	57	$	58	$	75


By Product

Prime	$	302	$	117	$	16	$	12	$	28	$	2	$	6	$	8	$	12
Alt-A		172		79		22		23		45		7		12		12		14
Pay option		150		63		30		22		52		5		14		16		17
Subprime		245		81		36		44		80		16		19		17		28
Home equity		88		17		-		16		16		2		5		5		4
Other		6		2		-		1		1		-		1		-		-

Total	$	963	$	359	$	104	$	118	$	222	$	32	$	57	$	58	$	75


⁽¹⁾		Includes $186 billion of original principal balance related to transactions with monoline participation.

⁽²⁾		Excludes transactions sponsored by Bank of America and Merrill Lynch where no representations or warranties were made.

⁽³⁾		Includes exposures on third-party sponsored transactions related to legacy entity originations.

Although we have limited loan-level experience with non-GSE repurchase claims, we expect additional activity in this area going forward and that the volume of repurchase claims from monolines, whole-loan investors and investors in non-GSE securitizations will continue to increase in the future. It is reasonably possible that future representations and warranties losses may occur, and we currently estimate that the upper range of possible loss related to non-GSE sales as of March 31, 2011, could be $7 billion to $10 billion over existing accruals. Any reduction in the estimated range previously disclosed as of December 31, 2010, resulting from the additional accruals recorded during the three months ended March 31, 2011 was offset by an increase in estimated repurchase rates and HPI deterioration during the three months ended March 31, 2011. A significant portion of this estimate relates to representations and warranties repurchase claims for loans originated through legacy Countrywide. This estimate of the range of possible loss for representations and warranties does not represent a probable loss, is based on currently available information, significant judgment, and a number of assumptions, including those set forth below, that are subject to change. This estimate does not include related, reasonably possible litigation losses disclosed in Note 11 – Commitments and Contingencies to the Consolidated Financial Statements, nor does it include any separate foreclosure costs and related costs and assessments or any possible losses related to potential claims for breaches of performance of servicing obligations, potential claims under securities laws or potential indemnity or other claims against us. We are not able to reasonably estimate the amount of any possible loss with respect to any such servicing, securities or other claims against us; however, such loss could be material.

The methodology used to estimate this non-GSE range of possible loss for representations and warranties considers a variety of factors including our experience related to actual defaults, estimated future defaults, historical loss experience, and our GSE experience with estimated repurchase rates by product. It also considers our assumptions regarding economic conditions, including estimated first quarter 2011 home prices. Since the terms of the non-GSE transactions differ from those of the GSEs, we apply judgment and adjustments to GSE experience in order to determine the range of possible loss for non-GSE securitizations.

These adjustments we made include: (1) contractual loss causation requirements, (2) the representations and warranties provided, and (3) the requirement to meet certain presentation thresholds. The first adjustment is based on our belief that a contractual liability to repurchase a loan generally arises only if the counterparties prove there is a breach of representations and warranties that materially and adversely affects the interest of the investor or all investors in a securitization trust and, accordingly, we believe that the repurchase claimants must prove that the alleged representations and warranties breach was the cause of the loss. The second adjustment is related to the fact that non-GSE securitizations have different types of representations and warranties provided. We believe the non-GSE securitizations’ representations and warranties are less rigorous and actionable than the comparable agreements with the GSEs. The third adjustment is related to the fact that certain presentation thresholds need to be met in order for any repurchase claim to be asserted under the non-GSE contracts. A securitization trustee may investigate or demand repurchase on its own action, and most agreements contain a threshold, for example 25 percent of the voting rights per trust, that allows investors to declare a servicing event of default under certain circumstances or to request certain action, such as requesting loan files, that the trustee may choose to accept and follow, exempt from liability, provided the trustee is acting in good faith. If there is an uncured servicing event of default, and the trustee fails to bring suit during a 60-day period, then, under most agreements, investors may file suit. In addition to this, most agreements also allow investors to direct the securitization trustee to investigate loan files or demand the repurchase of loans, if security holders hold a specified percentage, for example, 25 percent of the voting rights of each tranche of the outstanding securities. This estimated range of possible loss assumes that this presentation threshold is met for some but significantly less than all of the non-GSE securitization transactions. The foregoing factors, individually and in the aggregate, require us to use significant judgment in estimating the range of possible loss for non-GSE representations and warranties. The adjustments have been developed assuming a loan-level analysis and consider product type, age, number of payments made, and type of security, loan originator and sponsor.

Future provisions and/or ranges of possible loss for non-GSE representations and warranties may be significantly impacted if actual results are different from our assumptions in our predictive models, including, without limitation, those regarding estimated repurchase rates, economic conditions, home prices, consumer and counterparty behavior, and a variety of judgmental factors. Developments with respect to one or more of the assumptions underlying the estimated range of possible loss for non-GSE representations and warranties could result in significant increases to this range of loss estimate. For example, we believe that the contractual requirement typically included in non-GSE securitization agreements that a representations and warranties breach materially and adversely affect the interest of the investor or all investors in the securitization trust in order to give rise to the repurchase obligation means repurchase claimants must prove that the representations and warranties breach was the cause of the loss. If a court or courts were to disagree with our interpretation of these agreements, it could impact this estimated range of possible loss. Additionally, certain recent court rulings related to monoline litigation, including one related to us, have allowed for sampling of loan files to determine if a breach of representations and warranties occurred instead of requiring a review of each loan file. If this sampling approach is upheld more generally in the courts, private-label investors may view litigation as a more attractive alternative as compared to a loan-by-loan review. In addition, although we believe that the representations and warranties typically given in non-GSE securitization transactions are less rigorous and actionable than those given in GSE transactions, we do not have significant loan-level experience to measure the impact of these differences on the probability that a loan will be required to be repurchased. Finally, as mentioned previously, the trustee is empowered to have access to the loan files without a request by the investors. If additional private-label investors organize and meet the presentation threshold, such as 25 percent of the voting rights per trust, then the investors will be able to request the trustee to obtain loan files to investigate breaches of representations and warranties or other matters and the trustee may choose to follow that request, exempt from liability, provided that the trustee is acting in good faith. It is difficult to predict how a trustee may act or how many investors may be able to meet the prerequisite presentation thresholds. In this regard, our model reflects an adjustment to reduce the range of possible loss for the presentation threshold for all private-label securitizations of approximately $4 billion to arrive at the $7 billion to $10 billion range. Although our evaluation of these factors results in lowering the estimated range of possible loss for non-GSE representations and warranties, any adverse developments in contractual interpretations of causation or level of representations, or the presentation threshold, could each have a significant impact on future provisions and the estimate of range of possible loss.

The techniques used to arrive at our non-GSE range of possible loss for representations and warranties have a basis in historical market behavior, and are also based to some degree on management’s judgment. We cannot provide assurance that its modeling assumptions, techniques, strategies or management judgment will at all times prove to be accurate and effective.

We have vigorously contested any request for repurchase when we conclude that a valid basis for repurchase claim did not exist and will continue to do so in the future. In addition, we may reach one or more bulk settlements, including settlement amounts which could be material, with counterparties (in lieu of the loan-by-loan review process) if opportunities arise on terms determined to be advantageous to us.

The following discussion provides more detailed information related to non-GSE counterparties.

Monoline Insurers

Legacy companies have sold $185.6 billion of loans originated between 2004 and 2008 into monoline-insured securitizations, which are included in Table 11, including $106.2 billion of first-lien mortgages and $79.4 billion of second-lien mortgages. Of these balances, $45.5 billion of the first-lien mortgages and $48.9 billion of the second-lien mortgages have paid off and $33.9 billion of the first-lien mortgages and $15.0 billion of the second-lien mortgages have defaulted or are severely delinquent and are considered principal at-risk at March 31, 2011. At least 25 payments have been made on approximately 56 percent of the loans included in principal at-risk. Of the first-lien mortgages sold, $41.0 billion, or 39 percent, were sold as whole loans to other institutions which subsequently included these loans with those of other originators in private-label securitization transactions in which the monolines typically insured one or more securities. Through March 31, 2011, we have received $6.2 billion of representations and warranties claims related to the monoline-insured transactions. Of these repurchase claims, $914 million have been resolved, with losses of $636 million. The majority of these resolved claims related to second-lien mortgages and $791 million of these claims were resolved through repurchase or indemnification while $123 million were rescinded by the investor or paid in full. At March 31, 2011, the unpaid principal balance of loans related to unresolved monoline repurchase claims was $5.3 billion, including $4.1 billion that have been reviewed where it is believed a valid defect has not been identified which would constitute an actionable breach of representations and warranties and $1.2 billion that are in the process of review. We have had limited experience with most of the monoline insurers in the repurchase process, which has constrained our ability to resolve the open claims with such counterparties. Also, certain monoline insurers have instituted litigation against legacy Countrywide and Bank of America, which limits our ability to enter into constructive dialogue with these monolines to resolve the open claims. It is not possible at this time to reasonably estimate future repurchase obligations with respect to those monolines with whom we have limited repurchase experience and, therefore, no liability has been recorded in connection with these monolines, other than a liability for repurchase claims where we have determined that there are valid loan defects. However, certain other monoline insurers have engaged with us in a consistent repurchase process and we have used that experience, influenced by increased dialogue with such monoline insurers, to record a liability related to existing and projected future claims from such counterparties.

Assured Guaranty Settlement

On April 14, 2011, we, including our legacy Countrywide affiliates, entered into an agreement with one of the monolines, Assured Guaranty to resolve all of the monoline insurer’s outstanding and potential repurchase claims related to alleged representations and warranties breaches involving 29 first- and second-lien RMBS trusts where Assured Guaranty provided financial guarantee insurance. The agreement also resolves historical loan servicing issues and other potential liabilities with respect to these trusts. The agreement covers 21 first-lien RMBS trusts and eight second-lien RMBS trusts, representing total original collateral exposure of approximately $35.8 billion, with total principal at-risk (which is the sum of outstanding principal balance on severely delinquent loans and the principal balance on previously defaulted loans) of approximately $10.9 billion, which includes principal at-risk previously resolved. The agreement includes cash payments totaling approximately $1.1 billion to Assured Guaranty, as well as a loss-sharing reinsurance arrangement that has an expected value of approximately $470 million, and other terms, including termination of certain derivative contracts. The cash payments consist of $850 million paid on April 14, 2011, with the remainder payable in four equal installments at the end of each quarter through March 31, 2012. The total cost of the agreement is currently estimated to be approximately $1.6 billion, which we have provided for in our liability for representations and warranties as of March 31, 2011.

Whole Loan Sales and Private-label Securitizations

Legacy entities, and to a lesser extent Bank of America, sold loans in whole loan sales or via private-label securitizations with a total principal balance of $777.1 billion originated between 2004 and 2008, which are included in Table 11, of which $391.3 billion have been paid off and $173.1 billion are considered principal at-risk at March 31, 2011. At least 25 payments have been made on approximately 61 percent of the loans included in principal at-risk. We have received approximately $8.4 billion of representations and warranties claims from whole-loan investors and private-label securitization investors related to these vintages, including $5.9 billion from whole-loan investors, $800 million from one private-label securitization counterparty which were submitted prior to 2008 and $1.7 billion in recent demands from private-label securitization investors received in the third quarter of 2010. Private-label securitization investors generally do not have the contractual right to demand repurchase of loans directly or the right to access loan files. The inclusion of the $1.7 billion in outstanding claims does not mean that we believe these claims have satisfied the contractual thresholds required for these investors to direct the securitization trustee to take action or that these claims are otherwise procedurally or substantively valid. One of these claimants has filed litigation against us relating to certain of these claims. Additionally, certain private-label securitizations are insured by the monoline insurers, which are not reflected in these figures regarding whole loan sales and private-label securitizations. For additional information, refer to Litigation and Regulatory Matters – Repurchase Litigation on page 180 of Note 11 – Commitments and Contingencies to the Consolidated Financial Statements.

We have resolved $5.5 billion of the claims received from whole-loan investors and private-label securitization investors with losses of $1.2 billion. Approximately $2.3 billion of these claims were resolved through repurchase or indemnification and $3.2 billion were rescinded by the investor. Claims outstanding related to these vintages totaled $2.9 billion at March 31, 2011, $2.8 billion of which we have reviewed and declined to repurchase based on an assessment of whether a material breach exists and $126 million of which are in the process of review. The majority of the claims that we have received outside of the GSEs and monolines are from whole-loan investors, and until we have meaningful repurchase experience with counterparties other than whole-loan investors, it is not possible to determine whether a loss related to our private-label securitizations has occurred or is probable. However, certain whole-loan investors have engaged with us in a consistent repurchase process and we have used that experience to record a liability related to existing and future claims from such counterparties.

On October 18, 2010, Countrywide Home Loans Servicing, LP (which changed its name to BAC Home Loans Servicing, LP), a wholly-owned subsidiary of the Corporation, in its capacity as servicer on 115 private-label RMBS securitizations received a letter from Gibbs & Bruns LLP (the Law Firm) on behalf of certain investors in those securitizations that alleged a servicer event of default and asserted breaches of certain loan servicing obligations, including an alleged failure to provide notice to the trustee and other parties to the pooling and servicing agreements of breaches of representations and warranties with respect to mortgage loans included in the securitization transactions. The Law Firm has stated that it now represents security holders who hold at least 25 percent with respect to approximately 230 securitizations, representing original collateral exposure of approximately $177.1 billion. To permit the parties to discuss the issues raised by the letter, BAC Home Loans Servicing, LP and the Law Firm on behalf of certain investors including those who signed the letter, as well as The Bank of New York Mellon, as trustee, have entered into multiple extensions to toll as of the 59th day of a 60 day period commenced by the letter. We are in discussions with the Law Firm, the investors and the trustee regarding the issues raised and more recently the parties have discussed possible concepts for resolution of any potential representations and warranties, servicing or other claims. However, there can be no assurances that any resolution will be reached.

Other Mortgage-related Matters

Review of Foreclosure Processes

In October 2010, we voluntarily stopped taking residential mortgage foreclosure proceedings to judgment in states where foreclosure requires a court order following a legal proceeding (judicial states) and stopped foreclosure sales in all states in order to complete an assessment of related business processes. We have resumed foreclosure sales in non-judicial states. We remain in the early stages of our resumption of foreclosure sales in judicial states. We have not yet resumed foreclosure proceedings in judicial or non-judicial states for certain types of customers, including those in bankruptcy and those with FHA-insured loans. In judicial states, implementation of our process and control enhancements has resulted in continuing delays in foreclosure sales. The implementation of changes in procedures and controls may result in other delays in completing sales, as well as creating obstacles to the collection of certain fees and expenses, in both judicial and non-judicial foreclosures.

On April 13, 2011, we entered into a consent order with the Federal Reserve and Bank of America, N.A. entered into a consent order with the OCC to address the regulators' concerns about residential mortgage servicing practices and foreclosure processes. Also on April 13, 2011, the other 13 largest mortgage servicers separately entered into consent orders with their respective federal bank regulators related to residential mortgage servicing practices and foreclosure processes. The orders resulted from an interagency horizontal review conducted by federal bank regulators of major residential mortgage servicers. While federal bank regulators found that loans foreclosed upon had been generally considered for other alternatives (such as loan modifications) and were seriously delinquent, and that servicers could support their standing to foreclose, several areas for process improvement requiring timely and comprehensive remediation across the industry were also identified. We identified most of these areas for process improvement after our own review in late 2010 and have been making significant progress in these areas in the last several months. The federal bank regulator consent orders with the mortgage servicers do not assess civil monetary penalties. However, the consent orders do not preclude the assertion of civil monetary penalties and a federal bank regulator has stated publicly that it believes monetary penalties are appropriate. The consent order with the OCC requires servicers to make several enhancements to their servicing operations, including implementation of a single point of contact model for borrowers throughout the loss mitigation and foreclosure processes; adoption of measures designed to ensure that foreclosure activity is halted once a borrower has been approved for a modification unless the borrower fails to make payments under the modified loan; and implementation of enhanced controls over third-party vendors that provide default servicing support services. In addition, the consent order requires that servicers retain an independent consultant, approved by the OCC, to conduct a review of all foreclosure actions pending, or foreclosure sales that occurred, between January 1, 2009 and December 31, 2010 and that servicers submit a plan to the OCC to remediate all financial injury to borrowers caused by any deficiencies identified through the review.

In addition, law enforcement authorities in all 50 states and the U.S. Department of Justice and other federal agencies continue to investigate alleged irregularities in the foreclosure practices of residential mortgage servicers. Authorities have publicly stated that the scope of the investigations extends beyond foreclosure documentation practices to include other default servicing practices, including mortgage loan modification and loss mitigation practices. We are cooperating with these investigations and are dedicating significant resources to address these issues. We and the other 13 largest mortgage servicers have engaged in ongoing discussions regarding these matters with these law enforcement authorities and federal agencies.

We continue to be subject to additional borrower and non-borrower litigation and governmental and regulatory scrutiny related to our past and current foreclosure activities. This scrutiny may extend beyond our pending foreclosure matters to issues arising out of alleged irregularities with respect to previously completed foreclosure activities. The current environment of heightened regulatory scrutiny has the potential to subject us to inquiries or investigations that could significantly adversely affect our reputation. Such investigations by state and federal authorities, as well as any other governmental or regulatory scrutiny of our foreclosure processes, could result in material fines, penalties, equitable remedies, additional default servicing requirements and process changes, or other enforcement actions, and could result in significant legal costs in responding to governmental investigations and additional litigation. For more information on the consent orders with the federal bank regulators, see Recent Events on page 14.

In the first quarter of 2011, we incurred $874 million of mortgage-related assessments and waivers costs which included $548 million for compensatory fees that we expect to be assessed by the GSEs as a result of foreclosure delays with the remainder being out-of-pocket costs that we do not expect to recover because of foreclosure delays compared to $230 million in the fourth quarter of 2010. We expect such costs will continue as additional loans are delayed in the foreclosure process and as the GSEs assert more aggressive criteria. We also expect that additional costs related to resources necessary to perform the foreclosure process assessment, to revise affidavit filings and to implement other operational changes will continue into at least the remainder of 2011. This will likely result in continued higher noninterest expense, including higher default servicing costs and legal expenses, in Consumer Real Estate Services. It is also possible that the temporary suspension in foreclosure sales may result in additional costs and expenses, including costs associated with the maintenance of properties or possible home price declines while foreclosures are delayed. In addition, required process changes, including those required under the consent orders with federal bank regulators, are likely to result in further increases in our default servicing costs over the longer term. Finally, the time to complete foreclosure sales may continue to be protracted, which may result in a greater number of nonperforming loans and increased servicing advances and may impact the collectability of such advances and the value of our MSR asset, MBS and real estate owned properties. An increase in the time to complete foreclosure sales also

may increase the number of highly delinquent loans in our mortgage servicing portfolio, result in increasing levels of consumer nonperforming loans, and could have a dampening effect on net interest margin as nonperforming assets increase. Accordingly, delays in foreclosure sales, including any delays beyond those currently anticipated, our continued process enhancements, including those required under the federal bank regulator consent orders and any issues that may arise out of alleged irregularities in our foreclosure process could significantly increase the costs associated with our mortgage operations.

Certain Servicing-related Items

We service a large portion of the loans we or our subsidiaries have securitized and also service loans on behalf of third-party securitization vehicles and other investors. Many non-agency residential MBS and whole-loan servicing agreements require the servicer to indemnify the trustee or other investor for or against failures by the servicer to perform its servicing obligations or acts or omissions that involve willful malfeasance, bad faith or gross negligence in the performance of, or reckless disregard of, the servicer’s duties. Servicing agreements with the GSEs generally provide the GSEs with broader rights relative to the servicer than are found in servicing agreements with private investors. For example, each GSE typically has the right to demand that the servicer repurchase loans that breach the seller’s representations and warranties made in connection with the initial sale of the loans even if the servicer was not the seller. The GSEs also reserve the contractual right to demand indemnification or loan repurchase for certain servicing breaches although we believe that repurchase or indemnification demands solely for servicing breaches have been rare. In addition, our agreements with the GSEs and their first mortgage seller/servicer guides provide for timelines to resolve delinquent loans through workout efforts or liquidation, if necessary. For more information on servicing-related items, refer to Certain Servicing-related Issues on pages 34-35 of the Corporation’s 2010 Annual Report on Form 10-K. For information about alleged breaches of certain loan servicing obligations with respect to mortgage loans included in 230 private-label residential MBS securitizations, see Representations and Warranties and Other Mortgage-related Matters on page 44.

Regulatory Matters

For additional information regarding significant regulatory matters including Regulation E and the CARD Act, refer to Item 1A. Risk Factors, as well as Regulatory Matters beginning on page 56 of the MD&A of the Corporation’s 2010 Annual Report on Form 10-K.

Financial Reform Act

On July 21, 2010, the Financial Reform Act was signed into law. The Financial Reform Act enacts sweeping financial regulatory reform and will alter the way in which we conduct certain businesses, increase our costs and reduce our revenues.

Debit Interchange Fees

The Financial Reform Act provides the Federal Reserve with authority over interchange fees received or charged by a debit card issuer and requires that fees must be “reasonable and proportional” to the costs of processing such transactions. On December 16, 2010, the Federal Reserve issued a proposed rule that would establish debit card interchange fee standards and prohibit network exclusivity arrangements and routing restrictions. As previously announced on July 16, 2010 and subject to final rulemaking over the next several months, we believe that our debit card revenue will be adversely impacted beginning in the third quarter of 2011. Based on 2010 volumes, our estimate of revenue loss due to the debit card interchange fee standards to be adopted under the Financial Reform Act was approximately $2.0 billion annually. If the Federal Reserve sets the final interchange fee standards at the lowest proposed fee alternative (i.e., $0.07 per transaction), the decrease to our interchange revenue could also result in additional impairment of goodwill in Global Card Services. On March 29, 2011, the Federal Reserve indicated that it had concluded it will be unable to meet the April 21, 2011 deadline for publication of the final debit card interchange and networking routing rules, but that it is committed to meeting the final July 21, 2011 deadline under the Financial Reform Act. In view of the uncertainty with model inputs including the final ruling, changes in the economic outlook and the corresponding impact to revenues and asset quality, and the impacts of mitigation actions, it is not possible to estimate the amount or range of amounts of additional goodwill impairment, if any, associated with changes to interchange fee standards. For more information on goodwill and the impairment charge recorded in Global Card Services in 2010, refer to Note 10 – Goodwill and Intangible Assets to the Consolidated Financial Statements and Complex Accounting Estimates on page 111.

Limitations on Certain Activities

We anticipate that the final regulations associated with the Financial Reform Act will include limitations on proprietary trading, as will be defined by various regulators (the Volcker Rule). The Volcker Rule will include clarifications to the definition of proprietary trading and distinctions between permitted and prohibited activities have not yet been finalized. The final regulations are required to be in place by October 21, 2011, and the Volcker Rule becomes effective twelve months after such rules are final or on July 21, 2012, whichever is earlier. The Volcker Rule then gives certain financial institutions two years from the effective date, with opportunities for additional extensions, to bring activities and investments into conformance. In anticipation of the adoption of the final regulations, we have begun winding down our proprietary trading operations, with completion expected later this year. The ultimate impact of the Volcker Rule’s prohibition on proprietary trading continues to remain uncertain, including any additional significant operational and compliance costs we may incur. We continue to work with regulators to develop appropriate procedures and metrics that may be used to distinguish proprietary trading from permissible activities. For additional information about our proprietary trading business, see GBAM on page 36.

Derivatives

The Financial Reform Act includes measures to broaden the scope of derivative instruments subject to regulation by requiring clearing and exchange trading of certain derivatives, imposing new capital margin, reporting, registration and business conduct requirements for certain market participants and imposing position limits on certain over-the-counter (OTC) derivatives. Generally, regulators have until July 16, 2011 to promulgate the rulemakings necessary to implement these regulations. The ultimate impact of these derivatives regulations, and the time it will take to comply, continues to remain uncertain. The final regulations will impose additional operational and compliance costs on us and may require us to restructure certain businesses, thereby negatively impacting our revenues and results of operations.

FDIC Deposit Insurance Assessments

On February 7, 2011, the Federal Deposit Insurance Corporation (FDIC) issued a new regulation implementing revisions to the assessment system mandated by the Financial Reform Act, which became effective on April 1, 2011. The new regulation will be reflected in the June 30, 2011 FDIC fund balance and the invoices for assessments due September 30, 2011. As a result of the new regulations, we expect our 2011 deposit insurance assessments to increase by approximately $300 million. Any future increases in required deposit insurance premiums or other bank industry fees could have a significant adverse impact on our financial condition and results of operations.

Credit Risk Retention

On March 29, 2011, numerous federal regulators jointly issued a proposed rule regarding credit risk retention that would, among other things, require sponsors of ABS and MBS to retain at least five percent of the credit risk of the assets underlying the securities and would not permit sponsors to transfer or hedge that credit risk. The proposed rule would provide sponsors with various options for meeting the five percent risk-retention requirements of the Financial Reform Act, including by vertical (i.e., pro rata) or horizontal (i.e., by credit tranche) retention of ABS or MBS securities sponsored. The proposal also includes descriptions of loans that would not be subject to the risk-retention requirements, including ABS and MBS that are collateralized by residential mortgages that meet the definition of a qualified residential mortgage, certain commercial, auto and other loans that meet specified underwriting criteria and certain loans guaranteed by government agencies or pooled with the GSEs. The federal regulators seek public comment on the proposed rule by June 10, 2011 and we expect a final rule to be issued in the third quarter of 2011.

The proposed rule as currently written would likely have an adverse impact on our ability to engage in many types of MBS and ABS securitizations conducted by our Consumer Real Estate Services, GBAM and other business segments. However, it remains unclear what requirements will be included in the final rule and what will be the ultimate impact of the final rule on our Consumer Real Estate Services, GBAM and other business segments or our consolidated results of operations. The proposed rule would impose additional operational and compliance costs on us, and could negatively impact our revenue and results of operations. Adoption of the proposed rule could also negatively influence the value, liquidity and transferability of certain ABS or MBS, loans and other assets.

Certain Other Provisions

The Financial Reform Act also provides for resolution authority to establish a process to unwind large systemically important financial companies; creates a new regulatory body to set requirements regarding the terms and conditions of consumer financial products and expands the role of state regulators in enforcing consumer protection requirements over banks; includes new minimum leverage and risk-based capital requirements for large financial institutions; and disqualifies trust preferred securities and other hybrid capital securities from Tier 1 capital. Many of the provisions under the Financial Reform Act have begun to be phased-in or will be phased-in over the next several months or years and will be subject both to further rulemaking and the discretion of applicable regulatory bodies.

The Financial Reform Act will continue to have a significant and negative impact on our earnings through fee reductions, higher costs and new restrictions, as well as a reduction in available capital. The Financial Reform Act may also continue to have a material adverse impact on the value of certain assets and liabilities held on our balance sheet. The ultimate impact of the Financial Reform Act on our businesses and results of operations will depend on regulatory interpretation and rulemaking, as well as the success of any of our actions to mitigate the negative earnings impact of certain provisions. For information on the impact of the Financial Reform Act on our credit ratings, see Liquidity Risk on page 60.

The Financial Reform Act and other proposed regulatory initiatives may also have an adverse impact on capital. During 2010, the Basel Committee on Banking Supervision finalized rules on certain capital and liquidity measurements. For additional information on these rules, see Regulatory Capital – Regulatory Capital Changes on page 56.

U.K. Bank Levy

As previously discussed, the U.K. Government announced its intention to introduce an annual levy on banks operating in the U.K. The legislation for the bank levy is expected to be enacted in the third quarter of 2011. The rate has been set at 7.5 bps for short-term liabilities and 3.75 bps for long-term liabilities for 2011 and will increase to 7.8 bps for short-term liabilities and 3.9 bps for long-term liabilities beginning in 2012. We currently estimate that the cost of the U.K. bank levy will be approximately $120 million annually beginning in 2011, which we expect will be fully accrued in the second half of 2011.

Managing Risk

Overview

Risk is inherent in every activity that we undertake. Our business exposes us to strategic, credit, market, liquidity, compliance, operational and reputational risk. We must manage these risks to maximize our long-term results by ensuring the integrity of our assets and the quality of our earnings. Our risk management infrastructure is continually evolving to meet the heightened challenges posed by the increased complexity of the financial services industry and markets, by our increased size and global footprint, and by the financial crisis. We have a defined risk framework and clearly articulated risk appetite which is approved annually by the Corporation’s Board of Directors (the Board).

We take a comprehensive approach to risk management. Risk management planning is fully integrated with strategic, financial and customer/client planning so that goals and responsibilities are aligned across the organization. Risk is managed in a systematic manner by focusing on the Corporation as a whole as well as managing risk across the enterprise and within individual business units, products, services and transactions, and across all geographic locations. We maintain a governance structure that delineates the responsibilities for risk management activities, as well as governance and oversight of those activities, by executive management and the Board. For a more detailed discussion of our risk management activities, see pages 59 through 107 of the MD&A of the Corporation’s 2010 Annual Report on Form 10-K.

Strategic Risk Management

Strategic risk is embedded in every line of business and is one of the major risk categories along with credit, market, liquidity, compliance and operational risks. It is the risk that results from adverse business decisions, ineffective or inappropriate business plans, or failure to respond to changes in the competitive environment, business cycles, customer preferences, product obsolescence, regulatory environment, business strategy execution and/or other inherent risks of the business including reputational risk. In the financial services industry, strategic risk is high due to changing customer, competitive and regulatory environments. Our appetite for strategic risk is assessed within the context of the strategic plan, with strategic risks selectively and carefully considered in the context of the evolving marketplace. Strategic risk is managed in the context of our overall financial condition and assessed, managed and acted on by the Chief Executive Officer and executive management team. Significant strategic actions, such as material acquisitions or capital actions, are reviewed and approved by the Board.

For more information on our Strategic Risk Management activities, refer to pages 62 through 63 of the MD&A of the Corporation’s 2010 Annual Report on Form 10-K.

Capital Management

Bank of America manages its capital position to maintain a strong and flexible financial position in order to perform through economic cycles, take advantage of organic growth opportunities, maintain ready access to financial markets, remain a source of financial strength for its subsidiaries, and return capital to its shareholders as appropriate.

To determine the appropriate level of capital, we assess the results of our Internal Capital Adequacy Assessment Process (ICAAP), the current economic and market environment, and feedback from investors, ratings agencies and regulators. For additional information regarding the ICAAP, see page 63 of the MD&A of the Corporation’s 2010 Annual Report on Form 10-K.

Capital management is integrated into the risk and governance processes, as capital is a key consideration in development of the strategic plan, risk appetite and risk limits. Economic capital is allocated to each business unit and used to perform risk-adjusted return analysis at the business unit, client relationship and transaction level.

Regulatory Capital

As a financial services holding company, we are subject to the risk-based capital guidelines (Basel I) issued by the banking agencies. At March 31, 2011, we operated banking activities primarily under two charters: Bank of America, N.A. and FIA Card Services, N.A. Under these guidelines, the Corporation and its affiliated banking entities measure capital adequacy based on Tier 1 common capital, Tier 1 capital and Total capital (Tier 1 plus Tier 2 capital). Capital ratios are calculated by dividing each capital amount by risk-weighted assets. Additionally, Tier 1 capital is divided by adjusted quarterly average total assets to derive the Tier 1 leverage ratio.

Certain corporate-sponsored trust companies which issue trust preferred capital debt securities (Trust Securities) are not consolidated. In accordance with Federal Reserve guidance, Trust Securities continue to qualify as Tier 1 capital with revised quantitative limits. As a result, the Corporation includes Trust Securities in Tier 1 capital. The Financial Reform Act includes a provision under which the Corporation’s previously issued and outstanding Trust Securities in the aggregate amount of $19.9 billion (approximately 139 bps of Tier 1 capital) at March 31, 2011 will no longer qualify as Tier 1 capital effective January 1, 2013. This amount excludes $1.6 billion of hybrid Trust Securities that are expected to be converted to preferred stock prior to the date of implementation. The exclusion of Trust Securities from Tier 1 capital will be phased in incrementally over a three-year phase-in period. The treatment of Trust Securities during the phase-in period remains unclear and is subject to future rulemaking.

For additional information on these and other regulatory requirements, see Note 18 – Regulatory Requirements and Restrictions to the Consolidated Financial Statements of the Corporation’s 2010 Annual Report on Form 10-K.

Capital Composition and Ratios

On January 21, 2010, the joint agencies issued a final rule regarding the impact of the new consolidation guidance on risk-based capital. The incremental impact of the new consolidation guidance on January 1, 2010 was an increase in assets of $100.4 billion and risk-weighted assets of $21.3 billion and a reduction in Tier 1 common capital and Tier 1 capital of $9.7 billion. The overall effect of the new consolidation guidance and the final rule was a decrease in Tier 1 capital and Tier 1 common capital ratios of 76 bps and 73 bps on January 1, 2010.

Tier 1 common capital decreased $1.3 billion at March 31, 2011 compared to December 31, 2010. The decrease was driven by an increase of $3.8 billion in disallowed deferred tax assets, for regulatory capital purposes, offset by $2.0 billion in earnings generated during the three months ended March 31, 2011. This increase in the deferred tax asset disallowance, which is nonrecurring, was due to the expiration of the longer look-forward period granted by the regulators at the time of the Merrill Lynch acquisition. Tier 1 capital and Total capital decreased by $1.3 billion and $500 million during the three months ended March 31, 2011.

Risk-weighted assets declined by $22.5 billion at March 31, 2011. The risk-weighted asset reduction is consistent with our continued efforts to reduce non-core assets and legacy loan portfolios. As a result of our reduced level of risk-weighted assets, the Tier 1 common capital ratio increased four bps to 8.64 percent, the Tier 1 capital ratio increased eight bps to 11.32 percent and Total capital increased 21 bps to 15.98 percent. The Tier 1 leverage ratio increased four bps to 7.25 percent, reflecting a $32.6 billion reduction in adjusted quarterly average total assets, offset by the decrease in Tier 1 capital mentioned above.

Table 12 presents the Corporation’s capital ratios and related information at March 31, 2011 and December 31, 2010.

Table 12

Regulatory Capital

March 31, 2011

December 31, 2010

Actual

Minimum

Actual

Minimum

(Dollars in millions)

Ratio

Amount

Required⁽¹⁾

Ratio

Amount

Required ⁽¹⁾

Tier 1 common equity ratio

8.64

123,882

n/a

8.60

125,139

n/a

Tier 1 capital ratio

11.32

162,295

57,335

11.24

163,626

58,238

Total capital ratio

15.98

229,094

114,670

15.77

229,594

116,476

Tier 1 leverage ratio

7.25

162,295

89,537

7.21

163,626

90,811

March 31

December 31

2011

2010

Risk-weighted assets (in billions)

1,433

1,456

Adjusted quarterly average total assets (in billions) ⁽²⁾

2,238

2,270


(1)		Dollar amount required to meet guidelines for adequately capitalized institutions.

(2)		Reflects adjusted average total assets for the three months ended March 31, 2011 and December 31, 2010.

n/a = not applicable

Table 13 presents the capital composition at March 31, 2011 and December 31, 2010.


*Table 13*
*Capital Composition*
	March 31			December 31
(Dollars in millions)	2011			2010

Total common shareholders’ equity	$	214,314		$	211,686
Goodwill		(73,869	)		(73,861	)
Nonqualifying intangible assets (includes core deposit intangibles, affinity relationships, customer relationships and other intangibles)		(6,610	)		(6,846	)
Net unrealized (gains) or losses on AFS debt and marketable equity securities and net losses on derivatives recorded in accumulated OCI, net-of-tax		(4,564	)		(4,137	)
Unamortized net periodic benefit costs recorded in accumulated OCI, net-of-tax		3,872			3,947
Exclusion of fair value adjustment related to structured notes ⁽¹⁾		3,354			2,984
Disallowed deferred tax asset		(12,496	)		(8,663	)
Other		(119	)		29

Total Tier 1 common capital		123,882			125,139

Preferred stock		16,562			16,562
Trust preferred securities		21,479			21,451
Noncontrolling interest		372			474

Total Tier 1 capital		162,295			163,626

Long-term debt qualifying as Tier 2 capital		41,824			41,270
Allowance for loan and lease losses		39,843			41,885
Reserve for unfunded lending commitments		961			1,188
Allowance for loan and lease losses exceeding 1.25 percent of risk-weighted assets		(22,795	)		(24,690	)
45 percent of the pre-tax net unrealized gains on AFS marketable equity securities		5,360			4,777
Other		1,606			1,538

Total capital	$	229,094		$	229,594


⁽¹⁾		Represents loss on structured notes, net-of-tax, that is excluded from Tier 1 common capital, Tier 1 capital and Total capital for regulatory purposes.

Regulatory Capital Changes

In June 2004, the Basel II Accord was published by the Basel Committee on Banking Supervision (the Basel Committee) with the intent of more closely aligning regulatory capital requirements with underlying risks, similar to economic capital. While economic capital is measured to cover unexpected losses, we also manage regulatory capital to adhere to regulatory standards of capital adequacy.

The Basel II Final Rule (Basel II) which was published in December 2007 established requirements for U.S. implementation of the Basel Committee’s Basel II Accord and provides detailed requirements for a new regulatory capital framework. This regulatory capital framework includes requirements related to credit and operational risk (Pillar 1), supervisory requirements (Pillar 2) and disclosure requirements (Pillar 3). We began the Basel II parallel qualification period on April 1, 2010.

On December 16, 2010, U.S. regulators issued a Notice of Proposed Rulemaking on the Risk-based Capital Guidelines for Market Risk (Market Risk Rules), reflecting partial adoption of the Basel Committee’s July 2009 consultative document on the topic. We anticipate U.S. regulators will adopt the Market Risk Rules in mid-2011.

On December 16, 2010, the Basel Committee issued “Basel III: A global regulatory framework for more resilient banks and banking systems” (Basel III), proposing a January 2013 implementation date for Basel III. If implemented by U.S. regulators as proposed, Basel III could significantly increase our capital requirements. Basel III and the Financial Reform Act propose the disqualification of trust preferred securities from Tier 1 capital, with the Financial Reform Act proposing that the disqualification be phased in from 2013 to 2015. Basel III also proposes the deduction of certain assets from capital (deferred tax assets, MSRs, investments in financial firms and pension assets, among others, within prescribed limitations), the inclusion of accumulated OCI in capital, increased capital for counterparty credit risk, and new minimum capital and buffer requirements. The phase-in period for the capital deductions is proposed to occur in 20 percent increments from 2014 through 2018 with full implementation by December 31, 2018. The increase in capital requirements for counterparty credit is proposed to be effective January 2013. The phase-in period for the new minimum capital

requirements and related buffers is proposed to occur between 2013 and 2019. U.S. regulators are expected to begin final rulemaking processes for Basel III in early 2011 and have indicated a goal to adopt final rules by year-end 2011 or early 2012. For additional information on our MSRs, refer to Note 19 – Mortgage Servicing Rights to the Consolidated Financial Statements. We have made the implementation and migration of the new capital rules a strategic priority. We will continue to actively reduce legacy asset portfolios and implement capital-related initiatives. As the new rules come into effect, we anticipate that we will be in excess of the minimum required ratios without needing to raise new equity capital. For additional information on deferred tax assets, refer to Note 21 – Income Taxes to the Consolidated Financial Statements of the Corporation’s 2010 Annual Report on Form 10-K.

We also note there remains significant uncertainty of the final impacts of the Basel Rules as the U.S. has only issued final rules for Basel II at this time. Impacts may change as the U.S. finalizes rules under Basel III and the regulatory agencies interpret the final rules during the implementation process. For additional information regarding Basel II, Basel III, Market Risk Rules and other proposed regulatory capital changes, see Regulatory Capital beginning on page 64 of the MD&A of the Corporation’s 2010 Annual Report on Form 10-K.

Bank of America, N.A. and FIA Card Services, N.A. Regulatory Capital

Table 14 presents regulatory capital information for Bank of America, N.A. and FIA Card Services, N.A. at March 31, 2011 and December 31, 2010. The goodwill impairment charges recognized in 2010 did not impact the regulatory capital ratios.

Table 14

Bank of America, N.A. and FIA Card Services, N.A. Regulatory Capital

March 31, 2011

December 31, 2010

Actual

Minimum

Actual

Minimum

(Dollars in millions)

Ratio

Amount

Required⁽¹⁾

Ratio

Amount

Required ⁽¹⁾

Tier 1

Bank of America, N.A.

11.01

117,521

42,688

10.78

114,345

42,416

FIA Card Services, N.A.

17.59

27,297

6,208

15.30

25,589

6,691

Total

Bank of America, N.A.

14.48

154,518

85,375

14.26

151,255

84,831

FIA Card Services, N.A.

19.19

29,784

12,415

16.94

28,343

13,383

Tier 1 leverage

Bank of America, N.A.

8.19

117,521

57,396

7.83

114,345

58,391

FIA Card Services, N.A.

14.21

27,297

7,682

13.21

25,589

7,748


⁽¹⁾		Dollar amount required to meet guidelines for adequately capitalized institutions.

The Bank of America, N.A. Tier 1 and Total capital ratios increased 23 bps to 11.01 percent and 22 bps to 14.48 percent at March 31, 2011 compared to December 31, 2010. The increase in the ratios was driven by $2.5 billion in earnings generated during the three months ended March 31, 2011 and a $4.4 billion capital contribution from Bank of America Corporation, as the parent company, partially offset by a $3.8 billion dividend payment to Bank of America Corporation. The Tier 1 leverage ratio increased 36 bps to 8.19 percent benefiting from the improvement in Tier 1 capital combined with a $24.9 billion decrease in adjusted quarterly average total assets resulting from our continued efforts to reduce non-core assets and legacy loan portfolios.

The FIA Card Services, N.A. Tier 1 capital ratio increased 229 bps to 17.59 percent and Total capital ratio increased 225 bps to 19.19 percent at March 31, 2011 compared to December 31, 2010. The increase in the Tier 1 capital ratio was due to a decrease in risk-weighted assets of $12.1 billion. The increase in the Total capital ratio was due to an increase in total core capital and the previously mentioned reduction in risk-weighted assets. The Tier 1 leverage ratio increased 100 bps to 14.21 percent at March 31, 2011 compared to December 31, 2010 due to a $1.7 billion decrease in adjusted quarterly average total assets.

Broker/Dealer Regulatory Capital

Bank of America’s principal U.S. broker/dealer subsidiaries are Merrill Lynch, Pierce, Fenner & Smith (MLPF&S) and Merrill Lynch Professional Clearing Corp (MLPCC). MLPCC is a subsidiary of MLPF&S and provides clearing and settlement services. Both entities are subject to the net capital requirements of SEC Rule 15c3-1. Both entities are also

registered as futures commission merchants and subject to the Commodity Futures Trading Commission (CFTC) Regulation 1.17.

MLPF&S has elected to compute the minimum capital requirement in accordance with the “Alternative Net Capital Requirement” as permitted by SEC Rule 15c3-1. At March 31, 2011, MLPF&S’s regulatory net capital as defined by Rule 15c3-1 was $10.1 billion and exceeded the minimum requirement of $833 million by $9.3 billion. MLPCC’s net capital of $2.2 billion exceeded the minimum requirement by $2.0 billion.

In accordance with the Alternative Net Capital Requirements, MLPF&S is required to maintain tentative net capital in excess of $1 billion and notify the SEC in the event its tentative net capital is less than $5 billion. At March 31, 2011, MLPF&S had tentative net capital in excess of the minimum and notification requirements.

Economic Capital

Our economic capital measurement process provides a risk-based measurement of the capital required for unexpected credit, market and operational losses over a one-year time horizon at a 99.97 percent confidence level, consistent with a “AA” credit rating. Economic capital is allocated to each business unit based upon its risk positions and contribution to enterprise risk, and is used for capital adequacy, performance measurement and risk management purposes. The strategic planning process utilizes economic capital with the goal of allocating risk appropriately and measuring returns consistently across all businesses and activities. For additional information regarding economic capital, credit risk capital, market risk capital and operational risk capital, see page 66 of the MD&A of the Corporation’s 2010 Annual Report on Form 10-K.

Common Stock Dividends

Table 15 is a summary of our declared quarterly cash dividends on common stock for 2011 as of May 5, 2011.


*Table 15*
*Common Stock Cash Dividend Summary*
Declaration Date	Record Date	Payment Date	Dividend Per Share

January 26, 2011	March 4, 2011	March 25, 2011	$	0.01

Preferred Stock Dividends

Table 16 is a summary of our most recent cash dividend declarations on preferred stock as of May 5, 2011. For additional information on preferred stock, see Note 15 – Shareholders’ Equity to the Consolidated Financial Statements of the Corporation’s 2010 Annual Report on Form 10-K.


*Table 16*
*Preferred Stock Cash Dividend Summary*
	Outstanding
	Notional
	Amount					Per Annum			Dividend Per
Preferred Stock	(in millions)		Declaration Date	Record Date	Payment Date	Dividend Rate			Share

Series B ⁽¹⁾	$	1	January 26, 2011	April 11, 2011	April 25, 2011		7.00	%	$	1.75

Series D ⁽²⁾	$	661	April 4, 2011	May 31, 2011	June 14, 2011		6.204	%	$	0.38775

			January 4, 2011	February 28, 2011	March 14, 2011		6.204			0.38775

Series E ⁽²⁾	$	487	April 4, 2011	April 29, 2011	May 16, 2011	Floating			$	0.24722

			January 4, 2011	January 31, 2011	February 15, 2011	Floating				0.25556

Series H ⁽²⁾	$	2,862	April 4, 2011	April 15, 2011	May 2, 2011		8.20	%	$	0.51250

			January 4, 2011	January 15, 2011	February 1, 2011		8.20			0.51250

Series I ⁽²⁾	$	365	April 4, 2011	June 15, 2011	July 1, 2011		6.625	%	$	0.41406

			January 4, 2011	March 15, 2011	April 1, 2011		6.625			0.41406

Series J ⁽²⁾	$	978	April 4, 2011	April 15, 2011	May 2, 2011		7.25	%	$	0.45312

			January 4, 2011	January 15, 2011	February 1, 2011		7.25			0.45312

Series K ^{(3, 4)}	$	1,668	January 4, 2011	January 15, 2011	January 31, 2011	Fixed-to-floating			$	40.00

Series L	$	3,349	March 17, 2011	April 1, 2011	May 2, 2011		7.25	%	$	18.125

Series M ^{(3, 4)}	$	1,434	April 4, 2011	April 30, 2011	May 16, 2011	Fixed-to-floating			$	40.625

Series 1 ⁽⁵⁾	$	146	April 4, 2011	May 15, 2011	May 31, 2011	Floating			$	0.18542

			January 4, 2011	February 15, 2011	February 28, 2011	Floating				0.19167

Series 2 ⁽⁵⁾	$	526	April 4, 2011	May 15, 2011	May 31, 2011	Floating			$	0.18542

			January 4, 2011	February 15, 2011	February 28, 2011	Floating				0.19167

Series 3 ⁽⁵⁾	$	670	April 4, 2011	May 15, 2011	May 31, 2011		6.375	%	$	0.39843

			January 4, 2011	February 15, 2011	February 28, 2011		6.375			0.39843

Series 4 ⁽⁵⁾	$	389	April 4, 2011	May 15, 2011	May 31, 2011	Floating			$	0.24722

			January 4, 2011	February 15, 2011	February 28, 2011	Floating				0.25556

Series 5 ⁽⁵⁾	$	606	April 4, 2011	May 1, 2011	May 23, 2011	Floating			$	0.24722

			January 4, 2011	February 1, 2011	February 22, 2011	Floating				0.25556

Series 6 ⁽⁶⁾	$	65	April 4, 2011	June 15, 2011	June 30, 2011		6.70	%	$	0.41875

			January 4, 2011	March 15, 2011	March 30, 2011		6.70			0.41875

Series 7 ⁽⁶⁾	$	17	April 4, 2011	June 15, 2011	June 30, 2011		6.25	%	$	0.39062

			January 4, 2011	March 15, 2011	March 30, 2011		6.25			0.39062

Series 8 ⁽⁵⁾	$	2,673	April 4, 2011	May 15, 2011	May 31, 2011		8.625	%	$	0.53906

			January 4, 2011	February 15, 2011	February 28, 2011		8.625			0.53906


⁽¹⁾		Dividends are cumulative.

⁽²⁾		Dividends per depositary share, each representing a 1/1,000^th interest in a share of preferred stock.

⁽³⁾		Initially pays dividends semi-annually.

⁽⁴⁾		Dividends per depositary share, each representing a 1/25^th interest in a share of preferred stock.

⁽⁵⁾		Dividends per depositary share, each representing a 1/1,200^th interest in a share of preferred stock.

⁽⁶⁾		Dividends per depositary share, each representing a 1/40^th interest in a share of preferred stock.

Enterprise-wide Stress Testing

As a part of our core risk management practices, we conduct enterprise-wide stress tests on a periodic basis to better understand earnings, capital and liquidity sensitivities to certain economic and business scenarios, including economic and market conditions that are more severe than anticipated. These enterprise-wide stress tests provide an understanding of the potential impacts from our risk profile to earnings, capital and liquidity, and serve as a key component of our capital management practices. Scenarios are selected by a group comprised of senior line of business, risk and finance executives. Impacts to each line of business from each scenario are then determined and analyzed, primarily leveraging the models and processes utilized in everyday management routines. Impacts are assessed along with potential mitigating actions that may be taken. Analysis from such stress scenarios is compiled for and reviewed through our Risk Oversight Committee, Asset Liability Market Risk Committee (ALMRC) and the Board’s Enterprise Risk Committee, and serves to inform and be incorporated, along with other core business processes, into decision-making by management and the Board. We have made substantial investments to establish stress testing capabilities as a core business process.

Liquidity Risk

Funding and Liquidity Risk Management

We define liquidity risk as the potential inability to meet our contractual and contingent financial obligations, on- or off-balance sheet, as they come due. Our primary liquidity objective is to ensure adequate funding for our businesses throughout market cycles, including periods of financial stress. To achieve that objective, we analyze and monitor our liquidity risk, maintain excess liquidity and access diverse funding sources including our stable deposit base. We define excess liquidity as readily available assets, limited to cash and high-quality, liquid, unencumbered securities that we can use to meet our funding requirements as those obligations arise.

Global funding and liquidity risk management activities are centralized within Corporate Treasury. We believe that a centralized approach to funding and liquidity risk management enhances our ability to monitor liquidity requirements, maximizes access to funding sources, minimizes borrowing costs and facilitates timely responses to liquidity events. For additional information regarding global funding and liquidity risk management, see Funding and Liquidity Risk Management beginning on page 67 of the MD&A of the Corporation’s 2010 Annual Report on Form 10-K.

Global Excess Liquidity Sources and Other Unencumbered Assets

We maintain excess liquidity available to the parent company and selected subsidiaries in the form of cash and high-quality, liquid, unencumbered securities. These assets serve as our primary means of liquidity risk mitigation and we call these assets our “Global Excess Liquidity Sources.” Our cash is primarily on deposit with central banks, such as the Federal Reserve. We limit the composition of high-quality, liquid, unencumbered securities to U.S. government securities, U.S. agency securities, U.S. agency MBS and a select group of non-U.S. government securities. We believe we can quickly obtain cash for these securities, even in stressed market conditions, through repurchase agreements or outright sales. We hold our Global Excess Liquidity Sources in entities that allow us to meet the liquidity requirements of our global businesses, and we consider the impact of potential regulatory, tax, legal and other restrictions that could limit the transferability of funds among entities.

Our Global Excess Liquidity Sources increased $50 billion to $386 billion at March 31, 2011 compared to $336 billion at December 31, 2010 and were maintained as presented in Table 17. This increase was due primarily to liquidity generated by our bank subsidiaries through deposit growth, reductions in LHFS and other factors.


*Table 17*
*Global Excess Liquidity Sources*
	March 31		December 31
(Dollars in billions)	2011		2010

Parent company	$	116	$	121
Bank subsidiaries		231		180
Broker/dealers		39		35

Total global excess liquidity sources	$	386	$	336

As noted in Table 17, the excess liquidity available to the parent company is held in cash and high-quality, liquid, unencumbered securities and totaled $116 billion and $121 billion at March 31, 2011 and December 31, 2010. Typically, parent company cash is deposited overnight with Bank of America, N.A.

Our bank subsidiaries’ excess liquidity sources at March 31, 2011 and December 31, 2010 were $231 billion and $180 billion. These amounts are distinct from the cash deposited by the parent company, as described in Table 17. In addition to their excess liquidity sources, our bank subsidiaries hold significant amounts of other unencumbered securities that we believe could also be used to generate liquidity, such as investment-grade ABS, MBS and municipal bonds. Another way our bank subsidiaries can generate incremental liquidity is by pledging a range of other unencumbered loans and securities to certain Federal Home Loan Banks and the Federal Reserve Discount Window. The cash we could have obtained by borrowing against this pool of specifically identified eligible assets was approximately $187 billion and $170 billion at March 31, 2011 and December 31, 2010. We have established operational procedures to enable us to borrow against these assets, including regularly monitoring our total pool of eligible loans and securities collateral. Due to regulatory restrictions, liquidity generated by the bank subsidiaries can only be used to fund obligations within the bank subsidiaries and cannot be transferred to the parent company or nonbank subsidiaries.

Our broker/dealer subsidiaries’ excess liquidity sources at March 31, 2011 and December 31, 2010 consisted of $39 billion and $35 billion in cash and high-quality, liquid, unencumbered securities. Our broker/dealers also held significant amounts of other unencumbered securities we believe could also be used to generate additional liquidity, including investment-grade corporate securities and equities. Liquidity held in a broker/dealer subsidiary is only available to meet the obligations of that entity and cannot be transferred to the parent company or to any other subsidiary, often due to regulatory restrictions and minimum requirements.

Time to Required Funding and Stress Modeling

We use a variety of metrics to determine the appropriate amounts of excess liquidity to maintain at the parent company and our bank and broker/dealer subsidiaries. One metric we use to evaluate the appropriate level of excess liquidity at the parent company is “Time to Required Funding.” This debt coverage measure indicates the number of months that the parent company can continue to meet its unsecured contractual obligations as they come due using only its Global Excess Liquidity Sources without issuing any new debt or accessing any additional liquidity sources. We define unsecured contractual obligations for purposes of this metric as maturities of senior or subordinated debt issued or guaranteed by Bank of America Corporation or Merrill Lynch & Co., Inc., including certain unsecured debt instruments, primarily structured notes, which we may be required to settle for cash prior to maturity. The ALMRC has established a target for Time to Required Funding of 21 months. Our Time to Required Funding at March 31, 2011 was 25 months.

We utilize liquidity stress models to assist us in determining the appropriate amounts of excess liquidity to maintain at the parent company and our bank and broker/dealer subsidiaries. These risk sensitive models have become increasingly important in analyzing our potential contractual and contingent cash outflows beyond those outflows considered in the Time to Required Funding analysis. For additional information on Time to Required Funding and liquidity stress modeling, see page 68 of the MD&A of the Corporation’s 2010 Annual Report on Form 10-K.

Basel III Liquidity Standards

In December 2010, the Basel Committee on Bank Supervision issued “International framework for liquidity risk measurement, standards and monitoring,” which includes two measures of liquidity risk. These two minimum liquidity measures were initially introduced in guidance in December 2009 and are considered part of Basel III.

The first liquidity measure is the Liquidity Coverage Ratio (LCR) which identifies the amount of unencumbered, high-quality, liquid assets a financial institution holds that can be used to offset the net cash outflows the institution would encounter under an acute 30-day stress scenario. The second liquidity measure is the Net Stable Funding Ratio (NSFR) which measures the amount of longer-term, stable sources of funding employed by a financial institution relative to the liquidity profiles of the assets funded and the potential for contingent calls on funding liquidity arising from off-balance sheet commitments and obligations over a one-year period. The Basel Committee expects the LCR to be implemented in January 2015 and the NSFR in January 2018, following observation periods beginning in 2012. We continue to monitor the development and the potential impact of these evolving proposals and expect to be able to meet the final requirements.

Diversified Funding Sources

We fund our assets primarily with a mix of deposits and secured and unsecured liabilities through a globally coordinated funding strategy. We diversify our funding globally across products, programs, markets, currencies and investor bases.

We fund a substantial portion of our lending activities through our deposit base, which was $1,020 billion and $1,010 billion at March 31, 2011 and December 31, 2010. Deposits are primarily generated by our Deposits, Global Commercial Banking, GWIM and GBAM segments. These deposits are diversified by clients, product type and geography. Certain of our U.S. deposits are insured by the FDIC. We consider a substantial portion of our deposits to be a stable, low-cost and consistent source of funding. We believe this deposit funding is generally less sensitive to interest rate changes, market volatility or changes in our credit ratings than wholesale funding sources.

Our trading activities are primarily funded on a secured basis through securities lending and repurchase agreements; these amounts will vary based on customer activity and market conditions. We believe funding these activities in the secured financing markets is more cost-efficient and less sensitive to changes in our credit ratings than unsecured financing. Repurchase agreements are generally short-term and often overnight. Disruptions in secured financing markets for financial institutions have occurred in prior market cycles which resulted in adverse changes in terms or significant reductions in the availability of such financing. We manage the liquidity risks arising from secured funding by sourcing funding globally from a diverse group of counterparties, providing a range of securities collateral and pursuing longer durations, when appropriate.

In addition, our parent company, bank and broker-dealer subsidiaries regularly access short-term secured and unsecured markets through federal funds purchased, commercial paper and other short-term borrowings to support customer activities, short-term financing requirements and cash management.

Table 18 presents information on short-term borrowings.

Table 18
Short-term Borrowings


	March 31, 2011					December 31, 2010
(Dollars in millions)	Amount		Rate			Amount		Rate
Period-end balance
Federal funds purchased	$	1,588		0.09	%	$	1,458		0.14	%
Securities loaned or sold under agreements to repurchase		258,933		1.10			243,901		1.15
Commercial paper		13,594		0.97			15,093		0.65
Other short-term borrowings		44,730		2.59			44,869		2.02

Total	$	318,845		1.25		$	305,321		1.27


	Three Months Ended March 31
	Amount				Rate
	2011		2010		2011			2010

Average during period
Federal funds purchased	$	2,940	$	4,418		0.11	%		0.09	%
Securities loaned or sold under agreements to repurchase		303,475		411,661		1.17			0.56
Commercial paper		18,467		34,102		0.73			0.44
Other short-term borrowings		46,691		58,151		2.39			1.49

Total	$	371,573	$	508,332		1.29			0.65

Maximum month-end balance during period
Federal funds purchased	$	4,133	$	8,320
Securities loaned or sold under agreements to repurchase		293,519		458,532
Commercial paper		21,212		36,236
Other short-term borrowings		46,267		63,081

For average and period-end balance discussions, see Balance Sheet Overview beginning on page 11. For more information, see Note 12 – Federal Funds Sold, Securities Borrowed or Purchased Under Agreements to Resell and Short-term Borrowings to the Consolidated Financial Statements of the Corporation’s 2010 Annual Report on Form 10-K.

We issue the majority of our long-term unsecured debt at the parent company and Bank of America, N.A. During the three months ended March 31, 2011, the parent company issued $6.2 billion of long-term unsecured debt. Bank of America, N.A. had no long-term senior unsecured debt issuances during the three months ended March 31, 2011.

We issue long-term unsecured debt in a variety of maturities and currencies to achieve cost-efficient funding and to maintain an appropriate maturity profile. While the cost and availability of unsecured funding may be negatively impacted by general market conditions or by matters specific to the financial services industry or the Corporation, we seek to mitigate refinancing risk by actively managing the amount of our borrowings that we anticipate will mature within any month or quarter.

The primary benefits of our centralized funding strategy include greater control, reduced funding costs, wider name recognition by investors and greater flexibility to meet the variable funding requirements of subsidiaries. Where regulations, time zone differences or other business considerations make parent company funding impractical, certain other subsidiaries may issue their own debt.

At March 31, 2011 and December 31, 2010, our long-term debt was in the currencies presented in Table 19.


*Table 19*
*Long-term Debt By Major Currency*
	March 31		December 31
(Dollars in millions)	2011		2010

U.S. Dollar	$	298,588	$	302,487
Euros		83,769		87,482
Japanese Yen		19,000		19,901
British Pound		11,680		16,505
Australian Dollar		7,117		6,924
Canadian Dollar		5,382		6,628
Swiss Franc		4,044		3,069
Other		4,856		5,435

Total long-term debt	$	434,436	$	448,431

We use derivative transactions to manage the duration, interest rate and currency risks of our borrowings, considering the characteristics of the assets they are funding. For further details on our ALM activities, refer to Interest Rate Risk Management for Nontrading Activities beginning on page 106.

We also diversify our funding sources by issuing various types of debt instruments including structured notes, which are debt obligations that pay investors with returns linked to other debt or equity securities, indices, currencies or commodities. We typically hedge the returns we are obligated to pay on these notes with derivative positions and/or in the underlying instruments so that from a funding perspective, the cost is similar to our other unsecured long-term debt. We could be required to immediately settle certain structured note obligations for cash or other securities under certain circumstances, which we consider for liquidity planning purposes. We believe, however, that a portion of such borrowings will remain outstanding beyond the earliest put or redemption date. We had outstanding structured notes of $63.1 billion and $61.1 billion at March 31, 2011 and December 31, 2010.

Substantially all of our senior and subordinated debt obligations contain no provisions that could trigger a requirement for an early repayment, require additional collateral support, result in changes to terms, accelerate maturity or create additional financial obligations upon an adverse change in our credit ratings, financial ratios, earnings, cash flows or stock price.

Prior to 2010, we participated in the FDIC’s Temporary Liquidity Guarantee Program (TLGP) which allowed us to issue senior unsecured debt that the FDIC guaranteed, in return for a fee based on the amount and maturity of the debt. At March 31, 2011, we had $27.5 billion outstanding under the program. We no longer issue debt under this program and all of our debt issued under TLGP will mature by June 30, 2012. Under this program, our debt received the highest long-term ratings from the major credit ratings agencies which resulted in a lower total cost of issuance than if we had issued non-FDIC guaranteed long-term debt.

Table 20 represents the book value for aggregate annual maturities of long-term debt at March 31, 2011.


*Table 20*
*Long-term Debt By Maturity*
(Dollars in millions)	2011		2012		2013		2014		2015		Thereafter		Total

Bank of America Corporation	$	11,645	$	42,825	$	9,247	$	18,542	$	13,632	$	91,678	$	187,569
Merrill Lynch & Co., Inc. and subsidiaries		20,916		20,418		18,528		18,405		4,845		41,323		124,435
Bank of America, N.A. and other subsidiaries		883		4,855		-		39		703		8,831		15,311
Other debt		18,597		13,772		5,158		1,736		434		2,227		41,924

Total long-term debt excluding consolidated VIEs		52,041		81,870		32,933		38,722		19,614		144,059		369,239
Long-term debt of consolidated VIEs		13,605		11,578		16,970		9,175		1,228		12,641		65,197

Total long-term debt	$	65,646	$	93,448	$	49,903	$	47,897	$	20,842	$	156,700	$	434,436

For additional information on long-term debt funding, see Note 13 – Long-term Debt to the Consolidated Financial Statements of the Corporation’s 2010 Annual Report on Form 10-K. For additional information regarding funding and liquidity risk management, refer to pages 67 through 70 of the MD&A of the Corporation’s 2010 Annual Report on Form 10-K.

Contingency Planning

We maintain contingency funding plans that outline our potential responses to liquidity stress events at various levels of severity. These policies and plans are based on stress scenarios and include potential funding strategies, and communication and notification procedures that we would implement in the event we experienced stressed liquidity conditions. We periodically review and test the contingency funding plans to validate efficacy and assess readiness.

Our U.S. bank subsidiaries can access contingency funding through the Federal Reserve Discount Window. Certain non-U.S. subsidiaries have access to central bank facilities in the jurisdictions in which they operate. While we do not rely on these sources in our liquidity modeling, we maintain the policies, procedures and governance processes that would enable us to access these sources if necessary.

Credit Ratings

Our borrowing costs and ability to raise funds are directly impacted by our credit ratings. In addition, credit ratings may be important to customers or counterparties when we compete in certain markets and when we seek to engage in certain transactions, including OTC derivatives. Thus, it is our objective to maintain high-quality credit ratings.

Credit ratings and outlooks are opinions on our creditworthiness and that of our obligations or securities, including long-term debt, short-term borrowings, preferred stock and other securities, including asset securitizations. Our credit ratings are subject to ongoing review by the ratings agencies and thus may change from time to time based on a number of factors, including our own financial strength, performance, prospects and operations as well as factors not under our control. In light of the recent difficulties in the financial services industry and financial markets, there can be no assurance that we will maintain our current ratings.

During 2010, the three major ratings agencies made negative adjustments to the outlooks for our long-term credit ratings. For a description of these rating adjustments, refer to Credit Ratings on page 70 of the MD&A of the Corporation’s 2010 Annual Report on Form 10-K. Currently, Bank of America Corporation’s long-term senior debt and outlook expressed by the ratings agencies are as follows: A2 (negative) by Moody’s Investors Services, Inc. (Moody’s); A (negative) by Standard and Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. (S&P); and A+ (rating watch negative) by Fitch, Inc. (Fitch). Bank of America, N.A.’s long-term debt and outlook currently are as follows: Aa3 (negative), A+ (negative) and A+ (rating watch negative) by those same three credit ratings agencies, respectively. These ratings agencies have indicated that, as a systemically important financial institution, our credit ratings currently reflect their expectation that, if necessary, we would receive significant support from the U.S. government. All three ratings agencies, however, have indicated they will reevaluate, and could reduce the uplift they include in our ratings for government support, for reasons arising from financial services regulatory reform proposals or legislation. Other factors that influence our credit ratings include changes to the ratings agencies’ methodologies for our industry or certain security types, the ratings agencies’ assessment of the general operating environment for financial services companies, our relative positions in the markets in which we compete, reputation, liquidity position, diversity of funding sources, the level and volatility of earnings, corporate governance and risk management policies, capital position, capital management practices and current or future regulatory and legislative initiatives.

A reduction in certain of our credit ratings or the ratings of certain asset-backed securitizations would likely have a material adverse effect on our liquidity, access to credit markets, the related cost of funds, our businesses and on certain trading revenues, particularly in those businesses where counterparty creditworthiness is critical. Under the terms of certain OTC derivatives contracts and other trading agreements, in the event of a credit ratings downgrade, the counterparties to those agreements may require us to provide additional collateral or to terminate these contracts or agreements. Such collateral calls or terminations could cause us to sustain losses, impair our liquidity, or both, by requiring us to provide the counterparties with additional collateral in the form of cash or highly liquid securities. If Bank of America Corporation’s or Bank of America, N.A.’s commercial paper or short-term credit ratings (which currently have the following ratings: P-1 by Moody’s, A-1 by S&P and F1+ by Fitch) were downgraded by one or more levels, the potential loss of short-term funding sources such as commercial paper or repo financing, and the effect on our incremental cost of funds would be material. For information regarding the additional collateral and termination payments that would be required in connection with certain OTC derivative contracts and other trading agreements as a result of such a credit ratings downgrade, see Note 4 – Derivatives to the Consolidated Financial Statements and Item 1A. Risk Factors of the Corporation’s 2010 Annual Report on Form 10-K.

The credit ratings of Merrill Lynch & Co., Inc. from the three major credit ratings agencies are the same as those of Bank of America Corporation. The major credit ratings agencies have indicated that the primary drivers of Merrill Lynch’s credit ratings are Bank of America Corporation’s credit ratings.

Credit Risk Management

During the first quarter of 2011, credit quality continued to show improvement. Continued economic stability and our proactive credit risk management initiatives positively impacted the credit portfolio as charge-offs and delinquencies continued to improve across almost all portfolios along with risk rating improvements in the commercial portfolios. However, global and national economic uncertainty, home price declines, regulatory initiatives and reform continued to weigh on the credit portfolios through March 31, 2011. For more information, see Economic and Business Environment beginning on page 5.

We proactively refine our underwriting and credit management practices, as well as credit standards, to meet the changing economic environment. To actively mitigate losses and enhance customer support in our consumer businesses, we have expanded collections, loan modification and customer assistance infrastructures. We also have implemented a number of actions to mitigate losses in the commercial businesses including increasing the frequency and intensity of portfolio monitoring, hedging activity and our practice of transferring management of deteriorating commercial exposures to independent special asset officers as credits approach criticized levels.

Since January 2008, and through the first quarter of 2011, Bank of America and Countrywide have completed 840,000 loan modifications with customers. During the three months ended March 31, 2011, we completed over 64,000 customer loan modifications with a total unpaid principal balance of approximately $14.0 billion, including 26,000 permanent modifications under the government’s Making Home Affordable Program. Of the loan modifications completed in the first quarter of 2011, in terms of both the volume of modifications and the unpaid principal balance associated with the underlying loans, most were in the portfolio serviced for investors and were not on our balance sheet. The most common types of modifications include a combination of rate reduction and capitalization of past due amounts which represent 68 percent of the volume of modifications completed during the first quarter of 2011, while principal forbearance represented 12 percent and capitalization of past due amounts represented eight percent. We also provide rate reductions, rate and payment extensions, principal forgiveness and other actions. These modification types are generally considered troubled debt restructurings (TDRs). For more information on TDRs and portfolio impacts, see Nonperforming Consumer Loans and Foreclosed Properties Activity beginning on page 79 and Note 6 – Outstanding Loans and Leases to the Consolidated Financial Statements.

Certain European countries, including Greece, Ireland, Italy, Portugal and Spain, continue to experience varying degrees of financial stress. Recent events in the Middle East/North Africa and Japan add uncertainty to the global economic outlook. Risks and ongoing concerns about the debt crisis in Europe, rising oil and commodity prices and impacts to global supply chains could result in a disruption of financial and commodity markets and trade which could have a detrimental impact on the global economic recovery, including the impact of sovereign and non-sovereign debt in these and other countries. For more information on our direct sovereign and non-sovereign exposures in non-U.S. countries, see Non-U.S. Portfolio beginning on page 94.

Consumer Portfolio Credit Risk Management

Credit risk management for the consumer portfolio begins with initial underwriting and continues throughout a borrower’s credit cycle. Statistical techniques in conjunction with experiential judgment are used in all aspects of portfolio management including underwriting, product pricing, risk appetite, setting credit limits and establishing operating processes and metrics to quantify and balance risks and returns. Statistical models are built using detailed behavioral information from external sources such as credit bureaus and/or internal historical experience. These models are a component of our consumer credit risk management process and are used, in part, to help determine both new and existing credit decisions, portfolio management strategies including authorizations and line management, collection practices and strategies, determination of the allowance for loan and lease losses, and economic capital allocations for credit risk.

For information on our accounting policies regarding delinquencies, nonperforming status, charge-offs and TDRs for the consumer portfolio, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2010 Annual Report on Form 10-K.

Consumer Credit Portfolio

Improvement in the U.S. economy and labor markets throughout most of 2010 and into the first quarter of 2011 resulted in lower losses in all consumer portfolios when compared to the first quarter of 2010. However, continued stress in the housing market, including declining home prices, continued to adversely impact the home loans portfolio.

Table 21 presents our outstanding consumer loans and the Countrywide PCI loan portfolio. Loans that were acquired from Countrywide and considered credit-impaired were written down to fair value upon acquisition. In addition to being included in the “Outstandings” columns in Table 21, these loans are also shown separately, net of purchase accounting adjustments, in the “Countrywide Purchased Credit-impaired Loan Portfolio” column. Loans that were acquired from Merrill Lynch were recorded at fair value including those that were considered credit-impaired upon acquisition. The Merrill Lynch consumer PCI loan portfolio did not materially alter the reported credit quality statistics of the consumer portfolios and is, therefore, excluded from the “Countrywide Purchased Credit-impaired Loan Portfolio” column and discussion below. For additional information, see Note 6 — Outstanding Loans and Leases to the Consolidated Financial Statements. The impact of the Countrywide PCI loan portfolio on certain credit statistics is reported where appropriate. See Countrywide Purchased Credit-impaired Loan Portfolio beginning on page 75 for more information. Under certain circumstances, loans that were originally classified as discontinued real estate loans upon acquisition have been subsequently modified from pay option or subprime loans into loans with more conventional terms and are now included in the residential mortgage portfolio shown below.

Table 21

Consumer Loans

Countrywide Purchased

Credit-impaired Loan

Outstandings

Portfolio

March 31

December 31

March 31

December 31

(Dollars in millions)

2011

2010

2011

2010

Residential mortgage ⁽¹⁾

261,934

257,973

10,368

10,592

Home equity

133,629

137,981

12,469

12,590

Discontinued real estate ⁽²⁾

12,694

13,108

11,295

11,652

U.S. credit card

107,107

113,785

n/a

n/a

Non-U.S. credit card

27,235

27,465

n/a

n/a

Direct/Indirect consumer ⁽³⁾

89,444

90,308

n/a

n/a

Other consumer ⁽⁴⁾

2,754

2,830

n/a

n/a

Total

634,797

643,450

34,132

34,834


⁽¹⁾		Outstandings include non-U.S. residential mortgages of $92 million and $90 million at March 31, 2011 and December 31, 2010.

⁽²⁾		Outstandings include $11.4 billion and $11.8 billion of pay option loans at March 31, 2011 and December 31, 2010, and $1.3 billion of subprime loans at March 31, 2011 and December 31, 2010. We no longer originate these products.

⁽³⁾		Outstandings include dealer financial services loans of $41.0 billion and $42.9 billion, consumer lending loans of $11.5 billion and $12.9 billion, U.S. securities-based lending margin loans of $19.7 billion and $16.6 billion, student loans of $6.6 billion and $6.8 billion, non-U.S. consumer loans of $8.5 billion and $8.0 billion and other consumer loans of $2.1 billion and $3.1 billion at March 31, 2011 and December 31, 2010, respectively.

⁽⁴⁾		Outstandings include consumer finance loans of $1.9 billion at both March 31, 2011 and December 31, 2010. Outstandings also include other non-U.S. consumer loans of $818 million and $803 million and consumer overdrafts of $69 million and $88 million at March 31, 2011 and December 31, 2010.

n/a = not applicable

Table 22 presents our accruing consumer loans past due 90 days or more and our consumer nonperforming loans. Nonperforming loans do not include past due consumer credit card loans, consumer non-real estate-secured loans or unsecured consumer loans as these loans are generally charged off no later than the end of the month in which the loan becomes 180 days past due. Real estate-secured past due consumer loans insured by the FHA are reported as accruing as opposed to nonperforming since the principal repayment is insured by the FHA. FHA-insured loans accruing past due 90 days or more are primarily related to our purchases of delinquent loans pursuant to our servicing agreements with GNMA. Additionally, nonperforming loans and accruing balances past due 90 days or more do not include the Countrywide PCI loans even though the customer may be contractually past due. Foreclosures were voluntarily halted in October 2010 as we began a review of our foreclosure processes and we have not resumed foreclosures on FHA-insured loans. For information on the status of foreclosures, see Other Mortgage-related Matters – Review of Foreclosure Processes beginning on page 50.


*Table 22*
*Consumer Credit Quality*
	Accruing Past Due 90 Days or More				Nonperforming
	March 31		December 31		March 31		December 31
(Dollars in millions)	2011		2010		2011		2010

Residential mortgage ^{(1, 2)}	$	19,754	$	16,768	$	17,466	$	17,691
Home equity ⁽¹⁾		-		-		2,559		2,694
Discontinued real estate ⁽¹⁾		-		-		327		331
U.S. credit card		2,879		3,320		n/a		n/a
Non-U.S. credit card		691		599		n/a		n/a
Direct/Indirect consumer		940		1,058		68		90
Other consumer		3		2		36		48


Total	$	24,267	$	21,747	$	20,456	$	20,854


⁽¹⁾		Our policy is to classify consumer real estate-secured loans as nonperforming at 90 days past due, except Countrywide PCI loans and FHA-insured loans as referenced in footnote (2).

⁽²⁾		Balances accruing past due 90 days or more are loans insured by the FHA. These balances include $11.1 billion and $8.3 billion of loans on which interest has been curtailed by the FHA although principal is still insured and $8.7 billion and $8.5 billion of loans on which the FHA is paying interest.

n/a = not applicable

Accruing consumer loans and leases past due 90 days or more as a percentage of outstanding consumer loans and leases were 3.82 percent (0.84 percent excluding the Countrywide PCI and FHA-insured loan portfolios) and 3.38 percent (0.90 percent excluding the Countrywide PCI and FHA-insured loan portfolios) at March 31, 2011 and December 31, 2010. Nonperforming consumer loans as a percentage of outstanding consumer loans were 3.22 percent (3.81 percent excluding the Countrywide PCI and FHA-insured loan portfolios) and 3.24 percent (3.76 percent excluding the Countrywide PCI and FHA-insured loan portfolios) at March 31, 2011 and December 31, 2010.

Table 23 presents net charge-offs and related ratios for our consumer loans and leases for the three months ended March 31, 2011 and 2010.


*Table 23*
*Consumer Net Charge-offs and Related Ratios*
	Net Charge-offs				Net Charge-off Ratios ^(1,2)
	Three Months Ended				Three Months Ended
	March 31				March 31
(Dollars in millions)	2011		2010		2011			2010

Residential mortgage	$	905	$	1,069		1.40	%		1.78	%
Home equity		1,179		2,397		3.51			6.37
Discontinued real estate		20		21		0.61			0.60
U.S. credit card		2,274		3,963		8.39			12.82
Non-U.S. credit card		402		631		5.91			8.57
Direct/Indirect consumer		525		1,109		2.36			4.46
Other consumer		40		58		5.93			7.80

Total	$	5,345	$	9,248		3.38			5.60


⁽¹⁾		Net charge-off ratios are calculated as annualized net charge-offs divided by average outstanding loans and leases.

⁽²⁾		Net charge-off ratios excluding the Countrywide PCI and FHA-insured loan portfolio were 1.92 percent and 2.01 percent for residential mortgage, 3.87 percent and 6.97 percent for home equity, 5.57 percent and 4.47 percent for discontinued real estate and 3.96 percent and 6.09 percent for the total consumer portfolio for the three months ended March 31, 2011 and 2010. These are the only product classifications materially impacted by the Countrywide PCI loan portfolio for the three months ended March 31, 2011 and 2010. For all loan and lease categories, the net charge-offs were unchanged.

During the first quarter of 2011, we announced a plan to manage the exposures we have to certain residential mortgage, home equity and discontinued real estate products through the creation of Legacy Asset Servicing within Consumer Real Estate Services which will manage both our owned loans as well as loans serviced for others that meet certain criteria. The criteria generally represent home lending standards which we do not consider as part our continuing core business. The Legacy Asset Servicing portfolio includes the following:

	•		Discontinued real estate loans (e.g., subprime and pay option)

	•		Residential mortgage loans and home equity loans for products we no longer originate (e.g., reduced document loans and interest-only loans not underwritten to fully amortizing payment)

	•		Loans that would not have been originated under our underwriting standards at December 31, 2010 (e.g., conventional loans with an original loan-to-value (LTV) greater than 95 percent and government-insured loans for which the borrower has a FICO score less than 620)

	•		Countrywide PCI portfolios

	•		Certain loans that met a predefined delinquency and probability of default threshold as of January 1, 2011

The Legacy Asset Servicing portfolio was established as of January 1, 2011. The criteria for inclusion of certain loans in the Legacy Asset Servicing portfolio may continue to be evaluated over time. Information presented relating to periods prior to December 31, 2010 was not restated to conform to the realignment between the core portfolio and Legacy Asset Servicing portfolio. For more information on Legacy Asset Servicing within Consumer Real Estate Services, see page 29.

As shown in Table 24, the Legacy Asset Servicing portfolio represents substantially all of the home loans portfolio’s nonperforming loans and net charge-offs. As such, the credit quality discussion below is based on the entire portfolio.


*Table 24*
*Home Loans Portfolio*
	Outstandings				Nonperforming				Net Charge-offs
									Three Months
	March 31		December 31		March 31		December 31		Ended
(Dollars in millions)	2011		2010		2011		2010		March 31, 2011

Core portfolio
Residential mortgage	$	169,171	$	166,927	$	1,596	$	1,510	$	23
Home equity		70,017		71,519		149		107		48
Legacy Asset Servicing portfolio
Residential mortgage		92,763		91,046		15,870		16,181		882
Home equity		63,612		66,462		2,410		2,587		1,131
Discontinued real estate		12,694		13,108		327		331		20

Total home loans portfolio
Residential mortgage		261,934		257,973		17,466		17,691		905
Home equity		133,629		137,981		2,559		2,694		1,179
Discontinued real estate		12,694		13,108		327		331		20

Total home loans portfolio	$	408,257	$	409,062	$	20,352	$	20,716	$	2,104

We believe that the presentation of information adjusted to exclude the impact of the Countrywide PCI and FHA-insured loan portfolios is more representative of the ongoing operations and credit quality of the business. As a result, in the following discussions of the residential mortgage, home equity and discontinued real estate portfolios, we provide information that excludes the impact of the Countrywide PCI and FHA-insured loan portfolios in certain credit quality statistics. We separately disclose information on the Countrywide PCI loan portfolio beginning on page 75.

Residential Mortgage

The residential mortgage portfolio, which excludes the discontinued real estate portfolio acquired with Countrywide, makes up the largest percentage of our consumer loan portfolio at 41 percent of consumer loans at March 31, 2011. Approximately 14 percent of the residential mortgage portfolio is in GWIM and represents residential mortgages that are originated for the home purchase and refinancing needs of our wealth management clients. The remaining portion of the portfolio is mostly in All Other and is comprised of both originated loans as well as purchased loans used in our overall ALM activities.

Outstanding balances in the residential mortgage portfolio increased $4.0 billion at March 31, 2011 compared to December 31, 2010 as FHA-insured origination volume was partially offset by paydowns, charge-offs and transfers to foreclosed properties. In addition, repurchases of FHA-insured delinquent loans pursuant to our servicing agreements with GNMA also increased the residential mortgage portfolio during the three months ended March 31, 2011. At March 31, 2011 and December 31, 2010, the residential mortgage portfolio included $63.7 billion and $53.9 billion of outstanding loans that were insured by the FHA. On this portion of the residential mortgage portfolio, we are protected against principal loss as a result of FHA insurance. Table 25 presents certain residential mortgage key credit statistics on both a reported basis and excluding the Countrywide PCI and FHA-insured loan portfolios. We believe the presentation of information adjusted to exclude the impacts of the Countrywide PCI and FHA-insured loan portfolios is more representative of the credit risk in this portfolio. For more information on the Countrywide PCI loan portfolio, see the discussion beginning on page 75.


*Table 25*
*Residential Mortgage – Key Credit Statistics*
							Excluding Countrywide
							Purchased Credit-impaired
	Reported Basis						and FHA-Insured Loans
	March 31			December 31			March 31			December 31
(Dollars in millions)	2011			2010			2011			2010

Outstandings	$	261,934		$	257,973		$	187,895		$	193,435
Accruing past due 90 days or more		19,754			16,768			n/a			n/a
Nonperforming loans		17,466			17,691			17,466			17,691
Percent of portfolio
Refreshed LTVs greater than 90 but less than 100		15	%		15	%		10	%		10	%
Refreshed LTVs greater than 100		33			32			23			23
Refreshed FICOs below 620		22			20			14			14
2006 and 2007 vintages		30			32			37			38


	Three Months Ended						Three Months Ended
	March 31						March 31
	2011			2010			2011			2010

Net charge-off ratio ⁽¹⁾		1.40	%		1.78	%		1.92	%		2.01	%


⁽¹⁾		Net charge-off ratios are calculated as annualized net charge-offs divided by average outstanding loans and leases.

n/a = not applicable

The following discussion presents the residential mortgage portfolio excluding the Countrywide PCI and FHA-insured loan portfolios.

We have mitigated a portion of our credit risk on the residential mortgage portfolio through the use of synthetic securitization vehicles and long-term credit protection agreements with FNMA and FHLMC as described in Note 6 – Outstanding Loans and Leases to the Consolidated Financial Statements. At March 31, 2011 and December 31, 2010, $16.7 billion and $14.3 billion in loans were protected by long-term credit protection agreements. Substantially all of these loans are individually insured and therefore the Corporation does not record an allowance for credit losses. At March 31, 2011 and December 31, 2010, the synthetic securitization vehicles referenced $49.8 billion and $53.9 billion of residential mortgage loans and provided loss protection up to $1.0 billion and $1.1 billion. At March 31, 2011 and December 31, 2010, the Corporation had a receivable of $494 million and $722 million from these vehicles for reimbursement of losses. The Corporation records an allowance for credit losses on loans referenced by the synthetic securitization vehicles. The reported net charge-offs for the residential mortgage portfolio do not include the benefit of amounts reimbursable from these vehicles. Adjusting for the benefit of the credit protection from the synthetic securitizations, the residential mortgage net charge-off ratio for the three months ended March 31, 2011 would have been reduced by 14 bps compared to five bps for the same period in 2010. Synthetic securitizations and the protection provided by FNMA and FHLMC together mitigate risk on 35 percent of our residential mortgage portfolio at both March 31, 2011 and December 31, 2010. These credit protection agreements reduce our regulatory risk-weighted assets due to the transfer of a portion of our credit risk to unaffiliated parties. At March 31, 2011 and December 31, 2010, these transactions had the cumulative effect of reducing our risk-weighted assets by $8.8 billion and $8.6 billion, and increased our Tier 1 capital ratio by seven bps and our Tier 1 common capital ratio by five bps.

Nonperforming residential mortgage loans decreased $225 million compared to December 31, 2010 as nonperforming loans returned to performing status, and charge-offs, paydowns and payoffs outpaced new inflows, which continued to slow in the three months ending March 31, 2011 due to favorable delinquency trends. At March 31, 2011, $12.7 billion, or 73 percent, of the nonperforming residential mortgage loans were 180 days or more past due and had been written down to the estimated fair value of the collateral less estimated costs to sell. Net charge-offs decreased $164 million to $905

million in the first quarter of 2011, or 1.92 percent of total average residential mortgage loans compared to 2.01 percent for the same period in 2010 driven primarily by the absence of the impact related to certain modified loans that were written down to the underlying collateral value in the first quarter of 2010, as well as favorable delinquency trends which were due in part to improvement in the U.S. economy. These improvements were partially offset by increased losses on refreshed valuations of underlying collateral on loans greater than 180 days past due. Net charge-off ratios were further impacted by lower loan balances primarily due to paydowns and charge-offs.

Loans in the residential mortgage portfolio with certain characteristics have greater risk of loss than others. These characteristics include loans with a high refreshed LTV, loans originated at the peak of home prices in 2006 and 2007, interest-only loans and loans to borrowers located in California and Florida where we have concentrations and where significant declines in home prices have been experienced. Although the following disclosures address each of these risk characteristics separately, there is significant overlap in loans with these characteristics, which contributed to a disproportionate share of the losses in the portfolio. The residential mortgage loans with all of these higher risk characteristics comprised five percent of the residential mortgage portfolio at both March 31, 2011 and December 31, 2010. Loans with these risk characteristics accounted for 23 percent and 30 percent of the residential mortgage net charge-offs for the three months ended March 31, 2011 and 2010.

Residential mortgage loans with a greater than 90 percent but less than 100 percent refreshed LTV represented 10 percent of the residential mortgage portfolio at both March 31, 2011 and December 31, 2010. Loans with a refreshed LTV greater than 100 percent represented 23 percent of the residential mortgage loan portfolio at both March 31, 2011 and December 31, 2010. Of the loans with a refreshed LTV greater than 100 percent, 90 percent and 88 percent were performing at March 31, 2011 and December 31, 2010. Loans with a refreshed LTV greater than 100 percent reflect loans where the outstanding carrying value of the loan is greater than the most recent valuation of the property securing the loan. The majority of these loans have a refreshed LTV greater than 100 percent due primarily to home price deterioration over the past several years. Loans to borrowers with refreshed FICO scores below 620 represented 14 percent of the residential mortgage portfolio at both March 31, 2011 and December 31, 2010.

The 2006 and 2007 vintage loans, which represented 37 percent and 38 percent of our residential mortgage portfolio at March 31, 2011 and December 31, 2010, typically have higher refreshed LTVs than other vintages and accounted for 66 percent and 67 percent of nonperforming residential mortgage loans at March 31, 2011 and December 31, 2010. These vintages of loans accounted for 74 percent and 79 percent of residential mortgage net charge-offs during the three months ended March 31, 2011 and 2010.

Of the residential mortgage loans, $62.7 billion, or 33 percent, and $62.5 billion, or 32 percent, at March 31, 2011 and December 31, 2010 are interest-only loans of which 87 percent were performing for both periods. Nonperforming balances on interest-only residential mortgage loans were $7.9 billion, or 45 percent, and $8.0 billion, or 45 percent, of total nonperforming residential mortgages at March 31, 2011 and December 31, 2010. Additionally, net charge-offs on the interest-only portion of the portfolio represented 55 percent and 48 percent of the total residential mortgage net charge-offs for the three months ended March 31, 2011 and 2010.

Table 26 presents outstandings, nonperforming loans and net charge-offs by certain state concentrations for the residential mortgage portfolio. California and Florida combined represented 42 percent of outstandings and 48 percent of nonperforming loans at March 31, 2011 and December 31, 2010. These states accounted for 51 percent of the net charge-offs for the three months ended March 31, 2011 compared to 60 percent for the same period in 2010. The Los Angeles-Long Beach-Santa Ana Metropolitan Statistical Area (MSA) within California represented 13 percent of outstandings at both March 31, 2011 and December 31, 2010. Loans within these MSAs comprised only six percent of net charge-offs for both the three months ended March 31, 2011 and 2010.


*Table 26*
*Residential Mortgage State Concentrations*
	Outstandings				Nonperforming				Net Charge-offs
									Three Months Ended
	March 31		December 31		March 31		December 31		March 31
(Dollars in millions)	2011		2010		2011		2010		2011		2010

California	$	65,874	$	68,341	$	6,326	$	6,389	$	308	$	480
Florida		13,223		13,616		2,028		2,054		156		160
New York		12,337		12,545		805		772		19		(2	)
Texas		8,894		9,077		494		492		12		9
Virginia		6,783		6,960		444		450		14		24
Other U.S./Non-U.S.		80,784		82,896		7,369		7,534		396		398

Residential mortgage loans ⁽¹⁾	$	187,895	$	193,435	$	17,466	$	17,691	$	905	$	1,069

FHA-insured loans		63,671		53,946
Countrywide purchased credit-impaired residential mortgage portfolio		10,368		10,592

Total residential mortgage loan portfolio	$	261,934	$	257,973


⁽¹⁾		Amount excludes the Countrywide PCI residential mortgage and FHA-insured loan portfolios.

The Community Reinvestment Act (CRA) encourages banks to meet the credit needs of their communities for housing and other purposes, particularly in neighborhoods with low or moderate incomes. At March 31, 2011 and December 31, 2010, our CRA portfolio was $15.1 billion and $15.3 billion, or eight percent of the residential mortgage loan balances for both periods. The CRA portfolio included $2.9 billion and $3.0 billion of nonperforming loans at March 31, 2011 and December 31, 2010 representing 16 percent and 17 percent of total nonperforming residential mortgage loans. Net charge-offs related to this portfolio were $208 million and $280 million for the three months ended March 31, 2011 and 2010, or 23 percent and 26 percent of total net charge-offs for the residential mortgage portfolio.

For information on representations and warranties related to our residential mortgage portfolio, see Representations and Warranties and Other Mortgage-related Matters on page 44 and Note 9 – Representations and Warranties Obligations and Corporate Guarantees to the Consolidated Financial Statements.

Home Equity

The home equity portfolio makes up 21 percent of the consumer portfolio and is comprised of home equity lines of credit, home equity loans and reverse mortgages. At March 31, 2011, approximately 88 percent of the home equity portfolio was included in Consumer Real Estate Services, while the remainder of the portfolio was primarily in GWIM. Outstanding balances in the home equity portfolio decreased $4.4 billion at March 31, 2011 compared to December 31, 2010 primarily due to paydowns and charge-offs. Of the loans in the home equity portfolio at March 31, 2011 and December 31, 2010, $25.4 billion, or 19 percent, and $24.8 billion, or 18 percent, were in first-lien positions (21 percent and 20 percent excluding the Countrywide PCI home equity loan portfolio). For more information on the Countrywide PCI home equity loan portfolio, see the discussion beginning on page 75.

Home equity unused lines of credit totaled $76.1 billion at March 31, 2011 compared to $80.1 billion at December 31, 2010. This decrease was due primarily to customers choosing to close accounts as well as line management initiatives on deteriorating accounts, which more than offset new production. The home equity line of credit utilization rate was 59 percent at both March 31, 2011 and December 31, 2010.

Table 27 presents certain home equity key credit statistics on both a reported basis as well as excluding the Countrywide PCI loan portfolio. We believe the presentation of information adjusted to exclude the impacts of the Countrywide PCI loan portfolio is more representative of the credit risk in this portfolio.

Table 27
Home Equity – Key Credit Statistics


							Excluding Countrywide Purchased
	Reported Basis						Credit-impaired Loans
	March 31			December 31			March 31			December 31
(Dollars in millions)	2011			2010			2011			2010

Outstandings	$	133,629		$	137,981		$	121,160		$	125,391
Nonperforming loans		2,559			2,694			2,559			2,694
Percent of portfolio
Refreshed CLTVs greater than 90 but less than 100		11	%		11	%		11	%		11	%
Refreshed CLTVs greater than 100		37			34			33			30
Refreshed FICOs below 620		14			14			13			12
2006 and 2007 vintages		50			50			47			47

	Three Months Ended						Three Months Ended
	March 31						March 31
	2011			2010			2011			2010
Net charge-off ratio ⁽¹⁾		3.51	%		6.37	%		3.87	%		6.97	%


⁽¹⁾		Net charge-off ratios are calculated as annualized net charge-offs divided by average outstanding loans and leases.

The following discussion presents the home equity portfolio excluding the Countrywide PCI loan portfolio.

Nonperforming home equity loans decreased $135 million to $2.6 billion compared to December 31, 2010 driven primarily by charge-offs and nonperforming loans returning to performing status which together outpaced delinquency inflows which continued to slow during the three months ending March 31, 2011 due to favorable delinquency trends. At March 31, 2011, $934 million, or 36 percent, of the nonperforming home equity loans were 180 days or more past due and had been written down to their fair values. Net charge-offs decreased $1.2 billion to $1.2 billion, or 3.87 percent, of total average home equity loans for the three months ended March 31, 2011 compared to $2.4 billion, or 6.97 percent, for the same period in the prior year. The decrease was primarily driven by the absence of $643 million of net charge-offs related to certain modified loans that were written down to the underlying collateral value in the first quarter of 2010 and favorable portfolio trends in the first quarter of 2011 due in part to improvement in the U.S. economy. Net charge-off ratios were further impacted by lower loan balances primarily as a result of charge-offs and paydowns.

Loans with a high refreshed combined loan-to-value (CLTV), loans originated at the peak of home prices in 2006 and 2007 and loans in geographic areas that have experienced the most significant declines in home prices have greater risk of loss than others in the portfolio. Home price declines coupled with the fact that most home equity loans are secured by second-lien positions have significantly reduced and, in some cases, eliminated all collateral value after consideration of the first-lien position. Although the disclosures below address each of these risk characteristics separately, there is significant overlap in loans with these characteristics, which has contributed to a disproportionate share of losses in the portfolio. Home equity loans with all of these higher risk characteristics comprised 10 percent of the total home equity portfolio at both March 31, 2011 and December 31, 2010, but accounted for 27 percent of the home equity net charge-offs during the three months ended March 31, 2011 compared to 30 percent during the three months ended March 31, 2010.

Home equity loans with greater than 90 percent but less than 100 percent refreshed CLTVs comprised 11 percent of the home equity portfolio at both March 31, 2011 and December 31, 2010. Loans with refreshed CLTVs greater than 100 percent comprised 33 percent and 30 percent of the home equity portfolio at March 31, 2011 and December 31, 2010. Of those loans with a refreshed CLTV greater than 100 percent, 97 percent were performing at both March 31, 2011 and December 31, 2010. Home equity loans and lines of credit with a refreshed CLTV greater than 100 percent reflect loans where the carrying value and available line of credit of the combined loans are equal to or greater than the most recent valuation of the property securing the loan. Depending on the value of the property, there may be collateral in excess of the first-lien that is available to reduce the severity of loss on the second-lien. Home price deterioration over the past several years has contributed to an increase in CLTV ratios. In addition, loans to borrowers with a refreshed FICO score below 620 represented 13 percent and 12 percent of the home equity loans at March 31, 2011 and December 31, 2010. Of the total home equity portfolio, 76 percent and 75 percent at March 31, 2011 and December 31, 2010 were interest-only loans.

The 2006 and 2007 vintage loans, which represent 47 percent of our home equity portfolio at both March 31, 2011 and December 31, 2010, have higher refreshed CLTVs and accounted for 56 percent of nonperforming home equity loans at March 31, 2011 compared to 57 percent at December 31, 2010. These vintages of loans accounted for 67 percent and 65 percent of net charge-offs for the three months ended March 31, 2011 and 2010.

Table 28 below presents outstandings, nonperforming loans and net charge-offs by certain state concentrations for the home equity loan portfolio. California and Florida combined represented 41 percent and 40 percent of the total home equity portfolio and 44 percent of nonperforming home equity loans at March 31, 2011 and December 31, 2010. These states accounted for 52 percent of the home equity net charge-offs for the three months ended March 31, 2011 compared to 58 percent of the home equity net charge-offs for the same period in the prior year. In the New York area, the New York-Northern New Jersey-Long Island MSA made up 11 percent of outstanding home equity loans at both March 31, 2011 and December 31, 2010. This MSA comprised only seven percent and six percent of net charge-offs for the three months ended March 31, 2011 and 2010. The Los Angeles-Long Beach-Santa Ana MSA within California made up 11 percent of outstanding home equity loans at both March 31, 2011 and December 31, 2010. Loans within this MSA comprised 10 percent and 12 percent of net charge-offs for the three months ended March 31, 2011 and 2010.

For information on representations and warranties related to our home equity portfolio, see Representations and Warranties and Other Mortgage-related Matters on page 44 and Note 9 – Representations and Warranties Obligations and Corporate Guarantees to the Consolidated Financial Statements.

Table 28
Home Equity State Concentrations


	Outstandings				Nonperforming				Net Charge-offs
									Three Months Ended
	March 31		December 31		March 31		December 31		March 31
(Dollars in millions)	2011		2010		2011		2010		2011		2010

California	$	34,597	$	35,426	$	679	$	708	$	368	$	871
Florida		14,618		15,028		442		482		239		514
New Jersey		7,904		8,153		166		169		42		70
New York		7,848		8,061		237		246		53		85
Massachusetts		5,225		5,657		72		71		20		36
Other U.S./Non-U.S.		50,968		53,066		963		1,018		457		821

Home equity loans ⁽¹⁾	$	121,160	$	125,391	$	2,559	$	2,694	$	1,179	$	2,397

Countrywide purchased credit-impaired home equity loan portfolio		12,469		12,590

Total home equity loan portfolio	$	133,629	$	137,981


⁽¹⁾		Amount excludes the Countrywide PCI home equity loan portfolio.

Discontinued Real Estate

The discontinued real estate portfolio, totaling $12.7 billion at March 31, 2011, consists of pay option and subprime loans acquired in the Countrywide acquisition. Upon acquisition, the majority of the discontinued real estate portfolio was considered credit-impaired and written down to fair value. At March 31, 2011, the Countrywide PCI loan portfolio comprised $11.3 billion, or 89 percent, of the total discontinued real estate portfolio. This portfolio is included in All Other and is managed as part of our overall ALM activities. See Countrywide Purchased Credit-impaired Loan Portfolio below for more information on the discontinued real estate portfolio.

At March 31, 2011, the purchased discontinued real estate portfolio that was not credit-impaired was $1.4 billion. Loans with greater than 90 percent refreshed LTVs and CLTVs comprised 28 percent of the portfolio and those with refreshed FICO scores below 620 represented 46 percent of the portfolio. California represented 37 percent of the portfolio and 33 percent of the nonperforming loans while Florida represented 10 percent of the portfolio and 15 percent of the nonperforming loans at March 31, 2011. The Los Angeles-Long Beach-Santa Ana MSA within California made up 16 percent of outstanding discontinued real estate loans at March 31, 2011.

Pay option adjustable-rate mortgages (ARMs), which are included in the discontinued real estate portfolio, have interest rates that adjust monthly and minimum required payments that adjust annually, subject to resetting of the loan if minimum payments are made and deferred interest limits are reached. Annual payment adjustments are subject to a 7.5 percent maximum change. To ensure that contractual loan payments are adequate to repay a loan, the fully amortizing loan payment amount is re-established after the initial five or 10-year period and again every five years thereafter. These payment adjustments are not subject to the 7.5 percent limit and may be substantial due to changes in interest rates and the

addition of unpaid interest to the loan balance. Payment advantage ARMs have interest rates that are fixed for an initial period of five years. Payments are subject to reset if the minimum payments are made and deferred interest limits are reached. If interest deferrals cause a loan’s principal balance to reach a certain level within the first 10 years of the life of the loan, the payment is reset to the interest-only payment; then at the 10-year point, the fully amortizing payment is required.

The difference between the frequency of changes in the loans’ interest rates and payments along with a limitation on changes in the minimum monthly payments of 7.5 percent per year can result in payments that are not sufficient to pay all of the monthly interest charges (i.e., negative amortization). Unpaid interest charges are added to the loan balance until the loan balance increases to a specified limit, which can be no more than 115 percent of the original loan amount, at which time a new monthly payment amount adequate to repay the loan over its remaining contractual life is established.

At March 31, 2011, the unpaid principal balance of pay option loans was $14.0 billion, with a carrying amount of $11.4 billion, including $10.6 billion of loans that were credit-impaired upon acquisition. The total unpaid principal balance of pay option loans with accumulated negative amortization was $11.8 billion including $823 million of negative amortization. The percentage of borrowers electing to make only the minimum payment on option ARMs was 69 percent at March 31, 2011. We continue to evaluate our exposure to payment resets on the acquired negative-amortizing loans including the Countrywide PCI pay option loan portfolio and have taken into consideration several assumptions regarding this evaluation (e.g., prepayment rates). Based on our expectations, eight percent and three percent of the pay option loan portfolio are expected to reset in the remainder of 2011 and 2012. Approximately five percent are expected to reset thereafter and approximately 84 percent are expected to default or repay prior to being reset.

Countrywide Purchased Credit-impaired Loan Portfolio

Loans acquired with evidence of credit quality deterioration since origination and for which it is probable at purchase that we will be unable to collect all contractually required payments are accounted for under the accounting guidance for PCI loans, which addresses accounting for differences between contractual and expected cash flows to be collected from the purchaser’s initial investment in loans if those differences are attributable, at least in part, to credit quality. Evidence of credit quality deterioration as of the acquisition date may include statistics such as past due status, refreshed FICO scores and refreshed LTVs. PCI loans are recorded at fair value upon acquisition and the applicable accounting guidance prohibits carrying over or recording a valuation allowance in the initial accounting. The Merrill Lynch PCI consumer loan portfolio did not materially alter the reported credit quality statistics of the consumer portfolios. As such, the Merrill Lynch consumer PCI loans are excluded from the following discussion and credit statistics.

Acquired loans from Countrywide that were considered credit-impaired were written down to fair value at the acquisition date. Table 29 presents the unpaid principal balance, carrying value, related valuation allowance and the net carrying value as a percentage of the unpaid principal balance for the Countrywide PCI loan portfolio at March 31, 2011 and December 31, 2010.

Table 29
Countrywide Purchased Credit-impaired Loan Portfolio


	March 31, 2011
							Carrying
	Unpaid				Related		Value Net of		% of Unpaid
	Principal		Carrying		Valuation		Valuation		Principal
(Dollars in millions)	Balance		Value		Allowance ⁽¹⁾		Allowance		Balance

Residential mortgage	$	11,210	$	10,368	$	1,093	$	9,275		82.74	%
Home equity		14,571		12,469		4,942		7,527		51.66
Discontinued real estate		14,259		11,295		1,810		9,485		66.52

Total Countrywide PCI loan portfolio	$	40,040	$	34,132	$	7,845	$	26,287		65.65	%

	December 31, 2010
Residential mortgage	$	11,481	$	10,592	$	663	$	9,928		86.47	%
Home equity		15,072		12,590		4,467		8,123		53.89
Discontinued real estate		14,893		11,652		1,204		10,449		70.16

Total Countrywide PCI loan portfolio	$	41,446	$	34,834	$	6,334	$	28,500		68.76	%


⁽¹⁾		Certain PCI loans that were originally classified as discontinued real estate loans upon acquisition have been subsequently modified and are now included in the residential mortgage outstandings along with the related allowance.

Of the unpaid principal balance at March 31, 2011, $15.3 billion was 180 days or more past due, including $10.6 billion of first-lien and $4.7 billion of home equity. Of the $24.7 billion that is less than 180 days past due, $20.8 billion,

or 84 percent of the total unpaid principal balance, was current based on the contractual terms while $2.1 billion, or eight percent, was in early stage delinquency. During the three months ended March 31, 2011, we recorded $1.5 billion of provision for credit losses on Countrywide PCI loans which was comprised of $815 million for discontinued real estate, $475 million for home equity and $221 million for residential mortgage loans. This compared to a total provision for Countrywide PCI loans of $890 million during the three months ended March 31, 2010. Provision expense for the three months ended March 31, 2011 was driven primarily by recent deterioration in home prices resulting in a refined outlook reflecting further declines in home prices over 2011 and slower appreciation versus previous expectations in 2012 through 2015. For further information on the PCI loan portfolio, see Note 6 – Outstanding Loans and Leases to the Consolidated Financial Statements.

Additional information is provided below on the Countrywide PCI residential mortgage, home equity and discontinued real estate loan portfolios.

Purchased Credit-impaired Residential Mortgage Loan Portfolio

The Countrywide PCI residential mortgage loan portfolio had a carrying value before the valuation allowance of $10.4 billion at March 31, 2011 and comprised 30 percent of the total Countrywide PCI loan portfolio. Those loans to borrowers with a refreshed FICO score below 620 represented 39 percent of the Countrywide PCI residential mortgage loan portfolio at March 31, 2011. Refreshed LTVs greater than 90 percent represented 59 percent of the PCI residential mortgage loan portfolio after consideration of purchase accounting adjustments and the related valuation allowance, and 85 percent based on the unpaid principal balance at March 31, 2011. Those loans that were originally classified as discontinued real estate loans upon acquisition and have been subsequently modified are now included in the residential mortgage outstandings. Table 30 presents outstandings net of purchase accounting adjustments, by certain state concentrations.

Table 30
Outstanding Countrywide Purchased Credit-impaired Loan Portfolio – Residential Mortgage State Concentrations


	March 31		December 31
(Dollars in millions)	2011		2010

California	$	5,751	$	5,882
Florida		761		779
Virginia		567		579
Maryland		266		271
Texas		157		164
Other U.S./Non-U.S.		2,866		2,917

Total Countrywide purchased credit-impaired residential mortgage loan portfolio	$	10,368	$	10,592

Purchased Credit-impaired Home Equity Loan Portfolio

The Countrywide PCI home equity loan portfolio had a carrying value before the valuation allowance of $12.5 billion at March 31, 2011 and comprised 37 percent of the total Countrywide PCI loan portfolio. Those loans with a refreshed FICO score below 620 represented 27 percent of the Countrywide PCI home equity loan portfolio at March 31, 2011. Refreshed CLTVs greater than 90 percent represented 81 percent of the PCI home equity loan portfolio after consideration of purchase accounting adjustments and the related valuation allowance, and 85 percent based on the unpaid principal balance at March 31, 2011. Table 31 presents outstandings net of purchase accounting adjustments, by certain state concentrations.

Table 31
Outstanding Countrywide Purchased Credit-impaired Loan Portfolio – Home Equity State Concentrations


	March 31		December 31
(Dollars in millions)	2011		2010

California	$	4,093	$	4,178
Florida		744		750
Virginia		527		532
Arizona		510		520
Colorado		374		375
Other U.S./Non-U.S.		6,221		6,235

Total Countrywide purchased credit-impaired home equity loan portfolio	$	12,469	$	12,590

Purchased Credit-impaired Discontinued Real Estate Loan Portfolio

The Countrywide PCI discontinued real estate loan portfolio had a carrying value before the valuation allowance of $11.3 billion at March 31, 2011 and comprised 33 percent of the total Countrywide PCI loan portfolio. Those loans to borrowers with a refreshed FICO score below 620 represented 62 percent of the Countrywide PCI discontinued real estate loan portfolio at March 31, 2011. Refreshed LTVs and CLTVs greater than 90 percent represented 35 percent of the PCI discontinued real estate loan portfolio after consideration of purchase accounting adjustments and the related valuation allowance, and 84 percent based on the unpaid principal balance at March 31, 2011. Those loans that were originally classified as discontinued real estate loans upon acquisition and have been subsequently modified are now excluded from this portfolio and included in the Countrywide PCI residential mortgage loan portfolio, but remain in the PCI loan pool.

Table 32 presents outstandings net of purchase accounting adjustments, by certain state concentrations.

Table 32
Outstanding Countrywide Purchased Credit-impaired Loan Portfolio – Discontinued Real Estate State Concentrations


	March 31		December 31
(Dollars in millions)	2011		2010

California	$	6,091	$	6,322