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What would you like
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Annual Report 2019
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Bank of America 2019 Annual Report
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CONTENTS
01 A letter from Chairman and CEO
Brian Moynihan: Responsible Growth
drove our performance in 2019
07
A message from Lead Independent
Director Jack Bovender
09 A message from Brian Moynihan:
Responsible Growth and stakeholder
capitalism in action
14 Q&A with Dean Athanasia:
Consumer & Small Business priorities
16 Q&A with Katy Knox and Andy Sieg:
Transforming wealth management
18 Personalized banking, digitally delivered
19 Building rewarding relationships
20 Making financial lives better in
underserved communities
21 Market presidents deliver the bank
22 Q&A with Tom Montag:
Global Banking and Global Markets
23 Powerful CashPro® platform
24 Q&A with Anne Finucane:
Addressing society’s biggest challenges
27 A world of ESG innovation
28
Investing to improve the environment
29 Driving economic mobility:
one community’s story
30
32
Diversity at work and in our communities
Creating opportunities through employee
development
34 Supporting teammates in moments
that matter
35 Partnering to end AIDS
35
Courageous conversations
36
Total rewards
37 Funding the power to dream
37 2019 Human Capital Management Report
38 2019 ESG highlights
40 Financial highlights
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A letter from Chairman and CEO Brian Moynihan:
Responsible Growth drove our performance in 2019
To our shareholders and clients,
To my teammates,
To leaders and partners in the communities we serve
across the U.S. and around the world,
I am pleased to share the 2019 Bank of America Annual Report with
you. In this report, my teammates and I share highlights of the progress
our company made during the year, which capped off a decade of
growth for our company and for the U.S. and global economy.
In 2019, your company followed its Responsible
Growth operating principles and delivered $27.4 billion
in earnings, or $2.75 per share. After adjusting for a
third-quarter non-cash impairment charge, we earned
$29.1 billion.1 That adjusted figure exceeded our record
2018 results. We returned more than $34 billion in capital
to you, our shareholders, including $28 billion in share
buybacks and $6 billion in common dividends. We raised
the annual dividend by 22%, from $0.54 to $0.66 cents
per share. Through our capital deployment over the last
few years, we reduced the number of outstanding shares
to below 9 billion last year, 2.5 billion fewer than at the
peak. We committed to you that we would wring out
the share dilution caused by the increased capital levels
required under the new capital rules and the shares we
issued to rebuild our base of capital last decade. We
remain committed to that reduction and will accomplish
it while continuing to invest in our company.
We enter 2020 with strength and momentum after a
decade of transformative change. Our capital, liquidity
and capacity to serve clients are excellent, and we are
delivering strong earnings. Our products are best in
class, and we continue to improve them. Our team gets
stronger every day, as we continue to invest heavily to
make sure we are the best place to work.
Over the course of the decade that just ended, we
earned $127 billion and returned $97 billion to you,
our common shareholders, and $111 billion to you and
our preferred shareholders together. The rest is in our
capital base to serve our customers. Our stock returns
have also been strong and you can see our one-, three-
and five-year charts below. We have balanced our risk
and streamlined our company, and our returns are well
in excess of our cost of capital.
What a difference a decade makes.
1-year stock
performance2
3-year stock
performance2
5-year stock
performance2
96.9%
59.4%
60.1%
56.9%
52.7%
43.8%
42.9%
44.4% 44.3%
28.9%
32.1%
35.9%
22.3%
23.5%
22.1%
DJIA
S&P
500
BKX
Index
U.S. LC BAC
Peers
DJIA
S&P
500
BKX
Index
U.S. LC BAC
Peers
DJIA
S&P
500
BKX
Index
U.S. LC BAC
Peers
1 The $29.1 billion net income represents a non-GAAP financial measure, as it excludes the third-quarter $2.1 billion pre-tax, $1.7 billion after-tax,
non-cash impairment charge related to the notice of termination of our merchant services joint venture which increased noninterest expense and
is included in the reported net income of $27.4 billion.
2 U.S. large cap (LC) peers include JPM, C, WFC, GS, and MS.
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Client activity was strong across all business lines,
allowing the benefits of our growth in loans and
deposits to offset the impact of lower rates.
Total loans and leases
(billions)
Total deposits
(trillions)
Those accomplishments are due to our team. It starts
with our dedicated group of independent directors,
led by Jack Bovender, our lead independent director.
You can see the board’s commitment to our strategy in
Jack’s letter on page 7 of this report. I thank Jack for his
board leadership; his term runs through our 2021 annual
meeting. Jack’s leadership is stellar, and his eventual
successor will have big shoes to fill.
Our team includes the 208,000 teammates who work
tirelessly every day to serve our customers well and
deliver the returns for you. They are led by a talented
management team, many of whom share their insights
about our company in this report. I thank the board and
the management team for the work they do on behalf of
our company.
At Bank of America, we focus on results and we
focus on how we deliver them. One of the things we
should all be proud of is how we have delivered for our
traditional stakeholders, customers, teammates and
shareholders, and how we delivered for the broader
society at the same time. A concept we embrace — the
“genius of the and”3 — applies to how we are delivering
for customers, for teammates, for shareholders,
AND for our communities and the society in which
we operate.
In a separate note on page 9 of this report, I offer a
more extended discussion that addresses questions
being raised about whether the challenges we face are
so profound that our capitalist system itself is incapable
of addressing them.
While we must acknowledge and address some short-
comings within our capitalist system, I will discuss our
belief at Bank of America that the remedies to these
shortcomings are found within capitalism itself.
So how does Bank of America produce these results?
We do it by delivering on Responsible Growth. Let’s
discuss how we did in 2019.
Responsible Growth
Our 208,000 teammates delivered the 2019 results
I mentioned earlier — $29.1 billion in adjusted earnings
and $34 billion in capital returns to you — through their
disciplined focus on Responsible Growth.
3 This is a concept developed by Jim Collins in his book Built to Last: Successful Habits of Visionary Companies.
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$897$907$937$947$98320152016201720182019Total loans and leases (billions)$1.20$1.26$1.31$1.38$1.4320152016201720182019Total deposits (trillions) Bank of America 2019 Annual Report
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Responsible Growth has four straightforward tenets:
We have to grow — no excuses.
We have to be client focused in our growth.
We have to grow within our risk appetite.
And our growth must be sustainable, which has three
elements: 1) we have to drive operational excellence;
2) we have to be a great place to work; and 3) we
have to share our success with our communities.
Grow and win in the market — no excuses
The first pillar of Responsible Growth is to grow, no
excuses. And we did that in 2019. Client activity was
strong across all business lines, allowing the benefits of
our growth in loans and deposits to offset the impact
of lower rates. Average deposits grew $65 billion, or
5%, year over year. We have grown deposits every
quarter over the prior year by more than $40 billion for
nearly five years now. Average loans were up 3% last
year, again led by Consumer Banking, where average
loans grew 6%. Dean Athanasia, who leads Consumer
Banking and Small Business, shares some insights in
his Q&A on page 14 about how we continue to deliver
for retail and preferred clients and small business with
innovation and great service.
We saw commercial loan growth last year of 4% and
a 10% increase in our lending to small businesses and
loans to middle market clients. We are proud this year
that we became the largest U.S. lender to small busi-
nesses, the lifeblood of the American economy. We also
became the largest commercial and industrial lender
in the U.S. Our growth efforts continue to bear fruit as
we added hundreds of commercial and small business
bankers across our footprint. And you can rest assured,
we have done so by staying within our risk appetite,
as I will discuss below. In a Q&A on page 22, Chief
Operating Officer Tom Montag discusses the invest-
ments we are making to deepen our client relationships
and the other opportunities ahead in our Global Banking
and Global Markets businesses.
Each of our businesses contributed to our strong earn-
ings last year. And most of them grew their market share
while producing good bottom-line growth. Consumer
Banking earned $13 billion last year by deepening rela-
tionships with our clients while we continued to invest
in infrastructure and client capabilities. Our wealth
management teams saw net new household growth
of more than 20% last year, earning record income of
$4.3 billion with average client deposits up $15 billion.
Our Global Banking business earned $8.1 billion, and our
Global Markets business earned $3.5 billion. Combining
the results for these businesses, as other financial
services companies report them, would result in
$11.6 billion for 2019.
We must grow and
remain customer focused
We deliver Responsible Growth by focusing on our
clients and what they need to live their financial lives.
All our growth is organic. We call it growth that will stick
to our ribs, not run off. We are seeing the results of our
client focus in many areas. Client satisfaction scores
across our eight lines of business, for instance, are at
an all-time high. Our brand continues to be very strong.
We see continued gains in attracting new clients, and
importantly our current clients continue to do more
with us. That means we are doing a great job for them.
Our 65,000-strong team in our consumer businesses
has grown Consumer Banking checking balances 44
consecutive quarters. At the end of 2019, Consumer
Banking held more than $700 billion in deposits. Our
66 million consumer and small business clients value
our online and mobile capabilities along with the
convenience of 4,300 financial centers and more than
16,800 ATMs. In addition to this high-touch capability,
our clients value the high-tech capabilities we offer.
We interact with our clients almost 28 million times
every day, and 81% of these interactions come from
our 38 million active digital banking clients. Our clients
benefit from our investments in artificial intelligence
(AI) to help personalize their individual financial habits,
goals and priorities. Clients who use Zelle® for sending
and receiving money through their mobile phone made
300 million transfers representing $78 billion last year.
Our AI-driven digital assistant, Erica®, was launched in
2018, and we topped 10 million users last year, while
roughly 10 million clients are active users of Zelle. More
than 55% of our total consumer client payments are
made digitally. This is more than $1.6 trillion moved digi-
tally by Bank of America consumer clients each year.
Of our total deposit transactions, 27% were done
through our mobile channels, and 79% through mobile
and ATMs together. More than 50% of our clients
have gone paperless. Digital channels generated 29%
of overall sales, with 34% of mortgages and 56% of
auto loans now originating in our mobile app or online
banking site. Customers also arranged more than
2.3 million appointments through digital and mobile in
2019, up 19% from 2018. This enables our teammates
in the financial centers to efficiently address the more
complex needs of their clients in person and contributes
to a better client experience.
There is much talk about what happens to traditional
banks when digitization occurs. You can see that in
the statistics above. We are enabling our clients, and
the teammates who serve them, with the best, most
comprehensive high-tech digital capabilities, while
investing and advancing high-touch service through
financial centers and other channels, for an unmatched
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range of access that reflects the many ways clients
choose to do business with us.
Client-centered growth drove our results in our wealth
management businesses, too. Wealth management
client balances exceeded $3 trillion for the first time.
The Bank of America Private Bank saw an increase of
64% in net new households, while Merrill saw a 25%
gain. Merrill alone brought in more than 40,000 net
new affluent households, and we added 60% more
private bank relationships in 2019 over 2018. Our
wealth management clients benefit from a high-touch
and high-tech mix, too. Household mobile usage was
up 39% in the private bank and 44% in Merrill, and
we had the most top advisor rankings in the industry.
For a deeper look at how we are transforming wealth
management, look for a discussion on page 16 with
Katy Knox, president of Bank of America Private Bank,
and Andy Sieg, president of Merrill Lynch Wealth
Management.
We’re driving deeper client engagement with our Global
Banking and Global Markets teams, too. Our teams
continue to grow loans, adhering to our risk framework
that is more stringent than industry averages. They
are growing transaction services fees nicely, too. In
investment banking, we have gained share of the global
fee pools with a successful retooling of the business.
We are the largest U.S. commercial lending business
and have one of the top market-making and investment
banking platforms that can deliver for clients globally.
Global Banking deposits grew $23 billion, a reflection of
the hundreds of additional relationship bankers we have
added in the U.S. and globally in the last several years.
Our Global Markets business serves our clients well and
last year made money on 98% of the trading days.
Grow while staying within
our risk appetite
Growing within our risk appetite is another tenet of
Responsible Growth. Our loan losses are at historic lows.
Asset and credit quality are strong across our consumer
and commercial portfolios, and our capital and liquidity
are much higher than a decade ago. Even as we returned
$34 billion to shareholders last year, our Tier 1 common
equity ratio was 11.2%, well above our 9.5% minimum
requirement. We continued to use our operational excel-
lence work to drive operational risk out of the company.
We are growing the right way.
TOTAL
SHAREHOLDER
RETURN4
Rolling 5-year
Bank of
America
114.1%
S&P 500
73.8%
U.S.
Large Cap
Peer Avg.
60.5%
Growing in a sustainable manner
Earlier I stated the three tenets to growth that is
sustainable. They are 1) drive operational excellence,
2) be the best place for teammates to work, and
3) share our success with our communities. The combi-
nation of delivering all the results I’ve discussed rests
upon a bedrock of this pillar of Responsible Growth.
This ensures that we are investing long term, while
delivering near-term results. This tenet ensures that we
deliver for all our constituencies. And this tenet ensures
we have the best team.
Operational excellence
Operational excellence generates savings and efficien-
cies that make it possible for us to continue to invest.
By improving the way we serve clients, streamlining
our internal processes and creating other efficiencies
that stem from the thousands of ideas our teammates
generated last year, we were able to invest in our capa-
bilities even as we managed our expenses consistent
with the $53 billion target for 2019, which we set in 2016.
This has been a continuous process of improvement.
4 Total shareholder return includes stock price appreciation and dividends paid. U.S. large cap (LC) peers include JPM, C, WFC, GS, and MS.
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Since the beginning of 2010, we have invested $30 billion
in new technology initiatives, including the mobile and
digital capabilities we highlight throughout this report.
In addition, in just the last year, we completed the
upgrade of our network of more than 16,800 ATMs and
added 900 new ones, while modernizing more than
500 of our financial centers and opening 90 new ones.
We continue to add financial centers in new markets
starting where we already have wealth management
and business clients — all made possible by savings
from our focus on operational excellence. For instance,
we opened our first financial centers in Ohio in 2019,
and plan to open more than 30 centers in Cincinnati,
Columbus and the Cleveland area over the next two
years. We added about 100 ATMs in the state in the last
year and a half.
The investment in our financial centers and ATMs goes
beyond modernizing existing centers and building new
ones. It connects all of our client services and experi-
ences and creates the opportunity to build on existing
relationships, attract new ones and acquaint clients with
Preferred Rewards, which rewards members for doing
more with us across their entire banking relationship.
As our clients’ needs and expectations evolve, the
financial center client experience and design has to
evolve with them. Every day, 800,000 clients visit our
financial centers. The financial centers continue to
evolve to better serve the range of needs of our clients.
Last year, we developed 1,500 “One Team” financial
centers with dedicated wealth management, Business
Advantage and consumer lending specialists to make
it easier for clients to connect across all our products
and services.
Another example of the type of investment that opera-
tional excellence helps generate is our Aira service—a
new technology to help blind and low-vision clients gain
better access to our financial centers and ATMs. Aira
delivers instant access to visual information at the touch
of a button. This free service connects these special
needs clients with visual information on demand.
At the same time, we are making investments in tech-
nology to optimize the digital experience for chief
financial officers and treasurers of our corporate clients.
Some 500,000 clients now use CashPro®, our digital
application for our business client treasury and lending
needs. Mobile CashPro logins grew more than 100%
year over year. Adoption of other new tools relying on
AI and machine learning for corporate clients is growing
even faster.
Even as our team maintained expense discipline over
the past decade, we continued to invest in our people,
our technology, infrastructure, buildings and facilities,
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We continue to
use our operational
excellence work to
drive operational risk
out of the company.
We are growing the
right way.
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and in helping make progress on many societal
priorities. And — by the way — we made these invest-
ments while returning our excess of our earnings to
you — $34 billion — through dividends and buybacks.
A company like ours can invest and manage its capital.
Here are a few highlights of investments we made for
2019 alone:
• We made $1.7 billion in capital investments in new and
modernized facilities in 2019. This past decade, we
invested in new buildings in Charlotte, Dallas, Houston,
Chicago, Paris, Hong Kong and many other markets.
We modernized more than 1,300 financial centers the
last three years, and the plan we announced in 2016
to upgrade and expand our entire financial center and
ATM network by 2021 is on track.
• In 2019, we added 3,600 new teammates. We hired
32,000 employees, including 6,300 new employees
from low- and moderate-income neighborhoods, and
4,000 college and MBA graduates. We passed a major
milestone of our 100-year support for the military,
and reached our five-year goal to hire 10,000 military
veterans.
• For our employees, it was the third consecutive year
in which we recognized approximately 95% (all but the
top 5% paid) of our teammates for driving Responsible
Growth with a special compensation award. (In total,
more than $1.5 billion in the last three years.) In the
first quarter of 2020, we raised our minimum starting
salary to $20 per hour, up from $17 per hour in 2019.
As you can see, operational excellence allows us to
deliver industry-leading efficiency, while investing
heavily. And that serves us well no matter what environ-
ment is ahead of us.
A great place to work
Being a great place to work is another driver of sustain-
able Responsible Growth. To provide the best service
to our clients and to support the communities in which
we operate, we must continue to attract and retain
the best talent. Being a great place to work includes
our ongoing commitment to developing and managing
talent, employee engagement, equal pay for equal work
and core values anchored in our commitment to diver-
sity and inclusion.
In 2019, we published our first Human Capital
Management Report. Throughout the report, we provide
detailed information about the actions our company
has taken for teammates and their families across the
globe. I encourage you to review it carefully; there is
additional detail and insight throughout this report
as well.
To highlight one area of focus, since 2012, there has
been no increase in medical premiums for teammates
earning less than $50,000. For all teammates, we vary
the medical premium contribution by annual pay level,
with larger company subsidies for those earning less.
Also, our average contribution increases since 2012
have been below national health care trends. Another
area of focus in the report is the progress we continue
to make to ensure diverse representation at all levels
of our company, including a board of directors and
management team who are more than 45% diverse.
Additionally, women comprise more than 45% of the
management team and 40% of the top three levels of
our company.
We saw significant internal and external awareness
for being a great place to work. In 2019, the Diversity
& Inclusion Index in our 2019 Employee Engagement
Survey was the highest it has ever been. Bank of
America also was the top financial institution in the
2019 LinkedIn Top Companies list, which recognizes
the most sought-after places to work.
Sharing success
One way we share our success is through our local
market and country teams and their support of
local partners through community development lending
and philanthropy. Over the last decade, we have
provided around $50 billion in community development
lending, including for priorities in affordable housing
and economic mobility, and $2 billion in philanthropy.
Last year alone, we delivered nearly $5 billion in
community development financing for affordable
housing and other community priorities, and made
more than $250 million in philanthropic contributions.
Our employees directed more than $60 million
through individual giving and matching gifts and
logged nearly 2 million volunteer hours to strengthen
local communities.
Sharing success also includes the work we do in our
Environmental Business Initiative. In 2019, we met our
10-year, $125 billion environmental business initiative—
six years ahead of schedule. We established a new
target of $300 billion in clean energy finance by 2030.
Consistent with the objectives of our Environmental
Business Initiative, we have met our 2020 goal of
becoming carbon neutral in our own activities. Look
for a discussion on page 24 with Vice Chairman Anne
Finucane, who leads our sustainable development
work and co-chairs with Tom Montag our broader work
in sustainable finance, on the leadership we bring to
driving progress on the societal priorities through our
core financing and other activities.
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A message from
Lead Independent Director
Jack Bovender
Dear fellow shareholders,
As the lead independent director and on behalf of the
independent directors of Bank of America Corporation,
thank you for choosing to invest in Bank of America. The
directors comprise individuals representing a diverse
range of informed expertise. Sixteen of the 17 directors
are independent; 65% have CEO-level experience;
and 35% have senior executive experience at financial
institutions.
Your board reviews and approves the company strategy
as presented by the management team each fall. The
directors oversee the execution of the strategy by
engaging in a year-round strategic assessment and
planning process. Throughout 2019, our dialogue at the
board and with the company’s management included
regular review of the company’s adherence to its tenets
of Responsible Growth, including risk management
and environmental, social and governance practices.
We remain abreast of developments in markets, the
economy and geopolitical issues that may affect
them. We discuss and assess trends in the financial
services industry, all with an eye toward ensuring
the long-term, sustainable value of the company.
I also meet regularly with shareholders and gather
viewpoints that I share with the board. This direct
engagement with shareholders provides feedback
on executive compensation, capital allocation and
other important matters. That feedback informs
our board meeting agendas and helps enhance our
governance discussions. You will find extensive
discussion of all of these matters throughout this
annual report and in our 2020 Proxy Statement.
I encourage you to review this material carefully.
On behalf of the directors, I join Chairman and
CEO Brian Moynihan and the management team
in thanking you again for your investment in
our company.
Sincerely,
In the United States, one of the important ways
we engage and share success in the communities we
serve is through our market president organization.
Our network of 90 market presidents is responsible
for leading an integrated team to deliver for clients,
teammates and the community, serving as the chief
executive for Bank of America in that market. You will
see a more detailed discussion of how our market
president organization does this through the experience
of Raul Anaya, our Los Angeles market president, on
page 21.
External recognition
Because of our investments in our capabilities and in
our people, in 2019 we received recognition in many
areas, including for our products and services, for our
commitment to our team and to diversity and inclu-
sion, and for our contributions addressing important
societal priorities.
We are proud that Global Finance recognized Bank
of America as the Best Bank in the World in 2019. In
early 2020, Fortune named your company to its list of
the 100 Great Places to Work, and as the only global
financial services firm on its list of the top 18 Best Big
Companies to Work For.
Also last year, our research team was recognized as
Top Global Research Firm by Institutional Investor, an
honor we held for most of the last decade, including
each year from 2011 to 2016.
Global Finance also named Bank of America the
Best Consumer Digital Bank in America and Money
magazine ranked us the Best Bank for College Students.
Reflecting our focus on managing risk well, for ourselves
and for our clients, we earned prestigious recognition
from Risk magazine, which named us Derivatives House
of the Year, Equity Derivatives House of the Year and
OTC Client Clearer of the Year.
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The external recognition includes several areas that
reflect our commitment to being a great place to work,
another tenet of Responsible Growth. Euromoney
named us the World’s Best Bank for Diversity &
Inclusion, and Forbes included us in their JUST 100:
Companies Doing Right by America ranking of how the
country’s largest publicly traded companies perform in
important areas including fair wages, acting ethically
and setting the standard in stakeholder treatment.
Looking ahead
to 2020
I hope you’ll enjoy reading about your company in
the following pages, where you can look at how we’re
helping make financial lives better through every
connection.
Our performance and recognition took place against a
backdrop of a growing U.S. and global economy, driven
by solid consumer spending. While geopolitical and
trade uncertainty remains, we saw some of it clear up
as trade agreements with Canada, Mexico and China
were concluded in 2019.
There are factors beyond our control that impact the
markets and economies in which we operate. As this
report is being completed, we are experiencing volatility
because of uncertainties around the impacts of the
coronavirus. We are taking the necessary measures to
look after our employees and serve them as this situa-
tion develops.
Despite headwinds that may arise from time to time,
over the last decade we have built a strong, stable
platform, with significant liquidity and capital, and we
will remain resilient as we maintain disciplined focus on
what we can control, which is embedded in delivering
Responsible Growth.
As we look ahead to 2020 and beyond, we will maintain
our focus on delivering Responsible Growth through
disciplined adherence to the tenets I’ve discussed: by
serving our clients, managing risk well and ensuring
those results are sustainable through operational excel-
lence, being a great place to work for our teammates,
and sharing our success. The three-year company
strategy that our board of directors reviewed in the
fall of 2019 is based on continued adherence to this
approach. And as always, we will continue to learn what
is most important to those we serve by asking:
What would you like the power to do?
Let me know at brian.t.moynihan@bofa.com
Brian Moynihan
March 3, 2020
Total assets
(trillions)
Return on average tangible
common shareholders’ equity5
$2.28
$2.35
$2.43
$2.14
$2.19
15.55%
14.86%
9.16%
9.51%
9.41%
2015
2016
2017
2018 2019
2015
2016
2017
2018 2019
5 Represents a non-GAAP financial measure. For more information on these measures and ratios, and a corresponding reconciliation to GAAP
financial measures, see Supplemental Financial Data on page 48 and Non-GAAP Reconciliations on page 101 of the 2019 Financial Review section.
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A message from Brian Moynihan:
Responsible Growth and stakeholder
capitalism in action
What would you like the power to do?
Our core job is to ask this question of our teammates, our clients, our shareholders and the
communities we serve. By listening to the answer, we learn what is most important to them.
And then we try to help them do it.
Our clients want the best capabilities, services and ideas to help them live their financial lives.
Our employees want to be able to bring their authentic selves to work and to create a good
life for themselves and their families with competitive compensation and benefits.
Our shareholders want the best returns on their investment in Bank of America.
By driving Responsible Growth, we deliver for these
stakeholders.
At the same time, we also serve broader society.
We must tackle important societal priorities, such as
affordable housing, economic mobility and a clean
energy future. And we are. There is a lot of discussion
today about the best ways to mobilize the resources
needed to address these challenges. The discussion
includes questions about how effective our capitalist
economic system is at prioritizing these needs and
whether we need to think differently about it. Simply
stated: Can capitalism address the most challenging
societal priorities, or might we need to think about
another economic model?
In 2019, the Business Roundtable in the U.S. issued a
Statement on the Purpose of a Corporation. Bank of
America is a member of the Business Roundtable, and
I signed the statement, because it reflects the way
our company has operated for many, many years. The
statement is straightforward, and I encourage everyone
with an interest in Bank of America to read it.
The Business Roundtable issued its statement in
the context of this ongoing discussion about capitalism.
In that context, the statement has been interpreted
in some quarters as a step away from the important
responsibility we have to deliver the best financial
returns to our shareholders so that companies can focus
on other, “more important” societal priorities.
At Bank of America, we reject that false choice.
The simple fact is that at Bank of America, we believe
we must continue to deliver great returns AND help
drive progress on societal priorities. There is ample
evidence to suggest the wisdom of this approach. The
BofA Global Research team — ranked number one in
the world by Institutional Investor for seven of the last
nine years — has published a series of research reports
demonstrating that companies that pay close attention
to environmental, social and governance (ESG) priorities
are much less likely to fail than companies that do not.
At Bank of America, we believe capitalism is best at
creating opportunity for people to realize their hopes
and dreams. We believe if we keep aiming capital-
ism’s power toward the challenges we face, we can
make significant progress on society’s most pressing
problems.
Bank of America’s role in that system is to help all of our
stakeholders — our clients, shareholders, teammates
and those in the communities where we operate — grab
the opportunities they see for themselves by helping
with their financial lives.
We also believe, though, that it is important to acknowl-
edge questions being raised, such as:
• How do we ensure equal access to opportunity?
• Are companies sharing their success equitably with
their employees?
• Are we doing all we can do to accelerate the transition
to a low carbon, clean energy economy?
• What will happen to today’s employees as technology
advancements change the nature of work?
• Can companies hold themselves accountable through
strong self-governance?
These discussions are at the heart of the policy debates
in legislative and executive bodies around the world.
These are concerns for our clients, our communities
and increasingly for our shareholders. Our teammates
discuss them with their families and with each other.
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How do we ensure the opportunities are available to all
and that we harness the energy of capitalism to address
society’s concerns? These issues can be solved if the
private sector is engaged and helping to drive forward.
But it has to be done the right way.
Which brings me
back to our question.
What if we asked the world: “What would you like the
power to do?”
The answer might be summed up in what the U.S. and
nearly 200 other countries agreed to at a summit in
2015 when they set forth the Sustainable Development
Goals (SDGs). The SDGs represent 17 categories of
societal priorities that address equality of opportunity …
access to clean water … renewable energy … affordable
housing … and other priorities, with specific goals to be
met. World leaders agreed that these goals are the ones
we need to address to build a sustainable future and
create opportunity and prosperity for all.
The SDGs are estimated to require about $6 trillion
annually of investment capital. This will take all sectors
of society. Certainly philanthropy and governments
have critical roles to play, but all annual charitable
contributions in the world total just over $800 billion.
Total global non-profit foundation assets are about
$1.5 trillion. Even if annual charitable contributions
and every endowment and foundation in the world
were directed toward reaching the SDGs and no other
priorities — not the arts, not additional medical causes,
not any of the other worthy priorities that get support
today — we still would fall far short of what is needed.
Governments alone also cannot address the challenges
laid out in the SDGs. The U.S. operating budget is the
largest in the world at about $4.5 trillion. If all of it were
dedicated to the SDGs only — meaning not funding
national security, basic research, basic services for the
U.S. taxpayers, and not paying the federal debt — we
still would fall short of the annual need.
So how can we
fund these needs?
The private sector and capitalism.
This goes well beyond corporate philanthropy, as
important as that is. Since I became CEO of Bank of
America in 2010, we have delivered more than $2 billion
in philanthropy to support important priorities in the
U.S. and around the world. Our teammates have, with
our support, volunteered about 2 million hours of their
time each year to non-profit organizations and causes.
We are proud of that, but even if every company on the
Fortune 500 delivered that amount of philanthropy in
a year, we would still fall well short of the need.
What the private sector is doing, and what is reflected
in the Business Roundtable statement, is aligning
our ordinary business activities to help solve these
challenges.
For Bank of America, that means we have to bring our
$2.4 trillion balance sheet to bear to the task.
We have to bring our $53 billion expense base to
the task.
We have to bring our $268 billion equity base to
the task.
We have to bring our trillions a year of capital raising
for our clients to the task.
Based on client desires, we have to usher the $3 trillion
in assets in our wealth management business to
the task.
If all operating companies continue to align themselves
to deliver on those SDGs on which they can have the
most impact, and if we measured ourselves to be sure
we’re making progress, we would deliver the capital,
the creativity and the expertise to address the world’s
most pressing challenges.
How does
Bank of America
do that?
First, we do it with our own operations. We are carbon
neutral as of this year. We are reducing paper, we focus
on the environmental efficiency of our buildings and
we continuously reduce waste.
Second, of course we drive our charity, our philan-
thropy and volunteering and our nearly $5 billion in
annual community development lending and investing
to address the areas. You can find those in our
annual report.
Third, we do it with our employment and human
resources practices, which are well laid out in our
2019 Human Capital Management Report. We employ
teammates, support families and their economic devel-
opment by providing funding for education and many
other useful purposes. We provide strong and progres-
sive health and wellness benefits: All teammates get
the same plans, and lower paid teammates pay a lot
less for them. Other benefits include paid family leave
of 16 weeks, industry-leading bereavement benefits
and a minimum starting salary of $20 an hour, about
$42,000 a year. We make available to our teammates
the reskilling resources and opportunities as work
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Bank of America is working with the World Economic
Forum (WEF) and the accounting firms Deloitte,
EY, KPMG and PwC to develop a framework to provide
all stakeholders, including shareholders, a consistent
method to evaluate the progress companies are making
to advance SDG priorities in the areas of human capital,
environmental sustainability, governance and other
sustainable development objectives.
changes. We hired 10,000 veterans over the last five
years. Our hiring in low- and moderate-income neigh-
borhoods has produced more than 8,000 hires in the
last two years.
Fourth, we do it with our client financing capabilities —
our core activities. We provide examples of that in our
annual report. For example, Bank of America is one of
the largest underwriters of green bonds, and we have
helped companies raise more than $40 billion on behalf
of more than 100 clients to provide critical funding on
environmental projects.
Another example is in our consumer product design.
We have one of the lowest priced checking account
options in the industry, with a monthly maintenance
fee of just under $5 for access to our banking channels,
including mobile, online services, ATMs and financial
centers. And our Advantage SafeBalance Banking, intro-
duced in 2014, was one of the first banking accounts to
eliminate overdraft fees and non-sufficient fund fees.
The account was the primary reason Money magazine
named us the “Best Bank for College Students” in
2019. We surpassed 1 million Advantage SafeBalance
Banking accounts in June 2019.
Fifth, we help our investor clients find opportunities
to drive impact investing, ESG investing or blended
finance across the SDGs.
We dedicate all of our business operations to driving
great returns for our shareholders AND to addressing
these priorities. If each company focuses on delivering
both through their individual routine business opera-
tions and practices, then we can channel the world’s
capital to make meaningful progress on the SDGs.
One important way to ensure we are making progress
is to have a basic framework for measuring it. We
need to do this so we can demonstrate progress to
all stakeholders. With a measurement framework,
we can reward the companies that achieve both, as
investors can prioritize their investments and capital
to companies making progress over those that are
not. Remember, the BofA Global Research team has
demonstrated that operating companies that don’t pay
attention to these priorities are more risky and less
predictable.
There is no shortage of ways to measure this progress.
This actually has been a barrier to progress, because
there is no standard method of gaining alignment
between the operators of companies that are doing
so much to address these priorities and the investors
seeking to direct capital toward them. There is a large
and growing number of external forums and bodies
trying to advance this work. By some estimates, there
will be as many as 600 conferences in the U.S. alone
this year to discuss ESG, sustainability, and sustainable
business and finance models.
There is a dizzying number of measurement systems
and metrics, too. Public companies face requests
from many stakeholders — investors, public officials,
regulators and developers of their own proprietary
measurement systems — that we adopt their preferred
metric or routine to address a particular priority. The
volume of approaches and the varied metrics and meth-
odologies make it difficult for those of us who operate
companies to determine how best to provide consis-
tent reporting. And many of us would rather put our
energy into actually making progress on the SDGs than
debating the measurement of progress.
Company management teams and the asset owners
and asset managers who invest in these companies
need a straightforward framework by which to compare
non-financial information in these areas across compa-
nies in a given industry, and across industries, to
determine which companies are making progress on
the issues most critical toward ensuring a sustainable
global economy.
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The International Business Council, which I am priv-
ileged to chair, of the World Economic Forum (WEF)
has recently addressed this need. The WEF asked
the accounting firms Deloitte, EY, KPMG and PwC
to develop a framework to provide all stakeholders,
including shareholders, a consistent method to evaluate
the progress companies are making to advance SDG
priorities in the areas of human capital, environmental
sustainability, governance and other sustainable devel-
opment objectives.
Our objective is to develop a scorecard based on a
consistent measurement framework for companies
to disclose the progress they are making on specific
SDGs. Our scorecard is one step toward creating some
convergence among the many existing ESG metrics
and measurement systems that are available. The
experts working on this have identified a narrow and
impactful range of metrics from some of the most
widely acknowledged measurement systems available.
The intent is for stakeholders to have a common set of
metrics to measure the material impact that companies
are having on the SDGs across and within industries,
so that investors and other stakeholders can compare
and evaluate progress. This is to simply show how
capitalism is aligned generally and how each company
is aligned specifically to delivering the progress. The
metrics also will help investors evaluate the long-term
value and sustainability of companies seeking to make
progress on the SDGs.
Just imagine how much intellectual and financial
creativity we can harness if we 1) accept that capitalism
is the best way to create access to opportunity for the
most people; 2) acknowledge the shortcomings in our
capitalist system just the same; and 3) address those
shortcomings by harnessing the world’s capital toward
the SDGs agreed to by nearly 200 countries. That’s a
powerful force for progress.
At Bank of America, we believe it is not only possible
but it is the desired outcome for us to serve our clients,
deliver for our shareholders AND deliver for the soci-
eties and communities we serve. That’s Responsible
Growth and stakeholder capitalism in action.
Bank of America Board of Directors
Front row (from left): Michael White, David Yost, Maria Zuber, Jack Bovender,
Brian Moynihan, Susan Bies, Linda Hudson, Lionel Nowell
Back row (from left): Thomas Woods, Frank Bramble, Denise Ramos, Pierre de Weck,
Monica Lozano, Thomas May, Sharon Allen, Clayton Rose, Arnold Donald
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What would you like
the power to do?
At Bank of America, we ask this question every day of those
we serve. By listening to the answers we learn what matters
most to people. It’s how we deliver Responsible Growth.
Bank of America
Executive Management Team
Front row (from left): Christine Katziff, Anne Finucane, Brian Moynihan,
Catherine Bessant, Thong Nguyen, Sheri Bronstein
Back row (from left): Andrew Sieg, Paul Donofrio, Dean Athanasia,
Andrea Smith, David Leitch, Kathleen Knox, Geoffrey Greener, Thomas Montag
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Consumer &
Small Business
priorities
Q&A with Dean Athanasia,
President of Consumer & Small Business
Q: How are you driving Responsible Growth
in Consumer & Small Business?
Dean: We take an integrated high-tech and
high-touch approach, offering our clients the
convenience of our award-winning digital
platform even as we’re investing in our network
of 4,300 financial centers and approximately
16,800 ATMs. We staff our centers with
professionals who can help clients with all their
financial needs, from transacting and borrowing
for a home, auto or business to saving and
investing with Merrill. And we do it all with a
passion for client care that extends throughout
our organization. At the same time, we’re
focused on strengthening our communities,
because Responsible Growth needs to be both
shared and sustainable. And we’re investing in
our employees’ development, because the more
capable they become, the more we can do for
our clients and communities.
Q: What is your strategy for exceeding
expectations for Consumer & Small
Business clients?
Dean: Bank of America and Merrill offer clients
our full range of banking and investment
services wherever and whenever they want,
on our mobile app or talking with our expert
professionals over the phone, through online
chat, in a video conference or face-to-face in
one of our new and upgraded financial centers.
And then we provide extensive rewards and
benefits across their entire relationship with us
through programs like Preferred Rewards— the
more they do with us, the more their benefits
grow. These are among the many reasons we
have been able to grow average Consumer
Banking deposits by more than $155 billion
over the past five years, nearly 70% of that
in Checking.
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66M
Consumer and Small
Business clients
38M
Digital banking
clients
4,300
25,200
Retail financial centers
and 16,800 ATMs
(with about 1/3 located
in LMI communities)
Client professionals offering
advice for investments,
lending and small business
in our financial centers
Behind the scenes, we’re taking advantage of the latest
advances in artificial intelligence (AI), machine learning and
business intelligence to enable us to deliver personalized,
client-specific insights, recommendations and resources during
moments that matter. Our virtual AI-driven financial assistant,
Erica®, uses all this intelligence to deliver a personalized
experience for each and every client.
Q: What are you doing to support the communities
where you do business, especially low- and moderate-
income communities?
Dean: We are helping to empower economic mobility for our
clients and small businesses through a community-centered
approach that offers resources tailored to meet their needs.
Our strategy is designed to connect clients with products and
services, employment opportunities and capital to increase
financial resilience and help our local communities thrive.
That means being focused on the needs of diverse commu-
nities. We serve 9.5 million Hispanic-Latino individuals and
more than 1 million Hispanic business owners. In 2019, our
market share as the primary bank for U.S. Hispanic-Latino
consumers grew to 21%, maintaining our industry-leading
position. And by the end of 2019, we had more than 2 million
users of our Spanish-language mobile app, a 23.5% increase
over the prior year.
It also means being focused on underserved communities.
Today, roughly one-third of our financial centers and ATMs are
located in low- and moderate-income (LMI) neighborhoods,
and 33% of our financial center employees work in these
locations. In the rural markets where we work and serve, we
have 235 financial centers, 820 ATMs and over 1,500 financial
center employees. Across our network, nearly two-thirds of
our financial centers are staffed by teammates who speak
more than one language. Of the total number of multilingual
associates, 81% work in our centers located in LMI areas.
Q: How can employees develop and advance
their careers at Bank of America?
Dean: We’re helping our teammates in Consumer & Small
Business, Merrill and the Private Bank build great careers at
Bank of America through The Academy, our award-winning
coaching and development organization. Academy programs
provide robust coursework taught by subject matter experts,
dedicated training time for frontline employees — each
teammate receives a minimum of 80 hours of training when
taking on a new role and up to 1,000 hours in the first five
years, depending on the career path — in addition to peer
mentoring and coaching. We also offer hands-on, high-tech
immersion training programs using virtual reality and client
engagement simulators, which is a first for our industry.
More than 45,000 teammates participated in Academy
programs in 2019, with nearly 11,000 advancing in their
careers as a result.
We encourage employees to consider their opportunities
inside our company. Managers are expected to have that
conversation with their teams, so they understand the
opportunities they have to learn more about a different
position in the market where they live, across all of our lines
of business. We want employees to think about their career
opportunities within our company, and we are empowering
them and their managers to help them gain the training
and the resources to do that. As a result, we’re seeing the
highest employee engagement scores and lowest turnover
we have ever experienced, even in an environment with
low unemployment.
Our investment in our teammates is helping us better serve
our clients and the communities in which we live and work,
providing more professional expertise and improving client
care in every interaction.
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Transforming
wealth management
Q&A with Katy Knox, President of Bank of America Private Bank
and Andy Sieg, President of Merrill Lynch Wealth Management
Q: How is the wealth management landscape changing?
Andy: The demographics are shifting. More people are saving, investing and passing wealth on
to the next generation, and the financial power of women is growing. At the same time, financial
planning factors are evolving in a way that people want more information and greater choice in how
they receive financial advice. These range from brokerage to online robo-advisors, to high-tech and
high-touch full-service advisory relationships. And, clients want an integrated set of banking and
lending services to help them meet their financial goals. The result is transformational; it’s a golden
age for advice, with the advisor helping clients make smarter decisions.
Q: How are your businesses aligned to
capitalize on these opportunities?
Katy: Our goal is to enable individuals,
families, business owners and institutions
to preserve and share their wealth, build
legacies and plan for growth and success.
We bring together business lines across Bank
of America — Consumer Banking, Business
Banking, Global Commercial Banking, Global
Corporate & Investment Banking and Global
Markets — to harness all of our resources
designed to meet our clients’ needs. It’s a
tremendous advantage to be able to holistically
address both business and personal needs.
From growing a business for the next gener-
ation, to unlocking capital in an art collection,
to giving with passion and purpose, we help
clients with their connected priorities.
Andy: Last year was a record year for Merrill in
client balances, revenue and net income. We’re
in an era where Merrill advisors can serve as
indispensable partners over their clients’ entire
financial lives. We can provide clients the finest
advice and service — investment management
and access to banking, credit and lending — all
through their advisor or the other channels we
offer clients to interact with us. In today’s world,
even the most astute families feel challenged
by high-stakes financial decisions. That’s why
you see more and more people looking for
comprehensive advice from a single relationship.
That’s what we offer our clients in a way no
one else can.
Q: How is the company helping clients
looking to transition wealth to the
next generation?
Katy: We’ve helped individuals and families pass
down their values across generations for more
than 200 years. To meet a family’s financial
goals, our Private Bank specialists draw upon
their experience and expertise in wealth struc-
turing, investment management and credit and
banking to create a thoughtful, comprehensive
wealth plan. For business owners, we offer
strategies to plan for a business transfer while
keeping clients’ personal and family needs top
of mind. For families with significant wealth,
complex assets and ownership structures,
the Bank of America Private Bank Family
Office provides the highest level of expertise
and service.
Q: How are your digital capabilities
enhancing the wealth management
client experience?
Andy: Clients, especially those with complex
wealth needs, want a personal connection plus
the convenience that technology offers. In the
age of smartphones and mobile apps, Merrill
clients can easily see their investment and cash
accounts across the company, keep track of their
financial goals and engage their advisor teams
when and how they choose. Also, Merrill’s digital
tools save our clients precious time by enabling
them to quickly scan and sign documents and
securely chat with their advisors through text.
Katy: The Private Bank offers that same
digital experience, with features such as
seamless money transfers, document scanning,
educational podcasts and integration of
charitable gift fund accounts. As we look toward
an increasingly digital future, we’ve made it
easier for clients to have online access to their
accounts across wealth and banking. Secure
messaging between our advisors and clients
facilitates a new type of relationship, including
real-time engagement when that is what
clients want.
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Personalized banking,
digitally delivered
Digital is more important than ever. Today, clients expect the best
mobile and digital technology in their financial relationships, just as
they do in other areas of their lives. Our award-winning high-tech
capabilities — our digital services earned 34 industry accolades in
2019 alone — together with our high-touch approach are making
banking better and delivering a more intuitive and efficient
experience for our clients across all channels.
Three core principles guide how we develop and deliver each digital
experience: The information and advice we provide should be in the
best interest of the client, timely and relevant, and offer a choice of
the next best step.
Our digital platforms bring never-before-possible convenience to
our more than 38 million digital clients, including more than 80%
of our small business owner clients. Significant investments in our
user interface (UI) and artificial intelligence (AI) allow us to deliver
a digital experience with powerful simplicity and groundbreaking
personalization.
Our virtual AI-driven assistant, Erica®, is the engine that enables this
personalization at scale, delivering valuable client-specific insights
and advice at key moments. Clients interact with Erica through voice,
text chat or on-screen gesture, receiving help with their banking
needs and proactive insights to help make managing finances easier
and meet savings goals. For instance, Erica detects duplicate charges
on an account and notifies clients if their spending is higher than
usual or their checking account balance is trending toward $0. Erica
can also assist with common inquiries, including billing disputes, fees,
deposit holds and transaction-related questions. Since launching in
2018, Erica has already helped more than 10 million clients complete
over 100 million requests.
In 2019, clients logged into our digital platforms more than 8 billion
times, deposited more than 140 million checks through Mobile Check
Deposit, and sent and received over $78 billion using Zelle®. More
than one-quarter of all new products are provided through digital
channels, including auto loans and home mortgages.
In February 2019, we launched Business Advantage 360, our one-stop
digital dashboard for business owners, and we recently enhanced
the platform with the ability to integrate data from key third-party
business applications. Since the launch, more than 1 million business
owner clients have used Business Advantage 360, and Barlow
Research recently named Bank of America No. 1 in Small Business
Mobile Banking Adoption among the top 10 U.S. banks.
Our digital and mobile capabilities are aligned with the capabilities
clients receive in a financial center, too. For example, clients can
use our mobile app to easily book an appointment with an employee
to discuss a specific matter in a financial center. Alternatively, an
employee in the financial center can discuss and save products
to a client’s digital shopping cart, and the client can complete the
application digitally at a later date.
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Building rewarding
relationships
The more clients do with us, the more their
benefits grow. Our approach to deepening
the relationships we have with our clients
rewards them by recognizing the value of
their entire relationship. This sets us apart
from our competitors. Preferred Rewards
is a first-of-its-kind relationship-based
approach that provides members with
extensive rewards and benefits across
their deposit accounts, investments, credit
cards, mortgages and auto loans, along
with exclusive discounts.
Launched in September 2014, the Preferred
Rewards program has over 6 million mem-
bers, representing $501 billion in assets as
of Dec. 31, 2019. The program allows and
encourages members to get more from their
banking relationship. On average, members
hold about twice the number of banking
products as nonmembers and show higher
levels of satisfaction with their banking
experience. Our retention rate for Preferred
Rewards members was close to 99% at
the end of last year and, in a 2019 bank
survey, 8 out of 10 members told us they
are “highly likely” to recommend Bank of
America to friends and family.
Preferred Rewards for Business is having
a significant impact, as well. During the
program’s inaugural year, we rewarded
participating small business clients with
approximately $175 million in benefits, in
recognition of the tremendous value of their
relationships with us. Preferred Rewards for
Business was recognized in 2019 by Barlow
Research with a Monarch Innovation Award
in the “Business Banking Most Innovative
Product” category.
Clients can also use My Rewards, an easy-
to-use tool that tracks the rewards they
have earned across Preferred Rewards,
credit cards, BankAmeriDeals® and Preferred
Rewards for Wealth Management. This
information is conveniently presented in
our Mobile Banking app. Since My Rewards
launched in 2018, 17 million unique users
have reviewed their rewards, with 65% being
repeat users.
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Making financial
lives better
in underserved
communities
Core to how we drive Responsible
Growth is ensuring it is sustainable. We
do that through operational excellence,
which creates the savings we generate
to reinvest in serving our clients and in
our capabilities. We ensure sustainability
by being a great place to work for our
teammates, which we discuss in more
detail throughout this report. And
sustainability is driven by the ways we
share success with the communities in
which we operate.
Our approach to serving low- and
moderate-income (LMI) neighborhoods
reflects all these elements of sustain-
ability. LMI neighborhoods include more
than 8.4 million unbanked households
and 24.2 million underbanked house-
holds.1 Today, about one-third of our
financial centers and ATMs are located
in LMI neighborhoods and 33% of
our financial center teammates work
in these locations. With the anchor
of that physical presence, we serve
these communities in several ways
by providing:
• Access to secure, transparent and
affordable products, including credit
• Personalized financial education
and tools
• Employment and business
opportunities
Secure, transparent and
affordable products
Through our digital banking platform and
strong community presence, we offer all
our clients access to secure, transparent
and affordable products that can be
personalized to meet their unique needs.
For example, Bank of America Advantage
SafeBalance Banking® is a checkless
bank account that helps clients avoid
overdraft fees. SafeBalance Banking
includes a debit card and has unlimited
access online and mobile services,
financial centers and more than 16,800
Bank of America ATMs.
To help increase access to affordable
and sustainable homeownership,
in April 2019, we announced the
$5 billion Bank of America Community
Homeownership Commitment™ to
benefit LMI homebuyers over the next
five years. The initiative will help more
than 20,000 individuals and families
achieve homeownership through grants
that directly assist homebuyers with
their down payments and closing costs.
At the end of 2019, the program helped
over 9,000 new homeowners with
$2.3 billion in mortgage lending.
Personalized financial
education and tools
Through Better Money Habits®, we
support people in becoming more
financially resilient by connecting them
to the tools, resources and education
they need to help achieve their financial
goals. This includes content to assist
with budgeting and saving, homeowner-
ship, reducing debt, and retirement
goals. Better Money Habits empowers
people to evaluate their life priorities,
such as family, health and home, and
helps them determine how they should
approach their finances. All content is
available in both English and Spanish.
Consumers have accessed this free
platform over 2.7 billion times. And
it has had an impact on the habits of
those who use it: 1 in 4 users (1 in 3 LMI
users) of Better Money Habits and the
Spending & Budgeting content grew
their savings by 20% or more.2
Additionally, we’ve trained over 4,000
teammates who work in approximately
700 community financial centers on how
to help consumers build their financial
skills and pursue their goals, delivering
quarterly educational workshops in
English and Spanish.
Employment and
business opportunities
We also are focused on helping people
who live in our communities find mean-
ingful employment. Externally — through
our Supplier Diversity Program — we
spend $2 billion each year with diverse-,
veteran- and women-owned businesses.
In 2018, we committed to hiring and
training 10,000 teammates in LMI
neighborhoods within five years. We are
well ahead of that pace; our Consumer
& Small Business team has hired more
than 8,000 employees from these
communities in just two years.
Those teammates benefit from our
commitment to be a great place to work,
which includes offering fair and compet-
itive pay. We are an industry leader in
establishing an internal minimum rate
of pay above all mandated minimums
for our U.S. hourly teammates, and have
made regular increases over the past
several years. Our minimum hourly wage
for U.S. teammates is $20, as of the first
quarter of 2020.
20 | BANK OF AMERICA 2019
1 Source: 2017 FDIC National Survey of Unbanked and Underbanked Households
2 Refer to footnote 1 on page 39 for Better Money Habits research study information
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Market presidents
deliver the bank
Los Angeles Market President Raul Anaya
Bank of America operates locally in communities all across the
United States. Having a strong local presence with deep connections
in our communities drives performance in each of our lines of
business. Leading the way in these communities are Bank of America
market presidents who oversee integrated business teams to
ensure we’re delivering the full capabilities of our company to each
client in every community, and lead our interactions with countless
nonprofit partners.
This coast-to-coast network of more than 90 local executives —
each of whom also serves in full-time roles as division leaders, client
managers, financial advisors and more—connects the banking and
investment resources offered through our eight lines of business to
companies, families and individuals in each market, from the largest
cities in the country to suburban and rural communities. They also
lead our work in sharing our success by deploying Bank of America
resources—including philanthropy and employee volunteerism—to
address social and economic concerns and build strong communities.
One example is Los Angeles Market President Raul Anaya, who
has spent the past eight years leading in one of the country’s most
vibrant and dynamic cities.
“As market president, I work with members of my team to bring the
expertise and resources of our company to our clients, serve as a
civic leader on community and social issues, and keep employees
connected to reach their personal and career goals — all of which
enhance the strength of our 100-plus year heritage here in Los
Angeles,” said Raul. “I’m incredibly proud.”
Recently, to promote business integration, the market
hosted its first-ever “Power of Inclusion Summit,” an
event designed to engage with business leaders on
the strategic value of building a diverse and inclusive
workforce. Existing and prospective clients were invited
to attend and hear from leaders on how they are using
inclusion as a competitive advantage, creating an ideal
opportunity to build relationships and create momentum
on an important issue.
In 2019, the L.A. team also helped address a critical issue
in the city — housing and homelessness — partnering
with groups such as the Central City Association and
United Way to hold deep conversations about stemming
the tide of homelessness through lending and investing
in underserved areas and advocating for public-private
solutions to complex housing issues. Coupled with the
bank’s community development lending and investing
of over $315 million to help create more than 500 units
of affordable housing in L.A., as well as local philan-
thropy of over $7 million to local groups, these efforts
demonstrate that we’re not only talking the talk, we’re
walking the walk to improve the economic mobility of
all Angelenos.
To help make the bank a great place to work, the Los
Angeles team established a number of ways to develop
local talent, including creating mentoring programs,
holding career events in partnership with groups such as
the National Black MBA Association and offering training
programs for those who serve on nonprofit boards.
These are just a few examples of the work market
presidents are doing across the country to ensure Bank
of America drives progress in every community where
our clients and employees live and work.
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Global Banking and Global Markets
Q&A with Tom Montag on deepening local client coverage
and driving Responsible Growth
Q: Who does your business serve, and what’s
your vision for delivering for those clients?
Tom: Our Global Banking businesses serve companies of varying
sizes. In Business Banking, we work with clients with more than
$5 million in revenue; our Global Commercial Banking clients are
mid-sized companies with revenues of $50 million to $2–$3 billion;
and through Global Corporate & Investment Banking, we serve
the largest companies and corporations in the world. Our Global
Markets businesses serve institutional investors with sales and
trading services, liquidity, hedging strategies and ideas and
insights they draw from our top-ranked Global Research platform.
Our strategy is straightforward: deliver the full benefits of our company to
our clients. We do this by deepening relationships and connecting our clients
with the capabilities and solutions they need to drive their businesses forward.
Every relationship and every market matters. From a first credit card to a first
line of credit, to raising capital or advising
on the sale of a company, we support our
clients as their needs and aspirations evolve.
Q: How are Global Banking and Global
Markets evolving to serve clients?
Tom: This year, we are continuing to
build our capabilities in Global Banking to
create more opportunity for middle market
clients, who increasingly are global in their
perspective. We are hiring and assigning
additional client relationship bankers to
serve clients through our local market teams,
so they live and work in the same commu-
nities as those clients. Being local with an
unparalleled global platform is a strength
that differentiates us.
Tom Montag, Chief Operating Officer of
Bank of America and President of Global Banking
and Global Markets
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Powerful
CashPro® platform
Our mobile and digital capabilities extend beyond
our retail client offerings. Our business clients
also seek solutions to help them work faster and
more efficiently. Our commitment to providing
those solutions has earned the business of
approximately 35,000 companies and institutions
across 175 countries. Each year, we manage
$72 trillion in payments, receivables and deposit
transactions through CashPro®, our award-
winning platform accessed by approximately
500,000 users.
Through ongoing digitization of processes and
expansion of online, application-programming
interfaces and mobile capabilities, including
electronic signature, real-time payments and loan
information, clients can now access the platform
anytime, anywhere. Last summer, one of our
business clients used our mobile app to send a
$1.6 billion payment, the biggest transaction ever
on our CashPro app. CashPro ranks first in the
Mobile category of Greenwich Associates latest
Digital Banking Benchmarking study.
Client feedback helps make all of our capabilities
better. The CashPro Client Advisory Boards,
made up of clients of all sizes, help ensure that
we are delivering for our clients through our
digital platform and deepening our relationships
with them.
95%
We have relationships
with 95% of the 2019 U.S.
Fortune 1,000; and 77% of
the 2019 Global Fortune 500
We are also expanding the types of unique
solutions available to our clients, including
the leading capabilities we have in environ-
mental, social and governance (ESG) and
sustainable finance. Through BofA Securities,
we have led more green bond deals than
anyone else and we continue to provide
clients with options that help finance a more
environmentally sound planet. Our Investment
Bank showed tremendous momentum in
2019, with increased market share in key
countries across the world where we operate,
including our U.S. middle market clients with
which we already hold primary core banking
relationships.
In Global Markets, we recently realigned
our business to cover clients more efficiently
and are making strategic investments in
technology and people to continue to innovate
across every asset class.
Q: What makes Global Banking
and Global Markets at Bank
of America unique?
Tom: We serve our clients by delivering
market-leading solutions across consumer
banking, wealth management, commercial
banking, corporate and investment banking,
sales and trading, and research. No one can
offer the range of services and capabilities at
the level that Bank of America can. By building
relationships, being in the local market and
consistently bringing the full value of our
company for our clients, we are delivering on
our commitment to Responsible Growth.
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Addressing society’s
biggest challenges
Q&A with Vice Chairman Anne Finucane
The Sustainable Development Goals (SDGs) are the world’s roadmap to a
sustainable future. The SDGs give governments, the private sector, foundations,
and others a framework to prioritize resources and policies toward goals we
all share: prosperity, equality, human rights, and a sustainable, clean energy
future. Brian Moynihan lays out in these pages the ways that the private
sector can align business operating models with investors seeking to drive
capital toward companies that are making progress on the SDGs.
At Bank of America, sustainability is a central characteristic of our operating
model. This includes our core financing and advisory capabilities for our
clients, how we manage our own operations — our New York headquarters
at One Bryant Park was the first Platinum certified LEED skyscraper in
the world — our global workplace practices and our philanthropy. By aligning
all of our capabilities, we create the scale needed to drive capital toward
the world’s most important priorities as defined in the SDGs: climate
change, affordable housing, clean water and equal access to opportunities
for prosperity.
Q: How are we driving progress
on the United Nations Sustainable
Development Goals?
Anne: To sharpen our focus on bringing even more
business solutions to this work, we recently estab-
lished a Sustainable Markets Committee, co-chaired
by Chief Operating Officer Tom Montag and me, to
accelerate our progress, identify new opportunities
and build upon our work in sustainable finance
in particular. While we already are making great
progress — we are the largest underwriter of green
bonds in the world for instance — the Sustainable
Markets Committee will help us expand on that to
identify even more opportunities to develop products,
capabilities and services in support of our clients as
we work together to help realize the achievement
of the SDGs.
Q: How have we accelerated
progress on specific SDGs?
Anne: Last year, Bank of America directed more
than $50 billion in capital toward activities that
support achievement of the SDGs. I’ll highlight a few:
Affordable and Clean Energy (SDG7) and Clean Water
and Sanitation (SDG6): From 2007 through the end
of 2030, we will have financed more than $445 billion
to low-carbon, sustainable business activities in
support of energy efficiency, renewable energy
and sustainable transportation, and in other areas
including water conservation, land use and waste.
In our own operations, we are carbon neutral as
of 2020.
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Sustainable Cities and Communities (SDG11):
Between 2005 and 2019, we financed 202,800
affordable housing units. In 2019 alone, our
Community Development Banking unit provided a
record $4.88 billion in capital for affordable housing
and community development, including financing
more than 8,300 affordable housing units.
Good Health and Wellbeing (SDG3) and Decent Work
and Economic Growth (SDG8): We are increasing
our U.S. minimum wage to $20 per hour in 2020,
and have strong and progressive health and wellness
benefits. For example, for U.S. employees making
less than $50,000, we reduced annual family coverage
medical premiums by 50% in 2011, and have kept
those premiums flat since 2012. We have paid family
leave of 16 weeks for maternity, paternity and
adoption, and generous bereavement benefits for
those who have lost a loved one. And externally, since
2014, we have partnered with (RED)® to achieve an
AIDS-free generation, pledging more than $35 million
by 2025 to the Global Fund to Fight AIDS.
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Gender Equality (SDG5): We support equal pay for
equal work. At our company, compensation received
by women on average is greater than 99% of that
received by men, and compensation received by
people of color on average is greater than 99% of
non-people of color, as validated by third-party
analysis. In addition to compensation, our ongoing
work to invest in women as they make meaningful
contributions within our company and in our commu-
nities includes our focus on being a great place to
work for our female employees, making the financial
lives of our female clients better, and advancing the
economic empowerment of women around the world.
Zero Hunger (SDG2), Quality Education (SDG4) and
Reduced Inequalities (SDG10): We invested nearly
$250 million in 2019 in global philanthropic giving
to advance economic mobility — with $2 billion in
giving since 2009. For example, since 2015, across
the globe we’ve invested nearly $50 million in
support of hunger relief, and $243 million to advance
skill building and jobs for young adults and those
with barriers to employment, including addressing
issues affecting social justice and racial and
gender inequality.
These are just some of many examples of how
we bring our full company and broader influence
to address these 17 critical goals.
Q: How are you engaging with others
externally to drive this work?
Anne: We drive global collaboration to address these
major societal challenges by engaging with external
stakeholders. Brian Moynihan discusses in his letter
the work he is doing at the International Business
Council of the World Economic Forum to develop
standardized metrics that define sustainable business
practices. We also are working with the World Bank
and Stanford University to develop financial vehicles
that will deploy greater capital to support the SDGs
and close the funding gap. We are working with
the Vatican, the United Nations and the Prince of
Wales to help harness the power of the capitalist
system to be able to address society’s needs. In the
U.S., our National Community Advisory Council
(NCAC) consists of senior leaders from social justice,
consumer advocacy, community development,
environmental, research and advocacy organizations
who provide external perspectives, guidance and
feedback on our business policies and practices. Our
work in these areas is recognized by others: In 2019,
we were named to the CDP A list for leadership in
addressing climate change. This was our ninth year
as a CDP-recognized leader. And for the sixth straight
year, we were recognized for ESG leadership on the
Dow Jones Sustainability Index (DJSI) World Index.
In addition to the work I’m describing here, please see
the following pages for additional examples of the
progress we are making.
We are addressing some of society’s greatest challenges
by helping align the various sources of capital — from the
“ business community, the public sector, and philanthropy —
with all of Bank of America’s financial capabilities and talent,
calling on the expertise of our teams and the passion of our
employees around the globe. ”
26 | BANK OF AMERICA 2019
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A world of ESG
innovation
We have achieved carbon neutrality in our own
operations* one year ahead of schedule.
How did we get there? We reduced Scope 1 and 2
emissions in our facilities by more than 52% since
2010 and met our goal to purchase 100% of our
electricity from renewable sources. We installed
on-site solar at our facilities, completed multiple
long-term renewable agreements to add new wind
and solar electricity to the grid, and purchased
Renewable Energy Credits.
To compensate for unavoidable emissions, we pur-
chased carbon offsets by supporting four projects in
impoverished areas around the globe, which help to
preserve biodiversity and drive reforestation, while
furthering local economic mobility.
In Indonesia, we supported peatland protection
through Cool Effect. The project is restoring 157,000
hectares of damaged vital peatland. It also directly
supports 34 communities, has 100% Indonesian
staff and has provided 948 micro-loans for sustain-
able small business development.
In the Mississippi River Valley, we supported an
Arbor Day tree planting as part of the largest refor-
estation program in North America — already over
120,000 acres have been reforested with more than
500 landowners participating and 42 million trees
planted. This ultimately helps communities in some
of the poorest counties in the U.S. to build resiliency
against climate change and flooding.
In Peru, we supported a conservation program that
helps protect the Andes and Amazon forests by
establishing sustainable livelihoods for communities
living around the Cordillera Azul National Park. The
project created 624 jobs, 30% of which are held by
women. It also returned $1.43 million to the local
economy through the production of fair trade,
organic cocoa, coffee and honey.
Finally, in Kenya and Uganda, we supported an
endeavor that empowers small farmer communities
to learn to plant and maintain trees, for which
they receive cash stipends. They also receive
health training on HIV/AIDS, malaria, typhoid and
tuberculosis, as well as vocational education and
leadership training.
We have achieved carbon
neutrality in our own
operations* one year ahead
of schedule.
*pending third-party validation
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Investing to improve
the environment
Our financial commitment to improving the environment
helps inform our global business strategy, including how
we work with partners, support our employees, make our
operations more sustainable, manage issues and govern
our activities. These efforts are critical to our efforts to
achieve U.N. Sustainable Development Goals focused on
Clean Water and Sanitation (SDG6), Affordable and Clean
Energy (SDG7) and more.
Our $125 billion commitment to mobilize capital to
low-carbon, sustainable business activities was achieved
in 2019, six years ahead of schedule, and we’re not done
yet. In 2019, we announced an additional $300 billion
environmental business commitment, which we will meet
by 2030, in support of energy efficiency, renewable energy
and sustainable transportation, as well as important
areas like water conservation, land use and waste.
We are the first U.S. financial institution to issue five
corporate green bonds, which raised a total of $6.35 billion
for renewable energy projects since 2013. And we have
been a leader in green bond underwriting globally. BofA
Securities has underwritten more than $49 billion on
behalf of over 100 clients, supporting more than 288 deals
and providing critical funding to environmental projects
since 2007. We have also been the top investor in tax
equity projects in the U.S. since 2015. Our current portfolio
holds approximately $9.4 billion of renewable energy tax
equity projects supporting wind and solar facilities.
We have achieved carbon neutrality in our own operations*
one year ahead of schedule.
$158B
Deployed to low-carbon
sustainable business activities
$49B
Green bonds underwritten
since 2007 supporting
environmental projects
$9.4B
Renewable energy tax
equity projects for wind and
solar facilities
*pending third-party validation
28 | BANK OF AMERICA 2019
Driving
economic
mobility:
one
community’s
story
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$1.5B Community Development Financial
Our investment across 255
Institutions to finance economic
development, small businesses,
affordable housing and community
facilities and services
$2B
Philanthropic investments
since 2009 to drive economic
mobility and social progress in
the communities we serve
$5B
Part of our affordable home
ownership initiative for low- and
moderate-income homebuyers
and communities across the U.S.
2M
Volunteer hours by Bank of
America employees in their local
communities in 2019
workforce, committing $1 million of $6 million raised from
the private sector over five years. This private sector
investment leveraged $229 million in Mecklenburg County
-
-
funding for pre K and childcare subsidies over the same
period of time.
To create pathways to job opportunities, we support
youth apprenticeship and other workforce development
initiatives. Participating CELC members, including Bank
of America, expect to hire 1,000 employees through local
training programs and offer 1,500 work based learning
experiences for K 12 students in the coming year.
-
-
-
-
’
—
—
We have partnered with other financial institutions to
commit more than $135 million to affordable housing
the largest private sector investment in affordable
housing in Charlotte s history. To help the project work
financially, our commitment includes below market loans,
a donation of land, an investment in the Charlotte
Housing Opportunity Investment Fund, and economic
mobility grants and programs. In total, public and private
partners in Charlotte have committed over $270 million
to affordable housing.
-
-
Economic inequality is one of the
fundamental challenges of our time.
Bank of America has a responsibility to
use our resources — including capital,
ideas, and the talent and passion of
our team members — to help create
solutions to this challenge.
Our approach starts with a basic fact: Economic opportunity
often depends on where a person lives. Some neighborhoods
offer a path to a quality education, a decent home, a good job
and financial security; but others do not.
In our headquarters city, Charlotte, North Carolina, we joined
with other business leaders, government agencies and
nonprofit organizations to address this disparity and improve
economic mobility for our fellow citizens. Local corporations
and academic institutions came together in 2015 to form the
Charlotte Executive Leadership Council (CELC) to tackle struc
-
-
tural obstacles to economic opportunity. Bank of America s
’
’
CEO, Brian Moynihan, has chaired the CELC since 2018.
Following the detailed recommendations of a local task force
to address the roots of economic inequality, we are working
through the CELC to make an impact in education, workforce
development, affordable housing, community engagement
and economic development.
Investing in education, jobs and housing
Because early education is vital to economic mobility, extend
-
-
ing free, public pre K to all 4 year olds in Charlotte was a top
-
-
priority. We contributed to the initial studies and helped fund
scholarships and related expenses to expand the pre K teacher
-
-
-
-
-
-
’
’
What s happening in Charlotte is not an isolated effort.
Many of the initiatives first used in Charlotte are now
being piloted in other Bank of America markets, with
a goal of creating greater economic mobility for all our
communities and the people who live and work in them.
—
—
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Diversity at work and
in our communities
Diversity — in thought, style, age, sexual orientation, gender
identity, race, ethnicity, culture and experience — makes us
stronger and is essential to our ability to serve our clients,
fulfill our purpose and drive Responsible Growth. We have
a longstanding commitment to invest in diverse communi-
ties, including supporting strong diversity in representation
across our company, reflecting the clients and communities
we serve. We’re proud of the progress we’ve made, partic-
ularly our efforts in support of Black/African American and
Hispanic-Latino communities, which we feature below. A broad
discussion of our diversity commitment, how we execute on
it and our results are discussed in detail throughout our 2019
Human Capital Report, which is available on our Investor
Relations website.
We are sharply focused on building a diverse workforce, which
is currently 13% Black/African American and 18% Hispanic-
Latino, exceeding EEOC financial services and Department
of Labor benchmarks; and last year, the number of executive
and senior-level officials and managers drawn from these
populations increased more than 14%.
In our efforts to further increase our diverse representation,
we’re partnering with more than 200 external organizations
to identify diverse talent. And, we have networking groups to
provide professional development, mentoring and leadership
opportunities. Employee Networks such as our Hispanic-
Latino Organization for Leadership & Advancement (HOLA)
and Black Professional Group (BPG) have more than 14,500
memberships each.
We’re committed to making the financial lives of our clients
better. Approximately 1 in every 3 checking accounts opened
at Bank of America is by Hispanic-Latino clients, and 15%
of checking accounts opened at Bank of America are by
Black/African American clients. We deliver a full spectrum
of products and services for these clients, whether they are
looking to invest or just starting their financial journey. We
offer Spanish-language capabilities across multiple products
and services including our free Better Money Habits® website,
which helps people build their financial know-how. In 2020,
we celebrate 30 years of our corporate Supplier Diversity &
Development Program, which supports minority-, women- and
other diverse-owned suppliers, spending nearly $2 billion with
diverse suppliers each year.
Partnerships and programs are helping to drive our focus
on economic mobility. In 2019 alone, we invested more than
$55 million to advance issues of economic mobility and social
justice affecting Blacks/African Americans and Hispanic-Latino
individuals. We partner with change-making organizations
like the NAACP, National Urban League and UnidosUS, all of
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whom serve on our National Community Advisory Council, a
group that helps inform our approach to serving our clients
and communities. We use our voice to advocate for progress
on societal challenges that disproportionately affect diverse
communities. For example, we signed the CEO Action Pledge
for Diversity & Inclusion, continuing our leadership role
in making our sector more diverse and inclusive, expanding
unconscious bias education and sharing best practices. In
2019, we became the first financial services organization to
sign the Hispanic Promise, pledging our commitment to hire,
promote, retain and celebrate Hispanic-Latino individuals in
the workplace. And last year, we renewed our commitment to
Unlocked Futures, which invests in social entrepreneurs who
have been impacted by the criminal justice system.
Helping break barriers to economic mobility and drive progress
on social issues for diverse populations is important to our
employees, our clients, our investors and our communities,
and we will continue driving this work.
Employee Networks
Our 11 Employee Networks, which include more than
300 chapters and 160,000 memberships worldwide, help
teammates develop leadership skills, build ties with local
communities and advance diversity recruitment.
Our Employee Networks include:
• Asian Leadership Network
• Black Professional Group
• Disability Advocacy Network
• Hispanic/Latino Organization for Leadership and
Advancement (HOLA)
• Inter-Generational Employee Network
• Leadership, Education, Advocacy and Development (LEAD)
for Women
• Lesbian, Gay, Bisexual and Transgender (LGBT+) Pride
• Military Support and Assistance Group
• Multicultural Leadership Network
• Native American Professional Network
• Parents and Caregivers Network
200+
Number of external
organizations we’re
partnering with to
identify diverse talent
$55M+
160,000+
Amount invested in 2019
to advance issues of
economic mobility and social
justice affecting Blacks/
African Americans and
Hispanic-Latino individuals
Memberships
in our 11 Employee
Networks
Our diversity makes us stronger, and the value we deliver as a company is strengthened when
we bring broad perspectives together to meet the needs of our diverse stakeholders.
over 50%
of our management
team are women or
people of color
over 50%
of our global workforce
are women
over 45%
of our U.S.-based
workforce are people
of color
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Creating opportunities through
employee development
“A key element of sustainable growth is being a great place to
work for our more than 200,000 employees. That means creating
opportunities for our teammates to grow and develop so they
can deliver great service to our clients while having a rewarding
career at our company.”
Sheri Bronstein, Chief Human Resources Officer
CORDELL JACKSON (Right)
Cordell Jackson started in the Consumer Banking
call center and has grown professionally over the
years thanks to his talent, support from managers
and teammates, and our career resources. As
part of his career progression, Cordell recently
transitioned roles, from a risk analysis senior
manager to a strategic consumer product analyst.
“If you aren’t learning, you aren’t growing,” Cordell
explains, and the bank has been with him every
step of the way. To help Cordell further develop
his skills, he was nominated to participate in our
Diverse Leader Sponsorship Program, a highly
selective 10-month development program that pairs
candidates with more senior executive sponsors
who will help them build skills, gain exposure and
broaden their network. In addition, our tuition
reimbursement program helped Cordell finance his
master’s certificate. Through our online Learning
Hub platform, he can access an extensive library
of career development resources, including white
papers, videos and articles from industry experts.
Now, Cordell continues to develop his skills, grow his
professional network and mentor other employees
as co-chair of the bank’s Black Professional Group
chapter in Delaware.
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JUDY RETANA (Below)
Judy Retana started her career as an intern with Bank of
America through long-time bank partner Year Up® before
becoming a full-time teammate through our Pathways
program. Through Pathways, we work with nonprofit partners
like Year Up to provide skills training and career pathways
to Consumer & Small Business teammates from low- and
moderate-income communities. “Year Up provided me with
the tools to help me create a professional brand to advance
my corporate career. Its mission is to close the opportunity
divide between those who have a college education and
work experience, and those who don’t but who have high
potential,” Judy explained. Today she’s thriving in her role as a
Merrill ongoing support specialist. “Our business is constantly
changing, with a lot of new opportunities. There are many
talented people who deserve the same chance in life I’ve had.
Programs like Year Up and Pathways enable people to start
their careers.”
DANIEL BURTON-MORGAN (Above)
London-based Daniel Burton-Morgan was in
his final year at university when he was offered
his first full-time job with our company as a
UK mergers and acquisitions analyst. Fourteen
years later, he’s a managing director in Global
Corporate & Investment Banking with deep
experience serving our global clients across
Europe, the Middle East and Africa. According
to Daniel, the opportunity to move into new
roles across business units and in different
locations is one of many reasons that Bank
of America is such a great place to work
and build a long-term career. Another is our
commitment to developing employees. Daniel is
an alumnus of our Emerging Leaders Program,
which brings together leaders to enhance their
effectiveness. “It was a fantastic opportunity
to meet teammates across the company and
exchange ideas around growing our business,”
he said. “Professional development is critically
important because it keeps work interesting and
rewarding,” Daniel added. “Even more, clients
expect us to grow with them, and they want
financial advice and solutions delivered through
a global lens.”
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Supporting
teammates in
moments that
matter
Part of being a great place to work is supporting
our employees in the moments that matter most.
This includes helping our teammates navigate
significant life events — connecting them to internal
and external resources, benefits, counseling and
other support options. In 2014, we established our
Life Event Services (LES) group — an internal and
highly specialized team that has provided more
than 100,000 team members with empathetic and
personalized support for needs related to terminal
illness, taking a leave of absence, the death of a
loved one, domestic violence, medical accommoda-
tions, transgender and gender identity, retirement
and military service.
Additionally, when disasters occur, LES provides
support for employees who are affected by an
event, such as a natural disaster, violence or
house fire. This can include providing paid time
off to handle the impacts of the event, temporary
housing and referrals to community organizations,
or arranging emotional support for the teammate
and family members.
Chief Human Resources Officer Sheri Bronstein
said, “Being a great place to work means having a
culture of caring. By supporting our teammates
through difficult moments, we help them to be their
best both at work and at home so they can deliver
for their families, our clients and our communities.”
LES was there for Alison Harding, an employee in
Global Technology & Operations, when a hurricane
threatened her home in Charleston, South Carolina.
The area was under mandatory evacuation; however,
Alison’s family did not have a vehicle large enough
to accommodate her special-needs child, his medical
equipment, nurse and the family. LES took action to
help and within 20 minutes, secured a large vehicle
to meet their needs enabling the family to safely
evacuate. “I felt instant relief, followed by how proud
I was to work for a company that helped me in a
time of need,” said Alison. “With a special-needs
child, we have to consider and worry about so many
things and this obstacle was removed so we could
focus on caring for our family.”
100,000+
Employees supported
during the moments
they and their families
needed it the most
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Courageous
conversations
Our commitment to being a great place to work is
rooted in celebrating diversity and inclusion (D&I).
Women make up 50% of our workforce, and over
45% of our U.S. workforce are people of color.
Over the past few years, we have developed a new
forum for bringing us all together, called coura-
geous conversations. These candid dialogues,
focused on topics like race and gender equality,
social justice, emotional wellness and domestic
violence, engage teammates and drive inclusivity.
More than 60,000 teammates have participated
in these sessions.
We have incorporated courageous conversations
into our broad D&I learning, including our “Let’s
Get Real” program, a quarterly series sponsored
by the Global Diversity & Inclusion Council.
Due to the positive feedback we received about
these internal discussions, we began hosting
conversations with our clients and communities,
including a recent Boston-based session on
substance misuse disorders and ways to support
those in recovery.
photo
FPO
60,000+
Teammates
have participated
in courageous
conversations
BANK OF AMERICA 2019 | 35
Partnering
to end AIDS
Since 2014, we have partnered with (RED)®
to achieve an AIDS-free generation. As of
December 31, 2019, our partnership has generated
nearly $19 million in contributions to the Global
Fund to Fight AIDS. In October 2019, we extended
our commitment to pledge more than $35 million
by 2025.
In partnership with brands worldwide, (RED) raises
money and awareness in the fight against AIDS.
Its partners contribute to Global Fund grants
that provide treatment, testing and preventative
care and counseling services, with a focus on
ending mother-to-child HIV transmission in eight
sub-Saharan African countries.
Currently, 38 million people are living with HIV
globally, with 26 million in sub-Saharan Africa.
Thanks in large part to (RED) and the Global Fund,
more than 24.5 million people now have access to
life-saving treatment. Additionally, AIDS-related
illnesses have decreased by more than half since
peaking in 2004.
Our work with (RED) is an example of how we
are partnering to help address local, national and
global social priorities—including Good Health
and Wellbeing (SDG3) — to deliver Responsible
Growth. By furthering our commitment and
working together, we will help end AIDS.
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Total rewards
We listen and learn from our teammates
about what matters most as we continue
to deliver on our commitment to be a
great place to work. Our teammates
-
emphasize that they want the opportu
-
nity to have rewarding, long-term careers;
to be supported in physical, emotional
-
and financial wellness; and to make a dif
-
ference in our local communities.
-
To support our employees with their per
-
sonal and professional goals, we pay our
teammates competitively and provide
broad and diverse benefits to meet their
needs both today and in the future.
In the first quarter of 2020, we are
increasing our minimum hourly wage
for U.S. teammates to $20. As a result
of this change, our yearly minimum
rate of pay for a full time employee
will increase to more than $41,000.
In addition to this yearly wage, we
provide a variety of health care and
wellness benefits, which are significant,
additional components of the total
rewards that all employees receive.
-
As an example, an employee making
just over our minimum hourly wage
with a base salary of $45,572 who also
receives company contributions for
-
retirement, health and insurance cover
-
age and childcare, would have total
annual pay and benefits of over $77,000
per year. And this number could increase
further depending on the other benefits
—
such
an employee may choose to use
—
-
as tuition assistance, free confiden
-
tial counseling through our Employee
Assistance Program, company provided
matching gifts for charitable donations
and more.
-
-
Each year, eligible U.S. employees have
the opportunity to review a summary of
what they earned, what they saved and
how much the company contributed to
their benefits for the prior year all part
of our approach to total rewards and
investing in our teammates.
—
—
Assuming an
employee with a
base salary of
$45,572*
Company
contributions to
family health and
insurance coverage
would be
$25,133
Company
contributions to
401(k) would be
$3,190
Company-
provided child care
reimbursements
would be
$3,595
Company
contributions would
bring total annual pay
and benefits to
$77,490
36 | BANK OF AMERICA 2019
* Example is based on employee with a base salary of $45,572 and benefits profile, living in one of our markets in the U.S., who is enrolled
in a representative set of Bank of America employee benefit programs (including 401(k) plan, medical, dental, disability, life insurance,
accidental death & dismemberment insurance, and child care reimbursement). For the 401(k), it assumes the employee has at least 1 year
of service, and is receiving 2% Annual Company Contribution and 5% Company Match (based on a contribution rate of at least 5%).
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Funding the
power to dream
In 2019, we asked employees from across the globe “What would you like the power to do?” and
how they would put a financial grant to work in their communities. We responded with nearly
$1 million in funding for 42 employee ideas that focused on economic mobility, the environment,
and arts and culture. These ideas were selected to receive a $50,000 or $10,000 grant and
support from within the bank, in partnership with an eligible local nonprofit.
Among those selected was Ashton
Ngwena, an employee in Investment
Banking. Ashton knows firsthand
that a quality education is not afford-
able or accessible for everyone. His
journey from a small farming village in
Zimbabwe inspired his desire to assist
other children who are in a similar posi-
tion. His idea will help build a community
school for Education Matters Africa
in Zimbabwe. “Getting accepted into
Education Matters Africa was a key turn-
ing point in my life. I am grateful to Bank
of America for helping this organization
to further their impact through this
opportunity for the students to learn, to
hope and to dream of a brighter future
for their communities,” said Ashton.
Similarly, Merrill Lynch Wealth
Management Advisor Sue Harmon
was inspired to help young adults with
developmental disabilities achieve their
dreams by ensuring they have trans-
portation to get to work. She is tackling
this common problem by partnering
with The Arc of Greater Williamsburg
in Virginia to launch Wheels4Work, a
transportation and employment project.
This program is just one way we are
building on our progress to support
our teammates, their families and the
communities where we work and live.
Photo courtesy of Education Matters Africa
Being a Great
Place to Work
2019 HUMAN CAPITAL MANAGEMENT REPORT
Published November 2019
2019 Human Capital
Management Report
We are committed to being a great place to work and investing in the
people who serve our clients and live and work in our communities.
In 2019, we published our first human capital management report
detailing all we do to support our more than 200,000 teammates and
their families. The importance our stakeholders place on transparency
and how we engage our employees on key issues — such as talent
management, employee engagement and diversity — is an increasingly
common theme. To provide additional clarity on our company’s actions,
the 2019 Human Capital Management Report — available on our Investor
Relations website — illustrates how we promote a diverse and inclusive
workforce, recognize and reward performance, attract and develop
talent, and support our teammates’ physical, emotional and financial
wellness. Going forward, we will continue to report on these items and
the progress we’re making as part of our focus on making this the best
place for our employees to work.
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2019 ESG highlights
At Bank of America, we are driving Responsible Growth with a strong focus on environmental,
social and governance (ESG) leadership. This helps us to serve clients, deliver attractive returns
for our shareholders and address some of society’s greatest challenges.
Green bonds
We have been a leader in green bond
underwriting globally since 2007. BofA
Securities has underwritten more than
$49 billion on behalf of 100+ clients,
supporting more than 288 deals and
providing critical funding to environ-
mental projects, since 2007.
We are the first U.S. financial institution
to issue five corporate green bonds.
These five corporate green bonds raised
a total of $6.35 billion for renewable
energy projects since 2013.
Blended Finance
Catalyst Pool
In 2018, we launched our Blended
Finance Catalyst Pool to mobilize
additional private capital to help address
the U.N. Sustainable Development
Goals. This financing initiative provides
$60 million of capital for Affordable
and Clean Energy (SDG7), Sustainable
Cities and Communities (SDG11), Clean
Water and Sanitation (SDG6), and
Climate Action (SDG13), among others.
Climate risk and
ESG disclosure
We understand climate change presents
risks to the business community, and it
is important for companies to articulate
how these risks are being managed.
We will be issuing our Task Force on
Climate-related Financial Disclosures
(TCFD) report in 2020 to ensure our
shareholders, clients and communities
are aware of the financial risks of
climate change to our business and how
we are managing those risks. We also
continue to focus on transparency and
driving data with organizations like the
World Economic Forum, Sustainability
Accounting Standards Board, the Global
Reporting Initiative and others, and how
best to align those metrics to the U.N.
Sustainable Development Goals.
Affordable homeownership
In April 2019, we announced our new
$5 billion Bank of America Community
Homeownership Commitment™ to
benefit low- and moderate-income (LMI)
homebuyers and communities across the
country over the next five years.
Community
Development Banking
Bank of America Community
Development Banking (CDB) provided
a record $4.88 billion in loans, tax
credit equity investments and other
real estate development solutions.
CDB deployed $3.1 billion in debt
commitments and $1.78 billion in
investments to help build strong,
sustainable communities by financing
affordable housing, charter schools
and economic development across
the country.
Between 2005 and 2019, Bank of
America financed 202,800 affordable
housing units.
Sustainable finance
Each year, we mobilize, conservatively,
more than $50 billion that impacts a
key subset of the SDGs.
Environmental business
commitment
Our Environmental Business Initiative
will direct an additional $300 billion
to low-carbon, sustainable business
activities over the next 10 years. Since
2007 when it was launched, we have
already deployed $158 billion to these
efforts across the globe.
Tax equity for
renewables
We have been the top tax equity
investor in the U.S. since 2015. Our
portfolio at the end of 2019 was
approximately $9.4 billion of Tax
Equity renewable energy investment.
Carbon neutrality
We achieved carbon neutrality by
reducing Scope 1 and 2 emissions
from our facilities, purchasing 100%
renewable electricity and buying
carbon offsets for our remaining
unavoidable emissions.
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Community Development
Financial Institutions
(CDFI) lending
We originated more than $325 million
in loans as part of our more than
$1.5 billion investment in 255 CDFIs to
finance affordable housing, economic
development projects, small businesses,
health care centers, charter schools, and
other community facilities and services.
Bank of America Art
Conservation Project
Since 2010, the Bank of America Art
Conservation Project has provided
grants to fund 170 conservation
projects in 33 countries to conserve
paintings, sculptures, and art and
cultural treasures that are important
to cultural heritage. We are a leader
in helping the arts flourish across the
globe, supporting more than 2,000
nonprofit cultural institutions
each year.
Small business lending
We provide advice, tools, solutions
and dedicated support to meet the
unique needs of our 12 million small
business owners. We are a top lender
in the Small Business Administration’s
(SBA’s) 504 and 7(a) programs, and
according to the FDIC, we are the top
small business lender with $37.6 billion
total outstanding small business loan
balances as of third quarter 2019. More
than half (57%) of all small business
loans booked in 2019 were LMI loans
for a total amount of $6.3 billion.
ESG client balances
We have $25.11 billion in assets in
our wealth management business
with a clearly defined ESG investment
approach as of Dec. 31, 2019.
Employee giving
and volunteering
Last year, employees volunteered
2 million hours and directed
$77 million to communities through
individual giving and the bank’s
matching gifts program.
Women’s economic
empowerment
In 2019, we doubled our investment
in the Tory Burch Foundation Capital
Program, committing $100 million in
capital to connect women small business
owners to affordable loans. Since the
program’s launch five years ago, more
than 3,200 women entrepreneurs have
received $54 million in loans through
CDFIs to help them grow and refine
their businesses.
After launching the Bank of America
Institute for Women’s Entrepreneurship
at Cornell in 2018, we announced in 2019
that we are doubling our commitment
and will provide access for 20,000 women
entrepreneurs to participate in the only
online Ivy League, certificate program
for women business owners in the world.
Representing over 65 countries including
Bangladesh, Egypt, Ghana, Uruguay and
the United States, more than 15,700
women are currently enrolled.
Philanthropic giving
We have delivered $2 billion in
philanthropic investments since 2009.
In 2019, we delivered approximately
$250 million in philanthropic invest-
ments to drive economic mobility and
social progress in the communities
we serve.
Pathways
We are helping individuals of all
socioeconomic backgrounds find
meaningful employment, including
through Pathways, our community
hiring and development program that
provides entry-level jobs and career
training in Consumer & Small Business
for individuals from LMI neighborhoods.
To date, the bank has hired more than
8,000 employees from these commu-
nities, putting the company at over 80%
of its five-year 10,000 hiring goal in
just two years.
Better Money Habits®
Since launching the Better Money Habits
program, we’ve reached consumers over
2.7 billion times.
1 in 4 users of Better Money Habits
content and tools grew their savings by
20% or more.1
In 2019, visitors to Better Money Habits
home loans content were 37 times
more likely to obtain a home loan within
30 days.1
71% of active Better Money Habits
users have used the Spending &
Budgeting tool.
1 Represents Bank of America Consumer households for entire 12-months under study who used the Saving and Budgeting Tool during March 2017. Analysis
based on average balances for the 6 months prior to March 2017 (“pre” period) and the 6 months after March 2017 (“post” period).
BANK OF AMERICA 2019 | 39
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022311
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page 40
Bank of America Corporation — Financial highlights
Bank of America Corporation (NYSE: BAC) is headquartered in Charlotte, North Carolina. As of December 31, 2019, we operated
across the United States, its territories and more than 35 countries. Through our banking and various nonbank subsidiaries
throughout the United States and in international markets, we provide a diversified range of banking and nonbank financial
services and products through four business segments: Consumer Banking, Global Wealth and Investment Management,
Global Banking and Global Markets.
Financial highlights ($ in millions, except per share information)
For the year
Revenue, net of interest expense
Net income
Earnings per common share
Diluted earnings per common share
Dividends paid per common share
Return on average assets
Return on average tangible common shareholders’ equity1
Efficiency ratio
Average diluted common shares issued and outstanding
At year-end
Total loans and leases
Total assets
Total deposits
Total shareholders’ equity
Book value per common share
Tangible book value per common share1
Market price per common share
Common shares issued and outstanding
Tangible common equity ratio1
$
2019
91,244
27,430
2.77
2.75
0.66
1.14%
14.86
60.17
9,443
2019
$ 983,426
2,434,079
1,434,803
264,810
27.32
19.41
35.22
8,836
7.3
$
2018
91,020
28,147
$
2017
87,126
18,232
2.64
2.61
0.54
1.21%
15.55
58.40
10,237
2018
$ 946,895
2,354,507
1,381,476
265,325
25.13
17.91
24.64
9,669
7.6
1.63
1.56
0.39
0.80%
9.41
62.57
10,778
2017
$ 936,749
2,281,234
1,309,545
267,146
23.80
16.96
29.52
10,287
7.9
1Represents a non-GAAP financial measure. For more information on these measures and ratios, and a corresponding reconciliation to GAAP financial measures, see Supplemental
Financial Data on page 48 and Non-GAAP Reconciliations on page 101 of the 2019 Financial Review section.
Total Cumulative Shareholder Return2
BAC Five-Year Stock Performance
$250
$200
$150
$100
$50
$0
2014
2015
2016
2017
2018
2019
December 31
2014
2015
2016
2017
2018 2019
Bank of America Corporation
S&P 500
KBW Bank Sector Index
$100
100
100
$95
101
100
$127
113
129
$172
138
153
$146 $214
174
132
172
126
2This graph compares the yearly change in the Corporation’s total cumulative shareholder return
on its common stock with (i) the Standard & Poor’s 500 Index and (ii) the KBW Bank Index for the
years ended December 31, 2014 through 2019. The graph assumes an initial investment of $100
at the end of 2014 and the reinvestment of all dividends during the years indicated.
KBW
S&P
B of A
$40
$35
$30
$25
$20
$15
$10
$5
$0
2015
2016
2017
2018
HIGH $18.45
$23.16
$29.88
$32.84
LOW
15.15
CLOSE 16.83
11.16
22.10
22.05
29.52
22.73
24.64
2019
$35.52
24.56
35.22
Book Value Per Share/
Tangible Book Value Per Share
8
4
.
2
2
$
6
5
.
5
1
$
.
7
9
3
2
$
9
8
.
6
1
$
.
0
8
3
2
$
.
6
9
6
1
$
.
3
1
5
2
$
.
1
9
7
1
$
.
2
3
7
2
$
.
1
4
9
1
$
2015
2016
Book Value Per Share
2017
2018
Tangible Book Value Per Share³
2019
40 | BANK OF AMERICA 2019
3Tangible book value per share is a non-GAAP financial measure.
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2019 Financial Review
Bank of America 2019 41
Financial Review
Table of Contents
Executive Summary
Recent Developments
Financial Highlights
Balance Sheet Overview
Supplemental Financial Data
Business Segment Operations
Consumer Banking
Global Wealth & Investment Management
Global Banking
Global Markets
All Other
Off-Balance Sheet Arrangements and Contractual Obligations
Managing Risk
Strategic Risk Management
Capital Management
Liquidity Risk
Credit Risk Management
Consumer Portfolio Credit Risk Management
Commercial Portfolio Credit Risk Management
Non-U.S. Portfolio
Provision for Credit Losses
Allowance for Credit Losses
Market Risk Management
Trading Risk Management
Interest Rate Risk Management for the Banking Book
Mortgage Banking Risk Management
Compliance and Operational Risk Management
Reputational Risk Management
Complex Accounting Estimates
Non-GAAP Reconciliations
Statistical Tables
Page
43
44
45
46
48
53
54
56
58
60
61
62
63
66
66
71
74
75
81
87
89
89
92
93
95
97
97
98
98
101
102
42 42
Bank of America 2019
Bank of America 2019
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(the “Corporation”) and
its
Bank of America Corporation
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
“anticipates,” “targets,” “expects,” “hopes,” “estimates,” “intends,”
“plans,” “goals,” “believes,” “continue” and other similar expressions
or future or conditional verbs such as “will,” “may,” “might,” “should,”
“would” and “could.” Forward-looking statements represent the
Corporation’s current expectations, plans or forecasts of its future
results, revenues, expenses, efficiency ratio, capital measures,
strategy and future business and economic conditions more
generally, and other future matters. These statements are not
guarantees of future results or performance and involve certain
known and unknown risks, uncertainties and assumptions that are
difficult to predict and are often beyond the Corporation’s control.
Actual outcomes and results may differ materially from those
expressed in, or implied by, any of these 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 under
Item 1A. Risk Factors of our 2019 Annual Report on Form 10-K: the
Corporation’s potential claims, damages, penalties, fines and
reputational damage resulting from pending or future litigation,
regulatory proceedings and enforcement actions; the possibility that
the Corporation's future liabilities may be in excess of its recorded
liability and estimated range of possible loss for litigation, regulatory
and representations and warranties exposures; the possibility that
the Corporation could face increased servicing, fraud, indemnity,
contribution or other claims from one or more counterparties,
including trustees, purchasers of loans, underwriters, issuers,
monolines, private-label and other investors, or other parties
involved in securitizations; the Corporation’s ability to resolve
representations and warranties repurchase and related claims,
including claims brought by investors or trustees seeking to avoid
the statute of limitations for repurchase claims; the risks related to
the discontinuation of the London Interbank Offered Rate and other
reference rates, including increased expenses and litigation and the
effectiveness of hedging strategies; uncertainties about the
financial stability and growth rates of non-U.S. jurisdictions, the risk
that those jurisdictions may face difficulties servicing their sovereign
debt, and related stresses on financial markets, currencies and
trade, and the Corporation’s exposures to such risks, including direct,
indirect and operational; the impact of U.S. and global interest rates,
inflation, currency exchange rates, economic conditions, trade
policies and tensions, including tariffs, and potential geopolitical
instability; the impact of the interest rate environment on the
Corporation’s business,financial condition and results of operations;
the possibility that future credit losses may be higher than currently
expected due to changes in economic assumptions, customer
behavior, adverse developments with respect to U.S. or global
economic conditions and other uncertainties; the Corporation’s
ability to achieve its expense targets and expectations regarding net
interest income, provision for credit losses, net charge-offs, effective
tax rate, loan growth or other projections; adverse changes to the
Corporation’s credit ratings from the major credit rating agencies;
an inability to access capital markets or maintain deposits or
borrowing costs; estimates of the fair value and other accounting
values, subject to impairment assessments, of certain of the
Corporation’s assets and liabilities; the estimated or actual impact
of changes in accounting standards or assumptions in applying
those standards; uncertainty regarding the content, timing and
impact of regulatory capital and liquidity requirements; the impact
of adverse changes to total loss-absorbing capacity requirements
and/or global systemically important bank surcharges; the potential
impact of actions of the Board of Governors of the Federal Reserve
System on the Corporation’s capital plans; the effect of regulations,
other guidance or additional information on the impact from the Tax
Cuts and Jobs Act; the impact of implementation and compliance
with U.S. and international laws, regulations and regulatory
interpretations, including, but not limited to, recovery and resolution
planning requirements, Federal Deposit Insurance Corporation
assessments, the Volcker Rule, fiduciary standards and derivatives
regulations; a failure or disruption in or breach of the Corporation’s
operational or security systems or infrastructure, or those of third
parties, including as a result of cyber attacks or campaigns; the
impact on the Corporation’s business, financial condition and results
of operations from the United Kingdom's exit from the European
Union; the impact of any future federal government shutdown and
uncertainty regarding the federal government’s debt limit; the impact
of natural disasters, the emergence of widespread health
emergencies or pandemics, military conflict, terrorism or other
geopolitical events; and other matters.
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-year amounts have been reclassified
to conform to current-year presentation. Throughout the MD&A,
the Corporation uses certain acronyms and abbreviations which
are defined in the Glossary.
Executive Summary
Business Overview
The Corporation is a Delaware corporation, a bank holding company
(BHC) and a financial holding company. When used in this report,
“the Corporation,” “we,” “us” and “our” may refer to Bank of
America Corporation individually, Bank of America Corporation and
its subsidiaries, or certain of Bank of America Corporation’s
subsidiaries or affiliates. Our principal executive offices are
located in Charlotte, North Carolina. Through our banking and
various nonbank subsidiaries throughout the U.S. and in
international markets, we provide a diversified range of banking
and nonbank financial services and products through four
business segments: Consumer Banking, Global Wealth &
Investment Management (GWIM), Global Banking and Global
Markets, with the remaining operations recorded in All Other. We
operate our banking activities primarily under the Bank of America,
National Association (Bank of America, N.A. or BANA) charter. At
December 31, 2019, the Corporation had $2.4 trillion in assets
and a headcount of approximately 208,000 employees.
As of December 31, 2019, we served clients through
operations across the U.S., its territories and approximately 35
countries. Our retail banking footprint covers approximately 90
percent of the U.S. population, and we serve approximately 66
million consumer and small business clients with approximately
4,300 retail financial centers, approximately 16,800 ATMs, and
leading digital banking platforms (www.bankofamerica.com) with
more than 38 million active users, including over 29 million active
mobile users. We offer industry-leading support to approximately
Bank of America 2019 43
Bank of America 2019 43
three million small business owners. Our wealth management
businesses, with client balances of $3.0 trillion, provide tailored
solutions to meet client needs through a full set of investment
management, brokerage, banking, trust and retirement products.
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.
Recent Developments
Capital Management
During 2019, we repurchased $28.1 billion of common stock
pursuant to the Corporation's Board of Directors’ (the Board)
repurchase authorizations. For more information, see Capital
Management on page 66.
Merchant Services Joint Venture
A significant portion of our merchant processing activity is
performed by a joint venture, formed in 2009, in which we own a
49 percent ownership interest. The joint venture is accounted for
as an equity method investment. As previously disclosed in the
Corporation's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2019, we gave notice on July 29, 2019 to the joint venture
partner of the termination of the joint venture upon the conclusion
of its current term, after which we expect to pursue our own
merchant services strategy. In addition, the Corporation and the
joint venture partner have an agreement to provide uninterrupted
delivery of products and services to the joint venture merchants
through at least June 2023. As a result of the above actions, we
incurred a non-cash, pretax impairment charge of $2.1 billion
included in other general operating expense in the three months
ended September 30, 2019. As stated above, the Corporation
expects to pursue its own merchant services strategy, which is
expected to begin in the third quarter of 2020. Under this strategy,
we will begin to record the revenues and expenses from those
operations in the Consolidated Statement of Income instead of
recognizing our proportionate share of the joint venture's income
under the equity method. For more information, see Note 13 –
Commitments and Contingencies to the Consolidated Financial
Statements.
U.K. Exit from the EU
On January 31, 2020, the U.K. formally exited the European Union
(EU). Upon exit, a transition period began during which time the
U.K. and the EU expect to negotiate a trade agreement and other
terms associated with their future relationship. The transition
period is scheduled to end on December 31, 2020.
We conduct business in Europe, the Middle East and Africa
primarily through our subsidiaries in the U.K., Ireland and France.
For information on the changes we have implemented to enable
us to continue to operate in the region, including establishing a
bank and broker-dealer in the EU, see the Corporation’s Quarterly
Report on Form 10-Q for the quarter ended March 31, 2019. While
we have taken measures to minimize operational disruption and
prepare for various potential outcomes of the U.K.’s withdrawal
from the EU, the preparedness of our counterparties and the
relevant financial markets infrastructure remain outside our
control. The global economic impact of the U.K.’s withdrawal from
the EU remains uncertain and could result in regional and global
financial market disruptions. We continue to assess potential
risks, including operational, regulatory and legal risks.
LIBOR and Other Benchmark Rates
Following the 2017 announcement by the U.K.’s Financial Conduct
Authority (FCA) that it will no longer persuade or require
participating banks to submit rates for the London Interbank
Offered Rate (LIBOR) after 2021, central banks and regulators
around the world have commissioned working groups to find
suitable replacements for Interbank Offered Rates (IBOR),
including LIBOR, and other benchmark rates and to implement
financial benchmark
future
discontinuance of IBORs is a complex process that has resulted
in significant uncertainty regarding the transition to suitable
alternative reference rates (ARRs) and could cause disruptions in
a variety of global financial markets, as well as adversely impact
our business, operations and financial results.
reforms more generally. The
IBORs, including LIBOR, are used in many of the Corporation’s
including mortgages, consumer,
products and contracts,
commercial and corporate loans, derivatives, floating-rate notes
and other adjustable-rate products and financial instruments. The
aggregate notional amount of these products and contracts is
material to our business. As previously disclosed, to facilitate an
orderly transition from IBORs and other benchmark rates to ARRs,
the Corporation has established an enterprise-wide initiative led
by senior management. As part of this initiative, the Corporation
continues to identify, assess and monitor risks associated with
the expected discontinuation or unavailability of LIBOR and other
benchmarks and evaluate and address documentation and
contractual mechanics of outstanding IBOR-based products and
contracts that mature after 2021 and new and potential future
ARR-based products and contracts to achieve operational
readiness. Additionally, the Corporation is continuing to evaluate
potential regulatory, tax and accounting impacts of the transition,
including guidance published and/or proposed by the Internal
Revenue Service and Financial Accounting Standards Board,
engage impacted clients in connection with the transition to ARRs
and work actively with global regulators, industry working groups
and trade associations to develop strategies for an effective
transition to ARRs.
The Corporation is also modifying its operational models,
systems, procedures and internal infrastructure to transition to
ARRs. In 2019, the Corporation launched capabilities to support
issuance and trading in products indexed to the new Secured
Overnight Financing Rate (SOFR), which is the alternative
benchmark rate to U.S. dollar LIBOR recommended by the
Alternative Reference Rates Committee, a group of private-market
participants and official-sector entities convened by the Board of
Governors of the Federal Reserve System (Federal Reserve) and
the Federal Reserve Bank of New York, and a broad measure of
the cost of borrowing cash overnight collateralized by U.S. Treasury
securities. Also, in 2019, the Corporation issued debt linked to
SOFR, and the Corporation co-arranged one of the first credit
facilities linked to SOFR and has implemented fallback provisions
into certain new IBOR-based products and contracts. The
Corporation continues to monitor the development and usage of
ARRs, including SOFR. For more information on the expected
replacement of LIBOR and other benchmark rates, see Item 1A.
Risk Factors of our 2019 Annual Report on Form 10-K.
44 44
Bank of America 2019
Bank of America 2019
Financial Highlights
In the Consolidated Statement of Income, amounts related to
certain asset and liability management (ALM) activities have been
reclassified from other income to market making and similar
activities, which was previously referred to as trading account
income. All prior periods presented reflect this change, which has
no impact on the Corporation's total noninterest income or net
income, and has no impact on business segment results. For more
information, see Note 1 – Summary of Significant Accounting
Principles to the Consolidated Financial Statements.
Table 1 Summary Income Statement and Selected
Financial Data
(Dollars in millions, except per share information)
2019
2018
Income statement
Net interest income
Noninterest income
Total revenue, net of interest expense
Provision for credit losses
Noninterest expense
Income before income taxes
Income tax expense
Net income
Preferred stock dividends
$
$
48,891
42,353
91,244
3,590
54,900
32,754
5,324
27,430
1,432
48,162
42,858
91,020
3,282
53,154
34,584
6,437
28,147
1,451
Net income applicable to common
shareholders
$
25,998
$
26,696
Per common share information
Earnings
Diluted earnings
Dividends paid
Performance ratios
Return on average assets
Return on average common shareholders’
equity
Return on average tangible common
shareholders’ equity (1)
Efficiency ratio
Balance sheet at year end
Total loans and leases
Total assets
Total deposits
Total liabilities
Total common shareholders’ equity
Total shareholders’ equity
$
$
2.77
2.75
0.66
2.64
2.61
0.54
1.14%
1.21%
10.62
14.86
60.17
11.04
15.55
58.40
$
983,426
2,434,079
1,434,803
2,169,269
241,409
264,810
$ 946,895
2,354,507
1,381,476
2,089,182
242,999
265,325
(1) Return on average tangible common shareholders’ equity is a non-GAAP financial measure. For
more information and a corresponding reconciliation to the most closely related financial
measures defined by accounting principles generally accepted in the United States of America,
see Non-GAAP Reconciliations on page 101.
Net income was $27.4 billion or $2.75 per diluted share in
2019 compared to $28.1 billion, or $2.61 per diluted share in
2018. The decrease in net income was primarily driven by an
increase in noninterest expense as a result of the $2.1 billion
pretax impairment charge related to the notice of termination of
the merchant services joint venture at the conclusion of its current
term. Also contributing to the decrease in net income were higher
provision for credit losses and lower noninterest income, partially
offset by an increase in net interest income.
For discussion and analysis of our consolidated and business
segment results of operations for 2018 compared to 2017, see
the Financial Highlights and Business Segment Operations
sections in the MD&A of the Corporation's 2018 Annual Report
on Form 10-K.
Net Interest Income
Net interest income increased $729 million to $48.9 billion in
2019 compared 2018. Net interest yield on a fully taxable-
equivalent (FTE) basis decreased two basis points (bps) to 2.43
percent for 2019. The increase in net interest income was primarily
driven by loan and deposit growth, partially offset by lower long-
end rates. Assuming a stable economic and interest rate
environment compared to December 31, 2019, we expect quarterly
net interest income for the first two quarters of 2020 to be lower
compared to the fourth quarter of 2019 driven by the impact of
rates and one fewer day of interest accruals. Quarterly net interest
income is expected to rise modestly in the second half of 2020
due to one additional day of interest accruals and expected loan
and deposit growth. For more information on net interest yield and
the FTE basis, see Supplemental Financial Data on page 48, and
for more information on interest rate risk management, see
Interest Rate Risk Management for the Banking Book on page 95.
Noninterest Income
Table 2 Noninterest Income
(Dollars in millions)
Fees and commissions:
Card income
Service charges
Investment and brokerage services
Investment banking fees
Total fees and commissions
Market making and similar activities
Other income
$
Total noninterest income
$
2019
2018
5,797
7,674
13,902
5,642
33,015
9,034
304
42,353
$
$
5,824
7,767
14,160
5,327
33,078
9,008
772
42,858
Noninterest income decreased $505 million to $42.4 billion in
2019 compared to 2018. The following highlights the significant
changes.
Service charges decreased $93 million primarily driven by lower
fees due to policy changes in 2018 and lower ATM volume in
Consumer Banking.
Investment and brokerage services income decreased $258
million primarily due to lower transactional revenue and a
decrease in assets under management (AUM) pricing, partially
offset by the positive impact of AUM flows and higher market
valuations.
Investment banking fees increased $315 million due to
increases in advisory fees and equity and debt underwriting
fees.
Other income decreased $468 million primarily due to lower
gains on sales of non-core consumer loans and higher
partnership losses associated with an increase in tax-
advantaged investments, partially offset by higher gains on
sales of debt securities.
Bank of America 2019 45
Bank of America 2019 45
Provision for Credit Losses
The provision for credit losses increased $308 million to $3.6
billion in 2019 compared to 2018. The increase was primarily due
to the energy reserve releases in the commercial portfolio in 2018,
partially offset by the impact of recoveries recorded in connection
with sales of previously charged-off non-core consumer real estate
loans. For more information on the provision for credit losses, see
Provision for Credit Losses on page 89.
Noninterest Expense
Table 3 Noninterest Expense
(Dollars in millions)
2019
2018
Compensation and benefits
Occupancy and equipment
Information processing and communications
Product delivery and transaction related
Marketing
Professional fees
Other general operating
$
31,977 $
6,588
4,646
2,762
1,934
1,597
5,396
Total noninterest expense
$
54,900 $
31,880
6,380
4,555
2,857
1,674
1,699
4,109
53,154
Noninterest expense increased $1.7 billion to $54.9 billion in
2019 compared to 2018. The increase was primarily due to the
Balance Sheet Overview
Table 5 Selected Balance Sheet Data
aforementioned impairment charge related to our merchant
services joint venture of $2.1 billion as well as increased costs
associated with investment in the businesses, including brand-
related marketing costs, and higher litigation expense. These
were partially offset by efficiency savings, lower Federal Deposit
Insurance Corporation (FDIC) expense and lower amortization of
intangibles expense.
Income Tax Expense
Table 4 Income Tax Expense
(Dollars in millions)
Income before income taxes
Income tax expense
Effective tax rate
2019
2018
$
$
32,754
5,324
16.3%
34,584
6,437
18.6%
The effective tax rates for 2019 and 2018 reflect the impact of
our recurring tax preference benefits. The 2019 effective rate also
included net tax benefits primarily related to the resolution of
various tax controversy matters.
We expect the effective tax rate for 2020 to be approximately
18 percent, absent unusual items.
(Dollars in millions)
Assets
Cash and cash equivalents
Federal funds sold and securities borrowed or purchased under agreements to resell
Trading account assets
Debt securities
Loans and leases
Allowance for loan and lease losses
All other assets
Total assets
Liabilities
Deposits
Federal funds purchased and securities loaned or sold under agreements to repurchase
Trading account liabilities
Short-term borrowings
Long-term debt
All other liabilities
Total liabilities
Shareholders’ equity
Total liabilities and shareholders’ equity
December 31
2019
2018
% Change
$
161,560 $
274,597
229,826
472,197
983,426
(9,416)
321,889
177,404
261,131
214,348
441,753
946,895
(9,601)
322,577
$ 2,434,079 $ 2,354,507
$ 1,434,803 $ 1,381,476
186,988
68,220
20,189
229,392
202,917
2,089,182
265,325
$ 2,434,079 $ 2,354,507
165,109
83,270
24,204
240,856
221,027
2,169,269
264,810
(9)%
5
7
7
4
(2)
—
3
4
(12)
22
20
5
9
4
—
3
Assets
At December 31, 2019, total assets were approximately $2.4
trillion, up $79.6 billion from December 31, 2018. The increase
in assets was primarily due to higher loans and leases and debt
securities primarily funded by deposit growth.
Cash and Cash Equivalents
Cash and cash equivalents decreased $15.8 billion driven by
investment of short-term excess cash into securities purchased
under agreements to resell, debt securities and growth in loans
and leases.
Federal Funds Sold and Securities Borrowed or Purchased
Under Agreements to Resell
Federal funds transactions involve lending reserve balances on a
short-term basis. Securities borrowed or purchased under
agreements to resell are collateralized lending transactions
utilized to accommodate customer transactions, earn interest rate
spreads, and obtain securities for settlement and for collateral.
Federal funds sold and securities borrowed or purchased under
agreements to resell increased $13.5 billion due to investment of
excess cash levels.
46 46
Bank of America 2019
Bank of America 2019
Trading Account Assets
Trading account assets consist primarily of long positions in equity
and fixed-income securities including U.S. government and agency
securities, corporate securities and non-U.S. sovereign debt.
Trading account assets increased $15.5 billion primarily driven by
additional inventory in Global Markets to facilitate client demand.
Debt Securities
Debt securities primarily include U.S. Treasury and agency
securities, mortgage-backed securities (MBS), principally agency
MBS, non-U.S. bonds, corporate bonds and municipal debt. We
use the debt securities portfolio primarily to manage interest rate
and liquidity risk and to take advantage of market conditions that
create economically attractive returns on these investments. Debt
securities increased $30.4 billion primarily driven by the
deployment of deposit inflows. For more information on debt
securities, see Note 4 – Securities to the Consolidated Financial
Statements.
Loans and Leases
Loans and leases increased $36.5 billion primarily due to net loan
growth driven by client demand for commercial loans and increases
in residential mortgage. For more information on the loan portfolio,
see Credit Risk Management on page 74.
Allowance for Loan and Lease Losses
The allowance for loan and lease losses decreased $185 million
primarily due to the impact of improvements in credit quality from
a stronger economy and continued runoff and sales in the non-
core consumer real estate portfolio. For more information, see
Allowance for Credit Losses on page 89.
Liabilities
At December 31, 2019, total liabilities were approximately $2.2
trillion, up $80.1 billion from December 31, 2018, primarily due
to deposit growth.
Deposits
Deposits increased $53.3 billion primarily due to increases in both
retail and wholesale deposits.
Federal Funds Purchased and Securities Loaned or Sold
Under Agreements to Repurchase
Federal funds transactions involve borrowing reserve balances on
a short-term basis. Securities loaned or sold under agreements
to repurchase are collateralized borrowing transactions utilized to
accommodate customer transactions, earn interest rate spreads
and finance assets on the balance sheet. Federal funds purchased
and securities loaned or sold under agreements to repurchase
decreased $21.9 billion primarily driven by balance sheet
efficiencies within Global Markets.
Trading Account Liabilities
Trading account liabilities consist primarily of short positions in
equity and fixed-income securities including U.S. Treasury and
agency securities, corporate securities and non-U.S. sovereign
debt. Trading account liabilities increased $15.1 billion primarily
due to higher levels of short positions in government and corporate
bonds driven by client demand within Global Markets.
Short-term Borrowings
Short-term borrowings provide an additional funding source and
primarily consist of Federal Home Loan Bank (FHLB) short-term
borrowings, notes payable and various other borrowings that
generally have maturities of one year or less. Short-term
borrowings increased $4.0 billion primarily due to an increase in
short-term FHLB advances to manage liquidity needs. For more
information on short-term borrowings, see Note 11 – Federal Funds
Sold or Purchased, Securities Financing Agreements, Short-term
Borrowings and Restricted Cash to the Consolidated Financial
Statements.
Long-term Debt
Long-term debt increased $11.5 billion primarily driven by debt
issuances and valuation adjustments, partially offset by maturities
and redemptions. For more information on long-term debt, see
Note 12 – Long-term Debt to the Consolidated Financial
Statements.
All Other Liabilities
All other liabilities increased $18.1 billion primarily driven by an
increase in broker-dealer payables within Global Markets due to
timing of unsettled trades and an increase in lease liabilities due
to implementation of the new lease accounting standard.
Shareholders’ Equity
Shareholders’ equity decreased $515 million driven by returns of
capital to shareholders through share repurchases, common and
preferred stock dividends of $35.7 billion, as well as redemption
of preferred stock, largely offset by earnings, market value
increases on debt securities and issuances of preferred stock.
Cash Flows Overview
The Corporation’s operating assets and liabilities support our
global markets and lending activities. We believe that cash flows
from operations, available cash balances and our ability to
generate cash through short- and long-term debt are sufficient to
fund our operating liquidity needs. Our investing activities primarily
include the debt securities portfolio and loans and leases. Our
financing activities reflect cash flows primarily related to customer
deposits, securities financing agreements and long-term debt. For
more information on liquidity, see Liquidity Risk on page 71.
Bank of America 2019 47
Bank of America 2019 47
Supplemental Financial Data
In this Form 10-K, we present certain non-GAAP financial
measures. Non-GAAP financial measures exclude certain items or
otherwise include components that differ from the most directly
comparable measures calculated in accordance with accounting
principles generally accepted in the United States of America
(GAAP). Non-GAAP financial measures are provided as additional
useful information to assess our financial condition, results of
operations (including period-to-period operating performance) or
compliance with prospective regulatory requirements. These non-
GAAP financial measures are not intended as a substitute for GAAP
financial measures and may not be defined or calculated the same
way as non-GAAP financial measures used by other companies.
We view net interest income and related ratios and analyses
on an FTE basis, which when presented on a consolidated basis
are non-GAAP financial measures. 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 21 percent for 2019 and 2018 (35
percent for 2017) and a representative state tax rate. Net interest
yield, which measures the basis points we earn over the cost of
funds, utilizes net interest income on an FTE basis. We believe
that presentation of these items on an FTE basis allows for
comparison of amounts from both taxable and tax-exempt sources
and is consistent with industry practices.
We may present certain key performance indicators and ratios
excluding certain items (e.g., debit valuation adjustment (DVA)
gains (losses)) which result in non-GAAP financial measures. We
believe that the presentation of measures that exclude these items
is useful because such measures provide additional information
to assess the underlying operational performance and trends of
our businesses and to allow better comparison of period-to-period
operating performance.
We also evaluate our business based on certain ratios that
utilize tangible equity, a non-GAAP financial measure. Tangible
equity represents shareholders’ equity or common shareholders’
equity reduced by goodwill and intangible assets (excluding
mortgage servicing rights (MSRs)), net of related deferred tax
("adjusted" shareholders' equity or common
liabilities
shareholders' equity). These measures are used to evaluate our
use of equity. In addition, profitability, relationship and investment
models use both
tangible common
return on average
shareholders’ equity and return on average tangible shareholders’
equity as key measures to support our overall growth goals. These
ratios are as follows:
Return on average tangible common shareholders’ equity
measures our net income applicable to common shareholders
as a percentage of adjusted average common shareholders’
equity. The tangible common equity ratio represents adjusted
ending common shareholders’ equity divided by total tangible
assets.
Return on average tangible shareholders' equity measures our
net income as a percentage of adjusted average total
shareholders’ equity. The tangible equity ratio represents
adjusted ending shareholders’ equity divided by total tangible
assets.
Tangible book value per common share represents adjusted
ending common shareholders’ equity divided by ending
common shares outstanding.
We believe that the use of ratios that utilize tangible equity
provides additional useful information because they present
measures of those assets that can generate income. Tangible
book value per common share provides additional useful
information about the level of tangible assets in relation to
outstanding shares of common stock.
The aforementioned supplemental data and performance
measures are presented in Tables 6 and 7.
For more information on the reconciliation of these non-GAAP
financial measures to the corresponding GAAP financial measures,
see Non-GAAP Reconciliations on page 101.
48 48
Bank of America 2019
Bank of America 2019
Table 6 Five-year Summary of Selected Financial Data
(In millions, except per share information)
Income statement
Net interest income
Noninterest income
Total revenue, net of interest expense
Provision for credit losses
Noninterest expense
Income before income taxes
Income tax expense
Net income
Net income applicable to common shareholders
Average common shares issued and outstanding
Average diluted common shares issued and outstanding
Performance ratios
Return on average assets
Return on average common shareholders’ equity
Return on average tangible common shareholders’ equity (1)
Return on average shareholders’ equity
Return on average tangible shareholders’ equity (1)
Total ending equity to total ending assets
Total average equity to total average assets
Dividend payout
Per common share data
Earnings
Diluted earnings
Dividends paid
Book value
Tangible book value (1)
Market capitalization
Average balance sheet
Total loans and leases
Total assets
Total deposits
Long-term debt
Common shareholders’ equity
Total shareholders’ equity
Asset quality (2)
2019
2018
2017
2016
2015
$
48,891
42,353
91,244
3,590
54,900
32,754
5,324
27,430
25,998
9,390.5
9,442.9
$
48,162
42,858
91,020
3,282
53,154
34,584
6,437
28,147
26,696
10,096.5
10,236.9
$
45,239
41,887
87,126
3,396
54,517
29,213
10,981
18,232
16,618
10,195.6
10,778.4
$
41,486
42,012
83,498
3,597
54,880
25,021
7,199
17,822
16,140
10,248.1
11,046.8
$
38,958
44,007
82,965
3,161
57,617
22,187
6,277
15,910
14,427
10,462.3
11,236.2
1.14%
1.21%
10.62
14.86
10.24
13.85
10.88
11.14
23.65
11.04
15.55
10.63
14.46
11.27
11.39
20.31
0.80%
6.72
9.41
6.72
9.08
11.71
11.96
24.24
0.81%
6.69
9.51
6.70
9.17
12.17
12.14
15.94
0.74%
6.28
9.16
6.33
8.88
11.92
11.64
14.49
$
2.77
2.75
0.66
27.32
19.41
$ 311,209
$ 958,416
2,405,830
1,380,326
201,623
244,853
267,889
$
2.64
2.61
0.54
25.13
17.91
$ 238,251
$ 933,049
2,325,246
1,314,941
200,399
241,799
264,748
$
1.63
1.56
0.39
23.80
16.96
$ 303,681
$ 918,731
2,268,633
1,269,796
194,882
247,101
271,289
$
1.57
1.49
0.25
23.97
16.89
$ 222,163
$ 900,433
2,190,218
1,222,561
204,826
241,187
265,843
$
1.38
1.31
0.20
22.48
15.56
$ 174,700
$ 876,787
2,160,536
1,155,860
240,059
229,576
251,384
Allowance for credit losses (3)
Nonperforming loans, leases and foreclosed properties (4)
Allowance for loan and lease losses as a percentage of total loans and leases
outstanding (4)
Allowance for loan and lease losses as a percentage of total nonperforming
loans and leases (4)
$
10,229
3,837
$
10,398
5,244
$
11,170
6,758
$
11,999
8,084
$
12,880
9,836
0.97%
1.02%
1.12%
1.26%
1.37%
265
194
161
149
130
Net charge-offs
Net charge-offs as a percentage of average loans and leases outstanding (4)
$
3,648
$
3,763
$
3,979
$
3,821
$
4,338
0.38%
0.41%
0.44%
0.43%
0.50%
Capital ratios at year end (5)
Common equity tier 1 capital
Tier 1 capital
Total capital
Tier 1 leverage
Supplementary leverage ratio
Tangible equity (1)
Tangible common equity (1)
11.2%
12.6
14.7
7.9
6.4
8.2
7.3
11.6%
13.2
15.1
8.4
6.8
8.6
7.6
11.5%
13.0
14.8
8.6
n/a
8.9
7.9
10.8%
12.4
14.2
8.8
n/a
9.2
8.0
9.8%
11.2
12.8
8.4
n/a
8.9
7.8
(1) Tangible equity ratios and tangible book value per share of common stock are non-GAAP financial measures. For more information on these ratios and corresponding reconciliations to GAAP
financial measures, see Supplemental Financial Data on page 48 and Non-GAAP Reconciliations on page 101.
(2) Asset quality metrics include $75 million of non-U.S. consumer credit card net charge-offs in 2017 and $243 million of non-U.S. consumer credit card allowance for loan and lease losses, $9.2
billion of non-U.S. consumer credit card loans and $175 million of non-U.S. consumer credit card net charge-offs in 2016. The non-U.S. consumer credit card business was sold in 2017.
Includes the allowance for loan and leases losses and the reserve for unfunded lending commitments.
(3)
(4) 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 Consumer Portfolio
Credit Risk Management – Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity on page 80 and corresponding Table 29 and Commercial Portfolio Credit Risk Management
– Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity on page 84 and corresponding Table 36.
(5) Basel 3 transition provisions for regulatory capital adjustments and deductions were fully phased-in as of January 1, 2018. Prior periods are presented on a fully phased-in basis. For more
information, including which approach is used to assess capital adequacy, see Capital Management on page 66.
n/a = not applicable
Bank of America 2019 49
Bank of America 2019 49
Table 7 Selected Quarterly Financial Data
(In millions, except per share information)
Income statement
Net interest income
Noninterest income
Total revenue, net of interest expense
Provision for credit losses
Noninterest expense
Income before income taxes
Income tax expense
Net income
Net income applicable to common shareholders
Average common shares issued and outstanding
Average diluted common shares issued and outstanding
Performance ratios
Return on average assets
Four-quarter trailing return on average assets (1)
Return on average common shareholders’ equity
Return on average tangible common shareholders’ equity (2)
Return on average shareholders’ equity
Return on average tangible shareholders’ equity (2)
Total ending equity to total ending assets
Total average equity to total average assets
Dividend payout
Per common share data
Earnings
Diluted earnings
Dividends paid
Book value
Tangible book value (2)
Market capitalization
Average balance sheet
Total loans and leases
Total assets
Total deposits
Long-term debt
Common shareholders’ equity
Total shareholders’ equity
Asset quality
Allowance for credit losses (3)
Nonperforming loans, leases and foreclosed properties (4)
Allowance for loan and lease losses as a percentage of total
loans and leases outstanding (4)
Allowance for loan and lease losses as a percentage of total
nonperforming loans and leases (4)
2019 Quarters
2018 Quarters
Fourth
Third
Second
First
Fourth
Third
Second
First
$ 12,140
10,209
22,349
941
13,239
8,169
1,175
6,994
6,748
9,017.1
9,079.5
$ 12,187
10,620
22,807
779
15,169
6,859
1,082
5,777
5,272
9,303.6
9,353.0
$ 12,189
10,895
23,084
857
13,268
8,959
1,611
7,348
7,109
9,523.2
9,559.6
$ 12,375
10,629
23,004
1,013
13,224
8,767
1,456
7,311
6,869
9,725.9
9,787.3
$ 12,504
10,173
22,677
905
13,074
8,698
1,420
7,278
7,039
9,855.8
9,996.0
$ 12,061
10,663
22,724
716
13,014
8,994
1,827
7,167
6,701
10,031.6
10,170.8
$ 11,828
10,721
22,549
827
13,224
8,498
1,714
6,784
6,466
10,181.7
10,309.4
$ 11,769
11,301
23,070
834
13,842
8,394
1,476
6,918
6,490
10,322.4
10,472.7
1.13%
1.14
11.00
15.43
10.40
14.09
10.88
10.89
23.90
0.95%
1.17
8.48
11.84
8.48
11.43
11.06
11.21
31.48
1.23%
1.24
11.62
16.24
11.00
14.88
11.33
11.17
19.95
1.26%
1.22
11.42
16.01
11.14
15.10
11.23
11.28
21.20
1.24%
1.21
11.57
16.29
10.95
14.90
11.27
11.30
20.90
1.23%
1.00
10.99
15.48
10.74
14.61
11.21
11.42
22.35
1.17%
0.93
10.75
15.15
10.26
13.95
11.53
11.42
18.83
1.21%
0.86
10.85
15.26
10.57
14.37
11.43
11.41
19.06
$
0.75
0.74
0.18
27.32
19.41
$ 311,209
$ 973,986
450,005
2,
410,439
1,
206,026
243,439
266,900
$
0.57
0.56
0.18
26.96
19.26
$ 264,842
$ 964,733
12,223
2,4
75,052
1,3
02,620
2
46,630
2
70,430
2
$
0.75
0.74
0.15
26.41
18.92
$ 270,935
$ 950,525
99,051
2,3
75,450
1,3
01,007
2
45,438
2
67,975
2
$
0.71
0.70
0.15
25.57
18.26
$ 263,992
$ 944,020
60,992
2,3
59,864
1,3
96,726
1
43,891
2
66,217
2
$
0.71
0.70
0.15
25.13
17.91
$ 238,251
$ 934,721
34,586
2,3
44,951
1,3
01,056
2
41,372
2
63,698
2
$
0.67
0.66
0.15
24.33
17.23
$ 290,424
$ 930,736
17,829
2,3
16,345
1,3
03,239
2
41,812
2
64,653
2
$
0.64
0.63
0.12
24.07
17.07
$ 282,259
$ 934,818
22,678
2,3
00,659
1,3
199,448
241,313
265,181
$
0.63
0.62
0.12
23.74
16.84
$ 305,176
$ 931,915
25,878
2,3
97,268
1,2
97,787
1
42,713
2
65,480
2
$
10,229
3,837
$
10,242
3,723
$
10,333
4,452
$
10,379
5,145
$
10,398
5,244
$
10,526
5,449
$
10,837
6,181
$
11,042
6,694
0.97%
0.98%
1.00%
1.02%
1.02%
1.05%
1.08%
1.11%
Net charge-offs
Annualized net charge-offs as a percentage of average loans
$
and leases outstanding (4)
Capital ratios at period end
Common equity tier 1 capital
Tier 1 capital
Total capital
Tier 1 leverage
Supplementary leverage ratio
Tangible equity (2)
Tangible common equity (2)
265
959
$
271
811
$
228
887
$
197
991
$
194
924
$
189
932
$
170
996
$
161
911
0.39%
0.34%
0.38%
0.43%
0.39%
0.40%
0.43%
0.40%
11.2%
12.6
14.7
7.9
6.4
8.2
7.3
11.4%
12.9
15.1
8.2
6.6
8.4
7.4
11.7%
13.3
15.4
8.4
6.8
8.7
7.6
11.6%
13.1
15.2
8.4
6.8
8.5
7.6
11.6%
13.2
15.1
8.4
6.8
8.6
7.6
11.4%
12.9
14.7
8.3
6.7
8.5
7.5
11.4%
13.0
14.8
8.4
6.7
8.7
7.7
11.3%
13.0
14.8
8.4
6.8
8.7
7.6
Total loss-absorbing capacity and long-term debt metrics (5)
Total loss-absorbing capacity to risk-weighted assets
Total loss-absorbing capacity to supplementary leverage
exposure
Eligible long-term debt to risk-weighted assets
Eligible long-term debt to supplementary leverage
24.6%
24.8%
25.5%
24.8%
12.5
11.5
5.8
12.7
11.4
5.8
13.0
11.8
6.0
12.8
11.4
5.9
(1) Calculated as total net income for four consecutive quarters divided by annualized average assets for four consecutive quarters.
(2) Tangible equity ratios and tangible book value per share of common stock are non-GAAP financial measures. For more information on these ratios and corresponding reconciliations to GAAP
financial measures, see Supplemental Financial Data on page 48 and Non-GAAP Reconciliations on page 101.
Includes the allowance for loan and lease losses and the reserve for unfunded lending commitments.
(3)
(4) 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 Consumer Portfolio
Credit Risk Management – Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity on page 80 and corresponding Table 29 and Commercial Portfolio Credit Risk Management
– Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity on page 84 and corresponding Table 36.
(5) Effective January 1, 2019, we became subject to minimum total loss-absorbing capacity and long-term debt requirements. For more information, see Capital Management on page 66.
50 50
Bank of America 2019
Bank of America 2019
Table 8 Average Balances and Interest Rates - FTE Basis
(Dollars in millions)
Earning assets
Interest-bearing deposits with the Federal Reserve, non-
Average
Balance
Interest
Income/
Expense (1)
2019
Yield/
Rate
Average
Balance
Interest
Income/
Expense (1)
2018
Yield/
Rate
Average
Balance
Interest
Income/
Expense (1)
2017
Yield/
Rate
U.S. central banks and other banks
$
125,555
$
1,823
1.45% $ 139,848 $
1,926
1.38% $ 127,431 $
1,122
Time deposits placed and other short-term investments
9,427
207
2.19
9,446
216
2.29
12,112
241
Federal funds sold and securities borrowed or purchased
under agreements to resell
Trading account assets
Debt securities
Loans and leases (2):
Residential mortgage
Home equity
Credit card
Non-U.S. credit card (3)
Direct/Indirect and other consumer (4)
Total consumer
U.S. commercial
Non-U.S. commercial
Commercial real estate (5)
Commercial lease financing
Total commercial
Total loans and leases (3)
Other earning assets
Total earning assets
Cash and due from banks
Other assets, less allowance for loan and lease losses
Total assets
Interest-bearing liabilities
U.S. interest-bearing deposits:
Savings
NOW and money market deposit accounts
Consumer CDs and IRAs
Negotiable CDs, public funds and other deposits
Total U.S. interest-bearing deposits
Non-U.S. interest-bearing deposits:
Banks located in non-U.S. countries
Governments and official institutions
Time, savings and other
Total non-U.S. interest-bearing deposits
Total interest-bearing deposits
979,057
7,188
Federal funds purchased, securities loaned or sold under
agreements to repurchase, short-term borrowings and
other interest-bearing liabilities
Trading account liabilities
Long-term debt
276,432
45,449
201,623
7,208
1,249
6,700
Total interest-bearing liabilities
1,502,561
22,345
Noninterest-bearing sources:
Noninterest-bearing deposits
Other liabilities (6)
Shareholders’ equity
401,269
234,111
267,889
Total liabilities and shareholders’ equity
$ 2,405,830
Net interest spread
Impact of noninterest-bearing sources
Net interest income/yield on earning assets (7)
$ 49,486
279,610
148,076
450,090
220,552
44,600
94,488
—
90,656
450,296
321,467
103,918
62,044
20,691
508,120
958,416
69,089
2,040,263
26,193
339,374
$ 2,405,830
4,843
5,269
11,917
7,651
2,194
1.73
3.56
2.65
3.47
4.92
10,166
10.76
—
3,261
23,272
13,016
3,547
2,741
718
20,022
43,294
4,478
71,831
—
3.60
5.17
4.05
3.41
4.42
3.47
3.94
4.52
6.48
3.52
251,328
132,724
437,312
207,523
53,886
94,612
—
93,036
449,057
304,387
97,664
60,384
21,557
483,992
933,049
76,524
3,176
4,901
11,837
7,294
2,573
9,579
—
3,104
22,550
11,937
3,220
2,618
698
18,473
41,023
4,300
1,980,231
67,379
25,830
319,185
$ 2,325,246
1.26
3.69
2.66
3.51
4.77
10.12
—
3.34
5.02
3.92
3.30
4.34
3.24
3.82
4.40
5.62
3.40
222,818
129,007
435,005
197,766
62,260
91,068
3,929
96,002
451,025
292,452
95,005
58,502
21,747
467,706
918,731
76,957
1,806
4,618
10,626
6,831
2,608
8,791
358
2,734
21,322
9,765
2,566
2,116
706
15,153
36,475
3,224
1,922,061
58,112
27,995
318,577
$ 2,268,633
$
52,020
$
5
0.01% $
54,226 $
6
0.01% $
53,783 $
741,126
47,577
66,866
907,589
1,936
181
69,351
71,468
4,471
471
1,407
6,354
20
—
814
834
0.60
0.99
2.11
0.70
1.04
0.05
1.17
1.17
0.73
2.61
2.75
3.32
1.49
676,382
2,636
39,823
50,593
157
991
821,024
3,790
2,312
810
65,097
68,219
39
—
666
705
889,243
4,495
269,748
50,928
200,399
5,839
1,358
6,915
1,410,318
18,607
0.39
0.39
1.96
0.46
1.69
0.01
1.02
1.03
0.51
2.17
2.67
3.45
1.32
628,647
44,794
36,782
5
873
121
354
764,006
1,353
2,442
1,006
62,386
65,834
21
10
547
578
829,840
1,931
274,975
45,518
194,882
3,146
1,204
5,667
1,345,215
11,948
425,698
224,482
264,748
$ 2,325,246
439,956
212,173
271,289
$ 2,268,633
2.03%
0.40
2.43%
2.08%
0.37
2.45%
$ 48,772
$ 46,164
0.88%
1.99
0.81
3.58
2.44
3.45
4.19
9.65
9.12
2.85
4.73
3.34
2.70
3.62
3.25
3.24
3.97
4.19
3.02
0.01%
0.14
0.27
0.96
0.18
0.85
0.95
0.88
0.88
0.23
1.14
2.64
2.91
0.89
2.13%
0.27
2.40%
(1)
Includes the impact of interest rate risk management contracts. For more information, see Interest Rate Risk Management for the Banking Book on page 95.
(2) Nonperforming loans are included in the respective average loan balances. Income on these nonperforming loans is generally recognized on a cost recovery basis.
(3)
Includes assets of the Corporation's non-U.S. consumer credit card business, which was sold during the second quarter of 2017.
Includes non-U.S. consumer loans of $2.9 billion, $2.8 billion and $2.9 billion for 2019, 2018 and 2017, respectively.
Includes U.S. commercial real estate loans of $57.3 billion, $56.4 billion and $55.0 billion, and non-U.S. commercial real estate loans of $4.7 billion, $4.0 billion and $3.5 billion for 2019, 2018
and 2017, respectively.
Includes $35.5 billion, $30.4 billion and $30.3 billion of structured notes and liabilities for 2019, 2018 and 2017, respectively.
(4)
(5)
(6)
(7) Net interest income includes FTE adjustments of $595 million, $610 million and $925 million for 2019, 2018 and 2017, respectively.
Bank of America 2019 51
Bank of America 2019 51
Table 9 Analysis of Changes in Net Interest Income - FTE Basis
(Dollars in millions)
Increase (decrease) in interest income
Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other
banks
Time deposits placed and other short-term investments
Federal funds sold and securities borrowed or purchased under agreements to resell
Trading account assets
Debt securities
Loans and leases:
Residential mortgage
Home equity
Credit card
Non-U.S. credit card (2)
Direct/Indirect and other consumer
Total consumer
U.S. commercial
Non-U.S. commercial
Commercial real estate
Commercial lease financing
Total commercial
Total loans and leases
Other earning assets
Total interest income
Increase (decrease) in interest expense
U.S. interest-bearing deposits:
Savings
NOW and money market deposit accounts
Consumer CDs and IRAs
Negotiable CDs, public funds and other deposits
Total U.S. interest-bearing deposits
Non-U.S. interest-bearing deposits:
Banks located in non-U.S. countries
Governments and official institutions
Time, savings and other
Total non-U.S. interest-bearing deposits
Total interest-bearing deposits
Due to Change in (1)
Rate
Volume
From 2018 to 2019
Net Change
Due to Change in (1)
Rate
Volume
From 2017 to 2018
Net Change
$
(193) $
90 $
(103) $
109 $
695 $
804
—
347
563
135
447
(446)
(17)
—
(76)
665
209
75
(28)
(9)
1,320
(195)
(55)
(90)
67
604
—
233
414
118
48
48
(417)
595
$
(9)
1,667
368
80
357
(379)
587
—
157
722
1,079
327
123
20
1,549
2,271
178
4,452
$
(1) $
— $
(1) $
254
29
320
(6)
—
41
1,581
285
96
(13)
—
107
1,835
314
416
2,564
(19)
—
148
129
2,693
(53)
230
134
44
329
(350)
339
(358)
(82)
402
71
70
(5)
28
1,140
149
1,167
134
315
449
—
452
1,770
583
432
(3)
(18)
1,094
$
1 $
1,689
49
505
— $
74
(13)
132
(1)
(2)
26
19
(8)
93
(25)
1,370
283
1,211
463
(35)
788
(358)
370
1,228
2,172
654
502
(8)
3,320
4,548
1,076
9,267
1
1,763
36
637
2,437
18
(10)
119
127
2,564
Federal funds purchased, securities loaned or sold under agreements to repurchase,
short-term borrowings and other interest-bearing liabilities
160
1,209
1,369
(71)
2,764
2,693
Trading account liabilities
Long-term debt
154
1,248
6,659
2,608
(1) The changes for each category of interest income and expense are divided between the portion of change attributable to the variance in volume and the portion of change attributable to the variance
Total interest expense
Net increase in net interest income (3)
(109)
(215)
3,738
714
14
1,083
(145)
41
36
(256)
140
165
$
$
in rate for that category. The unallocated change in rate or volume variance is allocated between the rate and volume variances.
(2) The Corporation sold its non-U.S. credit card business in the second quarter of 2017.
(3)
Includes decreases in FTE basis adjustments of $15 million from 2018 to 2019 and $315 million from 2017 to 2018.
52 52
Bank of America 2019
Bank of America 2019
Business Segment Operations
Segment Description and Basis of Presentation
We report our results of operations through the following four business segments: Consumer Banking, GWIM, Global Banking and Global
Markets, with the remaining operations recorded in All Other. We manage our segments and report their results on an FTE basis. The
primary activities, products and businesses of the business segments and All Other are shown below.
We periodically review capital allocated to our businesses and
allocate capital annually during the strategic and capital planning
processes. We utilize a methodology that considers the effect of
regulatory capital requirements in addition to internal risk-based
capital models. Our internal risk-based capital models use a risk-
adjusted methodology incorporating each segment’s credit,
market, interest rate, business and operational risk components.
For more information on the nature of these risks, see Managing
Risk on page 63. The capital allocated to the business segments
is referred to as allocated capital. Allocated equity in the reporting
units is comprised of allocated capital plus capital for the portion
of goodwill and intangibles specifically assigned to the reporting
unit. For more information, including the definition of a reporting
unit, see Note 8 – Goodwill and Intangible Assets to the
Consolidated Financial Statements.
For more information on our presentation of financial
information on an FTE basis, see Supplemental Financial Data on
page 48, and for reconciliations to consolidated total revenue, net
income and year-end total assets, see Note 24 – Business Segment
Information to the Consolidated Financial Statements.
Bank of America 2019 53
Bank of America 2019 53
Consumer Banking
(Dollars in millions)
Net interest income
Noninterest income:
Card income
Service charges
All other income
Total noninterest income
Total revenue, net of interest expense
Provision for credit losses
Noninterest expense
Income before income taxes
Income tax expense
Net income
Effective tax rate (1)
Net interest yield
Return on average allocated capital
Efficiency ratio
Balance Sheet
Average
Total loans and leases
Total earning assets (2)
Total assets (2)
Total deposits
Allocated capital
Deposits
Consumer Lending
2019
2018
2019
2018
Total Consumer Banking
2018
2019
% Change
$
16,904
$
15,939
$
11,254
$
11,086
$
28,158
$
27,025
4%
(33)
4,217
832
5,016
21,920
269
10,682
10,969
2,687
8,282 $
(33)
4,298
762
5,027
20,966
195
10,657
10,114
2,578
7,536
2.40%
69
48.73
2.34%
63
50.83
$
5,373
703,444
735,232
702,908
12,000
5,233
682,592
710,925
678,640
12,000
$
$
$
$
5,117
2
294
5,413
16,667
3,503
6,936
6,228
1,526
4,702 $
5,135
2
429
5,566
16,652
3,469
7,015
6,168
1,572
4,596
5,084
4,219
1,126
10,429
38,587
3,772
17,618
17,197
4,213
$
12,984 $
5,102
4,300
1,191
10,593
37,618
3,664
17,672
16,282
4,150
12,132
24.5%
25.5%
3.80%
19
41.61
3.97%
18
42.12
3.81
35
45.66
3.77
33
46.98
295,562
296,051
306,169
5,368
25,000
$ 278,574
279,217
290,068
5,533
25,000
$
300,935
738,770
780,676
708,276
37,000
$ 283,807
717,189
756,373
684,173
37,000
—
(2)
(5)
(2)
3
3
—
6
2
7
6%
3
3
4
—
Year end
Total loans and leases
Total earning assets (2)
Total assets (2)
Total deposits
(1) Estimated at the segment level only.
(2) In segments and businesses where the total of liabilities and equity exceeds assets, we allocate assets from All Other to match the segments’ and businesses’ liabilities and allocated shareholders’
$ 288,865
289,249
299,970
4,480
$ 294,335
728,813
768,881
696,146
5,470
694,672
724,019
691,666
5,472
724,536
758,385
725,598
311,942
312,684
322,717
5,080
317,414
760,137
804,019
730,678
8%
4
5
5
$
$
$
$
equity. As a result, total earning assets and total assets of the businesses may not equal total Consumer Banking.
Consumer Banking, which is comprised of Deposits and
Consumer Lending, offers a diversified range of credit, banking
and investment products and services to consumers and small
businesses. Deposits and Consumer Lending include the net
impact of migrating customers and their related deposit,
brokerage asset and loan balances between Deposits, Consumer
Lending and GWIM, as well as other client-managed businesses.
Our customers and clients have access to a coast to coast
network including financial centers in 38 states and the District
of Columbia. Our network includes approximately 4,300 financial
centers, approximately 16,800 ATMs, nationwide call centers,
and leading digital banking platforms with more than 38 million
active users, including over 29 million active mobile users.
Consumer Banking Results
Net income for Consumer Banking increased $852 million to
$13.0 billion in 2019 compared to 2018 primarily driven by higher
net interest income and lower noninterest expense, partially
offset by lower noninterest income. Net interest income increased
$1.1 billion to $28.2 billion primarily due to growth in deposits
and loans. Noninterest income decreased $164 million to $10.4
billion driven by lower service charges and lower mortgage
banking income, largely offset by higher results from ALM
activities.
The provision for credit losses increased $108 million to $3.8
billion driven by overdrafts and portfolio seasoning in the credit
card portfolio. Noninterest expense decreased $54 million to
$17.6 billion primarily driven by lower FDIC expense and operating
efficiencies, partially offset by continued investment in the
business.
The return on average allocated capital was 35 percent, up
from 33 percent, driven by higher net income. For information on
capital allocated to the business segments, see Business
Segment Operations on page 53.
Deposits
Deposits includes the results of consumer deposit activities
which consist of a comprehensive range of products provided to
consumers and small businesses. Our deposit products include
traditional savings accounts, money market savings accounts,
CDs and IRAs, and noninterest- and interest-bearing checking
accounts, as well as investment accounts and products. Net
interest income is allocated to the deposit products using our
funds transfer pricing process that matches assets and liabilities
with similar interest rate sensitivity and maturity characteristics.
Deposits 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. Merrill
Edge is an integrated investing and banking service targeted at
customers with less than $250,000 in investable assets. Merrill
Edge provides investment advice and guidance, client brokerage
asset services, a self-directed online investing platform and key
banking capabilities including access to the Corporation’s
network of financial centers and ATMs.
54 54
Bank of America 2019
Bank of America 2019
Net income for Deposits increased $746 million to $8.3 billion
driven by higher net interest income. Net interest income
increased $965 million to $16.9 billion primarily due to growth
in deposits and pricing discipline. Noninterest income decreased
$11 million to $5.0 billion primarily driven by lower service
charges, largely offset by higher results from ALM activities.
The provision for credit losses increased $74 million to $269
million in 2019. Noninterest expense increased $25 million to
$10.7 billion driven by continued investment in the business,
partially offset by lower FDIC expense and operating efficiencies.
Average deposits increased $24.3 billion to $702.9 billion in
2019 driven by strong organic growth. Growth in checking and
time deposits of $27.0 billion was partially offset by a decline in
traditional savings and money market savings of $2.5 billion.
Net income for Consumer Lending increased $106 million to
$4.7 billion driven by higher net interest income and lower
noninterest expense, partially offset by lower noninterest income.
Net interest income increased $168 million to $11.3 billion driven
by loan growth. Noninterest income decreased $153 million to
$5.4 billion primarily driven by lower mortgage banking income
and lower card income.
The provision for credit losses increased $34 million to $3.5
billion primarily driven by portfolio seasoning in the credit card
portfolio. Noninterest expense decreased $79 million to $6.9
billion primarily driven by operating efficiencies.
Average loans increased $17.0 billion to $295.6 billion
primarily driven by increases in residential mortgages and credit
card, partially offset by lower home equity loans.
Key Statistics – Deposits
Key Statistics – Consumer Lending
Total deposit spreads (excludes noninterest costs) (1)
2.34%
2.14%
Total credit card (1)
2019
2018
(Dollars in millions)
2019
2018
Year end
Consumer investment assets (in millions) (2)
Active digital banking users (units in thousands) (3)
Active mobile banking users (units in thousands)
Financial centers
ATMs
(1)
$ 240,132
38,266
29,174
4,300
16,788
$185,881
36,264
26,433
4,341
16,255
Gross interest yield
Risk-adjusted margin
New accounts (in thousands)
Purchase volumes
Debit card purchase volumes
(1)
Includes GWIM's credit card portfolio.
10.76%
8.28
4,320
$ 277,852
$ 360,672
10.12%
8.25
4,544
$264,706
$338,810
Includes deposits held in Consumer Lending.
Includes client brokerage assets, deposit sweep balances and AUM in Consumer Banking.
(2)
(3) Active digital banking users represents mobile and/or online users.
Consumer investment assets increased $54 billion in 2019
driven by strong market performance and client flows. Active
mobile banking users increased 3 million reflecting continuing
changes in our customers’ banking preferences. The number of
financial centers declined by a net 41 reflecting changes in
customer preferences to self-service options as we continue to
optimize our consumer banking network and improve our cost to
serve.
Consumer Lending
Consumer Lending offers products to consumers and small
businesses across the U.S. The products offered include credit
and debit cards, residential mortgages and home equity loans,
and direct and indirect loans such as automotive, recreational
vehicle and consumer personal loans. In addition to earning net
interest spread revenue on its lending activities, Consumer
Lending generates interchange revenue from credit and debit card
transactions, late fees, cash advance fees, annual credit card
fees, mortgage banking fee income and other miscellaneous
fees. Consumer Lending products are available to our customers
through our retail network, direct telephone, and online and
mobile channels. Consumer Lending results also include the
impact of servicing residential mortgages and home equity loans
in the core portfolio, including loans held on the balance sheet
of Consumer Lending and loans serviced for others.
During 2019, the total credit card risk-adjusted margin
increased 3 bps compared to 2018, primarily driven by a portfolio
shift away from promotional-rate loans. Total credit card purchase
volumes increased $13.1 billion to $277.9 billion, and debit card
purchase volumes increased $21.9 billion to $360.7 billion,
reflecting higher levels of consumer spending.
Key Statistics – Loan Production (1)
(Dollars in millions)
Total (2):
First mortgage
Home equity
2019
2018
$ 72,467
11,131
$ 41,195
14,869
Consumer Banking:
First mortgage
Home equity
$ 27,280
13,251
(1) The loan production amounts represent the unpaid principal balance of loans and, in the case
$ 49,179
9,755
of home equity, the principal amount of the total line of credit.
(2) In addition to loan production in Consumer Banking, there is also first mortgage and home
equity loan production in GWIM.
First mortgage loan originations in Consumer Banking and for
the total Corporation increased $21.9 billion and $31.3 billion
in 2019 primarily driven by a lower interest rate environment
driving higher first-lien mortgage refinances.
Home equity production in Consumer Banking and for the total
Corporation decreased $3.5 billion and $3.7 billion in 2019
primarily driven by lower demand.
Bank of America 2019 55
Bank of America 2019 55
Global Wealth & Investment Management
(Dollars in millions)
Net interest income
Noninterest income:
Investment and brokerage services
All other income
Total noninterest income
Total revenue, net of interest expense
Provision for credit losses
Noninterest expense
Income before income taxes
Income tax expense
Net income
Effective tax rate
Net interest yield
Return on average allocated capital
Efficiency ratio
Balance Sheet
Average
Total loans and leases
Total earning assets
Total assets
Total deposits
Allocated capital
Year end
Total loans and leases
Total earning assets
Total assets
Total deposits
2019
2018
% Change
$
6,504
$
6,265
4%
11,870
1,163
13,033
19,537
82
13,823
5,632
1,380
4,252
$
11,959
1,229
13,188
19,453
86
14,015
5,352
1,364
3,988
24.5%
25.5%
2.33
29
70.75
2.41
28
72.04
$
$
168,910
279,684
292,003
256,505
14,500
176,600
287,212
299,756
263,103
161,342
259,808
277,220
241,256
14,500
164,854
287,199
305,907
268,700
$
$
$
(1)
(5)
(1)
—
(5)
(1)
5
1
7
5%
8
5
6
—
7%
—
(2)
(2)
GWIM consists of two primary businesses: Merrill Lynch Global
Wealth Management (MLGWM) and Bank of America Private Bank.
MLGWM’s advisory business provides a high-touch client
experience through a network of financial advisors focused on
clients with over $250,000 in total investable assets. MLGWM
provides tailored solutions to meet clients’ needs through a full
set of investment management, brokerage, banking and retirement
products.
Bank of America Private Bank, together with MLGWM’s Private
Wealth Management business, provides comprehensive wealth
management solutions targeted to high net worth and ultra high
net worth clients, as well as customized solutions to meet clients’
wealth structuring, investment management, trust and banking
needs, including specialty asset management services.
Net income for GWIM increased $264 million to $4.3 billion
due to lower noninterest expense and higher revenue. The
operating margin was 29 percent compared to 28 percent in 2018.
Net interest income increased $239 million to $6.5 billion due
to the impact of growth in deposits and loans.
Noninterest income, which primarily includes investment and
brokerage services income, decreased $155 million to $13.0
billion. The decrease was primarily driven by declines in AUM
pricing and transactional revenue, partially offset by the impact of
positive AUM flows and higher market valuations.
Noninterest expense decreased $192 million to $13.8 billion,
as investments for business growth were more than offset by lower
amortization of intangibles and FDIC expense.
The return on average allocated capital was 29 percent, up
from 28 percent, due to higher net income.
MLGWM revenue of $16.1 billion increased one percent
primarily driven by higher net interest income and the impact of
positive AUM flows and higher market valuations, partially offset
by lower transactional volumes and AUM pricing.
Bank of America Private Bank revenue of $3.4 billion decreased
one percent primarily due to lower net interest income.
56 56
Bank of America 2019
Bank of America 2019
Key Indicators and Metrics
(Dollars in millions, except as noted)
Revenue by Business
Merrill Lynch Global Wealth Management
Bank of America Private Bank
Total revenue, net of interest expense
Client Balances by Business, at year end
Merrill Lynch Global Wealth Management
Bank of America Private Bank
Total client balances
Client Balances by Type, at year end
Assets under management
Brokerage and other assets
Deposits
Loans and leases (1)
Less: Managed deposits in assets under management
Total client balances
Assets Under Management Rollforward
Assets under management, beginning of year
Net client flows
Market valuation/other
Total assets under management, end of year
Associates, at year end
Number of financial advisors
Total wealth advisors, including financial advisors
Total primary sales professionals, including financial advisors and wealth advisors
Merrill Lynch Global Wealth Management Metric
Financial advisor productivity (in thousands)
Bank of America Private Bank Metric, at year end
Primary sales professionals
(1)
Includes margin receivables which are classified in customer and other receivables on the Consolidated Balance Sheet.
2019
2018
16,111
3,426
19,537
2,558,102
489,690
3,047,792
1,275,555
1,372,733
263,103
179,296
(42,895)
3,047,792
1,072,234
24,865
178,456
1,275,555
$
$
$
$
$
$
$
$
15,998
3,455
19,453
2,193,562
427,294
2,620,856
1,072,234
1,162,997
268,700
167,938
(51,013)
2,620,856
1,121,383
44,607
(93,756)
1,072,234
$
$
$
$
$
$
$
$
17,458
19,440
20,586
17,518
19,459
20,586
$
1,082 $
1,034
1,766
1,748
Client Balances
Client balances managed under advisory and/or discretion of
GWIM are AUM and are typically held in diversified portfolios. Fees
earned on AUM are calculated as a percentage of clients’ AUM
balances. The asset management fees charged to clients per year
depend on various factors, but are commonly driven by the breadth
of the client’s relationship. The net client AUM flows represent the
net change in clients’ AUM balances over a specified period of
time, excluding market appreciation/depreciation and other
adjustments.
Client balances increased $426.9 billion, or 16 percent, to
$3.0 trillion at December 31, 2019 compared to December 31,
2018. The increase in client balances was primarily due to higher
market valuations and positive net flows over the last year.
Bank of America 2019 57
Bank of America 2019 57
Global Banking
(Dollars in millions)
Net interest income
Noninterest income:
Service charges
Investment banking fees
All other income
Total noninterest income
Total revenue, net of interest expense
Provision for credit losses
Noninterest expense
Income before income taxes
Income tax expense
Net income
Effective tax rate
Net interest yield
Return on average allocated capital
Efficiency ratio
Balance Sheet
Average
Total loans and leases
Total earning assets
Total assets
Total deposits
Allocated capital
Year end
Total loans and leases
Total earning assets
Total assets
Total deposits
n/m = not meaningful
2019
2018
% Change
$
10,675
$
10,993
(3)%
3,015
3,137
3,656
9,808
20,483
414
9,017
11,052
2,984
8,068
$
3,027
2,891
3,090
9,008
20,001
8
8,745
11,248
2,923
8,325
27.0%
26.0%
2.75
20
44.02
3.01
20
43.72
$
$
374,304
388,152
443,083
362,731
41,000
379,268
407,180
464,032
383,180
354,236
364,748
425,675
336,337
41,000
365,717
377,812
442,330
360,248
$
$
$
—
9
18
9
2
n/m
3
(2)
2
(3)
6 %
6
4
8
—
4 %
8
5
6
Global Banking, which includes Global Corporate Banking,
Global Commercial Banking, Business Banking and Global
Investment Banking, provides a wide range of lending-related
products and services, integrated working capital management
and treasury solutions, and underwriting and advisory services
through our network of offices and client relationship teams. Our
lending products and services include commercial loans, leases,
commitment facilities, trade finance, commercial real estate
lending and asset-based lending. Our treasury solutions business
includes treasury management, foreign exchange and short-term
investing options. We also provide investment banking products
to our clients such as debt and equity underwriting and distribution,
and merger-related and other advisory services. Underwriting debt
and equity issuances, fixed-income and equity research, and
certain market-based activities are executed through our global
broker-dealer affiliates, which are our primary dealers in several
countries. Within Global Banking, Global Commercial Banking
clients generally include middle-market companies, commercial
real estate firms and not-for-profit companies. Global Corporate
Banking clients generally include large global corporations,
financial institutions and leasing clients. Business Banking clients
include mid-sized U.S.-based businesses requiring customized
and integrated financial advice and solutions.
Net income for Global Banking decreased $257 million to $8.1
billion in 2019 compared to 2018 primarily driven by higher
provision for credit losses and noninterest expense partially offset
by higher revenue.
Revenue increased $482 million to $20.5 billion driven by
higher noninterest income, partially offset by lower net interest
income. Net interest income decreased $318 million to $10.7
billion primarily due to the allocation of ALM results and credit
spread compression, partly offset by growth in loan and deposit
balances.
Noninterest income increased $800 million to $9.8 billion
primarily due to higher leasing-related revenue and investment
banking fees. The provision for credit losses increased $406
million to $414 million primarily driven by reserve releases in 2018
primarily from energy exposures. Noninterest expense increased
$272 million primarily due to continued investment in the business
partially offset by lower FDIC expense.
The return on average allocated capital was 20 percent in 2019
and 2018. For information on capital allocated to the business
segments, see Business Segment Operations on page 53.
Global Corporate, Global Commercial and Business
Banking
Global Corporate, Global Commercial and Business Banking each
include Business Lending and Global Transaction Services
activities. Business Lending includes various lending-related
products and services, and related hedging activities, including
commercial loans, leases, commitment facilities, trade finance,
real estate lending and asset-based lending. Global Transaction
Services includes deposits, treasury management, credit card,
foreign exchange and short-term investment products.
58 58
Bank of America 2019
Bank of America 2019
The table below and following discussion present a summary of the results, which exclude certain investment banking activities in
Global Banking.
Global Corporate, Global Commercial and Business Banking
(Dollars in millions)
Revenue
Global Corporate Banking
Global Commercial Banking
Business Banking
Total
2019
2018
2019
2018
2019
2018
2019
2018
Business Lending
Global Transaction Services
Total revenue, net of interest expense
$
$
3,994 $
3,994
7,988 $
3,904 $
3,832
7,736 $
4,132 $
3,499
7,631 $
4,330 $
3,346
7,676 $
363 $
1,064
1,427 $
431 $
987
1,418 $
8,489 $
8,557
17,046 $
8,665
8,165
16,830
Balance Sheet
Average
Total loans and leases
Total deposits
Year end
Total loans and leases
Total deposits
$ 177,713 $ 163,516 $ 181,485 $ 174,279 $
177,924
163,559
144,620
135,337
15,058 $
40,196
16,432 $ 374,256 $ 354,227
362,740
336,358
37,462
$ 181,409 $ 174,378 $ 182,727 $ 175,937 $
185,352
173,183
157,322
149,118
15,152 $
40,504
15,402 $ 379,288 $ 365,717
383,178
360,274
37,973
Business Lending revenue decreased $176 million in 2019
compared to 2018. The decrease was primarily driven by the
allocation of ALM results, partly offset by higher leasing-related
revenue.
Global Transaction Services revenue increased $392 million in
2019 compared to 2018 driven by the impact of higher deposit
balances.
Average loans and leases increased six percent in 2019
compared to 2018 driven by growth in the commercial and
industrial portfolio. Average deposits increased eight percent due
to growth in domestic and international interest-bearing balances.
Global Investment Banking
Client teams and product specialists underwrite and distribute
debt, equity and loan products, and provide advisory services and
tailored risk management solutions. The economics of certain
investment banking and underwriting activities are shared primarily
between Global Banking and Global Markets under an internal
revenue-sharing arrangement. Global Banking originates certain
deal-related transactions with our corporate and commercial
clients that are executed and distributed by Global Markets. To
provide a complete discussion of our consolidated investment
banking fees, the following table presents total Corporation
investment banking fees and the portion attributable to Global
Banking.
Investment Banking Fees
(Dollars in millions)
Products
Advisory
Debt issuance
Equity issuance
Gross investment
banking fees
Self-led deals
Total investment
banking fees
Global Banking
2019
2018
Total Corporation
2019
2018
$ 1,336 $ 1,153 $ 1,460 $ 1,258
3,084
1,183
1,326
412
3,107
1,259
1,348
453
3,137
2,891
(62)
(68)
5,826
(184)
5,525
(198)
$ 3,075 $ 2,823 $ 5,642 $ 5,327
Total Corporation investment banking fees, excluding self-led
deals, of $5.6 billion, which are primarily included within Global
Banking and Global Markets, increased six percent due to
increases in advisory fees as well as higher equity issuance fees.
Bank of America 2019 59
Bank of America 2019 59
Global Markets
(Dollars in millions)
Net interest income
Noninterest income:
Investment and brokerage services
Investment banking fees
Market making and similar activities
All other income
Total noninterest income
Total revenue, net of interest expense
Provision for credit losses
Noninterest expense
Income before income taxes
Income tax expense
Net income
Effective tax rate
Return on average allocated capital
Efficiency ratio
Balance Sheet
Average
Trading-related assets:
Trading account securities
Reverse repurchases
Securities borrowed
Derivative assets
Total trading-related assets
Total loans and leases
Total earning assets
Total assets
Total deposits
Allocated capital
Year end
Total trading-related assets
Total loans and leases
Total earning assets
Total assets
Total deposits
n/m = not meaningful
2019
2018
% Change
$
3,915
$
3,857
2%
1,738
2,288
7,065
608
11,699
15,614
(9)
10,722
4,901
1,397
3,504
$
1,780
2,296
7,260
990
12,326
16,183
—
10,835
5,348
1,390
3,958
28.5%
26.0%
10
68.67
11
66.96
$
$
246,335
116,883
83,216
43,271
489,705
71,334
476,225
679,297
31,380
35,000
452,496
72,993
471,701
641,806
34,676
215,112
125,084
78,889
46,047
465,132
72,651
473,383
666,000
31,209
35,000
447,998
73,928
457,224
641,923
37,841
$
$
$
(2)
—
(3)
(39)
(5)
(4)
n/m
(1)
(8)
1
(11)
15%
(7)
5
(6)
5
(2)
1
2
1
—
1%
(1)
3
—
(8)
Global Markets offers sales and trading services and research
services to institutional clients across fixed-income, credit,
currency, commodity and equity businesses. Global Markets
product coverage includes securities and derivative products in
both the primary and secondary markets. Global Markets provides
market-making, 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 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 risk in a broad range of
financial products including government securities, equity and
equity-linked securities, high-grade and high-yield corporate debt
securities, syndicated loans, MBS, commodities and asset-backed
securities. The economics of certain investment banking and
underwriting activities are shared primarily between Global Markets
and Global Banking under an
revenue-sharing
arrangement. Global Banking originates certain deal-related
transactions with our corporate and commercial clients that are
executed and distributed by Global Markets. For information on
investment banking fees on a consolidated basis, see page 59.
internal
The following explanations for year-over-year changes in results
for Global Markets, including those disclosed under Sales and
Trading Revenue, exclude net DVA, but the explanations would be
the same if net DVA was included.
Net income for Global Markets decreased $454 million to $3.5
billion in 2019 compared to 2018. Net DVA losses were $222
million compared to losses of $162 million in 2018. Excluding net
DVA, net income decreased $408 million to $3.7 billion. These
decreases were primarily driven by a decrease in revenue, partially
offset by lower noninterest expense.
Revenue declined $569 million to $15.6 billion as sales and
trading revenue decreased $492 million, and excluding net DVA,
decreased $432 million. These decreases were primarily driven
by a decline in Equities revenue. Noninterest expense decreased
$113 million to $10.7 billion, primarily driven by lower revenue-
related expenses.
Average total assets increased $13.3 billion to $679.3 billion,
primarily due to increased levels of inventory in fixed-income,
currencies and commodities (FICC) to facilitate expected client
demand. Year-end total assets were largely unchanged at $641.8
billion.
The return on average allocated capital was 10 percent, down
from 11 percent, reflecting lower net income. For information on
60 60
Bank of America 2019
Bank of America 2019
capital allocated to the business segments, see Business
Segment Operations on page 53.
Sales and Trading Revenue (1, 2, 3)
Sales and Trading Revenue
Sales and trading revenue includes unrealized and realized gains
and losses on trading and other assets which are included in
market making and similar activities, net interest income, and fees
primarily from commissions on equity securities. Sales and trading
revenue is segregated into fixed-income (government debt
obligations, investment and non-investment grade corporate debt
obligations, commercial MBS, residential mortgage-backed
securities, collateralized loan obligations, interest rate and credit
derivative contracts), currencies (interest rate and foreign
exchange contracts), commodities (primarily futures, forwards,
swaps and options) and equities (equity-linked derivatives and
cash equity activity). The following table and related discussion
present sales and trading revenue, substantially all of which is in
Global Markets, with the remainder in Global Banking. In addition,
the following table and related discussion present sales and
trading revenue, excluding net DVA, which is a non-GAAP financial
measure. For more information on net DVA, see Supplemental
Financial Data on page 48.
All Other
(Dollars in millions)
Net interest income
Noninterest income (loss)
Total revenue, net of interest expense
Provision for credit losses
Noninterest expense
Loss before income taxes
Income tax benefit
Net loss
Balance Sheet
Average
Total loans and leases
Total assets (1)
Total deposits
Year end
Total loans and leases
Total assets (1)
Total deposits
(1)
(Dollars in millions)
Sales and trading revenue (2)
2019
2018
Fixed-income, currencies and commodities
Equities
Total sales and trading revenue
$
$
8,188
4,491
12,679
$
$
8,271
4,900
13,171
Sales and trading revenue, excluding net DVA (4)
Fixed-income, currencies and commodities
Equities
8,413
4,920
13,333
(1) For more information on sales and trading revenue, see Note 3 – Derivatives to the Consolidated
Total sales and trading revenue, excluding net DVA
8,396
4,505
12,901
$
$
$
$
Financial Statements.
Includes FTE adjustments of $189 million and $248 million for 2019 and 2018.
(2)
(3) Includes Global Banking sales and trading revenue of $533 million and $421 million for 2019
and 2018.
(4) FICC and Equities sales and trading revenue, excluding net DVA, is a non-GAAP financial measure.
FICC net DVA losses were $208 million and $142 million for 2019 and 2018. Equities net DVA
losses were $14 million and $20 million for 2019 and 2018.
FICC revenue decreased $17 million. Equities revenue
decreased $415 million driven by under performance in equity
derivatives compared to a strong prior year which benefited from
higher client activity and a more volatile market environment.
2019
2018
% Change
$
$
$
$
$
$
$
$
234
(2,616)
(2,382)
(669)
3,720
(5,433)
(4,055)
(1,378)
42,933
210,771
21,434
37,151
224,466
23,166
632
(2,257)
(1,625)
(476)
1,887
(3,036)
(2,780)
(256)
61,013
199,978
21,966
48,061
195,466
18,541
(63)%
16
47
41
97
79
46
n/m
(30)%
5
(2)
(23)%
15
25
In segments where the total of liabilities and equity exceeds assets, which are generally deposit-taking segments, we allocate assets from All Other to those segments to match liabilities (i.e.,
deposits) and allocated shareholders’ equity. Average allocated assets were 544.2 billion and $517.0 billion for 2019 and 2018, and year-end allocated assets were $565.3 billion and $540.8
billion at December 31, 2019 and 2018.
n/m = not meaningful
All Other consists of ALM activities, equity investments, non-core
mortgage loans and servicing activities, liquidating businesses
and certain expenses not otherwise allocated to a business
segment. ALM activities encompass certain
residential
mortgages, debt securities, and interest rate and foreign currency
risk management activities. Substantially all of the results of ALM
activities are allocated to our business segments. For more
information on our ALM activities, see Note 24 – Business Segment
Information to the Consolidated Financial Statements. Equity
investments include our merchant services joint venture, as well
as a portfolio of equity, real estate and other alternative
investments. For information on our merchant services joint
venture, see Note 13 – Commitments and Contingencies to the
Consolidated Financial Statements.
Residential mortgage loans that are held for ALM purposes,
including interest rate or liquidity risk management, are classified
as core and are presented on the balance sheet of All Other. During
2019, residential mortgage loans held for ALM activities
decreased $3.2 billion to $21.7 billion primarily as a result of
payoffs and paydowns. Non-core residential mortgage and home
equity loans, which are principally runoff portfolios, are also held
in All Other. During 2019, total non-core loans decreased $7.8
billion to $15.7 billion due primarily to payoffs, paydowns and
sales, as well as Federal Housing Administration (FHA) loan
conveyances, partially offset by repurchases. For more information
on the composition of the core and non-core portfolios, see
Consumer Portfolio Credit Risk Management on page 75.
Bank of America 2019 61
Bank of America 2019 61
The net loss for All Other increased $1.1 billion to a net loss
of $1.4 billion, primarily driven by the $2.1 billion pretax
impairment charge disclosed in Executive Summary – Recent
Developments – Merchant Services Joint Venture, as well as lower
revenue, partially offset by a higher benefit in the provision for
credit losses.
Revenue decreased $757 million due to lower net interest
income and an increase in the loss in noninterest income. Net
interest income decreased $398 million due to the impact of non-
core consumer real estate loan sales and portfolio run-off. The
loss in noninterest income increased $359 million primarily due
to lower gains on sales of non-core consumer loans and higher
partnership losses associated with an increase in tax-advantaged
investments, partially offset by a $729 million charge related to
the redemption of certain trust preferred securities in 2018.
Noninterest expense increased $1.8 billion to $3.7 billion
primarily due to the aforementioned $2.1 billion pretax impairment
charge.
The income tax benefit was $4.1 billion compared to a benefit
of $2.8 billion in 2018. The increase in the tax benefit was primarily
driven by the tax effect of the higher pretax loss, the positive impact
from the resolution of various tax controversy matters and a higher
level of income tax credits. Both years included income tax benefit
adjustments to eliminate the FTE treatment of certain tax credits
recorded in Global Banking.
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 contractual arrangements whereby we
commit to future purchases of products or services from
unaffiliated parties. Purchase obligations are defined as
obligations that are legally binding agreements whereby we agree
Table 10 Contractual Obligations
to purchase products or services with a specific minimum quantity
at a fixed, minimum or variable price over a specified period of
time. Included in purchase obligations are vendor contracts, the
most significant of which include communication services,
processing services and software contracts. Debt, lease and other
obligations are more fully discussed in Note 12 – Long-term Debt
and Note 13 – Commitments and Contingencies to the Consolidated
Financial Statements.
Other long-term liabilities include our contractual funding
obligations related to the Non-U.S. Pension Plans and Nonqualified
and Other Pension Plans (together, the Plans). Obligations to the
Plans are based on the current and projected obligations of the
Plans, performance of the Plans’ assets, and any participant
contributions, if applicable. During 2019 and 2018, we contributed
$135 million and $156 million to the Plans, and we expect to make
$128 million of contributions during 2020. The Plans are more
fully discussed in Note 18 – Employee Benefit Plans to the
Consolidated Financial Statements.
We enter into 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
a summary of the total unfunded, or off-balance sheet, credit
extension commitment amounts by expiration date, see Credit
Extension Commitments in Note 13 – Commitments and
Contingencies to the Consolidated Financial Statements.
We also utilize variable interest entities (VIEs) in the ordinary
course of business to support our financing and investing needs
as well as those of our customers. For more information on our
involvement with unconsolidated VIEs, see Note 7 – Securitizations
and Other Variable Interest Entities to the Consolidated Financial
Statements.
Table 10 includes certain contractual obligations at December
31, 2019 and 2018.
(Dollars in millions)
December 31, 2019
Due in One
Year or Less
Due After
One Year
Through
Three Years
Due After
Three Years
Through
Five Years
December 31
2018
Due After
Five Years
Total
Total
Long-term debt
Operating lease obligations
Purchase obligations
Time deposits
Other long-term liabilities
Estimated interest expense on long-term debt and time deposits (1)
229,392
15,770
4,048
61,039
3,933
56,852
371,034
(1) Represents forecasted net interest expense on long-term debt and time deposits based on interest rates at December 31, 2019 and 2018. Forecasts are based on the contractual maturity dates
1,966
1,272
68,351
1,670
5,571
102,981 $
123,560 $
4,225
731
247
659
23,871
11,794
3,530
74,673
4,099
44,385
2,338
401
1,463
714
6,870
3,265
1,126
4,612
1,056
8,073
Total contractual obligations
153,293 $
240,856 $
379,337 $
24,151 $
46,049 $
47,096 $
58,882 $
64,181 $
$
$
of each liability, and are net of derivative hedges, where applicable.
62 62
Bank of America 2019
Bank of America 2019
Representations and Warranties Obligations
For information on representations and warranties obligations in
connection with the sale of mortgage loans, see Note 13 –
Commitments and Contingencies to the Consolidated Financial
Statements.
Managing Risk
Overview
Risk is inherent in all our business activities. Sound risk
management enables us to serve our customers and deliver for
our shareholders. If not managed well, risks can result in financial
loss, regulatory sanctions and penalties, and damage to our
reputation, each of which may adversely impact our ability to
execute our business strategies. We take a comprehensive
approach to risk management with a defined Risk Framework and
an articulated Risk Appetite Statement which are approved
annually by the Enterprise Risk Committee (ERC) and the Board.
The seven key types of risk faced by the Corporation are
strategic, credit, market, liquidity, compliance, operational and
reputational.
Strategic risk is the risk resulting from incorrect assumptions
about external or internal factors, inappropriate business
plans, ineffective business strategy execution, or failure to
respond in a timely manner to changes in the regulatory,
macroeconomic or competitive environments in the geographic
locations in which we operate.
Credit risk is the risk of loss arising from the inability or failure
of a borrower or counterparty to meet its obligations.
Market risk is the risk that changes in market conditions may
adversely impact the value of assets or liabilities, or otherwise
negatively impact earnings.
Liquidity risk is the inability to meet expected or unexpected
cash flow and collateral needs while continuing to support our
businesses and customers under a range of economic
conditions.
Compliance risk is the risk of legal or regulatory sanctions,
material financial loss or damage to the reputation of the
Corporation arising from the failure of the Corporation to comply
with the requirements of applicable laws, rules and regulations
and our internal policies and procedures.
Operational risk is the risk of loss resulting from inadequate
or failed processes, people and systems, or from external
events.
Reputational risk is the risk that negative perceptions of the
Corporation’s conduct or business practices may adversely
impact its profitability or operations.
The following sections address in more detail the specific
procedures, measures and analyses of the major categories of
risk. This discussion of managing risk focuses on the current Risk
Framework that, as part of its annual review process, was approved
by the ERC and the Board.
As set forth in our Risk Framework, a culture of managing risk
well is fundamental to fulfilling our purpose and our values and
delivering responsible growth. It requires us to focus on risk in all
activities and encourages the necessary mindset and behavior to
enable effective risk management, and promotes sound risk-taking
within our risk appetite. Sustaining a culture of managing risk well
throughout the organization is critical to our success and is a clear
expectation of our executive management team and the Board.
Our Risk Framework serves as the foundation for the consistent
and effective management of risks facing the Corporation. The
Risk Framework sets forth clear roles, responsibilities and
accountability for the management of risk and provides a blueprint
for how the Board, through delegation of authority to committees
and executive officers, establishes risk appetite and associated
limits for our activities.
Executive management assesses, with Board oversight, the
risk-adjusted returns of each business. Management reviews and
approves the strategic and financial operating plans, as well as
the capital plan and Risk Appetite Statement, and recommends
them annually to the Board for approval. Our strategic plan takes
into consideration return objectives and financial resources, which
must align with risk capacity and risk appetite. Management sets
financial objectives for each business by allocating capital and
setting a target for return on capital for each business. Capital
allocations and operating limits are regularly evaluated as part of
our overall governance processes as the businesses and the
economic environment in which we operate continue to evolve. For
more information regarding capital allocations, see Business
Segment Operations on page 53.
The Corporation’s risk appetite indicates the amount of capital,
earnings or liquidity we are willing to put at risk to achieve our
strategic objectives and business plans, consistent with applicable
regulatory requirements. Our risk appetite provides a common and
comparable set of measures for senior management and the Board
to clearly indicate our aggregate level of risk and to monitor whether
the Corporation’s risk profile remains in alignment with our
strategic and capital plans. Our risk appetite is formally articulated
in the Risk Appetite Statement, which includes both qualitative
components and quantitative limits.
Our overall capacity to take risk is limited; therefore, we prioritize
the risks we take in order to maintain a strong and flexible financial
position so we can withstand challenging economic conditions and
take advantage of organic growth opportunities. Therefore, we set
objectives and targets for capital and liquidity that are intended
to permit us to continue to operate in a safe and sound manner,
including during periods of stress.
Our lines of business operate with risk limits (which may include
credit, market and/or operational limits, as applicable) that align
with the Corporation’s risk appetite. Executive management is
responsible for tracking and reporting performance measurements
as well as any exceptions to guidelines or limits. The Board, and
its committees when appropriate, oversee financial performance,
execution of the strategic and financial operating plans, adherence
to risk appetite limits and the adequacy of internal controls.
For a more detailed discussion of our risk management
activities, see the discussion below and pages 66 through 98.
Risk Management Governance
The Risk Framework describes delegations of authority whereby
the Board and its committees may delegate authority to
management-level committees or executive officers. Such
delegations may authorize certain decision-making and approval
functions, which may be evidenced in, for example, committee
charters, job descriptions, meeting minutes and resolutions.
Bank of America 2019 63
Bank of America 2019 63
The chart below illustrates the inter-relationship among the Board, Board committees and management committees that have
the majority of risk oversight responsibilities for the Corporation.
(1) Reports to the CEO and CFO with oversight by the Audit Committee
Board of Directors and Board Committees
The Board is composed of 17 directors, all but one of whom are
independent. The Board authorizes management to maintain an
effective Risk Framework, and oversees compliance with safe and
sound banking practices. In addition, the Board or its committees
conduct inquiries of, and receive reports from management on
risk-related matters to assess scope or resource limitations that
could impede the ability of Independent Risk Management (IRM)
and/or Corporate Audit to execute its responsibilities. The Board
committees discussed below have the principal responsibility for
enterprise-wide oversight of our risk management activities.
Through these activities, the Board and applicable committees are
provided with information on our risk profile and oversee executive
management addressing key risks we face. Other Board
committees, as described below, provide additional oversight of
specific risks.
Each of the committees shown on the above chart regularly
reports to the Board on risk-related matters within the committee’s
responsibilities, which is intended to collectively provide the Board
with integrated insight about our management of enterprise-wide
risks.
Audit Committee
The Audit Committee oversees the qualifications, performance and
independence of the Independent Registered Public Accounting
Firm, the performance of our corporate audit function, the integrity
of our consolidated financial statements, our compliance with legal
and regulatory requirements, and makes inquiries of management
or the Chief Audit Executive (CAE) to determine whether there are
scope or resource limitations that impede the ability of Corporate
Audit to execute its responsibilities. The Audit Committee is also
responsible for overseeing compliance risk pursuant to the New
York Stock Exchange listing standards.
Enterprise Risk Committee
The ERC has primary responsibility for oversight of the Risk
Framework and key risks we face and of the Corporation’s overall
risk appetite. It approves the Risk Framework and the Risk Appetite
Statement and further recommends these documents to the Board
for approval. The ERC oversees senior management’s
responsibilities for the identification, measurement, monitoring
and control of key risks we face. The ERC may consult with other
Board committees on risk-related matters.
Other Board Committees
Our Corporate Governance, ESG, and Sustainability Committee
oversees our Board’s governance processes, identifies and
reviews
the qualifications of potential Board members,
recommends nominees for election to our Board, recommends
committee appointments for Board approval and reviews our
Environmental, Social and Governance and stockholder
engagement activities.
Our Compensation and Human Capital Committee oversees
establishing, maintaining and administering our compensation
programs and employee benefit plans, including approving and
recommending our Chief Executive Officer’s (CEO) compensation
to our Board for further approval by all independent directors;
reviewing and approving all of our executive officers’
compensation, as well as compensation for non-management
directors; and reviewing certain other human capital management
topics.
Management Committees
Management committees may receive their authority from the
Board, a Board committee, another management committee or
from one or more executive officers. Our primary management-
level risk committee is the Management Risk Committee (MRC).
Subject to Board oversight, the MRC is responsible for
management oversight of key risks facing the Corporation. This
includes providing management oversight of our compliance and
risk programs, balance sheet and capital
operational
management, funding activities and other liquidity activities, stress
testing, trading activities, recovery and resolution planning, model
risk, subsidiary governance and activities between member banks
and their nonbank affiliates pursuant to Federal Reserve rules and
regulations, among other things.
Lines of Defense
We have clear ownership and accountability across three lines of
defense: Front Line Units (FLUs), IRM and Corporate Audit. We
also have control functions outside of FLUs and IRM (e.g., Legal
and Global Human Resources). The three lines of defense are
integrated into our management-level governance structure. Each
of these functional roles is described in more detail below.
64 64
Bank of America 2019
Bank of America 2019
Executive Officers
Executive officers lead various functions representing the
functional roles. Authority for functional roles may be delegated
to executive officers from the Board, Board committees or
management-level committees. Executive officers, in turn, may
further delegate responsibilities, as appropriate, to management-
level committees, management routines or individuals. Executive
officers review our activities for consistency with our Risk
Framework, Risk Appetite Statement and applicable strategic,
capital and financial operating plans, as well as applicable policies,
standards, procedures and processes. Executive officers and
other employees make decisions individually on a day-to-day basis,
consistent with the authority they have been delegated. Executive
officers and other employees may also serve on committees and
participate in committee decisions.
Front Line Units
FLUs, which include the lines of business as well as the Global
for
Technology and Operations Group, are
appropriately assessing and effectively managing all of the risks
associated with their activities.
responsible
Three organizational units that include FLU activities and
control function activities, but are not part of IRM are first, the
Chief Financial Officer (CFO) Group; second, Environmental, Social
and Governance (ESG), Capital Deployment (CD) and Public Policy
(PP); and third, the Chief Administrative Officer (CAO) Group.
Independent Risk Management
IRM is part of our control functions and includes Global Risk
Management. We have other control functions that are not part of
IRM (other control functions may also provide oversight to FLU
activities), including Legal, Global Human Resources and certain
activities within the CFO Group; ESG, CD and PP; and CAO Group.
IRM, led by the Chief Risk Officer (CRO), is responsible for
independently assessing and overseeing risks within FLUs and
other control functions. IRM establishes written enterprise policies
and procedures that include concentration risk limits, where
appropriate. Such policies and procedures outline how aggregate
risks are identified, measured, monitored and controlled.
The CRO has the stature, authority and independence to
develop and implement a meaningful risk management framework.
The CRO has unrestricted access to the Board and reports directly
to both the ERC and to the CEO. Global Risk Management is
organized into horizontal risk teams that cover a specific risk area
and vertical CRO teams that cover a particular front line unit or
control function. These teams work collaboratively in executing
their respective duties.
Corporate Audit
Corporate Audit and the CAE maintain their independence from
the FLUs, IRM and other control functions by reporting directly to
the Audit Committee or the Board. The CAE administratively reports
to the CEO. Corporate Audit provides independent assessment
and validation through testing of key processes and controls
across the Corporation. Corporate Audit includes Credit Review
which periodically tests and examines credit portfolios and
processes.
Risk Management Processes
The Risk Framework requires that strong risk management
practices are integrated in key strategic, capital and financial
planning processes and in day-to-day business processes across
the Corporation, with a goal of ensuring risks are appropriately
considered, evaluated and responded to in a timely manner.
We employ our risk management process, referred to as
Identify, Measure, Monitor and Control, as part of our daily
activities.
Identify – To be effectively managed, risks must be clearly defined
and proactively identified. Proper risk identification focuses on
recognizing and understanding key risks inherent in our
business activities or key risks that may arise from external
factors. Each employee is expected to identify and escalate
risks promptly. Risk identification is an ongoing process,
incorporating input from FLUs and control functions, designed
to be forward looking and capture relevant risk factors across
all of our lines of business.
Measure – Once a risk is identified, it must be prioritized and
accurately measured through a systematic risk quantification
process including quantitative and qualitative components.
Risk is measured at various levels including, but not limited
to, risk type, FLU, legal entity and on an aggregate basis. This
risk quantification process helps to capture changes in our risk
profile due to changes in strategic direction, concentrations,
portfolio quality and the overall economic environment. Senior
management considers how risk exposures might evolve under
a variety of stress scenarios.
Monitor – We monitor risk levels regularly to track adherence to
risk appetite, policies, standards, procedures and processes.
We also regularly update risk assessments and review risk
exposures. Through our monitoring, we can determine our level
of risk relative to limits and can take action in a timely manner.
We also can determine when risk limits are breached and have
processes to appropriately report and escalate exceptions.
This includes requests for approval to managers and alerts to
executive management, management-level committees or the
Board (directly or through an appropriate committee).
Control – We establish and communicate risk limits and controls
through policies, standards, procedures and processes that
define the responsibilities and authority for risk-taking. The
limits and controls can be adjusted by the Board or
management when conditions or risk tolerances warrant.
These limits may be absolute (e.g., loan amount, trading
volume) or relative (e.g., percentage of loan book in higher-risk
categories). Our lines of business are held accountable to
perform within the established limits.
risk well
The formal processes used to manage risk represent a part of
our overall risk management process. We instill a strong and
comprehensive culture of managing
through
communications, training, policies, procedures and organizational
roles and responsibilities. Establishing a culture reflective of our
purpose to help make our customers’ financial lives better and
delivering our responsible growth strategy is also critical to
effective risk management. We understand that improper actions,
behaviors or practices that are illegal, unethical or contrary to our
core values could result in harm to the Corporation, our
shareholders or our customers, damage the integrity of the
financial markets, or negatively impact our reputation, and have
established protocols and structures so that such conduct risk is
governed and reported across the Corporation. Specifically, our
Code of Conduct provides a framework for all of our employees to
conduct themselves with the highest integrity. Additionally, we
continue to strengthen the link between the employee performance
management process and individual compensation to encourage
employees to work toward enterprise-wide risk goals.
Bank of America 2019 65
Bank of America 2019 65
Corporation-wide Stress Testing
Integral to our Capital Planning, Financial Planning and Strategic
Planning processes, we conduct capital scenario management and
stress forecasting on a periodic basis to better understand balance
sheet, earnings and capital sensitivities to certain economic and
business scenarios, including economic and market conditions
that are more severe than anticipated. These stress forecasts
provide an understanding of the potential impacts from our risk
profile on the balance sheet, earnings and capital, and serve as
a key component of our capital and risk management practices.
The intent of stress testing is to develop a comprehensive
understanding of potential impacts of on- and off-balance sheet
risks at the Corporation and how they impact financial resiliency,
which provides confidence to management, regulators and our
investors.
Contingency Planning
We have developed and maintain contingency plans that are
designed to prepare us in advance to respond in the event of
potential adverse economic, financial or market stress. These
contingency plans include our Capital Contingency Plan and
Financial Contingency and Recovery Plan, which provide
monitoring, escalation, actions and routines designed to enable
us to increase capital, access funding sources and reduce risk
through consideration of potential options that include asset sales,
business sales, capital or debt issuances, or other de-risking
strategies. We also maintain a Resolution Plan to limit adverse
systemic impacts that could be associated with a potential
resolution of Bank of America.
Strategic Risk Management
Strategic risk is embedded in every business and is one of the
major risk categories along with credit, market, liquidity,
compliance, operational and reputational risks. This risk results
from incorrect assumptions about external or internal factors,
inappropriate business plans, ineffective business strategy
execution, or failure to respond in a timely manner to changes in
the regulatory, macroeconomic or competitive environments, in the
geographic locations in which we operate, such as competitor
actions, changing customer preferences, product obsolescence
and technology developments. Our strategic plan is consistent
with our risk appetite, capital plan and liquidity requirements, and
specifically addresses strategic risks.
On an annual basis, the Board reviews and approves the
strategic plan, capital plan, financial operating plan and Risk
Appetite Statement. With oversight by the Board, executive
management directs the lines of business to execute our strategic
plan consistent with our core operating principles and risk appetite.
The executive management team monitors business performance
throughout the year and provides the Board with regular progress
reports on whether strategic objectives and timelines are being
met, including reports on strategic risks and if additional or
alternative actions need to be considered or implemented. The
regular executive reviews focus on assessing forecasted earnings
and returns on capital, the current risk profile, current capital and
liquidity requirements, staffing levels and changes required to
support the strategic plan, stress testing results, and other
qualitative factors such as market growth rates and peer analysis.
Significant strategic actions, such as capital actions, material
acquisitions or divestitures, and resolution plans are reviewed and
approved by the Board. At the business level, processes are in
place to discuss the strategic risk implications of new, expanded
or modified businesses, products or services and other strategic
initiatives, and to provide formal review and approval where
required. With oversight by the Board and the ERC, executive
management performs similar analyses throughout the year, and
evaluates changes to the financial forecast or the risk, capital or
liquidity positions as deemed appropriate to balance and optimize
achieving the targeted risk appetite, shareholder returns and
maintaining the targeted financial strength. Proprietary models are
used to measure the capital requirements for credit, country,
market, operational and strategic risks. The allocated capital
assigned to each business is based on its unique risk profile. With
oversight by the Board, executive management assesses the risk-
adjusted returns of each business in approving strategic and
financial operating plans. The businesses use allocated capital to
define business strategies, and price products and transactions.
Capital Management
The Corporation manages its capital position so that its capital is
more than adequate to support its business activities and aligns
with risk, risk appetite and strategic planning. Additionally, we seek
to maintain safety and soundness at all times, even under adverse
scenarios, take advantage of organic growth opportunities, meet
obligations to creditors and counterparties, maintain ready access
to financial markets, continue to serve as a credit intermediary,
remain a source of strength for our subsidiaries, and satisfy current
and future regulatory capital requirements. Capital management
is integrated into our risk and governance processes, as capital
is a key consideration in the development of our strategic plan,
risk appetite and risk limits.
We conduct an Internal Capital Adequacy Assessment Process
(ICAAP) on a periodic basis. The ICAAP is a forward-looking
assessment of our projected capital needs and resources,
incorporating earnings, balance sheet and risk forecasts under
baseline and adverse economic and market conditions. We utilize
periodic stress tests to assess the potential impacts to our
balance sheet, earnings, regulatory capital and liquidity under a
variety of stress scenarios. We perform qualitative risk
assessments to identify and assess material risks not fully
captured in our forecasts or stress tests. We assess the potential
capital impacts of proposed changes to regulatory capital
requirements. Management assesses ICAAP results and provides
documented quarterly assessments of the adequacy of our capital
guidelines and capital position to the Board or its committees.
We periodically review capital allocated to our businesses and
allocate capital annually during the strategic and capital planning
processes. For more information, see Business Segment
Operations on page 53.
CCAR and Capital Planning
The Federal Reserve requires BHCs to submit a capital plan and
requests for capital actions on an annual basis, consistent with
the rules governing the Comprehensive Capital Analysis and
Review (CCAR) capital plan.
On June 27, 2019, following the Federal Reserve’s non-
objection to our 2019 CCAR capital plan, the Board authorized the
repurchase of approximately $30.9 billion in common stock from
July 1, 2019 through June 30, 2020, which includes approximately
$900 million to offset shares awarded under equity-based
compensation plans during the same period. During 2019,
pursuant to the Board’s authorizations, including those related to
our 2018 CCAR capital plan that expired June 30, 2019, we
repurchased $28.1 billion of common stock, which includes
common stock repurchases to offset equity-based compensation
awards. At December 31, 2019, our remaining stock repurchase
authorization was $15.6 billion.
Our stock repurchases are subject to various factors, including
the Corporation’s capital position, liquidity, financial performance
and alternative uses of capital, stock trading price and general
66 66
Bank of America 2019
Bank of America 2019
market conditions, and may be suspended at any time. The
repurchases may be effected through open market purchases or
privately negotiated transactions, including repurchase plans that
satisfy the conditions of Rule 10b5-1 of the Securities Exchange
Act of 1934, as amended (Exchange Act).
Regulatory Capital
As a financial services holding company, we are subject to
regulatory capital rules, including Basel 3, issued by U.S. banking
regulators. Basel 3 established minimum capital ratios and buffer
requirements and outlined two methods of calculating risk-
weighted assets, the Standardized approach and the Advanced
approaches. The Standardized approach relies primarily on
supervisory risk weights based on exposure type, and the
Advanced approaches determine risk weights based on internal
models.
The Corporation's depository institution subsidiaries are also
subject to the Prompt Corrective Action (PCA) framework. The
Corporation and its primary affiliated banking entity, BANA, are
Advanced approaches institutions under Basel 3 and are required
to report regulatory risk-based capital ratios and risk-weighted
assets under both the Standardized and Advanced approaches.
The approach that yields the lower ratio is used to assess capital
adequacy including under the PCA framework. As of December 31,
2019, the Common equity tier 1 (CET1) and Tier 1 capital ratios
for the Corporation were lower under the Standardized approach
whereas the Advanced approaches yielded a lower Total capital
ratio.
Minimum Capital Requirements
Minimum capital requirements and related buffers were fully
phased in as of January 1, 2019. The PCA framework established
categories of capitalization, including well capitalized, based on
the Basel 3 regulatory ratio requirements. U.S. banking regulators
are required to take certain mandatory actions depending on the
category of capitalization, with no mandatory actions required for
well-capitalized banking organizations.
In order to avoid restrictions on capital distributions and
discretionary bonus payments, the Corporation must meet risk-
based capital
include a capital
conservation buffer greater than 2.5 percent, plus any applicable
countercyclical capital buffer and a global systemically important
bank (G-SIB) surcharge. The buffers and surcharge must be
comprised solely of CET1 capital.
requirements
ratio
that
The Corporation is also required to maintain a minimum
supplementary leverage ratio (SLR) of 3.0 percent plus a leverage
buffer of 2.0 percent in order to avoid certain restrictions on capital
distributions and discretionary bonus payments. Our insured
depository institution subsidiaries are required to maintain a
minimum 6.0 percent SLR to be considered well capitalized under
the PCA framework. The numerator of the SLR is quarter-end Basel
3 Tier 1 capital. The denominator is total leverage exposure based
on the daily average of the sum of on-balance sheet exposures
less permitted Tier 1 deductions, as well as the simple average
of certain off-balance sheet exposures, as of the end of each month
in a quarter.
Capital Composition and Ratios
Table 11 presents Bank of America Corporation’s capital ratios
and related information in accordance with Basel 3 Standardized
and Advanced approaches as measured at December 31, 2019
and 2018. As of the periods presented herein, the Corporation
met the definition of well capitalized under current regulatory
requirements.
Bank of America 2019 67
Bank of America 2019 67
Table 11 Bank of America Corporation Regulatory Capital under Basel 3
(Dollars in millions, except as noted)
Risk-based capital metrics:
Common equity tier 1 capital
Tier 1 capital
Total capital (2)
Risk-weighted assets (in billions)
Common equity tier 1 capital ratio
Tier 1 capital ratio
Total capital ratio
Leverage-based metrics:
Adjusted quarterly average assets (in billions) (3)
Tier 1 leverage ratio
SLR leverage exposure (in billions)
SLR
Risk-based capital metrics:
Common equity tier 1 capital
Tier 1 capital
Total capital (2)
Risk-weighted assets (in billions)
Common equity tier 1 capital ratio
Tier 1 capital ratio
Total capital ratio
Leverage-based metrics:
Adjusted quarterly average assets (in billions) (3)
Tier 1 leverage ratio
SLR leverage exposure (in billions)
SLR
Standardized
Approach
Advanced
Approaches
December 31, 2019
Regulatory
Minimum (1)
$
$
166,760
188,492
221,230
1,493
166,760
188,492
213,098
1,447
11.2%
12.6
14.8
11.5%
13.0
14.7
9.5%
11.0
13.0
4.0
5.0
$
2,374
$
2,374
7.9%
7.9%
$
2,946
6.4%
December 31, 2018
$
167,272
189,038
221,304
1,437
$
167,272
189,038
212,878
1,409
11.6%
13.2
15.4
11.9%
13.4
15.1
8.25%
9.75
11.75
$
2,258
$
2,258
8.4%
8.4%
$
2,791
6.8%
4.0
5.0
(1) The capital conservation buffer and G-SIB surcharge were 2.5 percent at December 31, 2019 and 1.875 percent at December 31, 2018. The countercyclical capital buffer for both periods was zero.
The SLR minimum includes a leverage buffer of 2.0 percent.
(2) Total capital under the Advanced approaches differs from the Standardized approach due to differences in the amount permitted in Tier 2 capital related to the qualifying allowance for credit losses.
(3) Reflects total average assets adjusted for certain Tier 1 capital deductions.
At December 31, 2019, CET1 capital and Total capital under
primarily due to loan growth and increased client activity in Global
the Advanced approaches were relatively unchanged compared to Markets and Global Banking.
December 31, 2018. Risk-weighted assets under the Standardized
approach, which yielded the lower CET1 capital ratio at December
31, 2019, increased $56.3 billion during 2019 to $1,493 billion
and 2018.
Table 12 shows the capital composition at December 31, 2019
Table 12 Capital Composition under Basel 3
(Dollars in millions)
Total common shareholders’ equity
Goodwill, net of related deferred tax liabilities
Deferred tax assets arising from net operating loss and tax credit carryforwards
Intangibles, other than mortgage servicing rights and goodwill, net of related deferred tax liabilities
Other
Common equity tier 1 capital
Qualifying preferred stock, net of issuance cost
Other
Tier 1 capital
Tier 2 capital instruments
Eligible credit reserves included in Tier 2 capital
Other
Total capital under the Advanced approaches
December 31
2019
2018
241,409 $
(68,570)
(5,193)
(1,328)
442
166,760
22,329
(597)
188,492
22,538
2,097
(29)
213,098 $
242,999
(68,572)
(5,981)
(1,294)
120
167,272
22,326
(560)
189,038
21,887
1,972
(19)
212,878
$
$
68 68
Bank of America 2019
Bank of America 2019
Table 13 shows the components of risk-weighted assets as measured under Basel 3 at December 31, 2019 and 2018.
Table 13 Risk-weighted Assets under Basel 3
(Dollars in billions)
Credit risk
Market risk
Operational risk
Risks related to credit valuation adjustments
Total risk-weighted assets
n/a = not applicable
Standardized
Approach
Advanced
Approaches
Standardized
Approach
Advanced
Approaches
2019
1,437 $
56
n/a
n/a
1,493 $
$
$
December 31
858 $
55
500
34
1,447 $
2018
1,384 $
53
n/a
n/a
1,437 $
827
52
500
30
1,409
Bank of America, N.A. Regulatory Capital
Table 14 presents regulatory capital information for BANA in accordance with Basel 3 Standardized and Advanced approaches as
measured at December 31, 2019 and 2018. BANA met the definition of well capitalized under the PCA framework at both year ends.
Table 14 Bank of America, N.A. Regulatory Capital under Basel 3
(Dollars in millions, except as noted)
Risk-based capital metrics:
Common equity tier 1 capital
Tier 1 capital
Total capital (2)
Risk-weighted assets (in billions)
Common equity tier 1 capital ratio
Tier 1 capital ratio
Total capital ratio
Leverage-based metrics:
Adjusted quarterly average assets (in billions) (3)
Tier 1 leverage ratio
SLR leverage exposure (in billions)
SLR
Risk-based capital metrics:
Common equity tier 1 capital
Tier 1 capital
Total capital (2)
Risk-weighted assets (in billions)
Common equity tier 1 capital ratio
Tier 1 capital ratio
Total capital ratio
Leverage-based metrics:
Adjusted quarterly average assets (in billions) (3)
Tier 1 leverage ratio
SLR leverage exposure (in billions)
SLR
Standardized
Approach
Advanced
Approaches
Regulatory
Minimum (1)
December 31, 2019
$
$
154,626
154,626
166,567
1,241
12.5%
12.5
13.4
154,626
154,626
158,665
991
15.6%
15.6
16.0
$
1,780
$
1,780
8.7%
8.7%
$
2,177
7.1%
December 31, 2018
$
$
149,824
149,824
161,760
1,195
12.5%
12.5
13.5
149,824
149,824
153,627
959
15.6%
15.6
16.0
$
1,719
$
1,719
8.7%
8.7%
$
2,112
7.1%
7.0%
8.5
10.5
5.0
6.0
6.5%
8.0
10.0
5.0
6.0
(1) Risk-based capital regulatory minimums at December 31, 2019 are the minimum ratios under Basel 3 including a capital conservation buffer of 2.5 percent. The regulatory minimums for the leverage
ratios as of both period ends and risk-based capital ratios as of December 31, 2018 are the percent required to be considered well capitalized under the PCA framework.
(2) Total capital under the Advanced approaches differs from the Standardized approach due to differences in the amount permitted in Tier 2 capital related to the qualifying allowance for credit losses.
(3) Reflects total average assets adjusted for certain Tier 1 capital deductions.
Total Loss-Absorbing Capacity Requirements
Effective January 1, 2019, the Corporation is subject to the Federal
Reserve’s final rule requiring G-SIBs to maintain minimum levels
of total loss-absorbing capacity (TLAC) and long-term debt. TLAC
consists of the Corporation’s Tier 1 capital and eligible long-term
debt issued directly by the Corporation. Eligible long-term debt for
TLAC ratios is comprised of unsecured debt that has a remaining
maturity of at least one year and satisfies additional requirements
as prescribed in the TLAC final rule. As with the risk-based capital
ratios and SLR, the Corporation is required to maintain TLAC ratios
in excess of minimum requirements plus applicable buffers to
avoid restrictions on capital distributions and discretionary bonus
payments. Table 15 presents the Corporation's TLAC and long-
term debt ratios and related information as of December 31, 2019.
Bank of America 2019 69
Bank of America 2019 69
Table 15 Bank of America Corporation Total Loss-Absorbing Capacity and Long-Term Debt
(Dollars in millions)
Total eligible balance
Percentage of risk-weighted assets (3)
Percentage of SLR leverage exposure
TLAC
Regulatory
Minimum (1)
Long-term
Debt
Regulatory
Minimum (2)
$
367,449
$
171,349
December 31, 2019
24.6%
12.5
22.0%
9.5
11.5%
5.8
8.5%
4.5
(1) The TLAC risk-weighted assets regulatory minimum consists of 18.0 percent plus a TLAC risk-weighted assets buffer comprised of 2.5 percent plus the method 1 G-SIB surcharge of 1.5 percent.
The countercyclical buffer is zero for this period. The TLAC SLR leverage exposure regulatory minimum consists of 7.5 percent plus a 2.0 percent TLAC leverage buffer. The TLAC risk-weighted assets
and leverage buffers must be comprised solely of CET1 capital and Tier 1 capital, respectively.
(2) The long-term debt risk-weighted assets regulatory minimum is comprised of 6.0 percent plus an additional 2.5 percent requirement based on the Corporation’s method 2 G-SIB surcharge. The long
term debt leverage exposure regulatory minimum is 4.5 percent.
(3) The approach that yields the higher risk-weighted assets is used to calculate TLAC and long-term debt ratios, which was the Standardized approach as of December 31, 2019.
Regulatory Capital and Securities Regulation
The Corporation’s principal U.S. broker-dealer subsidiaries are
BofA Securities, Inc. (BofAS), Merrill Lynch Professional Clearing
Corp. (MLPCC) and Merrill Lynch, Pierce, Fenner & Smith
Incorporated (MLPF&S). BofAS was formed as a result of the
reorganization of MLPF&S which was completed in May 2019. The
Corporation's principal European broker-dealer subsidiaries are
Merrill Lynch International (MLI) and BofA Securities Europe SA
(BofASE).
The U.S. broker-dealer subsidiaries are subject to the net
capital requirements of Rule 15c3-1 under the Exchange Act.
BofAS computes its minimum capital requirements as an
alternative net capital broker-dealer under Rule 15c3-1, and
MLPCC and MLPF&S compute their minimum capital requirements
in accordance with the alternative standard under Rule 15c3-1.
BofAS and MLPCC are also registered as futures commission
merchants and are subject to U.S. Commodity Futures Trading
Commission (CFTC) Regulation 1.17.
BofAS provides institutional services, and in accordance with
the alternative net capital requirements, is required to maintain
tentative net capital in excess of $1.0 billion and net capital in
excess of the greater of $500 million or a certain percentage of
its reserve requirement. BofAS must also notify the Securities and
Exchange Commission (SEC) in the event its tentative net capital
is less than $5.0 billion. BofAS is also required to hold a certain
percentage of its risk-based margin in order to meet its CFTC
minimum net capital requirement. At December 31, 2019, BofAS
had tentative net capital of $12.5 billion. BofAS also had regulatory
net capital of $10.4 billion which exceeded the minimum
requirement of $2.4 billion.
MLPCC is a fully-guaranteed subsidiary of BofAS and provides
clearing and settlement services. At December 31, 2019, MLPCC’s
regulatory net capital of $5.3 billion exceeded the minimum
requirement of $1.3 billion.
MLPF&S provides retail services. At December 31, 2019,
MLPF&S' regulatory net capital was $4.1 billion which exceeded
the minimum requirement of $102 million.
Our European broker-dealers are regulated by non-U.S.
regulators. MLI, a U.K. investment firm, is regulated by the
Prudential Regulation Authority and the FCA and is subject to
certain regulatory capital requirements. At December 31, 2019,
MLI’s capital resources were $34.8 billion, which exceeded the
minimum Pillar 1 requirement of $13.9 billion. BofASE, a French
investment firm, is regulated by the Autorité de Contrôle Prudentiel
et de Résolution and the Autorité des Marchés Financiers, and is
subject to certain regulatory capital requirements. At December
31, 2019, BofASE's capital resources were $5.5 billion which
exceeded the minimum Pillar 1 requirement of $1.3 billion.
Regulatory Developments
Revisions to Basel 3 to Address Current Expected Credit
Loss Accounting
On January 1, 2020, the Corporation adopted the new accounting
standard that requires the measurement of the allowance for credit
losses to be based on management’s best estimate of lifetime
expected credit losses inherent in the Corporation's relevant
financial assets. For more information, see Note 1 - Summary of
Significant Accounting Principles to the Consolidated Financial
Statements. Our adoption of the standard resulted in a decrease
to the CET1 capital ratio of 17 bps, which will be phased in evenly,
or approximately four bps per year, at the beginning of each year
from January 1, 2020 through January 1, 2023 in accordance with
transition provisions issued by the U.S. banking regulators.
Security-Based Swap Dealer Capital, Margin and
Segregation Requirements
On June 21, 2019, the SEC published a final rule establishing
capital, margin and segregation requirements for security-based
swap dealers (SBSDs). The final rule increases the minimum net
capital requirements for broker-dealers authorized to use internal
models to compute alternative net capital (ANC broker-dealers).
For ANC broker-dealers, the minimum tentative net capital
requirement increased from $1.0 billion to $5.0 billion, and the
net capital requirement was raised to the greater of $1.0 billion
or two percent of the applicable risk-margin amount (initial margin
maintained for cleared and non-cleared security-based swaps) plus
two percent of certain customer-related assets. For stand-alone
SBSDs that use models to calculate haircuts, the minimum
tentative net capital requirement is $100 million and the minimum
net capital requirement is the greater of $20 million or two percent
of the risk-margin amount.
Capital Requirements for Swap Dealers
On December 10, 2019, the CFTC re-opened the comment period
on its 2016 proposal to establish capital requirements for swap
dealers and major swap participants that are not subject to existing
U.S. prudential regulation. Under the proposal, applicable
subsidiaries of the Corporation would be permitted to elect one
of two approaches to compute their regulatory capital. The first
approach is a bank-based capital approach which requires that
firms maintain CET1 capital greater than or equal to the larger of
8.0 percent of the entity’s RWA as calculated under Basel 3, or
8.0 percent of the margin of the entity’s cleared and uncleared
swaps, security-based swaps, futures and foreign futures
positions. The second approach is based on net liquid assets and
requires that a firm maintain net capital greater than or equal to
8.0 percent of the margin as described above. The proposal also
includes liquidity and reporting requirements.
70 70
Bank of America 2019
Bank of America 2019
Single-Counterparty Credit Limits
The Federal Reserve established single-counterparty credit limits
(SCCL) for BHCs with total consolidated assets of $250 billion or
more. The SCCL rule is designed to ensure that the maximum
possible loss that a BHC could incur due to the default of a single
counterparty or a group of connected counterparties would not
endanger the BHC’s survival, thereby reducing the probability of
future financial crises. Beginning January 1, 2020, G-SIBs must
calculate SCCL on a daily basis by dividing the aggregate net credit
exposure to a given counterparty by the G-SIB’s Tier 1 capital,
ensuring that exposures to other G-SIBs and nonbank financial
institutions regulated by the Federal Reserve do not breach 15
percent of Tier 1 capital and exposures to most other
counterparties do not breach 25 percent of Tier 1 capital. Certain
exposures, including exposures to the U.S. government, U.S.
government-sponsored
central
counterparties, are exempt from the credit limits.
qualifying
entities
and
Liquidity Risk
Funding and Liquidity Risk Management
Our primary liquidity risk management objective is to meet
expected or unexpected cash flow and collateral needs while
continuing to support our businesses and customers under a range
of economic conditions. To achieve that objective, we analyze and
monitor our liquidity risk under expected and stressed conditions,
maintain liquidity and access to diverse funding sources, including
our stable deposit base, and seek to align liquidity-related
incentives and risks.
We define liquidity as readily available assets, limited to cash
and high-quality, liquid, unencumbered securities that we can use
to meet our contractual and contingent financial obligations as
those obligations arise. We manage our liquidity position through
line of business and ALM activities, as well as through our legal
entity funding strategy, on both a forward and current (including
intraday) basis under both expected and stressed conditions. We
believe that a centralized approach to funding and liquidity
management enhances our ability
liquidity
requirements, maximizes access to funding sources, minimizes
borrowing costs and facilitates timely responses to liquidity
events.
to monitor
The Board approves our liquidity risk policy and the Financial
Contingency and Recovery Plan. The ERC establishes our liquidity
risk tolerance levels. The MRC is responsible for overseeing
liquidity risks and directing management to maintain exposures
within the established tolerance levels. The MRC reviews and
monitors our liquidity position and stress testing results, approves
certain liquidity risk limits and reviews the impact of strategic
decisions on our liquidity. For more information, see Managing Risk
on page 63. Under this governance framework, we have developed
certain funding and liquidity risk management practices which
include: maintaining liquidity at the parent company and selected
subsidiaries, including our bank subsidiaries and other regulated
entities; determining what amounts of liquidity are appropriate for
these entities based on analysis of debt maturities and other
potential cash outflows, including those that we may experience
during stressed market conditions; diversifying funding sources,
considering our asset profile and legal entity structure; and
performing contingency planning.
NB Holdings Corporation
We have intercompany arrangements with certain key subsidiaries
under which we transferred certain assets of Bank of America
Corporation, as the parent company, which is a separate and
distinct legal entity from our banking and nonbank subsidiaries,
and agreed to transfer certain additional parent company assets
not needed to satisfy anticipated near-term expenditures, to NB
Holdings Corporation, a wholly-owned holding company subsidiary
(NB Holdings). The parent company is expected to continue to have
access to the same flow of dividends, interest and other amounts
of cash necessary to service its debt, pay dividends and perform
other obligations as it would have had if it had not entered into
these arrangements and transferred any assets.
In consideration for the transfer of assets, NB Holdings issued
a subordinated note to the parent company in a principal amount
equal to the value of the transferred assets. The aggregate
principal amount of the note will increase by the amount of any
future asset transfers. NB Holdings also provided the parent
company with a committed line of credit that allows the parent
company to draw funds necessary to service near-term cash
needs. These arrangements support our preferred single point of
entry resolution strategy, under which only the parent company
would be resolved under the U.S. Bankruptcy Code. These
arrangements include provisions to terminate the line of credit,
forgive the subordinated note and require the parent company to
transfer its remaining financial assets to NB Holdings if our
projected liquidity resources deteriorate so severely that resolution
of the parent company becomes imminent.
Global Liquidity Sources and Other Unencumbered Assets
We maintain liquidity available to the Corporation, including the
parent company and selected subsidiaries, in the form of cash
and high-quality, liquid, unencumbered securities. Our liquidity
buffer, referred to as Global Liquidity Sources (GLS), is comprised
of assets that are readily available to the parent company and
selected subsidiaries, including holding company, bank and broker-
dealer subsidiaries, even during stressed market conditions. Our
cash is primarily on deposit with the Federal Reserve Bank and,
to a lesser extent, central banks outside of the U.S. 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
can quickly obtain cash for these securities, even in stressed
conditions, through repurchase agreements or outright sales. We
hold our GLS in legal 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.
Table 16 presents average GLS for the three months ended
December 31, 2019 and 2018.
Table 16 Average Global Liquidity Sources
(Dollars in billions)
Parent company and NB Holdings
Bank subsidiaries
Other regulated entities
Total Average Global Liquidity Sources
Three Months Ended
December 31
2019
2018
$
$
59 $
454
63
576 $
76
420
48
544
Typically, parent company and NB Holdings liquidity is in the
form of cash deposited with BANA.
Our bank subsidiaries’ liquidity is primarily driven by deposit
and lending activity, as well as securities valuation and net debt
activity. Liquidity at bank subsidiaries excludes the cash deposited
by the parent company and NB Holdings. Our bank subsidiaries
can also generate incremental liquidity by pledging a range of
unencumbered loans and securities to certain FHLBs and the
Federal Reserve Discount Window. The cash we could have
Bank of America 2019 71
Bank of America 2019 71
obtained by borrowing against this pool of specifically-identified
eligible assets was $372 billion and $344 billion at December 31,
2019 and 2018. 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.
Eligibility is defined in guidelines from the FHLBs and the Federal
Reserve and is subject to change at their discretion. Due to
regulatory restrictions, liquidity generated by the bank subsidiaries
can generally be used only to fund obligations within the bank
subsidiaries, and transfers to the parent company or nonbank
subsidiaries may be subject to prior regulatory approval.
Liquidity held in other regulated entities, comprised primarily
of broker-dealer subsidiaries, is primarily available to meet the
obligations of that entity and transfers to the parent company or
to any other subsidiary may be subject to prior regulatory approval
due to regulatory restrictions and minimum requirements. Our
other regulated entities also hold unencumbered investment-grade
securities and equities that we believe could be used to generate
additional liquidity.
Table 17 presents the composition of average GLS for the three
months ended December 31, 2019 and 2018.
Table 17 Average Global Liquidity Sources Composition
Three Months Ended
December 31
2019
2018
(Dollars in billions)
Cash on deposit
U.S. Treasury securities
U.S. agency securities and mortgage-backed
securities
Non-U.S. government securities
$
103 $
98
358
17
Total Average Global Liquidity Sources
$
576 $
113
81
340
10
544
Our GLS are substantially the same in composition to what
qualifies as High Quality Liquid Assets (HQLA) under the final U.S.
Liquidity Coverage Ratio (LCR) rules. However, HQLA for purposes
of calculating LCR is not reported at market value, but at a lower
value that incorporates regulatory deductions and the exclusion
of excess liquidity held at certain subsidiaries. The LCR is
calculated as the amount of a financial institution’s unencumbered
HQLA relative to the estimated net cash outflows the institution
could encounter over a 30-day period of significant liquidity stress,
expressed as a percentage. Our average consolidated HQLA, on
a net basis, was $464 billion and $446 billion for the three months
ended December 31, 2019 and 2018. For the same periods, the
average consolidated LCR was 116 percent and 118 percent. Our
LCR
fluctuates due to normal business flows from customer
activity.
Liquidity Stress Analysis
We utilize liquidity stress analysis to assist us in determining the
appropriate amounts of liquidity to maintain at the parent company
and our subsidiaries to meet contractual and contingent cash
outflows under a range of scenarios. The scenarios we consider
and utilize incorporate market-wide and Corporation-specific
events, including potential credit rating downgrades for the parent
company and our subsidiaries, and more severe events including
potential resolution scenarios. The scenarios are based on our
historical experience, experience of distressed and failed financial
institutions, regulatory guidance, and both expected and
unexpected future events.
The types of potential contractual and contingent cash outflows
we consider in our scenarios may include, but are not limited to,
upcoming contractual maturities of unsecured debt and reductions
in new debt issuance; diminished access to secured financing
72 72
Bank of America 2019
Bank of America 2019
markets; potential deposit withdrawals; increased draws on loan
commitments, liquidity facilities and letters of credit; additional
collateral that counterparties could call if our credit ratings were
downgraded; collateral and margin requirements arising from
market value changes; and potential liquidity required to maintain
businesses and finance customer activities. Changes in certain
market factors, including, but not limited to, credit rating
downgrades, could negatively impact potential contractual and
contingent outflows and the related financial instruments, and in
some cases these impacts could be material to our financial
results.
We consider all sources of funds that we could access during
each stress scenario and focus particularly on matching available
sources with corresponding liquidity requirements by legal entity.
We also use the stress modeling results to manage our asset and
liability profile and establish limits and guidelines on certain
funding sources and businesses.
Net Stable Funding Ratio
U.S. banking regulators issued a proposal for a Net Stable Funding
Ratio (NSFR) requirement applicable to U.S. financial institutions
following the Basel Committee’s final standard. The proposed U.S.
NSFR would apply to the Corporation on a consolidated basis and
to our insured depository institutions. While the final requirement
remains pending and is subject to change, if finalized as proposed,
we expect to be in compliance within the regulatory timeline. The
standard is intended to reduce funding risk over a longer time
horizon. The NSFR is designed to provide an appropriate amount
of stable funding, generally capital and liabilities maturing beyond
one year, given the mix of assets and off-balance sheet items.
Diversified Funding Sources
We fund our assets primarily with a mix of deposits, and secured
through a centralized, globally
and unsecured
coordinated funding approach diversified across products,
programs, markets, currencies and investor groups.
liabilities
The primary benefits of our centralized funding approach
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.
We fund a substantial portion of our lending activities through
our deposits, which were $1.43 trillion and $1.38 trillion at
December 31, 2019 and 2018. Deposits are primarily generated
by our Consumer Banking, GWIM and Global Banking segments.
These deposits are diversified by clients, product type and
geography, and the majority 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 lending activities may also be
financed through secured borrowings, including credit card
securitizations and securitizations with government-sponsored
enterprises (GSE), the FHA and private-label investors, as well as
FHLB loans.
Our trading activities in other regulated entities are primarily
funded on a secured basis through securities lending and
repurchase agreements, and 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. For
more information on secured financing agreements, see Note 11
– Federal Funds Sold or Purchased, Securities Financing
Agreements, Short-term Borrowings and Restricted Cash to the
Consolidated Financial Statements.
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.
Table 18 presents our long-term debt by major currency at
December 31, 2019 and 2018.
Table 18 Long-term Debt by Major Currency
(Dollars in millions)
U.S. dollar
Euro
British pound
Japanese yen
Canadian dollar
Australian dollar
Other
December 31
2019
2018
$
191,284 $
32,781
5,067
4,310
3,857
1,957
1,600
240,856 $
180,724
34,328
5,450
3,038
2,936
1,722
1,194
229,392
Total long-term debt
$
Total long-term debt increased $11.5 billion during 2019,
primarily due to debt issuances and valuation adjustments,
partially offset by maturities and redemptions. We may, from time
to time, purchase outstanding debt instruments in various
transactions, depending on market conditions, liquidity and other
factors. Our other regulated entities may also make markets in
our debt instruments to provide liquidity for investors.
During 2019, the Corporation issued $52.5 billion of long-term
debt consisting of $29.3 billion of notes issued by Bank of America
Corporation, substantially all of which was TLAC compliant, $10.9
billion of notes issued by Bank of America, N.A. and $12.3 billion
of other debt, substantially all of which was structured liabilities.
During 2018, the Corporation issued $64.4 billion of long-term
debt consisting of $30.7 billion of notes issued by Bank of America
Corporation, substantially all of which was TLAC compliant, $18.7
billion of notes issued by Bank of America, N.A. and $15.0 billion
of other debt, substantially all of which was structured liabilities.
During 2019, the Corporation had total long-term debt
maturities and redemptions in the aggregate of $50.6 billion
consisting of $21.1 billion for Bank of America Corporation, $19.9
billion for Bank of America, N.A. and $9.6 billion of other debt.
During 2018, the Corporation had total long-term debt maturities
and redemptions in the aggregate of $53.3 billion consisting of
$29.8 billion for Bank of America Corporation, $11.2 billion for
Bank of America, N.A. and $12.3 billion of other debt.
At December 31, 2019, Bank of America Corporation's senior
notes of $159.8 billion included $107.7 billion of outstanding
notes that are both TLAC eligible and callable at least one year
before their stated maturities. Of these senior notes, $7.4 billion
will be callable and become TLAC ineligible during 2020, and $11.7
billion, $14.8 billion, $10.7 billion and $9.2 billion will do so during
each of 2021 through 2024, respectively, and $53.9 billion
thereafter.
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 more information
on our ALM activities, see Interest Rate Risk Management for the
Banking Book on page 95.
We may issue unsecured debt in the form of structured notes
for client purposes, certain of which qualify as TLAC-eligible debt.
During 2019, we issued $9.6 billion of structured notes, which are
debt obligations that pay investors returns linked to other debt or
equity securities, indices, currencies or commodities. We typically
hedge the returns we are obligated to pay on these liabilities with
derivatives and/or investments 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 settle certain
structured note obligations for cash or other securities prior to
maturity 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.
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. For more
information on long-term debt funding, including issuances and
maturities and redemptions, see Note 12 – Long-term Debt to the
Consolidated Financial Statements.
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 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
over-the-counter (OTC) derivatives. Thus, it is our objective to
maintain high-quality credit ratings, and management maintains
an active dialogue with the major rating agencies.
Credit ratings and outlooks are opinions expressed by rating
agencies 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 rating agencies, and they consider a number of factors,
including our own financial strength, performance, prospects and
operations as well as factors not under our control. The rating
Bank of America 2019 73
Bank of America 2019 73
agencies could make adjustments to our ratings at any time, and
they provide no assurances that they will maintain our ratings at
current levels.
Lynch International Designated Activity Company, which Fitch
upgraded by one notch to AA-/F1+. The rating outlook for all long-
term ratings is currently stable.
Other factors that influence our credit ratings include changes
to the rating agencies’ methodologies for our industry or certain
security types; the rating agencies’ assessment of the general
operating environment for financial services companies; our
relative positions in the markets in which we compete; our various
risk exposures and risk management policies and activities;
pending litigation and other contingencies or potential tail risks;
our reputation; our liquidity position, diversity of funding sources
and funding costs; the current and expected level and volatility of
our earnings; our capital position and capital management
practices; our corporate governance; the sovereign credit ratings
of the U.S. government; current or future regulatory and legislative
initiatives; and the agencies’ views on whether the U.S.
government would provide meaningful support to the Corporation
or its subsidiaries in a crisis.
On June 12, 2019, Fitch Ratings (Fitch) completed its periodic
review of the 12 large, complex securities trading and universal
banks, including Bank of America Corporation. The agency affirmed
the long-term and short-term senior debt ratings of the Corporation
and all of its rated subsidiaries, except Bank of America Merrill
On March 6, 2019, Moody’s Investors Service (Moody’s)
upgraded the long-term and short-term ratings of the Corporation
by one notch to A2/P-1 from A3/P-2 for senior debt, as well as the
long-term ratings of its rated subsidiaries, including BANA, which
the agency upgraded to Aa2 from Aa3 for senior debt. Moody’s
concurrently affirmed the short-term ratings of the Corporation’s
rated subsidiaries,
the
Corporation’s strengthening profitability, continued adherence to
a conservative risk profile and stable capital ratios as rationale
for the upgrade. The rating outlook for all long-term ratings is
currently stable.
including BANA. Moody’s cited
The ratings from Standard & Poor’s Global Ratings (S&P) for
the Corporation and its subsidiaries did not change during 2019.
The long-term and short-term debt ratings of BofAS and BofASE,
which were initially rated by S&P during the first quarter 2019,
also remained unchanged during the rest of 2019.
Table 19 presents the Corporation’s current long-term/short-
term senior debt ratings and outlooks expressed by the rating
agencies.
Table 19 Senior Debt Ratings
Bank of America Corporation
Bank of America, N.A.
Bank of America Merrill Lynch International
Designated Activity Company
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
BofA Securities, Inc.
Merrill Lynch International
BofA Securities Europe SA
NR = not rated
A2
Aa2
NR
NR
NR
NR
NR
P-1
P-1
NR
NR
NR
NR
NR
Moody’s Investors Service
Short-term
Long-term
Standard & Poor’s Global Ratings
Short-term
Long-term
Outlook
Stable
Stable
NR
NR
NR
NR
NR
A-
A+
A+
A+
A+
A+
A+
A-2
A-1
A-1
A-1
A-1
A-1
A-1
Outlook
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Long-term
Fitch Ratings
Short-term
A+
AA-
AA-
AA-
AA-
A+
A+
F1
F1+
F1+
F1+
F1+
F1
F1
Outlook
Stable
Stable
Stable
Stable
Stable
Stable
Stable
in
those
businesses where
A reduction in certain of our credit ratings or the ratings of
certain asset-backed securitizations may have a material adverse
effect on our liquidity, potential loss of access to credit markets,
the related cost of funds, our businesses and on certain revenues,
particularly
counterparty
creditworthiness is critical. In addition, under the terms of certain
OTC derivative contracts and other trading agreements, in the
event of downgrades of our or our rated subsidiaries’ credit ratings,
the counterparties to those agreements may require us to provide
additional collateral, or to terminate these contracts or
agreements, which could cause us to sustain losses and/or
adversely impact our liquidity. If the short-term credit ratings of
our parent company, bank or broker-dealer subsidiaries were
downgraded by one or more levels, the potential loss of access to
short-term funding sources such as repo financing and the effect
on our incremental cost of funds could be material.
While certain potential
impacts are contractual and
quantifiable, the full scope of the consequences of a credit rating
downgrade to a financial institution is inherently uncertain, as it
depends upon numerous dynamic, complex and inter-related
factors and assumptions, including whether any downgrade of a
company’s long-term credit ratings precipitates downgrades to its
short-term credit ratings, and assumptions about the potential
behaviors of various customers, investors and counterparties. For
more information on potential impacts of credit rating downgrades,
see Liquidity Risk – Liquidity Stress Analysis on page 72.
74 74
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Bank of America 2019
For more information on additional collateral and termination
payments that could be required in connection with certain OTC
derivative contracts and other trading agreements as a result of
such a credit rating downgrade, see Note 3 – Derivatives to the
Consolidated Financial Statements and Item 1A. Risk Factors of
our 2019 Annual Report on Form 10-K.
Common Stock Dividends
For a summary of our declared quarterly cash dividends on
common stock during 2019 and through February 19, 2020, see
Note 14 – Shareholders’ Equity to the Consolidated Financial
Statements.
Credit Risk Management
Credit risk is the risk of loss arising from the inability or failure of
a borrower or counterparty to meet its obligations. Credit risk can
also arise from operational failures that result in an erroneous
advance, commitment or investment of funds. We define the credit
exposure to a borrower or counterparty as the loss potential arising
from all product classifications including loans and leases, deposit
overdrafts, derivatives, assets held-for-sale and unfunded lending
commitments which include loan commitments, letters of credit
and financial guarantees. Derivative positions are recorded at fair
value and assets held-for-sale are recorded at either fair value or
the lower of cost or fair value. Certain loans and unfunded
commitments are accounted for under the fair value option. Credit
risk for categories of assets carried at fair value is not accounted
for as part of the allowance for credit losses but as part of the fair
value adjustments recorded in earnings. For derivative positions,
our credit risk is measured as the net cost in the event the
counterparties with contracts in which we are in a gain position
fail to perform under the terms of those contracts. We use the
current fair value to represent credit exposure without giving
consideration to future mark-to-market changes. The credit risk
amounts take into consideration the effects of legally enforceable
master netting agreements and cash collateral. Our consumer and
commercial credit extension and review procedures encompass
funded and unfunded credit exposures. For more information on
derivatives and credit extension commitments, see Note 3 –
Derivatives and Note 13 – Commitments and Contingencies to the
Consolidated Financial Statements.
We manage credit risk based on the risk profile of the borrower
or counterparty, repayment sources, the nature of underlying
collateral, and other support given current events, conditions and
expectations. We classify our portfolios as either consumer or
commercial and monitor credit risk in each as discussed below.
We refine our underwriting and credit risk management
practices as well as credit standards to meet the changing
economic environment. To mitigate losses and enhance customer
support in our consumer businesses, we have in place collection
programs and loan modification and customer assistance
infrastructures. We utilize 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 enter
criticized categories.
For more information on our credit risk management activities,
see Consumer Portfolio Credit Risk Management below,
Commercial Portfolio Credit Risk Management on page 81, Non-
U.S. Portfolio on page 87, Provision for Credit Losses on page 89,
Allowance for Credit Losses on page 89, and Note 5 – Outstanding
Loans and Leases and Note 6 – Allowance for Credit Losses to the
Consolidated Financial Statements.
Table 20 Consumer Credit Quality
(Dollars in millions)
Residential mortgage (1)
Home equity
Credit card
Direct/Indirect consumer (2)
Other consumer
Consumer loans excluding loans accounted for under the fair value option
Loans accounted for under the fair value option (3)
Total consumer loans and leases
Percentage of outstanding consumer loans and leases (4)
Percentage of outstanding consumer loans and leases, excluding fully-insured
loan portfolios (4)
$
$
$
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 and are a
component of our consumer credit risk management process.
These models are used in part to assist in making both new and
ongoing credit decisions, as well as portfolio management
strategies, including authorizations and line management,
collection practices and strategies, and determination of the
allowance for loan and lease losses and allocated capital for credit
risk.
Consumer Credit Portfolio
Improvement in home prices continued during 2019 resulting in
improved credit quality compared to 2018. Net recoveries in the
consumer real estate portfolio due primarily to non-core loan sales
were partially offset by seasoning in the credit card portfolio
compared to 2018.
Improved credit quality and continued loan balance runoff
primarily in the non-core consumer real estate portfolio, partially
offset by seasoning within the credit card portfolio, drove a $260
million decrease in the consumer allowance for loan and lease
losses in 2019 to $4.5 billion. For more information, see Allowance
for Credit Losses on page 89.
For more information on our accounting policies regarding
delinquencies, nonperforming status, charge-offs and troubled
debt restructurings (TDRs) for the consumer portfolio, see Note 1
– Summary of Significant Accounting Principles and Note 5 –
Outstanding Loans and Leases to the Consolidated Financial
Statements.
Table 20 presents our outstanding consumer loans and leases,
consumer nonperforming loans and accruing consumer loans past
due 90 days or more.
Outstandings
Nonperforming
December 31
Accruing Past Due
90 Days or More
2018
40,208
97,608
90,998
192
2019
236,169 $ 208,557
48,286
98,338
91,166
202
465,175 $ 446,549
682
465,769 $ 447,231
n/a
594
n/a
2019
2018
2019
2018
$
$
1,470
536
n/a
47
—
2,053
$
$
1,893
1,893
n/a
56
—
3,842
$
$
1,088
—
1,042
33
—
2,163
$
$
1,884
—
994
38
—
2,916
0.44%
0.86%
0.47%
0.65%
n/a
n/a
0.46
0.90
0.24
0.24
(1) Residential mortgage loans accruing past due 90 days or more are fully-insured loans. At December 31, 2019 and 2018, residential mortgage includes $740 million and $1.4 billion of loans on
which interest had been curtailed by the FHA, and therefore were no longer accruing interest, although principal was still insured, and $348 million and $498 million of loans on which interest was
still accruing.
(2) Outstandings primarily include auto and specialty lending loans and leases of $50.4 billion and $50.1 billion, U.S. securities-based lending loans of $36.7 billion and $37.0 billion and non-U.S.
consumer loans of $2.8 billion and $2.9 billion at December 31, 2019 and 2018.
(3) Consumer loans accounted for under the fair value option include residential mortgage loans of $257 million and $336 million and home equity loans of $337 million and $346 million at December
31, 2019 and 2018. For more information on the fair value option, see Note 22 – Fair Value Option to the Consolidated Financial Statements.
(4) Excludes consumer loans accounted for under the fair value option. At December 31, 2019 and 2018, $6 million and $12 million of loans accounted for under the fair value option were past due
90 days or more and not accruing interest.
n/a = not applicable
Bank of America 2019 75
Bank of America 2019 75
Table 21 presents net charge-offs and related ratios for consumer loans and leases.
Table 21 Consumer Net Charge-offs and Related Ratios
(Dollars in millions)
Residential mortgage
Home equity
Credit card
Direct/Indirect consumer
Other consumer
Total
Net Charge-offs
2019
2018
Net Charge-off Ratios (1)
2019
2018
$
(47) $
(358)
2,948
209
234
$
2,986 $
28
(2)
2,837
195
182
3,240
(0.02)%
(0.81)
3.12
0.23
n/m
0.66
0.01%
—
3.00
0.21
n/m
0.72
(1) Net charge-off ratios are calculated as net charge-offs divided by average outstanding loans and leases excluding loans accounted for under the fair value option.
n/m = not meaningful
Table 22 presents outstandings, nonperforming balances, net
charge-offs, allowance for loan and lease losses and provision for
loan and lease losses for the core and non-core portfolios within
the consumer real estate portfolio. We categorize consumer real
estate loans as core and non-core based on loan and customer
characteristics such as origination date, product type, loan-to-value
(LTV), Fair Isaac Corporation (FICO) score and delinquency status
consistent with our current consumer and mortgage servicing
strategy. Generally, loans that were originated after January 1,
2010, qualified under GSE underwriting guidelines, or otherwise
met our underwriting guidelines in place in 2015 are characterized
as core loans. All other loans are generally characterized as non-
core loans and represent runoff portfolios. Core loans as reported
in Table 22 include loans held in the Consumer Banking and GWIM
segments, as well as loans held for ALM activities in All Other.
As shown in Table 22, outstanding core consumer real estate
loans increased $27.3 billion during 2019 driven by an increase
of $32.1 billion in residential mortgage, partially offset by a $4.8
billion decrease in home equity.
During 2019, we sold $4.7 billion of consumer real estate
loans, primarily non-core, compared to $11.6 billion in 2018.
Table 22 Consumer Real Estate Portfolio (1)
(Dollars in millions)
Core portfolio
Residential mortgage
Home equity
Total core portfolio
Non-core portfolio
Residential mortgage
Home equity
Total non-core portfolio
Consumer real estate portfolio
Residential mortgage
Home equity
Outstandings
Nonperforming
2019
2018
2019
2018
2019
2018
December 31
Net Charge-offs
$
225,770 $
193,695 $
35,226
260,996
40,010
233,705
883 $
363
1,246
1,010 $
955
1,965
7 $
51
58
10,399
4,982
15,381
14,862
8,276
23,138
236,169
40,208
208,557
48,286
587
173
760
1,470
536
883
938
1,821
(54)
(409)
(463)
1,893
1,893
3,786 $
(47)
(358)
(405) $
11
78
89
17
(80)
(63)
28
(2)
26
Total consumer real estate portfolio
$
276,377 $
256,843 $
2,006 $
Core portfolio
Residential mortgage
Home equity
Total core portfolio
Non-core portfolio
Residential mortgage
Home equity
Total non-core portfolio
Consumer real estate portfolio
Allowance for Loan
and Lease Losses
December 31
Provision for Loan
and Lease Losses
2019
2018
2019
2018
$
$
229
120
349
96
101
197
$
214
228
442
208
278
486
$
22
(58)
(36)
(134)
(510)
(644)
7
(60)
(53)
(104)
(335)
(439)
Residential mortgage
Home equity
(97)
(395)
(492)
(1) Outstandings and nonperforming loans exclude loans accounted for under the fair value option. Consumer loans accounted for under the fair value option include residential mortgage loans of $257
million and $336 million and home equity loans of $337 million and $346 million at December 31, 2019 and 2018. For more information, see Note 22 – Fair Value Option to the Consolidated Financial
Statements.
Total consumer real estate portfolio
422
506
928 $
(112)
(568)
(680) $
325
221
546 $
$
76 Bank of America 2019
Bank of America 2019
76
We believe that the presentation of information adjusted to
exclude the impact of the fully-insured loan portfolio and loans
accounted for under the fair value option is more representative
of the ongoing operations and credit quality of the business. As a
result, in the following tables and discussions of the residential
mortgage and home equity portfolios, we exclude loans accounted
for under the fair value option and provide information that
excludes the impact of the fully-insured loan portfolio in certain
credit quality statistics.
Residential Mortgage
The residential mortgage portfolio made up the largest percentage
of our consumer loan portfolio at 51 percent of consumer loans
and leases at December 31, 2019. Approximately 50 percent of
the residential mortgage portfolio was in Consumer Banking and
36 percent was in GWIM. The remaining portion was in All Other
and was comprised of loans used in our overall ALM activities,
delinquent FHA loans repurchased pursuant to our servicing
agreements with the Government National Mortgage Association
as well as loans repurchased related to our representations and
warranties.
Outstanding balances in the residential mortgage portfolio
increased $27.6 billion in 2019 as retention of new originations
was partially offset by loan sales of $2.7 billion and runoff.
At December 31, 2019 and 2018, the residential mortgage
portfolio included $18.7 billion and $20.1 billion of outstanding
fully-insured loans, of which $11.2 billion and $14.0 billion had
FHA insurance with the remainder protected by long-term standby
agreements.
Table 23 presents certain residential mortgage key credit
statistics on both a reported basis and excluding the fully-insured
loan portfolio. The following discussion presents the residential
mortgage portfolio excluding the fully-insured loan portfolio.
Table 23 Residential Mortgage – Key Credit Statistics
(Dollars in millions)
Outstandings
Accruing past due 30 days or more
Accruing past due 90 days or more
Nonperforming loans
Percent of portfolio
Refreshed LTV greater than 90 but less than or equal to 100
Refreshed LTV greater than 100
Refreshed FICO below 620
2006 and 2007 vintages (2)
Reported Basis (1)
Excluding Fully-insured Loans (1)
$
2019
236,169
3,108
1,088
1,470
$
December 31
2018
208,557
3,945
1,884
1,893
2019
$ 217,479
1,296
—
1,470
$
2018
188,427
1,155
—
1,893
2%
1
3
4
2%
1
4
6
2%
1
2
4
2%
1
2
6
(1) Outstandings, accruing past due, nonperforming loans and percentages of portfolio exclude loans accounted for under the fair value option.
(2) These vintages of loans accounted for $365 million, or 25 percent, and $536 million, or 28 percent, of nonperforming residential mortgage loans at December 31, 2019 and 2018.
Nonperforming residential mortgage loans decreased $423
million in 2019 primarily driven by sales. Of the nonperforming
residential mortgage loans at December 31, 2019, $616 million,
or 42 percent, were current on contractual payments. Loans
accruing past due 30 days or more increased $141 million.
Net charge-offs improved $75 million to a net recovery of $47
million in 2019 compared to net charge-offs of $28 million in 2018
primarily due to recoveries from the sales of previously charged-
off loans and continued improvement in credit quality.
Of the $217.5 billion in total residential mortgage loans
outstanding at December 31, 2019, as shown in Table 23, 26
percent were originated as interest-only loans. The outstanding
balance of interest-only residential mortgage loans that have
entered the amortization period was $7.4 billion, or 13 percent,
at December 31, 2019. Residential mortgage loans that have
entered the amortization period generally have experienced a
higher rate of early stage delinquencies and nonperforming status
compared to the residential mortgage portfolio as a whole. At
December 31, 2019, $124 million, or two percent, of outstanding
interest-only residential mortgages that had entered the
amortization period were accruing past due 30 days or more
compared to $1.3 billion, or one percent, for the entire residential
mortgage portfolio. In addition, at December 31, 2019, $260
million, or four percent, of outstanding interest-only residential
mortgage loans that had entered the amortization period were
nonperforming, of which $108 million were contractually current,
compared to $1.5 billion, or one percent, for the entire residential
mortgage portfolio. Loans that have yet to enter the amortization
period in our interest-only residential mortgage portfolio are
primarily well-collateralized loans to our wealth management
clients and have an interest-only period of three to ten years.
Approximately 94 percent of these loans that have yet to enter the
amortization period will not be required to make a fully-amortizing
payment until 2022 or later.
Table 24 presents outstandings, nonperforming loans and net
charge-offs by certain state concentrations for the residential
mortgage portfolio. The Los Angeles-Long Beach-Santa Ana
Metropolitan Statistical Area (MSA) within California represented
16 percent of outstandings at both December 31, 2019 and 2018.
In the New York area, the New York-Northern New Jersey-Long
Island MSA made up 13 percent of outstandings at both December
31, 2019 and 2018.
Bank of America 2019 77
Bank of America 2019 77
Table 24 Residential Mortgage State Concentrations
(Dollars in millions)
California
New York
Florida
Texas
New Jersey
Other
Residential mortgage loans
Fully-insured loan portfolio
Total residential mortgage loan portfolio
Outstandings (1)
Nonperforming (1)
2019
2018
2019
2018
2019
2018
December 31
Net Charge-offs
88,998 $
22,385
12,833
8,943
8,734
75,586
76,323 $
19,219
11,624
7,820
7,051
66,390
274 $
196
143
65
77
715
217,479 $
188,427 $
1,470 $
314 $
222
221
102
98
936
1,893 $
(22) $
5
(12)
1
(4)
(15)
(47) $
(22)
10
(6)
4
8
34
28
18,690
236,169 $
20,130
208,557
$
$
$
(1) Outstandings and nonperforming loans exclude loans accounted for under the fair value option.
Home Equity
At December 31, 2019, the home equity portfolio made up nine
percent of the consumer portfolio and was comprised of home
equity lines of credit (HELOCs), home equity loans and reverse
mortgages. We no longer originate home equity loans or reverse
mortgages.
At December 31, 2019, our HELOC portfolio had an outstanding
balance of $37.5 billion, or 93 percent of the total home equity
portfolio, compared to $44.3 billion, or 92 percent, at December
31, 2018. HELOCs generally have an initial draw period of 10
years, and after the initial draw period ends, the loans generally
convert to 15- or 20-year amortizing loans.
At December 31, 2019, our home equity loan portfolio had an
outstanding balance of $1.2 billion, or three percent of the total
home equity portfolio, compared to $1.8 billion, or four percent,
at December 31, 2018. At December 31, 2019, our reverse
mortgage portfolio had an outstanding balance of $1.5 billion, or
four percent of the total home equity portfolio, compared to $2.2
billion, also four percent, at December 31, 2018.
At December 31, 2019, 80 percent of the home equity portfolio
was in Consumer Banking, 12 percent was in All Other and the
remainder of the portfolio was primarily in GWIM. Outstanding
balances in the home equity portfolio decreased $8.1 billion in
2019 primarily due to paydowns and loan sales of $2.0 billion
outpacing new originations and draws on existing lines. Of the total
home equity portfolio at December 31, 2019 and 2018, $15.0
billion, or 37 percent, and $17.3 billion, or 36 percent, were in
first-lien positions. At December 31, 2019, outstanding balances
in the home equity portfolio that were in a second-lien or more
junior-lien position and where we also held the first-lien loan totaled
$6.9 billion, or 17 percent of our total home equity portfolio.
Unused HELOCs totaled $43.6 billion and $43.1 billion at
December 31, 2019 and 2018. The increase was primarily driven
by the impact of lower utilization of open lines and new production
partially offset by customers choosing to close accounts. The
HELOC utilization rate was 46 percent and 51 percent at December
31, 2019 and 2018.
Table 25 presents certain home equity portfolio key credit
statistics.
Table 25 Home Equity – Key Credit Statistics (1)
(Dollars in millions)
Outstandings
Accruing past due 30 days or more (2)
Nonperforming loans (2)
Percent of portfolio
Refreshed CLTV greater than 90 but less than or equal to 100
Refreshed CLTV greater than 100
Refreshed FICO below 620
2006 and 2007 vintages (3)
December 31
$
2019
40,208
218
536
$
2018
48,286
363
1,893
1%
2
3
18
2%
3
5
22
(1) Outstandings, accruing past due, nonperforming loans and percentages of the portfolio exclude loans accounted for under the fair value option.
(2) Accruing past due 30 days or more include $30 million and $48 million and nonperforming loans include $57 million and $218 million of loans where we serviced the underlying first lien at December
31, 2019 and 2018.
(3) These vintages of loans accounted for 34 percent and 49 percent of nonperforming home equity loans at December 31, 2019 and 2018.
Nonperforming outstanding balances in the home equity
portfolio decreased $1.4 billion in 2019 as outflows, primarily
sales, outpaced new inflows. Of the nonperforming home equity
loans at December 31, 2019, $241 million, or 45 percent, were
current on contractual payments. Nonperforming loans that are
contractually current primarily consist of collateral-dependent
TDRs, including those that have been discharged in Chapter 7
bankruptcy, junior-lien loans where the underlying first lien is 90
days or more past due, as well as loans that have not yet
demonstrated a sustained period of payment performance
following a TDR. In addition, $162 million, or 30 percent, of
nonperforming home equity loans were 180 days or more past due
and had been written down to the estimated fair value of the
collateral, less costs to sell. Accruing loans that were 30 days or
more past due decreased $145 million in 2019.
Net charge-offs decreased $356 million to a net recovery of
$358 million in 2019 compared to a net recovery of $2 million in
2018 primarily driven by recoveries from the sales of previously
charged off non-core home equity loans.
Of the $40.2 billion in total home equity portfolio outstandings
at December 31, 2019, as shown in Table 25, 17 percent require
interest-only payments. The outstanding balance of HELOCs that
have reached the end of their draw period and have entered the
amortization period was $11.5 billion at December 31, 2019. The
HELOCs that have entered the amortization period have
experienced a higher percentage of early stage delinquencies and
78 78
Bank of America 2019
Bank of America 2019
nonperforming status when compared to the HELOC portfolio as
a whole. At December 31, 2019, $149 million, or one percent, of
outstanding HELOCs that had entered the amortization period were
accruing past due 30 days or more. In addition, at December 31,
2019, $472 million, or four percent, were nonperforming. Loans
that have yet to enter the amortization period in our interest-only
portfolio are primarily post-2008 vintages and generally have
better credit quality than the previous vintages that had entered
the amortization period. We communicate to contractually current
customers more than a year prior to the end of their draw period
to inform them of the potential change to the payment structure
before entering the amortization period, and provide payment
options to customers prior to the end of the draw period.
Although we do not actively track how many of our home equity
customers pay only the minimum amount due on their home equity
Table 26 Home Equity State Concentrations
loans and lines, we can infer some of this information through a
review of our HELOC portfolio that we service and that is still in
its revolving period. During 2019, 13 percent of these customers
with an outstanding balance did not pay any principal on their
HELOCs.
Table 26 presents outstandings, nonperforming balances and
net charge-offs by certain state concentrations for the home equity
portfolio. In the New York area, the New York-Northern New Jersey-
Long Island MSA made up 13 percent of the outstanding home
equity portfolio at both December 31, 2019 and 2018. The Los
Angeles-Long Beach-Santa Ana MSA within California made up 11
percent of the outstanding home equity portfolio at both December
31, 2019 and 2018.
(Dollars in millions)
California
Florida
New Jersey
New York
Massachusetts
Other
Total home equity loan portfolio
Outstandings (1)
Nonperforming (1)
2019
2018
2019
2018
2019
2018
December 31
Net Charge-offs
$
$
11,232 $
4,327
3,216
2,899
2,023
16,511
40,208 $
13,515 $
5,418
3,871
3,590
2,400
19,492
48,286 $
101 $
71
56
85
29
194
536 $
536 $
315
150
194
65
633
1,893 $
(117) $
(74)
(8)
(1)
(5)
(153)
(358) $
(54)
1
25
23
5
(2)
(2)
(1) Outstandings and nonperforming loans exclude loans accounted for under the fair value option.
Credit Card
At December 31, 2019, 97 percent of the credit card portfolio was
managed in Consumer Banking with the remainder in GWIM.
Outstandings in the credit card portfolio decreased $730 million
in 2019 to $97.6 billion. In 2019, net charge-offs increased $111
million to $2.9 billion compared to net charge-offs of $2.8 billion
in 2018. Credit card loans 30 days or more past due and still
accruing interest increased $46 million and loans 90 days or more
past due and still accruing interest increased $48 million. These
increases were driven by portfolio seasoning.
Unused lines of credit for credit card increased to $336.9 billion
at December 31, 2019 from $334.8 billion at December 31, 2018.
Table 27 presents certain state concentrations for the credit
card portfolio.
Table 27 Credit Card State Concentrations
(Dollars in millions)
California
Florida
Texas
New York
Washington
Other
Total credit card portfolio
Outstandings
Accruing Past Due
90 Days or More
2019
2018
2019
2018
2019
2018
December 31
Net Charge-offs
$
$
16,135 $
9,075
7,815
5,975
4,639
53,969
97,608 $
16,062 $
8,840
7,730
6,066
4,558
55,082
98,338 $
178 $
135
93
80
26
530
1,042 $
163 $
119
84
81
24
523
994 $
526 $
363
241
243
71
1,504
2,948 $
479
332
224
268
63
1,471
2,837
Direct/Indirect Consumer
At December 31, 2019, 56 percent of the direct/indirect portfolio
was included in Consumer Banking (consumer auto and specialty
lending – automotive, recreational vehicle, marine, aircraft and
consumer personal loans) and 44 percent was included in GWIM
(principally securities-based lending loans).
Outstandings of $91.0 billion in the direct/indirect portfolio
were relatively unchanged at December 31, 2019.
Table 28 presents certain state concentrations for the direct/
indirect consumer loan portfolio.
Bank of America 2019 79
Bank of America 2019 79
Table 28 Direct/Indirect State Concentrations
(Dollars in millions)
California
Florida
Texas
New York
New Jersey
Other
Total direct/indirect loan portfolio
Outstandings
Accruing Past Due
90 Days or More
2019
2018
2019
2018
2019
2018
December 31
Net Charge-offs
$
$
11,912 $
10,154
9,516
6,394
3,468
49,554
90,998 $
11,734 $
10,240
9,876
6,296
3,308
49,712
91,166 $
4 $
4
5
1
1
18
33 $
4 $
4
6
2
1
21
38 $
49 $
27
29
12
4
88
209 $
21
36
30
9
2
97
195
Nonperforming Consumer Loans, Leases and Foreclosed
Properties Activity
Table 29 presents nonperforming consumer loans, leases and
foreclosed properties activity during 2019 and 2018. During 2019,
nonperforming consumer loans decreased $1.8 billion to $2.1
billion primarily driven by loan sales of $1.5 billion.
At December 31, 2019, $606 million, or 29 percent, of
nonperforming loans were 180 days or more past due and had
been written down to their estimated property value less costs to
sell. In addition, at December 31, 2019, $901 million, or 44
percent, of nonperforming consumer loans were modified and are
now current after successful trial periods, or are current loans
classified as nonperforming loans in accordance with applicable
policies.
Foreclosed properties decreased $15 million in 2019 to $229
million as liquidations outpaced additions.
Nonperforming loans also include certain loans that have been
modified in TDRs where economic concessions have been granted
to borrowers experiencing financial difficulties. Nonperforming
TDRs are included in Table 29.
Table 29 Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity
2019
2018
$
3,842
1,407
$
5,166
2,440
(701)
(1,523)
(766)
(111)
(95)
—
(1,789)
2,053
229
2,282
$
(958)
(969)
(1,283)
(401)
(151)
(2)
(1,324)
3,842
244
4,086
0.44%
0.86%
0.49
0.92
(Dollars in millions)
Nonperforming loans and leases, January 1
Additions
Reductions:
Paydowns and payoffs
Sales
Returns to performing status (1)
Charge-offs
Transfers to foreclosed properties
Transfers to loans held-for-sale
Total net reductions to nonperforming loans and leases
Total nonperforming loans and leases, December 31
Foreclosed properties, December 31 (2)
Nonperforming consumer loans, leases and foreclosed properties, December 31
$
Nonperforming consumer loans and leases as a percentage of outstanding consumer loans and leases (3)
Nonperforming consumer loans, leases and foreclosed properties as a percentage of outstanding consumer loans, leases and
foreclosed properties (3)
(1) Consumer loans may be returned to performing status when all principal and interest is current and full repayment of the remaining contractual principal and interest is expected, or when the loan
otherwise becomes well-secured and is in the process of collection.
(2) Foreclosed property balances do not include properties insured by certain government-guaranteed loans, principally FHA-insured, of $260 million and $488 million at December 31, 2019 and 2018.
(3) Outstanding consumer loans and leases exclude loans accounted for under the fair value option.
Table 30 presents TDRs for the consumer real estate portfolio. Performing TDR balances are excluded from nonperforming loans
and leases in Table 29.
Table 30 Consumer Real Estate Troubled Debt Restructurings
December 31, 2019
Performing
Total
Nonperforming
December 31, 2018
Performing
Total
(Dollars in millions)
Nonperforming
$
Residential mortgage (1, 2)
Home equity (3)
6,197
2,359
8,556
(1) At December 31, 2019 and 2018, residential mortgage TDRs deemed collateral dependent totaled $1.2 billion and $1.6 billion, and included $748 million and $960 million of loans classified as
Total consumer real estate troubled debt restructurings
1,209 $
1,107
2,316 $
4,988 $
1,252
6,240 $
4,753 $
1,229
5,982 $
921 $
252
3,832 $
1,173 $
4,809 $
977
$
nonperforming and $468 million and $605 million of loans classified as performing.
(2) At December 31, 2019 and 2018, residential mortgage performing TDRs include $2.1 billion and $2.8 billion of loans that were fully-insured.
(3) At December 31, 2019 and 2018, home equity TDRs deemed collateral dependent totaled $442 million and $1.3 billion, and include $209 million and $961 million of loans classified as nonperforming
and $233 million and $322 million of loans classified as performing.
In addition to modifying consumer real estate loans, we work
with customers who are experiencing financial difficulty by
modifying credit card and other consumer loans. Credit card and
other consumer loan modifications generally involve a reduction
in the customer’s interest rate on the account and placing the
customer on a fixed payment plan not exceeding 60 months, all
of which are considered TDRs (the renegotiated TDR portfolio).
80 80
Bank of America 2019
Bank of America 2019
Modifications of credit card and other consumer loans are
made through renegotiation programs utilizing direct customer
contact, but may also utilize external renegotiation programs. The
renegotiated TDR portfolio is excluded in large part from Table 29
as substantially all of the loans remain on accrual status until
either charged off or paid in full. At December 31, 2019 and 2018,
our renegotiated TDR portfolio was $679 million and $566 million,
of which $570 million and $481 million were current or less than
30 days past due under the modified terms. The increase in the
renegotiated TDR portfolio was primarily driven by new
renegotiated enrollments outpacing runoff of existing portfolios.
Commercial Portfolio Credit Risk Management
Credit risk management for the commercial portfolio begins with
an assessment of the credit risk profile of the borrower or
counterparty based on an analysis of its financial position. As part
of the overall credit risk assessment, our commercial credit
exposures are assigned a risk rating and are subject to approval
based on defined credit approval standards. Subsequent to loan
origination, risk ratings are monitored on an ongoing basis, and if
necessary, adjusted to reflect changes in the financial condition,
cash flow, risk profile or outlook of a borrower or counterparty. In
making credit decisions, we consider risk rating, collateral, country,
industry and single-name concentration limits while also balancing
these considerations with the total borrower or counterparty
relationship. We use a variety of tools to continuously monitor the
ability of a borrower or counterparty to perform under its
obligations. We use risk rating aggregations to measure and
evaluate concentrations within portfolios. In addition, risk ratings
are a factor in determining the level of allocated capital and the
allowance for credit losses.
As part of our ongoing risk mitigation initiatives, we attempt to
work with clients experiencing financial difficulty to modify their
loans to terms that better align with their current ability to pay. In
situations where an economic concession has been granted to a
borrower experiencing financial difficulty, we identify these loans
as TDRs. For more information on our accounting policies regarding
delinquencies, nonperforming status and net charge-offs for the
commercial portfolio, see Note 1 – Summary of Significant
Accounting Principles to the Consolidated Financial Statements.
Management of Commercial Credit Risk
Concentrations
Commercial credit risk is evaluated and managed with the goal
that concentrations of credit exposure continue to be aligned with
our risk appetite. We review, measure and manage concentrations
of credit exposure by industry, product, geography, customer
relationship and loan size. We also review, measure and manage
commercial real estate loans by geographic location and property
type. In addition, within our non-U.S. portfolio, we evaluate
exposures by region and by country. Tables 35, 38 and 41
summarize our concentrations. We also utilize syndications of
exposure to third parties, loan sales, hedging and other risk
mitigation techniques to manage the size and risk profile of the
commercial credit portfolio. For more information on our industry
concentrations, see Commercial Portfolio Credit Risk Management
– Industry Concentrations on page 85 and Table 38.
We account for certain large corporate loans and loan
commitments, including issued but unfunded letters of credit
which are considered utilized for credit risk management purposes,
that exceed our single-name credit risk concentration guidelines
under the fair value option. Lending commitments, both funded
and unfunded, are actively managed and monitored, and as
appropriate, credit risk for these lending relationships may be
mitigated through the use of credit derivatives, with our credit view
and market perspectives determining the size and timing of the
hedging activity. In addition, we purchase credit protection to cover
the funded portion as well as the unfunded portion of certain other
credit exposures. To lessen the cost of obtaining our desired credit
protection levels, credit exposure may be added within an industry,
borrower or counterparty group by selling protection. These credit
derivatives do not meet the requirements for treatment as
accounting hedges. They are carried at fair value with changes in
fair value recorded in other income.
In addition, we are a member of various securities and
derivative exchanges and clearinghouses, both in the U.S. and
other countries. As a member, we may be required to pay a pro-
rata share of the losses incurred by some of these organizations
as a result of another member default and under other loss
scenarios. For more information, see Note 13 – Commitments and
Contingencies to the Consolidated Financial Statements.
Commercial Credit Portfolio
During 2019, credit quality among large corporate and middle-
market borrowers in our commercial and industrial portfolio
remained strong. Credit quality of commercial real estate
borrowers in most sectors remained stable with conservative LTV
ratios. However, some of the real estate markets experienced
slowing tenant demand and decelerating rental income.
Total commercial utilized credit exposure increased $14.3
billion in 2019 to $635.3 billion driven by higher loans and leases.
The utilization rate for loans and leases, SBLCs and financial
guarantees, and commercial letters of credit, in the aggregate,
was 58 percent at December 31, 2019 and 59 percent at
December 31, 2018.
Table 31 presents commercial credit exposure by type for
utilized, unfunded and total binding committed credit exposure.
Commercial utilized credit exposure includes SBLCs and financial
guarantees and commercial letters of credit that have been issued
and for which we are legally bound to advance funds under
prescribed conditions during a specified time period, and excludes
exposure related to trading account assets. Although funds have
not yet been advanced, these exposure types are considered
utilized for credit risk management purposes.
Bank of America 2019 81
Bank of America 2019 81
Table 31 Commercial Credit Exposure by Type
(Dollars in millions)
2019
2018
2019
2018
2019
2018
Commercial Utilized (1)
Commercial Unfunded (2, 3, 4)
December 31
Total Commercial Committed
$
517,657 $
Loans and leases
Derivative assets (5)
Standby letters of credit and financial guarantees
Debt securities and other investments
Loans held-for-sale
Operating leases
Commercial letters of credit
Other
868,946
43,725
35,432
29,675
23,902
6,060
1,378
898
389,003 $ 1,062,295 $ 1,010,016
(1) Commercial utilized exposure includes loans of $7.7 billion and $3.7 billion and issued letters of credit with a notional amount of $170 million and $100 million accounted for under the fair value
405,834 $
—
468
5,101
15,135
—
451
—
426,989 $
43,725
34,941
25,425
9,090
6,060
1,210
898
621,013 $
40,485
36,062
25,546
7,047
6,660
1,049
800
635,306 $
—
491
4,250
14,812
—
168
—
40,485
36,530
30,647
22,182
6,660
1,500
800
499,664 $
369,282 $
923,491 $
Total
$
option at December 31, 2019 and 2018.
(2) Commercial unfunded exposure includes commitments accounted for under the fair value option with a notional amount of $4.2 billion and $3.0 billion at December 31, 2019 and 2018.
(3) Excludes unused business card lines, which are not legally binding.
(4) Includes the notional amount of unfunded legally binding lending commitments net of amounts distributed (i.e., syndicated or participated) to other financial institutions. The distributed amounts
were $10.6 billion and $10.7 billion at December 31, 2019 and 2018.
(5) Derivative assets are carried at fair value, reflect the effects of legally enforceable master netting agreements and have been reduced by cash collateral of $33.9 billion and $32.4 billion at December
31, 2019 and 2018. Not reflected in utilized and committed exposure is additional non-cash derivative collateral held of $35.2 billion and $33.0 billion at December 31, 2019 and 2018, which
consists primarily of other marketable securities.
portfolio. The allowance for loan and lease losses for the
Outstanding commercial loans and leases increased $18.0
billion during 2019 primarily in the commercial and industrial
commercial portfolio increased $75 million to $4.9 billion at
portfolio. Nonperforming commercial loans increased $397 million December 31, 2019. For more information, see Allowance for
Credit Losses on page 89. Table 32 presents our commercial loans
and commercial reservable criticized utilized exposure increased
$391 million driven by a small number of client downgrades across
and leases portfolio and related credit quality information at
industries which were not indicative of broader issues in the December 31, 2019 and 2018.
Table 32 Commercial Credit Quality
(Dollars in millions)
Commercial and industrial:
U.S. commercial
Non-U.S. commercial
Total commercial and industrial
Commercial real estate
Commercial lease financing
U.S. small business commercial (1)
Commercial loans excluding loans accounted f
or under
the fair value option
Loans accounted for under the fair value option (2)
Total commercial loans and leases
(1)
Includes card-related products.
Outstandings
Nonperforming
December 31
Accruing Past Due
90 Days or More
2019
2018
2019
2018
2019
2018
$
$
307,048
104,966
412,014
62,689
19,880
494,583
15,333
$
299,277
98,776
398,053
60,845
22,534
481,432
14,565
509,916
495,997
$
1,094
43
1,137
280
32
1,449
50
1,499
$
794
80
874
156
18
1,048
54
1,102
7,741
517,657 $
3,667
499,664 $
$
—
1,499 $
—
1,102 $
$
106
8
114
19
20
153
97
250
—
250 $
197
—
197
4
29
230
84
314
—
314
(2) Commercial loans accounted for under the fair value option include U.S. commercial of $4.7 billion and $2.5 billion and non-U.S. commercial of $3.1 billion and $1.1 billion at December 31, 2019
and 2018. For more information on the fair value option, see Note 22 – Fair Value Option to the Consolidated Financial Statements.
Table 33 presents net charge-offs and related ratios for our commercial loans and leases for 2019 and 2018.
Table 33 Commercial Net Charge-offs and Related Ratios
(Dollars in millions)
Commercial and industrial:
U.S. commercial
Non-U.S. commercial
Total commercial and industrial
Commercial real estate
Commercial lease financing
U.S. small business commercial
Total commercial
Net Charge-offs
2019
2018
Net Charge-off Ratios (1)
2019
2018
$
$
256 $
84
340
29
21
390
272
662 $
215
68
283
1
(1)
283
240
523
0.08%
0.08
0.08
0.05
0.10
0.08
1.83
0.13
0.07%
0.07
0.07
—
(0.01)
0.06
1.70
0.11
(1) Net charge-off ratios are calculated as net charge-offs divided by average outstanding loans and leases excluding loans accounted for under the fair value option.
82 82
Bank of America 2019
Bank of America 2019
Table 34 presents commercial reservable criticized utilized exposure by loan type. Criticized exposure corresponds to the Special
Mention, Substandard and Doubtful asset categories as defined by regulatory authorities. At December 31, 2019 and 2018, 90 percent
and 91 percent of commercial reservable criticized utilized exposure was secured.
Table 34 Commercial Reservable Criticized Utilized Exposure (1, 2)
(Dollars in millions)
Commercial and industrial:
U.S. commercial
Non-U.S. commercial
Total commercial and industrial
Commercial real estate
Commercial lease financing
U.S. small business commercial
Total commercial reservable criticized utilized exposure (1)
December 31
2019
2018
$
$
8,272
989
9,261
1,129
329
10,719
733
11,452
2.46% $
0.89
2.07
1.75
1.66
2.01
4.78
2.09
$
7,986
1,013
8,999
936
366
10,301
760
11,061
2.43%
0.97
2.08
1.50
1.62
1.99
5.22
2.08
(1) Total commercial reservable criticized utilized exposure includes loans and leases of $10.7 billion and $10.3 billion and commercial letters of credit of $715 million and $781 million at December
31, 2019 and 2018.
(2) Percentages are calculated as commercial reservable criticized utilized exposure divided by total commercial reservable utilized exposure for each exposure category.
Commercial and Industrial
Commercial and industrial loans include U.S. commercial and non-
U.S. commercial portfolios.
U.S. Commercial
At December 31, 2019, 70 percent of the U.S. commercial loan
portfolio, excluding small business, was managed in Global
Banking, 16 percent in Global Markets, 13 percent in GWIM
(generally business-purpose loans for high net worth clients) and
the remainder primarily in Consumer Banking. U.S. commercial
loans increased $7.8 billion during 2019, across lines of business.
Non-U.S. Commercial
At December 31, 2019, 83 percent of the non-U.S. commercial
loan portfolio was managed in Global Banking and 17 percent in
Global Markets. Non-U.S. commercial loans increased $6.2 billion
during 2019, primarily in Global Banking. For information on the
non-U.S. commercial portfolio, see Non-U.S. Portfolio on page 87.
Commercial Real Estate
Commercial real estate primarily includes commercial loans
secured by non-owner-occupied real estate and is dependent on
the sale or lease of the real estate as the primary source of
repayment. Outstanding loans increased $1.8 billion, or three
percent, during 2019 to $62.7 billion due to new originations
slightly outpacing paydowns. The portfolio remains diversified
across property types and geographic regions. California
represented the largest state concentration at 24 percent and 23
percent of the commercial real estate portfolio at December 31,
2019 and 2018. The commercial real estate portfolio is
predominantly managed in Global Banking and consists of loans
made primarily to public and private developers, and commercial
real estate firms.
During 2019, we continued to see low default rates and solid
credit quality in both the residential and non-residential portfolios.
We use a number of proactive risk mitigation initiatives to reduce
adversely rated exposure in the commercial real estate portfolio,
including transfers of deteriorating exposures to management by
independent special asset officers and the pursuit of loan
restructurings or asset sales to achieve the best results for our
customers and the Corporation.
Table 35 presents outstanding commercial real estate loans
by geographic region, based on the geographic location of the
collateral, and by property type.
Bank of America 2019 83
Bank of America 2019 83
Table 35 Outstanding Commercial Real Estate Loans
(Dollars in millions)
By Geographic Region
California
Northeast
Southwest
Southeast
Florida
Illinois
Midwest
Midsouth
Northwest
Non-U.S.
Other (1)
December 31
2019
2018
$
$
14,910
12,408
8,408
5,937
3,984
3,349
3,203
2,468
1,638
3,724
2,660
14,002
10,895
7,339
5,726
3,680
2,989
3,772
2,919
2,178
4,240
3,105
60,845
Total outstanding commercial real estate loans
$
62,689 $
By Property Type
Non-residential
Office
Industrial / Warehouse
Shopping centers / Retail
Multi-family rental
Hotels / Motels
Unsecured
Multi-use
Other
17,246
5,379
8,798
7,762
7,248
2,956
2,848
7,029
59,266
1,579
60,845
Includes unsecured loans to real estate investment trusts and national home builders whose portfolios of properties span multiple geographic regions and properties in the states of Colorado, Utah,
Hawaii, Wyoming and Montana.
8,677
8,183
7,250
6,982
3,438
1,788
6,958
61,178
1,511
Total outstanding commercial real estate loans
Total non-residential
62,689 $
17,902 $
$
$
Residential
(1)
U.S. Small Business Commercial
The U.S. small business commercial loan portfolio is comprised
of small business card loans and small business loans managed
in Consumer Banking. Credit card-related products were 52 percent
and 51 percent of the U.S. small business commercial portfolio
at December 31, 2019 and 2018. Of the U.S. small business
commercial net charge-offs, 94 percent and 95 percent were credit
card-related products in 2019 and 2018.
Nonperforming Commercial Loans, Leases and Foreclosed
Properties Activity
Table 36 presents the nonperforming commercial loans, leases
and foreclosed properties activity during 2019 and 2018.
Nonperforming loans do not include loans accounted for under the
fair value option. During 2019, nonperforming commercial loans
and leases increased $397 million to $1.5 billion. At December
31, 2019, 94 percent of commercial nonperforming loans, leases
and foreclosed properties were secured and 64 percent were
contractually current. Commercial nonperforming loans were
carried at 88 percent of their unpaid principal balance before
consideration of the allowance for loan and lease losses as the
carrying value of these loans has been reduced to the estimated
collateral value less costs to sell.
Table 36 Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity (1, 2)
(Dollars in millions)
Nonperforming loans and leases, January 1
Additions
Reductions:
Paydowns
Sales
Returns to performing status (3)
Charge-offs
Transfers to foreclosed properties
Transfers to loans held-for-sale
Total net reductions to nonperforming loans and leases
Total nonperforming loans and leases, December 31
Foreclosed properties, December 31
2019
2018
$
1,102
2,048
$
1,304
1,415
(648)
(215)
(120)
(478)
(9)
(181)
397
1,499
56
1,555
0.29%
0.30
$
(771)
(210)
(246)
(361)
(12)
(17)
(202)
1,102
56
1,158
0.22%
0.23
Nonperforming commercial loans, leases and foreclosed properties, December 31
$
Nonperforming commercial loans and leases as a percentage of outstanding commercial loans and leases (4)
Nonperforming commercial loans, leases and foreclosed properties as a percentage of outstanding commercial loans, leases and
foreclosed properties (4)
(1) Balances do not include nonperforming loans held-for-sale of $239 million and $292 million at December 31, 2019 and 2018.
(2)
Includes U.S. small business commercial activity. Small business card loans are excluded as they are not classified as nonperforming.
(3) Commercial loans and leases may be returned to performing status when all principal and interest is current and full repayment of the remaining contractual principal and interest is expected, or
when the loan otherwise becomes well-secured and is in the process of collection. TDRs are generally classified as performing after a sustained period of demonstrated payment performance.
(4) Outstanding commercial loans exclude loans accounted for under the fair value option.
84 84
Bank of America 2019
Bank of America 2019
Table 37 presents our commercial TDRs by product type and performing status. U.S. small business commercial TDRs are comprised
of renegotiated small business card loans and small business loans. The renegotiated small business card loans are not classified
as nonperforming as they are charged off no later than the end of the month in which the loan becomes 180 days past due. For more
information on TDRs, see Note 5 – Outstanding Loans and Leases to the Consolidated Financial Statements.
Table 37 Commercial Troubled Debt Restructurings
Nonperforming
December 31, 2019
Performing
Total
Nonperforming
December 31, 2018
Performing
Total
(Dollars in millions)
Commercial and industrial:
U.S. commercial
Non-U.S. commercial
Total commercial and industrial
Commercial real estate
Commercial lease financing
U.S. small business commercial
$
617 $
41
658
212
18
888
—
Total commercial troubled debt restructurings
$
888 $
Industry Concentrations
Table 38 presents commercial committed and utilized credit
exposure by industry and the total net credit default protection
purchased to cover the funded and unfunded portions of certain
credit exposures. Our commercial credit exposure is diversified
across a broad range of industries. Total commercial committed
exposure increased $52.3 billion, or five percent, during 2019 to
$1.1 trillion. The increase in commercial committed exposure was
concentrated in the Real estate, Utilities and Finance companies
industry sectors. Increases were partially offset by decreased
exposure to the Pharmaceuticals and biotechnology, Technology
hardware and equipment, and Government and public education
industry sectors.
Industry limits are used internally to manage industry
concentrations and are based on committed exposure that is
allocated on an industry-by-industry basis. A risk management
framework is in place to set and approve industry limits as well
999 $
193
1,192
14
31
1,237
27
1,264 $
1,616 $
234
1,850
226
49
2,125
27
2,152 $
306 $
78
384
114
3
501
3
504 $
1,092 $
162
1,254
6
68
1,328
18
1,346 $
1,398
240
1,638
120
71
1,829
21
1,850
as to provide ongoing monitoring. The MRC oversees industry limit
governance.
Asset managers and funds, our largest industry concentration
with committed exposure of $110.0 billion, increased $2.1 billion,
or two percent, during 2019.
Real estate, our second largest industry concentration with
committed exposure of $96.3 billion, increased $9.8 billion, or 11
percent, during 2019. This growth occurred primarily in the
category of industrial and warehouse buildings, partially offset by
declines in REITs.
Capital goods, our third largest industry concentration with
committed exposure of $80.9 billion, increased $5.8 billion, or
eight percent, during 2019 with the growth largely occurring in the
trading companies and distributors industry categories, partially
offset by a decrease in industrial conglomerates. For more
information on the commercial real estate and related portfolios,
see Commercial Portfolio Credit Risk Management – Commercial
Real Estate on page 83.
Bank of America 2019 85
Bank of America 2019 85
Table 38 Commercial Credit Exposure by Industry (1)
(Dollars in millions)
Asset managers and funds
Real estate (3)
Capital goods
Finance companies
Healthcare equipment and services
Government and public education
Materials
Consumer services
Retailing
Food, beverage and tobacco
Commercial services and supplies
Energy
Utilities
Transportation
Global commercial banks
Individuals and trusts
Technology hardware and equipment
Media
Vehicle dealers
Consumer durables and apparel
Software and services
Pharmaceuticals and biotechnology
Telecommunication services
Insurance
Automobiles and components
Financial markets infrastructure (clearinghouses)
Food and staples retailing
Religious and social organizations
Total commercial credit exposure by industry
Net credit default protection purchased on total commitments (4)
Includes U.S. small business commercial exposure.
(1)
Commercial
Utilized
Total Commercial
Committed (2)
December 31
2019
2018
2019
2018
$
$
71,289 $
70,341
41,060
40,171
34,353
41,889
26,663
28,434
25,868
24,163
23,102
16,407
12,383
23,448
26,492
18,926
10,645
12,429
18,013
10,193
10,432
5,962
9,144
6,669
7,345
9,351
6,290
3,844
635,306 $
71,756 $
65,328
39,192
36,662
35,763
43,675
27,347
25,702
25,333
23,586
22,623
13,727
12,035
22,814
26,583
18,643
13,014
12,132
17,603
9,904
8,809
7,430
8,686
8,674
7,131
8,317
4,787
3,757
621,013 $
$
109,972 $
96,349
80,871
63,940
55,918
53,566
52,128
49,071
48,317
45,956
38,943
36,327
36,060
33,027
28,670
27,815
24,071
23,629
21,435
21,245
20,556
20,203
16,103
15,214
14,910
11,851
10,392
5,756
107,888
86,514
75,080
56,659
56,489
54,749
51,865
43,298
47,507
42,745
39,349
32,279
27,623
31,523
28,627
25,019
26,228
24,502
20,446
20,199
19,172
23,634
14,166
15,807
13,893
10,042
9,093
5,620
1,062,295 $ 1,010,016
(2,663)
(3,349) $
(2) Includes the notional amount of unfunded legally binding lending commitments net of amounts distributed (i.e., syndicated or participated) to other financial institutions. The distributed amounts
were $10.6 billion and $10.7 billion at December 31, 2019 and 2018.
(3) Industries are viewed from a variety of perspectives to best isolate the perceived risks. For purposes of this table, the real estate industry is defined based on the primary business activity of the
borrowers or counterparties using operating cash flows and primary source of repayment as key factors.
(4) Represents net notional credit protection purchased to hedge funded and unfunded exposures for which we elected the fair value option, as well as certain other credit exposures. For more information,
see Commercial Portfolio Credit Risk Management – Risk Mitigation.
Risk Mitigation
We purchase credit protection to cover the funded portion as well
as the unfunded portion of certain credit exposures. To lower the
cost of obtaining our desired credit protection levels, we may add
credit exposure within an industry, borrower or counterparty group
by selling protection.
At December 31, 2019 and 2018, net notional credit default
protection purchased in our credit derivatives portfolio to hedge
our funded and unfunded exposures for which we elected the fair
value option, as well as certain other credit exposures, was $3.3
billion and $2.7 billion. We recorded net losses of $145 million
in 2019 compared to net losses of $2 million in 2018 on these
positions. The gains and losses on these instruments were offset
by gains and losses on the related exposures. The Value-at-Risk
(VaR) results for these exposures are included in the fair value
option portfolio information in Table 45. For more information, see
Trading Risk Management on page 93.
Tables 39 and 40 present the maturity profiles and the credit
exposure debt ratings of the net credit default protection portfolio
at December 31, 2019 and 2018.
Table 39 Net Credit Default Protection by Maturity
Less than or equal to one year
Greater than one year and less than or equal
to five years
Greater than five years
Total net credit default protection
December 31
2019
2018
54%
45
1
100%
20%
78
2
100%
86 86
Bank of America 2019
Bank of America 2019
Table 40 Net Credit Default Protection by Credit
Exposure Debt Rating
Net
Notional (1)
Percent of
Total
Net
Notional (1)
Percent of
Total
December 31
(Dollars in millions)
2019
2018
Ratings (2, 3)
A
BBB
BB
B
CCC and below
NR (4)
Total net credit
default protection
$
(697)
(1,089)
(766)
(373)
(119)
(305)
20.8% $
32.5
22.9
11.1
3.6
9.1
(700)
(501)
(804)
(422)
(205)
(31)
26.3%
18.8
30.2
15.8
7.7
1.2
$
(3,349)
100.0% $
(2,663)
100.0%
(1) Represents net credit default protection purchased.
(2) Ratings are refreshed on a quarterly basis.
(3) Ratings of BBB- or higher are considered to meet the definition of investment grade.
(4) NR is comprised of index positions held and any names that have not been rated.
In addition to our net notional credit default protection
purchased to cover the funded and unfunded portion of certain
credit exposures, credit derivatives are used for market-making
activities for clients and establishing positions intended to profit
from directional or relative value changes. We execute the majority
of our credit derivative trades in the OTC market with large,
multinational financial institutions, including broker-dealers and,
to a lesser degree, with a variety of other investors. Because these
transactions are executed in the OTC market, we are subject to
settlement risk. We are also subject to credit risk in the event that
these counterparties fail to perform under the terms of these
contracts. In order to properly reflect counterparty credit risk, we
record counterparty credit risk valuation adjustments on certain
derivative assets, including our purchased credit default
protection.
In most cases, credit derivative transactions are executed on
a daily margin basis. Therefore, events such as a credit downgrade,
depending on the ultimate rating level, or a breach of credit
covenants would typically require an increase in the amount of
collateral required by the counterparty, where applicable, and/or
allow us to take additional protective measures such as early
termination of all trades. For more information on credit derivatives
and counterparty credit risk valuation adjustments, see Note 3 –
Derivatives to the Consolidated Financial Statements.
Non-U.S. Portfolio
Our non-U.S. credit and trading portfolios are subject to country
risk. We define country risk as the risk of loss from unfavorable
economic and political conditions, currency fluctuations, social
instability and changes in government policies. A risk management
framework is in place to measure, monitor and manage non-U.S.
risk and exposures. In addition to the direct risk of doing business
in a country, we also are exposed to indirect country risks (e.g.,
related to the collateral received on secured financing transactions
or related to client clearing activities). These indirect exposures
are managed in the normal course of business through credit,
market and operational risk governance, rather than through
country risk governance.
Table 41 presents our 20 largest non-U.S. country exposures
at December 31, 2019. These exposures accounted for 88 percent
and 89 percent of our total non-U.S. exposure at December 31,
2019 and 2018. Net country exposure for these 20 countries
increased $8.5 billion in 2019, primarily driven by increased
sovereign and corporate exposure across multiple countries.
Non-U.S. exposure
risk
management basis and includes sovereign and non-sovereign
credit exposure, securities and other investments issued by or
domiciled in countries other than the U.S.
is presented on an
internal
Funded loans and loan equivalents include loans, leases, and
other extensions of credit and funds, including letters of credit and
due from placements. Unfunded commitments are the undrawn
portion of legally binding commitments related to loans and loan
equivalents. Net counterparty exposure includes the fair value of
derivatives, including the counterparty risk associated with credit
default swaps (CDS), and secured financing transactions.
Securities and other investments are carried at fair value and long
securities exposures are netted against short exposures with the
same underlying issuer to, but not below, zero. Net country
exposure represents country exposure less hedges and credit
default protection purchased, net of credit default protection sold.
Bank of America 2019 87
Bank of America 2019 87
Table 41 Top 20 Non-U.S. Countries Exposure
Funded Loans
and Loan
Equivalents
Unfunded
Loan
Commitments
Net
Counterparty
Exposure
Securities/
Other
Investments
Country
Exposure at
December 31
2019
Hedges and
Credit Default
Protection
Net Country
Exposure at
December 31
2019
Increase
(Decrease)
from
December 31
2018
$
29,156 $
21,920
7,967
7,243
13,304
7,817
7,393
6,100
8,450
6,322
5,981
3,749
4,190
4,387
5,106
5,077
2,353
3,153
3,267
2,142
17,341 $
7,408
8,255
9,208
497
364
716
3,583
896
3,585
758
435
1,733
2,947
353
1,259
2,303
1,073
229
979
7,800 $
1,828
1,690
876
1,085
398
218
415
1,002
330
386
172
224
213
434
526
510
258
119
76
3,545 $
1,967
2,879
969
949
3,660
3,683
1,443
1,589
876
1,762
3,528
1,814
325
1,194
159
1,386
867
10
201
57,842 $
33,123
20,791
18,296
15,835
12,239
12,010
11,541
11,937
11,113
8,887
7,884
7,961
7,872
7,087
7,021
6,552
5,351
3,625
3,398
(1,998) $
(2,295)
(669)
(2,041)
(248)
(222)
(238)
(439)
(1,405)
(786)
(182)
(58)
(150)
(487)
(31)
(514)
(1,175)
(629)
(38)
(31)
55,844 $
30,828
20,122
16,255
15,587
12,017
11,772
11,102
10,532
10,327
8,705
7,826
7,811
7,385
7,056
6,507
5,377
4,722
3,587
3,367
990
2,171
607
3,604
946
905
1,523
1,172
(9,491)
(1,250)
(465)
2,309
1,575
(379)
(180)
929
2,296
72
(62)
1,206
$
155,077 $
63,922 $
18,560 $
32,806 $
270,365 $
(13,636) $
256,729 $
8,478
(Dollars in millions)
United Kingdom
Germany
Canada
France
China
India
Brazil
Australia
Japan
Netherlands
South Korea
Singapore
Mexico
Switzerland
Hong Kong
Belgium
Italy
Spain
United Arab Emirates
Ireland
Total top 20 non-U.S.
countries exposure
A number of economic conditions and geopolitical events have
given rise to risk aversion in certain emerging markets. Additionally,
in light of ongoing trade tensions, we continue to closely monitor
our exposures to tariff-sensitive regions and industries, particularly
to countries that account for a large percentage of U.S. trade, such
as China.
Our largest emerging market country exposure at December
31, 2019 was China, with net exposure of $15.6 billion,
concentrated in large state-owned companies, subsidiaries of
multinational corporations and commercial banks.
The economic performance in the EU remains uncertain,
including as a result of the uncertainty surrounding the terms of
a potential trade agreement and other terms associated with the
future relationship between the U.K. and the EU, which could weigh
unevenly on the economic performance of EU countries generally,
and even more heavily on that of the U.K. For more information,
see Item 1A. Risk Factors of our 2019 Annual Report on Form 10-
K and Executive Summary – Recent Developments – U.K. Exit from
the EU on page 44. Our largest EU country exposure at December
31, 2019 was the U.K. with net exposure of $55.8 billion, which
represents a $990 million increase from December 31, 2018. Our
second largest EU exposure was Germany with net exposure of
$30.8 billion as of December 31, 2019, which represents a $2.2
billion increase from December 31, 2018. The increase in Germany
was primarily driven by an increase in sovereign exposure.
Table 42 presents countries that had total cross-border
exposure, including the notional amount of cash loaned under
secured financing agreements, exceeding one percent of our total
assets at December 31, 2019. Local exposure, defined as
exposure booked in local offices of a respective country with clients
in the same country, is excluded. At December 31, 2019, the U.K.
and France were the only countries where their respective total
cross-border exposures exceeded one percent of our total assets.
At December 31, 2019, Germany had total cross-border exposure
of $19.4 billion representing 0.80 percent of our total assets. No
other countries had total cross-border exposure that exceeded
0.75 percent of our total assets at December 31, 2019.
Table 42 Total Cross-border Exposure Exceeding One Percent of Total Assets
(Dollars in millions)
United Kingdom
France
December 31
Public Sector
Banks
Private Sector
Cross-border
Exposure
Exposure as a
Percent of
Total Assets
2019 $
2018
2017
2019
2018
2017
1,859 $
1,505
923
736
633
2,964
3,580 $
3,458
2,984
2,473
2,385
1,521
93,232 $
46,191
47,205
23,172
29,847
27,903
98,671
51,154
51,112
26,381
32,865
32,388
4.05%
2.17
2.24
1.08
1.40
1.42
88 88
Bank of America 2019
Bank of America 2019
Provision for Credit Losses
The provision for credit losses increased $308 million to $3.6
billion in 2019 compared to 2018. The provision for credit losses
was $58 million lower than net charge-offs for 2019, resulting in
a decrease in the allowance for credit losses. This compared to a
decrease of $481 million in the allowance for credit losses in
2018. Net charge-offs in 2019 were $3.6 billion compared to $3.8
billion in 2018.
The provision for credit losses for the consumer portfolio
decreased $117 million to $2.8 billion in 2019 compared to 2018.
The decrease was primarily driven by consumer real estate loan
sales.
The provision for credit losses for the commercial portfolio,
including unfunded lending commitments, increased $425 million
to $758 million in 2019 compared to 2018. The increase was due
in part to energy reserve releases in the prior-year periods.
Assuming a stable economic environment in 2020 compared
to the end of 2019, we expect net charge-offs of approximately
$1 billion per quarter in 2020. In view of the newly adopted
accounting standard on the measurement of the allowance for
credit losses, we expect the provision for credit losses to be
modestly higher than net charge-offs in 2020, assuming no change
in the current economic outlook and estimates of loan growth,
including product mix. For more information regarding the new
accounting standard, see Note 1 – Summary of Significant
Accounting Principles to the Consolidated Financial Statements.
Allowance for Credit Losses
Allowance for Loan and Lease Losses
The allowance for loan and lease losses is comprised of two
components. The
first component covers nonperforming
commercial loans and TDRs. The second component covers loans
and leases on which there are incurred losses that are not yet
individually identifiable, as well as incurred losses that may not
be represented in the loss forecast models. We evaluate the
adequacy of the allowance for loan and lease losses based on the
total of these two components, each of which is described in more
detail below. The allowance for loan and lease losses excludes
loans held-for-sale (LHFS) and loans accounted for under the fair
value option as the fair value reflects a credit risk component.
The first component of the allowance for loan and lease losses
covers both nonperforming commercial loans and all TDRs within
the consumer and commercial portfolios. These loans are subject
to impairment measurement based on the present value of
projected future cash flows discounted at the loan’s original
effective interest rate, or in certain circumstances, impairment
may also be based upon the collateral value or the loan’s
observable market price if available. Impairment measurement for
the renegotiated consumer credit card and small business credit
card TDR portfolios is based on the present value of projected
cash flows discounted using the average portfolio contractual
interest rate, excluding promotionally priced loans, in effect prior
to restructuring. For purposes of computing this specific loss
component of the allowance, larger impaired loans are evaluated
individually and smaller impaired loans are evaluated as a pool
using historical experience for the respective product types and
risk ratings of the loans.
The second component of the allowance for loan and lease
losses covers the remaining consumer and commercial loans and
leases that have incurred losses that are not yet individually
identifiable. The allowance for consumer (including credit card and
other consumer loans) and certain homogeneous commercial loan
and lease products is based on aggregated portfolio evaluations,
which include both quantitative and qualitative components,
generally by product type. Loss forecast models are utilized that
consider a variety of factors including, but not limited to, historical
loss experience, estimated defaults or foreclosures based on
portfolio trends, delinquencies, economic trends, credit scores
and the amount of loss in the event of default. Our consumer real
estate loss forecast model estimates the portion of loans that will
default based on individual loan attributes, the most significant of
which are refreshed LTV or combined loan-to-value (CLTV), and
borrower credit score as well as vintage and geography, all of which
are further broken down into current delinquency status.
Additionally, we incorporate the delinquency status of underlying
first-lien loans on our junior-lien home equity portfolio in our
allowance process. Incorporating refreshed LTV and CLTV into our
probability of default allows us to factor the impact of changes in
home prices into our allowance for loan and lease losses. These
loss forecast models are updated on a quarterly basis to
incorporate
the current economic
reflecting
environment. As of December 31, 2019, the loss forecast process
resulted in reductions in the allowance related to the residential
mortgage and home equity portfolios compared to December 31,
2018.
information
and
trends,
geographic
performance
The allowance for commercial loan and lease losses is
established by product type after analyzing historical loss
experience, internal risk rating, current economic conditions,
industry
obligor
concentrations within each portfolio and any other pertinent
information. The statistical models for commercial loans are
generally updated annually and utilize our historical database of
actual defaults and other data, including external default data. The
loan risk ratings and composition of the commercial portfolios
used to calculate the allowance are updated quarterly to
incorporate the most recent data reflecting the current economic
environment. For risk-rated commercial loans, we estimate the
probability of default and the loss given default (LGD) based on
our historical experience of defaults and credit losses. Factors
considered when assessing the internal risk rating include the
value of the underlying collateral, if applicable, the industry in which
the obligor operates, the obligor’s liquidity and other financial
indicators, and other quantitative and qualitative factors relevant
to the obligor’s credit risk. As of December 31, 2019, the allowance
for the commercial real estate portfolio increased compared to
December 31, 2018.
Also included within the second component of the allowance
for loan and lease losses are reserves to cover losses that are
incurred but, in our assessment, may not be adequately
represented in the historical loss data used in the loss forecast
models. For example, factors that we consider include, among
others, changes in lending policies and procedures, changes in
economic and business conditions, changes in the nature and size
of the portfolio, changes in portfolio concentrations, changes in
the volume and severity of past due loans and nonaccrual loans,
the effect of external factors such as competition, and legal and
regulatory requirements. Further, we consider the inherent
uncertainty in mathematical models that are built upon historical
data.
We monitor differences between estimated and actual incurred
loan and lease losses. This monitoring process includes periodic
assessments by senior management of loan and lease portfolios
and the models used to estimate incurred losses in those
portfolios.
The allowance for loan and lease losses for the consumer
portfolio, as presented in Table 43, was $4.5 billion at December
31, 2019, a decrease of $260 million from December 31, 2018.
The decrease was primarily in the consumer real estate portfolio,
partially offset by an increase in the credit card portfolio. The
Bank of America 2019 89
Bank of America 2019 89
reduction in the allowance for the consumer real estate portfolio
was driven by improved credit quality, a decrease in loan balances
in our non-core portfolio, proactive credit risk management
initiatives and high credit quality originations. The improved credit
quality was impacted by continuing improvements in the U.S.
economy and strong labor markets evidenced by low levels of
unemployment and increases in home prices. Nonperforming
consumer loans decreased $1.8 billion during 2019 as loan sales,
returns to performing status and paydowns continued to outpace
additions. The increase in allowance for the credit card portfolio
was primarily driven by continued portfolio seasoning.
The allowance for loan and lease losses for the commercial
portfolio, as presented in Table 43, was $4.9 billion at December
31, 2019, an increase of $75 million from December 31, 2018.
Commercial reservable criticized utilized exposure increased to
$11.5 billion at December 31, 2019 from $11.1 billion (to 2.09
percent from 2.08 percent of total commercial reservable utilized
exposure) at December 31, 2018, and nonperforming commercial
loans increased to $1.5 billion at December 31, 2019 from $1.1
billion (to 0.29 percent from 0.22 percent of outstanding
commercial loans excluding loans accounted for under the fair
value option) at December 31, 2018 with the increases spread
across multiple industries. See Tables 32, 33 and 34 for more
details on key commercial credit statistics.
The allowance for loan and lease losses as a percentage of
total loans and leases outstanding was 0.97 percent at December
31, 2019 compared to 1.02 percent at December 31, 2018.
On January 1, 2020, the Corporation adopted the new
accounting standard that requires the measurement of the
allowance for credit losses to be based on management’s best
estimate of lifetime expected credit losses inherent in the
Corporation’s relevant financial assets. Upon adoption of the
standard on January 1, 2020, the Corporation recorded a $3.3
billion, or 32 percent, increase to the allowance for credit losses.
After adjusting for deferred taxes and other adoption effects, a
$2.4 billion decrease was recorded in retained earnings through
a cumulative-effect adjustment. For more information regarding
this new accounting standard, see Note 1 – Summary of Significant
Accounting Principles to the Consolidated Financial Statements.
losses
related
to unfunded
Reserve for Unfunded Lending Commitments
In addition to the allowance for loan and lease losses, we also
estimate probable
lending
commitments such as letters of credit, financial guarantees,
unfunded bankers’ acceptances and binding loan commitments,
excluding commitments accounted for under the fair value option.
Unfunded lending commitments are subject to the same
assessment as funded loans, including estimates of probability
of default and LGD. Due to the nature of unfunded commitments,
the estimate of probable losses must also consider utilization. To
estimate the portion of these undrawn commitments that is likely
to be drawn by a borrower at the time of estimated default, analyses
of our historical experience are applied to the unfunded
commitments to estimate the funded exposure at default (EAD).
The expected loss for unfunded lending commitments is the
product of the probability of default, the LGD and the EAD, adjusted
for any qualitative factors including economic uncertainty and
inherent imprecision in models.
The reserve for unfunded lending commitments was $813
million at December 31, 2019 compared to $797 million at
December 31, 2018.
Table 43 Allocation of the Allowance for Credit Losses by Product Type
$
(Dollars in millions)
Allowance for loan and lease losses
Residential mortgage
Home equity
Credit card
Direct/Indirect consumer
Other consumer
Total consumer
U.S. commercial (2)
Non-U.S. commercial
Commercial real estate
Commercial lease financing
Total commercial
Allowance for loan and lease losses
Reserve for unfunded lending commitments
Allowance for credit losses
$
Amount
Percent of
Total
Percent of
Loans and
Leases
Outstanding (1)
Amount
Percent of
Total
Percent of
Loans and
Leases
Outstanding (1)
December 31, 2019
December 31, 2018
3.45%
2.35
39.39
2.49
0.55
48.23
32.02
6.99
11.07
1.69
51.77
100.00%
325
221
3,710
234
52
4,542
3,015
658
1,042
159
4,874
9,416
813
10,229
0.14% $
0.55
3.80
0.26
n/m
0.98
0.94
0.63
1.66
0.80
0.96
0.97
$
422
506
3,597
248
29
4,802
3,010
677
958
154
4,799
9,601
797
10,398
4.40%
5.27
37.47
2.58
0.30
50.02
31.35
7.05
9.98
1.60
49.98
100.00%
0.20%
1.05
3.66
0.27
n/m
1.08
0.96
0.69
1.57
0.68
0.97
1.02
(1) Ratios are calculated as allowance for loan and lease losses as a percentage of loans and leases outstanding excluding loans accounted for under the fair value option. Consumer loans accounted
for under the fair value option include residential mortgage loans of $257 million and $336 million and home equity loans of $337 million and $346 million at December 31, 2019 and 2018.
Commercial loans accounted for under the fair value option include U.S. commercial loans of $4.7 billion and $2.5 billion and non-U.S. commercial loans of $3.1 billion and $1.1 billion at December
31, 2019 and 2018.
Includes allowance for loan and lease losses for U.S. small business commercial loans of $523 million and $474 million at December 31, 2019 and 2018.
n/m = not meaningful
(2)
90 90
Bank of America 2019
Bank of America 2019
Table 44 presents a rollforward of the allowance for credit losses, which includes the allowance for loan and lease losses and the
reserve for unfunded lending commitments, for 2019 and 2018.
Table 44 Allowance for Credit Losses
(Dollars in millions)
Allowance for loan and lease losses, January 1
Loans and leases charged off
Residential mortgage
Home equity
Credit card
Direct/Indirect consumer
Other consumer
Total consumer charge-offs
U.S. commercial (1)
Non-U.S. commercial
Commercial real estate
Commercial lease financing
Total commercial charge-offs
Total loans and leases charged off
Recoveries of loans and leases previously charged off
Residential mortgage
Home equity
Credit card
Direct/Indirect consumer
Other consumer
Total consumer recoveries
U.S. commercial (2)
Non-U.S. commercial
Commercial real estate
Commercial lease financing
Total commercial recoveries
Total recoveries of loans and leases previously charged off
Net charge-offs
Provision for loan and lease losses
Other (3)
Allowance for loan and lease losses, December 31
Reserve for unfunded lending commitments, January 1
Provision for unfunded lending commitments
Reserve for unfunded lending commitments, December 31
Allowance for credit losses, December 31
Loan and allowance ratios:
2019
2018
$
9,601
$
10,393
(93)
(429)
(3,535)
(518)
(249)
(4,824)
(650)
(115)
(31)
(26)
(822)
(5,646)
140
787
587
309
15
1,838
122
31
2
5
160
1,998
(3,648)
3,574
(111)
9,416
797
16
813
10,229
$
(207)
(483)
(3,345)
(495)
(197)
(4,727)
(575)
(82)
(10)
(8)
(675)
(5,402)
179
485
508
300
15
1,487
120
14
9
9
152
1,639
(3,763)
3,262
(291)
9,601
777
20
797
10,398
$
Loans and leases outstanding at December 31 (4)
Allowance for loan and lease losses as a percentage of total loans and leases outstanding at December 31 (4)
Consumer allowance for loan and lease losses as a percentage of total consumer loans and leases outstanding at
December 31 (5)
Commercial allowance for loan and lease losses as a percentage of total commercial loans and leases outstanding at
December 31 (6)
Average loans and leases outstanding (4)
Net charge-offs as a percentage of average loans and leases outstanding (4)
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases at December 31
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs
Amounts included in allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and
leases at December 31 (7)
$
975,091
$
942,546
0.97%
1.02%
0.98
0.96
1.08
0.97
$
951,583
$
927,531
0.38%
265
2.58
0.41%
194
2.55
$
4,151
$
4,031
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases, excluding the allowance for loan
and lease losses for loans and leases that are excluded from nonperforming loans and leases at December 31 (7)
148%
113%
(1)
(2)
Includes U.S. small business commercial charge-offs of $320 million and $287 million in 2019 and 2018.
Includes U.S. small business commercial recoveries of $48 million and $47 million in 2019 and 2018.
(3) Primarily represents write-offs of purchased credit-impaired (PCI) loans, the net impact of portfolio sales, and transfers to loans held-for-sale.
(4) Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option of $8.3 billion and $4.3 billion at December 31, 2019 and 2018. Average loans
accounted for under the fair value option were $6.8 billion and $5.5 billion in 2019 and 2018.
(5) Excludes consumer loans accounted for under the fair value option of $594 million and $682 million at December 31, 2019 and 2018.
(6) Excludes commercial loans accounted for under the fair value option of $7.7 billion and $3.7 billion at December 31, 2019 and 2018.
(7) Primarily includes amounts allocated to credit card and unsecured consumer lending portfolios in Consumer Banking.
Bank of America 2019 91
Bank of America 2019 91
Market Risk Management
Market risk is the risk that changes in market conditions may
adversely impact the value of assets or liabilities, or otherwise
negatively impact earnings. This risk is inherent in the financial
instruments associated with our operations, primarily within our
Global Markets segment. We are also exposed to these risks in
other areas of the Corporation (e.g., our ALM activities). In the
event of market stress, these risks could have a material impact
on our results. For more information, see Interest Rate Risk
Management for the Banking Book on page 95.
Our traditional banking loan and deposit products are non-
trading positions and are generally reported at amortized cost for
assets or the amount owed for liabilities (historical cost). However,
these positions are still subject to changes in economic value
based on varying market conditions, with one of the primary risks
being changes in the levels of interest rates. The risk of adverse
changes in the economic value of our non-trading positions arising
from changes in interest rates is managed through our ALM
activities. We have elected to account for certain assets and
liabilities under the fair value option.
Our trading positions are reported at fair value with changes
reflected in income. Trading positions are subject to various
changes in market-based risk factors. The majority of this risk is
generated by our activities in the interest rate, foreign exchange,
credit, equity and commodities markets. In addition, the values of
assets and liabilities could change due to market liquidity,
correlations across markets and expectations of market volatility.
We seek to manage these risk exposures by using a variety of
financial
techniques
instruments. The key risk management techniques are discussed
in more detail in the Trading Risk Management section.
that encompass a broad
range of
Global Risk Management is responsible for providing senior
management with a clear and comprehensive understanding of
the trading risks to which we are exposed. These responsibilities
include ownership of market risk policy, developing and maintaining
quantitative risk models, calculating aggregated risk measures,
establishing and monitoring position limits consistent with risk
appetite, conducting daily reviews and analysis of trading inventory,
approving material risk exposures and fulfilling regulatory
requirements. Market risks that impact businesses outside of
Global Markets are monitored and governed by their respective
governance functions.
responsible
Model risk is the potential for adverse consequences from
decisions based on incorrect or misused model outputs and
reports. Given that models are used across the Corporation, model
risk impacts all risk types including credit, market and operational
(EMRC), a
risk. The Enterprise Model Risk Committee
subcommittee of the MRC, is
for providing
management oversight and approval of model risk management
and governance. The EMRC defines model risk standards,
consistent with the Corporation’s Risk Framework and risk
appetite, prevailing regulatory guidance and industry best practice.
All models, including risk management, valuation and regulatory
capital models, must meet certain validation criteria, including
effective challenge of the conceptual soundness of the model,
independent model testing and ongoing monitoring through
outcomes analysis and benchmarking. The EMRC oversees that
model standards are consistent with model risk requirements and
monitors the effective challenge in the model validation process
across the Corporation.
Interest Rate Risk
Interest rate risk represents exposures to instruments whose
values vary with the level or volatility of interest rates. These
instruments include, but are not limited to, loans, debt securities,
certain trading-related assets and liabilities, deposits, borrowings
and derivatives. Hedging instruments used to mitigate these risks
include derivatives such as options, futures, forwards and swaps.
Foreign Exchange Risk
Foreign exchange risk represents exposures to changes in the
values of current holdings and future cash flows denominated in
currencies other than the U.S. dollar. The types of instruments
exposed to this risk include investments in non-U.S. subsidiaries,
foreign currency-denominated loans and securities, future cash
flows in foreign currencies arising from foreign exchange
transactions, foreign currency-denominated debt and various
foreign exchange derivatives whose values fluctuate with changes
in the level or volatility of currency exchange rates or non-
U.S. interest rates. Hedging instruments used to mitigate this risk
include foreign exchange options, currency swaps, futures,
forwards, and foreign currency-denominated debt and deposits.
certificates,
Mortgage Risk
Mortgage risk represents exposures to changes in the values of
mortgage-related instruments. The values of these instruments
are sensitive to prepayment rates, mortgage rates, agency debt
ratings, default, market liquidity, government participation and
interest rate volatility. Our exposure to these instruments takes
several forms. For example, we trade and engage in market-making
activities in a variety of mortgage securities including whole loans,
pass-through
and
collateralized mortgage obligations including collateralized debt
obligations using mortgages as underlying collateral. In addition,
we originate a variety of MBS, which involves the accumulation of
mortgage-related loans in anticipation of eventual securitization,
and we may hold positions in mortgage securities and residential
mortgage loans as part of the ALM portfolio. We also record MSRs
as part of our mortgage origination activities. Hedging instruments
used to mitigate this risk include derivatives such as options,
swaps, futures and forwards as well as securities including MBS
and U.S. Treasury securities. For more information, see Mortgage
Banking Risk Management on page 97.
commercial mortgages
Equity Market Risk
Equity market risk represents exposures to securities that
represent an ownership interest in a corporation in the form of
domestic and foreign common stock or other equity-linked
instruments. Instruments that would lead to this exposure include,
but are not limited to, the following: common stock, exchange-
traded funds, American Depositary Receipts, convertible bonds,
listed equity options (puts and calls), OTC equity options, equity
total return swaps, equity index futures and other equity derivative
products. Hedging instruments used to mitigate this risk include
options, futures, swaps, convertible bonds and cash positions.
Commodity Risk
Commodity risk represents exposures to instruments traded in
the petroleum, natural gas, power and metals markets. These
instruments consist primarily of futures, forwards, swaps and
options. Hedging instruments used to mitigate this risk include
options, futures and swaps in the same or similar commodity
product, as well as cash positions.
Issuer Credit Risk
Issuer credit risk represents exposures to changes in the
creditworthiness of individual issuers or groups of issuers. Our
portfolio is exposed to issuer credit risk where the value of an
asset may be adversely impacted by changes in the levels of credit
spreads, by credit migration or by defaults. Hedging instruments
92 92
Bank of America 2019
Bank of America 2019
used to mitigate this risk include bonds, CDS and other credit
fixed-income instruments.
Market Liquidity Risk
Market liquidity risk represents the risk that the level of expected
market activity changes dramatically and, in certain cases, may
even cease. This exposes us to the risk that we will not be able
to transact business and execute trades in an orderly manner
which may impact our results. This impact could be further
exacerbated if expected hedging or pricing correlations are
compromised by disproportionate demand or lack of demand for
certain instruments. We utilize various risk mitigating techniques
as discussed in more detail in Trading Risk Management.
Trading Risk Management
To evaluate risks in our trading activities, we focus on the actual
and potential volatility of revenues generated by individual
positions as well as portfolios of positions. Various techniques
and procedures are utilized to enable the most complete
understanding of these risks. Quantitative measures of market
risk are evaluated on a daily basis from a single position to the
portfolio of the Corporation. These measures include sensitivities
of positions to various market risk factors, such as the potential
impact on revenue from a one basis point change in interest rates,
and statistical measures utilizing both actual and hypothetical
market moves, such as VaR and stress testing. Periods of extreme
market stress influence the reliability of these techniques to
varying degrees. Qualitative evaluations of market risk utilize the
suite of quantitative risk measures while understanding each of
their
risk managers
limitations. Additionally,
independently evaluate the risk of the portfolios under the current
market environment and potential future environments.
respective
VaR is a common statistic used to measure market risk as it
allows the aggregation of market risk factors, including the effects
of portfolio diversification. A VaR model simulates the value of a
portfolio under a range of scenarios in order to generate a
distribution of potential gains and losses. VaR represents the loss
a portfolio is not expected to exceed more than a certain number
of times per period, based on a specified holding period,
confidence level and window of historical data. We use one VaR
model consistently across the trading portfolios and it uses a
historical simulation approach based on a three-year window of
historical data. Our primary VaR statistic is equivalent to a 99
percent confidence level, which means that for a VaR with a one-
day holding period, there should not be losses in excess of VaR,
on average, 99 out of 100 trading days.
Within any VaR model, there are significant and numerous
assumptions that will differ from company to company. The
accuracy of a VaR model depends on the availability and quality
of historical data for each of the risk factors in the portfolio. A VaR
model may require additional modeling assumptions for new
products that do not have the necessary historical market data or
for less liquid positions for which accurate daily prices are not
consistently available. For positions with insufficient historical
data for the VaR calculation, the process for establishing an
appropriate proxy is based on fundamental and statistical analysis
of the new product or less liquid position. This analysis identifies
reasonable alternatives that replicate both the expected volatility
and correlation to other market risk factors that the missing data
would be expected to experience.
VaR may not be indicative of realized revenue volatility as
changes in market conditions or in the composition of the portfolio
can have a material impact on the results. In particular, the
historical data used for the VaR calculation might indicate higher
or lower levels of portfolio diversification than will be experienced.
In order for the VaR model to reflect current market conditions, we
update the historical data underlying our VaR model on a weekly
basis, or more frequently during periods of market stress, and
regularly review the assumptions underlying the model. A minor
portion of risks related to our trading positions is not included in
VaR. These risks are reviewed as part of our ICAAP. For more
information regarding ICAAP, see Capital Management on page 66.
Global Risk Management continually reviews, evaluates and
enhances our VaR model so that it reflects the material risks in
our trading portfolio. Changes to the VaR model are reviewed and
approved prior to implementation and any material changes are
reported to management through the appropriate management
committees.
Trading limits on quantitative risk measures, including VaR, are
independently set by Global Markets Risk Management and
reviewed on a regular basis so that trading limits remain relevant
and within our overall risk appetite for market risks. Trading limits
are reviewed in the context of market liquidity, volatility and
strategic business priorities. Trading limits are set at both a
granular level to allow for extensive coverage of risks as well as
at aggregated portfolios to account for correlations among risk
factors. All trading limits are approved at least annually. Approved
trading limits are stored and tracked in a centralized limits
management system. Trading limit excesses are communicated
to management for review. Certain quantitative market risk
measures and corresponding limits have been identified as critical
in the Corporation’s Risk Appetite Statement. These risk appetite
limits are reported on a daily basis and are approved at least
annually by the ERC and the Board.
In periods of market stress, Global Markets senior leadership
communicates daily to discuss losses, key risk positions and any
limit excesses. As a result of this process, the businesses may
selectively reduce risk.
Table 45 presents the total market-based portfolio VaR which
is the combination of the total covered positions (and less liquid
trading positions) portfolio and the fair value option portfolio.
Covered positions are defined by regulatory standards as trading
assets and liabilities, both on- and off-balance sheet, that meet a
defined set of specifications. These specifications identify the
most liquid trading positions which are intended to be held for a
short-term horizon and where we are able to hedge the material
risk elements in a two-way market. Positions in less liquid markets,
or where there are restrictions on the ability to trade the positions,
typically do not qualify as covered positions. Foreign exchange and
commodity positions are always considered covered positions,
except for structural foreign currency positions that are excluded
with prior regulatory approval. In addition, Table 45 presents our
fair value option portfolio, which includes substantially all of the
funded and unfunded exposures for which we elect the fair value
option, and their corresponding hedges. Additionally, market risk
VaR for trading activities as presented in Table 45 differs from VaR
used for regulatory capital calculations due to the holding period
being used. The holding period for VaR used for regulatory capital
calculations is 10 days, while for the market risk VaR presented
below, it is one day. Both measures utilize the same process and
methodology.
The total market-based portfolio VaR results in Table 45 include
market risk to which we are exposed from all business segments,
excluding credit valuation adjustment (CVA), DVA and related
hedges. The majority of this portfolio is within the Global Markets
segment.
Table 45 presents year-end, average, high and low daily trading
VaR for 2019 and 2018 using a 99 percent confidence level. The
amounts disclosed in Table 45 and Table 46 align to the view of
covered positions used in the Basel 3 capital calculations. Foreign
Bank of America 2019 93
Bank of America 2019 93
exchange and commodity positions are always considered covered
positions, regardless of trading or banking treatment for the trade,
except for structural foreign currency positions that are excluded
with prior regulatory approval.
The annual average of total covered positions and less liquid
trading positions portfolio VaR slightly increased during 2019 with
no significant drivers.
Table 45 Market Risk VaR for Trading Activities
(Dollars in millions)
2019
2018
Year
End
Average
High (1)
Low (1)
Year
End
Average
High (1)
Low (1)
$
$
$
Total covered positions portfolio
Impact from less liquid exposures
Foreign exchange
Interest rate
Credit
Equity
Commodities
Portfolio diversification
2
15
20
11
3
—
20
—
23
8
4
—
5
—
26
(1) The high and low for each portfolio may have occurred on different trading days than the high and low for the components. Therefore the impact from less liquid exposures and the amount of portfolio
36
26
20
13
(59)
45
5
50
8
5
(7)
6
(3)
53 $
15 $
45
31
40
15
—
45
—
51
18
17
—
16
—
57
14
16
14
4
—
24
—
27
7
4
—
5
—
28 $
Fair value option loans
Fair value option hedges
Fair value option portfolio diversification
6
24
23
22
6
(49)
32
3
35
10
10
(10)
10
(7)
38
4
25
26
29
4
(47)
41
—
41
8
10
(9)
9
(5)
45
25
25
20
8
(55)
31
3
34
11
9
(11)
9
(5)
38
13
49
32
33
31
—
47
—
53
13
17
—
16
—
56
Total covered positions and less liquid trading positions portfolio
Total fair value option portfolio
Total market-based portfolio
Portfolio diversification
2 $
9 $
8 $
$
$
$
diversification, which is the difference between the total portfolio and the sum of the individual components, is not relevant.
The graph below presents the daily covered positions and less liquid trading positions portfolio VaR for 2019, corresponding to the
data in Table 45.
Additional VaR statistics produced within our single VaR model are provided in Table 46 at the same level of detail as in Table 45.
Evaluating VaR with additional statistics allows for an increased understanding of the risks in the portfolio as the historical market
data used in the VaR calculation does not necessarily follow a predefined statistical distribution. Table 46 presents average trading
VaR statistics at 99 percent and 95 percent confidence levels for 2019 and 2018.
Table 46 Average Market Risk VaR for Trading Activities – 99 percent and 95 percent VaR Statistics
(Dollars in millions)
Foreign exchange
Interest rate
Credit
Equity
Commodities
Portfolio diversification
Total covered positions portfolio
Impact from less liquid exposures
Total covered positions and less liquid trading positions portfolio
Fair value option loans
Fair value option hedges
Fair value option portfolio diversification
Total fair value option portfolio
Portfolio diversification
Total market-based portfolio
2019
2018
99 percent
95 percent
99 percent
95 percent
$
$
6 $
24
23
22
6
(49)
32
3
35
10
10
(10)
10
(7)
38 $
3 $
15
15
11
3
(29)
18
2
20
5
6
(5)
6
(5)
21 $
8 $
25
25
20
8
(55)
31
3
34
11
9
(11)
9
(5)
38
$
5
16
15
11
4
(33)
18
1
19
6
6
(7)
5
(3)
21
94 94
Bank of America 2019
Bank of America 2019
Backtesting
The accuracy of the VaR methodology is evaluated by backtesting,
which compares the daily VaR results, utilizing a one-day holding
period, against a comparable subset of trading revenue. A
backtesting excess occurs when a trading loss exceeds the VaR
for the corresponding day. These excesses are evaluated to
understand the positions and market moves that produced the
trading loss with a goal to ensure that the VaR methodology
accurately represents those losses. We expect the frequency of
trading losses in excess of VaR to be in line with the confidence
level of the VaR statistic being tested. For example, with a 99
percent confidence level, we expect one trading loss in excess of
VaR every 100 days or between two to three trading losses in
excess of VaR over the course of a year. The number of backtesting
excesses observed can differ from the statistically expected
number of excesses if the current level of market volatility is
materially different than the level of market volatility that existed
during the three years of historical data used in the VaR calculation.
The trading revenue used for backtesting is defined by
regulatory agencies in order to most closely align with the VaR
component of the regulatory capital calculation. This revenue
differs from total trading-related revenue in that it excludes revenue
from trading activities that either do not generate market risk or
the market risk cannot be included in VaR. Some examples of the
types of revenue excluded for backtesting are fees, commissions,
reserves, net interest income and intra-day trading revenues.
We conduct daily backtesting on the VaR results used for
regulatory capital calculations as well as the VaR results for key
legal entities, regions and risk factors. These results are reported
to senior market risk management. Senior management regularly
reviews and evaluates the results of these tests.
During 2019, there were no days in which there was a
backtesting excess for our total covered portfolio VaR, utilizing a
one-day holding period.
Total Trading-related Revenue
Total trading-related revenue, excluding brokerage fees, and CVA,
DVA and funding valuation adjustment gains (losses), represents
the total amount earned from trading positions, including market-
based net interest income, which are taken in a diverse range of
financial instruments and markets. Trading account assets and
liabilities are reported at fair value. For more information on fair
value, see Note 21 – Fair Value Measurements to the Consolidated
Financial Statements. Trading-related revenue can be volatile and
is largely driven by general market conditions and customer
demand. Also, trading-related revenue is dependent on the volume
and type of transactions, the level of risk assumed, and the
volatility of price and rate movements at any given time within the
ever-changing market environment. Significant daily revenue by
business is monitored and the primary drivers of these are
reviewed.
The following histogram is a graphic depiction of trading
volatility and illustrates the daily level of trading-related revenue
for 2019 and 2018. During 2019, positive trading-related revenue
was recorded for 98 percent of the trading days, of which 80
percent were daily trading gains of over $25 million, and the largest
loss was $35 million. This compares to 2018 where positive
trading-related revenue was recorded for 98 percent of the trading
days, of which 79 percent were daily trading gains of over $25
million.
Trading Portfolio Stress Testing
Because the very nature of a VaR model suggests results can
exceed our estimates and it is dependent on a limited historical
window, we also stress test our portfolio using scenario analysis.
This analysis estimates the change in the value of our trading
portfolio that may result from abnormal market movements.
A set of scenarios, categorized as either historical or
hypothetical, are computed daily for the overall trading portfolio
and individual businesses. These scenarios include shocks to
underlying market risk factors that may be well beyond the shocks
found in the historical data used to calculate VaR. Historical
scenarios simulate the impact of the market moves that occurred
during a period of extended historical market stress. Generally, a
multi-week period representing the most severe point during a
crisis is selected for each historical scenario. Hypothetical
scenarios provide estimated portfolio impacts from potential
future market stress events. Scenarios are reviewed and updated
in response to changing positions and new economic or political
information. In addition, new or ad hoc scenarios are developed
to address specific potential market events or particular
vulnerabilities in the portfolio. The stress tests are reviewed on a
regular basis and the results are presented to senior management.
Stress testing for the trading portfolio is integrated with
enterprise-wide stress testing and incorporated into the limits
framework. The macroeconomic scenarios used for enterprise-
wide stress testing purposes differ from the typical trading portfolio
scenarios in that they have a longer time horizon and the results
are forecasted over multiple periods for use in consolidated capital
and liquidity planning. For more information, see Managing Risk
on page 63.
Interest Rate Risk Management for the Banking
Book
The following discussion presents net interest income for banking
book activities.
Interest rate risk represents the most significant market risk
exposure to our banking book balance sheet. Interest rate risk is
measured as the potential change in net interest income caused
by movements in market interest rates. Client-facing activities,
primarily lending and deposit-taking, create interest rate sensitive
positions on our balance sheet.
We prepare forward-looking forecasts of net interest income.
The baseline forecast takes into consideration expected future
business growth, ALM positioning and the direction of interest rate
movements as implied by the market-based forward curve. We
then measure and evaluate the impact that alternative interest
rate scenarios have on the baseline forecast in order to assess
interest rate sensitivity under varied conditions. The net interest
income forecast is frequently updated for changing assumptions
and differing outlooks based on economic trends, market
conditions and business strategies. Thus, we continually monitor
Bank of America 2019 95
Bank of America 2019 95
our balance sheet position in order to maintain an acceptable level
of exposure to interest rate changes.
The interest rate scenarios that we analyze incorporate balance
sheet assumptions such as loan and deposit growth and pricing,
changes in funding mix, product repricing, maturity characteristics
and investment securities premium amortization. Our overall goal
is to manage interest rate risk so that movements in interest rates
do not significantly adversely affect earnings and capital.
Table 47 presents the spot and 12-month forward rates used
in our baseline forecasts at December 31, 2019 and 2018.
Table 47 Forward Rates
Federal
Funds
December 31, 2019
Three-month
LIBOR
10-Year
Swap
Spot rates
12-month forward rates
1.75%
1.50
1.91%
1.62
Spot rates
12-month forward rates
December 31, 2018
2.50%
2.50
2.81%
2.64
1.90%
1.92
2.71%
2.75
Table 48 shows the pretax impact to forecasted net interest
income over the next 12 months from December 31, 2019 and
2018, resulting from instantaneous parallel and non-parallel
shocks to the market-based forward curve. Periodically we evaluate
the scenarios presented so that they are meaningful in the context
of the current rate environment.
During 2019, the asset sensitivity of our balance sheet
increased primarily due to decreases in interest rates. We continue
to be asset sensitive to a parallel move in interest rates with the
majority of that impact coming from the short end of the yield
curve. Additionally, higher interest rates impact the fair value of
debt securities and, accordingly, for debt securities classified as
available for sale (AFS), may adversely affect accumulated other
comprehensive income (OCI) and thus capital levels under the
Basel 3 capital rules. Under instantaneous upward parallel shifts,
the near-term adverse impact to Basel 3 capital is reduced over
time by offsetting positive impacts to net interest income. For more
information on Basel 3, see Capital Management – Regulatory
Capital on page 67.
Table 48 Estimated Banking Book Net Interest Income
Sensitivity to Curve Changes
Short
Rate
(bps)
Long
Rate
(bps)
December 31
2019
2018
+100
+100 $
4,190 $
2,833
-100
-100
(6,536)
(4,280)
+100
—
2,641
2,158
—
-100
(2,965)
(1,618)
-100
—
(3,527)
(2,648)
(Dollars in millions)
Parallel Shifts
+100 bps
instantaneous shift
-100 bps
instantaneous shift
Flatteners
Short-end
instantaneous change
Long-end
instantaneous change
Steepeners
Short-end
instantaneous change
Long-end
instantaneous change
—
+100
1,561
675
The sensitivity analysis in Table 48 assumes that we take no
action in response to these rate shocks and does not assume any
change in other macroeconomic variables normally correlated with
changes in interest rates. As part of our ALM activities, we use
securities, certain residential mortgages, and interest rate and
foreign exchange derivatives in managing interest rate sensitivity.
The behavior of our deposits portfolio in the baseline forecast
and in alternate interest rate scenarios is a key assumption in our
projected estimates of net interest income. The sensitivity analysis
in Table 48 assumes no change in deposit portfolio size or mix
from the baseline forecast in alternate rate environments. In higher
rate scenarios, any customer activity resulting in the replacement
of low-cost or noninterest-bearing deposits with higher yielding
deposits or market-based funding would reduce our benefit in
those scenarios.
Interest Rate and Foreign Exchange Derivative
Contracts
Interest rate and foreign exchange derivative contracts are utilized
in our ALM activities and serve as an efficient tool to manage our
interest rate and foreign exchange risk. We use derivatives to
hedge the variability in cash flows or changes in fair value on our
balance sheet due to interest rate and foreign exchange
components. For more information on our hedging activities, see
Note 3 – Derivatives to the Consolidated Financial Statements.
Our interest rate contracts are generally non-leveraged generic
interest rate and foreign exchange basis swaps, options, futures
and forwards. In addition, we use foreign exchange contracts,
including cross-currency interest rate swaps, foreign currency
futures contracts, foreign currency forward contracts and options
to mitigate the foreign exchange risk associated with foreign
currency-denominated assets and liabilities.
Changes to the composition of our derivatives portfolio during
2019 reflect actions taken for interest rate and foreign exchange
rate risk management. The decisions to reposition our derivatives
portfolio are based on the current assessment of economic and
financial conditions including the interest rate and foreign currency
environments, balance sheet composition and trends, and the
relative mix of our cash and derivative positions.
We use interest rate derivative instruments to hedge the
variability in the cash flows of our assets and liabilities and other
forecasted transactions (collectively referred to as cash flow
hedges). The net losses on both open and terminated cash flow
hedge derivative instruments recorded in accumulated OCI were
$496 million and $1.3 billion, on a pretax basis, at December 31,
2019 and 2018. These net losses are expected to be reclassified
into earnings in the same period as the hedged cash flows affect
earnings and will decrease income or increase expense on the
respective hedged cash flows. Assuming no change in open cash
flow derivative hedge positions and no changes in prices or interest
rates beyond what is implied in forward yield curves at December
31, 2019, the pretax net losses are expected to be reclassified
into earnings as follows: 17 percent within the next year, 44 percent
in years two through five, 22 percent in years six through ten, with
the remaining 17 percent thereafter. For more information on
derivatives designated as cash flow hedges, see Note 3 –
Derivatives to the Consolidated Financial Statements.
We hedge our net investment in non-U.S. operations determined
to have functional currencies other than the U.S. dollar using
forward foreign exchange contracts that typically settle in less than
180 days, cross-currency basis swaps and foreign exchange
options. We recorded net after-tax losses on derivatives in
accumulated OCI associated with net investment hedges which
were offset by gains on our net investments in consolidated non-
U.S. entities at December 31, 2019.
Table 49 presents derivatives utilized in our ALM activities and
shows the notional amount, fair value, weighted-average receive-
fixed and pay-fixed rates, expected maturity and average estimated
96 96
Bank of America 2019
Bank of America 2019
durations of our open ALM derivatives at December 31, 2019 and
2018. These amounts do not include derivative hedges on our
MSRs. During 2019, the fair value of receive-fixed interest rate
swaps increased while pay-fixed interest rate swaps decreased,
driven by lower swap rates.
Table 49 Asset and Liability Management Interest Rate and Foreign Exchange Contracts
December 31, 2019
Expected Maturity
(Dollars in millions, average estimated duration in
years)
Fair
Value
Receive-fixed interest rate swaps (1)
$ 12,370
Total
2020
2021
2022
2023
2024
Thereafter
Notional amount
Weighted-average fixed-rate
Pay-fixed interest rate swaps (1)
Notional amount
Weighted-average fixed-rate
Same-currency basis swaps (2)
Notional amount
(2,669)
(290)
$215,123
$ 16,347
$ 14,642
$ 21,616
$ 36,356
$ 21,257
$104,905
2.68%
2.68%
3.17%
2.48%
2.36%
2.55%
2.79%
$ 69,586
$ 4,344
$ 2,117
$
2.36%
2.16%
2.15%
—
—%
$ 13,993
$ 8,194
$ 40,938
2.52%
2.26%
2.35%
$152,160
$ 18,857
$ 18,590
$ 4,306
$ 2,017
$ 14,567
$ 93,823
Foreign exchange basis swaps (1, 3, 4)
(1,258)
Notional amount
Foreign exchange contracts (1, 4, 5)
Notional amount (6)
Option products
Notional amount
Net ALM contracts
414
—
$
8,567
113,529
23,639
24,215
14,611
7,111
3,521
40,432
(53,106)
(79,315)
4,539
2,674
2,340
4,432
12,224
15
—
—
—
15
—
—
(Dollars in millions, average estimated duration
in years)
Fair
Value
Receive-fixed interest rate swaps (1)
$ 2,128
Total
2019
2020
2021
2022
2023
Thereafter
December 31, 2018
Expected Maturity
Notional amount
Weighted-average fixed-rate
Pay-fixed interest rate swaps (1)
Notional amount
Weighted-average fixed-rate
Same-currency basis swaps (2)
Notional amount
Foreign exchange basis swaps (1, 3, 4)
(1,716)
Notional amount
Foreign exchange contracts (1, 4, 5)
Notional amount (6)
Option products
Notional amount
Net ALM contracts
82
2
$
812
$198,914
$ 27,176
$ 16,347
$ 14,640
$ 19,866
$ 36,215
$ 84,670
2.66%
1.87%
2.68%
3.17%
2.56%
2.37%
2.97%
$ 49,275
$ 1,210
$ 4,344
$ 1,616
$
2.50%
2.07%
2.16%
2.22%
—
—%
$ 10,801
$ 31,304
2.59%
2.55%
295
21
$101,203
$ 7,628
$ 15,097
$ 15,493
$ 2,586
$ 2,017
$ 58,382
106,742
13,946
21,448
19,241
10,239
6,260
35,608
(8,447)
(27,823)
587
572
13
—
4,196
2,741
2,448
9,978
—
—
15
—
Average
Estimated
Duration
6.47
6.99
Average
Estimated
Duration
5.17
6.30
(1) Does not include basis adjustments on either fixed-rate debt issued by the Corporation or AFS debt securities, which are hedged using derivatives designated as fair value hedging instruments, that
substantially offset the fair values of these derivatives.
(2) At December 31, 2019 and 2018, the notional amount of same-currency basis swaps included $152.2 billion and $101.2 billion in both foreign currency and U.S. dollar-denominated basis swaps
in which both sides of the swap are in the same currency.
(3) Foreign exchange basis swaps consisted of cross-currency variable interest rate swaps used separately or in conjunction with receive-fixed interest rate swaps.
(4) Does not include foreign currency translation adjustments on certain non-U.S. debt issued by the Corporation that substantially offset the fair values of these derivatives.
(5) The notional amount of foreign exchange contracts of $(53.1) billion at December 31, 2019 was comprised of $29.0 billion in foreign currency-denominated and cross-currency receive-fixed swaps,
$(82.4) billion in net foreign currency forward rate contracts, $(313) million in foreign currency-denominated interest rate swaps and $644 million in net foreign currency futures contracts. Foreign
exchange contracts of $(8.4) billion at December 31, 2018 were comprised of $25.2 billion in foreign currency-denominated and cross-currency receive-fixed swaps, $(32.7) billion in net foreign
currency forward rate contracts, $(1.8) billion in foreign currency-denominated interest rate swaps and $814 million in foreign currency futures contracts.
(6) Reflects the net of long and short positions. Amounts shown as negative reflect a net short position.
rates, the value of the MSRs will increase driven by lower
prepayment expectations. Because the interest rate risks of these
hedged items offset, we combine them into one overall hedged
item with one combined economic hedge portfolio consisting of
derivative contracts and securities.
Mortgage Banking Risk Management
We originate, fund and service mortgage loans, which subject us
to credit, liquidity and interest rate risks, among others. We
determine whether loans will be held for investment or held for
sale at the time of commitment and manage credit and liquidity
risks by selling or securitizing a portion of the loans we originate.
Interest rate risk and market risk can be substantial in the
mortgage business. Changes in interest rates and other market
factors impact the volume of mortgage originations. Changes in
interest rates also impact the value of interest rate lock
commitments (IRLCs) and the related residential first mortgage
LHFS between the date of the IRLC and the date the loans are Compliance and Operational Risk Management
sold to the secondary market. An increase in mortgage interest
rates typically leads to a decrease in the value of these
instruments. Conversely, when there is an increase in interest
During 2019, 2018 and 2017, we recorded gains of $291
million, $244 million and $118 million related to the change in
fair value of the MSRs, IRLCs and LHFS, net of gains and losses
on the hedge portfolio. For more information on MSRs, see Note
21 – Fair Value Measurements to the Consolidated Financial
Statements.
Compliance risk is the risk of legal or regulatory sanctions, material
financial loss or damage to the reputation of the Corporation
arising from the failure of the Corporation to comply with the
Bank of America 2019 97
Bank of America 2019 97
requirements of applicable laws, rules, regulations and our internal
policies and procedures (collectively, applicable laws, rules and
regulations).
Operational risk is the risk of loss resulting from inadequate
or failed processes, people and systems or from external events.
Operational risk may occur anywhere in the Corporation, including
third-party business processes, and is not limited to operations
functions. Effects may extend beyond financial losses and may
result in reputational risk impacts. Operational risk includes legal
risk. Additionally, operational risk is a component in the calculation
of total risk-weighted assets used in the Basel 3 capital
calculation. For more information on Basel 3 calculations, see
Capital Management on page 66.
FLUs and control functions are first and foremost responsible
for managing all aspects of their businesses, including their
compliance and operational risk. FLUs and control functions are
required to understand their business processes and related risks
and controls, including third-party dependencies, the related
regulatory requirements, and monitor and report on the
effectiveness of the control environment. In order to actively
monitor and assess the performance of their processes and
controls, they must conduct comprehensive quality assurance
activities and identify issues and risks to remediate control gaps
and weaknesses. FLUs and control functions must also adhere to
compliance and operational risk appetite limits to meet strategic,
capital and financial planning objectives. Finally, FLUs and control
functions are responsible for the proactive identification,
management and escalation of compliance and operational risks
across the Corporation.
Global Compliance and Operational Risk teams independently
assess compliance and operational risk, monitor business
activities and processes, evaluate FLUs and control functions for
adherence to applicable laws, rules and regulations, including
identifying issues and risks, determining and developing tests to
be conducted by the Enterprise Independent Testing unit, and
reporting on the state of the control environment. Enterprise
Independent Testing, an independent testing function within IRM,
works with Global Compliance and Operational Risk, the FLUs and
control functions in the identification of testing needs and test
design, and is accountable for test execution, reporting and
analysis of results.
Corporate Audit provides independent assessment and
validation through testing of key compliance and operational risk
processes and controls across the Corporation.
The Corporation's Global Compliance Enterprise Policy and
Operational Risk Management - Enterprise Policy set the
requirements for reporting compliance and operational risk
information to executive management as well as the Board or
in support of Global
appropriate Board-level committees
Compliance and Operational Risk’s responsibilities for conducting
independent oversight of our compliance and operational risk
management activities. The Board provides oversight of
compliance risk through its Audit Committee and the ERC, and
operational risk through the ERC.
includes cybersecurity. Cybersecurity
A key operational risk facing the Corporation is information
security, which
risk
represents, among other things, exposure to failures or
interruptions of service or breaches of security, including as a
result of malicious technological attacks, that impact the
confidentiality, availability or
third
parties' (including their downstream service providers, the
financial services industry and financial data aggregators)
operations, systems or data, including sensitive corporate and
customer information. The Corporation manages information
security risk in accordance with internal policies which govern our
integrity of our, or
comprehensive information security program designed to protect
the Corporation by enabling preventative, detective and responsive
measures to combat information and cybersecurity risks. The
Board and the ERC provide cybersecurity and information security
risk oversight for the Corporation and our Global Information
Security Team manages the day-to-day implementation of our
information security program.
Reputational Risk Management
Reputational risk is the risk that negative perceptions of the
Corporation’s conduct or business practices may adversely impact
its profitability or operations. Reputational risk may result from
many of the Corporation’s activities, including those related to the
management of our strategic, operational, compliance and credit
risks.
risk
reputational
The Corporation manages
through
established policies and controls in its businesses and risk
management processes to mitigate reputational risks in a timely
manner and through proactive monitoring and identification of
potential reputational risk events. If reputational risk events occur,
we focus on remediating the underlying issue and taking action to
minimize damage to the Corporation’s reputation. The Corporation
has processes and procedures in place to respond to events that
give rise to reputational risk, including educating individuals and
organizations that influence public opinion, implementing external
communication strategies to mitigate the risk, and informing key
stakeholders of potential reputational risks. The Corporation’s
organization and governance structure provides oversight of
reputational risks, and reputational risk reporting is provided
regularly and directly to management and the ERC, which provides
primary oversight of reputational risk. In addition, each FLU has a
committee, which includes representatives from Compliance,
Legal and Risk, that is responsible for the oversight of reputational
risk. Such committees’ oversight includes providing approval for
business activities that present elevated levels of reputational
risks.
Complex Accounting Estimates
Our significant accounting principles, as described in Note 1 -
Summary of Significant Accounting Principles to the Consolidated
Financial Statements, are essential in understanding the MD&A.
Many of our significant accounting principles require complex
judgments to estimate the values of assets and liabilities. We
have procedures and processes in place to facilitate making these
judgments.
The more judgmental estimates are summarized in the following
discussion. We have identified and described the development of
the variables most important in the estimation processes that
involve mathematical models to derive the estimates. In many
cases, there are numerous alternative judgments that could be
used in the process of determining the inputs to the models. Where
alternatives exist, we have used the factors that we believe
represent the most reasonable value in developing the inputs.
Actual performance that differs from our estimates of the key
variables could materially impact our results of operations.
Separate from the possible future impact to our results of
operations from input and model variables, the value of our lending
portfolio and market-sensitive assets and liabilities may change
subsequent to the balance sheet date, often significantly, due to
the nature and magnitude of future credit and market conditions.
Such credit and market conditions may change quickly and in
unforeseen ways and the resulting volatility could have a
significant, negative effect on future operating results. These
fluctuations would not be indicative of deficiencies in our models
or inputs.
98 98
Bank of America 2019
Bank of America 2019
Allowance for Credit Losses
The allowance for credit losses, which includes the allowance for
loan and lease losses and the reserve for unfunded lending
commitments, represents management’s estimate of probable
incurred credit losses in the Corporation’s loan and lease portfolio
excluding those loans accounted for under the fair value option.
The allowance for credit losses includes both quantitative and
qualitative components. The qualitative component has a higher
degree of management subjectivity, and includes factors such as
concentrations, economic conditions and other considerations.
Our process for determining the allowance for credit losses is
discussed in Note 1 – Summary of Significant Accounting Principles
to the Consolidated Financial Statements.
Our estimate for the allowance for loan and lease losses is
sensitive to the loss rates and expected cash flows from our
Consumer Real Estate and Credit Card and Other Consumer
portfolio segments, as well as our U.S. small business commercial
card portfolio within the Commercial portfolio segment. For each
one-percent increase in the loss rates on loans collectively
evaluated for impairment in our Consumer Real Estate portfolio
segment, coupled with a one-percent decrease in the discounted
cash flows on those loans individually evaluated for impairment
within this portfolio segment, the allowance for loan and lease
losses at December 31, 2019 would have increased $18 million.
Within our Credit Card and Other Consumer portfolio segment and
U.S. small business commercial card portfolio, for each one-
percent increase in the loss rates on loans collectively evaluated
for impairment coupled with a one-percent decrease in the
expected cash flows on those loans individually evaluated for
impairment, the allowance for loan and lease losses at December
31, 2019 would have increased $46 million.
Our allowance for loan and lease losses is sensitive to the risk
ratings assigned to loans and leases within the Commercial
portfolio segment (excluding the U.S. small business commercial
card portfolio). Assuming a downgrade of one level in the internal
risk ratings for commercial loans and leases, except loans and
leases already classified as Substandard and Doubtful as defined
by regulatory authorities, the allowance for loan and lease losses
would have increased $2.6 billion at December 31, 2019.
The allowance for loan and lease losses as a percentage of
total loans and leases at December 31, 2019 was 0.97 percent
and these hypothetical increases in the allowance would raise the
ratio to 1.24 percent.
These sensitivity analyses do not represent management’s
expectations of the deterioration in risk ratings or the increases
in loss rates but are provided as hypothetical scenarios to assess
the sensitivity of the allowance for loan and lease losses to
changes in key inputs. We believe the risk ratings and loss
severities currently in use are appropriate and that the probability
of the alternative scenarios outlined above occurring within a short
period of time is remote.
The process of determining the level of the allowance for credit
losses requires a high degree of judgment. It is possible that
others, given the same information, may at any point in time reach
different reasonable conclusions.
The processes, judgments and estimates described herein
relate to the accounting standard in effect through December 31,
2019. On January 1, 2020, the Corporation adopted the new
accounting standard that requires the measurement of the
allowance for credit losses to be based on management’s best
estimate of lifetime expected credit losses inherent in the
Corporation’s relevant financial assets. The Corporation’s lifetime
expected credit losses are determined using macroeconomic
forecast assumptions and management judgments applicable to
and through the expected life of the loan portfolios. For more
information, see Note 1 – Summary of Significant Accounting
Principles to the Consolidated Financial Statements.
Fair Value of Financial Instruments
Under applicable accounting standards, we are required to
maximize the use of observable inputs and minimize the use of
unobservable inputs in measuring fair value. We classify fair value
measurements of financial instruments and MSRs based on the
three-level fair value hierarchy in the accounting standards.
The fair values of assets and liabilities may include
adjustments, such as market liquidity and credit quality, where
appropriate. Valuations of products using models or other
techniques are sensitive to assumptions used for the significant
inputs. Where market data is available, the inputs used for
valuation reflect that information as of our valuation date. Inputs
to valuation models are considered unobservable if they are
supported by little or no market activity. In periods of extreme
volatility, lessened liquidity or in illiquid markets, there may be
more variability in market pricing or a lack of market data to use
in the valuation process. In keeping with the prudent application
of estimates and management judgment in determining the fair
value of assets and liabilities, we have in place various processes
and controls that include: a model validation policy that requires
review and approval of quantitative models used for deal pricing,
financial statement
risk
quantification; a trading product valuation policy that requires
verification of all traded product valuations; and a periodic review
and substantiation of daily profit and loss reporting for all traded
products. Primarily through validation controls, we utilize both
broker and pricing service inputs which can and do include both
market-observable and internally-modeled values and/or valuation
inputs. Our reliance on this information is affected by our
understanding of how the broker and/or pricing service develops
its data with a higher degree of reliance applied to those that are
more directly observable and lesser reliance applied to those
developed through their own internal modeling. For example, broker
quotes in less active markets may only be indicative and therefore
less reliable. These processes and controls are performed
independently of the business. For more information, see Note 21
– Fair Value Measurements and Note 22 – Fair Value Option to the
Consolidated Financial Statements.
value determination and
fair
Level 3 Assets and Liabilities
Financial assets and liabilities, and MSRs, where values are based
on valuation techniques that require inputs that are both
unobservable and are significant to the overall fair value
measurement are classified as Level 3 under the fair value
hierarchy established in applicable accounting standards. The fair
value of these Level 3 financial assets and liabilities and MSRs
is determined using pricing models, discounted cash flow
methodologies or similar techniques for which the determination
of fair value requires significant management judgment or
estimation.
Level 3 financial instruments may be hedged with derivatives
classified as Level 1 or 2; therefore, gains or losses associated
with Level 3 financial instruments may be offset by gains or losses
associated with financial instruments classified in other levels of
the fair value hierarchy. The Level 3 gains and losses recorded in
earnings did not have a significant impact on our liquidity or capital.
We conduct a review of our fair value hierarchy classifications on
a quarterly basis. Transfers into or out of Level 3 are made if the
significant inputs used in the financial models measuring the fair
values of the assets and liabilities became unobservable or
observable, respectively, in the current marketplace. For more
information on transfers into and out of Level 3 during 2019, 2018
Bank of America 2019 99
Bank of America 2019 99
and 2017, see Note 21 – Fair Value Measurements to the
Consolidated Financial Statements.
Accrued Income Taxes and Deferred Tax Assets
Accrued income taxes, reported as a component of either other
assets or accrued expenses and other liabilities on the
Consolidated Balance Sheet, represent the net amount of current
income taxes we expect to pay to or receive from various taxing
jurisdictions attributable to our operations to date. We currently
file income tax returns in more than 100 jurisdictions and consider
many factors, including statutory, judicial and regulatory guidance,
in estimating the appropriate accrued income taxes for each
jurisdiction.
Net deferred tax assets, reported as a component of other
assets on the Consolidated Balance Sheet, represent the net
decrease in taxes expected to be paid in the future because of
net operating loss (NOL) and tax credit carryforwards and because
of future reversals of temporary differences in the bases of assets
and liabilities as measured by tax laws and their bases as reported
in the financial statements. NOL and tax credit carryforwards result
in reductions to future tax liabilities, and many of these attributes
can expire if not utilized within certain periods. We consider the
need for valuation allowances to reduce net deferred tax assets
to the amounts that we estimate are more likely than not to be
realized.
Consistent with the applicable accounting guidance, we monitor
relevant tax authorities and change our estimates of accrued
income taxes and/or net deferred tax assets due to changes in
income tax laws and their interpretation by the courts and
regulatory authorities. These revisions of our estimates, which
also may result from our income tax planning and from the
resolution of income tax audit matters, may be material to our
operating results for any given period.
See Note 20 – Income Taxes to the Consolidated Financial
Statements for a table of significant tax attributes and additional
information. For more information, see Item 1A. Risk Factors of
our 2019 Annual Report on Form 10-K.
Goodwill and Intangible Assets
The nature of and accounting for goodwill and intangible assets
are discussed in Note 1 – Summary of Significant Accounting
Principles, and Note 8 – Goodwill and Intangible Assets to the
Consolidated Financial Statements.
We completed our annual goodwill impairment test as of June
30, 2019 for all of our reporting units that had goodwill. We
performed that test by assessing qualitative factors to determine
whether it is more likely than not that the fair value of each reporting
unit is less than its respective carrying value. Factors considered
in the qualitative assessments include, among other things,
macroeconomic conditions, industry and market considerations,
financial performance of the respective reporting unit and other
relevant entity- and reporting-unit specific considerations. If based
on the results of the qualitative assessment, it is more likely than
not that the fair value of a reporting unit is less than its carrying
value, a quantitative assessment is performed.
Based on our qualitative assessments, we determined that for
each reporting unit with goodwill, it was more likely than not that
its respective fair value exceeded its carrying value, indicating
there was no impairment. For more information regarding goodwill
balances at June 30, 2019, see Note 8 – Goodwill and Intangible
Assets to the Consolidated Financial Statements.
Certain Contingent Liabilities
For more information on the complex judgments associated with
certain contingent liabilities, see Note 13 – Commitments and
Contingencies to the Consolidated Financial Statements.
100 100
Bank of America 2019
Bank of America 2019
Non-GAAP Reconciliations
Tables 50 and 51 provide reconciliations of certain non-GAAP financial measures to GAAP financial measures.
Table 50 Five-year Reconciliations to GAAP Financial Measures (1)
(Dollars in millions, shares in thousands)
2019
2018
2017
2016
2015
Reconciliation of average shareholders’ equity to average tangible shareholders’ equity and
average tangible common shareholders’ equity
Shareholders’ equity
Goodwill
Intangible assets (excluding MSRs)
Related deferred tax liabilities
Tangible shareholders’ equity
Preferred stock
Tangible common shareholders’ equity
Reconciliation of year-end shareholders’ equity to year-end tangible shareholders’ equity and
year-end tangible common shareholders’ equity
Shareholders’ equity
Goodwill
Intangible assets (excluding MSRs)
Related deferred tax liabilities
Tangible shareholders’ equity
Preferred stock
Tangible common shareholders’ equity
Reconciliation of year-end assets to year-end tangible assets
(68,951)
(1,721)
773
$ 267,889 $ 264,748 $ 271,289 $ 265,843 $ 251,384
(69,772)
(4,201)
1,852
$ 197,990 $ 194,645 $ 200,814 $ 194,355 $ 179,263
(21,808)
$ 174,954 $ 171,696 $ 176,626 $ 169,699 $ 157,455
(69,750)
(3,382)
1,644
(68,951)
(2,058)
906
(69,286)
(2,652)
1,463
(24,188)
(22,949)
(24,656)
(23,036)
(68,951)
(1,661)
713
$ 264,810 $ 265,325 $ 267,146 $ 266,195 $ 255,615
(69,761)
(3,768)
1,716
$ 194,911 $ 195,458 $ 196,826 $ 195,007 $ 183,802
(22,272)
$ 171,510 $ 173,132 $ 174,503 $ 169,787 $ 161,530
(68,951)
(2,312)
943
(69,744)
(2,989)
1,545
(68,951)
(1,774)
858
(25,220)
(22,323)
(22,326)
(23,401)
Assets
Goodwill
Intangible assets (excluding MSRs)
Related deferred tax liabilities
$ 2,434,079 $2,354,507 $2,281,234 $2,188,067 $2,144,606
(69,761)
(3,768)
1,716
$ 2,364,180 $2,284,640 $2,210,914 $2,116,879 $2,072,793
(1) Presents reconciliations of non-GAAP financial measures to GAAP financial measures. For more information on non-GAAP financial measures and ratios we use in assessing the results of the
(69,744)
(2,989)
1,545
(68,951)
(2,312)
943
(68,951)
(1,774)
858
(68,951)
(1,661)
713
Tangible assets
Corporation, see Supplemental Financial Data on page 48.
Table 51 Quarterly Reconciliations to GAAP Financial Measures (1)
(Dollars in millions)
Fourth
Third
Second
First
Fourth
Third
Second
First
2019 Quarters
2018 Quarters
Reconciliation of average shareholders’ equity to average tangible
shareholders’ equity and average tangible common shareholders’
equity
Shareholders’ equity
Goodwill
Intangible assets (excluding MSRs)
Related deferred tax liabilities
Tangible shareholders’ equity
Preferred stock
$ 266,900 $ 270,430 $ 267,975 $ 266,217 $ 263,698 $ 264,653 $ 265,181 $ 265,480
(68,951)
(1,678)
730
(68,951)
(68,951)
(68,951)
(68,951)
(68,951)
(68,951)
(68,951)
(1,707)
(1,736)
(1,763)
(1,857)
(1,992)
(2,126)
(2,261)
752
770
841
874
896
916
939
$ 197,001 $ 200,524 $ 198,058 $ 196,344 $ 193,764 $ 194,606 $ 195,020 $ 195,207
(23,461)
(23,800)
(22,537)
(22,326)
(22,326)
(22,841)
(23,868)
(22,767)
Tangible common shareholders’ equity
$ 173,540 $ 176,724 $ 175,521 $ 174,018 $ 171,438 $ 171,765 $ 171,152 $ 172,440
Reconciliation of period-end shareholders’ equity to period-end tangible
shareholders’ equity and period-end tangible common shareholders’
equity
Shareholders’ equity
Goodwill
Intangible assets (excluding MSRs)
Related deferred tax liabilities
Tangible shareholders’ equity
Preferred stock
$ 264,810 $ 268,387 $ 271,408 $ 267,010 $ 265,325 $ 262,158 $ 264,216 $ 266,224
(68,951)
(1,661)
713
(68,951)
(68,951)
(68,951)
(68,951)
(68,951)
(68,951)
(68,951)
(1,690)
(1,718)
(1,747)
(1,774)
(1,908)
(2,043)
(2,177)
734
756
773
858
878
900
920
$ 194,911 $ 198,480 $ 201,495 $ 197,085 $ 195,458 $ 192,177 $ 194,122 $ 196,016
(23,401)
(23,606)
(24,689)
(22,326)
(22,326)
(22,326)
(23,181)
(24,672)
Tangible common shareholders’ equity
$ 171,510 $ 174,874 $ 176,806 $ 174,759 $ 173,132 $ 169,851 $ 170,941 $ 171,344
Reconciliation of period-end assets to period-end tangible assets
Assets
Goodwill
Intangible assets (excluding MSRs)
Related deferred tax liabilities
Tangible assets
$ 2,434,079 $ 2,426,330 $2,395,892 $ 2,377,164 $ 2,354,507 $2,338,833 $ 2,291,670 $ 2,328,478
(68,951)
(1,661)
713
(68,951)
(68,951)
(68,951)
(68,951)
(68,951)
(68,951)
(68,951)
(1,690)
(1,718)
(1,747)
(1,774)
(1,908)
(2,043)
(2,177)
734
756
773
858
878
900
920
$ 2,364,180 $ 2,356,423 $2,325,979 $ 2,307,239 $ 2,284,640 $2,268,852 $ 2,221,576 $ 2,258,270
(1) Presents reconciliations of non-GAAP financial measures to GAAP financial measures. For more information on non-GAAP financial measures and ratios we use in assessing the results of the
Corporation, see Supplemental Financial Data on page 48.
Bank of America 2019 101
Bank of America 2019 101
Statistical Tables
Table of Contents
Table I – Outstanding Loans and Leases
Table II – Nonperforming Loans, Leases and Foreclosed Properties
Table III – Accruing Loans and Leases Past Due 90 Days or More
Table IV – Selected Loan Maturity Data
Table V – Allowance for Credit Losses
Table VI – Allocation of the Allowance for Credit Losses by Product Type
Table I Outstanding Loans and Leases
Page
102
103
103
104
104
105
(Dollars in millions)
Consumer
Residential mortgage
Home equity
Credit card
Non-U.S. credit card
Direct/Indirect consumer (1)
Other consumer (2)
Total consumer loans excluding loans accounted for under the
fair value option
Consumer loans accounted for under the fair value option (3)
Total consumer
Commercial
2019
2018
December 31
2017
2016
2015
$
236,169
40,208
97,608
—
90,998
192
465,175
594
465,769
$
208,557
48,286
98,338
—
91,166
202
446,549
682
447,231
$ 203,811
57,744
96,285
—
96,342
166
454,348
928
455,276
$
191,797
66,443
92,278
9,214
95,962
626
456,320
1,051
457,371
$
187,911
75,948
89,602
9,975
90,149
713
454,298
1,871
456,169
U.S. small business commercial (5)
U.S. commercial
Non-U.S. commercial
Commercial real estate (4)
Commercial lease financing
252,771
91,549
57,199
21,352
422,871
12,876
435,747
5,067
440,814
—
$ 983,426 $ 946,895 $ 936,749 $ 906,683 $ 896,983
(1) Includes primarily auto and specialty lending loans and leases of $50.4 billion, $50.1 billion, $52.4 billion, $50.7 billion and $43.9 billion, U.S. securities-based lending loans of $36.7 billion, $37.0
billion, $39.8 billion, $40.1 billion and $39.8 billion and non-U.S. consumer loans of $2.8 billion, $2.9 billion, $3.0 billion, $3.0 billion and $3.9 billion at December 31, 2019, 2018, 2017, 2016
and 2015, respectively.
270,372
89,397
57,355
22,375
439,499
12,993
452,492
6,034
458,526
(9,214)
299,277
98,776
60,845
22,534
481,432
14,565
495,997
3,667
499,664
—
284,836
97,792
58,298
22,116
463,042
13,649
476,691
4,782
481,473
—
307,048
104,966
62,689
19,880
494,583
15,333
509,916
7,741
517,657
—
Total commercial loans excluding loans accounted for under th
Commercial loans accounted for under the fair value option (3)
Less: Loans of business held for sale (6)
Total loans and leases
e fair value option
Total commercial
(2) Substantially all of other consumer at December 31, 2019, 2018 and 2017 is consumer overdrafts. Other consumer at December 31, 2016 and 2015 also includes consumer finance loans of $465
million and $564 million, respectively.
(3) Consumer loans accounted for under the fair value option include residential mortgage loans of $257 million, $336 million, $567 million, $710 million and $1.6 billion, and home equity loans of
$337 million, $346 million, $361 million, $341 million and $250 million at December 31, 2019, 2018, 2017, 2016 and 2015, respectively. Commercial loans accounted for under the fair value
option include U.S. commercial loans of $4.7 billion, $2.5 billion, $2.6 billion, $2.9 billion and $2.3 billion, and non-U.S. commercial loans of $3.1 billion, $1.1 billion, $2.2 billion, $3.1 billion and
$2.8 billion at December 31, 2019, 2018, 2017, 2016 and 2015, respectively.
Includes U.S. commercial real estate loans of $59.0 billion, $56.6 billion, $54.8 billion, $54.3 billion and $53.6 billion, and non-U.S. commercial real estate loans of $3.7 billion, $4.2 billion, $3.5
billion, $3.1 billion and $3.5 billion at December 31, 2019, 2018, 2017, 2016 and 2015, respectively.
Includes card-related products.
(4)
(5)
(6) Represents non-U.S. credit card loans, which were included in assets of business held for sale on the Consolidated Balance Sheet.
102 102
Bank of America 2019
Bank of America 2019
Table II Nonperforming Loans, Leases and Foreclosed Properties (1)
(Dollars in millions)
Consumer
Residential mortgage
Home equity
Direct/Indirect consumer
Other consumer
Total consumer (2)
Commercial
2019
2018
December 31
2017
2016
2015
$
1,470 $
536
47
—
2,053
1,893 $
1,893
56
—
3,842
2,476 $
2,644
46
—
5,166
3,056 $
2,918
28
2
6,004
4,803
3,337
24
1
8,165
U.S. commercial
Non-U.S. commercial
Commercial real estate
Commercial lease financing
867
158
93
12
1,130
82
1,212
9,377
459
$
9,836
(1) Balances exclude foreclosed properties insured by certain government-guaranteed loans, principally FHA-insured loans, that entered foreclosure of $260 million, $488 million, $801 million, $1.2
Total commercial (3)
Total nonperforming loans and leases
794
80
156
18
1,048
54
1,102
4,944
300
1,256
279
72
36
1,643
60
1,703
7,707
377
814
299
112
24
1,249
55
1,304
6,470
288
1,094
43
280
32
1,449
50
1,499
3,552
285
Total nonperforming loans, leases and foreclosed properties
U.S. small business commercial
Foreclosed properties
6,758 $
8,084 $
5,244 $
3,837 $
billion and $1.4 billion at December 31, 2019, 2018, 2017, 2016 and 2015, respectively.
(2) In 2019, $422 million in interest income was estimated to be contractually due on $2.1 billion of consumer loans and leases classified as nonperforming at December 31, 2019, as presented in
the table above, plus $5.5 billion of TDRs classified as performing at December 31, 2019. Approximately $297 million of the estimated $422 million in contractual interest was received and included
in interest income for 2019.
(3) In 2019, $133 million in interest income was estimated to be contractually due on $1.5 billion of commercial loans and leases classified as nonperforming at December 31, 2019, as presented in
the table above, plus $1.3 billion of TDRs classified as performing at December 31, 2019. Approximately $88 million of the estimated $133 million in contractual interest was received and included
in interest income for 2019.
Table III Accruing Loans and Leases Past Due 90 Days or More (1)
(Dollars in millions)
Consumer
Residential mortgage (2)
Credit card
Non-U.S. credit card
Direct/Indirect consumer
Other consumer
Total consumer
Commercial
U.S. commercial
Non-U.S. commercial
Commercial real estate
Commercial lease financing
U.S. small business commercial
Total commercial
Total accruing loans and leases past due 90 days or more
2019
2018
December 31
2017
2016
2015
$
1,088 $
1,042
—
33
—
2,163
106
8
19
20
153
97
250
1,884 $
3,230 $
4,793 $
994
—
38
—
2,916
197
—
4
29
230
84
314
900
—
40
—
4,170
144
3
4
19
170
75
245
782
66
34
4
5,679
106
5
7
19
137
71
208
$
2,413 $
3,230 $
4,415 $
5,887 $
7,150
789
76
39
3
8,057
113
1
3
15
132
61
193
8,250
(1) Our policy is to classify consumer real estate-secured loans as nonperforming at 90 days past due, except the fully-insured loan portfolio and loans accounted for under the fair value option.
(2) Balances are fully-insured loans.
Bank of America 2019 103
Bank of America 2019 103
Table IV Selected Loan Maturity Data (1, 2)
(Dollars in millions)
U.S. commercial
U.S. commercial real estate
Non-U.S. and other (3)
Total selected loans
Percent of total
Sensitivity of selected loans to changes in interest rates for loans due after one year:
Fixed interest rates
Floating or adjustable interest rates
Total
(1) Loan maturities are based on the remaining maturities under contractual terms.
(2)
Includes loans accounted for under the fair value option.
(3) Loan maturities include non-U.S. commercial and commercial real estate loans.
Due in One
Year or Less
$
$
76,523
13,683
47,828
138,034
28%
December 31, 2019
Due After One
Year Through
Five Years
Due After
Five Years
$
$
$
$
200,298
39,259
56,072
295,629
59%
21,526
274,103
295,629
$
$
$
$
50,216
6,023
7,875
64,114
$
$
Total
327,037
58,965
111,775
497,777
13%
100%
31,383
32,731
64,114
Table V Allowance for Credit Losses
(Dollars in millions)
Allowance for loan and lease losses, January 1
Loans and leases charged off
Residential mortgage
Home equity
Credit card
Non-U.S. credit card (1)
Direct/Indirect consumer
Other consumer
Total consumer charge-offs
U.S. commercial (2)
Non-U.S. commercial
Commercial real estate
Commercial lease financing
Total commercial charge-offs
Total loans and leases charged off
Recoveries of loans and leases previously charged off
Residential mortgage
Home equity
Credit card
Non-U.S. credit card (1)
Direct/Indirect consumer
Other consumer
Total consumer recoveries
U.S. commercial (3)
Non-U.S. commercial
Commercial real estate
Commercial lease financing
Total commercial recoveries
Total recoveries of loans and leases previously charged off
Net charge-offs
Provision for loan and lease losses
Other (4)
Total allowance for loan and lease losses, December 31
Less: Allowance included in assets of business held for sale (5)
Allowance for loan and lease losses, December 31
Reserve for unfunded lending commitments, January 1
Provision for unfunded lending commitments
Other (4)
Reserve for unfunded lending commitments, December 31
Allowance for credit losses, December 31
2019
2018
2017
2016
2015
$
9,601 $ 10,393 $ 11,237 $ 12,234 $ 14,419
(93)
(429)
(3,535)
—
(518)
(249)
(4,824)
(650)
(115)
(31)
(26)
(822)
(5,646)
(207)
(483)
(3,345)
—
(495)
(197)
(4,727)
(575)
(82)
(10)
(8)
(675)
(5,402)
(188)
(582)
(2,968)
(103)
(491)
(212)
(4,544)
(589)
(446)
(24)
(16)
(1,075)
(5,619)
(403)
(752)
(2,691)
(238)
(392)
(232)
(4,708)
(567)
(133)
(10)
(30)
(740)
(5,448)
(866)
(975)
(2,738)
(275)
(383)
(224)
(5,461)
(536)
(59)
(30)
(19)
(644)
(6,105)
140
787
587
—
309
15
1,838
122
31
2
5
160
1,998
(3,648)
3,574
(111)
9,416
—
9,416
797
16
—
813
393
339
424
87
271
31
1,545
172
5
35
10
222
1,767
(4,338)
3,043
(890)
12,234
—
12,234
528
118
—
646
10,229 $ 10,398 $ 11,170 $ 11,999 $ 12,880
272
347
422
63
258
27
1,389
175
13
41
9
238
1,627
(3,821)
3,581
(514)
11,480
(243)
11,237
646
16
100
762
288
369
455
28
277
49
1,466
142
6
15
11
174
1,640
(3,979)
3,381
(246)
10,393
—
10,393
762
15
—
777
179
485
508
—
300
15
1,487
120
14
9
9
152
1,639
(3,763)
3,262
(291)
9,601
—
9,601
777
20
—
797
$
(1) Represents amounts related to the non-U.S. credit card loan portfolio, which was sold in 2017.
(2)
Includes U.S. small business commercial charge-offs of $320 million, $287 million, $258 million, $253 million and $282 million in 2019, 2018, 2017, 2016 and 2015, respectively.
Includes U.S. small business commercial recoveries of $48 million, $47 million, $43 million, $45 million and $57 million in 2019, 2018, 2017, 2016 and 2015, respectively.
(3)
(4) Primarily represents write-offs of PCI loans, the net impact of portfolio sales, consolidations and deconsolidations, foreign currency translation adjustments, transfers to held for sale and certain
other reclassifications.
(5) Represents allowance related to the non-U.S. credit card loan portfolio, which was sold in 2017.
104 104
Bank of America 2019
Bank of America 2019
Table V Allowance for Credit Losses (continued)
(Dollars in millions)
Loan and allowance ratios (6):
Loans and leases outstanding at December 31 (7)
Allowance for loan and lease losses as a percentage of total loans and leases outstanding
at December 31 (7)
Consumer allowance for loan and lease losses as a percentage of total consumer loans and
leases outstanding at December 31 (8)
Commercial allowance for loan and lease losses as a percentage of total commercial loans
and leases outstanding at December 31 (9)
Average loans and leases outstanding (7)
Net charge-offs as a percentage of average loans and leases outstanding (7)
Allowance for loan and lease losses as a percentage of total nonperforming loans and
leases at December 31
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs
Amounts included in allowance for loan and lease losses for loans and leases that are
excluded from nonperforming loans and leases at December 31 (10)
Allowance for loan and lease losses as a percentage of total nonperforming loans and
leases, excluding the allowance for loan and lease losses for loans and leases that are
excluded from nonperforming loans and leases at December 31 (10)
2019
2018
2017
2016
2015
$ 975,091
$ 942,546
$ 931,039
$ 908,812
$ 890,045
0.97%
1.02%
1.12%
1.26%
1.37%
0.98
0.96
1.08
0.97
1.18
1.05
1.36
1.16
1.63
1.11
$ 951,583
$ 927,531
$ 911,988
$ 892,255
$ 869,065
0.38%
0.41%
0.44%
0.43%
0.50%
265
2.58
194
2.55
161
2.61
149
3.00
130
2.82
$
4,151
$
4,031
$
3,971
$
3,951
$
4,518
148%
113%
99%
98%
82%
(6) Loan and allowance ratios for 2016 include $243 million of non-U.S. credit card allowance for loan and lease losses and $9.2 billion of ending non-U.S. credit card loans, which were sold in 2017.
(7) Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option of $8.3 billion, $4.3 billion, $5.7 billion, $7.1 billion and $6.9 billion at December 31,
2019, 2018, 2017, 2016 and 2015, respectively. Average loans accounted for under the fair value option were $6.8 billion, $5.5 billion, $6.7 billion, $8.2 billion and $7.7 billion in 2019, 2018,
2017, 2016 and 2015, respectively.
(8) Excludes consumer loans accounted for under the fair value option of $594 million, $682 million, $928 million, $1.1 billion and $1.9 billion at December 31, 2019, 2018, 2017, 2016 and 2015,
respectively.
(9) Excludes commercial loans accounted for under the fair value option of $7.7 billion, $3.7 billion, $4.8 billion, $6.0 billion and $5.1 billion at December 31, 2019, 2018, 2017, 2016 and 2015,
respectively.
(10) Primarily includes amounts allocated to credit card and unsecured consumer lending portfolios in Consumer Banking and, in 2016 and 2015, the non-U.S. credit card portfolio in All Other.
Table VI Allocation of the Allowance for Credit Losses by Product Type
(Dollars in millions)
Allowance for loan and lease losses
Residential mortgage
Home equity
Credit card
Non-U.S. credit card
Direct/Indirect consumer
Other consumer
Total consumer
U.S. commercial (1)
Non-U.S. commercial
Commercial real estate
Commercial lease financing
Total commercial
Total allowance for loan and lease
losses
2019
2018
December 31
2017
2016
2015
Amount
Percent
of Total
Amount
Percent
of Total
Amount
Percent
of Total
Amount
Percent
of Total
Amount
Percent
of Total
$
325
221
3,710
—
234
52
4,542
3,015
658
1,042
159
4,874
3.45% $
2.35
39.39
—
2.49
0.55
48.23
32.02
6.99
11.07
1.69
51.77
422
506
3,597
—
248
29
4,802
3,010
677
958
154
4,799
4.40% $
5.27
37.47
—
2.58
0.30
50.02
31.35
7.05
9.98
1.60
49.98
701
1,019
3,368
—
264
31
5,383
3,113
803
935
159
5,010
6.74% $ 1,012
1,738
9.80
2,934
32.41
243
—
244
2.54
51
0.30
6,222
51.79
3,326
29.95
874
7.73
920
9.00
138
1.53
5,258
48.21
8.82% $ 1,500
2,414
2,927
274
223
47
7,385
2,964
754
967
164
4,849
15.14
25.56
2.12
2.13
0.44
54.21
28.97
7.61
8.01
1.20
45.79
12.26%
19.73
23.93
2.24
1.82
0.38
60.36
24.23
6.17
7.90
1.34
39.64
9,416
100.00%
9,601
100.00%
10,393
100.00%
11,480
100.00%
12,234
100.00%
Less: Allowance included in assets of
business held for sale (2)
Allowance for loan and lease losses
Reserve for unfunded lending commitments
Allowance for credit losses
—
9,416
813
$ 10,229
—
9,601
797
$ 10,398
—
10,393
777
$ 11,170
(243)
11,237
762
$ 11,999
—
12,234
646
$ 12,880
(1)
Includes allowance for loan and lease losses for U.S. small business commercial loans of $523 million, $474 million, $439 million, $416 million and $507 million at December 31, 2019, 2018,
2017, 2016 and 2015, respectively.
(2) Represents allowance for loan and lease losses related to the non-U.S. credit card loan portfolio, which was sold in 2017.
Bank of America 2019 105
Bank of America 2019 105
Financial Statements and Notes
Table of Contents
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Shareholders’ Equity
Consolidated Statement of Cash Flows
Note 1 – Summary of Significant Accounting Principles
Note 2 – Net Interest Income and Noninterest Income
Note 3 – Derivatives
Note 4 – Securities
Note 5 – Outstanding Loans and Leases
Note 6 – Allowance for Credit Losses
Note 7 – Securitizations and Other Variable Interest Entities
Note 8 – Goodwill and Intangible Assets
Note 9 – Leases
Note 10 – Deposits
Note 11 – Federal Funds Sold or Purchased, Securities Financing Agreements, Short-term Borrowings
and Restricted Cash
Note 12 – Long-term Debt
Note 13 – Commitments and Contingencies
Note 14 – Shareholders’ Equity
Note 15 – Accumulated Other Comprehensive Income (Loss)
Note 16 – Earnings Per Common Share
Note 17 – Regulatory Requirements and Restrictions
Note 18 – Employee Benefit Plans
Note 19 – Stock-based Compensation Plans
Note 20 – Income Taxes
Note 21 – Fair Value Measurements
Note 22 – Fair Value Option
Note 23 – Fair Value of Financial Instruments
Note 24 – Business Segment Information
Note 25 – Parent Company Information
Note 26 – Performance by Geographical Area
Glossary
Acronyms
Page
110
110
111
112
113
114
122
123
130
133
141
142
146
146
147
147
149
150
155
157
158
158
160
164
165
166
175
177
177
180
182
183
184
106 106
Bank of America 2019
Bank of America 2019
Report of Management on Internal Control Over Financial Reporting
Bank of America Corporation and Subsidiaries
The management of Bank of America Corporation is responsible
for establishing and maintaining adequate internal control over
financial reporting.
The Corporation’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with accounting
principles generally accepted in the United States of America. The
Corporation’s internal control over financial reporting includes
those policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the Corporation;
(ii) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in
accordance with accounting principles generally accepted in the
United States of America, and that receipts and expenditures of
the Corporation are being made only in accordance with
authorizations of management and directors of the Corporation;
and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition
of the Corporation’s assets that could have a material effect on
the financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.
Management assessed the effectiveness of the Corporation’s
internal control over financial reporting as of December 31, 2019
based on the framework set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control –
Integrated Framework (2013). Based on that assessment,
management concluded that, as of December 31, 2019, the
Corporation’s internal control over financial reporting is effective.
The Corporation’s internal control over financial reporting
as of December 31, 2019 has been audited by
PricewaterhouseCoopers, LLP, an independent registered public
accounting firm, as stated in their accompanying report which
expresses an unqualified opinion on the effectiveness of the
Corporation’s internal control over financial reporting as of
December 31, 2019.
Brian T. Moynihan
Chairman, Chief Executive Officer and President
Paul M. Donofrio
Chief Financial Officer
Bank of America 2019 107
Bank of America 2019 107
Report of Independent Registered Public Accounting Firm
Bank of America Corporation and Subsidiaries
To the Board of Directors and Shareholders of Bank
of America Corporation:
the
Opinions on the Financial Statements and Internal
Control over Financial Reporting
We have audited the accompanying consolidated balance sheets
of Bank of America Corporation and its subsidiaries (the
"Corporation") as of December 31, 2019 and December 31, 2018,
income,
related consolidated statements of
and
comprehensive income, changes in shareholders’ equity and cash
flows for each of the three years in the period ended December
31, 2019, including the related notes (collectively referred to as
the “consolidated financial statements”). We also have audited
the Corporation’s internal control over financial reporting as of
December 31, 2019, based on criteria established in Internal
Control - Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of the Corporation as of December 31, 2019 and
December 31, 2018, and the results of its operations and its cash
flows for each of the three years in the period ended December
31, 2019 in conformity with accounting principles generally
accepted in the United States of America. Also in our opinion, the
Corporation maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2019, based
on criteria established in Internal Control - Integrated Framework
(2013) issued by the COSO.
is
for
responsible
Basis for Opinions
The Corporation’s management
these
consolidated financial statements, for maintaining effective
internal control over financial reporting, and for its assessment of
the effectiveness of internal control over financial reporting,
included in the accompanying Report of Management on Internal
Control Over Financial Reporting. Our responsibility is to express
opinions on the Corporation’s consolidated financial statements
and on the Corporation’s internal control over financial reporting
based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United
States) (PCAOB) and are required to be independent with respect
to the Corporation in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of
the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the
consolidated
free of material
misstatement, whether due to error or fraud, and whether effective
internal control over financial reporting was maintained in all
material respects.
financial statements are
the
Our audits of the consolidated financial statements included
performing procedures
risks of material
to assess
misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included
evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. Our audit
of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in
the circumstances. We believe that our audits provide a reasonable
basis for our opinions.
Definition and Limitations of Internal Control over
Financial Reporting
A company’s internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (i) pertain
to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets
of
that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations
of management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.
reasonable assurance
the company;
(ii) provide
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.
required
that were communicated or
Critical Audit Matters
The critical audit matters communicated below are matters arising
from the current period audit of the consolidated financial
statements
to be
communicated to the audit committee and that (i) relate to
accounts or disclosures that are material to the consolidated
financial statements and (ii) involved our especially challenging,
subjective, or complex judgments. The communication of critical
audit matters does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are
not, by communicating the critical audit matters below, providing
separate opinions on the critical audit matters or on the accounts
or disclosures to which they relate.
Allowance for Loan and Lease Losses
As described in Notes 1 and 6 to the consolidated financial
statements, the allowance for loan and lease losses represents
management’s estimate of probable incurred credit losses in the
Corporation’s loan and lease portfolio. As of December 31, 2019,
the allowance for loan and lease losses was $9.4 billion on total
loans and leases of $975.1 billion, which excludes loans
accounted for under the fair value option. The allowance for loan
and lease losses includes both quantitative and qualitative
components. The allowance for certain consumer loan portfolios
considers a variety of factors including historical loss experience,
estimated defaults or foreclosures based on portfolio trends,
delinquencies, bankruptcies, economic conditions, credit scores
and the amount of loss in the event of default. The allowance for
108
Bank of America 2019
Bank of America 2019
108
certain commercial loans is calculated using loss rates delineated
by risk rating and product type. In addition, the qualitative
component has a higher degree of management subjectivity, and
includes factors such as concentrations, economic conditions and
other considerations.
The principal considerations for our determination that
performing procedures relating to the allowance for loan and lease
losses is a critical audit matter are (i) there was significant
judgment and estimation by management in determining the
allowance for loan and lease losses, which in turn led to a high
degree of auditor judgment, subjectivity and effort in performing
procedures and in evaluating audit evidence obtained relating to
the allowance for loan and lease losses, including the qualitative
component, and (ii) the audit effort involved professionals with
specialized skill and knowledge to assist in evaluating certain audit
evidence.
Addressing the matter involved performing procedures and
evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These
procedures included testing the effectiveness of controls relating
to the allowance for loan and lease losses. These procedures also
included, among others, testing management’s process for
estimating the allowance for loan and lease losses, including
evaluating the appropriateness of the loss forecast models and
methodology, testing the completeness and accuracy of certain
data used in the allowance for loan and lease losses, and
evaluating the reasonableness of significant assumptions and
judgments used by management to estimate the qualitative
component of the allowance for loan and lease losses including
those judgments related to the impact of concentrations, economic
conditions and other considerations. The procedures also included
the involvement of professionals with specialized skill and
knowledge to assist in evaluating the reasonableness of certain
forecast models and methodologies, evaluating the
loss
reasonableness of risk ratings used in the allowance for
commercial loans, and evaluating the reasonableness of certain
judgments used by management in estimating the qualitative
component of the allowance for loan and lease losses.
Valuation of Certain Level 3 Financial Instruments
As described in Notes 1 and 21 to the consolidated financial
statements, the Corporation carries certain financial instruments
at fair value, which includes $10.3 billion of assets and $5.9 billion
of liabilities classified as Level 3 fair value measurements for
which the determination of fair value requires significant
management judgment or estimation. The Corporation determines
the fair value of certain Level 3 financial instruments using
quantitative models that utilize multiple significant unobservable
inputs, including long-dated volatility and forward price, as
applicable. As disclosed by management, estimation risk is greater
for financial instruments that are either option-based or have
longer maturity dates where observable market inputs are less
readily available, or are unobservable, in which case, quantitative-
based extrapolations are used in determining fair values.
The principal considerations for our determination that
performing procedures relating to the valuation of certain Level 3
financial instruments is a critical audit matter are the significant
judgment and estimation used by management to determine the
fair value of these financial instruments. This in turn led to a high
degree of auditor judgment and effort in performing procedures,
including the involvement of professionals with specialized skill
and knowledge to assist in evaluating certain audit evidence.
Addressing the matter involved performing procedures and
evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These
procedures included testing the effectiveness of controls relating
to the valuation of financial instruments, including controls related
to valuation models, significant unobservable inputs, and data.
These procedures also included, among others, the involvement
of professionals with specialized skill and knowledge to assist in
developing an independent estimate of fair value for a sample of
these certain
instruments and comparison of
management’s estimate to the independently developed estimate
of fair value. Developing the independent estimate involved testing
the completeness and accuracy of data provided by management
and evaluating
reasonableness of management’s
assumptions used to develop the significant unobservable inputs.
financial
the
Charlotte, North Carolina
February 19, 2020
We have served as the Corporation’s auditor since 1958.
Bank of America 2019 109
Bank of America 2019 109
Bank of America Corporation and Subsidiaries
Consolidated Statement of Income
(In millions, except per share information)
2019
2018
2017
Net interest income
Interest income
Interest expense
Net interest income
Noninterest income
Fees and commissions
Market making and similar activities
Other income
Total noninterest income
Total revenue, net of interest expense
Provision for credit losses
Noninterest expense
Compensation and benefits
Occupancy and equipment
Information processing and communications
Product delivery and transaction related
Marketing
Professional fees
Other general operating
Total noninterest expense
Income before income taxes
Income tax expense
Net income
Preferred stock dividends
Net income applicable to common shareholders
Per common share information
Earnings
Diluted earnings
Average common shares issued and outstanding
Average diluted common shares issued and outstanding
Consolidated Statement of Comprehensive Income
(Dollars in millions)
Net income
Other comprehensive income (loss), net-of-tax:
Net change in debt securities
Net change in debit valuation adjustments
Net change in derivatives
Employee benefit plan adjustments
Net change in foreign currency translation adjustments
Other comprehensive income (loss)
Comprehensive income
$
$
71,236
22,345
48,891
$
66,769
18,607
48,162
57,579
12,340
45,239
33,015
9,034
304
42,353
91,244
33,078
9,008
772
42,858
91,020
33,341
7,102
1,444
41,887
87,126
3,590
3,282
3,396
31,977
6,588
4,646
2,762
1,934
1,597
5,396
54,900
32,754
5,324
27,430
1,432
25,998
2.77
2.75
9,390.5
9,442.9
$
$
$
31,880
6,380
4,555
2,857
1,674
1,699
4,109
53,154
34,584
6,437
28,147
1,451
26,696
2.64
2.61
10,096.5
10,236.9
$
$
$
31,931
6,264
4,530
3,041
1,746
1,888
5,117
54,517
29,213
10,981
18,232
1,614
16,618
1.63
1.56
10,195.6
10,778.4
$
$
$
2019
2018
2017
$
27,430 $
28,147 $
18,232
5,875
(963)
616
136
(86)
5,578
$
33,008 $
(3,953)
749
(53)
(405)
(254)
(3,916)
24,231 $
61
(293)
64
288
86
206
18,438
See accompanying Notes to Consolidated Financial Statements.
110 110
Bank of America 2019
Bank of America 2019
Bank of America Corporation and Subsidiaries
Consolidated Balance Sheet
(Dollars in millions)
Assets
Cash and due from banks
Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banks
Cash and cash equivalents
Time deposits placed and other short-term investments
Federal funds sold and securities borrowed or purchased under agreements to resell
(includes $50,364 and $56,399 measured at fair value)
Trading account assets (includes $90,946 and $119,363 pledged as collateral)
Derivative assets
Debt securities:
Carried at fair value
Held-to-maturity, at cost (fair value – $219,821 and $200,435)
Total debt securities
Loans and leases (includes $8,335 and $4,349 measured at fair value)
Allowance for loan and lease losses
Loans and leases, net of allowance
Premises and equipment, net
Goodwill
Loans held-for-sale (includes $3,709 and $2,942 measured at fair value)
Customer and other receivables
Other assets (includes $15,518 and $19,739 measured at fair value)
Total assets
Liabilities
Deposits in U.S. offices:
Noninterest-bearing
Interest-bearing (includes $508 and $492 measured at fair value)
Deposits in non-U.S. offices:
Noninterest-bearing
Interest-bearing
Total deposits
Federal funds purchased and securities loaned or sold under agreements to repurchase
(includes $16,008 and $28,875 measured at fair value)
Trading account liabilities
Derivative liabilities
Short-term borrowings (includes $3,941 and $1,648 measured at fair value)
Accrued expenses and other liabilities (includes $15,434 and $20,075 measured at fair value
and $813 and $797 of reserve for unfunded lending commitments)
Long-term debt (includes $34,975 and $27,689 measured at fair value)
Total liabilities
Commitments and contingencies (Note 7 – Securitizations and Other Variable Interest Entities
and Note 13 – Commitments and Contingencies)
Shareholders’ equity
Preferred stock, $0.01 par value; authorized – 100,000,000 shares; issued and outstanding – 3,887,440 and 3,843,140 shares
Common stock and additional paid-in capital, $0.01 par value; authorized – 12,800,000,000 shares;
issued and outstanding – 8,836,148,954 and 9,669,286,370 shares
Retained earnings
Accumulated other comprehensive income (loss)
Total shareholders’ equity
Total liabilities and shareholders’ equity
Assets of consolidated variable interest entities included in total assets above (isolated to settle t
he liabilities of the variable interest entities)
Trading account assets
Loans and leases
Allowance for loan and lease losses
Loans and leases, net of allowance
All other assets
Total assets of consolidated variable interest entities
Liabilities of consolidated variable interest entities included in total liabilities above
Short-term borrowings
Long-term debt (includes $8,717 and $10,943 of non-recourse debt)
All other liabilities (includes $19 and $27 of non-recourse liabilities)
Total liabilities of consolidated variable interest entities
See accompanying Notes to Consolidated Financial Statements.
December 31
2019
2018
$
30,152 $
131,408
161,560
7,107
274,597
229,826
40,485
29,063
148,341
177,404
7,494
261,131
214,348
43,725
256,467
215,730
472,197
983,426
(9,416)
974,010
10,561
68,951
9,158
55,937
129,690
238,101
203,652
441,753
946,895
(9,601)
937,294
9,906
68,951
10,367
65,814
116,320
2,434,079 $ 2,354,507
403,305 $
940,731
412,587
891,636
13,719
77,048
1,434,803
14,060
63,193
1,381,476
165,109
186,988
83,270
38,229
24,204
68,220
37,891
20,189
182,798
240,856
2,169,269
165,026
229,392
2,089,182
23,401
22,326
91,723
118,896
156,319
(6,633)
264,810
136,314
(12,211)
265,325
2,434,079 $ 2,354,507
5,811
38,837
(807)
38,030
540
44,381
$
$
2,175
$
8,718
22
5,798
43,850
(912)
42,938
337
49,073
742
10,944
30
10,915
$
11,716
Bank of America 2019 111
Bank of America 2019 111
$
$
$
$
$
$
$
Bank of America Corporation and Subsidiaries
Consolidated Statement of Changes in Shareholders’ Equity
(In millions)
Balance, December 31, 2016
Net income
Net change in debt securities
Net change in debit valuation adjustments
Net change in derivatives
Employee benefit plan adjustments
Net change in foreign currency translation adjustments
Dividends declared:
Common
Preferred
Common stock issued in connection with exercise of warrants and
exchange of preferred stock
Common stock issued under employee plans, net, and other
Common stock repurchased
Balance, December 31, 2017
Cumulative adjustment for adoption of hedge accounting standard
Adoption of accounting standard related to certain tax effects
stranded in accumulated other comprehensive income (loss)
Net income
Net change in debt securities
Net change in debit valuation adjustments
Net change in derivatives
Employee benefit plan adjustments
Net change in foreign currency translation adjustments
Dividends declared:
Common
Preferred
Issuance of preferred stock
Redemption of preferred stock
Common stock issued under employee plans, net, and other
Common stock repurchased
Balance, December 31, 2018
Cumulative adjustment for adoption of lease accounting standard
Net income
Net change in debt securities
Net change in debit valuation adjustments
Net change in derivatives
Employee benefit plan adjustments
Net change in foreign currency translation adjustments
Dividends declared:
Common
Preferred
Preferred
Stock
Common Stock and
Additional Paid-in Capital
Shares
Amount
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Shareholders’
Equity
$
25,220
10,052.6 $
147,038 $
101,225 $
(7,288) $
18,232
(4,027)
(1,578)
61
(293)
64
288
86
(2,897)
700.0
2,933
(36)
$
22,323
43.3
(508.6)
10,287.3 $
932
(12,814)
138,089 $
113,816 $
(32)
(7,082) $
57
266,195
18,232
61
(293)
64
288
86
(4,027)
(1,578)
—
932
(12,814)
267,146
25
—
28,147
(3,953)
749
(53)
(405)
(254)
(5,424)
(1,451)
4,515
(4,512)
889
(20,094)
265,325
165
27,430
5,875
(963)
616
136
(86)
(6,146)
(1,432)
3,643
(2,568)
959
(28,144)
264,810
(1,270)
(3,953)
749
(53)
(405)
(254)
1,270
28,147
(5,424)
(1,451)
(12)
136,314 $
165
27,430
(12,211) $
5,875
(963)
616
136
(86)
(6,146)
(1,432)
(12)
156,319 $
(6,633) $
4,515
(4,512)
58.2
(676.2)
$
22,326
9,669.3 $
901
(20,094)
118,896 $
Issuance of preferred stock
Redemption of preferred stock
Common stock issued under employee plans, net, and other
Common stock repurchased
Balance, December 31, 2019
3,643
(2,568)
123.3
(956.5)
$
23,401
8,836.1 $
971
(28,144)
91,723 $
See accompanying Notes to Consolidated Financial Statements.
112 112
Bank of America 2019
Bank of America 2019
Bank of America Corporation and Subsidiaries
Consolidated Statement of Cash Flows
(Dollars in millions)
Operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses
Gains on sales of debt securities
Depreciation and amortization
Net amortization of premium/discount on debt securities
Deferred income taxes
Stock-based compensation
Impairment of equity method investment
Loans held-for-sale:
Originations and purchases
Proceeds from sales and paydowns of loans originally classified as held for sale and instruments
from related securitization activities
Net change in:
Trading and derivative assets/liabilities
Other assets
Accrued expenses and other liabilities
Other operating activities, net
Net cash provided by operating activities
Investing activities
Net change in:
Time deposits placed and other short-term investments
Federal funds sold and securities borrowed or purchased under agreements to resell
Debt securities carried at fair value:
Proceeds from sales
Proceeds from paydowns and maturities
Purchases
Held-to-maturity debt securities:
Proceeds from paydowns and maturities
Purchases
Loans and leases:
Proceeds from sales of loans originally classified as held for investment and instruments
from related securitization activities
Purchases
Other changes in loans and leases, net
Other investing activities, net
Net cash used in investing activities
Financing activities
Net change in:
Deposits
Federal funds purchased and securities loaned or sold under agreements to repurchase
Short-term borrowings
Long-term debt:
Proceeds from issuance
Retirement
Preferred stock:
Proceeds from issuance
Redemption
Common stock repurchased
Cash dividends paid
Other financing activities, net
Net cash provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at January 1
Cash and cash equivalents at December 31
Supplemental cash flow disclosures
Interest paid
Income taxes paid, net
2019
2018
2017
$
27,430 $
28,147 $
18,232
3,590
(217)
1,729
2,066
2,435
1,974
2,072
3,282
(154)
2,063
1,824
3,041
1,729
—
3,396
(255)
2,103
2,251
8,175
1,649
—
(28,874)
(28,071)
(43,506)
30,191
28,972
40,548
7,920
(11,113)
16,363
6,211
61,777
387
(13,466)
52,006
79,114
(152,782)
34,770
(37,115)
12,201
(5,963)
(46,808)
(2,974)
(80,630)
53,327
(21,879)
4,004
52,420
(50,794)
(23,673)
11,920
13,010
(2,570)
39,520
3,659
(48,384)
5,117
78,513
(76,640)
18,789
(35,980)
21,365
(4,629)
(31,292)
(1,986)
(71,468)
71,931
10,070
(12,478)
64,278
(53,046)
3,643
(2,568)
(28,144)
(5,934)
(698)
3,377
(368)
(15,844)
177,404
161,560 $
4,515
(4,512)
(20,094)
(6,895)
(651)
53,118
(1,200)
19,970
157,434
177,404 $
(14,663)
(20,090)
4,673
7,351
9,864
(1,292)
(14,523)
73,353
93,874
(166,975)
16,653
(25,088)
11,996
(6,846)
(41,104)
8,411
(51,541)
48,611
7,024
8,538
53,486
(49,480)
—
—
(12,814)
(5,700)
(397)
49,268
2,105
9,696
147,738
157,434
22,196 $
19,087 $
4,359
2,470
12,852
3,235
$
$
See accompanying Notes to Consolidated Financial Statements.
Bank of America 2019 113
Bank of America 2019 113
Bank of America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Adoption of the standards did not have a significant effect on the
Corporation’s regulatory capital measures.
NOTE 1 Summary of Significant Accounting
Principles
Bank of America Corporation, a bank holding company and a
financial holding company, provides a diverse range of financial
services and products throughout the U.S. and in certain
international markets. The term “the Corporation” as used herein
may refer to Bank of America Corporation, individually, Bank of
America Corporation and its subsidiaries, or certain of Bank of
America Corporation’s subsidiaries or affiliates.
Principles of Consolidation and Basis of Presentation
The Consolidated Financial Statements include the accounts of
the Corporation and its majority-owned subsidiaries and those
variable interest entities (VIEs) where the Corporation is the
primary beneficiary. Intercompany accounts and transactions have
been eliminated. Results of operations of acquired companies are
included from the dates of acquisition, and for VIEs, from the dates
that the Corporation became the primary beneficiary. Assets held
in an agency or fiduciary capacity are not included in the
Consolidated Financial Statements. The Corporation accounts for
investments in companies for which it owns a voting interest and
for which it has the ability to exercise significant influence over
operating and financing decisions using the equity method of
accounting. These investments are included in other assets. Equity
method investments are subject to impairment testing, and the
Corporation’s proportionate share of income or loss is included in
other income.
The preparation of the Consolidated Financial Statements in
conformity with accounting principles generally accepted in the
United States of America requires management to make estimates
and assumptions that affect reported amounts and disclosures.
Actual results could materially differ from those estimates and
assumptions. Certain prior-period amounts have been reclassified
to conform to current-period presentation.
In the Consolidated Statement of Income, amounts related to
certain asset and liability management (ALM) activities have been
reclassified from other income to market making and similar
activities, which was previously referred to as trading account
income. All prior periods presented reflect this change, which has
no impact on the Corporation's total noninterest income or net
income, and has no impact on business segment results. The
amounts included in market making and similar activities related
to this change in presentation are increases of $930 million, $1.1
billion and $332 million for 2019, 2018 and 2017, respectively.
New Accounting Standards
Lease Accounting
On January 1, 2019, the Corporation adopted the new accounting
standards that require lessees to recognize operating leases on
the balance sheet as right-of-use assets and lease liabilities based
on the value of the discounted future lease payments. Lessor
accounting is largely unchanged. Expanded disclosures about the
nature and terms of lease agreements are required prospectively
and are included in Note 9 – Leases. The Corporation elected to
retain prior determinations of whether an existing contract
contains a lease and how the lease should be classified. The
Corporation elected to recognize leases existing on January 1,
2019 through a cumulative-effect adjustment which increased
retained earnings by $165 million, with no adjustment to prior
periods presented. Upon adoption, the Corporation also
recognized right-of-use assets and lease liabilities of $9.7 billion.
Accounting for Financial Instruments -- Credit Losses
On January 1, 2020, the Corporation adopted the new accounting
standard that requires the measurement of the allowance for credit
losses to be based on management’s best estimate of lifetime
expected credit losses inherent in the Corporation’s relevant
financial assets. The Corporation’s lifetime expected credit losses
are determined using macroeconomic forecast assumptions and
management judgments applicable to and through the expected
life of the loan portfolios, and are net of expected recoveries on
loans that were previously charged off. The standard also expands
credit quality disclosures beginning in the first quarter of 2020.
While the standard changes the measurement of the allowance
for credit losses, it does not change the Corporation’s credit risk
of its lending portfolios or the ultimate losses in those portfolios.
Upon adoption of the standard on January 1, 2020, the Corporation
recorded a $3.3 billion, or 32 percent, increase to the allowance
for credit losses. After adjusting for deferred taxes and other
adoption effects, a $2.4 billion decrease was recorded in retained
earnings through a cumulative-effect adjustment.
Significant Accounting Principles
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash items in
the process of collection, cash segregated under federal and other
brokerage regulations, and amounts due from correspondent
banks, the Federal Reserve Bank and certain non-U.S. central
banks. Certain cash balances are restricted as to withdrawal or
usage by legally binding contractual agreements or regulatory
requirements.
Securities Financing Agreements
Securities borrowed or purchased under agreements to resell and
securities loaned or sold under agreements to repurchase
(securities financing agreements) are treated as collateralized
financing transactions except in instances where the transaction
is required to be accounted for as individual sale and purchase
transactions. Generally, these agreements are recorded at
acquisition or sale price plus accrued interest, except for certain
securities financing agreements that the Corporation accounts for
under the fair value option. Changes in the fair value of securities
financing agreements that are accounted for under the fair value
option are recorded in market making and similar activities in the
Consolidated Statement of Income.
The Corporation’s policy is to monitor the market value of the
principal amount loaned under resale agreements and obtain
collateral from or return collateral pledged to counterparties when
appropriate. Securities financing agreements do not create
material credit risk due to these collateral provisions; therefore,
an allowance for loan losses is not necessary.
In transactions where the Corporation acts as the lender in a
securities lending agreement and receives securities that can be
pledged or sold as collateral, it recognizes an asset on the
Consolidated Balance Sheet at fair value, representing the
securities received, and a liability, representing the obligation to
return those securities.
Collateral
The Corporation accepts securities and loans as collateral that it
is permitted by contract or practice to sell or repledge. At December
31, 2019 and 2018, the fair value of this collateral was $693.0
billion and $599.0 billion, of which $593.8 billion and $508.6
114 114
Bank of America 2019
Bank of America 2019
billion were sold or repledged. The primary source of this collateral
is securities borrowed or purchased under agreements to resell.
The Corporation also pledges company-owned securities and
loans as collateral in transactions that include repurchase
agreements, securities loaned, public and trust deposits, U.S.
Treasury tax and loan notes, and short-term borrowings. This
collateral, which in some cases can be sold or repledged by the
counterparties to the transactions, is parenthetically disclosed on
the Consolidated Balance Sheet.
In certain cases, the Corporation has transferred assets to
consolidated VIEs where those restricted assets serve as
collateral for the interests issued by the VIEs. These assets are
included on the Consolidated Balance Sheet in Assets of
Consolidated VIEs.
In addition, the Corporation obtains collateral in connection
with its derivative contracts. Required collateral levels vary
depending on the credit risk rating and the type of counterparty.
Generally, the Corporation accepts collateral in the form of cash,
U.S. Treasury securities and other marketable securities. Based
on provisions contained in master netting agreements, the
Corporation nets cash collateral received against derivative
assets. The Corporation also pledges collateral on its own
derivative positions which can be applied against derivative
liabilities.
Trading Instruments
Financial instruments utilized in trading activities are carried at
fair value. Fair value is generally based on quoted market prices
for the same or similar assets and liabilities. If these market prices
are not available, fair values are estimated based on dealer quotes,
pricing models, discounted cash flow methodologies, or similar
techniques where the determination of fair value may require
significant management judgment or estimation. Realized gains
and losses are recorded on a trade-date basis. Realized and
unrealized gains and losses are recognized in market making and
similar activities.
include derivatives
Derivatives and Hedging Activities
Derivatives are entered into on behalf of customers, for trading or
to support risk management activities. Derivatives used in risk
management activities
that are both
designated in qualifying accounting hedge relationships and
derivatives used to hedge market risks in relationships that are
not designated in qualifying accounting hedge relationships
(referred to as other risk management activities). The Corporation
manages interest rate and foreign currency exchange rate
sensitivity predominantly through the use of derivatives.
Derivatives utilized by the Corporation include swaps, futures and
forward settlement contracts, and option contracts.
All derivatives are recorded on the Consolidated Balance Sheet
at fair value, taking into consideration the effects of legally
enforceable master netting agreements that allow the Corporation
to settle positive and negative positions and offset cash collateral
held with the same counterparty on a net basis. For exchange-
traded contracts, fair value is based on quoted market prices in
active or inactive markets or is derived from observable market-
based pricing parameters, similar to those applied to over-the-
counter (OTC) derivatives. For non-exchange traded contracts, fair
value is based on dealer quotes, pricing models, discounted cash
for which the
flow methodologies or similar techniques
determination of fair value may require significant management
judgment or estimation.
Valuations of derivative assets and liabilities reflect the value
of the instrument including counterparty credit risk. These values
also take into account the Corporation’s own credit standing.
Trading Derivatives and Other Risk Management Activities
Derivatives held for trading purposes are included in derivative
assets or derivative liabilities on the Consolidated Balance Sheet
with changes in fair value included in market making and similar
activities.
Derivatives used for other risk management activities are
included in derivative assets or derivative liabilities. Derivatives
used in other risk management activities have not been designated
in qualifying accounting hedge relationships because they did not
qualify or the risk that is being mitigated pertains to an item that
is reported at fair value through earnings so that the effect of
measuring the derivative instrument and the asset or liability to
which the risk exposure pertains will offset in the Consolidated
Statement of Income to the extent effective. The changes in the
fair value of derivatives that serve to mitigate certain risks
associated with mortgage servicing rights (MSRs), interest rate
lock commitments (IRLCs) and first-lien mortgage loans held-for-
sale (LHFS) that are originated by the Corporation are recorded in
other income. Changes in the fair value of derivatives that serve
to mitigate interest rate risk and foreign currency risk are included
in market making and similar activities. Credit derivatives are also
used by the Corporation to mitigate the risk associated with various
credit exposures. The changes in the fair value of these derivatives
are included in market making and similar activities and other
income.
Derivatives Used For Hedge Accounting Purposes
(Accounting Hedges)
For accounting hedges, the Corporation formally documents at
inception all relationships between hedging instruments and
hedged items, as well as the risk management objectives and
strategies for undertaking various accounting hedges. Additionally,
the Corporation primarily uses regression analysis at the inception
of a hedge and for each reporting period thereafter to assess
whether the derivative used in an accounting hedge transaction is
expected to be and has been highly effective in offsetting changes
in the fair value or cash flows of a hedged item or forecasted
transaction. The Corporation discontinues hedge accounting when
it is determined that a derivative is not expected to be or has
ceased to be highly effective as a hedge, and then reflects changes
in fair value of the derivative in earnings after termination of the
hedge relationship.
Fair value hedges are used to protect against changes in the
fair value of the Corporation’s assets and liabilities that are
attributable to interest rate or foreign exchange volatility. Changes
in the fair value of derivatives designated as fair value hedges are
recorded in earnings, together and in the same income statement
line item with changes in the fair value of the related hedged item.
If a derivative instrument in a fair value hedge is terminated or the
hedge designation removed, the previous adjustments to the
carrying value of the hedged asset or liability are subsequently
accounted for in the same manner as other components of the
carrying value of that asset or liability. For interest-earning assets
and interest-bearing liabilities, such adjustments are amortized to
earnings over the remaining life of the respective asset or liability.
Cash flow hedges are used primarily to minimize the variability
in cash flows of assets and liabilities or forecasted transactions
caused by interest rate or foreign exchange rate fluctuations. The
Corporation also uses cash flow hedges to hedge the price risk
associated with deferred compensation. Changes in the fair value
of derivatives used in cash flow hedges are recorded in
accumulated other comprehensive
(OCI) and are
reclassified into the line item in the income statement in which
the hedged item is recorded in the same period the hedged item
affects earnings. Components of a derivative that are excluded in
income
Bank of America 2019 115
Bank of America 2019 115
assessing hedge effectiveness are recorded in the same income
statement line item as the hedged item.
Net investment hedges are used to manage the foreign
exchange rate sensitivity arising from a net investment in a foreign
operation. Changes in the spot prices of derivatives that are
designated as net investment hedges of foreign operations are
recorded as a component of accumulated OCI. The remaining
components of these derivatives are excluded in assessing hedge
effectiveness and are recorded in market making and similar
activities.
Securities
Debt securities are reported on the Consolidated Balance Sheet
at their trade date. Their classification is dependent on the purpose
for which the securities were acquired. Debt securities purchased
for use in the Corporation’s trading activities are reported in trading
account assets at fair value with unrealized gains and losses
included in market making and similar activities. Substantially all
other debt securities purchased are used in the Corporation’s ALM
activities and are reported on the Consolidated Balance Sheet as
either debt securities carried at fair value or as held-to-maturity
(HTM) debt securities. Debt securities carried at fair value are
either available-for-sale (AFS) securities with unrealized gains and
losses net-of-tax included in accumulated OCI or carried at fair
value with unrealized gains and losses reported in other income.
HTM debt securities, which are certain debt securities that
management has the intent and ability to hold to maturity, are
reported at amortized cost.
The Corporation regularly evaluates each AFS and HTM debt
security where the value has declined below amortized cost to
assess whether the decline in fair value is other than temporary.
In determining whether an impairment is other than temporary, the
Corporation considers the severity and duration of the decline in
fair value, the length of time expected for recovery, the financial
condition of the issuer, and other qualitative factors, as well as
whether the Corporation either plans to sell the security or it is
more likely than not that it will be required to sell the security
before recovery of the amortized cost. For AFS debt securities the
Corporation intends to hold, an analysis is performed to determine
how much of the decline in fair value is related to the issuer’s
credit and how much is related to market factors (e.g., interest
rates). If any of the decline in fair value is due to credit, an other-
than-temporary impairment (OTTI) loss is recognized in the
Consolidated Statement of Income for that amount. If any of the
decline in fair value is related to market factors, that amount is
recognized in accumulated OCI. In certain instances, the credit
loss may exceed the total decline in fair value, in which case, the
difference is due to market factors and is recognized as an
unrealized gain in accumulated OCI. If the Corporation intends to
sell or believes it is more likely than not that it will be required to
sell the debt security, it is written down to fair value as an OTTI
loss.
Interest on debt securities, including amortization of premiums
and accretion of discounts, is included in interest income.
Premiums and discounts are amortized or accreted to interest
income at a constant effective yield over the contractual lives of
the securities. Realized gains and losses from the sales of debt
securities are determined using the specific identification method.
Equity securities with readily determinable fair values that are
not held for trading purposes are carried at fair value with
unrealized gains and losses included in other income. Equity
securities that do not have readily determinable fair values are
recorded at cost less impairment, if any, plus or minus qualifying
observable price changes. These securities are reported in other
assets.
Loans and Leases
Loans, with the exception of loans accounted for under the fair
value option, are measured at historical cost and reported at their
outstanding principal balances net of any unearned income,
charge-offs, unamortized deferred fees and costs on originated
loans, and for purchased loans, net of any unamortized premiums
or discounts. Loan origination fees and certain direct origination
costs are deferred and recognized as adjustments to interest
income over the lives of the related loans. Unearned income,
discounts and premiums are amortized to interest income using
a level yield methodology. The Corporation elects to account for
certain consumer and commercial loans under the fair value option
with interest reported in interest income and changes in fair value
reported in market making and similar activities or other income.
Under applicable accounting guidance, for reporting purposes,
the loan and lease portfolio is categorized by portfolio segment
and, within each portfolio segment, by class of financing
receivables. A portfolio segment is defined as the level at which
an entity develops and documents a systematic methodology to
determine the allowance for credit losses, and a class of financing
receivables is defined as the level of disaggregation of portfolio
segments based on the initial measurement attribute, risk
characteristics and methods for assessing risk. The Corporation’s
three portfolio segments are Consumer Real Estate, Credit Card
and Other Consumer, and Commercial. The classes within the
Consumer Real Estate portfolio segment are residential mortgage
and home equity. The classes within the Credit Card and Other
Consumer portfolio segment are credit card, direct/indirect
consumer and other consumer. The classes within the Commercial
portfolio segment are U.S. commercial, non-U.S. commercial,
commercial real estate, commercial lease financing and U.S. small
business commercial.
Leases
The Corporation provides equipment financing to its customers
through a variety of lessor arrangements. Direct financing leases
and sales-type leases are carried at the aggregate of lease
payments receivable plus the estimated residual value of the
leased property less unearned income, which is accreted to
interest income over the lease terms using methods that
approximate the interest method. Operating lease income is
recognized on a straight-line basis. The Corporation's lease
arrangements generally do not contain non-lease components.
Allowance for Credit Losses
The allowance for credit losses, which includes the allowance for
loan and lease losses and the reserve for unfunded lending
commitments, represents management’s estimate of probable
incurred credit losses in the Corporation’s loan and lease portfolio
excluding loans and unfunded lending commitments accounted
for under the fair value option. The allowance for credit losses
includes both quantitative and qualitative components. The
qualitative component has a higher degree of management
subjectivity, and includes factors such as concentrations,
economic conditions and other considerations. The allowance for
loan and lease losses represents the estimated probable credit
losses on funded consumer and commercial loans and leases
while the reserve for unfunded lending commitments, including
standby letters of credit (SBLCs) and binding unfunded loan
commitments, represents estimated probable credit losses on
these unfunded credit
instruments based on utilization
assumptions. Lending-related credit exposures deemed to be
uncollectible, excluding loans carried at fair value, are charged off
against these accounts.
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The Corporation performs periodic and systematic detailed
reviews of its lending portfolios to identify credit risks and to
assess the overall collectability of those portfolios. The allowance
on certain homogeneous consumer loan portfolios, which
generally consist of consumer real estate loans within the
Consumer Real Estate portfolio segment and credit card loans
within the Credit Card and Other Consumer portfolio segment, is
based on aggregated portfolio segment evaluations generally by
product type. Loss forecast models are utilized for these portfolios
which consider a variety of factors including, but not limited to,
historical loss experience, estimated defaults or foreclosures
based on portfolio trends, delinquencies, bankruptcies, economic
conditions, credit scores and the amount of loss in the event of
default.
For consumer loans secured by residential real estate, using
statistical modeling methodologies, the Corporation estimates the
number of loans that will default based on the individual loan
attributes aggregated into pools of homogeneous loans with
similar attributes. The attributes that are most significant to the
probability of default and are used to estimate defaults include
refreshed loan-to-value (LTV) or, in the case of a subordinated lien,
refreshed combined LTV (CLTV), borrower credit score, months
since origination and geography, all of which are further broken
down by present collection status (whether the loan is current,
delinquent, in default or in bankruptcy). The severity or loss given
default is estimated based on the refreshed LTV for first-lien
mortgages or CLTV for subordinated liens. The estimates are
based on the Corporation’s historical experience with the loan
portfolio, adjusted to reflect an assessment of environmental
factors not yet reflected in the historical data underlying the loss
estimates, such as changes in real estate values, local and
national economies, underwriting standards and the regulatory
environment. The probability of default models also incorporate
recent experience with modification programs including re-defaults
subsequent to modification, a loan’s default history prior to
modification and the change in borrower payments post-
modification. On home equity loans where the Corporation holds
only a second-lien position and foreclosure is not the best
alternative, the loss severity is estimated at 100 percent.
The allowance on certain commercial loans (except business
card and certain small business loans) is calculated using loss
rates delineated by risk rating and product type. Factors considered
when assessing loss rates include the value of the underlying
collateral, if applicable, the industry of the obligor, and the obligor’s
liquidity and other financial indicators along with certain qualitative
factors. These statistical models are updated regularly for changes
in economic and business conditions. Included in the analysis of
consumer and commercial loan portfolios are qualitative
estimates which are maintained to cover uncertainties that affect
the Corporation’s estimate of probable losses including domestic
and global economic uncertainty and large single-name defaults.
For individually impaired loans, which include nonperforming
commercial loans as well as consumer and commercial loans and
(TDR),
leases modified
management measures impairment primarily based on the present
value of payments expected to be received, discounted at the
loans’ original effective contractual interest rates. Credit card
loans are discounted at the portfolio average contractual annual
percentage rate, excluding promotionally priced loans, in effect
prior to restructuring. Impaired loans and TDRs may also be
measured based on observable market prices, or for loans that
are solely dependent on the collateral for repayment, the estimated
fair value of the collateral less costs to sell. If the recorded
investment in impaired loans exceeds this amount, a specific
allowance is established as part of the allowance for loan and
in a troubled debt restructuring
lease losses unless these are secured consumer loans that are
solely dependent on collateral for repayment, in which case the
amount that exceeds the fair value of the collateral is charged off.
Generally, the Corporation initially estimates the fair value of
the collateral securing these consumer real estate-secured loans
using an automated valuation model (AVM). An AVM is a tool that
estimates the value of a property by reference to market data
including sales of comparable properties and price trends specific
to the Metropolitan Statistical Area in which the property being
valued is located. In the event that an AVM value is not available,
the Corporation utilizes publicized indices or if these methods
provide less reliable valuations, the Corporation uses appraisals
or broker price opinions to estimate the fair value of the collateral.
While there is inherent imprecision in these valuations, the
Corporation believes that they are representative of the portfolio
in the aggregate.
In addition to the allowance for loan and lease losses, the
Corporation also estimates probable losses related to unfunded
lending commitments, such as letters of credit, financial
guarantees and binding unfunded loan commitments. Unfunded
lending commitments are subject to individual reviews and are
analyzed and segregated by risk according to the Corporation’s
internal risk rating scale. These risk classifications, in conjunction
with an analysis of historical loss experience, utilization
assumptions, current economic conditions, performance trends
within the portfolio and any other pertinent information, result in
the estimation of the reserve for unfunded lending commitments.
The allowance for credit losses related to the loan and lease
portfolio is reported separately on the Consolidated Balance Sheet
whereas the reserve for unfunded lending commitments is
reported on the Consolidated Balance Sheet in accrued expenses
and other liabilities. The provision for credit losses related to the
loan and lease portfolio and unfunded lending commitments is
reported in the Consolidated Statement of Income.
Nonperforming Loans and Leases, Charge-offs and
Delinquencies
Nonperforming loans and leases generally include loans and
leases that have been placed on nonaccrual status. Loans
accounted for under the fair value option and LHFS are not reported
as nonperforming.
In accordance with the Corporation’s policies, consumer real
estate-secured loans, including residential mortgages and home
equity loans, are generally placed on nonaccrual status and
classified as nonperforming at 90 days past due unless repayment
of the loan is insured by the Federal Housing Administration (FHA)
or through individually insured long-term standby agreements with
Fannie Mae (FNMA) or Freddie Mac (FHLMC) (the fully-insured
portfolio). Residential mortgage loans in the fully-insured portfolio
are not placed on nonaccrual status and, therefore, are not
reported as nonperforming. Junior-lien home equity loans are
placed on nonaccrual status and classified as nonperforming when
the underlying first-lien mortgage loan becomes 90 days past due
even if the junior-lien loan is current. The outstanding balance of
real estate-secured loans that is in excess of the estimated
property value less costs to sell is charged off no later than the
end of the month in which the loan becomes 180 days past due
unless the loan is fully insured, or for loans in bankruptcy, within
60 days of receipt of notification of filing, with the remaining
balance classified as nonperforming.
Consumer loans secured by personal property, credit card loans
and other unsecured consumer loans are not placed on nonaccrual
status prior to charge-off and, therefore, are not reported as
nonperforming loans, except for certain secured consumer loans,
including those that have been modified in a TDR. Personal
Bank of America 2019 117
Bank of America 2019 117
property-secured loans (including auto loans) are charged off to
collateral value no later than the end of the month in which the
account becomes 120 days past due, or upon repossession of an
auto or, for loans in bankruptcy, within 60 days of receipt of
notification of filing. Credit card and other unsecured customer
loans are charged off no later than the end of the month in which
the account becomes 180 days past due, within 60 days after
receipt of notification of death or bankruptcy, or upon confirmation
of fraud.
Commercial loans and leases, excluding business card loans,
that are past due 90 days or more as to principal or interest, or
where reasonable doubt exists as to timely collection, including
loans that are individually identified as being impaired, are
generally placed on nonaccrual status and classified as
nonperforming unless well-secured and in the process of
collection.
Business card loans are charged off in the same manner as
consumer credit card loans. Other commercial loans and leases
are generally charged off when all or a portion of the principal
amount is determined to be uncollectible.
The entire balance of a consumer loan or commercial loan or
lease is contractually delinquent if the minimum payment is not
received by the specified due date on the customer’s billing
statement. Interest and fees continue to accrue on past due loans
and leases until the date the loan is placed on nonaccrual status,
if applicable. Accrued interest receivable is reversed when loans
and leases are placed on nonaccrual status. Interest collections
on nonaccruing loans and leases for which the ultimate
collectability of principal is uncertain are applied as principal
reductions; otherwise, such collections are credited to income
when received. Loans and leases may be restored to accrual status
when all principal and interest is current and full repayment of the
remaining contractual principal and interest is expected.
Troubled Debt Restructurings
Consumer and commercial loans and leases whose contractual
terms have been restructured in a manner that grants a concession
to a borrower experiencing financial difficulties are classified as
TDRs. Concessions could include a reduction in the interest rate
to a rate that is below market on the loan, payment extensions,
forgiveness of principal, forbearance or other actions designed to
maximize collections. Loans that are carried at fair value and LHFS
are not classified as TDRs.
Loans and leases whose contractual terms have been modified
in a TDR and are current at the time of restructuring may remain
on accrual status if there is demonstrated performance prior to
the restructuring and payment in full under the restructured terms
is expected. Otherwise, the loans are placed on nonaccrual status
and reported as nonperforming, except for fully-insured consumer
real estate loans, until there is sustained repayment performance
for a reasonable period, generally six months. If accruing TDRs
cease to perform in accordance with their modified contractual
terms, they are placed on nonaccrual status and reported as
nonperforming TDRs.
Secured consumer loans that have been discharged in Chapter
7 bankruptcy and have not been reaffirmed by the borrower are
classified as TDRs at the time of discharge. Such loans are placed
on nonaccrual status and written down to the estimated collateral
value less costs to sell no later than at the time of discharge. If
these loans are contractually current, interest collections are
generally recorded in interest income on a cash basis. Consumer
real estate-secured loans for which a binding offer to restructure
has been extended are also classified as TDRs. Credit card and
other unsecured consumer loans that have been renegotiated in
a TDR generally remain on accrual status until the loan is either
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Bank of America 2019
paid in full or charged off, which occurs no later than the end of
the month in which the loan becomes 180 days past due or, for
loans that have been placed on a fixed payment plan, 120 days
past due.
A loan that had previously been modified in a TDR and is
subsequently refinanced under current underwriting standards at
a market rate with no concessionary terms is accounted for as a
new loan and is no longer reported as a TDR.
Loans Held-for-sale
Loans that the Corporation intends to sell in the foreseeable future,
including residential mortgages, loan syndications, and to a lesser
degree, commercial real estate, consumer finance and other loans,
are reported as LHFS and are carried at the lower of aggregate
cost or fair value. The Corporation accounts for certain LHFS,
including residential mortgage LHFS, under the fair value option
with interest recorded in interest income and changes in fair value
recorded in other income. Loan origination costs related to LHFS
that the Corporation accounts for under the fair value option are
recognized in noninterest expense when incurred. Loan origination
costs for LHFS carried at the lower of cost or fair value are
capitalized as part of the carrying value of the loans and recognized
as a reduction of noninterest income upon the sale of such loans.
LHFS that are on nonaccrual status and are reported as
nonperforming, as defined in the policy herein, are reported
separately from nonperforming loans and leases.
Premises and Equipment
Premises and equipment are carried at cost less accumulated
depreciation and amortization. Depreciation and amortization are
recognized using the straight-line method over the estimated
useful lives of the assets. Estimated lives range up to 40 years
for buildings, up to 12 years for furniture and equipment, and the
shorter of lease term or estimated useful life for leasehold
improvements.
Lessee Arrangements
Substantially all of the Corporation’s lessee arrangements are
operating leases. Under these arrangements, the Corporation
records right-of-use assets and lease liabilities at lease
commencement. Right-of-use assets are reported in other assets
on the Consolidated Balance Sheet, and the related lease
liabilities are reported in accrued expenses and other liabilities.
All leases are recorded on the Consolidated Balance Sheet except
leases with an initial term less than 12 months for which the
Corporation made the short-term lease election. Lease expense
is recognized on a straight-line basis over the lease term and is
recorded in occupancy and equipment expense in the Consolidated
Statement of Income.
The Corporation made an accounting policy election not to
separate lease and non-lease components of a contract that is or
contains a lease for its real estate and equipment leases. As such,
lease payments represent payments on both lease and non-lease
components. At lease commencement, lease liabilities are
recognized based on the present value of the remaining lease
payments and discounted using the Corporation’s incremental
borrowing rate. Right-of-use assets initially equal the lease liability,
adjusted
lease
commencement and for any lease incentives.
lease payments made prior
for any
to
Goodwill and Intangible Assets
Goodwill is the purchase premium after adjusting for the fair value
of net assets acquired. Goodwill is not amortized but is reviewed
for potential impairment on an annual basis, or when events or
circumstances indicate a potential impairment, at the reporting
unit level. A reporting unit is a business segment or one level below
a business segment.
The Corporation assesses the fair value of each reporting unit
against its carrying value, including goodwill, as measured by
allocated equity. For purposes of goodwill impairment testing, the
Corporation utilizes allocated equity as a proxy for the carrying
value of its reporting units. Allocated equity in the reporting units
is comprised of allocated capital plus capital for the portion of
goodwill and intangibles specifically assigned to the reporting unit.
In performing its goodwill impairment testing, the Corporation
first assesses qualitative factors to determine whether it is more
likely than not that the fair value of a reporting unit is less than
its carrying value. Qualitative factors include, among other things,
macroeconomic conditions, industry and market considerations,
financial performance of the respective reporting unit and other
relevant entity- and reporting-unit specific considerations.
If the Corporation concludes it is more likely than not that the
fair value of a reporting unit is less than its carrying value, a
quantitative assessment is performed. If the fair value of the
reporting unit exceeds its carrying value, goodwill of the reporting
unit is considered not impaired; however, if the carrying value of
the reporting unit exceeds its fair value, an additional step is
performed to measure potential impairment.
This step involves calculating an implied fair value of goodwill
which is the excess of the fair value of the reporting unit, as
determined in the first step, over the aggregate fair values of the
assets, liabilities and identifiable intangibles as if the reporting
unit was being acquired in a business combination. If the implied
fair value of goodwill exceeds the goodwill assigned to the reporting
unit, there is no impairment. If the goodwill assigned to a reporting
unit exceeds the implied fair value of goodwill, an impairment
charge is recorded for the excess. An impairment loss recognized
cannot exceed the amount of goodwill assigned to a reporting unit.
An impairment loss establishes a new basis in the goodwill, and
subsequent reversals of goodwill impairment losses are not
permitted under applicable accounting guidance.
For intangible assets subject to amortization, an impairment
loss is recognized if the carrying value of the intangible asset is
not recoverable and exceeds fair value. The carrying value of the
intangible asset is considered not recoverable if it exceeds the
sum of the undiscounted cash flows expected to result from the
use of the asset. Intangible assets deemed to have indefinite
useful lives are not subject to amortization. An impairment loss
is recognized if the carrying value of the intangible asset with an
indefinite life exceeds its fair value.
Variable Interest Entities
A VIE is an entity that lacks equity investors or whose equity
investors do not have a controlling financial interest in the entity
through their equity investments. The Corporation consolidates a
VIE if it has both the power to direct the activities of the VIE that
most significantly impact the VIE’s economic performance and an
obligation to absorb losses or the right to receive benefits that
could potentially be significant to the VIE. On a quarterly basis,
the Corporation reassesses its involvement with the VIE and
evaluates the impact of changes in governing documents and its
financial interests in the VIE. The consolidation status of the VIEs
with which the Corporation is involved may change as a result of
such reassessments.
The Corporation primarily uses VIEs for its securitization
activities, in which the Corporation transfers whole loans or debt
securities into a trust or other vehicle. When the Corporation is
the servicer of whole loans held in a securitization trust, including
non-agency residential mortgages, home equity loans, credit cards,
and other loans, the Corporation has the power to direct the most
significant activities of the trust. The Corporation generally does
not have the power to direct the most significant activities of a
residential mortgage agency trust except in certain circumstances
in which the Corporation holds substantially all of the issued
securities and has the unilateral right to liquidate the trust. The
power to direct the most significant activities of a commercial
mortgage securitization trust is typically held by the special
servicer or by the party holding specific subordinate securities
which embody certain controlling rights. The Corporation
consolidates a whole-loan securitization trust if it has the power
to direct the most significant activities and also holds securities
issued by the trust or has other contractual arrangements, other
than standard representations and warranties, that could
potentially be significant to the trust.
The Corporation may also transfer trading account securities
and AFS securities into municipal bond or resecuritization trusts.
The Corporation consolidates a municipal bond or resecuritization
trust if it has control over the ongoing activities of the trust such
as the remarketing of the trust’s liabilities or, if there are no ongoing
activities, sole discretion over the design of the trust, including
the identification of securities to be transferred in and the structure
of securities to be issued, and also retains securities or has
liquidity or other commitments that could potentially be significant
to the trust. The Corporation does not consolidate a municipal
bond or resecuritization trust if one or a limited number of third-
party investors share responsibility for the design of the trust or
have control over the significant activities of the trust through
liquidation or other substantive rights.
Other VIEs used by the Corporation include collateralized debt
obligations (CDOs), investment vehicles created on behalf of
customers and other investment vehicles. The Corporation does
not routinely serve as collateral manager for CDOs and, therefore,
does not typically have the power to direct the activities that most
significantly impact the economic performance of a CDO. However,
following an event of default, if the Corporation is a majority holder
of senior securities issued by a CDO and acquires the power to
manage its assets, the Corporation consolidates the CDO.
The Corporation consolidates a customer or other investment
vehicle if it has control over the initial design of the vehicle or
manages the assets in the vehicle and also absorbs potentially
significant gains or losses through an investment in the vehicle,
derivative contracts or other arrangements. The Corporation does
not consolidate an investment vehicle if a single investor controlled
the initial design of the vehicle or manages the assets in the
vehicles or if the Corporation does not have a variable interest
that could potentially be significant to the vehicle.
Retained interests in securitized assets are initially recorded
at fair value. In addition, the Corporation may invest in debt
securities issued by unconsolidated VIEs. Fair values of these debt
securities, which are classified as trading account assets, debt
securities carried at fair value or HTM securities, are based
primarily on quoted market prices in active or inactive markets.
Generally, quoted market prices for retained residual interests are
not available; therefore, the Corporation estimates fair values
based on the present value of the associated expected future cash
flows.
Fair Value
The Corporation measures the fair values of its assets and
liabilities, where applicable, in accordance with accounting
guidance that requires an entity to base fair value on exit price.
Under this guidance, an entity is required to maximize the use of
observable inputs and minimize the use of unobservable inputs
in measuring fair value. Under applicable accounting standards,
fair value measurements are categorized into one of three levels
Bank of America 2019 119
Bank of America 2019 119
based on the inputs to the valuation technique with the highest
priority given to unadjusted quoted prices in active markets and
the lowest priority given to unobservable inputs. The Corporation
categorizes its fair value measurements of financial instruments
based on this three-level hierarchy.
Level 1 Unadjusted quoted prices in active markets for identical
assets or liabilities. Level 1 assets and liabilities include
debt and equity securities and derivative contracts that
are traded in an active exchange market, as well as
certain U.S. Treasury securities that are highly liquid and
are actively traded in OTC markets.
than exchange-traded
Level 2 Observable inputs other than Level 1 prices, such as
quoted prices for similar assets or liabilities, quoted
prices in markets that are not active, or other inputs that
are observable or can be corroborated by observable
market data for substantially the full term of the assets
or liabilities. Level 2 assets and liabilities include debt
securities with quoted prices that are traded less
frequently
instruments and
derivative contracts where fair value is determined using
a pricing model with inputs that are observable in the
market or can be derived principally from or corroborated
by observable market data. This category generally
includes U.S. government and agency mortgage-backed
(MBS) and asset-backed securities (ABS), corporate debt
securities, derivative contracts, certain loans and LHFS.
Level 3 Unobservable inputs that are supported by little or no
market activity and that are significant to the overall fair
value of the assets or liabilities. Level 3 assets and
liabilities include financial instruments for which the
determination of
requires significant
management judgment or estimation. The fair value for
such assets and liabilities is generally determined using
pricing models, discounted cash flow methodologies or
similar techniques that incorporate the assumptions a
market participant would use in pricing the asset or
liability. This category generally includes retained
residual interests in securitizations, consumer MSRs,
certain ABS, highly structured, complex or long-dated
derivative contracts, certain loans and LHFS, IRLCs and
certain CDOs where independent pricing information
cannot be obtained for a significant portion of the
underlying assets.
fair value
Income Taxes
There are two components of income tax expense: current and
deferred. Current income tax expense reflects taxes to be paid or
refunded for the current period. Deferred income tax expense
results from changes in deferred tax assets and liabilities between
periods. These gross deferred tax assets and liabilities represent
decreases or increases in taxes expected to be paid in the future
because of future reversals of temporary differences in the bases
of assets and liabilities as measured by tax laws and their bases
as reported in the financial statements. Deferred tax assets are
also recognized for tax attributes such as net operating loss
carryforwards and tax credit carryforwards. Valuation allowances
are recorded to reduce deferred tax assets to the amounts
management concludes are more likely than not to be realized.
Income tax benefits are recognized and measured based upon
a two-step model: first, a tax position must be more likely than not
to be sustained based solely on its technical merits in order to be
recognized, and second, the benefit is measured as the largest
dollar amount of that position that is more likely than not to be
sustained upon settlement. The difference between the benefit
recognized and the tax benefit claimed on a tax return is referred
to as an unrecognized tax benefit. The Corporation records income
tax-related interest and penalties, if applicable, within income tax
expense.
Revenue Recognition
The following summarizes the Corporation’s revenue recognition
accounting policies for certain noninterest income activities.
the corresponding payment network’s
Card Income
Card income includes annual, late and over-limit fees as well as
fees earned from interchange, cash advances and other
miscellaneous transactions and is presented net of direct costs.
Interchange fees are recognized upon settlement of the credit and
debit card payment transactions and are generally determined on
a percentage basis for credit cards and fixed rates for debit cards
based on
rates.
Substantially all card fees are recognized at the transaction date,
except for certain time-based fees such as annual fees, which are
recognized over 12 months. Fees charged to cardholders that are
estimated to be uncollectible are reserved in the allowance for
loan and lease losses. Included in direct cost are rewards and
credit card partner payments. Rewards paid to cardholders are
related to points earned by the cardholder that can be redeemed
for a broad range of rewards including cash, travel and gift cards.
The points to be redeemed are estimated based on past
redemption behavior, card product type, account transaction
activity and other historical card performance. The liability is
reduced as the points are redeemed. The Corporation also makes
payments to credit card partners. The payments are based on
revenue-sharing agreements that are generally driven by
cardholder transactions and partner sales volumes. As part of the
revenue-sharing agreements, the credit card partner provides the
Corporation exclusive rights to market to the credit card partner’s
members or customers on behalf of the Corporation.
Service Charges
Service charges include deposit and lending-related fees. Deposit-
related fees consist of fees earned on consumer and commercial
deposit activities and are generally recognized when the
transactions occur or as the service is performed. Consumer fees
are earned on consumer deposit accounts
for account
maintenance and various transaction-based services, such as ATM
transactions, wire transfer activities, check and money order
transactions.
processing and
Commercial deposit-related fees are from the Corporation’s Global
Transaction Services business and consist of commercial deposit
and
including account
maintenance and other services, such as payroll, sweep account
and other cash management services. Lending-related fees
generally represent transactional fees earned from certain loan
commitments, financial guarantees and SBLCs.
treasury management services,
funds/overdraft
insufficient
Investment and Brokerage Services
Investment and brokerage services consist of asset management
and brokerage fees. Asset management fees are earned from the
management of client assets under advisory agreements or the
full discretion of the Corporation’s financial advisors (collectively
referred to as assets under management (AUM)). Asset
management fees are earned as a percentage of the client’s AUM
and generally range from 50 basis points (bps) to 150 bps of the
AUM. In cases where a third party is used to obtain a client’s
investment allocation, the fee remitted to the third party is recorded
net and is not reflected in the transaction price, as the Corporation
is an agent for those services.
120 120
Bank of America 2019
Bank of America 2019
Brokerage fees include income earned from transaction-based
services that are performed as part of investment management
services and are based on a fixed price per unit or as a percentage
of the total transaction amount. Brokerage fees also include
distribution fees and sales commissions that are primarily in the
Global Wealth & Investment Management (GWIM) segment and are
earned over time. In addition, primarily in the Global Markets
segment, brokerage fees are earned when the Corporation fills
customer orders to buy or sell various financial products or when
it acknowledges, affirms, settles and clears transactions and/or
submits trade information to the appropriate clearing broker.
Certain customers pay brokerage, clearing and/or exchange fees
imposed by relevant regulatory bodies or exchanges in order to
execute or clear trades. These fees are recorded net and are not
reflected in the transaction price, as the Corporation is an agent
for those services.
Investment Banking Income
Investment banking income includes underwriting income and
financial advisory services income. Underwriting consists of fees
earned for the placement of a customer’s debt or equity securities.
The revenue is generally earned based on a percentage of the
fixed number of shares or principal placed. Once the number of
shares or notes is determined and the service is completed, the
underwriting fees are recognized. The Corporation incurs certain
out-of-pocket expenses, such as legal costs, in performing these
services. These expenses are recovered through the revenue the
Corporation earns from the customer and are included in operating
expenses. Syndication fees represent fees earned as the agent
or lead lender responsible for structuring, arranging and
administering a loan syndication.
Financial advisory services consist of fees earned for assisting
clients with transactions related to mergers and acquisitions and
financial restructurings. Revenue varies depending on the size of
the transaction and scope of services performed and is generally
contingent on successful completion of the transaction. Revenue
is typically recognized once the transaction is completed and all
services have been rendered. Additionally, the Corporation may
earn a fixed fee in merger and acquisition transactions to provide
a fairness opinion, with the fees recognized when the opinion is
delivered to the client.
Other Revenue Measurement and Recognition Policies
The Corporation did not disclose the value of any open performance
obligations at December 31, 2019, as its contracts with customers
generally have a fixed term that is less than one year, an open
term with a cancellation period that is less than one year, or
provisions that allow the Corporation to recognize revenue at the
amount it has the right to invoice.
Earnings Per Common Share
Earnings per common share (EPS) is computed by dividing net
income allocated to common shareholders by the weighted-
average common shares outstanding, excluding unvested common
shares subject to repurchase or cancellation. Net income allocated
to common shareholders is net income adjusted for preferred
stock dividends including dividends declared, accretion of
discounts on preferred stock including accelerated accretion when
preferred stock is repaid early, and cumulative dividends related
to the current dividend period that have not been declared as of
period end, less income allocated to participating securities.
Diluted EPS is computed by dividing income allocated to common
shareholders plus dividends on dilutive convertible preferred stock
and preferred stock that can be tendered to exercise warrants, by
the weighted-average common shares outstanding plus amounts
representing the dilutive effect of stock options outstanding,
restricted stock, restricted stock units (RSUs), outstanding
warrants and the dilution resulting from the conversion of
convertible preferred stock, if applicable.
Foreign Currency Translation
Assets, liabilities and operations of foreign branches and
subsidiaries are recorded based on the functional currency of each
entity. When the functional currency of a foreign operation is the
local currency, the assets, liabilities and operations are translated,
for consolidation purposes, from the local currency to the U.S.
dollar reporting currency at period-end rates for assets and
liabilities and generally at average rates for results of operations.
The resulting unrealized gains and losses are reported as a
component of accumulated OCI, net-of-tax. When the foreign
entity’s functional currency is the U.S. dollar, the resulting
remeasurement gains or losses on foreign currency-denominated
assets or liabilities are included in earnings.
Bank of America 2019 121
Bank of America 2019 121
NOTE 2 Net Interest Income and Noninterest Income
The table below presents the Corporation’s net interest income and noninterest income disaggregated by revenue source for 2019,
2018 and 2017. For more information, see Note 1 – Summary of Significant Accounting Principles. For a disaggregation of noninterest
income by business segment and All Other, see Note 24 – Business Segment Information.
(Dollars in millions)
Net interest income
Interest income
Loans and leases
Debt securities
Federal funds sold and securities borrowed or purchased under agreements to resell
Trading account assets
Other interest income
Total interest income
Interest expense
Deposits
Short-term borrowings
Trading account liabilities
Long-term debt
Total interest expense
Net interest income
Noninterest income
Fees and commissions
Card income
Interchange fees (1)
Other card income
Total card income
Service charges
Deposit-related fees
Lending-related fees
Total service charges
Investment and brokerage services
Asset management fees
Brokerage fees
Total investment and brokerage services
2019
2018
2017
$
$
$
$
43,086
11,806
4,843
5,196
6,305
71,236
7,188
7,208
1,249
6,700
22,345
48,891 $
$
3,834
1,963
5,797
6,588
1,086
7,674
10,241
3,661
13,902
$
40,811
11,724
3,176
4,811
6,247
66,769
4,495
5,839
1,358
6,915
18,607
48,162 $
$
3,866
1,958
5,824
6,667
1,100
7,767
10,189
3,971
14,160
36,221
10,471
2,390
4,474
4,023
57,579
1,931
3,538
1,204
5,667
12,340
45,239
3,777
1,899
5,676
6,708
1,110
7,818
9,310
4,526
13,836
Investment banking fees
Underwriting income
Syndication fees
Financial advisory services
2,821
1,499
1,691
6,011
33,341
7,102
1,444
41,887
(1) Gross interchange fees were $10.0 billion, $9.5 billion and $8.8 billion for 2019, 2018 and 2017, respectively, and are presented net of $6.2 billion, $5.6 billion and $5.1 billion of expenses for
Total investment banking fees
Total fees and commissions
Market making and similar activities
Other income
2,722
1,347
1,258
5,327
33,078
9,008
772
42,858 $
2,998
1,184
1,460
5,642
33,015
9,034
304
42,353 $
Total noninterest income
$
rewards and partner payments for the same periods.
122 122
Bank of America 2019
Bank of America 2019
NOTE 3 Derivatives
Derivative Balances
Derivatives are entered into on behalf of customers, for trading or
to support risk management activities. Derivatives used in risk
management activities include derivatives that may or may not be
designated
relationships.
Derivatives that are not designated in qualifying hedge accounting
relationships are referred to as other risk management derivatives.
For more information on the Corporation’s derivatives and hedging
in qualifying hedge accounting
activities, see Note 1 – Summary of Significant Accounting
Principles. The following tables present derivative instruments
included on the Consolidated Balance Sheet in derivative assets
and liabilities at December 31, 2019 and 2018. Balances are
presented on a gross basis, prior to the application of counterparty
and cash collateral netting. Total derivative assets and liabilities
are adjusted on an aggregate basis to take into consideration the
effects of legally enforceable master netting agreements and have
been reduced by cash collateral received or paid.
(Dollars in billions)
Interest rate contracts
Swaps
Futures and forwards
Written options
Purchased options
Foreign exchange contracts
Swaps
Spot, futures and forwards
Written options
Purchased options
Equity contracts
Swaps
Futures and forwards
Written options
Purchased options
Commodity contracts
Swaps
Futures and forwards
Written options
Purchased options
Credit derivatives (2)
Purchased credit derivatives:
Credit default swaps
Total return swaps/options
Written credit derivatives:
Credit default swaps
Total return swaps/options
Gross derivative assets/liabilities
Less: Legally enforceable master netting agreements
Less: Cash collateral received/paid
Total derivative assets/liabilities
Gross Derivative Assets
Gross Derivative Liabilities
December 31, 2019
Trading and
Other Risk
Management
Derivatives
Qualifying
Accounting
Hedges
Contract/
Notional (1)
Total
Trading and
Other Risk
Management
Derivatives
Qualifying
Accounting
Hedges
Total
$ 15,074.4 $
3,279.8
1,767.7
1,673.6
162.0 $
1.0
—
37.4
9.7 $
—
—
—
171.7 $
1.0
—
37.4
168.5 $
1.0
32.5
—
0.4 $
—
—
—
168.9
1.0
32.5
—
1,657.7
3,792.7
274.3
261.6
315.0
125.1
731.1
668.6
42.0
61.3
33.2
37.9
321.6
86.6
300.2
86.2
30.3
35.9
—
4.0
6.5
0.3
—
42.4
2.1
1.7
—
1.4
2.7
0.4
0.7
0.1
—
—
—
—
—
—
—
—
—
—
—
—
31.0
36.0
—
4.0
6.5
0.3
—
42.4
2.1
1.7
—
1.4
2.7
0.4
31.7
38.7
3.8
—
8.1
1.1
34.6
—
4.4
0.4
1.4
—
5.6
1.3
0.9
0.3
—
—
—
—
—
—
—
—
—
—
—
—
5.4
0.8
334.3 $
—
—
10.5 $
$
$
5.4
0.8
344.8 $
(270.4)
(33.9)
40.5
2.0
0.4
335.5 $
—
—
1.6 $
$
32.6
39.0
3.8
—
8.1
1.1
34.6
—
4.4
0.4
1.4
—
5.6
1.3
2.0
0.4
337.1
(270.4)
(28.5)
38.2
(1) Represents the total contract/notional amount of derivative assets and liabilities outstanding.
(2) The net derivative asset (liability) and notional amount of written credit derivatives for which the Corporation held purchased credit derivatives with identical underlying referenced names were $2.8
billion and $309.7 billion at December 31, 2019.
Bank of America 2019 123
Bank of America 2019 123
(Dollars in billions)
Interest rate contracts
Swaps
Futures and forwards
Written options
Purchased options
Foreign exchange contracts
Swaps
Spot, futures and forwards
Written options
Purchased options
Equity contracts
Swaps
Futures and forwards
Written options
Purchased options
Commodity contracts
Swaps
Futures and forwards
Written options
Purchased options
Credit derivatives (2)
Purchased credit derivatives:
Credit default swaps
Total return swaps/options
Written credit derivatives:
Credit default swaps
Total return swaps/options
Gross derivative assets/liabilities
Less: Legally enforceable master netting agreements
Less: Cash collateral received/paid
Total derivative assets/liabilities
Gross Derivative Assets
Gross Derivative Liabilities
December 31, 2018
Trading and
Other Risk
Management
Derivatives
Qualifying
Accounting
Hedges
Contract/
Notional (1)
Total
Trading and
Other Risk
Management
Derivatives
Qualifying
Accounting
Hedges
Total
$ 15,977.9 $
3,656.6
1,584.9
1,614.0
141.0 $
4.7
—
30.8
3.2 $
—
—
—
144.2 $
4.7
—
30.8
138.9 $
5.0
28.6
—
2.0 $
—
—
—
140.9
5.0
28.6
—
1,704.8
4,276.0
256.7
240.4
253.6
100.0
597.1
549.4
43.1
51.7
27.5
23.4
408.1
84.5
371.9
87.3
38.8
39.8
—
4.6
7.7
2.1
—
36.0
2.7
3.2
—
1.7
5.3
0.4
4.4
0.6
323.8 $
$
1.4
0.4
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5.0 $
$
40.2
40.2
—
4.6
7.7
2.1
—
36.0
2.7
3.2
—
1.7
5.3
0.4
42.2
39.3
5.0
—
8.4
0.3
27.5
—
4.5
0.5
2.2
—
4.9
1.0
4.3
0.6
313.2 $
4.4
0.6
328.8 $
(252.7)
(32.4)
43.7
2.3
0.3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4.6 $
$
44.5
39.6
5.0
—
8.4
0.3
27.5
—
4.5
0.5
2.2
—
4.9
1.0
4.3
0.6
317.8
(252.7)
(27.2)
37.9
(1) Represents the total contract/notional amount of derivative assets and liabilities outstanding.
(2) The net derivative asset (liability) and notional amount of written credit derivatives for which the Corporation held purchased credit derivatives with identical underlying referenced names were $(185)
million and $342.8 billion at December 31, 2018.
Offsetting of Derivatives
The Corporation enters into International Swaps and Derivatives
Association, Inc. (ISDA) master netting agreements or similar
agreements with substantially all of the Corporation’s derivative
counterparties. Where legally enforceable, these master netting
agreements give the Corporation, in the event of default by the
counterparty, the right to liquidate securities held as collateral and
to offset receivables and payables with the same counterparty.
For purposes of the Consolidated Balance Sheet, the Corporation
offsets derivative assets and liabilities and cash collateral held
with the same counterparty where it has such a legally enforceable
master netting agreement.
The following table presents derivative instruments included
in derivative assets and liabilities on the Consolidated Balance
Sheet at December 31, 2019 and 2018 by primary risk (e.g.,
interest rate risk) and the platform, where applicable, on which
these derivatives are transacted. Balances are presented on a
gross basis, prior to the application of counterparty and cash
collateral netting. Total gross derivative assets and liabilities are
adjusted on an aggregate basis to take into consideration the
effects of legally enforceable master netting agreements which
include reducing the balance for counterparty netting and cash
collateral received or paid.
For more information on offsetting of securities financing
agreements, see Note 11 – Federal Funds Sold or Purchased,
Securities Financing Agreements, Short-term Borrowings and
Restricted Cash.
124 124
Bank of America 2019
Bank of America 2019
Offsetting of Derivatives (1)
(Dollars in billions)
Interest rate contracts
Over-the-counter
Exchange-traded
Over-the-counter cleared
Foreign exchange contracts
Over-the-counter
Over-the-counter cleared
Equity contracts
Over-the-counter
Exchange-traded
Commodity contracts
Over-the-counter
Exchange-traded
Over-the-counter cleared
Credit derivatives
Over-the-counter
Over-the-counter cleared
Total gross derivative assets/liabilities, before netting
Over-the-counter
Exchange-traded
Over-the-counter cleared
Less: Legally enforceable master netting agreements and cash collateral received/paid
Derivative
Assets
Derivative
Liabilities
Derivative
Assets
Derivative
Liabilities
December 31, 2019
December 31, 2018
$
203.1 $
0.1
6.0
196.6 $
0.1
5.3
174.2 $
—
4.8
169.4
—
4.0
69.2
0.5
21.3
26.4
2.8
0.8
—
6.4
2.5
302.8
27.3
9.0
73.1
0.5
17.8
22.8
4.2
0.8
0.1
6.6
2.2
298.3
23.7
8.1
82.5
0.9
24.6
16.1
3.5
1.0
—
7.7
2.5
292.5
17.1
8.2
86.3
0.9
14.6
15.1
4.5
0.9
—
8.2
2.3
283.0
16.0
7.2
Derivative assets/liabilities, after netting
Over-the-counter
Exchange-traded
Over-the-counter cleared
(259.2)
(13.5)
(7.2)
26.3
11.6
37.9
(8.6)
Total net derivative assets/liabilities
29.3
(1) OTC derivatives include bilateral transactions between the Corporation and a particular counterparty. OTC-cleared derivatives include bilateral transactions between the Corporation and a counterparty
(264.4)
(13.5)
(7.2)
32.7
11.0
43.7
(16.3)
27.4 $
(269.3)
(21.5)
(8.1)
31.2
7.0
38.2
(16.1)
22.1 $
(274.7)
(21.5)
(8.1)
34.8
5.7
40.5
(14.6)
25.9 $
Other gross derivative assets/liabilities (2)
Less: Financial instruments collateral (3)
Total derivative assets/liabilities
$
where the transaction is cleared through a clearinghouse. Exchange-traded derivatives include listed options transacted on an exchange.
(2) Consists of derivatives entered into under master netting agreements where the enforceability of these agreements is uncertain under bankruptcy laws in some countries or industries.
(3) Amounts are limited to the derivative asset/liability balance and, accordingly, do not include excess collateral received/pledged. Financial instruments collateral includes securities collateral received
or pledged and cash securities held and posted at third-party custodians that are not offset on the Consolidated Balance Sheet but shown as a reduction to derive net derivative assets and liabilities.
ALM and Risk Management Derivatives
The Corporation’s ALM and risk management activities include the
use of derivatives to mitigate risk to the Corporation including
in qualifying hedge accounting
derivatives designated
relationships and derivatives used in other risk management
activities. Interest rate, foreign exchange, equity, commodity and
credit contracts are utilized in the Corporation's ALM and risk
management activities.
The Corporation maintains an overall interest rate risk
management strategy that incorporates the use of interest rate
contracts, which are generally non-leveraged generic interest rate
and basis swaps, options, futures and forwards, to minimize
significant fluctuations in earnings caused by interest rate
volatility. The Corporation’s goal is to manage interest rate
sensitivity and volatility so that movements in interest rates do
not significantly adversely affect earnings or capital. As a result
of interest rate fluctuations, hedged fixed-rate assets and liabilities
appreciate or depreciate in fair value. Gains or losses on the
derivative instruments that are linked to the hedged fixed-rate
assets and liabilities are expected to substantially offset this
unrealized appreciation or depreciation.
Market risk, including interest rate risk, can be substantial in
the mortgage business. Market risk in the mortgage business is
the risk that values of mortgage assets or revenues will be
adversely affected by changes in market conditions such as
interest rate movements. To mitigate the interest rate risk in
mortgage banking production income, the Corporation utilizes
forward loan sale commitments and other derivative instruments,
including purchased options, and certain debt securities. The
Corporation also utilizes derivatives such as interest rate options,
interest rate swaps, forward settlement contracts and eurodollar
futures to hedge certain market risks of MSRs.
The Corporation uses foreign exchange contracts to manage
the foreign exchange risk associated with certain foreign currency-
denominated assets and liabilities, as well as the Corporation’s
investments in non-U.S. subsidiaries. Exposure to loss on these
contracts will increase or decrease over their respective lives as
currency exchange and interest rates fluctuate.
The Corporation purchases credit derivatives to manage credit
risk related to certain funded and unfunded credit exposures.
Credit derivatives include credit default swaps (CDS), total return
swaps and swaptions. These derivatives are recorded on the
Consolidated Balance Sheet at fair value with changes in fair value
recorded in other income.
Derivatives Designated as Accounting Hedges
The Corporation uses various types of interest rate and foreign
exchange derivative contracts to protect against changes in the
fair value of its assets and liabilities due to fluctuations in interest
rates and exchange rates (fair value hedges). The Corporation also
uses these types of contracts to protect against changes in the
cash flows of its assets and liabilities, and other forecasted
transactions (cash flow hedges). The Corporation hedges its net
investment in consolidated non-U.S. operations determined to
have functional currencies other than the U.S. dollar using forward
exchange contracts and cross-currency basis swaps, and by
issuing foreign currency-denominated debt (net investment
hedges).
Bank of America 2019 125
Bank of America 2019 125
Fair Value Hedges
The table below summarizes information related to fair value hedges for 2019, 2018 and 2017.
Gains and Losses on Derivatives Designated as Fair Value Hedges
(Dollars in millions)
Interest rate risk on long-term debt (1)
Interest rate and foreign currency risk on long-term debt (2)
Interest rate risk on available-for-sale securities (3)
Total
2019
Derivative
2018
2017
2019
Hedged Item
2018
2017
$
$
6,113 $
119
(102)
6,130 $
(1,538) $
(1,187)
(52)
(2,777) $
(1,537) $
1,811
(67)
207 $
(6,110) $
(101)
98
(6,113) $
1,429 $
1,079
50
2,558 $
1,045
(1,767)
35
(687)
(1) Amounts are recorded in interest expense in the Consolidated Statement of Income.
(2) In 2019, 2018 and 2017, the derivative amount includes gains (losses) of $73 million, $(116) million and $(365) million in interest expense, $28 million, $(992) million and $2.2 billion in market
making and similar activities, and $18 million and $(79) million in accumulated OCI, respectively. Line item totals are in the Consolidated Statement of Income and in the Consolidated Balance
Sheet.
(3) Amounts are recorded in interest income in the Consolidated Statement of Income.
The table below summarizes the carrying value of hedged assets and liabilities that are designated and qualifying in fair value
hedging relationships along with the cumulative amount of fair value hedging adjustments included in the carrying value that have been
recorded in the current hedging relationships. These fair value hedging adjustments are open basis adjustments that are not subject
to amortization as long as the hedging relationship remains designated.
Designated Fair Value Hedged Assets (Liabilities)
(Dollars in millions)
Long-term debt (2)
Available-for-sale debt securities (2)
Carrying Value
Cumulative
Fair Value
Adjustments (1)
Carrying Value
Cumulative
Fair Value
Adjustments (1)
$
December 31, 2019
(162,389) $
(8,685)
$
(138,682) $
December 31, 2018
1,654
64
981
(2,117)
(29)
(1) For assets, increase (decrease) to carrying value and for liabilities, (increase) decrease to carrying value.
(2) At December 31, 2019 and 2018, the cumulative fair value adjustments remaining on long-term debt and AFS debt securities from discontinued hedging relationships resulted in a decrease in the
related liability of $1.3 billion and $1.6 billion and an increase (decrease) in the related asset of $8 million and $(29) million, which are being amortized over the remaining contractual life of the de-
designated hedged items.
Cash Flow and Net Investment Hedges
The following table summarizes certain information related to cash
flow hedges and net investment hedges for 2019, 2018 and 2017.
Of the $400 million after-tax net loss ($526 million pretax) on
derivatives in accumulated OCI at December 31, 2019, $68 million
after-tax ($90 million pretax) is expected to be reclassified into
earnings in the next 12 months. These net losses reclassified into
earnings are expected to primarily reduce net interest income
related to the respective hedged items. For terminated cash flow
hedges, the time period over which the majority of the forecasted
transactions are hedged is approximately 3 years, with a maximum
length of time for certain forecasted transactions of 16 years.
Gains and Losses on Derivatives Designated as Cash Flow and Net Investment Hedges
(Dollars in millions, amounts pretax)
Cash flow hedges
Interest rate risk on variable-rate assets (1)
Price risk on certain compensation plans (2)
Total
Net investment hedges
Gains (Losses) in
Accumulated OCI on Derivatives
Gains (Losses) in Income
Reclassified from Accumulated OCI
2019
2018
2017
2019
2018
2017
$
$
671 $
34
705 $
(159) $
4
(155) $
(109) $
59
(50) $
(104) $
(2)
(106) $
(165) $
27
(138) $
(327)
148
(179)
Foreign exchange risk (3)
989 $
(1) Amounts reclassified from accumulated OCI are recorded in interest income in the Consolidated Statement of Income.
(2) Amounts reclassified from accumulated OCI are recorded in compensation and benefits expense in the Consolidated Statement of Income.
(3) Amounts reclassified from accumulated OCI are recorded in other income in the Consolidated Statement of Income. Amounts excluded from effectiveness testing and recognized in market making
411 $
(1,588) $
366 $
22 $
1,782
$
and similar activities were gains of $154 million, $47 million and $120 million in 2019, 2018 and 2017, respectively.
Other Risk Management Derivatives
Other risk management derivatives are used by the Corporation to reduce certain risk exposures by economically hedging various
assets and liabilities. The following table presents gains (losses) on these derivatives for 2019, 2018 and 2017. These gains (losses)
are largely offset by the income or expense recorded on the hedged item.
126 126
Bank of America 2019
Bank of America 2019
Gains and Losses on Other Risk Management Derivatives
(Dollars in millions)
Interest rate risk on mortgage activities (1, 2) $
Credit risk on loans (2)
Interest rate and foreign currency risk on
ALM activities (3)
2019
2018
2017
315 $
(58)
(107) $
9
8
(6)
1,112
3,278
(1,318)
Price risk on certain compensation plans (4)
704
(1) Primarily related to hedges of interest rate risk on MSRs and IRLCs to originate mortgage loans
that will be held for sale. The net gains on IRLCs, which are not included in the table but are
considered derivative instruments, were $73 million, $47 million and $220 million in 2019,
2018 and 2017, respectively.
(495)
943
(2) Gains (losses) on these derivatives are recorded in other income.
(3) Gains (losses) on these derivatives are recorded in market making and similar activities. Prior-
period amounts have been updated to conform to the current-period presentation.
(4) Gains (losses) on these derivatives are recorded in compensation and benefits expense.
Transfers of Financial Assets with Risk Retained
through Derivatives
The Corporation enters into certain transactions involving the
transfer of financial assets that are accounted for as sales where
substantially all of the economic exposure to the transferred
financial assets is retained through derivatives (e.g., interest rate
and/or credit), but the Corporation does not retain control over
the assets transferred. As of December 31, 2019 and 2018, the
Corporation had transferred $5.2 billion and $5.8 billion of non-
U.S. government-guaranteed MBS to a third-party trust and
retained economic exposure to the transferred assets through
derivative contracts. In connection with these transfers, the
Corporation received gross cash proceeds of $5.2 billion and $5.8
billion at the transfer dates. At December 31, 2019 and 2018,
the fair value of the transferred securities was $5.3 billion and
$5.5 billion.
Sales and Trading Revenue
The Corporation enters into trading derivatives to facilitate client
transactions and to manage risk exposures arising from trading
account assets and liabilities. It is the Corporation’s policy to
include these derivative instruments in its trading activities which
include derivatives and non-derivative cash instruments. The
resulting risk from these derivatives is managed on a portfolio
basis as part of the Corporation’s Global Markets business
segment. The related sales and trading revenue generated within
Global Markets is recorded in various income statement line items
including market making and similar activities and net interest
income as well as other revenue categories.
Sales and trading revenue includes changes in the fair value
and realized gains and losses on the sales of trading and other
assets, net interest income, and fees primarily from commissions
on equity securities. Revenue is generated by the difference in the
client price for an instrument and the price at which the trading
desk can execute the trade in the dealer market. For equity
securities, commissions related to purchases and sales are
recorded in the “Other” column in the Sales and Trading Revenue
table. Changes in the fair value of these securities are included
in market making and similar activities. For debt securities,
revenue, with the exception of interest associated with the debt
securities, is typically included in market making and similar
activities. Unlike commissions for equity securities, the initial
revenue related to broker-dealer services for debt securities is
typically included in the pricing of the instrument rather than being
charged through separate fee arrangements. Therefore, this
revenue is recorded in market making and similar activities as part
of the initial mark to fair value. For derivatives, the majority of
revenue is included in market making and similar activities. In
transactions where the Corporation acts as agent, which include
exchange-traded futures and options, fees are recorded in other
income.
The following table, which includes both derivatives and non-
derivative cash instruments, identifies the amounts in the
respective income statement line items attributable to the
Corporation’s sales and trading revenue in Global Markets,
categorized by primary risk, for 2019, 2018 and 2017. This table
includes debit valuation adjustment (DVA) and funding valuation
adjustment (FVA) gains (losses). Global Markets results in Note 24
– Business Segment Information are presented on a fully taxable-
equivalent (FTE) basis. The table below is not presented on an FTE
basis.
Sales and Trading Revenue
Market
making and
similar
activities
Net
Interest
Income
2019
Other (1)
Total
$
916 $ 1,831 $
1,300
3,565
1,158
123
54
(638)
1,800
75
121 $ 2,868
1,397
4,501
3,469
255
43
1,574
511
57
$
7,062 $ 3,122 $ 2,306 $ 12,490
$
784 $ 1,696 $
2018
1,486
3,874
1,063
50
11
(662)
1,861
202
259 $ 2,739
1,511
4,856
3,512
305
14
1,644
588
53
$
7,257 $ 3,108 $ 2,558 $ 12,923
$
429 $ 1,846 $
2017
1,409
2,598
1,685
79
12
(427)
1,945
170
248 $ 2,523
1,430
4,075
4,208
324
9
1,904
578
75
$
6,200 $ 3,546 $ 2,814 $ 12,560
(Dollars in millions)
Interest rate risk
Foreign exchange risk
Equity risk
Credit risk
Other risk
Total sales and trading
revenue
Interest rate risk
Foreign exchange risk
Equity risk
Credit risk
Other risk
Total sales and trading
revenue
Interest rate risk
Foreign exchange risk
Equity risk
Credit risk
Other risk
Total sales and trading
revenue
(1) Represents amounts in investment and brokerage services and other income that are recorded
in Global Markets and included in the definition of sales and trading revenue. Includes investment
and brokerage services revenue of $1.7 billion, $1.7 billion and $2.0 billion in 2019, 2018 and
2017, respectively.
Credit Derivatives
The Corporation enters into credit derivatives primarily to facilitate
client transactions and to manage credit risk exposures. Credit
derivatives derive value based on an underlying third-party
referenced obligation or a portfolio of referenced obligations and
generally require the Corporation, as the seller of credit protection,
to make payments to a buyer upon the occurrence of a predefined
credit event. Such credit events generally include bankruptcy of
the referenced credit entity and failure to pay under the obligation,
as well as acceleration of indebtedness and payment repudiation
or moratorium. For credit derivatives based on a portfolio of
referenced credits or credit indices, the Corporation may not be
required to make payment until a specified amount of loss has
occurred and/or may only be required to make payment up to a
specified amount.
Credit derivatives are classified as investment and non-
investment grade based on the credit quality of the underlying
referenced obligation. The Corporation considers ratings of BBB-
or higher as investment grade. Non-investment grade includes non-
Bank of America 2019 127
Bank of America 2019 127
rated credit derivative instruments. The Corporation discloses
internal categorizations of investment grade and non-investment
grade consistent with how risk is managed for these instruments.
Credit derivative instruments where the Corporation is the
seller of credit protection and their expiration at December 31,
2019 and 2018 are summarized in the following table.
Credit Derivative Instruments
(Dollars in millions)
Credit default swaps:
Investment grade
Non-investment grade
Total
Total return swaps/options:
Investment grade
Non-investment grade
Total
Total credit derivatives
Credit-related notes:
Investment grade
Non-investment grade
Total credit-related notes
Credit default swaps:
Investment grade
Non-investment grade
Total
Total return swaps/options:
Investment grade
Non-investment grade
Total
Total credit derivatives
Credit default swaps:
Investment grade
Non-investment grade
Total
Total return swaps/options:
Investment grade
Non-investment grade
Total
Total credit derivatives
Credit-related notes:
Investment grade
Non-investment grade
Total credit-related notes
Credit default swaps:
Investment grade
Non-investment grade
Total
Total return swaps/options:
Investment grade
Non-investment grade
Total
Total credit derivatives
Less than
One Year
One to
Three Years
Three to
Five Years
December 31, 2019
Carrying Value
Over Five
Years
Total
$
5 $
60 $
292
297
—
—
—
561
621
—
—
—
1 $
3 $
1
2
5 $
2 $
Maximum Payout/Notional
297 $
621 $
972 $
—
70
70
35
344
379
449 $
— $
6
6 $
132
134
105
472
577
711 $
— $
1
1 $
$
$
$
$
$
$
$
$
$
$
$
67,838
26,521
94,359
$
71,320
29,618
100,938
55,827
19,049
74,876
56,488
28,707
85,195
$
160,071 $
$
2 $
44 $
—
657
657
95,016 $
62
104
166
101,104 $
December 31, 2018
Carrying Value
636
680
—
21
21
701 $
436 $
914
1,350
—
—
—
1,350 $
4 $
— $
1
1
1 $
5 $
Maximum Payout/Notional
$
164
808
972
—
—
—
639 $
1,125
1,764 $
$
17,708
12,337
30,045
76
60
136
30,181 $
488 $
1,691
2,179
—
—
—
2,179 $
532 $
1,500
2,032 $
229
1,731
1,960
35
344
379
2,339
643
1,134
1,777
212,693
87,525
300,218
56,626
29,528
86,154
386,372
970
3,373
4,343
105
493
598
4,941
536
1,503
2,039
53,758
24,297
78,055
60,042
24,524
84,566
$
$
95,699
33,881
129,580
$
95,274
34,530
129,804
822
1,649
2,471
132,051 $
59
39
98
129,902 $
$
20,054
14,426
34,480
72
70
142
34,622 $
264,785
107,134
371,919
60,995
26,282
87,277
459,196
$
162,621 $
The notional amount represents the maximum amount payable
by the Corporation for most credit derivatives. However, the
Corporation does not monitor its exposure to credit derivatives
based solely on the notional amount because this measure does
not take into consideration the probability of occurrence. As such,
the notional amount is not a reliable indicator of the Corporation’s
exposure to these contracts. Instead, a risk framework is used to
define risk tolerances and establish limits so that certain credit
risk-related losses occur within acceptable, predefined limits.
Credit-related notes in the table above include investments in
securities issued by CDO, collateralized loan obligation (CLO) and
credit-linked note vehicles. These instruments are primarily
classified as trading securities. The carrying value of these
instruments equals the Corporation’s maximum exposure to loss.
The Corporation is not obligated to make any payments to the
entities under the terms of the securities owned.
Credit-related Contingent Features and Collateral
The Corporation executes the majority of its derivative contracts
in the OTC market with large, international financial institutions,
including broker-dealers and, to a lesser degree, with a variety of
non-financial companies. A significant majority of the derivative
transactions are executed on a daily margin basis. Therefore,
events such as a credit rating downgrade (depending on the
ultimate rating level) or a breach of credit covenants would typically
require an increase in the amount of collateral required of the
counterparty, where applicable, and/or allow the Corporation to
128 128
Bank of America 2019
Bank of America 2019
take additional protective measures such as early termination of
all trades. Further, as previously discussed on page 124, the
Corporation enters into legally enforceable master netting
agreements which reduce risk by permitting closeout and netting
of transactions with the same counterparty upon the occurrence
of certain events.
Certain of the Corporation’s derivative contracts contain credit
risk-related contingent features, primarily in the form of ISDA
master netting agreements and credit support documentation that
enhance the creditworthiness of these instruments compared to
other obligations of the respective counterparty with whom the
Corporation has transacted. These contingent features may be for
the benefit of the Corporation as well as its counterparties with
respect to changes in the Corporation’s creditworthiness and the
mark-to-market exposure under the derivative transactions. At
December 31, 2019 and 2018, the Corporation held cash and
securities collateral of $84.3 billion and $81.6 billion and posted
cash and securities collateral of $69.1 billion and $56.5 billion in
the normal course of business under derivative agreements,
excluding cross-product margining agreements where clients are
permitted to margin on a net basis for both derivative and secured
financing arrangements.
In connection with certain OTC derivative contracts and other
trading agreements, the Corporation can be required to provide
additional collateral or to terminate transactions with certain
counterparties in the event of a downgrade of the senior debt
ratings of the Corporation or certain subsidiaries. The amount of
additional collateral required depends on the contract and is
usually a fixed incremental amount and/or the market value of the
exposure.
At December 31, 2019, the amount of collateral, calculated
based on the terms of the contracts, that the Corporation and
certain subsidiaries could be required to post to counterparties
but had not yet posted to counterparties was $2.3 billion, including
$913 million for Bank of America, National Association (BANA).
Some counterparties are currently able to unilaterally
terminate certain contracts, or the Corporation or certain
subsidiaries may be required to take other action such as find a
suitable replacement or obtain a guarantee. At December 31,
2019 and 2018, the liability recorded for these derivative contracts
was not significant.
The following table presents the amount of additional collateral
that would have been contractually required by derivative contracts
and other trading agreements at December 31, 2019 if the rating
agencies had downgraded their long-term senior debt ratings for
the Corporation or certain subsidiaries by one incremental notch
and by an additional second incremental notch.
Additional Collateral Required to be Posted Upon
Downgrade at December 31, 2019
(Dollars in millions)
Bank of America Corporation
Bank of America, N.A. and subsidiaries (1)
(1)
Included in Bank of America Corporation collateral requirements in this table.
One
incremental
notch
Second
incremental
notch
$
480 $
222
491
353
The following table presents the derivative liabilities that would
be subject to unilateral termination by counterparties and the
amounts of collateral that would have been contractually required
at December 31, 2019 if the long-term senior debt ratings for the
Corporation or certain subsidiaries had been lower by one
incremental notch and by an additional second incremental notch.
Derivative Liabilities Subject to Unilateral Termination
Upon Downgrade at December 31, 2019
(Dollars in millions)
Derivative liabilities
Collateral posted
One
incremental
notch
Second
incremental
notch
$
57 $
42
783
411
Valuation Adjustments on Derivatives
The Corporation records credit risk valuation adjustments on
derivatives in order to properly reflect the credit quality of the
counterparties and its own credit quality. The Corporation
calculates valuation adjustments on derivatives based on a
modeled expected exposure that incorporates current market risk
factors. The exposure also takes into consideration credit
mitigants such as enforceable master netting agreements and
collateral. CDS spread data is used to estimate the default
probabilities and severities that are applied to the exposures.
Where no observable credit default data is available for
counterparties, the Corporation uses proxies and other market
data to estimate default probabilities and severity.
Valuation adjustments on derivatives are affected by changes
in market spreads, non-credit related market factors such as
interest rates and foreign exchange rates that affect the expected
exposure, and other
in collateral
arrangements and partial payments. Credit spreads and non-credit
factors can move independently. For example, for an interest rate
swap, changes in interest rates may increase the expected
exposure, which would increase the counterparty credit valuation
adjustment (CVA). Independently, counterparty credit spreads may
tighten, which would result in an offsetting decrease to CVA.
like changes
factors
The Corporation enters into risk management activities to
offset market driven exposures. The Corporation often hedges the
counterparty spread risk in CVA with CDS. The Corporation hedges
other market risks in both CVA and DVA primarily with foreign
exchange and interest rate swaps. In certain instances, the net-
of-hedge amounts in the table below move in the same direction
as the gross amount or may move in the opposite direction. This
movement is a consequence of the complex interaction of the risks
being hedged, resulting in limitations in the ability to perfectly
hedge all of the market exposures at all times.
The table below presents CVA, DVA and FVA gains (losses) on
derivatives, which are recorded in market making and similar
activities, on a gross and net of hedge basis for 2019, 2018 and
2017. CVA gains reduce the cumulative CVA thereby increasing
the derivative assets balance. DVA gains increase the cumulative
DVA thereby decreasing the derivative liabilities balance. CVA and
DVA losses have the opposite impact. FVA gains related to
derivative assets reduce the cumulative FVA thereby increasing
the derivative assets balance. FVA gains related to derivative
liabilities increase the cumulative FVA thereby decreasing the
derivative liabilities balance. FVA losses have the opposite impact.
Valuation Adjustments Gains (Losses) on Derivatives (1)
Derivative assets (CVA)
Derivative assets/liabilities
(FVA)
Net
Gross
Gross Net
2018
$ 72 $ 45 $ 77 $ 187 $ 330 $ 98
Gross Net
2017
2019
(2)
46
(15)
14
160
178
(281)
Derivative liabilities (DVA)
(1) At December 31, 2019, 2018 and 2017, cumulative CVA reduced the derivative assets balance
by $528 million, $600 million and $677 million, cumulative FVA reduced the net derivatives
balance by $153 million, $151 million and $136 million, and cumulative DVA reduced the
derivative liabilities balance by $285 million, $432 million and $450 million, respectively.
(324)
(19)
(55)
(147)
(135)
Bank of America 2019 129
Bank of America 2019 129
NOTE 4 Securities
The table below presents the amortized cost, gross unrealized gains and losses, and fair value of AFS debt securities, other debt
securities carried at fair value and HTM debt securities at December 31, 2019 and 2018.
Debt Securities
(Dollars in millions)
Available-for-sale debt securities
Mortgage-backed securities:
Agency
Agency-collateralized mortgage obligations
Commercial
Non-agency residential (1)
Total mortgage-backed securities
U.S. Treasury and agency securities
Non-U.S. securities
Other taxable securities, substantially all asset-backed securities
Total taxable securities
Tax-exempt securities
Total available-for-sale debt securities
Other debt securities carried at fair value (2)
Total debt securities carried at fair value
Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities
Total debt securities (3, 4)
Available-for-sale debt securities
Mortgage-backed securities:
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
December 31, 2019
Fair
Value
$ 121,698 $
4,587
14,797
948
142,030
67,700
11,987
3,874
225,591
17,716
243,307
10,596
253,903
215,730
$ 469,633 $
1,013 $
78
249
138
1,478
1,023
6
67
2,574
202
2,776
255
3,031
4,433
7,464 $
(183) $ 122,528
4,641
(24)
15,021
(25)
(9)
1,077
(241)
143,267
(195)
68,528
(2)
11,991
—
3,941
(438)
227,727
(6)
17,912
(444)
245,639
10,828
(23)
(467)
256,467
(342)
219,821
(809) $ 476,288
December 31, 2018
138 $
Agency
Agency-collateralized mortgage obligations
Commercial
Non-agency residential (1)
Total mortgage-backed securities
U.S. Treasury and agency securities
Non-U.S. securities
Other taxable securities, substantially all asset-backed securities
(3,428) $ 121,826
5,530
(110)
14,078
(402)
1,917
(11)
143,351
(3,951)
54,923
(1,378)
9,306
(6)
4,410
(6)
211,990
(5,341)
17,376
(72)
229,366
(5,413)
8,735
(32)
238,101
(5,445)
(3,964)
200,435
(9,409) $ 438,536
(1) At December 31, 2019 and 2018, the underlying collateral type included approximately 49 percent and 68 percent prime, six percent and four percent Alt-A and 45 percent and 28 percent subprime.
(2) Primarily includes non-U.S. securities used to satisfy certain international regulatory requirements. Any changes in value are reported in other income. For detail on the components, see Note 21 –
$ 125,116 $
5,621
14,469
1,792
146,998
56,239
9,307
4,387
216,931
17,349
234,280
8,595
242,875
203,652
$ 446,527 $
Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities
19
11
136
304
62
5
29
400
99
499
172
671
747
Other debt securities carried at fair value (2)
Total debt securities carried at fair value
Total available-for-sale debt securities
Total debt securities (3, 4)
Total taxable securities
Tax-exempt securities
1,418 $
Fair Value Measurements.
Includes securities pledged as collateral of $67.0 billion and $40.6 billion at December 31, 2019 and 2018.
(3)
(4) The Corporation held debt securities from FNMA and FHLMC that each exceeded 10 percent of shareholders’ equity, with an amortized cost of $157.2 billion and $54.1 billion, and a fair value of
$160.6 billion and $55.1 billion at December 31, 2019, and an amortized cost of $161.2 billion and $52.2 billion, and a fair value of $158.5 billion and $51.4 billion at December 31, 2018.
At December 31, 2019, the accumulated net unrealized gain
on AFS debt securities, excluding the amount related to debt
securities previously transferred to held to maturity, included in
accumulated OCI was $1.8 billion, net of the related income tax
expense of $569 million. The Corporation had nonperforming AFS
debt securities of $9 million and $11 million at December 31,
2019 and 2018.
At December 31, 2019, the Corporation held equity securities
at an aggregate fair value of $891 million and other equity
securities, as valued under the measurement alternative, at cost
of $183 million, both of which are included in other assets. At
December 31, 2019, the Corporation also held equity securities
at fair value of $1.0 billion included in time deposits placed and
other short-term investments.
The gross realized gains and losses on sales of AFS debt
securities for 2019, 2018 and 2017 are presented in the table
below.
Gains and Losses on Sales of AFS Debt Securities
(Dollars in millions)
Gross gains
Gross losses
Net gains on sales of AFS debt securities
Income tax expense attributable to realized
net gains on sales of AFS debt securities
2019
2018
2017
$
$
$
336 $
(119)
217 $
169 $
(15)
154 $
352
(97)
255
54 $
37
$
97
130 130
Bank of America 2019
Bank of America 2019
The table below presents the fair value and the associated gross unrealized losses on AFS debt securities and whether these
securities have had gross unrealized losses for less than 12 months or for 12 months or longer at December 31, 2019 and 2018.
Temporarily Impaired and Other-than-temporarily Impaired AFS Debt Securities
(Dollars in millions)
Temporarily impaired AFS debt securities
Mortgage-backed securities:
Agency
Agency-collateralized mortgage obligations
Commercial
Non-agency residential
Total mortgage-backed securities
U.S. Treasury and agency securities
Non-U.S. securities
Other taxable securities, substantially all asset-backed securities
Total taxable securities
Tax-exempt securities
Total temporarily impaired AFS debt securities
Other-than-temporarily impaired AFS debt securities (1)
Non-agency residential mortgage-backed securities
Less than Twelve Months
Twelve Months or Longer
Total
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
December 31, 2019
Fair
Value
Gross
Unrealized
Losses
$
17,641 $
255
2,180
19
20,095
12,836
851
938
34,720
4,286
39,006
(41) $
(1)
(22)
(1)
(65)
(71)
—
—
(136)
(5)
(141)
17,238 $
925
442
1
18,606
18,866
837
222
38,531
190
38,721
(142) $
(23)
(3)
—
(168)
(124)
(2)
—
(294)
(1)
(295)
34,879 $
1,180
2,622
20
38,701
31,702
1,688
1,160
73,251
4,476
77,727
(183)
(24)
(25)
(1)
(233)
(195)
(2)
—
(430)
(6)
(436)
103
(5)
21
(3)
124
(8)
Total temporarily impaired and other-than-temporarily impaired
AFS debt securities
$
39,109 $
(146) $
38,742 $
(298) $
77,851 $
(444)
Temporarily impaired AFS debt securities
Mortgage-backed securities:
Agency
Agency-collateralized mortgage obligations
Commercial
Non-agency residential
Total mortgage-backed securities
U.S. Treasury and agency securities
Non-U.S. securities
Other taxable securities, substantially all asset-backed securities
Total taxable securities
Tax-exempt securities
Total temporarily impaired AFS debt securities
Other-than-temporarily impaired AFS debt securities (1)
Non-agency residential mortgage-backed securities
$
14,771 $
3
1,344
106
16,224
288
773
183
17,468
232
17,700
131
—
(8)
(8)
(65)
(1)
(5)
(1)
(72)
(2)
(74)
—
December 31, 2018
(49) $
99,211 $
(3,379) $ 113,982 $
4,452
11,991
49
115,703
51,374
21
185
167,283
2,148
169,431
(110)
(394)
(3)
(3,886)
(1,377)
(1)
(5)
(5,269)
(70)
(5,339)
4,455
13,335
155
131,927
51,662
794
368
184,751
2,380
187,131
(3,428)
(110)
(402)
(11)
(3,951)
(1,378)
(6)
(6)
(5,341)
(72)
(5,413)
3
—
134
—
Total temporarily impaired and other-than-temporarily impaired
AFS debt securities
$
17,831 $
(74) $ 169,434 $
(5,339) $ 187,265 $
(5,413)
(1)
Includes other-than-temporarily impaired AFS debt securities on which an OTTI loss, primarily related to changes in interest rates, remains in accumulated OCI.
In 2019, 2018 and 2017, the Corporation had $24 million,
$33 million and $41 million, respectively, of credit-related OTTI
losses on AFS debt securities which were recognized in other
income. The amount of non-credit related OTTI losses for these
AFS debt securities, which is recognized in OCI, was not significant
for all periods presented.
The cumulative OTTI credit losses recognized in income on AFS
debt securities that the Corporation does not intend to sell were
$85 million, $120 million and $274 million at December 31,
2019, 2018 and 2017, respectively.
The Corporation estimates the portion of a loss on a security
that is attributable to credit using a discounted cash flow model
and estimates the expected cash flows of the underlying collateral
using internal credit, interest rate and prepayment risk models
that incorporate management’s best estimate of current key
assumptions such as default rates, loss severity and prepayment
rates. Assumptions used for the underlying loans that support the
MBS can vary widely from loan to loan and are influenced by such
factors as loan interest rate, geographic location of the borrower,
borrower characteristics and collateral type. Based on these
assumptions, the Corporation then determines how the underlying
collateral cash flows will be distributed to each MBS issued from
the applicable special purpose entity. Expected principal and
interest cash flows on an impaired AFS debt security are
discounted using the effective yield of each individual impaired
AFS debt security.
Significant assumptions used in estimating the expected cash
flows for measuring credit losses on non-agency residential
mortgage-backed securities (RMBS) were as follows at December
31, 2019.
Bank of America 2019 131
Bank of America 2019 131
Significant Assumptions
Prepayment speed
Loss severity
Life default rate
(1) Represents the range of inputs/assumptions based upon the underlying collateral.
(2) The value of a variable below which the indicated percentile of observations will fall.
Annual constant prepayment speed and loss severity rates are
projected considering collateral characteristics such as LTV,
creditworthiness of borrowers as measured using Fair Isaac
Corporation (FICO) scores, and geographic concentrations. The
weighted-average severity by collateral type was 12.9 percent for
prime, 11.1 percent for Alt-A and 18.8 percent for subprime at
December 31, 2019. Default rates are projected by considering
collateral characteristics including, but not limited to, LTV, FICO
and geographic concentration. Weighted-average life default rates
Range (1)
Weighted
average
10th
Percentile (2)
90th
Percentile (2)
16.6%
14.7
11.9
5.5%
8.0
1.0
27.8%
30.7
36.5
by collateral type were 7.8 percent for prime, 11.6 percent for Alt-
A and 13.6 percent for subprime at December 31, 2019.
The remaining contractual maturity distribution and yields of
the Corporation’s debt securities carried at fair value and HTM
debt securities at December 31, 2019 are summarized in the table
below. Actual duration and yields may differ as prepayments on
the loans underlying the mortgages or other ABS are passed
through to the Corporation.
Maturities of Debt Securities Carried at Fair Value and Held-to-maturity Debt Securities
(Dollars in millions)
Amount
Yield (1)
Amount
Yield (1)
Amount
Yield (1)
Amount
Yield (1)
Amount
Yield (1)
Due in One
Year or Less
Due after One Year
through Five Years
Due after Five Years
through Ten Years
Due after
Ten Years
Total
Amortized cost of debt securities carried at fair value
Mortgage-backed securities:
Agency
Agency-collateralized mortgage obligations
Commercial
Non-agency residential
Total mortgage-backed securities
U.S. Treasury and agency securities
Non-U.S. securities
Other taxable securities, substantially all asset-backed
securities
Total taxable securities
Tax-exempt securities
Total amortized cost of debt securities carried at
$
—
—
—
—
—
1,350
15,648
1,189
18,187
2,189
—% $
—
—
—
—
0.92
1.17
2.80
1.26
1.72
11
—
3,806
—
3,817
35,544
2,598
1,650
43,609
7,472
5.25% $
—
2.37
—
2.38
1.67
1.03
3.02
1.74
2.10
66
27
10,136
12
10,241
30,789
7
440
41,477
4,849
4.56% $124,618
3.24% $124,695
3.24%
2.48
2.57
—
2.58
2.25
4.17
3.32
2.34
2.06
4,560
868
2,157
132,203
20
96
595
132,914
3,206
3.16
2.99
9.26
3.33
2.45
6.74
2.91
3.34
2.44
4,587
14,810
2,169
146,261
67,703
18,349
3,874
236,187
17,716
3.16
2.54
9.22
3.25
1.92
1.18
2.97
2.70
2.10
2.67
3.19
fair value
$ 20,376
1.31
$ 51,081
1.79
$ 46,326
2.31
$ 136,120
3.32
$ 253,903
Amortized cost of HTM debt securities (2)
$ 1,025
2.83
$
48
3.57
$ 1,102
2.57
$ 213,555
3.19
$ 215,730
Debt securities carried at fair value
Mortgage-backed securities:
Agency
$
Agency-collateralized mortgage obligations
Commercial
Non-agency residential
Total mortgage-backed securities
U.S. Treasury and agency securities
Non-U.S. securities
Other taxable securities, substantially all asset-backed
securities
Total taxable securities
Tax-exempt securities
Total debt securities carried at fair value
Fair value of HTM debt securities (2)
—
—
—
—
—
1,347
15,751
1,196
18,294
2,192
$ 20,486
$ 1,025
$
11
—
$
71
26
3,854
—
3,865
35,686
2,606
1,687
43,844
7,509
10,287
25
10,409
31,478
8
465
42,360
4,976
$ 51,353
$
48
$ 47,336
$ 1,113
$125,449
$125,531
4,615
893
2,386
133,343
20
98
596
134,057
3,235
$ 137,292
$ 217,635
4,641
15,034
2,411
147,617
68,531
18,463
3,944
238,555
17,912
$ 256,467
$ 219,821
(1) The weighted-average yield is computed based on a constant effective interest rate over the contractual life of each security. The average yield considers the contractual coupon and the amortization
of premiums and accretion of discounts, excluding the effect of related hedging derivatives.
(2) Substantially all U.S. agency MBS.
132 132
Bank of America 2019
Bank of America 2019
NOTE 5 Outstanding Loans and Leases
The following tables present total outstanding loans and leases and an aging analysis for the Consumer Real Estate, Credit Card and
Other Consumer, and Commercial portfolio segments, by class of financing receivables, at December 31, 2019 and 2018.
10,399
4,982
97,608
90,998
192
465,175
594
465,769
307,048
104,966
62,689
19,880
15,333
509,916
(Dollars in millions)
Consumer real estate
Core portfolio
Residential mortgage
Home equity
Non-core portfolio
Residential mortgage
Home equity
Credit card and other consumer
Credit card
Direct/Indirect consumer (4)
Other consumer
Total consumer
30-59 Days
Past Due (1)
60-89 Days
Past Due (1)
$
1,378
135
$
458
34
564
297
—
2,866
261
70
209
16
429
85
—
1,070
90 Days or
More
Past Due (2)
Total Past
Due 30
Days
or More
Total
Current or
Less Than
30 Days
Past Due (3)
Loans
Accounted
for Under
the Fair
Total
Value Option Outstandings
December 31, 2019
$
$
565
198
2,204
403
$ 223,566
34,823
$ 225,770
35,226
1,263
72
1,042
35
—
3,175
1,930
122
2,035
417
—
7,111
8,469
4,860
95,573
90,581
192
458,064
Consumer loans accounted for under the fair value
option (5)
Total consumer loans and leases
2,866
1,070
3,175
7,111
458,064
$
594
594
Commercial
U.S. commercial
Non-U.S. commercial
Commercial real estate (6)
Commercial lease financing
U.S. small business commercial
Total commercial
Commercial loans accounted for under the fair value
option (5)
788
35
144
100
119
1,186
279
23
19
56
56
433
371
8
119
39
107
644
1,438
66
282
195
282
2,263
305,610
104,900
62,407
19,685
15,051
507,653
Total commercial loans and leases
Total loans and leases (7)
1,186
4,052
$
433
1,503
$
644
3,819
$
2,263
9,374
507,653
$ 965,717
$
$
7,741
7,741
8,335
7,741
517,657
$ 983,426
Percentage of outstandings
100.00%
(1) Consumer real estate loans 30-59 days past due includes fully-insured loans of $517 million and nonperforming loans of $139 million. Consumer real estate loans 60-89 days past due includes
98.20%
0.39%
0.85%
0.95%
0.41%
0.15%
fully-insured loans of $206 million and nonperforming loans of $114 million.
(2) Consumer real estate includes fully-insured loans of $1.1 billion.
(3) Consumer real estate includes $856 million and direct/indirect consumer includes $45 million of nonperforming loans.
(4) Total outstandings primarily includes auto and specialty lending loans and leases of $50.4 billion, U.S. securities-based lending loans of $36.7 billion and non-U.S. consumer loans of $2.8 billion.
(5) Consumer loans accounted for under the fair value option includes residential mortgage loans of $257 million and home equity loans of $337 million. Commercial loans accounted for under the fair
value option includes U.S. commercial loans of $4.7 billion and non-U.S. commercial loans of $3.1 billion. For more information, see Note 21 – Fair Value Measurements and Note 22 – Fair Value
Option.
(6) Total outstandings includes U.S. commercial real estate loans of $59.0 billion and non-U.S. commercial real estate loans of $3.7 billion.
(7) Total outstandings includes loans and leases pledged as collateral of $25.9 billion. The Corporation also pledged $168.2 billion of loans with no related outstanding borrowings to secure potential
borrowing capacity with the Federal Reserve Bank and Federal Home Loan Bank.
Bank of America 2019 133
Bank of America 2019 133
14,862
8,276
98,338
91,166
202
446,549
682
447,231
299,277
98,776
60,845
22,534
14,565
495,997
(Dollars in millions)
Consumer real estate
Core portfolio
Residential mortgage
Home equity
Non-core portfolio
Residential mortgage
Home equity
Credit card and other consumer
Credit card
Direct/Indirect consumer (4)
Other consumer (5)
Total consumer
30-59 Days
Past Due (1)
60-89 Days
Past Due (1)
$
1,188
200
$
757
139
577
317
—
3,178
249
85
309
69
418
90
—
1,220
90 Days or
More
Past Due (2)
Total Past
Due 30
Days
or More
Total
Current or
Less Than
30 Days
Past Due (3)
Loans
Accounted
for Under
the Fair
Total
Value Option Outstandings
December 31, 2018
$
$
793
387
2,230
672
$ 191,465
39,338
$ 193,695
40,010
2,201
339
994
40
—
4,754
3,267
547
1,989
447
—
9,152
11,595
7,729
96,349
90,719
202
437,397
Consumer loans accounted for under the fair value
option (6)
Total consumer loans and leases
3,178
1,220
4,754
9,152
437,397
$
682
682
Commercial
U.S. commercial
Non-U.S. commercial
Commercial real estate (7)
Commercial lease financing
U.S. small business commercial
Total commercial
594
1
29
124
83
831
232
49
16
114
54
465
573
—
14
37
96
720
1,399
50
59
275
233
2,016
297,878
98,726
60,786
22,259
14,332
493,981
Commercial loans accounted for under the fair value
option (6)
Total commercial loans and leases
Total loans and leases (8)
831
4,009
$
465
1,685
$
720
5,474
2,016
$ 11,168
493,981
$ 931,378
$
$
3,667
3,667
4,349
3,667
499,664
$ 946,895
Percentage of outstandings
100.00%
(1) Consumer real estate loans 30-59 days past due includes fully-insured loans of $637 million and nonperforming loans of $217 million. Consumer real estate loans 60-89 days past due includes
98.36%
0.42%
0.18%
1.18%
0.58%
0.46%
fully-insured loans of $269 million and nonperforming loans of $146 million.
(2) Consumer real estate includes fully-insured loans of $1.9 billion.
(3) Consumer real estate includes $1.8 billion and direct/indirect consumer includes $53 million of nonperforming loans.
(4) Total outstandings primarily includes auto and specialty lending loans and leases of $50.1 billion, U.S. securities-based lending loans of $37.0 billion and non-U.S. consumer loans of $2.9 billion.
(5) Substantially all of other consumer is consumer overdrafts.
(6) Consumer loans accounted for under the fair value option includes residential mortgage loans of $336 million and home equity loans of $346 million. Commercial loans accounted for under the fair
value option includes U.S. commercial loans of $2.5 billion and non-U.S. commercial loans of $1.1 billion. For more information, see Note 21 – Fair Value Measurements and Note 22 – Fair Value
Option.
(7) Total outstandings includes U.S. commercial real estate loans of $56.6 billion and non-U.S. commercial real estate loans of $4.2 billion.
(8) Total outstandings includes loans and leases pledged as collateral of $36.7 billion. The Corporation also pledged $166.1 billion of loans with no related outstanding borrowings to secure potential
borrowing capacity with the Federal Reserve Bank and Federal Home Loan Bank.
The Corporation categorizes consumer real estate loans as
core and non-core based on loan and customer characteristics
such as origination date, product type, LTV, FICO score and
delinquency status consistent with its current consumer and
mortgage servicing strategy. Generally, loans that were originated
after January 1, 2010, qualified under government-sponsored
enterprise (GSE) underwriting guidelines, or otherwise met the
Corporation’s underwriting guidelines in place in 2015 are
characterized as core loans. All other loans are generally
characterized as non-core loans and represent runoff portfolios.
The Corporation has entered into long-term credit protection
agreements with FNMA and FHLMC on loans totaling $7.5 billion
and $6.1 billion at December 31, 2019 and 2018, providing full
credit protection on residential mortgage loans that become
severely delinquent. All of these loans are individually insured and
therefore the Corporation does not record an allowance for credit
losses related to these loans.
During 2019, the Corporation sold $4.7 billion of consumer
real estate compared to $11.6 billion in 2018.
Nonperforming Loans and Leases
The Corporation classifies consumer real estate loans that have
been discharged in Chapter 7 bankruptcy and not reaffirmed by
the borrower as TDRs, irrespective of payment history or
delinquency status, even if the repayment terms for the loans have
not been otherwise modified. The Corporation continues to have
a lien on the underlying collateral.
134 134
Bank of America 2019
Bank of America 2019
The table below presents the Corporation’s nonperforming loans and leases including nonperforming TDRs, and loans accruing past
due 90 days or more at December 31, 2019 and 2018. Nonperforming LHFS are excluded from nonperforming loans and leases as
they are recorded at either fair value or the lower of cost or fair value. For more information on the criteria for classification as
nonperforming, see Note 1 – Summary of Significant Accounting Principles.
Credit Quality
(Dollars in millions)
Consumer real estate
Core portfolio
Residential mortgage (1)
Home equity
Non-core portfolio
Residential mortgage (1)
Home equity
Credit card and other consumer
Credit card
Direct/Indirect consumer
Total consumer
Commercial
Nonperforming Loans
and Leases
Accruing Past Due
90 Days or More
2019
2018
2019
2018
December 31
$
883 $
363
1,010 $
955
176 $
—
587
173
n/a
47
2,053
883
938
n/a
56
3,842
912
—
1,042
33
2,163
274
—
1,610
—
994
38
2,916
U.S. commercial
Non-U.S. commercial
Commercial real estate
Commercial lease financing
U.S. small business commercial
197
—
4
29
84
314
3,230
(1) Residential mortgage loans in the core and non-core portfolios accruing past due 90 days or more are fully-insured loans. At December 31, 2019 and 2018, residential mortgage includes $740
million and $1.4 billion of loans on which interest has been curtailed by the FHA and therefore are no longer accruing interest, although principal is still insured, and $348 million and $498 million
of loans on which interest is still accruing.
794
80
156
18
54
1,102
4,944 $
1,094
43
280
32
50
1,499
3,552 $
Total commercial
Total loans and leases
106
8
19
20
97
250
2,413 $
$
n/a = not applicable
Credit Quality Indicators
The Corporation monitors credit quality within its Consumer Real
Estate, Credit Card and Other Consumer, and Commercial portfolio
segments based on primary credit quality indicators. For more
information on the portfolio segments, see Note 1 – Summary of
Significant Accounting Principles. Within the Consumer Real Estate
portfolio segment, the primary credit quality indicators are
refreshed LTV and refreshed FICO score. Refreshed LTV measures
the carrying value of the loan as a percentage of the value of the
property securing the loan, refreshed quarterly. Home equity loans
are evaluated using CLTV which measures the carrying value of
the Corporation’s loan and available line of credit combined with
any outstanding senior liens against the property as a percentage
of the value of the property securing the loan, refreshed quarterly.
FICO score measures the creditworthiness of the borrower based
on the financial obligations of the borrower and the borrower’s
credit history. FICO scores are typically refreshed quarterly or more
frequently. Certain borrowers (e.g., borrowers that have had debts
discharged in a bankruptcy proceeding) may not have their FICO
scores updated. FICO scores are also a primary credit quality
indicator for the Credit Card and Other Consumer portfolio segment
and the business card portfolio within U.S. small business
commercial. Within the Commercial portfolio segment, loans are
evaluated using the internal classifications of pass rated or
reservable criticized as the primary credit quality indicators. The
term reservable criticized refers to those commercial loans that
are internally classified or listed by the Corporation as Special
Mention, Substandard or Doubtful, which are asset quality
categories defined by regulatory authorities. These assets have
an elevated level of risk and may have a high probability of default
or total loss. Pass rated refers to all loans not considered
reservable criticized. In addition to these primary credit quality
indicators, the Corporation uses other credit quality indicators for
certain types of loans.
The following tables present certain credit quality indicators
for the Corporation's Consumer Real Estate, Credit Card and Other
Consumer, and Commercial portfolio segments, by class of
financing receivables, at December 31, 2019 and 2018.
Bank of America 2019 135
Bank of America 2019 135
Consumer Real Estate – Credit Quality Indicators (1)
(Dollars in millions)
Refreshed LTV
Less than or equal to 90 percent
Greater than 90 percent but less than or equal to
100 percent
Greater than 100 percent
Fully-insured loans (2)
Total consumer real estate
Refreshed FICO score
Less than 620
Greater than or equal to 620 and less than 680
Greater than or equal to 680 and less than 740
Greater than or equal to 740
Fully-insured loans (2)
Total consumer real estate
Core
Residential
Mortgage
Non-core
Residential
Mortgage
Core
Home
Equity
Non-core
Home
Equity
Core
Residential
Mortgage
Non-core
Residential
Mortgage
Core
Home
Equity
Non-core
Home
Equity
December 31, 2019
December 31, 2018
$ 205,357 $
7,433 $ 34,733 $
4,127 $ 173,911 $ 10,272 $ 39,246 $
6,478
3,100
273
226
1,049
16,264
267
2,426
$ 225,770 $ 10,399 $ 35,226 $
267
$
751 $
2,127 $
4,821
26,905
175,653
16,264
1,230 $
1,053
1,981
3,709
2,426
$ 225,770 $ 10,399 $ 35,226 $
1,550
6,025
26,900
348
507
2,349
817
16,618
533
545
3,512
354
410
715
1,083
4,982 $ 193,695 $ 14,862 $ 40,010 $
8,276
541 $
800
1,412
2,229
2,125 $
4,538
23,841
146,573
16,618
1,974 $
1,719
3,042
4,615
3,512
1,064 $
2,008
7,008
29,930
1,503
1,720
2,188
2,865
4,982 $ 193,695 $ 14,862 $ 40,010 $
8,276
(1) Excludes $594 million and $682 million of loans accounted for under the fair value option at December 31, 2019 and 2018.
(2) Credit quality indicators are not reported for fully-insured loans as principal repayment is insured.
Credit Card and Other Consumer – Credit Quality Indicators
(Dollars in millions)
Refreshed FICO score
Less than 620
Greater than or equal to 620 and less than 680
Greater than or equal to 680 and less than 740
Greater than or equal to 740
Other internal credit metrics (1, 2)
Credit
Card
Direct/Indirect
Consumer
December 31, 2019
Other
Consumer
Credit
Card
Direct/Indirect
Consumer
December 31, 2018
Other
Consumer
$
5,179 $
12,277
35,301
44,851
1,720
2,734
8,460
37,825
40,259 $
90,998 $
$
5,016 $
12,415
35,781
45,126
192
192 $
98,338 $
1,719
3,124
8,921
36,709
40,693 $
91,166 $
202
202
Total credit card and other consumer
$
97,608 $
(1) Other internal credit metrics may include delinquency status, geography or other factors.
(2) Direct/indirect consumer includes $39.6 billion and $39.9 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk at December 31, 2019 and 2018.
Commercial – Credit Quality Indicators (1)
(Dollars in millions)
Risk ratings
Pass rated
Reservable criticized
Refreshed FICO score
Less than 620
Greater than or equal to 620 and less than 680
Greater than or equal to 680 and less than 740
Greater than or equal to 740
Other internal credit metrics (3)
Total commercial
Risk ratings
Pass rated
Reservable criticized
Refreshed FICO score
Less than 620
Greater than or equal to 620 and less than 680
Greater than or equal to 680 and less than 740
Greater than or equal to 740
Other internal credit metrics (3)
Total commercial
U.S.
Commercial
Non-U.S.
Commercial
Commercial
Real Estate
December 31, 2019
Commercial
Lease
Financing
U.S. Small
Business
Commercial (2)
$
299,380 $
7,668
104,051 $
915
61,598 $
1,091
19,551 $
329
$
307,048 $
104,966 $
62,689 $
19,880 $
December 31, 2018
231
18
308
756
2,267
4,607
7,146
15,333
$
291,918 $
7,359
97,916 $
860
59,910 $
935
22,168 $
366
389
29
$
299,277 $
98,776 $
60,845 $
22,534 $
264
684
2,072
4,254
6,873
14,565
(1) Excludes $7.7 billion and $3.7 billion of loans accounted for under the fair value option at December 31, 2019 and 2018.
(2) At December 31, 2019 and 2018, U.S. small business commercial includes $715 million and $731 million of criticized business card and small business loans which are evaluated using refreshed
FICO scores or internal credit metrics, including delinquency status, rather than risk ratings. Refreshed FICO score and other internal credit metrics are applicable only to the U.S. small business
commercial portfolio.
(3) Other internal credit metrics may include delinquency status, application scores, geography or other factors. At both December 31, 2019 and 2018, 99 percent of the balances where internal credit
metrics are used were current or less than 30 days past due.
136 136
Bank of America 2019
Bank of America 2019
Impaired Loans and Troubled Debt Restructurings
A loan is considered impaired when, based on current information,
it is probable that the Corporation will be unable to collect all
amounts due from the borrower in accordance with the contractual
terms of the loan. For more information, see Note 1 – Summary
of Significant Accounting Principles.
Consumer Real Estate
Impaired consumer real estate loans within the Consumer Real
Estate portfolio segment consist entirely of TDRs. Most
modifications of consumer real estate loans meet the definition
of TDRs when a binding offer is extended to a borrower.
Modifications of consumer real estate loans are done in
accordance with government programs or the Corporation’s
proprietary programs. These modifications are considered to be
TDRs if concessions have been granted to borrowers experiencing
financial difficulties. Concessions may include reductions in
interest rates, capitalization of past due amounts, principal and/
or interest forbearance, payment extensions, principal and/or
interest forgiveness, or combinations thereof.
Prior to permanently modifying a loan, the Corporation may
enter into trial modifications with certain borrowers under both
government and proprietary programs. Trial modifications generally
represent a three- to four-month period during which the borrower
makes monthly payments under the anticipated modified payment
terms. Upon successful completion of the trial period, the
Corporation and the borrower enter into a permanent modification.
Binding trial modifications are classified as TDRs when the trial
offer is made and continue to be classified as TDRs regardless of
whether the borrower enters into a permanent modification.
Consumer real estate loans of $632 million that have been
discharged in Chapter 7 bankruptcy with no change in repayment
terms and not reaffirmed by the borrower were included in TDRs
at December 31, 2019, of which $101 million were classified as
nonperforming and $275 million were loans fully insured by the
FHA. For more information on loans discharged in Chapter 7
bankruptcy, see Nonperforming Loans and Leases in this Note.
Consumer real estate TDRs are measured primarily based on
the net present value of the estimated cash flows discounted at
the loan’s original effective interest rate. If the carrying value of a
TDR exceeds this amount, a specific allowance is recorded as a
component of the allowance for loan and lease losses.
Alternatively, consumer real estate TDRs that are considered to
be dependent solely on the collateral for repayment (e.g., due to
the lack of income verification) are measured based on the
estimated fair value of the collateral and a charge-off is recorded
if the carrying value exceeds the fair value of the collateral.
Consumer real estate loans that reached 180 days past due prior
to modification had been charged off to their net realizable value,
less costs to sell, before they were modified as TDRs in accordance
with established policy. Therefore, modifications of consumer real
estate loans that are 180 or more days past due as TDRs do not
have an impact on the allowance for loan and lease losses nor
are additional charge-offs required at the time of modification.
Subsequent declines in the fair value of the collateral after a loan
has reached 180 days past due are recorded as charge-offs. Fully-
insured loans are protected against principal loss, and therefore,
the Corporation does not record an allowance for loan and lease
losses on the outstanding principal balance, even after they have
been modified in a TDR.
At December 31, 2019 and 2018, remaining commitments to
lend additional funds to debtors whose terms have been modified
in a consumer real estate TDR were not significant. Consumer real
estate foreclosed properties totaled $229 million and $244 million
at December 31, 2019 and 2018. The carrying value of consumer
real estate loans, including fully-insured loans, for which formal
foreclosure proceedings were in process at December 31, 2019
was $1.6 billion. During 2019 and 2018, the Corporation
reclassified $611 million and $670 million of consumer real estate
loans to foreclosed properties or, for properties acquired upon
foreclosure of certain government-guaranteed loans (principally
FHA-insured loans), to other assets. The reclassifications
represent non-cash investing activities and, accordingly, are not
reflected in the Consolidated Statement of Cash Flows.
The following table provides the unpaid principal balance,
carrying value and related allowance at December 31, 2019 and
2018 and the average carrying value and interest income
recognized in 2019, 2018 and 2017 for impaired loans in the
Corporation’s Consumer Real Estate portfolio segment. Certain
impaired consumer real estate loans do not have a related
allowance as the current valuation of these impaired loans
exceeded the carrying value, which is net of previously recorded
charge-offs.
Bank of America 2019 137
Bank of America 2019 137
Impaired Loans – Consumer Real Estate
(Dollars in millions)
With no recorded allowance
Residential mortgage
Home equity
With an allowance recorded
Residential mortgage
Home equity
Total
Residential mortgage
Home equity
With no recorded allowance
Residential mortgage
Home equity
With an allowance recorded
Residential mortgage
Home equity
Total
Unpaid
Principal
Balance
Carrying
Value
Related
Allowance
Unpaid
Principal
Balance
Carrying
Value
Related
Allowance
December 31, 2019
December 31, 2018
$
4,224 $
1,176
3,354 $
706
— $
—
5,396 $
2,948
4,268 $
1,599
$
1,426 $
1,399 $
543
523
$
5,650 $
1,719
4,753 $
1,229
70 $
69
70 $
69
1,977 $
1,929 $
812
760
7,373 $
3,760
6,197 $
2,359
—
—
114
144
114
144
Average
Carrying
Value
Interest
Income
Recognized (1)
Average
Carrying
Value
Interest
Income
Recognized (1)
Average
Carrying
Value
Interest
Income
Recognized (1)
2019
2018
2017
$
3,831 $
1,221
155 $
76
5,424 $
1,894
207 $
105
7,737 $
1,997
$
1,635 $
637
62 $
22
2,409 $
861
91 $
25
3,414 $
858
311
109
123
24
Residential mortgage
Home equity
434
133
(1) Interest income recognized includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on nonaccruing impaired loans for
7,833 $
2,755
5,466 $
1,858
298 $
130
11,151 $
217 $
2,855
98
$
which the principal is considered collectible.
The table below presents the December 31, 2019, 2018 and 2017 unpaid principal balance, carrying value, and average pre- and
post-modification interest rates of consumer real estate loans that were modified in TDRs during 2019, 2018 and 2017. The following
Consumer Real Estate portfolio segment tables include loans that were initially classified as TDRs during the period and also loans
that had previously been classified as TDRs and were modified again during the period.
Consumer Real Estate – TDRs Entered into During 2019, 2018 and 2017
(Dollars in millions)
Residential mortgage
Home equity
Total
Residential mortgage
Home equity
Total
Residential mortgage
Home equity
Total
Unpaid
Principal
Balance
Carrying
Value
Pre-
Modification
Interest Rate
Post-
Modification
Interest Rate (1)
464
141
605
774
489
1,263
824
764
1,588
$
$
$
$
$
$
December 31, 2019
377
101
478
December 31, 2018
641
358
999
December 31, 2017
712
590
1,302
4.19%
5.04
4.39
4.33%
4.46
4.38
4.43%
4.22
4.33
$
$
$
$
$
$
4.13%
4.31
4.17
4.21%
3.74
4.03
4.16%
3.49
3.83
(1) The post-modification interest rate reflects the interest rate applicable only to permanently completed modifications, which exclude loans that are in a trial modification period.
138 138
Bank of America 2019
Bank of America 2019
The table below presents the December 31, 2019, 2018 and 2017 carrying value for consumer real estate loans that were modified
in a TDR during 2019, 2018 and 2017, by type of modification.
Consumer Real Estate – Modification Programs
(Dollars in millions)
TDRs Entered into During
2018
2019
2017
Modifications under government programs (1)
Modifications under proprietary programs (1)
Loans discharged in Chapter 7 bankruptcy (2)
Trial modifications
85
437
211
569
1,302
(1) Includes other modifications such as term or payment extensions and repayment plans. During 2018, this included $198 million of modifications that met the definition of a TDR related to the 2017
hurricanes; there were no such modifications in 2019 or 2017. These modifications were written down to their net realizable value less costs to sell or were fully insured as of December 31, 2018.
Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.
61
523
130
285
999 $
174
68
201
478 $
Total modifications
35 $
$
$
$
(2)
The table below presents the carrying value of consumer real estate loans that entered into payment default during 2019, 2018
and 2017 that were modified in a TDR during the 12 months preceding payment default. A payment default for consumer real estate
TDRs is recognized when a borrower has missed three monthly payments (not necessarily consecutively) since modification.
Consumer Real Estate – TDRs Entering Payment Default that were Modified During the Preceding 12 Months
(Dollars in millions)
Modifications under government programs
Modifications under proprietary programs
Loans discharged in Chapter 7 bankruptcy (1)
Trial modifications (2)
Total modifications
Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.
Includes trial modification offers to which the customer did not respond.
(1)
(2)
2019
2018
2017
$
$
26
88
30
57
201
$
$
39
158
64
107
368
$
$
81
138
116
391
726
Credit Card and Other Consumer
Impaired loans within the Credit Card and Other Consumer portfolio
segment consist entirely of loans that have been modified in TDRs.
The Corporation seeks to assist customers that are experiencing
financial difficulty by modifying loans while ensuring compliance
with federal and local laws and guidelines. Credit card and other
consumer loan modifications generally involve reducing the
interest rate on the account, placing the customer on a fixed
payment plan not exceeding 60 months and canceling the
customer’s available line of credit, all of which are considered
TDRs. The Corporation makes loan modifications directly with
borrowers for debt held only by the Corporation (internal programs).
Additionally, the Corporation makes loan modifications for
borrowers working with third-party renegotiation agencies that
provide solutions to customers’ entire unsecured debt structures
(external programs). The Corporation classifies other secured
consumer loans that have been discharged in Chapter 7
bankruptcy as TDRs which are written down to collateral value and
placed on nonaccrual status no later than the time of discharge.
For more information on the regulatory guidance on loans
discharged in Chapter 7 bankruptcy, see Nonperforming Loans and
Leases in this Note.
The following table provides the unpaid principal balance,
carrying value and related allowance at December 31, 2019 and
2018 and the average carrying value for 2019, 2018 and 2017
on TDRs within the Credit Card and Other Consumer portfolio
segment.
Impaired Loans – Credit Card and Other Consumer
Unpaid
Principal
Balance
Carrying
Value (1)
Related
Allowance
Unpaid
Principal
Balance
Carrying
Value (1)
Related
Allowance
December 31, 2019
December 31, 2018
Average Carrying Value (2)
2018
2019
2017
(Dollars in millions)
With no recorded allowance
Direct/Indirect consumer
With an allowance recorded
Credit card (3)
Includes accrued interest and fees.
(1)
$
$
73
$
32
$
— $
72
$
33
$
—
$
33 $
30
$
21
633 $
647 $
188 $
522 $
533 $
154
$
594 $
491 $
511
(2) The related interest income recognized, which includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on nonaccruing
impaired loans for which the principal was considered collectible, was not significant in 2019, 2018 and 2017.
(3) The average carrying value in 2017 includes $47 million related to the non-U.S. credit card portfolio, which was sold in the second quarter of 2017.
Bank of America 2019 139
Bank of America 2019 139
The table below provides information on the Corporation’s primary modification programs for the Credit Card and Other Consumer
TDR portfolio at December 31, 2019 and 2018.
Credit Card and Other Consumer – TDRs by Program Type at December 31
(Dollars in millions)
Internal programs
External programs
Other
Total
Percent of balances current or less than 30 days past due
Credit Card
2019
2018
Direct/Indirect Consumer
2019
2018
Total TDRs by Program Type
2019
2018
$
$
$
$
339
308
—
647
85%
$
$
259
273
1
533
85%
$
$
—
—
32
32
78%
$
$
—
—
33
33
81%
$
$
339
308
32
679
84%
259
273
34
566
85%
The table below provides information on the Corporation’s Credit Card and Other Consumer TDR portfolio including the December
31, 2019, 2018 and 2017 unpaid principal balance, carrying value, and average pre- and post-modification interest rates of loans that
were modified in TDRs during 2019, 2018 and 2017.
Credit Card and Other Consumer – TDRs Entered into During 2019, 2018 and 2017
(Dollars in millions)
Credit card
Direct/Indirect consumer
Total
Credit card
Direct/Indirect consumer
Total
Credit card
Non-U.S. credit card
Total
Includes accrued interest and fees.
(1)
Unpaid
Principal
Balance
Carrying
Value (1)
Pre-
Modification
Interest Rate
Post-
Modification
Interest Rate
$
$
$
$
$
$
340
40
380
278
42
320
203
37
240
$
$
$
$
$
$
December 31, 2019
355
21
376
19.18%
5.23
18.42
December 31, 2018
292
23
315
19.49%
5.10
18.45
December 31, 2017
213
22
235
18.47%
4.81
17.17
5.35%
5.21
5.34
5.24%
4.95
5.22
5.32%
4.30
5.22
Credit card and other consumer loans are deemed to be in
payment default during the quarter in which a borrower misses the
second of two consecutive payments. Payment defaults are one
of the factors considered when projecting future cash flows in the
calculation of the allowance for loan and lease losses for impaired
credit card and other consumer loans. Based on historical
experience, the Corporation estimates that 14 percent of new
credit card TDRs and 20 percent of new direct/indirect consumer
TDRs may be in payment default within 12 months after
modification.
Commercial Loans
Impaired commercial loans include nonperforming loans and TDRs
(both performing and nonperforming). Modifications of loans to
commercial borrowers that are experiencing financial difficulty are
designed to reduce the Corporation’s loss exposure while providing
the borrower with an opportunity to work through financial
difficulties, often to avoid foreclosure or bankruptcy. Each
modification is unique and reflects the individual circumstances
of the borrower. Modifications that result in a TDR may include
extensions of maturity at a concessionary (below market) rate of
interest, payment forbearances or other actions designed to
benefit the customer while mitigating the Corporation’s risk
exposure. Reductions in interest rates are rare. Instead, the
interest rates are typically increased, although the increased rate
may not represent a market rate of interest. Infrequently,
concessions may also include principal forgiveness in connection
with foreclosure, short sale or other settlement agreements
leading to termination or sale of the loan.
At the time of restructuring, the loans are remeasured to reflect
the impact, if any, on projected cash flows resulting from the
modified terms. If there was no forgiveness of principal and the
interest rate was not decreased, the modification may have little
or no impact on the allowance established for the loan. If a portion
of the loan is deemed to be uncollectible, a charge-off may be
recorded at the time of restructuring. Alternatively, a charge-off
may have already been recorded in a previous period such that no
charge-off is required at the time of modification. For more
information on modifications for the U.S. small business
commercial portfolio, see Credit Card and Other Consumer in this
Note.
At December 31, 2019 and 2018, remaining commitments to
lend additional funds to debtors whose terms have been modified
in a commercial loan TDR were $445 million and $297 million.
The balance of commercial TDRs in payment default was not
significant at December 31, 2019 and 2018.
The table below provides information on impaired loans in the
Commercial loan portfolio segment including the unpaid principal
balance, carrying value and related allowance at December 31,
2019 and 2018, and the average carrying value for 2019, 2018
and 2017. Certain impaired commercial loans do not have a
related allowance because the valuation of these impaired loans
exceeded the carrying value, which is net of previously recorded
charge-offs.
140 140
Bank of America 2019
Bank of America 2019
Impaired Loans – Commercial
(Dollars in millions)
With no recorded allowance
U.S. commercial
Non-U.S. commercial
Commercial real estate
Commercial lease financing
With an allowance recorded
U.S. commercial
Non-U.S. commercial
Commercial real estate
Commercial lease financing
U.S. small business commercial (2)
Total
Unpaid
Principal
Balance
Carrying
Value
Related
Allowance
Unpaid
Principal
Balance
Carrying
Value
Related
Allowance
Average Carrying Value (1)
December 31, 2019
December 31, 2018
2019
2018
2017
$
$
$
$
$
$
534
123
67
12
1,776
113
322
57
91
520
123
58
12
1,574
113
236
51
77
$
$
—
—
—
—
216
9
64
1
30
$
$
638
93
—
—
1,437
155
247
71
83
$
$
616
93
—
—
1,270
149
162
71
72
$
$
—
—
—
—
121
30
16
—
29
$
$
635
79
96
5
1,316
218
149
73
75
$
$
655
43
44
3
1,162
327
46
42
73
772
46
69
—
1,260
463
73
8
73
U.S. commercial
Non-U.S. commercial
Commercial real estate
Commercial lease financing
U.S. small business commercial (2)
2,032
509
142
8
73
(1) The related interest income recognized, which includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on nonaccruing
2,075
248
247
71
83
1,817
370
90
45
73
1,886
242
162
71
72
2,310
236
389
69
91
2,094
236
294
63
77
1,951
297
245
78
75
121
30
16
—
29
216
9
64
1
30
$
$
$
$
$
$
$
$
$
impaired loans for which the principal was considered collectible, was not significant in 2019, 2018 and 2017.
Includes U.S. small business commercial renegotiated TDR loans and related allowance.
(2)
Loans Held-for-sale
The Corporation had LHFS of $9.2 billion and $10.4 billion at December 31, 2019 and 2018. Cash and non-cash proceeds from sales
and paydowns of loans originally classified as LHFS were $30.6 billion, $29.2 billion and $41.3 billion for 2019, 2018 and 2017,
respectively. Cash used for originations and purchases of LHFS totaled $28.9 billion, $28.1 billion and $43.5 billion for 2019, 2018
and 2017, respectively.
NOTE 6 Allowance for Credit Losses
The table below summarizes the changes in the allowance for credit losses by portfolio segment for 2019, 2018 and 2017.
Consumer
Real Estate
Credit Card and
Other Consumer
Commercial
Total
(Dollars in millions)
Allowance for loan and lease losses, January 1
Loans and leases charged off
Recoveries of loans and leases previously charged off
Net charge-offs
Provision for loan and lease losses
Other (1)
Allowance for loan and lease losses, December 31
Reserve for unfunded lending commitments, January 1
Provision for unfunded lending commitments
Reserve for unfunded lending commitments, December 31
Allowance for credit losses, December 31
Allowance for loan and lease losses, January 1
Loans and leases charged off
Recoveries of loans and leases previously charged off
Net charge-offs
Provision for loan and lease losses
Other (1)
Allowance for loan and lease losses, December 31
Reserve for unfunded lending commitments, January 1
Provision for unfunded lending commitments
Reserve for unfunded lending commitments, December 31
Allowance for credit losses, December 31
Allowance for loan and lease losses, January 1
Loans and leases charged off
Recoveries of loans and leases previously charged off
Net charge-offs
Provision for loan and lease losses
Other (1)
Allowance for loan and lease losses, December 31
Reserve for unfunded lending commitments, January 1
Provision for unfunded lending commitments
Reserve for unfunded lending commitments, December 31
Allowance for credit losses, December 31
$
$
$
$
$
$
928 $
(522)
927
405
(680)
(107)
546
—
—
—
546 $
1,720 $
(690)
664
(26)
(492)
(274)
928
—
—
—
928 $
2,750 $
(770)
657
(113)
(710)
(207)
1,720
—
—
—
1,720 $
2019
3,874 $
(4,302)
911
(3,391)
3,512
1
3,996
—
—
—
3,996 $
2018
3,663 $
(4,037)
823
(3,214)
3,441
(16)
3,874
—
—
—
3,874 $
2017
3,229 $
(3,774)
809
(2,965)
3,437
(38)
3,663
—
—
—
3,663 $
(1) Primarily represents write-offs of purchased credit-impaired loans, the net impact of portfolio sales, and transfers to LHFS.
4,799 $
(822)
160
(662)
742
(5)
4,874
797
16
813
5,687 $
5,010 $
(675)
152
(523)
313
(1)
4,799
777
20
797
5,596 $
5,258 $
(1,075)
174
(901)
654
(1)
5,010
762
15
777
5,787 $
9,601
(5,646)
1,998
(3,648)
3,574
(111)
9,416
797
16
813
10,229
10,393
(5,402)
1,639
(3,763)
3,262
(291)
9,601
777
20
797
10,398
11,237
(5,619)
1,640
(3,979)
3,381
(246)
10,393
762
15
777
11,170
Bank of America 2019 141
Bank of America 2019 141
The table below presents the allowance and the carrying value of outstanding loans and leases by portfolio segment at December
31, 2019 and 2018.
(Dollars in millions)
Impaired loans and troubled debt restructurings (1)
Allowance for loan and lease losses
Carrying value (2)
Allowance as a percentage of carrying value
Loans collectively evaluated for impairment
Allowance for loan and lease losses
Carrying value (2, 3)
Allowance as a percentage of carrying value (3)
Total
Allowance for loan and lease losses
Carrying value (2, 3)
Allowance as a percentage of carrying value (3)
Impaired loans and troubled debt restructurings (1)
Allowance for loan and lease losses
Carrying value (2)
Allowance as a percentage of carrying value
Loans collectively evaluated for impairment
Allowance for loan and lease losses
Carrying value (2, 3)
Allowance as a percentage of carrying value (3)
Total
Allowance for loan and lease losses
Carrying value (2, 3)
Allowance as a percentage of carrying value (3)
Consumer
Real Estate
Credit Card and
Other Consumer
Commercial
Total
December 31, 2019
$
$
$
$
$
$
139
5,982
2.32%
407
270,395
0.15%
546
276,377
$
$
$
188
679
27.69%
3,808
188,119
2.02%
3,996
188,798
$
$
$
320
2,764
11.58%
4,554
507,152
0.90%
4,874
509,916
$
$
$
647
9,425
6.86%
8,769
965,666
0.91%
9,416
975,091
0.20%
2.12%
0.96%
0.97%
December 31, 2018
258
8,556
3.02%
670
248,287
0.27%
928
256,843
$
$
$
154
566
27.21%
3,720
189,140
1.97%
3,874
189,706
$
$
$
196
2,433
8.06%
4,603
493,564
0.93%
4,799
495,997
$
$
$
608
11,555
5.26%
8,993
930,991
0.97%
9,601
942,546
1.02%
(1) Impaired loans include nonperforming commercial loans and leases, as well as all TDRs, including both commercial and consumer TDRs. Impaired loans exclude nonperforming consumer loans
0.36%
2.04%
0.97%
unless they are TDRs, and all consumer and commercial loans accounted for under the fair value option.
(2) Amounts are presented gross of the allowance for loan and lease losses.
(3) Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option of $8.3 billion and $4.3 billion at December 31, 2019 and 2018.
NOTE 7 Securitizations and Other Variable
Interest Entities
The Corporation utilizes VIEs in the ordinary course of business
to support its own and its customers’ financing and investing
needs. The Corporation routinely securitizes loans and debt
securities using VIEs as a source of funding for the Corporation
and as a means of transferring the economic risk of the loans or
debt securities to third parties. The assets are transferred into a
trust or other securitization vehicle such that the assets are legally
isolated from the creditors of the Corporation and are not available
to satisfy its obligations. These assets can only be used to settle
obligations of the trust or other securitization vehicle. The
Corporation also administers, structures or invests in other VIEs
including CDOs, investment vehicles and other entities. For more
information on the Corporation’s use of VIEs, see Note 1 –
Summary of Significant Accounting Principles.
The tables in this Note present the assets and liabilities of
consolidated and unconsolidated VIEs at December 31, 2019 and
2018 in situations where the Corporation has continuing
involvement with transferred assets or if the Corporation otherwise
has a variable interest in the VIE. The tables also present the
Corporation’s maximum loss exposure at December 31, 2019 and
2018 resulting from its involvement with consolidated VIEs and
unconsolidated VIEs in which the Corporation holds a variable
interest. The Corporation’s maximum loss exposure is based on
the unlikely event that all of the assets in the VIEs become
worthless and incorporates not only potential losses associated
with assets recorded on the Consolidated Balance Sheet but also
potential losses associated with off-balance sheet commitments,
such as unfunded liquidity commitments and other contractual
arrangements. The Corporation’s maximum loss exposure does
not include losses previously recognized through write-downs of
assets.
The Corporation invests in ABS issued by third-party VIEs with
which it has no other form of involvement and enters into certain
commercial lending arrangements that may also incorporate the
use of VIEs, for example to hold collateral. These securities and
loans are included in Note 4 – Securities or Note 5 – Outstanding
Loans and Leases. In addition, the Corporation has used VIEs in
connection with its funding activities.
The Corporation did not provide financial support to
consolidated or unconsolidated VIEs during 2019, 2018 and 2017
that it was not previously contractually required to provide, nor
does it intend to do so.
The Corporation had liquidity commitments, including written
put options and collateral value guarantees, with certain
unconsolidated VIEs of $1.1 billion and $218 million at December
31, 2019 and 2018.
First-lien Mortgage Securitizations
As part of its mortgage banking activities, the Corporation
securitizes a portion of the first-lien residential mortgage loans it
originates or purchases from third parties, generally in the form
of RMBS guaranteed by GSEs, FNMA and FHLMC (collectively the
GSEs), or the Government National Mortgage Association (GNMA)
primarily in the case of FHA-insured and U.S. Department of
Veterans Affairs (VA)-guaranteed mortgage loans. Securitization
usually occurs in conjunction with or shortly after origination or
purchase, and the Corporation may also securitize loans held in
its residential mortgage portfolio. In addition, the Corporation may,
from time to time, securitize commercial mortgages it originates
142 142
Bank of America 2019
Bank of America 2019
or purchases from other entities. The Corporation typically services
the loans it securitizes. Further, the Corporation may retain
beneficial interests in the securitization trusts including senior and warranties.
subordinate securities and equity tranches issued by the trusts.
Except as described in Note 13 – Commitments and Contingencies,
the Corporation does not provide guarantees or recourse to the
securitization trusts other than standard representations and
The table below summarizes select information related to first-
lien mortgage securitizations for 2019, 2018 and 2017.
First-lien Mortgage Securitizations
(Dollars in millions)
Residential Mortgage - Agency
2018
2017
2019
Commercial Mortgage
2019
2018
2017
5,887
Proceeds from loan sales (1)
91
Gains on securitizations (2)
—
Repurchases from securitization trusts (3)
(1) The Corporation transfers residential mortgage loans to securitizations sponsored primarily by the GSEs or GNMA in the normal course of business and primarily receives RMBS in exchange.
6,858 $ 5,801 $ 16,161 $
62
1,485
158
2,713
101
—
103
—
27
881
6,991 $
8,661 $
$
Substantially all of these securities are classified as Level 2 within the fair value hierarchy and are sold shortly after receipt.
(2) A majority of the first-lien residential mortgage loans securitized are initially classified as LHFS and accounted for under the fair value option. Gains recognized on these LHFS prior to securitization,
which totaled $64 million, $71 million and $243 million, net of hedges, during 2019, 2018 and 2017, respectively, are not included in the table above.
(3) The Corporation may have the option to repurchase delinquent loans out of securitization trusts, which reduces the amount of servicing advances it is required to make. The Corporation may also
repurchase loans from securitization trusts to perform modifications. Repurchased loans include FHA-insured mortgages collateralizing GNMA securities.
The Corporation recognizes consumer MSRs from the sale or
securitization of consumer real estate loans. The unpaid principal
balance of loans serviced for investors, including residential
mortgage and home equity loans, totaled $192.1 billion and
$226.6 billion at December 31, 2019 and 2018. Servicing fee
and ancillary fee income on serviced loans was $585 million, $710
million and $893 million during 2019, 2018 and 2017. Servicing
advances on serviced loans, including loans serviced for others
and loans held for investment, were $2.4 billion and $3.3 billion
at December 31, 2019 and 2018. For more information on MSRs,
see Note 21 – Fair Value Measurements.
During 2019,
the Corporation deconsolidated agency
residential mortgage securitization trusts with total assets of $1.2
billion. There were no significant deconsolidations in 2018 or
2017.
The following table summarizes select information related to
first-lien mortgage securitization trusts in which the Corporation
held a variable interest at December 31, 2019 and 2018.
First-lien Mortgage VIEs
Agency
Prime
Residential Mortgage
Non-agency
Subprime
December 31
Alt-A
Commercial Mortgage
(Dollars in millions)
Unconsolidated VIEs
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Maximum loss exposure (1)
$
12,554 $
16,011
$
340 $
448
$
1,622 $
1,897
$
98 $
217
$
1,036 $
767
On-balance sheet assets
Senior securities:
Trading account assets
$
627 $
460
$
5 $
30
$
54 $
36
$
24 $
90
$
65 $
97
Debt securities carried at fair
value
Held-to-maturity securities
All other assets
6,392
5,535
—
9,381
6,170
—
193
—
2
246
—
3
1,178
1,470
—
49
—
37
72
—
2
125
—
2
—
809
38
—
528
40
Total retained positions
Principal balance outstanding (2)
$
$
12,554 $
160,226 $
16,011
187,512
$
$
200 $
7,268 $
279
8,954
$
$
1,281 $
8,594 $
1,543
8,719
$
$
98 $
19,878 $
217
23,467
$
$
912 $
60,129 $
665
43,593
Consolidated VIEs
Maximum loss exposure (1)
$
10,857 $
13,296
$
5 $
7
$
44 $
— $
— $
— $
— $
On-balance sheet assets
Trading account assets
$
780 $
1,318
$
116 $
150
$
149 $
— $
— $
— $
— $
Loans and leases, net
All other assets
Total assets
Total liabilities
9,917
161
11,858
143
10,858 $
13,319
4 $
26
$
$
$
$
—
—
116 $
111 $
—
—
150
143
$
$
—
—
149 $
105 $
—
—
— $
— $
—
—
— $
— $
—
—
— $
— $
—
—
— $
— $
76
76
—
—
76
—
(1) Maximum loss exposure includes obligations under loss-sharing reinsurance and other arrangements for non-agency residential mortgage and commercial mortgage securitizations, but excludes the
reserve for representations and warranties obligations and corporate guarantees and also excludes servicing advances and other servicing rights and obligations. For more information, see Note 13
– Commitments and Contingencies and Note 21 – Fair Value Measurements.
(2) Principal balance outstanding includes loans where the Corporation was the transferor to securitization VIEs with which it has continuing involvement, which may include servicing the loans.
Bank of America 2019 143
Bank of America 2019 143
Other Asset-backed Securitizations
The following table summarizes select information related to home equity, credit card and other asset-backed VIEs in which the
Corporation held a variable interest at December 31, 2019 and 2018.
Home Equity Loan, Credit Card and Other Asset-backed VIEs
(Dollars in millions)
Unconsolidated VIEs
Maximum loss exposure
On-balance sheet assets
Senior securities (4):
Trading account assets
Debt securities carried at fair value
Held-to-maturity securities
Total retained positions
Total assets of VIEs (5)
Consolidated VIEs
Maximum loss exposure
On-balance sheet assets
Trading account assets
Loans and leases
Allowance for loan and lease losses
All other assets
Total assets
On-balance sheet liabilities
Short-term borrowings
Long-term debt
All other liabilities
Total liabilities
Home Equity (1)
Credit Card (2, 3)
Resecuritization Trusts
Municipal Bond Trusts
December 31
2019
2018
2019
2018
2019
2018
2019
2018
412 $
908
$
— $
— $
7,526 $
7,647
$
3,701 $
2,150
$
—
11
—
11 $
1,023 $
—
27
—
27
1,813
$
$
$
$
—
—
—
— $
— $
$
—
—
—
$
2,188
1,126
4,212
$
1,419
1,337
4,891
$
—
—
—
26
—
—
— $
— $
7,526 $
21,234 $
7,647
16,949
$
$
— $
4,395 $
26
2,829
64 $
85
$
17,915 $
18,800
$
54 $
128
$
2,656 $
1,540
— $
122
(2)
3
123 $
— $
64
—
64 $
—
$
— $
—
$
73
$
366
$
2,480
$
1,553
133
(5)
4
132
—
55
—
55
$
$
$
26,985
(800)
119
26,304 $
— $
8,372
17
8,389 $
29,906
(901)
136
29,141
$
—
$
10,321
20
10,341
$
—
—
—
73 $
—
$
19
—
19 $
—
—
—
366
—
238
—
238
$
$
$
—
—
176
2,656 $
2,175
$
—
—
2,175 $
—
—
1
1,554
742
12
—
754
$
$
$
$
$
$
$
$
$
(1) For unconsolidated home equity loan VIEs, the maximum loss exposure includes outstanding trust certificates issued by trusts in rapid amortization, net of recorded reserves. For both consolidated
and unconsolidated home equity loan VIEs, the maximum loss exposure excludes the reserve for representations and warranties obligations and corporate guarantees. For more information, see
Note 13 – Commitments and Contingencies.
(2) At December 31, 2019 and 2018, loans and leases in the consolidated credit card trust included $10.5 billion and $11.0 billion of seller’s interest.
(3) At December 31, 2019 and 2018, all other assets in the consolidated credit card trust included unbilled accrued interest and fees.
(4) The retained senior securities were valued using quoted market prices or observable market inputs (Level 2 of the fair value hierarchy).
(5) Total assets of VIEs includes loans the Corporation transferred with which it has continuing involvement, which may include servicing the loan.
Home Equity Loans
The Corporation retains interests, primarily senior securities, in
home equity securitization trusts to which it transferred home
equity loans. In addition, the Corporation may be obligated to
provide subordinate funding to the trusts during a rapid
amortization event. This obligation is included in the maximum
loss exposure in the table above. The charges that will ultimately
be recorded as a result of the rapid amortization events depend
on the undrawn portion of the home equity lines of credit (HELOCs),
performance of the loans, the amount of subsequent draws and
the timing of related cash flows.
Credit Card Securitizations
The Corporation securitizes originated and purchased credit card
loans. The Corporation’s continuing involvement with the
securitization trust includes servicing the receivables, retaining an
undivided interest (seller’s interest) in the receivables, and holding
certain retained interests including subordinate interests in
accrued interest and fees on the securitized receivables.
During 2019, 2018 and 2017, new senior debt securities
issued to third-party investors from the credit card securitization
trust were $1.3 billion, $4.0 billion and $3.1 billion, respectively.
At December 31, 2019 and 2018, the Corporation held
subordinate securities issued by the credit card securitization trust
with a notional principal amount of $7.4 billion and $7.7 billion.
These securities serve as a form of credit enhancement to the
senior debt securities and have a stated interest rate of zero
percent. During 2019, 2018 and 2017, the credit card
securitization trust issued $202 million, $650 million and $500
million, respectively, of these subordinate securities.
transfers securities, typically MBS,
Resecuritization Trusts
The Corporation
into
resecuritization VIEs at the request of customers seeking
securities with specific characteristics. Generally, there are no
significant ongoing activities performed in a resecuritization trust,
and no single investor has the unilateral ability to liquidate the
trust.
The Corporation resecuritized $24.4 billion, $22.8 billion and
$25.1 billion of securities during 2019, 2018 and 2017,
respectively. Securities transferred into resecuritization VIEs were
measured at fair value with changes in fair value recorded in market
making and similar activities prior to the resecuritization and,
accordingly, no gain or loss on sale was recorded. During 2019,
2018 and 2017, resecuritization proceeds included securities with
an initial fair value of $5.2 billion, $4.1 billion and $3.3 billion,
respectively. Substantially all of the other securities received as
resecuritization proceeds were classified as trading securities and
were categorized as Level 2 within the fair value hierarchy.
Municipal Bond Trusts
The Corporation administers municipal bond trusts that hold highly-
rated, long-term, fixed-rate municipal bonds. The trusts obtain
financing by issuing floating-rate trust certificates that reprice on
a weekly or other short-term basis to third-party investors.
The Corporation’s liquidity commitments to unconsolidated
municipal bond trusts, including those for which the Corporation
was transferor, totaled $3.7 billion and $2.1 billion at December
31, 2019 and 2018. The weighted-average remaining life of bonds
held in the trusts at December 31, 2019 was 10.0 years. There
were no significant write-downs or downgrades of assets or issuers
during 2019, 2018 and 2017.
144 144
Bank of America 2019
Bank of America 2019
Other Variable Interest Entities
The table below summarizes select information related to other VIEs in which the Corporation held a variable interest at December 31,
2019 and 2018.
Other VIEs
(Dollars in millions)
Maximum loss exposure
On-balance sheet assets
Trading account assets
Debt securities carried at fair value
Loans and leases
Allowance for loan and lease losses
All other assets
Total
On-balance sheet liabilities
Long-term debt
All other liabilities
Total
Total assets of VIEs
Consolidated
Unconsolidated
Total
Consolidated
Unconsolidated
Total
2019
2018
December 31
4,055 $
26,326 $
30,381 $
4,177 $
24,498 $
28,675
2,213 $
—
1,810
(2)
81
4,102 $
46 $
2
48 $
4,102 $
549 $
74
3,214
(38)
20,547
24,346 $
— $
5,087
5,087 $
98,491 $
2,762 $
74
5,024
(40)
20,628
28,448 $
46 $
5,089
5,135 $
102,593 $
2,335 $
—
1,949
(2)
53
4,335 $
152 $
7
159 $
4,335 $
860 $
84
3,940
(30)
18,885
23,739 $
— $
4,231
4,231 $
94,746 $
3,195
84
5,889
(32)
18,938
28,074
152
4,238
4,390
99,081
$
$
$
$
$
$
Customer VIEs
Customer VIEs include credit-linked, equity-linked and commodity-
linked note VIEs, repackaging VIEs and asset acquisition VIEs,
which are typically created on behalf of customers who wish to
obtain market or credit exposure to a specific company, index,
commodity or financial instrument.
The Corporation’s maximum loss exposure to consolidated and
unconsolidated customer VIEs totaled $2.2 billion and $2.1 billion
at December 31, 2019 and 2018, including the notional amount
of derivatives to which the Corporation is a counterparty, net of
losses previously recorded, and the Corporation’s investment, if
any, in securities issued by the VIEs.
Collateralized Debt Obligation VIEs
The Corporation receives fees for structuring CDO VIEs, which hold
diversified pools of fixed-income securities, typically corporate
debt or ABS, which the CDO VIEs fund by issuing multiple tranches
of debt and equity securities. CDOs are generally managed by third-
party portfolio managers. The Corporation typically transfers
assets to these CDOs, holds securities issued by the CDOs and
may be a derivative counterparty to the CDOs. The Corporation’s
maximum loss exposure to consolidated and unconsolidated
CDOs totaled $304 million and $421 million at December 31,
2019 and 2018.
Investment VIEs
The Corporation sponsors, invests in or provides financing, which
may be in connection with the sale of assets, to a variety of
investment VIEs that hold loans, real estate, debt securities or
other financial instruments and are designed to provide the desired
investment profile to investors or the Corporation. At December
31, 2019 and 2018, the Corporation’s consolidated investment
VIEs had total assets of $104 million and $270 million. The
Corporation also held investments in unconsolidated VIEs with
total assets of $32.4 billion and $37.7 billion at December 31,
2019 and 2018. The Corporation’s maximum loss exposure
associated with both consolidated and unconsolidated investment
VIEs totaled $6.4 billion and $7.2 billion at December 31, 2019
and 2018 comprised primarily of on-balance sheet assets less
non-recourse liabilities.
Leveraged Lease Trusts
The Corporation’s net investment in consolidated leveraged lease
trusts totaled $1.7 billion and $1.8 billion at December 31, 2019
and 2018. The trusts hold long-lived equipment such as rail cars,
power generation and distribution equipment, and commercial
aircraft. The Corporation structures the trusts and holds a
significant residual interest. The net investment represents the
Corporation’s maximum loss exposure to the trusts in the unlikely
event that the leveraged lease investments become worthless.
Debt issued by the leveraged lease trusts is non-recourse to the
Corporation.
Tax Credit VIEs
The Corporation holds investments in unconsolidated limited
partnerships and similar entities that construct, own and operate
affordable housing, wind and solar projects. An unrelated third
party is typically the general partner or managing member and has
control over the significant activities of the VIE. The Corporation
earns a return primarily through the receipt of tax credits allocated
to the projects. The maximum loss exposure included in the Other
VIEs table was $18.9 billion and $17.0 billion at December 31,
2019 and 2018. The Corporation’s risk of loss is generally
mitigated by policies requiring that the project qualify for the
expected tax credits prior to making its investment.
The Corporation’s
in affordable housing
investments
partnerships, which are reported in other assets on the
Consolidated Balance Sheet, totaled $10.0 billion and $8.9 billion,
including unfunded commitments to provide capital contributions
of $4.3 billion and $3.8 billion at December 31, 2019 and 2018.
The unfunded commitments are expected to be paid over the next
five years. During 2019, 2018 and 2017, the Corporation
recognized tax credits and other tax benefits from investments in
affordable housing partnerships of $1.0 billion, $981 million and
$1.0 billion and reported pretax losses in other income of $882
million, $798 million and $766 million, respectively. Tax credits
are recognized as part of the Corporation’s annual effective tax
rate used to determine tax expense in a given quarter. Accordingly,
the portion of a year’s expected tax benefits recognized in any
given quarter may differ from 25 percent. The Corporation may
from time to time be asked to invest additional amounts to support
a troubled affordable housing project. Such additional investments
have not been and are not expected to be significant.
Bank of America 2019 145
Bank of America 2019 145
NOTE 8 Goodwill and Intangible Assets
Goodwill
The table below presents goodwill balances by business segment
and All Other at December 31, 2019 and 2018. The reporting units
utilized for goodwill impairment testing are the operating segments
or one level below.
Goodwill
(Dollars in millions)
Consumer Banking
Global Wealth & Investment Management
Global Banking
Global Markets
All Other
Total goodwill
December 31
2019
2018
$
$
30,123 $
9,677
23,923
5,182
46
68,951 $
30,123
9,677
23,923
5,182
46
68,951
During 2019, the Corporation completed its annual goodwill
impairment test as of June 30, 2019 using qualitative
assessments for all applicable reporting units. Based on the
results of the annual goodwill impairment test, the Corporation
determined there was no impairment. For more information on the
use of qualitative assessments, see Note 1 – Summary of
Significant Accounting Principles.
Intangible Assets
At December 31, 2019 and 2018, the net carrying value of
intangible assets was $1.7 billion and $1.8 billion. At December
31, 2019 and 2018, intangible assets included $1.6 billion of
intangible assets associated with trade names, substantially all
of which had an indefinite life and, accordingly, are not being
amortized. Amortization of intangibles expense was $112 million,
$538 million and $621 million for 2019, 2018 and 2017,
respectively.
NOTE 9 Leases
The Corporation enters into both lessor and lessee arrangements.
For more information on lease accounting, see Note 1 – Summary
of Significant Accounting Principles, and on lease financing
receivables, see Note 5 – Outstanding Loans and Leases.
Lessor Arrangements
The Corporation’s lessor arrangements primarily consist of
operating, sales-type and direct financing leases for equipment.
Lease agreements may include options to renew and for the lessee
to purchase the leased equipment at the end of the lease term.
At December 31, 2019, the total net investment in sales-type
and direct financing leases was $21.9 billion, comprised of $19.3
billion in lease receivables and $2.6 billion in unguaranteed
residuals. In certain cases, the Corporation obtains third-party
residual value insurance to reduce its residual asset risk. The
carrying value of residual assets with third-party residual value
insurance for at least a portion of the asset value was $5.8 billion.
For 2019, total lease income was $1.7 billion, consisting of
$797 million from sales-type and direct financing leases and $891
million from operating leases.
Lessee Arrangements
The Corporation’s lessee arrangements predominantly consist of
operating leases for premises and equipment; the Corporation’s
146 146
Bank of America 2019
Bank of America 2019
financing leases are not significant. Right-of-use assets were $9.7
billion and lease liabilities were $10.1 billion at December 31,
2019. The weighted-average discount rate used to calculate the
present value of future minimum lease payments was four percent.
Lease terms may contain renewal and extension options and
early termination features. Generally, these options do not impact
the lease term because the Corporation is not reasonably certain
that it will exercise the options. The weighted-average lease term
was 8.2 years at December 31, 2019.
The table below provides the components of lease cost and
supplemental information for 2019.
Lease Cost and Supplemental Information for 2019
(Dollars in millions)
Operating lease cost
Variable lease cost (1)
Total lease cost (2)
Right-of-use assets obtained in exchange for new
operating lease liabilities (3)
$
$
$
2,085
498
2,583
931
Operating cash flows from operating leases (4)
(1) Primarily consists of payments for common area maintenance and property taxes.
(2) Amounts are recorded in occupancy and equipment expense in the Consolidated Statement
2,009
of Income.
(3) Represents non-cash activity and, accordingly, is not reflected in the Consolidated Statement
of Cash Flows.
(4) Represents cash paid for amounts included in the measurement of lease liabilities.
Maturity Analysis
The maturities of lessor and lessee arrangements outstanding at
December 31, 2019 are presented in the table below based on
undiscounted cash flows.
Maturities of Lessor and Lessee Arrangements
Operating
Leases
Lessor
Sales-type and
Direct Financing
Leases (2)
December 31, 2019
Lessee (1)
Operating
Leases
$
843 $
746
651
530
397
1,057
4,657 $
4,887
4,259
3,416
1,939
1,910
1,966
1,763
1,502
1,240
1,098
4,225
$
4,224
21,068
11,794
1,756
1,701
(Dollars in millions)
2020
2021
2022
2023
2024
Thereafter
Total undiscounted
cash flows
Less: Net present
value adjustment
Total (3)
10,093
(1) Excludes $1.5 billion in commitments under lessee arrangements that have not yet commenced
19,312 $
$
with lease terms that will begin in 2020.
(2) Includes $15.1 billion in commercial lease financing receivables and $4.2 billion in direct/
indirect consumer lease financing receivables.
(3) Represents lease receivables for lessor arrangements and lease liabilities for lessee
arrangements.
At December 31, 2018, operating lease commitments under
lessee arrangements were $2.4 billion, $2.2 billion, $2.0 billion,
$1.7 billion and $1.3 billion for 2019 through 2023, respectively,
and $6.2 billion in the aggregate for all years thereafter. These
amounts include variable lease payments and commitments under
leases that have not yet commenced, both of which are excluded
from the lessee maturity analysis presented in the table above.
NOTE 10 Deposits
The table below presents information about the Corporation’s time deposits of $100 thousand or more at December 31, 2019 and
2018. The Corporation also had aggregate time deposits of $15.8 billion and $16.4 billion in denominations that met or exceeded
the Federal Deposit Insurance Corporation (FDIC) insurance limit at December 31, 2019 and 2018.
Time Deposits of $100 Thousand or More
(Dollars in millions)
December 31, 2019
December 31
2018
Three Months
or Less
Over Three
Months to
Twelve Months
Thereafter
Total
Total
U.S. certificates of deposit and other time deposits
Non-U.S. certificates of deposit and other time deposits
$
16,115 $
21,351 $
7,108
4,821
2,273 $
1,105
39,739 $
13,034
29,505
10,792
The scheduled contractual maturities for total time deposits at December 31, 2019 are presented in the table below.
Contractual Maturities of Total Time Deposits
(Dollars in millions)
Due in 2020
Due in 2021
Due in 2022
Due in 2023
Due in 2024
Thereafter
Total time deposits
U.S.
Non-U.S.
Total
$
$
56,351 $
3,503
990
280
187
212
61,523 $
12,000 $
101
18
15
981
35
13,150 $
68,351
3,604
1,008
295
1,168
247
74,673
NOTE 11 Federal Funds Sold or Purchased, Securities Financing Agreements, Short-term Borrowings
and Restricted Cash
The table below presents federal funds sold or purchased, securities financing agreements (which include securities borrowed or
purchased under agreements to resell and securities loaned or sold under agreements to repurchase) and short-term borrowings. The
Corporation elects to account for certain securities financing agreements and short-term borrowings under the fair value option. For
more information on the fair value option, see Note 22 – Fair Value Option.
(Dollars in millions)
Federal funds sold and securities borrowed or purchased under agreements to resell
Average during year
Maximum month-end balance during year
Federal funds purchased and securities loaned or sold under agreements to repurchase
Average during year
Maximum month-end balance during year
Short-term borrowings
Average during year
Maximum month-end balance during year
n/a = not applicable
Amount
Rate
Amount
Rate
2019
2018
$
$
279,610
281,684
201,797
203,063
24,301
36,538
$
$
1.73%
n/a
2.31%
n/a
2.42
n/a
251,328
279,350
193,681
201,089
36,021
52,480
1.26%
n/a
1.80%
n/a
2.69
n/a
Bank of America, N.A. maintains a global program to offer up
to a maximum of $75 billion outstanding at any one time, of bank
notes with fixed or floating rates and maturities of at least seven
days from the date of issue. Short-term bank notes outstanding
under this program totaled $11.7 billion and $12.1 billion at
December 31, 2019 and 2018. These short-term bank notes,
along with Federal Home Loan Bank advances, U.S. Treasury tax
and loan notes, and term federal funds purchased, are included
in short-term borrowings on the Consolidated Balance Sheet.
Offsetting of Securities Financing Agreements
The Corporation enters into securities financing agreements to
accommodate customers (also referred to as “matched-book
transactions”), obtain securities to cover short positions and
finance inventory positions. Substantially all of the Corporation’s
securities financing activities are transacted under legally
enforceable master repurchase agreements or legally enforceable
master securities lending agreements that give the Corporation,
in the event of default by the counterparty, the right to liquidate
securities held and to offset receivables and payables with the
same counterparty. The Corporation offsets securities financing
transactions with the same counterparty on the Consolidated
Balance Sheet where it has such a legally enforceable master
netting agreement and the transactions have the same maturity
date.
The Securities Financing Agreements table presents securities
financing agreements included on the Consolidated Balance Sheet
in federal funds sold and securities borrowed or purchased under
agreements to resell, and in federal funds purchased and
securities loaned or sold under agreements to repurchase at
December 31, 2019 and 2018. Balances are presented on a gross
basis, prior to the application of counterparty netting. Gross assets
and liabilities are adjusted on an aggregate basis to take into
consideration the effects of legally enforceable master netting
agreements. For more information on the offsetting of derivatives,
see Note 3 – Derivatives.
Bank of America 2019 147
Bank of America 2019 147
Securities Financing Agreements
Gross Assets/
Liabilities (1)
Amounts Offset
Net Balance
Sheet Amount
Financial
Instruments (2)
Net Assets/
Liabilities
(Dollars in millions)
Securities borrowed or purchased under agreements to resell (3)
Securities loaned or sold under agreements to repurchase
Other (4)
Total
434,257 $
$
324,769
15,346
D
(159,660)
(159,660)
—
ecember 31, 2019
$
$
274,597 $
$
165,109
15,346
340,115 $
(159,660) $
180,455 $
$
$
$
December 31, 2018
Securities borrowed or purchased under agreements to resell (3)
Securities loaned or sold under agreements to repurchase
Other (4)
Total
Includes activity where uncertainty exists as to the enforceability of certain master netting agreements under bankruptcy laws in some countries or industries.
366,274 $
$
293,853
19,906
(106,865) $
(106,865) $
259,409 $
186,988 $
(106,865) $
206,894 $
313,759 $
19,906
$
$
—
$
(1)
(244,486) $
(141,482)
$
(15,346)
(156,828) $
(240,790) $
(176,740) $
(19,906)
(196,646) $
30,111
23,627
—
23,627
18,619
10,248
—
10,248
(2) Includes securities collateral received or pledged under repurchase or securities lending agreements where there is a legally enforceable master netting agreement. These amounts are not offset
on the Consolidated Balance Sheet, but are shown as a reduction to derive a net asset or liability. Securities collateral received or pledged where the legal enforceability of the master netting
agreements is uncertain is excluded from the table.
(3) Excludes repurchase activity of $12.9 billion and $11.5 billion reported in loans and leases on the Consolidated Balance Sheet at December 31, 2019 and 2018.
(4) Balance is reported in accrued expenses and other liabilities on the Consolidated Balance Sheet and relates to transactions where the Corporation acts as the lender in a securities lending agreement
and receives securities that can be pledged as collateral or sold. In these transactions, the Corporation recognizes an asset at fair value, representing the securities received, and a liability, representing
the obligation to return those securities.
Repurchase Agreements and Securities Loaned
Transactions Accounted for as Secured Borrowings
The following tables present securities sold under agreements to
repurchase and securities loaned by remaining contractual term
to maturity and class of collateral pledged. Included in “Other” are
transactions where the Corporation acts as the lender in a
securities lending agreement and receives securities that can be
pledged as collateral or sold. Certain agreements contain a right
to substitute collateral and/or terminate the agreement prior to
maturity at the option of the Corporation or the counterparty. Such
agreements are included in the table below based on the remaining
contractual term to maturity.
Remaining Contractual Maturity
(Dollars in millions)
Securities sold under agreements to repurchase
Securities loaned
Other
Total
Securities sold under agreements to repurchase
Securities loaned
Other
Total
(1) No agreements have maturities greater than three years.
Class of Collateral Pledged
(Dollars in millions)
U.S. government and agency securities
Corporate securities, trading loans and other
Equity securities
Non-U.S. sovereign debt
Mortgage trading loans and ABS
Total
U.S. government and agency securities
Corporate securities, trading loans and other
Equity securities
Non-U.S. sovereign debt
Mortgage trading loans and ABS
Total
Overnight and
Continuous
30 Days or Less
After 30 Days
Through 90 Days
Greater than
90 Days (1)
Total
$
$
$
$
129,455
18,766
15,346
163,567
139,017
7,753
19,906
166,676
$
$
$
$
December 31, 2019
122,685 $
3,329
—
126,014 $
25,322 $
1,241
—
26,563 $
December 31, 2018
81,917 $
4,197
—
86,114 $
34,204 $
1,783
—
35,987 $
21,922
2,049
—
23,971
21,476
3,506
—
24,982
$
$
$
$
299,384
25,385
15,346
340,115
276,614
17,239
19,906
313,759
Securities Sold
Under Agreements
to Repurchase
Securities
Loaned
Other
Total
$
$
$
$
173,533 $
10,467
14,933
96,576
3,875
299,384 $
164,664 $
11,400
14,090
81,329
5,131
276,614 $
December 31, 2019
1 $
2,014
20,026
3,344
—
25,385 $
December 31, 2018
— $
2,163
10,869
4,207
—
17,239 $
— $
258
15,024
64
—
15,346 $
— $
287
19,572
47
—
19,906 $
173,534
12,739
49,983
99,984
3,875
340,115
164,664
13,850
44,531
85,583
5,131
313,759
148 148
Bank of America 2019
Bank of America 2019
Under repurchase agreements, the Corporation is required to
post collateral with a market value equal to or in excess of the
principal amount borrowed. For securities loaned transactions, the
Corporation receives collateral in the form of cash, letters of credit
or other securities. To determine whether the market value of the
underlying collateral remains sufficient, collateral is generally
valued daily, and the Corporation may be required to deposit
additional collateral or may receive or return collateral pledged
when appropriate. Repurchase agreements and securities loaned
transactions are generally either overnight, continuous (i.e., no
stated term) or short-term. The Corporation manages liquidity risks
related to these agreements by sourcing funding from a diverse
group of counterparties, providing a range of securities collateral
and pursuing longer durations, when appropriate.
Restricted Cash
At December 31, 2019 and 2018, the Corporation held restricted
cash included within cash and cash equivalents on the
Consolidated Balance Sheet of $24.4 billion and $22.6 billion,
predominantly related to cash held on deposit with the Federal
Reserve Bank and non-U.S. central banks to meet reserve
requirements and cash segregated in compliance with securities
regulations.
NOTE 12 Long-term Debt
Long-term debt consists of borrowings having an original maturity of one year or more. The table below presents the balance of long-
term debt at December 31, 2019 and 2018, and the related contractual rates and maturity dates as of December 31, 2019.
(Dollars in millions)
Notes issued by Bank of America Corporation (1)
Senior notes:
Fixed
Floating
Senior structured notes
Subordinated notes:
Fixed
Floating
Junior subordinated notes:
Fixed
Floating (2)
Total notes issued by Bank of America Corporation
Notes issued by Bank of America, N.A.
Senior notes:
Fixed
Floating
Subordinated notes
Advances from Federal Home Loan Banks:
Fixed
Floating
Securitizations and other BANA VIEs (3)
Other
Total notes issued by Bank of America, N.A.
Other debt
Structured liabilities
Nonbank VIEs (3)
Total other debt
Total long-term debt
Weighted-
average Rate
Interest Rates
Maturity Dates
2019
2018
December
31
3.30 %
1.81
0.25 - 8.05 %
0.25 - 6.68
2020 - 2050 $
2020 - 2044
4.89
2.74
6.71
2.71
3.34
2.18
6.00
4.98
1.79
2.94 - 8.57
2.56 - 2.89
6.45 - 8.05
2.71
2021 - 2045
2022 - 2026
2027 - 2066
2056
3.34
1.99 - 2.51
6.00
2023
2020 - 2041
2036
0.01 - 7.72
1.77 - 1.84
2020 - 2034
2020
140,265 $
19,552
16,941
21,632
782
736
1
199,909
508
6,519
1,744
112
2,500
8,373
402
20,158
20,442
347
20,789
$
240,856 $
120,548
25,574
13,815
20,843
1,742
732
1
183,255
—
1,770
1,617
130
14,751
10,326
442
29,036
16,483
618
17,101
229,392
(1)
(2)
Includes total loss-absorbing capacity compliant debt.
Includes amounts related to trust preferred securities. For more information, see Trust Preferred Securities in this Note.
(3) Represents liabilities of consolidated VIEs included in total long-term debt on the Consolidated Balance Sheet.
During 2019, the Corporation issued $52.5 billion of long-term
debt consisting of $29.3 billion of notes issued by Bank of America
Corporation, $10.9 billion of notes issued by Bank of America,
N.A. and $12.3 billion of other debt, substantially all of which was
structured liabilities. During 2018, the Corporation issued $64.4
billion of long-term debt consisting of $30.7 billion of notes issued
by Bank of America Corporation, $18.7 billion of notes issued by
Bank of America, N.A. and $15.0 billion of other debt, substantially
all of which was structured liabilities.
During 2019, the Corporation had total long-term debt
maturities and redemptions in the aggregate of $50.6 billion
consisting of $21.1 billion for Bank of America Corporation, $19.9
billion for Bank of America, N.A. and $9.6 billion of other debt.
During 2018, the Corporation had total long-term debt maturities
and redemptions in the aggregate of $53.3 billion consisting of
$29.8 billion for Bank of America Corporation, $11.2 billion for
Bank of America, N.A. and $12.3 billion of other debt.
Bank of America Corporation and Bank of America, N.A.
maintain various U.S. and non-U.S. debt programs to offer both
senior and subordinated notes. The notes may be denominated
in U.S. dollars or foreign currencies. At December 31, 2019 and
2018, the amount of foreign currency-denominated debt translated
into U.S. dollars included in total long-term debt was $49.6 billion
and $48.6 billion. Foreign currency contracts may be used to
convert certain foreign currency-denominated debt into U.S.
dollars.
At December 31, 2019, long-term debt of consolidated VIEs in
the table above included debt from credit card, residential
mortgage, home equity, other VIEs and ABS of $8.4 billion, $217
million, $64 million, $46 million and $19 million, respectively.
Long-term debt of VIEs is collateralized by the assets of the VIEs.
For more information, see Note 7 – Securitizations and Other
Variable Interest Entities.
Bank of America 2019 149
Bank of America 2019 149
The weighted-average effective interest rates for total long-term
debt (excluding senior structured notes), total fixed-rate debt and
total floating-rate debt were 3.26 percent, 3.55 percent and 1.92
percent, respectively, at December 31, 2019, and 3.29 percent,
3.66 percent and 2.26 percent, respectively, at December 31,
2018. The Corporation’s ALM activities maintain 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. The Corporation’s goal is to
manage interest rate sensitivity so that movements in interest
rates do not significantly adversely affect earnings and capital.
The weighted-average rates are the contractual interest rates on
the debt and do not reflect the impacts of derivative transactions.
Debt outstanding of $5.7 billion at December 31, 2019 was
issued by BofA Finance LLC, a 100 percent owned finance
subsidiary of Bank of America Corporation, the parent company,
and is fully and unconditionally guaranteed by the parent company.
The table below shows the carrying value for aggregate annual
contractual maturities of long-term debt as of December 31, 2019.
Included in the table are certain structured notes issued by the
Corporation that contain provisions whereby the borrowings are
redeemable at the option of the holder (put options) at specified
dates prior to maturity. Other structured notes have coupon or
repayment terms linked to the performance of debt or equity
securities, indices, currencies or commodities, and the maturity
may be accelerated based on the value of a referenced index or
security. In both cases, the Corporation or a subsidiary may be
required to settle the obligation for cash or other securities prior
to the contractual maturity date. These borrowings are reflected
in the table as maturing at their contractual maturity date.
Long-term Debt by Maturity
(Dollars in millions)
Bank of America Corporation
Senior notes
Senior structured notes
Subordinated notes
Junior subordinated notes (1)
Total Bank of America Corporation
Bank of America, N.A.
Senior notes
Subordinated notes
Advances from Federal Home Loan Banks
Securitizations and other Bank VIEs (2)
Other
Total Bank of America, N.A.
Other debt
Structured liabilities
Nonbank VIEs (2)
Total other debt
Total long-term debt
2020
2021
2022
2023
2024
Thereafter
Total
$
9,312 $
822
—
—
10,134
3,000
—
2,509
3,099
134
8,742
15,978 $
453
360
—
16,791
3,499
—
2
4,080
55
7,636
14,875 $
2,232
386
—
17,493
—
—
3
1,185
—
1,188
23,045 $
288
—
—
23,333
17,236 $
547
3,213
—
20,996
79,371 $ 159,817
16,941
12,599
22,414
18,455
737
737
199,909
111,162
509
—
1
9
130
649
—
—
—
—
—
—
19
1,744
97
—
83
1,943
7,027
1,744
2,612
8,373
402
20,158
5,275
—
5,275
24,151 $
1,884
—
1,884
26,311 $
1,057
—
1,057
19,738 $
1,372
1
1,373
25,355 $
745
—
745
20,442
10,109
347
346
20,789
10,455
21,741 $ 123,560 $ 240,856
$
(1)
Includes amounts related to trust preferred securities. For more information, see Trust Preferred Securities in this Note.
(2) Represents liabilities of consolidated VIEs included in total long-term debt on the Consolidated Balance Sheet.
Trust Preferred Securities
At December 31, 2019, trust preferred securities (Trust Securities)
with a carrying value of $1 million, issued by BAC Capital Trust XV
(the Trust), a 100 percent owned, non-consolidated finance
subsidiary of the Corporation, were issued and outstanding. The
Trust Securities are mandatorily redeemable preferred security
obligations of the Trust. The sole asset of the Trust is a junior
subordinated deferrable interest note of the Corporation (the
Note).
Periodic cash payments and payments upon liquidation or
redemption with respect to Trust Securities are guaranteed by the
Corporation to the extent of funds held by the Trust (the Preferred
Securities Guarantee). The Preferred Securities Guarantee, when
taken together with the Corporation’s other obligations including
its obligations under the Note, generally will constitute a full and
unconditional guarantee, on a subordinated basis, by the
Corporation of payments due on the Trust Securities.
NOTE 13 Commitments and Contingencies
In the normal course of business, the Corporation enters into a
number of off-balance sheet commitments. These commitments
expose the Corporation to varying degrees of credit and market
risk and are subject to the same credit and market risk limitation
reviews as those instruments recorded on the Consolidated
Balance Sheet.
Credit Extension Commitments
The Corporation enters into commitments to extend credit such
as loan commitments, SBLCs and commercial letters of credit to
meet the financing needs of its customers. The following table
includes the notional amount of unfunded legally binding lending
commitments net of amounts distributed (i.e., syndicated or
participated) to other financial institutions. The distributed
amounts were $10.6 billion and $10.7 billion at December 31,
2019 and 2018. At December 31, 2019, the carrying value of
these commitments, excluding commitments accounted for under
the fair value option, was $829 million, including deferred revenue
of $16 million and a reserve for unfunded lending commitments
of $813 million. At December 31, 2018, the comparable amounts
were $813 million, $16 million and $797 million, respectively. The
carrying value of these commitments is classified in accrued
expenses and other liabilities on the Consolidated Balance Sheet.
Legally binding commitments to extend credit generally have
specified rates and maturities. Certain of these commitments have
adverse change clauses that help to protect the Corporation
against deterioration in the borrower’s ability to pay.
150 150
Bank of America 2019
Bank of America 2019
The table below includes the notional amount of commitments which is classified in accrued expenses and other liabilities. For
of $4.4 billion and $3.1 billion at December 31, 2019 and 2018 more information regarding the Corporation’s loan commitments
accounted for under the fair value option, see Note 22 – Fair Value
that are accounted for under the fair value option. However, the
table excludes cumulative net fair value of $90 million and $169
Option.
million at December 31, 2019 and 2018 on these commitments,
Credit Extension Commitments
Expire in One
Year or Less
Expire After One
Year Through
Three Years
Expire After Three
Years Through
Five Years
Expire After
Five Years
Total
(Dollars in millions)
Notional amount of credit extension commitments
Loan commitments (1)
Home equity lines of credit
Standby letters of credit and financial guarantees (2)
Letters of credit (3)
Legally binding commitments
Credit card lines (4)
Total credit extension commitments
Notional amount of credit extension commitments
Loan commitments (1)
Home equity lines of credit
Standby letters of credit and financial guarantees (2)
Letters of credit (3)
Legally binding commitments
Credit card lines (4)
Total credit extension commitments
$
$
$
$
97,454 $
1,137
21,311
1,156
121,058
376,067
497,125 $
84,910 $
2,578
22,571
1,168
111,227
371,658
482,885 $
December 31, 2019
148,000 $
1,948
11,512
254
161,714
—
161,714 $
173,699 $
6,351
3,712
65
183,827
—
183,827 $
December 31, 2018
142,271 $
2,249
9,702
84
154,306
—
154,306 $
155,298 $
3,530
2,457
69
161,354
—
161,354 $
24,487 $
34,134
408
25
59,054
—
59,054 $
22,683 $
34,702
1,074
57
58,516
—
58,516 $
443,640
43,570
36,943
1,500
525,653
376,067
901,720
405,162
43,059
35,804
1,378
485,403
371,658
857,061
(1) At December 31, 2019 and 2018, $5.1 billion and $4.3 billion of these loan commitments are held in the form of a security.
(2) The notional amounts of SBLCs and financial guarantees classified as investment grade and non-investment grade based on the credit quality of the underlying reference name within the instrument
were $27.9 billion and $8.6 billion at December 31, 2019, and $28.3 billion and $7.1 billion at December 31, 2018. Amounts in the table include consumer SBLCs of $413 million and $372 million
at December 31, 2019 and 2018.
(3) At December 31, 2019 and 2018, included are letters of credit of $1.4 billion and $422 million related to certain liquidity commitments of VIEs. For more information, see Note 7 – Securitizations
and Other Variable Interest Entities.
Includes business card unused lines of credit.
(4)
Other Commitments
At December 31, 2019 and 2018, the Corporation had
commitments to purchase loans (e.g., residential mortgage and
commercial real estate) of $86 million and $329 million, which
upon settlement will be included in loans or LHFS, and
commitments to purchase commercial loans of $1.1 billion and
$463 million, which upon settlement will be included in trading
account assets.
At December 31, 2019 and 2018, the Corporation had
commitments to purchase commodities, primarily liquefied natural
gas, of $830 million and $1.3 billion, which upon settlement will
be included in trading account assets.
At December 31, 2019 and 2018, the Corporation had
commitments to enter into resale and forward-dated resale and
securities borrowing agreements of $97.2 billion and $59.7 billion,
and commitments to enter into forward-dated repurchase and
securities lending agreements of $24.9 billion and $21.2 billion.
These commitments expire primarily within the next 12 months.
At December 31, 2019 and 2018, the Corporation had a
commitment to originate or purchase up to $3.3 billion and $3.0
billion on a rolling 12-month basis, of auto loans and leases from
a strategic partner. This commitment extends through November
2022 and can be terminated with 12 months prior notice.
Other Guarantees
$9.8 billion. At December 31, 2019 and 2018, the Corporation’s
maximum exposure related to these guarantees totaled $1.1
billion and $1.5 billion, with estimated maturity dates between
2033 and 2039.
Indemnifications
In the ordinary course of business, the Corporation enters into
various agreements that contain indemnifications, such as tax
indemnifications, whereupon payment may become due if certain
external events occur, such as a change in tax law. The
indemnification clauses are often standard contractual terms and
were entered into in the normal course of business based on an
assessment that the risk of loss would be remote. These
agreements typically contain an early termination clause that
permits the Corporation to exit the agreement upon these events.
The maximum potential future payment under indemnification
agreements is difficult to assess for several reasons, including
the occurrence of an external event, the inability to predict future
changes in tax and other laws, the difficulty in determining how
such laws would apply to parties in contracts, the absence of
exposure limits contained in standard contract language and the
timing of any early termination clauses. Historically, any payments
made under these guarantees have been de minimis. The
Corporation has assessed the probability of making such
payments in the future as remote.
Bank-owned Life Insurance Book Value Protection
The Corporation sells products that offer book value protection to
insurance carriers who offer group life insurance policies to
corporations, primarily banks. At December 31, 2019 and 2018,
the notional amount of these guarantees totaled $7.3 billion and
Merchant Services
In accordance with credit and debit card association rules, the
Corporation sponsors merchant processing servicers that process
credit and debit card transactions on behalf of various merchants.
If a merchant processor fails to meet its obligation regarding
Bank of America 2019 151
Bank of America 2019 151
disputed transactions, then the Corporation could be held liable.
In 2019 and 2018, the sponsored entities processed $916.6
billion and $874.3 billion of transactions and recorded losses of
$24 million and $31 million.
At December 31, 2019 and 2018, the maximum potential
exposure for sponsored transactions totaled $384.2 billion and
$348.1 billion. However, the Corporation believes that the
maximum potential exposure is not representative of the actual
potential loss exposure and does not expect to make material
payments in connection with these guarantees.
A significant portion of the Corporation's merchant processing
activity is performed by a joint venture, formed in 2009, in which
the Corporation holds a 49 percent ownership interest. The
carrying value of the Corporation’s investment was $640 million
and $2.8 billion at December 31, 2019 and 2018. The joint venture
is accounted for as an equity method investment and reported in
All Other. On July 29, 2019, the Corporation gave notice to the
joint venture partner of the termination of the joint venture upon
the conclusion of its current term in June 2020. As a result, the
Corporation incurred a non-cash, pretax impairment charge in
2019 of $2.1 billion, included in other general operating expense.
Exchange and Clearing House Member Guarantees
The Corporation is a member of various securities and derivative
exchanges and clearinghouses, both in the U.S. and other
countries. As a member, the Corporation may be required to pay
a pro-rata share of the losses incurred by some of these
organizations as a result of another member default and under
other loss scenarios. The Corporation’s potential obligations may
be limited to its membership interests in such exchanges and
clearinghouses, to the amount (or multiple) of the Corporation’s
contribution to the guarantee fund or, in limited instances, to the
full pro-rata share of the residual losses after applying the
guarantee fund. The Corporation’s maximum potential exposure
under these membership agreements is difficult to estimate;
however, the Corporation has assessed the probability of making
any such payments as remote.
Prime Brokerage and Securities Clearing Services
In connection with its prime brokerage and clearing businesses,
the Corporation performs securities clearance and settlement
services with other brokerage firms and clearinghouses on behalf
of its clients. Under these arrangements, the Corporation stands
ready to meet the obligations of its clients with respect to securities
transactions. The Corporation’s obligations in this respect are
secured by the assets in the clients’ accounts and the accounts
of their customers as well as by any proceeds received from the
transactions cleared and settled by the Corporation on behalf of
clients or their customers. The Corporation’s maximum potential
exposure under these arrangements is difficult to estimate;
however, the potential for the Corporation to incur material losses
pursuant to these arrangements is remote.
Other Guarantees
The Corporation has entered into additional guarantee agreements
and commitments, including sold risk participation swaps, liquidity
facilities,
lease-end obligation agreements, partial credit
guarantees on certain leases, real estate joint venture guarantees,
divested business commitments and sold put options that require
gross settlement. The maximum potential future payments under
these agreements are approximately $8.7 billion and $5.9 billion
at December 31, 2019 and 2018. The estimated maturity dates
of these obligations extend up to 2049. The Corporation has made
no material payments under these guarantees. For more
information on maximum potential future payments under VIE-
related liquidity commitments, see Note 7 – Securitizations and
Other Variable Interest Entities.
During 2019, the Corporation recognized a loss of $210 million
in other income under its indemnity obligation in connection with
the 2017 sale of its non-U.S. consumer credit card business
(payment protection insurance).
In the normal course of business, the Corporation periodically
guarantees the obligations of its affiliates in a variety of
transactions including ISDA-related transactions and non-ISDA
related transactions such as commodities trading, repurchase
agreements, prime brokerage agreements and other transactions.
Guarantees of Certain Long-term Debt
The Corporation, as the parent company, fully and unconditionally
guarantees the securities issued by BofA Finance LLC, a 100
percent owned finance subsidiary of the Corporation, and
effectively provides for the full and unconditional guarantee of trust
securities issued by certain statutory trust companies that are
100 percent owned finance subsidiaries of the Corporation.
Representations and Warranties Obligations and
Corporate Guarantees
The Corporation securitizes first-lien residential mortgage loans
generally in the form of RMBS guaranteed by the GSEs or by GNMA
in the case of FHA-insured, VA-guaranteed and Rural Housing
Service-guaranteed mortgage loans, and sells pools of first-lien
residential mortgage loans in the form of whole 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, the Corporation or certain of
its subsidiaries or legacy companies make and have made various
representations
these
representations and warranties have resulted in and may continue
to result in the requirement to repurchase mortgage loans or to
otherwise make whole or provide indemnification or other remedies
to sponsors, investors, securitization trusts, guarantors, insurers
or other parties (collectively, repurchases).
and warranties. Breaches
of
Unresolved Repurchase Claims
Unresolved representations and warranties repurchase claims
represent the notional amount of repurchase claims made by
counterparties, typically the outstanding principal balance or the
unpaid principal balance at the time of default. In the case of first-
lien mortgages, the claim amount is often significantly greater than
the expected loss amount due to the benefit of collateral and, in
some cases, mortgage insurance or mortgage guarantee
payments.
The notional amount of unresolved repurchase claims at
December 31, 2019 and 2018 was $10.7 billion and $14.4 billion.
These balances included $3.7 billion and $6.2 billion at December
31, 2019 and 2018 of claims related to loans in specific private-
label securitization groups or tranches where the Corporation owns
substantially all of the outstanding securities or will otherwise
realize the benefit of any repurchase claims paid. The balance for
2019 also includes $1.6 billion of repurchase claims related to a
single monoline insurer and is the subject of litigation.
During 2019, the Corporation received $461 million in new
repurchase claims that were not time-barred. During 2019, $4.2
billion in claims were resolved, including $2.1 billion of claims that
were deemed time-barred.
152 152
Bank of America 2019
Bank of America 2019
Reserve and Related Provision
The reserve for representations and warranties obligations and
corporate guarantees was $1.8 billion and $2.0 billion at
December 31, 2019 and 2018 and is included in accrued
expenses and other liabilities on the Consolidated Balance Sheet
and the related provision is included in other income in the
Consolidated Statement of Income. The representations and
warranties reserve represents the Corporation’s best estimate of
probable incurred losses, is based on our experience in previous
negotiations, and is subject to judgment, a variety of assumptions,
and known or unknown uncertainties. Future representations and
warranties losses may occur in excess of the amounts recorded
for these exposures; however, the Corporation does not expect
such amounts to be material to the Corporation's financial
condition and liquidity. See Litigation and Regulatory Matters in
this Note below for the Corporation's combined range of possible
loss in excess of the reserve for representations and warranties,
and the accrued liability for litigation.
Litigation and Regulatory Matters
In the ordinary course of business, the Corporation and its
subsidiaries are routinely defendants in or parties to many pending
and threatened legal, regulatory and governmental actions and
proceedings. In view of the inherent difficulty of predicting the
outcome of such matters, particularly where the claimants seek
very large or indeterminate damages or where the matters present
novel legal theories or involve a large number of parties, the
Corporation generally cannot predict the eventual outcome of the
pending matters, timing of the ultimate resolution of these matters,
or eventual loss, fines or penalties related to each pending matter.
In accordance with applicable accounting guidance, the
Corporation establishes an accrued liability when those matters
present loss contingencies that are both probable and estimable.
In such cases, there may be an exposure to loss in excess of any
amounts accrued. As a matter develops, the Corporation, in
conjunction with any outside counsel handling the matter,
evaluates on an ongoing basis whether such matter presents a
loss contingency that is probable and estimable. Once the loss
contingency is deemed to be both probable and estimable, the
Corporation will establish an accrued liability and record a
litigation-related expense. The
corresponding amount of
Corporation continues to monitor the matter
further
developments that could affect the amount of the accrued liability
that has been previously established. Excluding expenses of
internal and external legal service providers, litigation-related
expense of $681 million and $469 million was recognized in 2019
and 2018.
for
For a limited number of the matters disclosed in this Note for
which a loss, whether in excess of a related accrued liability or
where there is no accrued liability, is reasonably possible in future
periods, the Corporation is able to estimate a range of possible
loss. In determining whether it is possible to estimate a range of
possible loss, the Corporation reviews and evaluates its matters
on an ongoing basis, in conjunction with any outside counsel
handling the matter, in light of potentially relevant factual and legal
developments. With respect to the matters disclosed in this Note,
in cases in which the Corporation possesses sufficient appropriate
information to estimate a range of possible loss, that estimate is
aggregated and disclosed below. There may be other disclosed
matters for which a loss is probable or reasonably possible but
such an estimate of the range of possible loss may not be possible.
For such matters disclosed in this Note, where an estimate of the
range of possible loss is possible, as well as for representations
and warranties exposures, management currently estimates the
aggregate range of reasonably possible loss for these exposures
is $0 to $1.6 billion in excess of the accrued liability, if any.
The estimated range of possible loss, as well as the
Corporation's accrued liability, is based upon currently available
information and is subject to significant judgment, a variety of
assumptions and known and unknown uncertainties. The matters
underlying the estimated range of possible loss and liability accrual
are unpredictable and will change from time to time, and actual
losses may vary significantly from the current estimate and
accrual. The estimated range of possible loss does not represent
the Corporation’s maximum loss exposure.
taking
into account accrued
Information is provided below regarding the nature of the
litigation and associated claimed damages. Based on current
knowledge, and
liabilities,
management does not believe that loss contingencies arising from
pending matters, including the matters described herein, will have
a material adverse effect on the consolidated financial condition
or liquidity of the Corporation. However, in light of the significant
judgment, variety of assumptions and uncertainties involved in
these matters, some of which are beyond the Corporation’s control,
and the very large or indeterminate damages sought in some of
these matters, an adverse outcome in one or more of these
matters could be material to the Corporation’s business or results
of operations for any particular reporting period, or cause
significant reputational harm.
Ambac Bond Insurance Litigation
Ambac Assurance Corporation and the Segregated Account of
Ambac Assurance Corporation (together, Ambac) have filed four
separate lawsuits against the Corporation and its subsidiaries
relating to bond insurance policies Ambac provided on certain
securitized pools of HELOCs, first-lien subprime home equity loans,
fixed-rate second-lien mortgage loans and negative amortization
pay option adjustable-rate mortgage loans. Ambac alleges that
they have paid or will pay claims as a result of defaults in the
underlying loans and asserts that the defendants misrepresented
the characteristics of the underlying loans and/or breached certain
contractual
the
underwriting and servicing of the loans. In those actions where
the Corporation is named as a defendant, Ambac contends the
Corporation is liable on various successor and vicarious liability
theories. These actions are at various procedural stages with
material developments provided below.
representations and warranties
regarding
Ambac v. Countrywide I
The Corporation, Countrywide and other Countrywide entities are
named as defendants in an action filed on September 28, 2010
in New York Supreme Court. Ambac asserts claims for fraudulent
inducement as well as breach of contract and seeks damages in
excess of $2.2 billion, plus punitive damages.
judgment
rulings. Ambac appealed
On May 16, 2017, the First Department issued its decisions
on the parties’ cross-appeals of the trial court’s October 22, 2015
the First
summary
Department’s rulings requiring Ambac to prove all of the elements
of its fraudulent inducement claim, including justifiable reliance
and loss causation; restricting Ambac’s sole remedy for its breach
of contract claims to the repurchase protocol of cure, repurchase
or substitution of any materially defective loan; and dismissing
Ambac’s claim for reimbursements of attorneys’ fees. On June 27,
2018, the New York Court of Appeals affirmed the First Department
rulings that Ambac appealed.
Bank of America 2019 153
Bank of America 2019 153
Ambac v. Countrywide II
On December 30, 2014, Ambac filed a complaint in New York
Supreme Court against the same defendants, claiming fraudulent
inducement against Countrywide, and successor and vicarious
liability against the Corporation. Ambac seeks damages in excess
of $600 million, plus punitive damages. On December 19, 2016,
the Court granted in part and denied in part Countrywide’s motion
to dismiss the complaint.
Ambac v. Countrywide IV
On July 21, 2015, Ambac filed an action in New York Supreme
Court against Countrywide asserting the same claims for
fraudulent inducement that Ambac asserted in the now-dismissed
Ambac v. Countrywide III. The complaint seeks damages in excess
of $350 million, plus punitive damages.
Ambac v. First Franklin
On April 16, 2012, Ambac filed an action against BANA, First
Franklin and various Merrill Lynch entities, including Merrill Lynch,
Pierce, Fenner & Smith Incorporated, in New York Supreme Court
relating to guaranty insurance Ambac provided on a First Franklin
securitization sponsored by Merrill Lynch. The complaint alleges
fraudulent inducement and breach of contract, including breach of
contract claims against BANA based upon its servicing of the loans
in the securitization. Ambac seeks as damages hundreds of
millions of dollars that Ambac alleges it has paid or will pay in
claims.
Deposit Insurance Assessment
On January 9, 2017, the FDIC filed suit against BANA in the U.S.
District Court for the District of Columbia alleging failure to pay a
December 15, 2016 invoice for additional deposit insurance
assessments and interest in the amount of $542 million for the
quarters ending June 30, 2013 through December 31, 2014. On
April 7, 2017, the FDIC amended its complaint to add a claim for
additional deposit insurance and interest in the amount of $583
million for the quarters ending March 31, 2012 through March 31,
2013. The FDIC asserts these claims based on BANA’s alleged
underreporting of counterparty exposures that resulted in
underpayment of assessments for those quarters and its
Enforcement Section is also conducting a parallel investigation
related to the same alleged reporting error. BANA disagrees with
the FDIC’s interpretation of the regulations as they existed during
the relevant time period and is defending itself against the FDIC’s
claims. Pending final resolution, BANA has pledged security
satisfactory to the FDIC related to the disputed additional
assessment amounts.
On March 27, 2018, the U.S. District Court for the District of
Columbia denied BANA’s partial motion to dismiss certain of the
FDIC’s claims.
Interchange Litigation
In 2005, a group of merchants filed a series of putative class
actions and individual actions directed at interchange fees
associated with Visa and MasterCard payment card transactions.
These actions, which were consolidated in the U.S. District Court
for the Eastern District of New York under the caption In re Payment
Card Interchange Fee and Merchant Discount Anti-Trust Litigation,
named Visa, MasterCard, the Corporation, BANA and other banks
as defendants. Plaintiffs alleged antitrust claims and sought
compensatory and treble damages as well as injunctive relief.
In 2018, defendants reached a settlement of the putative Rule
23(b)(3) damages class. Defendants agreed to pay an additional
amount to participating class members by contribution to the
escrow fund established as part of the settlement previously
rejected by the U.S. Court of Appeals for the Second Circuit. The
Corporation’s additional contribution was not material. The District
Court granted final approval of the settlement in December 2019.
Beginning in January 2020, a number of class members who
objected to the settlement appealed to the U.S. Court of Appeals
for the Second Circuit.
LIBOR, Other Reference Rates, Foreign Exchange (FX) and
Bond Trading Matters
Government authorities in the U.S. and various international
jurisdictions continue to conduct investigations of, to make
inquiries of, and to pursue proceedings against, the Corporation
and its subsidiaries regarding FX and other reference rates as well
as government, sovereign, supranational and agency bonds in
connection with conduct and systems and controls. The
Corporation is cooperating with these inquiries and investigations,
and responding to the proceedings.
LIBOR
The Corporation, BANA and certain Merrill Lynch entities have been
named as defendants along with most of the other London
Interbank Offered Rate (LIBOR) panel banks in a number of
individual and putative class actions by persons alleging they
sustained losses on U.S. dollar LIBOR-based financial instruments
as a result of collusion or manipulation by defendants regarding
the setting of U.S. dollar LIBOR. Plaintiffs assert a variety of claims,
including antitrust,Commodity Exchange Act, Racketeer Influenced
and Corrupt Organizations (RICO), Securities Exchange Act of
1934, common law fraud and breach of contract claims, and seek
compensatory, treble and punitive damages, and injunctive relief.
All cases naming the Corporation and its affiliates relating to U.S.
dollar LIBOR are pending in the U.S. District Court for the Southern
District of New York.
The District Court has dismissed all RICO claims, and
dismissed all manipulation claims based on alleged trader conduct
against Bank of America entities. The District Court has also
substantially limited the scope of antitrust, Commodity Exchange
Act and various other claims, including by dismissing in their
entirety certain individual and putative class plaintiffs’ antitrust
claims for lack of standing and/or personal jurisdiction. Plaintiffs
whose antitrust claims were dismissed by the District Court are
pursuing appeals in the Second Circuit. Certain individual and
putative class actions remain pending in the District Court against
the Corporation, BANA and certain Merrill Lynch entities.
On February 28, 2018, the District Court denied certification
of proposed classes of lending institutions and persons that
transacted in eurodollar futures, and the U.S. Court of Appeals for
the Second Circuit subsequently denied petitions filed by those
plaintiffs for interlocutory appeals of those rulings. Also on
February 28, 2018, the District Court granted certification of a
class of persons that purchased OTC swaps and notes that
referenced U.S. dollar LIBOR from one of the U.S. dollar LIBOR
panel banks, limited to claims under Section 1 of the Sherman
Act. The U.S. Court of Appeals for the Second Circuit subsequently
denied a petition filed by the defendants for interlocutory appeal
of that ruling.
Mortgage Appraisal Litigation
The Corporation, Countrywide and certain affiliates are named as
defendants in two consolidated putative class action lawsuits filed
in the U.S. District Court for the Central District of California
(Waldrup and Williams, et al.). Plaintiffs allege that Countrywide
and a former Countrywide subsidiary, LandSafe Appraisal Services,
Inc., arranged for and completed appraisals that were not in
compliance with applicable laws and appraisal standards.
Plaintiffs assert a RICO claim and seek, among other forms of
relief, compensatory and treble damages. On February 8, 2018,
154 154
Bank of America 2019
Bank of America 2019
the District Court granted plaintiffs’ motion for class certification.
On May 22, 2018, the U.S. Court of Appeals for the Ninth Circuit
denied defendants’ petition for permission to file an interlocutory
appeal of the District Court’s ruling granting class certification.
On January 21, 2020, the parties agreed to resolve the
litigation for an amount that is not material to the Corporation, and
which was fully accrued as of December 31, 2019. The agreement
is subject to court approval.
U.S. Bank - Harborview and SURF/OWNIT Repurchase
Litigation
Beginning in 2011, U.S. Bank, National Association (U.S. Bank),
as trustee for the HarborView Mortgage Loan Trust 2005-10 and
various SURF/OWNIT RMBS trusts filed complaints against the
Corporation, Countrywide entities, Merrill Lynch entities and other
affiliates in New York Supreme Court alleging breaches of
representations and warranties. The defendants and certain
certificate-holders in the trusts agreed to settle the respective
matters in amounts not material to the Corporation, subject to
acceptance by U.S. Bank. The litigations have been stayed pending
finalization of the settlements.
NOTE 14 Shareholders’ Equity
Common Stock
Declared Quarterly Cash Dividends on Common Stock (1)
Declaration Date
Record Date
Payment Date
January 29, 2020
October 22, 2019
July 25, 2019
April 24, 2019
January 30, 2019
(1)
March 6, 2020
December 6, 2019
September 6, 2019
June 7, 2019
March 1, 2019
March 27, 2020
December 27, 2019
September 27, 2019
June 28, 2019
March 29, 2019
In 2019, and through February 19, 2020.
Dividend
Per Share
0.18
$
0.18
0.18
0.15
0.15
The cash dividends paid per share of common stock were $0.66,
$0.54 and $0.39 for 2019, 2018 and 2017, respectively.
The following table summarizes common stock repurchases
during 2019, 2018 and 2017.
Common Stock Repurchase Summary
(in millions)
Total share repurchases, including CCAR
capital plan repurchases
2019
2018
2017
956
676
509
Purchase price of shares repurchased and
retired
CCAR capital plan repurchases
Other authorized repurchases
Total shares repurchased
$ 25,644 $16,754 $ 9,347
3,467
$ 28,144 $20,094 $12,814
3,340
2,500
On June 28, 2018, following the non-objection of the Board of
Governors of the Federal Reserve System (Federal Reserve) to the
Corporation’s 2018 Comprehensive Capital Analysis and Review
(CCAR) capital plan, the Corporation’s Board of Directors (Board)
authorized the repurchase of approximately $20.6 billion in
common stock from July 1, 2018 through June 30, 2019, which
included approximately $600 million in repurchases to offset
shares awarded under equity-based compensation plans during
the same period. On February 7, 2019, following approval by the
Federal Reserve, the Board authorized the repurchase of an
additional $2.5 billion of common stock by June 30, 2019.
On June 27, 2019, following the Federal Reserve's non-
objection to the Corporation's 2019 CCAR capital plan, the Board
authorized the repurchase of approximately $30.9 billion in
common stock from July 1, 2019 through June 30, 2020, which
includes approximately $900 million in repurchases to offset
shares awarded under equity-based compensation plans during
the same period.
During 2019, the Corporation repurchased 956 million shares
of common stock in connection with the Board's 2018 and 2019
repurchase authorizations, which reduced shareholders’ equity by
$28.1 billion.
In connection with employee stock plans, in 2019, the
Corporation issued 91 million shares of its common stock and, to
satisfy tax withholding obligations, repurchased 35 million shares
of its common stock. At December 31, 2019, the Corporation had
reserved 579 million unissued shares of common stock for future
issuances under employee stock plans, convertible notes and
preferred stock.
Preferred Stock
The cash dividends declared on preferred stock were $1.4 billion,
$1.5 billion and $1.6 billion for 2019, 2018 and 2017,
respectively.
On June 20, 2019, the Corporation issued 40,000 shares of
5.125% Fixed-to-Floating Rate Non-Cumulative Preferred Stock,
Series JJ for $1.0 billion. On June 25, 2019, the Corporation issued
55,900 shares of 5.375% Non-Cumulative Preferred Stock, Series
KK for $1.4 billion. On September 17, 2019, the Corporation
issued 52,400 shares of 5.000% Non-Cumulative Preferred Stock,
Series LL for $1.3 billion. Additionally, on January 24, 2020, the
Corporation issued 44,000 shares of 4.300% Fixed-to-Floating
Rate Non-Cumulative Preferred Stock, Series MM for $1.1 billion.
In 2019, the Corporation fully redeemed Series V and Series
W preferred stock for $2.6 billion. Additionally, on January 27,
2020, the Corporation fully redeemed Series Y preferred stock for
$1.1 billion.
All series of preferred stock in the Preferred Stock Summary
table have a par value of $0.01 per share, are not subject to the
operation of a sinking fund, have no participation rights, and with
the exception of the Series L Preferred Stock, are not convertible.
The holders of the Series B Preferred Stock and Series 1 through
5 Preferred Stock have general voting rights and vote together with
the common stock. The holders of the other series included in the
table have no general voting rights. All outstanding series of
preferred stock of the Corporation have preference over the
Corporation’s common stock with respect to the payment of
dividends and distribution of the Corporation’s assets in the event
of a liquidation or dissolution. With the exception of the Series B,
F, G and T Preferred Stock, if any dividend payable on these series
is in arrears for three or more semi-annual or six or more quarterly
dividend periods, as applicable (whether consecutive or not), the
holders of these series and any other class or series of preferred
stock ranking equally as to payment of dividends and upon which
equivalent voting rights have been conferred and are exercisable
(voting as a single class) will be entitled to vote for the election
of two additional directors. These voting rights terminate when the
Corporation has paid in full dividends on these series for at least
two semi-annual or four quarterly dividend periods, as applicable,
following the dividend arrearage.
The 7.25% Non-Cumulative Perpetual Convertible Preferred
Stock, Series L (Series L Preferred Stock) does not have early
redemption/call rights. Each share of the Series L Preferred Stock
may be converted at any time, at the option of the holder, into 20
shares of the Corporation’s common stock plus cash in lieu of
fractional shares. The Corporation may cause some or all of the
Series L Preferred Stock, at its option, at any time or from time to
time, to be converted into shares of common stock at the then-
applicable conversion rate if, for 20 trading days during any period
Bank of America 2019 155
Bank of America 2019 155
of 30 consecutive trading days, the closing price of common stock
exceeds 130 percent of the then-applicable conversion price of will still pay any accrued dividends payable.
the Series L Preferred Stock. If a conversion of Series L Preferred
Stock occurs at the option of the holder, subsequent to a dividend
stock outstanding at December 31, 2019.
The table below presents a summary of perpetual preferred
record date but prior to the dividend payment date, the Corporation
Preferred Stock Summary
(Dollars in millions, except as noted)
Series
Description
Initial
Issuance
Date
Total
Shares
Outstanding
Liquidation
Preference
per Share
(in dollars)
Carrying
Value
Per Annum
Dividend Rate
Dividend per
Share
(in dollars)
Annual
Dividend
Redemption Period (1)
7% Cumulative
Redeemable
June
1997
Floating Rate Non-
Cumulative
November
2006
Floating Rate Non-
Cumulative
Adjustable Rate Non-
Cumulative
March
2012
March
2012
7,110
$
100
$
1
7.00% $
7.00
$
12,691
25,000
317
3-mo. LIBOR + 35 bps (3)
1.01
1,409
100,000
141
3-mo. LIBOR + 40 bps (3)
4,055.56
4,926
100,000
493
3-mo. LIBOR + 40 bps (3)
4,055.56
—
13
6
20
n/a
On or after
November 15, 2011
On or after
March 15, 2012
On or after
March 15, 2012
Series B
Series E (2)
Series F
Series G
Series L
7.25% Non-
Cumulative
Perpetual
Convertible
Series T
6% Non-cumulative
January
2008
September
2011
3,080,182
1,000
3,080
7.25%
72.50
223
n/a
354
100,000
35
6.00%
6,000.00
2
After May 7, 2019
Series U (4)
Fixed-to-Floating
Rate Non-Cumulative
May
2013
40,000
25,000
1,000
Series X (4)
Series Y (2)
Fixed-to-Floating
Rate Non-Cumulative
September
2014
6.500% Non-
Cumulative
January
2015
80,000
25,000
2,000
44,000
25,000
1,100
6.500%
1.63
Series Z (4)
Fixed-to-Floating
Rate Non-Cumulative
October
2014
56,000
25,000
1,400
5.2% to, but excluding,
6/1/23; 3-mo. LIBOR +
313.5 bps thereafter
6.250% to, but excluding,
9/5/24; 3-mo. LIBOR +
370.5 bps thereafter
52.00
52
62.50
125
72
91
65.00
6.500% to, but excluding,
10/23/24; 3-mo. LIBOR +
417.4 bps thereafter
6.100% to, but excluding,
3/17/25; 3-mo. LIBOR +
389.8 bps thereafter
Series AA (4)
Series CC (2)
Series DD (4)
Series EE (2)
Series FF (4)
Series GG (2)
Series HH (2)
Series JJ (4)
Series KK (2)
Series LL (2)
Series 1 (5)
Series 2 (5)
Series 4 (5)
Series 5 (5)
Fixed-to-Floating
Rate Non-Cumulative
March
2015
6.200% Non-
Cumulative
January
2016
Fixed-to-Floating
Rate Non-Cumulative
6.000% Non-
Cumulative
Fixed-to-Floating
Rate Non-Cumulative
6.000% Non-
Cumulative
5.875% Non-
Cumulative
Fixed-to-Floating
Rate Non-Cumulative
5.375% Non-
Cumulative
March
2016
April
2016
March
2018
May
2018
July
2018
June
2019
June
2019
5.000% Non-
Cumulative
September
2019
Floating Rate Non-
Cumulative
November
2004
Floating Rate Non-
Cumulative
March
2005
Floating Rate Non-
Cumulative
November
2005
Floating Rate Non-
Cumulative
March
2007
76,000
25,000
1,900
61.00
116
44,000
25,000
1,100
6.200%
1.55
40,000
25,000
1,000
6.300% to, but excluding,
3/10/26; 3-mo. LIBOR +
455.3 bps thereafter
63.00
36,000
25,000
900
6.000%
1.50
68
63
54
94,000
25,000
2,350
5.875% to, but excluding,
3/15/28; 3-mo. LIBOR +
293.1 bps thereafter
58.75
138
54,000
25,000
1,350
6.000%
1.50
34,160
25,000
854
5.875%
1.47
40,000
25,000
1,000
5.125% to, but excluding,
6/20/24; 3-mo. LIBOR +
329.2 bps thereafter
25.63
55,900
25,000
1,398
5.375%
0.67
52,400
25,000
1,310
5.000%
0.31
3,275
30,000
98
3-mo. LIBOR + 75 bps (6)
9,967
30,000
299
3-mo. LIBOR + 65 bps (6)
7,010
30,000
210
3-mo. LIBOR + 75 bps (3)
14,056
30,000
422
3-mo. LIBOR + 50 bps (3)
0.82
0.81
1.01
1.01
81
50
26
38
16
3
10
9
17
On or after
June 1, 2023
On or after
September 5, 2024
On or after
January 27, 2020
On or after
October 23, 2024
On or after
March 17, 2025
On or after
January 29, 2021
On or after
March 10, 2026
On or after
April 25, 2021
On or after
March 15, 2028
On or after
May 16, 2023
On or after
July 24, 2023
On or after
June 20, 2024
On or after
June 25, 2024
On or after
September 17, 2024
On or after
November 28, 2009
On or after
November 28, 2009
On or after
November 28, 2010
On or after
May 21, 2012
Issuance costs and certain adjustments
Total
3,887,440
(357)
$ 23,401
(1) The Corporation may redeem series of preferred stock on or after the redemption date, in whole or in part, at its option, at the liquidation preference plus declared and unpaid dividends. Series B
and Series L Preferred Stock do not have early redemption/call rights.
(2) Ownership is held in the form of depositary shares, each representing a 1/1,000th interest in a share of preferred stock, paying a quarterly cash dividend, if and when declared.
(3) Subject to 4.00% minimum rate per annum.
(4) Ownership is held in the form of depositary shares, each representing a 1/25th interest in a share of preferred stock, paying a semi-annual cash dividend, if and when declared, until the first
redemption date at which time, it adjusts to a quarterly cash dividend, if and when declared, thereafter.
(5) Ownership is held in the form of depositary shares, each representing a 1/1,200th interest in a share of preferred stock, paying a quarterly cash dividend, if and when declared.
(6) Subject to 3.00% minimum rate per annum.
n/a = not applicable
156 156
Bank of America 2019
Bank of America 2019
NOTE 15 Accumulated Other Comprehensive Income (Loss)
The table below presents the changes in accumulated OCI after-tax for 2019, 2018 and 2017.
(Dollars in millions)
Balance, December 31, 2016
Net change
Balance, December 31, 2017
Accounting change related to certain tax effects
Cumulative adjustment for hedge accounting change
Net change
Balance, December 31, 2018
Net change
Balance, December 31, 2019
Debt Securities
Debit Valuation
Adjustments
Derivatives
Employee
Benefit Plans
Foreign
Currency
$
$
$
$
(1,267) $
61
(1,206) $
(393)
—
(3,953)
(5,552) $
5,875
323 $
(767) $
(293)
(1,060) $
(220)
—
749
(531) $
(963)
(1,494) $
(895) $
64
(831) $
(189)
57
(53)
(1,016) $
616
(400) $
(3,480) $
288
(3,192) $
(707)
—
(405)
(4,304) $
136
(4,168) $
(879) $
86
(793) $
239
—
(254)
(808) $
(86)
(894) $
Total
(7,288)
206
(7,082)
(1,270)
57
(3,916)
(12,211)
5,578
(6,633)
The table below presents the net change in fair value recorded in accumulated OCI, net realized gains and losses reclassified into
earnings and other changes for each component of OCI pre- and after-tax for 2019, 2018 and 2017.
(Dollars in millions)
Debt securities:
Net increase (decrease) in fair value
Net realized (gains) reclassified into earnings (1)
Net change
Debit valuation adjustments:
Net increase (decrease) in fair value
Net realized losses reclassified into earnings (1)
Net change
Derivatives:
Net increase (decrease) in fair value
Reclassifications into earnings:
Net interest income
Compensation and benefits expense
Net realized losses reclassified into earnings
Net change
Employee benefit plans:
Net increase (decrease) in fair value
Net actuarial losses and other reclassified into earnings (2)
Settlements, curtailments and other
Net change
Foreign currency:
Net (decrease) in fair value
Net realized (gains) losses reclassified into earnings (3)
Net change
Pretax
Tax
effect
2019
After-
tax
Pretax
Tax
effect
2018
After-
tax
Pretax
Tax
fect
ef
2
017
After-
tax
$ 8,020 $ (2,000) $ 6,020 $ (5,189) $ 1,329 $ (3,860) $
(193)
7,827
48
(1,952)
(145)
5,875
(123)
(5,312)
30
1,359
(93)
(3,953)
240 $
(304)
(64)
(1,276)
18
(1,258)
289
6
295
(987)
24
(963)
952
26
978
(224)
(5)
(229)
728
21
749
(490)
42
(448)
14 $
111
125
171
(16)
155
254
(193)
61
(319)
26
(293)
692
(156)
536
(232)
74
(158)
(50)
1
(49)
104
2
106
798
41
150
3
194
(13)
(110)
(123)
(26)
—
(26)
(182)
(21)
(36)
(1)
(58)
(52)
89
37
78
2
80
616
20
114
2
136
(65)
(21)
(86)
165
(27)
138
(94)
(703)
171
11
(521)
(8)
(149)
(157)
(40)
7
(33)
41
164
(46)
(2)
116
(195)
98
(97)
125
(20)
105
(53)
(539)
125
9
(405)
(203)
(51)
(254)
327
(148)
179
129
223
179
3
405
(122)
56
(66)
(65)
(55)
(61)
(1)
(117)
(439)
(606)
(1,045)
430
701
1,131
205
(92)
113
64
168
118
2
288
(9)
95
86
206
Total other comprehensive income (loss)
$ 7,438 $ (1,860) $ 5,578 $ (5,106) $ 1,190 $ (3,916) $ (1,023) $ 1,229 $
(1) Reclassifications of pretax debt securities and DVA are recorded in other income in the Consolidated Statement of Income.
(2) Reclassifications of pretax employee benefit plan costs are recorded in other general operating expense in the Consolidated Statement of Income.
(3) Reclassifications of pretax debt securities, DVA and foreign currency (gains) losses are recorded in other income in the Consolidated Statement of Income.
Bank of America 2019 157
Bank of America 2019 157
NOTE 16 Earnings Per Common Share
The calculation of EPS and diluted EPS for 2019, 2018 and 2017 is presented below. For more information on the calculation of EPS,
see Note 1 – Summary of Significant Accounting Principles.
$
$
$
$
$
2019
2018
2017
27,430 $
(1,432)
25,998 $
9,390.5
2.77
$
28,147 $
(1,451)
26,696 $
10,096.5
2.64
25,998
—
25,998
9,390.5
52.4
9,442.9
$
$
26,696
—
26,696
10,096.5
140.4
10,236.9
$
2.75 $
2.61 $
$
$
$
18,232
(1,614)
16,618
10,195.6
1.63
16,618
186
16,804
10,195.6
582.8
10,778.4
1.56
Federal Reserve. The Corporation’s banking entity affiliates are
subject to capital adequacy rules issued by the OCC.
The Corporation and its primary banking entity affiliate, BANA,
are Advanced approaches institutions under Basel 3. As Advanced
approaches institutions, the Corporation and its banking entity
affiliates are required to report regulatory risk-based capital ratios
and risk-weighted assets under both the Standardized and
Advanced approaches. The approach that yields the lower ratio is
used to assess capital adequacy, including under the Prompt
Corrective Action (PCA) framework. At December 31, 2019 and
2018, Common equity tier 1 and Tier 1 capital ratios were lower
under the Standardized approach whereas the Advanced
approaches yielded a lower result for the Total capital ratio.
The Corporation
is required to maintain a minimum
supplementary leverage ratio (SLR) of 3.0 percent plus a leverage
buffer of 2.0 percent in order to avoid certain restrictions on capital
distributions and discretionary bonus payments. The Corporation’s
insured depository institution subsidiaries are required to maintain
a minimum 6.0 percent SLR to be considered well capitalized under
the PCA framework.
The following table presents capital ratios and related
information in accordance with Basel 3 Standardized and
Advanced approaches as measured at December 31, 2019 and
2018 for the Corporation and BANA.
(In millions, except per share information)
Earnings per common share
Net income
Preferred stock dividends
Net income applicable to common shareholders
Average common shares issued and outstanding
Earnings per common share
Diluted earnings per common share
Net income applicable to common shareholders
Add preferred stock dividends due to assumed conversions (1)
Net income allocated to common shareholders
Average common shares issued and outstanding
Dilutive potential common shares (2)
Total diluted average common shares issued and outstanding
Diluted earnings per common share
(1) Represents the Series T dividends under the "If-converted" method prior to conversion.
(2)
Includes incremental dilutive shares from RSUs, restricted stock and warrants.
For 2019, 2018 and 2017, 62 million average dilutive potential
common shares associated with the Series L preferred stock were
not included in the diluted share count because the result would
have been antidilutive under the “if-converted” method. For 2018
and 2017, average options to purchase four million and 21 million
shares of common stock were outstanding but not included in the
computation of EPS because the result would have been
antidilutive under the treasury stock method. For 2017, average
warrants to purchase 122 million shares of common stock were
outstanding but not included in the computation of EPS because
the result would have been antidilutive under the treasury stock
method. These warrants expired on October 29, 2018. For 2019,
2018 and 2017, average warrants to purchase three million, 136
million and 143 million shares of common stock, respectively, were
included in the diluted EPS calculation under the treasury stock
method. Substantially all of these warrants were exercised on or
before their expiration date of January 16, 2019.
NOTE 17 Regulatory Requirements and
Restrictions
The Federal Reserve, Office of the Comptroller of the Currency
(OCC) and FDIC (collectively, U.S. banking regulators) jointly
establish regulatory capital adequacy guidelines, including Basel
3, for U.S. banking organizations. As a financial holding company,
the Corporation is subject to capital adequacy rules issued by the
158 158
Bank of America 2019
Bank of America 2019
Regulatory Capital under Basel 3
(Dollars in millions, except as noted)
Risk-based capital metrics:
Common equity tier 1 capital
Tier 1 capital
Total capital (3)
Risk-weighted assets (in billions)
Common equity tier 1 capital ratio
Tier 1 capital ratio
Total capital ratio
Leverage-based metrics:
Adjusted quarterly average assets (in billions) (4)
Tier 1 leverage ratio
SLR leverage exposure (in billions)
SLR
Risk-based capital metrics:
Common equity tier 1 capital
Tier 1 capital
Total capital (3)
Risk-weighted assets (in billions)
Common equity tier 1 capital ratio
Tier 1 capital ratio
Total capital ratio
Leverage-based metrics:
Adjusted quarterly average assets (in billions) (4)
Tier 1 leverage ratio
SLR leverage exposure (in billions)
SLR
Bank of America Corporation
Bank of America, N.A.
Standardized
Approach
Advanced
Approaches
Regulatory
Minimum (1)
Standardized
Approach
Advanced
Approaches
Regulatory
Minimum (2)
December 31, 2019
$ 166,760
188,492
221,230
1,493
$ 166,760
188,492
213,098
1,447
$ 154,626
154,626
166,567
1,241
11.2%
12.6
14.8
11.5%
13.0
14.7
9.5%
11.0
13.0
12.5%
12.5
13.4
$ 154,626
154,626
158,665
991
15.6%
15.6
16.0
7.0%
8.5
10.5
$
2,374
$
2,374
$
1,780
$
1,780
7.9%
7.9%
4.0
8.7%
8.7%
5.0
$
2,946
$
2,177
6.4%
5.0
7.1%
6.0
December 31, 2018
$ 167,272
189,038
221,304
1,437
$ 167,272
189,038
212,878
1,409
$ 149,824
149,824
161,760
1,195
11.6%
13.2
15.4
11.9%
13.4
15.1
8.25%
9.75
11.75
12.5%
12.5
13.5
$ 149,824
149,824
153,627
959
15.6%
15.6
16.0
6.5%
8.0
10.0
$
2,258
$
2,258
$
1,719
$
1,719
8.4%
8.4%
4.0
8.7%
8.7%
5.0
$
2,791
$
2,112
6.8%
5.0
7.1%
6.0
(1) The capital conservation buffer and global systemically important bank surcharge were 2.5 percent at December 31, 2019 and 1.875 percent at December 31, 2018. The countercyclical capital
buffer for both periods was zero. The SLR minimum includes a leverage buffer of 2.0 percent.
(2) Risk-based capital regulatory minimums at December 31, 2019 are the minimum ratios under Basel 3 including a capital conservation buffer of 2.5 percent. The regulatory minimums for the leverage
ratios as of both period ends and risk-based capital ratios as of December 31, 2018 are the percent required to be considered well capitalized under the PCA framework.
(3) Total capital under the Advanced approaches differs from the Standardized approach due to differences in the amount permitted in Tier 2 capital related to the qualifying allowance for credit losses.
(4) Reflects total average assets adjusted for certain Tier 1 capital deductions.
The capital adequacy rules issued by the U.S. banking
regulators require institutions to meet the established minimums
outlined in the table above. Failure to meet the minimum
requirements can lead to certain mandatory and discretionary
actions by regulators that could have a material adverse impact
on the Corporation’s financial position. At December 31, 2019 and
2018, the Corporation and its banking entity affiliates were well
capitalized.
Other Regulatory Matters
The Federal Reserve requires the Corporation’s bank subsidiaries
to maintain reserve requirements based on a percentage of certain
deposit liabilities. The average daily reserve balance requirements,
in excess of vault cash, maintained by the Corporation with the
Federal Reserve Bank were $14.6 billion and $11.4 billion for
2019 and 2018. At December 31, 2019 and 2018, the Corporation
had cash and cash equivalents in the amount of $6.3 billion and
$5.8 billion, and securities with a fair value of $14.7 billion and
$16.6 billion that were segregated in compliance with securities
regulations. Cash held on deposit with the Federal Reserve Bank
to meet reserve requirements and cash and cash equivalents
segregated in compliance with securities regulations are
components of restricted cash. For more information, see Note 11
– Federal Funds Sold or Purchased, Securities Financing
Agreements, Short-term Borrowings and Restricted Cash. In
addition, at December 31, 2019 and 2018, the Corporation had
cash deposited with clearing organizations of $7.6 billion and $8.1
billion primarily recorded in other assets on the Consolidated
Balance Sheet.
Bank Subsidiary Distributions
The primary sources of funds for cash distributions by the
Corporation to its shareholders are capital distributions received
from its bank subsidiaries, BANA and Bank of America California,
N.A. In 2019, the Corporation received dividends of $20.5 billion
from BANA and $215 million from Bank of America California, N.A.
In addition, BANA returned capital of $8.0 billion to the Corporation
in 2019.
The amount of dividends that a subsidiary bank may declare
in a calendar year without OCC approval is the subsidiary bank’s
net profits for that year combined with its retained net profits for
the preceding two years. Retained net profits, as defined by the
OCC, consist of net income less dividends declared during the
period. In 2020, BANA can declare and pay dividends of
approximately $9.4 billion to the Corporation plus an additional
amount equal to its retained net profits for 2020 up to the date
of any such dividend declaration. Bank of America California, N.A.
can pay dividends of $94 million in 2020 plus an additional amount
equal to its retained net profits for 2020 up to the date of any
such dividend declaration.
Bank of America 2019 159
Bank of America 2019 159
NOTE 18 Employee Benefit Plans
Pension and Postretirement Plans
The Corporation sponsors a qualified noncontributory trusteed
pension plan (Qualified Pension Plan), a number of noncontributory
nonqualified pension plans, and postretirement health and life
plans that cover eligible employees. Non-U.S. pension plans
sponsored by the Corporation vary based on the country and local
practices.
The Qualified Pension Plan has a balance guarantee feature
for account balances with participant-selected investments,
applied at the time a benefit payment is made from the plan that
effectively provides principal protection for participant balances
transferred and certain compensation credits. The Corporation is
responsible for funding any shortfall on the guarantee feature.
Benefits earned under the Qualified Pension Plan have been
frozen. Thereafter, the cash balance accounts continue to earn
investment credits or interest credits in accordance with the terms
of the plan document.
The Corporation has an annuity contract that guarantees the
payment of benefits vested under a terminated U.S. pension plan
(Other Pension Plan). The Corporation, under a supplemental
agreement, may be responsible for, or benefit from actual
experience and investment performance of the annuity assets.
The Corporation made no contribution under this agreement in
2019 or 2018. Contributions may be required in the future under
this agreement.
The Corporation’s noncontributory, nonqualified pension plans
are unfunded and provide supplemental defined pension benefits
to certain eligible employees.
In addition to retirement pension benefits, certain benefits-
eligible employees may become eligible to continue participation
as retirees in health care and/or life insurance plans sponsored
by the Corporation. These plans are referred to as the
Postretirement Health and Life Plans.
The Pension and Postretirement Plans table summarizes the
changes in the fair value of plan assets, changes in the projected
benefit obligation (PBO), the funded status of both the
accumulated benefit obligation (ABO) and the PBO, and the
weighted-average assumptions used to determine benefit
obligations for the pension plans and postretirement plans at
December 31, 2019 and 2018. The estimate of the Corporation’s
PBO associated with these plans considers various actuarial
assumptions, including assumptions for mortality rates and
discount rates. The discount rate assumptions are derived from
a cash flow matching technique that utilizes rates that are based
on Aa-rated corporate bonds with cash flows that match estimated
benefit payments of each of the plans. The decreases in the
weighted-average discount rates in 2019 resulted in increases to
the PBO of approximately $2.2 billion at December 31, 2019. The
increases in the weighted-average discount rates in 2018 resulted
in decreases to the PBO of approximately $1.3 billion at December
31, 2018. Significant gains and losses related to changes in the
PBO for 2019 and 2018 primarily resulted from changes in the
discount rate.
Pension and Postretirement Plans (1)
(Dollars in millions)
Fair value, January 1
Actual return on plan assets
Company contributions
Plan participant contributions
Settlements and curtailments
Benefits paid
Federal subsidy on benefits paid
Foreign currency exchange rate changes
Fair value, December 31
Change in projected benefit obligation
Projected benefit obligation, January 1
Service cost
Interest cost
Plan participant contributions
Plan amendments
Settlements and curtailments
Actuarial loss (gain)
Benefits paid
Federal subsidy on benefits paid
Foreign currency exchange rate changes
Projected benefit obligation, December 31
Amounts recognized on Consolidated Balance Sheet
Other assets
Accrued expenses and other liabilities
Net amount recognized, December 31
Funded status, December 31
Accumulated benefit obligation
Overfunded (unfunded) status of ABO
Provision for future salaries
Projected benefit obligation
Weighted-average assumptions, December 31
Discount rate
Rate of compensation increase
Interest-crediting rate
Qualified
Pension Plan
Non-U.S.
Pension Plans
Nonqualified and Other
Pension Plans
Postretirement
Health and Life Plans
2019
2018
2019
2018
2019
2018
2019
2018
$
$
$
$
$
$
$
18,178
3,187
—
—
—
(1,090)
n/a
n/a
20,275
14,144
—
593
—
—
—
1,714
(1,090)
n/a
n/a
15,361
4,914
—
4,914
15,361
4,914
—
15,361
$
$
$
$
$
$
$
19,708
(550)
—
—
—
(980)
n/a
n/a
18,178
15,706
—
563
—
—
—
(1,145)
(980)
n/a
n/a
14,144
4,034
—
4,034
14,144
4,034
—
14,144
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2,461
273
20
1
(42)
(108)
n/a
91
2,696
2,589
17
65
1
2
(42)
288
(108)
n/a
75
2,887
364
(555)
(191)
2,841
(145)
46
2,887
$
$
$
$
$
$
$
2,943
(181)
22
1
(107)
(52)
n/a
(165)
2,461
2,814
19
65
1
13
(107)
(29)
(52)
n/a
(135)
2,589
316
(444)
(128)
2,542
(81)
47
2,589
$
$
$
$
$
$
$
2,584
228
91
—
—
(237)
n/a
n/a
2,666
2,779
1
113
—
—
—
263
(237)
n/a
n/a
2,919
733
(986)
(253)
2,919
(253)
—
2,919
2,724
8
91
—
—
(239)
n/a
n/a
2,584
3,047
1
105
—
—
—
(135)
(239)
n/a
n/a
2,779
754
(949)
(195)
2,778
(194)
1
2,779
$
$
$
$
$
$
$
252
5
24
103
—
(185)
—
n/a
199
928
5
38
103
—
—
99
(185)
—
1
989
—
(790)
(790)
n/a
n/a
n/a
989
$
$
$
$
$
$
$
3.32%
n/a
5.06
4.32%
n/a
5.18
1.81%
4.10
1.53
2.60%
4.49
1.47
3.20%
4.00
4.52
4.26%
4.00
4.50
3.27%
n/a
n/a
300
5
43
115
—
(214)
3
n/a
252
1,056
6
36
115
—
—
(73)
(214)
3
(1)
928
—
(676)
(676)
n/a
n/a
n/a
928
4.25%
n/a
n/a
(1) The measurement date for all of the above plans was December 31 of each year reported.
n/a = not applicable
160 160
Bank of America 2019
Bank of America 2019
The Corporation’s estimate of its contributions to be made to minimum funding amount required by the Employee Retirement
the Non-U.S. Pension Plans, Nonqualified and Other Pension Plans,
and Postretirement Health and Life Plans in 2020 is $21 million,
$92 million and $15 million, respectively. The Corporation does
not expect to make a contribution to the Qualified Pension Plan in
2020. It is the policy of the Corporation to fund no less than the
Income Security Act of 1974 (ERISA).
Pension Plans with ABO and PBO in excess of plan assets as
of December 31, 2019 and 2018 are presented in the table below.
For these plans, funding strategies vary due to legal requirements
and local practices.
Plans with ABO and PBO in Excess of Plan Assets
(Dollars in millions)
PBO
ABO
Fair value of plan assets
Components of Net Periodic Benefit Cost
(Dollars in millions)
Components of net periodic benefit cost (income)
Service cost
Interest cost
Expected return on plan assets
Amortization of net actuarial loss
Other
Net periodic benefit cost (income)
Weighted-average assumptions used to determine net cost for years ended December 31
Discount rate
Expected return on plan assets
Rate of compensation increase
(Dollars in millions)
Components of net periodic benefit cost (income)
Service cost
Interest cost
Expected return on plan assets
Amortization of net actuarial loss (gain)
Other
Net periodic benefit cost (income)
Weighted-average assumptions used to determine net cost for years ended December 31
Discount rate
Expected return on plan assets
Rate of compensation increase
n/a = not applicable
Non-U.S.
Pension Plans
Nonqualified
and Other
Pension Plans
2019
2018
2019
2018
$
744 $
720
191
615 $
605
173
988 $
988
1
950
949
1
Qualified Pension Plan
2018
2017
2019
Non-U.S. Pension Plans
2018
2017
2019
$
—
593
(1,088)
135
—
$
— $
563
(1,136)
147
—
$
—
606
(1,068)
154
—
$
(360) $
(426) $
(308) $
$
17
65
(99)
6
4
(7) $
$
19
65
(126)
10
12
(20) $
4.32%
6.00
n/a
3.68%
6.00
n/a
4.16%
6.00
n/a
2.60%
4.13
4.49
2.39%
4.37
4.31
24
72
(136)
8
(7)
(39)
2.56%
4.73
4.51
Nonqualified and
Other Pension Plans
Postretirement Health
and Life Plans
2019
2018
2017
2019
2018
2017
$
$
1
113
(95)
34
—
53
$
$
1
105
(84)
43
—
65
$
$
1
117
(95)
34
—
57
$
$
5
38
(5)
(24)
(2)
12
$
$
6
36
(6)
(27)
(3)
6
$
$
6
43
—
(21)
4
32
4.26%
3.73
4.00
3.58%
3.19
4.00
4.01%
3.50
4.00
4.25%
2.00
n/a
3.58%
2.00
n/a
3.99%
n/a
n/a
The asset valuation method used to calculate the expected
return on plan assets component of net periodic benefit cost for
the Qualified Pension Plan recognizes 60 percent of the prior year’s
market gains or losses at the next measurement date with the
remaining 40 percent spread equally over the subsequent four
years.
Gains and losses for all benefit plans except postretirement
health care are recognized in accordance with the standard
amortization provisions of the applicable accounting guidance. Net
periodic postretirement health and life expense was determined
using the “projected unit credit” actuarial method. For the
Postretirement Health and Life Plans, 50 percent of the
unrecognized gain or loss at the beginning of the year (or at
subsequent remeasurement) is recognized on a level basis during
the year.
Assumed health care cost trend rates affect the postretirement
benefit obligation and benefit cost reported for the Postretirement
Health and Life Plans. The assumed health care cost trend rate
used to measure the expected cost of benefits covered by the
Postretirement Health and Life Plans is 6.50 percent for 2020,
reducing in steps to 5.00 percent in 2026 and later years.
The Corporation’s net periodic benefit cost (income) recognized
for the plans is sensitive to the discount rate and expected return
on plan assets. For the Qualified Pension Plan, Non-U.S. Pension
Plans, Nonqualified and Other Pension Plans, and Postretirement
Health and Life Plans, a 25 bp decline in discount rates and
expected return on assets would not have had a significant impact
on the net periodic benefit cost for 2019.
Bank of America 2019 161
Bank of America 2019 161
Pretax Amounts included in Accumulated OCI and OCI
(Dollars in millions)
Net actuarial loss (gain)
Prior service cost (credits)
Qualified
Pension Plan
Non-U.S.
Pension Plans
Nonqualified
and Other
Pension Plans
Postretirement
Health and
Life Plans
Total
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
$ 3,865 $ 4,386 $ 559 $ 454 $ 1,008 $ 912 $
—
—
18
18
—
—
48 $
(6)
42 $
(75) $ 5,480 $ 5,677
12
9
(84) $ 5,492 $ 5,686
(9)
Amounts recognized in accumulated OCI
$ 3,865 $ 4,386 $ 577 $ 472 $ 1,008 $ 912 $
Current year actuarial loss (gain)
Amortization of actuarial gain (loss) and
prior service cost
Current year prior service cost (credit)
Amounts recognized in OCI
$ (385) $ 541 $ 110 $ 270 $ 130 $
(59) $
99 $
(73) $
(46) $ 679
(135)
(147)
—
—
(7)
2
(11)
13
$ (520) $ 394 $ 105 $ 272 $
(34)
(43)
26
30
(150)
(171)
—
96 $ (102) $ 125 $
—
—
2
13
—
(43) $ (194) $ 521
Plan Assets
The Qualified Pension Plan has been established as a retirement
vehicle for participants, and trusts have been established to
secure benefits promised under the Qualified Pension Plan. The
Corporation’s policy is to invest the trust assets in a prudent
manner for the exclusive purpose of providing benefits to
participants and defraying reasonable expenses of administration.
The Corporation’s investment strategy is designed to provide a
total return that, over the long term, increases the ratio of assets
to liabilities. The strategy attempts to maximize the investment
return on assets at a level of risk deemed appropriate by the
Corporation while complying with ERISA and any applicable
regulations and laws. The investment strategy utilizes asset
allocation as a principal determinant for establishing the risk/
return profile of the assets. Asset allocation ranges are
established, periodically reviewed and adjusted as funding levels
and liability characteristics change. Active and passive investment
managers are employed to help enhance the risk/return profile of
the assets. An additional aspect of the investment strategy used
to minimize risk (part of the asset allocation plan) includes
matching the exposure of participant-selected
investment
measures.
The assets of the Non-U.S. Pension Plans are primarily
attributable to a U.K. pension plan. This U.K. pension plan’s assets
are invested prudently so that the benefits promised to members
are provided with consideration given to the nature and the duration
of the plans' liabilities. The selected asset allocation strategy is
designed to achieve a higher return than the lowest risk strategy.
The expected rate of return on plan assets assumption was
developed through analysis of historical market returns, historical
asset class volatility and correlations, current market conditions,
anticipated future asset allocations, the funds’ past experience,
and expectations on potential future market returns. The expected
return on plan assets assumption is determined using the
calculated market-related value for the Qualified Pension Plan and
the Other Pension Plan and the fair value for the Non-U.S. Pension
Plans and Postretirement Health and Life Plans. The expected
return on plan assets assumption represents a long-term average
view of the performance of the assets in the Qualified Pension
Plan, the Non-U.S. Pension Plans, the Other Pension Plan, and
Postretirement Health and Life Plans, a return that may or may not
be achieved during any one calendar year. The Other Pension Plan
is invested solely in an annuity contract which is primarily invested
in fixed-income securities structured such that asset maturities
match the duration of the plan’s obligations.
The target allocations for 2020 by asset category for the
Qualified Pension Plan, Non-U.S. Pension Plans, and Nonqualified
and Other Pension Plans are presented in the following table.
Equity securities for the Qualified Pension Plan include common
stock of the Corporation in the amounts of $315 million (1.55
percent of total plan assets) and $221 million (1.22 percent of
total plan assets) at December 31, 2019 and 2018.
2020 Target Allocation
Asset Category
Equity securities
Debt securities
Real estate
Other
Percentage
Qualified
Pension Plan
Non-U.S.
Pension Plans
Nonqualified
and Other
Pension Plans
15 - 50%
45 - 80%
0 - 10%
0 - 5%
5 - 30%
40 - 70%
0 - 15%
10 - 40%
0 - 5%
95 - 100%
0 - 5%
0 - 5%
Fair Value Measurements
For more information on fair value measurements, including descriptions of Level 1, 2 and 3 of the fair value hierarchy and the valuation
methods employed by the Corporation, see Note 1 – Summary of Significant Accounting Principles and Note 21 – Fair Value Measurements.
Combined plan investment assets measured at fair value by level and in total at December 31, 2019 and 2018 are summarized in the
Fair Value Measurements table.
162 162
Bank of America 2019
Bank of America 2019
Fair Value Measurements
(Dollars in millions)
Cash and short-term investments
Level 1
Level 3
Level 2
December 31, 2019
Total
Level 1
Level 3
Level 2
December 31, 2018
Total
Money market and interest-bearing cash
Cash and cash equivalent commingled/mutual funds
$
1,426
—
Fixed income
U.S. government and agency securities
Corporate debt securities
Asset-backed securities
Non-U.S. debt securities
Fixed income commingled/mutual funds
Equity
Common and preferred equity securities
Equity commingled/mutual funds
Public real estate investment trusts
Real estate
4,403
—
—
748
804
4,655
147
91
$
— $
250
890
3,676
2,684
1,015
1,439
—
1,355
—
— $
—
1,426 $
250
1,530
—
8
—
—
—
—
—
—
—
5,301
3,676
2,684
1,763
2,243
4,655
1,502
91
3,637
—
—
539
933
4,414
288
104
$
— $
644
805
2,852
2,119
961
1,177
—
1,275
—
— $
—
1,530
644
9
—
—
—
—
—
—
—
4,451
2,852
2,119
1,500
2,110
4,414
1,563
104
Private real estate
Real estate commingled/mutual funds
5
898
240
1,045
1,569 $ 23,475
(1) Other investments include commodity and balanced funds of $233 million and $305 million, insurance annuity contracts of $614 million and $562 million and other various investments of $190
1,661 $ 25,836 $ 11,538 $ 10,368 $
Limited partnerships
Other investments (1)
Total plan investment assets, at fair value
—
945
263
1,037
$ 12,285 $ 11,890 $
—
13
158
364
5
885
82
588
—
18
173
390
—
927
90
636
—
—
—
93
—
—
—
11
million and $178 million at December 31, 2019 and 2018.
The Level 3 Fair Value Measurements table presents a reconciliation of all plan investment assets measured at fair value using
significant unobservable inputs (Level 3) during 2019, 2018 and 2017.
Level 3 Fair Value Measurements
(Dollars in millions)
Fixed income
U.S. government and agency securities
Real estate
Private real estate
Real estate commingled/mutual funds
Limited partnerships
Other investments
Total
Fixed income
U.S. government and agency securities
Real estate
Private real estate
Real estate commingled/mutual funds
Limited partnerships
Other investments
Total
Fixed income
U.S. government and agency securities
Real estate
Private real estate
Real estate commingled/mutual funds
Limited partnerships
Other investments
Total
Balance
January 1
Actual Return on
Plan Assets Still
Held at the
Reporting Date
Purchases, Sales
and Settlements
Balance
December 31
2019
9 $
— $
5
885
82
588
1,569 $
9 $
93
831
85
74
1,092 $
10 $
150
748
38
83
1,029 $
—
33
—
6
39 $
2018
— $
(7)
52
(12)
—
33 $
2017
— $
8
63
14
5
90 $
$
$
$
$
$
$
(1) $
(5)
9
8
42
53 $
8
—
927
90
636
1,661
— $
9
(81)
2
9
514
444 $
5
885
82
588
1,569
(1) $
9
(65)
20
33
(14)
(27) $
93
831
85
74
1,092
Bank of America 2019 163
Bank of America 2019 163
Projected Benefit Payments
Benefit payments projected to be made from the Qualified Pension Plan, Non-U.S. Pension Plans, Nonqualified and Other Pension Plans,
and Postretirement Health and Life Plans are presented in the table below.
Projected Benefit Payments
(Dollars in millions)
Qualified
Pension Plan (1)
Non-U.S.
Pension Plans (2)
Nonqualified
and Other
Pension Plans (2)
Postretirement
Health and
Life Plans (3)
2020
2021
2022
2023
2024
2025 - 2029
(1) Benefit payments expected to be made from the plan’s assets.
(2) Benefit payments expected to be made from a combination of the plans’ and the Corporation’s assets.
(3) Benefit payments (net of retiree contributions) expected to be made from a combination of the plans’ and the Corporation’s assets.
917 $
926
927
917
924
4,409
$
108 $
107
110
116
126
594
242 $
245
232
230
223
1,011
83
80
77
74
72
313
Defined Contribution Plans
The Corporation maintains qualified and non-qualified defined
contribution retirement plans. The Corporation recorded expense
of $1.0 billion in each of 2019, 2018 and 2017 related to the
qualified defined contribution plans. At December 31, 2019 and
2018, 189 million and 212 million shares of the Corporation’s
common stock were held by these plans. Payments to the plans
for dividends on common stock were $133 million, $115 million
and $86 million in 2019, 2018 and 2017, respectively.
Certain non-U.S. employees are covered under defined
contribution pension plans that are separately administered in
accordance with local laws.
NOTE 19 Stock-based Compensation Plans
The Corporation administers a number of equity compensation
plans, with awards being granted predominantly from the Bank of
America Key Employee Equity Plan (KEEP). On April 24, 2019, Bank
of America's shareholders approved an amendment to the KEEP
to increase the number of shares available for grant by 150 million.
Subsequent to this amendment, 600 million shares of the
Corporation’s common stock are authorized to be used for grants
of awards.
During 2019 and 2018, the Corporation granted 94 million and
71 million RSU awards to certain employees under the KEEP. These
RSUs were authorized to settle predominantly in shares of common
stock of the Corporation. Certain RSUs will be settled in cash or
contain settlement provisions that subject these awards to variable
accounting whereby compensation expense is adjusted to fair
value based on changes in the share price of the Corporation’s
common stock up to the settlement date. Of the RSUs granted in
2019 and 2018, 71 million and 63 million will vest predominantly
over three years with most vesting occurring in one-third
increments on each of the first three anniversaries of the grant
date provided that the employee remains continuously employed
with the Corporation during that time, and will be expensed ratably
over the vesting period, net of estimated forfeitures, for non-
retirement eligible employees based on the grant-date fair value
of the shares. For RSUs granted to employees who are retirement
eligible, the awards are deemed authorized as of the beginning of
the year preceding the grant date when the incentive award plans
are generally approved. As a result, the estimated value is
expensed ratably over the year preceding the grant date.
Additionally, 23 million and eight million of the RSUs granted in
2019 and 2018 will vest predominantly over four years with most
vesting occurring in one-fourth increments on each of the first four
anniversaries of the grant date provided that the employee remains
continuously employed with the Corporation during that time, and
will be expensed ratably over the vesting period, net of estimated
forfeitures, based on the grant-date fair value of the shares.
The compensation cost for the stock-based plans was $2.1
billion, $1.8 billion and $2.2 billion and the related income tax
benefit was $511 million, $433 million and $829 million for 2019,
2018 and 2017, respectively.
Restricted Stock/Units
The table below presents the status at December 31, 2019 of the
share-settled restricted stock/units and changes during 2019.
Stock-settled Restricted Stock/Units
Outstanding at January 1, 2019
Granted
Vested
Canceled
Outstanding at December 31, 2019
Shares/Units
Weighted-
average Grant
Date Fair Value
165,621,246 $
91,164,482
(92,215,549)
(6,660,864)
157,909,315
23.22
27.72
19.30
27.49
27.93
The table below presents the status at December 31, 2019 of
the cash-settled RSUs and changes during 2019.
Cash-settled Restricted Units
Outstanding at January 1, 2019
Granted
Vested
Canceled
Outstanding at December 31, 2019
Units
2,609,122
2,455,177
(3,006,707)
(93,170)
1,964,422
At December 31, 2019, there was an estimated $1.6 billion of
total unrecognized compensation cost related to certain share-
based compensation awards that is expected to be recognized
over a period of up to four years, with a weighted-average period
of 2.2 years. The total fair value of restricted stock vested in 2019,
2018 and 2017 was $2.6 billion, $2.3 billion and $1.3 billion,
respectively. In 2019, 2018 and 2017, the amount of cash paid
to settle equity-based awards for all equity compensation plans
was $84 million, $1.3 billion and $1.9 billion, respectively.
164 164
Bank of America 2019
Bank of America 2019
NOTE 20 Income Taxes
The components of income tax expense for 2019, 2018 and 2017
are presented in the table below.
Income Tax Expense
(Dollars in millions)
Current income tax expense
U.S. federal
U.S. state and local
Non-U.S.
Total current expense
Deferred income tax expense
U.S. federal
U.S. state and local
Non-U.S.
Total deferred expense
Total income tax expense
$
2019
2018
2017
$
1,136 $
816 $
901
852
2,889
1,377
1,203
3,396
2,001
223
211
2,435
5,324 $
2,579
240
222
3,041
6,437 $
1,310
557
939
2,806
7,238
835
102
8,175
10,981
Total income tax expense does not reflect the tax effects of
items that are included in OCI each period. For more information,
see Note 15 – Accumulated Other Comprehensive Income (Loss).
Other tax effects included in OCI each period resulted in an
expense of $1.9 billion in 2019 and a benefit of $1.2 billion in
both 2018 and 2017.
Reconciliation of Income Tax Expense
(Dollars in millions)
Expected U.S. federal income tax expense
Increase (decrease) in taxes resulting from:
State tax expense, net of federal benefit
Affordable housing/energy/other credits
Changes in prior-period UTBs, including interest
Tax-exempt income, including dividends
Stock-based compensation
Rate differential on non-U.S. earnings
Nondeductible expenses
Tax law changes
Other
Total income tax expense
The reconciliation of the beginning unrecognized tax benefits
(UTB) balance to the ending balance is presented in the following
table.
Reconciliation of the Change in Unrecognized Tax
Benefits
(Dollars in millions)
Balance, January 1
2019
2018
2017
$
2,197 $
1,773 $
875
Increases related to positions taken
during the current year
Increases related to positions taken
during prior years (1)
Decreases related to positions
taken during prior years (1)
238
401
395
406
292
750
(1,102)
(371)
(122)
Balance, December 31
Settlements
Expiration of statute of limitations
(17)
(5)
$
1,773
(1) The sum of the positions taken during prior years differs from the $(613) million, $144 million
and $133 million in the Reconciliation of Income Tax Expense table due to temporary items,
state items and jurisdictional offsets, as well as the inclusion of interest in the Reconciliation
of Income Tax Expense table.
(6)
—
2,197 $
(541)
(18)
1,175 $
Income tax expense for 2019, 2018 and 2017 varied from the
amount computed by applying the statutory income tax rate to
income before income taxes. The Corporation’s federal statutory
tax rate was 21 percent for 2019 and 2018, and 35 percent for
2017. A reconciliation of the expected U.S. federal income tax
expense, calculated by applying the federal statutory tax rate, to
the Corporation’s actual income tax expense, and the effective tax
rates for 2019, 2018 and 2017 are presented in the table below.
On December 22, 2017, the President signed into law the Tax
Act which made significant changes to federal income tax law
including, among other things, reducing the statutory corporate
income tax rate to 21 percent from 35 percent and changing the
taxation of the Corporation’s non-U.S. business activities. The
impact on net income in 2017 was $2.9 billion, driven by $2.3
billion in income tax expense, largely from a lower valuation of
certain U.S. deferred tax assets and liabilities. The change in the
statutory tax rate also impacted the Corporation’s tax-advantaged
energy investments, resulting in a downward valuation adjustment
of $946 million recorded in other income and a related income
tax benefit of $347 million, which when netted against the $2.3
billion, resulted in a net impact on income tax expense of $1.9
billion.
Amount
Percent
Amount
Percent
Amount
Percent
2019
2018
2017
$
6,878
21.0% $
7,263
21.0% $ 10,225
35.0%
1,283
(2,365)
(613)
(433)
(225)
504
290
—
5
5,324
$
3.9
(7.2)
(1.9)
(1.3)
(0.7)
1.5
0.9
—
0.1
16.3% $
1,367
(1,888)
144
(413)
(257)
98
302
—
(179)
6,437
881
4.0
(1,406)
(5.5)
133
0.4
(672)
(1.2)
(236)
(0.7)
(272)
0.3
97
0.9
2,281
—
(0.6)
(50)
18.6% $ 10,981
3.0
(4.8)
0.5
(2.3)
(0.8)
(0.9)
0.3
7.8
(0.2)
37.6%
At December 31, 2019, 2018 and 2017, the balance of the
Corporation’s UTBs which would, if recognized, affect the
Corporation’s effective tax rate was $814 million, $1.6 billion and
$1.2 billion, respectively. Included in the UTB balance are some
items the recognition of which would not affect the effective tax
rate, such as the tax effect of certain temporary differences, the
portion of gross state UTBs that would be offset by the tax benefit
of the associated federal deduction and the portion of gross non-
U.S. UTBs that would be offset by tax reductions in other
jurisdictions.
It is reasonably possible that the UTB balance may decrease
by as much as $64 million during the next 12 months, since
resolved items will be removed from the balance whether their
resolution results in payment or recognition.
The Corporation recognized an interest benefit of $19 million
in 2019 and interest expense of $43 million and $1 million in
2018 and 2017. At December 31, 2019 and 2018, the
Corporation’s accrual for interest and penalties that related to
income taxes, net of taxes and remittances, was $147 million and
$218 million.
The Corporation files income tax returns in more than 100 state
and non-U.S. jurisdictions each year. The IRS and other tax
authorities in countries and states in which the Corporation has
Bank of America 2019 165
Bank of America 2019 165
significant business operations examine tax returns periodically
(continuously
table
summarizes the status of examinations by major jurisdiction for
the Corporation and various subsidiaries at December 31, 2019.
jurisdictions). The
in some
following
Tax Examination Status
Years under
Examination (1)
Status at
December 31
2019
United States
California
New York
United Kingdom
(1) All tax years subsequent to the years shown remain subject to examination.
2017-2018
2012-2017
2016-2018
2018
To begin in 2020
Field examination
Field examination
Field examination
Significant components of the Corporation’s net deferred tax
assets and liabilities at December 31, 2019 and 2018 are
presented in the following table.
Deferred Tax Assets and Liabilities
(Dollars in millions)
Deferred tax assets
Net operating loss carryforwards
Allowance for credit losses
Lease liability
Security, loan and debt valuations
Accrued expenses
Employee compensation and retirement benefits
Credit carryforwards
Available-for-sale securities
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets, net of valuation
allowance
Deferred tax liabilities
Equipment lease financing
Right-to-use asset
Tax credit investments
Fixed assets
Available-for-sale securities
Other
Gross deferred tax liabilities
Net deferred tax assets
December 31
2019
2018
$
7,417 $
2,354
2,321
1,860
1,719
1,622
183
—
1,203
18,679
(1,989)
7,993
2,400
—
1,818
1,875
1,564
623
1,854
1,037
19,164
(1,569)
16,690
17,595
2,933
2,246
1,577
1,505
100
1,885
10,246
2,684
—
940
1,104
—
2,126
6,854
6,444 $ 10,741
$
The table below summarizes the deferred tax assets and
related valuation allowances recognized for the net operating loss
(NOL) and tax credit carryforwards at December 31, 2019.
Net Operating Loss and Tax Credit Carryforward Deferred
Tax Assets
Deferred
Tax Asset
Valuation
Allowance
Net
Deferred
Tax Asset
First Year
Expiring
$
312
$
— $
312
After 2028
5,276
—
5,276
None
493
(423)
70
Various
(Dollars in millions)
Net operating losses -
U.S.
Net operating losses -
U.K. (1)
Net operating losses -
other non-U.S.
Net operating losses -
U.S. states (2)
2028
Foreign tax credits
(1) Represents U.K. broker-dealer net operating losses that may be carried forward indefinitely.
(2) The net operating losses and related valuation allowances for U.S. states before considering
(183)
183
—
756
Various
1,336
(580)
the benefit of federal deductions were $1.7 billion and $734 million.
166 166
Bank of America 2019
Bank of America 2019
Management concluded that no valuation allowance was
necessary to reduce the deferred tax assets related to the U.K.
NOL carryforwards and U.S. federal and certain state NOL
carryforwards since estimated future taxable income will be
sufficient to utilize these assets prior to their expiration. The
majority of the Corporation’s U.K. net deferred tax assets, which
consist primarily of NOLs, are expected to be realized by certain
subsidiaries over an extended number of years. Management’s
conclusion is supported by financial results, profit forecasts for
the relevant entities and the indefinite period to carry forward
NOLs. However, a material change in those estimates could lead
management to reassess such valuation allowance conclusions.
At December 31, 2019, U.S. federal income taxes had not been
provided on approximately $5.0 billion of temporary differences
associated with investments in non-U.S. subsidiaries that are
essentially permanent in duration. If the Corporation were to
record the associated deferred tax liability, the amount would be
approximately $1.0 billion.
NOTE 21 Fair Value Measurements
Under applicable accounting standards, fair value is defined as
the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement
date. The Corporation determines the fair values of its financial
instruments under applicable accounting standards that require
an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs. The Corporation categorizes its
financial instruments into three levels based on the established
fair value hierarchy and conducts a review of fair value hierarchy
classifications on a quarterly basis. Transfers into or out of fair
value hierarchy classifications are made if the significant inputs
used in the financial models measuring the fair values of the
assets and liabilities become unobservable or observable in the
current marketplace. For more information regarding the fair value
hierarchy and how the Corporation measures fair value, see Note
1 – Summary of Significant Accounting Principles. The Corporation
accounts for certain financial instruments under the fair value
option. For more information, see Note 22 – Fair Value Option.
Valuation Techniques
The following sections outline the valuation methodologies for the
Corporation’s assets and liabilities. While the Corporation believes
its valuation methods are appropriate and consistent with other
market participants, the use of different methodologies or
assumptions to determine the fair value of certain financial
instruments could result in a different estimate of fair value at the
reporting date.
During 2019, there were no significant changes to valuation
approaches or techniques that had, or are expected to have, a
material impact on the Corporation’s consolidated financial
position or results of operations.
Trading Account Assets and Liabilities and Debt Securities
The fair values of trading account assets and liabilities are primarily
based on actively traded markets where prices are based on either
direct market quotes or observed transactions. The fair values of
debt securities are generally based on quoted market prices or
market prices for similar assets. Liquidity is a significant factor in
the determination of the fair values of trading account assets and
liabilities and debt securities. Market price quotes may not be
readily available for some positions such as positions within a
market sector where trading activity has slowed significantly or
ceased. Some of these instruments are valued using a discounted
cash flow model, which estimates the fair value of the securities
using internal credit risk, and interest rate and prepayment risk
models that incorporate management’s best estimate of current
key assumptions such as default rates, loss severity and
prepayment rates. Principal and interest cash flows are discounted
using an observable discount rate for similar instruments with
adjustments that management believes a market participant
would consider in determining fair value for the specific security.
Other instruments are valued using a net asset value approach
which considers the value of the underlying securities. Underlying
assets are valued using external pricing services, where available,
or matrix pricing based on the vintages and ratings. Situations of
illiquidity generally are triggered by the market’s perception of
credit uncertainty regarding a single company or a specific market
sector. In these instances, fair value is determined based on
limited available market information and other factors, principally
from reviewing the issuer’s financial statements and changes in
credit ratings made by one or more rating agencies.
Derivative Assets and Liabilities
The fair values of derivative assets and liabilities traded in the
OTC market are determined using quantitative models that utilize
multiple market inputs including interest rates, prices and indices
to generate continuous yield or pricing curves and volatility factors
to value the position. The majority of market inputs are actively
quoted and can be validated through external sources, including
brokers, market transactions and third-party pricing services.
When third-party pricing services are used, the methods and
assumptions are reviewed by the Corporation. Estimation risk is
greater for derivative asset and liability positions that are either
option-based or have longer maturity dates where observable
market inputs are less readily available, or are unobservable, in
which case, quantitative-based extrapolations of rate, price or
index scenarios are used in determining fair values. The fair values
of derivative assets and liabilities include adjustments for market
liquidity, counterparty credit quality and other instrument-specific
factors, where appropriate.
the Corporation
incorporates within its fair value measurements of OTC derivatives
a valuation adjustment to reflect the credit risk associated with
the net position. Positions are netted by counterparty, and fair
value for net long exposures is adjusted for counterparty credit
risk while the fair value for net short exposures is adjusted for the
Corporation’s own credit risk. The Corporation also incorporates
FVA within its fair value measurements to include funding costs
on uncollateralized derivatives and derivatives where the
Corporation is not permitted to use the collateral it receives. An
estimate of severity of loss is also used in the determination of
fair value, primarily based on market data.
In addition,
Loans and Loan Commitments
The fair values of loans and loan commitments are based on
market prices, where available, or discounted cash flow analyses
using market-based credit spreads of comparable debt
instruments or credit derivatives of the specific borrower or
comparable borrowers. Results of discounted cash flow analyses
may be adjusted, as appropriate, to reflect other market conditions
or the perceived credit risk of the borrower.
Mortgage Servicing Rights
The fair values of MSRs are primarily determined using an option-
adjusted spread valuation approach, which factors in prepayment
risk to determine the fair value of MSRs. This approach consists
of projecting servicing cash flows under multiple interest rate
scenarios and discounting these cash flows using risk-adjusted
discount rates.
Loans Held-for-sale
The fair values of LHFS are based on quoted market prices, where
available, or are determined by discounting estimated cash flows
using interest rates approximating the Corporation’s current
origination rates for similar loans adjusted to reflect the inherent
credit risk. The borrower-specific credit risk is embedded within
the quoted market prices or is implied by considering loan
performance when selecting comparables.
Short-term Borrowings and Long-term Debt
The Corporation issues structured liabilities that have coupons or
repayment terms linked to the performance of debt or equity
securities, interest rates, indices, currencies or commodities. The
fair values of these structured liabilities are estimated using
quantitative models for the combined derivative and debt portions
of the notes. These models incorporate observable and, in some
instances, unobservable inputs including security prices, interest
rate yield curves, option volatility, currency, commodity or equity
rates and correlations among these inputs. The Corporation also
considers the impact of its own credit spread in determining the
discount rate used to value these liabilities. The credit spread is
determined by reference to observable spreads in the secondary
bond market.
Securities Financing Agreements
The fair values of certain reverse repurchase agreements,
repurchase agreements and securities borrowed transactions are
determined using quantitative models, including discounted cash
flow models that require the use of multiple market inputs including
interest rates and spreads to generate continuous yield or pricing
curves, and volatility factors. The majority of market inputs are
actively quoted and can be validated through external sources,
including brokers, market transactions and third-party pricing
services.
Deposits
The fair values of deposits are determined using quantitative
models, including discounted cash flow models that require the
use of multiple market inputs including interest rates and spreads
to generate continuous yield or pricing curves, and volatility factors.
The majority of market inputs are actively quoted and can be
validated through external sources, including brokers, market
transactions and third-party pricing services. The Corporation
considers the impact of its own credit spread in the valuation of
these liabilities. The credit risk is determined by reference to
observable credit spreads in the secondary cash market.
Asset-backed Secured Financings
The fair values of asset-backed secured financings are based on
external broker bids, where available, or are determined by
discounting estimated cash
rates
approximating the Corporation’s current origination rates for
similar loans adjusted to reflect the inherent credit risk.
flows using
interest
Bank of America 2019 167
Bank of America 2019 167
Recurring Fair Value
Assets and liabilities carried at fair value on a recurring basis at December 31, 2019 and 2018, including financial instruments that
the Corporation accounts for under the fair value option, are summarized in the following tables.
(Dollars in millions)
Assets
Time deposits placed and other short-term investments
Federal funds sold and securities borrowed or purchased under
$
agreements to resell
Trading account assets:
U.S. Treasury and agency securities (2)
Corporate securities, trading loans and other
Equity securities
Non-U.S. sovereign debt
Mortgage trading loans, MBS and ABS:
U.S. government-sponsored agency guaranteed (2)
Mortgage trading loans, ABS and other MBS
Total trading account assets (3)
Derivative assets
AFS debt securities:
U.S. Treasury and agency securities
Mortgage-backed securities:
Agency
Agency-collateralized mortgage obligations
Non-agency residential
Commercial
Non-U.S. securities
Other taxable securities
Tax-exempt securities
Total AFS debt securities
Other debt securities carried at fair value:
U.S. Treasury and agency securities
Agency MBS
Non-agency residential MBS
Non-U.S. and other securities
Total other debt securities carried at fair value
Loans and leases
Loans held-for-sale
Other assets (4)
Total assets (5)
Liabilities
Interest-bearing deposits in U.S. offices
Federal funds purchased and securities loaned or sold under
$
$
agreements to repurchase
Trading account liabilities:
U.S. Treasury and agency securities
Equity securities
Non-U.S. sovereign debt
Corporate securities and other
Total trading account liabilities
Derivative liabilities
Short-term borrowings
Accrued expenses and other liabilities
Long-term debt
Fair Value Measurements
December 31, 2019
Level 1
Level 2
Level 3
Netting
Adjustments (1)
Assets/Liabilities
at Fair Value
1,000
$
— $
— $
— $
1,000
—
50,364
49,517
—
53,597
3,965
—
—
107,079
14,079
4,157
25,226
32,619
23,854
24,324
8,786
118,966
328,442
67,332
1,196
—
—
—
—
—
—
—
67,332
3
—
—
400
403
—
—
11,782
201,675
$
122,528
4,641
653
15,021
11,989
3,876
17,804
177,708
—
3,003
1,035
6,088
10,126
7,642
3,334
1,376
697,958
— $
508
$
$
—
—
1,507
239
482
—
1,553
3,781
2,226
—
—
—
424
—
2
65
108
599
—
—
299
—
299
693
375
2,360
10,333
—
—
—
—
—
—
—
—
(304,262)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(304,262)
$
$
50,364
53,674
26,733
86,455
28,301
24,324
10,339
229,826
40,485
68,528
122,528
4,641
1,077
15,021
11,991
3,941
17,912
245,639
3
3,003
1,334
6,488
10,828
8,335
3,709
15,518
605,704
— $
— $
508
—
16,008
—
—
16,008
13,140
38,148
10,751
—
62,039
11,904
—
13,927
—
87,870
282
4,144
11,310
5,478
21,214
320,479
3,941
1,507
33,826
397,483
—
2
—
15
17
4,764
—
—
1,149
5,930
—
—
—
—
—
(298,918)
—
—
—
(298,918)
$
13,422
42,294
22,061
5,493
83,270
38,229
3,941
15,434
34,975
192,365
Total liabilities (5)
$
(1) Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.
(2)
$
$
$
Includes $26.7 billion of GSE obligations.
(3) Includes securities with a fair value of $14.7 billion that were segregated in compliance with securities regulations or deposited with clearing organizations. This amount is included in the parenthetical
disclosure on the Consolidated Balance Sheet.
Includes MSRs of $1.5 billion which are classified as Level 3 assets.
(4)
(5) Total recurring Level 3 assets were 0.42 percent of total consolidated assets, and total recurring Level 3 liabilities were 0.27 percent of total consolidated liabilities.
168 168
Bank of America 2019
Bank of America 2019
(Dollars in millions)
Assets
Time deposits placed and other short-term investments
Federal funds sold and securities borrowed or purchased under
$
agreements to resell
Trading account assets:
U.S. Treasury and agency securities (2)
Corporate securities, trading loans and other
Equity securities
Non-U.S. sovereign debt
Mortgage trading loans, MBS and ABS:
U.S. government-sponsored agency guaranteed (2)
Mortgage trading loans, ABS and other MBS
Total trading account assets (3)
Derivative assets
AFS debt securities:
U.S. Treasury and agency securities
Mortgage-backed securities:
Agency
Agency-collateralized mortgage obligations
Non-agency residential
Commercial
Non-U.S. securities
Other taxable securities
Tax-exempt securities
Total AFS debt securities
Other debt securities carried at fair value:
U.S. Treasury and agency securities
Non-agency residential MBS
Non-U.S. and other securities
Total other debt securities carried at fair value
Loans and leases
Loans held-for-sale
Other assets (4)
Total assets (5)
Liabilities
Interest-bearing deposits in U.S. offices
Federal funds purchased and securities loaned or sold under
$
$
agreements to repurchase
Trading account liabilities:
U.S. Treasury and agency securities
Equity securities
Non-U.S. sovereign debt
Corporate securities and other
Total trading account liabilities
Derivative liabilities
Short-term borrowings
Accrued expenses and other liabilities
Long-term debt
Fair Value Measurements
December 31, 2018
Level 1
Level 2
Level 3
Netting
Adjustments (1)
Assets/Liabilities
at Fair Value
1,214
$
—
$
—
$
— $
1,214
—
56,399
53,131
—
53,840
5,818
—
—
112,789
9,967
53,663
—
—
—
—
—
—
—
53,663
1,282
—
490
1,772
—
—
15,032
194,437
$
1,593
24,630
23,163
19,210
19,586
9,443
97,625
315,413
1,260
121,826
5,530
1,320
14,078
9,304
4,403
17,376
175,097
—
1,434
5,357
6,791
4,011
2,400
1,775
659,511
$
—
—
1,558
276
465
—
1,635
3,934
3,466
—
—
—
597
—
2
7
—
606
—
172
—
172
338
542
2,932
11,990
—
—
—
—
—
—
—
—
(285,121)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
(285,121) $
56,399
54,724
26,188
77,279
25,493
19,586
11,078
214,348
43,725
54,923
121,826
5,530
1,917
14,078
9,306
4,410
17,376
229,366
1,282
1,606
5,847
8,735
4,349
2,942
19,739
580,817
—
$
492
$
—
$
— $
492
—
28,875
—
—
28,875
7,894
33,739
7,452
—
49,085
9,931
—
18,096
—
77,112
761
4,070
9,182
5,104
19,117
303,441
1,648
1,979
26,872
382,424
—
—
—
18
18
4,401
—
—
817
5,236
—
—
—
—
—
(279,882)
—
—
—
(279,882) $
8,655
37,809
16,634
5,122
68,220
37,891
1,648
20,075
27,689
184,890
Total liabilities (5)
$
(1) Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.
(2)
$
$
$
Includes $20.2 billion of GSE obligations.
(3) Includes securities with a fair value of $16.6 billion that were segregated in compliance with securities regulations or deposited with clearing organizations. This amount is included in the parenthetical
disclosure on the Consolidated Balance Sheet.
Includes MSRs of $2.0 billion which are classified as Level 3 assets.
(4)
(5) Total recurring Level 3 assets were 0.51 percent of total consolidated assets, and total recurring Level 3 liabilities were 0.25 percent of total consolidated liabilities.
Bank of America 2019 169
Bank of America 2019 169
The following tables present a reconciliation of all assets and
liabilities measured at fair value on a recurring basis using
significant unobservable inputs (Level 3) during 2019, 2018 and
2017, including net realized and unrealized gains (losses) included
in earnings and accumulated OCI. Transfers into Level 3 occur
primarily due to decreased price observability, and transfers out
of Level 3 occur primarily due to increased price observability.
Transfers occur on a regular basis for long-term debt instruments
due to changes in the impact of unobservable inputs on the value
of the embedded derivative in relation to the instrument as a whole.
Level 3 – Fair Value Measurements (1)
Total
Realized/
Unrealized
Gains
(Losses) in
Net
Income (2)
Balance
January 1
Gains
(Losses)
in OCI (3) Purchases
Gross
Sales
Issuances Settlements
Gross
Gross
Transfers Transfers
into
Level 3
out of
Level 3
Balance
December 31
Change in
Unrealized
Gains
(Losses) in
Net Income
Related to
Financial
Instruments
Still Held (2)
$ 1,558 $
276
465
1,635
3,934
(935)
105 $ — $
(12)
46
99
238
(37)
—
(12)
(2)
(14)
—
534 $ (390) $
38
1
662
1,235
298
(87)
—
(899)
(1,376)
(837)
18 $
—
—
—
18
—
(578) $
(9)
(51)
(175)
(813)
(97)
699 $
79
39
738
1,555
147
(439) $
(46)
(6)
(505)
(996)
(1,077)
1,507 $
239
482
1,553
3,781
(2,538)
597
2
7
—
606
172
338
542
2,932
—
(18)
(817)
13
—
2
—
15
36
—
48
(81)
(2)
8
(59)
64
—
—
—
64
—
—
(6)
19
—
—
(64)
—
—
—
—
—
—
230
12
—
—
(1)
—
(73)
—
—
—
(73)
—
(35)
(71)
(10)
—
(3)
—
—
—
—
—
—
—
217
36
179
—
(1)
(40)
(40)
—
(5)
—
(45)
206
—
61
108
375
(343)
—
—
—
(343)
(17)
155
(47)
(57)
(245)
(683)
—
—
180
—
59
5
—
—
(350)
—
—
(1)
—
—
1
424
2
65
108
599
299
693
375
2,360
(2)
(15)
(1,149)
$ 1,864 $
235
556
1,498
4,153
(1,714)
(32) $
(17)
47
148
146
106
(1) $
—
(44)
3
(42)
—
436 $ (403) $
44
13
585
1,078
531
(11)
(57)
(910)
(1,381)
(1,179)
5 $
—
—
—
5
—
—
25
509
469
1,003
—
571
690
2,425
(24)
(8)
(1,863)
27
—
1
—
28
(18)
(16)
44
414
11
—
103
(33)
(1)
(3)
—
(37)
—
—
(26)
(38)
—
—
4
—
—
—
—
—
—
—
71
2
9
—
9
(71)
(10)
(23)
—
(104)
(8)
(134)
—
(69)
(12)
—
—
—
—
—
—
—
—
—
1
96
(2)
—
(141)
(4)
(30)
(158)
(760)
778
(25)
(15)
(11)
(1)
(52)
(34)
(83)
(201)
(792)
—
8
486
(568) $ 804 $
78
117
705
1,704
39
(547) $
(49)
(137)
(236)
(969)
504
1,558 $
276
465
1,635
3,934
(935)
774
3
60
1
838
365
—
23
929
—
—
(262)
(75)
—
(526)
(469)
(1,070)
(133)
—
(60)
(35)
—
—
847
597
2
7
—
606
172
338
542
2,932
(18)
—
(817)
29
(18)
47
26
84
228
—
—
—
—
—
38
(1)
22
(267)
(2)
—
(55)
(117)
(22)
48
97
6
(116)
—
—
—
—
—
(18)
(9)
31
149
(7)
—
95
(Dollars in millions)
Year Ended December 31, 2019
Trading account assets:
Corporate securities, trading loans and other
Equity securities
Non-U.S. sovereign debt
Mortgage trading loans, ABS and other MBS
Total trading account assets
Net derivative assets (liabilities) (4,5)
AFS debt securities:
Non-agency residential MBS
Non-U.S. securities
Other taxable securities
Tax-exempt securities
Total AFS debt securities
Other debt securities carried at fair value – Non-
agency residential MBS
Loans and leases (6,7)
Loans held-for-sale (6,7)
Other assets (7)
Trading account liabilities – Equity securities
Trading account liabilities – Corporate securities
and other
Long-term debt (5,6)
Year Ended December 31, 2018
Trading account assets:
Corporate securities, trading loans and other
Equity securities
Non-U.S. sovereign debt
Mortgage trading loans, ABS and other MBS
Total trading account assets
Net derivative assets (liabilities) (4)
AFS debt securities:
Non-agency residential MBS
Non-U.S. securities
Other taxable securities
Tax-exempt securities
Total AFS debt securities (8)
Other debt securities carried at fair value – Non-
agency residential MBS
Loans and leases (6,7)
Loans held-for-sale (6)
Other assets (7,8)
Trading account liabilities – Corporate securities
and other
Accrued expenses and other liabilities (6)
Long-term debt (6)
(1) Assets (liabilities). For assets, increase (decrease) to Level 3 and for liabilities, (increase) decrease to Level 3.
(2) Includes gains (losses) reported in earnings in the following income statement line items: Trading account assets/liabilities - predominantly market making and similar activities; Net derivative assets
(liabilities) - market making and similar activities and other income; Other debt securities carried at fair value - other income; Loans and leases - predominantly other income; Loans held-for-sale -
other income; Other assets - primarily other income related to MSRs; Long-term debt - primarily market making and similar activities.
(3) Includes unrealized gains (losses) in OCI on AFS debt securities, foreign currency translation adjustments and the impact of changes in the Corporation’s credit spreads on long-term debt accounted
for under the fair value option. Amounts include net unrealized gains (losses) of $3 million and $(105) million related to financial instruments still held at December 31, 2019 and 2018.
(4) Net derivative assets (liabilities) include derivative assets of $2.2 billion and $3.5 billion and derivative liabilities of $4.8 billion and $4.4 billion at December 31, 2019 and 2018.
(5) Transfers into long-term debt include a $1.4 billion transfer in of Level 3 derivative assets to reflect the Corporation's change to present bifurcated embedded derivatives with their respective host
instruments.
(6) Amounts represent instruments that are accounted for under the fair value option.
(7)
Issuances represent loan originations and MSRs recognized following securitizations or whole-loan sales.
(8) Transfers out of AFS debt securities and into other assets primarily relate to the reclassification of certain securities.
170 170
Bank of America 2019
Bank of America 2019
Level 3 – Fair Value Measurements (1)
Total
Realized/
Unrealized
Gains/
Balance
January 1
(Losses) in Gains/
(Losses)
in OCI (3) Purchases
Net
Income (2)
Gross
Sales
Issuances Settlements
(Dollars in millions)
Year Ended December 31, 2017
Trading account assets:
Change in
Unrealized
Gains/
(Losses) in
Net Income
Related to
Financial
Instruments
out of
Level 3 December 31 Still Held (2)
Balance
Gross
Transfers Transfers
Gross
into
Level 3
Corporate securities, trading loans and other $ 2,777 $
Equity securities
Non-U.S. sovereign debt
Mortgage trading loans, ABS and other MBS
229 $ — $
547 $ (702) $
55
53
1,210
1,865
664
(70)
(59)
(990)
(1,821)
(979)
5 $
—
—
—
5
—
(666) $ 728 $(1,054) $
146
(10)
72
(73)
(233)
218
(982) 1,164
48
949
(185)
(13)
(81)
(1,333)
(99)
1,864 $
235
556
1,498
4,153
(1,714)
Total trading account assets
Net derivative assets (liabilities) (4)
AFS debt securities:
Non-U.S. securities
Other taxable securities
Tax-exempt securities
Total AFS debt securities
Other debt securities carried at fair value –
Non-agency residential MBS
Loans and leases (5)
Loans held-for-sale (5,6)
Other assets (6)
Federal funds purchased and securities loaned
or sold under agreements to repurchase (5)
Trading account liabilities – Corporate
securities and other
281
510
1,211
4,779
(1,313)
229
594
542
1,365
25
720
656
2,986
18
74
165
486
(984)
2
4
1
7
(1)
15
100
144
(359)
(5)
(27)
14
—
(8)
(2)
(10)
—
16
8
3
27
—
—
(3)
(57)
—
—
49
5
14
68
—
—
(70)
(70)
—
(21)
3
3
2
(34)
(189)
(214)
—
—
—
—
—
—
—
258
(271)
(42)
(11)
(324)
(3)
(126)
(346)
(758)
—
34
35
69
—
—
501
64
—
(94)
(45)
(139)
—
(7)
(32)
—
25
509
469
1,003
—
571
690
2,425
—
—
(12)
171
(58)
263
—
8
(17)
(2)
—
(288)
—
1
514
—
—
(711)
—
—
218
(24)
(8)
(1,863)
2
(1)
70
72
143
(409)
—
—
—
—
—
11
14
(226)
—
2
—
(196)
Accrued expenses and other liabilities (5)
Long-term debt (5)
(1) Assets (liabilities). For assets, increase (decrease) to Level 3 and for liabilities, (increase) decrease to Level 3.
(2)
(9)
(1,514)
—
(135)
—
(31)
—
84
—
—
Includes gains (losses) reported in earnings in the following income statement line items: Trading account assets/liabilities - market making and similar activities; Net derivative assets (liabilities)
- primarily market making and similar activities and other income; Other debt securities carried at fair value - other income; Loans and leases - other income; Loans held-for-sale - other income; Other
assets - primarily other income related to MSRs; Long-term debt - predominantly market making and similar activities.
(3) Includes unrealized gains (losses) in OCI on AFS debt securities, foreign currency translation adjustments and the impact of changes in the Corporation’s credit spreads on long-term debt accounted
for under the fair value option.
(4) Net derivative assets (liabilities) include derivative assets of $4.1 billion and derivative liabilities of $5.8 billion.
(5) Amounts represent instruments that are accounted for under the fair value option.
(6)
Issuances represent loan originations and MSRs recognized following securitizations or whole-loan sales.
Bank of America 2019 171
Bank of America 2019 171
The following tables present information about significant unobservable inputs related to the Corporation’s material categories of
Level 3 financial assets and liabilities at December 31, 2019 and 2018.
Quantitative Information about Level 3 Fair Value Measurements at December 31, 2019
(Dollars in millions)
Inputs
Loans and Securities (2)
Financial Instrument
Fair
Value
Valuation
Technique
Significant Unobservable
Inputs
Ranges of
Inputs
Weighted
Average (1)
Instruments backed by residential real estate assets
$ 1,407
Trading account assets – Mortgage trading loans, ABS and other MBS
Loans and leases
Loans held-for-sale
AFS debt securities, primarily non-agency residential
Other debt securities carried at fair value - Non-agency residential
Instruments backed by commercial real estate assets
$
Trading account assets – Corporate securities, trading loans and other
Trading account assets – Mortgage trading loans, ABS and other MBS
Loans held-for-sale
332
281
4
491
299
303
201
85
17
Commercial loans, debt securities and other
$ 3,798
Trading account assets – Corporate securities, trading loans and other
Trading account assets – Non-U.S. sovereign debt
Trading account assets – Mortgage trading loans, ABS and other MBS
AFS debt securities – Other taxable securities
Loans and leases
Loans held-for-sale
Other assets, primarily auction rate securities
$
1,306
482
1,136
108
412
354
815
Yield
Prepayment speed
Discounted cash
flow, Market
comparables
Default rate
Loss severity
Discounted cash
flow
Price
Yield
Price
Yield
Prepayment speed
Discounted cash
flow, Market
comparables
Default rate
Loss severity
Price
Long-dated equity volatilities
Price
Discounted cash
flow, Market
comparables
MSRs
$ 1,545
Weighted-average life, fixed rate (5)
Discounted cash
flow
Weighted-average life, variable rate (5)
Option-adjusted spread, fixed rate
Option-adjusted spread, variable rate
0% to 25%
6%
1% to 27% CPR
17% CPR
0% to 3% CDR
1% CDR
0% to 47%
$0 to $160
0% to 30%
$0 to $100
1% to 20%
10% to 20%
3% to 4%
35% to 40%
$0 to $142
35%
14%
$94
14%
$55
6%
13%
4%
38%
$72
n/a
$10 to $100
$96
0 to 14 years
0 to 9 years
5 years
3 years
7% to 14%
9% to 15%
2% to 6%
9% to 100%
4% to 101%
$0 to $116
9%
11%
5%
63%
32%
$74
Structured liabilities
Long-term debt
Net derivative assets (liabilities)
Credit derivatives
Equity derivatives
$
(1,149)
Discounted cash
flow, Market
comparables,
Industry standard
derivative pricing (3)
Yield
Equity correlation
Long-dated equity volatilities
Price
Natural gas forward price
$1/MMBtu to $5/MMBtu
$3/MMBtu
$
13
Yield
Discounted cash
flow, Stochastic
recovery correlation
model
$
(1,081)
Industry standard
derivative pricing (3)
Upfront points
Prepayment speed
Default rate
Loss severity
Price
Equity correlation
Long-dated equity volatilities
5%
n/a
0 to 100 points
63 points
15% to 100% CPR
22% CPR
1% to 4% CDR
2% CDR
35%
$0 to $104
9% to 100%
4% to 101%
n/a
$73
63%
32%
Commodity derivatives
$
(1,357) Discounted cash
Natural gas forward price
$1/MMBtu to $5/MMBtu
$3/MMBtu
Interest rate derivatives
$
(113)
Total net derivative assets (liabilities)
$
(2,538)
flow, Industry
standard derivative
pricing (3)
Correlation
Volatilities
Industry standard
derivative pricing (4)
Correlation (IR/IR)
Correlation (FX/IR)
Long-dated inflation rates
Long-dated inflation volatilities
30% to 69%
14% to 54%
15% to 94%
0% to 46%
-23% to 56%
0% to 1%
68%
27%
52%
2%
16%
1%
(1) For loans and securities, structured liabilities and net derivative assets (liabilities), the weighted average is calculated based upon the absolute fair value of the instruments.
(2) The categories are aggregated based upon product type which differs from financial statement classification. The following is a reconciliation to the line items in the table on page 168: Trading
account assets – Corporate securities, trading loans and other of $1.5 billion, Trading account assets – Non-U.S. sovereign debt of $482 million, Trading account assets – Mortgage trading loans,
ABS and other MBS of $1.6 billion, AFS debt securities of $599 million, Other debt securities carried at fair value - Non-agency residential of $299 million, Other assets, including MSRs, of $2.4
billion, Loans and leases of $693 million and LHFS of $375 million.
Includes models such as Monte Carlo simulation and Black-Scholes.
Includes models such as Monte Carlo simulation, Black-Scholes and other methods that model the joint dynamics of interest, inflation and foreign exchange rates.
(3)
(4)
(5) The weighted-average life is a product of changes in market rates of interest, prepayment rates and other model and cash flow assumptions.
CPR = Constant Prepayment Rate
CDR = Constant Default Rate
MMBtu = Million British thermal units
IR = Interest Rate
FX = Foreign Exchange
n/a = not applicable
172 172
Bank of America 2019
Bank of America 2019
Quantitative Information about Level 3 Fair Value Measurements at December 31, 2018
(Dollars in millions)
Inputs
Loans and Securities (2)
Financial Instrument
Fair
Value
Valuation
Technique
Significant Unobservable
Inputs
Ranges of
Inputs
Weighted
Average (1)
Instruments backed by residential real estate assets
$ 1,536
Trading account assets – Mortgage trading loans, ABS and other MBS
Loans and leases
Loans held-for-sale
AFS debt securities, primarily non-agency residential
Other debt securities carried at fair value - Non-agency residential
Instruments backed by commercial real estate assets
$
Trading account assets – Corporate securities, trading loans and other
Trading account assets – Mortgage trading loans, ABS and other MBS
419
338
1
606
172
291
200
91
Commercial loans, debt securities and other
Trading account assets – Corporate securities, trading loans and other
Trading account assets – Non-U.S. sovereign debt
Trading account assets – Mortgage trading loans, ABS and other MBS
Loans held-for-sale
Other assets, primarily auction rate securities
$ 3,489
1,358
465
1,125
541
890
$
Yield
Prepayment speed
Discounted cash
flow, Market
comparables
Default rate
Loss severity
Discounted cash
flow
Price
Yield
Price
Yield
Discounted cash
flow, Market
comparables
Prepayment speed
Default rate
Loss severity
Price
Price
Discounted cash
flow, Market
comparables
MSRs
$ 2,042
Weighted-average life, fixed rate (5)
Discounted cash
flow
Weighted-average life, variable rate (5)
Option-adjusted spread, fixed rate
Option-adjusted spread, variable rate
Structured liabilities
Long-term debt
$
(817) Discounted cash
Equity correlation
Net derivative assets (liabilities)
Credit derivatives
$
(565)
flow, Market
comparables,
Industry standard
derivative pricing (3)
Discounted cash
flow, Stochastic
recovery correlation
model
Equity derivatives
Commodity derivatives
Interest rate derivatives
$
(348)
$
10
$
(32)
Industry standard
derivative pricing (3)
Discounted cash
flow, Industry
standard derivative
pricing (3)
Industry standard
derivative pricing (4)
Total net derivative assets (liabilities)
$
(935)
Long-dated equity volatilities
Yield
Price
Yield
Upfront points
Credit correlation
Prepayment speed
Default rate
Loss severity
Price
Equity correlation
Long-dated equity volatilities
0% to 25%
8%
0% to 21% CPR
12% CPR
0% to 3% CDR
1% CDR
0% to 51%
$0 to $128
0% to 25%
$0 to $100
1% to 18%
10% to 20%
3% to 4%
35% to 40%
$0 to $141
$10 to $100
17%
$72
7%
$79
13%
15%
4%
38%
$68
$95
0 to 14 years
0 to 10 years
5 years
3 years
7% to 14%
9% to 15%
11% to 100%
4% to 84%
7% to 18%
$0 to $100
9%
12%
67%
32%
16%
$72
0% to 5%
4%
0 points to 100 points
70 points
70%
n/a
15% to 20% CPR
15% CPR
1% to 4% CDR
2% CDR
35%
$0 to $138
11% to 100%
4% to 84%
n/a
$93
67%
32%
Natural gas forward price
$1/MMBtu to $12/MMBtu
$3/MMBtu
Correlation
Volatilities
Correlation (IR/IR)
Correlation (FX/IR)
Long-dated inflation rates
Long-dated inflation volatilities
38% to 87%
15% to 132%
15% to 70%
0% to 46%
-20% to 38%
0% to 1%
71%
38%
61%
1%
2%
1%
(1) For loans and securities, structured liabilities and net derivative assets (liabilities), the weighted average is calculated based upon the absolute fair value of the instruments.
(2) The categories are aggregated based upon product type which differs from financial statement classification. The following is a reconciliation to the line items in the table on page 169: Trading
account assets – Corporate securities, trading loans and other of $1.6 billion, Trading account assets – Non-U.S. sovereign debt of $465 million, Trading account assets – Mortgage trading loans,
ABS and other MBS of $1.6 billion, AFS debt securities of $606 million, Other debt securities carried at fair value - Non-agency residential of $172 million, Other assets, including MSRs, of $2.9
billion, Loans and leases of $338 million and LHFS of $542 million.
Includes models such as Monte Carlo simulation and Black-Scholes.
Includes models such as Monte Carlo simulation, Black-Scholes and other methods that model the joint dynamics of interest, inflation and foreign exchange rates.
(3)
(4)
(5) The weighted-average life is a product of changes in market rates of interest, prepayment rates and other model and cash flow assumptions.
CPR = Constant Prepayment Rate
CDR = Constant Default Rate
MMBtu = Million British thermal units
IR = Interest Rate
FX = Foreign Exchange
n/a = not applicable
Bank of America 2019 173
Bank of America 2019 173
In the previous tables, instruments backed by residential and
commercial real estate assets include RMBS, commercial MBS,
whole loans and mortgage CDOs. Commercial loans, debt
securities and other include corporate CLOs and CDOs,
commercial loans and bonds, and securities backed by non-real
estate assets. Structured liabilities primarily include equity-linked
notes that are accounted for under the fair value option.
The Corporation uses multiple market approaches in valuing
certain of its Level 3 financial instruments. For example, market
comparables and discounted cash flows are used together. For a
given product, such as corporate debt securities, market
comparables may be used to estimate some of the unobservable
inputs and then these inputs are incorporated into a discounted
cash flow model. Therefore, the balances disclosed encompass
both of these techniques.
The level of aggregation and diversity within the products
disclosed in the tables result in certain ranges of inputs being
wide and unevenly distributed across asset and liability categories.
Uncertainty of Fair Value Measurements from
Unobservable Inputs
Loans and Securities
A significant increase in market yields, default rates, loss
severities or duration would have resulted in a significantly lower
fair value for long positions. Short positions would have been
impacted in a directionally opposite way. The impact of changes
in prepayment speeds would have resulted in differing impacts
depending on the seniority of the instrument and, in the case of
CLOs, whether prepayments can be reinvested. A significant
increase in price would have resulted in a significantly higher fair
value for long positions, and short positions would have been
impacted in a directionally opposite way.
Structured Liabilities and Derivatives
For credit derivatives, a significant increase in market yield, upfront
points (i.e., a single upfront payment made by a protection buyer
at inception), credit spreads, default rates or loss severities would
Assets Measured at Fair Value on a Nonrecurring Basis
have resulted in a significantly lower fair value for protection sellers
and higher fair value for protection buyers. The impact of changes
in prepayment speeds would have resulted in differing impacts
depending on the seniority of the instrument.
Structured credit derivatives are impacted by credit correlation.
Default correlation is a parameter that describes the degree of
dependence among credit default rates within a credit portfolio
that underlies a credit derivative instrument. The sensitivity of this
input on the fair value varies depending on the level of
subordination of the tranche. For senior tranches that are net
purchases of protection, a significant increase in default
correlation would have resulted in a significantly higher fair value.
Net short protection positions would have been impacted in a
directionally opposite way.
For equity derivatives, commodity derivatives, interest rate
derivatives and structured liabilities, a significant change in long-
dated rates and volatilities and correlation inputs (i.e., the degree
of correlation between an equity security and an index, between
two different commodities, between two different interest rates,
or between interest rates and foreign exchange rates) would have
resulted in a significant impact to the fair value; however, the
magnitude and direction of the impact depend on whether the
Corporation is long or short the exposure. For structured liabilities,
a significant increase in yield or decrease in price would have
resulted in a significantly lower fair value.
Nonrecurring Fair Value
The Corporation holds certain assets that are measured at fair
value only in certain situations (e.g., the impairment of an asset),
and these measurements are referred to herein as nonrecurring.
The amounts below represent assets still held as of the reporting
date for which a nonrecurring fair value adjustment was recorded
during 2019, 2018 and 2017. In the tables below, other assets
includes the measurement of the Corporation's merchant services
equity method investment on which the Corporation recorded an
impairment charge of $2.1 billion during 2019. For more
information, see Note 13 – Commitments and Contingencies.
(Dollars in millions)
Assets
Loans held-for-sale
Loans and leases (1)
Foreclosed properties (2, 3)
Other assets
Assets
December 31, 2019
December 31, 2018
Level 2
Level 3
Level 2
Level 3
$
53 $
—
—
178
102 $
257
17
646
$
274
—
—
331
—
474
42
14
2019
Gains (Losses)
2018
2017
Loans held-for-sale
Loans and leases (1)
Foreclosed properties
Other assets
Includes $36 million, $83 million and $135 million of losses on loans that were written down to a collateral value of zero during 2019, 2018 and 2017, respectively.
(14) $
(81)
(9)
(2,145)
$
(1)
$
(18)
(202)
(24)
(64)
(6)
(336)
(41)
(124)
(2) Amounts are included in other assets on the Consolidated Balance Sheet and represent the carrying value of foreclosed properties that were written down subsequent to their initial classification
as foreclosed properties. Losses on foreclosed properties include losses recorded during the first 90 days after transfer of a loan to foreclosed properties.
(3) Excludes $260 million and $488 million of properties acquired upon foreclosure of certain government-guaranteed loans (principally FHA-insured loans) at December 31, 2019 and 2018.
174 174
Bank of America 2019
Bank of America 2019
The table below presents information about significant unobservable inputs at December 31, 2019 and 2018.
Quantitative Information about Nonrecurring Level 3 Fair Value Measurements
Financial Instrument
Fair
Value
Valuation
Technique
Significant
Unobservable
Inputs
December 31, 2019
Inputs
Ranges of
Inputs
Weighted
Average (1)
(Dollars in millions)
Loans held-for-sale
Loans and leases (2)
Other assets (3)
$
102 Discounted cash flow Price
257 Market comparables OREO discount
640 Discounted cash flow Customer attrition
Costs to sell
Costs to service
December 31, 2018
$85 to $97
13% to 59%
8% to 26%
0% to 19%
11% to 19%
13% to 59%
8% to 26%
$88
24%
9%
5%
15%
25%
9%
Loans and leases (2)
$
474 Market comparables OREO discount
Costs to sell
(1) The weighted average is calculated based upon the fair value of the loans.
(2) Represents residential mortgages where the loan has been written down to the fair value of the underlying collateral.
(3) The fair value of the merchant services joint venture was measured using a discounted cash flow method in which the two primary drivers of fair value were the customer attrition rate and certain
costs to service the customers. The weighted averages are calculated based on variations of the attrition rates and costs to service the customers.
NOTE 22 Fair Value Option
Loans and Loan Commitments
The Corporation elects to account for certain loans and loan
commitments that exceed the Corporation’s single-name credit
risk concentration guidelines under the fair value option. Lending
commitments are actively managed and, as appropriate, credit risk
for these lending relationships may be mitigated through the use
of credit derivatives, with the Corporation’s public side credit view
and market perspectives determining the size and timing of the
hedging activity. These credit derivatives do not meet the
requirements for designation as accounting hedges and therefore
are carried at fair value. The fair value option allows the Corporation
to carry these loans and loan commitments at fair value, which is
more consistent with management’s view of the underlying
economics and the manner in which they are managed. In addition,
the fair value option allows the Corporation to reduce the
accounting volatility that would otherwise result from the
asymmetry created by accounting for the financial instruments at
historical cost and the credit derivatives at fair value.
Loans Held-for-sale
The Corporation elects to account for residential mortgage LHFS,
commercial mortgage LHFS and certain other LHFS under the fair
value option. These loans are actively managed and monitored
and, as appropriate, certain market risks of the loans may be
mitigated through the use of derivatives. The Corporation has
elected not to designate the derivatives as qualifying accounting
hedges, and therefore, they are carried at fair value. The changes
in fair value of the loans are largely offset by changes in the fair
value of the derivatives. The fair value option allows the
Corporation to reduce the accounting volatility that would
otherwise result from the asymmetry created by accounting for the
financial instruments at the lower of cost or fair value and the
derivatives at fair value. The Corporation has not elected to account
for certain other LHFS under the fair value option primarily because
these loans are floating-rate loans that are not hedged using
derivative instruments.
Loans Reported as Trading Account Assets
The Corporation elects to account for certain loans that are held
for the purpose of trading and are risk-managed on a fair value
basis under the fair value option.
Other Assets
The Corporation elects to account for certain long-term fixed-rate
margin loans that are hedged with derivatives under the fair value
option. Election of the fair value option allows the Corporation to
reduce the accounting volatility that would otherwise result from
the asymmetry created by accounting for the financial instruments
at historical cost and the derivatives at fair value.
Securities Financing Agreements
The Corporation elects to account for certain securities financing
agreements, including resale and repurchase agreements, under
the fair value option based on the tenor of the agreements, which
reflects the magnitude of the interest rate risk. The majority of
securities financing agreements collateralized by U.S. government
securities are not accounted for under the fair value option as
these contracts are generally short-dated and therefore the
interest rate risk is not significant.
Long-term Deposits
The Corporation elects to account for certain long-term fixed-rate
and rate-linked deposits that are hedged with derivatives that do
not qualify for hedge accounting under the fair value option.
Election of the fair value option allows the Corporation to reduce
the accounting volatility that would otherwise result from the
asymmetry created by accounting for the financial instruments at
historical cost and the derivatives at fair value. The Corporation
has not elected to carry other long-term deposits at fair value
because they are not hedged using derivatives.
Short-term Borrowings
The Corporation elects to account for certain short-term
borrowings, primarily short-term structured liabilities, under the
fair value option because this debt is risk-managed on a fair value
basis.
The Corporation elects to account for certain asset-backed
secured financings, which are also classified in short-term
borrowings, under the fair value option. Election of the fair value
option allows the Corporation to reduce the accounting volatility
that would otherwise result from the asymmetry created by
accounting for the asset-backed secured financings at historical
cost and the corresponding mortgage LHFS securing these
financings at fair value.
Bank of America 2019 175
Bank of America 2019 175
Long-term Debt
The Corporation elects to account for certain long-term debt,
primarily structured liabilities, under the fair value option. This long-
term debt is either risk-managed on a fair value basis or the related
hedges do not qualify for hedge accounting.
assets and liabilities accounted for under the fair value option at
December 31, 2019 and 2018, and information about where
changes in the fair value of assets and liabilities accounted for
under the fair value option are included in the Consolidated
Statement of Income for 2019, 2018 and 2017.
Fair Value Option Elections
The following tables provide information about the fair value
carrying amount and the contractual principal outstanding of
Fair Value Option Elections
(Dollars in millions)
Federal funds sold and securities borrowed or
purchased under agreements to resell
Loans reported as trading account assets (1)
Trading inventory – other
Consumer and commercial loans
Loans held-for-sale (1)
Other assets
Long-term deposits
Federal funds purchased and securities loaned or
sold under agreements to repurchase
December 31, 2019
December 31, 2018
Fair Value
Carrying
Amount
Contractual
Principal
Outstanding
Fair Value
Carrying
Amount Less
Unpaid Principal
Fair Value
Carrying
Amount
Contractual
Principal
Outstanding
Fair Value
Carrying
Amount Less
Unpaid Principal
$
50,364 $
50,318 $
46
$
56,399 $
56,376 $
6,989
19,574
8,335
3,709
4
508
16,008
14,703
n/a
8,372
4,879
n/a
496
16,029
(7,714)
n/a
(37)
(1,170)
n/a
12
6,195
13,778
4,349
2,942
3
492
(21)
28,875
13,088
n/a
4,399
4,749
n/a
454
28,881
23
(6,893)
n/a
(50)
(1,807)
n/a
38
(6)
Short-term borrowings
—
Unfunded loan commitments
n/a
(1,509)
Long-term debt (2)
(1) A significant portion of the loans reported as trading account assets and LHFS are distressed loans that were purchased at a deep discount to par, and the remainder are loans with a fair value near
1,648
n/a
29,198
1,648
169
27,689
3,930
n/a
35,730
3,941
90
34,975
11
n/a
(755)
contractual principal outstanding.
Includes structured liabilities with a fair value of $34.6 billion and $27.3 billion, and contractual principal outstanding of $35.3 billion and $28.8 billion at December 31, 2019 and 2018.
(2)
n/a = not applicable
Gains (Losses) Relating to Assets and Liabilities Accounted for Under the Fair Value Option
(Dollars in millions)
Loans reported as trading account assets
Trading inventory – other (1)
Consumer and commercial loans
Loans held-for-sale (2)
Long-term debt (3)
Other (4)
Total (5)
Loans reported as trading account assets
Trading inventory – other (1)
Consumer and commercial loans
Loans held-for-sale (2)
Long-term debt (3)
Other (4)
Total (5)
Loans reported as trading account assets
Trading inventory – other (1)
Consumer and commercial loans
Loans held-for-sale (2)
Long-term debt (3)
Other (4)
Total (5)
Market making and
similar activities
Other
Income
2019
Total
$
$
$
$
$
$
203 $
5,795
92
—
(1,098)
(15)
4,977 $
8 $
1,750
(422)
1
2,157
8
3,502 $
318 $
3,821
(9)
—
(1,044)
(93)
2,993 $
2018
2017
— $
—
12
98
(78)
52
84 $
— $
—
(53)
24
(93)
(31)
(153) $
— $
—
35
298
(146)
49
236 $
203
5,795
104
98
(1,176)
37
5,061
8
1,750
(475)
25
2,064
(23)
3,349
318
3,821
26
298
(1,190)
(44)
3,229
(1) The gains in market making and similar activities are primarily offset by losses on trading liabilities that hedge these assets.
(2)
Includes the value of IRLCs on funded loans, including those sold during the period.
(3) The net gains (losses) in market making and similar activities relate to the embedded derivatives in structured liabilities and are typically offset by (losses) gains on derivatives and securities that
hedge these liabilities. For the cumulative impact of changes in the Corporation’s own credit spreads and the amount recognized in accumulated OCI, see Note 15 – Accumulated Other Comprehensive
Income (Loss). For more information on how the Corporation’s own credit spread is determined, see Note 21 – Fair Value Measurements.
(4) Includes gains (losses) on federal funds sold and securities borrowed or purchased under agreements to resell, long-term deposits, federal funds purchased and securities loaned or sold under
agreements to repurchase, short-term borrowings and unfunded loan commitments.
(5) Gains (losses) related to borrower-specific credit risk were $194 million, $(148) million and $38 million in 2019, 2018 and 2017, respectively.
176 176
Bank of America 2019
Bank of America 2019
NOTE 23 Fair Value of Financial Instruments
Financial instruments are classified within the fair value hierarchy
using the methodologies described in Note 21 – Fair Value
Measurements. Certain loans, deposits, long-term debt and
unfunded lending commitments are accounted for under the fair
value option. For more information, see Note 22 – Fair Value Option.
The following disclosures include financial instruments that are
not carried at fair value or only a portion of the ending balance is
carried at fair value on the Consolidated Balance Sheet.
Short-term Financial Instruments
The carrying value of short-term financial instruments, including
cash and cash equivalents, certain time deposits placed and other
short-term investments, federal funds sold and purchased, certain
resale and repurchase agreements and short-term borrowings,
approximates the fair value of these instruments. These financial
instruments generally expose the Corporation to limited credit risk
and have no stated maturities or have short-term maturities and
carry interest rates that approximate market. The Corporation
accounts for certain resale and repurchase agreements under the
fair value option.
Under the fair value hierarchy, cash and cash equivalents are
classified as Level 1. Time deposits placed and other short-term
investments, such as U.S. government securities and short-term
commercial paper, are classified as Level 1 or Level 2. Federal
funds sold and purchased are classified as Level 2. Resale and
repurchase agreements are classified as Level 2 because they
are generally short-dated and/or variable-rate instruments
collateralized by U.S. government or agency securities. Short-term
borrowings are classified as Level 2.
Fair Value of Financial Instruments
The carrying values and fair values by fair value hierarchy of certain
financial instruments where only a portion of the ending balance
was carried at fair value at December 31, 2019 and 2018 are
presented in the following table.
Fair Value of Financial Instruments
Carrying
Value
(Dollars in millions)
Financial assets
Loans
Loans held-for-sale
$ 950,093 $
9,158
Fair Value
Level 2
Level 3
Total
December 31, 2019
63,633 $ 914,597 $ 978,230
9,158
8,439
719
Financial liabilities
Deposits (1)
Long-term debt
Commercial
unfunded lending
commitments (2)
Financial assets
Loans
Loans held-for-sale
Financial liabilities
Deposits (1)
Long-term debt
Commercial
unfunded lending
commitments (2)
1,434,803
240,856
1,434,809
247,376
—
1,149
1,434,809
248,525
903
90
4,777
4,867
December 31, 2018
$ 911,520 $ 58,228 $ 859,160 $ 917,388
10,367
10,367
9,592
775
1,381,476
229,392
1,381,239
230,019
—
817
1,381,239
230,836
966
169
5,558
5,727
(1) Includes demand deposits of $545.5 billion and $531.9 billion with no stated maturities at
December 31, 2019 and 2018.
(2) The carrying value of commercial unfunded lending commitments is included in accrued
expenses and other liabilities on the Consolidated Balance Sheet. The Corporation does not
estimate the fair value of consumer unfunded lending commitments because, in many instances,
the Corporation can reduce or cancel these commitments by providing notice to the borrower.
For more information on commitments, see Note 13 – Commitments and Contingencies.
NOTE 24 Business Segment Information
The Corporation reports its results of operations through the
following four business segments: Consumer Banking, GWIM,
Global Banking and Global Markets, with the remaining operations
recorded in All Other.
Consumer Banking
Consumer Banking offers a diversified range of credit, banking and
investment products and services to consumers and small
businesses. Consumer Banking product offerings
include
traditional savings accounts, money market savings accounts, CDs
and IRAs, checking accounts, and investment accounts and
products, as well as credit and debit cards, residential mortgages
and home equity loans, and direct and indirect loans to consumers
and small businesses in the U.S. Consumer Banking includes the
impact of servicing residential mortgages and home equity loans
in the core portfolio.
Global Wealth & Investment Management
GWIM provides a high-touch client experience through a network
of financial advisors focused on clients with over $250,000 in
total investable assets, including tailored solutions to meet
clients’ needs through a full set of investment management,
brokerage, banking and retirement products. GWIM also provides
comprehensive wealth management solutions targeted to high net
worth and ultra high net worth clients, as well as customized
solutions to meet clients’ wealth structuring, investment
management, trust and banking needs, including specialty asset
management services.
Global Banking
Global Banking provides a wide range of lending-related products
and services, integrated working capital management and treasury
solutions, and underwriting and advisory services through the
Corporation’s network of offices and client relationship teams.
Global Banking also provides investment banking products to
clients. The economics of certain investment banking and
underwriting activities are shared primarily between Global Banking
revenue-sharing
and Global Markets under an
arrangement. Global Banking clients generally include middle-
market companies, commercial real estate firms, not-for-profit
companies, large global corporations, financial institutions,
leasing clients, and mid-sized U.S.-based businesses requiring
customized and integrated financial advice and solutions.
internal
Global Markets
Global Markets offers sales and trading services and research
services to institutional clients across fixed-income, credit,
currency, commodity and equity businesses. Global Markets
provides market-making, financing, securities clearing, settlement
and custody services globally to institutional investor clients in
support of their investing and trading activities. Global Markets
product coverage includes securities and derivative products in
both the primary and secondary markets. Global Markets also
works with commercial and corporate clients to provide risk
management products. As a result of market-making activities,
Global Markets may be required to manage risk in a broad range
of financial products. In addition, the economics of certain
investment banking and underwriting activities are shared primarily
between Global Markets and Global Banking under an internal
revenue-sharing arrangement.
Bank of America 2019 177
Bank of America 2019 177
All Other
All Other consists of ALM activities, equity investments, non-core
mortgage loans and servicing activities, liquidating businesses
and certain expenses not otherwise allocated to business
segments. ALM activities encompass certain
residential
mortgages, debt securities, interest rate and foreign currency risk
management activities. Substantially all of the results of ALM
activities are allocated to the business segments. Equity
investments include the merchant services joint venture as well
as a portfolio of equity, real estate and other alternative
investments.
Basis of Presentation
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 an FTE basis and noninterest income. The adjustment
of net interest income to an 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. In segments where the total of
liabilities and equity exceeds assets, which are generally deposit-
taking segments, the Corporation allocates assets to match
liabilities. Net interest income of the business segments also
includes an allocation of net interest income generated by certain
of the Corporation’s ALM activities.
The Corporation’s ALM activities include an overall interest rate
risk management strategy that incorporates the use of various
derivatives and cash instruments to manage fluctuations in
earnings and capital that are caused by interest rate volatility. The
Corporation’s goal is to manage interest rate sensitivity so that
movements in interest rates do not significantly adversely affect
earnings and capital. The results of substantially all of the
Corporation’s ALM activities are allocated to the business
segments and fluctuate based on the performance of the ALM
activities. ALM activities include external product pricing decisions
including deposit pricing strategies, the effects of the Corporation’s
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 costs of
certain centralized or shared functions are allocated based on
methodologies that reflect utilization.
The following table presents net income (loss) and the
components thereto (with net interest income on an FTE basis for
the business segments, All Other and the total Corporation) for
2019, 2018 and 2017, and total assets at December 31, 2019
and 2018 for each business segment, as well as All Other.
Results of Business Segments and All Other
At and for the year ended December 31
(Dollars in millions)
Net interest income
Noninterest income
Total revenue, net of interest expense
Provision for credit losses
Noninterest expense
Income before income taxes
Income tax expense
Net income
Period-end total assets
Net interest income
Noninterest income
Total revenue, net of interest expense
Provision for credit losses
Noninterest expense
Income before income taxes
Income tax expense
Net income
Period-end total assets
Net interest income
Noninterest income
Total revenue, net of interest expense
Provision for credit losses
Noninterest expense
Income (loss) before income taxes
Income tax expense (benefit)
Net income (loss)
Period-end total assets
(1) There were no material intersegment revenues.
178 178
Bank of America 2019
Bank of America 2019
2019
Total Corporation (1)
2018
2017
2019
Consumer Banking
2018
2017
$
49,486 $
42,353
91,839
3,590
54,900
33,349
5,919
48,772 $
42,858
91,630
3,282
53,154
35,194
7,047
27,430 $
$
$ 2,434,079 $ 2,354,507
28,147 $
46,164 $
41,887
88,051
3,396
54,517
30,138
11,906
18,232 $
$
28,158 $
10,429
38,587
3,772
17,618
17,197
4,213
12,984 $
804,019 $
27,025 $
10,593
37,618
3,664
17,672
16,282
4,150
12,132 $
768,881
24,203
10,101
34,304
3,525
17,847
12,932
4,897
8,035
Global Wealth &
Investment Management
2018
2019
2017
2019
2018
2017
Global Banking
$
6,504
13,033
19,537
82
13,823
5,632
1,380
4,252 $
299,756 $
$
6,265
13,188
19,453
86
14,015
5,352
1,364
3,988 $
305,907
$
6,152
12,447
18,599
56
13,770
4,773
1,807
2,966 $
$
$
10,675
9,808
20,483
414
9,017
11,052
2,984
8,068 $
464,032 $
$
10,993
9,008
20,001
8
8,745
11,248
2,923
8,325 $
442,330
10,615
9,510
20,125
212
8,811
11,102
4,204
6,898
2019
Global Markets
2018
2017
2019
All Other
2018
2017
3,915
11,699
15,614
(9)
10,722
4,901
1,397
3,504
641,806
$
$
$
3,857
12,326
16,183
—
10,835
5,348
1,390
3,958
641,923
$
$
4,264
11,698
15,962
164
10,997
4,801
1,666
3,135
$
$
$
234
(2,616)
(2,382)
(669)
3,720
(5,433)
(4,055)
(1,378)
224,466
$
$
$
632
(2,257)
(1,625)
(476)
1,887
(3,036)
(2,780)
(256)
195,466
$
$
930
(1,869)
(939)
(561)
3,092
(3,470)
(668)
(2,802)
$
$
$
$
$
$
The table below presents noninterest income and the components thereto for 2019, 2018 and 2017 for each business segment,
All Other and the total Corporation. For more information, see Note 2 – Net Interest Income and Noninterest Income.
Noninterest Income by Business Segment and All Other
(Dollars in millions)
Fees and commissions:
Card income
Interchange fees
Other card income
Total card income
Service charges
Deposit-related fees
Lending-related fees
Total service charges
Investment and brokerage services
Asset management fees
Brokerage fees
Total investment and brokerage services
Investment banking fees
Underwriting income
Syndication fees
Financial advisory services
Total investment banking fees
Total fees and commissions
Market making and similar activities
Other income
Total noninterest income
Fees and commissions:
Card income
Interchange fees
Other card income
Total card income
Service charges
Deposit-related fees
Lending-related fees
Total service charges
Investment and brokerage services
Asset management fees
Brokerage fees
Total investment and brokerage services
Investment banking fees
Underwriting income
Syndication fees
Financial advisory services
Total investment banking fees
Total fees and commissions
Market making and similar activities
Other income
Total noninterest income
(1) All Other includes eliminations of intercompany transactions.
Total Corporation
Consumer Banking
2019
2018
2017
2019
2018
2017
$ 3,834 $ 3,866 $ 3,777 $ 3,174 $ 3,196 $ 3,038 $
1,963
5,797
6,588
1,086
7,674
1,958
5,824
6,667
1,100
7,767
1,899
5,676
6,708
1,110
7,818
10,241
3,661
13,902
10,189
3,971
14,160
9,310
4,526
13,836
1,910
5,084
4,219
—
4,219
144
149
293
1,906
5,102
4,300
—
4,300
147
172
319
1,846
4,884
4,266
—
4,266
Global Wealth &
Investment Management
2018
2019
2017
60 $
41
101
81 $
46
127
109
44
153
68
—
68
73
—
73
77
—
77
133
184
317
10,130
1,740
11,870
10,042
1,917
11,959
9,177
2,217
11,394
2,998
1,184
1,460
5,642
33,015
9,034
304
316
—
2
318
11,942
144
361
$ 42,353 $ 42,858 $ 41,887 $ 10,429 $ 10,593 $ 10,101 $ 13,033 $ 13,188 $ 12,447
335
—
2
337
12,496
112
580
2,821
1,499
1,691
6,011
33,341
7,102
1,444
2,722
1,347
1,258
5,327
33,078
9,008
772
401
—
—
401
12,440
113
480
(1)
—
—
(1)
9,720
8
865
—
—
—
—
9,467
3
631
—
—
—
—
9,596
6
827
Global Banking
2018
2019
2017
2019
Global Markets
2018
2017
2019
All Other (1)
2018
2017
$
519 $
13
532
2,121
894
3,015
—
34
34
503 $
8
511
478 $
12
490
81 $
(1)
80
86 $
(2)
84
86 $
(2)
84
— $
—
—
— $
—
—
2,111
916
3,027
2,197
928
3,125
—
94
94
—
97
97
156
192
348
—
1,738
1,738
161
184
345
—
1,780
1,780
147
182
329
—
2,049
2,049
24
—
24
(33)
—
(33)
22
—
22
—
8
8
66
(1)
65
21
—
21
—
(21)
(21)
1,227
574
1,336
3,137
6,718
235
2,855
(255)
1
(1)
(255)
(190)
618
(2,297)
$ 9,808 $ 9,008 $ 9,510 $ 11,699 $ 12,326 $ 11,698 $ (2,616) $ (2,257) $ (1,869)
(197)
1
—
(196)
(166)
1,368
(3,459)
(185)
—
1
(184)
(193)
1,615
(4,038)
1,172
742
1,557
3,471
7,183
134
2,193
1,090
648
1,153
2,891
6,523
260
2,225
1,495
698
103
2,296
4,505
7,260
561
1,588
756
133
2,477
4,939
6,203
556
1,555
610
123
2,288
4,454
7,065
180
Bank of America 2019 179
Bank of America 2019 179
Business Segment Reconciliations
(Dollars in millions)
Segments’ total revenue, net of interest expense
Adjustments (1):
ALM activities
Liquidating businesses, eliminations and other
FTE basis adjustment
Consolidated revenue, net of interest expense
Segments’ total net income
Adjustments, net-of-tax (1):
ALM activities
Liquidating businesses, eliminations and other
Consolidated net income
Segments’ total assets
Adjustments (1):
ALM activities, including securities portfolio
Elimination of segment asset allocations to match liabilities
Other
Consolidated total assets
2019
2018
2017
$
94,221 $
93,255 $
88,990
241
(2,623)
(595)
91,244 $
28,808
202
(1,580)
27,430 $
(325)
(1,300)
(610)
91,020 $
28,403
(222)
(34)
28,147 $
161
(1,100)
(925)
87,126
21,034
154
(2,956)
18,232
$
$
December 31
2019
2,209,613 $
2018
2,159,041
$
721,806
(565,346)
68,006
2,434,079 $
669,204
(540,798)
67,060
2,354,507
$
(1) Adjustments include consolidated income, expense and asset amounts not specifically allocated to individual business segments.
NOTE 25 Parent Company Information
The following tables present the Parent Company-only financial information.
Condensed Statement of Income
(Dollars in millions)
Income
Dividends from subsidiaries:
Bank holding companies and related subsidiaries
Nonbank companies and related subsidiaries
Interest from subsidiaries
Other income (loss)
Total income
Expense
Interest on borrowed funds from related subsidiaries
Other interest expense
Noninterest expense
Total expense
Income before income taxes and equity in undistributed earnings of subsidiaries
Income tax expense (benefit)
Income before equity in undistributed earnings of subsidiaries
Equity in undistributed earnings (losses) of subsidiaries:
Bank holding companies and related subsidiaries
Nonbank companies and related subsidiaries
Total equity in undistributed earnings of subsidiaries
Net income
2019
2018
2017
$
$
27,820
—
9,502
74
37,396
451
5,899
1,641
7,991
29,405
341
29,064
$
28,575
91
8,425
(1,025)
36,066
235
6,425
1,600
8,260
27,806
(281)
28,087
(1,717)
83
(1,634)
27,430 $
306
(246)
60
28,147 $
$
12,088
202
7,043
28
19,361
189
5,555
1,672
7,416
11,945
950
10,995
8,725
(1,488)
7,237
18,232
180 180
Bank of America 2019
Bank of America 2019
Condensed Balance Sheet
(Dollars in millions)
Assets
Cash held at bank subsidiaries (1)
Securities
Receivables from subsidiaries:
Bank holding companies and related subsidiaries
Banks and related subsidiaries
Nonbank companies and related subsidiaries
Investments in subsidiaries:
Bank holding companies and related subsidiaries
Nonbank companies and related subsidiaries
Other assets
Total assets
Liabilities and shareholders’ equity
Accrued expenses and other liabilities
Payables to subsidiaries:
Banks and related subsidiaries
Nonbank companies and related subsidiaries
Long-term debt
Total liabilities
Shareholders’ equity
Total liabilities and shareholders’ equity
(1) Balance includes third-party cash held of $4 million and $389 million at December 31, 2019 and 2018.
Condensed Statement of Cash Flows
(Dollars in millions)
Operating activities
Net income
Reconciliation of net income to net cash provided by (used in) operating activities:
Equity in undistributed (earnings) losses of subsidiaries
Other operating activities, net
Net cash provided by operating activities
Investing activities
Net sales (purchases) of securities
Net payments to subsidiaries
Other investing activities, net
Net cash used in investing activities
Financing activities
Net increase (decrease) in other advances
Proceeds from issuance of long-term debt
Retirement of long-term debt
Proceeds from issuance of preferred stock
Redemption of preferred stock
Common stock repurchased
Cash dividends paid
Net cash used in financing activities
Net increase (decrease) in cash held at bank subsidiaries
Cash held at bank subsidiaries at January 1
Cash held at bank subsidiaries at December 31
December 31
2019
2018
$
5,695 $
656
173,301
51
391
297,465
3,663
9,438
490,660 $
5,141
628
152,905
195
969
293,045
3,432
14,696
471,011
13,381 $
8,828
458
12,102
199,909
225,850
264,810
490,660 $
349
13,301
183,208
205,686
265,325
471,011
$
$
$
2019
2018
2017
$
27,430
$
28,147
$
18,232
1,634
16,973
46,037
(17)
(19,121)
7
(19,131)
(1,625)
29,315
(21,039)
3,643
(2,568)
(28,144)
(5,934)
(26,352)
554
5,141
5,695 $
(60)
(3,706)
24,381
51
(2,262)
48
(2,163)
3,867
30,708
(29,413)
4,515
(4,512)
(20,094)
(6,895)
(21,824)
394
4,747
5,141 $
(7,237)
(2,593)
8,402
312
(7,087)
(1)
(6,776)
(6,672)
37,704
(29,645)
—
—
(12,814)
(5,700)
(17,127)
(15,501)
20,248
4,747
$
Bank of America 2019 181
Bank of America 2019 181
NOTE 26 Performance by Geographical Area
The Corporation’s operations are highly integrated with operations
in both U.S. and non-U.S. markets. The non-U.S. business
activities are largely conducted in Europe, the Middle East and
Africa and in Asia. The Corporation identifies its geographic
performance based on the business unit structure used to manage
the capital or expense deployed in the region as applicable. This
requires certain judgments related to the allocation of revenue so
that revenue can be appropriately matched with the related capital
or expense deployed in the region. Certain asset, liability, income
and expense amounts have been allocated to arrive at total assets,
total revenue, net of interest expense, income before income taxes
and net income by geographic area as presented below.
(Dollars in millions)
U.S. (3)
Asia
Europe, Middle East and Africa
Latin America and the Caribbean
Total Non-U.S.
Total Consolidated
Total Assets at
Year End (1)
Total Revenue,
Net of Interest
Expense (2)
Income Before
Income Taxes
Net Income
2019
2018
2017
2019
2018
2017
2019
2018
2017
2019
2018
2017
2019
2018
2017
2019
2018
2017
$
2,122,734 $
2,051,182
102,440
94,865
178,889
185,285
30,016
23,175
311,345
303,325
$
2,434,079 $
2,354,507
81,236 $
80,777
74,604
3,491
3,507
3,405
5,310
5,632
7,907
1,207
1,104
1,210
10,008
10,243
12,522
91,244 $
91,020
87,126
30,699 $
31,904
25,108
765
865
676
921
1,543
2,990
369
272
439
2,055
2,680
4,105
32,754 $
34,584
29,213
25,937
26,407
15,550
570
520
464
672
1,126
1,926
251
94
292
1,493
1,740
2,682
27,430
28,147
18,232
(1) Total assets include long-lived assets, which are primarily located in the U.S.
(2) There were no material intercompany revenues between geographic regions for any of the periods presented.
(3) Substantially reflects the U.S.
182 182
Bank of America 2019
Bank of America 2019
Glossary
Alt-A Mortgage – A type of U.S. mortgage that is considered riskier
than A-paper, or “prime,” and less risky than “subprime,” the
riskiest category. Typically, Alt-A mortgages are characterized by
borrowers with less than full documentation, lower credit scores
and higher LTVs.
Assets Under Management (AUM) – The total market value of
assets under the investment advisory and/or discretion of GWIM
which generate asset management fees based on a percentage
of the assets’ market values. AUM reflects assets that are
generally managed for institutional, high net worth and retail
clients, and are distributed through various investment products
including mutual funds, other commingled vehicles and separate
accounts.
Banking Book – All on- and off-balance sheet financial instruments
of the Corporation except for those positions that are held for
trading purposes.
Brokerage and Other Assets – Non-discretionary client assets
which are held in brokerage accounts or held for safekeeping.
Committed Credit Exposure – Any funded portion of a facility plus
the unfunded portion of a facility on which the lender is legally
bound to advance funds during a specified period under prescribed
conditions.
Credit Derivatives – Contractual agreements that provide
protection against a specified credit event on one or more
referenced obligations.
Credit Valuation Adjustment (CVA) – A portfolio adjustment required
to properly reflect the counterparty credit risk exposure as part of
the fair value of derivative instruments.
Debit Valuation Adjustment (DVA) – A portfolio adjustment required
to properly reflect the Corporation’s own credit risk exposure as
part of the fair value of derivative instruments and/or structured
liabilities.
Funding Valuation Adjustment (FVA) – A portfolio adjustment
required to include funding costs on uncollateralized derivatives
and derivatives where the Corporation is not permitted to use the
collateral it receives.
Interest Rate Lock Commitment (IRLC) – Commitment with a loan
applicant in which the loan terms are guaranteed for a designated
period of time subject to credit approval.
Letter of Credit – A document issued on behalf of a customer to
a third party promising to pay the third party upon presentation of
specified documents. A letter of credit effectively substitutes the
issuer’s credit for that of the customer.
Loan-to-value (LTV) – A commonly used credit quality metric. LTV
is calculated as the outstanding carrying value of the loan divided
by the estimated value of the property securing the loan.
Margin Receivable – An extension of credit secured by eligible
securities in certain brokerage accounts.
Matched Book – Repurchase and resale agreements or securities
borrowed and loaned transactions where the overall asset and
liability position is similar in size and/or maturity. Generally, these
are entered into to accommodate customers where the
Corporation earns the interest rate spread.
Mortgage Servicing Rights (MSR) – The right to service a mortgage
loan when the underlying loan is sold or securitized. Servicing
includes collections for principal, interest and escrow payments
from borrowers and accounting for and remitting principal and
interest payments to investors.
Net Interest Yield – Net interest income divided by average total
interest-earning assets.
Nonperforming Loans and Leases – Includes loans and leases that
have been placed on nonaccrual status, including nonaccruing
loans whose contractual terms have been restructured in a manner
that grants a concession to a borrower experiencing financial
difficulties.
Operating Margin – Income before income taxes divided by total
revenue, net of interest expense.
Prompt Corrective Action (PCA) – A framework established by the
U.S. banking regulators requiring banks to maintain certain levels
of regulatory capital ratios, comprised of five categories of
capitalization: “well capitalized,” “adequately capitalized,”
“undercapitalized,” “significantly undercapitalized” and “critically
undercapitalized.” Insured depository institutions that fail to meet
certain of these capital levels are subject to increasingly strict
limits on their activities, including their ability to make capital
distributions, pay management compensation, grow assets and
take other actions.
Subprime Loans – Although a standard industry definition for
subprime loans (including subprime mortgage loans) does not
exist, the Corporation defines subprime loans as specific product
offerings for higher risk borrowers.
Troubled Debt Restructurings (TDRs) – Loans whose contractual
terms have been restructured in a manner that grants a concession
to a borrower experiencing financial difficulties. Certain consumer
loans for which a binding offer to restructure has been extended
are also classified as TDRs.
Value-at-Risk (VaR) – VaR is a model that simulates the value of
a portfolio under a range of hypothetical scenarios in order to
generate a distribution of potential gains and losses. VaR
represents the loss the portfolio is expected to experience with a
given confidence level based on historical data. A VaR model is
an effective tool in estimating ranges of potential gains and losses
on our trading portfolios.
Bank of America 2019 183
Bank of America 2019 183
Acronyms
ABS
AFS
ALM
ARR
AUM
AVM
BANA
BHC
BofAS
BofASE
bps
CAE
CAO
CCAR
CDO
CDS
CET1
CFPB
CLO
CFTC
CLTV
CRO
CVA
DIF
DVA
EAD
EMRC
EPS
ERC
EU
FCA
FDIC
FDICIA
FHA
FHFA
FHLB
FHLMC
FICC
FICO
FLUs
FNMA
FTE
FVA
GAAP
GDPR
GLS
GNMA
Asset-backed securities
Available-for-sale
Asset and liability management
Alternative reference rates
Assets under management
Automated valuation model
Bank of America, National Association
Bank holding company
BofA Securities, Inc.
BofA Securities Europe SA
basis points
Chief Audit Executive
Chief Administrative Officer
Comprehensive Capital Analysis and Review
Collateralized debt obligation
Credit default swap
Common equity tier 1
Consumer Financial Protection Bureau
Collateralized loan obligation
Commodity Futures Trading Commission
Combined loan-to-value
Chief Risk Officer
Credit valuation adjustment
Deposit Insurance Fund
Debit valuation adjustment
Exposure at default
Enterprise Model Risk Committee
Earnings per common share
Enterprise Risk Committee
European Union
Financial Conduct Authority
Federal Deposit Insurance Corporation
Federal Deposit Insurance Corporation
Improvement Act of 1991
Federal Housing Administration
Federal Housing Finance Agency
Federal Home Loan Bank
Freddie Mac
Fixed-income, currencies and commodities
Fair Isaac Corporation (credit score)
Front line units
Fannie Mae
Fully taxable-equivalent
Funding valuation adjustment
Accounting principles generally accepted in the
United States of America
General Data Protection Regulation
Global Liquidity Sources
Government National Mortgage Association
GSE
G-SIB
GWIM
HELOC
HQLA
HTM
ICAAP
IRM
IBOR
IRLC
ISDA
LCR
LGD
LHFS
LIBOR
LTV
MBS
MD&A
MLGWM
MLI
MLPCC
MLPF&S
MRC
MSA
MSR
NOL
NSFR
OCC
OCI
OREO
OTC
OTTI
PCA
RMBS
RSU
SBLC
SCCL
SBSDs
SEC
SLR
SOFR
TDR
TLAC
VA
VaR
VIE
Government-sponsored enterprise
Global systemically important bank
Global Wealth & Investment Management
Home equity line of credit
High Quality Liquid Assets
Held-to-maturity
Internal Capital Adequacy Assessment Process
Independent Risk Management
Interbank Offered Rates
Interest rate lock commitment
International Swaps and Derivatives Association,
Inc.
Liquidity Coverage Ratio
Loss given default
Loans held-for-sale
London Interbank Offered Rate
Loan-to-value
Mortgage-backed securities
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Merrill Lynch Global Wealth Management
Merrill Lynch International
Merrill Lynch Professional Clearing Corp
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Management Risk Committee
Metropolitan Statistical Area
Mortgage servicing right
Net operating loss
Net Stable Funding Ratio
Office of the Comptroller of the Currency
Other comprehensive income
Other real estate owned
Over-the-counter
Other-than-temporary impairment
Prompt Corrective Action
Residential mortgage-backed securities
Restricted stock unit
Standby letter of credit
Single-counterparty credit limits
Security-based swap dealers
Securities and Exchange Commission
Supplementary leverage ratio
Secured Overnight Financing Rate
Troubled debt restructurings
Total loss-absorbing capacity
U.S. Department of Veterans Affairs
Value-at-Risk
Variable interest entity
184 184
Bank of America 2019
Bank of America 2019
Disclosure Controls and Procedures
Bank of America Corporation and Subsidiaries
As of the end of the period covered by this report and pursuant to Rule 13a-15 of the Securities Exchange Act of 1934, as amended
(Exchange Act), Bank of America’s management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation
of the effectiveness and design of our disclosure controls and procedures (as that term is defined in Rule 13a-15(e) of the Exchange
Act). Based upon that evaluation, Bank of America’s Chief Executive Officer and Chief Financial Officer concluded that Bank of America’s
disclosure controls and procedures were effective, as of the end of the period covered by this report.
Bank of America 2019 185
Bank of America 2019 185
Executive Management Team and Management Committee
Bank of America Corporation
Executive Management Team
Brian T. Moynihan*
Chairman of the Board and
Chief Executive Officer
Management Committee**
Michael C. Ankrom, Jr.
Global Banking Chief Risk Officer
and Enterprise Credit Risk Executive
Dean C. Athanasia*
President, Retail and Preferred
& Small Business Banking
Catherine P. Bessant*
Chief Operations and
Technology Officer
Sheri B. Bronstein*
Chief Human Resources Officer
Paul M. Donofrio*
Chief Financial Officer
Anne M. Finucane
Vice Chairman, Bank of America
Geoffrey S. Greener*
Chief Risk Officer
Christine P. Katziff
Chief Audit Executive
Kathleen A. Knox*
President, Private Bank
David G. Leitch*
Global General Counsel
Thomas K. Montag*
Chief Operating Officer
Thong M. Nguyen*
Vice Chairman, Bank of America
Andrew M. Sieg*
President, Merrill Lynch Wealth
Management
Andrea B. Smith*
Chief Administrative Officer
Bruce R. Thompson
Vice Chairman and President of
European Union and Switzerland
Keith T. Banks
Vice Chairman, Wealth Management &
Head of Investment Solutions Group
Aditya Bhasin
Consumer, Small Business & Wealth
Management, Global Human Resources,
Corporate Audit & Credit Review, Legal
Technology, Third-Party Management
and Workspace Services Executive
Alexandre Bettamio
President, Latin America
Rudolf A. Bless
Chief Accounting Officer
D. Steve Boland
Head of Consumer Lending
Alastair M. Borthwick
Head of Global Commercial Banking
Candace E. Browning-Platt
Head of Global Research
James P. DeMare
Co-Head of Global Fixed Income,
Currencies & Commodities Trading
Fabrizio Gallo
Head of Global Equities
Matthew M. Koder
Head of Global Corporate and
Investment Banking
Aron D. Levine
Head of Consumer Banking and
Investments
Bernard A. Mensah
President of United Kingdom and
Central & Eastern Europe, the Middle
East and Africa and Co-Head of
Global Fixed Income, Currencies &
Commodities Trading
Sharon L. Miller
Head of Small Business
Andrei Magasiner
Treasurer
E. Lee McEntire
Investor Relations Executive
Lauren A. Mogensen
Global Compliance and Operational
Risk Executive
Tram V. Nguyen
Global Corporate Strategy Executive
Holly O’Neill
Head of Consumer, Small Business &
Wealth Management Client Care
David Reilly
Global Banking & Markets, Enterprise
Risk & Finance Technology, and Core
Technology Infrastructure Executive
Lorna R. Sabbia
Head of Retirement and Personal
Wealth Solutions
Robert A. Schleusner
Head of Wholesale Credit
April Schneider
Head of Consumer & Small Business
Products
Thomas M. Scrivener
Consumer, Small Business & Wealth
Management Operations Executive
Jiro Seguchi
Co-President of Asia Pacific, and
Head of Asia Pacific Global Corporate
and Investment Banking
Jin Su
Co-President, Asia Pacific and
Co-Head of Asia Pacific Fixed Income,
Currencies & Commodities
David C. Tyrie
Head of Consumer & Small Business
Advanced Solutions and Digital Banking
Anne Walker
Global Real Estate and Strategic
Initiatives Executive
Ather Williams III
Head of Business Banking and Global
Banking and Markets Anti-Money
Laundering
Sanaz Zaimi
Head of Global Fixed Income,
Currencies & Commodities Sales and
Country Executive, France
* Executive Officer
** All members of the Executive Management Team are also members of the Management Committee
184 Bank of America 2019
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Board of Directors
Bank of America Corporation
Board of Directors
Brian T. Moynihan
Chairman of the Board and
Chief Executive Officer,
Bank of America Corporation
Jack O. Bovender, Jr.
Lead Independent Director,
Bank of America Corporation;
Former Chairman and
Chief Executive Officer, HCA Inc.
Sharon L. Allen
Former Chairman, Deloitte LLP
Susan S. Bies
Former Member, Board of Governors
of the Federal Reserve System
Frank P. Bramble, Sr.
Former Executive Vice Chairman,
MBNA Corporation
Pierre J.P. de Weck
Former Chairman and Global Head
of Private Wealth Management,
Deutsche Bank AG
Arnold W. Donald
President and Chief Executive Officer,
Carnival Corporation and Carnival plc
Linda P. Hudson
Former Chairman and Chief Executive
Officer, The Cardea Group, LLC;
Former President and Chief Executive
Officer, BAE Systems, Inc.
Monica C. Lozano
Chief Executive Officer, College
Futures Foundation; Former Chairman,
US Hispanic Media Inc.
Thomas J. May
Former Chairman, President, and Chief
Executive Officer, Eversource Energy
Lionel L. Nowell III
Former Senior Vice President and
Treasurer, PepsiCo, Inc.
Denise L. Ramos
Former Chief Executive Officer, ITT Inc.
Clayton S. Rose
President, Bowdoin College
Michael D. White
Former Chairman, President, and
Chief Executive Officer, DIRECTV
Thomas D. Woods
Former Vice Chairman and Senior
Executive Vice President, Canadian
Imperial Bank of Commerce
R. David Yost
Former Chief Executive Officer,
AmerisourceBergen Corporation
Maria T. Zuber
Vice President for Research and
E.A. Griswold Professor of Geophysics,
Massachusetts Institute of Technology
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Corporate Information
Bank of America Corporation
Headquarters
The principal executive offices of Bank of America
Corporation (the Corporation) are located in the Bank
of America Corporate Center, 100 North Tryon Street,
Charlotte, NC 28255.
Annual Report on Form 10-K
The Corporation’s 2019 Annual Report on Form 10-K is available
at http://investor.bankofamerica.com. The Corporation also
will provide a copy of the 2019 Annual Report on Form 10-K
(without exhibits) upon written request addressed to:
Stock Listing
The Corporation’s common stock is listed on the New
York Stock Exchange (NYSE) under the symbol BAC. The
stock is typically listed as BankAm in newspapers. As of
December 31, 2019, there were 163,072 registered holders
of the Corporation’s common stock.
Investor Relations
Analysts, portfolio managers and other investors seeking
additional information about Bank of America stock
should contact our Equity Investor Relations group at
1.704.386.5681 or i_r@bankofamerica.com. For addi-
tional information about Bank of America from a credit
perspective, including debt and preferred securities,
contact our Fixed Income Investor Relations group at
1.866.607.1234 or fixedincomeir@bankofamerica.com. Visit
the Investor Relations area of the Bank of America website,
http://investor.bankofamerica.com, for stock and dividend
information, financial news releases, links to Bank of America
SEC filings, electronic versions of our annual reports and
other items of interest to the Corporation’s shareholders.
Customers
For assistance with Bank of America products and services,
call 1.800.432.1000, or visit the Bank of America website
at www.bankofamerica.com. Additional toll-free numbers for
specific products and services are listed on our website at
www.bankofamerica.com/contact.
News Media
News media seeking information should visit our online
newsroom at http://newsroom.bankofamerica.com for
news releases, press kits and other items relating to the
Corporation, including a complete list of the Corporation’s
media relations specialists grouped by business specialty
or geography.
Bank of America Corporation
Office of the Corporate Secretary
Bank of America Corporate Center
100 North Tryon Street
NC1-007-56-06
Charlotte, NC 28255
Shareholder Inquiries
For inquiries concerning dividend checks, electronic deposit
of dividends, dividend reinvestment, tax statements,
electronic delivery, transferring ownership, address changes
or lost or stolen stock certificates, contact Bank of America
Shareholder Services at Computershare Trust Company,
N.A., via the Internet at www.computershare.com/bac; call
1.800.642.9855; or write to P.O. Box 505005, Louisville, KY
40233. For general shareholder information, contact Bank of
America Office of the Corporate Secretary at 1.800.521.3984.
Shareholders outside of the United States and Canada may
call 1.781.575.2621.
Electronic Delivery
As part of our ongoing commitment to reduce paper
consumption, we offer electronic methods for customer
communications and transactions. Customers can sign up to
receive online statements through their Bank of America or
Merrill Lynch Wealth Management account website. In 2012,
we adopted the SEC’s Notice and Access rule, which allows
certain issuers to inform shareholders of the electronic
availability of Proxy materials, including the Annual Report,
which significantly reduced the number of printed copies
we produce and mail to shareholders. Shareholders still
receiving printed copies can join our efforts by electing to
receive an electronic copy of the Annual Report and Proxy
materials. If you have an account maintained in your name at
Computershare Investor Services, you may sign up for this
service at www.computershare.com/bac. If your shares are
held by a broker, bank or other nominee, you may elect to
receive an electronic copy of the Proxy materials online at
www.proxyvote.com, or contact your broker.
186 Bank of America 2019
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Investment products:
Are Not FDIC Insured
May Lose Value
Are Not Bank Guaranteed
“Bank of America” and “BofA Securities” are the marketing names used by the Global Banking and Global Markets
divisions of Bank of America Corporation. Lending, other commercial banking activities, and trading in certain
financial instruments are performed globally by banking affiliates of Bank of America Corporation, including
Bank of America, N.A., Member FDIC. Trading in securities and financial instruments, and strategic advisory, and
other investment banking activities, are performed globally by investment banking affiliates of Bank of America
Corporation (“Investment Banking Affiliates”), including, in the United States, BofA Securities, Inc. and Merrill
Lynch Professional Clearing Corp., both of which are registered broker-dealers and Members of SIPC, and, in other
jurisdictions, by locally registered entities. BofA Securities, Inc. and Merrill Lynch Professional Clearing Corp. are
registered as futures commission merchants with the CFTC and are members of the NFA.
Bank of America is a marketing name for the Retirement Services business of Bank of America Corporation
(“BofA Corp.”). Banking activities may be performed by wholly owned banking affiliates of BofA Corp., including
Bank of America, N.A., member FDIC.
Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as “MLPF&S” or “Merrill”) makes available
certain investment products sponsored, managed, distributed or provided by companies that are affiliates of
Bank of America Corporation (“BofA Corp.”). MLPF&S is a registered broker-dealer, registered investment adviser,
Member SIPC, and a wholly owned subsidiary of BofA Corp.
BofA Global Research is research produced by BofA Securities, Inc. (“BofAS”) and/or one or more of its affiliates.
BofAS is a registered broker-dealer, Member SIPC, and wholly owned subsidiary of Bank of America Corporation.
Bank of America Private Bank is a division of Bank of America, N.A., Member FDIC, and a wholly-owned subsidiary
of BofA Corp.
Banking products are provided by Bank of America, N.A., and affiliated banks, Members FDIC, and wholly owned
subsidiaries of BofA Corp.
Zelle and Zelle-related marks are wholly owned by Early Warning Services, LLC and are used herein under license.
1. Zelle should only be used to send money to friends, family or others you trust. We recommend that you do not
use Zelle to send money to persons that you do not know. Transfers require enrollment in the service and must
be made from an eligible Bank of America consumer deposit account to a domestic bank account or debit card.
Recipients have 14 days to enroll to receive money or the transfer will be canceled. Transactions typically occur
in minutes when the recipient’s email address or U.S. mobile number is already enrolled with Zelle. We will send
you an email alert with delivery details immediately after you schedule the transfer. Dollar and frequency limits
apply. See the Online Banking Service Agreement at bankofamerica.com/serviceagreement for further details.
Payment requests to persons not already enrolled in Zelle must be sent to a U.S. email address. Data connection
required. Message and data rates may apply. Neither Bank of America nor Zelle offers a protection program for
any authorized payments made with Zelle.
2. Mobile Banking requires that you download the Mobile Banking app and is only available for select mobile
devices. Message and data rates may apply.
3. You are not liable for fraudulent Online and Mobile Banking transactions when you notify the bank within 60 days
of the transaction first appearing on your statement and comply with security responsibilities. See Section 5 of
our Online Banking Service Agreement for full terms and conditions.
The ranking or ratings shown herein may not be representative of all client experiences because they reflect an
average or sampling of the client experiences. These rankings or ratings are not indicative of any future performance
or investment outcome. More information can be found at www.bankofamerica.com/awards.
© 2020 Bank of America Corporation. All rights reserved.
Printed on 30% recovered fiber content. By using this paper, Bank of America is helping to reduce greenhouse
gas emissions and water consumption. Leaf icon is a registered trademark of Bank of America Corporation.
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