Coming together
in new ways
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Annual Report 2020
CONTENTS
1 A letter from Chairman and CEO
Brian Moynihan
10 Measuring stakeholder capitalism
11 A message from outgoing
Lead Independent Director
Jack Bovender
11 A message from incoming
Lead Independent Director
Lionel Nowell
14 Addressing a global health crisis
as one company
18 Q&A with D. Steve Boland and
Aron Levine: Working together to
meet clients’ changing needs in a
challenging year
19 Growth of digital banking, lending
and investing at Bank of America
20 Q&A with Matthew Koder:
Delivering for our clients with
defining differentiators
21 A message from Bernie Mensah:
Making significant progress
internationally
22 Delivering innovative wealth
solutions and exceptional client
service
23 What sets us apart:
BofA Global Research
24 Serving our clients and communities
through technology
25 Market Presidents deliver our
global company to each client,
employee and community
29 Supporting emotional wellness
and mental health
30 Continuing to be a workplace where
all teammates can grow and thrive
32 Being a great place to work —
2020 highlights
33 Investing $1 billion over four years
to advance racial equality and
economic opportunity
34 A conversation with Anne Finucane
and Karen Fang: Addressing
the world’s challenges through
sustainable finance
26 A message from Sheri Bronstein:
36 2020 ESG highlights
Being a great place for our
teammates to work
28 Driving meaningful change when
the world needs it most
38 Financial highlights
39 Recognition
40 Stakeholder Capitalism Metrics
A letter from Chairman and CEO Brian Moynihan
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 hope this finds you safe and well.
It is my pleasure to share with you the 2020 Bank of
America Annual Report. Our report documents how
your company responded to the impacts — both
humanitarian and financial — of the global health
crisis. It describes how we responded to the social
and racial justice issues that moved to the forefront
in 2020. The pages also tell the story of how our
company came together in new ways to deliver
for our shareholders, our teammates, our clients,
our communities and to help address society’s
biggest challenges.
I begin this letter by thanking my 213,000
teammates and our senior management team.
I thank them for their extraordinary efforts over
the past 12 months, and for everything they do to
support our clients, and each other, every day.
outgoing Lead Independent Director, Jack Bovender,
for all he has done for our company and those we
serve. As we announced in September 2020, Lionel
Nowell III takes over this important role. Lionel is an
experienced leader and has been a valued member
of our Board for the past eight years. Jack and
Lionel share their perspectives on the past
year, and what lies ahead, on page 11.
Looking at our 2020 results, one thing is clear:
Our decade-long focus on Responsible Growth
prepared us well for this crisis. It allowed us to be
a source of stability for our customers and clients
during challenging times, to continue supporting the
communities in which we work and live and deliver
more consistent results for our shareholders through
a well-understood risk framework. You can see the
impact of Responsible Growth in the chart below.
I would also like to thank our Board of Directors for
their leadership and guidance throughout 2020. In
particular, I would like to extend my gratitude to our
Despite the impacts of the global health crisis,
which resulted in a historically low interest rate
2010 to 2014: Dramatic
net income volatility
(billions)
2015 to 2020: Net income
reflecting Responsible Growth¹
(billions)
$5.5
$3.2
e
m
o
c
n
i
t
e
n
y
l
r
e
t
r
a
u
Q
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
BANK OF AMERICA 2020 | 1
¹ 4Q 2017 net income of $5.3B represents a non-GAAP financial measure. GAAP net income of $2.4B excludes $2.9B related to the adoption of the Tax Cuts and Jobs Act.
environment and a period of market volatility, your company
earned $17.9 billion in net income, or $1.87 per share.
Moreover, we ended 2020 with more capital, more deposits,
record liquidity and improved capital ratios. We did this while
increasing support for our clients.
In March of 2020, the stock price for banks in general saw
a sharp drop as the health crisis unfolded and investors
contemplated potentially large credit losses and revenue
declines from interest rates and a paucity of economic activity.
From those lows, bank stocks made a steady recovery as
fears moderated, ending the year modestly down from the
start of the year.
Our stock price declined 49% in March from the beginning
of 2020 and then saw a 68% recovery, ending the year down
14%. This was in line with the broader bank index but below
the broader market rise of 16%. Despite the 2020 decline,
our stock price has outperformed the broader bank index on a
3-year and 5-year basis. As we prepare to issue this report in
late February 2021, the price is up 14% this year, reflecting the
improved economic outlook.
During 2020, we delivered $12 billion in capital back to
shareholders through dividends and net share repurchases. We
did this even as we halted share repurchases late in the first
quarter of 2020 in line with additional federal bank regulatory
restrictions. We have resumed share repurchases in the first
quarter of 2021 from a position of strength with $36 billion of
capital above our minimum regulatory requirements.
Our results in 2020 built onto a solid foundation established
by focusing on Responsible Growth for the past decade. We
have a strong balance sheet, a best-in-class suite of products
and capabilities — including our industry-leading digital
capabilities — and a global team of dedicated professionals
that is second to none. We are well-positioned to continue
delivering for our shareholders, and all those we serve, in
2021 and beyond.
We believe we must continue to deliver these strong results
and help make progress on important societal priorities. That is
core to how we run our business and drive Responsible Growth.
In 2020, we also continued to make meaningful progress
on important issues that affect us all. During the year, we
accelerated our longstanding work to promote racial equality
and economic opportunity, with a $1 billion, four-year
commitment aimed at supporting jobs, healthcare, housing
and businesses. While we were pleased to see commitments
being made by other companies and organizations, we
have moved quickly to get money moving to our priority
areas of focus. So far, we have invested in jobs and skills
training at 11 historically Black colleges and universities and
11 community colleges. We have delivered over 20 million
masks and other personal protective equipment (PPE) to
2 | BANK OF AMERICA 2020
5-year stock performance
80.1%
45.8%
34.0%
BAC
BKX
Index1
U.S. LC
Peers2
5-year total shareholder return
98.7%
64.7%
53.1%
BAC
BKX
Index1
U.S. LC
Peers2
1 The BKX Index consists of 24 stocks selected from the
largest U.S. regional and nationwide banking companies.
2 Total shareholder return includes stock price appreciation and dividends
paid. U.S. Large Cap (LC) Peers include JPM, C, WFC, GS and MS.
Brian Moynihan
Chairman and CEO
community partners, nonprofits, and other venues. We have
invested in 14 Minority Depository Institutions (MDIs) to help
them grow and serve their communities. We have increased
our overall commitment to Community Development
Financial Institutions (CDFIs) to $1.7 billion — making Bank
of America the largest private sector CDFI funder. And, we
have agreed to invest in 61 minority-owned or -focused
venture capital or private equity funds in communities around
the U.S., which will deliver more equity into thousands of
minority-owned small businesses. You can find out more
about our commitment to racial equality and economic
opportunity on page 33.
We also continued to support the transition to a low-carbon,
sustainable economy, through our operations, our business
activities and our partnerships. This includes our commitment
to a goal of achieving net-zero carbon emissions by 2050.
Responsible Growth
There are four pillars to Responsible Growth.
• We must grow in the market, no excuses.
• We must grow with a customer focus.
• We must grow within our risk framework.
• We must grow in a sustainable manner.
I’ll discuss each of these in turn, and the ways our team in 2020
delivered on these pillars.
Grow in the market, no excuses
What could we do in an economy to help our clients and grow?
We supported our clients in lockdown with our various customer
assistance programs. We supported small businesses with
Paycheck Protection Program (PPP) loans. We supported wealth
management clients with advice, expertise and execution in
BANK OF AMERICA 2020 | 3
volatile markets. We supported commercial clients with our
strong balance sheet that provided more than $70 billion in loans
in a few-week period, and raised $772 billion in capital over the
course of the year. For institutional investors, it meant having the
market expertise and insights, trading capabilities and access to
enable them to navigate through.
All of this, and more, allowed us to continue to serve clients
relatively uninterrupted by the pandemic, even as volumes
surged. We played our part, with our industry colleagues, in
helping ensure economies around the world, and here in the
U.S., recover more quickly. In the end, that is the role of the
bank. Your company executed that role well.
But we believe it was our planning and investments over the
past decade that made this all work. We supplied needed capital
and liquidity to borrowers. Our investments in digital client
interfaces across our client groups allowed us to maintain a
close relationship with our clients, as they moved seamlessly to
digital check deposits, payments, banking and investing. On the
commercial side, we had invested in our CashPro application,
which allowed our clients to safely and securely move billions
of dollars every day. We used automated signature capabilities
to allow clients to complete estate plans, borrow or invest — all
with the same security as doing it in person. With institutional
investors, we moved quickly to supply liquidity and a strong and
resilient platform to support their activities and help assure
stability of the financial system.
And we grew.
In 2020, average deposits increased 18% year-over-year to
approximately $1.6 trillion. In Consumer Banking, we added
$115 billion in average deposits during the year, cementing
our position as the #1 bank in the U.S. by retail deposits.
We leveraged our leading digital capabilities to serve our
consumer clients how, when and where they chose to bank
with us. Across all consumer sales in 2020, 42% of sales
came through digital channels.
During the year, we also enrolled more than one million clients
into our flagship loyalty program, Preferred Rewards, driving
total membership to 7.2 million. Preferred Rewards recognizes
Revenue¹,² FY2020
(billions)
Net income³ FY2020
(billions)
$85.5B
$17.9B
Note: Amounts may not total due to rounding.
¹ Business segment results are reported on a fully taxable-equivalent (FTE) basis with remaining operations recorded in All Other with revenue of ($3.6B).
² Total revenue, net of interest expense, on a GAAP basis is $85.5B and $86.0B on an FTE basis, a non-GAAP financial measure. The FTE adjustment is $499M.
³ Net Income of $17.9B includes a net loss of $407M in All Other.
4 | BANK OF AMERICA 2020
Global Markets$5.2Global Markets$18.8Consumer$6.5Consumer$33.3Global Banking$3.5Global Banking$19.0GWIM$3.1GWIM$18.6 and rewards clients for their entire relationship with us, and we
continue to see 99% retention rates from our members.
We brought our top retail bank brand to new markets in
the U.S., including markets in Ohio and Utah, while building
our presence in existing markets. According to our internal
research, we continued to gain share in key markets. In 25 of
the top 30 markets across America — representing over half of
the U.S. population — we now hold the #1, #2 or #3 position.
That is twice as many markets as our closest peer and includes
14 markets in which we hold the #1 position.
During the year, our wealth management team found new
ways to connect with, and deliver for, our Merrill and Private
Bank clients. On page 22, we take a closer look at how
our advisors continued to support clients and helped
them navigate a changing environment. We added
roughly 22,000 Merrill and 1,800 Private Bank relationships
in 2020, and ended the year with client balances at all-time
highs of $3.3 trillion.
For the companies we serve, we begin with our small business
clients. Apart from the role we played as the largest lender
in the federal government’s PPP by number of loans, we also
continued as the largest small business lender in the country
overall, ending the year with more than $32 billion in small
business loan balances. We also deployed our new merchant
services capabilities.
For our commercial clients, the year was difficult as they had
to absorb massive changes to the business cycle brought by
the health crisis. We were there for them. Early in the year,
we supported their borrowing rush as they sought liquidity in
February, March and April. As conditions stabilized, we helped
with market access for them to raise needed and permanent
capital. We continued to bring digital capabilities to ensure
their businesses could run smoothly, even in a work-from-home
environment. The results for us were a surge in loans to these
businesses. We peaked at $585 billion in commercial loans; by
year-end those were down to $499 billion.
Our investment banking team recorded $7 billion in total
investment banking fees and posted three of the strongest
investment banking quarters in our history. Our performance
in this business helped us gain market share and retain the
#3 market position, thanks to the efforts of our talented
team. Matthew Koder, President of Global Corporate
& Investment Banking, looks back on his team’s
accomplishments on page 20.
In Global Markets, full-year sales and trading revenue for 2020
increased 18% year-over-year to $15 billion. During the year
we continued to push our innovative capabilities in electronic
trading forward to help win mindshare with some of our largest
clients. At the same time, our own research team was again
ranked as one of the top Global Research Firms by Institutional
Investor—placing as one of the top two firms for each of the
past 10 years. You can read more about our award-winning
research capabilities on page 23.
Each of our businesses contributed to our results, and the
diversity of our offerings served us well through a dynamic market
environment. It will continue to serve us well as we look forward.
Grow by focusing on our clients
Last year, thanks to the commitment of our teammates, the
strength of our platform and our focus on Responsible Growth,
we achieved the highest client satisfaction scores in company
history. That is a credit to each and every member of our global
team, who work hard to serve our customers and clients — and
exceed their expectations — in every interaction.
In 2020, that included far-ranging measures to support those
impacted by the health crisis, through our own relief programs
and those provided by the federal government. We processed
approximately 2 million payment deferral requests as part
of our Client Assistance Program. We processed more than
16 million Economic Impact Payments (EIP), totaling more than
$26 billion in the initial round of U.S. government stimulus
payments — and continued processing additional payments
following subsequent relief legislation.
As the largest PPP lender by number of PPP loans in the first
three rounds of the program, in 2020 we helped more than
343,000 small business clients — in every industry, every
market — receive PPP loans, delivering more than $25 billion
in PPP loan funds to businesses in need. We began accepting
applications for PPP loans once again in January 2021, in
line with a new round of federal PPP lending. Once again, we
are among the top lenders in the program.
At the same time, we remained focused on supporting the
everyday financial needs of millions of clients. With additional
health and safety measures in place, our teams continued to
serve individuals and businesses across our nationwide network
of approximately 4,300 financial centers and 17,000 ATMs. I’d
like to offer a special thanks to my teammates in the financial
centers who have played an essential role for our clients and
communities through this health crisis.
Not surprisingly, we also saw a growing number of clients
choose to connect with us digitally during 2020. Our ten-plus
years of sustained investment into technology — such as
39.3M
digital customers
at year-end, up 3% over 2019
BANK OF AMERICA 2020 | 5
artificial intelligence (AI) — and our award-winning digital
platforms ensured we could continue to serve our clients when
they needed us most.
In Consumer Banking, we ended 2020 with 39.3 million digital
customers, up 3% over 2019. They connected with us nearly
11 billion times. Our roughly 13 million active Zelle® users, both
consumers and small businesses, sent approximately $141 billion
in transfers in 2020. To put that into perspective, that’s almost
50% of the payments made by our 38 million consumers
and small businesses using their credit cards.
More than 17 million of our digital banking clients use Erica®,
our AI-based virtual financial assistant, to do everything from
checking their balances to paying their bills. Erica will also
reach out to help if, for example, a client’s balance is at risk
of going below $0 in the next week, or if a merchant charges
them twice. Erica continues to gain knowledge and evolve in
response to client needs. For example, at the beginning of
the health crisis, Erica learned 60,000 new pandemic-related
intents in a matter of days. In 2020 alone, Erica completed
135 million client requests.
In September, we launched LifePlan®, which gives clients the
power to select what’s most important to them and receive
personalized insights — through both high-tech and high-touch
interactions — to help them achieve their financial needs and
goals. By the end of 2020, our clients had created more than
2 million plans, one of the fastest product rollouts in our history.
Our digital platforms also allow us to extend further into our
communities, allowing millions of clients to access services and
connect into the broader economy. In 2020, we added Balance
Assist™, a low-cost, digital-only alternative to payday-type
loans. Balance Assist, which allows clients to borrow up to
$500 for a $5 flat fee, joins our existing suite of safe banking
solutions, including SafeBalance™ and Secured Card. D. Steve
Boland, President of Retail, joins Aron Levine, President
of Preferred and Consumer Banking & Investments, to
discuss how these products can help provide financial
freedom and stability for clients on page 18.
$1B
In 2020, our team generated
more than 1,700 ideas to
drive operational excellence,
saving the company nearly
$1 billion.
6 | BANK OF AMERICA 2020
Digital connectivity was also fundamental to our success in
wealth management, and we saw digital engagement for
wealth management clients climb to record levels. By the
end of 2020, 77% of Merrill Lynch households and Private
Bank clients were using online or mobile banking. Our
digital platforms also allowed for effective advisor-client
communications, which became a critical part of relationship
building as the pandemic continued.
In Global Banking, our CashPro® platform helped more CFOs
and other business leaders efficiently and securely manage
their cash flow from their offices and homes—and on their
mobile devices. Our roughly 500,000 CashPro users drove a
40% increase in platform sign-ins in 2020. Here, too, we
applied the power of AI for our clients, digitally matching
19 million incoming receivables in a 12-month period using
our Intelligent Receivables® solution.
Stepping back, what we saw in 2020 was the impact of years
of investment in capabilities and digital access across our
platform and our businesses. And what was unique is that even
in areas where we had heretofore experienced customers or
employees traditionally preferring to operate in a face-to-face,
physical world, we saw dramatic changes. We had a record
year in new $10 million or higher relationships in Global Wealth
& Investment Management (GWIM), yet we were unable to
have many face-to-face meetings. We had a record year in
investment banking fees, yet all of our “pitch” meetings with
clients were virtual. We saw record movement in money by our
consumer customers yet we had up to 30% of our financial
centers closed for safety. The implications for the long term are
yet to be borne out. But we are confident that the investments
we have made set us on the correct course.
I want to call out our technology and operations team, who
showed creativity and excellence in execution by positioning all
of our client-facing teammates to be able to operate in a work-
from-home environment. In four weeks, our tech and ops team
deployed 100,000 computers and screens to those teammates. It
was no small task, and it enabled us to continue to serve clients
who themselves were adjusting to the pandemic conditions.
Grow within our risk framework
Growing within our established risk framework is integral to how
we drive Responsible Growth. Our principled approach to risk
management allowed us to continue supporting our customers
and clients against the backdrop of one of the worst economic
declines in U.S. history, driven by the global pandemic.
At the onset on the health crisis, we took immediate action to
strengthen our reserves for credit losses. We ended 2020 with
nearly $21 billion in credit reserves, more than twice what we
had at the end of 2019. Together with our existing capital, we
have substantial reserves available to manage potential losses.
Credit losses were much lower than many expected, but we
were confident our underwriting would hold up, and it did. In
fact, our actual charge-offs moved from $3.6 billion in 2019 to
$4.1 billion in 2020, a slight increase.
On the markets side, our team led by Tom Montag and Jim
DeMare navigated the markets very well and we had a strong
year of trading revenue. More importantly, we provided support
for our institutional clients. And we had only a handful of days
with trading losses.
We continue to actively monitor and assess the impacts — both
direct and indirect — of the health crisis and other potential
risks through our risk management framework. And we continue
to drive out operational risk from the company through our
focus on operational excellence.
Grow in a sustainable manner
To drive Responsible Growth, we must ensure that our growth is
sustainable. There are three complementary and interdependent
tenets to how we approach sustainable growth: driving
operational excellence, being the best place for teammates
to work and sharing our success with our communities.
Driving operational excellence
While “operational excellence,” “organizational health,”
“simplify and improve” and other terms we use may sound
a little mechanical, they are instrumental to our success.
In 2015, your company had $57 billion in expenses. In 2020,
we had $55 billion, including roughly $1.5 billion in net
coronavirus-related costs. Compared with 2015, we have
more customers and clients and more transactions — so more
work. Yet costs are down and headcount is down. During
those six years, we invested about $18 billion in technology
initiatives, added 15% more sales teammates, opened 300
financial centers and refurbished 2,000 more. All of these
investments were made while costs came down. We continue
to apply the practice of operational excellence to enable us
to produce strong returns above our cost of capital while
investing back into our company and our capabilities. This
will provide powerful leverage as interest rates rise and the
economy continues to recover and grow.
Operational excellence is as much a mindset as it is a program. It
describes the ways in which we drive continuous improvement,
reduce operational risk and seek to find faster, simpler and more
efficient ways of working and serving our clients.
This work is fueled by the ingenuity and creativity of our
teammates, who continuously look for ways we can do things
better. In total, we’ve approved nearly 8,600 of their ideas,
which commit to delivering billions in expense savings. In 2020
alone, our team generated more than 1,700 ideas that helped
us define commitments to save nearly $1 billion. We reinvested
those savings back into our team, our capabilities, our client
experience, our communities and our shareholders.
For example, savings from operational excellence help fund
the ongoing modernization of sites across our real estate
portfolio, including renovating our financial centers to deliver
a client-focused interior and exterior design and full support
for digital transactions.
It’s important to note we made investments like these
in 2020 — and many more described throughout this
report — while at the same time returning $12 billion in
net capital to our shareholders. And — as you will see
discussed elsewhere in this report — we invested in our
team, including the fourth consecutive year of company-wide
supplemental bonuses, increasing our minimum hourly rate
of pay for U.S. employees and keeping medical expenses down
for our lesser-paid teammates.
Being a great place to work for our teammates
Attracting and retaining the best talent is key to driving
Responsible Growth and one of our top priorities. It helps us
manage our operations, provide the best service for our clients
and support our communities.
We strive to make Bank of America a great place to work
for all teammates. And we fulfill this commitment by being
a diverse and inclusive workplace, attracting and developing
talent, recognizing and rewarding performance and supporting
teammates’ physical, emotional and financial wellness. On
page 26, Sheri Bronstein, our Chief Human Resources
Officer, shares her thoughts on our progress in 2020 and
what it means for the future.
Our workforce must reflect the communities we serve. As
highlighted in our 2020 Human Capital Management Report, we
have continued to make progress in our goal to ensure diverse
representation at all levels of our company. Fifty percent of our
management team is diverse, and Bank of America is one of
only five S&P 100 companies with six or more women on the
Board. And over the past decade, the number of people of color
we hire in the U.S. from universities has increased by 50%.
1 of 5
Bank of America is one of
only five S&P 100 companies
with six or more women
on the Board.
$20
In 2020, we raised our
minimum hourly rate of pay
for U.S. teammates to $20.
BANK OF AMERICA 2020 | 7
We want our teammates to build long-term careers with Bank
of America. And that starts with a competitive starting wage
and benefits. We moved to our minimum hourly rate of pay
for U.S. teammates of $20 — roughly $42,000 per year — one
year earlier than planned. And we offer ongoing training and
development resources to help those teammates grow and
thrive within our organization. We hire with a career mindset.
And we work to reskill our teammates.
For teammates earning lower salaries, we provide higher
company subsidies for medical premiums. Since 2012, there
has been no increase in medical premiums for teammates
earning less than $50,000.
To support our teammates during the health crisis, at work and
at home, we expanded many of our benefits and resources.
This included additional support for mental health, free virtual
consultations and no-cost coronavirus testing.
Sharing our success with our communities
One of the ways we ensure our growth is sustainable is by
sharing our success with the communities in which we work
and live. We invest significant time and money to help address
issues facing our local communities and society at large, and
commit all of our business activities and operations to the task.
This begins with our $250 million in annual corporate
philanthropy. To this, we added another $100 million in 2020
to increase access to food and medical supplies in local
communities.
Individual giving by my teammates, combined with matching
gifts from Bank of America, amounted to more than $65 million
in additional philanthropic support in 2020. To maximize
the impact of each employee gift, we lowered the employee
matching gift minimum to $1 and doubled our match for
employee donations to 17 organizations through 2020.
As the pandemic hit, we knew our teammates were going to
be under pressure at home. For most of them, home was their
workplace. For our 40,000 teammates with children, home was
often a school or daycare. For many teammates with aging
parents, home became an assisted living space. Our teammates
needed help. We offered them $100 per day to hire that help.
More than 3 million days of care have been provided. This
helped our teammates immensely — they have told us. And it
also allowed them to serve our clients better.
We also support our communities through our lending and
investing activities. In 2020, for example, we provided a record
$5.87 billion in loans, tax credit equity investments and other
real estate development solutions, and deployed $3.62 billion
in debt commitments and $2.25 billion in investments to help
build strong, sustainable communities by financing affordable
housing and economic development across the country.
Between 2005 and 2020, we financed more than 215,000
affordable housing units.
In 2020, we came together to support one another like never
before. It was a great reflection of the commitments, the
compassion and the people that make our company a great
place to work.
$2B
We issued a $2 billion equality
progress sustainability bond
designed to advance racial
equality, economic opportunity and
environmental sustainability.
$1B
We launched a $1 billion
corporate social bond, the first
issued by a U.S. commercial
bank to entirely focus on fighting
the pandemic.
8 | BANK OF AMERICA 2020
In May of 2020, we launched a $1 billion corporate social
bond, the first issued by a U.S. commercial bank to entirely
focus on fighting the pandemic. We followed that up with an
industry-first $2 billion equality progress sustainability bond
designed to advance racial equality, economic opportunity and
environmental sustainability.
Our commitment to racial equality and economic opportunity
demonstrates the way in which we approach major societal
issues and align all of our resources to help drive progress
locally. Our investments and partnerships in this work are
targeted at strategic areas in which we already are a leader:
jobs, healthcare, housing and businesses. By providing
even sharper focus, we seek to make a lasting impact on
underserved minority entrepreneurs and communities. You
can read more about how we are executing on our
$1 billion commitment and a broader update on our work
in sustainable finance in the discussion between Vice
Chairman Anne Finucane and Global Sustainable Finance
Executive Karen Fang on pages 33–35.
The most important way we shape our engagement in local
communities is through our market president organization. Our
network of 90 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. We talk more about how our presidents support
our clients and communities on page 25.
Driving profits and purpose
The principles of stakeholder capitalism are embedded in
Responsible Growth. We deliver for our clients, our employees,
our communities and our shareholders and, at the same time,
do our part to deliver progress against society’s biggest
challenges. This includes our work to support the health
and safety of our teammates, the many ways we help the
communities we serve grow and prosper, our efforts to
promote racial equality and economic opportunity and our
ongoing drive toward a clean energy future.
Stakeholder capitalism is not a new concept, even if its recent
focus makes it seem that way. As a financial institution,
our success has always been tied to the success of the
communities and markets we serve. In recent years, business
organizations including the U.S. Business Roundtable, the
World Economic Forum and others have helped create broader
awareness of the ways that companies must think about
delivering long-term value — for shareholders, of course, but for
all of our other stakeholders, too.
Helping address societal issues can stimulate the commitment
of private sector capital to help drive even more progress.
And there’s growing evidence to back that up. As our Global
Research team has found, companies that pay close attention
to environmental, social and governance (ESG) priorities are
much less likely to fail than companies that do not, giving
investors a significant opportunity to build investment
portfolios for the long-term. And — through research and our
own lived experience — we know that ESG commitments can
translate into a better brand, more client favorability and a
better place for our teammates to work.
There is an important discussion underway about the role
capitalism plays in our society and the ways in which it must
evolve to ensure all participants in our economic system
are treated fairly and rewards are available equitably. Public
companies have an important role to play to help drive
that discussion. At Bank of America, we embrace our dual
responsibility to drive both profits and purpose. And we work
with organizations and leaders around the world to champion
these ideals and drive meaningful progress. We need a way to
measure that and in 2020 we made substantial progress on
that front, too.
Measuring and delivering long-term value
To help society make progress toward important goals you
need to know two things.
First, you need to understand what society’s priorities are.
And we do. The countries of the world identified those
priorities in 2015, when nearly 200 countries agreed to the
United Nations (U.N.) Sustainable Development Goals (SDGs).
The SDGs reflect 17 categories of societal priorities that
$2.82
$1.80
$2.43
$2.35
$2.19
$2.28
$1.38
$1.43
$1.26
$1.31
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
$2.8T
$1.8T
BANK OF AMERICA 2020 | 9
Total assets (trillions)Total deposits (trillions)$2.19$2.28$2.35$2.8220162017201820192020$2.43$1.26$1.31$1.38$1.43$1.8020162017201820192020 Measuring
stakeholder capitalism
The International Business Council, with the
collaboration of the accounting firms Deloitte,
KPMG, PwC and EY, compiled a set of common ESG
Stakeholder Capitalism Metrics disclosures. These
metrics are compiled from leading ESG standards-
setters, including the Task Force on Climate-related
Disclosures (TCFD), the Sustainability Accounting
Standards Board (SASB), the Global Reporting
Initiative (GRI) and others. As discussed in CEO Brian
Moynihan’s shareholder letter in this report, the goal
of the Stakeholder Capitalism Metrics is to provide
investors and other stakeholders a common set
of standards by which to evaluate the progress the
company is making to address the societal priorities
agreed to in the SDGs. The metrics include
non-financial disclosures in four categories: people,
planet, prosperity and principles of governance.
Nearly 70 global companies have agreed to begin
using the Stakeholder Capitalism Metrics, and many
more are evaluating them for their own use. Bank of
America is a founding member of His Royal Highness
the Prince of Wales’ Sustainable Markets Initiative
(SMI), which seeks to harness the creativity, the
innovation and the balance sheets of businesses
around the world to help drive long-term growth in
a globally sustainable fashion. In December 2020,
under the guidance of His Holiness Pope Francis
and His Eminence Cardinal Peter Turkson, Bank
of America joined an alliance of business leaders
and companies around the world as part of the
Vatican’s Council for Inclusive Capitalism (VCIC).
Comprising companies that collectively have more
than 200 million employees from over 163 countries,
the VCIC illustrates how capitalism can take the lead
in creating economic growth that is fair, responsible,
trusted, dynamic and sustainable. The SMI, the VCIC,
and similar organizations recognize the Stakeholder
Capitalism Metrics as an important step toward
providing the disclosures needed to measure the
progress that private sector capitalism can help deliver
in addressing important societal priorities.
Given the cross-industry application of this set of
common metrics, not each standard will apply to
each company that is disclosing. Where a disclosure
is not provided or not linked to another Bank of
America disclosure, we provide a brief explanation.
We share the long-term objective of other companies,
asset owners and asset managers, key government
regulators and the standards-setters themselves that
eventually there will be a single set of non-financial
ESG disclosure standards to help stakeholders
evaluate companies in the same fashion that standard
financial disclosures now permit.
address equality of opportunity, affordable housing,
prosperity, access to clean water, renewable energy, and
other priorities, with specific goals to be met. Leaders
in each country agreed these goals are the ones we
need to address to build a sustainable future and create
opportunity and prosperity for all.
Second, you need to know how to measure progress. The
International Business Council (IBC), which I am privileged
to chair, has compiled a set of Stakeholder Capitalism
Metrics aligned to the SDGs. These metrics create a
consistent way of measuring companies’ long-term value,
across industries. This, in turn, helps direct investment
toward high performers and align capital to progress on
the SDG and ultimately defines stakeholder capitalism. It
also aligns capitalism’s innovation, its entrepreneurship
and its massive resources to the progress, which won’t be
made without the private sector.
In September, the IBC — working with the accounting
firms Deloitte, EY, KPMG and PwC — released a set of
21 core metrics, and 34 expanded metrics, aligned to
the themes of people, planet, prosperity and principles
of governance. As of January 2021, Bank of America
and nearly 70 other global corporations have agreed
to implement reporting on the Stakeholder Capitalism
Metrics, and the coalition continues to grow. Later in
this Annual Report you can see our initial set of
Stakeholder Capitalism Metrics disclosures.
At Bank of America, we drive progress on the SDGs
through all of our efforts and activities. We do so
through our operations, our philanthropy, our human
resources practices, our client financing capabilities
and the guidance we provide to investor clients. We
bring our $2.8 trillion balance sheet, our $55 billion
expense base and the trillions of dollars we raise
each year for our clients to the task. And, critically,
we commit the considerable ingenuity, innovation and
passion of our team.
For over a decade, we have focused on driving
Responsible Growth so that we can create value for
every stakeholder and for society — through every
economic environment. Our focus on Responsible Growth
positioned us well as we faced the unforeseen challenges
of 2020, and positions us well as we look to the future.
We remain committed to delivering for our shareholders,
our teammates, our clients, our communities and to
making a positive impact on the world for years to come.
On behalf of my 213,000 teammates, our management
team and the Board of Directors, I thank you for your
support of Bank of America.
10 | BANK OF AMERICA 2020
Brian Moynihan
March 1, 2021
A message from outgoing
Lead Independent Director Jack Bovender
the execution of the strategy through
regular, systematic interaction with
company management. In performing
our duties, we are mindful of
developments in the markets, the
economy and geopolitical issues
that may impact the execution of
the strategy.
Our responsibility is to assess
opportunities and risks and determine
how well the company is adhering to
the tenets of Responsible Growth that
drive the company’s strategy. CEO Brian
Moynihan discusses this in greater
detail in his nearby letter and you will
see it brought to life in the articles
and disclosures throughout this report.
The tenets of Responsible Growth
include the company’s ESG practices.
Our Corporate Governance, ESG and
Sustainability Committee reviews and
reports to the board on the company’s
activities in these areas. This includes,
for instance, the company’s
recently
announced commitment to net-zero
greenhouse gas emissions by 2050.
As many of you know, I will be retiring
from our board at the time of the
annual meeting. Since becoming
the Lead Independent Director of
Bank of America, I have had the privilege
of meeting annually with many of our
shareholders. The feedback from these
meetings has been invaluable and I
have routinely shared it with the
board. It has significantly shaped our
approach to fulfilling our governance
responsibilities. For more detailed
information, please review this
2020 Annual Report, our 2021 Proxy
Statement and our Human Capital
Management Report.
At the annual meeting, Lionel Nowell
will assume the role of Lead
Independent Director. Lionel is totally
committed to his new role and
will continue our practice of meeting
regularly with our shareholders.
It has been both an honor and pleasure
to serve as Lead Independent Director.
On behalf of Brian, Lionel and the
other directors, thank you for investing
in Bank of America.
Dear shareholders:
Thank you for investing in Bank of
America. The directors bring
independent and diverse perspectives
to our task of helping create long-term
value for you. We represent a range
backgrounds and skills,
of expertise,
including chief executives and others
who have served in senior risk,
operations, finance, technology and
human resources positions.
This mix of expertise and experience is
beneficial throughout the year, including
in the fall when the management team
presents the company strategy for the
board to review and approve. We oversee
A message from incoming
Lead Independent Director Lionel Nowell
director in January 2013, and I have
appreciated the opportunity to oversee
the development and execution of
the company’s strategy for long-term
Responsible Growth. Fifteen of the
company’s 16 directors are independent
and we bring our unique perspectives
to each of our board and committee
meetings.
Our discussions among ourselves
and with the company’s management
are grounded in facts and data. I
am particularly pleased with the level
of detail we regularly disclose to our
investors, including in the 2020 Human
Capital Management Report and other
non-financial disclosures we make
to give you as clear a piCture of our
company as we can.
I also value the insights I receive when
I speak with shareholders; I intend to
maintain a consistent rhythm of
engagement in the same fashion as my
predecessor, Jack Bovender. I want to
thank Jack for his impressive leadership as
our Lead Independent Director, and I look
forward to assuming those responsibilities
after the 2021 annual meeting.
Thank you again for your investment in
our company.
BANK OF AMERICA 2020 | 11
To my fellow shareholders:
I join Brian Moynihan, Jack Bovender and
the other directors in thanking you for
choosing to invest in Bank of America.
I began my service as a Bank of America
Bank of America
Board of Directors
Brian T. Moynihan
Chairman of the Board and
Chief Executive Officer
Sharon L. Allen
Susan S. Bies
Jack O. Bovender, Jr.
Frank P. Bramble, Sr.
Pierre J.P. de Weck
Arnold W. Donald
Linda P. Hudson
Monica C. Lozano
Thomas J. May
Lionel L. Nowell III
Denise L. Ramos
Clayton S. Rose
Michael D. White
Thomas D. Woods
R. David Yost
Maria T. Zuber
We set the tone at the top through oversight by our Board
of Directors, who oversee our corporate strategy. In addition,
the heads of our eight lines of business as well as key
leadership for International and our institutional client base
make up our Executive Management Team.
12 | BANK OF AMERICA 2020
Bank of America
Executive Management Team
Brian T. Moynihan
Chairman of the Board and
Chief Executive Officer
Raul A. Anaya
President, Business Banking
Dean C. Athanasia
President, Retail and Preferred
& Small Business Banking
Catherine P. Bessant
Chief Operations and
Technology Officer
D. Steve Boland
President, Retail
Alastair M. Borthwick
President, Global
Commercial Banking
Sheri B. Bronstein
Chief Human Resources
Officer
James P. DeMare
President, Global Markets
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
Matthew M. Koder
President, Global Corporate
& Investment Banking
David G. Leitch
Global General Counsel
Aron D. Levine
President, Preferred and
Consumer Banking &
Investments
Bernard A. Mensah
President, International
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,
Bank of America
Sanaz Zaimi
Head of Global Fixed Income,
Currencies and Commodities
Sales; CEO of BofA Securities
Europe SA, and Country
Executive for France
BANK OF AMERICA 2020 | 13
Addressing a global health
crisis as one company
We’re united in helping our teammates, clients and communities — when and
where they need us most.
In 2020, our company rallied as we never have before — across every business and in
cities and towns around the world — to respond to the health and humanitarian crisis
affecting individuals, families and business owners in the communities where we live
and work. Our services are essential to our clients and to the economy. Through our
global presence and longstanding focus on addressing critical social issues, we’ve taken
care of our teammates and their families, delivered for our clients when and where
they needed it most and supported relief efforts around the world. And, together, we
ended 2020 stronger and more committed to the people and causes we care about.
14 | BANK OF AMERICA 2020
Supporting the health and safety
of our teammates
Our teammates’ health and safety is always our top priority.
Since the coronavirus was first identified, we have taken many
broad-ranging steps to protect all of our teammates and to
support their families.
to teammates impacted by the coronavirus, and we continue
to offer 24/7 confidential counseling through our Employee
Assistance Program (EAP) for teammates and their
immediate family members.
• We seamlessly transitioned about 85% of our employees
to work from home, including any teammate who identified
as high-risk. For employees who identify as high-risk, many
have been redeployed to roles they can perform remotely.
• To ensure our employees maintain access to critical
medical resources, we have provided no-cost telehealth
resources with 24/7 virtual access to general medicine
doctors and mental health specialists, home delivery service
of preventative prescription medications with a temporarily
waived refill waiting period and no-cost coronavirus testing.
• To help address the personal impacts the environment has
had on teammates and their families, we have expanded
our back-up childcare for employees in the U.S.,
including providing nearly three million days of back-up child
and adult care and an investment of nearly $300 million
in child and adult care reimbursements in 2020 to help offset
costs for our teammates. We have continued that support
in 2021.
• Additionally, we have provided a variety of resources to help
parents and caregivers as their children return to
school (whether in-person or virtually), including a dedicated
back-to-school website with webinars, articles, weekly tips
and discounts on computers, devices and school supplies.
• We also have added new physical and mental health
resources, such as training for stress management,
resiliency and mindfulness — and provided additional
vacation and personal day flexibility.
• We have expanded our dedicated team of Life Event
Services (LES) specialists to provide personalized support
Additionally, we have taken specific actions to support
the health of our thousands of teammates working in the
office — in our financial centers, operations centers and
trading floors — and to recognize all our employees are doing
in support of our clients, including:
• Temperature checks, daily health screenings and
onsite nurses at many of our sites. We will continue to
expand these measures prior to additional employees
returning to the office.
• Onsite coronavirus testing introduced for employees
working in our financial centers and administrative
buildings with more than 100 employees working in
the office
• Enhanced deep cleanings of our facilities, installing
thousands of wellness barriers and putting physical
distancing markings in place for our employees and clients
• Special compensation programs, including supplemental
pay, enhanced overtime pay and other special incentives
for employees working in our offices and buildings to
serve clients
• Transportation and meal subsidies, delivering more than
three million meals to employees to-date
These are just some examples of how we have supported our
teammates and their families during this critical time. For
more information on these and other programs and benefits
we provide, read about our response to the coronavirus in
our 2020 Human Capital Management Report.
BANK OF AMERICA 2020 | 15
Delivering for our clients
When our clients needed us most, our teammates redoubled
efforts to help clients navigate the changes and challenges
of 2020 in new and creative ways: transitioning from in-person
to virtual interactions, using new technologies and launching
client relief efforts.
Specifically, we helped 343,000 small business clients receive
loans through the Small Business Administration’s Paycheck
Protection Program — extending more than $25 billion — and
processed more than $26 billion of EIP for clients in 2020. We
also processed nearly two million payment deferral requests.
Employees around the world continued to provide advice,
guidance and access to all our capabilities to help clients
meet their financial needs. In particular, teammates have
been proactively reaching out to clients across all businesses,
including by sending millions of emails and placing outbound
calls to Consumer & Small Business clients, holding thousands
of calls, meetings and broadcasts to actively advise and
connect with Merrill Lynch Wealth Management and Private
Bank clients, and issuing proactive guidance and market
insight from our BofA Global Research and Investment Insights
teams through multiple channels, including virtual investor
conferences.
Our employees have also delivered critical financial relief for
clients through our programs as well as efforts launched by the
federal government.
16 | BANK OF AMERICA 2020
343,000
We have helped 343,000 small
business clients receive loans
through the Small Business
Administration’s PPP.
Investing in our communities
Additionally, to help address the impact of the coronavirus in our
communities, we donated important PPE to communities
across the U.S., including more than 22 million face coverings,
nearly 3 million gloves and more than 17,000 cases of sanitizer
through early February 2021.
We pledged $100 million toward medical supplies, food
security and other vital support, and an additional $250 million
to community development financial institutions (CDFIs)
to provide more companies and not-for-profits access to
important capital.
And, in recognition of the broad and deep impact the
humanitarian crisis is having on communities and people of
color, we have made a $1 billion, four-year commitment to
accelerate work underway to help advance racial equality
and economic opportunity — specifically focused on workforce
development, healthcare, housing and small-business
assistance.
22M+
face coverings
3M
gloves
17,000+
cases of hand sanitizer
$100M
toward medical supplies,
food security and other
vital support
$250M
to CDFIs to provide more
companies and not-for-profits
access to important capital
$1B
4-year commitment to
accelerate work underway
to help advance racial equality
and economic opportunity
Looking ahead to 2021
While we made a tremendous impact in supporting our
teammates, clients and communities in 2020, our work isn’t
finished. The health crisis continues to affect the global
economy as well as individuals and communities around the
world. Our focus now is what else we can do — and how we
can do it better. Throughout 2021 and beyond, we remain
resolute in how we meet our clients’ changing needs, how we
take care of our teammates and how we help our communities
move forward in meaningful ways.
BANK OF AMERICA 2020 | 17
Donating PPE in our communitiesInvesting in our communities Working together to meet clients’
changing needs in a challenging year
Q&A with D. Steve Boland, President, Retail and
Aron Levine, President, Preferred and Consumer Banking & Investments
In 2020, Steve and Aron worked together to deliver exceptional service and a full suite of
products and platforms to help make our clients’ financial lives better.
in our financial centers, we believe we can quickly adapt
and respond to clients’ evolving needs. In 2020, we used
our Client Assistance Program to help clients experiencing
hardships related to the impact of the coronavirus and
provided financial relief through the Coronavirus Aid, Relief
and Economic Security Act and the PPP, as well as by
processing EIP.
Q. How is Bank of America meeting the needs of today’s
mass affluent clients?
Aron: Mass affluent clients have more diverse needs than
ever before and are looking for advice and education to help
them meet their banking, lending and investing goals. Our
Preferred business is designed to provide these clients with
streamlined ways to manage their finances and obtain advice
and guidance when and wherever they want. We provide
extensive rewards and benefits across their entire relationship
with us — the more they do with us, the more their benefits
grow. Throughout 2020, our high-tech digital capabilities
together with our personalized high-touch approach allowed us
to deliver a more intuitive and efficient banking experience for
our clients across all of our channels, providing the expertise
of financial professionals in our financial centers, Merrill
offices, digitally and over the phone.
Q. Bank of America launched Balance Assist last year.
What is it, and why was it the right thing to do?
Steve: Balance Assist provides a unique low-cost, digital way
for our clients to manage their short-term liquidity needs,
borrowing only the amount they need, up to $500. We believe
people want the power to achieve financial freedom and
stability, and are seeking simple, clear solutions and advice
Q. What did you learn from clients last year, and how did
you respond to their changing needs?
Steve: Our clients needed to know that we would stand by
them and help provide safe and reliable ways to help them
manage their finances any time and any way they choose.
We found that the best way to do this — and what our
clients are most comfortable with — is through our award-
winning digital capabilities. Our high-tech and high-touch
approach means that between our full-featured mobile and
online platforms and the expert, personal service we offer
“We’re in an advantageous
position to provide the solutions
and advice our clients need
while helping them build their
financial acumen.”
18 | BANK OF AMERICA 2020
to help them along the way. Balance Assist is the latest in
a set of transparent, easy-to-use solutions to help our clients
budget, save, spend and borrow carefully and confidently.
With solutions like SafeBalance Banking®, the Keep the Change®
savings program, our secured credit cards and our affordable
homeownership options, we’re in an advantageous position to
provide the solutions and advice our clients need while helping
them build their financial acumen.
Q. Clients often begin a financial relationship with Bank
of America as young adults then progress to Retail,
Preferred and beyond. How is Bank of America equipped
to help clients at every stage of life?
Aron: We are committed to meeting the full range of our
clients’ needs, at every stage of their financial lives. To do so,
we strive to develop strong partnerships across our Retail and
Preferred businesses, as well as with Merrill and the Private
Bank, to serve the needs of our clients along the full wealth
spectrum. We introduced Bank of America Life Plan® to help
clients set and track progress on their short- and long-term
financial goals based on their life priorities and relationship
with us. We’ve also invested heavily in providing quality
financial education and developing industry-leading tools and
resources, like Better Money Habits® and our new Idea Builder
to help ensure clients are banking and investing with their
financial goals in mind. Together, we offer a comprehensive
relationship, and provide a streamlined way for clients to
manage their finances with advice and guidance that grows
along with them.
17.2
12.9
10.3
9.7
6.7
4.8
2018
2019
2020
Zelle
Erica
“We are committed to meeting the
full range of our clients’ needs, at every
stage of their financial lives.”
Growth of digital banking, lending
and investing at Bank of America
In 2020, our clients depended on our digital capabilities more
than ever before, with 69% of our Consumer, Small
Business and Wealth Management households generating
nine billion logins.
To better serve our clients, we invested in new technologies
and enhanced our industry-leading digital capabilities,
developed and deployed by Head of Digital David Tyrie and
his team, in partnership with Chief Information Officer
and Head of Consumer, Small Business & Wealth Management
Technology Aditya Bhasin and his organization in Global
Technology & Operations.
Digital accounted for 42% of consumer sales, and our
Consumer & Small Business households were reliant on
our core digital capabilities, such as our digital financial
assistant Erica®, Zelle® and Mobile Check Deposit, among
many others, as well as our virtual (phone, video and chat)
channels. The number of Erica users grew 67% over the course
of the year, and Erica has helped clients with over 200 million
requests since launch in 2018. Notably, Zelle transaction
volume grew 71% year-over-year. Our automated channels
(mobile, online and ATMs) accounted for 84% of deposits
in 2020, up from 78% in 2019.
We deliver a wealth of services through our mobile and online
banking, ATM and Erica platforms, and are constantly exploring
ways to expand, interconnect and perfect these tools to
deliver a more seamless, personalized experience for each client
that spans and supports their entire relationship with us.
BANK OF AMERICA 2020 | 19
Growth in Zelle and Erica users (millions) Delivering for our clients
with defining differentiators
Q&A with Matthew Koder
President, Global Corporate & Investment Banking
For our Global Corporate & Investment Banking
teammates and operational specialists, close
coordination and enhanced communication
was key to providing optimal financing and
strategic solutions for clients while winning
their confidence in 2020.
Q. How did your business stand out in 2020?
Matthew: Despite last year’s unprecedented uncertain market
environment, we were relentless in helping our clients and
distinguishing our business with many leading, innovative
solutions. We provided support by advising across the entire
capital structure and executing transactions across loans,
bonds, convertibles, follow-ons, IPOs, private capital markets,
mergers and acquisitions and more. Through it all, we believe
the high volume of deals and transactions we completed on
behalf of our clients repeatedly showed we had their trust
and that our integrated corporate banking, investment banking
and capital market services — along with the bank’s strong
balance sheet, highly developed global platform and innovative
solutions — were our defining differentiators.
While 2020 may have physically separated us from our clients,
it didn’t dampen the opportunity to stay connected, deepen
relationships and drive enhanced value. We significantly
increased the level of our communications with our clients
and expanded our client base by leveraging local coverage
teams and cross-business integration opportunities. We
believe the more clients do with us, the more value we can
offer them from our integrated resources and expertise.
In addition, despite the complexities of the environment, we
continued to enhance our client-facing platforms at a record
pace to drive connectivity and efficiency and deliver smarter,
faster and more secure digital experiences for clients.
Q. What were some of your key accomplishments
in 2020?
Matthew: When our clients needed a strong financial partner
through the crisis, we were committed to be there — approving
over $100 billion in credit across approximately 500 requests.
In addition, our team’s resilience and the seamless strength
of our connections positioned us as the industry leader in
re-opening the capital markets after the initial market
dislocation resulting from the pandemic. By the end of 2020,
we helped raise approximately $772 billion of capital in the
20 | BANK OF AMERICA 2020
global capital markets. This leadership and experience
further provided us with critical insight into investor
receptivity, which allowed us to advise our clients on
optimal financing solutions across products, markets and
geographies throughout the year.
We believe all of these efforts resonated with our clients
and translated into our ability to increase our investment
banking fees by 27% in 2020. This resulted in a total
of $7.2 billion in fees, which was a record for a full-year
and also included three of the strongest quarters in
our company’s history. In addition, we increased our
investment banking industry ranking to #3 and grew our
market share by 70 bps — including our highest ever
share in equity capital markets and mergers and
acquisitions. We see all of these as valuable indicators
of our clients’ confidence in our people and capabilities.
Q. What impact did your business make on
sustainable finance in 2020?
Matthew: Leadership in ESG and sustainable finance
are valuable competitive differentiators for Bank of
America. We’re always looking for innovative solutions
for investors to support social and environmental
change. The past year was particularly meaningful to
us because our bankers and operations teams drove a
number of industry-leading achievements.
For example, we were the #1 global underwriter of
corporate ESG-related bonds. In addition, we helped
launch the world’s first sustainability-linked bond and
led the first green convertible bond in the U.S. with
a designated green use of proceeds. This particular
accomplishment represented an important, innovative
landmark, as it was the first time sustainable finance
tools crossed over into the equity-linked market.
We also underwrote nearly $50 billion in coronavirus-
related social bonds, helping a broad audience from
corporations to national governments finance their
pandemic responses.
Strong interest from our clients in these bonds shows
that companies can do good and do well. There is a
growing desire around the globe to support investments
that have a positive societal impact. And, we’re proud to
be at the forefront in delivering these solutions.
Q. Looking to 2021 and beyond, what do you want
your clients to know?
Matthew: That we will continue to be there for them. In
the long shadow of the health crisis and amidst so many
transformational changes, we will continue to be there
for our clients as their steadfast and trusted partner. We
are committed to leveraging our resources and franchise
to deliver for them — and grow with them — as the
recovery takes root.
Making significant
progress internationally
A message from Bernie Mensah
President, International
Our international presence, which spans approximately
35 countries and territories, is vital to the thousands
of corporate and institutional clients that we serve. We
strive to provide rapid, on-the-ground access to our
expansive platform and capabilities, exceptional market
insight and a talented, diverse and dedicated employee
base. Never has this been more important than in
2020, a year of significant progress for our company
internationally, notwithstanding the challenges of the
health crisis.
In Asia Pacific, we generated record revenues
participating in the rapid growth of capital markets
in the region and connecting investment capital to
significant opportunities presented in many of the
world’s fastest growing large economies. From China
to Australia, and India to Japan, we provided critical
advice on multiple transactions, helping clients to
access primary capital and market liquidity as needed.
In Europe, Africa and the Middle East, despite the
backdrop of more challenging economic conditions and
political uncertainties, we continued to see our franchise
advance with important new client gains in many
product areas. In addition, after nearly four years of
preparation, we successfully completed our thorough
Brexit planning, making the necessary adjustments
to ensure we could continue to seamlessly and
efficiently service all clients in both the E.U. and the
U.K. from our key hubs in Dublin, Paris and London
and additional local offices. With Brexit uncertainties
behind us, we now look forward to continuing to expand
our market share across all our lines of business in
the region.
We now are focused on building on our current
momentum by continuing to drive Responsible Growth
globally and meeting client needs in the year ahead.
BANK OF AMERICA 2020 | 21
Delivering innovative wealth solutions
and exceptional client service
The bank’s digital leadership also made it easier for us
to provide more comprehensive service. With one click,
clients can deposit checks, make transfers, pay their
mortgage and see their credit card activity. During 2020,
77% of wealth management clients used our online or
mobile platforms and opened 107,000 bank accounts.
The importance of advice and guidance in a
changing environment
Throughout 2020, our clients and families expressed
a greater need for comprehensive and personalized
financial advice than at any time in the past. Our
Chief Investment Office helped answer the call by
providing valuable insights through its rapid-response
commentaries, as well as through its industry-leading
thought leadership and investment strategies, the
latter comprising more than 100 managed investment
platforms.
Building wealth management for the future
In 2020, we continued to carry out our vision to be our
clients’ trusted partners — providing support, helping
them meet their needs and achieve their goals by
providing helpful advice and service at every stage of
their financial lives. We are led by advisor teams with a
passion to serve and excel. Our exceptional colleagues
are winning more top rankings than any other firm
and multiple awards for their customer service and
philanthropy expertise. And we are becoming more
diverse, better reflecting the families, enterprises,
institutions and communities we serve.
We believe Bank of America’s wealth management
businesses are strongly positioned for the future, ready
to answer the next set of challenging questions that
comes. We will continue to strive to be an industry leader,
and we will judge our performance on our success in
helping our clients achieve their goals.
Our focus on supporting our clients in
Merrill Lynch Wealth Management and
Bank of America Private Bank is stronger
— and more important — than ever
before. To meet clients’ diverse needs and
maintain the highest level of service as we
helped them navigate the changes 2020
presented, our advisors created new ways
to deliver innovative solutions and the
power of Bank of America’s capabilities
and technology. As a result, we forged even
deeper, more meaningful connections with
our existing clients, while adding thousands
of new relationships — and improving
client satisfaction across the board.
Running a relationship business when people
can’t come together
As the environment changed, our wealth management
businesses quickly transitioned to connecting with clients
in new ways, including meeting virtually. Through rapid
deployment of Webex video conferencing, 25,000 wealth
teammates held approximately 375,000 virtual client
meetings — five times more than the year before —
engaging clients in wealth, estate and philanthropic
planning conversations. Our teams also stayed connected
virtually, setting strategy, sharing peer-to-peer learning
and insights and recognizing success in new ways.
Expanding digital capabilities to meet clients’ needs
Throughout the year, we added a steady stream of digital
enhancements to transform how we deliver advice and
service. Working closely with our clients, we empowered
them to embrace our digital innovations so they could
access information, execute transactions and seamlessly
collaborate with their advisors.
For example, clients now use Mobile Easy Sign digital
signatures for more than 80% of account opening and
maintenance tasks. Through the Client Engagement
Work Station, advisors can view all critical information
regarding clients’ accounts which helps deliver a great
experience. Another innovation, the Personal Wealth
Analysis, is a single tool connecting clients’ goals to
investment solutions.
22 | BANK OF AMERICA 2020
What sets us apart:
BofA Global Research
Candace Browning
Head of Global Research
Under the leadership of Candace Browning, BofA Global Research is constantly evolving
with a singular focus — to best serve the needs of our clients. The division was named
Top Global Research Firm by Institutional Investor magazine from 2011-2016 and in 2019,
and the No. 2 firm in 2017, 2018 and 2020. More information about these awards can be
found at https://go.bofa.com/awards.
A team of more than 675 analysts located in 20 countries
provides recommendations on 3,300 stocks and 1,350
corporate bond issuers globally across 24 sectors, as well as
forecasts for 56 economies, forecasts for 26 commodities
and recommendations on 47 currencies. The goal is to create
innovative, collaborative and forward-looking research and
deliver it in a variety of ways that suit our clients.
44,000+
Delivered more than 44,000
research reports
“Through strategic innovation and collaboration across regions,
sectors and disciplines, our mission is to transform information
into actionable investment insight,” said Browning.
From major world events to deep-dives into sectors and
industry-leading research on ESG impacts, the team leverages
its knowledge, relationships and cutting-edge technology to
uncover insights and trends.
In 2020, during a year of unprecedented market volatility,
BofA Global Research demonstrated its commitment to our
clients by delivering more than 44,000 research reports and
hosting nearly 3,000 conference calls.
BANK OF AMERICA 2020 | 23
Serving our clients and
communities through technology
Through our Global Technology &
Operations team, we’re providing industry-
leading capabilities to drive client service
and deepen relationships, faster and better.
There is no question that the events of the past year
accelerated the use of digital capabilities by our clients
across every line of business, with nine billion online and
mobile logins in our consumer and wealth management
businesses alone. We saw record-setting levels of use
of our digital and electronic channels to conduct every
element of our clients’ business — investing, savings, all
the way up to our large institutional customers.
invest approximately $3 billion annually in technology
growth — especially in digital, mobile and online platforms.
Further driving the digital transformation is our culture
of innovation. Last year, the bank ranked 108th on the
Intellectual Property Owners Association’s list of the top
300 U.S. organizations receiving patents, our highest
ranking ever. That ranking reflects our company’s
record-high 443 patents for innovations related to
money transfers, bill payments, ATM transactions, check
verification using augmented reality and authentication
technology. The bank’s patent portfolio consists of more
than 4,600 patents and applications, resulting from the
work of more than 5,700 inventors from 12 countries.
People are interested in virtual connectivity and its
ability to augment and, in some cases, replace physical
connectivity. Add in the fact that we had no choice but
to connect virtually, and our digital capabilities really
worked to our advantage. 2020 has shown us that digital
adoption will continue to grow.
“Innovating is essential to making life easier for our
clients,” said Cathy Bessant, chief operations and
technology officer. “We do not have an innovation lab or
an innovation team, because it’s everyone’s job. These
numbers demonstrate our unmatched commitment to
making sure innovation is part of our DNA.”
Our clients’ rapid adoption of digital capabilities was
made possible by work we began a decade ago. Back
then, we started to simplify and modernize our
technology and infrastructure, an intensive transformation
that would support our businesses, help reduce risk and
improve our competitive cost position. Through that
work, we removed $2 billion annually from our operating
expenses while replacing core platforms to create
modern operations.
During the world health crisis this past year, we realized
the importance of connectivity, bandwidth and technical
tools. We are using technology to bridge divides by
helping to make sure connectivity is universal and equally
available to all. We believe equity of access and service
will drive economic mobility and equality going forward,
and Bank of America will strive to be at the forefront
of that change.
“Merrill benefits tremendously from the technology
investments made by Bank of America over the past
several years,” said Andy Sieg, president of Merrill
Lynch Wealth Management. “Our best-in-industry
digital capabilities continue to set Merrill apart from
the competition, enabling clients to work with us
when they want, how they want, while providing the
seamless experience they demand.”
Shared platforms and a common infrastructure across
the enterprise brought together company data and
emerging technology to improve service, drive speed
to market and increase data accuracy, while decreasing
risk and improving cost to serve our clients. Our modern
infrastructure and simplified operations underscore
the importance of smart investments. We continue to
24 | BANK OF AMERICA 2020
Market Presidents deliver our global company
to each client, employee and community
Hong Ogle
President, Bank of America Houston
In cities and towns across the U.S., Bank of
America’s more than 90 market presidents and
their teams lead the local work of the company
to serve clients, support teammates and
strengthen communities. In 2020, the efforts
of our market presidents were more critical
than ever, particularly in cities like Houston,
Texas, that faced challenges on multiple fronts.
“2020 will be a year to remember,” said Hong Ogle,
president of Bank of America Houston, who also leads
the Central South Division for the Private Bank region,
overseeing offices in Texas, Kansas, Oklahoma, Arkansas
and the surrounding states. “In addition to the health
crisis, oil and gas price volatility added extra stress on
Houston, the energy capital of the world. And, being the
hometown to George Floyd pushed our city to the front
lines of the racial justice movement.”
Through it all, Hong says, the team remained undeterred,
rising to the challenge to support teammates, serve
clients and help the Houston community. Hong is especially
complimentary of the financial center teammates who
expertly cared for clients who needed our support and
services throughout the health crisis and of commercial
banking client managers, financial advisors and personal
bankers who rallied to help their clients manage through
changing conditions.
Integrating our full capabilities for the benefit of each
client is among the chief responsibilities of our market
presidents, who help to ensure all lines of business are
working together seamlessly.
For example, last year, Houston teammates in Business
Banking and the Private Bank came together to help a
20-year, Houston-based client sell their company to another
client in Ohio. The Houston-based client manager connected
the Texas client to a local Private Bank advisor, ultimately
helping them entrust the proceeds of the sale, along with
other assets, to the Private Bank. This interaction highlights
the value and importance of integration across our businesses
in markets across the country.
Integrating our capabilities and expertise influences how
market presidents and their teams address challenges
facing their communities. After our four-year, $1 billion
commitment to drive racial equality and economic
opportunity was announced, the Houston team went to
work, partnering with local elected officials and
community leaders to help ensure the collective resources
were spent wisely.
Hong also feels a personal connection to the commitment
the company has made to driving equality and helps further
these efforts locally in the Houston community. She came
to the U.S. from China when she was 24, and is a leader
in several company diversity groups as well as the city’s
Greater Houston Partnership Racial Equity Committee. “I feel
a strong responsibility to help make sure dollars are spent
where it makes a difference,” she said. “It’s not just about
giving money — it’s helping people and communities. And it’s
helping not just those individuals who benefit directly from
these programs; it’s also helping their families and future
generations.”
This focus on clients and community led Bank of America
to be named Large Corporation of the Year by the Association
of Fundraising Professionals Greater Houston and Hong
to be recognized as a Houston Business Journal Most Admired
CEO in 2019, accolades that reflect the team’s work carrying
forward the bank’s mission while making an impact locally.
BANK OF AMERICA 2020 | 25
Being a great place
for our teammates to work
A message from Sheri Bronstein
Chief Human Resources Officer
We know 2020 will be remembered for many
reasons, including the global health crisis and
the social and racial inequalities that were
exacerbated by it. At Bank of America, it
was a year that strengthened our resolve to
identify additional opportunities to support
our teammates and address societal issues.
Together, we continued driving progress, and
we have much to be hopeful for as we look
ahead. And importantly, in 2020 we were
reminded how critical it is that we take care
of ourselves, our families, our clients, our
communities and each other.
As a company, we have a long history of supporting our
teammates and their families by investing in their physical,
emotional and financial well-being. In response to the global
health crisis, we took significant steps to provide enhanced
resources and benefits to help our teammates stay healthy
and balance the competing priorities of work and home. Those
benefits include access to virtual medical and behavioral
consultations, robust emotional wellness training through
our partnership with Thrive Global and child and adult care
resources designed to help our teammates ensure their loved
ones were cared for. You can read more about our support for
teammates on page 15.
We also felt the urgency to address the ongoing impacts of
racial inequality in the communities where we live and work.
While diversity and inclusion is and has been core to our values
as a company for multiple decades, it was a year in which
we needed to bring together our efforts with our teammates
and marry those with the work we do with our communities
and clients. Our courageous conversations series served as a
foundation for dialogue amongst our leaders, our teammates,
visiting speakers and authors, and gave a platform for our
$25 million charitable donation to the Smithsonian so they
could facilitate conversations on race across our country
through the eyes of one of our most important educational
26 | BANK OF AMERICA 2020
museums and institutions. Our longstanding efforts to
drive economic opportunity and upward mobility provided
the foundation for us to quickly accelerate efforts we had
underway to create greater opportunities for people and
communities of color. While we have much more to do, I am
proud of the initiatives we’re advancing in connection to our
$1 billion, four-year initiative focused on addressing systemic
gaps in education, healthcare, workforce development, housing
and other important areas. You can learn more about these
efforts on page 33.
Our deep appreciation for our teammates, their dedication to
living our purpose and their support for each other remained
at the core of every decision we made in 2020. And from last
year, we learned incredible lessons: thanks to our teammates,
our ability to remain resilient and the importance of our
decade-long commitment to Responsible Growth, we were
able to serve our clients and communities when they needed
us most. As we begin a new year, our focus on supporting our
teammates, their families and the clients and communities we
serve will continue to guide everything we do.
I also encourage you to read about our efforts to support
the health and safety of our teammates as well as the
work we’re doing to advance racial equality and economic
opportunity in our 2020 Human Capital Management Report.
We initially launched this report in 2019 as a means to provide
transparency into our employee practices, our workforce
diversity metrics and all that we do for our teammates to be a
great place to work. It was the first-of-its-kind in the industry
and has been met with overwhelmingly positive responses
from our shareholders, our teammates and our clients.
200,000+
We support our more than
200,000 global teammates
and their families through
comprehensive benefits,
programs and resources.
2020 Human Capital Management Report
In November, we released our 2020 Human Capital
Management Report, which continues our efforts to
provide clarity and transparency around all we do
to be a great place to work and to support our more
than 200,000 teammates and their families. Building
on our inaugural Human Capital Management Report
from 2019, our 2020 report shares the many programs
and resources, as well as supporting data, in our
primary focus areas: being a diverse and inclusive
workplace; attracting and retaining exceptional talent;
providing holistic benefits supporting our teammates’
physical, emotional and financial wellness; and
recognizing and rewarding performance.
New in this year’s report is information on the many
unprecedented steps we have taken during the ongoing
health crisis and to advance work underway to drive
racial equality and economic opportunity. In addition,
we continue to share metrics on diverse representation
across our company, a practice we have had in place for
many years. We will continue to report on these items
and the progress we’re making as part of our ongoing
focus on driving Responsible Growth and making this
the best place for our teammates to work.
BANK OF AMERICA 2020 | 27
Driving meaningful change
when the world needs it most
Our ongoing work to foster a diverse and inclusive
environment took on greater meaning for our more than
200,000 global teammates during a year that brought issues
of racial inequality and social injustice to the forefront. The
global health crisis has exposed longstanding disparities in
our society and inspired one of the greatest social justice
movements in modern history.
These realities strengthened our resolve and inspired our work
to right the injustices we’ve witnessed. We have a greater
clarity of purpose for where we want to go as a company and
in the communities where we live and work — as well as the
work we need to do to get there.
This starts with being a great place for our teammates to
work, which is foundational to continuing to drive Responsible
Growth. We know we must reflect the diversity of the clients
and communities we serve and continue to take meaningful
steps to ensure diverse representation at all levels of our
company. Attracting diverse talent is a priority, and we achieve
this through a variety of recruiting efforts, including through
internships and campus programs, targeted partnerships with
diverse organizations, support for military and veterans, and
hiring and reskilling individuals from low-and-moderate income
(LMI) communities. “We know that just because you have
diversity in representation does not mean you have inclusion.
That’s why we continue to work to ensure we have a culture
where our teammates feel comfortable bringing who they are
to work each day and why we offer equal access to opportunity
at all levels of our company,” says our Chief Diversity &
Inclusion and Talent Acquisition Officer Cynthia Bowman.
We also look to address societal priorities that impact
communities around the world. In 2020, building on
longstanding work underway, we made a $1 billion, four-year
commitment to help drive racial equality and economic
opportunity for people and communities of color with a focus
on healthcare, jobs, small businesses and housing. We’ve also
continued to deploy capital to businesses and communities
in need of economic revitalization through CDFIs and issuing
social bonds.
Another way we actively promote these principles is by
engaging each other through courageous conversations —
sharing perspectives on our differences and establishing
connections to create greater empathy and understanding.
Last year, we held courageous conversations, reaching
more than 165,000 employees with civil rights, social
justice and inclusion leaders focused on racial, social and
economic injustices.
As we look to the work and road ahead, investing in our
teammates, our clients and communities will always be core
to who we are and how we drive Responsible Growth. By first
looking inward and holding ourselves accountable to increasing
diversity across our teams, we will continue taking steps
forward to help drive inclusion and meaningful progress in the
communities we serve.
28 | BANK OF AMERICA 2020
Supporting emotional wellness
and mental health
Supporting our teammates’ emotional wellness and mental
health has always been a critical focus for us. In 2020, people’s
daily lives and routines were impacted in many ways, bringing
the conversation of emotional wellness and mental health
to the forefront. Given the new stressors and demands our
teammates faced over the year, it was important employees
understood the range of resources available to support their
emotional wellness and mental health. We enhanced our
ongoing offerings to include innovative, industry-leading and
flexible programs and resources to help our teammates and
their families.
In 2020, we provided no-cost consultations with Teladoc’s®
behavioral health specialists for employees on a national U.S.
bank medical plan. We also expanded training and education
to help teammates build key skills to enhance their well-being.
Additionally, through our partnership with Thrive Global, a
corporate and consumer well-being firm, we launched
emotional wellness and resiliency training for employees.
These virtual courses address stress management as well as
ways to build resiliency and avoid burnout. Our mindfulness
daily practice sessions and introductory courses hosted by
internal specialists help teammates create and maintain peace
of mind. In addition, ongoing mental health tips from experts,
mindfulness apps and open conversations about mental health
helped teammates prioritize their own wellness.
Our ongoing work to care for our teammates’ emotional
wellness and mental health includes confidential counseling
and unlimited telephone consultations, available 24/7, through
our Employee Assistance Programs for both teammates
and members of their household. And, for support for
major life events, our internal, highly specialized Life Event
Services team connects employees to resources, benefits
and counseling.
“The last year taught us that prioritizing our
emotional wellness and mental health
was incredibly important. It was critical to
ensure that our employees knew they,
and their loved ones, were supported. As
we move into 2021, our focus will stay
the same — offering benefits, programs
and resources to meet their diverse needs.”
— Chris Fabro, Global Head of Compensation,
Benefits and Executive Development
BANK OF AMERICA 2020 | 29
Continuing to be a workplace where
all teammates can grow and thrive
In a year unlike any before, the diversity and broad perspectives of our teammates enabled us
to make a positive impact for our clients and communities. We continue to invest heavily
in our people — bringing diverse talent to our company, supporting their well-being and giving
opportunities to grow and develop. Meet four exceptional women who bring their diversity
of thought and experiences to life across our company.
Helping teammates
care for their families
Jessica Cullen
Global Banking & Markets
Global Commercial Banking Relationship Manager
Hiring the next
generation of leaders
Reena Shukla
Global Technology & Operations
EMEA Operations Executive
Jessica Cullen, a relationship manager in Global Commercial
Banking, and her husband started working from home in
early 2020 due to the health crisis, while also caring for their
two young daughters. With daycare centers closed, Jessica
needed care for her children while working from home,
so she looked into Bank of America’s expanded childcare
benefits after hearing about them from her manager. Eligible
teammates can take advantage of the bank’s expanded
back-up care benefits, which include reimbursement of up
to $100 a day when securing their own care provider. “It
was super easy to sign up for the childcare benefit, and the
reimbursement process is quick,” explains Jessica. She took
advantage of the opportunity to hire someone from her
personal network, and was thrilled to be able to help one of
the teachers at her daughters’ daycare center who had lost
income due to the coronavirus-related closures. “It’s good
for her and good for us,” Jessica said. “The best part is my
entire management team has been extremely supportive.
The resources and empathy toward working parents make
me really proud to work for Bank of America.”
30 | BANK OF AMERICA 2020
London-based Reena Shukla believes exceptional talent can
be found at all levels. After completing Merrill’s graduate
recruitment program, she has grown her career and is now
a managing director, leading the EMEA Client Services team
for Global Markets. Reena is passionate about recruiting
others early in their careers whose contributions can
challenge the status quo and inspire new ways of thinking to
strengthen our teams and client relationships — something
she can relate to given her own experience with the
bank’s recruiting efforts. Reena is focused on hiring
teammates who demonstrate a natural curiosity to learn
and challenge themselves. “Recruiting fresh talent pushes
boundaries within our teams and enables new ideas for
the ways we serve our clients,” explains Reena. Through
Bank of America’s Africa recruitment initiative and the U.K.
government apprenticeship program, Reena has built a
balanced team with both experienced and new talent, with
each providing significant contributions for future success.
“Hiring talent early in their careers helps develop our
future leaders, something that I have experienced firsthand
at our company.”
Leading the way to a
more inclusive environment
Adrienne Hughes
Merrill
Client Experience Executive
As Merrill’s client experience executive, Adrienne Hughes
recognizes the power of strong, authentic connections. She
is personally committed to creating an inclusive culture
that values, encourages and leverages the strength of our
diversity. “Inclusion comes from celebrating our uniqueness
and creating an environment where people are valued and
encouraged to bring who they are to the workplace —
creatively collaborating to strengthen our business,” says
Adrienne. Involved in several Bank of America Employee
Networks, which help teammates be heard, develop
leadership skills, build ties with peers and local communities
and advance diversity recruitment, Adrienne has embraced
her advocacy for inclusion in the workplace by using her
voice and encouraging others to do the same. She has taken
advantage of Bank of America’s passion for open and honest
discussions and hosted several courageous conversations
around race, equality and economic opportunity in the
Chicago market. As a member of our Women’s Leadership
Council and the Multicultural Women Ready to Lead
Initiative, Adrienne also continues to be a leader for women’s
equality in the workplace. “I am proud to work for a company
that invests in creating a culture where every individual
is valued. I’m inspired to lead by example and drive that
commitment forward.”
Helping teammates grow and
develop fulfilling careers
Evelyn Castillo
Consumer & Small Business
Consumer Banking Region Executive
After joining Bank of America in 2009, Evelyn Castillo, a
Consumer Banking region executive, never imagined she
would still be working at the same company nearly a decade
later. Motivated by support from mentors as well as the
many development opportunities she’s discovered, Evelyn
has grown her career at Bank of America in a way that
takes advantage of her strengths and builds new skills. “I
have been blessed to have great leaders and mentors who
invested in me and my abilities. I see the impact this has
had on my career, and I want to give that same opportunity
to others,” says Evelyn. Inspired by her experiences at the
bank, she has made it her mission to mentor her teammates
and develop their leadership skills. By taking advantage of
the bank’s many career development resources, Evelyn has
been able to help develop and promote the next generation
of leaders. Additionally, as a market president lead for
Consumer & Small Business and member of the Hispanic/
Latino Organization for Leadership and Advancement
Employee Network, Evelyn is able to interact with
diverse employees and connect them to areas of interest.
“Making connections enables career mobility, which helps
retain our talent. I’m proof you can have a lifelong career
at Bank of America.”
Representation of people of color across our company
18%
20%
48%
54%
of our management team
are people of color
of our management levels
1–3 are people of color
of our U.S. workforce
are people of color
of our full-time campus
hires are people of color
BANK OF AMERICA 2020 | 31
Being a great place to work —2020 highlights
A critical component of how we drive Responsible Growth is making Bank of America a great place
to work. See how we fulfill that commitment to our employees.
$20 minimum
hourly rate
In the first quarter of 2020, we raised
our minimum hourly rate of pay for
U.S. employees to $20, one year earlier
than planned.
Medical premiums
for employees
Since 2012, there has been no increase
in medical premiums for employees
earning less than $50,000.
Sharing
our success
For the fourth time since 2017, we
recognized teammates with a special
award in cash or restricted stock. In the
first quarter of 2021, approximately
97% of teammates received a
Delivering Together award, in addition
to any regular annual incentives.
Equal pay for
equal work
For teammates in comparable
positions, compensation received by
women, on average, was greater than
99% of that received by men; and
compensation received by people of
color was, on average, greater than
99% of that received by teammates
who are not people of color.
$500 wellness
credit
We provide a $500 credit toward
medical plan premiums following
completion of a wellness screening and
questionnaire (or $1,000 if a covered
spouse or partner also completes).
Employee
Relief Fund
Employees can receive up to $2,500
in financial assistance through our
Employee Relief Fund for a qualified
disaster and up to $5,000 for an
emergency hardship.
Hired 10K+
military veterans
We surpassed our goal of hiring over
10,000 military veterans, achieving
our five-year commitment, with plans
to maintain hiring momentum for
the future.
Supporting career
development
We provide an extensive portfolio of
learning and leadership development
opportunities to our more than 200,000
employees, including foundational and
skills-based training and an enterprise-
wide focus on manager development.
Hiring 10K+ from
LMI communities
We hired more than 10,000 employees
from LMI communities since 2018 —
ahead of our commitment to do so
by 2023.
Up to $7,500
in tuition
reimbursement
Through our tuition reimbursement
program, we provide up to $7,500 (up
to $5,250 tax-free) annually for eligible
undergraduate or graduate courses.
32 | BANK OF AMERICA 2020
Investing $1 billion over
four years to advance racial equality
and economic opportunity
In 2020, we saw intensified passion to address the obstacles to true racial equality in the U.S. In
response, we accelerated work already underway to announce a $1 billion, four-year initiative to
help advance racial equality and economic opportunity with a focus on four areas:
• Jobs and reskilling the workforce
• Supporting minority small business owners
• Making home ownership and rental housing more affordable
• Addressing inequities in health services
This work is being led by Vice Chairman Anne Finucane and developed by a cross-functional team led by Global Head of ESG
Andrew Plepler with the expertise and perspective of the company’s Black and Hispanic Leadership councils, our local market teams
and other business leaders. It recognizes that issues of racial equality and economic opportunity are deeply connected, and that
understanding the past is critical to charting a path forward. Our objective is to address systemic barriers where they exist and help
drive more opportunity and sustained progress.
Already, we’ve allocated more than $300 million (or one-third) across 91 markets and globally, including:
Investments in 61 private
equity funds across the U.S.
$150 million in funds focused
on minority entrepreneurs and
predominantly led by diverse fund
managers
Partnerships with more
than 20 higher education
institutions and major
employers
Jobs initiatives with community
colleges, historically Black colleges
and universities and Hispanic-serving
institutions to connect students
to career success
Launched Smithsonian’s
“Race, Community and Our
Shared Future”
Program to deliver thought leadership
on civil rights, social justice and
economic mobility to communities
across the country
Expanding opportunities
for 50,000 women
Bank of America Institute for Women’s
Entrepreneurship at Cornell, with a
focus on women of color
Capital investments in
14 MDIs and CDFI banks
Toward lending, housing, neighborhood
revitalization and other banking
services
Partnerships with CVS
Health and local nonprofits
Flu vaccine vouchers in under-
resourced communities and donations
of PPE to community partners across
the country
“We must not let the current intense demand for action die down. And we will not. Our
management team, our market presidents and market executives, leaders of our company
at every level, all of us can and will do more.” — CEO Brian Moynihan
BANK OF AMERICA 2020 | 33
Addressing the world’s challenges
through sustainable finance
A conversation with Anne Finucane, Vice Chairman and
Karen Fang, Global Head of Sustainable Finance
At Bank of America, sustainability is embedded in our operating model. This extends to how we
support our clients through core lending and investments; equity and debt capital markets
activities; the advisory services we offer; how we manage our supply chain and how we conduct
our own operations. In 2020, after meeting our goal to be carbon-neutral a year early, we finalized
our commitment to achieve net-zero greenhouse gas (GHG) emissions before 2050 across
all scopes of emissions including those from our operations, financing activities and supply chain.
Central to our purpose as a financial services company, we
will need to assist our clients in their own carbon reduction
journey. To accelerate our sustainable finance work and help
create a consistent perspective across all of our capabilities
and product offerings, in January 2020, we established the
Sustainable Markets Committee, which I co-chair along with
Chief Operating Officer Tom Montag. To lead this effort, we
named Karen Fang as the Global Head of Sustainable Finance.
Karen and I sat down recently to talk about our progress, the
business, and our goals for 2021.
Anne: Karen, we have developed a leadership position in
clean energy finance, and we will discuss that later. This
year, though, we saw particular interest in other aspects of
sustainable finance, against a backdrop of economic and social
challenges during the global health crisis. We mobilized and
deployed approximately $100 billion of sustainable finance
capital aligned with the United Nations (U.N.) SDGs in 2020, a
significant increase from 2019 despite the global challenges,
with approximately $55 billion allocated to climate finance. In
addition, approximately $45 billion was allocated to Inclusive
Development. This includes our significant lending and
investing in affordable housing, healthcare, education and
other social infrastructure as a part of our support for local
communities across the U.S. Also included are the deposits
and equity capital we provided to CDFIs and MDIs, and equity
and fund investments into minority-owned businesses as a
part of our $1 billion racial equality and economic opportunity
initiative. And the global health crisis and associated
challenges did offer the opportunity for some unique offerings
by our company. Can you discuss that a little bit?
Karen: Yes, we are particularly proud of two innovative
transactions we completed in 2020 for Bank of America that
demonstrate the creativity and strength of collaboration
across many of our lines of business in an effort to deliver for
our clients. In May 2020, we issued a $1 billion corporate social
bond focused on the coronavirus response, the first such
34 | BANK OF AMERICA 2020
“The Sustainable Markets Committee
gathers our capabilities across every line
of business and puts them to work for our
clients who are innovating and investing
in the low carbon, sustainable economy.”
— Tom Montag, Chief Operating Officer
platinum Leadership in Energy and Environmental Design
(LEED) skyscraper and continue to make progress in our own
real estate footprint. So our own track record means we are
well positioned to (i) have a comprehensive discussion with
our clients about carbon neutrality and net-zero as a business
imperative; (ii) encourage clients to establish a concrete and
credible glide path plan to reduce their own carbon footprints;
and (iii) offer clients advisory services and financial tools to
support their decarbonization efforts toward net-zero.
offering by a U.S. bank. This bond was designed to provide
targeted lending to healthcare institutions that are on the
front lines of combatting the health crisis, and it paved the
way for Bank of America to underwrite and distribute more
than $50 billion of social bonds for numerous governments,
agencies and public companies. This speaks to our ability
to scale capital deployment for important societal needs.
In September 2020, we issued a $2 billion equality progress
sustainability bond to advance racial equality, economic
opportunity and environmental sustainability. The social side
of the proceeds were exclusively allocated to make new and
impactful investments and lending in affordable housing,
healthcare, and small businesses in Black and Hispanic-Latino
communities. This first-of-its-kind transaction again inspired
other issuers to follow similar approaches, scaling capital
for wealth creation and socioeconomic empowerment of
these communities.
Some highlights on the environmental transition side include
underwriting and distributing green and sustainability bonds,
completing some of the largest asset finance transactions
for renewable energy generation and providing financing and
leasing solutions for energy efficiency projects and electric
vehicles (EVs).
Bank of America’s commitment to sustainable finance runs
deeper than just doing transactions. Thanks to the commitment
and leadership from you, our whole Management Team and
all of our teammates, we are at the forefront of climate
change thought leadership. We are key members of various
global alliances focused on sustainable development, such
as the U.N. Global Investors for Sustainable Development,
the World Economic Forum Net-Zero Transition Finance
Committee, His Royal Highness the Prince of Wales’
Sustainable Markets Initiative, the Rocky Mountain Institute
Center for Climate Aligned Finance and the 1t.org U.S.
Steering Council, among others.
Anne: Let’s talk a little more about “traditional” sustainable
finance, if I can use that term since we’ve been at it now
for so many years. We reached carbon neutrality in our own
footprint and are on a path toward net-zero before 2050. We
have reduced our energy use by 40% and our location-based
GHG emissions by 50%, sourced renewable energy to power
our facilities, and purchased and retired carbon offsets for
those final amounts of unavoidable emissions. In keeping
with our focus on the environment, we even erected the first
Karen: Exactly. In 2020, we developed the “4 R’s” approach
to decarbonization for our corporate clients: Reduce,
Renew, Retire, and Realign. We financed energy efficiency
projects that helped clients reduce their energy usage; we
helped shift clients’ electricity footprints from fossil fuels
to renewable energy by providing debt financing, tax equity
and leasing capital for wind and solar power generation; we
mobilized capital for more EV production and leasing; and
we financed LEED-certified construction of office facilities
and manufacturing sites. We are also helping develop a more
robust, voluntary carbon-offset market.
Anne: Whether it is Environmental Transition or Inclusive
Development, our business focus has been to expand
current activities and innovate to help advance emerging
technologies. New domains and possibilities seem to be
emerging at an ever faster pace. In the area of Environmental
Transition, we are looking at solutions for the next frontier
beyond wind, solar, and EVs including (i) clean hydrogen,
fuel cells, sustainable aviation fuels and waste-to-energy;
(ii) EV charging and battery infrastructure; (iii) nature and
engineered solutions for carbon capture and offsets; and
(iv) sustainable agriculture and better water infrastructure.
Let’s talk about what we’re focused on in the Inclusive
Development side of things.
Karen: We’ll continue to help advance racial and gender
equality, support healthcare as we focus on continued
coronavirus response and vaccine delivery, and investing in
job training and reskilling. Certain projects that we are
pursuing include working with developers to create affordable
housing projects that incorporate more environmental and
social sustainability features and materials. Also, we are
expanding our supply chain financing and banking services
to more minority-owned and operated businesses.
BANK OF AMERICA 2020 | 35
2020 ESG highlights*
Our strong focus on environmental, social and governance (ESG) is key to how we drive
Responsible Growth. We’re addressing society’s greatest challenges through our investments,
philanthropy and responsible business operations. This helps us to serve clients, deliver
returns for our shareholders and contribute to a more sustainable future.
Sustainable finance
We mobilized and deployed
approximately $100 billion in capital
to support the environmental transition
to a low-carbon economy, as well as
inclusive development focusing on
affordable housing, healthcare, education
and racial/gender equality.
Environmental business
commitment
Our Environmental Business Initiative
will direct at least $445 billion to
low-carbon, sustainable business
activities by 2030. Since 2007 when
it was launched, we have mobilized
more than $200 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 Tax Equity
renewable energy portfolio at the end of
2020 was approximately $10.1 billion.
Our investments have contributed to
the development of approximately 17%
(33GW) of total installed renewable wind
and solar energy capacity in the U.S.
Blended Finance
Catalyst Pool
Our Blended Finance Catalyst Pool will
provide $60 million from Bank of America
to leverage additional private capital to
help address the U.N. SDGs. We finalized
commitments totaling $15 million in four
different blended finance vehicles that
will help mobilize more than $500 million
in total investor funds.
36 | BANK OF AMERICA 2020
Affordable homeownership
Having surpassed our initial
commitment, we tripled our Bank of
America Community Homeownership
Commitment® to $15 billion through
2025, aiming to help more than
60,000 LMI individuals and families
purchase a home. Since 2019, the
initiative has helped nearly
21,000 individuals and families purchase
a home and over $180 million in
down payment and closing cost grants.
Community
Development Banking
We provided a record $5.87 billion in
loans, tax credit equity investments
and other real estate development
solutions through $3.62 billion in
debt commitments and $2.25 billion
in investments to help build strong,
sustainable communities by financing
affordable housing and economic
development across the country.
Between 2005 and 2020, we financed
more than 215,000 affordable
housing units.
Community development
financial institutions (CDFI)
lending
We originated over $394 million in loans
and investments as part of our more
than $1.8 billion portfolio in 256 CDFIs
to finance affordable housing, economic
development projects, small businesses,
healthcare centers, charter schools, and
other community facilities and services.
Small business lending
We provide dedicated support to meet
the needs of our 13 million small
business owners and are a top lender
in the SBA’s 504 and 7(a) programs,
according to the FDIC. More than half
(54%) of all small business loans booked
in 2020 were made to LMI borrowers.
Sustainable client balances
We have $36.8 billion in assets in our
wealth management business with
a clearly defined ESG investment
approach.
Green, social and
sustainability bonds
We issued a $1 billion corporate social
bond to support those on the front
lines of the health crisis; and a first-
of-its kind $2 billion equality progress
sustainability bond to help advance
racial equality, economic opportunity
and environmental sustainability. Since
2013, Bank of America has issued
$9.85 billion in eight corporate Green,
Social and Sustainability Bonds. We
have also been a leader in ESG-themed
bond underwriting globally since
2007, having underwritten more than
$75 billion on behalf of more than
225 clients, supported more than
400 deals and provided critical funding
to environmental and social projects.
*Data and metrics are as of year-end 2020 unless otherwise noted.
Net-zero commitment
We are carbon neutral and purchase
100% renewable electricity. We have
committed to achieving net-zero
greenhouse gas emissions in our
financing activities, operations and
supply chain before 2050.
Climate risk and
ESG disclosure
We disclose our risk and governance
practices under several frameworks. On
page 40, we have reported under new
ESG Stakeholder Capitalism Metrics
developed by the World Economic
Forum’s International Business Council.
We issued our first report under the
recommendations of the TCFD, and our
first SASB report. This is in addition to
publicly disclosed information about
how we manage climate risk in the
Management Discussion & Analysis
section of our Annual Report on Form
10-K and reporting through the GRI
and CDP (formerly known as Carbon
Disclosure Project) global disclosure
system. We also disclose our ESG
strategy, policies and practices in
our Environmental and Social Risk
Policy Framework and Human Capital
Management Report.
Women’s economic
empowerment
We expanded opportunities for 50,000
women entrepreneurs, with a focus on
women of color, to participate in the
Bank of America Institute for Women’s
Entrepreneurship at Cornell, the only
online Ivy League certificate program for
women business owners in the world.
More than 20,000 women are currently
enrolled, representing over 85 countries,
including the U.S..
Philanthropic giving
We increased our philanthropy to more
than $350 million, including $100 million
to support communities impacted by
the health and humanitarian crisis and
$250 million to drive economic mobility
and social progress in the communities
we serve. We continue to advance
economic mobility and nonprofit
leadership through our Neighborhood
Builders and Neighborhood Champions
programs, investing $256 million to
support more than 1,000 nonprofits and
2,000 nonprofit executives since 2004.
Last year, through local partnerships
and our own Student Leaders program,
we connected more than 4,000 young
people to early employment.
Arts and culture
We remain steadfast in our support
of arts and culture, providing more than
$50 million in support to arts and culture
nonprofits around the world last year.
We fulfilled all commitments in 2020,
whether or not partners were open and/
or their programming had been digitized,
postponed or canceled.
Employee giving
and volunteering
In response to the health and
humanitarian crisis and the need to
advance racial equality, we lowered
our matching gift minimum to $1 and
doubled our match for donations to
17 organizations focused on racial
equality and economic opportunity.
Last year, despite shifting to a
virtual environment, our employees
volunteered over 1.1 million hours and
directed $65 million to communities
through individual giving and the bank’s
matching gifts program.
Pathways
Since 2018, Bank of America’s
Pathways program has fueled our
enterprise-wide talent pipeline, hiring
more than 10,000 employees from
LMI neighborhoods — well ahead of
our commitment to do so by 2023.
We do this through partnerships with
community colleges and long-time
partners such as Year Up, UnidosUS
and the National Urban League.
Better Money Habits®
Through our Better Money Habits
platform, we continue to connect people
to relevant advice, tools and guidance
that empowers them to take control of
their finances. Content on the Better
Money Habits website was accessed for
free over 6 million times, and consumers
clicked through to make an appointment
more than 23,000 times. Mejores Habitos
Financieros, our Spanish site, was
accessed more than 1 million times. To
further extend these resources in LMI
communities, more than 4,300 employee
volunteers serve as Better Money Habits
Volunteer Champions, delivering financial
know-how in partnership with local
nonprofits across the U.S.
BANK OF AMERICA 2020 | 37
Bank of America Corporation — Financial highlights
Bank of America Corporation (NYSE: BAC) is headquartered in Charlotte, North Carolina. As of December 31, 2020, we
operated across the United States, its territories and more than 35 countries. Through our banking and various nonbank
subsidiaries throughout the United States and in international markets, we provide a diversified range of banking
and nonbank financial services and products through four business segments: Consumer Banking, Global Wealth and
Investment Management, Global Banking and Global Markets.
Financial highlights ($ 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 common equity
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 capitalization
Market price per common share
Common shares issued and outstanding
Tangible common equity ratio1
2020
$ 85,528
17,894
1.88
1.87
0.72
0.67%
6.76%
9.48
64.55
8,797
2020
$ 927,861
2,819,627
1,795,480
272,924
28.72
20.60
262,206
30.31
8,651
6.5
$
2019
91,244
27,430
2.77
2.75
0.66
1.14%
10.62%
14.86
60.17
9,443
2019
$ 983,426
2,434,079
1,434,803
264,810
27.32
19.41
311,209
35.22
8,836
7.3
$
2018
91,020
28,147
2.64
2.61
0.54
1.21%
11.04%
15.55
58.40
10,237
2018
$ 946,895
2,354,507
1,381,476
265,325
25.13
17.91
238,251
24.64
9,669
7.6
Total Cumulative Shareholder Return²
BAC Five-Year Stock Performance
$250
$200
$150
$100
$50
$0
2015
2016
2017
2018
2019
2020
December 31
2015
2016
2017
2018
2019
2020
Bank of America Corporation
S&P 500
KBW Bank Sector Index
$100
100
100
$133
112
129
$181
136
152
$154
130
125
$225
171
171
$199
203
153
KBW
S&P
B of A
$40
$30
$20
$10
$0
2016
2017
2018
2019
2020
HIGH $23.16
$29.88
$32.84
$35.52
$35.64
LOW
11.16
22.05
CLOSE
22.10
29.52
22.73
24.64
24.56
35.22
18.08
30.31
Book Value Per Share/
Tangible Book Value Per Share¹
.
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
$
.
2
7
8
2
$
.
0
6
0
2
$
1 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 54 and Non-GAAP Reconciliations on page 111 of the 2020 Financial Review section.
² This 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, 2015 through 2020. The graph assumes an initial investment of $100 at the end of 2015 and the reinvestment of all dividends during the years indicated.
38 | BANK OF AMERICA 2020
2016
2017
Book Value Per Share
2018
2019
Tangible Book Value Per Share
2020
Recognition
We are honored to be recognized by organizations and media around the world for our work in driving Responsible Growth, including
our ESG commitments and initiatives and our efforts to be a great place to work.
In 2020, we were recognized by Fortune as one of their 100 Best Companies to Work For, Working Mother as the number-one best
company for Dads and Euromoney as the World’s Best Bank for Corporate Responsibility, among several others. Below are some
of our most recent awards.
Fortune
100 Best Companies to Work For (2020, 2019)
Best Big Companies to Work For (2020, 2019)
only financial services company recognized two
years in a row
The Banker
Most Innovative Investment Bank of the Year for
Corporate Social Responsibility (2019)
Climate Leadership Awards
Innovative Partnership Certificate (2019)
Best Workplaces for Women (2020, 2019)
Best Workplaces in Financial Services &
Insurance (2020, 2019)
Best Workplaces for Diversity (2019)
Best Workplaces for Parents (2020, 2019)
Best Workplaces for Giving Back (2018)
Change the World (2020, 2019)
named the top global bank two years in a row
Euromoney
World’s Best Bank for Corporate Responsibility
(2020)
Excellence in Leadership—North America (2020)
Best Digital Bank—North America (2020)
Best Bank for Transaction Services—North
America and Latin America (2020)
Best Bank for Small and Medium-Sized
Enterprises—North America (2020)
World’s Best Bank for Diversity and Inclusion
(2019)
World’s Best Bank (2018)
World’s Best Bank for Corporate Social
Responsibility (2017)
Asia’s Best Bank for Corporate Social
Responsibility (2019)
Barron’s
100 Most Sustainable Companies (2020)
Top Women Advisors (2020)
recognized for the 15th consecutive year
LinkedIn
50 Top Companies in the U.S. (2019)
top ranking financial institution
Working Mother
Top Wealth Advisor Moms (2020)
125 Merrill advisors recognized
100 Best Companies (32 consecutive years)
Best Companies for Multicultural Women
(2020, 2019)
Best Companies for Dads (2020, 2019)
Diversity Best Practices Inclusion Index (2020)
U.S. Environmental Protection Agency
EPA Green Power Leadership Award for
Excellence in Green Power (2019)
Investing in Women Initiative
Catalyst Award Winner (2019)
Forbes
Corporate Responders (2020)
Top Women Advisors (2020)
240 Merrill advisors recognized
World’s Best Employers (2019)
Bloomberg
Gender-Equality Index (2019)
Financial Services Gender-Equality Index (2017)
Brandon Hall
25 Human Capital Management Excellence
Awards (2020)
RateMyPlacement
100 Undergraduate Employers (2019-2020)
PEOPLE Magazine
Companies that Care (2020, 2019)
AnitaB.org
Top Companies for Women Technologists (2019)
Diversity MBA Magazine
50 Out Front: Best Places for Women & Diverse
Managers to Work (2020, 2019)
JUST Capital
America’s Most JUST Companies (2020, 2019)
JUST 100 (2020)
Military Times
Best for Vets: Employers (2020, 2019)
Stonewall UK Workplace
Equality Index (2020, 2019)
Fatherly
Certified Best Place to Work for Dads (2019)
American Council on Renewable Energy
(ACORE)
Renewable Energy Leadership Award (2019)
Dow Jones Sustainability Index
World Index (top 10% of banks) (2019)
North America Index (top 20% of banks) (2019)
UK Armed Forces Covenant
Employer Recognition Scheme Gold Award
(2016-2020)
U.S. Veterans Magazine
Top Veteran-Friendly Company (2020)
Equileap
U.S. and Global Gender Equality Reports (2019)
named the leading company in U.S. for gender
equality
Black Enterprise
50 Best Companies for Diversity (2018)
Dave Thomas Foundation for Adoption
100 Best Adoption-Friendly Workplace
(2020, 2019)
Disability:IN and the American Association
of People with Disabilities
Disability Equality Index (2020) scored 100%
Global Employer of the Year (2019)
National Association of Asian American
Professionals
Milestone Honor Award (Asian Leadership
Network, 2016)
Global Finance Magazine
Best Bank in the United States (2020)
Best Bank in North America (2020)
Best Consumer Digital Bank in the United States
(2020)
Best Bank in the World (2019)
LATINA Style
Company of the Year (2020)
Top 50 Best Companies for Latinas to Work for
in the U.S. (21 consecutive years)
Top 12 Companies of the Year (2019)
Top 12 Employee Resource Groups of the Year
(Hispanic-Latino Organization for Leadership &
Advancement, 2019)
National Association for Female Executives
(NAFE)
Top Companies for Executive Women (12 years)
PR News
CSR Award for Employee Relations (2019)
CDP
A list named for the ninth year (2019)
Supplier Engagement Leaderboard (2019)
Center for Political Accountability
Trendsetter on CPA-Zicklin Index of Corporate
Political Disclosure and Accountability
(2016-2019)
BANK OF AMERICA 2020 | 39
STAKEHOLDER CAPITALISM METRICS
The index reflects our report in alignment with the Stakeholder Capitalism Metrics (the Metrics) published by the International
Business Council of the World Economic Forum. We believe these Metrics help to demonstrate how our sustainable business model
drives progress towards inclusive capitalism and the U.N.’s Sustainable Development Goals. In this index, we either reference
existing disclosures or respond directly. We currently do not report on all of the Metrics but will continue to evaluate both core
and expanded metrics for potential future additional disclosure. Our commitment is to provide investors with useful, relevant and
meaningful sustainability information and we expect our disclosures to evolve over time. All reported data is as of and for year
end December 31, 2020, unless otherwise noted.
INDICATES CORE METRIC
THEME
METRIC
RESPONSE
Principles of Governance
Governing Purpose
Quality of
Governing Body
Ethical Behavior
Setting Purpose: The company’s stated purpose, as the
expression of the means by which a business proposes
solutions to economic, environmental, and social issues.
Corporate purpose should create value for all stakeholders,
including shareholders.
Purpose-led management: How the company’s stated purpose
is embedded in company strategies, policies, and goals.
Governing Body Composition: Composition of the highest
governance body and its committees by: competencies relating
to economic, environmental, and social topics; executive or
non-executive; independence; tenure on the governance body;
number of each individual’s other significant positions and
commitments, and the nature of the commitments; gender;
membership of under-represented social groups; stakeholder
representation.
Progress against strategic milestones: Disclosure of
the material strategic economic, environmental, and social
milestones expected to be achieved in the following year,
such milestones achieved from the previous year, and how
those milestones are expected to or have contributed to
long-term value.
Remuneration:
1. How performance criteria in the remuneration policies
relate to the highest governance body’s and senior executives’
objectives for economic, environmental and social topics, as
connected to the company’s stated purpose, strategy, and
long-term value.
2. Remuneration policies for the highest governance body
and senior executives for the following types of remuneration:
Fixed pay and variable pay, including performance-based pay,
equity-based pay, bonuses, and deferred or vested shares,
Sign-on bonuses or recruitment incentive payments,
termination payments, clawback and retirement benefits.
Anti-corruption:
1. Total percentage of governance body members, employees
and business partners who have received training on the
organization’s anti-corruption policies and procedures, broken
down by region.
2. (a) Total number and nature of incidents of corruption
confirmed during the current year but related to previous
years and
(b) Total number and nature of incidents of corruption
confirmed during the current year, related to this year.
3. Discussion of initiatives and stakeholder engagement to
improve the broader operating environment and culture, in
order to combat corruption.
Protected ethics advice and reporting mechanisms: A
description of internal and external mechanisms for:
1. Seeking advice about ethical and lawful behaviour and
organizational integrity
2. Reporting concerns about unethical or unlawful behaviour
and organizational integrity
Monetary losses from unethical behaviour: Total amount
of monetary losses as a result of legal proceedings associated
with: fraud, insider trading, anti-trust, anti-competitive
behaviour, market manipulation, malpractice, or violations of
other related industry laws or regulations.
Our Responsible Growth strategy referenced in this 2020 Annual
Report and our 2021 Proxy Statement articulates how our purpose
and environmental, social and governance leadership creates
stakeholder value.
Refer to the section entitled “Proposal 1: Electing directors” in our
2021 Proxy Statement available on the Bank of America Investor
Relations website at www.bankofamerica.com/investor.
Refer to our 2019 ESG Performance Data Summary available at
www.bankofamerica.com/ESGData.
Refer to the section entitled “Compensation discussion and analysis”
in our 2021 Proxy Statement available on the Bank of America Investor
Relations website at www.bankofamerica.com/investor.
1. 100% of Bank of America employees are required to take training
on anti-bribery and anti-corruption policies as part of Bank of
America’s Code of Conduct training.
2. For disclosure of significant litigation and regulatory matters, see
Note 12 — Commitments and Contingencies on page 161 of the 2020
Financial Review section.
3. Refer to our Code of Conduct on the Bank of America Investor
Relations website available at www.bankofamerica.com/investor.
Refer to page 13 in our Code of Conduct on the Bank of America
Investor Relations website available at www.bankofamerica.com/
investor.
For disclosure of significant litigation and regulatory matters, see
Note 12 — Commitments and Contingencies on page 161 of the 2020
Financial Review section.
40 | BANK OF AMERICA 2020
THEME
METRIC
RESPONSE
Ethical Behavior
(continued)
Risk and Opportunity
Oversight
Alignment of strategy and policies to lobbying: The
significant issues that are the focus of the company’s
participation in public policy development and lobbying; the
company’s strategy relevant to these areas of focus; and any
differences between its lobbying positions, purpose, and any
stated policies, goals, or other public positions.
Integrating risk and opportunity into business process:
Company risk factor and opportunity disclosures that clearly
identify the principal material risks and opportunities facing
the company specifically (as opposed to generic sector risks),
the company appetite in respect of these risks, how these risks
and opportunities have moved over time and the response to
those changes. These opportunities and risks should integrate
material economic, environmental, and social issues, including
climate change and data stewardship.
Refer to our Political Activities disclosure available on the Bank of
America Investor Relations website at www.bankofamerica.com/
investor.
Refer to our Environmental and Social Risk Policy Framework available
at www.bankofamerica.com/ESRPF.
Stakeholder
Engagement
Material issues impacting stakeholders: A list of the topics
that are material to key stakeholders and the company, how the
topics were identified, and how the stakeholders were engaged.
Refer to our ESG Materiality disclosure available at
www.bankofamerica.com/ESGMateriality.
THEME
Climate Change
Fresh water
availability
METRIC
RESPONSE
Planet*
Greenhouse Gas (GHG) emissions: For all relevant
greenhouse gases (e.g. carbon dioxide, methane, nitrous
oxide, F-gases etc.), report in metric tonnes of carbon
dioxide equivalent (tCO₂e) GHG Protocol Scope 1 and
Scope 2 emissions. Estimate and report material upstream
and downstream (GHG Protocol Scope 3) emissions where
appropriate.
Bank of America’s 2019 greenhouse gas emissions (tCO₂e) are as
follows. Since 2010, we have reduced location-based emissions 56%
globally. For more information, refer to our ESG Performance Data
Summary (2019) available at www.bankofamerica.com/ESGData.
• Scope 1: 62,639
• Location-based Scope 2: 728,771
• Market-Based Scope 2: 17,523
• Total net Scope 1 and Market-Based Scope 2: 0
• Scope 3 Purchased Goods and Services: 2,329,208
• Scope 3 Capital Goods: 251,336
• Scope 3 Fuel- and Energy-Related Activities: 161,151
• Scope 3 Upstream Transportation and Distribution: 140,215
• Scope 3 Waste (Traditional Disposal): 22,386
• Scope 3 Business Travel: 162,457
• Scope 3 Employee Commuting: 378,088
• Scope 3 Downstream Transportation and Distribution: 1,400,000
• Scope 3 Use of Sold Products: 4,000
• Scope 3 End of Life Treatment of Sold Products: 19,000
TCFD implementation: Fully implement the recommendations
of the Task Force on Climate-related Financial Disclosures
(TCFD). If necessary, disclose a timeline of at most three years
for full implementation. Disclose whether you have set, or have
committed to set GHG emissions targets that are in line with
the goals of the Paris Agreement — to limit global warming to
well-below 2°C above pre-industrial levels and pursue efforts
to limit warming to 1.5°C — and to achieve net-zero emissions
before 2050.
In 2020, Bank of America released its Task Force on
Climate-related Financial Disclosures (TCFD) Report available
at www.bankofamerica.com/TCFD.
In early 2021, Bank of America took the next step in our climate
journey by publicly committing to achieve net zero greenhouse
gas emissions before 2050 across our operations, supply chain,
and financing activities. For more information, refer to
www.bankofamerica.com/NetZero.
Paris-aligned GHG emissions targets: Define and
report progress against time-bound science-based GHG
emissions targets that are in line with the goals of the Paris
Agreement — to limit global warming to well-below 2°C above
pre-industrial levels and pursue efforts to limit warming to
1.5°C. This should include defining a date before 2050 by which
you will achieve net-zero greenhouse gas emissions and interim
reduction targets based on the methodologies provided by the
Science Based Targets initiative if applicable.
To reach the goals of the Paris Agreement, we are developing a
strategy across our entire value chain which includes setting interim
emission reduction targets based on science, engaging with clients
on climate goals and supporting climate innovation. Our net zero goal
includes operations (Scope 1 and 2), supply chain (Scope 3 upstream
emissions) and all material emissions attributed to our loans and
investments (Scope 3 investments). For more information, refer to
www.bankofamerica.com/NetZero.
Impact of Greenhouse gas emissions: Report wherever
material along the value chain (GHG protocol Scopes 1, 2 & 3),
the valued societal impact of greenhouse gas emissions.
Disclose the estimate of the social/societal cost of carbon used
and the source or basis for this estimate.
The societal impact of Bank of America’s Scope 1, Scope 2 (location-
based), and Scope 3 (Categories 1–7, 9, 11–12) emissions in 2019
was estimated to be $238 million. This figure was calculated using the
EPA’s 2020 social cost of carbon of $42/metric ton CO₂ (3% discount
rate, reported in 2007 USD).
Water consumption and withdrawal in water-stressed
areas: Report for operations where material, mega litres of
water withdrawn, mega litres of water consumed and the
percentage of each in regions with high or extremely high
baseline water stress according to WRI Aqueduct water risk
atlas tool. Estimate and report the same information for the
full value chain (upstream and downstream) where appropriate.
In 2019, Bank of America withdrew 7,550 and consumed 1,630 mega
liters of water from our global operations. Of this, 38% of withdrawals
and 41% of consumption were from regions with high or extremely
high baseline water stress according to the WRI Aqueduct water risk
atlas tool.
BANK OF AMERICA 2020 | 41
THEME
Nature Loss
Air pollution
METRIC
RESPONSE
Land use and ecological sensitivity: Report the number
and area (in hectares) of sites owned, leased or managed in or
adjacent to protected areas and/or key biodiversity areas (KBA).
In 2019, Bank of America had 8 active U.S. sites that intersected
with areas protected for biodiversity. The area of these buildings is
6,900 square meters. Only U.S. sites are included in this analysis; U.S.
sites make up over 90% of Bank of America’s real estate footprint.
Sites were overlaid on the U.S. Geological Survey’s Protected Areas
Database (PADUS) to understand intersection with protected areas.
Air pollution: Report wherever material along the value chain:
Nitrogen oxides (NOx), sulphur oxides (SOx), particulate matter
and other significant air emissions. Wherever possible, estimate
the proportion of specified emissions that occur in or adjacent
to urban/densely populated areas.
Bank of America’s 2019 air pollution emissions (metric tons) are
as follows. These air pollution emissions are from all of our sites
globally and are not specific to urban/densely populated areas. For
more information, refer to our 2019 ESG Performance Data Summary
available at www.bankofamerica.com/ESGData.
• SOx: 1
• NOx: 20
• CO: 32
• VOC: 2
• Particulate Matter: 3
Impact of air pollution: Report wherever material along
the value chain, the valued impact of air pollution, including
nitrogen oxides (NOx), sulfur oxides (SOx), particulate matter
and other significant air emissions.
The valued impact of Bank of America’s air pollution (SOx, NOx, CO,
VOCs, and PM) in 2019 was estimated to be $146,000. This figure was
calculated using the social cost factors of each pollutant as reported
in the World Resources Institute’s Transport Emissions & Social Cost
Assessment (TESCA) Tool v1.0. These social cost factors are weighted
averages based on a meta-analysis of international academic studies.
*2020 Environmental Data will be published in Q2 2021.
THEME
METRIC
RESPONSE
Prosperity
External Hires
Diversity
Region
Female
POC
Black/
African American
Hispanic/Latino
51% U.S.
59% APAC
EMEA
17% LATAM
27% Canada
Turnover
Diversity
Region
Total
Female
POC
Black/
African American
Hispanic/Latino
7% U.S.
6% APAC
7% EMEA
LATAM
7% Canada
7%
84%
12%
3%
0%
0%
7%
5%
5%
4%
4%
In 2020, turnover was at extremely low levels given the pandemic,
however we would not assume these levels to remain in the future.
While external research has found that women are dropping out
of the workforce at a higher rate than men, we have not experienced
this turnover at Bank of America.
1a–d. Refer to Financial Statements and Notes beginning on page 116
of the 2020 Financial Review section.
1e. Refer to Total tax paid metric.
1f. 2020 Total philanthropic giving was $350 million.
2. See the company’s response for the Total Tax Paid metric for more
information about certain income tax credits that the company does
not consider to be nor includes in the response as financial assistance
received from a government.
Employment and wealth
generation
Absolute number and rate of employment:
1. Total number and rate of new employee hires during the
reporting period, by age group, gender, other indicators of
diversity and region.
2. Total number and rate of employee turnover during the
reporting period, by age group, gender, other indicators of
diversity and region.
Economic Contribution:
1. Direct economic value generated and distributed (EVG&D) —
on an accrual basis, covering the basic components for the
organization’s global operations, ideally split out by:
a. Revenue
b. Operating Costs
c. Employee wages and benefits
d. Payments to providers of capital
e. Payments to government
f. Community Investment.
2. Financial assistance received from the government —
Total monetary value of financial assistance received by the
organization from any government during the reporting period.
42 | BANK OF AMERICA 2020
THEME
METRIC
RESPONSE
Wealth creation and
Employment
Financial investment contribution disclosure:
1. Total capital expenditures (CapEx) minus depreciation
supported by narrative to describe the company’s investment
strategy.
2. Share buybacks plus dividend payments supported by
narrative to describe the company’s strategy for returns of
capital to shareholders.
Community and
social vitality
Total tax paid: The total global tax borne by the company,
including corporate income taxes, property taxes, non-
creditable VAT and other sales taxes, employer-paid payroll
taxes and other taxes that constitute costs to the company, by
category of taxes.
Innovation in better
products and services
Total R&D expenses ($): Total costs related to research and
development.
1. We made $2.74 billion in fixed asset capital investments
($0.83 billion net of depreciation) primarily related to our real estate
portfolio and technology expenditures. Our real estate investments
focused on items that will allow us to bring teammates together to
drive greater collaboration and efficiencies in support of our effort to
deliver one company to our clients. We invested in modernizing sites
across the portfolio while also providing health and safety resources to
all locations to support our teammates. We also continue to invest
in the expansion and modernization of our financial center network.
Additionally, our technology purchases represent hardware and
software to support ongoing investments in the Bank of America
technology infrastructure and represent efforts to continue to support
customers, clients, and employees.
2. For more information outlining our return of capital to shareholders,
see Note 13 — Shareholders’ Equity on page 166 of the 2020 Financial
Review section.
The following table reflects the approximate amount of each category
of tax borne by the company globally. U.S. income tax law provides
investors in affordable housing projects, renewable energy projects
and other activities that further ESG principles with credits that can
reduce income taxes otherwise owed. These investments generally
involve substantial pre-tax losses. The amount shown in the table for
Corporate Income Taxes paid would have been approximately $3 billion
higher were it not for these credits.
Global Tax Paid in 2020
($ in billions)
Corporate Income Taxes
Property Taxes
Non-creditable VAT and Other Sales Taxes
Employer-paid Payroll Taxes
Other Taxes
Total
2.9
0.2
0.6
1.7
0.8
6.2
While R&D expenses are indicative of a company’s investment in
innovation and producing better products and services for their clients,
it is not the only way to measure a company’s efforts to innovate new
products and services and to be fit for the future.
For example, Bank of America is in the midst of a 10-year $300B
commitment to finance the transition to a low-carbon economy
including the adoption of low-carbon technologies such as resource-
efficient building construction, renewable energy generation,
sustainable transportation such as electric vehicles and charging
infrastructure, and resource-efficient agriculture. We are also
dedicating significant financial, intellectual, philanthropic and catalytic
capital to support the advancement of developing technologies,
such as carbon finance, sustainable agriculture and biofuels, water
infrastructure, clean hydrogen, waste-to-energy, and carbon capture
sequestration.
In addition to our financing commitment referenced above, we
invest heavily in technology development to meet the needs of
the Corporation in support of LRR (Laws, Rules, Regulations), Data
Remediation, Resiliency and Stability, clients / new products and
efficiencies. We spent $3.5B on these items during 2020.
Bank of America is also granted patents by the U.S. Patent Office. In
2020, we filed 722 patent applications and separately received 444
patents for the products and services we bring to our clients including
innovations in information security, ATM technology, data integrity and
monitoring using artificial intelligence (AI) or machine learning, fully
functioning payment instruments, network management and network
traffic analysis. The bank is one of the top 15 holders of U.S. banking-
related patents and applications.
BANK OF AMERICA 2020 | 43
THEME
METRIC
RESPONSE
Dignity and equality
Diversity and inclusion (%): Percentage of employees per
employee category, per age group, gender and other indicators
of diversity (e.g. ethnicity).
Refer to pages 11 & 27 in our 2020 Human Capital Management
Report available on the Bank of America Investor Relations website
at www.bankofamerica.com/investor.
People
Pay equality: Ratio of the basic salary and remuneration for
each employee category by significant locations of operation
for priority areas of equality: women to men; minor to major
ethnic groups; and other relevant equality areas.
Wage level (%):
1. Ratios of standard entry-level wage by gender compared to
local minimum wage
2. Ratio of CEO’s total annual compensation to median total
annual compensation of all employees (excluding the CEO)
Risk for incidents of child, forced or compulsory labor: An
explanation of the operations and suppliers considered to have
significant risk for incidents of child labor, forced or compulsory
labor. Such risks could emerge in relation to type of operation
(such as manufacturing plant) and type of supplier; or countries or
geographic areas with operations and suppliers considered at risk.
Discrimination and Harassment Incidents (#) and
the Total Amount of Monetary Losses ($): Number
of discrimination and harassment incidents, status of the
incidents and actions taken and the total amount of monetary
losses as a result of legal proceedings associated with (1) law
violations and (2) employment discrimination.
Freedom of Association and Collective Bargaining
at Risk (%):
1. Percentage of active workforce covered under collective
bargaining agreements
2. An explanation of the assessment performed on suppliers
for which the right to freedom of association and collective
bargaining is at risk including measures taken by the
organization to address these risks.
Health and Safety (%):
1. The number and rate of fatalities as a result of work-related
injury; high-consequence work-related injuries (excluding
fatalities); recordable work-related injuries, main types of work-
related injury; and the number of hours worked.
2. An explanation of how the organization facilitates workers’
access to non-occupational medical and healthcare services
and the scope of access provided for employees and workers.
Training provided (#, $):
1. Average hours of training per person that the organization’s
employees have undertaken during the reporting period, by
gender and employee category (total number of trainings
provided to employees divided by the number of employees).
2. Average training and development expenditure per full time
employee.
Number of unfilled “Skilled” positions (#, %):
1. Number of unfilled “Skilled” positions (#)
2. Percentage of unfilled “Skilled” positions for which the
company will hire unskilled candidates and train them. (%).
Refer to the Equal Pay for Equal Work Section in our 2021 Proxy
Statement available on the Bank of America Investor Relations website
at www.bankofamerica.com/investor.
We conduct rigorous analysis with outside experts to examine individual
employee pay before year-end compensation decisions are finalized
adjusting compensation where appropriate. The results of our equal pay
for equal work review are disclosed in the Proxy Statement. Our analysis
focuses on total compensation and includes geographies where we have
significant operations for women and covers the U.S. for people of color.
1. 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 was raised to $20 in the
first quarter of 2020, more than one year earlier than planned.
We compare our average U.S. hourly pay and benefits to living wage
standards utilizing MIT’s Living Wage Calculator. The Living Wage
calculator is a market based approach that measures the basic needs
of a family including items such as food, childcare, health insurance
and housing costs. We are above the living wage for a family of four in
all of our U.S. markets when we consider our average hourly pay plus
benefits in alignment with the living wage definition.
2. Refer to the section entitled “CEO pay ratio” in our 2021 Proxy
Statement on the Bank of America Investor Relations website available
at www.bankofamerica.com/investor.
Refer to our 2019 Modern Slavery Act Statement available at
www.bankofamerica.com/ModernSlaveryAct.
For disclosure of significant litigation and regulatory matters, see
Note 12 — Commitments and Contingencies on page 161 of the 2020
Financial Review section.
1. No U.S.-based employees are subject to collective bargaining
agreements.
2. We do not currently conduct this assessment.
1. This metric is not material for the banking industry.
2. Refer to pages 20–23 of our 2020 Human Capital Management
Report on the Bank of America Investor Relations website available at
www.bankofamerica.com/investor.
1. Training Hours Per Person
Total
Female
POC
Black/
African American
Hispanic/Latino
2. $1,600 per employee
42
47
54
53
66
Bank of America is committed to creating opportunities for our current
and prospective employees to grow and develop, including creating
avenues for reskilling for specialized jobs. For example, we have hired
more than 10,000 individuals from low- to moderate-income commu-
nities through our Pathways career program. For more information on
how we attract and develop talent, refer to pages 15–18 of our Human
Capital Management report available on the Bank of America Investor
Relations website at www.bankofamerica.com/investor.
Health and well being
Skills for the future
44 | BANK OF AMERICA 2020
2020 Financial Review
BANK OF AMERICA 2020 | 45
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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
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
Climate Risk Management
Complex Accounting Estimates
Non-GAAP Reconciliations
Statistical Tables
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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(the “Corporation”) and
Bank of America Corporation
its
management may make certain statements that constitute
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements can
be identified by the fact that they do not relate strictly to
historical or current facts. Forward-looking statements often use
words such as “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
current
expectations, plans or forecasts of its future results, revenues,
provision for credit losses, 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.
the Corporation’s
statements
represent
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 2020 Annual Report on Form
10-K: the Corporation’s potential judgments, 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, and regulatory and government actions,
including as a result of our participation in and execution of
government programs related to the Coronavirus Disease 2019
(COVID-19) pandemic; the possibility that the Corporation could
face increased claims from one or more parties involved in
mortgage securitizations; the Corporation’s ability to resolve
representations and warranties repurchase and related claims;
the risks related to the discontinuation of the London Interbank
Offered Rate and other reference rates, including increased
litigation and the effectiveness of hedging
expenses and
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
financial condition and results of
Corporation’s business,
operations; the possibility that future credit losses may be higher
than currently expected due
in economic
assumptions, customer behavior, adverse developments with
respect to U.S. or global economic conditions and other
uncertainties; the Corporation's concentration of credit risk; the
Corporation’s ability
targets and
expectations regarding revenue, 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
to changes
its expense
to achieve
in applying
and liabilities; the estimated or actual impact of changes in
accounting standards or assumptions
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,
stress capital buffer 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,
derivatives regulations and the Coronavirus Aid, Relief, and
Economic Security Act and any similar or related rules and
regulations; a
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 climate change; the
federal government shutdown and
impact of any
uncertainty regarding the federal government’s debt limit or
changes to the U.S. presidential administration and Congress; the
emergence of widespread health emergencies or pandemics,
including the magnitude and duration of the COVID-19 pandemic
and its impact on the U.S. and/or global, financial market
conditions and our business, results of operations, financial
condition and prospects; the impact of natural disasters, extreme
weather events, military conflict, terrorism or other geopolitical
events; and other matters.
failure or disruption
in or breach of
future
Forward-looking statements speak only as of the date they are
made, and the Corporation undertakes no obligation to update
any
impact of
circumstances or events that arise after the date the forward-
looking statement was made.
forward-looking statement
reflect
the
to
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
various bank and 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
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including
financial markets,
resulted in, among other things, higher rates of unemployment
and underemployment and caused volatility and disruptions in
the global
the energy and
commodity markets. Although vaccines have been approved for
immunization against COVID-19
in certain countries and
restrictive measures have been eased in certain areas,
COVID-19 cases have significantly increased in recent months in
the U.S. and many regions of the world compared to earlier
levels. Businesses, market participants, our counterparties and
clients, and the U.S. and global economies have been
negatively impacted and are likely to be so for an extended
period of time, as there remains significant uncertainty about
the timing and strength of an economic recovery.
To address the economic impact in the U.S., in March and
April 2020, four economic stimulus packages were enacted to
provide relief to businesses and individuals, including the
Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
Among other measures, the CARES Act established the Small
Business Administration (SBA) Paycheck Protection Program
(PPP), which provides loans to small businesses to keep their
employees on payroll and make other eligible payments. The
original funding for the PPP under the CARES Act was fully
allocated by mid-April 2020, with additional funding made
available on April 24, 2020 under the Paycheck Protection
Program and Health Care Enhancement Act. In December 2020,
an additional economic stimulus package was included as part
of
(the
the Consolidated Appropriations Act of 2021
Consolidated Appropriations Act), which provides relief to
individuals and businesses. This relief included additional
funding for the PPP under the Economic Aid to Hard-Hit Small
Businesses, Nonprofits, and Venues Act (the Economic Aid Act).
In response to the pandemic, the Corporation has
implemented protocols and processes to execute its business
continuity plans and help protect its employees and support its
clients. The Corporation is managing its response to the
pandemic according to its Enterprise Response Framework,
which invokes centralized management of the crisis event and
the integration of its response. The CEO and key members of
the Corporation’s management team meet regularly with co-
leaders of the Executive Response Team, which is composed of
senior executives across the Corporation, to help drive
decisions, communications and consistency of response across
all businesses and functions. We are also coordinating with
global, regional and local authorities and health experts,
including the U.S. Centers for Disease Control and Prevention
(CDC) and the World Health Organization.
Additionally, we have implemented a number of measures
to assist our employees, clients and the communities we serve
as discussed below.
Employees
We are providing support to our teammates to help promote the
health and safety of our employees and help to ensure our
protocols remain aligned to current guidance by monitoring
guidance from the CDC, medical boards and health authorities
and sharing such guidance with our employees. We are also
operating our businesses from remote locations and leveraging
our business continuity plans and capabilities.
The Corporation has globally implemented a work-from-home
posture, which has resulted in the substantial majority of our
employees working from home, and pre-planned contingency
strategies
remaining
employees. We continue to evaluate our continuity plans and
work-from-home strategy in an effort to best protect the health
and safety of our employees.
for site-based operations
for our
America, National Association (Bank of America, N.A. or BANA)
charter. At December 31, 2020, the Corporation had $2.8
trillion in assets and a headcount of approximately 213,000
employees.
As of December 31, 2020, we served clients through
operations across the U.S., its territories and approximately 35
countries. Our retail banking footprint covers all major markets
in the U.S., and we serve approximately 66 million consumer
and small business clients with approximately 4,300 retail
financial centers, approximately 17,000 ATMs, and leading
digital banking platforms (www.bankofamerica.com) with more
than 39 million active users, including approximately 31 million
active mobile users. We offer industry-leading support to
approximately three million small business households. Our
GWIM businesses, with client balances of $3.3 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
(Federal Reserve) notified BHCs of
Capital Management
In June 2020, the Board of Governors of the Federal Reserve
their 2020
System
Comprehensive Capital Analysis and Review (CCAR) supervisory
stress test results. Due to economic uncertainty resulting from
the Coronavirus Disease 2019 (COVID-19) pandemic (the
pandemic), the Federal Reserve required all large banks to
update and resubmit their capital plans in November 2020
based on the Federal Reserve’s updated supervisory stress test
scenarios. The results of the additional supervisory stress tests
were published in December 2020.
The Federal Reserve also required large banks to suspend
share repurchase programs during the second half of 2020,
except for repurchases to offset shares awarded under equity-
based compensation plans, and to limit common stock
dividends to existing rates that did not exceed the average of
the last four quarters’ net income. In December 2020, the
Federal Reserve announced that beginning in the first quarter of
2021, large banks would be permitted to pay common stock
dividends at existing rates and to repurchase shares in an
amount that, when combined with dividends paid, does not
exceed the average of net income over the last four quarters.
On January 19, 2021, we announced that the Board of
Directors (the Board) declared a quarterly common stock
dividend of $0.18 per share, payable on March 26, 2021 to
shareholders of record as of March 5, 2021. We also
announced that the Board authorized the repurchase of $2.9
billion in common stock through March 31, 2021, plus
repurchases to offset shares awarded under equity-based
compensation plans during the same period, estimated to be
approximately $300 million. This authorization equals the
maximum amount allowed by the Federal Reserve for the period.
For more information, see Capital Management on page 73.
COVID-19 Pandemic
In the first quarter of 2020, the World Health Organization
declared the outbreak of COVID-19 a pandemic. In an attempt to
contain the spread and impact of the pandemic, travel bans and
restrictions, quarantines, shelter-in-place orders and other
limitations on business activity were implemented. Additionally,
there has been a decline in global economic activity, reduced
U.S. and global economic output and a deterioration in
macroeconomic conditions in the U.S. and globally. This has
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Clients
We continue to leverage our business continuity plans and
capabilities to service our clients and meet our clients’ financial
needs by offering assistance to clients affected by the
pandemic,
including providing access to credit and the
important financial services on which our clients rely. We are
also participating in the programs created by the CARES Act and
Federal Reserve lending programs for businesses, including
originating PPP loans. We have also participated in the Main
Street Lending Program, which ended on January 8, 2021. While
most of our deferral programs expired in the third quarter of
2020, we continue to offer assistance on a case-by-case basis
when requested by clients affected by the pandemic.
As of December 31, 2020, we had approximately 332,000
PPP loans outstanding with a carrying value of $22.7 billion,
which were recorded in the Consumer, GWIM and Global Banking
segments. Since the PPP's inception through February 17,
2021, borrowers have submitted applications for forgiveness to
us for approximately 113,000 PPP loans with balances totaling
$10.9 billion. We have submitted approximately 72,000 PPP
loans with balances totaling $8.5 billion to the SBA for
repayment, of which we have received to date $5.4 billion in
repayment from the SBA. Additionally, as of February 17, 2021,
we have originated $4.1 billion in PPP loans under the Economic
Aid Act. For more information on PPP loans, see Credit Risk
Management on page 84, and for more information on
accounting for PPP loans and loan modifications under the
CARES Act, see Note 1 – Summary of Significant Accounting
Principles to the Consolidated Financial Statements.
Community Partners
We continue to support the communities where we live and work
by engaging in various initiatives to help those affected by
COVID-19. These initiatives include committing resources to
provide medical supplies, food and other necessities for those
in need. We are also supporting racial equality, economic
opportunity and environmental sustainability through direct
equity investments in minority-owned depository institutions,
equity investments in minority entrepreneurs, businesses and
funds, as well as other initiatives.
Risk Management
We continue to manage the increased operational risk related to
the execution of our business continuity plans in accordance
with our Enterprise Response Framework, Risk Framework and
Operational Risk Management Program. For more information,
see Managing Risk on page 70.
Loan Modifications
The Corporation has implemented various consumer and
commercial loan modification programs to provide its borrowers
relief from the economic impacts of COVID-19. Based on
guidance in the CARES Act that the Corporation adopted,
COVID-19 related modifications to consumer and commercial
loans that were current as of December 31, 2019 are exempt
from troubled debt restructuring (TDR) classification under
accounting principles generally accepted in the United States of
America (GAAP). In addition, the bank regulatory agencies
issued interagency guidance stating that COVID-19 related
short-term modifications (i.e., six months or less) granted to
consumer or commercial loans that were current as of the loan
modification program implementation date are not TDRs. In
December 2020, the Consolidated Appropriations Act amended
from TDR
the CARES Act by extending
classification for COVID-19 related modifications from December
31, 2020 to the earlier of January 1, 2022 or 60 days after the
national emergency has ended. For more information, see Note
the exemption
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1 – Summary of Significant Accounting Principles and Note 5 –
Outstanding Loans and Leases and Allowance for Credit Losses
to the Consolidated Financial Statements.
We have provided borrowers with relief from the economic
impacts of COVID-19 through payment deferral and forbearance
programs. A significant portion of deferrals expired during the
second half of 2020, reflecting a decline in customer requests
for assistance. As of February 17, 2021, deferred consumer
and small business loans recorded on the Consolidated Balance
Sheet totaled $6.8 billion, predominantly consisting of $6.4
billion of residential mortgage and home equity loans, including
loans serviced by others, that are well-collateralized.
Other Related Matters
Although the macroeconomic outlook improved modestly during
the second half of 2020, the future direct and indirect impact of
COVID-19 on our businesses, results of operations and financial
condition of the Corporation remains highly uncertain. Should
current economic conditions persist or deteriorate,
this
macroeconomic environment will have a continued adverse
effect on our businesses and results of operations and could
have an adverse effect on our financial condition. For more
information on how the risks related to the pandemic may
adversely affect our businesses, results of operations and
financial condition, see Item 1A. Risk Factors of our 2020
Annual Report on Form 10-K.
financial
industry working groups have
LIBOR and Other Benchmark Rates
Following the 2017 announcement by the U.K.’s Financial
Conduct Authority (FCA) that it would no longer compel
participating banks to submit rates for the London Interbank
Offered Rate (LIBOR) after 2021, regulators, trade associations
and
identified
recommended replacement rates for LIBOR, as well as other
Interbank Offered Rates
(IBORs), and have published
recommended conventions to allow new and existing products
to incorporate fallbacks or that reference these Alternative
Reference Rates (ARRs). The continuation of all British Pound
Sterling, Euro, Swiss Franc and Japanese Yen LIBOR settings
and one-week and two-month U.S. dollar LIBOR settings on the
current basis are expected to terminate at the end of December
2021, and the remaining U.S. dollar LIBOR settings (i.e.,
overnight, one month, three month, six month and 12 month)
are expected to terminate at the end of June 2023.
As a result of this and other announcements, financial
benchmark reforms, regulatory guidance and changes in short-
term interbank lending markets more generally, a major
transition is in progress in global financial markets with respect
to the replacement of IBORs and certain benchmarks. The
transition of IBORs to ARRs is a complex process impacting a
variety of global financial markets and our business and
operations.
IBORs are used in many of the Corporation’s products and
contracts, including derivatives, consumer and commercial
loans, mortgages, floating-rate notes and other adjustable-rate
products and financial instruments. The discontinuation of
IBORs requires us to transition a significant number of IBOR-
including related hedging
based products and contracts,
arrangements. In response, the Corporation established an
enterprise-wide
led by senior
management in early 2018. This program, which is led by the
Corporation's Chief Operating Officer,
includes active
involvement of senior management and regular reports to the
Enterprise Risk Committee (ERC). The program is intended to
address the Corporation's industry and regulatory engagement,
client and financial contract changes, internal and external
transition program
IBOR
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communications, technology and operations modifications,
introduction of new products, migration of existing clients, and
program strategy and governance. In addition, the program is
designed to monitor a variety of scenarios, including operational
risks associated with insufficient preparation by individual
market participants or the overall market ecosystem, volatility
along the Secured Overnight Financing Rate (SOFR) curve,
development and adoption of credit-sensitive and other rates,
regulatory and legal uncertainty with respect to various matters
including contract continuity, access by market participants to
liquidity in certain products, and IBOR continuity beyond
December 2021.
industry-recommended
As of February 1, 2021, a significant majority of the
aggregate notional amount of our LIBOR-based products and
contracts maturing after 2021 include or have been updated to
include fallbacks to ARRs based on market driven protocols,
regulatory guidance and
fallback
provisions and related mechanisms. For certain of the remaining
products and contracts, the transition will be more complex,
particularly where there is no industry-wide protocol or similar
mechanism. The Corporation is executing transition plans that
are intended to be in line with applicable major industry-wide
IBOR product cessation and launch milestones recommended
by the Alternative Reference Rates Committee, a group of
private market participants and official sector entities convened
by the Federal Reserve and the Federal Reserve Bank of New
York, and the Bank of England Sterling Risk Free Rate Working
Group, other than the cessation of LIBOR-based adjustable-rate
consumer mortgages. The Corporation plans to no longer offer
these mortgages and
launch SOFR-based adjustable-rate
consumer mortgages by the end of the first quarter of 2021.
The Corporation is executing product and client roadmaps
that it believes align with industry-recommended and regulatory
milestones, and the Corporation has developed employee
training programs as well as other internal and external sources
of information on the various challenges and opportunities that
the replacement of IBORs presents. As the transition to ARRs
evolves, the Corporation continues to monitor and participate in
the development and usage of certain ARRs, including SOFR,
the Euro Short Term Rate and the Sterling Overnight Index
Average (SONIA). The Corporation’s key transition efforts to date
include issuances of debt and deposits linked to SOFR and
SONIA by the Corporation, facilitating debt issuances linked to
ARRs by clients and secondary market liquidity for products
linked to ARRs, originating and arranging loans linked to ARRs,
including hedging arrangements, executing, trading, market
making and clearing ARR-based derivatives, and launching
capabilities and services to support the issuance and trading in
products indexed to certain ARRs. The Corporation updated its
operational models, systems, procedures and
internal
infrastructure in connection with the transition to ARRs by the
the
central clearing counterparties.
Corporation and certain of its subsidiaries adhered to the
International Swaps and Derivatives Association, Inc. 2020
IBOR Fallbacks Protocol, effective January 25, 2021, which
provides a mechanism to enable market participants to
incorporate fallbacks for certain legacy non-cleared derivatives
linked to certain IBORs.
In October 2020,
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. For more information on the
expected replacement of LIBOR and other benchmark rates, see
Item 1A. Risk Factors of our 2020 Annual Report on Form 10-K.
U.K. Exit from the EU
On January 31, 2020, the U.K. formally exited the European
Union (EU), and a transition period began during which time the
U.K. and the EU negotiated a trade agreement and other terms
associated with their future relationship. The transition period
ended 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
and implemented changes to enable us to continue to operate
in the region, including establishing a bank and broker-dealer in
the EU, as well as minimize the potential for any operational
disruption. As 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 operational, regulatory and legal risks. For
more information, see Item 1A. Risk Factors of our 2020 Annual
Report on Form 10-K.
Financial Highlights
Effective January 1, 2020, we adopted the new accounting
standard on current expected credit losses (CECL), under which
the allowance is measured based on management’s best
estimate of lifetime expected credit losses (ECL). Prior-year
periods presented reflect measurement of the allowance based
on management’s estimate of probable incurred credit losses.
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)
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
Net income applicable to common
shareholders
Per common share information
Earnings
Diluted earnings
Dividends paid
Performance ratios
Return on average assets (1)
Return on average common shareholders’
equity (1)
Return on average tangible common
shareholders’ equity (2)
Efficiency ratio (1)
Balance sheet at year end
Total loans and leases
Total assets
Total deposits
Total liabilities
Total common shareholders’ equity
Total shareholders’ equity
$
$
$
2020
2019
43,360
42,168
85,528
11,320
55,213
18,995
1,101
17,894
1,421
$
48,891
42,353
91,244
3,590
54,900
32,754
5,324
27,430
1,432
16,473
$
25,998
$
1.88
1.87
0.72
2.77
2.75
0.66
0.67 %
1.14 %
6.76
9.48
64.55
10.62
14.86
60.17
$ 927,861
2,819,627
1,795,480
2,546,703
248,414
272,924
$ 983,426
2,434,079
1,434,803
2,169,269
241,409
264,810
(1) For definitions, see Key Metrics on page 196.
(2) 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 111.
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Net income was $17.9 billion or $1.87 per diluted share in
2020 compared to $27.4 billion or $2.75 per diluted share in
2019. The decline in net income was primarily due to higher
provision for credit losses driven by the weaker economic
outlook related to COVID-19 and lower net interest income.
For discussion and analysis of our consolidated and
business segment results of operations for 2019 compared to
2018, see the Financial Highlights and Business Segment
Operations sections in the MD&A of the Corporation's 2019
Annual Report on Form 10-K.
Net Interest Income
Net interest income decreased $5.5 billion to $43.4 billion in
2020 compared to 2019. Net interest yield on a fully taxable-
equivalent (FTE) basis decreased 53 basis points (bps) to 1.90
percent for 2020. The decrease in net interest income was
primarily driven by lower interest rates, partially offset by
reduced deposit and funding costs, the deployment of excess
deposits into securities and an additional day of interest
accrual. Assuming continued economic improvement and based
on the forward interest rate curve as of January 19, 2021, when
we announced quarterly and annual results for the periods
ended December 31, 2020, we expect net interest income to be
higher in the second half of 2021 as compared to both the
second half of 2020 and the first half of 2021. For more
information on net interest yield and the FTE basis, see
Supplemental Financial Data on page 54, and for more
information on interest rate risk management, see Interest Rate
Risk Management for the Banking Book on page 105.
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
2020
2019
$
$
5,656 $
7,141
14,574
7,180
34,551
8,355
(738)
42,168 $
5,797
7,674
13,902
5,642
33,015
9,034
304
42,353
Noninterest income decreased $185 million to $42.2 billion in
2020 compared to 2019. The following highlights the significant
changes.
• Card income decreased $141 million primarily due to lower
levels of consumer spending driven by the impact of
COVID-19, partially offset by higher income related to the
processing of unemployment insurance.
• Service charges decreased $533 million primarily due to
higher deposit balances and lower client activity due to the
impact of COVID-19.
Investment and brokerage services income increased $672
million primarily due to higher client transactional activity,
higher market valuations and assets under management
(AUM) flows, partially offset by declines in AUM pricing.
•
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•
Investment banking fees increased $1.5 billion primarily
driven by higher equity issuance fees.
• Market making and similar activities decreased $679 million
primarily due to the impact of lower U.S. interest rates on
certain risk management derivatives, partially offset by
increased client activity and strong trading performance in
fixed income, currencies and commodities (FICC).
• Other income decreased $1.0 billion primarily due to lower
equity investment income, higher partnership losses on tax
credit
investments, primarily affordable housing and
renewable energy, partially offset by higher gains on loan
sales and sales of debt securities.
Provision for Credit Losses
The provision for credit losses increased $7.7 billion to $11.3
billion in 2020 compared to 2019 primarily driven by higher ECL
due to a weaker economic outlook related to COVID-19. For
more information on the provision for credit losses, see
Allowance for Credit Losses on page 99.
Noninterest Expense
Table 3 Noninterest Expense
(Dollars in millions)
Compensation and benefits
Occupancy and equipment
Information processing and communications
Product delivery and transaction related
Marketing
Professional fees
Other general operating
2020
2019
$
$
32,725
7,141
5,222
3,433
1,701
1,694
3,297
31,977
6,588
4,646
2,762
1,934
1,597
5,396
54,900
Total noninterest expense
$
55,213 $
Noninterest expense increased $313 million to $55.2 billion in
2020 compared to 2019. The increase was primarily due to
higher operating costs related to COVID-19, merchant services
expenses, which were previously recorded in other income as
part of joint venture net earnings, and higher activity-based
expenses due to increased client activity, partially offset by a
$2.1 billion pretax impairment charge related to the notice of
termination of the merchant services joint venture in 2019.
Income Tax Expense
Table 4 Income Tax Expense
(Dollars in millions)
Income before income taxes
Income tax expense
Effective tax rate
$
2020
18,995
1,101
2019
$ 32,754
5,324
5.8 %
16.3 %
Income tax expense was $1.1 billion for 2020 compared to
$5.3 billion in 2019, resulting in an effective tax rate of 5.8
percent compared to 16.3 percent.
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The change in the effective tax rate for 2020 was driven by
the impact of our recurring tax preference benefits on lower
levels of pretax income. These benefits primarily consist of tax
credits from environmental, social and governance (ESG)
investments in affordable housing and renewable energy,
aligning with our responsible growth strategy to address global
sustainability challenges. Excluding tax credits related to our
ESG investment activity, the effective tax rate for 2020 would
have been 21 percent.
The 2020 rate also included the impact of the U.K. tax law
change, whereby on July 22, 2020, the U.K. enacted a repeal of
the final two percent of scheduled decreases in the U.K.
corporation tax rate, which had been previously enacted. This
change will unfavorably affect income tax expense on future U.K.
Balance Sheet Overview
Table 5 Selected Balance Sheet Data
earnings, and requires a reversal of the adjustment to the U.K.
net deferred tax assets recognized at the time the tax rate
decreases were originally enacted. Accordingly, during the third
quarter of 2020, the Corporation recorded an income tax benefit
of approximately $700 million along with a corresponding
increase to the U.K. net deferred tax assets.
The effective tax rate for 2019 included net tax benefits
primarily related to the resolution of various tax controversy
matters.
Absent unusual items, we expect the effective tax rate for
2021 to be in the range of 10 – 12 percent, reflecting tax
credits related to our ESG investment activity.
(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
2020
2019
% Change
$
380,463 $
304,058
198,854
684,850
927,861
(18,802)
342,343
161,560
274,597
229,826
472,197
983,426
(9,416)
321,889
$ 2,819,627 $ 2,434,079
$ 1,795,480 $ 1,434,803
165,109
83,270
24,204
240,856
221,027
2,169,269
264,810
$ 2,819,627 $ 2,434,079
170,323
71,320
19,321
262,934
227,325
2,546,703
272,924
135 %
11
(13)
45
(6)
100
6
16
25
3
(14)
(20)
9
3
17
3
16
Assets
At December 31, 2020, total assets were approximately $2.8
trillion, up $385.5 billion from December 31, 2019. The
increase in assets was primarily due to higher cash held at
central banks that was primarily funded by deposit growth and
debt securities, partially offset by a decline in loans and leases.
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 decreased $31.0 billion
due to a decline in inventory within Global Markets.
Cash and Cash Equivalents
Cash and cash equivalents increased $218.9 billion driven by
deposit growth.
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 $29.5 billion
primarily due to deployment of deposit inflows.
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 $212.7 billion primarily
driven by the deployment of deposit
inflows. For more
information on debt securities, see Note 4 – Securities to the
Consolidated Financial Statements.
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Loans and Leases
Loans and leases decreased $55.6 billion primarily driven by
commercial loan paydowns, lower credit card spending and
lower residential mortgages due to higher paydowns and a
decline in originations. For more information on the loan
portfolio, see Credit Risk Management on page 84.
Allowance for Loan and Lease Losses
The allowance for loan and lease losses increased $9.4 billion
primarily due to the weaker economic outlook related to
COVID-19 and the impact of the adoption of the new credit loss
accounting standard. For more information, see Allowance for
Credit Losses on page 99.
Liabilities
At December 31, 2020, total liabilities were approximately $2.5
trillion, up $377.4 billion from December 31, 2019, primarily
due to deposit growth.
Deposits
Deposits increased $360.7 billion primarily due to an increase
in 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
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 increased $5.2 billion primarily
driven by client activity within Global Markets.
to
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 decreased $12.0 billion
primarily due to lower levels of short positions 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 decreased $4.9 billion due to higher deposit levels.
For more information on short-term borrowings, see Note 10 –
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 $22.1 billion primarily due to debt
issuances and valuation adjustments, partially offset by
maturities and redemptions. For more information on long-term
debt, see Note 11 – Long-term Debt to the Consolidated
Financial Statements.
Shareholders’ Equity
Shareholders’ equity increased $8.1 billion driven by net
income, market value
increases on debt securities and
issuances of preferred and common stock, partially offset by the
return of capital to shareholders totaling $14.7 billion through
share repurchases and common and preferred stock dividends,
as well as the impact of the adoption of the new credit loss
accounting standard and the redemption 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 80.
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shareholders’ equity as key measures to support our overall
growth objectives. These ratios are as follows:
• Return on average tangible common shareholders’ equity
measures our net
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.
income applicable
• 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 ratios utilizing tangible equity provide 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
financial measures
measures, see Non-GAAP Reconciliations on page 111.
the corresponding GAAP
to
Key Performance Indicators
We present certain key financial and nonfinancial performance
indicators (key performance indicators) that management uses
when assessing our consolidated and/or segment results. We
believe they are useful to investors because they provide
additional
information about our underlying operational
performance and trends. These key performance indicators
(KPIs) may not be defined or calculated in the same way as
similar KPIs used by other companies. For information on how
these metrics are defined, see Key Metrics on page 196.
Our consolidated key performance indicators, which include
various equity and credit metrics, are presented in Table 1 on
page 50 and/or Tables 6 and 7 on pages 55 and 56.
For information on key segment performance metrics, see
Business Segment Operations on page 59.
Supplemental Financial Data
Non-GAAP Financial Measures
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
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 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.
equity
represents
shareholders’
We also evaluate our business based on certain ratios that
utilize tangible equity, a non-GAAP financial measure. Tangible
equity
common
shareholders’ equity reduced by goodwill and intangible assets
(excluding mortgage servicing rights (MSRs)), net of related
deferred tax liabilities ("adjusted" shareholders' equity or
common shareholders' equity). These measures are used to
evaluate our use of equity. In addition, profitability, relationship
and investment models use both return on average tangible
common shareholders’ equity and return on average tangible
or
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Table 6 Five-year Summary of Selected Financial Data
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(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 (1)
Return on average common shareholders’ equity (1)
Return on average tangible common shareholders’ equity (2)
Return on average shareholders’ equity (1)
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 (1)
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 (3)
2020
2019
2018
2017
2016
$ 43,360
42,168
85,528
11,320
55,213
18,995
1,101
17,894
16,473
8,753.2
8,796.9
$ 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
0.67 %
6.76
9.48
6.69
9.07
9.68
9.96
38.18
$
1.88
1.87
0.72
28.72
20.60
$ 262,206
$ 982,467
2,683,122
1,632,998
220,440
243,685
267,309
1.14 %
1.21 %
10.62
14.86
10.24
13.85
10.88
11.14
23.65
$
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
11.04
15.55
10.63
14.46
11.27
11.39
20.31
$
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
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
$
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
Allowance for credit losses (4)
Nonperforming loans, leases and foreclosed properties (5)
Allowance for loan and lease losses as a percentage of total loans and leases
outstanding (5)
Allowance for loan and lease losses as a percentage of total nonperforming loans
and leases (5)
Net charge-offs
Net charge-offs as a percentage of average loans and leases outstanding (5)
$ 20,680
5,116
$ 10,229
3,837
$ 10,398
5,244
$ 11,170
6,758
$ 11,999
8,084
2.04 %
0.97 %
1.02 %
1.12 %
1.26 %
$
380
4,121
0.42 %
$
265
3,648
194
3,763
161
3,979
$
$
$
149
3,821
0.38 %
0.41 %
0.44 %
0.43 %
Capital ratios at year end (6)
Common equity tier 1 capital
Tier 1 capital
Total capital
Tier 1 leverage
Supplementary leverage ratio
Tangible equity (2)
Tangible common equity (2)
11.9 %
13.5
16.1
7.4
7.2
7.4
6.5
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
(1) For definitions, see Key Metrics on page 196
(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 54 and Non-GAAP Reconciliations on page 111.
(3) 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 Corporation sold its non-U.S. consumer credit card business in
2017.
Includes the allowance for loan and leases losses and the reserve for unfunded lending commitments.
(4)
(5) 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 90 and corresponding Table 28 and Commercial Portfolio Credit Risk Management
– Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity on page 94 and corresponding Table 35.
(6) 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 additional
information, including which approach is used to assess capital adequacy, see Capital Management on page 73.
n/a = not applicable
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Table 7 Selected Quarterly Financial Data
(In millions, except per share information)
Fourth
Third
Second
First
Fourth
Third
Second
First
2020 Quarters
2019 Quarters
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 (1)
Four-quarter trailing return on average assets (2)
Return on average common shareholders’ equity (1)
Return on average tangible common shareholders’ equity (3)
Return on average shareholders’ equity (1)
Return on average tangible shareholders’ equity (3)
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 (1)
Tangible book value (3)
Market capitalization
Average balance sheet
Total loans and leases
Total assets
Total deposits
Long-term debt
Common shareholders’ equity
Total shareholders’ equity
Asset quality
$ 10,253
9,846
20,099
53
13,927
6,119
649
5,470
5,208
8,724.9
8,785.0
$ 10,129
10,207
20,336
1,389
14,401
4,546
(335)
4,881
4,440
8,732.9
8,777.5
$ 10,848
11,478
22,326
5,117
13,410
3,799
266
3,533
3,284
8,739.9
8,768.1
$ 12,130
10,637
22,767
4,761
13,475
4,531
521
4,010
3,541
8,815.6
8,862.7
$ 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
0.78 %
0.67
8.39
11.73
8.03
10.84
9.68
9.71
30.11
0.71 %
0.75
7.24
10.16
7.26
9.84
9.82
9.76
35.36
0.53 %
0.81
5.44
7.63
5.34
7.23
9.69
9.85
47.87
0.65 %
0.99
5.91
8.32
6.10
8.29
10.11
10.60
44.57
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
$
0.60
0.59
0.18
$
0.51
0.51
0.18
$
0.38
0.37
0.18
$
0.40
0.40
0.18
$
0.75
0.74
0.18
$
$
0.57
0.56
0.18
0.75
0.74
0.15
$
0.71
0.70
0.15
28.72
20.60
$ 262,206
$ 934,798
2,791,874
1,737,139
225,423
246,840
271,020
28.33
20.23
$ 208,656
27.96
19.90
$ 205,772
27.84
19.79
$ 184,181
27.32
19.41
$ 311,209
26.96
19.26
$ 264,842
26.41
18.92
$ 270,935
25.57
18.26
$ 263,992
$ 974,018
2,739,684
1,695,488
224,254
243,896
267,323
$1,031,387
2,704,186
1,658,197
221,167
242,889
266,316
$ 990,283
2,494,928
1,439,336
210,816
241,078
264,534
$ 973,986
2,450,005
1,410,439
206,026
243,439
266,900
$ 964,733
2,412,223
1,375,052
202,620
246,630
270,430
$ 950,525
2,399,051
1,375,450
201,007
245,438
267,975
$ 944,020
2,360,992
1,359,864
196,726
243,891
266,217
Allowance for credit losses (4)
Nonperforming loans, leases and foreclosed properties (5)
$ 20,680
5,116
$ 21,506
4,730
$ 21,091
4,611
$ 17,126
4,331
$ 10,229
3,837
$ 10,242
3,723
$ 10,333
4,452
$ 10,379
5,145
Allowance for loan and lease losses as a percentage of total loans
and leases outstanding (5)
Allowance for loan and lease losses as a percentage of total
nonperforming loans and leases (5)
Net charge-offs
Annualized net charge-offs as a percentage of average loans and
leases outstanding (5)
Capital ratios at period end (6)
Common equity tier 1 capital
Tier 1 capital
Total capital
Tier 1 leverage
Supplementary leverage ratio
Tangible equity (3)
Tangible common equity (3)
Total loss-absorbing capacity and long-term debt metrics
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 exposure
2.04 %
2.07 %
1.96 %
1.51 %
0.97 %
0.98 %
1.00 %
1.02 %
380
881
$
431
972
441
1,146
$
389
1,122
$
$
265
959
$
271
811
$
228
887
$
197
991
$
0.38 %
0.40 %
0.45 %
0.46 %
0.39 %
0.34 %
0.38 %
0.43 %
11.9 %
13.5
16.1
7.4
7.2
7.4
6.5
27.4 %
14.5
13.3
7.1
11.9 %
13.5
16.1
7.4
6.9
7.4
6.6
26.9 %
13.7
12.9
6.6
11.4 %
12.9
14.8
7.4
7.1
7.3
6.5
26.0 %
14.2
12.4
6.7
10.8 %
12.3
14.6
7.9
6.4
7.7
6.7
24.6 %
12.8
11.6
6.1
11.2 %
12.6
14.7
7.9
6.4
8.2
7.3
24.6 %
12.5
11.5
5.8
11.4 %
12.9
15.1
8.2
6.6
8.4
7.4
24.8 %
12.7
11.4
5.8
11.7 %
13.3
15.4
8.4
6.8
8.7
7.6
25.5 %
13.0
11.8
6.0
11.6 %
13.1
15.2
8.4
6.8
8.5
7.6
24.8 %
12.8
11.4
5.9
(1) For definitions, see Key Metrics on page 196.
(2) Calculated as total net income for four consecutive quarters divided by annualized average assets for four consecutive quarters.
(3) 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 54 and Non-GAAP Reconciliations on page 111.
Includes the allowance for loan and lease losses and the reserve for unfunded lending commitments.
(4)
(5) 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 91 and corresponding Table 28 and Commercial Portfolio Credit Risk Management
– Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity on page 95 and corresponding Table 35.
(6) For more information, including which approach is used to assess capital adequacy, see Capital Management on page 73.
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Table 8 Average Balances and Interest Rates - FTE Basis
(Dollars in millions)
Earning assets
Average
Balance
Interest
Income/
Expense (1)
2020
Yield/
Rate
Average
Balance
Interest
Income/
Expense (1)
2019
Yield/
Rate
Average
Balance
Interest
Income/
Expense (1)
2018
Yield/
Rate
Interest-bearing deposits with the Federal Reserve, non-
U.S. central banks and other banks
$ 253,227
$
Time deposits placed and other short-term investments
8,840
359
29
903
4,185
9,868
7,338
1,290
8,759
2,545
19,932
9,712
2,208
1,790
559
14,269
34,201
2,539
52,084
0.14 % $ 125,555 $
1,823
1.45 % $ 139,848 $
1,926
0.33
0.29
2.83
1.87
3.10
3.37
10.30
2.83
4.43
2.82
2.07
2.82
3.02
2.68
3.48
3.06
2.25
9,427
207
2.19
9,446
216
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
10,166
3,261
23,272
13,161
3,402
2,741
718
20,022
43,294
4,478
71,831
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
67,379
1.73
3.56
2.65
3.47
4.92
10.76
3.60
5.17
4.09
3.27
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
1,980,231
25,830
319,185
$ 2,325,246
1.38 %
2.29
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
309,945
148,076
532,266
236,719
38,251
85,017
89,974
449,961
344,095
106,487
63,428
18,496
532,506
982,467
83,078
2,317,899
31,885
333,338
$ 2,683,122
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
Direct/Indirect and other consumer (3)
Total consumer
U.S. commercial (4)
Non-U.S. commercial (4)
Commercial real estate (5)
Commercial lease financing
Total commercial
Total loans and leases
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
Demand 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
$
58,113
$
829,719
47,780
64,857
6
977
405
323
1,000,469
1,711
1,476
184
75,386
77,046
4
—
228
232
0.01 % $
52,020 $
5
0.01 % $
54,226 $
6
0.01 %
0.12
0.85
0.50
0.17
0.27
0.01
0.30
0.30
0.18
0.34
2.35
1.96
0.50
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
979,057
7,188
276,432
45,449
201,623
7,208
1,249
6,700
1,502,561
22,345
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
401,269
234,111
267,889
$ 2,405,830
425,698
224,482
264,748
$ 2,325,246
1.75 %
0.15
1.90 %
2.03 %
0.40
2.43 %
$ 49,486
2.08 %
0.37
2.45 %
$ 48,772
Total interest-bearing deposits
1,077,515
1,943
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
Total interest-bearing liabilities
Noninterest-bearing sources
Noninterest-bearing deposits
Other liabilities (6)
Shareholders’ equity
987
974
4,321
8,225
293,466
41,386
220,440
1,632,807
555,483
227,523
267,309
Total liabilities and shareholders’ equity
$ 2,683,122
Net interest spread
Impact of noninterest-bearing sources
Net interest income/yield on earning assets (7)
$ 43,859
(1)
Includes the impact of interest rate risk management contracts. For more information, see Interest Rate Risk Management for the Banking Book on page 105.
(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)
(4) Certain prior-period amounts for 2019 have been reclassified to conform to current-period presentation.
(5)
Includes non-U.S. consumer loans of $2.9 billion, $2.9 billion and $2.8 billion for 2020, 2019 and 2018, respectively.
Includes U.S. commercial real estate loans of $59.8 billion, $57.3 billion and $56.4 billion, and non-U.S. commercial real estate loans of $3.6 billion, $4.7 billion and $4.0 billion for 2020, 2019
and 2018, respectively.
(6)
Includes $34.3 billion, $35.5 billion and $30.4 billion of structured notes and liabilities for 2020, 2019 and 2018, respectively.
(7) Net interest income includes FTE adjustments of $499 million, $595 million and $610 million for 2020, 2019 and 2018, respectively.
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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
Due to Change in (1)
Rate
Volume
From 2019 to 2020
Net Change
Due to Change in (1)
Volume
Rate
Net Change
From 2018 to 2019
5
8
6
2
5
3
9
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banks
$ 1,849 $
(1,464) $
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
Direct/Indirect and other consumer
Total consumer
U.S. commercial (2)
Non-U.S. commercial (2)
Commercial real estate
Commercial lease financing
Total commercial
Total loans and leases
Other earning assets
Net increase (decrease) in interest income
Increase (decrease) in interest expense
U.S. interest-bearing deposits
Savings
Demand 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
Time, savings and other
Total non-U.S. interest-bearing deposits
Total interest-bearing deposits
(13)
519
3
2,188
563
(312)
(1,018)
(22)
912
80
63
(76)
(3,313) $
(165)
(4,459)
(1,087)
(4,237)
(876)
(592)
(389)
(694)
(4,361)
(1,274)
(1,014)
(83)
905
(2,844)
$
$
1
507
2
(39)
(5)
68
$
— $
(4,001)
(68)
(1,045)
(11)
(654)
(178)
(3,940)
(1,084)
(2,049)
(313)
(904)
(1,407)
(716)
(3,340)
(3,449)
(1,194)
(951)
(159)
(5,753)
(9,093)
(1,939)
(19,747)
1
(3,494)
(66)
(1,084)
(4,643)
(16)
(586)
(602)
(5,245)
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
Net increase (decrease) in interest expense
Net increase (decrease) in net interest income (3)
451
(111)
619
(6,672)
(164)
(2,998)
(6,221)
(275)
(2,379)
(14,120)
$
(5,627)
(193) $
—
347
563
135
90 $
(9)
1,320
(195)
(55)
447
(446)
(17)
(76)
665
209
75
(28)
(90)
67
604
233
559
(27)
48
48
(417)
595
$
$
(1) $
— $
254
29
320
1,581
285
96
(6)
41
(13)
107
160
(145)
41
1,209
36
(256)
(103)
(9)
1,667
368
80
357
(379)
587
157
722
1,224
182
123
20
1,549
2,271
178
4,452
(1)
1,835
314
416
2,564
(19)
148
129
2,693
1,369
(109)
(215)
3,738
$
714
(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 in rate for that category. The unallocated change in rate or volume variance is allocated between the rate and volume variances.
(2) Certain prior-period amounts have been reclassified to conform to current-period presentation.
(3)
Includes changes in FTE basis adjustments of a $96 million decrease from 2019 to 2020 and a $15 million decrease from 2018 to 2019.
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Business Segment Operations
Segment Description and Basis of Presentation
We report our results of operations through 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,
rate, business and
operational risk components. For more information on the
nature of these risks, see Managing Risk on page 70. 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 7 – Goodwill and Intangible Assets to the
Consolidated Financial Statements.
interest
For more information on our presentation of financial
information on an FTE basis, see Supplemental Financial Data
on page 54, and for reconciliations to consolidated total
revenue, net income and period-end total assets, see Note 23 –
Business Segment Information to the Consolidated Financial
Statements.
Key Performance Indicators
We present certain key financial and nonfinancial performance
indicators that management uses when evaluating segment
results. We believe they are useful to investors because they
provide additional information about our segments’ operational
performance, customer trends and business growth.
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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
Year end
Total loans and leases
Total earning assets (2)
Total assets (2)
Total deposits
Deposits
Consumer Lending
Total Consumer Banking
2020
13,739
2019
16,904
$
$
2020
10,959
2019
11,254
$
2020
24,698
2019
28,158
$
$
$
% Change
(12)%
(20)
3,416
310
3,706
17,445
379
11,508
5,558
1,362
4,196
1.69 %
35
65.97
5,144
813,779
849,924
816,968
12,000
4,673
899,951
939,629
906,092
$
$
$
$
$
$
(33)
4,216
833
5,016
21,920
269
10,718
10,933
2,679
8,254
$
4,693
1
164
4,858
15,817
5,386
7,370
3,061
750
2,311
$
5,117
2
294
5,413
16,667
3,503
6,928
6,236
1,528
4,708
4,673
3,417
474
8,564
33,262
5,765
18,878
8,619
2,112
6,507
$
5,084
4,218
1,127
10,429
38,587
3,772
17,646
17,169
4,207
12,962
$
24.5 %
24.5 %
2.40 %
69
48.90
3.53 %
9
46.60
3.80 %
19
41.56
2.88
17
56.76
3.81
35
45.73
5,371
703,481
735,298
702,972
12,000
$ 310,436
310,862
314,599
6,698
26,500
$ 295,562
296,051
306,169
5,368
25,000
$ 315,580
858,724
898,606
823,666
38,500
$ 300,933
738,807
780,742
708,340
37,000
5,467
724,573
758,459
725,665
$ 295,261
295,627
299,186
6,560
$ 311,942
312,684
322,717
5,080
$ 299,934
945,343
988,580
912,652
$ 317,409
760,174
804,093
730,745
(8)
(19)
(58)
(18)
(14)
53
7
(50)
(50)
(50)
5 %
16
15
16
4
(6)%
24
23
25
(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’ 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 17,000 ATMS, nationwide call
centers and leading digital banking platforms with more than
39 million active users, including approximately 31 million
active mobile users.
Consumer Banking Results.
Net income for Consumer Banking decreased $6.5 billion to
$6.5 billion in 2020 compared to 2019 primarily due to lower
revenue, higher provision for credit losses and higher expenses.
Net interest income decreased $3.5 billion to $24.7 billion
loan balances. Noninterest
primarily due to lower rates, partially offset by the benefit of
higher deposit and
income
decreased $1.9 billion to $8.6 billion driven by a decline in
service charges primarily due to higher deposit balances and
lower card income due to decreased client activity, as well as
lower other income due to the allocation of asset and liability
management (ALM) results.
The provision for credit losses increased $2.0 billion to $5.8
billion primarily due to the weaker economic outlook related to
COVID-19. Noninterest expense increased $1.2 billion to $18.9
billion primarily driven by incremental expense to support
customers and employees during the pandemic, as well as the
cost of increased client activity and continued investments for
business growth, including the merchant services platform.
The return on average allocated capital was 17 percent,
down from 35 percent, driven by lower net income and, to a
lesser extent, an increase in allocated capital. For information
on capital allocated to the business segments, see Business
Segment Operations on page 59.
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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.
Net income for Deposits decreased $4.1 billion to $4.2
billion primarily driven by lower revenue. Net interest income
declined $3.2 billion to $13.7 billion primarily due to lower
interest rates, partially offset by the benefit of growth in
deposits. Noninterest income decreased $1.3 billion to $3.7
billion primarily driven by lower service charges due to higher
deposit balances and lower client activity related to the impact
of COVID-19, as well as lower other income due to the allocation
of ALM results.
The provision for credit losses increased $110 million to
$379 million in 2020 due to the weaker economic outlook
related to COVID-19. Noninterest expense increased $790
million to $11.5 billion driven by continued investments in the
business and incremental expense to support customers and
employees during the pandemic.
Average deposits increased $114.0 billion to $817.0 billion
in 2020 driven by strong organic growth of $79.3 billion in
checking and time deposits and $34.4 billion in traditional
savings and money market savings.
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The following table provides key performance indicators for
Deposits. Management uses these metrics, and we believe they
are useful to
investors because they provide additional
information to evaluate our deposit profitability and digital/
mobile trends.
Key Statistics – Deposits
Total deposit spreads (excludes noninterest costs) (1)
Year End
Consumer investment assets (in millions) (2)
Active digital banking users (units in thousands) (3)
Active mobile banking users (units in thousands) (4)
Financial centers
ATMs
2020
1.94%
2019
2.34%
$306,104 $240,132
39,315
30,783
4,312
16,904
38,266
29,174
4,300
16,788
(1)
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 at period end.
(4) Active mobile banking users represents mobile users at period end.
Consumer investment assets increased $66.0 billion in
2020 driven by market performance and client flows. Active
mobile banking users increased approximately two million
reflecting continuing changes
in our customers’ banking
preferences. We had a net increase of 12 financial centers as
we continued to optimize our consumer banking network.
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
income and other
card
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.
fees, mortgage banking
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Net income for Consumer Lending was $2.3 billion, a
decrease of $2.4 billion, primarily due to higher provision for
credit losses. Net interest income declined $295 million to
$11.0 billion primarily due to lower interest rates, partially offset
by loan growth. Noninterest income decreased $555 million to
$4.9 billion primarily driven by lower card income due to lower
client activity, as well as lower other income due to the
allocation of ALM results.
The provision for credit losses increased $1.9 billion to $5.4
billion primarily due to the weaker economic outlook related to
COVID-19. Noninterest expense increased $442 million to $7.4
billion primarily driven by investments in the business and
incremental expense to support customers and employees
during the pandemic.
Average loans increased $14.9 billion to $310.4 billion
primarily driven by an increase in residential mortgages and PPP
loans, partially offset by a decline in credit cards.
The following table provides key performance indicators for
Consumer Lending. Management uses these metrics, and we
believe they are useful to investors because they provide
additional information about loan growth and profitability.
the
lower
interest
During 2020, the total risk-adjusted margin increased 88
bps compared to 2019 driven by a lower mix of customer
balances at promotional
rate
rates,
environment and lower net credit losses. Total credit card
purchase volumes declined $26.3 billion to $251.6 billion. The
decline in credit card purchase volumes was driven by the
impact of COVID-19. While overall spending improved during the
second half of 2020, spending for travel and entertainment
remained lower compared to 2019. During 2020, debit card
purchase volumes increased $23.8 billion to $384.5 billion,
despite COVID-19 impacts. Debit card purchase volumes
improved in the second half of 2020 as businesses reopened
and spending improved.
Key Statistics – Residential Mortgage Loan Production (1)
(Dollars in millions)
Consumer Banking:
First mortgage
Home equity
Total (2) :
First mortgage
Home equity
2020
2019
$
$
43,197 $
6,930
69,086 $
8,160
49,179
9,755
72,467
11,131
Key Statistics – Consumer Lending
(Dollars in millions)
Total credit card (1)
Gross interest yield (2)
Risk-adjusted margin (3)
New accounts (in thousands)
Purchase volumes
Debit card purchase volumes
2020
2019
10.27 %
9.16
2,505
251,599
384,503
10.76 %
8.28
4,320
$ 277,852
$ 360,672
$
$
Includes GWIM's credit card portfolio.
(1)
(2) Calculated as the effective annual percentage rate divided by average loans.
(3) Calculated as the difference between total revenue, net of interest expense, and net credit
losses divided by average loans.
(1) The loan production amounts represent the unpaid principal balance of loans and, in the
(2)
case of home equity, the principal amount of the total line of credit.
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 decreased $6.0 billion and $3.4 billion in
2020 primarily driven by a decline
in nonconforming
applications.
Home equity production in Consumer Banking and for the
total Corporation decreased $2.8 billion and $3.0 billion in
2020 primarily driven by a decline in applications.
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(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
n/m = not meaningful
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2020
2019
% Change
$
5,468
$
6,504
(16)%
12,270
846
13,116
18,584
357
14,154
4,073
998
3,075
$
11,870
1,164
13,034
19,538
82
13,825
5,631
1,380
4,251
24.5 %
24.5 %
1.73
21
76.16
2.33
29
70.76
$
$
183,402
316,008
328,384
287,123
15,000
188,562
356,873
369,736
322,157
168,910
279,681
292,016
256,516
14,500
176,600
287,201
299,770
263,113
$
$
$
3
(27)
1
(5)
n/m
2
(28)
(28)
(28)
9 %
13
12
12
3
7 %
24
23
22
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 decreased $1.2 billion to $3.1 billion
primarily due to lower net interest income, higher noninterest
expense and higher provision for credit losses.
Net interest income decreased $1.0 billion to $5.5 billion
due to the impact of lower interest rates, partially offset by the
benefit of strong deposit and loan growth.
Noninterest income, which primarily includes investment and
brokerage services income, increased $82 million to $13.1
billion primarily due to higher market valuations and positive
AUM flows, largely offset by declines in AUM pricing as well as
lower other income due to the allocation of ALM results.
The provision for credit losses increased $275 million to
$357 million primarily due to the weaker economic outlook
related to COVID-19. Noninterest expense increased $329
million to $14.2 billion primarily driven by higher investments in
primary sales professionals and revenue-related incentives.
The return on average allocated capital was 21 percent,
down from 29 percent, due to lower net income and, to a lesser
extent, a small increase in allocated capital.
Average loans increased $14.5 billion to $183.4 billion
primarily driven by residential mortgage and custom lending.
Average deposits increased $30.6 billion to $287.1 billion
primarily driven by inflows resulting from client responses to
market volatility and lower spending.
MLGWM revenue of $15.3 billion decreased five percent
primarily driven by the impact of lower interest rates, partially
offset by the benefits of higher market valuations and positive
AUM flows.
Bank of America Private Bank revenue of $3.3 billion
decreased four percent primarily driven by the impact of lower
interest rates.
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Key Indicators and Metrics
(Dollars in millions, except as noted)
Revenue by Business
Merrill Lynch Global Wealth Management
Bank of America Private Bank
Total revenue, net of interest expense
Client Balances by Business, at year end
Merrill Lynch Global Wealth Management
Bank of America Private Bank
Total client balances
Client Balances by Type, at year end
Assets under management
Brokerage and other assets
Deposits
Loans and leases (1)
Less: Managed deposits in assets under management
Total client balances
Assets Under Management Rollforward
Assets under management, beginning of year
Net client flows
Market valuation/other
Total assets under management, end of year
Associates, at year end
Number of financial advisors
Total wealth advisors, including financial advisors
Total primary sales professionals, including financial advisors and wealth advisors
Merrill Lynch Global Wealth Management Metric
Financial advisor productivity (2) (in thousands)
Bank of America Private Bank Metric, at year end
Primary sales professionals
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$
$
$
$
$
$
$
$
2020
2019
15,292 $
3,292
18,584 $
16,112
3,426
19,538
2,808,340 $
541,464
3,349,804 $
2,558,102
489,690
3,047,792
1,408,465 $
1,479,614
322,157
191,124
(51,556)
3,349,804 $
1,275,555
1,372,733
263,103
179,296
(42,895)
3,047,792
1,275,555 $
19,596
113,314
1,408,465 $
1,072,234
24,865
178,456
1,275,555
17,331
19,373
21,213
17,458
19,440
20,586
$
1,126 $
1,082
1,759
1,766
Includes margin receivables which are classified in customer and other receivables on the Consolidated Balance Sheet.
(1)
(2) For a definition, see Key Metrics on page 196.
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 $302.0 billion, or 10 percent, to
$3.3 trillion at December 31, 2020 compared to December 31,
2019. The increase in client balances was primarily due to
higher market valuations and positive client flows.
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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
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2020
2019
% Change
$
9,013
$
10,675
(16)%
3,238
4,010
2,726
9,974
18,987
4,897
9,337
4,753
1,283
3,470
$
3,015
3,137
3,656
9,808
20,483
414
9,011
11,058
2,985
8,073
27.0 %
27.0 %
1.86
8
49.17
2.75
20
43.99
$
$
382,264
485,688
542,302
456,562
42,500
339,649
522,650
580,561
493,748
374,304
388,152
443,083
362,731
41,000
379,268
407,180
464,032
383,180
$
$
$
7
28
(25)
2
(7)
n/m
4
(57)
(57)
(57)
2 %
25
22
26
4
(10)%
28
25
29
lending. Our
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
treasury solutions
business includes treasury management, foreign exchange,
short-term investing options and merchant services. 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 Corporate Banking clients
generally include large global corporations, financial institutions
and leasing clients.
Global Commercial Banking clients
generally include middle-market companies, commercial real
estate firms and not-for-profit companies. Business Banking
clients
include mid-sized U.S.-based businesses requiring
customized and integrated financial advice and solutions.
Net income for Global Banking decreased $4.6 billion to
$3.5 billion primarily driven by higher provision for credit losses
as well as lower revenue.
Revenue decreased $1.5 billion to $19.0 billion driven by
lower net interest income. Net interest income decreased $1.7
billion to $9.0 billion primarily driven by lower interest rates,
partially offset by higher loan and deposit balances.
Noninterest income of $10.0 billion increased $166 million
driven by higher investment banking fees, partially offset by
lower valuation driven adjustments on the fair value loan
portfolio, debt securities and leveraged loans, as well as the
allocation of ALM results.
The provision for credit losses increased $4.5 billion to $4.9
billion primarily due to the weaker economic outlook related to
COVID-19. Noninterest expense increased $326 million primarily
due to continued investments in the business, partially offset by
lower revenue-related incentives.
The return on average allocated capital was eight percent in
2020 compared to 20 percent in 2019 due to lower net income
and, to a lesser extent, an increase in allocated capital. For
information on capital allocated to the business segments, see
Business Segment Operations on page 59.
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.
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The table below and following discussion present a summary of the results, which exclude certain investment banking, merchant
services and PPP activities in Global Banking.
Global Corporate, Global Commercial and Business Banking
(Dollars in millions)
Revenue
Global Corporate Banking
Global Commercial Banking
Business Banking
Total
2020
2019
2020
2019
2020
2019
2020
2019
Business Lending
Global Transaction Services
Total revenue, net of interest expense
$
$
3,552 $
2,986
6,538 $
3,994
3,994
7,988
$
$
3,743 $
3,169
6,912 $
4,132
3,499
7,631
$
$
$
261
893
1,154 $
363
1,064
1,427
$
$
7,556 $
7,048
14,604
$
8,489
8,557
17,046
Balance Sheet
Average
Total loans and leases
Total deposits
Year end
Total loans and leases
Total deposits
$ 179,393 $ 177,713 $ 182,212 $ 181,485 $
216,371
177,924
191,813
144,620
$ 153,126 $ 181,409 $ 164,641 $ 182,727 $
233,484
185,352
207,597
157,322
14,410
48,214
13,242
52,150
$
$
15,058 $ 376,015 $ 374,256
362,740
40,196
456,398
15,152 $ 331,009 $ 379,288
383,178
40,504
493,231
Business Lending revenue decreased $933 million in 2020
compared to 2019. The decrease was primarily driven by lower
interest rates.
consolidated investment banking fees, the following table
presents total Corporation investment banking fees and the
portion attributable to Global Banking.
Global Transaction Services revenue decreased $1.5 billion
in 2020 compared to 2019 driven by the allocation of ALM
results, partially offset by the impact of higher deposit balances.
Average loans and leases were relatively flat in 2020
compared to 2019. Average deposits increased 26 percent
primarily
client responses to market volatility,
government stimulus and placement of credit draws.
due
to
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
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
2020
2019
Total Corporation
2019
2020
$
1,458 $ 1,336 $ 1,621 $ 1,460
3,107
1,555
1,259
997
1,348
453
3,443
2,328
4,010
(93)
3,137
(62)
7,392
(212)
5,826
(184)
$
3,917 $ 3,075 $ 7,180 $ 5,642
Total Corporation investment banking fees, excluding self-led
deals, of $7.2 billion, which are primarily included within Global
Banking and Global Markets, increased 27 percent primarily
driven by higher equity issuance fees.
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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
financing,
securities
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,
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 internal revenue-sharing
arrangement. Global Banking originates certain deal-related
transactions with our corporate and commercial clients that are
62539financials
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2020
2019
% Change
$
4,646
$
3,915
19 %
1,973
2,991
8,471
685
14,120
18,766
251
11,422
7,093
1,844
5,249
$
1,738
2,288
7,065
608
11,699
15,614
(9)
10,728
4,895
1,395
3,500
26.0 %
28.5 %
15
60.86
10
68.71
$
$
243,519
104,697
87,125
47,655
482,996
73,062
482,171
685,047
47,400
36,000
421,698
78,415
447,350
616,609
53,925
246,336
116,883
83,216
43,273
489,708
71,334
476,225
679,300
31,380
35,000
452,499
72,993
471,701
641,809
34,676
$
$
$
14
31
20
13
21
20
n/m
6
45
32
50
(1)%
(10)
5
10
(1)
2
1
1
51
3
(7)%
7
(5)
(4)
56
executed and distributed by Global Markets. For information on
investment banking fees on a consolidated basis, see page 66.
The following explanations for year-over-year changes for
Global Markets, including those disclosed under Sales and
Trading Revenue, are the same for amounts including and
excluding net DVA. Amounts excluding net DVA are a non-GAAP
financial measure. For more information on net DVA, see
Supplemental Financial Data on page 54.
Net income for Global Markets increased $1.7 billion to $5.2
billion. Net DVA losses were $133 million compared to losses
of $222 million in 2019. Excluding net DVA, net income
increased $1.7 billion to $5.4 billion. These increases were
primarily driven by higher revenue, partially offset by higher
noninterest expense and provision for credit losses.
Revenue increased $3.2 billion to $18.8 billion primarily
driven by higher sales and trading revenue and investment
banking fees. Sales and trading revenue increased $2.3 billion,
and excluding net DVA, increased $2.2 billion. These increases
were driven by higher revenue across FICC and Equities.
The provision for credit losses increased $260 million
primarily due to the weaker economic outlook related to
COVID-19. Noninterest expense increased $694 million to
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$11.4 billion driven by higher activity-based expenses for both
card and trading.
Average total assets increased $5.7 billion to $685.0 billion
driven by higher client balances in Global Equities. Year-end
total assets decreased $25.2 billion to $616.6 billion driven by
lower levels of inventory in FICC and increased hedging of client
activity in Equities with derivative transactions relative to stock
positions.
The return on average allocated capital was 15 percent, up
from 10 percent, reflecting higher net income, partially offset by
an increase in allocated capital.
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,
loan
residential mortgage-backed securities, collateralized
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,
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)
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excluding net DVA, which is a non-GAAP financial measure. For
more information on net DVA, see Supplemental Financial Data
on page 54.
Sales and Trading Revenue (1, 2, 3)
(Dollars in millions)
Sales and trading revenue
Fixed income, currencies and commodities
Equities
Total sales and trading revenue
2020
2019
$ 9,595 $ 8,189
4,493
$ 15,017 $ 12,682
5,422
$ 9,725 $ 8,397
Sales and trading revenue, excluding net DVA (4)
Fixed income, currencies and commodities
Equities
4,507
$ 15,150 $ 12,904
(1 ) For more information on sales and trading revenue, see Note 3 – Derivatives to the
Total sales and trading revenue, excluding net DVA
5,425
(2 )
(3 )
Consolidated Financial Statements.
Includes FTE adjustments of $196 million and $187 million for 2020 and 2019.
Includes Global Banking sales and trading revenue of $478 million and $538 million for
2020 and 2019.
(4) FICC and Equities sales and trading revenue, excluding net DVA, is a non-GAAP financial
measure. FICC net DVA losses were $130 million and $208 million for 2020 and 2019.
Equities net DVA losses were $3 million and $14 million for 2020 and 2019.
FICC revenue increased $1.3 billion driven by increased
client activity and improved market-making conditions across
macro products. Equities revenue increased $918 million driven
by increased client activity and a strong trading performance in a
more volatile market environment.
2020
2019
% Change
$
$
$
$
$
34
(3,606)
(3,572)
50
1,422
(5,044)
(4,637)
(407) $
234
(2,617)
(2,383)
(669)
3,690
(5,404)
(4,048)
(1,356)
28,159 $
228,783
18,247
42,935
210,689
21,359
$
21,301
264,141
12,998
37,156
224,375
23,089
(85)%
38
50
(107)
(61)
(7)
15
(70)
(34)%
9
(15)
(43)%
18
(44)
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 $763.1 billion and $544.3 billion for 2020 and 2019, and year-end allocated assets were $977.7 billion and $565.4
billion at December 31, 2020 and 2019.
loans and servicing activities,
All Other consists of ALM activities, equity investments, non-
core mortgage
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
23 – Business Segment Information 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 2020, residential mortgage loans held for ALM
activities decreased $12.7 billion to $9.0 billion due primarily to
loan sales. Non-core residential mortgage and home equity
loans, which are principally runoff portfolios, are also held in All
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Other. During 2020, total non-core loans decreased $3.0 billion
to $12.6 billion due primarily to payoffs and paydowns, as well
as Federal Housing Administration (FHA) loan conveyances and
sales, 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 85.
The net loss for All Other decreased $949 million to a net
loss of $407 million, primarily due to a $2.1 billion pretax
impairment charge related to the notice of termination of the
merchant services joint venture in 2019, partially offset by lower
revenue and higher provision for credit losses.
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 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 11
– Long-term Debt
and Note 12 – Commitments and
Contingencies to the Consolidated Financial Statements.
Revenue decreased $1.2 billion primarily due
to
extinguishment losses on certain structured liabilities, higher
client-driven ESG
in higher
partnership losses on these tax-advantaged investments, and
lower net interest income, partially offset by a gain on sales of
mortgage loans.
investment activity,
resulting
The provision for credit losses increased $719 million to
$50 million from a provision benefit of $669 million in 2019,
primarily due to recoveries from sales of previously charged-off
non-core consumer real estate loans in 2019, as well as the
weaker economic outlook related to COVID-19.
Noninterest expense decreased $2.3 billion to $1.4 billion
primarily due to the $2.1 billion pretax impairment charge in
2019, partially offset by higher litigation expense.
The income tax benefit increased $589 million primarily
driven by the impact of the U.K. tax law change and a higher
level of income tax credits related to our ESG investment
activity, partially offset by the positive impact from the
resolution of various tax controversy matters in 2019. 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
Table 10 Contractual Obligations
to
related
Other long-term liabilities include our contractual funding
obligations
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 2020 and
2019, we contributed $115 million and $135 million to the
Plans, and we expect to make $136 million of contributions
during 2021. The Plans are more fully discussed in Note 17 –
the Consolidated Financial
Employee Benefit Plans
Statements.
to
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 12 – 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 6 –
Securitizations and Other Variable Interest Entities to the
Consolidated Financial Statements.
Table 10 includes certain contractual obligations at December
31, 2020 and 2019.
(Dollars in millions)
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)
December 31, 2020
Due After
One Year
Through
Three Years
Due After
Three Years
Through
Five Years
Due After
Five Years
50,824 $
48,568 $ 143,190 $
Due in One
Year or Less
$
20,352 $
1,927
551
50,661
1,656
4,542
3,169
700
3,206
1,092
8,123
2,395
80
426
953
6,958
4,609
103
1,563
781
30,924
December 31
2019
Total
262,934 $
12,100
1,434
55,856
4,482
50,547
Total
240,856
11,794
3,530
74,673
4,099
44,385
379,337
Total contractual obligations
$
79,689 $
67,114 $
59,380 $ 181,170 $
387,353 $
(1) Represents forecasted net interest expense on long-term debt and time deposits based on interest rates at December 31, 2020 and 2019. Forecasts are based on the contractual maturity dates
of each liability, and are net of derivative hedges, where applicable.
Representations and Warranties Obligations
For information on representations and warranties obligations in connection with the sale of mortgage loans, see Note 12 –
Commitments and Contingencies to the Consolidated Financial Statements.
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Managing Risk
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 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 to current or projected financial
condition arising 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
is
otherwise negatively
composed of price risk and interest rate risk.
impact earnings. Market
risk
• 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.
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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
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 59.
financial objectives
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.
is
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
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.
tracking and
responsible
for
For a more detailed discussion of our risk management
activities, see the discussion below and pages 73 through 108.
For more information about the Corporation's risks related to
the pandemic, see Item 1A. Risk Factors of our 2020 Annual
Report on Form 10-K. These COVID-19 related risks are being
managed within our Risk Framework and supporting risk
management programs.
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.
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.
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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.
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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.
independence of the
Audit Committee
The Audit Committee oversees the qualifications, performance
Independent Registered Public
and
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
identification,
measurement, monitoring and control of key risks we face. The
responsibilities
the
for
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
operational
risk programs, balance sheet and capital
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 further described in this
section.
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delegate
responsibilities,
level committees, management
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
to
further
routines or
management
individuals. Executive officers
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.
review our activities
appropriate,
as
Front Line Units
FLUs, which include the lines of business as well as the Global
Technology and Operations Group, are
for
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.
implement a meaningful
The CRO has the stature, authority and independence to
develop and
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
teams work
collaboratively in executing their respective duties.
line unit or control
function. These
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
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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.
to changes
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
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.
training,
risk well
procedures
The formal processes used to manage risk represent a part of
our overall risk management process. We instill a strong and
through
comprehensive culture of managing
communications,
and
policies,
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.
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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.
risk,
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 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
is
regulatory capital
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.
requirements. Capital management
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 59.
CCAR and Capital Planning
The Federal Reserve requires BHCs to submit a capital plan and
planned capital actions on an annual basis, consistent with the
rules governing the CCAR capital plan.
Based on the results of our 2020 CCAR supervisory stress
test that was submitted to the Federal Reserve in the second
quarter of 2020, we are subject to a 2.5 percent stress capital
buffer (SCB) for the period beginning October 1, 2020 and
ending on September 30, 2021. Our Common equity tier 1
(CET1) capital ratio under the Standardized approach must
remain above 9.5 percent during this period (the sum of our
CET1 capital ratio minimum of 4.5 percent, global systemically
important bank (G-SIB) surcharge of 2.5 percent and our SCB of
2.5 percent) in order to avoid restrictions on capital distributions
and discretionary bonus payments.
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
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Due to economic uncertainty resulting from the pandemic,
the Federal Reserve required all large banks to update and
resubmit their capital plans in November 2020 based on the
Federal Reserve’s updated supervisory stress test scenarios.
The results of the additional supervisory stress tests were
published in December 2020.
The Federal Reserve also required large banks to suspend
share repurchase programs during the second half of 2020,
except for repurchases to offset shares awarded under equity-
based compensation plans, and to limit common stock
dividends to existing rates that did not exceed the average of
the last four quarters’ net income. The Federal Reserve’s
directives regarding share repurchases aligned with our decision
to voluntarily suspend our general common stock repurchase
program during the first half of 2020. The suspension of our
repurchases did not include repurchases to offset shares
awarded under our equity-based compensation plans. Pursuant
to the Board’s authorization, we repurchased $7.0 billion of
common stock during 2020.
In December 2020, the Federal Reserve announced that
beginning in the first quarter of 2021, large banks would be
permitted to pay common stock dividends at existing rates and
to repurchase shares in an amount that, when combined with
dividends paid, does not exceed the average of net income over
the last four quarters.
On January 19, 2021, we announced that the Board
declared a quarterly common stock dividend of $0.18 per share,
payable on March 26, 2021 to shareholders of record as of
March 5, 2021. We also announced that the Board authorized
the repurchase of $2.9 billion in common stock through March
31, 2021, plus repurchases to offset shares awarded under
equity-based compensation plans during the same period,
estimated to be approximately $300 million. This authorization
equals the maximum amount allowed by the Federal Reserve for
the period.
Our stock repurchase program is subject to various factors,
including the Corporation’s capital position, liquidity, financial
performance and alternative uses of capital, stock trading price
and general market conditions, and may be suspended at any
time. Such repurchases may be effected through open market
purchases or privately negotiated
including
repurchase plans that satisfy the conditions of Rule 10b5-1 of
the Securities Exchange Act of 1934, as amended (Exchange
Act).
transactions,
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
requirements and outlined two methods of
and buffer
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risk-weighted assets
the Standardized
calculating
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.
(RWA),
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 RWA
under both the Standardized and Advanced approaches. The
approach that yields the lower ratio is used to assess capital
adequacy
framework. As of
December 31, 2020, the CET1, Tier 1 capital and Total capital
ratios for the Corporation were lower under the Standardized
approach.
including under
the PCA
ratio
Minimum Capital Requirements
In order to avoid restrictions on capital distributions and
discretionary bonus payments, the Corporation must meet risk-
based capital
include a capital
than 2.5 percent, plus any
conservation buffer greater
applicable countercyclical capital buffer and a G-SIB surcharge.
On October 1, 2020, the capital conservation buffer was
replaced by the SCB for the Corporation’s Standardized
approach ratio requirements. The buffers and surcharge must
be comprised solely of CET1 capital.
requirements
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 deductions and applicable temporary exclusions, as
well as the simple average of certain off-balance sheet
exposures, as of the end of each month in a quarter. For more
information,
– Regulatory
Developments on page 78.
see Capital Management
related
Capital Composition and Ratios
Table 11 presents Bank of America Corporation’s capital ratios
and
in accordance with Basel 3
Standardized and Advanced approaches as measured at
December 31, 2020 and 2019. For the periods presented
herein, the Corporation met the definition of well capitalized
under current regulatory requirements.
information
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Table 11 Bank of America Corporation Regulatory Capital under Basel 3
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Risk-based capital metrics:
Common equity tier 1 capital
Tier 1 capital
Total capital (4)
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) (5)
Tier 1 leverage ratio
Supplementary leverage exposure (in billions) (6)
Supplementary leverage ratio
Risk-based capital metrics:
Common equity tier 1 capital
Tier 1 capital
Total capital (4)
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) (5)
Tier 1 leverage ratio
Supplementary leverage exposure (in billions)
Supplementary leverage ratio
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Standardized
Approach (1, 2)
Advanced
Approaches (1)
December 31, 2020
Regulatory
Minimum (3)
$
176,660
200,096
237,936
1,480
11.9 %
13.5
16.1
$
2,719
7.4 %
$
$
$
176,660
200,096
227,685
1,371
12.9 %
14.6
16.6
2,719
7.4 %
2,786
7.2 %
December 31, 2019
$
166,760
188,492
221,230
1,493
$
166,760
188,492
213,098
1,447
11.2 %
12.6
14.8
$
2,374
7.9 %
$
$
11.5 %
13.0
14.7
2,374
7.9 %
2,946
6.4 %
9.5 %
11.0
13.0
4.0
5.0
9.5 %
11.0
13.0
4.0
5.0
(1) As of December 31, 2020, capital ratios are calculated using the regulatory capital rule that allows a five-year transition period related to the adoption of CECL.
(2) Derivative exposure amounts are calculated using the standardized approach for measuring counterparty credit risk at December 31, 2020 and the current exposure method at December 31,
2019.
(3) The capital conservation buffer and G-SIB surcharge were 2.5 percent at both December 31, 2020 and 2019. At December 31, 2020, the Corporation's SCB of 2.5 percent was applied in place of
the capital conservation buffer under the Standardized approach. The countercyclical capital buffer for both periods was zero. The SLR minimum includes a leverage buffer of 2.0 percent.
(4) 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.
(5) Reflects total average assets adjusted for certain Tier 1 capital deductions.
(6) Supplementary leverage exposure at December 31, 2020 reflects the temporary exclusion of U.S. Treasury securities and deposits at Federal Reserve Banks.
At December 31, 2020, CET1 capital was $176.7 billion, an
increase of $9.9 billion from December 31, 2019, driven by
earnings and net unrealized gains on available-for-sale (AFS)
debt securities included in accumulated other comprehensive
income (OCI), partially offset by common stock repurchases and
dividends. Total capital under the Standardized approach
increased $16.7 billion primarily driven by the same factors as
CET1 capital, an increase in the adjusted allowance for credit
losses included in Tier 2 capital and the issuance of preferred
stock. RWA under the Standardized approach, which yielded the
lower CET1 capital ratio at December 31, 2020, decreased
$13.7 billion during 2020 to $1,480 billion primarily due to
lower commercial and consumer lending exposures, partially
offset by investments of excess deposits in securities. Table 12
shows the capital composition at December 31, 2020 and
2019.
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Table 12 Capital Composition under Basel 3
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Total common shareholders’ equity
CECL transitional amount (1)
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, net of related deferred tax liabilities
Defined benefit pension plan net assets
Cumulative unrealized net (gain) loss related to changes in fair value of financial liabilities attributable to own creditworthiness,
net-of-tax
Other
Common equity tier 1 capital
Qualifying preferred stock, net of issuance cost
Other
Tier 1 capital
Tier 2 capital instruments
Qualifying allowance for credit losses (2)
Other
Total capital under the Standardized approach
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December 31
2020
2019
$
248,414 $
4,213
(68,565)
(5,773)
(1,617)
(1,164)
1,753
(601)
176,660
23,437
(1)
200,096
22,213
15,649
(22)
237,936
241,409
—
(68,570)
(5,193)
(1,328)
(1,003)
1,278
167
166,760
22,329
(597)
188,492
22,538
10,229
(29)
221,230
(8,132)
213,098
Adjustment in qualifying allowance for credit losses under the Advanced approaches (2)
Total capital under the Advanced approaches
(10,251)
227,685 $
$
(1) The CECL transitional amount includes the impact of the Corporation's adoption of the new CECL accounting standard on January 1, 2020 plus 25 percent of the increase in the adjusted
allowance for credit losses from January 1, 2020 through December 31, 2020.
(2) The balance at December 31, 2020 includes the impact of transition provisions related to the new CECL accounting standard.
Table 13 shows the components of RWA as measured under Basel 3 at December 31, 2020 and 2019.
Table 13 Risk-weighted Assets under Basel 3
Standardized
Approach (1)
Advanced
Approaches
Standardized
Approach (1)
Advanced
Approaches
December 31
(Dollars in billions)
Credit risk
Market risk
Operational risk (2)
Risks related to credit valuation adjustments
858
55
500
34
1,447
(1) Derivative exposure amounts are calculated using the standardized approach for measuring counterparty credit risk at December 31, 2020 and the current exposure method at December 31,
2019
1,437 $
56
n/a
n/a
1,493 $
2020
1,420 $
60
n/a
n/a
1,480 $
60
372
43
1,371 $
Total risk-weighted assets
896 $
$
$
2019.
(2) December 31, 2020 includes the effects of an update made to our operational risk RWA model during the third quarter of 2020.
n/a = not applicable
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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, 2020 and 2019. BANA met the definition of well capitalized under the PCA framework for both periods.
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 (4)
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) (5)
Tier 1 leverage ratio
Supplementary leverage exposure (in billions)
Supplementary leverage ratio
Risk-based capital metrics:
Common equity tier 1 capital
Tier 1 capital
Total capital (4)
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) (5)
Tier 1 leverage ratio
Supplementary leverage exposure (in billions)
Supplementary leverage ratio
Standardized
Approach (1, 2)
Advanced
Approaches (1)
December 31, 2020
Regulatory
Minimum (3)
$
164,593
164,593
181,370
1,221
13.5 %
13.5
14.9
$
2,143
7.7 %
$
$
$
164,593
164,593
170,922
1,014
16.2 %
16.2
16.9
2,143
7.7 %
2,525
6.5 %
December 31, 2019
$
154,626
154,626
166,567
1,241
12.5 %
12.5
13.4
$
1,780
8.7 %
$
$
$
154,626
154,626
158,665
991
15.6 %
15.6
16.0
1,780
8.7 %
2,177
7.1 %
7.0 %
8.5
10.5
5.0
6.0
7.0 %
8.5
10.5
5.0
6.0
(1) As of December 31, 2020, capital ratios are calculated using the regulatory capital rule that allows a five-year transition period related to the adoption of CECL.
(2) Derivative exposure amounts are calculated using the standardized approach for measuring counterparty credit risk at December 31, 2020 and the current exposure method at December 31,
2019.
(3) Risk-based capital regulatory minimums at both December 31, 2020 and 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 are the percent required to be considered well capitalized under the PCA framework.
(4) 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.
(5) Reflects total average assets adjusted for certain Tier 1 capital deductions.
loss-absorbing capacity
Total Loss-Absorbing Capacity Requirements
Total
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
(TLAC) consists of
risk-based capital ratios and SLR, the Corporation is required
to maintain TLAC ratios in excess of minimum requirements
restrictions on capital
to avoid
plus applicable buffers
distributions and discretionary bonus payments. Table 15
presents the Corporation's TLAC and long-term debt ratios and
related information as of December 31, 2020 and 2019.
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Table 15 Bank of America Corporation Total Loss-Absorbing Capacity and Long-Term Debt
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Total eligible balance
Percentage of risk-weighted assets (4)
Percentage of supplementary leverage exposure (5, 6)
Total eligible balance
Percentage of risk-weighted assets (4)
Percentage of supplementary leverage exposure (6)
TLAC (1)
Regulatory
Minimum (2)
Long-term
Debt
Regulatory
Minimum (3)
$
405,153
$
196,997
December 31, 2020
27.4 %
14.5
22.0 %
9.5
13.3 %
7.1
8.5 %
4.5
$ 367,449
$ 171,349
December 31, 2019
24.6 %
12.5
22.0 %
9.5
11.5 %
5.8
8.5 %
4.5
(1) As of December 31, 2020, TLAC ratios are calculated using the regulatory capital rule that allows a five-year transition period related to the adoption of CECL.
(2) The TLAC RWA regulatory minimum consists of 18.0 percent plus a TLAC RWA buffer comprised of 2.5 percent plus the Method 1 G-SIB surcharge of 1.5 percent. The countercyclical buffer is zero
for both periods. The TLAC supplementary leverage exposure regulatory minimum consists of 7.5 percent plus a 2.0 percent TLAC leverage buffer. The TLAC RWA and leverage buffers must be
comprised solely of CET1 capital and Tier 1 capital, respectively.
(3) The long-term debt RWA 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.
(4) The approach that yields the higher RWA is used to calculate TLAC and long-term debt ratios, which was the Standardized approach as of both December 31, 2020 and 2019.
(5) Supplementary leverage exposure at December 31, 2020 reflects the temporary exclusion of U.S. Treasury Securities and deposits at Federal Reserve Banks.
(6) Derivative exposure amounts are calculated using the standardized approach for measuring counterparty credit risk at December 31, 2020 and the current exposure method at December 31,
2019.
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 ECL inherent in the Corporation's relevant
financial assets. For more information, see Note 1 – Summary of
Significant Accounting Principles to the Consolidated Financial
Statements. During the first quarter of 2020, in accordance with
an interim final rule issued by U.S. banking regulators that was
finalized on August 26, 2020, the Corporation delayed for two
years the initial adoption impact of CECL on regulatory capital,
followed by a three-year transition period to phase out the
aggregate amount of the capital benefit provided during 2020
and 2021 (i.e., a five-year transition period). During the two-year
delay, the Corporation will add back to CET1 capital 100 percent
of the initial adoption impact of CECL plus 25 percent of the
cumulative quarterly changes in the allowance for credit losses
(i.e., quarterly transitional amounts). After two years, starting on
January 1, 2022, the quarterly transitional amounts along with
the initial adoption impact of CECL will be phased out of CET1
capital over the three-year period.
Stress Capital Buffer
On March 4, 2020, the Federal Reserve issued a final rule that
integrates the annual quantitative assessment of the CCAR
program with the buffer requirements in the U.S. Basel 3 Final
Rule. The new approach replaced the static 2.5 percent capital
conservation buffer
for Basel 3 Standardized approach
requirements with a SCB, calculated as the decline in the CET1
capital ratio under the supervisory severely adverse scenario
plus four quarters of planned common stock dividends, floored
at 2.5 percent. Based on the CCAR 2020 supervisory stress
test results, the Corporation is subject to a 2.5 percent SCB for
the period beginning October 1, 2020 and ending on September
30, 2021.
In conjunction with this new requirement, the Federal
Reserve has removed the annual CCAR quantitative objection
process beginning with CCAR 2020. While the final rule
continues to require that the Corporation describe its planned
capital distributions in its CCAR capital plan, the Corporation is
no longer required to seek prior approval if it makes capital
distributions in excess of those included in its CCAR capital
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plan. The Corporation
to automatic
distribution limitations if its capital ratios fall below its buffer
requirements, which include the SCB.
instead subject
is
Eligible Retained Income
On March 17, 2020, in response to the economic impact of the
pandemic, the U.S. banking regulators issued an interim final
rule that revises the definition of eligible retained income to be
based on average net income over the prior four quarters. This
change, which was finalized on August 26, 2020, more
gradually phases in automatic distribution restrictions to the
extent capital buffers are breached.
Supplementary Leverage Ratio
On April 1, 2020, in response to the economic impact of the
pandemic, the Federal Reserve issued an interim final rule to
temporarily exclude the on-balance sheet amounts of U.S.
Treasury securities and deposits at Federal Reserve Banks from
the calculation of supplementary leverage exposure for bank
holding companies. The rule is effective for June 30, 2020
through March 31, 2021 reports. As of December 31, 2020,
temporary exclusions improved the SLR by 1.0 percent to 7.2
percent.
On May 15, 2020, the U.S. banking regulators issued an
interim final rule that provides a similar temporary exclusion to
depository institutions, effective from the beginning of the
second quarter of 2020 through March 31, 2021; however,
institutions must elect the relief. Beginning in the third quarter
of 2020, a depository institution electing to apply the exclusion
must receive approval from its primary regulator prior to making
any capital distributions as long as the exclusion is in effect. As
of December 31, 2020, the Corporation’s insured depository
institution subsidiaries have not elected the exclusion.
Paycheck Protection Program Loans
On April 9, 2020, in response to the economic impact of the
pandemic, the U.S. banking regulators issued an interim final
rule that, among other things, stipulates PPP loans, which are
guaranteed by the SBA, will receive a zero percent risk weight
under the Basel 3 Advanced and Standardized approaches. The
rule was later finalized by the U.S. banking regulators on
October 28, 2020. For more information on the PPP, see
Executive Summary – Recent Developments – COVID-19
Pandemic on page 48 and Note 1 – Summary of Significant
Accounting Principles to the Consolidated Financial Statements.
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the Corporation adopted
Standardized Approach for Measuring Counterparty Credit
Risk
On June 30, 2020
the new
standardized approach for measuring counterparty credit risk
(SA-CCR), which replaces the current exposure method for
calculating the exposure amount of derivative contracts for risk-
weighted assets and supplementary
leverage exposure.
Adoption of SA-CCR resulted in a decrease of approximately $15
billion in the Corporation’s Standardized RWA, and a $66 billion
decrease in supplementary leverage exposure.
Swap Dealer Capital Requirements
On July 22, 2020, the U.S. Commodity Futures Trading
Commission (CFTC) issued a final rule to establish capital
requirements for swap dealers and major swap participants that
are not subject to existing U.S. prudential regulation. Under the
rule, 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 6.5 percent of the entity’s RWA as
calculated under Basel 3, Total capital greater than or equal to
8.0 percent of the entity’s RWA as calculated under Basel 3 and
Total capital greater than or equal to 8.0 percent of the entity’s
uncleared swap margin. The second approach is based on net
liquid assets and requires that a firm maintain net capital
greater than or equal to 2.0 percent of its uncleared swap
margin. The final rule also includes reporting requirements. The
impact on the Corporation is not expected to be significant.
Deduction of Unsecured Debt of G-SIBs
On October 20, 2020, the Federal Reserve, Federal Deposit
Insurance Corporation (FDIC) and the Office of the Comptroller
of the Currency (U.S. Agencies) finalized a rule requiring
Advanced approaches institutions to deduct from regulatory
capital certain investments in TLAC-eligible long-term debt and
other pari passu or subordinated debt instruments issued by G-
SIBs above a specified threshold. The final rule is intended to
limit
is
complementary to existing regulatory capital requirements that
generally require banks to deduct investments in the regulatory
capital of financial institutions. The final rule is effective April 1,
2021. The impact to the Corporation is not expected to be
significant.
interconnectedness between G-SIBs and
the
Volcker Rule
Effective January 1, 2020, we became subject to certain
changes to the Volcker Rule, including removing the requirement
for banking organizations to deduct from Tier 1 capital
ownership interests of covered funds acquired or retained under
the underwriting or market-making exemptions of the Volcker
Rule, which the banking entity did not organize or offer.
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
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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 entities
and qualifying central counterparties, are exempt from the credit
limits.
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). 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 15c3-1e, 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 CFTC Regulation
1.17. The U.S. broker-dealer subsidiaries are also registered
with the Financial Industry Regulatory Authority, Inc. (FINRA).
Pursuant to FINRA Rule 4110, FINRA may impose higher net
capital requirements than Rule 15c3-1 under the Exchange Act
with respect to each of the broker-dealers.
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 customers' and affiliates' risk-based
margin in order to meet its CFTC minimum net capital
requirement. At December 31, 2020, BofAS had tentative net
capital of $16.8 billion. BofAS also had regulatory net capital of
$14.1 billion, which exceeded the minimum requirement of $2.9
billion.
MLPCC is a fully-guaranteed subsidiary of BofAS and
provides clearing and settlement services as well as prime
brokerage and arranged financing services for institutional
clients. At December 31, 2020, MLPCC’s regulatory net capital
of $8.6 billion exceeded the minimum requirement of $1.4
billion.
MLPF&S provides retail services. At December 31, 2020,
MLPF&S' regulatory net capital was $3.6 billion, which exceeded
the minimum requirement of $180 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, 2020,
MLI’s capital resources were $34.1 billion, which exceeded the
minimum Pillar 1 requirement of $14.7 billion. BofASE, a French
investment firm, is regulated by the Autorité de Contrôle
Prudentiel et de Résolution and the Autorité des Marchés
Financiers, and
regulatory capital
requirements. At December 31, 2020, BofASE's capital
resources were $6.2 billion, which exceeded the minimum Pillar
1 requirement of $1.9 billion.
is subject
to certain
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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. These liquidity risk
management practices have allowed us to effectively manage
the market stress from the pandemic that began in the first
quarter of 2020. For more information on the effects of the
pandemic, see Item 1A. Risk Factors of our 2020 Annual Report
on Form 10-K and Executive Summary – Recent Developments –
COVID-19 Pandemic on page 48.
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 to
monitor liquidity requirements, maximizes access to funding
sources, minimizes borrowing costs and facilitates timely
responses to liquidity events.
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 70. 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
funding sources,
stressed market conditions; diversifying
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 bank 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
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.
in stressed conditions,
Table 16 presents average GLS for the three months ended
December 31, 2020 and 2019.
Table 16 Average Global Liquidity Sources
(Dollars in billions)
Bank entities
Nonbank and other entities (1 )
Total Average Global Liquidity Sources
Three Months Ended
December 31
2020
2019
$
$
773
170
943
$
$
454
122
576
(1 ) Nonbank includes Parent, NB Holdings and other regulated entities.
Our bank subsidiaries’ liquidity is primarily driven by deposit
and lending activity, as well as securities valuation and net debt
activity. 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 obtained by borrowing against
this pool of specifically-identified eligible assets was $306
billion and $372 billion at December 31, 2020 and 2019. 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.
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Liquidity is also held in nonbank entities, including the
Parent, NB Holdings and other regulated entities. Parent
company and NB Holdings liquidity is typically in the form of
cash deposited at BANA and is excluded from the liquidity at
bank subsidiaries. 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, 2020 and 2019.
Table 17 Average Global Liquidity Sources Composition
(Dollars in billions)
Cash on deposit
U.S. Treasury securities
U.S. agency securities, mortgage-backed
securities, and other investment-grade
securities
Non-U.S. government securities
$
Total Average Global Liquidity Sources
$
Three Months Ended
December 31
2020
2019
322 $
141
462
18
943 $
103
98
358
17
576
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 $584 billion
and $464 billion for the three months ended December 31,
2020 and 2019. For
the average
consolidated LCR was 122 percent and 116 percent. Our LCR
fluctuates due to normal business flows from customer activity.
the same periods,
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 issuances; diminished access to
secured financing 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 Final Rule
On October 20, 2020, the U.S. Agencies finalized the Net
Stable Funding Ratio (NSFR), a rule requiring large banks to
maintain a minimum level of stable funding over a one-year
period. The final rule is intended to support the ability of banks
to lend to households and businesses in both normal and
adverse economic conditions and is complementary to the LCR
rule, which focuses on short-term liquidity risks. The final rule is
effective July 1, 2021. The U.S. NSFR would apply to the
Corporation on a consolidated basis and to our insured
depository institutions. The Corporation expects to be in
compliance within the final NSFR rule in the regulatory timeline
provided and does not expect any significant impacts to the
Corporation.
Diversified Funding Sources
We fund our assets primarily with a mix of deposits, and
secured and unsecured liabilities through a centralized, globally
coordinated funding approach diversified across products,
programs, markets, currencies and investor groups.
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
requirements of subsidiaries. Where
variable
regulations,
zone differences or other business
considerations make parent company funding impractical,
certain other subsidiaries may issue their own debt.
funding
time
We fund a substantial portion of our lending activities
through our deposits, which were $1.80 trillion and $1.43
trillion at December 31, 2020 and 2019. 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
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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 10 – Federal Funds Sold or Purchased,
Securities Financing Agreements, Short-term Borrowings and
Restricted Cash to the Consolidated Financial Statements.
Total long-term debt increased $22.1 billion to $262.9
billion during 2020, 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 2020, we issued $56.9 billion of long-term debt
consisting of $43.8 billion of notes issued by Bank of America
Corporation, substantially all of which was TLAC compliant, $4.8
billion of notes issued by Bank of America, N.A. and $8.3 billion
of other debt. During 2019, we 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.
During 2020, we had total long-term debt maturities and
redemptions in the aggregate of $47.1 billion consisting of
$22.6 billion for Bank of America Corporation, $11.5 billion for
Bank of America, N.A. and $13.0 billion of other debt. During
2019, we 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.
At December 31, 2020, Bank of America Corporation's
senior notes of $191.2 billion included $146.6 billion of
outstanding notes that are both TLAC eligible and callable at
least one year before their stated maturities. Of these senior
notes, $12.0 billion will be callable and become TLAC ineligible
during 2021, and $15.3 billion, $14.6 billion, $11.7 billion and
$13.2 billion will do so during each of 2022 through 2025,
respectively, and $79.8 billion thereafter.
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. We may issue unsecured debt in the form of structured
notes for client purposes, certain of which qualify as TLAC-
eligible debt. During 2020, we issued $7.3 billion of structured
notes, which are unsecured 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.
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that could
Substantially all of our senior and subordinated debt
obligations contain no provisions
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
11 – Long-term Debt to the Consolidated Financial Statements.
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 105.
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
ratings, and
management maintains an active dialogue with the major rating
agencies.
to maintain high-quality credit
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 agencies could make adjustments to our ratings at any
time, and they provide no assurances that they will maintain our
ratings at current levels.
for
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
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.
legislative
future
government; current or
regulatory and
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initiatives; and the agencies’ views on whether the U.S.
government would provide meaningful support
the
Corporation or its subsidiaries in a crisis.
to
On April 22, 2020, Fitch Ratings (Fitch) completed its review
of large, complex securities trading and universal banks in the
U.S., including Bank of America, in response to declining
economic activity from the pandemic. The agency affirmed its
long-term and short-term senior debt ratings for the Corporation
and all of its rated subsidiaries, except for select issuer and
instrument-level ratings that had previously been placed under
criteria observation on March 4, 2020, following changes in the
agency’s bank rating criteria on February 28, 2020.
Concurrently, Fitch reached a conclusion on select under-
criteria-observation designations
the Corporation and
upgraded its long-term and short-term senior debt ratings of MLI
and BofASE by one notch to AA-/F1+. The agency also upgraded
its preferred stock rating for the Corporation by one notch to
BBB and downgraded its subordinated debt rating for the
Corporation by one notch to A-. According to Fitch, rating
for
Table 18 Senior Debt Ratings
changes under criteria observation are the sole result of bank
rating criteria changes and do not reflect a change in the
underlying fundamentals of the institution. Fitch’s outlook for all
of our long-term ratings is currently Stable.
On June 9, 2020, Fitch affirmed
for the
subordinated debt of BANA at A. This rating had remained under
criteria observation following Fitch’s broader rating actions.
its rating
On November 18, 2020, Moody’s
Investors Service
(Moody's) affirmed its long-term and short-term debt ratings for
the Corporation and all of its rated subsidiaries, which did not
change during 2020. Moody’s outlook for all of our long-term
ratings is currently Stable.
The current ratings and Stable outlooks for the Corporation
and its subsidiaries from Standard & Poor’s Global Ratings also
did not change during 2020.
Table 18 presents the Corporation’s current long-term/short-
term senior debt ratings and outlooks expressed by the rating
agencies.
Bank of America Corporation
Bank of America, N.A.
Bank of America Europe 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
Outlook
Stable
Stable
Long-term
A-
A+
NR
NR
NR
NR
NR
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
A+
AA-
AA-
AA-
AA-
AA-
AA-
Fitch Ratings
Short-term
F1
F1+
Outlook
Stable
Stable
F1+
F1+
F1+
F1+
F1+
Stable
Stable
Stable
Stable
Stable
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 in those businesses where
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
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.
the counterparties
ratings,
to
to a
institution
While certain potential
impacts are contractual and
quantifiable, the full scope of the consequences of a credit
inherently
financial
rating downgrade
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 81.
is
For more information on additional collateral and termination
payments that could be required in connection with certain over-
the-counter derivative contracts and other trading agreements in
the event of a credit rating downgrade, see Note 3 – Derivatives
to the Consolidated Financial Statements and Item 1A. Risk
Factors of our 2020 Annual Report on Form 10-K.
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Common Stock Dividends
For a summary of our declared quarterly cash dividends on
common stock during 2020 and through February 24, 2021,
see Note 13 – Shareholders’ Equity to the Consolidated
Financial Statements.
Finance Subsidiary Issuers and Parent Guarantor
BofA Finance LLC, a Delaware limited liability company (BofA
Finance), is a consolidated finance subsidiary of the Corporation
that has issued and sold, and is expected to continue to issue
and sell, its senior unsecured debt securities (Guaranteed
Notes), that are fully and unconditionally guaranteed by the
Corporation. The Corporation guarantees the due and punctual
payment, on demand, of amounts payable on the Guaranteed
Notes if not paid by BofA Finance. In addition, each of BAC
Capital Trust XIII and BAC Capital Trust XIV, Delaware statutory
trusts (collectively, the Trusts), is a 100 percent owned finance
subsidiary of the Corporation that has issued and sold trust
preferred securities (the Trust Preferred Securities and, together
with the Guaranteed Notes, the Guaranteed Securities) that
remained outstanding at December 31, 2020. The Corporation
guarantees the payment of amounts and distributions with
respect to the Trust Preferred Securities if not paid by the
Trusts, to the extent of funds held by the Trusts, and this
guarantee, together with the Corporation’s other obligations with
respect to the Trust Preferred Securities, effectively constitutes
a full and unconditional guarantee of the Trusts’ payment
obligations on
the Trust Preferred Securities. No other
subsidiary of the Corporation guarantees the Guaranteed
Securities.
the Trusts are
independent assets,
BofA Finance and each of
finance
revenues or
subsidiaries, have no
operations and are dependent upon the Corporation and/or the
Corporation’s other subsidiaries to meet their respective
obligations under the Guaranteed Securities in the ordinary
course. If holders of the Guaranteed Securities make claims on
their Guaranteed Securities in a bankruptcy, resolution or
similar proceeding, any recoveries on those claims will be
limited to those available under the applicable guarantee by the
Corporation, as described above.
The Corporation is a holding company and depends upon its
subsidiaries for liquidity. Applicable laws and regulations and
intercompany arrangements entered into in connection with the
Corporation’s resolution plan could restrict the availability of
funds from subsidiaries to the Corporation, which could
adversely affect the Corporation’s ability to make payments
under its guarantees. In addition, the obligations of the
Corporation under the guarantees of the Guaranteed Securities
will be structurally subordinated to all existing and future
liabilities of its subsidiaries, and claimants should look only to
assets of the Corporation for payments. If the Corporation, as
guarantor of the Guaranteed Notes, transfers all or substantially
all of its assets to one or more direct or indirect majority-owned
subsidiaries, under the indenture governing the Guaranteed
Notes, the subsidiary or subsidiaries will not be required to
assume the Corporation’s obligations under its guarantee of the
Guaranteed Notes.
For more information on factors that may affect payments to
holders of the Guaranteed Securities, see Liquidity Risk – NB
Holdings Corporation in this section, see Item 1. Business of
our 2020 Annual Report on Form 10-K and Item 1A. Risk
Factors of our 2020 Annual Report on Form 10-K.
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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
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 12 –
Commitments and Contingencies to the Consolidated Financial
Statements.
recorded
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
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.
the commercial businesses
losses
in
For information on our credit risk management activities, see
Consumer Portfolio Credit Risk Management below, Commercial
Portfolio Credit Risk Management on page 91, Non-U.S.
Portfolio on page 97, Allowance for Credit Losses on page 99,
and Note 5 – Outstanding Loans and Leases and Allowance for
Credit Losses to the Consolidated Financial Statements.
During 2020, the pandemic negatively impacted economic
activity in the U.S. and around the world. In particular, beginning
in the latter portion of the first quarter of 2020, the pandemic
resulted in changes to consumer and business behaviors and
restrictions on economic activity. These restrictions gave rise to
increased unemployment and underemployment, lower business
profits,
increased business closures and bankruptcies,
fluctuations and disruptions to commercial and consumer
spending and markets, and lower global GDP, all of which
negatively impacted our consumer and commercial credit
portfolio.
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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,
line
management, collection practices and strategies, and
determination of the allowance for loan and lease losses and
allocated capital for credit risk.
including authorizations and
Consumer Credit Portfolio
While COVID-19 is severely impacting economic activity, and is
contributing to increasing nonperforming loans within certain
consumer portfolios, it did not have a significant impact on
consumer portfolio charge-offs during 2020 due to payment
deferrals and government stimulus benefits. However, COVID-19
could lead to adverse impacts to credit quality metrics in future
periods if negative economic conditions continue or worsen.
During 2020, net charge-offs decreased $334 million to $2.7
billion primarily due to lower credit card losses.
loan and
losses
increased $5.5 billion in 2020 to $10.1 billion due to the
adoption of the new CECL accounting standard and deterioration
in the economic outlook resulting from the impact of COVID-19.
For more information, see Allowance for Credit Losses on page
99.
The consumer allowance
lease
for
For more information on our accounting policies regarding
delinquencies, nonperforming status, charge-offs, TDRs for the
consumer portfolio, as well as interest accrual policies and
delinquency status for loan modifications related to the
pandemic, see Note 1 – Summary of Significant Accounting
Principles and Note 5 – Outstanding Loans and Leases and
Allowance for Credit Losses to the Consolidated Financial
Statements.
Table 19 presents our outstanding consumer loans and
leases, consumer nonperforming loans and accruing consumer
loans past due 90 days or more.
To provide relief to individuals and businesses in the U.S.,
economic stimulus packages were enacted throughout 2020,
including the CARES Act, an executive order signed in August
2020 to establish the Lost Wage Assistance Program, and most
recently, the Consolidated Appropriations Act enacted
in
December 2020. In addition, U.S. bank regulatory agencies
issued interagency guidance to financial institutions that have
worked with and continue to work with borrowers affected by
COVID-19.
including offering
To support our customers, we implemented various loan
modification programs and other forms of support beginning in
March 2020,
loan payment deferrals,
refunding certain fees, and pausing foreclosure sales, evictions
and repossessions. Since June 2020, we have experienced a
decline in the need for customer assistance as the number of
customer accounts and balances on deferral decreased
significantly. For information on the accounting for loan
modifications related to the pandemic, see Note 1 – Summary of
Significant Accounting Principles to the Consolidated Financial
Statements.
Furthermore, as COVID-19 cases eased and
initial
restrictions lifted, the global economy began to improve. This
improvement, coupled with the aforementioned relief, facilitated
economic recovery, with unemployment dropping from double-
digit highs in the second quarter of 2020 and GDP significantly
rebounding in the third quarter of 2020.
increases
However, economic recovery remains uneven, with certain
sectors of the economy more significantly impacted from the
pandemic (e.g., travel and entertainment). As a result, we have
experienced
in commercial reservable criticized
utilized exposures driven by industries most heavily impacted by
COVID-19. Also, we have seen modest
in
nonperforming loans driven by commercial loans and consumer
real estate customer deferral activities, though consumer
charge-offs remained low during 2020 due to payment deferrals
and government stimulus benefits.
increases
The pandemic and its full impact on the global economy
continue to be highly uncertain. While COVID-19 cases have
begun to ease from their January 2021 peak, the spread of
new, more contagious variants could impact the magnitude and
duration of
this health crisis. However, ongoing virus
containment efforts and vaccination progress, as well as the
possibility of further government stimulus, could accelerate the
macroeconomic recovery. For more information on how the
pandemic may affect our operations, see Executive Summary –
Recent Developments – COVID-19 Pandemic on page 48 and
Item 1A. Risk Factors of our 2020 Annual Report on Form 10-K.
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Table 19 Consumer Credit Quality
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Residential mortgage (1 )
Home equity
Credit card
Direct/Indirect consumer (2 )
Other consumer
Outstandings
Nonperforming
December 31
Accruing Past Due
90 Days or More
2020
$
223,555 $
2019
236,169 $
34,311
78,708
91,363
124
40,208
97,608
90,998
192
2020
2,005
649
$
n/a
71
—
2019
2020
2019
$
1,470
536
n/a
47
—
762
—
903
33
—
$
1,088
—
1,042
33
—
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 )
$
$
428,061 $
735
428,796 $
n/a
465,175 $
594
465,769
n/a
2,725
$
2,053
$
1,698
$
2,163
0.64 %
0.44 %
0.40 %
0.47 %
n/a
n/a
0.65
0.46
0.22
0.24
(1 ) Residential mortgage loans accruing past due 90 days or more are fully-insured loans. At December 31, 2020 and 2019, residential mortgage includes $537 million and $740 million of loans on
which interest had been curtailed by the FHA, and therefore were no longer accruing interest, although principal was still insured, and $225 million and $348 million of loans on which interest was
still accruing.
(2 ) Outstandings primarily include auto and specialty lending loans and leases of $46.4 billion and $50.4 billion, U.S. securities-based lending loans of $41.1 billion and $36.7 billion and non-U.S.
consumer loans of $3.0 billion and $2.8 billion at December 31, 2020 and 2019.
(3 ) Consumer loans accounted for under the fair value option include residential mortgage loans of $298 million and $257 million and home equity loans of $437 million and $337 million at
December 31, 2020 and 2019. For more information on the fair value option, see Note 21 – Fair Value Option to the Consolidated Financial Statements.
(4 ) Excludes consumer loans accounted for under the fair value option. At December 31, 2020 and 2019, $11 million and $6 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
Table 20 presents net charge-offs and related ratios for consumer loans and leases.
Table 20 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
2020
2019
Net Charge-off Ratios (1 )
2019
2020
$
$
(30)
(73)
2,349
122
284
$
2,652 $
(47)
(358)
2,948
209
234
2,986
(0.01)%
(0.19)
2.76
0.14
n/m
0.59
(0.02)%
(0.81)
3.12
0.23
n/m
0.66
(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 21 presents outstandings, nonperforming balances,
net charge-offs, allowance for credit losses and provision for
credit 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 21 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 21, outstanding core consumer real
estate loans decreased $15.4 billion during 2020 driven by a
decrease of $10.5 billion in residential mortgage and a $4.9
billion decrease in home equity.
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Table 21 Consumer Real Estate Portfolio (1 )
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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
Total consumer real estate portfolio
Core portfolio
Residential mortgage
Home equity
Total core portfolio
Non-core portfolio
Residential mortgage
Home equity (2 )
Total non-core portfolio
Consumer real estate portfolio
Residential mortgage
Home equity (3 )
Total consumer real estate portfolio
Outstandings
Nonperforming
2020
2019
2020
2019
2020
2019
December 31
Net Charge-offs
$
215,273 $
225,770 $
1,390 $
30,328
245,601
8,282
3,983
12,265
223,555
34,311
35,226
260,996
10,399
4,982
15,381
236,169
40,208
462
1,852
615
187
802
2,005
649
$
257,866 $
276,377 $
2,654 $
883 $
363
1,246
587
173
760
1,470
536
2,006 $
(25) $
(6)
(31)
(5)
(67)
(72)
(30)
(73)
(103) $
7
51
58
(54)
(409)
(463)
(47)
(358)
(405)
Allowance for Loan
and Lease Losses
December 31
Provision for Loan
and Lease Losses
2020
2019
2020
2019
$
$
$
374
599
973
85
(63)
22
459
536
995 $
229 $
120
349
96
101
197
325
221
546 $
136
135
271
75
(21)
54
211
114
325
$
$
22
(58)
(36)
(134)
(510)
(644)
(112)
(568)
(680)
(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
$298 million and $257 million and home equity loans of $437 million and $337 million at December 31, 2020 and 2019. For more information, see Note 21 – Fair Value Option to the
Consolidated Financial Statements.
(2 ) The home equity non-core allowance is in a negative position at December 31, 2020 as it includes expected recoveries of amounts previously charged off.
(3 ) Home equity allowance includes a reserve for unfunded lending commitments of $137 million at December 31, 2020.
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 52 percent of
consumer
leases at December 31, 2020.
Approximately 52 percent of the residential mortgage portfolio
was in Consumer Banking and 40 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
loans and
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
decreased $12.6 billion in 2020 as both loan sales and
paydowns were partially offset by originations.
At December 31, 2020 and 2019, the residential mortgage
portfolio included $11.8 billion and $18.7 billion of outstanding
fully-insured loans, of which $2.8 billion and $11.2 billion had
FHA insurance, with the remainder protected by Fannie Mae
long-term standby agreements. The decline was primarily driven
by sales of loans with FHA insurance during 2020.
Table 22 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.
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Table 22 Residential Mortgage – Key Credit Statistics
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Outstandings
Accruing past due 30 days or more
Accruing past due 90 days or more
Nonperforming loans (2 )
Percent of portfolio
Reported Basis (1 )
Excluding Fully-insured Loans (1 )
December 31
2020
2019
2020
2019
$
$
223,555
2,314
762
2,005
$
236,169
3,108
1,088
1,470
$
211,737
1,224
—
2,005
217,479
1,296
—
1,470
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 (3 )
2%
1
2
3
2 %
1
3
4
1%
1
1
3
2 %
1
2
4
(1 ) Outstandings, accruing past due, nonperforming loans and percentages of portfolio exclude loans accounted for under the fair value option. For information on our interest accrual policies and
(2 )
delinquency status for loan modifications related to the pandemic, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements.
Includes loans that are contractually current which primarily consist of collateral-dependent TDRs, including those that have been discharged in Chapter 7 bankruptcy and loans that have not yet
demonstrated a sustained period of payment performance following a TDR.
(3 ) These vintages of loans accounted for $503 million and $365 million, or 25 percent, of nonperforming residential mortgage loans at both December 31, 2020 and 2019.
Nonperforming outstanding balances in the residential
mortgage portfolio increased $535 million in 2020 primarily
driven by COVID-19 deferral activity, as well as the inclusion of
certain loans that, upon adoption of the new credit loss
standard, became accounted for on an individual basis, which
previously had been accounted for under a pool basis. Of the
nonperforming residential mortgage loans at December 31,
2020, $892 million, or 45 percent, were current on contractual
payments. Loans accruing past due 30 days or more decreased
$72 million.
Net charge-offs increased $17 million to a net recovery of
$30 million in 2020 compared to a net recovery of $47 million
in 2019. This increase is due largely to lower recoveries from
the sales of previously charged-off loans.
Of the $211.7 billion in total residential mortgage loans
outstanding at December 31, 2020, as shown in Table 22, 27
percent were originated as interest-only loans. The outstanding
balance of interest-only residential mortgage loans that have
entered the amortization period was $5.9 billion, or 10 percent,
at December 31, 2020. 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, 2020, $113 million, or two percent of
outstanding interest-only residential mortgages that had entered
Table 23 Residential Mortgage State Concentrations
residential mortgage portfolio.
the amortization period were accruing past due 30 days or more
compared to $1.2 billion, or less than one percent, for the
In addition, at
entire
December 31, 2020, $356 million, or six percent, of
outstanding interest-only residential mortgage loans that had
entered the amortization period were nonperforming, of which
$96 million were contractually current, compared to $2.0 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 98
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 23 presents outstandings, nonperforming loans and
net charge-offs by certain state concentrations
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,
2020 and 2019. In the New York area, the New York-Northern
New Jersey-Long Island MSA made up 14 percent and 13
percent of outstandings at December 31, 2020 and 2019.
for
(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 )
2020
2019
2020
2019
2020
2019
December 31
Net Charge-offs
$
$
$
83,185 $
23,832
13,017
8,868
8,806
74,029
88,998 $
22,385
12,833
8,943
8,734
75,586
211,737 $
11,818
223,555 $
217,479 $
18,690
236,169
$
570
272
175
78
98
812
2,005 $
274 $
196
143
65
77
715
1,470 $
(18)
3
(5)
—
(1)
(9)
(30)
$
$
(22)
5
(12)
1
(4)
(15)
(47)
(1 ) Outstandings and nonperforming loans exclude loans accounted for under the fair value option.
Home Equity
At December 31, 2020, the home equity portfolio made up eight
percent of the consumer portfolio and was comprised of home
equity lines of credit (HELOCs), home equity loans and reverse
mortgages. 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. We no longer
originate home equity loans or reverse mortgages.
At December 31, 2020, 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
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$5.9 billion in 2020 primarily due to paydowns outpacing new
originations and draws on existing lines. Of the total home
equity portfolio at December 31, 2020 and 2019, $13.8 billion,
or 40 percent, and $15.0 billion, or 37 percent, were in first-lien
positions. At December 31, 2020, 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
$5.9 billion, or 17 percent, of our total home equity portfolio.
Unused HELOCs totaled $42.3 billion and $43.6 billion at
December 31, 2020 and 2019. The HELOC utilization rate was
43 percent and 46 percent at December 31, 2020 and 2019.
Table 24 presents certain home equity portfolio key credit
statistics.
Table 24 Home Equity – Key Credit Statistics (1 )
(Dollars in millions)
Outstandings
Accruing past due 30 days or more (2 )
Nonperforming loans (2 , 3 )
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 (4 )
December 31
$
2020
34,311
186
649
$
2019
40,208
218
536
1%
1
3
16
1 %
2
3
18
(1 ) Outstandings, accruing past due, nonperforming loans and percentages of the portfolio exclude loans accounted for under the fair value option. For information on our interest accrual policies and
delinquency status for loan modifications related to the pandemic, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements.
(2 ) Accruing past due 30 days or more include $25 million and $30 million and nonperforming loans include $88 million and $57 million of loans where we serviced the underlying first lien at
(3 )
December 31, 2020 and 2019.
Includes loans that are contractually current which 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.
(4 ) These vintages of loans accounted for 36 percent and 34 percent of nonperforming home equity loans at December 31, 2020 and 2019.
Nonperforming outstanding balances in the home equity
portfolio increased $113 million during 2020 primarily driven by
COVID-19 deferral activity. Of the nonperforming home equity
loans at December 31, 2020, $259 million, or 40 percent, were
current on contractual payments. In addition, $237 million, or
36 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 $32 million in 2020.
Net charge-offs increased $285 million to a net recovery of
$73 million in 2020 compared to a net recovery of $358 million
in 2019 as the prior-year period included recoveries from non-
core home equity loan sales.
in
Of
the $34.3 billion
total home equity portfolio
outstandings at December 31, 2020, as shown in Table 24, 15
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 $9.2 billion at
December 31, 2020. The HELOCs that have entered the
amortization period have experienced a higher percentage of
early stage delinquencies and nonperforming status when
compared to the HELOC portfolio as a whole. At December 31,
2020, $121 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, 2020, $477 million,
or five 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 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 2020, nine
percent of these customers with an outstanding balance did not
pay any principal on their HELOCs.
Table 25 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, 2020
and 2019. The Los Angeles-Long Beach-Santa Ana MSA within
California made up 11 percent of the outstanding home equity
portfolio at both December 31, 2020 and 2019.
Table 25 Home Equity State Concentrations
(Dollars in millions)
California
Florida
New Jersey
New York
Massachusetts
Other
Total home equity loan portfolio
Outstandings (1 )
Nonperforming (1 )
2020
2019
2020
2019
2020
2019
December 31
Net Charge-offs
$
$
9,488 $
3,715
2,749
2,495
1,719
14,145
34,311 $
11,232 $
4,327
3,216
2,899
2,023
16,511
40,208 $
143
80
67
103
32
224
649
$
$
101 $
71
56
85
29
194
536 $
(26)
(11)
(3)
(1)
(1)
(31)
(73)
$
$
(117)
(74)
(8)
(1)
(5)
(153)
(358)
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Credit Card
At December 31, 2020, 97 percent of the credit card portfolio
was managed in Consumer Banking with the remainder in GWIM.
Outstandings in the credit card portfolio decreased $18.9 billion
in 2020 to $78.7 billion due to lower retail spending and higher
payments. Net charge-offs decreased $599 million to $2.3
billion during 2020 compared to net charge-offs of $2.9 billion
in 2019 due to government stimulus benefits and payment
deferrals associated with COVID-19. Credit card loans 30 days
or more past due and still accruing interest decreased $346
million, and loans 90 days or more past due and still accruing
interest decreased $139 million primarily due to government
stimulus benefits and declines in loan balances.
Unused lines of credit for credit card increased to $342.4
billion at December 31, 2020 from $336.9 billion in 2019.
Table 26 presents certain state concentrations for the credit
card portfolio.
Table 26 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 (1 )
2020
2019
2020
2019
2020
December 31
Net Charge-offs
$
$
12,543 $
7,666
6,499
4,654
3,685
43,661
78,708 $
16,135 $
9,075
7,815
5,975
4,639
53,969
97,608 $
166
135
87
76
21
418
903
$
$
178 $
135
93
80
26
530
1,042 $
$
419
306
202
188
56
1,178
2,349 $
2019
526
363
241
243
71
1,504
2,948
(1 ) For information on our interest accrual policies and delinquency status for loan modifications related to the pandemic, see Note 1 – Summary of Significant Accounting Principles to the
Consolidated Financial Statements.
Direct/Indirect Consumer
At December 31, 2020, 51 percent of the direct/indirect
portfolio was included in Consumer Banking (consumer auto and
recreational vehicle lending) and 49 percent was included in
GWIM (principally securities-based lending loans). Outstandings
in the direct/indirect portfolio increased $365 million in 2020 to
$91.4 billion primarily due to increases in securities-based
lending offset by lower originations in Auto.
Table 27 presents certain state concentrations for the
direct/indirect consumer loan portfolio.
Table 27 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 (1 )
2020
2019
2020
2019
2020
2019
December 31
Net Charge-offs
$
$
12,248
10,891
8,981
6,609
3,572
49,062
91,363
$
$
11,912 $
10,154
9,516
6,394
3,468
49,554
90,998 $
6
4
6
2
—
15
33
$
$
4
4
5
1
1
18
33
$
$
20
20
20
9
2
51
122
$
$
49
27
29
12
4
88
209
(1 ) For information on our interest accrual policies and delinquency status for loan modifications related to the pandemic, see Note 1 – Summary of Significant Accounting Principles to the
Consolidated Financial Statements.
Nonperforming Consumer Loans, Leases and Foreclosed
Properties Activity
Table 28 presents nonperforming consumer loans, leases and
foreclosed properties activity during 2020 and 2019. During
2020, nonperforming consumer loans increased $672 million to
$2.7 billion primarily driven by COVID-19 deferral activity, as well
as the inclusion of $144 million of certain loans that were
previously classified as purchased credit-impaired loans and
accounted for under a pool basis.
At December 31, 2020, $892 million, or 33 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, 2020, $1.2 billion, or 45
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 $106 million in 2020 to
$123 million as the Corporation has paused formal loan
foreclosure proceedings and foreclosure sales for occupied
properties during 2020.
to borrowers experiencing
Nonperforming loans also include certain loans that have
been modified in TDRs where economic concessions have been
granted
financial difficulties.
Nonperforming TDRs are included in Table 28. For more
information on our loan modification programs offered in
response to the pandemic, most of which are not TDRs, see
Executive Summary – Recent Developments – COVID-19
Pandemic on page 48 and Note 1 – Summary of Significant
Accounting Principles to the Consolidated Financial Statements.
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Table 28 Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity
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Nonperforming loans and leases, January 1
Additions
Reductions:
Paydowns and payoffs
Sales
Returns to performing status (1 )
Charge-offs
Transfers to foreclosed properties
Total net additions/(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 )
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2020
$
2,053
2,278
$
2019
3,842
1,407
(440)
(38)
(1,014)
(78)
(36)
672
2,725
123
2,848
0.64 %
$
(701)
(1,523)
(766)
(111)
(95)
(1,789)
2,053
229
2,282
0.44 %
0.66
0.49
(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 $119 million and $260 million at December 31, 2020 and
2019.
(3 ) Outstanding consumer loans and leases exclude loans accounted for under the fair value option.
Table 29 presents TDRs for the consumer real estate portfolio. Performing TDR balances are excluded from nonperforming loans
and leases in Table 28. For more information on our loan modification programs offered in response to the pandemic, most of which
are not TDRs, see Executive Summary – Recent Developments – COVID-19 Pandemic on page 48 and Note 1 – Summary of
Significant Accounting Principles to the Consolidated Financial Statements.
Table 29 Consumer Real Estate Troubled Debt Restructurings
(Dollars in millions)
Residential mortgage (1 , 2 )
Home equity (3 )
Nonperforming
$
1,195 $
248
2,899 $
836
Total consumer real estate troubled debt restructurings
$
1,443 $
3,735 $
4,094 $
1,084
5,178 $
921 $
252
3,832 $
977
1,173 $
4,809 $
4,753
1,229
5,982
December 31, 2020
Performing
Total
Nonperforming
December 31, 2019
Performing
Total
(1 ) At December 31, 2020 and 2019, residential mortgage TDRs deemed collateral dependent totaled $1.4 billion and $1.2 billion, and included $1.0 billion and $748 million of loans classified as
nonperforming and $361 million and $468 million of loans classified as performing.
(2 ) At December 31, 2020 and 2019, residential mortgage performing TDRs include $1.5 billion and $2.1 billion of loans that were fully-insured.
(3 ) At December 31, 2020 and 2019, home equity TDRs deemed collateral dependent totaled $407 million and $442 million, and include $216 million and $209 million of loans classified as
nonperforming and $191 million and $233 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.
Modifications of credit card and other consumer loans are
made through programs utilizing direct customer contact, but
may also utilize external programs. At December 31, 2020 and
2019, our credit card and other consumer TDR portfolio was
$701 million and $679 million, of which $614 million and $570
million were current or less than 30 days past due under the
modified terms.
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
industry, product,
concentrations of credit exposure by
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
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and commercial clients contributing to the $67.2 billion loan
growth in the first quarter of 2020 have largely been repaid, as
emergency or contingent funding was no longer needed or
clients were able to access capital markets. Additionally, as part
of the CARES Act, we had $22.7 billion of PPP loans
outstanding with our small business clients at December 31,
2020, which are included in U.S. small business commercial in
the tables in this section. For more information on PPP loans,
see Note 1 – Summary of Significant Accounting Principles to the
Consolidated Financial Statements.
Credit quality of commercial real estate borrowers has begun
to stabilize in many sectors as certain economies have
reopened. Certain sectors, including hospitality and retail,
continue to be negatively impacted as a result of COVID-19.
Moreover, many real estate markets, while improving, are still
in demand, supply chain
experiencing some disruptions
challenges and tenant difficulties.
The commercial allowance for loan and lease losses
increased $3.9 billion during 2020 to $8.7 billion due to the
deterioration in the economic outlook resulting from the impact
of COVID-19. For more information, see Allowance for Credit
Losses on page 99.
Total commercial utilized credit exposure decreased $15.0
billion during 2020 to $620.3 billion driven by lower loans and
leases. The utilization rate for loans and leases, SBLCs and
financial guarantees, and commercial letters of credit, in the
aggregate, was 57 percent at December 31, 2020 and 58
percent at December 31, 2019.
Table 30 presents commercial credit exposure by type for
utilized, unfunded and total binding committed credit exposure.
includes SBLCs and
Commercial utilized credit exposure
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
risk
exposure
management purposes.
types are considered utilized
for credit
non-U.S. portfolio, we evaluate exposures by region and by
country. Tables 34, 37 and 40 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
industry concentrations, see
more
Commercial Portfolio Credit Risk Management – Industry
Concentrations on page 95 and Table 37.
information on our
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
these
organizations as a result of another member default and under
other loss scenarios. For more information, see Note 12 –
Commitments and Contingencies to the Consolidated Financial
Statements.
incurred by some of
losses
the
Commercial Credit Portfolio
During 2020, commercial asset quality weakened as a result of
the economic impact from COVID-19. However, there were also
positive signs during this period. The draws by large corporate
Table 30 Commercial Credit Exposure by Type
Commercial Utilized (1 )
Commercial Unfunded (2 , 3 , 4 )
December 31
Total Commercial Committed
(Dollars in millions)
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
Total
$
2020
$
499,065 $
47,179
34,616
22,618
8,378
6,424
855
1,168
620,303 $
2019
517,657 $
40,485
36,062
25,546
7,047
6,660
1,049
800
635,306 $
2020
404,740 $
—
538
4,827
9,556
—
280
—
419,941 $
2020
903,805 $
2019
405,834 $
—
468
5,101
15,135
—
451
—
2019
923,491
40,485
47,179
36,530
35,154
30,647
27,445
22,182
17,934
6,660
6,424
1,500
1,135
800
1,168
426,989 $ 1,040,244 $ 1,062,295
(1 ) Commercial utilized exposure includes loans of $5.9 billion and $7.7 billion and issued letters of credit with a notional amount of $89 million and $170 million accounted for under the fair value
option at December 31, 2020 and 2019.
(2 ) Commercial unfunded exposure includes commitments accounted for under the fair value option with a notional amount of $3.9 billion and $4.2 billion at December 31, 2020 and 2019.
(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 $10.5 billion and $10.6 billion at December 31, 2020 and 2019.
(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 $42.5 billion and $33.9 billion at
December 31, 2020 and 2019. Not reflected in utilized and committed exposure is additional non-cash derivative collateral held of $39.3 billion and $35.2 billion at December 31, 2020 and
2019, which consists primarily of other marketable securities.
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Outstanding commercial loans and leases decreased $18.6
billion during 2020 primarily driven by repayments due in part to
reduced working capital needs and a favorable capital markets
environment, partially offset by $22.7 billion of PPP loans
outstanding at December 31, 2020. Nonperforming commercial
loans increased $728 million across industries, and commercial
Table 31 Commercial Credit Quality
reservable criticized utilized exposure increased $27.2 billion
spread across several
travel and
entertainment, as a result of weaker economic conditions
arising from COVID-19. Table 31 presents our commercial loans
and leases portfolio and related credit quality information at
December 31, 2020 and 2019.
industries,
including
(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 )
Outstandings
Nonperforming
December 31
Accruing Past Due
90 Days or More (3 )
2020
2019
2020
2019
2020
2019
$
288,728 $
90,460
379,188
60,364
17,098
456,650
36,469
307,048 $
104,966
412,014
62,689
19,880
494,583
15,333
1,243 $
418
1,661
404
87
2,152
75
2,227
1,094 $
43
1,137
280
32
1,449
50
1,499
$
228
10
238
6
25
269
115
384
106
8
114
19
20
153
97
250
Commercial loans excluding loans accounted for under the fair
value option
Loans accounted for under the fair value option (2 )
Total commercial loans and leases
493,119
5,946
499,065 $
509,916
7,741
517,657
$
Includes card-related products.
(1 )
(2 ) Commercial loans accounted for under the fair value option include U.S. commercial of $2.9 billion and $4.7 billion and non-U.S. commercial of $3.0 billion and $3.1 billion at December 31,
2020 and 2019. For more information on the fair value option, see Note 21 – Fair Value Option to the Consolidated Financial Statements.
(3 ) For information on our interest accrual policies and delinquency status for loan modifications related to the pandemic, see Note 1 – Summary of Significant Accounting Principles to the
Consolidated Financial Statements.
Table 32 presents net charge-offs and related ratios for our commercial loans and leases for 2020 and 2019.
Table 32 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
2020
2019
Net Charge-off Ratios (1 )
2019
2020
$
$
718
155
873
270
59
1,202
267
$
1,469 $
256
84
340
29
21
390
272
662
0.23%
0.15
0.21
0.43
0.32
0.24
0.86
0.28
0.08%
0.08
0.08
0.05
0.10
0.08
1.83
0.13
(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.
Table 33 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. Total commercial reservable criticized
utilized exposure increased $27.2 billion during 2020, which was spread across several industries, including travel and
entertainment, as a result of weaker economic conditions arising from COVID-19. At December 31, 2020 and 2019, 79 percent and
90 percent of commercial reservable criticized utilized exposure was secured.
Table 33 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
2020
2019
$
$
21,388
5,051
26,439
10,213
714
37,366
1,300
38,666
6.83 % $
5.03
6.40
16.42
4.18
7.59
3.56
7.31
$
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
(1 ) Total commercial reservable criticized utilized exposure includes loans and leases of $36.6 billion and $10.7 billion and commercial letters of credit of $2.1 billion and $715 million at
December 31, 2020 and 2019.
(2 ) Percentages are calculated as commercial reservable criticized utilized exposure divided by total commercial reservable utilized exposure for each exposure category.
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Commercial and Industrial
Commercial and industrial loans include U.S. commercial and
non-U.S. commercial portfolios.
U.S. Commercial
At December 31, 2020, 65 percent of the U.S. commercial loan
portfolio, excluding small business, was managed in Global
Banking, 18 percent in Global Markets, 15 percent in GWIM
(generally business-purpose loans for high net worth clients) and
the remainder primarily in Consumer Banking . U.S. commercial
loans decreased $18.3 billion during 2020 driven by Global
Banking. Reservable criticized utilized exposure increased $13.1
billion, which was spread across several industries, including
travel and entertainment, as a result of weaker economic
conditions arising from COVID-19.
Non-U.S. Commercial
At December 31, 2020, 79 percent of the non-U.S. commercial
loan portfolio was managed in Global Banking and 21 percent in
Global Markets. Non-U.S. commercial loans decreased $14.5
billion during 2020, primarily in Global Banking. For information
on the non-U.S. commercial portfolio, see Non-U.S. Portfolio on
page 97.
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 declined by $2.3 billion during
2020 as paydowns exceeded new originations. Reservable
criticized utilized exposure increased $9.1 billion to $10.2
billion from $1.1 billion, or 16.42 and 1.75 percent of the
commercial real estate portfolio at December 31, 2020 and
2019, due to downgrades driven by the impact of COVID-19
across industries, primarily hotels. Although we have observed
property-level improvements in a number of the most impacted
sectors, the length of time for recovery has been slower than
originally anticipated, which has prompted additional
downgrades. The portfolio remains diversified across property
types and geographic regions. California represented the largest
state concentration at 23 percent and 24 percent of the
commercial real estate portfolio at December 31, 2020 and
2019. 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 2020, we continued to see low default rates and
varying degrees of improvement in the portfolio. 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 34 presents outstanding commercial real estate loans
by geographic region, based on the geographic location of the
collateral, and by property type.
Table 34 Outstanding Commercial Real Estate Loans
(Dollars in millions)
By Geographic Region
California
Northeast
Southwest
Southeast
Florida
Midwest
Illinois
Midsouth
Northwest
Non-U.S.
Other (1 )
Total outstanding commercial real estate loans
By Property Type
Non-residential
Office
Industrial / Warehouse
Shopping centers / Retail
Hotels / Motels
Multi-family rental
Unsecured
Multi-use
Other
Total non-residential
Residential
December 31
2020
2019
$
$
$
14,028 $
11,628
8,551
6,588
4,294
3,483
2,594
2,370
1,634
3,187
2,007
60,364 $
17,667 $
8,330
7,931
7,226
7,051
2,336
1,460
7,146
59,147
1,217
14,910
12,408
8,408
5,937
3,984
3,203
3,349
2,468
1,638
3,724
2,660
62,689
17,902
8,677
8,183
6,982
7,250
3,438
1,788
6,958
61,178
1,511
62,689
Total outstanding commercial real estate loans
$
60,364 $
(1 )
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.
U.S. Small Business Commercial
The U.S. small business commercial loan portfolio is comprised
of small business card loans and small business loans primarily
managed in Consumer Banking, and includes $22.7 billion of
PPP loans outstanding at December 31, 2020. Excluding PPP,
credit card-related products were 50 percent and 52 percent of
the U.S. small business commercial portfolio at December 31,
2020 and 2019. Of the U.S. small business commercial net
charge-offs, 91 percent and 94 percent were credit card-related
products in 2020 and 2019.
Nonperforming Commercial Loans, Leases and Foreclosed
Properties Activity
Table 35 presents the nonperforming commercial loans, leases
and foreclosed properties activity during 2020 and 2019.
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Nonperforming loans do not include loans accounted for under
the fair value option. During 2020, nonperforming commercial
loans and leases increased $728 million to $2.2 billion,
primarily driven by the impact of COVID-19. At December 31,
2020, 84 percent of commercial nonperforming loans, leases
and foreclosed properties were secured and 66 percent were
contractually current. Commercial nonperforming loans were
carried at 81 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 35 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 additions to nonperforming loans and leases
Total nonperforming loans and leases, December 31
Foreclosed properties, December 31
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 )
2020
2019
$
1,499
3,518
$
(1,002)
(350)
(172)
(1,208)
(2)
(56)
728
2,227
41
2,268
1,102
2,048
(648)
(215)
(120)
(478)
(9)
(181)
397
1,499
56
1,555
0.45 %
0.29 %
0.46
0.30
Includes U.S. small business commercial activity. Small business card loans are excluded as they are not classified as nonperforming.
(1 ) Balances do not include nonperforming loans held-for-sale of $359 million and $239 million at December 31, 2020 and 2019.
(2 )
(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.
Table 36 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 and Allowance for Credit Losses
to the Consolidated Financial Statements. For more information
on our loan modification programs offered in response to the
pandemic, most of which are not TDRs, see Executive Summary
– Recent Developments – COVID-19 Pandemic on page 48 and
Note 1 – Summary of Significant Accounting Principles to the
Consolidated Financial Statements.
Table 36 Commercial Troubled Debt Restructurings
Nonperforming
December 31, 2020
Performing
Total
Nonperforming
December 31, 2019
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
$
509 $
49
558
137
42
737
—
Total commercial troubled debt restructurings
$
737 $
Industry Concentrations
Table 37 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 decreased $22.1 billion, or two percent, during 2020
in commercial committed
to $1.0 trillion. The decrease
exposure was concentrated in the Global commercial banks,
Asset managers and funds, Utilities, and Real estate industry
sectors. Decreases were partially offset by increased exposure
to the Finance companies and Automobiles and components
industry sectors.
Industry limits are used internally to manage industry
concentrations and are based on committed exposure that is
850 $
119
969
—
2
971
29
1,000 $
1,359 $
168
1,527
137
44
1,708
29
1,737 $
617 $
41
658
212
18
888
—
888 $
999 $
193
1,192
14
31
1,237
27
1,264 $
1,616
234
1,850
226
49
2,125
27
2,152
determined on an industry-by-industry basis. A risk management
framework is in place to set and approve industry limits as well
as to provide ongoing monitoring. The MRC oversees industry
limit governance.
Asset managers and funds, our largest industry concentration
with committed exposure of $101.5 billion, decreased $8.5
billion, or eight percent, during 2020.
Real estate, our second largest industry concentration with
committed exposure of $92.4 billion, decreased $4.0 billion, or
four percent, during 2020. For more information on the
commercial real estate and related portfolios, see Commercial
Portfolio Credit Risk Management – Commercial Real Estate on
page 94.
Capital goods, our third largest industry concentration with
committed exposure of $81.0 billion, remained flat during
2020.
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Given the widespread impact of the pandemic on the U.S.
and global economy, a number of industries have been and will
likely continue to be adversely impacted. We continue to monitor
all industries, particularly higher risk industries which are
experiencing or could experience a more significant impact to
their financial condition. The impact of the pandemic has also
placed significant stress on global demand for oil. Our energy-
related committed exposure decreased $3.3 billion, or nine
percent, during 2020 to $33.0 billion, driven by declines in
exploration and production, refining and marketing exposure,
energy equipment and services, partially offset by an increase
in our integrated client exposure. For more information on
COVID-19, see Executive Summary – Recent Developments –
COVID-19 Pandemic on page 48.
Table 37 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
Retailing
Consumer services
Food, beverage and tobacco
Commercial services and supplies
Transportation
Energy
Utilities
Individuals and trusts
Technology hardware and equipment
Media
Software and services
Global commercial banks
Automobiles and components
Consumer durables and apparel
Vehicle dealers
Pharmaceuticals and biotechnology
Telecommunication services
Insurance
Food and staples retailing
Financial markets infrastructure (clearinghouses)
Religious and social organizations
Commercial
Utilized
Total Commercial
Committed (2 )
December 31
2020
2019
2020
2019
68,093 $
69,267
39,911
46,948
33,759
41,669
24,548
24,749
32,000
22,871
21,154
23,426
13,936
12,387
18,784
10,515
13,144
11,709
20,751
10,956
9,232
15,028
5,217
9,411
5,921
5,209
4,939
4,769
620,303 $
71,386 $
70,361
41,082
40,173
34,353
41,889
26,663
25,868
28,434
24,163
23,103
23,449
16,406
12,383
18,927
10,646
12,445
10,432
30,171
7,345
10,193
18,013
5,964
9,154
6,673
6,290
5,496
3,844
635,306 $
$
101,540 $
92,414
80,959
70,004
57,880
56,212
50,792
49,710
48,026
44,628
38,149
33,444
32,983
29,234
25,881
24,796
24,677
23,647
22,922
20,765
20,223
18,696
16,349
15,605
13,491
11,810
8,648
6,759
1,040,244 $
(4,170) $
110,069
96,370
80,892
63,942
55,918
53,566
52,129
48,317
49,071
45,956
38,944
33,028
36,326
36,060
27,817
24,072
23,645
20,556
32,345
14,910
21,245
21,435
20,206
16,113
15,218
10,392
7,997
5,756
1,062,295
(3,349)
Total commercial credit exposure by industry
Net credit default protection purchased on total commitments (4 )
Includes U.S. small business commercial exposure.
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 $10.5 billion and $10.6 billion at December 31, 2020 and 2019.
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.
$
(1 )
(2 )
(3 )
(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, 2020 and 2019, 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
$4.2 billion and $3.3 billion. We recorded net losses of $240
million in 2020 compared to net losses of $145 million in 2019
for these same 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 44. For more information, see Trading Risk Management
on page 102.
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Tables 38 and 39 present the maturity profiles and the
credit exposure debt ratings of the net credit default protection
portfolio at December 31, 2020 and 2019.
Table 38 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
2020
2019
65 %
34
1
100 %
54 %
45
1
100 %
Table 39 Net Credit Default Protection by Credit
Exposure Debt Rating
Net
Notional (1 )
Percent of
Total
Net
Notional (1 )
Percent of
Total
December 31
2020
2019
$
(250)
(1,856)
(1,363)
(465)
(182)
(54)
6.0 % $
44.5
32.7
11.2
4.4
1.2
(697)
(1,089)
(766)
(373)
(119)
(305)
20.8 %
32.5
22.9
11.1
3.6
9.1
(Dollars in millions)
Ratings (2 , 3 )
A
BBB
BB
B
CCC and below
NR (4 )
Total net credit
default protection
$
(4,170)
100.0 % $
(3,349)
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
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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.
in government policies. A
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
risk
instability and changes
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 40 presents our 20 largest non-U.S. country exposures
at December 31, 2020. These exposures accounted for 90
percent and 88 percent of our total non-U.S. exposure at
December 31, 2020 and 2019. Net country exposure for these
20 countries increased $21.2 billion in 2020. The majority of
the increase was due to higher deposits with central banks in
Germany and Japan.
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.
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Table 40 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
2020
Hedges and
Credit Default
Protection
Net Country
Exposure at
December 31
2020
Increase
(Decrease)
from
December 31
2019
$
31,817 $
29,169
8,657
8,219
12,679
10,098
6,559
5,854
4,654
4,115
5,161
5,428
3,811
4,434
3,712
2,456
2,471
2,835
2,785
2,218
18,201 $
10,772
8,681
8,353
1,086
67
4,242
696
4,109
278
856
221
2,817
452
1,379
1,784
1,334
1,156
1,050
136
6,601 $
2,155
1,624
988
1,115
1,529
372
708
486
359
488
353
412
584
205
553
505
262
100
266
4,086 $
4,492
2,628
4,329
3,325
1,952
2,235
3,288
997
4,603
2,214
1,989
130
1,128
1,112
1,568
797
914
253
77
60,705 $
46,588
21,590
21,889
18,205
13,646
13,408
10,546
10,246
9,355
8,719
7,991
7,170
6,598
6,408
6,361
5,107
5,167
4,188
2,697
(1,233) $
(1,685)
(456)
(1,098)
(709)
(226)
(321)
(253)
(562)
(73)
(168)
(180)
(275)
(61)
(121)
(669)
(140)
(351)
(23)
(10)
59,472 $
44,903
21,134
20,791
17,496
13,420
13,087
10,293
9,684
9,282
8,551
7,811
6,895
6,537
6,287
5,692
4,967
4,816
4,165
2,687
3,628
14,075
1,012
4,536
6,964
(2,167)
1,985
(1,479)
(643)
1,456
(154)
(4,206)
(490)
(519)
(1,524)
315
(1,540)
94
798
(900)
$
157,132 $
67,670 $
19,665 $
42,117 $
286,584 $
(8,614) $
277,970 $
21,241
(Dollars in millions)
United Kingdom
Germany
Canada
France
Japan
China
Australia
Brazil
Netherlands
Singapore
South Korea
India
Switzerland
Hong Kong
Mexico
Italy
Belgium
Spain
Ireland
United Arab Emirates
Total top 20 non-U.S.
countries exposure
Our largest non-U.S. country exposure at December 31, 2020
was the U.K. with net exposure of $59.5 billion, which
represents a $3.6 billion increase from December 31, 2019.
Our second largest non-U.S. country exposure was Germany with
net exposure of $44.9 billion at December 31, 2020, a $14.1
billion increase from December 31, 2019. The increase in
Germany was primarily driven by an increase in deposits with
the central bank.
In light of the global pandemic, we are monitoring our non-
U.S. exposure closely, particularly in countries where restrictions
on certain activities, in an attempt to contain the spread and
impact of the virus, have affected and will likely continue to
adversely affect economic activity. We are managing the impact
to our international business operations as part of our overall
response framework and are taking actions to manage exposure
carefully in impacted regions while supporting the needs of our
clients. The magnitude and duration of the pandemic and its full
impact on the global economy continue to be highly uncertain.
The impact of COVID-19 could have an adverse impact on the
global economy for a prolonged period of time. For more
information on how the pandemic may affect our operations,
see Executive Summary – Recent Developments – COVID-19
Pandemic on page 48 and Item 1A. Risk Factors of our 2020
Annual Report on Form 10-K.
Table 41 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, 2020. Local exposure, defined as
exposure booked in local offices of a respective country with
clients in the same country, is excluded. At December 31,
2020, the U.K. and France were the only countries where their
respective total cross-border exposures exceeded one 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, 2020.
Table 41 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
2020 $
2019
2018
2020
2019
2018
4,733 $
1,859
1,505
3,073
736
633
2,269 $
3,580
3,458
1,726
2,473
2,385
95,180 $
93,232
46,191
26,399
23,172
29,847
102,182
98,671
51,154
31,198
26,381
32,865
3.62 %
4.05
2.17
1.11
1.08
1.40
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Allowance for 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 ECL inherent in the Corporation’s relevant
financial assets. Upon adoption of the new accounting standard,
the Corporation recorded a net increase of $3.3 billion in the
allowance for credit losses which was comprised of a net
increase of $2.9 billion in the allowance for loan and lease
losses and an increase of $310 million in the reserve for
unfunded lending commitments. The net increase was primarily
driven by a $3.1 billion increase related to the credit card
portfolio.
The allowance for credit losses further increased by $7.2
billion from January 1, 2020 to $20.7 billion at December 31,
2020, which included a $5.0 billion reserve increase related to
the commercial portfolio and a $2.2 billion reserve increase
related to the consumer portfolio. The increases were driven by
deterioration in the economic outlook resulting from the impact
of COVID-19.
The following table presents an allocation of the allowance
for credit losses by product type for December 31, 2020,
January 1, 2020 and December 31, 2019 (prior to the adoption
of the CECL accounting standard).
Table 42 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
Amount
Percent of
Total
Percent of
Loans and
Leases
Outstanding (1 )
December 31, 2020
Amount
Percent of
Total
January 1, 2020
Percent of
Loans and
Leases
Outstanding (1 )
Amount
Percent of
Total
Percent of
Loans and
Leases
Outstanding (1 )
December 31, 2019
459
399
8,420
752
41
10,071
5,043
1,241
2,285
162
8,731
18,802
1,878
2.44 %
0.21 % $
2.12
44.79
4.00
0.22
53.57
26.82
6.60
12.15
0.86
46.43
100.00 %
1.16
10.70
0.82
n/m
2.35
1.55
1.37
3.79
0.95
1.77
2.04
212
228
6,809
566
55
7,870
2,723
668
1,036
61
4,488
12,358
1,123
1.72 %
0.09 % $
1.84
55.10
4.58
0.45
63.69
22.03
5.41
8.38
0.49
36.31
100.00 %
0.57
6.98
0.62
n/m
1.69
0.84
0.64
1.65
0.31
0.88
1.27
325
221
3,710
234
52
4,542
3,015
658
1,042
159
4,874
9,416
813
$
10,229
3.45 %
0.14 %
2.35
39.39
2.49
0.55
48.23
32.02
6.99
11.07
1.69
51.77
100.00 %
0.55
3.80
0.26
n/m
0.98
0.94
0.63
1.66
0.80
0.96
0.97
Allowance for credit losses
$
20,680
$
13,481
(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 $298 million at December 31, 2020 and $257 million at January 1, 2020 and December 31, 2019 and home
equity loans of $437 million at December 31, 2020 and $337 million at January 1, 2020 and December 31, 2019. Commercial loans accounted for under the fair value option include U.S.
commercial loans of $2.9 billion, $5.1 billion and $4.7 billion at December 31, 2020, January 1, 2020 and December 31, 2019, and non-U.S. commercial loans of $3.0 billion, $3.2 billion and
$3.1 billion at December 31, 2020, January 1, 2020 and December 31, 2019.
Includes allowance for loan and lease losses for U.S. small business commercial loans of $1.5 billion, $831 million and $523 million at December 31, 2020, January 1, 2020 and December 31,
2019.
n/m = not meaningful
(2 )
Net charge-offs for 2020 were $4.1 billion compared to $3.6
billion in 2019 driven by increases in commercial losses. The
provision for credit losses increased $7.7 billion to $11.3 billion
during 2020 compared to 2019. The allowance for credit losses
included a reserve build of $7.2 billion for 2020, excluding the
impact of the new accounting standard, primarily due to the
deterioration in the economic outlook resulting from the impact
of COVID-19 on both the consumer and commercial portfolios.
The provision for credit losses for the consumer portfolio,
including unfunded lending commitments, increased $2.0 billion
to $4.9 billion during 2020 compared to 2019. The provision for
credit losses for the commercial portfolio, including unfunded
lending commitments, increased $5.7 billion to $6.5 billion
during 2020 compared to 2019.
The following table presents a rollforward of the allowance
for credit losses, including certain loan and allowance ratios for
2020, noting that measurement of the allowance for credit
losses for 2019 was based on management’s estimate of
probable
the
Corporation’s credit loss accounting policies and activity related
to the allowance for credit losses, see Note 1 – Summary of
Significant Accounting Principles and Note 5 – Outstanding Loans
and Leases and Allowance for Credit Losses to the Consolidated
Financial Statements.
losses. For more
information on
incurred
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Table 43 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
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:
Loans and leases outstanding at December 31 (3 )
Allowance for loan and lease losses as a percentage of total loans and leases outstanding at December 31 (3 )
Consumer allowance for loan and lease losses as a percentage of total consumer loans and leases outstanding at December
31 (4 )
Commercial allowance for loan and lease losses as a percentage of total commercial loans and leases outstanding at
December 31 (5 )
Average loans and leases outstanding (3 )
Annualized net charge-offs as a percentage of average loans and leases outstanding (3 )
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 (6 )
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 (6 )
62539financials
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2020
2019
$
12,358
$
9,601
(40)
(58)
(2,967)
(372)
(307)
(3,744)
(1,163)
(168)
(275)
(69)
(1,675)
(5,419)
70
131
618
250
23
1,092
178
13
5
10
206
1,298
(4,121)
10,565
—
18,802
1,123
755
1,878
20,680
921,180
2.04 %
2.35
1.77
974,281
0.42 %
380
4.56
$
$
$
(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
975,091
0.97 %
0.98
0.96
951,583
0.38 %
265
2.58
9,854
$
4,151
181 %
148 %
$
$
$
$
(1 )
Includes U.S. small business commercial charge-offs of $321 million in 2020 compared to $320 million in 2019.
Includes U.S. small business commercial recoveries of $54 million in 2020 compared to $48 million in 2019.
(2 )
(3 ) Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option of $6.7 billion and $8.3 billion at December 31, 2020 and 2019. Average loans
accounted for under the fair value option were $8.2 billion in 2020 compared to $6.8 billion in 2019.
(4 ) Excludes consumer loans accounted for under the fair value option of $735 million and $594 million at December 31, 2020 and 2019.
(5 ) Excludes commercial loans accounted for under the fair value option of $5.9 billion and $7.7 billion at December 31, 2020 and 2019.
(6 ) Primarily includes amounts related to credit card and unsecured consumer lending portfolios in Consumer Banking.
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Market Risk Management
Interest Rate Risk
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 105.
We have been affected, and expect
to continue to be
affected, by market stress resulting from the pandemic that
began in the first quarter of 2020. For more information on the
effects of
the pandemic, see Executive Summary – Recent
Developments – COVID-19 Pandemic on page 48.
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 techniques that encompass a broad range of financial
instruments.
The key
risk management
techniques are
discussed in more detail
in the Trading Risk Management
section.
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.
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
risks. The Enterprise Model Risk Policy defines
model risk standards, consistent with our 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 Enterprise
Model Risk Committee (EMRC), a subcommittee of the MRC,
oversees that model standards are consistent with model risk
validation process across the Corporation.
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.
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 certificates, commercial mortgages
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 107.
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
Bank of America 2020 101
requirements and monitors the effective challenge in the model
options. Hedging instruments used to mitigate this risk include
1
0
1
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2
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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 105.
We have been affected, and expect to continue to be
affected, by market stress resulting from the pandemic that
began in the first quarter of 2020. For more information on the
effects of
the pandemic, see Executive Summary – Recent
Developments – COVID-19 Pandemic on page 48.
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 techniques that encompass a broad range of financial
techniques are
instruments. The key
discussed in more detail in the Trading Risk Management
section.
risk management
risks
trading
include ownership of market
Global Risk Management is responsible for providing senior
management with a clear and comprehensive understanding of
to which we are exposed. These
the
responsibilities
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.
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 risks. The Enterprise Model Risk Policy defines
model risk standards, consistent with our 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 Enterprise
Model Risk Committee (EMRC), a subcommittee of the MRC,
oversees that model standards are consistent with model risk
requirements and monitors the effective challenge in the model
validation process across the Corporation.
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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
liabilities,
deposits, borrowings and derivatives. Hedging instruments used
to mitigate these risks include derivatives such as options,
futures, forwards and swaps.
trading-related assets and
to
risk
this
include
investments
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
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.
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 certificates, commercial mortgages
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 107.
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
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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 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
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.
further exacerbated
the Corporation. These measures
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
include
portfolio of
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
respective
limitations. Additionally, risk managers independently evaluate
the risk of the portfolios under the current market environment
and potential future environments.
their
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
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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 73.
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
the appropriate
management committees.
to management
reported
through
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
review. Certain
to management
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.
for
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 44 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 44 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
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trading activities as presented in Table 44 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 44
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 44 presents year-end, average, high and low daily
trading VaR for 2020 and 2019 using a 99 percent confidence
Table 44 Market Risk VaR for Trading Activities
level. The amounts disclosed in Table 44 and Table 45 align to
the view of covered positions used in the Basel 3 capital
calculations. Foreign 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 increased for 2020 compared to
2019 primarily due to the impact of market volatility related to
the pandemic in the VaR look back period.
(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
2020
2019
Year
End
Average
High (1 )
Low (1 )
Year
End
Average
High (1 )
Low (1 )
$
$
8
30
79
20
4
(72)
69
52
121
52
11
(17)
46
(4)
163
$
$
$
7
19
58
24
6
(61)
53
27
80
52
13
(24)
41
(15)
106
$
25
39
91
162
12
—
171
—
169
84
17
—
86
—
171
2
7
25
12
3
—
27
—
30
7
9
—
9
—
32
$
$
$
4
25
26
29
4
(47)
41
—
41
8
10
(9)
9
(5)
45 $
$
6
24
23
22
6
(49)
32
3
35
10
10
(10)
10
(7)
38
$
13
49
32
33
31
—
47
—
53
13
17
—
16
—
56
2
14
16
14
4
—
24
—
27
7
4
—
5
—
28
(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 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 2020, corresponding to
the data in Table 44. Peak VaR in mid-March 2020 was driven by increased market realized volatility and higher implied volatilities.
Additional VaR statistics produced within our single VaR
model are provided in Table 45 at the same level of detail as in
Table 44. 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 45
presents average trading VaR statistics at 99 percent and 95
percent confidence levels for 2020 and 2019. The increase in
VaR for the 99 percent confidence level for 2020 was primarily
due to COVID-19 related market volatility, which impacted the
99 percent VaR average more severely than the 95 percent VaR
average.
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Table 45 Average Market Risk VaR for Trading Activities – 99 percent and 95 percent VaR Statistics
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(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
Backtesting
is evaluated by
The accuracy of the VaR methodology
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
risk management. Senior
management regularly reviews and evaluates the results of
these tests.
to senior market
During 2020, there were seven days where this subset of
trading revenue had losses that exceeded 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. For more
information on
fair value, see Note 20 – Fair Value
Measurements to the Consolidated Financial Statements.
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2019
99 percent
95 percent
99 percent
$
$
$
7
19
58
24
6
(61)
53
27
80
52
13
(24)
41
(15)
106 $
$
4
9
18
13
3
(26)
21
2
23
13
7
(8)
12
(6)
29 $
6
24
23
22
6
(49)
32
3
35
10
10
(10)
10
(7)
38
95 percent
3
15
15
11
3
(29)
18
2
20
5
6
(5)
6
(5)
21
$
$
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 2020 and 2019. During 2020, positive trading-related
revenue was recorded for 98 percent of the trading days, of
which 87 percent were daily trading gains of over $25 million,
and the largest loss was $90 million. This compares to 2019
where 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.
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
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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
liquidity planning. For more
consolidated capital and
information, see Managing Risk on page 70.
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 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 46 presents the spot and 12-month forward rates used
in our baseline forecasts at December 31, 2020 and 2019.
Table 46 Forward Rates
Federal
Funds
December 31, 2020
Three-month
LIBOR
10-Year
Swap
Spot rates
12-month forward rates
0.25 %
0.25
0.24 %
0.19
Spot rates
12-month forward rates
December 31, 2019
1.75 %
1.50
1.91 %
1.62
0.93 %
1.06
1.90 %
1.92
Table 47 shows the pretax impact to forecasted net interest
income over the next 12 months from December 31, 2020 and
2019 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. The interest rate
scenarios also assume U.S. dollar rates are floored at zero.
During 2020, the asset sensitivity of our balance sheet
increased in both up-rate and down-rate scenarios primarily due
to continued deposit growth invested in long-term securities. We
continue to be asset sensitive to a parallel upward 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 AFS, may adversely affect
accumulated 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 74.
Table 47 Estimated Banking Book Net Interest Income
Sensitivity to Curve Changes
Short
Rate
(bps)
Long
Rate
(bps)
December 31
2020
2019
(Dollars in millions)
Parallel Shifts
+100 bps
instantaneous shift
+100
+100 $
10,468
$
4,190
-25 bps
instantaneous shift
-25
-25
(2,766)
(1,500)
Flatteners
Short-end
instantaneous change
+100
Long-end
instantaneous change
—
—
-25
6,321
2,641
(1,686)
(653)
Steepeners
Short-end
instantaneous change
-25
—
(1,084)
(844)
Long-end
instantaneous change
—
+100
4,333
1,561
The sensitivity analysis in Table 47 assumes that we take no
action in response to these rate shocks and does not assume
in other macroeconomic variables normally
any change
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 47 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 non-
interest-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
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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
interest rate
exchange contracts,
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.
including cross-currency
Changes to the composition of our derivatives portfolio
during 2020 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 results on both open and terminated cash
flow hedge derivative instruments recorded in accumulated OCI
were a gain of $580 million and a loss of $496 million, on a
pretax basis, at December 31, 2020 and 2019. These gains
and 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,
2020, the after-tax net gains are expected to be reclassified
into earnings as follows: a gain of $187 million within the next
year, a gain of $358 million in years two through five, a loss of
$59 million in years six through ten, with the remaining loss of
$50 million 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, 2020.
Table 48 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 durations of our open ALM derivatives at
December 31, 2020 and 2019. These amounts do not include
derivative hedges on our MSRs. During 2020, the fair value of
receive-fixed interest rate swaps increased while pay-fixed
interest swaps decreased, primarily driven by lower swap rates
on hedges of U.S. dollar long-term debt.
Table 48 Asset and Liability Management Interest Rate and Foreign Exchange Contracts
December 31, 2020
Expected Maturity
(Dollars in millions, average estimated duration in
years)
Receive-fixed interest rate swaps (1 )
Fair
Value
$ 14,885
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 )
Notional amount
Foreign exchange contracts (1 , 4 , 5 )
Notional amount (6 )
Futures and forward rate contracts
Notional amount
Option products
Notional amount
Net ALM contracts
(5,502)
(235)
(1,014)
349
47
—
$
8,530
Total
2021
2022
2023
2024
2025
Thereafter
$269,015
$ 11,050
$ 20,908
$ 30,654
$ 31,317
$ 32,898
$142,188
1.54 %
3.25 %
0.91 %
1.48 %
1.17 %
1.07 %
1.69 %
$252,698
$ 7,562
$ 21,667
$ 24,671
$ 24,406
$ 32,052
$142,340
0.89 %
0.57 %
0.10 %
1.28 %
0.86 %
0.68 %
1.00 %
$223,659
$ 18,769
$ 12,245
$ 9,747
$ 22,737
$ 28,222
$131,939
112,465
27,424
16,038
8,066
3,819
4,446
52,672
(42,490)
(69,299)
2,841
2,505
4,735
4,369
12,359
14,255
14,255
17
—
—
—
—
17
—
—
—
—
—
—
Average
Estimated
Duration
8.08
6.52
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Table 48 Asset and Liability Management Interest Rate and Foreign Exchange Contracts (continued)
December 31, 2019
Expected Maturity
(Dollars in millions, average estimated duration in
years)
Receive-fixed interest rate swaps (1 )
Fair
Value
$ 12,370
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 )
Notional amount
Foreign exchange contracts (1 , 4 , 5 )
Notional amount (6 )
Option products
Notional amount
Net ALM contracts
(2,669)
(290)
(1,258)
414
—
$ 8,567
Total
2020
2021
2022
2023
2024
Thereafter
$215,123
2.68 %
$ 16,347
$ 14,642
$ 21,616
$ 36,356
$ 21,257
$104,905
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
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
—
—
Average
Estimated
Duration
6.47
6.99
(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, 2020 and 2019, the notional amount of same-currency basis swaps included $223.7 billion and $152.2 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 $(42.5) billion at December 31, 2020 was comprised of $34.2 billion in foreign currency-denominated and cross-currency receive-fixed
swaps, $(74.3) billion in net foreign currency forward rate contracts, $(3.1) billion in foreign currency-denominated interest rate swaps and $711 million in net foreign currency futures contracts.
Foreign exchange contracts of $(53.1) billion at December 31, 2019 were 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 foreign currency futures contracts.
(6 ) Reflects the net of long and short positions. Amounts shown as negative reflect a net short position.
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
loans held-for-sale (LHFS) between the date of the IRLC and the
date the loans are 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 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.
During 2020, 2019 and 2018, we recorded gains of $321
million, $291 million and $244 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
20 – Fair Value Measurements to the Consolidated Financial
Statements.
Compliance and Operational Risk Management
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, 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 RWA used in the Basel 3
capital calculation. For more
information on Basel 3
calculations, see Capital Management on page 73.
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 and 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.
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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
for
responsibilities
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.
integrity of our, or
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 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.
Climate Risk Management
Climate-related risks are divided into two major categories: (1)
risks related to the transition to a low-carbon economy, which
may entail extensive policy, legal, technology and market
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changes, and (2) risks related to the physical impacts of climate
change, driven by extreme weather events, such as hurricanes
and floods, as well as chronic longer-term shifts, such as
temperature increases and sea level rises. These changes and
events can have broad impacts on operations, supply chains,
distribution networks, customers, and markets and are
otherwise referred to, respectively, as transition risk and
physical risk. The financial impacts of transition risk can lead to
and amplify credit risk. Physical risk can also lead to increased
credit risk by diminishing borrowers’ repayment capacity or
collateral values.
As climate risk is interconnected with all key risk types, we
have developed and continue to enhance processes to embed
climate risk considerations into our Risk Framework and risk
management programs established for strategic, credit, market,
liquidity, compliance, operational and reputational risks. A key
element of how we manage climate
the Risk
Identification process through which climate and other risks are
identified across all FLUs and control functions, prioritized in our
risk inventory and evaluated to determine estimated severity
and likelihood of occurrence. Once identified, climate risks are
assessed for potential impacts and incorporated into the design
of macroeconomic scenarios to generate loss forecasts and
assess how climate-related impacts could affect us and our
clients.
risk
is
Our governance framework establishes oversight of climate
risk practices and strategies by the Board, supported by its
Corporate Governance, ESG, and Sustainability Committee, the
ERC and the Global Environmental, Social and Governance
Committee, a management-level committee comprised of senior
leaders across every major FLU and control function. The
Climate Risk Steering Council oversees our climate risk
management practices, shapes our approach to managing
climate-related risks in line with our Risk Framework and meets
monthly. In 2020, the climate risk management effort was
bolstered through the appointment of a Global Climate Risk
Executive who reports to the CRO, and establishment of a new
division within our Global Risk organization to drive execution of
the climate risk management program with the support of FLUs,
Technology & Operations and Risk partners. For additional
information about climate risk, see the Bank of America website
(the content of which is not incorporated by reference into this
Annual Report on Form 10-K).
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
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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.
Allowance for Credit Losses
On January 1, 2020, the Corporation adopted the new
accounting standard that requires the measurement of the
allowance for credit losses, which includes the allowance for
loan and lease losses and the reserve for unfunded lending
commitments, to be based on management’s best estimate of
lifetime ECL inherent in the Corporation's relevant financial
assets.
that
options.
variables
incorporate
borrower-controlled
extension
include
The Corporation's estimate of lifetime ECL includes the use
of quantitative models
forward-looking
macroeconomic scenarios that are applied over the contractual
life of the loan portfolios, adjusted for expected prepayments
These
and
macroeconomic scenarios
that have
historically been key drivers of increases and decreases in
credit losses. These variables include, but are not limited to,
unemployment rates, real estate prices, gross domestic product
and corporate bond spreads. As any one economic outlook is
leverages multiple
the Corporation
inherently uncertain,
scenarios. The scenarios that are chosen each quarter and the
amount of weighting given to each scenario depend on a variety
of factors including recent economic events, leading economic
indicators, views of internal and third-party economists and
industry trends.
factors
The Corporation also includes qualitative reserves to cover
losses that are expected but, in the Corporation's assessment,
may not be adequately reflected in the economic assumptions
described above. For example,
the Corporation
considers include changes in lending policies and procedures,
business conditions, the nature and size of the portfolio,
portfolio concentrations, the volume and severity of past due
loans and nonaccrual loans, the effect of external factors such
as competition and legal and regulatory requirements, among
inherent
others. Further,
uncertainty in quantitative models that are built on historical
data.
the Corporation considers
the
The allowance for credit losses can also be impacted by
unanticipated changes in asset quality of the portfolio, such as
increases in risk rating downgrades in our commercial portfolio,
deterioration in borrower delinquencies or credit scores in our
credit card portfolio or increases in LTVs in our consumer real
estate portfolio. In addition, while we have incorporated our
estimated impact of COVID-19 into our allowance for credit
losses, the ultimate impact of the pandemic is still unknown,
including how long economic activities will be impacted and
what effect the unprecedented levels of government fiscal and
monetary actions will have on the economy and our credit
losses.
credit
losses
As described above, the process to determine the allowance
for
requires numerous estimates and
assumptions, some of which require a high degree of judgment
and are often interrelated. Changes in the estimates and
assumptions can result in significant changes in the allowance
for credit losses. Our process for determining the allowance for
credit losses is further discussed in Note 1 – Summary of
Significant Accounting Principles and Note 5 – Outstanding Loans
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and Leases and Allowance for Credit Losses 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.
that
requires
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
review and approval of
quantitative models used for deal pricing, financial statement
fair value determination and 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
20 – Fair Value Measurements and Note 21 – Fair Value Option
to the Consolidated Financial Statements.
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
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We completed our annual goodwill impairment test as of
June 30, 2020. In performing that test, we compared the fair
value of each reporting unit to its estimated carrying value as
measured by allocated equity. We estimated the fair value of
each reporting unit based on the income approach (which
utilizes the present value of cash flows to estimate fair value)
and the market multiplier approach (which utilizes observable
market prices and metrics of peer companies to estimate fair
value).
Our discounted cash flows were generally based on the
Corporation’s three-year internal forecasts with a long-term
growth rate of 3.68 percent. Our estimated cash flows
considered the current challenging global industry and market
conditions related to the pandemic, including the low interest
rate environment. The cash flows were discounted using rates
that ranged from 9 percent to 12 percent, which were derived
from a capital asset pricing model that incorporates the risk and
uncertainty in the cash flow forecasts, the financial markets and
industries similar to each of the reporting units.
Under the market multiplier approach, we estimated the fair
value of the individual reporting units utilizing various market
multiples, primarily various pricing multiples, from comparable
publicly-traded companies in industries similar to the reporting
unit and then factored in a control premium based upon
observed comparable premiums paid for change-in-control
transactions for financial institutions.
Based on the results of the test, we determined that each
reporting unit’s estimated fair value exceeded its respective
carrying value and that the goodwill assigned to each reporting
unit was not impaired. The fair values of the reporting units as a
percentage of their carrying values ranged from 109 percent to
213 percent. It currently remains difficult to estimate the future
economic impacts related to the pandemic. If economic and
market conditions
internationally)
deteriorate, our reporting units could be negatively impacted,
which could change our key assumptions and related estimates
and may result in a future impairment charge.
in the U.S. and
(both
Certain Contingent Liabilities
For more information on the complex judgments associated with
certain contingent liabilities, see Note 12 – Commitments and
Contingencies to the Consolidated Financial Statements.
liabilities became unobservable or observable, respectively, in
the current marketplace. For more information on transfers into
and out of Level 3 during 2020, 2019 and 2018, see Note 20 –
Fair Value Measurements
the Consolidated Financial
to
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 19 – 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 2020 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 , andNote 7 – Goodwill and Intangible Assets to the
Consolidated Financial Statements.
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Non-GAAP Reconciliations
Tables 49 and 50 provide reconciliations of certain non-GAAP financial measures to GAAP financial measures.
Table 49 Five-year Reconciliations to GAAP Financial Measures (1 )
(Dollars in millions, shares in thousands)
2020
2019
2018
2017
2016
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
Assets
Goodwill
Intangible assets (excluding MSRs)
Related deferred tax liabilities
Tangible assets
(68,951)
(1,862)
821
(68,951)
(1,721)
773
$ 267,309 $ 267,889 $ 264,748 $ 271,289 $ 265,843
(69,750)
(3,382)
1,644
$ 197,317 $ 197,990 $ 194,645 $ 200,814 $ 194,355
(24,656)
$ 173,693 $ 174,954 $ 171,696 $ 176,626 $ 169,699
(69,286)
(2,652)
1,463
(68,951)
(2,058)
906
(24,188)
(22,949)
(23,036)
(23,624)
(68,951)
(2,151)
920
(68,951)
(1,661)
713
$ 272,924 $ 264,810 $ 265,325 $ 267,146 $ 266,195
(69,744)
(2,989)
1,545
$ 202,742 $ 194,911 $ 195,458 $ 196,826 $ 195,007
(25,220)
$ 178,232 $ 171,510 $ 173,132 $ 174,503 $ 169,787
(68,951)
(2,312)
943
(68,951)
(1,774)
858
(22,323)
(22,326)
(23,401)
(24,510)
$ 2,819,627 $2,434,079 $2,354,507 $2,281,234 $2,188,067
(69,744)
(2,989)
1,545
$ 2,749,445 $2,364,180 $2,284,640 $2,210,914 $2,116,879
(68,951)
(2,312)
943
(68,951)
(1,774)
858
(68,951)
(1,661)
713
(68,951)
(2,151)
920
(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 54.
Table 50 Quarterly Reconciliations to GAAP Financial Measures (1 )
(Dollars in millions)
Fourth
Third
Second
First
Fourth
Third
Second
First
2020 Quarters
2019 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
$ 271,020 $ 267,323 $ 266,316 $ 264,534 $ 266,900 $ 270,430 $ 267,975 $ 266,217
(68,951)
(2,173)
910
(68,951)
(68,951)
(1,976)
(1,640)
855
790
(68,951)
(1,655)
728
(68,951)
(68,951)
(1,678)
(1,707)
730
752
(68,951)
(1,736)
770
(68,951)
(1,763)
841
$ 200,806 $ 197,251 $ 196,515 $ 194,656 $ 197,001 $ 200,524 $ 198,058 $ 196,344
(24,180)
(23,427)
(23,427)
(23,456)
(23,461)
(23,800)
(22,537)
(22,326)
Tangible common shareholders’ equity
$ 176,626
$ 173,824 $ 173,088 $ 171,200 $ 173,540 $ 176,724 $ 175,521 $ 174,018
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
$ 272,924 $ 268,850 $ 265,637 $ 264,918 $ 264,810 $ 268,387 $ 271,408 $ 267,010
(68,951)
(2,151)
920
(68,951)
(68,951)
(2,185)
(1,630)
910
789
(68,951)
(1,646)
790
(68,951)
(68,951)
(1,661)
(1,690)
713
734
(68,951)
(1,718)
756
(68,951)
(1,747)
773
$ 202,742 $ 198,624 $ 195,845 $ 195,111 $ 194,911 $ 198,480 $ 201,495 $ 197,085
(24,510)
(23,427)
(23,427)
(23,427)
(23,401)
(23,606)
(24,689)
(22,326)
Tangible common shareholders’ equity
$ 178,232
$ 175,197 $ 172,418 $ 171,684 $ 171,510 $ 174,874 $ 176,806 $ 174,759
Reconciliation of period-end assets to period-end tangible assets
Assets
Goodwill
Intangible assets (excluding MSRs)
Related deferred tax liabilities
Tangible assets
$ 2,819,627 $ 2,738,452 $2,741,688 $ 2,619,954 $ 2,434,079 $2,426,330 $ 2,395,892 $ 2,377,164
(68,951)
(2,151)
920
(68,951)
(68,951)
(2,185)
(1,630)
910
789
(68,951)
(1,646)
790
(68,951)
(68,951)
(1,661)
(1,690)
713
734
(68,951)
(1,718)
756
(68,951)
(1,747)
773
$ 2,749,445 $ 2,668,226 $2,671,896 $ 2,550,147 $ 2,364,180 $2,356,423 $ 2,325,979 $ 2,307,239
(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 54.
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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
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113
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115
(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
U.S. commercial
Non-U.S. commercial
Commercial real estate (4 )
Commercial lease financing
U.S. small business commercial (5 )
Total commercial loans excluding loans accounted for under the fair value option
Commercial loans accounted for under the fair value option (3 )
Total commercial
Less: Loans of business held for sale (6 )
Total loans and leases
2020
2019
December 31
2018
2017
2016
$ 223,555 $ 236,169 $ 208,557 $ 203,811 $ 191,797
66,443
92,278
9,214
95,962
626
456,320
1,051
457,371
57,744
96,285
—
96,342
166
454,348
928
455,276
48,286
98,338
—
91,166
202
446,549
682
447,231
40,208
97,608
—
90,998
192
465,175
594
465,769
34,311
78,708
—
91,363
124
428,061
735
428,796
288,728
90,460
60,364
17,098
456,650
36,469
493,119
5,946
499,065
—
270,372
89,397
57,355
22,375
439,499
12,993
452,492
6,034
458,526
(9,214)
$ 927,861 $ 983,426 $ 946,895 $ 936,749 $ 906,683
284,836
97,792
58,298
22,116
463,042
13,649
476,691
4,782
481,473
—
299,277
98,776
60,845
22,534
481,432
14,565
495,997
3,667
499,664
—
307,048
104,966
62,689
19,880
494,583
15,333
509,916
7,741
517,657
—
(1 )
Includes primarily auto and specialty lending loans and leases of $46.4 billion, $50.4 billion, $50.1 billion, $52.4 billion and $50.7 billion, U.S. securities-based lending loans of $41.1 billion,
$36.7 billion, $37.0 billion, $39.8 billion and $40.1 billion and non-U.S. consumer loans of $3.0 billion, $2.8 billion, $2.9 billion, $3.0 billion and $3.0 billion at December 31, 2020, 2019,
2018, 2017 and 2016, respectively.
(2 ) Substantially all of other consumer at December 31, 2020, 2019, 2018 and 2017 is consumer overdrafts. Other consumer at December 31, 2016 also includes consumer finance loans of $465
million.
(3 ) Consumer loans accounted for under the fair value option include residential mortgage loans of $298 million, $257 million, $336 million, $567 million and $710 million, and home equity loans of
$437 million, $337 million, $346 million, $361 million and $341 million at December 31, 2020, 2019, 2018, 2017 and 2016, respectively. Commercial loans accounted for under the fair value
option include U.S. commercial loans of $2.9 billion, $4.7 billion, $2.5 billion, $2.6 billion and $2.9 billion, and non-U.S. commercial loans of $3.0 billion, $3.1 billion, $1.1 billion, $2.2 billion
and $3.1 billion at December 31, 2020, 2019, 2018, 2017 and 2016, respectively.
Includes U.S. commercial real estate loans of $57.2 billion, $59.0 billion, $56.6 billion, $54.8 billion and $54.3 billion, and non-U.S. commercial real estate loans of $3.2 billion, $3.7 billion,
$4.2 billion, $3.5 billion and $3.1 billion at December 31, 2020, 2019, 2018, 2017 and 2016, respectively.
Includes card-related products.
(5 )
(6 ) Represents non-U.S. credit card loans, which were included in assets of business held for sale on the Consolidated Balance Sheet.
(4 )
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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
U.S. commercial
Non-U.S. commercial
Commercial real estate
Commercial lease financing
U.S. small business commercial
Total commercial (3 )
Total nonperforming loans and leases
Foreclosed properties
2020
2019
December 31
2018
2017
2016
$
2,005 $
1,470 $
649
71
—
2,725
1,243
418
404
87
2,152
75
2,227
4,952
164
536
47
—
2,053
1,094
43
280
32
1,449
50
1,499
3,552
285
1,893 $
1,893
56
—
3,842
2,476 $
2,644
46
—
5,166
794
80
156
18
1,048
54
1,102
4,944
300
814
299
112
24
1,249
55
1,304
6,470
288
3,056
2,918
28
2
6,004
1,256
279
72
36
1,643
60
1,703
7,707
377
8,084
Total nonperforming loans, leases and foreclosed properties
$
5,116 $
3,837 $
5,244 $
6,758 $
(1 ) Balances exclude foreclosed properties insured by certain government-guaranteed loans, principally FHA-insured loans, that entered foreclosure of $119 million, $260 million, $488 million, $801
(2 )
(3 )
million and $1.2 billion at December 31, 2020, 2019, 2018, 2017 and 2016, respectively.
In 2020, $372 million in interest income was estimated to be contractually due on $2.7 billion of consumer loans and leases classified as nonperforming at December 31, 2020, as presented in
the table above, plus $4.4 billion of TDRs classified as performing at December 31, 2020. Approximately $254 million of the estimated $372 million in contractual interest was received and
included in interest income for 2020.
In 2020, $115 million in interest income was estimated to be contractually due on $2.2 billion of commercial loans and leases classified as nonperforming at December 31, 2020, as presented
in the table above, plus $1.0 billion of TDRs classified as performing at December 31, 2020. Approximately $71 million of the estimated $115 million in contractual interest was received and
included in interest income for 2020.
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
2020
2019
December 31
2018
2017
2016
$
$
762
903
—
33
—
1,698
1,088 $
1,042
—
33
—
2,163
228
10
6
25
269
115
384
106
8
19
20
153
97
250
1,884 $
3,230 $
994
—
38
—
2,916
197
—
4
29
230
84
314
900
—
40
—
4,170
144
3
4
19
170
75
245
$
2,082 $
2,413 $
3,230 $
4,415 $
4,793
782
66
34
4
5,679
106
5
7
19
137
71
208
5,887
(1 ) Our policy is to classify consumer real estate-secured loans as nonperforming at 90 days past due, except for the fully-insured loan portfolio and loans accounted for under the fair value option.
(2 ) Balances are fully-insured loans.
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Table IV Selected Loan Maturity Data (1 , 2 )
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(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 )
(3 ) Loan maturities include non-U.S. commercial and commercial real estate loans.
Includes loans accounted for under the fair value option.
Due in One
Year or Less
82,577
14,073
33,196
129,846
$
$
27 %
December 31, 2020
Due After One
Year Through
Five Years
Due After
Five Years
$
$
$
$
198,898
37,552
54,488
290,938
60 %
46,911
244,027
290,938
$
$
$
$
46,642
5,552
8,989
61,183
$
$
Total
328,117
57,177
96,673
481,967
13 %
100 %
32,280
28,903
61,183
Table V Allowance for Credit Losses (1 )
(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 (2 )
Direct/Indirect consumer
Other consumer
Total consumer charge-offs
U.S. commercial (3 )
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 (2 )
Direct/Indirect consumer
Other consumer
Total consumer recoveries
U.S. commercial (4 )
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 (5 )
Total allowance for loan and lease losses, December 31
Less: Allowance included in assets of business held for sale (6 )
Allowance for loan and lease losses, December 31
Reserve for unfunded lending commitments, January 1
Provision for unfunded lending commitments
Other (5 )
Reserve for unfunded lending commitments, December 31
Allowance for credit losses, December 31
2020
2019
2018
2017
2016
$ 12,358 $
9,601 $ 10,393 $ 11,237 $ 12,234
(40)
(58)
(2,967)
—
(372)
(307)
(3,744)
(1,163)
(168)
(275)
(69)
(1,675)
(5,419)
(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)
70
131
618
—
250
23
1,092
178
13
5
10
206
1,298
(4,121)
10,565
—
18,802
—
18,802
1,123
755
—
1,878
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
$ 20,680 $ 10,229 $ 10,398 $ 11,170 $ 11,999
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
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
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 ) On January 1, 2020, the Corporation adopted the CECL accounting standard, which increased the allowance for loan and lease losses by $2.9 billion and the reserve for unfunded lending
commitments by $310 million. For more information, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements.
(2 ) Represents amounts related to the non-U.S. credit card loan portfolio, which was sold in 2017.
(3 )
Includes U.S. small business commercial charge-offs of $321 million, $320 million, $287 million, $258 million and $253 million in 2020, 2019, 2018, 2017 and 2016, respectively.
Includes U.S. small business commercial recoveries of $54 million, $48 million, $47 million, $43 million and $45 million in 2020, 2019, 2018, 2017 and 2016, respectively.
(4 )
(5 ) Primarily represents write-offs of purchased credit-impaired loans for years prior to 2020, the net impact of portfolio sales, consolidations and deconsolidations, foreign currency translation
adjustments, transfers to held for sale and certain other reclassifications.
(6 ) Represents allowance related to the non-U.S. credit card loan portfolio, which was sold in 2017.
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Table V Allowance for Credit Losses (continued)
(Dollars in millions)
Loan and allowance ratios (7) :
Loans and leases outstanding at December 31 (8)
Allowance for loan and lease losses as a percentage of total loans and leases outstanding
at December 31 (8 )
Consumer allowance for loan and lease losses as a percentage of total consumer loans and
leases outstanding at December 31 (9 )
Commercial allowance for loan and lease losses as a percentage of total commercial loans
and leases outstanding at December 31 (10 )
Average loans and leases outstanding (8 )
Net charge-offs as a percentage of average loans and leases outstanding (8 )
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 (11 )
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 (11 )
2020
2019
2018
2017
2016
$921,180
$975,091
$942,546
$931,039
$908,812
2.04 %
0.97 %
1.02 %
1.12 %
1.26 %
2.35
0.98
1.08
1.18
1.36
1.77
$974,281
0.96
$951,583
0.97
$927,531
1.05
$911,988
1.16
$892,255
0.42 %
0.38 %
0.41 %
0.44 %
0.43 %
380
4.56
265
2.58
194
2.55
161
2.61
149
3.00
$ 9,854
$ 4,151
$ 4,031
$ 3,971
$ 3,951
181 %
148 %
113 %
99 %
98 %
(7 ) 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.
(8 ) Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option of $6.7 billion, $8.3 billion, $4.3 billion, $5.7 billion and $7.1 billion at
December 31, 2020, 2019, 2018, 2017 and 2016, respectively. Average loans accounted for under the fair value option were $8.2 billion, $6.8 billion, $5.5 billion, $6.7 billion and $8.2 billion
in 2020, 2019, 2018, 2017 and 2016, respectively.
(9 ) Excludes consumer loans accounted for under the fair value option of $735 million, $594 million, $682 million, $928 million and $1.1 billion at December 31, 2020, 2019, 2018, 2017 and
2016, respectively.
(10 ) Excludes commercial loans accounted for under the fair value option of $5.9 billion, $7.7 billion, $3.7 billion, $4.8 billion and $6.0 billion at December 31, 2020, 2019, 2018, 2017 and 2016,
respectively.
(11 ) Primarily includes amounts related to credit card and unsecured consumer lending portfolios in Consumer Banking and, in 2017 and 2016, the non-U.S. credit card portfolio in All Other.
Table VI Allocation of the Allowance for Credit Losses by Product Type (1 )
(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 (2 )
Non-U.S. commercial
Commercial real estate
Commercial lease financing
Total commercial
Total allowance for loan and lease losses
Less: Allowance included in assets of
business held for sale (3 )
Allowance for loan and lease losses
Reserve for unfunded lending commitments
Allowance for credit losses
2020
2019
December 31
2018
2017
2016
Amount
Percent
of Total
Amount
Percent
of Total
Amount
Percent
of Total
Amount
Percent
of Total
Amount
Percent
of Total
$
459
399
8,420
—
752
41
10,071
5,043
1,241
2,285
162
8,731
2.44 % $
2.12
44.79
—
4.00
0.22
53.57
26.82
6.60
12.15
0.86
46.43
18,802 100.00 %
325
221
3,710
—
234
52
4,542
3,015
658
1,042
159
4,874
9,416 100.00 %
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
9,601 100.00 %
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 %
15.14
25.56
2.12
2.13
0.44
54.21
28.97
7.61
8.01
1.20
45.79
10,393 100.00 %
11,480 100.00 %
—
18,802
1,878
$ 20,680
—
9,416
813
$ 10,229
—
9,601
797
$ 10,398
—
10,393
777
$ 11,170
(243)
11,237
762
$ 11,999
(1 ) On January 1, 2020, the Corporation adopted the CECL accounting standard. For more information, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial
(2 )
Statements.
Includes allowance for loan and lease losses for U.S. small business commercial loans of $1.5 billion, $523 million, $474 million, $439 million and $416 million at December 31, 2020, 2019,
2018, 2017 and 2016, respectively.
(3 ) Represents allowance for loan and lease losses related to the non-U.S. credit card loan portfolio, which was sold in 2017.
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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 and Allowance for Credit Losses
Note 6 – Securitizations and Other Variable Interest Entities
Note 7 – Goodwill and Intangible Assets
Note 8 – Leases
Note 9 – Deposits
Note 10 – Federal Funds Sold or Purchased, Securities Financing Agreements, Short-term Borrowings
and Restricted Cash
Note 11 – Long-term Debt
Note 12 – Commitments and Contingencies
Note 13 – Shareholders’ Equity
Note 14 – Accumulated Other Comprehensive Income
Note 15 – Earnings Per Common Share
Note 16 – Regulatory Requirements and Restrictions
Note 17 – Employee Benefit Plans
Note 18 – Stock-based Compensation Plans
Note 19 – Income Taxes
Note 20 – Fair Value Measurements
Note 21 – Fair Value Option
Note 22 – Fair Value of Financial Instruments
Note 23 – Business Segment Information
Note 24 – Parent Company Information
Note 25 – Performance by Geographical Area
Glossary
Acronyms
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Page
120
120
121
122
123
124
133
134
141
144
152
156
157
157
158
160
161
166
168
168
169
170
175
175
177
186
188
189
192
194
195
197
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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
to permit
that
preparation of
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
the
of unauthorized acquisition, use, or disposition of
Corporation’s assets that could have a material effect on the
financial statements.
recorded as necessary
financial statements
transactions are
of
the
assessed
Management
effectiveness
the
Corporation’s internal control over financial reporting as of
December 31, 2020 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, 2020, the Corporation’s internal control over
financial reporting is effective.
31,
2020
The Corporation’s internal control over financial reporting as
of December
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, 2020.
audited
been
has
Brian T. Moynihan
Chairman, Chief Executive Officer and President
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.
Paul M. Donofrio
Chief Financial Officer
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Report of Independent Registered Public Accounting Firm
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Bank of America Corporation and Subsidiaries
To the Board of Directors and Shareholders of Bank
of America Corporation:
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, 2020 and 2019, and the
related consolidated statements of income, comprehensive
income, changes in shareholders’ equity and cash flows for
each of the three years in the period ended December 31,
2020, 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, 2020, 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, 2020
and 2019, and the results of its operations and its cash flows
for each of the three years in the period ended December 31,
2020
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,
-
2020, based on criteria established in Internal Control
Integrated Framework (2013) issued by the COSO.
Change in Accounting Principle
As discussed
financial
to
statements, the Corporation changed the manner in which it
accounts for credit losses on certain financial instruments in
2020.
the consolidated
in Note 1
is responsible
Basis for Opinions
The Corporation’s management
for 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 financial statements are free of
material misstatement, whether due to error or fraud, and
whether effective internal control over financial reporting was
in all material respects. Our audits of the
maintained
consolidated
performing
statements
procedures to assess the risks of material 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
included
financial
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
included obtaining an
reporting
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.
financial
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 the company; (ii) provide
reasonable assurance 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.
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.
Critical Audit Matters
The critical audit matters communicated below are matters
arising from the current period audit of the consolidated
financial statements that were communicated or required 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 - Commercial and
Consumer Card Loans
As described in Notes 1 and 5 to the consolidated financial
statements, the allowance for loan and lease losses represents
management’s estimate of the expected credit losses in the
Corporation’s loan and lease portfolio, excluding loans and
unfunded lending commitments accounted for under the fair
value option. As of December 31, 2020, the allowance for loan
and lease losses was $18.8 billion on total loans and leases of
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119
also included the involvement of professionals with specialized
skill and knowledge to assist in evaluating the appropriateness
of certain
forecast models, the reasonableness of
economic forecast scenarios and related weightings and the
reasonableness of certain qualitative reserves.
loss
carries
certain
the Corporation
Valuation of Certain Level 3 Financial Instruments
As described in Notes 1 and 20 to the consolidated financial
statements,
financial
instruments at fair value, which includes $10.0 billion of assets
and $7.4 billion of liabilities classified as Level 3 fair value
measurements on a recurring basis and $1.7 billion of assets
classified as Level 3 fair value measurements on a nonrecurring
basis, for which the determination of fair value requires
significant management
The
Corporation determines the fair value of Level 3 financial
flow
instruments using pricing models, discounted cash
methodologies, or similar techniques that require inputs that
are both unobservable and are significant to the overall fair
value measurement. Unobservable inputs, such as volatility or
price, may
quantitative-based
extrapolations or other internal methodologies which incorporate
management estimates and available market information.
judgment or estimation.
determined
using
be
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, which in
turn led to a high degree of auditor judgment and effort in
performing
of
including
professionals with specialized skill and knowledge to assist in
evaluating certain audit evidence.
involvement
procedures,
the
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 financial instruments
the
and
independently developed estimate of fair value. Developing the
independent estimate involved testing the completeness and
accuracy of data provided by management and evaluating the
reasonableness of management’s assumptions used to develop
the significant unobservable inputs.
comparison of management’s estimate
to
Charlotte, North Carolina
February 24, 2021
We have served as the Corporation’s auditor since 1958.
include
through
variables
information
$921.2 billion, which excludes loans accounted for under the
fair value option. For commercial and consumer card loans, the
expected credit loss is estimated using quantitative methods
that consider a variety of factors such as historical loss
experience, the current credit quality of the portfolio as well as
an economic outlook over the life of the loan. In its loss
forecasting framework, the Corporation incorporates forward
looking
the use of macroeconomic
scenarios applied over the forecasted life of the assets. These
macroeconomic scenarios
that have
historically been key drivers of increases and decreases in
credit losses. These variables include, but are not limited to,
unemployment rates, real estate prices, gross domestic product
levels and corporate bond spreads. The scenarios that are
chosen and the amount of weighting given to each scenario
depend on a variety of factors including recent economic events,
leading economic indicators, views of internal as well as third-
party economists and industry trends. Also included in the
allowance for loan losses are qualitative reserves to cover
losses that are expected but, in the Corporation's assessment,
may not be adequately reflected in the quantitative methods or
the economic assumptions. Factors that the Corporation
considers include changes in lending policies and procedures,
business conditions, the nature and size of the portfolio,
portfolio concentrations, the volume and severity of past due
loans and nonaccrual loans, the effect of external factors such
as competition, and legal and regulatory requirements, among
inherent
others. Further,
uncertainty in quantitative models that are built on historical
data.
the Corporation considers
the
The principal considerations for our determination that
performing procedures relating to the allowance for loan and
lease losses for the commercial and consumer card portfolios is
a critical audit matter are (i) the significant judgment and
estimation by management in developing lifetime economic
forecast scenarios, related weightings to each scenario and
certain qualitative reserves, which in turn led to a high degree of
in performing
auditor
procedures and in evaluating audit evidence obtained, and (ii)
the audit effort involved professionals with specialized skill and
knowledge to assist in evaluating certain audit evidence.
judgment, subjectivity and effort
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, including
controls over the evaluation and approval of models, forecast
scenarios and related weightings, and qualitative reserves.
testing
These procedures also
management’s process for estimating the allowance for loan
losses, including (i) evaluating the appropriateness of the loss
the
forecast models and methodology,
(ii) evaluating
reasonableness of certain macroeconomic variables,
(iii)
evaluating the reasonableness of management’s development,
selection and weighting of economic forecast scenarios used in
the loss forecast models, (iv) testing the completeness and
accuracy of data used in the estimate, and (v) evaluating certain
qualitative reserves made to the model output results to
determine the overall allowance for loan losses. The procedures
included, among others,
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Bank of America Corporation and Subsidiaries
Consolidated Statement of Income
(In millions, except per share information)
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
62539financials
120
2020
2019
2018
$
$
51,585
8,225
43,360
71,236 $
22,345
48,891
66,769
18,607
48,162
34,551
8,355
(738)
42,168
85,528
11,320
32,725
7,141
5,222
3,433
1,701
1,694
3,297
55,213
18,995
1,101
33,015
9,034
304
42,353
91,244
33,078
9,008
772
42,858
91,020
3,590
3,282
31,977
6,588
4,646
2,762
1,934
1,597
5,396
54,900
32,754
5,324
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
17,894 $
27,430 $
1,421
1,432
16,473 $
25,998 $
$
$
$
1.88 $
1.87
8,753.2
8,796.9
2.77 $
2.75
9,390.5
9,442.9
2.64
2.61
10,096.5
10,236.9
2020
2019
2018
$
17,894 $
27,430 $
28,147
4,799
(498)
826
(98)
(52)
4,977
5,875
(963)
616
136
(86)
5,578
$
22,871 $
33,008 $
(3,953)
749
(53)
(405)
(254)
(3,916)
24,231
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See accompanying Notes to Consolidated Financial Statements.
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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 $108,856 and $50,364 measured at fair value)
Trading account assets (includes $91,510 and $90,946 pledged as collateral)
Derivative assets
Debt securities:
Carried at fair value
Held-to-maturity, at cost (fair value – $448,180 and $219,821)
Total debt securities
Loans and leases (includes $6,681 and $8,335 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 $1,585 and $3,709 measured at fair value)
Customer and other receivables
Other assets (includes $15,718 and $15,518 measured at fair value)
Total assets
Liabilities
Deposits in U.S. offices:
Noninterest-bearing
Interest-bearing (includes $481 and $508 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 $135,391 and $16,008 measured at fair value)
Trading account liabilities
Derivative liabilities
Short-term borrowings (includes $5,874 and $3,941 measured at fair value)
Accrued expenses and other liabilities (includes $16,311 and $15,434 measured at fair value
and $1,878 and $813 of reserve for unfunded lending commitments)
Long-term debt (includes $32,200 and $34,975 measured at fair value)
Total liabilities
Commitments and contingencies (Note 6 – Securitizations and Other Variable Interest Entities
and Note 12 – Commitments and Contingencies)
Shareholders’ equity
Preferred stock, $0.01 par value; authorized – 100,000,000 shares; issued and outstanding – 3,931,440 and 3,887,440 shares
Common stock and additional paid-in capital, $0.01 par value; authorized – 12,800,000,000 shares;
issued and outstanding – 8,650,814,105 and 8,836,148,954 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 the 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 (includes $22 and $0 of non-recourse short-term borrowings)
Long-term debt (includes $7,053 and $8,717 of non-recourse debt)
All other liabilities (includes $16 and $19 of non-recourse liabilities)
Total liabilities of consolidated variable interest entities
See accompanying Notes to Consolidated Financial Statements.
62539financials
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December 31
2020
2019
$
36,430 $
344,033
380,463
6,546
304,058
198,854
47,179
30,152
131,408
161,560
7,107
274,597
229,826
40,485
246,601
438,249
684,850
927,861
(18,802)
909,059
11,000
68,951
9,243
64,221
135,203
256,467
215,730
472,197
983,426
(9,416)
974,010
10,561
68,951
9,158
55,937
129,690
$ 2,819,627 $ 2,434,079
$
650,674 $
1,038,341
403,305
940,731
17,698
88,767
1,795,480
170,323
71,320
45,526
19,321
181,799
262,934
2,546,703
13,719
77,048
1,434,803
165,109
83,270
38,229
24,204
182,798
240,856
2,169,269
24,510
23,401
85,982
164,088
(1,656)
272,924
91,723
156,319
(6,633)
264,810
$ 2,819,627 $ 2,434,079
$
$
$
$
5,225
23,636
(1,693)
21,943
1,387
28,555
454
7,053
16
7,523
$
$
$
$
5,811
38,837
(807)
38,030
540
44,381
2,175
8,718
22
10,915
Bank of America 2020 121
Bank of America 2020 121
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Bank of America Corporation and Subsidiaries
Bank of America Corporation and Subsidiaries
Bank of America Corporation and Subsidiaries
Consolidated Statement of Changes in Shareholders’ Equity
Consolidated Statement of Changes in Shareholders’ Equity
Prefe
Sto
rred
ck
2,323
$ 2
Common Stock and
Additional Paid-in Capital
Shares
Amount
10,287.3 $
138,089 $
Accumulated
Other
Comprehensive
Income (Loss)
Total
Shareholders’
Equity
Retained
Earnings
113,816 $
(7,082) $
267,146
(32)
57
25
(In millions)
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
Issuance of preferred stock
Redemption of preferred stock
Common stock issued under employee plans, net, and other
Common stock repurchased
Balance, December 31, 2019
Cumulative adjustment for adoption of credit loss 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
4,515
(4,512)
58.2
(676.2)
$ 22,326
9,669.3 $
901
(20,094)
118,896 $
3,643
(2,568)
123.3
(956.5)
$ 23,401
8,836.1 $
971
(28,144)
91,723 $
Issuance of preferred stock
Redemption of preferred stock
Common stock issued under employee plans, net, and other
Common stock repurchased
Balance, December 31, 2020
2,181
(1,072)
41.7
(227.0)
$ 24,510
8,650.8 $
1,284
(7,025)
85,982 $
(1,270)
(3,953)
749
(53)
(405)
(254)
1,270
28,147
(5,424)
(1,451)
(12)
136,314 $
(12,211) $
5,875
(963)
616
136
(86)
165
27,430
(6,146)
(1,432)
(12)
156,319 $
(6,633) $
4,799
(498)
826
(98)
(52)
(2,406)
17,894
(6,289)
(1,421)
(9)
—
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
(2,406)
17,894
4,799
(498)
826
(98)
(52)
(6,289)
(1,421)
2,181
(1,072)
1,275
(7,025)
164,088 $
(1,656) $
272,924
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See accompanying Notes to Consolidated Financial Statements.
See accompanying Notes to Consolidated Financial Statements.
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Bank of America Corporation and Subsidiaries
Bank of America Corporation and Subsidiaries
Bank of America Corporation and Subsidiaries
Consolidated Statement of Cash Flows
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
62539financials
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2020
2019
2018
$
17,894 $
27,430 $
28,147
11,320
(411)
1,843
4,101
(1,737)
2,031
—
3,590
(217)
1,729
2,066
2,435
1,974
2,072
3,282
(154)
2,063
1,824
3,041
1,729
—
(19,657)
(28,874)
(28,071)
19,049
30,191
28,972
16,942
(12,883)
(4,385)
3,886
37,993
561
(29,461)
77,524
91,084
(194,877)
93,835
(257,535)
13,351
(5,229)
36,571
(3,489)
(177,665)
360,677
5,214
(4,893)
57,013
(47,948)
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)
2,181
(1,072)
(7,025)
(7,727)
(601)
355,819
2,756
218,903
161,560
380,463 $
3,643
(2,568)
(28,144)
(5,934)
(698)
3,377
(368)
(15,844)
177,404
161,560 $
(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)
4,515
(4,512)
(20,094)
(6,895)
(651)
53,118
(1,200)
19,970
157,434
177,404
8,662 $
2,894
22,196 $
4,359
19,087
2,470
$
$
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122 Bank of America 2020
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See accompanying Notes to Consolidated Financial Statements.
See accompanying Notes to Consolidated Financial Statements.
See accompanying Notes to Consolidated Financial Statements.
See accompanying Notes to Consolidated Financial Statements.
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Bank of America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
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.
New Accounting Standards
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 (ECL) 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. Prior to
January 1, 2020, the allowance
losses was
determined based on management’s estimate of probable
incurred losses.
for credit
Reference Rate Reform
The Financial Accounting Standards Board (FASB) issued a new
accounting standard in March 2020, which was subsequently
amended in January 2021, related to contracts or hedging
relationships that reference London Interbank Offered Rate
(LIBOR) or other reference rates that are expected to be
discontinued due to reference rate reform. The new standard
provides for optional expedients and other guidance regarding
the accounting related to modifications of contracts, hedging
124
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relationships and other transactions affected by reference rate
reform. The Corporation has elected to retrospectively adopt the
new standard as of January 1, 2020. The adoption did not have
a material accounting impact on the Corporation’s consolidated
financial position or results of operations; however, it did ease
the administrative burden in accounting for certain effects of
reference rate reform.
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
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.
regulations, and amounts due
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
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
to
counterparties when
financing
agreements do not create material credit risk due to these
collateral provisions; therefore, an allowance for loan losses is
not necessary.
return collateral pledged
appropriate. Securities
from or
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, 2020 and 2019, the fair value of this collateral
was $812.4 billion and $693.0 billion, of which $758.5 billion
and $593.8 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.
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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.
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 include derivatives 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
risk management activities). The
(referred
foreign currency
Corporation manages
exchange rate sensitivity predominantly through the use of
derivatives. Derivatives utilized by the Corporation include
swaps, futures and forward settlement contracts, and option
contracts.
to as other
rate and
interest
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
flow methodologies or similar
models, discounted cash
techniques for which the 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
62539financials
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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.
for undertaking
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
various accounting hedges.
strategies
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
forecasted transaction. The
item or
flows of a hedged
Corporation discontinues hedge accounting when
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.
it
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-bearing
liabilities, such adjustments are amortized to earnings over the
remaining life of the respective asset or liability.
interest-earning assets and
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
income (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 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
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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 asset and liability management (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 market making and similar activities. HTM debt
securities are debt securities that management has the intent
and ability to hold to maturity and are reported at amortized
cost.
The Corporation evaluates each AFS security where the value
has declined below amortized cost. 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 through
earnings. For AFS debt securities the Corporation intends to
hold, the Corporation evaluates the debt securities for ECL
except for debt securities that are guaranteed by the U.S.
Treasury, U.S. government agencies or sovereign entities of high
credit quality where the Corporation applies a zero credit loss
assumption. For the remaining AFS debt securities, the
Corporation considers qualitative parameters such as internal
and external credit ratings and the value of underlying collateral.
If an AFS debt security fails any of the qualitative parameters, a
discounted cash flow analysis is used by the Corporation to
determine if a portion of the unrealized loss is a result of an
expected credit loss. The Corporation will then recognize either
credit loss expense or a reversal of credit loss expense in other
income for the amount necessary to adjust the debt securities
valuation allowance to its current estimate of excepted credit
losses. Cash flows expected to be collected are estimated
using all relevant information available such as remaining
payment terms, prepayment speeds, the financial condition of
the issuer, expected defaults and the value of the underlying
collateral. 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 allowance recorded is limited to
the difference between the amortized cost and the fair value of
the asset.
The Corporation separately evaluates its HTM debt securities
for any credit losses, of which substantially all qualify for the
zero loss assumption. For the remaining securities, the
Corporation performs a discounted cash flow analysis to
estimate any credit losses which are then recognized as part of
the allowance for credit losses.
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.
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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
for purchased
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, 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.
for
Under applicable accounting guidance,
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 includes both the allowance for
loan and lease losses and the reserve for unfunded lending
commitments and represents management’s estimate of the
ECL in the Corporation’s loan and lease portfolio, excluding
loans and unfunded lending commitments accounted for under
the fair value option. The ECL on funded consumer and
commercial loans and leases is referred to as the allowance for
loan and lease losses and is reported separately as a contra-
asset to loans and leases on the Consolidated Balance Sheet.
The ECL for unfunded lending commitments, including home
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equity lines of credit (HELOCs), standby letters of credit (SBLCs)
and binding unfunded loan 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.
For loans and leases, the ECL is typically estimated using
quantitative methods that consider a variety of factors such as
historical loss experience, the current credit quality of the
portfolio as well as an economic outlook over the life of the
loan. The life of the loan for closed-ended products is based on
the contractual maturity of the loan adjusted for any expected
prepayments. The contractual maturity includes any extension
options that are at the sole discretion of the borrower. For open-
ended products (e.g., lines of credit), the ECL is determined
based on the maximum repayment term associated with future
draws from credit lines unless those lines of credit are
unconditionally cancellable (e.g., credit cards) in which case the
Corporation does not record any allowance.
In
its
loss
framework,
forecasting
the Corporation
incorporates forward-looking information through the use of
macroeconomic scenarios applied over the forecasted life of the
assets. These macroeconomic scenarios include variables that
have historically been key drivers of increases and decreases in
credit losses. These variables include, but are not limited to,
unemployment rates, real estate prices, gross domestic product
levels and corporate bond spreads. As any one economic
outlook is inherently uncertain, the Corporation leverages
multiple scenarios. The scenarios that are chosen each quarter
and the weighting given to each scenario depend on a variety of
factors including recent economic events, leading economic
indicators, views of internal and third-party economists and
industry trends.
The estimate of credit losses includes expected recoveries
of amounts previously charged off (i.e., negative allowance). If a
loan has been charged off, the expected cash flows on the loan
are not limited by the current amortized cost balance. Instead,
expected cash flows can be assumed up to the unpaid principal
balance immediately prior to the charge-off.
The allowance for loan and lease losses for troubled debt
restructurings (TDR) is measured based on the present value of
projected future lifetime principal and interest cash flows
discounted at the loan’s original effective interest rate, or in
cases where foreclosure is probable or the loan is collateral
dependent, at the loan’s collateral value or its observable
market price, if available. The measurement of ECL for the
renegotiated consumer credit card TDR portfolio is based on the
present value of projected cash flows discounted using the
average TDR portfolio contractual interest rate, excluding
promotionally priced loans, in effect prior to restructuring.
Projected cash flows for TDRs use the same economic outlook
as discussed above. 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.
Also included in the allowance for loan and lease losses are
qualitative reserves to cover losses that are expected but, in the
Corporation's assessment, may not be adequately reflected in
the quantitative methods or
the economic assumptions
described above. For example, factors that the Corporation
considers include changes in lending policies and procedures,
business conditions, the nature and size of the portfolio,
portfolio concentrations, the volume and severity of past due
loans and nonaccrual loans, the effect of external factors such
as competition, and legal and regulatory requirements, among
62539financials
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inherent
others. Further,
uncertainty in quantitative models that are built on historical
data.
the Corporation considers
the
generally
With the exception of the Corporation's credit card portfolio,
the Corporation does not include reserves for interest receivable
in the measurement of the allowance for credit losses as the
Corporation
as
classifies
nonperforming at 90 days past due and reverses interest
income for these loans at that time. For credit card loans, the
Corporation reserves for interest and fees as part of the
allowance for loan and lease losses. Upon charge-off of a credit
card loan, the Corporation reverses the interest and fee income
against the income statement line item where it was originally
recorded.
consumer
loans
The Corporation has identified the following three portfolio
segments and measures the allowance for credit losses using
the following methods.
using
prepayments,
Consumer Real Estate
To estimate ECL for consumer loans secured by residential real
estate, the Corporation estimates the number of loans that will
default over the life of the existing portfolio, after factoring in
estimated
quantitative modeling
methodologies. The attributes that are most significant in
estimating the Corporation’s ECL 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 estimates are based on the
Corporation’s historical experience with the loan portfolio,
adjusted to reflect the economic outlook. The outlook on the
unemployment rate and consumer real estate prices are key
factors that impact the frequency and severity of loss estimates.
The Corporation does not reserve for credit losses on the
unpaid principal balance of loans insured by the Federal
Housing Administration (FHA) and long-term standby loans, as
these loans are fully insured. The Corporation records a reserve
for unfunded lending commitments for the ECL associated with
the undrawn portion of the Corporation’s HELOCs, which can
only be canceled by the Corporation if certain criteria are met.
The ECL associated with these unfunded lending commitments
is calculated using the same models and methodologies noted
above and incorporate utilization assumptions at time of
default.
loans
these
For loans that are more than 180 days past due and
collateral-dependent TDRs, the Corporation bases the allowance
on the estimated fair value of the underlying collateral as of the
reporting date less costs to sell. The fair value of the collateral
securing
is generally determined using an
automated valuation model (AVM) that estimates the value of a
property by reference to market data including sales of
comparable properties and price
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
these
valuations, the Corporation believes that they are representative
of this portfolio in the aggregate.
trends specific
imprecision
inherent
there
to
in
is
For loans that are more than 180 days past due and
collateral-dependent TDRs, with
the
Corporation’s fully insured portfolio, the outstanding balance of
loans that is in excess of the estimated property value after
the exception of
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adjusting for costs to sell is charged off. If the estimated
property value decreases in periods subsequent to the initial
charge-off, the Corporation will record an additional charge-off;
however, if the value increases in periods subsequent to the
charge-off, the Corporation will adjust the allowance to account
for the increase but not to a level above the cumulative charge-
off amount.
Credit Cards and Other Consumer
Credit cards are revolving lines of credit without a defined
maturity date. The estimated life of a credit card receivable is
determined by estimating the amount and timing of expected
future payments
full payments,
(e.g., borrowers making
minimum payments or somewhere in between) that it will take
for a receivable balance to pay off. The ECL on the future
payments incorporates the spending behavior of a borrower
through time using key borrower-specific factors and the
economic outlook described above. The Corporation applies all
expected payments
in accordance with the Credit Card
Accountability Responsibility and Disclosure Act of 2009 (i.e.,
paying down the highest interest rate bucket first). Then
forecasted future payments are prioritized to pay off the oldest
balance until it is brought to zero or an expected charge-off
amount. Unemployment rate outlook, borrower credit score,
delinquency status and historical payment behavior are all key
inputs into the credit card receivable loss forecasting model.
Future draws on the credit card lines are excluded from the ECL
as they are unconditionally cancellable.
The ECL for the consumer vehicle lending portfolio is also
determined using quantitative methods supplemented with
qualitative analysis. The quantitative model estimates ECL
giving consideration to key borrower and loan characteristics
such as delinquency status, borrower credit score, LTV ratio,
underlying collateral type and collateral value.
Commercial
The ECL on commercial loans is forecasted using models that
estimate credit losses over the loan’s contractual life at an
individual loan level. The models use the contractual terms to
forecast future principal cash flows while also considering
expected prepayments. For open-ended commitments such as
revolving lines of credit, changes in funded balance are captured
by forecasting a borrower’s draw and payment behavior over the
remaining life of the commitment. For loans collateralized with
commercial real estate and for which the underlying asset is the
primary source of repayment, the loss forecasting models
consider key loan and customer attributes such as LTV ratio,
net operating income and debt service coverage, and captures
variations in behavior according to property type and region. The
outlook on the unemployment rate, gross domestic product, and
forecasted real estate prices are utilized to determine indicators
such as rent levels and vacancy rates, which impact the ECL
estimate. For all other commercial loans and leases, the loss
forecasting model determines the probabilities of transition to
different credit risk ratings or default at each point over the life
of the asset based on the borrower’s current credit risk rating,
industry sector, size of the exposure and the geographic market.
The severity of loss is determined based on the type of
collateral securing the exposure, the size of the exposure, the
borrower’s industry sector, any guarantors and the geographic
market. Assumptions of expected loss are conditioned to the
economic outlook, and the model considers key economic
variables such as unemployment rate, gross domestic product,
corporate bond spreads, real estate and other asset prices and
equity market returns.
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In addition to the allowance for loan and lease losses, the
Corporation also estimates ECL related to unfunded 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. Reserves are estimated for the unfunded exposure using
the same models and methodologies as the funded exposure
and are
lending
reserves
commitments.
for unfunded
reported as
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 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 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
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62539financials
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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 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.
COVID-19 Programs
The Corporation has implemented various consumer and
commercial loan modification programs to provide its borrowers
relief from the economic impacts of the COVID-19 pandemic (the
pandemic). In accordance with the Coronavirus Aid, Relief, and
Economic Security Act (CARES Act), the Corporation has elected
to not apply TDR classification to eligible COVID-19 related loan
modifications that were performed after March 1, 2020 to loans
that were current as of December 31, 2019. Accordingly, these
restructurings are not classified as TDRs. The availability of this
election expires upon the earlier of January 1, 2022 or 60 days
after the national emergency related to COVID-19 terminates. In
that
addition, for loans modified in response to the pandemic that do
not meet the above criteria (e.g., current payment status at
December 31, 2019), the Corporation is applying the guidance
included in an interagency statement issued by the bank
regulatory agencies. This guidance states
loan
modifications performed in light of the pandemic, including loan
payment deferrals that are up to six months in duration, that
were granted to borrowers who were current as of the
implementation date of a
loan modification program or
modifications granted under government mandated modification
programs, are not TDRs. For loan modifications that include a
payment deferral and are not TDRs, the borrowers' past due and
nonaccrual status have not been impacted during the deferral
period. The Corporation has continued to accrue interest during
the deferral period using a constant effective yield method. For
most mortgage, HELOC and commercial loan modifications, the
contractual interest that accrued during the deferral period is
payable at the maturity of the loan. The Corporation includes
these amounts with the unpaid principal balance when
computing its allowance for credit losses. Amounts that are
subsequently deemed uncollectible are written off against the
allowance for credit losses.
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. 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, upon the sale of a loan, are recognized
as part of the gain or loss in noninterest income. 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.
federal
Other Assets
For the Corporation’s financial assets that are measured at
amortized cost and are not included in debt securities or loans
and leases on the Consolidated Balance Sheet, the Corporation
evaluates these assets for ECL using various techniques. For
assets that are subject to collateral maintenance provisions,
including
funds sold and securities borrowed or
purchased under agreements to resell, where the collateral
consists of daily margining of liquid and marketable assets
where the margining is expected to be maintained into the
foreseeable future, the expected losses are assumed to be
zero. For all other assets, the Corporation performs qualitative
analyses, including consideration of historical losses and
current economic conditions, to estimate any ECL which are
then included in a valuation account that is recorded as a
contra-asset against the amortized cost basis of the financial
asset.
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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
liabilities are recognized based on the present value of the
remaining
the
Corporation’s incremental borrowing rate. Right-of-use assets
initially equal the lease liability, adjusted for any lease payments
made prior to lease commencement and for any lease
incentives.
lease payments and discounted using
lease commencement,
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
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.
its goodwill
impairment
testing,
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. The Corporation has an
unconditional option to bypass the qualitative assessment for
any reporting unit in any period and proceed directly to
performing the quantitative goodwill impairment test. The
Corporation may resume performing the qualitative assessment
in any subsequent period.
When performing the quantitative assessment, if the fair
value of the reporting unit exceeds its carrying value, goodwill of
the reporting unit would not be considered impaired. If the
carrying value of the reporting unit exceeds its fair value, a
goodwill impairment loss would be recognized for the amount by
which the reporting unit’s allocated equity exceeds its fair value.
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
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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
the VIE. The
consolidation status of the VIEs with which the Corporation is
involved may change as a result of such reassessments.
interests
financial
its
in
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
representations and
than standard
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
investors share
one or a
responsibility for the design of the trust or have control over the
significant activities of the trust through liquidation or other
substantive rights.
limited number of third-party
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
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that most significantly
the economic
activities
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.
impact
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 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.
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 than exchange-traded
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
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discounted
pricing models,
fair value of the assets or liabilities. Level 3 assets
and liabilities include financial instruments for which
the determination of fair value requires significant
management judgment or estimation. The fair value for
such assets and liabilities is generally determined
flow
using
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.
cash
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 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.
future because of
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.
fixed
rates
fees are
Interchange
Card Income
Card income includes annual, late and over-limit fees as well as
interchange, cash advances and other miscellaneous items
from credit and debit card transactions and from processing
card transactions for merchants. Card income is presented net
of direct costs.
recognized upon
settlement of the credit and debit card payment transactions
and are generally determined on a percentage basis for credit
cards and
the
corresponding payment network’s 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 and merchants 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
for debit cards based on
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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 processing and insufficient funds/overdraft transactions.
Commercial deposit-related fees are from the Corporation’s
Global Transaction Services business and consist of commercial
deposit and treasury management services, 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.
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.
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
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.
information
trade
to
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
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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
Financial advisory services consist of fees earned for
assisting clients with transactions related to mergers and
acquisitions and
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, 2020, 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.
Paycheck Protection Program
The Corporation is participating in the Paycheck Protection
Program (PPP), which is a loan program that originated from the
CARES Act and was subsequently expanded by the Paycheck
Protection Program and Health Care Enhancement Act. The PPP
is designed to provide U.S. small businesses with cash-flow
fully guaranteed by the Small
assistance through
loans
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the proceeds
Business Administration (SBA). If the borrower meets certain
criteria and uses
towards certain eligible
expenses, the borrower’s obligation to repay the loan can be
forgiven up to the full principal amount of the loan and any
accrued interest. Upon borrower forgiveness, the SBA pays the
Corporation for the principal and accrued interest owed on the
loan. If the full principal of the loan is not forgiven, the loan will
operate according to the original loan terms with the 100
percent SBA guaranty remaining. As of December 31, 2020, the
Corporation had approximately 332,000 PPP loans with a
carrying value of $22.7 billion. As compensation for originating
the loans, the Corporation received lender processing fees from
the SBA, which are capitalized, along with the loan origination
costs, and will be amortized over the loans’ contractual lives
and recognized as interest income. Upon forgiveness of a loan
and repayment by the SBA, any unrecognized net capitalized
fees and costs related to the loan will be recognized as interest
income in that period.
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 2020,
2019 and 2018. 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 23 – 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
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 (loss)
Total noninterest income
2020
2019
2018
$
34,029 $
9,790
903
4,128
2,735
51,585
1,943
987
974
4,321
8,225
$
43,360 $
43,086 $
11,806
4,843
5,196
6,305
71,236
7,188
7,208
1,249
6,700
22,345
48,891 $
$
3,954 $
1,702
5,656
3,834 $
1,963
5,797
5,991
1,150
7,141
10,708
3,866
14,574
4,698
861
1,621
7,180
34,551
8,355
(738)
42,168 $
6,588
1,086
7,674
10,241
3,661
13,902
2,998
1,184
1,460
5,642
33,015
9,034
304
42,353 $
$
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
2,722
1,347
1,258
5,327
33,078
9,008
772
42,858
(1) Gross interchange fees were $9.2 billion, $10.0 billion and $9.5 billion for 2020, 2019 and 2018, respectively, and are presented net of $5.5 billion, $6.2 billion and $5.6 billion of expenses for
rewards and partner payments as well as certain other card costs for the same periods.
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NOTE 3 Derivatives
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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 in qualifying hedge accounting relationships.
in qualifying hedge
Derivatives that are not designated
risk
accounting
referred
the
management derivatives. For more
to as other
information on
relationships are
62539financials
134
instruments
Corporation’s derivatives and hedging activities, see Note 1 –
Summary of Significant Accounting Principles. The following
tables present derivative
the
Consolidated Balance Sheet in derivative assets and liabilities
at December 31, 2020 and 2019. 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.
included on
Gross Derivative Assets
Gross Derivative Liabilities
December 31, 2020
Trading and
Other Risk
Management
Derivatives
Qualifying
Accounting
Hedges
Contract/
Notional (1)
Trading and
Other Risk
Management
Derivatives
Qualifying
Accounting
Hedges
Total
Total
(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
$ 13,242.8 $
3,222.2
1,530.5
1,545.8
199.9 $
3.5
—
45.3
37.1
53.4
—
5.0
13.3
0.3
—
52.6
1.9
2.0
—
1.5
2.3
0.2
1,475.8
3,710.7
289.6
279.3
320.2
106.2
599.1
541.2
36.4
63.6
24.6
24.7
322.7
63.6
301.5
68.6
10.9 $
0.1
—
—
0.3
—
—
—
—
—
—
—
—
—
—
—
—
—
210.8 $
3.6
—
45.3
209.3 $
3.6
40.5
—
1.3 $
—
—
—
210.6
3.6
40.5
—
37.4
53.4
—
5.0
13.3
0.3
—
52.6
1.9
2.0
—
1.5
2.3
0.2
39.7
54.5
4.8
—
14.5
1.4
48.8
—
4.4
1.0
1.4
—
4.4
1.0
0.6
0.5
—
—
—
—
—
—
—
—
—
—
—
—
40.3
55.0
4.8
—
14.5
1.4
48.8
—
4.4
1.0
1.4
—
4.4
1.0
4.4
0.6
423.3 $
$
—
—
11.3 $
$
1.9
0.4
431.6 $
4.4
0.6
434.6 $
(344.9)
(42.5)
47.2
—
—
2.4 $
$
1.9
0.4
434.0
(344.9)
(43.6)
45.5
(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 $2.2
billion and $269.8 billion at December 31, 2020.
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(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)
Trading and
Other Risk
Management
Derivatives
Qualifying
Accounting
Hedges
Total
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
5.4
0.8
334.3 $
$
—
—
10.5 $
$
2.0
0.4
335.5 $
5.4
0.8
344.8 $
(270.4)
(33.9)
40.5
0.9
0.3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
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.
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, 2020 and 2019 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 10 – Federal Funds Sold or Purchased,
Securities Financing Agreements, Short-term Borrowings and
Restricted Cash.
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(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
Over-the-counter
Exchange-traded
Over-the-counter cleared
Derivative assets/liabilities, after netting
Other gross derivative assets/liabilities (2)
Total derivative assets/liabilities
Less: Financial instruments collateral (3)
Total net derivative assets/liabilities
Derivative
Assets
Derivative
Liabilities
Derivative
Assets
Derivative
Liabilities
December 31, 2020
December 31, 2019
$
247.7 $
—
10.2
243.5 $
—
9.1
203.1 $
0.1
6.0
196.6
0.1
5.3
92.2
1.4
31.3
32.3
3.5
0.7
—
5.2
2.2
379.9
33.0
13.8
96.5
1.3
28.3
31.0
5.0
0.7
—
5.6
1.9
378.9
31.7
12.3
69.2
0.5
21.3
26.4
2.8
0.8
—
6.4
2.5
302.8
27.3
9.0
(345.7)
(29.5)
(12.2)
39.3
7.9
47.2
(16.1)
31.1 $
(347.2)
(29.5)
(11.8)
34.4
11.1
45.5
(16.6)
28.9 $
(274.7)
(21.5)
(8.1)
34.8
5.7
40.5
(14.6)
25.9 $
$
73.1
0.5
17.8
22.8
4.2
0.8
0.1
6.6
2.2
298.3
23.7
8.1
(269.3)
(21.5)
(8.1)
31.2
7.0
38.2
(16.1)
22.1
(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 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 derivatives designated in qualifying hedge accounting
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,
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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
foreign currency-
issuing
denominated debt (net investment hedges).
Fair Value Hedges
The following table summarizes information related to fair value hedges for 2020, 2019 and 2018.
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
2020
Derivative
2019
2018
2020
Hedged Item
2019
2018
$
$
7,091 $
783
(44)
7,830 $
6,113 $
119
(102)
6,130 $
(1,538) $
(1,187)
(52)
(2,777) $
(7,220) $
(783)
49
(7,954) $
(6,110) $
(101)
98
(6,113) $
1,429
1,079
50
2,558
(1) Amounts are recorded in interest expense in the Consolidated Statement of Income.
(2)
In 2020, 2019 and 2018, the derivative amount includes gains (losses) of $701 million, $73 million and $(116) million in interest expense, $73 million, $28 million and $(992) million in market
making and similar activities, and $9 million, $18 million and $(79) million in accumulated OCI, respectively. Line item totals are in the Consolidated Statement of Income and on 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, 3, 4)
Trading account assets (5)
Carrying Value
Cumulative
Fair Value
Adjustments (1)
Carrying Value
Cumulative
Fair Value
Adjustments (1)
$
December 31, 2020
(150,556) $
116,252
427
(8,910) $
114
15
December 31, 2019
(162,389) $
1,654
—
(8,685)
64
—
(1) For assets, increase (decrease) to carrying value and for liabilities, (increase) decrease to carrying value.
(2) At December 31, 2020 and 2019, the cumulative fair value adjustments remaining on long-term debt and AFS debt securities from discontinued hedging relationships resulted in an (increase)
decrease in the related liability of $(3.7) billion and $1.3 billion and an increase (decrease) in the related asset of $(69) million and $8 million, which are being amortized over the remaining
contractual life of the de-designated hedged items.
(3) These amounts include the amortized cost basis of the prepayable financial assets used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at
the end of the hedging relationship (i.e. last-of-layer hedging relationship). At December 31, 2020, the amortized cost of the closed portfolios used in these hedging relationships was $34.6
billion, of which $7.0 billion was designated in the last-of-layer hedging relationship. The cumulative basis adjustments associated with these hedging relationships were not significant.
(4) Carrying value represents amortized cost.
(5) Represents hedging activities related to precious metals inventory.
Cash Flow and Net Investment Hedges
The following table summarizes certain information related to
cash flow hedges and net investment hedges for 2020, 2019
and 2018. Of the $426 million after-tax net gain ($566 million
pretax) on derivatives in accumulated OCI at December 31,
2020, gains of $190 million after-tax ($254 million pretax)
related to both open and terminated hedges are expected to be
reclassified into earnings in the next 12 months. These net
gains reclassified into earnings are expected to primarily
increase 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 forecasted MBS purchases (1)
Price risk on certain compensation plans (2)
Total
Net investment hedges
Foreign exchange risk (3)
Gains (Losses) Recognized in
Accumulated OCI on Derivatives
2019
2018
2020
Gains (Losses) in Income
Reclassified from Accumulated OCI
2019
2018
2020
$
$
$
$
763
241
85
1,089 $
(834) $
671
—
34
705
22
$
$
$
(159) $
—
4
(155) $
989 $
(7)
9
12
14
4
$
$
$
(104) $
—
(2)
(106) $
(165)
—
27
(138)
366 $
411
(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
and similar activities were gains (losses) of $(11) million, $154 million and $47 million in 2020, 2019 and 2018, respectively.
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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 2020, 2019 and 2018. These
gains (losses) are largely offset by the income or expense
recorded on the hedged item.
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)
Price risk on certain compensation plans (4)
2020
2019
2018
$
446
(68)
315 $
(58)
(107)
9
(2,971)
700
1,112
943
3,278
(495)
(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 $165 million, $73 million and $47 million in
2020, 2019 and 2018.
(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.
(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. At both December 31, 2020
and 2019, the Corporation had transferred $5.2 billion of non-
U.S. government-guaranteed mortgage-backed securities 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 as of both transfer dates. At December
31, 2020 and 2019, the fair value of the transferred securities
was $5.5 billion and $5.3 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.
interest
fees primarily
Sales and trading revenue includes changes in the fair value
and realized gains and losses on the sales of trading and other
assets, net
from
income, and
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
62539financials
138
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 2020, 2019 and 2018. This
table includes debit valuation adjustment (DVA) and funding
valuation adjustment (FVA) gains (losses). Global Markets
results in Note 23 – 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
Other (1)
Total
(Dollars in millions)
Interest rate risk
Foreign exchange risk
Equity risk
Credit risk
Other risk
Total sales and trading
$
2,211 $
1,482
3,656
812
308
2020
2,400 $
(20)
(77)
1,638
4
231 $
3
1,801
328
44
4,842
1,465
5,380
2,778
356
revenue
$
8,469 $
3,945 $
2,407 $ 14,821
Interest rate risk
Foreign exchange risk
Equity risk
Credit risk
Other risk
$
1,000 $
1,288
3,563
1,091
120
Total sales and trading
2019
1,817 $
62
(634)
1,807
70
113 $
57
1,569
519
53
2,930
1,407
4,498
3,417
243
revenue
$
7,062 $
3,122 $
2,311 $ 12,495
2018
Interest rate risk
Foreign exchange risk
Equity risk
Credit risk
Other risk
Total sales and trading
$
$
810
1,504
3,870
1,034
40
1,651
31
(657)
1,886
197
$
245 $
22
1,643
600
49
2,706
1,557
4,856
3,520
286
revenue
$
7,258 $
3,108 $
2,559 $ 12,925
(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 $1.9 billion, $1.7 billion and $1.7
billion in 2020, 2019 and 2018, respectively.
transactions and
to manage credit
Credit Derivatives
The Corporation enters into credit derivatives primarily to
risk
facilitate client
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
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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.
or higher as investment grade. Non-investment grade includes
non-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 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-
Credit derivative instruments where the Corporation is the
seller of credit protection and their expiration at December 31,
2020 and 2019 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, 2020
Carrying Value
Over Five
Years
Total
1 $
35 $
94 $
233
234
4
—
4
238 $
364
399
—
—
—
399 $
— $
2
2 $
Maximum Payout/Notional
— $
10
10 $
33,474 $
13,664
47,138
75,731 $
28,770
104,501
87,218 $
35,978
123,196
30,961
36,128
67,089
$
114,227 $
1,061
364
1,425
105,926 $
77
27
104
123,300 $
— $
26
26
21
345
366
392 $
— $
64
64 $
— $
70
70
35
344
379
449 $
— $
6
6 $
$
$
$
$
$
$
$
$
$
$
55,827 $
19,049
74,876
67,838 $
26,521
94,359
71,320 $
29,618
100,938
56,488
28,707
85,195
$
160,071 $
—
657
657
95,016 $
62
104
166
101,104 $
December 31, 2019
Carrying Value
5 $
60 $
292
297
—
—
—
561
621
—
—
—
3 $
2
5 $
Maximum Payout/Notional
1 $
1
2 $
297 $
621 $
972 $
1,163
1,257
—
—
—
1,257 $
$
572
947
1,519 $
16,822 $
9,852
26,674
—
5
5
26,679 $
164 $
808
972
—
—
—
639 $
1,125
1,764 $
17,708 $
12,337
30,045
76
60
136
30,181 $
130
1,786
1,916
25
345
370
2,286
572
1,023
1,595
213,245
88,264
301,509
32,099
36,524
68,623
370,132
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
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.
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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 take additional protective measures such as
early termination of all trades. Further, as previously discussed
on page 135, the Corporation enters into legally enforceable
master netting agreements that 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, 2020 and
2019, the Corporation held cash and securities collateral of
$96.5 billion and $84.3 billion and posted cash and securities
collateral of $88.6 billion and $69.1 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, 2020, 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 $2.6 billion,
including $1.2 billion 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,
2020 and 2019, 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, 2020 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, 2020
(Dollars in millions)
Bank of America Corporation
Bank of America, N.A. and subsidiaries (1)
$
One
incremental
notch
Second
incremental
notch
300 $
61
735
570
(1)
Included in Bank of America Corporation collateral requirements in this table.
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, 2020 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, 2020
(Dollars in millions)
Derivative liabilities
Collateral posted
One
incremental
notch
Second
incremental
notch
$
45 $
23
1,035
544
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.
The table below presents credit valuation adjustment (CVA),
DVA and FVA gains (losses) on derivatives (excluding the effect
of any related hedge activities), which are recorded in market
making and similar activities, for 2020, 2019 and 2018. 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)
(Dollars in millions)
Derivative assets (CVA)
Derivative assets/liabilities (FVA)
Derivative liabilities (DVA)
2020
2019
2018
$
(118) $
(24)
24
$
72
(2)
(147)
77
(15)
(19)
(1) At December 31, 2020, 2019 and 2018, cumulative CVA reduced the derivative assets
balance by $646 million, $528 million and $600 million, cumulative FVA reduced the net
derivatives balance by $177 million, $153 million and $151 million, and cumulative DVA
reduced the derivative liabilities balance by $309 million, $285 million and $432 million,
respectively.
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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, 2020 and 2019.
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 (3)
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 (3)
Total debt securities (3,4)
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)
Amortized
Cost
Gross
Gross
Unrealized
Unrealized
Gains
Losses
December 31, 2020
Fair
Value
$ 59,518 $
5,112
15,470
899
80,999
114,157
14,009
2,656
211,821
16,417
228,238
11,720
239,958
438,279
2,370 $
161
1,025
127
3,683
2,236
15
61
5,995
389
6,384
429
6,813
10,095
$ 678,237 $ 16,908 $
(39) $ 61,849
5,260
(13)
16,491
(4)
1,009
(17)
84,609
(73)
116,380
(13)
14,017
(7)
2,711
(6)
217,717
(99)
16,774
(32)
234,491
(131)
12,110
(39)
246,601
(170)
(194)
448,180
(364) $ 694,781
December 31, 2019
$ 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)
1,077
(9)
143,267
(241)
68,528
(195)
11,991
(2)
3,941
—
227,727
(438)
17,912
(6)
245,639
(444)
10,828
(23)
256,467
(467)
219,821
(342)
(809) $ 476,288
(1) At December 31, 2020 and 2019, the underlying collateral type included approximately 37 percent and 49 percent prime, two percent and six percent Alt-A and 61 percent and 45 percent
subprime.
(2) Primarily includes non-U.S. securities used to satisfy certain international regulatory requirements. Any changes in value are reported in market making and similar activities. For detail on the
components, see Note 20 – Fair Value Measurements.
Includes securities pledged as collateral of $65.5 billion and $67.0 billion at December 31, 2020 and 2019.
(3)
(4) The Corporation held debt securities from FNMA and FHLMC that each exceeded 10 percent of shareholders’ equity, with an amortized cost of $260.1 billion and $118.1 billion, and a fair value of
$267.5 billion and $120.7 billion at December 31, 2020, and 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.
At December 31, 2020, 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 $4.7 billion, net of the related income tax
expense of $1.6 billion. The Corporation had nonperforming AFS
debt securities of $20 million and $9 million at December 31,
2020 and 2019.
Effective January 1, 2020, the Corporation adopted the new
accounting standard for credit losses that requires evaluation of
AFS and HTM debt securities for any expected losses with
recognition of an allowance for credit losses, when applicable.
For more information, see Note 1 – Summary of Significant
Accounting Principles. At December 31, 2020, the Corporation
had $200.0 billion in AFS debt securities, which were primarily
U.S. agency and U.S. Treasury securities that have a zero credit
loss assumption. For the remaining $34.5 billion in AFS debt
securities, the amount of ECL was insignificant. Substantially all
of the Corporation's HTM debt securities are U.S. agency and
U.S. Treasury securities and have a zero credit loss assumption.
At December 31, 2020 and 2019, the Corporation held
equity securities at an aggregate fair value of $769 million and
$891 million and other equity securities, as valued under the
measurement alternative, at a carrying value of $240 million
and $183 million, both of which are included in other assets. At
December 31, 2020 and 2019, the Corporation also held
money market investments at a fair value of $1.6 billion and
$1.0 billion, which are included in time deposits placed and
other short-term investments.
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The gross realized gains and losses on sales of AFS debt securities for 2020, 2019 and 2018 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
2020
2019
2018
$
423
(12)
411 $
336 $
(119)
217 $
169
(15)
154
103 $
54
$
37
$
$
$
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, 2020 and 2019.
Total AFS Debt Securities in a Continuous Unrealized Loss Position
(Dollars in millions)
Continuously unrealized loss-positioned 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 AFS debt securities in a continuous
unrealized loss position
Continuously unrealized loss-positioned 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 AFS debt securities in a continuous
unrealized loss position
Less than Twelve Months
Fair
Value
Gross
Unrealized
Losses
Twelve Months or Longer
Gross
Fair
Unrealized
Value
Losses
December 31, 2020
Total
Fair
Value
Gross
Unrealized
Losses
$
2,841 $
(39) $
2 $
187
566
342
3,936
8,282
1,861
576
14,655
4,108
(2)
(4)
(9)
(54)
(9)
(6)
(2)
(71)
(29)
364
9
56
431
498
135
396
1,460
617
— $
(11)
—
(8)
(19)
(4)
(1)
(4)
(28)
(3)
2,843 $
551
575
398
4,367
8,780
1,996
972
16,115
4,725
(39)
(13)
(4)
(17)
(73)
(13)
(7)
(6)
(99)
(32)
$
18,763 $
(100) $
2,077 $
(31) $
20,840 $
(131)
December 31, 2019
$
17,641 $
255
2,180
122
20,198
12,836
851
938
34,823
4,286
(41) $
(1)
(22)
(6)
(70)
(71)
—
—
(141)
(5)
17,238 $
925
442
22
18,627
18,866
837
222
38,552
190
(142) $
34,879 $
(23)
(3)
(3)
(171)
(124)
(2)
—
(297)
(1)
1,180
2,622
144
38,825
31,702
1,688
1,160
73,375
4,476
(183)
(24)
(25)
(9)
(241)
(195)
(2)
—
(438)
(6)
$
39,109 $
(146) $
38,742 $
(298) $
77,851 $
(444)
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The remaining contractual maturity distribution and yields of the Corporation’s debt securities carried at fair value and HTM debt
securities at December 31, 2020 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
1
4
3
6
2
5
3
9
f
i
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a
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c
a
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i
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Due in One
Year or Less
Amount
Yield (1)
Due after One Year
through Five Years
Yield (1)
Amount
Due after Five Years
through Ten Years
Yield (1)
Amount
Due after
Ten Years
Total
Amount
Yield (1)
Amount
Yield (1)
(Dollars in millions)
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
$
—
—
26
—
26
10,020
22,862
699
33,607
872
Total amortized cost of debt securities carried at
fair value
$ 34,479
Amortized cost of HTM debt securities (2)
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)
$
$
15
—
—
26
—
26
10,056
23,187
702
33,971
874
$ 34,845
$
14
—
3.04
—
3.04
1.26
0.31
1.15
0.61
0.87
0.62
3.78
— % $
5.69 % $
7
—
6,669
—
6,676
29,533
926
1,336
38,471
8,430
$ 46,901
$
$
66
7
—
7,077
—
7,084
30,873
940
1,369
40,266
8,554
—
2.52
—
2.52
1.85
1.81
2.46
1.99
1.27
1.86
2.73
56
24
7,711
1
7,792
74,665
581
366
83,404
4,397
$ 87,801
$ 17,133
$
61
24
8,242
7
8,334
75,511
582
379
84,806
4,566
4.44 % $ 59,455
3.36 % $ 59,518
3.36 %
2.57
2.32
—
2.34
0.74
1.09
2.26
0.89
1.66
0.93
1.86
5,088
1,077
1,620
67,240
32
532
255
68,059
2,718
$ 70,777
$ 421,065
2.94
2.64
6.77
3.40
2.55
1.79
1.60
3.38
1.41
3.30
2.40
5,112
15,483
1,621
81,734
114,250
24,901
2,656
223,541
16,417
$ 239,958
$ 438,279
2.94
2.43
6.77
3.23
1.07
0.42
2.00
1.80
1.38
1.77
2.38
$ 61,781
$ 61,849
5,236
1,160
1,776
69,953
33
534
264
70,784
2,780
5,260
16,505
1,783
85,397
116,473
25,243
2,714
229,827
16,774
$ 246,601
$ 448,180
$ 48,820
$
69
$ 89,372
$ 17,139
$ 73,564
$ 430,958
(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.
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NOTE 5 Outstanding Loans and Leases and Allowance for Credit Losses
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, 2020 and 2019.
(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 (2)
Other consumer
Total consumer
Consumer loans accounted for under the fair value
option (3)
Total consumer loans and leases
Commercial
U.S. commercial
Non-U.S. commercial
Commercial real estate (4)
Commercial lease financing
U.S. small business commercial (5)
Total commercial
Commercial loans accounted for under the fair value
option (3)
30-59 Days
Past Due (1)
60-89 Days
Past Due (1)
$
1,157
126
$
273
28
445
209
—
2,238
2,238
561
61
128
86
84
920
175
61
122
17
341
67
—
783
783
214
44
113
20
56
447
90 Days or
More
Past Due (1)
Total Past
Due 30 Days
or More
December 31, 2020
Total Current
or Less Than
30 Days
Past Due (1)
Loans
Accounted
for Under the
Fair Value
Option
Total
Outstandings
$
2,118
456
$ 213,155
29,872
$ 215,273
30,328
$
786
269
913
76
903
37
—
2,984
1,308
121
1,689
313
—
6,005
6,974
3,862
77,019
91,050
124
422,056
2,984
6,005
422,056
$
735
735
512
11
226
57
123
929
1,287
116
467
163
263
2,296
287,441
90,344
59,897
16,935
36,206
490,823
8,282
3,983
78,708
91,363
124
428,061
735
428,796
288,728
90,460
60,364
17,098
36,469
493,119
Total commercial loans and leases
Total loans and leases (6)
920
3,158
$
447
1,230
$
929
3,913
$
2,296
8,301
$
490,823
$ 912,879
$
5,946
5,946
6,681
5,946
499,065
$ 927,861
Percentage of outstandings
0.34 %
0.13 %
0.42 %
0.89 %
98.39 %
0.72 %
100.00 %
(1) Consumer real estate loans 30-59 days past due includes fully-insured loans of $225 million and nonperforming loans of $126 million. Consumer real estate loans 60-89 days past due includes
fully-insured loans of $103 million and nonperforming loans of $95 million. Consumer real estate loans 90 days or more past due includes fully-insured loans of $762 million. Consumer real
estate loans current or less than 30 days past due includes $1.2 billion and direct/indirect consumer includes $66 million of nonperforming loans. For information on the Corporation's interest
accrual policies and delinquency status for loan modifications related to the pandemic, see Note 1 – Summary of Significant Accounting Principles.
(2) Total outstandings primarily includes auto and specialty lending loans and leases of $46.4 billion, U.S. securities-based lending loans of $41.1 billion and non-U.S. consumer loans of $3.0 billion.
(3) Consumer loans accounted for under the fair value option includes residential mortgage loans of $298 million and home equity loans of $437 million. Commercial loans accounted for under the
fair value option includes U.S. commercial loans of $2.9 billion and non-U.S. commercial loans of $3.0 billion. For more information, see Note 20 – Fair Value Measurements and Note 21 – Fair
Value Option.
(4) Total outstandings includes U.S. commercial real estate loans of $57.2 billion and non-U.S. commercial real estate loans of $3.2 billion.
(5)
(6) Total outstandings includes loans and leases pledged as collateral of $15.5 billion. The Corporation also pledged $153.1 billion of loans with no related outstanding borrowings to secure
Includes PPP loans.
potential borrowing capacity with the Federal Reserve Bank and Federal Home Loan Bank.
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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 (2)
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
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Loans
Accounted
for Under
the Fair
Value Option
Total
Outstandings
90 Days or
More
Past Due (1)
Total Past
Due 30
Days
or More
December 31, 2019
Total
Current or
Less Than
30 Days
Past Due (1)
$
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
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
Consumer loans accounted for under the fair value
option (3)
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 (4)
Commercial lease financing
U.S. small business commercial
Total commercial
Commercial loans accounted for under the fair value
option (3)
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 (5)
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
0.41 %
0.15 %
0.39 %
0.95 %
98.20 %
0.85 %
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
fully-insured loans of $206 million and nonperforming loans of $114 million. Consumer real estate loans 90 days or more past due includes fully-insured loans of $1.1 billion. Consumer real
estate loans current or less than 30 days past due includes $856 million and direct/indirect consumer includes $45 million of nonperforming loans.
(2) 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.
(3) 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 20 – Fair Value Measurements and Note 21 – Fair
Value Option.
(4) 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.
(5) 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.
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, Fair Isaac
Corporation (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 $9.0 billion
and $7.5 billion at December 31, 2020 and 2019, 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.
increases across multiple
Nonperforming Loans and Leases
Commercial nonperforming loans increased to $2.2 billion at
December 31, 2020 from $1.5 billion at December 31, 2019
industries.
with broad-based
Consumer nonperforming loans increased to $2.7 billion at
December 31, 2020 from $2.1 billion at December 31, 2019
driven by deferral activity, as well as the
inclusion of
$144 million of certain loans that were previously classified as
purchased credit-impaired loans and accounted for under a pool
basis.
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, 2020 and
2019. 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 information on the Corporation's
interest accrual policies, delinquency status
loan
modifications related to the pandemic and the criteria for
classification as nonperforming, see Note 1 – Summary of
Significant Accounting Principles.
for
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Credit Quality
(Dollars in millions)
Residential mortgage (2)
With no related allowance (3)
Home equity (2)
With no related allowance (3)
Credit Card
Direct/indirect consumer
Total consumer
U.S. commercial
Non-U.S. commercial
Commercial real estate
Commercial lease financing
U.S. small business commercial
Total commercial
Total nonperforming loans
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Nonperforming Loans
and Leases
Accruing Past Due
90 Days or More (1)
December 31
2020
2019
2020
2019
$
$
2,005
1,378
649
347
n/a
71
2,725
1,243
418
404
87
75
2,227
4,952
$
1,470
$
n/a
536
n/a
n/a
47
2,053
1,094
43
280
32
50
1,499
3,552
$
$
762
—
—
—
903
33
1,698
228
10
6
25
115
384
2,082
$
$
1,088
—
—
—
1,042
33
2,163
106
8
19
20
97
250
2,413
Percentage of outstanding loans and leases
0.54 %
0.36 %
0.23 %
0.25 %
(1) For information on the Corporation's interest accrual policies and delinquency status for loan modifications related to the pandemic, see Note 1 – Summary of Significant Accounting Principles.
(2) Residential mortgage loans accruing past due 90 days or more are fully-insured loans. At December 31, 2020 and 2019 residential mortgage includes $537 million and $740 million of loans on
which interest had been curtailed by the FHA, and therefore were no longer accruing interest, although principal was still insured, and $225 million and $348 million of loans on which interest was
still accruing.
(3) Primarily relates to loans for which the estimated fair value of the underlying collateral less any costs to sell is greater than the amortized cost of the loans as of the reporting date.
n/a = not applicable
Included in the December 31, 2020 nonperforming loans are
$127 million and $17 million of residential mortgage and home
equity loans that prior to the January 1, 2020 adoption of the
new credit loss standard were not included in nonperforming
loans, as they were previously classified as purchased credit-
impaired loans and accounted for under a pool basis.
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 and year of origination for term loan
balances at December 31, 2020, including revolving loans that
converted to term loans without an additional credit decision
after origination or through a TDR.
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Residential Mortgage – Credit Quality Indicators By Vintage
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Total Residential Mortgage
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
Total Residential Mortgage
Total Residential Mortgage
Refreshed FICO score
Total as of
December 31,
2020
2020
2019
2018
2017
2016
Prior
Term Loans by Origination Year
$ 207,389 $
68,907 $
43,771 $
14,658 $
21,589 $
22,967 $
35,497
3,138
1,210
11,818
$ 223,555 $
1,970
702
3,826
684
174
2,014
75,405 $
46,643 $
128
47
370
15,203 $
70
39
342
22,040 $
96
37
1,970
25,070 $
190
211
3,296
39,194
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
Total Residential Mortgage
$
2,717 $
5,462
25,349
178,209
11,818
$ 223,555 $
823 $
1,804
8,533
60,419
3,826
177 $
666
4,679
39,107
2,014
75,405 $
46,643 $
139 $
468
1,972
12,254
370
15,203 $
170 $
385
2,427
18,716
342
22,040 $
150 $
368
2,307
20,275
1,970
25,070 $
1,258
1,771
5,431
27,438
3,296
39,194
Home Equity - Credit Quality Indicators
(Dollars in millions)
Total Home Equity
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
Total Home Equity
Total Home Equity
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
Total Home Equity
Home Equity
Loans and
Reverse
Mortgages (1)
Revolving
Loans
December 31, 2020
Revolving
Loans
Converted to
Term Loans
Total
$
$
$
$
33,447 $
351
513
34,311 $
1,919 $
126
172
2,217 $
22,639 $
94
118
22,851 $
1,082 $
1,798
5,762
25,669
34,311 $
250 $
263
556
1,148
2,217 $
244 $
568
2,905
19,134
22,851 $
8,889
131
223
9,243
588
967
2,301
5,387
9,243
(1)
Includes reverse mortgages of $1.3 billion and home equity loans of $885 million which are no longer originated.
Credit Card and Direct/Indirect Consumer – Credit Quality Indicators By Vintage
Direct/Indirect
Term Loans by Origination Year
Credit Card
Total Direct/
Indirect as of
December 31,
2020
Revolving
Loans
2020
2019
2018
2017
2016
Prior
Total Credit
Card as of
December 31,
2020
Revolving
Loans
Revolving
Loans
Converted
to Term
Loans (3)
$
959
$
19 $
111
$
200
$
175
$
243
$
148
$
63
$
4,018 $ 3,832 $
186
2,143
7,431
36,064
20
80
120
653
559
329
301
176
105
9,419
9,201
2,848
12,540
2,015
10,588
1,033
5,869
739
3,495
400
1,781
316
1,671
27,585
37,686
27,392
37,642
44,766
44,098
74
115
84
67
52
276
—
—
218
193
44
—
$
91,363
$ 44,337 $ 16,226
$ 13,477
$ 7,490
$ 4,845
$ 2,557
$ 2,431
$
78,708
$ 78,067 $
641
(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)
Total credit card and other
consumer
(1) Other internal credit metrics may include delinquency status, geography or other factors.
(2) Direct/indirect consumer includes $44.1 billion of securities-based lending which is typically supported by highly liquid collateral with market value greater than or equal to the outstanding loan
balance and therefore has minimal credit risk at December 31, 2020.
(3) Represents TDRs that were modified into term loans.
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U.S. Commercial
Risk ratings
Pass rated
Reservable criticized
Total U.S. Commercial
Non-U.S. Commercial
Risk ratings
Pass rated
Reservable criticized
Total Non-U.S. Commercial
Commercial Real Estate
Risk ratings
Pass rated
Reservable criticized
Total Commercial Real Estate
Commercial Lease Financing
Risk ratings
Pass rated
Reservable criticized
Total Commercial Lease Financing
U.S. Small Business Commercial (3)
Risk ratings
Pass rated
Reservable criticized
Total U.S. Small Business Commercial
Total (1, 2)
Term Loans
Amortized Cost Basis by Origination Year
Total as of
December 31,
2020
2020
2019
2018
2017
2016
Prior
Revolving
Loans
$
$
$
$
$
$
$
$
$
$
$
268,812 $ 33,456 $ 33,305 $ 17,363 $ 14,102 $
2,542
288,728 $ 35,980 $ 35,847 $ 20,052 $ 14,956 $
19,916
2,689
2,524
854
7,420 $ 21,784 $ 141,382
1,402
9,207
8,118 $ 23,186 $ 150,589
698
85,914 $ 16,301 $ 11,396 $
914
90,460 $ 17,215 $ 11,968 $
4,546
572
7,451 $
5,037 $
1,674 $
492
436
138
7,943 $
5,473 $
1,812 $
2,194 $ 41,861
1,735
2,453 $ 43,596
259
50,260 $
10,104
60,364 $
8,429 $ 14,126 $
933
2,558
8,228 $
2,115
9,362 $ 16,684 $ 10,343 $
4,599 $
1,582
6,181 $
3,299 $
606
3,905 $
6,542 $
1,436
7,978 $
5,037
874
5,911
16,384 $
714
17,098 $
3,083 $
3,242 $
2,956 $
117
117
132
3,200 $
3,359 $
3,088 $
2,532 $
81
2,613 $
1,703 $
88
1,791 $
2,868 $
179
3,047 $
—
—
—
1,148
28,786 $ 24,539 $
172
13
185
486,584 $ 90,372 $ 69,218 $ 42,473 $ 30,133 $ 16,266 $ 37,841 $ 200,281
735 $
175
910 $
527 $
113
640 $
29,934 $ 24,615 $
837 $
210
855 $
322
1,177 $
1,047 $
1,121 $
1,360 $
239
76
(1) Excludes $5.9 billion of loans accounted for under the fair value option at December 31, 2020.
(2)
(3) Excludes U.S. Small Business Card loans of $6.5 billion. Refreshed FICO scores for this portfolio are $265 million for less than 620; $582 million for greater than or equal to 620 and less than
Includes $58 million of loans that converted from revolving to term loans.
680; $1.7 billion for greater than or equal to 680 and less than 740; and $3.9 billion greater than or equal to 740.
Due to the economic impact of COVID-19, commercial asset
quality weakened during 2020. Commercial reservable criticized
utilized exposure increased to $38.7 billion at December 31,
2020 from $11.5 billion (to 7.31 percent from 2.09 percent of
total commercial reservable utilized exposure) at December 31,
2019 with
industries,
increases spread across multiple
including travel and entertainment.
Troubled Debt Restructurings
The Corporation has been entering into loan modifications with
borrowers in response to the pandemic, most of which are not
classified as TDRs, and therefore are not included in the
discussion below. For more information on the criteria for
classifying loans as TDRs, see Note 1 – Summary of Significant
Accounting Principles.
Consumer Real Estate
Modifications of consumer real estate loans are classified as
TDRs when the borrower is experiencing financial difficulties and
a concession has been granted. 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 $372 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, 2020, of which $102 million
were classified as nonperforming and $68 million were loans
fully insured.
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 reach 180 days past
due prior to modification are charged off to their net realizable
value, less costs to sell, before they are modified as TDRs in
accordance with established policy. 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
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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, 2020 and 2019, 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 $123 million
and $229 million at December 31, 2020 and 2019. The
carrying value of consumer real estate loans, including fully-
insured loans, for which formal foreclosure proceedings were in
process at December 31, 2020 was $1.2 billion. Although the
Corporation has paused formal loan foreclosure proceedings
and foreclosure sales for occupied properties, during 2020, the
Corporation reclassified $182 million of consumer real estate
loans completed or which were in process prior to the pause in
foreclosures, to foreclosed properties or, for properties acquired
foreclosure of certain government-guaranteed
upon
loans
(principally FHA-insured
to other assets. The
loans),
reclassifications represent non-cash investing activities and,
accordingly, are not reflected in the Consolidated Statement of
Cash Flows.
The table below presents the December 31, 2020, 2019
and 2018 unpaid principal balance, carrying value, and average
pre- and post-modification interest rates of consumer real estate
loans that were modified in TDRs during 2020, 2019 and 2018.
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 2020, 2019 and 2018 (1)
(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
December 31, 2020
Post-
Modification
Interest Rate (2)
$
$
$
$
$
$
732 $
87
819 $
464 $
141
605 $
646
69
715
December 31, 2019
377
101
478
December 31, 2018
774 $
489
1,263 $
641
358
999
3.66 %
3.67
3.66
4.19 %
5.04
4.39
4.33 %
4.46
4.38
3.59 %
3.61
3.59
4.13 %
4.31
4.17
4.21 %
3.74
4.03
(1) For more information on the Corporation's loan modification programs offered in response to the pandemic, most of which are not TDRs, see Note 1 – Summary of Significant Accounting Principles.
(2) 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.
The table below presents the December 31, 2020, 2019 and 2018 carrying value for consumer real estate loans that were
modified in a TDR during 2020, 2019 and 2018, by type of modification.
Consumer Real Estate – Modification Programs (1)
(Dollars in millions)
Modifications under government programs
Modifications under proprietary programs
Loans discharged in Chapter 7 bankruptcy (2)
Trial modifications
Total modifications
2020
TDRs Entered into During
2019
2018
$
13
570
53
79
715 $
$
35
174
68
201
478 $
61
523
130
285
999
$
$
(1) For more information on the Corporation's loan modification programs offered in response to the pandemic, most of which are not TDRs, see Note 1 – Summary of Significant Accounting Principles.
(2)
Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.
The table below presents the carrying value of consumer real estate loans that entered into payment default during 2020, 2019
and 2018 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 (1)
(Dollars in millions)
Modifications under government programs
Modifications under proprietary programs
Loans discharged in Chapter 7 bankruptcy (2)
Trial modifications (3)
Total modifications
2020
2019
2018
$
$
$
16
51
19
54
140 $
26 $
88
30
57
201 $
39
158
64
107
368
(1) For more information on the Corporation's loan modification programs offered in response to the pandemic, most of which are not TDRs, see Note 1 – Summary of Significant Accounting Principles.
(2)
(3)
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.
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to assist customers
Credit Card and Other Consumer
that are
The Corporation seeks
experiencing
loans while
financial difficulty by modifying
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.
The table below provides information on the Corporation’s
Credit Card and Other Consumer TDR portfolio including the
December 31, 2020, 2019 and 2018 unpaid principal balance,
carrying value, and average pre- and post-modification interest
rates of loans that were modified in TDRs during 2020, 2019
and 2018.
Credit Card and Other Consumer – TDRs Entered into During 2020, 2019 and 2018 (1)
(Dollars in millions)
Credit card
Direct/Indirect consumer
Total
Credit card
Direct/Indirect consumer
Total
Credit card
Direct/Indirect consumer
Total
Unpaid Principal
Balance
Carrying
Value (2)
Pre-Modification
Interest Rate
Post-
Modification
Interest Rate
$
$
$
$
$
$
269 $
52
321 $
340 $
40
380 $
278 $
42
320 $
December 31, 2020
277
37
314
18.16 %
5.83
16.70
December 31, 2019
355
21
376
19.18 %
5.23
18.42
December 31, 2018
292
23
315
19.49 %
5.10
18.45
5.63 %
5.83
5.65
5.35 %
5.21
5.34
5.24 %
4.95
5.22
(1) For more information on the Corporation's loan modification programs offered in response to the pandemic, most of which are not TDRs, see Note 1 – Summary of Significant Accounting Principles.
(2)
Includes accrued interest and fees.
The table below presents the December 31, 2020, 2019 and 2018 carrying value for Credit Card and Other Consumer loans that
were modified in a TDR during 2020, 2019 and 2018, by program type.
Credit Card and Other Consumer – TDRs by Program Type at December 31 (1)
(Dollars in millions)
Internal programs
External programs
Other
Total
2020
2019
2018
$
$
$
225
73
16
314 $
247 $
108
21
376 $
199
93
23
315
(1)
Includes accrued interest and fees. For more information on the Corporation's loan modification programs offered in response to the pandemic, most of which are not TDRs, see Note 1 –
Summary of Significant Accounting Principles.
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
credit card and other consumer. Based on historical experience,
the Corporation estimates that 13 percent of new credit card
TDRs and 19 percent of new direct/indirect consumer TDRs may
be in payment default within 12 months after modification.
maturity at a concessionary (below market) rate of interest,
payment forbearances or other actions designed to benefit the
borrower 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 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
information on
modifications for the U.S. small business commercial portfolio,
see Credit Card and Other Consumer in this Note.
time of modification. For more
the
Commercial Loans
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
the borrower.
individual circumstances of
reflects
Modifications that result in a TDR may include extensions of
the
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in
quality of the portfolio and an economic outlook over the life of
the loan. Qualitative reserves cover losses that are expected
but, in the Corporation's assessment, may not be adequately
the economic
the quantitative methods or
reflected
assumptions. The Corporation
forward-looking
incorporates
the use of several macroeconomic
through
information
scenarios in determining the weighted economic outlook over
the forecasted life of the assets. These scenarios include key
macroeconomic variables such as gross domestic product,
unemployment rate, real estate prices and corporate bond
spreads. The scenarios that are chosen each quarter and the
weighting given to each scenario depend on a variety of factors
including recent economic events, leading economic indicators,
internal and third-party economist views, and industry trends.
As of January 1, 2020, to determine the allowance for credit
losses, the Corporation used a series of economic outlooks that
resulted in an economic outlook that was weighted towards the
potential of a recession with some expectation of tail risk
similar to the severely adverse scenario used in stress testing.
Various economic outlooks were also used in the December 31,
2020 estimate for allowance for credit losses that included
consensus estimates, multiple downside scenarios which
assumed a significantly longer period until economic recovery, a
tail risk scenario similar to the severely adverse scenario used
in stress testing and an upside scenario to reflect the potential
for continued improvement in the consensus outlooks. The
weighted economic outlook assumes
the U.S.
unemployment rate at the end of 2021 would be relatively
consistent with the level as of December 2020, slightly above
6.5 percent. Additionally, in this economic outlook, U.S. gross
domestic product returns to pre-pandemic levels in the early part
of 2022. The allowance for credit losses considers the impact
of enacted government stimulus, including the COVID-19
Emergency Relief Act of 2020, and continues to factor in the
unprecedented nature of the current health crisis.
that
The Corporation also factored into its allowance for credit
losses an estimated impact from higher-risk segments that
included leveraged loans and industries such as travel and
entertainment, which have been adversely impacted by the
effects of COVID-19, as well as the energy sector. The
Corporation also holds additional reserves for borrowers who
their credit
take
requested deferrals
characteristics and payment behavior subsequent to deferral.
into account
that
The allowance for credit losses at December 31, 2020 was
$20.7 billion, an increase of $7.2 billion compared to
January 1, 2020. The increase in the allowance for credit losses
was driven by the deterioration in the economic outlook
resulting from the impact of COVID-19. The increase in the
allowance for credit losses was comprised of a net increase of
$6.4 billion in the allowance for loan and lease losses and a
$755 million increase in the reserve for unfunded lending
commitments. The increase in the allowance for loan and lease
losses was attributed to $418 million in the consumer real
estate portfolio, $1.8 billion in the credit card and other
consumer portfolio, and $4.2 billion in the commercial portfolio.
Outstanding loans and leases excluding loans accounted for
under the fair value option decreased $53.9 billion in 2020,
driven by consumer loans, which decreased $37.1 billion
primarily due to a decline in credit card loans from reduced retail
spending and higher payments.
At December 31, 2020 and 2019, the Corporation had $1.7
billion and $2.2 billion of commercial TDRs with remaining
commitments to lend additional funds to debtors of $402
million and $445 million. The balance of commercial TDRs in
payment default was $218 million and $207 million at
December 31, 2020 and 2019.
Loans Held-for-sale
The Corporation had LHFS of $9.2 billion at both December 31,
2020 and 2019. Cash and non-cash proceeds from sales and
paydowns of loans originally classified as LHFS were $20.1
billion, $30.6 billion and $29.2 billion for 2020, 2019 and
2018, respectively. Cash used for originations and purchases of
LHFS totaled approximately $19.7 billion, $28.9 billion and
$28.1 billion for 2020, 2019 and 2018, respectively.
Accrued Interest Receivable
Accrued interest receivable for loans and leases and loans held-
for-sale at December 31, 2020 and 2019 was $2.4 billion and
$2.6 billion and is reported in customer and other receivables
on the Consolidated Balance Sheet.
Outstanding credit card loan balances include unpaid
principal, interest and fees. Credit card loans are not classified
as nonperforming but 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. During 2020, the
Corporation reversed $512 million of interest and fee income
against the income statement line item in which it was originally
recorded upon charge-off of the principal balance of the loan.
For the outstanding residential mortgage, home equity,
loan balances
direct/indirect consumer and commercial
classified as nonperforming during 2020, the Corporation
reversed $44 million of interest and fee income at the time the
loans were classified as nonperforming against the income
statement line item in which it was originally recorded. For more
information on the Corporation's nonperforming loan policies,
see Note 1 – Summary of Significant Accounting Principles.
Allowance for 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 ECL inherent in the Corporation’s relevant
financial assets. Upon adoption of the new accounting standard,
the Corporation recorded a $3.3 billion, or 32 percent, increase
in the allowance for credit losses on January 1, 2020, which
was comprised of a net increase of $2.9 billion in the allowance
for loan and lease losses and a $310 million increase in the
reserve for unfunded lending commitments. The net increase in
the allowance for loan and lease losses was primarily driven by
a $3.1 billion increase in credit card as the Corporation now
reserves for the life of these receivables. The increase in the
reserve for unfunded lending commitments included $119
million in the consumer portfolio for the undrawn portion of
HELOCs and $191 million in the commercial portfolio. For more
information on the Corporation's credit loss accounting policies
including the allowance for credit losses see Note 1 – Summary
of Significant Accounting Principles.
The allowance
is estimated using
quantitative and qualitative methods that consider a variety of
factors, such as historical loss experience, the current credit
for credit
losses
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The changes in the allowance for credit losses, including net charge-offs and provision for loan and lease losses, are detailed in
the table below.
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
$
$
$
$
$
440 $
(98)
201
103
307
8
858
119
18
137
995 $
928 $
(522)
927
405
(680)
(107)
546
—
—
—
546 $
1,720 $
(690)
664
(26)
(492)
(274)
928
—
—
—
$
928 $
2020
7,430 $
(3,646)
891
(2,755)
4,538
—
9,213
—
—
—
9,213 $
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 $
4,488 $
(1,675)
206
(1,469)
5,720
(8)
8,731
1,004
737
1,741
10,472 $
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 $
12,358
(5,419)
1,298
(4,121)
10,565
—
18,802
1,123
755
1,878
20,680
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
(1) Primarily represents write-offs of purchased credit-impaired loans in 2019, and the net impact of portfolio sales, transfers to held-for-sale and transfers to foreclosed properties.
NOTE 6 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, 2020
and 2019 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, 2020 and 2019 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
liquidity commitments and other contractual
unfunded
arrangements. The Corporation’s maximum loss exposure does
not include losses previously recognized through write-downs of
assets.
lending arrangements
The Corporation invests in ABS issued by third-party VIEs
with which it has no other form of involvement and enters into
that may also
certain commercial
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 and Allowance for Credit
Losses. In addition, the Corporation has used VIEs in connection
with its funding activities.
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The Corporation did not provide
financial support to
consolidated or unconsolidated VIEs during 2020, 2019 and
2018 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 $929 million and $1.1 billion at
December 31, 2020 and 2019.
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)
residential mortgage-backed securities
guaranteed by government-sponsored enterprises, FNMA and
FHLMC (collectively the GSEs), or the Government National
Mortgage Association (GNMA) primarily in the case of FHA-
(VA)-
insured and U.S. Department of Veterans Affairs
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 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 subordinate securities and equity tranches issued by the
trusts. Except as described in Note 12 – Commitments and
Contingencies, the Corporation does not provide guarantees or
recourse to the securitization trusts other than standard
representations and warranties.
The table below summarizes select information related to
first-lien mortgage securitizations for 2020, 2019 and 2018.
First-lien Mortgage Securitizations
(Dollars in millions)
Proceeds from loan sales (1)
Gains on securitizations (2)
Repurchases from securitization trusts (3)
Residential Mortgage - Agency
2019
2018
2020
Commercial Mortgage
2019
2018
2020
$
15,823 $
728
436
6,858 $
27
881
5,801 $
62
1,485
5,084 $
61
—
8,661 $
103
—
6,991
101
—
(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.
Substantially all of these securities are classified as Level 2 within the fair value hierarchy and are typically 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 $160 million, $64 million and $71 million net of hedges, during 2020, 2019 and 2018, 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 $160.4
billion and $192.1 billion at December 31, 2020 and 2019.
Servicing fee and ancillary fee income on serviced loans was
$474 million, $585 million and $710 million during 2020, 2019
and 2018, respectively. Servicing advances on serviced loans,
including
for
investment, were $2.2 billion and $2.4 billion at December 31,
2020 and 2019. For more information on MSRs, see Note 20 –
Fair Value Measurements.
for others and
loans serviced
loans held
During 2020, the Corporation completed the sale of $9.3
billion of consumer real estate loans through GNMA loan
securitizations. As part of the securitizations, the Corporation
retained $8.4 billion of MBS, which are classified as debt
securities carried at fair value on the Consolidated Balance
Sheet. Total gains on loan sales of $704 million were recorded
in other income in the Consolidated Statement of Income.
The following table summarizes select information related to
first-lien mortgage securitization trusts in which the Corporation
held a variable interest at December 31, 2020 and 2019.
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Agency
Prime
Residential Mortgage
Non-agency
Subprime
December 31
Alt-A
Commercial Mortgage
(Dollars in millions)
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Unconsolidated VIEs
Maximum loss exposure (1)
On-balance sheet assets
Senior securities:
$
13,477 $
12,554
$
250 $
340
$
1,031 $
1,622
$
46 $
98
$
1,169 $
1,036
Trading account assets
$
152 $
627
$
2 $
5
$
8 $
54
$
12 $
24
$
60 $
65
Debt securities carried at fair
value
Held-to-maturity securities
All other assets
Total retained positions
$
7,588
5,737
—
13,477 $
6,392
5,535
—
12,554
Principal balance outstanding (2)
$ 133,497 $
160,226
103
—
6
111 $
193
—
2
200
6,081 $
7,268
$
$
Consolidated VIEs
Maximum loss exposure (1)
On-balance sheet assets
Trading account assets
Loans and leases, net
All other assets
Total assets
Total liabilities
$
$
$
$
1,328 $
10,857
$
66 $
5
1,328 $
780
$
350 $
—
—
9,917
161
1,328 $
10,858
— $
4
$
$
—
—
350 $
284 $
116
—
—
116
111
$
$
$
$
$
$
676
—
26
710 $
1,178
—
49
1,281
$
33
—
1
46 $
72
—
2
98
6,691 $
8,594
$
16,554 $
19,878
—
925
50
1,035 $
—
809
38
912
59,268 $
60,129
$
$
53 $
44
260 $
—
—
260 $
207 $
149
—
—
149
105
$
$
$
$
— $
— $
— $
— $
— $
— $
—
—
— $
— $
—
—
— $
— $
—
—
— $
— $
—
—
—
—
—
—
(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 12 – Commitments and Contingencies and Note 20 – 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.
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, 2020 and 2019.
Home Equity Loan, Credit Card and Other Asset-backed VIEs
(Dollars in millions)
Unconsolidated VIEs
Maximum loss exposure
On-balance sheet assets
Securities (3) :
Trading account assets
Debt securities carried at fair value
Held-to-maturity securities
Total retained positions
Total assets of VIEs
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)
Resecuritization Trusts
Municipal Bond Trusts
December 31
2020
2019
2020
2019
2020
2019
2020
2019
206 $
412
$
— $
—
$
8,543 $
7,526
$
3,507 $
3,701
— $
2
—
2 $
609 $
— $
11
—
11
1,023
$
$
— $
—
—
— $
— $
—
—
—
—
—
$
$
$
948 $
2,727
4,868
8,543 $
17,250 $
2,188
1,126
4,212
7,526
21,234
58 $
64
$
14,606 $
17,915
$
217 $
— $
218
14
4
236 $
— $
178
—
178 $
— $
122
(2)
3
123
$
— $
64
—
64
$
— $
21,310
(1,704)
1,289
20,895 $
— $
6,273
16
6,289 $
— $
26,985
(800)
119
26,304
$
— $
8,372
17
8,389
$
217 $
—
—
—
217 $
— $
—
—
— $
54
73
—
—
—
73
—
19
—
19
$
$
$
$
$
$
$
$
— $
—
—
— $
4,042 $
—
—
—
—
4,395
1,030 $
2,656
990 $
—
—
40
1,030 $
432 $
—
—
432 $
2,480
—
—
176
2,656
2,175
—
—
2,175
$
$
$
$
$
$
$
$
$
(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 12 – Commitments and Contingencies.
(2) At December 31, 2020 and 2019, loans and leases in the consolidated credit card trust included $7.6 billion and $10.5 billion of seller’s interest.
(3) The retained senior securities were valued using quoted market prices or observable market inputs (Level 2 of the fair value hierarchy).
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
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to
the
in market making and similar activities prior
resecuritization and, accordingly, no gain or loss on sale was
recorded. Securities received from the resecuritization VIEs were
recognized at their fair value of $6.1 billion, $5.2 billion and
$4.1 billion during 2020, 2019 and 2018, respectively. In 2019
and 2018, substantially all of the securities were classified as
trading account assets. All of the securities received as
resecuritization proceeds during 2020 were classified as trading
account assets. Of the securities received as resecuritizations
proceeds during 2020, $2.4 billion, $2.1 billion and $1.7 billion
were classified as trading account assets, debt securities
carried at
respectively.
fair value and HTM securities,
Substantially all of the trading account securities and debt
securities carried at fair value 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 $3.5 billion and $3.7 billion at
December 31, 2020 and 2019. The weighted-average remaining
life of bonds held in the trusts at December 31, 2020 was 6.8
years. There were no significant write-downs or downgrades of
assets or issuers during 2020, 2019 and 2018.
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, 2020 and 2019.
events depend on the undrawn portion of the 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 and
cash reserve accounts.
During 2020, 2019 and 2018, the Corporation issued new
senior debt securities to third-party investors from the credit
card securitization trust of $1.0 billion, $1.3 billion and $4.0
billion, respectively.
At December 31, 2020 and 2019, the Corporation held
subordinate securities issued by the credit card securitization
trust with a notional principal amount of $6.8 billion and $7.4
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 2020, 2019 and 2018, the credit card
securitization trust issued $161 million, $202 million and $650
million, respectively, of these subordinate securities.
transfers securities,
Resecuritization Trusts
into
The Corporation
resecuritization VIEs generally 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.
typically MBS,
The Corporation resecuritized $39.0 billion, $24.4 billion
and $22.8 billion of securities during 2020, 2019 and 2018,
respectively. Securities transferred into resecuritization VIEs
were measured at fair value with changes in fair value recorded
Other VIEs
(Dollars in millions)
Maximum loss exposure (1)
On-balance sheet assets
Trading account assets (1)
Debt securities carried at fair value (1)
Loans and leases (1)
Allowance for loan and lease losses (1)
All other assets (1)
Total (1)
On-balance sheet liabilities
Short-term borrowings
Long-term debt
All other liabilities (1)
Total (1)
Total assets of VIEs (1)
Consolidated
Unconsolidated
December 31, 2020
Total
Consolidated
Unconsolidated
December 31, 2019
Total
4,106 $
23,870 $
27,976 $
4,055 $
21,069 $
25,124
2,080 $
—
2,108
(3)
54
4,239 $
$
22
111
—
133 $
4,239 $
623 $
9
184
(3)
22,553
23,366 $
— $
—
5,658
5,658 $
77,984 $
2,703 $
9
2,292
(6)
22,607
27,605 $
$
22
111
5,658
5,791 $
82,223 $
2,213 $
—
1,810
(2)
81
4,102 $
— $
46
2
48 $
4,102 $
549 $
10
533
—
19,354
20,446 $
— $
—
4,896
4,896 $
70,120 $
2,762
10
2,343
(2)
19,435
24,548
—
46
4,898
4,944
74,222
$
$
$
$
$
$
(1) Prior-period amounts have been revised to remove certain entities that are no longer considered VIEs.
include
Customer VIEs
Customer VIEs
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 $2.3 billion and $2.2
billion at December 31, 2020 and 2019, including the notional
amount of derivatives
is a
to which
counterparty, net of losses previously recorded, and the
the Corporation
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
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benefits from investments in affordable housing partnerships of
$1.2 billion, $1.0 billion and $981 million and reported pretax
losses in other income of $1.0 billion, $882 million and $798
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.
NOTE 7 Goodwill and Intangible Assets
Goodwill
The table below presents goodwill balances by business
segment and All Other at December 31, 2020 and 2019. 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
2020
2019
30,123 $
9,677
23,923
5,182
46
68,951 $
30,123
9,677
23,923
5,182
46
68,951
$
$
During 2020, the Corporation completed its annual goodwill
impairment test as of June 30, 2020 using a quantitative
assessment 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 quantitative assessments, see Note 1 – Summary of
Significant Accounting Principles.
Intangible Assets
At December 31, 2020 and 2019, the net carrying value of
intangible assets was $2.2 billion and $1.7 billion. During
2020, the Corporation recognized a $585 million intangible
asset, which is being amortized over a 10-year life, related to
the merchant contracts that were distributed to the Corporation
from its merchant servicing joint venture. For more information,
see Note 12 – Commitments and Contingencies.
At both December 31, 2020 and 2019, 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 $95 million, $112 million and $538 million for
2020, 2019 and 2018.
counterparty to the CDOs. The Corporation’s maximum loss
exposure to consolidated and unconsolidated CDOs totaled
$298 million and $304 million at December 31, 2020 and
2019.
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, 2020 and 2019, the Corporation’s consolidated
investment VIEs had total assets of $494 million and $104
million.
in
unconsolidated VIEs with total assets of $5.4 billion and $5.1
billion at December 31, 2020 and 2019. The Corporation’s
maximum loss exposure associated with both consolidated and
unconsolidated investment VIEs totaled $1.5 billion and $1.6
billion at December 31, 2020 and 2019 comprised primarily of
on-balance sheet assets less non-recourse liabilities.
The Corporation
investments
held
also
Leveraged Lease Trusts
The Corporation’s net investment in consolidated leveraged
lease trusts totaled $1.7 billion at both December 31, 2020
and 2019. 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 $22.0 billion and
$18.9 billion at December 31, 2020 and 2019. 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 $11.2 billion and $10.0
billion, including unfunded commitments to provide capital
contributions of $5.0 billion and $4.3 billion at December 31,
2020 and 2019. The unfunded commitments are expected to
be paid over the next five years. During 2020, 2019 and 2018,
the Corporation recognized
tax credits and other tax
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NOTE 8 Leases
The Corporation enters
lessee
arrangements. For more information on lease accounting, see
Note 1 – Summary of Significant Accounting Principles and on
lease financing receivables, see Note 5 – Outstanding Loans and
Leases and Allowance for Credit Losses.
lessor and
into both
Lessor Arrangements
The Corporation’s lessor arrangements primarily consist of
operating, sales-type and direct financing leases for equipment.
Lease agreements may include options to renew and for the
lessee to purchase the leased equipment at the end of the
lease term.
The following table presents the net investment in sales-type
and direct financing leases at December 31, 2020 and 2019.
62539financials
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$
$
$
$
December 31
2020
10,000
10,474
3.38 %
8.4
2,149
474
2,623
$
$
$
2019
9,735
10,093
3.68 %
8.2
2,085
498
2,583
851
$
931
2,039
2,009
Lessee Arrangements
(Dollars in millions)
Right-of-use asset
Lease liabilities
Weighted-average discount rate used to
calculate present value of future minimum
lease payments
Weighted-average lease term (in years)
Lease Cost and Supplemental Information:
Operating lease cost
Variable lease cost (1)
Total lease cost (2)
Right-of-use assets obtained in exchange for
new operating lease liabilities (3)
Operating cash flows from operating
leases (4)
Net Investment (1)
(Dollars in millions)
Lease receivables
Unguaranteed residuals
December 31
2020
2019
$ 17,627 $ 19,312
2,550
2,303
(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
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 measurements of lease liabilities.
Total net investment in sales-type and direct
financing leases
$ 19,930 $ 21,862
(1) 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 $6.9 billion and $5.8 billion at
December 31, 2020 and 2019.
Maturity Analysis
The maturities of lessor and lessee arrangements outstanding
at December 31, 2020 are presented in the table below based
on undiscounted cash flows.
The following table presents lease income at December 31,
2020 and 2019.
Lease Income
(Dollars in millions)
Sales-type and direct financing leases
Operating leases
Total lease income
December 31
2020
2019
$
$
$
707
931
1,638 $
797
891
1,688
Lessee Arrangements
The Corporation's lessee arrangements predominantly consist
the
of operating
Corporation's financing leases are not significant.
for premises and equipment;
leases
Lease terms may contain renewal and extension options and
early termination features. Generally, these options do not
impact the
is not
reasonably certain that it will exercise the options.
lease term because the Corporation
The following table provides information on the right-of-use
assets, lease liabilities and weighted-average discount rates
and lease terms at December 31, 2020 and 2019.
Maturities of Lessor and Lessee Arrangements
Operating
Leases
Lessor
Sales-type and
Direct Financing
Leases (2)
December 31, 2020
Lessee (1)
Operating
Leases
843 $
748
630
479
339
886
5,424 $
4,934
3,637
2,089
1,143
1,668
1,927
1,715
1,454
1,308
1,087
4,609
$
(Dollars in millions)
2021
2022
2023
2024
2025
Thereafter
Total undiscounted
cash flows
$
3,925
18,895
12,100
Less: Net present
value adjustment
Total (3)
$
1,268
17,627 $
1,626
10,474
(1) Excludes $885 million in commitments under lessee arrangements that have not yet
(2)
commenced with lease terms that will begin in 2021.
Includes $12.7 billion in commercial lease financing receivables and $4.9 billion in direct/
indirect consumer lease financing receivables.
(3) Represents lease receivables for lessor arrangements and lease liabilities for lessee
arrangements.
NOTE 9 Deposits
The table below presents information about the Corporation’s time deposits of $100,000 or more at December 31, 2020 and
2019. The Corporation also had aggregate time deposits of $10.7 billion and $15.8 billion in denominations that met or exceeded
the Federal Deposit Insurance Corporation (FDIC) insurance limit at December 31, 2020 and 2019.
Time Deposits of $100,000 or More
(Dollars in millions)
U.S. certificates of deposit and other time deposits
Non-U.S. certificates of deposit and other time deposits
December 31, 2020
December 31
2019
Three Months
or Less
Over Three
Months to
Twelve Months
Thereafter
Total
Total
$
12,485 $
10,668 $
8,568
1,925
1,445 $
1,432
24,598 $
11,925
39,739
13,034
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The scheduled contractual maturities for total time deposits at December 31, 2020 are presented in the table below.
Contractual Maturities of Total Time Deposits
(Dollars in millions)
Due in 2021
Due in 2022
Due in 2023
Due in 2024
Due in 2025
Thereafter
Total time deposits
U.S.
Non-U.S.
Total
$
$
40,052 $
2,604
431
222
186
276
43,771 $
10,609 $
167
4
5
13
1,287
12,085 $
50,661
2,771
435
227
199
1,563
55,856
NOTE 10 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 21 – 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
2020
2019
$
$
309,945
451,179
192,479
206,493
22,486
30,118
0.29 % $
n/a
279,610
281,684
0.69 % $
n/a
201,797
203,063
0.54
n/a
24,301
36,538
1.73 %
n/a
2.31 %
n/a
2.42
n/a
Bank of America, N.A. maintains a global program to offer up
to a maximum of $75.0 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 $3.9 billion and $11.7
billion at December 31, 2020 and 2019. 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
legally
enforceable master securities lending agreements that give the
Corporation, in the event of default by the counterparty, the right
repurchase agreements or
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, 2020 and 2019. 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.
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Securities Financing Agreements
(Dollars in millions)
Securities borrowed or purchased under agreements to resell (3)
Securities loaned or sold under agreements to repurchase
Other (4)
Total
Securities borrowed or purchased under agreements to resell (3)
Securities loaned or sold under agreements to repurchase
Other (4)
Total
Gross Assets/
Liabilities (1)
Amounts Offset
Net Balance
Sheet Amount
December 31, 2020
Financial
Instruments (2)
Net Assets/
Liabilities
$
$
$
$
$
$
492,387 $
358,652 $
16,210
(188,329) $
(188,329) $
—
304,058 $
170,323 $
16,210
(272,351) $
(158,867) $
(16,210)
374,862 $
(188,329) $
186,533 $
(175,077) $
December 31, 2019
434,257 $
324,769 $
15,346
(159,660) $
(159,660) $
—
274,597 $
165,109 $
15,346
340,115 $
(159,660) $
180,455 $
(244,486) $
(141,482) $
(15,346)
(156,828) $
31,707
11,456
—
11,456
30,111
23,627
—
23,627
(1)
(2)
Includes activity where uncertainty exists as to the enforceability of certain master netting agreements under bankruptcy laws in some countries or industries.
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 $14.7 billion and $12.9 billion reported in loans and leases on the Consolidated Balance Sheet at December 31, 2020 and 2019.
(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
December 31, 2020
Greater than
90 Days (1)
Total
$
$
$
$
158,400 $
19,140
16,210
193,750 $
129,455 $
18,766
15,346
163,567 $
122,448 $
271
—
122,719 $
32,149 $
1,029
—
33,178 $
December 31, 2019
122,685 $
3,329
—
126,014 $
25,322 $
1,241
—
26,563 $
22,684 $
2,531
—
25,215 $
21,922 $
2,049
—
23,971 $
335,681
22,971
16,210
374,862
299,384
25,385
15,346
340,115
Securities Sold
Under Agreements
to Repurchase
Securities
Loaned
Other
Total
$
$
$
$
195,167 $
8,633
14,752
113,142
3,987
335,681 $
173,533 $
10,467
14,933
96,576
3,875
299,384 $
December 31, 2020
5 $
1,628
21,125
213
—
22,971 $
December 31, 2019
1 $
2,014
20,026
3,344
—
25,385 $
— $
1,217
14,931
62
—
16,210 $
— $
258
15,024
64
—
15,346 $
195,172
11,478
50,808
113,417
3,987
374,862
173,534
12,739
49,983
99,984
3,875
340,115
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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, 2020 and 2019, the Corporation held
restricted cash included within cash and cash equivalents on
the Consolidated Balance Sheet of $7.0 billion and $24.4
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 11 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, 2020 and 2019, and the related contractual rates and maturity dates as of December 31, 2020.
(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
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 (2)
Other
Total notes issued by Bank of America, N.A.
Other debt
Structured liabilities
Nonbank VIEs (2)
Other
Weighted-
average Rate
Interest Rates
Maturity Dates
2020
2019
December 31
3.05 %
0.74
0.25 - 8.05 %
0.09 - 4.96
2021 - 2051 $
2021 - 2044
4.89
1.15
6.71
1.03
3.34
0.33
6.00
2.94 - 8.57
0.88 - 1.41
6.45 - 8.05
1.03
2021 - 2045
2022 - 2026
2027 - 2066
2056
3.34
0.28 - 0.49
6.00
2023
2021 - 2041
2036
0.99
0.01 - 7.72
2021 - 2034
174,385 $
16,788
17,033
23,337
799
738
1
233,081
511
2,323
1,883
599
—
6,296
683
12,295
16,792
757
9
17,558
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
$
262,934 $
Total notes issued by nonbank and other entities
Total long-term debt
Includes total loss-absorbing capacity compliant debt.
(1)
(2) Represents liabilities of consolidated VIEs included in total long-term debt on the Consolidated Balance Sheet.
During 2020, the Corporation issued $56.9 billion of long-
term debt consisting of $43.8 billion of notes issued by Bank of
America Corporation, $4.8 billion of notes issued by Bank of
America, N.A. and $8.3 billion of other debt. 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.
During 2020, the Corporation had total long-term debt
maturities and redemptions in the aggregate of $47.1 billion
consisting of $22.6 billion for Bank of America Corporation,
$11.5 billion for Bank of America, N.A. and $13.0 billion of
other debt. 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.
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, 2020 and
2019, the amount of
foreign currency-denominated debt
translated into U.S. dollars included in total long-term debt was
$54.6 billion and $49.6 billion. Foreign currency contracts may
be used to convert certain foreign currency-denominated debt
into U.S. dollars.
At December 31, 2020, long-term debt of consolidated VIEs
in the table above included debt from credit card, residential
mortgage, home equity and other VIEs of $6.3 billion, $491
million, $178 million and $111 million, respectively. Long-term
debt of VIEs is collateralized by the assets of the VIEs. For more
information, see Note 6 – Securitizations and Other Variable
Interest Entities.
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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 3.02 percent, 3.29
percent and 0.71 percent, respectively, at December 31, 2020,
and 3.26 percent, 3.55 percent and 1.92 percent, respectively,
at December 31, 2019. 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 caused by interest rate volatility. The
Corporation’s goal is to manage interest rate sensitivity so that
movements in interest rates do not have a significantly adverse
effect on 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 $4.8 billion at December 31, 2020 was
issued by BofA Finance LLC, a consolidated finance subsidiary
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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, 2020. 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
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.
repayment
linked
terms
to
Long-term Debt by Maturity
(Dollars in millions)
Bank of America Corporation
Senior notes
Senior structured notes
Subordinated notes
Junior subordinated notes
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 (1)
Other
Total Bank of America, N.A.
Other debt
Structured Liabilities
Nonbank VIEs (1)
Other
Total other debt
Total long-term debt
2021
2022
2023
2024
2025
Thereafter
Total
$
8,888 $
15,380 $
469
371
—
9,728
1,340
—
502
4,056
112
6,010
2,034
393
—
17,807
975
—
3
1,241
16
2,235
23,872 $
597
—
—
24,469
21,407 $
190
3,351
—
24,948
15,723 $
549
5,537
—
21,809
105,903 $
13,194
14,484
739
134,320
511
—
1
977
189
1,678
—
—
—
—
—
—
—
—
18
—
279
297
8
1,883
75
22
87
2,075
4,613
1
—
4,614
20,352 $
2,414
—
—
2,414
22,456 $
2,221
—
—
2,221
28,368 $
655
—
—
655
25,603 $
859
—
—
859
22,965 $
6,030
756
9
6,795
143,190 $
$
191,173
17,033
24,136
739
233,081
2,834
1,883
599
6,296
683
12,295
16,792
757
9
17,558
262,934
(1) Represents liabilities of consolidated VIEs included in total long-term debt on the Consolidated Balance Sheet.
NOTE 12 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 $10.5 billion and $10.6 billion at
December 31, 2020 and 2019. The carrying value of these
commitments at December 31, 2020 and 2019, excluding
commitments accounted for under the fair value option, was
$1.9 billion and $829 million, which primarily related to the
reserve for unfunded lending commitments. The carrying value
of these commitments is classified in accrued expenses and
other liabilities on the Consolidated Balance Sheet.
The
includes
table below
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.
the notional amount of
commitments of $4.0 billion and $4.4 billion at December 31,
2020 and 2019 that are accounted for under the fair value
option. However, the table excludes cumulative net fair value of
$99 million and $90 million at December 31, 2020 and 2019
on these commitments, which is classified in accrued expenses
and other liabilities. For more information regarding the
Corporation’s loan commitments accounted for under the fair
value option, see Note 21 – Fair Value Option.
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Credit Extension Commitments
(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
$
$
$
$
Expire in One
Year or Less
Expire After One
Year Through
Three Years
Expire After Three
Years Through
Five Years
December 31, 2020
Expire After
Five Years
Total
109,406 $
710
19,962
886
130,964
384,955
515,919 $
97,454 $
1,137
21,311
1,156
121,058
376,067
497,125 $
171,887 $
2,992
12,038
197
187,114
—
187,114 $
139,508 $
8,738
2,397
25
150,668
—
150,668 $
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 $
16,091 $
29,892
1,257
27
47,267
—
47,267 $
24,487 $
34,134
408
25
59,054
—
59,054 $
436,892
42,332
35,654
1,135
516,013
384,955
900,968
443,640
43,570
36,943
1,500
525,653
376,067
901,720
(1) At December 31, 2020 and 2019, $4.8 billion and $5.1 billion of these loan commitments were 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 $25.0 billion and $10.2 billion at December 31, 2020, and $27.9 billion and $8.6 billion at December 31, 2019. Amounts in the table include consumer SBLCs of $500 million
and $413 million at December 31, 2020 and 2019.
(3) At December 31, 2020 and 2019, included are letters of credit of $1.8 billion and $1.4 billion related to certain liquidity commitments of VIEs. For more information, see Note 6 – Securitizations
(4)
and Other Variable Interest Entities.
Includes business card unused lines of credit.
Other Commitments
At December 31, 2020 and 2019, the Corporation had
commitments to purchase loans (e.g., residential mortgage and
commercial real estate) of $93 million and $86 million, which
upon settlement will be included in trading account assets,
loans or LHFS, and commitments to purchase commercial loans
of $645 million and $1.1 billion, which upon settlement will be
included in trading account assets.
At December 31, 2020 and 2019, the Corporation had
commitments to purchase commodities, primarily liquefied
natural gas, of $582 million and $830 million, which upon
settlement will be included in trading account assets.
At December 31, 2020 and 2019, the Corporation had
commitments to enter into resale and forward-dated resale and
securities borrowing agreements of $66.5 billion and $97.2
billion, and commitments to enter into forward-dated repurchase
and securities lending agreements of $32.1 billion and $24.9
billion. These commitments generally expire within the next 12
months.
At December 31, 2020 and 2019, the Corporation had a
commitment to originate or purchase up to $3.9 billion and
$3.3 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
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, 2020 and
2019, the notional amount of these guarantees totaled $7.1
billion and $7.3 billion. At both December 31, 2020 and 2019,
the Corporation’s maximum exposure
these
guarantees totaled $1.1 billion, with estimated maturity dates
between 2033 and 2039.
related
to
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.
Merchant Services
Prior to July 1, 2020, a significant portion of the Corporation's
merchant processing activity was performed by a joint venture in
which the Corporation held a 49 percent ownership interest. 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 on June 30, 2020. Effective July
1, 2020, the Corporation received its share of the joint
venture's merchant contracts and began performing merchant
processing services for these merchants. While merchants bear
responsibility for any credit or debit card charges properly
reversed by the cardholder, the Corporation, in its role as
merchant acquirer, may be held liable for any reversed charges
that cannot be collected from the merchants due to, among
other things, merchant fraud or insolvency.
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The Corporation, as a card network member bank, also
sponsors other merchant acquirers, principally its former joint
venture partner with respect to merchant contracts distributed
to that partner upon the termination of the joint venture. If
charges are properly reversed after a purchase and cannot be
collected from either the merchants or merchant acquirers, the
Corporation may be held liable for these reversed charges. The
ability to reverse a charge is primarily governed by the
applicable regulatory and card network rules, which include, but
are not limited to, the type of charge, type of payment used and
time limits. For the six-months ended December 31, 2020, the
Corporation processed an aggregate purchase volume of
$339.2 billion. The Corporation’s risk in this area primarily
relates to circumstances where a cardholder has purchased
goods or services for future delivery. The Corporation mitigates
this risk by requiring cash deposits, guarantees, letters of credit
or other types of collateral from certain merchants. The
Corporation’s reserves for contingent losses and the losses
incurred related to the merchant processing activity were not
significant. The Corporation continues to monitor its exposure in
this area due to the potential economic impacts of COVID-19.
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.
Fixed Income Clearing Corporation Sponsored Member
Repo Program
The Corporation acts as a sponsoring member in a repo
program whereby the Corporation clears certain eligible resale
and repurchase agreements through the Government Securities
Division of the Fixed Income Clearing Corporation on behalf of
clients that are sponsored members in accordance with the
Fixed Income Clearing Corporation’s rules. As part of this
the payment and
program,
performance of its sponsored members to the Fixed Income
Clearing Corporation. The Corporation’s guarantee obligation is
the Corporation guarantees
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secured by a security interest in cash or high-quality securities
collateral placed by clients with the clearinghouse and therefore,
the potential for the Corporation to incur significant losses
under this arrangement is remote. The Corporation’s maximum
potential exposure, without taking into consideration the related
collateral, was $22.5 billion and $9.3 billion at December 31,
2020 and 2019.
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
these agreements are
potential
approximately $8.8 billion and $8.7 billion at December 31,
2020 and 2019. 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 6 – Securitizations and
Other Variable Interest Entities.
future payments under
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,
other
transactions.
agreements
brokerage
prime
and
the parent company,
Guarantees of Certain Long-term Debt
fully and
The Corporation, as
unconditionally guarantees the securities issued by BofA
Finance LLC, a consolidated
the
Corporation, and effectively provides
full and
unconditional guarantee of trust securities issued by certain
statutory trust companies that are 100 percent owned finance
subsidiaries of the Corporation.
finance subsidiary of
the
for
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 and warranties.
Breaches of 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).
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
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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, 2020 and 2019 was $8.5 billion and $10.7
billion. These balances included $2.9 billion and $3.7 billion at
December 31, 2020 and 2019 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.
During 2020, the Corporation received $89 million in new
repurchase claims that were not time-barred. During 2020,
$2.4 billion in claims were resolved, including $168 million of
claims that were deemed time-barred.
Reserve and Related Provision
The reserve for representations and warranties obligations and
corporate guarantees was $1.3 billion and $1.8 billion at
December 31, 2020 and 2019 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 its 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 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.
As a matter develops, the Corporation, in conjunction with
any outside counsel handling the matter, evaluates whether
such matter presents a loss contingency that is probable and
estimable, and, for the matters disclosed in this Note, whether
a loss in excess of any accrued liability is reasonably possible in
future periods. Once the loss contingency is deemed to be both
probable and estimable, the Corporation will establish an
accrued liability and record a corresponding amount of litigation-
related expense. The Corporation continues to monitor the
matter for further developments that could affect the amount of
the accrued liability that has been previously established.
Excluding expenses of internal and external legal service
providers, litigation-related expense of $823 million and $681
million was recognized in 2020 and 2019.
For the matters disclosed in this Note for which a loss in
future periods is reasonably possible and estimable (whether in
excess of an accrued liability or where there is no accrued
liability) and for representations and warranties exposures, the
Corporation’s estimated range of possible loss is $0 to $1.3
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billion in excess of the accrued liability, if any, as of December
31, 2020.
The accrued liability and estimated range of possible loss
are based upon currently available information and subject to
significant judgment, a variety of assumptions and known and
unknown uncertainties. The matters underlying the accrued
liability and estimated range of possible loss are unpredictable
and may 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 representations and warranties
regarding 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.
Ambac v. Countrywide I
The Corporation, and several 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.
its
fraudulent
On May 16, 2017, the First Department issued its decisions
on the parties' cross-appeals of the trial court's October 22,
2015 summary judgment rulings. Ambac appealed the First
Department's rulings requiring Ambac to prove all of the
elements of
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
for
dismissing
reimbursements of attorneys' fees. On June 27, 2018, the New
York Court of Appeals affirmed the First Department rulings that
Ambac appealed.
inducement claim,
Ambac's
claim
loan;
and
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On December 4, 2020, the New York Supreme Court
inducement claim. Ambac
fraudulent
dismissed Ambac’s
appealed the dismissal.
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
the Corporation. Ambac seeks
damages in excess of $600 million, plus punitive damages.
liability against
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. On
December 8, 2020, the New York Supreme Court dismissed
Ambac’s complaint. Ambac appealed the dismissal.
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.
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
inquiries and
investigations, and responding to the proceedings.
cooperating with
these
is
LIBOR
The Corporation, BANA and certain Merrill Lynch entities have
been named as defendants along with most of the other 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
fraud and breach of contract claims, and seek
law
compensatory, treble and punitive damages, and injunctive
relief. All but one of the 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 against Bank of America
entities based on alleged trader conduct. 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 against the
Corporation, BANA and certain Merrill Lynch entities.
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.
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.
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NOTE 13 Shareholders’ Equity
Common Stock
Declared Quarterly Cash Dividends on Common Stock (1)
Declaration Date
January 19, 2021
October 21, 2020
July 22, 2020
April 22, 2020
January 29, 2020
Record Date
March 5, 2021
December 4, 2020
September 4, 2020
June 5, 2020
March 6, 2020
Payment Date
March 26, 2021
December 24, 2020
September 25, 2020
June 26, 2020
March 27, 2020
(1)
In 2020, and through February 24, 2021.
Dividend
Per Share
0.18
$
0.18
0.18
0.18
0.18
The cash dividends paid per share of common stock were $0.72
$0.66 and $0.54 for 2020, 2019 and 2018, respectively.
The following table summarizes common stock repurchases
during 2020, 2019 and 2018.
Common Stock Repurchase Summary
(in millions)
2020
2019
2018
Total share repurchases, including CCAR
capital plan repurchases
227
956
676
Purchase price of shares repurchased
and retired
CCAR capital plan repurchases
Other authorized repurchases
Total shares repurchased
$ 7,025 $ 25,644 $ 16,754
3,340
$ 7,025 $ 28,144 $ 20,094
2,500
—
During 2020, the Board of Governors of the Federal Reserve
System (Federal Reserve) announced that due to economic
uncertainty resulting from COVID-19, all large banks would be
required to suspend share repurchase programs in the third and
fourth quarters of 2020, except for repurchases to offset shares
awarded under equity-based compensation plans, and to limit
dividends to existing rates that do not exceed the average of the
last four quarters’ net income.
Federal Reserve’s
share
repurchases aligned with
to
voluntarily suspend repurchases during the first half of 2020.
The suspension of the Corporation's repurchases did not
include repurchases to offset shares awarded under its equity-
based compensation plans.
the Corporation's decision
directives
regarding
The
During 2020, the Corporation repurchased and retired 227
million shares of common stock, which reduced shareholders’
equity by $7.0 billion.
During 2020, in connection with employee stock plans, the
Corporation issued 66 million shares of its common stock and,
to satisfy tax withholding obligations, repurchased 26 million
shares of its common stock. At December 31, 2020, the
Corporation had reserved 513 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, $1.4 billion and $1.5 billion for 2020, 2019 and 2018,
respectively.
On January 24, 2020, the Corporation issued 44,000 shares
of Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series
MM for $1.1 billion. Dividends are paid semi-annually during the
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fixed-rate period, then quarterly during the floating-rate period.
The Series MM preferred stock has a liquidation preference of
$25,000 per share and is subject to certain restrictions in the
event the Corporation fails to declare and pay full dividends.
On October 29, 2020, the Corporation issued 44,000
shares of 4.375% Non-Cumulative Preferred Stock, Series NN
for $1.1 billion, with quarterly dividend payments commencing in
February 2021. The Series NN preferred stock has a liquidation
preference of $25,000 per share and is subject to certain
restrictions in the event the Corporation fails to declare and pay
full dividends.
On January 28, 2021, the Corporation issued 36,000 shares
of 4.125% Non-Cumulative Preferred Stock, Series PP for
$915 million, with quarterly dividends commencing in May
2021. The Series PP preferred stock has a liquidation
preference of $25,000 per share and is subject to certain
restrictions in the event the Corporation fails to declare and pay
full dividends.
In 2020, the Corporation fully redeemed Series Y preferred
stock for $1.1 billion. Additionally, on January 29, 2021, the
Corporation fully redeemed Series CC 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 of 30 consecutive trading days, the closing price of
common stock exceeds 130 percent of the then-applicable
conversion price of the Series L Preferred Stock. If a conversion
of Series L Preferred Stock occurs at the option of the holder,
subsequent to a dividend record date but prior to the dividend
payment date, the Corporation will still pay any accrued
dividends payable.
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The table below presents a summary of perpetual preferred stock outstanding at December 31, 2020.
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)
1
6
7
6
2
5
3
9
f
i
n
a
n
c
a
s
i
l
Series B
Series E (2)
Series F
Series G
Series L
7% Cumulative
Redeemable
June
1997
Floating Rate Non-
Cumulative
November
2006
Floating Rate Non-
Cumulative
Adjustable Rate Non-
Cumulative
7.25% Non-Cumulative
Perpetual Convertible
March
2012
March
2012
January
2008
September
2011
Series T
6% Non-cumulative
Series U (4)
Series X (4)
Series Z (4)
Fixed-to-Floating Rate
Non-Cumulative
May
2013
Fixed-to-Floating Rate
Non-Cumulative
September
2014
Fixed-to-Floating Rate
Non-Cumulative
October
2014
Series AA (4)
Fixed-to-Floating Rate
Non-Cumulative
Series CC (2)
6.200% Non-Cumulative
Series DD (4)
Fixed-to-Floating Rate
Non-Cumulative
Series EE (2)
6.000% Non-Cumulative
Series FF (4)
Fixed-to-Floating Rate
Non-Cumulative
Series GG (2)
6.000% Non-Cumulative
Series HH (2)
5.875% Non-Cumulative
Series JJ (4)
Fixed-to-Floating Rate
Non-Cumulative
Series KK (2)
5.375% Non-Cumulative
March
2015
January
2016
March
2016
April
2016
March
2018
May
2018
July
2018
June
2019
June
2019
Series LL (2)
5.000% Non-Cumulative
Series MM (4)
Fixed-to-Floating Rate
Non-Cumulative
Series NN (2)
4.375% Non-Cumulative
September
2019
January
2020
October
2020
Series 1 (5)
Series 2 (5)
Series 4 (5)
Series 5 (5)
Floating Rate Non-
Cumulative
November
2004
Floating Rate Non-
Cumulative
March
2005
Floating Rate Non-
Cumulative
November
2005
Floating Rate Non-
Cumulative
March
2007
Issuance costs and certain adjustments
7,110 $
100 $
1
7.00 % $
7 $
12,691
25,000
317
3-mo. LIBOR + 35 bps (3)
1.02
1,409
100,000
141
3-mo. LIBOR + 40 bps (3)
4,066.67
4,926
100,000
493
3-mo. LIBOR + 40 bps (3)
4,066.67
—
13
6
20
n/a
On or after
November 15, 2011
On or after
March 15, 2012
On or after
March 15, 2012
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
40,000
25,000
1,000
80,000
25,000
2,000
56,000
25,000
1,400
76,000
25,000
1,900
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
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
52.00
52
On or after
June 1, 2023
62.50
125
On or after
September 5, 2024
65.00
91
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
58.75
138
94,000
25,000
2,350
54,000
25,000
1,350
34,160
25,000
854
40,000
25,000
1,000
5.875% to, but excluding,
3/15/28; 3-mo. LIBOR +
293.1 bps thereafter
6.000 %
5.875 %
5.125% to, but excluding,
6/20/24; 3-mo. LIBOR +
329.2 bps thereafter
55,900
25,000
1,398
52,400
25,000
1,310
5.375 %
5.000 %
1.50
1.47
51.25
1.34
1.25
44,000
25,000
1,100
4.300 %
43.48
44,000
25,000
1,100
4.375 %
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
3-mo. LIBOR + 50 bps (3)
422
(348)
0.29
0.75
0.76
1.02
1.02
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
January 28, 2025
On or after
November 3, 2025
On or after
November 28, 2009
On or after
November 28, 2009
On or after
November 28, 2010
On or after
May 21, 2012
81
50
51
75
66
48
13
3
10
9
17
Total
3,931,440
$ 24,510
(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
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NOTE 14 Accumulated Other Comprehensive Income (Loss)
The table below presents the changes in accumulated OCI after-tax for 2020, 2019 and 2018.
62539financials
168
f
i
n
a
n
c
a
s
i
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(Dollars in millions)
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
Net change
Balance, December 31, 2020
Debt Securities
$
Debit Valuation
Adjustments
Derivatives
Employee
Benefit Plans
Foreign
Currency
(1,206) $
(393)
—
(3,953)
(5,552) $
5,875
323 $
4,799
5,122 $
(1,060) $
(220)
—
749
(531) $
(963)
(1,494) $
(498)
(1,992) $
(831) $
(189)
57
(53)
(1,016) $
616
(400) $
826
426 $
(3,192) $
(707)
—
(405)
(4,304) $
136
(4,168) $
(98)
(4,266) $
(793) $
239
—
(254)
(808) $
(86)
(894) $
(52)
(946) $
Total
(7,082)
(1,270)
57
(3,916)
(12,211)
5,578
(6,633)
4,977
(1,656)
$
$
$
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 2020, 2019 and 2018.
(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 (gains) 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) reclassified into earnings (1)
Net change
Total other comprehensive income (loss)
Pretax
Tax
effect
2020
After-
tax
Pretax
Tax
effect
2019
After-
tax
Pretax
Tax
effect
2018
After-
tax
$ 6,819 $ (1,712) $ 5,107 $ 8,020 $ (2,000) $ 6,020 $ (5,189) $ 1,329 $ (3,860)
(93)
(3,953)
48
(1,952)
(123)
(5,312)
(193)
7,827
(145)
5,875
103
(1,609)
(411)
6,408
(308)
4,799
30
1,359
(669)
19
(650)
156
(4)
152
(513)
15
(498)
(1,276)
18
(1,258)
289
6
295
(987)
24
(963)
952
26
978
(224)
(5)
(229)
728
21
749
1,098
(268)
830
692
(156)
536
(232)
74
(158)
6
(12)
(6)
1,092
(381)
261
5
(115)
(1)
3
2
(266)
80
(63)
—
17
5
(9)
(4)
826
(301)
198
5
(98)
104
2
106
798
41
150
3
194
(26)
—
(26)
(182)
(21)
(36)
(1)
(58)
78
2
80
616
20
114
2
136
165
(27)
138
(94)
(703)
171
11
(521)
(40)
7
(33)
41
164
(46)
(2)
116
125
(20)
105
(53)
(539)
125
9
(405)
(251)
(1)
(252)
(203)
(51)
(254)
$ 6,483 $ (1,506) $ 4,977 $ 7,438 $ (1,860) $ 5,578 $ (5,106) $ 1,190 $ (3,916)
(13)
(110)
(123)
(8)
(149)
(157)
(195)
98
(97)
(65)
(21)
(86)
(52)
89
37
(52)
—
(52)
199
1
200
(1) Reclassifications of pretax debt securities, DVA and foreign currency (gains) losses 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.
NOTE 15 Earnings Per Common Share
The calculation of EPS and diluted EPS for 2020, 2019 and 2018 is presented below. For more information on the calculation of
EPS, see Note 1 – Summary of Significant Accounting Principles.
(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
Average common shares issued and outstanding
Dilutive potential common shares (1)
Total diluted average common shares issued and outstanding
Diluted earnings per common share
(1)
Includes incremental dilutive shares from RSUs, restricted stock and warrants.
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2020
2019
2018
17,894
(1,421)
16,473
8,753.2
$
$
27,430 $
(1,432)
25,998 $
9,390.5
1.88 $
2.77 $
28,147
(1,451)
26,696
10,096.5
2.64
16,473
8,753.2
43.7
8,796.9
$
25,998 $
9,390.5
52.4
9,442.9
1.87 $
2.75 $
26,696
10,096.5
140.4
10,236.9
2.61
$
$
$
$
$
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For 2020, 2019 and 2018, 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, average options to purchase four 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 2019 and
2018, average warrants to purchase three million and 136
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 16 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 rules, including Basel 3,
for U.S. banking organizations. As a financial holding company,
the Corporation is subject to capital adequacy rules issued by
the 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.
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, 2020 and
2019 for the Corporation and BANA.
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 (5)
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) (6)
Tier 1 leverage ratio
Supplementary leverage exposure (in billions) (7)
Supplementary leverage ratio
Risk-based capital metrics:
Common equity tier 1 capital
Tier 1 capital
Total capital (5)
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) (6)
Tier 1 leverage ratio
Supplementary leverage exposure (in billions)
Supplementary leverage ratio
Bank of America Corporation
Bank of America, N.A.
Standardized
Approach (1, 2)
Advanced
Approaches (1)
Regulatory
Minimum (3)
Standardized
Approach (1, 2)
Advanced
Approaches (1)
Regulatory
Minimum (4)
December 31, 2020
$ 176,660
200,096
237,936
1,480
$ 176,660
200,096
227,685
1,371
$ 164,593
164,593
181,370
1,221
$ 164,593
164,593
170,922
1,014
11.9 %
13.5
16.1
12.9 %
14.6
16.6
9.5 %
11.0
13.0
13.5 %
13.5
14.9
16.2 %
16.2
16.9
7.0 %
8.5
10.5
$
2,719
$
2,719
$
2,143
$
2,143
7.4 %
7.4 %
$
2,786
7.2 %
4.0
5.0
7.7 %
7.7 %
5.0
$
2,525
6.5 %
6.0
$ 166,760
188,492
221,230
1,493
$ 166,760
188,492
213,098
1,447
December 31, 2019
$ 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
(1 ) As of December 31, 2020, capital ratios are calculated using the regulatory capital rule that allows a five-year transition period related to the adoption of CECL.
(2 ) Derivative exposure amounts are calculated using the standardized approach for measuring counterparty credit risk at December 31, 2020 and the current exposure method at December 31,
2019.
(3 ) The capital conservation buffer and global systemically important bank surcharge were 2.5 percent at both December 31, 2020 and 2019. At December 31, 2020, the Corporation's stress capital
buffer of 2.5 percent was applied in place of the capital conservation buffer under the Standardized approach. The countercyclical capital buffer for both periods was zero. The SLR minimum
includes a leverage buffer of 2.0 percent.
(4 ) Risk-based capital regulatory minimums at December 31, 2020 and 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 are the percent required to be considered well capitalized under the PCA framework.
(5 ) 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.
(6 ) Reflects total average assets adjusted for certain Tier 1 capital deductions.
(7 ) Supplementary leverage exposure for the Corporation at December 31, 2020 reflects the temporary exclusion of U.S. Treasury securities and deposits at Federal Reserve Banks.
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require
to meet
institutions
The capital adequacy rules issued by the U.S. banking
regulators
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, 2020 and 2019, the Corporation and its banking
entity affiliates were well capitalized.
In response to the uncertainty arising from the pandemic,
the Federal Reserve required all large banks to suspend share
repurchase programs during the second half of 2020, except for
repurchases to offset shares awarded under equity-based
compensation plans, and to limit common stock dividends to
existing rates that did not exceed the average of the last four
quarters’ net income. In December 2020, the Federal Reserve
announced that beginning in the first quarter of 2021, large
banks would be permitted to pay common stock dividends at
existing rates and to repurchase shares in an amount that,
when combined with dividends paid, does not exceed the
average of net income over the last four quarters. For more
information, see Note 13 – Shareholders’ Equity.
requires
Other Regulatory Matters
The Federal Reserve
the Corporation’s bank
subsidiaries to maintain reserve requirements based on a
percentage of certain deposit liabilities. The average daily
in excess of vault cash,
reserve balance requirements,
maintained by the Corporation with the Federal Reserve Bank
were $3.8 billion for 2020, reflecting the Federal Reserve's
reduction of the reserve requirement to zero in the first quarter
due to COVID-19, and $14.6 billion for 2019. At December 31,
the Corporation had cash and cash
2020 and 2019,
equivalents in the amount of $4.9 billion and $6.3 billion, and
securities with a fair value of $16.8 billion and $14.7 billion
that were segregated in compliance with securities regulations.
Cash held on deposit with the Federal Reserve Bank to meet
requirements and cash and cash equivalents
reserve
segregated in compliance with securities regulations are
components of restricted cash. For more information, see Note
10 – Federal Funds Sold or Purchased, Securities Financing
Agreements, Short-term Borrowings and Restricted Cash .
addition, at December 31, 2020 and 2019, the Corporation had
cash deposited with clearing organizations of $10.9 billion and
$7.6 billion primarily
the
Consolidated Balance Sheet.
in other assets on
recorded
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 2020, the Corporation received dividends of
$10.3 billion from BANA and $62 million from Bank of America
California, N.A.
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 2021, BANA can declare and pay dividends of
approximately $10.3 billion to the Corporation plus an additional
amount equal to its retained net profits for 2021 up to the date
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170
of any such dividend declaration. Bank of America California,
N.A. can pay dividends of $198 million in 2021 plus an
additional amount equal to its retained net profits for 2021 up
to the date of any such dividend declaration.
NOTE 17 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 2020 or 2019. 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.
In
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, 2020 and 2019. The estimate of
the
Corporation’s PBO associated with these plans considers
various actuarial assumptions,
for
mortality
rate
rates and discount
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 2020 and 2019 resulted in increases to the PBO of
approximately $1.9 billion and $2.2 billion at December 31,
2020 and 2019. Significant gains and losses related to
changes in the PBO for 2020 and 2019 primarily resulted from
changes in the discount rate.
including assumptions
rates. The discount
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(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
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
2020
$ 20,275
2,468
—
—
—
(967)
n/a
n/a
2019
$ 18,178
3,187
—
—
—
(1,090)
n/a
n/a
$ 21,776
$ 20,275
$ 15,361
—
500
—
—
—
1,533
(967)
n/a
n/a
$ 14,144
—
593
—
—
—
1,714
(1,090)
n/a
n/a
$ 16,427
$ 15,361
$
$
5,349
—
5,349
$
$
4,914
—
4,914
$ 16,427
5,349
—
16,427
$ 15,361
4,914
—
15,361
2.57 %
n/a
5.02 %
3.32 %
n/a
5.06 %
(1) The measurement date for all of the above plans was December 31 of each year reported.
n/a = not applicable
The Corporation’s estimate of its contributions to be made
to the Non-U.S. Pension Plans, Nonqualified and Other Pension
Plans, and Postretirement Health and Life Plans in 2021 is $29
million, $93 million and $14 million,
respectively. The
Corporation does not expect to make a contribution to the
Qualified Pension Plan
in 2021. It is the policy of the
Corporation to fund no less than the minimum funding amount
Plans with ABO and PBO in Excess of Plan Assets
(Dollars in millions)
PBO
ABO
Fair value of plan assets
62539financials
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Non-U.S.
Pension Plans
Nonqualified and Other
Pension Plans
2020
2019
2020
2019
Postretirement
Health and Life Plans
2019
2020
2,696
379
23
1
(61)
(57)
n/a
97
3,078
2,887
20
49
1
3
(61)
396
(57)
n/a
102
3,340
$
$
$
$
$
428
(690)
(262) $
$
3,253
(175)
87
3,340
1.37 %
4.11
1.58
$
$
$
$
$
$
$
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
1.81 %
4.10
1.53
2,666
285
86
—
—
(248)
n/a
n/a
2,789
2,919
1
90
—
—
—
243
(248)
n/a
n/a
3,005
812
(1,028)
$
$
$
$
$
(216) $
$
3,005
(216)
—
3,005
2.33 %
4.00
4.49
$
$
$
$
$
$
$
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
3.20 %
4.00
4.52
199
1
6
110
—
(174)
1
n/a
143
989
5
32
110
—
—
43
(173)
1
—
1,007
$
$
$
$
— $
(864)
(864) $
n/a
n/a
n/a
1,007
2.48 %
n/a
n/a
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
3.27 %
n/a
n/a
required by the Employee Retirement Income Security Act of
1974 (ERISA).
Pension Plans with ABO and PBO in excess of plan assets as
of December 31, 2020 and 2019 are presented in the table
below. For these plans, funding strategies vary due to legal
requirements and local practices.
Non-U.S.
Pension Plans
Nonqualified
and Other
Pension Plans
2020
2019
2020
2019
$
$
900
841
211
744 $
720
191
1,028 $
1,028
1
988
988
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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)
Qualified Pension Plan
2019
2018
2020
$
— $
500
(1,154)
173
—
(481) $
—
593
(1,088)
135
—
(360)
$
—
563
(1,136)
147
—
(426)
$
$
$
$
3.32 %
6.00
n/a
4.32 %
6.00
n/a
3.68 %
6.00
n/a
Nonqualified and
Other Pension Plans
2019
2018
2020
$
1
90
(71)
50
—
70 $
1
113
(95)
34
—
53
$
$
1
105
(84)
43
—
65
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Non-U.S. Pension Plans
2019
2018
2020
20
49
(66)
9
8
20
$
$
17
65
(99)
6
4
(7)
$
$
19
65
(126)
10
12
(20)
1.81 %
2.57
4.10
2.60 %
4.13
4.49
2.39 %
4.37
4.31
Postretirement Health
and Life Plans
2019
2018
2020
5
32
(4)
29
(2)
60
$
$
5
38
(5)
(24)
(2)
12
$
$
6
36
(6)
(27)
(3)
6
$
$
$
$
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
3.20 %
2.77
4.00
4.26 %
3.73
4.00
3.58 %
3.19
4.00
3.27 %
2.00
n/a
4.25 %
2.00
n/a
3.58 %
2.00
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.
Pretax Amounts included in Accumulated OCI and OCI
trend
rates affect
Assumed health care cost
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
6.25 percent for 2021, 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
2020.
(Dollars in millions)
Net actuarial loss (gain)
Prior service cost (credits)
Amounts recognized in accumulated OCI
$ 3,912 $ 3,865 $ 646 $ 577 $ 987 $ 1,008 $
$ 3,912 $ 3,865 $ 628 $ 559 $ 987 $ 1,008 $
—
—
18
18
—
—
66
(4)
62
Qualified
Pension Plan
2019
2020
Non-U.S.
Pension Plans
2019
2020
Nonqualified
and Other
Pension Plans
2019
2020
Postretirement
Health and
Life Plans
Total
2020
2019
2020
2019
Current year actuarial loss (gain)
Amortization of actuarial gain (loss) and
prior service cost
Current year prior service cost (credit)
Amounts recognized in OCI
$ 219 $ (385) $
79
$ 110 $
29
$ 130 $
47
(173)
—
46 $ (520) $
(135)
—
$
(12)
3
70
(7)
2
$ 105 $
(50)
—
(21) $
(34)
—
96
$
(27)
—
20
172
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$
$
48
(6)
42
$ 5,593 $ 5,480
12
$ 5,607 $ 5,492
14
99
$ 374 $
(46)
26
—
(150)
2
$ 125 $ 115 $ (194)
(262)
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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
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.
levels and
funding
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
2021 Target Allocation
Asset Category
Equity securities
Debt securities
Real estate
Other
62539financials
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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
returns,
through analysis of historical market
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 2021 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
$274 million (1.26 percent of total plan assets) and $315
million (1.55 percent of total plan assets) at December 31,
2020 and 2019.
Percentage
Qualified
Pension Plan
15 - 50%
45 - 80%
0 - 10%
0 - 5%
Non-U.S.
Pension Plans
0 - 25%
40 - 70%
0 - 15%
10 - 40%
Nonqualified
and Other
Pension Plans
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 20 – Fair Value
Measurements. Combined plan investment assets measured at fair value by level and in total at December 31, 2020 and 2019 are
summarized in the Fair Value Measurements table.
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Fair Value Measurements
(Dollars in millions)
Cash and short-term investments
Level 1
Level 2
Level 3
December 31, 2020
Total
Level 1
Level 2
Level 3
December 31, 2019
Total
Money market and interest-bearing cash
Cash and cash equivalent commingled/mutual funds
$
1,380 $
—
— $
— $
1,380 $
383
—
383
1,426 $
—
— $
250
— $
—
1,426
250
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
Real estate commingled/mutual funds
Limited partnerships
Other investments (1)
4,590
—
—
1,021
1,224
4,438
134
73
—
—
5
1,238
5,021
1,967
1,122
1,319
—
1,542
—
20
184
401
7
—
—
—
—
—
—
—
943
83
691
5,835
5,021
1,967
2,143
2,543
4,438
1,676
73
963
267
1,097
4,403
—
—
748
804
4,655
147
91
—
—
11
890
3,676
2,684
1,015
1,439
—
1,355
—
18
173
390
Total plan investment assets, at fair value
$ 12,865 $ 13,197 $
1,724 $ 27,786 $ 12,285 $ 11,890 $
8
—
—
—
—
—
—
—
5,301
3,676
2,684
1,763
2,243
4,655
1,502
91
927
90
636
945
263
1,037
1,661 $ 25,836
(1) Other investments include commodity and balanced funds of $246 million and $233 million, insurance annuity contracts of $664 million and $614 million and other various investments of $187
million and $190 million at December 31, 2020 and 2019.
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 2020, 2019 and 2018.
Level 3 Fair Value Measurements
(Dollars in millions)
Fixed income
U.S. government and agency securities
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
8
$
927
90
636
1,661 $
9 $
5
885
82
588
2020
— $
(4)
2
6
4 $
2019
— $
—
33
—
6
1,569 $
39 $
9 $
93
831
85
74
1,092 $
2018
— $
(7)
52
(12)
—
33 $
$
$
$
$
$
$
(1) $
20
(9)
49
59 $
(1) $
(5)
9
8
42
53 $
7
943
83
691
1,724
8
—
927
90
636
1,661
— $
9
(81)
2
9
514
444 $
5
885
82
588
1,569
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.
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f
i
n
a
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c
a
s
i
l
(Dollars in millions)
2021
2022
2023
2024
2025
2026 - 2030
Qualified
Pension Plan (1)
Non-U.S.
Pension Plans (2)
Nonqualified
and Other
Pension Plans (2)
Postretirement
Health and
Life Plans (3)
$
856 $
943
939
943
934
4,474
127 $
134
143
135
140
675
244 $
245
229
224
221
977
79
76
74
70
67
290
(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.
Defined Contribution Plans
The Corporation maintains qualified and non-qualified defined
contribution retirement plans. The Corporation recorded expense
of $1.2 billion, $1.0 billion and $1.0 billion in 2020, 2019 and
2018 related to the qualified defined contribution plans. At both
December 31, 2020 and 2019, 189 million shares of the
Corporation’s common stock were held by these plans.
Payments to the plans for dividends on common stock were
$138 million, $133 million and $115 million in 2020, 2019 and
2018, respectively.
Certain non-U.S. employees are covered under defined
contribution pension plans that are separately administered in
accordance with local laws.
NOTE 18 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). Under this plan,
600 million shares of the Corporation’s common stock are
authorized to be used for grants of awards.
During 2020 and 2019, the Corporation granted 86 million
and 94 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 2020 and 2019, 61 million and
71 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, 25 million
and 23 million of the RSUs granted in 2020 and 2019 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, $2.1 billion and $1.8 billion, and the related income tax
benefit was $505 million, $511 million and $433 million for
2020, 2019 and 2018, respectively. At December 31, 2020,
there was an estimated $2.0 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.
Restricted Stock and Restricted Stock Units
The total fair value of restricted stock and restricted stock units
vested in 2020, 2019 and 2018 was $2.3 billion, $2.6 billion
and $2.3 billion, respectively. The table below presents the
status at December 31, 2020 of the share-settled restricted
stock and restricted stock units and changes during 2020.
Stock-settled Restricted Stock and Restricted Stock
Units
Outstanding at January 1, 2020
Granted
Vested
Canceled
Outstanding at December 31, 2020
Shares/Units
157,909,315 $
83,604,782
(68,578,284)
(4,982,584)
167,953,229
Weighted-
average Grant
Date Fair Value
27.93
33.01
27.38
30.88
30.60
Cash-settled Restricted Units
At December 31, 2020, approximately two million cash-settled
restricted units remain outstanding. In 2020, 2019 and 2018,
the amount of cash paid to settle the RSUs that vested was
$81 million, $84 million and $1.3 billion, respectively.
NOTE 19 Income Taxes
The components of income tax expense for 2020, 2019 and
2018 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
2020
2019
2018
$
$
1,092 $
1,076
670
2,838
(799)
(233)
(705)
(1,737)
1,101 $
1,136 $
901
852
2,889
2,001
223
211
2,435
5,324 $
816
1,377
1,203
3,396
2,579
240
222
3,041
6,437
Total income tax expense does not reflect the tax effects of
items that are included in OCI each period. For more
Bank of America 2020 175
Bank of America 2020 175
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information, see Note 14 – Accumulated Other Comprehensive
Income (Loss). Other tax effects included in OCI each period
resulted in an expense of $1.5 billion and $1.9 billion in 2020
and 2019 and a benefit of $1.2 billion in 2018.
Income tax expense for 2020, 2019 and 2018 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 2020, 2019 and 2018. 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 2020, 2019 and 2018 are presented in the table
below.
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
Tax law changes
Tax-exempt income, including dividends
Share-based compensation
Changes in prior-period UTBs, including interest
Nondeductible expenses
Rate differential on non-U.S. earnings
Other
Total income tax expense (benefit)
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
2020
2019
2018
$
1,175 $
2,197 $
1,773
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)
Settlements
Expiration of statute of limitations
Balance, December 31
$
238
99
238
401
395
406
(172)
—
—
1,340 $
(1,102)
(541)
(18)
1,175 $
(371)
(6)
—
2,197
(1) The sum of the positions taken during prior years differs from the $(41) million, $(613)
million and $144 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.
At December 31, 2020, 2019 and 2018, the balance of the
Corporation’s UTBs which would, if recognized, affect the
Corporation’s effective tax rate was $976 million, $814 million
and $1.6 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.
Amount
Percent
Amount
Percent
Amount
Percent
2020
2019
2018
$
3,989
21.0 % $
6,878
21.0 % $
7,263
21.0 %
728
(2,869)
(699)
(346)
(129)
(41)
324
218
(74)
1,101
$
3.8
(15.1)
(3.7)
(1.8)
(0.7)
(0.2)
1.7
1.1
(0.3)
5.8 % $
1,283
(2,365)
—
(433)
(225)
(613)
290
504
5
5,324
3.9
(7.2)
—
(1.3)
(0.7)
(1.9)
0.9
1.5
0.1
16.3 % $
1,367
(1,888)
—
(413)
(257)
144
302
98
(179)
6,437
4.0
(5.5)
—
(1.2)
(0.7)
0.4
0.9
0.3
(0.6)
18.6 %
It is reasonably possible that the UTB balance may decrease
by as much as $166 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 interest expense of $9 million in
2020, an interest benefit of $19 million in 2019 and interest
expense of $43 million in 2018. At December 31, 2020 and
2019, the Corporation’s accrual for interest and penalties that
related to income taxes, net of taxes and remittances, was
$130 million and $147 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 significant business operations examine tax returns
periodically (continuously in some jurisdictions). The following
table summarizes the status of examinations by major
jurisdiction for the Corporation and various subsidiaries at
December 31, 2020.
Tax Examination Status
United States
California
New York
United Kingdom (2)
Years under
Examination (1)
2017-2020
2012-2017
2016-2018
2018
Status at
December 31
2020
Field Examination
Field Examination
Field Examination
Field Examination
(1) All tax years subsequent to the years shown remain subject to examination.
(2) Field examination for tax year 2019 to begin in 2021.
Significant components of the Corporation’s net deferred tax
assets and liabilities at December 31, 2020 and 2019 are
presented in the following table.
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Deferred Tax Assets and Liabilities
(Dollars in millions)
Deferred tax assets
Net operating loss carryforwards
Allowance for credit losses
Security, loan and debt valuations
Lease liability
Employee compensation and retirement benefits
Accrued expenses
Credit carryforwards
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
Fixed assets
ESG-related tax credit investments
Available-for-sale securities
Other
Gross deferred tax liabilities
Net deferred tax assets
December 31
2020
2019
$
7,717 $
4,701
2,571
2,400
1,582
1,481
484
1,412
22,348
(2,346)
7,417
2,354
1,860
2,321
1,622
1,719
183
1,203
18,679
(1,989)
20,002
16,690
3,101
2,296
1,957
1,930
1,701
1,570
12,555
$
7,447 $
2,933
2,246
1,505
1,577
100
1,885
10,246
6,444
On January 1, 2020, the Corporation adopted the CECL
accounting standard. The transition adjustment included a tax
benefit of $760 million in retained earnings, which increased
deferred tax assets by a corresponding amount.
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, 2020.
Net Operating Loss and Tax Credit Carryforward Deferred
Tax Assets
(Dollars in millions)
Net operating losses -
Deferred
Tax Asset
Valuation
Allowance
Net
Deferred
Tax Asset
First Year
Expiring
U.S.
$
36 $
— $
36
After 2028
Net operating losses -
U.K. (1)
Net operating losses -
other non-U.S.
Net operating losses -
U.S. states (2)
Foreign tax credits
5,896
506
1,279
484
—
5,896
None
(441)
(579)
(484)
65
Various
700
—
Various
After 2028
(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
the benefit of federal deductions were $1.6 billion and $733 million.
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, 2020, U.S. federal income taxes had not
been provided on approximately $5.0 billion of temporary
associated with
non-U.S.
differences
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.
investments
in
NOTE 20 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 21 – 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 2020, 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
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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
is
inherent credit
embedded within the quoted market prices or is implied by
considering loan performance when selecting comparables.
risk. The borrower-specific credit
risk
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
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
factors,
principally from reviewing the issuer’s financial statements and
changes in credit ratings made by one or more rating agencies.
information and other
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,
in which case, quantitative-based
or are unobservable,
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. In addition, 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.
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.
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Recurring Fair Value
Assets and liabilities carried at fair value on a recurring basis at December 31, 2020 and 2019, 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
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)
Fair Value Measurements
December 31, 2020
Level 1
Level 2
Level 3
Netting
Adjustments (1)
Assets/Liabilities
at Fair Value
1,649 $
— $
— $
— $
1,649
—
108,856
45,219
—
36,372
5,753
—
—
87,344
15,624
115,266
—
—
—
—
—
—
—
115,266
93
—
2,619
2,712
—
—
9,898
3,051
22,817
31,372
20,884
21,566
8,440
108,130
416,175
1,114
61,849
5,260
631
16,491
13,999
2,640
16,598
118,582
—
506
8,625
9,131
5,964
1,349
3,850
—
—
1,359
227
354
75
1,365
3,380
2,751
—
—
—
378
—
18
71
176
643
—
267
—
267
717
236
1,970
—
—
—
—
—
—
—
—
(387,371)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
108,856
48,270
24,176
67,971
26,991
21,641
9,805
198,854
47,179
116,380
61,849
5,260
1,009
16,491
14,017
2,711
16,774
234,491
93
773
11,244
12,110
6,681
1,585
15,718
Total assets (5)
Liabilities
Interest-bearing deposits in U.S. offices
Federal funds purchased and securities loaned or sold under
$
$
232,493 $
772,037 $
9,964 $
(387,371) $
627,123
— $
481
$
— $
— $
481
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
Total liabilities (5)
—
135,391
9,425
38,189
5,853
—
53,467
14,907
—
12,297
—
139
4,235
8,043
5,420
17,837
412,881
5,874
4,014
31,036
—
—
—
—
16
16
6,219
—
—
1,164
—
135,391
—
—
—
—
—
(388,481)
—
—
—
9,564
42,424
13,896
5,436
71,320
45,526
5,874
16,311
32,200
$
80,671 $
607,514 $
7,399 $
(388,481) $
307,103
(3)
(1) Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.
(2)
Includes $22.2 billion of GSE obligations.
Includes securities with a fair value of $16.8 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. Trading account assets also includes precious metal inventories of $576 million that are accounted for at the lower of cost or net
realizable value, which is the current selling price less any costs to sell.
Includes MSRs of $1.0 billion which are classified as Level 3 assets.
(4)
(5) Total recurring Level 3 assets were 0.35 percent of total consolidated assets, and total recurring Level 3 liabilities were 0.29 percent of total consolidated liabilities.
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(Dollars in millions)
Assets
Fair Value Measurements
December 31, 2019
Level 1
Level 2
Level 3
Time deposits placed and other short-term investments
Federal funds sold and securities borrowed or purchased under
$
1,000
$
—
$
agreements to resell
Trading account assets:
U.S. Treasury and agency securities
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
Total liabilities (5)
$
$
$
—
49,517
—
53,597
3,965
—
—
107,079
14,079
67,332
—
—
—
—
—
—
—
67,332
3
—
—
400
403
—
—
11,782
201,675
—
—
13,140
38,148
10,751
—
62,039
11,904
—
13,927
—
87,870
50,364
4,157
25,226
32,619
23,854
24,324
8,786
118,966
328,442
1,196
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
16,008
282
4,144
11,310
5,478
21,214
320,479
3,941
1,507
33,826
$
$
$
$
$
397,483
$
—
—
—
1,507
239
482
—
1,553
3,781
2,226
—
—
—
424
—
2
65
108
599
—
—
299
—
299
693
375
2,360
10,333
—
—
—
2
—
15
17
4,764
—
—
1,149
5,930
Netting
Adjustments (1)
Assets/Liabilities
at Fair Value
$
— $
1,000
—
—
—
—
—
—
—
—
(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
$
$
(304,262) $
605,704
— $
508
—
—
—
—
—
—
(298,918)
—
—
—
16,008
13,422
42,294
22,061
5,493
83,270
38,229
3,941
15,434
34,975
$
(298,918) $
192,365
(3)
(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.
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.
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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 2020, 2019 and
2018, 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)
Gross
Purchases Sales
Issuances Settlements
Gross
Transfers
into
Level 3
Gross
Transfers
out of
Level 3
Balance
December 31
Change in
Unrealized
Gains
(Losses) in
Net Income
Related to
Financial
Instruments
Still Held (2)
(Dollars in millions)
Year Ended December 31, 2020
Trading account assets:
Corporate securities, trading loans and other $ 1,507 $
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
Other debt securities carried at fair value – Non-
agency residential MBS
Loans and leases (5,6)
Loans held-for-sale (5,6)
Other assets (6,7)
Trading account liabilities – Equity securities
Trading account liabilities – Corporate securities
and other
Long-term debt (5)
Year Ended December 31, 2019
Trading account assets:
Total trading account assets
Net derivative assets (liabilities) (4,8)
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 (5,6)
Loans held-for-sale (5,6)
Other assets (6,7)
Trading account liabilities – Equity securities
Trading account liabilities – Corporate securities
and other
Long-term debt (5,8)
Corporate securities, trading loans and other $ 1,558 $
Equity securities
Non-U.S. sovereign debt
Mortgage trading loans, ABS and other MBS
239
482
1,553
3,781
(2,538)
424
2
65
108
599
299
693
375
2,360
(2)
(15)
(1,149)
276
465
1,635
3,934
(935)
(138) $
(43)
45
(120)
(256)
(235)
(1) $
—
(46)
(3)
(50)
—
(2)
1
—
(21)
(22)
26
(4)
26
(288)
1
8
(46)
3
—
—
3
6
—
—
(28)
3
—
—
2
105 $
(12)
46
99
238
(37)
— $
—
(12)
(2)
(14)
—
430 $(242) $
78
76
577
(53)
(61)
(746)
1,161 (1,102)
(646)
120
23
—
9
—
32
(54)
(1)
(4)
—
(59)
—
145
—
178
—
(180)
(76)
(489)
(4)
—
(7)
(104)
(3)
—
534 $(390) $
38
1
662
(87)
—
(899)
1,235 (1,376)
(837)
298
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)
—
10 $
—
—
11
21
—
(282) $
(3)
(39)
(96)
(420)
(112)
639 $
58
150
757
1,604
(235)
(564) $
(49)
(253)
(493)
(1,359)
178
1,359 $
227
354
1,440
3,380
(3,468)
—
—
—
—
—
—
22
691
224
—
—
(47)
18 $
—
—
—
18
—
—
—
—
—
—
—
217
36
179
—
(1)
(40)
(44)
(1)
—
(169)
(214)
(24)
(161)
(119)
(506)
—
1
218
158
17
1
265
441
190
98
93
5
—
—
(52)
(130)
—
—
(10)
(140)
(44)
—
(313)
(2)
1
—
14
(578) $ 699 $
(9)
(51)
(175)
(813)
(97)
79
39
738
1,555
147
(40)
—
(5)
—
(45)
(17)
(57)
(245)
(683)
—
—
180
206
—
61
108
375
155
—
59
5
—
—
(350)
(439) $
(46)
(6)
(505)
(996)
(1,077)
(343)
—
—
—
(343)
(47)
—
—
(1)
—
—
1
378
18
71
176
643
267
717
236
1,970
—
(16)
(1,164)
1,507 $
239
482
1,553
3,781
(2,538)
424
2
65
108
599
299
693
375
2,360
(2)
(15)
(1,149)
(102)
(31)
47
(92)
(178)
(953)
(2)
1
—
(20)
(21)
3
9
(5)
(374)
—
—
(5)
29
(18)
47
26
84
228
—
—
—
—
—
38
(1)
22
(267)
(2)
—
(55)
(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; AFS debt securities - predominantly other income; Other debt securities carried at fair value - other income; Loans and
leases - market making and similar activities and other income; Loans held-for-sale - other income; Other assets - primarily other income related to MSRs; Long-term debt - market making and
similar activities.
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 $(41) million and $3 million related to financial instruments still held at December 31, 2020
and 2019.
(3 )
(4 ) Net derivative assets (liabilities) include derivative assets of $2.8 billion and $2.2 billion and derivative liabilities of $6.2 billion and $4.8 billion at December 31, 2020 and 2019.
(5 ) Amounts represent instruments that are accounted for under the fair value option.
(6 )
(7 ) Settlements primarily represent the net change in fair value of the MSR asset due to the recognition of modeled cash flows and the passage of time.
(8 ) 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
Issuances represent loan originations and MSRs recognized following securitizations or whole-loan sales.
instruments.
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Level 3 – Fair Value Measurements (1)
Total
Realized/
Unrealized
Gains
(Losses) in
Net
Income (2)
Gains
(Losses)
in OCI (3)
Balance
January 1
Gross
Purchases Sales
Issuances Settlements
Gross
Transfers
into
Level 3
Gross
Transfers
out of
Level 3
Balance
December 31
Change in
Unrealized
Gains
(Losses) in
Net Income
Related to
Financial
Instruments
Still Held (2)
$ 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
(11)
(57)
(910)
1,078 (1,381)
531 (1,179)
—
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)
—
—
5 $
—
—
—
5
—
—
—
—
—
—
—
—
1
96
(2)
—
(568) $ 804 $
(4)
(30)
(158)
(760)
778
78
117
705
1,704
39
(547) $
(49)
(137)
(236)
(969)
504
1,558 $
276
465
1,635
3,934
(935)
(25)
(15)
(11)
(1)
(52)
(34)
(83)
(201)
(792)
—
8
774
3
60
1
838
365
—
23
929
—
—
(75)
—
(526)
(469)
(1,070)
(133)
—
(60)
(35)
—
—
597
2
7
—
606
172
338
542
2,932
(18)
—
(817)
(141)
486
(262)
847
(117)
(22)
48
97
6
(116)
—
—
—
—
—
(18)
(9)
31
149
(7)
—
95
(Dollars in millions)
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 (5)
Other debt securities carried at fair value - Non-
agency residential MBS
Loans and leases (6,7)
Loans held-for-sale (6)
Other assets (5,7,8)
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.
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 losses of $105 million related to financial instruments still held at December 31, 2018.
(3 )
(4 ) Net derivative assets (liabilities) include derivative assets of $3.5 billion and derivative liabilities of $4.4 billion.
(5 ) Transfers out of AFS debt securities and into other assets primarily relate to the reclassifcation of certain securities.
(6 ) Amounts represent instruments that are accounted for under the fair value option.
(7 )
(8 ) Settlements primarily represent the net change in fair value of the MSR asset due to the recognition of modeled cash flows and the passage of time.
Issuances represent loan originations and MSRs recognized following securitizations or whole-loan sales.
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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, 2020 and 2019.
Quantitative Information about Level 3 Fair Value Measurements at December 31, 2020
(Dollars in millions)
Inputs
Loans and Securities (2)
Financial Instrument
Fair
Value
Valuation
Technique
Significant Unobservable
Inputs
Ranges of
Inputs
Weighted
Average (1)
(3)% to 25%
6%
1% to 56% CPR
20% CPR
0% to 3% CDR
1% CDR
$0 to $168
$110
0% to 47%
0% to 25%
$0 to $100
0% to 26%
10% to 20%
3% to 4%
35% to 40%
$0 to $142
77%
$10 to $97
8%
18%
4%
$52
9%
14%
4%
38%
$66
n/a
$91
n/a
0 to 13 years
0 to 10 years
4 years
3 years
7% to 14%
9% to 15%
0% to 11%
2% to 100%
7% to 64%
$0 to $124
9%
12%
9%
64%
32%
$86
5%
n/a
0 to 100 points
75 points
15% to 100% CPR
22% CPR
2% CDR
21% to 64%
$0 to $122
2% to 100%
7% to 64%
n/a
57%
$69
64%
32%
Instruments backed by residential real estate assets
$ 1,543
Trading account assets – Mortgage trading loans, ABS and other MBS
Loans and leases
AFS debt securities – 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
AFS debt securities, primarily other taxable securities
Loans held-for-sale
Discounted cash
flow, Market
comparables
Discounted cash
flow
467
431
378
267
407
262
43
89
13
Yield
Prepayment speed
Default rate
Price
Loss severity
Yield
Price
Commercial loans, debt securities and other
$ 3,066
Yield
Trading account assets – Corporate securities, trading loans and other
1,097
Prepayment speed
Trading account assets – Non-U.S. sovereign debt
Trading account assets – Mortgage trading loans, ABS and other MBS
AFS debt securities – Tax-exempt securities
Loans and leases
Loans held-for-sale
Other assets, primarily auction rate securities
$
354
930
176
286
223
937
MSRs
$ 1,033
Discounted cash
flow, Market
comparables
Default rate
Loss severity
Price
Long-dated equity volatilities
Discounted cash
flow, Market
comparables
Price
Discount rate
Discounted cash
flow
Weighted-average life, fixed rate (5)
Weighted-average life, variable rate (5)
Option-adjusted spread, fixed rate
Option-adjusted spread, variable rate
Structured liabilities
Long-term debt
$
(1,164)
Discounted cash
flow, Market
comparables,
Industry standard
derivative pricing (3)
Yield
Equity correlation
Long-dated equity volatilities
Price
Net derivative assets (liabilities)
Credit derivatives
$
(112)
Yield
Natural gas forward price
$1/MMBtu to $4/MMBtu $3 /MMBtu
Equity derivatives
Commodity derivatives
Interest rate derivatives
Discounted cash
flow, Stochastic
recovery correlation
model
$
(1,904)
$
(1,426)
$
(26)
Industry standard
derivative pricing (3)
Discounted cash
flow, Industry
standard derivative
pricing (3)
Industry standard
derivative pricing (4)
Total net derivative assets (liabilities)
$
(3,468)
Upfront points
Prepayment speed
Default rate
Credit correlation
Price
Equity correlation
Long-dated equity volatilities
Natural gas forward price
$1/MMBtu to $4/MMBtu $3 /MMBtu
Correlation
Volatilities
Correlation (IR/IR)
Correlation (FX/IR)
Long-dated inflation rates
Long-dated inflation volatilities
Interest rate volatilities
39% to 85%
23% to 70%
15% to 96%
0% to 46%
(7)% to 84%
0% to 1%
0% to 2%
73%
39%
34%
3%
14%
1%
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 179: Trading
account assets – Corporate securities, trading loans and other of $1.4 billion, Trading account assets – Non-U.S. sovereign debt of $354 million, Trading account assets – Mortgage trading loans,
ABS and other MBS of $1.4 billion, AFS debt securities of $643 million, Other debt securities carried at fair value - Non-agency residential of $267 million, Other assets, including MSRs, of $2.0
billion, Loans and leases of $717 million and LHFS of $236 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
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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)
1
8
4
6
2
5
3
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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 – Tax-exempt securities
Loans and leases
Loans held-for-sale
Other assets, primarily auction rate securities
$
1,306
482
1,136
108
412
354
815
MSRs
$ 1,545
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
Discounted cash flow
Weighted-average life, fixed rate (5)
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
5 years
0 to 9 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
Commodity derivatives
Interest rate derivatives
$
(1,149)
Discounted cash
flow, Market
comparables,
Industry standard
derivative pricing (3)
$
13
Discounted cash
flow, Stochastic
recovery correlation
model
$
(1,081)
$
(1,357)
$
(113)
Industry standard
derivative pricing (3)
Discounted cash
flow, Industry
standard derivative
pricing (3)
Industry standard
derivative pricing (4)
Total net derivative assets (liabilities)
$
(2,538)
Yield
Equity correlation
Long-dated equity volatilities
Price
Natural gas forward price
$1/MMBtu to $5/MMBtu $3/MMBtu
Yield
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%
Natural gas forward price
$1/MMBtu to $5/MMBtu $3/MMBtu
Correlation
Volatilities
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%
G(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 180: 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
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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
the
unobservable inputs and then these inputs are incorporated into
a discounted cash
flow model. Therefore, the balances
disclosed encompass both of these techniques.
to estimate some of
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
Assets Measured at Fair Value on a Nonrecurring Basis
protection buyer at inception), credit spreads, default rates or
loss severities would 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 2020, 2019 and 2018.
(Dollars in millions)
Assets
Loans held-for-sale
Loans and leases (1)
Foreclosed properties (2, 3)
Other assets
Assets
Loans held-for-sale
Loans and leases (1)
Foreclosed properties
Other assets
December 31, 2020
December 31, 2019
Level 2
Level 3
Level 2
Level 3
$
1,020 $
—
—
323
792 $
301
17
576
53 $
—
—
178
102
257
17
646
2020
Gains (Losses)
2019
2018
$
$
(79)
(73)
(6)
(98)
(14) $
(81)
(9)
(2,145)
(18)
(202)
(24)
(64)
Includes $30 million, $36 million and $83 million of losses on loans that were written down to a collateral value of zero during 2020, 2019 and 2018, respectively.
(1 )
(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 $119 million and $260 million of properties acquired upon foreclosure of certain government-guaranteed loans (principally FHA-insured loans) at December 31, 2020 and 2019.
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The table below presents information about significant unobservable inputs utilized in the Corporation's nonrecurring Level 3 fair
value measurements during 2020 and 2019.
Quantitative Information about Nonrecurring Level 3 Fair Value Measurements
(Dollars in millions)
Loans held-for-sale
Loans and leases (2)
Other assets (3)
Loans held-for-sale
Loans and leases (2)
Other assets (4)
Financial Instrument
Fair
Value
Valuation
Technique
Significant
Unobservable
Inputs
2020
Inputs
Ranges of
Inputs
Weighted
Average (1)
$
Discounted cash flow Price
792
301 Market comparables OREO discount
576 Discounted cash flow Revenue attrition
Costs to sell
Discount rate
2019
$
102 Discounted cash flow Price
257 Market comparables OREO discount
640 Discounted cash flow Customer attrition
Cost to service
Costs to sell
$8 to $99
13% to 59%
8% to 26%
2% to 19%
11% to 14%
$85 to $97
13% to 59%
8% to 26%
0% to 19%
11% to 19%
$95
24%
9%
7%
12%
$88
24%
9%
5%
15%
(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 intangible asset related to the merchant contracts received from the merchant services joint venture was measured using a discounted cash flow method for which the two
key assumptions were the revenue attrition rate and the discount rate. For more information, see Note 7 – Goodwill and Intangible Assets.
(4) Reflects the measurement of the Corporation’s merchant services equity method investment on which the Corporation recorded an impairment charge in 2019. The fair value of the merchant
services joint venture was measured using a discounted cash flow method for which the two key assumptions were the customer attrition rate and the cost-to-service rate.
NOTE 21 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
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
through
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,
repurchase
including
agreements, under the fair value option. These elections include
certain agreements collateralized by the U.S. government and
its agencies, which are generally short-dated and have minimal
interest rate risk.
resale and
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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.
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.
Fair Value Option Elections
The following tables provide information about the fair value
carrying amount and the contractual principal outstanding of
assets and liabilities accounted for under the fair value option
at December 31, 2020 and 2019, 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 2020, 2019 and 2018.
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. Election of the fair value option
allows the Corporation to reduce the accounting volatility that
the asymmetry created by
would otherwise
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.
result
from
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
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
December 31, 2020
December 31, 2019
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
108,856 $
7,967
22,790
6,681
1,585
200
481
108,811 $
45 $
50,364 $
17,372
n/a
6,778
2,521
n/a
448
(9,405)
n/a
(97)
(936)
n/a
33
6,989
19,574
8,335
3,709
4
508
50,318 $
14,703
n/a
8,372
4,879
n/a
496
46
(7,714)
n/a
(37)
(1,170)
n/a
12
sold under agreements to repurchase
(21)
Short-term borrowings
11
Unfunded loan commitments
n/a
Long-term debt
(755)
(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
135,390
5,178
n/a
33,470
135,391
5,874
99
32,200
16,029
3,930
n/a
35,730
16,008
3,941
90
34,975
1
696
n/a
(1,270)
near contractual principal outstanding.
n/a = not applicable
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Gains (Losses) Relating to Assets and Liabilities Accounted for Under the Fair Value Option
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(Dollars in millions)
Loans reported as trading account assets
Trading inventory – other (1)
Consumer and commercial loans
Loans held-for-sale (2)
Short-term borrowings
Unfunded loan commitments
Long-term debt (3)
Other (4)
Total
Loans reported as trading account assets
Trading inventory – other (1)
Consumer and commercial loans
Loans held-for-sale (2)
Short-term borrowings
Unfunded loan commitments
Long-term debt (3)
Other (4)
Total
Loans reported as trading account assets
Trading inventory – other (1)
Consumer and commercial loans
Loans held-for-sale (2)
Short-term borrowings
Unfunded loan commitments
Long-term debt (3)
Other (4)
Total
Market making
and similar
activities
Other
Income
2020
Total
$
$
$
$
$
$
$
107
3,216
22
—
(170)
—
(2,175)
35
1,035 $
203 $
5,795
92
—
(24)
—
(1,098)
9
4,977 $
8 $
1,750
(422)
1
2
—
2,157
6
3,502 $
— $
—
(3)
103
—
(65)
(53)
(22)
(40) $
— $
—
12
98
—
79
(78)
(27)
84 $
— $
—
(53)
24
—
(49)
(93)
18
(153) $
2019
2018
107
3,216
19
103
(170)
(65)
(2,228)
13
995
203
5,795
104
98
(24)
79
(1,176)
(18)
5,061
8
1,750
(475)
25
2
(49)
2,064
24
3,349
Includes the value of IRLCs on funded loans, including those sold during the period.
(1) The gains in market making and similar activities are primarily offset by losses on trading liabilities that hedge these assets.
(2)
(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 14 – Accumulated Other
Comprehensive Income (Loss). For more information on how the Corporation’s own credit spread is determined, see Note 20 – Fair Value Measurements.
Includes gains (losses) on federal funds sold and securities borrowed or purchased under agreements to resell, long-term deposits and federal funds purchased and securities loaned or sold
under agreements to repurchase.
(4)
Gains (Losses) Related to Borrower-specific Credit Risk for Assets and Liabilities Accounted for Under the Fair Value
Option
(Dollars in millions)
Loans reported as trading account assets
Consumer and commercial loans
Loans held-for-sale
Unfunded loan commitments
2020
2019
2018
$
(172) $
(19)
(105)
(65)
$
43
15
57
79
6
(56)
(4)
(94)
NOTE 22 Fair Value of Financial Instruments
Financial instruments are classified within the fair value
hierarchy using the methodologies described in Note 20 – Fair
Value Measurements. Certain loans, deposits, long-term debt,
unfunded lending commitments and other financial instruments
are accounted for under the fair value option. For more
information, see Note 21 – 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.
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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, 2020 and
2019 are presented in the following table.
Fair Value of Financial Instruments
Fair Value
Carrying
Value
Level 3
Level 2
December 31, 2020
Total
$ 887,289 $ 49,372 $ 877,682 $ 927,054
9,243
1,379
9,243
7,864
1,795,480
262,934
1,795,545
271,315
— 1,795,545
272,479
1,164
1,977
99
5,159
5,258
December 31, 2019
$ 950,093 $ 63,633 $ 914,597 $ 978,230
9,158
9,158
8,439
719
1,434,803
240,856
1,434,809
247,376
—
1,149
1,434,809
248,525
903
90
4,777
4,867
(Dollars in millions)
Financial assets
Loans
Loans held-for-sale
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)
Includes demand deposits of $799.0 billion and $545.5 billion with no stated maturities at
December 31, 2020 and 2019.
(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 12 – Commitments and
Contingencies.
NOTE 23 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
remaining
operations recorded in All Other.
the
Consumer Banking
Consumer Banking offers a diversified range of credit, banking
and investment products and services to consumers and small
include
businesses. Consumer Banking product offerings
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.
62539financials
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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 and Global Markets under an
internal revenue-sharing 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.
financing,
securities
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
clearing,
provides market-making,
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.
loans and servicing activities,
All Other
All Other consists of ALM activities, equity investments, non-
core mortgage
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.
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
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ALM activities.
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The Corporation’s ALM activities include an overall interest
rate risk management strategy that incorporates the use of
various derivatives and cash
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
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
in
62539financials
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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 2020, 2019 and 2018, and total assets at December 31,
2020 and 2019 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.
Total Corporation (1)
2019
2020
2018
2020
Consumer Banking
2019
2018
$
43,859 $
42,168
86,027
11,320
55,213
19,494
1,600
49,486 $
42,353
91,839
3,590
54,900
33,349
5,919
17,894 $
$
$ 2,819,627 $ 2,434,079
27,430 $
48,772 $
42,858
91,630
3,282
53,154
35,194
7,047
28,147 $
$
24,698 $
8,564
33,262
5,765
18,878
8,619
2,112
6,507 $
988,580 $
28,158 $
10,429
38,587
3,772
17,646
17,169
4,207
12,962 $
804,093
27,025
10,593
37,618
3,664
17,672
16,282
4,150
12,132
Global Wealth & Investment Management
2018
2019
2020
2020
Global Banking
2019
2018
$
5,468 $
6,504 $
6,265 $
13,116
18,584
357
14,154
4,073
998
3,075 $
369,736 $
13,034
19,538
82
13,825
5,631
1,380
4,251 $
299,770
13,188
19,453
86
14,015
5,352
1,364
3,988 $
$
9,013 $
9,974
18,987
4,897
9,337
4,753
1,283
3,470 $
580,561 $
10,675 $
9,808
20,483
414
9,011
11,058
2,985
8,073 $
464,032
10,993
9,008
20,001
8
8,745
11,248
2,923
8,325
2020
Global Markets
2019
$
4,646
14,120
18,766
251
11,422
7,093
1,844
5,249 $
616,609 $
3,915 $
11,699
15,614
(9)
10,728
4,895
1,395
3,500 $
641,809
2018
2020
All Other
2019
3,857 $
12,326
16,183
—
10,835
5,348
1,390
3,958 $
$
$
34
(3,606)
(3,572)
50
1,422
(5,044)
(4,637)
(407) $
264,141 $
234 $
(2,617)
(2,383)
(669)
3,690
(5,404)
(4,048)
(1,356) $
224,375
2018
632
(2,257)
(1,625)
(476)
1,887
(3,036)
(2,780)
(256)
$
$
$
$
$
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The table below presents noninterest income and the associated components for 2020, 2019 and 2018 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 (loss)
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 (loss)
Total Corporation
2019
2020
2018
2020
Consumer Banking
2019
2018
Global Wealth &
Investment Management
2019
2018
2020
$ 3,954 $ 3,834 $ 3,866 $ 3,027 $ 3,174 $ 3,196 $
1,702
5,656
5,991
1,150
7,141
1,963
5,797
6,588
1,086
7,674
1,958
5,824
6,667
1,100
7,767
10,708
3,866
14,574
10,241
3,661
13,902
10,189
3,971
14,160
1,646
4,673
3,417
—
3,417
146
127
273
1,910
5,084
4,218
—
4,218
144
149
293
1,907
5,103
4,300
—
4,300
147
172
319
$
36
42
78
67
—
67
$
59
42
101
68
—
68
81
46
127
73
—
73
10,578
1,692
12,270
10,130
1,740
11,870
10,042
1,917
11,959
4,698
861
1,621
7,180
34,551
8,355
(738)
335
—
2
337
12,496
112
580
$ 42,168 $ 42,353 $ 42,858 $ 8,564 $ 10,429 $ 10,593 $ 13,116 $ 13,034 $ 13,188
401
—
—
401
12,440
113
481
2,722
1,347
1,258
5,327
33,078
9,008
772
2,998
1,184
1,460
5,642
33,015
9,034
304
391
—
—
391
12,806
63
247
—
—
—
—
8,363
2
199
—
—
—
—
9,722
8
863
—
—
—
—
9,595
6
828
Global Banking
2019
2020
2018
2020
Global Markets
2019
2018
2020
All Other (1)
2019
2018
$
499
14
513
2,298
940
3,238
—
74
74
2,070
482
1,458
4,010
7,835
103
2,036
$
519 $
13
532
2,121
894
3,015
—
34
34
1,227
574
1,336
3,137
6,718
235
2,855
503 $
8
511
2,111
916
3,027
—
94
94
1,090
648
1,153
2,891
6,523
260
2,225
391
—
391
177
210
387
—
1,973
1,973
2,449
379
163
2,991
5,742
8,471
(93)
$
$
81
(1)
80
$
86
(2)
84
156
192
348
—
1,738
1,738
1,555
610
123
2,288
4,454
7,065
180
161
184
345
—
1,780
1,780
1,495
698
103
2,296
4,505
7,260
561
$
1
—
1
32
—
32
(16)
—
(16)
$
1
(1)
—
25
—
25
(33)
—
(33)
—
(1)
(1)
22
—
22
—
8
8
(212)
—
—
(212)
(195)
(284)
(3,127)
(3,606) $
(185)
—
1
(184)
(192)
1,615
(4,040)
(2,617) $
(198)
1
—
(197)
(168)
1,368
(3,457)
(2,257)
Total noninterest income
$ 9,974 $ 9,808 $ 9,008 $ 14,120 $ 11,699 $ 12,326 $
(1) All Other includes eliminations of intercompany transactions.
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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
62539financials
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2020
2019
2018
89,599 $
94,222 $
93,255
375
(3,947)
(499)
85,528 $
18,301
279
(686)
17,894 $
241
(2,624)
(595)
91,244 $
28,786
202
(1,558)
27,430 $
(325)
(1,300)
(610)
91,020
28,403
(222)
(34)
28,147
$
$
$
December 31
2020
2,555,486 $
2019
2,209,704
1,176,071
(977,685)
65,755
2,819,627 $
721,806
(565,378)
67,947
2,434,079
$
$
(1) Adjustments include consolidated income, expense and asset amounts not specifically allocated to individual business segments.
NOTE 24 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
2020
2019
2018
$
10,352
—
8,825
(138)
19,039
136
4,119
1,651
5,906
13,133
649
12,484
5,372
38
5,410
$
17,894 $
$
27,820 $
—
9,502
74
37,396
451
5,899
1,641
7,991
29,405
341
29,064
(1,717)
83
(1,634)
27,430 $
28,575
91
8,425
(1,025)
36,066
235
6,425
1,600
8,260
27,806
(281)
28,087
306
(246)
60
28,147
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(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 $7 million and $4 million at December 31, 2020 and 2019.
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 provided by (used in) financing activities
Net increase in cash held at bank subsidiaries
Cash held at bank subsidiaries at January 1
Cash held at bank subsidiaries at December 31
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December 31
2020
2019
$
5,893 $
701
206,566
213
410
305,818
3,715
9,850
533,166 $
5,695
656
173,301
51
391
297,465
3,663
9,438
490,660
15,965 $
13,381
129
11,067
233,081
260,242
272,924
533,166 $
458
12,102
199,909
225,850
264,810
490,660
$
$
$
2020
2019
2018
$
17,894 $
27,430 $
28,147
(5,410)
14,303
26,787
(4)
(33,111)
(7)
(33,122)
(422)
43,766
(23,168)
2,181
(1,072)
(7,025)
(7,727)
6,533
198
5,695
5,893 $
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
$
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NOTE 25 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
2020
2019
2018
2020
2019
2018
2020
2019
2018
2020
2019
2018
2020
2019
2018
2020
2019
2018
$
2,490,247 $
2,122,734
99,283
102,440
202,701
178,889
27,396
30,016
329,380
311,345
$
2,819,627 $
2,434,079
75,576 $
81,236
80,777
4,232
3,491
3,507
4,491
5,310
5,632
1,229
1,207
1,104
9,952
10,008
10,243
85,528 $
91,244
91,020
18,247 $
30,699
31,904
1,051
765
865
(596)
921
1,543
293
369
272
748
2,055
2,680
18,995 $
32,754
34,584
16,692
25,937
26,407
788
570
520
264
672
1,126
150
251
94
1,202
1,493
1,740
17,894
27,430
28,147
(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.
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Alt-A Mortgage – A type of U.S. mortgage that is considered
riskier than A-paper, or “prime,” and less risky than “subprime,”
Typically, Alt-A mortgages are
the
characterized by borrowers with less than full documentation,
lower credit scores and higher LTVs.
category.
riskiest
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.
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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)
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.
– The right
to service a
Nonperforming Loans and Leases – Includes loans and leases
including
that have been placed on nonaccrual status,
nonaccruing
terms have been
restructured in a manner that grants a concession to a borrower
experiencing financial difficulties.
loans whose contractual
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,”
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.
undercapitalized”
“significantly
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.
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Active Digital Banking Users – Mobile and/or online users with
activity at period end.
Operating Margin – Income before income taxes divided by total
revenue, net of interest expense.
Active Mobile Banking Users – Mobile users with activity at
period end.
Book Value – Ending common shareholders' equity divided by
ending common shares outstanding.
Deposit Spread – Annualized net interest income divided by
average deposits.
Efficiency Ratio – Noninterest expense divided by total revenue,
net of interest expense.
Financial advisor productivity – Adjusted MLGWM annualized
revenue divided by average financial advisors.
Gross Interest Yield – Effective annual percentage rate divided by
average loans.
Net Interest Yield – Net interest income divided by average total
interest-earning assets.
Risk-adjusted Margin – Difference between total revenue, net of
interest expense, and net credit losses divided by average
loans.
Return on Average Allocated Capital – Adjusted net income
divided by allocated capital.
Return on Average Assets – Net income divided by total average
assets.
Return on Average Common Shareholders' Equity – Net income
applicable to common shareholders divided by average common
shareholders' equity.
Return on Average Shareholders' Equity – Net income divided by
average shareholders' equity.
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Acronyms
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ABS
AFS
AI
ALM
ARR
AUM
AVM
BANA
BHC
BofAS
BofASE
bps
CAE
CAO
CCAR
CDO
CDS
CECL
CET1
CFPB
CFTC
CLO
CLTV
CRO
CVA
DIF
DVA
ECL
EMRC
EPS
ERC
ESG
EU
FCA
FDIC
FDICIA
FHA
FHLB
FHLMC
FICC
FICO
FLUs
FNMA
FTE
FVA
GAAP
GDPR
GLS
GNMA
Asset-backed securities
Available-for-sale
Artificial intelligence
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
Current expected credit losses
Common equity tier 1
Consumer Financial Protection Bureau
Commodity Futures Trading Commission
Collateralized loan obligation
Combined loan-to-value
Chief Risk Officer
Credit valuation adjustment
Deposit Insurance Fund
Debit valuation adjustment
Expected credit losses
Enterprise Model Risk Committee
Earnings per common share
Enterprise Risk Committee
Environmental, social and governance
European Union
Financial Conduct Authority
Federal Deposit Insurance Corporation
Federal Deposit Insurance Corporation
Improvement Act of 1991
Federal Housing Administration
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
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G-SIB
GSE
GWIM
HELOC
HQLA
HTM
IBOR
ICAAP
IRLC
IRM
ISDA
LCR
LHFS
LIBOR
LTV
MBS
MD&A
Global systemically important bank
Government-sponsored enterprise
Global Wealth & Investment Management
Home equity line of credit
High Quality Liquid Assets
Held-to-maturity
Interbank Offered Rates
Internal Capital Adequacy Assessment Process
Interest rate lock commitment
Independent Risk Management
International Swaps and Derivatives Association,
Inc.
Liquidity Coverage Ratio
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 International
MLGWM Merrill Lynch Global Wealth Management
MLI
MLPCC Merrill Lynch Professional Clearing Corp
MLPF&S Merrill Lynch, Pierce, Fenner & Smith Incorporated
MRC
MSA
MSR
NOL
NSFR
OCC
OCI
OREO
OTC
PCA
PPP
RMBS
RSU
RWA
SBA
SBLC
SCB
SCCL
SEC
SLR
SOFR
SONIA
TDR
TLAC
VA
VaR
VIE
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
Prompt Corrective Action
Paycheck Protection Program
Residential mortgage-backed securities
Restricted stock unit
Risk -weighted assets
Small Business Administration
Standby letter of credit
Stress capital buffer
Single-counterparty credit limits
Securities and Exchange Commission
Supplementary leverage ratio
Secured Overnight Financing Rate
Sterling Overnight Index Average
Troubled debt restructurings
Total loss-absorbing capacity
U.S. Department of Veterans Affairs
Value-at-Risk
Variable interest entity
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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.
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Executive Management Team and Management Committee
Bank of America Corporation
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 and 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 of Asia Pacific, and
Co-Head of Asia Pacific Fixed Income,
Currencies & Commodities
David C. Tyrie
Head of Digital
Anne Walker
Global Real Estate and Strategic
Initiatives Executive
Executive Management Team
Brian T. Moynihan*
Chairman of the Board and
Chief Executive Officer
Raul A. Anaya
President, Business Banking
Dean C. Athanasia*
President, Retail and Preferred
& Small Business Banking
Catherine P. Bessant*
Chief Operations and
Technology Officer
D. Steve Boland
President, Retail
Alastair M. Borthwick
President, Global Commercial Banking
Sheri B. Bronstein*
Chief Human Resources Officer
James P. DeMare
President, Global Markets
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
Matthew M. Koder
President, Global Corporate &
Investment Banking
David G. Leitch*
Global General Counsel
Aron D. Levine
President, Preferred and Consumer
Banking & Investments
Bernard A. Mensah
President, International
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, Bank of America
Sanaz Zaimi
Head of Global Fixed Income,
Currencies and Commodities Sales;
CEO of BofA Securities Europe SA, and
Country Executive for France
Management Committee**
Michael C. Ankrom, Jr.
Global Banking Chief Risk Officer,
Enterprise Credit Risk and Enterprise
Risk Appetite
Keith T. Banks
Vice Chairman, 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
Candace E. Browning-Platt
Head of Global Research
Sharon L. Miller
Head of Small Business
Andrei Magasiner
Treasurer
E. Lee McEntire
Head of Investor Relations
* Executive Officer
** All members of the Executive Management Team are also members of the Management Committee
200 | BANK OF AMERICA 2020
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
Susan S. Bies
Former Member, Federal Reserve
Board of Governors
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
Arnold W. Donald
President and Chief Executive Officer,
Carnival
Linda P. Hudson
Former Chairman and
Chief Executive Officer,
The Cardea Group, LLC;
Former President and Chief Executive
Officer, BAE
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
Lead Independent Director Successor,
Bank of America; Former Senior Vice
President and Treasurer, PepsiCo, Inc.
Denise L. Ramos
Former Chief Executive Officer and
President, ITT Inc.
Clayton S. Rose
President, Bowdoin College
Michael D. White
Former Chairman, President, and
Chief Executive Officer, DIRECTV; Lead
Director, Kimberly-Clark Corporation
Thomas D. Woods
Former Vice Chairman and Senior
Executive Vice President of CIBC;
Former Chairman, Hydro One Limited
R. David Yost
Former Chief Executive Officer,
AmerisourceBergen Corporation
Maria T. Zuber
Vice President for Research and
E.A. Griswold Professor of
Geophysics, MIT
* Not standing for reelection at the 2021 Annual Meeting of Shareholders
BANK OF AMERICA 2020 | 201
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.
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, 2020, there were 157,293 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@bofa.com. For additional
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@bofa.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.
202 | BANK OF AMERICA 2020
Annual Report on Form 10-K
The Corporation’s 2020 Annual Report on Form 10-K
is available at http://investor.bankofamerica.com. The
Corporation also will provide a copy of the 2020 Annual
Report on Form 10-K (without exhibits) upon written request
addressed to:
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. Hearing impaired 1.888.403.9700 or
outside the United States 1.781.575.4592.
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.
Bank of America Corporation (“Bank of America”) is a financial holding
company that, through its subsidiaries and affiliated companies, provides
banking and non-banking financial services.
“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.
Banking products are provided by Bank of America, N.A., and affiliated banks, Members FDIC, and wholly owned
subsidiaries of BofA Corp.
Bank of America Private Bank is a division of Bank of America, N.A.,
Member FDIC, and a wholly owned subsidiary of Bank of America Corporation.
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.
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 https://newsroom.bankofamerica.com/
awards.
Investment products:
Are Not FDIC Insured
May Lose Value
Are Not Bank Guaranteed
© 2021 Bank of America Corporation. All rights reserved.
Printed on 10% 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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2020 BAC Annual Report
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