Bank of America 2019 Annual Report PDF
Bank of America 2019 Annual Report PDF
96.9%
59.4% 60.1%
56.9%
52.7%
42.9% 44.4% 44.3% 43.8%
35.9%
32.1%
28.9%
22.3% 23.5% 22.1%
DJIA S&P BKX U.S. LC BAC DJIA S&P BKX U.S. LC BAC DJIA S&P BKX U.S. LC BAC
500 Index Peers 500 Index Peers 500 Index Peers
1 The $29.1 billion net income represents a non-GAAP financial measure, as it excludes the third-quarter $2.1 billion pre-tax, $1.7 billion after-tax,
non-cash impairment charge related to the notice of termination of our merchant services joint venture which increased noninterest expense and
is included in the reported net income of $27.4 billion.
2 U.S. large cap (LC) peers include JPM, C, WFC, GS, and MS.
$983 $1.43
$937 $947 $1.38
$897 $907 $1.31
$1.26
$1.20
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
Those accomplishments are due to our team. It starts for customers, for teammates, for shareholders,
with our dedicated group of independent directors, AND for our communities and the society in which
led by Jack Bovender, our lead independent director. we operate.
You can see the board’s commitment to our strategy in
In a separate note on page 9 of this report, I offer a
Jack’s letter on page 7 of this report. I thank Jack for his
more extended discussion that addresses questions
board leadership; his term runs through our 2021 annual
being raised about whether the challenges we face are
meeting. Jack’s leadership is stellar, and his eventual
so profound that our capitalist system itself is incapable
successor will have big shoes to fill.
of addressing them.
Our team includes the 208,000 teammates who work
While we must acknowledge and address some short-
tirelessly every day to serve our customers well and
comings within our capitalist system, I will discuss our
deliver the returns for you. They are led by a talented
belief at Bank of America that the remedies to these
management team, many of whom share their insights
shortcomings are found within capitalism itself.
about our company in this report. I thank the board and
the management team for the work they do on behalf of So how does Bank of America produce these results?
our company. We do it by delivering on Responsible Growth. Let’s
discuss how we did in 2019.
At Bank of America, we focus on results and we
focus on how we deliver them. One of the things we
should all be proud of is how we have delivered for our Responsible Growth
traditional stakeholders, customers, teammates and Our 208,000 teammates delivered the 2019 results
shareholders, and how we delivered for the broader I mentioned earlier — $29.1 billion in adjusted earnings
society at the same time. A concept we embrace — the and $34 billion in capital returns to you — through their
“genius of the and”3 — applies to how we are delivering disciplined focus on Responsible Growth.
3 This is a concept developed by Jim Collins in his book Built to Last: Successful Habits of Visionary Companies.
4 Total shareholder return includes stock price appreciation and dividends paid. U.S. large cap (LC) peers include JPM, C, WFC, GS, and MS.
In the United States, one of the important ways We are proud that Global Finance recognized Bank
we engage and share success in the communities we of America as the Best Bank in the World in 2019. In
serve is through our market president organization. early 2020, Fortune named your company to its list of
Our network of 90 market presidents is responsible the 100 Great Places to Work, and as the only global
for leading an integrated team to deliver for clients, financial services firm on its list of the top 18 Best Big
teammates and the community, serving as the chief Companies to Work For.
executive for Bank of America in that market. You will
Also last year, our research team was recognized as
see a more detailed discussion of how our market
Top Global Research Firm by Institutional Investor, an
president organization does this through the experience
honor we held for most of the last decade, including
of Raul Anaya, our Los Angeles market president, on
each year from 2011 to 2016.
page 21.
Global Finance also named Bank of America the
External recognition Best Consumer Digital Bank in America and Money
magazine ranked us the Best Bank for College Students.
Because of our investments in our capabilities and in
Reflecting our focus on managing risk well, for ourselves
our people, in 2019 we received recognition in many
and for our clients, we earned prestigious recognition
areas, including for our products and services, for our
from Risk magazine, which named us Derivatives House
commitment to our team and to diversity and inclu-
of the Year, Equity Derivatives House of the Year and
sion, and for our contributions addressing important
OTC Client Clearer of the Year.
societal priorities.
$2.43 15.55%
$2.35 14.86%
$2.28
$2.14 $2.19
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
5 Represents a non-GAAP financial measure. For more information on these measures and ratios, and a corresponding reconciliation to GAAP
financial measures, see Supplemental Financial Data on page 48 and Non-GAAP Reconciliations on page 101 of the 2019 Financial Review section.
By driving Responsible Growth, we deliver for these the world by Institutional Investor for seven of the last
stakeholders. nine years — has published a series of research reports
demonstrating that companies that pay close attention
At the same time, we also serve broader society.
to environmental, social and governance (ESG) priorities
We must tackle important societal priorities, such as
are much less likely to fail than companies that do not.
affordable housing, economic mobility and a clean
energy future. And we are. There is a lot of discussion At Bank of America, we believe capitalism is best at
today about the best ways to mobilize the resources creating opportunity for people to realize their hopes
needed to address these challenges. The discussion and dreams. We believe if we keep aiming capital-
includes questions about how effective our capitalist ism’s power toward the challenges we face, we can
economic system is at prioritizing these needs and make significant progress on society’s most pressing
whether we need to think differently about it. Simply problems.
stated: Can capitalism address the most challenging
Bank of America’s role in that system is to help all of our
societal priorities, or might we need to think about
stakeholders — our clients, shareholders, teammates
another economic model?
and those in the communities where we operate — grab
In 2019, the Business Roundtable in the U.S. issued a the opportunities they see for themselves by helping
Statement on the Purpose of a Corporation. Bank of with their financial lives.
America is a member of the Business Roundtable, and
We also believe, though, that it is important to acknowl-
I signed the statement, because it reflects the way
edge questions being raised, such as:
our company has operated for many, many years. The
statement is straightforward, and I encourage everyone • How do we ensure equal access to opportunity?
with an interest in Bank of America to read it.
• Are companies sharing their success equitably with
The Business Roundtable issued its statement in their employees?
the context of this ongoing discussion about capitalism.
• Are we doing all we can do to accelerate the transition
In that context, the statement has been interpreted
to a low carbon, clean energy economy?
in some quarters as a step away from the important
responsibility we have to deliver the best financial • What will happen to today’s employees as technology
returns to our shareholders so that companies can focus advancements change the nature of work?
on other, “more important” societal priorities.
• Can companies hold themselves accountable through
At Bank of America, we reject that false choice. strong self-governance?
The simple fact is that at Bank of America, we believe
These discussions are at the heart of the policy debates
we must continue to deliver great returns AND help
in legislative and executive bodies around the world.
drive progress on societal priorities. There is ample
These are concerns for our clients, our communities
evidence to suggest the wisdom of this approach. The
and increasingly for our shareholders. Our teammates
BofA Global Research team — ranked number one in
discuss them with their families and with each other.
changes. We hired 10,000 veterans over the last five investors can prioritize their investments and capital
years. Our hiring in low- and moderate-income neigh- to companies making progress over those that are
borhoods has produced more than 8,000 hires in the not. Remember, the BofA Global Research team has
last two years. demonstrated that operating companies that don’t pay
attention to these priorities are more risky and less
Fourth, we do it with our client financing capabilities —
predictable.
our core activities. We provide examples of that in our
annual report. For example, Bank of America is one of There is no shortage of ways to measure this progress.
the largest underwriters of green bonds, and we have This actually has been a barrier to progress, because
helped companies raise more than $40 billion on behalf there is no standard method of gaining alignment
of more than 100 clients to provide critical funding on between the operators of companies that are doing
environmental projects. so much to address these priorities and the investors
seeking to direct capital toward them. There is a large
Another example is in our consumer product design.
and growing number of external forums and bodies
We have one of the lowest priced checking account
trying to advance this work. By some estimates, there
options in the industry, with a monthly maintenance
will be as many as 600 conferences in the U.S. alone
fee of just under $5 for access to our banking channels,
this year to discuss ESG, sustainability, and sustainable
including mobile, online services, ATMs and financial
business and finance models.
centers. And our Advantage SafeBalance Banking, intro-
duced in 2014, was one of the first banking accounts to There is a dizzying number of measurement systems
eliminate overdraft fees and non-sufficient fund fees. and metrics, too. Public companies face requests
The account was the primary reason Money magazine from many stakeholders — investors, public officials,
named us the “Best Bank for College Students” in regulators and developers of their own proprietary
2019. We surpassed 1 million Advantage SafeBalance measurement systems — that we adopt their preferred
Banking accounts in June 2019. metric or routine to address a particular priority. The
volume of approaches and the varied metrics and meth-
Fifth, we help our investor clients find opportunities
odologies make it difficult for those of us who operate
to drive impact investing, ESG investing or blended
companies to determine how best to provide consis-
finance across the SDGs.
tent reporting. And many of us would rather put our
We dedicate all of our business operations to driving energy into actually making progress on the SDGs than
great returns for our shareholders AND to addressing debating the measurement of progress.
these priorities. If each company focuses on delivering
Company management teams and the asset owners
both through their individual routine business opera-
and asset managers who invest in these companies
tions and practices, then we can channel the world’s
need a straightforward framework by which to compare
capital to make meaningful progress on the SDGs.
non-financial information in these areas across compa-
One important way to ensure we are making progress nies in a given industry, and across industries, to
is to have a basic framework for measuring it. We determine which companies are making progress on
need to do this so we can demonstrate progress to the issues most critical toward ensuring a sustainable
all stakeholders. With a measurement framework, global economy.
we can reward the companies that achieve both, as
Bank of America
Executive Management Team
Front row (from left): Christine Katziff, Anne Finucane, Brian Moynihan,
Catherine Bessant, Thong Nguyen, Sheri Bronstein
Back row (from left): Andrew Sieg, Paul Donofrio, Dean Athanasia,
Andrea Smith, David Leitch, Kathleen Knox, Geoffrey Greener, Thomas Montag
Behind the scenes, we’re taking advantage of the latest Q: How can employees develop and advance
advances in artificial intelligence (AI), machine learning and their careers at Bank of America?
business intelligence to enable us to deliver personalized, Dean: We’re helping our teammates in Consumer & Small
client-specific insights, recommendations and resources during Business, Merrill and the Private Bank build great careers at
moments that matter. Our virtual AI-driven financial assistant, Bank of America through The Academy, our award-winning
Erica®, uses all this intelligence to deliver a personalized coaching and development organization. Academy programs
experience for each and every client. provide robust coursework taught by subject matter experts,
dedicated training time for frontline employees — each
Q: What are you doing to support the communities teammate receives a minimum of 80 hours of training when
where you do business, especially low- and moderate- taking on a new role and up to 1,000 hours in the first five
income communities? years, depending on the career path — in addition to peer
Dean: We are helping to empower economic mobility for our mentoring and coaching. We also offer hands-on, high-tech
clients and small businesses through a community-centered immersion training programs using virtual reality and client
approach that offers resources tailored to meet their needs. engagement simulators, which is a first for our industry.
Our strategy is designed to connect clients with products and
services, employment opportunities and capital to increase More than 45,000 teammates participated in Academy
financial resilience and help our local communities thrive. programs in 2019, with nearly 11,000 advancing in their
careers as a result.
That means being focused on the needs of diverse commu-
nities. We serve 9.5 million Hispanic-Latino individuals and We encourage employees to consider their opportunities
more than 1 million Hispanic business owners. In 2019, our inside our company. Managers are expected to have that
market share as the primary bank for U.S. Hispanic-Latino conversation with their teams, so they understand the
consumers grew to 21%, maintaining our industry-leading opportunities they have to learn more about a different
position. And by the end of 2019, we had more than 2 million position in the market where they live, across all of our lines
users of our Spanish-language mobile app, a 23.5% increase of business. We want employees to think about their career
over the prior year. opportunities within our company, and we are empowering
them and their managers to help them gain the training
It also means being focused on underserved communities. and the resources to do that. As a result, we’re seeing the
Today, roughly one-third of our financial centers and ATMs are highest employee engagement scores and lowest turnover
located in low- and moderate-income (LMI) neighborhoods, we have ever experienced, even in an environment with
and 33% of our financial center employees work in these low unemployment.
locations. In the rural markets where we work and serve, we
have 235 financial centers, 820 ATMs and over 1,500 financial Our investment in our teammates is helping us better serve
center employees. Across our network, nearly two-thirds of our clients and the communities in which we live and work,
our financial centers are staffed by teammates who speak providing more professional expertise and improving client
more than one language. Of the total number of multilingual care in every interaction.
associates, 81% work in our centers located in LMI areas.
BA N K OF
OF AM
A M ERIC A 20
2019 | 15
Transforming
wealth management
Q&A with Katy Knox, President of Bank of America Private Bank
and Andy Sieg, President of Merrill Lynch Wealth Management
Q: How are your businesses aligned to goals, our Private Bank specialists draw upon
capitalize on these opportunities? their experience and expertise in wealth struc-
Katy: Our goal is to enable individuals, turing, investment management and credit and
families, business owners and institutions banking to create a thoughtful, comprehensive
to preserve and share their wealth, build wealth plan. For business owners, we offer
legacies and plan for growth and success. strategies to plan for a business transfer while
We bring together business lines across Bank keeping clients’ personal and family needs top
of America — Consumer Banking, Business of mind. For families with significant wealth,
Banking, Global Commercial Banking, Global complex assets and ownership structures,
Corporate & Investment Banking and Global the Bank of America Private Bank Family
Markets — to harness all of our resources Office provides the highest level of expertise
designed to meet our clients’ needs. It’s a and service.
tremendous advantage to be able to holistically
address both business and personal needs. Q: How are your digital capabilities
From growing a business for the next gener- enhancing the wealth management
ation, to unlocking capital in an art collection, client experience?
to giving with passion and purpose, we help Andy: Clients, especially those with complex
clients with their connected priorities. wealth needs, want a personal connection plus
the convenience that technology offers. In the
Andy: Last year was a record year for Merrill in age of smartphones and mobile apps, Merrill
client balances, revenue and net income. We’re clients can easily see their investment and cash
in an era where Merrill advisors can serve as accounts across the company, keep track of their
indispensable partners over their clients’ entire financial goals and engage their advisor teams
financial lives. We can provide clients the finest when and how they choose. Also, Merrill’s digital
advice and service — investment management tools save our clients precious time by enabling
and access to banking, credit and lending — all them to quickly scan and sign documents and
through their advisor or the other channels we securely chat with their advisors through text.
offer clients to interact with us. In today’s world,
even the most astute families feel challenged Katy: The Private Bank offers that same
by high-stakes financial decisions. That’s why digital experience, with features such as
you see more and more people looking for seamless money transfers, document scanning,
comprehensive advice from a single relationship. educational podcasts and integration of
That’s what we offer our clients in a way no charitable gift fund accounts. As we look toward
one else can. an increasingly digital future, we’ve made it
easier for clients to have online access to their
Q: How is the company helping clients accounts across wealth and banking. Secure
looking to transition wealth to the messaging between our advisors and clients
next generation? facilitates a new type of relationship, including
Katy: We’ve helped individuals and families pass real-time engagement when that is what
down their values across generations for more clients want.
than 200 years. To meet a family’s financial
16 | BA NK OF
OF AM
A M ERIC A 20
2019
BANK OF AMERICA 2019 | 17
Personalized banking,
digitally delivered
Digital is more important than ever. Today, clients expect the best
mobile and digital technology in their financial relationships, just as
they do in other areas of their lives. Our award-winning high-tech
capabilities — our digital services earned 34 industry accolades in
2019 alone — together with our high-touch approach are making
banking better and delivering a more intuitive and efficient
experience for our clients across all channels.
Three core principles guide how we develop and deliver each digital
experience: The information and advice we provide should be in the
best interest of the client, timely and relevant, and offer a choice of
the next best step.
Our virtual AI-driven assistant, Erica®, is the engine that enables this
personalization at scale, delivering valuable client-specific insights
and advice at key moments. Clients interact with Erica through voice,
text chat or on-screen gesture, receiving help with their banking
needs and proactive insights to help make managing finances easier
and meet savings goals. For instance, Erica detects duplicate charges
on an account and notifies clients if their spending is higher than
usual or their checking account balance is trending toward $0. Erica
can also assist with common inquiries, including billing disputes, fees,
deposit holds and transaction-related questions. Since launching in
2018, Erica has already helped more than 10 million clients complete
over 100 million requests.
In 2019, clients logged into our digital platforms more than 8 billion
times, deposited more than 140 million checks through Mobile Check
Deposit, and sent and received over $78 billion using Zelle®. More
than one-quarter of all new products are provided through digital
channels, including auto loans and home mortgages.
Our digital and mobile capabilities are aligned with the capabilities
clients receive in a financial center, too. For example, clients can
use our mobile app to easily book an appointment with an employee
to discuss a specific matter in a financial center. Alternatively, an
employee in the financial center can discuss and save products
to a client’s digital shopping cart, and the client can complete the
application digitally at a later date.
”
employees around the globe.
$158B
Deployed to low-carbon
sustainable business activities
$49B
Green bonds underwritten
since 2007 supporting
environmental projects
$9.4B
Renewable energy tax
equity projects for wind and
solar facilities
$5B
Part of our affordable home
ownership initiative for low- and
moderate-income homebuyers
and communities across the U.S.
Investing in education, jobs and housing What’s happening in Charlotte is not an isolated effort.
Because early education is vital to economic mobility, extend- Many of the initiatives first used in Charlotte are now
ing free, public pre-K to all 4-year-olds in Charlotte was a top being piloted in other Bank of America markets, with
priority. We contributed to the initial studies and helped fund a goal of creating greater economic mobility for all our
scholarships and related expenses to expand the pre-K teacher communities — and the people who live and work in them.
Diversity — in thought, style, age, sexual orientation, gender opportunities. Employee Networks such as our Hispanic-
identity, race, ethnicity, culture and experience — makes us Latino Organization for Leadership & Advancement (HOLA)
stronger and is essential to our ability to serve our clients, and Black Professional Group (BPG) have more than 14,500
fulfill our purpose and drive Responsible Growth. We have memberships each.
a longstanding commitment to invest in diverse communi-
ties, including supporting strong diversity in representation We’re committed to making the financial lives of our clients
across our company, reflecting the clients and communities better. Approximately 1 in every 3 checking accounts opened
we serve. We’re proud of the progress we’ve made, partic- at Bank of America is by Hispanic-Latino clients, and 15%
ularly our efforts in support of Black/African American and of checking accounts opened at Bank of America are by
Hispanic-Latino communities, which we feature below. A broad Black/African American clients. We deliver a full spectrum
discussion of our diversity commitment, how we execute on of products and services for these clients, whether they are
it and our results are discussed in detail throughout our 2019 looking to invest or just starting their financial journey. We
Human Capital Report, which is available on our Investor offer Spanish-language capabilities across multiple products
Relations website. and services including our free Better Money Habits® website,
which helps people build their financial know-how. In 2020,
We are sharply focused on building a diverse workforce, which we celebrate 30 years of our corporate Supplier Diversity &
is currently 13% Black/African American and 18% Hispanic- Development Program, which supports minority-, women- and
Latino, exceeding EEOC financial services and Department other diverse-owned suppliers, spending nearly $2 billion with
of Labor benchmarks; and last year, the number of executive diverse suppliers each year.
and senior-level officials and managers drawn from these
populations increased more than 14%. Partnerships and programs are helping to drive our focus
on economic mobility. In 2019 alone, we invested more than
In our efforts to further increase our diverse representation, $55 million to advance issues of economic mobility and social
we’re partnering with more than 200 external organizations justice affecting Blacks/African Americans and Hispanic-Latino
to identify diverse talent. And, we have networking groups to individuals. We partner with change-making organizations
provide professional development, mentoring and leadership like the NAACP, National Urban League and UnidosUS, all of
Our diversity makes us stronger, and the value we deliver as a company is strengthened when
we bring broad perspectives together to meet the needs of our diverse stakeholders.
Part of being a great place to work is supporting LES was there for Alison Harding, an employee in
our employees in the moments that matter most. Global Technology & Operations, when a hurricane
This includes helping our teammates navigate threatened her home in Charleston, South Carolina.
significant life events — connecting them to internal The area was under mandatory evacuation; however,
and external resources, benefits, counseling and Alison’s family did not have a vehicle large enough
other support options. In 2014, we established our to accommodate her special-needs child, his medical
Life Event Services (LES) group — an internal and equipment, nurse and the family. LES took action to
highly specialized team that has provided more help and within 20 minutes, secured a large vehicle
than 100,000 team members with empathetic and to meet their needs enabling the family to safely
personalized support for needs related to terminal evacuate. “I felt instant relief, followed by how proud
illness, taking a leave of absence, the death of a I was to work for a company that helped me in a
loved one, domestic violence, medical accommoda- time of need,” said Alison. “With a special-needs
tions, transgender and gender identity, retirement child, we have to consider and worry about so many
and military service. things and this obstacle was removed so we could
focus on caring for our family.”
Additionally, when disasters occur, LES provides
support for employees who are affected by an
100,000+
event, such as a natural disaster, violence or
house fire. This can include providing paid time
off to handle the impacts of the event, temporary
housing and referrals to community organizations,
or arranging emotional support for the teammate
Employees supported
and family members. during the moments
they and their families
needed it the most
Assuming an
employee with a Company
base salary of contributions to
$45,572* family health and
insurance coverage
would be
Company
contributions to
$25,133
401(k) would be
$3,190
Company-
provided child care
reimbursements
would be
$3,595
Company
contributions would
bring total annual pay
and benefits to
$77,490
* Example is based on employee with a base salary of $45,572 and benefits profile, living in one of our markets in the U.S., who is enrolled
in a representative set of Bank of America employee benefit programs (including 401(k) plan, medical, dental, disability, life insurance,
accidental death & dismemberment insurance, and child care reimbursement). For the 401(k), it assumes the employee has at least 1 year
36 | BANK OF AMERICA 2019 of service, and is receiving 2% Annual Company Contribution and 5% Company Match (based on a contribution rate of at least 5%).
Funding the
power to dream
In 2019, we asked employees from across the globe “What would you like the power to do?” and
how they would put a financial grant to work in their communities. We responded with nearly
$1 million in funding for 42 employee ideas that focused on economic mobility, the environment,
and arts and culture. These ideas were selected to receive a $50,000 or $10,000 grant and
support from within the bank, in partnership with an eligible local nonprofit.
1 Represents Bank of America Consumer households for entire 12-months under study who used the Saving and Budgeting Tool during March 2017. Analysis
based on average balances for the 6 months prior to March 2017 (“pre” period) and the 6 months after March 2017 (“post” period).
December 31 2014 2015 2016 2017 2018 2019 Book Value Per Share/
Bank of America Corporation $100 $95 $127 $172 $146 $214 Tangible Book Value Per Share
S&P 500 100 101 113 138 132 174
$27.32
$25.13
KBW Bank Sector Index 100 100 129 153 126 172
$23.97
$23.80
$22.48
$19.41
$17.91
$16.96
$16.89
$15.56
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, 2014 through 2019. The graph assumes an initial investment of $100
at the end of 2014 and the reinvestment of all dividends during the years indicated.
2015 2016 2017 2018 2019
Book Value Per Share Tangible Book Value Per Share³
4242Bank of America
Bank 2019
of America 2019
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Bank of America Corporation (the “Corporation”) and its impact of regulatory capital and liquidity requirements; the impact
management may make certain statements that constitute of adverse changes to total loss-absorbing capacity requirements
“forward-looking statements” within the meaning of the Private and/or global systemically important bank surcharges; the potential
Securities Litigation Reform Act of 1995. These statements can be impact of actions of the Board of Governors of the Federal Reserve
identified by the fact that they do not relate strictly to historical or System on the Corporation’s capital plans; the effect of regulations,
current facts. Forward-looking statements often use words such as other guidance or additional information on the impact from the Tax
“anticipates,” “targets,” “expects,” “hopes,” “estimates,” “intends,” Cuts and Jobs Act; the impact of implementation and compliance
“plans,” “goals,” “believes,” “continue” and other similar expressions with U.S. and international laws, regulations and regulatory
or future or conditional verbs such as “will,” “may,” “might,” “should,” interpretations, including, but not limited to, recovery and resolution
“would” and “could.” Forward-looking statements represent the planning requirements, Federal Deposit Insurance Corporation
Corporation’s current expectations, plans or forecasts of its future assessments, the Volcker Rule, fiduciary standards and derivatives
results, revenues, expenses, efficiency ratio, capital measures, regulations; a failure or disruption in or breach of the Corporation’s
strategy and future business and economic conditions more operational or security systems or infrastructure, or those of third
generally, and other future matters. These statements are not parties, including as a result of cyber attacks or campaigns; the
guarantees of future results or performance and involve certain impact on the Corporation’s business, financial condition and results
known and unknown risks, uncertainties and assumptions that are of operations from the United Kingdom's exit from the European
difficult to predict and are often beyond the Corporation’s control. Union; the impact of any future federal government shutdown and
Actual outcomes and results may differ materially from those uncertainty regarding the federal government’s debt limit; the impact
expressed in, or implied by, any of these forward-looking statements. of natural disasters, the emergence of widespread health
You should not place undue reliance on any forward-looking emergencies or pandemics, military conflict, terrorism or other
statement and should consider the following uncertainties and risks, geopolitical events; and other matters.
as well as the risks and uncertainties more fully discussed under Forward-looking statements speak only as of the date they are
Item 1A. Risk Factors of our 2019 Annual Report on Form 10-K: the made, and the Corporation undertakes no obligation to update any
Corporation’s potential claims, damages, penalties, fines and forward-looking statement to reflect the impact of circumstances or
reputational damage resulting from pending or future litigation, events that arise after the date the forward-looking statement was
regulatory proceedings and enforcement actions; the possibility that made.
the Corporation's future liabilities may be in excess of its recorded Notes to the Consolidated Financial Statements referred to in
liability and estimated range of possible loss for litigation, regulatory the Management’s Discussion and Analysis of Financial Condition
and representations and warranties exposures; the possibility that and Results of Operations (MD&A) are incorporated by reference
the Corporation could face increased servicing, fraud, indemnity, into the MD&A. Certain prior-year amounts have been reclassified
contribution or other claims from one or more counterparties, to conform to current-year presentation. Throughout the MD&A,
including trustees, purchasers of loans, underwriters, issuers, the Corporation uses certain acronyms and abbreviations which
monolines, private-label and other investors, or other parties are defined in the Glossary.
involved in securitizations; the Corporation’s ability to resolve
representations and warranties repurchase and related claims, Executive Summary
including claims brought by investors or trustees seeking to avoid
the statute of limitations for repurchase claims; the risks related to Business Overview
the discontinuation of the London Interbank Offered Rate and other The Corporation is a Delaware corporation, a bank holding company
reference rates, including increased expenses and litigation and the (BHC) and a financial holding company. When used in this report,
effectiveness of hedging strategies; uncertainties about the “the Corporation,” “we,” “us” and “our” may refer to Bank of
financial stability and growth rates of non-U.S. jurisdictions, the risk America Corporation individually, Bank of America Corporation and
that those jurisdictions may face difficulties servicing their sovereign its subsidiaries, or certain of Bank of America Corporation’s
debt, and related stresses on financial markets, currencies and subsidiaries or affiliates. Our principal executive offices are
trade, and the Corporation’s exposures to such risks, including direct, located in Charlotte, North Carolina. Through our banking and
indirect and operational; the impact of U.S. and global interest rates, various nonbank subsidiaries throughout the U.S. and in
inflation, currency exchange rates, economic conditions, trade international markets, we provide a diversified range of banking
policies and tensions, including tariffs, and potential geopolitical and nonbank financial services and products through four
instability; the impact of the interest rate environment on the business segments: Consumer Banking, Global Wealth &
Corporation’s business,financial condition and results of operations; Investment Management (GWIM), Global Banking and Global
the possibility that future credit losses may be higher than currently Markets, with the remaining operations recorded in All Other. We
expected due to changes in economic assumptions, customer operate our banking activities primarily under the Bank of America,
behavior, adverse developments with respect to U.S. or global National Association (Bank of America, N.A. or BANA) charter. At
economic conditions and other uncertainties; the Corporation’s December 31, 2019, the Corporation had $2.4 trillion in assets
ability to achieve its expense targets and expectations regarding net and a headcount of approximately 208,000 employees.
interest income, provision for credit losses, net charge-offs, effective As of December 31, 2019, we served clients through
tax rate, loan growth or other projections; adverse changes to the operations across the U.S., its territories and approximately 35
Corporation’s credit ratings from the major credit rating agencies; countries. Our retail banking footprint covers approximately 90
an inability to access capital markets or maintain deposits or percent of the U.S. population, and we serve approximately 66
borrowing costs; estimates of the fair value and other accounting million consumer and small business clients with approximately
values, subject to impairment assessments, of certain of the 4,300 retail financial centers, approximately 16,800 ATMs, and
Corporation’s assets and liabilities; the estimated or actual impact leading digital banking platforms (www.bankofamerica.com) with
of changes in accounting standards or assumptions in applying more than 38 million active users, including over 29 million active
those standards; uncertainty regarding the content, timing and mobile users. We offer industry-leading support to approximately
4444Bank of America
Bank 2019
of America 2019
Financial Highlights the Financial Highlights and Business Segment Operations
In the Consolidated Statement of Income, amounts related to sections in the MD&A of the Corporation's 2018 Annual Report
certain asset and liability management (ALM) activities have been on Form 10-K.
reclassified from other income to market making and similar
activities, which was previously referred to as trading account Net Interest Income
income. All prior periods presented reflect this change, which has Net interest income increased $729 million to $48.9 billion in
no impact on the Corporation's total noninterest income or net 2019 compared 2018. Net interest yield on a fully taxable-
income, and has no impact on business segment results. For more equivalent (FTE) basis decreased two basis points (bps) to 2.43
information, see Note 1 – Summary of Significant Accounting percent for 2019. The increase in net interest income was primarily
Principles to the Consolidated Financial Statements. driven by loan and deposit growth, partially offset by lower long-
end rates. Assuming a stable economic and interest rate
environment compared to December 31, 2019, we expect quarterly
Table 1 Summary Income Statement and Selected net interest income for the first two quarters of 2020 to be lower
Financial Data compared to the fourth quarter of 2019 driven by the impact of
rates and one fewer day of interest accruals. Quarterly net interest
(Dollars in millions, except per share information) 2019 2018
income is expected to rise modestly in the second half of 2020
Income statement
due to one additional day of interest accruals and expected loan
Net interest income $ 48,891 $ 48,162
and deposit growth. For more information on net interest yield and
Noninterest income 42,353 42,858
Total revenue, net of interest expense 91,244 91,020
the FTE basis, see Supplemental Financial Data on page 48, and
Provision for credit losses 3,590 3,282 for more information on interest rate risk management, see
Noninterest expense 54,900 53,154 Interest Rate Risk Management for the Banking Book on page 95.
Income before income taxes 32,754 34,584
Income tax expense 5,324 6,437 Noninterest Income
Net income 27,430 28,147
Preferred stock dividends 1,432 1,451
Net income applicable to common
Table 2 Noninterest Income
shareholders $ 25,998 $ 26,696
(Dollars in millions) 2019 2018
Per common share information Fees and commissions:
Earnings $ 2.77 $ 2.64 Card income $ 5,797 $ 5,824
Diluted earnings 2.75 2.61 Service charges 7,674 7,767
Dividends paid 0.66 0.54 Investment and brokerage services 13,902 14,160
Performance ratios Investment banking fees 5,642 5,327
Return on average assets 1.14% 1.21% Total fees and commissions 33,015 33,078
Return on average common shareholders’ Market making and similar activities 9,034 9,008
equity 10.62 11.04 Other income 304 772
Return on average tangible common Total noninterest income $ 42,353 $ 42,858
shareholders’ equity (1) 14.86 15.55
Efficiency ratio 60.17 58.40 Noninterest income decreased $505 million to $42.4 billion in
Balance sheet at year end 2019 compared to 2018. The following highlights the significant
Total loans and leases $ 983,426 $ 946,895
changes.
Total assets 2,434,079 2,354,507
Total deposits 1,434,803 1,381,476 Service charges decreased $93 million primarily driven by lower
Total liabilities 2,169,269 2,089,182 fees due to policy changes in 2018 and lower ATM volume in
Total common shareholders’ equity 241,409 242,999
Consumer Banking.
Total shareholders’ equity 264,810 265,325
Investment and brokerage services income decreased $258
(1) Return on average tangible common shareholders’ equity is a non-GAAP financial measure. For
more information and a corresponding reconciliation to the most closely related financial million primarily due to lower transactional revenue and a
measures defined by accounting principles generally accepted in the United States of America, decrease in assets under management (AUM) pricing, partially
see Non-GAAP Reconciliations on page 101.
offset by the positive impact of AUM flows and higher market
Net income was $27.4 billion or $2.75 per diluted share in valuations.
2019 compared to $28.1 billion, or $2.61 per diluted share in Investment banking fees increased $315 million due to
2018. The decrease in net income was primarily driven by an increases in advisory fees and equity and debt underwriting
increase in noninterest expense as a result of the $2.1 billion fees.
pretax impairment charge related to the notice of termination of Other income decreased $468 million primarily due to lower
the merchant services joint venture at the conclusion of its current gains on sales of non-core consumer loans and higher
term. Also contributing to the decrease in net income were higher partnership losses associated with an increase in tax-
provision for credit losses and lower noninterest income, partially advantaged investments, partially offset by higher gains on
offset by an increase in net interest income. sales of debt securities.
For discussion and analysis of our consolidated and business
segment results of operations for 2018 compared to 2017, see
4646Bank of America
Bank 2019
of America 2019
Trading Account Assets Trading Account Liabilities
Trading account assets consist primarily of long positions in equity Trading account liabilities consist primarily of short positions in
and fixed-income securities including U.S. government and agency equity and fixed-income securities including U.S. Treasury and
securities, corporate securities and non-U.S. sovereign debt. agency securities, corporate securities and non-U.S. sovereign
Trading account assets increased $15.5 billion primarily driven by debt. Trading account liabilities increased $15.1 billion primarily
additional inventory in Global Markets to facilitate client demand. due to higher levels of short positions in government and corporate
bonds driven by client demand within Global Markets.
Debt Securities
Debt securities primarily include U.S. Treasury and agency Short-term Borrowings
securities, mortgage-backed securities (MBS), principally agency Short-term borrowings provide an additional funding source and
MBS, non-U.S. bonds, corporate bonds and municipal debt. We primarily consist of Federal Home Loan Bank (FHLB) short-term
use the debt securities portfolio primarily to manage interest rate borrowings, notes payable and various other borrowings that
and liquidity risk and to take advantage of market conditions that generally have maturities of one year or less. Short-term
create economically attractive returns on these investments. Debt borrowings increased $4.0 billion primarily due to an increase in
securities increased $30.4 billion primarily driven by the short-term FHLB advances to manage liquidity needs. For more
deployment of deposit inflows. For more information on debt information on short-term borrowings, see Note 11 – Federal Funds
securities, see Note 4 – Securities to the Consolidated Financial Sold or Purchased, Securities Financing Agreements, Short-term
Statements. Borrowings and Restricted Cash to the Consolidated Financial
Statements.
Loans and Leases
Loans and leases increased $36.5 billion primarily due to net loan Long-term Debt
growth driven by client demand for commercial loans and increases Long-term debt increased $11.5 billion primarily driven by debt
in residential mortgage. For more information on the loan portfolio, issuances and valuation adjustments, partially offset by maturities
see Credit Risk Management on page 74. and redemptions. For more information on long-term debt, see
Note 12 – Long-term Debt to the Consolidated Financial
Allowance for Loan and Lease Losses Statements.
The allowance for loan and lease losses decreased $185 million
primarily due to the impact of improvements in credit quality from All Other Liabilities
a stronger economy and continued runoff and sales in the non- All other liabilities increased $18.1 billion primarily driven by an
core consumer real estate portfolio. For more information, see increase in broker-dealer payables within Global Markets due to
Allowance for Credit Losses on page 89. timing of unsettled trades and an increase in lease liabilities due
to implementation of the new lease accounting standard.
Liabilities
At December 31, 2019, total liabilities were approximately $2.2 Shareholders’ Equity
trillion, up $80.1 billion from December 31, 2018, primarily due Shareholders’ equity decreased $515 million driven by returns of
to deposit growth. capital to shareholders through share repurchases, common and
preferred stock dividends of $35.7 billion, as well as redemption
Deposits of preferred stock, largely offset by earnings, market value
Deposits increased $53.3 billion primarily due to increases in both increases on debt securities and issuances of preferred stock.
retail and wholesale deposits.
Cash Flows Overview
Federal Funds Purchased and Securities Loaned or Sold The Corporation’s operating assets and liabilities support our
Under Agreements to Repurchase global markets and lending activities. We believe that cash flows
Federal funds transactions involve borrowing reserve balances on from operations, available cash balances and our ability to
a short-term basis. Securities loaned or sold under agreements generate cash through short- and long-term debt are sufficient to
to repurchase are collateralized borrowing transactions utilized to fund our operating liquidity needs. Our investing activities primarily
accommodate customer transactions, earn interest rate spreads include the debt securities portfolio and loans and leases. Our
and finance assets on the balance sheet. Federal funds purchased financing activities reflect cash flows primarily related to customer
and securities loaned or sold under agreements to repurchase deposits, securities financing agreements and long-term debt. For
decreased $21.9 billion primarily driven by balance sheet more information on liquidity, see Liquidity Risk on page 71.
efficiencies within Global Markets.
Bank
Bank of
of America
America 2019
2019 47
47
Supplemental Financial Data equity reduced by goodwill and intangible assets (excluding
In this Form 10-K, we present certain non-GAAP financial mortgage servicing rights (MSRs)), net of related deferred tax
measures. Non-GAAP financial measures exclude certain items or liabilities ("adjusted" shareholders' equity or common
otherwise include components that differ from the most directly shareholders' equity). These measures are used to evaluate our
comparable measures calculated in accordance with accounting use of equity. In addition, profitability, relationship and investment
principles generally accepted in the United States of America models use both return on average tangible common
(GAAP). Non-GAAP financial measures are provided as additional shareholders’ equity and return on average tangible shareholders’
useful information to assess our financial condition, results of equity as key measures to support our overall growth goals. These
operations (including period-to-period operating performance) or ratios are as follows:
compliance with prospective regulatory requirements. These non-
Return on average tangible common shareholders’ equity
GAAP financial measures are not intended as a substitute for GAAP
measures our net income applicable to common shareholders
financial measures and may not be defined or calculated the same
as a percentage of adjusted average common shareholders’
way as non-GAAP financial measures used by other companies.
equity. The tangible common equity ratio represents adjusted
We view net interest income and related ratios and analyses
ending common shareholders’ equity divided by total tangible
on an FTE basis, which when presented on a consolidated basis
assets.
are non-GAAP financial measures. To derive the FTE basis, net
Return on average tangible shareholders' equity measures our
interest income is adjusted to reflect tax-exempt income on an
net income as a percentage of adjusted average total
equivalent before-tax basis with a corresponding increase in
shareholders’ equity. The tangible equity ratio represents
income tax expense. For purposes of this calculation, we use the
adjusted ending shareholders’ equity divided by total tangible
federal statutory tax rate of 21 percent for 2019 and 2018 (35
assets.
percent for 2017) and a representative state tax rate. Net interest
Tangible book value per common share represents adjusted
yield, which measures the basis points we earn over the cost of
ending common shareholders’ equity divided by ending
funds, utilizes net interest income on an FTE basis. We believe
common shares outstanding.
that presentation of these items on an FTE basis allows for
comparison of amounts from both taxable and tax-exempt sources We believe that the use of ratios that utilize tangible equity
and is consistent with industry practices. provides additional useful information because they present
We may present certain key performance indicators and ratios measures of those assets that can generate income. Tangible
excluding certain items (e.g., debit valuation adjustment (DVA) book value per common share provides additional useful
gains (losses)) which result in non-GAAP financial measures. We information about the level of tangible assets in relation to
believe that the presentation of measures that exclude these items outstanding shares of common stock.
is useful because such measures provide additional information The aforementioned supplemental data and performance
to assess the underlying operational performance and trends of measures are presented in Tables 6 and 7.
our businesses and to allow better comparison of period-to-period For more information on the reconciliation of these non-GAAP
operating performance. financial measures to the corresponding GAAP financial measures,
We also evaluate our business based on certain ratios that see Non-GAAP Reconciliations on page 101.
utilize tangible equity, a non-GAAP financial measure. Tangible
equity represents shareholders’ equity or common shareholders’
4848Bank of America
Bank 2019
of America 2019
Table 6 Five-year Summary of Selected Financial Data
(In millions, except per share information) 2019 2018 2017 2016 2015
Income statement
Net interest income $ 48,891 $ 48,162 $ 45,239 $ 41,486 $ 38,958
Noninterest income 42,353 42,858 41,887 42,012 44,007
Total revenue, net of interest expense 91,244 91,020 87,126 83,498 82,965
Provision for credit losses 3,590 3,282 3,396 3,597 3,161
Noninterest expense 54,900 53,154 54,517 54,880 57,617
Income before income taxes 32,754 34,584 29,213 25,021 22,187
Income tax expense 5,324 6,437 10,981 7,199 6,277
Net income 27,430 28,147 18,232 17,822 15,910
Net income applicable to common shareholders 25,998 26,696 16,618 16,140 14,427
Average common shares issued and outstanding 9,390.5 10,096.5 10,195.6 10,248.1 10,462.3
Average diluted common shares issued and outstanding 9,442.9 10,236.9 10,778.4 11,046.8 11,236.2
Performance ratios
Return on average assets 1.14% 1.21% 0.80% 0.81% 0.74%
Return on average common shareholders’ equity 10.62 11.04 6.72 6.69 6.28
Return on average tangible common shareholders’ equity (1) 14.86 15.55 9.41 9.51 9.16
Return on average shareholders’ equity 10.24 10.63 6.72 6.70 6.33
Return on average tangible shareholders’ equity (1) 13.85 14.46 9.08 9.17 8.88
Total ending equity to total ending assets 10.88 11.27 11.71 12.17 11.92
Total average equity to total average assets 11.14 11.39 11.96 12.14 11.64
Dividend payout 23.65 20.31 24.24 15.94 14.49
Per common share data
Earnings $ 2.77 $ 2.64 $ 1.63 $ 1.57 $ 1.38
Diluted earnings 2.75 2.61 1.56 1.49 1.31
Dividends paid 0.66 0.54 0.39 0.25 0.20
Book value 27.32 25.13 23.80 23.97 22.48
Tangible book value (1) 19.41 17.91 16.96 16.89 15.56
Market capitalization $ 311,209 $ 238,251 $ 303,681 $ 222,163 $ 174,700
Average balance sheet
Total loans and leases $ 958,416 $ 933,049 $ 918,731 $ 900,433 $ 876,787
Total assets 2,405,830 2,325,246 2,268,633 2,190,218 2,160,536
Total deposits 1,380,326 1,314,941 1,269,796 1,222,561 1,155,860
Long-term debt 201,623 200,399 194,882 204,826 240,059
Common shareholders’ equity 244,853 241,799 247,101 241,187 229,576
Total shareholders’ equity 267,889 264,748 271,289 265,843 251,384
Asset quality (2)
Allowance for credit losses (3) $ 10,229 $ 10,398 $ 11,170 $ 11,999 $ 12,880
Nonperforming loans, leases and foreclosed properties (4) 3,837 5,244 6,758 8,084 9,836
Allowance for loan and lease losses as a percentage of total loans and leases
outstanding (4) 0.97% 1.02% 1.12% 1.26% 1.37%
Allowance for loan and lease losses as a percentage of total nonperforming
loans and leases (4) 265 194 161 149 130
Net charge-offs $ 3,648 $ 3,763 $ 3,979 $ 3,821 $ 4,338
Net charge-offs as a percentage of average loans and leases outstanding (4) 0.38% 0.41% 0.44% 0.43% 0.50%
Capital ratios at year end (5)
Common equity tier 1 capital 11.2% 11.6% 11.5% 10.8% 9.8%
Tier 1 capital 12.6 13.2 13.0 12.4 11.2
Total capital 14.7 15.1 14.8 14.2 12.8
Tier 1 leverage 7.9 8.4 8.6 8.8 8.4
Supplementary leverage ratio 6.4 6.8 n/a n/a n/a
Tangible equity (1) 8.2 8.6 8.9 9.2 8.9
Tangible common equity (1) 7.3 7.6 7.9 8.0 7.8
(1) Tangible equity ratios and tangible book value per share of common stock are non-GAAP financial measures. For more information on these ratios and corresponding reconciliations to GAAP
financial measures, see Supplemental Financial Data on page 48 and Non-GAAP Reconciliations on page 101.
(2) Asset quality metrics include $75 million of non-U.S. consumer credit card net charge-offs in 2017 and $243 million of non-U.S. consumer credit card allowance for loan and lease losses, $9.2
billion of non-U.S. consumer credit card loans and $175 million of non-U.S. consumer credit card net charge-offs in 2016. The non-U.S. consumer credit card business was sold in 2017.
(3) Includes the allowance for loan and leases losses and the reserve for unfunded lending commitments.
(4) Balances and ratios do not include loans accounted for under the fair value option. For additional exclusions from nonperforming loans, leases and foreclosed properties, see Consumer Portfolio
Credit Risk Management – Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity on page 80 and corresponding Table 29 and Commercial Portfolio Credit Risk Management
– Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity on page 84 and corresponding Table 36.
(5) Basel 3 transition provisions for regulatory capital adjustments and deductions were fully phased-in as of January 1, 2018. Prior periods are presented on a fully phased-in basis. For more
information, including which approach is used to assess capital adequacy, see Capital Management on page 66.
n/a = not applicable
Bank
Bankofof
America 2019
America 2019 4949
Table 7 Selected Quarterly Financial Data
2019 Quarters 2018 Quarters
(In millions, except per share information) Fourth Third Second First Fourth Third Second First
Income statement
Net interest income $ 12,140 $ 12,187 $ 12,189 $ 12,375 $ 12,504 $ 12,061 $ 11,828 $ 11,769
Noninterest income 10,209 10,620 10,895 10,629 10,173 10,663 10,721 11,301
Total revenue, net of interest expense 22,349 22,807 23,084 23,004 22,677 22,724 22,549 23,070
Provision for credit losses 941 779 857 1,013 905 716 827 834
Noninterest expense 13,239 15,169 13,268 13,224 13,074 13,014 13,224 13,842
Income before income taxes 8,169 6,859 8,959 8,767 8,698 8,994 8,498 8,394
Income tax expense 1,175 1,082 1,611 1,456 1,420 1,827 1,714 1,476
Net income 6,994 5,777 7,348 7,311 7,278 7,167 6,784 6,918
Net income applicable to common shareholders 6,748 5,272 7,109 6,869 7,039 6,701 6,466 6,490
Average common shares issued and outstanding 9,017.1 9,303.6 9,523.2 9,725.9 9,855.8 10,031.6 10,181.7 10,322.4
Average diluted common shares issued and outstanding 9,079.5 9,353.0 9,559.6 9,787.3 9,996.0 10,170.8 10,309.4 10,472.7
Performance ratios
Return on average assets 1.13% 0.95% 1.23% 1.26% 1.24% 1.23% 1.17% 1.21%
Four-quarter trailing return on average assets (1) 1.14 1.17 1.24 1.22 1.21 1.00 0.93 0.86
Return on average common shareholders’ equity 11.00 8.48 11.62 11.42 11.57 10.99 10.75 10.85
Return on average tangible common shareholders’ equity (2) 15.43 11.84 16.24 16.01 16.29 15.48 15.15 15.26
Return on average shareholders’ equity 10.40 8.48 11.00 11.14 10.95 10.74 10.26 10.57
Return on average tangible shareholders’ equity (2) 14.09 11.43 14.88 15.10 14.90 14.61 13.95 14.37
Total ending equity to total ending assets 10.88 11.06 11.33 11.23 11.27 11.21 11.53 11.43
Total average equity to total average assets 10.89 11.21 11.17 11.28 11.30 11.42 11.42 11.41
Dividend payout 23.90 31.48 19.95 21.20 20.90 22.35 18.83 19.06
Per common share data
Earnings $ 0.75 $ 0.57 $ 0.75 $ 0.71 $ 0.71 $ 0.67 $ 0.64 $ 0.63
Diluted earnings 0.74 0.56 0.74 0.70 0.70 0.66 0.63 0.62
Dividends paid 0.18 0.18 0.15 0.15 0.15 0.15 0.12 0.12
Book value 27.32 26.96 26.41 25.57 25.13 24.33 24.07 23.74
Tangible book value (2) 19.41 19.26 18.92 18.26 17.91 17.23 17.07 16.84
Market capitalization $ 311,209 $ 264,842 $ 270,935 $ 263,992 $ 238,251 $ 290,424 $ 282,259 $ 305,176
Average balance sheet
Total loans and leases $ 973,986 $ 964,733 $ 950,525 $ 944,020 $ 934,721 $ 930,736 $ 934,818 $ 931,915
Total assets 2,450,005 2,412,223 2,399,051 2,360,992 2,334,586 2,317,829 2,322,678 2,325,878
Total deposits 1,410,439 1,375,052 1,375,450 1,359,864 1,344,951 1,316,345 1,300,659 1,297,268
Long-term debt 206,026 202,620 201,007 196,726 201,056 203,239 199,448 197,787
Common shareholders’ equity 243,439 246,630 245,438 243,891 241,372 241,812 241,313 242,713
Total shareholders’ equity 266,900 270,430 267,975 266,217 263,698 264,653 265,181 265,480
Asset quality
Allowance for credit losses (3) $ 10,229 $ 10,242 $ 10,333 $ 10,379 $ 10,398 $ 10,526 $ 10,837 $ 11,042
Nonperforming loans, leases and foreclosed properties (4) 3,837 3,723 4,452 5,145 5,244 5,449 6,181 6,694
Allowance for loan and lease losses as a percentage of total
loans and leases outstanding (4) 0.97% 0.98% 1.00% 1.02% 1.02% 1.05% 1.08% 1.11%
Allowance for loan and lease losses as a percentage of total
nonperforming loans and leases (4) 265 271 228 197 194 189 170 161
Net charge-offs $ 959 $ 811 $ 887 $ 991 $ 924 $ 932 $ 996 $ 911
Annualized net charge-offs as a percentage of average loans
and leases outstanding (4) 0.39% 0.34% 0.38% 0.43% 0.39% 0.40% 0.43% 0.40%
Capital ratios at period end
Common equity tier 1 capital 11.2% 11.4% 11.7% 11.6% 11.6% 11.4% 11.4% 11.3%
Tier 1 capital 12.6 12.9 13.3 13.1 13.2 12.9 13.0 13.0
Total capital 14.7 15.1 15.4 15.2 15.1 14.7 14.8 14.8
Tier 1 leverage 7.9 8.2 8.4 8.4 8.4 8.3 8.4 8.4
Supplementary leverage ratio 6.4 6.6 6.8 6.8 6.8 6.7 6.7 6.8
Tangible equity (2) 8.2 8.4 8.7 8.5 8.6 8.5 8.7 8.7
Tangible common equity (2) 7.3 7.4 7.6 7.6 7.6 7.5 7.7 7.6
Total loss-absorbing capacity and long-term debt metrics (5)
Total loss-absorbing capacity to risk-weighted assets 24.6% 24.8% 25.5% 24.8%
Total loss-absorbing capacity to supplementary leverage
exposure 12.5 12.7 13.0 12.8
Eligible long-term debt to risk-weighted assets 11.5 11.4 11.8 11.4
Eligible long-term debt to supplementary leverage 5.8 5.8 6.0 5.9
(1) Calculated as total net income for four consecutive quarters divided by annualized average assets for four consecutive quarters.
(2) Tangible equity ratios and tangible book value per share of common stock are non-GAAP financial measures. For more information on these ratios and corresponding reconciliations to GAAP
financial measures, see Supplemental Financial Data on page 48 and Non-GAAP Reconciliations on page 101.
(3) Includes the allowance for loan and lease losses and the reserve for unfunded lending commitments.
(4) Balances and ratios do not include loans accounted for under the fair value option. For additional exclusions from nonperforming loans, leases and foreclosed properties, see Consumer Portfolio
Credit Risk Management – Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity on page 80 and corresponding Table 29 and Commercial Portfolio Credit Risk Management
– Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity on page 84 and corresponding Table 36.
(5) Effective January 1, 2019, we became subject to minimum total loss-absorbing capacity and long-term debt requirements. For more information, see Capital Management on page 66.
50 Bank
50 BankofofAmerica
America2019
2019
Table 8 Average Balances and Interest Rates - FTE Basis
5252Bank of America
Bank 2019
of America 2019
Business Segment Operations
Segment Description and Basis of Presentation
We report our results of operations through the following four business segments: Consumer Banking, GWIM, Global Banking and Global
Markets, with the remaining operations recorded in All Other. We manage our segments and report their results on an FTE basis. The
primary activities, products and businesses of the business segments and All Other are shown below.
We periodically review capital allocated to our businesses and units is comprised of allocated capital plus capital for the portion
allocate capital annually during the strategic and capital planning of goodwill and intangibles specifically assigned to the reporting
processes. We utilize a methodology that considers the effect of unit. For more information, including the definition of a reporting
regulatory capital requirements in addition to internal risk-based unit, see Note 8 – Goodwill and Intangible Assets to the
capital models. Our internal risk-based capital models use a risk- Consolidated Financial Statements.
adjusted methodology incorporating each segment’s credit, For more information on our presentation of financial
market, interest rate, business and operational risk components. information on an FTE basis, see Supplemental Financial Data on
For more information on the nature of these risks, see Managing page 48, and for reconciliations to consolidated total revenue, net
Risk on page 63. The capital allocated to the business segments income and year-end total assets, see Note 24 – Business Segment
is referred to as allocated capital. Allocated equity in the reporting Information to the Consolidated Financial Statements.
Provision for credit losses 269 195 3,503 3,469 3,772 3,664 3
Noninterest expense 10,682 10,657 6,936 7,015 17,618 17,672 —
Income before income taxes 10,969 10,114 6,228 6,168 17,197 16,282 6
Income tax expense 2,687 2,578 1,526 1,572 4,213 4,150 2
Net income $ 8,282 $ 7,536 $ 4,702 $ 4,596 $ 12,984 $ 12,132 7
Balance Sheet
Average
Total loans and leases $ 5,373 $ 5,233 $ 295,562 $ 278,574 $ 300,935 $ 283,807 6%
Total earning assets (2) 703,444 682,592 296,051 279,217 738,770 717,189 3
Total assets (2) 735,232 710,925 306,169 290,068 780,676 756,373 3
Total deposits 702,908 678,640 5,368 5,533 708,276 684,173 4
Allocated capital 12,000 12,000 25,000 25,000 37,000 37,000 —
Year end
Total loans and leases $ 5,472 $ 5,470 $ 311,942 $ 288,865 $ 317,414 $ 294,335 8%
Total earning assets (2) 724,536 694,672 312,684 289,249 760,137 728,813 4
Total assets (2) 758,385 724,019 322,717 299,970 804,019 768,881 5
Total deposits 725,598 691,666 5,080 4,480 730,678 696,146 5
(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 $17.6 billion primarily driven by lower FDIC expense and operating
Consumer Lending, offers a diversified range of credit, banking efficiencies, partially offset by continued investment in the
and investment products and services to consumers and small business.
businesses. Deposits and Consumer Lending include the net The return on average allocated capital was 35 percent, up
impact of migrating customers and their related deposit, from 33 percent, driven by higher net income. For information on
brokerage asset and loan balances between Deposits, Consumer capital allocated to the business segments, see Business
Lending and GWIM, as well as other client-managed businesses. Segment Operations on page 53.
Our customers and clients have access to a coast to coast
network including financial centers in 38 states and the District Deposits
of Columbia. Our network includes approximately 4,300 financial Deposits includes the results of consumer deposit activities
centers, approximately 16,800 ATMs, nationwide call centers, which consist of a comprehensive range of products provided to
and leading digital banking platforms with more than 38 million consumers and small businesses. Our deposit products include
active users, including over 29 million active mobile users. traditional savings accounts, money market savings accounts,
CDs and IRAs, and noninterest- and interest-bearing checking
Consumer Banking Results accounts, as well as investment accounts and products. Net
Net income for Consumer Banking increased $852 million to interest income is allocated to the deposit products using our
$13.0 billion in 2019 compared to 2018 primarily driven by higher funds transfer pricing process that matches assets and liabilities
net interest income and lower noninterest expense, partially with similar interest rate sensitivity and maturity characteristics.
offset by lower noninterest income. Net interest income increased Deposits generates fees such as account service fees, non-
$1.1 billion to $28.2 billion primarily due to growth in deposits sufficient funds fees, overdraft charges and ATM fees, as well as
and loans. Noninterest income decreased $164 million to $10.4 investment and brokerage fees from Merrill Edge accounts. Merrill
billion driven by lower service charges and lower mortgage Edge is an integrated investing and banking service targeted at
banking income, largely offset by higher results from ALM customers with less than $250,000 in investable assets. Merrill
activities. Edge provides investment advice and guidance, client brokerage
The provision for credit losses increased $108 million to $3.8 asset services, a self-directed online investing platform and key
billion driven by overdrafts and portfolio seasoning in the credit banking capabilities including access to the Corporation’s
card portfolio. Noninterest expense decreased $54 million to network of financial centers and ATMs.
54 Bank
54 of of
Bank America 2019
America 2019
Net income for Deposits increased $746 million to $8.3 billion Net income for Consumer Lending increased $106 million to
driven by higher net interest income. Net interest income $4.7 billion driven by higher net interest income and lower
increased $965 million to $16.9 billion primarily due to growth noninterest expense, partially offset by lower noninterest income.
in deposits and pricing discipline. Noninterest income decreased Net interest income increased $168 million to $11.3 billion driven
$11 million to $5.0 billion primarily driven by lower service by loan growth. Noninterest income decreased $153 million to
charges, largely offset by higher results from ALM activities. $5.4 billion primarily driven by lower mortgage banking income
The provision for credit losses increased $74 million to $269 and lower card income.
million in 2019. Noninterest expense increased $25 million to The provision for credit losses increased $34 million to $3.5
$10.7 billion driven by continued investment in the business, billion primarily driven by portfolio seasoning in the credit card
partially offset by lower FDIC expense and operating efficiencies. portfolio. Noninterest expense decreased $79 million to $6.9
Average deposits increased $24.3 billion to $702.9 billion in billion primarily driven by operating efficiencies.
2019 driven by strong organic growth. Growth in checking and Average loans increased $17.0 billion to $295.6 billion
time deposits of $27.0 billion was partially offset by a decline in primarily driven by increases in residential mortgages and credit
traditional savings and money market savings of $2.5 billion. card, partially offset by lower home equity loans.
Bank
BankofofAmerica
America2019
2019 55
55
Global Wealth & Investment Management
Balance Sheet
Average
Total loans and leases $ 168,910 $ 161,342 5%
Total earning assets 279,684 259,808 8
Total assets 292,003 277,220 5
Total deposits 256,505 241,256 6
Allocated capital 14,500 14,500 —
Year end
Total loans and leases $ 176,600 $ 164,854 7%
Total earning assets 287,212 287,199 —
Total assets 299,756 305,907 (2)
Total deposits 263,103 268,700 (2)
GWIM consists of two primary businesses: Merrill Lynch Global Net interest income increased $239 million to $6.5 billion due
Wealth Management (MLGWM) and Bank of America Private Bank. to the impact of growth in deposits and loans.
MLGWM’s advisory business provides a high-touch client Noninterest income, which primarily includes investment and
experience through a network of financial advisors focused on brokerage services income, decreased $155 million to $13.0
clients with over $250,000 in total investable assets. MLGWM billion. The decrease was primarily driven by declines in AUM
provides tailored solutions to meet clients’ needs through a full pricing and transactional revenue, partially offset by the impact of
set of investment management, brokerage, banking and retirement positive AUM flows and higher market valuations.
products. Noninterest expense decreased $192 million to $13.8 billion,
Bank of America Private Bank, together with MLGWM’s Private as investments for business growth were more than offset by lower
Wealth Management business, provides comprehensive wealth amortization of intangibles and FDIC expense.
management solutions targeted to high net worth and ultra high The return on average allocated capital was 29 percent, up
net worth clients, as well as customized solutions to meet clients’ from 28 percent, due to higher net income.
wealth structuring, investment management, trust and banking MLGWM revenue of $16.1 billion increased one percent
needs, including specialty asset management services. primarily driven by higher net interest income and the impact of
Net income for GWIM increased $264 million to $4.3 billion positive AUM flows and higher market valuations, partially offset
due to lower noninterest expense and higher revenue. The by lower transactional volumes and AUM pricing.
operating margin was 29 percent compared to 28 percent in 2018. Bank of America Private Bank revenue of $3.4 billion decreased
one percent primarily due to lower net interest income.
5656Bank of America
Bank 2019
of America 2019
Key Indicators and Metrics
(Dollars in millions, except as noted) 2019 2018
Revenue by Business
Merrill Lynch Global Wealth Management $ 16,111 $ 15,998
Bank of America Private Bank 3,426 3,455
Total revenue, net of interest expense $ 19,537 $ 19,453
Client Balances net change in clients’ AUM balances over a specified period of
Client balances managed under advisory and/or discretion of time, excluding market appreciation/depreciation and other
GWIM are AUM and are typically held in diversified portfolios. Fees adjustments.
earned on AUM are calculated as a percentage of clients’ AUM Client balances increased $426.9 billion, or 16 percent, to
balances. The asset management fees charged to clients per year $3.0 trillion at December 31, 2019 compared to December 31,
depend on various factors, but are commonly driven by the breadth 2018. The increase in client balances was primarily due to higher
of the client’s relationship. The net client AUM flows represent the market valuations and positive net flows over the last year.
Balance Sheet
Average
Total loans and leases $ 374,304 $ 354,236 6%
Total earning assets 388,152 364,748 6
Total assets 443,083 425,675 4
Total deposits 362,731 336,337 8
Allocated capital 41,000 41,000 —
Year end
Total loans and leases $ 379,268 $ 365,717 4%
Total earning assets 407,180 377,812 8
Total assets 464,032 442,330 5
Total deposits 383,180 360,248 6
n/m = not meaningful
Global Banking, which includes Global Corporate Banking, Revenue increased $482 million to $20.5 billion driven by
Global Commercial Banking, Business Banking and Global higher noninterest income, partially offset by lower net interest
Investment Banking, provides a wide range of lending-related income. Net interest income decreased $318 million to $10.7
products and services, integrated working capital management billion primarily due to the allocation of ALM results and credit
and treasury solutions, and underwriting and advisory services spread compression, partly offset by growth in loan and deposit
through our network of offices and client relationship teams. Our balances.
lending products and services include commercial loans, leases, Noninterest income increased $800 million to $9.8 billion
commitment facilities, trade finance, commercial real estate primarily due to higher leasing-related revenue and investment
lending and asset-based lending. Our treasury solutions business banking fees. The provision for credit losses increased $406
includes treasury management, foreign exchange and short-term million to $414 million primarily driven by reserve releases in 2018
investing options. We also provide investment banking products primarily from energy exposures. Noninterest expense increased
to our clients such as debt and equity underwriting and distribution, $272 million primarily due to continued investment in the business
and merger-related and other advisory services. Underwriting debt partially offset by lower FDIC expense.
and equity issuances, fixed-income and equity research, and The return on average allocated capital was 20 percent in 2019
certain market-based activities are executed through our global and 2018. For information on capital allocated to the business
broker-dealer affiliates, which are our primary dealers in several segments, see Business Segment Operations on page 53.
countries. Within Global Banking, Global Commercial Banking
clients generally include middle-market companies, commercial Global Corporate, Global Commercial and Business
real estate firms and not-for-profit companies. Global Corporate Banking
Banking clients generally include large global corporations, Global Corporate, Global Commercial and Business Banking each
financial institutions and leasing clients. Business Banking clients include Business Lending and Global Transaction Services
include mid-sized U.S.-based businesses requiring customized activities. Business Lending includes various lending-related
and integrated financial advice and solutions. products and services, and related hedging activities, including
Net income for Global Banking decreased $257 million to $8.1 commercial loans, leases, commitment facilities, trade finance,
billion in 2019 compared to 2018 primarily driven by higher real estate lending and asset-based lending. Global Transaction
provision for credit losses and noninterest expense partially offset Services includes deposits, treasury management, credit card,
by higher revenue. foreign exchange and short-term investment products.
5858Bank of America
Bank 2019
of America 2019
The table below and following discussion present a summary of the results, which exclude certain investment banking activities in
Global Banking.
Balance Sheet
Average
Total loans and leases $ 177,713 $ 163,516 $ 181,485 $ 174,279 $ 15,058 $ 16,432 $ 374,256 $ 354,227
Total deposits 177,924 163,559 144,620 135,337 40,196 37,462 362,740 336,358
Year end
Total loans and leases $ 181,409 $ 174,378 $ 182,727 $ 175,937 $ 15,152 $ 15,402 $ 379,288 $ 365,717
Total deposits 185,352 173,183 157,322 149,118 40,504 37,973 383,178 360,274
Business Lending revenue decreased $176 million in 2019 banking fees, the following table presents total Corporation
compared to 2018. The decrease was primarily driven by the investment banking fees and the portion attributable to Global
allocation of ALM results, partly offset by higher leasing-related Banking.
revenue.
Global Transaction Services revenue increased $392 million in
Investment Banking Fees
2019 compared to 2018 driven by the impact of higher deposit
balances. Global Banking Total Corporation
Average loans and leases increased six percent in 2019 (Dollars in millions) 2019 2018 2019 2018
compared to 2018 driven by growth in the commercial and Products
industrial portfolio. Average deposits increased eight percent due Advisory $ 1,336 $ 1,153 $ 1,460 $ 1,258
to growth in domestic and international interest-bearing balances. Debt issuance 1,348 1,326 3,107 3,084
Equity issuance 453 412 1,259 1,183
Global Investment Banking Gross investment
3,137 2,891 5,826 5,525
banking fees
Client teams and product specialists underwrite and distribute
Self-led deals (62) (68) (184) (198)
debt, equity and loan products, and provide advisory services and Total investment
tailored risk management solutions. The economics of certain banking fees $ 3,075 $ 2,823 $ 5,642 $ 5,327
investment banking and underwriting activities are shared primarily
between Global Banking and Global Markets under an internal Total Corporation investment banking fees, excluding self-led
revenue-sharing arrangement. Global Banking originates certain deals, of $5.6 billion, which are primarily included within Global
deal-related transactions with our corporate and commercial Banking and Global Markets, increased six percent due to
clients that are executed and distributed by Global Markets. To increases in advisory fees as well as higher equity issuance fees.
provide a complete discussion of our consolidated investment
Balance Sheet
Average
Trading-related assets:
Trading account securities $ 246,335 $ 215,112 15%
Reverse repurchases 116,883 125,084 (7)
Securities borrowed 83,216 78,889 5
Derivative assets 43,271 46,047 (6)
Total trading-related assets 489,705 465,132 5
Total loans and leases 71,334 72,651 (2)
Total earning assets 476,225 473,383 1
Total assets 679,297 666,000 2
Total deposits 31,380 31,209 1
Allocated capital 35,000 35,000 —
Year end
Total trading-related assets $ 452,496 $ 447,998 1%
Total loans and leases 72,993 73,928 (1)
Total earning assets 471,701 457,224 3
Total assets 641,806 641,923 —
Total deposits 34,676 37,841 (8)
n/m = not meaningful
Global Markets offers sales and trading services and research The following explanations for year-over-year changes in results
services to institutional clients across fixed-income, credit, for Global Markets, including those disclosed under Sales and
currency, commodity and equity businesses. Global Markets Trading Revenue, exclude net DVA, but the explanations would be
product coverage includes securities and derivative products in the same if net DVA was included.
both the primary and secondary markets. Global Markets provides Net income for Global Markets decreased $454 million to $3.5
market-making, financing, securities clearing, settlement and billion in 2019 compared to 2018. Net DVA losses were $222
custody services globally to our institutional investor clients in million compared to losses of $162 million in 2018. Excluding net
support of their investing and trading activities. We also work with DVA, net income decreased $408 million to $3.7 billion. These
our commercial and corporate clients to provide risk management decreases were primarily driven by a decrease in revenue, partially
products using interest rate, equity, credit, currency and commodity offset by lower noninterest expense.
derivatives, foreign exchange, fixed-income and mortgage-related Revenue declined $569 million to $15.6 billion as sales and
products. As a result of our market-making activities in these trading revenue decreased $492 million, and excluding net DVA,
products, we may be required to manage risk in a broad range of decreased $432 million. These decreases were primarily driven
financial products including government securities, equity and by a decline in Equities revenue. Noninterest expense decreased
equity-linked securities, high-grade and high-yield corporate debt $113 million to $10.7 billion, primarily driven by lower revenue-
securities, syndicated loans, MBS, commodities and asset-backed related expenses.
securities. The economics of certain investment banking and Average total assets increased $13.3 billion to $679.3 billion,
underwriting activities are shared primarily between Global Markets primarily due to increased levels of inventory in fixed-income,
and Global Banking under an internal revenue-sharing currencies and commodities (FICC) to facilitate expected client
arrangement. Global Banking originates certain deal-related demand. Year-end total assets were largely unchanged at $641.8
transactions with our corporate and commercial clients that are billion.
executed and distributed by Global Markets. For information on The return on average allocated capital was 10 percent, down
investment banking fees on a consolidated basis, see page 59. from 11 percent, reflecting lower net income. For information on
6060Bank of America
Bank 2019
of America 2019
capital allocated to the business segments, see Business
Segment Operations on page 53. Sales and Trading Revenue (1, 2, 3)
Sales and Trading Revenue (Dollars in millions) 2019 2018
Sales and trading revenue includes unrealized and realized gains Sales and trading revenue (2)
and losses on trading and other assets which are included in Fixed-income, currencies and commodities $ 8,188 $ 8,271
market making and similar activities, net interest income, and fees Equities 4,491 4,900
Total sales and trading revenue $ 12,679 $ 13,171
primarily from commissions on equity securities. Sales and trading
revenue is segregated into fixed-income (government debt Sales and trading revenue, excluding net DVA (4)
obligations, investment and non-investment grade corporate debt Fixed-income, currencies and commodities $ 8,396 $ 8,413
obligations, commercial MBS, residential mortgage-backed Equities 4,505 4,920
securities, collateralized loan obligations, interest rate and credit Total sales and trading revenue, excluding net DVA $ 12,901 $ 13,333
derivative contracts), currencies (interest rate and foreign (1) For more information on sales and trading revenue, see Note 3 – Derivatives to the Consolidated
Financial Statements.
exchange contracts), commodities (primarily futures, forwards, (2) Includes FTE adjustments of $189 million and $248 million for 2019 and 2018.
swaps and options) and equities (equity-linked derivatives and (3) Includes Global Banking sales and trading revenue of $533 million and $421 million for 2019
and 2018.
cash equity activity). The following table and related discussion (4) FICC and Equities sales and trading revenue, excluding net DVA, is a non-GAAP financial measure.
present sales and trading revenue, substantially all of which is in FICC net DVA losses were $208 million and $142 million for 2019 and 2018. Equities net DVA
losses were $14 million and $20 million for 2019 and 2018.
Global Markets, with the remainder in Global Banking. In addition,
the following table and related discussion present sales and FICC revenue decreased $17 million. Equities revenue
trading revenue, excluding net DVA, which is a non-GAAP financial decreased $415 million driven by under performance in equity
measure. For more information on net DVA, see Supplemental derivatives compared to a strong prior year which benefited from
Financial Data on page 48. higher client activity and a more volatile market environment.
All Other
Balance Sheet
Average
Total loans and leases $ 42,933 $ 61,013 (30)%
Total assets (1) 210,771 199,978 5
Total deposits 21,434 21,966 (2)
Year end
Total loans and leases $ 37,151 $ 48,061 (23)%
Total assets (1) 224,466 195,466 15
Total deposits 23,166 18,541 25
(1)In segments where the total of liabilities and equity exceeds assets, which are generally deposit-taking segments, we allocate assets from All Other to those segments to match liabilities (i.e.,
deposits) and allocated shareholders’ equity. Average allocated assets were 544.2 billion and $517.0 billion for 2019 and 2018, and year-end allocated assets were $565.3 billion and $540.8
billion at December 31, 2019 and 2018.
n/m = not meaningful
All Other consists of ALM activities, equity investments, non-core Residential mortgage loans that are held for ALM purposes,
mortgage loans and servicing activities, liquidating businesses including interest rate or liquidity risk management, are classified
and certain expenses not otherwise allocated to a business as core and are presented on the balance sheet of All Other. During
segment. ALM activities encompass certain residential 2019, residential mortgage loans held for ALM activities
mortgages, debt securities, and interest rate and foreign currency decreased $3.2 billion to $21.7 billion primarily as a result of
risk management activities. Substantially all of the results of ALM payoffs and paydowns. Non-core residential mortgage and home
activities are allocated to our business segments. For more equity loans, which are principally runoff portfolios, are also held
information on our ALM activities, see Note 24 – Business Segment in All Other. During 2019, total non-core loans decreased $7.8
Information to the Consolidated Financial Statements. Equity billion to $15.7 billion due primarily to payoffs, paydowns and
investments include our merchant services joint venture, as well sales, as well as Federal Housing Administration (FHA) loan
as a portfolio of equity, real estate and other alternative conveyances, partially offset by repurchases. For more information
investments. For information on our merchant services joint on the composition of the core and non-core portfolios, see
venture, see Note 13 – Commitments and Contingencies to the Consumer Portfolio Credit Risk Management on page 75.
Consolidated Financial Statements.
6262Bank of America
Bank 2019
of America 2019
Representations and Warranties Obligations throughout the organization is critical to our success and is a clear
For information on representations and warranties obligations in expectation of our executive management team and the Board.
connection with the sale of mortgage loans, see Note 13 – Our Risk Framework serves as the foundation for the consistent
Commitments and Contingencies to the Consolidated Financial and effective management of risks facing the Corporation. The
Statements. Risk Framework sets forth clear roles, responsibilities and
accountability for the management of risk and provides a blueprint
Managing Risk for how the Board, through delegation of authority to committees
and executive officers, establishes risk appetite and associated
Overview limits for our activities.
Risk is inherent in all our business activities. Sound risk Executive management assesses, with Board oversight, the
management enables us to serve our customers and deliver for risk-adjusted returns of each business. Management reviews and
our shareholders. If not managed well, risks can result in financial approves the strategic and financial operating plans, as well as
loss, regulatory sanctions and penalties, and damage to our the capital plan and Risk Appetite Statement, and recommends
reputation, each of which may adversely impact our ability to them annually to the Board for approval. Our strategic plan takes
execute our business strategies. We take a comprehensive into consideration return objectives and financial resources, which
approach to risk management with a defined Risk Framework and must align with risk capacity and risk appetite. Management sets
an articulated Risk Appetite Statement which are approved financial objectives for each business by allocating capital and
annually by the Enterprise Risk Committee (ERC) and the Board. setting a target for return on capital for each business. Capital
The seven key types of risk faced by the Corporation are allocations and operating limits are regularly evaluated as part of
strategic, credit, market, liquidity, compliance, operational and our overall governance processes as the businesses and the
reputational. economic environment in which we operate continue to evolve. For
more information regarding capital allocations, see Business
Strategic risk is the risk resulting from incorrect assumptions Segment Operations on page 53.
about external or internal factors, inappropriate business The Corporation’s risk appetite indicates the amount of capital,
plans, ineffective business strategy execution, or failure to earnings or liquidity we are willing to put at risk to achieve our
respond in a timely manner to changes in the regulatory, strategic objectives and business plans, consistent with applicable
macroeconomic or competitive environments in the geographic regulatory requirements. Our risk appetite provides a common and
locations in which we operate. comparable set of measures for senior management and the Board
Credit risk is the risk of loss arising from the inability or failure to clearly indicate our aggregate level of risk and to monitor whether
of a borrower or counterparty to meet its obligations. the Corporation’s risk profile remains in alignment with our
Market risk is the risk that changes in market conditions may strategic and capital plans. Our risk appetite is formally articulated
adversely impact the value of assets or liabilities, or otherwise in the Risk Appetite Statement, which includes both qualitative
negatively impact earnings. components and quantitative limits.
Liquidity risk is the inability to meet expected or unexpected Our overall capacity to take risk is limited; therefore,we prioritize
cash flow and collateral needs while continuing to support our the risks we take in order to maintain a strong and flexible financial
businesses and customers under a range of economic position so we can withstand challenging economic conditions and
conditions. take advantage of organic growth opportunities. Therefore, we set
Compliance risk is the risk of legal or regulatory sanctions, objectives and targets for capital and liquidity that are intended
material financial loss or damage to the reputation of the to permit us to continue to operate in a safe and sound manner,
Corporation arising from the failure of the Corporation to comply including during periods of stress.
with the requirements of applicable laws, rules and regulations Our lines of business operate with risk limits (which may include
and our internal policies and procedures. credit, market and/or operational limits, as applicable) that align
Operational risk is the risk of loss resulting from inadequate with the Corporation’s risk appetite. Executive management is
or failed processes, people and systems, or from external responsible for tracking and reporting performance measurements
events. as well as any exceptions to guidelines or limits. The Board, and
Reputational risk is the risk that negative perceptions of the its committees when appropriate, oversee financial performance,
Corporation’s conduct or business practices may adversely execution of the strategic and financial operating plans, adherence
impact its profitability or operations. to risk appetite limits and the adequacy of internal controls.
The following sections address in more detail the specific For a more detailed discussion of our risk management
procedures, measures and analyses of the major categories of activities, see the discussion below and pages 66 through 98.
risk. This discussion of managing risk focuses on the current Risk
Framework that, as part of its annual review process, was approved Risk Management Governance
by the ERC and the Board. The Risk Framework describes delegations of authority whereby
As set forth in our Risk Framework, a culture of managing risk the Board and its committees may delegate authority to
well is fundamental to fulfilling our purpose and our values and management-level committees or executive officers. Such
delivering responsible growth. It requires us to focus on risk in all delegations may authorize certain decision-making and approval
activities and encourages the necessary mindset and behavior to functions, which may be evidenced in, for example, committee
enable effective risk management, and promotes sound risk-taking charters, job descriptions, meeting minutes and resolutions.
within our risk appetite. Sustaining a culture of managing risk well
(1) Reports to the CEO and CFO with oversight by the Audit Committee
6464Bank of America
Bank 2019
of America 2019
Executive Officers We employ our risk management process, referred to as
Executive officers lead various functions representing the Identify, Measure, Monitor and Control, as part of our daily
functional roles. Authority for functional roles may be delegated activities.
to executive officers from the Board, Board committees or
management-level committees. Executive officers, in turn, may Identify – To be effectively managed, risks must be clearly defined
further delegate responsibilities, as appropriate, to management- and proactively identified. Proper risk identification focuses on
level committees, management routines or individuals. Executive recognizing and understanding key risks inherent in our
officers review our activities for consistency with our Risk business activities or key risks that may arise from external
Framework, Risk Appetite Statement and applicable strategic, factors. Each employee is expected to identify and escalate
capital and financial operating plans, as well as applicable policies, risks promptly. Risk identification is an ongoing process,
standards, procedures and processes. Executive officers and incorporating input from FLUs and control functions, designed
other employees make decisions individually on a day-to-day basis, to be forward looking and capture relevant risk factors across
consistent with the authority they have been delegated. Executive all of our lines of business.
officers and other employees may also serve on committees and Measure – Once a risk is identified, it must be prioritized and
participate in committee decisions. accurately measured through a systematic risk quantification
process including quantitative and qualitative components.
Front Line Units Risk is measured at various levels including, but not limited
FLUs, which include the lines of business as well as the Global to, risk type, FLU, legal entity and on an aggregate basis. This
Technology and Operations Group, are responsible for risk quantification process helps to capture changes in our risk
appropriately assessing and effectively managing all of the risks profile due to changes in strategic direction, concentrations,
associated with their activities. portfolio quality and the overall economic environment. Senior
Three organizational units that include FLU activities and management considers how risk exposures might evolve under
control function activities, but are not part of IRM are first, the a variety of stress scenarios.
Chief Financial Officer (CFO) Group; second, Environmental, Social Monitor – We monitor risk levels regularly to track adherence to
and Governance (ESG), Capital Deployment (CD) and Public Policy risk appetite, policies, standards, procedures and processes.
(PP); and third, the Chief Administrative Officer (CAO) Group. We also regularly update risk assessments and review risk
exposures. Through our monitoring, we can determine our level
Independent Risk Management of risk relative to limits and can take action in a timely manner.
IRM is part of our control functions and includes Global Risk We also can determine when risk limits are breached and have
Management. We have other control functions that are not part of processes to appropriately report and escalate exceptions.
IRM (other control functions may also provide oversight to FLU This includes requests for approval to managers and alerts to
activities), including Legal, Global Human Resources and certain executive management, management-level committees or the
activities within the CFO Group; ESG, CD and PP; and CAO Group. Board (directly or through an appropriate committee).
IRM, led by the Chief Risk Officer (CRO), is responsible for Control – We establish and communicate risk limits and controls
independently assessing and overseeing risks within FLUs and through policies, standards, procedures and processes that
other control functions. IRM establishes written enterprise policies define the responsibilities and authority for risk-taking. The
and procedures that include concentration risk limits, where limits and controls can be adjusted by the Board or
appropriate. Such policies and procedures outline how aggregate management when conditions or risk tolerances warrant.
risks are identified, measured, monitored and controlled. These limits may be absolute (e.g., loan amount, trading
The CRO has the stature, authority and independence to volume) or relative (e.g., percentage of loan book in higher-risk
develop and implement a meaningful risk management framework. categories). Our lines of business are held accountable to
The CRO has unrestricted access to the Board and reports directly perform within the established limits.
to both the ERC and to the CEO. Global Risk Management is
organized into horizontal risk teams that cover a specific risk area The formal processes used to manage risk represent a part of
and vertical CRO teams that cover a particular front line unit or our overall risk management process. We instill a strong and
control function. These teams work collaboratively in executing comprehensive culture of managing risk well through
their respective duties. communications, training, policies, procedures and organizational
roles and responsibilities. Establishing a culture reflective of our
Corporate Audit purpose to help make our customers’ financial lives better and
Corporate Audit and the CAE maintain their independence from delivering our responsible growth strategy is also critical to
the FLUs, IRM and other control functions by reporting directly to effective risk management. We understand that improper actions,
the Audit Committee or the Board. The CAE administratively reports behaviors or practices that are illegal, unethical or contrary to our
to the CEO. Corporate Audit provides independent assessment core values could result in harm to the Corporation, our
and validation through testing of key processes and controls shareholders or our customers, damage the integrity of the
across the Corporation. Corporate Audit includes Credit Review financial markets, or negatively impact our reputation, and have
which periodically tests and examines credit portfolios and established protocols and structures so that such conduct risk is
processes. governed and reported across the Corporation. Specifically, our
Code of Conduct provides a framework for all of our employees to
Risk Management Processes conduct themselves with the highest integrity. Additionally, we
The Risk Framework requires that strong risk management continue to strengthen the link between the employee performance
practices are integrated in key strategic, capital and financial management process and individual compensation to encourage
planning processes and in day-to-day business processes across employees to work toward enterprise-wide risk goals.
the Corporation, with a goal of ensuring risks are appropriately
considered, evaluated and responded to in a timely manner.
6666Bank of America
Bank 2019
of America 2019
market conditions, and may be suspended at any time. The the Basel 3 regulatory ratio requirements. U.S. banking regulators
repurchases may be effected through open market purchases or are required to take certain mandatory actions depending on the
privately negotiated transactions, including repurchase plans that category of capitalization, with no mandatory actions required for
satisfy the conditions of Rule 10b5-1 of the Securities Exchange well-capitalized banking organizations.
Act of 1934, as amended (Exchange Act). In order to avoid restrictions on capital distributions and
discretionary bonus payments, the Corporation must meet risk-
Regulatory Capital based capital ratio requirements that include a capital
As a financial services holding company, we are subject to conservation buffer greater than 2.5 percent, plus any applicable
regulatory capital rules, including Basel 3, issued by U.S. banking countercyclical capital buffer and a global systemically important
regulators. Basel 3 established minimum capital ratios and buffer bank (G-SIB) surcharge. The buffers and surcharge must be
requirements and outlined two methods of calculating risk- comprised solely of CET1 capital.
weighted assets, the Standardized approach and the Advanced The Corporation is also required to maintain a minimum
approaches. The Standardized approach relies primarily on supplementary leverage ratio (SLR) of 3.0 percent plus a leverage
supervisory risk weights based on exposure type, and the buffer of 2.0 percent in order to avoid certain restrictions on capital
Advanced approaches determine risk weights based on internal distributions and discretionary bonus payments. Our insured
models. depository institution subsidiaries are required to maintain a
The Corporation's depository institution subsidiaries are also minimum 6.0 percent SLR to be considered well capitalized under
subject to the Prompt Corrective Action (PCA) framework. The the PCA framework. The numerator of the SLR is quarter-end Basel
Corporation and its primary affiliated banking entity, BANA, are 3 Tier 1 capital. The denominator is total leverage exposure based
Advanced approaches institutions under Basel 3 and are required on the daily average of the sum of on-balance sheet exposures
to report regulatory risk-based capital ratios and risk-weighted less permitted Tier 1 deductions, as well as the simple average
assets under both the Standardized and Advanced approaches. of certain off-balance sheet exposures, as of the end of each month
The approach that yields the lower ratio is used to assess capital in a quarter.
adequacy including under the PCA framework. As of December 31,
2019, the Common equity tier 1 (CET1) and Tier 1 capital ratios Capital Composition and Ratios
for the Corporation were lower under the Standardized approach Table 11 presents Bank of America Corporation’s capital ratios
whereas the Advanced approaches yielded a lower Total capital and related information in accordance with Basel 3 Standardized
ratio. and Advanced approaches as measured at December 31, 2019
and 2018. As of the periods presented herein, the Corporation
Minimum Capital Requirements met the definition of well capitalized under current regulatory
Minimum capital requirements and related buffers were fully requirements.
phased in as of January 1, 2019. The PCA framework established
categories of capitalization, including well capitalized, based on
Leverage-based metrics:
Adjusted quarterly average assets (in billions) (3) $ 2,374 $ 2,374
Tier 1 leverage ratio 7.9% 7.9% 4.0
Leverage-based metrics:
Adjusted quarterly average assets (in billions) (3) $ 2,258 $ 2,258
Tier 1 leverage ratio 8.4% 8.4% 4.0
At December 31, 2019, CET1 capital and Total capital under primarily due to loan growth and increased client activity in Global
the Advanced approaches were relatively unchanged compared to Markets and Global Banking.
December 31, 2018. Risk-weighted assets under the Standardized Table 12 shows the capital composition at December 31, 2019
approach, which yielded the lower CET1 capital ratio at December and 2018.
31, 2019, increased $56.3 billion during 2019 to $1,493 billion
6868Bank of America
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of America 2019
Table 13 shows the components of risk-weighted assets as measured under Basel 3 at December 31, 2019 and 2018.
Leverage-based metrics:
Adjusted quarterly average assets (in billions) (3) $ 1,780 $ 1,780
Tier 1 leverage ratio 8.7% 8.7% 5.0
Leverage-based metrics:
Adjusted quarterly average assets (in billions) (3) $ 1,719 $ 1,719
Tier 1 leverage ratio 8.7% 8.7% 5.0
Total Loss-Absorbing Capacity Requirements maturity of at least one year and satisfies additional requirements
Effective January 1, 2019, the Corporation is subject to the Federal as prescribed in the TLAC final rule. As with the risk-based capital
Reserve’s final rule requiring G-SIBs to maintain minimum levels ratios and SLR, the Corporation is required to maintain TLAC ratios
of total loss-absorbing capacity (TLAC) and long-term debt. TLAC in excess of minimum requirements plus applicable buffers to
consists of the Corporation’s Tier 1 capital and eligible long-term avoid restrictions on capital distributions and discretionary bonus
debt issued directly by the Corporation. Eligible long-term debt for payments. Table 15 presents the Corporation's TLAC and long-
TLAC ratios is comprised of unsecured debt that has a remaining term debt ratios and related information as of December 31, 2019.
7070Bank of America
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of America 2019
Single-Counterparty Credit Limits and agreed to transfer certain additional parent company assets
The Federal Reserve established single-counterparty credit limits not needed to satisfy anticipated near-term expenditures, to NB
(SCCL) for BHCs with total consolidated assets of $250 billion or Holdings Corporation, a wholly-owned holding company subsidiary
more. The SCCL rule is designed to ensure that the maximum (NB Holdings). The parent company is expected to continue to have
possible loss that a BHC could incur due to the default of a single access to the same flow of dividends, interest and other amounts
counterparty or a group of connected counterparties would not of cash necessary to service its debt, pay dividends and perform
endanger the BHC’s survival, thereby reducing the probability of other obligations as it would have had if it had not entered into
future financial crises. Beginning January 1, 2020, G-SIBs must these arrangements and transferred any assets.
calculate SCCL on a daily basis by dividing the aggregate net credit In consideration for the transfer of assets, NB Holdings issued
exposure to a given counterparty by the G-SIB’s Tier 1 capital, a subordinated note to the parent company in a principal amount
ensuring that exposures to other G-SIBs and nonbank financial equal to the value of the transferred assets. The aggregate
institutions regulated by the Federal Reserve do not breach 15 principal amount of the note will increase by the amount of any
percent of Tier 1 capital and exposures to most other future asset transfers. NB Holdings also provided the parent
counterparties do not breach 25 percent of Tier 1 capital. Certain company with a committed line of credit that allows the parent
exposures, including exposures to the U.S. government, U.S. company to draw funds necessary to service near-term cash
government-sponsored entities and qualifying central needs. These arrangements support our preferred single point of
counterparties, are exempt from the credit limits. entry resolution strategy, under which only the parent company
would be resolved under the U.S. Bankruptcy Code. These
Liquidity Risk arrangements include provisions to terminate the line of credit,
forgive the subordinated note and require the parent company to
Funding and Liquidity Risk Management transfer its remaining financial assets to NB Holdings if our
Our primary liquidity risk management objective is to meet projected liquidity resources deteriorate so severely that resolution
expected or unexpected cash flow and collateral needs while of the parent company becomes imminent.
continuing to support our businesses and customers under a range
of economic conditions. To achieve that objective, we analyze and Global Liquidity Sources and Other Unencumbered Assets
monitor our liquidity risk under expected and stressed conditions, We maintain liquidity available to the Corporation, including the
maintain liquidity and access to diverse funding sources, including parent company and selected subsidiaries, in the form of cash
our stable deposit base, and seek to align liquidity-related and high-quality, liquid, unencumbered securities. Our liquidity
incentives and risks. buffer, referred to as Global Liquidity Sources (GLS), is comprised
We define liquidity as readily available assets, limited to cash of assets that are readily available to the parent company and
and high-quality, liquid, unencumbered securities that we can use selected subsidiaries, including holding company, bank and broker-
to meet our contractual and contingent financial obligations as dealer subsidiaries, even during stressed market conditions. Our
those obligations arise. We manage our liquidity position through cash is primarily on deposit with the Federal Reserve Bank and,
line of business and ALM activities, as well as through our legal to a lesser extent, central banks outside of the U.S. We limit the
entity funding strategy, on both a forward and current (including composition of high-quality, liquid, unencumbered securities to
intraday) basis under both expected and stressed conditions. We U.S. government securities, U.S. agency securities, U.S. agency
believe that a centralized approach to funding and liquidity MBS and a select group of non-U.S. government securities. We
management enhances our ability to monitor liquidity can quickly obtain cash for these securities, even in stressed
requirements, maximizes access to funding sources, minimizes conditions, through repurchase agreements or outright sales. We
borrowing costs and facilitates timely responses to liquidity hold our GLS in legal entities that allow us to meet the liquidity
events. requirements of our global businesses, and we consider the impact
The Board approves our liquidity risk policy and the Financial of potential regulatory, tax, legal and other restrictions that could
Contingency and Recovery Plan. The ERC establishes our liquidity limit the transferability of funds among entities.
risk tolerance levels. The MRC is responsible for overseeing Table 16 presents average GLS for the three months ended
liquidity risks and directing management to maintain exposures December 31, 2019 and 2018.
within the established tolerance levels. The MRC reviews and
monitors our liquidity position and stress testing results, approves
Table 16 Average Global Liquidity Sources
certain liquidity risk limits and reviews the impact of strategic
decisions on our liquidity. For more information, see Managing Risk Three Months Ended
on page 63. Under this governance framework, we have developed December 31
certain funding and liquidity risk management practices which (Dollars in billions) 2019 2018
include: maintaining liquidity at the parent company and selected Parent company and NB Holdings $ 59 $ 76
subsidiaries, including our bank subsidiaries and other regulated Bank subsidiaries 454 420
Other regulated entities 63 48
entities; determining what amounts of liquidity are appropriate for
Total Average Global Liquidity Sources $ 576 $ 544
these entities based on analysis of debt maturities and other
potential cash outflows, including those that we may experience Typically, parent company and NB Holdings liquidity is in the
during stressed market conditions; diversifying funding sources, form of cash deposited with BANA.
considering our asset profile and legal entity structure; and Our bank subsidiaries’ liquidity is primarily driven by deposit
performing contingency planning. and lending activity, as well as securities valuation and net debt
NB Holdings Corporation activity. Liquidity at bank subsidiaries excludes the cash deposited
We have intercompany arrangements with certain key subsidiaries by the parent company and NB Holdings. Our bank subsidiaries
under which we transferred certain assets of Bank of America can also generate incremental liquidity by pledging a range of
Corporation, as the parent company, which is a separate and unencumbered loans and securities to certain FHLBs and the
distinct legal entity from our banking and nonbank subsidiaries, Federal Reserve Discount Window. The cash we could have
A reduction in certain of our credit ratings or the ratings of For more information on additional collateral and termination
certain asset-backed securitizations may have a material adverse payments that could be required in connection with certain OTC
effect on our liquidity, potential loss of access to credit markets, derivative contracts and other trading agreements as a result of
the related cost of funds, our businesses and on certain revenues, such a credit rating downgrade, see Note 3 – Derivatives to the
particularly in those businesses where counterparty Consolidated Financial Statements and Item 1A. Risk Factors of
creditworthiness is critical. In addition, under the terms of certain our 2019 Annual Report on Form 10-K.
OTC derivative contracts and other trading agreements, in the
event of downgrades of our or our rated subsidiaries’ credit ratings, Common Stock Dividends
the counterparties to those agreements may require us to provide For a summary of our declared quarterly cash dividends on
additional collateral, or to terminate these contracts or common stock during 2019 and through February 19, 2020, see
agreements, which could cause us to sustain losses and/or Note 14 – Shareholders’ Equity to the Consolidated Financial
adversely impact our liquidity. If the short-term credit ratings of Statements.
our parent company, bank or broker-dealer subsidiaries were
downgraded by one or more levels, the potential loss of access to Credit Risk Management
short-term funding sources such as repo financing and the effect Credit risk is the risk of loss arising from the inability or failure of
on our incremental cost of funds could be material. a borrower or counterparty to meet its obligations. Credit risk can
While certain potential impacts are contractual and also arise from operational failures that result in an erroneous
quantifiable, the full scope of the consequences of a credit rating advance, commitment or investment of funds. We define the credit
downgrade to a financial institution is inherently uncertain, as it exposure to a borrower or counterparty as the loss potential arising
depends upon numerous dynamic, complex and inter-related from all product classifications including loans and leases, deposit
factors and assumptions, including whether any downgrade of a overdrafts, derivatives, assets held-for-sale and unfunded lending
company’s long-term credit ratings precipitates downgrades to its commitments which include loan commitments, letters of credit
short-term credit ratings, and assumptions about the potential and financial guarantees. Derivative positions are recorded at fair
behaviors of various customers, investors and counterparties. For value and assets held-for-sale are recorded at either fair value or
more information on potential impacts of credit rating downgrades, the lower of cost or fair value. Certain loans and unfunded
see Liquidity Risk – Liquidity Stress Analysis on page 72. 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
7474Bank of America
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value adjustments recorded in earnings. For derivative positions, Consumer Portfolio Credit Risk Management
our credit risk is measured as the net cost in the event the Credit risk management for the consumer portfolio begins with
counterparties with contracts in which we are in a gain position initial underwriting and continues throughout a borrower’s credit
fail to perform under the terms of those contracts. We use the cycle. Statistical techniques in conjunction with experiential
current fair value to represent credit exposure without giving judgment are used in all aspects of portfolio management
consideration to future mark-to-market changes. The credit risk including underwriting, product pricing, risk appetite, setting credit
amounts take into consideration the effects of legally enforceable limits, and establishing operating processes and metrics to
master netting agreements and cash collateral. Our consumer and quantify and balance risks and returns. Statistical models are built
commercial credit extension and review procedures encompass using detailed behavioral information from external sources such
funded and unfunded credit exposures. For more information on as credit bureaus and/or internal historical experience and are a
derivatives and credit extension commitments, see Note 3 – component of our consumer credit risk management process.
Derivatives and Note 13 – Commitments and Contingencies to the These models are used in part to assist in making both new and
Consolidated Financial Statements. ongoing credit decisions, as well as portfolio management
We manage credit risk based on the risk profile of the borrower strategies, including authorizations and line management,
or counterparty, repayment sources, the nature of underlying collection practices and strategies, and determination of the
collateral, and other support given current events, conditions and allowance for loan and lease losses and allocated capital for credit
expectations. We classify our portfolios as either consumer or risk.
commercial and monitor credit risk in each as discussed below.
We refine our underwriting and credit risk management Consumer Credit Portfolio
practices as well as credit standards to meet the changing Improvement in home prices continued during 2019 resulting in
economic environment. To mitigate losses and enhance customer improved credit quality compared to 2018. Net recoveries in the
support in our consumer businesses, we have in place collection consumer real estate portfolio due primarily to non-core loan sales
programs and loan modification and customer assistance were partially offset by seasoning in the credit card portfolio
infrastructures. We utilize a number of actions to mitigate losses compared to 2018.
in the commercial businesses including increasing the frequency Improved credit quality and continued loan balance runoff
and intensity of portfolio monitoring, hedging activity and our primarily in the non-core consumer real estate portfolio, partially
practice of transferring management of deteriorating commercial offset by seasoning within the credit card portfolio, drove a $260
exposures to independent special asset officers as credits enter million decrease in the consumer allowance for loan and lease
criticized categories. losses in 2019 to $4.5 billion. For more information, see Allowance
For more information on our credit risk management activities, for Credit Losses on page 89.
see Consumer Portfolio Credit Risk Management below, For more information on our accounting policies regarding
Commercial Portfolio Credit Risk Management on page 81, Non- delinquencies, nonperforming status, charge-offs and troubled
U.S. Portfolio on page 87, Provision for Credit Losses on page 89, debt restructurings (TDRs) for the consumer portfolio, see Note 1
Allowance for Credit Losses on page 89, and Note 5 – Outstanding – Summary of Significant Accounting Principles and Note 5 –
Loans and Leases and Note 6 – Allowance for Credit Losses to the Outstanding Loans and Leases to the Consolidated Financial
Consolidated Financial Statements. Statements.
Table 20 presents our outstanding consumer loans and leases,
consumer nonperforming loans and accruing consumer loans past
due 90 days or more.
consumer loans of $2.8 billion and $2.9 billion at December 31, 2019 and 2018.
(3) Consumer loans accounted for under the fair value option include residential mortgage loans of $257 million and $336 million and home equity loans of $337 million and $346 million at December
31, 2019 and 2018. For more information on the fair value option, see Note 22 – Fair Value Option to the Consolidated Financial Statements.
(4) Excludes consumer loans accounted for under the fair value option. At December 31, 2019 and 2018, $6 million and $12 million of loans accounted for under the fair value option were past due
Table 22 presents outstandings, nonperforming balances, net as core loans. All other loans are generally characterized as non-
charge-offs, allowance for loan and lease losses and provision for core loans and represent runoff portfolios. Core loans as reported
loan and lease losses for the core and non-core portfolios within in Table 22 include loans held in the Consumer Banking and GWIM
the consumer real estate portfolio. We categorize consumer real segments, as well as loans held for ALM activities in All Other.
estate loans as core and non-core based on loan and customer As shown in Table 22, outstanding core consumer real estate
characteristics such as origination date, product type, loan-to-value loans increased $27.3 billion during 2019 driven by an increase
(LTV), Fair Isaac Corporation (FICO) score and delinquency status of $32.1 billion in residential mortgage, partially offset by a $4.8
consistent with our current consumer and mortgage servicing billion decrease in home equity.
strategy. Generally, loans that were originated after January 1, During 2019, we sold $4.7 billion of consumer real estate
2010, qualified under GSE underwriting guidelines, or otherwise loans, primarily non-core, compared to $11.6 billion in 2018.
met our underwriting guidelines in place in 2015 are characterized
7676Bank of America
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We believe that the presentation of information adjusted to delinquent FHA loans repurchased pursuant to our servicing
exclude the impact of the fully-insured loan portfolio and loans agreements with the Government National Mortgage Association
accounted for under the fair value option is more representative as well as loans repurchased related to our representations and
of the ongoing operations and credit quality of the business. As a warranties.
result, in the following tables and discussions of the residential Outstanding balances in the residential mortgage portfolio
mortgage and home equity portfolios, we exclude loans accounted increased $27.6 billion in 2019 as retention of new originations
for under the fair value option and provide information that was partially offset by loan sales of $2.7 billion and runoff.
excludes the impact of the fully-insured loan portfolio in certain At December 31, 2019 and 2018, the residential mortgage
credit quality statistics. portfolio included $18.7 billion and $20.1 billion of outstanding
fully-insured loans, of which $11.2 billion and $14.0 billion had
Residential Mortgage FHA insurance with the remainder protected by long-term standby
The residential mortgage portfolio made up the largest percentage agreements.
of our consumer loan portfolio at 51 percent of consumer loans Table 23 presents certain residential mortgage key credit
and leases at December 31, 2019. Approximately 50 percent of statistics on both a reported basis and excluding the fully-insured
the residential mortgage portfolio was in Consumer Banking and loan portfolio. The following discussion presents the residential
36 percent was in GWIM. The remaining portion was in All Other mortgage portfolio excluding the fully-insured loan portfolio.
and was comprised of loans used in our overall ALM activities,
Nonperforming residential mortgage loans decreased $423 compared to $1.3 billion, or one percent, for the entire residential
million in 2019 primarily driven by sales. Of the nonperforming mortgage portfolio. In addition, at December 31, 2019, $260
residential mortgage loans at December 31, 2019, $616 million, million, or four percent, of outstanding interest-only residential
or 42 percent, were current on contractual payments. Loans mortgage loans that had entered the amortization period were
accruing past due 30 days or more increased $141 million. nonperforming, of which $108 million were contractually current,
Net charge-offs improved $75 million to a net recovery of $47 compared to $1.5 billion, or one percent, for the entire residential
million in 2019 compared to net charge-offs of $28 million in 2018 mortgage portfolio. Loans that have yet to enter the amortization
primarily due to recoveries from the sales of previously charged- period in our interest-only residential mortgage portfolio are
off loans and continued improvement in credit quality. primarily well-collateralized loans to our wealth management
Of the $217.5 billion in total residential mortgage loans clients and have an interest-only period of three to ten years.
outstanding at December 31, 2019, as shown in Table 23, 26 Approximately 94 percent of these loans that have yet to enter the
percent were originated as interest-only loans. The outstanding amortization period will not be required to make a fully-amortizing
balance of interest-only residential mortgage loans that have payment until 2022 or later.
entered the amortization period was $7.4 billion, or 13 percent, Table 24 presents outstandings, nonperforming loans and net
at December 31, 2019. Residential mortgage loans that have charge-offs by certain state concentrations for the residential
entered the amortization period generally have experienced a mortgage portfolio. The Los Angeles-Long Beach-Santa Ana
higher rate of early stage delinquencies and nonperforming status Metropolitan Statistical Area (MSA) within California represented
compared to the residential mortgage portfolio as a whole. At 16 percent of outstandings at both December 31, 2019 and 2018.
December 31, 2019, $124 million, or two percent, of outstanding In the New York area, the New York-Northern New Jersey-Long
interest-only residential mortgages that had entered the Island MSA made up 13 percent of outstandings at both December
amortization period were accruing past due 30 days or more 31, 2019 and 2018.
Home Equity At December 31, 2019, 80 percent of the home equity portfolio
At December 31, 2019, the home equity portfolio made up nine was in Consumer Banking, 12 percent was in All Other and the
percent of the consumer portfolio and was comprised of home remainder of the portfolio was primarily in GWIM. Outstanding
equity lines of credit (HELOCs), home equity loans and reverse balances in the home equity portfolio decreased $8.1 billion in
mortgages. We no longer originate home equity loans or reverse 2019 primarily due to paydowns and loan sales of $2.0 billion
mortgages. outpacing new originations and draws on existing lines. Of the total
At December 31, 2019, our HELOC portfolio had an outstanding home equity portfolio at December 31, 2019 and 2018, $15.0
balance of $37.5 billion, or 93 percent of the total home equity billion, or 37 percent, and $17.3 billion, or 36 percent, were in
portfolio, compared to $44.3 billion, or 92 percent, at December first-lien positions. At December 31, 2019, outstanding balances
31, 2018. HELOCs generally have an initial draw period of 10 in the home equity portfolio that were in a second-lien or more
years, and after the initial draw period ends, the loans generally junior-lien position and where we also held the first-lien loan totaled
convert to 15- or 20-year amortizing loans. $6.9 billion, or 17 percent of our total home equity portfolio.
At December 31, 2019, our home equity loan portfolio had an Unused HELOCs totaled $43.6 billion and $43.1 billion at
outstanding balance of $1.2 billion, or three percent of the total December 31, 2019 and 2018. The increase was primarily driven
home equity portfolio, compared to $1.8 billion, or four percent, by the impact of lower utilization of open lines and new production
at December 31, 2018. At December 31, 2019, our reverse partially offset by customers choosing to close accounts. The
mortgage portfolio had an outstanding balance of $1.5 billion, or HELOC utilization rate was 46 percent and 51 percent at December
four percent of the total home equity portfolio, compared to $2.2 31, 2019 and 2018.
billion, also four percent, at December 31, 2018. Table 25 presents certain home equity portfolio key credit
statistics.
Nonperforming outstanding balances in the home equity collateral, less costs to sell. Accruing loans that were 30 days or
portfolio decreased $1.4 billion in 2019 as outflows, primarily more past due decreased $145 million in 2019.
sales, outpaced new inflows. Of the nonperforming home equity Net charge-offs decreased $356 million to a net recovery of
loans at December 31, 2019, $241 million, or 45 percent, were $358 million in 2019 compared to a net recovery of $2 million in
current on contractual payments. Nonperforming loans that are 2018 primarily driven by recoveries from the sales of previously
contractually current primarily consist of collateral-dependent charged off non-core home equity loans.
TDRs, including those that have been discharged in Chapter 7 Of the $40.2 billion in total home equity portfolio outstandings
bankruptcy, junior-lien loans where the underlying first lien is 90 at December 31, 2019, as shown in Table 25, 17 percent require
days or more past due, as well as loans that have not yet interest-only payments. The outstanding balance of HELOCs that
demonstrated a sustained period of payment performance have reached the end of their draw period and have entered the
following a TDR. In addition, $162 million, or 30 percent, of amortization period was $11.5 billion at December 31, 2019. The
nonperforming home equity loans were 180 days or more past due HELOCs that have entered the amortization period have
and had been written down to the estimated fair value of the experienced a higher percentage of early stage delinquencies and
7878Bank of America
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nonperforming status when compared to the HELOC portfolio as loans and lines, we can infer some of this information through a
a whole. At December 31, 2019, $149 million, or one percent, of review of our HELOC portfolio that we service and that is still in
outstanding HELOCs that had entered the amortization period were its revolving period. During 2019, 13 percent of these customers
accruing past due 30 days or more. In addition, at December 31, with an outstanding balance did not pay any principal on their
2019, $472 million, or four percent, were nonperforming. Loans HELOCs.
that have yet to enter the amortization period in our interest-only Table 26 presents outstandings, nonperforming balances and
portfolio are primarily post-2008 vintages and generally have net charge-offs by certain state concentrations for the home equity
better credit quality than the previous vintages that had entered portfolio. In the New York area, the New York-Northern New Jersey-
the amortization period. We communicate to contractually current Long Island MSA made up 13 percent of the outstanding home
customers more than a year prior to the end of their draw period equity portfolio at both December 31, 2019 and 2018. The Los
to inform them of the potential change to the payment structure Angeles-Long Beach-Santa Ana MSA within California made up 11
before entering the amortization period, and provide payment percent of the outstanding home equity portfolio at both December
options to customers prior to the end of the draw period. 31, 2019 and 2018.
Although we do not actively track how many of our home equity
customers pay only the minimum amount due on their home equity
Credit Card accruing interest increased $46 million and loans 90 days or more
At December 31, 2019, 97 percent of the credit card portfolio was past due and still accruing interest increased $48 million. These
managed in Consumer Banking with the remainder in GWIM. increases were driven by portfolio seasoning.
Outstandings in the credit card portfolio decreased $730 million Unused lines of credit for credit card increased to $336.9 billion
in 2019 to $97.6 billion. In 2019, net charge-offs increased $111 at December 31, 2019 from $334.8 billion at December 31, 2018.
million to $2.9 billion compared to net charge-offs of $2.8 billion Table 27 presents certain state concentrations for the credit
in 2018. Credit card loans 30 days or more past due and still card portfolio.
Nonperforming Consumer Loans, Leases and Foreclosed percent, of nonperforming consumer loans were modified and are
Properties Activity now current after successful trial periods, or are current loans
Table 29 presents nonperforming consumer loans, leases and classified as nonperforming loans in accordance with applicable
foreclosed properties activity during 2019 and 2018. During 2019, policies.
nonperforming consumer loans decreased $1.8 billion to $2.1 Foreclosed properties decreased $15 million in 2019 to $229
billion primarily driven by loan sales of $1.5 billion. million as liquidations outpaced additions.
At December 31, 2019, $606 million, or 29 percent, of Nonperforming loans also include certain loans that have been
nonperforming loans were 180 days or more past due and had modified in TDRs where economic concessions have been granted
been written down to their estimated property value less costs to to borrowers experiencing financial difficulties. Nonperforming
sell. In addition, at December 31, 2019, $901 million, or 44 TDRs are included in Table 29.
Table 30 presents TDRs for the consumer real estate portfolio. Performing TDR balances are excluded from nonperforming loans
and leases in Table 29.
In addition to modifying consumer real estate loans, we work in the customer’s interest rate on the account and placing the
with customers who are experiencing financial difficulty by customer on a fixed payment plan not exceeding 60 months, all
modifying credit card and other consumer loans. Credit card and of which are considered TDRs (the renegotiated TDR portfolio).
other consumer loan modifications generally involve a reduction
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Modifications of credit card and other consumer loans are exposure to third parties, loan sales, hedging and other risk
made through renegotiation programs utilizing direct customer mitigation techniques to manage the size and risk profile of the
contact, but may also utilize external renegotiation programs. The commercial credit portfolio. For more information on our industry
renegotiated TDR portfolio is excluded in large part from Table 29 concentrations, see Commercial Portfolio Credit Risk Management
as substantially all of the loans remain on accrual status until – Industry Concentrations on page 85 and Table 38.
either charged off or paid in full. At December 31, 2019 and 2018, We account for certain large corporate loans and loan
our renegotiated TDR portfolio was $679 million and $566 million, commitments, including issued but unfunded letters of credit
of which $570 million and $481 million were current or less than which are considered utilized for credit risk management purposes,
30 days past due under the modified terms. The increase in the that exceed our single-name credit risk concentration guidelines
renegotiated TDR portfolio was primarily driven by new under the fair value option. Lending commitments, both funded
renegotiated enrollments outpacing runoff of existing portfolios. and unfunded, are actively managed and monitored, and as
appropriate, credit risk for these lending relationships may be
Commercial Portfolio Credit Risk Management mitigated through the use of credit derivatives, with our credit view
Credit risk management for the commercial portfolio begins with and market perspectives determining the size and timing of the
an assessment of the credit risk profile of the borrower or hedging activity. In addition, we purchase credit protection to cover
counterparty based on an analysis of its financial position. As part the funded portion as well as the unfunded portion of certain other
of the overall credit risk assessment, our commercial credit credit exposures. To lessen the cost of obtaining our desired credit
exposures are assigned a risk rating and are subject to approval protection levels, credit exposure may be added within an industry,
based on defined credit approval standards. Subsequent to loan borrower or counterparty group by selling protection. These credit
origination, risk ratings are monitored on an ongoing basis, and if derivatives do not meet the requirements for treatment as
necessary, adjusted to reflect changes in the financial condition, accounting hedges. They are carried at fair value with changes in
cash flow, risk profile or outlook of a borrower or counterparty. In fair value recorded in other income.
making credit decisions, we consider risk rating, collateral, country, In addition, we are a member of various securities and
industry and single-name concentration limits while also balancing derivative exchanges and clearinghouses, both in the U.S. and
these considerations with the total borrower or counterparty other countries. As a member, we may be required to pay a pro-
relationship. We use a variety of tools to continuously monitor the rata share of the losses incurred by some of these organizations
ability of a borrower or counterparty to perform under its as a result of another member default and under other loss
obligations. We use risk rating aggregations to measure and scenarios. For more information, see Note 13 – Commitments and
evaluate concentrations within portfolios. In addition, risk ratings Contingencies to the Consolidated Financial Statements.
are a factor in determining the level of allocated capital and the
allowance for credit losses. Commercial Credit Portfolio
As part of our ongoing risk mitigation initiatives, we attempt to During 2019, credit quality among large corporate and middle-
work with clients experiencing financial difficulty to modify their market borrowers in our commercial and industrial portfolio
loans to terms that better align with their current ability to pay. In remained strong. Credit quality of commercial real estate
situations where an economic concession has been granted to a borrowers in most sectors remained stable with conservative LTV
borrower experiencing financial difficulty, we identify these loans ratios. However, some of the real estate markets experienced
as TDRs. For more information on our accounting policies regarding slowing tenant demand and decelerating rental income.
delinquencies, nonperforming status and net charge-offs for the Total commercial utilized credit exposure increased $14.3
commercial portfolio, see Note 1 – Summary of Significant billion in 2019 to $635.3 billion driven by higher loans and leases.
Accounting Principles to the Consolidated Financial Statements. The utilization rate for loans and leases, SBLCs and financial
guarantees, and commercial letters of credit, in the aggregate,
Management of Commercial Credit Risk was 58 percent at December 31, 2019 and 59 percent at
Concentrations December 31, 2018.
Commercial credit risk is evaluated and managed with the goal Table 31 presents commercial credit exposure by type for
that concentrations of credit exposure continue to be aligned with utilized, unfunded and total binding committed credit exposure.
our risk appetite. We review, measure and manage concentrations Commercial utilized credit exposure includes SBLCs and financial
of credit exposure by industry, product, geography, customer guarantees and commercial letters of credit that have been issued
relationship and loan size. We also review, measure and manage and for which we are legally bound to advance funds under
commercial real estate loans by geographic location and property prescribed conditions during a specified time period, and excludes
type. In addition, within our non-U.S. portfolio, we evaluate exposure related to trading account assets. Although funds have
exposures by region and by country. Tables 35, 38 and 41 not yet been advanced, these exposure types are considered
summarize our concentrations. We also utilize syndications of utilized for credit risk management purposes.
Outstanding commercial loans and leases increased $18.0 portfolio. The allowance for loan and lease losses for the
billion during 2019 primarily in the commercial and industrial commercial portfolio increased $75 million to $4.9 billion at
portfolio. Nonperforming commercial loans increased $397 million December 31, 2019. For more information, see Allowance for
and commercial reservable criticized utilized exposure increased Credit Losses on page 89. Table 32 presents our commercial loans
$391 million driven by a small number of client downgrades across and leases portfolio and related credit quality information at
industries which were not indicative of broader issues in the December 31, 2019 and 2018.
Table 33 presents net charge-offs and related ratios for our commercial loans and leases for 2019 and 2018.
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Table 34 presents commercial reservable criticized utilized exposure by loan type. Criticized exposure corresponds to the Special
Mention, Substandard and Doubtful asset categories as defined by regulatory authorities. At December 31, 2019 and 2018, 90 percent
and 91 percent of commercial reservable criticized utilized exposure was secured.
Commercial and Industrial repayment. Outstanding loans increased $1.8 billion, or three
Commercial and industrial loans include U.S. commercial and non- percent, during 2019 to $62.7 billion due to new originations
U.S. commercial portfolios. slightly outpacing paydowns. The portfolio remains diversified
across property types and geographic regions. California
U.S. Commercial represented the largest state concentration at 24 percent and 23
At December 31, 2019, 70 percent of the U.S. commercial loan percent of the commercial real estate portfolio at December 31,
portfolio, excluding small business, was managed in Global 2019 and 2018. The commercial real estate portfolio is
Banking, 16 percent in Global Markets, 13 percent in GWIM predominantly managed in Global Banking and consists of loans
(generally business-purpose loans for high net worth clients) and made primarily to public and private developers, and commercial
the remainder primarily in Consumer Banking. U.S. commercial real estate firms.
loans increased $7.8 billion during 2019, across lines of business. During 2019, we continued to see low default rates and solid
Non-U.S. Commercial credit quality in both the residential and non-residential portfolios.
At December 31, 2019, 83 percent of the non-U.S. commercial We use a number of proactive risk mitigation initiatives to reduce
loan portfolio was managed in Global Banking and 17 percent in adversely rated exposure in the commercial real estate portfolio,
Global Markets. Non-U.S. commercial loans increased $6.2 billion including transfers of deteriorating exposures to management by
during 2019, primarily in Global Banking. For information on the independent special asset officers and the pursuit of loan
non-U.S. commercial portfolio, see Non-U.S. Portfolio on page 87. restructurings or asset sales to achieve the best results for our
customers and the Corporation.
Commercial Real Estate Table 35 presents outstanding commercial real estate loans
Commercial real estate primarily includes commercial loans by geographic region, based on the geographic location of the
secured by non-owner-occupied real estate and is dependent on collateral, and by property type.
the sale or lease of the real estate as the primary source of
U.S. Small Business Commercial Nonperforming loans do not include loans accounted for under the
The U.S. small business commercial loan portfolio is comprised fair value option. During 2019, nonperforming commercial loans
of small business card loans and small business loans managed and leases increased $397 million to $1.5 billion. At December
in Consumer Banking. Credit card-related products were 52 percent 31, 2019, 94 percent of commercial nonperforming loans, leases
and 51 percent of the U.S. small business commercial portfolio and foreclosed properties were secured and 64 percent were
at December 31, 2019 and 2018. Of the U.S. small business contractually current. Commercial nonperforming loans were
commercial net charge-offs, 94 percent and 95 percent were credit carried at 88 percent of their unpaid principal balance before
card-related products in 2019 and 2018. consideration of the allowance for loan and lease losses as the
carrying value of these loans has been reduced to the estimated
Nonperforming Commercial Loans, Leases and Foreclosed collateral value less costs to sell.
Properties Activity
Table 36 presents the nonperforming commercial loans, leases
and foreclosed properties activity during 2019 and 2018.
Table 36 Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity (1, 2)
(Dollars in millions) 2019 2018
Nonperforming loans and leases, January 1 $ 1,102 $ 1,304
Additions 2,048 1,415
Reductions:
Paydowns (648) (771)
Sales (215) (210)
Returns to performing status (3) (120) (246)
Charge-offs (478) (361)
Transfers to foreclosed properties (9) (12)
Transfers to loans held-for-sale (181) (17)
Total net reductions to nonperforming loans and leases 397 (202)
Total nonperforming loans and leases, December 31 1,499 1,102
Foreclosed properties, December 31 56 56
Nonperforming commercial loans, leases and foreclosed properties, December 31 $ 1,555 $ 1,158
Nonperforming commercial loans and leases as a percentage of outstanding commercial loans and leases (4) 0.29% 0.22%
Nonperforming commercial loans, leases and foreclosed properties as a percentage of outstanding commercial loans, leases and
foreclosed properties (4) 0.30 0.23
(1) Balances do not include nonperforming loans held-for-sale of $239 million and $292 million at December 31, 2019 and 2018.
(2) Includes U.S. small business commercial activity. Small business card loans are excluded as they are not classified as nonperforming.
(3) Commercial loans and leases may be returned to performing status when all principal and interest is current and full repayment of the remaining contractual principal and interest is expected, or
when the loan otherwise becomes well-secured and is in the process of collection. TDRs are generally classified as performing after a sustained period of demonstrated payment performance.
(4) Outstanding commercial loans exclude loans accounted for under the fair value option.
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of America 2019
Table 37 presents our commercial TDRs by product type and performing status. U.S. small business commercial TDRs are comprised
of renegotiated small business card loans and small business loans. The renegotiated small business card loans are not classified
as nonperforming as they are charged off no later than the end of the month in which the loan becomes 180 days past due. For more
information on TDRs, see Note 5 – Outstanding Loans and Leases to the Consolidated Financial Statements.
Industry Concentrations as to provide ongoing monitoring. The MRC oversees industry limit
Table 38 presents commercial committed and utilized credit governance.
exposure by industry and the total net credit default protection Asset managers and funds, our largest industry concentration
purchased to cover the funded and unfunded portions of certain with committed exposure of $110.0 billion, increased $2.1 billion,
credit exposures. Our commercial credit exposure is diversified or two percent, during 2019.
across a broad range of industries. Total commercial committed Real estate, our second largest industry concentration with
exposure increased $52.3 billion, or five percent, during 2019 to committed exposure of $96.3 billion, increased $9.8 billion, or 11
$1.1 trillion. The increase in commercial committed exposure was percent, during 2019. This growth occurred primarily in the
concentrated in the Real estate, Utilities and Finance companies category of industrial and warehouse buildings, partially offset by
industry sectors. Increases were partially offset by decreased declines in REITs.
exposure to the Pharmaceuticals and biotechnology, Technology Capital goods, our third largest industry concentration with
hardware and equipment, and Government and public education committed exposure of $80.9 billion, increased $5.8 billion, or
industry sectors. eight percent, during 2019 with the growth largely occurring in the
Industry limits are used internally to manage industry trading companies and distributors industry categories, partially
concentrations and are based on committed exposure that is offset by a decrease in industrial conglomerates. For more
allocated on an industry-by-industry basis. A risk management information on the commercial real estate and related portfolios,
framework is in place to set and approve industry limits as well see Commercial Portfolio Credit Risk Management – Commercial
Real Estate on page 83.
Risk Mitigation option portfolio information in Table 45. For more information, see
We purchase credit protection to cover the funded portion as well Trading Risk Management on page 93.
as the unfunded portion of certain credit exposures. To lower the Tables 39 and 40 present the maturity profiles and the credit
cost of obtaining our desired credit protection levels, we may add exposure debt ratings of the net credit default protection portfolio
credit exposure within an industry, borrower or counterparty group at December 31, 2019 and 2018.
by selling protection.
At December 31, 2019 and 2018, net notional credit default Table 39 Net Credit Default Protection by Maturity
protection purchased in our credit derivatives portfolio to hedge
our funded and unfunded exposures for which we elected the fair December 31
value option, as well as certain other credit exposures, was $3.3 2019 2018
billion and $2.7 billion. We recorded net losses of $145 million Less than or equal to one year 54% 20%
in 2019 compared to net losses of $2 million in 2018 on these Greater than one year and less than or equal
to five years 45 78
positions. The gains and losses on these instruments were offset
Greater than five years 1 2
by gains and losses on the related exposures. The Value-at-Risk
Total net credit default protection 100% 100%
(VaR) results for these exposures are included in the fair value
8686Bank of America
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allow us to take additional protective measures such as early
Table 40 Net Credit Default Protection by Credit termination of all trades. For more information on credit derivatives
Exposure Debt Rating and counterparty credit risk valuation adjustments, see Note 3 –
Derivatives to the Consolidated Financial Statements.
Net Percent of Net Percent of
Notional (1) Total Notional (1) Total Non-U.S. Portfolio
December 31 Our non-U.S. credit and trading portfolios are subject to country
(Dollars in millions) 2019 2018
risk. We define country risk as the risk of loss from unfavorable
Ratings (2, 3)
economic and political conditions, currency fluctuations, social
A $ (697) 20.8% $ (700) 26.3%
BBB (1,089) 32.5 (501) 18.8
instability and changes in government policies. A risk management
BB (766) 22.9 (804) 30.2
framework is in place to measure, monitor and manage non-U.S.
B (373) 11.1 (422) 15.8 risk and exposures. In addition to the direct risk of doing business
CCC and below (119) 3.6 (205) 7.7 in a country, we also are exposed to indirect country risks (e.g.,
NR (4) (305) 9.1 (31) 1.2 related to the collateral received on secured financing transactions
Total net credit or related to client clearing activities). These indirect exposures
default protection $ (3,349) 100.0% $ (2,663) 100.0% are managed in the normal course of business through credit,
(1) Represents net credit default protection purchased. market and operational risk governance, rather than through
(2) Ratings are refreshed on a quarterly basis.
(3) Ratings of BBB- or higher are considered to meet the definition of investment grade. country risk governance.
(4) NR is comprised of index positions held and any names that have not been rated. Table 41 presents our 20 largest non-U.S. country exposures
In addition to our net notional credit default protection at December 31, 2019. These exposures accounted for 88 percent
purchased to cover the funded and unfunded portion of certain and 89 percent of our total non-U.S. exposure at December 31,
credit exposures, credit derivatives are used for market-making 2019 and 2018. Net country exposure for these 20 countries
activities for clients and establishing positions intended to profit increased $8.5 billion in 2019, primarily driven by increased
from directional or relative value changes. We execute the majority sovereign and corporate exposure across multiple countries.
of our credit derivative trades in the OTC market with large, Non-U.S. exposure is presented on an internal risk
multinational financial institutions, including broker-dealers and, management basis and includes sovereign and non-sovereign
to a lesser degree, with a variety of other investors. Because these credit exposure, securities and other investments issued by or
transactions are executed in the OTC market, we are subject to domiciled in countries other than the U.S.
settlement risk. We are also subject to credit risk in the event that Funded loans and loan equivalents include loans, leases, and
these counterparties fail to perform under the terms of these other extensions of credit and funds, including letters of credit and
contracts. In order to properly reflect counterparty credit risk, we due from placements. Unfunded commitments are the undrawn
record counterparty credit risk valuation adjustments on certain portion of legally binding commitments related to loans and loan
derivative assets, including our purchased credit default equivalents. Net counterparty exposure includes the fair value of
protection. derivatives, including the counterparty risk associated with credit
In most cases, credit derivative transactions are executed on default swaps (CDS), and secured financing transactions.
a daily margin basis. Therefore, events such as a credit downgrade, Securities and other investments are carried at fair value and long
depending on the ultimate rating level, or a breach of credit securities exposures are netted against short exposures with the
covenants would typically require an increase in the amount of same underlying issuer to, but not below, zero. Net country
collateral required by the counterparty, where applicable, and/or exposure represents country exposure less hedges and credit
default protection purchased, net of credit default protection sold.
A number of economic conditions and geopolitical events have 31, 2019 was the U.K. with net exposure of $55.8 billion, which
given rise to risk aversion in certain emerging markets. Additionally, represents a $990 million increase from December 31, 2018. Our
in light of ongoing trade tensions, we continue to closely monitor second largest EU exposure was Germany with net exposure of
our exposures to tariff-sensitive regions and industries, particularly $30.8 billion as of December 31, 2019, which represents a $2.2
to countries that account for a large percentage of U.S. trade, such billion increase from December 31, 2018. The increase in Germany
as China. was primarily driven by an increase in sovereign exposure.
Our largest emerging market country exposure at December Table 42 presents countries that had total cross-border
31, 2019 was China, with net exposure of $15.6 billion, exposure, including the notional amount of cash loaned under
concentrated in large state-owned companies, subsidiaries of secured financing agreements, exceeding one percent of our total
multinational corporations and commercial banks. assets at December 31, 2019. Local exposure, defined as
The economic performance in the EU remains uncertain, exposure booked in local offices of a respective country with clients
including as a result of the uncertainty surrounding the terms of in the same country, is excluded. At December 31, 2019, the U.K.
a potential trade agreement and other terms associated with the and France were the only countries where their respective total
future relationship between the U.K. and the EU, which could weigh cross-border exposures exceeded one percent of our total assets.
unevenly on the economic performance of EU countries generally, At December 31, 2019, Germany had total cross-border exposure
and even more heavily on that of the U.K. For more information, of $19.4 billion representing 0.80 percent of our total assets. No
see Item 1A. Risk Factors of our 2019 Annual Report on Form 10- other countries had total cross-border exposure that exceeded
K and Executive Summary – Recent Developments – U.K. Exit from 0.75 percent of our total assets at December 31, 2019.
the EU on page 44. Our largest EU country exposure at December
8888Bank of America
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Provision for Credit Losses generally by product type. Loss forecast models are utilized that
The provision for credit losses increased $308 million to $3.6 consider a variety of factors including, but not limited to, historical
billion in 2019 compared to 2018. The provision for credit losses loss experience, estimated defaults or foreclosures based on
was $58 million lower than net charge-offs for 2019, resulting in portfolio trends, delinquencies, economic trends, credit scores
a decrease in the allowance for credit losses. This compared to a and the amount of loss in the event of default. Our consumer real
decrease of $481 million in the allowance for credit losses in estate loss forecast model estimates the portion of loans that will
2018. Net charge-offs in 2019 were $3.6 billion compared to $3.8 default based on individual loan attributes, the most significant of
billion in 2018. which are refreshed LTV or combined loan-to-value (CLTV), and
The provision for credit losses for the consumer portfolio borrower credit score as well as vintage and geography, all of which
decreased $117 million to $2.8 billion in 2019 compared to 2018. are further broken down into current delinquency status.
The decrease was primarily driven by consumer real estate loan Additionally, we incorporate the delinquency status of underlying
sales. first-lien loans on our junior-lien home equity portfolio in our
The provision for credit losses for the commercial portfolio, allowance process. Incorporating refreshed LTV and CLTV into our
including unfunded lending commitments, increased $425 million probability of default allows us to factor the impact of changes in
to $758 million in 2019 compared to 2018. The increase was due home prices into our allowance for loan and lease losses. These
in part to energy reserve releases in the prior-year periods. loss forecast models are updated on a quarterly basis to
Assuming a stable economic environment in 2020 compared incorporate information reflecting the current economic
to the end of 2019, we expect net charge-offs of approximately environment. As of December 31, 2019, the loss forecast process
$1 billion per quarter in 2020. In view of the newly adopted resulted in reductions in the allowance related to the residential
accounting standard on the measurement of the allowance for mortgage and home equity portfolios compared to December 31,
credit losses, we expect the provision for credit losses to be 2018.
modestly higher than net charge-offs in 2020, assuming no change The allowance for commercial loan and lease losses is
in the current economic outlook and estimates of loan growth, established by product type after analyzing historical loss
including product mix. For more information regarding the new experience, internal risk rating, current economic conditions,
accounting standard, see Note 1 – Summary of Significant industry performance trends, geographic and obligor
Accounting Principles to the Consolidated Financial Statements. concentrations within each portfolio and any other pertinent
information. The statistical models for commercial loans are
Allowance for Credit Losses generally updated annually and utilize our historical database of
actual defaults and other data, including external default data. The
Allowance for Loan and Lease Losses loan risk ratings and composition of the commercial portfolios
The allowance for loan and lease losses is comprised of two used to calculate the allowance are updated quarterly to
components. The first component covers nonperforming incorporate the most recent data reflecting the current economic
commercial loans and TDRs. The second component covers loans environment. For risk-rated commercial loans, we estimate the
and leases on which there are incurred losses that are not yet probability of default and the loss given default (LGD) based on
individually identifiable, as well as incurred losses that may not our historical experience of defaults and credit losses. Factors
be represented in the loss forecast models. We evaluate the considered when assessing the internal risk rating include the
adequacy of the allowance for loan and lease losses based on the value of the underlying collateral, if applicable, the industry in which
total of these two components, each of which is described in more the obligor operates, the obligor’s liquidity and other financial
detail below. The allowance for loan and lease losses excludes indicators, and other quantitative and qualitative factors relevant
loans held-for-sale (LHFS) and loans accounted for under the fair to the obligor’s credit risk. As of December 31, 2019, the allowance
value option as the fair value reflects a credit risk component. for the commercial real estate portfolio increased compared to
The first component of the allowance for loan and lease losses December 31, 2018.
covers both nonperforming commercial loans and all TDRs within Also included within the second component of the allowance
the consumer and commercial portfolios. These loans are subject for loan and lease losses are reserves to cover losses that are
to impairment measurement based on the present value of incurred but, in our assessment, may not be adequately
projected future cash flows discounted at the loan’s original represented in the historical loss data used in the loss forecast
effective interest rate, or in certain circumstances, impairment models. For example, factors that we consider include, among
may also be based upon the collateral value or the loan’s others, changes in lending policies and procedures, changes in
observable market price if available. Impairment measurement for economic and business conditions, changes in the nature and size
the renegotiated consumer credit card and small business credit of the portfolio, changes in portfolio concentrations, changes in
card TDR portfolios is based on the present value of projected the volume and severity of past due loans and nonaccrual loans,
cash flows discounted using the average portfolio contractual the effect of external factors such as competition, and legal and
interest rate, excluding promotionally priced loans, in effect prior regulatory requirements. Further, we consider the inherent
to restructuring. For purposes of computing this specific loss uncertainty in mathematical models that are built upon historical
component of the allowance, larger impaired loans are evaluated data.
individually and smaller impaired loans are evaluated as a pool We monitor differences between estimated and actual incurred
using historical experience for the respective product types and loan and lease losses. This monitoring process includes periodic
risk ratings of the loans. assessments by senior management of loan and lease portfolios
The second component of the allowance for loan and lease and the models used to estimate incurred losses in those
losses covers the remaining consumer and commercial loans and portfolios.
leases that have incurred losses that are not yet individually The allowance for loan and lease losses for the consumer
identifiable. The allowance for consumer (including credit card and portfolio, as presented in Table 43, was $4.5 billion at December
other consumer loans) and certain homogeneous commercial loan 31, 2019, a decrease of $260 million from December 31, 2018.
and lease products is based on aggregated portfolio evaluations, The decrease was primarily in the consumer real estate portfolio,
which include both quantitative and qualitative components, partially offset by an increase in the credit card portfolio. The
Bank of America 2019 89
reduction in the allowance for the consumer real estate portfolio Corporation’s relevant financial assets. Upon adoption of the
was driven by improved credit quality, a decrease in loan balances standard on January 1, 2020, the Corporation recorded a $3.3
in our non-core portfolio, proactive credit risk management billion, or 32 percent, increase to the allowance for credit losses.
initiatives and high credit quality originations. The improved credit After adjusting for deferred taxes and other adoption effects, a
quality was impacted by continuing improvements in the U.S. $2.4 billion decrease was recorded in retained earnings through
economy and strong labor markets evidenced by low levels of a cumulative-effect adjustment. For more information regarding
unemployment and increases in home prices. Nonperforming this new accounting standard, see Note 1 – Summary of Significant
consumer loans decreased $1.8 billion during 2019 as loan sales, Accounting Principles to the Consolidated Financial Statements.
returns to performing status and paydowns continued to outpace
additions. The increase in allowance for the credit card portfolio Reserve for Unfunded Lending Commitments
was primarily driven by continued portfolio seasoning. In addition to the allowance for loan and lease losses, we also
The allowance for loan and lease losses for the commercial estimate probable losses related to unfunded lending
portfolio, as presented in Table 43, was $4.9 billion at December commitments such as letters of credit, financial guarantees,
31, 2019, an increase of $75 million from December 31, 2018. unfunded bankers’ acceptances and binding loan commitments,
Commercial reservable criticized utilized exposure increased to excluding commitments accounted for under the fair value option.
$11.5 billion at December 31, 2019 from $11.1 billion (to 2.09 Unfunded lending commitments are subject to the same
percent from 2.08 percent of total commercial reservable utilized assessment as funded loans, including estimates of probability
exposure) at December 31, 2018, and nonperforming commercial of default and LGD. Due to the nature of unfunded commitments,
loans increased to $1.5 billion at December 31, 2019 from $1.1 the estimate of probable losses must also consider utilization. To
billion (to 0.29 percent from 0.22 percent of outstanding estimate the portion of these undrawn commitments that is likely
commercial loans excluding loans accounted for under the fair to be drawn by a borrower at the time of estimated default, analyses
value option) at December 31, 2018 with the increases spread of our historical experience are applied to the unfunded
across multiple industries. See Tables 32, 33 and 34 for more commitments to estimate the funded exposure at default (EAD).
details on key commercial credit statistics. The expected loss for unfunded lending commitments is the
The allowance for loan and lease losses as a percentage of product of the probability of default, the LGD and the EAD, adjusted
total loans and leases outstanding was 0.97 percent at December for any qualitative factors including economic uncertainty and
31, 2019 compared to 1.02 percent at December 31, 2018. inherent imprecision in models.
On January 1, 2020, the Corporation adopted the new The reserve for unfunded lending commitments was $813
accounting standard that requires the measurement of the million at December 31, 2019 compared to $797 million at
allowance for credit losses to be based on management’s best December 31, 2018.
estimate of lifetime expected credit losses inherent in the
9090Bank of America
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of America 2019
Table 44 presents a rollforward of the allowance for credit losses, which includes the allowance for loan and lease losses and the
reserve for unfunded lending commitments, for 2019 and 2018.
diversification, which is the difference between the total portfolio and the sum of the individual components, is not relevant.
The graph below presents the daily covered positions and less liquid trading positions portfolio VaR for 2019, corresponding to the
data in Table 45.
Additional VaR statistics produced within our single VaR model are provided in Table 46 at the same level of detail as in Table 45.
Evaluating VaR with additional statistics allows for an increased understanding of the risks in the portfolio as the historical market
data used in the VaR calculation does not necessarily follow a predefined statistical distribution. Table 46 presents average trading
VaR statistics at 99 percent and 95 percent confidence levels for 2019 and 2018.
Table 46 Average Market Risk VaR for Trading Activities – 99 percent and 95 percent VaR Statistics
2019 2018
(Dollars in millions) 99 percent 95 percent 99 percent 95 percent
Foreign exchange $ 6 $ 3 $ 8 $ 5
Interest rate 24 15 25 16
Credit 23 15 25 15
Equity 22 11 20 11
Commodities 6 3 8 4
Portfolio diversification (49) (29) (55) (33)
Total covered positions portfolio 32 18 31 18
Impact from less liquid exposures 3 2 3 1
Total covered positions and less liquid trading positions portfolio 35 20 34 19
Fair value option loans 10 5 11 6
Fair value option hedges 10 6 9 6
Fair value option portfolio diversification (10) (5) (11) (7)
Total fair value option portfolio 10 6 9 5
Portfolio diversification (7) (5) (5) (3)
Total market-based portfolio $ 38 $ 21 $ 38 $ 21
9494Bank of America
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of America 2019
Backtesting
The accuracy of the VaR methodology is evaluated by backtesting,
which compares the daily VaR results, utilizing a one-day holding
period, against a comparable subset of trading revenue. A
backtesting excess occurs when a trading loss exceeds the VaR
for the corresponding day. These excesses are evaluated to
understand the positions and market moves that produced the
trading loss with a goal to ensure that the VaR methodology
accurately represents those losses. We expect the frequency of
trading losses in excess of VaR to be in line with the confidence
level of the VaR statistic being tested. For example, with a 99
percent confidence level, we expect one trading loss in excess of
VaR every 100 days or between two to three trading losses in
excess of VaR over the course of a year. The number of backtesting
Trading Portfolio Stress Testing
Because the very nature of a VaR model suggests results can
excesses observed can differ from the statistically expected
exceed our estimates and it is dependent on a limited historical
number of excesses if the current level of market volatility is
window, we also stress test our portfolio using scenario analysis.
materially different than the level of market volatility that existed
This analysis estimates the change in the value of our trading
during the three years of historical data used in the VaR calculation.
portfolio that may result from abnormal market movements.
The trading revenue used for backtesting is defined by
A set of scenarios, categorized as either historical or
regulatory agencies in order to most closely align with the VaR
hypothetical, are computed daily for the overall trading portfolio
component of the regulatory capital calculation. This revenue
and individual businesses. These scenarios include shocks to
differs from total trading-related revenue in that it excludes revenue
underlying market risk factors that may be well beyond the shocks
from trading activities that either do not generate market risk or
found in the historical data used to calculate VaR. Historical
the market risk cannot be included in VaR. Some examples of the
scenarios simulate the impact of the market moves that occurred
types of revenue excluded for backtesting are fees, commissions,
during a period of extended historical market stress. Generally, a
reserves, net interest income and intra-day trading revenues.
multi-week period representing the most severe point during a
We conduct daily backtesting on the VaR results used for
crisis is selected for each historical scenario. Hypothetical
regulatory capital calculations as well as the VaR results for key
scenarios provide estimated portfolio impacts from potential
legal entities, regions and risk factors. These results are reported
future market stress events. Scenarios are reviewed and updated
to senior market risk management. Senior management regularly
in response to changing positions and new economic or political
reviews and evaluates the results of these tests.
information. In addition, new or ad hoc scenarios are developed
During 2019, there were no days in which there was a
to address specific potential market events or particular
backtesting excess for our total covered portfolio VaR, utilizing a
vulnerabilities in the portfolio. The stress tests are reviewed on a
one-day holding period.
regular basis and the results are presented to senior management.
Total Trading-related Revenue Stress testing for the trading portfolio is integrated with
Total trading-related revenue, excluding brokerage fees, and CVA, enterprise-wide stress testing and incorporated into the limits
DVA and funding valuation adjustment gains (losses), represents framework. The macroeconomic scenarios used for enterprise-
the total amount earned from trading positions, including market- wide stress testing purposes differ from the typical trading portfolio
based net interest income, which are taken in a diverse range of scenarios in that they have a longer time horizon and the results
financial instruments and markets. Trading account assets and are forecasted over multiple periods for use in consolidated capital
liabilities are reported at fair value. For more information on fair and liquidity planning. For more information, see Managing Risk
value, see Note 21 – Fair Value Measurements to the Consolidated on page 63.
Financial Statements. Trading-related revenue can be volatile and
is largely driven by general market conditions and customer Interest Rate Risk Management for the Banking
demand. Also, trading-related revenue is dependent on the volume Book
and type of transactions, the level of risk assumed, and the The following discussion presents net interest income for banking
volatility of price and rate movements at any given time within the book activities.
ever-changing market environment. Significant daily revenue by Interest rate risk represents the most significant market risk
business is monitored and the primary drivers of these are exposure to our banking book balance sheet. Interest rate risk is
reviewed. measured as the potential change in net interest income caused
The following histogram is a graphic depiction of trading by movements in market interest rates. Client-facing activities,
volatility and illustrates the daily level of trading-related revenue primarily lending and deposit-taking, create interest rate sensitive
for 2019 and 2018. During 2019, positive trading-related revenue positions on our balance sheet.
was recorded for 98 percent of the trading days, of which 80 We prepare forward-looking forecasts of net interest income.
percent were daily trading gains of over $25 million, and the largest The baseline forecast takes into consideration expected future
loss was $35 million. This compares to 2018 where positive business growth, ALM positioning and the direction of interest rate
trading-related revenue was recorded for 98 percent of the trading movements as implied by the market-based forward curve. We
days, of which 79 percent were daily trading gains of over $25 then measure and evaluate the impact that alternative interest
million. 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
Table 49 Asset and Liability Management Interest Rate and Foreign Exchange Contracts
December 31, 2019
Expected Maturity
Average
(Dollars in millions, average estimated duration in Fair Estimated
years) Value Total 2020 2021 2022 2023 2024 Thereafter Duration
Receive-fixed interest rate swaps (1) $ 12,370 6.47
Notional amount $215,123 $ 16,347 $ 14,642 $ 21,616 $ 36,356 $ 21,257 $104,905
Weighted-average fixed-rate 2.68% 2.68% 3.17% 2.48% 2.36% 2.55% 2.79%
Pay-fixed interest rate swaps (1) (2,669) 6.99
Notional amount $ 69,586 $ 4,344 $ 2,117 $ — $ 13,993 $ 8,194 $ 40,938
Weighted-average fixed-rate 2.36% 2.16% 2.15% —% 2.52% 2.26% 2.35%
Same-currency basis swaps (2) (290)
Notional amount $152,160 $ 18,857 $ 18,590 $ 4,306 $ 2,017 $ 14,567 $ 93,823
Foreign exchange basis swaps (1, 3, 4) (1,258)
Notional amount 113,529 23,639 24,215 14,611 7,111 3,521 40,432
Foreign exchange contracts (1, 4, 5) 414
Notional amount (6) (53,106) (79,315) 4,539 2,674 2,340 4,432 12,224
Option products —
Notional amount 15 — — — 15 — —
Net ALM contracts $ 8,567
Mortgage Banking Risk Management rates, the value of the MSRs will increase driven by lower
We originate, fund and service mortgage loans, which subject us prepayment expectations. Because the interest rate risks of these
to credit, liquidity and interest rate risks, among others. We hedged items offset, we combine them into one overall hedged
determine whether loans will be held for investment or held for item with one combined economic hedge portfolio consisting of
sale at the time of commitment and manage credit and liquidity derivative contracts and securities.
risks by selling or securitizing a portion of the loans we originate. During 2019, 2018 and 2017, we recorded gains of $291
Interest rate risk and market risk can be substantial in the million, $244 million and $118 million related to the change in
mortgage business. Changes in interest rates and other market fair value of the MSRs, IRLCs and LHFS, net of gains and losses
factors impact the volume of mortgage originations. Changes in on the hedge portfolio. For more information on MSRs, see Note
interest rates also impact the value of interest rate lock 21 – Fair Value Measurements to the Consolidated Financial
commitments (IRLCs) and the related residential first mortgage Statements.
LHFS between the date of the IRLC and the date the loans are Compliance and Operational Risk Management
sold to the secondary market. An increase in mortgage interest Compliance risk is the risk of legal or regulatory sanctions, material
rates typically leads to a decrease in the value of these financial loss or damage to the reputation of the Corporation
instruments. Conversely, when there is an increase in interest arising from the failure of the Corporation to comply with the
Bank of America 2019 97
requirements of applicable laws, rules, regulations and our internal comprehensive information security program designed to protect
policies and procedures (collectively, applicable laws, rules and the Corporation by enabling preventative, detective and responsive
regulations). measures to combat information and cybersecurity risks. The
Operational risk is the risk of loss resulting from inadequate Board and the ERC provide cybersecurity and information security
or failed processes, people and systems or from external events. risk oversight for the Corporation and our Global Information
Operational risk may occur anywhere in the Corporation, including Security Team manages the day-to-day implementation of our
third-party business processes, and is not limited to operations information security program.
functions. Effects may extend beyond financial losses and may
result in reputational risk impacts. Operational risk includes legal Reputational Risk Management
risk. Additionally, operational risk is a component in the calculation Reputational risk is the risk that negative perceptions of the
of total risk-weighted assets used in the Basel 3 capital Corporation’s conduct or business practices may adversely impact
calculation. For more information on Basel 3 calculations, see its profitability or operations. Reputational risk may result from
Capital Management on page 66. many of the Corporation’s activities, including those related to the
FLUs and control functions are first and foremost responsible management of our strategic, operational, compliance and credit
for managing all aspects of their businesses, including their risks.
compliance and operational risk. FLUs and control functions are The Corporation manages reputational risk through
required to understand their business processes and related risks established policies and controls in its businesses and risk
and controls, including third-party dependencies, the related management processes to mitigate reputational risks in a timely
regulatory requirements, and monitor and report on the manner and through proactive monitoring and identification of
effectiveness of the control environment. In order to actively potential reputational risk events. If reputational risk events occur,
monitor and assess the performance of their processes and we focus on remediating the underlying issue and taking action to
controls, they must conduct comprehensive quality assurance minimize damage to the Corporation’s reputation. The Corporation
activities and identify issues and risks to remediate control gaps has processes and procedures in place to respond to events that
and weaknesses. FLUs and control functions must also adhere to give rise to reputational risk, including educating individuals and
compliance and operational risk appetite limits to meet strategic, organizations that influence public opinion, implementing external
capital and financial planning objectives. Finally, FLUs and control communication strategies to mitigate the risk, and informing key
functions are responsible for the proactive identification, stakeholders of potential reputational risks. The Corporation’s
management and escalation of compliance and operational risks organization and governance structure provides oversight of
across the Corporation. reputational risks, and reputational risk reporting is provided
Global Compliance and Operational Risk teams independently regularly and directly to management and the ERC, which provides
assess compliance and operational risk, monitor business primary oversight of reputational risk. In addition, each FLU has a
activities and processes, evaluate FLUs and control functions for committee, which includes representatives from Compliance,
adherence to applicable laws, rules and regulations, including Legal and Risk, that is responsible for the oversight of reputational
identifying issues and risks, determining and developing tests to risk. Such committees’ oversight includes providing approval for
be conducted by the Enterprise Independent Testing unit, and business activities that present elevated levels of reputational
reporting on the state of the control environment. Enterprise risks.
Independent Testing, an independent testing function within IRM,
works with Global Compliance and Operational Risk, the FLUs and Complex Accounting Estimates
control functions in the identification of testing needs and test Our significant accounting principles, as described in Note 1 -
design, and is accountable for test execution, reporting and Summary of Significant Accounting Principles to the Consolidated
analysis of results. Financial Statements, are essential in understanding the MD&A.
Corporate Audit provides independent assessment and Many of our significant accounting principles require complex
validation through testing of key compliance and operational risk judgments to estimate the values of assets and liabilities. We
processes and controls across the Corporation. have procedures and processes in place to facilitate making these
The Corporation's Global Compliance Enterprise Policy and judgments.
Operational Risk Management - Enterprise Policy set the The more judgmental estimates are summarized in the following
requirements for reporting compliance and operational risk discussion. We have identified and described the development of
information to executive management as well as the Board or the variables most important in the estimation processes that
appropriate Board-level committees in support of Global involve mathematical models to derive the estimates. In many
Compliance and Operational Risk’s responsibilities for conducting cases, there are numerous alternative judgments that could be
independent oversight of our compliance and operational risk used in the process of determining the inputs to the models. Where
management activities. The Board provides oversight of alternatives exist, we have used the factors that we believe
compliance risk through its Audit Committee and the ERC, and represent the most reasonable value in developing the inputs.
operational risk through the ERC. Actual performance that differs from our estimates of the key
A key operational risk facing the Corporation is information variables could materially impact our results of operations.
security, which includes cybersecurity. Cybersecurity risk Separate from the possible future impact to our results of
represents, among other things, exposure to failures or operations from input and model variables, the value of our lending
interruptions of service or breaches of security, including as a portfolio and market-sensitive assets and liabilities may change
result of malicious technological attacks, that impact the subsequent to the balance sheet date, often significantly, due to
confidentiality, availability or integrity of our, or third the nature and magnitude of future credit and market conditions.
parties' (including their downstream service providers, the Such credit and market conditions may change quickly and in
financial services industry and financial data aggregators) unforeseen ways and the resulting volatility could have a
operations, systems or data, including sensitive corporate and significant, negative effect on future operating results. These
customer information. The Corporation manages information fluctuations would not be indicative of deficiencies in our models
security risk in accordance with internal policies which govern our or inputs.
9898Bank of America
Bank 2019
of America 2019
Allowance for Credit Losses information, see Note 1 – Summary of Significant Accounting
The allowance for credit losses, which includes the allowance for Principles to the Consolidated Financial Statements.
loan and lease losses and the reserve for unfunded lending
commitments, represents management’s estimate of probable Fair Value of Financial Instruments
incurred credit losses in the Corporation’s loan and lease portfolio Under applicable accounting standards, we are required to
excluding those loans accounted for under the fair value option. maximize the use of observable inputs and minimize the use of
The allowance for credit losses includes both quantitative and unobservable inputs in measuring fair value. We classify fair value
qualitative components. The qualitative component has a higher measurements of financial instruments and MSRs based on the
degree of management subjectivity, and includes factors such as three-level fair value hierarchy in the accounting standards.
concentrations, economic conditions and other considerations. The fair values of assets and liabilities may include
Our process for determining the allowance for credit losses is adjustments, such as market liquidity and credit quality, where
discussed in Note 1 – Summary of Significant Accounting Principles appropriate. Valuations of products using models or other
to the Consolidated Financial Statements. techniques are sensitive to assumptions used for the significant
Our estimate for the allowance for loan and lease losses is inputs. Where market data is available, the inputs used for
sensitive to the loss rates and expected cash flows from our valuation reflect that information as of our valuation date. Inputs
Consumer Real Estate and Credit Card and Other Consumer to valuation models are considered unobservable if they are
portfolio segments, as well as our U.S. small business commercial supported by little or no market activity. In periods of extreme
card portfolio within the Commercial portfolio segment. For each volatility, lessened liquidity or in illiquid markets, there may be
one-percent increase in the loss rates on loans collectively more variability in market pricing or a lack of market data to use
evaluated for impairment in our Consumer Real Estate portfolio in the valuation process. In keeping with the prudent application
segment, coupled with a one-percent decrease in the discounted of estimates and management judgment in determining the fair
cash flows on those loans individually evaluated for impairment value of assets and liabilities, we have in place various processes
within this portfolio segment, the allowance for loan and lease and controls that include: a model validation policy that requires
losses at December 31, 2019 would have increased $18 million. review and approval of quantitative models used for deal pricing,
Within our Credit Card and Other Consumer portfolio segment and financial statement fair value determination and risk
U.S. small business commercial card portfolio, for each one- quantification; a trading product valuation policy that requires
percent increase in the loss rates on loans collectively evaluated verification of all traded product valuations; and a periodic review
for impairment coupled with a one-percent decrease in the and substantiation of daily profit and loss reporting for all traded
expected cash flows on those loans individually evaluated for products. Primarily through validation controls, we utilize both
impairment, the allowance for loan and lease losses at December broker and pricing service inputs which can and do include both
31, 2019 would have increased $46 million. market-observable and internally-modeled values and/or valuation
Our allowance for loan and lease losses is sensitive to the risk inputs. Our reliance on this information is affected by our
ratings assigned to loans and leases within the Commercial understanding of how the broker and/or pricing service develops
portfolio segment (excluding the U.S. small business commercial its data with a higher degree of reliance applied to those that are
card portfolio). Assuming a downgrade of one level in the internal more directly observable and lesser reliance applied to those
risk ratings for commercial loans and leases, except loans and developed through their own internal modeling. For example, broker
leases already classified as Substandard and Doubtful as defined quotes in less active markets may only be indicative and therefore
by regulatory authorities, the allowance for loan and lease losses less reliable. These processes and controls are performed
would have increased $2.6 billion at December 31, 2019. independently of the business. For more information, see Note 21
The allowance for loan and lease losses as a percentage of – Fair Value Measurements and Note 22 – Fair Value Option to the
total loans and leases at December 31, 2019 was 0.97 percent Consolidated Financial Statements.
and these hypothetical increases in the allowance would raise the
Level 3 Assets and Liabilities
ratio to 1.24 percent.
Financial assets and liabilities, and MSRs, where values are based
These sensitivity analyses do not represent management’s
on valuation techniques that require inputs that are both
expectations of the deterioration in risk ratings or the increases
unobservable and are significant to the overall fair value
in loss rates but are provided as hypothetical scenarios to assess
measurement are classified as Level 3 under the fair value
the sensitivity of the allowance for loan and lease losses to
hierarchy established in applicable accounting standards. The fair
changes in key inputs. We believe the risk ratings and loss
value of these Level 3 financial assets and liabilities and MSRs
severities currently in use are appropriate and that the probability
is determined using pricing models, discounted cash flow
of the alternative scenarios outlined above occurring within a short
methodologies or similar techniques for which the determination
period of time is remote.
of fair value requires significant management judgment or
The process of determining the level of the allowance for credit
estimation.
losses requires a high degree of judgment. It is possible that
Level 3 financial instruments may be hedged with derivatives
others, given the same information, may at any point in time reach
classified as Level 1 or 2; therefore, gains or losses associated
different reasonable conclusions.
with Level 3 financial instruments may be offset by gains or losses
The processes, judgments and estimates described herein
associated with financial instruments classified in other levels of
relate to the accounting standard in effect through December 31,
the fair value hierarchy. The Level 3 gains and losses recorded in
2019. On January 1, 2020, the Corporation adopted the new
earnings did not have a significant impact on our liquidity or capital.
accounting standard that requires the measurement of the
We conduct a review of our fair value hierarchy classifications on
allowance for credit losses to be based on management’s best
a quarterly basis. Transfers into or out of Level 3 are made if the
estimate of lifetime expected credit losses inherent in the
significant inputs used in the financial models measuring the fair
Corporation’s relevant financial assets. The Corporation’s lifetime
values of the assets and liabilities became unobservable or
expected credit losses are determined using macroeconomic
observable, respectively, in the current marketplace. For more
forecast assumptions and management judgments applicable to
information on transfers into and out of Level 3 during 2019, 2018
and through the expected life of the loan portfolios. For more
Bank
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of America
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2019 99
99
and 2017, see Note 21 – Fair Value Measurements to the See Note 20 – Income Taxes to the Consolidated Financial
Consolidated Financial Statements. Statements for a table of significant tax attributes and additional
information. For more information, see Item 1A. Risk Factors of
Accrued Income Taxes and Deferred Tax Assets our 2019 Annual Report on Form 10-K.
Accrued income taxes, reported as a component of either other
assets or accrued expenses and other liabilities on the Goodwill and Intangible Assets
Consolidated Balance Sheet, represent the net amount of current The nature of and accounting for goodwill and intangible assets
income taxes we expect to pay to or receive from various taxing are discussed in Note 1 – Summary of Significant Accounting
jurisdictions attributable to our operations to date. We currently Principles, and Note 8 – Goodwill and Intangible Assets to the
file income tax returns in more than 100 jurisdictions and consider Consolidated Financial Statements.
many factors, including statutory, judicial and regulatory guidance, We completed our annual goodwill impairment test as of June
in estimating the appropriate accrued income taxes for each 30, 2019 for all of our reporting units that had goodwill. We
jurisdiction. performed that test by assessing qualitative factors to determine
Net deferred tax assets, reported as a component of other whether it is more likely than not that the fair value of each reporting
assets on the Consolidated Balance Sheet, represent the net unit is less than its respective carrying value. Factors considered
decrease in taxes expected to be paid in the future because of in the qualitative assessments include, among other things,
net operating loss (NOL) and tax credit carryforwards and because macroeconomic conditions, industry and market considerations,
of future reversals of temporary differences in the bases of assets financial performance of the respective reporting unit and other
and liabilities as measured by tax laws and their bases as reported relevant entity- and reporting-unit specific considerations. If based
in the financial statements. NOL and tax credit carryforwards result on the results of the qualitative assessment, it is more likely than
in reductions to future tax liabilities, and many of these attributes not that the fair value of a reporting unit is less than its carrying
can expire if not utilized within certain periods. We consider the value, a quantitative assessment is performed.
need for valuation allowances to reduce net deferred tax assets Based on our qualitative assessments, we determined that for
to the amounts that we estimate are more likely than not to be each reporting unit with goodwill, it was more likely than not that
realized. its respective fair value exceeded its carrying value, indicating
Consistent with the applicable accounting guidance, we monitor there was no impairment. For more information regarding goodwill
relevant tax authorities and change our estimates of accrued balances at June 30, 2019, see Note 8 – Goodwill and Intangible
income taxes and/or net deferred tax assets due to changes in Assets to the Consolidated Financial Statements.
income tax laws and their interpretation by the courts and
regulatory authorities. These revisions of our estimates, which Certain Contingent Liabilities
also may result from our income tax planning and from the For more information on the complex judgments associated with
resolution of income tax audit matters, may be material to our certain contingent liabilities, see Note 13 – Commitments and
operating results for any given period. Contingencies to the Consolidated Financial Statements.
100Bank
100 of America
Bank 2019
of America 2019
Non-GAAP Reconciliations
Tables 50 and 51 provide reconciliations of certain non-GAAP financial measures to GAAP financial measures.
102Bank
102 of America
Bank 2019
of America 2019
Table II Nonperforming Loans, Leases and Foreclosed Properties (1)
December 31
(Dollars in millions) 2019 2018 2017 2016 2015
Consumer
Residential mortgage $ 1,470 $ 1,893 $ 2,476 $ 3,056 $ 4,803
Home equity 536 1,893 2,644 2,918 3,337
Direct/Indirect consumer 47 56 46 28 24
Other consumer — — — 2 1
Total consumer (2) 2,053 3,842 5,166 6,004 8,165
Commercial
U.S. commercial 1,094 794 814 1,256 867
Non-U.S. commercial 43 80 299 279 158
Commercial real estate 280 156 112 72 93
Commercial lease financing 32 18 24 36 12
1,449 1,048 1,249 1,643 1,130
U.S. small business commercial 50 54 55 60 82
Total commercial (3) 1,499 1,102 1,304 1,703 1,212
Total nonperforming loans and leases 3,552 4,944 6,470 7,707 9,377
Foreclosed properties 285 300 288 377 459
Total nonperforming loans, leases and foreclosed properties $ 3,837 $ 5,244 $ 6,758 $ 8,084 $ 9,836
(1) Balances exclude foreclosed properties insured by certain government-guaranteed loans, principally FHA-insured loans, that entered foreclosure of $260 million, $488 million, $801 million, $1.2
billion and $1.4 billion at December 31, 2019, 2018, 2017, 2016 and 2015, respectively.
(2) In 2019, $422 million in interest income was estimated to be contractually due on $2.1 billion of consumer loans and leases classified as nonperforming at December 31, 2019, as presented in
the table above, plus $5.5 billion of TDRs classified as performing at December 31, 2019. Approximately $297 million of the estimated $422 million in contractual interest was received and included
in interest income for 2019.
(3) In 2019, $133 million in interest income was estimated to be contractually due on $1.5 billion of commercial loans and leases classified as nonperforming at December 31, 2019, as presented in
the table above, plus $1.3 billion of TDRs classified as performing at December 31, 2019. Approximately $88 million of the estimated $133 million in contractual interest was received and included
in interest income for 2019.
Table III Accruing Loans and Leases Past Due 90 Days or More (1)
December 31
(Dollars in millions) 2019 2018 2017 2016 2015
Consumer
Residential mortgage (2) $ 1,088 $ 1,884 $ 3,230 $ 4,793 $ 7,150
Credit card 1,042 994 900 782 789
Non-U.S. credit card — — — 66 76
Direct/Indirect consumer 33 38 40 34 39
Other consumer — — — 4 3
Total consumer 2,163 2,916 4,170 5,679 8,057
Commercial
U.S. commercial 106 197 144 106 113
Non-U.S. commercial 8 — 3 5 1
Commercial real estate 19 4 4 7 3
Commercial lease financing 20 29 19 19 15
153 230 170 137 132
U.S. small business commercial 97 84 75 71 61
Total commercial 250 314 245 208 193
Total accruing loans and leases past due 90 days or more $ 2,413 $ 3,230 $ 4,415 $ 5,887 $ 8,250
(1) Our policy is to classify consumer real estate-secured loans as nonperforming at 90 days past due, except the fully-insured loan portfolio and loans accounted for under the fair value option.
(2) Balances are fully-insured loans.
104Bank
104 of America
Bank 2019
of America 2019
Table V Allowance for Credit Losses (continued)
(Dollars in millions) 2019 2018 2017 2016 2015
Loan and allowance ratios (6):
Loans and leases outstanding at December 31 (7) $ 975,091 $ 942,546 $ 931,039 $ 908,812 $ 890,045
Allowance for loan and lease losses as a percentage of total loans and leases outstanding
at December 31 (7) 0.97% 1.02% 1.12% 1.26% 1.37%
Consumer allowance for loan and lease losses as a percentage of total consumer loans and
leases outstanding at December 31 (8) 0.98 1.08 1.18 1.36 1.63
Commercial allowance for loan and lease losses as a percentage of total commercial loans
and leases outstanding at December 31 (9) 0.96 0.97 1.05 1.16 1.11
Average loans and leases outstanding (7) $ 951,583 $ 927,531 $ 911,988 $ 892,255 $ 869,065
Net charge-offs as a percentage of average loans and leases outstanding (7) 0.38% 0.41% 0.44% 0.43% 0.50%
Allowance for loan and lease losses as a percentage of total nonperforming loans and
leases at December 31 265 194 161 149 130
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs 2.58 2.55 2.61 3.00 2.82
Amounts included in allowance for loan and lease losses for loans and leases that are
excluded from nonperforming loans and leases at December 31 (10) $ 4,151 $ 4,031 $ 3,971 $ 3,951 $ 4,518
Allowance for loan and lease losses as a percentage of total nonperforming loans and
leases, excluding the allowance for loan and lease losses for loans and leases that are
excluded from nonperforming loans and leases at December 31 (10) 148% 113% 99% 98% 82%
(6) Loan and allowance ratios for 2016 include $243 million of non-U.S. credit card allowance for loan and lease losses and $9.2 billion of ending non-U.S. credit card loans, which were sold in 2017.
(7) Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option of $8.3 billion, $4.3 billion, $5.7 billion, $7.1 billion and $6.9 billion at December 31,
2019, 2018, 2017, 2016 and 2015, respectively. Average loans accounted for under the fair value option were $6.8 billion, $5.5 billion, $6.7 billion, $8.2 billion and $7.7 billion in 2019, 2018,
2017, 2016 and 2015, respectively.
(8) Excludes consumer loans accounted for under the fair value option of $594 million, $682 million, $928 million, $1.1 billion and $1.9 billion at December 31, 2019, 2018, 2017, 2016 and 2015,
respectively.
(9) Excludes commercial loans accounted for under the fair value option of $7.7 billion, $3.7 billion, $4.8 billion, $6.0 billion and $5.1 billion at December 31, 2019, 2018, 2017, 2016 and 2015,
respectively.
(10) Primarily includes amounts allocated to credit card and unsecured consumer lending portfolios in Consumer Banking and, in 2016 and 2015, the non-U.S. credit card portfolio in All Other.
106 Bank
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Bank 2019
of America 2019
Report of Management on Internal Control Over Financial Reporting
Bank of America Corporation and Subsidiaries
The management of Bank of America Corporation is responsible Management assessed the effectiveness of the Corporation’s
for establishing and maintaining adequate internal control over internal control over financial reporting as of December 31, 2019
financial reporting. based on the framework set forth by the Committee of Sponsoring
The Corporation’s internal control over financial reporting is a Organizations of the Treadway Commission in Internal Control –
process designed to provide reasonable assurance regarding the Integrated Framework (2013). Based on that assessment,
reliability of financial reporting and the preparation of financial management concluded that, as of December 31, 2019, the
statements for external purposes in accordance with accounting Corporation’s internal control over financial reporting is effective.
principles generally accepted in the United States of America. The The Corporation’s internal control over financial reporting
Corporation’s internal control over financial reporting includes as of December 31, 2019 has been audited by
those policies and procedures that (i) pertain to the maintenance PricewaterhouseCoopers, LLP, an independent registered public
of records that, in reasonable detail, accurately and fairly reflect accounting firm, as stated in their accompanying report which
the transactions and dispositions of the assets of the Corporation; expresses an unqualified opinion on the effectiveness of the
(ii) provide reasonable assurance that transactions are recorded Corporation’s internal control over financial reporting as of
as necessary to permit preparation of financial statements in December 31, 2019.
accordance with accounting principles generally accepted in the
United States of America, and that receipts and expenditures of
the Corporation are being made only in accordance with
authorizations of management and directors of the Corporation;
and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition Brian T. Moynihan
of the Corporation’s assets that could have a material effect on Chairman, Chief Executive Officer and President
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. Paul M. Donofrio
Chief Financial Officer
Bank
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of America
America 2019
2019 109
109
Bank of America Corporation and Subsidiaries
Noninterest income
Fees and commissions 33,015 33,078 33,341
Market making and similar activities 9,034 9,008 7,102
Other income 304 772 1,444
Total noninterest income 42,353 42,858 41,887
Total revenue, net of interest expense 91,244 91,020 87,126
Noninterest expense
Compensation and benefits 31,977 31,880 31,931
Occupancy and equipment 6,588 6,380 6,264
Information processing and communications 4,646 4,555 4,530
Product delivery and transaction related 2,762 2,857 3,041
Marketing 1,934 1,674 1,746
Professional fees 1,597 1,699 1,888
Other general operating 5,396 4,109 5,117
Total noninterest expense 54,900 53,154 54,517
Income before income taxes 32,754 34,584 29,213
Income tax expense 5,324 6,437 10,981
Net income $ 27,430 $ 28,147 $ 18,232
Preferred stock dividends 1,432 1,451 1,614
Net income applicable to common shareholders $ 25,998 $ 26,696 $ 16,618
Liabilities
Deposits in U.S. offices:
Noninterest-bearing $ 403,305 $ 412,587
Interest-bearing (includes $508 and $492 measured at fair value) 940,731 891,636
Deposits in non-U.S. offices:
Noninterest-bearing 13,719 14,060
Interest-bearing 77,048 63,193
Total deposits 1,434,803 1,381,476
Federal funds purchased and securities loaned or sold under agreements to repurchase
(includes $16,008 and $28,875 measured at fair value) 165,109 186,988
Trading account liabilities 83,270 68,220
Derivative liabilities 38,229 37,891
Short-term borrowings (includes $3,941 and $1,648 measured at fair value) 24,204 20,189
Accrued expenses and other liabilities (includes $15,434 and $20,075 measured at fair value
and $813 and $797 of reserve for unfunded lending commitments) 182,798 165,026
Long-term debt (includes $34,975 and $27,689 measured at fair value) 240,856 229,392
Total liabilities 2,169,269 2,089,182
Commitments and contingencies (Note 7 – Securitizations and Other Variable Interest Entities
and Note 13 – Commitments and Contingencies)
Shareholders’ equity
Preferred stock, $0.01 par value; authorized – 100,000,000 shares; issued and outstanding – 3,887,440 and 3,843,140 shares 23,401 22,326
Common stock and additional paid-in capital, $0.01 par value; authorized – 12,800,000,000 shares;
issued and outstanding – 8,836,148,954 and 9,669,286,370 shares 91,723 118,896
Retained earnings 156,319 136,314
Accumulated other comprehensive income (loss) (6,633) (12,211)
Total shareholders’ equity 264,810 265,325
Total liabilities and shareholders’ equity $ 2,434,079 $ 2,354,507
Assets of consolidated variable interest entities included in total assets above (isolated to settle the liabilities of the variable interest entities)
Trading account assets $ 5,811 $ 5,798
Loans and leases 38,837 43,850
Allowance for loan and lease losses (807) (912)
Loans and leases, net of allowance 38,030 42,938
All other assets 540 337
Total assets of consolidated variable interest entities $ 44,381 $ 49,073
Liabilities of consolidated variable interest entities included in total liabilities above
Short-term borrowings $ 2,175 $ 742
Long-term debt (includes $8,717 and $10,943 of non-recourse debt) 8,718 10,944
All other liabilities (includes $19 and $27 of non-recourse liabilities) 22 30
Total liabilities of consolidated variable interest entities $ 10,915 $ 11,716
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The Corporation performs periodic and systematic detailed lease losses unless these are secured consumer loans that are
reviews of its lending portfolios to identify credit risks and to solely dependent on collateral for repayment, in which case the
assess the overall collectability of those portfolios. The allowance amount that exceeds the fair value of the collateral is charged off.
on certain homogeneous consumer loan portfolios, which Generally, the Corporation initially estimates the fair value of
generally consist of consumer real estate loans within the the collateral securing these consumer real estate-secured loans
Consumer Real Estate portfolio segment and credit card loans using an automated valuation model (AVM). An AVM is a tool that
within the Credit Card and Other Consumer portfolio segment, is estimates the value of a property by reference to market data
based on aggregated portfolio segment evaluations generally by including sales of comparable properties and price trends specific
product type. Loss forecast models are utilized for these portfolios to the Metropolitan Statistical Area in which the property being
which consider a variety of factors including, but not limited to, valued is located. In the event that an AVM value is not available,
historical loss experience, estimated defaults or foreclosures the Corporation utilizes publicized indices or if these methods
based on portfolio trends, delinquencies, bankruptcies, economic provide less reliable valuations, the Corporation uses appraisals
conditions, credit scores and the amount of loss in the event of or broker price opinions to estimate the fair value of the collateral.
default. While there is inherent imprecision in these valuations, the
For consumer loans secured by residential real estate, using Corporation believes that they are representative of the portfolio
statistical modeling methodologies, the Corporation estimates the in the aggregate.
number of loans that will default based on the individual loan In addition to the allowance for loan and lease losses, the
attributes aggregated into pools of homogeneous loans with Corporation also estimates probable losses related to unfunded
similar attributes. The attributes that are most significant to the lending commitments, such as letters of credit, financial
probability of default and are used to estimate defaults include guarantees and binding unfunded loan commitments. Unfunded
refreshed loan-to-value (LTV) or, in the case of a subordinated lien, lending commitments are subject to individual reviews and are
refreshed combined LTV (CLTV), borrower credit score, months analyzed and segregated by risk according to the Corporation’s
since origination and geography, all of which are further broken internal risk rating scale. These risk classifications, in conjunction
down by present collection status (whether the loan is current, with an analysis of historical loss experience, utilization
delinquent, in default or in bankruptcy). The severity or loss given assumptions, current economic conditions, performance trends
default is estimated based on the refreshed LTV for first-lien within the portfolio and any other pertinent information, result in
mortgages or CLTV for subordinated liens. The estimates are the estimation of the reserve for unfunded lending commitments.
based on the Corporation’s historical experience with the loan The allowance for credit losses related to the loan and lease
portfolio, adjusted to reflect an assessment of environmental portfolio is reported separately on the Consolidated Balance Sheet
factors not yet reflected in the historical data underlying the loss whereas the reserve for unfunded lending commitments is
estimates, such as changes in real estate values, local and reported on the Consolidated Balance Sheet in accrued expenses
national economies, underwriting standards and the regulatory and other liabilities. The provision for credit losses related to the
environment. The probability of default models also incorporate loan and lease portfolio and unfunded lending commitments is
recent experience with modification programs including re-defaults reported in the Consolidated Statement of Income.
subsequent to modification, a loan’s default history prior to
modification and the change in borrower payments post- Nonperforming Loans and Leases, Charge-offs and
modification. On home equity loans where the Corporation holds Delinquencies
only a second-lien position and foreclosure is not the best Nonperforming loans and leases generally include loans and
alternative, the loss severity is estimated at 100 percent. leases that have been placed on nonaccrual status. Loans
The allowance on certain commercial loans (except business accounted for under the fair value option and LHFS are not reported
card and certain small business loans) is calculated using loss as nonperforming.
rates delineated by risk rating and product type. Factors considered In accordance with the Corporation’s policies, consumer real
when assessing loss rates include the value of the underlying estate-secured loans, including residential mortgages and home
collateral, if applicable, the industry of the obligor, and the obligor’s equity loans, are generally placed on nonaccrual status and
liquidity and other financial indicators along with certain qualitative classified as nonperforming at 90 days past due unless repayment
factors. These statistical models are updated regularly for changes of the loan is insured by the Federal Housing Administration (FHA)
in economic and business conditions. Included in the analysis of or through individually insured long-term standby agreements with
consumer and commercial loan portfolios are qualitative Fannie Mae (FNMA) or Freddie Mac (FHLMC) (the fully-insured
estimates which are maintained to cover uncertainties that affect portfolio). Residential mortgage loans in the fully-insured portfolio
the Corporation’s estimate of probable losses including domestic are not placed on nonaccrual status and, therefore, are not
and global economic uncertainty and large single-name defaults. reported as nonperforming. Junior-lien home equity loans are
For individually impaired loans, which include nonperforming placed on nonaccrual status and classified as nonperforming when
commercial loans as well as consumer and commercial loans and the underlying first-lien mortgage loan becomes 90 days past due
leases modified in a troubled debt restructuring (TDR), even if the junior-lien loan is current. The outstanding balance of
management measures impairment primarily based on the present real estate-secured loans that is in excess of the estimated
value of payments expected to be received, discounted at the property value less costs to sell is charged off no later than the
loans’ original effective contractual interest rates. Credit card end of the month in which the loan becomes 180 days past due
loans are discounted at the portfolio average contractual annual unless the loan is fully insured, or for loans in bankruptcy, within
percentage rate, excluding promotionally priced loans, in effect 60 days of receipt of notification of filing, with the remaining
prior to restructuring. Impaired loans and TDRs may also be balance classified as nonperforming.
measured based on observable market prices, or for loans that Consumer loans secured by personal property, credit card loans
are solely dependent on the collateral for repayment, the estimated and other unsecured consumer loans are not placed on nonaccrual
fair value of the collateral less costs to sell. If the recorded status prior to charge-off and, therefore, are not reported as
investment in impaired loans exceeds this amount, a specific nonperforming loans, except for certain secured consumer loans,
allowance is established as part of the allowance for loan and including those that have been modified in a TDR. Personal
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unit level. A reporting unit is a business segment or one level below significant activities of the trust. The Corporation generally does
a business segment. not have the power to direct the most significant activities of a
The Corporation assesses the fair value of each reporting unit residential mortgage agency trust except in certain circumstances
against its carrying value, including goodwill, as measured by in which the Corporation holds substantially all of the issued
allocated equity. For purposes of goodwill impairment testing, the securities and has the unilateral right to liquidate the trust. The
Corporation utilizes allocated equity as a proxy for the carrying power to direct the most significant activities of a commercial
value of its reporting units. Allocated equity in the reporting units mortgage securitization trust is typically held by the special
is comprised of allocated capital plus capital for the portion of servicer or by the party holding specific subordinate securities
goodwill and intangibles specifically assigned to the reporting unit. which embody certain controlling rights. The Corporation
In performing its goodwill impairment testing, the Corporation consolidates a whole-loan securitization trust if it has the power
first assesses qualitative factors to determine whether it is more to direct the most significant activities and also holds securities
likely than not that the fair value of a reporting unit is less than issued by the trust or has other contractual arrangements, other
its carrying value. Qualitative factors include, among other things, than standard representations and warranties, that could
macroeconomic conditions, industry and market considerations, potentially be significant to the trust.
financial performance of the respective reporting unit and other The Corporation may also transfer trading account securities
relevant entity- and reporting-unit specific considerations. and AFS securities into municipal bond or resecuritization trusts.
If the Corporation concludes it is more likely than not that the The Corporation consolidates a municipal bond or resecuritization
fair value of a reporting unit is less than its carrying value, a trust if it has control over the ongoing activities of the trust such
quantitative assessment is performed. If the fair value of the as the remarketing of the trust’s liabilities or, if there are no ongoing
reporting unit exceeds its carrying value, goodwill of the reporting activities, sole discretion over the design of the trust, including
unit is considered not impaired; however, if the carrying value of the identification of securities to be transferred in and the structure
the reporting unit exceeds its fair value, an additional step is of securities to be issued, and also retains securities or has
performed to measure potential impairment. liquidity or other commitments that could potentially be significant
This step involves calculating an implied fair value of goodwill to the trust. The Corporation does not consolidate a municipal
which is the excess of the fair value of the reporting unit, as bond or resecuritization trust if one or a limited number of third-
determined in the first step, over the aggregate fair values of the party investors share responsibility for the design of the trust or
assets, liabilities and identifiable intangibles as if the reporting have control over the significant activities of the trust through
unit was being acquired in a business combination. If the implied liquidation or other substantive rights.
fair value of goodwill exceeds the goodwill assigned to the reporting Other VIEs used by the Corporation include collateralized debt
unit, there is no impairment. If the goodwill assigned to a reporting obligations (CDOs), investment vehicles created on behalf of
unit exceeds the implied fair value of goodwill, an impairment customers and other investment vehicles. The Corporation does
charge is recorded for the excess. An impairment loss recognized not routinely serve as collateral manager for CDOs and, therefore,
cannot exceed the amount of goodwill assigned to a reporting unit. does not typically have the power to direct the activities that most
An impairment loss establishes a new basis in the goodwill, and significantly impact the economic performance of a CDO. However,
subsequent reversals of goodwill impairment losses are not following an event of default, if the Corporation is a majority holder
permitted under applicable accounting guidance. of senior securities issued by a CDO and acquires the power to
For intangible assets subject to amortization, an impairment manage its assets, the Corporation consolidates the CDO.
loss is recognized if the carrying value of the intangible asset is The Corporation consolidates a customer or other investment
not recoverable and exceeds fair value. The carrying value of the vehicle if it has control over the initial design of the vehicle or
intangible asset is considered not recoverable if it exceeds the manages the assets in the vehicle and also absorbs potentially
sum of the undiscounted cash flows expected to result from the significant gains or losses through an investment in the vehicle,
use of the asset. Intangible assets deemed to have indefinite derivative contracts or other arrangements. The Corporation does
useful lives are not subject to amortization. An impairment loss not consolidate an investment vehicle if a single investor controlled
is recognized if the carrying value of the intangible asset with an the initial design of the vehicle or manages the assets in the
indefinite life exceeds its fair value. vehicles or if the Corporation does not have a variable interest
that could potentially be significant to the vehicle.
Variable Interest Entities Retained interests in securitized assets are initially recorded
A VIE is an entity that lacks equity investors or whose equity at fair value. In addition, the Corporation may invest in debt
investors do not have a controlling financial interest in the entity securities issued by unconsolidated VIEs. Fair values of these debt
through their equity investments. The Corporation consolidates a securities, which are classified as trading account assets, debt
VIE if it has both the power to direct the activities of the VIE that securities carried at fair value or HTM securities, are based
most significantly impact the VIE’s economic performance and an primarily on quoted market prices in active or inactive markets.
obligation to absorb losses or the right to receive benefits that Generally, quoted market prices for retained residual interests are
could potentially be significant to the VIE. On a quarterly basis, not available; therefore, the Corporation estimates fair values
the Corporation reassesses its involvement with the VIE and based on the present value of the associated expected future cash
evaluates the impact of changes in governing documents and its flows.
financial interests in the VIE. The consolidation status of the VIEs
with which the Corporation is involved may change as a result of Fair Value
such reassessments. The Corporation measures the fair values of its assets and
The Corporation primarily uses VIEs for its securitization liabilities, where applicable, in accordance with accounting
activities, in which the Corporation transfers whole loans or debt guidance that requires an entity to base fair value on exit price.
securities into a trust or other vehicle. When the Corporation is Under this guidance, an entity is required to maximize the use of
the servicer of whole loans held in a securitization trust, including observable inputs and minimize the use of unobservable inputs
non-agency residential mortgages, home equity loans, credit cards, in measuring fair value. Under applicable accounting standards,
and other loans, the Corporation has the power to direct the most fair value measurements are categorized into one of three levels
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Brokerage fees include income earned from transaction-based Other Revenue Measurement and Recognition Policies
services that are performed as part of investment management The Corporation did not disclose the value of any open performance
services and are based on a fixed price per unit or as a percentage obligations at December 31, 2019, as its contracts with customers
of the total transaction amount. Brokerage fees also include generally have a fixed term that is less than one year, an open
distribution fees and sales commissions that are primarily in the term with a cancellation period that is less than one year, or
Global Wealth & Investment Management (GWIM) segment and are provisions that allow the Corporation to recognize revenue at the
earned over time. In addition, primarily in the Global Markets amount it has the right to invoice.
segment, brokerage fees are earned when the Corporation fills
customer orders to buy or sell various financial products or when Earnings Per Common Share
it acknowledges, affirms, settles and clears transactions and/or Earnings per common share (EPS) is computed by dividing net
submits trade information to the appropriate clearing broker. income allocated to common shareholders by the weighted-
Certain customers pay brokerage, clearing and/or exchange fees average common shares outstanding, excluding unvested common
imposed by relevant regulatory bodies or exchanges in order to shares subject to repurchase or cancellation. Net income allocated
execute or clear trades. These fees are recorded net and are not to common shareholders is net income adjusted for preferred
reflected in the transaction price, as the Corporation is an agent stock dividends including dividends declared, accretion of
for those services. discounts on preferred stock including accelerated accretion when
preferred stock is repaid early, and cumulative dividends related
Investment Banking Income to the current dividend period that have not been declared as of
Investment banking income includes underwriting income and period end, less income allocated to participating securities.
financial advisory services income. Underwriting consists of fees Diluted EPS is computed by dividing income allocated to common
earned for the placement of a customer’s debt or equity securities. shareholders plus dividends on dilutive convertible preferred stock
The revenue is generally earned based on a percentage of the and preferred stock that can be tendered to exercise warrants, by
fixed number of shares or principal placed. Once the number of the weighted-average common shares outstanding plus amounts
shares or notes is determined and the service is completed, the representing the dilutive effect of stock options outstanding,
underwriting fees are recognized. The Corporation incurs certain restricted stock, restricted stock units (RSUs), outstanding
out-of-pocket expenses, such as legal costs, in performing these warrants and the dilution resulting from the conversion of
services. These expenses are recovered through the revenue the convertible preferred stock, if applicable.
Corporation earns from the customer and are included in operating
expenses. Syndication fees represent fees earned as the agent Foreign Currency Translation
or lead lender responsible for structuring, arranging and Assets, liabilities and operations of foreign branches and
administering a loan syndication. subsidiaries are recorded based on the functional currency of each
Financial advisory services consist of fees earned for assisting entity. When the functional currency of a foreign operation is the
clients with transactions related to mergers and acquisitions and local currency, the assets, liabilities and operations are translated,
financial restructurings. Revenue varies depending on the size of for consolidation purposes, from the local currency to the U.S.
the transaction and scope of services performed and is generally dollar reporting currency at period-end rates for assets and
contingent on successful completion of the transaction. Revenue liabilities and generally at average rates for results of operations.
is typically recognized once the transaction is completed and all The resulting unrealized gains and losses are reported as a
services have been rendered. Additionally, the Corporation may component of accumulated OCI, net-of-tax. When the foreign
earn a fixed fee in merger and acquisition transactions to provide entity’s functional currency is the U.S. dollar, the resulting
a fairness opinion, with the fees recognized when the opinion is remeasurement gains or losses on foreign currency-denominated
delivered to the client. assets or liabilities are included in earnings.
Interest expense
Deposits 7,188 4,495 1,931
Short-term borrowings 7,208 5,839 3,538
Trading account liabilities 1,249 1,358 1,204
Long-term debt 6,700 6,915 5,667
Total interest expense 22,345 18,607 12,340
Net interest income $ 48,891 $ 48,162 $ 45,239
Noninterest income
Fees and commissions
Card income
Interchange fees (1) $ 3,834 $ 3,866 $ 3,777
Other card income 1,963 1,958 1,899
Total card income 5,797 5,824 5,676
Service charges
Deposit-related fees 6,588 6,667 6,708
Lending-related fees 1,086 1,100 1,110
Total service charges 7,674 7,767 7,818
Investment and brokerage services
Asset management fees 10,241 10,189 9,310
Brokerage fees 3,661 3,971 4,526
Total investment and brokerage services 13,902 14,160 13,836
Investment banking fees
Underwriting income 2,998 2,722 2,821
Syndication fees 1,184 1,347 1,499
Financial advisory services 1,460 1,258 1,691
Total investment banking fees 5,642 5,327 6,011
Total fees and commissions 33,015 33,078 33,341
Market making and similar activities 9,034 9,008 7,102
Other income 304 772 1,444
Total noninterest income $ 42,353 $ 42,858 $ 41,887
(1) Gross interchange fees were $10.0 billion, $9.5 billion and $8.8 billion for 2019, 2018 and 2017, respectively, and are presented net of $6.2 billion, $5.6 billion and $5.1 billion of expenses for
rewards and partner payments for the same periods.
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NOTE 3 Derivatives activities, see Note 1 – Summary of Significant Accounting
Principles. The following tables present derivative instruments
Derivative Balances included on the Consolidated Balance Sheet in derivative assets
Derivatives are entered into on behalf of customers, for trading or and liabilities at December 31, 2019 and 2018. Balances are
to support risk management activities. Derivatives used in risk presented on a gross basis, prior to the application of counterparty
management activities include derivatives that may or may not be and cash collateral netting. Total derivative assets and liabilities
designated in qualifying hedge accounting relationships. are adjusted on an aggregate basis to take into consideration the
Derivatives that are not designated in qualifying hedge accounting effects of legally enforceable master netting agreements and have
relationships are referred to as other risk management derivatives. been reduced by cash collateral received or paid.
For more information on the Corporation’s derivatives and hedging
Offsetting of Derivatives Sheet at December 31, 2019 and 2018 by primary risk (e.g.,
The Corporation enters into International Swaps and Derivatives interest rate risk) and the platform, where applicable, on which
Association, Inc. (ISDA) master netting agreements or similar these derivatives are transacted. Balances are presented on a
agreements with substantially all of the Corporation’s derivative gross basis, prior to the application of counterparty and cash
counterparties. Where legally enforceable, these master netting collateral netting. Total gross derivative assets and liabilities are
agreements give the Corporation, in the event of default by the adjusted on an aggregate basis to take into consideration the
counterparty, the right to liquidate securities held as collateral and effects of legally enforceable master netting agreements which
to offset receivables and payables with the same counterparty. include reducing the balance for counterparty netting and cash
For purposes of the Consolidated Balance Sheet, the Corporation collateral received or paid.
offsets derivative assets and liabilities and cash collateral held For more information on offsetting of securities financing
with the same counterparty where it has such a legally enforceable agreements, see Note 11 – Federal Funds Sold or Purchased,
master netting agreement. Securities Financing Agreements, Short-term Borrowings and
The following table presents derivative instruments included Restricted Cash.
in derivative assets and liabilities on the Consolidated Balance
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Offsetting of Derivatives (1)
Derivative Derivative Derivative Derivative
Assets Liabilities Assets Liabilities
(Dollars in billions) December 31, 2019 December 31, 2018
Interest rate contracts
Over-the-counter $ 203.1 $ 196.6 $ 174.2 $ 169.4
Exchange-traded 0.1 0.1 — —
Over-the-counter cleared 6.0 5.3 4.8 4.0
Foreign exchange contracts
Over-the-counter 69.2 73.1 82.5 86.3
Over-the-counter cleared 0.5 0.5 0.9 0.9
Equity contracts
Over-the-counter 21.3 17.8 24.6 14.6
Exchange-traded 26.4 22.8 16.1 15.1
Commodity contracts
Over-the-counter 2.8 4.2 3.5 4.5
Exchange-traded 0.8 0.8 1.0 0.9
Over-the-counter cleared — 0.1 — —
Credit derivatives
Over-the-counter 6.4 6.6 7.7 8.2
Over-the-counter cleared 2.5 2.2 2.5 2.3
Total gross derivative assets/liabilities, before netting
Over-the-counter 302.8 298.3 292.5 283.0
Exchange-traded 27.3 23.7 17.1 16.0
Over-the-counter cleared 9.0 8.1 8.2 7.2
Less: Legally enforceable master netting agreements and cash collateral received/paid
Over-the-counter (274.7) (269.3) (264.4) (259.2)
Exchange-traded (21.5) (21.5) (13.5) (13.5)
Over-the-counter cleared (8.1) (8.1) (7.2) (7.2)
Derivative assets/liabilities, after netting 34.8 31.2 32.7 26.3
Other gross derivative assets/liabilities (2) 5.7 7.0 11.0 11.6
Total derivative assets/liabilities 40.5 38.2 43.7 37.9
Less: Financial instruments collateral (3) (14.6) (16.1) (16.3) (8.6)
Total net derivative assets/liabilities $ 25.9 $ 22.1 $ 27.4 $ 29.3
(1) OTC derivatives include bilateral transactions between the Corporation and a particular counterparty. OTC-cleared derivatives include bilateral transactions between the Corporation and a counterparty
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 Corporation also utilizes derivatives such as interest rate options,
The Corporation’s ALM and risk management activities include the interest rate swaps, forward settlement contracts and eurodollar
use of derivatives to mitigate risk to the Corporation including futures to hedge certain market risks of MSRs.
derivatives designated in qualifying hedge accounting The Corporation uses foreign exchange contracts to manage
relationships and derivatives used in other risk management the foreign exchange risk associated with certain foreign currency-
activities. Interest rate, foreign exchange, equity, commodity and denominated assets and liabilities, as well as the Corporation’s
credit contracts are utilized in the Corporation's ALM and risk investments in non-U.S. subsidiaries. Exposure to loss on these
management activities. contracts will increase or decrease over their respective lives as
The Corporation maintains an overall interest rate risk currency exchange and interest rates fluctuate.
management strategy that incorporates the use of interest rate The Corporation purchases credit derivatives to manage credit
contracts, which are generally non-leveraged generic interest rate risk related to certain funded and unfunded credit exposures.
and basis swaps, options, futures and forwards, to minimize Credit derivatives include credit default swaps (CDS), total return
significant fluctuations in earnings caused by interest rate swaps and swaptions. These derivatives are recorded on the
volatility. The Corporation’s goal is to manage interest rate Consolidated Balance Sheet at fair value with changes in fair value
sensitivity and volatility so that movements in interest rates do recorded in other income.
not significantly adversely affect earnings or capital. As a result
of interest rate fluctuations, hedged fixed-rate assets and liabilities Derivatives Designated as Accounting Hedges
appreciate or depreciate in fair value. Gains or losses on the The Corporation uses various types of interest rate and foreign
derivative instruments that are linked to the hedged fixed-rate exchange derivative contracts to protect against changes in the
assets and liabilities are expected to substantially offset this fair value of its assets and liabilities due to fluctuations in interest
unrealized appreciation or depreciation. rates and exchange rates (fair value hedges). The Corporation also
Market risk, including interest rate risk, can be substantial in uses these types of contracts to protect against changes in the
the mortgage business. Market risk in the mortgage business is cash flows of its assets and liabilities, and other forecasted
the risk that values of mortgage assets or revenues will be transactions (cash flow hedges). The Corporation hedges its net
adversely affected by changes in market conditions such as investment in consolidated non-U.S. operations determined to
interest rate movements. To mitigate the interest rate risk in have functional currencies other than the U.S. dollar using forward
mortgage banking production income, the Corporation utilizes exchange contracts and cross-currency basis swaps, and by
forward loan sale commitments and other derivative instruments, issuing foreign currency-denominated debt (net investment
including purchased options, and certain debt securities. The hedges).
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.
Cash Flow and Net Investment Hedges earnings in the next 12 months. These net losses reclassified into
The following table summarizes certain information related to cash earnings are expected to primarily reduce net interest income
flow hedges and net investment hedges for 2019, 2018 and 2017. related to the respective hedged items. For terminated cash flow
Of the $400 million after-tax net loss ($526 million pretax) on hedges, the time period over which the majority of the forecasted
derivatives in accumulated OCI at December 31, 2019, $68 million transactions are hedged is approximately 3 years, with a maximum
after-tax ($90 million pretax) is expected to be reclassified into length of time for certain forecasted transactions of 16 years.
Gains and Losses on Derivatives Designated as Cash Flow and Net Investment Hedges
Gains (Losses) in Gains (Losses) in Income
Accumulated OCI on Derivatives Reclassified from Accumulated OCI
(Dollars in millions, amounts pretax) 2019 2018 2017 2019 2018 2017
Cash flow hedges
Interest rate risk on variable-rate assets (1) $ 671 $ (159) $ (109) $ (104) $ (165) $ (327)
Price risk on certain compensation plans (2) 34 4 59 (2) 27 148
Total $ 705 $ (155) $ (50) $ (106) $ (138) $ (179)
Net investment hedges
Foreign exchange risk (3) $ 22 $ 989 $ (1,588) $ 366 $ 411 $ 1,782
(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 of $154 million, $47 million and $120 million in 2019, 2018 and 2017, respectively.
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transactions where the Corporation acts as agent, which include
Gains and Losses on Other Risk Management Derivatives exchange-traded futures and options, fees are recorded in other
income.
(Dollars in millions) 2019 2018 2017 The following table, which includes both derivatives and non-
Interest rate risk on mortgage activities (1, 2) $ 315 $ (107) $ 8 derivative cash instruments, identifies the amounts in the
Credit risk on loans (2) (58) 9 (6) respective income statement line items attributable to the
Interest rate and foreign currency risk on
ALM activities (3) 1,112 3,278 (1,318) Corporation’s sales and trading revenue in Global Markets,
Price risk on certain compensation plans (4) 943 (495) 704 categorized by primary risk, for 2019, 2018 and 2017. This table
(1) Primarily related to hedges of interest rate risk on MSRs and IRLCs to originate mortgage loans includes debit valuation adjustment (DVA) and funding valuation
that will be held for sale. The net gains on IRLCs, which are not included in the table but are adjustment (FVA) gains (losses). Global Markets results in Note 24
considered derivative instruments, were $73 million, $47 million and $220 million in 2019,
2018 and 2017, respectively. – Business Segment Information are presented on a fully taxable-
(2) Gains (losses) on these derivatives are recorded in other income. equivalent (FTE) basis. The table below is not presented on an FTE
(3) Gains (losses) on these derivatives are recorded in market making and similar activities. Prior-
period amounts have been updated to conform to the current-period presentation. basis.
(4) Gains (losses) on these derivatives are recorded in compensation and benefits expense.
Transfers of Financial Assets with Risk Retained Sales and Trading Revenue
through Derivatives Market
The Corporation enters into certain transactions involving the making and Net
transfer of financial assets that are accounted for as sales where similar Interest
activities Income Other (1) Total
substantially all of the economic exposure to the transferred
(Dollars in millions) 2019
financial assets is retained through derivatives (e.g., interest rate
Interest rate risk $ 916 $ 1,831 $ 121 $ 2,868
and/or credit), but the Corporation does not retain control over
Foreign exchange risk 1,300 54 43 1,397
the assets transferred. As of December 31, 2019 and 2018, the Equity risk 3,565 (638) 1,574 4,501
Corporation had transferred $5.2 billion and $5.8 billion of non- Credit risk 1,158 1,800 511 3,469
U.S. government-guaranteed MBS to a third-party trust and Other risk 123 75 57 255
retained economic exposure to the transferred assets through Total sales and trading
derivative contracts. In connection with these transfers, the revenue $ 7,062 $ 3,122 $ 2,306 $ 12,490
The notional amount represents the maximum amount payable instruments equals the Corporation’s maximum exposure to loss.
by the Corporation for most credit derivatives. However, the The Corporation is not obligated to make any payments to the
Corporation does not monitor its exposure to credit derivatives entities under the terms of the securities owned.
based solely on the notional amount because this measure does
not take into consideration the probability of occurrence. As such, Credit-related Contingent Features and Collateral
the notional amount is not a reliable indicator of the Corporation’s The Corporation executes the majority of its derivative contracts
exposure to these contracts. Instead, a risk framework is used to in the OTC market with large, international financial institutions,
define risk tolerances and establish limits so that certain credit including broker-dealers and, to a lesser degree, with a variety of
risk-related losses occur within acceptable, predefined limits. non-financial companies. A significant majority of the derivative
Credit-related notes in the table above include investments in transactions are executed on a daily margin basis. Therefore,
securities issued by CDO, collateralized loan obligation (CLO) and events such as a credit rating downgrade (depending on the
credit-linked note vehicles. These instruments are primarily ultimate rating level) or a breach of credit covenants would typically
classified as trading securities. The carrying value of these require an increase in the amount of collateral required of the
counterparty, where applicable, and/or allow the Corporation to
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take additional protective measures such as early termination of
all trades. Further, as previously discussed on page 124, the Derivative Liabilities Subject to Unilateral Termination
Corporation enters into legally enforceable master netting Upon Downgrade at December 31, 2019
agreements which reduce risk by permitting closeout and netting
of transactions with the same counterparty upon the occurrence One Second
incremental incremental
of certain events. (Dollars in millions) notch notch
Certain of the Corporation’s derivative contracts contain credit Derivative liabilities $ 57 $ 783
risk-related contingent features, primarily in the form of ISDA Collateral posted 42 411
master netting agreements and credit support documentation that
enhance the creditworthiness of these instruments compared to Valuation Adjustments on Derivatives
other obligations of the respective counterparty with whom the The Corporation records credit risk valuation adjustments on
Corporation has transacted. These contingent features may be for derivatives in order to properly reflect the credit quality of the
the benefit of the Corporation as well as its counterparties with counterparties and its own credit quality. The Corporation
respect to changes in the Corporation’s creditworthiness and the calculates valuation adjustments on derivatives based on a
mark-to-market exposure under the derivative transactions. At modeled expected exposure that incorporates current market risk
December 31, 2019 and 2018, the Corporation held cash and factors. The exposure also takes into consideration credit
securities collateral of $84.3 billion and $81.6 billion and posted mitigants such as enforceable master netting agreements and
cash and securities collateral of $69.1 billion and $56.5 billion in collateral. CDS spread data is used to estimate the default
the normal course of business under derivative agreements, probabilities and severities that are applied to the exposures.
excluding cross-product margining agreements where clients are Where no observable credit default data is available for
permitted to margin on a net basis for both derivative and secured counterparties, the Corporation uses proxies and other market
financing arrangements. data to estimate default probabilities and severity.
In connection with certain OTC derivative contracts and other Valuation adjustments on derivatives are affected by changes
trading agreements, the Corporation can be required to provide in market spreads, non-credit related market factors such as
additional collateral or to terminate transactions with certain interest rates and foreign exchange rates that affect the expected
counterparties in the event of a downgrade of the senior debt exposure, and other factors like changes in collateral
ratings of the Corporation or certain subsidiaries. The amount of arrangements and partial payments. Credit spreads and non-credit
additional collateral required depends on the contract and is factors can move independently. For example, for an interest rate
usually a fixed incremental amount and/or the market value of the swap, changes in interest rates may increase the expected
exposure. exposure, which would increase the counterparty credit valuation
At December 31, 2019, the amount of collateral, calculated adjustment (CVA). Independently, counterparty credit spreads may
based on the terms of the contracts, that the Corporation and tighten, which would result in an offsetting decrease to CVA.
certain subsidiaries could be required to post to counterparties The Corporation enters into risk management activities to
but had not yet posted to counterparties was $2.3 billion, including offset market driven exposures. The Corporation often hedges the
$913 million for Bank of America, National Association (BANA). counterparty spread risk in CVA with CDS. The Corporation hedges
Some counterparties are currently able to unilaterally other market risks in both CVA and DVA primarily with foreign
terminate certain contracts, or the Corporation or certain exchange and interest rate swaps. In certain instances, the net-
subsidiaries may be required to take other action such as find a of-hedge amounts in the table below move in the same direction
suitable replacement or obtain a guarantee. At December 31, as the gross amount or may move in the opposite direction. This
2019 and 2018, the liability recorded for these derivative contracts movement is a consequence of the complex interaction of the risks
was not significant. being hedged, resulting in limitations in the ability to perfectly
The following table presents the amount of additional collateral hedge all of the market exposures at all times.
that would have been contractually required by derivative contracts The table below presents CVA, DVA and FVA gains (losses) on
and other trading agreements at December 31, 2019 if the rating derivatives, which are recorded in market making and similar
agencies had downgraded their long-term senior debt ratings for activities, on a gross and net of hedge basis for 2019, 2018 and
the Corporation or certain subsidiaries by one incremental notch 2017. CVA gains reduce the cumulative CVA thereby increasing
and by an additional second incremental notch. 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
Additional Collateral Required to be Posted Upon
derivative assets reduce the cumulative FVA thereby increasing
Downgrade at December 31, 2019 the derivative assets balance. FVA gains related to derivative
One Second liabilities increase the cumulative FVA thereby decreasing the
incremental incremental derivative liabilities balance. FVA losses have the opposite impact.
(Dollars in millions) notch notch
Bank of America Corporation $ 480 $ 491
Bank of America, N.A. and subsidiaries (1) 222 353 Valuation Adjustments Gains (Losses) on Derivatives (1)
(1) Included in Bank of America Corporation collateral requirements in this table.
Gross Net Gross Net Gross Net
2019 2018 2017
The following table presents the derivative liabilities that would
Derivative assets (CVA) $ 72 $ 45 $ 77 $ 187 $ 330 $ 98
be subject to unilateral termination by counterparties and the
Derivative assets/liabilities
amounts of collateral that would have been contractually required (FVA) (2) 46 (15) 14 160 178
at December 31, 2019 if the long-term senior debt ratings for the Derivative liabilities (DVA) (147) (135) (19) (55) (324) (281)
Corporation or certain subsidiaries had been lower by one (1) At December 31, 2019, 2018 and 2017, cumulative CVA reduced the derivative assets balance
by $528 million, $600 million and $677 million, cumulative FVA reduced the net derivatives
incremental notch and by an additional second incremental notch. balance by $153 million, $151 million and $136 million, and cumulative DVA reduced the
derivative liabilities balance by $285 million, $432 million and $450 million, respectively.
Debt Securities
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(Dollars in millions) December 31, 2019
Available-for-sale debt securities
Mortgage-backed securities:
Agency $ 121,698 $ 1,013 $ (183) $ 122,528
Agency-collateralized mortgage obligations 4,587 78 (24) 4,641
Commercial 14,797 249 (25) 15,021
Non-agency residential (1) 948 138 (9) 1,077
Total mortgage-backed securities 142,030 1,478 (241) 143,267
U.S. Treasury and agency securities 67,700 1,023 (195) 68,528
Non-U.S. securities 11,987 6 (2) 11,991
Other taxable securities, substantially all asset-backed securities 3,874 67 — 3,941
Total taxable securities 225,591 2,574 (438) 227,727
Tax-exempt securities 17,716 202 (6) 17,912
Total available-for-sale debt securities 243,307 2,776 (444) 245,639
Other debt securities carried at fair value (2) 10,596 255 (23) 10,828
Total debt securities carried at fair value 253,903 3,031 (467) 256,467
Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities 215,730 4,433 (342) 219,821
Total debt securities (3, 4) $ 469,633 $ 7,464 $ (809) $ 476,288
At December 31, 2019, the accumulated net unrealized gain The gross realized gains and losses on sales of AFS debt
on AFS debt securities, excluding the amount related to debt securities for 2019, 2018 and 2017 are presented in the table
securities previously transferred to held to maturity, included in below.
accumulated OCI was $1.8 billion, net of the related income tax
expense of $569 million. The Corporation had nonperforming AFS
debt securities of $9 million and $11 million at December 31,
Gains and Losses on Sales of AFS Debt Securities
2019 and 2018. (Dollars in millions) 2019 2018 2017
At December 31, 2019, the Corporation held equity securities Gross gains $ 336 $ 169 $ 352
at an aggregate fair value of $891 million and other equity Gross losses (119) (15) (97)
securities, as valued under the measurement alternative, at cost Net gains on sales of AFS debt securities $ 217 $ 154 $ 255
of $183 million, both of which are included in other assets. At Income tax expense attributable to realized
December 31, 2019, the Corporation also held equity securities net gains on sales of AFS debt securities $ 54 $ 37 $ 97
at fair value of $1.0 billion included in time deposits placed and
other short-term investments.
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The table below presents the fair value and the associated gross unrealized losses on AFS debt securities and whether these
securities have had gross unrealized losses for less than 12 months or for 12 months or longer at December 31, 2019 and 2018.
In 2019, 2018 and 2017, the Corporation had $24 million, assumptions such as default rates, loss severity and prepayment
$33 million and $41 million, respectively, of credit-related OTTI rates. Assumptions used for the underlying loans that support the
losses on AFS debt securities which were recognized in other MBS can vary widely from loan to loan and are influenced by such
income. The amount of non-credit related OTTI losses for these factors as loan interest rate, geographic location of the borrower,
AFS debt securities, which is recognized in OCI, was not significant borrower characteristics and collateral type. Based on these
for all periods presented. assumptions, the Corporation then determines how the underlying
The cumulative OTTI credit losses recognized in income on AFS collateral cash flows will be distributed to each MBS issued from
debt securities that the Corporation does not intend to sell were the applicable special purpose entity. Expected principal and
$85 million, $120 million and $274 million at December 31, interest cash flows on an impaired AFS debt security are
2019, 2018 and 2017, respectively. discounted using the effective yield of each individual impaired
The Corporation estimates the portion of a loss on a security AFS debt security.
that is attributable to credit using a discounted cash flow model Significant assumptions used in estimating the expected cash
and estimates the expected cash flows of the underlying collateral flows for measuring credit losses on non-agency residential
using internal credit, interest rate and prepayment risk models mortgage-backed securities (RMBS) were as follows at December
that incorporate management’s best estimate of current key 31, 2019.
Annual constant prepayment speed and loss severity rates are by collateral type were 7.8 percent for prime, 11.6 percent for Alt-
projected considering collateral characteristics such as LTV, A and 13.6 percent for subprime at December 31, 2019.
creditworthiness of borrowers as measured using Fair Isaac The remaining contractual maturity distribution and yields of
Corporation (FICO) scores, and geographic concentrations. The the Corporation’s debt securities carried at fair value and HTM
weighted-average severity by collateral type was 12.9 percent for debt securities at December 31, 2019 are summarized in the table
prime, 11.1 percent for Alt-A and 18.8 percent for subprime at below. Actual duration and yields may differ as prepayments on
December 31, 2019. Default rates are projected by considering the loans underlying the mortgages or other ABS are passed
collateral characteristics including, but not limited to, LTV, FICO through to the Corporation.
and geographic concentration. Weighted-average life default rates
Maturities of Debt Securities Carried at Fair Value and Held-to-maturity Debt Securities
Due in One Due after One Year Due after Five Years Due after
Year or Less through Five Years through Ten Years Ten Years Total
(Dollars in millions) Amount Yield (1) Amount Yield (1) Amount Yield (1) Amount Yield (1) Amount Yield (1)
Amortized cost of debt securities carried at fair value
Mortgage-backed securities:
Agency $ — —% $ 11 5.25% $ 66 4.56% $124,618 3.24% $124,695 3.24%
Agency-collateralized mortgage obligations — — — — 27 2.48 4,560 3.16 4,587 3.16
Commercial — — 3,806 2.37 10,136 2.57 868 2.99 14,810 2.54
Non-agency residential — — — — 12 — 2,157 9.26 2,169 9.22
Total mortgage-backed securities — — 3,817 2.38 10,241 2.58 132,203 3.33 146,261 3.25
U.S. Treasury and agency securities 1,350 0.92 35,544 1.67 30,789 2.25 20 2.45 67,703 1.92
Non-U.S. securities 15,648 1.17 2,598 1.03 7 4.17 96 6.74 18,349 1.18
Other taxable securities, substantially all asset-backed
securities 1,189 2.80 1,650 3.02 440 3.32 595 2.91 3,874 2.97
Total taxable securities 18,187 1.26 43,609 1.74 41,477 2.34 132,914 3.34 236,187 2.70
Tax-exempt securities 2,189 1.72 7,472 2.10 4,849 2.06 3,206 2.44 17,716 2.10
Total amortized cost of debt securities carried at
fair value $ 20,376 1.31 $ 51,081 1.79 $ 46,326 2.31 $ 136,120 3.32 $ 253,903 2.67
Amortized cost of HTM debt securities (2) $ 1,025 2.83 $ 48 3.57 $ 1,102 2.57 $ 213,555 3.19 $ 215,730 3.19
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NOTE 5 Outstanding Loans and Leases
The following tables present total outstanding loans and leases and an aging analysis for the Consumer Real Estate, Credit Card and
Other Consumer, and Commercial portfolio segments, by class of financing receivables, at December 31, 2019 and 2018.
Total Loans
Total Past Current or Accounted
90 Days or Due 30 Less Than for Under
30-59 Days 60-89 Days More Days 30 Days the Fair Total
Past Due (1) Past Due (1) Past Due (2) or More Past Due (3) Value Option Outstandings
(Dollars in millions) December 31, 2019
Consumer real estate
Core portfolio
Residential mortgage $ 1,378 $ 261 $ 565 $ 2,204 $ 223,566 $ 225,770
Home equity 135 70 198 403 34,823 35,226
Non-core portfolio
Residential mortgage 458 209 1,263 1,930 8,469 10,399
Home equity 34 16 72 122 4,860 4,982
Credit card and other consumer
Credit card 564 429 1,042 2,035 95,573 97,608
Direct/Indirect consumer (4) 297 85 35 417 90,581 90,998
Other consumer — — — — 192 192
Total consumer 2,866 1,070 3,175 7,111 458,064 465,175
Consumer loans accounted for under the fair value
option (5) $ 594 594
Total consumer loans and leases 2,866 1,070 3,175 7,111 458,064 594 465,769
Commercial
U.S. commercial 788 279 371 1,438 305,610 307,048
Non-U.S. commercial 35 23 8 66 104,900 104,966
Commercial real estate (6) 144 19 119 282 62,407 62,689
Commercial lease financing 100 56 39 195 19,685 19,880
U.S. small business commercial 119 56 107 282 15,051 15,333
Total commercial 1,186 433 644 2,263 507,653 509,916
Commercial loans accounted for under the fair value
option (5) 7,741 7,741
Total commercial loans and leases 1,186 433 644 2,263 507,653 7,741 517,657
Total loans and leases (7) $ 4,052 $ 1,503 $ 3,819 $ 9,374 $ 965,717 $ 8,335 $ 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.
(2) Consumer real estate includes fully-insured loans of $1.1 billion.
(3) Consumer real estate includes $856 million and direct/indirect consumer includes $45 million of nonperforming loans.
(4) Total outstandings primarily includes auto and specialty lending loans and leases of $50.4 billion, U.S. securities-based lending loans of $36.7 billion and non-U.S. consumer loans of $2.8 billion.
(5) Consumer loans accounted for under the fair value option includes residential mortgage loans of $257 million and home equity loans of $337 million. Commercial loans accounted for under the fair
value option includes U.S. commercial loans of $4.7 billion and non-U.S. commercial loans of $3.1 billion. For more information, see Note 21 – Fair Value Measurements and Note 22 – Fair Value
Option.
(6) Total outstandings includes U.S. commercial real estate loans of $59.0 billion and non-U.S. commercial real estate loans of $3.7 billion.
(7) Total outstandings includes loans and leases pledged as collateral of $25.9 billion. The Corporation also pledged $168.2 billion of loans with no related outstanding borrowings to secure potential
borrowing capacity with the Federal Reserve Bank and Federal Home Loan Bank.
The Corporation categorizes consumer real estate loans as severely delinquent. All of these loans are individually insured and
core and non-core based on loan and customer characteristics therefore the Corporation does not record an allowance for credit
such as origination date, product type, LTV, FICO score and losses related to these loans.
delinquency status consistent with its current consumer and During 2019, the Corporation sold $4.7 billion of consumer
mortgage servicing strategy. Generally, loans that were originated real estate compared to $11.6 billion in 2018.
after January 1, 2010, qualified under government-sponsored
enterprise (GSE) underwriting guidelines, or otherwise met the Nonperforming Loans and Leases
Corporation’s underwriting guidelines in place in 2015 are The Corporation classifies consumer real estate loans that have
characterized as core loans. All other loans are generally been discharged in Chapter 7 bankruptcy and not reaffirmed by
characterized as non-core loans and represent runoff portfolios. the borrower as TDRs, irrespective of payment history or
The Corporation has entered into long-term credit protection delinquency status, even if the repayment terms for the loans have
agreements with FNMA and FHLMC on loans totaling $7.5 billion not been otherwise modified. The Corporation continues to have
and $6.1 billion at December 31, 2019 and 2018, providing full a lien on the underlying collateral.
credit protection on residential mortgage loans that become
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The table below presents the Corporation’s nonperforming loans and leases including nonperforming TDRs, and loans accruing past
due 90 days or more at December 31, 2019 and 2018. Nonperforming LHFS are excluded from nonperforming loans and leases as
they are recorded at either fair value or the lower of cost or fair value. For more information on the criteria for classification as
nonperforming, see Note 1 – Summary of Significant Accounting Principles.
Credit Quality
Nonperforming Loans Accruing Past Due
and Leases 90 Days or More
December 31
(Dollars in millions) 2019 2018 2019 2018
Consumer real estate
Core portfolio
Residential mortgage (1) $ 883 $ 1,010 $ 176 $ 274
Home equity 363 955 — —
Non-core portfolio
Residential mortgage (1) 587 883 912 1,610
Home equity 173 938 — —
Credit card and other consumer
Credit card n/a n/a 1,042 994
Direct/Indirect consumer 47 56 33 38
Total consumer 2,053 3,842 2,163 2,916
Commercial
U.S. commercial 1,094 794 106 197
Non-U.S. commercial 43 80 8 —
Commercial real estate 280 156 19 4
Commercial lease financing 32 18 20 29
U.S. small business commercial 50 54 97 84
Total commercial 1,499 1,102 250 314
Total loans and leases $ 3,552 $ 4,944 $ 2,413 $ 3,230
(1)Residential mortgage loans in the core and non-core portfolios accruing past due 90 days or more are fully-insured loans. At December 31, 2019 and 2018, residential mortgage includes $740
million and $1.4 billion of loans on which interest has been curtailed by the FHA and therefore are no longer accruing interest, although principal is still insured, and $348 million and $498 million
of loans on which interest is still accruing.
n/a = not applicable
Credit Quality Indicators scores updated. FICO scores are also a primary credit quality
The Corporation monitors credit quality within its Consumer Real indicator for the Credit Card and Other Consumer portfolio segment
Estate, Credit Card and Other Consumer, and Commercial portfolio and the business card portfolio within U.S. small business
segments based on primary credit quality indicators. For more commercial. Within the Commercial portfolio segment, loans are
information on the portfolio segments, see Note 1 – Summary of evaluated using the internal classifications of pass rated or
Significant Accounting Principles. Within the Consumer Real Estate reservable criticized as the primary credit quality indicators. The
portfolio segment, the primary credit quality indicators are term reservable criticized refers to those commercial loans that
refreshed LTV and refreshed FICO score. Refreshed LTV measures are internally classified or listed by the Corporation as Special
the carrying value of the loan as a percentage of the value of the Mention, Substandard or Doubtful, which are asset quality
property securing the loan, refreshed quarterly. Home equity loans categories defined by regulatory authorities. These assets have
are evaluated using CLTV which measures the carrying value of an elevated level of risk and may have a high probability of default
the Corporation’s loan and available line of credit combined with or total loss. Pass rated refers to all loans not considered
any outstanding senior liens against the property as a percentage reservable criticized. In addition to these primary credit quality
of the value of the property securing the loan, refreshed quarterly. indicators, the Corporation uses other credit quality indicators for
FICO score measures the creditworthiness of the borrower based certain types of loans.
on the financial obligations of the borrower and the borrower’s The following tables present certain credit quality indicators
credit history. FICO scores are typically refreshed quarterly or more for the Corporation's Consumer Real Estate, Credit Card and Other
frequently. Certain borrowers (e.g., borrowers that have had debts Consumer, and Commercial portfolio segments, by class of
discharged in a bankruptcy proceeding) may not have their FICO financing receivables, at December 31, 2019 and 2018.
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Impaired Loans and Troubled Debt Restructurings Alternatively, consumer real estate TDRs that are considered to
A loan is considered impaired when, based on current information, be dependent solely on the collateral for repayment (e.g., due to
it is probable that the Corporation will be unable to collect all the lack of income verification) are measured based on the
amounts due from the borrower in accordance with the contractual estimated fair value of the collateral and a charge-off is recorded
terms of the loan. For more information, see Note 1 – Summary if the carrying value exceeds the fair value of the collateral.
of Significant Accounting Principles. Consumer real estate loans that reached 180 days past due prior
to modification had been charged off to their net realizable value,
Consumer Real Estate less costs to sell, before they were modified as TDRs in accordance
Impaired consumer real estate loans within the Consumer Real with established policy. Therefore, modifications of consumer real
Estate portfolio segment consist entirely of TDRs. Most estate loans that are 180 or more days past due as TDRs do not
modifications of consumer real estate loans meet the definition have an impact on the allowance for loan and lease losses nor
of TDRs when a binding offer is extended to a borrower. are additional charge-offs required at the time of modification.
Modifications of consumer real estate loans are done in Subsequent declines in the fair value of the collateral after a loan
accordance with government programs or the Corporation’s has reached 180 days past due are recorded as charge-offs. Fully-
proprietary programs. These modifications are considered to be insured loans are protected against principal loss, and therefore,
TDRs if concessions have been granted to borrowers experiencing the Corporation does not record an allowance for loan and lease
financial difficulties. Concessions may include reductions in losses on the outstanding principal balance, even after they have
interest rates, capitalization of past due amounts, principal and/ been modified in a TDR.
or interest forbearance, payment extensions, principal and/or At December 31, 2019 and 2018, remaining commitments to
interest forgiveness, or combinations thereof. lend additional funds to debtors whose terms have been modified
Prior to permanently modifying a loan, the Corporation may in a consumer real estate TDR were not significant. Consumer real
enter into trial modifications with certain borrowers under both estate foreclosed properties totaled $229 million and $244 million
government and proprietary programs. Trial modifications generally at December 31, 2019 and 2018. The carrying value of consumer
represent a three- to four-month period during which the borrower real estate loans, including fully-insured loans, for which formal
makes monthly payments under the anticipated modified payment foreclosure proceedings were in process at December 31, 2019
terms. Upon successful completion of the trial period, the was $1.6 billion. During 2019 and 2018, the Corporation
Corporation and the borrower enter into a permanent modification. reclassified $611 million and $670 million of consumer real estate
Binding trial modifications are classified as TDRs when the trial loans to foreclosed properties or, for properties acquired upon
offer is made and continue to be classified as TDRs regardless of foreclosure of certain government-guaranteed loans (principally
whether the borrower enters into a permanent modification. FHA-insured loans), to other assets. The reclassifications
Consumer real estate loans of $632 million that have been represent non-cash investing activities and, accordingly, are not
discharged in Chapter 7 bankruptcy with no change in repayment reflected in the Consolidated Statement of Cash Flows.
terms and not reaffirmed by the borrower were included in TDRs The following table provides the unpaid principal balance,
at December 31, 2019, of which $101 million were classified as carrying value and related allowance at December 31, 2019 and
nonperforming and $275 million were loans fully insured by the 2018 and the average carrying value and interest income
FHA. For more information on loans discharged in Chapter 7 recognized in 2019, 2018 and 2017 for impaired loans in the
bankruptcy, see Nonperforming Loans and Leases in this Note. Corporation’s Consumer Real Estate portfolio segment. Certain
Consumer real estate TDRs are measured primarily based on impaired consumer real estate loans do not have a related
the net present value of the estimated cash flows discounted at allowance as the current valuation of these impaired loans
the loan’s original effective interest rate. If the carrying value of a exceeded the carrying value, which is net of previously recorded
TDR exceeds this amount, a specific allowance is recorded as a charge-offs.
component of the allowance for loan and lease losses.
The table below presents the December 31, 2019, 2018 and 2017 unpaid principal balance, carrying value, and average pre- and
post-modification interest rates of consumer real estate loans that were modified in TDRs during 2019, 2018 and 2017. The following
Consumer Real Estate portfolio segment tables include loans that were initially classified as TDRs during the period and also loans
that had previously been classified as TDRs and were modified again during the period.
Consumer Real Estate – TDRs Entered into During 2019, 2018 and 2017
Unpaid Pre- Post-
Principal Carrying Modification Modification
Balance Value Interest Rate Interest Rate (1)
(Dollars in millions) December 31, 2019
Residential mortgage $ 464 $ 377 4.19% 4.13%
Home equity 141 101 5.04 4.31
Total $ 605 $ 478 4.39 4.17
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The table below presents the December 31, 2019, 2018 and 2017 carrying value for consumer real estate loans that were modified
in a TDR during 2019, 2018 and 2017, by type of modification.
The table below presents the carrying value of consumer real estate loans that entered into payment default during 2019, 2018
and 2017 that were modified in a TDR during the 12 months preceding payment default. A payment default for consumer real estate
TDRs is recognized when a borrower has missed three monthly payments (not necessarily consecutively) since modification.
Consumer Real Estate – TDRs Entering Payment Default that were Modified During the Preceding 12 Months
(Dollars in millions) 2019 2018 2017
Modifications under government programs $ 26 $ 39 $ 81
Modifications under proprietary programs 88 158 138
Loans discharged in Chapter 7 bankruptcy (1) 30 64 116
Trial modifications (2) 57 107 391
Total modifications $ 201 $ 368 $ 726
(1) Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.
(2) Includes trial modification offers to which the customer did not respond.
Credit Card and Other Consumer provide solutions to customers’ entire unsecured debt structures
Impaired loans within the Credit Card and Other Consumer portfolio (external programs). The Corporation classifies other secured
segment consist entirely of loans that have been modified in TDRs. consumer loans that have been discharged in Chapter 7
The Corporation seeks to assist customers that are experiencing bankruptcy as TDRs which are written down to collateral value and
financial difficulty by modifying loans while ensuring compliance placed on nonaccrual status no later than the time of discharge.
with federal and local laws and guidelines. Credit card and other For more information on the regulatory guidance on loans
consumer loan modifications generally involve reducing the discharged in Chapter 7 bankruptcy, see Nonperforming Loans and
interest rate on the account, placing the customer on a fixed Leases in this Note.
payment plan not exceeding 60 months and canceling the The following table provides the unpaid principal balance,
customer’s available line of credit, all of which are considered carrying value and related allowance at December 31, 2019 and
TDRs. The Corporation makes loan modifications directly with 2018 and the average carrying value for 2019, 2018 and 2017
borrowers for debt held only by the Corporation (internal programs). on TDRs within the Credit Card and Other Consumer portfolio
Additionally, the Corporation makes loan modifications for segment.
borrowers working with third-party renegotiation agencies that
The table below provides information on the Corporation’s Credit Card and Other Consumer TDR portfolio including the December
31, 2019, 2018 and 2017 unpaid principal balance, carrying value, and average pre- and post-modification interest rates of loans that
were modified in TDRs during 2019, 2018 and 2017.
Credit Card and Other Consumer – TDRs Entered into During 2019, 2018 and 2017
Credit card and other consumer loans are deemed to be in with foreclosure, short sale or other settlement agreements
payment default during the quarter in which a borrower misses the leading to termination or sale of the loan.
second of two consecutive payments. Payment defaults are one At the time of restructuring, the loans are remeasured to reflect
of the factors considered when projecting future cash flows in the the impact, if any, on projected cash flows resulting from the
calculation of the allowance for loan and lease losses for impaired modified terms. If there was no forgiveness of principal and the
credit card and other consumer loans. Based on historical interest rate was not decreased, the modification may have little
experience, the Corporation estimates that 14 percent of new or no impact on the allowance established for the loan. If a portion
credit card TDRs and 20 percent of new direct/indirect consumer of the loan is deemed to be uncollectible, a charge-off may be
TDRs may be in payment default within 12 months after recorded at the time of restructuring. Alternatively, a charge-off
modification. may have already been recorded in a previous period such that no
charge-off is required at the time of modification. For more
Commercial Loans information on modifications for the U.S. small business
Impaired commercial loans include nonperforming loans and TDRs commercial portfolio, see Credit Card and Other Consumer in this
(both performing and nonperforming). Modifications of loans to Note.
commercial borrowers that are experiencing financial difficulty are At December 31, 2019 and 2018, remaining commitments to
designed to reduce the Corporation’s loss exposure while providing lend additional funds to debtors whose terms have been modified
the borrower with an opportunity to work through financial in a commercial loan TDR were $445 million and $297 million.
difficulties, often to avoid foreclosure or bankruptcy. Each The balance of commercial TDRs in payment default was not
modification is unique and reflects the individual circumstances significant at December 31, 2019 and 2018.
of the borrower. Modifications that result in a TDR may include The table below provides information on impaired loans in the
extensions of maturity at a concessionary (below market) rate of Commercial loan portfolio segment including the unpaid principal
interest, payment forbearances or other actions designed to balance, carrying value and related allowance at December 31,
benefit the customer while mitigating the Corporation’s risk 2019 and 2018, and the average carrying value for 2019, 2018
exposure. Reductions in interest rates are rare. Instead, the and 2017. Certain impaired commercial loans do not have a
interest rates are typically increased, although the increased rate related allowance because the valuation of these impaired loans
may not represent a market rate of interest. Infrequently, exceeded the carrying value, which is net of previously recorded
concessions may also include principal forgiveness in connection charge-offs.
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Impaired Loans – Commercial
Unpaid Unpaid
Principal Carrying Related Principal Carrying Related
Balance Value Allowance Balance Value Allowance Average Carrying Value (1)
(Dollars in millions) December 31, 2019 December 31, 2018 2019 2018 2017
With no recorded allowance
U.S. commercial $ 534 $ 520 $ — $ 638 $ 616 $ — $ 635 $ 655 $ 772
Non-U.S. commercial 123 123 — 93 93 — 79 43 46
Commercial real estate 67 58 — — — — 96 44 69
Commercial lease financing 12 12 — — — — 5 3 —
With an allowance recorded
U.S. commercial $ 1,776 $ 1,574 $ 216 $ 1,437 $ 1,270 $ 121 $ 1,316 $ 1,162 $ 1,260
Non-U.S. commercial 113 113 9 155 149 30 218 327 463
Commercial real estate 322 236 64 247 162 16 149 46 73
Commercial lease financing 57 51 1 71 71 — 73 42 8
U.S. small business commercial (2) 91 77 30 83 72 29 75 73 73
Total
U.S. commercial $ 2,310 $ 2,094 $ 216 $ 2,075 $ 1,886 $ 121 $ 1,951 $ 1,817 $ 2,032
Non-U.S. commercial 236 236 9 248 242 30 297 370 509
Commercial real estate 389 294 64 247 162 16 245 90 142
Commercial lease financing 69 63 1 71 71 — 78 45 8
U.S. small business commercial (2) 91 77 30 83 72 29 75 73 73
(1) The related interest income recognized, which includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on nonaccruing
impaired loans for which the principal was considered collectible, was not significant in 2019, 2018 and 2017.
(2) Includes U.S. small business commercial renegotiated TDR loans and related allowance.
Loans Held-for-sale
The Corporation had LHFS of $9.2 billion and $10.4 billion at December 31, 2019 and 2018. Cash and non-cash proceeds from sales
and paydowns of loans originally classified as LHFS were $30.6 billion, $29.2 billion and $41.3 billion for 2019, 2018 and 2017,
respectively. Cash used for originations and purchases of LHFS totaled $28.9 billion, $28.1 billion and $43.5 billion for 2019, 2018
and 2017, respectively.
2018
Allowance for loan and lease losses, January 1 $ 1,720 $ 3,663 $ 5,010 $ 10,393
Loans and leases charged off (690) (4,037) (675) (5,402)
Recoveries of loans and leases previously charged off 664 823 152 1,639
Net charge-offs (26) (3,214) (523) (3,763)
Provision for loan and lease losses (492) 3,441 313 3,262
Other (1) (274) (16) (1) (291)
Allowance for loan and lease losses, December 31 928 3,874 4,799 9,601
Reserve for unfunded lending commitments, January 1 — — 777 777
Provision for unfunded lending commitments — — 20 20
Reserve for unfunded lending commitments, December 31 — — 797 797
Allowance for credit losses, December 31 $ 928 $ 3,874 $ 5,596 $ 10,398
2017
Allowance for loan and lease losses, January 1 $ 2,750 $ 3,229 $ 5,258 $ 11,237
Loans and leases charged off (770) (3,774) (1,075) (5,619)
Recoveries of loans and leases previously charged off 657 809 174 1,640
Net charge-offs (113) (2,965) (901) (3,979)
Provision for loan and lease losses (710) 3,437 654 3,381
Other (1) (207) (38) (1) (246)
Allowance for loan and lease losses, December 31 1,720 3,663 5,010 10,393
Reserve for unfunded lending commitments, January 1 — — 762 762
Provision for unfunded lending commitments — — 15 15
Reserve for unfunded lending commitments, December 31 — — 777 777
Allowance for credit losses, December 31 $ 1,720 $ 3,663 $ 5,787 $ 11,170
(1) Primarily represents write-offs of purchased credit-impaired loans, the net impact of portfolio sales, and transfers to LHFS.
NOTE 7 Securitizations and Other Variable arrangements. The Corporation’s maximum loss exposure does
not include losses previously recognized through write-downs of
Interest Entities assets.
The Corporation utilizes VIEs in the ordinary course of business The Corporation invests in ABS issued by third-party VIEs with
to support its own and its customers’ financing and investing which it has no other form of involvement and enters into certain
needs. The Corporation routinely securitizes loans and debt commercial lending arrangements that may also incorporate the
securities using VIEs as a source of funding for the Corporation use of VIEs, for example to hold collateral. These securities and
and as a means of transferring the economic risk of the loans or loans are included in Note 4 – Securities or Note 5 – Outstanding
debt securities to third parties. The assets are transferred into a Loans and Leases. In addition, the Corporation has used VIEs in
trust or other securitization vehicle such that the assets are legally connection with its funding activities.
isolated from the creditors of the Corporation and are not available The Corporation did not provide financial support to
to satisfy its obligations. These assets can only be used to settle consolidated or unconsolidated VIEs during 2019, 2018 and 2017
obligations of the trust or other securitization vehicle. The that it was not previously contractually required to provide, nor
Corporation also administers, structures or invests in other VIEs does it intend to do so.
including CDOs, investment vehicles and other entities. For more The Corporation had liquidity commitments, including written
information on the Corporation’s use of VIEs, see Note 1 – put options and collateral value guarantees, with certain
Summary of Significant Accounting Principles. unconsolidated VIEs of $1.1 billion and $218 million at December
The tables in this Note present the assets and liabilities of 31, 2019 and 2018.
consolidated and unconsolidated VIEs at December 31, 2019 and
2018 in situations where the Corporation has continuing First-lien Mortgage Securitizations
involvement with transferred assets or if the Corporation otherwise As part of its mortgage banking activities, the Corporation
has a variable interest in the VIE. The tables also present the securitizes a portion of the first-lien residential mortgage loans it
Corporation’s maximum loss exposure at December 31, 2019 and originates or purchases from third parties, generally in the form
2018 resulting from its involvement with consolidated VIEs and of RMBS guaranteed by GSEs, FNMA and FHLMC (collectively the
unconsolidated VIEs in which the Corporation holds a variable GSEs), or the Government National Mortgage Association (GNMA)
interest. The Corporation’s maximum loss exposure is based on primarily in the case of FHA-insured and U.S. Department of
the unlikely event that all of the assets in the VIEs become Veterans Affairs (VA)-guaranteed mortgage loans. Securitization
worthless and incorporates not only potential losses associated usually occurs in conjunction with or shortly after origination or
with assets recorded on the Consolidated Balance Sheet but also purchase, and the Corporation may also securitize loans held in
potential losses associated with off-balance sheet commitments, its residential mortgage portfolio. In addition, the Corporation may,
such as unfunded liquidity commitments and other contractual from time to time, securitize commercial mortgages it originates
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or purchases from other entities. The Corporation typically services the Corporation does not provide guarantees or recourse to the
the loans it securitizes. Further, the Corporation may retain securitization trusts other than standard representations and
beneficial interests in the securitization trusts including senior and warranties.
subordinate securities and equity tranches issued by the trusts. The table below summarizes select information related to first-
Except as described in Note 13 – Commitments and Contingencies, lien mortgage securitizations for 2019, 2018 and 2017.
The Corporation recognizes consumer MSRs from the sale or at December 31, 2019 and 2018. For more information on MSRs,
securitization of consumer real estate loans. The unpaid principal see Note 21 – Fair Value Measurements.
balance of loans serviced for investors, including residential During 2019, the Corporation deconsolidated agency
mortgage and home equity loans, totaled $192.1 billion and residential mortgage securitization trusts with total assets of $1.2
$226.6 billion at December 31, 2019 and 2018. Servicing fee billion. There were no significant deconsolidations in 2018 or
and ancillary fee income on serviced loans was $585 million, $710 2017.
million and $893 million during 2019, 2018 and 2017. Servicing The following table summarizes select information related to
advances on serviced loans, including loans serviced for others first-lien mortgage securitization trusts in which the Corporation
and loans held for investment, were $2.4 billion and $3.3 billion held a variable interest at December 31, 2019 and 2018.
Consolidated VIEs
Maximum loss exposure (1) $ 10,857 $ 13,296 $ 5 $ 7 $ 44 $ — $ — $ — $ — $ 76
On-balance sheet assets
Trading account assets $ 780 $ 1,318 $ 116 $ 150 $ 149 $ — $ — $ — $ — $ 76
Loans and leases, net 9,917 11,858 — — — — — — — —
All other assets 161 143 — — — — — — — —
Total assets $ 10,858 $ 13,319 $ 116 $ 150 $ 149 $ — $ — $ — $ — $ 76
Total liabilities $ 4 $ 26 $ 111 $ 143 $ 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 13
– Commitments and Contingencies and Note 21 – Fair Value Measurements.
(2) Principal balance outstanding includes loans where the Corporation was the transferor to securitization VIEs with which it has continuing involvement, which may include servicing the loans.
Consolidated VIEs
Maximum loss exposure $ 64 $ 85 $ 17,915 $ 18,800 $ 54 $ 128 $ 2,656 $ 1,540
On-balance sheet assets
Trading account assets $ — $ — $ — $ — $ 73 $ 366 $ 2,480 $ 1,553
Loans and leases 122 133 26,985 29,906 — — — —
Allowance for loan and lease losses (2) (5) (800) (901) — — — —
All other assets 3 4 119 136 — — 176 1
Total assets $ 123 $ 132 $ 26,304 $ 29,141 $ 73 $ 366 $ 2,656 $ 1,554
On-balance sheet liabilities
Short-term borrowings $ — $ — $ — $ — $ — $ — $ 2,175 $ 742
Long-term debt 64 55 8,372 10,321 19 238 — 12
All other liabilities — — 17 20 — — — —
Total liabilities $ 64 $ 55 $ 8,389 $ 10,341 $ 19 $ 238 $ 2,175 $ 754
(1) For unconsolidated home equity loan VIEs, the maximum loss exposure includes outstanding trust certificates issued by trusts in rapid amortization, net of recorded reserves. For both consolidated
and unconsolidated home equity loan VIEs, the maximum loss exposure excludes the reserve for representations and warranties obligations and corporate guarantees. For more information, see
Note 13 – Commitments and Contingencies.
(2) At December 31, 2019 and 2018, loans and leases in the consolidated credit card trust included $10.5 billion and $11.0 billion of seller’s interest.
(3) At December 31, 2019 and 2018, all other assets in the consolidated credit card trust included unbilled accrued interest and fees.
(4) The retained senior securities were valued using quoted market prices or observable market inputs (Level 2 of the fair value hierarchy).
(5) Total assets of VIEs includes loans the Corporation transferred with which it has continuing involvement, which may include servicing the loan.
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Other Variable Interest Entities
The table below summarizes select information related to other VIEs in which the Corporation held a variable interest at December 31,
2019 and 2018.
Other VIEs
Consolidated Unconsolidated Total Consolidated Unconsolidated Total
December 31
(Dollars in millions) 2019 2018
Maximum loss exposure $ 4,055 $ 26,326 $ 30,381 $ 4,177 $ 24,498 $ 28,675
On-balance sheet assets
Trading account assets $ 2,213 $ 549 $ 2,762 $ 2,335 $ 860 $ 3,195
Debt securities carried at fair value — 74 74 — 84 84
Loans and leases 1,810 3,214 5,024 1,949 3,940 5,889
Allowance for loan and lease losses (2) (38) (40) (2) (30) (32)
All other assets 81 20,547 20,628 53 18,885 18,938
Total $ 4,102 $ 24,346 $ 28,448 $ 4,335 $ 23,739 $ 28,074
On-balance sheet liabilities
Long-term debt $ 46 $ — $ 46 $ 152 $ — $ 152
All other liabilities 2 5,087 5,089 7 4,231 4,238
Total $ 48 $ 5,087 $ 5,135 $ 159 $ 4,231 $ 4,390
Total assets of VIEs $ 4,102 $ 98,491 $ 102,593 $ 4,335 $ 94,746 $ 99,081
During 2019, the Corporation completed its annual goodwill Right-of-use assets obtained in exchange for new
impairment test as of June 30, 2019 using qualitative operating lease liabilities (3) $ 931
assessments for all applicable reporting units. Based on the Operating cash flows from operating leases (4) 2,009
(1) Primarily consists of payments for common area maintenance and property taxes.
results of the annual goodwill impairment test, the Corporation (2) Amounts are recorded in occupancy and equipment expense in the Consolidated Statement
determined there was no impairment. For more information on the of Income.
(3) Represents non-cash activity and, accordingly, is not reflected in the Consolidated Statement
use of qualitative assessments, see Note 1 – Summary of of Cash Flows.
Significant Accounting Principles. (4) Represents cash paid for amounts included in the measurement of lease liabilities.
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NOTE 10 Deposits
The table below presents information about the Corporation’s time deposits of $100 thousand or more at December 31, 2019 and
2018. The Corporation also had aggregate time deposits of $15.8 billion and $16.4 billion in denominations that met or exceeded
the Federal Deposit Insurance Corporation (FDIC) insurance limit at December 31, 2019 and 2018.
The scheduled contractual maturities for total time deposits at December 31, 2019 are presented in the table below.
NOTE 11 Federal Funds Sold or Purchased, Securities Financing Agreements, Short-term Borrowings
and Restricted Cash
The table below presents federal funds sold or purchased, securities financing agreements (which include securities borrowed or
purchased under agreements to resell and securities loaned or sold under agreements to repurchase) and short-term borrowings. The
Corporation elects to account for certain securities financing agreements and short-term borrowings under the fair value option. For
more information on the fair value option, see Note 22 – Fair Value Option.
Bank of America, N.A. maintains a global program to offer up in the event of default by the counterparty, the right to liquidate
to a maximum of $75 billion outstanding at any one time, of bank securities held and to offset receivables and payables with the
notes with fixed or floating rates and maturities of at least seven same counterparty. The Corporation offsets securities financing
days from the date of issue. Short-term bank notes outstanding transactions with the same counterparty on the Consolidated
under this program totaled $11.7 billion and $12.1 billion at Balance Sheet where it has such a legally enforceable master
December 31, 2019 and 2018. These short-term bank notes, netting agreement and the transactions have the same maturity
along with Federal Home Loan Bank advances, U.S. Treasury tax date.
and loan notes, and term federal funds purchased, are included The Securities Financing Agreements table presents securities
in short-term borrowings on the Consolidated Balance Sheet. financing agreements included on the Consolidated Balance Sheet
in federal funds sold and securities borrowed or purchased under
Offsetting of Securities Financing Agreements agreements to resell, and in federal funds purchased and
The Corporation enters into securities financing agreements to securities loaned or sold under agreements to repurchase at
accommodate customers (also referred to as “matched-book December 31, 2019 and 2018. Balances are presented on a gross
transactions”), obtain securities to cover short positions and basis, prior to the application of counterparty netting. Gross assets
finance inventory positions. Substantially all of the Corporation’s and liabilities are adjusted on an aggregate basis to take into
securities financing activities are transacted under legally consideration the effects of legally enforceable master netting
enforceable master repurchase agreements or legally enforceable agreements. For more information on the offsetting of derivatives,
master securities lending agreements that give the Corporation, see Note 3 – Derivatives.
Repurchase Agreements and Securities Loaned securities lending agreement and receives securities that can be
pledged as collateral or sold. Certain agreements contain a right
Transactions Accounted for as Secured Borrowings
to substitute collateral and/or terminate the agreement prior to
The following tables present securities sold under agreements to
maturity at the option of the Corporation or the counterparty. Such
repurchase and securities loaned by remaining contractual term
agreements are included in the table below based on the remaining
to maturity and class of collateral pledged. Included in “Other” are
contractual term to maturity.
transactions where the Corporation acts as the lender in a
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Under repurchase agreements, the Corporation is required to group of counterparties, providing a range of securities collateral
post collateral with a market value equal to or in excess of the and pursuing longer durations, when appropriate.
principal amount borrowed. For securities loaned transactions, the
Corporation receives collateral in the form of cash, letters of credit Restricted Cash
or other securities. To determine whether the market value of the At December 31, 2019 and 2018, the Corporation held restricted
underlying collateral remains sufficient, collateral is generally cash included within cash and cash equivalents on the
valued daily, and the Corporation may be required to deposit Consolidated Balance Sheet of $24.4 billion and $22.6 billion,
additional collateral or may receive or return collateral pledged predominantly related to cash held on deposit with the Federal
when appropriate. Repurchase agreements and securities loaned Reserve Bank and non-U.S. central banks to meet reserve
transactions are generally either overnight, continuous (i.e., no requirements and cash segregated in compliance with securities
stated term) or short-term. The Corporation manages liquidity risks regulations.
related to these agreements by sourcing funding from a diverse
Weighted- December 31
(Dollars in millions) average Rate Interest Rates Maturity Dates 2019 2018
Notes issued by Bank of America Corporation (1)
Senior notes:
Fixed 3.30 % 0.25 - 8.05 % 2020 - 2050 $ 140,265 $ 120,548
Floating 1.81 0.25 - 6.68 2020 - 2044 19,552 25,574
Senior structured notes 16,941 13,815
Subordinated notes:
Fixed 4.89 2.94 - 8.57 2021 - 2045 21,632 20,843
Floating 2.74 2.56 - 2.89 2022 - 2026 782 1,742
Junior subordinated notes:
Fixed 6.71 6.45 - 8.05 2027 - 2066 736 732
Floating (2) 2.71 2.71 2056 1 1
Total notes issued by Bank of America Corporation 199,909 183,255
Notes issued by Bank of America, N.A.
Senior notes:
Fixed 3.34 3.34 2023 508 —
Floating 2.18 1.99 - 2.51 2020 - 2041 6,519 1,770
Subordinated notes 6.00 6.00 2036 1,744 1,617
Advances from Federal Home Loan Banks:
Fixed 4.98 0.01 - 7.72 2020 - 2034 112 130
Floating 1.79 1.77 - 1.84 2020 2,500 14,751
Securitizations and other BANA VIEs (3) 8,373 10,326
Other 402 442
Total notes issued by Bank of America, N.A. 20,158 29,036
Other debt
Structured liabilities 20,442 16,483
Nonbank VIEs (3) 347 618
Total other debt 20,789 17,101
Total long-term debt $ 240,856 $ 229,392
(1) Includes total loss-absorbing capacity compliant debt.
(2) Includes amounts related to trust preferred securities. For more information, see Trust Preferred Securities in this Note.
(3) Represents liabilities of consolidated VIEs included in total long-term debt on the Consolidated Balance Sheet.
During 2019, the Corporation issued $52.5 billion of long-term Bank of America Corporation and Bank of America, N.A.
debt consisting of $29.3 billion of notes issued by Bank of America maintain various U.S. and non-U.S. debt programs to offer both
Corporation, $10.9 billion of notes issued by Bank of America, senior and subordinated notes. The notes may be denominated
N.A. and $12.3 billion of other debt, substantially all of which was in U.S. dollars or foreign currencies. At December 31, 2019 and
structured liabilities. During 2018, the Corporation issued $64.4 2018, the amount of foreign currency-denominated debt translated
billion of long-term debt consisting of $30.7 billion of notes issued into U.S. dollars included in total long-term debt was $49.6 billion
by Bank of America Corporation, $18.7 billion of notes issued by and $48.6 billion. Foreign currency contracts may be used to
Bank of America, N.A. and $15.0 billion of other debt, substantially convert certain foreign currency-denominated debt into U.S.
all of which was structured liabilities. dollars.
During 2019, the Corporation had total long-term debt At December 31, 2019, long-term debt of consolidated VIEs in
maturities and redemptions in the aggregate of $50.6 billion the table above included debt from credit card, residential
consisting of $21.1 billion for Bank of America Corporation, $19.9 mortgage, home equity, other VIEs and ABS of $8.4 billion, $217
billion for Bank of America, N.A. and $9.6 billion of other debt. million, $64 million, $46 million and $19 million, respectively.
During 2018, the Corporation had total long-term debt maturities Long-term debt of VIEs is collateralized by the assets of the VIEs.
and redemptions in the aggregate of $53.3 billion consisting of For more information, see Note 7 – Securitizations and Other
$29.8 billion for Bank of America Corporation, $11.2 billion for Variable Interest Entities.
Bank of America, N.A. and $12.3 billion of other debt.
Bank of America 2019 149
The weighted-average effective interest rates for total long-term subsidiary of Bank of America Corporation, the parent company,
debt (excluding senior structured notes), total fixed-rate debt and and is fully and unconditionally guaranteed by the parent company.
total floating-rate debt were 3.26 percent, 3.55 percent and 1.92 The table below shows the carrying value for aggregate annual
percent, respectively, at December 31, 2019, and 3.29 percent, contractual maturities of long-term debt as of December 31, 2019.
3.66 percent and 2.26 percent, respectively, at December 31, Included in the table are certain structured notes issued by the
2018. The Corporation’s ALM activities maintain an overall interest Corporation that contain provisions whereby the borrowings are
rate risk management strategy that incorporates the use of redeemable at the option of the holder (put options) at specified
interest rate contracts to manage fluctuations in earnings that are dates prior to maturity. Other structured notes have coupon or
caused by interest rate volatility. The Corporation’s goal is to repayment terms linked to the performance of debt or equity
manage interest rate sensitivity so that movements in interest securities, indices, currencies or commodities, and the maturity
rates do not significantly adversely affect earnings and capital. may be accelerated based on the value of a referenced index or
The weighted-average rates are the contractual interest rates on security. In both cases, the Corporation or a subsidiary may be
the debt and do not reflect the impacts of derivative transactions. required to settle the obligation for cash or other securities prior
Debt outstanding of $5.7 billion at December 31, 2019 was to the contractual maturity date. These borrowings are reflected
issued by BofA Finance LLC, a 100 percent owned finance in the table as maturing at their contractual maturity date.
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The table below includes the notional amount of commitments which is classified in accrued expenses and other liabilities. For
of $4.4 billion and $3.1 billion at December 31, 2019 and 2018 more information regarding the Corporation’s loan commitments
that are accounted for under the fair value option. However, the accounted for under the fair value option, see Note 22 – Fair Value
table excludes cumulative net fair value of $90 million and $169 Option.
million at December 31, 2019 and 2018 on these commitments,
Other Commitments $9.8 billion. At December 31, 2019 and 2018, the Corporation’s
At December 31, 2019 and 2018, the Corporation had maximum exposure related to these guarantees totaled $1.1
commitments to purchase loans (e.g., residential mortgage and billion and $1.5 billion, with estimated maturity dates between
commercial real estate) of $86 million and $329 million, which 2033 and 2039.
upon settlement will be included in loans or LHFS, and
Indemnifications
commitments to purchase commercial loans of $1.1 billion and
In the ordinary course of business, the Corporation enters into
$463 million, which upon settlement will be included in trading
various agreements that contain indemnifications, such as tax
account assets.
indemnifications, whereupon payment may become due if certain
At December 31, 2019 and 2018, the Corporation had
external events occur, such as a change in tax law. The
commitments to purchase commodities, primarily liquefied natural
indemnification clauses are often standard contractual terms and
gas, of $830 million and $1.3 billion, which upon settlement will
were entered into in the normal course of business based on an
be included in trading account assets.
assessment that the risk of loss would be remote. These
At December 31, 2019 and 2018, the Corporation had
agreements typically contain an early termination clause that
commitments to enter into resale and forward-dated resale and
permits the Corporation to exit the agreement upon these events.
securities borrowing agreements of $97.2 billion and $59.7 billion,
The maximum potential future payment under indemnification
and commitments to enter into forward-dated repurchase and
agreements is difficult to assess for several reasons, including
securities lending agreements of $24.9 billion and $21.2 billion.
the occurrence of an external event, the inability to predict future
These commitments expire primarily within the next 12 months.
changes in tax and other laws, the difficulty in determining how
At December 31, 2019 and 2018, the Corporation had a
such laws would apply to parties in contracts, the absence of
commitment to originate or purchase up to $3.3 billion and $3.0
exposure limits contained in standard contract language and the
billion on a rolling 12-month basis, of auto loans and leases from
timing of any early termination clauses. Historically, any payments
a strategic partner. This commitment extends through November
made under these guarantees have been de minimis. The
2022 and can be terminated with 12 months prior notice.
Corporation has assessed the probability of making such
Other Guarantees payments in the future as remote.
Exchange and Clearing House Member Guarantees Representations and Warranties Obligations and
The Corporation is a member of various securities and derivative Corporate Guarantees
exchanges and clearinghouses, both in the U.S. and other The Corporation securitizes first-lien residential mortgage loans
countries. As a member, the Corporation may be required to pay generally in the form of RMBS guaranteed by the GSEs or by GNMA
a pro-rata share of the losses incurred by some of these in the case of FHA-insured, VA-guaranteed and Rural Housing
organizations as a result of another member default and under Service-guaranteed mortgage loans, and sells pools of first-lien
other loss scenarios. The Corporation’s potential obligations may residential mortgage loans in the form of whole loans. In addition,
be limited to its membership interests in such exchanges and in prior years, legacy companies and certain subsidiaries sold
clearinghouses, to the amount (or multiple) of the Corporation’s pools of first-lien residential mortgage loans and home equity loans
contribution to the guarantee fund or, in limited instances, to the as private-label securitizations or in the form of whole loans. In
full pro-rata share of the residual losses after applying the connection with these transactions, the Corporation or certain of
guarantee fund. The Corporation’s maximum potential exposure its subsidiaries or legacy companies make and have made various
under these membership agreements is difficult to estimate; representations and warranties. Breaches of these
however, the Corporation has assessed the probability of making representations and warranties have resulted in and may continue
any such payments as remote. to result in the requirement to repurchase mortgage loans or to
otherwise make whole or provide indemnification or other remedies
Prime Brokerage and Securities Clearing Services to sponsors, investors, securitization trusts, guarantors, insurers
In connection with its prime brokerage and clearing businesses, or other parties (collectively, repurchases).
the Corporation performs securities clearance and settlement
services with other brokerage firms and clearinghouses on behalf Unresolved Repurchase Claims
of its clients. Under these arrangements, the Corporation stands Unresolved representations and warranties repurchase claims
ready to meet the obligations of its clients with respect to securities represent the notional amount of repurchase claims made by
transactions. The Corporation’s obligations in this respect are counterparties, typically the outstanding principal balance or the
secured by the assets in the clients’ accounts and the accounts unpaid principal balance at the time of default. In the case of first-
of their customers as well as by any proceeds received from the lien mortgages, the claim amount is often significantly greater than
transactions cleared and settled by the Corporation on behalf of the expected loss amount due to the benefit of collateral and, in
clients or their customers. The Corporation’s maximum potential some cases, mortgage insurance or mortgage guarantee
exposure under these arrangements is difficult to estimate; payments.
however, the potential for the Corporation to incur material losses The notional amount of unresolved repurchase claims at
pursuant to these arrangements is remote. December 31, 2019 and 2018 was $10.7 billion and $14.4 billion.
These balances included $3.7 billion and $6.2 billion at December
Other Guarantees 31, 2019 and 2018 of claims related to loans in specific private-
The Corporation has entered into additional guarantee agreements label securitization groups or tranches where the Corporation owns
and commitments, including sold risk participation swaps, liquidity substantially all of the outstanding securities or will otherwise
facilities, lease-end obligation agreements, partial credit realize the benefit of any repurchase claims paid. The balance for
guarantees on certain leases, real estate joint venture guarantees, 2019 also includes $1.6 billion of repurchase claims related to a
divested business commitments and sold put options that require single monoline insurer and is the subject of litigation.
gross settlement. The maximum potential future payments under During 2019, the Corporation received $461 million in new
these agreements are approximately $8.7 billion and $5.9 billion repurchase claims that were not time-barred. During 2019, $4.2
at December 31, 2019 and 2018. The estimated maturity dates billion in claims were resolved, including $2.1 billion of claims that
of these obligations extend up to 2049. The Corporation has made were deemed time-barred.
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Reserve and Related Provision range of possible loss is possible, as well as for representations
The reserve for representations and warranties obligations and and warranties exposures, management currently estimates the
corporate guarantees was $1.8 billion and $2.0 billion at aggregate range of reasonably possible loss for these exposures
December 31, 2019 and 2018 and is included in accrued is $0 to $1.6 billion in excess of the accrued liability, if any.
expenses and other liabilities on the Consolidated Balance Sheet The estimated range of possible loss, as well as the
and the related provision is included in other income in the Corporation's accrued liability, is based upon currently available
Consolidated Statement of Income. The representations and information and is subject to significant judgment, a variety of
warranties reserve represents the Corporation’s best estimate of assumptions and known and unknown uncertainties. The matters
probable incurred losses, is based on our experience in previous underlying the estimated range of possible loss and liability accrual
negotiations, and is subject to judgment, a variety of assumptions, are unpredictable and will change from time to time, and actual
and known or unknown uncertainties. Future representations and losses may vary significantly from the current estimate and
warranties losses may occur in excess of the amounts recorded accrual. The estimated range of possible loss does not represent
for these exposures; however, the Corporation does not expect the Corporation’s maximum loss exposure.
such amounts to be material to the Corporation's financial Information is provided below regarding the nature of the
condition and liquidity. See Litigation and Regulatory Matters in litigation and associated claimed damages. Based on current
this Note below for the Corporation's combined range of possible knowledge, and taking into account accrued liabilities,
loss in excess of the reserve for representations and warranties, management does not believe that loss contingencies arising from
and the accrued liability for litigation. pending matters, including the matters described herein, will have
a material adverse effect on the consolidated financial condition
Litigation and Regulatory Matters or liquidity of the Corporation. However, in light of the significant
In the ordinary course of business, the Corporation and its judgment, variety of assumptions and uncertainties involved in
subsidiaries are routinely defendants in or parties to many pending these matters, some of which are beyond the Corporation’s control,
and threatened legal, regulatory and governmental actions and and the very large or indeterminate damages sought in some of
proceedings. In view of the inherent difficulty of predicting the these matters, an adverse outcome in one or more of these
outcome of such matters, particularly where the claimants seek matters could be material to the Corporation’s business or results
very large or indeterminate damages or where the matters present of operations for any particular reporting period, or cause
novel legal theories or involve a large number of parties, the significant reputational harm.
Corporation generally cannot predict the eventual outcome of the
pending matters, timing of the ultimate resolution of these matters, Ambac Bond Insurance Litigation
or eventual loss, fines or penalties related to each pending matter. Ambac Assurance Corporation and the Segregated Account of
In accordance with applicable accounting guidance, the Ambac Assurance Corporation (together, Ambac) have filed four
Corporation establishes an accrued liability when those matters separate lawsuits against the Corporation and its subsidiaries
present loss contingencies that are both probable and estimable. relating to bond insurance policies Ambac provided on certain
In such cases, there may be an exposure to loss in excess of any securitized pools of HELOCs, first-lien subprime home equity loans,
amounts accrued. As a matter develops, the Corporation, in fixed-rate second-lien mortgage loans and negative amortization
conjunction with any outside counsel handling the matter, pay option adjustable-rate mortgage loans. Ambac alleges that
evaluates on an ongoing basis whether such matter presents a they have paid or will pay claims as a result of defaults in the
loss contingency that is probable and estimable. Once the loss underlying loans and asserts that the defendants misrepresented
contingency is deemed to be both probable and estimable, the the characteristics of the underlying loans and/or breached certain
Corporation will establish an accrued liability and record a contractual representations and warranties regarding the
corresponding amount of litigation-related expense. The underwriting and servicing of the loans. In those actions where
Corporation continues to monitor the matter for further the Corporation is named as a defendant, Ambac contends the
developments that could affect the amount of the accrued liability Corporation is liable on various successor and vicarious liability
that has been previously established. Excluding expenses of theories. These actions are at various procedural stages with
internal and external legal service providers, litigation-related material developments provided below.
expense of $681 million and $469 million was recognized in 2019
Ambac v. Countrywide I
and 2018.
The Corporation, Countrywide and other Countrywide entities are
For a limited number of the matters disclosed in this Note for
named as defendants in an action filed on September 28, 2010
which a loss, whether in excess of a related accrued liability or
in New York Supreme Court. Ambac asserts claims for fraudulent
where there is no accrued liability, is reasonably possible in future
inducement as well as breach of contract and seeks damages in
periods, the Corporation is able to estimate a range of possible
excess of $2.2 billion, plus punitive damages.
loss. In determining whether it is possible to estimate a range of
On May 16, 2017, the First Department issued its decisions
possible loss, the Corporation reviews and evaluates its matters
on the parties’ cross-appeals of the trial court’s October 22, 2015
on an ongoing basis, in conjunction with any outside counsel
summary judgment rulings. Ambac appealed the First
handling the matter, in light of potentially relevant factual and legal
Department’s rulings requiring Ambac to prove all of the elements
developments. With respect to the matters disclosed in this Note,
of its fraudulent inducement claim, including justifiable reliance
in cases in which the Corporation possesses sufficient appropriate
and loss causation; restricting Ambac’s sole remedy for its breach
information to estimate a range of possible loss, that estimate is
of contract claims to the repurchase protocol of cure, repurchase
aggregated and disclosed below. There may be other disclosed
or substitution of any materially defective loan; and dismissing
matters for which a loss is probable or reasonably possible but
Ambac’s claim for reimbursements of attorneys’ fees. On June 27,
such an estimate of the range of possible loss may not be possible.
2018, the New York Court of Appeals affirmed the First Department
For such matters disclosed in this Note, where an estimate of the
rulings that Ambac appealed.
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.
156Bank
156 of America
Bank 2019
of America 2019
NOTE 15 Accumulated Other Comprehensive Income (Loss)
The table below presents the changes in accumulated OCI after-tax for 2019, 2018 and 2017.
The table below presents the net change in fair value recorded in accumulated OCI, net realized gains and losses reclassified into
earnings and other changes for each component of OCI pre- and after-tax for 2019, 2018 and 2017.
For 2019, 2018 and 2017, 62 million average dilutive potential Federal Reserve. The Corporation’s banking entity affiliates are
common shares associated with the Series L preferred stock were subject to capital adequacy rules issued by the OCC.
not included in the diluted share count because the result would The Corporation and its primary banking entity affiliate, BANA,
have been antidilutive under the “if-converted” method. For 2018 are Advanced approaches institutions under Basel 3. As Advanced
and 2017, average options to purchase four million and 21 million approaches institutions, the Corporation and its banking entity
shares of common stock were outstanding but not included in the affiliates are required to report regulatory risk-based capital ratios
computation of EPS because the result would have been and risk-weighted assets under both the Standardized and
antidilutive under the treasury stock method. For 2017, average Advanced approaches. The approach that yields the lower ratio is
warrants to purchase 122 million shares of common stock were used to assess capital adequacy, including under the Prompt
outstanding but not included in the computation of EPS because Corrective Action (PCA) framework. At December 31, 2019 and
the result would have been antidilutive under the treasury stock 2018, Common equity tier 1 and Tier 1 capital ratios were lower
method. These warrants expired on October 29, 2018. For 2019, under the Standardized approach whereas the Advanced
2018 and 2017, average warrants to purchase three million, 136 approaches yielded a lower result for the Total capital ratio.
million and 143 million shares of common stock, respectively, were The Corporation is required to maintain a minimum
included in the diluted EPS calculation under the treasury stock supplementary leverage ratio (SLR) of 3.0 percent plus a leverage
method. Substantially all of these warrants were exercised on or buffer of 2.0 percent in order to avoid certain restrictions on capital
before their expiration date of January 16, 2019. distributions and discretionary bonus payments. The Corporation’s
insured depository institution subsidiaries are required to maintain
NOTE 17 Regulatory Requirements and a minimum 6.0 percent SLR to be considered well capitalized under
Restrictions the PCA framework.
The Federal Reserve, Office of the Comptroller of the Currency The following table presents capital ratios and related
(OCC) and FDIC (collectively, U.S. banking regulators) jointly information in accordance with Basel 3 Standardized and
establish regulatory capital adequacy guidelines, including Basel Advanced approaches as measured at December 31, 2019 and
3, for U.S. banking organizations. As a financial holding company, 2018 for the Corporation and BANA.
the Corporation is subject to capital adequacy rules issued by the
158Bank
158 of America
Bank 2019
of America 2019
Regulatory Capital under Basel 3
Bank of America Corporation Bank of America, N.A.
Standardized Advanced Regulatory Standardized Advanced Regulatory
Approach Approaches Minimum (1) Approach Approaches Minimum (2)
(Dollars in millions, except as noted) December 31, 2019
Risk-based capital metrics:
Common equity tier 1 capital $ 166,760 $ 166,760 $ 154,626 $ 154,626
Tier 1 capital 188,492 188,492 154,626 154,626
Total capital (3) 221,230 213,098 166,567 158,665
Risk-weighted assets (in billions) 1,493 1,447 1,241 991
Common equity tier 1 capital ratio 11.2% 11.5% 9.5% 12.5% 15.6% 7.0%
Tier 1 capital ratio 12.6 13.0 11.0 12.5 15.6 8.5
Total capital ratio 14.8 14.7 13.0 13.4 16.0 10.5
Leverage-based metrics:
Adjusted quarterly average assets (in billions) (4) $ 2,374 $ 2,374 $ 1,780 $ 1,780
Tier 1 leverage ratio 7.9% 7.9% 4.0 8.7% 8.7% 5.0
Leverage-based metrics:
Adjusted quarterly average assets (in billions) (4) $ 2,258 $ 2,258 $ 1,719 $ 1,719
Tier 1 leverage ratio 8.4% 8.4% 4.0 8.7% 8.7% 5.0
The capital adequacy rules issued by the U.S. banking addition, at December 31, 2019 and 2018, the Corporation had
regulators require institutions to meet the established minimums cash deposited with clearing organizations of $7.6 billion and $8.1
outlined in the table above. Failure to meet the minimum billion primarily recorded in other assets on the Consolidated
requirements can lead to certain mandatory and discretionary Balance Sheet.
actions by regulators that could have a material adverse impact
on the Corporation’s financial position. At December 31, 2019 and Bank Subsidiary Distributions
2018, the Corporation and its banking entity affiliates were well The primary sources of funds for cash distributions by the
capitalized. Corporation to its shareholders are capital distributions received
from its bank subsidiaries, BANA and Bank of America California,
Other Regulatory Matters N.A. In 2019, the Corporation received dividends of $20.5 billion
The Federal Reserve requires the Corporation’s bank subsidiaries from BANA and $215 million from Bank of America California, N.A.
to maintain reserve requirements based on a percentage of certain In addition, BANA returned capital of $8.0 billion to the Corporation
deposit liabilities. The average daily reserve balance requirements, in 2019.
in excess of vault cash, maintained by the Corporation with the The amount of dividends that a subsidiary bank may declare
Federal Reserve Bank were $14.6 billion and $11.4 billion for in a calendar year without OCC approval is the subsidiary bank’s
2019 and 2018. At December 31, 2019 and 2018, the Corporation net profits for that year combined with its retained net profits for
had cash and cash equivalents in the amount of $6.3 billion and the preceding two years. Retained net profits, as defined by the
$5.8 billion, and securities with a fair value of $14.7 billion and OCC, consist of net income less dividends declared during the
$16.6 billion that were segregated in compliance with securities period. In 2020, BANA can declare and pay dividends of
regulations. Cash held on deposit with the Federal Reserve Bank approximately $9.4 billion to the Corporation plus an additional
to meet reserve requirements and cash and cash equivalents amount equal to its retained net profits for 2020 up to the date
segregated in compliance with securities regulations are of any such dividend declaration. Bank of America California, N.A.
components of restricted cash. For more information, see Note 11 can pay dividends of $94 million in 2020 plus an additional amount
– Federal Funds Sold or Purchased, Securities Financing equal to its retained net profits for 2020 up to the date of any
Agreements, Short-term Borrowings and Restricted Cash. In such dividend declaration.
Bank of America 2019 159
NOTE 18 Employee Benefit Plans The Corporation’s noncontributory, nonqualified pension plans
are unfunded and provide supplemental defined pension benefits
Pension and Postretirement Plans to certain eligible employees.
The Corporation sponsors a qualified noncontributory trusteed In addition to retirement pension benefits, certain benefits-
pension plan (Qualified Pension Plan), a number of noncontributory eligible employees may become eligible to continue participation
nonqualified pension plans, and postretirement health and life as retirees in health care and/or life insurance plans sponsored
plans that cover eligible employees. Non-U.S. pension plans by the Corporation. These plans are referred to as the
sponsored by the Corporation vary based on the country and local Postretirement Health and Life Plans.
practices. The Pension and Postretirement Plans table summarizes the
The Qualified Pension Plan has a balance guarantee feature changes in the fair value of plan assets, changes in the projected
for account balances with participant-selected investments, benefit obligation (PBO), the funded status of both the
applied at the time a benefit payment is made from the plan that accumulated benefit obligation (ABO) and the PBO, and the
effectively provides principal protection for participant balances weighted-average assumptions used to determine benefit
transferred and certain compensation credits. The Corporation is obligations for the pension plans and postretirement plans at
responsible for funding any shortfall on the guarantee feature. December 31, 2019 and 2018. The estimate of the Corporation’s
Benefits earned under the Qualified Pension Plan have been PBO associated with these plans considers various actuarial
frozen. Thereafter, the cash balance accounts continue to earn assumptions, including assumptions for mortality rates and
investment credits or interest credits in accordance with the terms discount rates. The discount rate assumptions are derived from
of the plan document. a cash flow matching technique that utilizes rates that are based
The Corporation has an annuity contract that guarantees the on Aa-rated corporate bonds with cash flows that match estimated
payment of benefits vested under a terminated U.S. pension plan benefit payments of each of the plans. The decreases in the
(Other Pension Plan). The Corporation, under a supplemental weighted-average discount rates in 2019 resulted in increases to
agreement, may be responsible for, or benefit from actual the PBO of approximately $2.2 billion at December 31, 2019. The
experience and investment performance of the annuity assets. increases in the weighted-average discount rates in 2018 resulted
The Corporation made no contribution under this agreement in in decreases to the PBO of approximately $1.3 billion at December
2019 or 2018. Contributions may be required in the future under 31, 2018. Significant gains and losses related to changes in the
this agreement. PBO for 2019 and 2018 primarily resulted from changes in the
discount rate.
160Bank
160 of America
Bank 2019
of America 2019
The Corporation’s estimate of its contributions to be made to minimum funding amount required by the Employee Retirement
the Non-U.S. Pension Plans, Nonqualified and Other Pension Plans, Income Security Act of 1974 (ERISA).
and Postretirement Health and Life Plans in 2020 is $21 million, Pension Plans with ABO and PBO in excess of plan assets as
$92 million and $15 million, respectively. The Corporation does of December 31, 2019 and 2018 are presented in the table below.
not expect to make a contribution to the Qualified Pension Plan in For these plans, funding strategies vary due to legal requirements
2020. It is the policy of the Corporation to fund no less than the and local practices.
Nonqualified
Non-U.S. and Other
Pension Plans Pension Plans
(Dollars in millions) 2019 2018 2019 2018
PBO $ 744 $ 615 $ 988 $ 950
ABO 720 605 988 949
Fair value of plan assets 191 173 1 1
The asset valuation method used to calculate the expected Assumed health care cost trend rates affect the postretirement
return on plan assets component of net periodic benefit cost for benefit obligation and benefit cost reported for the Postretirement
the Qualified Pension Plan recognizes 60 percent of the prior year’s Health and Life Plans. The assumed health care cost trend rate
market gains or losses at the next measurement date with the used to measure the expected cost of benefits covered by the
remaining 40 percent spread equally over the subsequent four Postretirement Health and Life Plans is 6.50 percent for 2020,
years. reducing in steps to 5.00 percent in 2026 and later years.
Gains and losses for all benefit plans except postretirement The Corporation’s net periodic benefit cost (income) recognized
health care are recognized in accordance with the standard for the plans is sensitive to the discount rate and expected return
amortization provisions of the applicable accounting guidance. Net on plan assets. For the Qualified Pension Plan, Non-U.S. Pension
periodic postretirement health and life expense was determined Plans, Nonqualified and Other Pension Plans, and Postretirement
using the “projected unit credit” actuarial method. For the Health and Life Plans, a 25 bp decline in discount rates and
Postretirement Health and Life Plans, 50 percent of the expected return on assets would not have had a significant impact
unrecognized gain or loss at the beginning of the year (or at on the net periodic benefit cost for 2019.
subsequent remeasurement) is recognized on a level basis during
the year.
Nonqualified Postretirement
Qualified Non-U.S. and Other Health and
Pension Plan Pension Plans Pension Plans Life Plans Total
(Dollars in millions) 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018
Net actuarial loss (gain) $ 3,865 $ 4,386 $ 559 $ 454 $ 1,008 $ 912 $ 48 $ (75) $ 5,480 $ 5,677
Prior service cost (credits) — — 18 18 — — (6) (9) 12 9
Amounts recognized in accumulated OCI $ 3,865 $ 4,386 $ 577 $ 472 $ 1,008 $ 912 $ 42 $ (84) $ 5,492 $ 5,686
Current year actuarial loss (gain) $ (385) $ 541 $ 110 $ 270 $ 130 $ (59) $ 99 $ (73) $ (46) $ 679
Amortization of actuarial gain (loss) and
prior service cost (135) (147) (7) (11) (34) (43) 26 30 (150) (171)
Current year prior service cost (credit) — — 2 13 — — — — 2 13
Amounts recognized in OCI $ (520) $ 394 $ 105 $ 272 $ 96 $ (102) $ 125 $ (43) $ (194) $ 521
Plan Assets of the plans' liabilities. The selected asset allocation strategy is
The Qualified Pension Plan has been established as a retirement designed to achieve a higher return than the lowest risk strategy.
vehicle for participants, and trusts have been established to The expected rate of return on plan assets assumption was
secure benefits promised under the Qualified Pension Plan. The developed through analysis of historical market returns, historical
Corporation’s policy is to invest the trust assets in a prudent asset class volatility and correlations, current market conditions,
manner for the exclusive purpose of providing benefits to anticipated future asset allocations, the funds’ past experience,
participants and defraying reasonable expenses of administration. and expectations on potential future market returns. The expected
The Corporation’s investment strategy is designed to provide a return on plan assets assumption is determined using the
total return that, over the long term, increases the ratio of assets calculated market-related value for the Qualified Pension Plan and
to liabilities. The strategy attempts to maximize the investment the Other Pension Plan and the fair value for the Non-U.S. Pension
return on assets at a level of risk deemed appropriate by the Plans and Postretirement Health and Life Plans. The expected
Corporation while complying with ERISA and any applicable return on plan assets assumption represents a long-term average
regulations and laws. The investment strategy utilizes asset view of the performance of the assets in the Qualified Pension
allocation as a principal determinant for establishing the risk/ Plan, the Non-U.S. Pension Plans, the Other Pension Plan, and
return profile of the assets. Asset allocation ranges are Postretirement Health and Life Plans, a return that may or may not
established, periodically reviewed and adjusted as funding levels be achieved during any one calendar year. The Other Pension Plan
and liability characteristics change. Active and passive investment is invested solely in an annuity contract which is primarily invested
managers are employed to help enhance the risk/return profile of in fixed-income securities structured such that asset maturities
the assets. An additional aspect of the investment strategy used match the duration of the plan’s obligations.
to minimize risk (part of the asset allocation plan) includes The target allocations for 2020 by asset category for the
matching the exposure of participant-selected investment Qualified Pension Plan, Non-U.S. Pension Plans, and Nonqualified
measures. and Other Pension Plans are presented in the following table.
The assets of the Non-U.S. Pension Plans are primarily Equity securities for the Qualified Pension Plan include common
attributable to a U.K. pension plan. This U.K. pension plan’s assets stock of the Corporation in the amounts of $315 million (1.55
are invested prudently so that the benefits promised to members percent of total plan assets) and $221 million (1.22 percent of
are provided with consideration given to the nature and the duration total plan assets) at December 31, 2019 and 2018.
162Bank
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Bank 2019
of America 2019
Fair Value Measurements
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
(Dollars in millions) December 31, 2019 December 31, 2018
Cash and short-term investments
Money market and interest-bearing cash $ 1,426 $ — $ — $ 1,426 $ 1,530 $ — $ — $ 1,530
Cash and cash equivalent commingled/mutual funds — 250 — 250 — 644 — 644
Fixed income
U.S. government and agency securities 4,403 890 8 5,301 3,637 805 9 4,451
Corporate debt securities — 3,676 — 3,676 — 2,852 — 2,852
Asset-backed securities — 2,684 — 2,684 — 2,119 — 2,119
Non-U.S. debt securities 748 1,015 — 1,763 539 961 — 1,500
Fixed income commingled/mutual funds 804 1,439 — 2,243 933 1,177 — 2,110
Equity
Common and preferred equity securities 4,655 — — 4,655 4,414 — — 4,414
Equity commingled/mutual funds 147 1,355 — 1,502 288 1,275 — 1,563
Public real estate investment trusts 91 — — 91 104 — — 104
Real estate
Private real estate — — — — — — 5 5
Real estate commingled/mutual funds — 18 927 945 — 13 885 898
Limited partnerships — 173 90 263 — 158 82 240
Other investments (1) 11 390 636 1,037 93 364 588 1,045
Total plan investment assets, at fair value $ 12,285 $ 11,890 $ 1,661 $ 25,836 $ 11,538 $ 10,368 $ 1,569 $ 23,475
(1) Other investments include commodity and balanced funds of $233 million and $305 million, insurance annuity contracts of $614 million and $562 million and other various investments of $190
million and $178 million at December 31, 2019 and 2018.
The Level 3 Fair Value Measurements table presents a reconciliation of all plan investment assets measured at fair value using
significant unobservable inputs (Level 3) during 2019, 2018 and 2017.
2018
Fixed income
U.S. government and agency securities $ 9 $ — $ — $ 9
Real estate
Private real estate 93 (7) (81) 5
Real estate commingled/mutual funds 831 52 2 885
Limited partnerships 85 (12) 9 82
Other investments 74 — 514 588
Total $ 1,092 $ 33 $ 444 $ 1,569
2017
Fixed income
U.S. government and agency securities $ 10 $ — $ (1) $ 9
Real estate
Private real estate 150 8 (65) 93
Real estate commingled/mutual funds 748 63 20 831
Limited partnerships 38 14 33 85
Other investments 83 5 (14) 74
Total $ 1,029 $ 90 $ (27) $ 1,092
Nonqualified Postretirement
Qualified Non-U.S. and Other Health and
(Dollars in millions) Pension Plan (1) Pension Plans (2) Pension Plans (2) Life Plans (3)
2020 $ 917 $ 108 $ 242 $ 83
2021 926 107 245 80
2022 927 110 232 77
2023 917 116 230 74
2024 924 126 223 72
2025 - 2029 4,409 594 1,011 313
(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 anniversaries of the grant date provided that the employee remains
The Corporation maintains qualified and non-qualified defined continuously employed with the Corporation during that time, and
contribution retirement plans. The Corporation recorded expense will be expensed ratably over the vesting period, net of estimated
of $1.0 billion in each of 2019, 2018 and 2017 related to the forfeitures, based on the grant-date fair value of the shares.
qualified defined contribution plans. At December 31, 2019 and The compensation cost for the stock-based plans was $2.1
2018, 189 million and 212 million shares of the Corporation’s billion, $1.8 billion and $2.2 billion and the related income tax
common stock were held by these plans. Payments to the plans benefit was $511 million, $433 million and $829 million for 2019,
for dividends on common stock were $133 million, $115 million 2018 and 2017, respectively.
and $86 million in 2019, 2018 and 2017, respectively.
Certain non-U.S. employees are covered under defined Restricted Stock/Units
contribution pension plans that are separately administered in The table below presents the status at December 31, 2019 of the
accordance with local laws. share-settled restricted stock/units and changes during 2019.
164Bank
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of America 2019
NOTE 20 Income Taxes Income tax expense for 2019, 2018 and 2017 varied from the
The components of income tax expense for 2019, 2018 and 2017 amount computed by applying the statutory income tax rate to
are presented in the table below. income before income taxes. The Corporation’s federal statutory
tax rate was 21 percent for 2019 and 2018, and 35 percent for
2017. A reconciliation of the expected U.S. federal income tax
Income Tax Expense expense, calculated by applying the federal statutory tax rate, to
the Corporation’s actual income tax expense, and the effective tax
(Dollars in millions) 2019 2018 2017
rates for 2019, 2018 and 2017 are presented in the table below.
Current income tax expense
U.S. federal $ 1,136 $ 816 $ 1,310
On December 22, 2017, the President signed into law the Tax
U.S. state and local 901 1,377 557 Act which made significant changes to federal income tax law
Non-U.S. 852 1,203 939 including, among other things, reducing the statutory corporate
Total current expense 2,889 3,396 2,806 income tax rate to 21 percent from 35 percent and changing the
Deferred income tax expense taxation of the Corporation’s non-U.S. business activities. The
U.S. federal 2,001 2,579 7,238 impact on net income in 2017 was $2.9 billion, driven by $2.3
U.S. state and local 223 240 835 billion in income tax expense, largely from a lower valuation of
Non-U.S. 211 222 102 certain U.S. deferred tax assets and liabilities. The change in the
Total deferred expense 2,435 3,041 8,175 statutory tax rate also impacted the Corporation’s tax-advantaged
Total income tax expense $ 5,324 $ 6,437 $ 10,981 energy investments, resulting in a downward valuation adjustment
of $946 million recorded in other income and a related income
Total income tax expense does not reflect the tax effects of
tax benefit of $347 million, which when netted against the $2.3
items that are included in OCI each period. For more information,
billion, resulted in a net impact on income tax expense of $1.9
see Note 15 – Accumulated Other Comprehensive Income (Loss).
billion.
Other tax effects included in OCI each period resulted in an
expense of $1.9 billion in 2019 and a benefit of $1.2 billion in
both 2018 and 2017.
The reconciliation of the beginning unrecognized tax benefits At December 31, 2019, 2018 and 2017, the balance of the
(UTB) balance to the ending balance is presented in the following Corporation’s UTBs which would, if recognized, affect the
table. Corporation’s effective tax rate was $814 million, $1.6 billion and
$1.2 billion, respectively. Included in the UTB balance are some
items the recognition of which would not affect the effective tax
Reconciliation of the Change in Unrecognized Tax rate, such as the tax effect of certain temporary differences, the
Benefits
portion of gross state UTBs that would be offset by the tax benefit
(Dollars in millions) 2019 2018 2017 of the associated federal deduction and the portion of gross non-
Balance, January 1 $ 2,197 $ 1,773 $ 875 U.S. UTBs that would be offset by tax reductions in other
Increases related to positions taken jurisdictions.
during the current year 238 395 292 It is reasonably possible that the UTB balance may decrease
Increases related to positions taken by as much as $64 million during the next 12 months, since
during prior years (1) 401 406 750
resolved items will be removed from the balance whether their
Decreases related to positions
taken during prior years (1) (1,102) (371) (122) resolution results in payment or recognition.
Settlements (541) (6) (17) The Corporation recognized an interest benefit of $19 million
Expiration of statute of limitations (18) — (5) in 2019 and interest expense of $43 million and $1 million in
Balance, December 31 $ 1,175 $ 2,197 $ 1,773 2018 and 2017. At December 31, 2019 and 2018, the
(1) The sum of the positions taken during prior years differs from the $(613) million, $144 million Corporation’s accrual for interest and penalties that related to
and $133 million in the Reconciliation of Income Tax Expense table due to temporary items,
state items and jurisdictional offsets, as well as the inclusion of interest in the Reconciliation income taxes, net of taxes and remittances, was $147 million and
of Income Tax Expense table. $218 million.
The Corporation files income tax returns in more than 100 state
and non-U.S. jurisdictions each year. The IRS and other tax
authorities in countries and states in which the Corporation has
Bank of America 2019 165
significant business operations examine tax returns periodically Management concluded that no valuation allowance was
(continuously in some jurisdictions). The following table necessary to reduce the deferred tax assets related to the U.K.
summarizes the status of examinations by major jurisdiction for NOL carryforwards and U.S. federal and certain state NOL
the Corporation and various subsidiaries at December 31, 2019. carryforwards since estimated future taxable income will be
sufficient to utilize these assets prior to their expiration. The
Tax Examination Status majority of the Corporation’s U.K. net deferred tax assets, which
consist primarily of NOLs, are expected to be realized by certain
Status at subsidiaries over an extended number of years. Management’s
Years under December 31 conclusion is supported by financial results, profit forecasts for
Examination (1) 2019
the relevant entities and the indefinite period to carry forward
United States 2017-2018 To begin in 2020
NOLs. However, a material change in those estimates could lead
California 2012-2017 Field examination
New York 2016-2018 Field examination
management to reassess such valuation allowance conclusions.
United Kingdom 2018 Field examination
At December 31, 2019, U.S. federal income taxes had not been
(1) All tax years subsequent to the years shown remain subject to examination. provided on approximately $5.0 billion of temporary differences
associated with investments in non-U.S. subsidiaries that are
Significant components of the Corporation’s net deferred tax essentially permanent in duration. If the Corporation were to
assets and liabilities at December 31, 2019 and 2018 are record the associated deferred tax liability, the amount would be
presented in the following table. approximately $1.0 billion.
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cash flow model, which estimates the fair value of the securities risk to determine the fair value of MSRs. This approach consists
using internal credit risk, and interest rate and prepayment risk of projecting servicing cash flows under multiple interest rate
models that incorporate management’s best estimate of current scenarios and discounting these cash flows using risk-adjusted
key assumptions such as default rates, loss severity and discount rates.
prepayment rates. Principal and interest cash flows are discounted
using an observable discount rate for similar instruments with Loans Held-for-sale
adjustments that management believes a market participant The fair values of LHFS are based on quoted market prices, where
would consider in determining fair value for the specific security. available, or are determined by discounting estimated cash flows
Other instruments are valued using a net asset value approach using interest rates approximating the Corporation’s current
which considers the value of the underlying securities. Underlying origination rates for similar loans adjusted to reflect the inherent
assets are valued using external pricing services, where available, credit risk. The borrower-specific credit risk is embedded within
or matrix pricing based on the vintages and ratings. Situations of the quoted market prices or is implied by considering loan
illiquidity generally are triggered by the market’s perception of performance when selecting comparables.
credit uncertainty regarding a single company or a specific market
Short-term Borrowings and Long-term Debt
sector. In these instances, fair value is determined based on
The Corporation issues structured liabilities that have coupons or
limited available market information and other factors, principally
repayment terms linked to the performance of debt or equity
from reviewing the issuer’s financial statements and changes in
securities, interest rates, indices, currencies or commodities. The
credit ratings made by one or more rating agencies.
fair values of these structured liabilities are estimated using
Derivative Assets and Liabilities quantitative models for the combined derivative and debt portions
The fair values of derivative assets and liabilities traded in the of the notes. These models incorporate observable and, in some
OTC market are determined using quantitative models that utilize instances, unobservable inputs including security prices, interest
multiple market inputs including interest rates, prices and indices rate yield curves, option volatility, currency, commodity or equity
to generate continuous yield or pricing curves and volatility factors rates and correlations among these inputs. The Corporation also
to value the position. The majority of market inputs are actively considers the impact of its own credit spread in determining the
quoted and can be validated through external sources, including discount rate used to value these liabilities. The credit spread is
brokers, market transactions and third-party pricing services. determined by reference to observable spreads in the secondary
When third-party pricing services are used, the methods and bond market.
assumptions are reviewed by the Corporation. Estimation risk is
Securities Financing Agreements
greater for derivative asset and liability positions that are either
The fair values of certain reverse repurchase agreements,
option-based or have longer maturity dates where observable
repurchase agreements and securities borrowed transactions are
market inputs are less readily available, or are unobservable, in
determined using quantitative models, including discounted cash
which case, quantitative-based extrapolations of rate, price or
flow models that require the use of multiple market inputs including
index scenarios are used in determining fair values. The fair values
interest rates and spreads to generate continuous yield or pricing
of derivative assets and liabilities include adjustments for market
curves, and volatility factors. The majority of market inputs are
liquidity, counterparty credit quality and other instrument-specific
actively quoted and can be validated through external sources,
factors, where appropriate. In addition, the Corporation
including brokers, market transactions and third-party pricing
incorporates within its fair value measurements of OTC derivatives
services.
a valuation adjustment to reflect the credit risk associated with
the net position. Positions are netted by counterparty, and fair Deposits
value for net long exposures is adjusted for counterparty credit The fair values of deposits are determined using quantitative
risk while the fair value for net short exposures is adjusted for the models, including discounted cash flow models that require the
Corporation’s own credit risk. The Corporation also incorporates use of multiple market inputs including interest rates and spreads
FVA within its fair value measurements to include funding costs to generate continuous yield or pricing curves, and volatility factors.
on uncollateralized derivatives and derivatives where the The majority of market inputs are actively quoted and can be
Corporation is not permitted to use the collateral it receives. An validated through external sources, including brokers, market
estimate of severity of loss is also used in the determination of transactions and third-party pricing services. The Corporation
fair value, primarily based on market data. considers the impact of its own credit spread in the valuation of
these liabilities. The credit risk is determined by reference to
Loans and Loan Commitments
observable credit spreads in the secondary cash market.
The fair values of loans and loan commitments are based on
market prices, where available, or discounted cash flow analyses Asset-backed Secured Financings
using market-based credit spreads of comparable debt The fair values of asset-backed secured financings are based on
instruments or credit derivatives of the specific borrower or external broker bids, where available, or are determined by
comparable borrowers. Results of discounted cash flow analyses discounting estimated cash flows using interest rates
may be adjusted, as appropriate, to reflect other market conditions approximating the Corporation’s current origination rates for
or the perceived credit risk of the borrower. similar loans adjusted to reflect the inherent credit risk.
Mortgage Servicing Rights
The fair values of MSRs are primarily determined using an option-
adjusted spread valuation approach, which factors in prepayment
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December 31, 2018
Fair Value Measurements
Netting Assets/Liabilities
(Dollars in millions) Level 1 Level 2 Level 3 Adjustments (1) at Fair Value
Assets
Time deposits placed and other short-term investments $ 1,214 $ — $ — $ — $ 1,214
Federal funds sold and securities borrowed or purchased under
agreements to resell — 56,399 — — 56,399
Trading account assets:
U.S. Treasury and agency securities (2) 53,131 1,593 — — 54,724
Corporate securities, trading loans and other — 24,630 1,558 — 26,188
Equity securities 53,840 23,163 276 — 77,279
Non-U.S. sovereign debt 5,818 19,210 465 — 25,493
Mortgage trading loans, MBS and ABS:
U.S. government-sponsored agency guaranteed (2) — 19,586 — — 19,586
Mortgage trading loans, ABS and other MBS — 9,443 1,635 — 11,078
Total trading account assets (3) 112,789 97,625 3,934 — 214,348
Derivative assets 9,967 315,413 3,466 (285,121) 43,725
AFS debt securities:
U.S. Treasury and agency securities 53,663 1,260 — — 54,923
Mortgage-backed securities:
Agency — 121,826 — — 121,826
Agency-collateralized mortgage obligations — 5,530 — — 5,530
Non-agency residential — 1,320 597 — 1,917
Commercial — 14,078 — — 14,078
Non-U.S. securities — 9,304 2 — 9,306
Other taxable securities — 4,403 7 — 4,410
Tax-exempt securities — 17,376 — — 17,376
Total AFS debt securities 53,663 175,097 606 — 229,366
Other debt securities carried at fair value:
U.S. Treasury and agency securities 1,282 — — — 1,282
Non-agency residential MBS — 1,434 172 — 1,606
Non-U.S. and other securities 490 5,357 — — 5,847
Total other debt securities carried at fair value 1,772 6,791 172 — 8,735
Loans and leases — 4,011 338 — 4,349
Loans held-for-sale — 2,400 542 — 2,942
Other assets (4) 15,032 1,775 2,932 — 19,739
Total assets (5) $ 194,437 $ 659,511 $ 11,990 $ (285,121) $ 580,817
Liabilities
Interest-bearing deposits in U.S. offices $ — $ 492 $ — $ — $ 492
Federal funds purchased and securities loaned or sold under
agreements to repurchase — 28,875 — — 28,875
Trading account liabilities:
U.S. Treasury and agency securities 7,894 761 — — 8,655
Equity securities 33,739 4,070 — — 37,809
Non-U.S. sovereign debt 7,452 9,182 — — 16,634
Corporate securities and other — 5,104 18 — 5,122
Total trading account liabilities 49,085 19,117 18 — 68,220
Derivative liabilities 9,931 303,441 4,401 (279,882) 37,891
Short-term borrowings — 1,648 — — 1,648
Accrued expenses and other liabilities 18,096 1,979 — — 20,075
Long-term debt — 26,872 817 — 27,689
Total liabilities (5) $ 77,112 $ 382,424 $ 5,236 $ (279,882) $ 184,890
(1) Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.
(2) Includes $20.2 billion of GSE obligations.
(3) Includes securities with a fair value of $16.6 billion that were segregated in compliance with securities regulations or deposited with clearing organizations. This amount is included in the parenthetical
disclosure on the Consolidated Balance Sheet.
(4) Includes MSRs of $2.0 billion which are classified as Level 3 assets.
(5) Total recurring Level 3 assets were 0.51 percent of total consolidated assets, and total recurring Level 3 liabilities were 0.25 percent of total consolidated liabilities.
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Level 3 – Fair Value Measurements (1)
Change in
Unrealized
Total Gains/
Realized/ (Losses) in
Unrealized Net Income
Gains/ Related to
Gross Gross
(Losses) in Gains/ Transfers Transfers Financial
Balance Net (Losses) Gross Balance Instruments
into out of
(Dollars in millions) January 1 Income (2) in OCI (3) Purchases Sales Issuances Settlements Level 3 Level 3 December 31 Still Held (2)
Year Ended December 31, 2017
Trading account assets:
Corporate securities, trading loans and other $ 2,777 $ 229 $ — $ 547 $ (702) $ 5 $ (666) $ 728 $(1,054) $ 1,864 $ 2
Equity securities 281 18 — 55 (70) — (10) 146 (185) 235 (1)
Non-U.S. sovereign debt 510 74 (8) 53 (59) — (73) 72 (13) 556 70
Mortgage trading loans, ABS and other MBS 1,211 165 (2) 1,210 (990) — (233) 218 (81) 1,498 72
Total trading account assets 4,779 486 (10) 1,865 (1,821) 5 (982) 1,164 (1,333) 4,153 143
Net derivative assets (liabilities) (4) (1,313) (984) — 664 (979) — 949 48 (99) (1,714) (409)
AFS debt securities:
Non-U.S. securities 229 2 16 49 — — (271) — — 25 —
Other taxable securities 594 4 8 5 — — (42) 34 (94) 509 —
Tax-exempt securities 542 1 3 14 (70) — (11) 35 (45) 469 —
Total AFS debt securities 1,365 7 27 68 (70) — (324) 69 (139) 1,003 —
Other debt securities carried at fair value –
Non-agency residential MBS 25 (1) — — (21) — (3) — — — —
Loans and leases (5) 720 15 — 3 (34) — (126) — (7) 571 11
Loans held-for-sale (5,6) 656 100 (3) 3 (189) — (346) 501 (32) 690 14
Other assets (6) 2,986 144 (57) 2 (214) 258 (758) 64 — 2,425 (226)
Federal funds purchased and securities loaned
or sold under agreements to repurchase (5) (359) (5) — — — (12) 171 (58) 263 — —
Trading account liabilities – Corporate
securities and other (27) 14 — 8 (17) (2) — — — (24) 2
Accrued expenses and other liabilities (5) (9) — — — — — 1 — — (8) —
Long-term debt (5) (1,514) (135) (31) 84 — (288) 514 (711) 218 (1,863) (196)
(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 - market making and similar activities; Net derivative assets (liabilities)
- primarily market making and similar activities and other income; Other debt securities carried at fair value - other income; Loans and leases - other income; Loans held-for-sale - other income; Other
assets - primarily other income related to MSRs; Long-term debt - predominantly market making and similar activities.
(3) Includes unrealized gains (losses) in OCI on AFS debt securities, foreign currency translation adjustments and the impact of changes in the Corporation’s credit spreads on long-term debt accounted
for under the fair value option.
(4) Net derivative assets (liabilities) include derivative assets of $4.1 billion and derivative liabilities of $5.8 billion.
(5) Amounts represent instruments that are accounted for under the fair value option.
(6) Issuances represent loan originations and MSRs recognized following securitizations or whole-loan sales.
Quantitative Information about Level 3 Fair Value Measurements at December 31, 2019
(Dollars in millions) Inputs
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Quantitative Information about Level 3 Fair Value Measurements at December 31, 2018
Gains (Losses)
2019 2018 2017
Assets
Loans held-for-sale $ (14) $ (18) $ (6)
Loans and leases (1) (81) (202) (336)
Foreclosed properties (9) (24) (41)
Other assets (2,145) (64) (124)
(1) Includes $36 million, $83 million and $135 million of losses on loans that were written down to a collateral value of zero during 2019, 2018 and 2017, respectively.
(2) Amounts are included in other assets on the Consolidated Balance Sheet and represent the carrying value of foreclosed properties that were written down subsequent to their initial classification
as foreclosed properties. Losses on foreclosed properties include losses recorded during the first 90 days after transfer of a loan to foreclosed properties.
(3) Excludes $260 million and $488 million of properties acquired upon foreclosure of certain government-guaranteed loans (principally FHA-insured loans) at December 31, 2019 and 2018.
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The table below presents information about significant unobservable inputs at December 31, 2019 and 2018.
Gains (Losses) Relating to Assets and Liabilities Accounted for Under the Fair Value Option
Market making and Other
similar activities Income Total
(Dollars in millions) 2019
Loans reported as trading account assets $ 203 $ — $ 203
Trading inventory – other (1) 5,795 — 5,795
Consumer and commercial loans 92 12 104
Loans held-for-sale (2) — 98 98
Long-term debt (3) (1,098) (78) (1,176)
Other (4) (15) 52 37
Total (5) $ 4,977 $ 84 $ 5,061
2018
Loans reported as trading account assets $ 8 $ — $ 8
Trading inventory – other (1) 1,750 — 1,750
Consumer and commercial loans (422) (53) (475)
Loans held-for-sale (2) 1 24 25
Long-term debt (3) 2,157 (93) 2,064
Other (4) 8 (31) (23)
Total (5) $ 3,502 $ (153) $ 3,349
2017
Loans reported as trading account assets $ 318 $ — $ 318
Trading inventory – other (1) 3,821 — 3,821
Consumer and commercial loans (9) 35 26
Loans held-for-sale (2) — 298 298
Long-term debt (3) (1,044) (146) (1,190)
Other (4) (93) 49 (44)
Total (5) $ 2,993 $ 236 $ 3,229
(1) The gains in market making and similar activities are primarily offset by losses on trading liabilities that hedge these assets.
(2) Includes the value of IRLCs on funded loans, including those sold during the period.
(3) The net gains (losses) in market making and similar activities relate to the embedded derivatives in structured liabilities and are typically offset by (losses) gains on derivatives and securities that
hedge these liabilities. For the cumulative impact of changes in the Corporation’s own credit spreads and the amount recognized in accumulated OCI, see Note 15 – Accumulated Other Comprehensive
Income (Loss). For more information on how the Corporation’s own credit spread is determined, see Note 21 – Fair Value Measurements.
(4) Includes gains (losses) on federal funds sold and securities borrowed or purchased under agreements to resell, long-term deposits, federal funds purchased and securities loaned or sold under
agreements to repurchase, short-term borrowings and unfunded loan commitments.
(5) Gains (losses) related to borrower-specific credit risk were $194 million, $(148) million and $38 million in 2019, 2018 and 2017, respectively.
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NOTE 23 Fair Value of Financial Instruments NOTE 24 Business Segment Information
Financial instruments are classified within the fair value hierarchy The Corporation reports its results of operations through the
using the methodologies described in Note 21 – Fair Value following four business segments: Consumer Banking, GWIM,
Measurements. Certain loans, deposits, long-term debt and Global Banking and Global Markets, with the remaining operations
unfunded lending commitments are accounted for under the fair recorded in All Other.
value option. For more information, see Note 22 – Fair Value Option.
The following disclosures include financial instruments that are Consumer Banking
not carried at fair value or only a portion of the ending balance is Consumer Banking offers a diversified range of credit, banking and
carried at fair value on the Consolidated Balance Sheet. investment products and services to consumers and small
businesses. Consumer Banking product offerings include
Short-term Financial Instruments traditional savings accounts, money market savings accounts, CDs
The carrying value of short-term financial instruments, including and IRAs, checking accounts, and investment accounts and
cash and cash equivalents, certain time deposits placed and other products, as well as credit and debit cards, residential mortgages
short-term investments, federal funds sold and purchased, certain and home equity loans, and direct and indirect loans to consumers
resale and repurchase agreements and short-term borrowings, and small businesses in the U.S. Consumer Banking includes the
approximates the fair value of these instruments. These financial impact of servicing residential mortgages and home equity loans
instruments generally expose the Corporation to limited credit risk in the core portfolio.
and have no stated maturities or have short-term maturities and
carry interest rates that approximate market. The Corporation Global Wealth & Investment Management
accounts for certain resale and repurchase agreements under the GWIM provides a high-touch client experience through a network
fair value option. of financial advisors focused on clients with over $250,000 in
Under the fair value hierarchy, cash and cash equivalents are total investable assets, including tailored solutions to meet
classified as Level 1. Time deposits placed and other short-term clients’ needs through a full set of investment management,
investments, such as U.S. government securities and short-term brokerage, banking and retirement products. GWIM also provides
commercial paper, are classified as Level 1 or Level 2. Federal comprehensive wealth management solutions targeted to high net
funds sold and purchased are classified as Level 2. Resale and worth and ultra high net worth clients, as well as customized
repurchase agreements are classified as Level 2 because they solutions to meet clients’ wealth structuring, investment
are generally short-dated and/or variable-rate instruments management, trust and banking needs, including specialty asset
collateralized by U.S. government or agency securities. Short-term management services.
borrowings are classified as Level 2.
Global Banking
Fair Value of Financial Instruments Global Banking provides a wide range of lending-related products
The carrying values and fair values by fair value hierarchy of certain and services, integrated working capital management and treasury
financial instruments where only a portion of the ending balance solutions, and underwriting and advisory services through the
was carried at fair value at December 31, 2019 and 2018 are Corporation’s network of offices and client relationship teams.
presented in the following table. Global Banking also provides investment banking products to
clients. The economics of certain investment banking and
underwriting activities are shared primarily between Global Banking
Fair Value of Financial Instruments and Global Markets under an internal revenue-sharing
arrangement. Global Banking clients generally include middle-
Fair Value
Carrying
market companies, commercial real estate firms, not-for-profit
Value Level 2 Level 3 Total companies, large global corporations, financial institutions,
(Dollars in millions) December 31, 2019 leasing clients, and mid-sized U.S.-based businesses requiring
Financial assets customized and integrated financial advice and solutions.
Loans $ 950,093 $ 63,633 $ 914,597 $ 978,230
Loans held-for-sale 9,158 8,439 719 9,158 Global Markets
Financial liabilities
Global Markets offers sales and trading services and research
Deposits (1) 1,434,803 1,434,809 — 1,434,809
Long-term debt 240,856 247,376 1,149 248,525 services to institutional clients across fixed-income, credit,
Commercial currency, commodity and equity businesses. Global Markets
unfunded lending provides market-making, financing, securities clearing, settlement
commitments (2) 903 90 4,777 4,867
and custody services globally to institutional investor clients in
December 31, 2018
support of their investing and trading activities. Global Markets
Financial assets product coverage includes securities and derivative products in
Loans $ 911,520 $ 58,228 $ 859,160 $ 917,388 both the primary and secondary markets. Global Markets also
Loans held-for-sale 10,367 9,592 775 10,367 works with commercial and corporate clients to provide risk
Financial liabilities management products. As a result of market-making activities,
Deposits (1) 1,381,476 1,381,239 — 1,381,239
Long-term debt 229,392 230,019 817 230,836
Global Markets may be required to manage risk in a broad range
Commercial of financial products. In addition, the economics of certain
unfunded lending investment banking and underwriting activities are shared primarily
commitments (2) 966 169 5,558 5,727
between Global Markets and Global Banking under an internal
(1) Includes demand deposits of $545.5 billion and $531.9 billion with no stated maturities at
December 31, 2019 and 2018.
revenue-sharing arrangement.
(2) The carrying value of commercial unfunded lending commitments is included in accrued
expenses and other liabilities on the Consolidated Balance Sheet. The Corporation does not
estimate the fair value of consumer unfunded lending commitments because, in many instances,
the Corporation can reduce or cancel these commitments by providing notice to the borrower.
For more information on commitments, see Note 13 – Commitments and Contingencies.
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The table below presents noninterest income and the components thereto for 2019, 2018 and 2017 for each business segment,
All Other and the total Corporation. For more information, see Note 2 – Net Interest Income and Noninterest Income.
December 31
2019 2018
Segments’ total assets $ 2,209,613 $ 2,159,041
Adjustments (1):
ALM activities, including securities portfolio 721,806 669,204
Elimination of segment asset allocations to match liabilities (565,346) (540,798)
Other 68,006 67,060
Consolidated total assets $ 2,434,079 $ 2,354,507
(1) Adjustments include consolidated income, expense and asset amounts not specifically allocated to individual business segments.
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Condensed Balance Sheet
December 31
(Dollars in millions) 2019 2018
Assets
Cash held at bank subsidiaries (1) $ 5,695 $ 5,141
Securities 656 628
Receivables from subsidiaries:
Bank holding companies and related subsidiaries 173,301 152,905
Banks and related subsidiaries 51 195
Nonbank companies and related subsidiaries 391 969
Investments in subsidiaries:
Bank holding companies and related subsidiaries 297,465 293,045
Nonbank companies and related subsidiaries 3,663 3,432
Other assets 9,438 14,696
Total assets $ 490,660 $ 471,011
Liabilities and shareholders’ equity
Accrued expenses and other liabilities $ 13,381 $ 8,828
Payables to subsidiaries:
Banks and related subsidiaries 458 349
Nonbank companies and related subsidiaries 12,102 13,301
Long-term debt 199,909 183,208
Total liabilities 225,850 205,686
Shareholders’ equity 264,810 265,325
Total liabilities and shareholders’ equity $ 490,660 $ 471,011
(1) Balance includes third-party cash held of $4 million and $389 million at December 31, 2019 and 2018.
Total Revenue,
Total Assets at Net of Interest Income Before
(Dollars in millions) Year End (1) Expense (2) Income Taxes Net Income
U.S. (3) 2019 $ 2,122,734 $ 81,236 $ 30,699 $ 25,937
2018 2,051,182 80,777 31,904 26,407
2017 74,604 25,108 15,550
Asia 2019 102,440 3,491 765 570
2018 94,865 3,507 865 520
2017 3,405 676 464
Europe, Middle East and Africa 2019 178,889 5,310 921 672
2018 185,285 5,632 1,543 1,126
2017 7,907 2,990 1,926
Latin America and the Caribbean 2019 30,016 1,207 369 251
2018 23,175 1,104 272 94
2017 1,210 439 292
Total Non-U.S. 2019 311,345 10,008 2,055 1,493
2018 303,325 10,243 2,680 1,740
2017 12,522 4,105 2,682
Total Consolidated 2019 $ 2,434,079 $ 91,244 $ 32,754 $ 27,430
2018 2,354,507 91,020 34,584 28,147
2017 87,126 29,213 18,232
(1) Total assets include long-lived assets, which are primarily located in the U.S.
(2) There were no material intercompany revenues between geographic regions for any of the periods presented.
(3) Substantially reflects the U.S.
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Glossary
Alt-A Mortgage – A type of U.S. mortgage that is considered riskier Margin Receivable – An extension of credit secured by eligible
than A-paper, or “prime,” and less risky than “subprime,” the securities in certain brokerage accounts.
riskiest category. Typically, Alt-A mortgages are characterized by
borrowers with less than full documentation, lower credit scores Matched Book – Repurchase and resale agreements or securities
and higher LTVs. borrowed and loaned transactions where the overall asset and
liability position is similar in size and/or maturity. Generally, these
Assets Under Management (AUM) – The total market value of are entered into to accommodate customers where the
assets under the investment advisory and/or discretion of GWIM Corporation earns the interest rate spread.
which generate asset management fees based on a percentage
of the assets’ market values. AUM reflects assets that are Mortgage Servicing Rights (MSR) – The right to service a mortgage
generally managed for institutional, high net worth and retail loan when the underlying loan is sold or securitized. Servicing
clients, and are distributed through various investment products includes collections for principal, interest and escrow payments
including mutual funds, other commingled vehicles and separate from borrowers and accounting for and remitting principal and
accounts. interest payments to investors.
Banking Book – All on- and off-balance sheet financial instruments Net Interest Yield – Net interest income divided by average total
of the Corporation except for those positions that are held for interest-earning assets.
trading purposes. Nonperforming Loans and Leases – Includes loans and leases that
Brokerage and Other Assets – Non-discretionary client assets have been placed on nonaccrual status, including nonaccruing
which are held in brokerage accounts or held for safekeeping. loans whose contractual terms have been restructured in a manner
that grants a concession to a borrower experiencing financial
Committed Credit Exposure – Any funded portion of a facility plus difficulties.
the unfunded portion of a facility on which the lender is legally
bound to advance funds during a specified period under prescribed Operating Margin – Income before income taxes divided by total
conditions. revenue, net of interest expense.
Credit Derivatives – Contractual agreements that provide Prompt Corrective Action (PCA) – A framework established by the
protection against a specified credit event on one or more U.S. banking regulators requiring banks to maintain certain levels
referenced obligations. of regulatory capital ratios, comprised of five categories of
capitalization: “well capitalized,” “adequately capitalized,”
Credit Valuation Adjustment (CVA) – A portfolio adjustment required “undercapitalized,” “significantly undercapitalized” and “critically
to properly reflect the counterparty credit risk exposure as part of undercapitalized.” Insured depository institutions that fail to meet
the fair value of derivative instruments. certain of these capital levels are subject to increasingly strict
limits on their activities, including their ability to make capital
Debit Valuation Adjustment (DVA) – A portfolio adjustment required distributions, pay management compensation, grow assets and
to properly reflect the Corporation’s own credit risk exposure as take other actions.
part of the fair value of derivative instruments and/or structured
liabilities. Subprime Loans – Although a standard industry definition for
subprime loans (including subprime mortgage loans) does not
Funding Valuation Adjustment (FVA) – A portfolio adjustment exist, the Corporation defines subprime loans as specific product
required to include funding costs on uncollateralized derivatives offerings for higher risk borrowers.
and derivatives where the Corporation is not permitted to use the
collateral it receives. Troubled Debt Restructurings (TDRs) – Loans whose contractual
terms have been restructured in a manner that grants a concession
Interest Rate Lock Commitment (IRLC) – Commitment with a loan to a borrower experiencing financial difficulties. Certain consumer
applicant in which the loan terms are guaranteed for a designated loans for which a binding offer to restructure has been extended
period of time subject to credit approval. are also classified as TDRs.
Letter of Credit – A document issued on behalf of a customer to Value-at-Risk (VaR) – VaR is a model that simulates the value of
a third party promising to pay the third party upon presentation of a portfolio under a range of hypothetical scenarios in order to
specified documents. A letter of credit effectively substitutes the generate a distribution of potential gains and losses. VaR
issuer’s credit for that of the customer. represents the loss the portfolio is expected to experience with a
Loan-to-value (LTV) – A commonly used credit quality metric. LTV given confidence level based on historical data. A VaR model is
is calculated as the outstanding carrying value of the loan divided an effective tool in estimating ranges of potential gains and losses
by the estimated value of the property securing the loan. on our trading portfolios.
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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.
Bank
Bank of
of America
America 2019
2019 185
185
Executive Management Team and Management Committee
Bank of America Corporation
* Executive Officer
** All members of the Executive Management Team are also members of the Management Committee
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Board of Directors
Bank of America Corporation
Board of Directors
Brian T. Moynihan Monica C. Lozano
Chairman of the Board and Chief Executive Officer, College
Chief Executive Officer, Futures Foundation; Former Chairman,
Bank of America Corporation US Hispanic Media Inc.
Jack O. Bovender, Jr. Thomas J. May
Lead Independent Director, Former Chairman, President, and Chief
Bank of America Corporation; Executive Officer, Eversource Energy
Former Chairman and Lionel L. Nowell III
Chief Executive Officer, HCA Inc. Former Senior Vice President and
Sharon L. Allen Treasurer, PepsiCo, Inc.
Former Chairman, Deloitte LLP Denise L. Ramos
Susan S. Bies Former Chief Executive Officer, ITT Inc.
Former Member, Board of Governors Clayton S. Rose
of the Federal Reserve System President, Bowdoin College
Frank P. Bramble, Sr. Michael D. White
Former Executive Vice Chairman, Former Chairman, President, and
MBNA Corporation Chief Executive Officer, DIRECTV
Pierre J.P. de Weck Thomas D. Woods
Former Chairman and Global Head Former Vice Chairman and Senior
of Private Wealth Management, Executive Vice President, Canadian
Deutsche Bank AG Imperial Bank of Commerce
Arnold W. Donald R. David Yost
President and Chief Executive Officer, Former Chief Executive Officer,
Carnival Corporation and Carnival plc AmerisourceBergen Corporation
Linda P. Hudson Maria T. Zuber
Former Chairman and Chief Executive Vice President for Research and
Officer, The Cardea Group, LLC; E.A. Griswold Professor of Geophysics,
Former President and Chief Executive Massachusetts Institute of Technology
Officer, BAE Systems, Inc.
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188 Bank of America 1862019 2/24/20 7:06 PM
Investment products:
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