Results Include Litigation Expense of $4.0
Billion (Pretax) or Approximately $0.22 per Share (After
Tax)
Company Reaches Settlement With AIG to
Resolve Residential Mortgage-backed Securities Claims for $650
Million
Business Metrics Reflect Progress on Customer-focused
Strategy
- Total Period-end Deposit Balances up
$54 Billion, or 5 Percent, From Q2-13 to a Record $1.13
Trillion
- Funding of $13.7 Billion in Residential
Home Loans and Home Equity Loans in Q2-14 Helped Nearly 43,000
Homeowners Purchase a Home or Refinance a Mortgage
- More Than 1.1 Million New Credit Cards
Issued in Q2-14, With 65 Percent Going to Existing Customers
- Global Wealth and Investment Management
Reports Record Revenue of $4.6 Billion and Record Total Client
Balances of $2.47 Trillion
- Global Banking Average Loan Balances up
6 Percent From Q2-13 to $271 Billion
- Bank of America Merrill Lynch
Maintained a Leadership Position in Investment Banking with Total
Firmwide Fees of $1.6 Billion and Record Equity Issuance Fees in
Q2-14, Excluding Self-led Deals
- FICC Sales and Trading Revenue,
Excluding Net DVA, up 5 Percent From Q2-13(B)
- Noninterest Expense, Excluding
Litigation, Down 6 Percent From Q2-13 to $14.6 Billion(C)
- Credit Quality Continued to Improve
With Net Charge-offs Down 49 Percent From Q2-13 to $1.1 Billion;
Net Charge-off Ratio of 0.48 Percent Is Lowest in a Decade
Capital and Liquidity Measures Remain Strong
- Estimated Common Equity Tier 1 Ratio
Under Basel 3 (Standardized Approach, Fully Phased-in) Increased to
9.5 Percent in Q2-14; Advanced Approaches Increased to 9.9 Percent
in Q2-14(D)
- Estimated Supplementary Leverage Ratios
Above 2018 Required Minimums(E)
- Long-term Debt Down $5 Billion From
Year-ago Quarter
- Record Global Excess Liquidity Sources
of $431 Billion, up $89 Billion From Q2-13; Time-to-required
Funding at 38 Months
- Tangible Book Value per Share Increased
7 Percent From Q2-13 to $14.24 per Share(F)
Bank of America Corporation today reported net income of $2.3
billion, or $0.19 per diluted share, for the second quarter of
2014, compared to net income of $4.0 billion, or $0.32 per diluted
share, in the year-ago period. Revenue, net of interest expense, on
an FTE basis(A) declined 4 percent from the second quarter of 2013
to $22.0 billion.
"The economy continues to strengthen, and our customers and
clients are doing more business with us," said Chief Executive
Officer Brian Moynihan. "Among other positive indicators, consumers
are spending more, brokerage assets are up by double digits and our
corporate clients are increasingly turning to us to help finance
business expansion and merger activity. We are well positioned for
further progress."
"During the quarter, our Basel 3 capital ratios improved and
credit losses remained near historical lows," said Chief Financial
Officer Bruce Thompson. "In addition, we did a good job managing
expenses. Although litigation expenses were higher than the
year-ago quarter, total noninterest expense, excluding litigation,
declined 6 percent from the second quarter of 2013."(C)
Selected Financial Highlights
Three Months Ended (Dollars in millions, except per
share data)
June 30 2014 March 312014
June 302013 Net interest income, FTE basis1
$ 10,226
$ 10,286 $ 10,771 Noninterest income
11,734
12,481 12,178
Total revenue, net of interest expense, FTE
basis1
21,960 22,767 22,949 Provision for credit losses
411 1,009 1,211 Noninterest expense2
18,541 22,238
16,018
Net income (loss) $ 2,291 $ (276 ) $
4,012 Diluted earnings (loss) per common share
$ 0.19
$ (0.05 ) $ 0.32
1 Fully taxable-equivalent (FTE) basis is a non-GAAP financial
measure. For reconciliations to GAAP financial measures, refer to
pages 22-24 of this press release. Net interest income on a GAAP
basis was $10.0 billion, $10.1 billion and $10.5 billion for the
three months ended June 30, 2014, March 31, 2014 and
June 30, 2013, respectively. Total revenue, net of interest
expense, on a GAAP basis was $21.7 billion, $22.6 billion and $22.7
billion for the three months ended June 30, 2014, March 31,
2014 and June 30, 2013, respectively.
2 Noninterest expense includes litigation expense of $4.0
billion, $6.0 billion and $0.5 billion for the three months ended
June 30, 2014, March 31, 2014 and June 30, 2013,
respectively.
Net interest income, on an FTE basis, declined 5 percent from
the year-ago quarter to $10.2 billion(A). The decline was driven by
lower yields on debt securities due to a $528 million change in
market-related premium amortization expense. Excluding these
market-related adjustments, net interest income was relatively
stable at $10.4 billion for both periods and the net interest
margin was 2.26 percent in the second quarter of 2014, compared to
2.28 percent in the second quarter of 2013(A).
Noninterest income was down 4 percent from the year-ago quarter,
driven primarily by year-over-year declines in mortgage banking
income and equity investment income. The provision for credit
losses declined 66 percent from the second quarter of 2013 to $411
million, driven by improved credit quality. Net charge-offs
declined 49 percent from the second quarter of 2013 to $1.1
billion, with the net charge-off ratio falling to 0.48 percent in
the second quarter of 2014 from 0.94 percent in the year-ago
quarter. During the second quarter of 2014, the reserve release was
$662 million, compared to a reserve release of $900 million in the
second quarter of 2013.
Noninterest expense was $18.5 billion, compared to $16.0 billion
in the year-ago quarter, driven by higher mortgage-related
litigation expense, partially offset by reduced personnel expense.
Substantially all litigation expense incurred in the second quarter
of 2014 related to previously disclosed legacy mortgage-related
matters. Excluding litigation expense, noninterest expense declined
6 percent from the year-ago quarter to $14.6 billion, reflecting
continued progress by the company to realize cost savings in its
Legacy Assets and Servicing business as well as Project New
BAC(C).
The effective tax rate of 18.0 percent for the second quarter of
2014 was driven by the impact of recurring tax preference benefits
on the lower level of pretax income. The effective tax rate for the
second quarter of 2013 of 27.0 percent was primarily driven by
recurring tax preference benefits and an increase in tax benefits
from the 2012 non-U.S. restructurings.
At June 30, 2014, the company had 233,201 full-time
employees, down 9 percent from the year-ago quarter and 2 percent
below the first quarter of 2014.
AIG Settlement
On July 15, 2014, Bank of America executed a definitive
settlement agreement with AIG to resolve all outstanding
residential mortgage-backed securities (RMBS) litigation between
the parties. Under the terms of the settlement, AIG will file
notices of dismissal in its securities lawsuits against Bank of
America and its affiliates pending in California and New York
federal courts. Also, AIG has agreed to withdraw its objection to
the Bank of New York Mellon private-label securities settlement
(Article 77 Proceeding).
The AIG settlement amount of $650 million was covered by
litigation reserves as of June 30, 2014. Bank of America has now
resolved approximately 95 percent of the unpaid principal balance
of all RMBS as to which RMBS securities litigation has been filed
or threatened for all Bank of America-related entities.
In addition, the parties agreed to settle three actions brought
by Bank of America seeking to collect mortgage insurance proceeds
due from AIG’s United Guaranty mortgage insurance subsidiaries on
legacy Bank of America originated and serviced loans.
Business Segment Results
The company reports results through five business segments:
Consumer and Business Banking (CBB), Consumer Real Estate Services
(CRES), Global Wealth and Investment Management (GWIM), Global
Banking, and Global Markets, with the remaining operations recorded
in All Other.
Consumer and Business Banking (CBB)
Three Months Ended (Dollars in millions)
June
30 2014 March 312014 June 302013
Total
revenue, net of interest expense, FTE basis $
7,373 $ 7,438 $ 7,434 Provision for credit
losses
534 812 967 Noninterest expense
4,000 3,963
4,184
Net income $ 1,788 $ 1,666 $ 1,391
Return on average allocated capital1
24.3 % 22.9 %
18.6 % Average loans
$ 160,240 $ 162,061 $ 163,593
Average deposits
543,566 534,557 522,244
At
period-end Brokerage assets
$ 105,926
$ 100,206 $ 84,182
1 Return on average allocated capital is a non-GAAP financial
measure. The company believes the use of this non-GAAP financial
measure provides additional clarity in assessing the results of the
segments. Other companies may define or calculate this measure
differently. For reconciliation to GAAP financial measures, refer
to pages 22-24 of this press release.
Business Highlights
- Average deposit balances increased
$21.3 billion, or 4 percent, from the year-ago quarter to $543.6
billion. The increase was primarily driven by growth in liquid
products in the current low-rate environment.
- Client brokerage assets increased $21.7
billion, or 26 percent, from the year-ago quarter to $105.9
billion, driven by increased market valuation and account
flows.
- Credit card issuance remained strong
with the company issuing 1.1 million new credit cards in the second
quarter of 2014, up 18 percent from the year-ago quarter.
Approximately 65 percent of these cards went to existing
customers.
- The number of mobile banking customers
increased 17 percent from the year-ago quarter to 15.5 million
users, with 10 percent of customer deposit transactions using
mobile devices.
- Return on average allocated capital was
24.3 percent in the second quarter of 2014, compared to 18.6
percent in the second quarter of 2013.
Financial Overview
Consumer and Business Banking reported net income of $1.8
billion, up $397 million, or 29 percent, from the year-ago quarter,
reflecting lower provision for credit losses and continued progress
on the company's strategy of deepening relationships and reducing
costs by optimizing the delivery network. Revenue was relatively
stable compared to the year-ago quarter as higher service charge
income was offset by lower net interest income and slightly lower
card income.
The provision for credit losses decreased $433 million from the
year-ago quarter to $534 million, reflecting continued improvement
in credit quality. Noninterest expense decreased 4 percent, or $184
million, from the year-ago quarter to $4.0 billion, driven by lower
operating, litigation and personnel expenses. Network optimization
continued with the reduction of another 72 banking centers through
sales and closures during the second quarter of 2014.
Consumer Real Estate Services (CRES)
Three Months Ended (Dollars in millions)
June
30 2014 March 312014 June 302013
Total
revenue, net of interest expense, FTE basis $
1,390 $ 1,192 $ 2,115 Provision for credit
losses
(20 ) 25 291 Noninterest expense1
5,902
8,129 3,383
Net loss $ (2,802 ) $
(5,027 ) $ (930 ) Average loans and leases
88,257 88,914
90,114
At period-end Loans and leases
$ 88,156
$ 88,355 $ 89,257
1 Noninterest expense includes litigation expense of $3.8
billion, $5.8 billion and $219 million for the three months ended
June 30, 2014, March 31, 2014 and June 30, 2013.
Business Highlights
- Bank of America funded $13.7 billion in
residential home loans and home equity loans during the second
quarter of 2014, helping nearly 43,000 homeowners either refinance
an existing mortgage or purchase a home. This included more than
5,500 first-time homebuyer mortgages and more than 13,800 mortgages
to low- and moderate-income borrowers.
- The number of 60+ days delinquent first
mortgage loans serviced by Legacy Assets and Servicing (LAS)
declined 5 percent during the second quarter of 2014 to 263,000
loans from 277,000 loans at the end of the first quarter of 2014,
and declined 47 percent from 492,000 loans at the end of the second
quarter of 2013.
- Noninterest expense in LAS, excluding
litigation, declined to $1.4 billion in the second quarter of 2014
from $1.6 billion in the first quarter of 2014 and $2.3 billion in
the year-ago quarter as the company continued to focus on reducing
the number of delinquent mortgage loans in its portfolio(G).
Financial Overview
Consumer Real Estate Services reported a net loss of $2.8
billion for the second quarter of 2014, compared to a net loss of
$930 million for the same period in 2013, driven largely by a $3.6
billion increase in litigation expense. Revenue declined $725
million from the second quarter of 2013 to $1.4 billion, driven
primarily by lower core production revenue due to fewer loan
originations as well as lower servicing income, primarily due to a
smaller servicing portfolio.
CRES first-mortgage originations declined 59 percent in the
second quarter of 2014 compared to the same period in 2013,
reflecting a decline in overall market demand for refinance
mortgages. Core production revenue decreased $542 million from the
year-ago quarter to $318 million due primarily to lower volume and
a reduction in revenues from sales of loans that had returned to
performing status.
The provision for credit losses decreased $311 million from the
year-ago quarter to a provision benefit of $20 million due to the
continued improvement in portfolio trends.
Noninterest expense increased $2.5 billion from the year-ago
quarter to $5.9 billion, due to a $3.6 billion increase in
litigation expense, partially offset by lower LAS default-related
staffing and other default-related servicing expenses, and lower
Home Loans expenses as refinance demand slowed.
Global Wealth and Investment Management (GWIM)
Three Months Ended (Dollars in millions)
June
30 2014 March 312014 June 302013
Total
revenue, net of interest expense, FTE basis $
4,589 $ 4,547 $ 4,499 Provision for credit
losses
(8 ) 23 (15 ) Noninterest expense
3,447
3,359 3,270
Net income $ 724 $ 729 $ 759
Return on average allocated capital1
24.3 % 24.7 %
30.6 % Average loans and leases
$ 118,512 $ 115,945 $
109,589 Average deposits
240,042 242,792 235,344
At
period-end (dollars in billions) Assets under management
$ 878.7 $ 841.8 $ 743.6 Total client balances2
2,468.2 2,395.8 2,215.1
1 Return on average allocated capital is a non-GAAP financial
measure. The company believes the use of this non-GAAP financial
measure provides additional clarity in assessing the results of the
segments. Other companies may define or calculate this measure
differently. For reconciliation to GAAP financial measures, refer
to pages 22-24 of this press release.
2 Total client balances are defined as assets under management,
client brokerage assets, assets in custody, client deposits and
loans (including margin receivables).
Business Highlights
- Client balances increased 11 percent
from the year-ago quarter to a record $2.47 trillion, driven by
higher market levels and net inflows. Second-quarter 2014 long-term
assets under management (AUM) flows of $11.9 billion were the 20th
consecutive quarter of positive flows.
- Asset management fees grew to a record
$1.95 billion, up 15 percent from the year-ago quarter.
- Average loan balances increased 8
percent from the year-ago quarter to $118.5 billion.
- Pretax margin was 25.1 percent in the
second quarter of 2014, compared to the record year-ago margin of
27.6 percent, marking the sixth straight quarter over 25
percent.
Financial Overview
Global Wealth and Investment Management reported net income of
$724 million, compared to $759 million in the second quarter of
2013. Revenue increased 2 percent from the year-ago quarter to a
record $4.6 billion, driven by higher noninterest income related to
improved market valuation and long-term AUM flows.
Credit quality remained strong in the second quarter with the
provision for credit losses relatively stable compared to the
year-ago quarter. Noninterest expense increased 5 percent to $3.4
billion, driven in part by higher revenue-related incentive
compensation and other volume-related expenses and additional
investments in technology and other areas to support business
growth.
Return on average allocated capital was 24.3 percent in the
second quarter of 2014, down from 30.6 percent in the year-ago
quarter, as relatively stable earnings were more than offset by
increased capital allocations.
Client balances rose 11 percent from the year-ago quarter to
$2.47 trillion, driven largely by higher market levels, long-term
AUM flows of $49.0 billion and period-end client loan growth of
$8.5 billion. Assets under management rose $135.1 billion, or 18
percent, from the second quarter of 2013 to $878.7 billion, driven
by increased market valuation and long-term AUM flows. Average
deposit balances increased $4.7 billion from the second quarter of
2013 to $240.0 billion.
Global Banking
Three Months Ended (Dollars in millions)
June
30 2014 March 312014 June 302013
Total
revenue, net of interest expense, FTE basis $
4,179 $ 4,269 $ 4,138 Provision for credit
losses
132 265 163 Noninterest expense
1,899 2,028
1,849
Net income $ 1,353 $ 1,236 $ 1,297
Return on average allocated capital1
17.5 % 16.2 %
22.6 % Average loans and leases
$ 271,417 $ 271,475 $
255,674 Average deposits
258,937 256,433
226,912
1 Return on average allocated capital is a non-GAAP financial
measure. The company believes the use of this non-GAAP financial
measure provides additional clarity in assessing the results of the
segments. Other companies may define or calculate this measure
differently. For reconciliation to GAAP financial measures, refer
to pages 22-24 of this press release.
Business Highlights
- Bank of America Merrill Lynch (BAML)
was ranked No. 2 in global net investment banking fees in the
second quarter of 2014 with firmwide investment banking fees of
$1.6 billion, excluding self-led deals(H). Global Banking achieved
record equity underwriting fees, excluding self-led deals.
- BAML ranked among the top three
financial institutions globally in leveraged loans, convertible
debt, asset-backed securities, common stock underwriting,
investment grade corporate debt and syndicated loans during the
second quarter of 2014(H).
- BAML was recently awarded two of
Euromoney magazine’s most prestigious accolades: Best Global
Investment Bank and Best Global Transaction Services House, marking
the first time Euromoney awarded one firm both awards in the same
year.
- Average loan and lease balances
increased $15.7 billion, or 6 percent, from the year-ago quarter,
to $271.4 billion, with growth in the commercial and industrial
loan portfolio and the commercial real estate and leasing
portfolios.
- Average deposits increased $32.0
billion, or 14 percent, from the year-ago quarter to $258.9 billion
primarily due to increased client liquidity and international
growth.
Financial Overview
Global Banking reported net income of $1.4 billion in the second
quarter of 2014, compared to $1.3 billion in the year-ago quarter
as a decline in the provision for credit losses was partially
offset by higher noninterest expense. Revenue of $4.2 billion was
relatively stable compared to the second quarter of 2013.
Global Corporate Banking revenue increased to $1.6 billion in
the second quarter of 2014, up $29 million from the year-ago
quarter, and Global Commercial Banking revenue decreased $59
million to $1.7 billion. Included in these results are Business
Lending revenue of $1.8 billion, down $80 million from the year-ago
quarter, and Global Transaction Services revenue of $1.5 billion,
up $50 million from the year-ago period. Global Banking investment
banking fees, excluding self-led deals, increased $33 million
versus the year-ago quarter.
The provision for credit losses decreased $31 million from the
year-ago quarter to $132 million. Noninterest expense increased $50
million, or 3 percent, from the year-ago quarter to $1.9 billion,
primarily from higher litigation expense.
Return on average allocated capital was 17.5 percent in the
second quarter of 2014, down from 22.6 percent in the year-ago
quarter, as modest earnings improvement was more than offset by
increased capital allocations.
Global Markets1
Three Months Ended (Dollars in millions)
June
30 2014 March 312014 June 302013
Total
revenue, net of interest expense, FTE basis $
4,583 $ 5,012 $ 4,194 Provision for credit
losses
19 19 (16 ) Noninterest expense
2,862 3,077
2,770
Net income $ 1,101 $ 1,308 $ 962 Return
on average allocated capital2
13.0 % 15.6 % 12.9 %
Total average assets
$ 617,103 $
601,439 $ 656,109
1 During 2014, the management of structured liabilities and the
associated DVA were moved into Global Markets from All Other to
better align the performance risk of these instruments. As such,
net DVA represents the combined total of net DVA on derivatives and
structured liabilities. Prior periods have been reclassified to
conform to current period presentation. Net DVA gains were $69
million, $112 million and $49 million for the three months ended
June 30, 2014, March 31, 2014 and June 30, 2013,
respectively.
2 Return on average allocated capital is a non-GAAP financial
measure. The company believes the use of this non-GAAP financial
measure provides additional clarity in assessing the results of the
segments. Other companies may define or calculate this measure
differently. For reconciliation to GAAP financial measures, refer
to pages 22-24 of this press release.
Business Highlights
- Fixed Income, Currency and Commodities
(FICC) sales and trading revenue, excluding net DVA(B), increased 5
percent from the second quarter of 2013 to $2.4 billion.
- Return on average allocated capital was
13.0 percent in the second quarter of 2014, compared to 12.9
percent in the second quarter of 2013, reflecting increased net
income which was largely offset by an increase in allocated capital
compared to the year-ago quarter.
Financial Overview
Global Markets reported net income of $1.1 billion in the second
quarter of 2014, up 14 percent from the year-ago quarter. Revenue
increased $389 million, or 9 percent, from the year-ago quarter to
$4.6 billion, reflecting higher equity investment gains (not
included in sales and trading) and increased investment banking
fees.
Total sales and trading revenue was comparable to the year-ago
quarter at $3.5 billion. Excluding net DVA, sales and trading
revenue was $3.4 billion in both periods(I). FICC sales and trading
revenue, excluding net DVA(B), was $2.4 billion in the second
quarter of 2014, an increase of $117 million, or 5 percent, from
the year-ago quarter, reflecting improved performance in mortgage
and municipal products, partially offset by declines in foreign
exchange and commodities. Equities sales and trading revenue,
excluding net DVA(J), was $1.0 billion, a decrease of $162 million,
or 14 percent, from the year-ago quarter as low volatility
depressed secondary market volumes and reduced client activity. In
addition to sales and trading, there was an equity investment gain
of $240 million in the second quarter of 2014.
Noninterest expense was $2.9 billion compared to $2.8 billion in
the year-ago quarter.
All Other1
Three Months Ended (Dollars in millions)
June
30 2014 March 312014 June 302013
Total
revenue, net of interest expense, FTE basis2, 3 $
(154 ) $ 309 $ 569 Provision for credit
losses
(246 ) (135 ) (179 ) Noninterest expense4
431 1,682 562
Net income (loss) $ 127 $
(188 ) $ 533 Total average loans
210,575
217,391 238,910
1 All Other consists of ALM activities, equity investments, the
international consumer card business, liquidating businesses and
other. ALM activities encompass the whole-loan residential mortgage
portfolio and investment securities, interest rate and foreign
currency risk management activities including the residual net
interest income allocation, the impact of certain allocation
methodologies and accounting hedge ineffectiveness.
2 Revenue includes equity investment income of $56 million, $674
million and $576 million for the three months ended June 30, 2014,
March 31, 2014 and June 30, 2013, respectively, and gains
on sales of debt securities of $382 million, $357 million and $452
million for the three months ended June 30, 2014, March 31,
2014 and June 30, 2013, respectively.
3 During 2014, the management of structured liabilities and the
associated DVA were moved into Global Markets from All Other to
better align the performance risk of these instruments. Prior
periods have been reclassified to conform to current period
presentation.
4 The three months ended March 31, 2014 included $717
million of expense related to annual retirement-eligible incentive
compensation.
All Other reported net income of $127 million in the second
quarter of 2014, compared to net income of $533 million for the
same period a year ago. The decline was primarily driven by lower
equity investment income and the negative quarterly impact of
market-related net interest income adjustments compared to the
year-ago quarter. This was partially offset by an improvement in
the provision for credit losses driven primarily by recoveries on
bulk sales of nonperforming loans, and lower noninterest
expense.
Credit Quality
Three Months Ended (Dollars in millions)
June
30 2014 March 312014 June 302013 Provision
for credit losses
$ 411 $ 1,009 $ 1,211
Net charge-offs1
1,073 1,388 2,111 Net charge-off ratio1, 2
0.48 % 0.62 % 0.94 % Net charge-off ratio, excluding
the PCI loan portfolio2
0.49 0.64 0.97 Net charge-off ratio,
including PCI write-offs2
0.55 0.79 1.07
At
period-end Nonperforming loans, leases and foreclosed
properties
$ 15,300 $ 17,732 $ 21,280 Nonperforming
loans, leases and foreclosed properties ratio3
1.70 %
1.96 % 2.33 % Allowance for loan and lease losses
$
15,811 $ 16,618 $ 21,235 Allowance for loan and lease losses
ratio4
1.75 % 1.84 % 2.33 %
1 Excludes write-offs of PCI loans of $160 million, $391 million
and $313 million for the three months ended June 30, 2014,
March 31, 2014 and June 30, 2013, respectively.
2 Net charge-off ratios are calculated as annualized net
charge-offs divided by average outstanding loans and leases during
the period; quarterly results are annualized.
3 Nonperforming loans, leases and foreclosed properties ratios
are calculated as nonperforming loans, leases and foreclosed
properties divided by outstanding loans, leases and foreclosed
properties at the end of the period.
4 Allowance for loan and lease losses ratios are calculated as
allowance for loan and lease losses divided by loans and leases
outstanding at the end of the period.
Note: Ratios do not include loans accounted for under the fair
value option.
Credit quality continued to improve in the second quarter of
2014. Compared with the second quarter a year ago, net charge-offs
declined across all major portfolios and the provision for credit
losses decreased. The number of 30+ days performing delinquent
loans, excluding fully-insured loans, declined across all consumer
portfolios from the year-ago quarter, reaching record low levels in
the U.S. credit card portfolio. Additionally, reservable criticized
balances and nonperforming loans, leases and foreclosed properties
continued to decline, down 17 percent and 28 percent respectively,
from the year-ago period.
Net charge-offs were $1.1 billion in the second quarter of 2014,
down from $1.4 billion in the first quarter of 2014 and $2.1
billion in the second quarter of 2013. The second quarter of 2014
included $185 million of recoveries associated with the $2.1
billion bulk sale of nonperforming loans.
The provision for credit losses declined to $411 million in the
second quarter of 2014 from $1.2 billion in the second quarter of
2013, driven by lower levels of delinquencies across the consumer
lending portfolio, as well as improvement in the consumer real
estate portfolios, primarily due to increased home
prices. During the second quarter of 2014, the reserve release
was $662 million compared to a reserve release of $900 million in
the second quarter of 2013.
The allowance for loan and lease losses to annualized net
charge-off coverage ratio was 3.67 times in the second quarter of
2014, compared with 2.95 times in the first quarter of 2014 and
2.51 times in the second quarter of 2013. The increase was due to
the improvement in net charge-offs discussed above. The allowance
to annualized net charge-off coverage ratio, excluding the
purchased credit-impaired (PCI) portfolio, was 3.25 times, 2.58
times and 2.04 times for the same periods, respectively.
Nonperforming loans, leases and foreclosed properties were $15.3
billion at June 30, 2014, a decrease from $17.7 billion at
March 31, 2014 and $21.3 billion at June 30, 2013.
Capital and Liquidity Management1,2,3
(Dollars in billions)
At June 30 2014
At March 312014
Basel 3 Transition (under standardized
approach) Common equity tier 1 capital - Basel 3
$ 153.6 $ 150.9 Risk-weighted assets
1,282.7
1,282.1 Common equity tier 1 capital ratio - Basel 3
12.0
% 11.8 %
Basel 3 Fully Phased-in (under
standardized approach)3 Common equity tier 1 capital -
Basel 3
$ 137.2 130.1 Risk-weighted assets
1,437.0 1,447.4 Common equity tier 1 capital ratio - Basel 3
9.5 % 9.0 % (Dollars in millions, except per
share information)
At June 30 2014 At
March 312014 At June 302013 Tangible common equity ratio4
7.14 % 7.00 % 6.98 % Total
shareholders’ equity
$ 237,411 $ 231,888 $ 231,032
Common equity ratio
10.25 % 10.17 % 10.21 % Tangible
book value per share4
$ 14.24 $ 13.81 $ 13.32 Book
value per share
21.16 20.75
20.18
1 Regulatory capital ratios are preliminary.
2 On January 1, 2014, the Basel 3 rules became effective,
subject to transition provisions primarily related to regulatory
deductions and adjustments impacting common equity tier 1 capital
and tier 1 capital.
3 Basel 3 common equity tier 1 capital and risk-weighted assets
on a fully phased-in basis are non-GAAP financial measures. For
reconciliations to GAAP financial measures, refer to page 18 of
this press release. The company's fully phased-in Basel 3 estimates
are based on its current understanding of the Standardized and
Advanced approaches under the Basel 3 rules, assuming all relevant
regulatory model approvals, except for the potential reduction to
risk-weighted assets resulting from removal of the Comprehensive
Risk Measure surcharge. The Basel 3 rules require approval by
banking regulators of certain models used as part of risk-weighted
asset calculations. If these models are not approved, the company's
capital ratio would likely be adversely impacted, which in some
cases could be significant.
4 Tangible common equity ratio and tangible book value per share
are non-GAAP financial measures. For reconciliations to GAAP
financial measures, refer to pages 22-24 of this press release.
The common equity tier 1 capital ratio under the Basel 3
Standardized approach for measuring risk-weighted assets was 12.0
percent at June 30, 2014, up from 11.8 percent at
March 31, 2014.
While the Basel 3 fully phased-in Standardized and fully
phased-in Advanced approaches do not go into effect until 2018, the
company is providing the following estimates for comparative
purposes.
The estimated common equity tier 1 capital ratio under the Basel
3 Standardized approach on a fully phased-in basis was 9.5 percent
at June 30, 2014, up from 9.0 percent at March 31,
2014.(D)
The estimated common equity tier 1 capital ratio under the Basel
3 Advanced approaches on a fully phased-in basis increased to 9.9
percent from 9.6 percent at March 31, 2014.(D)
In connection with the final U.S. rule and Notice of Proposed
Rulemaking (NPR) issued on April 8 and effective in 2018(E), the
company's estimated supplementary leverage ratios were above the 5
percent supplementary leverage ratio minimum for bank holding
companies, and both of the company's primary bank subsidiaries were
above the 6 percent supplementary leverage ratio minimum for
primary bank subsidiaries.
At June 30, 2014, the company's Global Excess Liquidity
Sources totaled $431 billion, compared to $427 billion at
March 31, 2014 and $342 billion at June 30, 2013.
Time-to-required funding was 38 months at June 30, 2014,
compared to 35 months at March 31, 2014 and 32 months at
June 30, 2013.
Period-end common shares issued and outstanding were 10.52
billion at June 30, 2014, 10.53 billion at March 31, 2014
and 10.74 billion at June 30, 2013. During the second quarter
of 2014, approximately 14 million common shares were repurchased
for approximately $233 million at an average price of $16.16 per
share.
Tangible book value per share(F) was $14.24 at June 30,
2014, compared to $13.81 at March 31, 2014 and $13.32 at
June 30, 2013. Book value per share was $21.16 at
June 30, 2014, compared to $20.75 at March 31, 2014 and
$20.18 at June 30, 2013.
------------------------------
End Notes
(A) Fully taxable-equivalent (FTE) basis is a non-GAAP financial
measure. For reconciliation to GAAP financial measures, refer to
pages 22-24 of this press release. Net interest income on a GAAP
basis was $10.0 billion, $10.1 billion and $10.5 billion for the
three months ended June 30, 2014, March 31, 2014 and
June 30, 2013, respectively. Net interest income on an FTE
basis excluding market-related adjustments represents a non-GAAP
financial measure. Market-related adjustments of premium
amortization expense and hedge ineffectiveness were ($0.2) billion,
($0.3) billion, and $0.4 billion for the three months ended
June 30, 2014, March 31, 2014 and June 30, 2013,
respectively. Total revenue, net of interest expense, on a GAAP
basis was $21.7 billion, $22.6 billion and $22.7 billion for the
three months ended June 30, 2014, March 31, 2014 and
June 30, 2013, respectively.
(B) FICC sales and trading revenue, excluding net DVA is a
non-GAAP financial measure. Net DVA included in FICC revenue was
gains (losses) of $56 million, $80 million and $(37) million for
the three months ended June 30, 2014, March 31, 2014 and June 30,
2013, respectively.
(C) Noninterest expense excluding litigation is a non-GAAP
financial measure. Noninterest expense including litigation was
$18.5 billion, $22.2 billion and $16.0 billion for the three months
ended June 30, 2014, March 31, 2014 and June 30, 2013,
respectively. Noninterest expense excluding litigation was $14.6
billion, $16.2 billion and $15.5 billion or the three months ended
June 30, 2014, March 31, 2014 and June 30, 2013, respectively.
Litigation expense was $4.0 billion, $6.0 billion and $0.5 billion
for the three months ended June 30, 2014, March 31, 2014 and June
30, 2013, respectively.
(D) Basel 3 common equity tier 1 capital and risk-weighted
assets on a fully phased-in basis are non-GAAP financial measures.
For reconciliation to GAAP financial measures, refer to page 18 of
this press release. The company's fully phased-in Basel 3 estimates
are based on its current understanding of the Standardized and
Advanced approaches under the Basel 3 rules, assuming all relevant
regulatory model approvals, except for the potential reduction to
risk-weighted assets resulting from removal of the Comprehensive
Risk Measure surcharge. These estimates will evolve over time as
the company’s businesses change and as a result of further
rulemaking or clarification by U.S. regulatory agencies. The Basel
3 rules require approval by banking regulators of certain models
used as part of risk-weighted asset calculations. If these models
are not approved, the company's capital ratio would likely be
adversely impacted, which in some cases could be significant. The
company continues to evaluate the potential impact of proposed
rules and anticipates it will be in compliance with any final rules
by the proposed effective dates.
(E) The supplementary leverage ratio includes the estimated
increase to the supplementary leverage exposure in accordance with
the U.S. Notice of Proposed Rulemaking approved on April 8, 2014.
The supplementary leverage ratio is measured using the quarter-end
tier 1 capital calculated under Basel 3 on a fully phased-in basis,
divided by the simple average of the sum of on-balance sheet assets
and certain off-balance sheet exposures, including, among other
items, derivatives and securities financing transactions, at the
end of each month in the quarter.
(F) Tangible book value per share of common stock is a non-GAAP
financial measure. Other companies may define or calculate this
measure differently. Book value per share was $21.16 at
June 30, 2014, compared to $20.75 at March 31, 2014 and
$20.18 at June 30, 2013. For more information, refer to pages
22-24 of this press release.
(G) Legacy Assets and Servicing (LAS) noninterest expense,
excluding litigation, is a non-GAAP financial measure. LAS
noninterest expense was $5.2 billion, $7.4 billion and $2.5 billion
for the three months ended June 30, 2014, March 31, 2014 and
June 30, 2013, respectively. LAS litigation expense was $3.8
billion, $5.8 billion and $0.2 billion in the three months ended
June 30, 2014, March 31, 2014 and June 30, 2013.
(H) Rankings per Dealogic as of July 1, 2014.
(I) Sales and trading revenue excluding the impact of net DVA is
a non-GAAP financial measure. Net DVA gains were $69 million, $112
million and $49 million for the three months ended June 30, 2014,
March 31, 2014 and June 30, 2013, respectively. In the
first quarter of 2014, the management of structured liabilities and
the associated DVA were moved into Global Markets from All Other to
better align the performance risk of these instruments. As such,
net DVA represents the combined total of net DVA on derivatives and
structured liabilities. Prior periods have been reclassified to
conform to current period presentation.
(J) Equity sales and trading revenue, excluding net DVA is a
non-GAAP financial measure. Equities net DVA gains were $13
million, $32 million and $86 million for the three months ended
June 30, 2014, March 31, 2014 and June 30, 2013,
respectively.
Note: Chief Executive Officer Brian Moynihan and Chief Financial
Officer Bruce Thompson will discuss second-quarter 2014 results in
a conference call at 8:30 a.m. ET today.
The presentation and supporting materials can be accessed on the
Bank of America Investor Relations website at http://investor.bankofamerica.com. For a
listen-only connection to the conference call, dial 1.877.200.4456
(U.S.) or 1.785.424.1732 (international), and the conference ID is:
79795. Please dial in 10 minutes prior to the start of the
call.
A replay will be available via webcast through the Bank of
America Investor Relations website. A replay will also be available
beginning at noon on July 16 through midnight, July 24 by telephone
at 800.753.8546 (U.S.) or 1.402.220.0685 (international).
Bank of AmericaBank of America is one of the world's largest
financial institutions, serving individual consumers, small
businesses, middle-market businesses and large corporations with a
full range of banking, investing, asset management and other
financial and risk management products and services. The company
provides unmatched convenience in the United States, serving
approximately 49 million consumer and small business relationships
with approximately 5,000 retail banking offices and approximately
16,000 ATMs and award-winning online banking with 30 million active
users and more than 15 million mobile users. Bank of America is
among the world's leading wealth management companies and is a
global leader in corporate and investment banking and trading
across a broad range of asset classes, serving corporations,
governments, institutions and individuals around the world. Bank of
America offers industry-leading support to approximately 3 million
small business owners through a suite of innovative, easy-to-use
online products and services. The company serves clients through
operations in more than 40 countries. Bank of America Corporation
stock (NYSE: BAC) is listed on the New York Stock Exchange.
Forward-looking StatementsBank of America and its management may
make certain statements that constitute “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements can be identified by the fact
that they do not relate strictly to historical or current facts.
Forward-looking statements often use words such as “anticipates,”
“targets,” “expects,” “hopes,” “estimates,” “intends,” “plans,”
“goals,” “believes,” “continue” and other similar expressions or
future or conditional verbs such as “will,” “may,” “might,”
“should,” “would” and “could.” The forward-looking statements made
represent Bank of America's current expectations, plans or
forecasts of its future results and revenues, and future business
and economic conditions more generally, and other matters. These
statements are not guarantees of future results or performance and
involve certain risks, uncertainties and assumptions that are
difficult to predict and are often beyond Bank of America's
control. Actual outcomes and results may differ materially from
those expressed in, or implied by, any of these forward-looking
statements.
You should not place undue reliance on any forward-looking
statement and should consider the following uncertainties and
risks, as well as the risks and uncertainties more fully discussed
under Item 1A. Risk Factors of Bank of America's 2013 Annual Report
on Form 10-K, and in any of Bank of America's subsequent Securities
and Exchange Commission filings: the potential negative impacts of
the Company’s prior adjustment to its regulatory capital ratios,
including without limitation the results of the Federal Reserve's
review of the resubmitted Comprehensive Capital Analysis and
Review, or the revised capital actions that have been resubmitted
to the Federal Reserve, the Company's ability to resolve
representations and warranties repurchase claims made by monolines
and private-label and other investors, including as a result of any
adverse court rulings, and the chance that the Company could face
related servicing, securities, fraud, indemnity or other claims
from one or more counterparties, including monolines or
private-label and other investors; the possibility that final court
approval of negotiated settlements is not obtained; the possibility
that the court decision with respect to the BNY Mellon Settlement
is overturned on appeal in whole or in part; potential claims,
damages, penalties and fines resulting from pending or future
litigation and regulatory proceedings, including proceedings
instituted by the U.S. Department of Justice, state Attorneys
General and other members of the RMBS Working Group of the
Financial Fraud Enforcement Task Force concerning mortgage-related
matters; the possibility that the European Commission will impose
remedial measures in relation to its investigation of the Company's
competitive practices; the possible outcome of LIBOR, other
reference rate and foreign exchange inquiries and investigations;
the possibility that future representations and warranties losses
may occur in excess of the Company's recorded liability and
estimated range of possible loss for its representations and
warranties exposures; the possibility that the Company may not
collect mortgage insurance claims; the possibility that future
claims, damages, penalties and fines may occur in excess of the
Company’s recorded liability and estimated range of possible losses
for litigation exposures; uncertainties about the financial
stability and growth rates of non-U.S. jurisdictions, the risk that
those jurisdictions may face difficulties servicing their sovereign
debt, and related stresses on financial markets, currencies and
trade, and the Company's exposures to such risks, including direct,
indirect and operational; uncertainties related to the timing and
pace of Federal Reserve tapering of quantitative easing, and the
impact on global interest rates, currency exchange rates, and
economic conditions in a number of countries; the possibility of
future inquiries or investigations regarding pending or completed
foreclosure activities; the possibility that unexpected foreclosure
delays could impact the rate of decline of default-related
servicing costs; uncertainty regarding timing and the potential
impact of regulatory capital and liquidity requirements (including
Basel 3); the negative impact of the Dodd-Frank Wall Street Reform
and Consumer Protection Act on the Company's businesses and
earnings, including as a result of additional regulatory
interpretation and rulemaking and the success of the Company's
actions to mitigate such impacts; the potential impact of
implementing and conforming to the Volcker Rule; the potential
impact of future derivative regulations; adverse changes to the
Company's credit ratings from the major credit rating agencies;
estimates of the fair value of certain of the Company's assets and
liabilities; reputational damage that may result from negative
publicity, fines and penalties from regulatory violations and
judicial proceedings; the Company's ability to fully realize the
anticipated cost savings in Legacy Assets and Servicing and the
anticipated cost savings and other benefits from Project New BAC,
including in accordance with currently anticipated timeframes; a
failure in or breach of the Company’s operational or security
systems or infrastructure, or those of third parties with which we
do business, including as a result of cyber attacks; the impact on
the Company's business, financial condition and results of
operations of a potential higher interest rate environment; and
other similar matters.
Forward-looking statements speak only as of the date they are
made, and Bank of America undertakes no obligation to update any
forward-looking statement to reflect the impact of circumstances or
events that arise after the date the forward-looking statement was
made.
BofA Global Capital Management Group, LLC (BofA Global Capital
Management) is an asset management division of Bank of America
Corporation. BofA Global Capital Management entities furnish
investment management services and products for institutional and
individual investors.
Bank of America Merrill Lynch is the marketing name for the
global banking and global markets businesses of Bank of America
Corporation. Lending, derivatives and other commercial banking
activities are performed by banking affiliates of Bank of America
Corporation, including Bank of America, N.A., member FDIC.
Securities, financial advisory and other investment banking
activities are performed by investment banking affiliates of Bank
of America Corporation (Investment Banking Affiliates), including
Merrill Lynch, Pierce, Fenner & Smith Incorporated, which are
registered broker-dealers and members of FINRA and SIPC. Investment
products offered by Investment Banking Affiliates: Are Not FDIC
Insured * May Lose Value * Are Not Bank Guaranteed. Bank of America
Corporation's broker-dealers are not banks and are separate legal
entities from their bank affiliates. The obligations of the
broker-dealers are not obligations of their bank affiliates (unless
explicitly stated otherwise), and these bank affiliates are not
responsible for securities sold, offered or recommended by the
broker-dealers. The foregoing also applies to other non-bank
affiliates.
For more Bank of America news, visit the Bank of America
newsroom at http://newsroom.bankofamerica.com.
www.bankofamerica.com
Bank of America Corporation and Subsidiaries
Selected Financial Data (Dollars in millions,
except per share data; shares in thousands)
Summary Income Statement Six Months
EndedJune 30 SecondQuarter 2014
FirstQuarter 2014 SecondQuarter 2013
2014 2013 Net interest
income
$ 20,098 $ 21,213
$ 10,013 $
10,085 $ 10,549 Noninterest income
24,215 24,711
11,734 12,481 12,178 Total
revenue, net of interest expense
44,313 45,924
21,747
22,566 22,727 Provision for credit losses
1,420 2,924
411 1,009 1,211 Noninterest expense
40,779
35,518
18,541 22,238 16,018
Income (loss) before income taxes
2,114 7,482
2,795
(681 ) 5,498 Income tax expense (benefit)
99 1,987
504 (405 ) 1,486 Net income (loss)
$ 2,015 $ 5,495
$ 2,291
$ (276 ) $ 4,012 Preferred stock dividends
494
814
256 238 441 Net
income (loss) applicable to common shareholders
$
1,521 $ 4,681
$ 2,035 $
(514 ) $ 3,571 Common shares issued
25,149
44,480
224 24,925 364 Average common shares issued and
outstanding
10,539,769 10,787,357
10,519,359
10,560,518 10,775,867 Average diluted common shares issued and
outstanding (1)
10,599,641 11,549,693
11,265,123
10,560,518 11,524,510
Summary Average Balance
Sheet Total loans and leases
$ 916,012 $
910,269
$ 912,580 $ 919,482 $ 914,234 Total debt
securities
337,845 349,794
345,889 329,711 343,260
Total earning assets
1,822,177 1,845,651
1,840,850
1,803,298 1,833,541 Total assets
2,154,494 2,198,443
2,169,555 2,139,266 2,184,610 Total deposits
1,123,399 1,077,631
1,128,563 1,118,178 1,079,956
Common shareholders' equity
222,705 218,509
222,215
223,201 218,790 Total shareholders' equity
236,173 236,024
235,797 236,553 235,063
Performance
Ratios Return on average assets
0.19 %
0.50 %
0.42 % n/m 0.74 % Return on average tangible
common shareholders' equity (2)
2.05 6.53
5.47 n/m
9.88
Per common share information
Earnings (loss)
$ 0.14 $ 0.43
$ 0.19 $
(0.05 ) $ 0.33 Diluted earnings (loss) (1)
0.14 0.42
0.19 (0.05 ) 0.32 Dividends paid
0.02 0.02
0.01 0.01 0.01 Book value
21.16 20.18
21.16
20.75 20.18 Tangible book value (2)
14.24 13.32
14.24
13.81 13.32
June 30 2014 March 312014 June
302013
Summary Period-End Balance Sheet Total
loans and leases
$ 911,899 $ 916,217 $ 921,570 Total
debt securities
352,883 340,696 336,403 Total earning assets
1,830,546 1,812,832 1,779,883 Total assets
2,170,557
2,149,851 2,123,320 Total deposits
1,134,329 1,133,650
1,080,783 Common shareholders' equity
222,565 218,536
216,791 Total shareholders' equity
237,411 231,888 231,032
Period-end common shares issued and outstanding
10,515,825
10,530,045 10,743,098
Credit Quality
Six Months EndedJune 30 SecondQuarter
2014 FirstQuarter 2014 SecondQuarter 2013
2014 2013
Total net charge-offs
$ 2,461 $ 4,628
$
1,073 $ 1,388 $ 2,111 Net charge-offs as a percentage of
average loans and leases outstanding (3)
0.55 % 1.04
%
0.48 % 0.62 % 0.94 % Provision for credit losses
$ 1,420 $ 2,924
$ 411 $ 1,009 $ 1,211
June 30 2014 March 312014 June 302013 Total
nonperforming loans, leases and foreclosed properties (4)
$
15,300 $ 17,732 $ 21,280 Nonperforming loans, leases and
foreclosed properties as a percentage of total loans, leases and
foreclosed properties (3)
1.70 % 1.96 % 2.33 %
Allowance for loan and lease losses
$ 15,811 $ 16,618
$ 21,235 Allowance for loan and lease losses as a percentage of
total loans and leases outstanding (3)
1.75 % 1.84 %
2.33 %
Bank of America Corporation and Subsidiaries
Selected Financial Data (continued) (Dollars
in millions)
Basel 3 Transition Basel 1
Capital
Management June 30 2014 March 312014 June
302013
Risk-based capital metrics (5, 6):
Common equity tier 1 capital
$ 153,582 $ 150,922 n/a
Tier 1 common capital
n/a n/a $ 136,546 Common equity tier 1
capital ratio
12.0 % 11.8 % n/a Tier 1 common capital
ratio (7)
n/a n/a 10.6 % Tier 1 leverage ratio
7.7
7.4 7.4 Tangible equity ratio (8)
7.85 7.65 7.67
Tangible common equity ratio (8)
7.14 7.00 6.98
Regulatory Capital Reconciliations (5,
6) June 30 2014 March 312014
Regulatory
capital – Basel 3 transition to fully phased-in Common
equity tier 1 capital (transition) $ 153,582 $
150,922 Adjustments and deductions recognized in Tier 1 capital
during transition
(10,547 ) (11,302 ) Other
adjustments and deductions phased in during transition
(5,852 ) (9,474 )
Common equity tier 1 capital
(fully phased-in) $ 137,183 $ 130,146
June 30 2014 March 312014
Risk-weighted assets – As reported to Basel 3 (fully
phased-in) As reported risk-weighted assets $
1,282,720 $ 1,282,117 Change in risk-weighted assets from
reported to fully phased-in
154,240 165,332
Basel 3 Standardized approach risk-weighted assets (fully
phased-in) 1,436,960 1,447,449 Change in risk-weighted
assets for advanced models
(49,464 ) (86,234 )
Basel 3 Advanced approaches risk-weighted assets (fully
phased-in) $ 1,387,496 $ 1,361,215
Regulatory capital ratios Basel 3 Standardized
approach common equity tier 1 (transition)
12.0 %
11.8 % Basel 3 Standardized approach common equity tier 1 (fully
phased-in)
9.5 9.0 Basel 3 Advanced approaches common equity
tier 1 (fully phased-in)
9.9 9.6
(1) The diluted earnings (loss) per common share excludes the
effect of any equity instruments that are antidilutive to earnings
per share. There were no potential common shares that were dilutive
in the first quarter of 2014 because of the net loss.
(2) Return on average tangible shareholders' equity and tangible
book value per share of common stock are non-GAAP financial
measures. We believe the use of these non-GAAP financial measures
provides additional clarity in assessing the results of the
Corporation. Other companies may define or calculate non-GAAP
financial measures differently. See Reconciliations to GAAP
Financial Measures on pages 22-24.
(3) Ratios do not include loans accounted for under the fair
value option during the period. Charge-off ratios are annualized
for the quarterly presentation.
(4) Balances do not include past due consumer credit card,
consumer loans secured by real estate where repayments are insured
by the Federal Housing Administration and individually insured
long-term stand-by agreements (fully-insured home loans), and in
general, other consumer and commercial loans not secured by real
estate; purchased credit-impaired loans even though the customer
may be contractually past due; nonperforming loans held-for-sale;
nonperforming loans accounted for under the fair value option; and
nonaccruing troubled debt restructured loans removed from the
purchased credit-impaired portfolio prior to January 1, 2010.
(5) Regulatory capital ratios are preliminary.
(6) On January 1, 2014, the Basel 3 rules became effective,
subject to transition provisions primarily related to regulatory
deductions and adjustments impacting common equity tier 1 capital
and Tier 1 capital. We reported under Basel 1 (which included the
Market Risk Final Rules) at June 30, 2013. Basel 3 common equity
tier 1 capital and risk-weighted assets on a fully phased-in basis
are non-GAAP financial measures. For reconciliations to GAAP
financial measures, see above. The company's fully phased-in Basel
3 estimates are based on its current understanding of the
Standardized and Advanced approaches under the Basel 3 rules,
assuming all relevant regulatory model approvals, except for the
potential reduction to risk-weighted assets resulting from removal
of the Comprehensive Risk Measure surcharge. The Basel 3 rules
require approval by banking regulators of certain models used as
part of risk-weighted asset calculations. If these models are not
approved, the company's capital ratio would likely be adversely
impacted, which in some cases could be significant.
(7) Tier 1 common capital ratio equals Tier 1 capital excluding
preferred stock, trust preferred securities, hybrid securities and
minority interest divided by risk-weighted assets.
(8) Tangible equity ratio equals period-end tangible
shareholders' equity divided by period-end tangible assets.
Tangible common equity ratio equals period-end tangible common
shareholders' equity divided by period-end tangible assets.
Tangible shareholders' equity and tangible assets are non-GAAP
financial measures. We believe the use of these non-GAAP financial
measures provides additional clarity in assessing the results of
the Corporation. Other companies may define or calculate non-GAAP
financial measures differently. See Reconciliations to GAAP
Financial Measures on pages 22-24.
n/a = not applicable
n/m = not meaningful
Bank of America Corporation and Subsidiaries
Quarterly Results by Business Segment (Dollars in millions)
Second Quarter 2014
Consumer &
Business
Banking
Consumer
Real Estate
Services
GWIM Global
Banking
Global
Markets
All
Other
Total revenue, net of interest expense (FTE basis) (1)
$
7,373 $ 1,390 $ 4,589 $
4,179 $ 4,583 $ (154 )
Provision for credit losses
534 (20 )
(8 ) 132 19 (246 )
Noninterest expense
4,000 5,902 3,447
1,899 2,862 431 Net income (loss)
1,788
(2,802 ) 724 1,353 1,101
127 Return on average allocated capital (2)
24.33
% n/m 24.33 % 17.51 %
13.01 % n/m Balance Sheet
Average Total loans and leases
$ 160,240
$ 88,257 $ 118,512 $
271,417 $ 63,579 $ 210,575 Total
deposits
543,566 n/m 240,042 258,937
n/m 35,851 Allocated capital (2)
29,500
23,000 12,000 31,000 34,000 n/m
Period end Total loans and leases
$ 161,142
$ 88,156 $ 120,187 $
270,683 $ 66,260 $ 205,471 Total
deposits
545,530 n/m 237,046 270,268
n/m 31,999 First Quarter 2014
Consumer &
Business
Banking
Consumer
Real Estate
Services
GWIM Global
Banking
Global
Markets
All
Other
Total revenue, net of interest expense (FTE basis) (1) $ 7,438 $
1,192 $ 4,547 $ 4,269 $ 5,012 $ 309 Provision for credit losses 812
25 23 265 19 (135 ) Noninterest expense 3,963 8,129 3,359 2,028
3,077 1,682 Net income (loss) 1,666 (5,027 ) 729 1,236 1,308 (188 )
Return on average allocated capital (2) 22.92 % n/m 24.74 % 16.18 %
15.64 % n/m
Balance Sheet Average Total
loans and leases $ 162,061 $ 88,914 $ 115,945 $ 271,475 $ 63,696 $
217,391 Total deposits 534,557 n/m 242,792 256,433 n/m 34,381
Allocated capital (2) 29,500 23,000 12,000 31,000 34,000 n/m
Period end Total loans and leases $ 160,127 $ 88,355 $
116,482 $ 273,239 $ 64,598 $ 213,416 Total deposits 552,211 n/m
244,051 257,502 n/m 32,818 Second Quarter 2013
Consumer &
Business
Banking
Consumer
Real Estate
Services
GWIM Global
Banking
Global
Markets
All
Other
Total revenue, net of interest expense (FTE basis) (1) $ 7,434 $
2,115 $ 4,499 $ 4,138 $ 4,194 $ 569 Provision for credit losses 967
291 (15 ) 163 (16 ) (179 ) Noninterest expense 4,184 3,383 3,270
1,849 2,770 562 Net income (loss) 1,391 (930 ) 759 1,297 962 533
Return on average allocated capital (2) 18.62 % n/m 30.59 % 22.62 %
12.89 % n/m
Balance Sheet Average Total
loans and leases $ 163,593 $ 90,114 $ 109,589 $ 255,674 $ 56,354 $
238,910 Total deposits 522,244 n/m 235,344 226,912 n/m 34,017
Allocated capital (2) 30,000 24,000 10,000 23,000 30,000 n/m
Period end Total loans and leases $ 164,851 $ 89,257 $
111,785 $ 258,503 $ 63,127 $ 234,047 Total deposits 525,085 n/m
235,012 228,934 n/m 34,858
(1) Fully taxable-equivalent basis is a performance measure used
by management in operating the business that management believes
provides investors with a more accurate picture of the interest
margin for comparative purposes.
(2) Return on average allocated capital is calculated as net
income, adjusted for cost of funds and earnings credits and certain
expenses related to intangibles, divided by average allocated
capital. Allocated capital and the related return are non-GAAP
financial measures. The Corporation believes the use of these
non-GAAP financial measures provides additional clarity in
assessing the results of the segments. Other companies may define
or calculate these measures differently. (See Exhibit A: Non-GAAP
Reconciliations - Reconciliations to GAAP Financial Measures on
pages 22-24.)
n/m = not meaningful
Bank of America Corporation and Subsidiaries
Year-to-Date Results by Business Segment (Dollars in
millions)
Six Months Ended June 30, 2014
Consumer &
Business
Banking
Consumer
Real Estate
Services
GWIM Global
Banking
Global
Markets
All
Other
Total revenue, net of interest expense (FTE basis) (1)
$
14,811 $ 2,582 $ 9,136
$ 8,448 $ 9,595 $ 155
Provision for credit losses
1,346 5 15
397 38 (381 ) Noninterest expense
7,963 14,031 6,806 3,927 5,939
2,113 Net income (loss)
3,454 (7,829 )
1,453 2,589 2,409 (61 ) Return
on average allocated capital (2)
23.63 % n/m
24.53 % 16.85 % 14.32 %
n/m Balance Sheet Average Total
loans and leases
$ 161,145 $ 88,584
$ 117,235 $ 271,446 $
63,637 $ 213,965 Total deposits
539,087
n/m 241,409 257,692 n/m 35,119
Allocated capital (2)
29,500 23,000 12,000
31,000 34,000 n/m Period end Total
loans and leases
$ 161,142 $ 88,156
$ 120,187 $ 270,683 $
66,260 $ 205,471 Total deposits
545,530
n/m 237,046 270,268 n/m 31,999
Six Months Ended June 30, 2013
Consumer &
Business
Banking
Consumer
Real Estate
Services
GWIM Global
Banking
Global
Markets
All
Other
Total revenue, net of interest expense (FTE basis) (1) $ 14,846 $
4,427 $ 8,920 $ 8,168 $ 8,973 $ 1,023 Provision for credit losses
1,919 626 7 312 (11 ) 71 Noninterest expense 8,349 8,788 6,523
3,685 5,843 2,330 Net income (loss) 2,833 (3,086 ) 1,479 2,581
2,074 (386 ) Return on average allocated capital (2) 19.08 % n/m
30.00 % 22.64 % 13.97 % n/m
Balance Sheet
Average Total loans and leases $ 164,713 $ 91,531 $ 107,845
$ 249,903 $ 54,529 $ 241,748 Total deposits 512,424 n/m 244,329
224,132 n/m 34,883 Allocated capital (2) 30,000 24,000 10,000
23,000 30,000 n/m
Period end Total loans and leases $
164,851 $ 89,257 $ 111,785 $ 258,503 $ 63,127 $ 234,047 Total
deposits 525,085 n/m 235,012 228,934 n/m 34,858
(1) Fully taxable-equivalent basis is a performance measure used
by management in operating the business that management believes
provides investors with a more accurate picture of the interest
margin for comparative purposes.
(2) Return on average allocated capital is calculated as net
income, adjusted for cost of funds and earnings credits and certain
expenses related to intangibles, divided by average allocated
capital. Allocated capital and the related return are non-GAAP
financial measures. The Corporation believes the use of these
non-GAAP financial measures provides additional clarity in
assessing the results of the segments. Other companies may define
or calculate these measures differently. (See Exhibit A: Non-GAAP
Reconciliations - Reconciliations to GAAP Financial Measures on
pages 22-24.)
n/m = not meaningful
Bank of America Corporation and Subsidiaries
Supplemental Financial Data
(Dollars in millions)
Fully taxable-equivalent (FTE) basis
data (1) Six Months EndedJune 30
SecondQuarter 2014 FirstQuarter 2014 SecondQuarter
2013
2014 2013 Net interest income
$ 20,512 $
21,646
$ 10,226 $ 10,286 $ 10,771 Total revenue, net
of interest expense
44,727 46,357
21,960 22,767
22,949 Net interest yield (2)
2.26 % 2.36 %
2.22 % 2.29 % 2.35 % Efficiency ratio
91.17
76.62
84.43 97.68 69.80
Other
Data June 30 2014 March 312014 June 302013
Number of banking centers - U.S.
5,023 5,095 5,328 Number of
branded ATMs - U.S.
15,976 16,214 16,354 Ending full-time
equivalent employees
233,201 238,560 257,158
(1) FTE basis is a non-GAAP financial measure. FTE basis is a
performance measure used by management in operating the business
that management believes provides investors with a more accurate
picture of the interest margin for comparative purposes. See
Reconciliations to GAAP Financial Measures on pages 22-24.
(2) Beginning in the first quarter of 2014, interest-bearing
deposits placed with the Federal Reserve and certain non-U.S.
central banks are included in earning assets. Prior period yields
have been reclassified to conform to current period
presentation.
Bank of America Corporation and Subsidiaries
Reconciliations to GAAP Financial Measures (Dollars in
millions)
The Corporation evaluates its business based on a fully
taxable-equivalent basis, a non-GAAP financial measure. The
Corporation believes managing the business with net interest income
on a fully taxable-equivalent basis provides a more accurate
picture of the interest margin for comparative purposes. Total
revenue, net of interest expense, includes net interest income on a
fully taxable-equivalent basis and noninterest income. The
Corporation views related ratios and analyses (i.e., efficiency
ratios and net interest yield) on a fully taxable-equivalent basis.
To derive the fully taxable-equivalent basis, net interest income
is adjusted to reflect tax-exempt income on an equivalent
before-tax basis with a corresponding increase in income tax
expense. For purposes of this calculation, the Corporation uses the
federal statutory tax rate of 35 percent. This measure ensures
comparability of net interest income arising from taxable and
tax-exempt sources. The efficiency ratio measures the costs
expended to generate a dollar of revenue, and net interest yield
measures the basis points the Corporation earns over the cost of
funds.
The Corporation also evaluates its business based on the
following ratios that utilize tangible equity, a non-GAAP financial
measure. Tangible equity represents an adjusted shareholders'
equity or common shareholders' equity amount which has been reduced
by goodwill and intangible assets (excluding mortgage servicing
rights), net of related deferred tax liabilities. Return on average
tangible common shareholders' equity measures the Corporation's
earnings contribution as a percentage of adjusted average common
shareholders' equity. The tangible common equity ratio represents
adjusted ending common shareholders' equity divided by total assets
less goodwill and intangible assets (excluding mortgage servicing
rights), net of related deferred tax liabilities. Return on average
tangible shareholders\' equity measures the Corporation's earnings
contribution as a percentage of adjusted average total
shareholders' equity. The tangible equity ratio represents adjusted
ending shareholders' equity divided by total assets less goodwill
and intangible assets (excluding mortgage servicing rights), net of
related deferred tax liabilities. Tangible book value per common
share represents adjusted ending common shareholders' equity
divided by ending common shares outstanding. These measures are
used to evaluate the Corporation's use of equity. In addition,
profitability, relationship and investment models all use return on
average tangible shareholders' equity as key measures to support
our overall growth goals.
In addition, the Corporation evaluates its business segment
results based on measures that utilize average allocated capital.
The Corporation allocates capital to its business segments using a
methodology that considers the effect of regulatory capital
requirements in addition to internal risk-based capital models. The
Corporation's internal risk-based capital models use a
risk-adjusted methodology incorporating each segment's credit,
market, interest rate, business and operational risk components.
Return on average allocated capital is calculated as net income,
adjusted for cost of funds and earnings credits and certain
expenses related to intangibles, divided by average allocated
capital. Allocated capital and the related return both represent
non-GAAP financial measures. Allocated capital is reviewed
periodically and refinements are made based on multiple
considerations that include, but are not limited to, business
segment exposures and risk profile, regulatory constraints and
strategic plans. As part of this process, in the first quarter of
2014, the Corporation adjusted the amount of capital being
allocated to its business segments. This change resulted in a
reduction of the unallocated capital, which is reflected in All
Other, and an aggregate increase to the amount of capital being
allocated to the business segments. Prior periods were not
restated.
See the tables below and on pages 23-24 for reconciliations of
these non-GAAP financial measures to financial measures defined by
GAAP for the six months ended June 30, 2014 and 2013, and the three
months ended June 30, 2014, March 31, 2014 and
June 30, 2013. The Corporation believes the use of these
non-GAAP financial measures provides additional clarity in
assessing the results of the Corporation. Other companies may
define or calculate supplemental financial data differently.
Six Months EndedJune 30
SecondQuarter 2014 FirstQuarter 2014
SecondQuarter 2013
2014 2013
Reconciliation
of net interest income to net interest income on a fully
taxable-equivalent basis Net interest income
$ 20,098 $ 21,213
$ 10,013 $ 10,085 $
10,549 Fully taxable-equivalent adjustment
414 433
213 201 222
Net interest
income on a fully taxable-equivalent basis $
20,512 $ 21,646
$ 10,226
$ 10,286 $ 10,771
Reconciliation of
total revenue, net of interest expense to total revenue, net of
interest expense on a fully taxable-equivalent basis
Total revenue, net of interest expense
$
44,313 $ 45,924
$ 21,747 $ 22,566 $ 22,727
Fully taxable-equivalent adjustment
414 433
213 201 222
Total revenue, net of
interest expense on a fully taxable-equivalent basis $
44,727 $ 46,357
$ 21,960
$ 22,767 $ 22,949
Reconciliation of
income tax expense (benefit) to income tax expense (benefit) on a
fully taxable-equivalent basis Income tax expense
(benefit)
$ 99 $ 1,987
$ 504 $ (405 ) $
1,486 Fully taxable-equivalent adjustment
414 433
213 201 222
Income tax
expense (benefit) on a fully taxable-equivalent basis $
513 $ 2,420
$ 717 $ (204
) $ 1,708
Reconciliation of average common
shareholders' equity to average tangible common shareholders'
equity Common shareholders' equity
$
222,705 $ 218,509
$ 222,215 $ 223,201 $
218,790 Goodwill
(69,832 ) (69,937 )
(69,822
) (69,842 ) (69,930 ) Intangible assets (excluding mortgage
servicing rights)
(5,354 ) (6,409 )
(5,235
) (5,474 ) (6,270 ) Related deferred tax liabilities
2,132 2,393
2,100 2,165
2,360
Tangible common shareholders' equity $
149,651 $ 144,556
$ 149,258
$ 150,050 $ 144,950
Reconciliation of average shareholders' equity to average
tangible shareholders' equity Shareholders'
equity
$ 236,173 $ 236,024
$ 235,797 $
236,553 $ 235,063 Goodwill
(69,832 ) (69,937 )
(69,822 ) (69,842 ) (69,930 ) Intangible assets
(excluding mortgage servicing rights)
(5,354 ) (6,409
)
(5,235 ) (5,474 ) (6,270 ) Related deferred tax
liabilities
2,132 2,393
2,100
2,165 2,360
Tangible shareholders' equity
$ 163,119 $ 162,071
$
162,840 $ 163,402 $ 161,223
Bank of
America Corporation and Subsidiaries Reconciliations to GAAP
Financial Measures (continued) (Dollars in millions)
Six Months
EndedJune 30 SecondQuarter 2014
FirstQuarter 2014 SecondQuarter 2013
2014 2013
Reconciliation of period-end common shareholders' equity
to period-end tangible common shareholders' equity
Common shareholders' equity
$ 222,565 $
216,791
$ 222,565 $ 218,536 $ 216,791 Goodwill
(69,810 ) (69,930 )
(69,810 ) (69,842 )
(69,930 ) Intangible assets (excluding mortgage servicing rights)
(5,099 ) (6,104 )
(5,099 ) (5,337 )
(6,104 ) Related deferred tax liabilities
2,078 2,297
2,078 2,100 2,297
Tangible
common shareholders' equity $ 149,734 $
143,054
$ 149,734 $ 145,457 $
143,054
Reconciliation of period-end
shareholders' equity to period-end tangible shareholders'
equity Shareholders' equity
$
237,411 $ 231,032
$ 237,411 $ 231,888 $
231,032 Goodwill
(69,810 ) (69,930 )
(69,810
) (69,842 ) (69,930 ) Intangible assets (excluding mortgage
servicing rights)
(5,099 ) (6,104 )
(5,099
) (5,337 ) (6,104 ) Related deferred tax liabilities
2,078 2,297
2,078 2,100
2,297
Tangible shareholders' equity $
164,580 $ 157,295
$ 164,580
$ 158,809 $ 157,295
Reconciliation of period-end assets to period-end tangible
assets Assets
$ 2,170,557 $
2,123,320
$ 2,170,557 $ 2,149,851 $ 2,123,320
Goodwill
(69,810 ) (69,930 )
(69,810 )
(69,842 ) (69,930 ) Intangible assets (excluding mortgage servicing
rights)
(5,099 ) (6,104 )
(5,099 )
(5,337 ) (6,104 ) Related deferred tax liabilities
2,078
2,297
2,078 2,100 2,297
Tangible assets $ 2,097,726 $ 2,049,583
$ 2,097,726 $ 2,076,772 $
2,049,583
Book value per share of common
stock Common shareholders' equity
$
222,565 $ 216,791
$ 222,565 $ 218,536 $
216,791 Ending common shares issued and outstanding
10,515,825 10,743,098
10,515,825 10,530,045
10,743,098
Book value per share of common stock $
21.16 $ 20.18
$ 21.16 $ 20.75 $ 20.18
Tangible book value per share of common stock
Tangible common shareholders' equity
$ 149,734
$ 143,054
$ 149,734 $ 145,457 $ 143,054 Ending common
shares issued and outstanding
10,515,825 10,743,098
10,515,825 10,530,045 10,743,098
Tangible book value per
share of common stock $ 14.24 $ 13.32
$
14.24 $ 13.81 $ 13.32
Bank of America Corporation and
Subsidiaries Reconciliations to GAAP Financial Measures
(continued) (Dollars in millions)
Six Months EndedJune 30
SecondQuarter 2014 FirstQuarter 2014 SecondQuarter
2013
2014 2013
Reconciliation of return on average
allocated capital (1) Consumer
& Business Banking Reported net income
$ 3,454 $ 2,833
$ 1,788 $ 1,666 $ 1,391
Adjustment related to intangibles (2)
2 4
1 1 2
Adjusted net income
$ 3,456 $ 2,837
$ 1,789
$ 1,667 $ 1,393 Average allocated
equity (3)
$ 61,468 $ 62,063
$ 61,460 $
61,475 $ 62,050 Adjustment related to goodwill and a percentage of
intangibles
(31,968 ) (32,063 )
(31,960
) (31,975 ) (32,050 )
Average allocated capital
$ 29,500 $ 30,000
$
29,500 $ 29,500 $ 30,000
Global Wealth & Investment Management
Reported net income
$ 1,453 $ 1,479
$
724 $ 729 $ 759 Adjustment related to intangibles (2)
7 9
4 3 4
Adjusted net income $ 1,460 $ 1,488
$ 728 $ 732 $ 763
Average allocated equity (3)
$ 22,233 $ 20,311
$ 22,222 $ 22,243 $ 20,300 Adjustment related to
goodwill and a percentage of intangibles
(10,233 )
(10,311 )
(10,222 ) (10,243 ) (10,300 )
Average
allocated capital $ 12,000 $ 10,000
$ 12,000 $ 12,000 $ 10,000
Global Banking Reported net
income
$ 2,589 $ 2,581
$ 1,353 $ 1,236
$ 1,297 Adjustment related to intangibles (2)
1 1
1 — 1
Adjusted net income
$ 2,590 $ 2,582
$ 1,354
$ 1,236 $ 1,298 Average allocated
equity (3)
$ 53,406 $ 45,411
$ 53,405 $
53,407 $ 45,416 Adjustment related to goodwill and a percentage of
intangibles
(22,406 ) (22,411 )
(22,405
) (22,407 ) (22,416 )
Average allocated capital
$ 31,000 $ 23,000
$
31,000 $ 31,000 $ 23,000
Global Markets Reported net income
$ 2,409 $ 2,074
$ 1,101 $ 1,308 $ 962
Adjustment related to intangibles (2)
5 4
3 2 2
Adjusted net income
$ 2,414 $ 2,078
$ 1,104
$ 1,310 $ 964 Average allocated equity
(3)
$ 39,374 $ 35,364
$ 39,373 $ 39,375
$ 35,357 Adjustment related to goodwill and a percentage of
intangibles
(5,374 ) (5,364 )
(5,373 )
(5,375 ) (5,357 )
Average allocated capital $
34,000 $ 30,000
$ 34,000
$ 34,000 $ 30,000
(1) There are no adjustments to reported net income (loss) or
average allocated equity for Consumer Real Estate Services.
(2) Represents cost of funds, earnings credits and certain
expenses related to intangibles.
(3) Average allocated equity is comprised of average allocated
capital plus capital for the portion of goodwill and intangibles
specifically assigned to the business segment.
Certain prior period amounts have been reclassified to conform
to current period presentation.
This information is preliminary and based on
company data available at the time of the presentation.
Investors May Contact:Lee McEntire, Bank of America,
1.980.388.6780Jonathan Blum, Bank of America (Fixed Income),
1.212.449.3112
Reporters May Contact:Jerry Dubrowski, Bank of America,
1.980.388.2840jerome.f.dubrowski@bankofamerica.com
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