Results Include DoJ Settlement Costs of $5.3
Billion (Pretax) or $0.43 per Share (After Tax)
Continued Business Momentum
- Four of Five Businesses Report Higher
Net Income Compared to Year-ago Quarter
- Originated $14.9 Billion in Residential
Home Loans and Home Equity Loans in Q3-14, Helping More Than 43,500
Homeowners Purchase a Home or Refinance a Mortgage
- More Than 1.2 Million New Credit Cards
Issued in Q3-14, With 64 Percent Going to Existing Relationship
Customers
- Global Wealth and Investment Management
Reports Record Revenue and Record Earnings
- Total Firmwide Investment Banking Fees
up 4 Percent From Q3-13 to $1.4 Billion
- Sales and Trading Revenue, Excluding
Net DVA, up 9 Percent From Q3-13(B)
- Noninterest Expense, Excluding
Litigation, Down $1.1 Billion From Q3-13 to $14.2 Billion(C)
- Credit Quality Continued to Improve
With Net Charge-offs Down 38 Percent From Q3-13 to $1.0 Billion;
Net Charge-off Ratio of 0.46 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) 9.6 Percent
in Q3-14; Advanced Approaches 9.6 Percent in Q3-14(D)
- Estimated Supplementary Leverage Ratios
Above 2018 Required Minimums, With Parent Company at Approximately
5.5 Percent and Primary Bank at Approximately 6.8 Percent(E)
- Global Excess Liquidity Sources Remain
Strong at $429 Billion, up $70 Billion From Q3-13; Time-to-required
Funding at 38 Months
- Tangible Book Value per Share Increased
4 Percent From Q3-13 to $14.13 per Share(F)
Bank of America Corporation today reported net income of $168
million for the third quarter of 2014. After deducting dividends on
preferred shares, the company reported a loss of $0.01 per share.
The results include the previously announced pretax charge of $5.3
billion for the settlement with the Department of Justice, certain
federal agencies and six states (DoJ Settlement), which impacted
earnings per share by $0.43. Earnings in the year-ago period were
$2.5 billion or $0.20 per diluted share.
Revenue, net of interest expense, on an FTE basis declined 1
percent from the third quarter of 2013 to $21.4 billion. Revenue,
net of interest expense, on an FTE basis, excluding equity
investment gains ($9 million in the third quarter of 2014 and $1.2
billion in the third quarter of 2013) and valuation adjustments
related to changes in the company's credit spreads, increased 1
percent from the year-ago quarter to $21.2 billion from $21.0
billion(G).
“We saw solid customer and client activity and improved
profitability in most of our businesses relative to the year-ago
quarter,” said Chief Executive Officer Brian Moynihan. “We remain
focused on streamlining and simplifying our company and connecting
customers and clients with the real economy, an approach that is
paying dividends for them and for our shareholders.”
"We continued to focus on optimizing the balance sheet this
quarter so we can best serve the core financial needs of our
customers and clients and still be in a position to meet new
capital and liquidity requirements in an evolving regulatory
framework," said Chief Financial Officer Bruce Thompson. "We also
made significant progress on our cost structure, staying on track
to meet the goals we established three years ago, and our credit
quality metrics reflect both the improved environment and our risk
underwriting."
Selected Financial Highlights
Three Months Ended (Dollars in millions, except per share
data)
September 30 2014 June 302014
September 302013 Net interest income, FTE basis1
$ 10,444 $ 10,226 $
10,479 Noninterest income
10,990 11,734 11,264
Total
revenue, net of interest expense, FTE basis1
21,434 21,960 21,743
Total revenue, net of interest
expense, FTE basis, excluding DVA1, 2
21,229 21,891 22,187 Provision for credit losses
636
411 296 Noninterest expense3
19,742 18,541 16,389
Net
income $ 168 $ 2,291 $ 2,497 Diluted earnings
(loss) per common share
$ (0.01 )
$ 0.19 $ 0.20
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 $10.2 billion, $10.0 billion and $10.3 billion for the
three months ended September 30, 2014, June 30, 2014 and
September 30, 2013, respectively. Total revenue, net of
interest expense, on a GAAP basis was $21.2 billion, $21.7 billion
and $21.5 billion for the three months ended September 30, 2014,
June 30, 2014 and September 30, 2013, respectively.
2 Represents a non-GAAP financial measure. Net DVA gains
(losses) were $205 million, $69 million and $(444) million for the
three months ended September 30, 2014, June 30, 2014 and
September 30, 2013, respectively.
3 Noninterest expense includes litigation expense of $5.6
billion, $4.0 billion and $1.1 billion for the three months ended
September 30, 2014, June 30, 2014 and September 30, 2013,
respectively.
Net interest income, on an FTE basis, was comparable to the
year-ago quarter at $10.4 billion(A) as lower loan balances and
yields were largely offset by reductions in long-term debt and
improved funding costs.
Noninterest income was down 2 percent from the third quarter of
2013 to $11.0 billion. Excluding net debit valuation adjustments
(DVA) and equity investment income in both periods, noninterest
income was up 2 percent from the year-ago quarter, as modest
increases across most categories were largely offset by a decline
in mortgage banking income(G).
The provision for credit losses increased $340 million from the
third quarter of 2013 to $636 million, driven by $400 million in
incremental credit costs associated with the consumer relief
portion of the DoJ Settlement. Net charge-offs declined 38 percent
from the third quarter of 2013 to $1.0 billion, with the net
charge-off ratio falling to 0.46 percent in the third quarter of
2014 from 0.73 percent in the year-ago quarter. Including the
incremental credit costs associated with the DoJ Settlement, the
reserve release was $407 million in the third quarter of 2014,
compared to a reserve release of $1.4 billion in the third quarter
of 2013.
Noninterest expense was $19.7 billion, compared to $16.4 billion
in the year-ago quarter, driven by higher mortgage-related
litigation expense, partially offset by reduced personnel expense.
Excluding litigation expense of $5.6 billion in the third quarter
of 2014 and $1.1 billion in the year-ago quarter, noninterest
expense decreased 7 percent from the year-ago quarter to $14.2
billion, reflecting continued progress by the company to realize
cost savings in its Legacy Assets and Servicing business and, to a
lesser degree, Project New BAC(C).
The effective tax rate for the third quarter of 2014 was driven
by the non-deductible portion of the DoJ Settlement charge,
partially offset by certain discrete tax benefits contributing
approximately $0.04 of earnings per share, which included the
resolution of certain tax examinations, and by recurring tax
preference items. The effective tax rate for the third quarter
of 2013 was primarily driven by a $1.1 billion negative impact on
the company's deferred tax asset as a result of the change in the
U.K. corporate income tax rate enacted in July.
At September 30, 2014, the company had 229,538 full-time
employees, down 7 percent from the year-ago quarter and 2 percent
below the second quarter of 2014.
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)
September 30
2014 June 302014 September
302013
Total revenue, net of interest expense, FTE basis
$ 7,511 $ 7,371 $ 7,524
Provision for credit losses
617 534 761 Noninterest expense
3,979 3,984 3,967
Net income $ 1,856 $
1,797 $ 1,787 Return on average allocated capital1
25.0
% 24.5 % 23.7 % Average loans
$ 160,879 $
160,240 $ 165,719 Average deposits
545,116 543,567 522,009
At period-end Brokerage assets
$ 108,533
$ 105,926 $ 89,517
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
$23.1 billion, or 4 percent, from the year-ago quarter to $545.1
billion. The increase was primarily driven by growth in liquid
products in the current low-rate environment.
- Client brokerage assets increased $19.0
billion, or 21 percent, from the year-ago quarter to $108.5
billion, driven by increased account flows and market
valuations.
- Credit card issuance remained strong.
The company issued 1.2 million new credit cards in the third
quarter of 2014, up 15 percent from the 1.0 million cards issued in
the year-ago quarter. Approximately 64 percent of these cards went
to existing relationship customers during the third quarter of
2014.
- The number of mobile banking customers
increased 15 percent from the year-ago quarter to 16.1 million
users, and 11 percent of deposit transactions by consumers were
done through mobile compared to 8 percent in the year-ago
quarter.
- Return on average allocated capital was
25.0 percent in the third quarter of 2014, compared to 23.7 percent
in the third quarter of 2013.
Financial Overview
Consumer and Business Banking reported net income of $1.9
billion, up $69 million, or 4 percent, from the year-ago quarter,
driven by lower provision for credit losses. Revenue was relatively
stable compared to the year-ago quarter, as lower net interest
income resulting from lower loan balances and yields was partially
offset by higher noninterest income due to higher service charges
and card income.
The provision for credit losses decreased $144 million from the
year-ago quarter to $617 million, driven by continued improvement
in credit quality. Noninterest expense was $4.0 billion, in line
with the year-ago quarter. The company reduced its retail footprint
by another 76 banking centers during the third quarter of 2014 to
4,947 locations as a result of continued growth in mobile banking
and other self-service customer touchpoints.
Consumer Real Estate Services
(CRES)
Three Months Ended (Dollars in millions)
September 30
2014 June 302014 September
302013
Total revenue, net of interest expense, FTE basis
$ 1,093 $ 1,390 $ 1,577
Provision for credit losses
286 (20 ) (308 ) Noninterest
expense1
7,275 5,895 3,403
Net loss $
(5,184 ) $ (2,798 ) $ (990 ) Average loans and leases
87,971 88,257 88,406
At period-end Loans and leases
$ 87,962 $ 88,156
$ 87,586
1 Noninterest expense includes litigation expense of $5.3
billion, $3.8 billion and $338 million for the three months ended
September 30, 2014, June 30, 2014 and September 30,
2013.
Business Highlights
- The company originated $11.7 billion in
first-lien residential mortgage loans and $3.2 billion in home
equity loans in the third quarter of 2014, compared to $11.1
billion and $2.6 billion, respectively, in the second quarter of
2014, and $22.6 billion and $1.8 billion, respectively, in the
year-ago quarter.
- The number of 60+ days delinquent first
mortgage loans serviced by Legacy Assets and Servicing (LAS)
declined 16 percent during the third quarter of 2014 to 221,000
loans from 263,000 loans at the end of the second quarter of 2014.
Year-over-year, these loans are down 44 percent from 398,000 loans
at the end of the third quarter of 2013.
- Noninterest expense in LAS, excluding
litigation, declined to $1.3 billion in the third quarter of 2014
from $1.4 billion in the second quarter of 2014 and $2.2 billion in
the year-ago quarter as the company continued to focus on reducing
the number of delinquent mortgage loans(H).
Financial Overview
Consumer Real Estate Services reported a loss of $5.2 billion
for the third quarter of 2014, compared to a loss of $990 million
for the same period in 2013, driven largely by the impact of the
DoJ Settlement, including the non-deductible treatment of a portion
of the settlement.
Revenue declined $484 million from the third quarter of 2013 to
$1.1 billion, driven primarily by lower servicing fees due to a
smaller servicing portfolio, lower mortgage servicing rights (MSR)
results, net of hedges, and lower core production revenue due to
fewer loan originations. These reductions were partially offset by
lower representations and warranties provision compared to the
year-ago quarter. Core production revenue decreased $172 million
from the year-ago quarter to $293 million due primarily to lower
volume.
The provision for credit losses increased $594 million from the
year-ago quarter to $286 million, driven by $400 million in
incremental costs associated with the consumer relief portion of
the DoJ Settlement and a slower pace of credit quality
improvement.
Noninterest expense increased $3.9 billion from the year-ago
quarter to $7.3 billion due to a $5.0 billion increase in
litigation expense primarily due to the DoJ Settlement, 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)
September 30
2014 June 302014 September
302013
Total revenue, net of interest expense, FTE basis
$ 4,666 $ 4,589 $ 4,390
Provision for credit losses
(15 ) (8 ) 23 Noninterest
expense
3,403 3,445 3,247
Net income $
813 $ 726 $ 720 Return on average allocated capital1
27.0 % 24.4 % 28.7 % Average loans and leases
$ 121,002 $ 118,512 $ 112,752 Average deposits
239,352 240,042 239,663
At period-end (dollars in
billions) Assets under management
$ 888.0 $ 878.7 $
779.6 Total client balances2
2,462.1
2,468.2 2,283.4
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 8 percent
from the year-ago quarter to $2.46 trillion, driven by higher
market levels and net inflows. Third-quarter 2014 long-term assets
under management (AUM) flows of $11.2 billion were the 21st
consecutive quarter of positive flows.
- GWIM successfully completed the
national rollout of Merrill Lynch One, a new investment management
platform that offers a single view of clients' holdings across all
of their accounts. As of September 30, 2014, more than $157 billion
in AUM, including $37 billion in new balances, and more than
400,000 accounts were on this platform.
- Asset management fees grew to a record
$2.0 billion, up 19 percent from the year-ago quarter.
- Average loan balances increased 7
percent from the year-ago quarter to $121.0 billion from $112.8
billion.
- Pretax margin was 27.4 percent in the
third quarter of 2014, compared to the year-ago margin of 25.5
percent, marking the seventh straight quarter over 25 percent.
Financial Overview
Global Wealth and Investment Management reported record net
income of $813 million, compared to $720 million in the third
quarter of 2013. Revenue increased 6 percent from the year-ago
quarter to a record $4.7 billion, driven by higher noninterest
income related to improved market valuation and long-term AUM
flows.
The provision for credit losses decreased $38 million from the
year-ago quarter to a benefit of $15 million primarily as a result
of improved asset quality. Noninterest expense increased 5 percent
to $3.4 billion, driven by higher revenue-related incentive
compensation and other volume-related expenses.
Return on average allocated capital was 27.0 percent in the
third quarter of 2014, down from 28.7 percent in the year-ago
quarter, as improved earnings were more than offset by increased
allocated capital.
Global Banking
Three Months Ended (Dollars in millions)
September 30
2014 June 302014 September
302013
Total revenue, net of interest expense, FTE basis
$ 4,093 $ 4,179 $ 4,008
Provision for credit losses
(32 ) 132 322 Noninterest
expense
1,904 1,900 1,923
Net income $
1,414 $ 1,352 $ 1,137 Return on average allocated capital1
18.1 % 17.5 % 19.6 % Average loans and leases
$ 267,047 $ 271,417 $ 260,085 Average deposits
265,721 258,937
239,189
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
- Firmwide investment banking fees rose 4
percent from the third quarter of 2013 to $1.4 billion.
- Bank of America Merrill Lynch (BAML)
ranked among the top three financial institutions globally in
leveraged loans, asset-backed securities, investment grade
corporate debt and syndicated loans during the third quarter of
2014(I).
- Average loan and lease balances
increased $7.0 billion, or 3 percent, from the year-ago quarter, to
$267.0 billion, with growth mainly driven by the commercial and
industrial, and commercial real estate loan portfolios.
- Average deposits increased $26.5
billion, or 11 percent, from the year-ago quarter to $265.7 billion
primarily due to increased client liquidity and international
growth.
Financial Overview
Global Banking reported net income of $1.4 billion in the third
quarter of 2014, up $277 million, or 24 percent, from the year-ago
quarter, driven primarily by a reduction in the provision for
credit losses and an increase in revenue. Revenue of $4.1 billion
was up 2 percent from the third quarter of 2013, reflecting higher
investment banking fees and net interest income.
The provision for credit losses was a benefit of $32 million in
the third quarter of 2014, compared to a provision of $322 million
in the year-ago quarter when the company increased reserves due to
loan growth. Noninterest expense decreased $19 million, or 1
percent, from the year-ago quarter to $1.9 billion.
Return on average allocated capital was 18.1 percent in the
third quarter of 2014, down from 19.6 percent in the year-ago
quarter, as growth in earnings was more than offset by increased
capital allocations.
Global Markets1
Three Months Ended (Dollars in millions)
September 30
2014 June 302014 September
302013
Total revenue, net of interest expense, FTE basis
$ 4,136 $ 4,583 $ 3,219
Total revenue, net of interest expense, FTE basis, excluding net
DVA2 3,931 4,514 3,663 Provision for credit
losses
45 19 47 Noninterest expense
2,936 2,863 2,881
Net income (loss) $ 769 $ 1,100 $ (875 )
Net income, excluding net DVA and U.K. tax2 $
641 $ 1,057 $ 531 Return on average allocated capital3, 4
9.0 % 13.0 % n/m Total average assets
$
599,893 $ 617,103
$ 602,565
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.
2 Represents a non-GAAP financial measure. Net DVA gains
(losses) were $205 million, $69 million and $(444) million for the
three months ended September 30, 2014, June 30, 2014 and
September 30, 2013, respectively. The impact of the U.K.
corporate tax rate adjustment on the deferred tax asset was $1.1
billion for the three months ended September 30, 2013.
3 The return on average allocated capital for the three months
ended September 30, 2013 was not meaningful due to the U.K.
corporate tax rate adjustment and net DVA. Excluding these items,
the return on average allocated capital was 7.0 percent.
4 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, increased 11
percent from the year-ago quarter to $2.2 billion(J).
- Equities sales and trading revenue,
excluding net DVA, increased 6 percent from the year-ago quarter to
$1.0 billion(K).
Financial Overview
Global Markets reported net income of $769 million in the third
quarter of 2014, compared to a loss of $875 million in the year-ago
quarter. Excluding net DVA in both periods and the impact of the
U.K. corporate tax rate adjustment on the deferred tax asset in the
prior year, net income increased $110 million, or 21 percent, to
$641 million(L).
Revenue increased $917 million, or 28 percent, from the year-ago
quarter to $4.1 billion. Excluding net DVA, revenue increased $268
million, or 7 percent, to $3.9 billion reflecting improved
performance across FICC and Equities sales and trading(L). Net DVA
gains were $205 million, compared to losses of $444 million in the
year-ago quarter.
Fixed Income, Currency and Commodities sales and trading
revenue, excluding net DVA, increased 11 percent from the year-ago
quarter, driven by strong results in currencies due to increased
volatility in the period as well as gains in mortgages and
commodities(J). Equities sales and trading revenue, excluding net
DVA, increased 6 percent, from the year-ago quarter, driven by
increased client financing revenue(K).
Noninterest expense of $2.9 billion increased $55 million from
the year-ago quarter, driven by higher revenue-related
incentives.
All Other1
Three Months Ended (Dollars in millions)
September 30
2014 June 302014 September
302013
Total revenue, net of interest expense, FTE
basis2, 3 $ (65 ) $
(152 ) $ 1,025 Provision for credit losses
(265 ) (246 ) (549 ) Noninterest expense
245
454 968
Net income $ 500 $ 114 $ 718 Total
average loans
199,403 210,575
232,525
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 (loss) of $(51)
million, $56 million and $1.1 billion for the three months ended
September 30, 2014, June 30, 2014 and September 30, 2013,
respectively, and gains on sales of debt securities of $410
million, $382 million and $347 million for the three months ended
September 30, 2014, June 30, 2014 and September 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.
All Other reported net income of $500 million in the third
quarter of 2014, compared to net income of $718 million for the
same period a year ago.
Noninterest income declined $1.1 billion from the year-ago
quarter, reflecting lower equity investment income and an increase
in the payment protection insurance provision in the U.K. credit
card business in the third quarter of 2014. The decline in equity
investment income was largely driven by a $753 million pretax gain
on the sale of the company's remaining shares of China Construction
Bank in the year-ago quarter.
Provision for credit losses was a benefit of $265 million,
compared to a benefit of $549 million in the year-ago quarter,
driven primarily by a slower pace of credit quality improvement
related to the residential mortgage portfolio. Income tax expense
was a benefit of $545 million in the third quarter of 2014, and
included the resolution of certain tax matters.
Noninterest expense declined as a result of lower litigation
expense and lower personnel expense compared with the year-ago
quarter.
Credit Quality
Three Months Ended (Dollars in millions)
September 30
2014 June 302014 September
302013 Provision for credit losses
$ 636
$ 411 $ 296 Net charge-offs1
1,043
1,073 1,687 Net charge-off ratio1, 2
0.46 % 0.48 %
0.73 % Net charge-off ratio, excluding the PCI loan portfolio2
0.48 0.49 0.75 Net charge-off ratio, including PCI
write-offs2
0.57 0.55 0.92
At period-end
Nonperforming loans, leases and foreclosed properties
$
14,232 $ 15,300 $ 20,028 Nonperforming loans, leases and
foreclosed properties ratio3
1.61 % 1.70 % 2.17 %
Allowance for loan and lease losses
$ 15,106 $ 15,811
$ 19,432 Allowance for loan and lease losses ratio4
1.71
% 1.75 % 2.10 %
1 Excludes write-offs of PCI loans of $246 million, $160 million
and $443 million for the three months ended September 30, 2014,
June 30, 2014 and September 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 third quarter of 2014
with net charge-offs declining across most major portfolios when
compared to the year-ago quarter. The number of 30+ days performing
delinquent loans, excluding fully-insured loans, declined across
all consumer portfolios from the year-ago quarter, remaining at
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 16 percent and 29
percent, respectively, from the year-ago period.
Net charge-offs were $1.0 billion in the third quarter of 2014,
down from $1.1 billion in the second quarter of 2014 and $1.7
billion in the third quarter of 2013. The provision for credit
losses increased to $636 million in the third quarter of 2014 from
$296 million in the third quarter of 2013, driven by $400 million
in incremental costs associated with the consumer relief portion of
the DoJ Settlement. During the third quarter of 2014, the reserve
release was $407 million compared to a reserve release of $1.4
billion in the third quarter of 2013.
The allowance for loan and lease losses to annualized net
charge-off coverage ratio was 3.65 times in the third quarter of
2014, compared with 3.67 times in the second quarter of 2014 and
2.90 times in the third quarter of 2013. The increase from the
year-ago quarter 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 3.27 times, 3.25 times and 2.42 times for the same
periods, respectively.
Nonperforming loans, leases and foreclosed properties were $14.2
billion at September 30, 2014, a decrease from $15.3 billion
at June 30, 2014 and $20.0 billion at September 30,
2013.
Capital and Liquidity
Management1,2,3
(Dollars in billions)
At September 30 2014
At June 302014
Basel 3 Transition (under standardized
approach) Common equity tier 1 capital - Basel 3
$
152.9 $ 153.6 Risk-weighted assets
1,271.6 1,284.9
Common equity tier 1 capital ratio - Basel 3
12.0 %
12.0 %
Basel 3 Fully Phased-in (under standardized
approach)3 Common equity tier 1 capital - Basel 3
$ 135.5 $ 137.2 Risk-weighted assets
1,418.2
1,436.8 Common equity tier 1 capital ratio - Basel 3
9.6
% 9.5 % (Dollars in millions, except per share
information)
At September 30 2014 At
June 302014 At September 302013 Tangible common equity
ratio4
7.24 % 7.14 % 7.08 % Total shareholders’
equity
$ 239,081 $ 237,411 $ 232,282 Common equity
ratio
10.41 % 10.25 % 10.30 % Tangible book value per
share4
$ 14.13 $ 14.24 $ 13.62 Book value per share
21.03 21.16 20.50
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 Transition approach for measuring risk-weighted assets
was 12.0 percent at September 30, 2014, and June 30,
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 9.6 percent
at September 30, 2014, compared to 9.5 percent at
June 30, 2014(D).
The estimated common equity tier 1 capital ratio under the Basel
3 Advanced approaches on a fully phased-in basis was 9.6 percent at
September 30, 2014, compared to 9.9 percent at June 30,
2014(D).
On September 3, 2014, U.S. banking regulators adopted a final
rule to revise the definition and scope of the denominator of the
supplementary leverage ratio (SLR). The final rule prescribes the
calculation of total leverage exposure, the frequency of
calculation and required disclosures(E).
At September 30, 2014, the estimated SLR for the parent company
was approximately 5.5 percent, which exceeds the 5.0 percent
minimum for bank holding companies. On October 1, Bank of America
successfully completed the merger of FIA Card Services, National
Association (FIA) into Bank of America, National Association (BANA)
in line with the company's strategy to streamline and simplify the
legal entity structure. The estimated pro-forma SLR for the
combined entity was approximately 6.8 percent at September 30,
2014(E).
At September 30, 2014, Global Excess Liquidity Sources
totaled $429 billion, compared to $431 billion at June 30,
2014 and $359 billion at September 30, 2013. Time-to-required
funding was 38 months at September 30, 2014, compared to 38
months at June 30, 2014 and 35 months at September 30,
2013.
Period-end assets declined $47 billion from the prior quarter to
$2.1 trillion, primarily reflecting continued efforts to optimize
the balance sheet for liquidity and reductions in both market and
credit risk. During the quarter, the company shifted certain less
liquid residential mortgage loans to more liquid debt securities.
In addition the company reduced trading-related assets and sold
$2.5 billion in nonperforming and delinquent loans during the third
quarter of 2014.
Period-end common shares issued and outstanding were 10.52
billion at both September 30, 2014 and June 30, 2014, and
10.68 billion at September 30, 2013.
Tangible book value per share(F) was $14.13 at
September 30, 2014, compared to $14.24 at June 30, 2014
and $13.62 at September 30, 2013. Book value per share was
$21.03 at September 30, 2014, compared to $21.16 at
June 30, 2014 and $20.50 at September 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 $10.2 billion, $10.0 billion and $10.3 billion for the
three months ended September 30, 2014, June 30, 2014 and
September 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 ($0.1) billion,
($0.2) billion, and $0.0 billion for the three months ended
September 30, 2014, June 30, 2014 and September 30,
2013, respectively. Total revenue, net of interest expense, on a
GAAP basis was $21.2 billion, $21.7 billion and $21.5 billion for
the three months ended September 30, 2014, June 30, 2014
and September 30, 2013, respectively.
(B) Sales and trading revenue excluding the impact of net DVA is
a non-GAAP financial measure. Net DVA gains (losses) were $205
million, $69 million and $(444) million for the three months ended
September 30, 2014, June 30, 2014 and September 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.
(C) Noninterest expense excluding litigation is a non-GAAP
financial measure. Noninterest expense including litigation was
$19.7 billion, $18.5 billion and $16.4 billion for the three months
ended September 30, 2014, June 30, 2014 and
September 30, 2013, respectively. Noninterest expense
excluding litigation was $14.2 billion, $14.6 billion and $15.3
billion for the three months ended September 30, 2014,
June 30, 2014 and September 30, 2013, respectively.
Litigation expense was $5.6 billion, $4.0 billion and $1.1 billion
for the three months ended September 30, 2014, June 30, 2014
and September 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 is based on estimates from
our current understanding of recently finalized rules issued by
banking regulators on September 3, 2014. The estimated ratio is
measured using quarter-end tier 1 capital calculated under Basel 3
on a fully phased-in basis. The denominator is calculated as the
daily average of the sum of on-balance sheet assets as well as the
simple average of certain off-balance sheet exposures at the end of
each month in the quarter, including, among other items,
derivatives and securities financing transactions. The primary bank
SLR is on a pro-forma basis to reflect the October 1, 2014 merger
of FIA Card Services, National Association (FIA) into Bank of
America, National Association (BANA), our primary banking
subsidiary. The estimated primary bank SLR for both FIA Card
Services, National Association (FIA) and Bank of America, National
Association (BANA) on a reported basis was above 6.0 percent at
September 30, 2014.
(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 $21.03 at
September 30, 2014, compared to $21.16 at June 30, 2014
and $20.50 at September 30, 2013. For more information, refer
to pages 22-24 of this press release.
(G) Revenue, net of interest expense, on an FTE basis, excluding
DVA and equity investment gains; and noninterest income excluding
DVA and equity investment gains, are non-GAAP financial measures.
Total revenue, net of interest expense, on an FTE basis was $21.4
billion and $21.7 billion for the three months ended
September 30, 2014 and September 30, 2013, respectively.
Noninterest income was $11.0 billion and $11.3 billion for the
three months ended September 30, 2014 and September 30, 2013,
respectively. Net DVA gains (losses) were $205 million and $(444)
million for the three months ended September 30, 2014 and
September 30, 2013, respectively. Equity investment gains were
$9 million and $1.2 billion for the three months ended September
30, 2014 and September 30, 2013, respectively.
(H) Legacy Assets and Servicing (LAS) noninterest expense,
excluding litigation, is a non-GAAP financial measure. LAS
noninterest expense was $6.6 billion, $5.2 billion and $2.5 billion
for the three months ended September 30, 2014, June 30, 2014
and September 30, 2013, respectively. LAS litigation expense
was $5.3 billion, $3.8 billion and $336 million in the three months
ended September 30, 2014, June 30, 2014 and September 30,
2013, respectively.
(I) Rankings per Dealogic as of October 1, 2014.
(J) FICC sales and trading revenue, excluding net DVA is a
non-GAAP financial measure. Net DVA included in FICC revenue was
gains (losses) of $134 million, $56 million and $(393) million for
the three months ended September 30, 2014, June 30, 2014
and September 30, 2013, respectively.
(K) Equity sales and trading revenue, excluding net DVA is a
non-GAAP financial measure. Equities net DVA gains (losses) were
$71 million, $13 million and $(51) million for the three months
ended September 30, 2014, June 30, 2014 and
September 30, 2013, respectively.
(L) Global Markets revenue excluding net DVA, and net income
excluding net DVA and the impact of the U.K. corporate tax rate
adjustment on the deferred tax asset in the third quarter of 2013,
are non-GAAP financial measures. Net DVA gains (losses) were $205
million and $(444) million for the three months ended September 30,
2014 and September 30, 2013, respectively. The impact of the
U.K. corporate tax rate adjustment on the deferred tax asset was
$1.1 billion for the three months ended September 30,
2013.
Note: Chief Executive Officer Brian Moynihan and Chief Financial
Officer Bruce Thompson will discuss third-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 October 16 through midnight, October 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 48 million consumer and small business relationships
with approximately 4,900 retail banking offices and approximately
15,700 ATMs and award-winning online banking with 31 million active
users and more than 16 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 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; 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, 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
Nine Months EndedSeptember 30
ThirdQuarter 2014 SecondQuarter2014
ThirdQuarter2013
2014 2013 Net interest income
$
30,317 $ 31,479
$ 10,219 $ 10,013 $ 10,266
Noninterest income
35,205 35,975
10,990
11,734 11,264 Total revenue, net of interest
expense
65,522 67,454
21,209 21,747 21,530 Provision
for credit losses
2,056 3,220
636 411 296 Noninterest
expense
60,521 51,907
19,742
18,541 16,389 Income before income taxes
2,945
12,327
831 2,795 4,845 Income tax expense
762
4,335
663 504 2,348 Net income
$ 2,183 $ 7,992
$ 168
$ 2,291 $ 2,497 Preferred stock dividends
732 1,093
238 256 279
Net income (loss) applicable to common shareholders
$
1,451 $ 6,899
$ (70 ) $
2,035 $ 2,218 Common shares issued
25,218 44,664
69 224 184 Average common shares issued
and outstanding
10,531,688 10,764,216
10,515,790
10,519,359 10,718,918 Average diluted common shares issued and
outstanding (1)
10,587,841 11,523,649
10,515,790
11,265,123 11,482,226
Summary Average
Balance Sheet
Total debt securities
$ 345,194 $ 342,278
$
359,653 $ 345,889 $ 327,493 Total loans and leases
910,360 914,888
899,241 912,580 923,978 Total earning
assets
1,819,247 1,826,575
1,813,482 1,840,850
1,789,045 Total assets
2,148,298 2,173,164
2,136,109
2,169,555 2,123,430 Total deposits
1,124,777 1,082,005
1,127,488 1,128,563 1,090,611 Common shareholders' equity
222,593 217,922
222,372 222,215 216,766 Total
shareholders' equity
236,801 234,126
238,038 235,797
230,392
Performance
Ratios
Return on average assets
0.14 % 0.49 %
0.03
% 0.42 % 0.47 % Return on average tangible common
shareholders' equity (2)
1.30 6.40
n/m 5.47 6.15
Per common share
information
Earnings (loss)
$ 0.14 $ 0.64
$ (0.01
) $ 0.19 $ 0.21 Diluted earnings (loss) (1)
0.14 0.62
(0.01 ) 0.19 0.20 Dividends paid
0.07 0.03
0.05 0.01 0.01 Book value
21.03 20.50
21.03
21.16 20.50 Tangible book value (2)
14.13 13.62
14.13
14.24 13.62
September 30 2014 June 302014
September 302013
Summary
Period-End Balance Sheet
Total debt securities
$ 368,124 $ 352,883 $ 320,998
Total loans and leases
891,315 911,899 934,392 Total earning
assets
1,783,051 1,830,546 1,795,946 Total assets
2,123,613 2,170,557 2,126,653 Total deposits
1,111,981 1,134,329 1,110,118 Common shareholders' equity
221,168 222,565 218,967 Total shareholders' equity
239,081 237,411 232,282 Common shares issued and outstanding
10,515,894 10,515,825 10,683,282
Credit
Quality
Nine Months EndedSeptember 30
ThirdQuarter 2014 SecondQuarter2014
ThirdQuarter2013
2014 2013 Total net charge-offs
$
3,504 $ 6,315
$ 1,043 $ 1,073 $ 1,687 Net
charge-offs as a percentage of average loans and leases outstanding
(3)
0.52 % 0.93 %
0.46 % 0.48 % 0.73 %
Provision for credit losses
$ 2,056 $ 3,220
$
636 $ 411 $ 296
September 30 2014 June
302014 September 302013 Total nonperforming loans, leases and
foreclosed properties (4)
$ 14,232 $ 15,300 $ 20,028
Nonperforming loans, leases and foreclosed properties as a
percentage of total loans, leases and foreclosed properties (3)
1.61 % 1.70 % 2.17 % Allowance for loan and lease
losses
$ 15,106 $ 15,811 $ 19,432 Allowance for loan
and lease losses as a percentage of total loans and leases
outstanding (3)
1.71 % 1.75 % 2.10 %
Bank of America Corporation and Subsidiaries Selected
Financial Data (continued) (Dollars
in millions)
Basel 3 Transition
Basel 1
Capital
Management
September 30 2014 June 302014 September 302013
Risk-based capital metrics (5, 6): Common
equity tier 1 capital
$ 152,852 $ 153,582 n/a Tier 1
common capital
n/a n/a $ 139,410 Common equity tier 1
capital ratio
12.0 % 12.0 % n/a Tier 1 common capital
ratio (7)
n/a n/a 10.8 % Tier 1 leverage ratio
7.9
7.7 7.6 Tangible equity ratio (8)
8.12 7.85 7.73
Tangible common equity ratio (8)
7.24 7.14 7.08
Regulatory
Capital Reconciliations (5, 6)
September 30 2014 June 302014
Regulatory capital –
Basel 3 transition to fully phased-in Common equity tier 1
capital (transition) $ 152,852 $ 153,582
Adjustments and deductions recognized in Tier 1 capital during
transition
(10,191 ) (10,547 ) Other adjustments and
deductions phased in during transition
(7,115 )
(5,852 )
Common equity tier 1 capital (fully phased-in)
$ 135,546 $ 137,183
September
30 2014 June 302014
Risk-weighted assets – As
reported to Basel 3 (fully phased-in) As reported
risk-weighted assets $ 1,271,605 $ 1,284,924
Change in risk-weighted assets from reported to fully phased-in
146,581 151,901
Basel 3 Standardized
approach risk-weighted assets (fully phased-in)
1,418,186 1,436,825 Change in risk-weighted assets for
advanced models
(8,369 ) (49,390 )
Basel 3
Advanced approaches risk-weighted assets (fully phased-in)
$ 1,409,817 $ 1,387,435
Regulatory capital ratios Basel 3 Standardized approach
common equity tier 1 (transition)
12.0 % 12.0 % Basel
3 Standardized approach common equity tier 1 (fully phased-in)
9.6 9.5 Basel 3 Advanced approaches common equity tier 1
(fully phased-in)
9.6 9.9
(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 third quarter of 2014 because of the net loss applicable to
common shareholders.
(2) Return on average tangible common 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 September 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
Certain prior period amounts have been reclassified to conform
to current period presentation.
Bank of America Corporation and Subsidiaries Quarterly
Results by Business Segment (Dollars in millions)
Third 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)
$
7,511 $ 1,093 $ 4,666 $
4,093 $ 4,136 $ (65 )
Provision for credit losses
617 286 (15
) (32 ) 45 (265 )
Noninterest expense
3,979 7,275 3,403
1,904 2,936 245 Net income (loss)
1,856
(5,184 ) 813 1,414 769
500 Return on average allocated capital (2)
24.97
% n/m 26.98 % 18.09 %
9.00 % n/m
Balance
Sheet
Average Total loans and leases
$ 160,879
$ 87,971 $ 121,002 $
267,047 $ 62,939 $ 199,403 Total
deposits
545,116 n/m 239,352 265,721
n/m 29,268 Allocated capital (2)
29,500
23,000 12,000 31,000 34,000 n/m
Period end
Total loans and leases
$ 161,345 $
87,962 $ 122,395 $ 268,612
$ 62,645 $ 188,356 Total deposits
546,791 n/m 238,710 255,177 n/m
25,109 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) $ 7,371 $
1,390 $ 4,589 $ 4,179 $ 4,583 $ (152 ) Provision for credit losses
534 (20 ) (8 ) 132 19 (246 ) Noninterest expense 3,984 5,895 3,445
1,900 2,863 454 Net income (loss) 1,797 (2,798 ) 726 1,352 1,100
114 Return on average allocated capital (2) 24.45 % n/m 24.37 %
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 543,567 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 32,000 Third
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) $ 7,524 $
1,577 $ 4,390 $ 4,008 $ 3,219 $ 1,025 Provision for credit losses
761 (308 ) 23 322 47 (549 ) Noninterest expense 3,967 3,403 3,247
1,923 2,881 968 Net income (loss) 1,787 (990 ) 720 1,137 (875 ) 718
Return on average allocated capital (2) 23.67 % n/m 28.71 % 19.63 %
n/m n/m
Balance
Sheet
Average Total loans and leases $ 165,719 $ 88,406 $ 112,752
$ 260,085 $ 64,491 $ 232,525 Total deposits 522,009 n/m 239,663
239,189 n/m 35,419 Allocated capital (2) 30,000 24,000 10,000
23,000 30,000 n/m
Period end Total loans and leases $
167,257 $ 87,586 $ 114,175 $ 267,165 $ 68,662 $ 229,547 Total
deposits 526,836 n/m 241,553 262,502 n/m 30,909
(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
Certain prior period amounts have been reclassified among the
segments to conform to current period presentation.
Bank of America Corporation and Subsidiaries Year-to-Date
Results by Business Segment (Dollars in millions)
Nine Months Ended September 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)
$
22,320 $ 3,675 $ 13,802
$ 12,541 $ 13,731 $ 92
Provision for credit losses
1,963 291 —
365 83 (646 ) Noninterest expense
11,912 21,290 10,207 5,832 8,875
2,405 Net income (loss)
5,327 (13,003 )
2,268 4,002 3,178 411 Return on average
allocated capital (2)
24.16 % n/m 25.37
% 17.27 % 12.52 % n/m
Balance
Sheet
Average Total loans and leases
$ 161,055
$ 88,378 $ 118,505 $
269,963 $ 63,402 $ 209,057 Total
deposits
541,119 n/m 240,716 260,398
n/m 33,147 Allocated capital (2)
29,500
23,000 12,000 31,000 34,000 n/m
Period end Total loans and leases
$ 161,345
$ 87,962 $ 122,395 $
268,612 $ 62,645 $ 188,356 Total
deposits
546,791 n/m 238,710 255,177
n/m 25,109 Nine Months Ended September 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) $ 22,369 $
6,003 $ 13,310 $ 12,176 $ 12,192 $ 2,050 Provision for credit
losses 2,680 318 30 634 36 (478 ) Noninterest expense 12,287 12,161
9,770 5,608 8,724 3,357 Net income (loss) 4,638 (4,058 ) 2,199
3,718 1,199 296 Return on average allocated capital (2) 20.70 % n/m
29.57 % 21.62 % 5.37 % n/m
Balance
Sheet
Average Total loans and leases $ 165,052 $ 90,478 $ 109,499
$ 253,335 $ 57,886 $ 238,638 Total deposits 515,655 n/m 242,757
229,206 n/m 35,063 Allocated capital (2) 30,000 24,000 10,000
23,000 30,000 n/m
Period end Total loans and leases $
167,257 $ 87,586 $ 114,175 $ 267,165 $ 68,662 $ 229,547 Total
deposits 526,836 n/m 241,553 262,502 n/m 30,909
(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
Certain prior period amounts have been reclassified among the
segments to conform to current period presentation.
Bank of America Corporation and Subsidiaries Supplemental
Financial Data
(Dollars in millions)
Fully
taxable-equivalent (FTE) basis data (1)
Nine Months EndedSeptember 30
ThirdQuarter 2014 SecondQuarter2014
ThirdQuarter2013
2014 2013 Net interest income
$
30,956 $ 32,125
$ 10,444 $ 10,226 $ 10,479
Total revenue, net of interest expense
66,161 68,100
21,434 21,960 21,743 Net interest yield (2)
2.27
% 2.35 %
2.29 % 2.22 % 2.33 % Efficiency ratio
91.47 76.22
92.10 84.43 75.38
Other
Data
September 30 2014 June 302014 September 302013 Number
of banking centers - U.S.
4,947 5,023 5,243 Number of
branded ATMs - U.S.
15,675 15,976 16,201 Ending full-time
equivalent employees
229,538 233,201 247,943
(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 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.
Certain prior period amounts 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 nine months ended September 30, 2014 and 2013, and the
three months ended September 30, 2014, June 30, 2014 and
September 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.
Nine Months EndedSeptember 30
ThirdQuarter 2014 SecondQuarter2014
ThirdQuarter2013
2014 2013
Reconciliation of
net interest income to net interest income on a fully
taxable-equivalent basis
Net interest income
$ 30,317 $ 31,479
$
10,219 $ 10,013 $ 10,266 Fully taxable-equivalent adjustment
639 646
225 213 213
Net interest income on a fully taxable-equivalent
basis $ 30,956 $ 32,125
$
10,444 $ 10,226 $ 10,479
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
$
65,522 $ 67,454
$ 21,209 $ 21,747 $ 21,530
Fully taxable-equivalent adjustment
639 646
225 213 213
Total revenue, net of
interest expense on a fully taxable-equivalent basis $
66,161 $ 68,100
$ 21,434
$ 21,960 $ 21,743
Reconciliation of
income tax expense to income tax expense on a fully
taxable-equivalent basis
Income tax expense
$ 762 $ 4,335
$
663 $ 504 $ 2,348 Fully taxable-equivalent adjustment
639 646
225 213 213
Income tax expense on a fully taxable-equivalent
basis $ 1,401 $ 4,981
$
888 $ 717 $ 2,561
Reconciliation of
average common shareholders' equity to average tangible common
shareholders' equity
Common shareholders' equity
$ 222,593 $
217,922
$ 222,372 $ 222,215 $ 216,766 Goodwill
(69,818 ) (69,926 )
(69,792 ) (69,822 )
(69,903 ) Intangible assets (excluding mortgage servicing rights)
(5,232 ) (6,269 )
(4,992 ) (5,235 )
(5,993 ) Related deferred tax liabilities
2,114 2,360
2,077 2,100 2,296
Tangible
common shareholders' equity $ 149,657 $
144,087
$ 149,665 $ 149,258 $
143,166
Reconciliation of
average shareholders' equity to average tangible shareholders'
equity
Shareholders' equity
$ 236,801 $ 234,126
$ 238,038 $ 235,797 $ 230,392 Goodwill
(69,818
) (69,926 )
(69,792 ) (69,822 ) (69,903 )
Intangible assets (excluding mortgage servicing rights)
(5,232 ) (6,269 )
(4,992 ) (5,235 )
(5,993 ) Related deferred tax liabilities
2,114 2,360
2,077 2,100 2,296
Tangible
shareholders' equity $ 163,865 $ 160,291
$ 165,331 $ 162,840 $ 156,792
Certain prior period amounts have been reclassified to conform
to current period presentation.
Bank of America Corporation and Subsidiaries
Reconciliations to GAAP Financial Measures (continued)
(Dollars in millions, except per share data; shares in thousands)
Nine Months EndedSeptember 30
ThirdQuarter 2014 SecondQuarter2014
ThirdQuarter2013
2014 2013
Reconciliation of
period-end common shareholders' equity to period-end tangible
common shareholders' equity
Common shareholders' equity
$ 221,168 $
218,967
$ 221,168 $ 222,565 $ 218,967 Goodwill
(69,784 ) (69,891 )
(69,784 ) (69,810 )
(69,891 ) Intangible assets (excluding mortgage servicing rights)
(4,849 ) (5,843 )
(4,849 ) (5,099 )
(5,843 ) Related deferred tax liabilities
2,019 2,231
2,019 2,078 2,231
Tangible
common shareholders' equity $ 148,554 $
145,464
$ 148,554 $ 149,734 $
145,464
Reconciliation of
period-end shareholders' equity to period-end tangible
shareholders' equity
Shareholders' equity
$ 239,081 $ 232,282
$ 239,081 $ 237,411 $ 232,282 Goodwill
(69,784
) (69,891 )
(69,784 ) (69,810 ) (69,891 )
Intangible assets (excluding mortgage servicing rights)
(4,849 ) (5,843 )
(4,849 ) (5,099 )
(5,843 ) Related deferred tax liabilities
2,019 2,231
2,019 2,078 2,231
Tangible
shareholders' equity $ 166,467 $ 158,779
$ 166,467 $ 164,580 $ 158,779
Reconciliation of
period-end assets to period-end tangible assets
Assets
$ 2,123,613 $ 2,126,653
$
2,123,613 $ 2,170,557 $ 2,126,653 Goodwill
(69,784
) (69,891 )
(69,784 ) (69,810 ) (69,891 )
Intangible assets (excluding mortgage servicing rights)
(4,849 ) (5,843 )
(4,849 ) (5,099 )
(5,843 ) Related deferred tax liabilities
2,019 2,231
2,019 2,078 2,231
Tangible
assets $ 2,050,999 $ 2,053,150
$ 2,050,999 $ 2,097,726 $ 2,053,150
Book value per
share of common stock
Common shareholders' equity
$ 221,168 $
218,967
$ 221,168 $ 222,565 $ 218,967 Ending common
shares issued and outstanding
10,515,894 10,683,282
10,515,894 10,515,825 10,683,282
Book value per share of
common stock $ 21.03 $ 20.50
$
21.03 $ 21.16 $ 20.50
Tangible book
value per share of common stock
Tangible common shareholders' equity
$ 148,554
$ 145,464
$ 148,554 $ 149,734 $ 145,464 Ending common
shares issued and outstanding
10,515,894 10,683,282
10,515,894 10,515,825 10,683,282
Tangible book value per
share of common stock $ 14.13 $ 13.62
$
14.13 $ 14.24 $ 13.62
Certain prior period amounts have been reclassified to conform
to current period presentation.
Bank of America Corporation and Subsidiaries
Reconciliations to GAAP Financial
Measures (continued)
(Dollars in
millions)
Nine Months EndedSeptember 30
ThirdQuarter 2014 SecondQuarter2014
ThirdQuarter2013
2014 2013
Reconciliation of return
on average allocated capital (1)
Consumer &
Business Banking
Reported net income
$ 5,327 $ 4,638
$
1,856 $ 1,797 $ 1,787 Adjustment related to intangibles (2)
3 6
1 1 2
Adjusted net income $ 5,330 $ 4,644
$ 1,857 $ 1,798 $ 1,789
Average allocated equity (3)
$ 61,458 $ 62,050
$ 61,441 $ 61,459 $ 62,024 Adjustment related to
goodwill and a percentage of intangibles
(31,958 )
(32,050 )
(31,941 ) (31,959 ) (32,024 )
Average
allocated capital $ 29,500 $ 30,000
$ 29,500 $ 29,500 $ 30,000
Global Wealth
& Investment Management
Reported net income
$ 2,268 $ 2,199
$
813 $ 726 $ 720 Adjustment related to intangibles (2)
10 13
4 3 4
Adjusted net income $ 2,278 $ 2,212
$ 817 $ 729 $ 724
Average allocated equity (3)
$ 22,223 $ 20,302
$ 22,204 $ 22,222 $ 20,283 Adjustment related to
goodwill and a percentage of intangibles
(10,223 )
(10,302 )
(10,204 ) (10,222 ) (10,283 )
Average
allocated capital $ 12,000 $ 10,000
$ 12,000 $ 12,000 $ 10,000
Global
Banking
Reported net income
$ 4,002 $ 3,718
$
1,414 $ 1,352 $ 1,137 Adjustment related to intangibles (2)
1 2
1 — 1
Adjusted net income $ 4,003 $ 3,720
$ 1,415 $ 1,352 $ 1,138
Average allocated equity (3)
$ 53,405 $ 45,412
$ 53,402 $ 53,405 $ 45,413 Adjustment related to
goodwill and a percentage of intangibles
(22,405 )
(22,412 )
(22,402 ) (22,405 ) (22,413 )
Average
allocated capital $ 31,000 $ 23,000
$ 31,000 $ 31,000 $ 23,000
Global
Markets
Reported net income (loss)
$ 3,178 $ 1,199
$ 769 $ 1,100 $ (875 ) Adjustment related to
intangibles (2)
7 6
3 2 2
Adjusted net income (loss) $ 3,185
$ 1,205
$ 772 $ 1,102 $
(873 ) Average allocated equity (3)
$ 39,373 $
35,366
$ 39,371 $ 39,373 $ 35,369 Adjustment related
to goodwill and a percentage of intangibles
(5,373 )
(5,366 )
(5,371 ) (5,373 ) (5,369 )
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),
1.212.449.3112Reporters May Contact:Jerry Dubrowski, Bank of
America, 1.980.388.2840jerome.f.dubrowski@bankofamerica.com
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