Bank of America 2008 Annual Report Download - page 185

Note 22 – Business Segment Information
The Corporation reports the results of its operations through three busi-
ness segments: Global Consumer and Small Business Banking (GCSBB),
Global Corporate and Investment Banking (GCIB) and Global Wealth and
Investment Management (GWIM). The Corporation may periodically
reclassify business segment results based on modifications to its man-
agement reporting methodologies and changes in organizational align-
ment.
Global Consumer and Small Business Banking
GCSBB provides a diversified range of products and services to
individuals and small businesses. The Corporation reports GCSBB’s
results, specifically credit card and certain unsecured lending portfolios,
on a managed basis. Reporting on a managed basis is consistent with
the way that management evaluates the results of GCSBB. Managed
basis assumes that securitized loans were not sold and presents earn-
ings on these loans in a manner similar to the way loans that have not
been sold (i.e., held loans) are presented. This basis of presentation
excludes the Corporation’s securitized mortgage and home equity portfo-
lios for which the Corporation retains servicing. Loan securitization is an
alternative funding process that is used by the Corporation to diversify
funding sources. Loan securitization removes loans from the Con-
solidated Balance Sheet through the sale of loans to an off-balance sheet
QSPE which is excluded from the Corporation’s Consolidated Financial
Statements in accordance with GAAP.
The performance of the managed portfolio is important in under-
standing GCSBB’s results as it demonstrates the results of the entire
portfolio serviced by the business. Securitized loans continue to be serv-
iced by the business and are subject to the same underwriting standards
and ongoing monitoring as held loans. In addition, retained excess servic-
ing income is exposed to similar credit risk and repricing of interest rates
as held loans. GCSBB’s managed income statement line items differ
from a held basis as follows:
ŠManaged net interest income includes GCSBB’s net interest income on
held loans and interest income on the securitized loans less the
internal funds transfer pricing allocation related to securitized loans.
ŠManaged noninterest income includes GCSBB’s noninterest income on
a held basis less the reclassification of certain components of card
income (e.g., excess servicing income) to record securitized net inter-
est income and provision for credit losses. Noninterest income, both
on a held and managed basis, also includes the impact of adjustments
to the interest-only strips that are recorded in card income as
management continues to manage this impact within GCSBB.
ŠProvision for credit losses represents the provision for credit losses on
held loans combined with realized credit losses associated with the
securitized loan portfolio.
Global Corporate and Investment Banking
GCIB provides a wide range of financial services to both the Corporation’s
issuer and investor clients that range from business banking clients to
large international corporate and institutional investor clients using a
strategy to deliver value-added financial products and advisory solutions.
Global Wealth and Investment Management
GWIM offers investment and brokerage services, estate management,
financial planning services, fiduciary management, credit and banking
expertise, and diversified asset management products to institutional
clients, as well as affluent and high net-worth individuals. GWIM also
includes the impact of migrated qualifying affluent customers, including
their related deposit balances, from GCSBB. After migration, the asso-
ciated net interest income, service charges and noninterest expense on
the deposit balances are recorded in GWIM.
All Other
All Other consists of equity investment activities including Principal Inves-
ting, Corporate Investments and Strategic Investments, the residential
mortgage portfolio associated with ALM activities, the residual impact of
the cost allocation processes, merger and restructuring charges, and the
results of certain businesses that are expected to be or have been sold
or are in the process of being liquidated. All Other also includes certain
amounts associated with ALM activities and a corresponding
“securitization offset” which removes the “securitization impact” of sold
loans in GCSBB, in order to present the consolidated results of the
Corporation on a GAAP basis (i.e., held basis).
Basis of Presentation
Total revenue, net of interest expense, includes net interest income on a
FTE basis and noninterest income. The adjustment of net interest income
to a FTE basis results in a corresponding increase in income tax expense.
The net interest income of the businesses includes the results of a funds
transfer pricing process that matches assets and liabilities with similar
interest rate sensitivity and maturity characteristics. Net interest income
of the business segments also includes an allocation of net interest
income generated by the Corporation’s ALM activities.
Certain expenses not directly attributable to a specific business
segment are allocated to the segments based on pre-determined means.
The most significant of these expenses include data processing costs,
item processing costs and certain centralized or shared functions. Data
processing costs are allocated to the segments based on equipment
usage. Item processing costs are allocated to the segments based on the
volume of items processed for each segment. The costs of certain
centralized or shared functions are allocated based on methodologies
which reflect utilization.
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