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Bank of America Corporation
2014 Annual Report
Life’s better when we’re connected
®
Across our businesses,
we’re committed to helping
our customers and clients
succeed through the power
of every connection.

Table of contents

  • Page 1
    Bank of America Corporation 2014 Annual Report Across our businesses, we're committed to helping our customers and clients succeed through the power of every connection. Life's better when we're connected ®

  • Page 2
    ... to deliver long-term value to you, our shareholders, as we execute our strategy to serve our customers and clients. We still have lots of work ahead of us to get it back to a normalized level, but we are making good progress. Last year was again challenging for financial institutions. Sustained low...

  • Page 3
    ...signed up in just six months. We will continue to develop ways to help our mobile customers make secure, convenient payments. Our mobile customers are joined by about 31 million others who bank online via their computers. Each day, millions of customers log on at increasing rates to pay bills online...

  • Page 4
    ...time-to-required funding ($B)2 Ratio Months 4Q14 4Q13 4Q12 $376 $372 $439 39 38 33 2014 2013 2012 $152 $146 $144 7.5% 7.2% 6.7% their goods to overseas markets. Others are accessing more markets for their American-made products. Serving these increasingly global small- and medium-sized companies...

  • Page 5
    ... of the returns we see in our wealth management and commercial or corporate banking businesses, which derive synergies from the capabilities in Global Markets as described above, quite apart from the volatility in the sales and trading businesses in Global Markets. A strong company making steady...

  • Page 6
    ... investors - we have transformed Bank of America into a stronger, more straightforward company committed to making financial lives better. Our goal is to build broader, deeper and more enduring relationships with our customers and clients and deliver long-term value for our shareholders. Life...

  • Page 7
    ... client balances for Merrill Lynch Wealth Management and U.S. Trust, Bank of America Private Wealth Management, up 6 percent from 2013. • 4.5 million new credit cards were issued in 2014; 65 percent to customers with an existing banking relationship. • More than 90 percent of new home equity...

  • Page 8
    ... to expert guidance. More ways to bank: Customers can get current account information and transact when and where it is convenient for them - online, on their mobile phone, through our new ATMs with Teller Assist or our nationwide network of financial centers. Access to know-how: In partnership with...

  • Page 9
    ... to them. Through a goals-based wealth management approach, our advisors work with clients to understand their life priorities, define goals and help them realize positive outcomes. U.S. Trust, Bank of America Private Wealth Management Through an advisor and a team of specialists, we begin by...

  • Page 10
    ... all their financial needs: from business banking and cash management strategies that drive efficiency, to financing solutions that help companies advance, to wealth management and retirement solutions that provide stability for employees, and advisory services and execution capabilities that power...

  • Page 11
    ... efficiency. • Debt and equity underwriting and distribution • Merger-related and other advisory services • Commercial loans, leases, and commitment facilities • Treasury management • Real estate and asset-based lending • Foreign exchange and short-term investing • Trade...

  • Page 12
    ... almost 23,000 companies - that's one in three companies with $50M-$2B in annual sales operating in the U.S. Based on FY 2014 Greenwich Commercial Banking Study, companies $50M-$2B Green Bond transactions in 2014 3 Named Best Global Investment Bank and Best Global Transaction Services House by...

  • Page 13
    ..., credit, currencies, commodities and equities. In addition, we provide marketmaking, financing and securities clearing, settlement and custody services globally to our institutional investor clients in support of their investing and trading activities. We also help our corporate clients manage risk...

  • Page 14
    ... with integrated solutions across major product and service categories, including: • Global Research • Sales and Trading • Market making • Securities clearing, settlement and custody services • Risk management products • Portfolio solutions for pension funds, endowments and...

  • Page 15
    ... Commodities and Derivatives • Rates and Currencies 700 Global Research has consistently achieved high rankings for its equity and fixed-income research in regional and global investor surveys such as: Thomson Reuters Extel EMEA Survey: Ranked #1 Pan-European Firm for Equity and Equity-Linked...

  • Page 16
    ... to make a significant impact on people and communities around the world. With more than 220,000 employees serving millions of customers and clients, we're in a unique position to put our scale and global resources to work helping the public, private and nonprofit sectors effectively address many...

  • Page 17
    ... in 2014 1.85 million employee volunteer hours in 2014 We're partnering with a variety of organizations around the world to address societal challenges. We're connecting women to the human, social and financial capital they need to succeed. Through the Global Ambassadors Program, a partnership...

  • Page 18
    ...85.59 10,841 At year end Total loans and leases Total assets Total deposits Total shareholders' equity Book value per common share Tangible book value per common share1 Market price per common share Common shares issued and outstanding Tangible common equity ratio1 1 2014 $ 881,391 2,104,534 1,118...

  • Page 19
    2014 Financial Review Life's better when we're connected ®

  • Page 20
    ... Services Global Wealth & Investment Management Global Banking Global Markets All Other Off-Balance Sheet Arrangements and Contractual Obligations Managing Risk Strategic Risk Management Capital Management Liquidity Risk Credit Risk Management Consumer Portfolio Credit Risk Management Commercial...

  • Page 21
    ...our 2014 Annual Report on Form 10-K and in any of the Corporation's subsequent Securities and Exchange Commission filings for further information about factors that could affect such forward-looking statements: the Corporation's ability to resolve representations and warranties repurchase claims and...

  • Page 22
    ...and a financial holding company. When used in this report, "the Corporation" may refer to Bank of America Corporation individually, Bank of America Corporation and its subsidiaries, or certain of Bank of America Corporation's subsidiaries or affiliates. Our principal executive offices are located in...

  • Page 23
    ...credit-impaired loan portfolio Ratio of the allowance for loan and lease losses at December 31 to net charge-offs and purchased credit-impaired write-offs Balance sheet at year end Total loans and leases Total assets Total deposits Total common shareholders' equity Total shareholders' equity Capital...

  • Page 24
    ... in funding yields, lower long-term debt balances and commercial loan growth. Provision for Credit Losses The provision for credit losses decreased $1.3 billion to $2.3 billion for 2014 compared to 2013. The provision for credit losses was $2.1 billion lower than net charge-offs for 2014, resulting...

  • Page 25
    ...charges related to the settlements with the DoJ and FHFA. The increase in litigation expense was partially offset by a decrease of $3.3 billion in defaultrelated staffing and other default-related servicing expenses in Legacy Assets & Servicing. Also, personnel expense decreased $932 million in 2014...

  • Page 26
    ... Coverage Ratio (LCR) requirements. We shifted the mix of certain discretionary assets out of less liquid loans to more liquid debt securities. This included the sale of $10.7 billion of residential mortgage loans with standby insurance agreements and purchase of agency securities, and the sale of...

  • Page 27
    ... sales and net charge-offs outpacing new originations, and a decline in commercial loan balances. For more information on the loan portfolio, see Credit Risk Management on page 67. Long-term Debt Allowance for Loan and Lease Losses Year-end and average allowance for loan and lease losses decreased...

  • Page 28
    ...a decrease in federal funds sold and securities borrowed or purchased under agreements to resell and net sales of debt securities, partially offset by a net increase in loans and leases. During 2014, net cash used in financing activities of $12.2 billion primarily reflected a reduction in short-term...

  • Page 29
    ... of the net loss applicable to common shareholders. (2) Tangible equity ratios and tangible book value per share of common stock are non-GAAP financial measures. Other companies may define or calculate these measures differently. For more information on these ratios, see Supplemental Financial Data...

  • Page 30
    ... 22,908 Average balance sheet Total loans and leases Total assets Total deposits Long-term debt Common shareholders' equity Total shareholders' equity Asset quality (3) Allowance for credit losses (4) Nonperforming loans, leases and foreclosed properties (5) Allowance for loan and lease losses as...

  • Page 31
    ... Total revenue, net of interest expense Net interest yield (1) Efficiency ratio Performance ratios, excluding goodwill impairment charges (2) Per common share information Earnings Diluted earnings Efficiency ratio (FTE basis) Return on average assets Return on average common shareholders' equity...

  • Page 32
    ... long-term debt balances and commercial loan growth. For more information on the impact of interest rates, see Interest Rate Risk Management for Non-trading Activities on page 102. For more information on market-related premium amortization, see Note 1 - Summary of Significant Accounting Principles...

  • Page 33
    ... segments with how we manage the businesses in 2015, the Corporation changed its basis of segment presentation as follows: the Home Loans subsegment within CRES was moved to CBB, and Legacy Assets & Servicing became a separate segment. Also, a portion of the Business Banking business, based on the...

  • Page 34
    ...planning processes. We utilize 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...

  • Page 35
    ... for credit losses Noninterest expense Income before income taxes (FTE basis) Income tax expense (FTE basis) Net income Net interest yield (FTE basis) Return on average allocated capital Efficiency ratio (FTE basis) Balance Sheet Average Total loans and leases Total earning assets (1) Total assets...

  • Page 36
    ... access to the Corporation's network of banking centers and ATMs. Business Banking within Deposits provides a wide range of lending-related products and services, integrated working capital management and treasury solutions to clients through our network of offices and client relationship teams...

  • Page 37
    ... purchase and refinancing needs, home equity lines of credit (HELOCs) and home equity loans. First mortgage products are generally either sold into the secondary mortgage market to investors, while we retain MSRs (which are on the balance sheet of Legacy Assets & Servicing) and the Bank of America...

  • Page 38
    ... on the balance sheet of the Corporation. The home equity loan portfolio is held on the balance sheet of Legacy Assets & Servicing, and the residential mortgage loan portfolio is held on the balance sheet of All Other. The financial results of the on-balance sheet loans are reported in the segment...

  • Page 39
    .... Legacy Residential Mortgage Serviced Portfolio, a subset of the Residential Mortgage Serviced Portfolio (1) (Dollars in billions) 2014 December 31 2013 2012 Mortgage Banking Income (Dollars in millions) Unpaid principal balance Residential mortgage loans Total 60 days or more past due Number...

  • Page 40
    ... as noted) 2014 2013 Loan production (1) Total (2): First mortgage Home equity CRES: First mortgage Home equity Year end Mortgage serviced portfolio (in billions) (1, 3) Mortgage loans serviced for investors (in billions) (1) Mortgage servicing rights: Balance (4) Capitalized mortgage servicing...

  • Page 41
    ... Net interest yield (FTE basis) Return on average allocated capital Efficiency ratio (FTE basis) Balance Sheet Average Total loans and leases Total earning assets Total assets Total deposits Allocated capital Year end Total loans and leases Total earning assets Total assets Total deposits $ 2014...

  • Page 42
    ...and home equity loan balances of $4.5 billion to CRES, while CBB transferred credit card loan balances of $3.2 billion to GWIM. Client Balances by Type (Dollars in millions) Assets under management Brokerage assets Assets in custody Deposits Loans and leases (1) Total client balances (1) December...

  • Page 43
    ... Net interest yield (FTE basis) Return on average allocated capital Efficiency ratio (FTE basis) Balance Sheet Average Total loans and leases Total earning assets Total assets Total deposits Allocated capital Year end Total loans and leases Total earning assets Total assets Total deposits $ 2014...

  • Page 44
    ... commercial loans, leases, commitment facilities, trade finance, real estate lending and asset-based lending. Global Transaction Services includes deposits, treasury management, credit card, foreign exchange, and short-term investment and custody solutions to corporate and commercial banking...

  • Page 45
    ...commercial and corporate clients to provide risk management products using interest rate, equity, credit, currency and commodity derivatives, foreign exchange, fixed-income and mortgage-related products. As a result of our market-making activities in these products, we may be required to manage risk...

  • Page 46
    ...investment grade corporate debt obligations, commercial mortgage-backed securities, residential mortgage-backed securities (RMBS), collateralized loan obligations (CLOs), interest rate and credit derivative contracts), currencies (interest rate and foreign exchange contracts), commodities (primarily...

  • Page 47
    ...) Net income Balance Sheet Average Loans and leases: Residential mortgage Non-U.S. credit card Other Total loans and leases Total assets (1) Total deposits Year end Loans and leases: Residential mortgage Non-U.S. credit card Other Total loans and leases Total assets (1) Total deposits (1) $ 2014...

  • Page 48
    ... (Dollars in millions) Global Principal Investments Strategic and other investments Total equity investments included in All Other December 31 2014 2013 $ 912 $ 1,604 858 822 $ 1,770 $ 2,426 Equity investment income decreased $1.8 billion primarily due to a $753 million gain related to the sale...

  • Page 49
    .... Debt, lease, equity and other obligations are more fully discussed in Note 11 - Long-term Debt and Note 12 - Commitments and Contingencies to the Consolidated Financial Statements. We enter into commitments to extend credit such as loan commitments, standby letters of credit (SBLCs) and commercial...

  • Page 50
    ... loans sold by legacy Bank of America and Countrywide to Fannie Mae (FNMA) and Freddie Mac (FHLMC) through June 30, 2012 and December 31, 2009, respectively. For additional information, see Note 7 - Representations and Warranties Obligations and Corporate Guarantees to the Consolidated Financial...

  • Page 51
    ... claims activity in the computation of our liability for representations and warranties. Until we receive a repurchase claim, we generally do not review loan files related to private-label securitizations and believe we are not required by the governing documents to do so. Bank of America 2014...

  • Page 52
    ... of possible loss and the types of losses not considered in such estimates, see Item 1A. Risk Factors of our 2014 Annual Report on Form 10-K and Note 7 - Representations and Warranties Obligations and Corporate Guarantees to the Consolidated Financial Statements and, for more information related to...

  • Page 53
    ... Financial Statements. Mortgage-related Settlements - Servicing Matters In connection with the BNY Mellon Settlement, BANA has agreed to implement certain servicing changes related to loss mitigation activities. BANA also agreed to transfer the servicing rights related to certain high-risk loans...

  • Page 54
    ...and reporting, and risk governance) and the seven key types of risk we face. Executive management assesses, with Board oversight, the risk-adjusted returns of each business. Management reviews and approves strategic and financial operating plans, and recommends a financial plan annually to the Board...

  • Page 55
    ... and/or Corporate Audit to execute its responsibilities. The following Board committees have the principal responsibility for enterprise-wide oversight of our risk management activities. These committees and other Board committees, as applicable, regularly report to the Board on risk-related matters...

  • Page 56
    .... Executive officers review the Corporation's activities for consistency with our Risk Framework, Risk Appetite Statement, and applicable strategic, capital and financial operating plans, as well as applicable policies, standards, procedures and processes. Executive officers and other employees make...

  • Page 57
    ...use proprietary models to measure the capital requirements for credit, country, market, operational and strategic risks. The allocated capital assigned to each business is based on its unique risk exposures. With oversight by the Board, executive management assesses the risk-adjusted returns of each...

  • Page 58
    .... Off-balance sheet exposures include financial guarantees, unfunded lending commitments, letters of credit and derivatives. Market riskweighted assets are calculated using risk models for trading account positions, including all foreign exchange and commodity positions regardless of the applicable...

  • Page 59
    ...debt and certain marketable equity securities recorded in accumulated OCI; employee benefit plan adjustments recorded in accumulated OCI Tier 1 capital Percent of total amount deducted from Tier 1 capital includes: 80% 60% 40% 20% 0% Deferred tax assets arising from net operating loss and tax credit...

  • Page 60
    ... will require modifications to these models which would likely result in a material increase in our risk-weighted assets resulting in a decrease in our capital ratios. Capital Composition and Ratios Table 14 presents Bank of America Corporation's capital ratios and related information in accordance...

  • Page 61
    ...term debt qualifying as Tier 2 capital Nonqualifying trust preferred securities subject to phase out from Tier 2 capital Allowance for loan and lease losses Reserve for unfunded lending commitments Allowance for loan and lease losses exceeding 1.25 percent of risk-weighted assets Other Total capital...

  • Page 62
    ... significant investments) Net unrealized losses in accumulated OCI on AFS debt and certain marketable equity securities, and employee benefit plans Other deductions, net Basel 3 Common equity tier 1 capital (fully phased-in) December 31 2014 Basel 3 Transition Regulatory capital - Basel 3 transition...

  • Page 63
    ... among other items, lending commitments, letters of credit, OTC derivatives, repo-style transactions and margin loan commitments. We are required to disclose our SLR effective January 1, 2015. Effective January 1, 2018, the Corporation will be required to maintain a minimum SLR of 3.0 percent...

  • Page 64
    ... 31, 2014, MLI's capital resources Global Excess Liquidity Sources and Other Unencumbered Assets We maintain excess liquidity available to Bank of America Corporation, or the parent company and selected subsidiaries in the form of cash and high-quality, liquid, unencumbered securities. These...

  • Page 65
    ... a shift from less liquid mortgage loans into more liquid securities, partially offset by dividends and returns of capital to the parent company. Global Excess Liquidity Sources at bank subsidiaries exclude the cash deposited by the parent company. Our bank subsidiaries can also generate incremental...

  • Page 66
    ... more information on secured financing agreements, see Note 10 - Federal Funds Sold or Purchased, Securities Financing Agreements and Short-term Borrowings to the Consolidated Financial Statements. We issue long-term unsecured debt in a variety of maturities and currencies to achieve cost-efficient...

  • Page 67
    ... entities may make markets in our debt instruments to provide liquidity for investors. For more information on long-term debt funding, see Note 11 - Long-term Debt to the Consolidated Financial Statements. We use derivative transactions to manage the duration, interest rate and currency risks of our...

  • Page 68
    ... Risk - Time-to-required Funding and Stress Modeling on page 63. For more information on the additional collateral and termination payments that could be required in connection with certain OTC derivative contracts and other trading agreements as a result of such a credit rating downgrade, see Note...

  • Page 69
    ... Risk Management - Purchased Credit-impaired Loan Portfolio on page 75 and Note 4 - Outstanding Loans and Leases to the Consolidated Financial Statements. For more information on our accounting policies regarding delinquencies, nonperforming status, charge-offs and TDRs for the Bank of America 2014...

  • Page 70
    ... Accounting Principles to the Consolidated Financial Statements. For more information on representations and warranties related to our residential mortgage and home equity portfolios, see OffBalance Sheet Arrangements and Contractual Obligations - Representations and Warranties on page 47 and Note...

  • Page 71
    ... n/a = not applicable Table 26 presents net charge-offs and related ratios for consumer loans and leases. Table 26 Consumer Net Charge-offs and Related Ratios (Dollars in millions) Residential mortgage Home equity U.S. credit card Non-U.S. credit card Direct/Indirect consumer Other consumer Total...

  • Page 72
    ... servicing agreements with GNMA as well as loans repurchased related to our representations and warranties. Outstanding balances in the residential mortgage portfolio, excluding loans accounted for under the fair value option, decreased $31.9 billion during 2014 due to paydowns, sales, charge-offs...

  • Page 73
    ...percent, of total residential mortgage net charge-offs in 2013. Net charge-off ratios are calculated as net charge-offs divided by average outstanding loans excluding loans accounted for under the fair value option. Nonperforming residential mortgage loans decreased $4.8 billion in 2014 as sales of...

  • Page 74
    ... Financial Statements. Net charge-offs exclude $545 million of write-offs in the residential mortgage PCI loan portfolio in 2014 compared to $1.1 billion in 2013. These write-offs decreased the PCI valuation allowance included as part of the allowance for loan and lease losses. For more information...

  • Page 75
    ... the home equity portfolio excluding the PCI loan portfolio and loans accounted for under the fair value option. For more information on the PCI loan portfolio, see page 75. Table 30 Home Equity - Key Credit Statistics December 31 Reported Basis (1) (Dollars in millions) Excluding Purchased Credit...

  • Page 76
    ... of our home equity customers pay only the minimum amount due on their home equity loans and lines, we can infer some of this information through a review of our HELOC portfolio that we service and that is still in its revolving period (i.e., customers may draw on and repay their line of credit, but...

  • Page 77
    ... Financial Statements. Net charge-offs exclude $265 million of write-offs in the home equity PCI loan portfolio in 2014 compared to $1.2 billion in 2013. These write-offs decreased the PCI valuation allowance included as part of the allowance for loan and lease losses. For more information...

  • Page 78
    ... Pay option adjustable-rate mortgages (ARMs), which are included in the PCI residential mortgage portfolio, have interest rates that adjust monthly and minimum required payments that adjust annually, subject to resetting if minimum payments are made and deferred interest limits are reached. Annual...

  • Page 79
    ...charge-offs. Table 35 presents certain key credit statistics for the U.S. credit card portfolio. Table 35 U.S. Credit Card - Key Credit Statistics Table 34 Outstanding Purchased Credit-impaired Loan Portfolio - Home Equity State Concentrations (Dollars in millions) (Dollars in millions) California...

  • Page 80
    ... outstandings in the unsecured consumer lending and consumer dealer financial services portfolios were partially offset by growth in the securitiesbased lending portfolio. Net charge-offs decreased $176 million to $169 million in 2014, or 0.20 percent of total average direct/indirect loans, compared...

  • Page 81
    ... recorded net losses of $13 million resulting from changes in the fair value of these loans, including losses of $45 million on loans held in consolidated VIEs that were offset by gains recorded on related long-term debt. Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity Table...

  • Page 82
    ... balances do not include loans that are insured by the FHA and have entered foreclosure of $1.1 billion and $1.4 billion at December 31, 2014 and 2013. Outstanding consumer loans and leases exclude loans accounted for under the fair value option. Our policy is to record any losses in the value...

  • Page 83
    ... loans as TDRs. For more information on our accounting policies regarding delinquencies, nonperforming status and net charge-offs for the commercial portfolio, see Note 1 - Summary of Significant Accounting Principles to the Consolidated Financial Statements. Management of Commercial Credit Risk...

  • Page 84
    ... For more information on the fair value option, see Note 21 - Fair Value Option to the Consolidated Financial Statements. Table 42 presents net charge-offs and related ratios for our commercial loans and leases for 2014 and 2013. Improving trends across the portfolio drove lower charge-offs. Table...

  • Page 85
    ...credit risk management purposes. Total commercial utilized credit exposure decreased $852 million in 2014 primarily driven by loans and leases, SBLCs and financial guarantees, debt securities and other investments, partially offset by an increase in derivative assets. The utilization rate for loans...

  • Page 86
    ... Outstanding loans decreased $211 million during 2014 primarily due to portfolio sales. During 2014, we continued to see improvements in credit quality in both the residential and non-residential portfolios. We use a number of proactive risk mitigation initiatives to reduce adversely rated exposure...

  • Page 87
    ... development Other Total non-residential Residential Total commercial real estate (1) $ $ Net charge-off ratios are calculated as net charge-offs divided by average outstanding loans excluding loans accounted for under the fair value option. At December 31, 2014, total committed non-residential...

  • Page 88
    ...commercial loan portfolio was managed in Global Banking and 23 percent in Global Markets. Outstanding loans, excluding loans accounted for under the fair value option, decreased $9.4 billion in 2014 primarily due to client financing activity including prime brokerage loans. Net charge-offs decreased...

  • Page 89
    ... they are charged off no later than the end of the month in which the loan becomes 180 days past due. For more information on TDRs, see Note 4 - Outstanding Loans and Leases to the Consolidated Financial Statements. Table 49 Commercial Troubled Debt Restructurings December 31 (Dollars in millions...

  • Page 90
    ...' primary business activity using operating cash flows and primary source of repayment as key factors. Represents net notional credit protection purchased. For additional information, see Commercial Portfolio Credit Risk Management - Risk Mitigation on page 89. 88 Bank of America 2014

  • Page 91
    ... exposure Mark-to-market Counterparty credit valuation adjustment Net mark-to-market $ $ $ December 31 2014 2013 7,720 $ 10,631 49 (6) 43 2014 $ $ 2013 (2) $ 73 97 (15) 82 Gains (losses) from credit valuation changes $ Risk Mitigation We purchase credit protection to cover the funded portion as...

  • Page 92
    ... market risk factors including changes in market spreads and non-credit related market factors that affect the value of a derivative. The exposure also takes into consideration credit mitigants such as legally enforceable master netting agreements and collateral. For additional information, see Note...

  • Page 93
    ... to any allowance for loan and lease losses. Unfunded commitments are the undrawn portion of legally binding commitments related to loans and loan equivalents. Net counterparty exposure includes the fair value of derivatives, including the counterparty risk associated with credit default swaps (CDS...

  • Page 94
    ... DoJ Settlement. For more information on the DoJ Settlement, see OffBalance Sheet Arrangements and Contractual Obligations - Servicing, Foreclosure and Other Mortgage Matters on page 50. The provision for credit losses for the commercial portfolio, including unfunded lending commitments, decreased...

  • Page 95
    ... and home equity allowance declined due to write-offs in our PCI loan portfolio. These write-offs decreased the PCI valuation allowance included as part of the allowance for loan and lease losses. The decrease in the allowance related to the U.S. credit card and unsecured consumer lending portfolios...

  • Page 96
    ...Allowance for Credit Losses (Dollars in millions) Allowance for loan and lease losses, January 1 Loans and leases charged off Residential mortgage Home equity U.S. credit card Non-U.S. credit card Direct/Indirect consumer Other consumer Total consumer charge-offs U.S. commercial (1) Commercial real...

  • Page 97
    ... and the non-U.S. credit card portfolio in All Other. For more information on the PCI loan portfolio and the valuation allowance for PCI loans, see Note 4 - Outstanding Loans and Leases and Note 5 - Allowance for Credit Losses to the Consolidated Financial Statements. For reporting purposes, we...

  • Page 98
    ... instruments used to mitigate this risk include foreign exchange options, currency swaps, futures, forwards, and foreign currency-denominated debt and deposits. Mortgage Risk Mortgage risk represents exposures to changes in the values of mortgage-related instruments. The values of these instruments...

  • Page 99
    ...securities and residential mortgage loans as part of the ALM portfolio. Fourth, we create MSRs as part of our mortgage origination activities. For more information on MSRs, see Note 1 - Summary of Significant Accounting Principles and Note 23 - Mortgage Servicing Rights to the Consolidated Financial...

  • Page 100
    ... Statement. These risk appetite limits are monitored on a daily basis and are approved at least annually by the ERC and the Board. In periods of market stress, the GM subcommittee members communicate daily to discuss losses, key risk positions and any limit excesses. As a result of this process...

  • Page 101
    ...High (1) $ 24 60 82 32 10 - 86 - 101 40 23 - 28 - 120 Low $ (1) Foreign exchange Interest rate Credit Equities Commodities Portfolio diversification Total covered positions trading portfolio Impact from less liquid exposures Total market-based trading portfolio Fair value option loans Fair value...

  • Page 102
    ... are reported to senior market risk management. Senior management regularly reviews and evaluates the results of these tests. The trading revenue used for backtesting is defined by regulatory agencies in order to most closely align with the VaR component of the regulatory capital calculation. This...

  • Page 103
    ... trading portfolio scenarios in that they have a longer time horizon and the results are forecasted over multiple periods for use in consolidated capital and liquidity planning. For additional information, see Managing Risk - Corporation-wide Stress Testing on page 55. Bank of America 2014 101

  • Page 104
    ... in alternate rate environments. In higher rate scenarios, any customer activity resulting in the replacement of low-cost or noninterest-bearing deposits with higher-yielding deposits or market-based funding would reduce the Corporation's benefit in those scenarios. 102 Bank of America 2014

  • Page 105
    ... and foreign exchange risk. We use derivatives to hedge the variability in cash flows or changes in fair value on our balance sheet due to interest rate and foreign exchange components. For more information on our hedging activities, see Note 2 - Derivatives to the Consolidated Financial Statements...

  • Page 106
    ... translation adjustments on certain non-U.S. debt issued by the Corporation that substantially offset the fair values of these derivatives. The notional amount of option products of $980 million at December 31, 2014 was comprised of $974 million in foreign exchange options, $16 million in purchased...

  • Page 107
    ... of the Corporation's compliance risk management activities. The Board provides oversight of compliance risks through its Audit Committee and ERC. Mortgage Banking Risk Management We originate, fund and service mortgage loans, which subject us to credit, liquidity and interest rate risks, among...

  • Page 108
    ... the allowance for credit losses is discussed in Note 1 - Summary of Significant Accounting Principles to the Consolidated Financial Statements. We evaluate our allowance at the portfolio segment level and our portfolio segments are Home Loans, Credit Card and Other Consumer, and Commercial. Due to...

  • Page 109
    ... initial accounting. However, subsequent decreases in the expected cash flows from the date of acquisition result in a charge to the provision for credit losses and a corresponding increase to the allowance for loan and lease losses. We subject our PCI portfolio to stress scenarios to evaluate the...

  • Page 110
    ...certain loans, MBS, ABS, CDOs, CLOs and structured liabilities, as well as highly structured, complex or long-dated derivative contracts, private equity investments and consumer MSRs. The fair value of these Level 3 financial assets and liabilities is determined using pricing models, discounted cash...

  • Page 111
    ... retains its association with a particular acquisition. All of the revenue streams and related activities of a reporting unit, whether acquired or organic, are available to support the value of the goodwill. For purposes of goodwill impairment testing, the Corporation utilizes allocated equity as...

  • Page 112
    ...in the financial markets generally and specifically in our internally developed forecasts. We estimated expected rates of equity returns based on historical market returns and risk/return rates for similar industries of each reporting unit. We use our internal forecasts to estimate future cash flows...

  • Page 113
    ... compared to 2012. The increase was primarily due to reductions in long-term debt balances, higher yields on debt securities including the impact of market-related premium amortization expense, lower rates paid on deposits, higher commercial loan balances and increased trading-related net interest...

  • Page 114
    ...improvement in the home loans and credit card portfolios. This compared to a $6.7 billion reduction in the allowance for credit losses in 2012. Net charge-offs totaled $7.9 billion, or 0.87 percent of average loans and leases for 2013 compared to $14.9 billion, or 1.67 percent for 2012. The decrease...

  • Page 115
    ...billion decrease in representations and warranties provision as 2012 included provision related to the January 2013 settlement with FNMA. The provision for credit losses improved $1.6 billion to a benefit of $156 million due to improved delinquencies, increased home prices and continued loan balance...

  • Page 116
    ...- Analysis of Changes in Net Interest Income - FTE Basis III - Preferred Stock Cash Dividend Summary IV - Outstanding Loans and Leases V - Nonperforming Loans, Leases and Foreclosed Properties VI - Accruing Loans and Leases Past Due 90 Days or More VII - Allowance for Credit Losses VIII - Allocation...

  • Page 117
    ... banks (1) Time deposits placed and other short-term investments Federal funds sold and securities borrowed or purchased under agreements to resell Trading account assets Debt securities (2) Loans and leases (3): Residential mortgage (4) Home equity U.S. credit card Non-U.S. credit card Direct...

  • Page 118
    ... central banks (2) Time deposits placed and other short-term investments Federal funds sold and securities borrowed or purchased under agreements to resell Trading account assets Debt securities Loans and leases: Residential mortgage Home equity U.S. credit card Non-U.S. credit card Direct/Indirect...

  • Page 119
    .... Initially pays dividends semi-annually. Dividends per depositary share, each representing a 1/25th interest in a share of preferred stock. For information on the amendment of the Series T Preferred Stock, see Note 13 - Shareholders' Equity to the Consolidated Financial Statements. Bank of America...

  • Page 120
    ... Stock Cash Dividend Summary (1) (continued) December 31, 2014 Outstanding Notional Amount (in millions) $ 98 Preferred Stock Series 1 (7) Declaration Date January 9, 2015 October 9, 2014 July 9, 2014 April 2, 2014 January 13, 2014 January 9, 2015 October 9, 2014 July 9, 2014 April 2, 2014 January...

  • Page 121
    ... mortgage (1) Home equity U.S. credit card Non-U.S. credit card Direct/Indirect consumer (2) Other consumer (3) Total consumer loans excluding loans accounted for under the fair value option Consumer loans accounted for under the fair value option (4) Total consumer Commercial U.S. commercial...

  • Page 122
    ... mortgage Home equity Direct/Indirect consumer Other consumer Total consumer (2) Commercial U.S. commercial Commercial real estate Commercial lease financing Non-U.S. commercial U.S. small business commercial Total commercial (3) Total nonperforming loans and leases Foreclosed properties Total...

  • Page 123
    ...commercial Total commercial Total accruing loans and leases past due 90 days or more (3) (1) $ $ $ $ $ (2) (3) Our policy is to classify consumer real estate-secured loans as nonperforming at 90 days past due, except the PCI loan portfolio, the fully-insured loan portfolio and loans accounted...

  • Page 124
    ... for Credit Losses (Dollars in millions) Allowance for loan and lease losses, January 1 (1) Loans and leases charged off Residential mortgage Home equity U.S. credit card Non-U.S. credit card Direct/Indirect consumer Other consumer Total consumer charge-offs U.S. commercial (2) Commercial real...

  • Page 125
    ... PCI loans and the non-U.S. credit portfolio in All Other. For more information on the PCI loan portfolio and the valuation allowance for PCI loans, see Note 4 - Outstanding Loans and Leases and Note 5 - Allowance for Credit Losses to the Consolidated Financial Statements. Bank of America 2014 123

  • Page 126
    ... mortgage Home equity U.S. credit card Non-U.S. credit card Direct/Indirect consumer Other consumer Total consumer U.S. commercial (1) Commercial real estate Commercial lease financing Non-U.S. commercial Total commercial (2) Allowance for loan and lease losses (3) Reserve for unfunded lending...

  • Page 127
    ...rates Total (1) (2) (3) $ $ $ $ $ $ $ $ Loan maturities are based on the remaining maturities under contractual terms. Includes loans accounted for under the fair value option. Loan maturities include non-U.S. commercial and commercial real estate loans. Table X Non-exchange Traded Commodity...

  • Page 128
    ... and first quarters of 2014 because of the net loss applicable to common shareholders. Calculated as total net income (loss) for four consecutive quarters divided by annualized average assets for four consecutive quarters. (3) Tangible equity ratios and tangible book value per share of common stock...

  • Page 129
    ... millions) Average balance sheet Total loans and leases Total assets Total deposits Long-term debt Common shareholders' equity Total shareholders' equity Asset quality (4) Allowance for credit losses (5) Nonperforming loans, leases and foreclosed properties (6) Allowance for loan and lease losses as...

  • Page 130
    ... banks (1) Time deposits placed and other short-term investments Federal funds sold and securities borrowed or purchased under agreements to resell Trading account assets Debt securities (2) Loans and leases (3): Residential mortgage (4) Home equity U.S. credit card Non-U.S. credit card Direct...

  • Page 131
    ... banks (1) Time deposits placed and other short-term investments Federal funds sold and securities borrowed or purchased under agreements to resell Trading account assets Debt securities (2) Loans and leases (3): Residential mortgage (4) Home equity U.S. credit card Non-U.S. credit card Direct...

  • Page 132
    ... comparative purposes. For more information on these performance measures and ratios, see Supplemental Financial Data on page 29 and for corresponding reconciliations to GAAP financial measures, see Statistical Table XVII. Beginning in 2014, interest-bearing deposits placed with the Federal Reserve...

  • Page 133
    ... in assessing the results of the Corporation. Other companies may define or calculate these measures differently. For more information on non-GAAP financial measures and ratios we use in assessing the results of the Corporation, see Supplemental Financial Data on page 29. Bank of America 2014 131

  • Page 134
    .... For more information on non-GAAP financial measures and ratios we use in assessing the results of the Corporation, see Supplemental Financial Data on page 29. There are no adjustments to reported net income (loss) or average allocated equity for CRES. Represents cost of funds, earnings credits and...

  • Page 135
    ... in assessing the results of the Corporation. Other companies may define or calculate these measures differently. For more information on non-GAAP financial measures and ratios we use in assessing the results of the Corporation, see Supplemental Financial Data on page 29. Bank of America 2014 133

  • Page 136
    ... the property securing the loan. An additional metric related to LTV is combined loan-to-value (CLTV) which is similar to the LTV metric, yet combines the outstanding balance on the residential mortgage loan and the outstanding carrying value on the home equity loan or available line of credit, both...

  • Page 137
    ... loans secured by real estate that are insured by the FHA or through long-term credit protection agreements with FNMA and FHLMC (fully-insured loan portfolio) are not placed on nonaccrual status and are, therefore, not reported as nonperforming loans and leases. Purchased Credit-impaired (PCI) Loan...

  • Page 138
    ...Loss-given default Loans held-for-sale London InterBank Offered Rate Loan-to-value Management's Discussion and Analysis of Financial Condition and Results of Operations Mortgage insurance Management Risk Committee Metropolitan statistical area Mortgage servicing right Net Stable Funding Ratio Office...

  • Page 139
    ... Consolidated Balance Sheet Consolidated Statement of Changes in Shareholders' Equity Consolidated Statement of Cash Flows Note 1 - Summary of Significant Accounting Principles Note 2 - Derivatives Note 3 - Securities Note 4 - Outstanding Loans and Leases Note 5 - Allowance for Credit Losses Note...

  • Page 140
    ... report which expresses an unqualified opinion on the effectiveness of the Corporation's internal control over financial reporting as of December 31, 2014. Brian T. Moynihan Chairman, Chief Executive Officer and President Bruce R. Thompson Chief Financial Officer 138 Bank of America 2014

  • Page 141
    ... Balance Sheet and the related Consolidated Statement of Income, Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Shareholders' Equity and Consolidated Statement of Cash Flows present fairly, in all material respects, the financial position of Bank of America...

  • Page 142
    ... expense Deposits Short-term borrowings Trading account liabilities Long-term debt Total interest expense Net interest income Noninterest income Card income Service charges Investment and brokerage services Investment banking income Equity investment income Trading account profits Mortgage banking...

  • Page 143
    ...America Corporation and Subsidiaries Consolidated Statement of Comprehensive Income (Dollars in millions) Net income Other comprehensive income (loss), net-of-tax: Net change in available-for-sale debt and marketable equity securities Net change in derivatives Employee benefit plan adjustments Net...

  • Page 144
    ... Reserve and non-U.S. central banks Cash and cash equivalents Time deposits placed and other short-term investments Federal funds sold and securities borrowed or purchased under agreements to resell (includes $62,182 and $68,656 measured at fair value) Trading account assets (includes $110,923...

  • Page 145
    ... at fair value) Deposits in non-U.S. offices: Noninterest-bearing Interest-bearing Total deposits Federal funds purchased and securities loaned or sold under agreements to repurchase (includes $35,357 and $26,500 measured at fair value) Trading account liabilities Derivative liabilities Short-term...

  • Page 146
    ... exchanges of preferred stock and trust preferred securities Common stock issued under employee plans and related tax effects Balance, December 31, 2012 Net income Net change in available-for-sale debt and marketable equity securities Net change in derivatives Employee benefit plan adjustments Net...

  • Page 147
    ... activities, net Net cash provided by (used in) operating activities Investing activities Net change in: Time deposits placed and other short-term investments Federal funds sold and securities borrowed or purchased under agreements to resell Debt securities carried at fair value: Proceeds from sales...

  • Page 148
    ... testing and the Corporation's proportionate share of income or loss is included in equity investment income. The preparation of the Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates...

  • Page 149
    ... these market prices are not available, fair values are estimated based on dealer quotes, pricing models, discounted cash flow methodologies, or similar techniques where the determination of fair value may require significant management judgment or estimation. Realized gains and losses are recorded...

  • Page 150
    ... financial instrument), index, currency or commodity at a predetermined rate or price during a period or at a date in the future. Option agreements can be transacted on organized exchanges or directly between parties. All derivatives are recorded on the Consolidated Balance Sheet at fair value...

  • Page 151
    ... Consolidated Balance Sheet as of their trade date. Debt securities bought principally with the intent to buy and sell in the short term as part of the Corporation's trading activities are reported at fair value in trading account assets with unrealized gains and losses included in trading account...

  • Page 152
    ... for assessing risk. The Corporation's three portfolio segments are Home Loans, Credit Card and Other Consumer, and Commercial. The classes within the Home Loans portfolio segment are core portfolio residential mortgage, Legacy Assets & Servicing residential mortgage, core portfolio home equity and...

  • Page 153
    ... is reported on the Consolidated Balance Sheet in accrued expenses and other liabilities. The provision for credit losses related to the loan and lease portfolio and unfunded lending commitments is reported in the Consolidated Statement of Income. Nonperforming Loans and Leases, Charge-offs...

  • Page 154
    ... over the remaining life of the loan. In addition, reported net charge-offs exclude write-offs on PCI loans as the fair value already considers the estimated credit losses. Troubled Debt Restructurings Consumer loans and commercial loans and leases whose contractual terms have been restructured...

  • Page 155
    ... at fair value with changes in fair value recognized in mortgage banking income. The Corporation estimates the fair value of consumer MSRs using a valuation model that calculates the present value of estimated future net servicing income and, when available, quoted prices from independent parties...

  • Page 156
    ... prices in active or inactive markets. Generally, quoted market prices for retained residual interests are not available; therefore, the Corporation estimates fair values based on the present value of the associated expected future cash flows. This may require management to estimate credit losses...

  • Page 157
    ...life insurance benefit plans. Accumulated Other Comprehensive Income The Corporation records unrealized gains and losses on AFS debt and marketable equity securities, gains and losses on cash flow accounting hedges, certain employee benefit plan adjustments, foreign currency translation adjustments...

  • Page 158
    ... The following summarizes the Corporation's revenue recognition policies as they relate to certain noninterest income line items in the Consolidated Statement of Income. Card income is derived from fees such as interchange, cash advance, annual, late, over-limit and other miscellaneous fees...

  • Page 159
    ... to as other risk management derivatives. For more information on the Corporation's derivatives and hedging activities, see Note 1 - Summary of Significant Accounting Principles. The following tables present derivative instruments included on the Consolidated Balance Sheet in derivative assets and...

  • Page 160
    ... derivative assets and liabilities in the table to derive net derivative assets and liabilities. For more information on offsetting of securities financing agreements, see Note 10 - Federal Funds Sold or Purchased, Securities Financing Agreements and Short-term Borrowings. 158 Bank of America 2014

  • Page 161
    ... price risk management services to customers or to manage price risk associated with its physical and financial commodity positions. The non-derivative commodity contracts and physical inventories of commodities expose the Corporation to earnings volatility. Cash flow and fair value accounting...

  • Page 162
    ... 2012 Hedge Ineffectiveness $ (791) (92) (32) 6 (909) Interest rate risk on long-term debt (1) Interest rate and foreign currency risk on long-term debt (1) Interest rate risk on available-for-sale securities (2) Price risk on commodity inventory (3) Total $ $ $ Interest rate risk on long-term...

  • Page 163
    ... Derivatives $ $ $ 68 127 195 3,021 Gains (Losses) in Income Reclassified from Accumulated OCI $ $ $ 2013 Cash flow hedges Interest rate risk on variable-rate portfolios Price risk on restricted stock awards Total Net investment hedges Foreign exchange risk $ $ $ (321) 477 156 1,024 $ $ $ 2012 Cash...

  • Page 164
    ...change in the impact of interest rate and foreign currency risk on ALM activities was primarily driven by decreasing interest rates and foreign currency weakening against the U.S. Dollar throughout 2014 compared to strengthening during 2013. Other Risk Management Derivatives Gains (Losses) (Dollars...

  • Page 165
    ...statement line items attributable to the Corporation's sales and trading revenue in Global Markets, categorized by primary risk, for 2014, 2013 and 2012. The difference between total trading account profits in the table below and in the Consolidated Statement of Income represents trading activities...

  • Page 166
    ... grade includes non-rated credit derivative instruments. The Corporation discloses internal categorizations of investment grade and non-investment grade consistent with how risk is managed for these instruments. Credit Derivative Instruments December 31, 2014 Carrying Value (Dollars in millions...

  • Page 167
    ... loan obligation (CLO) and credit-linked note vehicles. These instruments are primarily classified as trading securities. The carrying value of these instruments equals the Corporation's maximum exposure to loss. The Corporation is not obligated to make any payments to the entities under the terms...

  • Page 168
    ...a funding benefit of $135 million related to derivative liability exposures. The net FVA charge was recorded as a reduction to sales and trading revenue in Global Markets. The Corporation calculated this valuation adjustment based on modeled expected exposure profiles discounted for the funding risk...

  • Page 169
    ...securities Total available-for-sale debt securities Other debt securities carried at fair value Total debt securities carried at fair value Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities Total debt securities Available-for-sale marketable equity securities...

  • Page 170
    ... to realized net gains on sales of AFS debt securities 2014 $ 1,366 (12) $ 1,354 $ 515 2013 2012 $ 1,302 $ 2,128 (31) (466) $ 1,271 $ 1,662 $ 470 $ 615 Other Debt Securities Carried at Fair Value (Dollars in millions) U.S. Treasury and agency securities Mortgage-backed securities: Agency Agency...

  • Page 171
    ... available-for-sale debt securities U.S. Treasury and agency securities Mortgage-backed securities: Agency Agency-collateralized mortgage obligations Non-agency residential Commercial Non-U.S. securities Corporate/Agency bonds Other taxable securities, substantially all asset-backed securities Total...

  • Page 172
    ... for AFS debt securities matured, sold or intended to be sold Balance, December 31 $ 2014 184 14 2 - 200 $ $ 2013 2012 243 $ 310 6 7 14 46 (79) (120) $ 184 $ 243 The Corporation estimates the portion of a loss on a security that is attributable to credit using a discounted cash flow model and...

  • Page 173
    ... a pretax gain of $753 million in All Other reported in equity investment income in the Consolidated Statement of Income. The strategic assistance agreement between the Corporation and CCB, which includes cooperation in specific business areas, extends through 2016. Bank of America 2014 171

  • Page 174
    NOTE 4 Outstanding Loans and Leases The following tables present total outstanding loans and leases and an aging analysis for the Corporation's Home Loans, Credit Card and Other Consumer, and Commercial portfolio segments, by class of financing receivables, at December 31, 2014 and 2013. December 31...

  • Page 175
    ... Past Due (2) Purchased Creditimpaired (4) Total Outstandings Home loans Core portfolio Residential mortgage Home equity Legacy Assets & Servicing portfolio Residential mortgage (5) Home equity Credit card and other consumer U.S. credit card Non-U.S. credit card Direct/Indirect consumer (6) Other...

  • Page 176
    ... 2014 2013 Home loans Core portfolio Residential mortgage (2) Home equity Legacy Assets & Servicing portfolio Residential mortgage (2) Home equity Credit card and other consumer U.S. credit card Non-U.S. credit card Direct/Indirect consumer Other consumer Total consumer Commercial U.S. commercial...

  • Page 177
    ...billion of loans accounted for under the fair value option. U.S. small business commercial includes $762 million of criticized business card and small business loans which are evaluated using refreshed FICO scores or internal credit metrics, including delinquency status, rather than risk ratings. At...

  • Page 178
    ...billion of loans accounted for under the fair value option. U.S. small business commercial includes $289 million of criticized business card and small business loans which are evaluated using refreshed FICO scores or internal credit metrics, including delinquency status, rather than risk ratings. At...

  • Page 179
    ... as charge-offs. Fully-insured loans are protected against principal loss, and therefore, the Corporation does not record an allowance for loan and lease losses on the outstanding principal balance, even after they have been modified in a TDR. The net present value of the estimated cash flows...

  • Page 180
    ... balance, carrying value and related allowance at December 31, 2014 and 2013, and the average carrying value and interest income recognized for 2014, 2013 and 2012 for impaired loans in the Corporation's Home Loans portfolio segment and includes primarily loans managed by Legacy Assets & Servicing...

  • Page 181
    ...completed modifications, which exclude loans that are in a trial modification period. Net charge-offs include amounts recorded on loans modified during the period that are no longer held by the Corporation at December 31, 2014, 2013 and 2012 due to sales and other dispositions. Bank of America 2014...

  • Page 182
    ... TDR during 2014, 2013 and 2012, by type of modification. Home Loans - Modification Programs TDRs Entered into During 2014 (Dollars in millions) Residential Mortgage $ 643 16 98 757 244 71 66 40 421 3,421 521 5,120 $ Home Equity 56 18 1 75 22 2 75 47 146 182 189 592 Total Carrying Value $ 699 34...

  • Page 183
    .... In all cases, the customer's available line of credit is canceled. The Corporation makes loan modifications directly with borrowers for debt held only by the Corporation (internal programs). Additionally, the Corporation makes loan modifications for borrowers working with third-party renegotiation...

  • Page 184
    ...loans for which the principal is considered collectible. The table below provides information on the Corporation's primary modification programs for the renegotiated TDR portfolio at December 31, 2014 and 2013. Credit Card and Other Consumer - Renegotiated TDRs by Program Type December 31 Internal...

  • Page 185
    ...below provides information on the Corporation's renegotiated TDR portfolio including the December 31, 2014, 2013 and 2012 unpaid principal balance, carrying value and average pre- and post-modification interest rates of loans that were modified in TDRs during 2014, 2013 and 2012, and net charge-offs...

  • Page 186
    ... no charge-off is required at the time of modification. For more information on modifications for the U.S. small business commercial portfolio, see Credit Card and Other Consumer in this Note. At December 31, 2014 and 2013, remaining commitments to lend additional funds to debtors whose terms have...

  • Page 187
    ... for 2014, 2013 and 2012 for impaired loans in the Corporation's Commercial loan portfolio segment. Certain impaired commercial loans do not have a related allowance as the valuation of these impaired loans exceeded the carrying value, which is net of previously recorded charge-offs. Impaired Loans...

  • Page 188
    ... related allowance of $317 million. For more information on PCI loans, see Note 1 - Summary of Significant Accounting Principles, and for the carrying value and valuation allowance for PCI loans, see Note 5 - Allowance for Credit Losses. Loans Held-for-sale Purchased Credit-impaired Loans PCI loans...

  • Page 189
    ... and deconsolidations, and foreign currency translation adjustments. In 2014, 2013 and 2012, for the PCI loan portfolio, the Corporation recorded a benefit of $31 million, $707 million and $103 million, respectively in the provision for credit losses with a corresponding decrease in the valuation...

  • Page 190
    ... are presented gross of the allowance for loan and lease losses. (4) Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option of $8.7 billion and $10.0 billion at December 31, 2014 and 2013. n/a = not applicable (2) 188 Bank of America 2014

  • Page 191
    ... Note 11 - Long-term Debt. The Corporation also uses VIEs in the form of synthetic securitization vehicles to mitigate a portion of the credit risk on its residential mortgage loan portfolio, as described in Note 4 - Outstanding Loans and Leases. The Corporation uses VIEs, such as cash funds managed...

  • Page 192
    ...Trading account assets Debt securities carried at fair value Held-to-maturity securities Residual interests held All other assets (3) Total retained positions Principal balance outstanding (4) Consolidated VIEs Maximum loss exposure (1) On-balance sheet assets Trading account assets Loans and leases...

  • Page 193
    ... available credit on the home equity lines, which totaled $39 million and $82 million at December 31, 2014 and 2013, as well as performance of the loans, the amount of subsequent draws and the timing of related cash flows. During 2013, the Corporation transferred servicing for consolidated home...

  • Page 194
    ...11,822 62 11,884 Consolidated VIEs Maximum loss exposure On-balance sheet assets Derivative assets Loans and leases (1) Allowance for loan and lease losses Loans held-for-sale All other assets (2) Total On-balance sheet liabilities Long-term debt All other liabilities Total (1) (2) 43,139 1 53,068...

  • Page 195
    ... Debt securities carried at fair value Residual interests held (3) All other assets Total retained positions Total assets of VIEs (4) Consolidated VIEs Maximum loss exposure On-balance sheet assets Trading account assets Loans and leases Loans held-for-sale All other assets Total assets On-balance...

  • Page 196
    ...-balance sheet assets Trading account assets Derivative assets Debt securities carried at fair value Loans and leases Allowance for loan and lease losses Loans held-for-sale All other assets Total On-balance sheet liabilities Short-term borrowings Long-term debt (1) All other liabilities Total Total...

  • Page 197
    ...the securities issued, by the monoline insurer or other financial guarantor, where the contract so provides. In the case of private-label securitizations, the applicable agreements may permit investors, Bank of America 2014 195 Leveraged Lease Trusts The Corporation's net investment in consolidated...

  • Page 198
    ... Corporation paid FHLMC a total of $391 million to resolve all outstanding and potential mortgage repurchase and make-whole claims arising out of any alleged breach of selling representations and warranties related to loans that had been sold directly to FHLMC by entities related to Bank of America...

  • Page 199
    ... financial statements. Syncora Settlement On July 17, 2012, the Corporation entered into a settlement with a monoline insurer, Syncora Guarantee Inc. and Syncora Holdings, Ltd. (Syncora), to resolve all of Syncora's outstanding and potential claims related to alleged representations and warranties...

  • Page 200
    ... claims related to private-label investors submitted without individual loan file reviews. Unresolved Repurchase Claims Unresolved representations and warranties repurchase claims represent the notional amount of repurchase claims made by counterparties, typically the outstanding principal balance...

  • Page 201
    ... monoline insurer. There may be additional claims or file requests in the future. As a result of various settlements with the GSEs, the Corporation has resolved substantially all outstanding and potential representations and warranties repurchase claims on whole loans sold by legacy Bank of America...

  • Page 202
    ... make-whole claims relating to the origination, sale and delivery of residential mortgage loans that were sold directly to FNMA through June 30, 2012 and to FHLMC through December 31, 2009, subject to certain exclusions, which the Corporation does not expect will be material. 200 Bank of America...

  • Page 203
    ... with these transactions. The Corporation's estimated range of possible loss related to representations and warranties exposures as of December 31, 2014 included possible losses related to these whole-loan sales and private-label securitizations. The majority of the repurchase claims that the...

  • Page 204
    ... residential mortgages primarily involved the GSEs while repurchases or indemnification payments related to home equity loans primarily involved the monoline insurers. Loan Repurchases and Indemnification Payments (excluding cash payments for settlements) December 31 2014 Unpaid Principal Balance...

  • Page 205
    ... was no goodwill in Consumer Real Estate Services at December 31, 2014 and 2013. Annual Impairment Tests During the three months ended September 30, 2014 and 2013, the Corporation completed its annual goodwill impairment test as of June 30 for all applicable reporting units. Based on the results of...

  • Page 206
    ... 2016 299 105 325 9 738 $ 2017 239 91 310 6 646 $ 2018 180 80 302 3 565 $ 2019 121 7 286 1 415 Purchased credit card and Affinity relationships Core deposit intangibles Customer relationships Other intangibles Total estimated future amortization expense $ $ $ $ $ 204 Bank of America 2014

  • Page 207
    ... Time Deposits (Dollars in millions) Due in 2015 Due in 2016 Due in 2017 Due in 2018 Due in 2019 Thereafter Total time deposits $ $ U.S. 61,439 4,119 1,532 775 830 1,734 70,429 Non-U.S. 14,165 176 38 - 35 - $ 14,414 $ $ $ Total 75,604 4,295 1,570 775 865 1,734 84,843 Bank of America 2014...

  • Page 208
    ... not applicable Bank of America, N.A. maintains a global program to offer up to a maximum of $75 billion outstanding at any one time, of bank notes with fixed or floating rates and maturities of at least seven days from the date of issue. Short-term bank notes outstanding under this program totaled...

  • Page 209
    The column titled "Financial Instruments" in the table includes securities collateral received or pledged under repurchase or securities lending agreements where there is a legally enforceable master netting agreement. These amounts are not offset on the Consolidated Balance Sheet, but are shown as ...

  • Page 210
    ... October 1, 2014, FIA Card Services, N.A. was merged into Bank of America, N.A. Bank of America Corporation and Bank of America, N.A. maintain various U.S. and non-U.S. debt programs to offer both senior and subordinated notes. The notes may be denominated in U.S. Dollars or foreign currencies. At...

  • Page 211
    ...America Corporation, $16.0 billion for Bank of America, N.A. and $10.3 billion of other debt. In 2013, in a combination of tender offers, calls and open-market transactions, the Corporation purchased senior and subordinated long-term debt with a carrying value of $9.2 billion and recorded net losses...

  • Page 212
    ... details the outstanding Trust Securities and the related Notes previously issued which remained outstanding at December 31, 2014. For more information on Trust Securities for regulatory capital purposes, see Note 16 - Regulatory Requirements and Restrictions. Trust Securities Summary (Dollars in...

  • Page 213
    ... the same credit and market risk limitation reviews as those instruments recorded on the Consolidated Balance Sheet. Credit Extension Commitments The Corporation enters into commitments to extend credit such as loan commitments, standby letters of credit (SBLCs) and commercial letters of credit to...

  • Page 214
    ...de minimis. The Corporation has assessed the probability of making such payments in the future as remote. Merchant Services In accordance with credit and debit card association rules, the Corporation sponsors merchant processing servicers that process credit and debit card transactions on behalf of...

  • Page 215
    ... agreements and other transactions. Payment Protection Insurance Claims Matter In the U.K., the Corporation previously sold payment protection insurance (PPI) through its international card services business to credit card customers and consumer loan customers. PPI covers a consumer's loan or debt...

  • Page 216
    ..., claiming fraudulent inducement against Countrywide and successor and vicarious liability against the Corporation relating to eight partially Ambacinsured RMBS transactions that closed between 2005 and 2007, all backed by negative amortization pay option adjustable-rate mortgage (ARM) loans that...

  • Page 217
    ... that it had addressed a Statement of Objections (SO) to the Corporation, BANA and Banc of America Securities LLC (together, the Bank of America Entities), a number of other financial institutions, Markit Group Limited, and the International Swaps and Derivatives Association (together, the Parties...

  • Page 218
    ...30, 2014, a substantively similar class action was filed against the Corporation and other FX market participants on behalf of a plaintiff and putative class allegedly located in Norway (the Foreign Action). The complaints allege that class members transacted with defendants at or around the time of...

  • Page 219
    ... Home Loan Bank of San Francisco (FHLB San Francisco) filed an action in California Superior Court, San Francisco County, entitled Federal Home Loan Bank of San Francisco v. Credit Suisse Securities (USA) LLC, et al. FHLB San Francisco's complaint asserts certain MBS Claims against BAS, Countrywide...

  • Page 220
    ...' discovery, during origination and servicing, of loans with material breaches of representations and warranties. Ocala Investor Litigation On November 25, 2009, BNP Paribas Mortgage Corporation (BNP) and Deutsche Bank AG each filed claims (the 2009 Actions) against BANA in the U.S. District...

  • Page 221
    ... 2009 offering. The amended complaint asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Sections 11 and 15 of the Securities Act of 1933, and alleged that the Corporation's public statements: (i) concealed problems in the Corporation's mortgage servicing...

  • Page 222
    .... In 2012, in connection with the exchanges described in Preferred Stock in this Note, the Corporation issued 50 million shares of its common stock. At December 31, 2014, the Corporation had warrants outstanding and exercisable to purchase 121.8 million shares of common stock at an exercise price of...

  • Page 223
    ... declared, thereafter. (7) Ownership is held in the form of depositary shares, each representing a 1/1,200th interest in a share of preferred stock, paying a quarterly cash dividend, if and when declared. (8) Subject to 3.00% minimum rate per annum. n/a = not applicable Bank of America 2014 221

  • Page 224
    .... The Corporation may cause some or all of the Series L Preferred Stock, at its option, at any time or from time to time, to be converted into shares of common stock at the then-applicable conversion rate if, for 20 trading days during any period of 30 consecutive trading days, the closing price of...

  • Page 225
    ... change Available-for-sale marketable equity securities: Net increase in fair value Net realized gains reclassified into earnings Net change Derivatives: Net increase in fair value Net realized losses reclassified into earnings Net change Employee benefit plans: Net increase (decrease) in fair value...

  • Page 226
    ... income taxes Income tax expense (benefit) Reclassification to net income $ Employee benefit plans: Prior service cost Transition obligation Net actuarial losses Settlements and curtailments Foreign currency: Insignificant items Total reclassification adjustments $ $ 224 Bank of America 2014

  • Page 227
    ... of EPS, see Note 1 - Summary of Significant Accounting Principles. (Dollars in millions, except per share information; shares in thousands) 2014 $ 4,833 (1,044) 3,789 - $ 3,789 10,527,818 0.36 $ $ 2013 2012 Earnings per common share Net income Preferred stock dividends Net income applicable to...

  • Page 228
    ... Deposit Insurance Corporation (collectively, joint agencies) establish regulatory capital guidelines for U.S. banking organizations. Regulatory capital guidelines require that capital be measured in relation to the credit and market risks of both on- and off-balance sheet items using various risk...

  • Page 229
    ...gains and losses on AFS debt and certain marketable equity securities recorded in accumulated OCI. These changes will be impacted by, among other things, future changes in interest rates, overall earnings performance and corporate actions. Changes to the composition of regulatory capital under Basel...

  • Page 230
    ... participant balances transferred and certain compensation credits. The Corporation is responsible for funding any shortfall on the guarantee feature. As a result of acquisitions, the Corporation assumed the obligations related to the pension plans of certain legacy companies. The benefit structures...

  • Page 231
    ... 4.85% n/a Change in fair value of plan assets Fair value, January 1 Actual return on plan assets Company contributions Plan participant contributions Settlements and curtailments Benefits paid Federal subsidy on benefits paid Foreign currency exchange rate changes Fair value, December 31 Change in...

  • Page 232
    ... benefit cost (income) Weighted-average assumptions used to determine net cost for years ended December 31 Discount rate Expected return on plan assets Rate of compensation increase $ $ $ Nonqualified and Other Pension Plans (Dollars in millions) Postretirement Health and Life Plans 2012 2014...

  • Page 233
    ...166 Non-U.S. Pension Plans $ $ 6 1 7 Nonqualified and Other Pension Plans $ $ 34 - 34 Postretirement Health and Life Plans $ $ (34) 4 (30) $ $ (Dollars in millions) Total 172 5 177 Net actuarial loss (gain) Prior service cost Total amounts amortized from accumulated OCI Bank of America 2014 231

  • Page 234
    ...profile of the assets. Asset allocation ranges are established, periodically reviewed and adjusted as funding levels and liability characteristics change. Active and passive investment managers are employed to help enhance the risk/return profile of the assets. An additional aspect of the investment...

  • Page 235
    ... (1) Total plan investment assets, at fair value $ $ $ $ December 31, 2013 Cash and short-term investments Money market and interest-bearing cash Cash and cash equivalent commingled/mutual funds Fixed income U.S. government and government agency securities Corporate debt securities Asset...

  • Page 236
    ... (Level 3) during 2014, 2013 and 2012. Level 3 Fair Value Measurements 2014 Actual Return on Plan Assets Still Held at the Reporting Date 12 6 119 462 145 135 879 $ - - 5 20 5 1 31 $ (Dollars in millions) Balance January 1 $ Purchases - - 5 150 3 1 159 $ Sales and Settlements (1) (2) (2) - (88...

  • Page 237
    ... used to hedge the price risk of cash-settled awards with changes in fair value recorded in personnel expense. For information on amounts recognized on equity total return swaps used to hedge the Corporation's outstanding RSUs, see Note 2 - Derivatives. Other Stock Plans The Corporation assumed the...

  • Page 238
    ... 2014. Stock Options Weightedaverage Exercise Price $ 48.23 46.32 48.96 48.96 Total income tax expense (benefit) does not reflect the deferred tax effects of unrealized gains and losses on AFS debt and marketable equity securities, foreign currency translation adjustments, derivatives and employee...

  • Page 239
    ... and 2012 are presented in the table below. Reconciliation of Income Tax Expense (Benefit) (Dollars in millions) Expected U.S. federal income tax expense Increase (decrease) in taxes resulting from: State tax expense, net of federal benefit Affordable housing credits/other credits Changes in prior...

  • Page 240
    ... assets Net operating loss carryforwards Accrued expenses Tax credit carryforwards Security, loan and debt valuations Allowance for credit losses Employee compensation and retirement benefits State income taxes Available-for-sale securities Other Gross deferred tax assets Valuation allowance Total...

  • Page 241
    ... quotes may not be readily available for some positions, or positions within a market sector where trading activity has slowed significantly or ceased. Some of these instruments are valued using a discounted cash flow model, which estimates the fair value of the securities using internal credit risk...

  • Page 242
    ...more information on MSRs, see Note 23 - Mortgage Servicing Rights. Loans Held-for-sale The fair values of LHFS are based on quoted market prices, where available, or are determined by discounting estimated cash flows using interest rates approximating the Corporation's current origination rates for...

  • Page 243
    ... Total other debt securities carried at fair value Loans and leases Mortgage servicing rights Loans held-for-sale Other assets Total assets (4) Liabilities Interest-bearing deposits in U.S. offices Federal funds purchased and securities loaned or sold under agreements to repurchase Trading account...

  • Page 244
    ... Commercial Non-U.S. securities Total other debt securities carried at fair value Loans and leases Mortgage servicing rights Loans held-for-sale Other assets Total assets (4) Liabilities Interest-bearing deposits in U.S. offices Federal funds purchased and securities loaned or sold under agreements...

  • Page 245
    ... 3 Balance December 31 2014 (Dollars in millions) Purchases Sales Issuances Settlements Trading account assets: U.S. government and agency securities Corporate securities, trading loans and other Equity securities Non-U.S. sovereign debt Mortgage trading loans and ABS Total trading account...

  • Page 246
    ... Equity securities Non-U.S. sovereign debt Mortgage trading loans and ABS Total trading account assets Net derivative assets (2) AFS debt securities: Commercial MBS Non-U.S. securities Corporate/Agency bonds Other taxable securities Tax-exempt securities Total AFS debt securities Loans and leases...

  • Page 247
    ... primarily related to decreased price observability for certain long-dated equity derivative liabilities due to a lack of independent pricing. Transfers into Level 3 for loans and leases were due to updated information related to certain commercial loans. Transfers into Level 3 for long-term debt...

  • Page 248
    ... leases (3) Mortgage servicing rights Loans held-for-sale (3) Other assets Trading account liabilities - Corporate securities and other Accrued expenses and other liabilities (3) Long-term debt (3) Total $ $ $ $ 2013 Trading account assets: Corporate securities, trading loans and other Equity...

  • Page 249
    ...loans and other Equity securities Non-U.S. sovereign debt Mortgage trading loans and ABS Total trading account assets Net derivative assets AFS debt securities: Non-agency residential MBS Corporate/Agency bonds Other taxable securities Tax-exempt securities Total AFS debt securities Loans and leases...

  • Page 250
    ...-term debt (3) Total $ $ $ $ 2013 Trading account assets: Corporate securities, trading loans and other Equity securities Non-U.S. sovereign debt Mortgage trading loans and ABS Total trading account assets Net derivative assets Loans and leases (3) Mortgage servicing rights Loans held-for-sale...

  • Page 251
    ...-term debt $ (2,362) Industry standard derivative pricing (2, 3) Net derivative assets Credit derivatives $ 22 Yield Upfront points Discounted cash flow, Stochastic recovery correlation model Spread to index Credit correlation Prepayment speed Default rate Loss severity Equity derivatives Commodity...

  • Page 252
    ...-term debt $ (1,990) Industry standard derivative pricing (2, 3) Net derivative assets Credit derivatives $ 808 Yield Upfront points Discounted cash flow, Stochastic recovery correlation model Spread to index Credit correlation Prepayment speed Default rate Loss severity Equity derivatives Commodity...

  • Page 253
    ..., whole loans and mortgage CDOs. Commercial loans, debt securities and other include corporate CLOs and CDOs, commercial loans and bonds, and securities backed by non-real estate assets. Structured liabilities primarily include equity-linked notes that are accounted for under the fair value option...

  • Page 254
    ...include LHFS, certain loans and leases, and foreclosed properties. The amounts below represent only balances measured at fair value during 2014, 2013 and 2012, and still held as of the reporting date. Assets Measured at Fair Value on a Nonrecurring Basis December 31 2014 (Dollars in millions) 2013...

  • Page 255
    ... of these loans was attributable to changes in borrower-specific credit risk in 2012. The Corporation elects to account for certain long-term debt, primarily structured liabilities, under the fair value option. This longterm debt is either risk-managed on a fair value basis or the related hedges do...

  • Page 256
    ... and commercial loans Loans held-for-sale Securities financing agreements Other assets Long-term deposits Unfunded loan commitments Short-term borrowings Long-term debt (2) (1) A significant portion of the loans reported as trading account assets are distressed loans which trade and were purchased...

  • Page 257
    ...(Loss) - - 69 83 - (26) (64) - 407 469 $ (Dollars in millions) Total (87) 1,091 45 825 (110) (3) (64) 52 646 2,395 Loans reported as trading account assets Trading inventory other (1) Consumer and commercial loans Loans held-for-sale (2) Securities financing agreements Long-term deposits Unfunded...

  • Page 258
    ...value of loans is presented net of the applicable allowance for loan losses and excludes leases. The Corporation accounts for certain commercial loans and residential mortgage loans under the fair value option. Financial assets Loans Loans held-for-sale Financial liabilities Deposits Long-term debt...

  • Page 259
    NOTE 23 Mortgage Servicing Rights The Corporation accounts for consumer MSRs at fair value with changes in fair value recorded in mortgage banking income in the Consolidated Statement of Income. The Corporation manages the risk in these MSRs with securities including MBS and U.S. Treasury securities...

  • Page 260
    ... 4,800 banking centers, 15,800 ATMs, nationwide call centers, and online and mobile platforms. CBB also offers a wide range of lendingrelated products and services, integrated working capital management and treasury solutions to clients through a network of offices and client relationship teams...

  • Page 261
    ... of the ALM activities. ALM activities include external product pricing decisions including deposit pricing strategies, the effects of the Corporation's internal funds transfer pricing process and the net effects of other ALM activities. Certain expenses not directly attributable to a specific...

  • Page 262
    ...) 17,031 3,973 2,891 Income tax expense (benefit) (FTE basis) 5,600 (215) Net income (loss) $ 4,833 $ 11,431 $ 4,188 Year-end total assets $ 2,104,534 $ 2,102,273 (Dollars in millions) At and for the Year Ended December 31 Consumer & Business Banking 2014 2013 2012 $ 19,685 $ 20,050 $ 19,853 10...

  • Page 263
    ... Reconciliations (Dollars in millions) Segments' total revenue, net of interest expense (FTE basis) Adjustments: ALM activities Equity investment income Liquidating businesses and other FTE basis adjustment Consolidated revenue, net of interest expense Segments' total net income Adjustments, net of...

  • Page 264
    ...., Inc. into Bank of America Corporation. Condensed Statement of Income (Dollars in millions) 2014 2013 2012 Income Dividends from subsidiaries: Bank holding companies and related subsidiaries Nonbank companies and related subsidiaries Interest from subsidiaries Other income (loss) Total income...

  • Page 265
    ..., net Net cash provided by (used in) operating activities Investing activities Net sales (purchases) of securities Net payments from (to) subsidiaries Other investing activities, net Net cash provided by (used in) investing activities Financing activities Net increase (decrease) in short-term...

  • Page 266
    ... before income taxes and net income (loss) by geographic area. The Corporation identifies its geographic performance based on the business unit structure used to manage the capital or expense deployed in the region as applicable. This requires certain judgments related to the allocation of revenue...

  • Page 267
    ... report and pursuant to Rule 13a-15 of the Securities Exchange Act of 1934 (Exchange Act), Bank of America's management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness and design of our disclosure controls and procedures (as that term...

  • Page 268
    ... the Corporation's disclosures in its reports, or whether such disclosures comply with the rules and regulations adopted by the Securities and Exchange Commission. In our opinion, Management's Assertion that the Corporation's disclosure controls and procedures were effective as of December 31, 2014...

  • Page 269
    ... Operations Executive David C. Darnell* Vice Chairman, Global Wealth and Investment Management Anne M. Finucane Global Strategy and Marketing Officer Geoffrey S. Greener* Chief Risk Officer Christine P. Katziff Corporate General Auditor Terrence P. Laughlin* President of Strategic Initiatives Gary...

  • Page 270
    ...for customer communications and transactions. Customers can sign up to receive online statements through their Bank of America or Merrill Lynch account website. In 2012, we adopted the SEC's Notice and Access rule, which allows certain issuers to inform shareholders of the electronic availability of...

  • Page 271
    ... Corporation ("BofA Corp."). Merrill Lynch, Merrill Edgeâ„¢, U.S. Trust, Bank of America Merrill Lynch and BofAâ„¢ Global Capital Management are affiliated subdivisions within Global Wealth and Investment Management. Merrill Lynch Wealth Management makes available products and services offered...

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    Bank of America Corporation 2014 Annual Report Please recycle. © 2015 Bank of America Corporation 00-04-1370B 3/2015