Bank of America 2014 Annual Report Download - page 31

Bank of America 2014 29
Supplemental Financial Data
We view net interest income and related ratios and analyses on
an FTE basis, which when presented on a consolidated basis, are
non-GAAP financial measures. We believe managing the business
with net interest income on an FTE basis provides a more accurate
picture of the interest margin for comparative purposes. To derive
the FTE basis, net interest income is adjusted to reflect tax-exempt
income on an equivalent before-tax basis with a corresponding
increase in income tax expense. For purposes of this calculation,
we use the federal statutory tax rate of 35 percent. This measure
ensures comparability of net interest income arising from taxable
and tax-exempt sources.
Certain performance measures including the efficiency ratio
and net interest yield utilize net interest income (and thus total
revenue) on an FTE basis. The efficiency ratio measures the costs
expended to generate a dollar of revenue, and net interest yield
measures the bps we earn over the cost of funds.
We also evaluate our business based on certain ratios that
utilize tangible equity, a non-GAAP financial measure. Tangible
equity represents an adjusted shareholders’ equity or common
shareholders’ equity amount which has been reduced by goodwill
and intangible assets (excluding mortgage servicing rights
(MSRs)), net of related deferred tax liabilities. These measures
are used to evaluate our use of equity. In addition, profitability,
relationship and investment models use both return on average
tangible common shareholders’ equity and return on average
tangible shareholders’ equity as key measures to support our
overall growth goals. These ratios are as follows:
Return on average tangible common shareholders’ equity
measures our earnings contribution as a percentage of adjusted
common shareholders’ equity. The tangible common equity ratio
represents adjusted ending common shareholders’ equity
divided by total assets less goodwill and intangible assets
(excluding MSRs), net of related deferred tax liabilities.
Return on average tangible shareholders’ equity measures our
earnings contribution as a percentage of adjusted average total
shareholders’ equity. The tangible equity ratio represents
adjusted ending shareholders’ equity divided by total assets
less goodwill and intangible assets (excluding MSRs), net of
related deferred tax liabilities.
Tangible book value per common share represents adjusted
ending common shareholders’ equity divided by ending common
shares outstanding.
The aforementioned supplemental data and performance
measures are presented in Table 7 and Statistical Table XII. In
addition, in Table 8, we have excluded the impact of goodwill
impairment charges of $3.2 billion and $12.4 billion recorded in
2011 and 2010 when presenting certain of these metrics.
Accordingly, these are non-GAAP financial measures.
We evaluate our business segment results based on measures
that utilize average allocated capital. Return on average allocated
capital is calculated as net income adjusted for cost of funds and
earnings credits and certain expenses related to intangibles,
divided by average allocated capital. Allocated capital and the
related return both represent non-GAAP financial measures. In
addition, for purposes of goodwill impairment testing, the
Corporation utilizes allocated equity as a proxy for the carrying
value of its reporting units. Allocated equity in the reporting units
is comprised of allocated capital plus capital for the portion of
goodwill and intangibles specifically assigned to the reporting unit.
For additional information, see Business Segment Operations on
page 31 and Note 8 – Goodwill and Intangible Assets to the
Consolidated Financial Statements.
Statistical Tables XV, XVI and XVII on pages 131, 132 and 133
provide reconciliations of these non-GAAP financial measures to
GAAP financial measures. We believe the use of these non-GAAP
financial measures provides additional clarity in assessing the
results of the Corporation and our segments. Other companies
may define or calculate these measures and ratios differently.
Table 8 Five-year Supplemental Financial Data
(Dollars in millions, except per share information) 2014 2013 2012 2011 2010
Fully taxable-equivalent basis data
Net interest income $ 40,821 $ 43,124 $ 41,557 $ 45,588 $ 52,693
Total revenue, net of interest expense 85,116 89,801 84,235 94,426 111,390
Net interest yield (1) 2.25%2.37% 2.24% 2.38% 2.59%
Efficiency ratio 88.25 77.07 85.59 85.01 74.61
Performance ratios, excluding goodwill impairment charges (2)
Per common share information
Earnings $ 0.32 $ 0.87
Diluted earnings 0.32 0.86
Efficiency ratio (FTE basis) 81.64% 63.48%
Return on average assets 0.20 0.42
Return on average common shareholders’ equity 1.54 4.14
Return on average tangible common shareholders’ equity 2.46 7.03
Return on average tangible shareholders’ equity 3.08 7.11
(1) Beginning in 2014, interest-bearing deposits placed with the Federal Reserve and certain non-U.S. central banks are included in earning assets. In prior periods, these balances were included with
cash and due from banks in the cash and cash equivalents line, consistent with the Consolidated Balance Sheet presentation. Prior periods have been reclassified to conform to current period
presentation.
(2) Performance ratios are calculated excluding the impact of goodwill impairment charges of $3.2 billion and $12.4 billion recorded in 2011 and 2010.