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Bank of America Corporation
2015 Annual Report
To our
shareholders,
Thank you for investing in
Bank of America. In , your
company earned nearly $ billion
and returned nearly $. billion
in capital. This progress is the
result of continued strong
business performance, no longer
clouded over by heavy mortgage
and crisis-related litigation and
operating costs.
Over the past several years, we’ve
followed a strategy to simplify the
company, rebuild our capital and
liquidity, invest in our company
and our capabilities, and pursue
a straightforward model focused
on responsible growth.
At the ore of our strategy is the
commitment we made to a clear
purpose: to make financial lives
better by connecting those we
serve to the resources and expertise
they need to achieve their goals.
This is what drives us.

Table of contents

  • Page 1
    ...Corporation 2015 Annual Report To our shareholders, Thank you for investing in Bank of America. In 2015, your company earned nearly $16 billion and returned nearly $4.5 billion in capital. This progress is the result of continued strong business performance, no longer clouded over by heavy mortgage...

  • Page 2
    ... the company's multi-year strategy. We assess how the company has performed against the prior year's plan. We examine how well the businesses are delivering for our customers and clients under the strategic plan, as well as the processes the company has in place to increase revenue, manage risk and...

  • Page 3
    ..., business activity, capital, liquidity, credit improvement and cost management. Here are just a few examples of how our team supported customers and clients. Your company: • Grew core loan balances by $75 billion and deposit balances by $78 billion. • Issued nearly 5 million new credit cards...

  • Page 4
    ... liquidity of more than half-a-trillion dollars. What does that mean? In a time of financial stress, we could fund our company for more than three years without tapping the markets. We also have strong capital. At the end of 2015, our common equity tier 1 ratio, on a Basel 3 fully phased-in basis...

  • Page 5
    ... center visits a week. This includes a growing specialized sales force to help customers with more complex transactions. In the past year, we added more than 800 Financial Solutions Advisors, Mortgage Loan Officers and Small Business Bankers as we optimized our branch network for relationship...

  • Page 6
    ... businesses, demonstrating a steady increase. #1 U.S. wealth management market position across client assets, deposits and loans for seven consecutive years Source: Barron's Penta (September 2015) $751 $619 $669 $676 2012 2013 2014 2015 Deposit Balances ($B, EOP) Since 2012, we have added...

  • Page 7
    ... consumer business category - checking, credit cards, mortgages, auto loans, and deposits - and we are growing faster than the market. Even as we continue to reduce costs, customer satisfaction is increasing because we are doing business the way they want us to. Turning to wealth management, Merrill...

  • Page 8
    ... the savers of America, by showing them the trends in the markets and providing access to the companies that are issuing debt or equity. This relationship between companies and investors that we help create is key to making American and global capitalism work and growing the real economy. As we look...

  • Page 9
    ...% 2015 60% 2012 61% 2013 67% 2014 $2.4T Wealth Management client balances Mobile Banking Users (MM) Our award-winning mobile platform is driving improvements in customer satisfaction, adding more than 5,500 users every day. $5.8B Investment banking fees We extended $10.7 billion in new credit...

  • Page 10
    ... Net Charge-Offs ($B) Since 2012, net charge-offs have declined significantly...2015 2014 Global Excess Liquidity Sources ($B) Time to Required Funding (months) Our capital and liquidity remain near record levels and our balance sheet is smaller with improved asset quality. Average Value at Risk...

  • Page 11
    ... to support our business clients by making credit available. Loan balances in our Global Banking and Global Markets businesses increased 28 percent from 2012 to $399 billion. We must grow within our Risk Framework As a financial services company, our business is to take risk in a responsible manner...

  • Page 12
    ... appointed a Lead Independent Director with responsibilities that exceed what governance experts 10 Through our Simplify and Improve work, we are harnessing ideas from our employees to make it easier for customers to do business with us, operate more efficiently and free up resources to continue to...

  • Page 13
    ... than $235MM in loans to CDFIs supporting affordable housing, small businesses, energy efficiency and neighborhood stabilization. Continued to deliver local economic growth and development through more than $2 billion in spending with diverse suppliers. Named to the 2015 Dow Jones Sustainability...

  • Page 14
    ... us is important to them. Finally, and most importantly, being a sustainable company means we value our people and give all employees the support they need to build a career, achieve their goals, and have the resources they need to improve their lives and the lives of their families. All that we are...

  • Page 15
    ... to serve clients and improve our communities. Together, we will continue to take the company forward and deliver more value to those we serve and to our shareholders. Thank you for your continued investment in Bank of America. Brian Moynihan Chairman and Chief Executive Officer March 7, 2016 13

  • Page 16
    ... including mortgage, home equity, and small business financing through Bank of America; as well as retirement and other investing goals through a Merrill Edge Financial Solutions Advisor or our investing platform for self- directed clients. Clients are greeted by a relationship manager who helps...

  • Page 17
    ... setting at a convenient time. NOT PICTURED: U.S. Trust offers high-net worth clients a highly-personalized, team-based approach to wealth management and access to credit and lending solutions from Bank of America. In select markets, some of our financial centers have dedicated space for U.S. Trust...

  • Page 18
    ... issued and outstanding At year-end Total loans and leases Total assets Total deposits Total shareholders' equity Book value per common share Tangible book value per common share 1 Market price per common share Common shares issued and outstanding Tangible common equity ratio 1 1 2015 $ 83,416 15...

  • Page 19
    2015 Financial Review

  • Page 20
    ... Data Business Segment Operations Consumer Banking Global Wealth & Investment Management Global Banking Global Markets Legacy Assets & Servicing All Other Off-Balance Sheet Arrangements and Contractual Obligations Managing Risk Strategic Risk Management Capital Management Liquidity Risk Credit Risk...

  • Page 21
    ... Item 1A. Risk Factors of our 2015 Annual Report on Form 10-K and in any of the Corporation's subsequent Securities and Exchange Commission filings: the Corporation's ability to resolve representations and warranties repurchase and related claims, including claims brought by investors or trustees...

  • Page 22
    ... ATMs, nationwide call centers, and leading online and mobile banking platforms (www.bankofamerica.com). We offer industry-leading support to approximately three million small business owners. Our wealth management businesses, with client balances of nearly $2.5 trillion, provide tailored solutions...

  • Page 23
    ... Securities. The Corporation recorded a $612 million charge to net interest income related to the discount on these securities. New Accounting Guidance on Recognition and Measurement of Financial Instruments In January 2016, the Financial Accounting Standards Board (FASB) issued new accounting...

  • Page 24
    ... lives of mortgage-related debt securities. Also included in marketrelated adjustments is hedge ineffectiveness that impacted net interest income. For additional information, see Note 1 - Summary of Significant Accounting Principles to the Consolidated Financial Statements. 22 Bank of America 2015

  • Page 25
    ... loan sales and other recoveries in 2015. The provision for credit losses for the commercial portfolio increased $160 million in 2015 compared to 2014 driven by energy sector exposure and higher unfunded balances. The decrease in net charge-offs was primarily due to credit quality improvement...

  • Page 26
    ... disclosed legacy mortgage-related matters and other litigation charges in 2014. The effective tax rate for 2015 was driven by our recurring tax preference benefits and tax benefits related to certain non-U.S. restructurings, partially offset by a charge for the impact of the U.K. tax law changes...

  • Page 27
    ... activity on the balance sheet, and a decrease in all other assets. The Corporation took certain actions in 2015 to further strengthen liquidity in response to the Basel 3 Liquidity Coverage Ratio (LCR) requirements. Most notably, we exchanged residential mortgage loans supported by long-term...

  • Page 28
    ...see Note 11 - Long-term Debt to the Consolidated Financial Statements. Deposits Deposits increased $78.3 billion due to an increase in retail deposits. Federal Funds Purchased and Securities Loaned or Sold Under Agreements to Repurchase Federal funds transactions involve borrowing reserve balances...

  • Page 29
    ... PCI loans and the non-U.S. credit card portfolio in All Other. (7) Net charge-offs exclude $808 million, $810 million and $2.3 billion of write-offs in the PCI loan portfolio for 2015, 2014 and 2013, respectively. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management...

  • Page 30
    ... 31 to net charge-offs, excluding the PCI loan portfolio Ratio of the allowance for loan and lease losses at December 31 to net charge-offs and PCI write-offs (8) Capital ratios at year end (9) Risk-based capital: Common equity tier 1 capital Tier 1 common capital Tier 1 capital Total capital Tier...

  • Page 31
    ... loan balances, as well as a charge of $612 million in 2015 related to the discount on certain trust preferred securities. This was partially offset by a $785 million improvement in market-related adjustments on debt securities, lower funding costs, lower rates paid on deposits and commercial loan...

  • Page 32
    ... Lending • Consumer and Small Business Credit Card • Debit Card • Consumer Vehicle Lending • Home Loans The Corporation periodically reviews capital allocated to its businesses and allocates capital annually during the strategic and capital planning processes. We utilize a methodology...

  • Page 33
    ... mortgage banking income from improved production margins, partially offset by lower service charges. The provision for credit losses decreased $156 million to $2.5 billion in 2015 driven by continued improvement in credit quality primarily related to our small business and credit card portfolios...

  • Page 34
    ..., recreational vehicle and consumer personal loans. In addition to earning net interest spread revenue on its lending activities, Consumer Lending generates interchange revenue from credit and debit card transactions, late fees, cash advance fees, annual credit card fees, mortgage banking fee income...

  • Page 35
    ...in the case of home equity, the principal amount of the total line of credit. In addition to loan production in Consumer Banking, there is also first mortgage and home equity loan production in GWIM. Mortgage Banking Income (Dollars in millions) 2015 $ 942 11 (70) 883 1,658 (177) 2,364 $ 2014 875...

  • Page 36
    ... 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 Total assets Total deposits Allocated capital Year end Total loans and...

  • Page 37
    ... and Metrics (Dollars in millions, except as noted) 2015 $ 14,898 3,027 76 18,001 $ 2014 15,256 3,084 64 18,404 Revenue by Business Merrill Lynch Global Wealth Management U.S. Trust Other (1) Total revenue, net of interest expense (FTE basis) Client Balances by Business, at year end Merrill Lynch...

  • Page 38
    ... Commercial Banking, Business Banking and Global Investment Banking, provides a wide range of lending-related products and services, integrated working capital management and treasury solutions to clients, and underwriting and advisory services through our network of offices and client relationship...

  • Page 39
    ...2015 342 702 1,044 $ $ 2014 363 715 1,078 $ 2015 7,607 6,137 $ 13,744 $ Total 2014 7,725 6,561 $ 14,286 (Dollars in millions) Revenue Business Lending Global Transaction Services Total revenue, net of interest expense Balance Sheet Average Total loans and leases Total deposits Year end Total loans...

  • Page 40
    ...institutional investor clients in support of their investing and trading activities. We also work with our 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...

  • Page 41
    ... lower tax expense, partially offset by lower revenue. Revenue, excluding net DVA, decreased due to lower trading account profits due to declines in credit-related businesses, lower investment banking fees and lower equity investment gains (not included in sales and trading revenue) as 2014 included...

  • Page 42
    ..., 2015, 2014 and 2013, respectively. In addition, LAS is responsible for contracting with and overseeing subservicing vendors who service loans on our behalf. Servicing activities include collecting cash for principal, interest and escrow payments from borrowers, disbursing customer draws for lines...

  • Page 43
    ... and $39 billion of home equity loans and HELOCs at December 31, 2015, 2014 and 2013, respectively. Non-Legacy Portfolio As previously discussed, LAS is responsible for all of our servicing activities. The table below summarizes the balances of the residential mortgage loans that are not included...

  • Page 44
    ...: Servicing fees Amortization of expected cash flows (1) Fair value changes of MSRs, net of risk management activities used to hedge certain market risks (2) Total net servicing income Representations and warranties (provision) benefit Other mortgage banking income (3) Total LAS mortgage banking...

  • Page 45
    ...certain residential mortgage loans that are managed by LAS are held in All Other. For more information on our ALM activities, see Interest Rate Risk Management for Nontrading Activities on page 95 and Note 24 - Business Segment Information to the Consolidated Financial Statements. Equity investments...

  • Page 46
    ..., if applicable. During 2015 and 2014, we contributed $234 million each year to the Plans, and we expect to make $261 million of contributions during 2016. The Plans are more fully discussed in Note 17 - Employee Benefit Plans to the Consolidated Financial Statements. Debt, lease, equity and other...

  • Page 47
    ...on accounting for representations and warranties, repurchase claims and exposures, see Note 7 - Representations and Warranties Obligations and Corporate Guarantees and Note 12 - Commitments and Contingencies to the Consolidated Financial Statements and Item 1A. Risk Factors of our 2015 Annual Report...

  • Page 48
    ...label and whole-loan investors without monoline insurance. Taking into account settlements and the application of the statute of limitations for repurchase claims for these trusts, we believe the remaining open exposure for repurchase claims exists on loans with an original principal balance of $102...

  • Page 49
    ...approach to risk management with a defined Risk Framework and an articulated Risk Appetite Statement which are approved annually by the Enterprise Risk Committee (ERC) and the Corporation's Board of Directors (the Board). The seven types of risk faced by the Corporation are strategic, credit, market...

  • Page 50
    ... risk limits (which may include credit, market and/or operational limits, as applicable) that are based on the amount of capital, earnings or liquidity we are willing to put at risk to achieve our strategic objectives and business plans. Executive management is responsible for tracking and reporting...

  • Page 51
    ...management routines or individuals. 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...

  • Page 52
    ... report and escalate exceptions. This includes immediate requests for approval to managers and alerts to executive management, management-level 50 Bank of America 2015 Corporation-wide Stress Testing Integral to the Corporation's Capital Planning, Financial Planning and Strategic Planning processes...

  • Page 53
    ... addresses strategic risks. The strategic plan is reviewed and approved annually by the Board, as is the capital plan, financial operating plan and risk appetite statement. With oversight by the Board, executive management ensures that consistency is applied while executing the Corporation...

  • Page 54
    ... than mortgage servicing rights and goodwill; defined benefit pension fund net assets; net unrealized cumulative gains (losses) related to changes in own credit risk on liabilities, including derivatives, measured at fair value; direct and indirect investments in our own Common equity tier 1 capital...

  • Page 55
    ... guarantees, unfunded lending commitments, letters of credit and potential future derivative exposures. Market risk applies to covered positions which include trading assets and liabilities, foreign exchange exposures and commodity exposures. Market risk capital is modeled for general market risk...

  • Page 56
    ... modifications to certain internal analytical models including the wholesale (e.g., commercial) credit models which increased our risk-weighted assets in the fourth quarter of 2015. (2) To be "well capitalized" under the current U.S. banking regulatory agency definitions, a bank holding company...

  • Page 57
    ... Deferred tax assets arising from net operating loss and tax credit carryforwards Trust preferred securities Defined benefit pension fund assets DVA related to liabilities and derivatives under transition Other Total Tier 1 capital Long-term debt qualifying as Tier 2 capital Allowance for loan and...

  • Page 58
    ... 1 capital (transition) Deferred tax assets arising from net operating loss and tax credit carryforwards phased out during transition Trust preferred securities phased out during transition Defined benefit pension fund assets phased out during transition DVA related to liabilities and derivatives...

  • Page 59
    ... meet a minimum long-term debt requirement equal to the greater of (1) 6.0 percent of risk-weighted assets plus the applicable method 2 G-SIB surcharge, or (2) 4.5 percent of the denominator of the SLR. Revisions to Approaches for Measuring Risk-Weighted Assets The Basel Committee has several open...

  • Page 60
    ...Common Stock Dividends For a summary of our declared quarterly cash dividends on common stock during 2015 and through February 24, 2016, see Note 13 - Shareholders' Equity to the Consolidated Financial Statements. Liquidity Risk Funding and Liquidity Risk Management Liquidity risk is the potential...

  • Page 61
    ... debt issued or guaranteed by Bank of America Corporation. These include certain unsecured debt instruments, primarily structured liabilities, which we may be required to settle for cash prior to maturity. Our timeto-required funding was 39 months at December 31, 2015. For purposes of calculating...

  • Page 62
    ... 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 funding and...

  • Page 63
    ... 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 64
    ... 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 2 - Derivatives to the Consolidated Financial Statements. 62 Bank of America 2015

  • Page 65
    ... 1A. Risk Factors of our 2015 Annual Report on Form 10-K. Utilized energy exposure represents approximately two percent of total loans and leases. For more information on our exposures and related risks in the energy industry, see Commercial Portfolio Credit Risk Management - Industry Concentrations...

  • Page 66
    ..., nonperforming status, charge-offs and TDRs for the consumer portfolio, see Note 1 - Summary of Significant Accounting Principles to the Consolidated Financial Statements. For more information on representations and warranties related to our residential mortgage and home equity portfolios, see...

  • Page 67
    ...presents net charge-offs and related ratios for consumer loans and leases. 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 (1) $ $ Net Charge-offs (1) 2015 2014...

  • Page 68
    ...in our overall ALM activities, delinquent FHA loans repurchased pursuant to our servicing agreements with GNMA as well as loans repurchased related to our representations and warranties. Approximately 30 percent of the residential mortgage portfolio is 66 Bank of America 2015 in GWIM and represents...

  • Page 69
    ... 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 $2.1 billion in 2015 including sales of $1.5 billion, partially offset by a $261 million net increase related...

  • Page 70
    ..., 2014. Home equity loans are almost all fixed-rate loans with amortizing payment terms of 10 to 30 years and of the $7.9 billion at December 31, 2015, 54 percent have 25- to 30year terms. At December 31, 2015, our reverse mortgage portfolio had an outstanding balance, excluding loans accounted for...

  • Page 71
    ... in 2015 and 2014. 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 outstanding balances in the home equity portfolio decreased $564 million in 2015 as outflows, including sales of...

  • Page 72
    ... 85,725 Net Charge-offs (2) 2015 2014 57 $ $ 118 128 170 51 68 61 81 17 30 322 440 636 $ $ 907 (Dollars in millions) California Florida (3) New Jersey (3) New York (3) Massachusetts Other U.S./Non-U.S. Home equity loans (4) Purchased credit-impaired home equity portfolio (5) Total home equity loan...

  • Page 73
    ...loans, see Note 1 - Summary of Significant Accounting Principles to the Consolidated Financial Statements. Table 30 presents the unpaid principal balance, carrying value, related valuation allowance and the net carrying value as a percentage of the unpaid principal balance for the PCI loan portfolio...

  • Page 74
    ... (Dollars in millions) Accruing Past Due 90 Days or More 2015 115 $ 81 58 57 19 459 789 $ 2014 $ 127 89 58 59 22 511 $ 866 Net Charge-offs 2015 358 $ 244 157 162 59 1,334 $ 2,314 2014 414 278 177 174 71 1,524 $ 2,638 $ California Florida Texas New York Washington Other U.S. Total U.S. credit card...

  • Page 75
    ... loans, see Note 1 - Summary of Significant Accounting Principles to the Consolidated Financial Statements. During 2015, nonperforming consumer loans declined $2.7 billion to $8.2 billion and included the impact of sales of $1.7 billion, partially offset by a net increase of $186 million related...

  • Page 76
    ...and warranties exposure and properties acquired with newly consolidated subsidiaries. At December 31, 2015, 41 percent of nonperforming loans were 180 days or more past due. Foreclosed property balances do not include properties insured by certain government-guaranteed loans, principally FHA-insured...

  • Page 77
    ... 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 78
    ...in 2014 and higher energy sector related losses in 2015. Table 38 Commercial Net Charge-offs and Related Ratios (Dollars in millions) U.S. commercial Commercial real estate Commercial lease financing Non-U.S. commercial U.S. small business commercial Total commercial (1) Net Charge-offs 2015 2014...

  • Page 79
    ..., or 15 percent, during 2015 due to growth across all of the commercial businesses. Nonperforming loans and leases increased $166 million, or 24 percent, in 2015, largely related to our energy exposure. Net charge-offs increased $51 million to $139 million during 2015. Bank of America 2015 77

  • Page 80
    ... portfolios. We use a number of proactive risk mitigation initiatives to reduce adversely rated exposure in the commercial real estate portfolio including transfers of deteriorating exposures to management by independent special asset officers and the pursuit of loan restructurings or asset sales...

  • Page 81
    ... loans accounted for under the fair value option. Table 43 Commercial Real Estate Net Charge-offs and Related Ratios (Dollars in millions) Net Charge-offs 2015 2014 $ 3 1 1 (1) 5 (4) (4) (9) 1 (7) 2 (5) $ (4) (22) 4 (1) (3) (9) (22) (2) (16) (75) (8) (83) Net Charge-off Ratios (1) 2015 2014...

  • Page 82
    ... card loans and small business loans managed in Consumer Banking. Credit card-related products were 45 percent and 43 percent of the U.S. small business commercial portfolio at December 31, 2015 and 2014. Net charge-offs decreased $57 million to $225 million in 2015 primarily driven by improvement...

  • Page 83
    ...as 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 45 Commercial Troubled Debt Restructurings December 31 (Dollars in millions...

  • Page 84
    ... Trading Risk Management on page 91. 82 Bank of America 2015 Tables 47 and 48 present the maturity profiles and the credit exposure debt ratings of the net credit default protection portfolio at December 31, 2015 and 2014. Table 47 Net Credit Default Protection by Maturity December 31 2015 2014 39...

  • Page 85
    ... Table 50. We calculate CVA based on a modeled expected exposure that incorporates current 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...

  • Page 86
    ... or related to client clearing activities). These indirect exposures are managed in the normal course of business through credit, market and operational risk governance, rather than through country risk governance. Table 51 presents our total non-U.S. exposure by region at December 31, 2015 and 2014...

  • Page 87
    ...of commodity prices, signs of slowing growth in China and a recession in Brazil are driving risk aversion in emerging markets. Net exposure to China decreased to $10.5 billion at December 31, 2015, concentrated in large state-owned companies, subsidiaries of multinational corporations and commercial...

  • Page 88
    ... the collateral value or the loan's observable market price if available. Impairment measurement for the renegotiated consumer credit card, small business credit card and unsecured consumer TDR portfolios is based on the present 86 Bank of America 2015 value of projected cash flows discounted using...

  • Page 89
    .... Further, the residential mortgage and home equity allowance declined due to write-offs in our PCI loan portfolio. The decrease in the allowance related to the U.S. credit card and unsecured consumer lending portfolios in Consumer Banking was primarily due to improvement in delinquencies and more...

  • Page 90
    ...for unfunded lending commitments, for 2015 and 2014. Table 54 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...

  • Page 91
    ... in 2015 and 2014. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management - Purchased Credit-impaired Loan Portfolio on page 71. For more information on our definition of nonperforming loans, see pages 73 and 80. Primarily includes amounts allocated to U.S. credit card...

  • Page 92
    ..., agency debt ratings, default, market liquidity, government participation and interest rate volatility. Our exposure to these instruments takes several forms. First, we trade and engage in market-making activities in a variety of mortgage securities including whole loans, pass-through certificates...

  • Page 93
    ... mortgage 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...

  • Page 94
    ...The majority of this portfolio is within the Global Markets segment. Table 56 presents year-end, average, high and low daily trading VaR for 2015 and 2014 using a 99 percent confidence level. Table 56 Market Risk VaR for Trading Activities 2015 (Dollars in millions) 2014 Low (1) $ 5 14 27 9 3 - 26...

  • Page 95
    ... for 2015 and 2014. Table 57 Average Market Risk VaR for Trading Activities - 99 percent and 95 percent VaR Statistics (Dollars in millions) Foreign exchange Interest rate Credit Equity Commodity Portfolio diversification Total covered positions trading portfolio Impact from less liquid exposures...

  • Page 96
    ...75 to 100 greater than 100 Revenue (dollars in millions) Year Ended December 31, 2014 Year Ended December 31, 2015 Trading Portfolio Stress Testing Because the very nature of a VaR model suggests results can exceed our estimates and it is dependent on a limited historical window, we also stress...

  • Page 97
    ... Derivative Contracts Interest rate and foreign exchange derivative contracts are utilized in our ALM activities and serve as an efficient tool to manage our interest rate and foreign exchange risk. We use derivatives to hedge the variability in cash flows or changes in fair value on our balance...

  • Page 98
    ... and 2014. These amounts do not include derivative hedges on our MSRs. Table 60 Asset and Liability Management Interest Rate and Foreign Exchange Contracts December 31, 2015 Expected Maturity (Dollars in millions, average estimated duration in years) Fair Value $ 6,291 Total $ 114,354 3.12% 2016...

  • Page 99
    ... objective independent oversight of the Corporation's compliance risk management activities. The Board provides oversight of compliance risk through its Audit Committee and ERC. Mortgage Banking Risk Management We originate, fund and service mortgage loans, which subject us to credit, liquidity...

  • Page 100
    ... monitoring adherence to corporate practices. Business and control function management uses the enterprise RCSA process to capture the identification and assessment of operational risk exposures and evaluate the status of risk and control issues including risk mitigation plans, as appropriate. The...

  • Page 101
    ...management's estimate of probable losses inherent in the Corporation's loan portfolio excluding those loans accounted for under the fair value option. Our process for determining the allowance for credit losses is discussed in Note 1 - Summary of Significant Accounting Principles to the Consolidated...

  • Page 102
    ..., MBS, ABS, CDOs, CLOs and structured liabilities, highly structured, complex or long-dated derivative contracts and consumer MSRs. The fair value of these Level 3 financial assets and liabilities is determined using pricing models, discounted cash flow methodologies or similar techniques for which...

  • Page 103
    ... 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. Effective January 1, 2015, the Corporation changed its basis of presentation related to its business segments. The realignment triggered a test for...

  • Page 104
    ... paid for change in control transactions for financial institutions, for all reporting units. The discount rates used in the June 30, 2015 annual goodwill impairment test ranged from 10.2 percent to 13.7 percent depending on the relative risk of a reporting unit. Growth rates developed by management...

  • Page 105
    ... net interest income. Market-related premium amortization was an expense of $1.2 billion in 2014 compared to a benefit of $784 million in 2013. Partially offsetting these declines were reductions in funding yields, lower long-term debt balances and commercial loan growth. Bank of America 2015...

  • Page 106
    ...2013. The decrease in net charge-offs was due to credit quality improvement across all major portfolios and the impact of increased recoveries primarily from nonperforming and delinquent loan sales. Global Wealth & Investment Management GWIM recorded net income of $3.0 billion in both 2014 and 2013...

  • Page 107
    ...in 2013, a decrease of $2.0 billion in equity investment income and a $363 million increase in U.K. PPI costs. Partially offsetting these decreases were gains related to the sales of residential mortgage loans, a $313 million improvement in the provision (benefit) for credit losses and a decrease of...

  • Page 108
    ... of the Allowance for Credit Losses by Product Type VII - Selected Loan Maturity Data VIII - Non-exchange Traded Commodity Contracts IX - Non-exchange Traded Commodity Contract Maturities X - Selected Quarterly Financial Data XI - Quarterly Average Balances and Interest Rates - FTE Basis XII...

  • Page 109
    ... 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 Home equity U.S. credit card Non-U.S. credit card Direct/Indirect...

  • Page 110
    ... banks and other 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...

  • Page 111
    ... Stock Cash Dividend Summary (1) December 31, 2015 Outstanding Notional Amount (in millions) $ 1 Preferred Stock Series B (2) Declaration Date January 21, 2016 October 22, 2015 July 23, 2015 April 16, 2015 February 10, 2015 Record Date April 11, 2016 January 11, 2016 October 9, 2015 July 10, 2015...

  • Page 112
    ... Stock Cash Dividend Summary (1) (continued) December 31, 2015 Outstanding Notional Amount (in millions) $ 98 Preferred Stock Series 1 (6) Declaration Date January 11, 2016 October 9, 2015 July 9, 2015 April 13, 2015 January 9, 2015 Record Date February 15, 2016 November 15, 2015 August 15, 2015...

  • Page 113
    ... at December 31, 2015, 2014, 2013, 2012 and 2011, respectively. Includes U.S. small business commercial loans, including card-related products, of $12.9 billion, $13.3 billion, $13.3 billion, $12.6 billion and $13.3 billion at December 31, 2015, 2014, 2013, 2012 and 2011, respectively. Includes...

  • Page 114
    ... in 2015, 2014, 2013, 2012 and 2011, respectively. Includes U.S. small business commercial recoveries of $57 million, $63 million, $98 million, $100 million and $106 million in 2015, 2014, 2013, 2012 and 2011, respectively. Primarily represents the net impact of portfolio sales, consolidations and...

  • Page 115
    ...31, 2015, 2014, 2013, 2012 and 2011, respectively. Net charge-offs exclude $808 million, $810 million, $2.3 billion and $2.8 billion of write-offs in the PCI loan portfolio in 2015, 2014, 2013 and 2012. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management - Purchased...

  • Page 116
    ... interest 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. 114 Bank of America 2015

  • Page 117
    ... of new contracts Other changes in fair value Gross fair value of contracts outstanding, December 31, 2015 Less: Legally enforceable master netting agreements Net fair value of contracts outstanding, December 31, 2015 $ $ Table IX Non-exchange Traded Commodity Contract Maturities 2015 (Dollars in...

  • Page 118
    ... second and first quarters of 2014, respectively. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management - Purchased Credit-impaired Loan Portfolio on page 71. (10) Capital ratios reported under Advanced approaches in the fourth quarter of 2015. Prior to fourth quarter...

  • Page 119
    ... period end to annualized net charge-offs, excluding the PCI loan portfolio Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs and PCI write-offs Capital ratios at period end (10) Risk-based capital: Common equity tier 1 capital Tier 1 capital Total capital...

  • Page 120
    ...other banks 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 (1) Loans and leases (2): Residential mortgage Home equity U.S. credit card Non-U.S. credit card Direct/Indirect...

  • Page 121
    ...other banks 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 (1) Loans and leases (2): Residential mortgage Home equity U.S. credit card Non-U.S. credit card Direct/Indirect...

  • Page 122
    ... income Total revenue, net of interest expense (2) Net interest yield Efficiency ratio (2) (1) (2) FTE basis is a non-GAAP financial measure. FTE basis is a performance measure used by management in operating the business that management believes provides investors with a more accurate picture of...

  • Page 123
    ... Tangible shareholders' equity Reconciliation of year-end assets to year-end tangible assets Assets Goodwill Intangible assets (excluding MSRs) Related deferred tax liabilities Tangible assets (1) 2015 $ $ 39,251 909 40,160 $ $ 2014 39,952 869 40,821 $ $ 2013 42,265 859 43,124 $ $ 2012 40,656...

  • Page 124
    ... plus capital for the portion of goodwill and intangibles specifically assigned to the business segment. For more information on allocated capital, see Business Segment Operations on page 30 and Note 8 - Goodwill and Intangible Assets to the Consolidated Financial Statements. 122 Bank of America...

  • Page 125
    ... and ratios we use in assessing the results of the Corporation, see Supplemental Financial Data on page 28. The results for 2015 were impacted by the early adoption of new accounting guidance on recognition and measurement of financial instruments. For additional information, see Executive Summary...

  • Page 126
    ... derivatives where the Corporation is not permitted to use the collateral it receives. Interest Rate Lock Commitment (IRLC) - Commitment with a loan applicant in which the loan terms, including interest rate and price, are guaranteed for a designated period of time subject to credit approval. Letter...

  • Page 127
    ...consumer 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. Prompt Corrective Action (PCA...

  • Page 128
    ...-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 of...

  • Page 129
    ... 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 130
    ... are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of the Corporation's internal control over financial reporting as of December 31...

  • Page 131
    ...Firm Bank of America Corporation and Subsidiaries To the Board of Directors and Shareholders of Bank of America Corporation: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, comprehensive income, changes in shareholders' equity and cash...

  • Page 132
    ... Card income Service charges Investment and brokerage services Investment banking income Equity investment income Trading account profits Mortgage banking income Gains on sales of debt securities Other income (loss) Total noninterest income Total revenue, net of interest expense Provision for credit...

  • Page 133
    ... 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 debit valuation adjustments Net change in derivatives Employee benefit plan...

  • Page 134
    Bank of America Corporation and Subsidiaries Consolidated Balance Sheet (Dollars in millions) December 31 2015 2014 $ 31,265 128,088 159,353 7,744 192,482 176,527 49,990 $ 33,118 105,471 138,589 7,510 191,823 191,785 52,682 Assets Cash and due from banks Interest-bearing deposits with the Federal...

  • Page 135
    Bank of America Corporation and Subsidiaries Consolidated Balance Sheet (continued) (Dollars in millions) December 31 2015 2014 Liabilities Deposits in U.S. offices: Noninterest-bearing Interest-bearing (includes $1,116 and $1,469 measured at fair value) Deposits in non-U.S. offices: Noninterest-...

  • Page 136
    ... plans and related tax effects Common stock repurchased Other Balance, December 31, 2013 Net income Net change in available-for-sale debt and marketable equity securities Net change in derivatives Employee benefit plan adjustments Net change in foreign currency translation adjustments Dividends paid...

  • Page 137
    ... by operating activities: Provision for credit losses Gains on sales of debt securities Fair value adjustments on structured liabilities Depreciation and premises improvements amortization Amortization of intangibles Net amortization of premium/discount on debt securities Deferred income taxes Loans...

  • Page 138
    ... in equity investment income. The preparation of the Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect reported amounts and disclosures. Realized...

  • Page 139
    ... repurchase agreements, securities loaned, public and trust deposits, U.S. Treasury tax and loan notes, and short-term borrowings. This collateral, which in some cases can be sold or repledged by the counterparties to the transactions, is parenthetically disclosed on the Consolidated Balance Sheet...

  • Page 140
    ... value is based on quoted market prices in active or inactive markets or is derived from observable marketbased pricing parameters, similar to those applied to over-thecounter (OTC) derivatives. For non-exchange traded contracts, fair value is based on dealer quotes, pricing models, discounted cash...

  • Page 141
    ... changes in the fair value of these derivatives are recorded in mortgage banking income. Securities Debt securities are recorded on the 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...

  • Page 142
    ..., risk characteristics and methods for assessing risk. The Corporation's three portfolio segments are Consumer Real Estate, Credit Card and Other Consumer, and Commercial. The classes within the Consumer Real Estate portfolio segment are core portfolio residential mortgage, Legacy Assets & Servicing...

  • Page 143
    ...The allowance on certain commercial loans (except business card and certain small business loans) is calculated using loss rates delineated by risk rating and product type. Factors considered when assessing loss rates include the value of the underlying collateral, if applicable, the industry of the...

  • Page 144
    ... the 142 Bank of America 2015 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 and commercial loans and leases whose contractual terms have been...

  • Page 145
    ... 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 146
    ...representations and warranties. When the Corporation is the servicer of whole loans held in a securitization trust, including non-agency residential mortgages, home equity loans, credit cards, automobile loans and student loans, the Corporation has the power to direct the most significant activities...

  • Page 147
    ... income line items in the Consolidated Statement of Income. Card income includes fees such as interchange, cash advance, annual, late, over-limit and other miscellaneous fees, which are recorded as revenue when earned. Uncollected fees are included in the customer card receivables balances with...

  • Page 148
    ...'s loan and deposit products and provide the Corporation with their mailing lists and marketing activities. These agreements generally have terms that range five or more years. The Corporation typically pays royalties in exchange for the endorsement. Compensation costs related to the credit card...

  • Page 149
    ... relationships are referred 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...

  • Page 150
    ... on the Consolidated Balance Sheet at December 31, 2015 and 2014 by primary risk (e.g., interest rate risk) and the platform, where applicable, on which these derivatives are transacted. Exchangetraded derivatives include listed options transacted on an exchange. OTC derivatives include bilateral...

  • Page 151
    ... hedge accounting relationships and derivatives used in other risk management activities. Interest rate, foreign exchange, equity, commodity and credit contracts are utilized in the Corporation's ALM and risk management activities. The Corporation maintains an overall interest rate risk management...

  • Page 152
    ...to be highly effective at offsetting changes in the fair value of the long-term debt attributable to interest rate risk. Derivatives Designated as Accounting Hedges The Corporation uses various types of interest rate, commodity and foreign exchange derivative contracts to protect against changes in...

  • Page 153
    ... 127 195 3,021 $ $ $ 2013 Cash flow hedges Interest rate risk on variable-rate portfolios Price risk on restricted stock awards (2) Total Net investment hedges Foreign exchange risk (1) (2) (Dollars in millions, amounts pretax) Hedge Ineffectiveness and Amounts Excluded from Effectiveness Testing...

  • Page 154
    ...cash instruments. The resulting risk from these derivatives is managed on a portfolio basis as part of the Corporation's Global Markets business segment. The related sales and trading revenue generated within Global Markets is recorded in various income statement line items including trading account...

  • Page 155
    ... brokerage services revenue of $2.2 billion, $2.2 billion and $2.1 billion for 2015, 2014 and 2013, respectively. Credit Derivatives The Corporation enters into credit derivatives primarily to facilitate client transactions and to manage credit risk exposures. Credit derivatives derive value based...

  • Page 156
    Credit Derivative Instruments December 31, 2015 Carrying Value (Dollars in millions) Less than One Year $ 84 672 756 5 171 176 932 267 61 328 One to Three Years $ 481 3,035 3,516 - 236 236 3,752 Three to Five Years $ 2,203 2,386 4,589 - 8 8 4,597 $ Over Five Years 680 3,583 4,263 - 2 2 4,265 2,...

  • Page 157
    ...predefined limits. The Corporation manages its market risk exposure to credit derivatives by entering into a variety of offsetting derivative contracts and security positions. For example, in certain instances, the Corporation may purchase credit protection with identical underlying referenced names...

  • Page 158
    ...funding benefit of $135 million, both related to derivative asset exposures. The net FVA charge was recorded as a reduction to sales and trading revenue in Global Markets. The Corporation calculates this valuation adjustment based on modeled expected exposure profiles discounted for the funding risk...

  • Page 159
    ...AFS marketable equity securities at December 31, 2015 and 2014. Debt Securities and Available-for-Sale Marketable Equity Securities December 31, 2015 Gross Gross Unrealized Unrealized Gains Losses (Dollars in millions) Amortized Cost Fair Value Available-for-sale debt securities Mortgage-backed...

  • Page 160
    ... debt securities for 2015, 2014 and 2013 are presented in the table below. Gains and Losses on Sales of AFS Debt Securities (Dollars in millions) Other Debt Securities Carried at Fair Value (Dollars in millions) Gross gains Gross losses Net gains on sales of AFS debt securities Income tax expense...

  • Page 161
    ...31, 2015 Twelve Months or Longer Gross Fair Unrealized Value Losses Total Fair Value Gross Unrealized Losses (Dollars in millions) Temporarily impaired AFS debt securities Mortgage-backed securities: Agency Agency-collateralized mortgage obligations Commercial Non-agency residential Total mortgage...

  • Page 162
    ... and 2013 consisted of credit losses on non-agency residential mortgage-backed securities (RMBS) and were recorded in other income in the Consolidated Statement of Income. The credit losses on the RMBS in 2015 were driven by decreases in the estimated RMBS cash flows primarily due to a model change...

  • Page 163
    ... 31, 2015 and 2014, which are expected to be paid over the next five years. These commitments are reported in accrued expenses and other liabilities on the Consolidated Balance Sheet. During 2015 and 2014, the Corporation recognized tax credits and other tax benefits from investments in affordable...

  • Page 164
    ...(4) Loans Accounted for Under the Fair Value Option Total Outstandings Consumer real estate 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...

  • Page 165
    ... 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 consumer (7) Total consumer Consumer loans accounted for under the fair value...

  • Page 166
    ..., see Note 1 - Summary of Significant Accounting Principles. Credit Quality December 31 Nonperforming Loans and Leases (Dollars in millions) Accruing Past Due 90 Days or More 2015 2014 2015 2014 Consumer real estate Core portfolio Residential mortgage (1) Home equity Legacy Assets & Servicing...

  • Page 167
    ...value option. U.S. small business commercial includes $670 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 December 31, 2015, 98 percent of the balances...

  • Page 168
    ...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 December 31, 2014, 98 percent of the balances...

  • Page 169
    ... for properties acquired upon foreclosure of certain government-guaranteed loans (principally FHA-insured loans), to other assets. The reclassifications represent non-cash investing activities and, accordingly, are not reflected on the Consolidated Statement of Cash Flows. Bank of America 2015 167

  • Page 170
    ...principal balance, carrying value and related allowance at December 31, 2015 and 2014, and the average carrying value and interest income recognized for 2015, 2014 and 2013 for impaired loans in the Corporation's Consumer Real Estate portfolio segment, and includes primarily loans managed by Legacy...

  • Page 171
    ...233 878 12,111 $ $ During 2015, 2014 and 2013, the Corporation forgave principal of $396 million, $53 million and $467 million, respectively, related to residential mortgage loans in connection with TDRs. The post-modification interest rate reflects the interest rate applicable only to permanently...

  • Page 172
    ... real estate loans that were modified in a TDR during 2015, 2014 and 2013, by type of modification. Consumer Real Estate - Modification Programs TDRs Entered into During 2015 (Dollars in millions) Residential Mortgage $ 408 4 46 458 191 69 124 34 418 1,516 263 2,655 $ Home Equity 23 7 - 30...

  • Page 173
    ... interest rate reduction. In substantially 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...

  • Page 174
    ...unpaid principal balance, carrying value and related allowance at December 31, 2015 and 2014, and the average carrying value and interest income recognized for 2015, 2014 and 2013 on the Corporation's renegotiated TDR portfolio in the Credit Card and Other Consumer portfolio segment. Impaired Loans...

  • Page 175
    ... information on the Corporation's primary modification programs for the renegotiated TDR portfolio for loans that were modified in TDRs during 2015, 2014 and 2013. Credit Card and Other Consumer - Renegotiated TDRs Entered into During the Period by Program Type 2015 (Dollars in millions) Internal...

  • Page 176
    ... Corporation estimates that 14 percent of new U.S. credit card TDRs, 88 percent of new non-U.S. credit card TDRs and 12 percent of new direct/indirect consumer TDRs may be in payment default within 12 months after modification. Loans that entered into payment default during 2015, 2014 and 2013 that...

  • Page 177
    ... the unpaid principal balance, carrying value and related allowance at December 31, 2015 and 2014, and the average carrying value and interest income recognized for 2015, 2014 and 2013 for impaired loans in the Corporation's Commercial loan portfolio segment. Certain impaired commercial loans do not...

  • Page 178
    ... life of the portfolio which results in a change to the amount of future interest cash flows. Commercial - TDRs Entered into During 2015, 2014 and 2013 December 31, 2015 Unpaid Principal Carrying Balance Value $ 853 42 329 14 1,238 $ 779 42 326 11 1,158 2015 Net Charge-offs $ 28 - - 3 31 2014...

  • Page 179
    ... net impact of portfolio sales, consolidations and deconsolidations, and foreign currency translation adjustments. In 2015, 2014 and 2013, for the PCI loan portfolio, the Corporation recorded a provision benefit of $40 million, $31 million and $707 million, respectively. Write-offs in the PCI loan...

  • Page 180
    ...includes $35 million related to impaired U.S. small business commercial at both December 31, 2015 and 2014. (3) Amounts 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...

  • Page 181
    ...Cash Flows. All of these securities were initially classified as Level 2 assets within the fair value hierarchy. During 2015 and 2014, there were no changes to the initial classification. The Corporation recognizes consumer MSRs from the sale or securitization of first-lien mortgage loans. Servicing...

  • Page 182
    .... For additional information, see Note 7 - Representations and Warranties Obligations and Corporate Guarantees and Note 23 - Mortgage Servicing Rights. As a holder of these securities, the Corporation receives scheduled principal and interest payments. During 2015 and 2014, there were no OTTI losses...

  • Page 183
    ... loss exposure excludes the liability for representations and warranties obligations and corporate guarantees. For additional information, see Note 7 - Representations and Warranties Obligations and Corporate Guarantees. At December 31, 2015 and 2014, loans and leases in the consolidated credit card...

  • Page 184
    ... debt securities and the Corporation continues to make advances to borrowers when they draw on their lines of credit. At December 31, 2015 and 2014, home equity loan securitizations in rapid amortization for which the Corporation has a subordinate funding obligation, including both consolidated...

  • Page 185
    ... the Corporation held a variable interest at December 31, 2015 and 2014. Other VIEs December 31 (Dollars in millions) Maximum loss exposure On-balance sheet assets Trading account assets Debt securities carried at fair value Loans and leases Allowance for loan and lease losses Loans held-for-sale...

  • Page 186
    ... 2014. The Corporation's maximum loss exposure associated with both consolidated and unconsolidated investment vehicles totaled $5.1 billion at both December 31, 2015 and 2014 comprised primarily of on-balance sheet assets less non-recourse liabilities. The Corporation transferred servicing advance...

  • Page 187
    ... such cases, subsequent to repurchasing the loan, the Corporation would be exposed to any credit loss on the repurchased mortgage loans after accounting for any mortgage insurance (MI) or mortgage guarantee payments that it may receive. The liability for representations and warranties exposures and...

  • Page 188
    ... all factors that inform the Corporation's liability for representations and warranties and the corresponding estimated range of possible loss. 186 Bank of America 2015 Prior to 2009, legacy companies and certain subsidiaries sold pools of first-lien residential mortgage loans and home equity loans...

  • Page 189
    ..., it considers such claims activity in the computation of its liability for representations and warranties. Monoline Insurers Experience During 2015, the Corporation had limited loan-level representations and warranties repurchase claims experience with the monoline insurers due to settlements with...

  • Page 190
    ... recorded for these exposures. Cash Payments During 2015 and 2014, excluding amounts paid in bulk settlements, the Corporation made loan repurchases and indemnification payments totaling $229 million and $496 million, respectively for first-lien and home equity loan repurchases and indemnification...

  • Page 191
    ... Consumer Banking Global Wealth & Investment Management Global Banking Global Markets All Other Total goodwill (1) There was no goodwill in LAS at December 31, 2015 and 2014. The Corporation completed its annual goodwill impairment tests as of June 30, 2015 and 2014 for all applicable reporting...

  • Page 192
    ... and $14.6 billion at December 31, 2015 and 2014. These short-term bank notes, along with Federal Home Loan Bank (FHLB) advances, U.S. Treasury tax and loan notes, and term federal funds purchased, are included in short-term borrowings on the Consolidated Balance Sheet. 190 Bank of America 2015

  • Page 193
    ... borrowed or purchased under agreements to resell, and in federal funds purchased and securities loaned or sold under agreements to repurchase at December 31, 2015 and 2014. Balances are presented on a gross basis, prior to the application of counterparty netting. Gross assets and liabilities...

  • Page 194
    ... or return collateral pledged when appropriate. Repurchase agreements and securities loaned transactions are generally either overnight, continuous (i.e., no stated term) or short-term. The Corporation manages liquidity risks related to these agreements by sourcing funding from a diverse group of...

  • Page 195
    ... of one year or more. The table below presents the balance of longterm debt at December 31, 2015 and 2014, and the related contractual rates and maturity dates as of December 31, 2015. December 31 2015 2014 (Dollars in millions) Notes issued by Bank of America Corporation Senior notes: Fixed, with...

  • Page 196
    ... stated maturity dates or their earlier redemption at a redemption price equal to their liquidation amount plus accrued distributions to the date fixed for redemption and the premium, if any, paid by the Corporation upon concurrent repayment of the related Notes. Periodic cash payments and payments...

  • Page 197
    ... 11/01/11 On or after 12/11 On or after 6/12 On or after 9/12 Notes are denominated in British Pound. Presentation currency is U.S. Dollar. Call notices for Merrill Lynch Preferred Capital Trust III, IV and V were sent on December 29, 2015 and settled on January 29, 2016. Bank of America 2015 195

  • Page 198
    ... 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, SBLCs and commercial letters of credit to meet the financing needs of its customers...

  • Page 199
    ... who offer group life insurance policies to corporations, primarily banks. The book value protection is provided on portfolios of intermediate investment-grade fixedincome securities and is intended to cover any shortfall in the event that policyholders surrender their policies and market value is...

  • Page 200
    ... related transactions such as commodities trading, repurchase agreements, prime brokerage 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...

  • Page 201
    ... pending in New York Supreme Court, relates to bond insurance policies provided by Ambac on certain securitized pools of second-lien (and in one pool, first-lien) HELOCs, first-lien subprime home equity loans and fixed-rate second-lien mortgage loans. Plaintiffs allege that they have paid claims as...

  • Page 202
    ... In 2005, a group of merchants filed a series of putative class actions and individual actions directed at interchange fees associated with Visa and MasterCard payment card transactions. These actions, which were consolidated in the U.S. District Court for the Eastern District of New York under the...

  • Page 203
    ...Corporation and BANA agreed to settle the class action for $180 million. On September 21, 2015, plaintiffs filed a second consolidated amended complaint, in which they named additional defendants, including MLPF&S, added claims for violations of the CEA, and expanded the scope of the FX transactions...

  • Page 204
    ...Countrywide Home Loans, Inc. (CHL), filed a complaint in New York Supreme Court, in a case entitled U.S. Bank National Association, as Trustee for HarborView Mortgage Loan Trust, Series 2005-10 v. Countrywide Home Loans, Inc. (dba Bank of America Home Loans), Bank of America Corporation, Countrywide...

  • Page 205
    ... current and former officers were named as defendants in a putative class action filed in the U.S. District Court for the Southern District of New York entitled Pennsylvania Public School Employees' Retirement System v. Bank of America, et al. Following the filing of a complaint on February 2, 2011...

  • Page 206
    ... that it did not object to the resubmitted CCAR capital plan. In 2015, the Corporation repurchased and retired 140.3 million shares of common stock in connection with the 2015 capital plan, which reduced shareholders' equity by $2.4 billion. In 2014 and 2013, the Corporation repurchased and retired...

  • Page 207
    ... 1 capital, and the amendment became effective in the three months ended June 30, 2014. The more significant changes to the terms of the Series T Preferred Stock in the amendment were: (1) dividends are no longer cumulative; (2) the dividend rate is fixed at 6%; and (3) the Corporation may redeem...

  • Page 208
    ... declared, thereafter. (6) 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. (7) Subject to 3.00% minimum rate per annum. n/a = not applicable 206 Bank of America 2015

  • Page 209
    ... but prior to the dividend payment date, the Corporation will still pay any accrued dividends payable. All series of preferred stock in the Preferred Stock Summary table have a par value of $0.01 per share, are not subject to the operation of a sinking fund, have no participation rights, and with...

  • Page 210
    ...presents the changes in accumulated OCI after-tax for 2013, 2014 and 2015. Available-forSale Debt Securities $ $ $ Available-forSale Marketable Equity Securities 462 (466) (4) 21 17 - 45 62 (Dollars in millions) Debit Valuation Adjustments (1) Derivatives Employee Benefit Plans Foreign Currency...

  • Page 211
    ...2015, 2014 and 2013. Reclassifications Out of Accumulated OCI (Dollars in millions) Accumulated OCI Components Available-for-sale debt securities: Income Statement Line Item Impacted Gains on sales of debt securities Other loss Income before income taxes Income tax expense Reclassification to net...

  • Page 212
    ... of EPS, see Note 1 - Summary of Significant Accounting Principles. (Dollars in millions, except per share information; shares in thousands) 2015 15,888 (1,483) 14,405 - $ 14,405 10,462,282 1.38 $ $ $ 2014 2013 Earnings per common share Net income Preferred stock dividends Net income applicable...

  • Page 213
    ... differs from the Standardized approach due to differences in the amount permitted in Tier 2 capital related to the qualifying allowance for credit losses. (4) Reflects adjusted average assets for the three months ended December 31, 2015 and 2014. n/a = not applicable Bank of America 2015 211

  • Page 214
    ... Protection Act. The final rule formalizes risk management requirements primarily related to governance and liquidity risk management and reiterates the provisions of previously issued final rules related to risk-based and leverage capital and stress test requirements. Also, a debt-to-equity limit...

  • Page 215
    ... the plan that effectively provides principal protection for participant balances transferred and certain compensation credits. The Corporation is responsible for funding any shortfall on the guarantee feature. The Corporation has an annuity contract that guarantees the payment of benefits vested...

  • Page 216
    ...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 projected benefit obligation Projected benefit obligation, January 1 Service...

  • Page 217
    ... 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 2013 2015 $ 8 48 (1) 4 (46) - 13 3.75% 6.00 n/a $ 2014 8 58...

  • Page 218
    ...Plan (Dollars in millions) Non-U.S. Pension Plans Nonqualified and Other Pension Plans 2014 $ 968 - $ 968 Postretirement Health and Life Plans Total 2014 $ 5,328 11 $ 5,339 Net actuarial loss (gain) Prior service cost (credits) Amounts recognized in accumulated OCI 2015 $ 3,920 - $ 3,920 2014...

  • Page 219
    ... is determined using the calculated market-related value for the Qualified Pension Plan and the Other Pension Plan and the fair value for the Non-U.S. Pension Plans and Postretirement Health and Life Plans. The expected return on plan assets assumption represents a long-term average view of the...

  • Page 220
    ... Total plan investment assets, at fair value $ $ $ $ December 31, 2014 Cash and short-term investments Money market and interest-bearing cash Cash and cash equivalent commingled/mutual funds Fixed income U.S. government and agency securities Corporate debt securities Asset-backed securities Non...

  • Page 221
    ... 2015, 2014 and 2013. Level 3 Fair Value Measurements 2015 Actual Return on Plan Assets Still Held at the Reporting Date 11 127 632 65 127 962 $ - 14 37 (1) (5) 45 $ Purchases, Sales and Settlements - 3 62 (15) (20) 30 2014 Fixed income U.S. government and agency securities Non-U.S. debt securities...

  • Page 222
    ... from the grant date to the date on which the employee becomes retirement eligible, net of estimated forfeitures. The compensation cost for the stock-based plans was $2.17 billion, $2.30 billion and $2.28 billion in 2015, 2014 and 2013, respectively. The related income tax benefit was $824 million...

  • Page 223
    ...$616 million in 2015 and $3.4 billion in 2014, and a benefit of $2.7 billion in 2013, recorded in accumulated OCI. In addition, total income tax expense does not reflect tax effects associated with the Corporation's employee stock plans which decreased common stock and additional paid-in capital $44...

  • Page 224
    ...New York U.K. 2010 - 2011 2012 - 2013 2008 - 2014 2012 Status at December 31 2015 IRS Appeals Field examination Field examination Field examination During 2015, the Corporation and IRS Appeals arrived at final agreement on the audit of Bank of America Corporation for the 2010 through 2011 tax years...

  • Page 225
    ...,329 General business credits Foreign tax credits (1) (2) Deferred tax assets Net operating loss carryforwards Accrued expenses Allowance for credit losses Security, loan and debt valuations Employee compensation and retirement benefits Tax credit carryforwards Available-for-sale securities Other...

  • Page 226
    ...assets and liabilities and debt securities. Market price 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...

  • Page 227
    ...fund's capital as reported by the respective fund managers. Asset-backed Secured Financings The fair values of asset-backed secured financings are based on external broker bids, where available, or are determined by discounting estimated cash flows using interest rates approximating the Corporation...

  • Page 228
    ... Mortgage servicing rights Loans held-for-sale Other assets (4) Total assets Liabilities Interest-bearing deposits in U.S. offices Federal funds purchased and securities loaned or sold under agreements to repurchase Trading account liabilities: U.S. government and agency securities Equity securities...

  • Page 229
    ... Mortgage servicing rights Loans held-for-sale Other assets (4) Total assets Liabilities Interest-bearing deposits in U.S. offices Federal funds purchased and securities loaned or sold under agreements to repurchase Trading account liabilities: U.S. government and agency securities Equity securities...

  • Page 230
    ... at fair value - Non-agency residential MBS Loans and leases (4, 5) Mortgage servicing rights (5) Loans held-for-sale (4) Other assets (6) Federal funds purchased and securities loaned or sold under agreements to repurchase (4) Trading account liabilities - Corporate securities and other Short-term...

  • Page 231
    ... 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 assets Net derivative...

  • Page 232
    ... 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 (3, 4) Mortgage servicing rights (4) Loans held-for-sale...

  • Page 233
    ... at fair value - Non-agency residential MBS Loans and leases (2) Mortgage servicing rights Loans held-for-sale (2) Other assets Federal funds purchased and securities loaned or sold under agreements to repurchase (2) Trading account liabilities - Corporate securities and other Short-term borrowings...

  • Page 234
    ... trading account assets Net derivative assets AFS debt securities: Non-U.S. securities Other taxable securities Tax-exempt securities Total AFS debt securities Loans and leases (2) Mortgage servicing rights Loans held-for-sale (2) Other assets Trading account liabilities - Corporate securities and...

  • Page 235
    ...$ 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 (2) Mortgage servicing rights Loans held-for-sale (2) Other assets Long-term debt...

  • Page 236
    ... securities AFS debt securities - Tax-exempt securities Structured liabilities Long-term debt $ (1,513) Industry standard derivative pricing (2, 3) Equity correlation Long-dated equity volatilities Yield Upfront points Discounted cash flow, Stochastic recovery correlation model Credit spreads Credit...

  • Page 237
    ... securities AFS debt securities - Tax-exempt securities Structured liabilities Long-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...

  • Page 238
    ... and foreign exchange rates) would result in a significant impact to the fair value; however, the magnitude and direction of the impact depends on whether the Corporation is long or short the exposure. Sensitivity of Fair Value Measurements to Changes in Unobservable Inputs Loans and Securities For...

  • Page 239
    ...date for which a nonrecurring fair value adjustment was recorded during 2015, 2014 and 2013. Assets Measured at Fair Value on a Nonrecurring Basis December 31 2015 (Dollars in millions) 2014 Level 3 Level 2 $ 156 5 - 13 Level 3 $ 30 4,636 208 - Level 2 $ 9 - - 54 Assets Loans held-for-sale Loans...

  • Page 240
    ... by U.S. government securities are not accounted for under the fair value option as these contracts are generally short-dated and therefore the interest rate risk is not significant. Loans Held-for-sale The Corporation elects to account for residential mortgage LHFS, commercial mortgage LHFS and...

  • Page 241
    ... and commercial loans Loans held-for-sale Other assets Long-term deposits Federal funds purchased and securities loaned or sold under agreements to repurchase Short-term borrowings Unfunded loan commitments Long-term debt (2) (1) A significant portion of the loans reported as trading account assets...

  • Page 242
    ...) Related to Borrower-specific Credit Risk for Assets Accounted for Under the Fair Value Option (Dollars in millions) 2015 $ 37 (200) 37 Loans reported as trading account assets Consumer and commercial loans Loans held-for-sale December 31 2014 $ 28 32 84 2013 $ 56 148 225 240 Bank of America...

  • Page 243
    ...of margin loans, servicing advances and other accounts receivable and are classified as Level 2 and Level 3. Customer payables and short-term borrowings are classified as Level 2. Long-term Debt The Corporation uses quoted market prices, when available, to estimate fair value for its long-term debt...

  • Page 244
    ... fair value with changes in fair value primarily recorded in mortgage banking income in the Consolidated Statement of Income. The Corporation manages the risk in these MSRs with derivatives such as options and interest rate swaps, which are not designated as accounting hedges, as well as securities...

  • Page 245
    ... savings accounts, money market savings accounts, CDs and IRAs, noninterest- and interest-bearing checking accounts, investment accounts and products, as well as credit and debit cards, residential mortgages and home equity loans, and direct and indirect loans to consumers and small businesses...

  • Page 246
    ... are recorded in the business to which the customers or clients migrated. The Corporation's ALM activities include an overall interest rate risk management strategy that incorporates the use of various derivatives and cash instruments to manage fluctuations in earnings and capital that are caused by...

  • Page 247
    ...of interest expense (FTE basis) Provision for credit losses Noninterest expense Loss before income taxes (FTE basis) Income tax benefit (FTE basis) Net income (loss) Year-end total assets (1) Legacy Assets & Servicing 2015 2015 2014 2013 $ 1,573 $ 1,520 $ 1,552 $ (348) 1,857 (271) 1,156 2,872 3,430...

  • Page 248
    ... basis adjustment Consolidated revenue, net of interest expense Segments' total net income Adjustments, net-of-taxes: ALM activities Equity investment income Liquidating businesses and other Consolidated net income $ 2015 84,035 237 - (856) (909) 82,507 16,377 (305) - (184) 15,888 $ 2014 85,684...

  • Page 249
    ... is presented in accordance with bank regulatory reporting requirements. Condensed Statement of Income (Dollars in millions) 2015 2014 2013 Income Dividends from subsidiaries: Bank holding companies and related subsidiaries Nonbank companies and related subsidiaries Interest from subsidiaries...

  • Page 250
    ..., 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 251
    ... 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 so that revenue...

  • Page 252
    Disclosure Controls and Procedures Bank of America Corporation and Subsidiaries As of the end of the period covered by this 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 ...

  • Page 253
    Executive Management Team and Board of Directors Bank of America Corporation Executive Management Team Brian T. Moynihan* Chairman of thd Board and Chidf Exdcutivd Officdr Dean C. Athanasia* Prdsiddnt, Prdfdrrdd and Small Busindss Banking and Co-hdad - Consumdr Banking Catherine P. Bessant* Chidf ...

  • Page 254
    ... inquiries concerning dividend checks, electronic deposit of dividends, dividend reinvestment, tax statements, electronic delivery, transferring ownership, address changes or lost or stolen stock certificates, contact Bank of America Shareholder Services at Computershare Trust Company, N.A. via the...

  • Page 255
    ... BofA Corp. Merrill Edge is available through MLPF&S, and consists of the Merrill Edge Advisory Center (investment guidance) and self- directed online investing. U.S. Trust, Bank of America Private Wealth Management operates through Bank of America, N.A., and other subsidiaries of BofA Corp. Banking...

  • Page 256
    Bank of America Corporation 2015 Annual Report © 2016 Bank of America Corporation 00-04-1373B 3/2016